10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2020.

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from           to           

Commission File Number: 001-32470

Franklin Street Properties Corp.

(Exact name of registrant as specified in its charter)

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

401 Edgewater Place, Suite 200

Wakefield, MA 01880

(Address of principal executive offices)(Zip Code)

(781) 557-1300

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer ☒	Accelerated Filer ☐
Non-accelerated Filer ☐	Smaller Reporting Company ☐
	Emerging Growth Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares of common stock outstanding as of July 30, 2020 was 107,328,199.

Franklin Street Properties Corp.
Form 10-Q

Quarterly Report
June 30, 2020

Table of Contents

			Page
Part I.	Financial Information
	Item 1.	Financial Statements
		Consolidated Balance Sheets as of June 30, 2020 and December 31, 2019	3
		Consolidated Statements of Operations for the three and six months ended June 30, 2020 and 2019	4
		Consolidated Statements of Comprehensive Income (loss) for the three and six months ended June 30, 2020 and 2019	5
		Consolidated Statements of Stockholders’ Equity for the three and six months ended June 30, 2020 and 2019	6
		Consolidated Statements of Cash Flows for the six months ended June 30, 2020 and 2019	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	37
	Item 4.	Controls and Procedures	38
Part II.	Other Information
	Item 1.	Legal Proceedings	39
	Item 1A.	Risk Factors	39
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	40
	Item 3.	Defaults Upon Senior Securities	40
	Item 4.	Mine Safety Disclosures	40
	Item 5.	Other Information	41
	Item 6.	Exhibits	42
Signatures			43

PART I — FINANCIAL INFORMATION

Item 1.Financial Statements

Franklin Street Properties Corp.

Consolidated Balance Sheets

(Unaudited)

	June 30,		December 31,
(in thousands, except share and par value amounts)	2020		2019
Assets:
Real estate assets:
Land	$	191,578	$	191,578
Buildings and improvements		1,964,308		1,924,664
Fixtures and equipment		12,250		11,665
		2,168,136		2,127,907
Less accumulated depreciation		522,238		490,697
Real estate assets, net		1,645,898		1,637,210
Acquired real estate leases, less accumulated amortization of $60,469 and $60,749, respectively		34,022		40,704
Cash, cash equivalents and restricted cash		2,890		9,790
Tenant rent receivables		4,192		3,851
Straight-line rent receivable		69,062		66,881
Prepaid expenses and other assets		6,506		7,246
Related party mortgage loan receivables		21,000		21,000
Other assets: derivative asset		—		3,022
Office computers and furniture, net of accumulated depreciation of $1,409 and $1,362, respectively		196		183
Deferred leasing commissions, net of accumulated amortization of $30,958 and $28,114, respectively		51,669		52,767
Total assets	$	1,835,435	$	1,842,654
Liabilities and Stockholders’ Equity:
Liabilities:
Bank note payable	$	30,000	$	—
Term loans payable, less unamortized financing costs of $3,507 and $4,267, respectively		766,493		765,733
Series A & Series B Senior Notes, less unamortized financing costs of $904 and $985, respectively		199,096		199,015
Accounts payable and accrued expenses		55,712		66,658
Accrued compensation		2,278		3,400
Tenant security deposits		9,155		9,346
Lease liability		1,716		1,890
Other liabilities: derivative liabilities		22,958		7,704
Acquired unfavorable real estate leases, less accumulated amortization of $4,804 and $4,676, respectively		2,024		2,512
Total liabilities		1,089,432		1,056,258
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 107,269,201 shares issued and outstanding, respectively		11		11
Additional paid-in capital		1,357,131		1,356,794
Accumulated other comprehensive loss		(22,958)		(4,682)
Accumulated distributions in excess of accumulated earnings		(588,181)		(565,727)
Total stockholders’ equity		746,003		786,396
Total liabilities and stockholders’ equity	$	1,835,435	$	1,842,654

The accompanying notes are an integral part of these consolidated financial statements.

3

Franklin Street Properties Corp.

Consolidated Statements of Operations

(Unaudited)

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
(in thousands, except per share amounts)	2020		2019		2020		2019
Revenues:
Rental	$	60,398	$	65,485	$	122,965	$	128,844
Related party revenue:
Management fees and interest income from loans		405		1,322		808		2,674
Other		5		6		18		11
Total revenues		60,808		66,813		123,791		131,529
Expenses:
Real estate operating expenses		15,470		17,116		32,768		34,842
Real estate taxes and insurance		12,307		12,801		24,069		24,903
Depreciation and amortization		22,245		22,109		44,583		45,354
General and administrative		3,817		3,702		7,342		7,211
Interest		8,980		9,371		18,043		18,739
Total expenses		62,819		65,099		126,805		131,049
Income (loss) before taxes		(2,011)		1,714		(3,014)		480
Tax expense on income		64		81		132		52
Net income (loss)	$	(2,075)	$	1,633	$	(3,146)	$	428
Weighted average number of shares outstanding, basic and diluted		107,287		107,231		107,278		107,231
Net income (loss) per share, basic and diluted	$	(0.02)	$	0.02	$	(0.03)	$	0.00

The accompanying notes are an integral part of these consolidated financial statements.

4

Franklin Street Properties Corp.

Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)

	For the				For the
	Three Months Ended				Six Months Ended
	June 30,				June 30,
(in thousands)	2020		2019		2020		2019
Net income (loss)	$	(2,075)	$	1,633	$	(3,146)	$	428
Other comprehensive income (loss):
Unrealized gain (loss) on derivative financial instruments		77		(11,461)		(18,276)		(18,252)
Total other comprehensive income (loss)		77		(11,461)		(18,276)		(18,252)
Comprehensive loss	$	(1,998)	$	(9,828)	$	(21,422)	$	(17,824)

The accompanying notes are an integral part of these consolidated financial statements.

5

Franklin Street Properties Corp.

Consolidated Statements of Stockholders’ Equity

(Unaudited)

						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, 2018	107,231	$	11	$	1,356,457	$	14,765	$	(533,599)	$	837,634
Comprehensive loss	—		—		—		(6,791)		(1,205)		(7,996)
Distributions $0.09 per share of common stock	—		—		—		—		(9,651)		(9,651)
Balance, March 31, 2019	107,231	$	11	$	1,356,457	$	7,974	$	(544,455)	$	819,987
Comprehensive income (loss)	—		—		—		(11,461)		1,633		(9,828)
Distributions $0.09 per share of common stock	—		—		—		—		(9,651)		(9,651)
Balance, June 30, 2019	107,231	$	11	$	1,356,457	$	(3,487)	$	(552,473)	$	800,508
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
Comprehensive income (loss)	—		—		—		77		(2,075)		(1,998)
Equity-based compensation	59		—		337						337
Distributions $0.09 per share of common stock	—		—		—		—		(9,654)		(9,654)
Balance, June 30, 2020	107,328	$	11	$	1,357,131	$	(22,958)	$	(588,181)	$	746,003

The accompanying notes are an integral part of these consolidated financial statements.

6

Franklin Street Properties Corp.

Consolidated Statements of Cash Flows

(Unaudited)

	For the Six Months Ended June 30,
(in thousands)	2020		2019
Cash flows from operating activities:
Net income (loss)	$	(3,146)	$	428
Adjustments to reconcile net income or loss to net cash provided by operating activities:
Depreciation and amortization expense		46,055		46,791
Amortization of above and below market leases		(147)		(193)
Shares issued as compensation		337		—
Decrease in allowance for doubtful accounts and write-off of accounts receivable		(13)		(91)
Changes in operating assets and liabilities:
Tenant rent receivables		(328)		(2,337)
Straight-line rents		(1,343)		(4,829)
Lease acquisition costs		(838)		(2,603)
Prepaid expenses and other assets		21		2,392
Accounts payable and accrued expenses		(10,006)		(8,741)
Accrued compensation		(1,122)		(852)
Tenant security deposits		(191)		2,799
Payment of deferred leasing commissions		(3,682)		(8,114)
Net cash provided by operating activities		25,597		24,650
Cash flows from investing activities:
Property improvements, fixtures and equipment		(43,189)		(28,944)
Investment in related party mortgage loan receivable		—		(2,400)
Repayment of related party mortgage loan receivable		—		51,530
Proceeds received from liquidating trust		—		1,470
Net cash provided by (used in) investing activities		(43,189)		21,656
Cash flows from financing activities:
Distributions to stockholders		(19,308)		(19,302)
Borrowings under bank note payable		60,000		45,000
Repayments of bank note payable		(30,000)		(70,000)
Deferred financing costs		—		(81)
Net cash provided by (used in) financing activities		10,692		(44,383)
Net increase (decrease) in cash, cash equivalents and restricted cash		(6,900)		1,923
Cash, cash equivalents and restricted cash, beginning of year		9,790		11,177
Cash, cash equivalents and restricted cash, end of period	$	2,890	$	13,100
Supplemental disclosure of cash flow information:
Cash paid for:
Interest	$	16,882	$	17,383
Taxes	$	470	$	377
Non-cash investing activities:
Accrued costs for purchases of real estate assets	$	9,985	$	11,201

The accompanying notes are an integral part of these consolidated financial statements.

7

Franklin Street Properties Corp.
Notes to Consolidated Financial Statements
(Unaudited)

1.  Organization, Properties, Basis of Presentation, Financial Instruments and Recent Accounting Standards

Organization

Franklin Street Properties Corp. (“FSP Corp.” or the “Company”) holds, directly and indirectly, 100% of the interest in FSP Investments LLC, FSP Property Management LLC, FSP Holdings LLC and FSP Protective TRS Corp. FSP Property Management LLC provides asset management and property management services. The Company also has a non-controlling common stock interest in two corporations organized to operate as real estate investment trusts (“REIT”). Collectively, the two REITs are referred to as the “Sponsored REITs”.

As of June 30, 2020, the Company owned and operated a portfolio of real estate consisting of 32 operating properties, three redevelopment properties and two managed Sponsored REITs and held one promissory note secured by a mortgage on real estate owned by a Sponsored REIT. From time-to-time, the Company may acquire real estate or make additional secured loans. The Company may also pursue, on a selective basis, the sale of its properties in order to take advantage of the value creation and demand for its properties, or for geographic or property specific reasons.

Properties

The following table summarizes the Company’s number of operating properties and rentable square feet of real estate. As of June 30, 2020 and June 30, 2019, the Company had three redevelopment properties, respectively, which are excluded from the table.

	As of June 30,
	2020	2019
Operating Properties:
Number of properties	32	32
Rentable square feet	9,508,226	9,498,858

Basis of Presentation

The unaudited consolidated financial statements of the Company include all of the accounts of the Company and its majority-owned subsidiaries. All significant intercompany balances and transactions have been eliminated. These financial statements should be read in conjunction with the Company’s consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for its fiscal year ended December 31, 2019, as filed with the Securities and Exchange Commission.

The accompanying interim financial statements are unaudited; however, the financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and in conjunction with the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the disclosures required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting solely of normal recurring matters) necessary for a fair presentation of the financial statements for these interim periods have been included. Operating results for the three and six months ended June 30, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020 or for any other period.

Financial Instruments

As disclosed in Note 4, the Company’s derivatives are recorded at fair value using Level 2 inputs. The Company estimates that the carrying values of cash and cash equivalents, restricted cash, receivables, prepaid expenses, accounts payable and accrued expenses, accrued compensation, and tenant security deposits approximate their fair values based on their short-term

8

maturity and the bank note and term loans payable approximate their fair values as they bear interest at variable interest rates or at rates that are at market for similar investments.

Cash, Cash Equivalents and Restricted Cash

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total of the same such amounts shown in the consolidated statement of cash flows.

	June 30,		June 30,
(in thousands)	2020		2019
Cash and cash equivalents	$	2,890	$	13,100
Restricted cash		—		—
Total cash, cash equivalents and restricted cash	$	2,890	$	13,100

Recent Accounting Standards

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which requires that entities use a new forward looking “expected loss” model that generally will result in the earlier recognition of allowance for credit losses. The measurement of expected credit losses is based upon historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company’s Sponsored REIT Loan (as defined in Note 2 below) receivables are within the scope of this standard and our analysis was completed using a Probability of Default / Loss Given Default Model. The Company’s receivables associated with its real estate operating leases are not within the scope of this standard. The Company adopted this standard on January 1, 2020. The adoption of this standard did not have a material impact on our consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”). The ASU is intended to improve the effectiveness of fair value measurement disclosures. ASU 2018-13 is effective for all entities for annual periods beginning after December 15, 2019, and interim periods within those fiscal years. This ASU amends existing fair value measurement disclosure requirements by adding, changing, or removing certain disclosures. ASU 2018-13 is effective for the Company as of January 1, 2020. The Company adopted this standard on January 1, 2020. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.

In April 2019, the FASB issued ASU No. 2019-04, Codification Improvements to Topics 326, Financial Instruments - Credit Losses, Topic 815 Derivatives and Hedging and Topic 825, Financial Instruments (“ASU 2019-04”). The ASU clarifies areas of guidance related to the recently issued standards on credit losses (Topic 326), derivatives and hedging (Topic 815), and recognition and measurement of financial instruments (Topic 825). The new guidance is effective for fiscal years beginning after December 15, 2019, and early adoption is permitted. The Company adopted this standard on January 1, 2020. The adoption of this standard did not have a material impact on our consolidated financial statements.

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”). The ASU contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. The Company is currently assessing the potential impact that the adoption of ASU 2020-04 may have on its consolidated financial statements.

2.  Related Party Transactions and Investments in Non-Consolidated Entities

Investment in Sponsored REITs:

At each of June 30, 2020 and December 31, 2019, the Company held a non-controlling common stock interest in two Sponsored REITs in which the Company no longer shares in economic benefit or risk.

9

Management fees and interest income from loans:

Asset management fees range from 1% to 5% of collected rents and the applicable contracts are cancellable with 30 days notice. Asset management fee income from non-consolidated entities amounted to approximately $45,000 and $121,000 for the six months ended June 30, 2020 and 2019, respectively.

From time to time the Company may make secured loans (“Sponsored REIT Loans”) to Sponsored REITs in the form of mortgage loans or revolving lines of credit to fund construction costs, capital expenditures, leasing costs and for other purposes. The Company reviews the need for an allowance under CECL for Sponsored REIT Loans each reporting period. The Company regularly evaluates the extent and impact of any credit deterioration that could affect performance and the value of the secured property, as well as the financial and operating capability of the borrower. A property’s operating results and existing cash balances are considered and used to assess whether cash flows from operations are sufficient to cover the current and future operating and debt service requirements. The Company also evaluates the borrower’s competency in managing and operating the secured property and considers the overall economic environment, real estate sector and geographic sub-market in which the secured property is located. The Company applies normal loan review and underwriting procedures (as may be implemented or modified from time to time) in making that judgment. The Company has evaluated the credit loss using a loss probability, loss given default model and determined that the expected credit loss on the Sponsored REIT Loan is immaterial.

The Company anticipates that each Sponsored REIT Loan will be repaid at maturity or earlier from refinancing, long term financings of the underlying properties, cash flows from the underlying properties or some other capital event. Each Sponsored REIT Loan is secured by a mortgage on the underlying property and has a term of approximately one to three years. The mortgage loan bears interest at a fixed rate.

The following is a summary of the Sponsored REIT Loans outstanding as of June 30, 2020:

			Maximum		Amount		Interest
(dollars in thousands, except footnotes)		Maturity	Amount		Outstanding		Rate at
Sponsored REIT	Location	Date	of Loan		30-Jun-20		30-Jun-20
Mortgage loan secured by property
FSP Monument Circle LLC (1)	Indianapolis, IN	6-Dec-20		21,000		21,000	7.19	%
			$	21,000	$	21,000

(1) The interest rate is a fixed rate and this mortgage loan includes an origination fee of $164,000 and an exit fee of $38,000 when repaid by the borrower.

The Company recognized interest income and fees from the Sponsored REIT Loans of approximately $763,000 and $2,553,000 for the six months ended June 30, 2020 and 2019, respectively.

3.  Bank Note Payable, Term Loans Payable and Senior Notes

JPM Term Loan

On August 2, 2018, the Company entered into an Amended and Restated Credit Agreement with JPMorgan Chase Bank, N.A., as administrative agent and lender (“JPMorgan”), and the other lending institutions party thereto (the “JPM Credit Agreement”), which provides a single unsecured bridge loan in the aggregate principal amount of $150 million (the “JPM Term Loan”) that remains fully advanced and outstanding. The JPM Term Loan matures on November 30, 2021. The JPM Term Loan was previously evidenced by a Credit Agreement, dated November 30, 2016, among the Company, JPMorgan, as

10

administrative agent and lender, and the other lending institutions party thereto, as amended by a First Amendment, dated October 18, 2017.

The JPM Term Loan bears interest at either (i) a number of basis points over a LIBOR-based rate depending on the Company’s credit rating (125.0 basis points over the LIBOR-based rate at June 30, 2020) or (ii) a number of basis points over the base rate depending on the Company’s credit rating (25.0 basis points over the base rate at June 30, 2020).

Although the interest rate on the JPM Term Loan is variable under the JPM Credit Agreement, the Company fixed the LIBOR-based rate on a portion of the JPM Term Loan by entering into interest rate swap transactions. On March 7, 2019, the Company entered into ISDA Master Agreements with various financial institutions to hedge a $100 million portion of the future LIBOR-based rate risk under the JPM Credit Agreement. Effective March 29, 2019, the Company fixed the LIBOR-based rate at 2.44% per annum on a $100 million portion of the JPM Term Loan until November 30, 2021. Accordingly, based upon the Company’s credit rating, as of June 30, 2020, the effective interest rate on a $100 million portion of the JPM Term Loan was 3.69% per annum.

Based upon the Company’s credit rating, as of June 30, 2020, the effective interest rate on the unhedged $50 million portion of the JPM Term Loan was 1.44% per annum. The weighted average interest rate on the unhedged $50 million portion of the JPM Term Loan during the six months ended June 30, 2020 was approximately 2.36% per annum. The weighted average interest rate on the JPM Term Loan during the year ended December 31, 2019 was approximately 3.54% per annum.

The JPM Credit Agreement contains customary affirmative and negative covenants for credit facilities of this type, including limitations with respect to indebtedness, liens, investments, mergers and acquisitions, disposition of assets, changes in business, certain restricted payments, the requirement to have subsidiaries provide a guaranty in the event that they incur recourse indebtedness and transactions with affiliates. The JPM Credit Agreement also contains financial covenants that require the Company to maintain a minimum tangible net worth, a minimum fixed charge coverage ratio, a maximum secured leverage ratio, a maximum leverage ratio, a maximum unencumbered leverage ratio, and minimum unsecured interest coverage. The JPM Credit Agreement provides for customary events of default with corresponding grace periods, including failure to pay any principal or interest when due, certain cross defaults and a change in control of the Company (as defined in the JPM Credit Agreement). In the event of a default by the Company, the administrative agent may, and at the request of the requisite number of lenders shall, declare all obligations under the JPM Credit Agreement immediately due and payable, and enforce any and all rights of the lenders or administrative agent under the JPM Credit Agreement and related documents. For certain events of default related to bankruptcy, insolvency, and receivership, all outstanding obligations of the Company will become immediately due and payable. The Company was in compliance with the JPM Term Loan financial covenants as of June 30, 2020.

BMO Term Loan

On September 27, 2018, the Company entered into a Second Amended and Restated Credit Agreement with the lending institutions party thereto and Bank of Montreal (“BMO”), as administrative agent (the “BMO Credit Agreement”). The BMO Credit Agreement provides for a single, unsecured term loan borrowing in the amount of $220 million (the “BMO Term Loan”) that remains fully advanced and outstanding. The BMO Term Loan consists of a $55 million tranche A term loan and a $165 million tranche B term loan. The tranche A term loan matures on November 30, 2021 and the tranche B term loan matures on January 31, 2024. The BMO Credit Agreement also includes an accordion feature that allows up to $100 million of additional loans, subject to receipt of lender commitments and satisfaction of certain customary conditions. The BMO Term Loan was previously evidenced by an Amended and Restated Credit Agreement, dated October 29, 2014, among the Company, BMO, as administrative agent and lender, and the other lending institutions party thereto, as amended by a First Amendment, dated July 21, 2016, and a Second Amendment, dated October 18, 2017.

The BMO Term Loan bears interest at either (i) a number of basis points over LIBOR depending on the Company’s credit rating (125 basis points over LIBOR at June 30, 2020) or (ii) a number of basis points over the base rate depending on the Company’s credit rating (25 basis points over the base rate at June 30, 2020).

Although the interest rate on the BMO Term Loan is variable under the BMO Credit Agreement, the Company fixed the base LIBOR interest rate by entering into interest rate swap transactions. On August 26, 2013, the Company entered into an ISDA

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Master Agreement with Bank of Montreal that fixed the base LIBOR interest rate on the BMO Term Loan at 2.32% per annum until August 26, 2020. On February 20, 2019, the Company entered into ISDA Master Agreements with a group of banks that fixed the base LIBOR interest rate on the BMO Term Loan at 2.39% per annum for the period beginning on August 26, 2020 and ending January 31, 2024. Accordingly, based upon the Company’s credit rating, as of June 30, 2020, the effective interest rate on the BMO Term Loan was 3.57% per annum.

The BMO Credit Agreement contains customary affirmative and negative covenants for credit facilities of this type, including limitations with respect to indebtedness, liens, investments, mergers and acquisitions, disposition of assets, changes in business, certain restricted payments, the requirement to have subsidiaries provide a guaranty in the event that they incur recourse indebtedness and transactions with affiliates. The BMO Credit Agreement also contains financial covenants that require the Company to maintain a minimum tangible net worth, a maximum leverage ratio, a maximum secured leverage ratio, a minimum fixed charge coverage ratio, a maximum unencumbered leverage ratio, and minimum unsecured interest coverage. The BMO Credit Agreement provides for customary events of default with corresponding grace periods, including failure to pay any principal or interest when due, certain cross defaults and a change in control of the Company (as defined in the BMO Credit Agreement). In the event of a default by the Company, the administrative agent may, and at the request of the requisite number of lenders shall, declare all obligations under the BMO Credit Agreement immediately due and payable, terminate the lenders’ commitments to make loans under the BMO Credit Agreement, and enforce any and all rights of the lenders or the administrative agent under the BMO Credit Agreement and related documents. For certain events of default related to bankruptcy, insolvency, and receivership, the commitments of lenders will be automatically terminated and all outstanding obligations of the Company will become immediately due and payable. The Company was in compliance with the BMO Term Loan financial covenants as of June 30, 2020.

BAML Credit Facility

On July 21, 2016, the Company entered into a First Amendment (the “BAML First Amendment”), and on October 18, 2017, the Company entered into a Second Amendment (the “BAML Second Amendment”), to the Second Amended and Restated Credit Agreement dated October 29, 2014 among the Company, the lending institutions party thereto and Bank of America, N.A., as administrative agent, L/C Issuer and Swing Line Lender (as amended by the BAML First Amendment and the BAML Second Amendment, the “BAML Credit Facility”) that continued an existing unsecured revolving line of credit (the “BAML Revolver”) and extended the maturity of an existing term loan (the “BAML Term Loan”).

BAML Revolver Highlights

● The BAML Revolver is for borrowings, at the Company's election, of up to $600 million. Borrowings made pursuant to the BAML Revolver may be revolving loans, swing line loans or letters of credit, the combined sum of which may not exceed $600 million outstanding at any time.

● Borrowings made pursuant to the BAML Revolver may be borrowed, repaid and reborrowed from time to time until the initial maturity date of January 12, 2022. The Company has the right to extend the maturity date of the BAML Revolver by two additional six month periods, or until January 12, 2023, upon payment of a fee and satisfaction of certain customary conditions.

● The BAML Credit Facility includes an accordion feature that allows for an aggregate amount of up to $500 million of additional borrowing capacity applicable to the BAML Revolver and/or the BAML Term Loan, subject to receipt of lender commitments and satisfaction of certain customary conditions.

As of June 30, 2020, there were $30 million of borrowings outstanding under the BAML Revolver. The BAML Revolver bears interest at either (i) a margin over LIBOR depending on the Company’s credit rating (1.20% over LIBOR at June 30, 2020) or (ii) a margin over the base rate depending on the Company’s credit rating (0.20% over the base rate at June 30, 2020). The BAML Credit Facility also obligates the Company to pay an annual facility fee in an amount that is also based on the Company’s credit rating. The facility fee is assessed against the total amount of the BAML Revolver, or $600 million (0.25% at June 30, 2020).

Based upon the Company’s credit rating, as of June 30, 2020, the interest rate on the BAML Revolver was 1.36% per annum. The weighted average interest rate on all amounts outstanding on the BAML Revolver during the six months ended June 30,

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2020 was approximately 2.01% per annum. As of December 31, 2019, there were no borrowings outstanding under the BAML Revolver. The weighted average interest rate on all amounts outstanding on the BAML Revolver during the year ended December 31, 2019 was approximately 3.67% per annum.

BAML Term Loan Highlights

● The BAML Term Loan is for $400 million.

● The BAML Term Loan matures on January 12, 2023.

● The BAML Credit Facility includes an accordion feature that allows for an aggregate amount of up to $500 million of additional borrowing capacity applicable to the BAML Revolver and/or the BAML Term Loan, subject to receipt of lender commitments and satisfaction of certain customary conditions.

● On September 27, 2012, the Company drew down the entire $400 million under the BAML Term Loan and such amount remains fully advanced and outstanding under the BAML Term Loan.

The BAML Term Loan bears interest at either (i) a margin over LIBOR depending on the Company’s credit rating (1.35% over LIBOR at June 30, 2020) or (ii) a margin over the base rate depending on the Company’s credit rating (0.35% over the base rate at June 30, 2020).

Although the interest rate on the BAML Credit Facility is variable, the Company fixed the base LIBOR interest rate on the BAML Term Loan by entering into interest rate swap transactions. On July 22, 2016, the Company entered into ISDA Master Agreements with a group of banks that fixed the base LIBOR interest rate on the BAML Term Loan at 1.12% per annum for the period beginning on September 27, 2017 and ending on September 27, 2021. Accordingly, based upon the Company’s credit rating, as of June 30, 2020, the effective interest rate on the BAML Term Loan was 2.47% per annum.

BAML Credit Facility General Information

The BAML Credit Facility contains customary affirmative and negative covenants for credit facilities of this type, including limitations with respect to indebtedness, liens, investments, mergers and acquisitions, disposition of assets, changes in business, certain restricted payments, the requirement to have subsidiaries provide a guaranty in the event that they incur recourse indebtedness and transactions with affiliates. The BAML Credit Facility also contains financial covenants that require the Company to maintain a minimum tangible net worth, a maximum leverage ratio, a maximum secured leverage ratio, a minimum fixed charge coverage ratio, a maximum unencumbered leverage ratio, and minimum unsecured interest coverage. The BAML Credit Facility provides for customary events of default with corresponding grace periods, including failure to pay any principal or interest when due, certain cross defaults and a change in control of the Company (as defined in the BAML Credit Facility). In the event of a default by the Company, the administrative agent may, and at the request of the requisite number of lenders shall, declare all obligations under the BAML Credit Facility immediately due and payable, terminate the lenders’ commitments to make loans under the BAML Credit Facility, and enforce any and all rights of the lenders or administrative agent under the BAML Credit Facility and related documents. For certain events of default related to bankruptcy, insolvency, and receivership, the commitments of lenders will be automatically terminated and all outstanding obligations of the Company will become immediately due and payable. The Company was in compliance with the BAML Credit Facility financial covenants as of June 30, 2020.

The Company may use the proceeds of the loans under the BAML Credit Facility to finance the acquisition of real properties and for other permitted investments; to finance investments associated with Sponsored REITs to refinance or retire indebtedness and for working capital and other general business purposes, in each case to the extent permitted under the BAML Credit Facility.

Senior Notes

On October 24, 2017, the Company entered into a note purchase agreement (the “Note Purchase Agreement”) with the various purchasers named therein (the “Purchasers”) in connection with a private placement of senior unsecured notes. Under the Note Purchase Agreement, the Company agreed to sell to the Purchasers an aggregate principal amount of $200 million of senior unsecured notes consisting of (i) 3.99% Series A Senior Notes due December 20, 2024 in an aggregate principal

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amount of $116 million (the “Series A Notes”) and (ii) 4.26% Series B Senior Notes due December 20, 2027 in an aggregate principal amount of $84 million (the “Series B Notes” and, together with the Series A Notes, the “Senior Notes”). On December 20, 2017, the Senior Notes were funded and the proceeds were used to reduce the outstanding balance of the BAML Revolver.

The Note Purchase Agreement contains customary financial covenants, including a maximum leverage ratio, a maximum secured leverage ratio, a minimum fixed charge coverage ratio, and a maximum unencumbered leverage ratio. The Note Purchase Agreement also contains restrictive covenants that, among other things, restrict the ability of the Company and its subsidiaries to enter into transactions with affiliates, merge, consolidate, create liens, make certain restricted payments, enter into certain agreements or prepay certain indebtedness. Such financial and restrictive covenants are substantially similar to the corresponding covenants contained in the BAML Credit Facility, the BMO Credit Agreement and the JPM Credit Agreement. The Senior Notes financial covenants require, among other things, the maintenance of a fixed charge coverage ratio of at least 1.50; a maximum leverage ratio and an unsecured leverage ratio of no more than 60% (65% if there were a significant acquisition for a short period of time). In addition, the Note Purchase Agreement provides that the Note Purchase Agreement will automatically incorporate additional financial and other specified covenants (such as limitations on investments and distributions) that are effective from time to time under the existing credit agreements, other material indebtedness or certain other private placements of debt of the Company and its subsidiaries. The Note Purchase Agreement contains customary events of default, including payment defaults, cross defaults with certain other indebtedness, breaches of covenants and bankruptcy events. In the case of an event of default, the Purchasers may, among other remedies, accelerate the payment of all obligations. The Company was in compliance with the Senior Notes financial covenants as of June 30, 2020.

