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, 2021. 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) (State or othe ...

Property Holdings and Dispositions - The company owns 34 office properties across 10 states as of December 31, 2020, consisting of 32 operating properties and 2 redevelopment properties[25] - An office property in Durham, North Carolina was sold for approximately $89.7 million, resulting in a gain of approximately $41.9 million on December 23, 2020[26] - The company anticipates property dispositions in 2021 to generate estimated gross proceeds between $350 million and $450 million, primarily for debt repayment[27] - The company has adopted a strategy to dispose of certain properties where valuation objectives have been met, enhancing financial flexibility[27] - The company is focused on acquiring properties in excellent locations with substantial infrastructure to avoid speculative investments[29] Financial Performance and Strategy - The company aims to create shareholder value through increased revenue from rental, dividends, interest, and fees, as well as net gains from property sales[24] - As of February 5, 2021, none of the company's owned properties were subject to mortgage debt, providing financial flexibility[36] Workforce and Diversity - The company had 37 employees as of February 5, 2021, with women representing 48.6% of the workforce, and 50.0% of management roles held by women[38] Debt and Interest Rates - Total debt amounts to $923.5 million, with significant repayments scheduled for 2023 and 2025[288] - The BAML Revolver has a total of $3.5 million due in 2023[288] - The JPM Term Loan remains at $100 million with no repayments due until 2024[288] - The BAML Term Loan has a repayment of $400 million scheduled for 2023[288] - BMO Term Loan Tranche A has a total of $55 million due in 2021[288] - BMO Term Loan Tranche B has a repayment of $165 million due in 2025[288] - Series A Notes total $116 million, with repayments due in 2025[288] - Series B Notes total $84 million, with repayments due thereafter[288] - The company has no immediate repayment obligations for the BAML Revolver and JPM Term Loan until 2024[288] - Overall, the company has structured its debt with staggered repayment schedules to manage cash flow effectively[288] Interest Rate Risk Management - As of December 31, 2020, a 10% increase in market rates on outstanding borrowings would decrease future earnings and cash flows by approximately $5,000 and $153,000 annually for the BAML Revolver and JPM Term Loan, respectively[281] - The interest rate on the BAML Revolver was LIBOR plus 120 basis points, or 1.34% per annum, as of December 31, 2020[281] - The interest rates on the BMO Term Loan, BAML Term Loan, and JPM Term Loan were fixed through interest rate swap agreements, with rates of 2.47%, 3.64%, and 3.69% per annum, respectively[282] - The fair value of the 2017 Interest Rate Swap was $(2,947) thousand, while the 2019 JPM Interest Rate Swap was $(2,102) thousand as of December 31, 2020[283] - The notional value of the 2019 BMO Interest Rate Swap was $220,000 thousand, with a strike rate of 2.39% and expiration in January 2024[283] - The BAML Revolver matures on January 12, 2022, while the JPM Term Loan matures on November 30, 2021[287] - The company has the right to extend the maturity date of the BAML Revolver and JPM Term Loan with two additional six-month extensions[287] - The company has mitigated interest rate risk on the BAML Term Loan through the 2017 Interest Rate Swap until September 27, 2021[282] - The company requires derivatives contracts to be with counterparties that have investment grade ratings to manage counterparty credit risk[285] - The effective portion of the derivatives' fair value is recorded to other comprehensive income in the consolidated statements of other comprehensive income (loss)[286] Regulatory Compliance and Competition - The company is committed to compliance with various governmental regulations, including the Americans With Disabilities Act (ADA) and fire safety regulations, which may require substantial capital expenditures[33][34] - The company may face competition from larger firms with more resources, which could impact rental revenues and occupancy levels[31]

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 September 30, 2020. OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to or organization) 401 Edgewater Place, Suite 200 Wakefield, MA 01880 (Address of principal executive offices)(Zip Code) (781) 557-130 ...

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 June 30, 2020. OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-32470 Franklin Street Properties Corp. (Exact name of registrant as specified in its charter) Maryland 04-357 ...

