Franklin Street Properties Corp. (the “Company”, “FSP”, “we” or
“our”) (NYSE American: FSP), a real estate investment trust (REIT),
announced its results for the second quarter ended June 30,
2018.
George J. Carter, Chairman and Chief Executive Officer,
commented as follows:
“For the second quarter of 2018, FSP’s Funds from Operations or
FFO totaled approximately $25.4 million or $0.24 per share. Leasing
activity picked up significantly within our property portfolio
during the quarter and we are currently seeing that momentum
continuing in the third quarter of 2018. We are seeing increased
potential leasing activity in the energy influenced markets of
Houston and Denver, compared to the last several years. We also
continue to see more of our existing tenants approaching us with
early lease renewal requests and believe that, among other factors,
this is a direct result of our re-cast office property portfolio
that is more concentrated in targeted urban locations within our
five core markets of Atlanta, Dallas, Denver, Houston and
Minneapolis. We are optimistic about achieving meaningful organic
growth in the value of our property portfolio during 2018/2019,
while maintaining our strong financial capabilities to help achieve
those results.”
Highlights
- FFO was $25.4 million or $0.24 per
basic and diluted share for the second quarter ended June 30, 2018.
We had Net Income of $0.7 million or $0.01 per basic and diluted
share for the second quarter ended June 30, 2018.
- Adjusted Funds From Operations (AFFO)
was $0.09 per basic and diluted share for the second quarter of
2018. AFFO was $0.16 per basic and diluted share for the first
quarter of 2018. We anticipate AFFO to be volatile
quarter-to-quarter during 2018 and 2019 as additional leasing
activity within the property portfolio occurs.
Leasing Update
- Our directly owned real estate
portfolio of 34 properties totaling approximately 9.8 million
square feet was approximately 89.0% leased as of June 30, 2018,
which was a 0.5% increase compared to March 31, 2018.
- During the three months ended June 30,
2018, we leased approximately 659,000 square feet, of which
approximately 141,000 square feet was with new tenants. During the
six months ended June 30, 2018, we leased approximately 768,000
square feet, of which approximately 166,000 square feet was with
new tenants.
- Weighted average annualized GAAP rent
per square foot was approximately $28.91 as of June 30, 2018,
compared to $28.87 as of December 31, 2017, $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.
- Subsequent to quarter end, on July 30,
2018, we finalized a lease renewal with T-Mobile South LLC, d/b/a
T-Mobile at our One Ravinia Drive property in Atlanta, Georgia,
that extended the approximately 151,792 square foot tenancy through
August 2025.
Acquisition and Disposition
Update
- We anticipate potential additional
disposition activity within our managed portfolio during 2018 and
will update the market as appropriate.
Dividend Update
On July 6, 2018, the Company announced that its Board of
Directors declared a regular quarterly cash dividend for the three
months ended June 30, 2018 of $0.09 per share of common stock that
will be paid on August 9, 2018 to stockholders of record on July
20, 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
June 30, 2018. 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 updating our full year FFO guidance for 2018, which is
estimated to be in the range of approximately $0.96 to $0.99 per
basic and diluted share, and are initiating guidance for the third
quarter of 2018, which is estimated to be in the range of
approximately $0.22 to $0.24 per basic and diluted share. We are
updating full year 2018 net income guidance, which is estimated to
be in the range of approximately $0.02 to $0.05 per basic and
diluted share, and are initiating net income (loss) guidance for
the third quarter of 2018, which is estimated to be in the range of
approximately $(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:
Q3 2018
Range Full Year 2018 Range Low High
Low High Net income (loss) per share $
(0.02 ) $ 0.00 $ 0.02
$ 0.05 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 $ 0.99
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 August 1, 2018 at 10:00 a.m.
