Recent Quotes View Full List My Watchlist Create Watchlist Indicators DJI Nasdaq Composite SPX Gold Crude Oil Hydroworld Market Index Markets Stocks ETFs Tools Overview News Currencies International Treasuries Franklin Street Properties Corp. Announces Second Quarter 2023 Results By: Franklin Street Properties Corp. via Business Wire August 01, 2023 at 17:10 PM EDT 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, 2023. George J. Carter, Chairman and Chief Executive Officer, commented as follows: “As the third quarter of 2023 begins, we continue to believe that the current price of our common stock does not accurately reflect the value of our underlying real estate assets. We will seek to increase shareholder value by (1) pursuing the sale of select properties where we believe that short to intermediate term valuation potential has been reached and (2) striving to lease vacant space. We intend to use proceeds from property dispositions primarily for debt reduction. We look forward to the remainder of 2023 and beyond with anticipation and optimism.” Financial Highlights GAAP net loss was $8.4 million and $6.0 million, or $0.08 and $0.06 per basic and diluted share for the three and six months ended June 30, 2023, respectively. Funds From Operations (FFO) was $7.1 million and $15.5 million, or $0.07 and $0.15 per basic and diluted share, for the three and six months ended June 30, 2023, respectively. Leasing Highlights During the six months ended June 30, 2023, we leased approximately 445,000 square feet, including 176,000 square feet of new leases. Our directly owned real estate portfolio of 20 owned properties, totaling approximately 6.1 million square feet, was approximately 75.7% leased as of June 30, 2023, compared to approximately 75.6% leased as of December 31, 2022. The increase in the leased percentage is primarily a result of leasing completed during the six months ended June 30, 2023, which was partially offset by lease expirations and a property disposition. The weighted average GAAP base rent per square foot achieved on leasing activity during the six months ended June 30, 2023, was $29.14, or 7.2% higher than average rents in the respective properties for the year ended December 31, 2022. The average lease term on leases signed during the six months ended June 30, 2023, was 6.6 years compared to 6.4 years during the year ended December 31, 2022. Overall, the portfolio weighted average rent per occupied square foot was $31.21 as of June 30, 2023, compared to $30.48 as of December 31, 2022. During the second quarter, we entered into a lease amendment with an existing tenant, Kaiser Foundation Health Plan, Inc., at our Greenwood Plaza property in Englewood, Colorado. The lease amendment extends the term applicable to all of Kaiser’s approximately 121,000 square foot premises by 5 years, from May 31, 2024, to May 31, 2029. During the second quarter, we entered into a new lease with the Commonwealth of Virginia, Department of General Services, at our Innsbrook property in Glen Allen, Virginia. The lease is for approximately 100,000 square feet, has a term of 10.5 years and is anticipated to commence during December 2023. We are currently tracking approximately 500,000 square feet of new prospective tenants, including approximately 300,000 square feet of prospective tenants that have identified our properties on their respective short lists of potential locations. We believe that our continuing portfolio of real estate is well located, primarily in the Sunbelt and Mountain West geographic regions, and consists of high-quality assets with upside leasing potential. Investment Highlights We remain committed to seeking to sell select properties during 2023 and using proceeds primarily for debt reduction. Since December 2020, we have completed the sale of properties resulting in gross proceeds of approximately $852 million and reflecting an average price per square foot of approximately $220. During the third quarter of 2023, we expect to close on the sale of Forest Park in Charlotte, North Carolina for approximately $9.2 million in gross proceeds. We recorded an impairment of $0.8 million on this property for the expected loss on sale and classified the property as an asset held-for-sale during the three months ended June 30, 2023. Proceeds will be used primarily for debt reduction. We have entered into purchase and sale agreements with three different (and unrelated) purchasers for the potential sale of three properties that would result in aggregate gross proceeds of approximately $156 million. These transactions remain subject to customary closing conditions, including without limitation, successful completion by the purchasers of due diligence inspection periods. If successful, these transactions are expected to close during the fourth quarter of 2023 and the proceeds are intended to be used primarily for the repayment of debt. Assuming that the three properties currently under purchase and sale agreement, together with our Forest Park property, close at their currently negotiated purchase prices, those four dispositions would reflect an average price per square foot of approximately $250. Dividends On July 7, 2023, we announced that our Board of Directors declared a quarterly cash dividend for the three months ended June 30, 2023 of $0.01 per share of common stock that will be paid on August 10, 2023 to stockholders of record on July 21, 2023. Consolidation of Sponsored REIT As of January 1, 2023, we consolidated the operations of our Monument Circle sponsored REIT into our financial statements. On October 29, 2021, we agreed to amend and restate our existing loan to Monument Circle that is secured by a mortgage on real estate owned by Monument Circle, which we refer to as the Sponsored REIT Loan. The amended and restated Sponsored REIT Loan extended the maturity date from December 6, 2022 to June 30, 2023 (subject to further extension to September 30, 2023), increased the aggregate principal amount of the loan from $21 million to $24 million, and included certain other modifications. On June 26, 2023, the maturity date was extended to September 30, 2023. In consideration of our agreement to amend and restate the Sponsored REIT Loan, we obtained from the stockholders of Monument Circle the right to vote their shares in favor of any sale of the property owned by Monument Circle any time on or after January 1, 2023. As a result of our obtaining this right to vote shares, GAAP variable interest entity (VIE) rules required us to consolidate Monument Circle as of January 1, 2023. A gain on consolidation of approximately $0.4 million was recognized in the three months ended March 31, 2023. Additional information about the consolidation of Monument Circle can be found in Note 1, “Organization, Properties, Basis of Presentation, Financial Instruments, and Recent Accounting Standards – Variable Interest Entities (VIEs)” and Note 2, “Related Party Transactions and Investments in Non-Consolidated Entities - Management fees and interest income from loans”, in the Notes to Consolidated Financial Statements included in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2023. Non-GAAP Financial Information A reconciliation of Net income to FFO, Adjusted Funds From Operations (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. 2023 Net Income, FFO and Disposition Guidance At this time, due primarily to economic conditions and uncertainty surrounding the timing and amount of proceeds received from property dispositions, we are continuing suspension of Net Income, FFO and property disposition guidance. Real Estate Update Supplementary schedules provide property information for the Company’s owned and consolidated properties as of June 30, 2023. 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 2, 2023 at 11:00 a.m. (ET) to discuss the second quarter 2023 results. To access the call, please dial 888-440-4368 and use conference ID 5398803. Internationally, the call may be accessed by dialing 646-960-0856 and using conference ID 5398803. 