FSP Franklin Street Properties Corp

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, 2018.

George J. Carter, Chairman and Chief Executive Officer, commented as follows:

“Leasing activity within our property portfolio of 32 operating and 3 redevelopment properties continued to be solid during the fourth quarter of 2018, with approximately 398,000 square feet leased during the quarter. This leasing activity contributed to making 2018 a record year of leasing at FSP, with approximately 1,681,000 square feet leased during the year. We also continued to see increased leasing activity in our energy-influenced markets of Houston and Denver. The price of oil was particularly volatile over the past quarter and we believe that longer-term supply/demand pricing characteristics of that commodity will be an important factor affecting future levels of office space absorption in those markets during 2019 and 2020.

As anticipated, we did experience known and planned for tenant move outs during the fourth quarter of 2018, including Burger King at Blue Lagoon in Miami, Florida, SunTrust at Innsbrook in Glen Allen, Virginia, and Red Cross at Forest Park in Charlotte, North Carolina, which reduced overall leased occupancy in our property portfolio.

As 2019 begins, we are continuing our lease-up efforts at our approximately 130,000 square foot redevelopment property known as 801 Marquette in Minneapolis, Minnesota, which was approximately 37% leased as of December 31, 2018. In addition, we are now redeveloping an approximately 213,000 square foot property known as Blue Lagoon in Miami, Florida and an approximately 62,000 square foot property known as Forest Park in Charlotte, North Carolina, for a total of approximately 400,000 square feet of redevelopment space in the aggregate. Similar to 801 Marquette, prior to beginning our redevelopment efforts, both Blue Lagoon and Forest Park had been long-term leased to single-tenants. In addition, both assets have been owned by us (or our affiliates) for in excess of 15 years, are anchored in excellent locations within their respective markets, and have generated consistently strong cash flows. We believe that current market rents for these assets are meaningfully higher than the expiring single-tenant rents. We also believe that our redevelopment efforts will provide us the opportunity to capture significant increased value for our shareholders through higher ongoing rental cash flows, as we seek to achieve a strong, long-term rate of return on our costs of redevelopment. Currently, these 3 redevelopment properties contribute no material rental income to the Company.

As 2019 begins, we are optimistic about our ability to lease significant portions of our vacancy in our 32 operating properties and in our 3 redevelopment properties, and believe that successful results will mark the beginning of a longer-term, more sustainable, rise in operating performance and value creation within our property portfolio in 2020. The reduction to our dividend in 2018 allows the Company to retain more operating cash flow to fund anticipated increased leasing costs and capital expenditures during 2019 and 2020.”

Highlights

• Net Income was $1.4 million and $13.1 million or $0.01 and $0.12 per basic and diluted share for the fourth quarter and year ended December 31, 2018, respectively. FFO was $24.5 million and $102.5 million or $0.23 and $0.96 per basic and diluted share for the fourth quarter and year ended December 31, 2018, respectively.
• Adjusted Funds From Operations (AFFO) was $0.10 and $0.47 per basic and diluted share for the fourth quarter and year ended December 31, 2018, respectively.

Leasing Update

• Our directly owned real estate portfolio of 32 operating properties (excluding 3 redevelopment properties) totaling approximately 9.5 million square feet was approximately 89.0% leased as of December 31, 2018.
• During the year ended December 31, 2018, we leased approximately 1,681,000 square feet, of which approximately 397,000 was with new tenants, representing a 14% increase in leasing accomplished compared to 2017, and a new high for the company.
• During the three months ended December 31, 2018, we leased approximately 398,000 square feet, of which approximately 54,000 square feet was with new tenants.
• The portfolio assets in our core markets of Houston and Denver improved in 2018:
  • Our core market of Houston’s leased percentage increased to 86.0% as of December 31, 2018, up from 76.4% leased as of December 31, 2017.
  • Our core market of Denver’s leased percentage increased to 90.7% as of December 31, 2018, up from 89.7% leased as of December 31, 2017.

Dividend Update

On January 11, 2019, the Company announced that its Board of Directors declared a regular quarterly cash dividend for the three months ended December 31, 2018 of $0.09 per share of common stock that will be paid on February 14, 2019 to stockholders of record on January 25, 2019.

