Exhibit 99.2

 

 

Supplemental Operating and Financial Data Second Quarter 2015

 

 

 

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
			Tenants by Industry	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 & AFFO	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 NOI	28
			AFFO	29
Owned and Managed Portfolio Overview	14-17

 

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.

 

Our Business

As of June 30, 2015, the Company owned and operated a portfolio of real estate consisting of 36 properties, managed 9 Sponsored REITs and held five 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 Secretary
John G. Demeritt			Jeffrey B. Carter
Executive Vice President, Chief			Executive Vice President and
Financial Officer  & Treasurer			Chief Investment Officer
Janet Notopoulos			Eriel Anchando
Executive Vice President and Director			Senior Vice President of
			Operations

 

Inquiries

Inquires should be directed to: Georgia Touma

877-686-9496 or InvestorRelations@franklinstreetproperties.com

 

Snapshot (as of June 30, 2015)
Corporate Headquarters	Wakefield, MA
Fiscal Year-End	31-Dec
Total Properties	36
Total Square Feet	9.6 Million
Trading Symbol	FSP
Exchange	NYSE MKT
Common Shares Outstanding	100,187,405
Quarterly Dividend	$0.19
Dividend Yield	6.7%
Total Market Capitalization	$2.1 Billion
Insider Holdings	5.1%

  

 

(in thousands except per share amounts, SF & number of properties)
		30-Jun-15				31-Mar-15				31-Dec-14				30-Sep-14				30-Jun-14
Income Items:
Rental revenue		$	58,801			$	59,013			$	61,022			$	59,728			$	60,994
Total revenue			60,233				60,507				62,489				61,190				62,741
Adjusted EBITDA*			32,642				31,097				33,182				33,973				34,359
Equity in losses of non-consolidated REITs			(38	)			(322	)			(269	)			(455	)			(552	)
Net income			3,903				12,533				4,295				1,567				3,713
FFO*			27,188				25,672				27,525				27,904				28,254
Per Share Data:
EPS		$	0.04			$	0.13			$	0.04			$	0.02			$	0.04
FFO*		$	0.27			$	0.26			$	0.27			$	0.28			$	0.28
Weighted Average Shares (diluted)			100,187				100,187				100,187				100,187				100,187
Closing share price		$	11.31			$	12.82			$	12.27			$	11.22			$	12.58
Dividend		$	0.19			$	0.19			$	0.19			$	0.19			$	0.19
Payout Ratio:			70	%			74	%			69	%			68	%			67	%
Balance Sheet Items:
Real estate, net		$	1,539,343			$	1,486,897			$	1,524,307			$	1,542,012			$	1,549,963
Other assets, net			400,758				402,515				412,083				425,305				438,634
Total assets, net			1,940,101				1,889,412				1,936,390				1,967,317				1,988,597
Total liabilities, net			984,555				921,082				956,743				968,948				975,853
Shareholders' equity			955,546				968,330				979,647				998,369				1,012,744
Market Capitalization and Debt:
Total Market Capitalization (a)		$	2,053,120			$	2,144,403			$	2,117,299			$	2,029,103			$	2,176,858
Total debt outstanding			920,000				860,000				888,000				905,000				916,500
Debt to Total Market Capitalization			44.8	%			40.1	%			41.9	%			44.6	%			42.1	%
Debt to Adjusted EBITDA			7.0				6.9				6.7				6.7				6.7
Owned Portfolio Leasing Statistics:
Owned portfolio assets			36				36				38				39				39
Portfolio total SF			9,639,740				9,310,131				9,580,057				9,690,361				9,686,215
Portfolio % leased			90.6	%			90.4	%			92.8	%			93.3	%			94.1	%

(a)

Total Market Capitalization is the closing share price multiplied 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 Definitions of these Non-GAAP Measures beginning on page 27.

 

 

