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,
2020.
George J. Carter, Chairman and Chief Executive Officer,
commented as follows:
“Leasing activity during the first quarter of 2020 continued the
strong pace of the previous two years, with new tenant leasing in
2020 at our 32 operating and 3 redevelopment properties finishing
the best first quarter results in FSP history. Prior to the
emergence of the COVID-19 pandemic, we believe that the Company was
positioned well for new tenant absorption, increasing occupancy
levels and higher rental rates during 2020, allowing us to
potentially start realizing the longer term value-add portfolio
proposition that was such an integral part of the strategy of
recasting our portfolio. However, despite our positive first
quarter results, in March 2020 the full weight of the COVID-19
pandemic and consequent U.S. economic shutdown became more
apparent. While leasing activity at our properties continues, we
believe that a significant ‘pause’ button has been pushed relative
to new tenant leasing prospects, making the actual amount of any
new tenant leasing going forward uncertain. As of April 28, 2020,
we had collected approximately 98% of April rents. However, at this
time, we are not able to predict whether and to what extent our
level of rental receipts may change in future months. Consequently,
we are withdrawing our previous income and Funds From Operations
(FFO) guidance and will not be providing additional guidance until
such time as we have a better understanding of the duration of the
COVID-19 pandemic and its impact on our business and the businesses
of our tenants. We believe the bulk of our tenants will be
financially able to weather the COVID-19 pandemic and that the
inherent value of our property portfolio, our own financial
resources and balance sheet flexibility, will see us through this
difficult time, and then allow us to resume the strong new tenant
leasing and absorption that was underway during the first
quarter.”
Financial Highlights
- Net loss was $1.1 million, or $0.01 per basic and diluted
share, for the first quarter ended March 31, 2020.
- FFO was $21.3 million, or $0.20 per basic and diluted share,
for the first quarter, which was at the high end of our previous
guidance range.
- Adjusted Funds From Operations (AFFO) was $0.03 per basic and
diluted share for the first quarter ended March 31, 2020.
- We are withdrawing our previous income and FFO guidance and
will not be providing additional guidance until such time as we
have a better understanding of the duration of the COVID-19
pandemic and its impact on our business and the businesses of our
tenants.
- As of March 31, 2020, we had $570 million available on our
revolving line of credit and had $17.3 million in cash on
hand.
- Our debt is entirely unsecured and we have no debt maturities
until November of 2021.
COVID-19 Pandemic Update
FSP is committed to the health and safety of its employees,
tenants, vendors and visitors and will continue to implement
recommended guidelines for social distancing and safety protocols
at our properties and corporate headquarters.
- We have implemented working from home policies for FSP
employees.
- All of our properties have been open and continue to be
accessible to tenants. We have communicated with tenants that we
are ready to welcome back increasing numbers of their respective
employees, vendors and visitors to each of our buildings.
- As of April 28, 2020, we had collected approximately 98% of
rental receipts due in April 2020. Due to the high level of
uncertainty related to the COVID-19 pandemic, we are unable to
predict the level of rental receipts in future months.
- During the past approximately five weeks, we have received rent
relief requests from some of our tenants. The majority of these
requests for relief have been in the form of potential rent
deferrals for varying lengths of time. We will review each request
for rent relief on a case by case basis. Where prudent, we may
grant deferrals and, in some instances, seek extended lease terms.
We are unable to predict the outcomes of these ongoing
negotiations, the amount of the rent relief packages, if any, and
ultimate recovery of any deferred amounts.
- Colorado, Georgia and Texas are beginning to lift their
respective COVID-19 pandemic restrictions. Denver, Atlanta, Dallas
and Houston are our four largest markets in terms of square
footage.
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 85.4%
leased as of March 31, 2020 compared to approximately 87.6% leased
as of December 31, 2019.
- During the quarter ended March 31, 2020, we leased
approximately 280,000 square feet, of which approximately 144,000
square feet was with new tenants. During the year ended December
31, 2019, we leased approximately 1,417,000 square feet, of which
approximately 534,000 square feet was with new tenants.
