FSP Franklin Street Properties Corp

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 $26.0 million or $0.26 per share for the first quarter ended March 31, 2016. Net income was $2.6 million or $0.03 per share for the first quarter ended March 31, 2016.

The Company evaluates its performance based on FFO, Adjusted Funds From Operations (AFFO), Net Income and Earnings Per Share (EPS) and believes each is an important measure. A reconciliation of Net Income to FFO and AFFO, which are non-GAAP financial measures, is provided on page 3 of this press release.

            (in 000's except per share data) Three Months Ended March 31, Increase 2016 2015 (Decrease)   Net Income $ 2,579 $ 12,533 $ (9,954 )   FFO $ 26,037 $ 25,672 $ 365   Per Share Data: EPS $ 0.03 $ 0.13 $ (0.10 ) FFO $ 0.26 $ 0.26 $ — AFFO $ 0.21 $ 0.21 $ —   Weighted average shares (diluted) 100,187 100,187 —    

Comparing results for the first quarter of 2016 to the same period in 2015, FFO increased $0.4 million to $26.0 million and was $0.26 per share for the first quarter of 2016 and the first quarter of 2015. The FFO increase was primarily from higher property income as a result of leasing and the acquisition of a property on April 8, 2015, which was partially offset by the impact of asset sales and loan repayments that occurred in the last twelve months. Net Income and EPS were $2.6 million and $0.03 per share for the first quarter of 2016, respectively, compared to Net Income of $12.5 million and EPS of $0.13 for the first quarter of 2015. Included in Net Income for the first quarter of 2015, were gains on sales of properties of $10.5 million or $0.10 per share. We did not sell any properties in the first quarter of 2016.

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

“For the first quarter of 2016, FSP’s funds from operations, or FFO, totaled approximately $26.0 million or $0.26 per share. These results are within our guidance range for the first quarter of 2016. Dividend distributions paid/declared for first quarter 2016 totaled approximately $19.0 million or $0.19 per share. Our initial FFO guidance for full year 2016 is being maintained and is estimated to be in the range of $1.01 to $1.07 per diluted share, while for the second quarter of 2016, we estimate FFO to be in the range of $0.24 to $0.26 per diluted share.

Our directly owned real estate portfolio of 35 properties totaling approximately 9.3 million square feet was approximately 90.2% leased as of March 31, 2016. We continued active leasing in the first quarter, much of it renewals ahead of future lease expirations. We anticipate continued significant leasing activity within the portfolio during 2016.

Subsequent to the end of the first quarter, on April 5, 2016, we sold our Maryland Heights, Missouri property, known as Lakeside Crossing I for $20.2 million. FSP will record a gain on sale for this property disposition of approximately $4.1 million in the second quarter of 2016. Property acquisition efforts are currently very active and are focused on CBD and urban infill office buildings located within our five core markets. We anticipate making one or more property acquisitions during 2016. Regarding our redevelopment efforts at 801 Marquette Avenue in downtown Minneapolis, Minnesota, after extensive costing analysis with our potential development partners and outside professionals, we have decided to redevelop the existing building ourselves, rather than raze it and build a new, mixed use tower with outside development partners. As previously announced, Ryan Companies US, Inc. will be the development manager and design/builder, Perkins+Will will lead the architectural design work and CBRE Group, Inc. will be the exclusive leasing agent. We are fully engaged with our outside professionals on this exciting redevelopment and will continue to provide updates as they become available.

As we continue 2016, our property portfolio is operating smoothly with existing and known upcoming vacancies actively being marketed to multiple potential tenants. We look forward with anticipation to 2016 and beyond.”

Dividend Update

On April 8, 2016, the Company announced that its Board of Directors declared a regular quarterly dividend for the three months ended March 31, 2016 of $0.19 per share of common stock that will be paid on May 12, 2016 to stockholders of record on April 22, 2016.

