Exhibit 99.2

 

 

Supplemental Operating and Financial Data Fourth Quarter 2013

 

 

 

Franklin Street Properties Corp. ● 401 Edgewater Place ● Wakefield, MA 01880 ● (781) 557-1300

 

www.franklinstreetproperties.com

 

 

	Page			Page
Company Overview	3		Tenant Analysis and Leasing Activity
			20 Largest Tenants, Industry Profile	18
Key Financial Data			20 Largest Tenants with Annualized Rent and Remaining Term	19
Financial Highlights	4		Leasing Activity	20
Income Statements	5		Lease Expirations by Square Feet	21
Balance Sheets	6		Lease Expirations with Annualized Rent per Square Foot	22
Cash Flow Statements	7		Capital Expenditures	23
Property Net Operating Income (NOI)	8
			Transaction Activity	24
Reconciliation
FFO & FAD	9		Loan Portfolio of Secured Real Estate	25
EBITDA	10
Property NOI	11		Net Asset Value Components	26
Debt Summary	12		Appendix: Definitions of Non-GAAP Measures
			FFO	27
Capital Analysis	13		EBITDA and AFFO	28
			NOI	29
Owned and Managed Portfolio Overview	14-17		FFO Comparison	30

 

All financial information contained in this supplemental information package is unaudited.  In addition, certain statements contained in this supplemental information package may be deemed to be forward-looking statements within the meaning of the federal securities laws.  Although FSP believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, it can give no assurance that its expectations will be achieved.  Factors that could cause actual results to differ materially from FSP’s current expectations include general economic conditions, uncertainties relating to fiscal policy, changes in government regulations, regulatory uncertainty, geopolitical events, local real estate conditions, the performance of properties that FSP has acquired or may acquire, the timely lease-up of properties and other risks, detailed from time to time in FSP’s SEC reports.  FSP assumes no obligation to update or supplement forward-looking statements that become untrue because of subsequent events.

 

 

Overview

Franklin Street Properties Corp. (“FSP”, “we”, “our” or the “Company”) (NYSE MKT: FSP) is investing in institutional-quality office properties in the U.S. FSP’s strategy is to invest in select urban infill and central business district (CBD) properties, with primary emphasis on our top five markets of Atlanta, Dallas, Denver, Houston, and Minneapolis. 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. FSP’s real estate operations include property acquisitions and dispositions, short-term financing, leasing, development and asset management. FSP’s subsidiary, FSP Investments LLC (member, FINRA and SIPC), is a real estate investment banking firm and registered broker/dealer that previously sponsored the organization of single-purpose entities that own real estate and the private placement of equity in those entities, which we refer to as “Sponsored REITs”.

 

Our Business

As of December 31, 2013, the Company owned and operated a portfolio of real estate consisting of 39 properties, managed 14 Sponsored REITs and held six promissory notes secured by mortgages on real estate owned by Sponsored REITs. From time-to-time, the Company may acquire real estate, make additional secured loans or acquire one of its Sponsored REITs. The Company may also pursue, on a selective basis, the sale of its properties in order to take advantage of the value creation and demand for its properties, or for geographic or property specific reasons.

 

Management Team
George J. Carter		Scott H. Carter
President, Chief Executive Officer		Executive Vice President, General
Chairman of the Board		Counsel and Assistant Secretary
Barbara J. Fournier		Jeffrey B. Carter
Executive Vice President,  Chief Operating Officer,		Executive Vice President and
Treasurer, Secretary and Director		Chief Investment Officer
Janet Notopoulos		John G. Demeritt
Executive Vice President and Director		Executive Vice President and
		Chief Financial Officer

 

Inquiries

Inquiries should be directed to: John Demeritt, CFO

877-686-9496 or InvestorRelations@franklinstreetproperties.com

 

Snapshot (as of December 31, 2013)
Corporate Headquarters	Wakefield, MA
Fiscal Year-End	31-Dec
Total Properties	39
Total Square Feet	9.7 Million
Trading Symbol	FSP
Exchange	NYSE MKT
Common Shares Outstanding	100,187,405
Quarterly Dividend	$0.19
Dividend Yield	6.4%
Total Market Capitalization	$2.1 Billion
Insider Holdings	10.6%

 

 

(in thousands except per share amounts, SF & number of properties)	For the Three Months Ended
	31-Dec-13			30-Sep-13			30-Jun-13			31-Mar-13			31-Dec-12			30-Sep-12			30-Jun-12			31-Mar-12
Income Items:
Rental revenue	$	61,307		$	56,760		$	46,017		$	42,842		$	41,227		$	37,944		$	35,265		$	35,998
Total revenue		63,024			58,446			47,671			44,495			43,115			41,468			38,349			38,648
Adjusted EBITDA*		35,645			31,862			26,074			24,712			25,490			23,348			22,753			22,789
Equity in earnings in non-consolidated REITs		(543	)		(431	)		(196	)		(188	)		972			176			494			391
Net income		6,591			4,094			4,741			4,401			5,459			(8,998	)		5,434			5,738
FFO*		29,220			27,566			22,810			21,237			20,690			20,048			19,596			20,021
Per Share Data:
EPS	$	0.07		$	0.04		$	0.05		$	0.05		$	0.07		$	(0.11	)	$	0.07		$	0.07
FFO*	$	0.29		$	0.28		$	0.25		$	0.26		$	0.25		$	0.24		$	0.24		$	0.24
Weighted Average Shares (diluted)		100,187			100,187			91,847			82,937			82,937			82,937			82,937			82,937
Closing share price	$	11.95		$	12.74		$	13.20		$	14.62		$	12.31		$	11.07		$	10.58		$	10.60
Dividend	$	0.19		$	0.19		$	0.19		$	0.19		$	0.19		$	0.19		$	0.19		$	0.19
Payout Ratio:		66%			69%			77%			74%			76%			79%			80%			79%
Balance Sheet Items:
Real estate, net	$	1,568,338		$	1,575,690		$	1,280,252		$	1,128,398		$	1,134,788		$	1,008,111		$	974,778		$	979,063
Other assets, net		475,696			500,939			428,789			383,244			391,280			386,662			454,373			458,203
Total assets, net		2,044,034			2,076,629			1,709,041			1,511,642			1,526,068			1,394,773			1,429,151			1,437,266
Total liabilities, net		993,868			1,017,480			627,997			657,809			661,319			520,177			528,128			525,919
Shareholders' equity		1,050,166			1,059,149			1,081,044			853,833			864,749			874,596			901,023			911,347
Market Capitalization and Debt:
Total Market Capitalization (a)	$	2,123,739		$	2,227,888		$	1,903,974		$	1,834,295		$	1,637,709		$	1,400,117		$	1,371,478		$	1,373,136
Total debt outstanding		926,500			951,500			581,500			621,750			616,750			482,000			494,000			494,000
Debt to Total Market Capitalization		43.6%			42.7%			30.5%			33.9%			37.7%			34.4%			36.0%			36.0%
Debt to Adjusted EBITDA		6.5			7.5			5.6			6.3			6.0			5.2			5.4			5.4
Owned Portfolio Leasing Statistics:
Owned portfolio assets (includes asset held for sale before 12/31/13)		39			40			38			37			37			37			36			36
Portfolio total SF		9,685,285			9,807,339			8,529,752			7,856,859			7,854,679			7,439,195			7,052,592			7,052,068
Portfolio % leased		94.1%			93.8%			94.4%			94.4%			94.0%			89.9%			90.0%			89.0%

 

(a) Total Market Capitalization is the closing share price multilplied by the number of shares outstanding plus total debt outstanding on that date.

