Franklin Street Properties Corp. (the “Company”, “FSP”, “we” or
“our”) (NYSE American: FSP), a real estate investment trust (REIT),
announced its results for the third quarter ended September 30,
2020.
George J. Carter, Chairman and Chief Executive Officer,
commented as follows:
“After slower-second quarter 2020 leasing results primarily due
to the emergence of the COVID-19 pandemic and its negative effects
on economic activity, the pace of third quarter leasing in FSP’s
property portfolio improved with approximately 282,000 square feet
in total leasing, of which approximately 181,000 square feet was
with new tenants. Prior to the emergence of the COVID-19 pandemic,
we were confident that the company was well positioned for new
tenant absorption, increasing occupancy levels and higher rental
rates during 2020, allowing us the potential to start realizing the
longer-term value-add property proposition that was such an
integral part of the strategy of recasting our portfolio.
We currently have approximately 240,000 square feet of potential
net absorption over the next three to six months, consisting of new
prospects for approximately 180,000 square feet and tenant
expansions for approximately 60,000 square feet.
For the full third quarter of 2020, we collected approximately
98% of contracted rent and as of October 31, 2020 we have collected
approximately 98% of October rents. However, at this time, we are
not able to predict whether and to what extent our level of rental
receipts may change in future months. Consequently, we are
continuing suspension of Net Income and Funds From Operations
(“FFO”) guidance and will not be providing additional guidance
until such time as we have a better understanding of the duration
of the COVID-19 pandemic and its impact on our business and the
businesses of our tenants.
At this time, we believe the bulk of our tenants will be
financially able to weather the COVID-19 pandemic and the inherent
value of our property portfolio and our own financial resources and
balance sheet flexibility will continue to see us through this
difficult time. We believe that we will then be well positioned to
resume the strong leasing activity that occurred in 2018, 2019 and
the first quarter of 2020.”
Financial Highlights
- Net loss was $1.7 million, or $0.02 per basic and diluted
share, for the third quarter ended September 30, 2020.
- FFO was $20.4 million, or $0.19 per basic and diluted share,
for the third quarter ended September 30, 2020.
- Adjusted Funds From Operations (AFFO) was $3.5 million or $0.03
per basic and diluted share, for the third quarter ended September
30, 2020.
- As of September 30, 2020, we had $570 million available on our
revolving line of credit.
- Our debt is entirely unsecured and we have no debt maturities
until November 30, 2021.
COVID-19 Pandemic Update
FSP remains committed to the health and safety of its employees,
tenants, vendors and visitors and will continue to implement
recommended guidelines for social distancing and other safety
protocols at our properties and corporate headquarters.
- We have implemented working from home policies for FSP
employees.
- All of our properties remain open for business.
- As of October 31, 2020, we had collected approximately 98% of
rental receipts due in October 2020. Due to the high level of
uncertainty related to the COVID-19 pandemic, we are unable to
predict the level of rental receipts in future months.
- During the past approximately 7 months, we have received rent
relief requests from some of our tenants. The majority of these
requests for relief have been in the form of potential rent
deferrals for varying lengths of time. To date, we have been in
discussions with tenants regarding potential rent deferrals
representing approximately 1% to 2% of annualized rents. We will
continue to review each request for rent relief on a case by case
basis. Where prudent, we may grant deferrals and, in some
instances, seek extended lease terms. We are unable to predict the
outcomes of these ongoing negotiations, the amount of the rent
relief packages, if any, and ultimate recovery of any deferred
amounts.
Leasing Update
- During the quarter ended September 30, 2020, we leased
approximately 282,000 square feet, of which approximately 181,000
square feet was with new tenants. During the nine months ended
September 30, 2020, we leased approximately 606,000 square feet, of
which approximately 347,000 square feet was with new tenants.
During the year ended December 31, 2019, we leased approximately
1,417,000 square feet, of which approximately 534,000 square feet
was with new tenants.
- Our directly owned real estate portfolio of 35 owned properties
(including our 3 redevelopment properties) totaling approximately
9.9 million square feet was approximately 84.3% leased as of
September 30, 2020, compared to approximately 83.3% leased as of
June 30, 2020.
- On September 14, 2020, we announced that we entered into a
lease agreement with a new tenant with an initial term of 16 years
for approximately 94,000 square feet, approximately 23,000 square
feet of which is at our property known as 121 South Eighth Street
in Minneapolis, Minnesota and approximately 71,000 square feet of
which is at our property known as 801 Marquette in Minneapolis,
Minnesota. Together with leases signed previously, 801 Marquette
was approximately 91.8% leased as of September 30, 2020.
