Franklin Street Properties Corp 10-Q for FY2021 Q1

Franklin Street Properties Corp (FSP)

10-Q 2021-05-04 For: 2021-03-31

Added on April 07, 2026

About this 10-Q

Franklin Street Properties Corp filed this 10-Q on May 4, 2021, covering the quarter ended March 31, 2021 (FY2021 Q1).

Headline figures

Quarter ended March 31, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $59.04M; down 6.3% from $62.98M a year earlier
Net loss: $6.46M; compared with a net loss of $1.07M a year earlier

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Maryland		04-3578653
(State or other jurisdiction of incorporation		(I.R.S. Employer Identification No.)
or organization)


Title of each class:	Trading Symbol	Name of each exchange on which registered:
Common Stock, $.0001 par value per share	FSP	NYSE American


Large Accelerated Filer ☐		Accelerated Filer ☒

Non-accelerated Filer ☐		Smaller Reporting Company ☐

		Emerging Growth Company ☐


			Page
Part I.	Financial Information

	Item 1.	Financial Statements

		Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020	3

		Consolidated Statements of Operations for the three months ended March 31, 2021 and 2020	4

		Consolidated Statements of Comprehensive Income (loss) for the three months ended March 31, 2021 and 2020	5

		Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 2021 and 2020	6

		Consolidated Statements of Cash Flows for the three months ended March 31, 2021 and 2020	7

		Notes to Consolidated Financial Statements	8-18

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	34

	Item 4.	Controls and Procedures	35

Part II.	Other Information

	Item 1.	Legal Proceedings	36

	Item 1A.	Risk Factors	36

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	36

	Item 3.	Defaults Upon Senior Securities	36

	Item 4.	Mine Safety Disclosures	36

	Item 5.	Other Information	36

	Item 6.	Exhibits	37

Signatures			38


	March 31,		December 31,
(in thousands, except share and par value amounts)	2021		2020
Assets:
Real estate assets:
Land	$	189,155	$	189,155
Buildings and improvements		1,954,838		1,938,629
Fixtures and equipment		13,308		12,949
		2,157,301		2,140,733
Less accumulated depreciation		555,688		538,717
Real estate assets, net		1,601,613		1,602,016
Acquired real estate leases, less accumulated amortization of $53,670 and $55,447, respectively		25,836		28,206
Cash, cash equivalents and restricted cash		4,113		4,150
Tenant rent receivables		4,337		7,656
Straight-line rent receivable		69,743		67,789
Prepaid expenses and other assets		5,873		5,752
Related party mortgage loan receivables		21,000		21,000
Office computers and furniture, net of accumulated depreciation of $1,459 and $1,443, respectively		147		163
Deferred leasing commissions, net of accumulated amortization of $26,384 and $30,411, respectively		56,771		56,452
Total assets	$	1,789,433	$	1,793,184

Liabilities and Stockholders’ Equity:
Liabilities:
Bank note payable	$	27,500	$	3,500
Term loans payable, less unamortized financing costs of $2,332 and $2,677, respectively		717,668		717,323
Series A & Series B Senior Notes, less unamortized financing costs of $781 and $822, respectively		199,219		199,178
Accounts payable and accrued expenses		63,456		72,058
Accrued compensation		1,390		3,918
Tenant security deposits		8,041		8,677
Lease liability		1,444		1,536
Other liabilities: derivative liabilities		13,698		17,311
Acquired unfavorable real estate leases, less accumulated amortization of $3,959 and $4,031, respectively		1,433		1,592
Total liabilities		1,033,849		1,025,093

Commitments and contingencies

Stockholders’ Equity:
Preferred stock, $.0001 par value, 20,000,000 shares authorized, none issued or outstanding		—		—
Common stock, $.0001 par value, 180,000,000 shares authorized, 107,328,199 and 107,328,199 shares issued and outstanding, respectively		11		11
Additional paid-in capital		1,357,131		1,357,131
Accumulated other comprehensive loss		(13,698)		(17,311)
Accumulated distributions in excess of accumulated earnings		(587,860)		(571,740)
Total stockholders’ equity		755,584		768,091
Total liabilities and stockholders’ equity	$	1,789,433	$	1,793,184



	For the Three Months Ended March 31,
(in thousands, except per share amounts)	2021		2020

