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,
2023.
George J. Carter, Chairman and Chief Executive Officer,
commented as follows:
“As the fourth quarter of 2023 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. We will
seek to increase shareholder value by continuing to (1) pursue the
sale of select properties where we believe that short to
intermediate term valuation potential has been reached and (2)
strive to increase occupancy through the leasing of vacant space.
We intend to use proceeds from property dispositions primarily for
debt reduction.
During the third quarter of 2023, on August 9, 2023, we sold our
only single-story-flex office property, which contains
approximately 64,198 square feet, located in Charlotte, North
Carolina and known as Forest Park, for gross proceeds of
$9,200,000, or approximately $143 per square foot. Subsequent to
the end of the third quarter of 2023, on October 26, 2023, we sold
an office property containing approximately 214,110 square feet
located in Plano, Texas, known as One Legacy, for gross proceeds of
$48,000,000, or approximately $224 per square foot.
As a result of our recent property dispositions and our ongoing
operations, as of November 7, 2023, we had cash, or cash
equivalents on our balance sheet of approximately $73,500,000. We
intend to use these funds primarily for continued debt reduction.
We are also currently engaged in discussions with our existing
lender group regarding extending or refinancing our remaining debt
and anticipate further property dispositions this year, which we
estimate will result in additional aggregate gross proceeds ranging
between $108,000,000 and $153,000,000. Proceeds from any additional
property dispositions are also intended to be used primarily for
debt reduction.
We look forward to the remainder of 2023 and beyond with
anticipation and optimism.”
Financial Highlights
- GAAP net loss was $45.7 million and $51.7 million, or $0.44 and
$0.50 per basic and diluted share for the three and nine months
ended September 30, 2023, respectively.
- Funds From Operations (FFO) was $7.5 million and $23.0 million,
or $0.07 and $0.22 per basic and diluted share, for the three and
nine months ended September 30, 2023, respectively.
Leasing Highlights
- During the nine months ended September 30, 2023, we leased
approximately 571,000 square feet, including 206,000 square feet of
new leases.
- Our directly owned real estate portfolio of 19 owned
properties, totaling approximately 6.0 million square feet, was
approximately 74.8% leased as of September 30, 2023, compared to
approximately 75.6% leased as of December 31, 2022. The decrease in
the leased percentage is primarily a result of lease expirations
and property dispositions, which was partially offset by leasing
completed during the nine months ended September 30, 2023.
- The weighted average GAAP base rent per square foot achieved on
leasing activity during the nine months ended September 30, 2023,
was $29.35, or 7.2% higher than average rents in the respective
properties for the year ended December 31, 2022. The average lease
term on leases signed during the nine months ended September 30,
2023, was 6.3 years compared to 6.4 years during the year ended
December 31, 2022. Overall, the portfolio weighted average rent per
occupied square foot was $31.46 as of September 30, 2023, compared
to $30.48 as of December 31, 2022.
- We are currently tracking more than 900,000 square feet of new
prospective tenants, including approximately 500,000 square feet of
prospective tenants that have identified our properties 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.
Investment Highlights
- We remain committed to seeking to sell select properties during
2023 and using proceeds primarily for debt reduction.
- Since December 2020, we have completed the sale of properties
resulting in gross proceeds of approximately $909 million and
reflecting an average price per square foot of approximately
$220.
- On August 9, 2023, we completed the sale of Forest Park in
Charlotte, North Carolina for approximately $9.2 million in gross
proceeds. On August 10, 2023, we used the net proceeds from this
sale and cash on hand to repay $10 million of the BMO Term
Loan.
- Subsequent to September 30, 2023, on October 26, 2023, we
completed the sale of One Legacy in Plano, Texas for approximately
$48 million in gross proceeds. Proceeds are intended to be used
primarily for the repayment of debt.