- On September 24, 2020, we announced that we entered into a
lease agreement with a new tenant with an initial term of 7 years
for approximately 28,000 square feet, or 43.9% of the rentable
square feet at our property known as Forest Park, in Charlotte,
North Carolina. Together with leases signed previously, Forest Park
was approximately 78.4% leased as of September 30, 2020.
- Despite delays caused by COVID-19, we currently have
approximately 240,000 square feet of potential net absorption over
the next three to six months, consisting of new prospects for
180,000 square feet and tenant expansions for 60,000 square
feet.
- Lease expirations for the remainder of 2020 are approximately
78,000 square feet, or approximately 0.8% of our owned
portfolio.
- The weighted average GAAP base rent per square foot achieved on
leasing activity during the nine months ended September 30, 2020
was $29.61, or 11.8% higher than average rents in the respective
properties as applicable compared to the year ended December 31,
2019. The average lease term on leases in the nine months ended
September 30, 2020, shortened to 7.8 years compared to 8.3 years
for the full year of 2019. Overall the portfolio weighted average
rent per occupied square foot increased to $29.92 as of September
30, 2020 from $29.88 as of December 31, 2019.
Dividend Update
On October 9, 2020, the Company announced that its Board of
Directors declared a regular quarterly cash dividend for the three
months ended September 30, 2020 of $0.09 per share of common stock
that will be paid on November 12, 2020 to stockholders of record on
October 23, 2020.
Non-GAAP Financial
Information
A reconciliation of Net income to FFO, AFFO and Sequential Same
Store NOI and our definitions of FFO, AFFO and Sequential Same
Store NOI can be found on Supplementary Schedules H and I.
Real Estate Update
Supplementary schedules provide property information for the
Company’s owned and managed real estate portfolio as of September
30, 2020. The Company will also be filing an updated supplemental
information package that will provide stockholders and the
financial community with additional operating and financial data.
The Company will file this supplemental information package with
the SEC and make it available on its website at
www.fspreit.com.
Today’s news release, along with other news about Franklin
Street Properties Corp., is available on the Internet at
www.fspreit.com. We routinely post information that may be
important to investors in the Investor Relations section of our
website. We encourage investors to consult that section of our
website regularly for important information about us and, if they
are interested in automatically receiving news and information as
soon as it is posted, to sign up for E-mail Alerts.
Earnings Call
A conference call is scheduled for November 4, 2020 at 11:00
a.m. (ET) to discuss the third quarter 2020 results. To access the
call, please dial 1-800-464-8240. Internationally, the call may be
accessed by dialing 1-412-902-6521. To access the call from Canada,
please dial 1-866-605-3852. To listen via live audio webcast,
please visit the Webcasts & Presentations section in the
Investor Relations section of the Company's website
(www.fspreit.com) at least ten minutes prior to the start of the
call and follow the posted directions. The webcast will also be
available via replay from the above location starting one hour
after the call is finished.
About Franklin Street Properties Corp.
Franklin Street Properties Corp., based in Wakefield,
Massachusetts, is focused on infill and central business district
(CBD) office properties in the U.S. Sunbelt and Mountain West, as
well as select opportunistic markets. FSP seeks value-oriented
investments with an eye towards long-term growth and appreciation,
as well as current income. FSP is a Maryland corporation that
operates in a manner intended to qualify as a real estate
investment trust (REIT) for federal income tax purposes. To learn
more about FSP please visit our website at www.fspreit.com.
Forward-Looking Statements
Statements made in this press release that state FSP’s or
management’s intentions, beliefs, expectations, or predictions for
the future may be forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. This press
release may also contain forward-looking statements, such as our
ability to lease space in the future, value creation/enhancement in
future periods and expectations for growth and leasing activities
in future periods that are based on current judgments and current
knowledge of management and are subject to certain risks, trends
and uncertainties that could cause actual results to differ
materially from those indicated in such forward-looking statements.
