EX-99 2 ex99-1.htm EARNINGS RELEASE

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

 

FRANKLIN STREET PROPERTIES CORP. ANNOUNCES

THIRD QUARTER AND NINE MONTH 2012 RESULTS

 

Wakefield, MA—October 30, 2012—Franklin Street Properties Corp. (the “Company”, “FSP”, “we” or “our”) (NYSE MKT: FSP), an investment firm specializing in real estate, announced today Funds From Operations (FFO) of $19.9 million or $0.24 per share for the third quarter ended September 30, 2012; and FFO of $58.5 million or $0.71 per share for the nine months ended September 30, 2012. The Company also announced a net loss of $9.0 million or $0.11 per share for the third quarter and net income of $2.2 million or $0.03 per share for the nine months ended September 30, 2012. The net loss for the third quarter included a provision for a loss on the sale of a property of $14.3 million or $0.17 per share. The Company also provided an update on other activities.

 

The Company evaluates its performance based on FFO, Net Income and EPS and believes each is an important measure. A reconciliation of Net Income to FFO, which is a non-GAAP financial measure, is provided on page 4 of this press release.

 

   Three Months Ended September 30,   Nine Months Ended September 30, 
(in 000's except per share data)  2012   2011   Increase
(Decrease)		   2012   2011   Increase
(Decrease)		 
                         
Net Income (loss)  $(8,998)  $3,314   $(12,312)  $2,174   $38,462   $(36,288)
                               
FFO  $19,913   $16,362   $3,551   $58,526   $52,752   $5,774 
Per Share Data:                              
EPS  $(0.11)  $0.04   $(0.15)  $0.03   $0.47   $(0.44)
FFO  $0.24   $0.20   $0.04   $0.71   $0.65   $0.06 
                               
Weighted average shares (diluted)   82,937    81,600    1,336    82,937    81,492    1,756 

 

Comparing results for the third quarter of 2012 to 2011, FFO increased $3.6 million or $0.04 per share for the third quarter of 2012 compared to the third quarter of 2011. The increase is primarily from the benefits of three property acquisitions made in late September 2011, October 2011 and July 2012 and increased interest income from secured real estate loans that benefitted the third quarter of 2012 compared to the third quarter of 2011. To a lesser extent, we had the benefit of increased leasing activity that increased occupancy in the real estate portfolio at September 30, 2012 to 89.9% compared to 89.7% at September 30, 2011. Net Income (loss) and EPS decreased $12.3 million or $0.15 per share. The decrease was primarily because the Company recorded a provision for a loss on a property held for sale. This decrease was partially offset by property acquisitions and increases to interest income from the secured real estate loans described above.

 

 
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Comparing results for the nine months ended September 30, 2012 to 2011, FFO increased $5.8 million or $0.06 per share for the nine months ended September 30, 2012 compared to the same period of 2011. The increase is primarily from property acquisitions and increases to interest income from secured real estate loans that benefitted the nine months ended September 30, 2012 compared to the same period in 2011 and was partially offset by the affect of our investment banking segment, which was discontinued during 2011. During the nine months ended September 30, 2011 results from our investment bank were about $3.3 million, which was not a factor during the nine months ended September 30, 2012. Net Income and EPS decreased $36.3 million or $0.44 per share. The decrease was primarily because the Company recorded a provision for a loss on a property held for sale; and from gains on sale of properties in January and June of 2011, which contributed $21.9 million or $0.27 per share to the first nine months of 2011. In addition, the decrease was affected by the discontinued operations of the investment bank described above and was partially offset by an increase from property acquisitions and increases to interest income from secured real estate loans, also described above.

 

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

 

“For the third quarter of 2012, FSP's profits as represented by FFO totaled approximately $19.9 million or $0.24 per share, an increase of approximately $0.9 million or $0.01 per share compared to the second quarter of 2012. Dividend distributions declared for the third quarter of 2012, which are payable on November 15, 2012, will be approximately $15.8 million or $0.19 per share.