* See pages 9 & 10 for reconciliations of Net Income to FFO and Adjusted EBITDA, respectively, and the Appendix for Defintions of these Non-GAAP Measures beginning on page 27.

 

 

													For the															For the
	For the Three Months Ended												Year Ended			For the Three Months Ended												Year Ended
	31-Mar-13			30-Jun-13			30-Sep-13			31-Dec-13			31-Dec-13			31-Mar-12			30-Jun-12			30-Sep-12			31-Dec-12			31-Dec-12
Revenue:
Rental	$	42,842		$	46,017		$	56,760		$	61,307		$	206,926		$	35,998		$	35,265		$	37,944		$	41,227		$	150,434
Related party revenue:
Management fees and interest income from loans		1,622			1,642			1,665			1,717			6,646			2,616			3,045			3,485			1,801			10,947
Other		31			12			21			—			64			34			39			39			87			199
Total revenue		44,495			47,671			58,446			63,024			213,636			38,648			38,349			41,468			43,115			161,580
Expenses:
Real estate operating expenses		10,770			11,116			13,991			15,223			51,100			8,694			8,602			9,642			10,502			37,440
Real estate taxes and insurance		6,595			7,308			8,801			8,912			31,616			5,693			5,491			5,761			5,959			22,904
Depreciation and amortization		15,781			16,919			22,163			23,976			78,839			12,867			12,798			13,367			15,019			54,051
Selling, general and administrative		2,532			3,204			3,477			2,698			11,911			2,077			2,236			3,141			2,462			9,916
Interest		4,208			4,174			5,474			7,198			21,054			3,677			4,037			4,187			4,167			16,068
Total expenses		39,886			42,721			53,906			58,007			194,520			33,008			33,164			36,098			38,109			140,379
Income before interest income, equity in earnings of non-consolidated REITs and taxes		4,609			4,950			4,540			5,017			19,116			5,640			5,185			5,370			5,006			21,201
Interest income		1			4			5			6			16			8			4			5			34			51
Equity in earnings of non-consolidated REITs		(188	)		(196	)		(431	)		(543	)		(1,358	)		391			494			176			972			2,033
Income before taxes on income		4,422			4,758			4,114			4,480			17,774			6,039			5,683			5,551			6,012			23,285
Income tax expense		119			115			118			128			480			79			77			80			99			335
Income from continuing operations		4,303			4,643			3,996			4,352			17,294			5,960			5,606			5,471			5,913			22,950
Income from discontinued operations		98			98			98			81			375			(222	)		(172	)		(169	)		72			(491	)
Gain (loss) on sale, less applicable income tax		—			—			—			2,158			2,158			—			—			(14,300	)		(526	)		(14,826	)
Net income	$	4,401		$	4,741		$	4,094		$	6,591		$	19,827		$	5,738		$	5,434		$	(8,998	)	$	5,459		$	7,633
Weighted average number of shares outstanding,basic and diluted		82,937			91,847			100,187			100,187			93,855			82,937			82,937			82,937			82,937			82,937
Earnings per share, basic and diluted, attributable to:
Continuing operations	$	0.05		$	0.05		$	0.04		$	0.04		$	0.18		$	0.07		$	0.07		$	0.07		$	0.07		$	0.28
Discontinued operations		—			—			—			—			—			—			—			—			—			(0.01	)
Gain (loss) on sale, less applicable income tax		—			—			—			0.03			0.03			—			—			(0.18	)		—			(0.18	)
Net income per share, basic and diluted	$	0.05		$	0.05		$	0.04		$	0.07		$	0.21		$	0.07		$	0.07		$	(0.11	)	$	0.07		$	0.09

 

 

	March 31,			June 30,			September 30,			December 31,			March 31,			June 30,			September 30,			December 31,
	2013			2013			2013			2013			2012			2012			2012			2012
Assets:
Real estate assets:
Land	$	141,545		$	157,879		$	185,479		$	185,479		$	129,602		$	129,602		$	133,054		$	141,545
Buildings and improvements		1,175,743			1,320,703			1,599,519			1,603,941			1,004,490			1,007,906			1,045,895			1,172,928
Fixtures and equipment		904			960			985			1,170			860			871			904			904
		1,318,192			1,479,542			1,785,983			1,790,590			1,134,952			1,138,379			1,179,853			1,315,377
Less accumulated depreciation		189,794			199,290			210,293			222,252			155,889			163,601			171,742			180,589
Real estate assets, net		1,128,398			1,280,252			1,575,690			1,568,338			979,063			974,778			1,008,111			1,134,788
Acquired real estate leases, net		102,274			129,226			194,893			183,454			82,778			78,646			88,766			108,203
Investment in non-consolidated REITs		81,746			81,523			81,065			80,494			87,061			86,658			85,927			81,960
Assets held for sale		10,431			10,286			10,143			—			26,217			25,895			11,404			10,575
Cash and cash equivalents		17,282			24,962			25,539			19,623			29,283			22,620			23,962			21,267
Restricted cash		583			602			623			643			511			533			546			575
Tenant rent receivables, net		2,357			2,331			6,029			5,102			1,090			1,403			1,182			1,749
Straight-line rent receivable, net		36,210			37,865			40,086			42,261			31,832			33,003			34,134			35,374
Prepaid expenses and other assets		10,545			12,532			11,846			11,215			1,164			2,605			2,336			1,106
Related party mortgage loan receivable		96,896			97,846			98,846			99,746			172,286			177,536			108,236			93,896
Other assets: derivative asset		—			6,739			4,365			5,321			4,006			3,640			8,467			13,199
Deferred leasing commissions, net		24,920			24,877			27,504			27,837			21,975			21,834			21,702			23,376
Total assets	$	1,511,642		$	1,709,041		$	2,076,629		$	2,044,034		$	1,437,266		$	1,429,151		$	1,394,773		$	1,526,068
Liabilities and Stockholders’ Equity:
Liabilities:
Bank note payable	$	221,750		$	181,500		$	331,500		$	306,500		$	494,000		$	494,000		$	82,000		$	216,750
Term loan payable		400,000			400,000			620,000			620,000			—			—			400,000			400,000
Accounts payable and accrued expenses		25,493			29,971			39,907			44,137			23,311			25,408			26,462			31,122
Accrued compensation		540			1,677			2,432			2,985			446			944			2,194			2,540
Tenant security deposits		2,474			3,074			3,891			4,027			2,181			2,113			2,281			2,489
Other liabilities: derivative termination value		778			—			4,579			2,044			—			—			1,671			1,219
Acquired unfavorable real estate leases, net		6,774			11,775			15,171			14,175			5,981			5,663			5,569			7,199
Total liabilities		657,809			627,997			1,017,480			993,868			525,919			528,128			520,177			661,319
Commitments and contingencies
Stockholders’ Equity:
Preferred stock		—			—			—			—			—			—			—			—
Common stock		8			10			10			10			8			8			8			8
Additional paid-in capital		1,042,876			1,273,585			1,273,585			1,273,556			1,042,876			1,042,876			1,042,876			1,042,876
Accumulated other comprehensive income (loss)		(778	)		6,739			(214	)		3,277			—			—			(1,671	)		(1,219	)
Accumulated distributions in excess of accumulated earnings		(188,273	)		(199,290	)		(214,232	)		(226,677	)		(131,537	)		(141,861	)		(166,617	)		(176,916	)
Total stockholders’ equity		853,833			1,081,044			1,059,149			1,050,166			911,347			901,023			874,596			864,749
Total liabilities and stockholders’ equity	$	1,511,642		$	1,709,041		$	2,076,629		$	2,044,034		$	1,437,266		$	1,429,151		$	1,394,773		$	1,526,068

