FRANKLIN STREET PROPERTIES: MA / Analyse par la direction de la situation financière et des résultats d'exploitation (formulaire 10-Q)


The following discussion should be read in conjunction with the financial
statements and notes thereto appearing elsewhere in this report and in our
Annual Report on Form 10-K for the year ended December 31, 2019. Historical
results and percentage relationships set forth in the consolidated financial
statements, including trends which might appear, should not be taken as
necessarily indicative of future operations. The following discussion and other
parts of this Quarterly Report on Form 10-Q may also contain forward-looking
statements based on current judgments and current knowledge of management, which
are subject to certain risks, trends and uncertainties that could cause actual
results to differ materially from those indicated in such forward-looking
statements. Accordingly, readers are cautioned not to place undue reliance on
forward-looking statements. Investors are cautioned that our forward-looking
statements involve risks and uncertainty, including without limitation, adverse
changes in general economic or local market conditions, including as a result of
the COVID-19 pandemic and other potential infectious disease outbreaks and
terrorist attacks or other acts of violence, which may negatively affect the
markets in which we and our tenants operate, adverse changes in energy prices,
which if sustained, could negatively impact occupancy and rental rates in the
markets in which we own properties, including energy-influenced markets such as
Dallas, Denver and Houston, changes in interest rates as a result of economic
market conditions or a downgrade in our credit rating, disruptions in the debt
markets, economic conditions in the markets in which we own properties, risks of
a lessening of demand for the types of real estate owned by us, uncertainties
relating to fiscal policy, changes in government regulations and regulatory
uncertainty, changes in energy prices, geopolitical events, and expenditures
that cannot be anticipated such as utility rate and usage increases, delays in
construction schedules, unanticipated increases in construction costs,
unanticipated repairs, additional staffing, insurance increases and real estate
tax valuation reassessments. See Part I, Item 1A. "Risk Factors" in our Annual
Report on Form 10-K for the year ended December 31, 2019 and Part II, Item 1A.
"Risk Factors" below. Although we believe the expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee future results,
levels of activity, performance or achievements. We may not update any of the
forward-looking statements after the date this Quarterly Report on Form 10-Q is
filed to conform them to actual results or to changes in our expectations that
occur after such date, other than as required by law.



Overview



FSP Corp., or we or the Company, operates in a single reportable segment: real
estate operations. The real estate operations market involves real estate rental
operations, leasing, secured financing of real estate and services provided for
asset management, property management, property acquisitions, dispositions and
development. Our current strategy is to invest in infill and central business
district office properties in the United States sunbelt and mountain west
regions, as well as select opportunistic markets. We believe that the United
States sunbelt and mountain west regions have macro-economic drivers that have
the potential to increase occupancies and rents. We seek value-oriented
investments with an eye towards long-term growth and appreciation, as well
as
current income.



As of June 30, 2020, approximately 7.8 million square feet, or approximately 78%
of our total owned portfolio, was located in Atlanta, Dallas, Denver, Houston
and Minneapolis. From time-to-time we may dispose of our smaller, suburban
office assets and replace them with larger infill and central business district
office assets. As we execute this strategy, short term operating results could
be adversely impacted. However, we believe that the transformed portfolio has
the potential to provide higher profit and asset value growth over a longer
period of time.



The main factor that affects our real estate operations is the broad economic
market conditions in the United States. These market conditions affect the
occupancy levels and the rent levels on both a national and local level. We have
no influence on broader economic/market conditions. We look to acquire and/or
develop quality properties in good locations in order to lessen the impact of
downturns in the market and to take advantage of upturns when they occur.



Trends and Uncertainties



COVID-19 Outbreak



Beginning in January 2020, there was a global outbreak of COVID-19, which
continues to adversely impact global commercial activity and has contributed to
significant volatility in financial markets. It has already disrupted global
travel

                                       19

  Table of Contents

and supply chains, adversely impacted global commercial activity, and its
long-term economic impact remains uncertain. Considerable uncertainty still
surrounds the COVID-19 pandemic and its potential effects on the population, as
well as the effectiveness of any responses taken on a national and local level
by government authorities and businesses. The travel restrictions, limits on
hours of operations and/or closures of various businesses and other efforts to
curb the spread of COVID-19 have significantly disrupted business activity
globally, including in the markets where we own properties, and we expect them
to have an adverse impact on our business. Many of our tenants are subject to
various quarantine restrictions, and the restrictions could be in place for an
extended period of time. The pandemic has had an adverse impact on economic and
market conditions and triggered a global economic slowdown. The reduction in
economic activity worldwide has had a significant negative effect on energy
prices, which, if sustained, could have an adverse impact on occupancy and
rental rates in energy-influenced markets such as Dallas, Denver and Houston,
where we have a significant concentration of properties. However, the evolving
nature of the pandemic makes it difficult to ascertain the long-term impact it
will have on commercial real estate markets and our business. Nevertheless, the
COVID-19 pandemic presents material uncertainty and risk with respect to the
performance of our properties and our financial results, such as the potential
negative impact to leasing efforts and occupancy at our properties, the
potential closure of certain of our assets for an extended period, uncertainty
regarding future rent collection levels or requests for rent concessions from
our tenants, the occurrence of a default under any of our debt agreements, the
potential for increased borrowing costs, a potential downgrade in our credit
rating that could lead to increased borrowing costs or reduce our access to
funding sources in credit and capital markets, our ability to refinance existing
indebtedness or to secure new sources of capital on favorable terms,
fluctuations in our level of dividends, increased costs of operations, our
ability to complete required capital expenditures in a timely manner and on
budget, decrease in values of our real estate assets, changes in law and/or
regulation, and uncertainty regarding government and regulatory policy. We are
unable to estimate the impact the COVID-19 pandemic will have on our future
financial results at this time. See also Part I, Item 1A. "Risk Factors" in our
Annual Report on Form 10-K for the year ended December 31, 2019 and Part II,
Item 1A. "Risk Factors" below.



We have been following and directing our vendors to follow the guidelines from
the Centers for Disease Control (CDC) and other applicable authorities to
minimize the spread of COVID-19 among our employees, tenants, vendors and
visitors, as well as at our properties. We have implemented working from home
policies for our employees. During the three months ended June 30, 2020 and as
of August 4, 2020, all of our properties remained open for business. Although
some of our tenants have requested rent concessions, and more tenants may
request rent concessions or may not pay rent in the future, as of July 31, 2020,
we had collected approximately 97% of rental receipts due in July 2020. Future
rent concession requests or nonpayment of rent could lead to increased customer
delinquencies and/or defaults under leases, a lower demand for rentable space
leading to increased concessions and, may in some instances, seek extended lease
terms, or lower occupancy, and/or capital expenditures, or reduced rental rates
to maintain occupancies. We review each rent concession request on a case by
case basis and may or may not provide rent concessions, depending on the
specific circumstances involved. Cash, cash equivalents and restricted cash were
$2.9 million as of June 30, 2020. Management believes that existing cash, cash
anticipated to be generated internally by operations and our existing
availability under the BAML Revolver ($570 million as of June 30, 2020) will be
sufficient to meet working capital requirements and anticipated capital
expenditures for at least the next 12 months. Although there is no guarantee
that we will be able to obtain the funds necessary for our future growth, we
anticipate generating funds from continuing real estate operations. We believe
that we have adequate funds to cover unusual expenses and capital improvements,
in addition to normal operating expenses. Our ability to maintain or increase
our level of dividends to stockholders, however, depends in significant part
upon the level of rental income from our real estate properties.



