Franklin Street Properties Corp. (FSP): PESTLE Analysis [Nov-2025 Updated]

You're looking for a clear-eyed breakdown of the forces shaping Franklin Street Properties Corp. (FSP) right now, and honestly, the office sector is definetly navigating a tough transition. The core takeaway is that FSP is aggressively managing its balance sheet risk through a strategic review while benefiting from its long-term bet on the growing Sunbelt and Mountain West markets, where demand is finally starting to stabilize. The immediate challenge is the $249.8 million debt wall hitting in April 2026, plus a Q3 2025 GAAP net loss of $8.3 million, but the flight-to-quality trend is helping them push weighted average GAAP base rent up 6.0% on new leases. This isn't a simple story; it's a race against the clock where political, economic, and environmental factors are all in play.

Franklin Street Properties Corp. (FSP) - PESTLE Analysis: Political factors

Strategic review (May 2025) for a potential sale or asset divestitures to maximize shareholder value.

You need to understand that the single biggest political factor for Franklin Street Properties Corp. (FSP) right now is internal-the ongoing strategic review announced on May 14, 2025. This isn't government policy, but it's a high-stakes corporate political decision driven by shareholder pressure to close the gap between the share price and the intrinsic value of their real estate holdings. The Board of Directors, advised by BofA Securities, is exploring a full range of options, including a sale of the entire company, targeted asset divestitures, and refinancing existing debt.

The company's total indebtedness was approximately $249.8 million as of June 30, 2025, and reducing this liability is a clear priority in the current high-interest-rate environment. The market is watching closely; any political move here, like a major asset sale, will defintely impact FSP's geographic footprint and cash flow immediately. A successful execution of this review is the most direct path to maximizing shareholder value.

Strategic Review Component	Status (November 2025)	Financial Context (Q2 2025)
Initiation Date	May 14, 2025	GAAP Net Loss: $7.9 million (Q2 2025)
Key Alternatives Under Review	Company sale, asset sales, debt refinancing	Total Indebtedness: Approximately $249.8 million
Financial Advisor	BofA Securities	Portfolio Leased Percentage: 69.1%

REIT (Real Estate Investment Trust) tax status requires maintaining specific income and asset tests.

The core of FSP's business model is its Real Estate Investment Trust (REIT) status, which allows it to avoid corporate income tax, provided it distributes at least 90% of its taxable income to shareholders. This is a massive tax advantage, but it comes with strict, non-negotiable political mandates from the IRS.

To maintain this status, FSP must pass two annual income tests and a quarterly asset test. Fail one, and you lose the status for five years-a catastrophic outcome. The rules are precise, and you must stay compliant.

• 75% Gross Income Test: At least 75% of annual gross income must come from real estate sources (rents, mortgage interest).
• 95% Gross Income Test: At least 95% of annual gross income must come from real estate sources plus other passive income (dividends, interest).
• 75% Asset Test (Quarterly): At least 75% of the value of total assets must be real estate assets, cash, and government securities.

A notable change, effective for tax years beginning after 2025, is the legislation raising the Taxable REIT Subsidiary (TRS) asset test limit from 20% to 25% of the REIT's gross asset value. This gives FSP slightly more flexibility to hold non-real estate assets, like property management or development services, within its TRS structure without jeopardizing the REIT status.

Local government mandates like the Denver Energize Ordinance require energy performance compliance.

While federal tax law is a big political factor, local mandates can hit your operating budget directly. For FSP, the Denver Energize Ordinance is a key example, given that Colorado is its largest market, representing 54.2% of its investment portfolio as of Q2 2025. This ordinance requires commercial and multifamily buildings over 25,000 square feet to meet phased energy performance targets.

The year 2025 is critical because many property types are due for a mandatory energy audit or electrification assessment. The ordinance's overarching goal is a 30% reduction in energy use citywide by 2030, with a cap that no single building must reduce its energy consumption by more than 42%. Failure to comply with benchmarking can result in a penalty of $2,000 per year, and missing performance targets can lead to fines up to $0.35/kBtu over the limit. This isn't just a cost, it's a capital expenditure requirement that must be factored into the valuation of FSP's Denver assets.

Business-friendly state policies in Sunbelt markets attract corporate relocations, boosting FSP's tenant pool.

The political climate in the Sunbelt and Mountain West regions-where FSP focuses its portfolio-is a major tailwind. Business-friendly state policies, primarily low or zero state income tax, are driving a significant corporate exodus from high-tax states. This is a clear opportunity.

