FRANKLIN STREET PROPERTIES CORP /MA/ - FORM 8-K - EX-99.2 - SUPPLEMENTAL OPERATING AND FINANCIAL DATA - February 23, 2011

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8-K - FRANKLIN STREET PROPERTIES CORP. - FRANKLIN STREET PROPERTIES CORP /MA/eps4095.htm
EX-99.1 - FRANKLIN STREET PROPERTIES CORP /MA/ex99-1.htm
Exhibit 99.2
 
 
 
 
 
     
 

Supplemental Operating and Financial Data

 
Fourth Quarter 2010
 
 
Franklin Street Properties Corp.  ●  401 Edgewater Place  ●  Wakefield, MA 01880  ●  (781) 557-1300
 
www.franklinstreetproperties.com

 
 
 
 
 
 

     Table of Contents
 
  Page     Page
         
Company Overview 3-5   Tenant Analysis  
      20 Largest tenants with annualized rent and remaining term 21-22
Key Financial Data     20 Largest Tenants, Industry Profile 23
Financial Highlights 6   Lease Expirations by Square Feet 24
Management’s Key Operating Measures  7   Lease Expirations with annualized rent per square foot 25
Income Statements 8      
EPS, FFO, GOS and FFO+GOS 9   Transactional Drivers  
Balance Sheets 10   Capital Recycling: Acquisitions and Dispositions 26
Cash Flow Statements 11   Investment Banking Performance 27
Segment Information 12-13      
Property Net Operating Income (NOI): Cash and GAAP Basis 14   FFO and FFO+GOS Reconciliations 28
Capital Analysis 15   FFO and FFO+GOS Definitions 29
      FAD Reconciliation and Definition 30
Portfolio Overview     EBITDA Reconciliation and Definition 31
Property by Form of FSP Participation 16   NOI Reconciliation and Definition 32
Regional Analysis, Map 17      
Owned Property List 18      
Properties with annualized rent per square foot 19      
Capital Expenditures 20      

All financial information contained in this supplemental information package is unaudited. In addition, certain statements contained in this supplemental information package may be deemed to be forward-looking statements within the meaning of the federal securities laws. Although FSP believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, it can give no assurance that its expectations will be achieved. Factors that could cause actual results to differ materially from FSP’s current expectations include general economic conditions, local real estate conditions, the performance of properties that FSP has acquired or may acquire, the timely lease-up of properties and other risks, detailed from time to time in FSP’s SEC reports. FSP assumes no obligation to update or supplement forward-looking statements that become untrue because of subsequent events.

 
 
December 31, 2010
  2
 
 
 
 

     Company Overview
 
 

Overview

Franklin Street Properties Corp. (FSP) (NYSE Amex: FSP) is an investment firm focused on achieving current income and long-term growth through investments in commercial properties. FSP’s portfolio of real estate assets consists primarily of suburban office buildings and includes select investments in central business district (CBD) properties. FSP’s real estate operations include property acquisitions and dispositions, interim acquisition and short-term financing, leasing, development and asset management. FSP’s subsidiary, FSP Investments LLC (member, FINRA and SIPC), is a real estate investment banking firm and registered broker/dealer.

Our Business

FSP operates in two business segments and has two principal sources of revenue; real estate operations and investment banking/investment services. Real estate operations include rental income from real estate leasing, interest income from loans made for interim acquisition or other purposes, and fee income from asset management. Investment banking/investment services generate brokerage commissions, loan origination fees, development services and other fees related to the organization of single-purpose entities that own real estate and the private placement of equity in those entities.

Strategy

FSP’s investment strategy is to make selective acquisitions based on market and/or property specific criteria, actively manage the property to maximize its value and dispose of the property when the ideal time or situation arises. Proceeds from property sales are redeployed into other specific real estate assets, used for other corporate purposes and/or paid out to shareholders as special dividends. Unlike many real estate investment companies, which have utilized significant leverage in an attempt to enhance their real estate portfolio’s returns, FSP has used very moderate leverage. FSP’s historical growth has been achieved without the use of permanent mortgage debt on any of our properties. This model has significantly reduced FSP’s risk profile by reducing foreclosure, financing and refinancing risk. The Company’s strategy is to employ modest leverage to accelerate its growth and capitalize on market conditions and opportunities as they arise. In addition, FSP believes that it can lower investment risk while enhancing current income and long-term appreciation potential by owning properties in diversified geographic locations that have sound long-term economic growth potential.

 
Snapshot  
(as of December 31, 2010)  
Corporate Headquarters Wakefield, MA
Fiscal Year-End 31-Dec
Total Properties 33
Total Square Feet 6.4 Million
Common Shares Outstanding 81,437,405
Quarterly Dividend $0.19
Dividend Yield 5.33%
Total Market Capitalization $1,445 Million
Insider Holdings 13.0%
 
 
 
December 31, 2010
 3
 
 
 
 

     Company Overview
 
 

Structure of the Company

FSP has elected to be taxed as a Real Estate Investment Trust (REIT) under the Internal Revenue Code. To qualify as a REIT, we must meet a number of organizational and operational requirements, including a requirement to distribute at least 90% of our adjusted taxable income to our shareholders. Management intends to continue to adhere to these requirements and to maintain our REIT status. As a REIT we are entitled to a tax deduction for some or all of the dividends we pay to shareholders. Accordingly, we generally will not be subject to federal income taxes as long as we distribute an amount equal to or in excess of our taxable income to shareholders.

Dividend Philosophy

FSP has been able to offer shareholders high-quality, risk-adjusted returns. The ongoing and recurring rental revenue stream provides stability to our regular quarterly dividend. In addition, the possibility exists for the payment of annual special dividends resulting from the sale of properties in the portfolio and the income from FSP’s investment banking business.

 

 

Board of Directors and Management        
         
George J. Carter   Dennis J. McGillicuddy   Scott H. Carter
President, Chief Executive Officer   Director   Executive Vice President, General
Chairman of the Board   Member, Audit Committee   Counsel and Assistant Secretary
    Member, Compensation Committee    
Barbara J. Fournier       John G. Demeritt
Executive Vice President,  Chief Operating Officer,   Georgia Murray   Executive Vice President and
Treasurer, Secretary and Director   Director   Chief Financial Officer
    Chair, Compensation Committee    
Janet Notopoulos   Member, Audit Committee   William W. Gribbell
Executive Vice President and Director       Executive Vice President
    Barry Silverstein    
John N. Burke   Director   R. Scott MacPhee
Director   Member, Audit Committee   Executive Vice President
Chair, Audit Committee   Member, Compensation Committee    
Member, Compensation Committee        

 
 
December 31, 2010
 4
 
 
 
 

     Company Overview
 
 
Corporate Headquarters
  
Trading Symbol
  
Inquiries
401 Edgewater Place, Suite 200
  
NYSE Amex
  
Inquires should be directed to:
Wakefield, MA 01880
  
Symbol: FSP
  
John Demeritt, CFO
(t) 781-557-1300
      
877-686-9496 or InvestorRelations@
(f) 781-246-2807
      
franklinstreetproperties.com
www.franklinstreetproperties.com
      
 
 
 
Common Stock Data (NYSE Amex: FSP)                
  For the Three Months Ended
  31-Dec-10 30-Sep-10 30-Jun-10 31-Mar-10 31-Dec-09 30-Sep-09 30-Jun-09 31-Mar-09
High Price 14.42 12.86 15.70 15.01 15.36 15.20 14.84 14.88
Low Price 12.2 10.99 11.04 11.64 10.35 12.00 11.43 9.57
Closing Price, at the end of the quarter 14.25 12.42 11.81 14.43 14.61 13.10 13.25 12.30
Dividends paid per share – quarterly 0.19 0.19 0.19 0.19 0.19 0.19 0.19 0.19
Closing dividend yield – annualized 5.33% 6.12% 6.44% 5.27% 5.20% 5.80% 5.74% 6.18%
Common shares outstanding (millions) 81.44 79.84 79.68 79.68 79.68 79.68 70.48 70.48

 

Timing

 

Quarterly and Annual results are expected to be announced during the week ending on these dates:

 

First Quarter:   6-May-11   Third Quarter: 4-Nov-11
Second Quarter:   5-Aug-11   Fourth Quarter: 24-Feb-12

 


 
December 31, 2010
  5
 
 
 
 

    
Financial Highlights
(in thousands, except per share data)
 
               For the Year              For the Year
   For the Three Months Ended:  Ended  For the Three Months Ended:  Ended
   31-Mar-10  30-Jun-10  30-Sep-10  31-Dec-10  31-Dec-10  31-Mar-09  30-Jun-09  30-Sep-09  31-Dec-09  31-Dec-09
Income Items:                                                  
Revenue:                                                  
  Rental  $28,757   $27,219   $29,391   $29,953   $115,320   $29,818   $29,254   $31,682   $29,259   $120,013 
  Related party revenue   800    1,852    896    4,162    7,710    583    860    371    4,434    6,248 
  Other   9    6    20    54    89    18    18    19    6    61 
Total revenue   29,566    29,077    30,307    34,169    123,119    30,419    30,132    32,072    33,699    126,322 
                                                   
Total expenses   25,384    24,547    27,047    29,319    106,297    23,738    25,821    25,538    27,149    102,246 
                                                   
