Franklin Street Properties Corp. Announces Second Quarter 2021 Results

Rhea-AI Summary

Franklin Street Properties Corp. (FSP) reported its second-quarter results for 2021, focusing on debt reduction and leasing efforts. Key highlights include:

• Sold 4 properties, raising $237 million, primarily used to repay $155 million of term loans and $47.5 million under a credit line.
• GAAP net income of $16.2 million ($0.15 per share) and FFO of $14.8 million ($0.14 per share).
• Leased 563,000 square feet in H1 2021; 78.5% of properties leased as of June 30, 2021.
• Dividend of $0.09 per share declared for Q2 2021, payable on August 5, 2021.

Positive

• Raised $237 million from property sales for debt repayment.
• Debt reduced to approximately $765 million as of June 30, 2021, from $1 billion in September 2020.
• Liquidity of $624.2 million available, including $24.2 million in cash and $600 million in credit.

Negative

• Suspended Net Income and FFO guidance due to uncertainty about future property sales.
• Leased percentage declined to 78.5% from 81% in Q1 2021.
• Leasing activity conversion from prospective tenant interest is taking longer than usual.

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, 2021.

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

“As the second half of 2021 begins, FSP remains focused on its two previously stated primary objectives for full year 2021: strengthening the balance sheet through debt reduction and leasing progress.

From the perspective of strengthening the balance sheet, during the second quarter ended June 30, 2021, we sold four properties for aggregate gross proceeds of approximately $237 million and used the proceeds primarily to repay debt: We repaid approximately $155 million of term loan indebtedness and all of the approximately $47.5 million that had been drawn under our revolving line of credit. As of June 30, 2021, our full $600 million revolving line of credit was available for use and we had approximately $24 million in cash on our balance sheet.

From a leasing perspective, we continue to see increasing exploratory activity by existing and new prospective tenants at our properties. Converting prospective tenant interest and activity into actual, signed leases is generally taking longer than has historically been the case. We believe that this is primarily due to tenant uncertainty regarding the strength and durability of the post-COVID-19 economy and, as a consequence, delayed decision making regarding the amount and configuration of office space needed to accommodate employees. Discussions with prospective tenants have convinced us that businesses will have better clarity on these subjects by Fall 2021.

At this time, we are reaffirming our previously announced 2021 disposition guidance to be in the range of $350 million to $450 million in aggregate gross proceeds, inclusive of the $237 million of gross proceeds in 2021 realized to date. We are also continuing our suspension of Net Income and FFO guidance due primarily to uncertainty surrounding the timing and amount of proceeds from further property dispositions. Proceeds from additional property dispositions will continue to be used primarily for debt reduction. However, the prices achieved in our dispositions have confirmed our belief that our stock price may at times not be fully reflective of the value of our underlying assets. As a result, we may use a portion of proceeds from asset sales for the repurchase of up to $50 million of our outstanding common shares as market conditions warrant pursuant to our previously announced stock repurchase program.

We expect to make continued progress in achieving our objectives over the balance of 2021.”

Financial Highlights

• GAAP net income was $16.2 million, or $0.15 for the three months ended June 30, 2021.
• Funds From Operations (FFO) was $14.8 million, or $0.14 per basic and diluted share, for the three months ended June 30, 2021.
• We pulled forward approximately $2.0 million of costs included in interest expense from breaking interest rate swaps and writing off deferred financing costs related to two term loans that were repaid on June 4, 2021. These costs would have been incurred in the second half of 2021 if the term loans had not been repaid. FFO excluding these pulled forward costs would have been $16.7 million, or $0.16 per basic and diluted share for the three months ended June 30, 2021.
• Adjusted Funds From Operations (AFFO) was $0.05 per basic and diluted share for the three months ended June 30, 2021.
• As noted above, we pulled forward approximately $1.9 million of costs included in interest expense from breaking interest rate swaps related to two term loans that were repaid on June 4, 2021. AFFO excluding these pulled forward costs would have been $6.8 million, or $0.06 per basic and diluted share for the three months ended June 30, 2021.
• During the three months ended June 30, 2021, we repaid approximately $155 million of term loan indebtedness and all of the approximately $47.5 million that was drawn under our revolving line of credit.
• Since September 30, 2020, we have strengthened our balance sheet by repaying approximately $235 million of indebtedness from the proceeds of asset sales. As of September 30, 2020, our total indebtedness was approximately $1 billion, and as of June 30, 2021, our total indebtedness was approximately $765 million.
• We have $624.2 million of liquidity as of June 30, 2021, consisting of $24.2 million of cash and $600.0 million available to draw under our revolving line of credit.
• Our debt is entirely unsecured and we have no scheduled debt maturities until January 12, 2022, when the revolving line of credit matures, which had no amount drawn at June 30, 2021.

