Exhibit 99.2

 

 

Supplemental Operating and Financial Data Fourth Quarter 2014

 

 

 

Franklin Street Properties Corp. ● 401 Edgewater Place ● Wakefield, MA 01880 ● (781) 557-1300

 

www.franklinstreetproperties.com

 

 

	Page			Page
Company Overview	3		Tenant Analysis and Leasing Activity
			20 Largest Tenants, Industry Profile	18
Key Financial Data			20 Largest Tenants with Annualized Rent and Remaining Term	19
Financial Highlights	4		Leasing Activity	20
Income Statements	5		Lease Expirations by Square Feet	21
Balance Sheets	6		Lease Expirations with Annualized Rent per Square Foot	22
Cash Flow Statements	7		Capital Expenditures	23
Property Net Operating Income (NOI)	8
			Transaction Activity	24
Reconciliation
FFO & AFFO	9		Loan Portfolio of Secured Real Estate	25
EBITDA	10
Property NOI	11		Net Asset Value Components	26
Debt Summary	12		Appendix: Definitions of Non-GAAP Measures
			FFO	27
Capital Analysis	13		EBITDA and NOI	28
			AFFO	29
Owned and Managed Portfolio Overview	14-17		AFFO Comparison	30

 

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, uncertainties relating to fiscal policy, changes in government regulations, regulatory uncertainty, geopolitical events, 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. 

 

Overview

Franklin Street Properties Corp. (“FSP”, “we”, “our” or the “Company”) (NYSE MKT: FSP) is investing in institutional-quality office properties in the U.S. FSP’s strategy is to invest in select urban infill and central business district (CBD) properties, with primary emphasis on our top five markets of Atlanta, Dallas, Denver, Houston, and Minneapolis. FSP seeks value-oriented investments with an eye towards long-term growth and appreciation, as well as current income. FSP is a Maryland corporation that operates in a manner intended to qualify as a real estate investment trust (REIT) for federal income tax purposes. FSP’s real estate operations include property acquisitions and dispositions, short-term financing, leasing, development and asset management.

 

Our Business

As of December 31, 2014, the Company owned and operated a portfolio of real estate consisting of 38 properties, managed 10 Sponsored REITs and held five promissory notes secured by mortgages on real estate owned by Sponsored REITs. From time-to-time, the Company may acquire real estate, make additional secured loans or acquire one of its Sponsored REITs. The Company may also pursue, on a selective basis, the sale of its properties in order to take advantage of the value creation and demand for its properties, or for geographic or property specific reasons.

 

Management Team
George J. Carter		Scott H. Carter
President, Chief Executive Officer		Executive Vice President, General
Chairman of the Board		Counsel and Assistant Secretary
Barbara J. Fournier		Jeffrey B. Carter
Executive Vice President,  Chief Operating Officer,		Executive Vice President and
Treasurer, Secretary and Director		Chief Investment Officer
Janet Notopoulos		John G. Demeritt
Executive Vice President and Director		Executive Vice President and
		Chief Financial Officer

 

Inquiries

Inquires should be directed to: John Demeritt, CFO

877-686-9496 or InvestorRelations@franklinstreetproperties.com

 

Snapshot (as of December 31, 2014)
Corporate Headquarters	Wakefield, MA
Fiscal Year-End	31-Dec
Total Properties	38
Total Square Feet	9.6
Trading Symbol	FSP
Exchange	NYSE MKT
Common Shares Outstanding	100,187,405
Quarterly Dividend	$0.19
Dividend Yield	6.2%
Total Market Capitalization	$2.1 Billion
Insider Holdings	10.2%

 

(in thousands except per share amounts, SF & number of properties)
		31-Dec-14				30-Sep-14				30-Jun-14				31-Mar-14				31-Dec-13				30-Sep-13				30-Jun-13				31-Mar-13
Income Items:
Rental revenue		$	61,022			$	59,728			$	60,994			$	61,597			$	61,307			$	56,760			$	46,017			$	42,842
Total revenue			62,489				61,190				62,741				63,263				63,024				58,446				47,671				44,495
Adjusted EBITDA*			33,182				33,973				34,359				35,175				35,645				31,862				26,074				24,712
Equity in losses of non-consolidated REITs			(269	)			(455	)			(552	)			(484	)			(543	)			(431	)			(196	)			(188	)
Net income			4,295				1,567				3,713				3,573				6,591				4,094				4,741				4,401
FFO*			27,525				27,904				28,254				28,779				29,220				27,566				22,810				21,237
Per Share Data:
EPS		$	0.04			$	0.02			$	0.04			$	0.04			$	0.07			$	0.04			$	0.05			$	0.05
FFO*		$	0.27			$	0.28			$	0.28			$	0.29			$	0.29			$	0.28			$	0.25			$	0.26
Weighted Average Shares (diluted)			100,187				100,187				100,187				100,187				100,187				100,187				91,847				82,937
Closing share price		$	12.27			$	11.22			$	12.58			$	12.60			$	11.95			$	12.74			$	13.20			$	14.62
Dividend		$	0.19			$	0.19			$	0.19			$	0.19			$	0.19			$	0.19			$	0.19			$	0.19
Payout Ratio:			69	%			68	%			67	%			66	%			66	%			69	%			77	%			74	%
Balance Sheet Items:
Real estate, net		$	1,524,307			$	1,542,012			$	1,549,963			$	1,558,136			$	1,568,338			$	1,575,690			$	1,280,252			$	1,128,398
Other assets, net			412,083				425,305				438,634				467,539				475,696				500,939				428,789				383,244
Total assets, net			1,936,390				1,967,317				1,988,597				2,025,675				2,044,034				2,076,629				1,709,041				1,511,642
Total liabilities, net			956,743				968,948				975,853				993,273				993,868				1,017,480				627,997				657,809
Shareholders' equity			979,647				998,369				1,012,744				1,032,402				1,050,166				1,059,149				1,081,044				853,833
Market Capitalization and Debt:
Total Market Capitalization (a)		$	2,117,299			$	2,029,103			$	2,176,858			$	2,198,861			$	2,123,739			$	2,227,888			$	1,903,974			$	1,834,295
Total debt outstanding			888,000				905,000				916,500				936,500				926,500				951,500				581,500				621,750
Debt to Total Market Capitalization			41.9	%			44.6	%			42.1	%			42.6	%			43.6	%			42.7	%			30.5	%			33.9	%
Debt to Adjusted EBITDA			6.7				6.7				6.7				6.7				6.5				7.5				5.6				6.3
Owned Portfolio Leasing Statistics:
Owned portfolio assets (includes asset held for sale before 12/31/13)			38				39				39				39				39				40				38				37
Portfolio total SF			9,580,057				9,690,361				9,686,215				9,686,055				9,685,285				9,807,339				8,529,752				7,856,859
Portfolio % leased			92.8	%			93.3	%			94.1	%			94.5	%			94.1	%			93.8	%			94.4	%			94.4	%

(a)

Total Market Capitalization is the closing share price multilplied by the number of shares outstanding plus total debt outstanding on that date.

