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Franklin Street Properties Corp. Announces Third Quarter 2017 Results

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Franklin Street Properties Corp. (the "Company", "FSP", "we" or "our")
(NYSE:FSP), a real estate investment trust (REIT), announced
its results for the third quarter ended September 30, 2017.

George J. Carter, Chairman and Chief Executive Officer, commented as
follows:

"With the fourth quarter of 2017 underway, we continue to expect growth
to be led by contributions from increased leasing activity at our
properties, full year contribution from our 2016 acquisitions and
anticipated successful results from our redevelopment of 801 Marquette
in downtown Minneapolis. Over the past several years, the portfolio
transition efforts at FSP have resulted in positioning a significant
portion of our office assets into urban and infill locations. Over 78%
of our portfolio is now located within our five core markets of Atlanta,
Dallas, Denver, Houston, and Minneapolis. We are optimistic about our
prospects for long-term sustainable growth and look forward with
anticipation to the remainder of 2017 and beyond."

Highlights

  • FFO was $28.0 million or $0.26 per basic and diluted share for the
    third quarter ended September 30, 2017. We had Net Income of $1.9
    million or $0.02 per basic and diluted share for the third quarter
    ended September 30, 2017.
  • Adjusted Funds From Operations (AFFO) was $0.16 per basic and diluted
    share for the third quarter ended September 30, 2017.
  • On October 18, 2017, we recast our credit facility with Bank of
    America, N.A., as administrative agent, to, among other things, (i)
    increase the borrowing capacity of the revolving line of credit from
    $500 million to $600 million, (ii) extend the maturity date applicable
    to the revolving line of credit from October 29, 2018 to January 12,
    2022 (with two optional six month extensions), (iii) extend the
    maturity date applicable to the term loan from September 27, 2021 to
    January 12, 2023, (iv) modify certain financial covenants, including a
    reset of minimum tangible net worth, and (v) increase the accordion
    feature from $350 million to $500 million. Pricing on the borrowing
    spread decreased by five basis points for the revolving line of credit
    and by ten basis points for the term loan. We also simultaneously
    amended our term loan with Bank of Montreal, as administrative agent,
    and our term loan with JPMorgan Chase Bank, N.A., as administrative
    agent, to conform the financial covenants and certain other
    provisions. Additional information on these transactions can be found
    in a Current Report on Form 8-K that the Company filed with the U.S.
    Securities and Exchange Commission ("SEC") on October 24, 2017.
  • On October 24, 2017, we entered into a note purchase agreement
    relating to a private placement of $200 million in an aggregate
    principal amount of unsecured senior notes, consisting of $116 million
    in aggregate principal amount of 3.99% Series A Senior Notes with a
    7-year maturity and $84 million in aggregate principal amount of 4.26%
    Series B Senior Notes with a 10-year maturity. We intend to use the
    proceeds from the private placement to reduce the outstanding balance
    on our revolving line of credit. Additional information on this
    transaction can be found in a Current Report on Form 8-K that the
    Company filed with the SEC on October 24, 2017.
  • On October 25, 2017, Moody's Investors Service assigned a Baa3 rating
    to our above-described $200 million unsecured senior notes and
    affirmed our issuer rating at Baa3 with a stable outlook.

Leasing and Development Update

  • Our directly owned real estate portfolio of 35 properties totaling
    approximately 10.1 million square feet was approximately 88.7% leased
    as of September 30, 2017, which was a 0.6% increase compared to June
    30, 2017. The increase was primarily attributable to leasing achieved
    during the quarter.
  • During the nine months ended September 30, 2017, we leased
    approximately 936,000 square feet, of which approximately 207,000
    square feet was with new tenants.
  • Third quarter 2017 leasing activity was the strongest of the year to
    date. We leased approximately 460,000 square feet, of which
    approximately 124,000 square feet was with new tenants and expansions
    of existing tenants.
  • Weighted average annualized GAAP rent per square foot was
    approximately $28.69 as of September 30, 2017, compared to $27.92 as
    of December 31, 2016, $26.93 as of December 31, 2015, and $26.04 as of
    December 31, 2014. The average annual increase since 2014 has been
    approximately 3.6%. We believe that the increase is attributable to
    the enhanced quality of our real estate portfolio and value creation
    derived from our recent acquisitions, dispositions and leasing.
  • Our project at 801 Marquette Avenue in Minneapolis was substantially
    complete at the end of the second quarter. As of September 30, 2017,
    we had incurred approximately $15.6 million in total redevelopment
    costs. The project has been well received by the market and interest
    in the building from prospective tenants has been strong. 801
    Marquette Avenue provides a contemporary, forward-looking office
    experience in a vintage warehouse style office with modern systems and
    market leading amenities in the heart of the Minneapolis CBD.