- During the quarter ended March 31, 2020, Willis Towers Watson
leased approximately 22,000 square feet at Forest Park in
Charlotte, North Carolina, representing approximately 35% of the
redevelopment asset. In addition, during the quarter ended March
31, 2020, Principal Life leased approximately 20,000 square feet at
One Overton Park in Atlanta, Georgia. Both tenants plan to occupy
their respective spaces in the second half of 2020.
- Lease expirations for the remainder of 2020 are approximately
356,000 square feet, or 3.6% of our portfolio. Those lease
expirations will be offset by approximately 388,000 square feet of
executed leases that are scheduled to commence during the remainder
of 2020.
- The weighted average GAAP base rent per square foot achieved on
leasing activity during the quarter ended March 31, 2020 was
$31.17, or 10.5% higher than average rents in the respective
properties as applicable compared to the year ended December 31,
2019. The average lease term on leases in the first quarter of 2020
shortened to 6.3 years compared to 8.3 years for the full year of
2019. Overall the portfolio weighted average rent per occupied
square foot increased to $30.28 as of March 31, 2020 from $29.88 as
of December 31, 2019.
Dividend Update
On April 3, 2020, the Company announced that its Board of
Directors declared a regular quarterly cash dividend for the three
months ended March 31, 2020 of $0.09 per share of common stock that
will be paid on May 7, 2020 to stockholders of record on April 17,
2020.
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 March 31,
2020. 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.
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 May 1, 2020 at 11:00 a.m.
(ET) to discuss the first quarter 2020 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, value creation/enhancement in
future periods and expectations for growth and leasing activities
in future periods 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, adverse changes in general economic or local
market conditions, including as a result of the COVID-19 pandemic
and other potential infectious disease outbreaks and terrorist
attacks or other acts of violence, which may negatively affect the
markets in which we and our tenants operate, increasing 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, adverse changes in energy
prices, which if sustained, could negatively impact occupancy and
rental rates in the markets in which we own properties, including
energy-influenced markets such as Dallas, Denver and Houston,
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 increases in construction costs, 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, 2019, as the same may be updated from time to
time in subsequent filings with the United States Securities and
Exchange Commission, including without limitation, the “Risk
Factors” set forth in Part II, Item 1A of our Quarterly Report on
Form 10-Q for the quarter ended March 31, 2020. 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 Loss
I
Franklin Street Properties Corp.
Financial Results
Supplementary Schedule A
Condensed Consolidated Statements
of Operations
(Unaudited)
For the
Three Months Ended
March 31,
(in thousands, except per share
amounts)
2020
2019
Revenue:
Rental
$
62,567
$
63,359
Related party revenue:
Management fees and interest income from
loans
403
1,352
Other
13
5
Total revenue
62,983
64,716
Expenses:
Real estate operating expenses
17,298
17,726
Real estate taxes and insurance
11,762
12,102
Depreciation and amortization
22,338
23,245
General and administrative
3,525
3,509
Interest
9,063
9,368
Total expenses
63,986
65,950
Income before taxes on income
(1,003)
(1,234)
Tax expense (benefit) on income
68
(29)
Net loss
$
(1,071)
$
(1,205)
Weighted average number of shares
outstanding, basic and diluted
107,269
107,231
Net loss per share, basic and diluted
$
(0.01)
$
(0.01)
Franklin Street Properties Corp.