Economic Conditions


The economy in the United States is currently in an economic downturn with
recessionary concerns as a result of the COVID-19 pandemic. Economic conditions
directly affect the demand for office space, our primary income producing asset.
The broad economic market conditions in the United States are typically affected
by numerous factors, including but not limited to, inflation and employment
levels, energy prices, the pace of economic growth and/or recessionary concerns,
uncertainty about government fiscal, monetary, trade and tax policies, changes
in currency exchange rates, geopolitical events, the regulatory environment, the
availability of credit, and interest rates. As of the date of this report, the
impact of the COVID-19 pandemic and related fallout from containment and
mitigation measures, such as work from home arrangements and the closing of
various businesses, is disproportionately affecting current economic conditions
in the United States.



                                       20

  Table of Contents

Real Estate Operations



Leasing



As of June 30, 2020, our real estate portfolio was comprised of 32 operating
properties, which we refer to as our operating properties, and 3 redevelopment
properties, which we refer to as our redevelopment properties, that are in the
process of being redeveloped, or are completed but not yet stabilized. We
collectively refer to our operating and our redevelopment properties as our
owned portfolio. Our 32 operating properties were approximately 84.5% leased as
of June 30, 2020, a decrease from 87.6% leased as of December 31, 2019. The 3.1%
decrease in leased space was a result of the impact of lease expirations and
terminations, which exceeded leasing completed during the six months ended June
30, 2020. As of June 30, 2020, we had approximately 1,476,000 square feet of
vacancy in our operating properties compared to approximately 1,175,000 square
feet of vacancy at December 31, 2019. During the six months ended June 30, 2020,
we leased approximately 324,000 square feet of office space, of which
approximately 158,000 square feet were with existing tenants, at a weighted
average term of 6.1 years. On average, tenant improvements for such leases were
$22.91 per square foot, lease commissions were $7.85 per square foot and rent
concessions were approximately four months of free rent. Average GAAP base rents
under such leases were $31.28 per square foot, or 10.3% higher than average
rents in the respective properties as applicable compared to the year ended
December 31, 2019.



As of June 30, 2020, our three redevelopment properties included an
approximately 130,000 square foot redevelopment property known as 801 Marquette
in Minneapolis, Minnesota, an approximately 213,000 square foot property known
as Blue Lagoon in Miami, Florida and an approximately 62,000 square foot
property known as Forest Park in Charlotte, North Carolina. Given the length of
the redevelopment and lease-up process, these properties are not classified as
an operating property until, in some cases, years after we commence the project.



The redevelopment at 801 Marquette was substantially completed at the end of the
second quarter of 2017 and is in the process of being leased up; however, it is
not stabilized. As of June 30, 2020, we had leases signed and tenants occupying
approximately 37.0% of the rentable square feet of the property. We expect to
incur redevelopment and lease-up costs of $29.6 million, of which we had
incurred approximately $23.1 million as of June 30, 2020.



The redevelopment of Blue Lagoon commenced in December 2018 following the
maturity of a lease with a major tenant that occupied 100% of the property. On
September 13, 2019, we entered into a lease agreement with a new tenant with an
initial term of 16 years for approximately 156,000 square feet, or 73.1% of the
property's rentable square feet. We expect to incur total restoration,
redevelopment and lease-up costs of $39.6 million, which include work on the
roof of the building, costs to make the space suitable for multiple tenants and
to increase parking at the property. As of June 30, 2020, we had incurred
approximately $13.3 million in total redevelopment costs. We anticipate
completing the redevelopment by the end of 2020.



The redevelopment of Forest Park commenced in January 2019 following the
maturity of a lease with a tenant that occupied 100% of the property through
December 31, 2018. We expect to incur total redevelopment and lease-up costs of
$5.7 million, which include interior work to make the space suitable for
multiple tenants. As of June 30, 2020, we had incurred approximately $1.1
million in redevelopment costs. We completed the redevelopment during the three
months ended June 30, 2020. We have a lease with one tenant for approximately
22,000 square feet or approximately 35.6% of the total rentable square feet, for
an initial term of 11 years.



As of June 30, 2020, leases for approximately 1.8% and 9.0% of the square
footage in our owned portfolio are scheduled to expire during 2020 and 2021,
respectively. As the third quarter of 2020 begins, we believe that our operating
properties are well stabilized, with a balanced lease expiration schedule, and
that existing vacancy is being actively marketed to numerous potential tenants.
While leasing activity at our properties has continued, we believe that the
COVID-19 pandemic and related containment and mitigation measures may limit or
delay new tenant leasing during at least the third quarter of 2020 and
potentially in future periods.



While we cannot generally predict when an existing vacancy in our owned
portfolio will be leased or if existing tenants with expiring leases will renew
their leases or what the terms and conditions of the lease renewals will be, we
expect to renew or sign new leases at then-current market rates for locations in
which the buildings are located, which could be above or below the expiring
rates. Also, we believe the potential for any of our tenants to default on its
lease or to seek the protection of

                                       21

Table des matières

la faillite existe. Si l'un de nos locataires fait défaut à son bail, nous pouvons
éprouver des retards dans l'application de nos droits en tant que propriétaire et peut encourir
des coûts importants pour protéger notre investissement. De plus, à tout moment, un
le locataire de l'un de nos biens peut demander la protection des lois sur la faillite,
ce qui pourrait entraîner le rejet et la résiliation du bail de ce locataire et
entraîner une réduction des liquidités disponibles pour distribution à nos
actionnaires.




Critical Accounting Policies



We have certain critical accounting policies that are subject to judgments and
estimates by our management and uncertainties of outcome that affect the
application of these policies. We base our estimates on historical experience
and on various other assumptions we believe to be reasonable under the
circumstances. On an on-going basis, we evaluate our estimates. In the event
estimates or assumptions prove to be different from actual results, adjustments
are made in subsequent periods to reflect more current information. The
accounting policies that we believe are most critical to the understanding of
our financial position and results of operations, and that require significant
management estimates and judgments, are discussed in Item 7, Management's
Discussion and Analysis of Financial Condition and Results of Operations in our
Annual Report on Form 10-K for the year ended December 31, 2019.



Les méthodes comptables critiques sont celles qui ont le plus d'impact sur le
la présentation de notre situation financière et de nos résultats d'exploitation et ceux
nécessitant des jugements et des estimations significatifs. Nous croyons que nos jugements et
les évaluations sont appliquées de manière cohérente et produisent des informations financières qui
présente fidèlement nos résultats d’exploitation.

