Franklin Street Properties (US:FSP)2025-07-29 20:27Portfolio and Occupancy - As of June 30, 2025, the owned portfolio consisted of approximately 4.8 million square feet, located in Dallas, Denver, Houston, and Minneapolis [111]. - The leased occupancy rate of owned properties decreased to 69.1% as of June 30, 2025, down from 70.3% at the end of 2024, with approximately 1,484,000 square feet of vacancy [123]. - The leased space in owned properties was 69.1% as of June 30, 2025, down from 72.3% as of June 30, 2024 [140]. - As of June 30, 2025, the company reported total owned properties with a net rentable square footage of 4,807,663 and an occupied square footage of 3,244,882, resulting in an overall occupancy rate of 67.5% [173]. Financial Performance - Total revenues decreased by $4.1 million to $26.7 million for the three months ended June 30, 2025, compared to the same period in 2024, primarily due to a decrease in rental revenue from property sales and lease expirations [140]. - The company recorded a net loss of $7.9 million for the three months ended June 30, 2025, an improvement from a net loss of $21.0 million in the same period of 2024 [149]. - Total expenses decreased by $3.8 million to $35.1 million for the three months ended June 30, 2025, mainly due to reductions in real estate operating expenses and depreciation [141]. - Total revenues for the six months ended June 30, 2025, decreased by $8.2 million to $53.8 million, primarily due to a decrease in rental revenue from property sales [151]. - Total expenses for the six months ended June 30, 2025, decreased by $7.9 million to $70.6 million, largely due to lower real estate operating expenses and interest expenses [152]. - The net loss for the six months ended June 30, 2025, was $29.3 million, compared to a net loss of $28.6 million for the same period in 2024 [160]. - Funds From Operations (FFO) for the six months ended June 30, 2025, was $5.243 million, down from $7.914 million in 2024 [165]. - Net Operating Income (NOI) for the six months ended June 30, 2025, was $22.902 million, a decrease of 17.2% compared to the same period in 2024 [169]. Debt and Financing - The company repaid a total of $154.7 million of debt during 2024, including $102 million on February 21, $25.3 million on July 10, and $27.4 million on October 25 [117]. - Approximately 50.6% of total debt as of June 30, 2025, was unhedged variable rate debt, which could be adversely affected by rising interest rates [122]. - The credit rating for the company's senior unsecured debt was downgraded to Caa1 as of June 30, 2025, reflecting increased risk in the current economic environment [119]. - The company has aggregate outstanding indebtedness of approximately $249.8 million under three unsecured loans, maturing on April 1, 2026 [175]. - The BMO Term Loan has an outstanding principal amount of approximately $70.9 million, maturing on April 1, 2026, with recent amendments affecting interest rates and repayment terms [185]. - The company intends to engage in discussions with lenders to extend or refinance existing debt, with a belief that it is likely to succeed [176]. - The BMO Term Loan interest rate increased from 8.00% per annum to 9.00% per annum effective April 1, 2025 [190]. - The aggregate principal amount of Senior Notes was approximately $123.4 million as of June 30, 2025, consisting of Series A Notes of approximately $71.6 million and Series B Notes of approximately $51.8 million [204]. - The interest rates for Series A and Series B Notes increased from 4.49% and 4.76% per annum to 8.00% per annum, respectively, following the amendment on February 21, 2024 [204]. - The company had $55.5 million outstanding on the BofA Term Loan as of June 30, 2025, with an interest rate of 9.00% per annum [215]. - The company had $70.9 million outstanding on the BMO Term Loan Tranche B as of June 30, 2025, also with an interest rate of 9.00% per annum [216]. Asset Sales and Impairments - For the year ended December 31, 2024, the company achieved aggregate gross sale proceeds of $100.0 million from property dispositions [117]. - The company sold an office property in Richardson, Texas for $35 million on January 26, 2024, resulting in an impairment loss of $2.1 million recorded in 2023 [130]. - An impairment loss of $13.3 million was recorded for a property in Indianapolis, Indiana, which was sold for a gross price of $6.0 million, leading to a net loss of $12.9 million after final sale adjustments [145]. - The company entered into an agreement to sell a property in Glen Allen, Virginia for approximately $31.0 million, expecting a loss of $13.2 million, with the sale closing on July 8, 2024 [157]. - The company reclassified $28.6 million of office property as an asset held for sale as of June 30, 2024 [157]. Cash Flow and Liquidity - The company had cash and cash equivalents of $30.5 million as of June 30, 2025, down from $42.7 million at the end of 2024, reflecting a decrease of $12.2 million [178]. - Cash used in operating activities for the six months ended June 30, 2025, was $8.4 million, primarily due to the net loss and adjustments for non-cash expenses [179]. - The company reported cash used in investing activities of $1.2 million, primarily due to real estate asset purchases and office equipment investments [180]. - The company has substantial doubt about its ability to continue as a going concern for at least one year following the issuance of the financial statements due to uncertainties regarding debt maturity [176]. Dividend Policy - The company adopted a variable quarterly dividend policy in July 2022, with dividends determined based on various factors including taxable income estimates [118]. - The BofA Credit Agreement restricts quarterly dividend distributions to not exceed $0.01 per share of common stock [202]. - The company discontinued its stock repurchase program authorized for up to $50 million on February 10, 2023 [211]. Market Conditions and Strategic Review - The long-term impact of the COVID-19 pandemic continues to create uncertainty regarding tenant occupancy and rent collection levels [121]. - The company initiated a strategic review in May 2025 to explore alternatives for maximizing shareholder value, including potential asset sales and refinancing [120]. - Rental income exceeded operating expenses for all properties except Monument Circle for the three and six months ended June 30, 2025 [213].