										For the Six																				For the
		For the Three Months Ended								Months Ended				For the Three Months Ended																Year Ended
		31-Mar-15				30-Jun-15				30-Jun-15				31-Mar-14				30-Jun-14				30-Sep-14				31-Dec-14				31-Dec-14
Revenue:
Rental		$	59,013			$	58,801			$	117,814			$	61,597			$	60,994			$	59,728			$	61,022			$	243,341
Related party revenue:
Management fees and interest income from loans			1,473				1,412				2,885				1,643				1,671				1,462				1,465				6,241
Other			21				20				41				23				76				—				2				101
Total revenue			60,507				60,233				120,740				63,263				62,741				61,190				62,489				249,683
Expenses:
Real estate operating expenses			15,356				14,644				30,000				15,071				14,995				15,632				16,334				62,032
Real estate taxes and insurance			10,048				9,469				19,517				9,251				9,763				8,555				9,288				36,857
Depreciation and amortization			22,672				23,207				45,879				24,300				23,563				24,878				23,174				95,915
Selling, general and administrative			3,691				3,401				7,092				3,272				3,148				3,071				3,492				12,983
Interest			6,187				6,365				12,552				7,176				6,891				6,883				6,483				27,433
Total expenses			57,954				57,086				115,040				59,070				58,360				59,019				58,771				235,220
Income before interest income, equity in losses of non-consolidated REITs and taxes			2,553				3,147				5,700				4,193				4,381				2,171				3,718				14,463
Interest income			1				—				1				1				1				—				1				3
Equity in losses of non-consolidated REITs			(322	)			(38	)			(360	)			(484	)			(552	)			(455	)			(269	)			(1,760	)
Gain on sale of properties, less applicable income tax			10,462				948				11,410				—				—				—				940				940
Income before taxes on income			12,694				4,057				16,751				3,710				3,830				1,716				4,390				13,646
Income tax expense			161				154				315				137				117				149				95				498
Net income		$	12,533			$	3,903			$	16,436			$	3,573			$	3,713			$	1,567			$	4,295			$	13,148
Weighted average number of shares outstanding,
basic and diluted			100,187				100,187				100,187				100,187				100,187				100,187				100,187				100,187
Net income per share, basic and diluted		$	0.13			$	0.04			$	0.16			$	0.04			$	0.04			$	0.02			$	0.04			$	0.13

 

 

		March 31,				June 30,				March 31,				June 30,				September 30,				December 31,
		2015				2015				2014				2014				2014				2014
Assets:
Real estate assets:
Land		$	174,707			$	180,271			$	185,479			$	185,479			$	185,479			$	183,930
Buildings and improvements			1,581,524				1,636,444				1,605,808				1,609,747				1,613,699				1,604,984
Fixtures and equipment			1,724				1,800				1,296				1,395				1,633				1,677
			1,757,955				1,818,515				1,792,583				1,796,621				1,800,811				1,790,591
Less accumulated depreciation			271,058				279,172				234,447				246,658				258,799				266,284
Real estate assets, net			1,486,897				1,539,343				1,558,136				1,549,963				1,542,012				1,524,307
Acquired real estate leases, net			124,337				126,926				172,262				161,519				149,019				138,714
Investment in non-consolidated REITs			78,228				78,164				79,983				79,405				78,907				78,611
Cash and cash equivalents			14,945				15,841				20,031				18,455				15,930				7,519
Restricted cash			56				48				688				728				707				742
Tenant rent receivables, net			4,587				2,886				6,035				2,867				2,865				4,733
Straight-line rent receivable, net			45,498				46,168				44,392				46,021				46,737				47,021
Prepaid expenses and other assets			14,114				9,658				9,954				9,716				9,768				10,901
Related party mortgage loan receivable			93,641				93,641				101,916				88,436				88,436				93,641
Other assets: derivative asset			774				918				4,801				2,626				4,582				3,020
Deferred leasing commissions, net			26,335				26,508				27,477				28,861				28,354				27,181
Total assets		$	1,889,412			$	1,940,101			$	2,025,675			$	1,988,597			$	1,967,317			$	1,936,390
Liabilities and Stockholders’ Equity:
Liabilities:
Bank note payable		$	240,000			$	300,000			$	316,500			$	296,500			$	285,000			$	268,000
Term loan payable			620,000				620,000				620,000				620,000				620,000				620,000
Accounts payable and accrued expenses			36,065				39,199				34,390				34,590				40,228				42,561
Accrued compensation			1,241				2,327				1,027				2,052				2,863				3,758
Tenant security deposits			4,019				4,315				4,258				4,259				4,331				4,248
Other liabilities: derivative termination value			9,836				7,632				3,825				5,985				4,847				7,268
Acquired unfavorable real estate leases, net			9,921				11,082				13,273				12,467				11,679				10,908
Total liabilities			921,082				984,555				993,273				975,853				968,948				956,743
Commitments and contingencies
Stockholders’ Equity:
Preferred stock			—				—				—				—				—				—
Common stock			10				10				10				10				10				10
Additional paid-in capital			1,273,556				1,273,556				1,273,556				1,273,556				1,273,556				1,273,556
Accumulated other comprehensive income (loss)			(9,062	)			(6,714	)			976				(3,359	)			(265	)			(4,248	)
Accumulated distributions in excess of accumulated earnings			(296,174	)			(311,306	)			(242,140	)			(257,463	)			(274,932	)			(289,671	)
Total stockholders’ equity			968,330				955,546				1,032,402				1,012,744				998,369				979,647
Total liabilities and stockholders’ equity		$	1,889,412			$	1,940,101			$	2,025,675			$	1,988,597			$	1,967,317			$	1,936,390

 

 

