FRANKLIN STREET PROPERTIES CORP.

(FSP)
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Franklin Street Properties : Announces Second Quarter 2022 Results - Form 8-K

08/02/2022 | 04:43pm EDT

Franklin Street Properties Corp. Announces

Second Quarter 2022 Results

Wakefield, MA-August 2, 2022-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, 2022.

George J. Carter, Chairman and Chief Executive Officer, commented as follows:

"As the third quarter of 2022 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. Our objectives for 2022 are twofold: We will seek to increase shareholder value (1) through the potential sale of select properties where we believe that short to intermediate term valuation potential has been reached and (2) by striving to increase occupancy in our continuing portfolio of real estate. We intend to use proceeds from any potential future property dispositions for debt reduction, repurchases of our common stock, dividends under our variable quarterly dividend policy and any dividends required to meet REIT requirements, and other general corporate purposes.

At this time, we are updating our property disposition guidance for full-year 2022 to be in the range of approximately $200 million to $300 million in aggregate gross proceeds compared to our previously estimated range of $250 million to $350 million. However, this disposition guidance is subject to change for a variety of reasons, including economic conditions, office market conditions and geopolitical events. We will update our disposition guidance quarterly in our earnings releases.

We look forward to the balance of 2022 and beyond with anticipation and optimism."

Financial Highlights

GAAP net loss was $9.1 million and $13.3 million, or $0.09 and $0.13 per basic and diluted share for the three and six months ended June 30, 2022, respectively.
Funds From Operations (FFO) was $10.3 million and $21.8 million, or $0.10 and $0.21 per basic and diluted share for the three and six months ended June 30, 2022, respectively.
Adjusted Funds From Operations (AFFO) was a loss of $0.04 and $0.03 per basic and diluted share for the three and six months ended June 30, 2022, respectively.

Leasing Highlights

During the six months ended June 30, 2022, we leased approximately 276,000 square feet, including 171,000 square feet of new leases.
Our directly owned real estate portfolio of 24 owned properties totaling approximately 6.9 million square feet, was approximately 76.3% leased as of June 30, 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 first half of 2022.
Lease expirations for 2022 and 2023 are approximately 127,000 and 383,000 square feet, representing approximately 1.8% and 5.5% of our owned portfolio, respectively.
The weighted average GAAP base rent per square foot achieved on leasing activity during the six months ended June 30, 2022 was $33.58, or 4.7% higher than average rents in the respective properties

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as applicable compared to the year ended December 31, 2021. The average lease term on leases signed in the six months ended June 30, 2022, was 6.9 years compared to 7.7 years for the year ended December 31, 2021. Overall the portfolio weighted average rent per occupied square foot was $30.48 as of June 30, 2022 compared to $30.60 as of December 31, 2021.
Subsequent to quarter end, we are currently tracking approximately 600,000 square feet of new prospective tenants, including approximately 400,000 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

Disposition guidance for full-year 2022 was updated to be in the range of approximately $200 million to $300 million in aggregate gross proceeds.
Subject to market conditions and satisfactory outcomes on prospective transactions, we anticipate dispositions to occur during the third and/or fourth quarters of 2022 and will provide updates as appropriate.
Disposition proceeds are intended to be used for debt reduction, dividends under our variable quarterly dividend policy and any special dividends required to meet REIT requirements, repurchases of our common stock, and other general corporate purposes.
Potential disposition candidates include: 380 and 390 Interlocken in Broomfield, Colorado; Eldridge Green and Park Ten in Houston, Texas; 909 Davis in Evanston, Illinois; Pershing Park in Atlanta, Georgia; and Blue Lagoon in Miami, Florida.

Stock Repurchases

During the first quarter of 2022, we repurchased approximately 847,000 shares of our common stock for approximately $4.8 million pursuant to our previously announced stock repurchase plan. We did not repurchase any shares of our common stock during the second quarter of 2022.
Up to approximately $26.9 million remains authorized for potential future repurchases of our common stock pursuant to our previously announced stock repurchase plan.