Income before interest income, equity in earnings in
non-consolidated REITs and taxes		   4,182    4,530    3,260    4,850    16,822    6,681    4,311    6,534    6,550    24,076 
Interest income   8    9    4    4    25    36    36    16    8    96 
Equity in earnings in non-consolidated REITs   253    380    404    229    1,266    792    443    475    284    1,994 
                                                   
Income before taxes   4,443    4,919    3,668    5,083    18,113    7,509    4,790    7,025    6,842    26,166 
Income tax expense (benefit)   (68)   5    (37)   317    217    (299)   (75)   (270)   65    (579)
                                                   
Income from continuing operations   4,511    4,914    3,705    4,766    17,896    7,808    4,865    7,295    6,777    26,745 
Income from discontinued operations   1,051    1,040    1,052    1,054    4,197    —      —      (353)   1,056    703 
Gain on sale of assets   —      —      —     —      —      —      —      —      424    424 
                                                   
Net income  $5,562   $5,954   $4,757   $5,820   $22,093   $7,808   $4,865   $6,942   $8,257   $27,872 
                                                   
FFO+GOS*:                                                  
FFO  $16,650   $16,702   $16,052   $17,518   $66,922   $17,338   $17,409   $17,537   $19,075   $71,359 
GOS   —      —      —      —      —      —      —      —      424    424 
FFO+GOS  $16,650   $16,702   $16,052   $17,518   $66,922   $17,338   $17,409   $17,537   $19,499   $71,783 
                                                   
Per Share Data:                                                  
EPS  $0.07   $0.07   $0.06   $0.07   $0.28   $0.11   $0.07   $0.10   $0.10   $0.38 
FFO   0.21    0.21    0.20    0.22    0.84    0.25    0.25    0.25    0.24    0.98 
GOS   —      —      —      —      —      —      —      —      —      —   
FFO+GOS   0.21    0.21    0.20    0.22    0.84    0.25    0.25    0.25    0.24    0.98 
                                                   
Weighted Aveage Shares (diluted)   79,681    79,681    79,751    80,187    79,826    70,481    70,481    71,281    79,681    73,001 
                                                   
Balance Sheet Items:                                                  
Real estate, net  $855,661   $874,558   $872,038   $867,608   $867,608   $839,826   $869,557   $864,370   $860,218   $860,218 
Other assets, net   295,770    311,492    316,340    371,127    371,127    178,682    195,939    281,405    294,632    294,632 
Total assets, net   1,151,431    1,186,050    1,188,378    1,238,735    1,238,735    1,018,508    1,065,496    1,144,827    1,154,850    1,154,850 
Total liabilities, net   223,654    267,198    278,091    317,177    317,177    175,075    229,903    200,848    217,576    217,576 
Shareholders' equity   927,777    918,852    910,287    921,558    921,558    843,433    835,593    943,979    937,274    937,274 
 

* See page 28 for a reconciliation of Net Income to FFO and FFO+GOS and page 29 for definitions of FFO and FFO+GOS

 
 
December 31, 2010
 6
 
 
 
 

    
Management’s Key Operating Measures
 
 
 
 
* See page 28 for a reconciliation of Net Income to FFO and FFO+GOS (Total Profits) and page 29 for definitions of FFO and FFO+GOS

 
 
December 31, 2010
 7
 
 
 
 

    
Condensed Consolidated Income Statements
($ in thousands, except per share amounts)
 
               For the              For the
   For the Three Months Ended:  Year Ended  For the Three Months Ended:  Year Ended
   31-Mar-10  30-Jun-10  30-Sep-10  31-Dec-10  31-Dec-10  31-Mar-09  30-Jun-09  30-Sep-09  31-Dec-09  31-Dec-09
                               
Revenue:                                                  
Rental  $28,757   $27,219   $29,391   $29,953   $115,320   $29,818   $29,254   $31,682   $29,259   $120,013 
Related party revenue:                                                  
Syndication fees   121    541    20    1,862    2,544    10    29    —      2,389    2,428 
Transaction fees   146    753    246    1,582    2,727    28    514    1    1,537    2,080 
Management fees and interest income from loans   533    558    630    718    2,439    545    317    370    508    1,740 
Other   9    6    20    54    89    18    18    19    6    61 
Total revenue   29,566    29,077    30,307    34,169    123,119    30,419    30,132    32,072    33,699    126,322 
                                                   
Expenses:                                                  
Real estate operating expenses   7,955    7,335    8,715    9,604    33,609    7,280    7,144    7,752    8,634    30,810 
Real estate taxes and insurance   4,996    4,061    4,659    4,454    18,170    4,829    4,686    5,364    4,102    18,981 
Depreciation and amortization   8,496    8,521    9,691    9,764    36,472    7,914    10,225    8,801    8,630    35,570 
Selling, general and administrative   2,171    2,559    2,074    2,482    9,286    2,008    2,127    1,869    2,510    8,514 
Commissions   114    336    16    1,011    1,477    130    40    8    1,623    1,801 
Interest   1,652    1,735    1,892    2,004    7,283    1,577    1,599    1,744    1,650    6,570 
Total expenses   25,384    24,547    27,047    29,319    106,297    23,738    25,821    25,538    27,149    102,246 
                                                   
Income before interest income, equity in earnings of non-consolidated REITs and taxes   4,182    4,530    3,260    4,850    16,822    6,681    4,311    6,534    6,550    24,076 
Interest income   8    9    4    4    25    36    36    16    8    96 
Equity in earnings of non-consolidated REITs   253    380    404    229    1,266    792    443    475    284    1,994 
                                                   
    4,443    4,919    3,668    5,083    18,113    7,509    4,790    7,025    6,842    26,166 
Income tax expense (benefit)   (68)   5    (37)   317    217    (299)   (75)   (270)   65    (579)
                                                   
Income from continuing operations   4,511    4,914    3,705    4,766    17,896    7,808    4,865    7,295    6,777    26,745 
Income from discontinued operations   1,051    1,040    1,052    1,054    4,197    —      —      (353)   1,056    703 
Gain on sale of assets   —      —      —      —      —      —      —      —      424    424 
                                                   
Net income  $5,562   $5,954   $4,757   $5,820   $22,093   $7,808   $4,865   $6,942   $8,257   $27,872 
                                                   
Weighted average number of shares outstanding, basic and diluted   79,681    79,681    79,751    80,187    79,826    70,481    70,481    71,281    79,681    73,001 
                                                   
Earnings per share, basic and diluted, attributable to:                                                  
Continuing operations  $0.06   $0.06   $0.05   $0.06   $0.23   $0.11   $0.07   $0.10   $0.09   $0.37 
Discontinued operations   0.01    0.01    0.01    0.01    0.05    —      —      —      0.01    0.01 
Gains on sales of assets   —      —      —      —      —      —      —      —      —      —   
Net income per share, basic and diluted  $0.07   $0.07   $0.06   $0.07   $0.28   $0.11   $0.07   $0.10   $0.10   $0.38 
 
 
December 31, 2010
 8
 
 
 
 

    
EPS, FFO, GOS and FFO+GOS*
 
 
*See page 28 for a reconciliation of Net Income to FFO and FFO+GOS and page 29 for definitions of FFO and FFO+GOS
 
 
December 31, 2010
 9
 
 
 
 

    
Condensed Consolidated Balance Sheets
(in thousands)
 
   March 31,  June 30,  September 30,  December 31,  March 31,  June 30,  September 30,  December 31,
   2010  2010  2010  2010  2009  2009  2009  2009
Assets:                                        
Real estate assets:                                        
 Land  $114,677   $123,305   $123,305   $123,305   $107,153   $114,677   $114,677   $114,677 
 Buildings and improvements   845,504    861,986    865,810    867,858    812,470    840,605    841,751    843,845 
 Fixtures and equipment   354    458    458    578    299    310    310    328 
    960,535    985,749    989,573    991,741    919,922    955,592    956,738    958,850 
 Less accumulated depreciation   104,874    111,191    117,535    124,133    80,096    86,035    92,368    98,632 
 Real estate assets, net   855,661    874,558    872,038    867,608    839,826    869,557    864,370    860,218 
                                         
 Acquired real estate leases, net   30,822    45,871    43,185    40,578    26,042    38,996    36,240    33,395 
 Investment in non-consolidated REITs   91,787    90,782    89,995    89,327    82,388    94,579    93,936    92,910 
 Assets held for syndication, net   2,791    —      —      2,976    13,004    —      —      4,827 
 Assets held for sale   71,593    70,991    70,391    69,790    —      —      73,001    72,182 
 Cash and cash equivalents   22,815    21,487    20,554    68,213    27,650    24,542    26,385    27,404 
 Restricted cash   50    59    55    420    336    335    331    334 
 Tenant rent receivables, net   1,385    900    2,123    1,922    1,084    720    1,400    1,782 
 Straight-line rent receivable, net   13,994    14,645    15,757    18,752    9,190    9,219    9,723    10,633 
 Prepaid expenses   2,236    2,280    2,511    1,654    2,253    2,267    3,430    2,594 
 Related party mortgage loan receivable   41,325    46,270    53,756    57,684    4,725    12,115    23,264    36,535 
 Other assets   1,220    1,620    1,387    1,356    1,517    2,271    1,860    1,228 
 Deferred leasing commissions, net   15,752    16,587    16,626    18,455    10,493    10,895    10,887    10,808 
 Total assets  $1,151,431   $1,186,050   $1,188,378   $1,238,735   $1,018,508   $1,065,496   $1,144,827   $1,154,850 
                                         