FFO Guidance

We are maintaining our full year FFO guidance for 2016 to be in the range of $1.01 to $1.07 per diluted share and, for the second quarter of 2016, we estimate FFO to be in the range of $0.24 to $0.26 per diluted share. This guidance (a) excludes the impact of future acquisitions, developments, dispositions, debt financings or repayments or other capital market transactions; (b) reflects estimates from our ongoing portfolio of properties, other real estate investments and 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, 2016. 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) 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 H. Management believes FFO and AFFO are used broadly throughout the real estate investment trust (REIT) industry as measurements of performance. Management also believes that FFO and AFFO represent the most accurate measures of activity and are 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 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) 2016 2015   Net income $ 2,579 $ 12,533 Gain on sale of assets, less applicable income tax — (10,462 ) GAAP loss from non-consolidated REITs 286 322 FFO from non-consolidated REITs 645 601 Depreciation & amortization   22,527     22,678   NAREIT FFO 26,037 25,672 Acquisition costs of new properties   —     —   Funds From Operations (FFO) $ 26,037   $ 25,672     Funds From Operations (FFO) $ 26,037 $ 25,672 Reverse FFO from non-consolidated REITs (645 ) (601 ) Distributions from non-consolidated REITs 27 27 Amortization of deferred financing costs 517 517 Straight-line rent (1,275 ) (69 ) Tenant improvements (1,929 ) (2,936 ) Leasing commissions (1,613 ) (830 ) Non-investment capex   (438 )   (643 ) Adjusted Funds From Operations (AFFO) $ 20,681   $ 21,137     Per Share Data EPS $ 0.03 $ 0.13 FFO $ 0.26 $ 0.26 AFFO $ 0.21 $ 0.21   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 27, 2016 at 10:00 a.m. (ET) to discuss the first quarter 2016 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, 2015, 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 ReleaseSupplementary InformationTable of Contents

          Franklin Street Properties Corp. Financial Results A-C Real Estate Portfolio Summary Information D Portfolio and Other Supplementary Information E Percentage of Leased Space F Largest 20 Tenants – FSP Owned Portfolio G Definition of Funds From Operations (FFO) H    

Franklin Street Properties Corp. Financial ResultsSupplementary Schedule ACondensed Consolidated Income (Loss) Statements(Unaudited)

        For the

Three Months Ended

      March 31, (in thousands, except per share amounts)     2016     2015   Revenue: Rental $ 58,360 $ 59,013 Related party revenue: Management fees and interest income from loans 1,433 1,473 Other       20         21   Total revenue       59,813         60,507     Expenses: Real estate operating expenses 15,292 15,356 Real estate taxes and insurance 9,150 10,048 Depreciation and amortization 22,445 22,672 Selling, general and administrative 3,530 3,691 Interest       6,433         6,187   Total expenses       56,850         57,954     Income before interest income, equity in losses of non-consolidated REITs and taxes 2,963 2,553 Interest income — 1 Equity in losses of non-consolidated REITs (286 ) (322 ) Gain on sale of properties, less applicable income tax       —         10,462     Income before taxes on income 2,677 12,694 Taxes on income       98         161   Net income     $ 2,579       $ 12,533     Weighted average number of shares outstanding, basic and diluted       100,187         100,187     Net income per share, basic and diluted     $ 0.03       $ 0.13      

Franklin Street Properties Corp. Financial ResultsSupplementary Schedule BCondensed Consolidated Balance Sheets(Unaudited)

        March 31, December 31, (in thousands, except share and par value amounts)     2016     2015 Assets: Real estate assets: Land $ 168,120 $ 170,021 Buildings and improvements 1,625,819 1,637,066 Fixtures and equipment       2,649         2,528   1,796,588 1,809,615 Less accumulated depreciation       309,307         299,991   Real estate assets, net 1,487,281 1,509,624 Acquired real estate leases, less accumulated amortization of $117,134 and $112,844, respectively 99,102 108,046 Investment in non-consolidated REITs 76,707 77,019 Asset held for sale 15,921 — Cash and cash equivalents 14,316 18,163 Restricted cash 10 23 Tenant rent receivables, less allowance for doubtful accounts of $130 and $130, respectively 3,691 2,898 Straight-line rent receivable, less allowance for doubtful accounts of $50 and $50, respectively 49,696 48,502 Prepaid expenses and other assets 5,943 5,484 Related party mortgage loan receivables 79,575 118,641 Other assets: derivative asset — 1,132 Office computers and furniture, net of accumulated depreciation of $1,372 and $1,333, respectively 438 484 Deferred leasing commissions, net of accumulated amortization of $21,035 and $20,002, respectively       28,705         28,999   Total assets     $ 1,861,385       $ 1,919,015     Liabilities and Stockholders’ Equity: Liabilities: Bank note payable $ 265,000 $ 290,000 Term loans payable, less unamortized financing costs of $2,120 and $2,353, respectively 617,880 617,647 Accounts payable and accrued expenses 37,791 49,489 Accrued compensation 1,274 3,726 Tenant security deposits 4,433 4,829 Other liabilities: derivative liability 13,226 8,243 Acquired unfavorable real estate leases, less accumulated amortization of $9,822 and $9,368, respectively       8,697         9,425   Total liabilities       948,301         983,359     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 (13,226 ) (7,111 ) Accumulated distributions in excess of accumulated earnings       (347,256 )       (330,799 ) Total stockholders’ equity       913,084         935,656   Total liabilities and stockholders’ equity     $ 1,861,385       $ 1,919,015      

