FRANKLIN STREET PROPERTIES CORP /MA/ - FORM 8-K - EX-99.2

Attached files

file	filename
EX-99.1 - EX-99.1 - FRANKLIN STREET PROPERTIES CORP /MA/	ex-99d1.htm
8-K - 8-K - FRANKLIN STREET PROPERTIES CORP /MA/	f8-k.htm

Exhibit 99.2

Franklin Street Properties

Supplemental Operating

and Financial Data

Fourth Quarter 2017

Franklin Street Properties Corp.

401 Edgewater Place | Wakefield, Massachusetts 01880

781.557.1300 | www.fspreit.com

Table of Contents


	Page		Page

Company Information	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, which are detailed from time to time in FSP’s reports filed with the Securities and Exchange Commission. FSP assumes no obligation to update or supplement forward-looking statements that become untrue because of subsequent events.

		Rendering of 801 Marquette: Perkins + Will

December 31, 2017| Page 2


	Company Information

Overview		Snapshot (as of December 31, 2017)
Franklin Street Properties Corp. (“FSP”, “we”, “our” or the “Company”) (NYSE American: 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 five core 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.		Corporate Headquarters	Wakefield, MA
		Fiscal Year-End	31-Dec
		Total Properties	34
		Total Square Feet	9.8 Million
		Trading Symbol	FSP
		Exchange	NYSE American
		Common Shares Outstanding	107,231,155
		Quarterly Dividend	$0.19
Our Business		Dividend Yield	7.1%
As of December 31, 2017, the Company owned and operated a portfolio of real estate consisting of 34 properties, one property that has been redeveloped and is classified as non-operating and six managed Sponsored REITs, and held four promissory notes secured by mortgages on real estate owned by Sponsored REITs. From time-to-time, the Company may acquire, develop or redevelop 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.		Total Market Capitalization	$2.2 Billion*
		Insider Holdings	4.0%


Management Team

George J. Carter	Jeffrey B. Carter
Chief Executive Officer and	President and Chief Investment
Chairman of the Board	Officer

John G. Demeritt	Scott H. Carter
Executive Vice President, Chief	Executive Vice President, General
Financial Officer and Treasurer	Counsel and Secretary

John F. Donahue	Eriel Anchondo
Executive Vice President	Executive Vice President and Chief Operating Officer	Dominion Towers, Denver, CO

Inquiries
Inquiries should be directed to: Georgia Touma
877.686.9496 or InvestorRelations@fspreit.com * Total Market Capitalization is the closing share price multiplied by the number of shares outstanding plus total debt outstanding.

December 31, 2017| Page 3


	Summary of Financial Highlights


(in thousands except per share amounts, SF & number of properties)
	31-Dec-17		30-Sep-17		30-Jun-17		31-Mar-17		31-Dec-16
Income Items:
Rental revenue	$	65,555	$	67,339	$	66,995	$	67,376	$	64,611
Total revenue		66,835		68,626		68,371		68,756		65,988
Adjusted EBITDA*		34,033		35,354		35,525		35,036		32,823
Equity in losses of non-consolidated REITs		(2,885)		(121)		(201)		(397)		(263)
Net income (loss)		(4,932)		1,903		(17,395)		4,480		1,729
FFO*		26,347		27,991		28,571		28,528		26,907

Per Share Data:
EPS	$	(0.05)	$	0.02	$	(0.16)	$	0.04	$	0.02
FFO*	$	0.25	$	0.26	$	0.27	$	0.27	$	0.25
Weighted Average Shares (diluted)		107,231		107,231		107,231		107,231		107,231
Closing share price	$	10.74	$	10.62	$	11.08	$	12.14	$	12.96
Dividend	$	0.19	$	0.19	$	0.19	$	0.19	$	0.19
Payout Ratio:		77%		73%		71%		71%		76%

Balance Sheet Items:
Real estate, net	$	1,632,692	$	1,635,706	$	1,640,551	$	1,686,154	$	1,685,269
Other assets, net		357,820		395,979		402,016		392,132		402,864
Total assets, net		1,990,512		2,031,685		2,042,567		2,078,286		2,088,133
Total liabilities, net		1,119,220		1,142,299		1,134,723		1,130,263		1,126,089
Shareholders' equity		871,292		889,386		907,844		948,023		962,044

Market Capitalization and Debt:
Total Market Capitalization (a)	$	2,199,663	$	2,208,795	$	2,253,121	$	2,366,786	$	2,439,716
Total debt outstanding (excluding unamortized financing costs)		1,048,000		1,070,000		1,065,000		1,065,000		1,050,000
Debt to Total Market Capitalization		47.6%		48.4%		47.3%		45.0%		43.0%
Net Debt to Adjusted EBITDA*		7.6		7.5		7.4		7.5		7.6

Owned Portfolio Leasing Statistics (b):
Owned portfolio assets		34		35		35		35		36
Portfolio total SF		9,761,984		10,085,889		10,084,710		10,118,112		10,163,615
Portfolio % leased		89.7%		88.7%		88.1%		89.6%		89.3%

(a)

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

(b)

For periods in 2016 and 2017, excludes one property that was redeveloped and is classified as non-operating, which is located in Minneapolis, Minnesota.

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

December 31, 2017| Page 4

Condensed Consolidated Income Statements

($ in thousands, except per share amounts)


									Year										For the
	Three Months Ended								Ended		For the Three Months Ended								Year Ended
	31-Mar-17		30-Jun-17		30-Sep-17		31-Dec-17		31-Dec-17		31-Mar-16		30-Jun-16		30-Sep-16		31-Dec-16		31-Dec-16

Revenue:
Rental	$	67,376	$	66,995	$	67,339	$	65,555	$	267,265	$	58,360	$	59,453	$	61,925	$	64,611	$	244,349
Related party revenue:
Management fees and interest income from loans		1,370		1,366		1,278		1,271		5,285		1,433		1,337		1,338		1,357		5,465
Other		10		10		9		9		38		20		17		17		20		74
Total revenue		68,756		68,371		68,626		66,835		272,588		59,813		60,807		63,280		65,988		249,888

