Published:
Franklin Street Properties Corp. Announces First Quarter Results
Franklin Street Properties Corp. ("Franklin
Street Properties," the "Company" or "FSP") (AMEX: FSP) announced today net
income and Earnings Per Share (EPS) for the first quarter ended March 31,
2006. The Company also announced Adjusted Funds From Operations (AFFO) for
first quarter ended March 31, 2006, and an update on the recently completed
acquisition of five properties.
The Company evaluates its performance based on net income, EPS and AFFO,
and believes each is an important measure. The Company considers these
measurements in determining distributions paid to equity holders. A
reconciliation of net income to AFFO (a "Non-GAAP financial measure") is
provided on page 2 of this press release.
-- EPS for the three months ended March 31, 2006 increased $0.01 per
share to $0.22 per share compared to the three months ended March 31, 2005.
Net income was $13.1 million or $0.22 per share (based on 59.8 million
shares), compared to $10.4 million or $0.21 per share (based on 49.6
million shares) in 2005.
-- AFFO for the three months ended March 31, 2006 increased $0.06 per
share to $0.34 per share compared to the three months ended March 31, 2005.
AFFO was $20.3 million or $0.34 per share (based on 59.8 million shares),
compared to $13.7 million or $0.28 per share (based on 49.6 million shares)
in 2005.
The following significant factors affected net income, EPS and AFFO for the
three months ended March 31, 2006 compared to results for the same period
in 2005:
-- Increased net operating income from the real estate portfolio included:
-- The benefits of four properties that were acquired through merger in
April 2005, which we did not have in 2005 and were accretive to our
per share calculations.
-- The benefits of three Class A suburban office properties acquired in
2005 and 2006, including one property located in Colorado acquired in
February 2005, another in Indiana that was acquired in July 2005, and
one in Texas that was acquired in February 2006.
-- A $4.6 million termination payment from a tenant at our property in
Illinois. The property has subsequently been 100% leased to a new
tenant.
-- Interest income increased $358,000 to $588,000 in the first quarter of
2006 compared to 2005 as a result of higher bank balances during the
quarter and rising interest rates.
-- These increases were partially offset by lower investment banking
results for the first quarter of 2006 compared to 2005. Gross proceeds
on the sale of securities, which our investment banking revenues are
based upon, for the first quarter of 2006 were $29.2 million compared to
$37.0 million in the first quarter of 2005.
-- Interest income from loans to properties in syndication was also lower
in 2006, as a property was purchased for syndication toward the end
of the first quarter of 2006, while last year there was a property loan
outstanding for the entire quarter.
-- There was a net increase of 10.2 million weighted average shares of FSP
common stock ("Shares") for the quarter ended March 31, 2006 compared to
2005, as a result of the merger completed in May 2005, which added 10.9
million Shares, less the repurchase of 0.7 million Shares in the fourth
quarter of 2005. EPS and AFFO calculations were affected by this
increase.
A reconciliation of net income to AFFO is shown below and a definition of
AFFO is on Supplemental Schedule F. We believe AFFO is used broadly
throughout the REIT industry and is generally calculated in a similar
manner to our calculation.
Three Months Ended
March 31,
----------------------
(In thousands except per share amounts) 2006 2005
--------- ---------
Net income $ 13,139 $ 10,423
GAAP income from non-consolidated REITs (275) (665)
Distributions from non-consolidated REITs 118 599
Depreciation of real estate & intangible
amortization 7,133 3,632
Straight-line rent 200 (307)
Capital expenditures (268) (327)
Payments of deferred leasing costs (156) (95)
Proceeds from funded reserves 424 422
--------- ---------
Adjusted Funds From Operations (AFFO) $ 20,315 $ 13,682
========= =========
Per Share Data
EPS $ 0.22 $ 0.21
AFFO $ 0.34 $ 0.28
Weighted average shares (basic and diluted) 59,795 49,630
========= =========
Dividend announcement:
On April 14, 2006 the Board of Directors of the Company declared a cash
distribution of $0.31 per share of common stock payable on May 19, 2006 to
stockholders of record as of April 28, 2006.
2006 Merger Update:
On May 4, 2006 we announced that effective April 30, 2006 we issued
approximately 10,972,000 Shares in a tax-free exchange for preferred shares
of five single-asset REITs valued at approximately $230 million in the
aggregate. The properties acquired are all suburban office buildings and
have a total of approximately 1.1 million square feet of rentable space.