4.  Financial Instruments: Derivatives and Hedging

On July 22, 2016, the Company fixed the interest rate for the period beginning on September 27, 2017 and ending on September 27, 2021 on the BAML Term Loan (the “2017 Interest Rate Swap”). On August 26, 2013, the Company fixed the interest rate until August 26, 2020 on the BMO Term Loan (the “2013 BMO Interest Rate Swap”). On March 7, 2019, the Company fixed the interest rate for the period beginning on March 29, 2019 and ending on November 30, 2021 on a $100 million portion of the JPM Term Loan (the “2019 JPM Interest Rate Swap”). On February 20, 2019, the Company fixed the interest rate for the period beginning August 26, 2020 and ending January 31, 2024 on the BMO Term Loan (the “2019 BMO Interest Rate Swap”). The variable rates that were fixed under the 2017 Interest Rate Swap, the 2013 BMO Interest Rate Swap, the 2019 JPM Interest Rate Swap and the 2019 BMO Interest Rate Swap (collectively referred to as the “Interest Rate Swaps”) are described in Note 3.

The Interest Rate Swaps qualify as cash flow hedges and have been recognized on the consolidated balance sheets at fair value. If a derivative qualifies as a hedge, depending on the nature of the hedge, changes in the fair value of the derivative will either be offset against the change in fair value of the hedged asset, liability, or firm commitment through earnings, or recognized in other comprehensive income until the hedged item is recognized in earnings. The ineffective portion of a derivative’s change in fair value will be recognized in earnings in the same period in which the hedged interest payments affect earnings, which may increase or decrease reported net income and stockholders’ equity prospectively, depending on future levels of interest rates and other variables affecting the fair values of derivative instruments and hedged items, but will have no effect on cash flows.

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The following table summarizes the notional and fair value of the Company’s derivative financial instruments at June 30, 2020. The notional value is an indication of the extent of the Company’s involvement in these instruments at that time, but does not represent exposure to credit, interest rate or market risks.

	Notional		Strike		Effective	Expiration	Fair
(in thousands)	Value		Rate		Date	Date	Value
2017 Interest Rate Swap	$	400,000	1.12	%	Sep-17	Sep-21	$	(4,880)
2013 BMO Interest Rate Swap	$	220,000	2.32	%	Aug-13	Aug-20	$	(734)
2019 JPM Interest Rate Swap	$	100,000	2.44	%	Mar-19	Nov-21	$	(3,241)
2019 BMO Interest Rate Swap (1)	$	220,000	2.39	%	Aug-20	Jan-24	$	(14,103)
(1) The Notional Value will decrease to $165 million on November 30, 2021.

On June 30, 2020, the 2017 Interest Rate Swap, 2013 BMO Interest Rate Swap, 2019 JPM Interest Rate Swap and 2019 BMO Interest Rate Swap were reported as liabilities with an aggregate fair value of approximately $23.0 million and are included in other liabilities: derivative liabilities in the consolidated balance sheet at June 30, 2020.

The gain/(loss) on the Company’s Interest Rate Swaps that was recorded in other comprehensive income (loss) (OCI) and the accompanying consolidated statements of operations as a component of interest expense for the six months ended June 30, 2020 and 2019, respectively, was as follows:

(in thousands)	Six Months Ended June 30,
Interest Rate Swaps in Cash Flow Hedging Relationships:	2020		2019
Amounts of loss recognized in OCI	$	(20,439)	$	(15,322)
Amounts of previously recorded gain/(loss) reclassified from OCI into Interest Expense	$	(2,163)	$	2,930
Total amount of Interest Expense presented in the consolidated statements of operations	$	18,043	$	18,739

Over time, the unrealized gains and losses held in accumulated other comprehensive income will be reclassified into earnings as an increase or reduction to interest expense in the same periods in which the hedged interest payments affect earnings. The Company estimates that approximately $10.9 million of the current balance held in accumulated other comprehensive income (loss) will be reclassified into earnings within the next 12 months.

The Company is hedging the exposure to variability in anticipated future interest payments on existing debt.

The BMO Term Loan, BAML Term Loan and JPM Term Loan hedging transactions used derivative instruments that involve certain additional risks such as counterparty credit risk, the enforceability of hedging contracts and the risk that unanticipated and significant changes in interest rates will cause a significant loss of basis in either or both of the contracts. The Company requires its derivatives contracts to be with counterparties that have investment grade ratings. As a result, the Company does not anticipate that any counterparty will fail to meet its obligations. However, there can be no assurance that the Company will be able to adequately protect against the foregoing risks or that it will ultimately realize an economic benefit that exceeds the related amounts incurred in connection with engaging in such hedging strategies.

The fair value of the Company’s derivative instruments are determined using the net discounted cash flows of the expected cash flows of the derivative based on the market based interest rate curve and are adjusted to reflect credit or nonperformance risk. The risk is estimated by the Company using credit spreads and risk premiums that are observable in the market. These financial instruments were classified within Level 2 of the fair value hierarchy and were classified as an asset or liability on the consolidated balance sheets.

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The Company’s derivatives are recorded at fair value in other assets: derivative asset and other liabilities: derivative liability in the consolidated balance sheets and the effective portion of the derivatives’ fair value is recorded to other comprehensive income (loss) in the consolidated statements of comprehensive income (loss).

5.  Net Income Per Share

Basic net income per share is computed by dividing net income by the weighted average number of Company shares outstanding during the period. Diluted net income per share reflects the potential dilution that could occur if securities or other contracts to issue shares were exercised or converted into shares. There were no potential dilutive shares outstanding at each of June 30, 2020 and 2019.

6.  Stockholders’ Equity

As of June 30, 2020, the Company had 107,328,199 shares of common stock outstanding. The Company declared and paid dividends as follows (in thousands, except per share amounts):

	Dividends Per		Total
Quarter Paid	Share		Dividends
First quarter of 2020	$	0.09	$	9,654
Second quarter of 2020	$	0.09	$	9,654
First quarter of 2019	$	0.09	$	9,651
Second quarter of 2019	$	0.09	$	9,651

Equity-Based Compensation

On May 20, 2002, the stockholders of the Company approved the 2002 Stock Incentive Plan (the “Plan”). The Plan is an equity-based incentive compensation plan, and provides for the grants of up to a maximum of 2,000,000 shares of the Company’s common stock (“Awards”). All of the Company’s employees, officers, directors, consultants and advisors are eligible to be granted Awards. Awards under the Plan are made at the discretion of the Company’s Board of Directors, and have no vesting requirements. Upon granting an Award, the Company will recognize compensation cost equal to the fair value of the Company’s common stock, as determined by the Company’s Board of Directors, on the date of the grant. The Company granted 55,572 shares under the Plan between 2002 and 2005, made no grants between 2006 and 2018 and granted 38,046 shares under the Plan in 2019.

On June 4, 2020, the Company granted 58,998 shares under the Plan to non-employee directors at a compensation cost of approximately $337,000, which was recognized during the three months ended June 30, 2020 and is included in general and administrative expenses. Such shares were fully vested on the date of issuance. There are currently 1,847,384 shares available for grant under the Plan.

	Shares Available		Compensation
(in thousands)	for Grant		Cost
Balance, December 31, 2016, 2017 and 2018		1,944,428
Shares granted 2019		(38,046)	$	337,000
Balance December 31, 2019		1,906,382		337,000
Shares granted 2020		(58,998)		337,000
Balance June 30, 2020		1,847,384	$	674,000

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7.  Income Taxes

General

The Company has elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended (the “Code”). As a REIT, the Company generally is entitled to a tax deduction for distributions paid to its shareholders, thereby effectively subjecting the distributed net income of the Company to taxation at the shareholder level only. The Company must comply with a variety of restrictions to maintain its status as a REIT. These restrictions include the type of income it can earn, the type of assets it can hold, the number of shareholders it can have and the concentration of their ownership, and the amount of the Company’s taxable income that must be distributed annually.

One such restriction is that the Company generally cannot own more than 10% of the voting power or value of the securities of any one issuer unless the issuer is itself a REIT or a taxable REIT subsidiary (“TRS”). In the case of TRSs, the Company’s ownership of securities in all TRSs generally cannot exceed 20% (25% of taxable years beginning on or before December 31, 2017) of the value of all of the Company’s assets and, when considered together with other non-real estate assets, cannot exceed 25% of the value of all of the Company’s assets. FSP Investments LLC and FSP Protective TRS Corp. are the Company’s taxable REIT subsidiaries operating as taxable corporations under the Code. The TRSs have gross amounts of net operating losses (“NOLs”) available to those taxable corporations of $4.4 million, $4.2 million and $4.0 million as of each of December 31, 2019, 2018 and 2017, respectively. The NOLs created prior to 2018 will expire between 2030 and 2047 and the NOLs generated after 2017 will not expire. A valuation allowance is provided for the full amount of the NOLs as the realization of any tax benefits from such NOLs is not assured.

Income taxes are recorded based on the future tax effects of the difference between the tax and financial reporting bases of the Company’s assets and liabilities. In estimating future tax consequences, potential future events are considered except for potential changes in income tax law or in rates.

The Company adopted an accounting pronouncement related to uncertainty in income taxes effective January 1, 2007, which did not result in recording a liability, nor was any accrued interest and penalties recognized with the adoption. Accrued interest and penalties will be recorded as income tax expense, if the Company records a liability in the future. The Company’s effective tax rate was not affected by the adoption. The Company and one or more of its subsidiaries files income tax returns in the U.S. federal jurisdiction and various state jurisdictions. The statute of limitations for the Company’s income tax returns is generally three years and as such, the Company’s returns that remain subject to examination would be primarily from 2016 and thereafter.

Net operating losses

Section 382 of the Code restricts a corporation’s ability to use NOLs to offset future taxable income following certain “ownership changes.” Such ownership changes occurred with past mergers and accordingly a portion of the NOLs incurred by the Sponsored REITs available for use by the Company in any particular future taxable year will be limited. To the extent that the Company does not utilize the full amount of the annual NOLs limit, the unused amount may be carried forward to offset taxable income in future years. NOLs generated prior to December 31, 2018 will expire 20 years after the year in which they arise, and the last of the Company’s NOLs will expire in 2027. A valuation allowance is provided for the full amount of the NOLs as the realization of any tax benefits from such NOLs is not assured. The gross amount of NOLs available to the Company was $13.0 million as of each of June 30, 2020 and December 31, 2019.

Income Tax Expense

The Company is subject to a business tax known as the Revised Texas Franchise Tax. Some of the Company’s leases allow reimbursement by tenants for these amounts because the Revised Texas Franchise Tax replaces a portion of the property tax for school districts. Because the tax base on the Revised Texas Franchise Tax is derived from an income based measure, it is considered an income tax. The Company recorded a provision for the Revised Texas Franchise Tax of $132,000 and $164,000 for the six months ended June 30, 2020 and 2019, respectively.

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The income tax expense reflected in the consolidated statements of operations relates primarily to a franchise tax on the Company’s Texas properties. FSP Protective TRS Corp. provides taxable services to tenants at some of the Company’s properties, and the tax expenses associated with these activities and a refund receivable of $0.1 million recorded during the six months ended June 30, 2019 are reported as Other Taxes in the table below:

	For the Six Months Ended June 30,
(Dollars in thousands)	2020		2019
Revised Texas Franchise Tax	$	132	$	164
Other Taxes		—		(112)
Tax expense	$	132	$	52

Taxes on income are a current tax expense. No deferred income taxes were provided as there were no material temporary differences between the financial reporting basis and the tax basis of the TRSs.

8.  Leases

Leases as a Lessor:

The Company is a lessor of commercial real estate with operations that include the leasing of office and industrial properties. Many of the leases with customers contain options to extend leases at a fair market rate and may also include options to terminate leases. The Company considers several inputs when evaluating the amount it expects to derive from its leased assets at the end of the lease terms, such as the remaining useful life, expected market conditions, fair value of lease payments, expected fair values of underlying assets, and expected deployment of the underlying assets. The Company’s strategy to address its risk for the residual value in its commercial real estate is to re-lease the commercial space.

The Company has elected to apply the practical expedient to not separate non-lease components from the related lease component of real estate leases. This combined component is primarily comprised of fixed lease payments, early termination fees, common area maintenance cost reimbursements, and parking lease payments. The Company applies ASC 842-Leases to the combined lease and non-lease components.

A minority of the Company’s leases are subject to annual changes in the Consumer Price Index (“CPI”). Although increases in the CPI are not estimated as part of the Company’s measurement of straight-line rent revenue, to the extent that the actual CPI is greater or less than the CPI at lease commencement, there could be changes to realized income or loss.

For the six months ended June 30, 2020 and 2019, the Company recognized the following amounts of income relating to lease payments:

Income relating to lease payments:
	Six Months Ended
(in thousands)	June 30, 2020		June 30, 2019
Income from leases (1)	$	121,474	$	123,821
	$	121,474	$	123,821
(1) Amount from variable lease payments $29,945 and $32,085 for the six months ended June 30, 2020 and 2019, respectively.

9.  Subsequent Events

On July 6, 2020, the Board of Directors of the Company declared a cash distribution of $0.09 per share of common stock payable on August 6, 2020 to stockholders of record on July 17, 2020.

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

The following discussion should be read in conjunction with the financial statements and notes thereto appearing elsewhere in this report and in our Annual Report on Form 10-K for the year ended December 31, 2019. Historical results and percentage relationships set forth in the consolidated financial statements, including trends which might appear, should not be taken as necessarily indicative of future operations. The following discussion and other parts of this Quarterly Report on Form 10-Q may also contain forward-looking statements based on current judgments and current knowledge of management, which are subject to certain risks, trends and uncertainties that could cause actual results to differ materially from those indicated in such forward-looking statements. Accordingly, readers are cautioned not to place undue reliance on forward-looking statements. Investors are cautioned that our forward-looking statements involve risks and uncertainty, including without limitation, adverse changes in general economic or local market conditions, including as a result of the COVID-19 pandemic and other potential infectious disease outbreaks and terrorist attacks or other acts of violence, which may negatively affect the markets in which we and our tenants operate, adverse changes in energy prices, which if sustained, could negatively impact occupancy and rental rates in the markets in which we own properties, including energy-influenced markets such as Dallas, Denver and Houston, changes in interest rates as a result of economic market conditions or a downgrade in our credit rating, disruptions in the debt markets, economic conditions in the markets in which we own properties, risks of a lessening of demand for the types of real estate owned by us, uncertainties relating to fiscal policy, changes in government regulations and regulatory uncertainty, changes in energy prices, geopolitical events, and expenditures that cannot be anticipated such as utility rate and usage increases, delays in construction schedules, unanticipated increases in construction costs, unanticipated repairs, additional staffing, insurance increases and real estate tax valuation reassessments. See Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019 and Part II, Item 1A. “Risk Factors” below. Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. We may not update any of the forward-looking statements after the date this Quarterly Report on Form 10-Q is filed to conform them to actual results or to changes in our expectations that occur after such date, other than as required by law.

Overview

FSP Corp., or we or the Company, operates in a single reportable segment: real estate operations. The real estate operations market involves real estate rental operations, leasing, secured financing of real estate and services provided for asset management, property management, property acquisitions, dispositions and development. Our current strategy is to invest in infill and central business district office properties in the United States sunbelt and mountain west regions, as well as select opportunistic markets. We believe that the United States sunbelt and mountain west regions have macro-economic drivers that have the potential to increase occupancies and rents. We seek value-oriented investments with an eye towards long-term growth and appreciation, as well as current income.

As of June 30, 2020, approximately 7.8 million square feet, or approximately 78% of our total owned portfolio, was located in Atlanta, Dallas, Denver, Houston and Minneapolis. From time-to-time we may dispose of our smaller, suburban office assets and replace them with larger infill and central business district office assets. As we execute this strategy, short term operating results could be adversely impacted. However, we believe that the transformed portfolio has the potential to provide higher profit and asset value growth over a longer period of time.

The main factor that affects our real estate operations is the broad economic market conditions in the United States. These market conditions affect the occupancy levels and the rent levels on both a national and local level. We have no influence on broader economic/market conditions. We look to acquire and/or develop quality properties in good locations in order to lessen the impact of downturns in the market and to take advantage of upturns when they occur.

Trends and Uncertainties

COVID-19 Outbreak

Beginning in January 2020, there was a global outbreak of COVID-19, which continues to adversely impact global commercial activity and has contributed to significant volatility in financial markets. It has already disrupted global travel

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and supply chains, adversely impacted global commercial activity, and its long-term economic impact remains uncertain. Considerable uncertainty still surrounds the COVID-19 pandemic and its potential effects on the population, as well as the effectiveness of any responses taken on a national and local level by government authorities and businesses. The travel restrictions, limits on hours of operations and/or closures of various businesses and other efforts to curb the spread of COVID-19 have significantly disrupted business activity globally, including in the markets where we own properties, and we expect them to have an adverse impact on our business. Many of our tenants are subject to various quarantine restrictions, and the restrictions could be in place for an extended period of time. The pandemic has had an adverse impact on economic and market conditions and triggered a global economic slowdown. The reduction in economic activity worldwide has had a significant negative effect on energy prices, which, if sustained, could have an adverse impact on occupancy and rental rates in energy-influenced markets such as Dallas, Denver and Houston, where we have a significant concentration of properties. However, the evolving nature of the pandemic makes it difficult to ascertain the long-term impact it will have on commercial real estate markets and our business. Nevertheless, the COVID-19 pandemic presents material uncertainty and risk with respect to the performance of our properties and our financial results, such as the potential negative impact to leasing efforts and occupancy at our properties, the potential closure of certain of our assets for an extended period, uncertainty regarding future rent collection levels or requests for rent concessions from our tenants, the occurrence of a default under any of our debt agreements, the potential for increased borrowing costs, a potential downgrade in our credit rating that could lead to increased borrowing costs or reduce our access to funding sources in credit and capital markets, our ability to refinance existing indebtedness or to secure new sources of capital on favorable terms, fluctuations in our level of dividends, increased costs of operations, our ability to complete required capital expenditures in a timely manner and on budget, decrease in values of our real estate assets, changes in law and/or regulation, and uncertainty regarding government and regulatory policy. We are unable to estimate the impact the COVID-19 pandemic will have on our future financial results at this time. See also Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019 and Part II, Item 1A. “Risk Factors” below.

We have been following and directing our vendors to follow the guidelines from the Centers for Disease Control (CDC) and other applicable authorities to minimize the spread of COVID-19 among our employees, tenants, vendors and visitors, as well as at our properties. We have implemented working from home policies for our employees. During the three months ended June 30, 2020 and as of August 4, 2020, all of our properties remained open for business. Although some of our tenants have requested rent concessions, and more tenants may request rent concessions or may not pay rent in the future, as of July 31, 2020, we had collected approximately 97% of rental receipts due in July 2020. Future rent concession requests or nonpayment of rent could lead to increased customer delinquencies and/or defaults under leases, a lower demand for rentable space leading to increased concessions and, may in some instances, seek extended lease terms, or lower occupancy, and/or capital expenditures, or reduced rental rates to maintain occupancies. We review each rent concession request on a case by case basis and may or may not provide rent concessions, depending on the specific circumstances involved. Cash, cash equivalents and restricted cash were $2.9 million as of June 30, 2020. Management believes that existing cash, cash anticipated to be generated internally by operations and our existing availability under the BAML Revolver ($570 million as of June 30, 2020) will be sufficient to meet working capital requirements and anticipated capital expenditures for at least the next 12 months. Although there is no guarantee that we will be able to obtain the funds necessary for our future growth, we anticipate generating funds from continuing real estate operations. We believe that we have adequate funds to cover unusual expenses and capital improvements, in addition to normal operating expenses. Our ability to maintain or increase our level of dividends to stockholders, however, depends in significant part upon the level of rental income from our real estate properties.

Economic Conditions

The economy in the United States is currently in an economic downturn with recessionary concerns as a result of the COVID-19 pandemic. Economic conditions directly affect the demand for office space, our primary income producing asset. The broad economic market conditions in the United States are typically affected by numerous factors, including but not limited to, inflation and employment levels, energy prices, the pace of economic growth and/or recessionary concerns, uncertainty about government fiscal, monetary, trade and tax policies, changes in currency exchange rates, geopolitical events, the regulatory environment, the availability of credit, and interest rates. As of the date of this report, the impact of the COVID-19 pandemic and related fallout from containment and mitigation measures, such as work from home arrangements and the closing of various businesses, is disproportionately affecting current economic conditions in the United States.

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Real Estate Operations

Leasing

As of June 30, 2020, our real estate portfolio was comprised of 32 operating properties, which we refer to as our operating properties, and 3 redevelopment properties, which we refer to as our redevelopment properties, that are in the process of being redeveloped, or are completed but not yet stabilized. We collectively refer to our operating and our redevelopment properties as our owned portfolio. Our 32 operating properties were approximately 84.5% leased as of June 30, 2020, a decrease from 87.6% leased as of December 31, 2019. The 3.1% decrease in leased space was a result of the impact of lease expirations and terminations, which exceeded leasing completed during the six months ended June 30, 2020. As of June 30, 2020, we had approximately 1,476,000 square feet of vacancy in our operating properties compared to approximately 1,175,000 square feet of vacancy at December 31, 2019. During the six months ended June 30, 2020, we leased approximately 324,000 square feet of office space, of which approximately 158,000 square feet were with existing tenants, at a weighted average term of 6.1 years. On average, tenant improvements for such leases were $22.91 per square foot, lease commissions were $7.85 per square foot and rent concessions were approximately four months of free rent. Average GAAP base rents under such leases were $31.28 per square foot, or 10.3% higher than average rents in the respective properties as applicable compared to the year ended December 31, 2019.

As of June 30, 2020, our three redevelopment properties included an approximately 130,000 square foot redevelopment property known as 801 Marquette in Minneapolis, Minnesota, an approximately 213,000 square foot property known as Blue Lagoon in Miami, Florida and an approximately 62,000 square foot property known as Forest Park in Charlotte, North Carolina. Given the length of the redevelopment and lease-up process, these properties are not classified as an operating property until, in some cases, years after we commence the project.

The redevelopment at 801 Marquette was substantially completed at the end of the second quarter of 2017 and is in the process of being leased up; however, it is not stabilized. As of June 30, 2020, we had leases signed and tenants occupying approximately 37.0% of the rentable square feet of the property. We expect to incur redevelopment and lease-up costs of $29.6 million, of which we had incurred approximately $23.1 million as of June 30, 2020.

The redevelopment of Blue Lagoon commenced in December 2018 following the maturity of a lease with a major tenant that occupied 100% of the property. On September 13, 2019, we entered into a lease agreement with a new tenant with an initial term of 16 years for approximately 156,000 square feet, or 73.1% of the property’s rentable square feet. We expect to incur total restoration, redevelopment and lease-up costs of $39.6 million, which include work on the roof of the building, costs to make the space suitable for multiple tenants and to increase parking at the property. As of June 30, 2020, we had incurred approximately $13.3 million in total redevelopment costs. We anticipate completing the redevelopment by the end of 2020.

The redevelopment of Forest Park commenced in January 2019 following the maturity of a lease with a tenant that occupied 100% of the property through December 31, 2018. We expect to incur total redevelopment and lease-up costs of $5.7 million, which include interior work to make the space suitable for multiple tenants. As of June 30, 2020, we had incurred approximately $1.1 million in redevelopment costs. We completed the redevelopment during the three months ended June 30, 2020. We have a lease with one tenant for approximately 22,000 square feet or approximately 35.6% of the total rentable square feet, for an initial term of 11 years.

As of June 30, 2020, leases for approximately 1.8% and 9.0% of the square footage in our owned portfolio are scheduled to expire during 2020 and 2021, respectively. As the third quarter of 2020 begins, we believe that our operating properties are well stabilized, with a balanced lease expiration schedule, and that existing vacancy is being actively marketed to numerous potential tenants. While leasing activity at our properties has continued, we believe that the COVID-19 pandemic and related containment and mitigation measures may limit or delay new tenant leasing during at least the third quarter of 2020 and potentially in future periods.

While we cannot generally predict when an existing vacancy in our owned portfolio will be leased or if existing tenants with expiring leases will renew their leases or what the terms and conditions of the lease renewals will be, we expect to renew or sign new leases at then-current market rates for locations in which the buildings are located, which could be above or below the expiring rates. Also, we believe the potential for any of our tenants to default on its lease or to seek the protection of

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bankruptcy exists. If any of our tenants defaults on its lease, we may experience delays in enforcing our rights as a landlord and may incur substantial costs in protecting our investment. In addition, at any time, a tenant of one of our properties may seek the protection of bankruptcy laws, which could result in the rejection and termination of such tenant’s lease and thereby cause a reduction in cash available for distribution to our stockholders.

Critical Accounting Policies

We have certain critical accounting policies that are subject to judgments and estimates by our management and uncertainties of outcome that affect the application of these policies. We base our estimates on historical experience and on various other assumptions we believe to be reasonable under the circumstances. On an on-going basis, we evaluate our estimates. In the event estimates or assumptions prove to be different from actual results, adjustments are made in subsequent periods to reflect more current information. The accounting policies that we believe are most critical to the understanding of our financial position and results of operations, and that require significant management estimates and judgments, are discussed in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2019.

Critical accounting policies are those that have the most impact on the reporting of our financial condition and results of operations and those requiring significant judgments and estimates. We believe that our judgments and assessments are consistently applied and produce financial information that fairly presents our results of operations.

Recent Accounting Standards

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which requires that entities use a new forward looking “expected loss” model that generally will result in the earlier recognition of allowance for credit losses. The measurement of expected credit losses is based upon historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company’s Sponsored REIT Loan (as defined in Note 2 of our consolidated financial statements) receivables are within the scope of this standard. The Company’s receivables associated with its real estate operating leases are not within the scope of this standard and our analysis was completed using a Probability of Default / Loss Given Default Model. The Company adopted this standard on January 1, 2020. The adoption of this standard did not have a material impact on our consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”). The ASU is intended to improve the effectiveness of fair value measurement disclosures. ASU 2018-13 is effective for all entities for annual periods beginning after December 15, 2019. This ASU amends existing fair value measurement disclosure requirements by adding, changing, or removing certain disclosures. ASU 2018-13 will be effective for the Company as of January 1, 2020, and earlier adoption is permitted. The Company adopted this standard on January 1, 2020. The adoption of this standard did not have a material impact on our consolidated financial statements.

In April 2019, the FASB issued ASU No. 2019-04, Codification Improvements to Topics 326, Financial Instruments - Credit Losses, Topic 815 Derivatives and Hedging and Topic 825, Financial Instruments (“ASU 2019-04”). The ASU clarifies areas of guidance related to the recently issued standards on credit losses (Topic 326), derivatives and hedging (Topic 815), and recognition and measurement of financial instruments (Topic 825). The new guidance is effective for fiscal years beginning after December 15, 2019, and early adoption is permitted. The Company adopted this standard on January 1, 2020. The adoption of this standard did not have a material impact on our consolidated financial statements.

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”). The ASU contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. The Company is currently assessing the potential impact that the adoption of ASU 2020-04 may have on its consolidated financial statements.

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Results of Operations

The following table shows financial results for the three months ended June 30, 2020 and 2019:

	Three months ended June 30,
(in thousands)	2020		2019		Change
Revenues:
Rental	$	60,398	$	65,485	$	(5,087)
Related party revenue:
Management fees and interest income from loans		405		1,322		(917)
Other		5		6		(1)
Total revenues		60,808		66,813		(6,005)
Expenses:
Real estate operating expenses		15,470		17,116		(1,646)
Real estate taxes and insurance		12,307		12,801		(494)
Depreciation and amortization		22,245		22,109		136
General and administrative		3,817		3,702		115
Interest		8,980		9,371		(391)
Total expenses		62,819		65,099		(2,280)
Income (loss) before taxes		(2,011)		1,714		(3,725)
Tax expense on income		64		81		(17)
Net income (loss)	$	(2,075)	$	1,633	$	(3,708)

Comparison of the three months ended June 30, 2020 to the three months ended June 30, 2019:

Revenues

Total revenues decreased by $6.0 million to $60.8 million for the three months ended June 30, 2020, as compared to the three months ended June 30, 2019. The decrease was primarily a result of:

● A decrease in rental revenue of approximately $5.1 million arising primarily from the loss of rental income from leases that expired after June 30, 2019 during the three months ended June 30, 2020 compared to the same period in 2019. These decreases were partially offset by rental income earned from leases commencing after June 30, 2019. Our leased space in our operating properties was 84.5% at June 30, 2020 and 88.1% at June 30, 2019.

● A decrease of approximately $0.9 million in interest income from Sponsored REIT Loans primarily as a result of repayment of approximately $51 million of these loans in June 2019.

Expenses

Total expenses decreased by $2.3 million to $62.8 million for the three months ended June 30, 2020, as compared to the three months ended June 30, 2019. The decrease was primarily a result of:

● A decrease in real estate operating expenses and real estate taxes and insurance of approximately $2.1 million.

● A decrease in interest expense of approximately $0.4 million. The decrease was primarily attributable to lower interest rates during the three months ended June 30, 2020 compared to the same period in 2019.

These increases were partially offset by:

● An increase to depreciation and amortization of approximately $0.1 million.

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● An increase in general and administrative expenses of $0.1 million, which was primarily from personnel costs.

Tax expense on income

Included in income taxes is the Revised Texas Franchise Tax, which is a tax on revenues from Texas properties, which decreased $17,000 during the three months ended June 30, 2020 compared to the three months ended June 30, 2019.

