WAKEFIELD, MA -- (MARKET WIRE) -- 05/01/07 --
Franklin Street Properties Corp. (the
"Company" or "FSP") (AMEX: FSP) an investment firm specializing in real
estate, announced today Net Income and Earnings Per Share (EPS) for the
three months ended March 31, 2007. The Company also announced Adjusted
Funds From Operations (AFFO), AFFO plus Gains on Sales (AFFO+GOS) and
provided an update on other activities. Please note that during the first
quarter of 2007 and 2006 there were no asset sales, consequently AFFO+GOS
matches AFFO.
The Company evaluates its performance based on Net Income, EPS, AFFO and
AFFO+GOS, and believes each is an important measure. A reconciliation of
Net Income to AFFO and AFFO+GOS, which are non-GAAP financial measures, is
provided later in this press release.
(in 000's except per share data) Three Months Ended March 31,
--------------------------------
Increase
2007 2006 (Decrease)
---------- ---------- ----------
Net Income $ 9,732 $ 13,139 $ (3,407)
========== ========== ==========
AFFO $ 18,323 $ 20,315 $ (1,992)
GOS - - -
---------- ---------- ----------
AFFO+GOS $ 18,323 $ 20,315 $ (1,992)
========== ========== ==========
Per Share Data:
EPS $ 0.14 $ 0.22 $ (0.08)
AFFO $ 0.26 $ 0.34 $ (0.08)
AFFO+GOS $ 0.26 $ 0.34 $ (0.08)
Weighted ave shares (diluted) 70,766 59,795 10,971
---------- ---------- ----------
The following significant factors affected Net Income, EPS and AFFO for the
three months ended March 31, 2007 compared to results for the same period
in 2006:
-- Net Income and EPS decreased $3.4 million or $0.08 per share and AFFO
decreased $2.0 million or $0.08 per share in the first quarter of 2007
compared to 2006. These decreases were principally a result of
termination fee income, which is included in rental revenue, of less
than $0.1 million in the first quarter of 2007 compared to $4.7
million in the first quarter of 2006. The impact of this $4.7 million
decrease was partially offset by increased net operating income from
real estate operations of approximately $1.1 million and the benefit
of increased investment banking results of approximately $0.3 million.
- Increased net operating income from the real estate portfolio
included:
-- the benefits of five properties acquired by merger in April 2006;
-- the benefits of three suburban office properties acquired
directly in 2006; and
-- were partially offset by the impact of vacancies and rent roll
downs from the last 12 months, which reduced real estate
contribution.
- Investment banking results increased compared to the same period in
2006. Gross proceeds on the sale of securities, which our revenue
and expenses in investment banking are directly related to,
increased $20.0 million to $49.2 million for the quarter ended March
31, 2007 compared to $29.2 million for the same period in 2006.
- A net increase of 11.0 million weighted average shares for the three
months ended March 31, 2007, compared to the same period in 2006 due
to the merger completed on April 30, 2006.
George J. Carter, President and CEO, commented as follows:
"First quarter 2007 Net Income/EPS, AFFO, and AFFO+GOS levels were
anticipated and planned for within the FSP business/investment model.
Because of the transactional nature of significant portions of our real
estate investment business and their timing profiles, quarterly financial
metrics historically have been quite variable. FSP does not manage its
business to quarterly targets but rather longer-term ones. Consequently,
FSP management considers annual financial results much more meaningful for
performance and trend measurements. I continue to be very optimistic about
FSP's full year 2007 financial performance potential and growth prospects."
FSP is an investment firm specializing in, and focusing on, the asset class
of real estate. Our Company has three major business components that
contribute to its profitability. They are:
-- Rental income from properties
-- Gains or losses on the sale of properties
-- Fee income from real estate investment banking activities
Rental Income for the first quarter of 2007 was about as expected, with
leased square footage of our 29 properties averaging 86%. Significantly,
two properties totaling approximately 263,000 square feet, one in the
greater Seattle/Tacoma area, and the other in Silicon Valley, did not
contribute meaningful rental income as each was substantially vacant. Both
properties are in the process of being physically repositioned in their
respective markets from single- to multi-tenant configurations.
