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Franklin Street Properties Corp. Announces Second Quarter 2021 Results

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Maintains 2021 Disposition Guidance

Anticipates Aggregate Gross Proceeds of Approximately $350 Million to $450 Million

Sale Proceeds to be Primarily Used for Repayment of Debt

FSP Remains Committed to its Sunbelt and Mountain West Market Focus

WAKEFIELD, Mass., August 03, 2021--(BUSINESS WIRE)--Franklin Street Properties Corp. (the "Company", "FSP", "we" or "our") (NYSE American: FSP), a real estate investment trust (REIT), announced its results for the second quarter ended June 30, 2021.

George J. Carter, Chairman and Chief Executive Officer, commented as follows:

"As the second half of 2021 begins, FSP remains focused on its two previously stated primary objectives for full year 2021: strengthening the balance sheet through debt reduction and leasing progress.

From the perspective of strengthening the balance sheet, during the second quarter ended June 30, 2021, we sold four properties for aggregate gross proceeds of approximately $237 million and used the proceeds primarily to repay debt: We repaid approximately $155 million of term loan indebtedness and all of the approximately $47.5 million that had been drawn under our revolving line of credit. As of June 30, 2021, our full $600 million revolving line of credit was available for use and we had approximately $24 million in cash on our balance sheet.

From a leasing perspective, we continue to see increasing exploratory activity by existing and new prospective tenants at our properties. Converting prospective tenant interest and activity into actual, signed leases is generally taking longer than has historically been the case. We believe that this is primarily due to tenant uncertainty regarding the strength and durability of the post-COVID-19 economy and, as a consequence, delayed decision making regarding the amount and configuration of office space needed to accommodate employees. Discussions with prospective tenants have convinced us that businesses will have better clarity on these subjects by Fall 2021.

At this time, we are reaffirming our previously announced 2021 disposition guidance to be in the range of $350 million to $450 million in aggregate gross proceeds, inclusive of the $237 million of gross proceeds in 2021 realized to date. We are also continuing our suspension of Net Income and FFO guidance due primarily to uncertainty surrounding the timing and amount of proceeds from further property dispositions. Proceeds from additional property dispositions will continue to be used primarily for debt reduction. However, the prices achieved in our dispositions have confirmed our belief that our stock price may at times not be fully reflective of the value of our underlying assets. As a result, we may use a portion of proceeds from asset sales for the repurchase of up to $50 million of our outstanding common shares as market conditions warrant pursuant to our previously announced stock repurchase program.

We expect to make continued progress in achieving our objectives over the balance of 2021."

Financial Highlights

  • GAAP net income was $16.2 million, or $0.15 for the three months ended June 30, 2021.

  • Funds From Operations (FFO) was $14.8 million, or $0.14 per basic and diluted share, for the three months ended June 30, 2021.

  • We pulled forward approximately $2.0 million of costs included in interest expense from breaking interest rate swaps and writing off deferred financing costs related to two term loans that were repaid on June 4, 2021. These costs would have been incurred in the second half of 2021 if the term loans had not been repaid. FFO excluding these pulled forward costs would have been $16.7 million, or $0.16 per basic and diluted share for the three months ended June 30, 2021.

  • Adjusted Funds From Operations (AFFO) was $0.05 per basic and diluted share for the three months ended June 30, 2021.

  • As noted above, we pulled forward approximately $1.9 million of costs included in interest expense from breaking interest rate swaps related to two term loans that were repaid on June 4, 2021. AFFO excluding these pulled forward costs would have been $6.8 million, or $0.06 per basic and diluted share for the three months ended June 30, 2021.

  • During the three months ended June 30, 2021, we repaid approximately $155 million of term loan indebtedness and all of the approximately $47.5 million that was drawn under our revolving line of credit.

  • Since September 30, 2020, we have strengthened our balance sheet by repaying approximately $235 million of indebtedness from the proceeds of asset sales. As of September 30, 2020, our total indebtedness was approximately $1 billion, and as of June 30, 2021, our total indebtedness was approximately $765 million.

