Business & Finance
Business and Finance
Business and Finance
Wed, August 5, 2009
Tue, August 4, 2009 Franklin Street Properties Corp.: Franklin Street Properties Corp. Announces Second Quarter 2009 Results
WAKEFIELD, MA--(Marketwire - August 4, 2009) - Franklin Street Properties Corp. (the "Company" or "FSP") (
The Company evaluates its performance based on Net Income, EPS, FFO, Gains on Sales (GOS) and FFO+GOS, and believes each is an important measure. A reconciliation of Net Income to FFO and FFO+GOS, which are non-GAAP financial measures, is provided on page 4 of this press release.
Three Months Ended June 30, Six Months Ended June 30, (in 000's ----------------------------- ---------------------------- except per Increase Increase share data) 2009 2008 (Decrease) 2009 2008 (Decrease) -------- -------- ---------- -------- -------- ---------- Net Income $ 4,865 $ 10,534 $ (5,669) $ 12,673 $ 17,920 $ (5,247) ======== ======== ========== ======== ======== ========== FFO $ 17,409 $ 20,283 $ (2,874) $ 34,747 $ 35,920 $ (1,173) GOS - - - - - - -------- -------- ---------- -------- -------- ---------- FFO+GOS $ 17,409 $ 20,283 $ (2,874) $ 34,747 $ 35,920 $ (1,173) ======== ======== ========== ======== ======== ========== Per Share Data: EPS $ 0.07 $ 0.15 $ (0.08) $ 0.18 $ 0.25 $ (0.07) FFO $ 0.25 $ 0.29 $ (0.04) $ 0.49 $ 0.51 $ (0.02) GOS $ - $ - $ - $ - $ - $ - FFO+GOS $ 0.25 $ 0.29 $ (0.04) $ 0.49 $ 0.51 $ (0.02) Weighted average shares (diluted) 70,481 70,481 - 70,481 70,481 - -------- -------- ---------- -------- -------- ----------
Comparing results for the second quarter of 2009 to 2008, Net Income and EPS decreased $5.7 million or $0.08 per share; and FFO and FFO+GOS each decreased $2.9 million or $0.04 per share. The decrease in FFO was primarily from a decrease in investment banking FFO of $3.7 million and was partially offset by an increase in real estate FFO of $0.8 million. The decrease from investment banking was caused by lower sales of securities by our investment bank, which decreased $49.5 million to $375,000 for the second quarter of 2009 compared to the second quarter of 2008. Revenue from our investment bank is primarily based on the value of these securities sales. The increase in real estate FFO was primarily from contributions from two acquisitions made in December 2008. There was no GOS in the second quarter of 2009 or 2008.
Comparing results for the first half of 2009 to 2008, Net Income and EPS decreased $5.2 million or $0.07 per share; and FFO and FFO+GOS each decreased $1.2 million or $0.02 per share. The decrease in FFO was primarily from a decrease in investment banking FFO of $4.0 million and was partially offset by an increase in real estate FFO of $2.8 million. The decrease from investment banking was caused by lower sales of securities by our investment bank, which decreased $52.0 million to $550,000 for the six months ended June 30, 2009 compared to the six months ended June 30, 2008. Revenue from our investment bank is primarily based on the value of these securities sales. The increase in real estate FFO was primarily from contributions from two acquisitions made in December 2008. There was no GOS in the first half of 2009 or 2008.
George J. Carter, President and CEO, commented as follows:
"For the second quarter of 2009, FSP's profits as represented by FFO+GOS totaled approximately $17.4 million or $0.25 per share, sequentially flat compared to the first quarter of 2009. Dividend distributions declared for the second quarter of 2009, which are payable on August 20, 2009, will be approximately $13.4 million or $0.19 per share.
Significant portions of our real estate investment business, specifically property sales and investment banking, are transactional. Similar to the first quarter of 2009, neither of these business segments made a positive contribution to the second quarter results. Substantially all profits for the quarter were produced by our ongoing/recurring real estate operations.