 

Our directly-owned real estate portfolio of 37 properties, totaling approximately 7,439,195 square feet, was approximately 89.9% leased as of September 30, 2012, down from approximately 90.0% leased as of June 30, 2012. The drop in percentage of leased space of approximately 0.1% in the third quarter was due solely to the acquisition during the quarter of the 386,603 rentable square foot “value-add” suburban office building in Atlanta, Georgia known as “One Ravinia Drive”. The property portfolio excluding One Ravinia Drive increased its occupancy during the quarter. The occupancy at One Ravinia Drive also increased from 82% at the time of acquisition to 84.5% as of the close of the quarter. Our property portfolio is primarily suburban office assets. Most of the rental/leasing markets where our properties are located remained stable during the third quarter, both in terms of occupancy and rental rate levels. Within this environment, we continue to make steady leasing progress and anticipate higher year-end occupancy. Our property portfolio has relatively modest lease expirations over the next two years and, along with our improving occupancy levels, continues to allow overall tenant improvement expenditures and leasing costs to moderate in relation to the level of rental revenues being achieved.

 

There were two real estate investments completed in the third quarter of 2012. On July 5, 2012, FSP made a $33 million two-year bridge loan on a suburban office property located in the I-10 energy corridor of Houston, Texas. The property is a 14-story, multi-tenant Class A office building containing approximately 325,796 rentable square feet. The property is owned by FSP Energy Tower I Corp., a single-asset REIT affiliate of FSP, and is approximately 100% leased. The loan is secured by a first mortgage on the property. On July 31, 2012, FSP purchased a Class A suburban office property in Atlanta, Georgia known as “One Ravinia Drive” for $52.8 million. The property is 17 stories, contains approximately 386,603 rentable square feet and was approximately 82% leased at the time of acquisition to numerous tenants. The property is located in the “Central Perimeter” submarket of Atlanta. FSP and its affiliates have been investing in the suburban Atlanta office market since 2003 and currently own three properties there totaling approximately 907,000 square feet. In addition, we expect to close on the acquisition of a Class A suburban office property in Houston, Texas known as “Westchase I & II” for $154.8 million on or about November 1, 2012. The property is a two-building office complex totaling approximately 629,022 rentable square feet located in Houston’s Westchase District. Each building is 14 stories, and the entire property is approximately 95% leased to numerous tenants. FSP, its affiliates and predecessor have been investing in suburban Houston since 1993 and, with the addition of this asset, will own six properties totaling approximately 2,144,732 square feet in Houston. Additional potential real estate investment opportunities are actively being explored, and we would anticipate further real estate investments in the coming months.

 

 
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There were no property sales in the third quarter of 2012, although we continuously review and evaluate our directly-owned portfolio of 37 properties for potentially advantageous disposition opportunities. However, we plan to sell our 214,697 square foot Southfield, Michigan (greater Detroit) property within the next year. In recent years we have tried different strategies to improve the property’s performance but have been unsuccessful in those efforts. Consequently, we have taken a provision for a loss on its sale this quarter. We do not anticipate re-entering the greater Detroit property market. In addition, certain properties owned by some of our single-asset REIT affiliates, and in which FSP may have a financial interest, could become possible candidates for sale as they stabilize their occupancies, and the markets in which they are located become more attractive to potential acquirers. FSP Phoenix Tower Corp., a single asset REIT affiliate of FSP, owns a 34-story multi-tenant Class A office building containing approximately 623,944 square feet located in Houston, Texas that is currently being offered for sale. FSP has both an equity and first mortgage investment in FSP Phoenix Tower Corp. On July 27, 2012, FSP’s $106.2 million two-year bridge loan to its single-asset REIT affiliate, FSP 50 South Tenth Street Corp., was repaid in full from the proceeds of an institutional third-party first mortgage loan secured by the Minneapolis, Minnesota CBD property.

 

Importantly, on September 27, 2012, the Company completed a new $900 million credit facility with a group of banks. The new credit facility effectively:

 

1.expanded the size of our previous credit facility;
2.fixed the interest rate cost on a large portion of the new credit facility (that is currently outstanding) at an interest rate cost about equal to the cost of our previous credit facility’s 30-day variable revolver rate;
3.lowered our current interest rate costs on the revolver-portion of the new credit facility below the interest rate costs of our previous credit facility; and
4.extended the maturity of our previous credit facility.

