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 September 30, 2023.

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 November 2, 2023, was 103,430,353.

Franklin Street Properties Corp.
Form 10-Q

Quarterly Report
September 30, 2023

Table of Contents

			Page
Part I.	Financial Information
	Item 1.	Financial Statements
		Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022	3
		Consolidated Statements of Operations for the three and nine months ended September 30, 2023 and 2022	4
		Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2023 and 2022	5
		Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 30, 2023 and 2022	6
		Consolidated Statements of Cash Flows for the nine months ended September 30, 2023 and 2022	7
		Notes to Consolidated Financial Statements	8-22
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	42
	Item 4.	Controls and Procedures	43
Part II.	Other Information
	Item 1.	Legal Proceedings	44
	Item 1A.	Risk Factors	44
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	45
	Item 3.	Defaults Upon Senior Securities	45
	Item 4.	Mine Safety Disclosures	45
	Item 5.	Other Information	45
	Item 6.	Exhibits	46
Signatures			47

PART I — FINANCIAL INFORMATION

Item 1.Financial Statements

Franklin Street Properties Corp.

Consolidated Balance Sheets

(Unaudited)

	September 30,		December 31,
(in thousands, except share and par value amounts)	2023		2022
Assets:
Real estate assets:
Land (amounts related to variable interest entities ("VIEs") of $6,416 and $0 at September 30, 2023 and December 31, 2022, respectively)	$	114,298	$	126,645
Buildings and improvements (amounts related to VIEs of $13,279 and $0 at September 30, 2023 and December 31, 2022, respectively)		1,183,744		1,388,869
Fixtures and equipment		10,377		11,151
		1,308,419		1,526,665
Less accumulated depreciation (amounts related to VIEs of $256 and $0 at September 30, 2023 and December 31, 2022, respectively)		386,838		423,417
Real estate assets, net (amounts related to VIEs of $19,439 and $0 at September 30, 2023 and December 31, 2022, respectively)		921,581		1,103,248
Acquired real estate leases, less accumulated amortization of $19,660 and $20,243, respectively (amounts related to VIEs of $305, less accumulated amortization of $166 and $0 at September 30, 2023 and December 31, 2022, respectively)		7,447		10,186
Assets held for sale		132,659		—
Cash, cash equivalents and restricted cash (amounts related to VIEs of $2,445 and $0 at September 30, 2023 and December 31, 2022, respectively)		13,043		6,632
Tenant rent receivables		2,854		2,201
Straight-line rent receivable		43,253		52,739
Prepaid expenses and other assets		5,601		6,676
Related party mortgage loan receivable, less allowance for credit loss of $0 and $4,237, respectively		—		19,763
Other assets: derivative asset		—		4,358
Office computers and furniture, net of accumulated depreciation of $1,166 and $1,115, respectively		109		154
Deferred leasing commissions, net of accumulated amortization of $17,143 and $19,043, respectively		25,226		35,709
Total assets	$	1,151,773	$	1,241,666
Liabilities and Stockholders’ Equity:
Liabilities:
Bank note payable	$	80,000	$	48,000
Term loans payable, less unamortized financing costs of $390 and $250, respectively		114,610		164,750
Series A & Series B Senior Notes, less unamortized financing costs of $371 and $494, respectively		199,629		199,506
Accounts payable and accrued expenses (amounts related to VIEs of $628 and $0 at September 30, 2023 and December 31, 2022, respectively)		36,857		50,366
Accrued compensation		3,179		3,644
Tenant security deposits		5,631		5,710
Lease liability		444		759
Acquired unfavorable real estate leases, less accumulated amortization of $384 and $574, respectively		97		195
Total liabilities		440,447		472,930
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, 103,430,353 and 103,235,914 shares issued and outstanding, respectively		10		10
Additional paid-in capital		1,335,091		1,334,776
Accumulated other comprehensive income		1,417		4,358
Accumulated distributions in excess of accumulated earnings		(625,192)		(570,408)
Total stockholders’ equity		711,326		768,736
Total liabilities and stockholders’ equity	$	1,151,773	$	1,241,666

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 September 30,				For the Nine Months Ended September 30,
(in thousands, except per share amounts)	2023		2022		2023		2022
Revenues:
Rental	$	36,903	$	40,366	$	110,927	$	122,994
Related party revenue:
Management fees and interest income from loans		—		466		—		1,393
Other		—		4		9		17
Total revenues		36,903		40,836		110,936		124,404
Expenses:
Real estate operating expenses		12,797		13,369		37,627		38,547
Real estate taxes and insurance		7,115		8,951		21,257		26,713
Depreciation and amortization		13,408		15,148		42,780		49,004
General and administrative		3,265		3,232		10,849		10,997
Interest		6,209		6,110		18,099		17,140
Total expenses		42,794		46,810		130,612		142,401
Loss on extinguishment of debt		(39)		(78)		(106)		(78)
Gain on consolidation of Sponsored REIT		—		—		394		—
Impairment and loan loss reserve		—		(717)		—		(1,857)
Gain (loss) on sale of properties and impairment of assets held for sale, net		(39,671)		24,077		(32,085)		24,077
Income (loss) before taxes		(45,601)		17,308		(51,473)		4,145
Tax expense		70		62		212		167
Net income (loss)	$	(45,671)	$	17,246	$	(51,685)	$	3,978
Weighted average number of shares outstanding, basic and diluted		103,430		103,236		103,333		103,372
Net income (loss) per share, basic and diluted	$	(0.44)	$	0.17	$	(0.50)	$	0.04

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				Nine Months Ended
	September 30,				September 30,
(in thousands)	2023		2022		2023		2022
Net income (loss)	$	(45,671)	$	17,246	$	(51,685)	$	3,978
Other comprehensive income (loss):
Unrealized gain on derivative financial instruments		—		2,315		177		9,504
Reclassification from accumulated other comprehensive income into interest expense		(1,063)		—		(3,118)		—
Total other comprehensive income (loss)		(1,063)		2,315		(2,941)		9,504
Comprehensive income (loss)	$	(46,734)	$	19,561	$	(54,626)	$	13,482

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, 2021	103,999	$	10	$	1,339,226	$	(5,239)	$	(550,794)	$	783,203
Comprehensive income (loss)	—		—		—		5,044		(4,158)		886
Repurchased shares	(847)		—		(4,843)		—		—		(4,843)
Distributions $0.09 per share of common stock	—		—		—		—		(9,360)		(9,360)
Balance, March 31, 2022	103,152	$	10	$	1,334,383	$	(195)	$	(564,312)	$	769,886
Comprehensive income (loss)	—		—		—		2,146		(9,110)		(6,964)
Equity-based compensation	84		—		393		—		—		393
Distributions $0.09 per share of common stock	—		—		—		—		(9,283)		(9,283)
Balance, June 30, 2022	103,236	$	10	$	1,334,776	$	1,951	$	(582,705)	$	754,032
Comprehensive income	—		—		—		2,315		17,246		19,561
Distributions $0.01 per share of common stock	—		—		—		—		(1,032)		(1,032)
Balance, September 30, 2022	103,236	$	10	$	1,334,776	$	4,266	$	(566,491)	$	772,561
Balance, December 31, 2022	103,236	$	10	$	1,334,776	$	4,358	$	(570,408)	$	768,736
Comprehensive income (loss)	—		—		—		(814)		2,406		1,592
Distributions $0.01 per share of common stock	—		—		—		—		(1,033)		(1,033)
Balance, March 31, 2023	103,236	$	10	$	1,334,776	$	3,544	$	(569,035)	$	769,295
Comprehensive loss	—		—		—		(1,064)		(8,420)		(9,484)
Equity-based compensation	194		—		315		—		—		315
Distributions $0.01 per share of common stock	—		—		—		—		(1,032)		(1,032)
Balance, June 30, 2023	103,430	$	10	$	1,335,091	$	2,480	$	(578,487)	$	759,094
Comprehensive loss	—		—		—		(1,063)		(45,671)		(46,734)
Distributions $0.01 per share of common stock	—		—		—		—		(1,034)		(1,034)
Balance, September 30, 2023	103,430	$	10	$	1,335,091	$	1,417	$	(625,192)	$	711,326

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 Nine Months Ended September 30,
(in thousands)	2023		2022
Cash flows from operating activities:
Net income (loss)	$	(51,685)	$	3,978
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization expense		44,705		50,472
Amortization of above and below market leases		(39)		(88)
Shares issued as compensation		315		394
Amortization of other comprehensive income into interest expense		(2,789)		—
Loss on extinguishment of debt		106		78
Gain on consolidation of Sponsored REIT		(394)		—
Impairment and loan loss reserve		—		1,857
(Gain) loss on sale of properties and impairment of assets held for sale, net		32,085		(24,077)
Changes in operating assets and liabilities:
Tenant rent receivables		(653)		645
Straight-line rents		427		(4,064)
Lease acquisition costs		(903)		(2,659)
Prepaid expenses and other assets		(644)		(1,670)
Accounts payable and accrued expenses		(2,516)		(6,388)
Accrued compensation		(465)		(1,545)
Tenant security deposits		(79)		(493)
Payment of deferred leasing commissions		(5,926)		(7,086)
Net cash provided by operating activities		11,545		9,354
Cash flows from investing activities:
Property improvements, fixtures and equipment		(26,024)		(38,035)
Consolidation of Sponsored REIT		3,048		—
Proceeds received from sales of properties		37,062		102,007
Net cash provided by investing activities		14,086		63,972
Cash flows from financing activities:
Distributions to stockholders		(3,099)		(52,956)
Proceeds received from termination of interest rate swap		4,206		—
Stock repurchases		—		(4,843)
Borrowings under bank note payable		67,000		80,000
Repayments of bank note payable		(35,000)		(15,000)
Repayment of term loan payable		(50,000)		(110,000)
Deferred financing costs		(2,327)		(2,561)
Net cash used in financing activities		(19,220)		(105,360)
Net increase (decrease) in cash, cash equivalents and restricted cash		6,411		(32,034)
Cash, cash equivalents and restricted cash, beginning of year		6,632		40,751
Cash, cash equivalents and restricted cash, end of period	$	13,043	$	8,717
Supplemental disclosure of cash flow information:
Cash paid for:
Interest	$	16,704	$	13,692
Taxes	$	337	$	664
Non-cash investing activities:
Accrued costs for purchases of real estate assets	$	2,562	$	7,466
Investment in related party mortgage loan receivable converted to real estate assets and acquired real estate leases in conjunction with variable interest entity consolidation	$	20,000	$	—

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 the corporation that is the sole member of FSP Monument Circle LLC, which corporation was organized to operate as a real estate investment trust (“Monument Circle” or the “Sponsored REIT”).

As of September 30, 2023, the Company owned and operated a portfolio of real estate consisting of 19 operating properties, and the Sponsored REIT, which was consolidated effective January 1, 2023. The Company may pursue, on a selective basis, the sale of its properties in order to take advantage of the value creation and demand for its properties, for geographic, property specific reasons or for other general corporate purposes.

Properties

The following table summarizes the Company’s number of owned and consolidated properties and rentable square feet of real estate.

	As of September 30,
	2023	2022
Owned and Consolidated Properties:
Number of properties (1)	20	22
Rentable square feet	6,206,460	6,433,954

(1) Includes three properties that were classified as assets held for sale as of September 30, 2023.

Basis of Presentation

The unaudited consolidated financial statements of the Company include all of the accounts of the Company and its majority-owned and controlled 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, 2022, 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 nine months ended September 30, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023 or for any other period.

Management is in discussions with lenders to extend or refinance the Company’s debt, a portion of which matures within one year after the date that these financial statements are issued as more fully described in Note 3 below. Management has considered whether there is substantial doubt about the Company's ability to continue as a going concern within one year of the issuance date of these interim financial statements due to the fact of the uncertainty regarding the maturities of this debt as set forth in Accounting Standards Codification (ASC) 205-40, “Presentation of Financial Statements - Going Concern.” As described in Note 1 below, the Company has concluded that management’s plans to dispose of assets and extend and/or

8

refinance the Company’s debt are probable of being achieved and alleviate substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern and do not include any adjustments that might result from an adverse outcome of this uncertainty.

Financial Instruments

As disclosed in Note 4, the Company’s derivatives were recorded at fair value using Level 2 inputs prior to their termination on February 8, 2023. 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.

	September 30,		September 30,
(in thousands)	2023		2022
Cash and cash equivalents (1)	$	13,043	$	6,367
Restricted cash		—		2,350
Total cash, cash equivalents and restricted cash	$	13,043	$	8,717

(1) Includes $2,445 at September 30, 2023, pertaining to Monument Circle, which the Company is unable to utilize for its own operational purposes.

Restricted cash consists of escrows arising from property sales. Cash held in escrow is paid based on the terms of the closing agreements for the sale.

Variable Interest Entities (VIEs)

The Company determines whether an entity is a VIE and, if so, whether it should be consolidated by utilizing judgments and estimates that are inherently subjective. The determination of whether an entity in which the Company holds a, direct or indirect, variable interest is a VIE is based on several factors, including whether the entity’s total equity investment at risk upon inception is sufficient to finance the entity’s activities without additional subordinated financial support. The Company makes judgments regarding the sufficiency of the equity at risk based first on a qualitative analysis, and then a quantitative analysis, if necessary.

The Company analyzes any investments in VIEs to determine if the Company is the primary beneficiary. In evaluating whether the Company is the primary beneficiary, the Company evaluates its direct and indirect economic interests in the entity. Determining which reporting entity, if any, is the primary beneficiary of a VIE is primarily a qualitative approach focused on identifying which reporting entity has both (1) the power to direct the activities of a VIE that most significantly impact such entity’s economic performance and (2) the obligation to absorb losses or the right to receive benefits from such entity that could potentially be significant to such entity. Performance of that analysis requires the exercise of judgment.

The Company considers a variety of factors in identifying the entity that holds the power to direct matters that most significantly impact the VIE’s economic performance including, but not limited to, the ability to direct a proposed sale of the property or merger of the company. In addition, the Company considers the rights of other investors to participate in those decisions, to replace the manager and to amend the corporate charter. The Company determines whether it is the primary beneficiary of a VIE at the time it becomes involved with a VIE and considers that conclusion upon a reconsideration event.

As of January 1, 2023, the Company’s relationship with the Sponsored REIT was considered a VIE and the Company became the primary beneficiary. Upon this reconsideration event, the entity is included within the Company’s consolidated financial statements and all intercompany accounts and transactions have been eliminated in consolidation. A gain on

9

consolidation of approximately $0.4 million was recognized in the three months ended March 31, 2023. Cash and cash equivalents of $3 million held by Monument Circle was included in the Company’s cash and cash equivalents upon consolidation and is reflected as “Consolidation of Sponsored REIT” in the consolidated statement of cash flows. The cash and cash equivalents held by Monument Circle are unable to be utilized for the Company’s operational purposes. The creditors of Monument Circle’s trade payables do not have any recourse against the Company.

The consolidation value of Monument Circle was allocated to real estate investments and leases, including lease origination costs. Lease origination costs represent the value associated with acquiring an in-place lease (i.e. the market cost to execute a similar lease, including leasing commission, legal, vacancy, and other related costs). The value assigned to building approximates the replacement cost; the value assigned to land approximates its appraised value; and the value assigned to leases approximate their fair value. Other assets and liabilities are recorded at their historical costs, which approximates fair value.

The Company assessed the fair value of the acquired real estate leases based on estimated cash flow projections that utilize appropriate discount rates and available market information. Such inputs are Level 3 in the fair value hierarchy.

The following table summarizes the estimated fair value of the assets acquired at the date of consolidation, January 1, 2023:

(in thousands)
Real estate assets	$	19,695
Value of acquired real estate leases		305
Total	$	20,000

The following is quantitative information about significant unobservable inputs in the Company’s Level 3 measurement of the assets acquired in the consolidation of Monument Circle and were measured at fair value on a nonrecurring basis at January 1, 2023:

	Fair Value (1) at			Significant	Range				Weighted
Description	January 1, 2023		Valuation Technique	Unobservable Input	Min		Max		Average (2)
		(in thousands)
Monument Circle Consolidation	$	20,000	Discounted Cash Flows	Exit Cap Rate	7.50	%	7.50	%	7.50	%
				Discount Rate	9.50	%	9.50	%	9.50	%
(1) Classified within Level 3 of the fair value hierarchy.
(2) Unobservable inputs were weighted based on the fair value of the related instrument.

Prior to January 1, 2023, the Company’s relationship with the Sponsored REIT was considered a VIE in which the Company was not the primary beneficiary. The Company’s maximum exposure to losses associated with this VIE was limited to the principal amount outstanding under the loan from the Company to the Sponsored REIT secured by a mortgage on real estate owned by the Sponsored REIT (the “Sponsored REIT Loan”) net of the allowance for credit loss, the related accrued interest receivable and an exit fee receivable, which were in aggregate approximately $22.1 million at December 31, 2022. The accrued interest and exit fee receivables are included in prepaid expenses and other assets in the consolidated balance sheet and were approximately $2.3 million at December 31, 2022. The relationships and investments related to the Sponsored REIT are summarized in Note 2.

Liquidity and Management’s Plan

When preparing financial statements for each annual and interim reporting period, management evaluates whether there are conditions or events that, when considered in the aggregate, raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued as set forth in Accounting Standards Codification (ASC) 205-40, “Presentation of Financial Statements - Going Concern.” In making its assessment, management considered the Company’s financial condition and liquidity sources.

10

As of September 30, 2023 and November 7, 2023, the Company had aggregate outstanding indebtedness under two unsecured loans, the BofA Revolver and the BMO Term Loan (as defined in Note 3), totaling approximately $195 million and $205 million, respectively, maturing within 12 months of the date of issuance of the financial statements, and expects to have sufficient financial resources available to satisfy the obligations when due. Subsequent to September 30, 2023, on October 26, 2023, the Company closed on the disposition of one property resulting in net proceeds of approximately $46.7 million. As of the date of these interim financial statements, the Company is holding such net proceeds in cash and cash equivalents. As of September 30, 2023, the Company had entered into agreements to effect the sale of two properties held for sale that are scheduled to close during the fourth quarter of 2023, which two dispositions would result in aggregate net proceeds of approximately $96.5 million. As of November 7, 2023, the Company had cash and cash equivalents of approximately $73.5 million, which when combined with the aggregate net proceeds of approximately $96.5 million from the above-described two dispositions scheduled to close during the fourth quarter of 2023, will be sufficient to repay approximately $170.0 million of the approximately $205.0 million of indebtedness maturing on October 1, 2024.

The Company is also actively working on the potential disposition of additional properties that are not classified as assets held for sale as of September 30, 2023. As of September 30, 2023, the Company had entered into an agreement to effect the sale of a property that is scheduled to close during the fourth quarter of 2023, which would result in net proceeds of approximately $43.6 million. The Company intends to use net proceeds from dispositions primarily for the repayment of debt.

Management is also actively engaged in discussions with the Company’s lenders to extend and/or refinance the BofA Revolver and the BMO Term Loan prior to maturity. The Company believes that it will be able to extend and/or refinance the BofA Revolver and the BMO Term Loan prior to their scheduled October 1, 2024 maturity dates. However, there can be no assurance that the Company will be able to obtain extensions and/or refinancings in a timely manner, or on acceptable terms, if at all, or generate the cash necessary to pay off the BofA Revolver and the BMO Term Loan through asset sales prior to their October 1, 2024 maturity dates. The failure to obtain extensions and/or refinancings, or otherwise to repay the BofA Revolver and the BMO Term Loan, when due, could lead to events of default, which would have a material adverse effect on the Company’s financial condition.

The Company has concluded that management’s plans to dispose of assets and extend and/or refinance the BofA Revolver and the BMO Term Loan are probable of being achieved and alleviate substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern and do not include any adjustments that might result from an adverse outcome of this uncertainty.

As of September 30, 2023, the Company also has the Series A Notes (as defined in Note 3) in the aggregate principal amount of $116 million outstanding that are scheduled to mature on December 20, 2024, which is beyond 12 months of the date of issuance of the financial statements in this Quarterly Report on Form 10-Q and therefore have been excluded from management’s associated going concern assessment and analysis.

Recent Accounting Standards

In October 2023, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2023-06, Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative (“ASU 2023-06”). ASU 2023-06 adds interim and annual disclosure requirements to GAAP at the request of the Securities and Exchange Commission. The guidance in ASU 2023-06 is required to be applied prospectively and the GAAP requirements will be effective when the removal of the related SEC disclosure requirements is effective. If the SEC does not act to remove its related requirement by June 30, 2027, any related FASB amendments will be removed from the Accounting Standards Codification and will not be effective. The Company does not anticipate that the adoption of ASU 2023-06 will have a material impact on the 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”). ASU 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in ASU 2020-04 is

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optional and may be elected over time as reference rate reform activities occur. The Company does not anticipate that the adoption of ASU 2020-04 will have a material impact on the consolidated financial statements.

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

Investment in Sponsored REITs:

At December 31, 2022, the Company held a non-controlling common stock interest in the Sponsored REIT.

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 $0 and $26,000 for the nine months ended September 30, 2023 and 2022, respectively.

Prior to the consolidation of Monument Circle on January 1, 2023, the Company held the Sponsored REIT Loan, which was reported in the balance sheet as a related party mortgage loan receivable. The Company reviewed the need for an allowance under the current expected credit loss model for the Sponsored REIT Loan at each reporting period. The measurement of expected credit losses was based upon historical experiences, current conditions, and reasonable and supportable forecasts that affected the collectability of the reported amount. The Company elected to apply the practical expedient for financial assets secured by collateral in instances where the borrower was experiencing financial difficulty and repayment of the Sponsored REIT Loan was expected to be provided substantially through operation or sale of the collateral. The Company used the fair value of the collateral at the reporting date, and an adjustment to the allowance for expected credit losses was recorded when the amortized cost basis of the financial asset exceeded the fair value of the collateral, less costs to sell.

The Company regularly evaluated 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 fair value, operating results and existing cash balances were considered and used to assess whether cash flows from operations were sufficient to cover the current and future operating and debt service requirements. The Company also evaluated the borrower’s competency in managing and operating the secured property and considered the overall economic environment, real estate sector and geographic sub-market in which the secured property is located. The Company applied normal loan review and underwriting procedures (as may be implemented or modified from time to time) in making that judgment. The outstanding Sponsored REIT Loan is secured by a mortgage on the underlying property and the balances within the borrower’s cash accounts.

The Company recognized interest income and fees from the Sponsored REIT Loan of approximately $0 and $1,367,000 for the nine months ended September 30, 2023 and 2022, respectively.

On October 29, 2021, the Company agreed to amend and restate the then existing Sponsored REIT Loan to extend the maturity date from December 6, 2022 to June 30, 2023 and to advance an additional $3.0 million tranche of indebtedness to FSP Monument Circle LLC with the same June 30, 2023 maturity date, effectively increasing the aggregate principal amount of the Sponsored REIT Loan from $21 million to $24 million. In addition, the Company agreed to defer all principal and interest payments due under the Sponsored REIT Loan until the maturity date. As part of its consideration for agreeing to amend and restate the Sponsored REIT Loan, the Company obtained from the stockholders of the parent of Monument Circle the right to vote their shares in favor of any sale of the property owned by Monument Circle any time on or after January 1, 2023. There were no commitments to lend additional funds to the Sponsored REIT. On June 26, 2023, the Sponsored REIT Loan maturity was extended to September 30, 2023. On September 26, 2023, the Sponsored REIT Loan maturity was extended to September 30, 2024.

The Company recorded a $4.2 million increase in its provision for credit losses during the year ended December 31, 2022 which was primarily due to the deterioration within the real estate market, changes to key assumptions applied within our financial model to reflect these changes, such as the exit capitalization and discount rates, and an increase in the accrued interest receivable balance. The Company recorded a $4.2 million decrease in its provision for credit losses during the three months ended March 31, 2023. The change in the allowance for credit losses during the three months ended March 31, 2023

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was due to the consolidation of Monument Circle. There were no adjustments during the subsequent months through September 30, 2023. The following table presents a roll-forward of the Company’s allowance for credit losses.