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 December 31, 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 initiating our full year net income guidance for 2019, which is estimated to be in the range of a net loss of approximately $0.03 to net income of $0.03 per basic and diluted share, and are for the first quarter of 2019, which is estimated to be in the range of a net loss of approximately $0.02 to $0.00 per basic and diluted share. We are initiating our full year FFO guidance for 2019, which is estimated to be in the range of approximately $0.81 to $0.87 per basic and diluted share, and for the first quarter of 2019, which is estimated to be in the range of approximately $0.19 to $0.21 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 2019 Range Full Year 2019 Range Low High Low High Net income (loss) per share $ (0.02 ) $ - $ (0.03 ) $ 0.03 GAAP income from non-consolidated REITs - - - - FFO from non-consolidated REITs - - - - Depreciation & Amortization   0.21     0.21   0.84     0.84 Funds From Operations per share $ 0.19   $ 0.21 $ 0.81   $ 0.87

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 13, 2019 at 10:00 a.m. (ET) to discuss the fourth quarter and year end 2018 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 operating performance, rates of return and value creation/enhancement in future periods, expectations for operating cash flow in future periods, expectations for growth, leasing and acquisition and disposition activities in future periods, including in the Denver and Houston markets, expectations regarding the timing, leasing and economic results of our redevelopment properties, 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, including the level of interest rates, 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, 2018, 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 AdjustedFunds From Operations (AFFO) H Reconciliation and Definition of Sequential Same Store results to Property NetOperating Income (NOI) and Net Income (Loss) I        

Franklin Street Properties Corp. Financial ResultsSupplementary Schedule ACondensed Consolidated Income (Loss) Statements(Unaudited)

      For theThree Months EndedDecember 31,   For theYear EndedDecember 31, (in thousands, except per share amounts)   2018   2017   2018   2017   Revenue: Rental $ 65,304 $ 65,555 $ 263,777 $ 267,265 Related party revenue: Management fees and interest income from loans 1,268 1,271 5,061 5,285 Other     6     9       32     38   Total revenue     66,578     66,835       268,870     272,588     Expenses: Real estate operating expenses 18,652 18,720 70,703 71,212 Real estate taxes and insurance 10,737 9,961 45,857 45,841 Depreciation and amortization 23,327 25,659 94,230 101,258 General and administrative 3,162 3,665 13,070 13,471 Interest     9,200     8,657       38,374     32,387   Total expenses     65,078     66,662       262,234     264,169     Income before equity in income (loss) of non-consolidated REITs, other, gain (loss) on sale of properties and properties held for sale and taxes 1,500 173 6,636 8,419 Equity in income (loss) of non-consolidated REITs — (2,885 ) 6,793 (3,604 ) Other — (2,096 ) — (1,878 ) Gain (loss) on sale of properties and properties held for sale     —     (21 )     —     (18,481 )   Income (loss) before taxes on income 1,500 (4,829 ) 13,429 (15,544 ) Taxes on income     129     103       360     400   Net income (loss)   $ 1,371   $ (4,932 )   $ 13,069   $ (15,944 )   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   $ (0.05 )   $ 0.12   $ (0.15 )      

Franklin Street Properties Corp. Financial ResultsSupplementary Schedule BCondensed Consolidated Balance Sheets(Unaudited)

