Franklin Street Properties Corp. (the “Company”, “FSP”, “we” or
“our”) (NYSE American: FSP), a real estate investment trust (REIT),
announced its results for the fourth quarter and the year ended
December 31, 2022.
George J. Carter, Chairman and Chief Executive Officer,
commented as follows:
“As the first 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 (1) pursuing the sale of
select properties where we believe that short to intermediate term
valuation potential has been reached and (2) striving to lease
vacant space. We intend to use proceeds from property dispositions
primarily for debt reduction.
We look forward to 2023 and beyond with anticipation and
optimism.”
Financial Highlights
- GAAP net loss was $2.9 million or $0.03 per basic and diluted
share for the three months ended December 31, 2022 and GAAP net
income was $1.1 million or $0.01 per basic and diluted share, for
the year ended December 31, 2022.
- Funds From Operations (FFO) was $10.5 million and $41.3
million, or $0.10 and $0.40 per basic and diluted share, for the
three and twelve months ended December 31, 2022, respectively.
- Adjusted Funds From Operations (AFFO) was a loss of $0.08 and
$0.21 per basic and diluted share for the three and twelve months
ended December 31, 2022, respectively.
- During the three and twelve months ended December 31, 2022, we
repaid approximately $27 million and $137 million of debt,
respectively, including $110 million on September 6, 2022 as
repayment in full of a former term loan.
- Subsequent to quarter end, on February 10, 2023, we entered
into an amendment to the credit agreement evidencing our $165
million term loan. On February 10, 2023, as part of the amendment
to credit agreement, we repaid a $40 million portion of this term
loan, so that $125 million remains outstanding. In addition, on or
before April 1, 2024, we are required to repay an additional $25
million of the term loan. The amendment, among other items,
extended the maturity date from January 31, 2024 to October 1,
2024, changed the interest rate from a number of basis points over
LIBOR depending on our credit rating to 300 basis points over SOFR,
and made certain changes to conditions and covenants.
- Subsequent to quarter end, on February 10, 2023, we entered
into an amendment to our revolving line of credit agreement. The
amendment, among other items, extended the maturity date from
January 12, 2024 to October 1, 2024, reduced availability from
$237.5 million to $150 million, with further reductions to $125
million effective October 1, 2023 and to $100 million effective
April 1, 2024, changed the interest rate from a number of basis
points over SOFR depending on our credit rating to 300 basis points
over SOFR, and made certain changes to conditions and
covenants.
Leasing Highlights
- During the year ended December 31, 2022, we leased
approximately 435,000 square feet, including 275,000 square feet of
new leases.
- Our directly owned real estate portfolio of 21 owned
properties, totaling approximately 6.2 million square feet, was
approximately 75.6% leased as of December 31, 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 year ended December 31, 2022 and property
dispositions.
- The weighted average GAAP base rent per square foot achieved on
leasing activity during the year ended December 31, 2022 was
$33.27, or 10.6% 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 during the year ended
December 31, 2022 was 6.4 years compared to 7.7 years during the
year ended December 31, 2021. Overall the portfolio weighted
average rent per occupied square foot was $30.48 as of December 31,
2022 compared to $30.60 as of December 31, 2021.
- Subsequent to quarter end, we are currently tracking
approximately 500,000 square feet of new prospective tenants,
including approximately 300,000 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
- On December 28, 2022, FSP completed the sale of 909 Davis in
Evanston, Illinois for approximately $27.8 million in gross
proceeds and recorded a gain of approximately $3.9 million.
- During 2022, we closed on dispositions that resulted in
approximately $130.3 million total aggregate gross proceeds and we
repaid approximately $137 million in debt.
- We remain committed to selling select properties during 2023
and using proceeds primarily for debt reduction.
- At this time, due primarily to economic conditions and
uncertainty surrounding the timing and amount of proceeds received
from property dispositions, we are suspending property disposition
guidance.
- We will continue to provide quarterly updates on any
disposition activity.
Stock Repurchases
- During the first quarter of 2022, we repurchased approximately
847,000 shares of our common stock for an aggregate purchase price
of approximately $4.8 million. We did not repurchase any shares of
our common stock during the remainder of 2022.
