Franklin Street Properties Corp. (the “Company”, “FSP”, “we” or
“our”) (NYSE American: FSP), a real estate investment trust (REIT),
announced its results for the first quarter ended March 31,
2019.
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 at a strong pace during
the first quarter of 2019, setting an FSP record for the amount of
first quarter square footage leased. In addition, the price of
crude oil increased during the first quarter of 2019 and we believe
that a continuation of this trend could provide support to many
businesses and their expansion plans within our energy-influenced
markets of Houston and Denver. Prospective new tenant activity at
our 3 redevelopment properties located in Miami, Minneapolis and
Charlotte was robust during the first quarter of 2019. We expect to
make meaningful leasing progress with these assets during the
remainder of 2019. With over $568 million of available capital
liquidity as of March 31, 2019, we are confident that we have the
financial resources needed to maximize our leasing and
redevelopment value-add opportunities.”
Highlights
- Net Loss was $1.2 million or $0.01 per
basic and diluted share for the first quarter ended March 31, 2019.
Funds From Operations (FFO) was $22.1 million or $0.21 per basic
and diluted share for the first quarter ended March 31, 2019.
- Adjusted Funds From Operations (AFFO)
was $0.06 per basic and diluted share for the first quarter ended
March 31, 2019.
- During the first quarter ended March
31, 2019, we effectively fixed interest rates on two of our term
loans via interest rate swap transactions. As of March 31, 2019,
approximately 91% of our indebtedness had fixed interest rates or
were effectively fixed via interest rate swap transactions. As of
March 31, 2019, the 30-Day LIBOR rate was approximately 2.49% and
all of the base LIBOR rates that we fixed via interest rate swap
transactions were below the 30-day LIBOR rate.
- On February 20, 2019, we executed
interest rate swap transactions that fixed the base LIBOR rate on
both tranches of our $220 million term loan with Bank of Montreal
as administrative agent at 2.385% per annum from August 26, 2020
until the loan matures on January 31, 2024.
- On March 7, 2019, we executed interest
rate swap transactions that fixed the base LIBOR-based rate on a
$100 million portion of our $150 million term loan with JPMorgan
Chase Bank, N.A. as administrative agent at 2.44% per annum from
March 29, 2019 until the loan matures on November 30, 2021.
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 88.5% leased as of March 31, 2019.
- During the quarter ended March 31,
2019, we leased approximately 460,000 square feet, of which
approximately 95,000 was with new tenants. The leasing total
represents a first quarter record high for FSP, the average first
quarter leasing total for the prior five years was approximately
176,000 square feet.
- The weighted average GAAP base rent
achieved on leasing activity during the first quarter was $32.32
per square foot and the portfolio weighted average rent per
occupied square foot increased from $29.01 as of December 31, 2018
to $29.60 as of March 31, 2019.
Dividend Update
On April 5, 2019, the Company announced that its Board of
Directors declared a regular quarterly cash dividend for the three
months ended March 31, 2019 of $0.09 per share of common stock that
will be paid on May 9, 2019 to stockholders of record on April 19,
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 March 31,
2019. 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 maintaining our full year net income or loss 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 introducing guidance for the second quarter of 2019,
which is estimated to be in the range of a net loss approximately
$0.02 to $0.00 per basic and diluted share. We are maintaining 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 introducing guidance for the second 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:
Q2 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 CallA conference
call is scheduled for May 1, 2019 at 11:00 a.m. (ET) to discuss the
first quarter 2019 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 infill and central business district
(CBD) office properties in the U.S. Sunbelt and Mountain West, as
well as select opportunistic markets. 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, expectations for crude oil prices and their impact on
the Houston and Denver markets in future periods, 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, 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 Adjusted Funds From Operations
