FSP Franklin Street Properties Corp

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

 

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

 

Date of Report (Date of earliest event reported): April 28, 2015

 

Franklin Street Properties Corp.

(Exact name of registrant as specified in its charter)

 

 

Maryland	001-32470	04-3578653
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

 

 

401 Edgewater Place, Suite 200, Wakefield, Massachusetts	01880
(Address of principal executive offices)	(Zip Code)

 

 

Registrant’s telephone number, including area code: (781) 557-1300

 

(Former name or former address, if changed since last report.)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

☐

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02. Results of Operations and Financial Condition.

 

On April 28, 2015, Franklin Street Properties Corp. (the “Registrant”) announced its financial results for the three months ended March 31, 2015. The full text of the press release issued in connection with the announcement is furnished as Exhibit 99.1 to this Current Report on Form 8-K. The press release references certain supplemental operating and financial data that is now available on the Registrant’s website. A copy of the supplemental operating and financial data is attached hereto as Exhibit 99.2 and is incorporated by reference herein.

 

The information in this Form 8-K (including Exhibits 99.1 and 99.2) shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934 (the "Exchange Act") or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as expressly set forth by specific reference in such a filing.

 

Item 9.01. Financial Statements and Exhibits.

 

(d)     Exhibits

 

See Exhibit Index attached hereto.

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

	FRANKLIN STREET PROPERTIES CORP.
Date:  April 28, 2015	By:  /s/ George J. Carter
		George J. Carter President and Chief Executive Officer

 

EXHIBIT INDEX

 

 

Exhibit No.	Description
99.1	Press Release issued by Franklin Street Properties Corp. on April 28, 2015.
99.2	Supplemental Operating and Financial Data for the three months ended March 31, 2015.

 

 

 

Exhibit 99.1

 

PRESS RELEASE	Franklin Street Properties Corp.
401 Edgewater Place · Suite 200 · Wakefield, Massachusetts 01880 · (781) 557-1300 · www.franklinstreetproperties.com
Contact: John Demeritt (877) 686-9496		For Immediate Release

 

Franklin Street Properties Corp. Announces

First Quarter 2015 Results

 

Wakefield, MA—April 28, 2015—Franklin Street Properties Corp. (the “Company”, “FSP”, “we” or “our”) (NYSE MKT: FSP), a real estate investment trust (REIT), announced today Funds From Operations (FFO) of $25.7 million or $0.26 per share for the first quarter ended March 31, 2015; and net income was $12.5 million or $0.13 per share for the first quarter ended March 31, 2015.

 

The Company evaluates its performance based on FFO, Net Income and EPS and believes each is an important measure. A reconciliation of Net Income to FFO, which is a non-GAAP financial measure, is provided on page 3 of this press release.

 

		Three Months Ended March 31,
(in 000's except per share data)		2015				2014				Increase (Decrease)
Net Income		$	12,533			$	3,573			$	8,960
FFO		$	25,672			$	28,779			$	(3,107	)
Per Share Data:
EPS		$	0.13			$	0.04			$	0.09
FFO		$	0.26			$	0.29			$	(0.03	)
Weighted average shares (diluted)			100,187				100,187				—

 

Comparing results for the first quarter of 2015 to the same period in 2014, FFO decreased $3.1 million or $0.03 per share to $25.7 million or $0.26 per share in 2015. The FFO decrease was primarily from lower property income as a result of asset sales and loan repayments achieved in the last twelve months and from lower occupancy, which were partially offset by lower interest expense for the quarter as we used proceeds to repay debt. Interest expense was also lower as a result of lower spreads on our revolving line of credit that was amended on October 29, 2014. We achieved a $10.5 million gain on the sale of two properties in the first quarter of 2015. Net Income and EPS was $12.5 million or $0.13 per share for the first quarter of 2015 compared to a net income of $3.6 million or $0.04 per share for the first quarter of 2014.

 

George J. Carter, President and CEO, commented as follows:

 

“For the first quarter of 2015, FSP’s profits as represented by FFO totaled approximately $25.7 million or $0.26 per share. Our directly owned real estate portfolio of 36 properties totaling approximately 9.3 million square feet was 90.4% leased as of March 31, 2015. We are maintaining our full-year 2015 FFO guidance range of $1.03 to $1.08 per share.

 

During the first quarter of 2015 we completed the disposition of a property known as Willow Bend located in Plano, Texas for approximately $20.8 million, and a property known as Eden Bluff located in Eden Prairie, Minnesota for approximately $28.0 million. A total gain of $10.5 million was realized as a result of the sale of these properties. Willow Bend is a two-story suburban office property with approximately 117,050 square feet and is a suburban office property that had been owned by FSP or an FSP affiliate for over fifteen years. Eden Bluff is a one-story, flex, single-tenant, suburban office property with approximately 153,028 square feet that was owned by FSP for approximately five and one-half years. In December 2014, we also sold a property known as Centennial located in Colorado Springs, Colorado for approximately $15.5 million. The sale proceeds from these dispositions were not re-invested during the first quarter of 2015.

 

 

However, on April 8, 2015, we completed the acquisition of a property known as Two Ravinia in the greater Atlanta, Georgia market for $78 million, effectively fully re-investing proceeds from the Centennial, Willow Bend, and Eden Bluff dispositions.

 

Two Ravinia is a 17-story class “A” multi-tenant office tower with approximately 442,130 rentable square feet that is located in the Central Perimeter Submarket of Atlanta, Georgia. The newly acquired property is directly adjacent to our existing 386,603 square foot office tower known as One Ravinia, which we have owned since July of 2012. Two Ravinia is currently 80.5% leased, with in place rents that we believe average approximately 25% below today’s current market asking rates. We anticipate planned building capital investments at Two Ravinia (excluding leasing costs) of approximately $4.8 million over the next three to four years.

 

We continue to actively pursue further potential dispositions of other suburban office assets that we believe are no longer core to our long-term strategy of acquiring larger, multi-tenant, urban infill, CBD or town-center office properties. We believe selective acquisitions of this profile will provide shareholders with better risk/reward adjusted returns over an extended slow growth period in the U.S. business cycle. Potential target acquisition opportunities are primarily being pursued in our five core markets of Atlanta, Dallas, Denver, Houston and Minneapolis. Along with our existing property portfolio’s ongoing leasing activity, we believe the results, size, timing and execution of our current capital recycling efforts will meaningfully affect value-creation and results for full year 2015 and beyond.

 

We remain very positive about our prospects and opportunities.”

 

Dividend Update

 

On April 10, 2015, the Company announced that its Board of Directors declared a regular quarterly dividend for the three months ended March 31, 2015 of $0.19 per share of common stock that will be paid on May 14, 2015 to stockholders of record on April 24, 2015.

 

FFO Guidance

 

Our full year FFO guidance for 2015 continues to be maintained in the range of $1.03 to $1.08 per diluted share. This guidance (a) excludes the impact of future acquisitions, dispositions, debt financings or repayments or other capital market transactions; (b) reflects estimates from our ongoing portfolio of properties, other real estate investments and G&A 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.

 

Real Estate Update

 

Supplementary schedules provide property information for the Company’s owned real estate portfolio and for two non-consolidated REITs in which the Company holds preferred stock interests as of March 31, 2015. 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.franklinstreetproperties.com.

 

 

Funds From Operations (FFO)

 

A reconciliation of Net Income to FFO is shown below and a definition of FFO is provided on Supplementary Schedule H. Management believes FFO is used broadly throughout the real estate investment trust (REIT) industry as a measurement of performance. Management also believes that FFO represents the most accurate measure of activity and is the basis for distributions paid to equity holders. The Company has included the NAREIT FFO definition 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 may not be comparable to FFO reported by other REITs or real estate companies that define FFO differently.

 

Reconciliation of Net Income to FFO:		Three Months Ended
		March 31,
(In thousands, except per share amounts)		2015				2014
Net income		$	12,533			$	3,573
Gain on sale of assets, less applicable income tax			(10,462	)			—
GAAP loss from non-consolidated REITs			322				484
FFO from non-consolidated REITs			601				419
Depreciation & amortization			22,678				24,289
NAREIT FFO			25,672				28,765
Acquisition costs of new properties			—				14
Funds From Operations (FFO)		$	25,672			$	28,779
Per Share Data
EPS		$	0.13			$	0.04
FFO		$	0.26			$	0.29
Weighted average shares (basic and diluted)			100,187				100,187

 

Today’s news release, along with other news about Franklin Street Properties Corp., is available on the Internet at www.franklinstreetproperties.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 April 29, 2015 at 10:00 a.m. (ET) to discuss the first quarter 2015 results. To access the call, please dial 1-877-507-4376. Internationally, the call may be accessed by dialing 1-412-317-6014. To listen via live audio webcast, please visit the Webcasts & Presentations section in the Investor Relations section of the Company's website (www.franklinstreetproperties.com) at least ten minutes prior to the start of the call and follow the posted directions. The webcast will also be available via replay from the above location starting one hour after the call is finished.

