Franklin Street Properties Corp. (the “Company”, “FSP”, “we” or
“our”) (NYSE American: FSP), a real estate investment trust (REIT),
announced its results for the second quarter ended June 30,
2024.
George J. Carter, Chairman and Chief Executive Officer,
commented as follows:
“As the third quarter of 2024 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 when we believe that short to
intermediate term valuation potential has been reached and (2)
strive to increase occupancy through leasing of vacant space. We
intend to use proceeds from property dispositions primarily for
debt reductions.
During the second quarter of 2024, we did not sell any of our
office properties. During the second quarter of 2024, we leased a
total of approximately 75,000 square feet of office space within
our approximately 5.3 million square foot directly–owned property
portfolio.
Subsequent to the end of the quarter, on July 8, 2024, we
completed the sale of our last property in the Commonwealth of
Virginia. The property, located in Glen Allen and known as
Innsbrook, sold for a gross selling price of $31 million. On July
10, 2024, we repaid approximately $25.3 million of our debt with a
portion of the net proceeds of the Innsbrook disposition. As of
July 10, 2024, our total indebtedness was approximately $277.7
million, equivalent to approximately $56 per square foot on our
remaining approximately 5.0 million square foot directly-owned
property portfolio.
We look forward to the remainder of 2024 and beyond with
anticipation and optimism.”
Financial Highlights
- GAAP net loss was $21.0 million and $28.6 million, or $0.20 and
$0.28 per basic and diluted share for the three and six months
ended June 30, 2024, respectively.
- Funds From Operations (FFO) was $3.7 million and $7.9 million,
or $0.04 and $0.08 per basic and diluted share, for the three and
six months ended June 30, 2024, respectively.
- On July 8, 2024, we sold our last property in the Commonwealth
of Virginia. The property was a low-rise value office property
located in Glen Allen and known as Innsbrook. The property sold for
a gross selling price of $31 million. On July 10, 2024, we used
approximately $25.3 million of the net proceeds from the
disposition to repay debt.
Leasing Highlights
- During the six months ended June 30, 2024, we leased
approximately 272,000 square feet, including 92,000 square feet of
new leases.
- Our directly-owned real estate portfolio of 16 owned
properties, totaling approximately 5.3 million square feet, was
approximately 72.3% leased as of June 30, 2024, compared to
approximately 74.0% leased as of December 31, 2023. The decrease in
the leased percentage is primarily a result of one property
disposition and lease expirations during the six months ended June
30, 2024, which were partially offset by leasing completed during
the six months ended June 30, 2024 .
- The weighted average GAAP base rent per square foot achieved on
leasing activity during the six months ended June 30, 2024, was
$28.10, or 12.0% higher than average rents in the respective
properties for the year ended December 31, 2023. The average lease
term on leases signed during the six months ended June 30, 2024,
was 6.1 years compared to 6.8 years during the year ended December
31, 2023. Overall, the portfolio weighted average rent per occupied
square foot was $30.85 as of June 30, 2024, compared to $30.72 as
of December 31, 2023.
- 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
- To reduce indebtedness, since December of 2020, FSP has
selectively sold office properties when values and circumstances
have warranted.
- Since December of 2020, our dispositions have resulted in
aggregate gross proceeds of approximately $1,043,000,000 and
reflect an average sales price per square foot of approximately
$210.
- On July 8, 2024, we sold our last property in the Commonwealth
of Virginia. The property was a low-rise value office property
located in Glen Allen (Greater Richmond) and known as Innsbrook.
The property sold for a gross selling price of $31 million. On July
10, 2024, we used approximately $25.3 million of the net proceeds
from the disposition to repay debt resulting in a reduction in
total indebtedness to an aggregate of approximately $277.7 million,
which reflects about $56 per square foot on the remaining
approximately 5.0 million square foot directly-owned
portfolio.
Dividends
- On July 5, 2024, we announced that our Board of Directors
declared a quarterly cash dividend for the three months ended June
30, 2024, of $0.01 per share of common stock that will be paid on
August 8, 2024, to stockholders of record on July 19, 2024.
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 three and six months ended June 30, 2024.
Non-GAAP Financial
Information
A reconciliation of Net income (loss) 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.
