Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2018 | Jul. 31, 2018 | |
Document and Entity Information Abstract | ||
Entity Registrant Name | FSP 303 East Wacker Drive Corp. | |
Entity Central Index Key | 1,431,766 | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2018 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 1 | |
Document Fiscal Year Focus | 2,018 | |
Document Fiscal Period Focus | Q2 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | Jun. 30, 2018 | Dec. 31, 2017 |
Real estate investments, at cost: | ||
Land | $ 26,200,000 | $ 26,200,000 |
Buildings and improvements | 167,061,000 | 165,059,000 |
Furniture and equipment | 837,000 | 837,000 |
Real estate investments, gross | 194,098,000 | 192,096,000 |
Less accumulated depreciation | 51,183,000 | 47,992,000 |
Real estate investments, net | 142,915,000 | 144,104,000 |
Cash and cash equivalents | 24,773,000 | 22,628,000 |
Restricted cash | 3,943,000 | |
Tenant rent receivables, net of allowance for doubtful accounts of $98 and $133, respectively | 266,000 | 235,000 |
Step rent receivable | 8,136,000 | 7,553,000 |
Deferred leasing costs, net of accumulated amortization of $2,865 and $2,893, respectively | 6,372,000 | 6,151,000 |
Prepaid expenses and other assets | 392,000 | 88,000 |
Total assets | 182,854,000 | 184,702,000 |
Liabilities: | ||
Accounts payable and accrued expenses | 6,781,000 | 6,694,000 |
Tenant security deposits | 481,000 | 483,000 |
Loan payable, less unamortized financing costs of $96 and $111, respectively | 33,586,000 | 33,959,000 |
Total liabilities | 40,848,000 | 41,136,000 |
Commitments and Contingencies: | ||
Stockholders' Equity: | ||
Preferred Stock, $.01 par value, 2,210 shares authorized, issued and outstanding, aggregate liquidation preference $221,000 | ||
Common Stock, $.01 par value, 1 share authorized, issued and outstanding | ||
Additional paid-in capital | 197,162,000 | 197,162,000 |
Retained losses and distributions in excess of earnings | (55,156,000) | (53,596,000) |
Total Stockholders' Equity | 142,006,000 | 143,566,000 |
Total Liabilities and Stockholders' Equity | $ 182,854,000 | $ 184,702,000 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands | Jun. 30, 2018 | Dec. 31, 2017 |
Consolidated Balance Sheets | ||
Tenant rent receivables, allowance for doubtful accounts | $ 98 | $ 133 |
Deferred leasing costs, accumulated amortization | 2,865 | 2,893 |
Loan payable, unamortized financing costs | $ 96 | $ 111 |
Preferred Stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred Stock, shares authorized (in shares) | 2,210 | 2,210 |
Preferred Stock, shares issued (in shares) | 2,210 | 2,210 |
Preferred Stock, shares outstanding (in shares) | 2,210 | 2,210 |
Preferred Stock, aggregate liquidation preference | $ 221,000 | $ 221,000 |
Common Stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common Stock, shares authorized (in shares) | 1 | 1 |
Common Stock, shares issued (in shares) | 1 | 1 |
Common Stock, shares outstanding (in shares) | 1 | 1 |
Consolidated Statements of Oper
Consolidated Statements of Operations - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Revenues: | ||||
Rental | $ 5,182 | $ 4,926 | $ 10,483 | $ 9,695 |
Total revenue | 5,182 | 4,926 | 10,483 | 9,695 |
Expenses: | ||||
Rental operating expenses | 1,588 | 1,557 | 3,360 | 3,232 |
Real estate taxes and insurance | 1,228 | 1,409 | 2,592 | 2,645 |
Depreciation and amortization | 1,834 | 1,785 | 3,759 | 3,544 |
Interest expense | 415 | 424 | 832 | 851 |
Total expenses | 5,065 | 5,175 | 10,543 | 10,272 |
Income (loss) before interest income | 117 | (249) | (60) | (577) |
Interest income | 1 | 2 | 2 | 4 |
Net income (loss) attributable to preferred stockholders | $ 118 | $ (247) | $ (58) | $ (573) |
Weighted average number of preferred shares outstanding, basic and diluted | 2,210 | 2,210 | 2,210 | 2,210 |
Net income (loss) per preferred share, basic and diluted | $ 53 | $ (112) | $ (26) | $ (259) |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) | 6 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Cash flows from operating activities: | ||
Net loss | $ (58,000) | $ (573,000) |
Adjustments to reconcile net loss to net cash provided by operating activities: | ||
Depreciation and amortization | 3,774,000 | 3,559,000 |
Increase (decrease) in bad debt reserve | (35,000) | 35,000 |
Changes in operating assets and liabilities: | ||
Tenant rent receivable | 4,000 | (80,000) |
Step rent receivable | (583,000) | (656,000) |
Prepaid expenses and other assets | (304,000) | (32,000) |
Accounts payable and accrued expenses | 604,000 | 448,000 |
Tenant security deposits | (2,000) | (9,000) |
Payment of deferred leasing costs | (789,000) | (921,000) |