Revenues:
Rental	$	58,623	$	62,567
Related party revenue:
Management fees and interest income from loans		410		403
Other		6		13
Total revenues		59,039		62,983
Expenses:
Real estate operating expenses		15,939		17,298
Real estate taxes and insurance		12,366		11,762
Depreciation and amortization		24,381		22,338
General and administrative		4,146		3,525
Interest		8,600		9,063
Total expenses		65,432		63,986

Loss before taxes		(6,393)		(1,003)
Tax expense		67		68

Net loss	$	(6,460)	$	(1,071)

Weighted average number of shares outstanding, basic and diluted		107,328		107,269

Net loss per share, basic and diluted	$	(0.06)	$	(0.01)


	For the
	Three Months Ended
	March 31,
(in thousands)	2021		2020

Net loss	$	(6,460)	$	(1,071)

Other comprehensive income (loss):
Unrealized gain (loss) on derivative financial instruments		3,613		(18,353)

Total other comprehensive income (loss)		3,613		(18,353)

Comprehensive loss	$	(2,847)	$	(19,424)


						Accumulated		Distributions
				Additional		other		in excess of		Total
	Common Stock			Paid-In		comprehensive		accumulated		Stockholders’
(in thousands, except per share amounts)	Shares	Amount		Capital		income (loss)		earnings		Equity

Balance, December 31, 2019	107,269	$	11	$	1,356,794	$	(4,682)	$	(565,727)	$	786,396
Comprehensive loss	—		—		—		(18,353)		(1,071)		(19,424)
Distributions $0.09 per share of common stock	—		—		—		—		(9,654)		(9,654)
Balance, March 31, 2020	107,269	$	11	$	1,356,794	$	(23,035)	$	(576,452)	$	757,318

Balance, December 31, 2020	107,328	$	11	$	1,357,131	$	(17,311)	$	(571,740)	$	768,091
Comprehensive income (loss)	—		—		—		3,613		(6,460)		(2,847)
Distributions $0.09 per share of common stock	—		—		—		—		(9,660)		(9,660)
Balance, March 31, 2021	107,328	$	11	$	1,357,131	$	(13,698)	$	(587,860)	$	755,584


	As of March 31,
	2021	2020
Operating Properties:
Number of properties	33	32
Rentable square feet	9,548,810	9,506,513


	Notional		Strike		Effective	Expiration	Fair Value (2) at
(in thousands)	Value		Rate		Date	Date	March 31, 2021		December 31, 2020

2017 Interest Rate Swap	$	400,000	1.12	%	Sep-17	Sep-21	$	(1,981)	$	(2,947)
2019 JPM Interest Rate Swap	$	100,000	2.44	%	Mar-19	Nov-21	$	(1,540)	$	(2,102)
2019 BMO Interest Rate Swap (1)	$	220,000	2.39	%	Aug-20	Jan-24	$	(10,177)	$	(12,262)

(1) The Notional Value will decrease to $165 million on November 30, 2021.
(2) Classified within Level 2 of the fair value hierarchy.


(in thousands)	Three Months Ended March 31,
Interest Rate Swaps in Cash Flow Hedging Relationships:	2021		2020

Amounts of gain (loss) recognized in OCI	$	807	$	(18,389)
Amounts of previously recorded gain/(loss) reclassified from OCI into Interest Expense	$	(2,806)	$	(36)

Total amount of Interest Expense presented in the consolidated statements of operations	$	8,600	$	9,063


	Dividends Per		Total
Quarter Paid	Share		Dividends

First quarter of 2021	$	0.09	$	9,660

First quarter of 2020	$	0.09	$	9,654

(in thousands)	for Grant		Cost

Balance December 31, 2019		1,906,382		337,000
Shares granted 2020		(58,998)		337,000
Balance December 31, 2020		1,847,384	$	674,000
Shares granted 2021		-		-
Balance March 31, 2021		1,847,384	$	674,000


	For the Three Months Ended March 31,
(Dollars in thousands)	2021		2020

Revised Texas Franchise Tax	$	67	$	68
Other Taxes		—		—
Tax expense	$	67	$	68


Income relating to lease payments:
	Three Months Ended
(in thousands)	March 31, 2021		March 31, 2020
Income from leases (1)	$	56,709	$	61,529
	$	56,709	$	61,529

(1) Amounts recognized from variable lease payments were $14,688 and $15,629 for the three months ended March 31, 2021 and 2020, respectively.