(AFFO) H Reconciliation and Definition of Sequential Same Store
results to Property Net Operating Income (NOI) and Net Income
(Loss) I
Franklin Street Properties Corp. Financial
ResultsSupplementary Schedule ACondensed Consolidated Income (Loss)
Statements(Unaudited)
For the Three Months Ended
March 31, (in thousands, except per share amounts)
2019 2018 Revenue:
Rental $ 63,359 $ 65,628 Related party revenue: Management fees and
interest income from loans 1,352 1,256 Other 5
9 Total revenue
64,716 66,893
Expenses: Real estate operating expenses 17,726 17,151 Real estate
taxes and insurance 12,102 11,177 Depreciation and amortization
23,245 24,035 General and administrative 3,509 3,432 Interest
9,368 9,486
Total expenses 65,950
65,281 Income (loss) before taxes on income
and equity inincome (loss) of non-consolidated REITs (1,234 ) 1,612
Tax expense (benefit) on income (loss) (29 ) 82 Equity in loss of
non-consolidated REITs —
(105 ) Net income (loss) $ (1,205 )
$ 1,425 Weighted average number of shares
outstanding, basic and diluted 107,231
107,231 Net income (loss) per
share, basic and diluted $ (0.01 ) $
0.01
Franklin Street Properties Corp. Financial
ResultsSupplementary Schedule BCondensed Consolidated Balance
Sheets(Unaudited)
March 31, December 31, (in thousands, except
share and par value amounts)
2019
2018 Assets: Real estate assets: Land $ 191,578 $
191,578 Buildings and improvements 1,872,082 1,857,935 Fixtures and
equipment 9,153
8,839 2,072,813 2,058,352 Less accumulated depreciation
447,980 432,579
Real estate assets, net 1,624,833 1,625,773 Acquired real
estate leases, less accumulated amortization of $74,681 and
$101,897, respectively 53,948 59,595 Cash, cash equivalents and
restricted cash 8,832 11,177 Tenant rent receivables 4,489 3,938
Straight-line rent receivable 55,836 54,006 Prepaid expenses and
other assets 10,469 10,400 Related party mortgage loan receivables
72,795 70,660 Other assets: derivative asset 10,469 14,765 Office
computers and furniture, net of accumulated depreciation of $1,410
and $1,512, respectively 166 197 Deferred leasing commissions, net
of accumulated amortization of $25,249 and $24,318, respectively
49,408 47,591
Total assets $ 1,891,245
$ 1,898,102 Liabilities and Stockholders’ Equity:
Liabilities: Bank note payable $ 40,000 $ 25,000 Term loans
payable, less unamortized financing costs of $5,358 and $5,722,
respectively 764,642 764,278 Series A & Series B Senior Notes,
less unamortized financing costs of $1,108 and $1,150, respectively
198,892 198,850 Accounts payable and accrued expenses 52,248 59,183
Accrued compensation 1,073 3,043 Tenant security deposits 6,352
6,319 Lease liability 2,141 — Other liabilities: derivative
liabilities 2,496 — Acquired unfavorable real estate leases, less
accumulated amortization of $5,144 and $6,605, respectively
3,414 3,795 Total
liabilities 1,071,258
1,060,468 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 income 7,973 14,765 Accumulated distributions in
excess of accumulated earnings (544,454 )
(533,599 ) Total stockholders’ equity
819,987 837,634
Total liabilities and stockholders’ equity $
1,891,245 $ 1,898,102
Franklin Street Properties Corp. Financial
ResultsSupplementary Schedule CCondensed Consolidated Statements of
Cash Flows(Unaudited)
For the Three Months Ended March 31,
(in thousands)
2019 2018
Cash flows from operating activities: Net income
(loss) $ (1,205 ) $ 1,425 Adjustments to reconcile net income or
loss to net cash provided by operating activities: Depreciation and
amortization expense 23,962 24,748 Amortization of above and below
market leases (112 ) (85 ) Equity in (income) loss of
non-consolidated REITs — 105 Increase (decrease) in allowance for
doubtful accountsand write-off of accounts receivable (60 ) 75
Changes in operating assets and liabilities: Tenant rent
receivables (491 ) (363 ) Straight-line rents (1,140 ) 40 Lease
acquisition costs (689 ) (276 ) Prepaid expenses and other assets
1,497 (274 ) Accounts payable and accrued expenses (6,101 ) (6,911
) Accrued compensation (1,970 ) (2,529 ) Tenant security deposits
33 205 Payment of deferred leasing commissions
(4,242 ) (1,082 ) Net cash provided by
operating activities 9,482
15,078
Cash flows from investing
activities: Property improvements, fixtures and equipment
(15,223 ) (10,774 ) Distributions in excess of earnings from
non-consolidated REITs - 355 Repayment of related party mortgage
loan receivable 265 265 Investment in related party mortgage loan
receivable (2,400 ) — Proceeds received from liquidating trust
263 — Net