Accordingly, readers are cautioned not to place undue reliance on
forward-looking statements. Investors are cautioned that our
forward-looking statements involve risks and uncertainty, including
without limitation, adverse changes in general economic or local
market conditions, including as a result of the COVID-19 pandemic
and other potential infectious disease outbreaks and terrorist
attacks or other acts of violence, which may negatively affect the
markets in which we and our tenants operate, increasing interest
rates, disruptions in the debt markets, economic conditions in the
markets in which we own properties, risks of a lessening of demand
for the types of real estate owned by us, adverse changes in energy
prices, which if sustained, could negatively impact occupancy and
rental rates in the markets in which we own properties, including
energy-influenced markets such as Dallas, Denver and Houston,
changes in government regulations and regulatory uncertainty,
uncertainty about governmental fiscal policy, geopolitical events
and expenditures that cannot be anticipated such as utility rate
and usage increases, delays in construction schedules,
unanticipated increases in construction costs, unanticipated
repairs, additional staffing, insurance increases and real estate
tax valuation reassessments. See the “Risk Factors” set forth in
Part I, Item 1A of our Annual Report on Form 10-K for the year
ended December 31, 2019, as the same may be updated from time to
time in subsequent filings with the United States Securities and
Exchange Commission, including without limitation, the “Risk
Factors” set forth in Part II, Item 1A of our Quarterly Report on
Form 10-Q for the quarter ended September 30, 2020. Although we
believe the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results,
levels of activity, acquisitions, dispositions, performance or
achievements. We will not update any of the forward-looking
statements after the date of this press release to conform them to
actual results or to changes in our expectations that occur after
such date, other than as required by law.
Franklin Street Properties
Corp.
Earnings Release
Supplementary
Information
Table of Contents
Franklin Street Properties Corp. Financial
Results
A-C
Real Estate Portfolio Summary
Information
D
Portfolio and Other Supplementary
Information
E
Percentage of Leased Space
F
Largest 20 Tenants – FSP Owned
Portfolio
G
Reconciliation and Definitions of Funds
From Operations (FFO) and Adjusted
Funds From Operations (AFFO)
H
Reconciliation and Definition of
Sequential Same Store results to Property Net
Operating Income (NOI) and Net Loss
I
Franklin Street Properties Corp.
Financial Results
Supplementary Schedule A
Condensed Consolidated Statements
of Operations
(Unaudited)
For the
For the
Three Months Ended
Nine Months Ended
September 30,
September 30,
(in thousands, except per share
amounts)
2020
2019
2020
2019
Revenue:
Rental
$
61,834
$
68,108
$
184,799
$
196,952
Related party revenue:
Management fees and interest income from
loans
400
426
1,208
3,100
Other
13
5
31
16
Total revenue
62,247
68,539
186,038
200,068
Expenses:
Real estate operating expenses
16,730
18,041
49,498
52,883
Real estate taxes and insurance
12,279
12,505
36,348
37,408
Depreciation and amortization
22,076
22,559
66,659
67,913
General and administrative
3,817
3,886
11,159
11,097
Interest
8,953
9,036
26,996
27,775
Total expenses
63,855
66,027
190,660
197,076
Income (loss) before taxes on income
(1,608
)
2,512
(4,622
)
2,992
Tax expense on income
71
113
203
165
Net income (loss)
$
(1,679
)
$
2,399
$
(4,825
)
$
2,827
Weighted average number of shares
outstanding, basic and diluted
107,328
107,231
107,295
107,231
Net income (loss) per share, basic and
diluted
$
(0.02
)
$
0.02
$
(0.04
)
$
0.03
Franklin Street Properties Corp.