	For the Three Months Ended March 31,
(in thousands)	2021		2020
Cash flows from operating activities:
Net loss	$	(6,460)	$	(1,071)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization expense		25,088		23,086
Amortization of above and below market leases		(32)		(73)
Decrease in allowance for doubtful accounts and write-off of accounts receivable		—		(13)
Changes in operating assets and liabilities:
Tenant rent receivables		3,319		255
Straight-line rents		(1,904)		(966)
Lease acquisition costs		(50)		(470)
Prepaid expenses and other assets		(532)		(644)
Accounts payable and accrued expenses		(9,564)		(8,215)
Accrued compensation		(2,528)		(2,065)
Tenant security deposits		(636)		269
Payment of deferred leasing commissions		(5,056)		(2,892)
Net cash provided by operating activities		1,645		7,201
Cash flows from investing activities:
Property improvements, fixtures and equipment		(16,022)		(20,054)
Net cash used in investing activities		(16,022)		(20,054)
Cash flows from financing activities:
Distributions to stockholders		(9,660)		(9,654)
Borrowings under bank note payable		36,500		35,000
Repayments of bank note payable		(12,500)		(5,000)
Net cash provided by financing activities		14,340		20,346
Net increase (decrease) in cash, cash equivalents and restricted cash		(37)		7,493
Cash, cash equivalents and restricted cash, beginning of year		4,150		9,790
Cash, cash equivalents and restricted cash, end of period	$	4,113	$	17,283

Supplemental disclosure of cash flow information:
Cash paid for:
Interest	$	5,870	$	5,899
Taxes	$	24	$	—
Non-cash investing activities:
Accrued costs for purchases of real estate assets	$	9,585	$	9,645


		Shares Available			Compensation


	Rentable
	Square
	Feet	Three Months Ended		Three Months Ended		Inc		%
(in thousands)	or RSF	31-Mar-21		31-Mar-20		(Dec)		Change
Region
East	573	$	949	$	1,325	$	(376)	(28.4)	%
MidWest	1,557		5,378		5,485		(107)	(2.0)	%
South	4,387		12,423		13,290		(867)	(6.5)	%
West	2,624		10,369		11,463		(1,094)	(9.5)	%
Property NOI* from Operating Properties	9,141		29,119		31,563		(2,444)	(7.7)	%
Dispositions and Redevelopment Properties (a)	519		642		1,311		(669)	(1.8)	%
Property NOI*	9,660	$	29,761	$	32,874	$	(3,113)	(9.5)	%

Same Store		$	29,119	$	31,563	$	(2,444)	(7.7)	%

Less Nonrecurring
Items in NOI* (b)			32		26		6	(0.1)	%

Comparative
Same Store		$	29,087	$	31,537	$	(2,450)	(7.8)	%



		Three Months Ended		Three Months Ended
Reconciliation to Net Income (Loss)		31-Mar-21		31-Mar-20
Net loss		$	(6,460)	$	(1,071)
Add (deduct):
Management fee income			(465)		(478)
Depreciation and amortization			24,381		22,338
Amortization of above/below market leases			(32)		(73)
General and administrative			4,146		3,525
Interest expense			8,600		9,063
Interest income			(394)		(382)
Non-property specific items, net			(15)		(48)


Property NOI*		$	29,761	$	32,874


						Weighted
						Occupied		Weighted
			Year Built		Weighted	Percentage as of		Average
			or	Net Rentable	Occupied	March 31,		Rent per Occupied
Property Name	City	State	Renovated	Square Feet	Sq. Ft.	2021 (a)		Square Feet (b)