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 expectations for future potential leasing activity, expectations for future potential property dispositions, the payment of dividends 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, inflation rates, 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, and any delays in the timing of 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, increases in the level of general and administrative costs as a percentage of revenues as revenues decrease as a result of property dispositions, 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, 2022, which 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) 2023 2022 2023 2022 Revenue: Rental $ 36,257 $ 40,831 $ 74,024 $ 82,628 Related party revenue: Management fees and interest income from loans — 467 — 927 Other 9 6 9 13 Total revenue 36,266 41,304 74,033 83,568 Expenses: Real estate operating expenses 12,140 12,344 24,830 25,178 Real estate taxes and insurance 7,169 9,043 14,142 17,762 Depreciation and amortization 14,645 18,186 29,372 33,856 General and administrative 3,767 3,981 7,584 7,765 Interest 6,084 5,664 11,890 11,030 Total expenses 43,805 49,218 87,818 95,591 Loss on extinguishment of debt — — (67 ) — Gain on consolidation of Sponsored REIT — — 394 — Impairment and loan loss reserve — (1,140 ) — (1,140 ) Gain on sale of properties and impairment of asset held for sale, net (806 ) — 7,586 — Loss before taxes (8,345 ) (9,054 ) (5,872 ) (13,163 ) Tax expense 75 56 142 105 Net loss $ (8,420 ) $ (9,110 ) $ (6,014 ) $ (13,268 ) Weighted average number of shares outstanding, basic and diluted 103,330 103,193 103,283 103,441 Net loss per share, basic and diluted $ (0.08 ) $ (0.09 ) $ (0.06 ) $ (0.13 ) 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) 2023 2022 Assets: Real estate assets: Land $ 128,588 $ 126,645 Buildings and improvements 1,362,939 1,388,869 Fixtures and equipment 11,612 11,151 1,503,139 1,526,665 Less accumulated depreciation 421,180 423,417 Real estate assets, net 1,081,959 1,103,248 Acquired real estate leases, less accumulated amortization of $20,962 and $20,243, respectively 8,828 10,186 Asset held for sale 8,860 — Cash, cash equivalents and restricted cash 6,697 6,632 Tenant rent receivables 1,938 2,201 Straight-line rent receivable 50,267 52,739 Prepaid expenses and other assets 5,648 6,676 Related party mortgage loan receivable, less allowance for credit loss of $0 and $4,237, respectively — 19,763 Other assets: derivative asset — 4,358 Office computers and furniture, net of accumulated depreciation of $1,149 and $1,115, respectively 127 154 Deferred leasing commissions, net of accumulated amortization of $20,327 and $19,043, respectively 34,985 35,709 Total assets $ 1,199,309 $ 1,241,666 Liabilities and Stockholders’ Equity: Liabilities: Bank note payable $ 75,000 $ 48,000 Term loans payable, less unamortized financing costs of $529 and $250, respectively 124,471 164,750 Series A & Series B Senior Notes, less unamortized financing costs of $412 and $494, respectively 199,588 199,506 Accounts payable and accrued expenses 32,501 50,366 Accrued compensation 2,286 3,644 Tenant security deposits 5,666 5,710 Lease liability 550 759 Acquired unfavorable real estate leases, less accumulated amortization of $537 and $574, respectively 153 195 Total liabilities 440,215 472,930 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, 103,430,353 and 103,235,914 shares issued and outstanding, respectively 10 10 Additional paid-in capital 1,335,091 1,334,776 Accumulated other comprehensive income 2,480 4,358 Accumulated distributions in excess of accumulated earnings (578,487 ) (570,408 ) Total stockholders’ equity 759,094 768,736 Total liabilities and stockholders’ equity $ 1,199,309 $ 1,241,666 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) 2023 2022 Cash flows from operating activities: Net loss $ (6,014 ) $ (13,268 ) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization expense 30,634 34,863 Amortization of above and below market leases (30 ) (54 ) Amortization of other comprehensive income into interest expense (1,726 ) — Shares issued as compensation 315 394 Loss on extinguishment of debt 67 — Gain on consolidation of Sponsored REIT (394 ) — Impairment and loan loss reserve — 1,140 Gain on sale of properties and impairment of asset held for sale, net (7,586 ) — Changes in operating assets and liabilities: Tenant rent receivables 263 (673 ) Straight-line rents 322 (2,904 ) Lease acquisition costs (824 ) (2,426 ) Prepaid expenses and other assets (267 ) (1,153 ) Accounts payable and accrued expenses (8,747 ) (18,268 ) Accrued compensation (1,358 ) (2,452 ) Tenant security deposits (44 ) (400 ) Payment of deferred leasing commissions (4,137 ) (5,033 ) Net cash provided by (used in) operating activities 474 (10,234 ) Cash flows from investing activities: Property improvements, fixtures and equipment (18,369 ) (21,496 ) Consolidation of Sponsored REIT 3,048 — Proceeds received from sales of properties 28,098 — Net cash provided by (used in) investing activities 12,777 (21,496 ) Cash flows from financing activities: Distributions to stockholders (2,065 ) (51,924 ) Proceeds received from termination of interest rate swap 4,206 — Stock repurchases — (4,843 ) Borrowings under bank note payable 62,000 60,000 Repayments of bank note payable (35,000 ) (5,000 ) Repayments of term loans payable (40,000 ) — Deferred financing costs (2,327 ) (2,561 ) Net cash used in financing activities (13,186 ) (4,328 ) Net increase (decrease) in cash, cash equivalents and restricted cash 65 (36,058 ) Cash, cash equivalents and restricted cash, beginning of year 6,632 40,751 Cash, cash equivalents and restricted cash, end of period $ 6,697 $ 4,693 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 2023 177,038 2.8 % 2024 622,040 9.9 % 2025 438,551 7.0 % 2026 617,649 9.9 % 2027 334,289 5.3 % Thereafter (2) 4,081,091 65.1 % 6,270,658 100.0 % (1) Percentages are determined based upon total square footage. (2) Includes 1,674,276 square feet of vacancies at our owned and consolidated properties as of June 30, 2023. (dollars & square feet in 000's) As of June 30, 2023 % of Square % of State Properties Investment Portfolio Feet Portfolio Colorado 4 $ 457,647 42.3 % 2,140 34.1 % Texas 9 330,946 30.6 % 2,424 38.6 % Georgia 1 52,444 4.9 % 160 2.6 % Minnesota 3 119,425 11.0 % 758 12.1 % Virginia 1 31,821 2.9 % 298 4.8 % Florida 1 70,152 6.5 % 213 3.4 % Indiana 1 19,524 1.8 % 214 3.4 % North Carolina (a) 1 - 0.0 % 64 1.0 % Total 21 $ 1,081,959 100.0 % 6,271 100.0 % (a) Property was classified as an asset held for sale as of June 30, 2023. Franklin Street Properties Corp. Earnings Release Supplementary Schedule E Portfolio and Other Supplementary Information (Unaudited & Approximated) Recurring Capital Expenditures (in thousands) For the Three Months Ended Year to Date 31-Mar-23 30-Jun-23 30-Jun-23 Tenant improvements $ 3,047 $ 4,381 $ 7,428 Deferred leasing costs 908 3,230 4,138 Non-investment capex 2,967 2,042 5,009 $ 6,922 $ 9,653 $ 16,575 (in thousands) For the Three Months Ended Year Ended 31-Mar-22 30-Jun-22 30-Sep-22 31-Dec-22 31-Dec-22 Tenant improvements $ 1,877 $ 5,453 $ 6,813 $ 7,508 $ 21,651 Deferred leasing costs 3,032 1,327 2,053 1,152 7,564 Non-investment capex 5,065 6,736 9,289 9,074 30,164 $ 9,974 $ 13,516 $ 18,155 $ 17,734 $ 59,379 Square foot & leased percentages June 30, December 31, 2023 2022 Owned Properties: Number of properties (a) 20 21 Square feet 6,056,898 6,239,530 Leased percentage 75.7 % 75.6 % Consolidated Property - Single Asset REIT (SAR): Number of properties 1 — Square feet 213,760 — Leased percentage 4.1 % Total Owned and Consolidated Properties: Number of properties 21 21 Square feet 6,270,658 6,239,530 Leased percentage 73.3 % 75.6 % (a) Includes property that was classified as an asset held for sale as of June 30, 2023. 