Table of Contents
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 March 31, 2026.
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 April 23, 2026, was 103,690,340.
Franklin Street Properties Corp.Form 10-Q
Quarterly ReportMarch 31, 2026
Page
Part I.
Financial Information
Item 1.
Financial Statements
Consolidated Balance Sheets as of March 31, 2026 and December 31, 2025
3
Consolidated Statements of Operations for the three months ended March 31, 2026 and 2025
4
Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 2026 and 2025
5
Consolidated Statements of Cash Flows for the three months ended March 31, 2026 and 2025
6
Notes to Consolidated Financial Statements
7-15
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
16
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
28
Item 4.
Controls and Procedures
Part II.
Other Information
Legal Proceedings
29
Item 1A.
Risk Factors
Unregistered Sales of Equity Securities and Use of Proceeds
Defaults Upon Senior Securities
Mine Safety Disclosures
Item 5.
Item 6.
Exhibits
30
Signatures
31
PART I — FINANCIAL INFORMATION
Item 1.Financial Statements
Consolidated Balance Sheets
(Unaudited)
March 31,
December 31,
(in thousands, except share and par value amounts)
2026
2025
Assets:
Real estate assets:
Land
$
98,882
98,883
Buildings and improvements
1,094,771
1,091,728
Fixtures and equipment
11,562
11,572
1,205,215
1,202,183
Less accumulated depreciation
416,644
408,461
Real estate assets, net
788,571
793,722
Acquired real estate leases, less accumulated amortization of $15,058 and $14,648, respectively
2,080
2,490
Cash, cash equivalents and restricted cash
23,753
30,571
Tenant rent receivables
1,345
471
Straight-line rent receivable
38,670
38,744
Prepaid expenses and other assets
4,322
4,080
Office computers and furniture, net of accumulated depreciation of $1,059 and $1,047, respectively
124
136
Deferred leasing commissions, net of accumulated amortization of $14,694 and $14,571, respectively
22,921
22,670
Total assets
881,786
892,884
Liabilities and Stockholders’ Equity:
Liabilities:
Initial Term Loans, less unamortized financing costs and OID of $23,473
251,527
—
Term loans payable, less unamortized financing costs of $441
125,555
Series A & Series B Senior Notes, less unamortized financing costs of $236
122,686
Accounts payable and accrued expenses
26,391
28,724
Accrued compensation
234
2,394
Tenant security deposits
6,186
6,198
Lease liability
1,002
316
Acquired unfavorable real estate leases, less accumulated amortization of $58 and $56, respectively
33
34
Total liabilities
285,373
285,907
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, 103,690,340 and 103,690,340 shares issued and outstanding, respectively
10
Additional paid-in capital
1,335,586
Accumulated distributions in excess of accumulated earnings
(739,183)
(728,619)
Total stockholders’ equity
596,413
606,977
Total liabilities and stockholders’ equity
The accompanying notes are an integral part of these consolidated financial statements.
Consolidated Statements of Operations
For the Three Months Ended March 31,
(in thousands, except per share amounts)
Revenues:
Rental
26,225
27,107
Total revenues
Expenses:
Real estate operating expenses
10,290
10,095
Real estate taxes and insurance
4,243
5,369
Depreciation and amortization
10,580
10,824
General and administrative
2,669
3,484
Interest
6,812
5,691
Total expenses
34,594
35,463
Loss on extinguishment of debt
(1,267)
(2)
Loss on sale of properties and impairment of assets held for sale, net
(13,284)
Interest income
163
259
Loss before taxes
(9,473)
(21,383)
Tax expense
54
52
Net loss
(9,527)
(21,435)
Weighted average number of shares outstanding, basic and diluted
103,690
103,567
Net loss per share, basic and diluted
(0.09)
(0.21)
Consolidated Statements of Stockholders’ Equity
Accumulated
Distributions
Additional
other
in excess of
Total
Common Stock
Paid-In
comprehensive
accumulated
Stockholders’
Shares
Amount
Capital
income (loss)
earnings
Equity
Balance, December 31, 2024
1,335,361
(679,514)
655,857
Comprehensive loss
Distributions $0.01 per share of common stock
(1,036)
Balance, March 31, 2025
(701,985)
633,386
Balance, December 31, 2025
(1,037)
Balance, March 31, 2026
Consolidated Statements of Cash Flows
(in thousands)
Cash flows from operating activities:
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expense
11,600
11,509
1,267
2
13,284
Changes in operating assets and liabilities:
(874)
(179)
Straight-line rents
221
70
Lease acquisition costs
(147)
(74)
448
(225)
(4,582)
(5,914)
(2,160)
(1,892)
(12)
(81)
Payment of deferred leasing commissions
(1,386)
(546)
Net cash used in operating activities
(5,152)
(5,481)
Cash flows from investing activities:
Property improvements, fixtures and equipment
(2,696)
(4,454)
Net cash used in investing activities
Cash flows from financing activities:
Distributions to stockholders
Proceeds received from Initial Term Loans
258,500
Cost of extinguished debt
(1,018)
Repayments of Term Loans payable
(125,995)
(77)
Repayments of Series A&B Senior Notes
(122,922)
(76)
Deferred financing costs
(6,498)
Net cash provided by (used in) financing activities
1,030
(1,189)
Net decrease in cash, cash equivalents and restricted cash
(6,818)
(11,124)
Cash, cash equivalents and restricted cash, beginning of year
42,683
Cash, cash equivalents and restricted cash, end of period
31,559
Supplemental disclosure of cash flow information:
Cash paid for:
6,120
2,510
Non-cash investing activities:
Accrued costs for purchases of real estate assets
1,941
2,060
Non-cash financing activities:
Initial Term Loan original issue discount
16,500
Accrued deferred financing costs
1,068
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.