Net cash provided by operating activities | 2,611,000 | 1,771,000 |
Cash flows from investing activities: | ||
Purchase of real estate assets | (2,519,000) | (1,515,000) |
Net cash used for investing activities | (2,519,000) | (1,515,000) |
Cash flows from financing activities: | ||
Principal payments of the loan payable | (388,000) | (370,000) |
Distributions to stockholders | (1,502,000) | (1,458,000) |
Net cash used for financing activities | (1,890,000) | (1,828,000) |
Net decrease in cash, cash equivalents and restricted cash | (1,798,000) | (1,572,000) |
Cash, cash equivalents and restricted cash, beginning of year | 26,571,000 | 31,874,000 |
Cash, cash equivalents and restricted cash, end of period | 24,773,000 | 30,302,000 |
Supplemental disclosure of cash flow information: | ||
Cash paid for interest | 819,000 | 837,000 |
Disclosure of non-cash investing activities: | ||
Accrued costs for purchase of real estate assets | $ 118,000 | $ 176,000 |
Organization, Basis of Presenta
Organization, Basis of Presentation, Real Estate and Depreciation, Financial Instruments, Cash, Cash Equivalents and Restricted Cash, and Recent Accounting Standards | 6 Months Ended |
Jun. 30, 2018 | |
Organization, Basis of Presentation, Real Estate and Depreciation, Financial Instruments, Cash, Cash Equivalents and Restricted Cash, and Recent Accounting Standards | |
Organization, Basis of Presentation, Real Estate and Depreciation, Financial Instruments, Cash, Cash Equivalents and Restricted Cash, and Recent Accounting Standards | 1. Organization, Basis of Presentation, Real Estate and Depreciation, Financial Instruments, Cash, Cash Equivalents and Restricted Cash, and Recent Accounting Standards Organization FSP 303 East Wacker Drive Corp. (the “Company”) was organized on December 13, 2006 as a corporation under the laws of the State of Delaware to purchase, own, and operate a twenty-eight story Class “A” multi-tenant office tower containing approximately 860,000 rentable square feet of office and retail space and a 294-stall underground parking garage located in downtown Chicago, Illinois (the “Property”). The Company acquired the Property and commenced operations on January 5, 2007. Franklin Street Properties Corp. (“Franklin Street”) (NYSE American: FSP) holds the sole share of the Company’s common stock, $.01 par value per share (the “Common Stock”). Between February 2007 and December 2007, FSP Investments LLC, a wholly-owned subsidiary of Franklin Street, completed the sale on a best efforts basis of 2,210 shares of the Company’s preferred stock, $.01 par value per share (the “Preferred Stock”). FSP Investments LLC sold the Preferred Stock in a private placement offering to “accredited investors” within the meaning of Regulation D under the Securities Act of 1933. All references to the Company refer to FSP 303 East Wacker Drive Corp. and its consolidated subsidiary, collectively, unless the context otherwise requires. Basis of Presentation The unaudited consolidated financial statements of the Company include all of the accounts of the Company and its wholly owned subsidiary. These financial statements should be read in conjunction with the Company’s consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, as filed with the Securities and Exchange Commission (“SEC”). The accompanying interim financial statements are unaudited; however, the financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and in conjunction with the rules and regulations of the SEC. Accordingly, they do not include all of the disclosures required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting solely of normal recurring matters) necessary for a fair presentation of the financial statements for these interim periods have been included. Operating results for the six months ended June 30, 2018 are not necessarily indicative of the results that may be expected for the year ending December 31, 2018 or for any other period. Real Estate and Depreciation Real estate assets are stated at cost, less accumulated depreciation. If the Company determines that impairment has occurred, the affected assets are reduced to their fair value. Costs related to property acquisition and improvements are capitalized. Typical capital items include new roofs, site improvements, various exterior building improvements and major interior renovations. Routine replacements and ordinary maintenance and repairs that do not extend the life of the asset are expensed as incurred. Funding for repairs and maintenance items typically is provided by cash flows from operating activities. Depreciation is computed using the straight-line method over the assets’ estimated useful lives as follows: Category Years Buildings 