For example, Texas, which makes up 31.9% of FSP's investment portfolio, is one of the states with zero state income tax (corporate and personal), a policy that has helped it attract 55 Fortune 500 headquarters, more than any other state. This influx of corporate tenants directly boosts FSP's potential tenant pool and rental demand.

Here's the quick math: lower political friction translates to better economics. The average commercial rent in Austin, Texas, is about $35 per square foot annually, which is significantly more attractive to relocating companies than the approximately $80 per square foot seen in coastal cities like San Francisco. This political-economic arbitrage is a central pillar of FSP's strategy.

Franklin Street Properties Corp. (FSP) - PESTLE Analysis: Economic factors

You're looking at Franklin Street Properties Corp. (FSP) and seeing a classic commercial real estate story for 2025: deep financial pressure, but with a few bright spots on the leasing front. The economic factors are currently dominated by high capital costs and the persistent challenge of office vacancy, which translates directly into a tight liquidity situation for the company.

The core economic reality is this: FSP is operating at a loss while facing a significant debt wall. The near-term focus must be on generating cash flow (Funds From Operations) and successfully addressing the impending debt maturity.

Significant financial distress with a Q3 2025 GAAP net loss of $8.3 million.

The most immediate sign of economic distress is the bottom line. For the third quarter ended September 30, 2025, Franklin Street Properties Corp. reported a GAAP net loss of $8.3 million, or $0.08 per basic and diluted share. This isn't a one-off; the net loss for the nine months ended September 30, 2025, was a substantial $37.6 million. This sustained negative income is a direct result of the high cost of capital in the current interest rate environment, plus the drag from under-leased properties that still incur operating expenses.

To be fair, the Q3 2025 net loss of $8.3 million was an improvement compared to the $15.6 million loss in the same period last year, but still represents a significant cash burn. The market is definitely watching this, which is why the company has suspended its guidance for Net Income (Loss) and FFO for the remainder of 2025 due to economic conditions and uncertainty around property dispositions.

Total indebtedness is approximately $249.8 million, with a critical maturity deadline in April 2026.

The single most critical economic risk for Franklin Street Properties Corp. is its debt load. As of June 30, 2025, the total indebtedness was approximately $249.8 million. Here's the quick math: this debt equates to roughly $52 per square foot on their remaining portfolio of approximately 4.8 million square feet. That's a heavy burden in a soft office market.

The critical factor is the maturity date: all of the company's outstanding debt facilities are set to mature on April 1, 2026. This means the company has a very short window-less than six months from the Q3 2025 reporting-to either execute a major refinancing, complete substantial asset sales, or a combination of both. The Board is actively exploring strategic alternatives, including a sale of the company or asset sales, specifically to address this debt.

Funds From Operations (FFO) for Q3 2025 were only $2.3 million, reflecting high capital costs and low occupancy.

Funds From Operations (FFO), the key cash flow metric for a Real Estate Investment Trust (REIT), shows just how thin the margin is. For Q3 2025, FSP's FFO was only $2.3 million, translating to a mere $0.02 per share. This low FFO number is a direct signal of economic pressure. It's a tight spot because low FFO limits the capital available for necessary property upgrades (second-generation capital expenditures or capex) and leasing commissions, which are essential to attract new tenants and boost occupancy.

The company is currently prioritizing debt reduction over a higher dividend payout, which is a prudent, albeit painful, decision given the looming debt maturity. The FFO for the first nine months of 2025 totaled $7.6 million.

Portfolio is only 68.9% leased as of September 30, 2025, down from 70.3% at year-end 2024.

The weak occupancy rate is the fundamental economic headwind. As of September 30, 2025, the directly-owned real estate portfolio of 14 properties was only 68.9% leased. This is a decline from the 70.3% leased rate recorded at the end of 2024. This drop is due to lease expirations outpacing new leasing activity.

The low occupancy is a double whammy: it reduces rental revenue and increases the capital expenditure required to secure new tenants for vacant space. The total leased space during the first nine months of 2025 was approximately 274,000 square feet, with 219,000 square feet coming from renewals and expansions of existing tenants. That means new leasing activity is struggling to keep pace with the overall market churn.