	For the Nine Months Ended September 30,
(In thousands)		2023		2022
Beginning allowance for credit losses	$	(4,237)	$	—
Additional increases to the allowance for credit losses		—		(1,857)
Reductions to the allowance for credit losses		4,237		—
Ending allowance for credit losses	$	—	$	(1,857)

The following is quantitative information about significant unobservable inputs in the Company’s Level 3 measurement of the collateral of the Sponsored REIT Loan measured at fair value on a nonrecurring basis at December 31, 2022:

	Fair Value (1) at			Significant	Range				Weighted
Description	December 31, 2022		Valuation Technique	Unobservable Input	Min		Max		Average (2)
		(in thousands)
Sponsored REIT Loan	$	19,763	Discounted Cash Flows	Exit Cap Rate	7.50	%	7.50	%	7.50	%
				Discount Rate	9.50	%	9.50	%	9.50	%
(1) Classified within Level 3 of the fair value hierarchy.
(2) Unobservable inputs were weighted based on the fair value of the related instrument.

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

BMO Term Loan

On February 10, 2023, the Company entered into a First Amendment to the Second Amended and Restated Credit Agreement with the lending institutions party thereto and Bank of Montreal, as administrative agent (the “BMO First Amendment”). The BMO First Amendment amended the Second Amended and Restated Credit Agreement, dated September 27, 2018, among the Company and the lending institutions party thereto (as amended by the BMO First Amendment, the “BMO Credit Agreement”) to, among other things, extend the maturity date from January 31, 2024 to October 1, 2024 and change the interest rate from a number of basis points over LIBOR depending on the Company’s credit rating to 300 basis points over SOFR (Secured Overnight Financing Rate). The BMO Credit Agreement initially provided for an unsecured term loan borrowing in the amount of $220 million (the “BMO Term Loan”). In connection with the BMO First Amendment, the Company repaid a $40 million portion of the remaining balance of the BMO Term Loan, so that $125 million principal amount remained outstanding. On August 10, 2023, the Company repaid an additional $10 million of this loan, so that $115 million principal amount remains outstanding under the BMO Term Loan as of September 30, 2023. On or before April 1, 2024, the Company is required to repay an additional $15 million of the BMO Term Loan. The remaining balance of the BMO Term Loan matures on October 1, 2024.

Effective February 10, 2023 upon entering into the BMO First Amendment, the BMO Term Loan bears interest at either (i) 300 basis points over one, three or six month term SOFR, plus a corresponding adjustment of 0.11448%, 0.26161% or 0.42826%, respectively, or (ii) 200 basis points over the base rate. Prior to February 10, 2023, the BMO Term Loan bore interest at either (i) a number of basis points over LIBOR depending on the Company’s credit rating (165 basis points over LIBOR at December 31, 2022) or (ii) a number of basis points over the base rate depending on the Company’s credit rating (65 basis points over the base rate at December 31, 2022).

As of September 30, 2023, the interest rate on the BMO Term Loan was 8.43% per annum. The weighted average variable interest rate on all amounts outstanding under the BMO Term Loan from February 8, 2023, which is when the Company terminated its outstanding interest rate swaps applicable to the BMO Term Loan as described below, through September 30, 2023 was approximately 7.98% per annum.

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Although the interest rate on the BMO Term Loan is variable under the BMO Credit Agreement, the Company fixed the base LIBOR interest rate that previously applied to the BMO Term Loan by entering into interest rate swap transactions. 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 both December 31, 2022 and February 8, 2023, the effective interest rate on the BMO Term Loan was 4.04% per annum. On February 8, 2023, the Company terminated all outstanding interest rate swaps applicable to the BMO Term Loan and, on February 10, 2023, the Company received an aggregate of approximately $4.3 million as a result of such terminations, of which approximately $0.1 million related to interest receivable.

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 and repurchases and redemptions of the Company’s common stock; going concern qualifications to the Company’s financial statements; and the requirement to have subsidiaries provide a guaranty in the event that they incur recourse indebtedness and transactions with affiliates. In addition, the BMO Credit Agreement also restricts the Company’s ability to make quarterly dividend distributions that exceed $0.01 per share of the Company’s common stock; provided, however, that notwithstanding such restriction, the Company is permitted to make dividend distributions based on the Company’s good faith estimate of projected or estimated taxable income or otherwise as necessary to retain the Company’s status as a real estate investment trust, to meet the distribution requirements of Section 857 of the Internal Revenue Code or to eliminate any income or excise taxes to which the Company would otherwise be subject. 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 maximum secured recourse 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 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 September 30, 2023.

BofA Revolver

On February 10, 2023, the Company entered into a First Amendment to Credit Agreement with Bank of America, N.A., as administrative agent, a letter of credit issuer and a lender (“BofA”), and the other lending institutions party thereto (the “BofA First Amendment”), for a revolving line of credit for borrowings, at the Company’s election, of up to $150 million (the “BofA Revolver”). The BofA First Amendment amended the Credit Agreement, dated January 10, 2022, among the Company and the lending institutions party thereto (as amended by the BofA First Amendment, the “BofA Credit Agreement”) to, among other things, extend the maturity date from January 12, 2024 to October 1, 2024, reduce availability for borrowings, at the Company’s election, from up to $237.5 million to up to $150 million, and to change the interest rate from a number of basis points over SOFR depending on the Company’s credit rating to 300 basis points over SOFR. Borrowings made under the BofA Revolver may be revolving loans or letters of credit, the combined sum of which may not exceed $150 million outstanding at any time. Effective October 1, 2023, availability under the BofA Revolver will be reduced to $125 million and, effective April 1, 2024, availability under the BofA Revolver will be further reduced to $100 million. As of September 30, 2023 and November 7, 2023, there were borrowings of $80 million and $90 million drawn and outstanding under the BofA Revolver, respectively, which borrowings include $40 million that the Company borrowed on February 10, 2023 to repay a portion of the BMO Term Loan. Borrowings made pursuant to the BofA Revolver may be borrowed, repaid and reborrowed from time to time until the maturity date on October 1, 2024.

Effective February 10, 2023 upon entering into the BofA First Amendment, the BofA Revolver bears interest at 300 basis points over either (i) the daily simple SOFR, plus an adjustment of 0.11448%, or (ii) one, three or six month term SOFR, plus

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a corresponding adjustment of 0.11448%, 0.26161% or 0.42826%, respectively. In addition, under certain circumstances, such as if SOFR was not able to be determined, the BofA Revolver will instead bear interest at 200 basis points over the base rate. Prior to February 10, 2023, borrowings under the BofA Revolver bore interest at a margin over either (i) the daily simple SOFR, plus an adjustment of 0.11448%, or (ii) one, three or six month term SOFR, plus a corresponding adjustment of 0.11448%, 0.26161% or 0.42826%, respectively. Prior to February 10, 2023, the margin over SOFR or, if applicable, the base rate, varied depending on the Company’s leverage ratio (1.750% over SOFR and 0.750% over the base rate at December 31, 2022). Effective February 10, 2023 upon entering into the BofA First Amendment, the Company is also obligated to pay an annual facility fee on the unused portion of the BofA Revolver at the rate of 0.350% per annum and, if applicable, letter of credit fees. Prior to February 10, 2023, the Company was also obligated to pay an annual facility fee and, if applicable, letter of credit fees in amounts that were also based on the Company’s leverage ratio. The previous facility fee was assessed against the aggregate amount of lender commitments regardless of usage (0.350% at December 31, 2022).

As of September 30, 2023, the interest rate on the BofA Revolver was 8.43% per annum. The weighted average variable interest rate on all amounts outstanding under the BofA Revolver through September 30, 2023 was approximately 7.80% per annum.

The BofA 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, use of proceeds, the amount of cash and cash equivalents that the Company can have on its balance sheet after giving effect to an advance under the BofA Revolver, repurchases and redemptions of the Company’s common stock, going concern qualifications to the Company’s financial statements, and the requirement to have subsidiaries provide a guaranty in the event that they incur recourse indebtedness and transactions with affiliates. The BofA 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 maximum secured recourse leverage ratio, a minimum fixed charge coverage ratio, a maximum unencumbered leverage ratio and a minimum unsecured interest coverage ratio. The BofA Credit Agreement also restricts the Company’s ability to make quarterly dividend distributions that exceed $0.01 per share of the Company’s common stock; provided, however, that notwithstanding such restriction, the Company is permitted to make dividend distributions based on the Company’s good faith estimate of projected or estimated taxable income or otherwise as necessary to retain the Company’s status as a real estate investment trust, to meet the distribution requirements of Section 857 of the Internal Revenue Code or to eliminate any income or excise taxes to which the Company would otherwise be subject. The Company was in compliance with the BofA Revolver financial covenants as of September 30, 2023.

The BofA Credit Agreement provides for customary events of default with corresponding grace periods, including failure to pay any principal or interest when due, failure to comply with the provisions of the BofA Credit Agreement, certain cross defaults and a change in control of the Company (as defined in the BofA Credit Agreement). In the event of a default by the Company, BofA, in its capacity as administrative agent, may, and at the request of the requisite number of lenders shall, declare all obligations under the BofA Credit Agreement immediately due and payable and enforce any and all rights of the lenders or BofA under the BofA 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 may use the net proceeds of the BofA Revolver for permitted investments, working capital and other general business purposes, including for building improvements, tenant improvements and leasing commissions, in each case to the extent permitted under the BofA Credit Agreement.

Former BofA Credit Facility

On July 21, 2016, the Company entered into a First Amendment (the “BofA First Amendment”), and on October 18, 2017, the Company entered into a Second Amendment (the “BofA Second Amendment”), to the Second Amended and Restated Credit Agreement dated October 29, 2014 among the Company, the lending institutions party thereto and BofA, as administrative agent, L/C Issuer and Swing Line Lender (as amended by the BofA First Amendment and the BofA Second Amendment, the “Amended Former BofA Credit Facility”) that continued an existing unsecured revolving line of credit (the “Former BofA Revolver”) and an existing term loan (the “Former BofA Term Loan”). Effective simultaneously with the closing of the Amended Former BofA Credit Facility on January 10, 2022, the Company delivered a notice to BofA

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terminating the aggregate lender commitments under the Former BofA Revolver in their entirety. There were no amounts drawn on the Former BofA Revolver as of December 31, 2021 and January 10, 2022.

Former BofA Revolver Highlights

● The Former BofA Revolver was terminated at the Company’s election effective January 10, 2022.

● As of December 31, 2021 and January 10, 2022, there were no borrowings under the Former BofA Revolver.

The Former BofA Revolver bore interest at either (i) a margin over LIBOR depending on the Company’s credit rating (1.550% over LIBOR at December 31, 2021) or (ii) a margin over the base rate depending on the Company’s credit rating (0.550% over the base rate at December 31, 2021). The Former BofA Credit Facility also obligated the Company to pay an annual facility fee in an amount that is based on the Company’s credit rating. The facility fee was assessed against the total amount of the Former BofA Revolver, or $600 million (0.30% at December 31, 2021). The amount of any applicable facility fee, and the margin over LIBOR rate or base rate was determined based on the Company’s credit rating pursuant to a pricing grid.

For purposes of the Former BofA Credit Facility, base rate meant, for any day, a fluctuating rate per annum equal to the highest of: (i) the bank’s prime rate for such day, (ii) the Federal Funds Rate for such day, plus 0.50%, and (iii) the one month LIBOR based rate for such day plus 1.00%. As of December 31, 2021, the Company’s credit rating from Moody’s Investors Service was Ba1.

During 2022 and as of December 31, 2022, there were no borrowings under the Former BofA Revolver.

Former BofA Term Loan Highlights

● The Former BofA Term Loan was repaid in its entirety on September 6, 2022.

● The original principal amount of the Former BofA Term Loan was $400 million. On September 30, 2021, the Company repaid a $90 million portion and on October 25, 2021, the Company repaid a $200 million portion of the Former BofA Term Loan and incurred a loss on extinguishment of debt of $0.7 million related to unamortized deferred financing costs. On September 6, 2022, the Company prepaid the remaining $110 million balance of the Former BofA Term Loan in full and incurred a loss of extinguishment of debt of $0.1 million related to unamortized deferred financing costs.

The Former BofA Term Loan bore interest at either (i) a margin over LIBOR depending on the Company’s credit rating (1.75% over LIBOR at the date of repayment on September 6, 2022) or (ii) a margin over the base rate depending on the Company’s credit rating (0.750% over the base rate at the date of repayment on September 6, 2022). The margin over LIBOR rate or base rate was determined based on the Company’s credit rating pursuant to a pricing grid.

The interest rate on the Former BofA Term Loan was variable through the date of repayment on September 6, 2022. Previously the Company had fixed the base LIBOR interest rate on the Former BofA 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 Former BofA Term Loan at 1.12% per annum for the period beginning on September 27, 2017 and ended on September 27, 2021. The weighted average variable interest rate on all amounts outstanding under the Former BofA Term Loan through the date of repayment on September 6, 2022 was approximately 2.65% per annum.

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) Series A Senior Notes due December 20, 2024 in an aggregate principal amount of $116 million (the “Series A Notes”) and (ii) Series B Senior Notes due December 20, 2027 in an aggregate principal amount

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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 Former BofA Revolver.

The Senior Notes bear interest depending on the Company’s credit rating. As of September 30, 2023, the Series A Notes bear interest at 4.49% per annum and the Series B Notes bear interest at 4.76% per annum.

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 BofA Credit Agreement and the BMO 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 September 30, 2023.

4.  Financial Instruments: Derivatives and Hedging

On February 20, 2019, the Company entered into interest rate swap transactions that 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 2019 BMO Interest Rate Swap is described in Note 3. On February 8, 2023, the Company terminated the 2019 BMO Interest Rate Swap applicable to the BMO Term Loan and, on February 10, 2023, the Company received an aggregate of approximately $4.3 million as a result of such terminations, of which approximately $0.1 million related to interest receivable. As of September 30, 2023, there were no derivative instruments.

The 2019 BMO Interest Rate Swap qualified as a cash flow hedge and has 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 instrument at December 31, 2022. The notional value is an indication of the extent of the Company’s involvement in this instrument at that time, but does not represent exposure to credit, interest rate or market risks.

	Notional		Strike		Effective	Expiration	Fair Value (1) at
(in thousands)	Value		Rate		Date	Date	September 30, 2023		December 31, 2022
2019 BMO Interest Rate Swap	$	165,000	2.39	%	Aug-20	Jan-24	$	—	$	4,358
(1) Classified within Level 2 of the fair value hierarchy.

The 2019 BMO Interest Rate Swap was reported as an asset with a fair value of approximately $4.4 million at December 31, 2022. The balance is included in other assets: derivative asset in the consolidated balance sheet at December 31, 2022.

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The gain (loss) on the Company’s 2019 BMO Interest Rate Swap was recorded in other comprehensive income (loss) (OCI), and the accompanying consolidated statements of operations as a component of interest expense for the nine months ended September 30, 2023 and 2022, was as follows:

(in thousands)	Nine Months Ended September 30,
Interest Rate Swaps in Cash Flow Hedging Relationships:	2023		2022
Amounts of gain recognized in OCI	$	177	$	7,835
Amounts of previously recorded gain (loss) reclassified from OCI into Interest Expense	$	3,118	$	(1,669)
Total amount of Interest Expense presented in the consolidated statements of operations	$	18,099	$	17,140

Over time, the realized gains in accumulated other comprehensive income will be reclassified into earnings as a decrease to interest expense in the same periods in which the hedged interest payments would affect earnings. The Company estimates that approximately $1.4 million of the current balance held in accumulated other comprehensive income will be reclassified into earnings within the next 12 months.

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

The BMO Term Loan hedging transaction used derivative instruments that involved certain additional risks such as counterparty credit risk, the enforceability of hedging contracts and the risk that unanticipated and significant changes in interest rates would cause a significant loss of basis in the contract. The Company required its derivatives contracts to be with counterparties that have investment grade ratings. As a result, the Company did not anticipate that any counterparty would fail to meet its obligations. However, there was no assurance that the Company would be able to adequately protect against the foregoing risks or that it would ultimately realize an economic benefit that exceeded 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 sheet.

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 September 30, 2023 and 2022.

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6.  Stockholders’ Equity

As of September 30, 2023, the Company had 103,430,353 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 2023	$	0.01	$	1,033
Second quarter of 2023	$	0.01	$	1,032
Third quarter of 2023	$	0.01	$	1,034
2022:
Special dividend declared in December 2021 and paid January 2022	$	0.32	$	33,280
First quarter of 2022	$	0.09	$	9,360
Second quarter of 2022	$	0.09	$	9,284
Third quarter of 2022	$	0.01	$	1,032

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.

On each of May 17, 2022 and May 18, 2023, the Company granted shares under the Plan to non-employee directors with the compensation cost related to such grants indicated in the table below, which was recognized during the year ended December 31, 2022 and the nine months ended September 30, 2023, respectively, included in general and administrative expenses for the respective period. Such shares were fully vested on the date of issuance.

	Shares Available		Compensation
	for Grant		Cost
Balance December 31, 2021		1,780,820		1,012,500
Shares granted 2022		(84,133)		393,750
Balance December 31, 2022		1,696,687	$	1,406,250
Shares granted 2023		(194,439)		314,991
Balance September 30, 2023		1,502,248	$	1,721,241

Repurchase of Common Stock

On June 23, 2021, the Board of Directors of the Company authorized the repurchase of up to $50 million of the Company’s common stock from time to time in the open market, privately negotiated transactions or other manners as permitted by federal securities laws. The repurchase authorization may be suspended or discontinued at any time. The Company repurchased 846,739 shares of common stock during the first quarter of 2022 at an aggregate cost of approximately $4.8 million at an average cost of approximately $5.72 per share, inclusive of brokerage commissions. The Company did not repurchase any shares of common stock during the remainder of 2022 or the first quarter of 2023. The excess of the purchase price over the par value of the shares repurchased is applied to reduce additional paid-in capital. On February 10, 2023, the Company announced it had discontinued the previous repurchase authorization made on June 23, 2021.

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A summary of the repurchase of common stock by the Company is shown in the following table:

(Cost in thousands)	Shares Repurchased	Cost
Balance, December 31, 2021	4,413,741	$	37,019
Repurchase of shares	846,739		4,843
Balance, December 31, 2022	5,260,480	$	41,862

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 $4.9 million and $4.8 million as of December 31, 2022 and December 31, 2021, 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 2019 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 Company’s prior 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 $1.7 million and $1.7 million as of September 30, 2023 and December 31, 2022, respectively.

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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 $212,000 and $167,000 for the nine months ended September 30, 2023 and 2022, respectively.

The income tax expense reflected in the consolidated statements of operations relates primarily to a franchise tax on the Company’s Texas properties.

	For the Nine Months Ended September 30,
(Dollars in thousands)	2023		2022
Revised Texas Franchise Tax	$	212	$	167
Other Taxes		—		—
Tax expense	$	212	$	167

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.

For the nine months ended September 30, 2023 and 2022, the Company recognized the following amounts of income relating to lease payments:

Income relating to lease payments:
	Nine Months Ended
(in thousands)	September 30, 2023		September 30, 2022
Income from leases (1)	$	111,316	$	118,843
	$	111,316	$	118,843
(1) Includes amounts recognized from variable lease payments of $32,275 and $37,050 for the nine months ended September 30, 2023 and 2022, respectively.

9. Disposition of Properties and Asset Held for Sale

In 2021, the Company determined that further debt reduction would provide greater financial flexibility and potentially increase shareholder value. Accordingly, the Company adopted a strategy to dispose of certain properties where it believes valuation potential has been reached.

In 2022, the Company sold two office properties located in Broomfield, Colorado on August 31, 2022 for an aggregate sales price of $102.5 million, at a gain of approximately $24.1 million. The Company sold an office property located in Evanston,

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Illinois on December 28, 2022 for a sales price of $27.8 million, at a gain of approximately $3.9 million. The Company used the proceeds of the dispositions principally to repay outstanding indebtedness.

In 2023, the Company sold one office property located in Elk Grove, Illinois on March 10, 2023, for a sales price of $29.1 million, at a gain of approximately $8.4 million. The Company used the proceeds of the disposition principally to repay a portion of outstanding indebtedness. The Company sold one office property located in Charlotte, North Carolina on August 9, 2023 for a sales price of $9.2 million, at a loss of $0.8 million. During the three months ended September 30, 2023, the Company recorded a gain on sale of $53,000 as a result of conveying approximately 7,826 square feet of land at our Addison, Texas property to the Town of Addison as part of a road revitalization project.

During the three months ended September 30, 2023, the Company entered into an agreement to sell a property in Miami, Florida for a gross sales price of approximately $68.0 million at an expected loss of $19.2 million and an agreement to sell a property in Atlanta, Georgia for a gross sales price of approximately $40.0 million at an expected loss of $20.5 million.

The Company reclassified $96.4 million of its office properties in Miami, Florida and Atlanta, Georgia as assets held for sale as of September 30, 2023, which is comprised of $122.2 million of real estate assets, net of accumulated depreciation, $5.5 million of straight-line rents receivable, and $8.4 million of deferred leasing commissions, net of accumulated amortization. The Company recorded these properties at the fair value less cost to sell, which was less than the carrying value and resulted in an impairment of $39.7 million in the three months ended September 30, 2023. The reclassification is a non-cash investing activity on the statement of cash flows. The Company estimated the fair value of these properties, less estimated costs to sell, using the offers to purchase the properties made by third parties (Level 3 inputs, as there is no active market).

During the three months ended September 30, 2023, the Company entered into an agreement to sell a property in Plano, Texas for a gross sales price of approximately $48.0 million at an expected gain of $10.6 million. The Company reclassified $36.2 million of this office property as an asset held for sale as of September 30, 2023, which is comprised of $32.6 million of real estate assets, net of accumulated depreciation, $1.4 million of straight-line rents receivable, $1.7 million of deferred leasing commissions, net of accumulated amortization and $0.5 million of acquired real estate leases, net of accumulated amortization. The reclassification is a non-cash investing activity on the statement of cash flows.

The Company reports the results of operations of its properties in its consolidated statements of operations, which includes rental income, rental operating expenses, real estate taxes and insurance and depreciation and amortization.

The operating results for the properties that the Company disposed of or classified as assets held for sale are summarized below:

	Three months ended September 30,				Nine months ended September 30,
(in thousands)	2023		2022		2023		2022
Rental revenue	$	5,354	$	8,592	$	16,062	$	27,646
Rental operating expenses		(1,862)		(2,809)		(5,277)		(8,669)
Real estate taxes and insurance		(720)		(2,416)		(2,264)		(7,287)
Depreciation and amortization		(1,034)		(3,157)		(5,372)		(10,246)
Income from dispositions and assets held for sale	$	1,738	$	210	$	3,149	$	1,444

10.  Subsequent Events

On October 6, 2023, the Board of Directors of the Company declared a cash distribution of $0.01 per share of common stock payable on November 9, 2023 to stockholders of record on October 20, 2023.

On October 26, 2023, the Company sold an office building located in Plano, Texas, for a sales price of $48.0 million at a gain of approximately $10.6 million.

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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, 2022. 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 the impact of recessionary concerns, inflation, energy prices and interest rates, as well as those resulting from the COVID-19 pandemic, including the impact of work-from-home policies, 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, our inability to extend and/or refinance our debt or effect asset sales sufficient to repay such debt prior to the maturity dates thereof, 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, expectations for future potential property dispositions, expectations for future potential leasing activity, expectations for the potential payment of special dividends, changes in interest rates as a result of economic market conditions, 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, 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, increases in the level of general and administrative costs as a percentage of revenues as revenues decrease as a result of property dispositions, 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, 2022 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 September 30, 2023, approximately 5.3 million square feet, or approximately 85.7% of our total owned and consolidated portfolio, was located in Dallas, Denver, Houston and Minneapolis.

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 may 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.