As of March 31, 2026, the Company owned and operated a portfolio of real estate consisting of 14 operating properties. 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 properties and rentable square feet of real estate.
As of March 31,
Owned and Consolidated Properties:
Number of properties
14
Rentable square feet
4,809,487
4,806,456
Basis of Presentation
The unaudited consolidated financial statements of the Company include all of the accounts of the Company and its majority-owned subsidiaries. All significant intercompany balances and transactions have been eliminated. These financial statements should be read in conjunction with the Company’s consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for its fiscal year ended December 31, 2025, 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 months ended March 31, 2026 are not necessarily indicative of the results that may be expected for the year ending December 31, 2026 or for any other period.
The Company does not have any comprehensive loss other than what is included in net loss. If the Company has any comprehensive loss in the future such that a statement of comprehensive loss would be necessary, the Company will include such statement in a separate consolidated statement of comprehensive loss.
Financial Instruments
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 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.
7
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.
Cash and cash equivalents
30,167
Restricted cash
1,392
Total cash, cash equivalents and restricted cash
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 FSP Monument Circle LLC, which corporation was organized as a real estate investment trust (“Monument Circle” or the “Sponsored REIT”), was considered a VIE and the Company became the primary beneficiary. Upon this reconsideration event, the entity was included within the Company’s consolidated financial statements and all intercompany accounts and transactions were 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 was reflected as “Consolidation of Sponsored REIT” in the consolidated statement of cash flows. The cash and cash equivalents held by Monument Circle were unable to be utilized for the Company’s operational purposes. The creditors of Monument Circle’s trade payables did not have any recourse against the Company.
The property held by Monument Circle was sold on June 6, 2025, and Monument Circle and the corporation that had been its sole member were dissolved on December 9, 2025. The Company’s previous loan to Monument Circle that was secured by a mortgage on the real estate owned by Monument Circle (the “Sponsored REIT Loan”) was extinguished on June 6, 2025, when the property securing the loan was sold. More information on the sale is included in Note 7, “Disposition of Properties and Assets Held for Sale”.
8
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. The Company did not recognize asset management fee income from non-consolidated entities for the three months ended March 31, 2026 and 2025.
The Company did not recognize interest income and fees from the Sponsored REIT Loan for the three months ended March 31, 2025.
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 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 that the adoption of ASU 2023-06 will have a material impact on the consolidated financial statements.
In November 2024, the FASB issued ASU No. 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”). ASU 2024-03 requires public business entities to provide disaggregated disclosures, in the notes to the financial statements, of certain categories of expenses that are included in expense line items on the face of the income statement. The guidance in ASU 2024-03 is required to be applied prospectively and entities may apply it retrospectively. ASU 2024-03 is effective for public entities for fiscal years beginning after December 15, 2026. The Company does not anticipate that the adoption of ASU 2024-03 will have a material impact on the consolidated financial statements.
2. Term Loans Payable and Senior Notes
TPG Term Loans
On February 26, 2026 (the “Closing Date”), the Company entered into a Credit Agreement (the “Credit Agreement”) with Alter Domus (US) LLC, as administrative agent (the “Agent”), and Silver Oak Capital LLC, an affiliate of TPG Credit (collectively, the lenders from time to time party thereto, the “Lenders”). The Credit Agreement provides for a secured credit facility (the “Credit Facility”) for aggregate principal commitments of up to $320 million, consisting of (i) initial term loans in an aggregate principal amount of $275 million (the “Initial Term Loans”), and (ii) delayed draw term loans available upon the approval of the Lenders after the Closing Date in an aggregate principal amount of up to $45 million (the “Delayed Draw Term Loans” and together with the Initial Term Loans, the “Term Loans”). The Delayed Draw Term Loans may be used, subject to certain conditions, to fund tenant improvements, leasing commissions, building improvements and other uses approved by the Lenders.
The Term Loans are not subject to amortization and have an initial stated maturity date of February 26, 2029. The maturity date is subject to potential extension of up to one year at the option of the Company, subject to the satisfaction of certain conditions (the “Extension Option”).
Borrowings under the Credit Facility bear interest at an initial interest rate of 9.0% per annum. The Initial Term Loans were issued with original issue discount of 6.0% of the principal amount thereof. The Delayed Draw Term Loans, if any, will be issued with original issue discount of 6.0% of the principal amount thereof.
As of March 31, 2026, the remaining balance of the unamortized original issue discount and the unamortized deferred financing costs amounted to approximately $16.1 million and $7.4 million, respectively.
9
If the Company exercises the Extension Option, the interest rate will increase to a rate of 13.0% per annum. Additionally, if the Company exercises the Extension Option, the Company must pay the following extension fees multiplied by the then-outstanding principal amount of Term Loans on each applicable date:
(i)36th month anniversary of Closing Date: 2.00%
(ii)39th month anniversary of Closing Date: 0.50%
(iii)42nd month anniversary of Closing Date: 0.50%
(iv)45th month anniversary of Closing Date: 0.50%
(v)48th month anniversary of Closing Date: 0.50%
The Credit Agreement requires the Company to prepay outstanding Term Loans with certain proceeds of dispositions of real property. Additionally, the Company may voluntarily prepay the outstanding Term Loans at any time; provided, that if the Company prepays any Term Loans prior to the first anniversary of the Closing Date, the Company is required to pay a make-whole payment equal to the amount of interest that would have accrued on such Term Loans to and excluding the first anniversary of the Closing Date. The Company is required to pay an exit fee of 4.0% of the aggregate principal amount of such Term Loans upon any permitted repayment of the Term Loans prior to the applicable maturity date.
