Franklin Street Properties Corp. (the “Company”, “FSP”, “we” or
“our”) (NYSE American: FSP), a real estate investment trust (REIT),
announced its results for the fourth quarter and year ended
December 31, 2017.
George J. Carter, Chairman and Chief Executive Officer,
commented as follows:
“For the fourth quarter of 2017, FSP’s Funds from Operations or
FFO totaled approximately $26.3 million or $0.25 per share. For
full year 2017, FSP’s FFO totaled approximately $111.4 million or
$1.04 per share. During the fourth quarter of 2017, FSP took
advantage of a flattening yield curve and lengthened the average
maturity of its debt stack as the Federal Reserve continued to move
up shorter-term interest rates. In the process, the Company fixed
interest rates on over 78% of its total debt while increasing its
line of credit availability to about $522 million at December 31,
2017 from $220 million at December 31, 2016. These actions
culminated with the closing of our first ever private placement of
senior notes on December 20, 2017, and moved our weighted average
debt maturity to approximately 4.5 years from 2.6 years. We
estimate the weighted average interest rate on our debt will
increase to 3.7% for 2018, assuming the effect of one Fed Fund rate
increase in December 2017 and three anticipated Fed Fund rate
increases in 2018, from a weighted average interest rate of
approximately 3.0% in 2017. As we begin 2018, our fixed rate debt
as a percentage of total debt is 78%, which is up from a weighted
average of 59% in 2017. While this balance sheet action and
anticipated Fed Fund rate increases will result in estimated
increased borrowing costs of about $7 million in 2018, it provides
better matching of longer-term, fixed cost capital characteristics
with the longer-lived office assets we now own. At the same time,
this action helps to reduce rising interest rate risk and other
potential capital market disruptions. Over the past several years,
our portfolio transition efforts have resulted in positioning a
significant portion of our office property square footage into more
urban and infill locations resulting in about 78% of our portfolio
now being located within our five core markets of Atlanta, Dallas,
Denver, Houston and Minneapolis. As of year-end 2017, the Company’s
portfolio of 34 office properties totaling approximately 9.8
million square feet was 89.7% leased, up from 88.7% leased as of
the end of the third quarter 2017. FSP leased more square footage
in the last two quarters of 2017 than in any six month period in
its history.
As 2018 begins, we are continuing to see the increased leasing
momentum we experienced in the third and fourth quarters of 2017
and consequently are optimistic about the potential for improved
occupancy during the course of the year. The energy sensitive
markets of Houston and Denver that have struggled over the last few
years now appear to be stabilizing. When combined with broader
value-add opportunities at many of our recently acquired
urban-infill properties, we believe these trends should contribute
to more positive leasing outcomes in 2018 and 2019.
The transition of FSP’s property portfolio from a suburban to a
primarily urban orientation has generally resulted in higher
leasing costs per square foot in exchange for longer leases and
higher rents. With the anticipation of continued strong leasing of
vacant space during 2018, we believe our net operating income, or
NOI, from existing properties will continue to increase. While we
can’t be sure what our leasing volume and leasing costs will be in
2018 and 2019, our objective is to reach 92% to 94% stabilized
“occupancy” in our property portfolio. FSP is in a stronger
financial position with more readily available liquidity than ever
before to help it reach that objective.
At this time, we are initiating our full year FFO guidance for
2018, which is estimated to be in the range of approximately $0.96
to $1.00 per basic and diluted share. Compared to our 2017 FFO per
share, we estimate an approximately $0.07 per share reduction will
be a result of projected rising interest rates and the fourth
quarter reset of our debt stack toward a higher percentage of
longer-term, fixed rate debt and an additional approximately $0.02
per share reduction is a result of the sale of our East Baltimore
property in the fourth quarter, the proceeds of which have not been
reinvested in new property acquisitions.
We look forward to 2018 with confidence and optimism.”
Highlights
- FFO was $26.3 million and $111.4
million or $0.25 and $1.04 per basic and diluted share for the
fourth quarter and year ended December 31, 2017, respectively. We
had a Net Loss of $4.9 million and $15.9 million or $0.05 and $0.15
per basic and diluted share for the fourth quarter and year ended
December 31, 2017, respectively.
- Adjusted Funds From Operations (AFFO)
was $0.12 per and $0.62 per basic and diluted share for the fourth
quarter and year ended December 31, 2017, respectively.
- On October 18, 2017, we recast our
credit facility with Bank of America, N.A., as administrative
agent, to, among other things, (i) increase the borrowing capacity
of the revolving line of credit from $500 million to $600 million,
(ii) extend the maturity date applicable to the revolving line of
credit from October 29, 2018 to January 12, 2022 (with two optional
six month extensions), (iii) extend the maturity date applicable to
the term loan from September 27, 2021 to January 12, 2023, (iv)
modify certain financial covenants, including a reset of minimum
tangible net worth, and (v) increase the accordion feature from
$350 million to $500 million. Pricing on the borrowing spread
decreased by five basis points for the revolving line of credit and
by ten basis points for the term loan. We also simultaneously
amended our term loan with Bank of Montreal, as administrative
agent, and our term loan with JPMorgan Chase Bank, N.A., as
administrative agent, to conform the financial covenants and
certain other provisions. Additional information on these
transactions can be found in a Current Report on Form 8-K that the
Company filed with the U.S. Securities and Exchange Commission
(“SEC”) on October 24, 2017.