 Liabilities and Stockholders’ Equity:                                        
 Liabilities:                                        
 Bank note payable  $119,968    162,968    167,968    209,968   $72,468   $124,038   $91,008   $109,008 
 Term loan payable   75,000    75,000    75,000    74,850    75,000    75,000    75,000    75,000 
 Accounts payable and accrued expenses   20,467    18,766    25,064    22,435    17,687    21,252    25,351    23,787 
 Accrued compensation   274    1,040    1,334    1,803    250    500    750    1,416 
 Tenant security deposits   1,696    2,004    1,922    1,930    1,795    1,765    1,757    1,808 
 Other liabilities: derivative termination value   1,995    1,735    1,416    1,077    3,080    2,394    2,269    2,076 
 Acquired unfavorable real estate leases, net   4,254    5,685    5,387    5,114    4,795    4,954    4,713    4,481 
 Total liabilities   223,654    267,198    278,091    317,177    175,075    229,903    200,848    217,576 
                                         
 Commitments and contingencies                                        
                                         
 Stockholders’ Equity:                                        
 Preferred stock   —      —      —      —      —      —      —      —   
 Common stock   8    8    8    8    7    7    8    8 
 Additional paid-in capital   1,003,712    1,003,712    1,005,211    1,025,491    889,019    889,019    1,003,729    1,003,713 
 Accumulated other comprehensive loss   (1,995)   (1,735)   (1,416)   (1,077)   (3,080)   (2,394)   (2,269)   (2,076)
 Accumulated distributions in excess of accumulated earnings   (73,948)   (83,133)   (93,516)   (102,864)   (42,513)   (51,039)   (57,489)   (64,371)
 Total stockholders’ equity   927,777    918,852    910,287    921,558    843,433    835,593    943,979    937,274 
 Total liabilities and stockholders’ equity  $1,151,431   $1,186,050   $1,188,378   $1,238,735   $1,018,508   $1,065,496   $1,144,827   $1,154,850 
 
 
December 31, 2010
  10
 
 
 
 

    
Condensed Consolidated Statements of Cash Flows
(in thousands)
 
   Twelve Months ended December 31
   2010  2009  2008
          
Cash flows from operating activities:               
  Net income  $22,093   $27,872   $31,959 
  Adjustments to reconcile net income to net cash
        provided by  operating activities:		               
     Gains on assets sold   —      (424)   —   
     Depreciation and amortization expense   39,627    36,561    30,444 
     Amortization of above market lease   1,362    3,359    4,283 
     Equity in earnings (losses) from non-consolidated REITs   (1,183)   (2,012)   (2,747)
     Distributions from non-consolidated REITs   5,170    5,628    5,348 
     Increase in bad debt reserve   980    111    79 
 Changes in operating assets and liabilities:               
    Restricted cash   (86)   2    —   
    Tenant rent receivables   (1,120)   (564)   64 
    Straight-line rents   (4,249)   (1,879)   (1,406)
    Prepaid expenses and other assets   865    907    (901)
    Accounts payable and accrued expenses   (351)   2,760    448 
    Accrued compensation   387    (238)   90 
    Tenant security deposits   122    (66)   —   
    Payment of deferred leasing commissions   (10,515)   (2,659)   (3,353)
                
       Net cash provided by operating activities   53,102    69,358    64,308 
                
Cash flows from investing activities:               
     Purchase of real estate assets, office computers and
          furniture, capitalized merger costs and acquired real estate leases		   (54,344)   (132,323)   (78,396)
     Investment in non-consolidated REITs   (11)   (13,218)   (10)
     Investment in related party mortgage loan receivable   (21,149)   (35,410)   (1,125)
     Changes in deposits on real estate assets   (200)   —      (1,300)
     Investment in assets held for syndication, net   1,319    8,159    12,236 
     Proceeds received on sales of real estate assets   —      672    —   
                
     Net cash used in investing activities   (74,385)   (172,120)   (68,595)
                
Cash flows from financing activities:               
     Distributions to stockholders   (60,586)   (55,313)   (70,481)
     Proceeds from equity offering, net   21,868    114,695    —   
     Borrowings under bank note payable, net   100,960    41,540    (17,282)
     Borrowings (principal payments) under term note payable   (150)   —      75,000 
     Deferred financing costs   —      —      (694)
                
     Net cash (used in) provided by financing activities   62,092    100,922    (13,457)
                
Net decreases in cash and cash equivalents   40,809    (1,840)   (17,744)
                
Cash and cash equivalents, beginning of period   27,404    29,244    46,988 
                
     Cash and cash equivalents, end of period  $68,213   $27,404   $29,244 
 
 
 
December 31, 2010
  11
 
 
 
 

    
Segment Information*
($ in thousands except per share amounts)
 
   Three Months Ended
December 31, 2010		  Year Ended
December 31, 2010		  Three Months
Ended December 31, 2009		  Year Ended
December 31, 2009
   Real  Investment     Real  Investment     Real  Investment     Real  Investment   
   Estate  Banking  Total  Estate  Banking  Total  Estate  Banking  Total  Estate  Banking  Total
Revenue:                                                            
Rental Income  $29,953   $—     $29,953   $115,320   $—     $115,320   $29,259   $—     $29,259   $120,013   $—     $120,013 
Syndication Fees   —      1,862    1,862    —      2,544    2,544    —      2,389    2,389    —      2,428    2,428 
Transaction Fees   —      1,582    1,582    —      2,727    2,727    —      1,537    1,537    —      2,080    2,080 
Management Fees & Interest Income   718    —      718    2,439    —      2,439    508    —      508    1,740    —      1,740 
Other Income   54    —      54    89    —      89    6    —      6    61    —      61 
                                                             
Total Revenue   30,725    3,444    34,169    117,848    5,271    123,119    29,773    3,926    33,699    121,814    4,508    126,322 
                                                             
Expenses                                                            
Rental Operating Expenses   9,604    —      9,604    33,609    —      33,609    8,634    —      8,634    30,810    —      30,810 
Real Estate Taxes and Insurance   4,454    —      4,454    18,170    —      18,170    4,102    —      4,102    18,981    —      18,981 
Depreciation and Amortization   9,729    35    9,764    36,299    173    36,472    8,591    39    8,630    35,447    123    35,570 
Selling, general  and administrative   1,698    784    2,482    6,399    2,887    9,286    1,356    1,154    2,510    4,452    4,062    8,514 
Commissions and  Broker Expenses   —      1,011    1,011    —      1,477    1,477    —      1,623    1,623    —      1,801    1,801 
Interest & Commitment Fees   2,004    —      2,004    7,283    —      7,283    1,650    —      1,650    6,570    —      6,570 
Total Expenses   27,489    1,830    29,319    101,760    4,537    106,297    24,333    2,816    27,149    96,260    5,986    102,246 
                                                             
Income before Equity, Interest and Taxes   3,236    1,614    4,850    16,088    734    16,822    5,440    1,110    6,550    25,554    (1,478)   24,076 
Interest Income   4    —      4    24    1    25    8    —      8    92    4    96 
Equity Income SARs   229    —      229    1,266    —      1,266    284    —      284    1,994    —      1,994 
Income before Taxes   3,469    1,614    5,083    17,378    735    18,113    5,732    1,110    6,842    27,640    (1,474)   26,166 
Income Taxes   55    262    317    217    —      217    56    9    65    248    (827)   (579)
Income from continuing operations   3,414    1,352    4,766    17,161    735    17,896    5,676    1,101    6,777    27,392    (647)   26,745 
Income from discontinued operations   1,054    —      1,054    4,197    —      4,197    1,056    —      1,056    703    —      703 
Gain on sale of assets   —      —      —      —      —      —      424    —      424    424    —      424 
Net Income (loss)  $4,468   $1,352   $5,820   $21,358   $735   $22,093   $7,156   $1,101   $8,257   $28,519   $(647)  $27,872 
                                                             
Funds From Operations (FFO)*                                                            
Net Income  $4,468   $1,352   $5,820   $21,358   $735   $22,093   $7,156   $1,101   $8,257   $28,519   $(647)  $27,872 
Gain on sale of assets, net   —      —      —      —      —      —      (424)   —      (424)   (424)   —      (424)
Equity in income of SARs   (153)   —      (153)   (1,190)   —      (1,190)   (301)   —      (301)   (2,012)   —      (2,012)
Cash received from SARs   1,247    —      1,247    5,170    —      5,170    1,371    —      1,371    5,628    —      5,628 
Acquisition costs   —      —      —      125    —      125    4    —      4    643    —      643 
Depreciation and amortization   10,570    35    10,605    40,551    173    40,724    10,129    39    10,168    39,529    123    39,652 
Funds From Operations (FFO)*   16,132    1,387    17,519    66,014    908    66,922    17,935    1,140    19,075    71,883    (524)   71,359 
                                                             
EPS  $0.05   $0.02   $0.07   $0.27   $0.01   $0.28   $0.09   $0.01   $0.10   $0.39   $(0.01)  $0.38 
FFO per Share*  $0.20   $0.02   $0.22   $0.83   $0.01   $0.84   $0.23   $0.01   $0.24   $0.99   $(0.01)  $0.98 
                                                             
