FRANKLIN STREET PROPERTIES CORP /MA/ - FORM 8-K - EX-99.2 - SUPPLEMENTAL OPERATING AND FINANCIAL DATA - May 3, 2011

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8-K - FRANKLIN STREET PROPERTIES CORP. - FRANKLIN STREET PROPERTIES CORP /MA/eps4184.htm
EX-99 - FRANKLIN STREET PROPERTIES CORP /MA/ex99-1.htm
Exhibit 99.2
 
 
 
 
 
     
 

Supplemental Operating and Financial Data

 
First Quarter 2011
 
 
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
Key Financial Data     20 Largest Tenants, Industry Profile 22
Financial Highlights 6   Lease Expirations by Square Feet 23
Management’s Key Operating Measures  7   Lease Expirations with annualized rent per square foot 24
Income Statements 8      
EPS, FFO, GOS and FFO+GOS 9   Transactional Drivers  
Balance Sheets 10   Capital Recycling 25
Cash Flow Statements 11   Investment Banking Performance 26
Segment Information 12-13      
Property Net Operating Income (NOI): Cash and GAAP Basis 14   FFO and FFO+GOS Reconciliations 27
Capital Analysis 15   FFO and FFO+GOS Definitions 28
      FAD Reconciliation and Definition 29
Portfolio Overview     EBITDA Reconciliation and Definition 30
Property by Form of FSP Participation 16   NOI Reconciliation and Definition 31
Regional Analysis and 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.

 

 
March 31, 2011
  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 March 31, 2011)  
Corporate Headquarters Wakefield, MA
Fiscal Year-End 31-Dec
Total Properties 35
Total Square Feet 6.8 Million
Common Shares Outstanding 81,437,405
Quarterly Dividend $0.19
Dividend Yield 5.40%
Total Market Capitalization $1.5 Billion
Insider Holdings 12.8%

 

 

 
March 31, 2011
 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        

 

 

 
March 31, 2011
 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-Mar-11 31-Dec-10 30-Sep-10 30-Jun-10 31-Mar-10
High Price 15.63 14.42 12.86 15.70 15.01
Low Price 13.52 12.2 10.99 11.04 11.64
Closing Price, at the end of the quarter 14.07 14.25 12.42 11.81 14.43
Dividends paid per share – quarterly 0.19 0.19 0.19 0.19 0.19
Closing dividend yield – annualized 5.40% 5.33% 6.12% 6.44% 5.27%
Common shares outstanding (millions) 81.44 81.44 79.84 79.68 79.68
           

 

Timing

 

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

 

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

 

 

 
March 31, 2011
  5
 
 
 
 

    
Financial Highlights
(in thousands, except per share data)

 

                  For the Year
   For the Three Months Ended  Ended
   31-Mar-11  31-Mar-10  30-Jun-10  30-Sep-10  31-Dec-10  31-Dec-10
Income Items:                              
Revenue:                              
  Rental  $31,270   $28,757   $27,219   $29,391   $29,953   $115,320 
  Related party revenue   2,016    800    1,852    896    4,162    7,710 
  Other   7    9    6    20    54    89 
Total revenue   33,293    29,566    29,077    30,307    34,169    123,119 
                               
Total expenses   29,398    25,384    24,547    27,047    29,319    106,297 
                               
Income before interest income, equity in earnings in non-consolidated REITs and taxes   3,895    4,182    4,530    3,260    4,850    16,822 
Interest income   12    8    9    4    4    25 
Equity in earnings in non-consolidated REITs   968    253    380    404    229    1,266 
                               
Income before taxes   4,875    4,443    4,919    3,668    5,083    18,113 
Income tax expense (benefit)   50    (68)   5    (37)   317    217 
                               
Income from continuing operations   4,825    4,511    4,914    3,705    4,766    17,896 
Income from discontinued operations   350    1,051    1,040    1,052    1,054    4,197 
Gain on sale of assets   19,592    —      —           —      —   
                               
Net income  $24,767   $5,562   $5,954   $4,757   $5,820   $22,093 
                               
FFO+GOS*:                              
FFO  $16,250   $16,650   $16,702   $16,052   $17,518   $66,922 
GOS   19,592    —      —      —      —      —   
FFO+GOS  $35,842   $16,650   $16,702   $16,052   $17,518   $66,922 
                               
Per Share Data:                              
EPS  $0.30   $0.07   $0.07   $0.06   $0.07   $0.28 
FFO   0.20    0.21    0.21    0.20    0.22    0.84 
GOS   —      —      —      —      —      —   
FFO+GOS   0.44    0.21    0.21    0.20    0.22    0.84 
                               
Weighted Aveage Shares (diluted)   81,437    79,681    79,681    79,751    80,187    79,826 
                               
Balance Sheet Items:                              
Real estate, net  $984,441   $855,661   $874,558   $872,038   $867,608   $867,608 
Other assets, net   382,461    295,770    311,492    316,340    371,127    371,127 
Total assets, net   1,366,902    1,151,431    1,186,050    1,188,378    1,238,735    1,238,735 
Total liabilities, net   435,801    223,654    267,198    278,091    317,177    317,177 
Shareholders' equity   931,101    927,777    918,852    910,287    921,558    921,558 
                               

 

* See page 27 for a reconciliation of Net Income to FFO and FFO+GOS and page 28 for definitions of FFO and FFO+GOS

 

 

 
March 31, 2011
 6
 
 
 
 

    
Management’s Key Operating Measures

 

 

 

* See page 27 for a reconciliation of Net Income to FFO and FFO+GOS (Total Profits) and page 28 for definitions of FFO and FFO+GOS

 

 
March 31, 2011
 7
 
 
 
 

    
Condensed Consolidated Income Statements
($ in thousands, except per share amounts)

 

                  For the
   For the Three Months Ended  Year Ended
   31-Mar-11  31-Mar-10  30-Jun-10  30-Sep-10  31-Dec-10  31-Dec-10
                   