Expenses:
Real estate operating expenses		17,308		17,286		17,898		18,720		71,212		15,292		14,929		16,905		18,209		65,335
Real estate taxes and insurance		12,403		11,595		11,882		9,961		45,841		9,150		10,154		10,218		10,618		40,140
Depreciation and amortization		25,332		25,279		24,988		25,659		101,258		22,445		22,352		23,298		24,957		93,052
General and administrative		3,443		3,077		3,286		3,665		13,471		3,530		3,494		3,419		3,683		14,126
Interest		7,579		7,893		8,258		8,657		32,387		6,433		6,417		6,767		6,931		26,548
Total expenses		66,065		65,130		66,312		66,662		264,169		56,850		57,346		60,607		64,398		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		2,691		3,241		2,314		173		8,419		2,963		3,461		2,673		1,590		10,687
Equity in losses of non-consolidated REITs		(397)		(201)		(121)		(2,885)		(3,604)		(286)		(86)		(196)		(263)		(831)
Other		22		129		67		(2,096)		(1,878)		—		(1,009)		621		2,266		1,878
Gain (loss) on sale of properties and provision for loss on properties held for sale, less applicable income tax		2,289		(20,492)		(257)		(21)		(18,481)		—		(643)		(523)		(1,772)		(2,938)

Income (loss) before taxes on income		4,605		(17,323)		2,003		(4,829)		(15,544)		2,677		1,723		2,575		1,821		8,796
Income tax expense		125		72		100		103		400		98		111		117		92		418

Net income (loss)	$	4,480	$	(17,395)	$	1,903	$	(4,932)	$	(15,944)	$	2,579	$	1,612	$	2,458	$	1,729	$	8,378

Weighted average number of shares outstanding, basic and diluted		107,231		107,231		107,231		107,231		107,231		100,187		100,187		103,709		107,231		102,843

Net income (loss) per share, basic and diluted	$	0.04	$	(0.16)	$	0.02	$	(0.05)	$	(0.15)	$	0.03	$	0.02	$	0.02	$	0.02	$	0.08

December 31, 2017| Page 5

$ in thousands, except per share amounts)

Condensed Consolidated Balance Sheets

(in thousands)


	March 31,		June 30,		September 30,		December 31,		March 31,		June 30,		September 30,		December 31,
	2017		2017		2017		2017		2016		2016		2016		2016
Assets:
Real estate assets:
Land	$	196,178	$	191,578	$	191,578	$	191,578	$	168,120	$	172,205	$	177,505	$	196,178
Buildings and improvements		1,836,073		1,792,784		1,800,831		1,811,631		1,625,819		1,667,507		1,713,296		1,822,183
Fixtures and equipment		4,600		4,841		5,017		5,614		2,649		2,771		3,205		4,136
		2,036,851		1,989,203		1,997,426		2,008,823		1,796,588		1,842,483		1,894,006		2,022,497
Less accumulated depreciation		350,697		348,652		361,720		376,131		309,307		315,547		326,485		337,228
Real estate assets, net		1,686,154		1,640,551		1,635,706		1,632,692		1,487,281		1,526,936		1,567,521		1,685,269

Acquired real estate leases, net		115,471		105,811		96,282		86,520		99,102		104,350		102,226		125,491
Investment in non-consolidated REITs		74,423		73,876		73,405		70,164		76,707		76,289		75,761		75,165
Asset held for sale		—		31,868		31,615		—		15,921		9,275		8,893		3,871
Cash and cash equivalents		11,143		11,537		12,647		9,773		14,316		7,524		13,372		9,335
Restricted cash		31		86		63		46		10		3		48		31
Tenant rent receivables, net		3,785		4,706		3,990		3,123		3,691		3,268		3,331		3,113
Straight-line rent receivable, net		52,304		51,590		52,272		53,194		49,696		50,196		50,742		50,930
Prepaid expenses and other assets		4,946		5,124		6,282		8,387		5,943		5,875		6,460		5,231
Related party mortgage loan receivable		81,515		72,250		71,985		71,720		79,575		79,310		79,045		81,780
Other assets: derivative asset		13,603		11,333		10,771		13,925		—		—		—		12,907
Office computers and furniture, net of accumulated depreciation		275		287		319		289		438		385		370		313
Deferred leasing commissions, net		34,636		33,548		36,348		40,679		28,705		32,006		32,676		34,697
Total assets	$	2,078,286	$	2,042,567	$	2,031,685	$	1,990,512	$	1,861,385	$	1,895,417	$	1,940,445	$	2,088,133

Liabilities and Stockholders’ Equity:
Liabilities:
Bank note payable	$	295,000	$	295,000	$	300,000	$	78,000	$	265,000	$	310,000	$	278,000	$	280,000
Term loan payable, net of unamortized financing costs		765,539		765,861		766,183		764,901		617,880		618,113		615,636		765,217
Series A & Series B Senior Notes		—		—		—		198,692		—		—		—		—
Accounts payable and accrued expenses		50,529		55,241		57,593		61,039		37,791		41,498		53,964		57,259
Accrued compensation		1,259		1,929		3,000		3,641		1,274		2,170		3,238		3,784
Tenant security deposits		5,441		5,367		5,431		5,383		4,433		4,693		4,719		5,355
Other liabilities: derivative liabilities		4,351		4,364		3,721		1,759		13,226		14,913		12,651		5,551
Acquired unfavorable real estate leases, net		8,144		6,961		6,371		5,805		8,697		9,047		9,289		8,923
Total liabilities		1,130,263		1,134,723		1,142,299		1,119,220		948,301		1,000,434		977,497		1,126,089

Commitments and contingencies

Stockholders’ Equity:
Preferred stock		-		-		-		-		-		-		-		-
Common stock		11		11		11		11		10		10		11		11
Additional paid-in capital		1,356,457		1,356,457		1,356,457		1,356,457		1,273,556		1,273,556		1,356,457		1,356,457
Accumulated other comprehensive income (loss)		7,351		4,940		4,954		12,166		(13,226)		(13,904)		(12,263)		5,478
Accumulated distributions in excess of accumulated earnings		(415,796)		(453,564)		(472,036)		(497,342)		(347,256)		(364,679)		(381,257)		(399,902)
Total stockholders’ equity		948,023		907,844		889,386		871,292		913,084		894,983		962,948		962,044
Total liabilities and stockholders’ equity	$	2,078,286	$	2,042,567	$	2,031,685	$	1,990,512	$	1,861,385	$	1,895,417	$	1,940,445	$	2,088,133

December 31, 2017| Page 6

Condensed Consolidated Statements of Cash Flows

(in thousands)