We continue to believe that the current price of our common stock does not accurately reflect the value of our underlying real estate assets and we will seek to increase shareholder value by (1) pursuing the sale of select properties where we believe that short to intermediate term valuation potential has been reached and (2) striving to lease vacant space. As we continue to execute this strategy, our revenue, Funds From Operations, and capital expenditures may decrease in the short term. Proceeds from dispositions are intended to be used primarily for the repayment of debt.

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For the year ended December 31, 2022, our disposition strategy resulted in gross sale proceeds of $130.3 million and we repaid $128.9 million of debt. Specifically, on August 31, 2022, we sold two office properties located in Broomfield, Colorado for aggregate gross proceeds of $102.5 million, at a gain of approximately $24.1 million. On September 6, 2022, we prepaid our $110 million term loan with Bank of America, N.A. as administrative agent and the other lending institutions party thereto (the “Former BofA Term Loan”). In addition, on December 28, 2022, we sold one office property located in Evanston, Illinois for gross proceeds of $27.8 million, at a gain of $3.9 million. On December 29, 2022 and December 30, 2022, we repaid $7 million and $20 million, respectively, that had been drawn under our revolving line of credit with Bank of America, N.A. as administrative agent and the other lending institutions party thereto (the “BofA Revolver”).

In 2023, we sold one office property located in Elk Grove, Illinois on March 10, 2023 for a sales price of $29.1 million, at a gain of approximately $8.4 million. On March 13, 2023, we used proceeds of this sale to repay $25 million that had been drawn under the BofA Revolver. On August 9, 2023, we sold an office property located in Charlotte, North Carolina for a sales price of $9.2 million, at a loss of $0.8 million. On August 10, 2023, we used the net proceeds from this sale and cash on hand to repay $10 million of the BMO Term Loan.

In July 2022, we adopted a variable quarterly dividend policy, which replaced our previous regular quarterly dividend policy. Under the new variable quarterly dividend policy, the Board of Directors will determine quarterly dividends based upon a variety of factors, including the Company’s estimates of its annual taxable income and the amount that the Company is required to distribute annually in the aggregate to enable the Company to continue to qualify as a real estate investment trust for federal income tax purposes.

On April 12, 2023, the credit rating for our senior unsecured debt was downgraded by Moody’s Investor Service to Ba3 from Ba1 and on June 14, 2023, was downgraded to B3 from Ba3. On February 10, 2023, we entered into amendments to the BMO Term Loan and the BofA Revolver that, among other things, caused the interest rate applicable to those borrowings to no longer be based in part on the rating of our debt. The interest rate applicable to borrowings under the Senior Notes continues to be based in part on the rating of our debt. We anticipate that as a result of our below investment grade credit ratings, we will continue to incur approximately $1.0 million in additional interest costs from the Senior Notes over a full twelve-month period based on our borrowings as of October 26, 2023.

Trends and Uncertainties

Long-Term Impact of COVID-19 Pandemic

Considerable uncertainty still surrounds the long-term impact of the COVID-19 pandemic and its potential effects on the population, including the spread of more contagious variants of the virus, and on the commercial real estate market and our business. Many of our tenants still do not fully occupy the space that they lease. The COVID-19 pandemic continues to present material uncertainty and risk with respect to the performance of our properties and our financial results, such as the potential negative impact to the businesses of our tenants, the impact of work-from-home and return-to-work policies, the potential negative impact to leasing efforts and occupancy at our properties, 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, negative impacts on 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, making more difficult our ability to complete required capital expenditures in a timely manner and on budget, decreases 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 full extent of the impact that the COVID-19 pandemic will have on our future financial results at this time. See “Risk Factors” in Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022.

Economic Conditions

Although recent indicators suggest that economic activity has expanded at a modest pace, the global economy continues to experience significant disruptions as a result of various factors, including geopolitical events such as the ongoing conflict between Russia and Ukraine, Israel’s declaration of war on Hamas, a U.S. designated Foreign Terrorist Organization, current armed conflict in Israel and the Gaza Strip, increasing tensions with China, the long-term impact of the COVID-19 pandemic

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and continuing supply chain difficulties. In addition, various economic factors, including but not limited to, inflation and interest rates, are contributing to recessionary concerns for the economy of the United States. Economic conditions directly affect the demand for office space, our primary income producing asset. In addition, the broad economic market conditions in the United States are typically affected by numerous other factors, including but not limited to, inflation and employment levels, energy prices, uncertainty about government fiscal, monetary, trade and tax policies, changes in currency exchange rates, the regulatory environment and the availability of credit. During 2022 and 2023 and as of October 26, 2023, the Federal Reserve raised the federal funds rate target several times, most recently by 25 basis points on July 26, 2023, to a range of 5.25% to 5.50%. Any future increases in the target range could also increase interest rates. If interest rates continue to increase, then the interest costs on our unhedged variable rate debt would be adversely affected, which could in turn adversely affect our cash flow, our ability to pay principal and interest on our debt and our ability to make distributions to stockholders. As of September 30, 2023, approximately 49.4% of our total debt constituted unhedged variable rate debt. Increasing interest rates could also decrease the amount third parties are willing to pay for our assets and limit our ability to incur new debt or refinance existing debt when it matures. As of the date of this report, the impact of current economic conditions and geopolitical events and the long-term impact of the COVID-19 pandemic are adversely affecting the demand for office space in the United States.

Real Estate Operations

As of September 30, 2023, our real estate portfolio was comprised of 19 owned properties, which we refer to as our owned properties, and a non-controlling common stock interest in the corporation that is the sole member of FSP Monument Circle LLC, which corporation was organized to operate as a real estate investment trust, which we refer to as the Sponsored REIT. The Sponsored REIT, which we also refer to as Monument Circle, was consolidated effective January 1, 2023. We refer to these 20 properties as our owned and consolidated properties. Our owned properties were approximately 74.8% leased as of September 30, 2023, a decrease from 75.6% leased as of December 31, 2022. The 0.8% decrease in leased space was primarily a result of lease maturities that occurred during the nine months ended September 30, 2023 and the impact on leased percentage from the disposition of one property on March 10, 2023 and one property on August 9, 2023. These decreases were partially offset by new leasing during the nine months ending September 30, 2023. As of September 30, 2023, we had approximately 1,510,000 square feet of vacancy in our owned properties compared to approximately 1,524,000 square feet of vacancy at December 31, 2022. During the nine months ended September 30, 2023, we leased approximately 571,000 square feet of office space in our owned properties, of which approximately 365,000 square feet were with existing tenants, at a weighted average term of 6.3 years. On average, tenant improvements for such leases were $20.13 per square foot, lease commissions were $9.92 per square foot and rent concessions were approximately five months of free rent. Average GAAP base rents under such leases were $29.35 per square foot, or 7.2% higher than average rents in the respective properties as applicable compared to the year ended December 31, 2022.

Our owned and consolidated properties were approximately 72.4% leased as of September 30, 2023, compared to our owned properties at 74.8% leased as of September 30, 2023. The difference is a result of the consolidation of Monument Circle effective January 1, 2023. As of September 30, 2023, Monument Circle was approximately 4.1% leased.

As of September 30, 2023, leases for approximately 1.4% and 9.0% of the square footage in our owned and consolidated properties are scheduled to expire during 2023 and 2024, respectively. As the fourth quarter of 2023 begins, we believe that our owned properties are 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 impact of geopolitical events, current economic conditions and the long-term impact of the COVID-19 pandemic may limit or delay new tenant leasing during at least the fourth quarter of 2023 and potentially in future periods.

While we cannot generally predict when an existing vacancy in our owned properties 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 exists for any of our tenants to default on its lease or to seek the protection of bankruptcy. 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.

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Consolidation of Sponsored REIT

As of January 1, 2023, we consolidated Monument Circle into our financial statements. On October 29, 2021, we agreed to amend and restate our existing loan to Monument Circle that is secured by a mortgage on real estate owned by Monument Circle, which we refer to as the Sponsored REIT Loan. The amended and restated Sponsored REIT Loan extended the maturity date from December 6, 2022 to June 30, 2023, increased the aggregate principal amount of the loan from $21 million to $24 million, and included certain other modifications. In consideration of our agreement to amend and restate the Sponsored REIT Loan, we obtained from the stockholders of Monument Circle the right to vote their shares in favor of any sale of the property owned by Monument Circle any time on or after January 1, 2023. As a result of our obtaining this right to vote shares, GAAP variable interest entity (VIE) rules required us to consolidate Monument Circle as of January 1, 2023. A gain on consolidation of approximately $0.4 million was recognized in the three months ended March 31, 2023. On June 26, 2023, the Sponsored REIT Loan maturity was initially extended to September 30, 2023 and on September 26, 2023 was further extended to September 30, 2024.

Additional information about the consolidation of Monument Circle is incorporated herein by reference to Note 1, “Organization, Properties, Basis of Presentation, Financial Instruments, and Recent Accounting Standards – Variable Interest Entities (VIEs)” and 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.

Dispositions of Properties and Assets Held for Sale

During 2023, we sold an office property located in Elk Grove, Illinois on March 10, 2023 for a sales price of $29.1 million, at a gain of approximately $8.4 million. During the three months ended June 30, 2023, we entered into an agreement to sell a property in Charlotte, North Carolina at an expected loss of $0.8 million, which was recorded as an impairment and we classified the property as an asset held for sale as of June 30, 2023. The property sold on August 9, 2023 for a sales price of $9.2 million, at a loss of $0.8 million, which had been our expected loss. During the three months ended September 30, 2023, we recorded a gain on sale of $53,000 as a result of conveying approximately 7,826 square feet of land at our Addison, Texas property to the Town of Addison as part of a road revitalization project. In addition, during the three months ended September 30, 2023, we executed purchase and sale agreements with four different unrelated purchasers for the potential sale of four properties that would result in aggregate gross proceeds of approximately $201 million. Three of these potential dispositions were classified as assets held for sale as of September 30, 2023. On October 26, 2023, we completed the sale of one such asset held for sale as of September 30, 2023, an office building located in Plano, Texas for a sales price of $48.0 million at a gain of approximately $10.6 million. The two remaining assets held for sale as of September 30, 2023 are expected to sell for an aggregate sales price of $108 million at an aggregate loss of approximately $39.7 million, which was recorded as an impairment as of September 30, 2023. The three remaining potential dispositions remain subject to customary closing conditions, including successful completion by one of the purchasers of a due diligence inspection period and are expected to close during the fourth quarter of 2023.

During 2022, we sold two office properties located in Broomfield, Colorado on August 31, 2022 for an aggregate sales price of $102.5 million, at a gain of approximately $24.1 million. We also sold an office property in Evanston, Illinois on December 28, 2022 for a sales price of approximately $27.8 million, at a gain of $3.9 million.

We used, or intend to use, the proceeds of the dispositions primarily for the repayment of debt.

The dispositions of these properties did not represent a strategic shift that has a major effect on our operations and financial results. Our current strategy is to continue to invest in the sunbelt and mountain west regions of the United States. Accordingly, the properties sold remained classified within continuing operations for all periods presented.

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We continue to believe that the current price of our common stock does not accurately reflect the value of our underlying real estate assets, and we will seek to increase shareholder value by (1) pursuing the sale of select properties where we believe that short to intermediate term valuation potential has been reached and (2) striving to lease vacant space. As we continue to execute this strategy, our revenue, Funds From Operations, and capital expenditures may decrease in the short term. Proceeds from dispositions are intended to be used primarily for the repayment of debt.

Critical Accounting Estimates

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, 2022.

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 estimates are consistently applied and produce financial information that fairly presents our results of operations.

Recent Accounting Standards

In October 2023, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2023-06, Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative (“ASU 2023-06”). ASU 2023-06 adds interim and annual disclosure requirements to GAAP at the request of the Securities and Exchange Commission. The guidance in ASU 2023-06 is required to be applied prospectively and the GAAP requirements will be effective when the removal of the related SEC disclosure requirements is effective. If the SEC does not act to remove its related disclosure requirements by June 30, 2027, any related FASB amendments will be removed from the Accounting Standards Codification and will not be effective. The Company does not anticipate the adoption of ASU 2023-06 will have a material impact on the 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. We do not anticipate that the adoption of ASU 2020-04 will have a material impact on our consolidated financial statements.

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Results of Operations

The following table shows financial results for the three months ended September 30, 2023 and 2022:

	Three months ended September 30,
(in thousands)	2023		2022		Change
Revenues:
Rental	$	36,903	$	40,366	$	(3,463)
Related party revenue:
Management fees and interest income from loans		—		466		(466)
Other		—		4		(4)
Total revenues		36,903		40,836		(3,933)
Expenses:
Real estate operating expenses		12,797		13,369		(572)
Real estate taxes and insurance		7,115		8,951		(1,836)
Depreciation and amortization		13,408		15,148		(1,740)
General and administrative		3,265		3,232		33
Interest		6,209		6,110		99
Total expenses		42,794		46,810		(4,016)
Loss on extinguishment of debt		(39)		(78)		39
Impairment and loan loss reserve		—		(717)		717
Gain (loss) on sale of properties and impairment of assets held for sale, net		(39,671)		24,077		(63,748)
Income (loss) before taxes		(45,601)		17,308		(62,909)
Tax expense		70		62		8
Net income (loss)	$	(45,671)	$	17,246	$	(62,917)

Comparison of the three months ended September 30, 2023 to the three months ended September 30, 2022:

Revenues

Total revenues decreased by $3.9 million to $36.9 million for the three months ended September 30, 2023, as compared to the three months ended September 30, 2022. The decrease was primarily a result of:

● A decrease in rental revenue of approximately $3.4 million arising primarily from the sale of three properties during 2022 and two properties in 2023 and other losses of rental income from lease expirations during the periods presented. These decreases were partially offset by rental income earned from leases commencing after September 30, 2022. Our leased space in our owned and consolidated properties was 72.4% at September 30, 2023 and 75.9% at September 30, 2022.

● A decrease in interest income from loans of approximately $0.5 million, due to the consolidation of Monument Circle in our financial results as of January 1, 2023.

Expenses

Total expenses decreased by $4.0 million to $42.8 million for the three months ended September 30, 2023, as compared to the three months ended September 30, 2022. The decrease was primarily a result of:

● A decrease in real estate operating expenses and real estate taxes and insurance of approximately $2.4 million primarily attributable to the property dispositions noted above.

● A decrease in depreciation and amortization of approximately $1.7 million primarily attributable to the property dispositions noted above.

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These decreases were partially offset by:

● An increase in interest expense of approximately $0.1 million. The increase was primarily due to higher interest expense as a result of higher interest rates under the loan amendments we entered into on February 10, 2023 described above and was partially offset by a lower principal amount of debt outstanding compared to the same period in 2022.

Loss on extinguishment of debt

During the three months ended September 30, 2023 and September 30, 2022, we repaid debt and incurred a loss on extinguishment of debt of $39,000 and $78,000, respectively, related to unamortized deferred financing costs on the dates of the repayments.

Impairment and loan loss reserve

During the three months ended September 30, 2022, we recorded an impairment on a mortgage receivable of $0.7 million.

Gain and loss on sale of properties and impairment

During the three months ended September 30, 2023, we sold an office property located in Charlotte, North Carolina for a sales price of $9.2 million at a loss of approximately $0.8 million. During the three months ended September 30, 2023, we also recorded a gain on sale of $53,000 as a result of conveying approximately 7,826 square feet of land at our Addison, Texas property to the Town of Addison as part of a road revitalization project and increased the loss on sale of Forest Park by $38,000 as a result of final sales adjustments.

During the three months ended September 30, 2023, we entered into an agreement to sell a property in Miami, Florida for a gross sales price of approximately $68.0 million at an expected loss of $19.2 million and an agreement to sell a property in Atlanta, Georgia for a gross sales price of approximately $40.0 million at an expected loss of $20.5 million. We recorded corresponding impairments on these assets held for sale at September 30, 2023.

During the three months ended September 30, 2022, we sold two office properties located in Broomfield, Colorado on August 31, 2022 with an aggregate sales price of $102.5 million, at a gain of $24.1 million.

Tax expense on income

Included in income taxes is the Revised Texas Franchise Tax, which is a tax on revenues from Texas properties, which was $70,000 during the three months ended September 30, 2023 compared to $62,000 during the three months ended September 30, 2022.

Net income and loss

Net loss for the three months ended September 30, 2023 was $45.7 million compared to net income of $17.2 million for the three months ended September 30, 2022, for the reasons described above.

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The following table shows financial results for the nine months ended September 30, 2023 and 2022:

	Nine months ended September 30,
(in thousands)	2023		2022		Change
Revenues:
Rental	$	110,927	$	122,994	$	(12,067)
Related party revenue:
Management fees and interest income from loans		—		1,393		(1,393)
Other		9		17		(8)
Total revenues		110,936		124,404		(13,468)
Expenses:
Real estate operating expenses		37,627		38,547		(920)
Real estate taxes and insurance		21,257		26,713		(5,456)
Depreciation and amortization		42,780		49,004		(6,224)
General and administrative		10,849		10,997		(148)
Interest		18,099		17,140		959
Total expenses		130,612		142,401		(11,789)
Loss on extinguishment of debt		(106)		(78)		(28)
Gain on consolidation of Sponsored REIT		394		—		394
Impairment and loan loss reserve		—		(1,857)		1,857
Gain (loss) on sale of properties and impairment of assets held for sale, net		(32,085)		24,077		(56,162)
Income (loss) before taxes		(51,473)		4,145		(55,618)
Tax expense		212		167		45
Net income (loss)	$	(51,685)	$	3,978	$	(55,663)

Comparison of the nine months ended September 30, 2023 to the nine months ended September 30, 2022:

Revenues

Total revenues decreased by $13.5 million to $110.9 million for the nine months ended September 30, 2023, as compared to the nine months ended September 30, 2022. The decrease was primarily a result of:

● A decrease in rental revenue of approximately $12.1 million arising primarily from the sale of three properties during 2022 and two properties in 2023 and other losses of rental income from lease expirations during the periods presented. These decreases were partially offset by rental income earned from leases commencing after September 30, 2022. Our leased space in our owned and consolidated properties was 72.4% at September 30, 2023 and 75.9% at September 30, 2022.

● A decrease in interest income from loans of approximately $1.4 million due to the consolidation of Monument Circle in our financial results as of January 1, 2023.

Expenses

Total expenses decreased by $11.8 million to $130.6 million for the nine months ended September 30, 2023, as compared to the nine months ended September 30, 2022. The decrease was primarily a result of:

● A decrease in real estate operating expenses and real estate taxes and insurance of approximately $6.4 million primarily attributable to the property dispositions noted above.

● A decrease in depreciation and amortization of approximately $6.2 million primarily attributable to the property dispositions noted above.

● A decrease in general and administrative expenses of $0.1 million primarily attributable to lower personnel costs.

These decreases were partially offset by:

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● An increase in interest expense of approximately $0.9 million. The increase was primarily due to higher interest expense as a result of higher interest rates under the loan amendments we entered into on February 10, 2023 described above and was partially offset by a lower principal amount of debt outstanding compared to the same period in 2022.

Loss on extinguishment of debt

During the nine months ended September 30, 2023 and September 30, 2022, we repaid debt and incurred a loss on extinguishment of debt of approximately $0.1 million and $0.1 million, respectively, related to unamortized deferred financing costs on the dates of the repayments.

Gain on consolidation of Sponsored REIT

During the nine months ended September 30, 2023, we recorded a gain on consolidation of Sponsored REIT as a result of reducing the Monument Circle loan loss reserve, which resulted in a $0.4 million gain.

Impairment and loan reserve

During the nine months ended September 30, 2022, we recorded an impairment on a mortgage receivable of $1.9 million.

Gain and loss on sale of properties and impairment

During the three months ended March 31, 2023, we sold an office property located in Elk Grove, Illinois on March 10, 2023, for a sales price of $29.1 million, at a gain of approximately $8.4 million.

During the three months ended September 30, 2023, we sold an office property located in Charlotte, North Carolina for a sales price of $9.2 million at a loss of approximately $0.8 million. During the three months ended September 30, 2023, we also recorded a gain on sale of $53,000 as a result of conveying approximately 7,826 square feet of land at our Addison, Texas property to the Town of Addison as part of a road revitalization project and increased the loss on sale of Forest Park by $38,000 as a result of final sales adjustments.

During the three months ended September 30, 2023, we entered into an agreement to sell a property in Miami, Florida for a gross sales price of approximately $68.0 million at an expected loss of $19.2 million and an agreement to sell a property in Atlanta, Georgia for a gross sales price of approximately $40.0 million at an expected loss of $20.5 million. We recorded corresponding impairments on these assets held for sale at September 30, 2023.

Tax expense on income

Included in income taxes is the Revised Texas Franchise Tax, which is a tax on revenues from Texas properties, which was $212,000 during the nine months ended September 30, 2023 compared to $167,000 during the nine months ended September 30, 2022.

Net income and loss

Net loss for nine months ended September 30, 2023, was $51.7 million compared to net income of $4.0 million for the nine months ended September 30, 2022, 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					Nine Months Ended
	September 30,					September 30,
(in thousands):	2023			2022		2023			2022
Net income (loss)	$	(45,671)	$		17,246	$	(51,685)	$		3,978
Gain on consolidation of Sponsored REIT		—			—		(394)			—
Impairment and loan loss reserve		—			717		—			1,857
(Gain) loss on sale of properties and impairment of assets held for sale, net		39,671			(24,077)		32,085			(24,077)
Depreciation and amortization		13,400			15,114		42,742			48,916
NAREIT FFO		7,400			9,000		22,748			30,674
Lease Acquisition costs		109			41		278			206
Funds From Operations	$	7,509		$	9,041	$	23,026		$	30,880

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

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and consolidated in the periods presented, which we call Same Store. The comparative Same Store results include properties held for the periods presented and exclude acquired properties or properties that have been placed in service, but that do not have operating activity for all periods presented, 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 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
	Feet	Three Months Ended						Nine Months Ended		Three Months Ended						Nine Months Ended		Inc		%
(in thousands)	or RSF	31-Mar-23		30-Jun-23		30-Sep-23		30-Sep-23		31-Mar-22		30-Jun-22		30-Sep-22		30-Sep-22		(Dec)		Change
Region
East	298	$	276	$	343	$	239	$	858	$	274	$	278	$	221	$	773	$	85	11.0	%
MidWest	758		2,239		1,718		1,396		5,353		2,478		3,038		2,486		8,002		(2,649)	(33.1)	%
South	2,797		7,933		8,128		8,532		24,593		5,817		5,611		5,902		17,330		7,263	41.9	%
West	2,140		6,422		6,412		6,505		19,339		8,070		6,609		6,401		21,080		(1,741)	(8.3)	%
Property NOI* from Owned Properties	5,993		16,870		16,601		16,672		50,143		16,639		15,536		15,010		47,185		2,958	6.3	%
Disposition and Acquisition Properties (a)	213		870		(30)		(68)		772		2,942		3,582		2,658		9,182		(8,410)	(16.0)	%
Property NOI*	6,206	$	17,740	$	16,571	$	16,604	$	50,915	$	19,581	$	19,118	$	17,668	$	56,367	$	(5,452)	(9.7)	%
Same Store		$	16,870	$	16,601	$	16,672	$	50,143	$	16,639	$	15,536	$	15,010	$	47,185	$	2,958	6.3	%
Less Nonrecurring
Items in NOI* (b)			1,292		301		485		2,078		273		1,258		494		2,025		53	0.1	%
Comparative
Same Store		$	15,578	$	16,300	$	16,187	$	48,065	$	16,366	$	14,278	$	14,516	$	45,160	$	2,905	6.4	%
									Nine Months Ended								Nine Months Ended
		Three Months Ended							Ended	Three Months Ended							Ended
Reconciliation to Net Income (Loss)		31-Mar-23			30-Jun-23		30-Sep-23		30-Sep-23	31-Mar-22			30-Jun-22		30-Sep-22		30-Sep-22
Net income (loss)		$	2,406	$	(8,420)	$	(45,671)	$	(51,685)	$	(4,158)	$	(9,110)	$	17,246	$	3,978
Add (deduct):
Loss on extinguishment of debt			67		—		39		106		—		—		78		78
Gain on consolidation of Sponsored REIT			(394)		—		—		(394)		—		—		—		—
Impairment and loan loss reserve			—		—		—		—		—		1,140		717		1,857
Gain on sale of properties and impairment of assets held for sale, net			(8,392)		806		39,671		32,085		—		—		(24,077)		(24,077)
Management fee income			(374)		(427)		(460)		(1,261)		(291)		(267)		(274)		(832)
Depreciation and amortization			14,727		14,645		13,409		42,781		15,670		18,185		15,148		49,003
Amortization of above/below market leases			(18)		(12)		(9)		(39)		(9)		(45)		(34)		(88)
General and administrative			3,817		3,768		3,265		10,850		3,784		3,981		3,233		10,998
Interest expense			5,806		6,084		6,209		18,099		5,366		5,664		6,110		17,140
Interest income			—		—		—		—		(451)		(455)		(461)		(1,367)
Non-property specific items, net			95		127		151		373		(330)		25		(18)		(323)
Property NOI*		$	17,740	$	16,571	$	16,604	$	50,915	$	19,581	$	19,118	$	17,668	$	56,367

(a) We define Disposition and Acquisition Properties as properties that were sold or acquired or consolidated and do not have operating activity for all periods presented.

