PRESS RELEASE

Franklin Street Properties Corp.

Contact: Georgia Touma   (877) 686-9496

For Immediate Release

·

FFO was $26.3 million and $111.4 million or $0.25 and $1.04 per basic and diluted share for the fourth  quarter and year ended December 31, 2017, respectively.  We had a  Net Loss of $4.9 million and $15.9 million or $0.05 and $0.15 per basic and diluted share for the fourth quarter and year ended December 31, 2017, respectively.        

·

Adjusted Funds From Operations (AFFO) was $0.12 per and $0.62 per basic and diluted share for the fourth quarter and year ended December 31, 2017, respectively.    

·

On October 18, 2017, we recast our credit facility with Bank of America, N.A., as administrative agent, to, among other things, (i) increase the borrowing capacity of the revolving line of credit from $500 million to $600 million, (ii) extend the maturity date applicable to the revolving line of credit from October 29, 2018 to January 12, 2022 (with two optional six month extensions), (iii) extend the maturity date applicable to the term loan from September 27, 2021 to January 12, 2023, (iv) modify certain financial covenants, including a reset of minimum tangible net worth, and (v) increase the accordion feature from $350 million to $500 million.  Pricing on the borrowing spread decreased by five basis points for the revolving line of credit and by ten basis points for the term loan.  We also simultaneously amended our term loan with Bank of Montreal, as administrative agent, and our term loan with JPMorgan Chase Bank, N.A., as administrative agent, to conform the financial covenants and certain other provisions.  Additional information on these transactions can be found in a Current Report on Form 8-K that the Company filed with the U.S. Securities and Exchange Commission (“SEC”) on October 24, 2017.

·

On October 24, 2017, we entered into a note purchase agreement relating to a private placement of $200 million in an aggregate principal amount of unsecured senior notes, consisting of $116 million in aggregate principal amount of 3.99% Series A Senior Notes with a 7-year maturity and $84 million in aggregate principal amount of 4.26% Series B Senior Notes with a 10-year maturity.    On December 20, 2017, we closed the private placement and used the proceeds to reduce the outstanding balance on our revolving line of credit.  Additional information on this transaction can be found in a Current Report on Form 8-K that the Company filed with the SEC on October 24, 2017.

·

On October 25, 2017, Moody’s Investors Service assigned a Baa3 rating to our above-described $200 million unsecured senior notes and affirmed our issuer rating at Baa3 with a stable outlook. 

·

Our directly owned real estate portfolio of 34 properties totaling approximately 9.8 million square feet was approximately 89.7% leased as of December 31, 2017, which was a 1.0% increase compared to September 30, 2017.    The increase was attributable to leasing achieved during the quarter.     

·

During the year ended December 31,  2017, we leased approximately 1,471,000 square feet, of which approximately 460,000 square feet was with new tenants.     

·

Fourth quarter 2017 leasing activity was the strongest of the year to date.  We leased approximately 535,000 square feet, of which approximately 253,000 square feet was with new tenants. In the second half of 2017, we leased a total of 995,000 square feet. 

·

Weighted average annualized GAAP rent per square foot was approximately $28.87 as of December  31, 2017, compared to $27.92 as of December 31, 2016, $26.93 as of December 31, 2015, and $26.04 as of December 31, 2014.  We believe that the increase is attributable to the enhanced quality of our real estate portfolio and value creation derived from our recent acquisitions, dispositions and leasing.

·

Our project at 801 Marquette Avenue provides a contemporary, forward-looking experience in a vintage warehouse style office with modern systems and market leading amenities in the heart of the

Minneapolis CBD. The redevelopment of 801 Marquette has led to approximately 40 prospect tours representing in excess of 1.1 million square feet across all industries.  Over the past six months, we have been negotiating with potential tenants representing approximately 270,000 square feet. We expect Marquette to be substantially leased by year end 2018 and stabilized in the third quarter of 2019.  

·

On October 20, 2017, we sold a property located in Baltimore, Maryland that had been previously classified as an asset held for sale, and received approximately $31.6 million in net proceeds, which were used to reduce the outstanding balance on our revolving line of credit.        