- On October 24, 2017, we entered into a
note purchase agreement relating to a private placement of $200
million in an aggregate principal amount of unsecured senior notes,
consisting of $116 million in aggregate principal amount of 3.99%
Series A Senior Notes with a 7-year maturity and $84 million in
aggregate principal amount of 4.26% Series B Senior Notes with a
10-year maturity. On December 20, 2017, we closed the private
placement and used the proceeds to reduce the outstanding balance
on our revolving line of credit. Additional information on this
transaction can be found in a Current Report on Form 8-K that the
Company filed with the SEC on October 24, 2017.
- On October 25, 2017, Moody’s Investors
Service assigned a Baa3 rating to our above-described $200 million
unsecured senior notes and affirmed our issuer rating at Baa3 with
a stable outlook.
Leasing and Development
Update
- Our directly owned real estate
portfolio of 34 properties totaling approximately 9.8 million
square feet was approximately 89.7% leased as of December 31, 2017,
which was a 1.0% increase compared to September 30, 2017. The
increase was attributable to leasing achieved during the
quarter.
- During the year ended December 31,
2017, we leased approximately 1,471,000 square feet, of which
approximately 460,000 square feet was with new tenants.
- Fourth quarter 2017 leasing activity
was the strongest of the year to date. We leased approximately
535,000 square feet, of which approximately 253,000 square feet was
with new tenants. In the second half of 2017, we leased a total of
995,000 square feet.
- Weighted average annualized GAAP rent
per square foot was approximately $28.87 as of December 31, 2017,
compared to $27.92 as of December 31, 2016, $26.93 as of December
31, 2015, and $26.04 as of December 31, 2014. We believe that the
increase is attributable to the enhanced quality of our real estate
portfolio and value creation derived from our recent acquisitions,
dispositions and leasing.
- Our project at 801 Marquette Avenue
provides a contemporary, forward-looking experience in a vintage
warehouse style office with modern systems and market leading
amenities in the heart of the Minneapolis CBD. The redevelopment of
801 Marquette has led to approximately 40 prospect tours
representing in excess of 1.1 million square feet across all
industries. Over the past six months, we have been negotiating with
potential tenants representing approximately 270,000 square feet.
We expect Marquette to be substantially leased by year end 2018 and
stabilized in the third quarter of 2019.
Acquisition and Disposition
Update
- On October 20, 2017, we sold a property
located in Baltimore, Maryland that had been previously classified
as an asset held for sale, and received approximately $31.6 million
in net proceeds, which were used to reduce the outstanding balance
on our revolving line of credit.
- We continue to selectively evaluate
potential non-core property dispositions when appropriate
values/pricing are achieved.
- We continue to evaluate new potential
acquisition opportunities within our five core markets.
Dividend Update
On January 5, 2018, the Company announced that its Board of
Directors declared a regular quarterly cash dividend for the three
months ended December 31, 2017 of $0.19 per share of common stock
that was paid on February 8, 2018 to stockholders of record on
January 19, 2018.
Non-GAAP Financial
Information
A reconciliation of Net income (loss) to FFO, AFFO and
Sequential Same Store NOI and our definitions of FFO, AFFO and
Sequential Same Store NOI can be found on Supplementary Schedules H
and I.
Real Estate Update
Supplementary schedules provide property information for the
Company’s owned real estate portfolio and for two non-consolidated
REITs in which the Company holds preferred stock interests as of
December 31, 2017. The Company will also be filing an updated
supplemental information package that will provide stockholders and
the financial community with additional operating and financial
data. The Company will file this supplemental information package
with the SEC and make it available on its website at
www.fspreit.com.
FFO Guidance
We are initiating our full year FFO guidance for 2018, which is
estimated to be in the range of approximately $0.96 to $1.00 per
basic and diluted share, and for the first quarter of 2018, which
is estimated to be in the range of approximately $0.22 to $0.24 per
basic and diluted share. We have initiated full year 2018 net
income guidance in the range of $0.02 to $0.06 per basic and
diluted share, and for the first quarter of 2018, we initiated net
income (loss) guidance in the range of $(0.02) to $0.00 per basic
and diluted share. This guidance (a) excludes the impact of future
acquisitions, developments, dispositions, debt financings or
repayments or other capital market transactions; (b) reflects
estimates from our ongoing portfolio of properties, other real
estate investments and general and administrative expenses; and (c)
reflects our current expectations of economic conditions. We will
update guidance quarterly in our earnings releases. There can be no
assurance that the Company’s actual results will not differ
materially from the estimates set forth above.
