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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Franklin Street Properties Corp | AMEX:FSP | AMEX | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
-0.01 | -0.52% | 1.91 | 1.95 | 1.91 | 1.93 | 439,969 | 23:30:01 |
Franklin Street Properties Corp. (the “Company”, “FSP”, “we” or “our”) (NYSE American: FSP), a real estate investment trust (REIT), announced its results for the third quarter ended September 30, 2019.
George J. Carter, Chairman and Chief Executive Officer, commented as follows:
“Leasing activity during the third quarter of 2019 continued at a strong pace within our property portfolio of 32 operating and three redevelopment properties. We believe that we are adding value to our portfolio as we continue to work through a large, approximately three-year lease roll bulge, that began in 2018 and continues through 2020. Much of our recent leasing activity has been focused on renewing or backfilling existing tenant lease rollover space, but net new absorption is beginning to take place as well. We also continue to see generally rising rents and longer lease terms at our properties as we work through this period. Prospective new tenant activity at our three redevelopment properties located in Miami, Minneapolis and Charlotte continued to be solid during the quarter and we expect to make more progress with these assets during the remainder of 2019 and into 2020. With over $600 million of available liquidity as of September 30, 2019, we are confident that we have the financial resources needed for flexibility on our balance sheet and to maximize our leasing and redevelopment value-add opportunities.”
Highlights
Leasing Update
Dividend Update
On October 11, 2019, the Company announced that its Board of Directors declared a regular quarterly cash dividend for the three months ended September 30, 2019 of $0.09 per share of common stock that will be paid on November 14, 2019 to stockholders of record on October 25, 2019.
Non-GAAP Financial Information
A reconciliation of Net income 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 and managed real estate portfolio as of September 30, 2019. 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.
Net Income and FFO Guidance
We are raising our full year net income guidance for 2019, which is estimated to be in the range of approximately $0.03 to $0.05 per basic and diluted share, and are introducing net income guidance for the fourth quarter of 2019, which is estimated to be in the range of approximately $0.00 to $0.02 per basic and diluted share. We are raising our full year FFO guidance for 2019, which is estimated to be in the range of approximately $0.87 to $0.89 per basic and diluted share, and are introducing FFO guidance for the fourth quarter of 2019, which is estimated to be in the range of approximately $0.21 to $0.23 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 per share to the guidance for FFO per share is provided as follows:
Q4 2019 Range
Full Year 2019 Range
Low
High
Low
High
Net income per share
$
0.00
$
0.02
$
0.03
$
0.05
Depreciation & Amortization
0.21
0.21
0.84
0.84
Funds From Operations per share
$
0.21
$
0.23
$
0.87
$
0.89
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 October 30, 2019 at 11:00 a.m. (ET) to discuss the third quarter 2019 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 infill and central business district (CBD) office properties in the U.S. Sunbelt and Mountain West, as well as select opportunistic markets. 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 in future periods, expectations for lease termination fees in future periods, expectations for operating performance, value creation/enhancement in future periods, expectations for growth and leasing activities in future periods, expectations regarding the timing, leasing and economic results of our redevelopment properties 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, including the level of interest rates, 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, 2018, 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 Three Months Ended September 30,
For the Nine Months Ended September 30,
(in thousands, except per share amounts)
2019
2018
2019
2018
Revenue:
Rental
$
68,108
$
67,436
$
196,952
$
198,473
Related party revenue:
Management fees and interest income from loans
426
1,261
3,100
3,793
Other
5
8
16
26
Total revenue
68,539
68,705
200,068
202,292
Expenses:
Real estate operating expenses
18,041
17,946
52,883
52,051
Real estate taxes and insurance