 

About Franklin Street Properties Corp.

 

Franklin Street Properties Corp., based in Wakefield, Massachusetts, is focused on investing in institutional-quality office properties in the U.S. FSP’s strategy is to invest in select urban infill and central business district (CBD) properties, with primary emphasis on our top five markets of Atlanta, Dallas, Denver, Houston, and Minneapolis. FSP seeks value-oriented investments with an eye towards long-term growth and appreciation, as well as current income. FSP is a Maryland corporation that operates in a manner intended to qualify as a real estate investment trust (REIT) for federal income tax purposes. To learn more about FSP please visit our website at www.franklinstreetproperties.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 based on current judgments and current knowledge of management, which 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, 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, 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, 2014, 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, 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
Definition of Funds From Operations (FFO)	H

Franklin Street Properties Corp. Financial Results

Supplementary Schedule A

Condensed Consolidated Income (Loss) Statements

(Unaudited)

 

 

		For the Three Months Ended March 31,
(in thousands, except per share amounts)		2015				2014
Revenue:
Rental		$	59,013			$	61,597
Related party revenue:
Management fees and interest income from loans			1,473				1,643
Other			21				23
Total revenue			60,507				63,263
Expenses:
Real estate operating expenses			15,356				15,071
Real estate taxes and insurance			10,048				9,251
Depreciation and amortization			22,672				24,300
Selling, general and administrative			3,691				3,272
Interest			6,187				7,176
Total expenses			57,954				59,070
Income before interest income, equity in losses of
non-consolidated REITs and taxes			2,553				4,193
Interest income			1				1
Equity in losses of non-consolidated REITs			(322	)			(484	)
Gain on sale of properties, less applicable income tax			10,462				—
Income before taxes on income			12,694				3,710
Taxes on income			161				137
Net income		$	12,533			$	3,573
Weighted average number of shares outstanding,
basic and diluted			100,187				100,187
Net income per share, basic and diluted		$	0.13			$	0.04

 

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)		2015				2014
Assets:
Real estate assets:
Land		$	174,707			$	183,930
Buildings and improvements			1,581,524				1,604,984
Fixtures and equipment			1,724				1,677
			1,757,955				1,790,591
Less accumulated depreciation			271,058				266,284
Real estate assets, net			1,486,897				1,524,307
Acquired real estate leases, less accumulated amortization
of $105,045 and $101,838, respectively			124,337				138,714
Investment in non-consolidated REITs			78,228				78,611
Cash and cash equivalents			14,945				7,519
Restricted cash			56				742
Tenant rent receivables, less allowance for doubtful accounts
of $330 and $325, respectively			4,587				4,733
Straight-line rent receivable, less allowance for doubtful accounts
of $162 and $162, respectively			45,498				47,021
Prepaid expenses and other assets			13,526				10,292
Related party mortgage loan receivables			93,641				93,641
Other assets: derivative asset			774				3,020
Office computers and furniture, net of accumulated depreciation
of $1,109 and $1,036, respectively			588				609
Deferred leasing commissions, net of accumulated amortization
of $17,429 and $16,944, respectively			26,335				27,181
Total assets		$	1,889,412			$	1,936,390
Liabilities and Stockholders’ Equity:
Liabilities:
Bank note payable		$	240,000			$	268,000
Term loans payable			620,000				620,000
Accounts payable and accrued expenses			36,065				42,561
Accrued compensation			1,241				3,758
Tenant security deposits			4,019				4,248
Other liabilities: derivative liability			9,836				7,268
Acquired unfavorable real estate leases, less accumulated amortization of $9,218 and $8,687, respectively			9,921				10,908
Total liabilities			921,082				956,743
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, 100,187,405 and 100,187,405 shares issued and outstanding, respectively			10				10
Additional paid-in capital			1,273,556				1,273,556
Accumulated other comprehensive loss			(9,062	)			(4,248	)
Accumulated distributions in excess of accumulated earnings			(296,174	)			(289,671	)
Total stockholders’ equity			968,330				979,647
Total liabilities and stockholders’ equity		$	1,889,412			$	1,936,390

 

 

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)		2015				2014
Cash flows from operating activities:
Net income		$	12,533			$	3,573
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense			23,189				24,797
Amortization of above market lease			6				(11	)
Equity in losses of non-consolidated REITs			322				484
Gain on sale of properties, less applicable income tax			(10,462	)			—
Changes in operating assets and liabilities:
Restricted cash			686				(45	)
Tenant rent receivables			146				(933	)
Straight-line rents			(69	)			(1,784	)
Lease acquisition costs			(3	)			(347	)
Prepaid expenses and other assets			283				800
Accounts payable, accrued expenses and other items			(7,706	)			(7,257	)
Accrued compensation			(2,517	)			(1,958	)
Tenant security deposits			(230	)			231
Payment of deferred leasing commissions			(1,116	)			(1,113	)
Net cash provided by operating activities			15,062				16,437
Cash flows from investing activities:
Property acquisitions
Property improvements, fixtures and equipment			(4,298	)			(4,850	)
Distributions in excess of earnings from non-consolidated REITs			27				27
Investment in related party mortgage loan receivable			—				(2,170	)
Proceeds received on sales of real estate assets			47,671				—
Changes in deposits on real estate assets			(4,000	)			—
Net cash provided by (used in) investing activities			39,400				(6,993	)
Cash flows from financing activities:
Distributions to stockholders			(19,036	)			(19,036	)
Borrowings under bank note payable			20,000				10,000
Repayments of bank note payable			(48,000	)			—
Net cash used in financing activities			(47,036	)			(9,036	)
Net increase (decrease) in cash and cash equivalents			7,426				408
Cash and cash equivalents, beginning of year			7,519				19,623
Cash and cash equivalents, end of year		$	14,945			$	20,031

 

 

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
2015		349,621	3.8%
2016		1,005,893	10.8%
2017		1,039,874	11.2%
2018		934,962	10.0%
2019		1,566,112	16.8%
Thereafter (2)		4,413,669	47.4%
		9,310,131	100.0%

 

(1)

Percentages are determined based upon square footage of expiring commercial leases.

(2)

Includes 897,321 square feet of current vacancies.

 

 

 

(dollars & square feet in 000's)	As of March 31, 2015
	# of		% of		Square	% of
State	Properties	Investment	Portfolio		Feet	Portfolio
Texas	9	$    373,025	25.1%		2,422	26.0%
Colorado	5	433,900	29.2%		2,010	21.6%
Georgia	3	221,523	14.9%		1,396	15.0%
Virginia	4	96,087	6.5%		685	7.4%
Minnesota	1	29,865	2.0%		475	5.1%
Missouri	3	61,609	4.1%		477	5.1%
North Carolina	3	63,212	4.2%		431	4.6%
Illinois	2	45,833	3.1%		372	4.0%
Maryland	1	52,465	3.5%		325	3.5%
Florida	1	42,729	2.9%		213	2.3%
Indiana	1	32,573	2.2%		205	2.2%
California	2	20,313	1.4%		182	2.0%
Washington	1	13,763	0.9%		117	1.2%
	36	$  1,486,897	100.0%		9,310	100.0%

 

 

 

Franklin Street Properties Corp. Earnings Release

Supplementary Schedule E

Portfolio and Other Supplementary Information

(Unaudited & Approximated)

 

Recurring Capital Expenditures

Owned Portfolio

 

		Three Months
(in thousands)		Ended
		31-Mar-15
Tenant improvements		$	2,936
Deferred leasing costs			830
Non-investment capex			643
		$	4,409

 

		For the Three Months Ended:																Year ended
		31-Mar-14				30-Jun-14				30-Sep-14				31-Dec-14				31-Dec-14
Tenant improvements		$	1,132			$	1,837			$	2,612			$	4,244			$	9,825
Deferred leasing costs			1,080				2,786				577				1,405				5,848
Non-investment capex			364				1,621				700				851				3,536
		$	2,576			$	6,244			$	3,889			$	6,500			$	19,209