(ET) to discuss the second quarter 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, leasing
and acquisition and disposition activities in future periods,
prospects for long-term sustainable growth and the timing of
leasing at our 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 ReleaseSupplementary
InformationTable 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
ResultsSupplementary Schedule ACondensed Consolidated Income (Loss)
Statements(Unaudited)
For
the For the Three Months Ended Six Months
Ended June 30,
June 30, (in thousands, except per share amounts)
2018 2017
2018 2017 Revenue: Rental $
65,409 $ 66,995 $ 131,037 $ 134,371 Related party revenue:
Management fees and interest income from loans 1,276 1,366 2,532
2,736 Other 9 10
18 20
Total revenue 66,694
68,371 133,587
137,127 Expenses: Real estate
operating expenses 16,954 17,286 34,105 34,594 Real estate taxes
and insurance 12,292 11,595 23,469 23,998 Depreciation and
amortization 23,591 25,279 47,626 50,611 General and administrative
3,082 3,077 6,514 6,520 Interest 9,753
7,893 19,239
15,472 Total expenses
65,672 65,130
130,953 131,195
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
1,022 3,241 2,634 5,932 Equity in losses of non-consolidated REITs
(282 ) (201 ) (387 ) (598 ) Other — 129 — 151 Gain (loss) on sale
of properties and properties held for sale,
less applicable income tax
— (20,492 )
— (18,203 ) Income
(loss) before taxes on income 740 (17,323 ) 2,247 (12,718 ) Taxes
on income 75 72
157 197
Net income (loss) $ 665 $
(17,395 ) $ 2,090 $ (12,915 )
Weighted average number of shares outstanding, basic and
diluted 107,231
107,231 107,231
107,231 Net income (loss) per share, basic and
diluted $ 0.01 $ (0.16 )
$ 0.02 $ (0.12 )
Franklin Street Properties Corp. Financial
ResultsSupplementary Schedule BCondensed Consolidated Balance
Sheets(Unaudited)
June 30, December 31, (in
thousands, except share and par value amounts)
2018 2017 Assets: Real estate assets:
Land $ 191,578 $ 191,578 Buildings and improvements 1,833,470
1,811,631 Fixtures and equipment 7,565
5,614 2,032,613 2,008,823 Less
accumulated depreciation 405,115
376,131 Real estate assets, net 1,627,498
1,632,692 Acquired real estate leases, less accumulated
amortization of $96,899 and $109,771, respectively 71,861 86,520
Investment in non-consolidated REITs 69,067 70,164 Cash, cash
equivalents and restricted cash 10,448 9,819 Tenant rent
receivables, less allowance for doubtful accounts of $170 and $250,
respectively 4,039 3,123 Straight-line rent receivable, less
allowance for doubtful accounts of $50 and $50, respectively 53,294
53,194 Prepaid expenses and other assets 7,444 8,387 Related party
mortgage loan receivables 71,190 71,720 Other assets: derivative
asset 21,196 13,925 Office computers and furniture, net of
accumulated depreciation of $1,473 and $1,420, respectively 236 289
Deferred leasing commissions, net of accumulated amortization of
$23,698 and $22,276, respectively 43,254
40,679 Total assets
$ 1,979,527 $ 1,990,512
Liabilities and Stockholders’ Equity: Liabilities: Bank note
payable $ 98,000 $ 78,000 Term loans payable, less unamortized
financing costs of $4,382 and $5,099, respectively 765,618 764,901
Series A&B Senior Notes, less unamortized financing costs of
$1,232 and $1,308, respectively 198,768 198,692 Accounts payable
and accrued expenses 52,651 61,039 Accrued compensation 1,778 3,641
Tenant security deposits 5,576 5,383 Other liabilities: derivative
liabilities — 1,759 Acquired unfavorable real estate leases, less