Normes comptables récentes




In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit
Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASU
2016-13"), which requires that entities use a new forward looking "expected
loss" model that generally will result in the earlier recognition of allowance
for credit losses. The measurement of expected credit losses is based upon
historical experience, current conditions, and reasonable and supportable
forecasts that affect the collectability of the reported amount. ASU 2016-13 is
effective for fiscal years beginning after December 15, 2019, including interim
periods within those fiscal years. The Company's Sponsored REIT Loan (as defined
in Note 2 of our consolidated financial statements) receivables are within the
scope of this standard. The Company's receivables associated with its real
estate operating leases are not within the scope of this standard and our
analysis was completed using a Probability of Default / Loss Given Default
Model. The Company adopted this standard on January 1, 2020. The adoption of
this standard did not have a material impact on our consolidated financial
statements.



In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic
820): Disclosure Framework - Changes to the Disclosure Requirements for Fair
Value Measurement ("ASU 2018-13"). The ASU is intended to improve the
effectiveness of fair value measurement disclosures. ASU 2018-13 is effective
for all entities for annual periods beginning after December 15, 2019. This ASU
amends existing fair value measurement disclosure requirements by adding,
changing, or removing certain disclosures. ASU 2018-13 will be effective for the
Company as of January 1, 2020, and earlier adoption is permitted. The Company
adopted this standard on January 1, 2020. The adoption of this standard did not
have a material impact on our consolidated financial statements.



In April 2019, the FASB issued ASU No. 2019-04, Codification Improvements to
Topics 326, Financial Instruments - Credit Losses, Topic 815 Derivatives and
Hedging and Topic 825, Financial Instruments ("ASU 2019-04"). The ASU clarifies
areas of guidance related to the recently issued standards on credit losses
(Topic 326), derivatives and hedging (Topic 815), and recognition and
measurement of financial instruments (Topic 825). The new guidance is effective
for fiscal years beginning after December 15, 2019, and early adoption is
permitted. The Company adopted this standard on January 1, 2020. The adoption of
this standard did not have a material impact on our consolidated financial
statements.



In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic
848): Facilitation of the Effects of Reference Rate Reform on Financial
Reporting ("ASU 2020-04"). The ASU contains practical expedients for reference
rate reform related activities that impact debt, leases, derivatives and other
contracts. The guidance in ASU 2020-04 is optional and may be elected over time
as reference rate reform activities occur. The Company is currently assessing
the potential impact that the adoption of ASU 2020-04 may have on its
consolidated financial statements.



                                       22

  Table of Contents

Results of Operations



The following table shows financial results for the three months ended June 30,
2020 and 2019:




                                                     Three months ended June 30,
(in thousands)                                      2020         2019       Change
Revenues:
Rental                                            $  60,398$ 65,485$ (5,087)
Related party revenue:
Management fees and interest income from loans          405       1,322    
   (917)
Other                                                     5           6          (1)
Total revenues                                       60,808      66,813      (6,005)
Expenses:
Real estate operating expenses                       15,470      17,116    

(1 646)

Real estate taxes and insurance                      12,307      12,801    

(494)

Depreciation and amortization                        22,245      22,109    
     136
General and administrative                            3,817       3,702          115
Interest                                              8,980       9,371        (391)
Total expenses                                       62,819      65,099      (2,280)

Income (loss) before taxes                          (2,011)       1,714      (3,725)
Tax expense on income                                    64          81         (17)

Net income (loss)                                 $ (2,075)$  1,633$ (3,708)

Comparaison des trois mois terminés 30 juin 2020 aux trois mois terminés
30 juin 2019:



Revenues



Total revenues decreased by $6.0 million to $60.8 million for the three months
ended June 30, 2020, as compared to the three months ended June 30, 2019. The
decrease was primarily a result of:



Une baisse des revenus locatifs d'environ 5,1 millions de dollars découlant principalement

de la perte de revenus locatifs provenant de baux expirés après 30 juin 2019

? au cours des trois mois terminés 30 juin 2020 par rapport à la même période en

2019. Ces diminutions ont été partiellement compensées par les revenus locatifs tirés des baux

commençant après 30 juin 2019. Notre espace loué dans nos immeubles d'exploitation

était de 84,5% à 30 juin 2020 et 88,1% à 30 juin 2019.

Une diminution d'environ 0,9 million de dollars dans les revenus d'intérêts du FPI parrainé

? Prêts principalement en raison du remboursement d'environ 51 millions de dollars de ces

   loans in June 2019.


Expenses



Total expenses decreased by $2.3 million to $62.8 million for the three months
ended June 30, 2020, as compared to the three months ended June 30, 2019. The
decrease was primarily a result of:



? Une baisse des charges d'exploitation immobilière et des taxes foncières et

assurance d'environ 2,1 millions de dollars.

Une diminution des intérêts débiteurs d'environ 0,4 million de dollars. La diminution était

? principalement attribuable à la baisse des taux d'intérêt au cours des trois mois terminés

   June 30, 2020 compared to the same period in 2019.



Ces augmentations ont été partiellement compensées par:

? Une augmentation des amortissements d'environ 0,1 million de dollars.



                                       23

  Table of Contents

? Une augmentation des frais généraux et administratifs de 0,1 million de dollars, ce qui était

   primarily from personnel costs.




Tax expense on income



Included in income taxes is the Revised Texas Franchise Tax, which is a tax on
revenues from Texas properties, which decreased $17,000 during the three months
ended June 30, 2020 compared to the three months ended June 30, 2019.



Net loss


Net loss for the three months ended June 30, 2020 was $2.1 million compared to a
net income of $1.6 million for the three months ended June 30, 2019, for the
reasons described above.



                                       24

  Table of Contents

The following table shows financial results for the six months ended June 30,
2020 and 2019:




                                                       Six months ended June 30,
(in thousands)                                      2020         2019        Change
Revenues:
Rental                                            $ 122,965$ 128,844$ (5,879)
Related party revenue:
Management fees and interest income from loans          808        2,674   
  (1,866)
Other                                                    18           11            7
Total revenues                                      123,791      131,529      (7,738)
Expenses:
Real estate operating expenses                       32,768       34,842   

(2 074)

Real estate taxes and insurance                      24,069       24,903   

(834)

Depreciation and amortization                        44,583       45,354   
    (771)
General and administrative                            7,342        7,211          131
Interest                                             18,043       18,739        (696)
Total expenses                                      126,805      131,049      (4,244)
Income (loss) before taxes on income                (3,014)          480   
  (3,494)
Tax expense on income                                   132           52           80

Net income (loss)                                 $ (3,146)$     428$ (3,574)

Comparaison des six mois terminés 30 juin 2020 aux six mois terminés juin
30, 2019
:




Revenues



Le total des revenus a diminué de 7,7 millions de dollars à 123,8 millions de dollars pour les six mois
terminé 30 juin 2020, par rapport aux six mois terminés 30 juin 2019. le
la diminution est principalement attribuable à:

Une baisse des revenus locatifs d'environ 5,9 millions de dollars découlant principalement

de la perte de revenus locatifs provenant de baux expirés après 30 juin 2019

? au cours des six mois terminés 30 juin 2020 comparé à la même période en 2019.

Ces diminutions ont été partiellement compensées par les revenus locatifs tirés des baux

commençant après 30 juin 2019. Notre espace loué dans nos immeubles d'exploitation

était de 84,5% à 30 juin 2020 et 88,1% à 30 juin 2019.