The Company must also pay customary agency fees.
The obligations under the Credit Facility are guaranteed by substantially all subsidiaries of the Company and secured by a first priority lien on substantially all of the assets of the Company and its subsidiaries, including a first priority security interest in all of the Company’s and its subsidiaries’ personal property and first priority mortgage liens on the Company’s and its subsidiaries’ real property, in each case subject to certain exceptions.
The Credit Agreement contains customary representations and affirmative and negative covenants for credit facilities of this type, including, without limitation and subject to certain exceptions, restrictions on indebtedness, liens, investments, mergers, consolidations and other fundamental changes, dispositions of assets (including real property), capital expenditures, changes in business, certain restricted payments, transactions with affiliates, burdensome agreements, sale leaseback transactions, prepayments of other debt, corporate operating expenses and severance and retention payments.
The Credit Agreement also contains financial covenants that require the Company to maintain (i) a minimum tangible net worth $424,884,000 plus 70% of the aggregate net proceeds received by the Company in connection with any offering of stock or other equity in the Company after December 31, 2025 (with a step-down based on 70% of the impairment charge and/or loss resulting from dispositions of the mortgaged properties of the Company and its subsidiaries, or such other amount as agreed to by the Company and the Lenders) and (ii) a minimum liquidity of not less than $5,000,000 in cash or cash equivalents. The Company was in compliance with the Credit Agreement financial covenants as of March 31, 2026.
The Credit Agreement provides for customary events of default with corresponding grace periods, including, among other things, failure to pay principal or interest when due, breaches of certain covenants, inaccuracies in representations and warranties, certain cross defaults, certain defaults under material contracts, insolvency or bankruptcy events, the entry of certain judgments, the occurrence of a change in control of the Company (as defined in the Credit Agreement) and the departure of the chairman and chief executive officer of the Company. In the event of a default by the Company, the Agent may, and at the request of the requisite number of Lenders, shall, declare any commitment of the Lenders to make Term Loans terminated, declare all obligations under the Credit Agreement immediately due and payable and enforce any and all rights of the Lenders under the Credit Agreement and related documents. Certain events of default related to bankruptcy, insolvency, and receivership result in the automatic acceleration of all outstanding obligations.
The Company used the proceeds of the Initial Term Loans on the Closing Date to refinance and retire all outstanding indebtedness under the documents evidencing the BMO Term Loan, the BofA Term and the Senior Notes (each as defined below) and to pay fees and expenses related to the Credit Agreement. The Company incurred approximately $1.0 million of costs in connection with the retirement of the debt, consisting of a make-whole premium related to the Senior Notes and legal and professional fees payable to the lenders under the BMO Term Loan, the BofA Term Loan, and the Senior Notes. These costs were recognized as part of the loss on debt extinguishment.
The Company may use the proceeds of any Delayed Draw Term Loans funded to finance tenant improvements, leasing commissions, building improvements and other uses approved by the Lenders, subject to certain conditions, in each case as permitted under the Credit Agreement.
BMO Term Loan
On February 26, 2026, the Company repaid in its entirety the Company’s term loan borrowing in the aggregate principal amount of approximately $70.7 million, with Bank of Montreal, as administrative agent, and the other lending institutions party thereto, which the Company refers to as the BMO Term Loan. The BMO Term Loan would have matured on April 1, 2026. The BMO Term Loan was subject to the terms of the Second Amended and Restated Credit Agreement dated September 27, 2018, which the Company refers to as the Original BMO Credit Agreement, as amended by the First Amendment to Second Amended and Restated Credit Agreement dated February 10, 2023, which the Company refers to as the BMO First Amendment, and the Second Amendment to Second Amended and Restated Credit Agreement dated February 21, 2024, which the Company refers to as the BMO Second Amendment. The Company refers to the Original BMO Credit Agreement, as amended by the BMO First Amendment and the BMO Second Amendment, as the BMO Credit Agreement.
Effective April 1, 2025, the interest rate on the BMO Term Loan increased from 8.00% per annum to 9.00% per annum. As of February 26, 2026 and December 31, 2025, the interest rate on the BMO Term Loan was 9.00% per annum. The weighted average variable interest rate on all amounts outstanding under the BMO Term Loan was 9% for the period of January 1, 2026 until February 26, 2026 and was 8.75% for the year ended December 31, 2025.
The BMO Credit Agreement contained customary affirmative and negative covenants for credit facilities of this type. The BMO Credit Agreement also contained financial covenants that required 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 also provided 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 (as defined in the BMO Credit Agreement).
BofA Term Loan
On February 26, 2026, the Company repaid in its entirety the Company’s term loan borrowing in the amount of approximately $55.3 million, with Bank of America, N.A. as administrative agent, and other lending institutions party thereto, which the Company refers to as the BofA Term Loan. The BofA Term Loan would have matured on April 1, 2026. The BofA Term Loan was subject to the terms of the Credit Agreement dated January 10, 2022, which the Company refers to as the Original BofA Credit Agreement, as amended by the First Amendment to Credit Agreement dated February 10, 2023, which the Company refers to as the BofA First Amendment, and the Second Amendment to Credit Agreement dated February 21, 2024, which the Company refers to as the BofA Second Amendment. The Company refers to the Original BofA Credit Agreement, as amended by the BofA First Amendment and the BofA Second Amendment, as the BofA Credit Agreement.