2024 Net Income (Loss), 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 (Loss), FFO and property disposition guidance.
Real Estate Update
Supplementary schedules provide property information for the
Company’s owned and consolidated properties as of June 30, 2024.
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 July 31, 2024, at 11:00 a.m.
(ET) to discuss the second quarter 2024 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 is focused on 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 long-term effects of the COVID-19 pandemic, wars, 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, 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, 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
Six Months Ended
June 30,
June 30,
(in thousands, except per share
amounts)
2024
2023
2024
2023
Revenue:
Rental
$
30,818
$
36,257
$
62,043
$
74,024
Other
12
9
12
9
Total revenue
30,830
36,266
62,055
74,033
Expenses:
Real estate operating expenses
11,027
12,140
22,046
24,830
Real estate taxes and insurance
5,727
7,169
11,663
14,142
Depreciation and amortization
11,482
14,645
23,107
29,372
General and administrative
3,635
3,767
7,794
7,584
Interest
7,082
6,084
13,928
11,890
Total expenses
38,953
43,805
78,538
87,818
Loss on extinguishment of debt
—
—
(137
)
(67
)
Gain on consolidation of Sponsored
REIT
—
—
—
394
Gain (loss) on sale of properties and
impairment of assets held for sale, net
(13,200
)
(806
)
(13,205
)
7,586
Interest income
348
—
1,356
—
Loss before taxes
(20,975
)
(8,345
)
(28,469
)
(5,872
)
Tax expense
48
75
106
142
Net loss
$
(21,023
)
$
(8,420
)
$
(28,575
)
$
(6,014
)
Weighted average number of shares
outstanding, basic and diluted
103,477
103,330
103,454
103,283
Net loss per share, basic and diluted
$
(0.20
)
$
(0.08
)
$
(0.28
)
$
(0.06
)
Franklin Street Properties Corp.
Financial Results
Supplementary Schedule B
Condensed Consolidated Balance
Sheets
(Unaudited)
June 30,
December 31,
(in thousands, except share and par value
amounts)
2024
2023
Assets:
Real estate assets:
Land
$
105,298
$
110,298
Buildings and improvements
1,086,300
1,133,971
Fixtures and equipment
10,436
12,904
1,202,034
1,257,173
Less accumulated depreciation
361,278
366,349
Real estate assets, net
840,756
890,824
Acquired real estate leases, less
accumulated amortization of $20,505 and $20,413, respectively
5,306
6,694
Assets held for sale
67,823
73,318
Cash, cash equivalents and restricted
cash
31,495
127,880
Tenant rent receivables
2,349
2,191
Straight-line rent receivable
38,901
40,397
Prepaid expenses and other assets
4,064
4,239
Office computers and furniture, net of
accumulated depreciation of $1,051 and $1,020, respectively
92
123
Deferred leasing commissions, net of
accumulated amortization of $14,584 and $16,008, respectively
21,741
23,664
Total assets
$
1,012,527
$
1,169,330
Liabilities and Stockholders’ Equity:
Liabilities:
Bank note payable
$
—
$
90,000
Term loans payable, less unamortized
financing costs of $3,766 and $293, respectively
149,604
114,707
Series A & Series B Senior Notes, less
unamortized financing costs of $2,019 and $329, respectively
147,611
199,670
Accounts payable and accrued expenses
23,765
41,879
Accrued compensation
2,300
3,644
Tenant security deposits
6,248
6,204
Lease liability
859
334
Acquired unfavorable real estate leases,
less accumulated amortization of $419 and $396, respectively
63
87
Total liabilities
330,450
456,525
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, 103,566,715 and 103,430,353 shares
issued and outstanding, respectively
10
10
Additional paid-in capital
1,335,361
1,335,091
Accumulated other comprehensive income
—
355
Accumulated distributions in excess of
accumulated earnings
(653,294
)
(622,651
)
Total stockholders’ equity
682,077
712,805
Total liabilities and stockholders’
equity
$
1,012,527
$
1,169,330
Franklin Street Properties Corp.