12,505
11,651
37,408
35,120
Depreciation and amortization
22,559
23,277
67,913
70,903
General and administrative
3,886
3,394
11,097
9,908
Interest
9,036
9,935
27,775
29,174
Total expenses
66,027
66,203
197,076
197,156
Income before taxes on income and equity in
income of non-consolidated REITs
2,512
2,502
2,992
5,136
Tax expense on income
113
74
165
231
Equity in income of non-consolidated REITs
—
7,180
—
6,793
Net income
$
2,399
$
9,608
$
2,827
$
11,698
Weighted average number of shares outstanding, basic and diluted
107,231
107,231
107,231
107,231
Net income per share, basic and diluted
$
0.02
$
0.09
$
0.03
$
0.11
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)
2019
2018
Assets:
Real estate assets:
Land
$
191,578
$
191,578
Buildings and improvements
1,900,131
1,857,935
Fixtures and equipment
11,099
8,839
2,102,808
2,058,352
Less accumulated depreciation
476,298
432,579
Real estate assets, net
1,626,510
1,625,773
Acquired real estate leases, less accumulated amortization of $68,542 and $101,897, respectively
45,066
59,595
Cash, cash equivalents and restricted cash
20,159
11,177
Tenant rent receivables
4,410
3,938
Straight-line rent receivable
64,111
54,006
Prepaid expenses and other assets
8,868
10,400
Related party mortgage loan receivables
21,265
70,660
Other assets: derivative asset
2,844
14,765
Office computers and furniture, net of accumulated depreciation of $1,355 and $1,512, respectively
136
197
Deferred leasing commissions, net of accumulated amortization of $27,433 and $24,318, respectively
49,781
47,591
Total assets
$
1,843,150
$
1,898,102
Liabilities and Stockholders’ Equity:
Liabilities:
Bank note payable
$
—
$
25,000
Term loans payable, less unamortized financing costs of $4,631 and $5,722, respectively
765,369
764,278
Series A & Series B Senior Notes, less unamortized financing costs of $1,026 and $1,150, respectively
198,974
198,850
Accounts payable and accrued expenses
61,657
59,183
Accrued compensation
3,769
3,043
Tenant security deposits
9,008
6,319
Lease liability
1,976
—
Other liabilities: derivative liabilities
9,934
—
Acquired unfavorable real estate leases, less accumulated amortization of $4,907 and $6,605, respectively
2,810
3,795
Total liabilities
1,053,497
1,060,468
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 income (loss)
(7,090)
14,765
Accumulated distributions in excess of accumulated earnings
(559,725)
(533,599)
Total stockholders’ equity
789,653
837,634
Total liabilities and stockholders’ equity
$
1,843,150
$
1,898,102
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)
2019
2018
Cash flows from operating activities:
Net income
$
2,827
$
11,698
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense
70,072
73,127
Amortization of above and below market leases
(305)
(405)
Equity in loss of non-consolidated REITs
—
(6,793)
Decrease in allowance for doubtful accounts and write-off of accounts receivable
(69)
(25)
Changes in operating assets and liabilities:
Tenant rent receivables
(403)
(58)
Straight-line rents
(6,950)
821
Lease acquisition costs
(3,155)
(683)
Prepaid expenses and other assets
1,261
(487)
Accounts payable and accrued expenses
2,849
(2,665)
Accrued compensation
726
(797)
Tenant security deposits
2,689
236
Payment of deferred leasing commissions
(9,485)
(11,051)
Net cash provided by operating activities
60,057
62,918
Cash flows from investing activities:
Property improvements, fixtures and equipment
(47,905)
(35,901)
Investment in non-consolidated REITs
—
74,931
Distributions in excess of earnings from non-consolidated REITs
—
710
Repayment of related party mortgage loan receivable
(2,400)
—
Investment in related party mortgage loan receivable
51,795
795
Proceeds received from liquidating trust
1,470
—
Net cash provided by investing activities
2,960
40,535
Cash flows from financing activities:
Distributions to stockholders
(28,953)
(39,676)
Borrowings under bank note payable
45,000
30,000
Repayments of bank note payable
(70,000)
(91,000)
Deferred financing costs
(82)
(2,162)
Net cash used in financing activities
(54,035)
(102,838)
Net increase in cash, cash equivalents and restricted cash
8,982
615
Cash, cash equivalents and restricted cash, beginning of year
11,177
9,819
Cash, cash equivalents and restricted cash, end of period
$
20,159
$
10,434
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
2019
314,602
3.2%
2020
960,806
9.7%
2021
672,530
6.8%
2022
1,228,668
12.4%
2023
651,756
6.6%
Thereafter (2)
6,080,817
61.3%
9,909,179
100.0%
(1)
Percentages are determined based upon total square footage.