*

See pages 9 & 10 for reconciliations of Net Income to FFO and Adjusted EBITDA, respectively, and the Appendix for Defintions of these Non-GAAP Measures beginning on page 27.

																		For the																				For the
		For the Three Months Ended																Year Ended				For the Three Months Ended																Year Ended
		31-Mar-14				30-Jun-14				30-Sep-14				31-Dec-14				31-Dec-14				31-Mar-13				30-Jun-13				30-Sep-13				31-Dec-13				31-Dec-13
Revenue:
Rental		$	61,597			$	60,994			$	59,728			$	61,022			$	243,341			$	42,842			$	46,017			$	56,760			$	61,307			$	206,926
Related party revenue:
Management fees and interest income from loans			1,643				1,671				1,462				1,465				6,241				1,622				1,642				1,665				1,717				6,646
Other			23				76				—				2				101				31				12				21				—				64
Total revenue			63,263				62,741				61,190				62,489				249,683				44,495				47,671				58,446				63,024				213,636
Expenses:
Real estate operating expenses			15,071				14,995				15,632				16,334				62,032				10,770				11,116				13,991				15,223				51,100
Real estate taxes and insurance			9,251				9,763				8,555				9,288				36,857				6,595				7,308				8,801				8,912				31,616
Depreciation and amortization			24,300				23,563				24,878				23,174				95,915				15,781				16,919				22,163				23,976				78,839
Selling, general and administrative			3,272				3,148				3,071				3,492				12,983				2,532				3,204				3,477				2,698				11,911
Interest			7,176				6,891				6,883				6,483				27,433				4,208				4,174				5,474				7,198				21,054
Total expenses			59,070				58,360				59,019				58,771				235,220				39,886				42,721				53,906				58,007				194,520
Income before interest income, equity in losses of non-consolidated REITs and taxes			4,193				4,381				2,171				3,718				14,463				4,609				4,950				4,540				5,017				19,116
Interest income			1				1				—				1				3				1				4				5				6				16
Equity in losses of non-consolidated REITs			(484	)			(552	)			(455	)			(269	)			(1,760	)			(188	)			(196	)			(431	)			(543	)			(1,358	)
Gain on sale of property, less applicable income tax			—				—				—				940				940				—				—				—				—				—
Income before taxes on income			3,710				3,830				1,716				4,390				13,646				4,422				4,758				4,114				4,480				17,774
Income tax expense			137				117				149				95				498				119				115				118				128				480
Income from continuing operations			3,573				3,713				1,567				4,295				13,148				4,303				4,643				3,996				4,352				17,294
Income from discontinued operations			—																—				98				98				98				81				375
Gain on sale of property, less applicable income tax			—				—				—				—				—				—				—				—				2,158				2,158
Net income		$	3,573			$	3,713			$	1,567			$	4,295			$	13,148			$	4,401			$	4,741			$	4,094			$	6,591			$	19,827
Weighted average number of shares outstanding,
basic and diluted			100,187				100,187				100,187				100,187				100,187				82,937				91,847				100,187				100,187				93,855
Earnings per share, basic and diluted, attributable to:
Continuing operations		$	0.04			$	0.04			$	0.02			$	0.04			$	0.13			$	0.05			$	0.05			$	0.04			$	0.04			$	0.18
Discontinued operations			—				—				—				—				—				—				—				—				—				—
Gain on sale of property, less applicable income tax			—				—				—				—				—				—				—				—				0.03				0.03
Net income per share, basic and diluted		$	0.04			$	0.04			$	0.02			$	0.04			$	0.13			$	0.05			$	0.05			$	0.04			$	0.07			$	0.21

 

		March 31,				June 30,				September 30,				December 31,				March 31,				June 30,				September 30,				December 31,
		2014				2014				2014				2014				2013				2013				2013				2013
Assets:
Real estate assets:
Land		$	185,479			$	185,479			$	185,479			$	183,930			$	141,545			$	157,879			$	185,479			$	185,479
Buildings and improvements			1,605,808				1,609,747				1,613,699				1,604,984				1,175,743				1,320,703				1,599,519				1,603,941
Fixtures and equipment			1,296				1,395				1,633				1,677				904				960				985				1,170
			1,792,583				1,796,621				1,800,811				1,790,591				1,318,192				1,479,542				1,785,983				1,790,590
Less accumulated depreciation			234,447				246,658				258,799				266,284				189,794				199,290				210,293				222,252
Real estate assets, net			1,558,136				1,549,963				1,542,012				1,524,307				1,128,398				1,280,252				1,575,690				1,568,338
Acquired real estate leases, net			172,262				161,519				149,019				138,714				102,274				129,226				194,893				183,454
Investment in non-consolidated REITs			79,983				79,405				78,907				78,611				81,746				81,523				81,065				80,494
Assets held for sale			—																10,431				10,286				10,143				—
Cash and cash equivalents			20,031				18,455				15,930				7,519				17,282				24,962				25,539				19,623
Restricted cash			688				728				707				742				583				602				623				643
Tenant rent receivables, net			6,035				2,867				2,865				4,733				2,357				2,331				6,029				5,102
Straight-line rent receivable, net			44,392				46,021				46,737				47,021				36,210				37,865				40,086				42,261
Prepaid expenses and other assets			9,954				9,716				9,768				10,901				10,545				12,532				11,846				11,215
Related party mortgage loan receivable			101,916				88,436				88,436				93,641				96,896				97,846				98,846				99,746
Other assets: derivative asset			4,801				2,626				4,582				3,020				—				6,739				4,365				5,321
Deferred leasing commissions, net			27,477				28,861				28,354				27,181				24,920				24,877				27,504				27,837
Total assets		$	2,025,675			$	1,988,597			$	1,967,317			$	1,936,390			$	1,511,642			$	1,709,041			$	2,076,629			$	2,044,034
Liabilities and Stockholders’ Equity:
Liabilities:
Bank note payable		$	316,500			$	296,500			$	285,000			$	268,000			$	221,750			$	181,500			$	331,500			$	306,500
Term loan payable			620,000				620,000				620,000				620,000				400,000				400,000				620,000				620,000
Accounts payable and accrued expenses			34,390				34,590				40,228				42,561				25,493				29,971				39,907				44,137
Accrued compensation			1,027				2,052				2,863				3,758				540				1,677				2,432				2,985
Tenant security deposits			4,258				4,259				4,331				4,248				2,474				3,074				3,891				4,027
Other liabilities: derivative termination value			3,825				5,985				4,847				7,268				778				—				4,579				2,044
Acquired unfavorable real estate leases, net			13,273				12,467				11,679				10,908				6,774				11,775				15,171				14,175
Total liabilities			993,273				975,853				968,948				956,743				657,809				627,997				1,017,480				993,868
Commitments and contingencies
Stockholders’ Equity:
Preferred stock			—				—				—				—				—				—				—				—
Common stock			10				10				10				10				8				10				10				10
Additional paid-in capital			1,273,556				1,273,556				1,273,556				1,273,556				1,042,876				1,273,585				1,273,585				1,273,556
Accumulated other comprehensive income (loss)			976				(3,359	)			(265	)			(4,248	)			(778	)			6,739				(214	)			3,277
Accumulated distributions in excess of accumulated earnings			(242,140	)			(257,463	)			(274,932	)			(289,671	)			(188,273	)			(199,290	)			(214,232	)			(226,677	)
Total stockholders’ equity			1,032,402				1,012,744				998,369				979,647				853,833				1,081,044				1,059,149				1,050,166
Total liabilities and stockholders’ equity		$	2,025,675			$	1,988,597			$	1,967,317			$	1,936,390			$	1,511,642			$	1,709,041			$	2,076,629			$	2,044,034