Une diminution d'environ 1,8 million de dollars dans les revenus d'intérêts du FPI parrainé

? Prêts principalement en raison du remboursement d'environ 51 millions de dollars de ces

   loans in June 2019.


Expenses


Les dépenses totales ont diminué de 4,2 millions de dollars à 126,8 millions de dollars pour les six mois
terminé 30 juin 2020, par rapport aux six mois terminés 30 juin 2019. le
l'augmentation résulte principalement de:

? Une baisse des charges d'exploitation immobilière et des taxes foncières et

assurance d'environ 2,9 millions de dollars.

? Une diminution des amortissements d'environ 0,7 million de dollars.

Une diminution des intérêts débiteurs d'environ 0,7 million de dollars. La diminution était

? principalement attribuable à la baisse des taux d'intérêt au cours du semestre terminé en juin

   30, 2020 compared to the same period in 2019.



Ces baisses ont été partiellement compensées par:

? Une augmentation des frais généraux et administratifs de 0,1 million de dollars, ce qui était

   primarily from personnel costs.




                                       25

  Table of Contents



Tax expense on income



Included in income taxes is the Revised Texas Franchise Tax, which is a tax on
revenues from Texas properties, which decreased $32,000, and benefits from
federal and other income taxes, which decreased by $112,000, during the six
months ended June 30, 2019 compared to the six months ended June 30, 2020,
primarily as a result of a refund arising due to the provisions of the Tax Cuts
and Jobs Act of 2017 during the six months ended June 30, 2019.



Net loss


Perte nette pour les six mois terminés 30 juin 2020 était 3,1 millions de dollars par rapport à un
revenu net de 0,4 million de dollars pour les six mois terminés 30 juin 2019, pour le
raisons décrites ci-dessus.











                                       26

  Table of Contents

Non-GAAP Financial Measures



Funds From Operations


The Company evaluates performance based on Funds From Operations, which we refer
to as FFO, as management believes that FFO represents the most accurate measure
of activity and is the basis for distributions paid to equity holders. The
Company defines FFO as net income or loss (computed in accordance with GAAP),
excluding gains (or losses) from sales of property, hedge ineffectiveness,
acquisition costs of newly acquired properties that are not capitalized and
lease acquisition costs that are not capitalized plus depreciation and
amortization, including amortization of acquired above and below market lease
intangibles and impairment charges on properties or investments in
non-consolidated REITs, and after adjustments to exclude equity in income or
losses from, and, to include the proportionate share of FFO from,
non-consolidated REITs.



FFO should not be considered as an alternative to net income or loss (determined
in accordance with GAAP), nor as an indicator of the Company's financial
performance, nor as an alternative to cash flows from operating activities
(determined in accordance with GAAP), nor as a measure of the Company's
liquidity, nor is it necessarily indicative of sufficient cash flow to fund
all
of the Company's needs.



Other real estate companies and the National Association of Real Estate
Investment Trusts, or NAREIT, may define this term in a different manner. We
have included the NAREIT FFO definition as of May 17, 2016 in the table and note
that other REITs may not define FFO in accordance with the NAREIT definition or
may interpret the current NAREIT definition differently than we do.



We believe that in order to facilitate a clear understanding of the results of
the Company, FFO should be examined in connection with net income or loss and
cash flows from operating, investing and financing activities in the
consolidated financial statements.



Les calculs de FFO sont présentés dans le tableau suivant:




                                        For the                   For the
                                   Three Months Ended        Six Months Ended
                                        June 30,                 June 30,
(in thousands):                     2020         2019        2020         2019
Net income (loss)                $  (2,075)$    1,633$ (3,146)$      428
Depreciation and amortization        22,170      22,028       44,435      45,161
NAREIT FFO                           20,095      23,661       41,289      45,589
Lease Acquisition costs                  99         108          197         290

Funds From Operations            $   20,194$ 23,769$  41,486$ 45,879




Net Operating Income (NOI)



The Company provides property performance based on Net Operating Income, which
we refer to as NOI. Management believes that investors are interested in this
information. NOI is a non-GAAP financial measure that the Company defines as net
income or loss (the most directly comparable GAAP financial measure) plus
selling, general and administrative expenses, depreciation and amortization,
including amortization of acquired above and below market lease intangibles and
impairment charges, interest expense, less equity in earnings of nonconsolidated
REITs, interest income, management fee income, hedge ineffectiveness, gains or
losses on the sale of assets and excludes non-property specific income and
expenses. The information presented includes footnotes and the data is shown by
region with properties owned in the periods presented, which we call Same Store.
The comparative Same Store results include properties held for the periods
presented and exclude properties that are non-operating, being developed or
redeveloped, dispositions and significant nonrecurring income such as bankruptcy
settlements and lease termination fees. NOI, as defined by the Company, may not
be comparable to NOI reported by other REITs that define NOI differently. NOI
should not be considered an alternative to

                                       27

Table des matières

net income or loss as an indication of our performance or to cash flows as a
measure of the Company's liquidity or its ability to make distributions. The
calculations of NOI are shown in the following table:



                          Net Operating Income (NOI)*




                                       Rentable
                                        Square                                      Six Months                                      Six Months
                                         Feet           Three Months Ended            Ended             Three Months Ended            Ended           Inc         %
(in thousands)                          or RSF       31-Mar-20       30-Jun-20      30-Jun-20        31-Mar-19       30-Jun-19      30-Jun-19        (Dec)      Change
Region
East                                        944    $       2,664$     2,746$      5,410$       3,185$     3,301$      6,486$ (1,076)    (16.6) %
MidWest                                   1,557            5,485          5,088          10,573            5,163          5,174          10,337          236       2.3 %
South                                     4,387           13,290         13,025          26,315           14,272         15,196          29,468      (3,153)    (10.7) %
West                                      2,620           11,463         11,211          22,674           10,559         11,240          21,799          875       4.0 %
Property NOI* from Operating
Properties                                9,508           32,902         32,070          64,972           33,179         34,911          68,090      (3,118)     (4.6) %
Dispositions and Redevelopment
Properties                                  405             (28)            126              98            (205)          (215)           (420)          518       0.8 %
Property NOI*                             9,913    $      32,874$    32,196$     65,070$      32,974$    34,696$     67,670$ (2,600)     (3.8) %

Same Store                                         $      32,902$    32,070$     64,972$      33,179$    34,911$     68,090$ (3,118)     (4.6) %

Less Nonrecurring
Items in NOI* (a)                                             26            810             836               35            706             741           95     (0.2) %

Comparative
Same Store                                         $      32,876$    31,260$     64,136$      33,144$    34,205$     67,349$ (3,213)     (4.8) %


                                                                                     Six Months                                      Six Months
                                                        Three Months Ended             Ended            Three Months Ended             Ended
Reconciliation to Net Income (Loss)                  31-Mar-20        30-Jun-20      30-Jun-20       31-Mar-19        30-Jun-19      30-Jun-19
Net loss                                           $     (1,071)$   (2,075)$    (3,146)$     (1,205)$     1,633$        428
Add (deduct):
Management fee income                                      (478)          (446)           (924)            (677)          (645)         (1,322)
Depreciation and amortization                             22,338         22,245          44,583           23,245         22,109          45,354
Amortization of above/below market
leases                                                      (73)           (75)           (148)            (112)           (81)           (193)
General and administrative                                 3,525          3,817           7,342            3,509          3,703           7,212
Interest expense                                           9,063          8,980          18,043            9,368          9,371          18,739
Interest income                                            (382)          (381)           (763)          (1,294)        (1,259)         (2,553)
Non-property specific items, net                            (48)           
131              83              140          (135)               5


Property NOI*                                      $      32,874$    32,196$     65,070$      32,974$    34,696$     67,670

Les éléments non récurrents dans NOI comprennent le produit des faillites, la location
(a) les frais de résiliation ou autres produits ou dépenses non récurrents importants,

    may affect comparability.