accumulated amortization of $8,118 and $7,638, respectively
4,749 5,805 Total
liabilities 1,127,140
1,119,220 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 21,196 12,166 Accumulated distributions in
excess of accumulated earnings (525,277 )
(497,342 ) Total stockholders’ equity
852,387 871,292
Total liabilities and stockholders’ equity $
1,979,527 $ 1,990,512
Franklin Street Properties Corp. Financial
ResultsSupplementary Schedule CCondensed Consolidated Statements of
Cash Flows(Unaudited)
For the Six Months Ended
June 30, (in thousands)
2018
2017 Cash flows from operating activities: Net
income (loss) $ 2,090 $ (12,915 ) Adjustments to reconcile net
income or loss to net cash provided by operating activities:
Depreciation and amortization expense 49,050 51,823 Amortization of
above and below market leases (208 ) (855 ) Equity in losses of
non-consolidated REITs 387 598 Hedge ineffectiveness — (151 )
(Gain) loss on sale of properties and properties held for sale,
less applicable income tax — 18,203 Increase (decrease) in
allowance for doubtful accounts (80 ) 25 Changes in operating
assets and liabilities: Tenant rent receivables (836 ) (1,618 )
Straight-line rents 299 (1,897 ) Lease acquisition costs (398 )
(318 ) Prepaid expenses and other assets 325 (503 ) Accounts
payable, accrued expenses and other items (8,609 ) (6,829 ) Accrued
compensation (1,863 ) (1,855 ) Tenant security deposits 193 12
Payment of deferred leasing commissions (6,641
) (3,632 ) Net cash provided by operating
activities 33,709
40,088
Cash flows from investing activities: Property
improvements, fixtures and equipment (24,281 ) (28,464 )
Distributions in excess of earnings from non-consolidated REITs 710
691 Repayment of related party mortgage loan receivable 530 9,530
Proceeds received on sales of real estate assets
— 6,160 Net cash used in
investing activities (23,041 )
(12,083
)
Cash flows from financing activities: Distributions to
stockholders (30,025 ) (40,748 ) Borrowings under bank note payable
30,000 40,000 Repayments of bank note payable (10,000 ) (25,000 )
Deferred financing costs (14 )
— Net cash used in financing activities
(10,039 ) (25,748 )
Net increase in
cash, cash equivalents and restricted cash 629 2,257
Cash,
cash equivalents and restricted cash, beginning of year
9,819 9,366
Cash, cash equivalents and restricted cash, end of period
$ 10,448 $ 11,623
Franklin Street Properties Corp. Earnings
ReleaseSupplementary Schedule DReal Estate Portfolio Summary
Information(Unaudited & Approximated)
Commercial portfolio lease
expirations (1) Total % of
Year
Square Feet Portfolio 2018 700,906 7.2% 2019 1,163,210 11.9% 2020
992,620 10.2% 2021 697,517 7.1% 2022 1,208,678 12.4% Thereafter (2)
4,997,768 51.2% 9,760,699 100.0%
(1) Percentages are determined based upon total
square footage.(2) Includes 1,070,768 square feet of current
vacancies.
(dollars & square feet in 000's) As of June 30, 2018 #
of % of Square % of State Properties Investment Portfolio Feet
Portfolio Colorado 6 $ 536,927 33.4% 2,609 26.7% Texas 9
348,982 21.7% 2,417 24.8% Georgia 5 322,252 20.0% 1,967 20.2%
Minnesota (a) 2 95,677 6.0% 620 6.3% Virginia 4 84,648 5.3% 685
7.0% North Carolina 2 51,358 3.2% 322 3.3% Missouri 2 48,663 3.0%
351 3.6% Illinois 2 49,148 3.1% 372 3.8% Florida 1 38,191 2.4% 213
2.2% Indiana 1 30,396 1.9% 205
2.1% Total 34 $ 1,606,242
100.0% 9,761 100.0%
(a) Excludes approximately $21,256, which is our investment in a
property that was redeveloped and is classified as
non-operating.
