Franklin Street Properties (FSP) - 2025 Q2 - Quarterly Results

Company Information Company Overview FSP is a REIT specializing in U.S. Sunbelt and Mountain West office properties, with 14 owned properties as of June 30, 2025 - FSP focuses on office properties in the U.S. Sunbelt and Mountain West, as well as other select opportunistic markets[10] - As of June 30, 2025, the Company's portfolio comprised 14 owned properties totaling 4.8 million square feet[11][13] Corporate Snapshot (as of June 30, 2025) | Metric | Value | | :--- | :--- | | Trading Symbol | FSP (NYSE American) | | Common Shares Outstanding | 103,690,340 | | Total Market Capitalization | $0.4 Billion | | Insider Holdings | 8.67% | Key Financial Data Financial Highlights Financial highlights for Q2 2025 show declining revenue, persistent net losses, decreasing occupancy, and reduced total debt Quarterly Financial & Operational Trends | Metric (in thousands) | Q2 2025 | Q1 2025 | Q4 2024 | Q2 2024 | | :--- | :--- | :--- | :--- | :--- | | Total revenue | $26,715 | $27,107 | $28,375 | $30,830 | | Net loss | $(7,876) | $(21,435) | $(8,526) | $(21,023) | | FFO* | $2,516 | $2,727 | $2,707 | $3,721 | | AFFO* | $(514) | $(693) | $(5,157) | $518 | | Total assets, net | $903,243 | $916,366 | $946,931 | $1,012,527 | | Total debt outstanding | $249,818 | $250,179 | $250,332 | $303,000 | | Owned properties % leased | 69.1% | 69.2% | 70.3% | 72.3% | Income Statements Q2 2025 saw a $7.9 million net loss on $26.7 million total revenue, with six-month net loss at $29.3 million due to property dispositions Income Statement Summary (in thousands) | Period | Total Revenue | Total Expenses | Net Loss | | :--- | :--- | :--- | :--- | | Three Months Ended Jun 30, 2025 | $26,715 | $35,138 | $(7,876) | | Three Months Ended Jun 30, 2024 | $30,830 | $38,953 | $(21,023) | | Six Months Ended Jun 30, 2025 | $53,822 | $70,601 | $(29,311) | | Six Months Ended Jun 30, 2024 | $62,055 | $78,538 | $(28,575) | Balance Sheets As of June 30, 2025, total assets decreased to $903.2 million, liabilities to $278.5 million, and stockholders' equity to $624.7 million Balance Sheet Comparison (in thousands) | Account | June 30, 2025 | Dec 31, 2024 | June 30, 2024 | | :--- | :--- | :--- | :--- | | Real estate assets, net | $803,412 | $834,908 | $840,756 | | Total assets | $903,243 | $946,931 | $1,012,527 | | Total liabilities | $278,543 | $291,074 | $330,450 | | Total stockholders' equity | $624,700 | $655,857 | $682,077 | Cash Flow Statements H1 2025 saw a $12.2 million net cash outflow, with $8.4 million used in operations, $1.2 million in investing, and $2.6 million in financing Cash Flow Summary (Six Months Ended June 30, in thousands) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash used for operating activities | $(8,359) | $(7,736) | | Net cash (used for) provided by investing activities | $(1,221) | $21,079 | | Net cash used for financing activities | $(2,585) | $(109,728) | | Net decrease in cash | $(12,165) | $(96,385) | Property Net Operating Income (NOI) Same Store Property NOI decreased by 6.9% in H1 2025, with total Property NOI declining by 17.2% due to dispositions and weaker regional performance Same Store Property NOI (Six Months Ended June 30, in thousands) | Region | 2025 | 2024 | % Change | | :--- | :--- | :--- | :--- | | MidWest | $3,114 | $3,305 | (5.8)% | | South | $8,724 | $9,200 | (5.2)% | | West | $11,365 | $12,428 | (8.6)% | | Total Same Store | $23,203 | $24,933 | (6.9)% | - The report provides a detailed reconciliation from Net Loss to Property NOI, adjusting for items such as depreciation, G&A expenses, and interest to arrive at the property-level operating performance[35] FFO & AFFO Q2 2025 