 

 

		Twelve Months ended December 31
		2014				2013				2012
Cash flows from operating activities:
Net income		$	13,148			$	19,827			$	7,633
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense			97,916				81,267				57,500
Amortization of above market lease			635				(365	)			71
Gain (loss) on sale of properties, less applicable income tax			(940	)			(2,158	)			14,826
Equity in earnings (losses) from non-consolidated REITs			1,760				1,358				(2,033	)
Distributions from non-consolidated REITs			—				—				705
Increase in allowance for doubtful accounts			275				(1,250	)			65
Changes in operating assets and liabilities:
Restricted cash			(99	)			(68	)			(82	)
Tenant rent receivables			94				(2,103	)			(354	)
Straight-line rents			(4,737	)			(5,782	)			(4,464	)
Lease acquisition costs			(440	)			(1,146	)			(2,520	)
Prepaid expenses and other assets			700				(1,547	)			(328	)
Accounts payable and accrued expenses			206				11,137				3,717
Accrued compensation			773				445				318
Tenant security deposits			222				1,538				481
Payment of deferred leasing commissions			(6,347	)			(9,125	)			(5,179	)
Net cash provided by operating activities			103,166				92,028				70,356
Cash flows from investing activities:
Property acquisitions			—				(454,447	)			(167,812	)
Property improvements, fixtures and equipment			(18,370	)			(19,120	)			(15,824	)
Office computers and furniture			(191	)			(355	)			(232	)
Acquired real estate leases			—				(100,143	)			(37,302	)
Investment in non-consolidated REITs			—				4,858				(1	)
Distributions in excess of earnings from non-consolidated REITs			107				108				2,105
Investment in related party mortgage loan receivable			(11,170	)			(8,200	)			(74,580	)
Repayment of related party mortgage loan receivable			17,275				2,350				121,200
Changes in deposits on real estate assets			—				—				—
Investment in assets held for syndication, net			—				—				—
Proceeds received on sales of real estate assets			14,192				12,301				157
Net cash provided by (used in) investing activities			1,843				(562,648	)			(172,289	)
Cash flows from financing activities:
Distributions to stockholders			(76,142	)			(69,588	)			(63,032	)
Proceeds (costs) from equity offering, net			—				230,682				—
Borrowings under bank note payable			15,000				160,000				294,750
Borrowings (repayments) under Revolver			(53,500	)			(70,250	)			(527,000	)
Borrowing (repayment) of term loan payable, net			—				220,000				400,000
Deferred Financing Costs			(2,471	)			(1,868	)			(5,331	)
Swap termination payment			—				—				—
Net cash provided by (used in) financing activities			(117,113	)			468,976				99,387
Net decreases in cash and cash equivalents			(12,104	)			(1,644	)			(2,546	)
Cash and cash equivalents, beginning of period			19,623				21,267				23,813
Cash and cash equivalents, end of period		$	7,519			$	19,623			$	21,267

 

(in thousands)		Rentable
		Square																				Year																				Year
		Feet				Three Months Ended:																Ended				Three Months Ended:																Ended				Inc				%
Region		or RSF				31-Mar-14				30-Jun-14				30-Sep-14				31-Dec-14				31-Dec-14				31-Mar-13				30-Jun-13				30-Sep-13				31-Dec-13				31-Dec-13				(Dec)				Change
East			1,442			$	4,727			$	4,786			$	4,758			$	4,702			$	18,973			$	4,756			$	5,440			$	4,914			$	5,150			$	20,260			$	(1,287	)			-6.4%
MidWest			1,682				5,107				5,062				5,187				4,857				20,213				4,839				5,008				4,944				5,074				19,865				348				1.8%
South			3,525				14,135				13,694				13,720				13,803				55,352				13,226				13,297				13,199				13,410				53,132				2,220				4.2%
West			977				2,311				2,497				2,457				2,454				9,719				2,093				1,865				2,186				2,445				8,589				1,130				13.2%
Same Store			7,626				26,280				26,039				26,122				25,816				104,257				24,914				25,610				25,243				26,079				101,846				2,411				2.4%
Acquisitions			1,954				10,037				9,623				9,059				9,078				37,797				—				1,203				7,843				10,186				19,232				18,565				14.9%
Property NOI from the portfolio			9,580				36,317				35,662				35,181				34,894				142,054				24,914				26,813				33,086				36,265				121,078				20,976				17.3%
Property NOI on assets sold							256				264				272				207				999				510				505				507				340				1,862				(863	)			-0.8%
Property NOI						$	36,573			$	35,926			$	35,453			$	35,101			$	143,053			$	25,424			$	27,318			$	33,593			$	36,605			$	122,940			$	20,113				16.4%
Same Store						$	26,280			$	26,039			$	26,122			$	25,816			$	104,257			$	24,914			$	25,610			$	25,243			$	26,079			$	101,846			$	2,411				2.4%
Less Nonrecurring
Items in NOI (a)							707				287				173				56				1,223				63				557				—				378				998				225				-0.2%
Comparative
Same Store						$	25,573			$	25,752			$	25,949			$	25,760			$	103,034			$	24,851			$	25,053			$	25,243			$	25,701			$	100,848			$	2,186				2.2%

 

(a)

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

*

See page 11 for a reconciliation of Net Income to Property NOI and the Appendix for Definitions of Non-GAAP Measures beginning on page 27. Property NOI Excludes NOI from investments in and interest income from secured loans to non-consolidated REITs.

