Franklin Street Properties Corp. Announces Second Quarter 2013 Results

Franklin Street Properties Corp. Announces Second Quarter 2013 Results

WAKEFIELD, Mass.--(BUSINESS WIRE)-- Franklin Street Properties Corp. (the "Company", "FSP", "we" or "our") (NYSE MKT: FSP), a real estate investment trust (REIT), announced today Funds From Operations (FFO) of $22.1 million or $0.24 per share for the second quarter ended June 30, 2013. Net income was $4.7 million or $0.05 per share for the second quarter.

The Company evaluates its performance based on FFO, Net Income and EPS and believes each is an important measure. A reconciliation of Net Income to FFO, which is a non-GAAP financial measure, is provided on page 3 of this press release.

          Three Months Ended June 30,         Six Months Ended June 30,
(in 000's except per share data) 2013     2012    

Increase

(Decrease)

2013     2012    

Increase

(Decrease)

 
Net Income $ 4,741   $ 5,434   $ (693 ) $ 9,142   $ 11,172   $ (2,030 )
 
FFO $ 22,130   $ 19,041   $ 3,089   $ 42,747   $ 38,612   $ 4,135  
Per Share Data:
EPS $ 0.05 $ 0.07 $ (0.02 ) $ 0.10 $ 0.13 $ (0.03 )
FFO $ 0.24 $ 0.23 $ 0.01 $ 0.49 $ 0.47 $ 0.02
 

Weighted average shares (diluted)

  91,847     82,937       8,909     87,417     82,937       4,479  
 

Comparing results for the second quarter of 2013 to the same period in 2012, FFO increased $3.1 million or $0.01 per share. The FFO increase was primarily from higher property income due to three acquisitions completed since July 2012 and improved occupancy in our portfolio, which was partially offset by decreased interest income as a result of repayment of secured real estate loans and by higher G&A. Net Income and EPS was $4.7 million or $0.05 per share for the second quarter of 2013 compared to net income of $5.4 million or $0.07 per share for the second quarter of 2012.

Comparing results for the six months ended June 30, 2013 to 2012, FFO increased $4.1 million or $0.02 per share. The FFO increase was primarily from higher property income due to three acquisitions completed since July 2012 and improved occupancy in our portfolio, which was partially offset by decreased interest income as a result of repayment of secured real estate loans and by higher G&A. Net Income and EPS was $9.1 million and $0.10 per share, respectively, for the six months ended June 30, 2013 compared to net income of $11.2 million and $0.13 per share for the same period in 2012.

George J. Carter, President and CEO, commented as follows:

"For the second quarter of 2013, FSP's profits as represented by FFO totaled approximately $22.1 million or $0.24 per share compared to the first quarter of 2013 where FFO totaled approximately $20.6 million or $0.25 per share. Weighted average shares outstanding rose in the second quarter of 2013 as a result of our common stock offering of 17,250,000 shares completed on May 15, 2013. Proceeds from our stock offering were not fully deployed into additional planned property investments until July 1, 2013, the start of the third quarter. Consequently, there was some per-share dilution of FFO for the second quarter. The impact of fully investing the net proceeds from our recent stock offering should be visible in our third quarter 2013 results. Dividend distributions declared for the second quarter of 2013, which are payable on August 15, 2013, will be approximately $19 million or $0.19 per share.

Our directly-owned real estate portfolio of 38 properties, totaling 8,529,752 square feet, was approximately 94.4% leased as of June 30, 2013, unchanged from the first quarter of 2013. We anticipate continued organic growth in rental revenue/FFO from our existing portfolio of properties in the second half of this year as we begin to realize the benefit of significant new leases signed in recent quarters and as continuing "same-store" rental increases positively affect profits. Our property portfolio of office assets has relatively modest lease expirations over the next one and a half years, which we continue to proactively reduce. As of the end of the second quarter, only 1.2% of our commercial square footage is scheduled to expire during the balance of 2013, down from 2.2% at the end of the first quarter of 2013.

Growth in FSP's real estate assets and broader capital structure has been significant since the beginning of the second quarter of 2013, and we plan to continue to actively pursue additional growth opportunities that we believe are available to us. On May 15, 2013, we completed a common stock offering of 17,250,000 shares, providing the Company with proceeds of approximately $230.7 million. On May 22, 2013, we acquired a 680,277 rentable square foot office property for $183 million, located in the central business district of Denver, Colorado, one of FSP's primary markets. On July 1, 2013, we acquired a 621,007 rentable square foot office property for $157.9 million located in the mid-town submarket of Atlanta, Georgia, another one of FSP's primary markets. On July 15, 2013, we signed an agreement to purchase (subject to customary due diligence, etc.) a 655,565 rentable square foot office property located in the central business district of Denver, Colorado for $217 million. This second Denver central business district property, whose address is 1001 17th Street, is scheduled to close on August 28, 2013 (subject to successful due diligence, etc.). Capital to facilitate this acquisition, as well as for other uses, is anticipated to be provided by certain members of our existing bank group in the form of an unsecured fixed-rate term loan.

Continued growth, both organically and through additional property acquisitions, makes us very optimistic about our profit performance potential for the second half of 2013 and beyond."