Forest Park	Charlotte	NC	1999/2020	64,198	22,136	34.5	%	$	25.93
Meadow Point	Chantilly	VA	1999	138,537	97,419	70.3	%		24.72
Innsbrook	Glen Allen	VA	1999	298,183	170,680	57.2	%		18.65
Loudoun Tech Center	Dulles	VA	1999	136,658	135,209	98.9	%		20.73
Stonecroft (c)	Chantilly	VA	2008	111,469	—	—	%		—
East total				749,045	425,444	56.8	%		21.08
Northwest Point	Elk Grove Village	IL	1999	177,095	177,095	100.0	%		29.90
909 Davis Street	Evanston	IL	2002	195,098	182,104	93.3	%		40.68
River Crossing	Indianapolis	IN	1998	205,729	204,700	99.5	%		25.16
Timberlake	Chesterfield	MO	1999	234,496	224,319	95.7	%		32.88
Timberlake East	Chesterfield	MO	2000	117,036	97,866	83.6	%		26.99
121 South 8th Street	Minneapolis	MN	1974	297,209	249,269	83.9	%		23.75
801 Marquette Ave	Minneapolis	MN	1923/2017	129,821	48,021	37.0	%		35.11
Plaza Seven	Minneapolis	MN	1987	330,096	283,024	85.7	%		32.61
Midwest total				1,686,580	1,466,398	86.9	%		30.49
Blue Lagoon Drive	Miami	FL	2002/2021	213,182	103,862	48.7	%		26.23
One Overton Park	Atlanta	GA	2002	387,267	361,010	93.2	%		21.58
Park Ten	Houston	TX	1999	157,460	112,962	71.7	%		31.29
Addison Circle	Addison	TX	1999	289,325	242,194	83.7	%		31.40
Collins Crossing	Richardson	TX	1999	300,887	251,241	83.5	%		27.42


	Payment due by period
	(in thousands)
	Total		2021		2022		2023		2024		2025		Thereafter
BAML Revolver	$	27,500	$	—	$	27,500	$		$	—	$	—	$	—
JPM Term Loan		100,000		100,000		—		—		—		—		—
BAML Term Loan		400,000		—		—		400,000		—		—		—
BMO Term Loan Tranche A		55,000		55,000		—		—		—		—		—
BMO Term Loan Tranche B		165,000		—		—		—		165,000		—		—
Series A Notes		116,000		—		—		—		116,000		—		—
Series B Notes		84,000		—		—		—		—		—		84,000
Total	$	947,500	$	155,000	$	27,500	$	400,000	$	281,000	$	—	$	84,000


Exhibit No.		Description

3.1 (1)		Articles of Incorporation, as amended

3.2 (2)		Amended and Restated By-laws.

10.1 (3)		Purchase and Sale Agreement dated March 5, 2021, by and among FSP One Ravinia Drive LLC, FSP Two Ravinia Drive LLC, FSP One Overton Park LLC and CP ACQUISITION III LLC, as amended by First Amendment to Purchase and Sale Agreement dated April 8, 2021, as amended by Second Amendment to Purchase and Sale Agreement dated April 15, 2021.

31.1*		Certification of FSP Corp.’s Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*		Certification of FSP Corp.’s Chief Financial Officer pursuant to Section 302 of the Sarbanes- Oxley Act of 2002.

32.1*		Certification of FSP Corp.’s Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2*		Certification of FSP Corp.’s Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101*		The following materials from FSP Corp.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets; (ii) the Consolidated Statements of Operations; (iii) the Consolidated Statements of Stockholders’ Equity; (iv) the Consolidated Statements of Cash Flows; (v) the Consolidated Statements of Comprehensive Income (Loss); and (vi) the Notes to Consolidated Financial Statements.

104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).


Footnotes		Description

(1)		Incorporated by reference to Exhibit 3.1 to FSP Corp.’s Quarterly Report on Form 10-Q, filed on July 30, 2019 (File No. 001-32470).
(2)		Incorporated by reference to Exhibit 3.1 to FSP Corp.’s Current Report on Form 8-K, filed April 16, 2021 (File No. 001-32470).
(3)		Incorporated by reference to Exhibit 10.1 to FSP Corp.’s Current Report on Form 8-K, filed April 20, 2021 (File No. 001-32470).

*		Filed herewith.


Date	Signature	Title

Date: May 4, 2021	/s/ George J. Carter	Chief Executive Officer and Director
	George J. Carter	(Principal Executive Officer)


Date: May 4, 2021	/s/ John G. Demeritt	Chief Financial Officer
	John G. Demeritt	(Principal Financial Officer)

Pril
Date: May 4, 2021	/s/ George J. Carter
	George J. Carter
	Chief Executive Officer