Investment Update

• On May 27, 2021, we sold One Ravinia, Two Ravinia and One Overton Park in Atlanta Georgia for aggregate gross proceeds of approximately $219.5 million.
• On June 29, 2021, we sold Loudoun Technology Center in Sterling, Virginia for gross proceeds of approximately $17.3 million.
• Continue to actively work on the potential sale of select properties that we believe have met their near-term value objectives and whose value may not be accurately reflected in our share price.
• Reaffirming 2021 disposition guidance to be in the range of $350 to $450 million in aggregate gross proceeds. Disposition proceeds intended to be used primarily for strengthening the balance sheet through debt reduction.
• Current and potential disposition properties include: One and Two River Crossing in Indianapolis, Indiana; Timberlake Corporate Center in Chesterfield, Missouri; Meadow Point and Stonecroft in Chantilly, Virginia; and Innsbrook Corporate Center in Glen Allen, Virginia.

Leasing Update

• The list of potential tenant prospects continues to grow with increasing anticipation and optimism in regards to improving occupancies in the fall months ahead. We are currently tracking approximately 850,000 square feet of new prospective tenants, of which 500,000 square feet represents potential net absorption in the next nine months. In addition, we are currently working with approximately 100,000 square feet of existing tenants for renewals, early extensions and potential expansions.
• During the first half of 2021, we leased approximately 563,000 square feet, of which approximately 465,000 square feet was with existing tenants. During the year ended December 31, 2020, we leased approximately 1,130,000 square feet, of which approximately 762,000 square feet was with existing tenants.
• Our directly owned real estate portfolio of 30 owned properties (including one redevelopment property) totaling approximately 8.3 million square feet, was approximately 78.5% leased as of June 30, 2021, compared to approximately 81.0% leased as of March 31, 2021. The decrease in the leased percentage is primarily a result of property dispositions of properties that on average had a higher percentage of available space leased than the balance of our property portfolio during the second quarter ended June 30, 2021.
• Lease expirations for the remainder of 2021 are approximately 139,000 square feet, representing approximately 1.7% of our owned portfolio.
• The weighted average GAAP base rent per square foot achieved on leasing activity during the six months ended June 30, 2021 was $29.51, or 0.8% higher than average rents in the respective properties as applicable compared to the year ended December 31, 2020. The average lease term on leases in the six months ended June 30, 2021, was 8.3 years compared to 8.3 years for the full year of 2020. Overall the portfolio weighted average rent per occupied square foot was $30.89 as of June 30, 2021 compared to $29.60 as of December 31, 2020.

Dividend Update

On July 6, 2021, the Company announced that its Board of Directors declared a regular quarterly cash dividend for the three months ended June 30, 2021 of $0.09 per share of common stock that will be paid on August 5, 2021 to stockholders of record on July 16, 2021.

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.