I would refer shareholders to our press release and Current Report on Form 8-K dated September 27, 2012 for additional information regarding this new credit facility. We expect to use this new credit facility to facilitate our continuing growth plans. We look forward to the balance of 2012 and beyond.”

 

Dividend Announcement

 

On October 12, 2012, the Company announced that its Board of Directors declared a regular quarterly dividend for the three months ended September 30, 2012 of $0.19 per share of common stock payable on November 15, 2012 to stockholders of record on October 26, 2012.

 

Real Estate Update

 

Supplementary schedules provide property information for our owned real estate portfolio and for three non-consolidated REITs that we had preferred stock interests in as of September 30, 2012. The Company will also be filing a supplemental information package that will provide stockholders and the financial community with additional operating and financial data. The Company will file this supplemental information package with the SEC and make it available on its website at www.franklinstreetproperties.com.

__________________________________________________________________________________________

 

 
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A reconciliation of Net Income to FFO is shown below and a definition of FFO is provided on Supplementary Schedule I. We believe FFO is used broadly throughout the real estate investment trust (REIT) industry as a measurement of performance. We have included the NAREIT FFO definition in our table and note that other REITs may not define FFO in accordance with the current NAREIT definition or may interpret the current NAREIT definition differently than we do. Our computation of FFO may not be comparable to FFO reported by other REITs or real estate companies that define FFO differently.

 

Reconciliation of Net Income to FFO:  Three Months Ended   Nine Months Ended 
   September 30,   September 30, 
(In thousands, except per share amounts)  2012   2011   2012   2011 
                 
Net income (loss)  $(8,998)  $3,314   $2,174   $38,462 
(Gain) on sale of properties and Provision for loss on property held for sale of $14,300 less applicable income tax   14,300    —    14,300    (21,939)
GAAP (income) loss from non-consolidated REITs   (176)   (573)   (1,061)   (3,511)
Distributions from non-consolidated REITs   907    1,104    2,733    4,086 
Depreciation & amortization   13,779    12,332    40,279    35,191 
NAREIT FFO   19,812    16,177    58,425    52,289 
Acquisition costs of new properties   101    185    101    463 
Funds From Operations (FFO)  $19,913   $16,362   $58,526   $52,752 
                     
Per Share Data                    
EPS  $(0.11)  $0.04   $0.03   $0.47 
FFO  $0.24   $0.20   $0.71   $0.65 
                     
Weighted average shares (basic and diluted)   82,937    81,600    82,937    81,492 

 

__________________________________________________________________________________________

Today’s news release, along with other news about Franklin Street Properties Corp., is available on the Internet at www.franklinstreetproperties.com. We routinely post information that may be important to investors in the Investor Relations section of our website. We encourage investors to consult that section of our website regularly for important information about us and, if they are interested in automatically receiving news and information as soon as it is posted, to sign up for E-mail Alerts.

 

A conference call is scheduled for October 31, 2012 at 10:00 a.m. (ET) to discuss the third quarter 2012 results. To access the call, please dial 1-877-317-6789. Internationally, the call may be accessed by dialing 1-412-317-6789. To listen via live audio webcast, please visit the Webcasts & Presentations section in the Investor Relations section of the Company's website (www.franklinstreetproperties.com) at least ten minutes prior to the start of the call and follow the posted directions. The webcast will also be available via replay from the above location starting one hour after the call is finished.

 

 

 
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About Franklin Street Properties Corp.

 

Franklin Street Properties Corp., based in Wakefield, Massachusetts, is focused on achieving current income and long-term growth through investments in commercial properties. The majority of FSP's property portfolio is suburban office buildings, with select investments in certain central business district properties. FSP is a Maryland corporation that operates in a manner intended to qualify as a real estate investment trust (REIT) for federal income tax purposes. To learn more about FSP please visit our website at www.franklinstreetproperties.com.