39 Building Improvements 15-39 Furniture and Equipment 5-7 Tenant Improvements shorter of estimated useful life or the term of the lease The Company reviews the Property to determine if the carrying amount will be recovered from future cash flows if certain indicators of impairment are identified at the Property. The evaluation of anticipated cash flows is highly subjective and is based in part on assumptions regarding future occupancy, rental rates and capital requirements that could differ materially from actual results in future periods. When indicators of impairment are present and the sum of the undiscounted future cash flows is less than the carrying value of such asset, an impairment loss is recorded equal to the difference between the asset’s current carrying value and its fair value based on discounting its estimated future cash flows. At June 30, 2018 and December 31, 2017, no impairment charges were recorded. Financial Instruments The Company estimates that the carrying value of cash and cash equivalents, restricted cash and loan payable approximate their fair values based on their short-term maturity and prevailing interest rates. Cash, Cash Equivalents and Restricted Cash The Company is required under the loan payable to hold proceeds from the loan payable in a restricted reserve account or accounts. These proceeds are classified as restricted cash on the Consolidated Balance Sheets. Restricted cash at June 30, 2018 and December 31, 2017 consisted of amounts in a money market account totaling $0 and $3,943,000, respectively. The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total of the same such amounts shown in the consolidated statement of cash flows. (in thousands) June 30, 2018 June 30, 2017 Cash and cash equivalents $ $ Restricted cash — Total cash, cash equivalents and restricted cash $ $ Recent Accounting Standards In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2014-09, Revenue from Contracts with Customers (“Topic 606”), which provides guidance for revenue recognition. The standard’s core principle is that a company will recognize revenue when promised goods or services are transferred to customers in an amount that reflects the consideration to which a company expects to be entitled in exchange for those goods or services. This update is effective for interim and annual reporting periods beginning after December 15, 2017. A substantial portion of the Company’s revenue consists of rental income from leasing arrangements, which is specifically excluded from Topic 606. The Company adopted Topic 606 using the modified retrospective approach effective January 1, 2018 and the adoption did not have an impact on the amount or timing of revenue recognition in the consolidated financial statements. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (“ASU 2016-02”). ASU 2016-02 requires lessees to establish a lease liability for the obligation to make lease payments and a right-of-use asset for the right to use the underlying asset for the lease term on their balance sheets. Lessees will continue to recognize lease expenses on their income statements in a manner similar to current accounting. The guidance also eliminates current real estate-specific provisions for all entities. For lessors, the guidance modifies the classification criteria and the accounting for sales-type and direct financing leases. This new standard is effective for annual periods beginning after December 15, 2018, and interim periods thereafter with early adoption permitted. The Company is currently evaluating the potential changes from ASU 2016-02 to future financial reporting and disclosures. In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”), which clarifies how reporting entities should present and classify certain cash receipts and cash payments in the statement of cash flows. ASU 2016-15 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company adopted this guidance during the first quarter of 2018 and applied it retrospectively. In November 2016, the FASB issued ASU No. 2016-18, Restricted Cash (“ASU 2016-18”), which clarifies how reporting entities should present restricted cash and restricted cash equivalents. Reporting entities will show the changes in the total of cash, cash equivalents, restricted cash and restricted cash equivalents in the statement of cash flows. The new standard requires a reconciliation of the totals in the statement of cash flows to the related captions in the balance sheets. ASU 2016-18 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Upon the adoption of ASU 2016-18, the Company reconciled both cash and cash equivalents and restricted cash and restricted cash equivalents, whereas under the previous guidance the Company explained the changes during the period for cash and cash equivalents only. Prior periods were retrospectively adjusted to conform to the current period’s presentation. |