Revenue:                              
Rental  $31,270   $28,757   $27,219   $29,391   $29,953   $115,320 
Related party revenue:                              
Syndication fees   517    121    541    20    1,862    2,544 
Transaction fees   691    146    753    246    1,582    2,727 
Management fees and interest income from loans   808    533    558    630    718    2,439 
Other   7    9    6    20    54    89 
Total revenue   33,293    29,566    29,077    30,307    34,169    123,119 
                               
Expenses:                              
Real estate operating expenses   8,732    7,955    7,335    8,715    9,604    33,609 
Real estate taxes and insurance   4,783    4,996    4,061    4,659    4,454    18,170 
Depreciation and amortization   10,819    8,496    8,521    9,691    9,764    36,472 
Selling, general and administrative   2,368    2,171    2,559    2,074    2,482    9,286 
Commissions   287    114    336    16    1,011    1,477 
Interest   2,409    1,652    1,735    1,892    2,004    7,283 
Total expenses   29,398    25,384    24,547    27,047    29,319    106,297 
                               
Income before interest income, equity in earnings of non-consolidated REITs and taxes   3,895    4,182    4,530    3,260    4,850    16,822 
Interest income   12    8    9    4    4    25 
Equity in earnings of non-consolidated REITs   968    253    380    404    229    1,266 
                               
    4,875    4,443    4,919    3,668    5,083    18,113 
Income tax expense (benefit)   50    (68)   5    (37)   317    217 
                               
Income from continuing operations   4,825    4,511    4,914    3,705    4,766    17,896 
Income from discontinued operations   350    1,051    1,040    1,052    1,054    4,197 
Gain on sale of assets   19,592    —      —      —      —      —   
                               
Net income  $24,767   $5,562   $5,954   $4,757   $5,820   $22,093 
                               
Weighted average number of shares outstanding, basic and diluted   81,437    79,681    79,681    79,751    80,187    79,826 
                               
Earnings per share, basic and diluted, attributable to:                              
Continuing operations  $0.06   $0.06   $0.06   $0.05   $0.06   $0.23 
Discontinued operations   0.00    0.01    0.01    0.01    0.01    0.05 
Gains on sales of assets   0.24    —      —      —      —      —   
Net income per share, basic and diluted  $0.30   $0.07   $0.07   $0.06   $0.07   $0.28 

 

 
March 31, 2011
 8
 
 
 
 

    
EPS, FFO, GOS and FFO+GOS*
 
 
*See page 27 for a reconciliation of Net Income to FFO and FFO+GOS and page 28 for definitions of FFO and FFO+GOS
 
 
March 31, 2011
 9
 
 
 
 

    
Condensed Consolidated Balance Sheets
(in thousands)

 

   March 31,  March 31,  June 30,  September 30,  December 31,
   2011  2010  2010  2010  2010
Assets:                         
Real estate assets:                         
 Land  $131,385   $114,677   $123,305   $123,305   $123,305 
 Buildings and improvements   983,417    845,504    861,986    865,810    867,858 
 Fixtures and equipment   600    354    458    458    578 
    1,115,402    960,535    985,749    989,573    991,741 
 Less accumulated depreciation   130,961    104,874    111,191    117,535    124,133 
 Real estate assets, net   984,441    855,661    874,558    872,038    867,608 
                          
 Acquired real estate leases, net   85,290    30,822    45,871    43,185    40,578 
 Investment in non-consolidated REITs   88,652    91,787    90,782    89,995    89,327 
 Assets held for syndication, net   47,630    2,791    —      —      2,976 
 Assets held for sale   —      71,593    70,991    70,391    69,790 
 Cash and cash equivalents   49,488    22,815    21,487    20,554    68,213 
 Restricted cash   440    50    59    55    420 
 Tenant rent receivables, net   1,688    1,385    900    2,123    1,922 
 Straight-line rent receivable, net   20,992    13,994    14,645    15,757    18,752 
 Prepaid expenses   1,400    2,236    2,280    2,511    1,654 
 Related party mortgage loan receivable   60,116    41,325    46,270    53,756    57,684 
 Other assets   6,339    1,220    1,620    1,387    1,356 
 Deferred leasing commissions, net   20,426    15,752    16,587    16,626    18,455 
 Total assets  $1,366,902   $1,151,431   $1,186,050   $1,188,378   $1,238,735 
                          
 Liabilities and Stockholders’ Equity:                         
 Liabilities:                         
 Bank note payable  $404,000   $119,968    162,968    167,968    209,968 
 Term loan payable   —      75,000    75,000    75,000    74,850 
 Accounts payable and accrued expenses   20,562    20,467    18,766    25,064    22,435 
 Accrued compensation   603    274    1,040    1,334    1,803 
 Tenant security deposits   2,533    1,696    2,004    1,922    1,930 
 Other liabilities: derivative termination value   828    1,995    1,735    1,416    1,077 
 Acquired unfavorable real estate leases, net   7,275    4,254    5,685    5,387    5,114 
 Total liabilities   435,801    223,654    267,198    278,091    317,177 
                          
 Commitments and contingencies                         
                          
 Stockholders’ Equity:                         
 Preferred stock   —      —      —      —      —   
 Common stock   8    8    8    8    8 
 Additional paid-in capital   1,025,491    1,003,712    1,003,712    1,005,211    1,025,491 
 Accumulated other comprehensive loss   (828)   (1,995)   (1,735)   (1,416)   (1,077)
 Accumulated distributions in excess of accumulated earnings   (93,570)   (73,948)   (83,133)   (93,516)   (102,864)
 Total stockholders’ equity   931,101    927,777    918,852    910,287    921,558 
 Total liabilities and stockholders’ equity  $1,366,902   $1,151,431   $1,186,050   $1,188,378   $1,238,735 

 

 

 
March 31, 2011
  10
 
 
 
 

    
Condensed Consolidated Statements of Cash Flows
(in thousands)

 