Dividends

In light of the gains achieved on our dispositions in 2021, on December 3, 2021, we announced that our Board of Directors declared a special dividend of $0.32 per share, which was paid on January 12, 2022 to shareholders of record on December 31, 2021, in order to meet REIT requirements.
On July 5, 2022, we adopted a variable quarterly dividend policy, which replaced our previous regular quarterly dividend policy. Under the new variable quarterly dividend policy, the Board of Directors will determine quarterly dividends based upon a variety of factors, including the Company's estimates of its annual taxable income and the amount that the Company is required to distribute annually in the aggregate to enable the Company to continue to qualify as a real estate investment trust for federal income tax purposes.
On July 5, 2022, we announced that our Board of Directors declared a quarterly cash dividend for the three months ended June 30, 2022 of $0.01 per share of common stock pursuant to our variable quarterly dividend policy that will be paid on August 11, 2022 to stockholders of record on July 19, 2022.
If we are able to dispose of properties in 2022 at anticipated pricing levels, we may be required to again declare a special dividend in 2022 in addition to any regular quarterly dividends in order to meet REIT requirements.

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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.

2022 Net Income, FFO and Disposition Guidance

At this time, due primarily to uncertainty surrounding the timing and amount of proceeds received from property dispositions, we are continuing suspension of Net Income and FFO guidance. We are updating our previously announced disposition guidance for full-year 2022 as we execute on our strategy to dispose of certain properties that we believe have met their short to intermediate term valuation objectives and whose value may not be accurately reflected in our share price. Anticipated dispositions in 2022 are estimated to result in aggregate gross proceeds in the range of approximately $200 million to $300 million. We intend to use the proceeds of any future dispositions for debt reduction, repurchases of our stock, dividends under our variable quarterly dividend policy and any special distributions required to meet REIT requirements, and other general corporate purposes. This guidance reflects our current expectations of economic and market conditions and is subject to change. Our disposition guidance is subject to change for a variety of reasons, including economic conditions, office market conditions and geopolitical events. We will update our disposition guidance quarterly in our earnings releases. There can be no assurance that the Company's actual results will not differ materially from the estimates set forth above.

Real Estate Update

Supplementary schedules provide property information for the Company's owned and managed real estate portfolio as of June 30, 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 August 3, 2022 at 11:00 a.m. (ET) to discuss the second quarter 2022 results. To access the call, please dial 1-844-200-6205 and use access code 703841. Internationally, the call may be accessed by dialing 1-929-526-1599 and using access code 703841. 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.

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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, potential stock repurchases, the payment of special 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, 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, any inability to dispose of real estate properties at pricing levels comparable to recent historical portfolio dispositions, 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, 2021 and in Part II, Item 1A of our Quarterly Report on Form 10-Q for the quarter ended June 30, 2022, as the same may be updated from time to time in subsequent filings with the United States Securities and Exchange Commission. Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, 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.

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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

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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)

2022

2021

2022

2021

Revenue:

Rental

$

40,831

$

55,722

$

82,628

$

114,345

Related party revenue:

Management fees and interest income from loans

467

417

927

827

Other

6

6

13

12

Total revenue

41,304

56,145

83,568

115,184

Expenses:

Real estate operating expenses

12,344

15,352

25,178

31,291

Real estate taxes and insurance

9,043

11,895

17,762

24,261

Depreciation and amortization

18,186

19,136

33,856

43,517

General and administrative

3,981

3,962

7,765

8,108

Interest

5,664

10,054

11,030

18,654

Total expenses

49,218

60,399

95,591

125,831

Loss on extinguishment of debt

-

(167)

-

(167)

Impairment and loan loss reserve

(1,140)

-

(1,140)

-

Gain on sale of properties, net

-

20,626

-

20,626

Income (loss) before taxes

(9,054)

16,205

(13,163)

9,812

Tax expense

56

56

105

123

Net income (loss)

$

(9,110)

$

16,149

$

(13,268)

$

9,689

Weighted average number of shares outstanding, basic and diluted

103,193

107,359

103,441

107,344

Net income (loss) per share, basic and diluted

$

(0.09)

$

0.15

$

(0.13)

$

0.09

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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)

2022

2021

Assets:

Real estate assets:

Land

$

146,844

$

146,844

Buildings and improvements

1,477,913

1,457,209

Fixtures and equipment

12,192

11,404

1,636,949

1,615,457

Less accumulated depreciation

450,792

424,487

Real estate assets, net

1,186,157

1,190,970

Acquired real estate leases, less accumulated amortization of $18,956 and $40,423, respectively

12,373

14,934

Cash, cash equivalents and restricted cash

4,693

40,751

Tenant rent receivables

2,627

1,954

Straight-line rent receivable

54,354

49,024

Prepaid expenses and other assets

6,863

4,031

Related party mortgage loan receivable, less allowance for credit loss of $1,140 and $0, respectively