Acquisition and Disposition Update

  • On October 20, 2017, we sold a property located in Baltimore, Maryland
    that had been previously classified as an asset held for sale, and
    received approximately $31.6 million in net proceeds, which were used
    to reduce the outstanding balance on our revolving line of credit.
  • We continue to selectively evaluate potential non-core property
    dispositions when appropriate values/pricing are achieved.
  • We continue to evaluate new potential acquisition opportunities within
    our five core markets.

Dividend Update

On October 6, 2017, the Company announced that its Board of Directors
declared a regular quarterly cash dividend for the three months ended
September 30, 2017 of $0.19 per share of common stock that will be paid
on November 9, 2017 to stockholders of record on October 20, 2017.

Non-GAAP Financial Information

A reconciliation of Net income (loss) to FFO, AFFO and Sequential Same
Store NOI and our definitions of FFO, AFFO and Sequential Same Store NOI
can be found on Supplementary Schedules H and I.

Real Estate Update

Supplementary schedules provide property information for the Company's
owned real estate portfolio and for two non-consolidated REITs in which
the Company holds preferred stock interests as of September 30, 2017.
The Company will also be filing an updated supplemental information
package that will provide stockholders and the financial community with
additional operating and financial data. The Company will file this
supplemental information package with the SEC and make it available on
its website at www.fspreit.com.

FFO Guidance

We are updating our full year FFO guidance for 2017, which is estimated
to be approximately $1.04 per basic and diluted share, and for the
fourth quarter of 2017, which is estimated to be approximately $0.25 per
basic and diluted share. We estimate full year 2017 net income (loss)
guidance to be ($0.10) per basic and diluted share, and for the fourth
quarter of 2017, we estimate net income to be $0.02 per basic and
diluted share. This guidance (a) excludes the impact of future
acquisitions, developments, dispositions, debt financings or repayments
or other capital market transactions; (b) reflects estimates from our
ongoing portfolio of properties, other real estate investments and
general and administrative expenses; and (c) reflects our current
expectations of economic conditions. We will update guidance quarterly
in our earnings releases. There can be no assurance that the Company's
actual results will not differ materially from the estimates set forth
above.

A reconciliation of the guidance for net income (loss) per share to the
guidance for FFO per share is provided as follows:

       
Q4 2017 Full Year 2017
Guidance Guidance
Net income (loss) per share $ 0.02 $ (0.10 )
(Gain) loss or provision for loss on sale of properties and property
held for sale, less applicable income tax
0.00 0.17
GAAP loss from non-consolidated REITs 0.00 0.01
FFO from non-consolidated REITs 0.01 0.03
Depreciation & Amortization   0.22   0.93  
Funds From Operations per share $ 0.25 $ 1.04  
 

Today's news release, along with other news about Franklin Street
Properties Corp., is available on the Internet at www.fspreit.com.
We routinely post information that may be important to investors in the
Investor Relations section of our website. We encourage investors to
consult that section of our website regularly for important information
about us and, if they are interested in automatically receiving news and
information as soon as it is posted, to sign up for E-mail Alerts.

Earnings Call

A conference call is scheduled for November 1, 2017 at 10:00 a.m. (ET)
to discuss the third quarter 2017 results. To access the call, please
dial 1-800-464-8240. Internationally, the call may be accessed by
dialing 1-412-902-6521. To access the call from Canada, please dial
1-866-605-3852. To listen via live audio webcast, please visit the
Webcasts & Presentations section in the Investor Relations section of
the Company's website (www.fspreit.com)
at least ten minutes prior to the start of the call and follow the
posted directions. The webcast will also be available via replay from
the above location starting one hour after the call is finished.

About Franklin Street Properties Corp.

Franklin Street Properties Corp., based in Wakefield, Massachusetts, is
focused on 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 five
core 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. To learn
more about FSP please visit our website at www.fspreit.com.