 

 

																		For the																				For the
		For the Three Months Ended																Year Ended				For the Three Months Ended																Year Ended
		31-Mar-14				30-Jun-14				30-Sep-14				31-Dec-14				31-Dec-14				31-Mar-13				30-Jun-13				30-Sep-13				31-Dec-13				31-Dec-13
Net income		$	3,573			$	3,713			$	1,567			$	4,295			$	13,148			$	4,401			$	4,741			$	4,094			$	6,591			$	19,827
Gain (loss) on sale, less applicable income tax			—												(940	)			(940	)			—				—				—				(2,158	)			(2,158	)
GAAP income from non-consolidated REITs			484				552				455				269				1,760				188				196				431				543				1,358
FFO from non-consolidated REITs			419				351				508				652				1,930				647				696				459				346				2,148
Depreciation & amortization			24,289				23,638				25,374				23,249				96,550				15,984				17,044				22,176				23,886				79,090
NAREIT FFO*			28,765				28,254				27,904				27,525				112,448				21,220				22,677				27,160				29,208				100,265
Acquisition costs			14				—				—				—				14				17				133				406				12				568
Funds From Operations (FFO)*		$	28,779			$	28,254			$	27,904			$	27,525			$	112,462			$	21,237			$	22,810			$	27,566			$	29,220			$	100,833
Adjusted Funds From Operations (AFFO)*
Funds From Operations (FFO)*			28,779				28,254				27,904				27,525				112,462				21,237				22,810				27,566				29,220				100,833
Reverse FFO from non-consolidated REITs			(419	)			(351	)			(508	)			(652	)			(1,930	)			(647	)			(696	)			(459	)			(346	)			(2,148	)
Distributions from non-consolidated REITs			27				27				27				26				107				27				27				27				26				107
Amortization of deferred financing costs			499				499				498				506				2,002				429				429				456				499				1,813
Straight-line rent			(1,783	)			(1,541	)			(714	)			(698	)			(4,736	)			(657	)			(1,186	)			(2,078	)			(1,862	)			(5,783	)
Tenant improvements			(1,132	)			(1,837	)			(2,612	)			(4,244	)			(9,825	)			(1,724	)			(5,094	)			(4,594	)			(2,993	)			(14,405	)
Leasing commissions			(1,080	)			(2,786	)			(577	)			(1,405	)			(5,848	)			(2,812	)			(909	)			(3,821	)			(1,498	)			(9,040	)
Non-investment capex			(364	)			(1,621	)			(700	)			(851	)			(3,536	)			(482	)			(707	)			(498	)			(1,179	)			(2,866	)
Adjusted Funds From Operations (AFFO)*		$	24,527			$	20,644			$	23,318			$	20,207			$	88,696			$	15,371			$	14,674			$	16,599			$	21,867			$	68,511
Per Share Data:
EPS		$	0.04			$	0.04			$	0.02			$	0.04			$	0.13			$	0.05			$	0.05			$	0.04			$	0.07			$	0.21
FFO*			0.29				0.28				0.28				0.27				1.12				0.26				0.25				0.28				0.29				1.07
AFFO*			0.24				0.21				0.23				0.20				0.89				0.19				0.16				0.17				0.22				0.73
Weighted Average Shares (basic and diluted)			100,187				100,187				100,187				100,187				100,187				82,937				91,847				100,187				100,187				93,855

 

* See the Appendix for Definitions of these Non-GAAP Measures beginning on page 27.

 

 

		For the Three Months Ended																Year Ended				For the Three Months Ended																Year Ended
		31-Mar-14				30-Jun-14				30-Sep-14				31-Dec-14				31-Dec-14				31-Mar-13				30-Jun-13				30-Sep-13				31-Dec-13				31-Dec-13
Net income		$	3,573			$	3,713			$	1,567			$	4,295			$	13,148			$	4,401			$	4,741			$	4,094			$	6,591			$	19,827
Interest expense			7,176				6,891				6,883				6,483				27,433				4,208				4,174				5,474				7,198				21,054
Depreciation and amortization			24,289				23,638				25,374				23,249				96,550				15,984				17,044				22,176				23,886				79,090
Income taxes			137				117				149				95				498				119				115				118				128				480
EBITDA			35,175				34,359				33,973				34,122				137,629				24,712				26,074				31,862				37,803				120,451
Excluding (gain) loss on sale, less applicable income tax			—				—				—				(940	)			(940	)			—				—				—				(2,158	)			(2,158	)
Adjusted EBITDA		$	35,175			$	34,359			$	33,973			$	33,182			$	136,689			$	24,712			$	26,074			$	31,862			$	35,645			$	118,293
Interest expense		$	7,176			$	6,891			$	6,883			$	6,483			$	27,433			$	4,208			$	4,174			$	5,474			$	7,198			$	21,054
Scheduled principal payments			—				—				—				—				—				—				—				—				—				—
Interest and scheduled principal payments		$	7,176			$	6,891			$	6,883			$	6,483			$	27,433			$	4,208			$	4,174			$	5,474			$	7,198			$	21,054
Interest coverage ratio			4.90				4.99				4.94				5.12				4.98				5.87				6.25				5.82				4.95				5.62
Debt service coverage ratio			4.90				4.99				4.94				5.12				4.98				5.87				6.25				5.82				4.95				5.62
Debt		$	936,500			$	916,500			$	905,000			$	888,000							$	621,750			$	581,500			$	951,500			$	926,500
Adjusted EBITDA			35,175				34,359				33,973				33,182								24,712				26,074				31,862				35,645
Annualized			140,700				137,436				135,892				132,728								98,848				104,296				127,448				142,580
Debt-to-EBITDA			6.7				6.7				6.7				6.7								6.3				5.6				7.5				6.5

 

* See the Appendix for Definitions of these Non-GAAP Measures beginning on page 27. Amounts in the EBITDA reconciliation do not reflect our proportionate share of interest expense, depreciation, amortization , income taxes, gains or losses on sales and debt from our investments in non-consolidated REITs , which are accounted for under the equity method.

 

 

Reconciliation to Net income																		Year																				Year
						Three Months Ended:												Ended								Three Months Ended:												Ended
		31-Mar-14				30-Jun-14				30-Sep-14				31-Dec-14				31-Dec-14				31-Mar-13				30-Jun-13				30-Sep-13				31-Dec-13				31-Dec-13
Net Income		$	3,573			$	3,713			$	1,567			$	4,295			$	13,148			$	4,401			$	4,741			$	4,094			$	6,591			$	19,827
Add (deduct):
Discontinued operations			—				—				—				—				—				(98	)			(98	)			(98	)			(81	)			(375	)
Gain on sale of properties			—				—				—				(940	)			(940	)			—				—				—				(2,158	)			(2,158	)
Management fee income			(646	)			(682	)			(649	)			(619	)			(2,596	)			(559	)			(598	)			(692	)			(689	)			(2,538	)
Depreciation and amortization			24,300				23,563				24,878				23,174				95,915				15,784				16,917				22,163				23,976				78,840
Amortization of above/below market leases			(11	)			74				497				75				635				48				(29	)			(143	)			(91	)			(215	)
Selling, general and administrative			3,272				3,148				3,071				3,492				12,983				2,532				3,204				3,477				2,716				11,929
Interest expense			7,176				6,891				6,883				6,483				27,433				4,208				4,174				5,474				7,198				21,054
Interest income			(1,410	)			(1,408	)			(1,216	)			(1,264	)			(5,298	)			(1,353	)			(1,382	)			(1,411	)			(1,438	)			(5,584	)
Equity in earnings of non-consolidated REITs			484				552				455				269				1,760				187				196				431				544				1,358
Non-property specific items, net			(165	)			75				(33	)			136				13				22				(60	)			45				(45	)			(38	)
																																							—
Property NOI fromv the continuing portfolio			36,573				35,926				35,453				35,101				143,053				25,172				27,065				33,340				36,523				122,100
Property NOI classified in discontinued operations			—				—				—				—				—				252				253				253				82				840
Property NOI		$	36,573			$	35,926			$	35,453			$	35,101			$	143,053			$	25,424			$	27,318			$	33,593			$	36,605			$	122,940