(2)
Includes 975,128 square feet of vacancies at our operating properties and 201,388 square feet of vacancies at our redevelopment properties as of September 30, 2019. We define redevelopment properties as properties being developed, redeveloped or where development/redevelopment is complete but that are not yet stabilized.
(dollars & square feet in 000's)
As of September 30, 2019 (a)
# of
% of
Square
% of
State
Properties
Investment
Portfolio
Feet
Portfolio
Colorado
6
$
547,250
33.6%
2,620
26.4%
Texas
9
343,531
21.1%
2,420
24.4%
Georgia
5
319,850
19.7%
1,967
19.9%
Minnesota
3
119,702
7.4%
754
7.6%
Virginia
4
80,437
4.9%
685
6.9%
North Carolina
2
50,947
3.1%
322
3.2%
Missouri
2
45,794
2.8%
351
3.5%
Illinois
2
47,971
3.0%
372
3.8%
Florida
1
42,131
2.6%
213
2.2%
Indiana
1
28,897
1.8%
205
2.1%
Total
35
$
1,626,510
100.0%
9,909
100.0%
(a)
Includes investment in our redevelopment properties. We define redevelopment properties as properties being developed, redeveloped or where complete, but that are not yet stabilized.
Franklin Street Properties Corp. Earnings Release Supplementary Schedule E Portfolio and Other Supplementary Information (Unaudited & Approximated)
Recurring Capital Expenditures
Nine Months
(in thousands)
For the Three Months Ended
Ended
31-Mar-19
30-Jun-19
30-Sep-19
30-Sep-19
Tenant improvements
$
8,318
$
10,169
$
7,890
$
26,377
Deferred leasing costs
4,239
3,666
1,286
9,191
Non-investment capex
2,413
4,049
3,968
10,430
$
14,970
$
17,884
$
13,144
$
45,998
Nine Months
For the Three Months Ended
Ended
31-Mar-18
30-Jun-18
30-Sep-18
30-Sep-18
Tenant improvements
$
6,777
$
8,212
$
7,084
$
22,073
Deferred leasing costs
1,021
5,314
4,394
10,729
Non-investment capex
1,858
2,558
2,328
6,744
$
9,656
$
16,084
$
13,806
$
39,546
Square foot & leased percentages
September 30,
December 31,
2019
2018
Operating Properties (a):
Number of properties
32
32
Square feet
9,503,964
9,486,650
Leased percentage
89.7%
89.0%
Redevelopment Properties:
Number of properties
3
3
Square feet
405,215
404,652
Leased percentage
50.3%
27.2%
Managed Properties - Single Asset REITs (SARs):
Number of properties
2
3
Square feet
348,545
674,342
Total Operating, Redevelopment and Managed Properties:
Number of properties
37
38
Square feet
10,257,724
10,565,644
(a)
Excludes investment in our redevelopment properties. We define redevelopment properties as properties being developed, redeveloped or where development/redevelopment is complete but that are not yet stabilized.