Net loss

Net loss for the three months ended June 30, 2020 was $2.1 million compared to a net income of $1.6 million for the three months ended June 30, 2019, for the reasons described above.

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The following table shows financial results for the six months ended June 30, 2020 and 2019:

	Six months ended June 30,
(in thousands)	2020		2019		Change
Revenues:
Rental	$	122,965	$	128,844	$	(5,879)
Related party revenue:
Management fees and interest income from loans		808		2,674		(1,866)
Other		18		11		7
Total revenues		123,791		131,529		(7,738)
Expenses:
Real estate operating expenses		32,768		34,842		(2,074)
Real estate taxes and insurance		24,069		24,903		(834)
Depreciation and amortization		44,583		45,354		(771)
General and administrative		7,342		7,211		131
Interest		18,043		18,739		(696)
Total expenses		126,805		131,049		(4,244)
Income (loss) before taxes on income		(3,014)		480		(3,494)
Tax expense on income		132		52		80
Net income (loss)	$	(3,146)	$	428	$	(3,574)

Comparison of the six months ended June 30, 2020 to the six months ended June 30, 2019:

Revenues

Total revenues decreased by $7.7 million to $123.8 million for the six months ended June 30, 2020, as compared to the six months ended June 30, 2019. The decrease was primarily a result of:

● A decrease in rental revenue of approximately $5.9 million arising primarily from the loss of rental income from leases that expired after June 30, 2019 during the six months ended June 30, 2020 compared the same period in 2019. These decreases were partially offset by rental income earned from leases commencing after June 30, 2019. Our leased space in our operating properties was 84.5% at June 30, 2020 and 88.1% at June 30, 2019.

● A decrease of approximately $1.8 million in interest income from Sponsored REIT Loans primarily as a result of repayment of approximately $51 million of these loans in June 2019.

Expenses

Total expenses decreased by $4.2 million to $126.8 million for the six months ended June 30, 2020, as compared to the six months ended June 30, 2019. The increase was primarily a result of:

● A decrease in real estate operating expenses and real estate taxes and insurance of approximately $2.9 million.

● A decrease in depreciation and amortization of approximately $0.7 million.

● A decrease in interest expense of approximately $0.7 million. The decrease was primarily attributable to lower interest rates during the six months ended June 30, 2020 compared to the same period in 2019.

These decreases were partially offset by:

● An increase in general and administrative expenses of $0.1 million, which was primarily from personnel costs.

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Tax expense on income

Included in income taxes is the Revised Texas Franchise Tax, which is a tax on revenues from Texas properties, which decreased $32,000, and benefits from federal and other income taxes, which decreased by $112,000, during the six months ended June 30, 2019 compared to the six months ended June 30, 2020, primarily as a result of a refund arising due to the provisions of the Tax Cuts and Jobs Act of 2017 during the six months ended June 30, 2019.

Net loss

Net loss for the six months ended June 30, 2020 was $3.1 million compared to a net income of $0.4 million for the six months ended June 30, 2019, for the reasons described above.

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Non-GAAP Financial Measures

Funds From Operations

The Company evaluates performance based on Funds From Operations, which we refer to as FFO, as management believes that FFO represents the most accurate measure of activity and is the basis for distributions paid to equity holders. The Company defines FFO as net income or loss (computed in accordance with GAAP), excluding gains (or losses) from sales of property, hedge ineffectiveness, acquisition costs of newly acquired properties that are not capitalized and lease acquisition costs that are not capitalized plus depreciation and amortization, including amortization of acquired above and below market lease intangibles and impairment charges on properties or investments in non-consolidated REITs, and after adjustments to exclude equity in income or losses from, and, to include the proportionate share of FFO from, non-consolidated REITs.

FFO should not be considered as an alternative to net income or loss (determined in accordance with GAAP), nor as an indicator of the Company’s financial performance, nor as an alternative to cash flows from operating activities (determined in accordance with GAAP), nor as a measure of the Company’s liquidity, nor is it necessarily indicative of sufficient cash flow to fund all of the Company’s needs.

Other real estate companies and the National Association of Real Estate Investment Trusts, or NAREIT, may define this term in a different manner. We have included the NAREIT FFO definition as of May 17, 2016 in the table and note that other REITs may not define FFO in accordance with the NAREIT definition or may interpret the current NAREIT definition differently than we do.

We believe that in order to facilitate a clear understanding of the results of the Company, FFO should be examined in connection with net income or loss and cash flows from operating, investing and financing activities in the consolidated financial statements.

The calculations of FFO are shown in the following table:

	For the					For the
	Three Months Ended					Six Months Ended
	June 30,					June 30,
(in thousands):	2020			2019		2020			2019
Net income (loss)	$	(2,075)	$		1,633	$	(3,146)	$		428
Depreciation and amortization		22,170			22,028		44,435			45,161
NAREIT FFO		20,095			23,661		41,289			45,589
Lease Acquisition costs		99			108		197			290
Funds From Operations	$	20,194		$	23,769	$	41,486		$	45,879

Net Operating Income (NOI)

The Company provides property performance based on Net Operating Income, which we refer to as NOI. Management believes that investors are interested in this information. NOI is a non-GAAP financial measure that the Company defines as net income or loss (the most directly comparable GAAP financial measure) plus selling, general and administrative expenses, depreciation and amortization, including amortization of acquired above and below market lease intangibles and impairment charges, interest expense, less equity in earnings of nonconsolidated REITs, interest income, management fee income, hedge ineffectiveness, gains or losses on the sale of assets and excludes non-property specific income and expenses. The information presented includes footnotes and the data is shown by region with properties owned in the periods presented, which we call Same Store. The comparative Same Store results include properties held for the periods presented and exclude properties that are non-operating, being developed or redeveloped, dispositions and significant nonrecurring income such as bankruptcy settlements and lease termination fees. NOI, as defined by the Company, may not be comparable to NOI reported by other REITs that define NOI differently. NOI should not be considered an alternative to

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net income or loss as an indication of our performance or to cash flows as a measure of the Company’s liquidity or its ability to make distributions. The calculations of NOI are shown in the following table:

Net Operating Income (NOI)*

	Rentable
	Square					Six Months						Six Months
	Feet	Three Months Ended				Ended		Three Months Ended				Ended		Inc		%
(in thousands)	or RSF	31-Mar-20		30-Jun-20		30-Jun-20		31-Mar-19		30-Jun-19		30-Jun-19		(Dec)		Change
Region
East	944	$	2,664	$	2,746	$	5,410	$	3,185	$	3,301	$	6,486	$	(1,076)	(16.6)	%
MidWest	1,557		5,485		5,088		10,573		5,163		5,174		10,337		236	2.3	%
South	4,387		13,290		13,025		26,315		14,272		15,196		29,468		(3,153)	(10.7)	%
West	2,620		11,463		11,211		22,674		10,559		11,240		21,799		875	4.0	%
Property NOI* from Operating Properties	9,508		32,902		32,070		64,972		33,179		34,911		68,090		(3,118)	(4.6)	%
Dispositions and Redevelopment Properties	405		(28)		126		98		(205)		(215)		(420)		518	0.8	%
Property NOI*	9,913	$	32,874	$	32,196	$	65,070	$	32,974	$	34,696	$	67,670	$	(2,600)	(3.8)	%
Same Store		$	32,902	$	32,070	$	64,972	$	33,179	$	34,911	$	68,090	$	(3,118)	(4.6)	%
Less Nonrecurring
Items in NOI* (a)			26		810		836		35		706		741		95	(0.2)	%
Comparative
Same Store		$	32,876	$	31,260	$	64,136	$	33,144	$	34,205	$	67,349	$	(3,213)	(4.8)	%
							Six Months						Six Months
		Three Months Ended					Ended	Three Months Ended					Ended
Reconciliation to Net Income (Loss)		31-Mar-20			30-Jun-20		30-Jun-20	31-Mar-19			30-Jun-19		30-Jun-19
Net loss		$	(1,071)	$	(2,075)	$	(3,146)	$	(1,205)	$	1,633	$	428
Add (deduct):
Management fee income			(478)		(446)		(924)		(677)		(645)		(1,322)
Depreciation and amortization			22,338		22,245		44,583		23,245		22,109		45,354
Amortization of above/below market leases			(73)		(75)		(148)		(112)		(81)		(193)
General and administrative			3,525		3,817		7,342		3,509		3,703		7,212
Interest expense			9,063		8,980		18,043		9,368		9,371		18,739
Interest income			(382)		(381)		(763)		(1,294)		(1,259)		(2,553)
Non-property specific items, net			(48)		131		83		140		(135)		5
Property NOI*		$	32,874	$	32,196	$	65,070	$	32,974	$	34,696	$	67,670

(a) Nonrecurring Items in NOI include proceeds from bankruptcies, lease termination fees or other significant nonrecurring income or expenses, which may affect comparability.

*Excludes NOI from investments in and interest income from secured loans to non-consolidated REITs.

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The information presented below provides the weighted average GAAP rent per square foot for the six months ended June 30, 2020 for our properties and weighted occupancy square feet and percentages. GAAP rent includes the impact of tenant concessions and reimbursements. This table does not include information about properties held by our investments in non-consolidated REITs or those to which we have provided Sponsored REIT Loans.

						Weighted
						Occupied		Weighted
			Year Built		Weighted	Percentage as of		Average
			or	Net Rentable	Occupied	June 30,		Rent per Occupied
Property Name	City	State	Renovated	Square Feet	Sq. Ft.	2020 (a)		Square Feet (b)
Meadow Point	Chantilly	VA	1999	138,537	113,864	82.2	%	$	23.19
Innsbrook	Glen Allen	VA	1999	298,183	170,680	57.2	%		18.91
Loudoun Tech Center	Dulles	VA	1999	136,658	135,209	98.9	%		18.27
Stonecroft	Chantilly	VA	2008	111,469	-	—	%		—
Emperor Boulevard	Durham	NC	2009	259,531	259,531	100.0	%		32.37
East total				944,378	679,284	71.9	%		24.64
Northwest Point	Elk Grove Village	IL	1999	177,095	177,095	100.0	%		27.79
909 Davis Street	Evanston	IL	2002	195,098	182,104	93.3	%		41.14
River Crossing	Indianapolis	IN	1998	205,729	201,553	98.0	%		24.40
Timberlake	Chesterfield	MO	1999	234,496	224,319	95.7	%		27.24
Timberlake East	Chesterfield	MO	2000	117,036	117,036	100.0	%		26.67
121 South 8th Street	Minneapolis	MN	1974	297,209	263,208	88.6	%		22.76
Plaza Seven	Minneapolis	MN	1987	330,096	291,904	88.4	%		31.24
Midwest total				1,556,759	1,457,219	93.6	%		28.60
One Overton Park	Atlanta	GA	2002	387,267	320,928	82.9	%		24.30
Park Ten	Houston	TX	1999	157,460	112,962	71.7	%		26.01
Addison Circle	Addison	TX	1999	289,302	216,571	74.9	%		33.03
Collins Crossing	Richardson	TX	1999	300,887	239,265	79.5	%		26.79
Eldridge Green	Houston	TX	1999	248,399	248,399	100.0	%		29.81
Park Ten Phase II	Houston	TX	2006	156,746	135,068	86.2	%		28.16
Liberty Plaza	Addison	TX	1985	216,847	157,149	72.5	%		23.20
Legacy Tennyson Center	Plano	TX	1999/2008	207,049	190,154	91.8	%		29.90
One Legacy Circle	Plano	TX	2008	214,110	95,257	44.5	%		36.72

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The information presented below provides the weighted average GAAP rent per square foot for the six months ended June 30, 2020 for our properties and weighted occupancy square feet and percentages. GAAP rent includes the impact of tenant concessions and reimbursements. This table does not include information about properties held by our investments in non-consolidated REITs or those to which we have provided Sponsored REIT Loans.

						Weighted
						Occupied		Weighted
			Year Built		Weighted	Percentage as of		Average
			or	Net Rentable	Occupied	June 30,		Rent per Occupied
Property Name	City	State	Renovated	Square Feet	Sq. Ft.	2020 (a)		Square Feet (b)
One Ravinia Drive	Atlanta	GA	1985	386,602	334,140	86.4	%	$	27.27
Two Ravinia Drive	Atlanta	GA	1987	411,047	276,224	67.2	%		27.19
Westchase I & II	Houston	TX	1983/2008	629,025	351,814	55.9	%		29.46
Pershing Park Plaza	Atlanta	GA	1989	160,145	158,047	98.7	%		32.22
999 Peachtree	Atlanta	GA	1987	621,946	534,625	86.0	%		33.17
South Total				4,386,832	3,370,603	76.8	%		29.12
380 Interlocken	Broomfield	CO	2000	240,359	173,996	72.4	%		33.30
1999 Broadway	Denver	CO	1986	677,377	539,125	79.6	%		32.56
1001 17th Street	Denver	CO	1977/2006	655,420	642,770	98.1	%		36.79
600 17th Street	Denver	CO	1982	609,353	527,151	86.5	%		32.20
Greenwood Plaza	Englewood	CO	2000	196,236	196,236	100.0	%		25.10
390 Interlocken	Broomfield	CO	2002	241,512	238,107	98.6	%		33.73
West Total				2,620,257	2,317,385	88.4	%		33.20
Total Operating Properties				9,508,226	7,824,491	82.3	%		29.84
Redevelopment Properties (c)
Forest Park	Charlotte	NC	1999	62,212	—	—	%		—
Blue Lagoon Drive	Miami	FL	2002	213,182	—	—	%		—
801 Marquette Ave	Minneapolis	MN	1923/2017	129,821	48,021	37.0	%		28.37
Total Redevelopment Properties				405,215	48,021	11.9	%		28.37
Grand Total				9,913,441	7,872,512	79.4	%	$	29.83

(a) Based on weighted occupied square feet for the six months ended June 30, 2020, including month-to-month tenants, divided by the Property’s net rentable square footage.

(b)Represents annualized GAAP rental revenue for the six months ended June 30, 2020, per weighted occupied square foot.

(c)Redevelopment Properties include properties in the process of being redeveloped, or are completed but not yet stabilized.

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Liquidity and Capital Resources

Cash, cash equivalents and restricted cash were $2.9 million and $9.8 million at June 30, 2020 and December 31, 2019, respectively. The decrease of $6.9 million is attributable to $25.6 million provided by operating activities, less $43.2 million used for investing activities plus $10.7 million provided by financing activities. Management believes that existing cash, cash anticipated to be generated internally by operations and our existing debt financing will be sufficient to meet working capital requirements and anticipated capital expenditures for at least the next 12 months. Although there is no guarantee that we will be able to obtain the funds necessary for our future growth, we anticipate generating funds from continuing real estate operations. We believe that we have adequate funds to cover unusual expenses and capital improvements, in addition to normal operating expenses. Our ability to maintain or increase our level of dividends to stockholders, however, depends in significant part upon the level of rental income from our real estate properties.

Operating Activities

Cash provided by operating activities for the six months ended June 30, 2020 of $25.6 million is primarily attributable to a net loss of $3.1 million plus the add-back of $44.8 million of non-cash expenses, less a decrease in accounts payable and accrued compensation of $11.1 million, an increase in payment of deferred leasing commissions of $3.7 million, an increase in lease acquisition costs of $0.8 million, an increase in tenant rent receivables of $0.3 million and a decrease in tenant security deposits of $0.2 million.

Investing Activities

Cash used for investing activities for the six months ended June 30, 2020 of $43.2 million is primarily attributable to purchases of other real estate assets and office equipment investments of approximately $43.2 million.

Financing Activities

Cash provided by financing activities for the six months ended June 30, 2020 of $10.7 million is primarily attributable to net borrowings on the BAML Revolver (as defined below) of $30.0 million and was partially offset by distributions paid to stockholders of $19.3 million.

JPM Term Loan

On August 2, 2018, the Company entered into an Amended and Restated Credit Agreement with JPMorgan Chase Bank, N.A., as administrative agent and lender (“JPMorgan”), and the other lending institutions party thereto (the “JPM Credit Agreement”), which provides a single unsecured bridge loan in the aggregate principal amount of $150 million (the “JPM Term Loan”) that remains fully advanced and outstanding. The JPM Term Loan matures on November 30, 2021. The JPM Term Loan was previously evidenced by a Credit Agreement, dated November 30, 2016, among the Company, JPMorgan, as administrative agent and lender, and the other lending institutions party thereto, as amended by a First Amendment, dated October 18, 2017.

The JPM Term Loan bears interest at either (i) a number of basis points over a LIBOR-based rate depending on the Company’s credit rating (125.0 basis points over the LIBOR-based rate at June 30, 2020) or (ii) a number of basis points over the base rate depending on the Company’s credit rating (25.0 basis points over the base rate at June 30, 2020).

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Although the interest rate on the JPM Term Loan is variable under the JPM Credit Agreement, the Company fixed the LIBOR-based rate on a portion of the JPM Term Loan by entering into interest rate swap transactions. On March 7, 2019, the Company entered into ISDA Master Agreements with various financial institutions to hedge a $100 million portion of the future LIBOR-based rate risk under the JPM Credit Agreement. Effective March 29, 2019, the Company fixed the LIBOR-based rate at 2.44% per annum on a $100 million portion of the JPM Term Loan until November 30, 2021. Accordingly, based upon the Company’s credit rating, as of June 30, 2020, the effective interest rate on a $100 million portion of the JPM Term Loan was 3.69% per annum.

Based upon the Company’s credit rating, as of June 30, 2020, the effective interest rate on the unhedged $50 million portion of the JPM Term Loan was 1.44% per annum. The weighted average interest rate on the unhedged $50 million portion of the JPM Term Loan during the six months ended June 30, 2020 was approximately 2.36% per annum. The weighted average interest rate on the JPM Term Loan during the year ended December 31, 2019 was approximately 3.54% per annum.

The JPM Credit Agreement contains customary affirmative and negative covenants for credit facilities of this type, including limitations with respect to indebtedness, liens, investments, mergers and acquisitions, disposition of assets, changes in business, certain restricted payments, the requirement to have subsidiaries provide a guaranty in the event that they incur recourse indebtedness and transactions with affiliates. The JPM Credit Agreement also contains financial covenants that require the Company to maintain a minimum tangible net worth, a minimum fixed charge coverage ratio, a maximum secured leverage ratio, a maximum leverage ratio, a maximum unencumbered leverage ratio, and minimum unsecured interest coverage. The JPM Credit Agreement provides for customary events of default with corresponding grace periods, including failure to pay any principal or interest when due, certain cross defaults and a change in control of the Company (as defined in the JPM Credit Agreement). In the event of a default by the Company, the administrative agent may, and at the request of the requisite number of lenders shall, declare all obligations under the JPM Credit Agreement immediately due and payable, and enforce any and all rights of the lenders or administrative agent under the JPM Credit Agreement and related documents. For certain events of default related to bankruptcy, insolvency, and receivership, all outstanding obligations of the Company will become immediately due and payable. The Company was in compliance with the JPM Term Loan financial covenants as of June 30, 2020.

BMO Term Loan

On September 27, 2018, the Company entered into a Second Amended and Restated Credit Agreement with the lending institutions party thereto and Bank of Montreal (“BMO”), as administrative agent (the “BMO Credit Agreement”). The BMO Credit Agreement provides for a single, unsecured term loan borrowing in the amount of $220 million (the “BMO Term Loan”) that remains fully advanced and outstanding. The BMO Term Loan consists of a $55 million tranche A term loan and a $165 million tranche B term loan. The tranche A term loan matures on November 30, 2021 and the tranche B term loan matures on January 31, 2024. The BMO Credit Agreement also includes an accordion feature that allows up to $100 million of additional loans, subject to receipt of lender commitments and satisfaction of certain customary conditions. The BMO Term Loan was previously evidenced by an Amended and Restated Credit Agreement, dated October 29, 2014, among the Company, BMO, as administrative agent and lender, and the other lending institutions party thereto, as amended by a First Amendment, dated July 21, 2016, and a Second Amendment, dated October 18, 2017.

The BMO Term Loan bears interest at either (i) a number of basis points over LIBOR depending on the Company’s credit rating (125 basis points over LIBOR at June 30, 2020) or (ii) a number of basis points over the base rate depending on the Company’s credit rating (25 basis points over the base rate at June 30, 2020).

Although the interest rate on the BMO Term Loan is variable under the BMO Credit Agreement, the Company fixed the base LIBOR interest rate by entering into interest rate swap transactions. On August 26, 2013, the Company entered into an ISDA Master Agreement with Bank of Montreal that fixed the base LIBOR interest rate on the BMO Term Loan at 2.32% per annum until August 26, 2020. On February 20, 2019, the Company entered into ISDA Master Agreements with a group of banks that fixed the base LIBOR interest rate on the BMO Term Loan at 2.39% per annum for the period beginning on August 26, 2020 and ending January 31, 2024. Accordingly, based upon the Company’s credit rating, as of June 30, 2020, the effective interest rate on the BMO Term Loan was 3.57% per annum.

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The BMO Credit Agreement contains customary affirmative and negative covenants for credit facilities of this type, including limitations with respect to indebtedness, liens, investments, mergers and acquisitions, disposition of assets, changes in business, certain restricted payments, the requirement to have subsidiaries provide a guaranty in the event that they incur recourse indebtedness and transactions with affiliates. The BMO Credit Agreement also contains financial covenants that require the Company to maintain a minimum tangible net worth, a maximum leverage ratio, a maximum secured leverage ratio, a minimum fixed charge coverage ratio, a maximum unencumbered leverage ratio, and minimum unsecured interest coverage. The BMO Credit Agreement provides for customary events of default with corresponding grace periods, including failure to pay any principal or interest when due, certain cross defaults and a change in control of the Company (as defined in the BMO Credit Agreement). In the event of a default by the Company, the administrative agent may, and at the request of the requisite number of lenders shall, declare all obligations under the BMO Credit Agreement immediately due and payable, terminate the lenders’ commitments to make loans under the BMO Credit Agreement, and enforce any and all rights of the lenders or the administrative agent under the BMO Credit Agreement and related documents. For certain events of default related to bankruptcy, insolvency, and receivership, the commitments of lenders will be automatically terminated and all outstanding obligations of the Company will become immediately due and payable. The Company was in compliance with the BMO Term Loan financial covenants as of June 30, 2020.

BAML Credit Facility

On July 21, 2016, the Company entered into a First Amendment (the “BAML First Amendment”), and on October 18, 2017, the Company entered into a Second Amendment (the “BAML Second Amendment”), to the Second Amended and Restated Credit Agreement dated October 29, 2014 among the Company, the lending institutions party thereto and Bank of America, N.A., as administrative agent, L/C Issuer and Swing Line Lender (as amended by the BAML First Amendment and the BAML Second Amendment, the “BAML Credit Facility”) that continued an existing unsecured revolving line of credit (the “BAML Revolver”) and extended the maturity of an existing term loan (the “BAML Term Loan”).

BAML Revolver Highlights

● The BAML Revolver is for borrowings, at the Company's election, of up to $600 million. Borrowings made pursuant to the BAML Revolver may be revolving loans, swing line loans or letters of credit, the combined sum of which may not exceed $600 million outstanding at any time.

● Borrowings made pursuant to the BAML Revolver may be borrowed, repaid and reborrowed from time to time until the initial maturity date of January 12, 2022. The Company has the right to extend the maturity date of the BAML Revolver by two additional six month periods, or until January 12, 2023, upon payment of a fee and satisfaction of certain customary conditions.

● The BAML Credit Facility includes an accordion feature that allows for an aggregate amount of up to $500 million of additional borrowing capacity applicable to the BAML Revolver and/or the BAML Term Loan, subject to receipt of lender commitments and satisfaction of certain customary conditions.

As of June 30, 2020, there were borrowings of $30 million outstanding under the BAML Revolver. The BAML Revolver bears interest at either (i) a margin over LIBOR depending on the Company’s credit rating (1.20% over LIBOR at June 30, 2020) or (ii) a margin over the base rate depending on the Company’s credit rating (0.20% over the base rate at June 30, 2020). The BAML Credit Facility also obligates the Company to pay an annual facility fee in an amount that is also based on the Company’s credit rating. The facility fee is assessed against the total amount of the BAML Revolver, or $600 million (0.25% at June 30, 2020).

Based upon the Company’s credit rating, as of June 30, 2020, the interest rate on the BAML Revolver was 1.36% per annum. The weighted average interest rate on all amounts outstanding on the BAML Revolver during the six months ended June 30, 2020 was approximately 2.01% per annum. As of December 31, 2019, there were no borrowings outstanding under the BAML Revolver. The weighted average interest rate on all amounts outstanding on the BAML Revolver during the year ended December 31, 2019 was approximately 3.67% per annum.

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BAML Term Loan Highlights

● The BAML Term Loan is for $400 million.

● The BAML Term Loan matures on January 12, 2023.

● The BAML Credit Facility includes an accordion feature that allows for an aggregate amount of up to $500 million of additional borrowing capacity applicable to the BAML Revolver and/or the BAML Term Loan, subject to receipt of lender commitments and satisfaction of certain customary conditions.

● On September 27, 2012, the Company drew down the entire $400 million under the BAML Term Loan and such amount remains fully advanced and outstanding under the BAML Term Loan.

The BAML Term Loan bears interest at either (i) a margin over LIBOR depending on the Company’s credit rating (1.35% over LIBOR at June 30, 2020) or (ii) a margin over the base rate depending on the Company’s credit rating (0.35% over the base rate at June 30, 2020).

Although the interest rate on the BAML Credit Facility is variable, the Company fixed the base LIBOR interest rate on the BAML Term Loan by entering into interest rate swap transactions. On July 22, 2016, the Company entered into ISDA Master Agreements with a group of banks that fixed the base LIBOR interest rate on the BAML Term Loan at 1.12% per annum for the period beginning on September 27, 2017 and ending on September 27, 2021. Accordingly, based upon the Company’s credit rating, as of June 30, 2020, the effective interest rate on the BAML Term Loan was 2.47% per annum.

BAML Credit Facility General Information

The BAML Credit Facility contains customary affirmative and negative covenants for credit facilities of this type, including limitations with respect to indebtedness, liens, investments, mergers and acquisitions, disposition of assets, changes in business, certain restricted payments, the requirement to have subsidiaries provide a guaranty in the event that they incur recourse indebtedness and transactions with affiliates. The BAML Credit Facility also contains financial covenants that require the Company to maintain a minimum tangible net worth, a maximum leverage ratio, a maximum secured leverage ratio, a minimum fixed charge coverage ratio, a maximum unencumbered leverage ratio, and minimum unsecured interest coverage. The BAML Credit Facility provides for customary events of default with corresponding grace periods, including failure to pay any principal or interest when due, certain cross defaults and a change in control of the Company (as defined in the BAML Credit Facility). In the event of a default by the Company, the administrative agent may, and at the request of the requisite number of lenders shall, declare all obligations under the BAML Credit Facility immediately due and payable, terminate the lenders’ commitments to make loans under the BAML Credit Facility, and enforce any and all rights of the lenders or administrative agent under the BAML Credit Facility and related documents. For certain events of default related to bankruptcy, insolvency, and receivership, the commitments of lenders will be automatically terminated and all outstanding obligations of the Company will become immediately due and payable. The Company was in compliance with the BAML Credit Facility financial covenants as of June 30, 2020.

The Company may use the proceeds of the loans under the BAML Credit Facility to finance the acquisition of real properties and for other permitted investments; to finance investments associated with Sponsored REITs to refinance or retire indebtedness and for working capital and other general business purposes, in each case to the extent permitted under the BAML Credit Facility.

Senior Notes

On October 24, 2017, the Company entered into a note purchase agreement (the “Note Purchase Agreement”) with the various purchasers named therein (the “Purchasers”) in connection with a private placement of senior unsecured notes. Under the Note Purchase Agreement, the Company agreed to sell to the Purchasers an aggregate principal amount of $200 million of senior unsecured notes consisting of (i) 3.99% Series A Senior Notes due December 20, 2024 in an aggregate principal amount of $116 million (the “Series A Notes”) and (ii) 4.26% Series B Senior Notes due December 20, 2027 in an aggregate principal amount of $84 million (the “Series B Notes” and, together with the Series A Notes, the “Senior Notes”). On December 20, 2017, the Senior Notes were funded and the proceeds were used to reduce the outstanding balance of the BAML Revolver.

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The Note Purchase Agreement contains customary financial covenants, including a maximum leverage ratio, a maximum secured leverage ratio, a minimum fixed charge coverage ratio, and a maximum unencumbered leverage ratio. The Note Purchase Agreement also contains restrictive covenants that, among other things, restrict the ability of the Company and its subsidiaries to enter into transactions with affiliates, merge, consolidate, create liens, make certain restricted payments, enter into certain agreements or prepay certain indebtedness. Such financial and restrictive covenants are substantially similar to the corresponding covenants contained in the BAML Credit Facility, the BMO Credit Agreement and the JPM Credit Agreement. The Senior Notes financial covenants require, among other things, the maintenance of a fixed charge coverage ratio of at least 1.50; a maximum leverage ratio and an unsecured leverage ratio of no more than 60% (65% if there were a significant acquisition for a short period of time). In addition, the Note Purchase Agreement provides that the Note Purchase Agreement will automatically incorporate additional financial and other specified covenants (such as limitations on investments and distributions) that are effective from time to time under the existing credit agreements, other material indebtedness or certain other private placements of debt of the Company and its subsidiaries. The Note Purchase Agreement contains customary events of default, including payment defaults, cross defaults with certain other indebtedness, breaches of covenants and bankruptcy events. In the case of an event of default, the Purchasers may, among other remedies, accelerate the payment of all obligations. The Company was in compliance with the Senior Notes financial covenants as of June 30, 2020.

