Franklin Street Properties Corp. (the “Company”, “FSP”, “we” or
“our”) (NYSE American: FSP), a real estate investment trust (REIT),
announced its results for the third quarter ended September 30,
2018.
George J. Carter, Chairman and Chief Executive Officer,
commented as follows:
“For the third quarter of 2018, FSP’s Funds from Operations or
FFO totaled approximately $26.2 million or $0.24 per share. Leasing
activity continued to be strong within our property portfolio
during the quarter and we are currently seeing that activity extend
into the fourth quarter of 2018. We also saw increased leasing in
our energy influenced markets of Houston and Denver and anticipate
further occupancy gains in those markets during the balance of the
year as well as 2019. Dispositions during the quarter of the
properties owned by two of our single-asset REITs in which FSP had
a financial interest provided initial cash proceeds totaling
approximately $74.9 million, which was used for debt reduction.
These dispositions are projected to have the net effect of reducing
FFO for the fourth quarter and full year 2018, and are reflected in
our updated FFO guidance. A recast of two of our existing unsecured
term loans totaling $370 million during the quarter moved out our
near term debt maturities, achieved future interest cost savings
and maintained corporate liquidity for anticipated future leasing
costs. We remain optimistic about achieving meaningful value
creation within our property portfolio during 2018 and 2019, while
maintaining our financial capabilities to help achieve those
results.”
Highlights
- FFO was $26.2 million or $0.24 per
basic and diluted share for the third quarter ended September 30,
2018. We had Net Income of $9.6 million or $0.09 per basic and
diluted share for the third quarter ended September 30, 2018.
- Adjusted Funds From Operations (AFFO)
was $0.12 per basic and diluted share for the third quarter of
2018.
- During the third quarter we recast $370
million of our unsecured term loans with our bank group and
extended maturities of these loans, with $205 million now maturing
in November 2021, and $165 million now maturing in January
2024. As a result, we have no scheduled debt maturities for the
next three years. The lending spreads on these loans decreased,
which we anticipate will decrease interest costs approximately $1
million on an annualized basis while outstanding based on our
current credit rating.
- We reduced debt $81 million during the
third quarter, primarily from application of approximately $74.9
million in cash proceeds from dispositions of the properties owned
by two of our single-asset REITs in which we had a financial
interest.
Leasing Update
- Our directly owned real estate
portfolio of 34 properties totaling approximately 9.8 million
square feet was approximately 90.5% leased as of September 30,
2018, which was a 1.5% increase compared to June 30, 2018.
- During the three months ended September
30, 2018, we leased approximately 515,000 square feet, of which
approximately 177,000 square feet was with new tenants. During the
nine months ended September 30, 2018, we leased approximately
1,283,000 square feet, of which approximately 343,000 square feet
was with new tenants.
- The portfolio assets in our five core
markets reached a three-year high point of 88.0% leased occupancy
as of September 30, 2018, primarily from leasing improvements in
our Denver and Houston assets.
- Our core market of Denver’s leased
percentage increased to 89.6% as of September 30, 2018, up from
87.5% leased as of June 30, 2018.
- Our core market of Houston’s leased
percentage increased to 85.1% as of September 30, 2018, up from
79.3% leased as of June 30, 2018.
- FSP expects the overall trend of
improving leased occupancy in our core five markets to continue
into 2019.
Acquisition and Disposition
Update
- On July 19, 2018, one of our
single-asset REITs, FSP Grand Boulevard Corp., sold the property
owned by it to a third party. On August 17, 2018, we received an
initial cash distribution of $5.9 million in consideration of the
financial interest we previously held.
- On September 24, 2018, one of our
single-asset REITs, FSP 303 East Wacker Drive Corp., sold the
property owned by it to a third party. On September 27, 2018, we
received an initial cash distribution of $69 million in
consideration of the financial interest we previously held.
- We anticipate potential additional
disposition activity within our managed portfolio during the
remainder of 2018 and/or 2019.