·

We continue to selectively evaluate potential non-core property dispositions when appropriate values/pricing are achieved.

·

We continue to evaluate new potential acquisition opportunities within our five core markets.    

Q1 2018 Range

Full Year 2018 Range

Low

High

Low

High

Net income (loss) per share

$

(0.02)

$

0.00

$

0.02

$

0.06

GAAP loss from non-consolidated REITs

0.00

0.00

0.00

0.00

FFO from non-consolidated REITs

0.01

0.01

0.04

0.04

Depreciation & Amortization

0.23

0.23

0.90

0.90

Funds From Operations per share

$

0.22

$

0.24

$

0.96

$

1.00

Franklin Street Properties Corp. Financial Results

A-C

Real Estate Portfolio Summary Information

D

Portfolio and Other Supplementary Information

E

Percentage of Leased Space

F

Largest 20 Tenants – FSP Owned Portfolio

G

Reconciliation and Definitions of Funds From Operations (FFO) and Adjusted

Funds From Operations (AFFO)

H

Reconciliation and Definition of Sequential Same Store results to Property Net

Operating Income (NOI) and Net Income (Loss)

I

For the

For the

Three Months Ended

Year Ended

December 31,

December 31,

(in thousands, except per share amounts)

2017

2016

2017

2016

Revenue:

Rental

$

65,555

$

64,611

$

267,265

$

244,349

Related party revenue:

Management fees and interest income from loans

1,271

1,357

5,285

5,465

Other

 9

20

38

74

Total revenue

66,835

65,988

272,588

249,888

Expenses:

Real estate operating expenses

18,720

18,209

71,212

65,335

Real estate taxes and insurance

9,961

10,618

45,841

40,140

Depreciation and amortization

25,659

24,957

101,258

93,052

General and administrative

3,665

3,683

13,471

14,126

Interest

8,657

6,931

32,387

26,548

Total expenses

66,662

64,398

264,169

239,201

Income before equity in losses of non-consolidated REITs,

other, gain (loss) on sale of properties and properties held for sale,

less applicable income tax and taxes

173

1,590

8,419

10,687

Equity in losses of non-consolidated REITs

(2,885)

(263)

(3,604)

(831)

Other

(2,096)

2,266

(1,878)

1,878

Gain (loss) on sale of properties and properties held for sale,

less applicable income tax

(21)

(1,772)

(18,481)

(2,938)

Income (loss) before taxes on income

(4,829)

1,821

(15,544)

8,796

Taxes on income

103

92

400

418

Net income (loss)

$

(4,932)

$

1,729

$

(15,944)

$

8,378

Weighted average number of shares outstanding,  basic and diluted

107,231

107,231

107,231

102,843

Net income (loss) per share, basic and diluted

$

(0.05)

$

0.02

$

(0.15)

$

0.08

December 31,

December 31,

(in thousands, except share and par value amounts)

2017

2016

Assets:

Real estate assets:

Land

$

191,578

$

196,178

Buildings and improvements

1,811,631

1,822,183

Fixtures and equipment

5,614

4,136

2,008,823

2,022,497

Less accumulated depreciation

376,131

337,228

Real estate assets, net

1,632,692

1,685,269

Acquired real estate leases, less accumulated amortization of $109,771 and $112,441, respectively

86,520

125,491

Investment in non-consolidated REITs

70,164

75,165

Asset held for sale

 —

3,871

Cash and cash equivalents

9,773

9,335

Restricted cash

46

31

Tenant rent receivables, less allowance for doubtful accounts of $250 and $100, respectively

3,123

3,113

Straight-line rent receivable, less allowance for doubtful accounts of $50 and $50, respectively

53,194

50,930

Prepaid expenses and other assets

8,387

5,231

Related party mortgage loan receivables

71,720

81,780

Other assets: derivative asset

13,925

12,907

Office computers and furniture, net of accumulated depreciation of $1,420 and $1,277, respectively