   Three Months ended March 31,  Twelve Months ended December 31
   2011  2010  2010  2009  2008
                
Cash flows from operating activities:                         
Net income  $24,767   $5,562   $22,093   $27,872   $31,959 
Adjustments to reconcile net income to net cash provided by  operating activities:                         
Gains on assets sold   (19,592)   —      —      (424)   —   
Depreciation and amortization expense   11,109    9,284    39,627    36,561    30,444 
Amortization of above market lease   (6)   716    1,362    3,359    4,283 
Equity in earnings (losses) from non-consolidated REITs   (1,066)   (253)   (1,183)   (2,012)   (2,747)
Distributions from non-consolidated REITs   1,767    1,407    5,170    5,628    5,348 
Increase in bad debt reserve   (375)   380    980    111    79 
Changes in operating assets and liabilities:                         
Restricted cash   (20)   284    (86)   2    —   
Tenant rent receivables   609    17    (1,120)   (564)   64 
Straight-line rents   (2,303)   (1,020)   (4,249)   (1,879)   (1,406)
Prepaid expenses and other assets   88    265    865    907    (901)
Accounts payable and accrued expenses   (1,212)   (3,917)   (351)   2,760    448 
Accrued compensation   (1,200)   (1,142)   387    (238)   90 
Tenant security deposits   603    (112)   122    (66)   —   
Payment of deferred leasing commissions   (2,819)   (5,566)   (10,515)   (2,659)   (3,353)
                          
Net cash provided by operating activities   10,350    5,905    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   (169,339)   (3,529)   (54,344)   (132,323)   (78,396)
Investment in non-consolidated REITs   (9)   —      (11)   (13,218)   (10)
Investment in related party mortgage loan receivable   (2,432)   (4,790)   (21,149)   (35,410)   (1,125)
Changes in deposits on real estate assets   200    —      (200)   —      (1,300)
Investment in assets held for syndication, net   (45,186)   2,005    1,319    8,159    12,236 
Proceeds received on sales of real estate assets   89,382    —      —      672    —   
                          
Net cash used in investing activities   (127,384)   (6,314)   (74,385)   (172,120)   (68,595)
                          
Cash flows from financing activities:                         
Distributions to stockholders   (15,473)   (15,139)   (60,586)   (55,313)   (70,481)
Proceeds from equity offering, net   (90)   (1)   21,868    114,695    —   
Borrowings under bank note payable, net   194,032    10,960    100,960    41,540    (17,282)
Borrowing (repayment) of term loan payable   (74,850)   —      (150)   —      75,000 
Deferred Financing Costs   (4,328)   —      —      —      (694)
Swap termination payment   (982)   —      —      —      —   
                          
Net cash (used in) provided by financing activities   98,309    (4,180)   62,092    100,922    (13,457)
                          
Net decreases in cash and cash equivalents   (18,725)   (4,589)   40,809    (1,840)   (17,744)
                          
Cash and cash equivalents, beginning of period   68,213    27,404    27,404    29,244    46,988 
                          
Cash and cash equivalents, end of period  $49,488   $22,815   $68,213   $27,404   $29,244 

 

 
March 31, 2011
  11
 
 
 
 

    
Segment Information*
($ in thousands except per share amounts)

 

   Three Months Ended March 31, 2011  Three Months Ended March 31, 2010
      Investment        Investment   
   Real Estate  Banking  Total  Real Estate  Banking  Total
Revenue:                              
Rental Income  $31,270   $—     $31,270   $28,757   $—     $28,757 
Syndication Fees   —      517    517    —      122    122 
Transaction Fees   —      691    691    —      146    146 
Management Fees & Interest Income   808    —      808    533    —      533 
Other Income   7    —      7    8    —      8 
Total Revenue   32,085    1,208    33,293    29,298    268    29,566 
                               
Expenses                              
Rental Operating Expenses   8,732    —      8,732    7,954    —      7,954 
Real Estate Taxes and Insurance   4,783    —      4,783    4,996    —      4,996 
Depreciation and Amortization   10,781    38    10,819    8,463    34    8,497 
Selling, general  and administrative   1,645    724    2,369    1,447    724    2,171 
Commissions and  Broker Expenses   —      287    287    —      114    114 
Interest & Commitment Fees   2,408    —      2,408    1,652    —      1,652 
Total Expenses   28,349    1,049    29,398    24,512    872    25,384 
                               
Income before Equity, Interest and Taxes   3,736    159    3,895    4,786    (604)   4,182 
Interest Income   11    1    12    7    —      7 
Equity Income SARs   968    —      968    253    —      253 
Income before Taxes   4,715    160    4,875    5,046    (604)   4,442 
Income Taxes   50    —      50    57    (125)   (68)
Income from continuing operations   4,665    160    4,825    4,989    (479)   4,510 
Income from discontinued operations   350    —      350    1,051    —      1,051 
Gain on sale of assets   19,592    —      19,592    —      —      —   
Net Income (loss)  $24,607   $160   $24,767   $6,040   $(479)  $5,561 
                               
Funds From Operations (FFO)*                              
Net Income  $24,607   $160   $24,767   $6,040   $(479)  $5,561 
Gain on sale of assets, net   (19,592)   —      (19,592)   —      —      —   
Equity in income of SARs   (1,773)   —      (1,773)   (253)   —      (253)
Cash received from SARs   1,767    —      1,767    1,407    —      1,407 
Acquisition costs   269    —      269    —      —      —   
Depreciation and amortization   10,774    38    10,812    9,901    34    9,935 
Funds From Operations (FFO)*   16,052    198    16,250    17,095    (445)   16,650 
                               
EPS  $0.29   $0.00   $0.30   $0.07   $(0.01)  $0.07 
FFO per Share*  $0.20   $0.00   $0.20   $0.21   $(0.01)  $0.21 
                               
Weighted Average Shares             81,437              79,681 

 

*See page 27 for a reconciliation of Net Income to FFO and FFO+GOS and page 28 for definitions of FFO and FFO+GOS

