Franklin Street Properties Corp. Announces Third Quarter 2024 Results

Rhea-AI Summary

Franklin Street Properties (NYSE American: FSP) reported Q3 2024 results with a GAAP net loss of $15.6 million ($0.15 per share). The company's Funds From Operations (FFO) was $2.7 million ($0.03 per share). FSP completed two significant property sales: Innsbrook in Virginia for $31 million and Pershing Park Plaza in Atlanta for $34 million, using proceeds to reduce debt to $250.3 million. The company's portfolio occupancy decreased to 70.4% from 74.0% at year-end 2023. FSP leased approximately 92,000 square feet in Q3, with weighted average rents increasing 10.9% to $29.94 per square foot. The Board declared a quarterly dividend of $0.01 per share.

Positive

• Achieved 10.9% higher rental rates on new leases compared to previous year
• Successfully completed $65 million in property sales (Innsbrook and Pershing Park Plaza)
• Reduced total debt by approximately $52.7 million using sale proceeds

Negative

• Posted GAAP net loss of $15.6 million in Q3 2024
• Portfolio occupancy declined to 70.4% from 74.0% at year-end 2023
• Reduced quarterly dividend to $0.01 per share

Insights

Financial Analyst

The Q3 2024 results reveal significant strategic moves but concerning financial metrics. Net loss widened to $15.6 million in Q3, while FFO declined to just $0.03 per share. The portfolio's occupancy dropped to 70.4% from 74% at year-end 2023, reflecting ongoing office sector challenges.

Key positive developments include two property sales: Innsbrook for $31 million and Pershing Park Plaza for $34 million, with proceeds used to reduce debt to $250.3 million. The company achieved higher rental rates, with new leases 10.9% above previous rates, though shorter lease terms of 5.4 years versus 6.8 years previously indicate tenant caution.

Real Estate Market Analyst

FSP's strategic pivot to Sunbelt and Mountain West markets, combined with its debt reduction strategy, shows forward-thinking positioning. However, the 70.4% occupancy rate is concerning, significantly below market averages. The successful disposition strategy, yielding approximately $1.07 billion since 2020 at $211 per square foot, demonstrates strong execution in challenging market conditions.

The reduced quarterly dividend of $0.01 per share signals financial conservatism but may impact investor attraction. The higher achieved rents are positive, but shorter lease terms reflect ongoing market uncertainty in the office sector.

WAKEFIELD, Mass.--(BUSINESS WIRE)-- Franklin Street Properties Corp. (the “Company”, “FSP”, “we” or “our”) (NYSE American: FSP), a real estate investment trust (REIT), announced its results for the third quarter ended September 30, 2024.

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

“As the fourth quarter of 2024 begins, we continue to believe that the current price of our common stock does not accurately reflect the value of our underlying real estate assets. We will seek to increase shareholder value by continuing to (1) pursue the sale of select properties when we believe that short to intermediate term valuation potential has been reached and (2) strive to increase occupancy through leasing of vacant space. We intend to use proceeds from property dispositions primarily for debt reductions.

During the third quarter of 2024, we leased a total of approximately 92,000 square feet of office space within our approximately 5.0 million square foot directly–owned property portfolio.

During the third quarter of 2024, we completed the sale of our last property in the Commonwealth of Virginia on July 8, 2024. The property, located in Glen Allen and known as Innsbrook, sold for a gross selling price of $31 million. On July 10, 2024, we repaid approximately $25.3 million of our debt with a portion of the net proceeds of the Innsbrook disposition.

On October 23, 2024, we completed the sale of our last property in Atlanta, Georgia. The property, known as Pershing Park Plaza, sold for a gross selling price of $34 million. On October 25, 2024, we repaid approximately $27.4 million of our debt with a portion of the net proceeds from the Pershing Park Plaza disposition. As of October 25, 2024, our total indebtedness was approximately $250.3 million, equivalent to approximately $52 per square foot on our remaining approximately 4.8 million square foot directly-owned property portfolio.

We look forward to the remainder of 2024 and beyond with anticipation and optimism.”

Financial Highlights

• GAAP net loss was $15.6 million and $44.2 million, or $0.15 and $0.43 per basic and diluted share for the three and nine months ended September 30, 2024, respectively.
• Funds From Operations (FFO) was $2.7 million and $10.6 million, or $0.03 and $0.10 per basic and diluted share, for the three and nine months ended September 30, 2024, respectively.