Income Taxes
Income Taxes | 6 Months Ended |
Jun. 30, 2018 | |
Income Taxes | |
Income Taxes | 2. Income Taxes The Company has elected to be taxed as a real estate investment trust (“REIT”) under the Internal Revenue Code of 1986, as amended. As a REIT, the Company generally is entitled to a tax deduction for dividends paid to its stockholders, thereby effectively subjecting the distributed net income of the Company to taxation at the shareholder level only. The Company must comply with a variety of restrictions to maintain its status as a REIT. These restrictions include the type of income it can earn, the type of assets it can hold, the number of stockholders it can have and the concentration of their ownership, and the amount of the Company’s income that must be distributed annually. Accrued interest and penalties will be recorded as income tax expense, if the Company records a liability in the future. The Company files income tax returns in the U.S. federal jurisdiction and the State of Illinois jurisdiction. |
Loan Payable
Loan Payable | 6 Months Ended |
Jun. 30, 2018 | |
Loan Payable | |
Loan Payable | 3. Loan Payable On August 3, 2011, the Company entered into a mortgage note in favor of John Hancock Life Insurance Company (U.S.A.) (the “Lender”) to evidence a loan in the original principal amount of $35,000,000 that matures on September 1, 2021 (the “Loan”). The proceeds of the Loan are being held by the Lender for the Company’s benefit in a restricted reserve account or accounts to be drawn upon by the Company from time to time for tenant improvement costs and leasing commissions at the Property upon satisfaction of certain conditions. The Loan bears interest at the fixed rate of 4.83% per annum. The Company was obligated to make monthly payments of interest only for the initial 60 months of the Loan. Thereafter, the Company is obligated to make monthly payments of principal and interest for the remaining 60 months, based on a 25-year amortization schedule, until the maturity date, when all outstanding amounts become due. Commencing on October 1, 2016, the Loan became payable in monthly payments of principal and interest in the amount of $201,155. The Company may prepay the Loan with a prepayment premium, as defined in the Loan agreement. The Loan is secured, in part, by a mortgage, assignment of leases and rents and security agreement (the “Mortgage”) from the Company in favor of the Lender. The Mortgage constitutes a lien against the Property and has been recorded in the land records of Cook County, Illinois. Subject to customary exceptions, the Loan is nonrecourse to the Company. As of June 30, 2018, the Company had drawn an aggregate of $35,012,000 from the restricted reserve account(s). Interest expense incurred on the Loan for the six months ended June 30, 2018 and 2017 was $817,000 and $837,000, respectively. The documents evidencing and securing the Loan include restrictions on property liens and require compliance with various non-financial covenants, which include the requirement that the Company provide annual reports to the Lender. The Company was in compliance with the Loan covenants as of June 30, 2018 and December 31, 2017. Fees paid associated with the Loan were $304,000 and are being amortized on the straight-line basis over the term of the Loan. Amortization expense for each of the six months ended June 30, 2018 and 2017 was $15,000, and is included in interest expense in the Company’s Consolidated Statements of Operations. |
Related Party Transactions
Related Party Transactions | 6 Months Ended |
Jun. 30, 2018 | |
Related Party Transactions | |
Related Party Transactions | 4. Related Party Transactions Asset Management Agreement The Company has in the past engaged in and currently engages in transactions with a related party, Franklin Street, and its wholly-owned subsidiaries, FSP Investments LLC and FSP Property Management LLC (collectively “FSP”). The Company expects to continue to have related party transactions with FSP in the form of management fees paid to FSP to manage the Company on behalf of its stockholders. FSP Property Management LLC currently provides the Company with asset management and financial reporting services. The asset management agreement between the Company and FSP Property Management LLC requires the Company to pay FSP Property Management LLC a monthly fee equal to one-half of one percent (.5%) of the gross revenues of the Property. The asset management agreement between the Company and FSP Property Management