- Subsequent to quarter end, on February 10, 2023, we disclosed
in a Current Report on Form 8-K that our Board of Directors
discontinued its previous authorization to repurchase up to $50
million of our common stock from time to time in the open market,
privately negotiated transactions or other manners as permitted by
federal securities laws. We intend to use proceeds from property
dispositions primarily for debt reduction.
Dividends
- On January 13, 2023, we announced that our Board of Directors
declared a quarterly cash dividend for the three months ended
December 31, 2022 of $0.01 per share of common stock that will be
paid on February 16, 2023 to stockholders of record on January 27,
2023.
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.
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 and FFO guidance, and we are also suspending property
disposition guidance.
Real Estate Update
Supplementary schedules provide property information for the
Company’s owned and managed real estate portfolio as of December
31, 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 February 15, 2023 at 11:00
a.m. (ET) to discuss the fourth quarter 2022 results. To access the
call, please dial 1-844-200-6205 and use access code 758069.
Internationally, the call may be accessed by dialing 1-929-526-1599
and using access code 758069. 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, 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, 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 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, 2022, 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
Year Ended
December 31,
December 31,
(in thousands, except per share
amounts)
2022
2021
2022
2021
Revenue:
Rental
$
40,745
$
42,910
$
163,739
$
207,581
Related party revenue:
Management fees and interest income from
loans
462
454
1,855
1,700
Other
4
8
21
77
Total revenue
41,211
43,372
165,615
209,358
Expenses:
Real estate operating expenses
14,273
15,217
52,820
60,881
Real estate taxes and insurance
7,907
6,600
34,620
41,061
Depreciation and amortization
14,804
16,165
63,808
78,544
General and administrative
2,888
4,041
13,885
15,898
Interest
5,668
5,691
22,808
32,273
Total expenses
45,540
47,714
187,941
228,657
Loss on extinguishment of debt
—
(498)
(78)
(901)
Impairment and loan loss reserve
(2,380)
—
(4,237)
—
Gain on sale of properties, net
3,862
83,876
27,939
113,134
Income (loss) before taxes and equity in
income of non-consolidated REITs
(2,847)
79,036
1,298
92,934
Tax expense
37
464
204
638
Equity in income of non-consolidated
REITs
—
—
—
421
Net income (loss)
$
(2,884)
$
78,572
$
1,094
$
92,717
Weighted average number of shares
outstanding, basic and diluted
103,236
105,098
103,338
106,667
Net income (loss) per share, basic and
diluted
$
(0.03)
$
0.75
$
0.01
$
0.87
Franklin Street Properties Corp. Financial
Results Supplementary Schedule B Condensed Consolidated Balance
Sheets (Unaudited)
December 31,
December 31,
(in thousands, except share and par value
amounts)
2022
2021
Assets:
Real estate assets:
Land
$
126,645
$
146,844
Buildings and improvements
1,388,869
1,457,209
Fixtures and equipment
11,151
11,404
1,526,665
1,615,457
Less accumulated depreciation
423,417
424,487
Real estate assets, net
1,103,248
1,190,970
Acquired real estate leases, less
accumulated amortization of $20,243 and $40,423, respectively
10,186
14,934
Cash, cash equivalents and restricted
cash
6,632
40,751
Tenant rent receivables
2,201
1,954
Straight-line rent receivable
52,739
49,024
Prepaid expenses and other assets
6,676
4,031
Related party mortgage loan receivable,