Metric	Value (Q3 2025)	Change from Year-End 2024
GAAP Net Loss (Q3)	$8.3 million	Narrows from Q3 2024 loss of $15.6M
Funds From Operations (FFO) (Q3)	$2.3 million	Reflects high capital costs
Portfolio Leased Percentage	68.9% (as of 9/30/25)	Down from 70.3%
Total Indebtedness	Approx. $249.8 million (as of 6/30/25)	All debt matures on April 1, 2026

Weighted average GAAP base rent on new leasing increased 6.0% to $31.81 per square foot, showing pricing power on renewals.

This is the one clear economic opportunity. Despite the low occupancy, the company is demonstrating pricing power in its leasing activity. The weighted average GAAP base rent on new leasing during the nine months ended September 30, 2025, was $31.81 per square foot. Crucially, this figure represents a 6.0% increase over the average rents in the respective properties for the prior year.

This suggests that while the volume of new leasing is modest, the quality is high, and the properties are still desirable enough to command higher rents, particularly in their target U.S. Sunbelt and Mountain West markets. This ability to secure rent growth is a positive economic indicator that could stabilize net operating income (NOI) once occupancy rates improve. The management has noted encouraging signs of stabilization and increased tenant activity, including more larger potential lease transactions.

• Weighted average GAAP base rent: $31.81 per square foot.
• Rent increase over prior year: 6.0%.
• Total space leased YTD 2025: Approximately 274,000 square feet.
• Average lease term signed YTD 2025: 5.7 years.

Franklin Street Properties Corp. (FSP) - PESTLE Analysis: Social factors

Sustained population and job growth in the Sunbelt and Mountain West regions drive long-term demand.

The decades-long demographic shift toward the U.S. Sunbelt and Mountain West remains the single most powerful tailwind for Franklin Street Properties Corp. (FSP). This migration is not just a historical trend; it is accelerating, driven by lower costs of living, business-friendly regulatory environments, and a high quality of life.

Over the next decade, population growth in the Sunbelt is forecasted to increase by another 11 million people, a +7.3% rise, dramatically outpacing the non-Sunbelt states' projected growth of only 475,000 people, or +0.3%. This influx of residents directly translates into a greater need for office-using jobs, creating a more favorable leasing environment for FSP's properties in markets like Dallas and Denver.

Here's the quick math: more people means more companies, and more companies need office space. The Sunbelt's dominance is defintely a structural advantage.

Evolving workplace dynamics show 'return-to-office' trends, stabilizing office vacancy rates nationally.

The uncertainty around remote work is finally giving way to clearer return-to-office (RTO) mandates, which is a critical social factor stabilizing the office sector. FSP's CEO noted in Q3 2025 that they are seeing 'encouraging signs of stabilization and 'return-to-office' trends' across many U.S. cities.

This shift is evidenced by national data. Office attendance hit a post-pandemic high in July 2025, with foot traffic reaching approximately 80% of pre-pandemic levels. Furthermore, the overall U.S. office vacancy rate declined slightly for the first time since early 2019, falling by 20 basis points (bps) to 18.8% in Q3 2025.

This stabilization is crucial for FSP, whose own directly-owned portfolio (totaling $\approx$ 4.8 million square feet) was 68.9% leased as of September 30, 2025. The company is actively working to improve this figure, having leased $\approx$ 274,000 square feet during the first nine months of 2025, with the majority-219,000 square feet-coming from renewals and expansions.

Strong tenant preference for modern, high-quality office space (flight-to-quality) over older assets.

A key social trend in the office market is the 'flight-to-quality,' where tenants, in a bid to incentivize RTO and attract talent, are consolidating into newer, amenity-rich, and well-located Class A properties. This creates a two-tiered market.

The data from Q3 2025 clearly shows this preference:

• Vacancy for prime buildings (high-quality) fell by 50 bps to 14.2%.
• Vacancy for non-prime buildings (older/lower-quality) fell by only 20 bps to 19.1%.

The widening spread between these two vacancy rates means FSP's focus on high-quality, infill assets in desirable markets is a sound strategy. This trend is driving leasing activity, with the weighted average GAAP base rent per square foot on FSP's leasing activity during the first nine months of 2025 increasing to $31.81, a 6.0% increase from the prior year.

FSP's focus on infill and Central Business District (CBD) properties appeals to companies mandating office presence.

FSP's portfolio strategy-concentrating on infill and Central Business District (CBD) office properties-is directly aligned with the social and corporate demand for centralized, accessible locations that support mandatory RTO policies.

