FRANKLIN STREET PROPERTIES CORP /MA/ - Annual Report: 2012 (Form 10-K)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

FORM 10-K

 

(Mark One)

 

x           ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended December 31, 2012

 

o              TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from             to             

 

Commission File No. 001-32470

 

FRANKLIN STREET PROPERTIES CORP.

(Exact name of registrant as specified in its charter)

 

 

Registrant’s telephone number, including area code: (781) 557-1300

 

Securities registered pursuant to Section 12(b) of the Act:

 

 

Securities registered pursuant to Section 12(g) of the Act: None

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes x  No o.

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes o No x.

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x  No o.

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes x  No o.

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer x	Accelerated filer o
Non-accelerated filer o	Smaller reporting company o
(Do not check if a smaller reporting company)

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes o No x.

 

The aggregate market value of the voting and non-voting common equity held by non-affiliates based on the closing sale price as reported on NYSE MKT, as of the last business day of the registrant’s most recently completed second fiscal quarter, June 30, 2012, was approximately $771,388,918.

 

There were 82,937,405 shares of common stock of the registrant outstanding as of February 15, 2013.

 

Documents incorporated by reference: The registrant intends to file a definitive proxy statement pursuant to Regulation 14A, promulgated under the Securities Exchange Act of 1934, as amended, to be used in connection with the registrant’s Annual Meeting of Stockholders to be held on May 16, 2013 (the “Proxy Statement”).  The information required in response to Items 10 – 14 of Part III of this Form 10-K, other than that contained in Part I under the caption, “Directors and Executive Officers of FSP Corp.,” is hereby incorporated by reference to the Proxy Statement.

 

 

Table of Contents

 

TABLE OF CONTENTS

 

PART I		1
Item 1.	Business	1
Item 1A.	Risk Factors	7
Item 1B.	Unresolved Staff Comments	14
Item 2.	Properties	15
Item 3.	Legal Proceedings	20
Item 4.	Mine Safety Disclosures	20
PART II		21
Item 5.	Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	21
	Stock Performance Graph	22
Item 6.	Selected Financial Data	23
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	44
Item 8.	Financial Statements and Supplementary Data	46
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	46
Item 9A.	Controls and Procedures	46
Item 9B.	Other Information	47
PART III		48
Item 10.	Directors, Executive Officers and Corporate Governance	48
Item 11.	Executive Compensation	48
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	48
Item 13.	Certain Relationships and Related Transactions, and Director Independence	48
Item 14.	Principal Accounting Fees and Services	48
PART IV		49
Item 15.	Exhibits, Financial Statement Schedules	49
SIGNATURES		50

 

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PART I

 

Item 1.                     Business

 

History

 

Our company, Franklin Street Properties Corp., which we refer to as FSP Corp., the Company, we or our, is a Maryland corporation that operates in a manner intended to qualify as a real estate investment trust, or REIT, for federal income tax purposes.  Our common stock is traded on the NYSE MKT under the symbol “FSP”.  FSP Corp. is the successor to Franklin Street Partners Limited Partnership, or the FSP Partnership, which was originally formed as a Massachusetts general partnership in January 1997 as the successor to a Massachusetts general partnership that was formed in 1981.  On January 1, 2002, the FSP Partnership converted into FSP Corp., which we refer to as the conversion.  As a result of this conversion, the FSP Partnership ceased to exist and we succeeded to the business of the FSP Partnership.  In the conversion, each unit of both general and limited partnership interests in the FSP Partnership was converted into one share of our common stock. As a result of the conversion, we hold, directly and indirectly, 100% of the interest in three former subsidiaries of the FSP Partnership:  FSP Investments LLC, FSP Property Management LLC, and FSP Holdings LLC.  We operate some of our business through these subsidiaries.

 

Our Business

 

We are a REIT focused on commercial real estate investments primarily in suburban office markets and currently operate in only one segment: real estate operations.  The principal revenue sources for our real estate operations include rental income from real estate leasing, interest income from secured loans made on office properties and fee income from asset/property management.

 

Previously we also operated in an investment banking segment, which was discontinued in December 2011.  Our investment banking segment generated brokerage commissions, loan origination fees, development services and other fees related to the organization of single-purpose entities that own real estate and the private placement of equity in those entities.  We refer to these entities which are organized as corporations and operated in a manner intended to qualify as REITs, as Sponsored REITs.  On December 15, 2011, we announced that our broker/dealer subsidiary, FSP Investments LLC, would no longer sponsor the syndication of shares of preferred stock in newly-formed Sponsored REITs.  FSP Investments LLC is a registered broker/dealer with the Securities and Exchange Commission and is a member of the Financial Industry Regulatory Authority, or FINRA.

 

From time-to-time we may acquire real estate or invest in real estate by making secured loans on real estate or by acquiring our Sponsored REITs, although we have no legal or any other enforceable obligation to acquire or to offer to acquire any Sponsored REIT.  We may also pursue on a selective basis the sale of our properties to take advantage of the value creation and demand for our properties, or for geographic or property specific reasons.

 

Real Estate

 

We own and operate a portfolio of real estate consisting of 37 office properties as of December 31, 2012. We derive rental revenue from income paid to us by tenants of these properties.  See Item 2 of this Annual Report on Form 10-K for more information about our properties.  From time-to-time we dispose of properties generating gains or losses in an ongoing effort to improve and upgrade our portfolio.  We also held preferred stock investments in two Sponsored REITs as of December 31, 2012, from which we record our share of income or loss under the equity method of accounting, and from which we receive dividends.

 

We provide asset management, property management, property accounting, investor and/or development services to our portfolio and certain of our Sponsored REITs through our subsidiaries FSP Investments LLC and FSP Property Management LLC.  FSP Corp. recognizes revenue from its receipt of fee income from Sponsored REITs that have not been consolidated or acquired by us.  Neither FSP Investments LLC nor FSP Property Management LLC receives any rental income.

 

From time-to-time we may make secured 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 these loans will be repaid at their maturity or earlier from long-term financings of the underlying

 

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properties, cash flows from the underlying properties or some other capital event.  We refer to these loans as Sponsored REIT Loans.  We have seven Sponsored REIT Loans secured by real estate outstanding as of December 31, 2012, from which we derive interest income.

 

Prior to discontinuing our investment banking segment in December 2011, we typically made an acquisition loan to each Sponsored REIT to fund the purchase of its underlying property, which was secured by a mortgage on the borrower’s real estate.  These loans typically were repaid out of the proceeds of the borrower’s equity offering.  We refer to these loans as Acquisition Loans.  As of December 31, 2012 and 2011, there were no Acquisition Loans outstanding.

 

Investment Objectives

 

Our investment objectives are to create shareholder value by increasing revenue from rental, dividend and interest income and net gains from sales of properties and increase the cash available for distribution in the form of dividends to our stockholders.  We expect that we will continue to derive real estate revenue from Sponsored REIT Loans and fees from asset management, property management and investor services.  We may also acquire additional real properties by direct purchase or by acquisition of Sponsored REITs, though we have no obligation to acquire or offer to acquire any Sponsored REIT in the future.