  • We have $624.2 million of liquidity as of June 30, 2021, consisting of $24.2 million of cash and $600.0 million available to draw under our revolving line of credit.

  • Our debt is entirely unsecured and we have no scheduled debt maturities until January 12, 2022, when the revolving line of credit matures, which had no amount drawn at June 30, 2021.

Investment Update

  • On May 27, 2021, we sold One Ravinia, Two Ravinia and One Overton Park in Atlanta Georgia for aggregate gross proceeds of approximately $219.5 million.

  • On June 29, 2021, we sold Loudoun Technology Center in Sterling, Virginia for gross proceeds of approximately $17.3 million.

  • Continue to actively work on the potential sale of select properties that we believe have met their near-term value objectives and whose value may not be accurately reflected in our share price.

  • Reaffirming 2021 disposition guidance to be in the range of $350 to $450 million in aggregate gross proceeds. Disposition proceeds intended to be used primarily for strengthening the balance sheet through debt reduction.

  • Current and potential disposition properties include: One and Two River Crossing in Indianapolis, Indiana; Timberlake Corporate Center in Chesterfield, Missouri; Meadow Point and Stonecroft in Chantilly, Virginia; and Innsbrook Corporate Center in Glen Allen, Virginia.

Leasing Update

  • The list of potential tenant prospects continues to grow with increasing anticipation and optimism in regards to improving occupancies in the fall months ahead. We are currently tracking approximately 850,000 square feet of new prospective tenants, of which 500,000 square feet represents potential net absorption in the next nine months. In addition, we are currently working with approximately 100,000 square feet of existing tenants for renewals, early extensions and potential expansions.

  • During the first half of 2021, we leased approximately 563,000 square feet, of which approximately 465,000 square feet was with existing tenants. During the year ended December 31, 2020, we leased approximately 1,130,000 square feet, of which approximately 762,000 square feet was with existing tenants.

  • Our directly owned real estate portfolio of 30 owned properties (including one redevelopment property) totaling approximately 8.3 million square feet, was approximately 78.5% leased as of June 30, 2021, compared to approximately 81.0% leased as of March 31, 2021. The decrease in the leased percentage is primarily a result of property dispositions of properties that on average had a higher percentage of available space leased than the balance of our property portfolio during the second quarter ended June 30, 2021.

  • Lease expirations for the remainder of 2021 are approximately 139,000 square feet, representing approximately 1.7% of our owned portfolio.

  • The weighted average GAAP base rent per square foot achieved on leasing activity during the six months ended June 30, 2021 was $29.51, or 0.8% higher than average rents in the respective properties as applicable compared to the year ended December 31, 2020. The average lease term on leases in the six months ended June 30, 2021, was 8.3 years compared to 8.3 years for the full year of 2020. Overall the portfolio weighted average rent per occupied square foot was $30.89 as of June 30, 2021 compared to $29.60 as of December 31, 2020.

Dividend Update

On July 6, 2021, the Company announced that its Board of Directors declared a regular quarterly cash dividend for the three months ended June 30, 2021 of $0.09 per share of common stock that will be paid on August 5, 2021 to stockholders of record on July 16, 2021.

Non-GAAP Financial Information

A reconciliation of Net income to FFO, AFFO and Sequential Same Store NOI and our definitions of FFO, AFFO and Sequential Same Store NOI can be found on Supplementary Schedules H and I.