Financial Results
Supplementary Schedule B
Condensed Consolidated Balance
Sheets
(Unaudited)
March 31,
December 31,
(in thousands, except share and par value
amounts)
2020
2019
Assets:
Real estate assets:
Land
$
191,578
$
191,578
Buildings and improvements
1,941,952
1,924,664
Fixtures and equipment
11,917
11,665
2,145,447
2,127,907
Less accumulated depreciation
506,251
490,697
Real estate assets, net
1,639,196
1,637,210
Acquired real estate leases, less
accumulated amortization of $61,736 and $60,749, respectively
37,270
40,704
Cash, cash equivalents and restricted
cash
17,283
9,790
Tenant rent receivables
3,609
3,851
Straight-line rent receivable
68,317
66,881
Prepaid expenses and other assets
7,486
7,246
Related party mortgage loan
receivables
21,000
21,000
Other assets: derivative asset
—
3,022
Office computers and furniture, net of
accumulated depreciation of $1,386 and $1,362, respectively
215
183
Deferred leasing commissions, net of
accumulated amortization of $29,926 and $28,114, respectively
53,251
52,767
Total assets
$
1,847,627
$
1,842,654
Liabilities and Stockholders’ Equity:
Liabilities:
Bank note payable
$
30,000
$
—
Term loans payable, less unamortized
financing costs of $3,876 and $4,267, respectively
766,124
765,733
Series A & Series B Senior Notes, less
unamortized financing costs of $945 and $985, respectively
199,055
199,015
Accounts payable and accrued expenses
57,076
66,658
Accrued compensation
1,335
3,400
Tenant security deposits
9,615
9,346
Lease liability
1,803
1,890
Other liabilities: derivative
liabilities
23,035
7,704
Acquired unfavorable real estate leases,
less accumulated amortization of $4,794 and $4,676,
respectively
2,266
2,512
Total liabilities
1,090,309
1,056,258
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, 107,269,201 and 107,269,201 shares
issued and outstanding, respectively
11
11
Additional paid-in capital
1,356,794
1,356,794
Accumulated other comprehensive income
(loss)
(23,035)
(4,682)
Accumulated distributions in excess of
accumulated earnings
(576,452)
(565,727)
Total stockholders’ equity
757,318
786,396
Total liabilities and stockholders’
equity
$
1,847,627
$
1,842,654
Franklin Street Properties Corp.
Financial Results
Supplementary Schedule C
Condensed Consolidated Statements
of Cash Flows
(Unaudited)
For the
Three Months Ended
March 31,
(in thousands)
2020
2019
Cash flows from operating
activities:
Net loss
$
(1,071)
$
(1,205)
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization expense
23,086
23,962
Amortization of above and below market
leases
(73)
(112)
Decrease in allowance for doubtful
accounts and write-off of accounts receivable
(13)
(60)
Changes in operating assets and
liabilities:
Tenant rent receivables
255
(491)
Straight-line rents
(966)
(1,140)
Lease acquisition costs
(470)
(689)
Prepaid expenses and other assets
(644)
1,497
Accounts payable and accrued expenses
(8,215)
(6,101)
Accrued compensation
(2,065)
(1,970)
Tenant security deposits
269
33
Payment of deferred leasing
commissions
(2,892)
(4,242)
Net cash provided by operating
activities
7,201
9,482
Cash flows from investing
activities:
Property improvements, fixtures and
equipment
(20,054)
(15,223)
Repayment of related party mortgage loan
receivable
—
(2,400)
Investment in related party mortgage loan
receivable
—
265
Proceeds received from liquidating
trust
—
263
Net cash used in investing activities
(20,054)
(17,095)
Cash flows from financing
activities:
Distributions to stockholders
(9,654)
(9,651)
Borrowings under bank note payable
35,000
30,000
Repayments of bank note payable
(5,000)
(15,000)
Deferred financing costs
—
(81)
Net cash provided by financing
activities
20,346
5,268
Net increase (decrease) in cash, cash
equivalents and restricted cash
7,493
(2,345)
Cash, cash equivalents and restricted
cash, beginning of year
9,790
11,177
Cash, cash equivalents and restricted
cash, end of period
$
17,283
$
8,832
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
2020
355,633
3.6%
2021
846,202
8.5%
2022
1,193,848
12.0%
2023
661,961
6.7%
2024
863,983
8.7%
Thereafter (2)
5,990,101
60.5%
9,911,728
100.0%
_____________________________________
(1)
Percentages are determined based upon total square footage.