Leasing Highlights

• During the nine months ended September 30, 2024, we leased approximately 364,000 square feet, including 122,000 square feet of new leases.
• Our directly-owned real estate portfolio of 15 owned properties, totaling approximately 5.0 million square feet, was approximately 70.4% leased as of September 30, 2024, compared to approximately 74.0% leased as of December 31, 2023. The decrease in the leased percentage is primarily a result of two property dispositions and lease expirations during the nine months ended September 30, 2024, which were partially offset by leasing completed during the nine months ended September 30, 2024 .
• The weighted average GAAP base rent per square foot achieved on leasing activity during the nine months ended September 30, 2024, was $29.94, or 10.9% higher than average rents in the respective properties for the year ended December 31, 2023. The average lease term on leases signed during the nine months ended September 30, 2024, was 5.4 years compared to 6.8 years during the year ended December 31, 2023. Overall, the portfolio weighted average rent per occupied square foot was $31.92 as of September 30, 2024, compared to $30.72 as of December 31, 2023.
• We believe that our continuing portfolio of real estate is well located, primarily in the Sunbelt and Mountain West geographic regions, and consists of high-quality assets with upside leasing potential.

Investment Highlights

• To reduce indebtedness, since December of 2020, FSP has selectively sold office properties when values and circumstances have warranted.
• Since December of 2020, our dispositions have resulted in aggregate gross proceeds of approximately $1,077,000,000 and reflect an average sales price per square foot of approximately $211.
• On July 8, 2024, we sold our last property in the Commonwealth of Virginia. The property was a low-rise office property located in Glen Allen (Greater Richmond) and known as Innsbrook. The property sold for a gross selling price of $31 million. On July 10, 2024, we used approximately $25.3 million of the net proceeds from the disposition to repay debt.
• On October 23, 2024, we sold our last property in Atlanta, Georgia, known as Pershing Park Plaza. The property, an approximately 160,145 square foot office building, sold for a gross selling price of $34 million. On October 25, 2024, we used approximately $27.4 million of the net proceeds from the disposition to repay debt resulting in a reduction in total indebtedness to an aggregate of approximately $250.3 million, which reflects about $52 per square foot on the remaining approximately 4.8 million square foot directly owned portfolio.

Dividends

• On October 4, 2024, we announced that our Board of Directors declared a quarterly cash dividend for the three months ended September 30, 2024, of $0.01 per share of common stock that will be paid on November 7, 2024, to stockholders of record on October 18, 2024.

Consolidation of Sponsored REIT

As of January 1, 2023, we consolidated the operations of our Monument Circle sponsored REIT into our financial statements. On October 29, 2021, we agreed to amend and restate our existing loan to Monument Circle that is secured by a mortgage on real estate owned by Monument Circle, which we refer to as the Sponsored REIT Loan. The amended and restated Sponsored REIT Loan extended the maturity date from December 6, 2022 to June 30, 2023 (and was further extended to September 30, 2023 on June 26, 2023), increased the aggregate principal amount of the loan from $21 million to $24 million, and included certain other modifications. On September 26, 2023, the maturity date was extended to September 30, 2024 and on September 27, 2024, was further extended to September 30, 2025. In consideration of our agreement to amend and restate the Sponsored REIT Loan, we obtained from the stockholders of Monument Circle the right to vote their shares in favor of any sale of the property owned by Monument Circle any time on or after January 1, 2023. As a result of our obtaining this right to vote shares, GAAP variable interest entity (VIE) rules required us to consolidate Monument Circle as of January 1, 2023. A gain on consolidation of approximately $0.4 million was recognized in the three months ended March 31, 2023.

Additional information about the consolidation of Monument Circle can be found in Note 1, “Organization, Properties, Basis of Presentation, Financial Instruments, and Recent Accounting Standards – Variable Interest Entities (VIEs)” and Note 2, “Related Party Transactions and Investments in Non-Consolidated Entities - Management fees and interest income from loans”, in the Notes to Consolidated Financial Statements included in our Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2024.

Non-GAAP Financial Information

A reconciliation of Net income (loss) to FFO, Adjusted Funds From Operations (AFFO) and Sequential Same Store NOI and our definitions of FFO, AFFO and Sequential Same Store NOI can be found on Supplementary Schedules H and I.

2024 Net Income (Loss), FFO and Disposition Guidance

At this time, due primarily to economic conditions and uncertainty surrounding the timing and amount of proceeds received from property dispositions, we are continuing suspension of Net Income (Loss), FFO and property disposition guidance.