		Six Months ended June 30,								Twelve Months ended December 31
		2015				2014				2014				2013
Cash flows from operating activities:
Net income		$	16,436			$	7,286			$	13,148			$	19,827
Adjustments to reconcile net income to net cash provided by  operating activities:
Depreciation and amortization expense			46,913				48,854				97,916				81,267
Amortization of above market lease			(32	)			63				635				(365	)
Gain on sale of properties, less applicable income tax			(11,410	)			—				(940	)			(2,158	)
Equity in earnings (losses) from non-consolidated REITs			360				1,036				1,760				1,358
Increase in allowance for doubtful accounts			(75	)			125				275				(1,250	)
Changes in operating assets and liabilities:
Restricted cash			694				(85	)			(99	)			(68	)
Tenant rent receivables			1,922				2,110				94				(2,103	)
Straight-line rents			(643	)			(3,323	)			(4,737	)			(5,782	)
Lease acquisition costs			(231	)			(437	)			(440	)			(1,146	)
Prepaid expenses and other assets			196				503				700				(1,547	)
Accounts payable and accrued expenses			(4,306	)			(8,405	)			206				11,137
Accrued compensation			(1,431	)			(933	)			773				445
Tenant security deposits			66				232				222				1,538
Payment of deferred leasing commissions			(2,737	)			(3,908	)			(6,347	)			(9,125	)
Net cash provided by operating activities			45,722				43,118				103,166				92,028
Cash flows from investing activities:
Property acquisitions			(66,104	)							—				(454,447	)
Acquired real estate leases			(10,604	)							—				(100,143	)
Property improvements, fixtures and equipment			(10,333	)			(7,578	)			(18,370	)			(19,120	)
Office computers and furniture											(191	)			(355	)
Investment in non-consolidated REITs			—				—				—				4,858
Distributions in excess of earnings from non-consolidated REITs			54				54				107				108
Investment in related party mortgage loan receivable			—				(2,570	)			(11,170	)			(8,200	)
Repayment of related party mortgage loan receivable			—				13,880				17,275				2,350
Changes in deposits on real estate assets			—				—				—				—
Proceeds received on sales of real estate assets			55,659				—				14,192				12,301
Net cash provided by (used in) investing activities			(31,328	)			3,786				1,843				(562,648	)
Cash flows from financing activities:
Distributions to stockholders			(38,072	)			(38,072	)			(76,142	)			(69,588	)
Proceeds (costs) from equity offering, net			—				—				—				230,682
Borrowings under bank note payable			95,000				10,000				15,000				160,000
Repayments of bank note payable			(63,000	)			(20,000	)			(53,500	)			(70,250	)
Borrowing (repayment) of term loan payable, net			—				—				—				220,000
Deferred Financing Costs			—				—				(2,471	)			(1,868	)
Net cash provided by (used in) financing activities			(6,072	)			(48,072	)			(117,113	)			468,976
Net decreases in cash and cash equivalents			8,322				(1,168	)			(12,104	)			(1,644	)
Cash and cash equivalents, beginning of period			7,519				19,623				19,623				21,267
Cash and cash equivalents, end of period		$	15,841			$	18,455			$	7,519			$	19,623

 

 

		Rentable												Six Months												Six Months
		Square Feet				Three Months Ended								Ended				Three Months Ended								Ended				Inc				%
Region		or RSF				31-Mar-15				30-Jun-15				30-Jun-15				31-Mar-14				30-Jun-14				30-Jun-14				(Dec)				Change
East			1,333			$	4,736			$	4,648			$	9,384			$	4,577			$	4,655			$	9,232			$	152				1.6	%
MidWest			1,530				3,469				3,563				7,032				4,586				4,541				9,127				(2,095	)			-23.0	%
South			4,026				15,781				15,995				31,776				16,796				16,183				32,979				(1,203	)			-3.6	%
West			2,309				8,216				8,571				16,787				9,388				9,290				18,678				(1,891	)			-10.1	%
Same Store			9,198				32,202				32,777				64,979				35,347				34,669				70,016				(5,037	)			-7.2	%
Acquisitions			442				—				1,057				1,057				—				—				—				1,057				1.5	%
Property NOI from
the continuing portfolio			9,640				32,202				33,834				66,036				35,347				34,669				70,016				(3,980	)			-5.7	%
Dispositions							822				61				883				1,226				1,257				2,483				(1,600	)			-2.1	%
Property NOI						$	33,024			$	33,895			$	66,919			$	36,573			$	35,926			$	72,499			$	(5,580	)			-7.7	%
Same Store						$	32,202			$	32,777			$	64,979			$	35,347			$	34,669			$	70,016			$	(5,037	)			-7.2	%
Less Nonrecurring
Items in NOI (a)							75				81				156				707				287				994				(838	)			1.1	%
Comparative
Same Store						$	32,127			$	32,696			$	64,823			$	34,640			$	34,382			$	69,022			$	(4,199	)			-6.1	%