289

313

Deferred leasing commissions, net of accumulated amortization of $22,276 and $18,301, respectively

40,679

34,697

Total assets

$

1,990,512

$

2,088,133

Liabilities and Stockholders’ Equity:

Liabilities:

Bank note payable

$

78,000

$

280,000

Term loans payable, less unamortized financing costs of $5,099 and $4,783, respectively

764,901

765,217

Series A & Series B Senior Notes, less unamortized financing costs of $1,308

198,692

 —

Accounts payable and accrued expenses

61,039

57,259

Accrued compensation

3,641

3,784

Tenant security deposits

5,383

5,355

Other liabilities: derivative liabilities

1,759

5,551

Acquired unfavorable real estate leases, less accumulated amortization of $7,638 and $8,422, respectively

5,805

8,923

Total liabilities

1,119,220

1,126,089

Commitments and contingencies

Stockholders’ Equity:

Preferred stock, $.0001 par value, 20,000,000 shares authorized, none issued or outstanding

                 -

                 -

Common stock, $.0001 par value, 180,000,000 shares authorized, 107,231,155 and 107,231,155 shares issued and outstanding, respectively

11

11

Additional paid-in capital

1,356,457

1,356,457

Accumulated other comprehensive loss

12,166

5,478

Accumulated distributions in excess of accumulated earnings

(497,342)

(399,902)

Total stockholders’ equity

871,292

962,044

Total liabilities and stockholders’ equity

$

1,990,512

$

2,088,133

For the

Year Ended

December 31,

(in thousands)

2017

2016

Cash flows from operating activities:

Net income (loss)

$

(15,944)

$

8,378

Adjustments to reconcile net income or loss to net cash provided by operating activities:

Depreciation and amortization expense

103,743

95,243

Amortization of above and below market leases

(1,031)

(496)

Equity in losses of non-consolidated REITs

3,604

831

Hedge ineffectiveness

1,878

(1,878)

(Gain) loss on sale of properties and properties held for sale, less applicable income tax

18,481

2,938

Increase in allowance for doubtful accounts

150

(30)

Changes in operating assets and liabilities:

Restricted cash

(15)

(8)

Tenant rent receivables

(160)

(185)

Straight-line rents

(1,767)

(1,977)

Lease acquisition costs

(2,052)

(1,095)

Prepaid expenses and other assets

(403)

(721)

Accounts payable, accrued expenses and other items

3,870

5,751

Accrued compensation

(143)

58

Tenant security deposits

28

526

Payment of deferred leasing commissions

(14,309)

(12,965)

Net cash provided by operating activities

95,930

94,370

Cash flows from investing activities:

Property acquisitions

 —

(221,119)

Acquired real estate leases

 —

(51,509)

Property improvements, fixtures and equipment

(54,187)

(37,407)

Office computers and furniture

(119)

(83)

Distributions in excess of earnings from non-consolidated REITs

1,396

1,023

Repayment of related party mortgage loan receivable

10,060

39,861

Investment in related party mortgage loan receivable

 —

(3,000)

Proceeds received on sales of real estate assets

37,756

27,262

Net cash used in investing activities

(5,094)

(244,972)

Cash flows from financing activities:

Distributions to stockholders

(81,496)

(77,481)

Proceeds from equity offering

 —

83,511

Offering costs

 —

(609)

Borrowings under bank note payable

75,000

175,000

Repayments of bank note payable

(277,000)

(185,000)

Borrowing of Series A & Series B Senior Notes

200,000

 —

Borrowing of term loan payable

 —

150,000

Deferred financing costs

(6,902)

(3,647)

Net cash provided by (used in) financing activities

(90,398)

141,774

Net increase (decrease) in cash and cash equivalents

438

(8,828)

Cash and cash equivalents, beginning of year

9,335

18,163

Cash and cash equivalents, end of period

$

9,773

$

9,335

Commercial portfolio lease expirations (1)

Total

% of

Year

Square Feet

Portfolio

2018

1,038,265

2019

1,207,011

2020

871,386

2021

835,063

2022

1,217,165

Thereafter (2)

4,593,094

9,761,984

(1)

Percentages are determined based upon total square footage.   