Franklin Street Properties Corp. Financial ResultsSupplementary Schedule CCondensed Consolidated Statements of Cash Flows

(Unaudited)

        For the Three Months Ended March 31, (in thousands)     2016     2015 Cash flows from operating activities: Net income $ 2,579 $ 12,533 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization expense 22,962 23,189 Amortization of above market lease 81 6 Equity in losses of non-consolidated REITs 286 322 Gain on sale of properties, less applicable income tax — (10,462 ) Changes in operating assets and liabilities: Restricted cash 13 686 Tenant rent receivables (793 ) 146 Straight-line rents (1,275 ) (69 ) Lease acquisition costs (199 ) (3 ) Prepaid expenses and other assets (791 ) 283 Accounts payable, accrued expenses and other items (10,374 ) (7,706 ) Accrued compensation (2,452 ) (2,517 ) Tenant security deposits (396 ) (230 ) Payment of deferred leasing commissions       (1,825 )       (1,116 ) Net cash provided by operating activities       7,816         15,062   Cash flows from investing activities: Property improvements, fixtures and equipment (6,699 ) (4,298 ) Office computers and furniture (21 ) — Distributions in excess of earnings from non-consolidated REITs 27 27 Repayment of related party mortgage loan receivable 39,066 — Proceeds received on sales of real estate assets — 47,671 Changes in deposits on real estate assets       —         (4,000 ) Net cash provided by investing activities       32,373         39,400   Cash flows from financing activities: Distributions to stockholders (19,036 ) (19,036 ) Borrowings under bank note payable 15,000 20,000 Repayments of bank note payable       (40,000 )       (48,000 ) Net cash used in financing activities       (44,036 )       (47,036 ) Net increase (decrease) in cash and cash equivalents (3,847 ) 7,426 Cash and cash equivalents, beginning of year       18,163         7,519   Cash and cash equivalents, end of period     $ 14,316       $ 14,945      

Franklin Street Properties Corp. Earnings ReleaseSupplementary Schedule DReal Estate Portfolio Summary Information(Unaudited & Approximated)

 

 

        Commercial portfolio lease expirations (1) Total % of

Year

Square Feet

Portfolio 2016 587,494 6.3% 2017 1,012,296 10.9% 2018 1,113,118 11.9% 2019 1,314,261 14.1% 2020 851,253 9.1% Thereafter (2) 4,446,827     47.7% 9,325,249     100.0%  

(1) Percentages are determined based upon total square footage.

(2) Includes 917,040 square feet of current vacancies.

                    (dollars & square feet in 000's) As of March 31, 2016 # of % of Square % of State Properties Investment Portfolio Feet Portfolio   Texas 9 $ 363,725 24.2% 2,418 25.9% Colorado 5 428,338 28.5% 2,010 21.6% Georgia 4 286,124 19.1% 1,838 19.7% Virginia 4 92,516 6.2% 685 7.3% Minnesota (a) 1 26,544 1.8% 306 3.3% Missouri (b) 3 61,734 4.1% 478 5.1% North Carolina 2 54,805 3.7% 322 3.5% Illinois 2 44,002 2.9% 372 4.0% Maryland 1 50,797 3.4% 325 3.4% Florida 1 41,545 2.8% 213 2.3% Indiana 1 31,342 2.1% 205 2.2% California 1 3,794 0.3% 36 0.4% Washington 1       13,667     0.9% 117     1.3% Total 35     $ 1,498,933     100.0% 9,325     100.0%  

(a) Excludes approximately $4,269, which is our investment in a property being redeveloped.