A reconciliation of the guidance for net income (loss) per share
to the guidance for FFO per share is provided as follows:
Q1 2018 Range
Full Year 2018 Range Low High Low
High Net income (loss) per share $
(0.02 ) $ 0.00 $ 0.02
$ 0.06 GAAP loss from non-consolidated REITs 0.00
0.00 0.00 0.00 FFO from non-consolidated REITs 0.01 0.01 0.04 0.04
Depreciation & Amortization 0.23 0.23
0.90 0.90
Funds From Operations per share
$ 0.22 $ 0.24 $
0.96 $ 1.00
Today’s news release, along with other news about Franklin
Street Properties Corp., is available on the Internet at
www.fspreit.com. We routinely post information that may be
important to investors in the Investor Relations section of our
website. We encourage investors to consult that section of our
website regularly for important information about us and, if they
are interested in automatically receiving news and information as
soon as it is posted, to sign up for E-mail Alerts.
Earnings Call
A conference call is scheduled for February 14, 2018 at 10:00
a.m. (ET) to discuss the fourth quarter and year end 2017 results.
To access the call, please dial 1-800-464-8240. Internationally,
the call may be accessed by dialing 1-412-902-6521. To access the
call from Canada, please dial 1-866-605-3852. To listen via live
audio webcast, please visit the Webcasts & Presentations
section in the Investor Relations section of the Company's website
(www.fspreit.com) at least ten minutes prior to the start of the
call and follow the posted directions. The webcast will also be
available via replay from the above location starting one hour
after the call is finished.
About Franklin Street Properties Corp.
Franklin Street Properties Corp., based in Wakefield,
Massachusetts, is focused on investing in institutional-quality
office properties in the U.S. FSP’s strategy is to invest in select
urban infill and central business district (CBD) properties, with
primary emphasis on our five core markets of Atlanta, Dallas,
Denver, Houston, and Minneapolis. FSP seeks value-oriented
investments with an eye towards long-term growth and appreciation,
as well as current income. FSP is a Maryland corporation that
operates in a manner intended to qualify as a real estate
investment trust (REIT) for federal income tax purposes. To learn
more about FSP please visit our website at www.fspreit.com.
Forward-Looking Statements
Statements made in this press release that state FSP’s or
management’s intentions, beliefs, expectations, or predictions for
the future may be forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. This press
release may also contain forward-looking statements, such as our
ability to lease space in the future, expectations for FFO and net
income (loss) in future periods, expectations for growth and
leasing activities in future periods, prospects for long-term
sustainable growth and the timing and impact of the substantially
competed 801 Marquette Avenue property, that are based on current
judgments and current knowledge of management and are subject to
certain risks, trends and uncertainties that could cause actual
results to differ materially from those indicated in such
forward-looking statements. Accordingly, readers are cautioned not
to place undue reliance on forward-looking statements. Investors
are cautioned that our forward-looking statements involve risks and
uncertainty, including without limitation, economic conditions in
the United States, disruptions in the debt markets, economic
conditions in the markets in which we own properties, risks of a
lessening of demand for the types of real estate owned by us,
changes in government regulations and regulatory uncertainty,
uncertainty about governmental fiscal policy, geopolitical events
and expenditures that cannot be anticipated such as utility rate
and usage increases, delays in construction schedules,
unanticipated repairs, additional staffing, insurance increases and
real estate tax valuation reassessments. See the “Risk Factors” set
forth in Part I, Item 1A of our Annual Report on Form 10-K for the
year ended December 31, 2017, as the same may be updated from time
to time in subsequent filings with the United States Securities and
Exchange Commission. Although we believe the expectations reflected
in the forward-looking statements are reasonable, we cannot
guarantee future results, levels of activity, acquisitions,
dispositions, performance or achievements. We will not update any
of the forward-looking statements after the date of this press
release to conform them to actual results or to changes in our
expectations that occur after such date, other than as required by
law.
Franklin Street Properties
Corp.
