Franklin Street Properties Corp. Announces Second Quarter 2022 Results

Franklin Street Properties Corp. (the “Company”, “FSP”, “we” or “our”) (NYSE American: FSP), a real estate investment trust (REIT), announced its results for the second quarter ended June 30, 2022.

George J. Carter, Chairman and Chief Executive Officer, commented as follows:

“As the third quarter of 2022 begins, we continue to believe that the current price of our common stock does not accurately reflect the value of our underlying real estate assets. Our objectives for 2022 are twofold: We will seek to increase shareholder value (1) through the potential sale of select properties where we believe that short to intermediate term valuation potential has been reached and (2) by striving to increase occupancy in our continuing portfolio of real estate. We intend to use proceeds from any potential future property dispositions for debt reduction, repurchases of our common stock, dividends under our variable quarterly dividend policy and any dividends required to meet REIT requirements, and other general corporate purposes.

At this time, we are updating our property disposition guidance for full-year 2022 to be in the range of approximately $200 million to $300 million in aggregate gross proceeds compared to our previously estimated range of $250 million to $350 million. However, this disposition guidance is subject to change for a variety of reasons, including economic conditions, office market conditions and geopolitical events. We will update our disposition guidance quarterly in our earnings releases.

We look forward to the balance of 2022 and beyond with anticipation and optimism.”

Financial Highlights

  • GAAP net loss was $9.1 million and $13.3 million, or $0.09 and $0.13 per basic and diluted share for the three and six months ended June 30, 2022, respectively.
  • Funds From Operations (FFO) was $10.3 million and $21.8 million, or $0.10 and $0.21 per basic and diluted share for the three and six months ended June 30, 2022, respectively.
  • Adjusted Funds From Operations (AFFO) was a loss of $0.04 and $0.03 per basic and diluted share for the three and six months ended June 30, 2022, respectively.

Leasing Highlights

  • During the six months ended June 30, 2022, we leased approximately 276,000 square feet, including 171,000 square feet of new leases.
  • Our directly owned real estate portfolio of 24 owned properties totaling approximately 6.9 million square feet, was approximately 76.3% leased as of June 30, 2022, compared to approximately 78.4% leased as of December 31, 2021. The decrease in the leased percentage is primarily a result of lease expirations during the first half of 2022.
  • Lease expirations for 2022 and 2023 are approximately 127,000 and 383,000 square feet, representing approximately 1.8% and 5.5% of our owned portfolio, respectively.
  • The weighted average GAAP base rent per square foot achieved on leasing activity during the six months ended June 30, 2022 was $33.58, or 4.7% higher than average rents in the respective properties as applicable compared to the year ended December 31, 2021. The average lease term on leases signed in the six months ended June 30, 2022, was 6.9 years compared to 7.7 years for the year ended December 31, 2021. Overall the portfolio weighted average rent per occupied square foot was $30.48 as of June 30, 2022 compared to $30.60 as of December 31, 2021.
  • Subsequent to quarter end, we are currently tracking approximately 600,000 square feet of new prospective tenants, including approximately 400,000 square feet of prospective tenants that have identified FSP assets on their respective short lists of potential locations.
  • We believe that our continuing portfolio of real estate is well located, primarily in the Sunbelt and Mountain West geographic regions, and consists of high-quality assets with upside leasing potential in a post-COVID-19 environment.

Investment Highlights

  • Disposition guidance for full-year 2022 was updated to be in the range of approximately $200 million to $300 million in aggregate gross proceeds.
  • Subject to market conditions and satisfactory outcomes on prospective transactions, we anticipate dispositions to occur during the third and/or fourth quarters of 2022 and will provide updates as appropriate.
  • Disposition proceeds are intended to be used for debt reduction, dividends under our variable quarterly dividend policy and any special dividends required to meet REIT requirements, repurchases of our common stock, and other general corporate purposes.
  • Potential disposition candidates include: 380 and 390 Interlocken in Broomfield, Colorado; Eldridge Green and Park Ten in Houston, Texas; 909 Davis in Evanston, Illinois; Pershing Park in Atlanta, Georgia; and Blue Lagoon in Miami, Florida.