 

Square foot & leased percentages		March 31,		December 31,
		2015		2014
Owned portfolio of commercial real estate
	Number of properties	36		38
	Square feet	9,310,131		9,580,057
	Leased percentage	90.4%		92.8%
Investments in non-consolidated REITs
	Number of properties	2		2
	Square feet	1,396,071		1,395,780
	Leased percentage	70.1%		71.3%
Single Asset REITs (SARs) managed
	Number of properties	7		8
	Square feet	1,488,003		1,897,801
	Leased percentage	73.4%		84.7%
Total owned, investments & managed properties
	Number of properties	45		48
	Square feet	12,194,205		12,873,638
	Leased percentage	86.0%		89.3%

 

 

The following table shows property information for our investments in non-consolidated REITs:

 

			Square	% Leased	% Interest
Single Asset REIT name	City	State	Feet	31-Mar-15	Held
FSP 303 East Wacker Drive Corp.	Chicago	IL	861,000	59.6%	43.7%
FSP Grand Boulevard Corp.	Kansas City	MO	535,071	86.9%	27.0%
			1,396,071	70.1%

 

 

Franklin Street Properties Corp. Earnings Release
Supplementary Schedule F
Percentage of Leased Space
(Unaudited & Estimated)

 

					Fourth		First
				% Leased (1)	Quarter	% Leased (1)	Quarter
			Square	as of	Average %	as of	Average %
	Property Name	Location	Feet	31-Dec-14	Dec-14	31-Mar-15	Leased (2)
1	PARK SENECA	Charlotte, NC	109,699	92.1%	91.0%	91.9%	90.4%
2	HILLVIEW CENTER	Milpitas, CA	36,288	100.0%	100.0%	100.0%	100.0%
3	FOREST PARK	Charlotte, NC	62,212	100.0%	100.0%	100.0%	100.0%
4	MEADOW POINT	Chantilly, VA	138,537	92.6%	92.6%	92.6%	92.6%
5	TIMBERLAKE	Chesterfield, MO	232,766	98.3%	98.3%	43.8%	43.8%
6	FEDERAL WAY	Federal Way, WA	117,010	57.1%	57.3%	57.1%	57.1%
7	NORTHWEST POINT	Elk Grove Village, IL	176,848	100.0%	100.0%	100.0%	100.0%
8	TIMBERLAKE EAST	Chesterfield, MO	116,197	91.0%	91.0%	43.1%	35.8%
9	PARK TEN	Houston, TX	157,460	63.1%	68.8%	63.1%	63.1%
10	MONTAGUE	San Jose, CA	145,951	81.1%	81.1%	81.1%	81.1%
11	ADDISON	Addison, TX	294,053	89.6%	93.4%	86.2%	88.5%
12	COLLINS CROSSING	Richardson, TX	300,472	99.5%	99.5%	99.5%	99.5%
13	GREENWOOD PLAZA	Englewood, CO	196,236	100.0%	100.0%	100.0%	100.0%
14	RIVER CROSSING	Indianapolis, IN	205,059	100.0%	99.7%	100.0%	100.0%
15	LIBERTY PLAZA	Addison, TX	218,934	90.6%	93.2%	90.7%	90.5%
16	INNSBROOK	Glen Allen, VA	298,456	99.9%	99.9%	99.9%	99.9%
17	380 INTERLOCKEN	Broomfield, CO	240,185	95.8%	95.8%	95.8%	95.8%
18	BLUE LAGOON	Miami, FLA	212,619	100.0%	100.0%	100.0%	100.0%
19	ELDRIDGE GREEN	Houston, TX	248,399	100.0%	100.0%	100.0%	100.0%
20	WILLOW BEND	Plano, TX	-	100.0%	100.0%	Sold February 23, 2015
21	ONE OVERTON PARK	Atlanta, GA	387,267	86.3%	90.7%	84.4%	84.4%
22	390 INTERLOCKEN	Broomfield, CO	241,516	72.3%	72.0%	72.3%	72.3%
23	EAST BALTIMORE	Baltimore, MD	325,445	81.9%	81.9%	81.3%	81.3%
24	PARK TEN PHASE II	Houston, TX	156,746	100.0%	100.0%	100.0%	100.0%
25	LAKESIDE CROSSING I	Maryland Heights, MO	127,778	100.0%	100.0%	100.0%	100.0%
26	LOUDOUN TECH	Dulles, VA	136,658	92.0%	92.0%	92.0%	92.0%
27	4807 STONECROFT	Chantilly, VA	111,469	100.0%	100.0%	100.0%	100.0%
28	EDEN BLUFF	Eden Prairie, MN	-	100.0%	100.0%	Sold March 31, 2015
29	121 SOUTH EIGHTH ST	Minneapolis, MN	475,012	91.2%	90.9%	90.2%	90.6%
30	EMPEROR BOULEVARD	Durham, NC	259,531	100.0%	100.0%	100.0%	100.0%
31	LEGACY TENNYSON CTR	Plano, TX	202,600	100.0%	100.0%	100.0%	100.0%
32	ONE LEGACY	Plano, TX	214,110	100.0%	100.0%	100.0%	100.0%
33	909 DAVIS	Evanston, IL	195,245	97.9%	97.9%	97.9%	97.9%
34	ONE RAVINIA DRIVE	Atlanta, GA	386,603	95.2%	94.7%	95.2%	95.2%
35	WESTCHASE I & II	Houston, TX	629,025	97.7%	97.7%	97.1%	97.1%
36	1999 BROADWAY	Denver, CO	676,379	88.9%	88.4%	87.7%	88.0%
37	999 PEACHTREE	Atlanta, GA	621,946	97.7%	97.9%	98.2%	97.8%
38	1001 17th STREET	Denver, CO	655,420	84.8%	82.3%	86.1%	85.7%
	TOTAL WEIGHTED AVERAGE (3)		9,310,131	92.8%	93.0%	90.4%	90.4%

 

(1) % Leased as of month's end includes all leases that expire on the last day of the quarter.

(2) Average quarterly percentage is the average of the end of the month leased percentage for each of the 3 months during the quarter.

(3) Totals for Q4 include Willow Bend and Eden Bluff, which were sold in Q1 2015.

 

 

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 leased square feet:

 

 

	As of March 31, 2015
			% of
	Tenant	Sq Ft	Portfolio
1	TCF National Bank	263,111	2.8%
2	Quintiles Transnational Corp	259,531	2.8%
3	CITGO Petroleum Corporation	248,399	2.7%
4	Sutherland Asbill Brennan LLP (a)	243,839	2.6%
5	Newfield Exploration Company	234,495	2.5%
6	US Government (b)	221,270	2.4%
7	Burger King Corporation	212,619	2.3%
8	Denbury Onshore, LLC	202,600	2.1%
9	SunTrust Bank (c)	182,888	2.0%
10	Citicorp Credit Services, Inc	176,848	1.9%
11	T-Mobile South, LLC dba T-Mobile	151,792	1.6%
12	Houghton Mifflin Harcourt Publishing Company	150,050	1.6%
13	Petrobras America, Inc.	144,813	1.6%
14	Murphy Exploration & Production Company	144,677	1.6%
15	Argo Data Resource Corporation	140,246	1.5%
16	Monsanto Company	127,778	1.4%
17	Federal National Mortgage Association	123,144	1.3%
18	Vail Corp d/b/a Vail Resorts (d)	122,232	1.3%
19	Kaiser Foundation Health Plan	120,979	1.3%
20	Giesecke & Devrient America	112,110	1.2%
	Total	3,583,421	38.5%

 

(a)

Includes 222,422 expiring in 2020 and 21,417 expiring April 30, 2015.

(b)

Includes 180,444 and 27,398 square feet which expire in 2018 & 2017, respectively. The remaining 13,428 square feet expire between 2015 - 2020.

(c)

Includes 55,388 square feet which expires October 31, 2016. The remaining 127,500 square feet expires September 30, 2021.

(d)

Includes 38,293 square feet which expires March 31, 2019. The remaining 83,939 square feet expires March 31, 2023.

 

 

Franklin Street Properties Corp. Earnings Release

Supplementary Schedule H

Definition of 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 (computed in accordance with GAAP), excluding gains (or losses) from sales of property and acquisition costs of newly acquired properties 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 (determined in accordance with GAAP), nor as an indicator of the Company’s financial performance, nor as an alternative to cash flows from operating activities (determined in accordance with GAAP), nor as a measure of the Company’s liquidity, nor is it necessarily indicative of sufficient cash flow to fund all of the Company’s needs.