	Twelve Months Ended December 31,
	2017		2016		2015
Cash flows from operating activities:
Net income (loss)	$	(15,944)	$	8,378	$	35,014
Adjustments to reconcile net income or loss to net cash provided by operating activities:
Depreciation and amortization expense		103,743		95,243		93,426
Amortization of above and below market leases		(1,031)		(496)		(158)
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		(23,662)
Equity in earnings (losses) from non-consolidated REITs		3,604		831		1,451
Increase (decrease) in allowance for doubtful accounts		150		(30)		(195)
Changes in operating assets and liabilities:
Restricted cash		(15)		(8)		719
Tenant rent receivables		(160)		(185)		2,030
Straight-line rents		(1,767)		(1,977)		(2,448)
Lease acquisition costs		(2,052)		(1,095)		(1,487)
Prepaid expenses and other assets		(403)		(721)		422
Accounts payable and accrued expenses		3,870		5,751		5,505
Accrued compensation		(143)		58		(32)
Tenant security deposits		28		526		581
Payment of deferred leasing commissions		(14,309)		(12,965)		(8,276)
Net cash provided by operating activities		95,930		94,370		102,890

Cash flows from investing activities:
Property acquisitions		—		(221,119)		(66,104)
Acquired real estate leases		—		(51,509)		(10,604)
Property improvements, fixtures and equipment		(54,306)		(37,490)		(21,929)
Distributions in excess of earnings from non-consolidated REITs		1,396		1,023		107
Investment in related party mortgage loan receivable		—		(3,000)		(25,000)
Repayment of related party mortgage loan receivable		10,060		39,861		—
Proceeds received on sales of real estate assets		37,756		27,262		85,426
Net cash used in investing activities		(5,094)		(244,972)		(38,104)

Cash flows from financing activities:
Distributions to stockholders		(81,496)		(77,481)		(76,142)
Proceeds (costs) from equity offering, net		—		82,902		—
Borrowings under bank note payable		75,000		175,000		110,000
Repayments of bank note payable		(277,000)		(185,000)		(88,000)
Borrowing from 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		(54,142)
Net increase (decrease) in cash and cash equivalents		438		(8,828)		10,644
Cash and cash equivalents, beginning of period		9,335		18,163		7,519
Cash and cash equivalents, end of period	$	9,773	$	9,335	$	18,163

December 31, 2017| Page 7

Property Net Operating Income (NOI)* with

Same Store Comparison (in thousands)


	Rentable									Year										Year
	Square Feet	Three Months Ended								Ended		Three Months Ended								Ended		Inc		%
(in thousands)	or RSF	31-Mar-17		30-Jun-17		30-Sep-17		31-Dec-17		31-Dec-17		31-Mar-16		30-Jun-16		30-Sep-16		31-Dec-16		31-Dec-16		(Dec)		Change
Region
East	1,007	$	3,917	$	3,941	$	3,926	$	3,917	$	15,701	$	3,944	$	3,920	$	3,954	$	3,863	$	15,681	$	20	0.1	%
MidWest	1,224		3,017		2,479		2,989		3,636		12,121		2,958		3,102		2,974		2,882		11,916		205	1.7	%
South	4,436		16,211		15,613		15,763		15,323		62,910		17,200		17,441		16,380		16,483		67,504		(4,594)	(6.8)	%
West	2,010		8,189		8,999		8,519		8,613		34,320		8,190		8,355		7,926		7,688		32,159		2,161	6.7	%
Same Store	8,677		31,334		31,032		31,197		31,489		125,052		32,292		32,818		31,234		30,916		127,260		(2,208)	(1.7)	%

Acquisitions	1,085		4,914		5,325		5,073		4,888		20,200		—		166		1,893		2,911		4,970		15,230	11.6	%
Property NOI* from the continuing portfolio	9,762		36,248		36,357		36,270		36,377		145,252		32,292		32,984		33,127		33,827		132,230		13,022	9.9	%
Dispositions, Non-Operating, Development or Redevelopment	-		625		467		568		(77)		1,583		1,175		925		917		867		3,884		(2,301)	(2.0)	%
Property NOI*	9,762	$	36,873	$	36,824	$	36,838	$	36,300	$	146,835	$	33,467	$	33,909	$	34,044	$	34,694	$	136,114	$	10,721	7.9	%

Same Store		$	31,334	$	31,032	$	31,197	$	31,489	$	125,052	$	32,292	$	32,818	$	31,234	$	30,916	$	127,260	$	(2,208)	(1.7)	%

Less Nonrecurring
Items in NOI* (a)			65		1,178		1,103		914		3,260		413		586		146		502		1,647		1,613	(1.3)	%

Comparative
Same Store		$	31,269	$	29,854	$	30,094	$	30,575	$	121,792	$	31,879	$	32,232	$	31,088	$	30,414	$	125,613	$	(3,821)	(3.0)	%

(a)

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

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

December 31, 2017| Page 8

FFO* & AFFO* Reconciliation

(in thousands, except per share amounts)


									Year										Year
	Three Months Ended								Ended		Three Months Ended								Ended
	31-Mar-17		30-Jun-17		30-Sep-17		31-Dec-17		31-Dec-17		31-Mar-16		30-Jun-16		30-Sep-16		31-Dec-16		31-Dec-16

Net income (loss)	$	4,480	$	(17,395)	$	1,903	$	(4,932)	$	(15,944)	$	2,579	$	1,612	$	2,458	$	1,729	$	8,378

(Gain) loss on sale of properties and properties held for sale, less applicable income tax		(2,289)		20,492		257		21		18,481		—		643		523		1,772		2,938
GAAP income from non-consolidated REITs		397		201		121		2,885		3,604		286		86		196		263		831
FFO from non-consolidated REITs		791		800		874		708		3,173		645		895		787		714		3,041
Depreciation & amortization		25,163		24,592		24,903		25,569		100,227		22,527		22,352		23,112		24,565		92,556
NAREIT FFO*		28,542		28,690		28,058		24,251		109,541		26,037		25,588		27,076		29,043		107,744
Hedge ineffectiveness		(22)		(129)		(67)		2,096		1,878		—		1,009		(621)		(2,266)		(1,878)
Acquisition costs		8		10		—		—		18		—		134		215		130		479
Funds From Operations (FFO)*	$	28,528	$	28,571	$	27,991	$	26,347	$	111,437	$	26,037	$	26,731	$	26,670	$	26,907	$	106,345