Earnings Release
Supplementary Information
Table of Contents
Franklin Street Properties Corp. Financial Results
A-C Real Estate Portfolio Summary Information D Portfolio and Other
Supplementary Information E Percentage of Leased Space F Largest 20
Tenants – FSP Owned Portfolio G Reconciliation and Definitions of
Funds From Operations (FFO) and Adjusted Funds From Operations
(AFFO) H Reconciliation and Definition of Sequential Same Store
results to Property Net Operating Income (NOI) and Net Income
(Loss) I
Franklin Street Properties Corp. Financial
Results
Supplementary Schedule A
Condensed Consolidated Income (Loss)
Statements
(Unaudited)
For the For the Three
Months Ended Year Ended December
31, December 31, (in thousands, except per share
amounts)
2017 2016
2017 2016 Revenue: Rental
$ 65,555 $ 64,611 $ 267,265 $ 244,349 Related party revenue:
Management fees and interest income from loans 1,271 1,357 5,285
5,465 Other 9 20
38 74 Total revenue
66,835 65,988
272,588 249,888 Expenses: Real
estate operating expenses 18,720 18,209 71,212 65,335 Real estate
taxes and insurance 9,961 10,618 45,841 40,140 Depreciation and
amortization 25,659 24,957 101,258 93,052 General and
administrative 3,665 3,683 13,471 14,126 Interest
8,657 6,931 32,387
26,548 Total expenses 66,662
64,398 264,169
239,201
Income before equity in losses of
non-consolidated REITs, other, gain (loss) on sale of properties
and properties held for sale, less applicable income tax and
taxes
173 1,590 8,419 10,687 Equity in losses of non-consolidated REITs
(2,885 ) (263 ) (3,604 ) (831 ) Other (2,096 ) 2,266 (1,878 ) 1,878
Gain (loss) on sale of properties and
properties held for sale, less applicable income tax
(21 ) (1,772 ) (18,481 )
(2,938 ) Income (loss) before taxes on income
(4,829 ) 1,821 (15,544 ) 8,796 Taxes on income 103
92 400
418 Net income (loss) $ (4,932 ) $
1,729 $ (15,944 ) $ 8,378
Weighted average number of shares outstanding, basic and diluted
107,231 107,231
107,231 102,843 Net
income (loss) per share, basic and diluted $ (0.05 )
$ 0.02 $ (0.15 ) $ 0.08
Franklin Street Properties Corp. Financial
Results
Supplementary Schedule B
Condensed Consolidated Balance Sheets
(Unaudited)
December 31, December 31, (in
thousands, except share and par value amounts)
2017
2016 Assets: Real estate assets: Land $
191,578 $ 196,178 Buildings and improvements 1,811,631 1,822,183
Fixtures and equipment 5,614
4,136 2,008,823 2,022,497 Less accumulated depreciation
376,131 337,228 Real
estate assets, net 1,632,692 1,685,269 Acquired real estate leases,
less accumulated amortization of $109,771 and $112,441,
respectively 86,520 125,491 Investment in non-consolidated REITs
70,164 75,165 Asset held for sale — 3,871 Cash and cash equivalents
9,773 9,335 Restricted cash 46 31 Tenant rent receivables, less
allowance for doubtful accounts of $250 and $100, respectively
3,123 3,113 Straight-line rent receivable, less allowance for
doubtful accounts of $50 and $50, respectively 53,194 50,930
Prepaid expenses and other assets 8,387 5,231 Related party
mortgage loan receivables 71,720 81,780 Other assets: derivative
asset 13,925 12,907 Office computers and furniture, net of
accumulated depreciation of $1,420 and $1,277, respectively 289 313
Deferred leasing commissions, net of accumulated amortization of
$22,276 and $18,301, respectively 40,679
34,697 Total assets $ 1,990,512
$ 2,088,133 Liabilities and Stockholders’
Equity: Liabilities: Bank note payable $ 78,000 $ 280,000 Term
loans payable, less unamortized financing costs of $5,099 and
$4,783, respectively 764,901 765,217 Series A & Series B Senior
Notes, less unamortized financing costs of $1,308 198,692 —
Accounts payable and accrued expenses 61,039 57,259 Accrued
compensation 3,641 3,784 Tenant security deposits 5,383 5,355 Other
liabilities: derivative liabilities 1,759 5,551 Acquired
unfavorable real estate leases, less accumulated amortization of
$7,638 and $8,422, respectively 5,805
8,923 Total liabilities 1,119,220
1,126,089 Commitments and
contingencies Stockholders’ Equity: Preferred stock, $.0001
par value, 20,000,000 shares authorized, none issued or outstanding
- - Common stock, $.0001 par value, 180,000,000 shares authorized,
107,231,155 and 107,231,155 shares issued and outstanding,
respectively 11 11 Additional paid-in capital 1,356,457 1,356,457
Accumulated other comprehensive loss 12,166 5,478 Accumulated
distributions in excess of accumulated earnings
(497,342 ) (399,902 ) Total stockholders’ equity
871,292 962,044 Total
liabilities and stockholders’ equity $ 1,990,512
$ 2,088,133
Franklin Street Properties Corp. Financial
Results
Supplementary Schedule C
Condensed Consolidated Statements of Cash
Flows
(Unaudited)
For the Year Ended December 31,
(in thousands)
2017 2016