Two of the properties are located in Texas, and the other three are located
in Colorado, Florida and Virginia, respectively.
Real Estate and Investment Banking Update
In February 2006 we acquired an office property in Addison, Texas. During
April 2006 we reached an agreement to sell an office property in Fairfax,
Virginia at a gain, which is expected to close in the second quarter of
2006. We also have another property under agreement to be sold, which we
expect to be completed during 2006. As of March 31, 2006, these properties
were classified in our balance sheet as assets held-for-sale. Supplemental
Schedule D presents our continuing real estate portfolio of 27 properties
as of March 31, 2006.
George J. Carter, President and CEO, commented as follows:
"Net Income/EPS and AFFO levels for the first quarter of 2006 were expected
and, consequently, planned for within the FSP business/investment model.
Earnings of $0.22 per share and AFFO of $0.34 per share showed measurable
increases over the same period last year. Quarterly dividends paid during
the first quarter, and declared for the second quarter, remain unchanged at
$0.31 per share. I continue to be confident about the Company's current
competitive position within the broader capital/real estate markets and
optimistic about its financial performance for the balance of 2006.
"More specifically, results for the first quarter of 2006 reflected: (#1)
solid performance in rental operations from the Company's portfolio of
properties; (#2) no real estate dispositions, but the completion of the
reinvestment of sale proceeds from properties sold in the fourth quarter of
2005; and (#3) the closing of real estate investment banking business
totaling $29.2 million.
"#1. For the first quarter of 2006, the Company's continuing portfolio of
27 properties was 86% leased. Most of FSP's properties are suburban office
buildings, and, in most markets, we are continuing to find improving
conditions for both occupancy and rental rates. However, there are still
many tenant leases which were signed at the height of the most recent
office market cycle (approximately 1997-2001). Consequently, FSP and many
other office property owners continue to face rent roll downs as old leases
expire and new ones are signed. National occupancy levels continue to
improve, but rent levels in most office markets are still only modestly
increasing from a very low level. We believe that significant broad-based
rental increases, above the 1997-2001 peak, are probably one to three years
away, assuming continued overall U.S. economic growth and traditional
cyclical real estate dynamics. FSP is aggressively managing its lease
turnover to maximize our rental operations' contribution as the office
markets continue to climb back up their cyclical curve. Concern always
remains about the possibility of a new, significant downturn in the broader
economy that would reverse the positive trends our markets are starting to
see. Lofty worldwide energy prices, inflation and interest rates are
likely to be influencing factors.
"One of our single-tenant buildings located in suburban Chicago, built in
1999 and containing approximately 176,848 rentable square feet, became 100%
vacant through the exercise of an early lease termination option by the
tenant in the first quarter. The termination had been planned for by FSP,
and including other lease expirations during the quarter resulted in an
increase to overall vacancy from an 8% rate to 14% as of the end of the
quarter. In April 2006 we re-leased 100% of the property to CitiCorp
Credit Services, Inc., a wholly owned subsidiary of CitiGroup Inc. The
lease is guaranteed by CitiGroup Inc., and is for a term of ten years with
no early termination option. The signing of this lease on a pro forma
basis decreased our overall vacancy rate to 9%, and reduced our lease
expirations percentage for the balance of 2006 from 17.3% at December 31,
2005 to 10.9%.
"#2. During the first quarter of 2006, the Company did not dispose of any
properties. However, the remaining proceeds from fourth quarter 2005
property sales and cash from the balance sheet were used to purchase a
218,913 square foot office building located in Texas for the FSP portfolio.
This property was purchased for all cash and continues to be owned without
any mortgage debt, as is every other property in FSP's portfolio. There
continue to be existing real estate assets in our portfolio which we
believe are potential sale candidates, either because of property specific
or market driven reasons. However, property sales will be considered only
if we believe the potential exists to reinvest the sale proceeds in new
assets that have better near-term and long-term return potential than the
assets we sold. Without any permanent mortgage debt, and with significant
cash already on the balance sheet, property sales generate cash that is not
currently needed for reserves or for mortgage debt pay down. Current high
market pricing and competition for potentially acceptable property
acquisitions continue to present challenges, but new opportunities are
always being reviewed. Upgrading FSP's portfolio is an ongoing objective.