Real Estate Update

Supplementary schedules provide property information for the Company’s owned and consolidated properties as of September 30, 2024. The Company will also be filing an updated supplemental information package that will provide stockholders and the financial community with additional operating and financial data. The Company will file this supplemental information package with the SEC and make it available on its website at www.fspreit.com.

Today’s news release, along with other news about Franklin Street Properties Corp., is available on the Internet at www.fspreit.com. We routinely post information that may be important to investors in the Investor Relations section of our website. We encourage investors to consult that section of our website regularly for important information about us and, if they are interested in automatically receiving news and information as soon as it is posted, to sign up for E-mail Alerts.

Earnings Call

A conference call is scheduled for October 30, 2024, at 11:00 a.m. (ET) to discuss the third quarter 2024 results. To access the call, please dial 888-440-4368 and use conference ID 5398803. Internationally, the call may be accessed by dialing 646-960-0856 and using conference ID 5398803. To listen via live audio webcast, please visit the Webcasts & Presentations section in the Investor Relations section of the Company's website (www.fspreit.com) at least ten minutes prior to the start of the call and follow the posted directions. The webcast will also be available via replay from the above location starting one hour after the call is finished.

About Franklin Street Properties Corp.

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

Forward-Looking Statements

Statements made in this press release that state FSP’s or management’s intentions, beliefs, expectations, or predictions for the future may be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. This press release may also contain forward-looking statements, such as those relating to expectations for future potential leasing activity, expectations for future potential property dispositions, the payment of dividends and the repayment of debt in future periods, value creation/enhancement in future periods and expectations for growth and leasing activities in future periods that are based on current judgments and current knowledge of management and are subject to certain risks, trends and uncertainties that could cause actual results to differ materially from those indicated in such forward-looking statements. Accordingly, readers are cautioned not to place undue reliance on forward-looking statements. Investors are cautioned that our forward-looking statements involve risks and uncertainty, including without limitation, adverse changes in general economic or local market conditions, including as a result of the long-term effects of the COVID-19 pandemic, wars, terrorist attacks or other acts of violence, which may negatively affect the markets in which we and our tenants operate, inflation rates, interest rates, disruptions in the debt markets, economic conditions in the markets in which we own properties, risks of a lessening of demand for the types of real estate owned by us, adverse changes in energy prices, which if sustained, could negatively impact occupancy and rental rates in the markets in which we own properties, including energy-influenced markets such as Dallas, Denver and Houston, changes in government regulations and regulatory uncertainty, uncertainty about governmental fiscal policy, geopolitical events and expenditures that cannot be anticipated, such as utility rate and usage increases, delays in construction schedules, unanticipated increases in construction costs, increases in the level of general and administrative costs as a percentage of revenues as revenues decrease as a result of property dispositions, unanticipated repairs, additional staffing, insurance increases and real estate tax valuation reassessments. See the “Risk Factors” set forth in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2023, which may be updated from time to time in subsequent filings with the United States Securities and Exchange Commission. Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, acquisitions, dispositions, performance or achievements. We will not update any of the forward-looking statements after the date of this press release to conform them to actual results or to changes in our expectations that occur after such date, other than as required by law.

 

Franklin Street Properties Corp. Earnings Release Supplementary Information Table of Contents
Franklin Street Properties Corp. Financial Results	A-C
Real Estate Portfolio Summary Information	D
Portfolio and Other Supplementary Information	E
Percentage of Leased Space	F
Largest 20 Tenants – FSP Owned Portfolio	G
Reconciliation and Definitions of Funds From Operations (FFO) and Adjusted
Funds From Operations (AFFO)	H
Reconciliation and Definition of Sequential Same Store results to Property Net
Operating Income (NOI) and Net Loss	I

Franklin Street Properties Corp. Financial Results Supplementary Schedule A Condensed Consolidated Statements of Operations (Unaudited)
		For the								For the
		Three Months Ended								Nine Months Ended
		September 30,								September 30,
(in thousands, except per share amounts)		2024				2023				2024				2023
Revenue:
Rental		$	29,662			$	36,903			$	91,705			$	110,927
Other			20				—				32				9
Total revenue			29,682				36,903				91,737				110,936
Expenses:
Real estate operating expenses			11,574				12,797				33,620				37,627
Real estate taxes and insurance			5,512				7,115				17,175				21,257
Depreciation and amortization			10,911				13,408				34,018				42,780
General and administrative			3,275				3,265				11,069				10,849
Interest			6,585				6,209				20,513				18,099
Total expenses			37,857				42,794				116,395				130,612
Loss on extinguishment of debt			(477	)			(39	)			(614	)			(106	)
Gain on consolidation of Sponsored REIT			—				—				—				394
Loss on sale of properties and impairment of assets held for sale, net			(7,254	)			(39,671	)			(20,459	)			(32,085	)
Interest income			340				—				1,696				—
Loss before taxes			(15,566	)			(45,601	)			(44,035	)			(51,473	)
Tax expense			56				70				162				212
Net loss		$	(15,622	)		$	(45,671	)		$	(44,197	)		$	(51,685	)
Weighted average number of shares outstanding, basic and diluted			103,567				103,430				103,492				103,333
Net loss per share, basic and diluted		$	(0.15	)		$	(0.44	)		$	(0.43	)		$	(0.50	)