(b) 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.

33

The information presented below provides the weighted average GAAP rent per square foot for the nine months ended September 30, 2023 for our owned and consolidated properties and weighted occupancy square feet and percentages. GAAP rent includes the impact of tenant concessions and reimbursements.

						Weighted
						Occupied		Weighted
			Year Built		Weighted	Percentage as of		Average
			or	Net Rentable	Occupied	September 30,		Rent per Occupied
Property Name	City	State	Renovated	Square Feet	Sq. Ft.	2023 (a)		Square Feet (b)
Innsbrook	Glen Allen	VA	1999	298,183	142,382	47.8	%		18.69
East Total				298,183	142,382	47.8	%		18.69
120 Monument Circle	Indianapolis	IN	1992	213,760	8,722	4.1	%		31.71
121 South 8th Street	Minneapolis	MN	1974	298,121	244,757	82.1	%		25.06
801 Marquette Ave	Minneapolis	MN	1923/2017	129,691	119,108	91.8	%		24.13
Plaza Seven	Minneapolis	MN	1987	330,096	216,279	65.5	%		29.58
Midwest Total				971,668	588,866	60.6	%		26.63
Blue Lagoon Drive (c)	Miami	FL	2002/2021	213,182	174,511	81.9	%		44.71
Park Ten	Houston	TX	1999	157,609	122,872	78.0	%		28.58
Addison Circle	Addison	TX	1999	289,333	240,175	83.0	%		35.18
Collins Crossing	Richardson	TX	1999	300,887	285,451	94.9	%		26.93
Eldridge Green	Houston	TX	1999	248,399	248,399	100.0	%		27.05
Park Ten Phase II	Houston	TX	2006	156,746	148,924	95.0	%		29.24
Liberty Plaza	Addison	TX	1985	217,841	157,238	72.2	%		24.48
Legacy Tennyson Center	Plano	TX	1999/2008	209,461	102,552	49.0	%		30.25
One Legacy Circle (c)	Plano	TX	2008	214,110	142,983	66.8	%		38.31
Westchase I & II	Houston	TX	1983/2008	629,025	368,231	58.5	%		26.98
Pershing Park Plaza (c)	Atlanta	GA	1989	160,145	127,796	79.8	%		38.56
South Total				2,796,738	2,119,132	75.8	%		31.06
1999 Broadway	Denver	CO	1986	682,639	423,509	62.0	%		33.66
1001 17th Street	Denver	CO	1977/2006	648,861	454,657	70.1	%		38.84
600 17th Street	Denver	CO	1982	612,135	481,812	78.7	%		34.66
Greenwood Plaza	Englewood	CO	2000	196,236	130,006	66.3	%		29.04
West Total				2,139,871	1,489,984	69.6	%		35.16
Total Owned & Consolidated Properties				6,206,460	4,340,364	69.9	%	$	31.46

(a) Based on weighted occupied square feet for the nine months ended September 30, 2023, including month-to-month tenants, divided by the applicable property’s net rentable square footage.

(b) Represents annualized GAAP rental revenue for the nine months ended September 30, 2023, per weighted occupied square foot.

(c) Property is classified as an asset held for sale as of September 30, 2023.

34

Liquidity and Capital Resources

As of September 30, 2023 and November 7, 2023, we had aggregate outstanding indebtedness under two unsecured loans, the BofA Revolver and the BMO Term Loan, totaling approximately $195 million and $205 million, respectively, maturing within 12 months of the date of issuance of the financial statements in this report, and expect to have sufficient financial resources available to satisfy the obligations when due.

Subsequent to September 30, 2023, on October 26, 2023, we closed on the disposition of one property resulting in net proceeds of approximately $46.7 million. As of November 7, 2023, we are holding such net proceeds in cash and cash equivalents. As of September 30, 2023, we had entered into agreements to effect the sale of two properties held for sale that are scheduled to close during the fourth quarter of 2023, which two dispositions would result in aggregate net proceeds of approximately $96.5 million. As of November 7, 2023, we had cash and cash equivalents of approximately $73.5 million, which when combined with the aggregate net proceeds of approximately $96.5 million from the above-described two dispositions scheduled to close during the fourth quarter of 2023, will be sufficient to repay approximately $170.0 million of the approximately $205.0 million of indebtedness maturing on October 1, 2024.

We are also actively working on the potential disposition of additional properties that are not classified as assets held for sale as of September 30, 2023. As of September 30, 2023, we had entered into an agreement to effect the sale of a property that is scheduled to close during the fourth quarter of 2023, which would result in net proceeds of approximately $43.6 million. We intend to use net proceeds from dispositions primarily for the repayment of debt.

Management is also actively engaged in discussions with our lenders to extend and/or refinance the BofA Revolver and the BMO Term Loan prior to maturity. We believe that we will be able to extend and/or refinance the BofA Revolver and the BMO Term Loan prior to their scheduled October 1, 2024 maturity dates. However, there can be no assurance that we will be able to obtain extensions and/or refinancings in a timely manner, or on acceptable terms, if at all, or generate the cash necessary to pay off the BofA Revolver and the BMO Term Loan through asset sales prior to their October 1, 2024 maturity dates. The failure to obtain extensions and/or refinancings, or otherwise to repay the BofA Revolver and the BMO Term Loan, when due, could lead to events of default, which would have a material adverse effect on our financial condition.

We have concluded that management’s plans to dispose of assets and extend and/or refinance the BofA Revolver and the BMO Term Loan are probable of being achieved and alleviate substantial doubt about our ability to continue as a going concern. The accompanying financial statements have been prepared assuming that we will continue as a going concern and do not include any adjustments that might result from an adverse outcome of this uncertainty.

As of September 30, 2023, we also have the Series A Notes (as defined in Note 3) in the aggregate principal amount of $116 million outstanding that are scheduled to mature on December 20, 2024, which is beyond 12 months of the date of issuance of the financial statements in this Quarterly Report on Form 10-Q and therefore have been excluded from management’s associated going concern assessment and analysis.

Cash and cash equivalents were $13.0 million and $6.6 million at September 30, 2023 and December 31, 2022, respectively. The increase of $6.4 million is attributable to $11.5 million provided by operating activities, plus $14.1 million provided by investing activities less $19.2 million used in financing activities. 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 and property dispositions. 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 properties, property dispositions and our interest costs.

Operating Activities

Cash provided by operating activities for the nine months ended September 30, 2023 of $11.5 million is primarily attributable to a net loss of $51.7 million, plus the net loss on sale of a property and impairments on two assets held for sale of $32.1 million, less the gain on consolidation of Sponsored REIT of $0.4 million, plus the add-back of $42.7 million of non-cash expenses, less an increase in payment of deferred leasing commissions of $5.9 million, a decrease in accounts

35

payable and accrued compensation of $3.0 million, an increase in prepaid expenses of $0.6 million, an increase in lease acquisition costs of $0.9 million, an increase in tenant rent receivables of $0.7 million and an increase in tenant security deposits of $0.1 million.

Investing Activities

Cash provided by investing activities for the nine months ended September 30, 2023 of $14.1 million is primarily attributable to proceeds from an asset sale of $37.1 million and an increase of investment in a mortgage receivable of $3.0 million from cash recorded in consolidation of Monument Circle, which was partially offset by purchases of other real estate assets and office equipment investments of $26.0 million.

Financing Activities

Cash used in financing activities for the nine months ended September 30, 2023 of $19.2 million is primarily attributable to the repayment of a portion of the BMO Term Loan of $50.0 million, repayment of a portion of the BofA Revolver of $35.0 million, payment of distributions to stockholders of $3.1 million, and payment of deferred financing costs of $2.3 million, which was partially offset by net borrowings on the BofA Revolver of $67.0 million and the proceeds from the termination of interest rate swap of $4.2 million.

Liquidity beyond the next 12 months

In addition to the BofA Revolver and the BMO Term Loan maturities described above, our Series A Notes, of which an aggregate principal amount of $116 million is outstanding as of September 30, 2023, have a maturity date of December 20, 2024. Our ability to generate cash adequate to satisfy our debt obligations as they mature and meet our operating needs is dependent primarily on income from real estate investments, the sale of real estate investments, leveraging of real estate investments, availability of bank borrowings, proceeds from public offerings of stock, private placement of debt and access to the capital markets. The acquisition of new properties, the payment of expenses related to real estate operations, capital improvement expenses, debt service payments, general and administrative expenses, and distribution requirements place demands on our liquidity. See Part II, Item 1A, Risk Factors for additional risks relating to our liquidity.

We intend to operate our properties from the cash flows generated by our properties. However, our expenses are affected by various factors, including inflation. Increases in operating expenses are predominantly borne by our tenants. To the extent that increases cannot be passed on to our tenants through rent reimbursements, such expenses would reduce the amount of available cash flow, which can adversely affect the market value of the applicable property.

We have used a variety of sources to fund our cash needs in addition to our free cash flow generated from our investments in real estate. In the past, we considered borrowing on our unsecured line of credit facility, adding or refinancing existing term debt or raising capital through public offerings or At The Market (ATM) programs of our common stock.

BMO Term Loan

On February 10, 2023, the Company entered into a First Amendment to the Second Amended and Restated Credit Agreement with the lending institutions party thereto and Bank of Montreal, as administrative agent (the “BMO First Amendment”). The BMO First Amendment amended the Second Amended and Restated Credit Agreement dated September 27, 2018, among the Company and the lending institutions party thereto (as amended by the BMO First Amendment, the “BMO Credit Agreement”) to, among other things, extend the maturity date from January 31, 2024 to October 1, 2024 and change the interest rate from a number of basis points over LIBOR depending on the Company’s credit rating to 300 basis points over SOFR (Secured Overnight Financing Rate). The BMO Credit Agreement initially provided for an unsecured term loan borrowing in the amount of $220 million (the “BMO Term Loan”). In connection with the BMO First Amendment, the Company repaid a $40 million portion of the remaining principal balance of the BMO Term Loan, so that $125 million remained outstanding. On August 10, 2023, we repaid an additional $10 million of this loan, so that $115 million principal amount remains outstanding under the BMO Term Loan as of September 30, 2023. On or before April 1, 2024, we are required to repay an additional $25 million of the BMO Term Loan. The remaining balance of the BMO Term Loan matures on October 1, 2024.

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Effective February 10, 2023 upon entering into the BMO First Amendment, the BMO Term Loan bears interest at either (i) 300 basis points over one, three or six month term SOFR, plus a corresponding adjustment of 0.11448%, 0.26161% or 0.42826%, respectively, or (ii) 200 basis points over the base rate. Prior to February 10, 2023, the BMO Term Loan bore interest at either (i) a number of basis points over LIBOR depending on the Company’s credit rating (165 basis points over LIBOR at December 31, 2022) or (ii) a number of basis points over the base rate depending on the Company’s credit rating (65 basis points over the base rate at December 31, 2022).

As of September 30, 2023, the interest rate on the BMO Term Loan was 8.43% per annum. The weighted average variable interest rate on all amounts outstanding under the BMO Term Loan from February 8, 2023, which is when the Company terminated its outstanding interest rate swaps applicable to the BMO Term Loan as described below, through September 30, 2023 was approximately 7.98% per annum.

Although the interest rate on the BMO Term Loan is variable under the BMO Credit Agreement, the Company fixed the base LIBOR interest rate that previously applied to the BMO Term Loan by entering into interest rate swap transactions. 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 both December 31, 2022 and February 8, 2023, the effective interest rate on the BMO Term Loan was 4.04% per annum. On February 8, 2023, we terminated all outstanding interest rate swaps applicable to the BMO Term Loan and, on February 10, 2023, we received an aggregate of approximately $4.3 million as a result of such terminations, of which approximately $0.1 million related to interest receivable.

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 and repurchases and redemptions of the Company’s common stock; going concern qualifications to our financial statements; and the requirement to have subsidiaries provide a guaranty in the event that they incur recourse indebtedness and transactions with affiliates. In addition, the BMO Credit Agreement also restricts the Company’s ability to make quarterly dividend distributions that exceed $0.01 per share of the Company’s common stock; provided, however, that notwithstanding such restriction, the Company is permitted to make dividend distributions based on the Company’s good faith estimate of projected or estimated taxable income or otherwise as necessary to retain the Company’s status as a real estate investment trust, to meet the distribution requirements of Section 857 of the Internal Revenue Code or to eliminate any income or excise taxes to which the Company would otherwise be subject. 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 maximum secured recourse 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 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. We were in compliance with the BMO Term Loan financial covenants as of September 30, 2023.

BofA Revolver

On February 10, 2023, the Company entered into a First Amendment to Credit Agreement with Bank of America, N.A., as administrative agent, a letter of credit issuer and a lender (“BofA”), and the other lending institutions party thereto (the “BofA First Amendment”), for a revolving line of credit for borrowings, at the Company’s election, of up to $150 million (the “BofA Revolver”). The BofA First Amendment amended the Credit Agreement, dated January 10, 2022, among the Company and the lending institutions party thereto (as amended by the BofA First Amendment, the “BofA Credit Agreement”) to among other things, extend the maturity date from January 12, 2024 to October 1, 2024, reduce availability

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for borrowings, at the Company’s election, from up to $237.5 million to up to $150 million, and to change the interest rate from a number of basis points over SOFR depending on the Company’s credit rating to 300 basis points over SOFR. Borrowings made under the BofA Revolver may be revolving loans or letters of credit, the combined sum of which may not exceed $150 million outstanding at any time. Effective October 1, 2023, availability under the BofA Revolver will be reduced to $125 million and, effective April 1, 2024, availability under the BofA Revolver will be further reduced to $100 million. As of September 30, 2023 and November 7, 2023, there were borrowings of $80 million and $90 million drawn and outstanding under the BofA Revolver, respectively, which borrowings include $40 million that the Company borrowed on February 10, 2023 to repay a portion of the BMO Term Loan. Borrowings made pursuant to the BofA Revolver may be borrowed, repaid and reborrowed from time to time until the maturity date on October 1, 2024.

Effective February 10, 2023 upon entering into the BofA First Amendment, the BofA Revolver bears interest at 300 basis points over either (i) the daily simple SOFR, plus an adjustment of 0.11448%, or (ii) one, three or six month term SOFR, plus a corresponding adjustment of 0.11448%, 0.26161% or 0.42826%, respectively. In addition, under certain circumstances, such as if SOFR was not able to be determined, the BofA Revolver will instead bear interest at 200 basis points over the base rate. Prior to February 10, 2023, borrowings under the BofA Revolver bore interest at a margin over either (i) the daily simple SOFR, plus an adjustment of 0.11448%, or (ii) one, three or six month term SOFR, plus a corresponding adjustment of 0.11448%, 0.26161% or 0.42826%, respectively. Prior to February 10, 2023, the margin over SOFR or, if applicable, the base rate, varied depending on the Company’s leverage ratio (1.750% over SOFR and 0.750% over the base rate at December 31, 2022). Effective February 10, 2023 upon entering into the BofA First Amendment, the Company is also obligated to pay an annual facility fee on the unused portion of the BofA Revolver at the rate of 0.350% per annum and, if applicable, letter of credit fees. Prior to February 10, 2023, the Company was also obligated to pay an annual facility fee and, if applicable, letter of credit fees in amounts that were also based on the Company’s leverage ratio. The previous facility fee was assessed against the aggregate amount of lender commitments regardless of usage (0.350% at December 31, 2022).

As of September 30, 2023, the interest rate on the BofA Revolver was 8.43% per annum. The weighted average variable interest rate on all amounts outstanding under the BofA Revolver through September 30, 2023, was approximately 7.80% per annum.

The BofA 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, use of proceeds, the amount of cash and cash equivalents that the Company can have on its balance sheet after giving effect to an advance under the BofA Revolver, repurchases and redemptions of the Company’s common stock, going concern qualifications to our financial statements, and the requirement to have subsidiaries provide a guaranty in the event that they incur recourse indebtedness and transactions with affiliates. The BofA 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 maximum secured recourse leverage ratio, a minimum fixed charge coverage ratio, a maximum unencumbered leverage ratio and a minimum unsecured interest coverage ratio. The BofA Credit Agreement also restricts the Company’s ability to make quarterly dividend distributions that exceed $0.01 per share of the Company’s common stock; provided, however, that notwithstanding such restriction, the Company is permitted to make dividend distributions based on the Company’s good faith estimate of projected or estimated taxable income or otherwise as necessary to retain the Company’s status as a real estate investment trust, to meet the distribution requirements of Section 857 of the Internal Revenue Code or to eliminate any income or excise taxes to which the Company would otherwise be subject. The Company was in compliance with the BofA Revolver financial covenants as of September 30, 2023.

The BofA Credit Agreement provides for customary events of default with corresponding grace periods, including failure to pay any principal or interest when due, failure to comply with the provisions of the BofA Credit Agreement, certain cross defaults and a change in control of the Company (as defined in the BofA Credit Agreement). In the event of a default by the Company, BofA, in its capacity as administrative agent, may, and at the request of the requisite number of lenders shall, declare all obligations under the BofA Credit Agreement immediately due and payable and enforce any and all rights of the lenders or BofA under the BofA 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.

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The Company may use the net proceeds of the BofA Revolver for permitted investments and for working capital and other general business purposes, including for building improvements, tenant improvements and leasing commissions, in each case to the extent permitted under the BofA Credit Agreement.

Former BofA Credit Facility

On July 21, 2016, the Company entered into a First Amendment (the “BofA First Amendment”), and on October 18, 2017, the Company entered into a Second Amendment (the “BofA Second Amendment”), to the Second Amended and Restated Credit Agreement dated October 29, 2014 among the Company, the lending institutions party thereto and BofA, as administrative agent, L/C Issuer and Swing Line Lender (as amended by the BofA First Amendment and the BofA Second Amendment, the “Amended Former BofA Credit Facility”) that continued an existing unsecured revolving line of credit (the “Former BofA Revolver”) and an existing term loan (the “Former BofA Term Loan”). Effective simultaneously with the closing of the Amended Former BofA Credit Facility on January 10, 2022, the Company delivered a notice to BofA terminating the aggregate lender commitments under the Former BofA Revolver in their entirety. There were no amounts drawn on the Former BofA Revolver as of December 31, 2021 and January 10, 2022.

Former BofA Revolver Highlights

● The Former BofA Revolver was terminated at the Company’s election effective January 10, 2022.

● As of December 31, 2021 and January 10, 2022, there were no borrowings under the Former BofA Revolver.

The Former BofA Revolver bore interest at either (i) a margin over LIBOR depending on the Company’s credit rating (1.550% over LIBOR at December 31, 2021) or (ii) a margin over the base rate depending on the Company’s credit rating (0.550% over the base rate at December 31, 2021). The Former BofA Credit Facility also obligated the Company to pay an annual facility fee in an amount that is also based on the Company’s credit rating. The facility fee was assessed against the total amount of the Former BofA Revolver, or $600 million (0.30% at December 31, 2021). The amount of any applicable facility fee, and the margin over LIBOR rate or base rate was determined based on the Company’s credit rating pursuant to a pricing grid.

For purposes of the Former BofA Credit Facility, base rate meant, for any day, a fluctuating rate per annum equal to the highest of: (i) the bank’s prime rate for such day, (ii) the Federal Funds Rate for such day, plus 0.50%, and (iii) the one month LIBOR based rate for such day plus 1.00%. As of December 31, 2021, the Company’s credit rating from Moody’s Investors Service was Ba1.

During 2022 and as of December 31, 2022, there were no borrowings under the Former BofA Revolver.

Former BofA Term Loan Highlights

● The Former BofA Term Loan was repaid in its entirety on September 6, 2022.

● The original principal amount of the Former BofA Term Loan was $400 million. On September 30, 2021, the Company repaid a $90 million portion and on October 25, 2021, the Company repaid a $200 million portion of the Former BofA Term Loan and incurred a loss on extinguishment of debt of $0.7 million related to unamortized deferred financing costs. On September 6, 2022, the Company prepaid the remaining $110 million balance of the Former BofA Term Loan in full and incurred a loss of extinguishment of debt of $0.1 million related to unamortized deferred financing costs.

The Former BofA Term Loan bore interest at either (i) a margin over LIBOR depending on the Company’s credit rating (1.75% over LIBOR at the date of repayment on September 6, 2022) or (ii) a margin over the base rate depending on the Company’s credit rating (0.750% over the base rate at the date of repayment on September 6, 2022). The margin over LIBOR rate or base rate was determined based on the Company’s credit rating pursuant to a pricing grid.

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The interest rate on the Former BofA Term Loan was variable through the date of repayment on September 6, 2022. Previously the Company had fixed the base LIBOR interest rate on the Former BofA 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 Former BofA Term Loan at 1.12% per annum for the period beginning on September 27, 2017 and ended on September 27, 2021. The weighted average variable interest rate on all amounts outstanding under the Former BofA Term Loan through the date of repayment on September 6, 2022 was approximately 2.65% per annum.

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) Series A Senior Notes due December 20, 2024 in an aggregate principal amount of $116 million (the “Series A Notes”) and (ii) 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 proceeds were used to reduce the outstanding balance of the Former BofA Revolver.

The Senior Notes bear interest depending on the Company’s credit rating. As of September 30, 2023, the Series A Notes bear interest at 4.49% per annum and the Series B Notes bear interest at 4.76% per annum.

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 BofA Credit Agreement and the BMO 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. We were in compliance with the Senior Notes financial covenants as of September 30, 2023.

Equity Offering

From time to time, we may issue debt securities, common stock, preferred stock or depository shares under a registration statement to fund the acquisition of additional properties, to pay down any existing debt financing and for other corporate purposes.

Stock Repurchase Program

On June 23, 2021, we announced that our Board of Directors had authorized the repurchase of up to $50 million of the Company’s common stock from time to time in the open market, privately negotiated transactions or other manners as permitted by federal securities laws. The repurchase authorization may be suspended or discontinued at any time. On February 10, 2023, we disclosed in a Current Report on Form 8-K that our Board of Directors had discontinued the repurchase authorization.

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Contingencies

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

To the extent permitted by the BofA Credit Agreement, we intend to draw on the BofA Revolver in the future for a variety of corporate purposes, including for the Sponsored REIT Loan as described below.

Sponsored REIT Loan

The Sponsored REIT Loan is secured by a mortgage on the underlying property and has a current term of less than one year. We anticipate that the Sponsored REIT Loan will be repaid through cash flow from property operations or sale of the underlying property, although the actual amount and timing of any repayment is uncertain and will likely depend on prevailing market conditions at the time of any such sale.

The Sponsored REIT Loan subjects us to credit risk. However, we believe that our position as asset manager of the Sponsored REIT helps mitigate that risk by providing us with unique insight and the ability to rely on qualitative analysis of the Sponsored REIT. Before making the Sponsored REIT Loan, we considered a variety of subjective factors, including the quality of the underlying real estate, leasing, the financial condition of the 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 the Sponsored REIT Loan outstanding as of September 30, 2023, is incorporated herein by reference to 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 owned and consolidated properties from the rental revenue generated by the properties. For the three and nine months ended September 30, 2023 and 2022, respectively, the rental income exceeded the expenses for each individual property, with the exception of Monument Circle for the three and nine months ended September 30, 2023 and Pershing Park for the three and nine months ended September 30, 2022.