 

Other real estate companies and NAREIT, may define this term in a different manner. We have included the NAREIT FFO definition in our 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 and cash flows from operating, investing and financing activities in the consolidated financial statements.

 

 

Exhibit 99.2

 

 

Supplemental Operating and Financial Data First Quarter 2015

 

 

 

Franklin Street Properties Corp. ● 401 Edgewater Place ● Wakefield, MA 01880 ● (781) 557-1300

 

www.franklinstreetproperties.com

 

 

	Page			Page
Company Overview	3		Tenant Analysis and Leasing Activity
			Tenants by Industry	18
Key Financial Data			20 Largest Tenants with Annualized Rent and Remaining Term	19
Financial Highlights	4		Leasing Activity	20
Income Statements	5		Lease Expirations by Square Feet	21
Balance Sheets	6		Lease Expirations with Annualized Rent per Square Foot	22
Cash Flow Statements	7		Capital Expenditures	23
Property Net Operating Income (NOI)	8
			Transaction Activity	24
Reconciliation
FFO & AFFO	9		Loan Portfolio of Secured Real Estate	25
EBITDA	10
Property NOI	11		Net Asset Value Components	26
Debt Summary	12		Appendix: Definitions of Non-GAAP Measures
			FFO	27
Capital Analysis	13		EBITDA and NOI	28
			AFFO	29
Owned and Managed Portfolio Overview	14-17

 

All financial information contained in this supplemental information package is unaudited. In addition, certain statements contained in this supplemental information package may be deemed to be forward-looking statements within the meaning of the federal securities laws. Although FSP believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, it can give no assurance that its expectations will be achieved. Factors that could cause actual results to differ materially from FSP’s current expectations include general economic conditions, uncertainties relating to fiscal policy, changes in government regulations, regulatory uncertainty, geopolitical events, local real estate conditions, the performance of properties that FSP has acquired or may acquire, the timely lease-up of properties and other risks, detailed from time to time in FSP’s SEC reports. FSP assumes no obligation to update or supplement forward-looking statements that become untrue because of subsequent events.

 

Overview

Franklin Street Properties Corp. (“FSP”, “we”, “our” or the “Company”) (NYSE MKT: FSP) is investing in institutional-quality office properties in the U.S. FSP’s strategy is to invest in select urban infill and central business district (CBD) properties, with primary emphasis on our top five markets of Atlanta, Dallas, Denver, Houston, and Minneapolis. FSP seeks value-oriented investments with an eye towards long-term growth and appreciation, as well as current income. FSP is a Maryland corporation that operates in a manner intended to qualify as a real estate investment trust (REIT) for federal income tax purposes. FSP’s real estate operations include property acquisitions and dispositions, short-term financing, leasing, development and asset management.

 

Our Business

As of March 31, 2015, the Company owned and operated a portfolio of real estate consisting of 36 properties, managed 9 Sponsored REITs and held five promissory notes secured by mortgages on real estate owned by Sponsored REITs. From time-to-time, the Company may acquire real estate, make additional secured loans or acquire one of its Sponsored REITs. The Company may also pursue, on a selective basis, the sale of its properties in order to take advantage of the value creation and demand for its properties, or for geographic or property specific reasons.

 

Management Team
George J. Carter			Scott H. Carter
President, Chief Executive Officer			Executive Vice President, General
Chairman of the Board			Counsel and Secretary
John G. Demeritt			Jeffrey B. Carter
Executive Vice President and			Executive Vice President and
Chief Financial Officer and Treasuer			Chief Investment Officer
Janet Notopoulos			Eriel Anchondo
Executive Vice President and Director			Senior Vice President of Operations

 

Inquiries

Inquires should be directed to: John Demeritt, CFO

877-686-9496 or InvestorRelations@franklinstreetproperties.com

 

Snapshot (as of March 31, 2015)
Corporate Headquarters	Wakefield, MA
Fiscal Year-End	31-Dec
Total Properties	36
Total Square Feet	9.3 million
Trading Symbol	FSP
Exchange	NYSE MKT
Common Shares Outstanding	100,187,405
Quarterly Dividend	$0.19
Dividend Yield	5.9%
Total Market Capitalization	$2.1 Billion
Insider Holdings	10.2%

 

 

(in thousands except per share amounts, SF & number of properties)
		31-Mar-15				31-Dec-14				30-Sep-14				30-Jun-14				31-Mar-14
Income Items:
Rental revenue		$	59,013			$	61,022			$	59,728			$	60,994			$	61,597
Total revenue			60,507				62,489				61,190				62,741				63,263
Adjusted EBITDA*			31,097				33,182				33,973				34,359				35,175
Equity in losses of non-consolidated REITs			(322	)			(269	)			(455	)			(552	)			(484	)
Net income			12,533				4,295				1,567				3,713				3,573
FFO*			25,672				27,525				27,904				28,254				28,779
Per Share Data:
EPS		$	0.13			$	0.04			$	0.02			$	0.04			$	0.04
FFO*		$	0.26			$	0.27			$	0.28			$	0.28			$	0.29
Weighted Average Shares (diluted)			100,187				100,187				100,187				100,187				100,187
Closing share price		$	12.82			$	12.27			$	11.22			$	12.58			$	12.60
Dividend		$	0.19			$	0.19			$	0.19			$	0.19			$	0.19
Payout Ratio:			74	%			69	%			68	%			67	%			66	%
Balance Sheet Items:
Real estate, net		$	1,486,897			$	1,524,307			$	1,542,012			$	1,549,963			$	1,558,136
Other assets, net			402,515				412,083				425,305				438,634				467,539
Total assets, net			1,889,412				1,936,390				1,967,317				1,988,597				2,025,675
Total liabilities, net			921,082				956,743				968,948				975,853				993,273
Shareholders' equity			968,330				979,647				998,369				1,012,744				1,032,402
Market Capitalization and Debt:
Total Market Capitalization (a)		$	2,144,403			$	2,117,299			$	2,029,103			$	2,176,858			$	2,198,861
Total debt outstanding			860,000				888,000				905,000				916,500				936,500
Debt to Total Market Capitalization			40.1	%			41.9	%			44.6	%			42.1	%			42.6	%
Debt to Adjusted EBITDA			6.9				6.7				6.7				6.7				6.7
Owned Portfolio Leasing Statistics:
Owned portfolio assets			36				38				39				39				39
Portfolio total SF			9,310,131				9,580,057				9,690,361				9,686,215				9,686,055
Portfolio % leased			90.4	%			92.8	%			93.3	%			94.1	%			94.5	%

(a)

Total Market Capitalization is the closing share price multiplied by the number of shares outstanding plus total debt outstanding on that date.

*

See pages 9 & 10 for reconciliations of Net Income to FFO and Adjusted EBITDA, respectively, and the Appendix for Definitions of these Non-GAAP Measures beginning on page 27.

 

 

		For the Three																				For the
		Months Ended				For the Three Months Ended																Year Ended
		31-Mar-15				31-Mar-14				30-Jun-14				30-Sep-14				31-Dec-14				31-Dec-14
Revenue:
Rental		$	59,013			$	61,597			$	60,994			$	59,728			$	61,022			$	243,341
Related party revenue:
Management fees and interest income from loans			1,473				1,643				1,671				1,462				1,465				6,241
Other			21				23				76				—				2				101
Total revenue			60,507				63,263				62,741				61,190				62,489				249,683
Expenses:
Real estate operating expenses			15,356				15,071				14,995				15,632				16,334				62,032
Real estate taxes and insurance			10,048				9,251				9,763				8,555				9,288				36,857
Depreciation and amortization			22,672				24,300				23,563				24,878				23,174				95,915
Selling, general and administrative			3,691				3,272				3,148				3,071				3,492				12,983
Interest			6,187				7,176				6,891				6,883				6,483				27,433
Total expenses			57,954				59,070				58,360				59,019				58,771				235,220
Income before interest income, equity in losses of non-consolidated REITs and taxes			2,553				4,193				4,381				2,171				3,718				14,463
Interest income			1				1				1				—				1				3
Equity in losses of non-consolidated REITs			(322	)			(484	)			(552	)			(455	)			(269	)			(1,760	)
Gain on sale of properties, less applicable income tax			10,462				—				—				—				940				940
Income before taxes on income			12,694				3,710				3,830				1,716				4,390				13,646
Income tax expense			161				137				117				149				95				498
Net income		$	12,533			$	3,573			$	3,713			$	1,567			$	4,295			$	13,148
Weighted average number of shares outstanding, basic and diluted			100,187				100,187				100,187				100,187				100,187				100,187
Net income per share, basic and diluted		$	0.13			$	0.04			$	0.04			$	0.02			$	0.04			$	0.13