Effective April 1, 2025, the interest rate on the BofA Term Loan increased from 8.00% per annum to 9.00% per annum. As of February 26, 2026 and December 31, 2025, the interest rate on the BofA Term Loan was 9.00% per annum. The weighted average variable interest rate on all amounts outstanding under the BofA Term Loan was 9% for the period of January 1, 2026 until February 26, 2026 and was 8.75% for the year ended December 31, 2025.
The BofA Credit Agreement contained customary affirmative and negative covenants for credit facilities of this type. The BofA Credit Agreement also contained financial covenants that required 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 BofA Credit Agreement also provided 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 (as defined in the BofA Credit Agreement).
11
Senior Notes
On February 26, 2026, the Company repaid in its entirety the Company’s two series of senior notes in the aggregate principal amount of approximately $122.9 million, which the Company refers to as the Senior Notes. The Senior Notes would have matured on April 1, 2026. The Senior Notes consisted of (i) Series A Senior Notes due April 1, 2026 in an aggregate principal amount of approximately $71.3 million, which the Company refers to as the Series A Notes, and (ii) Series B Senior Notes due April 1, 2026 in the aggregate principal amount of approximately $51.6 million, which the Company refers to as the Series B Notes. The Senior Notes were subject to the terms of the Note Purchase Agreement dated October 24, 2017, which the Company refers to as the Original Note Purchase Agreement, as amended by the First Amendment to Note Purchase Agreement dated February 21, 2024. The Company refers to the Original Note Purchase Agreement, as amended by the NPA First Amendment, as the Note Purchase Agreement.
Effective April 1, 2025, the interest rates on both the Series A Notes and the Series B Notes permanently increased from 8.00% per annum to 9.00% per annum. As of February 26, 2026 and December 31, 2025, the interest rate on both the Series A Notes and the Series B Notes was 9.00% per annum and 9.00% per annum, respectively.
The Note Purchase Agreement contained customary affirmative and negative covenants. The Note Purchase Agreement also contained financial covenants that required 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.
3. Net Income (Loss) Per Share
Basic net income (loss) per share is computed by dividing net income (loss) by the weighted average number of Company shares outstanding during the period. Diluted net income (loss) 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 March 31, 2026 and 2025.
4. Stockholders’ Equity
As of March 31, 2026, the Company had 103,690,340 shares of common stock outstanding. The Company declared and paid dividends as follows (in thousands, except per share amounts):
Dividends Per
Quarter Paid
Share
Dividends
2026:
First quarter of 2026
0.01
1,037
2025:
First quarter of 2025
1,036
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.
12
On May 30, 2025, 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 three months ended June 30, 2025, and is included in general and administrative expenses for such period. Such shares were fully vested on the date of issuance.
Shares Available
Compensation
for Grant
Cost
Balance December 31, 2024
1,365,886
1,991,238
Shares granted 2025
(123,625)
224,998
Balance December 31, 2025
1,242,261
2,216,236
Shares granted 2026
Balance March 31, 2026
5. 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 $5.0 million and $4.9 million as of December 31, 2025 and December 31, 2024, respectively. The NOLs created prior to 2018 will expire between 2030 and 2037 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. The Company is expecting to use approximately $39,000 of the TRS’s NOLs in 2026 to offset federal income tax related to the actives of the TRSs; therefore, approximately $39,000 of the valuation allowances were reversed during the three months ending March 31, 2026.
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 2022 and thereafter.
Net operating losses
Section 382 of the Code restricts a corporation’s ability to use net operating losses (“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
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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 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 gross NOLs available as the realization of any tax benefits remaining from such NOLs is not assured. The gross amount of NOLs available to the Company was approximately $150.8 million as of both March 31, 2026 and December 31, 2025.
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 $52,000 and $52,000 for the three months ended March 31, 2026 and 2025, respectively.
The income tax expense reflected in the consolidated statements of operations relates primarily to a franchise tax on the Company’s Texas properties and federal income tax related to the TRSs.
(Dollars in thousands)
Federal Income Tax
Revised Texas Franchise Tax
Other Taxes
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.
6. Leases
Leases as a Lessor:
The Company is a lessor of commercial real estate with operations that include the leasing of office 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 three months ended March 31, 2026 and 2025, the Company recognized the following amounts of income relating to lease payments:
Income relating to lease payments:
Income from leases (1)
26,445
27,178
(1) Includes amounts recognized from variable lease payments of $7,770 and $8,107 for the three months ended March 31, 2026 and 2025, respectively.
7. Disposition of Properties and Assets Held for Sale
On April 7, 2025, Monument Circle entered into a purchase and sale agreement to sell its property located in Indianapolis, Indiana to a third party for a gross sales price of $6.0 million. The property was sold on June 6, 2025 at a total loss of $12.9 million, including an impairment loss of $13.3 million that was recorded during the three months ended March 31, 2025 and was decreased by $0.4 million for final sale adjustments during the three months ended June 30, 2025 after the sale was completed.
8. Segment Information
The Company is a REIT focused on real estate investments primarily in the office market and currently operates in one segment: real estate operations. Each of the Company’s properties qualify as an operating segment but are aggregated together because they exhibit similar economic characteristics and operating similarities.
The chief operating decision maker (“CODM”) of the Company is the Company’s Chief Executive Officer. The CODM measures the performance and profit or loss for the Company’s reportable segment using a measure referred to as Segment Net Operating Income (“Segment NOI”). The CODM utilizes Segment NOI when considering the deployment of the Company’s capital resources on a property-by-property basis. The significant expense categories which the Company’s CODM examines when measuring the segment’s performance include real estate operating expenses and real estate taxes and insurance. Asset information by segment is not reported because the Company does not use this measure to assess performance. The total assets of the Company’s reportable segment can be found on the Company’s consolidated balance sheets.