(2)

Includes 1,006,890 square feet of current vacancies.

(dollars & square feet in 000's)

As of December 31, 2017

# of

% of

Square

% of

State

Properties

Investment

Portfolio

Feet

Portfolio

Colorado

 6

$

540,638

2,608

Texas

 9

348,988

2,417

Georgia

 5

324,615

1,967

Minnesota (a)

 2

94,552

620

Virginia

 4

86,765

685

North Carolina

 2

52,124

322

Missouri

 2

49,397

352

Illinois

 2

45,518

373

Florida

 1

38,963

213

Indiana

 1

30,438

205

Total

34

$

1,611,998

9,762

(a)

Excludes approximately $20,694, which is our investment in a property that was redeveloped and is classified as non-operating.       

(in thousands)

For the Three Months Ended

Year Ended

31-Mar-17

30-Jun-17

30-Sep-17

31-Dec-17

31-Dec-17

Tenant improvements

$

6,474

$

5,363

$

4,474

$

4,166

$

20,477

Deferred leasing costs

1,579

1,963

4,482

5,869

13,893

Non-investment capex

1,670

1,685

1,860

3,836

9,051

$

9,723

$

9,011

$

10,816

$

13,871

$

43,421

For the Three Months Ended

Year Ended

31-Mar-16

30-Jun-16

30-Sep-16

31-Dec-16

31-Dec-16

Tenant improvements

$

1,929

$

1,329

$

3,325

$

7,885

$

14,468

Deferred leasing costs

1,613

4,966

2,247

3,783

12,609

Non-investment capex

438

1,052

2,211

1,842

5,543

$

3,980

$

7,347

$

7,783

$

13,510

$

32,620

Square foot & leased percentages

December 31,

December 31,

2017

2016

Owned portfolio of commercial real estate

Number of properties (a)

34

36

Square feet

9,761,984

10,163,615

Leased percentage

Investments in non-consolidated REITs

Number of properties

 2

 2

Square feet

1,396,071

1,396,071

Leased percentage

Single Asset REITs (SARs) managed

Number of properties

 4

 5

Square feet

810,278

1,075,135

Leased percentage

Total owned, investments & managed properties

Number of properties

40

43

Square feet

11,968,333

12,634,821

Leased percentage

(a)

Excludes one property that was redeveloped and is classified as non-operating. 

Square

% Leased

% Interest

Single Asset REIT name

City

State

Feet

31-Dec-17

Held

FSP 303 East Wacker Drive Corp.

Chicago

IL

861,000

FSP Grand Boulevard Corp.

Kansas City

MO

535,071

1,396,071

Third

Fourth

% Leased (1)

Quarter

% Leased (1)

Quarter

as of

Average %

as of

Average %

Property Name

Location

Square Feet

30-Sep-17

Leased (2)

31-Dec-17

Leased (2)

1

FOREST PARK

Charlotte, NC

62,212

2

MEADOW POINT

Chantilly, VA

138,537

3

TIMBERLAKE

Chesterfield, MO

234,496

4

TIMBERLAKE EAST

Chesterfield, MO

117,036

5

NORTHWEST POINT

Elk Grove Village, IL

177,095

6

PARK TEN

Houston, TX

157,460

7

PARK TEN PHASE II

Houston, TX

156,746

8

GREENWOOD PLAZA

Englewood, CO

196,236

9

ADDISON

Addison, TX

288,794

10

COLLINS CROSSING

Richardson, TX

300,887

11

INNSBROOK

Glen Allen, VA

298,456

12

RIVER CROSSING

Indianapolis, IN

205,059

13

LIBERTY PLAZA

Addison, TX

218,934

14

380 INTERLOCKEN

Broomfield, CO

240,358

15

390 INTERLOCKEN

Broomfield, CO

241,751

16

BLUE LAGOON

Miami, FL

212,619

17