LLC may be terminated by either party without cause at any time, upon at least thirty (30) days’ written notice. For the six months ended June 30, 2018 and 2017, management fees paid to FSP Property Management LLC were approximately $50,200 and $45,000, respectively. Investor Services Agreement On August 14, 2012, the Company entered into an Investor Services Agreement (the “FSPI Agreement”) with FSP Investments LLC for the provision of investor services to holders of Preferred Stock. FSP Investments LLC acted as a real estate investment firm and broker/dealer with respect to (a) the Company’s organization, (b) the Company’s acquisition of the Property and (c) the sale of the Company’s equity interests. The FSPI Agreement requires the Company to pay a monthly service fee of $500 for services performed under the FSPI Agreement, and to reimburse FSP Investments LLC for its reasonable out-of-pocket expenses incurred in connection with the FSPI Agreement. The FSPI Agreement may be terminated by either party with thirty days written notice or immediately upon certain events of default set forth in the FSPI Agreement. For the six months ended June 30, 2018 and 2017, investor services fees paid were approximately $10,400 and $8,400, respectively. Ownership of Preferred Stock and Common Stock On December 27, 2007, Franklin Street purchased 965.75 shares of Preferred Stock (or approximately 43.7% of the currently issued and outstanding shares of Preferred Stock) for consideration totaling $82,813,000. Prior to purchasing any shares of the Preferred Stock, Franklin Street agreed to vote any shares of Preferred Stock held by it on any matter presented to the holders of the Preferred Stock in a manner that approximates as closely as possible the votes cast in favor of and opposed to such matter by the holders of the Preferred Stock other than Franklin Street and its affiliates. For purposes of determining how Franklin Street votes its shares of the Preferred Stock, abstentions and non-votes by stockholders other than Franklin Street are not considered. Franklin Street is entitled to distributions that are declared on the Preferred Stock. Franklin Street is the sole holder of the one share of Common Stock that is issued and outstanding. Subsequent to the completion of the private placement of the Preferred Stock in December 2007, Franklin Street has not been entitled to share in the Company’s earnings or any dividend related to the Common Stock. |
Net Income Per Share
Net Income Per Share | 6 Months Ended |
Jun. 30, 2018 | |
Net Income Per Share | |
Net Income Per Share | 5. Net Income Per Share Basic net income per share is computed by dividing net income or loss by the weighted average number of shares of Preferred Stock outstanding during the period. Diluted net income or loss per share reflects the potential dilution that could occur if securities or other contracts to issue shares were exercised or converted into shares. There were no potential dilutive shares outstanding at June 30, 2018 and 2017. |
Segment Reporting
Segment Reporting | 6 Months Ended |
Jun. 30, 2018 | |
Segment Reporting | |
Segment Reporting | 6. Segment Reporting The Company operates in one industry segment, which is real estate ownership of commercial property. The Company owned and operated the Property for all periods presented. |
Cash Distributions
Cash Distributions | 6 Months Ended |
Jun. 30, 2018 | |
Cash Distributions | |
Cash Distributions | 7. Cash Distributions The Company’s board of directors declared and paid cash distributions as follows: Quarter Paid Distributions Total First quarter of 2018 $ $ Second quarter of 2018 $ $ First quarter of 2017 $ $ Second quarter of 2017 $ $ |
Potential Sale of the Property
Potential Sale of the Property | 6 Months Ended |
Jun. 30, 2018 | |
Potential Sale of the Property | |
Potential Sale of the Property | 8. Potential Sale of the Property On June 28, 2018, the Company entered into a Purchase and Sale Agreement with BCSP 8 Acquisition LLC (the “Purchaser”) pursuant to which the Purchaser agreed to purchase the Property for an aggregate gross purchase price of $182,000,000, subject to the satisfaction of customary closing conditions, including the approval of the Company’s stockholders. If the sale is consummated, the Company intends to effect a dissolution and liquidation of the Company, with the net proceeds of the sale distributed to stockholders after the payment of the Company’s obligations and provision for any contingent liabilities. |
Subsequent Event
Subsequent Event | 6 Months Ended |
Jun. 30, 2018 | |
Subsequent Event | |
