Franklin Street Properties Corp. Announces Second Quarter 2022 Results

Rhea-AI Summary

Franklin Street Properties Corp. (FSP) reported its second-quarter results as of June 30, 2022, highlighting a GAAP net loss of $9.1 million. The company plans to increase shareholder value through property sales and aims for $200-$300 million in gross proceeds from dispositions. Occupancy in its portfolio decreased to 76.3% from 78.4%. Notably, the company adopted a variable quarterly dividend policy, declaring a cash dividend of $0.01 per share. The upcoming earnings call is set for August 3, 2022.

Positive

• Updated property disposition guidance for 2022 indicates potential gross proceeds of $200-$300 million.
• Adoption of a variable quarterly dividend policy can provide flexibility in capital allocation.
• Leasing activity included approximately 276,000 square feet in the first half of 2022.

Negative

• GAAP net loss of $9.1 million, indicating financial challenges.
• Decrease in occupancy to 76.3% from 78.4% since the end of 2021.
• Adjusted Funds From Operations (AFFO) showed a loss per share for the first half of 2022.

WAKEFIELD, Mass.--(BUSINESS WIRE)-- Franklin Street Properties Corp. (the “Company”, “FSP”, “we” or “our”) (NYSE American: FSP), a real estate investment trust (REIT), announced its results for the 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 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.

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.

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.

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)			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

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

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

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	%

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

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.

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%

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

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 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	)%
				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.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20220802005922/en/

Georgia Touma (877) 686-9496

Source: Franklin Street Properties Corp.

FAQ

What are Franklin Street Properties Corp.'s second quarter 2022 financial results?

FSP reported a GAAP net loss of $9.1 million for Q2 2022, with a loss of $0.09 per share.

What is FSP's updated disposition guidance for 2022?

The updated disposition guidance is approximately $200 million to $300 million for full-year 2022.

What dividend did FSP declare in July 2022?

FSP declared a quarterly cash dividend of $0.01 per share for the three months ended June 30, 2022.

What was the occupancy rate of FSP's portfolio as of June 30, 2022?

As of June 30, 2022, FSP's portfolio was approximately 76.3% leased.

When is FSP's earnings call for the second quarter 2022 results?

The earnings call is scheduled for August 3, 2022, at 11:00 a.m. ET.