Financial Results
Supplementary Schedule B
Condensed Consolidated Balance
Sheets
(Unaudited)
September 30,
December 31,
(in thousands, except share and par value
amounts)
2020
2019
Assets:
Real estate assets:
Land
$
191,578
$
191,578
Buildings and improvements
1,983,979
1,924,664
Fixtures and equipment
12,714
11,665
2,188,271
2,127,907
Less accumulated depreciation
538,622
490,697
Real estate assets, net
1,649,649
1,637,210
Acquired real estate leases, less
accumulated amortization of $60,561 and $60,749, respectively
31,011
40,704
Cash, cash equivalents and restricted
cash
4,840
9,790
Tenant rent receivables
4,007
3,851
Straight-line rent receivable
71,033
66,881
Prepaid expenses and other assets
6,538
7,246
Related party mortgage loan
receivables
21,000
21,000
Other assets: derivative asset
—
3,022
Office computers and furniture, net of
accumulated depreciation of $1,426 and $1,362, respectively
178
183
Deferred leasing commissions, net of
accumulated amortization of $32,547 and $28,114, respectively
51,765
52,767
Total assets
$
1,840,021
$
1,842,654
Liabilities and Stockholders’ Equity:
Liabilities:
Bank note payable
$
30,000
$
—
Term loans payable, less unamortized
financing costs of $3,137 and $4,267, respectively
766,863
765,733
Series A & Series B Senior Notes, less
unamortized financing costs of $863 and $985, respectively
199,137
199,015
Accounts payable and accrued expenses
69,905
66,658
Accrued compensation
3,634
3,400
Tenant security deposits
9,435
9,346
Lease liability
1,627
1,890
Other liabilities: derivative
liabilities
20,157
7,704
Acquired unfavorable real estate leases,
less accumulated amortization of $4,911 and $4,676,
respectively
1,798
2,512
Total liabilities
1,102,556
1,056,258
Commitments and contingencies
Stockholders’ Equity:
Preferred stock, $.0001 par value,
20,000,000 shares authorized, none issued or outstanding
—
—
Common stock, $.0001 par value,
180,000,000 shares authorized, 107,328,199 and 107,269,201 shares
issued and outstanding, respectively
11
11
Additional paid-in capital
1,357,131
1,356,794
Accumulated other comprehensive loss
(20,157
)
(4,682
)
Accumulated distributions in excess of
accumulated earnings
(599,520
)
(565,727
)
Total stockholders’ equity
737,465
786,396
Total liabilities and stockholders’
equity
$
1,840,021
$
1,842,654
Franklin Street Properties Corp.
Financial Results
Supplementary Schedule C
Condensed Consolidated Statements
of Cash Flows
(Unaudited)
For the
Nine Months Ended
September 30,
(in thousands)
2020
2019
Cash flows from operating
activities:
Net income (loss)
$
(4,825
)
$
2,827
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization expense
68,859
70,072
Amortization of above and below market
leases
(234
)
(305
)
Shares issued as compensation
337
—
Decrease in allowance for doubtful
accounts and write-off of accounts receivable
(13
)
(69
)
Changes in operating assets and
liabilities:
Tenant rent receivables
(143
)
(403
)
Straight-line rents
(2,636
)
(6,950
)
Lease acquisition costs
(1,516
)
(3,155
)
Prepaid expenses and other assets
(504
)
1,261
Accounts payable and accrued expenses
2,527
2,849
Accrued compensation
234
726
Tenant security deposits
89
2,689
Payment of deferred leasing
commissions
(6,168
)
(9,485
)
Net cash provided by operating
activities
56,007
60,057
Cash flows from investing
activities:
Property improvements, fixtures and
equipment
(61,989
)
(47,905
)
Repayment of related party mortgage loan
receivable
—
(2,400
)
Investment in related party mortgage loan
receivable
—
51,795
Proceeds received from liquidating
trust
—
1,470
Net cash provided by (used in) investing
activities
(61,989
)
2,960
Cash flows from financing
activities:
Distributions to stockholders
(28,968
)
(28,953
)
Borrowings under bank note payable
85,000
45,000
Repayments of bank note payable
(55,000
)
(70,000
)
Deferred financing costs
—
(82
)
Net cash provided by (used in) financing
activities
1,032
(54,035
)
Net increase (decrease) in cash, cash
equivalents and restricted cash
(4,950
)
8,982
Cash, cash equivalents and restricted
cash, beginning of year
9,790
11,177
Cash, cash equivalents and restricted
cash, end of period
$
4,840
$
20,159
Franklin Street Properties Corp.
Earnings Release
Supplementary Schedule D
Real Estate Portfolio Summary
Information
(Unaudited &
Approximated)
Commercial portfolio lease
expirations (1)
Total
% of
Year
Square Feet
Portfolio
2020
78,358
0.8
%
2021
808,890
8.2
%
2022
1,179,221
11.9
%
2023
661,959
6.7
%
2024
874,968
8.8
%
Thereafter (2)
6,312,275
63.6
%
9,915,671
100.0
%
____________
(1)
Percentages are determined based upon
total square footage.
(2)
Includes 1,375,970 square feet of
vacancies at our operating properties and 182,710 square feet of
vacancies at our redevelopment properties as of September 30, 2020.
We define redevelopment properties as properties being developed,
redeveloped or where redevelopment is complete, but are in lease-up
and that are not stabilized.