Forward-Looking Statements

Statements made in this press release that state FSP's or
management's intentions, beliefs, expectations, or predictions for the
future may be forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995.
This press
release may also contain forward-looking statements, such as our ability
to lease space in the future, expectations for FFO and net income (loss)
in future periods, expectations for growth and leasing activities in
future periods, prospects for long-term sustainable growth and the
timing and impact of the substantially competed 801 Marquette Avenue
property, that are based on current judgments and current knowledge of
management and are subject to certain risks, trends and uncertainties
that could cause actual results to differ materially from those
indicated in such forward-looking statements.
Accordingly,
readers are cautioned not to place undue reliance on forward-looking
statements.
Investors are cautioned that our forward-looking
statements involve risks and uncertainty, including without limitation,
economic conditions in the United States, disruptions in the debt
markets, economic conditions in the markets in which we own properties,
risks of a lessening of demand for the types of real estate owned by us,
changes in government regulations and regulatory uncertainty,
uncertainty about governmental fiscal policy, geopolitical events and
expenditures that cannot be anticipated such as utility rate and usage
increases, delays in construction schedules, unanticipated repairs,
additional staffing, insurance increases and real estate tax valuation
reassessments.
See the "Risk Factors" set forth in Part I, Item
1A of our Annual Report on Form 10-K for the year ended December 31,
2016, as the same may be updated from time to time in subsequent filings
with the United States Securities and Exchange Commission.
Although
we believe the expectations reflected in the forward-looking statements
are reasonable, we cannot guarantee future results, levels of activity,
acquisitions, dispositions, performance or achievements.
We will
not update any of the forward-looking statements after the date of this
press release to conform them to actual results or to changes in our
expectations that occur after such date, other than as required by law.

     

Franklin Street Properties Corp.

Earnings Release

Supplementary Information

Table of Contents

 
 
Franklin Street Properties Corp. Financial Results A-C
Real Estate Portfolio Summary Information D
Portfolio and Other Supplementary Information E
Percentage of Leased Space F
Largest 20 Tenants – FSP Owned Portfolio G
Reconciliation and Definitions of Funds From Operations (FFO) and
Adjusted
Funds From Operations (AFFO) H
Reconciliation and Definition of Sequential Same Store results to
Property Net
Operating Income (NOI) and Net Income (Loss) I
 
               

Franklin Street Properties Corp. Financial Results

Supplementary Schedule A

Condensed Consolidated Income (Loss) Statements

(Unaudited)

 
 
For the For the
Three Months Ended Nine Months Ended
      September 30,     September 30,
(in thousands, except per share amounts)     2017       2016       2017       2016  
 
Revenue:
Rental $ 67,339 $ 61,925 $ 201,710 $ 179,738
Related party revenue:
Management fees and interest income from loans 1,278 1,338 4,014 4,108
Other       9         17         29         54  
Total revenue       68,626         63,280         205,753         183,900  
 
Expenses:
Real estate operating expenses 17,898 16,905 52,492 47,126
Real estate taxes and insurance 11,882 10,218 35,880 29,522
Depreciation and amortization 24,988 23,298 75,599 68,095
Selling, general and administrative 3,286 3,419 9,806 10,443
Interest       8,258         6,767         23,730         19,617  
Total expenses       66,312         60,607         197,507         174,803  
 
Income before equity in losses of non-consolidated REITs,

other, gain (loss) on sale of properties and properties held for
sale,

less applicable income tax and taxes

2,314 2,673 8,246 9,097
Equity in losses of non-consolidated REITs (121 ) (196 ) (719 ) (568 )
Other 67 621 218 (388 )
Gain (loss) on sale of properties and properties held for sale,

less applicable income tax

      (257 )       (523 )       (18,460 )       (1,166 )
 
Income (loss) before taxes on income 2,003 2,575 (10,715 ) 6,975
Taxes on income       100         117         297         326  
Net income (loss)     $ 1,903       $ 2,458       $ (11,012 )     $ 6,649  
 
Weighted average number of shares outstanding, basic and diluted       107,231         103,709         107,231         101,370  
 
Net income (loss) per share, basic and diluted     $ 0.02       $ 0.02       $ (0.10 )     $ 0.07  
 
       

Franklin Street Properties Corp. Financial Results

Supplementary Schedule B

Condensed Consolidated Balance Sheets

(Unaudited)

 
 
September 30, December 31,
(in thousands, except share and par value amounts)     2017     2016
Assets:
Real estate assets:
Land $ 191,578 $ 196,178
Buildings and improvements 1,800,831 1,822,183
Fixtures and equipment       5,017         4,136  
1,997,426 2,022,497
Less accumulated depreciation       361,720         337,228  
Real estate assets, net 1,635,706 1,685,269
Acquired real estate leases, less accumulated amortization of
$105,997 and $112,441, respectively
96,282 125,491
Investment in non-consolidated REITs 73,405 75,165
Asset held for sale 31,615 3,871
Cash and cash equivalents 12,647 9,335
Restricted cash 63 31
Tenant rent receivables, less allowance for doubtful accounts of
$125 and $100, respectively
3,990 3,113
Straight-line rent receivable, less allowance for doubtful accounts
of $50 and $50, respectively
52,272 50,930
Prepaid expenses and other assets 6,282 5,231
Related party mortgage loan receivables 71,985 81,780
Other assets: derivative asset 10,771 12,907
Office computers and furniture, net of accumulated depreciation of
$1,390 and $1,277, respectively
319 313
Deferred leasing commissions, net of accumulated amortization of
$20,842 and $18,301, respectively
      36,348         34,697  
Total assets     $ 2,031,685       $ 2,088,133  
 