 

 

		Twelve Months ended December 31
		2013				2012				2011
Cash flows from operating activities:
Net income		$	19,827			$	7,633			$	43,524
Adjustments to reconcile net income to net cash provided by  operating activities:
Depreciation and amortization expense			81,267				57,500				50,261
Amortization of above market lease			(365	)			71				(47	)
Gain (loss) on sale, less applicable income tax			(2,158	)			14,826				(21,939	)
Equity in earnings (losses) from non-consolidated REITs			1,358				(2,033	)			(3,086	)
Distributions from non-consolidated REITs			—				705				3,474
Increase in bad debt reserve			(1,250	)			65				(365	)
Changes in operating assets and liabilities:
Restricted cash			(68	)			(82	)			(73	)
Tenant rent receivables			(2,103	)			(354	)			827
Straight-line rents			(5,782	)			(4,464	)			(9,878	)
Lease acquisition costs			(1,146	)			(2,520	)			—
Prepaid expenses and other assets			(1,547	)			(328	)			1,611
Accounts payable and accrued expenses			11,137				3,717				4,213
Accrued compensation			445				318				419
Tenant security deposits			1,538				481				78
Payment of deferred leasing commissions			(9,125	)			(5,179	)			(8,058	)
Net cash provided by operating activities			92,028				70,356				60,961
Cash flows from investing activities:
Purchase of real estate assets, office computers and furniture, capitalized merger costs and acquired real estate leases			(574,065	)			(221,170	)			(236,250	)
Investment in non-consolidated REITs			4,858				(1	)			(10	)
Distributions in excess of earnings from non-consolidated REITs			108				2,105				1,582
Investment in related party mortgage loan receivable			(8,200	)			(74,580	)			(82,832	)
Repayment of related party mortgage loan receivable			2,350				121,200				—
Changes in deposits on real estate assets			—				—				200
Investment in assets held for syndication, net			—				—				2,230
Proceeds received on sales of real estate assets			12,301				157				96,790
Net cash used in investing activities			(562,648	)			(172,289	)			(218,290	)
Cash flows from financing activities:
Distributions to stockholders			(69,588	)			(63,032	)			(62,177	)
Proceeds (costs) from equity offering, net			230,682				—				17,295
Borrowings under bank note payable			160,000				294,750				449,000
Borrowings (repayments) under Revolver			(70,250	)			(527,000	)			(209,968	)
Borrowing (repayment) of term loan payable, net			220,000				400,000				(74,850	)
Deferred Financing Costs			(1,868	)			(5,331	)			(5,388	)
Swap termination payment			—				—				(983	)
Net cash provided by (used in) financing activities			468,976				99,387				112,929
Net decreases in cash and cash equivalents			(1,644	)			(2,546	)			(44,400	)
Cash and cash equivalents, beginning of period			21,267				23,813				68,213
Cash and cash equivalents, end of period		$	19,623			$	21,267			$	23,813

 

 

		Net Operating Income (NOI)*
(in thousands)
		Rentable
		Square Feet				Three Months Ended:																Year Ended			Three Months Ended:																	Year Ended				Inc				%
Region		or RSF				31-Mar-13				30-Jun-13				30-Sep-13				31-Dec-13				31-Dec-13				31-Mar-12				30-Jun-12				30-Sep-12				31-Dec-12				31-Dec-12				(Dec)				Change
East			1,441			$	4,756			$	5,440			$	4,914			$	5,150			$	20,260			$	5,113			$	4,723			$	4,799			$	4,725			$	19,360			$	900				4.6	%
MidWest			1,682				4,839				5,008				4,944				5,073				19,864				5,122				4,980				5,164				4,974				20,240				(376	)			-1.9	%
South			2,508				9,307				9,393				9,230				9,633				37,563				8,963				8,764				9,218				8,913				35,858				1,705				4.8	%
West			1,087				2,350				2,118				2,440				2,704				9,612				2,278				2,443				2,428				2,788				9,937				(325	)			-3.3	%
Same Store			6,718				21,252				21,959				21,528				22,560				87,299				21,476				20,910				21,609				21,400				85,395				1,904				2.2	%
Acquisitions			2,967				3,920				5,106				11,812				13,963				34,801				—				—				712				3,037				3,749				31,052				34.7	%
Property NOI from the continuing portfolio			9,685				25,172				27,065				33,340				36,523				122,100				21,476				20,910				22,321				24,437				89,144				32,956				37.0	%
Dispositions and asset held for sale							252				252				253				82				839				118				204				155				226				703				136				-0.1	%
Property NOI						$	25,424			$	27,317			$	33,593			$	36,605			$	122,939			$	21,594			$	21,114			$	22,476			$	24,663			$	89,847			$	33,092				36.8	%
Same Store						$	21,252			$	21,959			$	21,528			$	22,560			$	87,299			$	21,476			$	20,910			$	21,609			$	21,400			$	85,395			$	1,904				2.2	%
Less Nonrecurring
Items in NOI (a)							63				557				—				378				998				514				21				307				—				842				156				-0.1	%
Comparative
Same Store						$	21,189			$	21,402			$	21,528			$	22,182			$	86,301			$	20,962			$	20,889			$	21,302			$	21,400			$	84,553			$	1,748				2.1	%

 

(a)

Nonrecurring Items in NOI include proceeds from bankruptcies, lease termination fees or other significant nonrecurring income or expenses, which may affect comparability.