Weighted Average Shares             80,187              79,826              79,681              73,001 

 

*See page 28 for a reconciliation of Net Income to FFO and FFO+GOS and page 29 for definitions of FFO and FFO+GOS

 
 
December 31, 2010
  12
 
 
 
 
 
    
Segment Information*
($ in thousands except per share amounts)
 
   Year Ended December 31, 2010  Year Ended December 31, 2009  Year Ended December 31, 2008
    Real    Investment         Real    Investment         Real    Investment      
    Estate    Banking    Total    Estate    Banking    Total    Estate    Banking    Total 
Revenue:                                             
Rental Income  $115,320   $—     $115,320   $120,013   $—     $120,013   $111,198   $—     $111,198 
Syndication Fees   —      2,544    2,544    —      2,428    2,428    —      3,766    3,766 
Transaction Fees   —      2,727    2,727    —      2,080    2,080    —      3,641    3,641 
Management Fees & Interest Income   2,439    —      2,439    1,740    —      1,740    1,739    —      1,739 
Other Income   89    —      89    61    —      61    72    —      72 
                                              
Total Revenue   117,848    5,271    123,119    121,814    4,508    126,322    113,009    7,407    120,416 
                                              
Expenses                                             
Rental Operating Expenses   33,609    —      33,609    30,810    —      30,810    28,999    —      28,999 
Real Estate Taxes and Insurance   18,170    —      18,170    18,981    —      18,981    17,740    —      17,740 
Depreciation and Amortization   36,299    173    36,472    35,447    123    35,570    30,222    138    30,360 
Selling, general  and administrative   6,399    2,887    9,286    4,452    4,062    8,514    4,229    4,039    8,268 
Commissions and  Broker Expenses   —      1,477    1,477    —      1,801    1,801    100    2,051    2,151 
Interest & Commitment Fees   7,283    —      7,283    6,570    —      6,570    4,921    —      4,921 
Total Expenses   101,760    4,537    106,297    96,260    5,986    102,246    86,211    6,228    92,439 
                                              
Income before Equity, Interest and Taxes   16,088    734    16,822    25,554    (1,478)   24,076    26,798    1,179    27,977 
Interest Income   24    1    25    92    4    96    709    36    745 
Equity Income SARs   1,266    —      1,266    1,994    —      1,994    2,747    —      2,747 
Income before Taxes   17,378    735    18,113    27,640    (1,474)   26,166    30,254    1,215    31,469 
Income Taxes   217    —      217    248    (827)   (579)   246    (736)   (490)
Income from continuing operations   17,161    735    17,896    27,392    (647)   26,745    30,008    1,951    31,959 
Income from discontinued operations   4,197    —      4,197    703    —      703    —      —      —   
Gain on sale of assets   —      —      —      424    —      424    —      —      —   
Net Income  $21,358   $735   $22,093   $28,519   $(647)  $27,872   $30,008   $1,951   $31,959 
                                              
Funds From Operations (FFO)*                                             
Net Income  $21,358   $735   $22,093   $28,519   $(647)  $27,872   $30,008   $1,951   $31,959 
Gain on sale of assets, net   —      —      —      (424)   —      (424)   —      —      —   
Equity in income of SARs   (1,190)   —      (1,190)   (2,012)   —      (2,012)   (2,747)   —      (2,747)
Cash received from SARs   5,170    —      5,170    5,628    —      5,628    5,348    —      5,348 
Acquisition costs   125    —      125    643    —      643    —      —      —   
Depreciation and amortization   40,551    173    40,724    39,529    123    39,652    34,505    138    34,643 
Funds From Operations (FFO)*   66,014    908    66,922    71,883    (524)   71,359    67,114    2,089    69,203 
                                              
EPS  $0.27   $0.01   $0.28   $0.39   $(0.01)  $0.38   $0.43   $0.03   $0.45 
FFO per Share*  $0.83   $0.01   $0.84   $0.99   $(0.01)  $0.98   $0.95   $0.03   $0.98 
                                              
Weighted Average Shares             79,826              73,001              70,481 

 

*See page 28 for a reconciliation of Net Income to FFO and FFO+GOS and page 29 for definitions of FFO and FFO+GOS

 

 
December 31, 2010
 13
 
 
 
 

    
Property Net Operating Income (NOI):
Cash and GAAP Basis
(in thousands)
 

Property NOI Cash*

                     Year              Year
         Three Months Ended  Ended  Three Months Ended  Ended
      31-Dec-10                              
Region  Division  Sq Feet  31-Mar-10  30-Jun-10  30-Sep-10  31-Dec-10  2010  31-Mar-09  30-Jun-09  30-Sep-09  31-Dec-09  2009
                                     
Eastern   Mideast    1,543   $4,031   $4,390   $5,551   $4,931   $18,903   $3,740   $3,803   $4,401   $4,839   $16,783 
                                                             
Midwest   East North Central    597    1,103    1,574    1,184    1,123    4,984    1,524    1,578    1,108    1,129    5,339 
   West North Central    1,104    2,034    2,000    2,991    3,028    10,053    1,689    1,758    2,653    1,867    7,967 
         1,701    3,137    3,574    4,175    4,151    15,037    3,213    3,336    3,761    2,996    13,306 
                                                             
South   Southeast    600    2,307    2,251    2,285    1,917    8,760    2,220    2,213    2,353    2,138    8,924 
   Southwest    1,489    4,234    4,238    3,597    3,564    15,633    5,203    4,953    4,718    4,370    19,244 
         2,089    6,541    6,489    5,882    5,481    24,393    7,423    7,166    7,071    6,508    28,168 
                                                             
West   Mountain    790    3,254    2,212    810    894    7,170    3,194    3,519    3,003    3,126    12,842 
   Pacific    299    443    491    498    480    1,912    375    311    460    364    1,510 
         1,089    3,697    2,703    1,308    1,374    9,082    3,569    3,830    3,463    3,490    14,352 
                                                             
Total        6,422   $17,406   $17,156   $16,916   $15,937   $67,415   $17,945   $18,135   $18,696   $17,833   $72,609 

 

Property NOI GAAP*

                     Year              Year
         Three Months Ended  Ended  Three Months Ended  Ended
      31-Dec-10                              
Region  Division  Sq Feet  31-Mar-10  30-Jun-10  30-Sep-10  31-Dec-10  2010  31-Mar-09  30-Jun-09  30-Sep-09  31-Dec-09  2009
                                     
Eastern   Mideast    1,543   $4,666   $5,002   $5,992   $5,362   $21,022   $3,749   $3,726   $4,483   $5,232   $17,190 
                                                             
Midwest   East North Central    597    1,110    1,602    1,210    1,166    5,088    1,570    1,592    1,161    1,191    5,514 
   West North Central    1,104    2,164    2,106    3,136    3,135    10,541    1,606    1,667    2,626    2,016    7,915 
         1,701    3,274    3,708    4,346    4,301    15,629    3,176    3,259    3,787    3,207    13,429 
                                                             
South   Southeast    600    2,356    2,355    2,359    2,033    9,103    2,391    2,343    2,477    2,245    9,456 
   Southwest    1,489    4,404    4,395    3,797    3,778    16,374    5,265    4,828    4,820    4,643    19,556 
         2,089    6,760    6,750    6,156    5,811    25,477    7,656    7,171    7,297    6,888    29,012 
                                                             
West   Mountain    790    3,229    2,502    1,100    1,231    8,062    3,334    3,548    3,019    3,114    13,015 
   Pacific    299    497    533    524    513    2,067    404    339    515    425    1,683 
         1,089    3,726    3,035    1,624    1,744    10,129    3,738    3,887    3,534    3,539    14,698 
                                                             
Total        6,422   $18,426   $18,495   $18,118   $17,218   $72,257   $18,319   $18,043   $19,101   $18,866   $74,329 

 

*See page 32 for a reconciliation and definition of Net Income to Property NOI cash and Property NOI GAAP.

 
December 31, 2010
  14
 
 
 
 

    
Capital Analysis
(in thousands, except per share amounts)
 
   31-Mar-10  30-Jun-10  30-Sep-10  31-Dec-10  31-Mar-09  30-Jun-09  30-Sep-09  31-Dec-09
Market Data:                                        
Shares Outstanding   79,681    79,681    79,837    81,437    70,481    70,481    79,681    79,681 
Closing market price per share  $14.43   $11.81   $12.42   $14.25   $12.30   $13.25   $13.10   $14.61 
Market capitalization  $1,149,793   $941,029   $991,581   $1,160,483   $866,913   $933,869   $1,043,817   $1,164,135 
Total Debt   194,968    237,968    242,968   $284,118    147,468    199,038    166,008    184,008 
Total Market Capitalization  $1,344,761   $1,178,997   $1,234,549   $1,444,601   $1,014,381   $1,132,907   $1,209,825   $1,348,143 
                                         
Dividend Data:                                        
Total dividends paid  $15,139   $15,139   $15,139   $15,169   $13,391   $13,391   $13,391   $15,140 
Common dividend per share  $0.19   $0.19   $0.19   $0.19   $0.19   $0.19   $0.19   $0.19 
Quarterly dividend as a % of FFO*   90%   90%   95%   86%   76%   79%   76%   79%
                                         