Liabilities and Stockholders' Equity:
Liabilities:
Bank note payable $ 300,000 $ 280,000
Term loans payable, less unamortized financing costs of $3,817 and
$4,783, respectively
766,183 765,217
Accounts payable and accrued expenses 57,593 57,259
Accrued compensation 3,000 3,784
Tenant security deposits 5,431 5,355
Other liabilities: derivative liabilities 3,721 5,551
Acquired unfavorable real estate leases, less accumulated
amortization of $7,397 and $8,422, respectively
      6,371         8,923  
Total liabilities       1,142,299         1,126,089  
 
Commitments and contingencies
 
Stockholders' Equity:
Preferred stock, $.0001 par value, 20,000,000 shares authorized,
none issued or outstanding
- -
Common stock, $.0001 par value, 180,000,000 shares authorized,
107,231,155 and 107,231,155 shares issued and outstanding,
respectively
11 11
Additional paid-in capital 1,356,457 1,356,457
Accumulated other comprehensive loss 4,954 5,478
Accumulated distributions in excess of accumulated earnings       (472,036 )       (399,902 )
Total stockholders' equity       889,386         962,044  
Total liabilities and stockholders' equity     $ 2,031,685       $ 2,088,133  
 

Franklin Street Properties Corp. Financial Results

Supplementary Schedule C

Condensed Consolidated Statements of Cash Flows

(Unaudited)

    For the
Nine Months Ended
September 30,
(in thousands)     2017     2016
Cash flows from operating activities:    
Net income (loss) $ (11,012 ) $ 6,649
Adjustments to reconcile net income or loss to net cash provided by
operating activities:
Depreciation and amortization expense 77,418 69,750
Amortization of above and below market leases (941 ) (104 )
Equity in losses of non-consolidated REITs 719 568
Hedge ineffectiveness (218 ) 388
(Gain) loss on sale of properties and properties held for sale, less
applicable income tax
18,460 1,166
Increase in allowance for doubtful accounts 25 70
Changes in operating assets and liabilities:
Restricted cash (32 ) (25 )
Tenant rent receivables (902 ) (503 )
Straight-line rents (2,021 ) (2,094 )
Lease acquisition costs (876 ) (679 )
Prepaid expenses and other assets (1,945 ) (1,667 )
Accounts payable, accrued expenses and other items (489 ) 1,478
Accrued compensation (784 ) (488 )
Tenant security deposits 76 (110 )
Payment of deferred leasing commissions       (8,178 )       (9,147 )
Net cash provided by operating activities       69,300         65,252  
Cash flows from investing activities:
Property acquisitions (100,302 )
Acquired real estate leases (18,873 )
Property improvements, fixtures and equipment (41,743 ) (22,020 )
Office computers and furniture (119 ) (77 )
Distributions in excess of earnings from non-consolidated REITs 1,041 691
Repayment of related party mortgage loan receivable 9,795 39,596
Proceeds received on sales of real estate assets       6,160         20,058  
Net cash used in investing activities       (24,866 )       (80,927 )
Cash flows from financing activities:
Distributions to stockholders (61,122 ) (57,108 )
Proceeds from equity offering 83,511
Offering costs (544 )
Borrowings under bank note payable 60,000 155,000
Repayments of bank note payable (40,000 ) (167,000 )
Deferred financing costs               (2,975 )
Net cash provided by (used in) financing activities       (41,122 )       10,884  
Net increase (decrease) in cash and cash equivalents 3,312 (4,791 )
Cash and cash equivalents, beginning of year       9,335         18,163  
Cash and cash equivalents, end of period     $ 12,647       $ 13,372  
 
         

Franklin Street Properties Corp. Earnings Release

Supplementary Schedule D

Real Estate Portfolio Summary Information

(Unaudited & Approximated)

 
 
Commercial portfolio lease expirations (1)
Total % of

Year

Square Feet Portfolio
2017 136,685 1.4 %
2018 1,281,523 12.7 %
2019 1,328,528 13.2 %
2020 788,278 7.8 %
2021 809,404 8.0 %
Thereafter (2) 5,741,471     56.9 %
  10,085,889     100.0 %

(1) Percentages are determined based upon total square footage.
(2)
Includes 1,141,360 square feet of current vacancies.