2021 Net Income, FFO and Disposition Guidance

At this time, due primarily to uncertainty surrounding the timing and amount of proceeds received from property dispositions, we are continuing suspension of Net Income and FFO guidance. However, we are maintaining our previously announced disposition guidance for full-year 2021, as we execute on our strategy to dispose of certain properties that we believe have met their near-term value objectives and whose value may not be accurately reflected in our share price. Anticipated dispositions in 2021 are estimated to result in aggregate gross proceeds in the range of approximately $350 million to $450 million, inclusive of the $237 million of gross proceeds in 2021 realized to date. We intend to use the proceeds of any such dispositions primarily for the repayment of debt under our revolving line of credit and term loan facilities, repurchases of our stock, any special distributions required to meet REIT requirements, and general corporate purposes. This guidance reflects our current expectations of economic and market conditions and is subject to change. We will update our disposition guidance quarterly in our earnings releases. There can be no assurance that the Company’s actual results will not differ materially from the estimates set forth above.

Real Estate Update

Supplementary schedules provide property information for the Company’s owned and managed real estate portfolio as of June 30, 2021. 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.fspreit.com.

Today’s news release, along with other news about Franklin Street Properties Corp., is available on the Internet at www.fspreit.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.

Earnings Call

A conference call is scheduled for August 4, 2021 at 11:00 a.m. (ET) to discuss the second quarter 2021 results. To access the call, please dial 1-800-464-8240. Internationally, the call may be accessed by dialing 1-412-902-6521. To access the call from Canada, please dial 1-866-605-3852. To listen via live audio webcast, please visit the Webcasts & Presentations section in the Investor Relations section of the Company's website (www.fspreit.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.

About Franklin Street Properties Corp.

Franklin Street Properties Corp., based in Wakefield, Massachusetts, is focused on infill and central business district (CBD) office properties in the U.S. Sunbelt and Mountain West, as well as select opportunistic markets. 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.fspreit.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, such as those relating to our ability to lease space in the future, expectations for dispositions and the repayment of debt in future periods, value creation/enhancement in future periods and expectations for growth and leasing activities in future periods that are based on current judgments and current knowledge of management and 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, adverse changes in general economic or local market conditions, including as a result of the COVID-19 pandemic and other potential infectious disease outbreaks and terrorist attacks or other acts of violence, which may negatively affect the markets in which we and our tenants operate, increasing interest rates, 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, adverse changes in energy prices, which if sustained, could negatively impact occupancy and rental rates in the markets in which we own properties, including energy-influenced markets such as Dallas, Denver and Houston, uncertainty relating to the completion and timing of the disposition of properties under agreement, any inability to dispose of other properties on acceptable terms and any delays in the timing of any such anticipated dispositions, 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, delays in construction schedules, unanticipated increases in construction costs, 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, 2020, 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, acquisitions, dispositions, 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

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 Loss

I

Franklin Street Properties Corp. Financial Results

Supplementary Schedule A

Condensed Consolidated Statements of Operations

(Unaudited)

For the

For the

Three Months Ended

Six Months Ended

June 30,

June 30,

(in thousands, except per share amounts)

2021

2020

2021

2020

Revenue:

Rental

$

55,722

$

60,398

$

114,345

$

122,965

Related party revenue:

Management fees and interest income from loans

417

405

827

808

Other

6

5

12

18

Total revenue

56,145

60,808

115,184

123,791

Expenses:

Real estate operating expenses

15,352

15,470

31,291

32,768

Real estate taxes and insurance

11,895

12,307

24,261

24,069

Depreciation and amortization

19,136

22,245

43,517

44,583

General and administrative

3,962

3,817

8,108

7,342

Interest

10,054

8,980

18,654

18,043

Total expenses

60,399

62,819

125,831

126,805

Loss on extinguishment of debt

(167

)

(167

)

Gain on sale of properties, net

20,626

20,626

Income (loss) before taxes

16,205

(2,011

)

9,812

(3,014

)

Tax expense

56

64

123

132

Net income (loss)

$

16,149

$

(2,075

)

$

9,689

$

(3,146

)

Weighted average number of shares outstanding, basic and diluted

107,359

107,287

107,344

107,278

Net income (loss) per share, basic and diluted

$

0.15

$

(0.02

)

$

0.09

$

(0.03

)