"#3. First quarter investment banking business closed in $29.2 million of
investor capital by the partial syndication of one office property. FSP's
Investment Banking group has had a difficult time during the last several
years finding properties that meet its investment criteria. Higher pricing
and greater competition for quality commercial real estate have reduced the
number of attractive potential acquisitions we would consider. The
prospects for property acquisitions for FSP's Investment Banking group
remain uncertain."
Today's news release, along with other news about Franklin Street
Properties Corp., is available on the Internet at
www.franklinstreetproperties.com.
A conference call is scheduled for May 9, 2006 at 10:00 a.m. (ET) to
discuss the first quarter results. The toll free number is
1-800-901-5217, passcode 23223902. Internationally, the call may be
accessed by dialing 1-617-786-2964, passcode 23223902. The call will also
be available via a live webcast, which can be accessed at least 10 minutes
before the start time through the Webcasts & Presentations section of our
Investor Relations section at www.franklinstreetproperties.com. A replay of
the conference call will be available on the Company's website one hour
after the call.
About Franklin Street Properties Corp.
Franklin Street Properties Corp. is a real estate investment trust based in
Wakefield, Massachusetts, focused on achieving current income and long-term
growth through investments in commercial properties. FSP operates in two
business segments: real estate operations and investment banking/investment
services. FSP owns an unleveraged portfolio of real estate. The majority
of FSP's property portfolio is suburban office buildings. FSP's
subsidiary, FSP Investments LLC (member, NASD and SIPC), is a real estate
investment banking firm and a registered broker/dealer. The primary
activity of the investment bank is the organization of single purpose
entities that acquire, own and operate specific real estate properties.
FSP Investments LLC raises all of the capital required to fully equitize
those entities through private placement offerings. To learn more about
FSP please visit our website at www.franklinstreetproperties.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 are
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. This press release may also contain
forward-looking statements based on current judgments and current knowledge
of management, which 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 changes in economic conditions in
the markets in which we own properties, changes in the demand by investors
for investment in Sponsored REITs (as defined in our Annual Report on Form
10-K for the year ended December 31, 2005), risks of a lessening of demand
for the types of real estate owned by us, changes in government
regulations, and expenditures that cannot be anticipated such as utility
rate and usage increases, unanticipated repairs, additional staffing,
insurance increases and real estate tax valuation reassessments. See the
"Risk Factors" set forth in Item 1A of our Annual Report on Form 10-K for
the year ended December 31, 2005. Although we believe the expectations
reflected in the forward looking statements are reasonable, we cannot
guarantee future results, levels of activity, 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
Earnings Release
Supplementary information
Table of contents
Franklin Street Properties Financial Results A-C
Real estate portfolio summary information D
Other supplementary information E
Definition of Adjusted Funds From Operations F
Franklin Street Properties Financial Results
Supplementary Schedule A
Income Statement
(Unaudited)
For the
Three Months Ended
March 31,
----------------------
(in thousands, except per share amounts) 2006 2005
--------- ---------
Revenue:
Rental $ 24,281 $ 12,433
Related party revenue:
Syndication fees 1,921 2,519
Transaction fees 1,939 2,442
Management fees and interest income from loans 171 970
Other 22 5
--------- ---------
Total revenue 28,334 18,369
--------- ---------
Expenses:
Real estate operating expenses 4,992 2,522
Real estate taxes and insurance 2,733 1,828
Depreciation and amortization 5,377 2,623
Selling, general and administrative 1,805 1,825
Commissions 1,022 1,324
Interest 594 955
--------- ---------
Total expenses 16,523 11,077
--------- ---------
Income before interest income, equity in earnings of
non-consolidated REITs and taxes on income 11,811 7,292
Interest income 588 230