 

 
March 31, 2011
  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   $0.42   $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 27 for a reconciliation of Net Income to FFO and FFO+GOS and page 28 for definitions of FFO and FFO+GOS

 

 
March 31, 2011
 13
 
 
 
 

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

 

Property NOI Cash*

       Three                    
            Months                   Year
            Ended   Three Months Ended   Ended
        31-Mar-11                        
Region   Division   Sq Feet   31-Mar-11   31-Mar-10   30-Jun-10   30-Sep-10   31-Dec-10   2010
                                 
Eastern   Mideast   1,550   $    3,476   $    4,031   $    4,390   $    5,551   $    4,931   $   18,903
                                 
Midwest   East North Central   597   1,586   1,103   1,574   1,184   1,123   4,984
    West North Central   1,104   2,405   2,034   2,000   2,991   3,028   10,053
        1,701   3,991   3,137   3,574   4,175   4,151   15,037
                                 
South   Southeast   600   2,068   2,307   2,251   2,285   1,917   8,760
    Southwest   1,906   3,747   4,234   4,238   3,597   3,564   15,633
        2,506   5,815   6,541   6,489   5,882   5,481   24,393
                                 
West   Mountain   790   922   3,254   2,212   810   894   7,170
    Pacific   299   518   443   491   498   480   1,912
        1,089   1,440   3,697   2,703   1,308   1,374   9,082
                                 
Total       6,846   $   14,722   $   17,406   $   17,156   $   16,916   $   15,937   $   67,415
                                 
Property NOI GAAP*       Three                    
            Months                   Year
            Ended   Three Months Ended   Ended
        31-Mar-11                        
Region   Division   Sq Feet   31-Mar-11   31-Mar-10   30-Jun-10   30-Sep-10   31-Dec-10   2010
                                 
Eastern   Mideast   1,550   $    4,007   $    4,666   $    5,002   $    5,992   $    5,362   $   21,022
                                 
Midwest   East North Central   597   1,552   1,110   1,602   1,210   1,166   5,088
    West North Central   1,104   2,886   2,164   2,106   3,136   3,135   10,541
        1,701   4,438   3,274   3,708   4,346   4,301   15,629
                                 
South   Southeast   600   1,572   2,356   2,355   2,359   2,033   9,103
    Southwest   1,906   4,629   4,404   4,395   3,797   3,778   16,374
        2,506   6,201   6,760   6,750   6,156   5,811   25,477
                                 
West   Mountain   790   1,162   3,229   2,502   1,100   1,231   8,062
    Pacific   299   555   497   533   524   513   2,067
        1,089   1,717   3,726   3,035   1,624   1,744   10,129
                                 
Total       6,846   $   16,363   $   18,426   $   18,495   $   18,118   $   17,218   $   72,257

 

*See page 31 for a reconciliation and definition of Net Income to Property NOI cash and Property NOI GAAP.

 

 
March 31, 2011
  14
 
 
 
 

    
Capital Analysis
(in thousands, except per share amounts)

 

   31-Mar-11  31-Mar-10  30-Jun-10  30-Sep-10  31-Dec-10
Market Data:                         
Shares Outstanding   81,437    79,681    79,681    79,837    81,437 
Closing market price per share  $14.07   $14.43   $11.81   $12.42   $14.25 
Market capitalization  $1,145,824   $1,149,793   $941,029   $991,581   $1,160,483 
Total Debt   404,000    194,968    237,968    242,968   $284,118 
Total Market Capitalization  $1,549,824   $1,344,761   $1,178,997   $1,234,549   $1,444,601 
                          
Dividend Data:                         
Total dividends paid  $15,473   $15,139   $15,139   $15,139   $15,169 
Common dividend per share  $0.19   $0.19   $0.19   $0.19   $0.19 
Quarterly dividend as a % of FFO*   95%    90%    90%    95%    86% 
                          
Liquidity:                         
Cash and cash equivalents  $49,488   $22,815   $21,487   $20,554   $68,213 
Revolving credit facilities:                         
Gross potential available under current credit facilities   500,000    250,000    250,000    250,000    250,000 
  Less:                         
  Outstanding balance   (404,000)   (119,968)   (162,968)   (167,968)   (209,968)
Total Liquidity  $145,488   $152,847   $108,519   $102,586   $108,245 

 

*See page 27 for a reconciliation of Net Income to FFO and FFO+GOS and page 28 for definitions of FFO and FFO+GOS

 

 
March 31, 2011
  15
 
 
 
 

     Portfolio Overview 

 

  31-Mar-11 31-Dec-10 30-Sep-10 30-Jun-10 31-Mar-10
Owned portfolio of commercial real estate:          
  Number of properties (1) 35 33 33 33 32
  Square feet 6,845,176 6,422,357 6,417,299 6,418,835 5,942,299
  Leased percentage 88% 86% 82% 85% 85%
           
Investments in non-consolidated commercial real estate:          
  Number of properties 3 3 3 3 3
  Square feet 1,995,932 1,995,913 1,998,519 1,998,519 1,995,041
  Leased percentage 85% 77% 76% 77% 78%
           
Single Asset REITs (SARs) managed:          
  Number of properties 13 12 11 11 11
  Square feet * 3,325,694 2,915,896 2,702,287 2,406,370 2,406,370
  Leased percentage* 79% 75% 73% 76% 76%
           
Total owned, investments and managed properties:          
  Number of properties 51 48 47 47 46
  Square feet * 12,166,802 11,334,166 11,118,105 10,823,724 10,343,710
  Leased percentage* 85% 81% 79% 82% 82%
           

 

(1) Includes asset held for sale for 12/31/10 and prior periods

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

 

 

 
March 31, 2011
  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
Emperor Boulevard Durham NC East 259,531
Meadow Point Chantilly VA East 138,537
Stonecroft Chantilly VA East 111,469
Innsbrook Glen Allen VA East 308,771
East Baltimore Baltimore MD East 325,445
Loudoun Tech Center Dulles VA East 135,888
Bollman Place (1) 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 473,884
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
Legacy Tennyson Center Plano TX South 202,600
One Legacy Circle Plano TX South 214,110
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       6,845,176
 