- We have entered into purchase and sale agreements with three
different (and unrelated) purchasers for the potential sale of
three properties that would result in aggregate gross proceeds of
approximately $153 million. The transactions remain subject to
customary closing conditions, including without limitation,
successful completion by one of the purchasers of a due diligence
inspection period. If successful, the transactions are expected to
close during the fourth quarter of 2023 and the proceeds are
intended to be used primarily for the repayment of debt.
Dividends
- On October 6, 2023, we announced that our Board of Directors
declared a quarterly cash dividend for the three months ended
September 30, 2023, of $0.01 per share of common stock that will be
paid on November 9, 2023, to stockholders of record on October 20,
2023.
Consolidation of Sponsored
REIT
As of January 1, 2023, we consolidated the operations of our
Monument Circle sponsored REIT into our financial statements. On
October 29, 2021, we agreed to amend and restate our existing loan
to Monument Circle that is secured by a mortgage on real estate
owned by Monument Circle, which we refer to as the Sponsored REIT
Loan. The amended and restated Sponsored REIT Loan extended the
maturity date from December 6, 2022 to June 30, 2023 and was
further extended to September 30, 2023 on June 26, 2023), increased
the aggregate principal amount of the loan from $21 million to $24
million, and included certain other modifications. On September 26,
2023, the maturity date was further extended to September 30, 2024.
In consideration of our agreement to amend and restate the
Sponsored REIT Loan, we obtained from the stockholders of Monument
Circle the right to vote their shares in favor of any sale of the
property owned by Monument Circle any time on or after January 1,
2023. As a result of our obtaining this right to vote shares, GAAP
variable interest entity (VIE) rules required us to consolidate
Monument Circle as of January 1, 2023. A gain on consolidation of
approximately $0.4 million was recognized in the three months ended
March 31, 2023.
Additional information about the consolidation of Monument
Circle can be found in Note 1, “Organization, Properties, Basis of
Presentation, Financial Instruments, and Recent Accounting
Standards – Variable Interest Entities (VIEs)” and Note 2, “Related
Party Transactions and Investments in Non-Consolidated Entities -
Management fees and interest income from loans”, in the Notes to
Consolidated Financial Statements included in our Quarterly Report
on Form 10-Q for the quarter ended September 30, 2023.
Non-GAAP Financial
Information
A reconciliation of Net income to FFO, Adjusted Funds From
Operations (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.
2023 Net Income, FFO and Disposition
Guidance
At this time, due primarily to economic conditions and
uncertainty surrounding the timing and amount of proceeds received
from property dispositions, we are continuing suspension of Net
Income, FFO and property disposition guidance (other than our
expectations for property dispositions for the balance of the year
set forth above).
Real Estate Update
Supplementary schedules provide property information for the
Company’s owned and consolidated properties as of September 30,
2023. 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 8, 2023, at 11:00
a.m. (ET) to discuss the third quarter 2023 results. To access the
call, please dial 888-440-4368 and use conference ID 5398803.
Internationally, the call may be accessed by dialing 646-960-0856
and using conference ID 5398803. 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 expectations for future potential leasing activity,
expectations for future potential property dispositions, the
payment of 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, our inability to extend and/or refinance our debt or