Stock Repurchases

  • During the first quarter of 2022, we repurchased approximately 847,000 shares of our common stock for approximately $4.8 million pursuant to our previously announced stock repurchase plan. We did not repurchase any shares of our common stock during the second quarter of 2022.
  • Up to approximately $26.9 million remains authorized for potential future repurchases of our common stock pursuant to our previously announced stock repurchase plan.

Dividends

  • In light of the gains achieved on our dispositions in 2021, on December 3, 2021, we announced that our Board of Directors declared a special dividend of $0.32 per share, which was paid on January 12, 2022 to shareholders of record on December 31, 2021, in order to meet REIT requirements.
  • On July 5, 2022, we adopted a variable quarterly dividend policy, which replaced our previous regular quarterly dividend policy. Under the new variable quarterly dividend policy, the Board of Directors will determine quarterly dividends based upon a variety of factors, including the Company’s estimates of its annual taxable income and the amount that the Company is required to distribute annually in the aggregate to enable the Company to continue to qualify as a real estate investment trust for federal income tax purposes.
  • On July 5, 2022, we announced that our Board of Directors declared a quarterly cash dividend for the three months ended June 30, 2022 of $0.01 per share of common stock pursuant to our variable quarterly dividend policy that will be paid on August 11, 2022 to stockholders of record on July 19, 2022.
  • If we are able to dispose of properties in 2022 at anticipated pricing levels, we may be required to again declare a special dividend in 2022 in addition to any regular quarterly dividends in order to meet REIT requirements.

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.

2022 Net Income, FFO and Disposition Guidance

At this time, due primarily to uncertainty surrounding the timing and amount of proceeds received from property dispositions, we are continuing suspension of Net Income and FFO guidance. We are updating our previously announced disposition guidance for full-year 2022 as we execute on our strategy to dispose of certain properties that we believe have met their short to intermediate term valuation objectives and whose value may not be accurately reflected in our share price. Anticipated dispositions in 2022 are estimated to result in aggregate gross proceeds in the range of approximately $200 million to $300 million. We intend to use the proceeds of any future dispositions for debt reduction, repurchases of our stock, dividends under our variable quarterly dividend policy and any special distributions required to meet REIT requirements, and other general corporate purposes. This guidance reflects our current expectations of economic and market conditions and is subject to change. Our disposition guidance is subject to change for a variety of reasons, including economic conditions, office market conditions and geopolitical events. We will update our disposition 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 and managed real estate portfolio as of June 30, 2022. 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 August 3, 2022 at 11:00 a.m. (ET) to discuss the second quarter 2022 results. To access the call, please dial 1-844-200-6205 and use access code 703841. Internationally, the call may be accessed by dialing 1-929-526-1599 and using access code 703841. 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 those relating to our ability to lease space in the future, expectations for dispositions, potential stock repurchases, the payment of special dividends and the repayment of debt in future periods, 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, any inability to dispose of real estate properties at pricing levels comparable to recent historical portfolio dispositions, and any delays in the timing of any such anticipated dispositions, 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, increases in the level of general and administrative costs as a percentage of revenues as revenues decrease as a result of property dispositions, 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, 2021 and in Part II, Item 1A of our Quarterly Report on Form 10-Q for the quarter ended June 30, 2022, as the same may be updated from time to time in subsequent filings with the United States Securities and Exchange Commission. Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, acquisitions, dispositions, performance or achievements. We will not update any of the forward-looking statements after the date of this press release to conform them to actual results or to changes in our expectations that occur after such date, other than as required by law.

Franklin Street Properties Corp.