Segment 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, hedge ineffectiveness, gains or losses on the sale of assets and excludes income taxes. Segment NOI, as defined by the Company, may not be comparable to NOI reported by other REITs that define NOI differently. Segment 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 Segment NOI are shown in the following table:
Three Months Ended
March 31, 2026
March 31, 2025
Total consolidated revenues
Less:
Segment NOI
11,692
11,643
Reconciliation to Net loss
Add (deduct):
(Gain) loss on sale of properties and impairment of assets held for sale, net
Interest expense
(163)
(259)
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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, 2025. Historical results and percentage relationships set forth in the consolidated financial statements, including trends which might appear, should not be taken as necessarily indicative of future operations. The following discussion and other parts of this Quarterly Report on Form 10-Q may also contain forward-looking statements based on current judgments and current knowledge of management, which are subject to certain risks, trends and uncertainties that could cause actual results to differ materially from those indicated in such forward-looking statements. Accordingly, readers are cautioned not to place undue reliance on forward-looking statements. Investors are cautioned that our forward-looking statements involve risks and uncertainty, including without limitation, adverse changes in general economic or local market conditions, including as a result of the long-term effects of the COVID-19 pandemic, wars, terrorist attacks or other acts of violence, which may negatively affect the markets in which we and our tenants operate, impacts of changes in tariffs that the United States and other countries have announced or implemented, as well as any additional new tariffs, trade restrictions or export regulations that may be implemented or reversed in the future, inflation rates, interest rates, 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, 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, changes in government regulations and regulatory uncertainty, uncertainty about governmental fiscal policy, 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, 2025. 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 focus on 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 are focused on long-term growth and appreciation.
As of March 31, 2026, all of our total owned portfolio, consisting of approximately 4.8 million square feet, 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.
In May 2025, we announced that our Board of Directors had initiated a review of strategic alternatives in order to explore ways to maximize shareholder value. The review of potential strategic alternatives includes the evaluation of a range of alternatives, including corporate transactions, portfolio level transactions, individual asset sales, refinancing alternatives and other strategic initiatives.
On February 26, 2026, we closed a $320 million secured credit facility with an affiliate of TPG Credit. We repaid in full all of our then outstanding approximately $249 million aggregate principal amount of indebtedness with borrowings under the facility. The facility has an original stated maturity of February 26, 2029, subject to potential extension of up to one year at
our option, subject to certain conditions. The facility includes up to $45 million of delayed draw term loans which, subject to certain conditions, may be used to fund tenant improvements, leasing commissions, building improvements and other uses approved by the lenders. See Note 2, Term Loans Payable and Senior Notes, of the Notes to Consolidated Financial Statements contained in Part I, Item 1 of this Quarterly Report on Form 10-Q for further information on the Credit Agreement.
In April 2026, we announced that our Board of Directors had expanded its ongoing review of strategic alternatives to include BofA Securities, Inc. and Jones Lang LaSalle Securities, LLC as co-financial advisors. We believe that our co-financial advisors bring complementary capabilities across capital markets, mergers and acquisitions, and asset level execution, positioning us to evaluate a broad range of potential transactions with the objective of maximizing shareholder value.
Our review of potential strategic alternatives remains ongoing. While the capital markets environment for office assets remains uneven and transaction volume for office assets continues to be below historical levels, with constrained liquidity and limited participation from traditional institutional investors, and buyer activity remains more heavily weighted toward private, opportunistic, and non-traditional capital, we believe we are beginning to observe early signs of stabilization, which may represent the initial stages of a broader recovery over time.
We continue to prioritize leasing and occupancy improvement across our portfolio and have seen an increased number of larger prospective leasing opportunities across our markets. We also continue to focus on driving efficiencies across our platform, including the management of general and administrative expenses. We believe that the combination of an expanded and active strategic review process, disciplined execution, and continued leasing progress will provide the best path to maximizing value for our shareholders.
We have entered into an Inspection and Confidentiality Agreement with a potential owner user for our Greenwood Plaza property and are simultaneously negotiating a Purchase and Sale Agreement with that potential buyer. Closing of the transaction would be subject to completion of due diligence by the potential buyer, the negotiation and execution of a Purchase and Sale Agreement with the potential buyer and the satisfaction of other customary closing conditions.
In March 2026, our Board of Directors determined to suspend quarterly cash dividends to, in part, redeploy that capital into leasing efforts intended to enhance the value of our portfolio. In addition, the Credit Agreement provides that we may not declare dividends in excess of the greater of $0.01 per share or such amount as is required to maintain our status as a REIT. Any future declaration and payment of dividends will be determined from time to time by our Board of Directors and will depend on, among other things, our results of operations, cash flows, liquidity, financial condition, capital requirements and other factors the Board of Directors deems relevant.
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Trends and Uncertainties
Long-Term Impact of COVID-19 Pandemic
Uncertainty still surrounds the long-term impact of the COVID-19 pandemic on the commercial real estate market and our business. Many of our tenants still do not fully occupy the space that they lease. The impact of 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, decreases in values of our real estate assets, and uncertainty regarding government and regulatory policy. We are unable to estimate the full extent of the long-term impact that the COVID-19 pandemic has had and will have on our future financial results at this time. See “The long-term impact of the COVID-19 pandemic has had and may continue to have an adverse impact on our financial condition and results of operations. This impact could be materially adverse to the extent that the long-term impact of the COVID-19 pandemic, or future pandemics, cause tenants to be unable to pay their rent or reduce the demand for commercial real estate, or cause other impacts described below.” in Part I, Item 1A. “Risk Factors ” in our Annual Report on Form 10-K for the year ended December 31, 2025.