(2)
Includes 1,385,057 square feet of vacancies at our operating
properties and 179,254 square feet of vacancies at our
redevelopment properties as of March 31, 2020. 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, 2020 (a)
# of
% of
Square
% of
State
Properties
Investment
Portfolio
Feet
Portfolio
Colorado
6
$
552,470
33.7%
2,620
26.4%
Texas
9
344,184
21.0%
2,420
24.4%
Georgia
5
321,462
19.6%
1,967
19.8%
Minnesota
3
121,074
7.4%
755
7.6%
Virginia
4
82,765
5.0%
685
6.9%
North Carolina
2
50,341
3.1%
322
3.2%
Missouri
2
44,331
2.7%
351
3.6%
Illinois
2
47,642
2.9%
372
3.8%
Florida
1
46,029
2.8%
213
2.2%
Indiana
1
28,898
1.8%
206
2.1%
Total
35
$
1,639,196
100.0%
9,911
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
(in thousands)
For the Three Months Ended
31-Mar-20
Tenant improvements
$
10,716
Deferred leasing costs
2,730
Non-investment capex
4,527
$
17,973
For the Three Months Ended
Year Ended
31-Mar-19
30-Jun-19
30-Sep-19
31-Dec-19
31-Dec-19
Tenant improvements
$
8,318
$
10,169
$
7,890
$
15,874
$
42,251
Deferred leasing costs
4,239
3,666
1,286
3,164
12,355
Non-investment capex
2,413
4,049
3,968
6,304
16,734
$
14,970
$
17,884
$
13,144
$
25,342
$
71,340
Square foot & leased
percentages
March 31,
December 31,
2020
2019
Operating Properties (a):
Number of properties
32
32
Square feet
9,506,513
9,504,634
Leased percentage
85.4%
87.6%
Redevelopment Properties:
Number of properties
3
3
Square feet
405,215
405,215
Leased percentage
55.8%
50.3%
Managed Properties - Single Asset REITs
(SARs):
Number of properties
2
2
Square feet
348,545
348,545
Total Operating, Redevelopment and
Managed Properties:
Number of properties
37
37
Square feet
10,260,273
10,258,394
(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)
Fourth
First
% Leased (1)
Quarter
% Leased (1)
Quarter
as of
Average %
as of
Average %
Property Name
Location
Square Feet
31-Dec-19
Leased (2)
31-Mar-20
Leased (2)
1
MEADOW POINT
Chantilly, VA
138,537
100.0%
100.0%
91.1%
94.1%
2
TIMBERLAKE
Chesterfield, MO
234,496
95.7%
95.7%
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
79.0%
84.8%
71.7%
71.7%
6
PARK TEN PHASE II
Houston, TX
156,746
84.4%
85.8%
95.0%
95.0%
7
GREENWOOD PLAZA
Englewood, CO
196,236
100.0%
100.0%
100.0%
100.0%
8
ADDISON
Addison, TX
289,302
80.5%
81.1%
79.4%
76.4%
9
COLLINS CROSSING
Richardson, TX
300,887
88.4%
88.4%
79.7%
79.7%
10
INNSBROOK
Glen Allen, VA
298,183
57.2%
57.2%
57.2%
57.2%
11
RIVER CROSSING
Indianapolis, IN
205,729
98.5%
98.0%
98.5%
98.5%
12
LIBERTY PLAZA
Addison, TX
216,827
72.4%
72.4%
73.4%
72.7%
13
380 INTERLOCKEN
Broomfield, CO
240,359
87.2%
90.5%
73.1%
73.8%
14
390 INTERLOCKEN
Broomfield, CO
241,512
98.2%
98.2%
99.4%
99.0%
15
ELDRIDGE GREEN
Houston, TX
248,399
100.0%
100.0%
100.0%
100.0%
16
ONE OVERTON PARK
Atlanta, GA
387,267
85.3%
82.5%
93.3%
88.9%
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%
0.0%
0.0%
19
121 SOUTH EIGHTH ST
Minneapolis, MN
297,209
90.1%
90.1%
93.7%
92.5%
20
EMPEROR BOULEVARD
Durham, NC
259,531
100.0%
100.0%
100.0%
100.0%
21
LEGACY TENNYSON CTR
Plano, TX
207,049
100.0%
97.3%
100.0%
100.0%
22
ONE LEGACY
Plano, TX
214,110
69.4%
69.4%
52.9%
53.2%
23
909 DAVIS
Evanston, IL
195,098
93.3%
93.3%
93.3%
93.3%
24
ONE RAVINIA DRIVE
Atlanta, GA
386,602
86.8%
86.8%
87.9%
86.9%
25
TWO RAVINIA
Atlanta, GA
411,047
71.0%
69.7%
69.8%
70.6%
26
WESTCHASE I & II
Houston, TX
629,025
62.3%
72.4%
