Franklin Street Properties Corp. (the “Company”, “FSP”, “we” or
“our”) (NYSE American: FSP), a real estate investment trust (REIT),
announced its results for the third quarter ended September 30,
2019.
George J. Carter, Chairman and Chief Executive Officer,
commented as follows:
“Leasing activity during the third quarter of 2019 continued at
a strong pace within our property portfolio of 32 operating and
three redevelopment properties. We believe that we are adding value
to our portfolio as we continue to work through a large,
approximately three-year lease roll bulge, that began in 2018 and
continues through 2020. Much of our recent leasing activity has
been focused on renewing or backfilling existing tenant lease
rollover space, but net new absorption is beginning to take place
as well. We also continue to see generally rising rents and longer
lease terms at our properties as we work through this period.
Prospective new tenant activity at our three redevelopment
properties located in Miami, Minneapolis and Charlotte continued to
be solid during the quarter and we expect to make more progress
with these assets during the remainder of 2019 and into 2020. With
over $600 million of available liquidity as of September 30, 2019,
we are confident that we have the financial resources needed for
flexibility on our balance sheet and to maximize our leasing and
redevelopment value-add opportunities.”
Highlights
- Net income was $2.4 million or $0.02 per basic and diluted
share for the third quarter ended September 30, 2019. Funds From
Operations (FFO) was $24.9 million or $0.23 per basic and diluted
share for the third quarter ended September 30, 2019.
- Adjusted Funds From Operations (AFFO) was $0.10 per basic and
diluted share for the third quarter ended September 30, 2019.
- We are raising our full year FFO guidance for 2019, which is
now estimated to be in the range of $0.87 to $0.89 per basic and
diluted share, from our previously estimated range of $0.84 to
$0.88 per basic and diluted share. Lease termination fee income was
approximately $4.2 million for the nine months ended September 30,
2019, compared to approximately $4.4 million for the same period in
2018. Our full year FFO guidance for 2019 includes estimated lease
termination fee income of approximately $8.4 million, compared to
approximately $6.1 million during the year ended 2018.
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 89.7%
leased as of September 30, 2019 compared to approximately 88.1%
leased as of June 30, 2019.
- During the quarter ended September 30, 2019, we leased
approximately 304,000 square feet, of which approximately 226,000
square feet was with new tenants. During the nine months ended
September 30, 2019, we leased approximately 1,139,000 square feet,
of which approximately 444,000 square feet was with new
tenants.
- The weighted average GAAP base rent per square foot achieved on
leasing activity during the first nine months of 2019 was $32.73
compared to $31.02 in 2018 and the average lease term on leases in
2019 lengthened to 8.6 years compared to 7.2 years in 2018. Overall
the portfolio weighted average rent per occupied square foot
increased from $29.01 as of December 31, 2018 to $29.81 as of
September 30, 2019.
- On September 13, 2019, we entered into a lease agreement with
Lennar Homes, LLC for its new corporate headquarters. Lennar will
occupy approximately 156,000 square feet of our property in Miami,
Florida that we call Blue Lagoon. The lease has an initial term of
16 years.
Dividend Update
On October 11, 2019, the Company announced that its Board of
Directors declared a regular quarterly cash dividend for the three
months ended September 30, 2019 of $0.09 per share of common stock
that will be paid on November 14, 2019 to stockholders of record on
October 25, 2019.
Non-GAAP Financial
Information
A reconciliation of Net income to FFO, AFFO and Sequential Same
Store NOI and our definitions of FFO, AFFO and Sequential Same
Store NOI can be found on Supplementary Schedules H and I.
Real Estate Update
Supplementary schedules provide property information for the
Company’s owned and managed real estate portfolio as of September
30, 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.
Net Income and FFO
Guidance
We are raising our full year net income guidance for 2019, which
is estimated to be in the range of approximately $0.03 to $0.05 per
basic and diluted share, and are introducing net income guidance
for the fourth quarter of 2019, which is estimated to be in the
range of approximately $0.00 to $0.02 per basic and diluted share.