Dividend Update
On October 5, 2018, the Company announced that its Board of
Directors declared a regular quarterly cash dividend for the three
months ended September 30, 2018 of $0.09 per share of common stock
that will be paid on November 8, 2018 to stockholders of record on
October 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 and managed real estate portfolio as of September
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 $0.97 per
basic and diluted share, and are initiating guidance for the fourth
quarter of 2018, which is estimated to be in the range of
approximately $0.23 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 $0.11 to $0.12 per basic and
diluted share, and are initiating net income guidance for the
fourth quarter of 2018, which is estimated to be in the range of
approximately $0.00 to $0.01 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:
Q4 2018 Range
Full Year 2018 Range Low High Low
High Net income (loss) per share $ -
$ 0.01 $ 0.11 $ 0.12 GAAP
income from non-consolidated REITs - - (0.06 ) (0.06 ) FFO from
non-consolidated REITs - - 0.02 0.02 Depreciation &
Amortization 0.23 0.23 0.89 0.89
Funds From Operations per share $ 0.23
$ 0.24 $ 0.96 $
0.97
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 October 31, 2018 at 10:00
a.m. (ET) to discuss the third 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,
including in the Denver and Houston markets, and prospects for
long-term sustainable growth, 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 Nine Months Ended
September 30, September 30, (in thousands,
except per share amounts)
2018 2017
2018 2017 Revenue: Rental $
67,436 $ 67,339 $ 198,473 $ 201,710 Related party revenue:
Management fees and interest income from loans 1,261 1,278 3,793
4,014 Other 8 9 26
29 Total revenue 68,705
68,626 202,292 205,753
Expenses: Real estate operating expenses 17,946
17,898 52,051 52,492 Real estate taxes and insurance 11,651 11,882
35,120 35,880 Depreciation and amortization 23,277 24,988 70,903
75,599 General and administrative 3,394 3,286 9,908 9,806 Interest
9,935 8,258 29,174
23,730 Total expenses 66,203
66,312 197,156
197,507 Income before equity in income (loss) of
non-consolidated REITs, other, gain (loss) on sale of properties
and properties held for sale, less applicable income tax and taxes
2,502 2,314 5,136 8,246 Equity in income (loss) of non-consolidated
REITs 7,180 (121 ) 6,793 (719 ) Other — 67 — 218 Gain (loss) on
sale of properties and properties held for sale, less applicable
income tax — (257 ) —
(18,460 ) Income (loss) before taxes on income
9,682 2,003 11,929 (10,715 ) Taxes on income 74
100 231 297
Net income (loss) $ 9,608 $ 1,903 $
11,698 $ (11,012 ) 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 $ 0.09
$ 0.02 $ 0.11 $ (0.10 )
Franklin Street Properties Corp. Financial
Results
Supplementary Schedule B
Condensed Consolidated Balance Sheets
(Unaudited)
September 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 1,848,362 1,811,631 Fixtures and
equipment 7,842 5,614
2,047,782 2,008,823 Less accumulated depreciation
419,746 376,131 Real estate assets, net
1,628,036 1,632,692 Acquired real estate leases, less accumulated
amortization of $98,890 and $109,771, respectively 65,687 86,520
Investment in non-consolidated REITs — 70,164 Cash, cash
equivalents and restricted cash 10,434 9,819 Tenant rent
receivables, less allowance for doubtful accounts of $225 and $250,
respectively 3,206 3,123 Straight-line rent receivable, less
allowance for doubtful accounts of $50 and $50, respectively 53,056
53,194 Prepaid expenses and other assets 9,259 8,387 Related party
mortgage loan receivables 70,925 71,720 Other assets: derivative
asset 22,265 13,925 Office computers and furniture, net of
accumulated depreciation of $1,493 and $1,420, respectively 216 289
Deferred leasing commissions, net of accumulated amortization of
$24,059 and $22,276, respectively 45,475
40,679 Total assets $ 1,908,559
$ 1,990,512 Liabilities and Stockholders’
Equity: Liabilities: Bank note payable $ 17,000 $ 78,000 Term loans
payable, less unamortized financing costs of $6,086 and $5,099,
respectively 763,914 764,901 Series A&B Senior Notes, less
unamortized financing costs of $1,191 and $1,308, respectively
198,809 198,692 Accounts payable and accrued expenses 62,699 61,039
Accrued compensation 2,844 3,641 Tenant security deposits 5,619