* Exclut les NOI des investissements et les revenus d'intérêts des prêts garantis
FPI non consolidées.



                                       28

  Table of Contents
The information presented below provides the weighted average GAAP rent per
square foot for the six months ended June 30, 2020 for our properties and
weighted occupancy square feet and percentages. GAAP rent includes the impact of
tenant concessions and reimbursements. This table does not include information
about properties held by our investments in non-consolidated REITs or those to
which we have provided Sponsored REIT Loans.




                                                                                                         Weighted
                                                                                                         Occupied               Weighted
                                                        Year Built                     Weighted      Percentage as of           Average
                                                            or        Net Rentable     Occupied          June 30,          Rent per Occupied
Property Name                   City           State    Renovated     Square Feet       Sq. Ft.          2020 (a)           Square Feet (b)

Meadow Point              Chantilly            VA          1999            138,537        113,864                82.2 %   $              23.19
Innsbrook                 Glen Allen           VA          1999            298,183        170,680                57.2 %                  18.91
Loudoun Tech Center       Dulles               VA          1999            136,658        135,209                98.9 %                  18.27
Stonecroft                Chantilly            VA          2008            111,469              -                   - %                      -
Emperor Boulevard         Durham               NC          2009            259,531        259,531               100.0 %                  32.37
East total                                                                 944,378        679,284                71.9 %                  24.64
Northwest Point           Elk Grove Village    IL          1999            177,095        177,095               100.0 %                  27.79
909 Davis Street          Evanston             IL          2002            195,098        182,104                93.3 %                  41.14
River Crossing            Indianapolis         IN          1998            205,729        201,553                98.0 %                  24.40
Timberlake                Chesterfield         MO          1999            234,496        224,319                95.7 %                  27.24
Timberlake East           Chesterfield         MO          2000            117,036        117,036               100.0 %                  26.67
121 South 8th Street      Minneapolis          MN          1974            297,209        263,208                88.6 %                  22.76
Plaza Seven               Minneapolis          MN          1987            330,096        291,904                88.4 %                  31.24
Midwest total                                                            1,556,759      1,457,219                93.6 %                  28.60
One Overton Park          Atlanta              GA          2002            387,267        320,928                82.9 %                  24.30
Park Ten                  Houston              TX          1999            157,460        112,962                71.7 %                  26.01
Addison Circle            Addison              TX          1999            289,302        216,571                74.9 %                  33.03
Collins Crossing          Richardson           TX          1999            300,887        239,265                79.5 %                  26.79
Eldridge Green            Houston              TX          1999            248,399        248,399               100.0 %                  29.81
Park Ten Phase II         Houston              TX          2006            156,746        135,068                86.2 %                  28.16
Liberty Plaza             Addison              TX          1985            216,847        157,149                72.5 %                  23.20
Legacy Tennyson Center    Plano                TX       1999/2008          207,049        190,154                91.8 %                  29.90
One Legacy Circle         Plano                TX          2008            214,110         95,257                44.5 %                  36.72




                                       29

  Table of Contents
The information presented below provides the weighted average GAAP rent per
square foot for the six months ended June 30, 2020 for our properties and
weighted occupancy square feet and percentages. GAAP rent includes the impact of
tenant concessions and reimbursements. This table does not include information
about properties held by our investments in non-consolidated REITs or those to
which we have provided Sponsored REIT Loans.




                                                                                                          Weighted
                                                                                                          Occupied              Weighted
                                                          Year Built                     Weighted     Percentage as of           Average
                                                              or        Net Rentable     Occupied         June 30,          Rent per Occupied
Property Name                        City        State    Renovated     Square Feet      Sq. Ft.          2020 (a)           Square Feet (b)

One Ravinia Drive                 Atlanta        GA          1985            386,602       334,140                86.4 %   $             27.27
Two Ravinia Drive                 Atlanta        GA          1987            411,047       276,224                67.2 %                 27.19
Westchase I & II                  Houston        TX       1983/2008          629,025       351,814                55.9 %                 29.46
Pershing Park Plaza               Atlanta        GA          1989            160,145       158,047                98.7 %                 32.22
999 Peachtree                     Atlanta        GA          1987            621,946       534,625                86.0 %                 33.17
South Total                                                                4,386,832     3,370,603                76.8 %                 29.12
380 Interlocken                   Broomfield     CO          2000            240,359       173,996                72.4 %                 33.30
1999 Broadway                     Denver         CO          1986            677,377       539,125                79.6 %                 32.56
1001 17th Street                  Denver         CO       1977/2006          655,420       642,770                98.1 %                 36.79
600 17th Street                   Denver         CO          1982            609,353       527,151                86.5 %                 32.20
Greenwood Plaza                   Englewood      CO          2000            196,236       196,236               100.0 %                 25.10
390 Interlocken                   Broomfield     CO          2002            241,512       238,107                98.6 %                 33.73
West Total                                                                 2,620,257     2,317,385                88.4 %                 33.20

Total Operating Properties                                                 9,508,226     7,824,491                82.3 %                 29.84

Redevelopment Properties (c)
Forest Park                       Charlotte      NC          1999             62,212             -                   - %                     -
Blue Lagoon Drive                 Miami          FL          2002            213,182             -                   - %                     -
801 Marquette Ave                 Minneapolis    MN       1923/2017          129,821        48,021                37.0 %                 28.37
Total Redevelopment Properties
 405,215        48,021                11.9 %                 28.37

Grand Total                                                                9,913,441     7,872,512                79.4 %   $             29.83



Sur la base des pieds carrés occupés pondérés pour les six mois terminés 30 juin,
(a) 2020, y compris les locataires au mois, divisé par le montant net de

pieds carrés louables.

(b)Represents annualized GAAP rental revenue for the six months ended June 30,
2020, per weighted occupied square foot.
(c)Redevelopment Properties include properties in the process of being
redeveloped, or are completed but not yet stabilized.



                                       30

  Table of Contents

Liquidité et ressources en capital




Cash, cash equivalents and restricted cash were $2.9 million and $9.8 million at
June 30, 2020 and December 31, 2019, respectively. The decrease of $6.9 million
is attributable to $25.6 million provided by operating activities, less $43.2
million used for investing activities plus $10.7 million provided by financing
activities. Management believes that existing cash, cash anticipated to be
generated internally by operations and our existing debt financing will be
sufficient to meet working capital requirements and anticipated capital
expenditures for at least the next 12 months. Although there is no guarantee
that we will be able to obtain the funds necessary for our future growth, we
anticipate generating funds from continuing real estate operations. We believe
that we have adequate funds to cover unusual expenses and capital improvements,
in addition to normal operating expenses. Our ability to maintain or increase
our level of dividends to stockholders, however, depends in significant part
upon the level of rental income from our real estate properties.