(dollars & square feet in 000's)
As of September 30, 2020 (a)
# of
% of
Square
% of
State
Properties
Investment
Portfolio
Feet
Portfolio
Colorado
6
$
557,824
33.8
%
2,620
26.4
%
Texas
9
342,752
20.8
%
2,420
24.4
%
Georgia
5
322,465
19.6
%
1,967
19.8
%
Minnesota
3
121,048
7.3
%
757
7.6
%
Virginia
4
84,538
5.1
%
685
6.9
%
North Carolina
2
49,763
3.0
%
324
3.3
%
Missouri
2
43,316
2.6
%
352
3.5
%
Illinois
2
46,949
2.9
%
372
3.8
%
Florida
1
51,598
3.1
%
213
2.2
%
Indiana
1
29,396
1.8
%
206
2.1
%
Total
35
$
1,649,649
100.0
%
9,916
100.0
%
(a)
Includes investment in our redevelopment
properties. We define redevelopment properties as properties being
developed, redeveloped or where redevelopment is complete, but are
in lease-up and that are not stabilized.
Franklin Street Properties Corp. Earnings
Release Supplementary Schedule E Portfolio and Other Supplementary
Information (Unaudited & Approximated)
Recurring Capital Expenditures
Nine Months
(in thousands)
For the Three Months Ended
Ended
31-Mar-20
30-Jun-20
30-Sep-20
30-Sep-20
Tenant improvements
$
10,716
$
13,531
$
8,022
$
32,269
Deferred leasing costs
2,730
603
2,033
5,366
Non-investment capex
4,527
6,581
6,373
17,481
$
17,973
$
20,715
$
16,428
$
55,116
For the Three Months Ended
Year Ended
31-Mar-19
30-Jun-19
30-Sep-19
31-Dec-19
31-Dec-19
Tenant improvements
$
8,318
$
10,169
$
7,890
$
15,874
$
42,251
Deferred leasing costs
4,239
3,666
1,286
3,164
12,355
Non-investment capex
2,413
4,049
3,968
6,304
16,734
$
14,970
$
17,884
$
13,144
$
25,342
$
71,340
Square foot & leased
percentages
September 30,
December 31,
2020
2019
Operating Properties:
Number of properties
32
32
Square feet
9,526,822
9,504,634
Leased percentage
85.6%
87.6%
Redevelopment Properties (a):
Number of properties
3
3
Square feet
388,849
405,215
Leased percentage
53.0%
50.3%
Total Owned Properties:
Number of properties
35
35
Square feet
9,915,671
9,909,849
Leased percentage
84.3%
86.1%
Managed Properties - Single Asset REITs
(SARs):
Number of properties
2
2
Square feet
348,545
348,545
Total Operating, Redevelopment and
Managed Properties:
Number of properties
37
37
Square feet
10,264,216
10,258,394
(a)
We define redevelopment properties as
properties being developed, redeveloped or where redevelopment is
complete, but are in lease up and that are not stabilized
Franklin Street Properties Corp.
Earnings Release
Supplementary Schedule F
Percentage of Leased Space
(Unaudited & Estimated)
Second
Third
% Leased (1)
Quarter
% Leased (1)
Quarter
as of
Average %
as of
Average %
Property Name
Location
Square Feet
30-Jun-20
Leased (2)
30-Sep-20
Leased (2)
1
FOREST PARK (3)
Charlotte, NC
64,198
35.6%
35.6%
78.4%
49.9%
2
MEADOW POINT
Chantilly, VA
138,537
70.3%
70.3%
70.3%
70.3%
3
TIMBERLAKE
Chesterfield, MO
234,496
95.7%
95.7%
95.7%
95.7%
4
TIMBERLAKE EAST
Chesterfield, MO
117,036
100.0%
100.0%
100.0%
100.0%
5
NORTHWEST POINT
Elk Grove Village, IL
177,095
100.0%
100.0%
100.0%
100.0%
6
PARK TEN
Houston, TX
157,460
71.7%
71.7%
71.7%
71.7%
7
PARK TEN PHASE II
Houston, TX
156,746
95.0%
95.0%
95.0%
95.0%
8
GREENWOOD PLAZA
Englewood, CO
196,236
100.0%
100.0%