 

 

		March 31,				March 31,				June 30,				September 30,				December 31,
		2015				2014				2014				2014				2014
Assets:
Real estate assets:
Land		$	174,707			$	185,479			$	185,479			$	185,479			$	183,930
Buildings and improvements			1,581,524				1,605,808				1,609,747				1,613,699				1,604,984
Fixtures and equipment			1,724				1,296				1,395				1,633				1,677
			1,757,955				1,792,583				1,796,621				1,800,811				1,790,591
Less accumulated depreciation			271,058				234,447				246,658				258,799				266,284
Real estate assets, net			1,486,897				1,558,136				1,549,963				1,542,012				1,524,307
Acquired real estate leases, net			124,337				172,262				161,519				149,019				138,714
Investment in non-consolidated REITs			78,228				79,983				79,405				78,907				78,611
Cash and cash equivalents			14,945				20,031				18,455				15,930				7,519
Restricted cash			56				688				728				707				742
Tenant rent receivables, net			4,587				6,035				2,867				2,865				4,733
Straight-line rent receivable, net			45,498				44,392				46,021				46,737				47,021
Prepaid expenses and other assets			14,114				9,954				9,716				9,768				10,901
Related party mortgage loan receivable			93,641				101,916				88,436				88,436				93,641
Other assets: derivative asset			774				4,801				2,626				4,582				3,020
Deferred leasing commissions, net			26,335				27,477				28,861				28,354				27,181
Total assets		$	1,889,412			$	2,025,675			$	1,988,597			$	1,967,317			$	1,936,390
Liabilities and Stockholders’ Equity:
Liabilities:
Bank note payable		$	240,000			$	316,500			$	296,500			$	285,000			$	268,000
Term loan payable			620,000				620,000				620,000				620,000				620,000
Accounts payable and accrued expenses			36,065				34,390				34,590				40,228				42,561
Accrued compensation			1,241				1,027				2,052				2,863				3,758
Tenant security deposits			4,019				4,258				4,259				4,331				4,248
Other liabilities: derivative termination value			9,836				3,825				5,985				4,847				7,268
Acquired unfavorable real estate leases, net			9,921				13,273				12,467				11,679				10,908
Total liabilities			921,082				993,273				975,853				968,948				956,743
Commitments and contingencies
Stockholders’ Equity:
Preferred stock			—				—				—				—				—
Common stock			10				10				10				10				10
Additional paid-in capital			1,273,556				1,273,556				1,273,556				1,273,556				1,273,556
Accumulated other comprehensive income (loss)			(9,062	)			976				(3,359	)			(265	)			(4,248	)
Accumulated distributions in excess of accumulated earnings			(296,174	)			(242,140	)			(257,463	)			(274,932	)			(289,671	)
Total stockholders’ equity			968,330				1,032,402				1,012,744				998,369				979,647
Total liabilities and stockholders’ equity		$	1,889,412			$	2,025,675			$	1,988,597			$	1,967,317			$	1,936,390

 

		Three Months ended March 31,								Twelve Months ended December 31
		2015				2014				2014				2013
Cash flows from operating activities:
Net income		$	12,533			$	3,573			$	13,148			$	19,827
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense			23,189				24,797				97,916				81,267
Amortization of above market lease			6				(11	)			635				(365	)
Gain on sale of properties, less applicable income tax			(10,462	)			—				(940	)			(2,158	)
Equity in earnings (losses) from non-consolidated REITs			322				484				1,760				1,358
Increase in allowance for doubtful accounts			—				—				275				(1,250	)
Changes in operating assets and liabilities:
Restricted cash			686				(45	)			(99	)			(68	)
Tenant rent receivables			146				(933	)			94				(2,103	)
Straight-line rents			(69	)			(1,784	)			(4,737	)			(5,782	)
Lease acquisition costs			(3	)			(347	)			(440	)			(1,146	)
Prepaid expenses and other assets			283				800				700				(1,547	)
Accounts payable and accrued expenses			(7,706	)			(7,257	)			206				11,137
Accrued compensation			(2,517	)			(1,958	)			773				445
Tenant security deposits			(230	)			231				222				1,538
Payment of deferred leasing commissions			(1,116	)			(1,113	)			(6,347	)			(9,125	)
Net cash provided by operating activities			15,062				16,437				103,166				92,028
Cash flows from investing activities:
Property acquisitions											—				(454,447	)
Property improvements, fixtures and equipment			(4,298	)			(4,850	)			(18,370	)			(19,120	)
Office computers and furniture											(191	)			(355	)
Acquired real estate leases											—				(100,143	)
Investment in non-consolidated REITs			—				—				—				4,858
Distributions in excess of earnings from non-consolidated REITs			27				27				107				108
Investment in related party mortgage loan receivable			—				(2,170	)			(11,170	)			(8,200	)
Repayment of related party mortgage loan receivable											17,275				2,350
Changes in deposits on real estate assets			(4,000	)			—				—				—
Proceeds received on sales of real estate assets			47,671				—				14,192				12,301
Net cash provided by (used in) investing activities			39,400				(6,993	)			1,843				(562,648	)
Cash flows from financing activities:
Distributions to stockholders			(19,036	)			(19,036	)			(76,142	)			(69,588	)
Proceeds (costs) from equity offering, net			—				—				—				230,682
Borrowings under bank note payable			20,000				—				15,000				160,000
Repayments of bank note payable			(48,000	)			10,000				(53,500	)			(70,250	)
Borrowing (repayment) of term loan payable, net			—				—				—				220,000
Deferred Financing Costs			—				—				(2,471	)			(1,868	)
Net cash provided by (used in) financing activities			(47,036	)			(9,036	)			(117,113	)			468,976
Net decreases in cash and cash equivalents			7,426				408				(12,104	)			(1,644	)
Cash and cash equivalents, beginning of period			7,519				19,623				19,623				21,267
Cash and cash equivalents, end of period		$	14,945			$	20,031			$	7,519			$	19,623

 

 

		Net Operating Income (NOI)*
(in thousands)
		Rentable
		Square Feet				Three Months Ended								Inc				%
Region		or RSF				31-Mar-15				31-Mar-14				(Dec)				Change
East			1,442			$	4,832			$	4,726			$	106				2.2	%
MidWest			1,529				3,469				4,586				(1,117	)			-24.4	%
South			4,030				15,781				16,796				(1,015	)			-6.0	%
West			2,309				8,216				9,388				(1,172	)			-12.5	%
Same Store			9,310				32,298				35,496				(3,198	)			-9.0	%
Acquisitions			—				—				—				—				0.0	%
Property NOI from the continuing portfolio			9,310				32,298				35,496				(3,198	)			-9.0	%
Dispositions and asset held for sale							726				1,077				(351	)			-0.7	%
Property NOI						$	33,024			$	36,573			$	(3,549	)			-9.7	%
Same Store						$	32,298			$	35,496			$	(3,198	)			-9.0	%
Nonrecurring
Items in NOI (a)							75				707				(632	)			1.6	%
Comparative
Same Store						$	32,223			$	34,789			$	(2,566	)			-7.4	%

 

(a)

Nonrecurring Items in NOI include proceeds from bankruptcies, lease termination fees or other significant nonrecurring income or expenses, which may affect comparability.

*

See page 11 for a reconciliation of Net Income to Property NOI and the Appendix for Definitions of Non-GAAP Measures beginning on page 27. Property NOI Excludes NOI from investments in and interest income from secured loans to non-consolidated REITs.