Earnings Release

Supplementary Information

Table of Contents

 

 

Franklin Street Properties Corp. Financial Results

A-C

Real Estate Portfolio Summary Information

D

Portfolio and Other Supplementary Information

E

Percentage of Leased Space

F

Largest 20 Tenants – FSP Owned Portfolio

G

Reconciliation and Definitions of Funds From Operations (FFO) and Adjusted

 

Funds From Operations (AFFO)

H

Reconciliation and Definition of Sequential Same Store results to Property Net

 

Operating Income (NOI) and Net Loss

I

 

 

Franklin Street Properties Corp. Financial Results

Supplementary Schedule A

Condensed Consolidated Statements of Operations

(Unaudited)

 

 

 

 

 

 

For the

 

For the

 

Three Months Ended

 

Six Months Ended

 

June 30,

 

June 30,

(in thousands, except per share amounts)

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

 

 

 

 

 

Revenue:

 

 

 

 

Rental

$

40,831

 

$

55,722

 

$

82,628

 

$

114,345

 

Related party revenue:

 

 

 

 

Management fees and interest income from loans

 

467

 

 

417

 

 

927

 

 

827

 

Other

 

6

 

 

6

 

 

13

 

 

12

 

Total revenue

 

41,304

 

 

56,145

 

 

83,568

 

 

115,184

 

 

 

 

 

 

Expenses:

 

 

 

 

Real estate operating expenses

 

12,344

 

 

15,352

 

 

25,178

 

 

31,291

 

Real estate taxes and insurance

 

9,043

 

 

11,895

 

 

17,762

 

 

24,261

 

Depreciation and amortization

 

18,186

 

 

19,136

 

 

33,856

 

 

43,517

 

General and administrative

 

3,981

 

 

3,962

 

 

7,765

 

 

8,108

 

Interest

 

5,664

 

 

10,054

 

 

11,030

 

 

18,654

 

Total expenses

 

49,218

 

 

60,399

 

 

95,591

 

 

125,831

 

 

 

 

 

 

Loss on extinguishment of debt

 

 

 

(167

)

 

 

 

(167

)

Impairment and loan loss reserve

 

(1,140

)

 

 

 

(1,140

)

 

 

Gain on sale of properties, net

 

 

 

20,626

 

 

 

 

20,626

 

Income (loss) before taxes

 

(9,054

)

 

16,205

 

 

(13,163

)

 

9,812

 

Tax expense

 

56

 

 

56

 

 

105

 

 

123

 

Net income (loss)

$

(9,110

)

$

16,149

 

$

(13,268

)

$

9,689

 

 

 

 

 

 

Weighted average number of shares outstanding, basic and diluted

 

103,193

 

 

107,359

 

 

103,441

 

 

107,344

 

 

 

 

 

 

Net income (loss) per share, basic and diluted

$

(0.09

)

$

0.15

 

$

(0.13

)

$

0.09

 

Franklin Street Properties Corp. Financial Results

Supplementary Schedule B

Condensed Consolidated Balance Sheets

(Unaudited)

 

 

 

 

 

 

 

June 30,

 

December 31,

(in thousands, except share and par value amounts)

 

 

2022

 

 

 

2021

 

Assets:

 

 

 

 

Real estate assets:

 

 

 

 

Land

 

$

146,844

 

 

$

146,844

 

Buildings and improvements

 

 

1,477,913

 

 

 

1,457,209

 

Fixtures and equipment

 

 

12,192

 

 

 

11,404

 

 

 

 

1,636,949

 

 

 

1,615,457

 

Less accumulated depreciation

 

 

450,792

 

 

 

424,487

 

Real estate assets, net

 

 

1,186,157

 

 

 

1,190,970

 

Acquired real estate leases, less accumulated amortization of $18,956 and $40,423, respectively

 

 

12,373

 

 

 

14,934

 

Cash, cash equivalents and restricted cash

 

 

4,693

 

 

 

40,751

 

Tenant rent receivables

 

 

2,627

 

 

 

1,954

 

Straight-line rent receivable

 

 

54,354

 

 

 

49,024

 

Prepaid expenses and other assets

 

 

6,863

 

 

 

4,031

 

Related party mortgage loan receivable, less allowance for credit loss of $1,140 and $0, respectively

 

 

22,860

 

 

 

24,000

 

Other assets: derivative asset

 

 

1,951

 

 

 

 

Office computers and furniture, net of accumulated depreciation of $1,082 and $1,198, respectively

 

 

187

 

 

 

198

 

Deferred leasing commissions, net of accumulated amortization of $21,840 and $21,099, respectively

 

 

39,654

 

 

 

38,311

 

Total assets

 

$

1,331,719

 

 

$

1,364,173

 

 