Part I. Financial Information [Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited consolidated financial statements for the quarter ended March 31, 2020, including Balance Sheets, Statements of Operations, Comprehensive Income (Loss), Stockholders' Equity, and Cash Flows [Consolidated Balance Sheets](index=5&type=section&id=Consolidated%20Balance%20Sheets) Total assets increased slightly to **$1.848 billion** as of March 31, 2020, while total liabilities rose to **$1.090 billion**, leading to a decrease in stockholders' equity to **$757.3 million** Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2020 | December 31, 2019 | | :--- | :--- | :--- | | **Total Assets** | **$1,847,627** | **$1,842,654** | | Real estate assets, net | $1,639,196 | $1,637,210 | | Cash, cash equivalents and restricted cash | $17,283 | $9,790 | | **Total Liabilities** | **$1,090,309** | **$1,056,258** | | Bank note payable | $30,000 | $0 | | Term loans payable, net | $766,124 | $765,733 | | **Total Stockholders' Equity** | **$757,318** | **$786,396** | [Consolidated Statements of Operations](index=7&type=section&id=Consolidated%20Statements%20of%20Operations) The company reported a net loss of **$1.071 million** for Q1 2020, an improvement from Q1 2019, driven by lower total expenses despite a revenue decline Q1 Statement of Operations Summary (in thousands, except per share amounts) | Metric | Q1 2020 | Q1 2019 | | :--- | :--- | :--- | | Total Revenues | $62,983 | $64,716 | | Total Expenses | $63,986 | $65,950 | | Net Loss | $(1,071) | $(1,205) | | Net Loss Per Share | $(0.01) | $(0.01) | [Consolidated Statements of Comprehensive Income (Loss)](index=8&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) Comprehensive loss significantly increased to **$19.4 million** in Q1 2020, primarily due to an **$18.4 million** unrealized loss on derivative financial instruments Q1 Comprehensive Income (Loss) (in thousands) | Component | Q1 2020 | Q1 2019 | | :--- | :--- | :--- | | Net Loss | $(1,071) | $(1,205) | | Unrealized (loss) on derivative instruments | $(18,353) | $(6,791) | | **Comprehensive Loss** | **$(19,424)** | **$(7,996)** | [Consolidated Statements of Stockholders' Equity](index=9&type=section&id=Consolidated%20Statements%20of%20Stockholders'%20Equity) Total stockholders' equity decreased by **$29.1 million** in Q1 2020, driven by a **$19.4 million** comprehensive loss and **$9.7 million** in common stock distributions - Stockholders' equity declined to **$757.3 million** at March 31, 2020, from **$786.4 million** at December 31, 2019, primarily due to a comprehensive loss of **$19.4 million** and common stock distributions of **$9.7 million**[18](index=18&type=chunk) [Consolidated Statements of Cash Flows](index=10&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operating activities decreased to **$7.2 million** in Q1 2020, while investing activities used **$20.1 million** and financing activities provided **$20.3 million**, resulting in a net cash increase of **$7.5 million** Q1 Cash Flow Summary (in thousands) | Cash Flow Activity | Q1 2020 | Q1 2019 | | :--- | :--- | :--- | | Net Cash from Operating Activities | $7,201 | $9,482 | | Net Cash used in Investing Activities | $(20,054) | $(17,095) | | Net Cash from Financing Activities | $20,346 | $5,268 | | **Net Increase (Decrease) in Cash** | **$7,493** | **$(2,345)** | [Notes to Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Notes detail the company's 32 operating properties, adoption of new accounting standards with no material impact, various debt facilities, and **$23.0 million** in derivative liabilities from interest rate swaps - As of March 31, 2020, the company's portfolio consisted of **32 operating properties** and three redevelopment properties[26](index=26&type=chunk)[27](index=27&type=chunk) - The company adopted new accounting standards for leases (ASU 2016-02) and credit losses (ASU 2016-13) with no material impact on financial statements[36](index=36&type=chunk)[37](index=37&type=chunk) - The company utilizes four interest rate swap agreements to hedge variable-rate term loans, resulting in a derivative liability of approximately **$23.0 million** at March 31, 2020[78](index=78&type=chunk)[82](index=82&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=20&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial condition and operations, focusing on U.S. sunbelt office properties, COVID-19 risks, Q1 leasing activity with **85.4%** occupancy, and affirming sufficient liquidity for the next 12 months [Overview](index=20&type=section&id=Overview) The company's strategy targets