*

See page 11 for a reconciliation of Net Income to Property NOI and the Appendix for Definitions of Non-GAAP Measures beginning on page 27. Property NOI Excludes NOI from investments in and interest income from secured loans to non-consolidated REITs.

 

 

																		For the																				For the
		For the Three Months Ended																Year Ended				For the Three Months Ended:																Year Ended
		31-Mar-13				30-Jun-13				30-Sep-13				31-Dec-13				31-Dec-13				31-Mar-12				30-Jun-12				30-Sep-12				31-Dec-12				31-Dec-12
Net income		$	4,401			$	4,741			$	4,094			$	6,591			$	19,827			$	5,738			$	5,434			$	(8,998	)		$	5,459			$	7,633
Gain (loss) on sale, less applicable income tax			—				—				—				(2,158	)			(2,158	)			—				—				14,300				526				14,826
GAAP income from non-consolidated REITs			188				196				431				543				1,358				(391	)			(494	)			(176	)			(972	)			(2,033	)
FFO from non-consolidated REITs			647				696				459				346				2,148				1,379				1,451				1,042				252				4,124
Depreciation & amortization			15,984				17,044				22,176				23,886				79,090				13,295				13,205				13,779				15,239				55,518
NAREIT FFO*			21,220				22,677				27,160				29,208				100,265				20,021				19,596				19,947				20,504				80,068
Acquisition costs			17				133				406				12				568				—				—				101				186				287
Funds From Operations (FFO)*		$	21,237			$	22,810			$	27,566			$	29,220			$	100,833			$	20,021			$	19,596			$	20,048			$	20,690			$	80,355
Adjusted Funds From Operations (AFFO)*
Funds From Operations (FFO)*			21,237				22,810				27,566				29,220				100,833				20,021				19,596				20,048				20,690				80,355
Reverse FFO from non-consolidated REITs			(647	)			(696	)			(459	)			(346	)			(2,148	)			(1,379	)			(1,451	)			(1,042	)			(252	)			(4,124	)
Distributions from non-consolidated REITs			27				27				27				26				107				929				898				907				76				2,810
Amortization of deferred financing costs			429				429				456				499				1,813				508				507				607				430				2,052
Straight-line rent			(657	)			(1,186	)			(2,078	)			(1,862	)			(5,783	)			(1,517	)			(1,054	)			(927	)			(965	)			(4,463	)
Building improvements			(1,118	)			(1,622	)			(1,552	)			(1,479	)			(5,771	)			(746	)			(1,003	)			(711	)			(1,252	)			(3,712	)
Tenant improvements			(1,729	)			(5,754	)			(4,596	)			(2,992	)			(15,071	)			(3,014	)			(2,705	)			(2,854	)			(4,464	)			(13,037	)
Leasing commissions			(2,813	)			(1,087	)			(3,821	)			(1,536	)			(9,257	)			(2,196	)			(1,343	)			(1,104	)			(2,784	)			(7,427	)
Adjusted Funds From Operations (AFFO)*		$	14,729			$	12,921			$	15,543			$	21,530			$	64,723			$	12,606			$	13,445			$	14,924			$	11,479			$	52,454
Per Share Data:
EPS		$	0.05			$	0.05			$	0.04			$	0.07			$	0.21			$	0.07			$	0.07			$	(0.11	)		$	0.07			$	0.09
FFO*			0.26				0.25				0.28				0.29				1.07				0.24				0.24				0.24				0.25				0.97
AFFO*			0.18				0.14				0.16				0.21				0.69				0.15				0.16				0.18				0.14				0.63
Weighted Average Shares (basic and diluted)			82,937				91,847				100,187				100,187				93,855				82,937				82,937				82,937				82,937				82,937

 

* See the Appendix for Definitions of these Non-GAAP Measures beginning on page 27.

 

 

		For the Three Months Ended																Year Ended				For the Three Months Ended																Year Ended
		31-Mar-13				30-Jun-13				30-Sep-13				31-Dec-13				31-Dec-13				31-Mar-12				30-Jun-12				30-Sep-12				31-Dec-12				31-Dec-12
Net income		$	4,401			$	4,741			$	4,094			$	6,591			$	19,827			$	5,738			$	5,434			$	(8,998	)		$	5,459			$	7,633
Interest expense			4,208				4,174				5,474				7,198				21,054				3,677				4,037				4,187				4,167				16,068
Depreciation and amortization			15,984				17,044				22,176				23,886				79,090				13,295				13,205				13,779				15,239				55,518
Income taxes			119				115				118				128				480				79				77				80				99				335
EBITDA			24,712				26,074				31,862				37,803				120,451				22,789				22,753				9,048				24,964				79,554
Excluding (gain) loss on sale, less applicable income tax			—				—				—				(2,158	)			(2,158	)			—				—				14,300				526				14,826
Adjusted EBITDA		$	24,712			$	26,074			$	31,862			$	35,645			$	118,293			$	22,789			$	22,753			$	23,348			$	25,490			$	94,380
Interest expense		$	4,208			$	4,174			$	5,474			$	7,198			$	21,054			$	3,677			$	4,037			$	4,187			$	4,167			$	16,068
Scheduled principal payments			—				—				—				—				—				—				—				—				—				—
Interest and scheduled principal payments		$	4,208			$	4,174			$	5,474			$	7,198			$	21,054			$	3,677			$	4,037			$	4,187			$	4,167			$	16,068
Interest coverage ratio			5.87				6.25				5.82				4.95				5.62				6.20				5.64				5.58				6.12				5.87
Debt service coverage ratio			5.87				6.25				5.82				4.95				5.62				6.20				5.64				5.58				6.12				5.87
Debt		$	621,750			$	581,500			$	951,500			$	926,500							$	494,000			$	494,000			$	482,000			$	616,750
Adjusted EBITDA			24,712				26,074				31,862				35,645								22,789				22,753				23,348				25,490
Annualized			98,848				104,296				127,448				142,580								91,156				91,012				93,392				101,960
Debt-to-EBITDA			6.3				5.6				7.5				6.5								5.4				5.4				5.2				6.0

 

*See the Appendix for Definitions of these Non-GAAP Measures beginning on page 27. Amounts in the EBITDA reconciliation do not reflect our proportionate share of interest expense, depreciation, amortization , income taxes, gains or losses on sales and debt from our investments in non-consolidated REITs , which are accounted for under the equity method.