Equity Securities

As of June 30, 2020, we had an automatic shelf registration statement on Form S-3 with the Securities and Exchange Commission relating to the offer and sale, from time to time, of an indeterminate amount of our debt securities, common stock, preferred stock or depository shares. From time to time, we expect to issue debt securities, common stock, preferred stock or depository shares under our existing automatic shelf registration statements or a different registration statement to fund the acquisition of additional properties, to pay down any existing debt financing and for other corporate purposes.

Contingencies

From time to time, we may provide financing to Sponsored REITs in the form of a construction loan and/or a revolving line of credit secured by a mortgage. As of June 30, 2020, we had one loan outstanding for $21 million principal amount with one Sponsored REIT under such arrangements for the purpose of funding construction costs, capital expenditures, leasing costs or for other purposes. We anticipate that advances made under these facilities will be repaid at their maturity date or earlier from refinancing, long term financings of the underlying properties, cash flows from the underlying properties or another other capital event.

We may be subject to various legal proceedings and claims that arise in the ordinary course of our business. Although occasional adverse decisions (or settlements) may occur, we believe that the final disposition of such matters will not have a material adverse effect on our financial position or results of operations.

Related Party Transactions

We intend to draw on the BAML Credit Facility in the future for a variety of corporate purposes, including the acquisition of properties that we acquire directly for our portfolio and for Sponsored REIT Loans as described below.

Loans to Sponsored REITs

Sponsored REIT Loans

From time to time we may make secured loans (“Sponsored REIT Loans”) to Sponsored REITs in the form of mortgage loans or revolving lines of credit to fund construction costs, capital expenditures, leasing costs and for other purposes. We anticipate that advances made under these facilities will be repaid at their maturity date or earlier from refinancing, long term financings of the underlying properties, cash flows from the underlying properties or another capital event. Each Sponsored REIT Loan is secured by a mortgage on the underlying property and has a term of approximately two to three years.

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Our Sponsored REIT Loans subject us to credit risk. However, we believe that our position as asset manager of each of the Sponsored REITs helps mitigate that risk by providing us with unique insight and the ability to rely on qualitative analysis of the Sponsored REITs. Before making a Sponsored REIT Loan, we consider a variety of subjective factors, including the quality of the underlying real estate, leasing, the financial condition of the applicable Sponsored REIT and local and national market conditions. These factors are subject to change and we do not apply a formula or assign relative weights to the factors. Instead, we make a subjective determination after considering such factors collectively.

Additional information about our Sponsored REIT Loans outstanding as of June 30, 2020, including a summary table of our Sponsored REIT Loans, is incorporated herein by reference to Part 1, Item 1, Note 2, “Related Party Transactions and Investments in Non-Consolidated Entities - Management fees and interest income from loans”, in the Notes to Consolidated Financial Statements included in this report.

Other Considerations

We generally pay the ordinary annual operating expenses of our properties from the rental revenue generated by the properties. For the three and six months ended June 30, 2020 and 2019, respectively, the rental income exceeded the expenses for each individual property, with the exception of one property located in Chantilly, Virginia for each of the three and six months ended June 30, 2020 and one property located in Minneapolis, Minnesota for each of the three and six months ended June 30, 2019.

Our property located in Chantilly, Virginia (“Stonecroft”) had approximately 111,000 square feet of rentable space and became vacant in December 2019. We had no rental income and operating expenses of $274,000 during the three months ended June 30, 2020. We had no rental income and operating expenses of $446,000 during the six months ended June 30, 2020.

Our property located at 801 Marquette Avenue in Minneapolis, Minnesota (“801 Marquette Avenue”) had approximately 170,000 square feet of rentable space and became vacant in January 2016. On June 30, 2016, we commenced a redevelopment plan for the property and substantially completed the redevelopment in the second quarter of 2017. Redevelopment of 801 Marquette Avenue resulted in approximately 129,800 of net rentable square feet for the property. As of June 30, 2020, we have signed leases with two tenants that now occupy 48,000 square feet, or 37% of rentable square feet at the property. As a result, rental income exceeded operating expenses during the three and six months ended June 30, 2020. We had rental income of $129,000 and operating expenses of $277,000 during the three months ended June 30, 2019 and rental income of $214,000 and operating expenses of $563,000 during the six months ended June 30, 2019.

Off-Balance Sheet Arrangements and Contractual Obligations

There have been no material changes to our contractual obligations and off-balance-sheet arrangements as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2019.

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Item 3.  Quantitative and Qualitative Disclosures About Market Risk

Market Rate Risk

We are exposed to changes in interest rates primarily from our floating rate borrowing arrangements. We use interest rate derivative instruments to manage exposure to interest rate changes. As of June 30, 2020 and December 31, 2019, if market rates on our outstanding borrowings under the BAML Revolver and the floating rate portion of the JPM Term Loan increased by 10% at maturity, or approximately 14 and 31 basis points, respectively, over the current variable rate, the increase in interest expense would decrease future earnings and cash flows by $0.1 million and $0.2 million annually, respectively. Based upon our credit rating, the interest rate on the BAML Revolver as of June 30, 2020 was LIBOR plus 120 basis points, or 1.36% per annum. Based upon our credit rating, the interest rate on the $50 million portion of the JPM Term Loan that is not subject to interest rate swap transactions as of June 30, 2020 was the LIBOR-based rate plus 125 basis points, or 1.44% per annum. We do not believe that the interest rate risk on the BAML Revolver and the JPM Term Loan is material as of June 30, 2020.

Although the interest rates on the BMO Term Loan, the BAML Term Loan and the JPM Term Loan are variable, the Company fixed the base LIBOR interest rates on the BMO Term Loan and the BAML Term Loan, and the LIBOR-based rate on a $100 million portion of the JPM Term Loan, by entering into interest rate swap agreements. On July 22, 2016, the Company fixed the interest rate for the period beginning on September 27, 2017 and ending on September 27, 2021 on the BAML Term Loan with multiple interest rate swap agreements (the “2017 Interest Rate Swap”). On August 26, 2013, the Company fixed the interest rate until August 26, 2020 on the BMO Term Loan with an interest rate swap agreement (the “2013 BMO Interest Rate Swap”). On March 7, 2019, the Company fixed the interest rate for the period beginning on March 29, 2019 and ending on November 30, 2021 for the notional value of $100 million on the JPM Term Loan with interest rate swap agreements (the “2019 JPM Interest Rate Swap”). On February 20, 2019, the Company fixed the interest rate for the period beginning August 26, 2020 and ending January 31, 2024 on the BMO Term Loan with interest rate swap agreements (the “2019 BMO Interest Rate Swap”). Accordingly, based upon our credit rating, as of June 30, 2020, the interest rate on the BAML Term Loan was 2.47% per annum, the interest rate on the BMO Term Loan was 3.57% per annum, and the interest rate on $100 million of the JPM Term Loan was 3.69% per annum. The fair value of these interest rate swaps are affected by changes in market interest rates. We believe that we have mitigated interest rate risk with respect to the BAML Term Loan through the 2017 Interest Rate Swap from September 27, 2017 until September 27, 2021. We believe that we have mitigated interest rate risk with respect to the BMO Term Loan through the 2013 BMO Interest Rate Swap and the 2019 BMO Interest Rate Swap until January 31, 2024. We believe that we have mitigated the interest rate risk on a $100 million portion of the JPM Term Loan until November 30, 2021 with the 2019 JPM Interest Rate Swap. These interest rate swaps were our only derivative instruments as of June 30, 2020.

The table below lists our derivative instruments, which are hedging variable cash flows related to interest on our BAML Term Loan, BMO Term Loan and a portion of the JPM Term Loan as of June 30, 2020 (in thousands):

	Notional		Strike		Effective	Expiration	Fair
(in thousands)	Value		Rate		Date	Date	Value
2017 Interest Rate Swap	$	400,000	1.12	%	Sep-17	Sep-21	$	(4,880)
2013 BMO Interest Rate Swap	$	220,000	2.32	%	Aug-13	Aug-20	$	(734)
2019 JPM Interest Rate Swap	$	100,000	2.44	%	Mar-19	Nov-21	$	(3,241)
2019 BMO Interest Rate Swap (1)	$	220,000	2.39	%	Aug-20	Jan-24	$	(14,103)
(1) The Notional Value will decrease to $165 million on November 30, 2021.

Our BMO Term Loan, BAML Term Loan and JPM Term Loan hedging transactions used derivative instruments that involve certain additional risks such as counterparty credit risk, the enforceability of hedging contracts and the risk that unanticipated and significant changes in interest rates will cause a significant loss of basis in either or both of the contracts. We require our derivatives contracts to be with counterparties that have investment grade ratings. As a result, we do not anticipate that any counterparty will fail to meet its obligations. However, there can be no assurance that we will be able to

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adequately protect against the foregoing risks or that we will ultimately realize an economic benefit that exceeds the related amounts incurred in connection with engaging in such hedging strategies.

The Company’s derivatives are recorded at fair value in other assets and liabilities in the consolidated balance sheets, the effective portion of the derivatives’ fair value is recorded to other comprehensive income (loss) in the consolidated statements of comprehensive income (loss).

The following table presents, as of June 30, 2020, our contractual variable rate borrowings under our BAML Revolver, which matures on January 12, 2022, under our JPM Term Loan, which matures on November 30, 2021, under our BAML Term Loan, which matures on January 12, 2023, under our BMO Term Loan Tranche A, which matures on November 30, 2021, under our BMO Term Loan Tranche B, which matures on January 31, 2024, under our Series A Notes, which mature on December 20, 2024, and under our Series B Notes, which mature on December 20, 2027. Under the BAML Revolver, we have the right to extend the initial maturity date with two additional six month extensions, or until January 12, 2023, upon payment of a fee and satisfaction of certain customary conditions.

	Payment due by period
	(in thousands)
	Total		2020		2021		2022		2023		2024		Thereafter
BAML Revolver	$	30,000	$	—	$	—	$	30,000	$	—	$	—	$	—
JPM Term Loan		150,000		—		150,000		—		—		—		—
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	$	1,000,000	$	—	$	205,000	$	30,000	$	400,000	$	281,000	$	84,000

Item 4.  Controls and Procedures

Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2020. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of June 30, 2020, our chief executive officer and chief financial officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control Over Financial Reporting

No change in our internal control over financial reporting occurred during the quarter ended June 30, 2020, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II - OTHER INFORMATION

Item 1.  Legal Proceedings

From time to time, we may be subject to legal proceedings and claims that arise in the ordinary course of our business. Although occasional adverse decisions (or settlements) may occur, we believe that the final disposition of such matters will not have a material adverse effect on our financial position, cash flows or results of operations.

Item 1A.  Risk Factors

The following additional risk factor relating to COVID-19 should be read in conjunction with the risk factors set forth under Part I, “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2019 (“2019 Form 10-K”). The developments described in this additional risk factor have heightened, or in some cases manifested, certain of the risks disclosed in the risk factor section of the 2019 Form 10-K, and such risk factors are further qualified by the information relating to COVID-19 that is described in this Quarterly Report on Form 10-Q, including in the additional risk factor below. Except as described herein, there have been no material changes to the risk factors disclosed in the 2019 Form 10-K. In addition to the other information set forth in this report, you should carefully consider the risks discussed below and in the 2019 Form 10-K, which could materially affect our business, financial condition or future results. The risks described below and in the 2019 Form 10-K are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

The COVID-19 pandemic has caused severe disruptions in the U.S. and global economies and is expected to have an adverse impact on our financial condition and results of operations. This impact could be materially adverse to the extent that the current COVID-19 pandemic, or future pandemics, cause tenants to be unable to pay their rent or reduce the demand for commercial real estate, or cause other impacts described below.

The COVID-19 pandemic in many countries, including the United States, continues to adversely impact global economic activity and has contributed to significant volatility and negative pressure in financial markets. The global impact of the pandemic has been evolving and many countries, including the United States, have reacted by instituting quarantines and restrictions on travel.

Many U.S. cities and states, including cities and states where our properties are located, have also reacted by instituting quarantines, restrictions on travel, restrictions on types of business that may continue to operate, and/or restrictions on types of construction projects that may continue. There can be no assurances as to the length of time these restrictions will remain in place.

The effects of the COVID-19 pandemic or another future pandemic could adversely affect us and/or our tenants due to, among other factors:

● the unavailability of personnel, including our executive officers and other leaders that are part of our management team, and the inability to recruit, attract and retain skilled personnel;

● difficulty accessing debt and equity capital on attractive terms, or at all—a severe disruption and instability in the global financial markets or deteriorations in credit and financing conditions may affect our and our tenants’ ability to access capital necessary to fund business operations or replace or renew maturing liabilities on a timely basis on attractive terms, and may adversely affect the valuation of financial assets and liabilities, any of which could affect our ability to meet liquidity and capital expenditure requirements or have a material adverse effect on our business, financial condition, results of operations and cash flows;

● an inability to operate in affected areas, or delays in the supply of products or services from the vendors that are needed to operate effectively, including without limitation, the ability to complete construction on time and on budget;

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● a reduction in demand for oil as a result of decreased economic activity and travel restrictions which, if sustained, could have an adverse impact on occupancy and rental rates in the markets where we own properties, including energy-influenced markets such as Dallas, Denver and Houston, where we have a significant concentration of properties;

● tenants’ inability to pay rent on their leases or our inability to re-lease space that is or becomes vacant, which inability, if extreme, could cause us to: (i) no longer be able to maintain our current level of dividends in order to preserve liquidity and (ii) be unable to meet our debt obligations to lenders, which could cause us to be unable to meet debt covenants, which could trigger a default or defaults and cause us to have to sell properties or refinance debt on unattractive terms; and

● our inability to maintain an investment grade corporate credit rating could lead to increased borrowing costs and adversely affect our access to funding sources and the terms of any available funding sources.

COVID-19 has impacted our properties and operating results and will continue to do so to the extent it reduces occupancy, increases the cost of operation, results in limited hours, results in decreased rental receipts, results in increased borrowings or necessitates the closure of such properties. In addition, quarantines, states of emergencies and other measures taken to curb the spread of COVID-19 may negatively impact the ability of our properties to continue to obtain necessary goods and services or provide adequate staffing, which may also adversely affect our properties and operating results .

Some of our existing tenants and potential tenants operate in industries that are being adversely affected by the disruption to business caused by this pandemic. Tenants have been, and may in the future be, required to suspend operations at our properties for an extended periods of time. For example, some of our retail tenants have been, and may continue to be, closed for an extended period of time or only open certain hours of the day. Some of our tenants have requested rent concessions and more tenants may request rent concessions or may not pay rent in the future. This could lead to increased rent delinquencies and/or defaults under leases, a lower demand for rentable space leading to increased concessions or lower occupancy, increased tenant improvement capital expenditures, or reduced rental rates to maintain occupancies. Our operations could be materially negatively affected if the economic downturn is prolonged, which could adversely affect our operating results, ability to pay dividends, our ability to repay or refinance our existing indebtedness, and the price of our common stock.

The continuing evolution of this situation precludes any prediction as to the ultimate impact of the COVID-19 pandemic. The full extent of the impact and effects of the COVID-19 pandemic on our future financial performance, as a whole, and, specifically, on our real estate property holdings are uncertain at this time. The impact will depend on future developments, including, among other factors, the duration and spread of the outbreak, along with related travel advisories and restrictions, and the uncertainty with respect to the duration of the global economic slowdown. COVID-19 and the current financial, economic and capital markets environment, and future developments in these and other areas present uncertainty and risk with respect to our performance, financial condition, results of operations, cash flows, and the price of our common stock.

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

None.

Item 3.  Defaults Upon Senior Securities

None.

Item 4.  Mine Safety Disclosures

None.

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Item 5.  Other Information

On July 30, 2020, our Board of Directors approved an amendment and restatement of the Company’s Amended and Restated Bylaws (as amended and restated, the “Amended Bylaws”) to add a new Article XIV designating the Circuit Court for Baltimore City, Maryland, or, if that court does not have jurisdiction, the United States District Court for the District of Maryland, Northern Division as the exclusive forum for certain legal actions related to the Company. The Amended Bylaws also provide that the federal district courts are, to the fullest extent permitted by law, the sole and exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act of 1933, as amended. The Amended Bylaws were effective immediately upon approval by our Board of Directors.

This description of the changes effected to the Amended Bylaws is qualified in its entirety by reference to the full text of the Amended Bylaws, a copy of which is attached hereto as Exhibit 3.2 and incorporated herein by reference.

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Item 6.  Exhibits

Exhibit No.	Description
3.1 (1)	Articles of Incorporation, as amended
3.2*	Amended and Restated By-laws.
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 June 30, 2020, 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).
*	Filed herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

FRANKLIN STREET PROPERTIES CORP.

Date	Signature	Title
Date: August 4, 2020	/s/ George J. Carter	Chief Executive Officer and Director
	George J. Carter	(Principal Executive Officer)
Date: August 4, 2020	/s/ John G. Demeritt	Chief Financial Officer
	John G. Demeritt	(Principal Financial Officer)

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EX-3.2

Exhibit 3.2

AMENDED AND RESTATED BYLAWS

OF

FRANKLIN STREET PROPERTIES CORP.

ARTICLE I

OFFICES

Section 1.         PRINCIPAL OFFICE.

The principal office of Franklin Street Properties Corp. (the “Corporation”) shall be located at such place as the Board of Directors may from time to time designate.

Section 2.         ADDITIONAL OFFICES.

The Corporation may have additional offices at such places as the Board of Directors may from time to time determine or the business of the Corporation may require.

ARTICLE II

MEETINGS OF STOCKHOLDERS

Section 1.         PLACE.

All meetings of stockholders shall be held in the City of Boston, Commonwealth of Massachusetts or at such other place as shall be determined by the Board of Directors and stated in the notice of the meeting.

Section 2.         ANNUAL MEETING.

An annual meeting of the stockholders for the election of directors and the transaction of any business within the powers of the Corporation shall be held on the date (which date shall not be a legal holiday in the place where the meeting is to be held) and at the time set by the Board of Directors.

Section 3.         SPECIAL MEETING.

(a)        General

The President, Chief Executive Officer or a majority of the Board of Directors may call special meetings of the stockholders. Special meetings of stockholders shall also be called by the Secretary to act on any matter that may properly be considered at a meeting of stockholders upon the written request of the holders of shares entitled to cast not less than a majority of all the votes entitled to be cast at such meeting. Such request shall state the purpose of such meeting and the matters proposed to be acted on at such meeting and be made in accordance with the procedures and requirements of Section 3(b) of this Article II.

(b)        Stockholder Requested Special Meetings

(1)        Any stockholder of record seeking to have stockholders request a special meeting shall, by sending written notice to the Secretary (the “Record Date Request Notice”) at the principal executive office of the Corporation by registered mail, return receipt requested, request that the Board of Directors fix a record date to determine the stockholders entitled to request a special meeting (the “Request Record Date”). The Record Date Request Notice shall set forth the purpose of the meeting and the matters proposed to be acted on at such meeting, shall be signed by one or more stockholders of record as of the date of signature (or their agents duly authorized in a writing accompanying the Record Date Request Notice), shall bear the date of signature of each such stockholder (or such agent) and shall set forth all information relating to (i) each such stockholder and (ii) each matter proposed to be acted on at the meeting, in each case that would be required to be disclosed in connection with the solicitation of proxies for the election of directors in an election contest (even if an election contest is not involved), or would otherwise be required in connection with such a solicitation, in each case pursuant to Section 14(a) (or any successor provision) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and the rules and regulations promulgated thereunder. Upon receiving the Record Date Request Notice, the Board of Directors may fix a Request Record Date. The Request Record Date shall not precede and shall not be more than ten days after the close of business on the date on which the resolution fixing the Request Record Date is adopted by the Board of Directors. If the Board of Directors, within ten days after the date on which a valid Record Date Request Notice is received, fails to adopt a resolution fixing the Request Record Date, the Request Record Date shall be the close of business on the tenth day after the first date on which the Record Date Request Notice was received by the Secretary.

(2)        A stockholder request to hold a special meeting to act on any matter that may properly be considered at a meeting of stockholders shall be signed by stockholders of record (or their agents duly authorized in a writing accompanying the request) as of the Request Record Date entitled to cast not less than a majority (the “Special Meeting Percentage”) of all of the votes entitled to be cast on such matter at such meeting (the “Special Meeting Request”) and shall be delivered to the Secretary. In addition, to be in proper form, the Special Meeting Request shall (i) set forth the purpose of the meeting and the matters proposed to be acted on at it (which shall be limited to those lawful matters set forth in the Record Date Request Notice received by the Secretary), (ii) bear the date of signature of each such stockholder (or such agent) signing the Special Meeting Request, (iii) set forth the name and address, as they appear in the Corporation’s books, of each stockholder signing such request (or on whose behalf the Special Meeting Request is signed), the class, series and number of all shares of stock of the Corporation which are owned by each such stockholder, and the nominee holder for, and number of, shares owned by such stockholder beneficially but not of record, (iv) be delivered to the Secretary at the principal executive office of the Corporation by registered mail, return receipt requested, and (v) be received by the Secretary within 60 days after the Request Record Date. Any requesting stockholder (or agent duly authorized in a writing accompanying the revocation of the Special Meeting Request) may revoke his, her or its request for a special meeting at any time by written revocation delivered to the Secretary at the principal executive office of the Corporation.

(3)        The Secretary shall inform the requesting stockholders of the reasonably estimated cost of preparing and delivering the notice of meeting (including the Corporation’s

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proxy materials and other proxy materials that may be required in connection therewith). The Secretary shall not be required to call a special meeting upon stockholder request and such meeting shall not be held unless, in addition to the documents required by paragraph (2) of this Section 3(b), the Secretary receives payment of such reasonably estimated cost prior to the preparation and delivery of such notice of the meeting. Upon such stockholders’ payment to the Corporation of such costs, the Secretary shall, within thirty days of such payment, or such longer period as may be necessitated by compliance with any applicable statutory or regulatory requirements, give notice to each stockholder entitled to notice of the meeting in accordance with Section 4 of this Article II.

(4)        If written revocations of the Special Meeting Request have been delivered to the Secretary and the result is that stockholders of record (or their agents duly authorized in writing), as of the Request Record Date, entitled to cast less than the Special Meeting Percentage have delivered, and not revoked, requests for a special meeting to the Secretary, the Secretary shall: (i) if the notice of meeting has not already been delivered, refrain from delivering the notice of the meeting and send to all requesting stockholders who have not revoked such requests written notice of any revocation of a request for the special meeting, or (ii) if the notice of meeting has been delivered and if the Secretary first sends to all requesting stockholders who have not revoked requests for a special meeting written notice of any revocation of a request for the special meeting and written notice of the intention of the Corporation to revoke the notice of the meeting or for the chairman of the meeting to adjourn the meeting without action on the matter, (A) the Secretary may revoke the notice of the meeting at any time before ten days before the commencement of the meeting or (B) the chairman of the meeting may call the meeting to order and adjourn the meeting without acting on the matter. Any request for a special meeting received after a revocation by the Secretary of a notice of a meeting shall be considered a request for a new special meeting.

(5)        The President, Chief Executive Officer, or a majority of the Board of Directors may appoint regionally or nationally recognized independent inspectors of elections to act as the agent of the Corporation for the purpose of promptly performing a ministerial review of the validity of any purported Special Meeting Request received by the Secretary. For the purpose of permitting the inspectors to perform such review, no such purported request shall be deemed to have been delivered to the Secretary until the earlier of (i) ten Business Days (as defined below) after receipt by the Secretary of such purported request and (ii) such date as the independent inspectors certify to the Corporation that the valid requests received by the Secretary represent, as of the Request Record Date, stockholders of record entitled to cast not less than the Special Meeting Percentage. Nothing contained in this paragraph (5) shall in any way be construed to suggest or imply that the Corporation or any stockholder shall not be entitled to contest the validity of any request, whether during or after such ten Business Day period, or to take any other action (including, without limitation, the commencement, prosecution or defense of any litigation with respect thereto, and the seeking of injunctive relief in such litigation).

(6)        For purposes of these Bylaws, “Business Day” shall mean any day other than a Saturday, a Sunday or a day on which banking institutions in the Commonwealth of Massachusetts are authorized or obligated by law or executive order to close.

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(c)        Place and Time of Special Meeting

Except as provided in the next sentence, any special meeting shall be held at such place, date and time as may be designated by the President, Chief Executive Officer, or a majority of the Board of Directors, whoever has called the meeting. In the case of any special meeting called by the Secretary upon the request of stockholders (a “Stockholder Requested Meeting”), such meeting shall be held at such place, date and time as may be designated by the Board of Directors; provided, however, that the date of any Stockholder Requested Meeting shall be not more than 90 days after the record date for such meeting (the “Meeting Record Date”); and provided, further that if the Board of Directors fails to designate, within fifteen days after the date that a valid Special Meeting Request is actually received by the Secretary (the “Delivery Date”), a date and time for a Stockholder Requested Meeting, then such meeting shall be held at 2:00 p.m. local time on the 90th day after the Meeting Record Date or, if such 90th day is not a Business Day, on the first preceding Business Day; and provided, further that in the event that the Board of Directors fails to designate a place for a Stockholder Requested Meeting within ten days after the Delivery Date, then such meeting shall be held at the principal executive office of the Corporation. In fixing a date for any special meeting, the President, Chief Executive Officer, or Board of Directors may consider such factors as he, she or it deems relevant, including, without limitation, the nature of the matters to be considered, the facts and circumstances surrounding any request for the meeting and any plan of the Board of Directors to call an annual meeting or a special meeting. In the case of any Stockholder Requested Meeting, if the Board of Directors fails to fix a Meeting Record Date that is a date within 30 days after the Delivery Date, then the close of business on the 30th day after the Delivery Date shall be the Meeting Record Date. The Board of Directors may revoke the notice for any Stockholder Requested Meeting in the event that the requesting stockholders fail to comply with the provisions of paragraph (3) of Section 3(b). Notwithstanding anything in these Bylaws to the contrary, the Board of Directors may submit its own proposal or proposals for consideration at any Stockholder Requested Meeting.

Section 4.         NOTICE.

Not less than ten nor more than 90 days before each meeting of stockholders, the Secretary shall give notice in writing or by electronic transmission to each stockholder entitled to vote at such meeting and to each stockholder not entitled to vote but who is entitled to notice of the meeting stating the time and place of the meeting and, in the case of a special meeting or as otherwise may be required by statute, the purpose for which the meeting is called, by electronic transmission, mail, by presenting it to such stockholder personally or by leaving it at his residence or usual place of business or by any other means permitted by Maryland law. If mailed, such notice shall be deemed to be given when deposited in the United States mail addressed to the stockholder at his post office address as it appears on the records of the Corporation, with postage thereon prepaid. If sent by electronic transmission, such notice shall be deemed to be given when transmitted to the stockholder by an electronic transmission to any address or number of the stockholder at which the stockholder receives electronic transmissions. The Corporation may give a single notice to all stockholders who share an address, which single notice shall be effective as to any stockholder at such address, unless a stockholder objects to receiving such single notice or revokes a prior consent to receiving such single notice. Failure to give notice of any meeting to one or more stockholders, or any irregularity in such notice, shall

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not affect the validity of any meeting fixed in accordance with this Article II or the validity of any proceedings at any such meeting. For purposes of this Section 4, any reference to “electronic transmission” shall have the meaning ascribed thereto in Section 1-101 of the Maryland General Corporation Law (as the same may be amended from time to time) or any successor statute.

Section 5.         SCOPE OF NOTICE.

Subject to Section 12(a) of this Article II, any business of the Corporation may be transacted at an annual meeting of stockholders without being specifically designated in the notice, except such business as is required by statute to be stated in such notice. No business shall be transacted at a special meeting of stockholders except as specifically designated in the notice. The Corporation may postpone or cancel a meeting of stockholders by making a public announcement (as defined in Section 12(c)(3) of this Article II) of such postponement or cancellation prior to the meeting. Notice of the date, time and place to which the meeting is postponed shall be given not less than ten days prior to such date and otherwise in the manner set forth in Section 4.

Section 6.         QUORUM.

Except as otherwise provided by any statute or the charter of the Corporation (the “Charter”), at any meeting of stockholders, the presence in person or by proxy of stockholders entitled to cast a majority of all the votes entitled to be cast at such meeting shall constitute a quorum; but this section shall not affect any requirement under any statute, the Charter or these Bylaws for the vote necessary for the approval of any matter.

The stockholders present either in person or by proxy, at a meeting which has been duly called and at which a quorum was established, may continue to transact business until adjournment, notwithstanding the withdrawal from the meeting of enough stockholders to leave fewer than required to establish a quorum.

Section 7.         ADJOURNMENTS.

Any meeting of stockholders may be adjourned to any other time and any other place at which a meeting of stockholders may be held under these Bylaws by the stockholders present or represented at the meeting and entitled to vote, although less than a quorum, or, if no stockholder is present, by any officer entitled to preside at or to act as secretary of such meeting. It shall not be necessary to notify any stockholder of any adjournment to a date not more than 120 days after the original record date without notice other than announcement at the meeting, unless after the adjournment a new record date is fixed for the adjourned meeting. At such adjourned meeting at which a quorum shall be present, any business may be transacted which might have been transacted at the meeting as originally notified.

Section 8.         VOTING.