Economic Conditions
The global economy continues to experience significant disruptions as a result of various factors, including changes in U.S. trade or other policies or those policies of other nations, geopolitical events such as the conflicts in Ukraine and the Middle East, including Iran, increasing tensions with China, tensions between the U.S. and Europe related to the sovereignty of Greenland, major political shifts domestically or internationally and continuing supply chain difficulties. In addition, various economic factors, including but not limited to, impacts of changes in tariffs that the United States and other countries have announced or implemented, as well as any additional new tariffs, trade restrictions or export regulations that may be implemented or reversed in the future, inflation and interest rates, may adversely affect 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, 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. Increased interest rates could 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 March 31, 2026, our real estate portfolio was comprised of 14 owned properties, which we refer to as our owned properties. Our owned properties were approximately 68.4% leased as of March 31, 2026, a decrease from 68.9% leased as of December 31, 2025. The 0.5% decrease in leased space was primarily a result of lease expirations exceeding new executed leases during the three months ended March 31, 2026. As of March 31, 2026, we had approximately 1,520,000 square feet of vacancy in our owned properties compared to approximately 1,497,000 square feet of vacancy at December 31, 2025. During the three months ended March 31, 2026, we leased approximately 145,000 square feet of office space in our owned properties, of which approximately 112,000 square feet were with existing tenants, at a weighted average term of 6.2 years. On average, tenant improvements for such leases were $33.55 per square foot, lease commissions were $11.53 per square foot and rent concessions were approximately five months of free rent. Average GAAP base rents under such leases were $35.16 per square foot, or 6.4% higher than average rents in the respective properties as applicable compared to the year ended December 31, 2025.
As of March 31, 2026, leases for approximately 4.5% and 10.1% of the square footage in our owned portfolio are scheduled to expire during 2026 and 2027, respectively. As the second quarter of 2026 begins, we believe that:
•approximately half of our operating properties are stabilized with leased occupancy of 75% or more; and
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•our remaining operating properties are value add in nature with leased occupancy of less than 75%.
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 second quarter of 2026 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.
Dispositions of Properties and Assets Held for Sale
On April 7, 2025, Monument Circle entered into a purchase and sale agreement with a third party to sell its property located in Indianapolis, Indiana for a gross sales price of $6.0 million. We estimated the fair value of this property, less estimated costs to sell, based on the purchase price set forth in the letter of intent to purchase the property that Monument Circle entered into with the third party, which resulted in recording an impairment loss of $13.3 million during the three months ended March 31, 2025, and we reclassified the property as an asset held for sale of $5.7 million as of March 31, 2025. On June 6, 2025, the property was sold and the impairment loss was decreased by $0.4 million during the three months ended June 30, 2025 to a net loss of $12.9 million for final sale adjustments after the sale was completed.
The disposition of this property did not represent a strategic shift that has a major effect on our operations and financial results. Our current strategy is to focus on the sunbelt and mountain west regions of the United States. Accordingly, the property sold remained classified within continuing operations for all periods presented.
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, 2025.
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.
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 requirements by June 30, 2027, any related FASB amendments will be removed from the Accounting Standards
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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.
Results of Operations
The following table shows financial results for the three months ended March 31, 2026 and 2025:
Three months ended March 31,
Change
(882)
195
(1,126)
(244)
(815)
1,121
(869)
(1,265)
Gain (loss) on sale of properties and impairment of assets held for sale, net
(96)
11,910
11,908
Comparison of the three months ended March 31, 2026 to the three months ended March 31, 2025:
Revenues
Total revenues decreased by $0.9 million to $26.2 million for the three months ended March 31, 2026, as compared to the three months ended March 31, 2025. The decrease was primarily a result of:
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Expenses
Total expenses decreased by $0.9 million to $34.6 million for the three months ended March 31, 2026, as compared to the three months ended March 31, 2025. The decrease was primarily a result of:
These decreases were partially offset by:
During the three months ended March 31, 2026 and 2025, we repaid debt and incurred losses on extinguishment of debt of approximately $1.3 million and $2,000, respectively, related to debt deal costs incurred from refinanced debt in February 2026 and unamortized deferred financing costs on the dates of debt repayments in both periods.
Loss on sale of properties and impairment on asset held for sale
On April 7, 2025, Monument Circle entered into a purchase and sale agreement to sell its property located in Indianapolis, Indiana for a gross sales price of $6.0 million. We estimated the fair value of this property, less estimated costs to sell, based on the purchase price set forth in the letter of intent to purchase the property that Monument Circle entered into with the third party, which resulted in recording an impairment loss of $13.3 million.
During the three months ended March 31, 2026 and March 31, 2025, we invested disposition proceeds in an interest-bearing account and earned $0.2 million and $0.3 million, respectively, in interest income.
Tax expense on income
Included in income taxes is the Revised Texas Franchise Tax, which is a tax on revenues from Texas properties and which was $54,000 during the three months ended March 31, 2026, compared to $52,000 during the three months ended March 31, 2025.