We are raising our full year FFO guidance for 2019, which is
estimated to be in the range of approximately $0.87 to $0.89 per
basic and diluted share, and are introducing FFO guidance for the
fourth quarter of 2019, which is estimated to be in the range of
approximately $0.21 to $0.23 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 per share to the
guidance for FFO per share is provided as follows:
Q4 2019 Range
Full Year 2019 Range
Low
High
Low
High
Net income per share
$
0.00
$
0.02
$
0.03
$
0.05
Depreciation & Amortization
0.21
0.21
0.84
0.84
Funds From Operations per share
$
0.21
$
0.23
$
0.87
$
0.89
Today’s news release, along with other news about Franklin
Street Properties Corp., is available on the Internet at
www.fspreit.com. We routinely post information that may be
important to investors in the Investor Relations section of our
website. We encourage investors to consult that section of our
website regularly for important information about us and, if they
are interested in automatically receiving news and information as
soon as it is posted, to sign up for E-mail Alerts.
Earnings Call
A conference call is scheduled for October 30, 2019 at 11:00
a.m. (ET) to discuss the third 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 in future periods, expectations for lease termination fees
in future periods, expectations for operating performance, value
creation/enhancement in future periods, expectations for growth and
leasing activities in future periods, expectations regarding the
timing, leasing and economic results of our redevelopment
properties 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 Release Supplementary Information Table of
Contents
Franklin Street Properties Corp. Financial
Results
A-C
Real Estate Portfolio Summary
Information
D
Portfolio and Other Supplementary
Information
E
Percentage of Leased Space
F
Largest 20 Tenants – FSP Owned
Portfolio
G
Reconciliation and Definitions of Funds
From Operations (FFO) and Adjusted
Funds From Operations (AFFO)
H
Reconciliation and Definition of
Sequential Same Store results to Property Net
Operating Income (NOI) and Net Income
(Loss)
I
Franklin Street Properties Corp.
Financial Results Supplementary Schedule A Condensed Consolidated
Income (Loss) Statements (Unaudited)
For the Three Months Ended
September 30,
For the Nine Months Ended
September 30,
(in thousands, except per share
amounts)
2019
2018
2019
2018
Revenue:
Rental
$
68,108
$
67,436
$
196,952
$
198,473
Related party revenue:
Management fees and interest income from
loans
426
1,261
3,100
3,793
Other
5
8
16
26
Total revenue
68,539
68,705
200,068
202,292
Expenses:
Real estate operating expenses
18,041
17,946
52,883
52,051
Real estate taxes and insurance
12,505
11,651
37,408
35,120
Depreciation and amortization
22,559
23,277
67,913
70,903
General and administrative
3,886
3,394
11,097
9,908
Interest
9,036
9,935
27,775
29,174
Total expenses
66,027
66,203
197,076
197,156
Income before taxes on income and equity
in
income of non-consolidated REITs
2,512
2,502
2,992
5,136
Tax expense on income
113
74
165
231
Equity in income of non-consolidated
REITs
—
7,180
—
6,793
Net income
$
2,399
$
9,608
$
2,827
$
11,698
Weighted average number of shares
outstanding, basic and diluted
107,231
107,231
107,231
107,231
Net income per share, basic and
diluted
$
0.02
$
0.09
$
0.03
$
0.11
Franklin Street Properties Corp.