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-23 Leased (2) 30-Jun-23 Leased (2) 1 FOREST PARK (3) Charlotte, NC 64,198 78.4 % 78.4 % 78.4 % 78.4 % 2 PARK TEN Houston, TX 157,609 90.8 % 86.6 % 90.8 % 90.8 % 3 PARK TEN PHASE II Houston, TX 156,746 95.0 % 95.0 % 95.0 % 95.0 % 4 GREENWOOD PLAZA Englewood, CO 196,236 66.3 % 66.3 % 66.3 % 66.3 % 5 ADDISON Addison, TX 289,333 83.0 % 83.0 % 83.0 % 83.0 % 6 COLLINS CROSSING Richardson, TX 300,887 97.1 % 96.8 % 97.1 % 97.1 % 7 INNSBROOK Glen Allen, VA 298,183 47.8 % 47.8 % 81.3 % 81.3 % 8 LIBERTY PLAZA Addison, TX 217,841 72.9 % 72.9 % 71.6 % 71.8 % 9 BLUE LAGOON Miami, FL 213,182 98.5 % 98.5 % 98.5 % 98.5 % 10 ELDRIDGE GREEN Houston, TX 248,399 100.0 % 100.0 % 100.0 % 100.0 % 11 121 SOUTH EIGHTH ST Minneapolis, MN 298,121 84.5 % 84.5 % 79.6 % 82.2 % 12 801 MARQUETTE AVE Minneapolis, MN 129,691 91.8 % 91.8 % 91.8 % 91.8 % 13 LEGACY TENNYSON CTR Plano, TX 209,461 49.0 % 49.0 % 62.5 % 53.5 % 14 ONE LEGACY Plano, TX 214,110 69.3 % 69.3 % 73.8 % 73.8 % 15 WESTCHASE I & II Houston, TX 629,025 59.0 % 60.3 % 58.7 % 58.7 % 16 1999 BROADWAY Denver, CO 682,639 61.9 % 65.2 % 61.0 % 61.6 % 17 1001 17TH STREET Denver, CO 648,861 70.8 % 70.3 % 71.0 % 71.0 % 18 PLAZA SEVEN Minneapolis, MN 330,096 65.0 % 71.6 % 64.4 % 64.3 % 19 PERSHING PLAZA Atlanta, GA 160,145 79.8 % 79.8 % 79.8 % 79.8 % 20 600 17TH STREET Denver, CO 612,135 80.5 % 79.3 % 80.8 % 80.6 % OWNED PORTFOLIO 6,056,898 73.9 % 74.9 % 75.7 % 75.6 % 21 MONUMENT CIRCLE (4) Charlotte, NC 213,760 4.1 % 4.1 % 4.1 % 4.1 % OWNED & CONSOLIDATED PORTFOLIO 6,270,658 71.5 % 72.5 % 73.3 % 73.2 % (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) Property was classified as an asset held for sale as of June 30, 2023. (4) Consolidated property as of January 1, 2023, which was previously was a managed property. Franklin Street Properties Corp. Earnings Release Supplementary Schedule G Largest 20 Tenants – FSP Owned and Consolidated Portfolio (Unaudited & Estimated) The following table includes the largest 20 tenants in FSP’s owned and consolidated portfolio based on total square feet: As of June 30, 2023 % of Tenant Sq Ft Portfolio 1 CITGO Petroleum Corporation 248,399 4.0 % 2 EOG Resources, Inc. 169,167 2.7 % 3 US Government 168,573 2.7 % 4 Lennar Homes, LLC 155,808 2.5 % 5 Kaiser Foundation Health Plan, Inc. 120,979 1.9 % 6 Argo Data Resource Corporation 114,200 1.8 % 7 Swift, Currie, McGhee & Hiers, LLP 101,296 1.6 % 8 Commonwealth of Virginia 100,010 1.6 % 9 Deluxe Corporation 98,922 1.6 % 10 Ping Identity Corp. 89,856 1.4 % 11 Permian Resources Operating, LLC 67,856 1.1 % 12 Bread Financial Payments, Inc. 67,274 1.1 % 13 PricewaterhouseCoopers LLP 66,304 1.1 % 14 Hall and Evans LLC 65,878 1.0 % 15 Cyxtera Management, Inc. 61,826 1.0 % 16 Precision Drilling (US) Corporation 59,569 0.9 % 17 EMC Corporation 57,100 0.9 % 18 ID Software, LLC 57,100 0.9 % 19 Olin Corporation 54,080 0.9 % 20 Unique Vacations, Inc. 53,119 0.8 % Total 1,977,316 31.5 % 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 Loss to FFO and AFFO: Three Months Ended Six Months Ended June 30, June 30, (In thousands, except per share amounts) 2023 2022 2023 2022 Net loss $ (8,420 ) $ (9,110 ) $ (6,014 ) $ (13,268 ) Gain on consolidation of Sponsored REIT — — (394 ) — Impairment and loan loss reserve — 1,140 — 1,140 Gain on sale of properties and impairment of asset held for sale, net 806 — (7,586 ) — Depreciation & amortization 14,633 18,141 29,342 33,802 NAREIT FFO 7,019 10,171 15,348 21,674 Lease Acquisition costs 91 86 169 165 Funds From Operations (FFO) $ 7,110 $ 10,257 $ 15,517 $ 21,839 Funds From Operations (FFO) $ 7,110 $ 10,257 $ 15,517 $ 21,839 Loss on extinguishment of debt — — 67 — Amortization of deferred financing costs 672 481 1,261 1,007 Shares issued as compensation 315 394 315 394 Straight-line rent 653 (1,688 ) 322 (2,904 ) Tenant improvements (4,381 ) (5,453 ) (7,428 ) (7,330 ) Leasing commissions (3,230 ) (1,327 ) (4,138 ) (4,359 ) Non-investment capex (2,042 ) (6,736 ) (5,009 ) (11,801 ) Adjusted Funds From Operations (AFFO) $ (903 ) $ (4,072 ) $ 907 $ (3,154 ) Per Share Data EPS $ (0.08 ) $ (0.09 ) $ (0.06 ) $ (0.13 ) FFO $ 0.07 $ 0.10 $ 0.15 $ 0.21 AFFO $ (0.01 ) $ (0.04 ) $ 0.01 $ (0.03 ) Weighted average shares (basic and diluted) 103,330 103,193 103,283 103,441 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 loss on extinguishment of debt that is non-cash, (3) excluding our proportionate share of FFO and including distributions received, from non-consolidated REITs, (4) excluding the effect of straight-line rent, (5) plus the amortization of deferred financing costs, (6) plus the value of shares issued as compensation and (7) 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 all periods presented. We 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-23 31-Mar-23 (Dec) Change Region East 362 $ 553 $ 478 $ 75 15.7 % MidWest 758 1,718 2,239 (521 ) (23.3 ) % South 2,797 8,128 7,933 195 2.5 % West 2,140 6,412 6,422 (10 ) (0.2 ) % Property NOI* from Owned Properties 6,057 16,811 17,072 (261 ) (1.5 ) % Disposition and Acquisition Properties (a) 214 (240 ) 668 (908 ) (5.1 ) % NOI* 6,271 $ 16,571 $ 17,740 $ (1,169 ) (6.6 ) % Sequential Same Store $ 16,811 $ 17,072 $ (261 ) (1.5 ) % Less Nonrecurring Items in NOI* (b) 301 1,292 (991 ) 6.1 % Comparative Sequential Same Store $ 16,510 $ 15,780 $ 730 4.6 % Reconciliation to Three Months Ended Three Months Ended Net income (loss) 30-Jun-23 31-Mar-23 Net income (loss) $ (8,420 ) $ 2,406 Add (deduct): Loss on extinguishment of debt — 67 Gain on consolidation of Sponsored REIT — (394 ) Impairment and loan loss reserve — — Gain on sale of properties, net 806 (8,392 ) Management fee income (427 ) (374 ) Depreciation and amortization 14,645 14,727 Amortization of above/below market leases (12 ) (18 ) General and administrative 3,768 3,817 Interest expense 6,084 5,806 Interest income — — Non-property specific items, net 127 95 NOI* $ 16,571 $ 17,740 (a) We define Disposition and Acquisition Properties as properties that were sold or acquired or consolidated and 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/20230801022335/en/Contacts Georgia Touma (877) 686-9496 Data & News supplied by www.cloudquote.io Stock quotes supplied by Barchart Quotes delayed at least 20 minutes. By accessing this page, you agree to the following Privacy Policy and Terms and Conditions.
Franklin Street Properties Corp. Announces Second Quarter 2023 Results By: Franklin Street Properties Corp. via Business Wire August 01, 2023 at 17:10 PM EDT 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, 2023. George J. Carter, Chairman and Chief Executive Officer, commented as follows: “As the third quarter of 2023 begins, we continue to believe that the current price of our common stock does not accurately reflect the value of our underlying real estate assets. We will seek to increase shareholder value by (1) pursuing the sale of select properties where we believe that short to intermediate term valuation potential has been reached and (2) striving to lease vacant space. We intend to use proceeds from property dispositions primarily for debt reduction. We look forward to the remainder of 2023 and beyond with anticipation and optimism.” Financial Highlights GAAP net loss was $8.4 million and $6.0 million, or $0.08 and $0.06 per basic and diluted share for the three and six months ended June 30, 2023, respectively. Funds From Operations (FFO) was $7.1 million and $15.5 million, or $0.07 and $0.15 per basic and diluted share, for the three and six months ended June 30, 2023, respectively. Leasing Highlights During the six months ended June 30, 2023, we leased approximately 445,000 square feet, including 176,000 square feet of new leases. Our directly owned real estate portfolio of 20 owned properties, totaling approximately 6.1 million square feet, was approximately 75.7% leased as of June 30, 2023, compared to approximately 75.6% leased as of December 31, 2022. The increase in the leased percentage is primarily a result of leasing completed during the six months ended June 30, 2023, which was partially offset by lease expirations and a property disposition. The weighted average GAAP base rent per square foot achieved on leasing activity during the six months ended June 30, 2023, was $29.14, or 7.2% higher than average rents in the respective properties for the year ended December 31, 2022. The average lease term on leases signed during the six months ended June 30, 2023, was 6.6 years compared to 6.4 years during the year ended December 31, 2022. Overall, the portfolio weighted average rent per occupied square foot was $31.21 as of June 30, 2023, compared to $30.48 as of December 31, 2022. During the second quarter, we entered into a lease amendment with an existing