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-19
Leased (2)
30-Sep-19
Leased (2)
1
MEADOW POINT
Chantilly, VA
138,537
100.0%
100.0%
100.0%
100.0%
2
TIMBERLAKE
Chesterfield, MO
234,496
95.7%
97.1%
95.7%
95.7%
3
TIMBERLAKE EAST
Chesterfield, MO
117,036
100.0%
100.0%
100.0%
100.0%
4
NORTHWEST POINT
Elk Grove Village, IL
177,095
100.0%
100.0%
100.0%
100.0%
5
PARK TEN
Houston, TX
157,460
96.4%
96.4%
96.4%
96.4%
6
PARK TEN PHASE II
Houston, TX
156,746
66.9%
66.4%
88.8%
87.3%
7
GREENWOOD PLAZA
Englewood, CO
196,236
100.0%
100.0%
100.0%
100.0%
8
ADDISON
Addison, TX
289,302
82.4%
82.4%
82.4%
82.4%
9
COLLINS CROSSING
Richardson, TX
300,887
99.4%
99.4%
99.4%
99.4%
10
INNSBROOK
Glen Allen, VA
298,183
57.3%
57.3%
57.2%
57.3%
11
RIVER CROSSING
Indianapolis, IN
205,059
95.0%
95.0%
95.0%
95.0%
12
LIBERTY PLAZA
Addison, TX
216,834
71.5%
69.1%
73.4%
72.1%
13
380 INTERLOCKEN
Broomfield, CO
240,359
97.1%
97.1%
97.1%
97.1%
14
390 INTERLOCKEN
Broomfield, CO
241,512
98.2%
98.2%
98.2%
98.2%
15
ELDRIDGE GREEN
Houston, TX
248,399
100.0%
100.0%
100.0%
100.0%
16
ONE OVERTON PARK
Atlanta, GA
387,267
80.6%
80.3%
81.2%
81.1%
17
LOUDOUN TECH
Dulles, VA
136,658
98.9%
98.9%
98.9%
98.9%
18
4807 STONECROFT
Chantilly, VA
111,469
100.0%
100.0%
100.0%
100.0%
19
121 SOUTH EIGHTH ST
Minneapolis, MN
297,209
86.9%
82.9%
90.1%
88.7%
20
EMPEROR BOULEVARD
Durham, NC
259,531
100.0%
100.0%
100.0%
100.0%
21
LEGACY TENNYSON CTR
Plano, TX
207,049
91.6%
91.6%
91.8%
91.8%
22
ONE LEGACY
Plano, TX
214,110
100.0%
100.0%
100.0%
100.0%
23
909 DAVIS
Evanston, IL
195,098
93.3%
91.9%
93.3%
93.3%
24
ONE RAVINIA DRIVE
Atlanta, GA
386,602
85.7%
87.0%
86.8%
86.5%
25
TWO RAVINIA
Atlanta, GA
411,047
69.3%
72.8%
68.2%
68.2%
26
WESTCHASE I & II
Houston, TX
629,025
77.3%
79.2%
77.3%
77.3%
27
1999 BROADWAY
Denver, CO
677,378
78.7%
78.3%
87.1%
85.6%
28
999 PEACHTREE
Atlanta, GA
621,946
90.9%
90.8%
95.8%
94.2%
29
1001 17th STREET
Denver, CO
655,420
98.5%
98.5%
98.5%
98.5%
30
PLAZA SEVEN
Minneapolis, MN
326,757
88.6%
87.8%
88.6%
88.6%
31
PERSHING PLAZA
Atlanta, GA
160,145
97.4%
97.4%
98.9%
97.9%
32
600 17th STREET
Denver, CO
609,112
86.9%
86.7%
89.8%
88.5%
OPERATING TOTAL
9,503,964
88.1%
88.1%
89.7%
89.3%
33
FOREST PARK
Charlotte, NC
62,212
0.0%
0.0%
0.0%
0.0%
34
BLUE LAGOON
Miami, FL
213,182
0.0%
0.0%
73.1%
24.4%
35
801 MARQUETTE AVE
Minneapolis, MN
129,821
37.0%
37.0%
37.0%
37.0%
REDEVELOPMENT TOTAL
405,215
11.9%
11.9%
50.3%
24.7%
OWNED PORTFOLIO TOTAL
9,909,179
(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, 2019
% of
Tenant
Sq Ft
Portfolio
1
IQVIA Holdings Inc.
259,531
2.6%
2
US Government
259,141
2.6%
3
CITGO Petroleum Corporation
248,399
2.5%
4
Newfield Exploration Company
234,495
2.4%
5
Centene Management Company, LLC
216,879
2.2%
6
Eversheds Sutherland (US) LLP
179,868
1.8%
7
EOG Resources, Inc.