Franklin Street Properties Corp. Financial Results

Supplementary Schedule B

Condensed Consolidated Balance Sheets

(Unaudited)

June 30,

December 31,

(in thousands, except share and par value amounts)

2021

2020

Assets:

Real estate assets:

Land

$

170,377

$

189,155

Buildings and improvements

1,731,690

1,938,629

Fixtures and equipment

11,643

12,949

1,913,710

2,140,733

Less accumulated depreciation

500,163

538,717

Real estate assets, net

1,413,547

1,602,016

Acquired real estate leases, less accumulated amortization of $50,431 and $55,447, respectively

21,932

28,206

Cash, cash equivalents and restricted cash

24,180

4,150

Tenant rent receivables

3,116

7,656

Straight-line rent receivable

61,475

67,789

Prepaid expenses and other assets

5,405

5,752

Related party mortgage loan receivables

21,000

21,000

Office computers and furniture, net of accumulated depreciation of $1,166 and $1,443, respectively

167

163

Deferred leasing commissions, net of accumulated amortization of $24,840 and $30,411, respectively

49,793

56,452

Total assets

$

1,600,615

$

1,793,184

Liabilities and Stockholders’ Equity:

Liabilities:

Bank note payable

$

$

3,500

Term loans payable, less unamortized financing costs of $1,849 and $2,677, respectively

563,151

717,323

Series A & Series B Senior Notes, less unamortized financing costs of $740 and $822, respectively

199,260

199,178

Accounts payable and accrued expenses

50,799

72,058

Accrued compensation

2,309

3,918

Tenant security deposits

6,807

8,677

Lease liability

1,350

1,536

Other liabilities: derivative liabilities

9,425

17,311

Acquired unfavorable real estate leases, less accumulated amortization of $3,320 and $4,031, respectively

829

1,592

Total liabilities

833,930

1,025,093

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, 107,394,763 and 107,328,199 shares issued and outstanding, respectively

11

11

Additional paid-in capital

1,357,469

1,357,131

Accumulated other comprehensive loss

(9,425

)

(17,311

)

Accumulated distributions in excess of accumulated earnings

(581,370

)

(571,740

)

Total stockholders’ equity

766,685

768,091

Total liabilities and stockholders’ equity

$

1,600,615

$

1,793,184

...

Franklin Street Properties Corp. Financial Results

Supplementary Schedule C

Condensed Consolidated Statements of Cash Flows

(Unaudited)

For the

Six Months Ended

June 30,

(in thousands)

2021

2020

Cash flows from operating activities:

Net income (loss)

$

9,689

$

(3,146

)

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

Depreciation and amortization expense

44,910

46,055

Amortization of above and below market leases

(38

)

(147

)

Shares issued as compensation

338

337

Loss on extinguishment of debt

167

Gain on sale of properties, net

(20,626

)

Decrease in allowance for doubtful accounts and write-off of accounts receivable

(13

)

Changes in operating assets and liabilities:

Tenant rent receivables

4,540

(328

)

Straight-line rents

(2,858

)

(1,343

)

Lease acquisition costs

(623

)

(838

)

Prepaid expenses and other assets

(485

)

21

Accounts payable and accrued expenses

(18,520

)

(10,006

)

Accrued compensation

(1,609

)

(1,122

)

Tenant security deposits

(1,870

)

(191

)

Payment of deferred leasing commissions

(6,926

)

(3,682

)

Net cash provided by operating activities

6,089

25,597

Cash flows from investing activities:

Property improvements, fixtures and equipment

(36,957

)

(43,189

)

Proceeds received from sale of properties

228,717

Net cash provided by (used in) investing activities

191,760

(43,189

)

Cash flows from financing activities:

Distributions to stockholders

(19,319

)

(19,308

)

Borrowings under bank note payable

66,500

60,000

Repayments of bank note payable

(70,000

)

(30,000

)

Repayment on term loan payable

(155,000

)

Net cash provided by (used in) financing activities

(177,819

)