 

* See the Appendix for Definition of Non-GAAP Measures beginning on page 27.

 

 

(dollars in thousands)						Maximum				Amount				Interest				(a) Interest
		Maturity				Amount				Drawn at				Rate				Rate at				Facility
		Date				of Loan				31-Dec-14				Components				31-Dec-14				Fee
BAML Revolver			29-Oct-18			$	500,000			$	268,000				L+1.25%				1.41	%			0.25%
BAML Term Loan			27-Sep-17				400,000				400,000				0.75% + 1.45%				2.20	%
BMO Term Loan			26-Aug-20				220,000				220,000				2.32% + 1.65%				3.97	%
						$	1,120,000			$	888,000								2.40	%

 

(a) Interest rate excludes amortization of deferred financing costs and facility fees, see notes below

 

On October 29, 2014, we amended and restated our bank facility we call the BAML Credit Facility, which has a total of $900 million available and is comprised of a revolver that we can borrow up to $500 million on, which we call the BAML Revolver and a term loan for $400 million that we call the BAML Term Loan. On August 26, 2013, we entered into a term loan we call the BMO Term Loan and borrowed $220 million. Additional information about these loans are in the footnotes to our financial statements. Pricing is based on our credit rating for the BAML Revolver, BAML Term Loan and the BMO Term Loan. Our credit rating as of December 31, 2014 was Baa3 from Moody’s.

•

The BAML Revolver is priced based on our current credit rating at a spread of 1.25%, which was an interest rate of 1.41% as of December 31, 2014. The BAML Revolver is also subject to a facility fee based on our credit rating, which was 25 bps or approximately $1.25 million per year at December 31, 2014.

•

The BAML Term Loan has LIBOR fixed at 0.75% for five years. At our current credit rating the spread for the BAML Term Loan is 1.45%, so our interest rate is 2.20% as of December 31, 2014.

•

The BMO Term Loan has fixed LIBOR at 2.32% for seven years. At our current credit rating the spread over LIBOR is 1.65%, so our interest rate is 3.97% as December 31, 2014.

•

We incurred financing costs to close the BAML Revolver, BAML Term Loan and the credit facilities that preceded them. We also incurred financing costs to close the BMO Term Loan. These costs are deferred and amortized into interest expense during the terms of the loans. The annual run rate for amortization to interest expense from deferred financing costs is approximately $2.1 million.

•

The BAML Revolver can be extended for 1 year at the Company’s option upon payment of fees and includes an accordion feature that allows for up to $250 million of additional borrowing capacity. The BMO Term Loan includes an accordion feature that allows for up to $50 million of additional borrowing capacity. The accordion features are subject to receipt of lender commitments and satisfaction of certain customary conditions.

 

 

 

		31-Mar-14				30-Jun-14				30-Sep-14				31-Dec-14				31-Mar-13				30-Jun-13				30-Sep-13				31-Dec-13
Market Data:
Shares Outstanding			100,187				100,187				100,187				100,187				82,937				100,187				100,187				100,187
Closing market price per share		$	12.60			$	12.58			$	11.22			$	12.27			$	14.62			$	13.20			$	12.74			$	11.95
Market capitalization		$	1,262,361			$	1,260,358			$	1,124,103			$	1,229,299			$	1,212,545			$	1,322,474			$	1,276,388			$	1,197,239
Total Debt			936,500				916,500				905,000				888,000				621,750				581,500				951,500				926,500
Total Market Capitalization		$	2,198,861			$	2,176,858			$	2,029,103			$	2,117,299			$	1,834,295			$	1,903,974			$	2,227,888			$	2,123,739
Dividend Data:
Total dividends paid		$	19,036			$	19,035			$	19,036			$	19,036			$	15,758			$	15,758			$	19,036			$	19,036
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*			65.5	%			67.9	%			67.9	%			70.4	%			73.1	%			76.0	%			67.9	%			65.5	%
Liquidity:
Cash and cash equivalents		$	20,031			$	18,455			$	15,930			$	7,519			$	17,282			$	24,962			$	25,539			$	19,623
Revolving credit facilities:
Gross potential available under the BAML Credit Facility			900,000				900,000				900,000				900,000				900,000				900,000				900,000				900,000
Less:
Outstanding balance			(716,500	)			(696,500	)			(685,000	)			(668,000	)			(621,750	)			(581,500	)			(731,500	)			(706,500	)
Total Liquidity		$	203,531			$	221,955			$	230,930			$	239,519			$	295,532			$	343,462			$	194,039			$	213,123

 

*See page 9 for a reconciliation of Net Income to FFO and the Appendix for Definitions of Non-GAAP Measures beginning on page 27.

 

 

 

 

 

			Square	Percent	Wtd Ave (a)	GAAP (b)
MSA / Property Name	City	State	Feet	Leased	Occupied	Rent
East Region
Baltimore
East Baltimore	Baltimore	MD	325,445	81.9%	78.7%	$        23.35
Washington, D.C.
Meadow Point	Chantilly	VA	138,537	92.6%	92.6%	$        27.47
Stonecroft	Chantilly	VA	111,469	100.0%	100.0%	$        38.46
Loudoun Tech Center	Dulles	VA	136,658	92.0%	97.3%	$        16.17
Richmond
Innsbrook	Glen Allen	VA	298,456	99.9%	99.9%	$        18.28
Charlotte
Park Seneca	Charlotte	NC	109,674	92.1%	85.2%	$        15.43
Forest Park	Charlotte	NC	62,212	100.0%	100.0%	$        14.15
Raleigh-Durham
Emperor Boulevard	Durham	NC	259,531	100.0%	100.0%	$        35.66
East Region Total			1,441,982	93.8%	93.1%	$        24.56
Midwest Region
Chicago
Northwest Point	Elk Grove Village	IL	176,848	100.0%	100.0%	$        19.52
909 Davis Street	Evanston	IL	195,245	97.9%	97.9%	$        35.70
Indianapolis
River Crossing	Indianapolis	IN	205,059	100.0%	98.2%	$        23.08
St. Louis
Timberlake	Chesterfield	MO	232,766	98.3%	98.3%	$        21.32
Timberlake East	Chesterfield	MO	116,197	91.0%	91.0%	$        23.51
Lakeside Crossing	Maryland Heights	MO	127,778	100.0%	100.0%	$        26.10
Minneapolis
Eden Bluff	Eden Prairie	MN	153,028	100.0%	100.0%	$        27.73
121 South 8th Street	Minneapolis	MN	475,012	91.2%	90.3%	$        15.00
Midwest Region Total			1,681,933	96.4%	96.0%	$        22.50