 

 

 

 

Liabilities and Stockholders’ Equity:

 

 

 

 

Liabilities:

 

 

 

 

Bank note payable

 

$

55,000

 

 

$

 

Term loans payable, less unamortized financing costs of $482 and $714, respectively

 

 

274,518

 

 

 

274,286

 

Series A & Series B Senior Notes, less unamortized financing costs of $576 and $658, respectively

 

 

199,424

 

 

 

199,342

 

Accounts payable and accrued expenses

 

 

39,315

 

 

 

89,493

 

Accrued compensation

 

 

2,252

 

 

 

4,704

 

Tenant security deposits

 

 

5,819

 

 

 

6,219

 

Lease liability

 

 

962

 

 

 

1,159

 

Other liabilities: derivative liabilities

 

 

 

 

 

5,239

 

Acquired unfavorable real estate leases, less accumulated amortization of $634 and $2,285, respectively

 

 

397

 

 

 

528

 

Total liabilities

 

 

577,687

 

 

 

580,970

 

 

 

 

 

 

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, 103,235,914 and 103,998,520 shares issued and outstanding, respectively

 

 

10

 

 

 

10

 

Additional paid-in capital

 

 

1,334,776

 

 

 

1,339,226

 

Accumulated other comprehensive loss

 

 

1,951

 

 

 

(5,239

)

Accumulated distributions in excess of accumulated earnings

 

 

(582,705

)

 

 

(550,794

)

Total stockholders’ equity

 

 

754,032

 

 

 

783,203

 

Total liabilities and stockholders’ equity

 

$

1,331,719

 

 

$

1,364,173

 

Franklin Street Properties Corp. Financial Results

Supplementary Schedule C

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

 

 

 

 

 

 

For the

 

 

Six Months Ended

 

 

June 30,

(in thousands)

 

 

2022

 

 

 

2021

 

Cash flows from operating activities:

 

 

 

 

Net income (loss)

 

$

(13,268

)

 

$

9,689

 

Adjustments to reconcile net income (loss) to net cash used in operating activities:

 

 

 

 

Depreciation and amortization expense

 

 

34,863

 

 

 

44,910

 

Amortization of above and below market leases

 

 

(54

)

 

 

(38

)

Shares issued as compensation

 

 

394

 

 

 

338

 

Loss on extinguishment of debt

 

 

 

 

 

167

 

Impairment and loan loss reserve

 

 

1,140

 

 

 

 

Gain on sale of properties, net

 

 

 

 

 

(20,626

)

Changes in operating assets and liabilities:

 

 

 

 

Tenant rent receivables

 

 

(673

)

 

 

4,540

 

Straight-line rents

 

 

(2,904

)

 

 

(2,858

)

Lease acquisition costs

 

 

(2,426

)

 

 

(623

)

Prepaid expenses and other assets

 

 

(1,153

)

 

 

(485

)

Accounts payable and accrued expenses

 

 

(18,268

)

 

 

(18,520

)

Accrued compensation

 

 

(2,452

)

 

 

(1,609

)

Tenant security deposits

 

 

(400

)

 

 

(1,870

)

Payment of deferred leasing commissions

 

 

(5,033

)

 

 

(6,926

)

Net cash provided by (used in) operating activities

 

 

(10,234

)

 

 

6,089

 

Cash flows from investing activities:

 

 

 

 

Property improvements, fixtures and equipment

 

 

(21,496

)

 

 

(36,957

)

Proceeds received from sales of properties

 

 

 

 

 

228,717

 

Net cash provided by (used in) investing activities

 

 

(21,496

)

 

 

191,760

 

Cash flows from financing activities:

 

 

 

 

Distributions to stockholders

 

 

(51,924

)

 

 

(19,319

)

Stock repurchases

 

 

(4,843

)

 

 

 

Borrowings under bank note payable

 

 

60,000

 

 

 

66,500

 

Repayments of bank note payable

 

 

(5,000

)

 

 

(70,000

)

Repayments of Term Loans

 

 

 

 

 

(155,000

)

Deferred financing costs

 

 

(2,561

)

 

 

 

Net cash used in financing activities

 

 

(4,328

)