10,692

Net increase (decrease) in cash, cash equivalents and restricted cash

20,030

(6,900

)

Cash, cash equivalents and restricted cash, beginning of year

4,150

9,790

Cash, cash equivalents and restricted cash, end of period

$

24,180

$

2,890

Franklin Street Properties Corp. Earnings Release

Supplementary Schedule D

Real Estate Portfolio Summary Information

(Unaudited & Approximated)

Commercial portfolio lease expirations (1)

Total

% of

Year

Square Feet

Portfolio

2021

138,940

1.7%

2022

700,637

8.4%

2023

364,384

4.4%

2024

807,949

9.7%

2025

481,670

5.8%

Thereafter (2)

5,846,037

70.0%

8,339,617

100.0%

______________________

(1)

Percentages are determined based upon total square footage.

(2)

Includes 1,683,590 square feet of vacancies at our operating properties and 111,469 square feet of vacancies at our redevelopment property as of June 30, 2021. We define redevelopment properties as properties being developed, redeveloped or where redevelopment is complete, but are in lease-up and that are not stabilized.

(dollars & square feet in 000's)

As of June 30, 2021 (a)

# of

% of

Square

% of

State

Properties

Investment

Portfolio

Feet

Portfolio

Colorado

6

$

545,324

38.6%

2,625

31.5%

Texas

9

336,623

23.8%

2,420

29.0%

Georgia

2

153,949

10.9%

782

9.4%

Minnesota

3

122,575

8.7%

758

9.1%

Virginia

3

67,613

4.8%

548

6.6%

Florida

1

62,229

4.4%

213

2.5%

Illinois

2

45,645

3.2%

372

4.4%

Missouri

2

41,993

3.0%

352

4.2%

Indiana

1

29,894

2.1%

206

2.5%

North Carolina

1

7,702

0.5%

64

0.8%

Total

30

$

1,413,547

100.0%

8,340

100.0%

(a)

Includes investment in our redevelopment property. We define redevelopment properties as properties being developed, redeveloped or where redevelopment is complete, but are in lease-up and that are not stabilized.

Franklin Street Properties Corp. Earnings Release

Supplementary Schedule E

Portfolio and Other Supplementary Information

(Unaudited & Approximated)

Recurring Capital Expenditures

Six Months

(in thousands)

For the Three Months Ended

Ended

31-Mar-21

30-Jun-21

30-Jun-21

Tenant improvements

$

4,491

$

4,277

$

8,768

Deferred leasing costs

2,597

1,922

4,519

Non-investment capex

5,336

3,793

9,129

$

12,424

$

9,992

$

22,416

For the Three Months Ended

Year Ended

31-Mar-20

30-Jun-20

30-Sep-20

31-Dec-20

31-Dec-20

Tenant improvements

$

10,716

$

13,531

$

8,022

$

837

$

33,106

Deferred leasing costs

2,730

603

2,033

7,432

12,798

Non-investment capex

4,527

6,581

6,373

6,105

23,586

$

17,973

$

20,715

$

16,428

$

14,374

$

69,490

Square foot & leased percentages

June 30,

December 31,

2021

2020

Operating Properties:

Number of properties

29

32

Square feet

8,228,148

9,331,489

Leased percentage

79.5%

85.0%

Redevelopment Properties (a):

Number of properties

1

2

Square feet

111,469

324,651

Leased percentage

0.0%

48.0%

Total Owned Properties:

Number of properties

30

34

Square feet

8,339,617

9,656,140

Leased percentage

78.5%

83.8%

Managed Properties - Single Asset REITs (SARs):

Number of properties

2

2

Square feet

348,545

348,545

Total Operating, Redevelopment and Managed Properties:

Number of properties

32

36

Square feet

8,688,162

10,004,685

(a)

We define redevelopment properties as properties being developed, redeveloped or where redevelopment is complete, but are in lease-up and that are not stabilized.