 

Forward-Looking Statements

 

Statements made in this press release that state FSP’s or management’s intentions, beliefs, expectations, or predictions for the future may be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. This press release may also contain forward-looking statements based on current judgments and current knowledge of management, which are subject to certain risks, trends and uncertainties that could cause actual results to differ materially from those indicated in such forward-looking statements. Accordingly, readers are cautioned not to place undue reliance on forward-looking statements. Investors are cautioned that our forward-looking statements involve risks and uncertainty, including without limitation, economic conditions in the United States, disruptions in the debt markets, economic conditions in the markets in which we own properties, risks of a lessening of demand for the types of real estate owned by us, changes in government regulations and regulatory uncertainty, uncertainty about governmental fiscal policy, geopolitical events and expenditures that cannot be anticipated such as utility rate and usage increases, unanticipated repairs, additional staffing, insurance increases and real estate tax valuation reassessments. See the “Risk Factors” set forth in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2011, as the same may be updated from time to time in subsequent filings with the United States Securities and Exchange Commission. Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. We will not update any of the forward-looking statements after the date of this press release to conform them to actual results or to changes in our expectations that occur after such date, other than as required by law.

 

Franklin Street Properties Corp.

Earnings Release

Supplementary Information

Table of Contents

 

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

Supplementary Schedule A

Condensed Consolidated Income (Loss) Statements

(Unaudited)

 

   For the
Three Months Ended
September 30,		   For the
Nine Months Ended
September 30,		 
(in thousands, except per share amounts)  2012   2011   2012   2011 
                 
Revenue:                    
Rental  $38,251   $33,398   $110,124   $97,494 
Related party revenue:                    
Management fees and interest income from loans   3,485    1,037    9,146    2,995 
Other   39    7    112    20 
         Total revenue   41,775    34,442    119,382    100,509 
                     
Expenses:                    
Real estate operating expenses   9,639    8,889    26,940    25,590 
Real estate taxes and insurance   5,764    4,950    16,952    14,757 
Depreciation and amortization   13,572    12,183    39,647    34,671 
Selling, general and administrative   3,141    1,654    7,454    4,901 
Interest   4,187    3,419    11,901    9,405 
                     
        Total expenses   36,303    31,095    102,894    89,324 
                     
Income before interest income, equity in earnings of non-consolidated REITs and taxes   5,472    3,347    16,488    11,185 
Interest income   5    3    17    19 
Equity in earnings of non-consolidated REITs   176    573    1,061    2,707 
                     
Income before taxes on income   5,653    3,923    17,566    13,911 
Taxes on income   80    67    236    185 
                     
Income from continuing operations   5,573    3,856    17,330    13,726 
                     
Discontinued operations:                    
Income (loss)  from discontinued operations, net of income tax   (271)   (542)   (856)   2,797 
Gain on sale of properties and provision for loss on property held for sale of $14,300 less applicable income tax   (14,300)   —    (14,300)   21,939 
Total discontinued operations   (14,571)   (542)   (15,156)   24,736 
                     
Net income (loss)  $(8,998)  $3,314   $2,174   $38,462 
                     
Weighted average number of shares outstanding,                    
    basic and diluted   82,937    81,600    82,937    81,492 
                     
Earnings (loss) per share, basic and diluted, attributable to:                    
Continuing operations  $0.07   $0.05   $0.21   $0.17 
Discontinued operations   (0.18)   (.01)   (0.18)  $0.30 
Net income per share, basic and diluted  $(0.11)  $0.04   $0.03   $0.47 

 

 

 
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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)  2012   2011 
Assets:          
Real estate assets, net  $1,015,984   $991,225 
Acquired real estate leases, less accumulated amortization          
   of $35,282 and $31,189, respectively   92,717    91,613 
Investment in non-consolidated REITs   85,927    87,598 
Assets held for sale   685    15,355 
Cash and cash equivalents   23,962    23,813 
Restricted cash   546    493 
Tenant rent receivables, less allowance for doubtful accounts          
   of $1,340 and $1,235, respectively   1,182    1,460 
Straight-line rent receivable, less allowance for doubtful accounts          
   of $135 and $135, respectively   34,190    28,502 
Prepaid expenses   2,336    1,223 
Related party mortgage loan receivables   108,236    140,516 
Other assets   7,939    4,070 
Office computers and furniture, net of accumulated depreciation          
   of $547 and $428, respectively   528    468 
Deferred leasing commissions, net of accumulated amortization          
   of $11,489 and $9,139, respectively   21,702    22,325 
Total assets  $1,395,934   $1,408,661 
           