2021 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. However, we are maintaining our previously announced disposition guidance for full-year 2021, as we execute on our strategy to dispose of certain properties that we believe have met their near-term value objectives and whose value may not be accurately reflected in our share price. Anticipated dispositions in 2021 are estimated to result in aggregate gross proceeds in the range of approximately $350 million to $450 million, inclusive of the $237 million of gross proceeds in 2021 realized to date. We intend to use the proceeds of any such dispositions primarily for the repayment of debt under our revolving line of credit and term loan facilities, repurchases of our stock, any special distributions required to meet REIT requirements, and general corporate purposes. This guidance reflects our current expectations of economic and market conditions and is subject to change. 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, 2021. 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 4, 2021 at 11:00 a.m. (ET) to discuss the second quarter 2021 results. To access the call, please dial 1-800-464-8240. Internationally, the call may be accessed by dialing 1-412-902-6521. To access the call from Canada, please dial 1-866-605-3852. To listen via live audio webcast, please visit the Webcasts & Presentations section in the Investor Relations section of the Company's website (www.fspreit.com) at least ten minutes prior to the start of the call and follow the posted directions. The webcast will also be available via replay from the above location starting one hour after the call is finished.

About Franklin Street Properties Corp.

Franklin Street Properties Corp., based in Wakefield, Massachusetts, is focused on infill and central business district (CBD) office properties in the U.S. Sunbelt and Mountain West, as well as select opportunistic markets. FSP seeks value-oriented investments with an eye towards long-term growth and appreciation, as well as current income. FSP is a Maryland corporation that operates in a manner intended to qualify as a real estate investment trust (REIT) for federal income tax purposes. To learn more about FSP please visit our website at www.fspreit.com.

Forward-Looking Statements

Statements made in this press release that state FSP’s or management’s intentions, beliefs, expectations, or predictions for the future may be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. This press release may also contain forward-looking statements, such as those relating to our ability to lease space in the future, expectations for dispositions 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, uncertainty relating to the completion and timing of the disposition of properties under agreement, any inability to dispose of other properties on acceptable terms 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, 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, 2020, 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.

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)		2021				2020				2021				2020
Revenue:
Rental		$	55,722			$	60,398			$	114,345			$	122,965
Related party revenue:
Management fees and interest income from loans			417				405				827				808
Other			6				5				12				18
Total revenue			56,145				60,808				115,184				123,791
Expenses:
Real estate operating expenses			15,352				15,470				31,291				32,768
Real estate taxes and insurance			11,895				12,307				24,261				24,069
Depreciation and amortization			19,136				22,245				43,517				44,583
General and administrative			3,962				3,817				8,108				7,342
Interest			10,054				8,980				18,654				18,043
Total expenses			60,399				62,819				125,831				126,805
Loss on extinguishment of debt			(167	)			—				(167	)			—
Gain on sale of properties, net			20,626				—				20,626				—
Income (loss) before taxes			16,205				(2,011	)			9,812				(3,014	)
Tax expense			56				64				123				132
Net income (loss)		$	16,149			$	(2,075	)		$	9,689			$	(3,146	)
Weighted average number of shares outstanding, basic and diluted			107,359				107,287				107,344				107,278
Net income (loss) per share, basic and diluted		$	0.15			$	(0.02	)		$	0.09			$	(0.03	)

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)		2021				2020
Assets:
Real estate assets:
Land		$	170,377			$	189,155
Buildings and improvements			1,731,690				1,938,629
Fixtures and equipment			11,643				12,949
			1,913,710				2,140,733
Less accumulated depreciation			500,163				538,717
Real estate assets, net			1,413,547				1,602,016
Acquired real estate leases, less accumulated amortization of $50,431 and $55,447, respectively			21,932				28,206
Cash, cash equivalents and restricted cash			24,180				4,150
Tenant rent receivables			3,116				7,656
Straight-line rent receivable			61,475				67,789
Prepaid expenses and other assets			5,405				5,752
Related party mortgage loan receivables			21,000				21,000
Office computers and furniture, net of accumulated depreciation of $1,166 and $1,443, respectively			167				163
Deferred leasing commissions, net of accumulated amortization of $24,840 and $30,411, respectively			49,793				56,452
Total assets		$	1,600,615			$	1,793,184
Liabilities and Stockholders’ Equity:
Liabilities:
Bank note payable		$	—			$	3,500
Term loans payable, less unamortized financing costs of $1,849 and $2,677, respectively			563,151				717,323
Series A & Series B Senior Notes, less unamortized financing costs of $740 and $822, respectively			199,260				199,178
Accounts payable and accrued expenses			50,799				72,058
Accrued compensation			2,309				3,918
Tenant security deposits			6,807				8,677
Lease liability			1,350				1,536
Other liabilities: derivative liabilities			9,425				17,311
Acquired unfavorable real estate leases, less accumulated amortization of $3,320 and $4,031, respectively			829				1,592
Total liabilities			833,930				1,025,093
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, 107,394,763 and 107,328,199 shares issued and outstanding, respectively			11				11
Additional paid-in capital			1,357,469				1,357,131
Accumulated other comprehensive loss			(9,425	)			(17,311	)
Accumulated distributions in excess of accumulated earnings			(581,370	)			(571,740	)
Total stockholders’ equity			766,685				768,091
Total liabilities and stockholders’ equity		$	1,600,615			$	1,793,184