effect asset sales sufficient to repay such debt prior to the
maturity dates thereof, inflation rates, 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, and
any delays in the timing of 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, 2022 and “Risk Factors” in Part 1, Item 1A of
our Quarterly Report on Form 10-Q for the three months ended
September 30, 2023, which 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
Nine Months Ended
September 30,
September 30,
(in thousands, except per share
amounts)
2023
2022
2023
2022
Revenue:
Rental
$
36,903
$
40,366
$
110,927
$
122,994
Related party revenue:
Management fees and interest income from
loans
—
466
—
1,393
Other
—
4
9
17
Total revenue
36,903
40,836
110,936
124,404
Expenses:
Real estate operating expenses
12,797
13,369
37,627
38,547
Real estate taxes and insurance
7,115
8,951
21,257
26,713
Depreciation and amortization
13,408
15,148
42,780
49,004
General and administrative
3,265
3,232
10,849
10,997
Interest
6,209
6,110
18,099
17,140
Total expenses
42,794
46,810
130,612
142,401
Loss on extinguishment of debt
(39
)
(78
)
(106
)
(78
)
Gain on consolidation of Sponsored
REIT
—
—
394
—
Impairment and loan loss reserve
—
(717
)
—
(1,857
)
Gain (loss) on sale of properties and
impairment of assets held for sale, net
(39,671
)
24,077
(32,085
)
24,077
Income (loss) before taxes
(45,601
)
17,308
(51,473
)
4,145
Tax expense
70
62
212
167
Net income (loss)
$
(45,671
)
$
17,246
$
(51,685
)
$
3,978
Weighted average number of shares
outstanding, basic and diluted
103,430
103,236
103,333
103,372
Net income (loss) per share, basic and
diluted
$
(0.44
)
$
0.17
$
(0.50
)
$
0.04
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)
2023
2022
Assets:
Real estate assets:
Land
$
114,298
$
126,645
Buildings and improvements
1,183,744
1,388,869
Fixtures and equipment
10,377
11,151
1,308,419
1,526,665
Less accumulated depreciation
386,838
423,417
Real estate assets, net
921,581
1,103,248
Acquired real estate leases, less
accumulated amortization of $19,660 and $20,243, respectively
7,447
10,186
Assets held for sale
132,659
—
Cash, cash equivalents and restricted
cash
13,043
6,632
Tenant rent receivables
2,854
2,201
Straight-line rent receivable
43,253
52,739
Prepaid expenses and other assets
5,601
6,676
Related party mortgage loan receivable,
less allowance for credit loss of $0 and $4,237, respectively
—
19,763
Other assets: derivative asset
—
4,358
Office computers and furniture, net of
accumulated depreciation of $1,166 and $1,115, respectively
109
154
Deferred leasing commissions, net of
accumulated amortization of $17,143 and $19,043, respectively
25,226
35,709
Total assets
$
1,151,773
$
1,241,666
Liabilities and Stockholders’ Equity:
Liabilities:
Bank note payable
$
80,000
$
48,000
Term loans payable, less unamortized
financing costs of $390 and $250, respectively
114,610
164,750
Series A & Series B Senior Notes, less
unamortized financing costs of $371 and $494, respectively
199,629
199,506
Accounts payable and accrued expenses
36,857
50,366
Accrued compensation
3,179
3,644
Tenant security deposits
5,631
5,710
Lease liability
444
759
Acquired unfavorable real estate leases,
less accumulated amortization of $384 and $574, respectively
97
195
Total liabilities
440,447
472,930
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, 103,430,353 and 103,235,914 shares
issued and outstanding, respectively
10
10
Additional paid-in capital
1,335,091
1,334,776
Accumulated other comprehensive income
1,417
4,358
Accumulated distributions in excess of
accumulated earnings
(625,192
)
(570,408
)
Total stockholders’ equity
711,326
768,736
Total liabilities and stockholders’
equity
$
1,151,773
$
1,241,666
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)
2023
2022
Cash flows from operating
activities:
Net income (loss)
$
(51,685
)
$
3,978