 

From time to time, as market conditions warrant, we may sell properties owned by us.  We sold one property located in Southfield, Michigan on December 21, 2012 at a loss.  We sold one  industrial property located in Savage, Maryland on June 24, 2011, and one office property located in Falls Church, Virginia on January 21, 2011, each at a gain.  We did not sell any properties in 2010.  When we sell a property, we either distribute some or all of the sale proceeds to our stockholders as a distribution or retain some or all of such proceeds for investment in real properties or other corporate activities.

 

We may acquire, and have acquired, real properties in any geographic area of the United States and of any property type.  We own 37 properties that are located in 13 different states.  See Item 2 of this Annual Report on Form 10-K for more information about our properties.

 

We rely on the following principles in selecting real properties for acquisition by FSP Corp. and managing them after acquisition:

 

·                  we seek to buy or develop investment properties at a price which produces value for investors and avoid overpaying for real estate merely to outbid competitors;

·                  we seek to buy or develop properties in excellent locations with substantial infrastructure in place around them and avoid investing in locations where the future construction of such infrastructure is speculative;

·                  we seek to buy or develop properties that are well-constructed and designed to appeal to a broad base of users and avoid properties where quality has been sacrificed for cost savings in construction or which appeal only to a narrow group of users;

·                  we aggressively manage, maintain and upgrade our properties and refuse to neglect or undercapitalize management, maintenance and capital improvement programs; and

·                  we believe that we have the ability to hold properties through down cycles because we generally do not have significant leverage on the Company, which could place the properties at risk of foreclosure.  As of February 15, 2013, none of our 37 properties was subject to mortgage debt.

 

Competition

 

With respect to our real estate investments, we face competition in each of the markets where our properties are located.  In order to establish, maintain or increase the rental revenues for a property, it must be competitive on location, cost and amenities with other buildings of similar use.  Some of our competitors may have significantly more resources than we do and may be able to offer more attractive rental rates or services.  On the other hand, some of our competitors may be smaller or have less fixed overhead costs, less cash or other resources that make them willing or able to accept lower rents in order to maintain a certain occupancy level.  In markets where there is not currently significant existing property competition, our competitors may decide to enter the market and build new buildings to compete with our existing projects or those in a development stage.  Our

 

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competition is not only with other developers, but also with property users who choose to own their building or a portion of the building in the form of an office condominium.  Competitive conditions are affected by larger market forces beyond our control, such as general economic conditions, that may increase competition among landlords for quality tenants, and individual decisions by tenants that are beyond our control.

 

Employees

 

We had 35 employees as of December 31, 2012 and February 15, 2013.

 

Available Information

 

We are subject to the informational requirements of the Securities Exchange Act of 1934, and, in accordance therewith, we file reports and other information with the SEC.  The reports and other information we file can be inspected and copied at the SEC Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549.  Such reports and other information may also be obtained from the web site that the SEC maintains at http://www.sec.gov.  Further information about the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330.

 

We make available, free of charge through our website http://www.franklinstreetproperties.com our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such material with the SEC.

 

Reports and other information concerning us may also be obtained electronically through a variety of databases, including, among others, the Electronic Data Gathering, Analysis, and Retrieval (EDGAR) program at http://www.sec.gov, Knight-Ridder Information Inc., Federal Filing/Dow Jones and Lexis/Nexis.

 

We will voluntarily provide paper copies of our filings and code of ethics upon written request received at the address on the cover of this Annual Report on Form 10-K, free of charge.

 

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Directors and Executive Officers of FSP Corp.

 

The following table sets forth the names, ages and positions of all our directors and executive officers as of February 15, 2013.

 

Name		Age		Position
George J. Carter (5)		64		President, Chief Executive Officer and Director
Barbara J. Fournier (4)		57		Executive Vice President, Chief Operating Officer, Treasurer, Secretary and Director
Janet Prier Notopoulos (3)		65		Executive Vice President and Director
John N. Burke (1) (2) (4) (6)		51		Director
Brian N. Hansen(1) (2) (3)		41		Director
Dennis J. McGillicuddy (1) (2) (3)		71		Director
Georgia Murray (1) (2) (5) (7)		62		Director
Barry Silverstein (1) (2) (4)		79		Director
Jeffery B. Carter		41		Executive Vice President and Chief Investment Officer
Scott H. Carter		41		Executive Vice President, General Counsel and Assistant Secretary
John G. Demeritt		52		Executive Vice President and Chief Financial Officer

 

(1) Member of the Audit Committee

(2) Member of the Compensation Committee

(3) Class I Director

(4) Class II Director

(5) Class III Director

(6) Chair of the Audit Committee

(7) Chair of the Compensation Committee

 

George J. Carter, age 64, is President, Chief Executive Officer and has been a Director of FSP Corp. since 2002.  Mr. Carter is responsible for all aspects of the business of FSP Corp. and its affiliates, with special emphasis on the evaluation, acquisition and structuring of real estate investments.  Prior to the conversion, he was President of the general partner of the FSP Partnership (the “General Partner”) and was responsible for all aspects of the business of the FSP Partnership and its affiliates.  From 1992 through 1996 he was President of Boston Financial Securities, Inc. (“Boston Financial”).  Prior to joining Boston Financial, Mr. Carter was owner and developer of Gloucester Dry Dock, a commercial shipyard in Gloucester, Massachusetts.  From 1979 to 1988, Mr. Carter served as Managing Director in charge of marketing at First Winthrop Corporation, a national real estate and investment banking firm headquartered in Boston, Massachusetts.  Prior to that, he held a number of positions in the brokerage industry including those with Merrill Lynch & Co. and Loeb Rhodes & Co.  Mr. Carter is a graduate of the University of Miami (B.S.).  Mr. Carter is a FINRA General Securities Principal (Series 24) and holds a FINRA Series 7 general securities license and a FINRA Series 79, Investment Banker Registration license.

 

Barbara J. Fournier, age 57, is Executive Vice President, Chief Operating Officer, Treasurer, Secretary and has been a Director of FSP Corp. since 2002.  Ms. Fournier has as her primary responsibility, together with Mr. Carter, the management of all operating business affairs of FSP Corp. and its affiliates.  Ms. Fournier was the Principal Financial Officer until March 2005.  Prior to the conversion, Ms. Fournier was the Vice President, Chief Operating Officer, Treasurer and Secretary of the General Partner.  From 1993 through 1996, she was Director of Operations for the private placement division of Boston Financial.  Prior to joining Boston Financial, Ms. Fournier served as Director of Operations for Schuparra Securities Corp. and as the Sales Administrator for Weston Financial Group.  From 1979 through 1986, Ms. Fournier worked at First Winthrop Corporation in administrative and management capacities; including Office Manager, Securities Operations and Partnership Administration.  Ms. Fournier attended Northeastern University and the New York Institute of Finance.  Ms. Fournier is a member of the

 

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NYSE MKT Listed Company Council.  Ms. Fournier participates in corporate governance-related continuing education sessions offered by the NYSE affiliate, Corporate Board Member.  Ms. Fournier is a FINRA General Securities Principal (Series 24).  She also holds other FINRA supervisory licenses including Series 4 and Series 53, and a FINRA Series 7 general securities license, a FINRA Series 99, Operations Professional license and a FINRA Series 79, Investment Banker Registration license.