less allowance for credit loss of $4,237 and $0, respectively
19,763
24,000
Other assets: derivative asset
4,358
—
Office computers and furniture, net of
accumulated depreciation of $1,115 and $1,198, respectively
154
198
Deferred leasing commissions, net of
accumulated amortization of $19,043 and $21,099, respectively
35,709
38,311
Total assets
$
1,241,666
$
1,364,173
Liabilities and Stockholders’ Equity:
Liabilities:
Bank note payable
$
48,000
$
—
Term loans payable, less unamortized
financing costs of $250 and $714, respectively
164,750
274,286
Series A & Series B Senior Notes, less
unamortized financing costs of $494 and $658, respectively
199,506
199,342
Accounts payable and accrued expenses
50,366
89,493
Accrued compensation
3,644
4,704
Tenant security deposits
5,710
6,219
Lease liability
759
1,159
Other liabilities: derivative
liabilities
—
5,239
Acquired unfavorable real estate leases,
less accumulated amortization of $574 and $2,285, respectively
195
528
Total liabilities
472,930
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 income
(loss)
4,358
(5,239)
Accumulated distributions in excess of
accumulated earnings
(570,408)
(550,794)
Total stockholders’ equity
768,736
783,203
Total liabilities and stockholders’
equity
$
1,241,666
$
1,364,173
Franklin Street Properties Corp. Financial
Results Supplementary Schedule C Condensed Consolidated Statements
of Cash Flows (Unaudited)
For the
Year Ended
December 31,
(in thousands)
2022
2021
Cash flows from operating
activities:
Net income
$
1,094
$
92,717
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization expense
65,697
81,041
Amortization of above and below market
leases
(118)
(34)
Shares issued as compensation
394
338
Equity in income of non-consolidated
REITs
—
(421)
Distributions from non-consolidated
REITs
—
421
Loss on extinguishment of debt
78
901
Impairment and loan loss reserve
4,237
—
Gain on sale of properties, net
(27,939)
(113,134)
Changes in operating assets and
liabilities:
Tenant rent receivables
(247)
5,702
Straight-line rents
(5,895)
(3,930)
Lease acquisition costs
(4,494)
(2,353)
Prepaid expenses and other assets
(1,805)
82
Accounts payable and accrued expenses
(5,983)
(11,096)
Accrued compensation
(1,060)
786
Tenant security deposits
(509)
(2,458)
Payment of deferred leasing
commissions
(8,216)
(12,200)
Net cash provided by operating
activities
15,234
36,362
Cash flows from investing
activities:
Property improvements, fixtures and
equipment
(54,910)
(64,833)
Investment in related party mortgage loan
receivable
—
(3,000)
Proceeds received from sales of
properties
128,949
573,307
Net cash provided by investing
activities
74,039
505,474
Cash flows from financing
activities:
Distributions to stockholders
(53,988)
(38,491)
Stock repurchases
(4,843)
(18,244)
Borrowings under bank note payable
90,000
91,500
Repayments of bank note payable
(42,000)
(95,000)
Repayments of Term Loans
(110,000)
(445,000)
Deferred financing costs
(2,561)
—
Net cash used in financing activities
(123,392)
(505,235)
Net increase (decrease) in cash, cash
equivalents and restricted cash
(34,119)
36,601
Cash, cash equivalents and restricted
cash, beginning of year
40,751
4,150
Cash, cash equivalents and restricted
cash, end of period
$
6,632
$
40,751
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
398,204
6.4%
2024
862,393
13.8%
2025
429,146
6.9%
2026
612,913
9.8%
2027
307,689
4.9%
Thereafter (2)
3,629,185
58.2%
6,239,530
100.0%
(1) Percentages are determined based upon total square footage.
(2) Includes 1,523,988 square
feet of vacancies at our operating properties as of December 31,
2022.