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)		2021				2020
Cash flows from operating activities:
Net income (loss)		$	9,689			$	(3,146	)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense			44,910				46,055
Amortization of above and below market leases			(38	)			(147	)
Shares issued as compensation			338				337
Loss on extinguishment of debt			167				—
Gain on sale of properties, net			(20,626	)			—
Decrease in allowance for doubtful accounts and write-off of accounts receivable			—				(13	)
Changes in operating assets and liabilities:
Tenant rent receivables			4,540				(328	)
Straight-line rents			(2,858	)			(1,343	)
Lease acquisition costs			(623	)			(838	)
Prepaid expenses and other assets			(485	)			21
Accounts payable and accrued expenses			(18,520	)			(10,006	)
Accrued compensation			(1,609	)			(1,122	)
Tenant security deposits			(1,870	)			(191	)
Payment of deferred leasing commissions			(6,926	)			(3,682	)
Net cash provided by operating activities			6,089				25,597
Cash flows from investing activities:
Property improvements, fixtures and equipment			(36,957	)			(43,189	)
Proceeds received from sale of properties			228,717				—
Net cash provided by (used in) investing activities			191,760				(43,189	)
Cash flows from financing activities:
Distributions to stockholders			(19,319	)			(19,308	)
Borrowings under bank note payable			66,500				60,000
Repayments of bank note payable			(70,000	)			(30,000	)
Repayment on term loan payable			(155,000	)			—
Net cash provided by (used in) financing activities			(177,819	)			10,692
Net increase (decrease) in cash, cash equivalents and restricted cash			20,030				(6,900	)
Cash, cash equivalents and restricted cash, beginning of year			4,150				9,790
Cash, cash equivalents and restricted cash, end of period		$	24,180			$	2,890

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
2021		138,940		1.7%
2022		700,637		8.4%
2023		364,384		4.4%
2024		807,949		9.7%
2025		481,670		5.8%
Thereafter (2)		5,846,037		70.0%
		8,339,617		100.0%

______________________
(1)		Percentages are determined based upon total square footage.
(2)		Includes 1,683,590 square feet of vacancies at our operating properties and 111,469 square feet of vacancies at our redevelopment property as of June 30, 2021. We define redevelopment properties as properties being developed, redeveloped or where redevelopment is complete, but are in lease-up and that are not stabilized.

(dollars & square feet in 000's)		As of June 30, 2021 (a)
		# of					% of		Square		% of
State		Properties		Investment			Portfolio		Feet		Portfolio
Colorado		6		$	545,324		38.6%		2,625		31.5%
Texas		9			336,623		23.8%		2,420		29.0%
Georgia		2			153,949		10.9%		782		9.4%
Minnesota		3			122,575		8.7%		758		9.1%
Virginia		3			67,613		4.8%		548		6.6%
Florida		1			62,229		4.4%		213		2.5%
Illinois		2			45,645		3.2%		372		4.4%
Missouri		2			41,993		3.0%		352		4.2%
Indiana		1			29,894		2.1%		206		2.5%
North Carolina		1			7,702		0.5%		64		0.8%
Total		30		$	1,413,547		100.0%		8,340		100.0%

(a)		Includes investment in our redevelopment property. We define redevelopment properties as properties being developed, redeveloped or where redevelopment is complete, but are in lease-up and that are not stabilized.