                   
(dollars & square feet in 000's) As of September 30, 2017
# of % of Square % of
State Properties Investment Portfolio Feet Portfolio
 
Colorado 6 $ 540,665 33.5 % 2,607 25.8 %
Texas 9 351,310 21.7 % 2,417 24.0 %
Georgia 5 324,414 20.1 % 1,967 19.5 %
Minnesota (a) 2 94,562 5.9 % 620 6.2 %
Virginia 4 87,708 5.4 % 685 6.8 %
North Carolina 2 52,507 3.2 % 322 3.2 %
Missouri 2 49,389 3.1 % 352 3.5 %
Maryland (b) 1 0.0 % 325 3.2 %
Illinois 2 45,254 2.8 % 373 3.7 %
Florida 1 39,349 2.4 % 213 2.1 %
Indiana 1       30,731     1.9 % 205     2.0 %
Total 35     $ 1,615,889     100.0 % 10,086     100.0 %

(a) Excludes approximately $19,817, which is our investment in a
property that was redeveloped and is classified as non-operating.
(b)
Excludes the asset held for sale of $31,615, which sold on October 20,
2017.

               

Franklin Street Properties Corp. Earnings Release

Supplementary Schedule E

Portfolio and Other Supplementary Information

(Unaudited & Approximated)

 

Recurring Capital Expenditures

Owned Portfolio

For the For the Nine
(in thousands) Three Months Ended Months Ended
31-Mar-17 30-Jun-17 30-Sep-17 30-Sep-17
Tenant improvements $ 6,474 $ 5,363 $ 4,474 $ 16,311
Deferred leasing costs 1,579 1,963 4,482 8,024
Non-investment capex   1,670   1,685   1,860   5,215
$ 9,723 $ 9,011 $ 10,816 $ 29,550
                           
For the For the Nine
Three Months Ended Months Ended
31-Mar-16 30-Jun-16 30-Sep-16 30-Sep-16
Tenant improvements $ 1,929 $ 1,329 $ 3,325 $ 6,583
Deferred leasing costs 1,613 4,966 2,247 8,826
Non-investment capex   438   1,052   2,211   3,701
$ 3,980 $ 7,347 $ 7,783 $ 19,110
       
Square foot & leased percentages September 30, December 31,
2017 2016
Owned portfolio of commercial real estate
Number of properties (a) 35 36
Square feet 10,085,889 10,163,615
Leased percentage 88.7 % 89.3 %
 
Investments in non-consolidated REITs
Number of properties 2 2
Square feet 1,396,071 1,396,071
Leased percentage 79.2 % 78.1 %
 
Single Asset REITs (SARs) managed
Number of properties 4 5
Square feet 810,278 1,075,135
Leased percentage 89.9 % 89.6 %
 
Total owned, investments & managed properties
Number of properties 41 43
Square feet 12,292,238 12,634,821
Leased percentage 87.7 % 88.1 %

(a) Excludes one property that was redeveloped and is classified as
non-operating.

 

The following table shows property information for our investments in
non-consolidated REITs:

                   
Square % Leased % Interest
Single Asset REIT name City State Feet 30-Sep-17 Held
FSP 303 East Wacker Drive Corp. Chicago IL 861,000 77.7 % 43.7 %
FSP Grand Boulevard Corp. Kansas City MO 535,071 81.6 % 27.0 %
1,396,071 79.2 %
                           

Franklin Street Properties Corp. Earnings Release

Supplementary Schedule F

Percentage of Leased Space

(Unaudited & Estimated)

 
Second Third
% Leased (1) Quarter % Leased (1) Quarter
as of Average % as of Average %
Property Name Location Square Feet 30-Jun-17 Leased (2) 30-Sep-17 Leased (2)
 