 

Janet Prier Notopoulos, age 65, is an Executive Vice President of FSP Corp. and has been a Director of FSP Corp. and President of FSP Property Management since 2002.  Ms. Notopoulos has as her primary responsibility the oversight of the management of the real estate assets of FSP Corp. and its affiliates.  Prior to the conversion, Ms. Notopoulos was a Vice President of the General Partner.  Prior to joining the FSP Partnership in 1997, Ms. Notopoulos was a real estate and marketing consultant for various clients.  From 1975 to 1983, she was Vice President of North Coast Properties, Inc., a Boston real estate investment company.  Between 1969 and 1973, she was a real estate paralegal at Goodwin, Procter & Hoar.  Ms. Notopoulos is a graduate of Wellesley College (B.A.) and the Harvard School of Business Administration (M.B.A).

 

John N.Burke, age 51, has been a Director of FSP Corp. and Chair of the Audit Committee since June 2004.  Mr. Burke is a certified public accountant with approximately 30 years of experience in the practice of public accounting working with both private and publicly traded companies with extensive experience serving clients in the real estate industry.  Such experience includes analysis and evaluation of financial reporting, accounting systems, internal controls and audit matters.  Mr. Burke has been involved as an advisor on several public offerings, private equity and debt financings and merger and acquisition transactions.  Mr. Burke’s consulting experience includes a wide range of business planning services.  Prior to starting his own firm in 2003, Mr. Burke was a Partner in the Boston office of BDO USA, LLP.  Mr. Burke is a member of the American Institute of Certified Public Accountants and the Massachusetts Society of CPAs.  Mr. Burke earned an M.S. in Taxation and studied undergraduate accounting and finance at Bentley University.

 

Brian N. Hansen, age 41, became a Director in November 2012. Mr. Hansen is President and Chief Operating Officer of Confluence Investment Management LLC, a St. Louis based Registered Investment Advisor. Prior to founding Confluence in 2007, Mr. Hansen served as a Managing Director in A.G. Edwards’ Financial Institutions & Real Estate Investment Banking practice. While at A.G. Edwards, Mr. Hansen advised a wide variety of Real Estate Investment Trusts on numerous capital markets transactions, including public and private offerings of debt and equity securities as well as the analysis of various merger & acquisition opportunities. Prior to joining A.G. Edwards, Mr. Hansen served as a Manager in Arthur Andersen LLP’s Audit & Business Advisory practice. Mr. Hansen serves on the board of a number of non-profit entities and the Investment Committee of the Archdiocese of St. Louis. Mr. Hansen earned his MBA from the Kellogg School of Management at Northwestern University and his Bachelor of Science in Commerce from DePaul University. Mr. Hansen is a Certified Public Accountant.

 

Dennis J. McGillicuddy, age 71, has been a Director of FSP Corp. since May 2002.  Mr. McGillicuddy graduated from the University of Florida with a B.A. degree and from the University of Florida Law School with a J.D. degree.  In 1968, Mr. McGillicuddy joined Barry Silverstein in founding Coaxial Communications, a cable television company.  In 1998 and 1999, Coaxial sold its cable systems.  Mr. McGillicuddy has served on the boards of various charitable organizations. He is currently president of the Board of Trustees of Florida Studio Theater, a professional non-profit theater organization, and he serves as a Co-Chair, together with his wife, of Embracing Our Differences, an annual month-long art exhibit that promotes the values of diversity and inclusion.  Mr. McGillicuddy also is a member of the Advisory Board to the Center For Mindfulness In Medicine, Health Care & Society, University of Massachusetts Medical School.

 

Georgia Murray, age 62, has been a Director of FSP Corp. since April 2005 and Chair of the Compensation Committee since October 2006.  Ms. Murray is retired from Lend Lease Real Estate Investments, Inc., where she served as a Principal from November 1999 until May 2000.  From 1973 through October 1999, Ms. Murray worked at The Boston Financial Group, Inc., serving as Senior Vice President and a Director at times during her tenure.  Boston Financial was an affiliate of the Boston Financial Group, Inc.  She is a past Trustee of the Urban Land Institute and a past President of the Multifamily Housing Institute.  Ms. Murray previously served on the Board of Directors of Capital Crossing Bank.  She also serves on the boards of numerous non-profit entities.  Ms. Murray is a graduate of Newton College.

 

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Barry Silverstein, age 79, has been a Director of FSP Corp. since May 2002.  Mr. Silverstein took his law degree from Yale University in 1957 and subsequently held positions as attorney/officer/director of various privately-held manufacturing companies in Chicago, Illinois.  In 1964, he moved to Florida to manage his own portfolio and to teach at the University of Florida Law School.  In 1968, Mr. Silverstein became the principal founder and shareholder in Coaxial Communications, a cable television company.  In 1998 and 1999, Coaxial sold its cable systems.  Since January 2001, Mr. Silverstein has been a private investor.

 

Jeffrey B. Carter, age 41, is Executive Vice President and Chief Investment Officer of FSP Corp.  Mr. Carter was appointed to that position in February 2012.  Previously, Mr. Carter served as Senior Vice President and Director of Acquisitions of FSP Corp. from 2005 to 2012 and as Vice President - Acquisitions from 2003 to 2005.  Mr. Carter is primarily responsible for developing and implementing the Company’s investment strategy, including coordination of acquisitions and dispositions.  Prior to joining FSP Corp., Mr. Carter worked in Trust Administration for Northern Trust Bank in Miami, Florida.  Mr. Carter is a graduate of Arizona State University (B.A.) and The George Washington University (M.A.).  Mr. Carter holds a FINRA Series 7 general securities license and a FINRA Series 79, Investment Banker Registration license.  Mr. Carter’s father, George J. Carter, serves as President, Chief Executive Officer and a Director of FSP Corp. and Mr. Carter’s brother, Scott H. Carter, serves as Executive Vice President, General Counsel and Assistant Secretary of FSP Corp.

 

Scott H. Carter, age 41, is Executive Vice President, General Counsel and Assistant Secretary of FSP Corp.   Mr. Carter has been General Counsel since February 2008.  Mr. Carter joined FSP Corp. in October 2005 as Senior Vice President, In-house Counsel and was appointed to the position of Assistant Secretary in May 2006.  Mr. Carter has as his primary responsibility the management of all of the legal affairs of FSP Corp. and its affiliates.  Prior to joining FSP Corp. in October 2005, Mr. Carter was associated with the law firm of Nixon Peabody LLP, which he originally joined in 1999.  At Nixon Peabody LLP, Mr. Carter concentrated his practice on the areas of real estate syndication, acquisitions and finance.  Mr. Carter received a Bachelor of Business Administration (B.B.A.) degree in Finance and Marketing and a Juris Doctor (J.D.) degree from the University of Miami.  Mr. Carter is admitted to practice law in the Commonwealth of Massachusetts.  Mr. Carter’s father, George J. Carter, serves as President, Chief Executive Officer and a Director of FSP Corp. and Mr. Carter’s brother, Jeffery B. Carter, serves as Executive Vice President and Chief Investment Officer of FSP Corp.