infill and central business district office properties in U.S. sunbelt and mountain west regions, with **78%** of its portfolio in five key markets as of Q1 2020 - The company's current strategy is to invest in infill and central business district office properties in the U.S. sunbelt and mountain west regions[108](index=108&type=chunk) - As of March 31, 2020, approximately **78%** of the company's owned portfolio was located in Atlanta, Dallas, Denver, Houston, and Minneapolis[109](index=109&type=chunk) [Trends and Uncertainties](index=20&type=section&id=Trends%20and%20Uncertainties) This section highlights significant risks from the COVID-19 outbreak, including uncertainty for leasing and property values, despite **98%** rent collection for April 2020 and affirmed liquidity for the next year - The COVID-19 outbreak presents material uncertainty and risk regarding property performance, leasing efforts, occupancy, and future rent collection levels[113](index=113&type=chunk) - As of April 28, 2020, the company collected approximately **98%** of rental receipts due in April 2020, despite some tenant requests for rent concessions[114](index=114&type=chunk) - Management believes existing cash, anticipated cash from operations, and **$570 million** availability under the BAML Revolver will be sufficient for at least the next 12 months[114](index=114&type=chunk) [Real Estate Operations](index=22&type=section&id=Real%20Estate%20Operations) The portfolio of **32 operating properties** was **85.4%** leased in Q1 2020, with approximately **280,000 square feet** leased, and updates provided on three redevelopment projects - The **32 operating properties** were approximately **85.4%** leased as of March 31, 2020, a decrease from **87.6%** at December 31, 2019[117](index=117&type=chunk) - During Q1 2020, the company leased approximately **280,000 square feet** of office space at an average GAAP base rent of **$31.17 per square foot**, **10.5%** higher than 2019 average rents[117](index=117&type=chunk) - Progress updates were provided for three redevelopment properties: 801 Marquette in Minneapolis (**37.0%** leased), Blue Lagoon in Miami (**73.1%** pre-leased), and Forest Park in Charlotte (**35%** pre-leased)[119](index=119&type=chunk)[120](index=120&type=chunk)[121](index=121&type=chunk) [Results of Operations](index=25&type=section&id=Results%20of%20Operations) Total revenues decreased by **$1.7 million** to **$63.0 million** in Q1 2020, offset by a **$2.0 million** decrease in total expenses, resulting in a net loss of **$1.1 million**, an improvement from Q1 2019 Comparison of Results for the Three Months Ended March 31 (in thousands) | Item | 2020 | 2019 | Change | | :--- | :--- | :--- | :--- | | Total Revenues | $62,983 | $64,716 | $(1,733) | | Total Expenses | $63,986 | $65,950 | $(1,964) | | **Net Loss** | **$(1,071)** | **$(1,205)** | **$134** | - The decrease in revenue was primarily due to a **$0.8 million** drop in rental revenue from lease expirations and a **$0.9 million** decrease in interest income from Sponsored REIT loans[137](index=137&type=chunk) - The decrease in expenses was mainly a result of lower real estate operating expenses (**$0.8 million**), depreciation (**$0.9 million**), and interest expense (**$0.3 million**)[137](index=137&type=chunk)[138](index=138&type=chunk) [Non-GAAP Financial Measures](index=27&type=section&id=Non-GAAP%20Financial%20Measures) The company uses FFO and NOI to evaluate performance, with Q1 2020 FFO at **$21.3 million** and Same Store NOI decreasing by **0.8%** to **$32.9 million** Funds From Operations (FFO) (in thousands) | Metric | Q1 2020 | Q1 2019 | | :--- | :--- | :--- | | Net Loss | $(1,071) | $(1,205) | | Depreciation and amortization | $22,265 | $23,133 | | NAREIT FFO | $21,194 | $21,928 | | Lease Acquisition costs | $98 | $182 | | **Funds From Operations** | **$21,292** | **$22,110** | Same Store Net Operating Income (NOI) (in thousands) | Metric | Q1 2020 | Q1 2019 | % Change | | :--- | :--- | :--- | :--- | | Same Store NOI | $32,902 | $33,179 | (0.8)% | [Liquidity and Capital Resources](index=31&type=section&id=Liquidity%20and%20Capital%20Resources) Cash and cash equivalents increased to **$17.3 million** in Q1 2020, with the company in compliance with all debt covenants and sufficient liquidity affirmed for the next 12 months - Cash, cash equivalents and restricted cash increased by **$7.5 million** during the quarter to **$17.3 million** as of March 31, 2020[157](index=157&type=chunk) - The company was in compliance with all financial covenants related to its JPM Term Loan, BMO Term