Monument Circle has approximately 214,000 square feet of rentable space comprised of both office and street level retail space. The office component comprises approximately 95% of the rentable space and was net leased to a single corporate tenant, through December 31, 2018. The retail component comprises the remaining approximately 5% of the property’s rentable space. Monument Circle had approximately $70,000 of rental income and $304,000 of operating expenses for the three months ended September 30, 2023. Monument Circle had approximately $207,000 of rental income and $830,000 of operating expenses for the nine months ended September 30, 2023, and was 4.1% leased to two retail tenants as of September 30, 2023.

Pershing Park has approximately 160,000 square feet of rentable space, which was 12.4% leased at June 30, 2021 due to a large tenant departure on May 31, 2021. During the three months ended September 30, 2021, we signed a lease with a new tenant. During the three months ended March 31, 2022, we signed an expansion of space with that same tenant. The new lease inclusive of the expansion space is for approximately 101,000 square feet and has commenced. Pershing Park had $310,000 of rental income and $575,000 of operating expenses for the three months ended September 30, 2022. The property had $664,000 of rental income and $1,593,000 of operating expenses for the nine months ended September 30, 2022, and was 79.2% leased as of September 30, 2022.

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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, 2022.

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 have used interest rate derivative instruments to manage exposure to interest rate changes. As of September 30, 2023 and December 31, 2022, if market rates on our outstanding borrowings under the BofA Revolver subject to a floating rate increased by 10% at maturity, or approximately 84 and 62 basis points, respectively, over the current variable rate, the increase in interest expense would decrease future earnings and cash flows by approximately $0.7 million and $0.3 million, respectively. The interest rate on the BofA Revolver as of September 30, 2023 was SOFR plus an adjustment of 0.11448% plus 300 basis points, or 8.43% per annum, and as of December 31, 2022 was SOFR plus an adjustment of 0.11448% plus 175 basis points, or 4.358% per annum. There was $80 million and $48 million drawn on the BofA Revolver as of September 30, 2023 and December 31, 2022, respectively. We do not believe that the interest rate risk on the BofA Revolver is material as of September 30, 2023.

Although the interest rate on the BMO Term Loan is variable, the Company fixed the base LIBOR interest rate on the BMO Term Loan by entering into interest rate swap agreements. 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 December 31, 2022, the interest rate on the BMO Term Loan was 4.04% per annum. The fair value of these interest rate swaps are affected by changes in market interest rates. This interest rate swap was our only derivative instrument as of December 31, 2022. On February 8, 2023, we terminated all outstanding interest rate swaps applicable to the BMO Term Loan and, on February 10, 2023, we received an aggregate of approximately $4.3 million as a result of such terminations, of which approximately $0.1 million related to interest receivable. As of September 30, 2023, if market rates on our outstanding borrowings under the BMO Term Loan subject to a floating rate increased by 10% at maturity, or approximately 84 basis points over the current variable rate, the increase in interest expense would decrease future earnings and cash flows by approximately $1.0 million. The interest rate on the BMO Term Loan as of September 30, 2023 was SOFR plus an adjustment of 0.11448% plus 300 basis points, or 8.43% per annum.

The table below includes our derivative instrument, which hedged variable cash flows related to interest on our BMO Term Loan as of December 31, 2022:

	Notional		Strike		Effective	Expiration	Fair Value (1) at
(in thousands)	Value		Rate		Date	Date	September 30, 2023		December 31, 2022
2019 BMO Interest Rate Swap	$	165,000	2.39	%	Aug-20	Jan-24	$	—	$	4,358
(1) Classified within Level 2 of the fair value hierarchy.

Our BMO Term Loan hedging transaction used derivative instruments that involved certain additional risks such as counterparty credit risk, the enforceability of hedging contracts and the risk that unanticipated and significant changes in interest rates would cause a significant loss of basis in the contract. We require our derivatives contracts to be with counterparties that have investment grade ratings. As a result, we did not anticipate that any counterparty would fail to meet its obligations. However, there was no assurance that we would be able to adequately protect against the foregoing risks or that we would ultimately realize an economic benefit that exceeds the related amounts incurred in connection with engaging in such hedging strategies.

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

The following table presents, as of September 30, 2023, our contractual variable rate borrowings under our BofA Revolver, which matures on October 1, 2024, under our BMO Term Loan Tranche B, which matures on October 1, 2024, under our Series A Notes, which mature on December 20, 2024, and under our Series B Notes, which mature on December 20, 2027.

	Payment due by period
	(in thousands)
	Total		2023		2024		2025		2026		2027		Thereafter
BofA Revolver	$	80,000	$	—	$	80,000	$	—	$	—	$	—	$	—
BMO Term Loan Tranche B		115,000		—		115,000		—		—		—		—
Series A Notes		116,000		—		116,000		—		—		—		—
Series B Notes		84,000		—		—		—		—		84,000		—
Total	$	395,000	$	—	$	311,000	$	—	$	—	$	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 September 30, 2023. 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 September 30, 2023, 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 September 30, 2023 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

In addition to the other information set forth in this report, you should carefully consider the risk factors discussed in the Annual Report on Form 10-K for the year ended December 31, 2022 (“2022 Form 10-K”), which could materially affect our business, financial condition or future results. The risks described in the 2022 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.

In addition to the risk factors included in the 2022 Form 10-K, we have identified the following additional risk factor:

Risks Related to our Indebtedness

Our current debt maturities may raise substantial doubt about our ability to continue as a going concern.

When preparing financial statements for each annual and interim reporting period, management evaluates whether there are conditions or events that, when considered in the aggregate, raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued as set forth in Accounting Standards Codification (ASC) 205-40, “Presentation of Financial Statements - Going Concern.” In making its assessment, management considered the maturity of the BofA Revolver and the BMO Term Loan, which each has a maturity date of October 1, 2024.

As of September 30, 2023 and November 7, 2023, we had aggregate outstanding indebtedness under the BofA Revolver and the BMO Term Loan totaling approximately $195 million and $205 million, respectively, maturing within 12 months of the date of issuance of the financial statements accompanying this quarterly report on Form 10-Q.

Although management believes that we will be able to extend and/or refinance the BofA Revolver and the BMO Term Loan, or generate the cash necessary to pay off the BofA Revolver and the BMO Term Loan through asset sales prior to their scheduled October 1, 2024 maturity dates, there can be no assurance that we will be able to obtain extensions and/or refinancings in a timely manner, or on acceptable terms, if at all, or generate the cash necessary to pay off the BofA Revolver and the BMO Term Loan through asset sales prior to their October 1, 2024 maturity dates. The failure to obtain extensions and/or refinancings, or otherwise to repay the BofA Revolver and the BMO Term Loan when due, could lead to events of default, which would have a material adverse effect on our financial condition.

In addition, our Series A Notes, of which an aggregate principal amount of $116 million is outstanding as of September 30, 2023, have a maturity date of December 20, 2024, will need to be evaluated in connection with management’s evaluation of the Company’s ability to continue as a going concern in connection with the preparation of financial statements for the year ending December 31, 2023. If we are not able to extend and/or refinance our indebtedness or generate sufficient cash through asset sales prior to the issuance of our financial statements for the year ended December 31, 2023, an opinion with respect to our audited financial statements for the year ended December 31, 2023 would need to include a qualification relating to our ability to continue operating as a going concern.

Our outstanding debt instruments contain covenants that require us to deliver audited financial statements for the year ending December 31, 2023 that are accompanied by an opinion from our independent public accounts that does not include a qualification as to the Company’s ability to continue to operate as a going concern. If we are unable to do so, an event of default will occur which will accelerate our obligations under the BofA Revolver, the BMO Term Loan and the Senior Notes, which would have a material adverse effect on our liquidity and financial condition.

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Any inability to continue to operate as a going concern or the occurrence of an event of default under our outstanding indebtedness would likely have a material adverse effect on the price of our common stock.

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

The Company did not make any repurchases of any equity securities during the three months ended September 30, 2023.

Item 3.  Defaults Upon Senior Securities

None.

Item 4.  Mine Safety Disclosures

None.

Item 5.  Other Information

Director and Officer Trading Arrangements

None of our directors or officers adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement (as defined in Item 408(c) of Regulation S-K) during the quarterly period covered by this report.  

45

Item 6.  Exhibits

Exhibit No.	Description
3.1 (1)	Articles of Incorporation, as amended
3.2 (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 September 30, 2023, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets; (ii) the Consolidated Statements of Operations; (iii) the Consolidated Statements of Stockholders’ Equity; (iv) the Consolidated Statements of Cash Flows; (v) the Consolidated Statements of Comprehensive Income (Loss); and (vi) the Notes to Consolidated Financial Statements.
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

Footnotes	Description
(1)	Incorporated by reference to Exhibit 3.1 to FSP Corp.’s Quarterly Report on Form 10-Q, filed on July 30, 2019 (File No. 001-32470).
(2)	Incorporated by reference to Exhibit 3.1 to FSP Corp.’s Current Report on Form 8-K, filed on February 3, 2023 (File No. 001-32470).
*	Filed herewith.

46

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: November 7, 2023	/s/ George J. Carter	Chief Executive Officer and Director
	George J. Carter	(Principal Executive Officer)
Date: November 7, 2023	/s/ John G. Demeritt	Chief Financial Officer
	John G. Demeritt	(Principal Financial Officer)

47

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: November 7, 2023	/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: November 7, 2023	/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 September 30, 2023 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: November 7, 2023	/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 September 30, 2023 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: November 7, 2023	/s/ John G. Demeritt
	John G. Demeritt
	Chief Financial Officer

XML

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2023	Nov. 02, 2023
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Transition Report	false
Document Period End Date	Sep. 30, 2023
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	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		103,430,353
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2023
Document Fiscal Period Focus	Q3
Entity Central Index Key	0001031316
Amendment Flag	false

XML

Consolidated Balance Sheets - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Real estate assets:
Land (amounts related to variable interest entities ("VIEs") of $6,416 and $0 at September 30, 2023 and December 31, 2022, respectively)	$ 114,298	$ 126,645
Buildings and improvements (amounts related to VIEs of $13,279 and $0 at September 30, 2023 and December 31, 2022, respectively)	1,183,744	1,388,869
Fixtures and equipment	10,377	11,151
Total real estate assets, gross	1,308,419	1,526,665
Less accumulated depreciation (amounts related to VIEs of $256 and $0 at September 30, 2023 and December 31, 2022, respectively)	386,838	423,417
Real estate assets, net (amounts related to VIEs of $19,439 and $0 at September 30, 2023 and December 31, 2022, respectively)	921,581	1,103,248
Acquired real estate leases, less accumulated amortization of $19,660 and $20,243, respectively (amounts related to variable interest entities ("VIEs") of $305, less accumulated amortization of $166 and $0 at September 30, 2023 and December 31, 2022, respectively)	7,447	10,186
Asset held for sale	132,659
Cash, cash equivalents and restricted cash (amounts related to VIEs of $2,445 and $0 at September 30, 2023 and December 31, 2022, respectively)	13,043	6,632
Tenant rent receivables	2,854	2,201
Straight-line rent receivable	43,253	52,739
Prepaid expenses and other assets	5,601	6,676
Related party mortgage loan receivable, less allowance for credit loss of $0 and $4,237, respectively		19,763
Other assets: derivative asset		4,358
Office computers and furniture, net of accumulated depreciation of $1,166 and $1,115, respectively	109	154
Deferred leasing commissions, net of accumulated amortization of $17,143 and $19,043, respectively	25,226	35,709
Total assets	1,151,773	1,241,666
Liabilities:
Bank note payable	80,000	48,000
Term loans payable, less unamortized financing costs of $390 and $250, respectively	114,610	164,750
Series A & Series B Senior Notes, less unamortized financing costs of $371 and $494, respectively	199,629	199,506
Accounts payable and accrued expenses (amounts related to VIEs of $628 and $0 at September 30, 2023 and December 31, 2022, respectively)	36,857	50,366
Accrued compensation	3,179	3,644
Tenant security deposits	5,631	5,710
Lease liability	444	759
Acquired unfavorable real estate leases, less accumulated amortization of $384 and $574, respectively	97	195
Total liabilities	440,447	472,930
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, 103,430,353 and 103,235,914 shares issued and outstanding, respectively	10	10
Additional paid-in capital	1,335,091	1,334,776
Accumulated other comprehensive income (loss)	1,417	4,358
Accumulated distributions in excess of accumulated earnings	(625,192)	(570,408)
Total stockholders' equity	711,326	768,736
Total liabilities and stockholders' equity	$ 1,151,773	$ 1,241,666

XML

Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Land amounts related to variable interest entities ("VIEs")	$ 114,298	$ 126,645
Buildings and improvements amounts related to variable interest entities ("VIEs")	1,183,744	1,388,869
Less accumulated depreciation amounts related to variable interest entities ("VIEs")	(386,838)	(423,417)
Real estate assets	921,581	1,103,248
Acquired real estate leases	7,447	10,186
Acquired real estate leases, accumulated amortization	19,660	20,243
Cash, cash equivalents and restricted cash (amounts related to variable interest entities ("VIEs")	13,043	6,632
Allowance on related parties loans and leases receivable	0	4,237
Office computers and furniture, accumulated depreciation	1,166	1,115
Deferred leasing commissions, accumulated amortization	17,143	19,043
Term loan payable, unamortized financing costs	390	250
Series A & Series B Senior notes, unamortized financing costs	371	494
Accounts payable and accrued expenses amounts related to variable interest entities ("VIEs")	36,857	50,366
Acquired unfavorable real estate leases, accumulated amortization	$ 384	$ 574
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)	103,430,353	103,235,914
Common stock, shares outstanding (in shares)	103,430,353	103,235,914
Variable interest entities ("VIEs")
Land amounts related to variable interest entities ("VIEs")	$ 6,416	$ 0
Buildings and improvements amounts related to variable interest entities ("VIEs")	13,279	0
Less accumulated depreciation amounts related to variable interest entities ("VIEs")	(256)	0
Real estate assets	19,439	0
Acquired real estate leases	305	305
Acquired real estate leases, accumulated amortization	166	0
Cash, cash equivalents and restricted cash (amounts related to variable interest entities ("VIEs")	2,445	0
Accounts payable and accrued expenses amounts related to variable interest entities ("VIEs")	$ 628	$ 0

XML

Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Revenues:
Total revenues	$ 36,903	$ 40,836	$ 110,936	$ 124,404
Expenses:
Real estate operating expenses	12,797	13,369	37,627	38,547
Real estate taxes and insurance	7,115	8,951	21,257	26,713
Depreciation and amortization	13,408	15,148	42,780	49,004
General and administrative	3,265	3,232	10,849	10,997
Interest	6,209	6,110	18,099	17,140
Total expenses	42,794	46,810	130,612	142,401
Loss on extinguishment of debt	(39)	(78)	(106)	(78)
Gain on consolidation of Sponsored REIT			394
Impairment and loan loss reserve		717		1,857
(Gain) loss on sale of properties and impairment of assets held for sale, net	(39,671)	24,077	(32,085)	24,077
Income (loss) before taxes	(45,601)	17,308	(51,473)	4,145
Tax expense	70	62	212	167
Net loss (loss)	$ (45,671)	$ 17,246	$ (51,685)	$ 3,978
Weighted average number of shares outstanding, basic	103,430	103,236	103,333	103,372
Weighted average number of shares outstanding, diluted	103,430	103,236	103,333	103,372
Net income (loss) per share, basic	$ (0.44)	$ 0.17	$ (0.50)	$ 0.04
Net income (loss) per share, diluted	$ (0.44)	$ 0.17	$ (0.50)	$ 0.04
Rental
Revenues:
Rental	$ 36,903	$ 40,366	$ 110,927	$ 122,994
Related party revenue: Management fees and interest income from loans
Revenues:
Revenue		466		1,393
Related party revenue: Other
Revenues:
Revenue		$ 4	$ 9	$ 17

XML

Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Consolidated Statements of Comprehensive Income (Loss)
Net income (loss)	$ (45,671)	$ 17,246	$ (51,685)	$ 3,978
Other comprehensive income (loss):
Unrealized gain on derivative financial instruments		2,315	177	9,504
Reclassification from accumulated other comprehensive income into interest expense	(1,063)		(3,118)
Total other comprehensive income (loss)	(1,063)	2,315	(2,941)	9,504
Comprehensive income (loss)	$ (46,734)	$ 19,561	$ (54,626)	$ 13,482

XML

Consolidated Statements of Stockholders' Equity - USD ($) $ in Thousands	Common Stock	Additional Paid-In Capital	Accumulated other comprehensive income (loss)	Distributions in excess of accumulated earnings	Total
Balance at Dec. 31, 2021	$ 10	$ 1,339,226	$ (5,239)	$ (550,794)	$ 783,203
Balance (in shares) at Dec. 31, 2021	103,999,000
Increase (Decrease) in Stockholders' Equity
Comprehensive income (loss)			5,044	(4,158)	886
Repurchased shares		(4,843)			$ (4,843)
Repurchased shares (in shares)	(847,000)				(846,739)
Distributions				(9,360)	$ (9,360)
Balance at Mar. 31, 2022	$ 10	1,334,383	(195)	(564,312)	769,886
Balance (in shares) at Mar. 31, 2022	103,152,000
Balance at Dec. 31, 2021	$ 10	1,339,226	(5,239)	(550,794)	783,203
Balance (in shares) at Dec. 31, 2021	103,999,000
Increase (Decrease) in Stockholders' Equity
Comprehensive income (loss)					13,482
Balance at Sep. 30, 2022	$ 10	1,334,776	4,266	(566,491)	772,561
Balance (in shares) at Sep. 30, 2022	103,236,000
Balance at Dec. 31, 2021	$ 10	1,339,226	(5,239)	(550,794)	783,203
Balance (in shares) at Dec. 31, 2021	103,999,000
Increase (Decrease) in Stockholders' Equity
Repurchased shares					$ (4,843)
Repurchased shares (in shares)					(846,739)
Balance at Dec. 31, 2022	$ 10	1,334,776	4,358	(570,408)	$ 768,736
Balance (in shares) at Dec. 31, 2022	103,236,000
Balance at Mar. 31, 2022	$ 10	1,334,383	(195)	(564,312)	769,886
Balance (in shares) at Mar. 31, 2022	103,152,000
Increase (Decrease) in Stockholders' Equity
Comprehensive income (loss)			2,146	(9,110)	(6,964)
Equity-based compensation		393			393
Equity-based compensation (in shares)	84,000
Distributions				(9,283)	(9,283)
Balance at Jun. 30, 2022	$ 10	1,334,776	1,951	(582,705)	754,032
Balance (in shares) at Jun. 30, 2022	103,236,000
Increase (Decrease) in Stockholders' Equity
Comprehensive income (loss)			2,315	17,246	19,561
Distributions				(1,032)	(1,032)
Balance at Sep. 30, 2022	$ 10	1,334,776	4,266	(566,491)	772,561
Balance (in shares) at Sep. 30, 2022	103,236,000
Balance at Dec. 31, 2022	$ 10	1,334,776	4,358	(570,408)	768,736
Balance (in shares) at Dec. 31, 2022	103,236,000
Increase (Decrease) in Stockholders' Equity
Comprehensive income (loss)			(814)	2,406	1,592
Distributions				(1,033)	(1,033)
Balance at Mar. 31, 2023	$ 10	1,334,776	3,544	(569,035)	769,295
Balance (in shares) at Mar. 31, 2023	103,236,000
Balance at Dec. 31, 2022	$ 10	1,334,776	4,358	(570,408)	768,736
Balance (in shares) at Dec. 31, 2022	103,236,000
Increase (Decrease) in Stockholders' Equity
Comprehensive income (loss)					(54,626)
Repurchased shares					(4,800)
Balance at Sep. 30, 2023	$ 10	1,335,091	1,417	(625,192)	711,326
Balance (in shares) at Sep. 30, 2023	103,430,000
Balance at Mar. 31, 2023	$ 10	1,334,776	3,544	(569,035)	769,295
Balance (in shares) at Mar. 31, 2023	103,236,000
Increase (Decrease) in Stockholders' Equity
Comprehensive income (loss)			(1,064)	(8,420)	(9,484)
Equity-based compensation		315			315
Equity-based compensation (in shares)	194,000
Distributions				(1,032)	(1,032)
Balance at Jun. 30, 2023	$ 10	1,335,091	2,480	(578,487)	759,094
Balance (in shares) at Jun. 30, 2023	103,430,000
Increase (Decrease) in Stockholders' Equity
Comprehensive income (loss)			(1,063)	(45,671)	(46,734)
Distributions				(1,034)	(1,034)
Balance at Sep. 30, 2023	$ 10	$ 1,335,091	$ 1,417	$ (625,192)	$ 711,326
Balance (in shares) at Sep. 30, 2023	103,430,000

XML

Consolidated Statements of Stockholders' Equity (Parenthetical) - $ / shares	3 Months Ended
	Sep. 30, 2023	Jun. 30, 2023	Mar. 31, 2023	Sep. 30, 2022	Jun. 30, 2022	Mar. 31, 2022
Consolidated Statements of Stockholders' Equity
Distributions common stock (in dollars per share)	$ 0.01	$ 0.01	$ 0.01	$ 0.01	$ 0.09	$ 0.09

XML

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022
Cash flows from operating activities:
Net income (loss)	$ (51,685)	$ 3,978
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization expense	44,705	50,472
Amortization of above and below market leases	(39)	(88)
Shares issued as compensation	315	394
Amortization of other comprehensive income into interest expense	(2,789)
Loss on extinguishment of debt	106	78
Gain on consolidation of Sponsored REIT	(394)
Impairment and loan loss reserve		1,857
(Gain) loss on sale of properties and impairment of assets held for sale, net	(32,085)	24,077
Changes in operating assets and liabilities:
Tenant rent receivables	(653)	645
Straight-line rents	427	(4,064)
Lease acquisition costs	(903)	(2,659)
Prepaid expenses and other assets	(644)	(1,670)
Accounts payable and accrued expenses	(2,516)	(6,388)
Accrued compensation	(465)	(1,545)
Tenant security deposits	(79)	(493)
Payment of deferred leasing commissions	(5,926)	(7,086)
Net cash provided by operating activities	11,545	9,354
Cash flows from investing activities:
Property improvements, fixtures and equipment	(26,024)	(38,035)
Consolidation of Sponsored REIT	3,048
Proceeds received from sales of properties	37,062	102,007
Net cash provided by investing activities	14,086	63,972
Cash flows from financing activities:
Distributions to stockholders	(3,099)	(52,956)
Proceeds received from termination of interest rate swap	4,206
Stock repurchases		(4,843)
Borrowings under bank note payable	67,000	80,000
Repayments of bank note payable	(35,000)	(15,000)
Repayment of term loan payable	(50,000)	(110,000)
Deferred financing costs	(2,327)	(2,561)
Net cash used in financing activities	(19,220)	(105,360)
Net increase (decrease) in cash, cash equivalents and restricted cash	6,411	(32,034)
Cash, cash equivalents and restricted cash, beginning of year	6,632	40,751
Cash, cash equivalents and restricted cash, end of period	13,043	8,717
Cash paid for:
Interest	16,704	13,692
Taxes	337	664
Non-cash investing activities:
Accrued costs for purchase of real estate assets	2,562	$ 7,466
Investment in related party mortgage loan receivable converted to real estate assets and acquired real estate in conjunction with variable interest entity consolidation	$ 20,000

XML

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

9 Months Ended

Sep. 30, 2023

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

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 the corporation that is the sole member of FSP Monument Circle LLC, which corporation was organized to operate as a real estate investment trust (“Monument Circle” or the “Sponsored REIT”).