Operating Activities



Cash provided by operating activities for the six months ended June 30, 2020 of
$25.6 million is primarily attributable to a net loss of $3.1 million plus the
add-back of $44.8 million of non-cash expenses, less a decrease in accounts
payable and accrued compensation of $11.1 million, an increase in payment of
deferred leasing commissions of $3.7 million, an increase in lease acquisition
costs of $0.8 million, an increase in tenant rent receivables of $0.3 million
and a decrease in tenant security deposits of $0.2 million.



Investing Activities



Cash used for investing activities for the six months ended June 30, 2020 of
$43.2 million is primarily attributable to purchases of other real estate assets
and office equipment investments of approximately $43.2 million.



Financing Activities



Cash provided by financing activities for the six months ended June 30, 2020 of
$10.7 million is primarily attributable to net borrowings on the BAML Revolver
(as defined below) of $30.0 million and was partially offset by distributions
paid to stockholders of $19.3 million.



JPM Term Loan


On August 2, 2018, the Company entered into an Amended and Restated Credit
Agreement with JPMorgan Chase Bank, N.A., as administrative agent and lender
("JPMorgan"), and the other lending institutions party thereto (the "JPM Credit
Agreement"), which provides a single unsecured bridge loan in the aggregate
principal amount of $150 million (the "JPM Term Loan") that remains fully
advanced and outstanding. The JPM Term Loan matures on November 30, 2021. The
JPM Term Loan was previously evidenced by a Credit Agreement, dated November 30,
2016, among the Company, JPMorgan, as administrative agent and lender, and the
other lending institutions party thereto, as amended by a First Amendment,
dated
October 18, 2017.



The JPM Term Loan bears interest at either (i) a number of basis points over a
LIBOR-based rate depending on the Company's credit rating (125.0 basis points
over the LIBOR-based rate at June 30, 2020) or (ii) a number of basis points
over the base rate depending on the Company's credit rating (25.0 basis points
over the base rate at June 30, 2020).



                                       31

  Table of Contents

Although the interest rate on the JPM Term Loan is variable under the JPM Credit
Agreement, the Company fixed the LIBOR-based rate on a portion of the JPM Term
Loan by entering into interest rate swap transactions. On March 7, 2019, the
Company entered into ISDA Master Agreements with various financial institutions
to hedge a $100 million portion of the future LIBOR-based rate risk under the
JPM Credit Agreement. Effective March 29, 2019, the Company fixed the
LIBOR-based rate at 2.44% per annum on a $100 million portion of the JPM Term
Loan until November 30, 2021. Accordingly, based upon the Company's credit
rating, as of June 30, 2020, the effective interest rate on a $100 million
portion of the JPM Term Loan was 3.69% per annum.



Based upon the Company's credit rating, as of June 30, 2020, the effective
interest rate on the unhedged $50 million portion of the JPM Term Loan was 1.44%
per annum. The weighted average interest rate on the unhedged $50 million
portion of the JPM Term Loan during the six months ended June 30, 2020 was
approximately 2.36% per annum. The weighted average interest rate on the JPM
Term Loan during the year ended December 31, 2019 was approximately 3.54% per
annum.



The JPM Credit Agreement contains customary affirmative and negative covenants
for credit facilities of this type, including limitations with respect to
indebtedness, liens, investments, mergers and acquisitions, disposition of
assets, changes in business, certain restricted payments, the requirement to
have subsidiaries provide a guaranty in the event that they incur recourse
indebtedness and transactions with affiliates. The JPM Credit Agreement also
contains financial covenants that require the Company to maintain a minimum
tangible net worth, a minimum fixed charge coverage ratio, a maximum secured
leverage ratio, a maximum leverage ratio, a maximum unencumbered leverage ratio,
and minimum unsecured interest coverage. The JPM Credit Agreement provides for
customary events of default with corresponding grace periods, including failure
to pay any principal or interest when due, certain cross defaults and a change
in control of the Company (as defined in the JPM Credit Agreement). In the event
of a default by the Company, the administrative agent may, and at the request of
the requisite number of lenders shall, declare all obligations under the JPM
Credit Agreement immediately due and payable, and enforce any and all rights of
the lenders or administrative agent under the JPM Credit Agreement and related
documents. For certain events of default related to bankruptcy, insolvency, and
receivership, all outstanding obligations of the Company will become immediately
due and payable. The Company was in compliance with the JPM Term Loan financial
covenants as of June 30, 2020.



BMO Term Loan



On September 27, 2018, the Company entered into a Second Amended and Restated
Credit Agreement with the lending institutions party thereto and Bank of
Montreal ("BMO"), as administrative agent (the "BMO Credit Agreement"). The BMO
Credit Agreement provides for a single, unsecured term loan borrowing in the
amount of $220 million (the "BMO Term Loan") that remains fully advanced and
outstanding. The BMO Term Loan consists of a $55 million tranche A term loan and
a $165 million tranche B term loan. The tranche A term loan matures on November
30, 2021 and the tranche B term loan matures on January 31, 2024. The BMO Credit
Agreement also includes an accordion feature that allows up to $100 million of
additional loans, subject to receipt of lender commitments and satisfaction of
certain customary conditions. The BMO Term Loan was previously evidenced by an
Amended and Restated Credit Agreement, dated October 29, 2014, among the
Company, BMO, as administrative agent and lender, and the other lending
institutions party thereto, as amended by a First Amendment, dated July 21,
2016, and a Second Amendment, dated October 18, 2017.



The BMO Term Loan bears interest at either (i) a number of basis points over
LIBOR depending on the Company's credit rating (125 basis points over LIBOR at
June 30, 2020) or (ii) a number of basis points over the base rate depending on
the Company's credit rating (25 basis points over the base rate at June 30,
2020).



Although the interest rate on the BMO Term Loan is variable under the BMO Credit
Agreement, the Company fixed the base LIBOR interest rate by entering into
interest rate swap transactions. On August 26, 2013, the Company entered into an
ISDA Master Agreement with Bank of Montreal that fixed the base LIBOR interest
rate on the BMO Term Loan at 2.32% per annum until August 26, 2020. On February
20, 2019, the Company entered into ISDA Master Agreements with a group of banks
that fixed the base LIBOR interest rate on the BMO Term Loan at 2.39% per annum
for the period beginning on August 26, 2020 and ending January 31, 2024.
Accordingly, based upon the Company's credit rating, as of June 30, 2020, the
effective interest rate on the BMO Term Loan was 3.57% per annum.