Franklin Street Properties Corp. Earnings
ReleaseSupplementary Schedule EPortfolio and Other Supplementary
Information(Unaudited & Approximated)
Recurring Capital
ExpendituresOwned Portfolio
(in thousands) For the Three Months
Ended Six Months 31-Mar-18 30-Jun-18 30-Jun-18 Tenant
improvements $ 6,777 $ 8,212 $ 14,989 Deferred leasing costs 1,021
5,314 6,335 Non-investment capex 1,858 2,558
4,416 $ 9,656 $ 16,084 $ 25,740
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
Square foot & leased
percentages June 30, December 31, 2018 2017 Owned portfolio of
commercial real estate Number of properties (a) 34 34 Square feet
9,760,699 9,761,984 Leased percentage 89.0% 89.7%
Investments in non-consolidated REITs Number of properties 2 2
Square feet 1,396,493 1,396,071 Leased percentage 74.0% 75.3%
Single Asset REITs (SARs) managed Number of properties 3 4
Square feet 674,342 810,278 Leased percentage 96.1% 93.0%
Total owned, investments & managed properties Number of
properties 39 40 Square feet 11,831,534 11,968,333 Leased
percentage 87.7% 88.2%
(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 30-Jun-18 Held FSP 303 East Wacker Drive Corp. Chicago IL
861,422 73.5% 43.7% FSP Grand Boulevard Corp. Kansas City MO
535,071 74.9% 27.0% 1,396,493 74.0%
Franklin Street Properties Corp. Earnings
ReleaseSupplementary Schedule FPercentage of Leased Space(Unaudited
& Estimated)
First Second %
Leased (1) Quarter % Leased (1) Quarter
as of Average % as of Average %
Property Name Location Square Feet
31-Mar-18 Leased (2) 30-Jun-18 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
75.8% 73.4% 89.5% 84.9% 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 288,794 100.0% 100.0%
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
96.1% 96.1% 94.9% 95.3% 13 LIBERTY PLAZA Addison, TX 218,934 84.5%
88.6% 85.8% 85.0% 14 380 INTERLOCKEN Broomfield, CO 240,358 86.2%
86.2% 86.2% 86.2% 15 390 INTERLOCKEN Broomfield, CO 241,512 97.8%
97.8% 98.8% 98.5% 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 61.1% 61.1%
79.3% 67.4% 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 293,460 77.7% 78.9%
78.9% 78.1% 22 EMPEROR BOULEVARD Durham, NC 259,531 100.0% 100.0%
100.0% 100.0% 23 LEGACY TENNYSON CTR Plano, TX 202,600 86.4% 86.4%
86.4% 86.4% 24 ONE LEGACY Plano, TX 214,110 100.0% 100.0% 100.0%
100.0% 25 909 DAVIS Evanston, IL 195,098 92.3% 92.0% 92.2% 92.2% 26
ONE RAVINIA DRIVE Atlanta, GA 386,602 92.4% 92.4% 91.3% 91.7% 27
TWO RAVINIA Atlanta, GA 411,047 76.0% 75.8% 77.4% 76.7% 28
WESTCHASE I & II Houston, TX 629,025 86.0% 86.5% 88.1% 87.3% 29
1999 BROADWAY Denver, CO 676,379 80.6% 80.3% 76.6% 79.3% 30 999
PEACHTREE Atlanta, GA 621,946 88.6% 90.7% 84.8% 85.4% 31 1001 17th
STREET Denver, CO 655,413 96.8% 96.8% 93.2% 93.9% 32 PLAZA SEVEN
Minneapolis, MN 326,483 85.9% 93.2% 87.3% 86.4% 33 PERSHING PLAZA
Atlanta, GA 160,145 97.4% 97.4% 97.4% 97.4% 34 600 17th STREET
Denver, CO 598,630 84.6% 85.3%
85.4% 85.1%
TOTAL WEIGHTED AVERAGE
9,760,699 88.5%
89.0% 89.0% 88.6%
(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.