As of September 30, 2023, the Company owned and operated a portfolio of real estate consisting of 19 operating properties, and the Sponsored REIT, which was consolidated effective January 1, 2023. The Company may pursue, on a selective basis, the sale of its properties in order to take advantage of the value creation and demand for its properties, for geographic, property specific reasons or for other general corporate purposes.

Properties

The following table summarizes the Company’s number of owned and consolidated properties and rentable square feet of real estate.

	As of September 30,
	2023	2022
Owned and Consolidated Properties:
Number of properties (1)	20	22
Rentable square feet	6,206,460	6,433,954

(1) Includes three properties that were classified as assets held for sale as of September 30, 2023.

Basis of Presentation

The unaudited consolidated financial statements of the Company include all of the accounts of the Company and its majority-owned and controlled 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, 2022, 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 nine months ended September 30, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023 or for any other period.

Management is in discussions with lenders to extend or refinance the Company’s debt, a portion of which matures within one year after the date that these financial statements are issued as more fully described in Note 3 below. Management has considered whether there is substantial doubt about the Company's ability to continue as a going concern within one year of the issuance date of these interim financial statements due to the fact of the uncertainty regarding the maturities of this debt as set forth in Accounting Standards Codification (ASC) 205-40, “Presentation of Financial Statements - Going Concern.” As described in Note 1 below, the Company has concluded that management’s plans to dispose of assets and extend and/or

refinance the Company’s debt are probable of being achieved and alleviate substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern and do not include any adjustments that might result from an adverse outcome of this uncertainty.

Financial Instruments

As disclosed in Note 4, the Company’s derivatives were recorded at fair value using Level 2 inputs prior to their termination on February 8, 2023. 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.

	September 30,		September 30,
(in thousands)	2023		2022
Cash and cash equivalents (1)	$	13,043	$	6,367
Restricted cash		—		2,350
Total cash, cash equivalents and restricted cash	$	13,043	$	8,717

(1) Includes $2,445 at September 30, 2023, pertaining to Monument Circle, which the Company is unable to utilize for its own operational purposes.

Restricted cash consists of escrows arising from property sales. Cash held in escrow is paid based on the terms of the closing agreements for the sale.

Variable Interest Entities (VIEs)

The Company determines whether an entity is a VIE and, if so, whether it should be consolidated by utilizing judgments and estimates that are inherently subjective. The determination of whether an entity in which the Company holds a, direct or indirect, variable interest is a VIE is based on several factors, including whether the entity’s total equity investment at risk upon inception is sufficient to finance the entity’s activities without additional subordinated financial support. The Company makes judgments regarding the sufficiency of the equity at risk based first on a qualitative analysis, and then a quantitative analysis, if necessary.

The Company analyzes any investments in VIEs to determine if the Company is the primary beneficiary. In evaluating whether the Company is the primary beneficiary, the Company evaluates its direct and indirect economic interests in the entity. Determining which reporting entity, if any, is the primary beneficiary of a VIE is primarily a qualitative approach focused on identifying which reporting entity has both (1) the power to direct the activities of a VIE that most significantly impact such entity’s economic performance and (2) the obligation to absorb losses or the right to receive benefits from such entity that could potentially be significant to such entity. Performance of that analysis requires the exercise of judgment.

The Company considers a variety of factors in identifying the entity that holds the power to direct matters that most significantly impact the VIE’s economic performance including, but not limited to, the ability to direct a proposed sale of the property or merger of the company. In addition, the Company considers the rights of other investors to participate in those decisions, to replace the manager and to amend the corporate charter. The Company determines whether it is the primary beneficiary of a VIE at the time it becomes involved with a VIE and considers that conclusion upon a reconsideration event.

As of January 1, 2023, the Company’s relationship with the Sponsored REIT was considered a VIE and the Company became the primary beneficiary. Upon this reconsideration event, the entity is included within the Company’s consolidated financial statements and all intercompany accounts and transactions have been eliminated in consolidation. A gain on

consolidation of approximately $0.4 million was recognized in the three months ended March 31, 2023. Cash and cash equivalents of $3 million held by Monument Circle was included in the Company’s cash and cash equivalents upon consolidation and is reflected as “Consolidation of Sponsored REIT” in the consolidated statement of cash flows. The cash and cash equivalents held by Monument Circle are unable to be utilized for the Company’s operational purposes. The creditors of Monument Circle’s trade payables do not have any recourse against the Company.

The consolidation value of Monument Circle was allocated to real estate investments and leases, including lease origination costs. Lease origination costs represent the value associated with acquiring an in-place lease (i.e. the market cost to execute a similar lease, including leasing commission, legal, vacancy, and other related costs). The value assigned to building approximates the replacement cost; the value assigned to land approximates its appraised value; and the value assigned to leases approximate their fair value. Other assets and liabilities are recorded at their historical costs, which approximates fair value.

The Company assessed the fair value of the acquired real estate leases based on estimated cash flow projections that utilize appropriate discount rates and available market information. Such inputs are Level 3 in the fair value hierarchy.

The following table summarizes the estimated fair value of the assets acquired at the date of consolidation, January 1, 2023:

(in thousands)
Real estate assets	$	19,695
Value of acquired real estate leases		305
Total	$	20,000

The following is quantitative information about significant unobservable inputs in the Company’s Level 3 measurement of the assets acquired in the consolidation of Monument Circle and were measured at fair value on a nonrecurring basis at January 1, 2023:

	Fair Value (1) at			Significant	Range				Weighted
Description	January 1, 2023		Valuation Technique	Unobservable Input	Min		Max		Average (2)
		(in thousands)
Monument Circle Consolidation	$	20,000	Discounted Cash Flows	Exit Cap Rate	7.50	%	7.50	%	7.50	%
				Discount Rate	9.50	%	9.50	%	9.50	%
(1) Classified within Level 3 of the fair value hierarchy.
(2) Unobservable inputs were weighted based on the fair value of the related instrument.

Prior to January 1, 2023, the Company’s relationship with the Sponsored REIT was considered a VIE in which the Company was not the primary beneficiary. The Company’s maximum exposure to losses associated with this VIE was limited to the principal amount outstanding under the loan from the Company to the Sponsored REIT secured by a mortgage on real estate owned by the Sponsored REIT (the “Sponsored REIT Loan”) net of the allowance for credit loss, the related accrued interest receivable and an exit fee receivable, which were in aggregate approximately $22.1 million at December 31, 2022. The accrued interest and exit fee receivables are included in prepaid expenses and other assets in the consolidated balance sheet and were approximately $2.3 million at December 31, 2022. The relationships and investments related to the Sponsored REIT are summarized in Note 2.

Liquidity and Management’s Plan

When preparing financial statements for each annual and interim reporting period, management evaluates whether there are conditions or events that, when considered in the aggregate, raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued as set forth in Accounting Standards Codification (ASC) 205-40, “Presentation of Financial Statements - Going Concern.” In making its assessment, management considered the Company’s financial condition and liquidity sources.

As of September 30, 2023 and November 7, 2023, the Company had aggregate outstanding indebtedness under two unsecured loans, the BofA Revolver and the BMO Term Loan (as defined in Note 3), totaling approximately $195 million and $205 million, respectively, maturing within 12 months of the date of issuance of the financial statements, and expects to have sufficient financial resources available to satisfy the obligations when due. Subsequent to September 30, 2023, on October 26, 2023, the Company closed on the disposition of one property resulting in net proceeds of approximately $46.7 million. As of the date of these interim financial statements, the Company is holding such net proceeds in cash and cash equivalents. As of September 30, 2023, the Company had entered into agreements to effect the sale of two properties held for sale that are scheduled to close during the fourth quarter of 2023, which two dispositions would result in aggregate net proceeds of approximately $96.5 million. As of November 7, 2023, the Company had cash and cash equivalents of approximately $73.5 million, which when combined with the aggregate net proceeds of approximately $96.5 million from the above-described two dispositions scheduled to close during the fourth quarter of 2023, will be sufficient to repay approximately $170.0 million of the approximately $205.0 million of indebtedness maturing on October 1, 2024.

The Company is also actively working on the potential disposition of additional properties that are not classified as assets held for sale as of September 30, 2023. As of September 30, 2023, the Company had entered into an agreement to effect the sale of a property that is scheduled to close during the fourth quarter of 2023, which would result in net proceeds of approximately $43.6 million. The Company intends to use net proceeds from dispositions primarily for the repayment of debt.

Management is also actively engaged in discussions with the Company’s lenders to extend and/or refinance the BofA Revolver and the BMO Term Loan prior to maturity. The Company believes that it will be able to extend and/or refinance the BofA Revolver and the BMO Term Loan prior to their scheduled October 1, 2024 maturity dates. However, there can be no assurance that the Company will be able to obtain extensions and/or refinancings in a timely manner, or on acceptable terms, if at all, or generate the cash necessary to pay off the BofA Revolver and the BMO Term Loan through asset sales prior to their October 1, 2024 maturity dates. The failure to obtain extensions and/or refinancings, or otherwise to repay the BofA Revolver and the BMO Term Loan, when due, could lead to events of default, which would have a material adverse effect on the Company’s financial condition.

The Company has concluded that management’s plans to dispose of assets and extend and/or refinance the BofA Revolver and the BMO Term Loan are probable of being achieved and alleviate substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern and do not include any adjustments that might result from an adverse outcome of this uncertainty.

As of September 30, 2023, the Company also has the Series A Notes (as defined in Note 3) in the aggregate principal amount of $116 million outstanding that are scheduled to mature on December 20, 2024, which is beyond 12 months of the date of issuance of the financial statements in this Quarterly Report on Form 10-Q and therefore have been excluded from management’s associated going concern assessment and analysis.

Recent Accounting Standards

In October 2023, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2023-06, Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative (“ASU 2023-06”). ASU 2023-06 adds interim and annual disclosure requirements to GAAP at the request of the Securities and Exchange Commission. The guidance in ASU 2023-06 is required to be applied prospectively and the GAAP requirements will be effective when the removal of the related SEC disclosure requirements is effective. If the SEC does not act to remove its related requirement by June 30, 2027, any related FASB amendments will be removed from the Accounting Standards Codification and will not be effective. The Company does not anticipate that the adoption of ASU 2023-06 will have a material impact on the 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”). ASU 2020-04 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 does not anticipate that the adoption of ASU 2020-04 will have a material impact on the consolidated financial statements.

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Related Party Transactions and Investments in Non-Consolidated Entities

9 Months Ended

Sep. 30, 2023

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 December 31, 2022, the Company held a non-controlling common stock interest in the Sponsored REIT.

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 $0 and $26,000 for the nine months ended September 30, 2023 and 2022, respectively.

Prior to the consolidation of Monument Circle on January 1, 2023, the Company held the Sponsored REIT Loan, which was reported in the balance sheet as a related party mortgage loan receivable. The Company reviewed the need for an allowance under the current expected credit loss model for the Sponsored REIT Loan at each reporting period. The measurement of expected credit losses was based upon historical experiences, current conditions, and reasonable and supportable forecasts that affected the collectability of the reported amount. The Company elected to apply the practical expedient for financial assets secured by collateral in instances where the borrower was experiencing financial difficulty and repayment of the Sponsored REIT Loan was expected to be provided substantially through operation or sale of the collateral. The Company used the fair value of the collateral at the reporting date, and an adjustment to the allowance for expected credit losses was recorded when the amortized cost basis of the financial asset exceeded the fair value of the collateral, less costs to sell.

The Company regularly evaluated 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 fair value, operating results and existing cash balances were considered and used to assess whether cash flows from operations were sufficient to cover the current and future operating and debt service requirements. The Company also evaluated the borrower’s competency in managing and operating the secured property and considered the overall economic environment, real estate sector and geographic sub-market in which the secured property is located. The Company applied normal loan review and underwriting procedures (as may be implemented or modified from time to time) in making that judgment. The outstanding Sponsored REIT Loan is secured by a mortgage on the underlying property and the balances within the borrower’s cash accounts.

The Company recognized interest income and fees from the Sponsored REIT Loan of approximately $0 and $1,367,000 for the nine months ended September 30, 2023 and 2022, respectively.

On October 29, 2021, the Company agreed to amend and restate the then existing Sponsored REIT Loan to extend the maturity date from December 6, 2022 to June 30, 2023 and to advance an additional $3.0 million tranche of indebtedness to FSP Monument Circle LLC with the same June 30, 2023 maturity date, effectively increasing the aggregate principal amount of the Sponsored REIT Loan from $21 million to $24 million. In addition, the Company agreed to defer all principal and interest payments due under the Sponsored REIT Loan until the maturity date. As part of its consideration for agreeing to amend and restate the Sponsored REIT Loan, the Company obtained from the stockholders of the parent of Monument Circle the right to vote their shares in favor of any sale of the property owned by Monument Circle any time on or after January 1, 2023. There were no commitments to lend additional funds to the Sponsored REIT. On June 26, 2023, the Sponsored REIT Loan maturity was extended to September 30, 2023. On September 26, 2023, the Sponsored REIT Loan maturity was extended to September 30, 2024.

The Company recorded a $4.2 million increase in its provision for credit losses during the year ended December 31, 2022 which was primarily due to the deterioration within the real estate market, changes to key assumptions applied within our financial model to reflect these changes, such as the exit capitalization and discount rates, and an increase in the accrued interest receivable balance. The Company recorded a $4.2 million decrease in its provision for credit losses during the three months ended March 31, 2023. The change in the allowance for credit losses during the three months ended March 31, 2023

was due to the consolidation of Monument Circle. There were no adjustments during the subsequent months through September 30, 2023. The following table presents a roll-forward of the Company’s allowance for credit losses.

	For the Nine Months Ended September 30,
(In thousands)		2023		2022
Beginning allowance for credit losses	$	(4,237)	$	—
Additional increases to the allowance for credit losses		—		(1,857)
Reductions to the allowance for credit losses		4,237		—
Ending allowance for credit losses	$	—	$	(1,857)

The following is quantitative information about significant unobservable inputs in the Company’s Level 3 measurement of the collateral of the Sponsored REIT Loan measured at fair value on a nonrecurring basis at December 31, 2022:

	Fair Value (1) at			Significant	Range				Weighted
Description	December 31, 2022		Valuation Technique	Unobservable Input	Min		Max		Average (2)
		(in thousands)
Sponsored REIT Loan	$	19,763	Discounted Cash Flows	Exit Cap Rate	7.50	%	7.50	%	7.50	%
				Discount Rate	9.50	%	9.50	%	9.50	%
(1) Classified within Level 3 of the fair value hierarchy.
(2) Unobservable inputs were weighted based on the fair value of the related instrument.

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Bank Note Payable, Term Loans Payable and Senior Notes

9 Months Ended

Sep. 30, 2023

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

BMO Term Loan

On February 10, 2023, the Company entered into a First Amendment to the Second Amended and Restated Credit Agreement with the lending institutions party thereto and Bank of Montreal, as administrative agent (the “BMO First Amendment”). The BMO First Amendment amended the Second Amended and Restated Credit Agreement, dated September 27, 2018, among the Company and the lending institutions party thereto (as amended by the BMO First Amendment, the “BMO Credit Agreement”) to, among other things, extend the maturity date from January 31, 2024 to October 1, 2024 and change the interest rate from a number of basis points over LIBOR depending on the Company’s credit rating to 300 basis points over SOFR (Secured Overnight Financing Rate). The BMO Credit Agreement initially provided for an unsecured term loan borrowing in the amount of $220 million (the “BMO Term Loan”). In connection with the BMO First Amendment, the Company repaid a $40 million portion of the remaining balance of the BMO Term Loan, so that $125 million principal amount remained outstanding. On August 10, 2023, the Company repaid an additional $10 million of this loan, so that $115 million principal amount remains outstanding under the BMO Term Loan as of September 30, 2023. On or before April 1, 2024, the Company is required to repay an additional $15 million of the BMO Term Loan. The remaining balance of the BMO Term Loan matures on October 1, 2024.

Effective February 10, 2023 upon entering into the BMO First Amendment, the BMO Term Loan bears interest at either (i) 300 basis points over one, three or six month term SOFR, plus a corresponding adjustment of 0.11448%, 0.26161% or 0.42826%, respectively, or (ii) 200 basis points over the base rate. Prior to February 10, 2023, the BMO Term Loan bore interest at either (i) a number of basis points over LIBOR depending on the Company’s credit rating (165 basis points over LIBOR at December 31, 2022) or (ii) a number of basis points over the base rate depending on the Company’s credit rating (65 basis points over the base rate at December 31, 2022).

As of September 30, 2023, the interest rate on the BMO Term Loan was 8.43% per annum. The weighted average variable interest rate on all amounts outstanding under the BMO Term Loan from February 8, 2023, which is when the Company terminated its outstanding interest rate swaps applicable to the BMO Term Loan as described below, through September 30, 2023 was approximately 7.98% per annum.

Although the interest rate on the BMO Term Loan is variable under the BMO Credit Agreement, the Company fixed the base LIBOR interest rate that previously applied to the BMO Term Loan by entering into interest rate swap transactions. 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 both December 31, 2022 and February 8, 2023, the effective interest rate on the BMO Term Loan was 4.04% per annum. On February 8, 2023, the Company terminated all outstanding interest rate swaps applicable to the BMO Term Loan and, on February 10, 2023, the Company received an aggregate of approximately $4.3 million as a result of such terminations, of which approximately $0.1 million related to interest receivable.

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 and repurchases and redemptions of the Company’s common stock; going concern qualifications to the Company’s financial statements; and the requirement to have subsidiaries provide a guaranty in the event that they incur recourse indebtedness and transactions with affiliates. In addition, the BMO Credit Agreement also restricts the Company’s ability to make quarterly dividend distributions that exceed $0.01 per share of the Company’s common stock; provided, however, that notwithstanding such restriction, the Company is permitted to make dividend distributions based on the Company’s good faith estimate of projected or estimated taxable income or otherwise as necessary to retain the Company’s status as a real estate investment trust, to meet the distribution requirements of Section 857 of the Internal Revenue Code or to eliminate any income or excise taxes to which the Company would otherwise be subject. 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 maximum secured recourse 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 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 September 30, 2023.

BofA Revolver

On February 10, 2023, the Company entered into a First Amendment to Credit Agreement with Bank of America, N.A., as administrative agent, a letter of credit issuer and a lender (“BofA”), and the other lending institutions party thereto (the “BofA First Amendment”), for a revolving line of credit for borrowings, at the Company’s election, of up to $150 million (the “BofA Revolver”). The BofA First Amendment amended the Credit Agreement, dated January 10, 2022, among the Company and the lending institutions party thereto (as amended by the BofA First Amendment, the “BofA Credit Agreement”) to, among other things, extend the maturity date from January 12, 2024 to October 1, 2024, reduce availability for borrowings, at the Company’s election, from up to $237.5 million to up to $150 million, and to change the interest rate from a number of basis points over SOFR depending on the Company’s credit rating to 300 basis points over SOFR. Borrowings made under the BofA Revolver may be revolving loans or letters of credit, the combined sum of which may not exceed $150 million outstanding at any time. Effective October 1, 2023, availability under the BofA Revolver will be reduced to $125 million and, effective April 1, 2024, availability under the BofA Revolver will be further reduced to $100 million. As of September 30, 2023 and November 7, 2023, there were borrowings of $80 million and $90 million drawn and outstanding under the BofA Revolver, respectively, which borrowings include $40 million that the Company borrowed on February 10, 2023 to repay a portion of the BMO Term Loan. Borrowings made pursuant to the BofA Revolver may be borrowed, repaid and reborrowed from time to time until the maturity date on October 1, 2024.

Effective February 10, 2023 upon entering into the BofA First Amendment, the BofA Revolver bears interest at 300 basis points over either (i) the daily simple SOFR, plus an adjustment of 0.11448%, or (ii) one, three or six month term SOFR, plus

a corresponding adjustment of 0.11448%, 0.26161% or 0.42826%, respectively. In addition, under certain circumstances, such as if SOFR was not able to be determined, the BofA Revolver will instead bear interest at 200 basis points over the base rate. Prior to February 10, 2023, borrowings under the BofA Revolver bore interest at a margin over either (i) the daily simple SOFR, plus an adjustment of 0.11448%, or (ii) one, three or six month term SOFR, plus a corresponding adjustment of 0.11448%, 0.26161% or 0.42826%, respectively. Prior to February 10, 2023, the margin over SOFR or, if applicable, the base rate, varied depending on the Company’s leverage ratio (1.750% over SOFR and 0.750% over the base rate at December 31, 2022). Effective February 10, 2023 upon entering into the BofA First Amendment, the Company is also obligated to pay an annual facility fee on the unused portion of the BofA Revolver at the rate of 0.350% per annum and, if applicable, letter of credit fees. Prior to February 10, 2023, the Company was also obligated to pay an annual facility fee and, if applicable, letter of credit fees in amounts that were also based on the Company’s leverage ratio. The previous facility fee was assessed against the aggregate amount of lender commitments regardless of usage (0.350% at December 31, 2022).

As of September 30, 2023, the interest rate on the BofA Revolver was 8.43% per annum. The weighted average variable interest rate on all amounts outstanding under the BofA Revolver through September 30, 2023 was approximately 7.80% per annum.

The BofA 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, use of proceeds, the amount of cash and cash equivalents that the Company can have on its balance sheet after giving effect to an advance under the BofA Revolver, repurchases and redemptions of the Company’s common stock, going concern qualifications to the Company’s financial statements, and the requirement to have subsidiaries provide a guaranty in the event that they incur recourse indebtedness and transactions with affiliates. The BofA 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 maximum secured recourse leverage ratio, a minimum fixed charge coverage ratio, a maximum unencumbered leverage ratio and a minimum unsecured interest coverage ratio. The BofA Credit Agreement also restricts the Company’s ability to make quarterly dividend distributions that exceed $0.01 per share of the Company’s common stock; provided, however, that notwithstanding such restriction, the Company is permitted to make dividend distributions based on the Company’s good faith estimate of projected or estimated taxable income or otherwise as necessary to retain the Company’s status as a real estate investment trust, to meet the distribution requirements of Section 857 of the Internal Revenue Code or to eliminate any income or excise taxes to which the Company would otherwise be subject. The Company was in compliance with the BofA Revolver financial covenants as of September 30, 2023.

The BofA Credit Agreement provides for customary events of default with corresponding grace periods, including failure to pay any principal or interest when due, failure to comply with the provisions of the BofA Credit Agreement, certain cross defaults and a change in control of the Company (as defined in the BofA Credit Agreement). In the event of a default by the Company, BofA, in its capacity as administrative agent, may, and at the request of the requisite number of lenders shall, declare all obligations under the BofA Credit Agreement immediately due and payable and enforce any and all rights of the lenders or BofA under the BofA 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 may use the net proceeds of the BofA Revolver for permitted investments, working capital and other general business purposes, including for building improvements, tenant improvements and leasing commissions, in each case to the extent permitted under the BofA Credit Agreement.

Former BofA Credit Facility

On July 21, 2016, the Company entered into a First Amendment (the “BofA First Amendment”), and on October 18, 2017, the Company entered into a Second Amendment (the “BofA Second Amendment”), to the Second Amended and Restated Credit Agreement dated October 29, 2014 among the Company, the lending institutions party thereto and BofA, as administrative agent, L/C Issuer and Swing Line Lender (as amended by the BofA First Amendment and the BofA Second Amendment, the “Amended Former BofA Credit Facility”) that continued an existing unsecured revolving line of credit (the “Former BofA Revolver”) and an existing term loan (the “Former BofA Term Loan”). Effective simultaneously with the closing of the Amended Former BofA Credit Facility on January 10, 2022, the Company delivered a notice to BofA

terminating the aggregate lender commitments under the Former BofA Revolver in their entirety. There were no amounts drawn on the Former BofA Revolver as of December 31, 2021 and January 10, 2022.

Former BofA Revolver Highlights

● The Former BofA Revolver was terminated at the Company’s election effective January 10, 2022.

● As of December 31, 2021 and January 10, 2022, there were no borrowings under the Former BofA Revolver.