Franklin Street Properties Corp. Financial Results Supplementary Schedule B Condensed Consolidated Balance Sheets (Unaudited)
		September 30,				December 31,
(in thousands, except share and par value amounts)		2024				2023
Assets:
Real estate assets:
Land		$	105,298			$	110,298
Buildings and improvements			1,090,551				1,133,971
Fixtures and equipment			10,776				12,904
			1,206,625				1,257,173
Less accumulated depreciation			369,276				366,349
Real estate assets, net			837,349				890,824
Acquired real estate leases, less accumulated amortization of $16,465 and $20,413, respectively			4,695				6,694
Assets held for sale			32,926				73,318
Cash, cash equivalents and restricted cash			42,375				127,880
Tenant rent receivables			1,349				2,191
Straight-line rent receivable			38,432				40,397
Prepaid expenses and other assets			3,243				4,239
Office computers and furniture, net of accumulated depreciation of $1,063 and $1,020, respectively			80				123
Deferred leasing commissions, net of accumulated amortization of $14,724 and $16,008, respectively			21,064				23,664
Total assets		$	981,513			$	1,169,330
Liabilities and Stockholders’ Equity:
Liabilities:
Bank note payable		$	—			$	90,000
Term loans payable, less unamortized financing costs of $2,956 and $293, respectively			137,601				114,707
Series A & Series B Senior Notes, less unamortized financing costs of $1,585 and $329, respectively			135,545				199,670
Accounts payable and accrued expenses			32,821				41,879
Accrued compensation			3,193				3,644
Tenant security deposits			6,120				6,204
Lease liability			763				334
Acquired unfavorable real estate leases, less accumulated amortization of $310 and $396, respectively			51				87
Total liabilities			316,094				456,525
Commitments and contingencies
Stockholders’ Equity:
Preferred stock, $.0001 par value, 20,000,000 shares authorized, none issued or outstanding			—				—
Common stock, $.0001 par value, 180,000,000 shares authorized, 103,566,715 and 103,430,353 shares issued and outstanding, respectively			10				10
Additional paid-in capital			1,335,361				1,335,091
Accumulated other comprehensive income			—				355
Accumulated distributions in excess of accumulated earnings			(669,952	)			(622,651	)
Total stockholders’ equity			665,419				712,805
Total liabilities and stockholders’ equity		$	981,513			$	1,169,330

Franklin Street Properties Corp. Financial Results Supplementary Schedule C Condensed Consolidated Statements of Cash Flows (Unaudited)
		For the
		Nine Months Ended
		September 30,
(in thousands)		2024				2023
Cash flows from operating activities:
Net loss		$	(44,197	)		$	(51,685	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization expense			36,284				44,705
Amortization of above and below market leases			(17	)			(39	)
Amortization of other comprehensive income into interest expense			(355	)			(2,789	)
Shares issued as compensation			270				315
Loss on extinguishment of debt			614				106
Gain on consolidation of Sponsored REIT			—				(394	)
Loss on sale of properties and impairment of assets held for sale, net			20,459				32,085
Changes in operating assets and liabilities:
Tenant rent receivables			842				(653	)
Straight-line rents			1,249				427
Lease acquisition costs			(660	)			(903	)
Prepaid expenses and other assets			314				(644	)
Accounts payable and accrued expenses			(4,364	)			(2,516	)
Accrued compensation			(451	)			(465	)
Tenant security deposits			(84	)			(79	)
Payment of deferred leasing commissions			(3,168	)			(5,926	)
Net cash provided by operating activities			6,736				11,545
Cash flows from investing activities:
Property improvements, fixtures and equipment			(19,074	)			(26,024	)
Consolidation of Sponsored REIT			—				3,048
Proceeds received from sales of properties			62,909				37,062
Net cash provided by investing activities			43,835				14,086
Cash flows from financing activities:
Distributions to stockholders			(3,104	)			(3,099	)
Proceeds received from termination of interest rate swap			—				4,206
Borrowings under Bank note payable			—				67,000
Repayments of Bank note payable			(22,667	)			(35,000	)
Repayments of Term loans payable			(41,775	)			(50,000	)
Repayments of Series A&B Senior Notes			(62,870	)			—
Deferred financing costs			(5,660	)			(2,327	)
Net cash used in financing activities			(136,076	)			(19,220	)
Net increase (decrease) in cash, cash equivalents and restricted cash			(85,505	)			6,411
Cash, cash equivalents and restricted cash, beginning of year			127,880				6,632
Cash, cash equivalents and restricted cash, end of period		$	42,375			$	13,043