FFO decreased to $2.5 million ($0.02 per share), while AFFO was negative $0.5 million ($0.00 per share), reflecting lower FFO and capital expenditures FFO & AFFO Reconciliation (Q2 2025 vs Q2 2024) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net loss (in thousands) | $(7,876) | $(21,023) | | FFO (in thousands)* | $2,516 | $3,721 | | AFFO (in thousands)* | $(514) | $518 | | FFO per share* | $0.02 | $0.04 | | AFFO per share* | $(0.00) | $0.01 | EBITDA Q2 2025 Adjusted EBITDA was $8.8 million, with Net Debt-to-Annualized Adjusted EBITDA ratio at 6.2x, reflecting debt reduction EBITDA & Debt Metrics (as of June 30) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Adjusted EBITDA* (Quarterly, in thousands) | $8,790 | $10,783 | | Net Debt (in thousands) | $219,300 | $271,505 | | Net Debt-to-Adjusted EBITDA ratio* | 6.2x | 6.3x | Debt and Capital Analysis Debt Summary As of June 30, 2025, total debt was $249.8 million, with all instruments maturing April 1, 2026, at a 9.00% fixed interest rate Debt Outstanding as of June 30, 2025 (in thousands) | Debt Instrument | Maturity Date | Outstanding Balance | Interest Rate | | :--- | :--- | :--- | :--- | | BofA Term Loan | Apr 1, 2026 | $55,515 | 9.00% | | BMO Term Loan Tranche B | Apr 1, 2026 | $70,936 | 9.00% | | Series A Senior Notes | Apr 1, 2026 | $71,553 | 9.00% | | Series B Senior Notes | Apr 1, 2026 | $51,814 | 9.00% | | Total | | $249,818 | 9.00% | - The company has consistently used proceeds from property sales throughout 2024 and 2025 to repay outstanding debt pari passu[38] Capital Analysis Q2 2025 equity market capitalization was $170.1 million, total market capitalization $419.9 million, with a $0.01 per share quarterly common dividend Capitalization and Dividend Data (as of June 30, 2025) | Metric | Value | | :--- | :--- | | Closing market price per share | $1.64 | | Market capitalization (in thousands) | $170,052 | | Total debt outstanding (in thousands) | $249,818 | | Total Market Capitalization (in thousands) | $419,870 | | Common dividend declared per share | $0.01 | Portfolio Overview As of June 30, 2025, FSP's portfolio comprised 14 properties (4.8 million SF) with 69.1% leased, reflecting a reduction from prior year due to dispositions Owned Portfolio Trend | As of | Number of Properties | Square Feet | Leased Percentage | | :--- | :--- | :--- | :--- | | June 30, 2025 | 14 | 4,807,663 | 69.1% | | Dec 31, 2024 | 14 | 4,806,253 | 70.3% | | June 30, 2024 | 16 | 5,264,416 | 72.3% | Portfolio by Region (as of June 30, 2025) | Region | Square Feet | Leased Percentage | Wtd Avg GAAP Rent | | :--- | :--- | :--- | :--- | | South | 1,908,515 | 73.3% | $29.39 | | Midwest | 757,531 | 68.8% | $24.55 | | West | 2,141,617 | 65.5% | $34.89 | | Total | 4,807,663 | 69.1% | $30.98 | Tenant Analysis and Leasing Activity Tenants by Industry The portfolio's tenant base is diversified across industries like Energy, Professional Services, and Technology, mitigating concentration risk - The portfolio's tenancy is diversified by industry, with a visual breakdown provided by square feet[47] 20 Largest Tenants The top 20 tenants account for 33.1% of square footage and 51.6% of annualized rent, with CITGO Petroleum as the largest tenant - The top 20 tenants represent a significant portion of the portfolio's income, accounting for 51.6% of total annualized rent[50] Top 3 Tenants by Annualized Rent | Tenant | Leased Square Feet | % of Total Annualized Rent | | :--- | :--- | :--- | | 1. CITGO Petroleum Corporation | 248,399 | 7.5% | | 2. US Government | 168,573 | 6.4% | | 3. EOG Resources, Inc. | 169,167 | 6.3% | Leasing Activity H1 2025 leasing activity totaled 187,000 square feet, including 16,000 SF new