The Former BofA Revolver bore interest at either (i) a margin over LIBOR depending on the Company’s credit rating (1.550% over LIBOR at December 31, 2021) or (ii) a margin over the base rate depending on the Company’s credit rating (0.550% over the base rate at December 31, 2021). The Former BofA Credit Facility also obligated the Company to pay an annual facility fee in an amount that is based on the Company’s credit rating. The facility fee was assessed against the total amount of the Former BofA Revolver, or $600 million (0.30% at December 31, 2021). The amount of any applicable facility fee, and the margin over LIBOR rate or base rate was determined based on the Company’s credit rating pursuant to a pricing grid.

For purposes of the Former BofA Credit Facility, base rate meant, for any day, a fluctuating rate per annum equal to the highest of: (i) the bank’s prime rate for such day, (ii) the Federal Funds Rate for such day, plus 0.50%, and (iii) the one month LIBOR based rate for such day plus 1.00%. As of December 31, 2021, the Company’s credit rating from Moody’s Investors Service was Ba1.

During 2022 and as of December 31, 2022, there were no borrowings under the Former BofA Revolver.

Former BofA Term Loan Highlights

● The Former BofA Term Loan was repaid in its entirety on September 6, 2022.

● The original principal amount of the Former BofA Term Loan was $400 million. On September 30, 2021, the Company repaid a $90 million portion and on October 25, 2021, the Company repaid a $200 million portion of the Former BofA Term Loan and incurred a loss on extinguishment of debt of $0.7 million related to unamortized deferred financing costs. On September 6, 2022, the Company prepaid the remaining $110 million balance of the Former BofA Term Loan in full and incurred a loss of extinguishment of debt of $0.1 million related to unamortized deferred financing costs.

The Former BofA Term Loan bore interest at either (i) a margin over LIBOR depending on the Company’s credit rating (1.75% over LIBOR at the date of repayment on September 6, 2022) or (ii) a margin over the base rate depending on the Company’s credit rating (0.750% over the base rate at the date of repayment on September 6, 2022). The margin over LIBOR rate or base rate was determined based on the Company’s credit rating pursuant to a pricing grid.

The interest rate on the Former BofA Term Loan was variable through the date of repayment on September 6, 2022. Previously the Company had fixed the base LIBOR interest rate on the Former BofA 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 Former BofA Term Loan at 1.12% per annum for the period beginning on September 27, 2017 and ended on September 27, 2021. The weighted average variable interest rate on all amounts outstanding under the Former BofA Term Loan through the date of repayment on September 6, 2022 was approximately 2.65% per annum.

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) Series A Senior Notes due December 20, 2024 in an aggregate principal amount of $116 million (the “Series A Notes”) and (ii) 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 Former BofA Revolver.

The Senior Notes bear interest depending on the Company’s credit rating. As of September 30, 2023, the Series A Notes bear interest at 4.49% per annum and the Series B Notes bear interest at 4.76% per annum.

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 BofA Credit Agreement and the BMO 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 September 30, 2023.

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Financial Instruments: Derivatives and Hedging

9 Months Ended

Sep. 30, 2023

Financial Instruments: Derivatives and Hedging

Financial Instruments: Derivatives and Hedging

4.  Financial Instruments: Derivatives and Hedging

On February 20, 2019, the Company entered into interest rate swap transactions that 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 2019 BMO Interest Rate Swap is described in Note 3. On February 8, 2023, the Company terminated the 2019 BMO Interest Rate Swap applicable to the BMO Term Loan and, on February 10, 2023, the Company received an aggregate of approximately $4.3 million as a result of such terminations, of which approximately $0.1 million related to interest receivable. As of September 30, 2023, there were no derivative instruments.

The 2019 BMO Interest Rate Swap qualified as a cash flow hedge and has 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 instrument at December 31, 2022. The notional value is an indication of the extent of the Company’s involvement in this instrument at that time, but does not represent exposure to credit, interest rate or market risks.

	Notional		Strike		Effective	Expiration	Fair Value (1) at
(in thousands)	Value		Rate		Date	Date	September 30, 2023		December 31, 2022
2019 BMO Interest Rate Swap	$	165,000	2.39	%	Aug-20	Jan-24	$	—	$	4,358
(1) Classified within Level 2 of the fair value hierarchy.

The 2019 BMO Interest Rate Swap was reported as an asset with a fair value of approximately $4.4 million at December 31, 2022. The balance is included in other assets: derivative asset in the consolidated balance sheet at December 31, 2022.

The gain (loss) on the Company’s 2019 BMO Interest Rate Swap was recorded in other comprehensive income (loss) (OCI), and the accompanying consolidated statements of operations as a component of interest expense for the nine months ended September 30, 2023 and 2022, was as follows:

(in thousands)	Nine Months Ended September 30,
Interest Rate Swaps in Cash Flow Hedging Relationships:	2023		2022
Amounts of gain recognized in OCI	$	177	$	7,835
Amounts of previously recorded gain (loss) reclassified from OCI into Interest Expense	$	3,118	$	(1,669)
Total amount of Interest Expense presented in the consolidated statements of operations	$	18,099	$	17,140

Over time, the realized gains in accumulated other comprehensive income will be reclassified into earnings as a decrease to interest expense in the same periods in which the hedged interest payments would affect earnings. The Company estimates that approximately $1.4 million of the current balance held in accumulated other comprehensive income will be reclassified into earnings within the next 12 months.

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

The BMO Term Loan hedging transaction used derivative instruments that involved certain additional risks such as counterparty credit risk, the enforceability of hedging contracts and the risk that unanticipated and significant changes in interest rates would cause a significant loss of basis in the contract. The Company required its derivatives contracts to be with counterparties that have investment grade ratings. As a result, the Company did not anticipate that any counterparty would fail to meet its obligations. However, there was no assurance that the Company would be able to adequately protect against the foregoing risks or that it would ultimately realize an economic benefit that exceeded 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 sheet.

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

9 Months Ended

Sep. 30, 2023

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 September 30, 2023 and 2022.

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Stockholders' Equity

9 Months Ended

Sep. 30, 2023

Stockholders' Equity

Stockholders' Equity

6.  Stockholders’ Equity

As of September 30, 2023, the Company had 103,430,353 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 2023	$	0.01	$	1,033
Second quarter of 2023	$	0.01	$	1,032
Third quarter of 2023	$	0.01	$	1,034
2022:
Special dividend declared in December 2021 and paid January 2022	$	0.32	$	33,280
First quarter of 2022	$	0.09	$	9,360
Second quarter of 2022	$	0.09	$	9,284
Third quarter of 2022	$	0.01	$	1,032

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.

On each of May 17, 2022 and May 18, 2023, the Company granted shares under the Plan to non-employee directors with the compensation cost related to such grants indicated in the table below, which was recognized during the year ended December 31, 2022 and the nine months ended September 30, 2023, respectively, included in general and administrative expenses for the respective period. Such shares were fully vested on the date of issuance.

	Shares Available		Compensation
	for Grant		Cost
Balance December 31, 2021		1,780,820		1,012,500
Shares granted 2022		(84,133)		393,750
Balance December 31, 2022		1,696,687	$	1,406,250
Shares granted 2023		(194,439)		314,991
Balance September 30, 2023		1,502,248	$	1,721,241

Repurchase of Common Stock

On June 23, 2021, the Board of Directors of the Company authorized the repurchase of up to $50 million of the Company’s common stock from time to time in the open market, privately negotiated transactions or other manners as permitted by federal securities laws. The repurchase authorization may be suspended or discontinued at any time. The Company repurchased 846,739 shares of common stock during the first quarter of 2022 at an aggregate cost of approximately $4.8 million at an average cost of approximately $5.72 per share, inclusive of brokerage commissions. The Company did not repurchase any shares of common stock during the remainder of 2022 or the first quarter of 2023. The excess of the purchase price over the par value of the shares repurchased is applied to reduce additional paid-in capital. On February 10, 2023, the Company announced it had discontinued the previous repurchase authorization made on June 23, 2021.

A summary of the repurchase of common stock by the Company is shown in the following table:

(Cost in thousands)	Shares Repurchased	Cost
Balance, December 31, 2021	4,413,741	$	37,019
Repurchase of shares	846,739		4,843
Balance, December 31, 2022	5,260,480	$	41,862

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Income Taxes

9 Months Ended

Sep. 30, 2023

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 $4.9 million and $4.8 million as of December 31, 2022 and December 31, 2021, 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 2019 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 Company’s prior 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 $1.7 million and $1.7 million as of September 30, 2023 and December 31, 2022, respectively.

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 $212,000 and $167,000 for the nine months ended September 30, 2023 and 2022, respectively.

The income tax expense reflected in the consolidated statements of operations relates primarily to a franchise tax on the Company’s Texas properties.

	For the Nine Months Ended September 30,
(Dollars in thousands)	2023		2022
Revised Texas Franchise Tax	$	212	$	167
Other Taxes		—		—
Tax expense	$	212	$	167

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

9 Months Ended

Sep. 30, 2023

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.

For the nine months ended September 30, 2023 and 2022, the Company recognized the following amounts of income relating to lease payments:

Income relating to lease payments:
	Nine Months Ended
(in thousands)	September 30, 2023		September 30, 2022
Income from leases (1)	$	111,316	$	118,843
	$	111,316	$	118,843
(1) Includes amounts recognized from variable lease payments of $32,275 and $37,050 for the nine months ended September 30, 2023 and 2022, respectively.

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Disposition of Properties

9 Months Ended

Sep. 30, 2023

Dispositions of properties

Dispositions of properties

9. Disposition of Properties and Asset Held for Sale

In 2021, the Company determined that further debt reduction would provide greater financial flexibility and potentially increase shareholder value. Accordingly, the Company adopted a strategy to dispose of certain properties where it believes valuation potential has been reached.

In 2022, the Company sold two office properties located in Broomfield, Colorado on August 31, 2022 for an aggregate sales price of $102.5 million, at a gain of approximately $24.1 million. The Company sold an office property located in Evanston,

Illinois on December 28, 2022 for a sales price of $27.8 million, at a gain of approximately $3.9 million. The Company used the proceeds of the dispositions principally to repay outstanding indebtedness.

In 2023, the Company sold one office property located in Elk Grove, Illinois on March 10, 2023, for a sales price of $29.1 million, at a gain of approximately $8.4 million. The Company used the proceeds of the disposition principally to repay a portion of outstanding indebtedness. The Company sold one office property located in Charlotte, North Carolina on August 9, 2023 for a sales price of $9.2 million, at a loss of $0.8 million. During the three months ended September 30, 2023, the Company recorded a gain on sale of $53,000 as a result of conveying approximately 7,826 square feet of land at our Addison, Texas property to the Town of Addison as part of a road revitalization project.

During the three months ended September 30, 2023, the Company entered into an agreement to sell a property in Miami, Florida for a gross sales price of approximately $68.0 million at an expected loss of $19.2 million and an agreement to sell a property in Atlanta, Georgia for a gross sales price of approximately $40.0 million at an expected loss of $20.5 million.

The Company reclassified $96.4 million of its office properties in Miami, Florida and Atlanta, Georgia as assets held for sale as of September 30, 2023, which is comprised of $122.2 million of real estate assets, net of accumulated depreciation, $5.5 million of straight-line rents receivable, and $8.4 million of deferred leasing commissions, net of accumulated amortization. The Company recorded these properties at the fair value less cost to sell, which was less than the carrying value and resulted in an impairment of $39.7 million in the three months ended September 30, 2023. The reclassification is a non-cash investing activity on the statement of cash flows. The Company estimated the fair value of these properties, less estimated costs to sell, using the offers to purchase the properties made by third parties (Level 3 inputs, as there is no active market).

During the three months ended September 30, 2023, the Company entered into an agreement to sell a property in Plano, Texas for a gross sales price of approximately $48.0 million at an expected gain of $10.6 million. The Company reclassified $36.2 million of this office property as an asset held for sale as of September 30, 2023, which is comprised of $32.6 million of real estate assets, net of accumulated depreciation, $1.4 million of straight-line rents receivable, $1.7 million of deferred leasing commissions, net of accumulated amortization and $0.5 million of acquired real estate leases, net of accumulated amortization. The reclassification is a non-cash investing activity on the statement of cash flows.

The Company reports the results of operations of its properties in its consolidated statements of operations, which includes rental income, rental operating expenses, real estate taxes and insurance and depreciation and amortization.

The operating results for the properties that the Company disposed of or classified as assets held for sale are summarized below:

	Three months ended September 30,				Nine months ended September 30,
(in thousands)	2023		2022		2023		2022
Rental revenue	$	5,354	$	8,592	$	16,062	$	27,646
Rental operating expenses		(1,862)		(2,809)		(5,277)		(8,669)
Real estate taxes and insurance		(720)		(2,416)		(2,264)		(7,287)
Depreciation and amortization		(1,034)		(3,157)		(5,372)		(10,246)
Income from dispositions and assets held for sale	$	1,738	$	210	$	3,149	$	1,444

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Subsequent Events

9 Months Ended

Sep. 30, 2023

Subsequent Events

Subsequent Events

10.  Subsequent Events

On October 6, 2023, the Board of Directors of the Company declared a cash distribution of $0.01 per share of common stock payable on November 9, 2023 to stockholders of record on October 20, 2023.

On October 26, 2023, the Company sold an office building located in Plano, Texas, for a sales price of $48.0 million at a gain of approximately $10.6 million.

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

9 Months Ended

Sep. 30, 2023

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

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 and controlled 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, 2022, 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 nine months ended September 30, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023 or for any other period.

Management is in discussions with lenders to extend or refinance the Company’s debt, a portion of which matures within one year after the date that these financial statements are issued as more fully described in Note 3 below. Management has considered whether there is substantial doubt about the Company's ability to continue as a going concern within one year of the issuance date of these interim financial statements due to the fact of the uncertainty regarding the maturities of this debt as set forth in Accounting Standards Codification (ASC) 205-40, “Presentation of Financial Statements - Going Concern.” As described in Note 1 below, the Company has concluded that management’s plans to dispose of assets and extend and/or

refinance the Company’s debt are probable of being achieved and alleviate substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern and do not include any adjustments that might result from an adverse outcome of this uncertainty.

Financial Instruments

Financial Instruments

As disclosed in Note 4, the Company’s derivatives were recorded at fair value using Level 2 inputs prior to their termination on February 8, 2023. 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

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.

	September 30,		September 30,
(in thousands)	2023		2022
Cash and cash equivalents (1)	$	13,043	$	6,367
Restricted cash		—		2,350
Total cash, cash equivalents and restricted cash	$	13,043	$	8,717

(1) Includes $2,445 at September 30, 2023, pertaining to Monument Circle, which the Company is unable to utilize for its own operational purposes.

Restricted cash consists of escrows arising from property sales. Cash held in escrow is paid based on the terms of the closing agreements for the sale.

Recent Accounting Standards

Recent Accounting Standards

In October 2023, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2023-06, Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative (“ASU 2023-06”). ASU 2023-06 adds interim and annual disclosure requirements to GAAP at the request of the Securities and Exchange Commission. The guidance in ASU 2023-06 is required to be applied prospectively and the GAAP requirements will be effective when the removal of the related SEC disclosure requirements is effective. If the SEC does not act to remove its related requirement by June 30, 2027, any related FASB amendments will be removed from the Accounting Standards Codification and will not be effective. The Company does not anticipate that the adoption of ASU 2023-06 will have a material impact on the 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”). ASU 2020-04 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 does not anticipate that the adoption of ASU 2020-04 will have a material impact on the consolidated financial statements.

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

9 Months Ended

Sep. 30, 2023

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

	As of September 30,
	2023	2022
Owned and Consolidated Properties:
Number of properties (1)	20	22
Rentable square feet	6,206,460	6,433,954

Reconciliation of cash, cash equivalents, and restricted cash

	September 30,		September 30,
(in thousands)	2023		2022
Cash and cash equivalents (1)	$	13,043	$	6,367
Restricted cash		—		2,350
Total cash, cash equivalents and restricted cash	$	13,043	$	8,717

(1) Includes $2,445 at September 30, 2023, pertaining to Monument Circle, which the Company is unable to utilize for its own operational purposes.

Fair value of assets acquired at consolidation of VIE

(in thousands)
Real estate assets	$	19,695
Value of acquired real estate leases		305
Total	$	20,000

Quantitative information about significant unobservable inputs of Level 3 measurement

	Fair Value (1) at			Significant	Range				Weighted
Description	December 31, 2022		Valuation Technique	Unobservable Input	Min		Max		Average (2)
		(in thousands)
Sponsored REIT Loan	$	19,763	Discounted Cash Flows	Exit Cap Rate	7.50	%	7.50	%	7.50	%
				Discount Rate	9.50	%	9.50	%	9.50	%
(1) Classified within Level 3 of the fair value hierarchy.
(2) Unobservable inputs were weighted based on the fair value of the related instrument.

Variable interest entities ("VIEs")

Quantitative information about significant unobservable inputs of Level 3 measurement

	Fair Value (1) at			Significant	Range				Weighted
Description	January 1, 2023		Valuation Technique	Unobservable Input	Min		Max		Average (2)
		(in thousands)
Monument Circle Consolidation	$	20,000	Discounted Cash Flows	Exit Cap Rate	7.50	%	7.50	%	7.50	%
				Discount Rate	9.50	%	9.50	%	9.50	%
(1) Classified within Level 3 of the fair value hierarchy.
(2) Unobservable inputs were weighted based on the fair value of the related instrument.

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

9 Months Ended

Sep. 30, 2023

Related Party Transactions and Investments in Non-Consolidated Entities

Allowance for credit losses rollforward

	For the Nine Months Ended September 30,
(In thousands)		2023		2022
Beginning allowance for credit losses	$	(4,237)	$	—
Additional increases to the allowance for credit losses		—		(1,857)
Reductions to the allowance for credit losses		4,237		—
Ending allowance for credit losses	$	—	$	(1,857)

Quantitative information about significant unobservable inputs of Level 3 measurement

	Fair Value (1) at			Significant	Range				Weighted
Description	December 31, 2022		Valuation Technique	Unobservable Input	Min		Max		Average (2)
		(in thousands)
Sponsored REIT Loan	$	19,763	Discounted Cash Flows	Exit Cap Rate	7.50	%	7.50	%	7.50	%
				Discount Rate	9.50	%	9.50	%	9.50	%
(1) Classified within Level 3 of the fair value hierarchy.
(2) Unobservable inputs were weighted based on the fair value of the related instrument.

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Financial Instruments: Derivatives and Hedging (Tables)

9 Months Ended

Sep. 30, 2023

Financial Instruments: Derivatives and Hedging

Schedule of notional and fair value of derivative financial instruments

	Notional		Strike		Effective	Expiration	Fair Value (1) at
(in thousands)	Value		Rate		Date	Date	September 30, 2023		December 31, 2022
2019 BMO Interest Rate Swap	$	165,000	2.39	%	Aug-20	Jan-24	$	—	$	4,358
(1) Classified within Level 2 of the fair value hierarchy.

Summary of Interest Rate Swaps that was recorded in OCI

(in thousands)	Nine Months Ended September 30,
Interest Rate Swaps in Cash Flow Hedging Relationships:	2023		2022
Amounts of gain recognized in OCI	$	177	$	7,835
Amounts of previously recorded gain (loss) reclassified from OCI into Interest Expense	$	3,118	$	(1,669)
Total amount of Interest Expense presented in the consolidated statements of operations	$	18,099	$	17,140

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Stockholders' Equity (Tables)

9 Months Ended

Sep. 30, 2023

Stockholders' Equity

Schedule of dividends declared and paid

	Dividends Per		Total
Quarter Paid	Share		Dividends
First quarter of 2023	$	0.01	$	1,033
Second quarter of 2023	$	0.01	$	1,032
Third quarter of 2023	$	0.01	$	1,034
2022:
Special dividend declared in December 2021 and paid January 2022	$	0.32	$	33,280
First quarter of 2022	$	0.09	$	9,360
Second quarter of 2022	$	0.09	$	9,284
Third quarter of 2022	$	0.01	$	1,032

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

	Shares Available		Compensation
	for Grant		Cost
Balance December 31, 2021		1,780,820		1,012,500
Shares granted 2022		(84,133)		393,750
Balance December 31, 2022		1,696,687	$	1,406,250
Shares granted 2023		(194,439)		314,991
Balance September 30, 2023		1,502,248	$	1,721,241

Schedule of repurchase of common stock

(Cost in thousands)	Shares Repurchased	Cost
Balance, December 31, 2021	4,413,741	$	37,019
Repurchase of shares	846,739		4,843
Balance, December 31, 2022	5,260,480	$	41,862

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Income Taxes (Tables)

9 Months Ended

Sep. 30, 2023

Income Taxes

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

	For the Nine Months Ended September 30,
(Dollars in thousands)	2023		2022
Revised Texas Franchise Tax	$	212	$	167
Other Taxes		—		—
Tax expense	$	212	$	167

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Leases (Tables)

9 Months Ended

Sep. 30, 2023

Leases

Summary of income relating to lease payments and undiscounted cash flows

Income relating to lease payments:
	Nine Months Ended
(in thousands)	September 30, 2023		September 30, 2022
Income from leases (1)	$	111,316	$	118,843
	$	111,316	$	118,843
(1) Includes amounts recognized from variable lease payments of $32,275 and $37,050 for the nine months ended September 30, 2023 and 2022, respectively.