22,860

24,000

Other assets: derivative asset

1,951

-

Office computers and furniture, net of accumulated depreciation of $1,082 and $1,198, respectively

187

198

Deferred leasing commissions, net of accumulated amortization of $21,840 and $21,099, respectively

39,654

38,311

Total assets

$

1,331,719

$

1,364,173

Liabilities and Stockholders' Equity:

Liabilities:

Bank note payable

$

55,000

$

-

Term loans payable, less unamortized financing costs of $482 and $714, respectively

274,518

274,286

Series A & Series B Senior Notes, less unamortized financing costs of $576 and $658, respectively

199,424

199,342

Accounts payable and accrued expenses

39,315

89,493

Accrued compensation

2,252

4,704

Tenant security deposits

5,819

6,219

Lease liability

962

1,159

Other liabilities: derivative liabilities

-

5,239

Acquired unfavorable real estate leases, less accumulated amortization of $634 and $2,285, respectively

397

528

Total liabilities

577,687

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 loss

1,951

(5,239)

Accumulated distributions in excess of accumulated earnings

(582,705)

(550,794)

Total stockholders' equity

754,032

783,203

Total liabilities and stockholders' equity

$

1,331,719

$

1,364,173

-8-

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)

2022

2021

Cash flows from operating activities:

Net income (loss)

$

(13,268)

$

9,689

Adjustments to reconcile net income (loss) to net cash used in operating activities:

Depreciation and amortization expense

34,863

44,910

Amortization of above and below market leases

(54)

(38)

Shares issued as compensation

394

338

Loss on extinguishment of debt

-

167

Impairment and loan loss reserve

1,140

-

Gain on sale of properties, net

-

(20,626)

Changes in operating assets and liabilities:

Tenant rent receivables

(673)

4,540

Straight-line rents

(2,904)

(2,858)

Lease acquisition costs

(2,426)

(623)

Prepaid expenses and other assets

(1,153)

(485)

Accounts payable and accrued expenses

(18,268)

(18,520)

Accrued compensation

(2,452)

(1,609)

Tenant security deposits

(400)

(1,870)

Payment of deferred leasing commissions

(5,033)

(6,926)

Net cash provided by (used in) operating activities

(10,234)

6,089

Cash flows from investing activities:

Property improvements, fixtures and equipment

(21,496)

(36,957)

Proceeds received from sales of properties

-

228,717

Net cash provided by (used in) investing activities

(21,496)

191,760

Cash flows from financing activities:

Distributions to stockholders

(51,924)

(19,319)

Stock repurchases

(4,843)

-

Borrowings under bank note payable

60,000

66,500

Repayments of bank note payable

(5,000)

(70,000)

Repayments of Term Loans

-

(155,000)

Deferred financing costs

(2,561)

-

Net cash used in financing activities

(4,328)

(177,819)

Net increase (decrease) in cash, cash equivalents and restricted cash

(36,058)

20,030

Cash, cash equivalents and restricted cash, beginning of year

40,751

4,150

Cash, cash equivalents and restricted cash, end of period

$

4,693

$

24,180

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Franklin Street Properties Corp. Earnings Release

Supplementary Schedule D

Real Estate Portfolio Summary Information

(Unaudited & Approximated)

Commercial portfolio lease expirations (1)

Total

% of

Year

Square Feet

Portfolio

2022

126,588

1.8%

2023

382,953

5.5%

2024

747,458

10.8%

2025

498,772

7.2%

2026

543,683

7.9%

Thereafter (2)

4,616,261

66.8%

6,915,715

100.0%

(1) Percentages are determined based upon total square footage.
(2) Includes 1,638,306 square feet of vacancies at our operating properties as of June 30, 2022.