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-21			30-Jun-21			30-Jun-21
Tenant improvements		$	4,491		$	4,277		$	8,768
Deferred leasing costs			2,597			1,922			4,519
Non-investment capex			5,336			3,793			9,129
		$	12,424		$	9,992		$	22,416

		For the Three Months Ended												Year Ended
		31-Mar-20			30-Jun-20			30-Sep-20			31-Dec-20			31-Dec-20
Tenant improvements		$	10,716		$	13,531		$	8,022		$	837		$	33,106
Deferred leasing costs			2,730			603			2,033			7,432			12,798
Non-investment capex			4,527			6,581			6,373			6,105			23,586
		$	17,973		$	20,715		$	16,428		$	14,374		$	69,490

Square foot & leased percentages		June 30,		December 31,
		2021		2020
Operating Properties:
Number of properties		29		32
Square feet		8,228,148		9,331,489
Leased percentage		79.5%		85.0%
Redevelopment Properties (a):
Number of properties		1		2
Square feet		111,469		324,651
Leased percentage		0.0%		48.0%
Total Owned Properties:
Number of properties		30		34
Square feet		8,339,617		9,656,140
Leased percentage		78.5%		83.8%
Managed Properties - Single Asset REITs (SARs):
Number of properties		2		2
Square feet		348,545		348,545
Total Operating, Redevelopment and Managed Properties:
Number of properties		32		36
Square feet		8,688,162		10,004,685

(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.

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-21		Leased (2)		30-Jun-21			Leased (2)
1		FOREST PARK		Charlotte, NC		64,198		78.4%		78.4%		78.4	%		78.4	%
2		MEADOW POINT		Chantilly, VA		138,537		91.1%		91.1%		91.1	%		91.1	%
3		TIMBERLAKE		Chesterfield, MO		234,496		100.0%		100.0%		100.0	%		100.0	%
4		TIMBERLAKE EAST		Chesterfield, MO		117,036		100.0%		100.0%		100.0	%		100.0	%
5		NORTHWEST POINT		Elk Grove Village, IL		177,095		100.0%		100.0%		100.0	%		100.0	%
6		PARK TEN		Houston, TX		157,460		71.7%		71.7%		71.7	%		71.7	%
7		PARK TEN PHASE II		Houston, TX		156,746		95.0%		95.0%		95.0	%		95.0	%
8		GREENWOOD PLAZA		Englewood, CO		196,236		100.0%		100.0%		100.0	%		100.0	%
9		ADDISON		Addison, TX		289,325		83.7%		83.7%		83.7	%		83.7	%
10		COLLINS CROSSING		Richardson, TX		300,887		84.4%		83.8%		84.4	%		84.4	%
11		INNSBROOK		Glen Allen, VA		298,183		57.2%		57.2%		57.2	%		57.2	%
12		RIVER CROSSING		Indianapolis, IN		205,729		100.0%		100.0%		100.0	%		100.0	%
13		LIBERTY PLAZA		Addison, TX		216,952		74.1%		74.1%		79.0	%		79.0	%
14		380 INTERLOCKEN		Broomfield, CO		240,359		76.0%		76.0%		60.5	%		60.5	%
15		390 INTERLOCKEN		Broomfield, CO		241,512		99.4%		99.4%		99.4	%		99.4	%
16		BLUE LAGOON		Miami, FL		213,182		73.1%		73.1%		73.1	%		73.1	%
17		ELDRIDGE GREEN		Houston, TX		248,399		100.0%		100.0%		100.0	%		100.0	%
		ONE OVERTON PARK		Atlanta, GA		—		95.5%		95.6%		(4	)		(4	)
		LOUDOUN TECH		Dulles, VA		—		98.9%		98.9%		(5	)		(5	)
18		4807 STONECROFT (3)		Chantilly, VA		111,469		0.0%		0.0%		0.0	%		0.0	%
19		121 SOUTH EIGHTH ST		Minneapolis, MN		298,121		92.0%		92.2%		91.6	%		91.8	%
20		801 MARQUETTE AVE		Minneapolis, MN		129,821		91.8%		91.8%		91.8	%		91.8	%
21		LEGACY TENNYSON CTR		Plano, TX		207,049		41.1%		60.7%		41.1	%		41.1	%
22		ONE LEGACY		Plano, TX		214,110		56.4%		56.4%		56.4	%		56.4	%
23		909 DAVIS		Evanston, IL		195,098		93.3%		93.3%		93.3	%		93.3	%
		ONE RAVINIA DRIVE		Atlanta, GA		—		80.8%		80.8%		(4	)		(4	)
		TWO RAVINIA		Atlanta, GA		—		68.6%		68.7%		(4	)		(4	)
24		WESTCHASE I & II		Houston, TX		629,025		52.4%		52.4%		54.4	%		54.4	%
25		1999 BROADWAY		Denver, CO		680,255		67.2%		72.4%		66.5	%		66.5	%
26		999 PEACHTREE		Atlanta, GA		621,946		84.5%		84.5%		85.0	%		84.8	%
27		1001 17TH STREET		Denver, CO		655,420		96.0%		96.0%		95.2	%		95.5	%
28		PLAZA SEVEN		Minneapolis, MN		330,096		86.7%		87.3%		85.5	%		85.5	%
29		PERSHING PLAZA		Atlanta, GA		160,145		98.9%		98.9%		12.4	%		70.1	%
30		600 17TH STREET		Denver, CO		610,730		87.5%		87.7%		84.9	%		85.5	%
		OWNED PORTFOLIO				8,339,617		81.0%		81.8%		78.5	%		79.8	%