1 FOREST PARK Charlotte, NC 62,212 100.0 % 100.0 % 100.0 % 100.0 %
2 MEADOW POINT Chantilly, VA 138,537 100.0 % 100.0 % 100.0 % 100.0 %
3 TIMBERLAKE Chesterfield, MO 234,496 100.0 % 100.0 % 100.0 % 100.0 %
4 TIMBERLAKE EAST Chesterfield, MO 117,036 100.0 % 100.0 % 100.0 % 100.0 %
5 NORTHWEST POINT Elk Grove Village, IL 177,095 100.0 % 100.0 % 100.0 % 100.0 %
6 PARK TEN Houston, TX 157,460 70.5 % 67.1 % 70.5 % 70.5 %
7 PARK TEN PHASE II Houston, TX 156,746 1.4 % 32.1 % 1.4 % 1.4 %
8 GREENWOOD PLAZA Englewood, CO 196,236 100.0 % 100.0 % 100.0 % 100.0 %
9 ADDISON Addison, TX 288,794 86.6 % 86.6 % 97.3 % 90.2 %
10 COLLINS CROSSING Richardson, TX 300,887 100.0 % 100.0 % 100.0 % 100.0 %
11 INNSBROOK Glen Allen, VA 298,456 100.0 % 100.0 % 100.0 % 100.0 %
12 RIVER CROSSING Indianapolis, IN 205,059 98.6 % 98.6 % 98.6 % 98.6 %
13 LIBERTY PLAZA Addison, TX 218,934 91.2 % 88.2 % 91.2 % 91.2 %
14 380 INTERLOCKEN Broomfield, CO 240,358 86.2 % 86.2 % 85.9 % 86.1 %
15 390 INTERLOCKEN Broomfield, CO 241,751 98.9 % 98.9 % 98.9 % 98.9 %
16 BLUE LAGOON Miami, FL 212,619 100.0 % 100.0 % 100.0 % 100.0 %
17 ELDRIDGE GREEN Houston, TX 248,399 100.0 % 100.0 % 100.0 % 100.0 %
18 ONE OVERTON PARK Atlanta, GA 387,267 63.7 % 73.7 % 63.4 % 63.1 %
19 EAST BALTIMORE Baltimore, MD 325,445 75.9 % 75.9 % 75.5 % 75.5 %
20 LOUDOUN TECH Dulles, VA 136,658 95.7 % 94.5 % 95.7 % 95.7 %
21 4807 STONECROFT Chantilly, VA 111,469 100.0 % 100.0 % 100.0 % 100.0 %
22 121 SOUTH EIGHTH ST Minneapolis, MN 293,422 77.3 % 78.4 % 81.7 % 78.9 %
23 EMPEROR BOULEVARD Durham, NC 259,531 100.0 % 100.0 % 100.0 % 100.0 %
24 LEGACY TENNYSON CTR Plano, TX 202,600 65.6 % 65.6 % 65.6 % 65.6 %
25 ONE LEGACY Plano, TX 214,110 100.0 % 100.0 % 100.0 % 100.0 %
26 909 DAVIS Evanston, IL 196,581 78.5 % 78.2 % 78.2 % 78.4 %
27 ONE RAVINIA DRIVE Atlanta, GA 386,603 90.0 % 89.3 % 90.0 % 90.0 %
28 TWO RAVINIA Atlanta, GA 411,047 84.0 % 79.3 % 77.3 % 76.9 %
29 WESTCHASE I & II Houston, TX 629,025 82.5 % 83.8 % 87.3 % 86.6 %
30 1999 BROADWAY Denver, CO 676,379 76.7 % 76.4 % 80.4 % 78.0 %
31 999 PEACHTREE Atlanta, GA 621,946 99.5 % 98.9 % 99.1 % 99.4 %
32 1001 17th STREET Denver, CO 655,413 91.3 % 90.9 % 91.3 % 91.3 %
33 PLAZA SEVEN Minneapolis, MN 326,445 96.5 % 96.4 % 96.8 % 96.3 %
34 PERSHING PLAZA Atlanta, GA 160,145 97.4 % 97.4 % 97.4 % 97.4 %
35 600 17th STREET Denver, CO 596,728     91.2 %     90.4 %     90.1 %     89.4 %
TOTAL WEIGHTED AVERAGE 10,085,889     88.1 %     88.5 %     88.7 %     88.1 %
       

(1) % Leased as of month's end includes all leases that expire on the
last day of the quarter.
(2) Average quarterly percentage is the
average of the end of the month leased percentage for each of the 3
months during the quarter.

