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.
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