Adjusted Funds From Operations (AFFO)*
Funds From Operations (FFO)*	$	28,528	$	28,571	$	27,991	$	26,347	$	111,437	$	26,037	$	26,731	$	26,670	$	26,907	$	106,345
Reverse FFO from non-consolidated REITs		(791)		(800)		(874)		(708)		(3,173)		(645)		(895)		(787)		(714)		(3,041)
Distributions from non-consolidated REITs		346		345		350		355		1,396		27		332		332		332		1,023
Amortization of deferred financing costs		606		606		606		667		2,485		517		517		622		535		2,191
Straight-line rent		(1,082)		(792)		(147)		254		(1,767)		(1,275)		(700)		(119)		117		(1,977)
Tenant improvements		(6,474)		(5,363)		(4,474)		(4,166)		(20,477)		(1,929)		(1,329)		(3,325)		(7,885)		(14,468)
Leasing commissions		(1,579)		(1,963)		(4,482)		(5,869)		(13,893)		(1,613)		(4,966)		(2,247)		(3,783)		(12,609)
Non-investment capex		(1,670)		(1,685)		(1,860)		(3,836)		(9,051)		(438)		(1,052)		(2,211)		(1,842)		(5,543)
Adjusted Funds From Operations (AFFO)*	$	17,884	$	18,919	$	17,110	$	13,044	$	66,957	$	20,681	$	18,638	$	18,935	$	13,667	$	71,921

Per Share Data:
EPS	$	0.04	$	(0.16)	$	0.02	$	(0.05)	$	(0.15)	$	0.03	$	0.02	$	0.02	$	0.02	$	0.08
FFO*		0.27		0.27		0.26		0.25		1.04		0.26		0.27		0.26		0.25		1.03
AFFO*		0.17		0.18		0.16		0.12		0.62		0.21		0.19		0.18		0.13		0.70

Weighted Average Shares (basic and diluted)		107,231		107,231		107,231		107,231		107,231		100,187		100,187		103,709		107,231		102,843

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

December 31, 2017| Page 9

EBITDA* & Adjusted EBITDA* Reconciliation

(in thousands, except ratio amounts)


									Year										Year
	Three Months Ended								Ended		Three Months Ended								Ended
	31-Mar-17		30-Jun-17		30-Sep-17		31-Dec-17		31-Dec-17		31-Mar-16		30-Jun-16		30-Sep-16		31-Dec-16		31-Dec-16

Net income (loss)	$	4,480	$	(17,395)	$	1,903	$	(4,932)	$	(15,944)	$	2,579	$	1,612	$	2,458	$	1,729	$	8,378
Interest expense		7,579		7,893		8,258		8,657		32,387		6,433		6,417		6,767		6,931		26,548
Depreciation and amortization		25,163		24,592		24,903		25,569		100,227		22,527		22,352		23,112		24,565		92,556
Income taxes		125		72		100		103		400		98		111		117		92		418
EBITDA*		37,347		15,162		35,164		29,397		117,070		31,637		30,492		32,454		33,317		127,900
(Gain) loss on sale of properties and provisions for loss on properties held for sale or equity investments, less applicable income tax		(2,289)		20,492		257		2,540		21,000		—		643		523		1,772		2,938
Hedge ineffectiveness		(22)		(129)		(67)		2,096		1,878		—		1,009		(621)		(2,266)		(1,878)
Adjusted EBITDA*	$	35,036	$	35,525	$	35,354	$	34,033	$	139,948	$	31,637	$	32,144	$	32,356	$	32,823	$	128,960

Interest expense	$	7,579	$	7,893	$	8,258	$	8,657	$	32,387	$	6,433	$	6,417	$	6,767	$	6,931	$	26,548
Scheduled principal payments		—		—		—		—		—		—		—		—		—		—
Interest and scheduled principal payments	$	7,579	$	7,893	$	8,258	$	8,657	$	32,387	$	6,433	$	6,417	$	6,767	$	6,931	$	26,548

Interest coverage ratio		4.62		4.50		4.28		3.93		4.32		4.92		5.01		4.78		4.74		4.86

Debt service coverage ratio		4.62		4.50		4.28		3.93		4.32		4.92		5.01		4.78		4.74		4.86

Debt (excluding unamortized financing costs)	$	1,065,000	$	1,065,000	$	1,070,000	$	1,048,000			$	885,000	$	930,000	$	898,000	$	1,050,000
Cash and cash equivalents		11,143		11,537		12,647		9,773				14,316		7,524		13,372		9,335
Net Debt ( Debt less Cash and cash equivalents)	$	1,053,857	$	1,053,463	$	1,057,353	$	1,038,227			$	870,684	$	922,476	$	884,628	$	1,040,665

Adjusted EBITDA* (1)	$	35,036	$	35,525	$	35,354	$	34,033			$	31,637	$	32,478	$	32,721	$	34,418
Annualized	$	140,144	$	142,100	$	141,416	$	136,132			$	126,548	$	129,913	$	130,885	$	137,674

Net Debt-to-Adjusted EBITDA*		7.5		7.4		7.5		7.6				6.9		7.1		6.8		7.6

See the Appendix for Definitions of these Non-GAAP Measures beginning on page 27. Amounts in the EBITDA and Adjusted 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.

(1)

Includes an adjustment for acquisitions in the quarter acquired by the amount attributable to properties owned less than a full quarter. The calculation is based on the partial quarter results over the number of days held multiplied by the number of days in the full quarter.

December 31, 2017| Page 10

Reconciliation of Net Income (Loss) to Property NOI*

(in thousands)


