Franklin Street Properties (US:FSP)2025-04-29 20:26Property Leasing and Occupancy - As of March 31, 2025, approximately 69.2% of the company's owned properties were leased, down from 70.3% as of December 31, 2024, with a total of approximately 1,482,000 square feet of vacancy[115] - The leased space in owned and consolidated properties was 66.4% as of March 31, 2025, down from 70.6% as of March 31, 2024[135] - The average GAAP base rents for newly leased office space were $29.64 per square foot, representing a 3.4% increase compared to the previous year[115] - The company expects to renew or sign new leases at current market rates, which may vary from expiring rates due to market conditions[118] Financial Performance - Total revenues decreased by $4.1 million to $27.1 million for the three months ended March 31, 2025, compared to the same period in 2024, primarily due to a decrease in rental revenue from property sales and lease expirations[135] - Total expenses decreased by $4.1 million to $35.5 million for the three months ended March 31, 2025, mainly due to reductions in real estate operating expenses, depreciation, and general administrative expenses[136] - Net loss for the three months ended March 31, 2025, was $21.4 million, compared to a net loss of $7.6 million for the same period in 2024[143] - Funds From Operations (FFO) for the three months ended March 31, 2025, was $2.7 million, down from $4.2 million in the same period in 2024[148] - Property NOI from owned properties decreased by 7.6% to $11.3 million from $12.2 million year-over-year[157] Debt and Financing - Approximately 50.6% of the company's total debt was unhedged variable rate debt as of March 31, 2025, which could be adversely affected by rising interest rates[114] - The company had aggregate outstanding indebtedness of approximately $250.2 million, with loans maturing on April 1, 2026[157] - The company intends to engage in discussions with lenders to extend or refinance existing debt, although there is substantial doubt about its ability to continue as a going concern[158][159] - The company anticipates that proceeds from property dispositions will primarily be used for debt repayment[126] - The company anticipates repaying the Sponsored REIT Loan, which has a principal amount of $24 million, through cash flow from the sale of the underlying property, currently under a purchase agreement for $6.0 million[191] Cash Flow and Liquidity - The total cash and cash equivalents decreased to $31.6 million as of March 31, 2025, down from $42.7 million at the end of 2024, a decrease of $11.1 million[160] - Cash used in operating activities was $5.4 million, primarily due to the net loss and adjustments for non-cash expenses[161] - Cash used in investing activities totaled $4.5 million, primarily for purchases of real estate assets and office equipment[162] Impairment and Asset Sales - An impairment loss of $13.3 million was recorded for a property classified as held for sale, with a gross sales price of $6.0 million expected from a property sale[123] - The company recorded an impairment loss of $13.3 million related to the estimated fair value of a property in Indianapolis, Indiana, which is under a purchase and sale agreement for $6.0 million[139] - The company continues to pursue the sale of select properties to enhance shareholder value and lease vacant spaces[126] Market Conditions and Future Outlook - The company continues to face uncertainties related to the long-term impact of the COVID-19 pandemic on tenant occupancy and rent collection[111] - The company is focusing on infill and central business district office properties in the U.S. sunbelt and mountain west regions, aiming for long-term growth and appreciation[103] Credit Ratings and Covenants - The company's credit rating was downgraded to Caa1 as of March 31, 2025, impacting borrowing costs and financial flexibility[110] - The minimum fixed charge coverage ratio was reduced from 1.50x to 1.25x under the BMO and BofA Credit Agreements[168][177] - The company was in compliance with the financial covenants of the BMO Term Loan as of March 31, 2025[175] - The company was in compliance with all financial covenants under the BofA Credit Agreement and the Note Purchase Agreement[188] Interest Rates and Loan Terms - The interest rate on the BMO Term Loan was 8.00% as of March 31, 2025, and increased to 9.00% on April 1, 2025[173] - The interest rate on the BofA Term Loan was 8.00% as of March 31, 2025, and increased to 9.00% on April 1, 2025[180] - The interest rates on both Series A and Series B Notes increased from 8.00% per annum to 9.00% per annum effective April 1, 2025[187] Stock and Shareholder Value - The company has a stock repurchase program that was authorized for up to $50 million but was discontinued on February 10, 2023[190] - The company reported that rental income exceeded operating expenses for most properties, except for Monument Circle, which had $76,000 in rental income and $293,000 in operating expenses for the three months ended March 31, 2025[196]