Franklin Street Properties Corp. Earnings Release Supplementary Schedule D Real Estate Portfolio Summary Information (Unaudited & Approximated)
Commercial portfolio lease expirations (1)
		Total		% of
Year		Square Feet		Portfolio
2024		76,685		1.5	%
2025		437,680		8.4	%
2026		597,396		11.5	%
2027		301,032		5.8	%
2028		252,285		4.9	%
Thereafter (2)		3,515,080		67.9	%
		5,180,158		100.0	%

_______________________
(1)		Percentages are determined based upon total square footage.
(2)		Includes 1,674,459 square feet of vacancies at our owned and consolidated properties as of September 30, 2024.

(dollars & square feet in 000's)		As of September 30, 2024
							% of			Square		% of
State		Properties		Investment			Portfolio			Feet		Portfolio
Colorado		4		$	443,251		52.9	%		2,140		41.3	%
Texas		7			260,627		31.1	%		1,909		36.9	%
Georgia (a)		1			-		0.0	%		160		3.1	%
Minnesota		3			114,373		13.7	%		757		14.6	%
Indiana		1			19,098		2.3	%		214		4.1	%
Total		16		$	837,349		100.0	%		5,180		100.0	%

_______________________
(a)		Includes one property that was classified as an asset held for sale as of September 30, 2024.

Franklin Street Properties Corp. Earnings Release Supplementary Schedule E Portfolio and Other Supplementary Information (Unaudited & Approximated)
Recurring Capital Expenditures											For the Nine
(in thousands)		For the Three Months Ended									Months Ended
		31-Mar-24			30-Jun-24			30-Sep-24			30-Sep-24
Tenant improvements		$	2,619		$	2,558		$	4,444		$	9,621
Deferred leasing costs			2,237			511			421			3,169
Non-investment capex			1,019			1,480			1,658			4,157
		$	5,875		$	4,549		$	6,523		$	16,947

(in thousands)		For the Three Months Ended												Year Ended
		31-Mar-23			30-Jun-23			30-Sep-23			31-Dec-23			31-Dec-23
Tenant improvements		$	3,047		$	4,381		$	3,653		$	5,295		$	16,376
Deferred leasing costs			908			3,230			1,114			1,649			6,901
Non-investment capex			2,967			2,042			1,775			5,230			12,014
		$	6,922		$	9,653		$	6,542		$	12,174		$	35,291

Square foot & leased percentages		September 30,		December 31,
		2024		2023
Owned Properties:
Number of properties (a)		15		17
Square feet		4,966,398		5,565,782
Leased percentage		70.4%		74.0%
Consolidated Property - Single Asset REIT (SAR):
Number of properties		1		1
Square feet		213,760		213,760
Leased percentage		4.1%		4.1%
Total Owned and Consolidated Properties:
Number of properties		16		18
Square feet		5,180,158		5,779,542
Leased percentage		67.7%		71.5%

(a)

Includes one property that was classified as an asset held for sale as of September 30, 2024 and two properties that were classified as assets held for sale as of December 31, 2023.