 

(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
										Six Months																				Year
		For the Three Months Ended								Ended				For the Three Months Ended																Ended
		31-Mar-15				30-Jun-15				30-Jun-15				31-Mar-14				30-Jun-14				30-Sep-14				31-Dec-14				31-Dec-14
Net income		$	12,533			$	3,903			$	16,436			$	3,573			$	3,713			$	1,567			$	4,295			$	13,148
Gain (loss) on sale, less applicable income tax			(10,462	)			(948	)			(11,410	)			—				—				—				(940	)			(940	)
GAAP income from non-consolidated REITs			322				38				360				484				552				455				269				1,760
FFO from non-consolidated REITs			601				885				1,486				419				351				508				652				1,930
Depreciation & amortization			22,678				23,168				45,846				24,289				23,638				25,374				23,249				96,550
NAREIT FFO*			25,672				27,046				52,718				28,765				28,254				27,904				27,525				112,448
Acquisition costs			—				142				142				14				—				—				—				14
Funds From Operations (FFO)*		$	25,672			$	27,188			$	52,860			$	28,779			$	28,254			$	27,904			$	27,525			$	112,462
Adjusted Funds From Operations (AFFO)*
Funds From Operations (FFO)*		$	25,672			$	27,188			$	52,860			$	28,779			$	28,254			$	27,904			$	27,525			$	112,462
Reverse FFO from non-consolidated REITs			(601	)			(885	)			(1,486	)			(419	)			(351	)			(508	)			(652	)			(1,930	)
Distributions from non-consolidated REITs			27				27				54				27				27				27				26				107
Amortization of deferred financing costs			517				517				1,034				499				499				498				506				2,002
Straight-line rent			(69	)			(574	)			(643	)			(1,783	)			(1,541	)			(714	)			(698	)			(4,736	)
Tenant improvements			(2,936	)			(3,420	)			(6,356	)			(1,132	)			(1,837	)			(2,612	)			(4,244	)			(9,825	)
Leasing commissions			(830	)			(1,539	)			(2,369	)			(1,080	)			(2,786	)			(577	)			(1,405	)			(5,848	)
Non-investment capex			(643	)			(1,418	)			(2,061	)			(364	)			(1,621	)			(700	)			(851	)			(3,536	)
Adjusted Funds From Operations (AFFO)*		$	21,137			$	19,896			$	41,033			$	24,527			$	20,644			$	23,318			$	20,207			$	88,696
Per Share Data:
EPS		$	0.13			$	0.04			$	0.16			$	0.04			$	0.04			$	0.02			$	0.04			$	0.13
FFO*			0.26				0.27				0.53				0.29				0.28				0.28				0.27				1.12
AFFO*			0.21				0.20				0.41				0.24				0.21				0.23				0.20				0.89
Weighted Average Shares (basic and diluted)			100,187				100,187				100,187				100,187				100,187				100,187				100,187				100,187

 

 

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

 

 

										Six Months
		For the Three Months Ended								Ended				For the Three Months Ended																Year Ended
		31-Mar-15				30-Jun-15				30-Jun-15				31-Mar-14				30-Jun-14				30-Sep-14				31-Dec-14				31-Dec-14
Net income		$	12,533			$	3,903			$	16,436			$	3,573			$	3,713			$	1,567			$	4,295			$	13,148
Interest expense			6,187				6,365				12,552				7,176				6,891				6,883				6,483				27,433
Depreciation and amortization			22,678				23,168				45,846				24,289				23,638				25,374				23,249				96,550
Income taxes			161				154				315				137				117				149				95				498
EBITDA			41,559				33,590				75,149				35,175				34,359				33,973				34,122				137,629
Excluding (gain) loss on sale, less applicable income tax			(10,462	)			(948	)			(11,410	)			—				—				—				(940	)			(940	)
Adjusted EBITDA		$	31,097			$	32,642			$	63,739			$	35,175			$	34,359			$	33,973			$	33,182			$	136,689
Interest expense		$	6,187			$	6,365			$	12,552			$	7,176			$	6,891			$	6,883			$	6,483			$	27,433
Scheduled principal payments			—				—				—				—				—				—				—				—
Interest and scheduled principal payments		$	6,187			$	6,365			$	12,552			$	7,176			$	6,891			$	6,883			$	6,483			$	27,433
Interest coverage ratio			5.03				5.13				5.08				4.90				4.99				4.94				5.12				4.98
Debt service coverage ratio			5.03				5.13				5.08				4.90				4.99				4.94				5.12				4.98
Debt		$	860,000			$	920,000			$	920,000			$	936,500			$	916,500			$	905,000			$	888,000
Adjusted EBITDA			31,097				32,642				63,739				35,175				34,359				33,973				33,182
Annualized			124,388				130,568				127,478				140,700				137,436				135,892				132,728
Debt-to-EBITDA			6.9				7.0				7.2				6.7				6.7				6.7				6.7

