Franklin Street Properties (FSP) - 2020 Q4 - Annual Report

Property Holdings and Dispositions - The company owns 34 office properties across 10 states as of December 31, 2020, consisting of 32 operating properties and 2 redevelopment properties[25] - An office property in Durham, North Carolina was sold for approximately $89.7 million, resulting in a gain of approximately $41.9 million on December 23, 2020[26] - The company anticipates property dispositions in 2021 to generate estimated gross proceeds between $350 million and $450 million, primarily for debt repayment[27] - The company has adopted a strategy to dispose of certain properties where valuation objectives have been met, enhancing financial flexibility[27] - The company is focused on acquiring properties in excellent locations with substantial infrastructure to avoid speculative investments[29] Financial Performance and Strategy - The company aims to create shareholder value through increased revenue from rental, dividends, interest, and fees, as well as net gains from property sales[24] - As of February 5, 2021, none of the company's owned properties were subject to mortgage debt, providing financial flexibility[36] Workforce and Diversity - The company had 37 employees as of February 5, 2021, with women representing 48.6% of the workforce, and 50.0% of management roles held by women[38] Debt and Interest Rates - Total debt amounts to $923.5 million, with significant repayments scheduled for 2023 and 2025[288] - The BAML Revolver has a total of $3.5 million due in 2023[288] - The JPM Term Loan remains at $100 million with no repayments due until 2024[288] - The BAML Term Loan has a repayment of $400 million scheduled for 2023[288] - BMO Term Loan Tranche A has a total of $55 million due in 2021[288] - BMO Term Loan Tranche B has a repayment of $165 million due in 2025[288] - Series A Notes total $116 million, with repayments due in 2025[288] - Series B Notes total $84 million, with repayments due thereafter[288] - The company has no immediate repayment obligations for the BAML Revolver and JPM Term Loan until 2024[288] - Overall, the company has structured its debt with staggered repayment schedules to manage cash flow effectively[288] Interest Rate Risk Management - As of December 31, 2020, a 10% increase in market rates on outstanding borrowings would decrease future earnings and cash flows by approximately $5,000 and $153,000 annually for the BAML Revolver and JPM Term Loan, respectively[281] - The interest rate on the BAML Revolver was LIBOR plus 120 basis points, or 1.34% per annum, as of December 31, 2020[281] - The interest rates on the BMO Term Loan, BAML Term Loan, and JPM Term Loan were fixed through interest rate swap agreements, with rates of 2.47%, 3.64%, and 3.69% per annum, respectively[282] - The fair value of the 2017 Interest Rate Swap was $(2,947) thousand, while the 2019 JPM Interest Rate Swap was $(2,102) thousand as of December 31, 2020[283] - The notional value of the 2019 BMO Interest Rate Swap was $220,000 thousand, with a strike rate of 2.39% and expiration in January 2024[283] - The BAML Revolver matures on January 12, 2022, while the JPM Term Loan matures on November 30, 2021[287] - The company has the right to extend the maturity date of the BAML Revolver and JPM Term Loan with two additional six-month extensions[287] - The company has mitigated interest rate risk on the BAML Term Loan through the 2017 Interest Rate Swap until September 27, 2021[282] - The company requires derivatives contracts to be with counterparties that have investment grade ratings to manage counterparty credit risk[285] - The effective portion of the derivatives' fair value is recorded to other comprehensive income in the consolidated statements of other comprehensive income (loss)[286] Regulatory Compliance and Competition - The company is committed to compliance with various governmental regulations, including the Americans With Disabilities Act (ADA) and fire safety regulations, which may require substantial capital expenditures[33][34] - The company may face competition from larger firms with more resources, which could impact rental revenues and occupancy levels[31]