 

 

(177,819

)

Net increase (decrease) in cash, cash equivalents and restricted cash

 

 

(36,058

)

 

 

20,030

 

Cash, cash equivalents and restricted cash, beginning of year

 

 

40,751

 

 

 

4,150

 

Cash, cash equivalents and restricted cash, end of period

 

$

4,693

 

 

$

24,180

 

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

2022

 

126,588

 

1.8

%

2023

 

382,953

 

5.5

%

2024

 

747,458

 

10.8

%

2025

 

498,772

 

7.2

%

2026

 

543,683

 

7.9

%

Thereafter (2)

 

4,616,261

 

66.8

%

 

 

6,915,715

 

100.0

%

____________________
(1)

Percentages are determined based upon total square footage.

(2)

Includes 1,638,306 square feet of vacancies at our operating properties as of June 30, 2022.

 

 

 

 

 

 

 

 

 

 

 

(dollars & square feet in 000's)

 

As of June 30, 2022

 

 

 

 

 

 

% of

 

Square

 

% of

State

 

Properties

 

Investment

 

Portfolio

 

Feet

 

Portfolio

 

 

 

 

 

 

 

 

 

 

 

Colorado

 

6

 

$

533,365

 

45.0

%

 

2,628

 

38.0

%

Texas

 

9

 

 

331,463

 

27.9

%

 

2,423

 

35.0

%

Georgia

 

1

 

 

43,727

 

3.7

%

 

160

 

2.3

%

Minnesota

 

3

 

 

121,902

 

10.3

%

 

758

 

11.0

%

Virginia

 

1

 

 

32,955

 

2.8

%

 

298

 

4.3

%

Florida

 

1

 

 

68,476

 

5.8

%

 

213

 

3.1

%

Illinois

 

2

 

 

45,433

 

3.8

%

 

372

 

5.4

%

North Carolina

 

1

 

 

8,649

 

0.7

%

 

64

 

0.9

%

Total

 

24

 

$

1,185,970

 

100.0

%

 

6,916

 

100.0

%

Franklin Street Properties Corp. Earnings Release

Supplementary Schedule E

Portfolio and Other Supplementary Information

(Unaudited & Approximated)

Recurring Capital Expenditures

 

 

 

 

 

 

 

 

 

 

 

Six Months

(in thousands)

 

For the Three Months Ended

 

Ended

 

 

31-Mar-22

 

30-Jun-22

 

30-Jun-22

Tenant improvements

 

$

1,877

 

$

5,453

 

$

7,330

Deferred leasing costs

 

 

3,032

 

 

1,327

 

 

4,359

Non-investment capex

 

 

5,065

 

 

6,736

 

 

11,801

 

 

$

9,974

 

$

13,516

 

$

23,490

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended

 

Year Ended

 

 

31-Mar-21

 

30-Jun-21

 

30-Sep-21

 

31-Dec-21

 

31-Dec-21

Tenant improvements

 

$

4,491

 

$

4,277

 

$

3,952

 

$

1,881

 

$

14,601

Deferred leasing costs

 

 

2,597

 

 

1,922

 

 

2,371

 

 

1,319

 

 

8,209

Non-investment capex

 

 

5,336

 

 

3,793

 

 

4,528

 

 

4,672

 

 

18,329

 

 

$

12,424

 

$

9,992

 

$

10,851

 

$

7,872

 

$

41,139

 

 

 

 

 

Square foot & leased percentages

 

June 30,

 

December 31,

 

 

2022

 

2021

Owned or Operating Properties:

 

 

 

 

Number of properties

 

24

 

 

24

 

Square feet

 

6,915,715

 

 

6,911,225

 

Leased percentage

 

76.3

%

 

78.4

%

 

 

 

 

 

Managed Properties - Single Asset REITs (SARs):

 

 

 

 

Number of properties

 

1

 

 

2

 

Square feet

 

213,760

 

 

348,545

 

 

 

 

 

 

Total Owned or Operating and Managed Properties:

 

 

 

 

Number of properties

 

25

 

 

26

 

Square feet

 

7,129,475

 

 

7,259,770

 