Reconciliation of Net income to Property NOI*									Year										Year
	Three Months Ended								Ended		Three Months Ended								Ended
	31-Mar-17		30-Jun-17		30-Sep-17		31-Dec-17		31-Dec-17		31-Mar-16		30-Jun-16		30-Sep-16		31-Dec-16		31-Dec-16
Net income (loss)	$	4,480	$	(17,395)	$	1,903	$	(4,932)	$	(15,944)	$	2,579	$	1,612	$	2,458	$	1,729	$	8,378
Add (deduct):
(Gain) loss on sale of properties and properties held for sale, less applicable income taxes		(2,289)		20,492		257		21		18,481		—		643		523		1,772		2,938
Hedge ineffectiveness		(22)		(129)		(67)		2,096		1,878		—		1,009		(621)		(2,266)		(1,878)
Management fee income		(794)		(768)		(791)		(756)		(3,109)		(660)		(688)		(727)		(749)		(2,824)
Depreciation and amortization		25,332		25,279		24,988		25,659		101,258		22,445		22,352		23,298		24,957		93,052
Amortization of above/below market leases		(168)		(687)		(86)		(90)		(1,031)		81		—		(185)		(392)		(496)
General and administrative		3,443		3,077		3,286		3,665		13,471		3,530		3,494		3,419		3,683		14,126
Interest expense		7,579		7,893		8,258		8,657		32,387		6,433		6,417		6,767		6,931		26,548
Interest income		(1,214)		(1,206)		(1,134)		(1,133)		(4,687)		(1,279)		(1,171)		(1,184)		(1,200)		(4,834)
Equity in losses of non-consolidated REITs		397		201		121		2,885		3,604		286		86		196		263		831
Non-property specific items, net		129		67		103		228		527		52		155		100		(34)		273
Property NOI*	$	36,873	$	36,824	$	36,838	$	36,300	$	146,835	$	33,467	$	33,909	$	34,044	$	34,694	$	136,114

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

December 31, 2017| Page 11

Debt Summary

(in thousands)


		Maximum		Amount		Interest			Interest
	Maturity	Amount		Drawn at		Rate (a)			Rate at	Facility
	Date	of Loan		31-Dec-17		Components			31-Dec-17	Fee

BAML Revolver	12-Jan-22	$	600,000	$	78,000	L	+	1.20%	2.76%	0.25%
JPM Term Loan	30-Nov-18		150,000		150,000	L	+	1.35%	2.98%
BAML Term Loan	12-Jan-23		400,000		400,000	1.12%	+	1.35%	2.47%
BMO Term Loan	26-Aug-20		220,000		220,000	2.32%	+	1.65%	3.97%
Series A Senior Notes	20-Dec-24		116,000		116,000				3.99%
Series B Senior Notes	20-Dec-27		84,000		84,000				4.26%

		$	1,570,000	$	1,048,000				3.19%

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 is based on our investment grade rating. At our investment grade rating from Moody’s of Baa3, 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.

The BAML Revolver is subject to a 25 basis point facility fee at our investment grade rating and when applied to our new availability of $600 million would be $1.5 million annually.

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 drew the proceeds from the private placement and reduced the outstanding balance on our revolving line of credit.

We incurred financing costs to close the BAML Revolver, BAML Term Loan and the BMO Term Loan and the credit facilities that preceded them. We also incurred financing costs in connection with the JPM Term Loan and with the Series A and Series B Senior Notes. These costs are deferred and amortized into interest expense during the terms of the loans. Following the amendments on October 18, 2017 and the note purchase agreement on October 24, 2017, we estimate the annual run rate for amortization to interest expense from these deferred financing costs is approximately $2.9 million.

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 on October 24, 2017.

(a)

Interest rate excludes amortization of deferred financing costs and facility fees, which is discussed in the notes above.

December 31, 2017| Page 12

Capital Analysis

(in thousands, except per share amounts)


	31-Mar-17		30-Jun-17		30-Sep-17		31-Dec-17		31-Mar-16		30-Jun-16		30-Sep-16		31-Dec-16
Market Data:
Shares Outstanding		107,231		107,231		107,231		107,231		100,187		100,187		107,231		107,231
Closing market price per share	$	12.14	$	11.08	$	10.62	$	10.74	$	10.61	$	12.27	$	12.60	$	12.96
Market capitalization	$	1,301,786	$	1,188,121	$	1,138,795	$	1,151,663	$	1,062,988	$	1,229,299	$	1,351,113	$	1,389,716
Total Debt		1,065,000		1,065,000		1,070,000		1,048,000		885,000		930,000		898,000		1,050,000
Total Market Capitalization	$	2,366,786	$	2,253,121	$	2,208,795	$	2,199,663	$	1,947,988	$	2,159,299	$	2,249,113	$	2,439,716

Dividend Data:
Total dividends paid	$	20,374	$	20,374	$	20,374	$	20,374	$	19,036	$	19,036	$	19,036	$	20,373
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*		71.4%		71.3%		72.8%		77.3%		73.1%		71.2%		73.9%		75.7%

Liquidity:
Cash and cash equivalents	$	11,143	$	11,537	$	12,647	$	9,773	$	14,316	$	7,524	$	13,372	$	9,335
Revolver:
Gross potential available under the BAML Revolver		500,000		500,000		500,000		600,000		500,000		500,000		500,000		500,000
Less:
Outstanding balance		(295,000)		(295,000)		(300,000)		(78,000)		(265,000)		(310,000)		(278,000)		(280,000)
Total Liquidity	$	216,143	$	216,537	$	212,647	$	531,773	$	249,316	$	197,524	$	235,372	$	229,335

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

December 31, 2017| Page 13


	Owned Portfolio Overview


	As of the Quarter Ended
	31-Dec-17	30-Sep-17	30-Jun-17	31-Mar-17	31-Dec-16
Owned portfolio of commercial real estate:
Number of properties (a)	34	35	35	35	36
Square feet	9,761,984	10,085,889	10,084,710	10,118,112	10,163,615
Leased percentage	89.7%	88.7%	88.1%	89.6%	89.3%

Investments in non-consolidated commercial real estate:
Number of properties	2	2	2	2	2
Square feet	1,396,071	1,396,071	1,396,071	1,396,071	1,396,071
Leased percentage	75.3%	79.2%	78.9%	78.9%	78.1%

Single Asset REITs (SARs) managed:
Number of properties	4	4	4	5	5
Square feet	810,278	810,278	810,278	1,075,135	1,075,135
Leased percentage	93.0%	89.9%	90.1%	89.6%	89.6%

Total owned, investments and managed properties:
Number of properties	40	41	41	42	43
Square feet	11,968,333	12,292,238	12,291,059	12,589,318	12,634,821
Leased percentage	88.2%	87.7%	87.2%	88.5%	88.1%

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

December 31, 2017| Page 14


	Owned Portfolio Overview


				Percent	Wtd Ave (a)	GAAP (b)						Percent	Wtd Ave (a)	GAAP (b)
MSA / Property Name	City	State	Square Feet	Leased	Occupied	Rent		MSA / Property Name	City	State	Square Feet	Leased	Occupied	Rent