(b) Includes asset held for sale of $15,921, which was sold on April 5, 2016.

   

Franklin Street Properties Corp. Earnings ReleaseSupplementary Schedule EPortfolio and Other Supplementary Information(Unaudited & Approximated)

 

Recurring Capital ExpendituresOwned Portfolio

                        For the Three Months Ended Year ended 31-Mar-16 31-Mar-15 30-Jun-15 30-Sep-15 31-Dec-15 31-Dec-15   Tenant improvements $ 1,929 $ 2,936 $ 3,420 $ 1,794 $ 3,788 $ 11,938 Deferred leasing costs 1,613 830 1,539 1,490 3,952 7,811 Non-investment capex   438   643   1,411   1,090   1,162   4,306 Total Capital Expenditures $ 3,980 $ 4,409 $ 6,370 $ 4,374 $ 8,902 $ 24,055           Square foot & leased percentages March 31, December 31, 2016 2015 Owned portfolio of commercial real estate Number of properties (a) 35 36 Square feet 9,325,249 9,494,953 Leased percentage 90.2% 91.6%   Investments in non-consolidated REITs Number of properties 2 2 Square feet 1,396,071 1,396,071 Leased percentage 73.9% 73.5%   Single Asset REITs (SARs) managed Number of properties 6 7 Square feet 1,191,135 1,487,026 Leased percentage 75.8% 77.0%   Total owned, investments & managed properties Number of properties 43 45 Square feet 11,912,455 12,378,050 Leased percentage 86.8% 87.8%

(a) Excludes property in redevelopment in 2016.

 

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-16 Held FSP 303 East Wacker Drive Corp. Chicago IL 861,000 65.7% 43.7% FSP Grand Boulevard Corp. Kansas City MO 535,071     87.2% 27.0% 1,396,071     73.9%    

Franklin Street Properties Corp. Earnings ReleaseSupplementary Schedule FPercentage of Leased Space(Unaudited & Estimated)