100.0%
100.0%
9
ADDISON
Addison, TX
289,325
79.4%
79.4%
83.7%
84.6%
10
COLLINS CROSSING
Richardson, TX
300,887
79.7%
79.7%
83.5%
83.5%
11
INNSBROOK
Glen Allen, VA
298,183
57.2%
57.2%
57.2%
57.2%
12
RIVER CROSSING
Indianapolis, IN
205,729
98.5%
98.5%
100.0%
99.0%
13
LIBERTY PLAZA
Addison, TX
216,906
73.7%
73.6%
75.1%
74.2%
14
380 INTERLOCKEN
Broomfield, CO
240,359
73.1%
73.1%
73.1%
73.1%
15
390 INTERLOCKEN
Broomfield, CO
241,512
98.2%
99.0%
99.4%
99.0%
16
BLUE LAGOON (3)
Miami, FL
213,182
73.1%
73.1%
73.1%
73.1%
17
ELDRIDGE GREEN
Houston, TX
248,399
100.0%
100.0%
100.0%
100.0%
18
ONE OVERTON PARK
Atlanta, GA
387,267
93.3%
93.3%
93.3%
93.3%
19
LOUDOUN TECH
Dulles, VA
136,658
98.9%
98.9%
98.9%
98.9%
20
4807 STONECROFT (3)
Chantilly, VA
111,469
0.0%
0.0%
0.0%
0.0%
21
121 SOUTH EIGHTH ST
Minneapolis, MN
297,209
86.4%
91.2%
92.7%
87.4%
22
801 MARQUETTE AVE
Minneapolis, MN
129,821
37.0%
37.0%
91.8%
55.2%
23
EMPEROR BOULEVARD
Durham, NC
259,531
100.0%
100.0%
100.0%
100.0%
24
LEGACY TENNYSON CTR
Plano, TX
207,049
100.0%
100.0%
100.0%
100.0%
25
ONE LEGACY
Plano, TX
214,110
52.9%
52.9%
56.4%
55.2%
26
909 DAVIS
Evanston, IL
195,098
93.3%
93.3%
93.3%
93.3%
27
ONE RAVINIA DRIVE
Atlanta, GA
386,602
87.9%
87.9%
88.5%
87.7%
28
TWO RAVINIA
Atlanta, GA
411,047
69.5%
69.4%
69.2%
69.3%
29
WESTCHASE I & II
Houston, TX
629,025
55.6%
55.5%
56.3%
55.6%
30
1999 BROADWAY
Denver, CO
677,539
85.6%
85.6%
84.8%
85.3%
31
999 PEACHTREE
Atlanta, GA
621,946
90.9%
90.9%
86.5%
86.7%
32
1001 17TH STREET
Denver, CO
655,420
97.7%
98.0%
96.8%
97.0%
33
PLAZA SEVEN
Minneapolis, MN
330,096
88.8%
89.0%
91.9%
91.3%
34
PERSHING PLAZA
Atlanta, GA
160,145
98.9%
98.9%
98.9%
98.9%
35
600 17TH STREET
Denver, CO
609,353
92.9%
91.6%
87.1%
87.6%
OWNED PORTFOLIO
9,915,671
83.3%
83.4%
84.3%
83.4%
____________
(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
three months during the quarter.
(3)
We define redevelopment properties as
properties being developed, redeveloped or where redevelopment is
complete, but are in lease-up and that are not stabilized.
Franklin Street Properties Corp.
Earnings Release
Supplementary Schedule G
Largest 20 Tenants – FSP Owned
Portfolio
(Unaudited & Estimated)
The following table includes the
largest 20 tenants in FSP’s owned portfolio based on total square
feet:
As of September 30, 2020
% of
Tenant
Sq Ft
Portfolio
1
IQVIA Holdings Inc.
259,531
2.6%
2
CITGO Petroleum Corporation
248,399
2.5%
3
Ovintiv USA Inc.
234,495
2.4%
4
US Government
226,140
2.3%
5
Centene Management Company, LLC
216,879
2.2%
6
Eversheds Sutherland (US) LLP
179,868
1.8%
7
EOG Resources, Inc.
169,167
1.7%
8
The Vail Corporation
164,636
1.7%
9
Lennar Homes, LLC
155,808
1.6%
10
T-Mobile South, LLC dba T-Mobile
151,792
1.5%
11
Citicorp Credit Services, Inc.
146,260
1.5%
12
Jones Day
140,342
1.4%
13
Worldventures Holdings, LLC
129,998
1.3%
14
Kaiser Foundation Health Plan
120,979
1.2%
15
Argo Data Resource Corporation
114,200
1.1%
16
Giesecke & Devrient America
112,110
1.1%
17
Randstad General Partner (US)
109,638
1.1%
18
VMWare, Inc.
100,853
1.0%
19
Deluxe Corporation
94,302
1.0%
20
Ping Identity Corp.