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Disposition of properties (Tables)

9 Months Ended

Sep. 30, 2023

Dispositions of properties

Summary of operating results for discontinued operations

	Three months ended September 30,				Nine months ended September 30,
(in thousands)	2023		2022		2023		2022
Rental revenue	$	5,354	$	8,592	$	16,062	$	27,646
Rental operating expenses		(1,862)		(2,809)		(5,277)		(8,669)
Real estate taxes and insurance		(720)		(2,416)		(2,264)		(7,287)
Depreciation and amortization		(1,034)		(3,157)		(5,372)		(10,246)
Income from dispositions and assets held for sale	$	1,738	$	210	$	3,149	$	1,444

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Organization, Properties, Basis of Presentation, Financial Instruments and Recent Accounting Standards (Details)	9 Months Ended
	Sep. 30, 2023 ft² property	Sep. 30, 2022 ft² property
Properties
Number of properties	19
Number of owned and consolidated properties	20	22
Rentable square feet | ft²	6,206,460	6,433,954
Number of properties classified as assets held for sale	3
FSP Investments LLC
Organization
Ownership interest (as a percent)	100.00%
FSP Property Management 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, Cash Equivalents and Restricted Cash (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022	Sep. 30, 2022	Dec. 31, 2021
Cash, Cash Equivalents and Restricted Cash
Cash and cash equivalents	$ 13,043		$ 6,367
Restricted Cash			2,350
Total cash, cash equivalents and restricted cash	$ 13,043	$ 6,632	$ 8,717	$ 40,751
Restricted Cash, Statement of Financial Position [Extensible Enumeration]	Total cash, cash equivalents and restricted cash
FSP Monument Circle LLC
Cash, Cash Equivalents and Restricted Cash
Cash and cash equivalents	$ 2,445

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Organization, Properties, Basis of Presentation, Financial Instruments and Recent Accounting Standards - Variable Interest Entities (Details) $ in Thousands	9 Months Ended
	Sep. 30, 2023 USD ($)	Jan. 31, 2023 USD ($)	Dec. 31, 2022 USD ($)	Sep. 30, 2022 USD ($)	Dec. 31, 2021 USD ($)
Variable interest entity
Gain on consolidation of Sponsored REIT	$ 394
Cash, cash equivalents and restricted cash	13,043		$ 6,632	$ 8,717	$ 40,751
VIE at Consolidation
Real estate assets	921,581		1,103,248
Acquired real estate leases	7,447		10,186
Related party mortgage loan receivable			$ 19,763
Debt Securities, Available-for-Sale, Valuation Technique [Extensible Enumeration]			us-gaap:ValuationTechniqueDiscountedCashFlowMember
Level 3
VIE at Consolidation
Related party mortgage loan receivable			$ 19,763
Level 3 | Exit Cap Rate | Maximum
VIE at Consolidation
Measurement input			7.50
Level 3 | Exit Cap Rate | Minimum
VIE at Consolidation
Measurement input			7.50
Level 3 | Exit Cap Rate | Weighted Average
VIE at Consolidation
Measurement input			7.50
Level 3 | Discount Rate | Maximum
VIE at Consolidation
Measurement input			9.50
Level 3 | Discount Rate | Minimum
VIE at Consolidation
Measurement input			9.50
Level 3 | Discount Rate | Weighted Average
VIE at Consolidation
Measurement input			9.50
Variable interest entities ("VIEs")
Variable interest entity
Gain on consolidation of Sponsored REIT	400
Cash, cash equivalents and restricted cash	2,445		$ 0
VIE at Consolidation
Real estate assets	19,439	$ 19,695	0
Acquired real estate leases	305	305	305
Total		20,000
Variable interest entities ("VIEs") | FSP Monument Circle LLC
Variable interest entity
Cash, cash equivalents and restricted cash	$ 3,000
Variable interest entities ("VIEs") | Level 3
VIE at Consolidation
Related party mortgage loan receivable		$ 20,000
Debt Securities, Available-for-Sale, Valuation Technique [Extensible Enumeration]		us-gaap:ValuationTechniqueDiscountedCashFlowMember
Variable interest entities ("VIEs") | Level 3 | Exit Cap Rate | Maximum
VIE at Consolidation
Measurement input		7.50
Variable interest entities ("VIEs") | Level 3 | Exit Cap Rate | Minimum
VIE at Consolidation
Measurement input		7.50
Variable interest entities ("VIEs") | Level 3 | Exit Cap Rate | Weighted Average
VIE at Consolidation
Measurement input		7.50
Variable interest entities ("VIEs") | Level 3 | Discount Rate | Maximum
VIE at Consolidation
Measurement input		9.50
Variable interest entities ("VIEs") | Level 3 | Discount Rate | Minimum
VIE at Consolidation
Measurement input		9.50
Variable interest entities ("VIEs") | Level 3 | Discount Rate | Weighted Average
VIE at Consolidation
Measurement input		9.50
VIE, Not Primary Beneficiary
Variable interest entity
Maximum exposure to losses associated with VIE			22,100
VIE, Not Primary Beneficiary | Prepaid expenses and other assets
Variable interest entity
Accrued interest and exit fee receivables			$ 2,300

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Organization, Properties, Basis of Presentation, Financial Instruments and Recent Accounting Standards - Liquidity and Management's Plan (Details) $ in Thousands		2 Months Ended	3 Months Ended
	Oct. 26, 2023 USD ($) property	Dec. 31, 2023 USD ($) property	Dec. 31, 2023 USD ($) property	Oct. 01, 2024 USD ($)	Nov. 07, 2023 USD ($) loan	Sep. 30, 2023 USD ($) loan	Dec. 31, 2022 USD ($)	Oct. 24, 2017 USD ($)
Debt Instrument [Line Items]
Unsecured term loan						$ 114,610	$ 164,750
Number Of Properties Sold | property	1
Sale price	$ 46,700
Cash and cash equivalents available for repayment of debt					$ 73,500
Forecast
Debt Instrument [Line Items]
Sale price			$ 43,600
Disposal Group, Held-for-sale or Disposed of by Sale, Not Discontinued Operations
Debt Instrument [Line Items]
Number Of Properties Sold | property		2	2
Sale price		$ 96,500
Senior Notes
Debt Instrument [Line Items]
Principal amount of loan								$ 200,000
Series A Notes
Debt Instrument [Line Items]
Principal amount of loan						$ 116,000
BofA Revolver and BMO Term Loan
Debt Instrument [Line Items]
Number of loans | loan					2	2
Unsecured term loan				$ 205,000	$ 205,000	$ 195,000
BofA Revolver and BMO Term Loan | Forecast
Debt Instrument [Line Items]
Repayment of principal			$ 170,000

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Related Party Transactions and Investments in Non-Consolidated Entities - Management fees and interest income from loans (Details) - USD ($)	9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022
Sponsored REITs
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
Type of revenue	Asset management fees	Asset management fees
Asset management fees
Sponsored REITs
Revenue	$ 0	$ 26,000

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Related Party Transactions and Investments in Non-Consolidated Entities - Sponsored REIT Loans outstanding (Details) - USD ($)	9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Oct. 29, 2021	Oct. 28, 2021
Sponsored REITs
Amount Drawn			$ 24,000,000	$ 21,000,000
Related party mortgage loan receivable			24,000,000	$ 21,000,000
Sponsored REITs
Sponsored REITs
Interest income and fees from the Sponsored REIT Loans	$ 0	$ 1,367,000
FSP Monument Circle LLC
Sponsored REITs
Additional loan amount			$ 3,000,000.0

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Related Party Transactions and Investments in Non-Consolidated Entities - Allowance for credit losses (Details) - USD ($)	3 Months Ended	6 Months Ended	9 Months Ended		12 Months Ended
	Mar. 31, 2023	Sep. 30, 2023	Sep. 30, 2023	Sep. 30, 2022	Dec. 31, 2022
Accounts Receivable, Allowance for Credit Loss [Roll Forward]
Beginning allowance for credit losses	$ (4,237,000)		$ (4,237,000)
Additional increases to the allowance for credit losses				$ (1,857,000)	$ 4,200,000
Reductions to the allowance for credit losses	$ 4,200,000	$ 0	$ 4,237,000
Ending allowance for credit losses				$ 1,857,000	$ 4,237,000

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Related Party Transactions and Investments in Non-Consolidated Entities - Level 3 Significant unobservable inputs (Details) $ in Thousands	Dec. 31, 2022 USD ($)
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Related party mortgage loan receivable	$ 19,763
Debt Securities, Available-for-Sale, Valuation Technique [Extensible Enumeration]	us-gaap:ValuationTechniqueDiscountedCashFlowMember
Level 3
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Related party mortgage loan receivable	$ 19,763
Level 3 | Maximum | Exit Cap Rate
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Measurement input	7.50
Level 3 | Maximum | Discount Rate
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Measurement input	9.50
Level 3 | Minimum | Exit Cap Rate
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Measurement input	7.50
Level 3 | Minimum | Discount Rate
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Measurement input	9.50
Level 3 | Weighted Average | Exit Cap Rate
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Measurement input	7.50
Level 3 | Weighted Average | Discount Rate
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Measurement input	9.50

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Bank Note Payable, Term Loans Payable and Senior Notes (Details)									1 Months Ended	3 Months Ended						9 Months Ended		12 Months Ended
	Apr. 01, 2024 USD ($)	Aug. 10, 2023 USD ($)	Feb. 10, 2023 USD ($) $ / shares	Feb. 09, 2023	Sep. 30, 2022 USD ($)	Sep. 06, 2022 USD ($)	Oct. 25, 2021 USD ($)	Oct. 24, 2017 USD ($)	Dec. 31, 2021 USD ($) $ / shares	Sep. 30, 2023 USD ($) $ / shares	Jun. 30, 2023 $ / shares	Mar. 31, 2023 $ / shares	Sep. 30, 2022 USD ($) $ / shares	Jun. 30, 2022 $ / shares	Mar. 31, 2022 $ / shares	Sep. 30, 2023 USD ($)	Sep. 30, 2022 USD ($)	Dec. 31, 2022 USD ($)	Dec. 31, 2021 USD ($)	Nov. 07, 2023 USD ($)	Oct. 26, 2023 property	Oct. 01, 2023 USD ($)	Jan. 10, 2022 USD ($)	Sep. 27, 2021	Sep. 27, 2018 USD ($)
Debt Instrument [Line Items]
Repayments of unsecured debt																$ 50,000,000	$ 110,000,000
Loss on extinguishment of debt										$ (39,000)			$ (78,000)			(106,000)	$ (78,000)
Unsecured term loan										$ 114,610,000						114,610,000		$ 164,750,000
Received an aggregate amount																4,206,000
Cash dividend declared per share (in dollars per share) | $ / shares									$ 0.32	$ 0.01	$ 0.01	$ 0.01	$ 0.01	$ 0.09	$ 0.09
Distributions common stock (in dollars per share) | $ / shares										$ 0.01	$ 0.01	$ 0.01	$ 0.01	$ 0.09	$ 0.09
Borrowings outstanding										$ 80,000,000						80,000,000		48,000,000
Number of properties sold | property																					1
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						$ 116,000,000
Interest rate (as a percent)										4.49%						4.49%
Series B Notes
Debt Instrument [Line Items]
Principal amount of loan								$ 84,000,000
Interest rate (as a percent)										4.76%						4.76%
Maximum | Senior Notes
Debt Instrument [Line Items]
Unsecured leverage ratio								60.00%
Unsecured leverage ratio for significant acquisition								65.00%
Revolving Credit Facility
Debt Instrument [Line Items]
Interest rate during period (as a percent)																8.43%
Weighted average variable interest rate (as a percent)																7.80%
Borrowing capacity			$ 150,000,000															237,500,000
Borrowings outstanding			$ 40,000,000						$ 0	$ 80,000,000						$ 80,000,000		$ 0	$ 0	$ 90,000,000			$ 0
Facility fee at period end (as a percent)																		0.35%
Facility fee (as a percent)			0.35%
Revolving Credit Facility | Maximum
Debt Instrument [Line Items]
Distributions common stock (in dollars per share) | $ / shares			$ 0.01
Revolving Credit Facility | ScenarioForecastMember
Debt Instrument [Line Items]
Borrowing capacity	$ 100,000,000																					$ 125,000,000
Revolving Credit Facility | SOFR
Debt Instrument [Line Items]
Basis spread on variable rate (as a percent)			3.00%
Unsecured leverage ratio																		1.75%
Revolving Credit Facility | One Month SOFR
Debt Instrument [Line Items]
Basis spread on variable rate (as a percent)			0.11448%	0.11448%
Term of SOFR			1 month	1 month
Revolving Credit Facility | Three month SOFR
Debt Instrument [Line Items]
Basis spread on variable rate (as a percent)			0.26161%	0.26161%
Term of SOFR			3 months	3 months
Revolving Credit Facility | Six month SOFR
Debt Instrument [Line Items]
Basis spread on variable rate (as a percent)			0.42826%	0.42826%
Term of SOFR			6 months	6 months
Revolving Credit Facility | LIBOR
Debt Instrument [Line Items]
Basis spread on variable rate (as a percent)																			1.55%
Revolving Credit Facility | Bank's base rate
Debt Instrument [Line Items]
Basis spread on variable rate (as a percent)			2.00%																0.55%
Line of credit on which facility fee									$ 600,000,000										$ 600,000,000
Facility fee (as a percent)																			0.30%
Unsecured leverage ratio																		0.75%
BofA Line Of Credit | Federal Funds Rate
Debt Instrument [Line Items]
Basis spread on variable rate (as a percent)																			0.50%
BofA Line Of Credit | LIBOR
Debt Instrument [Line Items]
Basis spread on variable rate (as a percent)																			1.00%
Unsecured Debt [Member]
Debt Instrument [Line Items]
Principal amount of loan						$ 400,000,000
Repayments of unsecured debt					$ 90,000,000	110,000,000	$ 200,000,000
Loss on extinguishment of debt						$ 100,000	$ 700,000
Effective interest rate (as a percent)						2.65%
Unsecured Debt [Member] | LIBOR
Debt Instrument [Line Items]
Basis spread on variable rate at period end (as a percent)						1.75%
Fixed rate (as a percent)																								1.12%
Unsecured Debt [Member] | Bank's base rate
Debt Instrument [Line Items]
Basis spread on variable rate at period end (as a percent)						0.75%
BMO Term Loan
Debt Instrument [Line Items]
Principal amount of loan																									$ 220,000,000
Repayments of unsecured debt		$ 10,000,000
Unsecured term loan			$ 125,000,000							$ 115,000,000						$ 115,000,000
Interest rate during period (as a percent)																8.43%
Weighted average interest rate (as a percent)										7.98%						7.98%
Effective interest rate (as a percent)										4.04%						4.04%
BMO Term Loan | Maximum
Debt Instrument [Line Items]
Cash dividend declared per share (in dollars per share) | $ / shares			$ 0.01
BMO Term Loan | ScenarioForecastMember
Debt Instrument [Line Items]
Repayment of principal	$ 15,000,000
BMO Term Loan | BMO Interest Rate Swap
Debt Instrument [Line Items]
Received an aggregate amount			$ 4,300,000
Interest receivable portion of proceeds from termination of interest rate swap			$ 100,000
BMO Term Loan | SOFR
Debt Instrument [Line Items]
Basis spread on variable rate (as a percent)			3.00%
BMO Term Loan | One Month SOFR
Debt Instrument [Line Items]
Basis spread on variable rate (as a percent)			0.11448%
Term of SOFR			1 month
BMO Term Loan | Three month SOFR
Debt Instrument [Line Items]
Basis spread on variable rate (as a percent)			0.26161%
Term of SOFR			3 months
BMO Term Loan | Six month SOFR
Debt Instrument [Line Items]
Basis spread on variable rate (as a percent)			0.42826%
Term of SOFR			6 months
BMO Term Loan | LIBOR
Debt Instrument [Line Items]
Basis spread on variable rate at period end (as a percent)																		1.65%
BMO Term Loan | LIBOR | Hedged portion
Debt Instrument [Line Items]
Fixed rate (as a percent)										2.39%						2.39%
BMO Term Loan | Bank's base rate
Debt Instrument [Line Items]
Basis spread on variable rate (as a percent)			2.00%
Basis spread on variable rate at period end (as a percent)																		0.65%
Tranche A Term Loan
Debt Instrument [Line Items]
Repayment of principal			$ 40,000,000

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Financial Instruments: Derivatives and Hedging (Details) $ in Thousands		9 Months Ended
	Feb. 10, 2023 USD ($)	Sep. 30, 2023 USD ($) DerivativeInstrument	Dec. 31, 2022 USD ($)
Financial Instruments: Derivatives and Hedging
Received an aggregate amount		$ 4,206
Derivative, Number of Instruments Held | DerivativeInstrument		0
Amount estimated to be reclassified into earnings within next 12 months		$ 1,400
2019 BMO Interest Rate Swap
Financial Instruments: Derivatives and Hedging
Fair value of hedged asset			$ 4,400
Notional Value		$ 165,000
Strike Rate (as a percent)		2.39%
2019 BMO Interest Rate Swap | Level 2
Financial Instruments: Derivatives and Hedging
Fair Value			$ 4,358
BMO Interest Rate Swap | BMO Term Loan
Financial Instruments: Derivatives and Hedging
Received an aggregate amount	$ 4,300
Interest receivable portion of proceeds from termination of interest rate swap	$ 100

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Financial Instruments: Derivatives and Hedging - Interest Rate Swaps (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Total amount of Interest Expense presented in the consolidated statements of operations	$ 6,209	$ 6,110	$ 18,099	$ 17,140
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			18,099	17,140
Interest Rate Swap | Amounts of previously recorded 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			3,118	(1,669)
Interest Rate Swap | Amounts of gain 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			$ 177	$ 7,835

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Net Income Per Share (Details) - shares	9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022
Net Income Per Share
Potential dilutive shares outstanding	0	0

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Stockholders' Equity (Details)	1 Months Ended	3 Months Ended						9 Months Ended	12 Months Ended
	Dec. 31, 2021 USD ($) $ / shares shares	Sep. 30, 2023 USD ($) $ / shares shares	Jun. 30, 2023 USD ($) $ / shares	Mar. 31, 2023 USD ($) $ / shares shares	Sep. 30, 2022 USD ($) $ / shares	Jun. 30, 2022 USD ($) $ / shares	Mar. 31, 2022 USD ($) $ / shares shares	Sep. 30, 2023 USD ($) item shares	Dec. 31, 2022 USD ($) shares
Stockholders' Equity
Common Stock, Shares, Outstanding		103,430,353						103,430,353	103,235,914
Dividends declared and paid
Cash dividend declared per share (in dollars per share) | $ / shares	$ 0.32	$ 0.01	$ 0.01	$ 0.01	$ 0.01	$ 0.09	$ 0.09
Total Dividends | $	$ 33,280,000	$ 1,034,000	$ 1,032,000	$ 1,033,000	$ 1,032,000	$ 9,284,000	$ 9,360,000
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				1,696,687			1,780,820	1,696,687	1,780,820
Shares Granted								(194,439)	(84,133)
Number of shares available for grant under the plan, Ending	1,780,820	1,502,248						1,502,248	1,696,687
Compensation Cost, Beginning | $				$ 1,406,250			$ 1,012,500	$ 1,406,250	$ 1,012,500
Compensation cost | $								314,991	393,750
Compensation Cost, Ending | $	$ 1,012,500	$ 1,721,241						$ 1,721,241	$ 1,406,250

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Stockholders' Equity - Repurchase of Common Stock (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended	9 Months Ended	12 Months Ended
	Mar. 31, 2022	Sep. 30, 2023	Dec. 31, 2022	Jun. 23, 2021
Stockholders' Equity
Shares authorized to be repurchased				$ 50,000
Average cost per share of repurchased shares (in dollars per share)		$ 5.72
Total number of shares repurchased, beginning (in shares)	4,413,741	5,260,480	4,413,741
Shares repurchased (in shares)	846,739		846,739
Total number of shares repurchased, ending (in shares)			5,260,480
Amount of stock repurchased, beginning	$ 37,019	$ 41,862	$ 37,019
Aggregate cost of shares repurchased	$ 4,843	$ 4,800	4,843
Amount of stock repurchased, ending			$ 41,862

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Income Taxes (Details) - USD ($)	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022	Dec. 31, 2017	Dec. 31, 2022	Dec. 31, 2021
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						$ 4,900,000	$ 4,800,000
Period of statute of limitations applicable to the entity's income tax returns			3 years
Net operating losses
NOLs expiration period			20 years
Gross amount of NOLs available to company	$ 1,700,000		$ 1,700,000			$ 1,700,000
Income Tax Expense
Revised Texas Franchise Tax			212,000	$ 167,000
Tax expense	$ 70,000	$ 62,000	212,000	$ 167,000
Deferred income taxes			$ 0

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Leases - Income Relating to Lease Payments (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022
Income relating to lease payments:
Income from leases	$ 111,316	$ 118,843
Undiscounted Cash Flows
Variable lease payments	$ 32,275	$ 37,050

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Disposition of Properties (Details)						2 Months Ended	3 Months Ended		9 Months Ended
	Oct. 26, 2023 USD ($) property	Aug. 09, 2023 USD ($) property	Mar. 10, 2023 USD ($) property	Dec. 28, 2022 USD ($)	Aug. 31, 2022 USD ($) property	Dec. 31, 2023 USD ($) property	Sep. 30, 2023 USD ($) ft²	Sep. 30, 2022 USD ($) ft²	Sep. 30, 2023 USD ($) ft²	Sep. 30, 2022 USD ($) ft²	Dec. 31, 2022 USD ($)
Dispositions of properties
Number of properties sold | property	1
Assets Held-for-sale, Not Part of Disposal Group							$ 132,659,000		$ 132,659,000
Sale price	$ 46,700,000
Area of property (in square feet) | ft²							6,206,460	6,433,954	6,206,460	6,433,954
Real estate assets							$ 921,581,000		$ 921,581,000		$ 1,103,248,000
Straight-line rent receivable							43,253,000		43,253,000		52,739,000
Deferred leasing commissions							25,226,000		25,226,000		35,709,000
Acquired real estate leases							7,447,000		7,447,000		$ 10,186,000
Operating results for discontinued operations:
Rental revenue							5,354,000	$ 8,592,000	16,062,000	$ 27,646,000
Rental operating expenses							(1,862,000)	(2,809,000)	(5,277,000)	(8,669,000)
Real estate taxes and insurance							(720,000)	(2,416,000)	(2,264,000)	(7,287,000)
Depreciation and amortization							(1,034,000)	(3,157,000)	(5,372,000)	(10,246,000)
Income from dispositions and assets held for sale							1,738,000	$ 210,000	3,149,000	$ 1,444,000
Office properties in Broomfield, Colorado
Dispositions of properties
Number of properties sold | property					2
Gain (loss) on sale of property					$ 24,100,000
Sale price					$ 102,500,000
Property in Atlanta, Georgia
Dispositions of properties
Gain (loss) on sale of property							(20,500,000)
Sale price							40,000,000.0
Office Property in Evanston, Illinois
Dispositions of properties
Gain (loss) on sale of property				$ 3,900,000
Sale price				$ 27,800,000
Property in Plano, Texas
Dispositions of properties
Assets Held-for-sale, Not Part of Disposal Group							36,200,000		36,200,000
Gain (loss) on sale of property							10,600,000
Sale price							48,000,000.0
Real estate assets							32,600,000		32,600,000
Straight-line rent receivable							1,400,000		1,400,000
Deferred leasing commissions							1,700,000		1,700,000
Acquired real estate leases							500,000		$ 500,000
Property in Plano, Texas | Subsequent event
Dispositions of properties
Gain (loss) on sale of property	10,600,000
Sale price	$ 48,000,000.0
Office Property in Charlotte, North Carolina
Dispositions of properties
Number of properties sold | property		1
Gain (loss) on sale of property		$ (800,000)
Sale price		$ 9,200,000
Office Property in Elk Grove Village, Illinois
Dispositions of properties
Number of properties sold | property			1
Gain (loss) on sale of property			$ 8,400,000
Sale price			$ 29,100,000
Property in Addison, Texas
Dispositions of properties
Gain (loss) on sale of property							$ 53,000
Area of property (in square feet) | ft²							7,826		7,826
Property in Miami, Florida
Dispositions of properties
Gain (loss) on sale of property							$ (19,200,000)
Sale price							68,000,000.0
Properties in Miami, Florida and Atlanta, Georgia
Dispositions of properties
Assets Held-for-sale, Not Part of Disposal Group							96,400,000		$ 96,400,000
Real estate assets							122,200,000		122,200,000
Straight-line rent receivable							5,500,000		5,500,000
Deferred leasing commissions							$ 8,400,000		8,400,000
Impairment charge									$ 39,700,000
Disposal Group, Held-for-sale or Disposed of by Sale, Not Discontinued Operations
Dispositions of properties
Number of properties sold | property						2
Sale price						$ 96,500,000

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Subsequent Events (Details) $ / shares in Units, $ in Millions				1 Months Ended	3 Months Ended
	Oct. 26, 2023 USD ($) property	Oct. 06, 2023 $ / shares	Aug. 09, 2023 USD ($) property	Dec. 31, 2021 $ / shares	Dec. 31, 2023 USD ($)	Sep. 30, 2023 USD ($) $ / shares	Jun. 30, 2023 $ / shares	Mar. 31, 2023 $ / shares	Sep. 30, 2022 $ / shares	Jun. 30, 2022 $ / shares	Mar. 31, 2022 $ / shares
Subsequent Events
Cash dividend declared per share (in dollars per share) | $ / shares				$ 0.32		$ 0.01	$ 0.01	$ 0.01	$ 0.01	$ 0.09	$ 0.09
Number of properties sold | property	1
Sale price	$ 46.7
ScenarioForecastMember
Subsequent Events
Sale price					$ 43.6
Subsequent event
Subsequent Events
Cash dividend declared per share (in dollars per share) | $ / shares		$ 0.01
Property in Plano, Texas
Subsequent Events
Sale price						$ 48.0
Gain (loss) on sale of property						10.6
Property in Plano, Texas | Subsequent event
Subsequent Events
Sale price	48.0
Gain (loss) on sale of property	$ 10.6
Office Property in Charlotte, North Carolina
Subsequent Events
Number of properties sold | property			1
Sale price			$ 9.2
Gain (loss) on sale of property			$ (0.8)
Property in Miami, Florida
Subsequent Events
Sale price						68.0
Gain (loss) on sale of property						$ (19.2)

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Insider Trading Arrangements	9 Months Ended
	Sep. 30, 2023
Trading Arrangements, by Individual
Rule 10b5-1 Arrangement Adopted	false
Non-Rule 10b5-1 Arrangement Adopted	false
Rule 10b5-1 Arrangement Terminated	false
Non-Rule 10b5-1 Arrangement Terminated	false