Cash flows from operating activities: Net income (loss) $
(15,944 ) $ 8,378 Adjustments to reconcile net income or loss to
net cash provided by operating activities: Depreciation and
amortization expense 103,743 95,243 Amortization of above and below
market leases (1,031 ) (496 ) Equity in losses of non-consolidated
REITs 3,604 831 Hedge ineffectiveness 1,878 (1,878 ) (Gain) loss on
sale of properties and properties held for sale, less applicable
income tax 18,481 2,938 Increase in allowance for doubtful accounts
150 (30 ) Changes in operating assets and liabilities: Restricted
cash (15 ) (8 ) Tenant rent receivables (160 ) (185 ) Straight-line
rents (1,767 ) (1,977 ) Lease acquisition costs (2,052 ) (1,095 )
Prepaid expenses and other assets (403 ) (721 ) Accounts payable,
accrued expenses and other items 3,870 5,751 Accrued compensation
(143 ) 58 Tenant security deposits 28 526 Payment of deferred
leasing commissions (14,309 ) (12,965 )
Net cash provided by operating activities 95,930
94,370
Cash flows from investing
activities: Property acquisitions — (221,119 ) Acquired real
estate leases — (51,509 ) Property improvements, fixtures and
equipment (54,187 ) (37,407 ) Office computers and furniture (119 )
(83 ) Distributions in excess of earnings from non-consolidated
REITs 1,396 1,023 Repayment of related party mortgage loan
receivable 10,060 39,861 Investment in related party mortgage loan
receivable — (3,000 ) Proceeds received on sales of real estate
assets 37,756 27,262 Net
cash used in investing activities (5,094 )
(244,972 )
Cash flows from financing activities:
Distributions to stockholders (81,496 ) (77,481 ) Proceeds from
equity offering — 83,511 Offering costs — (609 ) Borrowings under
bank note payable 75,000 175,000 Repayments of bank note payable
(277,000 ) (185,000 ) Borrowing of Series A & Series B Senior
Notes 200,000 — Borrowing of term loan payable — 150,000 Deferred
financing costs (6,902 ) (3,647 ) Net
cash provided by (used in) financing activities
(90,398 ) 141,774
Net increase (decrease)
in cash and cash equivalents 438 (8,828 )
Cash and cash
equivalents, beginning of year 9,335
18,163
Cash and cash equivalents, end
of period $ 9,773 $ 9,335
Franklin Street Properties Corp. Earnings
Release
Supplementary Schedule D
Real Estate Portfolio Summary
Information
(Unaudited & Approximated)
Commercial portfolio lease expirations
(1) Total % of
Year
Square Feet Portfolio 2018 1,038,265 10.6% 2019 1,207,011 12.3%
2020 871,386 8.9% 2021 835,063 8.6% 2022 1,217,165 12.5% Thereafter
(2) 4,593,094 47.1% 9,761,984 100.0%
(1) Percentages are determined based upon total square
footage.(2) Includes 1,006,890 square feet of current
vacancies.
(dollars & square feet in
000's) As of December 31, 2017 # of % of Square % of State
Properties Investment Portfolio Feet Portfolio Colorado 6 $
540,638 33.5% 2,608 26.7% Texas 9 348,988 21.7% 2,417 24.8% Georgia
5 324,615 20.1% 1,967 20.2% Minnesota (a) 2 94,552 5.9% 620 6.3%
Virginia 4 86,765 5.4% 685 7.0% North Carolina 2 52,124 3.2% 322
3.3% Missouri 2 49,397 3.1% 352 3.6% Illinois 2 45,518 2.8% 373
3.8% Florida 1 38,963 2.4% 213 2.2% Indiana 1 30,438
1.9% 205 2.1% Total 34 $ 1,611,998
100.0% 9,762 100.0%
(a) Excludes approximately $20,694, which is our investment in a
property that was redeveloped and is classified as
non-operating.
Franklin Street Properties Corp. Earnings
Release
Supplementary Schedule E
Portfolio and Other Supplementary
Information
(Unaudited & Approximated)
Recurring Capital Expenditures
Owned Portfolio
(in thousands) For the Three Months Ended Year Ended
31-Mar-17 30-Jun-17 30-Sep-17 31-Dec-17 31-Dec-17 Tenant
improvements $ 6,474 $ 5,363 $ 4,474 $ 4,166 $ 20,477 Deferred
leasing costs 1,579 1,963 4,482 5,869 13,893 Non-investment capex
1,670 1,685 1,860 3,836 9,051 $
9,723 $ 9,011 $ 10,816 $ 13,871 $ 43,421 For the
Three Months Ended Year Ended 31-Mar-16 30-Jun-16 30-Sep-16
31-Dec-16 31-Dec-16 Tenant improvements $ 1,929 $ 1,329 $ 3,325 $
7,885 $ 14,468 Deferred leasing costs 1,613 4,966 2,247 3,783
12,609 Non-investment capex 438 1,052 2,211
1,842 5,543 $ 3,980 $ 7,347 $ 7,783 $ 13,510 $ 32,620
Square foot & leased percentages December
31, December 31, 2017 2016 Owned portfolio of commercial real
estate Number of properties (a) 34 36 Square feet 9,761,984
10,163,615 Leased percentage 89.7% 89.3% Investments in
non-consolidated REITs Number of properties 2 2 Square feet
1,396,071 1,396,071 Leased percentage 75.3% 78.1% Single
Asset REITs (SARs) managed Number of properties 4 5 Square feet
810,278 1,075,135 Leased percentage 93.0% 89.6% Total owned,
investments & managed properties Number of properties 40 43
Square feet 11,968,333 12,634,821 Leased percentage 88.2% 88.1%
(a) Excludes one property that was redeveloped and is classified
as non-operating.