  December 31, December 31, (in thousands, except share and par value amounts)   2018   2017 Assets: Real estate assets: Land $ 191,578 $ 191,578 Buildings and improvements 1,857,935 1,811,631 Fixtures and equipment     8,839       5,614   2,058,352 2,008,823 Less accumulated depreciation     432,579       376,131   Real estate assets, net 1,625,773 1,632,692 Acquired real estate leases, less accumulated amortization of $101,897 and $109,771, respectively 59,595 86,520 Investment in non-consolidated REITs — 70,164 Cash, cash equivalents and restricted cash 11,177 9,819 Tenant rent receivables, less allowance for doubtful accounts of $200 and $250, respectively 3,938 3,123 Straight-line rent receivable, less allowance for doubtful accounts of $50 and $50, respectively 54,006 53,194 Prepaid expenses and other assets 10,400 8,387 Related party mortgage loan receivables 70,660 71,720 Other assets: derivative asset 14,765 13,925 Office computers and furniture, net of accumulated depreciation of $1,512 and $1,420, respectively 197 289 Deferred leasing commissions, net of accumulated amortization of $24,318 and $22,276, respectively     47,591       40,679   Total assets   $ 1,898,102     $ 1,990,512     Liabilities and Stockholders’ Equity: Liabilities: Bank note payable $ 25,000 $ 78,000 Term loans payable, less unamortized financing costs of $5,722 and $5,099, respectively 764,278 764,901 Series A & Series B Senior Notes, less unamortized financing costs of $1,150 and $1,308, respectively 198,850 198,692 Accounts payable and accrued expenses 59,183 61,039 Accrued compensation 3,043 3,641 Tenant security deposits 6,319 5,383 Other liabilities: derivative liabilities — 1,759 Acquired unfavorable real estate leases, less accumulated amortization of $6,605 and $7,638, respectively     3,795       5,805   Total liabilities     1,060,468       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 14,765 12,166 Accumulated distributions in excess of accumulated earnings     (533,599 )     (497,342 ) Total stockholders’ equity     837,634       871,292   Total liabilities and stockholders’ equity   $ 1,898,102     $ 1,990,512        

Franklin Street Properties Corp. Financial ResultsSupplementary Schedule CCondensed Consolidated Statements of Cash Flows(Unaudited)

  For theYear EndedDecember 31, (in thousands)   2018   2017 Cash flows from operating activities: Net income (loss) $ 13,069 $ (15,944 ) Adjustments to reconcile net income or loss to net cash provided by operating activities: Depreciation and amortization expense 97,171 103,743 Amortization of above and below market leases (556 ) (1,031 ) Equity in (income) loss of non-consolidated REITs (6,793 ) 3,604 Hedge ineffectiveness — 1,878 Loss on sale of properties and properties held for sale — 18,481 Increase (decrease) in allowance for doubtful accounts (50 ) 150 Changes in operating assets and liabilities: Tenant rent receivables (765 ) (160 ) Straight-line rents 381 (1,767 ) Lease acquisition costs (1,193 ) (2,052 ) Prepaid expenses and other assets (1,940 ) (403 ) Accounts payable and accrued expenses (4,077 ) 3,870 Accrued compensation (598 ) (143 ) Tenant security deposits 936 28 Payment of deferred leasing commissions     (15,383 )     (14,309 ) Net cash provided by operating activities     80,202       95,945   Cash flows from investing activities: Property improvements, fixtures and equipment (51,057 ) (54,187 ) Office computers and furniture — (119 ) Investment in non-consolidated REITs 74,931 — Distributions in excess of earnings from non-consolidated REITs 710 1,396 Repayment of related party mortgage loan receivable 1,060 10,060 Proceeds received on sales of real estate assets     —       37,756   Net cash provided by (used in) investing activities     25,644       (5,094 ) Cash flows from financing activities: Distributions to stockholders (49,326 ) (81,496 ) Borrowings under bank note payable 38,000 75,000 Repayments of bank note payable (91,000 ) (277,000 ) Borrowing of Series A & Series B Senior Notes — 200,000 Deferred financing costs     (2,162 )     (6,902 ) Net cash used in financing activities     (104,488 )     (90,398 ) Net increase in cash, cash equivalents and restricted cash 1,358 453 Cash, cash equivalents and restricted cash, beginning of year     9,819       9,366   Cash, cash equivalents and restricted cash, end of period   $ 11,177     $ 9,819      

Franklin Street Properties Corp. Earnings ReleaseSupplementary Schedule DReal Estate Portfolio Summary Information(Unaudited & Approximated)

  Commercial portfolio lease expirations (1)

Year

TotalSquare Feet % ofPortfolio 2019 854,888 8.6% 2020 1,072,050 10.8% 2021 691,623 7.0% 2022 1,206,763 12.2% 2023 776,188 7.9% Thereafter (2) 5,289,790   53.5% 9,891,302   100.0%

__________

(1) Percentages are determined based upon total square footage.(2) Includes 1,046,853 square feet of current vacancies at our operating properties and 294,421 square feet of current vacancies at our redevelopment properties. We define redevelopment properties as properties being developed, redeveloped or where development/redevelopment is complete but that are not yet stabilized.

