Franklin Street Properties Corp. Announces First Quarter 2013 Results

Franklin Street Properties Corp. Announces First Quarter 2013 Results

WAKEFIELD, Ma.--(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 $20.6 million or $0.25 per share for the first quarter ended March 31, 2013. Net income was $4.4 million or $0.05 per share for the first 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 March 31,

(in 000's except per

Increase

share data)

2013

2012

(Decrease)

Net Income

$

4,401

$

5,738

$

(1,337

)

FFO

$

20,616

$

19,571

$

1,045

Per Share Data:

EPS

$

0.05

$

0.07

$

(0.02

)

FFO

$

0.25

$

0.24

$

0.01

Weighted average

shares (diluted)

82,937

82,937

-


Comparing results for the first quarter of 2013 to the same period in 2012, FFO increased $1.0 million or $0.01 per share. The FFO increase was primarily from higher property income due to two 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 interest expense and G&A. Net Income and EPS was $4.4 million or $0.05 per share for the first quarter of 2013 compared to net income of $5.7 million and $0.07 per share for the first quarter of 2012.

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

"For the first quarter of 2013, FSP's profits as represented by FFO totaled approximately $20.6 million or $0.25 per share, essentially flat compared to the fourth quarter of 2012. Dividend distributions declared for the first quarter of 2013, which are payable on May 16, 2013, will be approximately $15.8 million or $0.19 per share.

Our directly-owned real estate portfolio of 37 properties totaling 7,856,859 square feet was approximately 94.4% leased as of March 31, 2013, up from approximately 94.0% leased at the end of the fourth quarter of 2012. We anticipate 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 two years, which we continue to proactively reduce. As of the end of the first quarter, only 2.2% of our commercial square footage is scheduled to expire during the balance of 2013, down from 3.6% at the start of 2013. Overall tenant improvement expenditures and leasing costs continue to moderate in relation to the level of rental revenues being achieved and we are optimistic that by year end 2013, our portfolio's leased percentage can exceed its current 94.4% level.

Recently, we put under purchase/sale agreement two new real estate investments in long-standing FSP core investment markets for a total acquisition cost of approximately $341,000,000. We believe both properties have superior near-term growth/value-add opportunities and are being purchased at substantial discounts to replacement cost. We expect to close on the purchase of both properties on or before July 1, 2013. The first property, located at 999 Peachtree Street in the "Midtown" sub-market of Atlanta, Georgia, is 28-stories, totals approximately 621,007 rentable square feet and is under agreement to purchase for $157,900,000. The second property, located at 1999 Broadway in the CBD (central business district) of Denver, Colorado, is 43-stories, totals approximately 680,277 rentable square feet and is under agreement to purchase for $183,000,000. We believe the successful acquisition of these two properties has the potential to add significantly to our anticipated growth in rental revenues/FFO this year and in the future.

As the second quarter of 2013 begins, FSP will maintain its focus on continuing to grow profits by (1) increasing occupancy and rents in its existing property portfolio while (2) acquiring additional real estate investments that have the potential to meaningfully contribute to that effort.

We continue to be very optimistic about our prospects for growth during 2013 and beyond."

Dividend Announcement

On April 12, 2013, the Company announced that its Board of Directors declared a regular quarterly dividend for the three months ended March 31, 2013 of $0.19 per share of common stock payable on May 16, 2013 to stockholders of record on April 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 March 31, 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 May 1, 2013 at 10:00 a.m. (ET) to discuss the first 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

March 31,

(In thousands, except per share amounts)

2013

2012

Net income

$

4,401

$

5,738

(Gain) loss on sale of or equity interest in properties,

less applicable income tax

-

-

GAAP (income) loss from non-consolidated REITs

187

(391

)

Distributions from non-consolidated REITs

27

929

Depreciation & amortization

15,984

13,295

NAREIT FFO

20,599

19,571

Acquisition costs of new properties

17

-

Funds From Operations (FFO)

$

20,616

$

19,571

Per Share Data

EPS

$

0.05

$

0.07

FFO

$

0.25

$

0.24

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 achieving current income and long-term growth through investments in commercial properties. Our real estate portfolio consists of office properties. 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

Franklin Street Properties Corp. Financial Results

Supplementary Schedule A

Condensed Consolidated Income (Loss) Statements


(Unaudited)

For the

Three Months Ended

March 31,

(in thousands, except per share amounts)

2013

2012

Revenue:

Rental

$

43,147

$

36,303

Related party revenue:

Management fees and interest income from loans

1,622

2,616

Other

31

34

Total revenue

44,800

38,953

Expenses:

Real estate operating expenses

10,770

8,697

Real estate taxes and insurance

6,597

5,696

Depreciation and amortization

15,987

13,071

Selling, general and administrative

2,532

2,077

Interest

4,208

3,677

Total expenses

40,094

33,218

Income before interest income, equity in earnings of

non-consolidated REITs and taxes

4,706

5,735

Interest income

1

8

Equity in earnings (losses) of non-consolidated REITs

(187

)

391

Income before taxes on income

4,520

6,134

Taxes on income

119

79

Income from continuing operations

4,401

6,055

Discontinued operations:

Loss from discontinued operations, net of income tax

-

(317

)

Gain (loss) on sale of property, less applicable income tax

-

-

Total discontinued operations

-

(317

)

Net income

$

4,401

$

5,738

Weighted average number of shares outstanding,

basic and diluted

82,937

82,937

Earnings per share, basic and diluted, attributable to:

Continuing operations

$

0.05

$

0.07

Discontinued operations

-

-

Net income per share, basic and diluted

$

0.05

$

0.07

Franklin Street Properties Corp. Financial Results

Supplementary Schedule B

Condensed Consolidated Balance Sheets


(Unaudited)

March 31,

December 31,

(in thousands, except share and par value amounts)

2013

2012

Assets:

Real estate assets, net

$

1,136,204

$

1,142,628

Acquired real estate leases, less accumulated amortization

of $45,700 and $40,062, respectively

105,882

111,982

Investment in non-consolidated REITs

81,746

81,960

Cash and cash equivalents

17,282

21,267

Restricted cash

583

575

Tenant rent receivables, less allowance for doubtful accounts

of $110 and $1,300, respectively

2,357

1,749

Straight-line rent receivable, less allowance for doubtful accounts

of $135 and $135, respectively

36,287

35,441

Prepaid expenses

2,438

1,106

Related party mortgage loan receivables

96,896

93,896

Other assets

7,574

12,655

Office computers and furniture, net of accumulated depreciation

of $626 and $584, respectively

533

544

Deferred leasing commissions, net of accumulated amortization

of $12,607 and $11,812, respectively

24,920

23,376

Total assets

$

1,512,702

$

1,527,179

Liabilities and Stockholders' Equity:

Liabilities:

Bank note payable

$

221,750

$

216,750

Term loan payable

400,000

400,000

Accounts payable and accrued expenses

25,493

31,122

Accrued compensation