Loan, BAML Credit Facility, and Senior Notes as of March 31, 2020[165](index=165&type=chunk)[170](index=170&type=chunk)[180](index=180&type=chunk)[185](index=185&type=chunk) - As of March 31, 2020, the company had one outstanding loan of **$21 million** to a Sponsored REIT[187](index=187&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=36&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate changes on floating-rate debt, managed through interest rate swap agreements that fix rates on specific term loans, with details provided on these derivative instruments - The company is exposed to interest rate risk primarily from its floating-rate borrowing arrangements, specifically the BAML Revolver and the unhedged portion of the JPM Term Loan[199](index=199&type=chunk) - To manage this risk, the company has entered into interest rate swap agreements to fix the base LIBOR rates on its BAML Term Loan, BMO Term Loan, and a **$100 million** portion of its JPM Term Loan[202](index=202&type=chunk) Derivative Instruments as of March 31, 2020 (in thousands) | Instrument | Notional Value | Strike Rate | Expiration Date | Fair Value | | :--- | :--- | :--- | :--- | :--- | | 2017 Interest Rate Swap | $400,000 | 1.12% | Sep-21 | $(4,902) | | 2013 BMO Interest Rate Swap | $220,000 | 2.32% | Aug-20 | $(1,616) | | 2019 JPM Interest Rate Swap | $100,000 | 2.44% | Nov-21 | $(3,529) | | 2019 BMO Interest Rate Swap | $220,000 | 2.39% | Jan-24 | $(12,988) | [Controls and Procedures](index=38&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of March 31, 2020, with no material changes to internal control over financial reporting during the quarter - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of March 31, 2020[209](index=209&type=chunk) - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, internal controls[210](index=210&type=chunk) Part II. Other Information [Legal Proceedings](index=39&type=section&id=Item%201.%20Legal%20Proceedings) The company anticipates that legal proceedings arising in the ordinary course of business will not have a material adverse effect on its financial position, cash flows, or results of operations - The company believes that the final disposition of any legal matters arising in the ordinary course of business will not have a material adverse effect on its financial position or results of operations[212](index=212&type=chunk) [Risk Factors](index=39&type=section&id=Item%201A.%20Risk%20Factors) A new risk factor details the severe disruptions from the COVID-19 pandemic, expected to adversely impact financial results, including tenant rent payments, real estate demand, and capital market access - A new risk factor was added detailing the severe disruptions caused by the COVID-19 outbreak, which is expected to have an adverse impact on the company's financial condition and results of operations[214](index=214&type=chunk) - Specific risks from the pandemic include tenants' inability to pay rent, difficulty accessing debt and equity capital, operational disruptions, and reduced demand for office space, particularly in energy-influenced markets[217](index=217&type=chunk)[226](index=226&type=chunk) - The full extent of the pandemic's impact is uncertain and will depend on future developments, including the duration of the outbreak and the global economic slowdown[222](index=222&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=40&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities or use of proceeds from such sales during the quarter - None[223](index=223&type=chunk) [Defaults Upon Senior Securities](index=40&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon its senior securities during the quarter - None[224](index=224&type=chunk) [Mine Safety Disclosures](index=40&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - None[225](index=225&type=chunk) [Other Information](index=41&type=section&id=Item%205.%20Other%20Information) The company reported no other information required to be disclosed in this section - None[228](index=228&type=chunk) [Exhibits](index=42&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with Form 10-Q, including CEO and CFO certifications and iXBRL formatted financial statements - The list of exhibits includes CEO and CFO certifications under Sections 302 and 906 of the Sarbanes-Oxley Act, as well as iXBRL data files[230](index=230&type=chunk)

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2019 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File No. 001-32470 FRANKLIN STREET PROPERTIES CORP. (Exact name of registrant as specified in its charter) Maryland 04-3578653 (State ...