 

John G. Demeritt, age 52, is Executive Vice President and Chief Financial Officer of FSP Corp. and has been Chief Financial Officer since March 2005.  Mr. Demeritt previously served as Senior Vice President, Finance and Principal Accounting Officer since September 2004.  Prior to September 2004, Mr. Demeritt was a Manager with Caturano & Company, an independent accounting firm (which later merged with McGladrey) where he focused on Sarbanes Oxley compliance.  Previously, from March 2002 to March 2004 he provided consulting services to public and private companies where he focused on SEC filings, evaluation of business processes and acquisition integration.  During 2001 and 2002 he was Vice President of Financial Planning & Analysis at Cabot Industrial Trust, a publicly traded real estate investment trust, which was acquired by CalWest in December 2001.  From October 1995 to December 2000 he was Controller and Officer of The Meditrust Companies, a publicly traded real estate investment trust (formerly known as the The La Quinta Companies, which was then acquired by the Blackstone Group), where he was involved with a number of merger and financing transactions.  Prior to that, from 1986 to 1995 he had financial and accounting responsibilities at three other public companies, and was previously associated with Laventhol & Horwath, an independent accounting firm from 1983 to 1986.  Mr. Demeritt is a Certified Public Accountant and holds a Bachelor of Science degree from Babson College.

 

Each of the above executive officers has been a full-time employee of FSP Corp. for the past five fiscal years.

 

George J. Carter, Barbara J. Fournier and Janet Notopoulos is each also a director of each of the following public reporting companies, each of which is a Sponsored REIT: FSP Galleria North Corp.; FSP 50 South Tenth Street Corp.; and FSP 303 East Wacker Drive Corp. Each of these directors holds office in these companies from the time of his or her election until the next annual meeting and until a successor is elected and qualified, or until such director’s earlier death, resignation or removal.

 

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Item 1A         Risk Factors

 

The following important factors, among others, could cause actual results to differ materially from those indicated by forward-looking statements made in this Annual Report on Form 10-K and presented elsewhere by management from time-to-time.

 

Economic conditions in the United States could have a material adverse impact on our earnings and financial condition.

 

Because economic conditions in the United States may affect real estate values, occupancy levels and property income, current and future economic conditions in the United States could have a material adverse impact on our earnings and financial condition.  The economy in the United States is continuing to experience a period of limited economic growth, including high levels of unemployment, the failure and near failure of a number of financial institutions and increased credit risk premiums for a number of market participants.  These conditions may continue or worsen in the future.  Economic conditions may be affected by numerous factors, including but not limited to, inflation and employment levels, energy prices, slow growth and/or recessionary concerns, changes in currency exchange rates, fiscal policy uncertainty, geopolitical events, changes in government regulations, regulatory uncertainty, the availability of debt and interest rate fluctuations.  At this time we cannot predict the extent or duration of any negative impact that the current state of the U.S. economy will have on our earnings and financial condition.

 

If a Sponsored REIT defaults on a Sponsored REIT Loan, we may be required to keep a balance outstanding on our unsecured credit facility or use our cash balance to repay our unsecured credit facility which may reduce cash available for distribution to our stockholders or for other corporate purposes.

 

From time-to-time, we may draw on our unsecured credit facility comprised of both a revolving line of credit and a term loan, which we refer to as the 2012 Credit Facility, to make secured 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 refer to these loans as Sponsored REIT Loans.  We anticipate that each Sponsored REIT Loan will be repaid at maturity or earlier from long term financing of the property securing the loan, cash flows from that underlying property or some other capital event.  If a Sponsored REIT defaults on a Sponsored REIT Loan, the Sponsored REIT could be unable to fully repay the Sponsored REIT Loan and we would have to satisfy our obligation under the 2012 Credit Facility through other means.  If we are required to use cash for this purpose, we would have less cash available for distribution to our stockholders or for other corporate purposes.

 

Our operating results and financial condition could be adversely affected if we are unable to refinance the 2012 Credit Facility.

 

There can be no assurance that we will be able to refinance either the revolving line of credit portion of our 2012 Credit Facility upon its maturity on September 27, 2016 (subject to extension until September 27, 2017) or the term loan portion of our 2012 Credit Facility upon its maturity on September 27, 2017, that any such refinancings would be on terms as favorable as the terms of the 2012 Credit Facility, or that we will be able to otherwise obtain funds by selling assets or raising equity to make required payments on the 2012 Credit Facility.  If we are unable to refinance the 2012 Credit Facility at maturity or meet our payment obligations, the amount of our distributable cash flow and our financial condition would be adversely affected.

 

Failure to comply with covenants in our 2012 Credit Facility credit agreement could adversely affect our financial condition.

 

Our 2012 Credit Facility credit agreement contains customary restrictions, requirements and other limitations on our ability to incur indebtedness, including maximum leverage ratios, maximum secured leverage ratios, minimum fixed charge coverage ratios, maximum unencumbered leverage ratios and minimum unsecured debt service coverage ratios, which we must maintain.  Our continued ability to borrow under the 2012 Credit Facility is subject to compliance with our financial and other covenants.  Failure to comply with such covenants could cause a default under the 2012 Credit Facility, and we may then be required to repay the 2012 Credit Facility

 

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with capital from other sources.  Under those circumstances, other sources of capital may not be available to us, or be available only on unattractive terms.

 

We may use the 2012 Credit Facility to purchase properties directly for our real estate portfolio, to make Sponsored REIT Loans or for other corporate purposes.  If we breach covenants in our 2012 Credit Facility credit agreement, the lenders can declare a default.  A default under our 2012 Credit Facility credit agreement could result in difficulty financing growth in our business and could also result in a reduction in the cash available for distribution to our stockholders or for other corporate purposes.  A default under our 2012 Credit Facility credit agreement could materially and adversely affect our financial condition and results of operations.

 

An increase in interest rates would increase our interest costs on variable rate debt and could adversely impact our ability to refinance existing debt or sell assets.

 

As of December 31, 2012, we had approximately $217 million of indebtedness under the revolving line of credit portion of our 2012 Credit Facility that bears interest at variable rates, and we may incur more of such indebtedness in the future.  Borrowings under the revolving line of credit portion of our 2012 Credit Facility may not exceed $500 million outstanding at any time, although such amount may be increased by up to an additional $250 million through the exercise of an accordion feature.  The term loan portion of our 2012 Credit Facility is for $400 million.  On September 27, 2012, we fixed the base LIBOR rate on the term loan portion of our 2012 Credit Facility at 0.75% for five years by entering into an interest rate swap agreement.  In the future, if interest rates increase, then so will the interest costs on our unhedged variable rate debt, which could adversely affect our cash flow, our ability to pay principal and interest on our debt and our ability to make distributions to our stockholders.  In addition, rising interest rates could limit our ability to both incur new debt and to refinance existing debt when it matures.  From time to time, we may enter into interest rate swap agreements and other interest rate hedging contracts, including swaps, caps and floors.  While these agreements are intended to lessen the impact of rising interest rates on us, they also expose us to the risks that the other parties to the agreements will not perform, we could incur significant costs associated with the settlement of the agreements, the agreements will be unenforceable and the underlying transactions will fail to qualify as highly-effective cash flow hedges.  In addition, an increase in interest rates could decrease the amount third parties are willing to pay for our assets, thereby limiting our ability to change our portfolio promptly in response to changes in economic or other conditions.