Liabilities and Stockholders’ Equity:          
Liabilities:          
Bank note payable  $82,000   $449,000 
Term loan payable   400,000    — 
Accounts payable and accrued expenses   26,462    26,446 
Accrued compensation   2,194    2,222 
Tenant security deposits   2,281    2,008 
Other liabilities: derivative liability   1,671    — 
Acquired unfavorable real estate leases, less accumulated amortization          
of $4,568 and $3,759, respectively   6,730    7,618 
Total liabilities   521,338    487,294 
           
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,
82,937,405 and 82,937,405 shares issued and outstanding, respectively		   8    8 
Additional paid-in capital   1,042,876    1,042,876 
Accumulated other comprehensive loss   (1,671)   — 
Accumulated distributions in excess of accumulated earnings   (166,617)   (121,517)
Total stockholders’ equity   874,596    921,367 
Total liabilities and stockholders’ equity  $1,395,934   $1,408,661 

 

 

 
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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)  2012   2011 
Cash flows from operating activities:          
Net income  $2,174   $38,462 
Adjustments to reconcile net income to net cash provided by operating activities:          
Depreciation and amortization expense   41,846    36,563 
Amortization of above market lease   56    (119)
(Gain) on sale of properties and provision for loss on property held for          
  sale of $14,300 less applicable income tax   14,300    (21,939)
Equity in earnings of non-consolidated REITs   (1,061)   (2,805)
Distributions from non-consolidated REITs   1,246    3,034 
Increase (decrease) in bad debt reserve   105    (365)
Changes in operating assets and liabilities:          
Restricted cash   (53)   (57)
Tenant rent receivables, net   173    869 
Straight-line rents, net   (3,498)   (7,404)
Lease acquisition costs   (2,235)   (55)
Prepaid expenses and other assets, net   (1,278)   171 
Accounts payable and accrued expenses   (25)   4,131 
Accrued compensation   (28)   (420)
Tenant security deposits   273    523 
Payment of deferred leasing commissions   (2,425)   (6,710)
Net cash provided by operating activities   49,570    43,879 
Cash flows from investing activities:          
Purchase of real estate assets, office computers and furniture   (49,209)   (155,320)
Acquired real estate leases   (14,376)   (58,955)
Investments in non-consolidated REITs   (1)   (10)
Distributions in excess of earnings from non-consolidated REITs   1,487    1,052 
Investment in related party mortgage loan receivable   (73,920)   (4,232)
Repayment of related party mortgage loan receivable   106,200    — 
Changes in deposits on real estate assets   —    200 
Investment in assets held for syndication, net   —    (2,427)
Proceeds received on sales of real estate assets   —    96,790 
Net cash used in investing activities   (29,819)   (122,902)
Cash flows from financing activities:          
Distributions to stockholders   (47,274)   (46,419)
Proceeds from equity offering, net   —    18,001 
Proceeds from offering   —    (536)
Borrowings under bank note payable   160,000    375,000 
Repayment of bank note payable   (527,000)   (209,968)
Borrowing of term loan payable   400,000    (74,850)
Deferred financing costs   (5,328)   (5,389)
Swap termination payment   —    (982)
Net cash used in financing activities   (19,602)   54,857 
Net increase (decrease) in cash and cash equivalents   149    (24,166)
Cash and cash equivalents, beginning of period   23,813    68,213 
Cash and cash equivalents, end of period  $23,962   $44,047 

 

 
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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
2012   88,523 1.2%
2013   423,414 5.9%
2014   411,131 5.7%
2015   835,285 11.6%
2016   925,979 12.8%
Thereafter (2)   4,540,166 62.8%
    7,224,498 100.0%

 

 

(1)Percentages are determined based upon square footage of expiring commercial leases and excludes the asset held for sale.
(2)Includes 623,131 square feet of current vacancies.