          (dollars & square feet in 000's) As of December 31, 2018 (a) State # ofProperties Investment % ofPortfolio SquareFeet % ofPortfolio   Colorado 6 $ 537,998 33.1 % 2,609 26.4 % Texas 9 348,404 21.4 % 2,417 24.4 % Georgia 5 322,698 19.9 % 1,967 19.9 % Minnesota 3 118,871 7.3 % 750 7.6 % Virginia 4 82,920 5.1 % 685 6.9 % North Carolina 2 50,592 3.1 % 322 3.2 % Missouri 2 47,292 2.9 % 351 3.6 % Illinois 2 48,731 3.0 % 372 3.8 % Florida 1 38,432 2.4 % 213 2.2 % Indiana 1     29,835   1.8 % 205   2.0 % Total 35   $ 1,625,773   100.0 % 9,891   100.0 %  

(a) Includes investment in our redevelopment properties. We define redevelopment properties as properties being developed, redeveloped or where complete, but that are not yet stabilized.

         

Franklin Street Properties Corp. Earnings ReleaseSupplementary Schedule EPortfolio and Other Supplementary Information(Unaudited & Approximated)

 

Recurring Capital Expenditures

  (in thousands) For the Three Months Ended Year Ended 31-Mar-18 30-Jun-18 30-Sep-18 31-Dec-18 31-Dec-18 Tenant improvements $ 6,777 $ 8,212 $ 7,084 $ 6,895 $ 28,968 Deferred leasing costs 1,021 5,314 4,394 3,746 14,475 Non-investment capex   1,858   2,558   2,328   3,342   10,086 $ 9,656 $ 16,084 $ 13,806 $ 13,983 $ 53,529     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 December 31,2018 December 31,2017 Operating Properties (a): Number of properties 32 34 Square feet 9,486,650 9,761,984 Leased percentage 89.0 % 89.7 %   Redevelopment Properties: Number of properties 3 1 Square feet 404,652 129,821 Leased percentage 27.2 % 1.9 %   Managed Properties - Single Asset REITs (SARs): Number of properties 3 4 Square feet 674,342 810,278   Total Operating, Redevelopment and Managed Properties: Number of properties 38 39 Square feet 10,565,644 10,702,083  

(a) Excludes investment in our redevelopment properties. We define redevelopment properties as properties being developed, redeveloped or where development/redevelopment is complete but that are not yet stabilized.

 

Franklin Street Properties Corp. Earnings ReleaseSupplementary Schedule FPercentage of Leased Space(Unaudited & Estimated)