Net loss for the three months ended March 31, 2026 was $9.5 million, compared to a net loss of $21.4 million for the three months ended March 31, 2025, 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 three months ended March 31,
(in thousands):
Loss on sale of properties and impairment of asset held for sale, net
NAREIT FFO
1,053
2,673
Lease Acquisition costs
98
1,151
2,727
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 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
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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
Inc
%
or RSF
31-Mar-26
31-Mar-25
(Dec)
Region
MidWest
758
1,372
1,356
1.2
South
1,908
4,692
4,331
361
8.3
West
2,143
5,397
5,849
(452)
(7.7)
Property NOI* from Owned Properties
4,809
11,461
11,536
(75)
(0.7)
Disposition and Acquisition Properties (a)
-
(10)
(193)
183
1.7
Property NOI*
11,451
11,343
108
1.0
Same Store
Less Nonrecurring
Items in NOI* (b)
55
(3)
0.1
Comparative
11,409
11,481
(72)
(0.6)
Reconciliation to Net Income (Loss)
Management fee income
(375)
(380)
Amortization of above/below market leases
Non-property specific items, net
188
132
*Excludes NOI from investments in and interest income from secured loans to non-consolidated REITs.
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The information presented below provides the weighted average GAAP rent per square foot for the three months ended March 31, 2026 for our owned properties and weighted occupancy square feet and percentages. GAAP rent includes the impact of tenant concessions and reimbursements.
Weighted
Occupied
Year Built
Percentage as of
Average
or
Net Rentable
Rent per Occupied
Property Name
City
State
Renovated
Square Feet
Sq. Ft.
2026 (a)
Square Feet (b)
121 South 8th Street
Minneapolis
MN
1974
297,744
221,998
74.6
24.53
801 Marquette Ave
1923/2017
129,691
119,108
91.8
27.29
Plaza Seven
1987
330,096
161,285
48.9
31.26
Midwest Total
757,531
502,391
66.3
27.34
Park Ten
Houston
TX
1999
157,609
130,563
82.8
27.67
Addison Circle
Addison
289,333
186,128
64.3
37.03
Eldridge Green
248,399
100.0
28.16
Park Ten Phase II
2006
156,746
118,735
75.8
28.98
Liberty Plaza
1985
217,841
142,381
65.4
26.41
Legacy Tennyson Center
Plano
1999/2008
209,562
127,560
60.9
31.16
Westchase I & II
1983/2008
629,025
385,341
61.3
23.66
South Total
1,908,515
1,339,107
70.2
28.22
1999 Broadway
Denver
CO
1986
682,639
331,831
48.6
34.37
1001 17th Street
1977/2006
652,423
482,467
74.0
35.62
600 17th Street
1982
612,143
413,564
67.6
34.95
Greenwood Plaza
Englewood
2000
196,236
127,573
65.0
31.59
West Total
2,143,441
1,355,435
63.2
34.73
Total Owned Properties
3,196,933
66.5
30.84
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Liquidity and Capital Resources
Cash and cash equivalents were $23.8 million and $30.6 million as of March 31, 2026 and December 31, 2025, respectively. The decrease of $6.8 million is attributable to $5.1 million used in operating activities, less $2.7 million used in investing activities plus $1.0 million provided by 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, use of our Delayed Draw Term Loans (as defined below) and proceeds from 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 pay any dividends to stockholders in the future will depend in significant part upon the level of rental income from our real properties, property dispositions and our interest costs.
Operating Activities
Cash used in operating activities for the three months ended March 31, 2026, of $5.1 million is primarily attributable to a net loss of $9.5 million, plus the add-back of $13.1 million of non-cash expenses, less a decrease in accounts payable and accrued compensation of $6.7 million, less an increase in payment of deferred leasing commissions of $1.4 million, less an increase in lease acquisition costs of $0.1 million, less an increase in tenant receivables of $0.9 million plus an increase in prepaid expenses of $0.4 million.
Investing Activities
Cash used in investing activities for the three months ended March 31, 2026, of $2.7 million is primarily attributable to purchases of other real estate assets and office equipment investments.
Financing Activities
Cash provided by financing activities for the three months ended March 31, 2026 of $1.0 million is primarily attributable to funding from our Term Loan of $258.5 million less payment of distributions to stockholders of $1.0 million, costs of extinguishment of debt of $1.0 million, the repayment of $249.0 million of our debt that was refinanced with the Term Loan and deferred financing costs of $6.5 million.
Liquidity beyond the next 12 months
Our ability to generate cash adequate to meet our needs is dependent primarily on income from real estate investments, the sale of real estate investments, leveraging of real estate investments, 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.
We intend to operate our properties from the cash flows generated by our properties. However, our expenses are affected by various factors, including inflation. See Part II, Item 1A, Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2025 for additional factors. 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 from new lenders, adding or refinancing existing debt or raising capital through public offerings or At The Market (ATM) programs of our common stock.
On February 26, 2026 (the “Closing Date”), we entered into a Credit Agreement (the “Credit Agreement”) with Alter Domus (US) LLC, as administrative agent, and Silver Oak Capital LLC, an affiliate of TPG Credit (collectively, the lenders from time-to-time party thereto, the “Lenders”). The Credit Agreement provides for a secured credit facility for aggregate principal commitments of up to $320 million, consisting of (i) initial term loans in an aggregate principal amount
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of $275 million (the “Initial Term Loans”), and (ii) delayed draw term loans available upon the approval of the Lenders after the Closing Date in an aggregate principal amount of up to $45 million (the “Delayed Draw Term Loans” and together with the Initial Term Loans, the “Term Loans”). The Delayed Draw Term Loans may be used, subject to certain conditions, to fund tenant improvements, leasing commissions, building improvements and other uses approved by the Lenders. The Term Loans are not subject to amortization and have an initial stated maturity date of February 26, 2029. The maturity date is subject to potential extension of up to one year at the option of the Company, subject to the satisfaction of certain conditions. We used the proceeds of the Initial Term Loans on the Closing Date to refinance and retire all outstanding indebtedness under the BMO Term Loan, BofA Term Loan and the Senior Notes (each as defined below). See Note 2, Term Loans Payable and Senior Notes, of the Notes to Consolidated Financial Statements contained in Part I, Item 1 of this Quarterly Report on Form 10-Q for further information on the Credit Agreement.