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization expense
44,705
50,472
Amortization of above and below market
leases
(39
)
(88
)
Amortization of other comprehensive income
into interest expense
(2,789
)
—
Shares issued as compensation
315
394
Loss on extinguishment of debt
106
78
Gain on consolidation of Sponsored
REIT
(394
)
—
Impairment and loan loss reserve
—
1,857
(Gain) loss on sale of properties and
impairment of assets held for sale, net
32,085
(24,077
)
Changes in operating assets and
liabilities:
Tenant rent receivables
(653
)
645
Straight-line rents
427
(4,064
)
Lease acquisition costs
(903
)
(2,659
)
Prepaid expenses and other assets
(644
)
(1,670
)
Accounts payable and accrued expenses
(2,516
)
(6,388
)
Accrued compensation
(465
)
(1,545
)
Tenant security deposits
(79
)
(493
)
Payment of deferred leasing
commissions
(5,926
)
(7,086
)
Net cash provided by operating
activities
11,545
9,354
Cash flows from investing
activities:
Property improvements, fixtures and
equipment
(26,024
)
(38,035
)
Consolidation of Sponsored REIT
3,048
—
Proceeds received from sales of
properties
37,062
102,007
Net cash provided by investing
activities
14,086
63,972
Cash flows from financing
activities:
Distributions to stockholders
(3,099
)
(52,956
)
Proceeds received from termination of
interest rate swap
4,206
—
Stock repurchases
—
(4,843
)
Borrowings under bank note payable
67,000
80,000
Repayments of bank note payable
(35,000
)
(15,000
)
Repayments of term loans payable
(50,000
)
(110,000
)
Deferred financing costs
(2,327
)
(2,561
)
Net cash used in financing activities
(19,220
)
(105,360
)
Net increase (decrease) in cash, cash
equivalents and restricted cash
6,411
(32,034
)
Cash, cash equivalents and restricted
cash, beginning of year
6,632
40,751
Cash, cash equivalents and restricted
cash, end of period
$
13,043
$
8,717
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
2023
89,611
1.4
%
2024
557,694
9.0
%
2025
442,352
7.1
%
2026
637,257
10.3
%
2027
339,790
5.5
%
Thereafter (2)
4,139,756
66.7
%
6,206,460
100.0
%
___________________ (1)
Percentages are determined based upon total square footage.
(2)
Includes 1,714,644 square feet of vacancies at our owned and
consolidated properties as of September 30, 2023.
(dollars & square feet in 000's)
As of September 30, 2023
% of
Square
% of
State
Properties
Investment
Portfolio
Feet
Portfolio
Colorado
4
$
454,322
49.3
%
2,140
34.5
%
Texas (a)
9
296,879
32.2
%
2,423
39.1
%
Georgia (a)
1
-
0.0
%
160
2.6
%
Minnesota
3
118,218
12.8
%
758
12.2
%
Virginia
1
32,723
3.6
%
298
4.8
%
Florida (a)
1
-
0.0
%
213
3.4
%
Indiana
1
19,439
2.1
%
214
3.4
%
Total
20
$
921,581
100.0
%
6,206
100.0
%
________________________
(a)
Each state has one property that was
classified as an asset held for sale as of September 30, 2023.
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-23
30-Jun-23
30-Sep-23
30-Sep-23
Tenant improvements
$
3,047
$
4,381
$
3,653
$
11,081
Deferred leasing costs
908
3,230
1,114
5,252
Non-investment capex
2,967
2,042
1,775
6,784
$
6,922
$
9,653
$
6,542
$
23,117
(in thousands)
For the Three Months Ended
Year Ended
31-Mar-22
30-Jun-22
30-Sep-22
31-Dec-22
31-Dec-22
Tenant improvements
$
1,877
$
5,453
$
6,813
$
7,508
$
21,651
Deferred leasing costs
3,032
1,327
2,053
1,152
7,564
Non-investment capex
5,065
6,736
9,289
9,074
30,164
$
9,974
$
13,516
$
18,155
$
17,734
$
59,379
Square foot & leased
percentages
September 30,
December 31,
2023
2022
Owned Properties:
Number of properties (a)
19
21
Square feet
5,992,700
6,239,530
Leased percentage
74.8
%
75.6
%
Consolidated Property - Single Asset
REIT (SAR):
Number of properties
1
—
Square feet
213,760
—
Leased percentage
4.1
%
Total Owned and Consolidated
Properties:
Number of properties
20
21
Square feet
6,206,460
6,239,530
Leased percentage
72.4
%
75.6
%
(a)
Includes properties that were classified
as an asset held for sale as of September 30, 2023.