Financial Results Supplementary Schedule B Condensed Consolidated
Balance Sheets (Unaudited)
September 30,
December 31,
(in thousands, except share and par value
amounts)
2019
2018
Assets:
Real estate assets:
Land
$
191,578
$
191,578
Buildings and improvements
1,900,131
1,857,935
Fixtures and equipment
11,099
8,839
2,102,808
2,058,352
Less accumulated depreciation
476,298
432,579
Real estate assets, net
1,626,510
1,625,773
Acquired real estate leases, less
accumulated amortization of $68,542 and $101,897, respectively
45,066
59,595
Cash, cash equivalents and restricted
cash
20,159
11,177
Tenant rent receivables
4,410
3,938
Straight-line rent receivable
64,111
54,006
Prepaid expenses and other assets
8,868
10,400
Related party mortgage loan
receivables
21,265
70,660
Other assets: derivative asset
2,844
14,765
Office computers and furniture, net of
accumulated depreciation of $1,355 and $1,512, respectively
136
197
Deferred leasing commissions, net of
accumulated amortization of $27,433 and $24,318, respectively
49,781
47,591
Total assets
$
1,843,150
$
1,898,102
Liabilities and Stockholders’ Equity:
Liabilities:
Bank note payable
$
—
$
25,000
Term loans payable, less unamortized
financing costs of $4,631 and $5,722, respectively
765,369
764,278
Series A & Series B Senior Notes, less
unamortized financing costs of $1,026 and $1,150, respectively
198,974
198,850
Accounts payable and accrued expenses
61,657
59,183
Accrued compensation
3,769
3,043
Tenant security deposits
9,008
6,319
Lease liability
1,976
—
Other liabilities: derivative
liabilities
9,934
—
Acquired unfavorable real estate leases,
less accumulated amortization of $4,907 and $6,605,
respectively
2,810
3,795
Total liabilities
1,053,497
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
(loss)
(7,090)
14,765
Accumulated distributions in excess of
accumulated earnings
(559,725)
(533,599)
Total stockholders’ equity
789,653
837,634
Total liabilities and stockholders’
equity
$
1,843,150
$
1,898,102
Franklin Street Properties Corp.
Financial Results Supplementary Schedule C Condensed Consolidated
Statements of Cash Flows (Unaudited)
For the Nine Months Ended
September 30,
(in thousands)
2019
2018
Cash flows from operating
activities:
Net income
$
2,827
$
11,698
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization expense
70,072
73,127
Amortization of above and below market
leases
(305)
(405)
Equity in loss of non-consolidated
REITs
—
(6,793)
Decrease in allowance for doubtful
accounts and write-off of accounts receivable
(69)
(25)
Changes in operating assets and
liabilities:
Tenant rent receivables
(403)
(58)
Straight-line rents
(6,950)
821
Lease acquisition costs
(3,155)
(683)
Prepaid expenses and other assets
1,261
(487)
Accounts payable and accrued expenses
2,849
(2,665)
Accrued compensation
726
(797)
Tenant security deposits
2,689
236
Payment of deferred leasing
commissions
(9,485)
(11,051)
Net cash provided by operating
activities
60,057
62,918
Cash flows from investing
activities:
Property improvements, fixtures and
equipment
(47,905)
(35,901)
Investment in non-consolidated REITs
—
74,931
Distributions in excess of earnings from
non-consolidated REITs
—
710
Repayment of related party mortgage loan
receivable
(2,400)
—
Investment in related party mortgage loan
receivable
51,795
795
Proceeds received from liquidating
trust
1,470
—
Net cash provided by investing
activities
2,960
40,535
Cash flows from financing
activities:
Distributions to stockholders
(28,953)
(39,676)
Borrowings under bank note payable
45,000
30,000
Repayments of bank note payable
(70,000)
(91,000)
Deferred financing costs
(82)
(2,162)
Net cash used in financing activities
(54,035)
(102,838)
Net increase in cash, cash equivalents
and restricted cash
8,982
615
Cash, cash equivalents and restricted
cash, beginning of year
11,177
9,819
Cash, cash equivalents and restricted
cash, end of period
$
20,159
$
10,434
Franklin Street Properties Corp.