Franklin Street Properties Corp. Earnings Release

Supplementary Schedule F

Percentage of Leased Space

(Unaudited & Estimated)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

First

 

 

 

Second

 

 

 

 

 

 

 

 

% Leased (1)

 

Quarter

 

% Leased (1)

 

Quarter

 

 

 

 

 

 

 

 

as of

 

Average %

 

as of

 

Average %

 

 

Property Name

 

Location

 

Square Feet

 

31-Mar-22

 

Leased (2)

 

30-Jun-22

 

Leased (2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1

 

FOREST PARK

 

Charlotte, NC

 

64,198

 

78.4%

 

78.4%

 

78.4%

 

78.4%

2

 

NORTHWEST POINT

 

Elk Grove Village, IL

 

177,095

 

100.0%

 

100.0%

 

100.0%

 

100.0%

3

 

PARK TEN

 

Houston, TX

 

157,609

 

72.0%

 

72.0%

 

72.0%

 

72.0%

4

 

PARK TEN PHASE II

 

Houston, TX

 

156,746

 

95.0%

 

95.0%

 

95.0%

 

95.0%

5

 

GREENWOOD PLAZA

 

Englewood, CO

 

196,236

 

100.0%

 

100.0%

 

66.3%

 

77.5%

6

 

ADDISON

 

Addison, TX

 

289,333

 

72.3%

 

73.7%

 

83.0%

 

83.7%

7

 

COLLINS CROSSING

 

Richardson, TX

 

300,887

 

96.1%

 

88.3%

 

96.1%

 

96.1%

8

 

INNSBROOK

 

Glen Allen, VA

 

298,183

 

47.8%

 

50.9%

 

47.8%

 

47.8%

9

 

LIBERTY PLAZA

 

Addison, TX

 

217,600

 

81.8%

 

79.2%

 

76.5%

 

77.7%

10

 

380 INTERLOCKEN

 

Broomfield, CO

 

240,359

 

60.5%

 

60.5%

 

60.5%

 

60.5%

11

 

390 INTERLOCKEN

 

Broomfield, CO

 

241,512

 

99.4%

 

99.4%

 

99.4%

 

99.4%

12

 

BLUE LAGOON

 

Miami, FL

 

213,182

 

98.5%

 

98.5%

 

98.5%

 

98.5%

13

 

ELDRIDGE GREEN

 

Houston, TX

 

248,399

 

100.0%

 

100.0%

 

100.0%

 

100.0%

14

 

121 SOUTH EIGHTH ST

 

Minneapolis, MN

 

298,121

 

89.9%

 

89.9%

 

89.7%

 

89.8%

15

 

801 MARQUETTE AVE

 

Minneapolis, MN

 

129,691

 

91.8%

 

91.8%

 

91.8%

 

91.8%

16

 

LEGACY TENNYSON CTR

 

Plano, TX

 

208,966

 

40.7%

 

40.8%

 

40.7%

 

40.7%

17

 

ONE LEGACY

 

Plano, TX

 

214,110

 

63.7%

 

59.9%

 

63.7%

 

63.7%

18

 

909 DAVIS

 

Evanston, IL

 

195,098

 

93.3%

 

93.3%

 

93.3%

 

93.3%

19

 

WESTCHASE I & II

 

Houston, TX

 

629,025

 

56.7%

 

57.2%

 

62.9%

 

62.8%

20

 

1999 BROADWAY

 

Denver, CO

 

680,255

 

66.2%

 

66.8%

 

66.9%

 

66.9%

21

 

1001 17TH STREET

 

Denver, CO

 

657,706

 

79.8%

 

89.9%

 

71.0%

 

75.6%

22

 

PLAZA SEVEN

 

Minneapolis, MN

 

330,096

 

83.6%

 

83.6%

 

82.7%

 

83.0%

23

 

PERSHING PLAZA

 

Atlanta, GA

 

160,145

 

78.1%

 

77.1%

 

78.1%

 

78.1%

24

 

600 17TH STREET

 

Denver, CO

 

611,163

 

77.9%

 

78.9%

 

76.9%

 

76.9%

 

 

OWNED PORTFOLIO

 

 

 

6,915,715

 

77.3%

 

78.1%

 

76.3%

 

77.1%

____________________
(1)

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

(2)

Average quarterly percentage is the average of the end of the month leased percentage for each of the three months during the quarter.