Dividend Announcement

On July 12, 2013, the Company announced that its Board of Directors declared a regular quarterly dividend for the three months ended June 30, 2013 of $0.19 per share of common stock payable on August 15, 2013 to stockholders of record on July 26, 2013.

Real Estate Update

Supplementary schedules provide property information for the Company's owned real estate portfolio and for two non-consolidated REITs in which the Company holds preferred stock interests as of June 30, 2013. The Company will also be filing an updated supplemental information package that will provide stockholders and the financial community with additional operating and financial data. The Company will file this supplemental information package with the SEC and make it available on its website at www.franklinstreetproperties.com.

Earnings Call

A conference call is scheduled for July 31, 2013 at 10:00 a.m. (ET) to discuss the second quarter 2013 results. To access the call, please dial 1-888-317-6016. Internationally, the call may be accessed by dialing 1-412-317-6016. To listen via live audio webcast, please visit the Webcasts & Presentations section in the Investor Relations section of the Company's website (www.franklinstreetproperties.com) at least ten minutes prior to the start of the call and follow the posted directions. The webcast will also be available via replay from the above location starting one hour after the call is finished.

Funds From Operations (FFO)

A reconciliation of Net Income to FFO is shown below and a definition of FFO is provided on Supplementary Schedule I. Management believes FFO is used broadly throughout the real estate investment trust (REIT) industry as a measurement of performance. The Company has included the NAREIT FFO definition in the table and notes that other REITs may not define FFO in accordance with the current NAREIT definition or may interpret the current NAREIT definition differently. The Company's computation of FFO may not be comparable to FFO reported by other REITs or real estate companies that define FFO differently.

                   
Reconciliation of Net Income to FFO: Three Months Ended Six Months Ended

June 30,

June 30,
(In thousands, except per share amounts) 2013     2012 2013     2012
 
Net income $ 4,741 $ 5,434 $ 9,142 $ 11,172
Less gain on sale of properties - - - -
GAAP (income) loss from non-consolidated REITs 196 (494 ) 383 (885 )
Distributions from non-consolidated REITs 27 898 54 1,827
Depreciation & amortization   17,045         13,203     33,029         26,498  
NAREIT FFO 22,009 19,041 42,608 38,612
Acquisition costs of new properties   133         -     150         -  
Funds From Operations (FFO) $ 22,142       $ 19,041   $ 42,758       $ 38,612  
 
Per Share Data
EPS $ 0.05 $ 0.07 $ 0.10 $ 0.13
FFO $ 0.24 $ 0.23 $ 0.49 $ 0.47
 
Weighted average shares (basic and diluted)   91,847         82,937     87,417         82,937  
 

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

About Franklin Street Properties Corp.

Franklin Street Properties Corp., based in Wakefield, Massachusetts, is focused on 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. To learn more about FSP please visit our website at www.franklinstreetproperties.com.

Forward-Looking Statements

Statements made in this press release that state FSP's or management's intentions, beliefs, expectations, or predictions for the future may be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. This press release may also contain forward-looking statements based on current judgments and current knowledge of management, which are subject to certain risks, trends and uncertainties that could cause actual results to differ materially from those indicated in such forward-looking statements. Accordingly, readers are cautioned not to place undue reliance on forward-looking statements. Investors are cautioned that our forward-looking statements involve risks and uncertainty, including without limitation, economic conditions in the United States, disruptions in the debt markets, economic conditions in the markets in which we own properties, risks of a lessening of demand for the types of real estate owned by us, changes in government regulations and regulatory uncertainty, uncertainty about governmental fiscal policy, geopolitical events and expenditures that cannot be anticipated such as utility rate and usage increases, unanticipated repairs, additional staffing, insurance increases and real estate tax valuation reassessments. See the "Risk Factors" set forth in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2012, as the same may be updated from time to time in subsequent filings with the United States Securities and Exchange Commission. Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. We will not update any of the forward-looking statements after the date of this press release to conform them to actual results or to changes in our expectations that occur after such date, other than as required by law.

Franklin Street Properties Corp.
Earnings Release
Supplementary Information
Table of Contents
                                           
Franklin Street Properties Corp. Financial Results A-C
Real Estate Portfolio Summary Information D
Portfolio and Other Supplementary Information E
Quarterly Information - Prior Four Quarters F
Percentage of Leased Space G
Largest 20 Tenants - FSP Owned Portfolio H
Definition of Funds From Operations (FFO) I
 

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Franklin Street Properties Corp. Financial Results
Supplementary Schedule A
Condensed Consolidated Income (Loss) Statements
(Unaudited)
         
For the For the
Three Months Ended Six Months Ended
        June 30,     June 30,
(in thousands, except per share amounts)       2013     2012     2013     2012
       
Revenue:
Rental $ 46,322 $ 35,570 $ 89,469 $ 71,873
Related party revenue:
Management fees and interest income from loans 1,643 3,045 3,265 5,661
Other         12         39         43         73  
Total revenue         47,977         38,654         92,777         77,607  
 
Expenses:
Real estate operating expenses 11,116 8,604 21,886 17,301
Real estate taxes and insurance 7,311 5,493 13,908 11,189
Depreciation and amortization 17,124 13,003 33,111 26,074
Selling, general and administrative 3,204 2,236 5,736 4,313
Interest         4,174         4,037         8,382         7,714  
                           
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