Liquidity:                                        
Cash and cash equivalents  $22,815   $21,487   $20,554   $68,213   $27,650   $24,542   $26,385   $27,404 
Revolving credit facilities:                                        
Gross potential available under current credit facilities   250,000    250,000    250,000    250,000    250,000    250,000    250,000    250,000 
  Less:                                        
  Outstanding balance   (119,968)   (162,968)   (167,968)   (209,968)   (72,468)   (124,038)   (91,008)   (109,008)
Total Liquidity  $152,847   $108,519   $102,586   $108,245   $205,182   $150,504   $185,377   $168,396 

 

*See page 28 for a reconciliation of Net Income to FFO and FFO+GOS and page 29 for definitions of FFO and FFO+GOS

 
 
 
December 31, 2010
  15
 
 
 
 
 

     Portfolio Overview 
 
 
  31-Dec-10 30-Sep-10 30-Jun-10 31-Mar-10 31-Dec-09 30-Sep-09 30-Jun-09 31-Mar-09
Owned portfolio of commercial real estate:                
  Number of properties (1) 33 33 33 32 32 32 31 29
  Square feet 6,422,357 6,417,299 6,418,835 5,942,299 5,942,414 5,934,624 5,682,011 5,417,515
  Leased percentage 86% 82% 85% 85% 84% 90% 92% 93%
                 
Investments in non-consolidated commercial real estate:                
  Number of properties 3 3 3 3 3 3 3 2
  Square feet 1,995,913 1,998,519 1,998,519 1,995,041 1,995,041 1,995,041 1,994,686 1,461,224
  Leased percentage 77% 76% 77% 78% 78% 78% 78% 79%
                 
Single Asset REITs (SARs) managed:                
  Number of properties 12 11 11 11 11 9 9 10
  Square feet * 2,915,896 2,702,287 2,406,370 2,406,370 2,406,370 2,155,201 2,154,079 2,684,561
  Leased percentage* 75% 73% 76% 76% 91% 90% 87% 88%
                 
Total owned, investments and managed properties:                
  Number of properties 48 47 47 46 46 44 43 41
  Square feet * 11,334,166 11,118,105 10,823,724 10,343,710 10,343,825 10,084,866 9,830,776 9,563,300
  Leased percentage* 81% 79% 82% 82% 85% 88% 88% 90%

 

(1) Includes asset held for sale

*Prior to September 30, 2010, excludes a property that completed construction on July 9, 2010 with approximately 295,891 square feet

 

 
 
December 31, 2010
  16
 
 
 
 
 

    
Regional Analysis and Map
 
Owned:        
Name City State Region Square Feet
Park Seneca Charlotte NC East 109,550
Forest Park Charlotte NC East 62,212
Meadow Point Chantilly VA East 138,537
Stonecroft Chantilly VA East 111,469
Fairview (1) Falls Church VA East 252,613
Innsbrook Glen Allen VA East 308,803
East Baltimore Baltimore MD East 325,445
Loudoun Tech Center Dulles VA East 135,888
Bollman Place (2) Savage MD East 98,745
Southfield Centre Southfield MI MidWest 214,697
Northwest Point Elk  Grove Village IL MidWest 176,848
River Crossing Indianapolis IN MidWest 205,059
Timberlake Chesterfield MO MidWest 232,766
Timberlake East Chesterfield MO MidWest 116,197
Lakeside Crossing Maryland  Heights MO MidWest 127,778
Eden Bluff Eden Prairie MN MidWest 153,028
121 South 8th Street Minneapolis MN MidWest 474,661
Blue Lagoon Drive Miami FL South 212,619
One Overton Place Atlanta GA South 387,267
Willow Bend Office Center Plano TX South 116,622
Park Ten Houston TX South 155,715
Addison Circle Addison TX South 293,787
Collins Crossing Richardson TX South 298,766
Eldridge Green Houston TX South 248,399
Park Ten Phase II Houston TX South 156,746
Liberty Plaza Addison TX South 218,934
Centennial Technology Center Colorado Springs CO West 110,730
380 Interlocken Broomfield CO West 240,184
Greenwood Plaza Englewood CO West 197,527
390 Interlocken Broomfield CO West 241,516
Hillview Center Milpitas CA West 36,288
Federal Way Federal Way WA West 117,010
Montague Business Center San Jose CA West 145,951
Total       6,422,357
 
Managed:        
Name City State Region Square Feet
1441 Main Street Columbia SC East 267,982
303 East Wacker Drive Chicago IL MidWest 844,953
Monument Circle Indianapolis IN MidWest 213,609
505 Waterford Plymouth MN MidWest 256,348
50 South Tenth Street Minneapolis MN MidWest 498,768
Grand Boulevard Kansas City MO MidWest 532,453
Lakeside Crossing II Maryland Heights MO MidWest 116,000
Centre Pointe V West Chester OH MidWest 135,936
Satellite Place Duluth GA South 134,785
5601 Executive Drive Irving TX South 152,121
Galleria North Dallas TX South 379,518
Energy Tower I Houston TX South 325,796
Phoenix Tower Houston TX South 618,507
Highland Place I Centennial CO West 139,142
385 Interlocken Broomfield CO West 295,891
Total       4,911,809

 

(1) Asset held for sale

(2) Industrial property, all others are office properties

 

Properties by Division/Region
($ in thousands)
              NBV (a)   % Leased
  # of Properties   Square Feet   % of Portfolio   31-Dec-10   31-Dec-10
                   
East Region Total (b) 9   1,543,262   24.0   $       236,058   87.5%
  East North Central Division 3   596,604   9.3   79,212   84.3%
  West North Central 5   1,104,430   17.2   108,573   96.4%
Midwest Region Total 8   1,701,034   26.5   187,785   92.1%
  Southeast 2   599,886   9.3   120,853   95.1%
  Southwest 7   1,488,969   23.2   221,569   82.0%
South Region Total 9   2,088,855   32.5   342,422   85.7%
  Mountain  4   789,957   12.3   126,201   72.0%
  Pacific 3   299,249   4.7   35,470   74.0%
West Region Total 7   1,089,206   17.0   161,671   72.5%
                   
Grand Total 33   6,422,357   100.0   $       927,936   85.6%

 

(a) NBV is for real estate assets, excluding intangibles

(b) Includes asset held for sale

 

 

 
 
 
December 31, 2010
  17
 
 
 
 

    
Owned Property List
(in thousands)
 
            NBV (1) % Leased
Region Division Name City State S.F. 31-Dec-10 31-Dec-10
               
West Pacific Hillview Center Milpitas CA 36 4,174 100.0%
West Pacific Montague San Jose CA 146 16,884 100.0%
West Mountain 380 Interlocken Broomfield CO 240 42,800 85.1%
West Mountain 390 Interlocken Broomfield CO 241 42,980 98.3%
West Mountain Centennial Technology Center Colorado Springs CO 111 11,479 66.9%
West Mountain Greenwood Plaza Englewood CO 198 28,941 26.6%
South Southeast Blue Lagoon Drive Miami FL 213 46,986 100.0%
South Southeast One Overton Place Atlanta GA 387 73,867 92.4%
MidWest East North Central Northwest Point Elk  Grove Village IL 177 28,794 100.0%
MidWest East North Central River Crossing Indianapolis IN 205 35,761 97.5%
East Mideast East Baltimore Baltimore MD 325 55,689 84.5%
East Mideast Bollman Place Savage MD 99 4,910 100.0%
MidWest East North Central Southfield Centre Southfield MI 215 14,658 58.6%
MidWest West North Central Eden Bluff Eden Prairie MN 153 14,359 100.0%
MidWest West North Central 121 South 8th Street Minneapolis MN 474 23,878 92.1%
MidWest West North Central Timberlake Chesterfield MO 233 35,193 99.0%
MidWest West North Central Timberlake East Chesterfield MO 116 17,913 100.0%
MidWest West North Central Lakeside Crossing Maryland  Heights MO 128 17,229 100.0%
East Mideast Park Seneca Charlotte NC 110 7,547 81.0%
East Mideast Forest Park Charlotte NC 62 6,233 100.0%
South Southwest Addison Circle Addison TX 294 46,730 95.8%
South Southwest Liberty Plaza Addison TX 219 24,419 73.7%
South Southwest Park Ten Houston TX 156 18,378 48.2%
South Southwest Eldridge Green Houston TX 248 42,497 100.0%
South Southwest Park Ten Phase II Houston TX 157 30,899 97.8%
South Southwest Willow Bend Office Center Plano TX 117 17,586 55.5%
South Southwest Collins Crossing Richardson TX 299 41,061 79.1%
East Mideast Meadow Point Chantilly VA 138 23,424 97.9%
East Mideast Stonecroft Chantilly VA 111 19,412 100.0%
East Mideast Loudoun Tech Center Dulles VA 136 17,417 100.0%
East Mideast Fairview (2) Falls Church VA 253 60,328 100.0%
East Mideast Innsbrook Glen Allen VA 309 41,098 61.4%
West Pacific Federal Way Federal Way WA 117 14,412 33.6%
          6,422 $    927,936 85.6%
 

(1) NBV is for real estate assets, excluding intangibles

(2) Asset held for sale

 
 
December 31, 2010
  18
 
 
 
 

    
Properties with Annualized Rent per Square Foot
(includes asset held for sale)
 