 

 

Reconciliation to Net income																		Year																				Year
	Three Months Ended:																	Ended				Three Months Ended:																Ended
		31-Mar-13				30-Jun-13				30-Sep-13				31-Dec-13				31-Dec-13				31-Mar-12				30-Jun-12				30-Sep-12				31-Dec-12				31-Dec-12
Net Income		$	4,401			$	4,741			$	4,094			$	6,591			$	19,827			$	5,738			$	5,434			$	(8,998	)		$	5,459			$	7,633
Add (deduct):
Discontinued operations			(98	)			(98	)			(98	)			(81	)			(375	)			222				172				169				(72	)			491
Loss provision or (gain) on sale of assets			—				—				—				(2,158	)			(2,158	)			—				—				14,300				526				14,826
Management fee income			(559	)			(553	)			(692	)			(689	)			(2,493	)			(488	)			(479	)			(562	)			(591	)			(2,120	)
Depreciation and amortization			15,784				16,916				22,163				23,976				78,839				12,866				12,798				13,367				15,020				54,051
Amortization of above/below market leases			48				(27	)			(143	)			(91	)			(213	)			91				31				86				65				273
Selling, general and administrative			2,532				3,204				3,477				2,716				11,929				2,077				2,236				3,141				2,462				9,916
Interest expense			4,208				4,174				5,474				7,198				21,054				3,677				4,037				4,187				4,167				16,068
Interest income			(1,353	)			(1,382	)			(1,411	)			(1,438	)			(5,584	)			(2,340	)			(2,774	)			(3,201	)			(1,533	)			(9,848	)
Equity in earnings of non-consolidated REITs			187				196				431				544				1,358				(391	)			(494	)			(176	)			(972	)			(2,033	)
Non-property specific items, net			22				(106	)			45				(45	)			(84	)			24				(51	)			8				(94	)			(113	)
																			—																				—
Property NOI from the continuing portfolio		$	25,172			$	27,065			$	33,340			$	36,523			$	122,100			$	21,476			$	20,910			$	22,321			$	24,437			$	89,144
Dispositions and asset held for sale			252				252				253				82				839				118				204				155				226				703
Property NOI		$	25,424			$	27,317			$	33,593			$	36,605			$	122,939			$	21,594			$	21,114			$	22,476			$	24,663			$	89,847

 

* See the Appendix for Definition of Non-GAAP Measures beginning on page 27.

 

 

																		(a)
(dollars in thousands)						Maximum				Amount				Interest				Interest
		Maturity				Amount				Drawn at				Rate				Rate at				Facility
		Date				of Loan				31-Dec-13				Components				31-Dec-13				Fee
2012 Revolver			27-Sep-16			$	500,000			$	306,500				L+1.65%				1.82%				0.35%
2012 Term Loan			27-Sep-17				400,000				400,000				0.75% + 1.65%				2.40%				0.35%
2013 Term Loan			26-Aug-20				220,000				220,000				2.32% + 1.90%				4.22%
						$	1,120,000			$	926,500								2.64%

 

(a) Interest rate excludes amortization of deferred financing costs and facility fees, see notes below

 

On August 26, 2013, we entered into a term loan we call the 2013 Term Loan and borrowed $220 million. On September 27, 2012, we entered into a new bank facility we call the 2012 Credit Facility for a total of $900 million, which is comprised of a line of credit that we can borrow up to $500 million on, which we call the 2012 Revolver and a term loan for $400 million that we call the 2012 Term Loan. Additional information about these loans are in the footnotes to our financial statements. Pricing is leverage based over LIBOR for the 2013 Term Loan and the 2012 Credit Facility. Each of these facilities also has the option to use the respective bank’s base rate.

 

•

The 2013 Term Loan fixed LIBOR at 2.32% for seven years. The current leverage spread over LIBOR is 1.90%, so our interest rate is 4.22% as of December 31, 2013.

 

•

The 2012 Credit Facility has the 2012 Term Loan with LIBOR fixed at 0.75% for five years and the 2012 Revolver is at the LIBOR rate. The current leverage spread for the 2012 Credit Facility is 1.65%, so our interest rate is 2.06% as of December 31, 2013.

 

•

The total amount available under the 2012 Credit Facility is $900 million and is subject to a facility fee on the entire amount based on the leverage ratio. As of December 31, 2013 the facility fee was 35 bps based on our leverage ratio, or approximately $3.15 million per year.

 

•

We incurred financing costs to close the 2013 Term Loan, 2012 Credit Facility and the 2011 Revolver that preceded the 2012 Credit Facility. These costs are deferred and amortized into interest expense during the terms of the loans. The annual run rate for amortization to interest expense from deferred financing costs is approximately $2.0 million.

 

•

The 2012 Revolver can be extended for 1 year at the Company’s option upon payment of fees and includes an accordion feature that allows for up to $250 million of additional borrowing capacity. The 2013 Term Loan includes an accordion feature that allows for up to $50 million of additional borrowing capacity. The accordion features are subject to receipt of lender commitments and satisfaction of certain customary conditions.

 

 

 

		31-Mar-13				30-Jun-13				30-Sep-13				31-Dec-13				31-Mar-12				30-Jun-12				30-Sep-12				31-Dec-12
Market Data:
Shares Outstanding			82,937				100,187				100,187				100,187				82,937				82,937				82,937				82,937
Closing market price per share		$	14.62			$	13.20			$	12.74			$	11.95			$	10.60			$	10.58			$	11.07			$	12.31
Market capitalization		$	1,212,545			$	1,322,474			$	1,276,388			$	1,197,239			$	879,136			$	877,478			$	918,117			$	1,020,959
Total Debt			621,750				581,500				951,500				926,500				494,000				494,000				482,000				616,750
Total Market Capitalization		$	1,834,295			$	1,903,974			$	2,227,888			$	2,123,739			$	1,373,136			$	1,371,478			$	1,400,117			$	1,637,709
Dividend Data:
Total dividends paid		$	15,758			$	15,758			$	19,036			$	19,036			$	15,758			$	15,758			$	15,758			$	15,758
Common dividend per share		$	0.19			$	0.19			$	0.19			$	0.19			$	0.19			$	0.19			$	0.19			$	0.19
Quarterly dividend as a % of FFO*			73.1	%			76.0	%			67.9	%			65.5	%			79.2	%			79.2	%			79.2	%			76.0	%
Liquidity:
Cash and cash equivalents		$	17,282			$	24,962			$	25,539			$	19,623			$	29,283			$	22,620			$	23,962			$	21,267
Revolving credit facilities:
Gross potential available under the 2012 Credit Facility			900,000				900,000				900,000				900,000				600,000				600,000				900,000				900,000
Less:
Outstanding balance			(621,750	)			(581,500	)			(731,500	)			(706,500	)			(494,000	)			(494,000	)			(482,000	)			(616,750	)
Total Liquidity		$	295,532			$	343,462			$	194,039			$	213,123			$	135,283			$	128,620			$	441,962			$	304,517

 

*See page 9 for a reconciliation of Net Income to FFO and the Appendix for Definitions of Non-GAAP Measures beginning on page 27.