(dollars & square feet in 000's)

As of June 30, 2022

% of

Square

% of

State

Properties

Investment

Portfolio

Feet

Portfolio

Colorado

6

$

533,365

45.0%

2,628

38.0%

Texas

9

331,463

27.9%

2,423

35.0%

Georgia

1

43,727

3.7%

160

2.3%

Minnesota

3

121,902

10.3%

758

11.0%

Virginia

1

32,955

2.8%

298

4.3%

Florida

1

68,476

5.8%

213

3.1%

Illinois

2

45,433

3.8%

372

5.4%

North Carolina

1

8,649

0.7%

64

0.9%

Total

24

$

1,185,970

100.0%

6,916

100.0%

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Franklin Street Properties Corp. Earnings Release

Supplementary Schedule E

Portfolio and Other Supplementary Information

(Unaudited & Approximated)

Recurring Capital Expenditures

Six Months

(in thousands)

For the Three Months Ended

Ended

31-Mar-22

30-Jun-22

30-Jun-22

Tenant improvements

$

1,877

$

5,453

$

7,330

Deferred leasing costs

3,032

1,327

4,359

Non-investment capex

5,065

6,736

11,801

$

9,974

$

13,516

$

23,490

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

June 30,

December 31,

2022

2021

Owned or Operating Properties:

Number of properties

24

24

Square feet

6,915,715

6,911,225

Leased percentage

76.3%

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

25

26

Square feet

7,129,475

7,259,770

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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-22

Leased (2)

30-Jun-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%

72.0%

72.0%

4

PARK TEN PHASE II

Houston, TX

156,746

95.0%

95.0%

95.0%

95.0%

5

GREENWOOD PLAZA

Englewood, CO

196,236

100.0%

100.0%

66.3%

77.5%

6

ADDISON

Addison, TX

289,333

72.3%

73.7%

83.0%

83.7%

7

COLLINS CROSSING

Richardson, TX

300,887

96.1%

88.3%

96.1%

96.1%

8

INNSBROOK

Glen Allen, VA

298,183

47.8%

50.9%

47.8%

47.8%

9

LIBERTY PLAZA

Addison, TX

217,600

81.8%

79.2%

76.5%

77.7%

10

380 INTERLOCKEN

Broomfield, CO

240,359

60.5%

60.5%

60.5%

60.5%

11

390 INTERLOCKEN

Broomfield, CO

241,512

99.4%

99.4%

99.4%

99.4%

12

BLUE LAGOON

Miami, FL

213,182

98.5%

98.5%

98.5%

98.5%

13

ELDRIDGE GREEN

Houston, TX

248,399

100.0%

100.0%

100.0%

100.0%

14

121 SOUTH EIGHTH ST

Minneapolis, MN

298,121

89.9%

89.9%

89.7%

89.8%

15

801 MARQUETTE AVE

Minneapolis, MN

129,691

91.8%

91.8%

91.8%

91.8%

16

LEGACY TENNYSON CTR

Plano, TX

208,966

40.7%

40.8%

40.7%

40.7%

17

ONE LEGACY

Plano, TX

214,110

63.7%

59.9%

63.7%

63.7%

18

909 DAVIS

Evanston, IL

195,098

93.3%

93.3%

93.3%

93.3%

19

WESTCHASE I & II

Houston, TX

629,025

56.7%

57.2%

62.9%

62.8%

20

1999 BROADWAY

Denver, CO

680,255

66.2%

66.8%

66.9%

66.9%

21

1001 17TH STREET

Denver, CO

657,706

79.8%

89.9%

71.0%

75.6%

22

PLAZA SEVEN

Minneapolis, MN

330,096

83.6%

83.6%

82.7%

83.0%

23

PERSHING PLAZA

Atlanta, GA

160,145

78.1%

77.1%

78.1%

78.1%

24

600 17TH STREET

Denver, CO

611,163

77.9%

78.9%

76.9%

76.9%

OWNED PORTFOLIO

6,915,715

77.3%

78.1%

76.3%

77.1%

(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.

-12-

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 June 30, 2022

% of

Tenant

Sq Ft

Portfolio

1

CITGO Petroleum Corporation

248,399

3.6%

2

EOG Resources, Inc.

169,167

2.5%

3

US Government

168,573

2.4%

4

The Vail Corporation

164,636

2.4%

5

Lennar Homes, LLC

155,808

2.2%

6

Citicorp Credit Services, Inc

146,260

2.1%

7

Kaiser Foundation Health Plan

120,979

1.8%

8

Argo Data Resource Corporation

114,200

1.6%

9

Swift, Currie, McGhee & Hiers, LLP

101,296

1.5%

10

VMWare, Inc.

100,853

1.5%

11

Deluxe Corporation

98,922

1.4%

12

Ping Identity Corp.

89,856

1.3%

13

Centennial Resource Production, LLC

67,856

1.0%

14

Bread Financial Payments, Inc.