89,856
0.9%
Total
3,165,253
31.9%
Franklin Street Properties Corp. Earnings
Release Supplementary Schedule H Reconciliation and Definitions of
Funds From Operations (“FFO”) and Adjusted Funds From Operations
(“AFFO”)
A reconciliation of Net income to FFO and AFFO is shown below
and a definition of FFO and AFFO is provided on Supplementary
Schedule I. Management believes FFO and AFFO are used broadly
throughout the real estate investment trust (REIT) industry as
measurements of performance. The Company has included the National
Association of Real Estate Investment Trusts (NAREIT) FFO
definition as of May 17, 2016 in the table and notes that other
REITs may not define FFO in accordance with the current NAREIT
definition or may interpret the current NAREIT definition
differently. The Company’s computation of FFO and AFFO may not be
comparable to FFO or AFFO reported by other REITs or real estate
companies that define FFO or AFFO differently.
Reconciliation of Net Income to FFO and
AFFO:
Three Months Ended
Nine Months Ended
September 30,
September 30,
(In thousands, except per share
amounts)
2020
2019
2020
2019
Net income (loss)
$
(1,679
)
$
2,399
$
(4,825
)
$
2,827
Depreciation & amortization
21,989
22,448
66,424
67,609
NAREIT FFO
20,310
24,847
61,599
70,436
Lease Acquisition costs
136
61
333
351
Funds From Operations (FFO)
$
20,446
$
24,908
$
61,932
$
70,787
Funds From Operations (FFO)
$
20,446
$
24,908
$
61,932
$
70,787
Amortization of deferred financing
costs
727
720
2,201
2,157
Shares issued as compensation
—
—
337
—
Straight-line rent
(1,293
)
(2,120
)
(2,636
)
(6,949
)
Tenant improvements
(8,022
)
(7,890
)
(32,269
)
(26,377
)
Leasing commissions
(2,033
)
(1,286
)
(5,366
)
(9,191
)
Non-investment capex
(6,373
)
(3,968
)
(17,481
)
(10,430
)
Adjusted Funds From Operations (AFFO)
$
3,452
$
10,364
$
6,718
$
19,997
Per Share Data
EPS
$
(0.02
)
$
0.02
$
(0.04
)
$
0.03
FFO
$
0.19
$
0.23
$
0.58
$
0.66
AFFO
$
0.03
$
0.10
$
0.06
$
0.19
Weighted average shares (basic and
diluted)
107,328
107,231
107,295
107,231
Funds From Operations (“FFO”)
The Company evaluates performance based on Funds From
Operations, which we refer to as FFO, as management believes that
FFO represents the most accurate measure of activity and is the
basis for distributions paid to equity holders. The Company defines
FFO as net income or loss (computed in accordance with GAAP),
excluding gains (or losses) from sales of property, hedge
ineffectiveness, acquisition costs of newly acquired properties
that are not capitalized and lease acquisition costs that are not
capitalized plus depreciation and amortization, including
amortization of acquired above and below market lease intangibles
and impairment charges on properties or investments in
non-consolidated REITs, and after adjustments to exclude equity in
income or losses from, and, to include the proportionate share of
FFO from, non-consolidated REITs.
FFO should not be considered as an alternative to net income or
loss (determined in accordance with GAAP), nor as an indicator of
the Company’s financial performance, nor as an alternative to cash
flows from operating activities (determined in accordance with
GAAP), nor as a measure of the Company’s liquidity, nor is it
necessarily indicative of sufficient cash flow to fund all of the
Company’s needs.
Other real estate companies and the National Association of Real
Estate Investment Trusts, or NAREIT, may define this term in a
different manner. We have included the NAREIT FFO as of May 17,
2016 in the table and note that other REITs may not define FFO in
accordance with the current NAREIT definition or may interpret the
current NAREIT definition differently than we do.
We believe that in order to facilitate a clear understanding of
the results of the Company, FFO should be examined in connection
with net income or loss and cash flows from operating, investing
and financing activities in the consolidated financial
statements.
Adjusted Funds From Operations (“AFFO”)
The Company also evaluates performance based on Adjusted Funds
From Operations, which we refer to as AFFO. The Company defines
AFFO as (1) FFO, (2) excluding our proportionate share of FFO and
including distributions received, from non-consolidated REITs, (3)
excluding the effect of straight-line rent, (4) plus the
amortization of deferred financing costs, (5) plus the value of
shares issued as compensation and (6) less recurring capital
expenditures that are generally for maintenance of properties,
which we call non-investment capex or are second generation capital
expenditures. Second generation costs include re-tenanting space
after a tenant vacates, which include tenant improvements and
leasing commissions.