Subsequent Event | 9. Subsequent Event On July 27, 2018, the Company filed a definitive information statement (the “Consent Solicitation”) with the SEC. The Consent Solicitation, among other items, requests the consent of the holders of the Preferred Stock to the sale of the Property to an unaffiliated third-party buyer for a minimum gross sales price of $182,000,000. At this time, the Company is not able to predict the outcome of the Consent Solicitation, which would be required to sell the Property. |
Organization, Basis of Presen15
Organization, Basis of Presentation, Real Estate and Depreciation, Financial Instruments, Cash, Cash Equivalents and Restricted Cash, and Recent Accounting Standards | 6 Months Ended |
Jun. 30, 2018 | |
Organization, Basis of Presentation, Real Estate and Depreciation, Financial Instruments, Cash, Cash Equivalents and Restricted Cash, and Recent Accounting Standards | |
Basis of Presentation | Basis of Presentation The unaudited consolidated financial statements of the Company include all of the accounts of the Company and its wholly owned subsidiary. These financial statements should be read in conjunction with the Company’s consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, as filed with the Securities and Exchange Commission (“SEC”). The accompanying interim financial statements are unaudited; however, the financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and in conjunction with the rules and regulations of the SEC. Accordingly, they do not include all of the disclosures required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting solely of normal recurring matters) necessary for a fair presentation of the financial statements for these interim periods have been included. Operating results for the six months ended June 30, 2018 are not necessarily indicative of the results that may be expected for the year ending December 31, 2018 or for any other period. |
Real Estate and Depreciation | Real Estate and Depreciation Real estate assets are stated at cost, less accumulated depreciation. If the Company determines that impairment has occurred, the affected assets are reduced to their fair value. Costs related to property acquisition and improvements are capitalized. Typical capital items include new roofs, site improvements, various exterior building improvements and major interior renovations. Routine replacements and ordinary maintenance and repairs that do not extend the life of the asset are expensed as incurred. Funding for repairs and maintenance items typically is provided by cash flows from operating activities. Depreciation is computed using the straight-line method over the assets’ estimated useful lives as follows: Category Years Buildings 39 Building Improvements 15-39 Furniture and Equipment 5-7 Tenant Improvements shorter of estimated useful life or the term of the lease The Company reviews the Property to determine if the carrying amount will be recovered from future cash flows if certain indicators of impairment are identified at the Property. The evaluation of anticipated cash flows is highly subjective and is based in part on assumptions regarding future occupancy, rental rates and capital requirements that could differ materially from actual results in future periods. When indicators of impairment are present and the sum of the undiscounted future cash flows is less than the carrying value of such asset, an impairment loss is recorded equal to the difference between the asset’s current carrying value and its fair value based on discounting its estimated future cash flows. At June 30, 2018 and December 31, 2017, no impairment charges were recorded. |
Financial Instruments | Financial Instruments The Company estimates that the carrying value of cash and cash equivalents, restricted cash and loan payable approximate their fair values based on their short-term maturity and prevailing interest rates. |
Cash, Cash Equivalents and Restricted Cash | Cash, Cash Equivalents and Restricted Cash The Company is required under the loan payable to hold proceeds from the loan payable in a restricted reserve account or accounts. These proceeds are classified as restricted cash on the Consolidated Balance Sheets. Restricted cash at June 30, 2018 and December 31, 2017 consisted of amounts in a money market account totaling $0 and $3,943,000, respectively. The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total of the same such amounts shown in the consolidated statement of cash flows. (in thousands) June 30, 2018 June 30, 2017 Cash and cash equivalents $ $ Restricted cash — Total cash, cash equivalents and restricted cash $ $ |