 

* 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										Six Months												Six Months
		Three Months Ended								Ended				Three Months Ended								Ended
		31-Mar-15				30-Jun-15				30-Jun-15				31-Mar-14				30-Jun-14				30-Jun-14
Net Income		$	12,533			$	3,903			$	16,436			$	3,573			$	3,713			$	7,286
Add (deduct):
Gain on sale of properties,less applicable income taxes			(10,462	)			(948	)			(11,410	)			—				—				—
Loss provision or (gain) on sale of assets			—				—				—				—				—				—
Management fee income			(643	)			(559	)			(1,202	)			(646	)			(682	)			(1,328	)
Depreciation and amortization			22,672				23,207				45,879				24,300				23,563				47,863
Amortization of above/below market leases			6				(39	)			(33	)			(11	)			74				63
Selling, general and administrative			3,691				3,401				7,092				3,272				3,148				6,420
Interest expense			6,187				6,365				12,552				7,176				6,891				14,067
Interest income			(1,262	)			(1,278	)			(2,540	)			(1,410	)			(1,408	)			(2,818	)
Equity in losses of
non-consolidated REITs			322				38				360				484				552				1,036
Non-property specific items, net			(20	)			(195	)			(215	)			(165	)			75				(90	)
Property NOI		$	33,024			$	33,895			$	66,919			$	36,573			$	35,926			$	72,499

 

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

 

 

						Maximum				Amount				Interest				Interest
		Maturity				Amount				Drawn at				Rate				Rate at				Facility
		Date				of Loan				30-Jun-15				Components				30-Jun-15				Fee
BAML Revolver			29-Oct-18			$	500,000			$	300,000				L+1.25%				1.43	%			0.25	%
BAML Term Loan			27-Sep-17				400,000				400,000				0.75% + 1.45%				2.20	%
BMO Term Loan			26-Aug-20				220,000				220,000				2.32% + 1.65%				3.97	%
						$	1,120,000			$	920,000								2.37	%

  

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

 

On October 29, 2014, we amended and restated our bank facility we call the BAML Credit Facility, which has a total of $900 million available and is comprised of a revolver that we can borrow up to $500 million on, which we call the BAML Revolver and a term loan for $400 million that we call the BAML Term Loan. On August 26, 2013, we entered into a term loan we call the BMO Term Loan and borrowed $220 million. Additional information about these loans are in the footnotes to our financial statements. Pricing is based on our credit rating for the BAML Revolver, BAML Term Loan and the BMO Term Loan. Our credit rating as of June 30, 2015 was Baa3 from Moody’s.

•

The BAML Revolver is priced based on our current credit rating at a spread of 1.25%, which was an interest rate of 1.43% as of June 30, 2015. The BAML Revolver is also subject to a facility fee based on our credit rating, which was 25 bps or approximately $1.25 million per year.

•

The BAML Term Loan has LIBOR fixed at 0.75% for five years. At our credit rating the spread for the BAML Term Loan is 1.45%, so our interest rate is 2.20%.

•

The BMO Term Loan has fixed LIBOR at 2.32% for seven years. At our credit rating the spread over LIBOR is 1.65%, so our interest rate is 3.97%.

•

We incurred financing costs to close the BAML Revolver, BAML Term Loan and the credit facilities that preceded them. We also incurred financing costs to close the BMO Term Loan. 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 $2.1 million.

•

The BAML 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 BMO 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-15				30-Jun-15				31-Mar-14				30-Jun-14				30-Sep-14				31-Dec-14
Market Data:
Shares Outstanding			100,187				100,187				100,187				100,187				100,187				100,187
Closing market price per share		$	12.82			$	11.31			$	12.60			$	12.58			$	11.22			$	12.27
Market capitalization		$	1,284,403			$	1,133,120			$	1,262,361			$	1,260,358			$	1,124,103			$	1,229,299
Total Debt			860,000				920,000				936,500				916,500				905,000				888,000
Total Market Capitalization		$	2,144,403			$	2,053,120			$	2,198,861			$	2,176,858			$	2,029,103			$	2,117,299
Dividend Data:
Total dividends paid		$	19,036			$	19,036			$	19,036			$	19,035			$	19,036			$	19,036
Common dividend per share		$	0.19			$	0.19			$	0.19			$	0.19			$	0.19			$	0.19
Quarterly dividend as a % of FFO*			73.1	%			70.4	%			65.5	%			67.9	%			67.9	%			70.4	%
Liquidity:
Cash and cash equivalents		$	14,946			$	15,841			$	20,031			$	18,455			$	15,930			$	7,519
Revolving credit facilities:
Gross potential available under the BAML Credit Facility			900,000				900,000				900,000				900,000				900,000				900,000
Less:
Outstanding balance			(640,000	)			(700,000	)			(716,500	)			(696,500	)			(685,000	)			(668,000	)
Total Liquidity		$	274,946			$	215,841			$	203,531			$	221,955			$	230,930			$	239,519