We exclude development/redevelopment activities, capital
expenditures planned at acquisition and costs to reposition a
property. We also exclude first generation leasing costs, which are
generally to fill vacant space in properties we acquire or were
planned for at acquisition.
AFFO should not be considered as an alternative to net income or
loss (determined in accordance with GAAP), nor as an indicator of
the Company’s financial performance, nor as an alternative to cash
flows from operating activities (determined in accordance with
GAAP), nor as a measure of the Company’s liquidity, nor is it
necessarily indicative of sufficient cash flow to fund all of the
Company’s needs. Other real estate companies may define this term
in a different manner. We believe that in order to facilitate a
clear understanding of the results of the Company, AFFO should be
examined in connection with net income or loss and cash flows from
operating, investing and financing activities in the consolidated
financial statements.
Franklin Street Properties Corp. Earnings
Release Supplementary Schedule I Reconciliation and Definition of
Sequential Same Store results to property Net Operating Income
(NOI) and Net Income
Net Operating Income (“NOI”)
The Company provides property performance based on Net Operating
Income, which we refer to as NOI. Management believes that
investors are interested in this information. NOI is a non-GAAP
financial measure that the Company defines as net income or loss
(the most directly comparable GAAP financial measure) plus general
and administrative expenses, depreciation and amortization,
including amortization of acquired above and below market lease
intangibles and impairment charges, interest expense, less equity
in earnings of nonconsolidated REITs, interest income, management
fee income, hedge ineffectiveness, gains or losses on the sale of
assets and excludes non-property specific income and expenses. The
information presented includes footnotes and the data is shown by
region with properties owned in the periods presented, which we
call Sequential Same Store. The comparative Sequential Same Store
results include properties held for the periods presented and
exclude our redevelopment properties. We also exclude properties
that have been placed in service, but that do not have operating
activity for all periods presented, dispositions and significant
nonrecurring income such as bankruptcy settlements and lease
termination fees. NOI, as defined by the Company, may not be
comparable to NOI reported by other REITs that define NOI
differently. NOI should not be considered an alternative to net
income or loss as an indication of our performance or to cash flows
as a measure of the Company’s liquidity or its ability to make
distributions. The calculations of NOI and Sequential Same Store
are shown in the following table:
Rentable
Square Feet
Three Months Ended
Three Months Ended
Inc
%
(in thousands)
or RSF
30-Sep-20
30-Jun-20
(Dec)
Change
Region
East
833
$
2,425
$
3,019
$
(594
)
(19.7
)%
MidWest
1,557
5,068
5,089
(21
)
(0.4
)%
South
4,387
13,619
13,025
594
4.6
%
West
2,620
10,976
11,211
(235
)
(2.1
)%
Property NOI* from Operating
Properties
9,397
32,088
32,344
(256
)
(0.8
)%
Dispositions and Redevelopment Properties
(a)
519
109
(148
)
257
0.8
%
NOI*
9,916
$
32,197
$
32,196
$
1
0.0
%
Sequential Same Store
$
32,088
$
32,344
$
(256
)
(0.8
)%
Less Nonrecurring
Items in NOI* (b)
351
810
(459
)
1.4
%
Comparative
Sequential Same Store
$
31,737
$
31,534
$
203
0.6
%
Three Months Ended
Three Months Ended
Reconciliation to Net income
30-Sep-20
30-Jun-20
Net loss
$
(1,679
)
$
(2,075
)
Add (deduct):
Management fee income
(484
)
(446
)
Depreciation and amortization
22,076
22,245
Amortization of above/below market
leases
(86
)
(75
)
General and administrative
3,817
3,817
Interest expense
8,953
8,980
Interest income
(386
)
(381
)
Non-property specific items, net
(14
)
131
NOI*
$
32,197
$
32,196
(a)
We define redevelopment properties as properties being
developed, redeveloped or where redevelopment is complete, but are
in lease-up and that are not stabilized. We also include properties
that have been placed in service, but that do not have operating
activity for all periods presented.
(b)
Nonrecurring Items in NOI include proceeds from bankruptcies,
lease termination fees or other significant nonrecurring income or
expenses, which may affect comparability.
*Excludes NOI from investments in and interest income from
secured loans to non-consolidated REITs.
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Georgia Touma (877) 686-9496
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