Earnings Release Supplementary Schedule D Real Estate Portfolio
Summary Information (Unaudited & Approximated)
Commercial portfolio lease expirations
(1)
Total
% of
Year
Square Feet
Portfolio
2019
314,602
3.2%
2020
960,806
9.7%
2021
672,530
6.8%
2022
1,228,668
12.4%
2023
651,756
6.6%
Thereafter (2)
6,080,817
61.3%
9,909,179
100.0%
(1)
Percentages are determined based upon
total square footage.
(2)
Includes 975,128 square feet of vacancies
at our operating properties and 201,388 square feet of vacancies at
our redevelopment properties as of September 30, 2019. 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 September 30, 2019 (a)
# of
% of
Square
% of
State
Properties
Investment
Portfolio
Feet
Portfolio
Colorado
6
$
547,250
33.6%
2,620
26.4%
Texas
9
343,531
21.1%
2,420
24.4%
Georgia
5
319,850
19.7%
1,967
19.9%
Minnesota
3
119,702
7.4%
754
7.6%
Virginia
4
80,437
4.9%
685
6.9%
North Carolina
2
50,947
3.1%
322
3.2%
Missouri
2
45,794
2.8%
351
3.5%
Illinois
2
47,971
3.0%
372
3.8%
Florida
1
42,131
2.6%
213
2.2%
Indiana
1
28,897
1.8%
205
2.1%
Total
35
$
1,626,510
100.0%
9,909
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 Release Supplementary Schedule E Portfolio and Other
Supplementary Information (Unaudited & Approximated)
Recurring Capital Expenditures
Nine Months
(in thousands)
For the Three Months Ended
Ended
31-Mar-19
30-Jun-19
30-Sep-19
30-Sep-19
Tenant improvements
$
8,318
$
10,169
$
7,890
$
26,377
Deferred leasing costs
4,239
3,666
1,286
9,191
Non-investment capex
2,413
4,049
3,968
10,430
$
14,970
$
17,884
$
13,144
$
45,998
Nine Months
For the Three Months Ended
Ended
31-Mar-18
30-Jun-18
30-Sep-18
30-Sep-18
Tenant improvements
$
6,777
$
8,212
$
7,084
$
22,073
Deferred leasing costs
1,021
5,314
4,394
10,729
Non-investment capex
1,858
2,558
2,328
6,744
$
9,656
$
16,084
$
13,806
$
39,546
Square foot & leased
percentages
September 30,
December 31,
2019
2018
Operating Properties (a):
Number of properties
32
32
Square feet
9,503,964
9,486,650
Leased percentage
89.7%
89.0%
Redevelopment Properties:
Number of properties
3
3
Square feet
405,215
404,652
Leased percentage
50.3%
27.2%
Managed Properties - Single Asset REITs
(SARs):
Number of properties
2
3
Square feet
348,545
674,342
Total Operating, Redevelopment and
Managed Properties:
Number of properties
37
38
Square feet
10,257,724
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 Release Supplementary Schedule F Percentage of Leased
Space (Unaudited & Estimated)
Second
Third
% Leased (1)
Quarter
% Leased (1)
Quarter
as of
Average %
as of
Average %
Property Name
Location
Square Feet
30-Jun-19
Leased (2)
30-Sep-19
Leased (2)
1
MEADOW POINT
Chantilly, VA
138,537
100.0%
100.0%
100.0%
100.0%
2
TIMBERLAKE
Chesterfield, MO
234,496
95.7%
97.1%
95.7%
95.7%
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