 

*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				81.3	%			81.3	%		$	23.13
Washington, D.C.
Meadow Point			Chantilly			VA				138,537				100.0	%			92.6	%		$	27.29
Stonecroft			Chantilly			VA				111,469				100.0	%			100.0	%		$	37.76
Loudoun Tech Center			Dulles			VA				136,658				92.0	%			92.0	%		$	18.53
Richmond
Innsbrook			Glen Allen			VA				298,456				99.9	%			99.9	%		$	18.74
Charlotte
Forest Park			Charlotte			NC				62,212				100.0	%			100.0	%		$	13.77
Raleigh-Durham
Emperor Boulevard			Durham			NC				259,531				100.0	%			100.0	%		$	36.18
East Region Total										1,332,308				94.6	%			93.8	%		$	25.59
Midwest Region
Chicago
Northwest Point			Elk Grove Village			IL				176,848				100.0	%			100.0	%		$	23.17
909 Davis Street			Evanston			IL				195,245				100.0	%			98.4	%		$	35.91
Indianapolis
River Crossing			Indianapolis			IN				205,059				90.6	%			96.7	%		$	19.55
St. Louis
Timberlake			Chesterfield			MO				234,023				93.8	%			43.7	%		$	24.03
Timberlake East			Chesterfield			MO				116,197				43.7	%			20.9	%		$	21.03
Lakeside Crossing			Maryland Heights			MO				127,778				100.0	%			100.0	%		$	24.47
Minneapolis
121 South 8th Street			Minneapolis			MN				475,012				90.2	%			90.2	%		$	15.34
Midwest Region Total										1,530,162				90.5	%			81.7	%		$	22.03

 

 

												Percent				Wtd Ave (a)				GAAP (b)
MSA / Property Name		City		State				Square Feet				Leased				Occupied				Rent
South Region
Dallas-Fort Worth
Legacy Tennyson Center		Plano			TX				202,600				100.0	%			100.0	%		$	17.60
One Legacy Circle		Plano			TX				214,110				100.0	%			100.0	%		$	33.33
Addison Circle		Addison			TX				289,974				91.6	%			86.2	%		$	23.77
Collins Crossing		Richardson			TX				300,472				100.0	%			99.5	%		$	24.15
Liberty Plaza		Addison			TX				218,934				84.2	%			87.9	%		$	20.65
Houston
Park Ten		Houston			TX				157,460				63.1	%			63.1	%		$	31.66
Eldridge Green		Houston			TX				248,399				100.0	%			100.0	%		$	31.37
Park Ten Phase II		Houston			TX				156,746				100.0	%			100.0	%		$	31.43
Westchase I & II		Houston			TX				629,025				95.9	%			96.2	%		$	33.83
Miami-Ft. Lauderdale-West Palm Beach
Blue Lagoon Drive		Miami			FL				212,619				100.0	%			100.0	%		$	23.28
Atlanta
One Overton Place		Atlanta			GA				387,267				84.5	%			78.1	%		$	24.82
One Ravinia		Atlanta			GA				386,603				95.2	%			95.2	%		$	22.82
Two Ravinia		Atlanta			GA				442,130				77.5	%			75.9	%		$	24.79
999 Peachtree		Houston			TX				621,946				95.1	%			95.7	%		$	28.90
South Region Total									4,468,285				84.5	%			91.4	%		$	27.08
West Region
Seattle
Federal Way		Federal Way			WA				117,010				58.9	%			57.7	%		$	18.65
San Francisco-San Jose-Oakland
Hillview Center		Milpitas			CA				36,288				100.0	%			100.0	%		$	16.28
Montague Business Center		San Jose			CA				145,951				81.1	%			81.1	%		$	16.37
Denver
380 Interlocken		Broomfield			CO				240,185				97.1	%			95.8	%		$	29.39
1999 Broadway		Denver			CO				676,379				86.2	%			86.8	%		$	32.16
Greenwood Plaza		Englewood			CO				196,236				100.0	%			100.0	%		$	24.48
390 Interlocken		Broomfield			CO				241,516				72.3	%			71.3	%		$	28.40
1001 17th Street		Denver			CO				655,420				86.3	%			83.1	%		$	34.65
West Region Total									2,308,985				85.6	%			84.6	%		$	29.71
Total Owned									9,639,740				90.6	%			88.5	%		$	26.73

 

(a) Weighted Occupied Percentage for the six months ended June 30, 2015.
(b) Weighted Average GAAP Rent per Occupied Square Foot.