Financial Results
Supplementary Schedule C
Condensed Consolidated Statements
of Cash Flows
(Unaudited)
For the
Six Months Ended
June 30,
(in thousands)
2024
2023
Cash flows from operating
activities:
Net loss
$
(28,575
)
$
(6,014
)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization expense
24,604
30,634
Amortization of above and below market
leases
(11
)
(30
)
Amortization of other comprehensive income
into interest expense
(355
)
(1,726
)
Shares issued as compensation
270
315
Loss on extinguishment of debt
137
67
Gain on consolidation of Sponsored
REIT
—
(394
)
(Gain) loss on sale of properties and
impairment of assets held for sale, net
13,205
(7,586
)
Changes in operating assets and
liabilities:
Tenant rent receivables
(158
)
263
Straight-line rents
464
322
Lease acquisition costs
(292
)
(824
)
Prepaid expenses and other assets
(420
)
(267
)
Accounts payable and accrued expenses
(12,557
)
(8,747
)
Accrued compensation
(1,344
)
(1,358
)
Tenant security deposits
44
(44
)
Payment of deferred leasing
commissions
(2,748
)
(4,137
)
Net cash provided by (used in) operating
activities
(7,736
)
474
Cash flows from investing
activities:
Property improvements, fixtures and
equipment
(13,247
)
(18,369
)
Consolidation of Sponsored REIT
—
3,048
Proceeds received from sales of
properties
34,326
28,098
Net cash provided by investing
activities
21,079
12,777
Cash flows from financing
activities:
Distributions to stockholders
(2,068
)
(2,065
)
Proceeds received from termination of
interest rate swap
—
4,206
Borrowings under Bank note payable
—
62,000
Repayments of Bank note payable
(22,667
)
(35,000
)
Repayments of Term loans payable
(28,963
)
(40,000
)
Repayments of Series A&B Senior
Notes
(50,370
)
—
Deferred financing costs
(5,660
)
(2,327
)
Net cash used in financing activities
(109,728
)
(13,186
)
Net increase (decrease) in cash, cash
equivalents and restricted cash
(96,385
)
65
Cash, cash equivalents and restricted
cash, beginning of year
127,880
6,632
Cash, cash equivalents and restricted
cash, end of period
$
31,495
$
6,697
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
2024
171,693
3.1%
2025
476,539
8.7%
2026
552,224
10.1%
2027
295,314
5.4%
2028
239,307
4.4%
Thereafter (2)
3,743,099
68.3%
5,478,176
100.0%
__________________________
(1)
Percentages are determined based
upon total square footage.
(2)
Includes 1,661,397 square feet of
vacancies at our owned and consolidated properties as of June 30,
2024.
(dollars & square feet in 000's)
As of June 30, 2024
% of
Square
% of
State
Properties
Investment
Portfolio
Feet
Portfolio
Colorado
4
$
445,049
52.9%
2,140
39.1%
Texas
7
261,224
31.1%
1,909
34.8%
Georgia (a)
1
-
0.0%
160
2.9%
Minnesota
3
115,300
13.7%
757
13.8%
Virginia (a)
1
-
0.0%
298
5.5%
Indiana
1
19,183
2.3%
214
3.9%
Total
17
$
840,756
100.0%
5,478
100.0%
__________________________
(a)
Includes two properties that were
classified as an asset held for sale as of June 30 2024.
Franklin Street Properties Corp.
Earnings Release
Supplementary Schedule E
Portfolio and Other Supplementary
Information
(Unaudited &
Approximated)
Recurring Capital Expenditures
For the Six
(in thousands)
For the Three Months Ended
Months Ended
31-Mar-24
30-Jun-24
30-Jun-24
Tenant improvements
$
2,619
$
2,558
$
5,177
Deferred leasing costs
2,237
511
2,748
Non-investment capex
1,019
1,480
2,499
$
5,875
$
4,549
$
10,424
(in thousands)
For the Three Months Ended
Year Ended
31-Mar-23
30-Jun-23
30-Sep-23
31-Dec-23
31-Dec-23
Tenant improvements
$
3,047
$
4,381
$
3,653
$
5,295
$
16,376
Deferred leasing costs
908
3,230
1,114
1,649
6,901
Non-investment capex
2,967
2,042
1,775
5,230
12,014
$
6,922
$
9,653
$
6,542
$
12,174
$
35,291
Square foot & leased
percentages
June 30,
December 31,
2024
2023
Owned Properties:
Number of properties (a)
16
17
Square feet
5,264,416
5,565,782
Leased percentage
72.3%
74.0%
Consolidated Property - Single Asset
REIT (SAR):
Number of properties
1
1
Square feet
213,760
213,760
Leased percentage
4.1%
4.1%
Total Owned and Consolidated
Properties:
Number of properties
17
18
Square feet
5,478,176
5,779,542
Leased percentage
69.7%
71.5%
(a) Includes two properties that were
classified as assets held for sale as of June 30, 2024 and December
31, 2023.