Equity in earnings of non-consolidated REITs 80 665
--------- ---------
Income before taxes on income 12,479 8,187
Income tax expense 57 44
--------- ---------
Income from continuing operations 12,422 8,143
Income from discontinued operations 717 2,280
--------- ---------
Net income $ 13,139 $ 10,423
========= =========
Weighted average number of shares outstanding,
basic and diluted 59,795 49,630
========= =========
Per Share Data:
Net income from continuing operations $ 0.21 $ 0.16
Income from discontinued operations 0.01 0.05
--------- ---------
Net income per share, basic and diluted $ 0.22 $ 0.21
--------- ---------
Franklin Street Properties Financial Results
Supplementary Schedule B
Condensed Balance Sheet
(Unaudited)
(in thousands, except shares and par value amounts) March 31, December 31,
2006 2005
--------- ---------
Assets:
Real estate assets $ 575,077 $ 549,372
Less accumulated depreciation 36,162 32,885
--------- ---------
Real estate investments, net 538,915 516,487
Acquired real estate leases, net 28,108 30,180
Investment in non-consolidated REITs 4,966 5,006
Assets held for syndication 51,416 -
Assets held for sale 43,822 44,082
Cash and cash equivalents 33,312 69,715
Restricted cash 465 461
Straight-line rent receivable 4,972 5,196
Deferred leasing commissions, net 2,298 2,284
Current and other assets 4,114 3,762
--------- ---------
Total assets $ 712,388 $ 677,173
========= =========
Liabilities and Stockholders' Equity:
Liabilities:
Bank note payable $ 41,500 $ -
Accounts payable, accrued expenses,
tenant deposits & other liabilities 14,702 15,590
--------- ---------
Total liabilities 56,202 15,590
--------- ---------
Stockholders' Equity:
Common Stock, $.0001 par value,
180,000,000 shares
authorized, 59,794,608 and 59,794,608
issued and outstanding 6 6
Additional paid-in capital 677,397 677,397
Treasury stock, 731,898 and 731,898 shares,
respectively (14,008) (14,008)
Distributions in excess of earnings (7,209) (1,812)
--------- ---------
Total Stockholders' Equity 656,186 661,583
--------- ---------
Total Liabilities and Stockholders' Equity $ 712,388 $ 677,173
========= =========
Franklin Street Properties Financial Results
Supplementary Schedule C
Condensed Statement of Cash Flows
(Unaudited)
For the three months ended
March 31,
----------------------
2006 2005
--------- ---------
Cash flows from operating activities:
Net income $ 13,139 $ 10,423
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization expense 5,659 3,374
Amortization of above market lease 1,474 59
Equity in earnings of non-consolidated REITs (275) (665)
Distributions from non-consolidated REITs 118 599
Shares issued as compensation - 31
Changes in operating assets and liabilities:
Restricted cash (4) (43)
Tenant rent receivables, net 207 -
Straight-line rents, net 200 (230)
Operations of assets held for syndication, net - (236)
Prepaid expenses and other assets, net 210 (1,971)
Accounts payable, accrued expenses & other items (1,254) (953)
Accrued compensation (555) (105)
Tenant security deposits 76 43
Payment of deferred leasing commissions (156) (95)
--------- ---------
Net cash provided by operating activities 18,839 10,231
--------- ---------
Cash flows from investing activities:
Purchase of real estate assets (25,744) (327)
Acquired real estate leases (951) -
Investment in non-consolidated REITs (11) -
Investment in assets held for syndication (51,500) (14,725)
--------- ---------
Net cash provided by (used for) investing
activities (78,206) (15,052)
--------- ---------
Cash flows from financing activities:
Distributions to stockholders (18,536) (15,385)
Borrowings (repayments) under bank
note payable, net 41,500 14,725
--------- ---------
Net cash used for financing activities 22,964 (660)
--------- ---------
Net increase (decrease) in cash and cash equivalents (36,403) (5,481)
Cash and cash equivalents, beginning of year 69,715 52,752
--------- ---------
Cash and cash equivalents, end of year $ 33,312 $ 47,271
========= =========
Franklin Street Properties Earnings Release
Supplementary Schedule D
Real Estate Portfolio Summary
(Unaudited)
March 31, 2006
31-Mar-06 31-Dec-05
--------- ---------
Commercial real estate
Number of properties 26 26
Square feet 3,986,564 3,978,264
Leased percentage 86% 92%
Residential real estate
Number of properties 1 1
Number of apartments 228 228
Square feet 231,363 231,363
Leased percentage 94% 97%
Combined portfolio
Number of properties 27 27
Square feet 4,217,927 4,209,627
Leased percentage 86% 92%