96.4%
96.4%
96.4%
96.4%
6
PARK TEN PHASE II
Houston, TX
156,746
66.9%
66.4%
88.8%
87.3%
7
GREENWOOD PLAZA
Englewood, CO
196,236
100.0%
100.0%
100.0%
100.0%
8
ADDISON
Addison, TX
289,302
82.4%
82.4%
82.4%
82.4%
9
COLLINS CROSSING
Richardson, TX
300,887
99.4%
99.4%
99.4%
99.4%
10
INNSBROOK
Glen Allen, VA
298,183
57.3%
57.3%
57.2%
57.3%
11
RIVER CROSSING
Indianapolis, IN
205,059
95.0%
95.0%
95.0%
95.0%
12
LIBERTY PLAZA
Addison, TX
216,834
71.5%
69.1%
73.4%
72.1%
13
380 INTERLOCKEN
Broomfield, CO
240,359
97.1%
97.1%
97.1%
97.1%
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
80.6%
80.3%
81.2%
81.1%
17
LOUDOUN TECH
Dulles, VA
136,658
98.9%
98.9%
98.9%
98.9%
18
4807 STONECROFT
Chantilly, VA
111,469
100.0%
100.0%
100.0%
100.0%
19
121 SOUTH EIGHTH ST
Minneapolis, MN
297,209
86.9%
82.9%
90.1%
88.7%
20
EMPEROR BOULEVARD
Durham, NC
259,531
100.0%
100.0%
100.0%
100.0%
21
LEGACY TENNYSON CTR
Plano, TX
207,049
91.6%
91.6%
91.8%
91.8%
22
ONE LEGACY
Plano, TX
214,110
100.0%
100.0%
100.0%
100.0%
23
909 DAVIS
Evanston, IL
195,098
93.3%
91.9%
93.3%
93.3%
24
ONE RAVINIA DRIVE
Atlanta, GA
386,602
85.7%
87.0%
86.8%
86.5%
25
TWO RAVINIA
Atlanta, GA
411,047
69.3%
72.8%
68.2%
68.2%
26
WESTCHASE I & II
Houston, TX
629,025
77.3%
79.2%
77.3%
77.3%
27
1999 BROADWAY
Denver, CO
677,378
78.7%
78.3%
87.1%
85.6%
28
999 PEACHTREE
Atlanta, GA
621,946
90.9%
90.8%
95.8%
94.2%
29
1001 17th STREET
Denver, CO
655,420
98.5%
98.5%
98.5%
98.5%
30
PLAZA SEVEN
Minneapolis, MN
326,757
88.6%
87.8%
88.6%
88.6%
31
PERSHING PLAZA
Atlanta, GA
160,145
97.4%
97.4%
98.9%
97.9%
32
600 17th STREET
Denver, CO
609,112
86.9%
86.7%
89.8%
88.5%
OPERATING TOTAL
9,503,964
88.1%
88.1%
89.7%
89.3%
33
FOREST PARK
Charlotte, NC
62,212
0.0%
0.0%
0.0%
0.0%
34
BLUE LAGOON
Miami, FL
213,182
0.0%
0.0%
73.1%
24.4%
35
801 MARQUETTE AVE
Minneapolis, MN
129,821
37.0%
37.0%
37.0%
37.0%
REDEVELOPMENT TOTAL
405,215
11.9%
11.9%
50.3%
24.7%
OWNED PORTFOLIO TOTAL
9,909,179
(1)
% Leased as of month's end includes all
leases that expire on the last day of the quarter.
(2)
Average quarterly percentage is the
average of the end of the month leased percentage for each of the 3
months during the quarter.
Franklin Street Properties Corp.
Earnings Release Supplementary Schedule G Largest 20 Tenants – FSP
Owned Portfolio (Unaudited & Estimated) The following table
includes the largest 20 tenants in FSP’s owned portfolio based on
total square feet: As of September 30, 2019
% of
Tenant
Sq Ft
Portfolio
1
IQVIA Holdings Inc.
259,531
2.6%
2
US Government
259,141
2.6%
3
CITGO Petroleum Corporation
248,399
2.5%
4
Newfield Exploration Company
234,495
2.4%
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
Lennar Homes, LLC
155,808
1.6%
10
T-Mobile South, LLC dba T-Mobile
151,792
1.5%
11
Citicorp Credit Services, Inc.
146,260
1.5%
12
Petrobras America, Inc.