East Region								Midwest Region

Washington, D.C.								Chicago
Meadow Point	Chantilly	VA	138,537	100.0%	100.0%	$	26.27	Northwest Point	Elk Grove Village	IL	177,095	100.0%	100.0%	$	23.20
Stonecroft	Chantilly	VA	111,469	100.0%	100.0%	$	38.02	909 Davis Street	Evanston	IL	196,581	91.5%	77.9%	$	28.92
Loudoun Tech Center	Dulles	VA	136,658	95.7%	93.9%	$	18.12
								Indianapolis
Richmond								River Crossing	Indianapolis	IN	205,059	96.2%	95.5%	$	23.10
Innsbrook	Glen Allen	VA	298,456	100.0%	100.0%	$	18.21
								St. Louis
Charlotte								Timberlake	Chesterfield	MO	234,496	100.0%	100.0%	$	26.09
Forest Park	Charlotte	NC	62,212	100.0%	100.0%	$	14.06	Timberlake East	Chesterfield	MO	117,036	100.0%	100.0%	$	25.23

Raleigh-Durham								Minneapolis
Emperor Boulevard	Durham	NC	259,531	100.0%	100.0%	$	34.20	121 South 8th Street	Minneapolis	MN	293,422	81.8%	67.7%	$	20.93
								Plaza Seven	Minneapolis	MN	326,483	96.8%	95.7%		32.58



East Region Total			1,006,863	99.4%	99.2%	$	25.43	Midwest Region Total			1,550,172	94.3%	89.6%	$	26.26

(a)

Weighted Occupied Percentage for the three months ended December 31, 2017.

(b)

Weighted Average GAAP Rent per Occupied Square Foot.

December 31, 2017| Page 15


	Owned Portfolio Overview


				Percent	Wtd Ave (a)	GAAP (b)						Percent	Wtd Ave (a)	GAAP (b)
MSA / Property Name	City	State	Square Feet	Leased	Occupied	Rent		MSA / Property Name	City	State	Square Feet	Leased	Occupied	Rent

South Region								West Region

Dallas-Fort Worth								Denver
Legacy Tennyson Center	Plano	TX	202,600	86.4%	66.5%	$	20.31	380 Interlocken	Broomfield	CO	240,358	86.2%	83.5%	$	30.30
One Legacy Circle	Plano	TX	214,110	100.0%	99.2%	$	36.95	1999 Broadway	Denver	CO	676,379	80.2%	75.5%	$	31.92
Addison Circle	Addison	TX	288,794	100.0%	87.1%	$	33.28	Greenwood Plaza	Englewood	CO	196,236	100.0%	100.0%	$	25.29
Collins Crossing	Richardson	TX	300,887	100.0%	100.0%	$	24.88	390 Interlocken	Broomfield	CO	241,751	98.9%	97.1%	$	29.19
Liberty Plaza	Addison	TX	218,934	91.2%	85.7%	$	22.03	1001 17th Street	Denver	CO	655,413	96.8%	90.5%	$	36.24
								600 17th Street	Denver	CO	598,231	87.1%	89.2%	$	33.07
Houston								West Region Total			2,608,368	89.7%	87.0%	$	32.32
Park Ten	Houston	TX	157,460	68.6%	66.1%	$	29.88
Eldridge Green	Houston	TX	248,399	100.0%	100.0%	$	30.53	Total Owned			9,761,984	89.7%	87.7%	$	28.87
Park Ten Phase II	Houston	TX	156,746	1.4%	33.7%	$	24.21
Westchase I & II	Houston	TX	629,025	87.7%	83.6%	$	32.67

Miami-Ft. Lauderdale-West Palm Beach
Blue Lagoon Drive	Miami	FL	212,619	100.0%	100.0%	$	22.14

Atlanta
One Overton Park	Atlanta	GA	387,267	61.1%	69.0%	$	24.80
One Ravinia	Atlanta	GA	386,602	92.4%	89.8%	$	24.74
Two Ravinia	Atlanta	GA	411,047	75.3%	76.1%	$	27.27
Pershing Plaza	Atlanta	GA	160,145	97.4%	97.3%	$	35.85
999 Peachtree	Atlanta	GA	621,946	95.1%	95.8%	$	30.82
South Region Total			4,596,581	86.0%	85.1%	$	28.68

(a)

Weighted Occupied Percentage for the three months ended December 31, 2017.

(b)

Weighted Average GAAP Rent per Occupied Square Foot.

December 31, 2017| Page 16


	Managed Portfolio Overview

MSA / Property Name

City

State

Square Feet

MSA / Property Name

City

State

Square Feet

Southeast Region

Midwest Region

Atlanta

Chicago

Satellite Place

Duluth

134,785

(a)

East Wacker

Chicago

861,000

Indianapolis

Monument Circle

Indianapolis

213,760

Southeast Region Total

134,785

Kansas City

(b)

Grand Boulevard

Kansas City

535,071

Southwest Region

Cincinnati

Centre Pointe V

West Chester

135,936

Houston

Energy Tower I

Houston

325,797

Southwest Region Total

325,797

Midwest Region Total

1,745,767

Total Managed

2,206,349

Total Owned & Managed

11,968,333

(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.

December 31, 2017| Page 17

Tenants by Industry

(By Square Feet)

December 31, 2017| Page 18

20
	20 Largest Tenants with Annualized Rent and Remaining Term


			Remaining	Aggregate				% of Aggregate
	Tenant	Number of	Lease Term	Leased	% of Total	Annualized		Leased
	Name	Leases	in Months	Square Feet	Square Feet	Rent		Annualized Rent