tenant, Kaiser Foundation Health Plan, Inc., at our Greenwood Plaza property in Englewood, Colorado. The lease amendment extends the term applicable to all of Kaiser’s approximately 121,000 square foot premises by 5 years, from May 31, 2024, to May 31, 2029. During the second quarter, we entered into a new lease with the Commonwealth of Virginia, Department of General Services, at our Innsbrook property in Glen Allen, Virginia. The lease is for approximately 100,000 square feet, has a term of 10.5 years and is anticipated to commence during December 2023. We are currently tracking approximately 500,000 square feet of new prospective tenants, including approximately 300,000 square feet of prospective tenants that have identified our properties on their respective short lists of potential locations. We believe that our continuing portfolio of real estate is well located, primarily in the Sunbelt and Mountain West geographic regions, and consists of high-quality assets with upside leasing potential. Investment Highlights We remain committed to seeking to sell select properties during 2023 and using proceeds primarily for debt reduction. Since December 2020, we have completed the sale of properties resulting in gross proceeds of approximately $852 million and reflecting an average price per square foot of approximately $220. During the third quarter of 2023, we expect to close on the sale of Forest Park in Charlotte, North Carolina for approximately $9.2 million in gross proceeds. We recorded an impairment of $0.8 million on this property for the expected loss on sale and classified the property as an asset held-for-sale during the three months ended June 30, 2023. Proceeds will be used primarily for debt reduction. We have entered into purchase and sale agreements with three different (and unrelated) purchasers for the potential sale of three properties that would result in aggregate gross proceeds of approximately $156 million. These transactions remain subject to customary closing conditions, including without limitation, successful completion by the purchasers of due diligence inspection periods. If successful, these transactions are expected to close during the fourth quarter of 2023 and the proceeds are intended to be used primarily for the repayment of debt. Assuming that the three properties currently under purchase and sale agreement, together with our Forest Park property, close at their currently negotiated purchase prices, those four dispositions would reflect an average price per square foot of approximately $250. Dividends On July 7, 2023, we announced that our Board of Directors declared a quarterly cash dividend for the three months ended June 30, 2023 of $0.01 per share of common stock that will be paid on August 10, 2023 to stockholders of record on July 21, 2023. Consolidation of Sponsored REIT As of January 1, 2023, we consolidated the operations of our Monument Circle sponsored REIT into our financial statements. On October 29, 2021, we agreed to amend and restate our existing loan to Monument Circle that is secured by a mortgage on real estate owned by Monument Circle, which we refer to as the Sponsored REIT Loan. The amended and restated Sponsored REIT Loan extended the maturity date from December 6, 2022 to June 30, 2023 (subject to further extension to September 30, 2023), increased the aggregate principal amount of the loan from $21 million to $24 million, and included certain other modifications. On June 26, 2023, the maturity date was extended to September 30, 2023. In consideration of our agreement to amend and restate the Sponsored REIT Loan, we obtained from the stockholders of Monument Circle the right to vote their shares in favor of any sale of the property owned by Monument Circle any time on or after January 1, 2023. As a result of our obtaining this right to vote shares, GAAP variable interest entity (VIE) rules required us to consolidate Monument Circle as of January 1, 2023. A gain on consolidation of approximately $0.4 million was recognized in the three months ended March 31, 2023. Additional information about the consolidation of Monument Circle can be found in Note 1, “Organization, Properties, Basis of Presentation, Financial Instruments, and Recent Accounting Standards – Variable Interest Entities (VIEs)” and Note 2, “Related Party Transactions and Investments in Non-Consolidated Entities - Management fees and interest income from loans”, in the Notes to Consolidated Financial Statements included in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2023. Non-GAAP Financial Information A reconciliation of Net income to FFO, Adjusted Funds From Operations (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. 2023 Net Income, FFO and Disposition Guidance At this time, due primarily to economic conditions and uncertainty surrounding the timing and amount of proceeds received from property dispositions, we are continuing suspension of Net Income, FFO and property disposition guidance. Real Estate Update Supplementary schedules provide property information for the Company’s owned and consolidated properties as of June 30, 2023. 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 2, 2023 at 11:00 a.m. (ET) to discuss the second quarter 2023 results. To access the call, please dial 888-440-4368 and use conference ID 5398803. Internationally, the call may be accessed by dialing 646-960-0856 and using conference ID 5398803. 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 expectations for future potential leasing activity, expectations for future potential property dispositions, the payment of dividends 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, inflation rates, 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, and any delays in the timing of 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, increases in the level of general and administrative costs as a percentage of revenues as revenues decrease as a result of property dispositions, 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, 2022, which 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) 2023 2022 2023 2022 Revenue: Rental $ 36,257 $ 40,831 $ 74,024 $ 82,628 Related party revenue: Management fees and interest income from loans — 467 — 927 Other 9 6 9 13 Total revenue 36,266 41,304 74,033 83,568 Expenses: Real estate operating expenses 12,140 12,344 24,830 25,178 Real estate taxes and insurance 7,169 9,043 14,142 17,762 Depreciation and amortization 14,645 18,186 29,372 33,856 General and administrative 3,767 3,981 7,584 7,765 Interest 6,084 5,664 11,890 11,030 Total expenses 43,805 49,218 87,818 95,591 Loss on extinguishment of debt — — (67 ) — Gain on consolidation of Sponsored REIT — — 394 — Impairment and loan loss reserve — (1,140 ) — (1,140 ) Gain on sale of properties and impairment of asset held for sale, net (806 ) — 7,586 — Loss before taxes (8,345 ) (9,054 ) (5,872 ) (13,163 ) Tax expense 75 56 142 105 Net loss $ (8,420 ) $ (9,110 ) $ (6,014 ) $ (13,268 ) Weighted average number of shares outstanding, basic and diluted 103,330 103,193 103,283 103,441 Net loss per share, basic and diluted $ (0.08 ) $ (0.09 ) $ (0.06 ) $ (0.13 ) 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) 2023 2022 Assets: Real estate assets: Land $ 128,588 $ 126,645 Buildings and improvements 1,362,939 1,388,869 Fixtures and equipment 11,612 11,151 1,503,139 1,526,665 Less accumulated depreciation 421,180 423,417 Real estate assets, net 1,081,959 1,103,248 Acquired real estate leases, less accumulated amortization of $20,962 and $20,243, respectively 8,828 10,186 Asset held for sale 8,860 — Cash, cash equivalents and restricted cash 6,697 6,632 Tenant rent receivables 1,938 2,201 Straight-line rent receivable 50,267 52,739 Prepaid expenses and other assets 5,648 6,676 Related party mortgage loan receivable, less allowance for credit loss of $0 and $4,237, respectively — 19,763 Other assets: derivative asset — 4,358 Office computers and furniture, net of accumulated depreciation of $1,149 and $1,115, respectively 127 154 Deferred leasing commissions, net of accumulated amortization of $20,327 and $19,043, respectively 34,985 35,709 Total assets $ 1,199,309 $ 1,241,666 Liabilities and Stockholders’ Equity: Liabilities: Bank note payable $ 75,000 $ 48,000 Term loans payable, less unamortized financing costs of $529 and $250, respectively 124,471 164,750 Series A & Series B Senior Notes, less unamortized financing costs of $412 and $494, respectively 199,588 199,506 Accounts payable and accrued expenses 32,501 50,366 Accrued compensation 2,286 3,644 Tenant security deposits 5,666 5,710 Lease liability 550 759 Acquired unfavorable real estate leases, less accumulated amortization of $537 and $574, respectively 153 195 Total liabilities 440,215 472,930 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, 103,430,353 and 103,235,914 shares issued and outstanding, respectively 10 10 Additional paid-in capital 1,335,091 1,334,776 Accumulated other comprehensive income 2,480 4,358 Accumulated distributions in excess of accumulated earnings (578,487 ) (570,408 ) Total stockholders’ equity 759,094 768,736 Total liabilities and stockholders’ equity $ 1,199,309 $ 1,241,666 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) 2023 2022 Cash flows from operating activities: Net loss $ (6,014 ) $ (13,268 ) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization expense 30,634 34,863 Amortization of above and below market leases (30 ) (54 ) Amortization of other comprehensive income into interest expense (1,726 ) — Shares issued as compensation 315 394 Loss on extinguishment of debt 67 — Gain on consolidation of Sponsored REIT (394 ) — Impairment and loan loss reserve — 1,140 Gain on sale of properties and impairment of asset held for sale, net (7,586 ) — Changes in operating assets and liabilities: Tenant rent receivables 263 (673 ) Straight-line rents 322 (2,904 ) Lease acquisition costs (824 ) (2,426 ) Prepaid expenses and other assets (267 ) (1,153 ) Accounts payable and accrued expenses (8,747 ) (18,268 ) Accrued compensation (1,358 ) (2,452 ) Tenant security deposits (44 ) (400 ) Payment of deferred leasing commissions (4,137 ) (5,033 ) Net cash provided by (used in) operating activities 474 (10,234 ) Cash flows from investing activities: Property improvements, fixtures and equipment (18,369 ) (21,496 ) Consolidation of Sponsored REIT 3,048 — Proceeds received from sales of properties 28,098 — Net cash provided by (used in) investing activities 12,777 (21,496 ) Cash flows from financing activities: Distributions to stockholders (2,065 ) (51,924 ) Proceeds received from termination of interest rate swap 4,206 — Stock repurchases — (4,843 ) Borrowings under bank note payable 62,000 60,000 Repayments of bank note payable (35,000 ) (5,000 ) Repayments of term loans payable (40,000 ) — Deferred financing costs (2,327 ) (2,561 ) Net cash used in financing activities (13,186 ) (4,328 ) Net increase (decrease) in cash, cash equivalents and restricted cash 65 (36,058 ) Cash, cash equivalents and restricted cash, beginning of year 6,632 40,751 Cash, cash equivalents and restricted cash, end of period $ 6,697 $ 4,693 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 2023 177,038 2.8 % 2024 622,040 9.9 % 2025 438,551 7.0 % 2026 617,649 9.9 % 2027 334,289 5.3 % Thereafter (2) 4,081,091 65.1 % 6,270,658 100.0 % (1) Percentages are determined based upon total square footage. (2) Includes 1,674,276 square feet of vacancies at our owned and consolidated properties as of June 30, 2023. (dollars & square feet in 000's) As of June 30, 2023 % of Square % of State Properties Investment Portfolio Feet Portfolio Colorado 4 $ 457,647 42.3 % 2,140 34.1 % Texas 9 330,946 30.6 % 2,424 38.6 % Georgia 1 52,444 4.9 % 160 2.6 % Minnesota 3 119,425 11.0 % 758 12.1 % Virginia 1 31,821 2.9 % 298 4.8 % Florida 1 70,152 6.5 % 213 3.4 % Indiana 1 19,524 1.8 % 214 3.4 % North Carolina (a) 1 - 0.0 % 64 1.0 % Total 21 $ 1,081,959 100.0 % 6,271 100.0 % (a) Property was classified as an asset held for sale as of June 30, 2023. Franklin Street Properties Corp. Earnings Release Supplementary Schedule E Portfolio and Other Supplementary Information (Unaudited & Approximated) Recurring Capital Expenditures (in thousands) For the Three Months Ended Year to Date 31-Mar-23 30-Jun-23 30-Jun-23 Tenant improvements $ 3,047 $ 4,381 $ 7,428 Deferred leasing costs 908 3,230 4,138 Non-investment capex 2,967 2,042 5,009 $ 6,922 $ 9,653 $ 16,575 (in thousands) For the Three Months Ended Year Ended 31-Mar-22 30-Jun-22 30-Sep-22 31-Dec-22 31-Dec-22 Tenant improvements $ 1,877 $ 5,453 $ 6,813 $ 7,508 $ 21,651 Deferred leasing costs 3,032 1,327 2,053 1,152 7,564 Non-investment capex 5,065 6,736 9,289 9,074 30,164 $ 9,974 $ 13,516 $ 18,155 $ 17,734 $ 59,379 Square foot & leased percentages June 30, December 31, 2023 2022 Owned Properties: Number of properties (a) 20 21 Square feet 6,056,898 6,239,530 Leased percentage 75.7 % 75.6 % Consolidated Property - Single Asset REIT (SAR): Number of properties 1 — Square feet 213,760 — Leased percentage 4.1 % Total Owned and Consolidated Properties: Number of properties 21 21 Square feet 6,270,658 6,239,530 Leased percentage 73.3 % 75.6 % (a) Includes property that was classified as an asset held for sale as of June 30, 2023. 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-23 Leased (2) 30-Jun-23 Leased (2) 1 FOREST PARK (3) Charlotte, NC 64,198 78.4 % 78.4 % 78.4 % 78.4 % 2 PARK TEN Houston, TX 157,609 90.8 % 86.6 % 90.8 % 90.8 % 3 PARK TEN PHASE II Houston, TX 156,746 95.0 % 95.0 % 95.0 % 95.0 % 4 GREENWOOD PLAZA Englewood, CO 196,236 66.3 % 66.3 % 66.3 % 66.3 % 5 ADDISON Addison, TX 289,333 83.0 % 83.0 % 83.0 % 83.0 % 6 COLLINS CROSSING Richardson, TX 300,887 97.1 % 96.8 % 97.1 % 97.1 % 7 INNSBROOK Glen Allen, VA 298,183 47.8 % 47.8 % 81.3 % 81.3 % 8 LIBERTY PLAZA Addison, TX 217,841 72.9 % 72.9 % 71.6 % 71.8 % 9 BLUE LAGOON Miami, FL 213,182 98.5 % 98.5 % 98.5 % 98.5 % 10 ELDRIDGE GREEN Houston, TX 248,399 100.0 % 100.0 % 100.0 % 100.0 % 11 121 SOUTH EIGHTH ST Minneapolis, MN 298,121 84.5 % 84.5 % 79.6 % 82.2 % 12 801 MARQUETTE AVE Minneapolis, MN 129,691 91.8 % 91.8 % 91.8 % 91.8 % 13 LEGACY TENNYSON CTR Plano, TX 209,461 49.0 % 49.0 % 62.5 % 53.5 % 14 ONE LEGACY Plano, TX 214,110 69.3 % 69.3 % 73.8 % 73.8 % 15 WESTCHASE I & II Houston, TX 629,025 59.0 % 60.3 % 58.7 % 58.7 % 16 1999 BROADWAY Denver, CO 682,639 61.9 % 65.2 % 61.0 % 61.6 % 17 1001 17TH STREET Denver, CO 648,861 70.8 % 70.3 % 71.0 % 71.0 % 18 PLAZA SEVEN Minneapolis, MN 330,096 65.0 % 71.6 % 64.4 % 64.3 % 19 PERSHING PLAZA Atlanta, GA 160,145 79.8 % 79.8 % 79.8 % 79.8 % 20 600 17TH STREET Denver, CO 612,135 80.5 % 79.3 % 80.8 % 80.6 % OWNED PORTFOLIO 6,056,898 73.9 % 74.9 % 75.7 % 75.6 % 21 MONUMENT CIRCLE (4) Charlotte, NC 213,760 4.1 % 4.1 % 4.1 % 4.1 % OWNED & CONSOLIDATED PORTFOLIO 6,270,658 71.5 % 72.5 % 73.3 % 73.2 % (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) Property was classified as an asset held for sale as of June 30, 2023. (4) Consolidated property as of January 1, 2023, which was previously was a managed property. Franklin Street Properties Corp. Earnings Release Supplementary Schedule G Largest 20 Tenants – FSP Owned and Consolidated Portfolio (Unaudited & Estimated) The following table includes the largest 20 tenants in FSP’s owned and consolidated portfolio based on total square feet: As of June 30, 2023 % of Tenant Sq Ft Portfolio 1 CITGO Petroleum Corporation 248,399 4.0 % 2 EOG Resources, Inc. 169,167 2.7 % 3 US Government 168,573 2.7 % 4 Lennar Homes, LLC 155,808 2.5 % 5 Kaiser Foundation Health Plan, Inc. 120,979 1.9 % 6 Argo Data Resource Corporation 114,200 1.8 % 7 Swift, Currie, McGhee & Hiers, LLP 101,296 1.6 % 8 Commonwealth of Virginia 100,010 1.6 % 9 Deluxe Corporation 98,922 1.6 % 10 Ping Identity Corp. 89,856 1.4 % 11 Permian Resources Operating, LLC 67,856 1.1 % 12 Bread Financial Payments, Inc. 67,274 1.1 % 13 PricewaterhouseCoopers LLP 66,304 1.1 % 14 Hall and Evans LLC 65,878 1.0 % 15 Cyxtera Management, Inc. 61,826 1.0 % 16 Precision Drilling (US) Corporation 59,569 0.9 % 17 EMC Corporation 57,100 0.9 % 18 ID Software, LLC 57,100 0.9 % 19 Olin Corporation 54,080 0.9 % 20 Unique Vacations, Inc. 53,119 0.8 % Total 1,977,316 31.5 % 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 Loss to FFO and AFFO: Three Months Ended Six Months Ended June 30, June 30, (In thousands, except per share amounts) 2023 2022 2023 2022 Net loss $ (8,420 ) $ (9,110 ) $ (6,014 ) $ (13,268 ) Gain on consolidation of Sponsored REIT — — (394 ) — Impairment and loan loss reserve — 1,140 — 1,140 Gain on sale of properties and impairment of asset held for sale, net 806 — (7,586 ) — Depreciation & amortization 14,633 18,141 29,342 33,802 NAREIT FFO 7,019 10,171 15,348 21,674 Lease Acquisition costs 91 86 169 165 Funds From Operations (FFO) $ 7,110 $ 10,257 $ 15,517 $ 21,839 Funds From Operations (FFO) $ 7,110 $ 10,257 $ 15,517 $ 21,839 Loss on extinguishment of debt — — 67 — Amortization of deferred financing costs 672 481 1,261 1,007 Shares issued as compensation 315 394 315 394 Straight-line rent 653 (1,688 ) 322 (2,904 ) Tenant improvements (4,381 ) (5,453 ) (7,428 ) (7,330 ) Leasing commissions (3,230 ) (1,327 ) (4,138 ) (4,359 ) Non-investment capex (2,042 ) (6,736 ) (5,009 ) (11,801 ) Adjusted Funds From Operations (AFFO) $ (903 ) $ (4,072 ) $ 907 $ (3,154 ) Per Share Data EPS $ (0.08 ) $ (0.09 ) $ (0.06 ) $ (0.13 ) FFO $ 0.07 $ 0.10 $ 0.15 $ 0.21 AFFO $ (0.01 ) $ (0.04 ) $ 0.01 $ (0.03 ) Weighted average shares (basic and diluted) 103,330 103,193 103,283 103,441 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 loss on extinguishment of debt that is non-cash, (3) excluding our proportionate share of FFO and including distributions received, from non-consolidated REITs, (4) excluding the effect of straight-line rent, (5) plus the amortization of deferred financing costs, (6) plus the value of shares issued as compensation and (7) 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 all periods presented. We 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-23 31-Mar-23 (Dec) Change Region East 362 $ 553 $ 478 $ 75 15.7 % MidWest 758 1,718 2,239 (521 ) (23.3 ) % South 2,797 8,128 7,933 195 2.5 % West 2,140 6,412 6,422 (10 ) (0.2 ) % Property NOI* from Owned Properties 6,057 16,811 17,072 (261 ) (1.5 ) % Disposition and Acquisition Properties (a) 214 (240 ) 668 (908 ) (5.1 ) % NOI* 6,271 $ 16,571 $ 17,740 $ (1,169 ) (6.6 ) % Sequential Same Store $ 16,811 $ 17,072 $ (261 ) (1.5 ) % Less Nonrecurring Items in NOI* (b) 301 1,292 (991 ) 6.1 % Comparative Sequential Same Store $ 16,510 $ 15,780 $ 730 4.6 % Reconciliation to Three Months Ended Three Months Ended Net income (loss) 30-Jun-23 31-Mar-23 Net income (loss) $ (8,420 ) $ 2,406 Add (deduct): Loss on extinguishment of debt — 67 Gain on consolidation of Sponsored REIT — (394 ) Impairment and loan loss reserve — — Gain on sale of properties, net 806 (8,392 ) Management fee income (427 ) (374 ) Depreciation and amortization 14,645 14,727 Amortization of above/below market leases (12 ) (18 ) General and administrative 3,768 3,817 Interest expense 6,084 5,806 Interest income — — Non-property specific items, net 127 95 NOI* $ 16,571 $ 17,740 (a) We define Disposition and Acquisition Properties as properties that were sold or acquired or consolidated and 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/20230801022335/en/Contacts Georgia Touma (877) 686-9496
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, 2023. George J. Carter, Chairman and Chief Executive Officer, commented as follows: “As the third quarter of 2023 begins, we continue to believe that the current price of our common stock does not accurately reflect the value of our underlying real estate assets. We will seek to increase shareholder value by (1) pursuing the sale of select properties where we believe that short to intermediate term valuation potential has been reached and (2) striving to lease vacant space. We intend to use proceeds from property dispositions primarily for debt reduction. We look forward to the remainder of 2023 and beyond with anticipation and optimism.” Financial Highlights GAAP net loss was $8.4 million and $6.0 million, or $0.08 and $0.06 per basic and diluted share for the three and six months ended June 30, 2023, respectively. Funds From Operations (FFO) was $7.1 million and $15.5 million, or $0.07 and $0.15 per basic and diluted share, for the three and six months ended June 30, 2023, respectively. Leasing Highlights During the six months ended June 30, 2023, we leased approximately 445,000 square feet, including 176,000 square feet of new leases. Our directly owned real estate portfolio of 20 owned properties, totaling approximately 6.1 million square feet, was approximately 75.7% leased as of June 30, 2023, compared to approximately 75.6% leased as of December 31, 2022. The increase in the leased percentage is primarily a result of leasing completed during the six months ended June 30, 2023, which was partially offset by lease expirations and a property disposition. The weighted average GAAP base rent per square foot achieved on leasing activity during the six months ended June 30, 2023, was $29.14, or 7.2% higher than average rents in the respective properties for the year ended December 31, 2022. The average lease term on leases signed during the six months ended June 30, 2023, was 6.6 years compared to 6.4 years during the year ended December 31, 2022. Overall, the portfolio weighted average rent per occupied square foot was $31.21 as of June 30, 2023, compared to $30.48 as of December 31, 2022. During the second quarter, we entered into a lease amendment with an existing tenant, Kaiser Foundation Health Plan, Inc., at our Greenwood Plaza property in Englewood, Colorado. The lease amendment extends the term applicable to all of Kaiser’s approximately 121,000 square foot premises by 5 years, from May 31, 2024, to May 31, 2029. During the second quarter, we entered into a new lease with the Commonwealth of Virginia, Department of General Services, at our Innsbrook property in Glen Allen, Virginia. The lease is for approximately 100,000 square feet, has a term of 10.5 years and is anticipated to commence during December 2023. We are currently tracking approximately 500,000 square feet of new prospective tenants, including approximately 300,000 square feet of prospective tenants that have identified our properties on their respective short lists of potential locations. We believe that our continuing portfolio of real estate is well located, primarily in the Sunbelt and Mountain West geographic regions, and consists of high-quality assets with upside leasing potential. Investment Highlights We remain committed to seeking to sell select properties during 2023 and using proceeds primarily for debt reduction. Since December 2020, we have completed the sale of properties resulting in gross proceeds of approximately $852 million and reflecting an average price per square foot of approximately $220. During the third quarter of 2023, we expect to close on the sale of Forest Park in Charlotte, North Carolina for approximately $9.2 million in gross proceeds. We recorded an impairment of $0.8 million on this property for the expected loss on sale and classified the property as an asset held-for-sale during the three months ended June 30, 2023. Proceeds will be used primarily for debt reduction. We have entered into purchase and sale agreements with three different (and unrelated) purchasers for the potential sale of three properties that would result in aggregate gross proceeds of approximately $156 million. These transactions remain subject to customary closing conditions, including without limitation, successful completion by the purchasers of due diligence inspection periods. If successful, these transactions are expected to close during the fourth quarter of 2023 and the proceeds are intended to be used primarily for the repayment of debt. Assuming that the three properties currently under purchase and sale agreement, together with our Forest Park property, close at their currently negotiated purchase prices, those four dispositions would reflect an average price per square foot of approximately $250. Dividends On July 7, 2023, we announced that our Board of Directors declared a quarterly cash dividend for the three months ended June 30, 2023 of $0.01 per share of common stock that will be paid on August 10, 2023 to stockholders of record on July 21, 2023. Consolidation of Sponsored REIT As of January 1, 2023, we consolidated the operations of our Monument Circle sponsored REIT into our financial statements. On