Construction and lease-up of these two assets is likely to take up a good
portion of 2007 and possibly beyond. However, once repositioned and
re-leased, we believe these two properties can add meaningful rental income
and value to FSP. To date, approximately 42% of our 526,269 square feet of
expected 2007 lease expirations has been re-leased/renewed.
With the exception of the property we sold in Greenville, South Carolina
that was reported at year-end, there were no Property Sales for the first
quarter of 2007. However, we have identified several potential properties
in our portfolio that we believe are good potential disposition candidates
in 2007. Proceeds from any property sales would be designated for
reinvestment into newly acquired real estate assets that we believe would
perform better in the future than the properties that were sold. Acquiring
replacement properties that continue to upgrade the quality of our
portfolio is an ongoing effort. Identifying a replacement asset before
completing a property sale is not always feasible, but, for FSP, it is the
preferred way to operate. Property sales for the full year 2007 could be
significant.
Investment Banking activity for the first quarter of 2007 totaled
approximately $49.2 million. In January of 2007, an affiliate of FSP
purchased a property for investment syndication. Permanent equity
capitalization of the property was structured as a private placement
preferred stock offering totaling $221 million. This offering is the
largest single-investment syndication in FSP's history. The $49.2 million
of proceeds raised in the first quarter reflected the offering being
available for subscription for only a portion of the quarter. As of April
30, 2007, additional equity in the amount of approximately $24.8 million
was closed into the transaction. Our acquisition executives continue to
work on other property investment opportunities and are currently more
optimistic about potential future investment banking product than in the
past several years. Investment banking business at FSP is off to a solid
start this year, and we are optimistic about this business segment's
potential for increased contribution in 2007."
A reconciliation of Net Income to AFFO and AFFO+GOS is shown below, and
definitions of AFFO and AFFO+GOS are provided on Supplemental Schedule F.
We believe AFFO is used broadly throughout the real estate investment trust
(REIT) industry as a measurement of performance and is generally calculated
in a similar manner to our calculation. We also believe that AFFO+GOS is an
important measures as it considers investment performance.
Three Months Ended
March 31,
------------------------
(In thousands except per share amounts) 2007 2006
----------- -----------
Net income $ 9,732 $ 13,139
Net gains on sales of assets and
provision on one asset held for sale -- --
GAAP income from non-consolidated REITs 583 (275)
Distributions from non-consolidated REITs 281 118
Depreciation of real estate & intangible
amortization 9,000 7,133
Straight-line rent (1,273) 200
----------- -----------
Adjusted Funds From Operations (AFFO) 18,323 20,315
Plus gains on sales of assets -- --
----------- -----------
AFFO+GOS $ 18,323 $ 20,315
=========== ===========
Per Share Data
EPS $ 0.14 $ 0.22
AFFO $ 0.26 $ 0.34
AFFO+GOS $ 0.26 $ 0.34
Weighted average shares (basic and diluted) 70,766 59,795
=========== ===========
Dividend announcement
On April 20, 2007, the Board of Directors of the Company declared a cash
distribution of $0.31 per share of common stock payable on May 21, 2007 to
stockholders of record on April 30, 2007.
Real Estate and Investment Banking Update
Supplementary Schedule D presents our continuing real estate portfolio of
29 properties as of March 31, 2007. During the first quarter we started a
new syndication and completed $49.2 million in sales of preferred shares
with an opportunity to place up to $221 million.
Today's news release, along with other news about Franklin Street
Properties Corp., is available on the Internet at
www.franklinstreetproperties.com.
A conference call is scheduled for May 2, 2007 at 10:00 a.m. (ET) to
discuss the first quarter 2007 results. The toll free number is
1-800-329-9097, passcode 96744542. Internationally, the call may be
accessed by dialing 1-617-614-4929, passcode 96744542. The call will also
be available via a live webcast, which can be accessed at least 10 minutes
before the start time through the Webcasts & Presentations section of our
Investor Relations section at www.franklinstreetproperties.com. A replay of
the conference call will be available on the Company's website one hour
after the call.
About Franklin Street Properties Corp.