5,383 Other liabilities: derivative liabilities — 1,759 Acquired
unfavorable real estate leases, less accumulated amortization of
$7,985 and $7,638, respectively 4,261
5,805 Total liabilities 1,055,146
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 22,265 12,166 Accumulated
distributions in excess of accumulated earnings
(525,320 ) (497,342 ) Total stockholders’ equity
853,413 871,292 Total
liabilities and stockholders’ equity $ 1,908,559
$ 1,990,512
Franklin Street Properties Corp. Financial
Results
Supplementary Schedule C
Condensed Consolidated Statements of Cash
Flows
(Unaudited)
For the Nine Months Ended September
30, (in thousands)
2018 2017
Cash flows from operating activities: Net income (loss) $
11,698 $ (11,012 ) Adjustments to reconcile net income or loss to
net cash provided by operating activities: Depreciation and
amortization expense 73,127 77,418 Amortization of above and below
market leases (405 ) (941 ) Equity in (income) loss of
non-consolidated REITs (6,793 ) 719 Hedge ineffectiveness — (218 )
Loss on sale of properties and properties held for sale, less
applicable income tax — 18,460 Increase (decrease) in allowance for
doubtful accounts (25 ) 25 Changes in operating assets and
liabilities: Tenant rent receivables (58 ) (902 ) Straight-line
rents 821 (2,021 ) Lease acquisition costs (683 ) (876 ) Prepaid
expenses and other assets (487 ) (1,945 ) Accounts payable and
accrued expenses (2,665 ) (489 ) Accrued compensation (797 ) (784 )
Tenant security deposits 236 76 Payment of deferred leasing
commissions (11,051 ) (8,178 ) Net cash
provided by operating activities 62,918
69,332
Cash flows from investing activities:
Property improvements, fixtures and equipment (35,901 ) (41,862 )
Investment in non-consolidated REITs 74,931 — Distributions in
excess of earnings from non-consolidated REITs 710 1,041 Repayment
of related party mortgage loan receivable 795 9,795 Proceeds
received on sales of real estate assets —
6,160 Net cash used in investing activities
40,535 (24,866 )
Cash flows
from financing activities: Distributions to stockholders
(39,676 ) (61,122 ) Borrowings under bank note payable 30,000
60,000 Repayments of bank note payable (91,000 ) (40,000 ) Deferred
financing costs (2,162 ) — Net
cash used in financing activities (102,838 )
(41,122 )
Net increase in cash, cash equivalents and
restricted cash 615 3,344
Cash, cash equivalents and
restricted cash, beginning of year 9,819
9,366
Cash, cash equivalents and restricted
cash, end of period $ 10,434 $ 12,710
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 562,230 5.8% 2019 953,783 9.8% 2020
991,024 10.2% 2021 696,686 7.1% 2022 1,228,487 12.6% Thereafter (2)
5,328,489 54.5% 9,760,699 100.0%
(1) Percentages are determined based upon
total square footage.
(2) Includes 931,200 square feet of
current vacancies.
(dollars & square
feet in 000's) As of September 30, 2018 # of % of Square % of State
Properties Investment Portfolio Feet Portfolio Colorado 6 $
538,772 33.5% 2,609 26.7% Texas 9 348,576 21.7% 2,417 24.8% Georgia
5 322,282 20.0% 1,967 20.2% Minnesota (a) 2 96,624 6.0% 620 6.3%
Virginia 4 83,544 5.2% 685 7.0% North Carolina 2 50,975 3.2% 322
3.3% Missouri 2 48,150 3.0% 351 3.6% Illinois 2 49,350 3.1% 372
3.8% Florida 1 37,805 2.4% 213 2.2% Indiana 1 30,135
1.9% 205 2.1% Total 34 $ 1,606,213
100.0% 9,761 100.0%
(a) Excludes approximately $21,823, 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
(in thousands) For the Three Months Ended Nine Months
31-Mar-18 30-Jun-18 30-Sep-18 30-Sep-18 Tenant improvements $ 6,777
$ 8,212 $ 7,084 $ 22,073 Deferred leasing costs 1,021 5,314 4,394
10,729 Non-investment capex 1,858 2,558 2,328
6,744 $ 9,656 $ 16,084 $ 13,806 $ 39,546 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 September 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 90.5% 89.7%
Investments in non-consolidated REITs (b) Number of
properties — 2 Square feet — 1,396,071 Leased percentage — 75.3%
Single Asset REITs (SARs) managed Number of properties 3 4
Square feet 674,342 810,278 Leased percentage 93.9% 93.0%
Total owned, investments & managed properties Number of
properties 37 40 Square feet 10,435,041 11,968,333 Leased
percentage 90.7% 88.2%
(a) Excludes one property that was redeveloped and is classified
as non-operating.(b) Properties were sold during the three months
ended September 30, 2018.