On February 26, 2026, we repaid in its entirety our term loan borrowing in the aggregate principal amount of approximately $70.7 million, with Bank of Montreal, as administrative agent, and the other lending institutions party thereto, which we refer to as the BMO Term Loan. The BMO Term Loan would have matured on April 1, 2026. The BMO Term Loan was subject to the terms of the Second Amended and Restated Credit Agreement dated September 27, 2018, which we refer to as the Original BMO Credit Agreement, as amended by the First Amendment to Second Amended and Restated Credit Agreement dated February 10, 2023, which we refer to as the BMO First Amendment, and the Second Amendment to Second Amended and Restated Credit Agreement dated February 21, 2024, which we refer to as the BMO Second Amendment. We refer to the Original BMO Credit Agreement, as amended by the BMO First Amendment and the BMO Second Amendment, as the BMO Credit Agreement.
The BMO Credit Agreement contained customary affirmative and negative covenants for credit facilities of this type. The BMO Credit Agreement also contained financial covenants that required us 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 also provided 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 (as defined in the BMO Credit Agreement).
On February 26, 2026, we repaid in its entirety our term loan borrowing in the amount of approximately $55.3 million, with Bank of America, N.A. as administrative agent, and other lending institutions party thereto, which we refer to as the BofA Term Loan. The BofA Term Loan would have matured on April 1, 2026. The BofA Term Loan was subject to the terms of the Credit Agreement dated January 10, 2022, which we refer to as the Original BofA Credit Agreement, as amended by the First Amendment to Credit Agreement dated February 10, 2023, which we refer to as the BofA First Amendment, and the Second Amendment to Credit Agreement dated February 21, 2024, which we refer to as the BofA Second Amendment. We refer to the Original BofA Credit Agreement, as amended by the BofA First Amendment and the BofA Second Amendment, as the BofA Credit Agreement.
Effective April 1, 2025, the interest rate on the BofA Term Loan increased from 8.00% per annum to 9.00% per annum. As of February 26,2026 and December 31, 2025, the interest rate on the BofA Term Loan was 9.00% per annum. The weighted average variable interest rate on all amounts outstanding under the BofA Term Loan was 9% for the period of January 1, 2026 until February 26, 2026 and was 8.75% for the year ended December 31, 2025.
The BofA Credit Agreement contained customary affirmative and negative covenants for credit facilities of this type. The BofA Credit Agreement also contained financial covenants that required us to maintain a minimum tangible net
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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 BofA Credit Agreement also provided 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 (as defined in the BofA Credit Agreement).
On February 26, 2026, we repaid in its entirety our two series of senior notes in the aggregate principal amount of approximately $122.9 million, which we refer to as the Senior Notes. The Senior Notes would have matured on April 1, 2026. The Senior Notes consisted of (i) Series A Senior Notes due April 1, 2026 in an aggregate principal amount of approximately $71.3 million, which we refer to as the Series A Notes, and (ii) Series B Senior Notes due April 1, 2026 in the aggregate principal amount of approximately $51.6 million, which we refer to as the Series B Notes. The Notes were subject to the terms of the Note Purchase Agreement dated October 24, 2017, which we refer to as the Original Note Purchase Agreement, as amended by the First Amendment to Note Purchase Agreement dated February 21, 2024. We refer to the Original Note Purchase Agreement, as amended by the NPA First Amendment, as the Note Purchase Agreement.
The Note Purchase Agreement contained customary affirmative and negative covenants. The Note Purchase Agreement also contained financial covenants that required us 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.
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.
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.
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 months ended March 31, 2026 and 2025, respectively, the rental income exceeded the expenses for each individual property, with the exception of Monument Circle’s property for the three months ended March 31, 2025. Monument Circle sold its property on June 6, 2025. Monument Circle had approximately $76,000 of rental income and $293,000 of operating expenses for the three months ended March 31, 2025.
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, 2025.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
Market Rate Risk
Prior to February 26, 2026 when we repaid in full our variable interest rate debt in its entirety, we had been exposed to changes in interest rates primarily from these floating rate borrowing arrangements. As of March 31, 2026, there were no outstanding borrowings subject to variable rates.
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 March 31, 2026. 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 March 31, 2026, 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 March 31, 2026 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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, 2025 (“2025 Form 10-K”), which could materially affect our business, financial condition or future results. The risks described in the 2025 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.
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 March 31, 2026.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
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.
Item 6. Exhibits
Exhibit No.
Description
3.1 (1)
Articles of Incorporation, as amended.
3.2 (2)
Amended and Restated By-laws.
10.1 (3)
Credit Agreement, dated February 26, 2026, among FSP Corp., Alter Domus (US) LLC and the lenders party thereto.
31.1*
Certification of FSP Corp.’s Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*
Certification of FSP Corp.’s Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*
Certification of FSP Corp.’s Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*
Certification of FSP Corp.’s Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101*
The following materials from FSP Corp.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2026, 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.
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Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
Footnotes
(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).
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).
Incorporated by reference to Exhibit 10.1 to FSP Corp.’s Current Report on Form 8-K, filed on March 4, 2026 (File No. 001-32470).
*
Filed herewith.
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: April 28, 2026
/s/ George J. Carter
Chief Executive Officer and Director
George J. Carter
(Principal Executive Officer)
/s/ John G. Demeritt
Chief Financial Officer
John G. Demeritt
(Principal Financial Officer)