 

 

		For the Three																				For the
		Months Ended				For the Three Months Ended																Year Ended
		31-Mar-15				31-Mar-14				30-Jun-14				30-Sep-14				31-Dec-14				31-Dec-14
Net income		$	12,533			$	3,573			$	3,713			$	1,567			$	4,295			$	13,148
Gain (loss) on sale, less applicable income tax			(10,462	)			—												(940	)			(940	)
GAAP income from non-consolidated REITs			322				484				552				455				269				1,760
FFO from non-consolidated REITs			601				419				351				508				652				1,930
Depreciation & amortization			22,678				24,289				23,638				25,374				23,249				96,550
NAREIT FFO*			25,672				28,765				28,254				27,904				27,525				112,448
Acquisition costs			—				14				—				—				—				14
Funds From Operations (FFO)*		$	25,672			$	28,779			$	28,254			$	27,904			$	27,525			$	112,462
Adjusted Funds From Operations (AFFO)*
Funds From Operations (FFO)*			25,672				28,779				28,254				27,904				27,525				112,462
Reverse FFO from non-consolidated REITs			(601	)			(419	)			(351	)			(508	)			(652	)			(1,930	)
Distributions from non-consolidated REITs			27				27				27				27				26				107
Amortization of deferred financing costs			517				499				499				498				506				2,002
Straight-line rent			(69	)			(1,783	)			(1,541	)			(714	)			(698	)			(4,736	)
Tenant improvements			(2,936	)			(1,132	)			(1,837	)			(2,612	)			(4,244	)			(9,825	)
Leasing commissions			(830	)			(1,080	)			(2,786	)			(577	)			(1,405	)			(5,848	)
Non-investment capex			(643	)			(364	)			(1,621	)			(700	)			(851	)			(3,536	)
Adjusted Funds From Operations (AFFO)*		$	21,137			$	24,527			$	20,644			$	23,318			$	20,207			$	88,696
Per Share Data:
EPS		$	0.13			$	0.04			$	0.04			$	0.02			$	0.04			$	0.13
FFO*			0.26				0.29				0.28				0.28				0.27				1.12
AFFO*			0.21				0.24				0.21				0.23				0.20				0.89
Weighted Average Shares (basic and diluted)			100,187				100,187				100,187				100,187				100,187				100,187

 

* See the Appendix for Definitions of these Non-GAAP Measures beginning on page 27.

 

 

		Three Months
		Ended				For the Three Months Ended																Year Ended
		31-Mar-15				31-Mar-14				30-Jun-14				30-Sep-14				31-Dec-14				31-Dec-14
Net income		$	12,533			$	3,573			$	3,713			$	1,567			$	4,295			$	13,148
Interest expense			6,187				7,176				6,891				6,883				6,483				27,433
Depreciation and amortization			22,678				24,289				23,638				25,374				23,249				96,550
Income taxes			161				137				117				149				95				498
EBITDA			41,559				35,175				34,359				33,973				34,122				137,629
Excluding (gain) loss on sale, less applicable income tax			(10,462	)			—				—				—				(940	)			(940	)
Adjusted EBITDA		$	31,097			$	35,175			$	34,359			$	33,973			$	33,182			$	136,689
Interest expense		$	6,187			$	7,176			$	6,891			$	6,883			$	6,483			$	27,433
Scheduled principal payments			—				—				—				—				—				—
Interest and scheduled principal payments		$	6,187			$	7,176			$	6,891			$	6,883			$	6,483			$	27,433
Interest coverage ratio			5.03				4.90				4.99				4.94				5.12				4.98
Debt service coverage ratio			5.03				4.90				4.99				4.94				5.12				4.98
Debt		$	860,000			$	936,500			$	916,500			$	905,000			$	888,000
Adjusted EBITDA			31,097				35,175				34,359				33,973				33,182
Annualized			124,388				140,700				137,436				135,892				132,728
Debt-to-EBITDA			6.9				6.7				6.7				6.7				6.7

 

* See the Appendix for Definitions of these Non-GAAP Measures beginning on page 27. Amounts in the EBITDA reconciliation do not reflect our proportionate share of interest expense, depreciation, amortization , income taxes, gains or losses on sales and debt from our investments in non-consolidated REITs , which are accounted for under the equity method.

 

 

Reconciliation to Net income		Three Months
		Ended
		31-Mar-15				31-Mar-14
Net Income		$	12,533			$	3,573
Add (deduct):
Gain on sale of properties, less applicable income tax			(10,462	)			—
Management fee income			(643	)			(646	)
Depreciation and amortization			22,672				24,300
Amortization of above/below market leases			6				(11	)
Selling, general and administrative			3,691				3,272
Interest expense			6,187				7,176
Interest income			(1,262	)			(1,410	)
Equity in earnings of nonconsolidated REITs			322				484
Non-property specific items, net			(20	)			(165	)
Property NOI from the continuing portfolio		$	33,024			$	36,573
Dispositions and asset held for sale			—				—
Property NOI		$	33,024			$	36,573

 

* See the Appendix for Definition of Non-GAAP Measures beginning on page 27.

 

 

(a)

(dollars in thousands)

Maximum

Amount

Interest

Interest

Maturity

Amount

Drawn at

Rate

Rate at

Facility

Date

of Loan

31-Mar-15

Components

31-Mar-15

Fee

BAML Revolver

29-Oct-18

$

500,000

$

240,000

L+1.25%

1.42%

0.25%

BAML Term Loan

27-Sep-17

400,000

400,000

0.75% + 1.45%

2.20%

BMO Term Loan

26-Aug-20

220,000

220,000

2.32% + 1.65%

3.97%

$

1,120,000

$

860,000

2.44%

(a) Interest rate excludes amortization of deferred financing costs and facility fees, see notes below

 

On October 29, 2014, we amended and restated our bank facility we call the BAML Credit Facility, which has a total of $900 million available and is comprised of a revolver that we can borrow up to $500 million on, which we call the BAML Revolver and a term loan for $400 million that we call the BAML Term Loan. On August 26, 2013, we entered into a term loan we call the BMO Term Loan and borrowed $220 million. Additional information about these loans are in the footnotes to our financial statements. Pricing is based on our credit rating for the BAML Revolver, BAML Term Loan and the BMO Term Loan. Our credit rating as of March 31, 2015 was Baa3 from Moody’s.

•

The BAML Revolver is priced based on our current credit rating at a spread of 1.25%, which was an interest rate of 1.42% as of March 31, 2015. The BAML Revolver is also subject to a facility fee based on our credit rating, which was 25 bps or approximately $1.25 million per year at March 31, 2015.

•

The BAML Term Loan has LIBOR fixed at 0.75% for five years. At our current credit rating the spread for the BAML Term Loan is 1.45%, so our interest rate is 2.20%.

•

The BMO Term Loan has fixed LIBOR at 2.32% for seven years. At our current credit rating the spread over LIBOR is 1.65%, so our interest rate is 3.97%.

•

We incurred financing costs to close the BAML Revolver, BAML Term Loan and the credit facilities that preceded them. We also incurred financing costs to close the BMO Term Loan. These costs are deferred and amortized into interest expense during the terms of the loans. The annual run rate for amortization to interest expense from deferred financing costs is approximately $2.1 million.

•

The BAML Revolver can be extended for 1 year at the Company’s option upon payment of fees and includes an accordion feature that allows for up to $250 million of additional borrowing capacity. The BMO Term Loan includes an accordion feature that allows for up to $50 million of additional borrowing capacity. The accordion features are subject to receipt of lender commitments and satisfaction of certain customary conditions.

 

 

		31-Mar-15				31-Mar-14				30-Jun-14				30-Sep-14				31-Dec-14
Market Data:
Shares Outstanding			100,187				100,187				100,187				100,187				100,187
Closing market price per share		$	12.82			$	12.60			$	12.58			$	11.22			$	12.27
Market capitalization		$	1,284,403			$	1,262,361			$	1,260,358			$	1,124,103			$	1,229,299
Total Debt			860,000				936,500				916,500				905,000				888,000
Total Market Capitalization		$	2,144,403			$	2,198,861			$	2,176,858			$	2,029,103			$	2,117,299
Dividend Data:
Total dividends paid		$	19,036			$	19,036			$	19,035			$	19,036			$	19,036
Common dividend per share		$	0.19			$	0.19			$	0.19			$	0.19			$	0.19
Quarterly dividend as a % of FFO*			73.1%				65.5%				67.9%				67.9%				70.4%
Liquidity:
Cash and cash equivalents		$	14,946			$	20,031			$	18,455			$	15,930			$	7,519
Revolving credit facilities:
Gross potential available under the BAML Credit Facility			900,000				900,000				900,000				900,000				900,000
Less:
Outstanding balance			(640,000	)			(716,500	)			(696,500	)			(685,000	)			(668,000	)
Total Liquidity		$	274,946			$	203,531			$	221,955			$	230,930			$	239,519

 

*See page 9 for a reconciliation of Net Income to FFO and the Appendix for Definitions of Non-GAAP Measures beginning on page 27.