1	Quintiles IMS Healthcare Incorporated	1	101	259,531	2.6%	$	8,992,350	3.6%
2	US Government (a)	4	5, 20, 33, 37	250,520	2.5%		7,707,886	3.0%
3	CITGO Petroleum Corporation	1	50	248,399	2.5%		8,363,594	3.3%
4	Newfield Exploration Company	1	50	234,495	2.3%		9,136,807	3.6%
5	Eversheds Sutherland (US) LLP (b)	1	2, 100	222,422	2.2%		7,183,927	2.8%
6	Centene Management Company, LLC	3	66, 66, 66	216,879	2.2%		5,545,494	2.2%
7	Burger King Corporation	1	9	212,619	2.1%		5,351,620	2.1%
8	EOG Resources, Inc. (c)	1	1, 108	174,215	1.7%		5,941,615	2.4%
9	T-Mobile South, LLC dba T-Mobile	1	14	151,792	1.5%		4,010,411	1.6%
10	Citicorp Credit Services, Inc.	1	116	146,260	1.5%		4,715,422	1.9%
11	Petrobras America, Inc.	1	23	144,813	1.4%		5,452,209	2.2%
12	Jones Day	1	35	140,342	1.4%		4,853,880	1.9%
13	Argo Data Resource Corporation	1	68	140,246	1.4%		4,064,329	1.6%
14	Vail Corp d/b/a Vail Resorts (d)	3	15, 63, 63	132,229	1.3%		3,772,015	1.5%
15	SunTrust Bank	1	45	127,500	1.3%		2,362,575	0.9%
16	Federal National Mortgage Association	1	9	123,144	1.2%		4,465,201	1.8%
17	Kaiser Foundation Health Plan	1	77	120,979	1.2%		3,233,680	1.3%
18	Giesecke & Devrient America	1	84	112,110	1.1%		1,979,863	0.8%
19	Northrup Grumman Systems Corp.	1	24	111,469	1.1%		4,712,148	1.9%
20	ADS Alliance Data Systems, Inc.	1	102	107,698	1.1%		3,784,560	1.5%

			Total	3,377,662	33.5%	$	105,629,587	41.8%

(a)

Includes 180,444 square feet which expire in 2018. The remaining 70,060 square feet expire between 2019 and 2021.

(b)

Includes 42,554 square feet, which expire in 2018 and 179,868 square feet, which expire 4/30/26.

(c)

Includes 13,278 square feet, which expire 1/31/18 and 160,937 square feet, which expire 12/21/26.

(d)

Includes 38,293 square feet, which expire 3/31/19. The remaining 93,936 square feet expire 3/31/23.

December 31, 2017| Page 19

Leasing Activity

(Owned Portfolio)


	Year		Year		Year
	Ended		Ended		Ended
Leasing Activity		31-Dec-17		31-Dec-16		31-Dec-15
(in Square Feet - SF)
New leasing		460,000		299,000		362,000
Renewals and expansions		1,011,000		895,000		957,000
		1,471,000		1,194,000		1,319,000

Other information per SF
(Activity on a year-to-date basis)
GAAP Rents on leasing	$	30.43	$	29.64	$	28.66
Weighted average lease term		6.8 Years		6.6 Years		5.3 Years

Increase over average GAAP rents in prior year		12.3%		10.4%		10.4%

Average free rent		4 Months		3 Months		3 Months
Tenant Improvements	$	22.22	$	18.71	$	13.17
Leasing Costs	$	9.92	$	10.05	$	5.81

December 31, 2017| Page 20

Lease Expirations by Square Feet

(Owned Portfolio)

December 31, 2017| Page 21

Lease Expirations with Annualized Rent per Square Foot

(Owned Portfolio)


			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 (a)		Leases		Leases (b)		Leases		Leases	Total

2018	68	(c)	1,038,265		$	32,818,151	$	31.61	13.0%	13.0%
2019	64		1,207,011			35,748,041		29.62	14.1%	27.1%
2020	73		871,386			28,439,239		32.64	11.3%	38.4%
2021	59		835,063			20,836,671		24.95	8.2%	46.6%
2022	62		1,217,165			38,764,135		31.85	15.3%	61.9%
2023	53		937,970			24,669,643		26.30	9.8%	71.7%
2024	23		475,471			14,353,552		30.19	5.7%	77.4%
2025	15		368,549			8,755,443		23.76	3.4%	80.8%
2026	7		615,504			20,657,955		33.56	8.2%	89.0%
2027	6		420,116			13,871,833		33.02	5.5%	94.5%
2028 and thereafter	94		768,585	(d)		13,836,038		18.00	5.5%	100.0%
	524		8,755,085		$	252,750,701	$	28.87	100.0%
Vacancies as of 12/31/17			1,006,899
Total Portfolio Square Footage			9,761,984

(a)

The number of leases approximates the number of tenants. Tenants with lease maturities in different years are included in annual totals for each lease. Tenants may have multiple leases in the same year.

(b)

Annualized rent represents the monthly rent charged, including tenant reimbursements, for each lease in effect at December 31, 2017 multiplied by 12. Tenant reimbursements generally include payment of real estate taxes, operating expenses and common area maintenance and utility charges.

(c)

Includes 8 leases that are month-to-month.

(d)

Includes 113,305 square feet that are non-revenue producing building amenities.

December 31, 2017| Page 22


	Capital Expenditures


(in thousands)									Year
	For the Three Months Ended								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
Total Capital Expenditures	$	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
Total Capital Expenditures	$	3,980	$	7,347	$	7,783	$	13,510	$	32,620

First generation leasing and investment capital was $25.0 million and $19.6 million for the years ended December 31, 2017 and 2016, respectively.

December 31, 2017| Page 23

Transaction Activity

(in thousands except for Square Feet)

City

State

Square Feet

Date Acquired

Purchase Price

2016

Plaza Seven

Minneapolis

325,796

6/6/16

82,000

Pershing Plaza

Atlanta

160,145

8/10/16

45,450

600 17th Street

Denver

613,527

12/1/16

154,260

2015

Two Ravinia

Atlanta

442,130

4/8/15

78,000

2013

1999 Broadway

Denver

673,793

5/22/13

183,000

999 Peachtree

Atlanta

621,946

7/1/13

157,900

1001 17th Street

Denver

655,420

8/28/13

217,000

2012

One Ravinia

Atlanta

386,603

7/31/12

52,750

Westchase

Houston

629,025

11/1/12

154,750


					Gross Sale		Gain (loss)
	City	State	Square Feet	Date Sold	Proceeds		on Sale
2017
Hillview	Milpitas	CA	36,288	1/6/17	$	6,342	$	2,289
East Baltimore	Baltimore	MD	325,445	10/20/17		32,547		(20,770)

2016
Lakeside I	Maryland Heights	MO	127,778	4/5/16	$	20,189	$	4,154
Federal Way	Federal Way	WA	117,010	12/16/16		7,500		(7,092)

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		949
Montague	San Jose	CA	145,561	12/9/15		30,250		12,251

December 31, 2017| Page 24

Loan Portfolio of Secured Real Estate

(in thousands)

(dollars in thousands)

Maximum

Amount

Interest

Maturity

Amount

Drawn at

Interest

Draw

Rate at

Sponsored REIT

Location

Date

of Loan

31-Dec-17

Rate (1)

Fee (2)

31-Dec-17

Secured revolving lines of credit

FSP Satellite Place Corp.