A nominee for director shall be elected as a director only if such nominee receives the affirmative vote of a majority of the total votes cast for and against such nominee at a meeting of stockholders duly called and at which a quorum is present. However, directors shall be elected

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by a plurality of votes cast at a meeting of stockholders duly called and at which a quorum is present for which (i) the Secretary of the Corporation receives notice that a stockholder has nominated an individual for election as a director in compliance with the requirements of advance notice of stockholder nominees for director set forth in Article II, Section 12 of these Bylaws, and (ii) such nomination has not been withdrawn by such stockholder on or before the close of business on the tenth day before the date of filing of the definitive proxy statement of the Corporation with the Securities and Exchange Commission, and, as a result of which, the number of nominees is greater than the number of directors to be elected at the meeting. Each share may be voted for as many individuals as there are directors to be elected and for whose election the share is entitled to be voted. A majority of the votes cast at a meeting of stockholders duly called and at which a quorum is present shall be sufficient to approve any other matter which may properly come before the meeting, unless more than a majority of the votes cast is required by statute, the Charter or these Bylaws. Unless otherwise provided by statute or by the Charter, each outstanding share, regardless of class, shall be entitled to one vote on each matter submitted to a vote at a meeting of stockholders.

Shares of stock of the Corporation directly or indirectly owned by it shall not be voted at any meeting and shall not be counted in determining the total number of outstanding shares entitled to be voted at any given time, unless they are held by it in a fiduciary capacity, in which case they may be voted and shall be counted in determining the total number of outstanding shares at any given time.

Section 9.         PROXIES.

(a)        Each stockholder of record entitled to vote at a meeting of stockholders or to express consent or dissent to corporate action in writing without a meeting, may vote or express such consent or dissent in person or may authorize another Person or Persons (as defined in Section 9(e) below) to vote or act for him by a proxy as provided in this Section 9. Such proxy shall be filed with the Secretary of the Corporation before or at the time of the meeting. No proxy shall be valid after eleven months from the date of its authorization, unless otherwise provided in the proxy.

(b)        A stockholder may sign a writing authorizing another Person to act as proxy. Signing may be accomplished by the stockholder or the stockholder’s authorized agent signing the writing or causing the stockholder’s signature to be affixed to the writing by any reasonable means, including facsimile signature.

(c)        A stockholder may authorize another Person to act as a proxy by transmitting, or authorizing the transmission of, an authorization for the Person to act as a proxy to the Person authorized to act as proxy or any other Person authorized to receive the proxy authorization on behalf of the Person authorized to act as the proxy, including a proxy solicitation firm or proxy support service organization. The authorization may be transmitted by telegram, cablegram, datagram, electronic mail or any other electronic or telephonic means.

(d)        A copy, facsimile telecommunication or other reliable reproduction of the writing or transmission authorized under Sections 9(b) and (c) may be substituted for the original writing or transmission for any purpose for which the original writing or transmission could be used.

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(e)        For purposes of this Section 9, any reference to “Person” shall have the meaning ascribed thereto in Section 1-101 of the Maryland General Corporation Law (as the same may be amended from time to time) or any successor statute.

Section 10.      CONDUCT OF MEETINGS.

The Chairman of the Board or, in the absence of the Chairman, the President or a Vice President, or, in the absence of the Chairman and the President and Vice Presidents, a presiding officer elected at the meeting, shall preside over the meetings of the stockholders (the “Presiding Officer”). The Secretary of the Corporation, or, in the absence of the Secretary and Assistant Secretaries, the person appointed by the Presiding Officer of the meeting shall act as secretary of such meeting. The order of business and all other matters of procedure at any meeting of stockholders shall be determined by the Presiding Officer, who shall act as chairman of the meeting. The Presiding Officer may prescribe such rules, regulations and procedures and take such action as, in the discretion of such officer and without any action by the stockholders, are appropriate for the proper conduct of the meeting, including, without limitation, (a) restricting admission to the time set for the commencement of the meeting; (b) limiting attendance at the meeting to stockholders of record of the Corporation, their duly authorized proxies and other such individuals as the chairman of the meeting may determine; (c) limiting participation at the meeting on any matter to stockholders of record of the Corporation entitled to vote on such matter, their duly authorized proxies and other such individuals as the chairman of the meeting may determine; (d) limiting the time allotted to questions or comments by participants; (e) maintaining order and security at the meeting; (f) determining when and for how long the polls should be opened and when the polls should be closed; (g) removing any stockholder or any other individual who refuses to comply with meeting procedures, rules or guidelines as set forth by the chairman of the meeting; (h) concluding a meeting or recessing or adjourning the meeting to a later date and time and at a place announced at the meeting; and (i) complying with any state and local laws and regulations concerning safety and security. Unless otherwise determined by the chairman of the meeting, meetings of stockholders shall not be required to be held in accordance with the rules of parliamentary procedure.

Section 11.      TABULATION OF VOTES.

At any annual or special meeting of stockholders, the Presiding Officer shall be authorized to appoint one or more persons as inspectors for such meeting. An inspector may, but need not, be an officer, employee or agent of the Corporation. The inspectors shall be responsible for tabulating or causing to be tabulated shares voted at the meeting and reviewing or causing to be reviewed all proxies. In tabulating votes, the inspectors shall be entitled to rely in whole or in part on tabulations and analyses made by personnel of the Corporation, its counsel, its transfer agent, its registrar or such other organizations that are customarily employed to provide such services. The inspectors shall be authorized to determine the legality and sufficiency of all votes cast and proxies delivered under both the Charter and these Bylaws and applicable law. The Presiding Officer may review all determinations made by the inspectors hereunder, and in doing so the Presiding Officer shall be entitled to exercise his or her sole judgment and discretion and he or she shall not be bound by any determinations made by the inspectors.

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Section 12.      NOMINATIONS AND STOCKHOLDER BUSINESS.

(a)        Annual Meetings of Stockholders.

(1)        Nominations of persons for election to the Board of Directors and the proposal of business to be considered by the stockholders may be made at an annual meeting of stockholders (i) pursuant to the Corporation’s notice of meeting; (ii) by or at the direction of the Board of Directors or (iii) by any stockholder of the Corporation who was a stockholder of record (and, with respect to any beneficial owner, if different, on whose behalf such nomination or solicitation is proposed, only if such beneficial owner was the beneficial owner of shares of the Corporation) at the record date set by the Board of Directors for the purpose of determining stockholders entitled to vote at the annual meeting, at the time of giving of notice as provided for in this Section 12(a) and at the time of the annual meeting (and any postponement or adjournment thereof), who is entitled to vote at the meeting and who complied with the notice procedures set forth in this Section 12. Except for proposals properly made in accordance with Rule 14a-8 under the Exchange Act and included in the Corporation’s notice of meeting, the foregoing clause (iii) shall be the exclusive means for a stockholder to make nominations and propose business to be considered by the stockholders at an annual meeting.

(2)        For nominations to be properly brought before an annual meeting by a stockholder pursuant to clause (iii) of paragraph (a)(1) of this Section 12, the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation, the stockholder must provide any updates or supplements to such notice at the times and in the forms required by this Section 12 and the nomination must otherwise be a proper matter for action by the stockholders. To be timely, a stockholder’s notice shall set forth all information required by this Section 12 and shall be delivered to the Secretary at the principal executive offices of the Corporation not earlier than the 150th day nor later than 5:00 p.m., Eastern Time, on the 120th day prior to the first anniversary of the date of the proxy statement (as defined in Section 12(c)(3) of this Article II) for the preceding year’s annual meeting.

Such stockholder’s notice to the Secretary shall set forth:

(A)       as to each proposed nominee:

(i)         such person’s name, age, business address and, if known, residence address;

(ii)        such person’s principal occupation or employment;

(iii)       the class and series and number of shares of stock of the Corporation that are, directly or indirectly, owned, beneficially or of record, by such person;

(iv)       a description of all direct and indirect compensation and other material monetary agreements, arrangements and understandings during the past three years, and any other material relationships, between or among (x) the stockholder, the beneficial owner, if any, on whose behalf the nomination is being made and the respective affiliates and associates of, or others acting in concert with, such stockholder and such beneficial owner, on the one hand, and (y) each proposed nominee, and his or her respective affiliates and associates, or

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others acting in concert with such nominee(s), on the other hand, including all information that would be required to be disclosed pursuant to Item 404 of Regulation S-K if the stockholder making the nomination and any beneficial owner on whose behalf the nomination is made or any affiliate or associate thereof or person acting in concert therewith were the “registrant” for purposes of such Item and the proposed nominee were a director or executive officer of such registrant; and

(v)        any other information relating to such stockholder and such beneficial owner that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for the election of directors in a contested election pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder;

(B)       as to the stockholder giving the notice and as to any Stockholder Associated Person (as defined below):

(i)         the name and address of such stockholder, as they appear on the Corporation’s books, and of any such Stockholder Associated Person;

(ii)        the class and series and number of shares of stock of the Corporation that are, directly or indirectly, owned, beneficially or of record, by such stockholder and any such Stockholder Associated Person;

(iii)       a description of any agreement, arrangement or understanding between or among such stockholder and/or any such Stockholder Associated Person and each proposed nominee and any other person or persons (including their names) pursuant to which the nomination(s) are being made or who may participate in the solicitation of proxies in favor of electing such nominee(s) and the names and address of each other stockholder or beneficial owner of securities of the Corporation or Synthetic Equity Interests (as defined below) believed or known by such stockholder and/or any such Stockholder Associated Person to support such proposal, and, to the knowledge of such stockholder, the Disclosable Interests (as defined below) with respect to such other stockholders or beneficial owners;

(iv)       a description of (A) any derivative, swap or other transaction or series of transactions engaged in, directly or indirectly, by such stockholder or Stockholder Associated Person, the purpose or effect of which is to give such person economic risk similar to ownership of shares of any class or series of stock of the Corporation, including due to the fact that the value of such derivative, swap or other transactions are determined by reference to the price, value or volatility of any shares of any class or series of stock of the Corporation, or which derivative, swap or other transactions provide, directly or indirectly, the opportunity to profit from any increase in the price or value of shares of any class or series of stock of the Corporation (“Synthetic Equity Interests”), which Synthetic Equity Interests shall be disclosed without regard to whether (x) the derivative, swap or other transactions convey any voting rights in such shares to such stockholder or Stockholder Associated Person, (y) the derivative, swap or other transactions are required to be, or are capable of being, settled through delivery of such shares or (z) such person may have entered into other transactions that hedge or mitigate the economic effect of such derivative, swap or other transactions, (B) any proxy (other

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than a revocable proxy or consent given in response to a solicitation made pursuant to, and in accordance with, Section 14(a) of the Exchange Act by way of a solicitation statement filed on Schedule 14A), agreement, arrangement, understanding or relationship pursuant to which such person has or shares a right to vote any shares of any class or series of stock of the Corporation, (C) any agreement, arrangement, understanding or relationship, including any repurchase or similar so-called “stock borrowing” agreement or arrangement, engaged in, directly or indirectly, by such person, the purpose or effect of which is to mitigate loss to, reduce the economic risk (of ownership or otherwise) of shares of any class or series of stock of the Corporation by, manage the risk of share price changes for, or increase or decrease the voting power of, such person with respect to the shares of any class or series of stock of the Corporation, or which provides, directly or indirectly, the opportunity to profit from any decrease in the price or value of the shares of any class or series of stock of the Corporation (“Short Interests”), (D) any rights to dividends on the shares of any class or series of stock of the Corporation owned beneficially by such person that are separated or separable from the underlying shares of the Corporation, (E) any performance related fees (other than an asset based fee) that such person is entitled to based on any increase or decrease in the price or value of shares of any class or series of stock of the Corporation, or any Synthetic Equity Interests or Short Interests, if any, and (F) any other information relating to such person that would be required to be disclosed in a proxy statement or other filing required to be made in connection with solicitations of proxies or consents by such person with respect to the election of directors pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder (the disclosures to be made pursuant to the foregoing clauses (A) through (F) are referred to as “Disclosable Interests”); provided, however, that Disclosable Interests shall not include any such disclosures with respect to the ordinary course business activities of any broker, dealer, commercial bank, trust company or other nominee who is a Stockholder Associated Person solely as a result of being the stockholder directed to prepare and submit the notice required by these Bylaws on behalf of a beneficial owner;

(v)        a representation that such stockholder intends to appear in person or by proxy at the meeting to nominate the person(s) named in its notice; and

(vi)       a representation whether such stockholder and/or such Stockholder Associated Person intends or is part of a group which intends (x) to deliver a proxy statement and/or form of proxy to holders of at least the percentage of the Corporation’s outstanding capital stock reasonably believed by such stockholder or such Stockholder Associated Person to be sufficient to elect the nominee (and such representation shall be included in any such proxy statement and form of proxy) and/or (y) otherwise to solicit proxies from stockholders in support of such nomination (and such representation shall be included in any such solicitation materials).

Not later than five Business Days after the record date for the meeting and not later than eight Business Days prior to the meeting or any postponement or adjournment thereof, the information required by Items (A)(i)-(v) and (B)(i)-(vi) of the prior paragraph of this Section 12(a)(2) shall be supplemented by the stockholder giving the notice to provide updated information as of the record date for the meeting and as of the date that is ten Business Days prior to the meeting or any postponement or adjournment thereof, respectively. In addition, to be effective, the stockholder’s notice must be accompanied by the written consent of the proposed

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nominee to serve as a director if elected. The Corporation may require any proposed nominee to furnish such other information as the Corporation may reasonably require to determine the eligibility of such proposed nominee to serve as a director of the Corporation or whether such nominee would be independent under applicable Securities and Exchange Commission and stock exchange rules and the Corporation’s publicly disclosed corporate governance guidelines, including (delivered in accordance with the time periods prescribed for delivery of notice under Section 12(a) to the Secretary of the Corporation at the principal executive offices of the Corporation) a written questionnaire with respect to the background and qualification of such person and the background of any other person or entity on whose behalf the nomination is being made (which questionnaire shall be provided by the Secretary upon written request) and a written representation and agreement (in the form provided by the Secretary upon written request) that such person (i) is not and will not become a party to (A) any agreement, arrangement or understanding with, and has not given any commitment or assurance to, any person or entity as to how such person, if elected as a director of the Corporation, will act or vote on any issue or question (a “Voting Commitment”) that has not been disclosed to the Corporation or (B) any Voting Commitment that could limit or interfere with such person’s ability to comply, if elected as a director of the Corporation, with such person’s duties under applicable law, (ii) is not and will not become a party to any agreement, arrangement or understanding with any person or entity other than the Corporation with respect to any direct or indirect compensation, reimbursement or indemnification in connection with service or action as a director that has not been disclosed therein, and (iii) in such person’s individual capacity and on behalf of any person or entity on whose behalf the nomination is being made, would be in compliance, if elected as a director of the Corporation, and will comply with, applicable law and all applicable publicly disclosed corporate governance, conflict of interest, corporate opportunities, confidentiality and stock ownership and trading policies and guidelines of the Corporation.

A stockholder shall not have complied with this Section 12(a)(2) if the stockholder (or Stockholder Associated Person) solicits or does not solicit, as the case may be, proxies in support of such stockholder’s nominee in contravention of the representations with respect thereto required by this Section 12(a)(2), or, unless otherwise required by law, does not provide the updated information required pursuant Section 12(c), notwithstanding that proxies may have been received by the Corporation.

For the purposes of these Bylaws, “Stockholder Associated Person” of any stockholder shall mean (i) any person acting in concert with the stockholder, (ii) any beneficial owner of stock of the Corporation owned of record or beneficially by such stockholder (other than a stockholder that is a depositary) and (iii) any person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such stockholder or Stockholder Associated Person.

(3)        Notwithstanding anything in this subsection (a) of this Section 12 to the contrary, in the event that the number of directors to be elected to the Board of Directors is increased, and there is no public announcement of such action at least 130 days prior to the first anniversary of the date of the proxy statement (as defined in Section 12(c)(3) of this Article II) for the preceding year’s annual meeting, a stockholder’s notice required by this Section 12(a) shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the Secretary at the principal executive offices of the

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Corporation not later than 5:00 p.m., Eastern Time, on the tenth day following the day on which such public announcement is first made by the Corporation.

(4)        For other business to be properly brought before an annual meeting by a stockholder pursuant to clause (iii) of paragraph (a)(1) of this Section 12, the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation, the stockholder must provide any updates or supplements to such notice at the times and in the forms required by this Section 12 and the proposal must otherwise be a proper matter for action by the stockholders. To be timely, a stockholder’s notice shall be delivered to the Secretary at the principal executive offices of the Corporation not earlier than the 150th day nor later than 5:00 p.m., Eastern Time, on the 120th day prior to the first anniversary of the date of the proxy statement (as defined in Section 12(c)(3) of this Article II) for the preceding year’s annual meeting.

Such stockholder’s notice to the Secretary shall set forth:

(A)       as to each matter the stockholder proposes to bring before the annual meeting:

(i)         a reasonably brief description of the business desired to be brought before the annual meeting;

(ii)        the text of the proposal (including the exact text of any resolutions proposed for consideration and, in the event that such business includes a proposal to amend the Charter, the exact text of the proposed amendment); and

(iii)       the reasons for conducting such business at the annual meeting; and

(B)       as to the stockholder giving the notice and any Stockholder Associated Person:

(i)         the name and address of such stockholder, as they appear on the Corporation’s books, and of any such Stockholder Associated Person;

(ii)        the class and series and number of shares of stock of the Corporation that are, directly or indirectly, owned, beneficially or of record, by such stockholder and any such Stockholder Associated Person;

(iii)       a description of any material interest of such stockholder or any such Stockholder Associated Person and the respective affiliates and associates of, or others acting in concert with, such stockholder or such Stockholder Associated Person in such business;

(iv)       a description of any agreement, arrangement or understanding between or among such stockholder and/or any such Stockholder Associated Person and any other person or persons (including their names) pursuant to which the proposal(s) are being made or who may participate in the solicitation of proxies in favor of such proposals and the names and address of each other stockholder or beneficial owner of securities of the

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Corporation or Synthetic Equity Interests believed or known by such stockholder and/or any such Stockholder Associated Person to support such proposal, and, to the knowledge of such stockholder, the Disclosable Interests with respect to such other stockholders or beneficial owners;

(v)        a description of the Disclosable Interests with respect to such persons; provided, however, that Disclosable Interests shall not include any such disclosures with respect to the ordinary course business activities of any broker, dealer, commercial bank, trust company or other nominee who is a Stockholder Associated Person solely as a result of being the stockholder directed to prepare and submit the notice required by these Bylaws on behalf of a beneficial owner;

(vi)       a representation that such stockholder intends to appear in person or by proxy at the annual meeting to bring such business before the meeting; and

(vii)      a representation whether such stockholder and/or such Stockholder Associated Person intends or is part of a group which intends (x) to deliver a proxy statement and/or form of proxy to holders of at least the percentage of the Corporation’s outstanding capital stock required to approve or adopt the proposal (and such representation shall be included in any such proxy statement and form of proxy) and/or (y) otherwise to solicit proxies from stockholders in support of such proposal (and such representation shall be included in any such solicitation materials).

Notwithstanding anything in these Bylaws to the contrary, no business shall be conducted at any annual meeting of stockholders except in accordance with the procedures in this Section 12; provided that any stockholder proposal which complies with Rule 14a-8 of the proxy rules (or any successor provision) promulgated under the Exchange Act and is to be included in the Corporation’s proxy statement for an annual meeting of stockholders shall be deemed to comply with the notice requirements of this Section 12. A stockholder shall not have complied with this Section 12(a)(4) if the stockholder (or Stockholder Associated Person, if any, on whose behalf the proposal is made) solicits or does not solicit, as the case may be, proxies in support of such stockholder’s proposal in contravention of the representations with respect thereto required by this Section 12(a)(4), or, unless otherwise required by law, does not provide the updated information required pursuant to Section 12(c), notwithstanding that proxies may have been received by the Corporation. If information submitted pursuant to this Section 12(a) by any stockholder or Stockholder Associated Person proposing business at an annual meeting of stockholders shall be inaccurate in any material respect, such information may be deemed not to have been provided in accordance with this Section 12.

(b)        Special Meetings of Stockholders.

Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting pursuant to the Corporation’s notice of meeting.  Nominations of persons for election to the Board of Directors may be made at a special meeting of stockholders at which directors are to be elected (i) pursuant to the Corporation’s notice of meeting, (ii) by or at the direction of the Board of Directors or (iii) provided that the Board of Directors has determined that directors shall be elected at such special meeting, by any

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stockholder of the Corporation who is a stockholder of record at the record date set by the Board of Directors for the purposes of determining stockholders entitled to vote at the special meeting, at the time of giving of notice provided for in this Section 12(b) and at the time of the special meeting (and any postponement or adjournment thereof), who is entitled to vote at the meeting and who complied with the notice procedures set forth in this Section 12. In the event the Corporation calls a special meeting of stockholders for the purpose of electing one or more directors to the Board of Directors, any such stockholder may nominate a person or persons (as the case may be) for election to such position as specified in the Corporation’s notice of meeting, if a stockholder’s notice including the disclosure required by paragraph (a)(2) of this Section 12 shall be delivered to the Secretary at the principal executive offices of the Corporation not earlier than the 120th day prior to such special meeting and not later than 5:00 p.m., Eastern Time, on the later of the 90th day prior to such special meeting or the tenth day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board of Directors to be elected at such meeting. The public announcement of a postponement or adjournment of a special meeting shall not commence a new time period for the giving of a stockholder’s notice as described above.

(c)        General.

(1)        Only such persons who are nominated in accordance with the procedures set forth in this Section 12 shall be eligible to serve as directors and only such business shall be conducted at a meeting of stockholders as shall have been brought before the meeting in accordance with the procedures set forth in this Section 12. The Presiding Officer of the meeting shall have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made in accordance with the procedures set forth in this Section 12 and, if any proposed nomination or business is not in compliance with this Section 12, to declare that such defective nomination or proposal be disregarded.

(2)        Upon written request by the Secretary or the Board of Directors or any committee thereof, any stockholder proposing a nominee for election as a director or any proposal for other business at a meeting of stockholders shall provide, within five Business Days of delivery of such request (or such other period as may be specified in such request), written verification, satisfactory, in the discretion of the Board of Directors or any committee thereof or any authorized officer of the Corporation, to demonstrate the accuracy of any information submitted by the stockholder pursuant to this Section 12. If a stockholder fails to provide such written verification within such period, the information as to which written verification was requested may be deemed not to have been provided in accordance with this Section 12. A stockholder providing notice of a nominee for election as a director or any proposal for other business at a meeting of stockholders shall further update and supplement such notice, if necessary, so that the information provided or required to be provided in such notice pursuant to this Section 12 shall be true and correct as of the record date for the meeting and as of the date that is ten Business Days prior to the meeting or any postponement or adjournment thereof, and such update and supplement shall be delivered to, or mailed and received by, the secretary at the principal executive office of the Corporation not later than five Business Days after the record date for the meeting (in the case of the update and supplement required to be made as of the record date), and not later than eight Business Days prior to the date for the meeting or, if practicable, any postponement or adjournment thereof (and, if not practicable, on the first

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practicable date prior to the date to which the meeting has been postponed or adjourned) (in the case of the update and supplement required to be made as of ten Business Days prior to the meeting or any postponement or adjournment thereof).

(3)        For purposes of this Section 12, “the date of the proxy statement” shall have the same meaning as “the date of the company’s proxy statement released to shareholders” as used in Rule 14a-8(e) promulgated under the Exchange Act, as interpreted by the Securities and Exchange Commission from time to time. “Public announcement” shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Sections 13, 14 or 15(d) of the Exchange Act.

(4)        Notwithstanding the foregoing provisions of this Section 12, a stockholder shall also comply with all applicable requirements of state law and, if the Corporation has a class of securities registered under the Exchange Act, of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this Section 12. If the Corporation has a class of securities registered under the Exchange Act, nothing in this Section 12 shall be deemed to affect any rights of stockholders to request inclusion of proposals in, nor any rights of the Corporation to omit a proposal from, the Corporation’s proxy statement pursuant to Rule 14a-8 (or any successor provision) under the Exchange Act.

(5)        Notwithstanding anything in these Bylaws to the contrary, except as otherwise determined by the Presiding Officer, if the stockholder giving notice as provided for in this Section 12 does not appear in person or by proxy at such annual or special meeting to present each nominee for election as a director or the proposed business, as applicable, such matter shall not be considered at the meeting.

Section 13.      INFORMAL ACTION BY STOCKHOLDERS.

Any action required or permitted to be taken at a meeting of stockholders may be taken without a meeting if a consent in writing, setting forth such action, is signed by each stockholder entitled to vote on the matter and each stockholder who would be entitled to notice of a meeting of stockholders called to vote on such action (but not to vote thereat) has waived in writing any right to dissent from such action, and such consent and waiver are filed with the minutes of proceedings of the stockholders. Such consents and waivers may be signed by different stockholders in counterparts.

Section 14.      VOTING BY BALLOT.

Voting on any question or in any election may be viva voce unless the Presiding Officer shall order or any stockholder shall demand that voting be by ballot.

Section 15.      CONTROL SHARE ACQUISITION ACT.

Notwithstanding any provision of the Charter or these Bylaws to the contrary, Subtitle 7 of Title 3 of the Maryland General Corporation Law (as the same may be amended from time to time), and any successor statute, shall not apply to any acquisition by any person of shares of stock of the Corporation. This section may be repealed, in whole or in part, at any time, whether

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before or after an acquisition of control shares and, upon such repeal, may, to the extent provided by any successor Bylaw, apply to any prior or subsequent control share acquisition.

ARTICLE III

DIRECTORS

Section 1.         GENERAL POWERS; QUALIFICATIONS.

The business and affairs of the Corporation shall be managed under the direction of the Board of Directors. Directors need not be stockholders of the Corporation.

Section 2.         NUMBER, TENURE AND RESIGNATIONS.

At any regular meeting or at any special meeting called for that purpose, a majority of the entire Board of Directors may establish, increase or decrease the number of directors, provided that the number thereof shall never be less than the minimum number required by the Maryland General Corporation Law, and further provided that the tenure of office of a director shall not be affected by any decrease in the number of directors. Each director shall hold office for the term for which he is elected and until his successor is duly elected and qualified, or until his earlier resignation, removal (in accordance with the Charter and these Bylaws) or death. Any director may resign by delivering his written resignation to the Corporation at its principal office or to the President or Secretary.  Such resignation shall be effective upon receipt unless it is specified to be effective at some other time or upon the happening of some other event.

Section 3.         ANNUAL AND REGULAR MEETINGS.

An annual meeting of the Board of Directors shall be held immediately after and at the same place as the annual meeting of stockholders, no notice other than this Bylaw being necessary. The Board of Directors may provide, by resolution, the time and place, either within or without the State of Maryland, for the holding of regular meetings of the Board of Directors without other notice than such resolution; provided that any director who is absent when such resolution is adopted shall be given notice of the resolution.

Section 4.         SPECIAL MEETINGS.

Special meetings of the Board of Directors may be called by or at the request of the Chairman of the Board (or any co-Chairman of the Board if more than one), President or by a majority of the directors then in office. The person or persons authorized to call special meetings of the Board of Directors may fix any place, either within or without the State of Maryland, as the place for holding any special meeting of the Board of Directors called by them.

Section 5.         NOTICE.

Notice of any special meeting of directors shall be given to each director by the Secretary or by the officer or one of the directors calling the meeting.  Notice shall be duly given to each director (i) by giving notice to such director in person or by telephone at least 24 hours in advance of the meeting, (ii) by sending a telegram, facsimile or electronic mail, or delivering

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written notice by hand, to the address or electronic mail address, as applicable, provided by the director as his address for the time when the notice is given, or if no such address has been provided, to his last known business or home address or electronic mail address, as applicable, at least 48 hours in advance of the meeting, or (iii) by mailing written notice to the address provided by the director for the time when the notice is given, or if no such address has been provided, to his last known business or home address, at least 72 hours in advance of the meeting. Notices given pursuant to clause (i) above need not be in writing. Unless specifically required by statute, a notice or waiver of notice of a meeting of the Board of Directors need not specify the purposes of the meeting or the business to be transacted at such meeting.

Section 6.         QUORUM.

A majority of the total number of the directors shall constitute a quorum for the transaction of business at any meeting of the Board of Directors, provided that, if less than a majority of such directors are present at said meeting, a majority of the directors present may adjourn the meeting from time to time without further notice, and provided further that if, pursuant to the Charter or these Bylaws, the vote of a majority of a particular group of directors is required for action, a quorum must also include a majority of such group. In the event one or more of the directors shall be disqualified to vote at any meeting, then the required quorum shall be reduced by one for each such director so disqualified; provided, however, that in no case (i) shall less than one-third (1/3) of the number so fixed constitute a quorum and (ii) if there are two or three directors, shall fewer than two directors constitute a quorum.

Section 7.         VOTING.

The action of the majority of the directors present at a meeting at which a quorum is present shall be the action of the Board of Directors, unless the concurrence of a greater or lesser proportion is required for such action by the Charter, these Bylaws or applicable statute.

Section 8.         TELEPHONE MEETINGS.

Directors may participate in a meeting by means of a conference telephone or other communications equipment if all persons participating in the meeting can hear each other at the same time. Participation in a meeting by these means shall constitute presence in person at the meeting.

Section 9.         ACTION BY DIRECTORS WITHOUT A MEETING.

Any action required or permitted to be taken at any meeting of the Board of Directors may be taken without a meeting if a consent which sets forth the action is given in writing or by electronic transmission by each member of the Board of Directors and such consent is filed in paper or electronic form with the minutes of proceedings of the Board of Directors. Consents may be signed by different directors on separate counterparts.

Section 10.      VACANCIES.

If for any reason any or all the directors cease to be directors, such event shall not terminate the Corporation or affect these Bylaws or the powers of the remaining directors

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hereunder (even if fewer than the minimum number required by the Maryland General Corporation Law). Any vacancy on the Board of Directors for any cause, other than an increase in the number of directors, may be filled by the affirmative vote of a majority of the remaining directors, even if the remaining directors do not constitute a quorum. Any vacancy in the number of directors created by an increase in the number of directors may be filled by the affirmative vote of a majority of the entire Board of Directors. In addition, by the vote required to elect a director, the stockholders may fill any vacancy on the Board of Directors resulting from the removal of a director. Any individual so elected as director shall serve until the next annual meeting of stockholders and until his or her successor is duly elected and qualified.

