Franklin Street Properties (US:FSP)2025-10-28 20:25Portfolio and Occupancy - As of September 30, 2025, the owned portfolio consisted of approximately 4.8 million square feet, located in Dallas, Denver, Houston, and Minneapolis[110]. - The leased occupancy rate of owned properties decreased to 68.9% as of September 30, 2025, down from 70.3% at the end of 2024, with approximately 1,497,000 square feet of vacancy[122]. - The leased space in owned properties was 68.9% as of September 30, 2025, down from 70.4% as of September 30, 2024[142]. - Approximately 1.6% and 11.5% of the square footage in the owned portfolio is scheduled to expire during 2025 and 2026, respectively[123]. - The weighted average rent per occupied square foot across owned properties was $31.13 as of September 30, 2025[173]. Financial Performance - Total revenues decreased by $2.4 million to $27.3 million for the three months ended September 30, 2025, primarily due to a decrease in rental revenue from property sales and lease expirations[142]. - The net loss for the three months ended September 30, 2025, was $8.3 million, compared to a net loss of $15.6 million for the same period in 2024, reflecting an improvement of $7.3 million[151]. - Total expenses decreased by $2.0 million to $35.9 million for the three months ended September 30, 2025, mainly due to reductions in real estate operating expenses and depreciation[143]. - During the nine months ended September 30, 2025, total revenues decreased by $10.6 million to $81.1 million, primarily from a decline in rental revenue due to property sales[153]. - Net loss for the nine months ended September 30, 2025, was $37.6 million, compared to a net loss of $44.2 million for the same period in 2024, reflecting an improvement of approximately 15%[162]. - Funds From Operations (FFO) for the nine months ended September 30, 2025, was $7.566 million, down from $10.579 million in the same period of 2024, representing a decrease of approximately 28.5%[167]. - Net Operating Income (NOI) for the nine months ended September 30, 2025, was $33.994 million, compared to $40.039 million for the same period in 2024, indicating a decline of about 15.1%[170]. Debt and Financing - Approximately 50.6% of total debt as of September 30, 2025, constituted unhedged variable rate debt, which could be adversely affected by rising interest rates[121]. - The credit rating for senior unsecured debt was downgraded to Caa1 as of September 30, 2025, reflecting ongoing economic challenges[118]. - The company has aggregate outstanding indebtedness of approximately $248.9 million under three unsecured loans, maturing on April 1, 2026[175]. - Management intends to engage in discussions with lenders to extend or refinance existing debt, with substantial doubt about the company's ability to continue as a going concern for at least one year following the financial statement issuance[176]. - The BMO Term Loan has a principal amount of approximately $70.7 million, maturing on April 1, 2026, with recent amendments affecting interest rates and repayment terms[185]. - The company anticipates generating funds from continuing real estate operations and property dispositions to cover future growth and expenses[178]. - The interest rate on the BMO Term Loan increased from 8.00% per annum to 9.00% per annum effective April 1, 2025[190]. - The BofA Term Loan bears interest at 300 basis points over SOFR with a floor on SOFR of 5.00% effective February 21, 2024[196]. - The company is subject to mandatory prepayments of the BMO Term Loan, BofA Term Loan, and Senior Notes with net cash proceeds from asset dispositions, with specific percentages allocated to each[203]. - The company may issue debt securities or equity to fund acquisitions, pay down existing debt, and for other corporate purposes[207]. Asset Dispositions and Impairments - For the year ended December 31, 2024, the disposition strategy resulted in gross sale proceeds of $100.0 million, with $102 million of debt repaid on February 21, 2024[116]. - The company recorded a loss on sale of properties and impairment of assets held for sale of $12.9 million during the nine months ended September 30, 2025, compared to a loss of $20.5 million in the same period in 2024[152]. - The company sold a property in Atlanta, Georgia for a gross sales price of approximately $40.0 million, with an expected loss of $20.5 million recorded[147]. - An impairment loss of $13.3 million was recorded for a property in Indianapolis, Indiana during the three months ended March 31, 2025[130]. - The company recorded an impairment charge of $13.3 million for a property sale in Indianapolis, Indiana, with a gross sales price of $6.0 million, and a final sale adjustment of $0.4 million was made in June 2025[157]. - An expected loss of $20.5 million was recorded for a property in Atlanta, Georgia, which was later adjusted to $27.1 million after a new sales agreement for $34.0 million[158]. Cash and Liquidity - The company reported cash and cash equivalents of $31.6 million as of September 30, 2025, a decrease of $11.1 million from $42.7 million as of December 31, 2024[178]. - Cash used in investing activities for the nine months ended September 30, 2025, was $6.5 million, primarily due to $12.6 million in purchases of real estate assets and office equipment[180]. - Cash used in financing activities for the nine months ended September 30, 2025, was $4.5 million, mainly for distributions to stockholders of $3.1 million and debt repayment of $1.4 million[181]. - Interest income for the three months ended September 30, 2025, was $0.2 million, compared to $0.3 million for the same period in 2024[149]. - Interest income earned during the nine months ended September 30, 2025, was $0.8 million, down from $1.7 million in the same period of 2024[160]. Strategic Initiatives - The company initiated a strategic review in May 2025 to explore alternatives for maximizing shareholder value, including potential asset sales and refinancing[119]. - The company adopted a variable quarterly dividend policy in July 2022, with dividends determined based on various factors including annual taxable income estimates[117]. - The impact of geopolitical events and economic conditions may limit new tenant leasing activity in the fourth quarter of 2025 and beyond[124]. - The company does not anticipate that the adoption of recent accounting standards will have a material impact on its consolidated financial statements[136]. - The company has no material changes to its contractual obligations and off-balance-sheet arrangements as disclosed in its Annual Report for the year ended December 31, 2024[210].