October 29, 2021, we agreed to amend and restate our existing loan to Monument Circle that is secured by a mortgage on real estate owned by Monument Circle, which we refer to as the Sponsored REIT Loan. The amended and restated Sponsored REIT Loan extended the maturity date from December 6, 2022 to June 30, 2023 (subject to further extension to September 30, 2023), increased the aggregate principal amount of the loan from $21 million to $24 million, and included certain other modifications. On June 26, 2023, the maturity date was extended to September 30, 2023. In consideration of our agreement to amend and restate the Sponsored REIT Loan, we obtained from the stockholders of Monument Circle the right to vote their shares in favor of any sale of the property owned by Monument Circle any time on or after January 1, 2023. As a result of our obtaining this right to vote shares, GAAP variable interest entity (VIE) rules required us to consolidate Monument Circle as of January 1, 2023. A gain on consolidation of approximately $0.4 million was recognized in the three months ended March 31, 2023. Additional information about the consolidation of Monument Circle can be found in Note 1, “Organization, Properties, Basis of Presentation, Financial Instruments, and Recent Accounting Standards – Variable Interest Entities (VIEs)” and Note 2, “Related Party Transactions and Investments in Non-Consolidated Entities - Management fees and interest income from loans”, in the Notes to Consolidated Financial Statements included in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2023. Non-GAAP Financial Information A reconciliation of Net income to FFO, Adjusted Funds From Operations (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. 2023 Net Income, FFO and Disposition Guidance At this time, due primarily to economic conditions and uncertainty surrounding the timing and amount of proceeds received from property dispositions, we are continuing suspension of Net Income, FFO and property disposition guidance. Real Estate Update Supplementary schedules provide property information for the Company’s owned and consolidated properties as of June 30, 2023. 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 2, 2023 at 11:00 a.m. (ET) to discuss the second quarter 2023 results. To access the call, please dial 888-440-4368 and use conference ID 5398803. Internationally, the call may be accessed by dialing 646-960-0856 and using conference ID 5398803. 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 expectations for future potential leasing activity, expectations for future potential property dispositions, the payment of dividends 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, inflation rates, 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, and any delays in the timing of 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, increases in the level of general and administrative costs as a percentage of revenues as revenues decrease as a result of property dispositions, 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, 2022, which 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) 2023 2022 2023 2022 Revenue: Rental $ 36,257 $ 40,831 $ 74,024 $ 82,628 Related party revenue: Management fees and interest income from loans — 467 — 927 Other 9 6 9 13 Total revenue 36,266 41,304 74,033 83,568 Expenses: Real estate operating expenses 12,140 12,344 24,830 25,178 Real estate taxes and insurance 7,169 9,043 14,142 17,762 Depreciation and amortization 14,645 18,186 29,372 33,856 General and administrative 3,767 3,981 7,584 7,765 Interest 6,084 5,664 11,890 11,030 Total expenses 43,805 49,218 87,818 95,591 Loss on extinguishment of debt — — (67 ) — Gain on consolidation of Sponsored REIT — — 394 — Impairment and loan loss reserve — (1,140 ) — (1,140 ) Gain on sale of properties and impairment of asset held for sale, net (806 ) — 7,586 — Loss before taxes (8,345 ) (9,054 ) (5,872 ) (13,163 ) Tax expense 75 56 142 105 Net loss $ (8,420 ) $ (9,110 ) $ (6,014 ) $ (13,268 ) Weighted average number of shares outstanding, basic and diluted 103,330 103,193 103,283 103,441 Net loss per share, basic and diluted $ (0.08 ) $ (0.09 ) $ (0.06 ) $ (0.13 ) 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) 2023 2022 Assets: Real estate assets: Land $ 128,588 $ 126,645 Buildings and improvements 1,362,939 1,388,869 Fixtures and equipment 11,612 11,151 1,503,139 1,526,665 Less accumulated depreciation 421,180 423,417 Real estate assets, net 1,081,959 1,103,248 Acquired real estate leases, less accumulated amortization of $20,962 and $20,243, respectively 8,828 10,186 Asset held for sale 8,860 — Cash, cash equivalents and restricted cash 6,697 6,632 Tenant rent receivables 1,938 2,201 Straight-line rent receivable 50,267 52,739 Prepaid expenses and other assets 5,648 6,676 Related party mortgage loan receivable, less allowance for credit loss of $0 and $4,237, respectively — 19,763 Other assets: derivative asset — 4,358 Office computers and furniture, net of accumulated depreciation of $1,149 and $1,115, respectively 127 154 Deferred leasing commissions, net of accumulated amortization of $20,327 and $19,043, respectively 34,985 35,709 Total assets $ 1,199,309 $ 1,241,666 Liabilities and Stockholders’ Equity: Liabilities: Bank note payable $ 75,000 $ 48,000 Term loans payable, less unamortized financing costs of $529 and $250, respectively 124,471 164,750 Series A & Series B Senior Notes, less unamortized financing costs of $412 and $494, respectively 199,588 199,506 Accounts payable and accrued expenses 32,501 50,366 Accrued compensation 2,286 3,644 Tenant security deposits 5,666 5,710 Lease liability 550 759 Acquired unfavorable real estate leases, less accumulated amortization of $537 and $574, respectively 153 195 Total liabilities 440,215 472,930 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, 103,430,353 and 103,235,914 shares issued and outstanding, respectively 10 10 Additional paid-in capital 1,335,091 1,334,776 Accumulated other comprehensive income 2,480 4,358 Accumulated distributions in excess of accumulated earnings (578,487 ) (570,408 ) Total stockholders’ equity 759,094 768,736 Total liabilities and stockholders’ equity $ 1,199,309 $ 1,241,666 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) 2023 2022 Cash flows from operating activities: Net loss $ (6,014 ) $ (13,268 ) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization expense 30,634 34,863 Amortization of above and below market leases (30 ) (54 ) Amortization of other comprehensive income into interest expense (1,726 ) — Shares issued as compensation 315 394 Loss on extinguishment of debt 67 — Gain on consolidation of Sponsored REIT (394 ) — Impairment and loan loss reserve — 1,140 Gain on sale of properties and impairment of asset held for sale, net (7,586 ) — Changes in operating assets and liabilities: Tenant rent receivables 263 (673 ) Straight-line rents 322 (2,904 ) Lease acquisition costs (824 ) (2,426 ) Prepaid expenses and other assets (267 ) (1,153 ) Accounts payable and accrued expenses (8,747 ) (18,268 ) Accrued compensation (1,358 ) (2,452 ) Tenant security deposits (44 ) (400 ) Payment of deferred leasing commissions (4,137 ) (5,033 ) Net cash provided by (used in) operating activities 474 (10,234 ) Cash flows from investing activities: Property improvements, fixtures and equipment (18,369 ) (21,496 ) Consolidation of Sponsored REIT 3,048 — Proceeds received from sales of properties 28,098 — Net cash provided by (used in) investing activities 12,777 (21,496 ) Cash flows from financing activities: Distributions to stockholders (2,065 ) (51,924 ) Proceeds received from termination of interest rate swap 4,206 — Stock repurchases — (4,843 ) Borrowings under bank note payable 62,000 60,000 Repayments of bank note payable (35,000 ) (5,000 ) Repayments of term loans payable (40,000 ) — Deferred financing costs (2,327 ) (2,561 ) Net cash used in financing activities (13,186 ) (4,328 ) Net increase (decrease) in cash, cash equivalents and restricted cash 65 (36,058 ) Cash, cash equivalents and restricted cash, beginning of year 6,632 40,751 Cash, cash equivalents and restricted cash, end of period $ 6,697 $ 4,693 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 