 

 

				Percent	Wtd Ave (a)	GAAP (b)
MSA / Property Name	City	State	Square Feet	Leased	Occupied	Rent
East Region
Baltimore
East Baltimore	Baltimore	MD	325,445	77.8%	73.4%	$        24.44
Washington, D.C.
Meadow Point	Chantilly	VA	138,537	92.6%	92.6%	$        26.84
Stonecroft	Chantilly	VA	111,469	100.0%	100.0%	$        37.95
Loudoun Tech Center	Dulles	VA	135,888	100.0%	100.0%	$        15.91
Richmond
Innsbrook	Glen Allen	VA	298,456	99.9%	99.1%	$        17.93
Charlotte
Park Seneca	Charlotte	NC	109,674	82.3%	78.5%	$        15.59
Forest Park	Charlotte	NC	62,212	100.0%	100.0%	$        14.37
Raleigh-Durham
Emperor Boulevard	Durham	NC	259,531	100.0%	100.0%	$        35.46
East Region Total			1,441,212	92.9%	91.5%	$        24.59
Midwest Region
Chicago
Northwest Point	Elk Grove Village	IL	176,848	100.0%	100.0%	$        19.35
909 Davis Street	Evanston	IL	195,245	97.9%	97.9%	$        34.84
Indianapolis
River Crossing	Indianapolis	IN	205,059	99.1%	93.6%	$        22.24
St. Louis
Timberlake	Chesterfield	MO	232,766	98.3%	92.6%	$        22.93
Timberlake East	Chesterfield	MO	116,197	91.0%	93.3%	$        23.55
Lakeside Crossing	Maryland Heights	MO	127,778	100.0%	100.0%	$        24.28
Minneapolis
Eden Bluff	Eden Prairie	MN	153,028	100.0%	100.0%	$        27.60
121 South 8th Street	Minneapolis	MN	474,991	91.0%	90.2%	$        14.97
Midwest Region Total			1,681,912	96.2%	94.7%	$        22.34

 

(a) Weighted Occupied Percentage for the year ended December 31, 2013
(b) Weighted Average GAAP Rent per Occupied Square Foot

 

 

				Percent	Wtd Ave (a)	GAAP (b)
MSA / Property Name	City	State	Square Feet	Leased	Occupied	Rent
South Region
Dallas-Fort Worth
Willow Bend Office Center	Plano	TX	117,050	100.0%	88.9%	$        20.79
Legacy Tennyson Center	Plano	TX	202,600	100.0%	100.0%	$        18.53
One Legacy Circle	Plano	TX	214,110	100.0%	100.0%	$        32.29
Addison Circle	Addison	TX	293,787	94.3%	95.6%	$        24.06
Collins Crossing	Richardson	TX	298,766	99.5%	94.7%	$        23.82
Liberty Plaza	Addison	TX	218,934	96.0%	83.7%	$        19.75
Houston
Park Ten	Houston	TX	157,460	100.0%	99.1%	$        28.15
Eldridge Green	Houston	TX	248,399	100.0%	100.0%	$        30.13
Park Ten Phase II	Houston	TX	156,746	100.0%	100.0%	$        31.18
Westchase I & II	Houston	TX	629,025	97.1%	96.4%	$        31.52
Miami-Ft. Lauderdale-West Palm Beach
Blue Lagoon Drive	Miami	FL	212,619	100.0%	100.0%	$        23.53
Atlanta
One Overton Place	Atlanta	GA	387,267	98.3%	87.0%	$        22.91
One Ravinia	Atlanta	GA	386,603	90.4%	88.4%	$        21.78
999 Peachtree	Atlanta	GA	621,946	94.3%	94.4%	$        28.74
South Region Total			4,145,312	97.0%	94.4%	$        26.28
West Region
Seattle
Federal Way	Federal Way	WA	117,010	54.4%	48.3%	$        18.67
San Francisco-San Jose-Oakland
Hillview Center	Milpitas	CA	36,288	100.0%	100.0%	$        15.61
Montague Business Center	San Jose	CA	145,951	100.0%	100.0%	$        15.63
Denver
380 Interlocken	Broomfield	CO	240,184	86.1%	86.2%	$        29.14
1999 Broadway	Denver	CO	673,839	95.8%	95.3%	$        30.01
Greenwood Plaza	Englewood	CO	196,236	100.0%	69.2%	$        21.22
390 Interlocken	Broomfield	CO	241,516	69.4%	77.5%	$        28.70
1001 17th Street	Denver	CO	655,420	88.5%	88.5%	$        31.73
Colorado Springs
Centennial Technology Center	Colorado Springs	CO	110,405	85.4%	85.4%	$        15.71
West Region Total			2,416,849	88.4%	86.3%	$        27.50
Total Owned			9,685,285	94.1%	92.0%	$        25.61

 

(a) Weighted Occupied Percentage for the year ended December 31, 2013
(b) Weighted Average GAAP Rent per Occupied Square Foot

 

 

MSA / Property Name	City	State	Square Feet			MSA / Property Name	City	State	Square Feet
Southeast Region						Midwest Region
Columbia						Chicago
1441 Main Street	Columbia	SC	264,857			East Wacker (a)	Chicago	IL	860,429
Atlanta						Indianapolis
Satellite Place	Duluth	GA	134,785			Monument Circle	Indianapolis	IN	213,609
Southeast Region Total			399,642			St. Louis
						Lakeside Crossing II	Maryland Heights	MO	116,000
Southwest Region
						Minneapolis
Dallas-Fort Worth						50 South Tenth Street	Minneapolis	MN	498,768
5601 Executive Drive	Irving	TX	152,121
Galleria North	Dallas	TX	379,518			Kansas City
						Grand Boulevard (b)	Kansas City	MO	535,071
Houston
Energy Tower I	Houston	TX	325,797			Cincinnati
						Centre Pointe V	West Chester	OH	135,936
Denver						Union Centre	West Chester	OH	409,798
Highland Place	Centennial	CO	139,142
385 Interlocken	Broomfield	CO	296,868			Midwest Region Total			2,769,611
Southwest Region Total			1,293,446			Total Managed			4,462,699
						Total Owned & Managed			14,147,984

 

(a)	FSP has a Preferred Share Interest of 43.7% in the entity that owns this property.

(b)	FSP has a Preferred Share Interest of 27.0% in the entity that owns this property.