                                       32

  Table of Contents

The BMO Credit Agreement contains customary affirmative and negative covenants
for credit facilities of this type, including limitations with respect to
indebtedness, liens, investments, mergers and acquisitions, disposition of
assets, changes in business, certain restricted payments, the requirement to
have subsidiaries provide a guaranty in the event that they incur recourse
indebtedness and transactions with affiliates. The BMO Credit Agreement also
contains financial covenants that require the Company to maintain a minimum
tangible net worth, a maximum leverage ratio, a maximum secured leverage ratio,
a minimum fixed charge coverage ratio, a maximum unencumbered leverage ratio,
and minimum unsecured interest coverage. The BMO Credit Agreement provides for
customary events of default with corresponding grace periods, including failure
to pay any principal or interest when due, certain cross defaults and a change
in control of the Company (as defined in the BMO Credit Agreement). In the event
of a default by the Company, the administrative agent may, and at the request of
the requisite number of lenders shall, declare all obligations under the BMO
Credit Agreement immediately due and payable, terminate the lenders' commitments
to make loans under the BMO Credit Agreement, and enforce any and all rights of
the lenders or the administrative agent under the BMO Credit Agreement and
related documents. For certain events of default related to bankruptcy,
insolvency, and receivership, the commitments of lenders will be automatically
terminated and all outstanding obligations of the Company will become
immediately due and payable. The Company was in compliance with the BMO Term
Loan financial covenants as of June 30, 2020.



BAML Credit Facility



On July 21, 2016, the Company entered into a First Amendment (the "BAML First
Amendment"), and on October 18, 2017, the Company entered into a Second
Amendment (the "BAML Second Amendment"), to the Second Amended and Restated
Credit Agreement dated October 29, 2014 among the Company, the lending
institutions party thereto and Bank of America, N.A., as administrative agent,
L/C Issuer and Swing Line Lender (as amended by the BAML First Amendment and the
BAML Second Amendment, the "BAML Credit Facility") that continued an existing
unsecured revolving line of credit (the "BAML Revolver") and extended the
maturity of an existing term loan (the "BAML Term Loan").



BAML Revolver Highlights


Le revolver BAML est destiné aux emprunts, au choix de la société, jusqu'à 600 $

? million. Les emprunts contractés au titre du Revolver BAML peuvent être des crédits renouvelables,

prêts ou lettres de crédit swing line, dont la somme combinée ne peut excéder

600 millions de dollars exceptionnel à tout moment.

Les emprunts effectués conformément au revolver BAML peuvent être empruntés, remboursés et

réemprunté de temps à autre jusqu'à la date d'échéance initiale de 12 janvier,

? 2022. La Société a le droit de prolonger la date d'échéance du BAML

Revolver par deux périodes supplémentaires de six mois, ou jusqu'à 12 janvier 2023, sur

paiement d'une redevance et satisfaction de certaines conditions d'usage.

La facilité de crédit BAML comprend une fonction accordéon qui permet une

? montant total jusqu'à 500 millions de dollars de capacité d'emprunt supplémentaire

applicable au revolver BAML et / ou au prêt à terme BAML, sous réserve de réception

   of lender commitments and satisfaction of certain customary conditions.



As of June 30, 2020, there were borrowings of $30 million outstanding under the
BAML Revolver. The BAML Revolver bears interest at either (i) a margin over
LIBOR depending on the Company's credit rating (1.20% over LIBOR at June 30,
2020) or (ii) a margin over the base rate depending on the Company's credit
rating (0.20% over the base rate at June 30, 2020). The BAML Credit Facility
also obligates the Company to pay an annual facility fee in an amount that is
also based on the Company's credit rating. The facility fee is assessed against
the total amount of the BAML Revolver, or $600 million (0.25% at June 30, 2020).



Based upon the Company's credit rating, as of June 30, 2020, the interest rate
on the BAML Revolver was 1.36% per annum. The weighted average interest rate on
all amounts outstanding on the BAML Revolver during the six months ended June
30, 2020 was approximately 2.01% per annum. As of December 31, 2019, there were
no borrowings outstanding under the BAML Revolver. The weighted average interest
rate on all amounts outstanding on the BAML Revolver during the year ended
December 31, 2019 was approximately 3.67% per annum.



                                       33

  Table of Contents

BAML Term Loan Highlights


? Le prêt à terme BAML est pour 400 millions de dollars.

? Le prêt à terme BAML arrive à échéance le 12 janvier 2023.

La facilité de crédit BAML comprend une fonction accordéon qui permet une

? montant total jusqu'à 500 millions de dollars de capacité d'emprunt supplémentaire

applicable au revolver BAML et / ou au prêt à terme BAML, sous réserve de réception

des engagements des prêteurs et du respect de certaines conditions usuelles.

Sur 27 septembre 2012, la société a dessiné l'ensemble 400 millions de dollars sous le

? Prêt à terme BAML et ce montant reste entièrement avancé et impayé en vertu du

   BAML Term Loan.




The BAML Term Loan bears interest at either (i) a margin over LIBOR depending on
the Company's credit rating (1.35% over LIBOR at June 30, 2020) or (ii) a margin
over the base rate depending on the Company's credit rating (0.35% over the
base
rate at June 30, 2020).



Although the interest rate on the BAML Credit Facility is variable, the Company
fixed the base LIBOR interest rate on the BAML Term Loan by entering into
interest rate swap transactions. On July 22, 2016, the Company entered into ISDA
Master Agreements with a group of banks that fixed the base LIBOR interest rate
on the BAML Term Loan at 1.12% per annum for the period beginning on September
27, 2017 and ending on September 27, 2021. Accordingly, based upon the Company's
credit rating, as of June 30, 2020, the effective interest rate on the BAML
Term
Loan was 2.47% per annum.


Informations générales sur la facilité de crédit BAML




The BAML Credit Facility contains customary affirmative and negative covenants
for credit facilities of this type, including limitations with respect to
indebtedness, liens, investments, mergers and acquisitions, disposition of
assets, changes in business, certain restricted payments, the requirement to
have subsidiaries provide a guaranty in the event that they incur recourse
indebtedness and transactions with affiliates. The BAML Credit Facility also
contains financial covenants that require the Company to maintain a minimum
tangible net worth, a maximum leverage ratio, a maximum secured leverage ratio,
a minimum fixed charge coverage ratio, a maximum unencumbered leverage ratio,
and minimum unsecured interest coverage. The BAML Credit Facility provides for
customary events of default with corresponding grace periods, including failure
to pay any principal or interest when due, certain cross defaults and a change
in control of the Company (as defined in the BAML Credit Facility). In the event
of a default by the Company, the administrative agent may, and at the request of
the requisite number of lenders shall, declare all obligations under the BAML
Credit Facility immediately due and payable, terminate the lenders' commitments
to make loans under the BAML Credit Facility, and enforce any and all rights of
the lenders or administrative agent under the BAML Credit Facility and related
documents. For certain events of default related to bankruptcy, insolvency, and
receivership, the commitments of lenders will be automatically terminated and
all outstanding obligations of the Company will become immediately due and
payable. The Company was in compliance with the BAML Credit Facility financial
covenants as of June 30, 2020.



The Company may use the proceeds of the loans under the BAML Credit Facility to
finance the acquisition of real properties and for other permitted investments;
to finance investments associated with Sponsored REITs to refinance or retire
indebtedness and for working capital and other general business purposes, in
each case to the extent permitted under the BAML Credit Facility.