 

If we are not able to collect sufficient rents from each of our owned real properties, investments in Sponsored REITs or interest on Sponsored REIT Loans we fund, we may suffer significant operating losses or a reduction in cash available for future dividends.

 

A substantial portion of our revenue is generated by the rental income of our real properties and investments in Sponsored REITs.  If our properties do not provide us with a steady rental income or we do not collect interest income from Sponsored REIT Loans we fund, our revenues will decrease, which may cause us to incur operating losses in the future and reduce the cash available for distribution to our stockholders.

 

We may not be able to find properties that meet our criteria for purchase.

 

Growth in our portfolio of real estate is dependent on the ability of our acquisition executives to find properties for sale and/or development which meet the applicable investment criteria.  To the extent they fail to find such properties, we would be unable to increase the size of our portfolio of real estate, which would reduce the cash available for distribution to our stockholders.

 

We are dependent on key personnel.

 

We depend on the efforts of George J. Carter, our President and Chief Executive Officer and a Director; Barbara J. Fournier, our Chief Operating Officer, Treasurer, Secretary, an Executive Vice President and a Director; John G. Demeritt, our Chief Financial Officer and an Executive Vice President; Jeffery B. Carter, our Chief Investment Officer and an Executive Vice President; Janet Prier Notopoulos, an Executive Vice President and a Director; and Scott H. Carter, our General Counsel, Assistant Secretary and an Executive Vice President.  If any of our executive officers were to resign, our operations could be adversely affected.  We do not have employment agreements with any of our executive officers.

 

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Our level of dividends may fluctuate.

 

Because our real estate occupancy levels and rental rates can fluctuate, there is no predictable recurring level of revenue from such activities.  As a result of this, the amount of cash available for distribution may fluctuate, which may result in our not being able to maintain or grow dividend levels in the future.

 

We face risks from tenant defaults or bankruptcies.

 

If any of our tenants defaults on its lease, we may experience delays in enforcing our rights as a landlord and may incur substantial costs in protecting our investment.  In addition, at any time, a tenant of one of our properties may seek the protection of bankruptcy laws, which could result in the rejection and termination of such tenant’s lease and thereby cause a reduction in cash available for distribution to our stockholders.

 

The real properties held by us may significantly decrease in value.

 

As of February 15, 2013, we owned 37 properties.  Some or all of these properties may decline in value.  To the extent our real properties decline in value, our stockholders could lose some or all of the value of their investments.  The value of our common stock may be adversely affected if the real properties held by us decline in value since these real properties represent the majority of the tangible assets held by us.  Moreover, if we are forced to sell or lease the real property held by us below its initial purchase price or its carrying costs, respectively, or if we are forced to lease real property at below market rates because of the condition of the property, our results of operations would be adversely affected and such negative results of operations may result in lower dividends being paid to holders of our common stock.

 

New acquisitions may fail to perform as expected.

 

We may acquire new properties by direct FSP Corp. purchase, by acquisition of Sponsored REITs or by acquisition of other entities.  We may purchase these properties with cash, by drawing on the 2012 Credit Facility, by assuming existing indebtedness, by entering into new indebtedness, by issuing shares of our stock or by other means.  During the year ended December 31, 2012, we acquired one property located in Georgia and one property located in Texas.  During the year ended December 31, 2011, we acquired one property in North Carolina, one property in Illinois and three properties in Texas.  Newly acquired properties may fail to perform as expected, in which case, our results of operations could be adversely affected.

 

We face risks in owning, developing and operating real property.

 

An investment in us is subject to the risks incident to the ownership, development and operation of real estate-related assets.  These risks include the fact that real estate investments are generally illiquid, which may affect our ability to vary our portfolio in response to changes in economic and other conditions, as well as the risks normally associated with:

 

·                  changes in general and local economic conditions;

·                  the supply or demand for particular types of properties in particular markets;

·                  changes in market rental rates;

·                  the impact of environmental protection laws;

·                  changes in tax, real estate and zoning laws; and

·                  the impact of obligations and restrictions contained in title-related documents.

 

Certain significant costs, such as real estate taxes, utilities, insurance and maintenance costs, generally are not reduced even when a property’s rental income is reduced.  In addition, environmental and tax laws, interest rate levels, the availability of financing and other factors may affect real estate values and property income.  Furthermore, the supply of commercial space fluctuates with market conditions.

 

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We may encounter significant delays in reletting vacant space, resulting in losses of income.

 

When leases expire, we may incur expenses and may not be able to re-lease the space on the same terms.  While we cannot predict when existing vacancy 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 current market rates for locations in which the buildings are located, which in some cases may be below the expiring rates.  Certain leases provide tenants the right to terminate early if they pay a fee.  If we are unable to re-lease space promptly, if the terms are significantly less favorable than anticipated or if the costs are higher, we may have to reduce distributions to our stockholders.  This risk is currently heightened because the economy in the United States is continuing to experience a period of limited economic growth, including high levels of unemployment, the failure and near failure of a number of financial institutions and increased credit risk premiums for a number of market participants.  These conditions may continue or worsen in the future.  Typical lease terms range from five to ten years, so up to approximately 20% of our rental revenue from commercial properties could be expected to expire each year.

 

We face risks of tenant-type concentration.

 

As of December 31, 2012, our top twenty tenants leased, based on leased square feet, held approximately 42.7% of the total rentable square feet in our owned portfolio of properties.  Approximately 22% and 22% of our top twenty tenants as a percentage of the top twenty tenants rentable square feet (or 9.6% and 9.4% of the total rentable square feet in our portfolio) operated in the bank and credit services and energy services industry, respectively.  An economic downturn in these or any industry in which a high concentration of our tenants operate or in which a significant number of our tenants currently or may in the future operate, could negatively impact the financial condition of such tenants and cause them to fail to make timely rental payments or default on lease obligations, fail to renew their leases or renew their leases on terms less favorable to us, become bankrupt or insolvent, or otherwise become unable to satisfy their obligations to us, which could adversely affect our financial condition and results of operations.

 

We face risks from geographic concentration.

 

The properties in our portfolio as of December 31, 2012, by aggregate square footage, are distributed geographically as follows: South – 46.4%, Midwest – 21.4%, East – 18.3%, West – 13.8%.  However, within certain of those regions, we hold a larger concentration of our properties in Dallas, Texas – 18.7%, Houston, Texas – 15.1%, Greater Denver, Colorado – 8.6%, and Northern Virginia – 4.9%.  We are likely to face risks to the extent that any of these areas in which we hold a larger concentration of our properties suffer deteriorating economic conditions.

 

We compete with national, regional and local real estate operators and developers, which could adversely affect our cash flow.

 

Competition exists in every market in which our properties are currently located and in every market in which properties we may acquire in the future will be located.  We compete with, among others, national, regional and numerous local real estate operators and developers.  Such competition may adversely affect the percentage of leased space and the rental revenues of our properties, which could adversely affect our cash flow from operations and our ability to make expected distributions to our stockholders.  Some of our competitors may have more resources than we do or other competitive advantages.  Competition may be accelerated by any increase in availability of funds for investment in real estate.  For example, decreases in interest rates tend to increase the availability of funds and therefore can increase competition.  To the extent that our properties continue to operate profitably, this will likely stimulate new development of competing properties.  The extent to which we are affected by competition will depend in significant part on both local market conditions and national and global economic conditions.