leases and 171,000 SF renewals, with a 6.3-year weighted average lease term Leasing Activity (Six Months Ended June 30) | Activity | 2025 (in Square Feet) | 2024 (in Square Feet) | | :--- | :--- | :--- | | New leasing | 16,000 | 92,000 | | Renewals and expansions | 171,000 | 180,000 | | Total | 187,000 | 272,000 | Lease Expirations A significant lease expiration of 571,296 square feet (20.8% of annualized rent) is scheduled for 2026, representing the largest near-term concentration Upcoming Lease Expirations by Annualized Rent | Year of Expiration | Square Footage | % of Total Annualized Rent | | :--- | :--- | :--- | | 2025 | 146,798 | 4.4% | | 2026 | 571,296 | 20.8% | | 2027 | 324,440 | 11.2% | | 2028 | 242,052 | 7.4% | - A visual chart on page 20 illustrates the lease expiration schedule by square feet, highlighting the significant rollover in 2026[57] Capital Expenditures H1 2025 capital expenditures totaled $8.0 million, allocated to tenant improvements ($3.8 million), deferred leasing costs ($2.2 million), and non-investment capex ($2.0 million) Capital Expenditures (Six Months Ended June 30, 2025, in thousands) | Category | Amount | | :--- | :--- | | Tenant improvements | $3,789 | | Deferred leasing costs | $2,247 | | Non-investment capex | $2,008 | | Total Capital Expenditures | $8,044 | Disposition Activity The company sold one property in June 2025 for $6.0 million, incurring a $12.9 million loss, continuing its selective disposition strategy Recent Disposition Summary | Year | Number of Properties Sold | Total Gross Proceeds (in thousands) | | :--- | :--- | :--- | | 2025 (YTD) | 1 | $6,000 | | 2024 | 3 | $100,000 | | 2023 | 5 | $154,482 | - The sale of the Monument Circle property in Indianapolis on June 6, 2025, resulted in a significant loss on sale of $12.9 million[66] Net Asset Value Components This section provides key figures for Net Asset Value (NAV) calculation as of June 30, 2025, including market capitalization, asset/liability balances, and rental revenue reconciliation Key NAV Components (as of June 30, 2025) | Component | Value | | :--- | :--- | | Market capitalization (in thousands) | $170,052 | | Debt (in thousands) | $249,818 | | Total Market Capitalization (in thousands) | $419,870 | | Cash, cash equivalents and restricted cash (in thousands) | $30,518 | | Straight-line rent receivable (in thousands) | $37,839 | Appendix: Non-GAAP Financial Measures Definitions This appendix defines non-GAAP financial measures like FFO, AFFO, EBITDA, Adjusted EBITDA, and Property NOI, clarifying their calculation and use as key performance indicators FFO FFO is defined as net income adjusted for non-cash items and property sale gains/losses, serving as a primary operational performance and distribution measure - FFO is defined as net income excluding gains/losses from property sales and adding back depreciation and amortization[70] EBITDA and NOI EBITDA is net income plus interest, taxes, depreciation, and amortization; Adjusted EBITDA further excludes specific gains/losses; Property NOI measures property-level performance by excluding corporate and non-operating items - Adjusted EBITDA is presented as a supplemental disclosure for liquidity, showing the company's ability to service debt[75] - Property NOI is a non-GAAP measure used to evaluate the performance of the company's properties, excluding corporate-level and non-operating items[76] AFFO AFFO adjusts FFO for non-cash items and deducts recurring capital expenditures, aiming to measure residual cash flow available for distribution - AFFO adjusts FFO by excluding straight-line rent and deducting recurring capital expenditures like tenant improvements and leasing commissions[78]