    Property Name   Location   Square Feet   % Leased (1)as of30-Sep-18   ThirdQuarterAverage %Leased (2)   % Leased (1)as of31-Dec-18   FourthQuarterAverage %Leased (2)   FOREST PARK (3) Charlotte, NC — 100.0 % 100.0 % Note (3) Note (3) 1 MEADOW POINT Chantilly, VA 138,537 100.0 % 100.0 % 100.0 % 100.0 % 2 TIMBERLAKE Chesterfield, MO 234,496 100.0 % 100.0 % 100.0 % 100.0 % 3 TIMBERLAKE EAST Chesterfield, MO 117,036 100.0 % 100.0 % 100.0 % 100.0 % 4 NORTHWEST POINT Elk Grove Village, IL 177,095 100.0 % 100.0 % 100.0 % 100.0 % 5 PARK TEN Houston, TX 157,460 89.5 % 89.5 % 89.5 % 89.5 % 6 PARK TEN PHASE II Houston, TX 156,746 59.7 % 34.6 % 65.5 % 65.5 % 7 GREENWOOD PLAZA Englewood, CO 196,236 100.0 % 100.0 % 100.0 % 100.0 % 8 ADDISON Addison, TX 289,302 100.0 % 100.0 % 89.3 % 80.4 % 9 COLLINS CROSSING Richardson, TX 300,887 100.0 % 100.0 % 99.4 % 99.4 % 10 INNSBROOK Glen Allen, VA 298,456 100.0 % 100.0 % 57.3 % 57.3 % 11 RIVER CROSSING Indianapolis, IN 205,059 94.9 % 94.9 % 94.2 % 94.7 % 12 LIBERTY PLAZA Addison, TX 218,934 80.8 % 80.3 % 80.4 % 80.7 % 13 380 INTERLOCKEN Broomfield, CO 240,358 86.2 % 86.2 % 93.4 % 93.4 % 14 390 INTERLOCKEN Broomfield, CO 241,512 98.2 % 98.4 % 98.2 % 98.2 % BLUE LAGOON (3) Miami, FL — 100.0 % 100.0 % Note (3) Note (3) 15 ELDRIDGE GREEN Houston, TX 248,399 100.0 % 100.0 % 100.0 % 100.0 % 16 ONE OVERTON PARK Atlanta, GA 387,267 79.7 % 79.5 % 79.7 % 79.7 % 17 LOUDOUN TECH Dulles, VA 136,658 95.7 % 95.7 % 95.7 % 95.7 % 18 4807 STONECROFT Chantilly, VA 111,469 100.0 % 100.0 % 100.0 % 100.0 % 19 121 SOUTH EIGHTH ST Minneapolis, MN 293,460 80.4 % 79.1 % 80.1 % 80.2 % 20 EMPEROR BOULEVARD Durham, NC 259,531 100.0 % 100.0 % 100.0 % 100.0 % 21 LEGACY TENNYSON CTR Plano, TX 202,600 90.4 % 87.7 % 90.4 % 90.4 % 22 ONE LEGACY Plano, TX 214,110 100.0 % 100.0 % 100.0 % 100.0 % 23 909 DAVIS Evanston, IL 195,098 97.8 % 97.8 % 97.8 % 97.8 % 24 ONE RAVINIA DRIVE Atlanta, GA 386,602 91.3 % 91.3 % 92.3 % 91.6 % 25 TWO RAVINIA Atlanta, GA 411,047 78.2 % 77.7 % 78.5 % 78.4 % 26 WESTCHASE I & II Houston, TX 629,025 84.5 % 85.8 % 84.7 % 84.8 % 27 1999 BROADWAY Denver, CO 676,379 81.3 % 78.2 % 81.8 % 82.0 % 28 999 PEACHTREE Atlanta, GA 621,946 84.6 % 84.7 % 84.6 % 84.6 % 29 1001 17th STREET Denver, CO 655,413 97.7 % 96.1 % 97.7 % 97.7 % 30 PLAZA SEVEN Minneapolis, MN 326,757 87.3 % 87.3 % 88.2 % 87.9 % 31 PERSHING PLAZA Atlanta, GA 160,145 97.4 % 97.4 % 97.4 % 97.4 % 32 600 17th STREET Denver, CO 598,630   84.5 %   85.1 %   86.0 %   85.5 % OPERATING TOTAL 9,486,650   90.5 %   89.7 %   89.0 %   88.9 %   33 FOREST PARK Charlotte, NC 62,212 — — 100.0 % 100.0 % 34 BLUE LAGOON Miami, FL 212,619 — — 0.0 % 66.7 % 35 801 MARQUETTE AVE Minneapolis, MN 129,821   15.8 %   15.8 % 37.0 % 29.9 % REDEVELOPMENT TOTAL 404,652   15.8 %   15.8 % 27.2 % 60.0 %   OWNED PORTFOLIO TOTAL 9,891,302

_____________

(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) Classified as a redevelopment property.