Companies that require employees to be in the office, especially those in financial services and legal sectors, often prefer CBD locations for their prestige, transit access, and proximity to clients. This focus shields FSP somewhat from the struggles of older, suburban office parks.

The table below illustrates the specific, localized nature of FSP's portfolio and how it aligns with the high-growth Sunbelt/Mountain West areas, which continue to see strong absorption in their prime assets.

FSP Portfolio Focus (Q3 2025)	Total Square Footage	Leased Percentage	Social Factor Alignment
Directly-Owned Properties	$\approx$ 4.8 million sq. ft.	68.9%	Concentrated in high-growth Sunbelt/Mountain West metros.
Leasing Activity (9 Mos. 2025)	274,000 sq. ft.	N/A	Shows continued tenant commitment, with 80% being renewals/expansions.
Weighted Average Base Rent	$31.81 per sq. ft.	+6.0% YoY increase	Reflects tenant willingness to pay a premium for quality, in-demand space.

Franklin Street Properties Corp. (FSP) - PESTLE Analysis: Technological factors

Use of real-time energy monitoring software and energy audits to lower operating expenses

You need to know that technology is a direct defense against rising operating costs, especially when energy is the second largest expense category for commercial real estate. Franklin Street Properties Corp. (FSP) actively uses real-time energy monitoring software and benchmarking tools to track and optimize consumption across its portfolio.

This data-driven approach allows the property management team to identify and correct inefficiencies almost instantly, moving beyond simple monthly utility bill reviews. For context, FSP reported total expenses of $106.466 million for the nine months ended September 30, 2025, so even a small percentage drop in the second largest cost can generate millions in savings.

The company also participates in utility demand response programs where available, which provides regular payments in exchange for enacting an emergency energy curtailment plan during grid emergencies. This is smart, low-tech risk management layered onto high-tech monitoring.

Implementation of lighting and HVAC system upgrades to meet tenant demand for efficient buildings

Tenant retention in the 2025 office market hinges on providing modern, efficient, and comfortable space. FSP addresses this directly through targeted capital enhancements to building systems (HVAC, or Heating, Ventilation, and Air Conditioning) and lighting.

A concrete example of this investment is the work done at the 1999 Broadway property in Denver. To boost efficiency and tenant appeal, FSP completed a major lighting upgrade, converting approximately 413,000 square feet-which is 61% of the building's square footage-from fluorescent lighting to modern LED lighting.

They also installed a flat plate heat exchanger, a technology that allows for 'free cooling' by bypassing centrifugal chillers when the outdoor air temperature is optimal. These upgrades are not just about saving money; they are a necessary capital expenditure (capex) to attract and retain tenants in a competitive market, which is why FSP has seen elevated capex spending in 2025.

Green cleaning programs and high-efficiency air filters address tenant concerns for indoor air quality

Post-pandemic, indoor air quality (IAQ) is a non-negotiable for office tenants; it's defintely a key factor in return-to-office strategies. FSP's technological response here is two-fold: implementing green cleaning programs and deploying high-efficiency air filters.

The green cleaning programs use non-toxic, environmentally friendly products, reducing the volatile organic compounds (VOCs) that can degrade air quality. Plus, the use of high-efficiency air filters helps remove airborne particulates, which directly addresses tenant health and wellness concerns.

This focus on IAQ is a critical component of their overall environmental, social, and governance (ESG) strategy, which aims to reduce property expenses and contribute to higher levels of tenant satisfaction.

Technology-driven building efficiency helps FSP meet local energy performance requirements, like in Denver

Technology is the tool FSP uses to navigate the increasingly complex regulatory landscape of building performance standards (BPS). The Energize Denver Ordinance is a prime example, requiring large buildings (over 25,000 square feet) to reduce energy consumption by at least 30% by 2030/2032, with interim targets.

FSP's proactive use of technology has positioned them well ahead of these mandates. Their 1999 Broadway property in Denver, for instance, had an Energy Use Intensity (EUI) score of 46.1 in 2023, which is already significantly better than the Energize Denver target EUI of 53.5. This technological edge minimizes the risk of substantial regulatory fines, which can be as high as $0.35/kBtu over the limit.

The broad success of FSP's efficiency strategy is reflected in its portfolio certifications as of year-end 2024:

• Over 79% of the portfolio's square footage earned the EPA's ENERGY STAR label, placing their energy performance among the top 25% of similar properties nationally.
• Approximately 68% of the portfolio's square footage has been awarded some level of LEED certification, with the majority achieving the coveted LEED Gold standard.