169,167
1.7%
8
The Vail Corporation
164,636
1.7%
9
Lennar Homes, LLC
155,808
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
1.5%
13
Jones Day
140,342
1.4%
14
Argo Data Resource Corporation
140,246
1.4%
15
Worldventures Holdings, LLC
129,998
1.3%
16
Kaiser Foundation Health Plan
120,979
1.2%
17
VMWare, Inc.
119,558
1.2%
18
Giesecke & Devrient America
112,110
1.1%
19
Northrop Grumman Systems Corp.
111,469
1.1%
20
Randstad General Partner (US)
109,638
1.1%
Total
3,315,129
33.4%
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 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 to FFO and AFFO:
Three Months Ended
Nine Months Ended
September 30,
September 30,
(In thousands, except per share amounts)
2019
2018
2019
2018
Net income
$
2,399
$
9,608
$
2,827
$
11,698
Equity in loss from non-consolidated REITs
—
(7,180)
—
(6,793)
FFO from non-consolidated REITs
—
649
—
2,511
Depreciation & amortization
22,448
23,081
67,609
70,499
NAREIT FFO
24,847
26,158
70,436
77,915
Lease Acquisition costs
61
—
351
—
Funds From Operations (FFO)
$
24,908
$
26,158
$
70,787
$
77,915
Funds From Operations (FFO)
$
24,908
$
26,158
$
70,787
$
77,915
Reverse FFO from non-consolidated REITs
—
(649)
—
(2,511)
Distributions from non-consolidated REITs
—
—
—
710
Amortization of deferred financing costs
720
799
2,157
2,223
Straight-line rent
(2,120)
522
(6,949)
821
Tenant improvements
(7,890)
(7,084)
(26,377)
(22,073)
Leasing commissions
(1,286)
(4,394)
(9,191)
(10,729)
Non-investment capex
(3,968)
(2,328)
(10,430)
(6,744)
Adjusted Funds From Operations (AFFO)
$
10,364
$
13,024
$
19,997
$
39,612
Per Share Data
EPS
$
0.02
$
0.09
$
0.03
$
0.11
FFO
$
0.23
$
0.24
$
0.66
$
0.73
AFFO
$
0.10
$
0.12
$
0.19
$
0.37
Weighted average shares (basic and diluted)
107,231
107,231
107,231
107,231
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, acquisition costs of newly acquired properties that are not capitalized and lease acquisition costs 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 the National Association of Real Estate Investment Trusts, or 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 the amortization of 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
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 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 redevelopment properties, which include properties being developed, redeveloped or where redevelopment is complete but are in lease-up and are not stabilized, 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-19
30-Jun-19
(Dec)
Change
Region
East
944
$
3,001
$
3,301
$
(300)
(9.1)
%
MidWest
1,553
5,297
5,174
123
2.4
%
South
4,387
17,456
15,196
2,260
14.9
%
West
2,620
11,134
11,240
(106)
(0.9)
%
Property NOI* from Operating Properties
9,504
36,888
34,911
1,977
5.7
%
Dispositions and Redevelopment Properties
405
(21)
(215)
194
0.6
%
NOI*
9,909
$
36,867
$
34,696
$
2,171
6.3
%
Sequential Same Store
$
36,888
$
34,911
$
1,977
5.7
%
Less Nonrecurring
Items in NOI* (a)
3,434
706
2,728
(7.9)
%
Comparative
Sequential Same Store
$
33,454
$
34,205
$
(751)
(2.2)
%
Three Months Ended
Three Months Ended
Reconciliation to Net income
30-Sep-19
30-Jun-19
Net income
$
2,399
$
1,633
Add (deduct):
Management fee income
(634)
(645)
Depreciation and amortization
22,559
22,109
Amortization of above/below market leases
(112)
(81)
General and administrative
3,886
3,703
Interest expense
9,036
9,371
Interest income
(395)
(1,259)
Non-property specific items, net
128
(135)
NOI*
$
36,867
$
34,696
(1)
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.
View source version on businesswire.com: https://www.businesswire.com/news/home/20191029006087/en/
For Franklin Street Properties Corp. Georgia Touma, 877-686-9496
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