Although FSP has certain properties in its portfolio that we would contemplate selling, we have not listed any property for sale because of current adverse market conditions. Rather than sell in this negative environment, FSP continues to postpone consideration of the sale of some properties until a more attractive environment establishes itself, particularly within the mortgage/debt markets. A time frame for improvement in these markets is hard to predict. However, we continue to constantly evaluate property disposition opportunities.
During the second quarter of 2009, our investment banking group raised $375,000 of equity capital, an insignificant contribution similar to the first quarter of 2009. Concern continues to surround the potential impact on commercial real estate emanating from the U.S. recession and financial/credit crisis, and our established investor clients continue to sit on the sidelines until a clearer sense of stability returns to the property markets before considering significant new investment purchases. The lack of equity raising activity resulted in our investment banking business segment operating at a loss for the second quarter totaling approximately $0.3 million, which is less than $0.01 per share. We anticipate business in this area to remain constrained as long as broader commercial real estate fundamentals continue to deteriorate.
While profits continued to suffer in the second quarter of 2009 from our transactional businesses, our real estate portfolio of 31 properties maintained an overall 92% occupancy and provided steady rental income. FFO for the second quarter of 2009 was $0.25 per share, all of which came from real estate operations net of the cost of maintaining our investment banking capability.
During the last week of the second quarter of 2009, FSP purchased two additional office properties for our portfolio. The total purchase price for the two assets was approximately $51.6 million. Both acquisitions are in areas of the country where FSP or its affiliates have been active owners and managers of office property. Both properties are newly constructed within the last three years and are 100% net leased to excellent credit tenants. Considering cap rate, price per square foot, replacement cost and other metrics, we believe these acquisitions represent outstanding values. The acquisition dates of the assets did not allow them to contribute meaningfully to our second quarter results, but both properties will be owned for the full third quarter. These two property acquisitions are our first in 2009 and along with our three property acquisitions made during 2008, are now fully contributing to FSP's rental revenue. Additionally, during the second quarter of 2009, FSP purchased approximately 27% of the preferred stock in FSP Grand Boulevard Corp. for a net cost of $15,049,125. FSP Grand Boulevard Corp. owns a 28-story, class-A, multi-tenant office tower containing approximately 532,000 square feet of rentable space and is located in the Crown Center section of downtown Kansas City, Missouri. Continued active property acquisition efforts are ongoing, and we would expect to acquire additional properties in 2009.
As the capital markets and U.S. economy work through the current recession and financial/credit crisis, we will continue to pursue additional commercial property investment opportunities. It will be FSP's objective to continue to grow our property portfolio and rental income business during this period of liquidity-constrained capital markets by using our balance sheet strength to help finance and fund new acquisitions. We continue to be very optimistic about FSP's position in the current commercial real estate investment market and the opportunities that are presenting themselves to acquire commercial properties at better pricing and value metrics than we have seen in the last several years."
Dividend Announcement
On July 17, 2009, we announced that the Board of Directors declared a regular quarterly dividend for the three months ended June 30, 2009 of $0.19 per share of common stock payable on August 20, 2009 to stockholders of record on July 31, 2009.
Real Estate Update
During June 2009 we acquired an office property in Chantilly, Virginia for approximately $29 million and an office property in Eden Prairie, Minnesota for approximately $22.6 million. Supplementary Schedules D & E provide property information for our continuing real estate portfolio of 31 properties and for three non-consolidated REITs that we have interests in as of June 30, 2009. The Company will also be filing a 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.franklinstreetproperties.com ].
A reconciliation of Net Income to FFO and FFO+GOS is shown below and definitions of FFO and FFO+GOS are provided on Supplementary Schedule H. We believe FFO is used broadly throughout the real estate investment trust (REIT) industry as a measurement of performance and is generally calculated in a similar manner to our calculation. We also believe that FFO+GOS is an important measure as it considers investment performance.