 

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We are subject to possible liability relating to environmental matters, and we cannot assure you that we have identified all possible liabilities.

 

Under various federal, state and local laws, ordinances and regulations, an owner or operator of real property may become liable for the costs of removal or remediation of certain hazardous substances released on or in its property.  Such laws may impose liability without regard to whether the owner or operator knew of, or caused, the release of such hazardous substances.  The presence of hazardous substances on a property may adversely affect the owner’s ability to sell such property or to borrow using such property as collateral, and it may cause the owner of the property to incur substantial remediation costs.  In addition to claims for cleanup costs, the presence of hazardous substances on a property could result in the owner incurring substantial liabilities as a result of a claim by a private party for personal injury or a claim by an adjacent property owner for property damage.

 

In addition, we cannot assure you that:

 

·                  future laws, ordinances or regulations will not impose any material environmental liability;

·                  proposed legislation to address climate change will not increase utility and other costs of operating our properties which, if not offset by rising rental income and/or paid by tenants, would materially and adversely affect our financial condition and results of operations;

·                  the current environmental conditions of our properties will not be affected by the condition of properties in the vicinity of such properties (such as the presence of leaking underground storage tanks) or by third parties unrelated to us;

·                  tenants will not violate their leases by introducing hazardous or toxic substances into our properties that could expose us to liability under federal or state environmental laws; or

·                  environmental conditions, such as the growth of bacteria and toxic mold in heating and ventilation systems or on walls, will not occur at our properties and pose a threat to human health.

 

We are subject to compliance with the Americans With Disabilities Act and fire and safety regulations, any of which could require us to make significant capital expenditures.

 

All of our properties are required to comply with the Americans With Disabilities Act (ADA), and the regulations, rules and orders that may be issued thereunder.  The ADA has separate compliance requirements for “public accommodations” and “commercial facilities,” but generally requires that buildings be made accessible to persons with disabilities.  Compliance with ADA requirements might require, among other things, removal of access barriers and noncompliance could result in the imposition of fines by the U.S. government or an award of damages to private litigants.

 

In addition, we are required to operate our properties in compliance with fire and safety regulations, building codes and other land use regulations, as they may be adopted by governmental agencies and bodies and become applicable to our properties.  Compliance with such requirements may require us to make substantial capital expenditures, which expenditures would reduce cash otherwise available for distribution to our stockholders.

 

We face risks associated with our tenants being designated “Prohibited Persons” by the Office of Foreign Assets Control.

 

Pursuant to Executive Order 13224 and other laws, the Office of Foreign Assets Control of the United States Department of the Treasury, or OFAC, maintains a list of persons designated as terrorists or who are otherwise blocked or banned, which we refer to as Prohibited Persons.  OFAC regulations and other laws prohibit conducting business or engaging in transactions with Prohibited Persons (the “OFAC Requirements”).  Our current leases and certain other agreements require the other party to comply with the OFAC Requirements.  If a tenant or other party with whom we contract is placed on the OFAC list we may be required by the OFAC Requirements to terminate the lease or other agreement.  Any such termination could result in a loss of revenue or a damage claim by the other party that the termination was wrongful.

 

Security breaches and other disruptions could compromise our information and expose us to liability, which could cause our business and reputation to suffer.

 

In the ordinary course of our business, we collect and store sensitive data concerning investors in the Sponsored REITS.  Despite our security measures, our information technology and infrastructure may be vulnerable to attacks by hackers or breached due to employee error, malfeasance or other disruptions.  Any such breach could

 

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compromise our networks and the information stored there could be accessed, publicly disclosed, lost or stolen.  Any such access, disclosure or other loss of information could result in legal claims or proceedings and liability under laws that protect the privacy of personal information, and could damage our reputation.

 

Actual or threatened terrorist attacks may adversely affect our ability to generate revenues and the value of our properties.

 

We have significant investments in markets that may be the targets of actual or threatened terrorism attacks in the future.  As a result, some tenants in these markets may choose to relocate their businesses to other markets or to lower-profile office buildings within these markets that may be perceived to be less likely targets of future terrorist activity.  This could result in an overall decrease in the demand for office space in these markets generally or in our properties in particular, which could increase vacancies in our properties or necessitate that we lease our properties on less favorable terms or both.  In addition, future terrorist attacks in these markets could directly or indirectly damage our properties, both physically and financially, or cause losses that materially exceed our insurance coverage.  As a result of the foregoing, our ability to generate revenues and the value of our properties could decline materially.  See also “We may lose capital investment or anticipated profits if an uninsured event occurs.”

 

We may lose capital investment or anticipated profits if an uninsured event occurs.

 

We carry, or our tenants carry, comprehensive liability, fire and extended coverage with respect to each of our properties, with policy specification and insured limits customarily carried for similar properties.  There are, however, certain types of losses that may be either uninsurable or not economically insurable.  Should an uninsured material loss occur, we could lose both capital invested in the property and anticipated profits.

 

Contingent or unknown liabilities acquired in mergers or similar transactions could require us to make substantial payments.

 

The properties which we acquired in mergers were acquired subject to liabilities and without any recourse with respect to liabilities, whether known or unknown.  As a result, if liabilities were asserted against us based upon any of these properties, we might have to pay substantial sums to settle them, which could adversely affect our results of operations and financial condition and our cash flow and ability to make distributions to our stockholders.  Unknown liabilities with respect to properties acquired might include:

 

·                  liabilities for clean-up or remediation of environmental conditions;

·                  claims of tenants, vendors or other persons dealing with the former owners of the properties; and

·                  liabilities incurred in the ordinary course of business.

 

Our employee retention plan may prevent changes in control.

 

During February 2006, our Board of Directors approved a change in control plan, which included a form of retention agreement and discretionary payment plan.  Payments under the discretionary plan are capped at 1% of the market capitalization of FSP Corp. as reduced by the amount paid under the retention plan.  The costs associated with these two components of the plan may have the effect of discouraging a third party from making an acquisition proposal for us and may thereby inhibit a change in control under circumstances that could otherwise give the holders of our common stock the opportunity to realize a greater premium over the then-prevailing market prices.

 

Further issuances of equity securities may be dilutive to current stockholders.

 

The interests of our existing stockholders could be diluted if additional equity securities are issued to finance future acquisitions, repay indebtedness or to fund other general corporate purposes.  Our ability to execute our business strategy depends on our access to an appropriate blend of debt financing, including unsecured lines of credit and other forms of secured and unsecured debt, and equity financing.

 

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The price of our common stock may vary.

 

The market prices for our common stock may fluctuate with changes in market and economic conditions, including the market perception of REITs in general, and changes in the financial condition of our securities.  Such fluctuations may depress the market price of our common stock independent of the financial performance of FSP Corp.  The market conditions for REIT stocks generally could affect the market price of our common stock.

 

We would incur adverse tax consequences if we failed to qualify as a REIT.