 

 

	MSA / Property Name	City	State	Square Feet
	Southeast Region
	Columbia
	1441 Main Street	Columbia	SC	264,857
	Atlanta
	Satellite Place	Duluth	GA	134,785
	Southeast Region Total			399,642
	Southwest Region
	Houston
	Energy Tower I	Houston	TX	325,797
	Denver
	385 Interlocken	Broomfield	CO	295,891
	Southwest Region Total			621,688
	Midwest Region
	Chicago
(a)	East Wacker	Chicago	IL	861,000
	Indianapolis
	Monument Circle	Indianapolis	IN	213,760
	St. Louis
	Lakeside Crossing II	Maryland Heights	MO	116,000
	Kansas City
(b)	Grand Boulevard	Kansas City	MO	535,071
	Cincinnati
	Centre Pointe V	West Chester	OH	135,936
	Midwest Region Total			1,861,767
	Total Managed			2,883,097
	Total Owned & Managed			12,522,837

 

(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
					% of		Aggregate
			Remaining	Aggregate	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	6	263,111	3.0%	$             2,997,573	1.3%
2	Quintiles Transnational Corp	1	45	259,531	3.0%	9,067,770	4.0%
3	CITGO Petroleum Corporation	1	80	248,399	2.8%	7,904,056	3.5%
4	Newfield Exploration Company	1	80	234,495	2.7%	8,614,349	3.8%
5	US Government (a)	5	12, 14, 35, 49, 63	223,433	2.6%	7,173,033	3.2%
6	Sutherland Asbill Brennan LLP	1	58	222,422	2.5%	6,823,317	3.0%
7	Burger King Corporation	1	39	212,619	2.4%	5,134,749	2.3%
8	Denbury Onshore, LLC (b)	2	13, 49	202,600	2.3%	3,510,042	1.6%
9	SunTrust Bank (c)	2	16, 75	182,888	2.1%	3,736,826	1.7%
10	Citicorp Credit Services, Inc	1	18	176,848	2.0%	4,612,196	2.1%
11	T-Mobile South, LLC dba T-Mobile	1	44	151,792	1.7%	3,588,363	1.6%
12	Houghton Mifflin Harcourt Publishing Company	1	21	150,050	1.7%	6,243,052	2.8%
13	Petrobras America, Inc.	1	53	144,813	1.7%	5,337,807	2.4%
14	Murphy Exploration & Production Company	1	22	144,677	1.7%	4,718,321	2.1%
15	Argo Data Resource Corporation	1	98	140,246	1.6%	3,718,923	1.7%
16	Monsanto Company	1	55	127,778	1.5%	3,019,394	1.3%
17	Federal National Mortgage Association	1	15	123,144	1.4%	2,695,622	1.2%
18	Vail Corp d/b/a Vail Resorts (d)	2	45, 93	122,232	1.4%	3,471,917	1.5%
19	Kaiser Foundation Health Plan	1	107	120,979	1.4%	3,000,611	1.3%
20	Centene Management Company, LLC (e)	1	96	117,618	1.3%	-	-
			Total	3,569,675	40.9%	$        95,367,921	42.4%

 

(a)

Includes 180,444 and 27,398 square feet which expire in 2018 & 2017, respectively.

The remaining 15,591 square feet expire between 2016-2020.

(b)

Includes 102,600 square feet which expire 7/31/16 and 100,000 square feet that expires 7/31/19.

(c)

Includes 55,388 square feet which expires October 31, 2016. The remaining 127,500 square feet expires September 30, 2021.

d)

Includes 38,293 square feet which expires March 31, 2019. The remaining 83,939 square feet expires March 31, 2023.

(e)

The lease was executed June 30, 2015 and rent has not commenced.

 

		Six Months				Year				Year
		Ended				Ended				Ended
Leasing Activity			30-Jun-15				31-Dec-14				31-Dec-13
(in Square Feet - SF)
New leasing			218,000				149,000				267,000
Renewals			329,000				635,000				645,000
			547,000				784,000				912,000
Other information per SF
(Activity on a year-to-date basis)
GAAP Rents on leasing		$	26.38			$	26.89			$	23.33
Weighted average lease term			4.8 Years				6.25 Years				7.2 Years
Increase over average GAAP rents in prior year			12.9%				11.8%				8.0%
Average free rent			3 Months				3 Months				3 Months
Tenant Improvements		$	15.97			$	16.40			$	18.25
Leasing Costs		$	5.80			$	7.66			$	8.48

 

 

 

 

 