144,813
1.5%
13
Jones Day
140,342
1.4%
14
Argo Data Resource Corporation
140,246
1.4%
15
Worldventures Holdings, LLC
129,998
1.3%
16
Kaiser Foundation Health Plan
120,979
1.2%
17
VMWare, Inc.
119,558
1.2%
18
Giesecke & Devrient America
112,110
1.1%
19
Northrop Grumman Systems Corp.
111,469
1.1%
20
Randstad General Partner (US)
109,638
1.1%
Total
3,315,129
33.4%
Franklin Street Properties Corp.
Earnings Release
Supplementary Schedule H
Reconciliation and Definitions of
Funds From Operations (“FFO”) and
Adjusted Funds From Operations
(“AFFO”)
A reconciliation of Net income 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 to FFO and
AFFO:
Three Months Ended
Nine Months Ended
September 30,
September 30,
(In thousands, except per share
amounts)
2019
2018
2019
2018
Net income
$
2,399
$
9,608
$
2,827
$
11,698
Equity in loss from non-consolidated
REITs
—
(7,180)
—
(6,793)
FFO from non-consolidated REITs
—
649
—
2,511
Depreciation & amortization
22,448
23,081
67,609
70,499
NAREIT FFO
24,847
26,158
70,436
77,915
Lease Acquisition costs
61
—
351
—
Funds From Operations (FFO)
$
24,908
$
26,158
$
70,787
$
77,915
Funds From Operations (FFO)
$
24,908
$
26,158
$
70,787
$
77,915
Reverse FFO from non-consolidated
REITs
—
(649)
—
(2,511)
Distributions from non-consolidated
REITs
—
—
—
710
Amortization of deferred financing
costs
720
799
2,157
2,223
Straight-line rent
(2,120)
522
(6,949)
821
Tenant improvements
(7,890)
(7,084)
(26,377)
(22,073)
Leasing commissions
(1,286)
(4,394)
(9,191)
(10,729)
Non-investment capex
(3,968)
(2,328)
(10,430)
(6,744)
Adjusted Funds From Operations (AFFO)
$
10,364
$
13,024
$
19,997
$
39,612
Per Share Data
EPS
$
0.02
$
0.09
$
0.03
$
0.11
FFO
$
0.23
$
0.24
$
0.66
$
0.73
AFFO
$
0.10
$
0.12
$
0.19
$
0.37
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 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 Release Supplementary Schedule I Reconciliation and
Definition of Sequential Same Store results to property Net
Operating Income (NOI) and Net Income
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
30-Sep-19
30-Jun-19
(Dec)
Change
Region
East
944
$
3,001
$
3,301
$
(300)
(9.1)
%
MidWest
1,553
5,297
5,174
123
2.4
%
South
4,387
17,456
15,196
2,260
14.9
%
West
2,620
11,134
11,240
(106)
(0.9)
%
Property NOI* from Operating
Properties
9,504
36,888
34,911
1,977
5.7
%
Dispositions and Redevelopment
Properties
405
(21)
(215)
194
0.6
%
NOI*
9,909
$
36,867
$
34,696
$
2,171
6.3
%
Sequential Same Store
$
36,888
$
34,911
$
1,977
5.7
%
Less Nonrecurring
Items in NOI* (a)
3,434
706
2,728
(7.9)
%
Comparative
Sequential Same Store
$
33,454
$
34,205
$
(751)
(2.2)
%
Three Months Ended
Three Months Ended
Reconciliation to Net income
30-Sep-19
30-Jun-19
Net income
$
2,399
$
1,633
Add (deduct):
Management fee income
(634)
(645)
Depreciation and amortization
22,559
22,109
Amortization of above/below market
leases
(112)
(81)
General and administrative
3,886
3,703
Interest expense
9,036
9,371
Interest income
(395)
(1,259)
Non-property specific items, net
128
(135)
NOI*
$
36,867
$
34,696
(1)
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/20191029006087/en/
For Franklin Street Properties Corp. Georgia Touma,
877-686-9496
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