Franklin Street Properties Corp. Earnings Release Supplementary Schedule F Percentage of Leased Space (Unaudited & Estimated)
											Second						Third
								% Leased (1)			Quarter			% Leased (1)			Quarter
								as of			Average %			as of			Average %
		Property Name		Location		Square Feet		30-Jun-24			Leased (2)			30-Sep-24			Leased (2)
1		PARK TEN		Houston, TX		157,609		82.1	%		84.0	%		82.1	%		82.1	%
2		PARK TEN PHASE II		Houston, TX		156,746		66.9	%		85.6	%		66.9	%		66.9	%
3		GREENWOOD PLAZA		Englewood, CO		196,236		65.0	%		65.0	%		65.0	%		65.0	%
4		ADDISON		Addison, TX		289,333		79.4	%		79.4	%		79.4	%		79.4	%
		INNSBROOK (3)		Glen Allen, VA		—		89.6	%		89.9	%		(3	)		(3	)
5		LIBERTY PLAZA		Addison, TX		217,841		75.9	%		75.9	%		75.9	%		75.9	%
6		ELDRIDGE GREEN		Houston, TX		248,399		100.0	%		100.0	%		100.0	%		100.0	%
7		121 SOUTH EIGHTH ST		Minneapolis, MN		297,541		77.6	%		77.6	%		72.4	%		75.6	%
8		801 MARQUETTE AVE		Minneapolis, MN		129,691		91.8	%		91.8	%		91.8	%		91.8	%
9		LEGACY TENNYSON CTR		Plano, TX		209,562		53.1	%		53.1	%		51.0	%		52.4	%
10		WESTCHASE I & II		Houston, TX		629,025		66.5	%		65.7	%		68.8	%		67.6	%
11		1999 BROADWAY		Denver, CO		682,639		50.7	%		51.0	%		50.7	%		50.7	%
12		1001 17TH STREET		Denver, CO		649,400		76.5	%		76.5	%		76.5	%		76.5	%
13		PLAZA SEVEN		Minneapolis, MN		330,096		61.6	%		61.6	%		53.8	%		55.0	%
14		PERSHING PLAZA (4)		Atlanta, GA		160,145		79.8	%		79.8	%		79.8	%		79.8	%
15		600 17TH STREET		Denver, CO		612,135		78.8	%		78.8	%		76.7	%		77.1	%
		OWNED PORTFOLIO				4,966,398		72.3	%		72.9	%		70.4	%		70.6	%
16		MONUMENT CIRCLE (5)		Indianapolis, IN		213,760		4.1	%		4.1	%		4.1	%		4.1	%
		OWNED & CONSOLIDATED PORTFOLIO				5,180,158		69.7	%		70.2	%		67.7	%		67.9	%

_______________________
(1)		% Leased as of month's end includes all leases that expire on the last day of the quarter.
(2)		Average quarterly percentage is the average of the end of the month leased percentage for each of the three months during the quarter.
(3)		Property was sold on July 8, 2024.
(4)		Property was classified as an asset held for sale as of September 30, 2024.
(5)		Consolidated property as of January 1, 2023, which was previously a managed property.

Franklin Street Properties Corp. Earnings Release Supplementary Schedule G Largest 20 Tenants – FSP Owned and Consolidated Portfolio (Unaudited & Estimated)
The following table includes the largest 20 tenants in FSP’s owned and consolidated portfolio based on total square feet:
As of September 30, 2024
						% of
		Tenant		Sq Ft		Portfolio
1		CITGO Petroleum Corporation		248,399		4.8%
2		EOG Resources, Inc.		169,167		3.3%
3		US Government		168,573		3.2%
4		Kaiser Foundation Health Plan, Inc.		120,979		2.3%
5		Swift, Currie, McGhee & Hiers, LLP		101,296		2.0%
6		Deluxe Corporation		98,922		1.9%
7		Ping Identity Corp.		89,856		1.7%
8		Permian Resources Operating, LLC		67,856		1.3%
9		Hall and Evans LLC		65,878		1.3%
10		Cyxtera Management, Inc.		61,826		1.2%
11		Precision Drilling (US) Corporation		59,569		1.1%
12		PwC US Group		54,334		1.1%
13		Olin Corporation		54,080		1.0%
14		Coresite, LLC		49,518		1.0%
15		Schwegman, Lundberg & Woessner, P.A.		46,269		0.9%
16		Invenergy, LLC.		42,505		0.8%
17		Ark-La-Tex Financial Services, LLC.		41,011		0.8%
18		Chevron U.S.A., Inc.		35,088		0.7%
19		Caerus Operating, LLC.		34,063		0.7%
20		CarOffer, LLC.		30,913		0.6%
		Total		1,640,102		31.7%

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 (loss) to FFO and AFFO is shown below and a definition of FFO and AFFO is provided on Supplementary Schedule I. Management believes FFO and AFFO are used broadly throughout the real estate investment trust (REIT) industry as measurements of performance. The Company has included the National Association of Real Estate Investment Trusts (NAREIT) FFO definition as of May 17, 2016 in the table and notes that other REITs may not define FFO in accordance with the current NAREIT definition or may interpret the current NAREIT definition differently. The Company’s computation of FFO and AFFO may not be comparable to FFO or AFFO reported by other REITs or real estate companies that define FFO or AFFO differently.

