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)

Part I. Financial Information [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) The company reported a net loss of $1.2 million for the first quarter of 2019, a significant downturn from a net income of $1.4 million in the same period of 2018, with total assets slightly decreasing to $1.891 billion and cash flows from operations at $9.5 million Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2019 | December 31, 2018 | | :--- | :--- | :--- | | **Total Assets** | **$1,891,245** | **$1,898,102** | | Real estate assets, net | $1,624,833 | $1,625,773 | | Cash, cash equivalents and restricted cash | $8,832 | $11,177 | | **Total Liabilities** | **$1,071,258** | **$1,060,468** | | Term loans payable, net | $764,642 | $764,278 | | Bank note payable | $40,000 | $25,000 | | **Total Stockholders' Equity** | **$819,987** | **$837,634** | Consolidated Statement of Income Highlights (in thousands, except per share amounts) | Account | Three Months Ended March 31, 2019 | Three Months Ended March 31, 2018 | | :--- | :--- | :--- | | Total Revenues | $64,716 | $66,893 | | Rental Revenue | $63,359 | $65,628 | | Total Expenses | $65,950 | $65,281 | | **Net Income (Loss)** | **$(1,205)** | **$1,425** | | **Net Income (Loss) Per Share** | **$(0.01)** | **$0.01** | [Consolidated Statements of Comprehensive Income](index=6&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) Comprehensive loss for Q1 2019 was **$(8.0) million**, a stark contrast to the comprehensive income of **$8.0 million** in Q1 2018. This change was driven by an unrealized loss on derivative financial instruments of **$(6.8) million** in 2019 versus a gain of **$6.6 million** in 2018[14](index=14&type=chunk) [Consolidated Statements of Stockholders' Equity](index=7&type=section&id=Consolidated%20Statements%20of%20Stockholders%27%20Equity) - Total stockholders' equity decreased from **$837.6 million** at the end of 2018 to **$820.0 million** as of March 31, 2019. The decrease was primarily due to a comprehensive loss of **$(8.0) million** and common stock distributions of **$9.7 million**[16](index=16&type=chunk) - The company paid a dividend of **$0.09 per share** of common stock in Q1 2019, totaling **$9.7 million**. This is a reduction from the **$0.19 per share** dividend paid in Q1 2018, which totaled **$20.4 million**[16](index=16&type=chunk) [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Consolidated Statement of Cash Flows Highlights (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2019 | Three Months Ended March 31, 2018 | | :--- | :--- | :--- | | Net cash provided by operating activities | $9,482 | $15,078 | | Net cash used in investing activities | $(17,095) | $(10,154) | | Net cash provided by (used in) financing activities | $5,268 | $(388) | | **Net (decrease) increase in cash** | **$(2,345)** | **$4,536** | [Notes to Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) - As of March 31, 2019, the company's portfolio consisted of **32 operating properties** and **three redevelopment properties**. This is a decrease from **34 operating properties** as of March 31, 2018[24](index=24&type=chunk)[25](index=25&type=chunk)[26](index=26&type=chunk) - The company adopted new lease accounting standards (ASU 2016-02) on January 1, 2019, resulting in the recognition of a right-to-use asset of **$2.1 million** and a lease liability of **$2.2 million**[33](index=33&type=chunk) - The company has **four outstanding Sponsored REIT Loans** totaling **$72.8 million** as of March 31, 2019, which generated approximately **$1.3 million** in interest income and fees for the quarter[47](index=47&type=chunk)[49](index=49&type=chunk) - The company utilizes several interest rate swaps to hedge its variable-rate debt, qualifying them as cash flow hedges. As of March 31, 2019, the net fair value of these derivatives resulted in a derivative asset of **$10.5 million** and derivative liabilities of **$2.5 million**[77](index=77&type=chunk)[80](index=80&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=30&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the decline in revenues and FFO due to lease expirations and increased costs, alongside the company's strategic focus on U.S. sunbelt and mountain west properties with an 88.5% leased portfolio [Overview](index=30&type=section&id=Overview) - The company's current strategy is to invest in infill and central business district properties in the U.S. sunbelt and mountain west regions, seeking value-oriented investments with long-term growth potential[109](index=109&type=chunk) - As of March 31, 2019, approximately **78%** of the company's owned portfolio (**7.7 million square feet**) is concentrated in Atlanta, Dallas, Denver, Houston, and Minneapolis[110](index=110&type=chunk) [Trends and Uncertainties](index=34&type=section&id=Trends%20and%20Uncertainties) - The **32 operating properties** were **88.5% leased** as of March 31, 2019, a slight decrease from **89.0%** at year-end 2018[121](index=121&type=chunk) - During Q1 2019, the company leased approximately **460,000 square feet** of office space with a weighted average term of **9.0 years**. Average GAAP base rents for these new leases were **$32.32 per square foot**, **9.9% higher** than average rents in the respective properties compared to the prior year[121](index=121&type=chunk) - The company is actively redeveloping three properties: 801 Marquette in Minneapolis, Blue Lagoon