Financial Data and Key Metrics Changes - The company reported funds from operations (FFO) of $24.9 million or $0.23 per share for Q3 2019, with an upward revision of full year 2019 FFO guidance [7][12][14] - As of September 30, 2019, the company had approximately $970 million of unsecured debt outstanding, with a debt service coverage ratio of about 3.8 times [7][9] - Total liquidity at quarter end was $620 million, consisting of $600 million available on the revolver and $20 million in cash [9] Business Line Data and Key Metrics Changes - The FSP operating portfolio was 89.7% leased as of September 2019, an increase from 88.1% in June [17] - Total leasing achieved for the first nine months of 2019 was 1,139,000 square feet, with approximately 444,000 square feet leased to new tenants [19] - The weighted average GAAP gross rental rate achieved on leasing activity for the first nine months was $32.73 per square foot, compared to $20.50 on a net rent basis [20] Market Data and Key Metrics Changes - Denver, the largest market representing 26% of the portfolio, saw leased occupancy improve to approximately 93.5% as of September, up from 90.7% at the end of 2018 [18] - Weighted average GAAP rents in Denver exceeded $33 per square foot, compared to $31.85 per square foot at the end of 2018 [18] Company Strategy and Development Direction - The company focuses on owning high-quality office properties primarily in the U.S. Sunbelt and Mountain West regions, aiming for value creation through excellent service and well-located properties [22] - The company has completed dispositions and/or mortgage repayments of over $351 million since 2014, indicating a strategic reshaping of its portfolio [23] - The company is actively tracking suitable investment opportunities but sees stronger internal IRR potential from existing properties than from new acquisitions [24] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the leasing results and the potential for net new absorption in the portfolio, despite challenges from a large lease roll [10][11] - The company is confident in its property portfolio and locations, emphasizing a bullish outlook for navigating the upcoming three-year period [52] Other Important Information - The company expects to execute a high percentage of new leases from a pipeline of approximately 200,000 square feet of new potential tenants [19] - The estimated lease termination fee income for 2019 is approximately $8.4 million, up from $6.1 million in 2018, primarily from a tenant buyout in Dallas [13][14] Q&A Session Summary Question: Can you detail the amount of square feet you are talking about regarding the leasing pipeline? - The company has approximately 200,000 square feet of high probability prospects for new leases and an additional 200,000 square feet for potential renewals, expecting a strong fourth quarter [28] Question: What is the status of the WorldVentures lease? - The tenant is transitioning from a sublease, and the commencement will likely be cash in Q2 or Q3, with a few months of free rent [31] Question: How much of the total 2019 lease termination income was from a specific tenant? - The total lease termination income was approximately $7.6 million, with some adjustments due to straight-line rent receivable write-downs [32][34] Question: What are the current prospects for the Innsbrook property in Richmond? - The property is currently at 57% leased, with a mixture of medium-sized and large tenants being considered, but no deals have been finalized yet [41] Question: Can you provide an update on the Dallas lease buyout? - The buyout was negotiated as part of a spinoff, with the tenant wanting a clean balance sheet, which is considered an unusual deal [44]

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 September 30, 2019. 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 0 ...