                                    Fourth First % Leased (1) Quarter % Leased (1) Quarter as of Average % as of Average % Property Name Location Square Feet 31-Dec-15 Leased (2) 31-Mar-16 Leased (2)   1 HILLVIEW CENTER Milpitas, CA 36,288 100.0% 100.0% 100.0% 100.0% 2 FOREST PARK Charlotte, NC 62,212 100.0% 100.0% 100.0% 100.0% 3 MEADOW POINT Chantilly, VA 138,537 100.0% 100.0% 100.0% 100.0% 4 TIMBERLAKE Chesterfield, MO 234,023 95.4% 94.3% 95.4% 95.4% 5 FEDERAL WAY Federal Way, WA 117,010 66.8% 64.9% 61.6% 65.1% 6 NORTHWEST POINT Elk Grove Village, IL 176,848 100.0% 100.0% 100.0% 100.0% 7 TIMBERLAKE EAST Chesterfield, MO 116,197 96.2% 61.2% 96.2% 96.2% 8 PARK TEN Houston, TX 157,460 63.1% 63.1% 63.1% 63.1% 9 ADDISON Addison, TX 290,041 93.4% 93.4% 93.4% 93.4% 10 COLLINS CROSSING Richardson, TX 300,887 100.0% 100.0% 100.0% 100.0% 11 GREENWOOD PLAZA Englewood, CO 196,236 100.0% 100.0% 100.0% 100.0% 12 RIVER CROSSING Indianapolis, IN 205,059 91.1% 91.1% 91.1% 91.1% 13 LIBERTY PLAZA Addison, TX 218,934 81.8% 79.2% 80.9% 81.5% 14 INNSBROOK Glen Allen, VA 298,456 100.0% 100.0% 100.0% 100.0% 15 380 INTERLOCKEN Broomfield, CO 240,185 97.1% 97.1% 97.1% 97.1% 16 BLUE LAGOON Miami, FL 212,619 100.0% 100.0% 100.0% 100.0% 17 ELDRIDGE GREEN Houston, TX 248,399 100.0% 100.0% 100.0% 100.0% 18 ONE OVERTON PARK Atlanta, GA 387,267 85.0% 85.0% 85.0% 85.0% 19 390 INTERLOCKEN Broomfield, CO 241,516 84.6% 85.1% 84.6% 84.6% 20 EAST BALTIMORE Baltimore, MD 325,445 85.4% 85.4% 83.6% 84.8% 21 PARK TEN PHASE II Houston, TX 156,746 100.0% 100.0% 100.0% 100.0% 22 LAKESIDE CROSSING I Maryland Heights, MO 127,778 100.0% 100.0% 100.0% 100.0% 23 LOUDOUN TECH Dulles, VA 136,658 92.0% 92.0% 92.0% 92.0% 24 4807 STONECROFT Chantilly, VA 111,469 100.0% 100.0% 100.0% 100.0% 25 121 SOUTH EIGHTH ST Minneapolis, MN 305,990 88.3% 88.3% 56.2% 56.2% 801 MARQUETTE AVE (3) Minneapolis, MN — 97.2% 97.2% (3) (3) 26 EMPEROR BOULEVARD Durham, NC 259,531 100.0% 100.0% 100.0% 100.0% 27 LEGACY TENNYSON CTR Plano, TX 202,600 100.0% 100.0% 100.0% 100.0% 28 ONE LEGACY Plano, TX 214,110 100.0% 100.0% 100.0% 100.0% 29 909 DAVIS Evanston, IL 195,245 100.0% 100.0% 88.8% 88.8% 30 ONE RAVINIA DRIVE Atlanta, GA 386,603 94.8% 94.8% 94.8% 94.8% 31 TWO RAVINIA Atlanta, GA 442,130 80.8% 78.6% 84.0% 82.2% 32 WESTCHASE I & II Houston, TX 629,025 87.0% 87.8% 87.0% 87.0% 33 1999 BROADWAY Denver, CO 676,379 82.7% 82.7% 83.0% 82.8% 34 999 PEACHTREE Atlanta, GA 621,946 95.0% 95.2% 95.3% 95.1% 35 1001 17th STREET Denver, CO 655,420       88.6%       87.6%       87.6%       87.9% TOTAL WEIGHTED AVERAGE 9,325,249       91.6%       90.8%       90.2%       90.2%        

(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) Property is being redeveloped in 2016.

Franklin Street Properties Corp. Earnings ReleaseSupplementary Schedule GLargest 20 Tenants – FSP Owned Portfolio(Unaudited & Estimated)

The following table includes the largest 20 tenants in FSP’s owned portfolio based on total square feet:

As of March 31, 2016

            % of Tenant Sq Ft Portfolio 1 Quintiles Transnational Corp 259,531 3.1% 2 CITGO Petroleum Corporation 248,399 3.0% 3 Newfield Exploration Company 234,495 2.8% 4 US Government 223,433 2.7% 5 Sutherland Asbill Brennan LLP 222,422 2.6% 6 Burger King Corporation 212,619 2.5% 7 Denbury Onshore, LLC 202,600 2.4% 8 SunTrust Bank 182,888 2.2% 9 Centene Management Company, LLC 179,637 2.1% 10 Citicorp Credit Services, Inc 176,848 2.1% 11 T-Mobile South, LLC dba T-Mobile 151,792 1.8% 12 Petrobras America, Inc. 144,813 1.7% 13 Murphy Exploration & Production Company 144,677 1.7% 14 Argo Data Resource Corporation 140,246 1.7% 15 Houghton Mifflin Harcourt Publishing Company 128,226 1.5% 16 Monsanto Company 127,778 1.5% 17 Federal National Mortgage Association 123,144 1.5% 18 Vail Corp d/b/a Vail Resorts 122,232 1.5% 19 Kaiser Foundation Health Plan 120,979 1.4% 20 Giesecke & Devrient America 112,110     1.3% Total 3,458,869     41.1%  

Franklin Street Properties Corp. Earnings ReleaseSupplementary Schedule HDefinition of Funds From Operations (“FFO”) andAdjusted Funds From Operations (“AFFO”)

Funds From Operations (“FFO”)

The Company evaluates performance based on Funds From Operations, which we refer to as FFO. 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.

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 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 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.

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Franklin Street Properties Corp.Georgia Touma, 877-686-9496