 

 

 

 

 

																										% of Aggregate
										Remaining				Aggregate				% of Aggregate				Annualized				Leased
				Tenant		Number of				Lease Term				Leased				Leased				Rent				Annualized
				Name		Leases				in Months				Square Feet				Square Feet				(in 000's)				Rent
	1			TCF National Bank			2				24				263,111				2.7	%		$	2,884,380				1.3	%
	2			Quintiles Transnational Corp			1				63				259,531				2.7	%			8,462,994				3.8	%
	3			CITGO Petroleum Corporation			1				98				248,399				2.6	%			7,357,578				3.3	%
	4			Sutherland Asbill Brennan LLP			1				76				243,839				2.5	%			6,988,932				3.2	%
	5			Newfield Exploration Company			1				98				234,495				2.4	%			7,702,684				3.5	%
	6			US Government (a)			6				7, 8, 12, 20, 53, 81				229,752				2.4	%			7,211,986				3.3	%
	7			Burger King Corporation			1				57				212,619				2.2	%			4,756,287				2.2	%
	8			Denbury Onshore, LLC			2				67				202,600				2.1	%			3,510,042				1.6	%
	9			RGA Reinsurance Company			2				12				197,354				2.0	%			4,275,347				1.9	%
	10			SunTrust Bank (b)			2				34, 93				182,888				1.9	%			3,667,130				1.7	%
	11			Citicorp Credit Services, Inc			1				36				176,848				1.8	%			3,512,201				1.6	%
	12			C.H. Robinson Worldwide, Inc			1				90				153,028				1.6	%			4,111,249				1.9	%
	13			T-Mobile South, LLC dba T-Mobile			1				62				151,792				1.6	%			3,453,268				1.6	%
	14			Houghton Mifflin Harcourt Publishing Company			1				39				150,050				1.5	%			5,816,207				2.6	%
	15			Petrobras America, Inc.			1				71				144,813				1.5	%			4,855,579				2.2	%
	16			Murphy Exploration & Production Company			1				40				144,677				1.5	%			4,244,312				1.9	%
	17			Argo Data Resource Corporation			1				116				138,540				1.4	%			3,587,099				1.6	%
	18			Giesecke & Devrient America, Inc. (c)			1				132				135,888				1.4	%			1,897,346				0.9	%
	19			Monsanto Company			1				73				127,778				1.3	%			3,002,783				1.4	%
	20			Federal National Mortgage Association			1				33				123,144				1.3	%			2,886,188				1.3	%
				Total as of December 31, 2013											3,721,146				38.4	%		$	94,183,592				42.8	%

 

(a)  Includes 180,444 and 37,813 square feet which expire in 2018 & 2014, respectively.
The remaining 11,495 square feet expire between 2015 - 2020.
(b) Includes 55,388 square feet which expires October 31, 2016.
(c) Includes 23,778 square feet which expires effective January 1, 2014.

 

			Year				Year
			Ended				Ended
Leasing Activity			31-Dec-13				31-Dec-12
(in Square Feet - SF)
New leasing			267,000				315,740
Renewals			645,000				700,838
			912,000				1,016,578
Other information per SF
(Activity on a year-to-date basis)
GAAP Rents on leasing		$	23.33			$	22.41
Weighted average lease term			7.2 Years				5.1 Years
Increase over ave GAAP
rents in 2012			8.0	%			1.5	%
Average free rent			3 Months				3 Months
Tenant Improvements		$	18.25			$	12.26
Leasing Costs		$	8.48			$	5.40

 

 

 

			Rentable				Annualized		Percentage
	Number of		Square				Rent		of Total Final
Year of	Leases		Footage		Annualized		Per Square		Annualized
Lease	Expiring		Subject to		Rent Under		Foot Under		Rent Under
Expiration	Within the		Expiring		Expiring		Expiring		Expiring		Cumulative
December 31,	Year		Leases		Leases (a)		Leases		Leases		Total
2014	97	(b)	543,754		12,748,999		23.45		5.79%		5.79%
2015	86		918,562		22,463,847		24.46		10.21%		16.00%
2016	66		918,729		19,070,030		20.76		8.66%		24.66%
2017	64		1,072,134		28,051,003		26.16		12.74%		37.41%
2018	54		863,568		24,267,978		28.10		11.03%		48.43%
2019	43		1,598,835		40,119,448		25.09		18.23%		66.66%
2020	19		653,560		17,101,711		26.17		7.77%		74.43%
2021	15		846,713		16,953,423		20.02		7.70%		82.13%
2022 and thereafter	38		1,698,568	(c)	39,333,962		23.16		17.87%		100.00%
	482		9,114,423		220,110,401		24.15		100.00%
Vacancies as of 12/31/13			570,868
Total Portfolio Square Footage			9,685,291

 

(a) Annualized rent represents the monthly rent, including tenant reimbursements, for each lease in effect at December 31, 2013
mulitplied by 12.  Tenant reimbursements generally include payment of real estate taxes, operating expenses and common area
maintenance and utility charges.
(b) Includes 24 leases that are month-to-month.
(c) Includes 54,225 square feet that are non-revenue producing building amenities.

 

 

Capital Expenditures
Owned Portfolio		For the Three Months Ended																Year ended
(in thousands)		31-Mar-13				30-Jun-13				30-Sep-13				31-Dec-13				31-Dec-13
Building improvements		$	1,118			$	1,622			$	1,552			$	1,479			$	5,771
Tenant improvements			1,729				5,754				4,596				2,992				15,071
Deferred leasing costs			2,813				1,087				3,821				1,536				9,257
		$	5,660			$	8,463			$	9,969			$	6,007			$	30,099
		For the Three Months Ended:																	Year ended
			31-Mar-12				30-Jun-12				30-Sep-12				31-Dec-12				31-Dec-12
Building improvements		$	746			$	1,003			$	711			$	1,252			$	3,712
Tenant improvements			3,014				2,705				2,854				4,464				13,037
Deferred leasing costs			2,196				1,343				1,104				2,784				7,427
		$	5,956			$	5,051			$	4,669			$	8,500			$	24,176

 

 

Recent Acquisitions:

Purchase Price

City

State

Square Feet

Date Acquired

(in thousands)

2013

1999 Broadway

Denver

CO

673,793

5/22/13

$

183,000

999 Peachtree

Atlanta

GA

621,946

7/1/13

157,900

1001 17th Street

Denver

CO

655,420

8/28/13

217,000

2012

One Ravinia

Atlanta

GA

386,603

7/31/12

$

52,750

Westchase

Houston

TX

629,025

11/1/12

154,750

2011

Emperor Boulevard

Durham

NC

259,531

3/4/11

75,800

Legacy Tennyson Center

Plano

TX

202,600

3/10/11

37,000

One Legacy Circle

Plano

TX

214,110

3/24/11

52,983

909 Davis

Evanston

IL

195,245

9/30/11

37,062

East Renner Road

Richardson

TX

122,300

10/6/11

11,282

Recent Dispositions:

Net Sales

Gain (Loss)

City

State

Square Feet

Date Sold

Proceeds

on Sale

(in thousands)

2013

East Renner Road

Richardson

TX

122,300

10/29/13

$

12,300

$

2,169

2012

Southfield

Southfield

MI

252,613

12/21/12

$

293

$

(14,826

)

2011

Fairview

Falls Church

VA

252,613

1/21/11

89,382

19,592

Bollman (a)

Savage

MD

98,745

6/24/11

7,408

2,346

(a) Industrial property.  All other acquisitions and dispositions are office properties

 

 