 

 

 

 

 

				Percent	Wtd Ave (a)	GAAP (b)
MSA / Property Name	City	State	Square Feet	Leased	Occupied	Rent
East Region
Baltimore
East Baltimore	Baltimore	MD	325,445	81.3%	81.3%	$        23.06
Washington, D.C.
Meadow Point	Chantilly	VA	138,537	92.6%	92.6%	$        28.43
Stonecroft	Chantilly	VA	111,469	100.0%	100.0%	$        38.33
Loudoun Tech Center	Dulles	VA	136,658	92.0%	92.0%	$        19.54
Richmond
Innsbrook	Glen Allen	VA	298,456	99.9%	99.9%	$        18.77
Charlotte
Park Seneca	Charlotte	NC	109,699	91.9%	88.7%	$        14.57
Forest Park	Charlotte	NC	62,212	100.0%	100.0%	$        14.08
Raleigh-Durham
Emperor Boulevard	Durham	NC	259,531	100.0%	100.0%	$        35.86
East Region Total			1,442,007	93.7%	93.4%	$        24.99
Midwest Region
Chicago
Northwest Point	Elk Grove Village	IL	176,848	100.0%	100.0%	$        24.23
909 Davis Street	Evanston	IL	195,245	97.9%	97.9%	$        36.17
Indianapolis
River Crossing	Indianapolis	IN	205,059	100.0%	99.7%	$        21.10
St. Louis
Timberlake	Chesterfield	MO	232,766	43.8%	43.8%	$        23.24
Timberlake East	Chesterfield	MO	116,197	43.1%	10.8%	$        24.88
Lakeside Crossing	Maryland Heights	MO	127,778	100.0%	100.0%	$        25.47
Minneapolis
121 South 8th Street	Minneapolis	MN	475,012	90.2%	90.3%	$        15.03
Midwest Region Total			1,528,905	83.8%	81.3%	$        22.43

 

(a) Weighted Occupied Percentage for the three months ended March 31, 2015

(b) Weighted Average GAAP Rent per Occupied Square Foot

 

 

				Percent	Wtd Ave (a)	GAAP (b)
MSA / Property Name	City	State	Square Feet	Leased	Occupied	Rent
South Region
Dallas-Fort Worth
Legacy Tennyson Center	Plano	TX	202,600	100.0%	100.0%	$        17.59
One Legacy Circle	Plano	TX	214,110	100.0%	100.0%	$        33.46
Addison Circle	Addison	TX	294,053	86.2%	85.0%	$        24.04
Collins Crossing	Richardson	TX	300,472	99.5%	99.5%	$        24.20
Liberty Plaza	Addison	TX	218,934	90.7%	90.0%	$        20.88
Houston
Park Ten	Houston	TX	157,460	63.1%	63.1%	$        30.89
Eldridge Green	Houston	TX	248,399	100.0%	100.0%	$        31.08
Park Ten Phase II	Houston	TX	156,746	100.0%	100.0%	$        31.52
Westchase I & II	Houston	TX	629,025	97.1%	96.7%	$        33.44
Miami-Ft. Lauderdale-West Palm Beach
Blue Lagoon Drive	Miami	FL	212,619	100.0%	100.0%	$        23.44
Atlanta
One Overton Place	Atlanta	GA	387,267	84.4%	77.4%	$        24.89
One Ravinia	Atlanta	GA	386,603	95.2%	95.2%	$        22.88
999 Peachtree	Houston	TX	621,946	98.2%	96.1%	$        28.89
South Region Total			4,030,234	94.3%	93.1%	$        27.25
West Region
Seattle
Federal Way	Federal Way	WA	117,010	57.1%	57.1%	$        18.76
San Francisco-San Jose-Oakland
Hillview Center	Milpitas	CA	36,288	100.0%	100.0%	$        16.08
Montague Business Center	San Jose	CA	145,951	81.1%	81.1%	$        16.39
Denver
380 Interlocken	Broomfield	CO	240,185	95.8%	95.8%	$        29.79
1999 Broadway	Denver	CO	676,379	87.7%	87.1%	$        32.57
Greenwood Plaza	Englewood	CO	196,236	100.0%	100.0%	$        24.27
390 Interlocken	Broomfield	CO	241,516	72.3%	71.2%	$        29.50
1001 17th Street	Denver	CO	655,420	86.1%	81.1%	$        35.84
West Region Total			2,308,985	85.7%	84.0%	$        30.25
Total Owned			9,310,131	90.4%	89.0%	$        26.86

 

(a) Weighted Occupied Percentage for the three months ended March 31, 2015

(b) Weighted Average GAAP Rent per Occupied Square Foot

 

 

MSA / Property Name	City	State	Square Feet
Southeast Region
Columbia
1441 Main Street	Columbia	SC	264,857
Atlanta
Satellite Place	Duluth	GA	134,785
Southeast Region Total			399,642
Southwest Region
Houston
Energy Tower I	Houston	TX	325,797
Denver
385 Interlocken	Broomfield	CO	296,868
Southwest Region Total			622,665
Midwest Region
Chicago
East Wacker (a)	Chicago	IL	861,000
Indianapolis
Monument Circle	Indianapolis	IN	213,760
St. Louis
Lakeside Crossing II	Maryland Heights	MO	116,000
Kansas City
Grand Boulevard (b)	Kansas City	MO	535,071
Cincinnati
Centre Pointe V	West Chester	OH	135,936
Midwest Region Total			1,861,767
Total Managed			2,884,074
Total Owned & Managed			12,194,205

 

(a) FSP has a Preferred Share Interest of 43.7% in the entity that owns this property.

(b) FSP has a Preferred Share Interest of 27.0% in the entity that owns this property.

 

 

 

 

 

					% of		% of
			Remaining	Aggregate	Aggregate	Annualized	Aggregate
	Tenant	Number of	Lease Term	Leased	Leased	Rent	Leased
	Name	Leases	in Months	Square Feet	Square Feet	(in 000's)	Annualized Rent
1	TCF National Bank	2	9	263,111	2.8%	$           2,997,573	1.4%
2	Quintiles Transnational Corp	1	48	259,531	2.8%	9,067,770	4.1%
3	CITGO Petroleum Corporation	1	83	248,399	2.7%	7,904,056	3.6%
4	Sutherland Asbill Brennan LLP (a)	1	61	243,839	2.6%	7,210,826	3.3%
5	Newfield Exploration Company	1	83	234,495	2.5%	8,413,433	3.8%
6	US Government (b)	5	5, 15, 38, 52, 66	221,270	2.4%	7,147,549	3.3%
7	Burger King Corporation	1	42	212,619	2.3%	5,134,749	2.3%
8	Denbury Onshore, LLC	2	52	202,600	2.2%	3,510,042	1.6%
9	SunTrust Bank (c)	2	19, 78	182,888	2.0%	3,694,751	1.7%
10	Citicorp Credit Services, Inc	1	21	176,848	1.9%	4,612,196	2.1%
11	T-Mobile South, LLC dba T-Mobile	1	47	151,792	1.6%	3,620,103	1.6%
12	Houghton Mifflin Harcourt Publishing Company	1	24	150,050	1.6%	6,142,199	2.8%
13	Petrobras America, Inc.	1	56	144,813	1.6%	5,337,807	2.4%
14	Murphy Exploration & Production Company	1	25	144,677	1.5%	4,520,645	2.1%
15	Argo Data Resource Corporation	1	101	140,246	1.5%	3,718,923	1.7%
16	Monsanto Company	1	58	127,778	1.4%	3,019,394	1.4%
17	Federal National Mortgage Association	1	18	123,144	1.3%	2,695,622	1.2%
18	Vail Corp d/b/a Vail Resorts (d)	1	48, 96	122,232	1.3%	3,471,917	1.6%
19	Kaiser Foundation Health Plan	1	110	120,979	1.3%	2,942,751	1.3%
20	Giesecke & Devrient America	1	116	112,110	1.2%	1,892,417	0.9%
			Total	3,583,421	38.5%	$       97,054,721	44.2%

 

(a)

Includes 222,422 expiring in 2020 and 21,417 expiring April 30, 2015.

(b)

Includes 180,444 and 27,398 square feet which expire in 2018 & 2017, respectively. The remaining 13,428 square feet expire between 2015 - 2020.