cash used in investing activities (17,095 )
(10,154 )
Cash flows from financing
activities: Distributions to stockholders (9,651 ) (20,374 )
Borrowings under bank note payable 30,000 30,000 Repayments of bank
note payable (15,000 ) (10,000 ) Deferred financing costs
(81 ) (14 ) Net cash provided by
(used in) financing activities 5,268
(388 )
Net increase (decrease) in cash,
cash equivalents and restricted cash (2,345 ) 4,536
Cash,
cash equivalents and restricted cash, beginning of year
11,177 9,819
Cash, cash equivalents and restricted cash, end of period
$ 8,832 $ 14,355
Franklin Street Properties Corp. Earnings
ReleaseSupplementary Schedule DReal Estate Portfolio Summary
Information(Unaudited & Approximated)
Commercial portfolio lease expirations (1) Total % of
Year
Square Feet Portfolio 2019 638,664 6.4 % 2020 922,396 9.3 % 2021
674,792 6.8 % 2022 1,200,710 12.1 % 2023 664,600 6.7 % Thereafter
(2) 5,798,608 58.7 % 9,899,770 100.0 %
(1) Percentages are determined based upon
total square footage. (2) Includes 1,089,027 square feet of current
vacancies at our operating properties and 356,633 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 March 31, 2019 (a) # of %
of Square % of State Properties
Investment Portfolio Feet Portfolio Colorado 6 $ 541,172
33.3 % 2,620 26.5 % Texas 9 345,804 21.3 % 2,415 24.4 % Georgia 5
321,790 19.8 % 1,967 19.9 % Minnesota 3 118,953 7.3 % 750 7.6 %
Virginia 4 82,062 5.0 % 685 6.9 % North Carolina 2 50,177 3.1 % 322
3.2 % Missouri 2 46,543 2.9 % 351 3.5 % Illinois 2 48,483 3.0 % 372
3.8 % Florida 1 40,343 2.5 % 213 2.1 % Indiana 1
29,506 1.8 % 205 2.1 % Total 35
$ 1,624,833 100.0 % 9,900
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 31-Mar-19 Tenant
improvements $ 8,318 Deferred leasing costs 4,239 Non-investment
capex 2,413 $ 14,970 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
Square foot & leased percentages March 31,
December 31, 2019 2018
Operating Properties (a): Number of
properties 32 32 Square feet 9,495,118 9,486,650 Leased percentage
88.5% 89.0%
Redevelopment Properties: Number of
properties 3 3 Square feet 404,652 404,652 Leased percentage 11.9%
27.2%
Managed Properties - Single Asset REITs (SARs):
Number of properties 3 3 Square feet 674,342 674,342
Total Operating, Redevelopment and Managed Properties:
Number of properties 38 38 Square feet 10,574,112 10,565,644
(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)
Fourth First % Leased (1)
Quarter % Leased (1) Quarter as of
Average % as of Average % Property Name
Location Square Feet 31-Dec-18 Leased
(2) 31-Mar-19 Leased (2) 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% 96.4% 95.1% 6
PARK TEN PHASE II Houston, TX 156,746 65.5% 65.5% 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 89.3% 80.4% 89.3% 89.3% 9 COLLINS
CROSSING Richardson, TX 300,887 99.4% 99.4% 99.4% 99.4% 10
INNSBROOK Glen Allen, VA 298,456 57.3% 57.3% 57.3% 57.3% 11 RIVER
CROSSING Indianapolis, IN 205,059 94.2% 94.7% 95.0% 94.5% 12
LIBERTY PLAZA Addison, TX 216,851 80.4% 80.7% 74.5% 78.7% 13 380
INTERLOCKEN Broomfield, CO 240,358 93.4% 93.4% 90.5% 91.5% 14 390
INTERLOCKEN Broomfield, CO 241,512 98.2% 98.2% 98.2% 98.2% 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% 79.7% 80.1% 79.8% 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 80.1% 80.2% 80.9% 80.9% 20
EMPEROR BOULEVARD Durham, NC 259,531 100.0% 100.0% 100.0% 100.0% 21
LEGACY TENNYSON CTR Plano, TX 202,049 90.4% 90.4% 91.4% 90.9% 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% 91.2% 91.2% 24 ONE RAVINIA
DRIVE Atlanta, GA 386,602 92.3% 91.6% 89.7% 91.7% 25 TWO RAVINIA
Atlanta, GA 411,047 78.5% 78.4% 78.4% 77.4% 26 WESTCHASE I & II
Houston, TX 629,025 84.7% 84.8% 80.1% 82.2% 27 1999 BROADWAY
Denver, CO 677,378 81.8% 82.0% 77.1% 76.6% 28 999 PEACHTREE
Atlanta, GA 621,946 84.6% 84.6% 90.7% 87.0% 29 1001 17th STREET
Denver, CO 655,413 97.7% 97.7% 98.5% 98.2% 30 PLAZA SEVEN
Minneapolis, MN 326,757 88.2% 87.9% 87.4% 87.6% 31 PERSHING PLAZA
Atlanta, GA 160,145 97.4% 97.4% 97.4% 97.4% 32 600 17th STREET
Denver, CO 608,733 86.0% 85.5% 86.7%
85.9%
OPERATING TOTAL 9,495,118 89.0%
88.9% 88.5% 88.4%
33 FOREST PARK Charlotte, NC 62,212 100.0% 100.0% 0.0% 0.0% 34 BLUE
LAGOON Miami, FL 212,619 0.0% 66.7% 0.0% 0.0% 35 801 MARQUETTE AVE
Minneapolis, MN 129,821 37.0% 29.9% 37.0% 37.0%
REDEVELOPMENT TOTAL 404,652 27.2%
60.0% 11.9% 11.9% OWNED PORTFOLIO
TOTAL 9,899,770 (1)
% Leased as of month's end includes all leases that expire
on the last day of the quarter. (2) Average quarterly percentage is
the average of the end of the month leased percentage for each of
the 3 months during the quarter.