Franklin Street Properties Corp. Earnings Release

Supplementary Schedule F

Percentage of Leased Space

(Unaudited & Estimated)

First

Second

% Leased (1)

Quarter

% Leased (1)

Quarter

as of

Average %

as of

Average %

Property Name

Location

Square Feet

31-Mar-21

Leased (2)

30-Jun-21

Leased (2)

1

FOREST PARK

Charlotte, NC

64,198

78.4%

78.4%

78.4

%

78.4

%

2

MEADOW POINT

Chantilly, VA

138,537

91.1%

91.1%

91.1

%

91.1

%

3

TIMBERLAKE

Chesterfield, MO

234,496

100.0%

100.0%

100.0

%

100.0

%

4

TIMBERLAKE EAST

Chesterfield, MO

117,036

100.0%

100.0%

100.0

%

100.0

%

5

NORTHWEST POINT

Elk Grove Village, IL

177,095

100.0%

100.0%

100.0

%

100.0

%

6

PARK TEN

Houston, TX

157,460

71.7%

71.7%

71.7

%

71.7

%

7

PARK TEN PHASE II

Houston, TX

156,746

95.0%

95.0%

95.0

%

95.0

%

8

GREENWOOD PLAZA

Englewood, CO

196,236

100.0%

100.0%

100.0

%

100.0

%

9

ADDISON

Addison, TX

289,325

83.7%

83.7%

83.7

%

83.7

%

10

COLLINS CROSSING

Richardson, TX

300,887

84.4%

83.8%

84.4

%

84.4

%

11

INNSBROOK

Glen Allen, VA

298,183

57.2%

57.2%

57.2

%

57.2

%

12

RIVER CROSSING

Indianapolis, IN

205,729

100.0%

100.0%

100.0

%

100.0

%

13

LIBERTY PLAZA

Addison, TX

216,952

74.1%

74.1%

79.0

%

79.0

%

14

380 INTERLOCKEN

Broomfield, CO

240,359

76.0%

76.0%

60.5

%

60.5

%

15

390 INTERLOCKEN

Broomfield, CO

241,512

99.4%

99.4%

99.4

%

99.4

%

16

BLUE LAGOON

Miami, FL

213,182

73.1%

73.1%

73.1

%

73.1

%

17

ELDRIDGE GREEN

Houston, TX

248,399

100.0%

100.0%

100.0

%

100.0

%

ONE OVERTON PARK

Atlanta, GA

95.5%

95.6%

(4

)

(4

)

LOUDOUN TECH

Dulles, VA

98.9%

98.9%

(5

)

(5

)

18

4807 STONECROFT (3)

Chantilly, VA

111,469

0.0%

0.0%

0.0

%

0.0

%

19

121 SOUTH EIGHTH ST

Minneapolis, MN

298,121

92.0%

92.2%

91.6

%

91.8

%

20

801 MARQUETTE AVE

Minneapolis, MN

129,821

91.8%

91.8%

91.8

%

91.8

%

21

LEGACY TENNYSON CTR

Plano, TX

207,049

41.1%

60.7%

41.1

%

41.1

%

22

ONE LEGACY

Plano, TX

214,110

56.4%

56.4%

56.4

%

56.4

%

23

909 DAVIS

Evanston, IL

195,098

93.3%

93.3%

93.3

%

93.3

%

ONE RAVINIA DRIVE

Atlanta, GA

80.8%

80.8%

(4

)

(4

)

TWO RAVINIA

Atlanta, GA

68.6%

68.7%

(4

)

(4

)