 

(a) Weighted Occupied Percentage for the year ended December 31, 2014

(b) Weighted Average GAAP Rent per Occupied Square Foot

 

 

				Percent	Wtd Ave (a)	GAAP (b)
MSA / Property Name	City	State	Square Feet	Leased	Occupied	Rent
South Region
Dallas-Fort Worth
Willow Bend Office Center	Plano	TX	117,050	100.0%	98.7%	$        20.89
Legacy Tennyson Center	Plano	TX	202,600	100.0%	100.0%	$        17.59
One Legacy Circle	Plano	TX	214,110	100.0%	100.0%	$        33.10
Addison Circle	Addison	TX	293,926	89.6%	92.6%	$        24.47
Collins Crossing	Richardson	TX	300,472	99.5%	99.1%	$        24.59
Liberty Plaza	Addison	TX	218,934	90.6%	93.8%	$        20.63
Houston
Park Ten	Houston	TX	157,460	63.1%	82.6%	$        29.64
Eldridge Green	Houston	TX	248,399	100.0%	100.0%	$        31.23
Park Ten Phase II	Houston	TX	156,746	100.0%	100.0%	$        31.15
Westchase I & II	Houston	TX	629,025	97.7%	96.9%	$        32.82
Miami-Ft. Lauderdale-West Palm Beach
Blue Lagoon Drive	Miami	FL	212,619	100.0%	100.0%	$        23.19
Atlanta
One Overton Place	Atlanta	GA	387,267	86.3%	96.8%	$        23.38
One Ravinia	Atlanta	GA	386,603	95.2%	92.1%	$        23.04
999 Peachtree	Houston	TX	621,946	97.7%	93.6%	$        29.23
South Region Total			4,147,157	94.9%	95.9%	$        26.82
West Region
Seattle
Federal Way	Federal Way	WA	117,010	57.1%	54.7%	$        18.46
San Francisco-San Jose-Oakland
Hillview Center	Milpitas	CA	36,288	100.0%	100.0%	$        16.10
Montague Business Center	San Jose	CA	145,951	81.1%	89.0%	$        16.12
Denver
380 Interlocken	Broomfield	CO	240,185	95.8%	92.6%	$        29.56
1999 Broadway	Denver	CO	676,379	88.9%	90.8%	$        30.81
Greenwood Plaza	Englewood	CO	196,236	100.0%	100.0%	$        23.65
390 Interlocken	Broomfield	CO	241,516	72.3%	70.0%	$        27.50
1001 17th Street	Denver	CO	655,420	84.8%	85.0%	$        31.78
West Region Total			2,308,985	85.7%	86.2%	$        28.33
Total Owned			9,580,057	92.8%	93.1%	$        26.04

 

(a) Weighted Occupied Percentage for the year ended December 31, 2014

(b) Weighted Average GAAP Rent per Occupied Square Foot

 

 

MSA / Property Name	City	State	Square Feet
Southeast Region
Columbia
1441 Main Street	Columbia	SC	264,857
Atlanta
Satellite Place	Duluth	GA	134,785
Southeast Region Total			399,642
Southwest Region
Houston
Energy Tower I	Houston	TX	325,797
Denver
385 Interlocken	Broomfield	CO	296,868
Southwest Region Total			622,665
Midwest Region
Chicago
East Wacker (a)	Chicago	IL	860,709
Indianapolis
Monument Circle	Indianapolis	IN	213,760
St. Louis
Lakeside Crossing II	Maryland Heights	MO	116,000
Kansas City
Grand Boulevard (b)	Kansas City	MO	535,071
Cincinnati
Centre Pointe V	West Chester	OH	135,936
Union Centre	West Chester	OH	409,798
Midwest Region Total			2,271,274
Total Managed			3,293,581
Total Owned & Managed			12,873,638

 

(a)   FSP has a Preferred Share Interest of 43.7% in the entity that owns this property.

(b)   FSP has a Preferred Share Interest of 27.0% in the entity that owns this property.

 

 

 

 

 

			Remaining	Aggregate	% of Aggregate		% of Aggregate
	Tenant	Number of	Lease Term	Leased	Leased	Annualized	Leased
	Name	Leases	in Months	Square Feet	Square Feet	Rent	Annualized Rent
1	TCF National Bank	2	12	263,111	2.8%	$     2,937,400	1.3%
2	Quintiles Transnational Corp	1	51	259,531	2.7%	8,821,181	3.9%
3	CITGO Petroleum Corporation	1	86	248,399	2.6%	7,558,782	3.4%
4	Sutherland Asbill Brennan LLP	1	64	243,839	2.5%	7,352,253	3.3%
5	Newfield Exploration Company	1	86	234,495	2.4%	7,921,342	3.5%
6	US Government (a)	6	2, 8, 18, 41, 45, 69	224,427	2.3%	7,222,999	3.2%
7	Burger King Corporation	1	45	212,619	2.2%	5,217,670	2.3%
8	Denbury Onshore, LLC	2	55	202,600	2.1%	3,510,042	1.5%
9	RGA Reinsurance Company (b)	2	-	197,354	2.1%	4,304,802	1.9%
10	SunTrust Bank (c)	2	22, 81	182,888	1.9%	3,754,246	1.7%
11	Citicorp Credit Services, Inc	1	24	176,848	1.9%	3,689,049	1.6%
12	C.H. Robinson Worldwide, Inc	1	78	153,028	1.6%	4,221,068	1.9%
13	T-Mobile South, LLC dba T-Mobile	1	50	151,792	1.6%	3,588,227	1.6%
14	Houghton Mifflin Harcourt Publishing Company	1	27	150,050	1.6%	5,962,139	2.6%
15	Petrobras America, Inc.	1	59	144,813	1.5%	4,969,982	2.2%
16	Murphy Exploration & Production Company	1	28	144,677	1.5%	4,439,625	2.0%
17	Argo Data Resource Corporation	1	104	140,246	1.5%	3,741,362	1.7%
18	Monsanto Company	1	61	127,778	1.3%	3,282,617	1.5%
19	Federal National Mortgage Association	1	21	123,144	1.3%	2,678,382	1.2%
20	Vail Corp d/b/a Vail Resorts (d)	1	51, 99	122,232	1.3%	3,430,358	1.5%
			Total	3,703,871	38.7%	$    98,603,524	43.8%

 

(a)

Includes 180,444 and 5,090 square feet which expire in 2018 & 2016, respectively. The remaining 38,893 square feet expire between 2015-2020.