______________________
(1)		% Leased as of month's end includes all leases that expire on the last day of the quarter.
(2)		Average quarterly percentage is the average of the end of the month leased percentage for each of the three months during the quarter.
(3)		We define redevelopment properties as properties being developed, redeveloped or where redevelopment is complete, but are in lease-up and that are not stabilized.
(4)		Properties sold on May 27, 2021.
(5)		Property sold on June 29, 2021.

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, 2021
						% of
		Tenant		Sq Ft		Portfolio
1		Centene Management Company, LLC		317,101		3.8%
2		CITGO Petroleum Corporation		248,399		3.0%
3		Ovintiv USA Inc.		234,495		2.8%
4		Eversheds Sutherland (US) LLP		179,868		2.2%
5		EOG Resources, Inc.		169,167		2.0%
6		US Government		168,573		2.0%
7		The Vail Corporation		164,636		2.0%
8		Lennar Homes, LLC		155,808		1.9%
9		Citicorp Credit Services, Inc		146,260		1.7%
10		Kaiser Foundation Health Plan		120,979		1.4%
11		Argo Data Resource Corporation		114,200		1.4%
12		VMWare, Inc.		100,853		1.2%
13		Deluxe Corporation		98,922		1.2%
14		Ping Identity Corp.		89,856		1.1%
15		Common Grounds, LLC		76,984		0.9%
16		Somerset CPAs, P.C.		71,163		0.9%
17		ADS Alliance Data Systems, Inc.		67,274		0.8%
18		PricewaterhouseCoopers LLP		66,304		0.8%
19		DirecTV, Inc.		66,226		0.8%
20		Hall and Evans, LLC		65,878		0.8%
		Total		2,722,946		32.7%