         

Franklin Street Properties Corp. Earnings Release

Supplementary Schedule G

Largest 20 Tenants – FSP Owned Portfolio

(Unaudited & Estimated)

 

The following table includes the largest 20 tenants in FSP's owned
portfolio based on total square feet:

 

As of September 30, 2017

% of
Tenant Sq Ft Portfolio
1 Quintiles IMS Healthcare Incorporated 259,531 2.6 %
2 US Government 255,610 2.5 %
3 CITGO Petroleum Corporation 248,399 2.5 %
4 Newfield Exploration Company 234,495 2.3 %
5 Eversheds Sutherland (US) LLP 222,422 2.2 %
6 Centene Management Company, LLC 216,879 2.2 %
7 Burger King Corporation 212,619 2.1 %
8 EOG Resources, Inc. 174,215 1.7 %
9 SunTrust Bank 159,671 1.6 %
10 T-Mobile South, LLC dba T-Mobile 151,792 1.5 %
11 Citicorp Credit Services, Inc. 146,260 1.5 %
12 Petrobras America, Inc. 144,813 1.4 %
13 Jones Day 140,342 1.4 %
14 Argo Data Resource Corporation 140,246 1.4 %
15 Vail Corp d/b/a Vail Resorts 132,229 1.3 %
16 Federal National Mortgage Association 123,144 1.2 %
17 Kaiser Foundation Health Plan 120,979 1.2 %
18 Randstad US 114,235 1.1 %
19 Giesecke & Devrient America 112,110 1.1 %
20 Northrup Grumman Systems Corp. 111,469     1.1 %
Total 3,421,460     33.9 %
 

Franklin Street Properties Corp. Earnings Release
Supplementary
Schedule H
Reconciliation and Definitions of Funds From Operations
("FFO") and
Adjusted Funds From Operations ("AFFO")

A reconciliation of Net income (loss) to FFO and AFFO is shown below and
a definition of FFO and AFFO is provided on Supplementary Schedule I.
Management believes FFO and AFFO are used broadly throughout the real
estate investment trust (REIT) industry as measurements of performance.
The Company has included the National Association of Real Estate
Investment Trusts (NAREIT) FFO definition as of May 17, 2016 in the
table and notes that other REITs may not define FFO in accordance with
the current NAREIT definition or may interpret the current NAREIT
definition differently. The Company's computation of FFO and AFFO may
not be comparable to FFO or AFFO reported by other REITs or real estate
companies that define FFO or AFFO differently.

               
Reconciliation of Net Income (Loss) to FFO and AFFO: Three Months Ended Nine Months Ended
September 30, September 30,
(In thousands, except per share amounts) 2017 2016 2017 2016
 
Net income (loss) $ 1,903 $ 2,458 $ (11,012 ) $ 6,649
(Gain) loss on sale of properties and properties held for sale, less
applicable income tax
257 523 18,460 1,166
GAAP loss from non-consolidated REITs 121 196 719 568
FFO from non-consolidated REITs 874 787 2,465 2,327
Depreciation & amortization   24,903     23,112     74,658     67,991  
NAREIT FFO 28,058 27,076 85,290 78,701
Hedge ineffectiveness (67 ) (621 ) (218 ) 388
Acquisition costs of new properties       215     18     349  
Funds From Operations (FFO) $ 27,991   $ 26,670   $ 85,090   $ 79,438  
 
Funds From Operations (FFO) $ 27,991 $ 26,670 $ 85,090 $ 79,438
Reverse FFO from non-consolidated REITs (874 ) (787 ) (2,465 ) (2,327 )
Distributions from non-consolidated REITs 350 332 1,041 691
Amortization of deferred financing costs 606 622 1,818 1,656
Straight-line rent (147 ) (119 ) (2,021 ) (2,094 )
Tenant improvements (4,474 ) (3,325 ) (16,311 ) (6,583 )
Leasing commissions (4,482 ) (2,247 ) (8,024 ) (8,826 )
Non-investment capex   (1,860 )   (2,211 )   (5,215 )   (3,701 )
Adjusted Funds From Operations (AFFO) $ 17,110   $ 18,935   $ 53,913   $ 58,254  
 
Per Share Data
EPS $ 0.02 $ 0.02 $ (0.10 ) $ 0.07
FFO $ 0.26 $ 0.26 $ 0.79 $ 0.78
AFFO $ 0.16 $ 0.18 $ 0.50 $ 0.57
 
Weighted average shares (basic and diluted) 107,231   103,709   107,231   101,370  

Funds From Operations ("FFO")

The Company evaluates performance based on Funds From Operations, which
we refer to as FFO, as management believes that FFO represents the most
accurate measure of activity and is the basis for distributions paid to
equity holders. The Company defines FFO as net income or loss (computed
in accordance with GAAP), excluding gains (or losses) from sales of
property, hedge ineffectiveness 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 or loss
(determined in accordance with GAAP), nor as an indicator of the
Company's financial performance, nor as an alternative to cash flows
from operating activities (determined in accordance with GAAP), nor as a
measure of the Company's liquidity, nor is it necessarily indicative of
sufficient cash flow to fund all of the Company's needs.