Reconciliation of Net Loss to FFO and AFFO:		Three Months Ended								Nine Months Ended
		September 30,								September 30,
(In thousands, except per share amounts)		2024				2023				2024				2023
Net loss		$	(15,622	)		$	(45,671	)		$	(44,197	)		$	(51,685	)
Gain on consolidation of Sponsored REIT			—				—				—				(394	)
Loss on sale of properties and impairment of asset held for sale, net			7,254				39,671				20,459				32,085
Depreciation & amortization			10,907				13,400				34,002				42,742
NAREIT FFO			2,539				7,400				10,264				22,748
Lease Acquisition costs			126				109				315				278
Funds From Operations (FFO)		$	2,665			$	7,509			$	10,579			$	23,026
Funds From Operations (FFO)		$	2,665			$	7,509			$	10,579			$	23,026
Loss on extinguishment of debt			477				39				614				106
Amortization of deferred financing costs			767				665				2,265				1,926
Shares issued as compensation			—				—				270				315
Straight-line rent			785				106				1,249				428
Tenant improvements			(4,444	)			(3,653	)			(9,621	)			(11,081	)
Leasing commissions			(421	)			(1,114	)			(3,169	)			(5,252	)
Non-investment capex			(1,658	)			(1,775	)			(4,157	)			(6,784	)
Adjusted Funds From Operations (AFFO)		$	(1,829	)		$	1,777			$	(1,970	)		$	2,684
Per Share Data
EPS		$	(0.15	)		$	(0.44	)		$	(0.43	)		$	(0.50	)
FFO		$	0.03			$	0.07			$	0.10			$	0.22
AFFO		$	(0.02	)		$	0.02			$	(0.02	)		$	0.03
Weighted average shares (basic and diluted)			103,567				103,430				103,492				103,333

Funds From Operations (“FFO”)

The Company evaluates performance based on Funds From Operations, which we refer to as FFO, as management believes that FFO represents the most accurate measure of activity and is the basis for distributions paid to equity holders. The Company defines FFO as net income or loss (computed in accordance with GAAP), excluding gains (or losses) from sales of property, hedge ineffectiveness, acquisition costs of newly acquired properties that are not capitalized and lease acquisition costs that are not capitalized plus depreciation and amortization, including amortization of acquired above and below market lease intangibles and impairment charges on mortgage loans, properties or investments in non-consolidated REITs, and after adjustments to exclude equity in income or losses from, and, to include the proportionate share of FFO from, non-consolidated REITs.

FFO should not be considered as an alternative to net income or loss (determined in accordance with GAAP), nor as an indicator of the Company’s financial performance, nor as an alternative to cash flows from operating activities (determined in accordance with GAAP), nor as a measure of the Company’s liquidity, nor is it necessarily indicative of sufficient cash flow to fund all of the Company’s needs.

Other real estate companies and the National Association of Real Estate Investment Trusts, or NAREIT, may define this term in a different manner. We have included the NAREIT FFO as of May 17, 2016 in the table and note that other REITs may not define FFO in accordance with the current NAREIT definition or may interpret the current NAREIT definition differently than we do.

We believe that in order to facilitate a clear understanding of the results of the Company, FFO should be examined in connection with net income or loss and cash flows from operating, investing and financing activities in the consolidated financial statements.

Adjusted Funds From Operations (“AFFO”)

The Company also evaluates performance based on Adjusted Funds From Operations, which we refer to as AFFO. The Company defines AFFO as (1) FFO, (2) excluding loss on extinguishment of debt that is non-cash, (3) excluding our proportionate share of FFO and including distributions received, from non-consolidated REITs, (4) excluding the effect of straight-line rent, (5) plus the amortization of deferred financing costs, (6) plus the value of shares issued as compensation and (7) less recurring capital expenditures that are generally for maintenance of properties, which we call non-investment capex or are second generation capital expenditures. Second generation costs include re-tenanting space after a tenant vacates, which include tenant improvements and leasing commissions.

We exclude development/redevelopment activities, capital expenditures planned at acquisition and costs to reposition a property. We also exclude first generation leasing costs, which are generally to fill vacant space in properties we acquire or were planned for at acquisition.