55.8%
57.5%
27
1999 BROADWAY
Denver, CO
677,377
90.0%
88.2%
89.7%
89.9%
28
999 PEACHTREE
Atlanta, GA
621,946
94.2%
94.5%
91.8%
91.6%
29
1001 17th STREET
Denver, CO
655,420
98.5%
98.5%
98.5%
98.5%
30
PLAZA SEVEN
Minneapolis, MN
328,403
88.6%
88.6%
89.0%
89.3%
31
PERSHING PLAZA
Atlanta, GA
160,145
98.9%
98.9%
98.9%
98.9%
32
600 17th STREET
Denver, CO
609,353
89.5%
89.6%
92.4%
91.3%
OPERATING TOTAL
9,506,513
87.6%
88.2%
85.4%
85.2%
33
FOREST PARK
Charlotte, NC
62,212
0.0%
0.0%
35.6%
11.9%
34
BLUE LAGOON
Miami, FL
213,182
73.1%
73.1%
73.1%
73.1%
35
801 MARQUETTE AVE
Minneapolis, MN
129,821
37.0%
37.0%
37.0%
37.0%
REDEVELOPMENT TOTAL
405,215
50.3%
50.3%
55.8%
52.1%
OWNED PORTFOLIO TOTAL
9,911,728
________________________________________
(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 three 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 March 31, 2020
% 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
Jones Day
140,342
1.4%
13
Worldventures Holdings, LLC
129,998
1.3%
14
Kaiser Foundation Health Plan
120,979
1.2%
15
Argo Data Resource Corporation
114,200
1.1%
16
Giesecke & Devrient America
112,110
1.1%
17
Randstad General Partner (US)
109,638
1.1%
18
VMWare, Inc.
100,853
1.0%
19
Ping Identity Corp.
94,761
1.0%
20
Common Grounds LLC
76,984
0.8%
Total
3,185,841
32.1%
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
March 31,
(In thousands, except per share
amounts)
2020
2019
Net loss
$
(1,071)
$
(1,205)
Depreciation & amortization
22,265
23,133
NAREIT FFO
21,194
21,928
Lease Acquisition costs
98
182
Funds From Operations (FFO)
$
21,292
$
22,110
Funds From Operations (FFO)
$
21,292
$
22,110
Amortization of deferred financing
costs
748
717
Straight-line rent
(966)
(1,140)
Tenant improvements
(10,716)
(8,318)
Leasing commissions
(2,730)
(4,239)
Non-investment capex
(4,527)
(2,413)
Adjusted Funds From Operations (AFFO)
$
3,101
$
6,717
Per Share Data
EPS
$
(0.01)
$
(0.01)
FFO
$
0.20
$
0.21
AFFO
$
0.03
$
0.06
Weighted average shares (basic and
diluted)
107,269
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, (5) plus the value of
shares issued as compensation and (6) 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
31-Mar-20
31-Dec-19
(Dec)
Change
Region
East
944
$
2,664
$
3,174
$
(510)
(16.1)
%
MidWest
1,555
5,485
5,243
242
4.6
%
South
4,387
13,290
17,589
(4,299)
(24.4)
%
West
2,620
11,463
11,974
(511)
(4.3)
%
Property NOI* from Operating
Properties
9,506
32,902
37,980
(5,078)
(13.4)
%
Dispositions and Redevelopment
Properties
405
(28)
(47)
19
0.1
%
NOI*
9,911
$
32,874
$
37,933
$
(5,059)
(13.3)
%
Sequential Same Store
$
32,902
$
37,980
$
(5,078)
(13.4)
%
Less Nonrecurring
Items in NOI* (a)
26
4,402
(4,376)
11.3
%
Comparative
Sequential Same Store
$
32,876
$
33,578
$
(702)
(2.1)
%
Three Months Ended
Three Months Ended
Reconciliation to Net income
31-Mar-20
31-Dec-19
Net income (loss)
$
(1,071)
$
3,648
Add (deduct):
Management fee income
(478)
(570)
Depreciation and amortization
22,338
22,996
Amortization of above/below market
leases
(73)
(97)
General and administrative
3,525
3,375
Interest expense
9,063
8,982
Interest income
(382)
(390)
Non-property specific items, net
(48)
(11)
NOI*
$
32,874
$
37,933
(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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Georgia Touma (877) 686-9496
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