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-23
Leased (2)
30-Sep-23
Leased (2)
FOREST PARK (3)
Charlotte, NC
—
78.4
%
78.4
%
(3
)
(3
)
1
PARK TEN
Houston, TX
157,609
90.8
%
90.8
%
83.8
%
83.8
%
2
PARK TEN PHASE II
Houston, TX
156,746
95.0
%
95.0
%
95.0
%
95.0
%
3
GREENWOOD PLAZA
Englewood, CO
196,236
66.3
%
66.3
%
66.3
%
66.3
%
4
ADDISON
Addison, TX
289,333
83.0
%
83.0
%
83.0
%
83.0
%
5
COLLINS CROSSING
Richardson, TX
300,887
97.1
%
97.1
%
85.5
%
91.8
%
6
INNSBROOK
Glen Allen, VA
298,183
81.3
%
81.3
%
81.3
%
81.3
%
7
LIBERTY PLAZA
Addison, TX
217,841
71.6
%
71.8
%
78.3
%
76.1
%
8
BLUE LAGOON (5)
Miami, FL
213,182
98.5
%
98.5
%
98.5
%
98.5
%
9
ELDRIDGE GREEN
Houston, TX
248,399
100.0
%
100.0
%
100.0
%
100.0
%
10
121 SOUTH EIGHTH ST
Minneapolis, MN
298,121
79.6
%
82.2
%
79.6
%
79.6
%
11
801 MARQUETTE AVE
Minneapolis, MN
129,691
91.8
%
91.8
%
91.8
%
91.8
%
12
LEGACY TENNYSON CTR
Plano, TX
209,461
62.5
%
53.5
%
67.3
%
65.7
%
13
ONE LEGACY (5)
Plano, TX
214,110
73.8
%
73.8
%
71.3
%
72.1
%
14
WESTCHASE I & II
Houston, TX
629,025
58.7
%
58.7
%
60.7
%
60.1
%
15
1999 BROADWAY
Denver, CO
682,639
61.0
%
61.6
%
57.5
%
59.8
%
16
1001 17TH STREET
Denver, CO
648,861
71.0
%
71.0
%
71.1
%
71.4
%
17
PLAZA SEVEN
Minneapolis, MN
330,096
64.4
%
64.3
%
59.3
%
61.0
%
18
PERSHING PLAZA (5)
Atlanta, GA
160,145
79.8
%
79.8
%
79.8
%
79.8
%
19
600 17TH STREET
Denver, CO
612,135
80.8
%
80.6
%
80.8
%
80.8
%
OWNED PORTFOLIO
5,992,700
75.7
%
75.6
%
74.8
%
75.4
%
20
MONUMENT CIRCLE (4)
Indianapolis, IN
213,760
4.1
%
4.1
%
4.1
%
4.1
%
OWNED & CONSOLIDATED
PORTFOLIO
6,206,460
73.3
%
73.2
%
72.4
%
72.9
%
__________________
(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)
Property was classified as an asset held
for sale as of June 30, 2023 and was sold on August 9, 2023.
(4)
Consolidated property as of January 1,
2023, which was previously a managed property.
(5)
Properties were classified as assets held
for sale as of September 30, 2023.
Franklin Street Properties Corp.
Earnings Release
Supplementary Schedule G
Largest 20 Tenants – FSP Owned
and Consolidated Portfolio
(Unaudited & Estimated)
The following table includes the
largest 20 tenants in FSP’s owned and consolidated portfolio based
on total square feet:
As of September 30, 2023
% of
Tenant
Sq Ft
Portfolio
1
CITGO Petroleum Corporation
248,399
4.0%
2
EOG Resources, Inc.
169,167
2.7%
3
US Government
168,573
2.7%
4
Lennar Homes, LLC
155,808
2.5%
5
Kaiser Foundation Health Plan, Inc.
120,979
1.9%
6
Swift, Currie, McGhee & Hiers, LLP
101,296
1.6%
7
Commonwealth of Virginia
100,010
1.6%
8
Deluxe Corporation
98,922
1.6%
9
Ping Identity Corp.
89,856
1.5%
10
Argo Data Resource Corporation
85,650
1.4%
11
Permian Resources Operating, LLC
67,856
1.1%
12
Bread Financial Payments, Inc.