(dollars in thousands)			Maximum		Amount						Interest
		Maturity	Amount		Drawn at		Interest		Draw		Rate at
Sponsored REIT	Location	Date	of Loan		31-Dec-13		Rate (1)		Fee (2)		31-Dec-13
Secured revolving lines of credit
FSP Highland Place I Corp.	Centennial, CO	31-Dec-14	$     5,500		$      1,825		L+4.4%		0.5%		4.57%
FSP Satellite Place Corp.	Duluth, GA	31-Mar-14	5,500		5,500		L+4.4%		0.5%		4.57%
FSP 1441 Main Street Corp.	Columbia, SC	31-Mar-14	10,800		9,000		L+4.4%		0.5%		4.57%
FSP Galleria North Corp.	Dallas, TX	30-Jan-15	15,000		12,880		L+5.0%		0.5%		5.17%
Secured construction loan
FSP 385 Interlocken
Development Corp.	Broomfield, CO	30-Apr-14	42,000		37,541		L+4.4%		n/a		4.57%
Mortgage loan secured by property
FSP Energy Tower I Corp. (3)	Houston, TX	5-Jul-14	33,000		33,000		6.41%		n/a		6.41%
			$ 111,800		$    99,746

 

(1) The interest rate is 30-day LIBOR rate plus the additional rate indicated, otherwise a fixed rate.
(2) The draw fee is a percentage of each new advance, and is paid at the time of each new draw.
(3) The loan has a secured fixed mortgage amount of $33,000,000.  A loan fee of $300,630 was paid at the time
of closing and funding of the loan on July 5, 2012.  The borrower is required to pay the Company an exit
fee in the amount of 0.982% of  the principal repayment amount.

 

 

(in thousands except per share data)

 

 

 

 

Definition of 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 (computed in accordance with GAAP), excluding gains (or losses) from sales of property and acquisition costs of newly acquired properties that are not capitalized, plus depreciation and amortization, including amortization of acquired above and below market lease intangibles and impairment charges on 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. A comparison of the new and old definitions of FFO are on page 30.

FFO should not be considered as an alternative to net income (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 definition in our 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 and cash flows from operating, investing and financing activities in the consolidated financial statements.

 

 

Definition of Earnings before Interest, Taxes, Depreciation and
Amortization (EBITDA) and Adjusted EBITDA

EBITDA is defined as net income plus interest expense, income tax expense and depreciation and amortization expense. Adjusted EBITDA is defined as EBITDA excluding gains and losses on sales of properties or shares of equity investments or provisions for losses on assets held for sale. EBITDA and Adjusted EBITDA are not intended to represent cash flow for the period, are not presented as an alternative to operating income as an indicator of operating performance, should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP and are not indicative of operating income or cash provided by operating activities as determined under GAAP. EBITDA and Adjusted EBITDA are presented solely as a supplemental disclosure with respect to liquidity because the Company believes it provides useful information regarding the Company's ability to service or incur debt. Because all companies do not calculate EBITDA or Adjusted EBITDA the same way, this presentation may not be comparable to similarly titled measures of other companies. The Company believes that net income is the financial measure calculated and presented in accordance with GAAP that is most directly comparable to EBITDA and Adjusted EBITDA.

 

Definition of Adjusted Funds From Operations (AFFO)

 

The Company defines AFFO as the sum of (1) FFO; (2) less the effect of straight-line rent; (3) plus deferred financing costs, (4) less recurring capital expenditures that are generally for (a) maintenance of properties or are second generation capital expenditures or what we call non-investment capex, (b) tenant improvements, (c) leasing commissions; and (4) plus non-cash compensation expenses, if any. AFFO should not be considered as an alternative to net income (determined in accordance with GAAP), 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 and cash flows from operating, investing and financing activities in the consolidated financial statements.

 

 

Definition of Property Net Operating Income (Property NOI)

Property NOI is a non-GAAP financial measure equal to net income, the most directly comparable GAAP financial measure, plus selling, 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, gains or losses on the sale of assets and excludes non-property specific income and expenses. Property NOI presented 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 as an indication of our performance or to cash flows as a measure of the Company's liquidity or its ability to make distributions.

 

 

Quarterly FFO Per Share
New Definition	Q1	Q2	Q3	Q4	Total
2013	0.26	0.25	0.28	0.29	1.07
2012	0.24	0.24	0.24	0.25	0.97
Old Definition	Q1	Q2	Q3	Q4	Total
2013	0.25	0.24	0.27	0.29	1.05
2012	0.24	0.23	0.24	0.25	0.95

 

New Definition prior 4 year with growth rates:		For the Year Ended December 31,
(in thousands):		2013				2012				2011				2010
Net income (loss)		$	19,827			$	7,633			$	43,524			$	22,093
(Gain) loss on sale, less applicable income tax			(2,158	)			14,826				(21,939	)			—
Equity in earnings of non-consolidated REITs			1,358				(2,033	)			(4,490	)			(1,190	)
FFO from non-consolidated REITs			2,148				4,124				6,784				4,998
Depreciation and amortization			79,090				55,518				48,439				40,724
NAREIT FFO			100,265				80,068				72,318				66,625
Acquisition costs of new properties			568				287				620				125
Funds From Operations		$	100,833			$	80,355			$	72,938			$	66,750
Fully Diluted Shares (Weighted Ave Shares)			93,855				82,937				81,857				79,826
FFO Per Share		$	1.07			$	0.97			$	0.89			$	0.84
Growth over prior year			10.3	%			9.0	%			6.0	%

 

Old Definition prior 4 year with growth rates:		For the Year Ended December 31,
(in thousands):		2013				2012				2011				2010
Net income (loss)		$	19,827			$	7,633			$	43,524			$	22,093
(Gain) loss on sale, less applicable income tax			(2,158	)			14,826				(21,939	)			—
Equity in earnings of non-consolidated REITs			1,358				(2,033	)			(4,490	)			(1,190	)
Distributions from non-consolidated REITs			107				2,810				5,056				5,170
Depreciation and amortization			79,090				55,518				48,439				40,724
NAREIT FFO			98,224				78,754				70,590				66,797
Acquisition costs of new properties			568				287				620				125
Funds From Operations		$	98,792			$	79,041			$	71,210			$	66,922
Fully Diluted Shares (Weighted Ave Shares)			93,855				82,937				81,857				79,826
FFO Per Share		$	1.05			$	0.95			$	0.87			$	0.84
Growth over prior year			10.5	%			9.2	%			3.6	%

 

Note: The difference between the calculations is to include FFO from our investments in non-consolidated REITs in our FFO calculation under the new definition, which replaces the distributions from Non-consolidated REITs in the definition we are replacing. We believe this treatment as it discloses the FFO from these investments and more closely matches the NAREIT definition of FFO.

 

*Please see the definition of FFO on page 27.

 

 

 

 

Investor Relations Contact   (877) 686-9496 InvestorRelations@franklinstreetproperties.com

 

 

 

Franklin Street Properties Corp. ● 401 Edgewater Place ● Wakefield, MA 01880 ● (781) 557-1300

 

www.franklinstreetproperties.com