Financial Data and Key Metrics Changes - The company reported funds from operations (FFO) of $23.8 million or $0.22 per share for Q2 2019 [8] - As of June 30, the company had approximately $970 million of unsecured debt outstanding with a debt service coverage ratio of about 3.5x [8][10] - Total liquidity at the end of June was $613.1 million, including $600 million available on the revolver and $13.1 million in cash [10] Business Line Data and Key Metrics Changes - The FSP operating portfolio was 88.1% leased as of June 2019, while the entire portfolio, including redevelopment assets, was 85% leased [15] - Approximately 375,000 square feet were leased during Q2 2019, with 123,000 square feet leased to new tenants [16] - For the first half of 2019, the company leased approximately 835,000 square feet, including 218,000 square feet to new tenants, setting a record for the company [16] Market Data and Key Metrics Changes - The weighted average GAAP gross rental rate achieved on leasing activity for the first six months of the year was $31.46 per square foot, with a net rent basis of approximately $19.50 per square foot, representing a new high for FSP [19] - The company expects to improve net absorption and increase leased occupancy during Q3 2019, with a strong pipeline of prospective tenants [18] Company Strategy and Development Direction - The company focuses on owning high-quality office properties primarily in the U.S. Sunbelt and Mountain West regions, anticipating long-term employment and population growth in these areas [21] - The company has reshaped its portfolio over the past five years, completing dispositions and/or mortgage repayments totaling over $351 million [26] - Investment demand for high-quality office properties remains competitive, with historically low cap rates nationally [24] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about leasing results, indicating that 2019 is likely to be the trough in the percentage of leased space [14] - The company is financially prepared for current leasing efforts by increasing liquidity and fixing rates on much of its debt [13] - Management noted that the leasing activity is crucial for net new absorption to take place, with expectations of meaningful absorption in 2019 and 2020 [12] Other Important Information - The company sold the Energy Tower I property for $83.3 million, fully repaying a secured loan of approximately $51 million at the time of closing [25] - The company has no debt maturities until November 30, 2021, and about 95% of its debt is at fixed rates [10] Q&A Session Summary Question: What are the drivers behind the FFO guidance increase? - The increase in guidance is based on internal forecasts considering recent leasing activity, rising rents, and capitalizing operating expenses at redevelopment properties [32] Question: What is the expected impact of the 200,000 square feet of new prospective tenants? - The majority of the impact from these leases is expected to start in the second half of next year, with some smaller tenants potentially impacting Q4 of this year [34] Question: Can you provide an update on the Jones Day lease? - Jones Day is relocating to a new building, and the company is preparing to convert the current building to multi-tenant space [37] Question: Is the 200,000 square feet of new prospective tenants inclusive of the T-Mobile lease? - No, the 200,000 square feet excludes the T-Mobile lease [41] Question: How are operating expenses trending? - Operating expenses saw a healthy drop, attributed to capitalizing some expenses at redevelopment properties and better expense management [43] Question: Is the Board comfortable with the current dividend given the AFFO levels? - The Board is comfortable with the dividend and anticipates volatility in AFFO due to ongoing leasing activities [46]