The following table shows property information for our
investments in non-consolidated REITs:
Square % Leased % Interest
Single Asset REIT name City State Feet 31-Dec-17 Held FSP 303 East
Wacker Drive Corp. Chicago IL 861,000 73.5% 43.7% FSP Grand
Boulevard Corp. Kansas City MO 535,071 78.0% 27.0% 1,396,071 75.3%
Franklin Street Properties Corp. Earnings
Release
Supplementary Schedule F
Percentage of Leased Space
(Unaudited & Estimated)
Third
Fourth % Leased (1) Quarter % Leased
(1) Quarter as of Average % as of
Average % Property Name Location Square
Feet 30-Sep-17 Leased (2) 31-Dec-17
Leased (2) 1 FOREST PARK Charlotte, NC 62,212 100.0%
100.0% 100.0% 100.0% 2 MEADOW POINT Chantilly, VA 138,537 100.0%
100.0% 100.0% 100.0% 3 TIMBERLAKE Chesterfield, MO 234,496 100.0%
100.0% 100.0% 100.0% 4 TIMBERLAKE EAST Chesterfield, MO 117,036
100.0% 100.0% 100.0% 100.0% 5 NORTHWEST POINT Elk Grove Village, IL
177,095 100.0% 100.0% 100.0% 100.0% 6 PARK TEN Houston, TX 157,460
70.5% 70.5% 68.6% 69.8% 7 PARK TEN PHASE II Houston, TX 156,746
1.4% 1.4% 1.4% 1.4% 8 GREENWOOD PLAZA Englewood, CO 196,236 100.0%
100.0% 100.0% 100.0% 9 ADDISON Addison, TX 288,794 97.3% 90.2%
100.0% 100.0% 10 COLLINS CROSSING Richardson, TX 300,887 100.0%
100.0% 100.0% 100.0% 11 INNSBROOK Glen Allen, VA 298,456 100.0%
100.0% 100.0% 100.0% 12 RIVER CROSSING Indianapolis, IN 205,059
98.6% 98.6% 96.2% 97.0% 13 LIBERTY PLAZA Addison, TX 218,934 91.2%
91.2% 91.2% 91.2% 14 380 INTERLOCKEN Broomfield, CO 240,358 85.9%
86.1% 86.2% 86.2% 15 390 INTERLOCKEN Broomfield, CO 241,751 98.9%
98.9% 98.9% 98.9% 16 BLUE LAGOON Miami, FL 212,619 100.0% 100.0%
100.0% 100.0% 17 ELDRIDGE GREEN Houston, TX 248,399 100.0% 100.0%
100.0% 100.0% 18 ONE OVERTON PARK Atlanta, GA 387,267 63.4% 63.1%
61.1% 61.9% EAST BALTIMORE (3) Baltimore, MD — 75.5% 75.5% (3) (3)
19 LOUDOUN TECH Dulles, VA 136,658 95.7% 95.7% 95.7% 95.7% 20 4807
STONECROFT Chantilly, VA 111,469 100.0% 100.0% 100.0% 100.0% 21 121
SOUTH EIGHTH ST Minneapolis, MN 293,422 81.7% 78.9% 81.8% 81.9% 22
EMPEROR BOULEVARD Durham, NC 259,531 100.0% 100.0% 100.0% 100.0% 23
LEGACY TENNYSON CTR Plano, TX 202,600 65.6% 65.6% 86.4% 79.1% 24
ONE LEGACY Plano, TX 214,110 100.0% 100.0% 100.0% 100.0% 25 909
DAVIS Evanston, IL 196,581 78.2% 78.4% 91.5% 82.6% 26 ONE RAVINIA
DRIVE Atlanta, GA 386,602 90.0% 90.0% 92.4% 90.8% 27 TWO RAVINIA
Atlanta, GA 411,047 77.3% 76.9% 75.3% 75.9% 28 WESTCHASE I & II
Houston, TX 629,025 87.3% 86.6% 87.7% 87.7% 29 1999 BROADWAY
Denver, CO 676,379 80.4% 78.0% 80.2% 81.5% 30 999 PEACHTREE
Atlanta, GA 621,946 99.1% 99.4% 95.1% 94.5% 31 1001 17th STREET
Denver, CO 655,413 91.3% 91.3% 96.8% 93.1% 32 PLAZA SEVEN
Minneapolis, MN 326,483 96.8% 96.3% 96.8% 96.8% 33 PERSHING PLAZA
Atlanta, GA 160,145 97.4% 97.4% 97.4% 97.4% 34 600 17th STREET
Denver, CO 598,231 90.1% 89.4% 87.1%
88.4%
TOTAL WEIGHTED AVERAGE 9,761,984
88.7% 88.1% 89.7%
89.3%
(1) % Leased as of month's end includes all leases that expire
on the last day of the quarter.(2) Average quarterly percentage is
the average of the end of the month leased percentage for each of
the 3 months during the quarter.(3) Property was sold on October
20, 2017.