in Miami, and Forest Park in Charlotte, with expected total costs of **$28.4 million**, **$23.6 million**, and **$3.7 million**, respectively[122](index=122&type=chunk)[123](index=123&type=chunk)[124](index=124&type=chunk)[125](index=125&type=chunk) [Results of Operations](index=37&type=section&id=Results%20of%20Operations) Comparison of Results of Operations (in thousands) | Account | Three Months Ended March 31, 2019 | Three Months Ended March 31, 2018 | Change | | :--- | :--- | :--- | :--- | | Total Revenues | $64,716 | $66,893 | $(2,177) | | Total Expenses | $65,950 | $65,281 | $669 | | **Net Income (Loss)** | **$(1,205)** | **$1,425** | **$(2,630)** | - The **$2.2 million** decrease in rental revenue was primarily due to the loss of income from leases that expired in 2018 and 2019[132](index=132&type=chunk) - The **$0.7 million** increase in total expenses was driven by a **$1.5 million** rise in real estate operating expenses, taxes, and insurance, partially offset by a **$0.8 million** decrease in depreciation and amortization[133](index=133&type=chunk) [Non-GAAP Financial Measures](index=39&type=section&id=Non-GAAP%20Financial%20Measures) Funds From Operations (FFO) Reconciliation (in thousands) | Account | Three Months Ended March 31, 2019 | Three Months Ended March 31, 2018 | | :--- | :--- | :--- | | Net income (loss) | $(1,205) | $1,425 | | Depreciation and amortization | $23,133 | $23,950 | | Other adjustments | $182 | $989 | | **Funds From Operations** | **$22,110** | **$26,364** | - Property Net Operating Income (NOI) from operating properties decreased by **6.4%** to **$33.2 million** in Q1 2019 from **$35.5 million** in Q1 2018. On a comparative same-store basis, NOI decreased by **4.5%**[146](index=146&type=chunk) [Liquidity and Capital Resources](index=43&type=section&id=Liquidity%20and%20Capital%20Resources) - Cash and cash equivalents decreased by **$2.3 million** during the quarter to **$8.8 million** as of March 31, 2019. The decrease resulted from **$17.0 million** used in investing activities, which was not fully offset by **$9.4 million** provided by operations and **$5.3 million** from financing activities[155](index=155&type=chunk) - As of March 31, 2019, the company had **$40 million** outstanding under its **$600 million** BAML Revolver[173](index=173&type=chunk) Major Debt Facilities Outstanding (as of March 31, 2019) | Facility | Principal Amount | Maturity Date | | :--- | :--- | :--- | | JPM Term Loan | $150 million | Nov 30, 2021 | | BMO Term Loan | $220 million | Nov 30, 2021 / Jan 31, 2024 | | BAML Term Loan | $400 million | Jan 12, 2023 | | Senior Notes | $200 million | Dec 20, 2024 / Dec 20, 2027 | [Quantitative and Qualitative Disclosures About Market Risk](index=52&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company manages interest rate risk on its floating-rate debt through swaps, with a hypothetical 10% market rate increase on unhedged debt estimated to decrease annual earnings by $0.3 million - The company uses interest rate swaps to mitigate risk on its variable-rate term loans. As of March 31, 2019, swaps were in place for the **$400 million** BAML Term Loan, the **$220 million** BMO Term Loan, and **$100 million** of the **$150 million** JPM Term Loan[195](index=195&type=chunk) - The unhedged floating rate exposure is on the BAML Revolver (**$40 million** outstanding) and a **$50 million** portion of the JPM Term Loan. A **10%** increase in market rates would result in an estimated **$0.3 million** annual increase in interest expense[193](index=193&type=chunk) [Controls and Procedures](index=56&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of March 31, 2019, with no material changes to internal control over financial reporting during the quarter - Based on an evaluation as of March 31, 2019, the CEO and CFO concluded that the company's disclosure controls and procedures were effective[201](index=201&type=chunk) - No changes in internal control over financial reporting occurred during the quarter ended March 31, 2019, that materially affected, or are reasonably likely to materially affect, internal controls[202](index=202&type=chunk) Part II. Other Information [Legal Proceedings](index=57&type=section&id=Item%201.%20Legal%20Proceedings) The company does not anticipate any material adverse effects on its financial position or operations from current legal proceedings - The company is not currently involved in any legal proceedings that are expected to have a material adverse effect on its financial condition or operations[205](index=205&type=chunk) [Risk Factors](index=57&type=section&id=Item%201A.%20Risk%20Factors) No material changes to the risk factors previously disclosed in the Annual Report on Form 10-K have occurred - No material changes to the risk factors disclosed in the Annual Report on Form 10-K for the year ended December 31, 2018, have occurred as of March 31, 2019[206](index=206&type=chunk) [Exhibits](index=58&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications and XBRL financial statements - Exhibits filed with this report include CEO and CFO certifications (**31.1, 31.2, 32.1, 32.2**) and XBRL data files (**101**)[211](index=211&type=chunk)