AFFO should not be considered as an alternative to net income or loss (determined in accordance with GAAP), nor as an indicator of the Company’s financial performance, nor as an alternative to cash flows from operating activities (determined in accordance with GAAP), nor as a measure of the Company’s liquidity, nor is it necessarily indicative of sufficient cash flow to fund all of the Company’s needs. Other real estate companies may define this term in a different manner. We believe that in order to facilitate a clear understanding of the results of the Company, AFFO should be examined in connection with net income or loss and cash flows from operating, investing and financing activities in the consolidated financial statements.

Franklin Street Properties Corp. Earnings Release

Supplementary Schedule I

Reconciliation and Definition of Sequential Same Store results to property Net Operating Income (NOI) and Net Income

Net Operating Income (“NOI”)

The Company provides property performance based on Net Operating Income, which we refer to as NOI. Management believes that investors are interested in this information. NOI is a non-GAAP financial measure that the Company defines as net income or loss (the most directly comparable GAAP financial measure) plus general and administrative expenses, depreciation and amortization, including amortization of acquired above and below market lease intangibles and impairment charges, interest expense, less equity in earnings of nonconsolidated REITs, interest income, management fee income, hedge ineffectiveness, gains or losses on extinguishment of debt, gains or losses on the sale of assets and excludes non-property specific income and expenses. The information presented includes footnotes and the data is shown by region with properties owned in the periods presented, which we call Sequential Same Store. The comparative Sequential Same Store results include properties held for all periods presented. We exclude properties that have been placed in service, but that do not have operating activity for all periods presented, dispositions and significant nonrecurring income such as bankruptcy settlements and lease termination fees. NOI, as defined by the Company, may not be comparable to NOI reported by other REITs that define NOI differently. NOI should not be considered an alternative to net income or loss as an indication of our performance or to cash flows as a measure of the Company’s liquidity or its ability to make distributions. The calculations of NOI and Sequential Same Store are shown in the following table:

		Rentable
		Square Feet		Three Months Ended			Three Months Ended			Inc			%
(in thousands)		or RSF		30-Sep-24			30-Jun-24			(Dec)			Change
Region
MidWest		757			1,278			1,665			(387)		(23.2)	%
South		2,069			5,087			5,241			(154)		(2.9)	%
West		2,140			6,037			6,224			(187)		(3.0)	%
Property NOI* from Owned Properties		4,966			12,402			13,130			(728)		(5.5)	%
Disposition and Acquisition Properties (a)		214			(19)			618			(637)		(4.4)	%
NOI*		5,180		$	12,383		$	13,748		$	(1,365)		(9.9)	%
Sequential Same Store				$	12,402		$	13,130		$	(728)		(5.5)	%
Less Nonrecurring
Items in NOI* (b)					78			255			(177)		1.2	%
Comparative
Sequential Same Store				$	12,324		$	12,875		$	(551)		(4.3)	%
Reconciliation to				Three Months Ended			Three Months Ended
Net loss				30-Sep-24			30-Jun-24
Net loss				$	(15,622)		$	(21,023)
Add (deduct):
Loss on extinguishment of debt					477			—
Loss on sale of properties and impairment of assets held for sale, net					7,254			13,200
Management fee income					(422)			(443)
Depreciation and amortization					10,911			11,482
Amortization of above/below market leases					(5)			(6)
General and administrative					3,275			3,635
Interest expense					6,585			7,082
Interest income					(340)			(348)
Non-property specific items, net					270			169
NOI*				$	12,383		$	13,748

(a)		We define Disposition and Acquisition Properties as properties that were sold acquired or consolidated and do not have operating activity for all periods presented.
(b)		Nonrecurring Items in NOI include proceeds from bankruptcies, lease termination fees or other significant nonrecurring income or expenses, which may affect comparability.

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

View source version on businesswire.com: https://www.businesswire.com/news/home/20241029766764/en/

Georgia Touma   (877) 686-9496

Source: Franklin Street Properties Corp.

FAQ

What was Franklin Street Properties (FSP) net loss in Q3 2024?

FSP reported a GAAP net loss of $15.6 million, or $0.15 per basic and diluted share, for Q3 2024.

How much did FSP sell Pershing Park Plaza for in October 2024?

FSP sold Pershing Park Plaza in Atlanta for a gross selling price of $34 million on October 23, 2024.

What is FSP's current portfolio occupancy rate as of Q3 2024?

FSP's directly-owned real estate portfolio was approximately 70.4% leased as of September 30, 2024.

How much debt did FSP have after the Pershing Park Plaza sale in October 2024?

After the sale, FSP's total indebtedness was approximately $250.3 million, equivalent to about $52 per square foot.