Franklin Street Properties Corp. Earnings
ReleaseSupplementary Schedule GLargest 20 Tenants – FSP Owned
Portfolio(Unaudited & Estimated)
The following table includes the largest
20 tenants in FSP’s owned portfolio based on total square feet:
As of March 31, 2019
% of Tenant Sq Ft Portfolio 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 EOG Resources, Inc. 169,167 1.7% 8 The Vail
Corporation 164,636 1.7% 9 T-Mobile South, LLC dba T-Mobile 151,792
1.5% 10 Citicorp Credit Services, Inc. 146,260 1.5% 11 Petrobras
America, Inc. 144,813 1.5% 12 Jones Day 140,342 1.4% 13 Argo Data
Resource Corporation 140,246 1.4% 14 Worldventures Holdings, LLC
129,998 1.3% 15 Kaiser Foundation Health Plan 120,979 1.2% 16
VMWare, Inc. 119,558 1.2% 17 Giesecke & Devrient America
112,110 1.1% 18 Northrop Grumman Systems Corp. 111,469 1.1% 19
Randstad General Partner (US) 109,638 1.1% 20 ADS Alliance Data
Systems, Inc. 107,698 1.1% Total 3,231,519
32.6%
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 March 31, (In thousands, except per share
amounts) 2019 2018 Net income (loss) $ (1,205 ) $
1,425 GAAP (income) loss from non-consolidated REITs — 105 FFO from
non-consolidated REITs — 884 Depreciation & amortization
23,133 23,950 NAREIT FFO 21,928 26,364 Lease
Acquisition costs 182 — Funds From
Operations (FFO) $ 22,110 $ 26,364 Funds From
Operations (FFO) $ 22,110 $ 26,364 Reverse FFO from
non-consolidated REITs — (884 ) Distributions from non-consolidated
REITs — 355 Amortization of deferred financing costs 717 711
Straight-line rent (1,140 ) 40 Tenant improvements (8,318 ) (6,777
) Leasing commissions (4,239 ) (1,021 ) Non-investment capex
(2,413 ) (1,858 ) Adjusted Funds From Operations (AFFO) $
6,717 $ 16,930 Per Share Data EPS $ (0.01 ) $
0.01 FFO $ 0.21 $ 0.25 AFFO $ 0.06 $ 0.16 Weighted average
shares (basic and diluted) 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 the National Association of Real
Estate Investment Trusts, or 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 the
amortization of 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:
Rentable Square Feet Three Months Ended
Three Months Ended Inc % (in thousands)
or RSF 31-Mar-19 31-Dec-18 (Dec)
Change Region East 945 $ 3,185 $ 3,044 $ 141 4.6 % MidWest
1,549 5,163 5,028 135 2.7 % South 4,382 14,272 13,916 356 2.6 %
West 2,619 10,559 10,849
(290 ) (2.7 ) % Property NOI* from Operating Properties 9,495
33,179 32,837 342 1.0 % Dispositions and Redevelopment Properties
405 (205 ) 2,298 (2,503 )
(7.2 ) % NOI* 9,900 $ 32,974 $ 35,135 $
(2,161 ) (6.2 ) % Sequential Same Store $ 33,179 $ 32,837 $
342 1.0 % Less Nonrecurring Items in NOI* (a) 35
1,695 (1,660 ) 5.4
% Comparative Sequential Same Store $ 33,144 $ 31,142
$ 2,002 6.4 %
Three Months Ended Three Months Ended
Reconciliation to Net
income(loss)
31-Mar-19 31-Dec-18 Net income
(loss) $ (1,205 ) $ 1,371 Add (deduct): Management fee income (677
) (640 ) Depreciation and amortization 23,245 23,327 Amortization
of above/below market leases (112 ) (152 ) General and
administrative 3,509 3,162 Interest expense 9,368 9,200 Interest
income (1,294 ) (1,192 ) Equity in (income) loss of
non-consolidated REITs — — Non-property specific items, net
140 59 NOI* $ 32,974 $
35,135
(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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version on businesswire.com: https://www.businesswire.com/news/home/20190430006166/en/
Georgia Touma, (877) 686-9496
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