67,274
1.1%
13
PwC US Group
66,304
1.1%
14
Hall and Evans LLC
65,878
1.0%
15
Cyxtera Management, Inc.
61,826
1.0%
16
Precision Drilling (US) Corporation
59,569
1.0%
17
EMC Corporation
57,100
0.9%
18
ID Software, LLC
57,100
0.9%
19
Olin Corporation
54,080
0.9%
20
Unique Vacations, Inc.
53,119
0.9%
Total
1,948,766
31.4%
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 Loss to FFO and
AFFO:
Three Months Ended
Nine Months Ended
September 30,
September 30,
(In thousands, except per share
amounts)
2023
2022
2023
2022
Net income (loss)
$
(45,671
)
$
17,246
$
(51,685
)
$
3,978
Gain on consolidation of Sponsored
REIT
—
—
(394
)
—
Impairment and loan loss reserve
—
717
—
1,857
(Gain) loss on sale of properties and
impairment of assets held for sale, net
39,671
(24,077
)
32,085
(24,077
)
Depreciation & amortization
13,400
15,114
42,742
48,916
NAREIT FFO
7,400
9,000
22,748
30,674
Lease Acquisition costs
109
41
278
206
Funds From Operations (FFO)
$
7,509
$
9,041
$
23,026
$
30,880
Funds From Operations (FFO)
$
7,509
$
9,041
$
23,026
$
30,880
Loss on extinguishment of debt
39
78
106
78
Amortization of deferred financing
costs
665
461
1,926
1,468
Shares issued as compensation
—
—
315
394
Straight-line rent
106
(1,160
)
428
(4,064
)
Tenant improvements
(3,653
)
(6,813
)
(11,081
)
(14,143
)
Leasing commissions
(1,114
)
(2,053
)
(5,252
)
(6,412
)
Non-investment capex
(1,775
)
(9,289
)
(6,784
)
(21,090
)
Adjusted Funds From Operations (AFFO)
$
1,777
$
(9,735
)
$
2,684
$
(12,889
)
Per Share Data
EPS
$
(0.44
)
$
0.17
$
(0.50
)
$
0.04
FFO
$
0.07
$
0.09
$
0.22
$
0.30
AFFO
$
0.02
$
(0.09
)
$
0.03
$
(0.12
)
Weighted average shares (basic and
diluted)
103,430
103,236
103,333
103,372
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 all periods presented. We 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-23
30-Jun-23
(Dec)
Change
Region
East
298
$
239
$
343
$
(104
)
(30.3
)%
MidWest
758
1,396
1,718
(322
)
(18.7
)%
South
2,797
8,532
8,128
404
5.0
%
West
2,140
6,505
6,412
93
1.5
%
Property NOI* from Owned Properties
5,993
16,672
16,601
71
0.4
%
Disposition and Acquisition Properties
(a)
213
(68
)
(30
)
(38
)
(0.2
)%
NOI*
6,206
$
16,604
$
16,571
$
33
0.2
%
Sequential Same Store
$
16,672
$
16,601
$
71
0.4
%
Less Nonrecurring
Items in NOI* (b)
485
301
184
(1.1
)%
Comparative
Sequential Same Store
$
16,187
$
16,300
$
(113
)
(0.7
)%
Reconciliation to
Three Months Ended
Three Months Ended
Net income (loss)
30-Sep-23
30-Jun-23
Net income (loss)
$
(45,671
)
$
(8,420
)
Add (deduct):
Loss on extinguishment of debt
39
—
Gain on sale of properties, net
39,671
806
Management fee income
(460
)
(427
)
Depreciation and amortization
13,409
14,645
Amortization of above/below market
leases
(9
)
(12
)
General and administrative
3,265
3,768
Interest expense
6,209
6,084
Non-property specific items, net
151
127
NOI*
$
16,604
$
16,571
(a)
We define Disposition and Acquisition Properties as properties
that were sold or acquired or consolidated and 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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231107232256/en/
Georgia Touma (877) 686-9496
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