Here's the quick math on the Denver property showing the current performance against the mandate:

Property	Metric	FSP 2023 Performance	Energize Denver Target	Compliance Status (2025)
1999 Broadway, Denver	Energy Use Intensity (EUI)	46.1	53.5	Exceeds Target (Better EUI)
FSP Portfolio	ENERGY STAR Labeled (Year-end 2024)	Over 79% of square footage	Top 25% of similar properties	Industry Leader

Franklin Street Properties Corp. (FSP) - PESTLE Analysis: Legal factors

Critical need to refinance or repay the approximately $249.8 million in debt maturing in April 2026.

The single most pressing legal and financial risk for Franklin Street Properties Corp. is the looming maturity of its entire outstanding indebtedness. As of June 30, 2025, the Company's total debt stood at approximately $249.8 million, all of which is scheduled to mature on April 1, 2026. This isn't a staggered maturity schedule; it's a single, massive refinancing event in a challenging commercial office real estate market. The current weighted average interest rate on this debt is 9.00%, reflecting the higher cost of capital in the current environment.

The legal pressure here centers on avoiding a default, which would trigger immediate legal action and likely force a fire-sale of assets. The Board's ongoing review of strategic alternatives, including active negotiations with a potential lender to refinance all existing indebtedness, is a direct legal and financial action to mitigate this risk. Here's the quick math: missing that April 2026 deadline means the Company loses control of its asset disposition strategy. That's a defintely bad place to be.

Debt Instrument (as of June 30, 2025)	Outstanding Balance (in millions)	Maturity Date	Interest Rate (Approx.)
BofA Term Loan	$55.515	April 1, 2026	9.00% (SOFR + 4.00%)
BMO Term Loan Tranche B	$70.936	April 1, 2026	9.00% (SOFR + 4.00%)
Series A Senior Notes	$71.553	April 1, 2026	9.00%
Series B Senior Notes	$51.814	April 1, 2026	9.00%
Total Indebtedness	$249.818	-	-

Compliance with the complex regulatory structure required to maintain its REIT status.

Maintaining Real Estate Investment Trust (REIT) status is fundamental to Franklin Street Properties Corp.'s business model, allowing it to avoid corporate income tax. Losing this status would be financially devastating, immediately subjecting the Company to corporate-level taxation on its earnings.

The legal compliance is a constant, two-pronged challenge: income and assets. You must continually monitor these tests to ensure compliance on a quarterly and annual basis.

• Distribution Test: Must distribute at least 90% of its annual taxable income to shareholders.
• Asset Test: At least 75% of the value of total assets must be real estate assets, cash, or government securities.
• Income Tests: At least 75% of gross income must come from real estate sources (like rent and mortgage interest), and at least 95% from real estate and passive income sources (like dividends and interest).

The current environment of property dispositions and a net loss of $37.6 million for the nine months ended September 30, 2025, complicates the cash flow analysis for the distribution requirement, even though depreciation often helps.

Ongoing legal and financial due diligence related to the exploration of strategic alternatives.

Since the announcement on May 14, 2025, the Board has been exploring strategic alternatives, which carries significant legal and fiduciary responsibilities. This process involves extensive legal and financial due diligence, whether the outcome is a full company sale, a major asset divestiture, or a comprehensive debt refinancing. The legal team, supported by financial advisor BofA Securities, must manage complex negotiations and ensure all actions maximize shareholder value while adhering to SEC disclosure rules.

The active negotiations with a potential lender for a full debt refinance, announced in November 2025, are the most critical legal transaction currently underway. Any failure in due diligence or misstep in the negotiation could lead to shareholder litigation or a failed transaction, leaving the $249.8 million debt problem unresolved. This legal risk is a major near-term operational drag.

Adherence to local building codes and environmental ordinances, such as the Energize Denver law.

Local environmental, social, and governance (ESG) regulations are becoming a major legal cost driver for commercial office REITs. Franklin Street Properties Corp. holds significant assets in Denver, CO, including properties like Dominion Towers, 1001 17th Street, 1999 Broadway, and Greenwood Plaza. These properties are directly impacted by the Energize Denver Building Performance Policy, which mandates significant energy efficiency improvements.