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)		2021				2020				2021				2020
Net income (loss)		$	16,149			$	(2,075	)		$	9,689			$	(3,146	)
Gain on sale of properties, net			(20,626	)			—				(20,626	)			—
Depreciation & amortization			19,130				22,170				43,479				44,435
NAREIT FFO			14,653				20,095				32,542				41,289
Lease Acquisition costs			69				99				185				197
Funds From Operations (FFO)		$	14,722			$	20,194			$	32,727			$	41,486
Funds From Operations (FFO)		$	14,722			$	20,194			$	32,727			$	41,486
Amortization of deferred financing costs			853				726				1,560				1,474
Shares issued as compensation			338				337				338				337
Straight-line rent			(1,041	)			(377	)			(2,945	)			(1,343	)
Tenant improvements			(4,277	)			(13,531	)			(8,768	)			(24,247	)
Leasing commissions			(1,922	)			(603	)			(4,519	)			(3,333	)
Non-investment capex			(3,793	)			(6,581	)			(9,129	)			(11,108	)
Adjusted Funds From Operations (AFFO)		$	4,880			$	165			$	9,264			$	3,266
Per Share Data
EPS		$	0.15			$	(0.02	)		$	0.09			$	(0.03	)
FFO		$	0.14			$	0.19			$	0.30			$	0.39
AFFO		$	0.05			$	0.00			$	0.09			$	0.03
Weighted average shares (basic and diluted)			107,359				107,287				107,344				107,278

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 our proportionate share of FFO and including distributions received, from non-consolidated REITs, (3) excluding the effect of straight-line rent, (4) plus the amortization of deferred financing costs, (5) plus the value of shares issued as compensation and (6) 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 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-21				31-Mar-21				(Dec)				Change
Region
East		437		$	685			$	592			$	93			15.7		%
MidWest		1,558			5,252				5,378				(126	)		(2.3	)	%
South		3,202			9,207				9,555				(348	)		(3.6	)	%
West		2,624			9,902				10,369				(467	)		(4.5	)	%
Property NOI* from Operating Properties		7,821			25,046				25,894				(848	)		(3.3	)	%
Dispositions and Redevelopment Properties (a)		519			2,954				3,867				(913	)		(2.6	)	%
NOI*		8,340		$	28,000			$	29,761			$	(1,761	)		(5.9	)	%
Sequential Same Store				$	25,046			$	25,894			$	(848	)		(3.3	)	%
Less Nonrecurring
Items in NOI* (b)					34				32				2			(0.0	)	%
Comparative
Sequential Same Store				$	25,012			$	25,862			$	(850	)		(3.3	)	%
				Three Months Ended				Three Months Ended
Reconciliation to Net income				30-Jun-21				31-Mar-21
Net income (loss)				$	16,149			$	(6,460	)
Add (deduct):
Loss on extinguishment of debt					167				—
Gain on sale of properties, net					(20,626	)			—
Management fee income					(403	)			(465	)
Depreciation and amortization					19,136				24,381
Amortization of above/below market leases					(6	)			(32	)
General and administrative					3,962				4,146
Interest expense					10,054				8,600
Interest income					(399	)			(394	)
Non-property specific items, net					(34	)			(15	)
NOI*				$	28,000			$	29,761

(a)		We define redevelopment properties as properties being developed, redeveloped or where redevelopment is complete, but are in lease-up and that are not stabilized. We also include properties that have been placed in service, but that do not have operating activity for all periods presented.
(b)		Nonrecurring Items in NOI include proceeds from bankruptcies, lease termination fees or other significant nonrecurring income or expenses, which may affect comparability.

*Excludes NOI from investments in and interest income from secured loans to non-consolidated REITs.

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FAQ

What were Franklin Street Properties Corp.'s second quarter results for 2021?

FSP reported a GAAP net income of $16.2 million and FFO of $14.8 million for Q2 2021.

How much debt did Franklin Street Properties Corp. repay in Q2 2021?

FSP repaid approximately $155 million of term loan debt and all $47.5 million drawn from its revolving credit line.

What is Franklin Street Properties Corp.'s dividend for Q2 2021?

FSP declared a quarterly dividend of $0.09 per share, payable on August 5, 2021.

What percentage of Franklin Street Properties Corp.'s properties were leased as of June 30, 2021?

As of June 30, 2021, 78.5% of FSP's properties were leased.

What is Franklin Street Properties Corp.'s 2021 disposition guidance?

FSP reaffirmed its 2021 disposition guidance to be in the range of $350 million to $450 million.