(In Thousands) As of March 31, 2006
----------------------------------------------------------
# of % of Square % of
State Properties Investment Portfolio Feet Portfolio
----------- ----------- ----------- ---------- ----------- ----------
Texas 6 $ 169,383 31.40% 1,267 30.00%
Missouri 2 57,916 10.80% 349 8.30%
Virginia 2 48,158 8.90% 293 6.90%
Colorado 2 45,282 8.40% 310 7.40%
California 3 41,083 7.60% 324 7.70%
Indiana 1 39,242 7.30% 205 4.90%
Illinois 1 27,307 5.10% 177 4.20%
Massachusetts 3 25,745 4.80% 385 9.10%
Georgia 1 23,778 4.40% 161 3.80%
North Carolina 2 15,286 2.80% 172 4.10%
Michigan 1 15,043 2.80% 215 5.10%
Washington 1 14,771 2.70% 117 2.80%
South Carolina 1 10,598 2.00% 144 3.40%
Maryland 1 5,321 1.00% 99 2.30%
----------- ----------- ---------- ----------- ----------
Total 27 $ 538,915 100.00% 4,218 100.00%
=========== =========== ========== =========== ==========
Franklin Street Properties Earnings Release
Supplementary Schedule E
(Unaudited)
March 31, 2006
Property by type:
(In Thousands) As of March 31, 2006
-----------------------------------------------------------
# of % of Square % of
Type Properties Investment Portfolio Feet Portfolio
----------- ----------- ----------- ---------- ----------- ----------
Apartments 1 15,924 3.00% 231 5.50%
Office 24 508,708 94.40% 3,700 87.70%
Industrial 2 14,283 2.60% 287 6.80%
----------- ----------- ---------- ----------- ----------
Total 27 $ 538,915 100.00% 4,218 100.00%
=========== =========== ========== =========== ==========
Commercial portfolio lease expirations (1)
Total % of
Year Square Feet Portfolio
----------- ----------- ----------
2006 436,496 10.9%(2)
2007 602,021 15.10%
2008 178,940 4.50%
2009 670,252 16.80%
2010 776,691 19.50%
2011 174,662 4.40%
Thereafter 1,147,50 28.8%(3)
----------- ----------
3,986,564 100.00%
=========== ==========
(1) Percentages are determined based upon square footage of
expiring commercial leases.
Expirations exclude apartments, which generally are one year or
less.
(2) Includes affect of CitiCorp Credit Services, Inc. lease
signed in April 2006.
(3) Includes current vacancies.
Franklin Street Properties Earnings Release
Supplementary Schedule F
Definition of Adjusted Funds From Operations ("AFFO")
The Company evaluates the performance of its reportable segments based on
several measures including Adjusted Funds From Operations ("AFFO") as
management believes that AFFO represents an important measure of the
reportable segment's activity and is an important consideration in
determining distributions paid to equity holders. The Company defines AFFO
as: net income as computed in accordance with accounting principles
generally accepted in the United States of America ("GAAP"); excluding
gains or losses on the sale of real estate and non-cash income from
Sponsored REITs; plus certain non-cash items included in the computation of
net income (depreciation and amortization and straight-line rent
adjustments); plus distributions received from Sponsored REITs; plus the
net proceeds from the sale of land; less purchases of property and
equipment ("Capital Expenditures") and payments for deferred leasing
commissions, plus proceeds from (payments to) cash reserves. Depreciation
and amortization, gain or loss on the sale of real estate and straight-line
rents are an adjustment to AFFO, as these are non-cash items included in
net income. Capital Expenditures, payments of deferred leasing commissions
and the proceeds from (payments to) the funded reserve are an adjustment to
AFFO, as they represent cash items not reflected in net income.
The cash reserve represents funds that the Company has set aside from time
to time in anticipation of future capital needs. These reserves are
typically used for the payment of Capital Expenditures, deferred leasing
commissions and certain tenant allowances; however, there are no legal
restrictions on their use and they may be used for any Company purpose.
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 AFFO in
a different manner. It is at the Company's discretion to retain a portion
of AFFO for operational needs. 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.
Distributed by Market Wire
Copyright © 2008, MarketWire
Copyright © 2008, NewsBlaze,
Daily NewsTags: ,RealEstate and Construction:Construction, RealEstateandConstruction:CommercialRealEstate, RealEstateandConstruction:ResidentialRealEstate, ,AMEX0001,AMEX0001,MA,WAKEFIELD, MA
_ _Is your favorite bookmark site missing?
Ask for it.
Search News
Daily News