 

The provisions of the tax code governing the taxation of real estate investment trusts are very technical and complex, and although we expect that we will be organized and will operate in a manner that will enable us to meet such requirements, no assurance can be given that we will always succeed in doing so.  In addition, as a result of our past acquisition of certain Sponsored REITs by merger, which we refer to as target REITs, we might no longer qualify as a real estate investment trust.  We could lose our ability to so qualify for a variety of reasons relating to the nature of the assets acquired from the target REITs, the identity of the stockholders of the target REITs who become our stockholders or the failure of one or more of the target REITs to have previously qualified as a real estate investment trust.  Moreover, you should note that if one or more of the target REITs that we acquired in May 2008, April 2006, April 2005 or June 2003 did not qualify as a REIT` immediately prior to the consummation of its acquisition, we could be disqualified as a REIT as a result of such acquisition.

 

If in any taxable year we do not qualify as a real estate investment trust, we would be taxed as a corporation and distributions to our stockholders would not be deductible by us in computing our taxable income. In addition, if we were to fail to qualify as a real estate investment trust, we could be disqualified from treatment as a real estate investment trust in the year in which such failure occurred and for the next four taxable years and, consequently, we would be taxed as a regular corporation during such years.  Failure to qualify for even one taxable year could result in a significant reduction of our cash available for distribution to our stockholders or could require us to incur indebtedness or liquidate investments in order to generate sufficient funds to pay the resulting federal income tax liabilities.

 

Provisions in our organizational documents may prevent changes in control.

 

Our Articles of Incorporation and Bylaws contain provisions, described below, which may have the effect of discouraging a third party from making an acquisition proposal for us and may thereby inhibit a change of control under circumstances that could otherwise give the holders of our common stock the opportunity to realize a premium over the then-prevailing market prices.

 

Ownership Limits.  In order for us to maintain our qualification as a real estate investment trust, the holders of our common stock may be limited to owning, either directly or under applicable attribution rules of the Internal Revenue Code, no more than 9.8% of the lesser of the value or the number of our equity shares, and no holder of common stock may acquire or transfer shares that would result in our shares of common stock being beneficially owned by fewer than 100 persons. Such ownership limit may have the effect of preventing an acquisition of control of us without the approval of our board of directors.  Our Articles of Incorporation give our board of directors the right to refuse to give effect to the acquisition or transfer of shares by a stockholder in violation of these provisions.

 

Staggered Board.  Our board of directors is divided into three classes.  The terms of these classes will expire in 2013, 2014 and 2015, respectively.  Directors of each class are elected for a three-year term upon the expiration of the initial term of each class.  The staggered terms for directors may affect our stockholders’ ability to effect a change in control even if a change in control were in the stockholders’ best interests.

 

Preferred Stock. Our Articles of Incorporation authorize our board of directors to issue up to 20,000,000 shares of preferred stock, par value $.0001 per share, and to establish the preferences and rights of any such shares issued. The issuance of preferred stock could have the effect of delaying or preventing a change in control even if a change in control were in our stockholders’ best interest.

 

Increase of Authorized Stock.  Our board of directors, without any vote or consent of the stockholders, may increase the number of authorized shares of any class or series of stock or the aggregate number of authorized shares

 

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we have authority to issue. The ability to increase the number of authorized shares and issue such shares could have the effect of delaying or preventing a change in control even if a change in control were in our stockholders’ best interest.

 

Amendment of Bylaws.   Our board of directors has the sole power to amend our Bylaws.  This power could have the effect of delaying or preventing a change in control even if a change in control were in our stockholders’ best interests.

 

Stockholder Meetings. Our Bylaws require advance notice for stockholder proposals to be considered at annual meetings of stockholders and for stockholder nominations for election of directors at special meetings of stockholders.  The advance notice provisions require a proponent to provide us with detailed information about the proponent and/or nominee.  Our Bylaws also provide that stockholders entitled to cast more than 50% of all the votes entitled to be cast at a meeting must join in a request by stockholders to call a special meeting of stockholders and that a specific process for the meeting request must be followed.  These provisions could have the effect of delaying or preventing a change in control even if a change in control were in the best interests of our stockholders.

 

Supermajority Votes Required.  Our Articles of Incorporation require the affirmative vote of the holders of no less than 80% of the shares of capital stock outstanding and entitled to vote in order (i) to amend the provisions of our Articles of Incorporation relating to the classification of directors, removal of directors, limitation of liability of officers and directors or indemnification of officers and directors or (ii) to amend our Articles of Incorporation to impose cumulative voting in the election of directors.  These provisions could have the effect of delaying or preventing a change in control even if a change in control were in our stockholders’ best interest.

 

Item 1B.    Unresolved Staff Comments.

 

None.

 

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Item 2.                     Properties

 

Set forth below is information regarding our properties as of December 31, 2012:

 

				Approx.		Percent		Approx.
		Date of		Square		Leased as		Number
Property Location		Purchase (1)		Feet		of 12/31/12		of Tenants		Major Tenants (2)
Office
1515 Mockingbird Lane		8/1/97		109,406		79	%	56		Primary PhysicianCare
Charlotte, NC 28209
678-686 Hillview Drive		3/9/99		36,288		100	%	1		Headway Technologies, Inc.
Milpitas, CA 95035
600 Forest Point Circle		7/8/99		62,212		100	%	1		American National Red Cross
Charlotte, NC 28273
4820 & 4920 Centennial Blvd.		9/28/00		110,405		85	%	3		Comcast of ColoradoX, LLC
Colorado Springs, CO 80919										Walter Kidde Portable Equipment, Inc.
										METSO Minerals Industries, Inc.
14151 Park Meadow Drive		3/15/01		138,537		100	%	5		American Systems Corporation
Chantilly, VA 20151										Omniplex World Services
										Booz Allen Hamilton, Inc.
1370 & 1390 Timberlake		5/24/01		232,766		97	%	6		RGA Reinsurance Company
Manor Parkway,										AMDOCS, Inc.
Chesterfield, MO 63017
501 & 505 South 336th Street		9/14/01		117,010		47	%	10		SunGard Availability Services, LP
Federal Way, WA 98003
50 Northwest Point Rd.		12/5/01		176,848		100	%	1		Citicorp Credit Services, Inc.
Elk Grove Village, IL 60005
1350 Timberlake Manor		3/4/02		116,197		97	%	5		RGA Reinsurance Company
Parkway										AB Mauri Food Inc. d/b/a Fleischmanns
Chesterfield, MO 63017										Yeast
16285 Park Ten Place		6/27/02		155,715		96	%	10		Modec International, Inc.
Houston, TX 77084										PB Americas, Inc.
										BAE Systems Land & Armaments, LP
										Bluware, Inc.
2730-2760 Junction Avenue		8/27/02		145,951		100	%	3		County of Santa Clara
408-410 East Plumeria										Spidercloud Wireless, Inc.
San Jose, CA 95134										AltiGen Communications, Inc.
15601 Dallas Parkway		9/30/02		293,787		98	%	8		Behringer Harvard Holdings, LLC
Addison, TX 75001										Noble Royalties, Inc.
										Federal National Mortgage Association
1500 & 1600 Greenville Ave.		3/3/03		298,766		90	%	4		ARGO Data Resource Corp.
Richardson, TX 75080										VCE Company, LLC
										Id Software, LLC

 