[Part I. Financial Information](index=5&type=section&id=Part%20I.%20Financial%20Information) This section provides the company's unaudited consolidated financial statements, management's analysis of financial condition and operations, market risk disclosures, and internal controls assessment [Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited consolidated financial statements for Q2 2019, showing a net income increase for the quarter but a decrease for the six-month period year-over-year [Consolidated Balance Sheets](index=5&type=section&id=Consolidated%20Balance%20Sheets) Total assets decreased from **$1,898,102 thousand** at year-end 2018 to **$1,843,342 thousand** as of June 30, 2019, alongside reductions in total liabilities and stockholders' equity Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2019 | December 31, 2018 | | :--- | :--- | :--- | | **Total Assets** | **$1,843,342** | **$1,898,102** | | Real estate assets, net | $1,627,681 | $1,625,773 | | Cash, cash equivalents and restricted cash | $13,100 | $11,177 | | **Total Liabilities** | **$1,042,834** | **$1,060,468** | | Term loans payable, net | $765,005 | $764,278 | | **Total Stockholders' Equity** | **$800,508** | **$837,634** | [Consolidated Statements of Income](index=7&type=section&id=Consolidated%20Statements%20of%20Income) Net income for Q2 2019 increased to **$1,633 thousand** from **$665 thousand** in Q2 2018, but the six-month net income decreased significantly to **$428 thousand** from **$2,090 thousand** year-over-year Income Statement Summary (in thousands, except per share amounts) | Metric | Q2 2019 | Q2 2018 | 6 Months 2019 | 6 Months 2018 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $66,813 | $66,694 | $131,529 | $133,587 | | Total Expenses | $65,099 | $65,672 | $131,049 | $130,953 | | **Net Income** | **$1,633** | **$665** | **$428** | **$2,090** | | Net Income Per Share | $0.02 | $0.01 | $0.00 | $0.02 | [Consolidated Statements of Comprehensive Income](index=8&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) The company reported a comprehensive loss of **$9,828 thousand** in Q2 2019, a significant reversal from the **$3,120 thousand** comprehensive income in Q2 2018, primarily due to unrealized derivative losses Comprehensive Income (Loss) (in thousands) | Metric | Q2 2019 | Q2 2018 | 6 Months 2019 | 6 Months 2018 | | :--- | :--- | :--- | :--- | :--- | | Net Income | $1,633 | $665 | $428 | $2,090 | | Unrealized gain (loss) on derivatives | $(11,461) | $2,455 | $(18,252) | $9,030 | | **Comprehensive Income (Loss)** | **$(9,828)** | **$3,120** | **$(17,824)** | **$11,120** | [Consolidated Statements of Stockholders' Equity](index=9&type=section&id=Consolidated%20Statements%20of%20Stockholders%27%20Equity) Stockholders' equity decreased from **$837.6 million** at year-end 2018 to **$800.5 million** by June 30, 2019, driven by comprehensive loss and cash distributions - Total stockholders' equity decreased by **$37.1 million** in the first six months of 2019, from **$837.6 million** to **$800.5 million**[19](index=19&type=chunk) - The company distributed **$0.09 per share** in dividends in Q1 and Q2 2019, totaling **$19.3 million** for the six-month period[19](index=19&type=chunk)[95](index=95&type=chunk) [Consolidated Statements of Cash Flows](index=10&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operating activities for the first six months of 2019 decreased to **$24,650 thousand**, while investing activities provided **$21,656 thousand**, and financing activities used **$44,383 thousand** Cash Flow Summary for Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2019 | 2018 | | :--- | :--- | :--- | | Net cash provided by operating activities | $24,650 | $33,709 | | Net cash provided by (used in) investing activities | $21,656 | $(23,041) | | Net cash used in financing activities | $(44,383) | $(10,039) | | **Net increase in cash** | **$1,923** | **$629** | [Notes to Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) This section details the company's accounting policies, property portfolio, adoption of new accounting standards, financing arrangements, and subsequent dividend declarations - As of June 30, 2019, the company owned and operated a portfolio of **32 operating properties** and **three redevelopment properties**[27](index=27&type=chunk)[28](index=28&type=chunk) - The company adopted new accounting standards for Leases (ASU 2016-02) and Derivatives and Hedging (ASU 2017-12) on January 1, 2019[37](index=37&type=chunk)[39](index=39&type=chunk) - The company uses interest rate swaps to hedge variable interest rate risk on its BAML, BMO, and JPM term loans[84](index=84&type=chunk) The net fair value of these derivatives was a liability of approximately **$3.5 million** as of June 30, 2019[87](index=87&type=chunk)[88](index=88&type=chunk) - On July 5, 2019, the Board declared a cash distribution of **$0.09 per share** of common stock[114](index=114&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=33&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's