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 532,472
Lakeside Crossing II Maryland Heights MO MidWest 116,000
Centre Pointe V West Chester OH MidWest 135,936
Union Centre West Chester OH MidWest 409,798
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       5,321,626

 

(1) 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 9   1,550,148   22.7%   $      230,847   86.5%
    East North Central Division 3   596,604   8.7%   78,503   83.9%
    West North Central 5   1,103,653   16.1%   107,768   96.2%
Midwest Region Total 8   1,700,257   24.8%   186,272   91.9%
   Southeast 2   599,886   8.8%   119,984   95.1%
    Southwest 9   1,905,679   27.8%   286,272   90.0%
South Region Total 11   2,505,565   36.6%   406,256   91.2%
   Mountain  4   789,957   11.5%   125,798   79.6%
    Pacific 3   299,249   4.4%   35,268   77.3%
West Region Total 7   1,089,206   15.9%   161,066   79.0%
                   
Grand Total 35   6,845,176   100%   $       984,441   88.4%

 

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

 

 

 

 

 
March 31, 2011
  17
 
 
 
 

    
Owned Property List
(in thousands)

 

          NBV (1) % Leased
Division Name City State S.F. 31-Mar-11 31-Mar-11
             
Pacific Hillview Center Milpitas CA 36 $       4,155 100.0%
Pacific Montague San Jose CA 146 16,801 100.0%
Mountain 380 Interlocken Broomfield CO 240 43,005 85.1%
Mountain 390 Interlocken Broomfield CO 242 42,655 95.9%
Mountain Centennial Technology Center Colorado Springs CO 111 11,371 66.9%
Mountain Greenwood Plaza Englewood CO 198 28,768 60.1%
Southeast Blue Lagoon Drive Miami FL 213 46,690 100.0%
Southeast One Overton Place Atlanta GA 387 73,294 92.4%
East North Central Northwest Point Elk Grove Village IL 177 28,468 100.0%
East North Central River Crossing Indianapolis IN 205 35,486 93.8%
Mideast East Baltimore Baltimore MD 325 55,308 84.5%
Mideast Bollman Place Savage MD 99 4,881 100.0%
East North Central Southfield Centre Southfield MI 215 14,549 61.1%
West North Central Eden Bluff Eden Prairie MN 153 14,299 100.0%
West North Central 121 South 8th Street Minneapolis MN 474 23,774 92.2%
West North Central Timberlake Chesterfield MO 233 34,833 97.7%
West North Central Timberlake East Chesterfield MO 116 17,737 100.0%
West North Central Lakeside Crossing Maryland Heights MO 128 17,125 100.0%
Mideast Park Seneca Charlotte NC 110 7,490 78.5%
Mideast Forest Park Charlotte NC 62 6,189 77.5%
Mideast Emperor Boulevard Durham NC 260 56,305 100.0%
Southwest Addison Circle Addison TX 294 48,119 95.8%
Southwest Liberty Plaza Addison TX 219 24,212 75.6%
Southwest Park Ten Houston TX 156 18,201 98.8%
Southwest Eldridge Green Houston TX 248 42,215 100.0%
Southwest Park Ten Phase II Houston TX 157 30,694 100.0%
Southwest Willow Bend Office Center Plano TX 117 17,455 67.0%
Southwest Legacy Tennyson Center Plano TX 203 25,084 100.0%
Southwest One Legacy Circle Plano TX 214 39,198 89.7%
Southwest Collins Crossing Richardson TX 299 41,094 79.1%
Mideast Meadow Point Chantilly VA 139 23,219 100.0%
Mideast Stonecroft Chantilly VA 111 19,296 100.0%
Mideast Loudoun Tech Center Dulles VA 136 17,332 100.0%
Mideast Innsbrook Glen Allen VA 309 40,827 60.8%
Pacific Federal Way Federal Way WA 117 14,312 42.0%
        6,845 $     984,441 88.4%
           
  (1) NBV is for real estate assets, excluding intangibles

 

 
March 31, 2011
  18
 
 
 
 

    
Properties with Annualized Rent per Square Foot

 

                          Percentage   Annualized   Average
              Year Built           Leased as of   Rent as of   Annualized
              or   Net Rentable   Leased   March 31,   March 31,   Rent per Leased
Property Name   City   State Type   Renovated   Square Feet   Sq. Ft.   2011 (a)   2011 (b)   Square Feet (c)
                                   