(dollars & square feet in 000's)
As of December 31, 2022
% of
Square
% of
State
Properties
Investment
Portfolio
Feet
Portfolio
Colorado
4
$
461,804
41.9%
2,146
34.4%
Texas
9
332,441
30.1%
2,423
38.8%
Georgia
1
53,370
4.8%
160
2.6%
Minnesota
3
122,016
11.1%
758
12.2%
Virginia
1
32,318
2.9%
298
4.8%
Florida
1
70,933
6.4%
213
3.4%
Illinois
1
21,707
2.0%
177
2.8%
North Carolina
1
8,659
0.8%
65
1.0%
Total
21
$
1,103,248
100.0%
6,240
100.0%
Franklin Street Properties Corp. Earnings
Release Supplementary Schedule E Portfolio and Other Supplementary
Information (Unaudited & Approximated)
Recurring Capital Expenditures
Year
(in thousands)
For the Three Months Ended
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
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
December 31,
December 31,
2022
2021
Owned or Operating Properties:
Number of properties
21
24
Square feet
6,239,530
6,911,225
Leased percentage
75.6%
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
22
26
Square feet
6,453,290
7,259,770
Franklin Street Properties Corp. Earnings
Release Supplementary Schedule F Percentage of Leased Space
(Unaudited & Estimated)
Third
Fourth
% Leased (1)
Quarter
% Leased (1)
Quarter
as of
Average %
as of
Average %
Property Name
Location
Square Feet
30-Sep-22
Leased (2)
31-Dec-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%
78.1%
76.1%
4
PARK TEN PHASE II
Houston, TX
156,746
95.0%
95.0%
95.0%
95.0%
5
GREENWOOD PLAZA
Englewood, CO
196,236
66.3%
66.3%
66.3%
66.3%
6
ADDISON
Addison, TX
289,333
83.0%
83.0%
83.0%
83.0%
7
COLLINS CROSSING
Richardson, TX
300,887
96.1%
96.1%
96.1%
96.1%
8
INNSBROOK
Glen Allen, VA
298,183
47.8%
47.8%
47.8%
47.8%
9
LIBERTY PLAZA
Addison, TX
217,779
75.5%
75.9%
72.9%
74.7%
10
BLUE LAGOON
Miami, FL
213,182
98.5%
98.5%
98.5%
98.5%
11
ELDRIDGE GREEN
Houston, TX
248,399
100.0%
100.0%
100.0%
100.0%
12
121 SOUTH EIGHTH ST
Minneapolis, MN
298,121
88.6%
88.6%
85.2%
86.3%
13
801 MARQUETTE AVE
Minneapolis, MN
129,691
91.8%
77.7%
91.8%
91.8%
14
LEGACY TENNYSON CTR
Plano, TX
209,461
40.7%
40.7%
49.0%
46.2%
15
ONE LEGACY
Plano, TX
214,110
63.7%
63.7%
64.7%
64.7%
909 DAVIS
Evanston, IL
—
93.3%
93.3%
(3)
(3)
16
WESTCHASE I & II
Houston, TX
629,025
64.2%
63.7%
63.5%
63.7%
17
1999 BROADWAY
Denver, CO
680,255
66.9%
66.9%
66.9%
66.9%
18
1001 17TH STREET
Denver, CO
657,816
70.1%
70.7%
70.2%
70.1%
19
PLAZA SEVEN
Minneapolis, MN
330,096
79.3%
79.7%
79.3%
79.3%
20
PERSHING PLAZA
Atlanta, GA
160,145
79.2%
78.5%
79.2%
79.2%
21
600 17TH STREET
Denver, CO
611,163
77.8%
77.8%
78.3%
78.0%
OWNED PORTFOLIO
6,239,530
75.9%
75.8%
75.6%
75.9%
(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 sold on December 28, 2022.
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 December 31, 2022
% 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
Citicorp Credit Services, Inc
146,260
2.3%
6
Kaiser Foundation Health Plan
120,979
1.9%
7
Argo Data Resource Corporation
114,200
1.8%
8
Swift, Currie, McGhee & Hiers, LLP
101,296
1.6%
9
Deluxe Corporation
98,922
1.6%
10
Ping Identity Corp.
89,856
1.4%
11
Permian Resources Operating, LLC
67,856
1.1%
12
Bread Financial Payments, Inc.
67,274
1.1%
13
PricewaterhouseCoopers LLP
66,304
1.1%
14
Hall and Evans LLC
65,878
1.1%
15
Cyxtera Management, Inc.
61,826
1.0%
16
Precision Drilling (US) Corporation
59,569
1.0%
17
Schwegman, Lundberg & Woessner,
P.A.