Other real estate companies and NAREIT may define this term in a
different manner. We have included the NAREIT FFO as of May 17, 2016 in
the table and note that other REITs may not define FFO in accordance
with the current NAREIT definition or may interpret the current NAREIT
definition differently than we do.

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

Adjusted Funds From Operations ("AFFO")

The Company also evaluates performance based on Adjusted Funds From
Operations, which we refer to as AFFO. The Company defines AFFO as (1)
FFO, (2) excluding 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 and (5)
less recurring capital expenditures that are generally for maintenance
of properties, which we call non-investment capex or are second
generation capital expenditures. Second generation costs include
re-tenanting space after a tenant vacates, which include tenant
improvements and leasing commissions.

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

AFFO should not be considered as an alternative to net income or loss
(determined in accordance with GAAP), nor as an indicator of the
Company's financial performance, nor as an alternative to cash flows
from operating activities (determined in accordance with GAAP), nor as a
measure of the Company's liquidity, nor is it necessarily indicative of
sufficient cash flow to fund all of the Company's needs. Other real
estate companies may define this term in a different manner. We believe
that in order to facilitate a clear understanding of the results of the
Company, AFFO should be examined in connection with net income or loss
and cash flows from operating, investing and financing activities in the
consolidated financial statements.

Franklin Street Properties Corp. Earnings Release
Supplementary
Schedule I
Reconciliation and Definition of Sequential Same Store
results to property Net Operating Income (NOI) and Net Income (Loss)

Net Operating Income ("NOI")

The Company provides property performance based on Net Operating Income,
which we refer to as NOI. Management believes that investors are
interested in this information. NOI is a non-GAAP financial measure that
the Company defines as net income or loss (the most directly comparable
GAAP financial measure) plus 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, hedge ineffectiveness,
gains or losses on the sale of assets and excludes non-property specific
income and expenses. The information presented includes footnotes and
the data is shown by region with properties owned in the periods
presented, which we call Sequential Same Store. The comparative
Sequential Same Store results include properties held for the periods
presented and exclude properties that are non-operating, being developed
or redeveloped, dispositions and significant nonrecurring income such as
bankruptcy settlements and lease termination fees. NOI, as defined by
the Company, may not be comparable to NOI reported by other REITs that
define NOI differently. NOI should not be considered an alternative to
net income or loss as an indication of our performance or to cash flows
as a measure of the Company's liquidity or its ability to make
distributions. The calculations of NOI and Sequential Same Store are
shown in the following table:

                   
Rentable
Square Feet Three Months Ended Three Months Ended Inc %
(in thousands) or RSF 30-Sep-17 30-Jun-17     (Dec) Change
Region
East 1,007 $ 3,926 $ 3,941 $ (15) (0.4) %
MidWest 1,550 4,476 3,908 568 14.5 %
South 4,597 16,531 16,463 68 0.4 %
West 2,607   11,337   12,045       (708) (5.9) %
Same Store 9,761 36,270 36,357 (87) (0.2) %
 
Acquisitions           %
NOI* from the continuing portfolio 9,761 36,270 36,357 (87) (0.2) %
Dispositions, Non-Operating, Development or Redevelopment 325   568   467       101 0.3 %
NOI* 10,086 $ 36,838 $ 36,824     $ 14 0.0 %
 
Sequential Same Store $ 36,270 $ 36,357 $ (87) (0.2) %
 
Less Nonrecurring
Items in NOI* (a)   1,103   1,178       (75) 0.2 %
 
Comparative
Sequential Same Store $ 35,167 $ 35,179     $ (12) (0.0) %
 

 

Three Months Ended Three Months Ended
Reconciliation to Net income       30-Sep-17 30-Jun-17
Net income (loss) $ 1,903 $ (17,395)
Add (deduct):
(Gain) loss on sale of properties and property held for sale, less
applicable income taxes
257 20,492
Hedge ineffectiveness (67) (129)
Management fee income (791) (768)
Depreciation and amortization 24,988 25,279
Amortization of above/below market leases (86) (687)
Selling, general and administrative 3,286 3,077
Interest expense 8,258 7,893
Interest income (1,134) (1,206)
Equity in losses of non-consolidated REITs 121 201
Non-property specific items, net   103   67
 
 
NOI* $ 36,838 $ 36,824

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

*Excludes NOI from investments in and interest income from secured loans
to non-consolidated REITs.

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