strategy of investing in U.S. sunbelt office properties, noting a slight decrease in portfolio occupancy and a decline in H1 2019 FFO, while maintaining liquidity through cash flow and credit facilities - The company's strategy is to invest in infill and central business district properties in the U.S. sunbelt and mountain west regions[117](index=117&type=chunk) As of June 30, 2019, **78%** of the portfolio was concentrated in Atlanta, Dallas, Denver, Houston, and Minneapolis[118](index=118&type=chunk) - The operating property portfolio was **88.1% leased** as of June 30, 2019, a decrease from **89.0%** at December 31, 2018[130](index=130&type=chunk) Funds From Operations (FFO) (in thousands) | Period | FFO | FFO per Share (Calculated) | | :--- | :--- | :--- | | Q2 2019 | $23,769 | $0.22 | | Q2 2018 | $25,393 | $0.24 | | 6 Months 2019 | $45,879 | $0.43 | | 6 Months 2018 | $51,757 | $0.48 | - Liquidity is supported by cash on hand (**$13.1 million**), operating cash flow, and various credit facilities, including a **$600 million** BAML Revolver which was undrawn as of June 30, 2019[174](index=174&type=chunk)[191](index=191&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=62&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate exposure on floating-rate debt, which is actively managed through interest rate swaps to hedge the majority of its term loans - The company is primarily exposed to interest rate risk from its floating-rate borrowing arrangements[214](index=214&type=chunk) - Interest rate swaps are used to fix the base LIBOR rates on the BAML Term Loan (**2.47% effective rate**), BMO Term Loan (**3.57% effective rate**), and a **$100 million** portion of the JPM Term Loan (**3.69% effective rate**)[216](index=216&type=chunk) - A hypothetical **10% increase** in market rates on the unhedged portion of floating rate debt would decrease future annual earnings and cash flows by approximately **$0.2 million**[214](index=214&type=chunk) [Controls and Procedures](index=66&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of June 30, 2019, with no material changes to internal control over financial reporting during the quarter - Management concluded that disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2019[223](index=223&type=chunk) - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, internal controls[224](index=224&type=chunk) [Part II. Other Information](index=67&type=section&id=Part%20II.%20Other%20Information) This section covers legal proceedings, risk factors, equity sales, defaults, mine safety disclosures, other information, and a list of exhibits [Legal Proceedings](index=67&type=section&id=Item%201.%20Legal%20Proceedings) The company does not anticipate any material adverse effects on its financial position or operations from ordinary course legal proceedings - The company does not expect any ordinary course legal proceedings to have a material adverse effect on its financial position, cash flows, or results of operations[226](index=226&type=chunk) [Risk Factors](index=67&type=section&id=Item%201A.%20Risk%20Factors) No material changes to the risk factors previously disclosed in the 2018 Annual Report on Form 10-K have occurred - There have been no material changes to the risk factors previously disclosed in the 2018 Form 10-K[227](index=227&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=67&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) There were no unregistered sales of equity securities or use of proceeds reported during the period - None[228](index=228&type=chunk) [Defaults Upon Senior Securities](index=67&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) No defaults upon senior securities were reported by the company - None[229](index=229&type=chunk) [Mine Safety Disclosures](index=67&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) The company reported no mine safety disclosures - None[230](index=230&type=chunk) [Other Information](index=67&type=section&id=Item%205.%20Other%20Information) No other material information was reported by the company - None[231](index=231&type=chunk) [Exhibits](index=68&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the quarterly report, including required CEO and CFO certifications and iXBRL financial data - Exhibits filed include CEO and CFO certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act[233](index=233&type=chunk)