Franklin Street Properties Corp. Earnings
ReleaseSupplementary Schedule GLargest 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 June 30, 2018
% of Tenant Sq Ft
Portfolio 1 Quintiles IMS Healthcare Incorporated 259,531 2.7% 2
CITGO Petroleum Corporation 248,399 2.5% 3 Newfield Exploration
Company 234,495 2.4% 4 US Government 223,641 2.3% 5 Centene
Management Company, LLC 216,879 2.2% 6 Burger King Corporation
212,619 2.2% 7 Eversheds Sutherland (US) LLP 179,868 1.8% 8 The
Vail Corporation 164,636 1.7% 9 EOG Resources, Inc. 160,937 1.6% 10
T-Mobile South, LLC dba T-Mobile 151,792 1.6% 11 Citicorp Credit
Services, Inc. 146,260 1.5% 12 Petrobras America, Inc. 144,813 1.5%
13 Jones Day 140,342 1.4% 14 Argo Data Resource Corporation 140,246
1.4% 15 SunTrust Bank 127,500 1.3% 16 Federal National Mortgage
Association 123,144 1.3% 17 Kaiser Foundation Health Plan 120,979
1.2% 18 Giesecke & Devrient America 112,110 1.1% 19 Northrop
Grumman Systems Corp. 111,469 1.1% 20 Randstad General Partner (US)
109,638 1.1% Total 3,329,298 34.1%
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 Six Months Ended June 30, June 30, (In thousands, except per
share amounts) 2018 2017 2018 2017 Net income (loss) $ 665 $
(17,395 ) $ 2,090 $ (12,915 ) (Gain) loss on sale of properties and
properties held for sale, less applicable income tax — 20,492 —
18,203 GAAP loss from non-consolidated REITs 282 201 387 598 FFO
from non-consolidated REITs 978 800 1,862 1,591 Depreciation &
amortization 23,468 24,592
47,418 49,755 NAREIT FFO 25,393 28,690 51,757
57,232 Hedge ineffectiveness — (129 ) — (151 ) Acquisition costs of
new properties — 10 —
18 Funds From Operations (FFO) $ 25,393 $
28,571 $ 51,757 $ 57,099 Funds From
Operations (FFO) $ 25,393 $ 28,571 $ 51,757 $ 57,099 Reverse FFO
from non-consolidated REITs (978 ) (800 ) (1,862 ) (1,591 )
Distributions from non-consolidated REITs 355 345 710 691
Amortization of deferred financing costs 713 606 1,424 1,212
Straight-line rent 259 (792 ) 299 (1,874 ) Tenant improvements
(8,212 ) (5,363 ) (14,989 ) (11,837 ) Leasing commissions (5,314 )
(1,963 ) (6,335 ) (3,542 ) Non-investment capex (2,558 )
(1,685 ) (4,416 ) (3,355 ) Adjusted Funds From
Operations (AFFO) $ 9,658 $ 18,919 $ 26,588 $
36,803 Per Share Data EPS $ 0.01 $ (0.16 ) $ 0.02 $
(0.12 ) FFO $ 0.24 $ 0.27 $ 0.48 $ 0.53 AFFO $ 0.09 $ 0.18 $ 0.25 $
0.34 Weighted average shares (basic and diluted) 107,231
107,231 107,231 107,231
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) and Net 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 30-Jun-18 31-Mar-18
(Dec) Change Region East 1,007 $ 4,123 $ 3,991 $ 132
3.3 % MidWest 1,549 4,955 6,257 (1,302 ) (20.8 )% South 4,597
15,223 15,431 (208 ) (1.3 )% West 2,608 11,061
10,958 103 0.9 % Same Store
9,761 35,362 36,637 (1,275 ) (3.5 )% Acquisitions — —
— — — % NOI* from
the continuing portfolio 9,761 35,362 36,637 (1,275 ) (3.5 )%
Dispositions, Non-Operating, Development or Redevelopment -
(38 ) 79 (117 ) (0.3 )% NOI*
9,761 $ 35,324 $ 36,716 $ (1,392 ) (3.8
)% Sequential Same Store $ 35,362 $ 36,637 $ (1,275 ) (3.5
)% Less Nonrecurring Items in NOI* (a) 1,141
761 380 (1.1 )%
Comparative Sequential Same Store $ 34,221 $ 35,876
$ (1,655 ) (4.6 ) %
Three Months Ended Three Months Ended
Reconciliation to Net income
30-Jun-18 31-Mar-18 Net income $ 665 $ 1,425 Add
(deduct): Gain (loss) on sale of properties and property held for
sale, less applicable income taxes — — Hedge ineffectiveness — —
Management fee income (746 ) (746 ) Depreciation and amortization
23,591 24,035 Amortization of above/below market leases (123 ) (85
) General and administrative 3,082 3,432 Interest expense 9,753
9,486 Interest income (1,141 ) (1,120 ) Equity in losses of
non-consolidated REITs 282 105 Non-property specific items, net
(39 ) 184 NOI* $ 35,324 $
36,716
(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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