Franklin Street Properties Corp. Earnings
Release
Supplementary Schedule G
Largest 20 Tenants – FSP Owned
Portfolio
(Unaudited & Estimated)
The following table includes the largest
20 tenants in FSP’s owned portfolio based on total square feet:
As of December 31, 2017
% of Tenant Sq Ft Portfolio 1 Quintiles IMS
Healthcare Incorporated 259,531 2.6% 2 US Government 250,520 2.5% 3
CITGO Petroleum Corporation 248,399 2.5% 4 Newfield Exploration
Company 234,495 2.3% 5 Eversheds Sutherland (US) LLP 222,422 2.2% 6
Centene Management Company, LLC 216,879 2.2% 7 Burger King
Corporation 212,619 2.1% 8 EOG Resources, Inc. 174,215 1.7% 9
T-Mobile South, LLC dba T-Mobile 151,792 1.5% 10 Citicorp Credit
Services, Inc. 146,260 1.5% 11 Petrobras America, Inc. 144,813 1.4%
12 Jones Day 140,342 1.4% 13 Argo Data Resource Corporation 140,246
1.4% 14 Vail Corp d/b/a Vail Resorts 132,229 1.3% 15 SunTrust Bank
127,500 1.3% 16 Federal National Mortgage Association 123,144 1.2%
17 Kaiser Foundation Health Plan 120,979 1.2% 18 Giesecke &
Devrient America 112,110 1.1% 19 Northrup Grumman Systems Corp.
111,469 1.1% 20 ADS Alliance Data Systems, Inc. 107,698 1.1%
Total 3,377,662 33.5%
Franklin Street Properties Corp. Earnings
ReleaseSupplementary Schedule HReconciliation and Definitions of
Funds From Operations (“FFO”) andAdjusted Funds From Operations
(“AFFO”)
A reconciliation of Net income (loss) to FFO and AFFO is shown
below and a definition of FFO and AFFO is provided on Supplementary
Schedule I. Management believes FFO and AFFO are used broadly
throughout the real estate investment trust (REIT) industry as
measurements of performance. The Company has included the National
Association of Real Estate Investment Trusts (NAREIT) FFO
definition as of May 17, 2016 in the table and notes that other
REITs may not define FFO in accordance with the current NAREIT
definition or may interpret the current NAREIT definition
differently. The Company’s computation of FFO and AFFO may not be
comparable to FFO or AFFO reported by other REITs or real estate
companies that define FFO or AFFO differently.
Reconciliation of Net Income (Loss) to
FFO and AFFO: Three Months Ended Year Ended December 31, December
31, (In thousands, except per share amounts) 2017 2016
2017 2016 Net income (loss) $ (4,932 ) $ 1,729
$ (15,944 ) $ 8,378 (Gain) loss on sale of properties and
properties held for sale, less applicable income tax 21 1,772
18,481 2,938 GAAP loss from non-consolidated REITs 2,885 263 3,604
831 FFO from non-consolidated REITs 708 714 3,173 3,041
Depreciation & amortization 25,569 24,565
100,227 92,556 NAREIT FFO 24,251
29,043 109,541 107,744 Hedge ineffectiveness 2,096 (2,266 ) 1,878
(1,878 ) Acquisition costs of new properties —
130 18 479 Funds From Operations
(FFO) $ 26,347 $ 26,907 $ 111,437 $ 106,345
Funds From Operations (FFO) $ 26,347 $ 26,907 $
111,437 $ 106,345 Reverse FFO from non-consolidated REITs (708 )
(714 ) (3,173 ) (3,041 ) Distributions from non-consolidated REITs
355 332 1,396 1,023 Amortization of deferred financing costs 667
535 2,485 2,191 Straight-line rent 254 117 (1,767 ) (1,977 ) Tenant
improvements (4,166 ) (7,885 ) (20,477 ) (14,468 ) Leasing
commissions (5,869 ) (3,783 ) (13,893 ) (12,609 ) Non-investment
capex (3,836 ) (1,842 ) (9,051 ) (5,543
) Adjusted Funds From Operations (AFFO) $ 13,044 $ 13,667
$ 66,957 $ 71,921 Per Share Data EPS $
(0.05 ) $ 0.02 $ (0.15 ) $ 0.08 FFO $ 0.25 $ 0.25 $ 1.04 $ 1.03
AFFO $ 0.12 $ 0.13 $ 0.62 $ 0.70 Weighted average shares
(basic and diluted) 107,231 107,231 107,231
102,843
Funds From Operations (“FFO”)
The Company evaluates performance based on Funds From
Operations, which we refer to as FFO, as management believes that
FFO represents the most accurate measure of activity and is the
basis for distributions paid to equity holders. The Company defines
FFO as net income or loss (computed in accordance with GAAP),
excluding gains (or losses) from sales of property, hedge
ineffectiveness and acquisition costs of newly acquired properties
that are not capitalized, plus depreciation and amortization,
including amortization of acquired above and below market lease
intangibles and impairment charges on properties or investments in
non-consolidated REITs, and after adjustments to exclude equity in
income or losses from, and, to include the proportionate share of
FFO from, non-consolidated REITs.
FFO should not be considered as an alternative to net income or
loss (determined in accordance with GAAP), nor as an indicator of
the Company’s financial performance, nor as an alternative to cash
flows from operating activities (determined in accordance with
GAAP), nor as a measure of the Company’s liquidity, nor is it
necessarily indicative of sufficient cash flow to fund all of the
Company’s needs.
Other real estate companies and NAREIT may define this term in a
different manner. We have included the NAREIT FFO as of May 17,
2016 in the table and note that other REITs may not define FFO in
accordance with the current NAREIT definition or may interpret the
current NAREIT definition differently than we do.