Recent Accounting Standards | Recent Accounting Standards In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2014-09, Revenue from Contracts with Customers (“Topic 606”), which provides guidance for revenue recognition. The standard’s core principle is that a company will recognize revenue when promised goods or services are transferred to customers in an amount that reflects the consideration to which a company expects to be entitled in exchange for those goods or services. This update is effective for interim and annual reporting periods beginning after December 15, 2017. A substantial portion of the Company’s revenue consists of rental income from leasing arrangements, which is specifically excluded from Topic 606. The Company adopted Topic 606 using the modified retrospective approach effective January 1, 2018 and the adoption did not have an impact on the amount or timing of revenue recognition in the consolidated financial statements. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (“ASU 2016-02”). ASU 2016-02 requires lessees to establish a lease liability for the obligation to make lease payments and a right-of-use asset for the right to use the underlying asset for the lease term on their balance sheets. Lessees will continue to recognize lease expenses on their income statements in a manner similar to current accounting. The guidance also eliminates current real estate-specific provisions for all entities. For lessors, the guidance modifies the classification criteria and the accounting for sales-type and direct financing leases. This new standard is effective for annual periods beginning after December 15, 2018, and interim periods thereafter with early adoption permitted. The Company is currently evaluating the potential changes from ASU 2016-02 to future financial reporting and disclosures. In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”), which clarifies how reporting entities should present and classify certain cash receipts and cash payments in the statement of cash flows. ASU 2016-15 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company adopted this guidance during the first quarter of 2018 and applied it retrospectively. In November 2016, the FASB issued ASU No. 2016-18, Restricted Cash (“ASU 2016-18”), which clarifies how reporting entities should present restricted cash and restricted cash equivalents. Reporting entities will show the changes in the total of cash, cash equivalents, restricted cash and restricted cash equivalents in the statement of cash flows. The new standard requires a reconciliation of the totals in the statement of cash flows to the related captions in the balance sheets. ASU 2016-18 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Upon the adoption of ASU 2016-18, the Company reconciled both cash and cash equivalents and restricted cash and restricted cash equivalents, whereas under the previous guidance the Company explained the changes during the period for cash and cash equivalents only. Prior periods were retrospectively adjusted to conform to the current period’s presentation. |
Organization, Basis of Presen16
Organization, Basis of Presentation, Real Estate and Depreciation, Financial Instruments, Cash, Cash Equivalents and Restricted Cash, and Recent Accounting Standards (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Organization, Basis of Presentation, Real Estate and Depreciation, Financial Instruments, Cash, Cash Equivalents and Restricted Cash, and Recent Accounting Standards | |
Schedule of estimated useful lives of real estate assets | Category Years Buildings 39 Building Improvements 15-39 Furniture and Equipment 5-7 Tenant Improvements shorter of estimated useful life or the term of the lease |
Schedule of reconciliation of cash, cash equivalents and restricted cash | (in thousands) June 30, 2018 June 30, 2017 Cash and cash equivalents $ $ Restricted cash — Total cash, cash equivalents and restricted cash $ $ |
Cash Distributions (Tables)
Cash Distributions (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Cash Distributions | |
Schedule of declared and paid cash distributions | Quarter Paid Distributions Total First quarter of 2018 $ $ Second quarter of 2018 $ $ First quarter of 2017 $ $ Second quarter of 2017 $ $ |
Organization, Basis of Presen18
Organization, Basis of Presentation, Real Estate and Depreciation, Financial Instruments, Cash, Cash Equivalents and Restricted Cash, and Recent Accounting Standards (Details) | 6 Months Ended | 12 Months Ended | |||
Jun. 30, 2018USD ($)ft²item$ / shares | Dec. 31, 2017USD ($)$ / shares | Jun. 30, 2017USD ($) | Dec. 31, 2016USD ($) | Dec. 31, 2007$ / sharesshares | |
Organization | |||||
Number of stories in the multi-tenant office tower operated by the entity | item | 28 | ||||
Rentable square feet area | ft² | 860,000 | ||||
Number of parking garage stalls | item | 294 | ||||