     

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 December 31, 2018

  Tenant Sq Ft % ofPortfolio 1 IQVIA Holdings Inc. 259,531 2.6 % 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 Eversheds Sutherland (US) LLP 179,868 1.8 % 7 The Vail Corporation 164,636 1.7 % 8 EOG Resources, Inc. 160,937 1.6 % 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 Kaiser Foundation Health Plan 120,979 1.2 % 15 VMWare, Inc. 119,558 1.2 % 16 Giesecke & Devrient America 112,110 1.2 % 17 Northrop Grumman Systems Corp. 111,469 1.1 % 18 Randstad General Partner (US) 109,638 1.1 % 19 ADS Alliance Data Systems, Inc. 107,698 1.1 % 20 Densbury Onshore LLC 100,000   1.0 % Total 3,193,291   32.2 %  

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 EndedDecember 31, Year EndedDecember 31, (In thousands, except per share amounts) 2018 2017 2018 2017 Net income (loss) $ 1,371 $ (4,932) $ 13,069 $ (15,944)

Gain (loss) on sale of properties and properties

held for sale

— 21 — 18,481 GAAP (income) loss from non-consolidated REITs — 2,885 (6,793) 3,604 FFO from non-consolidated REITs — 708 2,511 3,173 Depreciation & amortization   23,175   25,569   93,674   100,227 NAREIT FFO 24,546 24,251 102,461 109,541 Hedge ineffectiveness — 2,096 — 1,878 Acquisition costs   —   —   —   18 Funds From Operations (FFO) $ 24,546 $ 26,347 $ 102,461 $ 111,437   Funds From Operations (FFO) $ 24,546 $ 26,347 $ 102,461 $ 111,437 Reverse FFO from non-consolidated REITs — (708) (2,511) (3,173) Distributions from non-consolidated REITs — 355 710 1,396 Amortization of deferred financing costs 717 667 2,940 2,485 Straight-line rent (440) 254 381 (1,767) Tenant improvements (6,895) (4,166) (28,968) (20,477) Leasing commissions (3,746) (5,869) (14,475) (13,893) Non-investment capex   (3,342)   (3,836)   (10,086)   (9,051) Adjusted Funds From Operations (AFFO) $ 10,840 $ 13,044 $ 50,452 $ 66,957   Per Share Data EPS $ 0.01 $ (0.05) $ 0.12 $ (0.15) FFO $ 0.23 $ 0.25 $ 0.96 $ 1.04 AFFO $ 0.10 $ 0.12 $ 0.47 $ 0.62   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, acquisition costs of newly acquired properties that are not capitalized and lease acquisition costs 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 redevelopment properties, which include properties being developed, redeveloped or where redevelopment is complete but are in lease-up and are not stabilized, 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:

          (in thousands) RentableSquare Feetor RSF

Three Months Ended31-Dec-18

Three Months Ended30-Sep-18

  Inc(Dec) %Change   Region East 945 $ 3,044 $ 3,868 $ (824 ) (21.3 )% MidWest 1,549 5,028 5,104 (76 ) (1.5 )% South 4,384 13,916 14,903 (987 ) (6.6 )% West 2,609   10,849     11,324       (475 ) (4.2 )% Property NOI* from Operating Properties 9,487 32,837 35,199 (2,362 ) (6.7 )% Dispositions and Redevelopment Properties 405   2,298     1,914       384   1.4 % NOI* 9,892 $ 35,135   $ 37,113     $ (1,978 ) (5.3 )%   Sequential Same Store $ 32,837 $ 35,199 $ (2,362 ) (6.7 )%   Less Nonrecurring Items in NOI* (a)   1,695     2,504       (809 ) 2.0 %   Comparative Sequential Same Store $ 31,142   $ 32,695     $ (1,553 ) (4.7 )%                       Reconciliation to Net income

Three Months Ended31-Dec-18

Three Months Ended30-Sep-18

Net income $ 1,371 $ 9,608 Add (deduct): (Gain) loss on sale of properties and properties

held for sale

— — Hedge ineffectiveness — — Management fee income (640 ) (712 ) Depreciation and amortization 23,327 23,277 Amortization of above/below market leases (152 ) (196 ) General and administrative 3,162 3,394 Interest expense 9,200 9,935 Interest income (1,192 ) (1,157 ) Equity in (income) loss of non-consolidated REITs — (7,180 ) Non-property specific items, net   59     144       NOI* $ 35,135   $ 37,113    

(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.

View source version on businesswire.com: https://www.businesswire.com/news/home/20190212005864/en/

For Franklin Street Properties Corp.Georgia Touma, 877-686-9496