Franklin Street Properties Corp., based in Wakefield, Massachusetts, is
focused on achieving current income and long-term growth through
investments in commercial properties. FSP operates in two business
segments: real estate operations and investment banking/investment
services. FSP owns an unleveraged portfolio of real estate. The majority of
FSP's property portfolio is suburban office buildings. FSP's subsidiary,
FSP Investments LLC (member, NASD and SIPC), is a real estate investment
banking firm and a registered broker/dealer. FSP is a Maryland corporation
that operates in a manner intended to qualify as a REIT for federal income
tax purposes. To learn more about FSP please visit our website at
www.franklinstreetproperties.com.
Forward-Looking Statements
Statements made in this press release that state FSP's or management's
intentions, beliefs, expectations, or predictions for the future are
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. This press release may also contain
forward-looking statements based on current judgments and current knowledge
of management, which are subject to certain risks, trends and uncertainties
that could cause actual results to differ materially from those indicated
in such forward-looking statements. Accordingly, readers are cautioned not
to place undue reliance on forward-looking statements. Investors are
cautioned that our forward-looking statements involve risks and
uncertainty, including without limitation changes in economic conditions in
the markets in which we own properties, changes in the demand by investors
for investment in Sponsored REITs (as defined in our Annual Report on Form
10-K for the year ended December 31, 2006), risks of a lessening of demand
for the types of real estate owned by us, changes in government
regulations, and expenditures that cannot be anticipated such as utility
rate and usage increases, unanticipated repairs, additional staffing,
insurance increases and real estate tax valuation reassessments. See the
"Risk Factors" set forth in Item 1A of our Annual Report on Form 10-K for
the year ended December 31, 2006 and subsequent filings with the Securities
and Exchange Commission. Although we believe the expectations reflected in
the forward-looking statements are reasonable, we cannot guarantee future
results, levels of activity, performance or achievements. We will not
update any of the forward-looking statements after the date of this press
release to conform them to actual results or to changes in our expectations
that occur after such date, other than as required by law.
Franklin Street Properties Corp. Financial Results
Supplementary Schedule A
Consolidated Income Statement
(Unaudited)
For the
Three Months Ended
March 31,
-------------------------
(in thousands, except per share amounts) 2007 2006
=========================
Revenue:
Rental $ 26,868 $ 21,317
Related party revenue:
Syndication fees 2,956 1,921
Transaction fees 3,081 1,939
Management fees and interest income from
loans 1,817 167
Other 38 26
----------- ------------
Total revenue 34,760 25,370
----------- ------------
Expenses:
Real estate operating expenses 6,655 4,099
Real estate taxes and insurance 4,483 2,405
Depreciation and amortization 7,657 4,775
Selling, general and administrative 1,888 1,805
Commissions 1,559 1,022
Interest 2,676 594
----------- ------------
Total expenses 24,918 14,700
----------- ------------
Income before interest income, equity in earnings
of non-consolidated REITs and taxes on income 9,842 10,670
Interest income 653 588
Equity in earnings of non-consolidated REITs (616) 80
----------- ------------
Income before taxes on income 9,879 11,338
Income tax expense 240 57
----------- ------------
Income from continuing operations 9,639 11,281
Income from discontinued operations 93 1,858
----------- ------------
Net income $ 9,732 $ 13,139
=========== ============
Weighted average number of shares outstanding,
basic and diluted 70,766 59,795
=========== ============
Earnings per share, basic and diluted,
attributable to:
Continuing operations $ 0.14 $ 0.19
Discontinued operations 0.00 0.03
----------- ------------
Net income per share, basic and diluted $ 0.14 $ 0.22
=========== ============
Franklin Street Properties Corp. Financial Results
Supplementary Schedule B