Park Seneca   Charlotte   NC Office   1969   109,550   86,039   78.5%   1,343,179   $     15.61
Forest Park   Charlotte   NC Office   1999   62,212   48,237   77.5%   768,213   15.93
Meadow Point   Chantilly   VA Office   1999   138,537   138,537   100.0%   3,392,491   24.49
Innsbrook   Glen Allen   VA Office   1999   308,771   187,836   60.8%   1,272,606   6.78
East Baltimore   Baltimore   MD Office   1989   325,445   275,113   84.5%   6,900,297   25.08
Loudoun Tech Center   Dulles   VA Office   1999   135,888   135,888   100.0%   1,788,430   13.16
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%   3,970,770   35.62
Emperor Boulevard   Durham   NC Office   2009   259,531   259,531   100.0%   8,190,181   31.56
  East total                 1,550,148   1,341,395   86.5%   28,250,235   21.06
Southfield Centre   Southfield   MI Office   1977   214,697   131,182   61.1%   1,148,310   8.75
Northwest Point   Elk Grove Village   IL Office   1999   176,848   176,848   100.0%   3,511,335   19.86
River Crossing   Indianapolis   IN Office   1998   205,059   192,279   93.8%   4,528,754   23.55
Timberlake   Chesterfield   MO Office   1999   232,766   227,292   97.7%   2,574,395   11.33
Timberlake East   Chesterfield   MO Office   2000   116,197   116,197   100.0%   2,790,640   24.02
Lakeside Crossing   Sl. Louis   MO Office   2008   127,778   127,778   100.0%   3,089,672   24.18
Eden Bluff   Eden Praire   MN Office   2006   153,028   153,028   100.0%   3,984,757   26.04
121 South 8th Street   Minneapolis   MN Office   1974   473,884   437,065   92.2%   6,678,480   15.28
  Midwest total                 1,700,257   1,561,669   91.9%   28,306,343   18.13
Blue Lagoon Drive   Miami   FL Office   2002   212,619   212,619   100.0%   4,440,795   20.89
One Overton Place   Atlanta   GA Office   2002   387,267   357,790   92.4%   7,245,055   20.25
Willow Bend Office Center   Plano   TX Office   1999   116,622   78,112   67.0%   1,321,754   16.92
Park Ten   Houston   TX Office   1999   155,715   153,820   98.8%   2,141,781   13.92
Addison Circle   Addison   TX Office   1999   293,787   281,503   95.8%   6,673,058   23.71
Collins Crossing   Richardson   TX Office   1999   298,766   236,267   79.1%   2,428,974   10.28
Eldridge Green   Houston   TX Office   1999   248,399   248,399   100.0%   7,150,326   28.79
Park Ten Phase II   Houston   TX Office   2006   156,746   156,746   100.0%   3,920,209   25.01
Liberty Plaza   Addison   TX Office   1985   218,934   165,426   75.6%   3,028,974   18.31
Denbury Park   Plano   TX Office   1999/2008   202,600   202,600   100.0%   3,290,040   16.24
One Legacy Circle   Plano   TX Office   2008   214,110   191,958   89.7%   3,391,503   17.67
  South Total                 2,505,565   2,285,240   91.2%   45,032,468   19.71
Centennial Technology Center   Colorado Springs   CO Office   1999   110,730   74,030   66.9%   1,284,850   17.36
380 Interlocken   Broomfield   CO Office   2000   240,184   204,347   85.1%   4,241,610   20.76
Greenwood Plaza   Englewood   CO Office   2000   197,527   118,725   60.1%   804,066   6.77
390 Interlocken   Broomfield   CO Office   2002   241,516   231,676   95.9%   6,240,274   26.94
Hillview Center   Milpitas   CA Office   1984   36,288   36,288   100.0%   526,298   14.50
Federal Way   Federal Way   WA Office   1982   117,010   49,149   42.0%   656,856   13.36
Montague Business Center   San Jose   CA Office   1982   145,951   145,951   100.0%   2,201,077   15.08
  West Total                 1,089,206   860,166   79.0%   15,955,031   18.55
                                   
  Grand Total                 6,845,176   6,048,470   88.4%   $    117,544,078   $    19.43

 

(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 March 2011 (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 gross rent as of March 2011 divided by leased square feet.

 

 
March 31, 2011
  19
 
 
 
 

    
Owned Property Capital Expenditures
(in thousands)

 

   Three Months
   Ended
   31-Mar-11
Tenant improvements  $2,506 
Deferred leasing costs   2,819 
Building improvements   449 
Total  $5,774 

 

            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 

 

 

 
March 31, 2011
 20
 
 
 
 

    
20 Largest Tenants with Annualized Rent
and Remaining Term

 

      Remaining Aggregate % of Aggregate Annualized % of
  Tenant Number of Lease Term Leased Leased Rent (1) Aggregate
  Name Leases in Months Square Feet Square Feet (in 000's) Annualized Rent
               
1 TCF National Bank 2 57 266,495 3.89% 2,863 2.44%
2 Quintiles Transnational Corp 1 96 259,531 3.79% 8,190 6.97%
3 CITGO Petroleum Corporation 1 131 248,399 3.63% 7,150 6.08%
4 Burger King Corporation 1 90 212,619 3.11% 4,441 3.78%
5 Denbury Onshore LLC 2 45 202,600 2.96% 3,290 2.80%
6 RGA Reinsurance Company 2 45 185,501 2.71% 3,800 3.23%
7 Citigroup Credit Services, Inc 1 69 176,848 2.58% 3,334 2.84%
8 C.H. Robinson Worldwide, Inc 1 123 153,028 2.24% 3,985 3.39%
9 SunTrust Bank (a) 2 67,126 145,204 2.12% 1,393 1.18%
10 Murphy Exploration & Production Company (b) 1 73 144,677 2.11% 3,637 3.09%
11 Giesecke & Devrient America, Inc. 1 47 135,888 1.99% 1,788 1.52%
12 Monsanto Company 1 46 127,778 1.87% 3,090 2.63%
13 Vail Holdings, Inc (c) 1 144 121,913 1.78% 3,144 2.67%
14 Northrop Grumman Systems Corporation 1 85 111,469 1.63% 3,971 3.38%
15 Maines Paper & Food Service, Inc 1 32 98,745 1.44% 624 0.53%
16 Federal National Mortgage Association 1 29 92,358 1.35% 1,755 1.49%
17 Amdocs, Inc (d) 1 69 91,928 1.34% - 0.00%
18 County of Santa Clara 1 81 90,467 1.32% 1,381 1.17%
19 Ober Kaler Grimes & Shriver (e) 1 - 88,736 1.30% 2,348 2.00%
20 International Business Machines Corp. (f) 1 57 87,587 1.28% 754 0.64%
               
        3,041,771 44.44% $     60,937 51.84%

 

(1)Annualized rent represents the monthly rent, including tenant reimbursements, for each lease in effect at March 31, 2011 multiplied by 12. Tenant reimbursements generally include payment of real estate taxes, operating expenses and common area maintenance and utility charges.