67,274

1.0%

15

PricewaterhouseCoopers LLP

66,304

1.0%

16

Hall and Evans LLC

65,878

0.9%

17

Cyxtera Management, Inc.

61,826

0.9%

18

Precision Drilling (US) Corporation

59,569

0.9%

19

Schwegman, Lundberg & Woessner, P.A.

58,263

0.8%

20

EMC Corporation

57,100

0.8%

Total

2,183,019

31.6%

-13-

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

Six Months Ended

June 30,

June 30,

(In thousands, except per share amounts)

2022

2021

2022

2021

Net income (loss)

$

(9,110)

$

16,149

$

(13,268)

$

9,689

Impairment and loan loss reserve

1,140

-

1,140

-

Gain on sale of properties, net

-

(20,626)

-

(20,626)

Depreciation & amortization

18,141

19,130

33,802

43,479

NAREIT FFO

10,171

14,653

21,674

32,542

Lease Acquisition costs

86

69

165

185

Funds From Operations (FFO)

$

10,257

$

14,722

$

21,839

$

32,727

Funds From Operations (FFO)

$

10,257

$

14,722

$

21,839

$

32,727

Loss on extinguishment of debt

-

167

-

167

Amortization of deferred financing costs

481

686

1,007

1,393

Shares issued as compensation

394

338

394

338

Straight-line rent

(1,688)

(1,041)

(2,904)

(2,945)

Tenant improvements

(5,453)

(4,277)

(7,330)

(8,768)

Leasing commissions

(1,327)

(1,922)

(4,359)

(4,519)

Non-investment capex

(6,736)

(3,793)

(11,801)

(9,129)

Adjusted Funds From Operations (AFFO)

$

(4,072)

$

4,880

$

(3,154)

$

9,264

Per Share Data

EPS

$

(0.09)

$

0.15

$

(0.13)

$

0.09

FFO

$

0.10

$

0.14

$

0.21

$

0.30

AFFO

$

(0.04)

$

0.05

$

(0.03)

$

0.09

Weighted average shares (basic and diluted)

103,193

107,359

103,441

107,344

-14-

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.

-15-

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 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

30-Jun-22

31-Mar-22

(Dec)

Change

Region

East

363

$

475

$

497

$

(22)

(4.4)

%

MidWest

1,130

4,850

3,897

953

24.5

%

South

2,796

5,611

5,817

(206)

(3.5)

%

West

2,627

8,037

9,681

(1,644)

(17.0)

%

Property NOI* from Operating Properties

6,916

18,973

19,892

(919)

(4.6)

%

Dispositions and Redevelopment Properties (a)

-

146

(311)

457

2.2

%

NOI*

6,916

$

19,119

$

19,581

$

(462)

(2.4)

%

Sequential Same Store

$

18,973

$

19,892

$

(919)

(4.6)

%

Less Nonrecurring

Items in NOI* (b)

1,258

273

985

(5.1)

%

Comparative

Sequential Same Store

$

17,715

$

19,619

$

(1,904)

(9.7)

%

-16-

Three Months Ended

Three Months Ended

Reconciliation to Net income

30-Jun-22

31-Mar-22

Net loss

$

(9,110)

$

(4,158)

Add (deduct):

Loss on extinguishment of debt

-

-

Impairment and loan loss reserve

1,140

-

Gain on sale of properties, net

-

-

Management fee income

(267)

(291)

Depreciation and amortization

18,185

15,670

Amortization of above/below market leases

(45)

(9)

General and administrative

3,981

3,784

Interest expense

5,664

5,366

Interest income

(455)

(451)

Non-property specific items, net

26

(330)

NOI*

$

19,119

$

19,581

(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.

Disclaimer

Franklin Street Properties Corporation published this content on 02 August 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 02 August 2022 20:39:02 UTC.


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Net income 2022 -31,0 M - -
Net Debt 2022 - - -
P/E ratio 2022 -10,7x
Yield 2022 4,97%
Capitalization 332 M 332 M -
Capi. / Sales 2022 2,14x
Capi. / Sales 2023 2,42x
Nbr of Employees 34
Free-Float 89,6%
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George John Carter Chairman, President & Chief Executive Officer
Jeffrey B. Carter Senior Vice President & Director-Acquisitions
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Matthew J. Buckley Manager-Information Technology & Assistant VP
Eriel Anchondo Chief Operating Officer & Executive Vice President
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