Franklin Street Properties Corp. Earnings
Release
Supplementary Schedule F
Percentage of Leased Space
(Unaudited & Estimated)
Second
Third % Leased (1) Quarter % Leased (1)
Quarter as of Average % as of
Average % Property Name Location Square
Feet 30-Jun-18 Leased (2) 30-Sep-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
89.5% 84.9% 89.5% 89.5% 7 PARK TEN PHASE II Houston, TX 156,746
1.4% 1.4% 59.7% 34.6% 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 94.9% 95.3% 94.9% 94.9% 13 LIBERTY PLAZA Addison, TX
218,934 85.8% 85.0% 80.8% 80.3% 14 380 INTERLOCKEN Broomfield, CO
240,358 86.2% 86.2% 86.2% 86.2% 15 390 INTERLOCKEN Broomfield, CO
241,512 98.8% 98.5% 98.2% 98.4% 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
79.3% 67.4% 79.7% 79.5% 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
78.9% 78.1% 80.4% 79.1% 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% 90.4% 87.7% 24 ONE LEGACY Plano, TX 214,110
100.0% 100.0% 100.0% 100.0% 25 909 DAVIS Evanston, IL 195,098 92.2%
92.2% 97.8% 97.8% 26 ONE RAVINIA DRIVE Atlanta, GA 386,602 91.3%
91.7% 91.3% 91.3% 27 TWO RAVINIA Atlanta, GA 411,047 77.4% 76.7%
78.2% 77.7% 28 WESTCHASE I & II Houston, TX 629,025 88.1% 87.3%
84.5% 85.8% 29 1999 BROADWAY Denver, CO 676,379 76.6% 79.3% 81.3%
78.2% 30 999 PEACHTREE Atlanta, GA 621,946 84.8% 85.4% 84.6% 84.7%
31 1001 17th STREET Denver, CO 655,413 93.2% 93.9% 97.7% 96.1% 32
PLAZA SEVEN Minneapolis, MN 326,483 87.3% 86.4% 87.3% 87.3% 33
PERSHING PLAZA Atlanta, GA 160,145 97.4% 97.4% 97.4% 97.4% 34 600
17th STREET Denver, CO 598,630 85.4% 85.1%
84.5% 85.1%
TOTAL WEIGHTED AVERAGE 9,760,699
89.0% 88.6% 90.5%
89.7%
(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
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 September 30, 2018
% of Tenant Sq Ft Portfolio 1 Quintiles IMS Healthcare
Incorporated 259,531 2.7% 2 CITGO Petroleum Corporation 248,399
2.6% 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 1.7% 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 Nine Months Ended September 30,
September 30, (In thousands, except per share amounts) 2018 2017
2018 2017 Net income (loss) $ 9,608 $ 1,903 $ 11,698 $ (11,012 )
Gain (loss) on sale of properties and
properties held for sale, less applicable income tax
— 257 — 18,460 GAAP (income) loss from non-consolidated REITs
(7,180 ) 121 (6,793 ) 719 FFO from non-consolidated REITs 649 874
2,511 2,465 Depreciation & amortization 23,081
24,903 70,499 74,658
NAREIT FFO 26,158 28,058 77,915 85,290 Hedge ineffectiveness — (67
) — (218 ) Acquisition costs of new properties —
— — 18 Funds From
Operations (FFO) $ 26,158 $ 27,991 $ 77,915 $
85,090 Funds From Operations (FFO) $ 26,158 $ 27,991
$ 77,915 $ 85,090 Reverse FFO from non-consolidated REITs (649 )
(874 ) (2,511 ) (2,465 ) Distributions from non-consolidated REITs
— 350 710 1,041 Amortization of deferred financing costs 799 606
2,223 1,818 Straight-line rent 522 (147 ) 821 (2,021 ) Tenant
improvements (7,084 ) (4,474 ) (22,073 ) (16,311 ) Leasing
commissions (4,394 ) (4,482 ) (10,729 ) (8,024 ) Non-investment
capex (2,328 ) (1,860 ) (6,744 ) (5,215
) Adjusted Funds From Operations (AFFO) $ 13,024 $ 17,110
$ 39,612 $ 53,913 Per Share Data EPS $
0.09 $ 0.02 $ 0.11 $ (0.10 ) FFO $ 0.24 $ 0.26 $ 0.73 $ 0.79 AFFO $
0.12 $ 0.16 $ 0.37 $ 0.50 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) 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
30-Sep-18 30-Jun-18 (Dec) Change
Region East 1,007 $ 4,032 $ 4,123 $ (91 ) (2.2 ) % MidWest 1,549
5,104 4,955 149 3.0 % South 4,597 16,722 15,223 1,499 9.8 % West
2,608 11,324 11,061 263
2.4 % Same Store 9,761 37,182 35,362 1,820 5.1 %
Acquisitions — — —
— — % NOI* from the continuing portfolio 9,761 37,182
35,362 1,820 5.1 % Dispositions, Non-Operating, Development or
Redevelopment - (69 ) (38 ) (31 ) —
% NOI* 9,761 $ 37,113 $ 35,324 $ 1,789
5.1 % Sequential Same Store $ 37,182 $ 35,362
$ 1,820 5.1 % Less Nonrecurring Items in NOI* (a)
2,504 1,141 1,363 (3.8 )
% Comparative Sequential Same Store $ 34,678 $ 34,221
$ 457 1.3 %
Three Months Ended Three Months Ended
Reconciliation to Net income 30-Sep-18
30-Jun-18 Net income $ 9,608 $ 665 Add (deduct):
(Gain) loss on sale of properties and
properties held for sale, less applicable income tax
— — Hedge ineffectiveness — — Management fee income (712 ) (746 )
Depreciation and amortization 23,277 23,591 Amortization of
above/below market leases (196 ) (123 ) General and administrative
3,394 3,082 Interest expense 9,935 9,753 Interest income (1,157 )
(1,141 ) Equity in (income) loss of non-consolidated REITs (7,180 )
282 Non-property specific items, net 144 (39 )
NOI* $ 37,113 $ 35,324
(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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