Senior Notes



On October 24, 2017, the Company entered into a note purchase agreement (the
"Note Purchase Agreement") with the various purchasers named therein (the
"Purchasers") in connection with a private placement of senior unsecured notes.
Under the Note Purchase Agreement, the Company agreed to sell to the Purchasers
an aggregate principal amount of $200 million of senior unsecured notes
consisting of (i) 3.99% Series A Senior Notes due December 20, 2024 in an
aggregate principal amount of $116 million (the "Series A Notes") and (ii) 4.26%
Series B Senior Notes due December 20, 2027 in an aggregate principal amount of
$84 million (the "Series B Notes" and, together with the Series A Notes, the
"Senior Notes"). On December 20, 2017, the Senior Notes were funded and the
proceeds were used to reduce the outstanding balance of the BAML Revolver.
                                       34

  Table of Contents



The Note Purchase Agreement contains customary financial covenants, including a
maximum leverage ratio, a maximum secured leverage ratio, a minimum fixed charge
coverage ratio, and a maximum unencumbered leverage ratio. The Note Purchase
Agreement also contains restrictive covenants that, among other things, restrict
the ability of the Company and its subsidiaries to enter into transactions with
affiliates, merge, consolidate, create liens, make certain restricted payments,
enter into certain agreements or prepay certain indebtedness. Such financial and
restrictive covenants are substantially similar to the corresponding covenants
contained in the BAML Credit Facility, the BMO Credit Agreement and the JPM
Credit Agreement. The Senior Notes financial covenants require, among other
things, the maintenance of a fixed charge coverage ratio of at least 1.50; a
maximum leverage ratio and an unsecured leverage ratio of no more than 60% (65%
if there were a significant acquisition for a short period of time). In
addition, the Note Purchase Agreement provides that the Note Purchase Agreement
will automatically incorporate additional financial and other specified
covenants (such as limitations on investments and distributions) that are
effective from time to time under the existing credit agreements, other material
indebtedness or certain other private placements of debt of the Company and its
subsidiaries. The Note Purchase Agreement contains customary events of default,
including payment defaults, cross defaults with certain other indebtedness,
breaches of covenants and bankruptcy events. In the case of an event of default,
the Purchasers may, among other remedies, accelerate the payment of all
obligations. The Company was in compliance with the Senior Notes financial
covenants as of June 30, 2020.



Equity Securities



As of June 30, 2020, we had an automatic shelf registration statement on Form
S-3 with the Securities and Exchange Commission relating to the offer and sale,
from time to time, of an indeterminate amount of our debt securities, common
stock, preferred stock or depository shares. From time to time, we expect to
issue debt securities, common stock, preferred stock or depository shares under
our existing automatic shelf registration statements or a different registration
statement to fund the acquisition of additional properties, to pay down any
existing debt financing and for other corporate purposes.



Contingencies


From time to time, we may provide financing to Sponsored REITs in the form of a
construction loan and/or a revolving line of credit secured by a mortgage. As of
June 30, 2020, we had one loan outstanding for $21 million principal amount with
one Sponsored REIT under such arrangements for the purpose of funding
construction costs, capital expenditures, leasing costs or for other purposes.
We anticipate that advances made under these facilities will be repaid at their
maturity date or earlier from refinancing, long term financings of the
underlying properties, cash flows from the underlying properties or another
other capital event.



We may be subject to various legal proceedings and claims that arise in the
ordinary course of our business. Although occasional adverse decisions (or
settlements) may occur, we believe that the final disposition of such matters
will not have a material adverse effect on our financial position or results of
operations.



Related Party Transactions


Nous avons l'intention de tirer parti de la facilité de crédit BAML à l'avenir pour divers
fins de l'entreprise, y compris l'acquisition de propriétés que nous acquérons
directement pour notre portefeuille et pour les prêts de FPI parrainés comme décrit ci-dessous.



Loans to Sponsored REITs



Sponsored REIT Loans



From time to time we may make secured loans ("Sponsored REIT Loans") to
Sponsored REITs in the form of mortgage loans or revolving lines of credit to
fund construction costs, capital expenditures, leasing costs and for other
purposes. We anticipate that advances made under these facilities will be repaid
at their maturity date or earlier from refinancing, long term financings of the
underlying properties, cash flows from the underlying properties or another
capital event. Each Sponsored REIT Loan is secured by a mortgage on the
underlying property and has a term of approximately two to three years.

                                       35

  Table of Contents



Our Sponsored REIT Loans subject us to credit risk. However, we believe that our
position as asset manager of each of the Sponsored REITs helps mitigate that
risk by providing us with unique insight and the ability to rely on qualitative
analysis of the Sponsored REITs. Before making a Sponsored REIT Loan, we
consider a variety of subjective factors, including the quality of the
underlying real estate, leasing, the financial condition of the applicable
Sponsored REIT and local and national market conditions. These factors are
subject to change and we do not apply a formula or assign relative weights to
the factors. Instead, we make a subjective determination after considering
such
factors collectively.



Additional information about our Sponsored REIT Loans outstanding as of June 30,
2020, including a summary table of our Sponsored REIT Loans, is incorporated
herein by reference to Part 1, Item 1, Note 2, "Related Party Transactions and
Investments in Non-Consolidated Entities - Management fees and interest income
from loans", in the Notes to Consolidated Financial Statements included in
this
report.



Other Considerations



We generally pay the ordinary annual operating expenses of our properties from
the rental revenue generated by the properties. For the three and six months
ended June 30, 2020 and 2019, respectively, the rental income exceeded the
expenses for each individual property, with the exception of one property
located in Chantilly, Virginia for each of the three and six months ended June
30, 2020 and one property located in Minneapolis, Minnesota for each of the
three and six months ended June 30, 2019.



Our property located in Chantilly, Virginia ("Stonecroft") had approximately
111,000 square feet of rentable space and became vacant in December 2019. We had
no rental income and operating expenses of $274,000 during the three months
ended June 30, 2020. We had no rental income and operating expenses of $446,000
during the six months ended June 30, 2020.



Our property located at 801 Marquette Avenue in Minneapolis, Minnesota ("801
Marquette Avenue") had approximately 170,000 square feet of rentable space and
became vacant in January 2016. On June 30, 2016, we commenced a redevelopment
plan for the property and substantially completed the redevelopment in the
second quarter of 2017. Redevelopment of 801 Marquette Avenue resulted in
approximately 129,800 of net rentable square feet for the property. As of June
30, 2020, we have signed leases with two tenants that now occupy 48,000 square
feet, or 37% of rentable square feet at the property. As a result, rental income
exceeded operating expenses during the three and six months ended June 30, 2020.
We had rental income of $129,000 and operating expenses of $277,000 during the
three months ended June 30, 2019 and rental income of $214,000 and operating
expenses of $563,000 during the six months ended June 30, 2019.



Arrangements hors bilan et obligations contractuelles

Il n'y a eu aucun changement important dans nos obligations contractuelles et
Arrangements hors bilan tels que divulgués dans notre rapport annuel sur formulaire 10-K
pour l'année terminée 31 décembre 2019.







                                       36

  Table of Contents

© Edgar Online, source Aperçus

Laisser un commentaire

Votre adresse de messagerie ne sera pas publiée. Les champs obligatoires sont indiqués avec *