Common Stock, par value (in dollars per share) | $ / shares | $ 0.01 | $ 0.01 | |||
Real Estate and Depreciation | |||||
Impairment charges | $ 0 | $ 0 | |||
Cash, Cash Equivalents and Restricted Cash | |||||
Cash and cash equivalents | 24,773,000 | 22,628,000 | $ 24,970,000 | ||
Restricted cash | 3,943,000 | 5,332,000 | |||
Total cash, cash equivalents and restricted cash | $ 24,773,000 | $ 26,571,000 | $ 30,302,000 | $ 31,874,000 | |
Buildings | |||||
Real Estate and Depreciation | |||||
Estimated useful lives | 39 years | ||||
Building Improvements | Minimum | |||||
Real Estate and Depreciation | |||||
Estimated useful lives | 15 years | ||||
Building Improvements | Maximum | |||||
Real Estate and Depreciation | |||||
Estimated useful lives | 39 years | ||||
Furniture and Equipment | Minimum | |||||
Real Estate and Depreciation | |||||
Estimated useful lives | 5 years | ||||
Furniture and Equipment | Maximum | |||||
Real Estate and Depreciation | |||||
Estimated useful lives | 7 years | ||||
Franklin Street | |||||
Organization | |||||
Common Stock, par value (in dollars per share) | $ / shares | $ 0.01 | ||||
FSP Investments LLC | |||||
Organization | |||||
Preferred stock, underwritten shares issued (in shares) | shares | 2,210 | ||||
Preferred stock, par value of underwritten shares (in dollars per share) | $ / shares | $ 0.01 |
Loan Payable (Details)
Loan Payable (Details) - Loan Payable - USD ($) | Oct. 01, 2016 | Aug. 03, 2011 | Jun. 30, 2018 | Jun. 30, 2017 |
Loan Payable | ||||
Principal amount of loan | $ 35,000,000 | |||
Debt fixed interest rate (as a percent) | 4.83% | |||
Number of monthly interest only payments | 60 months | |||
Number of remaining monthly principal and interest repayments | 60 months | |||
Debt amortization schedule term | 25 years | |||
Monthly payment | $ 201,155 | |||
Aggregate draw requests from the restricted reserve account(s) | $ 35,012,000 | |||
Interest expense incurred | 817,000 | $ 837,000 | ||
Fees paid associated with the loan | $ 304,000 | |||
Amortization expense included in interest expense | $ 15,000 | $ 15,000 |
Related Party Transactions (Det
Related Party Transactions (Details) - USD ($) | Aug. 14, 2012 | Dec. 27, 2007 | Jun. 30, 2018 | Jun. 30, 2017 | Dec. 31, 2017 |
Related Party Transactions | |||||
Common Stock, shares issued (in shares) | 1 | 1 | |||
Common Stock, shares outstanding (in shares) | 1 | 1 | |||
Franklin Street | |||||
Related Party Transactions | |||||
Number of shares of preferred stock purchased by the related party | 965.75 | ||||
Percentage of issued preferred stock purchased by related party | 43.70% | ||||
Percentage of outstanding preferred stock purchased by related party | 43.70% | ||||
Consideration paid by related party for purchase of preferred stock | $ 82,813,000 | ||||
Common Stock, shares issued (in shares) | 1 | 1 | |||
Common Stock, shares outstanding (in shares) | 1 | 1 | |||
FSP Property Management LLC | |||||
Related Party Transactions | |||||
Percentage of gross revenues of property | 0.50% | ||||
Management fees paid | $ 50,200 | $ 45,000 | |||
FSP Property Management LLC | Minimum | |||||
Related Party Transactions | |||||
Notice period for termination of agreement | 30 days | ||||
FSP Investments LLC | |||||
Related Party Transactions | |||||
Notice period for termination of agreement | 30 days | ||||
Monthly service fees payable under the agreement | $ 500 | ||||
Investor services fees paid | $ 10,400 | $ 8,400 |
Net Income Per Share (Details)
Net Income Per Share (Details) - shares | 6 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Net Income Per Share | ||
Potential dilutive shares outstanding | 0 | 0 |
Segment Reporting (Details)
Segment Reporting (Details) | 6 Months Ended |
Jun. 30, 2018segment | |
Segment Reporting | |
Number of operating segments | 1 |
Cash Distributions (Details)
Cash Distributions (Details) - USD ($) | 3 Months Ended | 6 Months Ended | ||||
Jun. 30, 2018 | Mar. 31, 2018 | Jun. 30, 2017 | Mar. 31, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Cash Distributions | ||||||
Distributions Per Preferred Share (in dollars per share) | $ 340 | $ 340 | $ 330 | $ 330 | ||
Total Distributions | $ 751,000 | $ 751,000 | $ 729,000 | $ 729,000 | $ 1,502,000 | $ 1,458,000 |
Potential Sale of the Property
Potential Sale of the Property (Details) | Jun. 28, 2018USD ($) |
FSP 303 East Wacker Drive Corp | Held-for-sale | BCSP 8 Acquisition LLC | |
Potential Sale of the Property | |
Aggregate gross purchase price | $ 182,000,000 |
Subsequent Event (Details)
Subsequent Event (Details) | Jul. 27, 2018USD ($) |
Subsequent Event | |
Subsequent Event | |
Minimum gross sales price of property under Consent Solicitation | $ 182,000,000 |