58,263
0.9%
18
EMC Corporation
57,100
0.9%
19
ID Software, LLC
57,100
0.9%
20
Olin Corporation
54,080
0.9%
Total
2,028,710
32.5%
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
Year Ended
December 31,
December 31,
(In thousands, except per share
amounts)
2022
2021
2022
2021
Net income (loss)
$
(2,884)
$
78,572
$
1,094
$
92,717
Impairment and loan loss reserve
2,380
—
4,237
—
Gain on sale of properties, net
(3,862)
(83,876)
(27,939)
(113,134)
Equity in income from non-consolidated
REITs
—
—
—
(421)
FFO from non-consolidated REITs
—
—
—
421
Depreciation & amortization
14,773
16,169
63,689
78,509
NAREIT FFO
10,407
10,865
41,081
58,092
Lease Acquisition costs
56
90
262
387
Funds From Operations (FFO)
$
10,463
$
10,955
$
41,343
$
58,479
Funds From Operations (FFO)
$
10,463
$
10,955
$
41,343
$
58,479
Loss on extinguishment of debt
—
498
78
901
Reverse FFO from non-consolidated
REITs
—
—
—
(421)
Distributions from non-consolidated
REITs
—
—
—
421
Amortization of deferred financing
costs
421
487
1,889
2,498
Shares issued as compensation
—
—
394
338
Straight-line rent
(1,831)
(827)
(5,895)
(4,017)
Tenant improvements
(7,508)
(1,881)
(21,651)
(14,601)
Leasing commissions
(1,152)
(1,319)
(7,564)
(8,209)
Non-investment capex
(9,074)
(4,672)
(30,164)
(18,329)
Adjusted Funds From Operations (AFFO)
$
(8,681)
$
3,241
$
(21,570)
$
17,060
Per Share Data
EPS
$
(0.03)
$
0.75
$
0.01
$
0.87
FFO
$
0.10
$
0.10
$
0.40
$
0.55
AFFO
$
(0.08)
$
0.03
$
(0.21)
$
0.16
Weighted average shares (basic and
diluted)
103,236
105,098
103,338
106,667
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. We exclude the FFO from any
Sponsored REIT that is consolidated from the calculation of
FFO.
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. We exclude the
NOI from any Sponsored REIT that is consolidated from the
calculation of NOI. 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
31-Dec-22
30-Sep-22
(Dec)
Change
Region
East
362
$
526
$
391
$
135
34.5
%
MidWest
935
3,099
3,131
(32)
(1.0)
%
South
2,797
7,896
5,902
1,994
33.8
%
West
2,146
6,028
6,401
(373)
(5.8)
%
Property NOI* from Operating
Properties
6,240
17,549
15,825
1,724
10.9
%
Dispositions and Redevelopment Properties
(a)
-
666
1,842
(1,176)
(7.8)
%
NOI*
6,240
$
18,215
$
17,667
$
548
3.1
%
Sequential Same Store
$
17,549
$
15,825
$
1,724
10.9
%
Less Nonrecurring
Items in NOI* (b)
818
494
324
(1.8)
%
Comparative
Sequential Same Store
$
16,731
$
15,331
$
1,400
9.1
%
Three Months Ended
Three Months Ended
Reconciliation to Net income
(loss)
31-Dec-22
30-Sep-22
Net income (loss)
$
(2,884)
$
17,246
Add (deduct):
Loss on extinguishment of debt
—
78
Impairment and loan loss reserve
2,380
717
Gain on sale of properties, net
(3,862)
(24,077)
Management fee income
(295)
(274)
Depreciation and amortization
14,805
15,148
Amortization of above/below market
leases
(30)
(34)
General and administrative
2,888
3,233
Interest expense
5,668
6,110
Interest income
(460)
(461)
Equity in (income) loss of
non-consolidated REITs
—
—
Non-property specific items, net
5
(19)
NOI*
$
18,215
$
17,667
(a) We define redevelopment properties as properties being
developed, redeveloped or where redevelopment is complete, but are
in lease-up and that are not stabilized. We also include
properties that have been placed in service, but that do not have
operating activity for all periods presented.
(b) Nonrecurring Items in NOI include
proceeds from bankruptcies, lease termination fees or other
significant nonrecurring income or expenses, which may affect
comparability.
*Excludes NOI from investments in and interest income from
secured loans to non-consolidated REITs.
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version on businesswire.com: https://www.businesswire.com/news/home/20230214005761/en/
Georgia Touma (877) 686-9496
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