19:53:51 EDT Thu 31 Oct 2024
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Franklin Street Properties Corp. Announces Third Quarter 2023 Results

2023-11-07 16:30 ET - News Release


Company Website: http://www.franklinstreetproperties.com
WAKEFIELD, Mass. -- (Business Wire)

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.

Contacts:

Georgia Touma (877) 686-9496

Source: Franklin Street Properties Corp.

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