				Rentable				Annualized		Percentage
		Number of		Square				Rent		of Total
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
2015		44	(b)	218,762		$         6,452,857		$            29.50		2.9%		2.9%
2016		74		1,084,573		22,883,620		21.10		10.2%		13.1%
2017		77		1,122,704		32,850,890		29.26		14.6%		27.7%
2018		70		956,527		30,112,401		31.48		13.4%		41.1%
2019		64		1,485,457		41,151,089		27.70		18.3%		59.4%
2020		55		841,461		21,526,151		25.58		9.6%		69.0%
2021		22		783,673		18,588,678		23.72		8.2%		77.2%
2022		25		998,198		28,239,300		28.29		12.5%		89.7%
2023 and thereafter		35		1,245,938	(c)	23,115,313		18.55		10.3%		100.0%
		466		8,737,293		$     224,920,300		$            25.74		100.0%
Vacancies as of 6/30/15				902,447
Total Portfolio Square Footage				9,639,740

 

(a)

Annualized rent represents the monthly rent, including tenant reimbursements, for each lease in effect at June 30, 2015 mulitplied by 12. Tenant reimbursements generally include payment of real estate taxes, operating expenses and common area maintenance and utility charges.

 

(b)

Includes 17 leases that are month-to-month.

 

(c)

Includes 62,170 square feet that are non-revenue producing building amenities.

 

 

(in thousands)										Six Months
		For the Three Months Ended								Ended
		31-Mar-15				30-Jun-15				30-Jun-15
Tenant improvements		$	2,936			$	3,420			$	6,356
Deferred leasing costs			830				1,539				2,369
Non-investment capex			643				1,418				2,061
Recurring Capital Expenditures			4,409				6,377				10,786
1st generation leasing			1,934				712				2,646
Investment capex			230				243				473
Total Capital Expenditures		$	6,573			$	7,332			$	13,905

 

		For the Three Months Ended																Year ended
		31-Mar-14				30-Jun-14				30-Sep-14				31-Dec-14				31-Dec-14
Tenant improvements		$	1,132			$	1,837			$	2,612			$	4,244			$	9,825
Deferred leasing costs			1,080				2,786				577				1,405				5,848
Non-investment capex			364				1,621				700				851				3,536
Recurring Capital Expenditures			2,576				6,244				3,889				6,500				19,209
1st generation leasing			33				9				394				580				1,016
Investment capex			755				580				244				516				2,095
Total Capital Expenditures		$	3,364			$	6,833			$	4,527			$	7,596			$	22,320

 

 

Recent Acquisitions:							Purchase Price
	City	State	Square Feet		Date Acquired		(in thousands)
2015
Two Ravinia	Atlanta	GA	442,130		4/8/15		$          78,000
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
Recent Dispositions:
							Gross Sales		Gains
	City	State	Square Feet		Date Sold		Proceeds		on Sales
2015
Willow Bend	Plano	TX	117,050		2/23/15		$          20,750		$          1,462
Eden Bluff	Eden Prairie	MN	153,028		3/31/15		28,000		9,000
Park Seneca	Charlotte	NC	109,699		5/13/15		8,150		948
2014
Centennial	Colorado Springs	CO	110,405		12/3/14		$          15,500		$             940
2013
East Renner Road	Richardson	TX	122,300		10/29/13		$          12,475		$          2,169

 

 

(dollars in thousands)			Maximum	Amount			Interest
		Maturity	Amount	Drawn at	Interest	Draw	Rate at
Sponsored REIT	Location	Date	of Loan	30-Jun-15	Rate (1)	Fee (2)	30-Jun-15
Secured revolving lines of credit
FSP Satellite Place Corp.	Duluth, GA	31-Mar-17	$     5,500	$      5,500	L+4.4%	0.5%	4.58%
FSP 1441 Main Street Corp.	Columbia, SC	31-Mar-16	10,800	9,000	L+4.4%	0.5%	4.58%
FSP Energy Tower I Corp.	Houston, TX	30-Jun-17	20,000	8,600	L+5.0%	0.5%	5.18%
Secured construction loan
FSP 385 Interlocken
Development Corp.	Broomfield, CO	30-Apr-16	42,000	37,541	L+4.4%	n/a	4.58%
Mortgage loan secured by property
FSP Energy Tower I Corp.	Houston, TX	30-Jun-17	33,000	33,000	6.41%	n/a	6.41%
			$ 111,300	$    93,641

 

(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.

 

 

 

 

 

 

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.

 

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 Property Net Operating Income (Property 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 (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. The information presented includes footnotes and the data is shown by region with properties owned in both periods, which we call Same Store. The Comparative Same Store results include properties held for the periods presented and exclude 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 as an indication of our performance or to cash flows as a measure of the Company's liquidity or its ability to make distributions.

 

 

 

Definition of Adjusted Funds From Operations (AFFO)

 

The Company defines AFFO as the sum of (1) FFO; (2) excluding our proportionate share of FFO and including distributions received, from non-consolidated REITs; (3) excluding the effect of straight-line rent; (4) plus deferred financing costs, (5) less recurring capital expenditures that are generally for (a) 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 (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.

 

 

 

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

 

 

 

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

 

www.franklinstreetproperties.com