Franklin Street Properties Corp. Earnings Release

Supplementary Schedule G

Largest 20 Tenants – FSP Owned Portfolio

(Unaudited & Estimated)

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



As of June 30, 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

% of

 

 

Tenant

 

Sq Ft

 

Portfolio

1

 

CITGO Petroleum Corporation

 

248,399

 

3.6%

2

 

EOG Resources, Inc.

 

169,167

 

2.5%

3

 

US Government

 

168,573

 

2.4%

4

 

The Vail Corporation

 

164,636

 

2.4%

5

 

Lennar Homes, LLC

 

155,808

 

2.2%

6

 

Citicorp Credit Services, Inc

 

146,260

 

2.1%

7

 

Kaiser Foundation Health Plan

 

120,979

 

1.8%

8

 

Argo Data Resource Corporation

 

114,200

 

1.6%

9

 

Swift, Currie, McGhee & Hiers, LLP

 

101,296

 

1.5%

10

 

VMWare, Inc.

 

100,853

 

1.5%

11

 

Deluxe Corporation

 

98,922

 

1.4%

12

 

Ping Identity Corp.

 

89,856

 

1.3%

13

 

Centennial Resource Production, LLC

 

67,856

 

1.0%

14

 

Bread Financial Payments, Inc.

 

67,274

 

1.0%

15

 

PricewaterhouseCoopers LLP

 

66,304

 

1.0%

16

 

Hall and Evans LLC

 

65,878

 

0.9%

17

 

Cyxtera Management, Inc.

 

61,826

 

0.9%

18

 

Precision Drilling (US) Corporation

 

59,569

 

0.9%

19

 

Schwegman, Lundberg & Woessner, P.A.

 

58,263

 

0.8%

20

 

EMC Corporation

 

57,100

 

0.8%

 

 

Total

 

2,183,019

 

31.6%

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

 

Six Months Ended

 

 

June 30,

 

June 30,

(In thousands, except per share amounts)

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

Net income (loss)

 

$

(9,110

)

 

$

16,149

 

 

$

(13,268

)

 

$

9,689

 

Impairment and loan loss reserve

 

 

1,140

 

 

 

 

 

 

1,140

 

 

 

 

Gain on sale of properties, net

 

 

 

 

 

(20,626

)

 

 

 

 

 

(20,626

)

Depreciation & amortization

 

 

18,141

 

 

 

19,130

 

 

 

33,802

 

 

 

43,479

 

NAREIT FFO

 

 

10,171

 

 

 

14,653

 

 

 

21,674

 

 

 

32,542

 

Lease Acquisition costs

 

 

86

 

 

 

69

 

 

 

165

 

 

 

185

 

Funds From Operations (FFO)

 

$

10,257

 

 

$

14,722

 

 

$

21,839

 

 

$

32,727

 

 

 

 

 

 

 

 

 

 

Funds From Operations (FFO)

 

$

10,257

 

 

$

14,722

 

 

$

21,839

 

 

$

32,727

 

Loss on extinguishment of debt

 

 

 

 

 

167

 

 

 

 

 

 

167

 

Amortization of deferred financing costs

 

 

481

 

 

 

686

 

 

 

1,007

 

 

 

1,393

 

Shares issued as compensation

 

 

394

 

 

 

338

 

 

 

394

 

 

 

338

 

Straight-line rent

 

 

(1,688

)

 

 

(1,041

)

 

 

(2,904

)

 

 

(2,945

)

Tenant improvements

 

 

(5,453

)

 

 

(4,277

)

 

 

(7,330

)

 

 

(8,768

)

Leasing commissions

 

 

(1,327

)

 

 

(1,922

)

 

 

(4,359

)

 

 

(4,519

)

Non-investment capex

 

 

(6,736

)

 

 

(3,793

)

 

 

(11,801

)

 

 

(9,129

)

Adjusted Funds From Operations (AFFO)

 

$

(4,072

)

 

$

4,880

 

 