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				Approx.		Percent		Approx.
		Date of		Square		Leased as		Number
Property Location		Purchase (1)		Feet		of 12/31/12		of Tenants		Major Tenants (2)
6550 & 6560 Greenwood Plaza		2/24/05		196,236		100	%	3		DIRECTV, Inc.
Englewood, CO 80111										Kaiser Foundation Health Plan
3815-3925 River Crossing Pkwy		7/6/05		205,059		92	%	14		Somerset CPAs, P.C.
Indianapolis, IN 46240										Crow Horwath, LLP
										The College Network, Inc.
5055 & 5057 Keller Springs Rd.		2/24/06		218,934		82	%	30		See Footnote 3
Addison, TX 75001
2740 North Dallas Parkway		12/15/00		117,050		78	%	5		Masergy Communications, Inc.
Plano, TX 75093										Special Insurance Services, Inc.
										NelsonArchitectural Engineers, Inc.
										WR Starky Mortgage, LLP
5505 Blue Lagoon Drive		11/6/03		212,619		100	%	1		Burger King Corporation
Miami, FL 33126
5600, 5620 & 5640 Cox Road		7/16/03		298,456		98	%	5		SunTrust Bank
Glen Allen, VA 23060										General Electric Company
										ChemTreat, Inc.
1293 Eldridge Parkway		1/16/04		248,399		100	%	1		CITGO Petroleum Corporation
Houston, TX 77077
380 Interlocken Crescent		8/15/03		240,184		90	%	10		VMWare, Inc.
Broomfield, CO 80021										MWH Americas, Inc
										Cooley LLP
										Sierra Financial Services, Inc.
3625 Cumberland Boulevard		6/27/06		387,267		95	%	27		Corporate Holdings, LLC
Atlanta, GA 30339										Century Business Services, Inc.
										Bennett Thrasher PC
390 Interlocken Crescent		12/21/06		241,516		97	%	11		Vail Holdings, Inc.
Broomfield, CO 80021										Urban Settlement Services LLC
										Leopard Communications, Inc.
										MSI, LLC
120 East Baltimore St.		6/13/07		325,445		77	%	15		SunTrust Bank
Baltimore, MD 21202										State’s Attorney for Baltimore City
										State Retirement and Pension Systems of Maryland
16290 Katy Freeway Houston, TX 77094		9/28/05		156,746		100	%	3		Murphy Exploration and Production Company

 

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				Approx.		Percent		Approx.
		Date of		Square		Leased as		Number
Property Location		Purchase (1)		Feet		of 12/31/12		of Tenants		Major Tenants (2)
2291 Ball Drive		12/11/08		127,778		100	%	1		Monsanto Company
St Louis, MO 63146
45925 Horseshoe Drive		12/26/08		135,888		100	%	1		Giesecke & Devrient America, Inc.
Sterling, VA 20166
4807 Stonecroft Blvd.		6/26/09		111,469		100	%	1		Northrop Grumman Systems Corp.
Chantilly, VA 20151
14800 Charlson Road		6/30/09		153,028		100	%	1		C.H. Robinson Worldwide, Inc.
Eden Praire, MN 55347
121 South Eighth Street and		6/29/10		475,303		91	%	41		TCF National Bank
801 Marquette Ave. S.
Minneapolis, MN 55402
4820 Emperor Boulevard		3/4/11		259,531		100	%	1		Quintiles Transnational Corp.
Durham, NC 27703
5100 & 5160 Tennyson Pkwy		3/10/11		202,600		100	%	1		Denbury Onshore LLC
Plano, TX 75024
7500 Dallas Parkway		3/24/11		214,110		100	%	6		ADS Alliance Data Systems, Inc.
Plano, TX 75024										Americorp., Inc. d/b/a Altair Global
909 Davis Street		9/30/11		195,245		98	%	6		Houghton Mifflin Harcourt
Evanston, IL 60201										Publishing Company
										Northshore University Healthsystem
1410 East Renner Road		10/6/11		122,300		100	%	1		AT&T Services, Inc.
Richardson, TX 75082
One Ravinia Drive		7/31/12		386,603		91	%	16		T-Mobile South LLC
Atlanta, Georgia										Internap Network Services Corporation
10370 & 10350 Richmond Ave.		11/1/12		629,025		96	%	48		Petrobras America, Inc.
Houston, TX 77042
Total Office				7,854,679		94	%

 

(1) Date of purchase or merged entity date of purchase.

(2) Major tenants that occupy 10% or more of the space in an individual property.

(3) No tenant occupies more than 10% of the space.

 

All of the properties listed above are owned, directly or indirectly, by us.  None of our properties are subject to any mortgage loans.  We have no material undeveloped or unimproved properties, or proposed programs for material renovation, improvement or development of any of our properties.  We believe that our properties are adequately covered by insurance as of December 31, 2012.

 

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Table of Contents

 

The information presented below provides the weighted average GAAP rent per square foot for the year ending December 31, 2012 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 nonconsolidated REITs or those which we have provided Sponsored REIT Loans.

 

												Weighted
												Occupied		Weighted
						Year Built				Weighted		Percentage as of		Average
						or		Net Rentable		Occupied		December 31,		Rent per Occupied
Property Name		City		State		Renovated		Square Feet		Sq. Ft.		2012 (a)		Square Feet (b)
Park Seneca		Charlotte		NC		1969		109,406		85,074		77.8	%	$	15.75
Forest Park		Charlotte		NC		1999		62,212		62,212		100.0	%	13.27
Meadow Point		Chantilly		VA		1999		138,537		138,537		100.0	%	26.56
Innsbrook		Glen Allen		VA		1999		298,456		284,787		95.4	%	17.41
East Baltimore		Baltimore		MD		1989		325,445		184,234		56.6	%	26.12
Loudoun Tech Center		Dulles		VA		1999		135,888		135,888		100.0	%	15.89
Stonecroft		Chantilly		VA		2008		111,469		111,469		100.0	%	37.74
Emperor Boulevard		Durham		NC		2009		259,531		259,531		100.0	%	34.72
East total								1,440,944		1,261,732		87.6	%	24.56
Northwest Point		Elk Grove Village		IL		1999		176,848		176,848		100.0	%	19.42
909 Davis Street		Evanston		IL		2002		195,245		185,737		95.1	%	34.62
River Crossing		Indianapolis		IN		1998		205,059		188,900		92.1	%	21.79
Timberlake		Chesterfield		MO		1999		232,766		225,876		97.0	%	21.25
Timberlake East		Chesterfield		MO		2000		116,197		105,367		90.7	%	23.33
Lakeside Crossing		Sl. Louis		MO		2008		127,778		127,778		100.0	%	24.17
Eden Bluff		Eden Praire		MN		2006		153,028		153,028		100.0	%	27.33
121 South 8th Street		Minneapolis		MN		1974		475,303		434,427		91.4	%	15.22
Midwest total								1,682,224		1,597,961		95.0	%	21.98
Blue Lagoon Drive		Miami		FL		2002		212,619		212,619		100.0	%	24.34
One Overton Place		Atlanta		GA		2002		387,267		356,828		92.1	%	21.97
Willow Bend Office Center		Plano		TX		1999		117,050		87,905		75.1	%	20.80
Park Ten		Houston		TX		1999		155,715		137,995		88.6	%	27.00
Addison Circle		Addison		TX		1999		293,787		281,507		95.8	%	24.74
Collins Crossing		Richardson		TX		1999		298,766		260,494		87.2	%	23.05

 

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