Condensed Consolidated Balance Sheet
(Unaudited)
(in thousands, except share and par value
amounts) March 31, December 31,
------------- -------------
2007 2006
------------- -------------
Assets:
Real estate investments, net $ 801,195 $ 803,490
Acquired real estate leases, less accumulated
amortization of $24,394 and $21,548,
respectively 39,994 43,167
Investment in non-consolidated REITs 5,004 5,064
Assets held for syndication 125,195
Assets held for sale - 5,830
Cash & cash equivalents 68,726 69,973
Certificate of deposit maturing April 11, 2007 5,180 5,143
Restricted cash 682 761
Tenant rent receivables, less allowance for
doubtful accounts of $433 and $433,
respectively 1,937 2,440
Straight-line rent receivable, less allowance
for doubtful accounts of $163 and $163,
respectively 5,875 4,720
Prepaid expenses 769 972
Deposits on real estate assets - 5,010
Other assets 556 1,118
Office computers and furniture, net of
accumulated depreciation of $881 and $851,
respectively 344 375
Deferred leasing commissions, net of
accumulated amortization of $1,623, and
$1,323, respectively 7,615 7,254
------------- -------------
Total assets $ 1,063,072 $ 955,317
============= =============
Liabilities and Stockholders' Equity:
Liabilities:
Bank note payable $ 130,000 $ --
Accounts payable and accrued expenses 16,945 25,275
Accrued compensation 1,255 2,643
Tenant security deposits 1,654 1,744
Acquired unfavorable real estate leases, less
accumulated amortization of $681, and $534,
respectively 3,462 3,693
------------- -------------
Total liabilities 153,316 33,355
------------- -------------
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, 70,766,305 and
70,766,305 shares issued and outstanding,
respectively 7 7
Additional paid-in capital 907,794 907,794
Treasury stock, 731,898 and 731,898 shares at
cost, respectively (14,008) (14,008)
Earnings (distributions) in excess of
accumulated earnings/distributions 15,963 28,169
------------- -------------
Total stockholders' equity 909,756 921,962
------------- -------------
Total liabilities and stockholders'
equity $ 1,063,072 $ 955,317
============= =============
Franklin Street Properties Corp. Financial Results
Supplementary Schedule C
Consolidated Statement of Cash Flows
(Unaudited)
For the three months
(in thousands) ended March 31,
------------------------
2007 2006
----------- -----------
Cash flows from operating activities:
Net income $ 9,732 $ 13,139
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization expense 7,666 5,659
Amortization of above market lease 1,334 1,474
Equity in earnings from non-consolidated
REITs 583 (275)
Distributions from non-consolidated REITs 281 118
Changes in operating assets and liabilities:
Restricted cash 79 (4)
Tenant rent receivables, net 503 207
Straight-line rents, net (1,273) 200
Prepaid expenses and other assets, net 755 210
Accounts payable and accrued expenses (1,856) (1,254)
Accrued compensation (1,388) (555)
Tenant security deposits (90) 76
Payment of deferred leasing commissions (661) (156)
----------- -----------
Net cash provided by operating activities 15,665 18,839
----------- -----------
Cash flows from investing activities:
Purchase of real estate assets, office
computers and furniture, capitalized merger
costs (9,327) (25,744)
Purchase of acquired favorable and
unfavorable leases, net - (951)
Investment in certificate of deposit (37) -
Investment in non-consolidated REITs (9) (11)
Investment in assets held for syndication,
net (121,431) (51,500)
Proceeds received on sale of real estate
assets 5,830 -
----------- -----------
Net cash used for investing activities (124,974) (78,206)
----------- -----------
Cash flows from financing activities:
Distributions to stockholders (21,938) (18,536)
Borrowings (repayments) under bank note
payable, net 130,000 41,500
----------- -----------
Net cash provided by financing activities 108,062 22,964
----------- -----------
Net decrease in cash and cash equivalents (1,247) (36,403)
Cash and cash equivalents, beginning of period 69,973 69,715
----------- -----------
Cash and cash equivalents, end of period $ 68,726 $ 33,312
=========== ===========
Franklin Street Properties Corp. Earnings Release
Supplementary Schedule D
Real Estate Portfolio Summary
(Unaudited)
March 31, 2007
As of March 31,
------------------------
2007 2006