2023 177,038 2.8 % 2024 622,040 9.9 % 2025 438,551 7.0 % 2026 617,649 9.9 % 2027 334,289 5.3 % Thereafter (2) 4,081,091 65.1 % 6,270,658 100.0 % (1) Percentages are determined based upon total square footage. (2) Includes 1,674,276 square feet of vacancies at our owned and consolidated properties as of June 30, 2023. (dollars & square feet in 000's) As of June 30, 2023 % of Square % of State Properties Investment Portfolio Feet Portfolio Colorado 4 $ 457,647 42.3 % 2,140 34.1 % Texas 9 330,946 30.6 % 2,424 38.6 % Georgia 1 52,444 4.9 % 160 2.6 % Minnesota 3 119,425 11.0 % 758 12.1 % Virginia 1 31,821 2.9 % 298 4.8 % Florida 1 70,152 6.5 % 213 3.4 % Indiana 1 19,524 1.8 % 214 3.4 % North Carolina (a) 1 - 0.0 % 64 1.0 % Total 21 $ 1,081,959 100.0 % 6,271 100.0 % (a) Property was classified as an asset held for sale as of June 30, 2023. Franklin Street Properties Corp. Earnings Release Supplementary Schedule E Portfolio and Other Supplementary Information (Unaudited & Approximated) Recurring Capital Expenditures (in thousands) For the Three Months Ended Year to Date 31-Mar-23 30-Jun-23 30-Jun-23 Tenant improvements $ 3,047 $ 4,381 $ 7,428 Deferred leasing costs 908 3,230 4,138 Non-investment capex 2,967 2,042 5,009 $ 6,922 $ 9,653 $ 16,575 (in thousands) For the Three Months Ended Year Ended 31-Mar-22 30-Jun-22 30-Sep-22 31-Dec-22 31-Dec-22 Tenant improvements $ 1,877 $ 5,453 $ 6,813 $ 7,508 $ 21,651 Deferred leasing costs 3,032 1,327 2,053 1,152 7,564 Non-investment capex 5,065 6,736 9,289 9,074 30,164 $ 9,974 $ 13,516 $ 18,155 $ 17,734 $ 59,379 Square foot & leased percentages June 30, December 31, 2023 2022 Owned Properties: Number of properties (a) 20 21 Square feet 6,056,898 6,239,530 Leased percentage 75.7 % 75.6 % Consolidated Property - Single Asset REIT (SAR): Number of properties 1 — Square feet 213,760 — Leased percentage 4.1 % Total Owned and Consolidated Properties: Number of properties 21 21 Square feet 6,270,658 6,239,530 Leased percentage 73.3 % 75.6 % (a) Includes property that was classified as an asset held for sale as of June 30, 2023. 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-23 Leased (2) 30-Jun-23 Leased (2) 1 FOREST PARK (3) Charlotte, NC 64,198 78.4 % 78.4 % 78.4 % 78.4 % 2 PARK TEN Houston, TX 157,609 90.8 % 86.6 % 90.8 % 90.8 % 3 PARK TEN PHASE II Houston, TX 156,746 95.0 % 95.0 % 95.0 % 95.0 % 4 GREENWOOD PLAZA Englewood, CO 196,236 66.3 % 66.3 % 66.3 % 66.3 % 5 ADDISON Addison, TX 289,333 83.0 % 83.0 % 83.0 % 83.0 % 6 COLLINS CROSSING Richardson, TX 300,887 97.1 % 96.8 % 97.1 % 97.1 % 7 INNSBROOK Glen Allen, VA 298,183 47.8 % 47.8 % 81.3 % 81.3 % 8 LIBERTY PLAZA Addison, TX 217,841 72.9 % 72.9 % 71.6 % 71.8 % 9 BLUE LAGOON Miami, FL 213,182 98.5 % 98.5 % 98.5 % 98.5 % 10 ELDRIDGE GREEN Houston, TX 248,399 100.0 % 100.0 % 100.0 % 100.0 % 11 121 SOUTH EIGHTH ST Minneapolis, MN 298,121 84.5 % 84.5 % 79.6 % 82.2 % 12 801 MARQUETTE AVE Minneapolis, MN 129,691 91.8 % 91.8 % 91.8 % 91.8 % 13 LEGACY TENNYSON CTR Plano, TX 209,461 49.0 % 49.0 % 62.5 % 53.5 % 14 ONE LEGACY Plano, TX 214,110 69.3 % 69.3 % 73.8 % 73.8 % 15 WESTCHASE I & II Houston, TX 629,025 59.0 % 60.3 % 58.7 % 58.7 % 16 1999 BROADWAY Denver, CO 682,639 61.9 % 65.2 % 61.0 % 61.6 % 17 1001 17TH STREET Denver, CO 648,861 70.8 % 70.3 % 71.0 % 71.0 % 18 PLAZA SEVEN Minneapolis, MN 330,096 65.0 % 71.6 % 64.4 % 64.3 % 19 PERSHING PLAZA Atlanta, GA 160,145 79.8 % 79.8 % 79.8 % 79.8 % 20 600 17TH STREET Denver, CO 612,135 80.5 % 79.3 % 80.8 % 80.6 % OWNED PORTFOLIO 6,056,898 73.9 % 74.9 % 75.7 % 75.6 % 21 MONUMENT CIRCLE (4) Charlotte, NC 213,760 4.1 % 4.1 % 4.1 % 4.1 % OWNED & CONSOLIDATED PORTFOLIO 6,270,658 71.5 % 72.5 % 73.3 % 73.2 % (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) Property was classified as an asset held for sale as of June 30, 2023. (4) Consolidated property as of January 1, 2023, which was previously was a managed property. Franklin Street Properties Corp. Earnings Release Supplementary Schedule G Largest 20 Tenants – FSP Owned and Consolidated Portfolio (Unaudited & Estimated) The following table includes the largest 20 tenants in FSP’s owned and consolidated portfolio based on total square feet: As of June 30, 2023 % of Tenant Sq Ft Portfolio 1 CITGO Petroleum Corporation 248,399 4.0 % 2 EOG Resources, Inc. 169,167 2.7 % 3 US Government 168,573 2.7 % 4 Lennar Homes, LLC 155,808 2.5 % 5 Kaiser Foundation Health Plan, Inc. 120,979 1.9 % 6 Argo Data Resource Corporation 114,200 1.8 % 7 Swift, Currie, McGhee & Hiers, LLP 101,296 1.6 % 8 Commonwealth of Virginia 100,010 1.6 % 9 Deluxe Corporation 98,922 1.6 % 10 Ping Identity Corp. 89,856 1.4 % 11 Permian Resources Operating, LLC 67,856 1.1 % 12 Bread Financial Payments, Inc. 67,274 1.1 % 13 PricewaterhouseCoopers LLP 66,304 1.1 % 14 Hall and Evans LLC 65,878 1.0 % 15 Cyxtera Management, Inc. 61,826 1.0 % 16 Precision Drilling (US) Corporation 59,569 0.9 % 17 EMC Corporation 57,100 0.9 % 18 ID Software, LLC 57,100 0.9 % 19 Olin Corporation 54,080 0.9 % 20 Unique Vacations, Inc. 53,119 0.8 % Total 1,977,316 31.5 % 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 Loss to FFO and AFFO: Three Months Ended Six Months Ended June 30, June 30, (In thousands, except per share amounts) 2023 2022 2023 2022 Net loss $ (8,420 ) $ (9,110 ) $ (6,014 ) $ (13,268 ) Gain on consolidation of Sponsored REIT — — (394 ) — Impairment and loan loss reserve — 1,140 — 1,140 Gain on sale of properties and impairment of asset held for sale, net 806 — (7,586 ) — Depreciation & amortization 14,633 18,141 29,342 33,802 NAREIT FFO 7,019 10,171 15,348 21,674 Lease Acquisition costs 91 86 169 165 Funds From Operations (FFO) $ 7,110 $ 10,257 $ 15,517 $ 21,839 Funds From Operations (FFO) $ 7,110 $ 10,257 $ 15,517 $ 21,839 Loss on extinguishment of debt — — 67 — Amortization of deferred financing costs 672 481 1,261 1,007 Shares issued as compensation 315 394 315 394 Straight-line rent 653 (1,688 ) 322 (2,904 ) Tenant improvements (4,381 ) (5,453 ) (7,428 ) (7,330 ) Leasing commissions (3,230 ) (1,327 ) (4,138 ) (4,359 ) Non-investment capex (2,042 ) (6,736 ) (5,009 ) (11,801 ) Adjusted Funds From Operations (AFFO) $ (903 ) $ (4,072 ) $ 907 $ (3,154 ) Per Share Data EPS $ (0.08 ) $ (0.09 ) $ (0.06 ) $ (0.13 ) FFO $ 0.07 $ 0.10 $ 0.15 $ 0.21 AFFO $ (0.01 ) $ (0.04 ) $ 0.01 $ (0.03 ) Weighted average shares (basic and diluted) 103,330 103,193 103,283 103,441 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 loss on extinguishment of debt that is non-cash, (3) excluding our proportionate share of FFO and including distributions received, from non-consolidated REITs, (4) excluding the effect of straight-line rent, (5) plus the amortization of deferred financing costs, (6) plus the value of shares issued as compensation and (7) 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 all periods presented. We 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-23 31-Mar-23 (Dec) Change Region East 362 $ 553 $ 478 $ 75 15.7 % MidWest 758 1,718 2,239 (521 ) (23.3 ) % South 2,797 8,128 7,933 195 2.5 % West 2,140 6,412 6,422 (10 ) (0.2 ) % Property NOI* from Owned Properties 6,057 16,811 17,072 (261 ) (1.5 ) % Disposition and Acquisition Properties (a) 214 (240 ) 668 (908 ) (5.1 ) % NOI* 6,271 $ 16,571 $ 17,740 $ (1,169 ) (6.6 ) % Sequential Same Store $ 16,811 $ 17,072 $ (261 ) (1.5 ) % Less Nonrecurring Items in NOI* (b) 301 1,292 (991 ) 6.1 % Comparative Sequential Same Store $ 16,510 $ 15,780 $ 730 4.6 % Reconciliation to Three Months Ended Three Months Ended Net income (loss) 30-Jun-23 31-Mar-23 Net income (loss) $ (8,420 ) $ 2,406 Add (deduct): Loss on extinguishment of debt — 67 Gain on consolidation of Sponsored REIT — (394 ) Impairment and loan loss reserve — — Gain on sale of properties, net 806 (8,392 ) Management fee income (427 ) (374 ) Depreciation and amortization 14,645 14,727 Amortization of above/below market leases (12 ) (18 ) General and administrative 3,768 3,817 Interest expense 6,084 5,806 Interest income — — Non-property specific items, net 127 95 NOI* $ 16,571 $ 17,740 (a) We define Disposition and Acquisition Properties as properties that were sold or acquired or consolidated and 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/20230801022335/en/