                          Percentage       Average  
              Year Built           Leased as of   Annualized Rent   Annualized  
              or   Net Rentable   Leased   December 31,   as of December 31,   Rent per Leased  
Property Name   City   State Type   Renovated   Square Feet   Sq. Ft.   2010 (a)   2010 (b)   Square Feet (c)  
                                     
Park Seneca   Charlotte   NC Office   1969   109,550   88,770   81.0%   1,438,039   $16.20  
Forest Park   Charlotte   NC Office   1999   62,212   62,212   100.0%   987,940   15.88  
Meadow Point   Chantilly   VA Office   1999   138,537   135,664   97.9%   2,379,464   17.54  
Innsbrook   Glen Allen   VA Office   1999   308,803   189,686   61.4%   1,273,806   6.72 (b)
East Baltimore   Baltimore   MD Office   1989   325,445   275,113   84.5%   7,289,593   26.50  
Loudoun Tech Center   Dulles   VA Office   1999   135,888   135,888   100.0%   1,736,340   12.78  
Bollman Place   Savage   MD Industrial   1984   98,745   98,745   100.0%   624,068   6.32  
Stonecroft   Chantilly   VA Office   2008   111,469   111,469   100.0%   4,043,600   36.28  
Fairview Park   Falls Church   VA Office   2001   252,613   252,613   100.0%   6,644,676   26.30  
  East total                 1,543,262   1,350,160   87.5%   26,417,527   19.57  
Southfield Centre   Southfield   MI Office   1977   214,697   125,835   58.6%   1,394,585   11.08  
Northwest Point   Elk  Grove Village   IL Office   1999   176,848   176,848   100.0%   3,334,487   18.86  
River Crossing   Indianapolis   IN Office   1998   205,059   199,966   97.5%   4,854,327   24.28  
Timberlake   Chesterfield   MO Office   1999   232,766   230,347   99.0%   4,743,489   20.59  
Timberlake East   Chesterfield   MO Office   2000   116,197   116,197   100.0%   2,713,159   23.35  
Lakeside Crossing   Maryland Heights   MO Office   2008   127,778   127,778   100.0%   3,011,727   23.57  
Eden Bluff   Eden Praire   MN Office   2006   153,028   153,028   100.0%   3,977,266   25.99  
121 South 8th Street   Minneapolis   MN Office   1974   474,661   437,065   92.1%   6,732,231   15.40  
  Midwest total                 1,701,034   1,567,064   92.1%   30,761,273   19.63  
Blue Lagoon Drive   Miami   FL Office   2002   212,619   212,619   100.0%   4,505,691   21.19  
One Overton Place   Atlanta   GA Office   2002   387,267   357,790   92.4%   9,341,668   26.11  
Willow Bend Office Center   Plano   TX Office   1999   116,622   64,731   55.5%   1,313,090   20.29  
Park Ten   Houston   TX Office   1999   155,715   74,997   48.2%   2,157,090   28.76  
Addison Circle   Addison   TX Office   1999   293,787   281,503   95.8%   6,663,018   23.67  
Collins Crossing   Richardson   TX Office   1999   298,766   236,267   79.1%   2,197,140   9.30 (b) 
Eldridge Green   Houston   TX Office   1999   248,399   248,399   100.0%   7,075,482   28.48  
Park Ten Phase II   Houston   TX Office   2006   156,746   153,326   97.8%   4,004,324   26.12  
Liberty Plaza   Addison   TX Office   1985   218,934   161,440   73.7%   3,058,159   18.94  
  South Total                 2,088,855   1,791,072   85.7%   40,315,662   22.51  
Centennial Technology Center   Colorado  Springs   CO Office   1999   110,730   74,030   66.9%   1,256,733   16.98  
380 Interlocken   Broomfield   CO Office   2000   240,184   204,347   85.1%   6,305,123   30.85  
Greenwood Plaza   Englewood   CO Office   2000   197,527   52,499   26.6%   804,066   15.32  
390 Interlocken   Broomfield   CO Office   2002   241,516   237,518   98.3%   5,036,748   21.21  
Hillview Center   Milpitas   CA Office   1984   36,288   36,288   100.0%   544,262   15.00  
Federal Way   Federal Way   WA Office   1982   117,010   39,308   33.6%   604,910   15.39  
Montague Business Center   San Jose   CA Office   1982   145,951   145,951   100.0%   2,184,672   14.97  
  West Total                 1,089,206   789,941   72.5%   16,736,515   21.19  
                                     
  Grand Total                 6,422,357   5,498,237   85.6%   $114,230,977   $20.78  

 

(a) Based on all leases in effect, including month-to-month tenants, divided by the Property's net rentable square footage.

(b) Represents gross rental charges for the month of December 2010 (including month-to-month leases) multiplied by 12, which can result in unusual per square foot amounts calculated when there are free rent periods (usually with new leases).

(c) Represents the annualized rent as of December 2010 divided by leased square feet.

 

 
 
December 31, 2010
  19
 
 
 
 

    
Owned Property Capital Expenditures
(in thousands)
 
 
          Year
  For the Three Months Ended Ended
  31-Mar-10 30-Jun-10 29-Sep-10 31-Dec-10 31-Dec-10
Tenant improvements $          1,305 $             935 $          3,634 $          1,126 $          7,000
Deferred leasing costs 5,566 1,519 808 2,622 10,515
Building improvements 380 498 671 1,053 2,602
Total $          7,251 $          2,952 $          5,113 $          4,801 $        20,117
           
           
          Year
  For the Three Months Ended Ended
  31-Mar-09 30-Jun-09 30-Sep-09 31-Dec-09 31-Dec-09
Tenant improvements $          1,373 $             912 $             931 $          1,528 $          4,744
Deferred leasing costs 162 1,395 645 457 2,659
Building improvements 466 116 265 619 1,466
Total $          2,001 $          2,423 $          1,841 $          2,604 $          8,869
 
 
December 31, 2010
 20
 
 
 
 

    
20 Largest Tenants with Annualized Rent
and Remaining Term
 
        Remaining Aggregate % of Aggregate Annualized % of
  Tenant   Number of Lease Term Leased Lease Rent (a) Aggregate
  Name Note Leases in Months Square Feet Square Feet (in 000's) Annualized Rent
                 
1 TCF National Bank 1 1 60 266,495 4.15% 2,893 2.53%
2 Noblis, Inc. 2 1 73 252,613 3.93% 6,645 5.82%
3 CITGO Petroleum Corporation 3 1 134 248,399 3.87% 7,075 6.19%
4 Burger King Corporation   1 93 212,619 3.31% 4,506 3.94%
5 RGA Reinsurance Company   1 48 185,501 2.89% 3,707 3.25%
6 Citicorp Credit Services, Inc 4 1 72 176,848 2.75% 3,334 2.92%
7 C.H. Robinson Worldwide, Inc.   1 126 153,028 2.38% 3,977 3.48%
8 SunTrust Bank 5 2 70 & 129 145,204 2.26% 1,423 1.25%
9 Geisecke & Devrient America, Inc.   1 50 135,888 2.12% 1,736 1.52%
10 Murphy Exploration & Production Company   1 76 133,786 2.08% 3,515 3.08%
11 Monsanto Company   1 49 127,778 1.99% 3,012 2.64%
12 Vail Holdings, Inc. 6 1 147 121,913 1.90% 1,882 1.65%
13 Northrop Grumman Systems Corporation   1 88 111,469 1.74% 4,044 3.54%
14 Maines Paper & Food Service, Inc.   1 35 98,745 1.54% 624 0.55%
15 Federal National Mortgage Association 7 1 32 92,358 1.44% 1,755 1.54%
16 Amdocs, Inc.   1 5 91,928 1.43% 2,139 1.87%
17 County of Santa Clara   1 84 90,467 1.41% 1,347 1.18%
18 Ober, Kaler, Grimes & Shriver   1 3 88,736 1.38% 2,472 2.16%
19   VCE Company, LLC 8 1 105 85,650 1.33% - 0.00%
20 ARGO Data Resource Corporation   1 68 83,944 1.31% 2,029 1.78%
          2,903,369 45.21% $     58,115 50.89%

 

(a) Annualized rent represents the monthly rent, including tenant reimbursements, for each lease in effect at December 31, 2010 mulitplied by 12.
  Tenant reimbursements generally include payment of real estate taxes, operating expenses and common area maintenance and utility charges.

 

 
 
December 31, 2010
 21
 
 
 
 
 

    
20 Largest Tenants with Annualized Rent
and Remaining Term Footnotes
 

1. Property was acquired on June 29, 2010.

2. Property was sold January 21, 2011.

3. On January 20, 2010, the Company signed a new lease at a Houston, Texas property, for approximately 248,000 square feet of space with one of its tenants, CITGO Petroleum Corporation, effectively extending the lease expiration from February 29, 2012 to February 28, 2022.

4. The lease with Citicorp Credit Services, Inc. is guaranteed by Citigroup.

5. On December 22, 2010 the Company signed a lease for approximately 90,000 square feet at a Glen Allen, Virginia property. The lease expires on September 30, 2021. The tenant also leases approximately 55,000 square feet at a Baltimore, Maryland property. The lease that expires on October 31, 2016.

6. On March 22, 2010, the Company signed a lease for approximate 38,000 square feet of space with one of its tenants, Vail Holdings, Inc. through March 2019. The remaining space of approximately 84,000 square feet is leased through March 2023.