(b)

Lease expired and tenants vacated on December 31, 2014. As of January 1, 2015, Kaiser Foundation Health Plan will become the 20th largest tenant with 120,979 square feet.

(c)

Includes 55,388 square feet which expires October 31, 2016. The remaining 127,500 square feet expires September 30, 2021.

(d)

Includes 38,293 square feet that expires March 31, 2019. The remaining 83,939 square feet expires March 31, 2023.

 

 

		Year		Year		Year
		Ended		Ended		Ended
Leasing Activity		31-Dec-14		31-Dec-13		31-Dec-12
(in Square Feet - SF)
New leasing		149,000		267,000		315,740
Renewals		635,000		645,000		700,838
		784,000		912,000		1,016,578
Other information per SF
(Activity on a year-to-date basis)
GAAP Rents on leasing		$          26.89		$          23.33		$        22.41
Weighted average lease term		6.25 Years		7.2 Years		5.1 Years
Increase over average GAAP
rents in prior year		11.8%		8.0%		1.5%
Average free rent		3 Months		3 Months		3 Months
Tenant Improvements		$          16.40		$          18.25		$        12.26
Leasing Costs		$            7.66		$            8.48		$          5.40

 

 

 

 

				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		Cumulative
December 31,	Year			Leases			Leases (a)		Leases		Leases		Total
2015	110	(b)		710,649			17,647,630		24.83		7.8%		7.8%
2016	72			962,093			20,118,004		20.91		8.9%		16.7%
2017	75			1,059,927			29,480,637		27.81		13.1%		29.8%
2018	64			944,323			27,380,387		28.99		12.2%		42.0%
2019	57			1,606,640			42,132,132		26.22		18.7%		60.7%
2020	32			771,151			20,964,007		27.19		9.3%		70.0%
2021	20			933,499			22,261,544		23.85		9.9%		79.9%
2022	18			903,231			25,031,685		27.71		11.1%		91.0%
2023 and thereafter	27			999,608	(c)		20,204,027		20.21		9.0%		100.0%
	475			8,891,121			225,220,053		25.33		100.0%
Vacant SF as of 12/31/14				688,936
Total Portfolio Square Footage				9,580,057

 

(a)

Annualized rent represents the monthly rent, including tenant reimbursements, for each lease in effect at December 31, 2014 mulitplied by 12. Tenant reimbursements generally include payment of real estate taxes, operating expenses and common area maintenance and utility charges.

(b)

Includes 24 leases that are month-to-month.

(c)

Includes 53,120 square feet that are non-revenue producing building amenities.

 

 

(in thousands)		For the Three Months Ended																Year ended
		31-Mar-14				30-Jun-14				30-Sep-14				31-Dec-14				31-Dec-14
Tenant improvements		$	1,132			$	1,837			$	2,612			$	4,244			$	9,825
Deferred leasing costs			1,080				2,786				577				1,405				5,848
Non-investment capex			364				1,621				700				851				3,536
Recurring Capital Expenditures			2,576				6,244				3,889				6,500				19,209
1st generation leasing			33				9				394				580				1,016
Investment capex			755				580				244				516				2,095
Total Capital Expenditures		$	3,364			$	6,833			$	4,527			$	7,596			$	22,320

 

		For the Three Months Ended:																Year ended
		31-Mar-13				30-Jun-13				30-Sep-13				31-Dec-13				31-Dec-13
Tenant improvements		$	1,724			$	5,094			$	4,594			$	2,993			$	14,405
Deferred leasing costs			2,812				909				3,821				1,498				9,040
Non-investment capex			482				707				498				1,179				2,866
Recurring Capital Expenditures			5,018				6,710				8,913				5,670				26,311
1st generation leasing			128				1,011				2				36				1,177
Investment capex			515				743				1,054				299				2,611
Total Capital Expenditures		$	5,661			$	8,464			$	9,969			$	6,005			$	30,099

 

 

 

Recent Acquisitions:							Purchase Price
	City	State	Square Feet		Date Acquired		(in thousands)
2013
1999 Broadway	Denver	CO	673,793		5/22/13		$        183,000
999 Peachtree	Atlanta	GA	621,946		7/1/13		157,900
1001 17th Street	Denver	CO	655,420		8/28/13		217,000
2012
One Ravinia	Atlanta	GA	386,603		7/31/12		$          52,750
Westchase	Houston	TX	629,025		11/1/12		154,750
2011
Emperor Boulevard	Durham	NC	259,531		3/4/11		75,800
Legacy Tennyson Center	Plano	TX	202,600		3/10/11		37,000
One Legacy Circle	Plano	TX	214,110		3/24/11		52,983
909 Davis	Evanston	IL	195,245		9/30/11		37,062
East Renner Road	Richardson	TX	122,300		10/6/11		11,282
Recent Dispositions:
							Net Sales		Gain (Loss)
	City	State	Square Feet		Date Sold		Proceeds		on Sale
							(in thousands)
2014
Centennial	Colorado Springs	CO	110,405		12/3/14		$          15,500		$             940
2013
East Renner Road	Richardson	TX	122,300		10/29/13		$          12,300		$          2,169
2012
Southfield	Southfield	MI	252,613		12/21/12		$               293		$      (14,826)
2011
Fairview	Falls Church	VA	252,613		1/21/11		89,382		19,592
Bollman (a)	Savage	MD	98,745		6/24/11		7,408		2,346

 

(a) Industrial property. All other acquisitions and dispositions are office properties

 

 

(dollars in thousands)			Maximum	Amount			Interest
		Maturity	Amount	Drawn at	Interest	Draw	Rate at
Sponsored REIT	Location	Date	of Loan	31-Dec-14	Rate (1)	Fee (2)	31-Dec-14
Secured revolving lines of credit
FSP Satellite Place Corp.	Duluth, GA	31-Mar-15	$     5,500	$      5,500	L+4.4%	0.5%	4.55%
FSP 1441 Main Street Corp.	Columbia, SC	31-Mar-15	10,800	9,000	L+4.4%	0.5%	4.55%
FSP Energy Tower I Corp.	Houston, TX	3-Jul-15	20,000	8,600	L+5.0%	0.5%	5.15%
Secured construction loan
FSP 385 Interlocken
Development Corp.	Broomfield, CO	30-Apr-15	42,000	37,541	L+4.4%	n/a	4.55%
Mortgage loan secured by property
FSP Energy Tower I Corp. (3)	Houston, TX	3-Jul-15	33,000	33,000	6.41%	n/a	6.41%
			$ 111,300	$    93,641

 

(1)

The interest rate is 30-day LIBOR rate plus the additional rate indicated, otherwise a fixed rate.