For buildings 25,000 square feet and larger, the law requires a reduction in energy consumption of at least 30% by 2030, with interim targets set for 2024 and 2027. Failure to meet these performance requirements can result in substantial fines, potentially up to $0.30 per kBtu over the limit. This is a capital expenditure mandate disguised as an environmental law, requiring FSP to budget for major system upgrades like lighting, HVAC, and building automation to avoid future legal penalties. The legal risk here is not just the fine, but the required capital outlay that competes with other uses of cash, like debt repayment.

Franklin Street Properties Corp. (FSP) - PESTLE Analysis: Environmental factors

You are right to focus on the 'E' in PESTLE; for a Real Estate Investment Trust (REIT) like Franklin Street Properties Corp., environmental performance directly maps to operating expenses and asset valuation, especially in a market that increasingly values green building credentials. The core takeaway is that FSP has maintained a strong, certifiable environmental profile, with a clear focus on energy and water efficiency, which translates directly into lower operating costs and risk mitigation for their portfolio.

Over 79% of the portfolio square footage had earned the EPA's ENERGY STAR label as of year-end 2024.

FSP's commitment to energy efficiency is a tangible competitive advantage. As of year-end 2024, over 79% of the total portfolio square footage-including both directly-owned and asset-managed properties-had earned the Environmental Protection Agency's (EPA) ENERGY STAR label. This certification means these buildings are performing in the top 25% nationally for energy efficiency compared to similar properties. This isn't just a marketing point; it's a direct hedge against rising utility costs.

Here's the quick math: energy is generally the second-largest operating cost for office properties, so a top-percentile performance directly boosts the net operating income (NOI) of the underlying assets. The company uses tools like real-time energy monitoring and utility demand response programs to keep this performance high, even benefiting from local utility rebates on upgrades.

Approximately 68% of the portfolio square footage has achieved some level of LEED certification.

Beyond energy efficiency, the portfolio demonstrates a commitment to broader sustainable design and construction through the Leadership in Energy and Environmental Design (LEED) program. As of year-end 2024, approximately 68% of the portfolio square footage had been awarded some level of LEED certification. The majority of these buildings have achieved the high standard of LEED Gold certification.

This level of certification signals to tenants and investors that FSP's assets meet a rigorous, third-party verified standard for sustainability, which improves tenant satisfaction and retention. The focus on LEED also ensures better indoor air quality through green cleaning programs and high-efficiency air filters, which is defintely a key factor for tenants in the post-2020 office market.

Active water consumption management through plumbing and landscaping enhancements, definitely reducing costs.

Water stewardship is a critical operational focus, especially for properties located in water-stressed regions of the Sunbelt. FSP actively manages water consumption through a mix of plumbing and landscaping enhancements. This isn't just about saving a few drops; it's about significant volumetric and cost reduction.

The absolute water consumption figures show a clear downward trend in recent years, demonstrating the effectiveness of these capital enhancements:

Year	Absolute Water Consumption (m³)	Year-over-Year Change (m³)
2022	233,916	-
2023	248,192	+14,276
2024	239,234	-8,958

What this estimate hides is the specific impact of projects like replacing irrigation lines with drip systems and using low water use plantings in landscape renovations, which directly reduce the utility bill. The absolute consumption of 239,234 m³ in 2024 represents a substantial volume of water saved compared to previous years, directly reducing property expenses.

Focus on resilience and managing greenhouse gas emissions to mitigate climate-related risks in the Sunbelt.

Given FSP's strategic focus on the U.S. Sunbelt and Mountain West, managing climate-related risks and ensuring asset resilience is crucial. The Sustainability Committee has explicitly highlighted Resilience and Greenhouse Gas Emissions as recent areas of focus. This forward-looking approach is essential for long-term asset value in regions facing increased extreme weather and water scarcity.

The company tracks its carbon footprint meticulously, with the latest available figures showing a continued reduction in emissions:

• Total Scope 1 (Direct GHG Emissions) for 2024: 1,008 MtCO2e.
• Total Scope 2 (Indirect GHG Emissions from purchased electricity, etc.) for 2024: 29,053 MtCO2e.

This reduction in Scope 2 emissions, in particular, reflects the success of the energy efficiency measures like upgrading lighting to LED and optimizing Building Automation Systems (BAS). The action item here is clear: continue to prioritize capital expenditure on resilience projects, such as flood mitigation or enhanced cooling systems, to protect the Sunbelt portfolio from physical climate risks.