We believe that in order to facilitate a clear understanding of
the results of the Company, FFO should be examined in connection
with net income or loss and cash flows from operating, investing
and financing activities in the consolidated financial
statements.
Adjusted Funds From Operations (“AFFO”)
The Company also evaluates performance based on Adjusted Funds
From Operations, which we refer to as AFFO. The Company defines
AFFO as (1) FFO, (2) excluding our proportionate share of FFO and
including distributions received, from non-consolidated REITs, (3)
excluding the effect of straight-line rent, (4) plus deferred
financing costs and (5) less recurring capital expenditures that
are generally for maintenance of properties, which we call
non-investment capex or are second generation capital expenditures.
Second generation costs include re-tenanting space after a tenant
vacates, which include tenant improvements and leasing
commissions.
We exclude development/redevelopment activities, capital
expenditures planned at acquisition and costs to reposition a
property. We also exclude first generation leasing costs, which are
generally to fill vacant space in properties we acquire or were
planned for at acquisition.
AFFO should not be considered as an alternative to net income or
loss (determined in accordance with GAAP), nor as an indicator of
the Company’s financial performance, nor as an alternative to cash
flows from operating activities (determined in accordance with
GAAP), nor as a measure of the Company’s liquidity, nor is it
necessarily indicative of sufficient cash flow to fund all of the
Company’s needs. Other real estate companies may define this term
in a different manner. We believe that in order to facilitate a
clear understanding of the results of the Company, AFFO should be
examined in connection with net income or loss and cash flows from
operating, investing and financing activities in the consolidated
financial statements.
Franklin Street Properties Corp. Earnings
ReleaseSupplementary Schedule IReconciliation and Definition of
Sequential Same Store results to property Net Operating Income
(NOI) andNet Income (Loss)
Net Operating Income (“NOI”)
The Company provides property performance based on Net Operating
Income, which we refer to as NOI. Management believes that
investors are interested in this information. NOI is a non-GAAP
financial measure that the Company defines as net income or loss
(the most directly comparable GAAP financial measure) plus general
and administrative expenses, depreciation and amortization,
including amortization of acquired above and below market lease
intangibles and impairment charges, interest expense, less equity
in earnings of nonconsolidated REITs, interest income, management
fee income, hedge ineffectiveness, gains or losses on the sale of
assets and excludes non-property specific income and expenses. The
information presented includes footnotes and the data is shown by
region with properties owned in the periods presented, which we
call Sequential Same Store. The comparative Sequential Same Store
results include properties held for the periods presented and
exclude properties that are non-operating, being developed or
redeveloped, dispositions and significant nonrecurring income such
as bankruptcy settlements and lease termination fees. NOI, as
defined by the Company, may not be comparable to NOI reported by
other REITs that define NOI differently. NOI should not be
considered an alternative to net income or loss as an indication of
our performance or to cash flows as a measure of the Company’s
liquidity or its ability to make distributions. The calculations of
NOI and Sequential Same Store are shown in the following table:
Rentable Square
Feet Three Months Ended Three Months Ended
Inc % (in thousands) or RSF
31-Dec-17 30-Sep-17 (Dec) Change
Region East 1,007 $ 3,917 $ 3,926 $ (9 ) (0.2 ) % MidWest 1,550
4,940 4,476 464 10.4 % South 4,597 16,168 16,531 (363 ) (2.2 ) %
West 2,608 11,352 11,337
15 0.1 % Same Store 9,762 36,377 36,270 107 0.3 %
Acquisitions — — —
— — % NOI* from the continuing portfolio 9,762 36,377
36,270 107 0.3 % Dispositions, Non-Operating, Development or
Redevelopment - (77 ) 568 (645 )
(1.8 ) % NOI* 9,762 $ 36,300 $ 36,838 $ (538 )
(1.5 ) % Sequential Same Store $ 36,377 $ 36,270 $ 107 0.3 %
Less Nonrecurring Items in NOI* (a) 914
1,103 (189 ) 0.5 % Comparative
Sequential Same Store $ 35,463 $ 35,167 $ 296
0.8 %
Three Months Ended Three Months Ended
Reconciliation to Net income 31-Dec-17
30-Sep-17 Net income (loss) $ (4,932 ) $ 1,903 Add (deduct):
(Gain) loss on sale of properties and property held for sale, less
applicable income taxes 21 257 Hedge ineffectiveness 2,096 (67 )
Management fee income (756 ) (791 ) Depreciation and amortization
25,659 24,988 Amortization of above/below market leases (90 ) (86 )
General and administrative 3,665 3,286 Interest expense 8,657 8,258
Interest income (1,133 ) (1,134 ) Equity in losses of
non-consolidated REITs 2,885 121 Non-property specific items, net
228 103 NOI* $ 36,300
$ 36,838
(a) Nonrecurring Items in NOI include proceeds from
bankruptcies, lease termination fees or other significant
nonrecurring income or expenses, which may affect
comparability.
*Excludes NOI from investments in and interest income from
secured loans to non-consolidated REITs.
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Franklin Street Properties Corp.Georgia Touma, 877-686-9496
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