Section 11.      COMPENSATION.

Directors may be paid such compensation for their services and such reimbursement for expenses of attendance at meetings as the Board of Directors may from time to time determine. No such payment shall preclude any director from serving the Corporation or any of its parent or subsidiary corporations in any other capacity and receiving compensation for such service.

Section 12.      REMOVAL OF DIRECTORS.

Directors may be removed from office only in the manner provided in the Charter.

Section 13.      RELIANCE.

Each director and officer of the Corporation shall, in the performance of his or her duties with respect to the Corporation, be entitled to rely on any information, opinion, report or statement, including any financial statement or other financial data, prepared or presented by an officer or employee of the Corporation whom the director or officer reasonably believes to be reliable and competent in the matters presented, by a lawyer, certified public accountant or other person, as to a matter which the director or officer reasonably believes to be within the person’s professional or expert competence, or, with respect to a director, by a committee of the Board of Directors on which the director does not serve, as to a matter within its designated authority, if the director reasonably believes the committee to merit confidence.

Section 14.      RATIFICATION.

The Board of Directors or the stockholders may ratify any action or inaction by the Corporation or its officers to the extent that the Board of Directors or the stockholders could have originally authorized the matter, and if so ratified, shall have the same force and effect as if originally duly authorized, and such ratification shall be binding upon the Corporation and its stockholders. Any action or inaction questioned in any proceeding on the ground of lack of authority, defective or irregular execution, adverse interest of a director, officer or stockholder, non-disclosure, miscomputation, the application of improper principles or practices of accounting or otherwise, may be ratified, before or after judgment, by the Board of Directors or by the stockholders, and such ratification shall constitute a bar to any claim or execution of any judgment in respect of such questioned action or inaction.

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ARTICLE IV

COMMITTEES

Section 1.         NUMBER, TENURE AND QUALIFICATIONS.

The Board of Directors may appoint from among its members an Executive Committee, an Audit Committee, a Compensation Committee and other committees, composed of one or more directors, to serve at the pleasure of the Board of Directors.

Section 2.         POWERS.

The Board of Directors may delegate to committees appointed under Section 1 of this Article any of the powers of the Board of Directors, except as prohibited by law. Except as may be otherwise provided by the Board of Directors, any committee may delegate some or all of its power and authority to one or more subcommittees, composed of one or more directors, as the committee deems appropriate in its sole discretion.

Section 3.         MEETINGS.

Notice of committee meetings shall be given in the same manner as notice for special meetings of the Board of Directors. A majority of the members of the committee shall constitute a quorum for the transaction of business at any meeting of the committee. The act of a majority of the committee members present at a meeting shall be the act of such committee. In the absence of any member of any such committee, the members thereof present at any meeting, whether or not they constitute a quorum, may appoint another director to act in the place of such absent member.

Section 4.         TELEPHONE MEETINGS.

Members of a committee of the Board of Directors may participate in a meeting by means of a conference telephone or other communications equipment if all persons participating in the meeting can hear each other at the same time. Participation in a meeting by these means shall constitute presence in person at the meeting.

Section 5.         ACTION BY COMMITTEES WITHOUT A MEETING.

Any action required or permitted to be taken at any meeting of a committee of the Board of Directors may be taken without a meeting if a consent which sets forth the action is given in writing or by electronic transmission by each member of the committee and such consent is filed in paper or electronic form with the minutes of proceedings of such committee. Consents may be signed by different directors on separate counterparts.

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ARTICLE V

OFFICERS

Section 1.         GENERAL PROVISIONS.

The officers of the Corporation shall include a Chairman of the Board (or one or more Chairmen of the Board), a Chief Executive Officer, a President, a Secretary and a Treasurer and may include one or more Vice Presidents (including Executive Vice Presidents and Senior Vice Presidents), a Chief Operating Officer, a Chief Financial Officer, one or more Assistant Secretaries and one or more Assistant Treasurers. In addition, the Board of Directors may from time to time appoint such other officers with such powers and duties as they shall deem necessary or desirable. The officers of the Corporation shall be elected annually by the Board of Directors at the first meeting of the Board of Directors held after each annual meeting of stockholders, except that the Chief Executive Officer or, if there is no Chief Executive Officer, the President may appoint one or more Vice Presidents (including Executive Vice Presidents and Senior Vice Presidents), Assistant Secretaries and Assistant Treasurers. If the election of officers shall not be held at such meeting, such election shall be held as soon thereafter as may be convenient. Each officer shall hold office until his successor is elected and qualified or until his death, resignation or removal in the manner hereinafter provided. Any two or more offices may be held by the same person except that the office of President and Vice President may not be held by the same person. In its discretion, the Board of Directors may leave unfilled any office except that of President, Treasurer and Secretary. Election of an officer or agent shall not of itself create contract rights between the Corporation and such officer or agent. No officer need be a stockholder.

Section 2.         REMOVAL AND RESIGNATION.

Any officer or agent of the Corporation may be removed by the Board of Directors if in its judgment the best interests of the Corporation would be served thereby. Any officer of the Corporation may resign at any time by giving written notice of his resignation to the Board of Directors, the Chairman of the Board (or any co-Chairman of the Board if more than one), the Chief Executive Officer, the President or the Secretary. Any resignation shall take effect at any time subsequent to the time specified therein or, if the time when it shall become effective is not specified therein, immediately upon its receipt. The acceptance of a resignation shall not be necessary to make it effective unless otherwise stated in the resignation. Except as the Board of Directors may otherwise determine, no officer who resigns or is removed shall have any right to any compensation as an officer for any period following his resignation or removal, or any right to damages on account of such removal, whether his compensation be by the month or by the year or otherwise, unless such compensation is expressly provided in a duly authorized written agreement with the Corporation.

Section 3.         VACANCIES.

A vacancy in any office may be filled by the Board of Directors for the balance of the term.

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Section 4.         CHAIRMAN OF THE BOARD.

The Board of Directors shall designate a Chairman of the Board (or one or more co-Chairmen of the Board). The Chairman of the Board shall preside over the meetings of the Board of Directors and of the stockholders at which he shall be present. If there be more than one, the co-Chairmen designated by the Board of Directors will perform such duties. The Chairman of the Board shall perform such other duties as may be assigned to him or them by the Board of Directors.

Section 5.         CHIEF EXECUTIVE OFFICER.

The Board of Directors shall designate a Chief Executive Officer. In the absence of such designation, the Chairman of the Board (or, if more than one, the co-Chairmen of the Board in the order designated at the time of their election or, in the absence of any designation, then in the order of their election) shall be the Chief Executive Officer of the Corporation. The Chief Executive Officer shall have general responsibility for implementation of the policies of the Corporation, as determined by the Board of Directors, and for the management of the business and affairs of the Corporation.

Section 6.         CHIEF OPERATING OFFICER.

The Board of Directors may designate a Chief Operating Officer. The Chief Operating Officer shall have the responsibilities and duties as set forth by the Board of Directors or the Chief Executive Officer.

Section 7.         CHIEF FINANCIAL OFFICER.

The Board of Directors may designate a Chief Financial Officer. The Chief Financial officer shall have the responsibilities and duties as set forth by the Board of Directors or the Chief Executive Officer.

Section 8.         PRESIDENT.

The President shall perform all duties incident to the office of President and such other duties as may be prescribed by the Board of Directors from time to time.

Section 9.         VICE PRESIDENT.

In the absence of the President or in the event of a vacancy in such office, any Executive Vice President or Senior Vice President, or in the absence of any Executive Vice President or Senior Vice President, any Vice President (or in the event there be more than one Vice President, the Vice Presidents in the order designated at the time of their election or, in the absence of any designation, then in the order of their election) shall perform the duties of the President and when so acting shall have all the powers of and be subject to all the restrictions upon the President; and shall perform such other duties as from time to time may be assigned to him by the President or by the Board of Directors. The Board of Directors may designate one or more Vice Presidents as Executive Vice President, Senior Vice President or as Vice President for particular areas of responsibility.

21

Section 10.      SECRETARY.

The Secretary shall (a) keep the minutes of the proceedings of the stockholders, the Board of Directors and committees of the Board of Directors in one or more books provided for that purpose; (b) see that all notices are duly given in accordance with the provisions of these Bylaws or as required by law; (c) be custodian of the records and of the seal of the Corporation; (d) keep a register of the post office address of each stockholder which shall be furnished to the Secretary by such stockholder; (e) have general charge of the share transfer books of the Corporation; and (f) in general perform such other duties as are incident to the office of Secretary and as from time to time may be assigned to him or her by the Chief Executive Officer, the President or the Board of Directors.

Section 11.      TREASURER.

The Treasurer shall perform such duties and shall have such powers as may from time to time be assigned to him or her by the Board of Directors or the President. In addition, the Treasurer shall perform such duties and have such powers as are incident to the office of Treasurer, including without limitation the duty and power to keep and be responsible for all funds and securities of the Corporation, to deposit funds of the Corporation in depositories selected in accordance with these Bylaws, to disburse such funds as ordered by the Board of Directors, to make proper accounts of such funds, and to render as required by the Board of Directors statements of all such transactions and of the financial condition of the Corporation. In the absence of a designation of Chief Financial Officer by the Board of Directors, the Treasurer shall be the Chief Financial Officer of the Corporation.

Section 12.      ASSISTANT SECRETARIES AND ASSISTANT TREASURERS.

The Assistant Secretaries and Assistant Treasurers, in general, shall perform such duties as shall be assigned to them by the Secretary or Treasurer, respectively, or by the Chief Executive Officer, the President or the Board of Directors.

Section 13.      SUBORDINATE OFFICERS.

The Corporation shall have such subordinate officers as the Board of Directors may from time to time elect. Each such officer shall hold office for such period and perform such duties as the Board of Directors, the Chief Executive Officer, the President or any designated committee or officer may prescribe.

ARTICLE VI

CONTRACTS, CHECKS AND BOOKS AND RECORDS

Section 1.         CONTRACTS.

The Board of Directors may authorize any officer or agent to enter into any contract or to execute and deliver any instruments in the name of and on behalf of the Corporation and such authority may be general or confined to specific instances. Any agreement, deed, mortgage, lease or other document executed by one or more of the directors or by an authorized person

22

shall be valid and binding upon the Board of Directors and upon the Corporation when authorized or ratified by action of the Board of Directors. A person who holds more than one office of the Corporation may not act in more than one capacity to execute, acknowledge or verify an instrument required by law to be executed, acknowledged or verified by more than one officer.

Section 2.         CHECKS AND DRAFTS.

All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the Corporation shall be signed by such officer or officers, agent or agents of the Corporation and in such manner as shall from time to time be determined by the Board of Directors.

Section 3.         BOOKS AND RECORDS.

The Corporation shall keep correct and complete books and records of its accounts and transactions and minutes of the proceedings of its stockholders and Board of Directors and of each committee exercising any of the power or authority of the Board of Directors. The books and records of the Corporation may be in written form or in any other form that can be converted within a reasonable time into written form for visual inspection. Minutes shall be recorded in written form, but may be maintained in the form of a reproduction.

ARTICLE VII

STOCK

Section 1.         CERTIFICATES.

The Corporation may issue some or all of the shares of any or all of the Corporation’s classes or series of stock without certificates if authorized by the Board of Directors. In the event that the Corporation issues shares of stock represented by certificates, each certificate shall be signed by the Chairman of the Board, the President or a Vice President and by the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer, or by such other officers of the Corporation as may be permitted by the Maryland General Corporation Law (as the same may be amended from time to time), and may be sealed with the seal, if any, of the Corporation. The signatures may be either manual or facsimile. Certificates shall be consecutively numbered, and if the Corporation shall, from time to time, issue several classes of stock, each class may have its own number series. A certificate is valid and may be issued whether or not an officer who signed it is still an officer when it is issued. Each certificate representing shares which are restricted as to their transferability or voting powers, which are preferred or limited as to their dividends or as to their allocable portion of the assets upon liquidation or which are redeemable at the option of the Corporation, shall have a statement of such restriction, limitation, preference or redemption provision, or a summary thereof, plainly stated on the certificate. If the Corporation has authority to issue shares of more than one class, the certificate shall contain on the face or back a full statement or summary of the designations and any preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications and terms and conditions of redemption of each class of shares and, if the

23

Corporation is authorized to issue any preferred or special class in series, the differences in the relative rights and preferences between the shares of each series to the extent they have been set and the authority of the Board of Directors to set the relative rights and preferences of subsequent series. In lieu of such statement or summary, the Corporation may set forth upon the face or back of the certificate a statement that the Corporation will furnish to any stockholder, upon request and without charge, a full statement of such information. If any class of shares is restricted by the Corporation as to transferability, the certificate shall contain a full statement of the restriction or state that the Corporation will furnish information about the restrictions to the stockholder on request and without charge. Without limiting the generality of the foregoing, each certificate representing shares of the Corporation shall bear substantially the legend set forth in Article VI, Section 2(d)(iii) of the Charter.

In the event that the Corporation issues shares of stock without certificates, the Corporation shall provide to the record holders of such shares, to the extent then required by the Maryland General Corporation Law, a written statement of the information required to be included on stock certificates. There shall be no difference in the rights and obligations of stockholders based on whether or not their shares are represented by certificates.

Section 2.         TRANSFERS.

Shares of stock of the Corporation shall be transferable in the manner prescribed by law and in these Bylaws. Subject to applicable law, shares of stock of the Corporation represented by certificates shall be transferred only upon surrender to the Corporation or its transfer agent of a certificate representing shares of the Corporation properly endorsed or accompanied by a written assignment or power of attorney properly executed, and with such proof of authority or the authenticity of signature as the Corporation or its transfer agent may reasonably require. Upon such transfer, the Corporation shall cancel the old certificate and record the transaction upon its books and may issue a new certificate to the person entitled thereto, subject to the determination of the Board of Directors that such shares shall no longer be represented by certificates. Except as may otherwise be required by law, by the Charter or by these Bylaws, the Corporation shall be entitled to treat the record holder of stock as shown on its books as the owner of such stock for all purposes, including the payment of dividends and the right to vote with respect to such stock, regardless of any transfer, pledge or other disposition of such stock until the shares have been transferred on the books of the Corporation in accordance with the requirements of these Bylaws. Notwithstanding the foregoing, transfers of shares of any class or series of stock will be subject in all respects to the Charter and all of the terms and conditions contained therein.

Section 3.        LOST CERTIFICATE.

The Board of Directors (or any officer designated by it) may direct a new certificate to be issued in place of any certificate previously issued by the Corporation alleged to have been lost, stolen or destroyed upon the making of an affidavit of that fact by the person claiming the certificate to be lost, stolen or destroyed. When authorizing the issuance of a new certificate, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, prescribe such conditions as it deems appropriate, including the presentation of reasonable evidence of such loss, theft or destruction and/or the posting of a bond, with sufficient surety, to

24

the Corporation to indemnify it against any loss or claim which may arise as a result of the issuance of a new certificate.

Section 4.         FIXING OF RECORD DATE.

The Board of Directors may set, in advance, a record date for the purpose of determining stockholders entitled to notice of or to vote at any meeting of stockholders, or stockholders entitled to receive payment of any dividend or the allotment of any other rights, or in order to make a determination of stockholders for any other proper purpose. Such record date, in any case, shall not be prior to the close of business on the day the record date is fixed and shall be not more than 90 days and, in the case of a meeting of stockholders, not less than ten days, before the date on which the meeting or particular action requiring such determination of stockholders is to be held or taken.

If no record date is fixed, (a) the record date for the determination of stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day on which the notice of meeting is mailed or the 30th day before the meeting, whichever is the closer date to the meeting; and (b) the record date for the determination of stockholders entitled to receive payment of a dividend or an allotment of any other rights shall be the close of business on the day on which the resolution of the directors, declaring the dividend or allotment of rights, is adopted, but the payment or allotment may not be made more than 60 days following the date on which the resolution is adopted.

When a determination of stockholders entitled to vote at any meeting of stockholders has been made as provided in this section, such determination shall apply to any postponement or adjournment thereof; provided, however, that the Board of Directors may fix a new record date for the postponed or adjourned meeting and shall fix a new record date if the date to which the meeting is postponed or adjourned is more than 120 days after the original record date.

Section 5.         STOCK LEDGER.

The Corporation shall maintain at its principal office or at the office of its counsel, accountants or transfer agent, an original or duplicate stock ledger containing the name and address of each stockholder and the number of shares of each class of stock held by such stockholder.

Section 6.         FRACTIONAL STOCK; ISSUANCE OF UNITS.

The Board of Directors may authorize the issuance of fractional shares of stock or provide for the issuance of scrip, all on such terms and under such conditions as they may determine. Notwithstanding any other provision of the Charter or these Bylaws, the Board of Directors may authorize the issuance of units consisting of different securities of the Corporation. Any security issued in a unit shall have the same characteristics as any identical securities issued by the Corporation, except that the Board of Directors may provide that for a specified period securities of the Corporation issued in such unit may be transferred on the books of the Corporation only in such unit.

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ARTICLE VIII

ACCOUNTING YEAR

The Board of Directors shall have the power, from time to time, to fix the fiscal year of the Corporation by a duly adopted resolution.

ARTICLE IX

DIVIDENDS

Section 1.         DECLARATION.

Dividends upon the stock of the Corporation may be authorized by the Board of Directors and declared by the Corporation, subject to the provisions of law and the Charter. Dividends and other distributions may be paid in cash, property or stock of the Corporation, subject to the provisions of law and the Charter.

Section 2.         CONTINGENCIES.

Before payment of any dividends or other distributions, there may be set aside out of any funds of the Corporation available for dividends or other distributions such sum or sums as the Board of Directors may from time to time, in its sole discretion, think proper as a reserve fund for contingencies, for equalizing dividends, for repairing or maintaining any property of the Corporation or for such other purpose as the Board of Directors shall determine to be in the best interest of the Corporation, and the Board of Directors may modify or abolish any such reserve in the manner in which it was created.

ARTICLE X

INVESTMENT POLICIES

The Board of Directors may from time to time adopt, amend, revise or terminate any policy or policies with respect to investments by the Corporation as it shall deem appropriate in its sole discretion.

ARTICLE XI

GENERAL PROVISIONS

Section 1.         SEAL.

The Board of Directors may authorize the adoption of a seal by the Corporation. The seal shall have inscribed thereon the name of the Corporation and the year of its organization. The Board of Directors may authorize one or more duplicate seals and provide for the custody thereof.

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Section 2.         AFFIXING SEAL.

Whenever the Corporation is required to place its seal to a document, it shall be sufficient to meet the requirements of any law, rule or regulation relating to a seal to place the word “(SEAL)” adjacent to the signature of the person authorized to execute the document on behalf of the Corporation.

Section 3.         VOTING OF SECURITIES.

Except as the directors may otherwise designate, the Chief Executive Officer, President or any Vice President may waive notice of, and act as, or appoint any person or persons to act as, proxy or attorney-in-fact for the Corporation (with or without power of substitution) at, any meeting of stockholders or shareholders of any other corporation or organization, the securities of which may be held by the Corporation.

Section 4.         EVIDENCE OF AUTHORITY.

A certificate by the Secretary, or an Assistant Secretary, or a temporary Secretary, as to any action taken by the stockholders, directors, a committee or any officer or representative of the Corporation shall as to all persons who rely on the certificate in good faith be conclusive evidence of such action.

ARTICLE XII

INDEMNIFICATION

Section 1.         INDEMNIFICATION OF AGENTS.

The Corporation shall indemnify, in the manner and to the fullest extent permitted by law, any person (or the estate of any person) who is or was a party to, or is threatened to be made a party to, or witness in, any threatened, pending or completed action, suit or proceeding, whether or not by or in the right of the Corporation, and whether civil, criminal, administrative, investigative or otherwise, by reason of the fact that such person is or was a director or officer of the Corporation, or is or was serving at the request of the Corporation as a director, officer, trustee, partner, member, agent or employee of another corporation, partnership, limited liability company, association, joint venture, trust or other enterprise. To the fullest extent permitted by law, the indemnification provided herein shall include expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement and any such expenses may be paid by the Corporation in advance of the final disposition of such action, suit or proceeding.

Section 2.         The Corporation may, with the approval of the Board of Directors, provide such indemnification and advancement of expenses as set forth in the preceding paragraph (a) of this Article XII to a person who served a predecessor of the Corporation in any of the capacities

27

described in the preceding paragraph (a) of Article XII and to agents and employees of the Corporation and any predecessor to the Corporation.

Section 3.         Any repeal or modification of this Article XII shall be prospective only, and shall not adversely affect any right to indemnification or advancement of expenses hereunder existing at the time of such repeal or modification.

ARTICLE XIII

WAIVER OF NOTICE

Whenever any notice is required to be given pursuant to the Charter or these Bylaws or pursuant to applicable law, a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time stated herein, shall be deemed equivalent to the giving of such notice. Neither the business to be transacted at nor the purpose of any meeting need to be set forth in the waiver of notice, unless specifically required by statute. The attendance of any person at any meeting shall constitute a waiver of notice of such meeting, except where such person attends a meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened.

ARTICLE XIV

EXCLUSIVE FORUM FOR CERTAIN LITIGATION

Unless the Corporation consents in writing to the selection of an alternative forum, the Circuit Court for Baltimore City, Maryland, or, if that Court does not have jurisdiction, the United States District Court for the District of Maryland, Northern Division, shall be the sole and exclusive forum for (a) any derivative action or proceeding brought on behalf of the Corporation, other than actions arising under federal securities laws, (b) any Internal Corporate Claim, as such term is defined in the Maryland General Corporation Law, or any successor provision thereof, including, without limitation, (i) any action asserting a claim of breach of any duty owed by any director or officer or other employee of the Corporation to the Corporation or to the stockholders of the Corporation or (ii) any action asserting a claim against the Corporation or any director or officer or other employee of the Corporation arising pursuant to any provision of the Maryland General Corporation Law, the Charter or these Bylaws, or (c) any other action asserting a claim against the Corporation or any director or officer or other employee of the Corporation that is governed by the internal affairs doctrine.  None of the foregoing actions, claims or proceedings may be brought in any court sitting outside the State of Maryland unless the Corporation consents in writing to such court.

Unless the Corporation consents in writing to the selection of an alternative forum, the federal district courts of the United States of America shall, to the fullest extent permitted by law, be the sole and exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act of 1933, as amended.

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ARTICLE XV

AMENDMENT OF BYLAWS

The Board of Directors shall have the power to adopt, alter or repeal any provision of these Bylaws and to make new Bylaws.  In addition, pursuant to a binding proposal that is properly submitted by stockholders for approval at a duly called annual meeting or special meeting of stockholders, the stockholders shall have the power, by the affirmative vote of a majority of all votes entitled to be cast on the matter, to alter or repeal any provision of these Bylaws and to adopt new Bylaw provisions, in any such case to the extent permitted by and consistent with the Charter, these Bylaws (including, without limitation, Section 3(b) and Section 12 of Article II of these Bylaws) and applicable law.

Effective July 30, 2020

29

EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, George J. Carter, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Franklin Street Properties Corp.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Pril
Date: August 4, 2020	/s/ George J. Carter
	George J. Carter
	Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATIONS

I, John G. Demeritt, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Franklin Street Properties Corp.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 4, 2020	/s/ John G. Demeritt
	John G. Demeritt
	Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report on Form 10-Q of Franklin Street Properties Corp. (the “Company”) for the period ended June 30, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, George J. Carter, Chief Executive Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, that to his knowledge:

(1)the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 4, 2020	/s/ George J. Carter
	George J. Carter
	Chief Executive Officer

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report on Form 10-Q of Franklin Street Properties Corp. (the “Company”) for the period ended June 30, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, John G. Demeritt, Chief Financial Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, that to his knowledge:

(1)the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 4, 2020	/s/ John G. Demeritt
	John G. Demeritt
	Chief Financial Officer

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2020	Jul. 30, 2020
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Transition Report	false
Document Period End Date	Jun. 30, 2020
Entity File Number	001-32470
Entity Registrant Name	Franklin Street Properties Corp.
Entity Incorporation, State or Country Code	MD
Entity Tax Identification Number	04-3578653
Entity Address, Address Line One	401 Edgewater Place, Suite 200
Entity Address, City or Town	Wakefield
Entity Address, State or Province	MA
Entity Address, Postal Zip Code	01880
City Area Code	781
Local Phone Number	557-1300
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Title of 12(b) Security	Common Stock
Trading Symbol	FSP
Security Exchange Name	NYSEAMER
Entity Common Stock, Shares Outstanding		107,328,199
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q2
Entity Central Index Key	0001031316
Amendment Flag	false

XML

Consolidated Balance Sheets - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Real estate assets:
Land	$ 191,578	$ 191,578
Buildings and improvements	1,964,308	1,924,664
Fixtures and equipment	12,250	11,665
Total real estate assets, gross	2,168,136	2,127,907
Less accumulated depreciation	522,238	490,697
Real estate assets, net	1,645,898	1,637,210
Acquired real estate leases, less accumulated amortization of $60,469 and $60,749, respectively	34,022	40,704
Cash, cash equivalents and restricted cash	2,890	9,790
Tenant rent receivables	4,192	3,851
Straight-line rent receivable	69,062	66,881
Prepaid expenses and other assets	6,506	7,246
Related party mortgage loan receivables	21,000	21,000
Other assets: derivative asset		3,022
Office computers and furniture, net of accumulated depreciation of $1,409 and $1,362, respectively	196	183
Deferred leasing commissions, net of accumulated amortization of $30,958 and $28,114, respectively	51,669	52,767
Total assets	1,835,435	1,842,654
Liabilities:
Bank note payable	30,000
Term loans payable, less unamortized financing costs of $3,507 and $4,267, respectively	766,493	765,733
Series A & Series B Senior Notes, less unamortized financing costs of $904 and $985, respectively	199,096	199,015
Accounts payable and accrued expenses	55,712	66,658
Accrued compensation	2,278	3,400
Tenant security deposits	9,155	9,346
Lease liability	1,716	1,890
Other liabilities: derivative liabilities	22,958	7,704
Acquired unfavorable real estate leases, less accumulated amortization of $4,804 and $4,676, respectively	2,024	2,512
Total liabilities	1,089,432	1,056,258
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 107,269,201 shares issued and outstanding, respectively	11	11
Additional paid-in capital	1,357,131	1,356,794
Accumulated other comprehensive income (loss)	(22,958)	(4,682)
Accumulated distributions in excess of accumulated earnings	(588,181)	(565,727)
Total stockholders' equity	746,003	786,396
Total liabilities and stockholders' equity	$ 1,835,435	$ 1,842,654

XML

Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Consolidated Balance Sheets
Acquired real estate leases, accumulated amortization	$ 60,469	$ 60,749
Office computers and furniture, accumulated depreciation	1,409	1,362
Deferred leasing commissions, accumulated amortization	30,958	28,114
Term loan payable, unamortized financing costs	3,507	4,267
Series A & Series B Senior notes, unamortized financing costs	904	985
Acquired unfavorable real estate leases, accumulated amortization	$ 4,804	$ 4,676
Preferred stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Preferred stock, shares authorized (in shares)	20,000,000	20,000,000
Preferred stock, shares issued (in shares)	0	0
Preferred stock, shares outstanding (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Common stock, shares authorized (in shares)	180,000,000	180,000,000
Common stock, shares issued (in shares)	107,328,199	107,269,201
Common stock, shares outstanding (in shares)	107,328,199	107,269,201

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Consolidated Statements of Income - USD ($) shares in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Revenues:
Revenue			$ 45,000	$ 121,000
Total revenues	$ 60,808,000	$ 66,813,000	123,791,000	131,529,000
Expenses:
Real estate operating expenses	15,470,000	17,116,000	32,768,000	34,842,000
Real estate taxes and insurance	12,307,000	12,801,000	24,069,000	24,903,000
Depreciation and amortization	22,245,000	22,109,000	44,583,000	45,354,000
General and administrative	3,817,000	3,702,000	7,342,000	7,211,000
Interest	8,980,000	9,371,000	18,043,000	18,739,000
Total expenses	62,819,000	65,099,000	126,805,000	131,049,000
Income (loss) before taxes	(2,011,000)	1,714,000	(3,014,000)	480,000
Tax expense on income	64,000	81,000	132,000	52,000
Net income (loss)	$ (2,075,000)	$ 1,633,000	$ (3,146,000)	$ 428,000
Weighted average number of shares outstanding, basic and diluted	107,287	107,231	107,278	107,231
Net loss per share, basic and diluted	$ (0.02)	$ 0.02	$ (0.03)	$ 0.00
Rental
Revenues:
Rental	$ 60,398,000	$ 65,485,000	$ 122,965,000	$ 128,844,000
Related party revenue: Management fees and interest income from loans
Revenues:
Revenue	405,000	1,322,000	808,000	2,674,000
Related party revenue: Other
Revenues:
Revenue	$ 5,000	$ 6,000	$ 18,000	$ 11,000

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Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Consolidated Statements of Comprehensive Income (Loss)
Net loss (loss)	$ (2,075)	$ 1,633	$ (3,146)	$ 428
Other comprehensive income (loss):
Unrealized gain (loss) on derivative financial instruments	77	(11,461)	(18,276)	(18,252)
Total other comprehensive income (loss)	77	(11,461)	(18,276)	(18,252)
Comprehensive loss	$ (1,998)	$ (9,828)	$ (21,422)	$ (17,824)