Financial Performance - Total revenue for FSP Corp. in 2018 was $268.87 million, a decrease of 1.6% from $272.59 million in 2017[135] - Net income for 2018 was $13.07 million, compared to a net loss of $15.94 million in 2017[135] - Total revenues decreased by approximately $3.7 million to $268.9 million for the year ended December 31, 2018, compared to $272.6 million in 2017[178] - Total expenses decreased by $1.9 million to $262.2 million for the year ended December 31, 2018, compared to $264.2 million in 2017[179] - Net income for the year ended December 31, 2018, was $13.1 million, a significant increase of $29.0 million compared to a net loss of $15.9 million in 2017[178] - Rental revenues decreased by $3.5 million to $263.8 million for the year ended December 31, 2018, compared to $267.3 million in 2017[178] - Net Operating Income (NOI) for the year ended December 31, 2018, was $144.3 million, a decrease of 1.7% from $146.8 million in 2017[210] - Same Store NOI decreased by 2.1% to $137.8 million in 2018 from $140.7 million in 2017[210] - Comparative Same Store NOI decreased by 4.2% to $131.7 million in 2018 from $137.4 million in 2017[210] - Funds From Operations (FFO) for the year ended December 31, 2018 was $102.5 million, compared to $111.4 million in 2017[207] Real Estate Portfolio - As of December 31, 2018, the real estate portfolio was approximately 89.0% leased, down from 89.7% in 2017, with a total vacancy of approximately 1,046,000 square feet[143] - The company leased approximately 1,681,000 square feet of office space in 2018, with average GAAP base rents at $31.02 per square foot, a 7.3% increase compared to the previous year[143] - Approximately 8.6% of the square footage in the owned portfolio is scheduled to expire in 2019, with expectations of positive leasing activity in major markets[148] - The company plans to actively evaluate its portfolio for potential advantageous property dispositions as market conditions improve[160] - As of December 31, 2018, the company had approximately $957.5 million in future minimum rental income commitments from non-cancelable operating leases[257] Redevelopment and Investment - FSP Corp. expects to incur redevelopment costs of $28.4 million for the 801 Marquette property, with $18.4 million already spent as of December 31, 2018[145] - The redevelopment of Blue Lagoon is expected to cost $22.5 million, with $0.9 million incurred as of December 31, 2018, and completion anticipated by the end of 2019[146] - The company continues to explore additional real estate investment opportunities, anticipating further investments in the future[155] Debt and Financing - Total assets as of December 31, 2018, were $1.90 billion, down from $1.99 billion in 2017, while total liabilities decreased to $1.06 billion from $1.12 billion[135] - The Company entered into a JPM Term Loan of $150 million, with an interest rate of 3.63% per annum as of December 31, 2018[221] - The BMO Term Loan amounts to $220 million, with an effective interest rate of 3.57% per annum as of December 31, 2018[226] - The Company has committed to fund up to $79.5 million to three Sponsored REITs, of which $70.7 million has been drawn and is outstanding[247] - The BAML Term Loan is for $400 million and matures on January 12, 2023[237] - The Company was in compliance with the financial covenants of both the BMO Credit Agreement and the BAML Credit Facility as of December 31, 2018[227][240] - The Company intends to use proceeds from the BAML Credit Facility for property acquisitions and general business purposes[241] - The BAML Revolver has a total of $25,000 due in 2023, while the Series A Notes and Series B Notes have maturities of $116,000 and $84,000, respectively, due in 2024 and 2027[277] Cash Flow and Liquidity - Cash and cash equivalents increased to $11.2 million in 2018 from $9.8 million in 2017, attributed to $80.2 million from operating activities[213] - Cash provided by investing activities was $25.7 million, primarily from liquidating distributions of $74.9 million from non-consolidated REITs[215] - Cash used in financing activities totaled $104.5 million, including $49.3 million in distributions to stockholders[216] - The Company anticipates generating sufficient funds from real estate operations to meet working capital and capital expenditure needs for at least the next 12 months[213] Accounting and Valuation - The company’s critical accounting policies involve significant estimates related to the allowance for doubtful accounts, impairment considerations, and the valuation of derivatives[161] - The company recognized an impairment charge of $0.3 million and $2.5 million during the three months ended June 30, 2018, and December 31, 2017, respectively, indicating a decline in fair value below the carrying value of investments in non-consolidated REITs[180] - The company’s derivatives are recorded at fair value in other liabilities, impacting other comprehensive income and earnings based on their effectiveness[273] Interest and Derivatives - Interest expense increased by approximately $6.0 million to $38.4 million for the year ended December 31, 2018, primarily due to interest accruing on Senior Notes issued at a weighted average rate of approximately 4.10%[179] - Interest income from loans to Sponsored REITs decreased by approximately $0.1 million due to repayments, partially offset by higher interest rates in 2018[182] - The interest rate on the BAML Revolver was LIBOR plus 120 basis points, or 3.70% per annum, as of December 31, 2018[270] - The company entered into interest rate swap agreements to mitigate interest rate risk, fixing the BAML Term Loan at 2.47% per annum and the BMO Term Loan at 3.57% per annum as of December 31, 2018[271]