 

 

(dollars & square feet in thousands) As of September 30, 2012 (a)
  # of   % of   Square % of
State Properties Investment Portfolio   Feet Portfolio
             
Texas 10 $      291,470 28.7%   2,028 28.1%
Colorado 4 123,182 12.1%   790 10.9%
Georgia 2 108,321 10.7%   774 10.7%
Virginia 4 100,190 9.9%   684 9.5%
Minnesota 2 39,417 3.9%   626 8.7%
Missouri 3 66,437 6.5%   477 6.6%
North Carolina 3 67,386 6.6%   431 6.0%
Illinois 2 49,901 4.9%   372 5.2%
Maryland 1 53,459 5.3%   325 4.5%
Florida 1 45,906 4.5%   213 2.9%
Indiana 1 34,775 3.4%   205 2.8%
California 2 21,581 2.1%   182 2.5%
Washington 1 13,959 1.4%   117 1.6%
  36 $   1,015,984 100.0%   7,224 100.0%
             
(a) Excludes asset held for sale.            

 

 
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Franklin Street Properties Corp. Earnings Release

Supplementary Schedule E

Portfolio and Other Supplementary Information

(Unaudited & Approximated)

 

Capital Expenditures                        
Owned Portfolio  Six Months Ended   Three Months Ended   Nine Months Ended 
(in thousands)  30-Jun-12   30-Jun-11   30-Sep-12   30-Sep-11   30-Sep-12   30-Sep-11 
                         
Tenant improvements  $5,719   $5,721   $2,854   $5,093   $8,573   $10,814 
Deferred leasing costs   3,539    5,386    1,104    1,322    4,643    6,708 
Building improvements   1,749    1,325    711    754    2,460    2,079 
   $11,007   $12,432   $4,669   $7,169   $15,676   $19,601 

 

 

Square foot & leased percentages September 30,   December 31,
    2012   2011
         
Owned portfolio of commercial real estate (a)      
  Number of properties 37   36
  Square feet 7,439,195   7,052,068
  Leased percentage 90%   89%
         
Investments in non-consolidated REITs      
  Number of properties 3   3
  Square feet 2,016,260   2,001,542
  Leased percentage 68%   87%
         
Single Asset REITs (SARs) managed      
  Number of properties 13   13
  Square feet 3,322,589   3,322,639
  Leased percentage 85%   80%
         
Total owned, investments & managed properties (a)        
  Number of properties 53   52
  Square feet 12,778,044   12,376,249
  Leased percentage 85%   86%
         
(a) Includes asset held for sale.      
               

 

 

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

 

      Square % Leased % Interest
Single Asset REIT name City State Feet 30-Sep-12 Held
FSP 303 East Wacker Drive Corp. Chicago IL 857,245 45.5% 43.7%
FSP Grand Boulevard Corp. Kansas City MO 535,071 79.4% 27.0%
FSP Phoenix Tower Corp. Houston TX 623,944 89.3%  4.6%
      2,016,260 68.0%  

 

 

 
-11-

 

Franklin Street Properties Corp. Earnings Release

Supplementary Schedule F: Quarterly Information

(Unaudited)

 

(in thousands)                
   Q3   Q4   Q1   Q2 
   2011   2011   2012   2012 
Revenue:                    
  Rental  $33,398   $36,744   $36,303   $35,570 
  Related party revenue:                    
Management fees and interest income from loans   1,037    1,051    2,616    3,045 
  Other   7    29    34    39 
Total revenues   34,442    37,824    38,953    38,654 
Expenses:                    
Real estate operating expenses   8,889    9,486    8,697    8,604 
Real estate taxes and insurance   4,950    5,357    5,696    5,493 
Depreciation and amortization   12,183    12,951    13,071    13,004 
Selling, general and administrative   1,654    2,012    2,077    2,236 
Interest   3,419    3,261    3,677    4,037 
Total expenses   31,095    33,067    33,218    33,374 
                     
Income before interest income, equity in earnings of non-consolidated REITs and taxes on income   3,347    4,757    5,735    5,280 
Interest income   3    3    8    4 
Equity in earnings of non-consolidated REITs   573    978    391    494 
                     
Income before taxes on income   3,923    5,738    6,134    5,778 
Taxes on income   67    82    79    77 
                     
Income from continuing operations   3,856    5,656    6,055    5,701 
Discontinued operations:                    
Income from discontinued operations, net of tax   (542)   (594)   (317)   (268)
Provision for loss on sale of property   —    —    —    — 
Total discontinued operations   (542)   (594)   (317)   (268)
                     
Net income  $3,314   $5,062   $5,738   $5,433 
                     
                     
FFO calculations:                    
                     