Franklin Street Properties Corp.
Earnings Release
Supplementary Schedule F
Percentage of Leased Space
(Unaudited & Estimated)
First
Second
% Leased (1)
Quarter
% Leased (1)
Quarter
as of
Average %
as of
Average %
Property Name
Location
Square Feet
31-Mar-24
Leased (2)
30-Jun-24
Leased (2)
1
PARK TEN
Houston, TX
157,609
83.8%
83.8%
82.1%
84.0%
2
PARK TEN PHASE II
Houston, TX
156,746
95.0%
95.0%
66.9%
85.6%
3
GREENWOOD PLAZA
Englewood, CO
196,236
66.3%
66.3%
65.0%
65.0%
4
ADDISON
Addison, TX
289,333
79.4%
79.4%
79.4%
79.4%
5
INNSBROOK (3)
Glen Allen, VA
298,183
90.5%
90.5%
89.6%
89.9%
6
LIBERTY PLAZA
Addison, TX
217,841
77.2%
78.2%
75.9%
75.9%
7
ELDRIDGE GREEN
Houston, TX
248,399
100.0%
100.0%
100.0%
100.0%
8
121 SOUTH EIGHTH ST
Minneapolis, MN
297,541
77.6%
77.5%
77.6%
77.6%
9
801 MARQUETTE AVE
Minneapolis, MN
129,691
91.8%
91.8%
91.8%
91.8%
10
LEGACY TENNYSON CTR
Plano, TX
209,562
53.1%
55.3%
53.1%
53.1%
11
WESTCHASE I & II
Houston, TX
629,025
65.0%
64.2%
66.5%
65.7%
12
1999 BROADWAY
Denver, CO
682,639
51.5%
51.7%
50.7%
51.0%
13
1001 17TH STREET
Denver, CO
649,235
76.5%
74.7%
76.5%
76.5%
14
PLAZA SEVEN
Minneapolis, MN
330,096
61.6%
62.1%
61.6%
61.6%
15
PERSHING PLAZA (3)
Atlanta, GA
160,145
79.8%
79.8%
79.8%
79.8%
16
600 17TH STREET
Denver, CO
612,135
78.8%
78.4%
78.8%
78.8%
OWNED PORTFOLIO
5,264,416
73.3%
73.1%
72.3%
72.9%
17
MONUMENT CIRCLE (4)
Indianapolis, IN
213,760
4.1%
4.1%
4.1%
4.1%
OWNED & CONSOLIDATED
PORTFOLIO
5,478,176
70.6%
70.4%
69.7%
70.2%
__________________________
(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)
Properties were classified as assets held
for sale as of June 30, 2024. Innsbrook was sold on July 8,
2024.
(4)
Consolidated property as of January 1,
2023, which was previously a managed property.
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 June 30, 2024
% of
Tenant
Sq Ft
Portfolio
1
CITGO Petroleum Corporation
248,399
4.5%
2
EOG Resources, Inc.
169,167
3.1%
3
US Government
168,573
3.1%
4
Commonwealth of Virginia
127,500
2.3%
5
Kaiser Foundation Health Plan, Inc.
120,979
2.2%
6
Swift, Currie, McGhee & Hiers, LLP
101,296
1.9%
7
Deluxe Corporation
98,922
1.8%
8
ChemTreat Inc.
94,456
1.7%
9
Ping Identity Corp.
89,856
1.7%
10
Permian Resources Operating, LLC
67,856
1.2%
11
PwC US Group
66,304
1.2%
12
Hall and Evans LLC
65,878
1.2%
13
Cyxtera Management, Inc.