(c)

Includes 55,388 square feet which expires October 31, 2016. The remaining 127,500 square feet expires September 30, 2021.

(d)

Includes 38,293 square feet which expires March 31, 2019. The remaining 83,939 square feet expires March 31, 2023.

 

 

						Year		Year
		Three Months Ended				Ended		Ended
Leasing Activity		31-Mar-15		31-Mar-14		31-Dec-14		31-Dec-13
(in Square Feet - SF)
New leasing		73,000		15,000		149,000		267,000
Renewals		135,000		165,000		635,000		645,000
		208,000		180,000		784,000		912,000
Other information per SF
(Activity on a year-to-date basis)
GAAP Rents on leasing		$         24.59		$        23.95		$         26.89		$        23.33
Weighted average lease term		4.0 Years		6.75 Years		6.25 Years		7.2 Years
Increase over average GAAP rents in prior year		10.5%		11.9%		11.8%		8.0%
Average free rent		2 Months		3 Months		3 Months		3 Months
Tenant Improvements		$         10.71		$        13.61		$         16.40		$        18.25
Leasing Costs		$           4.31		$          8.30		$           7.66		$         8.48

 

 

 

 

				Rentable					Annualized		Percentage
	Number of			Square					Rent		of Total
Year of	Leases			Footage			Annualized		Per Square		Annualized
Lease	Expiring			Subject to			Rent Under		Foot Under		Rent Under
Expiration	Within the			Expiring			Expiring		Expiring		Expiring		Cumulative
December 31,	Year			Leases			Leases (a)		Leases		Leases		Total
2015	90	(b)		349,621			$        9,521,008		$       27.23		4.33%		4.33%
2016	77			1,005,893			21,753,543		21.63		9.90%		14.23%
2017	81			1,039,874			30,383,530		29.22		13.83%		28.06%
2018	64			934,962			27,191,586		29.08		12.38%		40.44%
2019	62			1,566,112			42,318,668		27.02		19.26%		59.70%
2020	42			825,545			21,102,844		25.56		9.60%		69.30%
2021	18			758,994			18,278,842		24.08		8.32%		77.62%
2022	19			924,619			26,550,474		28.72		12.08%		89.70%
2023 and thereafter	31			1,007,190	(c)		22,624,317		22.46		10.30%		100.00%
	484			8,412,810			219,724,814		$       26.12		100.00%
Vacancies as of 3/31/15				897,321
Total Portfolio Square Footage				9,310,131

 

(a)

Annualized rent represents the monthly rent, including tenant reimbursements, for each lease in effect at March 31, 2015 mulitplied by 12. Tenant reimbursements generally include payment of real estate taxes, operating expenses and common area maintenance and utility charges.

 

(b)

Includes 28 leases that are month-to-month.

 

(c)

Includes 53,055 square feet that are non-revenue producing building amenities.

 

 

Capital Expenditures

Owned Portfolio

(in thousands)

 

		31-Mar-15
Tenant improvements		$	2,936
Deferred leasing costs			830
Non-investment capex			643
Recurring capital expenditures			4,409
1st generation leasing			1,934
Investment capex			230
Total capital expenditures		$	6,573

 

(in thousands)		For the Three Months Ended																Year ended
		31-Mar-14				30-Jun-14				30-Sep-14				31-Dec-14				31-Dec-14
Tenant improvements		$	1,132			$	1,837			$	2,612			$	4,244			$	9,825
Deferred leasing costs			1,080				2,786				577				1,405				5,848
Non-investment capex			364				1,621				700				851				3,536
Recurring capital expenditures			2,576				6,244				3,889				6,500				19,209
1st generation leasing			33				9				394				580				1,016
Investment capex			755				580				244				516				2,095
Total capital expenditures		$	3,364			$	6,833			$	4,527			$	7,596			$	22,320

 

 

Recent Acquisitions:							Purchase Price
	City	State	Square Feet		Date Acquired		(in thousands)
2015
Two Ravinia	Atlanta	GA	442,130		4/8/15		$              78,000
2013
1999 Broadway	Denver	CO	673,793		5/22/13		$            183,000
999 Peachtree	Atlanta	GA	621,946		7/1/13		157,900
1001 17th Street	Denver	CO	655,420		8/28/13		217,000
2012
One Ravinia	Atlanta	GA	386,603		7/31/12		$              52,750
Westchase	Houston	TX	629,025		11/1/12		154,750
Recent Dispositions:
							Gross Sales		Gain
	City	State	Square Feet		Date Sold		Proceeds		on Sale
2015
Willow Bend	Plano	TX	117,050		2/23/15		$              20,750		$              1,462
Eden Bluff	Eden Prairie	MN	153,028		3/31/15		28,000		9,000
2014
Centennial	Colorado Springs	CO	110,405		12/3/14		$              15,500		$                 940
2013
East Renner Road	Richardson	TX	122,300		10/29/13		$              12,475		$              2,169

 

 

(dollars in thousands)			Maximum	Amount				Interest
		Maturity	Amount	Drawn at		Interest	Draw	Rate at
Sponsored REIT	Location	Date	of Loan	31-Mar-15		Rate (1)	Fee (2)	31-Mar-15
Secured revolving lines of credit
FSP Satellite Place Corp.	Duluth, GA	31-Mar-17	$         5,500	$         5,500		L+4.4%	0.5%	4.57%
FSP 1441 Main Street Corp.	Columbia, SC	31-Mar-16	10,800	9,000		L+4.4%	0.5%	4.57%
FSP Energy Tower I Corp.	Houston, TX	3-Jul-15	20,000	8,600		L+5.0%	0.5%	5.17%
Secured construction loan
FSP 385 Interlocken
Development Corp.	Broomfield, CO	30-Apr-16	42,000	37,541		L+4.4%	n/a	4.57%
Mortgage loan secured by property
FSP Energy Tower I Corp.	Houston, TX	3-Jul-15	33,000	33,000		6.41%	n/a	6.41%
			$     111,300	$       93,641

 

(1) The interest rate is 30-day LIBOR rate plus the additional rate indicated, otherwise a fixed rate.

(2) The draw fee is a percentage of each new advance, and is paid at the time of each new draw.

 

 

 

 

 

 

Definition of 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 (computed in accordance with GAAP), excluding gains (or losses) from sales of property and acquisition costs of newly acquired properties 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 (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 definition in our 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 and cash flows from operating, investing and financing activities in the consolidated financial statements.

 

 

Definition of Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA) and Adjusted EBITDA

EBITDA is defined as net income plus interest expense, income tax expense and depreciation and amortization expense. Adjusted EBITDA is defined as EBITDA excluding gains and losses on sales of properties or shares of equity investments or provisions for losses on assets held for sale. EBITDA and Adjusted EBITDA are not intended to represent cash flow for the period, are not presented as an alternative to operating income as an indicator of operating performance, should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP and are not indicative of operating income or cash provided by operating activities as determined under GAAP. EBITDA and Adjusted EBITDA are presented solely as a supplemental disclosure with respect to liquidity because the Company believes it provides useful information regarding the Company's ability to service or incur debt. Because all companies do not calculate EBITDA or Adjusted EBITDA the same way, this presentation may not be comparable to similarly titled measures of other companies. The Company believes that net income is the financial measure calculated and presented in accordance with GAAP that is most directly comparable to EBITDA and Adjusted EBITDA.

 

Definition of Property Net Operating Income (Property 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 (the most directly comparable GAAP financial measure) plus selling, 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, 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 both periods, which we call Same Store. The Comparative Same Store results include properties held for the periods presented and exclude 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 as an indication of our performance or to cash flows as a measure of the Company's liquidity or its ability to make distributions.

 

 

Definition of Adjusted Funds From Operations (AFFO)

The Company defines AFFO as the sum of (1) FFO; (2) excluding our proportionate share of FFO and including distributions received, from non-consolidated REITs; (3) excluding the effect of straight-line rent; (4) plus deferred financing costs, (5) less recurring capital expenditures that are generally for (a) 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 (determined in accordance with GAAP), 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 and cash flows from operating, investing and financing activities in the consolidated financial statements.

 

 

 

Investor Relations Contact   (877) 686-9496 InvestorRelations@franklinstreetproperties.com

 

 

 

Franklin Street Properties Corp. ● 401 Edgewater Place ● Wakefield, MA 01880 ● (781) 557-1300

 

www.franklinstreetproperties.com