(2)

The draw fee is a percentage of each new advance, and is paid at the time of each new draw.

(3)

The loan has a secured fixed mortgage amount of $33,000,000, which was extended for one year from July 5, 2014 to July 3, 2015 and an extension fee of $108,900 was paid by the borrower to the Company.

 

 

 

 

 

 

Definition of Funds From Operations (“FFO”)

 

The Company evaluates performance based on Funds From Operations, which we refer to as FFO, as management believes that FFO represents the most accurate measure of activity and is the basis for distributions paid to equity holders. The Company defines FFO as net income (computed in accordance with GAAP), excluding gains (or losses) from sales of property and acquisition costs of newly acquired properties that are not capitalized, plus depreciation and amortization, including amortization of acquired above and below market lease intangibles and impairment charges on properties or investments in non-consolidated REITs, and after adjustments to exclude equity in income or losses from, and, to include the proportionate share of FFO from, non-consolidated REITs.

 

FFO should not be considered as an alternative to net income (determined in accordance with GAAP), nor as an indicator of the Company’s financial performance, nor as an alternative to cash flows from operating activities (determined in accordance with GAAP), nor as a measure of the Company’s liquidity, nor is it necessarily indicative of sufficient cash flow to fund all of the Company’s needs.

 

Other real estate companies and the National Association of Real Estate Investment Trusts, or NAREIT, may define this term in a different manner. We have included the NAREIT FFO definition in our table and note that other REITs may not define FFO in accordance with the current NAREIT definition or may interpret the current NAREIT definition differently than we do.

 

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

 

 

Definition of Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA) and Adjusted EBITDA

 

EBITDA is defined as net income plus interest expense, income tax expense and depreciation and amortization expense. Adjusted EBITDA is defined as EBITDA excluding gains and losses on sales of properties or shares of equity investments or provisions for losses on assets held for sale. EBITDA and Adjusted EBITDA are not intended to represent cash flow for the period, are 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 are not indicative of operating income or cash provided by operating activities as determined under GAAP. EBITDA and Adjusted EBITDA are 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 or Adjusted EBITDA the same way, this presentation 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 and Adjusted EBITDA.

 

Definition of Property Net Operating Income (Property NOI)

 

The Company provides property performance based on Net Operating Income, which we refer to as NOI. Management believes that investors are interested in this information. NOI is a non-GAAP financial measure that the Company defines as net income (the most directly comparable GAAP financial measure) plus selling, general and administrative expenses, depreciation and amortization, including amortization of acquired above and below market lease intangibles and impairment charges, interest expense, less equity in earnings of nonconsolidated REITs, interest income, management fee income, gains or losses on the sale of assets and excludes non-property specific income and expenses. The information presented includes footnotes and the data is shown by region with properties owned in both periods, which we call Same Store. The Comparative Same Store results include properties held for the periods presented and exclude significant nonrecurring income such as bankruptcy settlements and lease termination fees. NOI, as defined by the Company, may not be comparable to NOI reported by other REITs that define NOI differently. NOI should not be considered an alternative to net income as an indication of our performance or to cash flows as a measure of the Company's liquidity or its ability to make distributions.

 

 

Definition of Adjusted Funds From Operations (AFFO)

 

The Company defines AFFO as the sum of (1) FFO; (2) excluding our proportionate share of FFO and including distributions received, from non-consolidated REITs; (3) excluding the effect of straight-line rent; (4) plus deferred financing costs, (5) less recurring capital expenditures that are generally for (a) maintenance of properties, which we call non-investment capex or are second generation capital expenditures. Second generation costs include re-tenanting space after a tenant vacates, which include tenant improvements and leasing commissions.

 

We exclude development/redevelopment activities, capital expenditures planned at acquisition and costs to reposition a property. We also exclude first generation leasing costs, which are generally to fill vacant space in properties we acquire or were planned for at acquisition.

 

AFFO should not be considered as an alternative to net income (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, AFFO should be examined in connection with net income and cash flows from operating, investing and financing activities in the consolidated financial statements.

 

 

 

Quarterly AFFO Per Share
New Definition	Q1	Q2	Q3	Q4	Total
2014	$          0.24	$          0.21	$          0.23	$          0.20	$          0.89
2013	$          0.19	$          0.16	$          0.17	$          0.22	$          0.73
Old Definition	Q1	Q2	Q3	Q4	Total
2014	$          0.24	$          0.20	$          0.23	$          0.19	$          0.85
2013	$          0.18	$          0.14	$          0.16	$          0.21	$          0.69

 

Adjusted Funds From Operations (AFFO)*
New Definition		For the Year Ended
		December 31,
(in thousands):		2014				2013
Funds From Operations (FFO)*		$	112,462			$	100,833
Reverse FFO from non-consolidated REITs			(1,930	)			(2,148	)
Distributions from non-consolidated REITs			107				107
Amortization of deferred financing costs			2,002				1,813
Straight-line rent			(4,736	)			(5,783	)
Tenant improvements			(9,825	)			(14,405	)
Leasing commissions			(5,848	)			(9,040	)
Non-investment capex			(3,536	)			(2,866	)
Adjusted Funds From Operations (AFFO)*		$	88,696			$	68,511
Weighted Average Shares (basic and diluted)			100,187				93,855
AFFO Per Share		$	0.89			$	0.73

 

Old Definition		For the Year Ended
		December 31,
(in thousands):		2014				2013
Funds From Operations (FFO)*		$	112,462			$	100,833
Reverse FFO from non-consolidated REITs			(1,930	)			(2,148	)
Distributions from non-consolidated REITs			107				107
Amortization of deferred financing costs			2,002				1,813
Straight-line rent			(4,736	)			(5,783	)
Tenant improvements			(10,350	)			(15,071	)
Leasing commissions			(6,338	)			(9,257	)
Non-investment capex			(5,632	)			(5,771	)
Adjusted Funds From Operations (AFFO)*		$	85,585			$	64,723
Weighted Average Shares (basic and diluted)			100,187				93,855
AFFO Per Share		$	0.85			$	0.69

 

Note:

The new definition excludes development/redevelopment activities, capital expenditures planned at acquisition and costs to reposition a property. We also exclude first generation leasing costs, which are generally to fill vacant space in properties we acquire or were planned for at acquisition.

 

*Please see the definition of FFO on page 27 and AFFO on page 29.

 

 

 

 

Investor Relations Contact   (877) 686-9496 InvestorRelations@franklinstreetproperties.com

 

 

 

Franklin Street Properties Corp. ● 401 Edgewater Place ● Wakefield, MA 01880 ● (781) 557-1300

 

www.franklinstreetproperties.com