 

(a)Sun Tust Bank leases 55,388 sf at our Baltimore, Maryland property and also leases 89,816 sf at our Glen Allen, Virginia property.
(b)Murphy signed a lease on January 1, 2011 that includes expansion into 5,362 sf at the expiration of the current tenant's lease term.
(c)Vail signed a lease on March 22, 2010 that includes expansion into 13,467 sf and 24,826 sf at the expiration of various subleases and other tenant leases.
(d)Amdocs signed an amendment extending their lease on January 28, 2011 through December 31, 2016.
(e)Ober Kaler's lease expired on March 31, 2011 and the space became vacant on April 1, 2011.
(f)46,977 sf of this space expired by April 30, 2011.

 

 
March 31, 2011
 21
 
 
 
 
 

    
Tenant Analysis – 20 Largest Tenants, Industry Profile
(as a % of square feet)
 

 

 

 

 
March 31, 2011
 22
 
 
 
 

    
Lease Expirations by Square Feet

 

 

 

Year     Total
Square Feet		   % of
Square Feet
Commercial		  
             
2011     459,617   6.7%  
2012     301,049   4.4%  
2013     553,847   8.1%  
2014     467,768   6.8%  
2015     781,852   11.4%  
2016     978,697   14.3%  
2017     498,172   7.3%  
2018     501,136   7.3%  
2019     464,107   6.8%  
2020     151,357   2.2%  
2021     464,470   6.8%  
2022     342,778   5.0%  
2023     83,620   1.2%  
Vacant     796,706   11.7%  
             
Total     6,845,176   100.0%  

 

 
March 31, 2011
 23
 
 
 
 

    
Lease Expirations
with Annualized Rent per Square Foot
 

 

      Rentable     Annualized  Percentage
   Number of  Square      Rent  of Total
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 (a)  Leases (a)
2011   84(b)    459,617   $8,489,675   $18.47    7.22% 
2012   54    301,049    6,600,360    21.92    5.62% 
2013   51    553,847    11,044,886    19.94    9.40% 
2014   37    467,768    8,274,070    17.69    7.04% 
2015   31    781,852    16,326,889    20.88    13.89% 
2016   25    978,697    16,235,791    16.59    13.81% 
2017   10    498,172    8,963,388    17.99    7.63% 
2018   10    501,136    11,808,002    23.56    10.05% 
2019   7    464,107    11,631,975    25.06    9.90% 
2020 and thereafter   17    1,042,225    18,169,043    17.43    15.46% 
    326    6,048,470   $117,544,078   $19.43    100.00% 
Vacancies as of 3/31/11    796,706                
Total Portfolio Square Footage    6,845,176                

 

(a)Annualized rent represents the monthly rent, including tenant reimbursements, for each lease in effect at March 31, 2011 multiplied by 12. Tenant reimbursements generally include payment of real estate taxes, operating expenses and common area maintenance and utility charges.
(b)35 leases are Month to Month represent 0.53% of aggregate square feet and 1.57% represent other leases, which expired on April 1, 2011.

 

 

 
March 31, 2011
 24
 
 
 
 

    
Capital Recycling
($ in thousands)

 

Recent Acquisitions:                        
    State/Region   Property Type   Square Feet   Date Acquired   Purchase Price    
                         
2011                        
Emperor Boulevard   NC/East   Office            259,531   3/4/11     $             75,800    
Legacy Tennyson Center   TX/South   Office            202,600   3/10/11                   37,000    
One Legacy Circle   TX/South   Office            214,110   3/24/11                   52,983    
                         
2010                        
121 South 8th Street   MN/Midwest   Office            474,646   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    
                         
                         
Recent Dispositions:                        
                      Net Sales   Gain (Loss)
    State/Region   Property Type   Square Feet   Date Sold     Proceeds   on Sale
2011                        
Fairview   VA/East   Office            252,613   1/21/11     $             89,382     $             19,592
                         
2007                        
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

 

 
March 31, 2011
 25
 
 
 
 
 

    
Investment Banking Performance

 

 

 

 
March 31, 2011
 26
 
 
 
 

    
FFO and FFO+GOS Reconciliations
(in thousands, except per share amounts)

 

   For the three months ended  For the year ended
   31-Mar-11  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
                                  
Net income  $24,767   $5,562   $5,954   $4,757   $5,820   $7,808   $4,865   $6,941   $8,258   $22,093   $27,872 
(Gain) Loss on sale of assets   (19,592)   —      —      —      —      —      —      —      (424)   —      (424)
GAAP income from non-consolidated REITs   (1,773)   (253)   (380)   (404)   (153)   (792)   (443)   (475)   (301)   (1,190)   (2,011)
Distributions from non-consolidated REITs   1,767    1,407    1,324    1,192    1,247    1,615    1,523    1,119    1,371    5,170    5,628 
Acquisition costs   269    —      129    (4)   —      —      248    391    4    125    643 
Depreciation & amortization   10,812    9,934    9,675    10,510    10,605    8,707    11,216    9,561    10,167    40,724    39,651 
Funds From Operations (FFO)   16,250    16,650    16,702    16,051    17,519    17,338    17,409    17,537    19,075    66,922    71,359 
Plus gains on sales of assets (GOS)   19,592    —      —      —      —      —      —      —      424    —      424 
FFO+GOS (Total Profits)  $35,842   $16,650   $16,702   $16,051   $17,519   $17,338   $17,409   $17,537   $19,499   $66,922   $71,783 
                                                        
Per Share Data:                                                       
EPS  $0.30   $0.07   $0.07   $0.06   $0.07   $0.11   $0.07   $0.10   $0.10   $0.28   $0.38 
FFO   0.20    0.21    0.21    0.20    0.22    0.25    0.25    0.25    0.24    0.84    0.98 
GOS   0    —      —      —      —      —      —      —      —      —      —   
FFO+GOS   0.44    0.21    0.21    0.20    0.22    0.25    0.25    0.25    0.24    0.84    0.98 
                                                        
Weighted Average Shares (basic and diluted)   81,437    79,681    79,681    79,751    80,187    70,481    70,481    71,281    79,681    79,826    73,001 

 

 
March 31, 2011
 27
 
 
 
 
 

    
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.