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Consolidated Statements of Stockholders' Equity - USD ($) shares in Thousands, $ in Thousands	Common Stock	Additional Paid-In Capital	Accumulated other comprehensive income (loss)	Distributions in excess of accumulated earnings	Total
Balance at Dec. 31, 2018	$ 11	$ 1,356,457	$ 14,765	$ (533,599)	$ 837,634
Balance (in shares) at Dec. 31, 2018	107,231
Increase (Decrease) in Stockholders' Equity
Comprehensive income (loss)			(6,791)	(1,205)	(7,996)
Distributions				(9,651)	(9,651)
Balance at Mar. 31, 2019	$ 11	1,356,457	7,974	(544,455)	819,987
Balance (in shares) at Mar. 31, 2019	107,231
Balance at Dec. 31, 2018	$ 11	1,356,457	14,765	(533,599)	837,634
Balance (in shares) at Dec. 31, 2018	107,231
Increase (Decrease) in Stockholders' Equity
Comprehensive income (loss)					(17,824)
Balance at Jun. 30, 2019	$ 11	1,356,457	(3,487)	(552,473)	800,508
Balance (in shares) at Jun. 30, 2019	107,231
Balance at Dec. 31, 2018	$ 11	1,356,457	14,765	(533,599)	837,634
Balance (in shares) at Dec. 31, 2018	107,231
Balance at Dec. 31, 2019	$ 11	1,356,794	(4,682)	(565,727)	786,396
Balance (in shares) at Dec. 31, 2019	107,269
Balance at Mar. 31, 2019	$ 11	1,356,457	7,974	(544,455)	819,987
Balance (in shares) at Mar. 31, 2019	107,231
Increase (Decrease) in Stockholders' Equity
Comprehensive income (loss)			(11,461)	1,633	(9,828)
Distributions				(9,651)	(9,651)
Balance at Jun. 30, 2019	$ 11	1,356,457	(3,487)	(552,473)	800,508
Balance (in shares) at Jun. 30, 2019	107,231
Balance at Dec. 31, 2019	$ 11	1,356,794	(4,682)	(565,727)	786,396
Balance (in shares) at Dec. 31, 2019	107,269
Increase (Decrease) in Stockholders' Equity
Comprehensive income (loss)			(18,353)	(1,071)	(19,424)
Distributions				(9,654)	(9,654)
Balance at Mar. 31, 2020	$ 11	1,356,794	(23,035)	(576,452)	757,318
Balance (in shares) at Mar. 31, 2020	107,269
Balance at Dec. 31, 2019	$ 11	1,356,794	(4,682)	(565,727)	786,396
Balance (in shares) at Dec. 31, 2019	107,269
Increase (Decrease) in Stockholders' Equity
Comprehensive income (loss)					(21,422)
Balance at Jun. 30, 2020	$ 11	1,357,131	(22,958)	(588,181)	746,003
Balance (in shares) at Jun. 30, 2020	107,328
Balance at Mar. 31, 2020	$ 11	1,356,794	(23,035)	(576,452)	757,318
Balance (in shares) at Mar. 31, 2020	107,269
Increase (Decrease) in Stockholders' Equity
Comprehensive income (loss)			77	(2,075)	(1,998)
Distributions				(9,654)	(9,654)
Equity-based compensation		337			337
Equity-based compensation (in shares)	59
Balance at Jun. 30, 2020	$ 11	$ 1,357,131	$ (22,958)	$ (588,181)	$ 746,003
Balance (in shares) at Jun. 30, 2020	107,328

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Consolidated Statements of Stockholders' Equity (Parenthetical) - $ / shares	3 Months Ended
	Jun. 30, 2020	Mar. 31, 2020	Jun. 30, 2019	Mar. 31, 2019
Consolidated Statements of Stockholders' Equity
Distributions common stock (in dollars per share)	$ 0.09	$ 0.09	$ 0.09	$ 0.09

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Consolidated Statements of Cash Flows - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019
Cash flows from operating activities:
Net income (loss)	$ (3,146)	$ 428
Adjustments to reconcile net income or loss to net cash provided by operating activities:
Depreciation and amortization expense	46,055	46,791
Amortization of above and below market leases	(147)	(193)
Shares issued as compensation	337
Decrease in allowance for doubtful accounts and write-off of accounts receivable	(13)	(91)
Changes in operating assets and liabilities:
Tenant rent receivables	(328)	(2,337)
Straight-line rents	(1,343)	(4,829)
Lease acquisition costs	(838)	(2,603)
Prepaid expenses and other assets	21	2,392
Accounts payable and accrued expenses	(10,006)	(8,741)
Accrued compensation	(1,122)	(852)
Tenant security deposits	(191)	2,799
Payment of deferred leasing commissions	(3,682)	(8,114)
Net cash provided by operating activities	25,597	24,650
Cash flows from investing activities:
Property improvements, fixtures and equipment	(43,189)	(28,944)
Investment in related party mortgage loan receivable		(2,400)
Repayment of related party mortgage loan receivable		51,530
Proceeds received from liquidating trust		1,470
Net cash provided by (used in) investing activities	(43,189)	21,656
Cash flows from financing activities:
Distributions to stockholders	(19,308)	(19,302)
Borrowings under bank note payable	60,000	45,000
Repayments of bank note payable	(30,000)	(70,000)
Deferred financing costs		(81)
Net cash provided (used in) by financing activities	10,692	(44,383)
Net increase (decrease) in cash, cash equivalents and restricted cash	(6,900)	1,923
Cash, cash equivalents and restricted cash, beginning of year	9,790	11,177
Cash, cash equivalents and restricted cash, end of period	2,890	13,100
Cash paid for:
Interest	16,882	17,383
Taxes	470	377
Non-cash investing and financing activities:
Accrued costs for purchase of real estate assets	$ 9,985	$ 11,201

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Organization, Properties, Basis of Presentation, Financial Instruments and Recent Accounting Standards

6 Months Ended

Jun. 30, 2020

Organization

Organization, Properties, Basis of Presentation, Financial Instruments and Recent Accounting Standards

1.  Organization, Properties, Basis of Presentation, Financial Instruments and Recent Accounting Standards

Organization

Franklin Street Properties Corp. (“FSP Corp.” or the “Company”) holds, directly and indirectly, 100% of the interest in FSP Investments LLC, FSP Property Management LLC, FSP Holdings LLC and FSP Protective TRS Corp. FSP Property Management LLC provides asset management and property management services. The Company also has a non-controlling common stock interest in two corporations organized to operate as real estate investment trusts (“REIT”). Collectively, the two REITs are referred to as the “Sponsored REITs”.

As of June 30, 2020, the Company owned and operated a portfolio of real estate consisting of 32 operating properties, three redevelopment properties and two managed Sponsored REITs and held one promissory note secured by a mortgage on real estate owned by a Sponsored REIT. From time-to-time, the Company may acquire real estate or make additional secured loans. The Company may also pursue, on a selective basis, the sale of its properties in order to take advantage of the value creation and demand for its properties, or for geographic or property specific reasons.

Properties

The following table summarizes the Company’s number of operating properties and rentable square feet of real estate. As of June 30, 2020 and June 30, 2019, the Company had three redevelopment properties, respectively, which are excluded from the table.

	As of June 30,
	2020	2019
Operating Properties:
Number of properties	32	32
Rentable square feet	9,508,226	9,498,858

Basis of Presentation

The unaudited consolidated financial statements of the Company include all of the accounts of the Company and its majority-owned subsidiaries. All significant intercompany balances and transactions have been eliminated. These financial statements should be read in conjunction with the Company’s consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for its fiscal year ended December 31, 2019, as filed with the Securities and Exchange Commission.

The accompanying interim financial statements are unaudited; however, the financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and in conjunction with the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the disclosures required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting solely of normal recurring matters) necessary for a fair presentation of the financial statements for these interim periods have been included. Operating results for the three and six months ended June 30, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020 or for any other period.

Financial Instruments

As disclosed in Note 4, the Company’s derivatives are recorded at fair value using Level 2 inputs. The Company estimates that the carrying values of cash and cash equivalents, restricted cash, receivables, prepaid expenses, accounts payable and accrued expenses, accrued compensation, and tenant security deposits approximate their fair values based on their short-term

maturity and the bank note and term loans payable approximate their fair values as they bear interest at variable interest rates or at rates that are at market for similar investments.

Cash, Cash Equivalents and Restricted Cash

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total of the same such amounts shown in the consolidated statement of cash flows.

	June 30,		June 30,
(in thousands)	2020		2019
Cash and cash equivalents	$	2,890	$	13,100
Restricted cash		—		—
Total cash, cash equivalents and restricted cash	$	2,890	$	13,100

Recent Accounting Standards

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which requires that entities use a new forward looking “expected loss” model that generally will result in the earlier recognition of allowance for credit losses. The measurement of expected credit losses is based upon historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company’s Sponsored REIT Loan (as defined in Note 2 below) receivables are within the scope of this standard and our analysis was completed using a Probability of Default / Loss Given Default Model. The Company’s receivables associated with its real estate operating leases are not within the scope of this standard. The Company adopted this standard on January 1, 2020. The adoption of this standard did not have a material impact on our consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”). The ASU is intended to improve the effectiveness of fair value measurement disclosures. ASU 2018-13 is effective for all entities for annual periods beginning after December 15, 2019, and interim periods within those fiscal years. This ASU amends existing fair value measurement disclosure requirements by adding, changing, or removing certain disclosures. ASU 2018-13 is effective for the Company as of January 1, 2020. The Company adopted this standard on January 1, 2020. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.

In April 2019, the FASB issued ASU No. 2019-04, Codification Improvements to Topics 326, Financial Instruments - Credit Losses, Topic 815 Derivatives and Hedging and Topic 825, Financial Instruments (“ASU 2019-04”). The ASU clarifies areas of guidance related to the recently issued standards on credit losses (Topic 326), derivatives and hedging (Topic 815), and recognition and measurement of financial instruments (Topic 825). The new guidance is effective for fiscal years beginning after December 15, 2019, and early adoption is permitted. The Company adopted this standard on January 1, 2020. The adoption of this standard did not have a material impact on our consolidated financial statements.

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”). The ASU contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. The Company is currently assessing the potential impact that the adoption of ASU 2020-04 may have on its consolidated financial statements.

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Related Party Transactions and Investments in Non-Consolidated Entities

6 Months Ended

Jun. 30, 2020

Related Party Transactions and Investments in Non-Consolidated Entities

Related Party Transactions and Investments in Non-Consolidated Entities

2.  Related Party Transactions and Investments in Non-Consolidated Entities

Investment in Sponsored REITs:

At each of June 30, 2020 and December 31, 2019, the Company held a non-controlling common stock interest in two Sponsored REITs in which the Company no longer shares in economic benefit or risk.

Management fees and interest income from loans:

Asset management fees range from 1% to 5% of collected rents and the applicable contracts are cancellable with 30 days notice. Asset management fee income from non-consolidated entities amounted to approximately $45,000 and $121,000 for the six months ended June 30, 2020 and 2019, respectively.

From time to time the Company may make secured loans (“Sponsored REIT Loans”) to Sponsored REITs in the form of mortgage loans or revolving lines of credit to fund construction costs, capital expenditures, leasing costs and for other purposes. The Company reviews the need for an allowance under CECL for Sponsored REIT Loans each reporting period. The Company regularly evaluates the extent and impact of any credit deterioration that could affect performance and the value of the secured property, as well as the financial and operating capability of the borrower. A property’s operating results and existing cash balances are considered and used to assess whether cash flows from operations are sufficient to cover the current and future operating and debt service requirements. The Company also evaluates the borrower’s competency in managing and operating the secured property and considers the overall economic environment, real estate sector and geographic sub-market in which the secured property is located. The Company applies normal loan review and underwriting procedures (as may be implemented or modified from time to time) in making that judgment. The Company has evaluated the credit loss using a loss probability, loss given default model and determined that the expected credit loss on the Sponsored REIT Loan is immaterial.

The Company anticipates that each Sponsored REIT Loan will be repaid at maturity or earlier from refinancing, long term financings of the underlying properties, cash flows from the underlying properties or some other capital event. Each Sponsored REIT Loan is secured by a mortgage on the underlying property and has a term of approximately one to three years. The mortgage loan bears interest at a fixed rate.

The following is a summary of the Sponsored REIT Loans outstanding as of June 30, 2020:

			Maximum		Amount		Interest
(dollars in thousands, except footnotes)		Maturity	Amount		Outstanding		Rate at
Sponsored REIT	Location	Date	of Loan		30-Jun-20		30-Jun-20
Mortgage loan secured by property
FSP Monument Circle LLC (1)	Indianapolis, IN	6-Dec-20		21,000		21,000	7.19	%
			$	21,000	$	21,000

(1) The interest rate is a fixed rate and this mortgage loan includes an origination fee of $164,000 and an exit fee of $38,000 when repaid by the borrower.

The Company recognized interest income and fees from the Sponsored REIT Loans of approximately $763,000 and $2,553,000 for the six months ended June 30, 2020 and 2019, respectively.

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Bank Note Payable, Term Loans Payable and Senior Notes

6 Months Ended

Jun. 30, 2020

Bank Note Payable, Term Note Payable and Private Placements

Bank Note Payable, Term Note Payable and Private Placements

3.  Bank Note Payable, Term Loans Payable and Senior Notes

JPM Term Loan

On August 2, 2018, the Company entered into an Amended and Restated Credit Agreement with JPMorgan Chase Bank, N.A., as administrative agent and lender (“JPMorgan”), and the other lending institutions party thereto (the “JPM Credit Agreement”), which provides a single unsecured bridge loan in the aggregate principal amount of $150 million (the “JPM Term Loan”) that remains fully advanced and outstanding. The JPM Term Loan matures on November 30, 2021. The JPM Term Loan was previously evidenced by a Credit Agreement, dated November 30, 2016, among the Company, JPMorgan, as

administrative agent and lender, and the other lending institutions party thereto, as amended by a First Amendment, dated October 18, 2017.

The JPM Term Loan bears interest at either (i) a number of basis points over a LIBOR-based rate depending on the Company’s credit rating (125.0 basis points over the LIBOR-based rate at June 30, 2020) or (ii) a number of basis points over the base rate depending on the Company’s credit rating (25.0 basis points over the base rate at June 30, 2020).

Although the interest rate on the JPM Term Loan is variable under the JPM Credit Agreement, the Company fixed the LIBOR-based rate on a portion of the JPM Term Loan by entering into interest rate swap transactions. On March 7, 2019, the Company entered into ISDA Master Agreements with various financial institutions to hedge a $100 million portion of the future LIBOR-based rate risk under the JPM Credit Agreement. Effective March 29, 2019, the Company fixed the LIBOR-based rate at 2.44% per annum on a $100 million portion of the JPM Term Loan until November 30, 2021. Accordingly, based upon the Company’s credit rating, as of June 30, 2020, the effective interest rate on a $100 million portion of the JPM Term Loan was 3.69% per annum.

Based upon the Company’s credit rating, as of June 30, 2020, the effective interest rate on the unhedged $50 million portion of the JPM Term Loan was 1.44% per annum. The weighted average interest rate on the unhedged $50 million portion of the JPM Term Loan during the six months ended June 30, 2020 was approximately 2.36% per annum. The weighted average interest rate on the JPM Term Loan during the year ended December 31, 2019 was approximately 3.54% per annum.

The JPM Credit Agreement contains customary affirmative and negative covenants for credit facilities of this type, including limitations with respect to indebtedness, liens, investments, mergers and acquisitions, disposition of assets, changes in business, certain restricted payments, the requirement to have subsidiaries provide a guaranty in the event that they incur recourse indebtedness and transactions with affiliates. The JPM Credit Agreement also contains financial covenants that require the Company to maintain a minimum tangible net worth, a minimum fixed charge coverage ratio, a maximum secured leverage ratio, a maximum leverage ratio, a maximum unencumbered leverage ratio, and minimum unsecured interest coverage. The JPM Credit Agreement provides for customary events of default with corresponding grace periods, including failure to pay any principal or interest when due, certain cross defaults and a change in control of the Company (as defined in the JPM Credit Agreement). In the event of a default by the Company, the administrative agent may, and at the request of the requisite number of lenders shall, declare all obligations under the JPM Credit Agreement immediately due and payable, and enforce any and all rights of the lenders or administrative agent under the JPM Credit Agreement and related documents. For certain events of default related to bankruptcy, insolvency, and receivership, all outstanding obligations of the Company will become immediately due and payable. The Company was in compliance with the JPM Term Loan financial covenants as of June 30, 2020.

BMO Term Loan

On September 27, 2018, the Company entered into a Second Amended and Restated Credit Agreement with the lending institutions party thereto and Bank of Montreal (“BMO”), as administrative agent (the “BMO Credit Agreement”). The BMO Credit Agreement provides for a single, unsecured term loan borrowing in the amount of $220 million (the “BMO Term Loan”) that remains fully advanced and outstanding. The BMO Term Loan consists of a $55 million tranche A term loan and a $165 million tranche B term loan. The tranche A term loan matures on November 30, 2021 and the tranche B term loan matures on January 31, 2024. The BMO Credit Agreement also includes an accordion feature that allows up to $100 million of additional loans, subject to receipt of lender commitments and satisfaction of certain customary conditions. The BMO Term Loan was previously evidenced by an Amended and Restated Credit Agreement, dated October 29, 2014, among the Company, BMO, as administrative agent and lender, and the other lending institutions party thereto, as amended by a First Amendment, dated July 21, 2016, and a Second Amendment, dated October 18, 2017.

The BMO Term Loan bears interest at either (i) a number of basis points over LIBOR depending on the Company’s credit rating (125 basis points over LIBOR at June 30, 2020) or (ii) a number of basis points over the base rate depending on the Company’s credit rating (25 basis points over the base rate at June 30, 2020).

Although the interest rate on the BMO Term Loan is variable under the BMO Credit Agreement, the Company fixed the base LIBOR interest rate by entering into interest rate swap transactions. On August 26, 2013, the Company entered into an ISDA

Master Agreement with Bank of Montreal that fixed the base LIBOR interest rate on the BMO Term Loan at 2.32% per annum until August 26, 2020. On February 20, 2019, the Company entered into ISDA Master Agreements with a group of banks that fixed the base LIBOR interest rate on the BMO Term Loan at 2.39% per annum for the period beginning on August 26, 2020 and ending January 31, 2024. Accordingly, based upon the Company’s credit rating, as of June 30, 2020, the effective interest rate on the BMO Term Loan was 3.57% per annum.

The BMO Credit Agreement contains customary affirmative and negative covenants for credit facilities of this type, including limitations with respect to indebtedness, liens, investments, mergers and acquisitions, disposition of assets, changes in business, certain restricted payments, the requirement to have subsidiaries provide a guaranty in the event that they incur recourse indebtedness and transactions with affiliates. The BMO Credit Agreement also contains financial covenants that require the Company to maintain a minimum tangible net worth, a maximum leverage ratio, a maximum secured leverage ratio, a minimum fixed charge coverage ratio, a maximum unencumbered leverage ratio, and minimum unsecured interest coverage. The BMO Credit Agreement provides for customary events of default with corresponding grace periods, including failure to pay any principal or interest when due, certain cross defaults and a change in control of the Company (as defined in the BMO Credit Agreement). In the event of a default by the Company, the administrative agent may, and at the request of the requisite number of lenders shall, declare all obligations under the BMO Credit Agreement immediately due and payable, terminate the lenders’ commitments to make loans under the BMO Credit Agreement, and enforce any and all rights of the lenders or the administrative agent under the BMO Credit Agreement and related documents. For certain events of default related to bankruptcy, insolvency, and receivership, the commitments of lenders will be automatically terminated and all outstanding obligations of the Company will become immediately due and payable. The Company was in compliance with the BMO Term Loan financial covenants as of June 30, 2020.

BAML Credit Facility

On July 21, 2016, the Company entered into a First Amendment (the “BAML First Amendment”), and on October 18, 2017, the Company entered into a Second Amendment (the “BAML Second Amendment”), to the Second Amended and Restated Credit Agreement dated October 29, 2014 among the Company, the lending institutions party thereto and Bank of America, N.A., as administrative agent, L/C Issuer and Swing Line Lender (as amended by the BAML First Amendment and the BAML Second Amendment, the “BAML Credit Facility”) that continued an existing unsecured revolving line of credit (the “BAML Revolver”) and extended the maturity of an existing term loan (the “BAML Term Loan”).

BAML Revolver Highlights

● The BAML Revolver is for borrowings, at the Company's election, of up to $600 million. Borrowings made pursuant to the BAML Revolver may be revolving loans, swing line loans or letters of credit, the combined sum of which may not exceed $600 million outstanding at any time.

● Borrowings made pursuant to the BAML Revolver may be borrowed, repaid and reborrowed from time to time until the initial maturity date of January 12, 2022. The Company has the right to extend the maturity date of the BAML Revolver by two additional six month periods, or until January 12, 2023, upon payment of a fee and satisfaction of certain customary conditions.

● The BAML Credit Facility includes an accordion feature that allows for an aggregate amount of up to $500 million of additional borrowing capacity applicable to the BAML Revolver and/or the BAML Term Loan, subject to receipt of lender commitments and satisfaction of certain customary conditions.

As of June 30, 2020, there were $30 million of borrowings outstanding under the BAML Revolver. The BAML Revolver bears interest at either (i) a margin over LIBOR depending on the Company’s credit rating (1.20% over LIBOR at June 30, 2020) or (ii) a margin over the base rate depending on the Company’s credit rating (0.20% over the base rate at June 30, 2020). The BAML Credit Facility also obligates the Company to pay an annual facility fee in an amount that is also based on the Company’s credit rating. The facility fee is assessed against the total amount of the BAML Revolver, or $600 million (0.25% at June 30, 2020).

Based upon the Company’s credit rating, as of June 30, 2020, the interest rate on the BAML Revolver was 1.36% per annum. The weighted average interest rate on all amounts outstanding on the BAML Revolver during the six months ended June 30,

2020 was approximately 2.01% per annum. As of December 31, 2019, there were no borrowings outstanding under the BAML Revolver. The weighted average interest rate on all amounts outstanding on the BAML Revolver during the year ended December 31, 2019 was approximately 3.67% per annum.

BAML Term Loan Highlights

● The BAML Term Loan is for $400 million.

● The BAML Term Loan matures on January 12, 2023.

● The BAML Credit Facility includes an accordion feature that allows for an aggregate amount of up to $500 million of additional borrowing capacity applicable to the BAML Revolver and/or the BAML Term Loan, subject to receipt of lender commitments and satisfaction of certain customary conditions.

● On September 27, 2012, the Company drew down the entire $400 million under the BAML Term Loan and such amount remains fully advanced and outstanding under the BAML Term Loan.

The BAML Term Loan bears interest at either (i) a margin over LIBOR depending on the Company’s credit rating (1.35% over LIBOR at June 30, 2020) or (ii) a margin over the base rate depending on the Company’s credit rating (0.35% over the base rate at June 30, 2020).

Although the interest rate on the BAML Credit Facility is variable, the Company fixed the base LIBOR interest rate on the BAML Term Loan by entering into interest rate swap transactions. On July 22, 2016, the Company entered into ISDA Master Agreements with a group of banks that fixed the base LIBOR interest rate on the BAML Term Loan at 1.12% per annum for the period beginning on September 27, 2017 and ending on September 27, 2021. Accordingly, based upon the Company’s credit rating, as of June 30, 2020, the effective interest rate on the BAML Term Loan was 2.47% per annum.

BAML Credit Facility General Information

The BAML Credit Facility contains customary affirmative and negative covenants for credit facilities of this type, including limitations with respect to indebtedness, liens, investments, mergers and acquisitions, disposition of assets, changes in business, certain restricted payments, the requirement to have subsidiaries provide a guaranty in the event that they incur recourse indebtedness and transactions with affiliates. The BAML Credit Facility also contains financial covenants that require the Company to maintain a minimum tangible net worth, a maximum leverage ratio, a maximum secured leverage ratio, a minimum fixed charge coverage ratio, a maximum unencumbered leverage ratio, and minimum unsecured interest coverage. The BAML Credit Facility provides for customary events of default with corresponding grace periods, including failure to pay any principal or interest when due, certain cross defaults and a change in control of the Company (as defined in the BAML Credit Facility). In the event of a default by the Company, the administrative agent may, and at the request of the requisite number of lenders shall, declare all obligations under the BAML Credit Facility immediately due and payable, terminate the lenders’ commitments to make loans under the BAML Credit Facility, and enforce any and all rights of the lenders or administrative agent under the BAML Credit Facility and related documents. For certain events of default related to bankruptcy, insolvency, and receivership, the commitments of lenders will be automatically terminated and all outstanding obligations of the Company will become immediately due and payable. The Company was in compliance with the BAML Credit Facility financial covenants as of June 30, 2020.

The Company may use the proceeds of the loans under the BAML Credit Facility to finance the acquisition of real properties and for other permitted investments; to finance investments associated with Sponsored REITs to refinance or retire indebtedness and for working capital and other general business purposes, in each case to the extent permitted under the BAML Credit Facility.

Senior Notes

On October 24, 2017, the Company entered into a note purchase agreement (the “Note Purchase Agreement”) with the various purchasers named therein (the “Purchasers”) in connection with a private placement of senior unsecured notes. Under the Note Purchase Agreement, the Company agreed to sell to the Purchasers an aggregate principal amount of $200 million of senior unsecured notes consisting of (i) 3.99% Series A Senior Notes due December 20, 2024 in an aggregate principal

amount of $116 million (the “Series A Notes”) and (ii) 4.26% Series B Senior Notes due December 20, 2027 in an aggregate principal amount of $84 million (the “Series B Notes” and, together with the Series A Notes, the “Senior Notes”). On December 20, 2017, the Senior Notes were funded and the proceeds were used to reduce the outstanding balance of the BAML Revolver.

The Note Purchase Agreement contains customary financial covenants, including a maximum leverage ratio, a maximum secured leverage ratio, a minimum fixed charge coverage ratio, and a maximum unencumbered leverage ratio. The Note Purchase Agreement also contains restrictive covenants that, among other things, restrict the ability of the Company and its subsidiaries to enter into transactions with affiliates, merge, consolidate, create liens, make certain restricted payments, enter into certain agreements or prepay certain indebtedness. Such financial and restrictive covenants are substantially similar to the corresponding covenants contained in the BAML Credit Facility, the BMO Credit Agreement and the JPM Credit Agreement. The Senior Notes financial covenants require, among other things, the maintenance of a fixed charge coverage ratio of at least 1.50; a maximum leverage ratio and an unsecured leverage ratio of no more than 60% (65% if there were a significant acquisition for a short period of time). In addition, the Note Purchase Agreement provides that the Note Purchase Agreement will automatically incorporate additional financial and other specified covenants (such as limitations on investments and distributions) that are effective from time to time under the existing credit agreements, other material indebtedness or certain other private placements of debt of the Company and its subsidiaries. The Note Purchase Agreement contains customary events of default, including payment defaults, cross defaults with certain other indebtedness, breaches of covenants and bankruptcy events. In the case of an event of default, the Purchasers may, among other remedies, accelerate the payment of all obligations. The Company was in compliance with the Senior Notes financial covenants as of June 30, 2020.

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Financial Instruments: Derivatives and Hedging

6 Months Ended

Jun. 30, 2020

Financial Instruments: Derivatives and Hedging

Financial Instruments: Derivatives and Hedging

4.  Financial Instruments: Derivatives and Hedging

On July 22, 2016, the Company fixed the interest rate for the period beginning on September 27, 2017 and ending on September 27, 2021 on the BAML Term Loan (the “2017 Interest Rate Swap”). On August 26, 2013, the Company fixed the interest rate until August 26, 2020 on the BMO Term Loan (the “2013 BMO Interest Rate Swap”). On March 7, 2019, the Company fixed the interest rate for the period beginning on March 29, 2019 and ending on November 30, 2021 on a $100 million portion of the JPM Term Loan (the “2019 JPM Interest Rate Swap”). On February 20, 2019, the Company fixed the interest rate for the period beginning August 26, 2020 and ending January 31, 2024 on the BMO Term Loan (the “2019 BMO Interest Rate Swap”). The variable rates that were fixed under the 2017 Interest Rate Swap, the 2013 BMO Interest Rate Swap, the 2019 JPM Interest Rate Swap and the 2019 BMO Interest Rate Swap (collectively referred to as the “Interest Rate Swaps”) are described in Note 3.

The Interest Rate Swaps qualify as cash flow hedges and have been recognized on the consolidated balance sheets at fair value. If a derivative qualifies as a hedge, depending on the nature of the hedge, changes in the fair value of the derivative will either be offset against the change in fair value of the hedged asset, liability, or firm commitment through earnings, or recognized in other comprehensive income until the hedged item is recognized in earnings. The ineffective portion of a derivative’s change in fair value will be recognized in earnings in the same period in which the hedged interest payments affect earnings, which may increase or decrease reported net income and stockholders’ equity prospectively, depending on future levels of interest rates and other variables affecting the fair values of derivative instruments and hedged items, but will have no effect on cash flows.

The following table summarizes the notional and fair value of the Company’s derivative financial instruments at June 30, 2020. The notional value is an indication of the extent of the Company’s involvement in these instruments at that time, but does not represent exposure to credit, interest rate or market risks.

	Notional		Strike		Effective	Expiration	Fair
(in thousands)	Value		Rate		Date	Date	Value
2017 Interest Rate Swap	$	400,000	1.12	%	Sep-17	Sep-21	$	(4,880)
2013 BMO Interest Rate Swap	$	220,000	2.32	%	Aug-13	Aug-20	$	(734)
2019 JPM Interest Rate Swap	$	100,000	2.44	%	Mar-19	Nov-21	$	(3,241)
2019 BMO Interest Rate Swap (1)	$	220,000	2.39	%	Aug-20	Jan-24	$	(14,103)
(1) The Notional Value will decrease to $165 million on November 30, 2021.