$

(3,154

)

 

$

9,264

 

 

 

 

 

 

 

 

 

 

Per Share Data

 

 

 

 

 

 

 

 

EPS

 

$

(0.09

)

 

$

0.15

 

 

$

(0.13

)

 

$

0.09

 

FFO

 

$

0.10

 

 

$

0.14

 

 

$

0.21

 

 

$

0.30

 

AFFO

 

$

(0.04

)

 

$

0.05

 

 

$

(0.03

)

 

$

0.09

 

 

 

 

 

 

 

 

 

 

Weighted average shares (basic and diluted)

 

 

103,193

 

 

 

107,359

 

 

 

103,441

 

 

 

107,344

 

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 mortgage loans, 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 loss on extinguishment of debt that is non-cash, (3) excluding our proportionate share of FFO and including distributions received, from non-consolidated REITs, (4) excluding the effect of straight-line rent, (5) plus the amortization of deferred financing costs, (6) plus the value of shares issued as compensation and (7) 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 extinguishment of debt, 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-Jun-22

 

31-Mar-22

 

(Dec)

 

Change

Region

 

 

 

 

 

 

 

 

 

 

East

 

363

 

$

475

 

 

$

497

 

 

$

(22

)

 

(4.4

)%

MidWest

 

1,130

 

 

4,850

 

 

 

3,897

 

 

 

953

 

 

24.5

%

South

 

2,796

 

 

5,611

 

 

 

5,817

 

 

 

(206

)

 

(3.5

)%

West

 

2,627

 

 

8,037

 

 

 

9,681

 

 

 

(1,644

)

 

(17.0

)%

Property NOI* from Operating Properties

 

6,916

 

 

18,973

 

 

 

19,892

 

 

 

(919

)

 

(4.6

)%

Dispositions and Redevelopment Properties (a)

 

-

 

 

146

 

 

 

(311

)

 

 

457

 

 

2.2

%

NOI*

 

6,916

 

$

19,119

 

 

$

19,581

 

 

$

(462

)

 

(2.4

)%

 

 

 

 

 

 

 

 

 

 

 

Sequential Same Store

 

 

 

$

18,973

 

 

$

19,892

 

 

$

(919

)

 

(4.6

)%

 

 

 

 

 

 

 

 

 

 

 

Less Nonrecurring

 

 

 

 

 

 

 

 

 

 

Items in NOI* (b)

 

 

 

 

1,258

 

 

 

273

 

 

 

985

 

 

(5.1

)%

 

 

 

 

 

 

 

 

 

 

 

Comparative

 

 

 

 

 

 

 

 

 

 

Sequential Same Store

 

 

 

$

17,715

 

 

$

19,619

 

 

$

(1,904

)

 

(9.7

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Three Months Ended

 

 

 

 

Reconciliation to Net income

 

 

 

30-Jun-22

 

31-Mar-22

 

 

 

 

Net loss

 

 

 

$

(9,110

)

 

$

(4,158

)

 

 

 

 

Add (deduct):

 

 

 

 

 

 

 

 

 

 

Loss on extinguishment of debt

 

 

 

 

 

 

 

 

 

 

 

 

Impairment and loan loss reserve

 

 

 

 

1,140

 

 

 

 

 

 

 

 

Gain on sale of properties, net

 

 

 

 

 

 

 

 

 

 

 

 

Management fee income

 

 

 

 

(267

)

 

 

(291

)

 

 

 

 

Depreciation and amortization

 

 

 

 

18,185

 

 

 

15,670

 

 

 

 

 

Amortization of above/below market leases

 

 

 

 

(45

)

 

 

(9

)

 

 

 

 

General and administrative

 

 

 

 

3,981

 

 

 

3,784

 

 

 

 

 

Interest expense

 

 

 

 

5,664

 

 

 

5,366

 

 

 

 

 

Interest income

 

 

 

 

(455

)

 

 

(451

)

 

 

 

 

Non-property specific items, net

 

 

 

 

26

 

 

 

(330

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NOI*

 

 

 

$

19,119

 

 

$

19,581

 

 

 

 

 

(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.

 

Contacts

Georgia Touma (877) 686-9496

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