Duluth, GA

31-Dec-19

5,500

2,120

4.40%

0.5%

5.78%

FSP Energy Tower I Corp. (3)

Houston, TX

30-Jun-19

20,000

15,600

5.00%

0.5%

6.38%

Mortgage loan secured by property

FSP Monument Circle LLC (4)

Indianapolis, IN

7-Dec-18

21,000

4.90%

n/a

4.90%

FSP Energy Tower I Corp. (3) (5)

Houston, TX

30-Jun-19

33,000

6.41%

n/a

6.41%

79,500

71,720

(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)

These loans were extended on June 16, 2017.

(4)

Includes an origination fee of $164,000 and an exit fee of $38,000 when repaid by the borrower.

(5)

This mortgage includes an annual extension fee of $108,900 paid by the borrower.

December 31, 2017| Page 25


	Net Asset Value Components


(in thousands except per share data)
	As of		Assets:			Other information:
	31-Dec-17		Loans outstanding on secured RE	$	71,720	Leased SF to be FFO producing
Total Market Capitalization Values			Investments in SARs (book basis)		70,164	During 2017 (in 000's)		213
Shares outstanding		107,231.2	Straight-line rent receivable		53,194
Closing price	$	10.74	Asset held for sale		—	Straight-line rental revenue current quarter	$	(254)
Market capitalization	$	1,151,663	Cash and cash equivalents		9,773
Debt		1,048,000	Restricted cash		46	Management fee income current quarter	$	139
Total Market Capitalization	$	2,199,663	Tenant rent receivables		3,123	Interest income from secured loans		1,133
			Prepaid expenses		3,350	Management fees and interest income from loans	$	1,271
			Office computers and furniture		289
	3 Months		Other assets:			FFO from non-consolidated REITs - Q3 2017 (6):
	Ended		Deferred financing costs, net		11,444	East Wacker	$	765
NOI Components	31-Dec-17		Other assets: Derivative Market Value		13,925	Grand Boulevard		109
			Other assets		—	Total	$	874
Same Store NOI (1)	$	31,489		$	237,028
Acquisitions (1) (2)		4,888				Footnotes to the components
Property NOI (1)		36,377	Liabilities:
Full quarter adjustment (3)		—	Debt (excluding contra for unamortized financing costs)	$	1,048,000	(1) See pages 11 & 28 for definitions and reconciliations.
Stabilized portfolio	$	36,377	Accounts payable & accrued expenses		64,680
			Tenant security deposits		5,383	(2) Includes NOI from acquisitions not in Same Store.
			Other liabilities: derivative liability		1,759
Financial Statement Reconciliation:				$	1,119,822	(3) Adjustment to reflect property NOI for a full quarter in the quarter acquired, if necessary.
Rental Revenue	$	65,555
Rental operating expenses		(18,720)				(4) HB3 Tax in Texas is classified as an income tax, though we treat it as a real estate tax in Property NOI.
Real estate taxes and insurance		(9,961)
NOI on assets sold		77				(5) Management & other fees are eliminated in consolidation but included in Property NOI.
Taxes (4)		(103)
Management fees & other (5)		(471)				(6) We report FFO from non-consolidated REITs for the previous quarter as their financial statements are not yet complete for the current quarter.
Property NOI (1)	$	36,377

December 31, 2017| Page 26


	Appendix: Non-GAAP Financial Measure Definitions

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 or loss (computed in accordance with GAAP), excluding gains (or losses) from sales of property, hedge ineffectiveness 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 or loss (determined in accordance with GAAP), nor as an indicator of the Company’s financial performance, nor as an alternative to cash flows from operating activities (determined in accordance with GAAP), nor as a measure of the Company’s liquidity, nor is it necessarily indicative of sufficient cash flow to fund all of the Company’s needs.

Other real estate companies and the National Association of Real Estate Investment Trusts, or NAREIT, may define this term in a different manner. We have included the NAREIT FFO definition as of May 17, 2016 in the table on page 9 and note that other REITs may not define FFO in accordance with the current NAREIT definition or may interpret the current NAREIT definition differently than we do.

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

December 31, 2017| Page 27


	Appendix: Non-GAAP Financial Measure Definitions

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

EBITDA is defined as net income or loss plus interest expense, income tax expense and depreciation and amortization expense. Adjusted EBITDA is defined as EBITDA excluding hedge ineffectiveness, gains and losses on sales of properties or shares of equity investments or provisions for losses on assets held for sale or equity investments. 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 or loss 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 or loss (the most directly comparable GAAP financial measure) plus general and administrative expenses, depreciation and amortization, including amortization of acquired above and below market lease intangibles and impairment charges, interest expense, less equity in earnings of nonconsolidated REITs, interest income, management fee income, hedge ineffectiveness, gains or losses on the sale of assets and excludes non-property specific income and expenses. The information presented includes footnotes and the data is shown by region with properties owned in the periods presented, which we call Same Store. The comparative Same Store results include properties held for the periods presented and exclude properties that are non-operating, being developed or redeveloped, dispositions and significant nonrecurring income such as bankruptcy settlements and lease termination fees. NOI, as defined by the Company, may not be comparable to NOI reported by other REITs that define NOI differently. NOI should not be considered an alternative to net income or loss as an indication of our performance or to cash flows as a measure of the Company's liquidity or its ability to make distributions.

December 31, 2017| Page 28


	Appendix: Non-GAAP Financial Measure Definitions

Definition of Adjusted Funds From Operations (AFFO)

The Company also evaluates performance based on Adjusted Funds From Operations, which we refer to as AFFO. The Company defines AFFO as (1) FFO, (2) excluding 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 and (5) less recurring capital expenditures that are generally for maintenance of properties, which we call non-investment capex or are second generation capital expenditures. Second generation costs include re-tenanting space after a tenant vacates, which include tenant improvements and leasing commissions.

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

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

December 31, 2017| Page 29

Investor Relations Contact

Georgia Touma | 877.686.9496

InvestorRelations@fspreit.com

Pershing Park Plaza, Atlanta, GA

Franklin Street Properties Corp.

401 Edgewater Place Wakefield, Massachusetts 01880

781.557.1300 www.fspreit.com

December 31, 2017| Page 30

FRANKLIN STREET PROPERTIES CORP /MA/ - FORM 8-K - EX-99.2 - February 13, 2018

Attached files

FRANKLIN STREET PROPERTIES CORP /MA/ Reports