Net income  $3,314   $5,062   $5,738   $5,433 
GAAP income from non-consolidated REITs   (573)   (978)   (391)   (494)
Distributions from non-consolidated REITs   1,104    970    929    898 
Acquisition costs   185    157    —    — 
Depreciation of real estate & intangible amortization   12,332    13,248    13,295    13,203 
                     
Funds From Operations (FFO)  $16,362   $18,459   $19,571   $19,040 

 

 

 
-12-

 

Franklin Street Properties Corp. Earnings Release

Supplementary Schedule G

Percentage of Leased Space

(Unaudited & Estimated)

 

        % Second % Third
        Leased (1) Quarter Leased (1) Quarter
      Square as of Average % as of Average %
  Property Name Location Feet 30-Jun-12 Leased (2) 30-Sep-12 Leased (2)
               
1 PARK SENECA Charlotte, NC 109,550 81.5% 80.9% 77.3% 78.2%
2 HILLVIEW CENTER Milpitas, CA 36,288 100.0% 100.0% 100.0% 100.0%
3 SOUTHFIELD (3) Southfield, MI 214,697 39.6% 38.5% 41.4% 40.5%
4 FOREST PARK Charlotte, NC 62,212 100.0% 100.0% 100.0% 100.0%
5 CENTENNIAL Colorado Springs, CO 110,405 85.4% 85.4% 85.4% 85.4%
6 MEADOW POINT Chantilly, VA 138,537 100.0% 100.0% 100.0% 100.0%
7 TIMBERLAKE Chesterfield, MO 232,766 93.2% 96.2% 97.0% 97.0%
8 FEDERAL WAY Federal Way, WA 117,010 47.0% 47.0% 47.0% 47.0%
9 NORTHWEST POINT Elk Grove Village, IL 176,848 100.0% 100.0% 100.0% 100.0%
10 TIMBERLAKE EAST Chesterfield, MO 116,197 97.0% 89.6% 97.0% 97.0%
11 PARK TEN Houston, TX 155,715 96.1% 91.1% 96.1% 96.1%
12 MONTAGUE San Jose, CA 145,951 100.0% 100.0% 100.0% 100.0%
13 ADDISON Addison, TX 293,787 95.8% 95.8% 98.4% 96.7%
14 COLLINS CROSSING Richardson, TX 298,766 87.8% 87.8% 90.0% 88.5%
15 GREENWOOD PLAZA Englewood, CO 197,527 48.9% 48.9% 48.9% 48.9%
16 RIVER CROSSING Indianapolis, IN 205,059 96.1% 94.6% 97.0% 96.7%
17 LIBERTY PLAZA Addison, TX 218,934 84.1% 78.9% 85.2% 85.2%
18 INNSBROOK Glen Allen, VA 298,456 98.3% 98.3% 98.3% 98.3%
19 380 INTERLOCKEN Broomfield, CO 240,184 89.5% 89.5% 89.5% 89.5%
20 BLUE LAGOON Miami, FLA 212,619 100.0% 100.0% 100.0% 100.0%
21 ELDRIDGE GREEN Houston, TX 248,399 100.0% 100.0% 100.0% 100.0%
22 WILLOW BEND Plano, TX 117,050 77.8% 77.8% 77.8% 77.8%
23 ONE OVERTON PARK Atlanta, GA 387,267 92.6% 92.3% 94.6% 94.6%
24 390 INTERLOCKEN Broomfield, CO 241,516 97.2% 96.9% 97.2% 97.2%
25 EAST BALTIMORE Baltimore, MD 325,445 58.2% 57.5% 57.2% 57.5%
26 PARK TEN PHASE II Houston, TX 156,746 100.0% 100.0% 100.0% 100.0%
27 LAKESIDE CROSSING I Maryland Heights, MO 127,778 100.0% 100.0% 100.0% 100.0%
28 LOUDOUN TECH Dulles, VA 135,888 100.0% 100.0% 100.0% 100.0%
29 4807 STONECROFT Chantilly, VA 111,469 100.0% 100.0% 100.0% 100.0%
30 EDEN BLUFF Eden Prairie, MN 153,028 100.0% 100.0% 100.0% 100.0%
31 121 SOUTH EIGHTH ST Minneapolis, MN 472,712 95.6% 94.4% 91.1% 92.6%
32 EMPEROR BOULEVARD Durham, NC 259,531 100.0% 100.0% 100.0% 100.0%
33 LEGACY TENNYSON CTR Plano, TX 202,600 100.0% 100.0% 100.0% 100.0%
34 ONE LEGACY Plano, TX 214,110 100.0% 100.0% 100.0% 100.0%
35 909 DAVIS Evanston, IL 195,245 94.8% 94.8% 97.9% 96.9%
36 1410 EAST RENNER Richardson, TX 122,300 100.0% 100.0% 100.0% 100.0%
37 ONE RAVINIA DRIVE Atlanta, GA 386,603 n/a n/a 84.5% 84.0%
               