24

WESTCHASE I & II

Houston, TX

629,025

52.4%

52.4%

54.4

%

54.4

%

25

1999 BROADWAY

Denver, CO

680,255

67.2%

72.4%

66.5

%

66.5

%

26

999 PEACHTREE

Atlanta, GA

621,946

84.5%

84.5%

85.0

%

84.8

%

27

1001 17TH STREET

Denver, CO

655,420

96.0%

96.0%

95.2

%

95.5

%

28

PLAZA SEVEN

Minneapolis, MN

330,096

86.7%

87.3%

85.5

%

85.5

%

29

PERSHING PLAZA

Atlanta, GA

160,145

98.9%

98.9%

12.4

%

70.1

%

30

600 17TH STREET

Denver, CO

610,730

87.5%

87.7%

84.9

%

85.5

%

OWNED PORTFOLIO

8,339,617

81.0%

81.8%

78.5

%

79.8

%

______________________

(1)

% Leased as of month's end includes all leases that expire on the last day of the quarter.

(2)

Average quarterly percentage is the average of the end of the month leased percentage for each of the three months during the quarter.

(3)

We define redevelopment properties as properties being developed, redeveloped or where redevelopment is complete, but are in lease-up and that are not stabilized.

(4)

Properties sold on May 27, 2021.

(5)

Property sold on June 29, 2021.

Franklin Street Properties Corp. Earnings Release

Supplementary Schedule G

Largest 20 Tenants – FSP Owned Portfolio

(Unaudited & Estimated)

The following table includes the largest 20 tenants in FSP’s owned portfolio based on total square feet:

As of June 30, 2021

% of

Tenant

Sq Ft

Portfolio

1

Centene Management Company, LLC

317,101

3.8%

2

CITGO Petroleum Corporation

248,399

3.0%

3

Ovintiv USA Inc.

234,495

2.8%

4

Eversheds Sutherland (US) LLP

179,868

2.2%

5

EOG Resources, Inc.

169,167

2.0%

6

US Government

168,573

2.0%

7

The Vail Corporation

164,636

2.0%

8

Lennar Homes, LLC

155,808

1.9%

9

Citicorp Credit Services, Inc

146,260

1.7%

10

Kaiser Foundation Health Plan

120,979

1.4%

11

Argo Data Resource Corporation

114,200

1.4%

12

VMWare, Inc.

100,853

1.2%

13

Deluxe Corporation

98,922

1.2%

14

Ping Identity Corp.

89,856

1.1%

15

Common Grounds, LLC

76,984

0.9%

16

Somerset CPAs, P.C.

71,163

0.9%

17

ADS Alliance Data Systems, Inc.

67,274

0.8%

18

PricewaterhouseCoopers LLP

66,304

0.8%

19

DirecTV, Inc.

66,226

0.8%

20

Hall and Evans, LLC

65,878

0.8%

Total

2,722,946

32.7%

Franklin Street Properties Corp. Earnings Release
Supplementary Schedule H
Reconciliation and Definitions of Funds From Operations ("FFO") and
Adjusted Funds From Operations ("AFFO")

A reconciliation of Net income to FFO and AFFO is shown below and a definition of FFO and AFFO is provided on Supplementary Schedule I. Management believes FFO and AFFO are used broadly throughout the real estate investment trust (REIT) industry as measurements of performance. The Company has included the National Association of Real Estate Investment Trusts (NAREIT) FFO definition as of May 17, 2016 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 and AFFO may not be comparable to FFO or AFFO reported by other REITs or real estate companies that define FFO or AFFO differently.

Reconciliation of Net Income to FFO and AFFO:

Three Months Ended

Six Months Ended

June 30,

June 30,

(In thousands, except per share amounts)

2021

2020

2021

2020

Net income (loss)

$

16,149

$

(2,075

)

$

9,689

$

(3,146

)

Gain on sale of properties, net

(20,626

)

(20,626

)

Depreciation & amortization

19,130

22,170

43,479

44,435

NAREIT FFO

14,653

20,095

32,542

41,289

Lease Acquisition costs

69

99

185

197

Funds From Operations (FFO)

$

14,722

$

20,194

$

32,727

$

41,486

Funds From Operations (FFO)

$

14,722

$

20,194

$

32,727

$

41,486

Amortization of deferred financing costs

853

726

1,560

1,474

Shares issued as compensation

338

337

338

337

Straight-line rent

(1,041

)