7. On June 7, 2010, Federal National Mortgage Association commenced a lease for approximately 92,000 square feet of space at an Addison, Texas property. The lease expires September 6, 2013.

8. On December 20, 2010, the Company signed a lease for approximately 86,000 square feet of space at a Richardson, Texas property. The lease expires on September 30, 2019 and is guaranteed by EMC Corporation.

 

 
December 31, 2010
 22
 
 
 
 
 

    
Tenant Analysis – 20 Largest Tenants, Industry Profile
(as a % of square feet and includes asset held for sale)
 
 

 
 
December 31, 2010
 23
 
 
 
 

    
Lease Expirations by Square Feet
(includes asset held for sale)
 
 
 
Year   Total
Square Feet		   % of
Square Feet
Commercial		  
           
2011   655,783   10.2%  
2012   399,528   6.2%  
2013   543,235   8.4%  
2014   595,886   9.3%  
2015   813,023   12.7%  
2016   555,571   8.6%  
2017   523,853   8.2%  
2018   401,496   6.3%  
2019   129,042   2.0%  
2020   142,313   2.2%  
2021   406,488   6.3%  
2022   248,399   3.9%  
2023   83,620   1.3%  
Vacant   924,120   14.4%  
           
Total   6,422,357   100.0%  
 
 
December 31, 2010
 24
 
 
 
 

    
Lease Expirations
with Annualized Rent per Square Foot
(includes asset held for sale)
 
      Rentable       Annualized   Percentage
  Number of   Square       Rent   of Total Final
Year of Leases   Footage   Annualized   Per Square   Annualized
Lease Expiring   Subject to   Rent Under   Foot Under   Rent Under
Expiration Within the   Expiring   Expiring   Expiring   Expiring
December 31, Year   Leases   Leases (a)   Leases   Leases
2011 103 (b) 655,783   13,529,015   20.63   11.84%
2012 55   399,528   8,698,826   21.77   7.62%
2013 51   543,235   10,069,311   18.54   8.81%
2014 32   595,886   13,505,503   22.66   11.82%
2015 28   813,023   13,897,329   17.09   12.17%
2016 17   555,571   12,872,449   23.17   11.27%
2017 6   523,853   12,774,531   24.39   11.18%
2018 7   401,496   10,507,743   26.17   9.20%
2019 3   129,042   1,029,009   7.97   0.90%
2020 and thereafter 15   880,820   17,347,261   19.69   15.19%
  317   5,498,237   114,230,977   20.78   100.00%
                   
  Vacancies as of December 31, 2010   924,120            
  Total Portfolio Square Footage   6,422,357            

 

(a) Annualized rent represents the monthly rent, including tenant reimbursements, for each lease in effect at December 31,2010 multiplied by 12.  Tenant reimbursements generally include payment of real estate taxes, operating expenses and common area maintenance and utility charges.
   
(b) 34 leases are Month to Month and 5 leases expired on December 31, 2010.

 

 
 
December 31, 2010
 25
 
 
 
 

    
Capital Recycling
($ in thousands)
 
Acquisitions:       Property       Date   Purchase    
    State/Region   Type   Square Feet   Acquired   Price    
2010                        
121 South 8th Street   MN/Midwest   Office   474,661   6/29/10   $39,405    
                         
2009                        
Stonecroft-Chantilly   VA/East   Office   111,469   6/26/09   29,000    
Eden Bluff - Eden Prairie   MN/Midwest   Office   153,028   6/30/09   22,784    
Fairview   VA/East   Office   252,613   9/30/09   73,000    
                         
2008                        
Park Ten Phase II   TX/South   Office   156,746   5/15/08   35,079    
Lakeside Crossing   MO/Midwest   Office   127,778   12/11/08   20,003    
Loudoun Tech Center   VA/East   Office   135,888   12/23/08   18,628    
                         
2007                        
East Baltimore   MD/East   Office   325,298   6/13/07   63,592    
                         
2006                        
Liberty Plaza   TX/South   Office   218,934   2/24/06   26,472    
Innsbrook   VA/East   Office   297,789   5/1/06   48,240    
380 Interlocken   CO/West   Office   240,184   5/1/06   47,587    
Blue Lagoon Drive   FL/South   Office   212,619   5/1/06   56,051    
Eldridge Green   TX/South   Office   248,399   5/1/06   53,435    
Willow Bend Office Center   TX/South   Office   116,622   5/1/06   19,713    
One Overton Place   GA/South   Office   387,267   6/27/06   85,284    
390 Interlocken   CO/West   Office   241,516   12/21/06   46,459    
                         
2005                        
Greenwood Plaza   CO/West   Office   199,077   2/24/05   44,116    
Addison Circle   TX/South   Office   293,787   5/1/05   56,295    
Royal Ridge   GA/South   Office   161,366   5/1/05   27,391    
Collins Crossing   TX/South   Office   298,766   5/1/05   53,667    
Montague Business Center   CA/West   Office   145,951   5/1/05   20,147    
River Crossing   IN/Midwest   Office   205,059   7/6/05   42,016    
                         
Dispositions:                        
        Property           Net Sales   Gain (Loss)
2007   State/Region   Type   Square Feet   Date Sold   Proceeds   on Sale
Piedmont Center   SC/East   Office   144,029   1/31/07   $5,830   $(4,849)
Royal Ridge   GA/South   Office   161,366   6/21/07   32,535   6,601
Goldentop Technology Center   CA/West   Office   141,405   6/27/07   36,199   14,741
Lyberty Way   MA/East   Office   104,711   7/16/07   10,861   1,942
Austin N.W. (Canyon Hills)   TX/South   Office   68,533   12/20/07   10,429   257
                         
2006                        
Merrywood Apartments   TX/South   Apt   231,363   5/24/06   18,204   2,373
Santa Clara   CA/West   Office   40,280   5/31/06   8,188   1,557
Fair Lakes   VA/East   Office   210,613   5/31/06   61,412   24,240
One Technology Drive   MA/East   Industrial   188,000   8/10/06   15,995   6,366
Plaza Ridge   VA/East   Office   158,016   11/16/06   58,022   27,941
North Andover Office Park   MA/East   Office   92,913   11/21/06   11,362   3,810
                         
2005                        
Blue Ravine   CA/West   Office   47,058   7/13/05   4,764   (1,124)
Silverside Plantation   LA/South   Apt   223,812   9/19/05   22,280   7,265
Gateway Crossing   MD/East   Office   188,819   9/20/05   25,949   6,807
Essex Lane Associates   TX/South   Apt   118,798   10/5/05   13,752   5,112
Gael Apartments   TX/South   Apt   187,338   10/5/05   22,715   5,151
Telecom Business Center   CA/West   Office   101,726   12/8/05   22,570   6,943
 
 
December 31, 2010
 26
 
 
 
 
 

    
Investment Banking Performance
 
 
 
 
 
December 31, 2010
 27
 
 
 
 

    
FFO and FFO+GOS Reconciliations
(in thousands, except per share amounts)
 
   For the three months ended  For the year ended
   31-Mar-10  30-Jun-10  30-Sep-10  31-Dec-10  31-Mar-09  30-Jun-09  30-Sep-09  31-Dec-09  2010  2009  2008
                                  
Net income  $5,562   $5,954   $4,757   $5,820   $7,808   $4,865   $6,941   $8,258   $22,093   $27,872   $31,958 
(Gain) Loss on sale of assets   —      —      —      —      —      —      —      (424)   —      (424)   —   
GAAP income from non-consolidated REITs   (253)   (380)   (404)   (153)   (792)   (443)   (475)   (301)   (1,190)   (2,011)   (2,746)
Distributions from non-consolidated REITs   1,407    1,324    1,192    1,247    1,615    1,523    1,119    1,371    5,170    5,628    5,348 
Acquisition costs   —      129    (4)   —      —      248    391    4    125    643    —   
Depreciation & amortization   9,934    9,675    10,510    10,605    8,707    11,216    9,561    10,167    40,724    39,651    34,644 
Funds From Operations (FFO)   16,650    16,702    16,051    17,519    17,338    17,409    17,537    19,075    66,922    71,359    69,204 
Plus gains on sales of assets (GOS)   —      —      —      —      —      —      —      424    —      424    —   
FFO+GOS (Total Profits)  $16,650   $16,702   $16,051   $17,519   $17,338   $17,409   $17,537   $19,499   $66,922   $71,783   $69,204 
                                                        
Per Share Data:                                                       
EPS  $0.07   $0.07   $0.06   $0.07   $0.11   $0.07   $0.10   $0.10   $0.28   $0.38   $0.45 
FFO   0.21    0.21    0.20    0.22    0.25    0.25    0.25    0.24    0.84    0.98    0.98 
GOS   —      —      —      —      —      —      —      —      —      —      —   
FFO+GOS   0.21    0.21    0.20    0.22    0.25    0.25    0.25    0.24    0.84    0.98    0.98 
                                                        
Weighted Average Shares (basic and diluted)   79,681    79,681    79,751    80,187    70,481    70,481    71,281    79,681    79,826    73,001    70,481 
 
 
 
December 31, 2010
 28
 
 
 
 
 

    
FFO and FFO+GOS  Definitions
 

Definition of Funds From Operations (“FFO”), and FFO plus Gains on Sales (“FFO+GOS”)

The Company evaluates the performance of its reportable segments based on several measures including, Funds From Operations (“FFO”) and FFO plus Gains on Sales (“FFO+GOS” or “Total Profits”) as management believes they represent important measures of activity and are an important consideration in determining distributions paid to equity holders. The Company defines FFO as net income (computed in accordance with generally accepted accounting principles, or GAAP), excluding gains (or losses) from sales of property, and acquisition costs of newly acquired properties that are not capitalized, plus depreciation and amortization, and after adjustments to exclude non-cash income (or losses) from non-consolidated or Sponsored REITs, plus distributions received from non-consolidated or Sponsored REITs. The Company defines FFO+GOS as FFO as defined above, plus gains (or losses) from sales of properties and provisions for assets held for sale, if applicable.