 
 
March 31, 2011
 28
 
 
 
 

    
Funds Available for Distribution (FAD)
Reconciliation and Definition
(in thousands, except per share amounts)

 

   For the three months ended:
   31-Mar-11  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  $24,767   $5,562   $5,954   $4,757   $5,820   $7,808   $4,865   $6,941   $8,258 
(Gain) Loss on sale of assets   (19,592)   —      —      —      —      —      —      —      (424)
GAAP income from non-consolidated REITs   (1,773)   (253)   (380)   (404)   (153)   (792)   (443)   (475)   (301)
Distributions from non-consolidated REITs   1,767    1,407    1,324    1,192    1,247    1,615    1,522    1,119    1,371 
Acquisition costs   269    —      129    (4)   —      —      248    391    4 
Depreciation & amortization   10,812    9,934    9,675    10,510    10,605    8,707    11,217    9,561    10,167 
Funds From Operations (FFO)   16,250    16,650    16,702    16,051    17,519    17,338    17,409    17,537    19,075 
Plus gains on sales of assets (GOS)   19,592    —      —      —      —      —      —      —      424 
FFO+GOS (Total Profits)  $35,842   $16,650   $16,702   $16,051   $17,519   $17,338   $17,409   $17,537   $19,499 
                                              
Funds Available for Distribution:                                             
Funds From Operations (FFO)   16,250    16,650    16,702    16,051    17,519    17,338    17,409    17,537    19,075 
Straight-line rent   (2,303)   (1,018)   (740)   (1,203)   (1,288)   (374)   (69)   (405)   (1,030)
Capital expenditures   (449)   (380)   (498)   (671)   (1,053)   (466)   (115)   (265)   (619)
Funds Available for Distribution (FAD)  $13,498   $15,252   $15,464   $14,177   $15,178   $16,498   $17,225   $16,867   $17,426 
                                              
Per Share Data:                                             
EPS  $0.30   $0.07   $0.07   $0.06   $0.07   $0.11   $0.07   $0.10   $0.10 
FFO   0.20    0.21    0.21    0.20    0.22    0.25    0.25    0.25    0.24 
GOS   0.24    —      —      —      —      —      —      —      —   
FFO+GOS   0.44    0.21    0.21    0.20    0.22    0.25    0.25    0.25    0.24 
FAD   0.17    0.19    0.19    0.18    0.19    0.23    0.24    0.24    0.22 
                                              
Weighted Average Shares (basic and diluted)   81,437    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.

 

 
March 31, 2011
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EBITDA Reconciliation and Definition
(in thousands, except ratio amounts)

 

                  Year Ended              Year Ended
   For the three months ended:  31-Dec-10  For the three months ended:  31-Dec-09
   31-Mar-11  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  $24,767   $5,562   $5,954   $4,757   $5,820   $22,093   $7,808   $4,865   $6,941   $8,258   $27,872 
Interest expense   2,408    1,652    1,735    1,892    2,004    7,283    1,577    1,599    1,744    1,650    6,570 
Depreciation and amortization   10,812    9,934    9,675    10,510    10,605    40,724    8,707    11,216    9,561    10,167    39,651 
Income taxes   50    (68)   5    (37)   317    217    (299)   (75)   (270)   65    (579)
EBITDA   38,037    17,080    17,369    17,122    18,746    70,317    17,793    17,605    17,976    20,140    73,514 
                                                        
Interest expense  $2,408   $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  $2,408   $1,652   $1,735   $1,892   $2,154   $7,433   $1,577   $1,599   $1,744   $1,650   $6,570 
                                                        
Interest coverage ratio   15.80    10.34    10.01    9.05    9.35    9.65    11.28    11.01    10.31    12.21    11.19 
                                                        
Debt service coverage ratio   15.80    10.34    10.01    9.05    8.70    9.46    11.28    11.01    10.31    12.21    11.19 

 

(1) Scheduled principal payments exclude repayment of our Term Loan on February 22, 2011 in its entirety.

 

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.

 

 
March 31, 2011
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Reconciliation of Net Income to Property NOI:
Cash & GAAP Basis and Definition
(in thousands)

 

   Three months ended:  2010  Three months ended:  2009
   31-Mar-11  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  $24,767   $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)   (160)   479    (263)   401    (1,352)   (735)   778    346    625    (1,103)   646 
Gain on sale of assets   (19,592)   —      —      —      —      —      —      —      —      (424)   (424)
Management fees (before elimination)   (364)   (484)   (359)   (362)   (535)   (1,740)   (425)   (398)   (402)   (408)   (1,633)
Depreciation and Amortization   10,781    9,184    9,205    10,348    10,453    39,190    7,887    10,200    8,768    9,314    36,169 
Amortization of favorable leases   (39)   716    432    96    119    1,363    793    992    759    815    3,359 
Selling, general and administrative   1,644    1,447    1,854    1,400    1,698    6,399    983    1,163    1,324    1,359    4,829 
Interest expense   2,408    1,652    1,736    1,892    2,003    7,283    1,577    1,599    1,744    1,650    6,570 
Interest income   (600)   (338)   (374)   (431)   (491)   (1,634)   (347)   (136)   (170)   (278)   (931)
Equity in earnings of nonconsolidated REITs   (968)   (253)   (380)   (404)   (229)   (1,266)   (792)   (443)   (475)   (283)   (1,993)
Non-property specific income and expenses, net   (1,514)   461    690    421    (268)   1,304    57    (145)   (13)   (34)   (135)
GAAP Property NOI   16,363    18,426    18,495    18,118    17,218    72,257    18,319    18,043    19,101    18,866    74,329 
Straight-line rent   (1,641)   (1,020)   (1,339)   (1,202)   (1,281)   (4,842)   (374)   92    (405)   (1,033)   (1,720)
Cash Property NOI  $14,722   $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.

 

 

 
March 31, 2011
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FRANKLIN STREET PROPERTIES CORP /MA/ Reports