On June 30, 2020, the 2017 Interest Rate Swap, 2013 BMO Interest Rate Swap, 2019 JPM Interest Rate Swap and 2019 BMO Interest Rate Swap were reported as liabilities with an aggregate fair value of approximately $23.0 million and are included in other liabilities: derivative liabilities in the consolidated balance sheet at June 30, 2020.

The gain/(loss) on the Company’s Interest Rate Swaps that was recorded in other comprehensive income (loss) (OCI) and the accompanying consolidated statements of operations as a component of interest expense for the six months ended June 30, 2020 and 2019, respectively, was as follows:

(in thousands)	Six Months Ended June 30,
Interest Rate Swaps in Cash Flow Hedging Relationships:	2020		2019
Amounts of loss recognized in OCI	$	(20,439)	$	(15,322)
Amounts of previously recorded gain/(loss) reclassified from OCI into Interest Expense	$	(2,163)	$	2,930
Total amount of Interest Expense presented in the consolidated statements of operations	$	18,043	$	18,739

Over time, the unrealized gains and losses held in accumulated other comprehensive income will be reclassified into earnings as an increase or reduction to interest expense in the same periods in which the hedged interest payments affect earnings. The Company estimates that approximately $10.9 million of the current balance held in accumulated other comprehensive income (loss) will be reclassified into earnings within the next 12 months.

The Company is hedging the exposure to variability in anticipated future interest payments on existing debt.

The BMO Term Loan, BAML Term Loan and JPM Term Loan hedging transactions used derivative instruments that involve certain additional risks such as counterparty credit risk, the enforceability of hedging contracts and the risk that unanticipated and significant changes in interest rates will cause a significant loss of basis in either or both of the contracts. The Company requires its derivatives contracts to be with counterparties that have investment grade ratings. As a result, the Company does not anticipate that any counterparty will fail to meet its obligations. However, there can be no assurance that the Company will be able to adequately protect against the foregoing risks or that it will ultimately realize an economic benefit that exceeds the related amounts incurred in connection with engaging in such hedging strategies.

The fair value of the Company’s derivative instruments are determined using the net discounted cash flows of the expected cash flows of the derivative based on the market based interest rate curve and are adjusted to reflect credit or nonperformance risk. The risk is estimated by the Company using credit spreads and risk premiums that are observable in the market. These financial instruments were classified within Level 2 of the fair value hierarchy and were classified as an asset or liability on the consolidated balance sheets.

The Company’s derivatives are recorded at fair value in other assets: derivative asset and other liabilities: derivative liability in the consolidated balance sheets and the effective portion of the derivatives’ fair value is recorded to other comprehensive income (loss) in the consolidated statements of comprehensive income (loss).

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Net Income Per Share

6 Months Ended

Jun. 30, 2020

Net Income Per Share

Net Income Per Share

5.  Net Income Per Share

Basic net income per share is computed by dividing net income by the weighted average number of Company shares outstanding during the period. Diluted net income per share reflects the potential dilution that could occur if securities or other contracts to issue shares were exercised or converted into shares. There were no potential dilutive shares outstanding at each of June 30, 2020 and 2019.

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Stockholders' Equity

6 Months Ended

Jun. 30, 2020

Stockholders' Equity

Stockholders' Equity

6.  Stockholders’ Equity

As of June 30, 2020, the Company had 107,328,199 shares of common stock outstanding. The Company declared and paid dividends as follows (in thousands, except per share amounts):

	Dividends Per		Total
Quarter Paid	Share		Dividends
First quarter of 2020	$	0.09	$	9,654
Second quarter of 2020	$	0.09	$	9,654
First quarter of 2019	$	0.09	$	9,651
Second quarter of 2019	$	0.09	$	9,651

Equity-Based Compensation

On May 20, 2002, the stockholders of the Company approved the 2002 Stock Incentive Plan (the “Plan”). The Plan is an equity-based incentive compensation plan, and provides for the grants of up to a maximum of 2,000,000 shares of the Company’s common stock (“Awards”). All of the Company’s employees, officers, directors, consultants and advisors are eligible to be granted Awards. Awards under the Plan are made at the discretion of the Company’s Board of Directors, and have no vesting requirements. Upon granting an Award, the Company will recognize compensation cost equal to the fair value of the Company’s common stock, as determined by the Company’s Board of Directors, on the date of the grant. The Company granted 55,572 shares under the Plan between 2002 and 2005, made no grants between 2006 and 2018 and granted 38,046 shares under the Plan in 2019.

On June 4, 2020, the Company granted 58,998 shares under the Plan to non-employee directors at a compensation cost of approximately $337,000, which was recognized during the three months ended June 30, 2020 and is included in general and administrative expenses. Such shares were fully vested on the date of issuance. There are currently 1,847,384 shares available for grant under the Plan.

	Shares Available		Compensation
(in thousands)	for Grant		Cost
Balance, December 31, 2016, 2017 and 2018		1,944,428
Shares granted 2019		(38,046)	$	337,000
Balance December 31, 2019		1,906,382		337,000
Shares granted 2020		(58,998)		337,000
Balance June 30, 2020		1,847,384	$	674,000

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Income Taxes

6 Months Ended

Jun. 30, 2020

Income Taxes

Income Taxes

7.  Income Taxes

General

The Company has elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended (the “Code”). As a REIT, the Company generally is entitled to a tax deduction for distributions paid to its shareholders, thereby effectively subjecting the distributed net income of the Company to taxation at the shareholder level only. The Company must comply with a variety of restrictions to maintain its status as a REIT. These restrictions include the type of income it can earn, the type of assets it can hold, the number of shareholders it can have and the concentration of their ownership, and the amount of the Company’s taxable income that must be distributed annually.

One such restriction is that the Company generally cannot own more than 10% of the voting power or value of the securities of any one issuer unless the issuer is itself a REIT or a taxable REIT subsidiary (“TRS”). In the case of TRSs, the Company’s ownership of securities in all TRSs generally cannot exceed 20% (25% of taxable years beginning on or before December 31, 2017) of the value of all of the Company’s assets and, when considered together with other non-real estate assets, cannot exceed 25% of the value of all of the Company’s assets. FSP Investments LLC and FSP Protective TRS Corp. are the Company’s taxable REIT subsidiaries operating as taxable corporations under the Code. The TRSs have gross amounts of net operating losses (“NOLs”) available to those taxable corporations of $4.4 million, $4.2 million and $4.0 million as of each of December 31, 2019, 2018 and 2017, respectively. The NOLs created prior to 2018 will expire between 2030 and 2047 and the NOLs generated after 2017 will not expire. A valuation allowance is provided for the full amount of the NOLs as the realization of any tax benefits from such NOLs is not assured.

Income taxes are recorded based on the future tax effects of the difference between the tax and financial reporting bases of the Company’s assets and liabilities. In estimating future tax consequences, potential future events are considered except for potential changes in income tax law or in rates.

The Company adopted an accounting pronouncement related to uncertainty in income taxes effective January 1, 2007, which did not result in recording a liability, nor was any accrued interest and penalties recognized with the adoption. Accrued interest and penalties will be recorded as income tax expense, if the Company records a liability in the future. The Company’s effective tax rate was not affected by the adoption. The Company and one or more of its subsidiaries files income tax returns in the U.S. federal jurisdiction and various state jurisdictions. The statute of limitations for the Company’s income tax returns is generally three years and as such, the Company’s returns that remain subject to examination would be primarily from 2016 and thereafter.

Net operating losses

Section 382 of the Code restricts a corporation’s ability to use NOLs to offset future taxable income following certain “ownership changes.” Such ownership changes occurred with past mergers and accordingly a portion of the NOLs incurred by the Sponsored REITs available for use by the Company in any particular future taxable year will be limited. To the extent that the Company does not utilize the full amount of the annual NOLs limit, the unused amount may be carried forward to offset taxable income in future years. NOLs generated prior to December 31, 2018 will expire 20 years after the year in which they arise, and the last of the Company’s NOLs will expire in 2027. A valuation allowance is provided for the full amount of the NOLs as the realization of any tax benefits from such NOLs is not assured. The gross amount of NOLs available to the Company was $13.0 million as of each of June 30, 2020 and December 31, 2019.

Income Tax Expense

The Company is subject to a business tax known as the Revised Texas Franchise Tax. Some of the Company’s leases allow reimbursement by tenants for these amounts because the Revised Texas Franchise Tax replaces a portion of the property tax for school districts. Because the tax base on the Revised Texas Franchise Tax is derived from an income based measure, it is considered an income tax. The Company recorded a provision for the Revised Texas Franchise Tax of $132,000 and $164,000 for the six months ended June 30, 2020 and 2019, respectively.

The income tax expense reflected in the consolidated statements of operations relates primarily to a franchise tax on the Company’s Texas properties. FSP Protective TRS Corp. provides taxable services to tenants at some of the Company’s properties, and the tax expenses associated with these activities and a refund receivable of $0.1 million recorded during the six months ended June 30, 2019 are reported as Other Taxes in the table below:

	For the Six Months Ended June 30,
(Dollars in thousands)	2020		2019
Revised Texas Franchise Tax	$	132	$	164
Other Taxes		—		(112)
Tax expense	$	132	$	52

Taxes on income are a current tax expense. No deferred income taxes were provided as there were no material temporary differences between the financial reporting basis and the tax basis of the TRSs.

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Leases

6 Months Ended

Jun. 30, 2020

Leases

Leases

8.  Leases

Leases as a Lessor:

The Company is a lessor of commercial real estate with operations that include the leasing of office and industrial properties. Many of the leases with customers contain options to extend leases at a fair market rate and may also include options to terminate leases. The Company considers several inputs when evaluating the amount it expects to derive from its leased assets at the end of the lease terms, such as the remaining useful life, expected market conditions, fair value of lease payments, expected fair values of underlying assets, and expected deployment of the underlying assets. The Company’s strategy to address its risk for the residual value in its commercial real estate is to re-lease the commercial space.

The Company has elected to apply the practical expedient to not separate non-lease components from the related lease component of real estate leases. This combined component is primarily comprised of fixed lease payments, early termination fees, common area maintenance cost reimbursements, and parking lease payments. The Company applies ASC 842-Leases to the combined lease and non-lease components.

A minority of the Company’s leases are subject to annual changes in the Consumer Price Index (“CPI”). Although increases in the CPI are not estimated as part of the Company’s measurement of straight-line rent revenue, to the extent that the actual CPI is greater or less than the CPI at lease commencement, there could be changes to realized income or loss.

For the six months ended June 30, 2020 and 2019, the Company recognized the following amounts of income relating to lease payments:

Income relating to lease payments:
	Six Months Ended
(in thousands)	June 30, 2020		June 30, 2019
Income from leases (1)	$	121,474	$	123,821
	$	121,474	$	123,821
(1) Amount from variable lease payments $29,945 and $32,085 for the six months ended June 30, 2020 and 2019, respectively.

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Subsequent Events

6 Months Ended

Jun. 30, 2020

Subsequent Events

Subsequent Events

9.  Subsequent Events

On July 6, 2020, the Board of Directors of the Company declared a cash distribution of $0.09 per share of common stock payable on August 6, 2020 to stockholders of record on July 17, 2020.

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Organization, Properties, Basis of Presentation, Financial Instruments and Recent Accounting Standards (Policies)

6 Months Ended

Jun. 30, 2020

Organization

Basis of Presentation

Basis of Presentation

The unaudited consolidated financial statements of the Company include all of the accounts of the Company and its majority-owned subsidiaries. All significant intercompany balances and transactions have been eliminated. These financial statements should be read in conjunction with the Company’s consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for its fiscal year ended December 31, 2019, as filed with the Securities and Exchange Commission.

The accompanying interim financial statements are unaudited; however, the financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and in conjunction with the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the disclosures required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting solely of normal recurring matters) necessary for a fair presentation of the financial statements for these interim periods have been included. Operating results for the three and six months ended June 30, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020 or for any other period.

Financial Instruments

Financial Instruments

As disclosed in Note 4, the Company’s derivatives are recorded at fair value using Level 2 inputs. The Company estimates that the carrying values of cash and cash equivalents, restricted cash, receivables, prepaid expenses, accounts payable and accrued expenses, accrued compensation, and tenant security deposits approximate their fair values based on their short-term

maturity and the bank note and term loans payable approximate their fair values as they bear interest at variable interest rates or at rates that are at market for similar investments.

Restricted Cash

Cash, Cash Equivalents and Restricted Cash

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total of the same such amounts shown in the consolidated statement of cash flows.

	June 30,		June 30,
(in thousands)	2020		2019
Cash and cash equivalents	$	2,890	$	13,100
Restricted cash		—		—
Total cash, cash equivalents and restricted cash	$	2,890	$	13,100

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Organization, Properties, Basis of Presentation, Financial Instruments and Recent Accounting Standards (Tables)

6 Months Ended

Jun. 30, 2020

Organization

Summary of the entity's investment in real estate assets, including number of properties and rentable square feet of real estate

	As of June 30,
	2020	2019
Operating Properties:
Number of properties	32	32
Rentable square feet	9,508,226	9,498,858

Reconciliation of cash, cash equivalents, and restricted cash

	June 30,		June 30,
(in thousands)	2020		2019
Cash and cash equivalents	$	2,890	$	13,100
Restricted cash		—		—
Total cash, cash equivalents and restricted cash	$	2,890	$	13,100

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Related Party Transactions and Investments in Non-Consolidated Entities (Tables)

6 Months Ended

Jun. 30, 2020

Related Party Transactions and Investments in Non-Consolidated Entities

Summary of financial information of Sponsored REITs

Summary of the Sponsored REIT Loans outstanding

			Maximum		Amount		Interest
(dollars in thousands, except footnotes)		Maturity	Amount		Outstanding		Rate at
Sponsored REIT	Location	Date	of Loan		30-Jun-20		30-Jun-20
Mortgage loan secured by property
FSP Monument Circle LLC (1)	Indianapolis, IN	6-Dec-20		21,000		21,000	7.19	%
			$	21,000	$	21,000

(1) The interest rate is a fixed rate and this mortgage loan includes an origination fee of $164,000 and an exit fee of $38,000 when repaid by the borrower.

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Financial Instruments: Derivatives and Hedging (Tables)

6 Months Ended

Jun. 30, 2020

Financial Instruments: Derivatives and Hedging

Schedule of notional and fair value of derivative financial instruments

	Notional		Strike		Effective	Expiration	Fair
(in thousands)	Value		Rate		Date	Date	Value
2017 Interest Rate Swap	$	400,000	1.12	%	Sep-17	Sep-21	$	(4,880)
2013 BMO Interest Rate Swap	$	220,000	2.32	%	Aug-13	Aug-20	$	(734)
2019 JPM Interest Rate Swap	$	100,000	2.44	%	Mar-19	Nov-21	$	(3,241)
2019 BMO Interest Rate Swap (1)	$	220,000	2.39	%	Aug-20	Jan-24	$	(14,103)
(1) The Notional Value will decrease to $165 million on November 30, 2021.

Summary of Interest Rate Swaps that was recorded in OCI

(in thousands)	Six Months Ended June 30,
Interest Rate Swaps in Cash Flow Hedging Relationships:	2020		2019
Amounts of loss recognized in OCI	$	(20,439)	$	(15,322)
Amounts of previously recorded gain/(loss) reclassified from OCI into Interest Expense	$	(2,163)	$	2,930
Total amount of Interest Expense presented in the consolidated statements of operations	$	18,043	$	18,739

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Stockholders' Equity (Tables)

6 Months Ended

Jun. 30, 2020

Stockholders' Equity

Schedule of dividends declared and paid

	Dividends Per		Total
Quarter Paid	Share		Dividends
First quarter of 2020	$	0.09	$	9,654
Second quarter of 2020	$	0.09	$	9,654
First quarter of 2019	$	0.09	$	9,651
Second quarter of 2019	$	0.09	$	9,651

Schedule of Share-based Payment Arrangement, Nonemployee Director Award Plan, Activity

	Shares Available		Compensation
(in thousands)	for Grant		Cost
Balance, December 31, 2016, 2017 and 2018		1,944,428
Shares granted 2019		(38,046)	$	337,000
Balance December 31, 2019		1,906,382		337,000
Shares granted 2020		(58,998)		337,000
Balance June 30, 2020		1,847,384	$	674,000

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Income Taxes (Tables)

6 Months Ended

Jun. 30, 2020

Income Taxes

Schedule of income tax expense reflected in the condensed consolidated statements of income

	For the Six Months Ended June 30,
(Dollars in thousands)	2020		2019
Revised Texas Franchise Tax	$	132	$	164
Other Taxes		—		(112)
Tax expense	$	132	$	52

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Leases (Tables)

6 Months Ended

Jun. 30, 2020

Leases

Summary of income relating to lease payments and undiscounted cash flows

Income relating to lease payments:
	Six Months Ended
(in thousands)	June 30, 2020		June 30, 2019
Income from leases (1)	$	121,474	$	123,821
	$	121,474	$	123,821
(1) Amount from variable lease payments $29,945 and $32,085 for the six months ended June 30, 2020 and 2019, respectively.

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Organization, Properties, Basis of Presentation, Financial Instruments and Recent Accounting Standards (Details)	6 Months Ended
	Jun. 30, 2020	Jun. 30, 2020 entity	Jun. 30, 2020 property	Jun. 30, 2020 ft²	Dec. 31, 2019 entity	Jun. 30, 2019 ft² property
Organization
Number of REITs in which the entity holds non-controlling common stock interest | entity		2			2
Number of Sponsored REITs		2	2
Number of properties in redevelopment			3			3
Number of promissory notes secured by mortgages on real estate owned by Sponsored REITs			1
Properties
Number of properties			32			32
Rentable square feet | ft²				9,508,226		9,498,858
FSP Investments LLC
Organization
Ownership interest (as a percent)	100.00%
FSP Holdings LLC
Organization
Ownership interest (as a percent)	100.00%
FSP Protective TRS Corp.
Organization
Ownership interest (as a percent)	100.00%

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Organization, Properties, Basis of Presentation, Financial Instruments and Recent Accounting Standards - Cash (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019	Jun. 30, 2019	Dec. 31, 2018
Cash, Cash Equivalents and Restricted Cash
Cash and cash equivalents	$ 2,890		$ 13,100
Total cash, cash equivalents amd restricted cash	$ 2,890	$ 9,790	$ 13,100	$ 11,177

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Related Party Transactions and Investments in Non-Consolidated Entities - Investment in Sponsored REITs (Details) - entity	Jun. 30, 2020	Dec. 31, 2019
Related Party Transactions and Investments in Non-Consolidated Entities
Number of REITs in which the entity holds non-controlling common stock interest	2	2

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Related Party Transactions and Investments in Non-Consolidated Entities - Management fees and interest income from loans (Details) - USD ($)	6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019
Related Party Transactions and Investments in Non-Consolidated Entities
Asset management fees, low end of range (as a percent)	1.00%
Asset management fees, high end of range (as a percent)	5.00%
Notice period for cancellation of applicable contracts	30 days
Revenue	$ 45,000	$ 121,000
Revenue, Product and Service [Extensible List]	us-gaap:AssetManagement1Member	us-gaap:AssetManagement1Member

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Related Party Transactions and Investments in Non-Consolidated Entities - Sponsored REIT Loans outstanding (Details) - USD ($)	6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Dec. 31, 2019
Sponsored REITs
Maximum amount of loan	$ 21,000,000
Amount Drawn	$ 21,000,000		$ 21,000,000
Sponsored REITs
Sponsored REITs
Term of sponsored REIT loan secured by mortgage, minimum	1 year
Term of sponsored REIT loan secured by mortgage, maximum	3 years
Interest income and fees from the Sponsored REIT Loans	$ 763,000	$ 2,553,000
Mortgage loan secured by property | FSP Monument Circle LLC
Sponsored REITs
Maximum amount of loan	21,000,000
Amount Drawn	$ 21,000,000
Interest rate (as a percent)	7.19%
Origination fee	$ 164,000
Exit fee	$ 38,000

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Bank Note Payable, Term Loans Payable and Senior Notes (Details)		6 Months Ended
	Sep. 27, 2012 USD ($)	Jun. 30, 2020 USD ($) period	Dec. 31, 2019 USD ($)	Aug. 02, 2018 USD ($)
Debt Instrument [Line Items]
Portion of future LIBOR-based rate risk		$ 23,000,000.0
Borrowings outstanding		30,000,000
Senior Notes
Debt Instrument [Line Items]
Principal amount of loan		$ 200,000,000
Fixed charge coverage ratio		1.50
Series A Notes
Debt Instrument [Line Items]
Principal amount of loan		$ 116,000,000
Interest rate (as a percent)		3.99%
Series B Notes
Debt Instrument [Line Items]
Principal amount of loan		$ 84,000,000
Interest rate (as a percent)		4.26%
Maximum | Senior Notes
Debt Instrument [Line Items]
Unsecured leverage ratio		60.00%
Unsecured leverage ratio for significant acquisition		65.00%
BAML Revolver
Debt Instrument [Line Items]
Weighted average interest rate (as a percent)		2.01%	3.67%
Effective interest rate (as a percent)		1.36%
Total available		$ 600,000,000
Number of periods of extension | period		2
Length of extension period		6 months
Additional borrowing capacity allowed by exercising an accordion feature		$ 500,000,000
Borrowings outstanding		$ 30,000,000	$ 0
Facility fee at period end (as a percent)		0.25%
BAML Revolver | LIBOR
Debt Instrument [Line Items]
Basis spread on variable rate at period end (as a percent)		1.20%
BAML Revolver | Base Rate
Debt Instrument [Line Items]
Basis spread on variable rate at period end (as a percent)		0.20%
BAML Term Loan
Debt Instrument [Line Items]
Principal amount of loan		$ 400,000,000
Effective interest rate (as a percent)		2.47%
Additional borrowing capacity allowed by exercising an accordion feature		$ 500,000,000
Amount drawn down	$ 400,000,000
BAML Term Loan | LIBOR
Debt Instrument [Line Items]
Basis spread on variable rate at period end (as a percent)		1.35%
Fixed rate (as a percent)		1.12%
BAML Term Loan | Base Rate
Debt Instrument [Line Items]
Basis spread on variable rate at period end (as a percent)		0.35%
JPM Term Loan
Debt Instrument [Line Items]
Principal amount of loan				$ 150,000,000
Portion of future LIBOR-based rate risk		$ 100,000,000
JPM Term Loan | Hedged portion
Debt Instrument [Line Items]
Portion of future LIBOR-based rate risk		$ 100,000,000
Effective interest rate (as a percent)		3.69%
JPM Term Loan | Unhedged portion
Debt Instrument [Line Items]
Weighted average interest rate (as a percent)		2.36%	3.54%
Portion of future LIBOR-based rate risk		$ 50,000,000
Effective interest rate (as a percent)		1.44%
JPM Term Loan | LIBOR
Debt Instrument [Line Items]
Basis spread on variable rate at period end (as a percent)		1.25%
JPM Term Loan | LIBOR | Hedged portion
Debt Instrument [Line Items]
Fixed rate (as a percent)		2.44%
JPM Term Loan | Base Rate
Debt Instrument [Line Items]
Basis spread on variable rate at period end (as a percent)		0.25%
BMO Term Loan
Debt Instrument [Line Items]
Principal amount of loan		$ 220,000,000
Additional loans allowed by exercising an accordion feature		$ 100,000,000
Effective interest rate (as a percent)		3.57%
BMO Term Loan | LIBOR
Debt Instrument [Line Items]
Basis spread on variable rate at period end (as a percent)		1.25%
Fixed rate (as a percent)		2.32%
BMO Term Loan | LIBOR | Hedged portion
Debt Instrument [Line Items]
Fixed rate (as a percent)		2.39%
BMO Term Loan | Base Rate
Debt Instrument [Line Items]
Basis spread on variable rate at period end (as a percent)		0.25%
Tranche A Term Loan
Debt Instrument [Line Items]
Principal amount of loan		$ 55,000,000
Tranche B Term Loan
Debt Instrument [Line Items]
Principal amount of loan		$ 165,000,000

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Financial Instruments: Derivatives and Hedging (Details) - USD ($) $ in Thousands	Nov. 30, 2021	Jun. 30, 2020
Financial Instruments: Derivatives and Hedging
Hedged amount of portion of the future LIBOR-based rate risk		$ 23,000
Amount estimated to be reclassified into earnings within next 12 months		10,900
JPM Term Loan
Financial Instruments: Derivatives and Hedging
Hedged amount of portion of the future LIBOR-based rate risk		100,000
2017 Interest Rate Swap | Cash flow hedges
Financial Instruments: Derivatives and Hedging
Notional Value		$ 400,000
Strike Rate (as a percent)		1.12%
Fair Value		$ (4,880)
2013 BMO Interest Rate Swap | Cash flow hedges
Financial Instruments: Derivatives and Hedging
Notional Value		$ 220,000
Strike Rate (as a percent)		2.32%
Fair Value		$ (734)
2019 JPM Interest Rate Swap | Cash flow hedges
Financial Instruments: Derivatives and Hedging
Notional Value		$ 100,000
Strike Rate (as a percent)		2.44%
Fair Value		$ (3,241)
2019 BMO Interest Rate Swap | Cash flow hedges
Financial Instruments: Derivatives and Hedging
Notional Value		$ 220,000
Strike Rate (as a percent)		2.39%
Fair Value		$ (14,103)
2019 BMO Interest Rate Swap | Cash flow hedges | Forecast
Financial Instruments: Derivatives and Hedging
Notional Value	$ 165,000

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Financial Instruments: Derivatives and Hedging - Interest Rate Swaps (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Total amount of Interest Expense presented in the consolidated statements of operations	$ 8,980	$ 9,371	$ 18,043	$ 18,739
Interest rate swap
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Total amount of Interest Expense presented in the consolidated statements of operations			18,043	18,739
Interest rate swap | Amounts of previously recorded gain/(loss) reclassified from OCI into Interest Expense
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Total amount of Interest Expense presented in the consolidated statements of operations			(2,163)	2,930
Interest rate swap | Amounts of loss recognized in OCI
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Total amount of Interest Expense presented in the consolidated statements of operations			$ (20,439)	$ (15,322)

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Net Income Per Share (Details) - shares	6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019
Net Income Per Share
Potential dilutive shares outstanding	0	0

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Stockholders' Equity (Details)		3 Months Ended				6 Months Ended	12 Months Ended	48 Months Ended	156 Months Ended
	Jun. 04, 2020 shares	Jun. 30, 2020 USD ($) $ / shares shares	Mar. 31, 2020 USD ($) $ / shares shares	Jun. 30, 2019 USD ($) $ / shares	Mar. 31, 2019 USD ($) $ / shares shares	Jun. 30, 2020 USD ($) item shares	Dec. 31, 2019 USD ($) shares	Dec. 31, 2005 shares	Dec. 31, 2018 shares
Stockholders' Equity
Common Stock, Shares, Outstanding		107,328,199				107,328,199	107,269,201
Dividends declared and paid
Cash dividend declared per share (in dollars per share) | $ / shares		$ 0.09	$ 0.09	$ 0.09	$ 0.09
Total Dividends | $		$ 9,654,000	$ 9,654,000	$ 9,651,000	$ 9,651,000
General and Administrative Expense [Member]
Equity-Based Compensation
Compensation cost | $		$ 337,000
2002 Stock Incentive Plan
Equity-Based Compensation
Maximum number of shares provided for grant under equity-based incentive compensation plan		2,000,000				2,000,000
Number of vesting requirements | item						0
Number of shares available for grant under the plan, Beginning			1,906,382		1,944,428	1,906,382	1,944,428
Shares Granted	(58,998)					(58,998)	(38,046)	(55,572)	0
Number of shares available for grant under the plan, Ending		1,847,384				1,847,384	1,906,382		1,944,428
Compensation cost | $		$ 337,000				$ 674,000	$ 337,000

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Income Taxes (Details) - USD ($)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019	Dec. 31, 2017	Dec. 31, 2019	Dec. 31, 2018
Income Taxes
Maximum ownership as a percentage of the voting power or value of the securities of each issuer other than REIT or "TRS"			10.00%
Maximum ownership of securities in all TRS (as a percent)			20.00%		25.00%
Maximum ownership of securities in all TRS when considered together with other non-real estate assets (as a percent)			25.00%
Gross amount of NOL of TRS					$ 4,000,000.0	$ 4,400,000	$ 4,200,000
Net operating losses
Gross amount of NOLs available to company	$ 13,000,000.0		$ 13,000,000.0
Income Tax Expense
Income Taxes Receivable		$ 100,000		$ 100,000
Revised Texas Franchise Tax			132,000	164,000
Other Taxes				(112,000)
Tax expense	$ 64,000	$ 81,000	132,000	$ 52,000
Deferred income taxes			$ 0

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Leases - Income Relating to Lease Payments (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019
Income relating to lease payments:
Income from leases	$ 121,474	$ 123,821
Variable lease payments	$ 29,945	$ 32,085

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Subsequent Events (Details)		3 Months Ended
	Jul. 06, 2020 $ / shares	Jun. 30, 2020 ft² $ / shares	Mar. 31, 2020 $ / shares	Jun. 30, 2019 ft² $ / shares	Mar. 31, 2019 $ / shares
Subsequent Events
Cash dividend declared per share (in dollars per share)		$ 0.09	$ 0.09	$ 0.09	$ 0.09
Area of Real Estate Property | ft²		9,508,226		9,498,858
Cash distribution declared | Subsequent Events.
Subsequent Events
Cash dividend declared per share (in dollars per share)	$ 0.09

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Organization, Properties, Basis of Presentation, Financial Instruments and Recent Accounting Standards - Recent Accounting Standards (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Significant Accounting Policies
Lease liability	$ 1,716	$ 1,890