(377

)

(2,945

)

(1,343

)

Tenant improvements

(4,277

)

(13,531

)

(8,768

)

(24,247

)

Leasing commissions

(1,922

)

(603

)

(4,519

)

(3,333

)

Non-investment capex

(3,793

)

(6,581

)

(9,129

)

(11,108

)

Adjusted Funds From Operations (AFFO)

$

4,880

$

165

$

9,264

$

3,266

Per Share Data

EPS

$

0.15

$

(0.02

)

$

0.09

$

(0.03

)

FFO

$

0.14

$

0.19

$

0.30

$

0.39

AFFO

$

0.05

$

0.00

$

0.09

$

0.03

Weighted average shares (basic and diluted)

107,359

107,287

107,344

107,278

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, acquisition costs of newly acquired properties that are not capitalized and lease acquisition costs that are not capitalized plus depreciation and amortization, including amortization of acquired above and below market lease intangibles and impairment charges on mortgage loans, 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 as of May 17, 2016 in the table and note that other REITs may not define FFO in accordance with the current NAREIT definition or may interpret the current NAREIT definition differently than we do.

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

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 the amortization of deferred financing costs, (5) plus the value of shares issued as compensation and (6) 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.

Franklin Street Properties Corp. Earnings Release
Supplementary Schedule I
Reconciliation and Definition of Sequential Same Store results to property Net Operating Income (NOI) and Net Income

Net Operating Income ("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 extinguishment of debt, 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 Sequential Same Store. The comparative Sequential Same Store results include properties held for the periods presented and exclude our redevelopment properties. We also exclude properties that have been placed in service, but that do not have operating activity for all periods presented, 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. The calculations of NOI and Sequential Same Store are shown in the following table:

Rentable

Square Feet

Three Months Ended

Three Months Ended

Inc

%

(in thousands)

or RSF

30-Jun-21

31-Mar-21

(Dec)

Change

Region

East

437

$

685

$

592

$

93

15.7

%

MidWest

1,558

5,252

5,378

(126

)

(2.3

)

%

South

3,202

9,207

9,555

(348

)

(3.6

)

%

West

2,624

9,902

10,369

(467

)

(4.5

)

%

Property NOI* from Operating Properties

7,821

25,046

25,894

(848

)

(3.3

)

%

Dispositions and Redevelopment Properties (a)

519

2,954

3,867

(913

)

(2.6

)

%

NOI*

8,340

$

28,000

$

29,761

$

(1,761

)

(5.9

)

%

Sequential Same Store

$

25,046

$

25,894

$

(848

)

(3.3

)

%

Less Nonrecurring

Items in NOI* (b)

34

32

2

(0.0

)

%

Comparative

Sequential Same Store

$

25,012

$

25,862

$

(850

)

(3.3

)

%

Three Months Ended

Three Months Ended

Reconciliation to Net income

30-Jun-21

31-Mar-21

Net income (loss)

$

16,149

$

(6,460

)

Add (deduct):

Loss on extinguishment of debt

167

Gain on sale of properties, net

(20,626

)

Management fee income

(403

)

(465

)

Depreciation and amortization

19,136

24,381

Amortization of above/below market leases

(6

)

(32

)

General and administrative

3,962

4,146

Interest expense

10,054

8,600

Interest income

(399

)

(394

)

Non-property specific items, net

(34

)

(15

)

NOI*

$

28,000

$

29,761

(a)

We define redevelopment properties as properties being developed, redeveloped or where redevelopment is complete, but are in lease-up and that are not stabilized. We also include properties that have been placed in service, but that do not have operating activity for all periods presented.

(b)

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

*Excludes NOI from investments in and interest income from secured loans to non-consolidated REITs.

View source version on businesswire.com: https://www.businesswire.com/news/home/20210803005958/en/

Contacts

Georgia Touma (877) 686-9496