----------- -----------
Commercial real estate*
Number of properties 29 26
Square feet 5,148,490 3,986,564
Leased percentage 86% 86%
Residential real estate
Number of properties -- 1
Number of apartments -- 228
Square feet -- 231,363
Leased percentage -- 94%
Combined portfolio*
Number of properties 29 27
Square feet 5,148,490 4,217,927
Leased percentage 86% 86%
* Excludes assets held for sale at March 31, 2006
(In Thousands) As of March 31, 2007
# of % of Square % of
---------- ---------- --------- ------ ---------
State Properties Investment Portfolio Feet Portfolio
Texas 7 $ 217,359 27.1% 1,401 27.2%
Colorado 4 132,653 16.6% 791 15.4%
Georgia 2 103,737 12.9% 548 10.6%
Virginia 2 65,154 8.1% 433 8.4%
Missouri 2 58,634 7.3% 349 6.8%
Florida 1 51,346 6.4% 212 4.1%
California 3 40,674 5.1% 324 6.3%
Indiana 1 39,043 4.9% 205 4.0%
Illinois 1 33,648 4.2% 177 3.5%
Michigan 1 15,232 1.9% 215 4.2%
North Carolina 2 14,961 1.9% 172 3.3%
Washington 1 14,433 1.8% 117 2.3%
Massachusetts 1 8,973 1.1% 105 2.0%
Maryland 1 5,347 0.7% 99 1.9%
---------- ---------- --------- ------ ---------
29 $ 801,194 100.0% 5,148 100.0%
========== ========== ========= ====== =========
Franklin Street Properties Corp. Earnings Release
Supplementary Schedule E
(Unaudited)
March 31, 2007
Property by type:
(dollars & square feet As of March 31, 2007
in 000's) # of % of Square % of
Type Properties Investment Portfolio Feet Portfolio
---------- ---------- --------- ------ ---------
Office 28 $ 795,847 99.3% 5,050 98.1%
Industrial 1 5,347 0.7% 99 1.9%
---------- ---------- --------- ------ ---------
Total 29 $ 801,194 100.0% 5,148 100.0%
========== ========== ========= ====== =========
Commercial portfolio lease expirations (1)
Total % of
Year Square Feet Portfolio
------------ -----------
2007 146,150 2.8%
2008 512,880 10.0%
2009 639,108 12.4%
2010 723,317 14.0%
2011 264,500 5.1%
2012 786,670 15.3%
Thereafter 2,075,865 40.4%(2)
------------ -----------
5,148,490 100.0%
============ ===========
(1) Percentages are determined based upon square footage of expiring
commercial leases and exclude assets held for sale.
(2) Includes 746,000 square feet of current vacancies.
Capital Expenditures
(in thousands) 31-Mar-07 31-Mar-06
------------ ------------
Tenant improvements $ 2,304 $ 268
Deferred leasing costs 661 156
Building improvements 551 --
------------ ------------
$ 3,516 $ 424
============ ============
The Company evaluates the performance of its reportable segments based on
several measures including, Adjusted Funds From Operations ("AFFO") and
AFFO plus Gains on Sales ("AFFO+GOS") as management believes they represent
important measures of activity and are an important consideration in
determining distributions paid to equity holders. The Company defines AFFO
as: Net Income as computed in accordance with accounting principles
generally accepted in the United States of America ("GAAP"); excluding
gains or losses on the sale of real estate and non-cash income from
Sponsored REITs; plus certain non-cash items included in the computation of
Net Income (depreciation and amortization and straight-line rent
adjustments); plus distributions received from Sponsored REITs; plus the
net proceeds from the sale of land; Depreciation and amortization, gain or
loss on the sale of real estate and straight-line rents are an adjustment
to AFFO, as these are non-cash items included in Net Income. The Company
defines AFFO+GOS as AFFO as defined above, plus gains and losses on sales
of properties and provisions for assets held for sale.
AFFO and AFFO+GOS should not be considered as alternatives to Net Income
(determined in accordance with GAAP), as indicators of the Company's
financial performance, as alternatives to cash flows from operating
activities (determined in accordance with GAAP), or as measures of the
Company's liquidity, or are they necessarily indicative of sufficient cash
flow to fund all of the Company's needs. Other real estate companies may
define these terms in a different manner. We believe that in order to
facilitate a clear understanding of the results of the Company, AFFO and
AFFO+GOS should be examined in connection with Net Income and cash flows
from operating, investing and financing activities in the consolidated
financial statements.
Contact:
Donna Brownell
877-686-9496