  TOTAL WEIGHTED AVERAGE  7,439,195 90.0% 89.5% 89.9% 89.8%

 

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

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

(3) Asset held for sale at September 30, 2012

 

 
-13-

 

Franklin Street Properties Corp. Earnings Release

Supplementary Schedule H

Largest 20 Tenants – FSP Owned Portfolio

(Unaudited & Estimated)

 

 

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

 

  As of September 30, 2012 (a)      
        % of
  Tenant Sq Ft SIC Code Portfolio
1 TCF National Bank 268,252 60 3.7%
2 Quintiles Transnational Corp 259,531 87 3.6%
3 CITGO Petroleum Corporation 248,399 29 3.4%
4 Burger King Corporation 212,619 58 2.9%
5 Denbury Onshore LLC 202,600 13 2.8%
6 RGA Reinsurance Company 197,354 63 2.7%
7 SunTrust Bank 182,888 60 2.5%
8 Citicorp Credit Services, Inc 176,848 61 2.5%
9 C.H. Robinson Worldwide, Inc 153,028 47 2.1%
10 T-Mobile South, LLC dba T-Mobile 151,792 48 2.1%
11 Houghton Mifflin Harcourt Publishing Company 150,050 27 2.1%
12 Murphy Exploration & Production Company 144,677 13 2.0%
13 Giesecke & Devrient America, Inc. 135,888 73 1.9%
14 Monsanto Company 127,778 28 1.8%
15 AT&T Services, Inc. 122,300 48 1.7%
16 Vail Holdings, Inc. 122,232 79 1.7%
17 Northrop Grumman Systems Corporation 111,469 73 1.5%
18 Argo Data Resource Corporation 109,990 73 1.5%
19 Alliance Data Systems 96,749 73 1.3%
20 Federal National Mortgage Association 92,358 61 1.3%
  Total 3,266,802   45.1%
         
  (a) Based on rentable square footage excluding asset held for sale.      

 

 

 

 
-14-

Franklin Street Properties Corp. Earnings Release

Supplementary Schedule I

Definition of Funds From Operations (“FFO”),

 

 

The Company evaluates performance based on Funds From Operations, which we refer to as FFO, as management believes that FFO represents the most accurate measure of activity and is the basis for distributions paid to equity holders. The Company defines FFO as net income (computed in accordance with GAAP), excluding gains (or losses) from sales of property and acquisition costs of newly acquired properties that are not capitalized, plus depreciation and amortization, including amortization of acquired above and below market lease intangibles and impairment charges, and after adjustments to exclude non-cash income (or losses) from non-consolidated or Sponsored REITs, plus distributions received from non-consolidated or Sponsored REITs.

 

FFO should not be considered as an alternative to net income (determined in accordance with GAAP), nor as an indicator of the Company’s financial performance, nor as an alternative to cash flows from operating activities (determined in accordance with GAAP), nor as a measure of the Company’s liquidity, nor is it necessarily indicative of sufficient cash flow to fund all of the Company’s needs.

 

Other real estate companies and the National Association of Real Estate Investment Trusts, or NAREIT, may define this term in a different manner. We have included the NAREIT FFO definition in our table and note that other REITs may not define FFO in accordance with the current NAREIT definition or may interpret the current NAREIT definition differently than we do.

 

We believe that in order to facilitate a clear understanding of the results of the Company, FFO should be examined in connection with net income and cash flows from operating, investing and financing activities in the consolidated financial statements.