 

FFO and FFO+GOS should not be considered as alternatives to net income (determined in accordance with GAAP), as indicators of the Company’s financial performance, nor as alternatives to cash flows from operating activities (determined in accordance with GAAP), nor as measures of the Company’s liquidity, nor 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, FFO and FFO+GOS should be examined in connection with net income and cash flows from operating, investing and financing activities in the consolidated financial statements.

 
 
December 31, 2010
 29
 
 
 
 

    
Funds Available for Distribution (FAD)
Reconciliation and Definition
(in thousands, except per share amounts)
 
   Three Months Ended:
   31-Mar-10  30-Jun-10  30-Sep-10  31-Dec-10  31-Mar-09  30-Jun-09  30-Sep-09  31-Dec-09
                         
Net income  $5,562   $5,954   $4,757   $5,820   $7,808   $4,865   $6,941   $8,258 
(Gain) Loss on sale of assets   —      —      —      —      —      —      —      (424)
GAAP income from non-consolidated REITs   (253)   (380)   (404)   (153)   (792)   (443)   (475)   (301)
Distributions from non-consolidated REITs   1,407    1,324    1,192    1,247    1,615    1,522    1,119    1,371 
Acquisition costs   —      129    (4)   —      —      248    391    4 
Depreciation & amortization   9,934    9,675    10,510    10,605    8,707    11,217    9,561    10,167 
Funds From Operations (FFO)   16,650    16,702    16,051    17,519    17,338    17,409    17,537    19,075 
Plus gains on sales of assets (GOS)   —      —      —      —      —      —      —      424 
FFO+GOS (Total Profits)  $16,650   $16,702   $16,051   $17,519   $17,338   $17,409   $17,537   $19,499 
                                         
Funds Available for Distribution:                                        
Funds From Operations (FFO)   16,650    16,702    16,051    17,519    17,338    17,409    17,537    19,075 
Straight-line rent   (1,018)   (740)   (1,203)   (1,288)   (374)   (69)   (405)   (1,030)
Capital expenditures   (380)   (498)   (671)   (1,053)   (466)   (115)   (265)   (619)
Funds Available for Distribution (FAD)  $15,252   $15,464   $14,177   $15,178   $16,498   $17,225   $16,867   $17,426 
                                         
Per Share Data:                                        
EPS  $0.07   $0.07   $0.06   $0.07   $0.11   $0.07   $0.10   $0.10 
FFO   0.21    0.21    0.20    0.22    0.25    0.25    0.25    0.24 
GOS   —      —      —      —      —      —      —      0 
FFO+GOS   0.21    0.21    0.20    0.22    0.25    0.25    0.25    0.24 
FAD   0.19    0.19    0.18    0.19    0.23    0.24    0.24    0.22 
                                         
Weighted Average Shares (basic and diluted)   79,681    79,681    79,751    80,187    70,481    70,481    71,281    79,681 

 

The Company defines FAD as the sum of (1) FFO, (2) less the effect of straight-line rent, (3) less recurring capital expenditures that are generally for maintenance of properties and are not recovered through rental income from tenants, and (4) plus non-cash compensation expenses, if any. FAD should not be considered as an alternative to net income (determined in accordance with GAAP), 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, FAD should be examined in connection with net income and cash flows from operating, investing and financing activities in the consolidated financial statements.

 
 
December 31, 2010
 30
 
 
 
 

    
EBITDA Reconciliation and Definition
(in thousands, except ratio amounts)
 
   For the three months ended:  Year Ended    For the three months ended:  Year Ended
   31-Mar-10  30-Jun-10  30-Sep-10  31-Dec-10  31-Dec-10    31-Mar-09  30-Jun-09  30-Sep-09  31-Dec-09  31-Dec-09
                                 
Net income  $5,562   $5,954   $4,757   $5,820   $22,093     $7,808   $4,865   $6,941   $8,258   $27,872 
Interest expense   1,652    1,735    1,892    2,004    7,283      1,577    1,599    1,744    1,650    6,570 
Depreciation and amortization   9,934    9,675    10,510    10,605    40,724      8,707    11,216    9,561    10,167    39,651 
Income taxes   (68)   5    (37)   317    217      (299)   (75)   (270)   65    (579)
EBITDA   17,080    17,369    17,122    18,746    70,317      17,793    17,605    17,976    20,140    73,514 
                                                     
Interest expense  $1,652   $1,735   $1,892   $2,004   $7,283     $1,577   $1,599   $1,744   $1,650   $6,570 
Scheduled principal payments (1)   —      —      —      150    150      —      —      —      —      —   
Interest and scheduled principal payments  $1,652   $1,735   $1,892   $2,154   $7,433     $1,577   $1,599   $1,744   $1,650   $6,570 
                                                     
Interest coverage ratio   10.34    10.01    9.05    9.35    9.65      11.28    11.01    10.31    12.21    11.19 
                                                     
Debt service coverage ratio   10.34    10.01    9.05    8.70    9.46      11.28    11.01    10.31    12.21    11.19 

 

(1) Scheduled principal payments include required principal payments on our unsecured term debt, which commenced in November 2011 using a 30 year amortization schedule.

 

EBITDA, a non-GAAP financial measure, is defined as net income, plus interest expense, income tax expense and depreciation and amortization expense. EBITDA is not intended to represent cash flow for the period, is not presented as an alternative to operating income as an indicator of operating performance, should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP and is not indicative of operating income or cash provided by operating activities as determined under GAAP. EBITDA is presented solely as a supplemental disclosure with respect to liquidity because the Company believes it provides useful information regarding the Company's ability to service or incur debt. Because all companies do not calculate EBITDA the same way, this presentation of EBITDA may not be comparable to similarly titled measures of other companies. The Company believes that net income is the financial measure calculated and presented in accordance with GAAP that is most directly comparable to EBITDA.

 
 
December 31, 2010
 31
 
 
 

    
Reconciliation of Net Income to Property NOI:
Cash & GAAP Basis and Definition
(in thousands)
 
   Three months ended:  2010    Three months ended:  2009
   31-Mar-10  30-Jun-10  30-Sep-10  31-Dec-10  Total    31-Mar-09  30-Jun-09  30-Sep-09  31-Dec-09  Total
                                 
Net Income  $5,562   $5,954   $4,757   $5,820   $22,093     $7,808   $4,865   $6,941   $8,258   $27,872 
Add (deduct):                                                    
Investment banking segment net loss (income)   479    (263)   401    (1,352)   (735)     778    346    625    (1,103)   646 
Gain on sale of assets   —      —      —      —      —        —      —      —      (424)   (424)
Management fees (before elimination)   (484)   (359)   (362)   (535)   (1,740)     (425)   (398)   (402)   (408)   (1,633)
Depreciation and Amortization   9,184    9,205    10,348    10,453    39,190      7,887    10,200    8,768    9,314    36,169 
Amortization of favorable leases   716    432    96    119    1,363      793    992    759    815    3,359 
Selling, general and administrative   1,447    1,854    1,400    1,698    6,399      983    1,163    1,324    1,359    4,829 
Interest expense   1,652    1,736    1,892    2,003    7,283      1,577    1,599    1,744    1,650    6,570 
Interest income   (338)   (374)   (431)   (491)   (1,634)     (347)   (136)   (170)   (278)   (931)
Equity in earnings of nonconsolidated REITs   (253)   (380)   (404)   (229)   (1,266)     (792)   (443)   (475)   (283)   (1,993)
Non-property specific income and expenses, net   461    690    421    (268)   1,304      57    (145)   (13)   (34)   (135)
GAAP Property NOI   18,426    18,495    18,118    17,218    72,257      18,319    18,043    19,101    18,866    74,329 
Straight-line rent   (1,020)   (1,339)   (1,202)   (1,281)   (4,842)     (374)   92    (405)   (1,033)   (1,720)
Cash Property NOI  $17,406   $17,156   $16,916   $15,937   $67,415     $17,945   $18,135   $18,696   $17,833   $72,609 

 

GAAP Property NOI is a non-GAAP financial measure equal to net income, the most directly comparable GAAP financial measure, plus selling, general and administrative expenses, depreciation and amortization, interest expense, less equity in earnings of nonconsolidated REITs, interest income, management fee income, gains or losses on the sale of assets and excludes non-property specific income and expenses. The Company also presents this on a cash basis (Cash Property NOI), which is GAAP Property NOI after eliminating the effects of straight-line rent. GAAP Property NOI and Cash Property NOI presented 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 as an indication of our performance or to cash flows as a measure of the Company's liquidity or its ability to make distributions.

 
 
December 31, 2010
 32
 
 

FRANKLIN STREET PROPERTIES CORP /MA/ Reports

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