61,826
1.1%
14
Precision Drilling (US) Corporation
59,569
1.1%
15
Olin Corporation
54,080
1.0%
16
Coresite, LLC
49,518
0.9%
17
Schwegman, Lundberg & Woessner,
P.A.
46,269
0.8%
18
Invenergy, LLC.
42,505
0.8%
19
Ark-La-Tex Financial Services, LLC.
41,011
0.8%
20
Chevron U.S.A., Inc.
35,088
0.6%
Total
1,809,052
33.0%
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 (loss) 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
Six Months Ended
June 30,
June 30,
(In thousands, except per share
amounts)
2024
2023
2024
2023
Net loss
$
(21,023
)
$
(8,420
)
$
(28,575
)
$
(6,014
)
Gain on consolidation of Sponsored
REIT
—
—
—
(394
)
(Gain) loss on sale of properties and
impairment of asset held for sale, net
13,200
806
13,205
(7,586
)
Depreciation & amortization
11,476
14,633
23,095
29,342
NAREIT FFO
3,653
7,019
7,725
15,348
Lease Acquisition costs
68
91
189
169
Funds From Operations (FFO)
$
3,721
$
7,110
$
7,914
$
15,517
Funds From Operations (FFO)
$
3,721
$
7,110
$
7,914
$
15,517
Loss on extinguishment of debt
—
—
137
67
Amortization of deferred financing
costs
818
672
1,498
1,261
Shares issued as compensation
270
315
270
315
Straight-line rent
258
653
464
322
Tenant improvements
(2,558
)
(4,381
)
(5,177
)
(7,428
)
Leasing commissions
(511
)
(3,230
)
(2,748
)
(4,138
)
Non-investment capex
(1,480
)
(2,042
)
(2,499
)
(5,009
)
Adjusted Funds From Operations (AFFO)
$
518
$
(903
)
$
(141
)
$
907
Per Share Data
EPS
$
(0.20
)
$
(0.08
)
$
(0.28
)
$
(0.06
)
FFO
$
0.04
$
0.07
$
0.08
$
0.15
AFFO
$
0.01
$
(0.01
)
$
(0.00
)
$
0.01
Weighted average shares (basic and
diluted)
103,477
103,330
103,454
103,283
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-Jun-24
31-Mar-24
(Dec)
Change
Region
East
298
$
711
$
709
$
2
0.3
%
MidWest
757
1,665
1,640
25
1.5
%
South
2,069
5,240
5,266
(26
)
(0.5
)%
West
2,140
6,224
6,204
20
0.3
%
Property NOI* from Owned Properties
5,264
13,840
13,819
21
0.2
%
Disposition and Acquisition Properties
(a)
214
(92
)
89
(181
)
(1.3
)%
NOI*
5,478
$
13,748
$
13,908
$
(160
)
(1.1
)%
Sequential Same Store
$
13,840
$
13,819
$
21
0.2
%
Less Nonrecurring
Items in NOI* (b)
255
246
9
(0.1
)%
Comparative
Sequential Same Store
$
13,585
$
13,573
$
12
0.1
%
Reconciliation to
Three Months Ended
Three Months Ended
Net income (loss)
30-Jun-24
31-Mar-24
Net income (loss)
$
(21,023
)
$
(7,552
)
Add (deduct):
Loss on extinguishment of debt
—
137
Gain on sale of properties, net
13,200
5
Management fee income
(443
)
(462
)
Depreciation and amortization
11,482
11,625
Amortization of above/below market
leases
(6
)
(6
)
General and administrative
3,635
4,159
Interest expense
7,082
6,846
Interest income
(348
)
(1,008
)
Non-property specific items, net
169
164
NOI*
$
13,748
$
13,908
(a)
We define Disposition and Acquisition
Properties as properties that were sold or acquired or consolidated
and do not have operating activity for all periods presented.
(b)
Nonrecurring Items in NOI include proceeds
from bankruptcies, lease termination fees or other significant
nonrecurring income or expenses, which may affect
comparability.
*Excludes NOI from investments in and
interest income from secured loans to non-consolidated REITs.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240730489791/en/
For Franklin Street Properties Corp. Georgia Touma,
877-686-9496
Franklin Street Properties (AMEX:FSP)
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