Three Months Ended Six Months Ended June 30, June 30, (In thousands, except per share ------------------ ------------------ amounts) 2009 2008 2009 2008 -------- -------- -------- -------- Net income $ 4,865 $ 10,534 $ 12,673 $ 17,920 (Gain) Loss on sale of properties - - - - GAAP (income) loss from non-consolidated REITs (443) (694) (1,235) (1,487) Distributions from non-consolidated REITs 1,523 1,731 3,137 2,277 Acquisition costs of new properties 248 - 248 - Depreciation of real estate & intangible amortization 11,216 8,712 19,924 17,210 -------- -------- -------- -------- Funds From Operations (FFO) 17,409 20,283 34,747 35,920 Plus gains on sales of properties - - - - -------- -------- -------- -------- FFO+GOS $ 17,409 $ 20,283 $ 34,747 $ 35,920 ======== ======== ======== ======== Per Share Data EPS $ 0.07 $ 0.15 $ 0.18 $ 0.25 FFO $ 0.25 $ 0.29 $ 0.49 $ 0.51 GOS $ - $ - $ - $ - FFO+GOS $ 0.25 $ 0.29 $ 0.49 $ 0.51 Weighted average shares (basic and diluted) 70,481 70,481 70,481 70,481 ======== ======== ======== ========
Today's news release, along with other news about Franklin Street Properties Corp., is available on the Internet at [ www.franklinstreetproperties.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.
A conference call is scheduled for August 5, 2009 at 10:00 a.m. (ET) to discuss the second quarter 2009 results. The toll free number is 1-866-770-7051, passcode 12644681. Internationally, the call may be accessed by dialing 1-617-213-8064, passcode 12644681. To listen via live audio webcast, please visit the Webcasts & Presentations section in the Investor Relations section of the Company's website, [ www.franklinstreetproperties.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 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. The majority of FSP's property portfolio is suburban office buildings, with select investments in certain central business district properties. FSP's subsidiary, FSP Investments LLC (member, FINRA and SIPC), is a real estate investment banking firm and a registered broker/dealer. 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.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 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 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, economic conditions in the United States, disruptions in the debt markets, 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, 2008), 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 Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2008, 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, 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 Quarterly Information F Largest 20 Tenants - FSP Owned Portfolio G Definition of Funds From Operations (FFO) and FFO+GOS H Franklin Street Properties Corp. Financial Results Supplementary Schedule A Condensed Consolidated Income Statements (Unaudited) For the For the Three Months Ended Six Months Ended June 30, June 30, (in thousands, except per share ------------------ ------------------ amounts) 2009 2008 2009 2008 -------- -------- -------- -------- Revenue: Rental $ 29,254 $ 27,700 $ 59,072 $ 54,356 Related party revenue: Syndication fees 29 3,257 39 3,462 Transaction fees 514 3,138 542 3,306 Management fees and interest income from loans 317 423 862 984 Other 18 19 36 39 -------- -------- -------- -------- Total revenue 30,132 34,537 60,551 62,147 -------- -------- -------- -------- Expenses: Real estate operating expenses 7,144 7,116 14,424 13,815 Real estate taxes and insurance 4,686 4,505 9,515 8,784 Depreciation and amortization 10,225 7,591 18,139 14,950 Selling, general and administrative 2,127 2,621 4,135 4,630 Commissions 40 1,654 170 1,812 Interest 1,599 1,051 3,176 2,243 -------- -------- -------- -------- Total expenses 25,821 24,538 49,559 46,234 -------- -------- -------- -------- Income before interest income, equity in earnings of non-consolidated REITs and taxes 4,311 9,999 10,992 15,913 Interest income 36 176 72 479 Equity in earnings of non-consolidated REITs 443 694 1,235 1,487 -------- -------- -------- -------- Income before taxes 4,790 10,869 12,299 17,879 Income tax expense (benefit) (75) 335 (374) (41) -------- -------- -------- -------- Net income $ 4,865 $ 10,534 $ 12,673 $ 17,920 ======== ======== ======== ======== Weighted average number of shares outstanding, basic and diluted 70,481 70,481 70,481 70,481 ======== ======== ======== ======== Net income per share, basic and diluted $ 0.07 $ 0.15 $ 0.18 $ 0.25 ======== ======== ======== ======== Franklin Street Properties Corp. Financial Results Supplementary Schedule B Condensed Consolidated Balance Sheets (Unaudited) (in thousands, except share and par value amounts) June 30, December 31, ----------- ----------- 2009 2008 ----------- ----------- Assets: Real estate assets, net $ 869,557 $ 844,058 Acquired real estate leases, less accumulated amortization of $32,930 and $29,200, respectively 38,996 28,518 Investment in non-consolidated REITs 94,579 83,046 Assets held for syndication, net - 13,254 Cash and cash equivalents 24,542 29,244 Restricted cash 335 336 Tenant rent receivables, less allowance for doubtful accounts of $620 and $509, respectively 720 1,329 Straight-line rent receivable, less allowance for doubtful accounts of $100 and $261, respectively 9,219 8,816 Prepaid expenses 2,267 2,206 Related party mortgage loan receivable 12,115 1,125 Other assets 1,854 2,406 Office computers and furniture, net of accumulated depreciation of $1,160 and $1,108, respectively 417 281 Deferred leasing commissions, net of accumulated amortization of $4,221, and $3,416, respectively 10,895 10,814 ----------- ----------- Total assets $ 1,065,496 $ 1,025,433 =========== =========== Liabilities and Stockholders' Equity: Liabilities: Bank note payable $ 124,038 $ 67,468 Term loan payable 75,000 75,000 Accounts payable and accrued expenses 21,252 22,297 Accrued compensation 500 1,654 Tenant security deposits 1,765 1,874 Other liabilities: derivative termination value 2,394 3,099 Acquired unfavorable real estate leases, less accumulated amortization of $2,266, and $1,779, respectively 4,954 5,044 ----------- ----------- Total liabilities 229,903 176,436 ----------- ----------- 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, 70,480,705 and 70,480,705 shares issued and outstanding, respectively 7 7 Additional paid-in capital 889,019 889,019 Accumulated other comprehensive loss (2,394) (3,099) Accumulated distributions in excess of accumulated earnings (51,039) (36,930) ----------- ----------- Total stockholders' equity 835,593 848,997 ----------- ----------- Total liabilities and stockholders' equity $ 1,065,496 $ 1,025,433 =========== =========== Franklin Street Properties Corp. Financial Results Supplementary Schedule C Condensed Consolidated Statements of Cash Flows (Unaudited) For the Six Months Ended June 30, ------------------ (in thousands) 2009 2008 -------- -------- Cash flows from operating activities: Net income $ 12,673 $ 17,920 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization expense 18,276 14,973 Amortization of above market lease 1,780 2,259 Equity in earnings of non-consolidated REITs (1,235) (1,487) Distributions from non-consolidated REITs 3,137 2,277 Increase in bad debt reserve 111 79 Changes in operating assets and liabilities: Restricted cash 1 1 Tenant rent receivables, net 498 404 Straight-line rents, net (444) (507) Prepaid expenses and other assets, net (943) 160 Accounts payable, accrued expenses 482 (2,002) Accrued compensation (1,154) 281 Tenant security deposits (109) (64) Payment of deferred leasing commissions (1,557) (2,131) -------- -------- Net cash provided by operating activities 31,516 32,163 -------- -------- Cash flows from investing activities: Purchase of real estate assets and office computers and furniture, capitalized merger costs (56,135) (36,970) Changes in deposits on real estate assets 1,300 - Investment in non-consolidated REITs (13,198) (10) Investment in related party mortgage loan receivable (10,990) (1,000) Investment in assets held for syndication 13,017 11,698 -------- -------- Net cash used in investing activities (66,006) (26,282) -------- -------- Cash flows from financing activities: Distributions to stockholders (26,782) (43,698) Borrowings under bank note payable 56,570 25,245 Deferred financing costs - (30) -------- -------- Net cash provided by (used in) financing activities 29,788 (18,483) -------- -------- Net decrease in cash and cash equivalents (4,702) (12,602) Cash and cash equivalents, beginning of period 29,244 46,988 -------- -------- Cash and cash equivalents, end of period $ 24,542 $ 34,386 ======== ======== 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 ---- --------------- -------------- 2009 688,524 12.1% 2010 751,156 13.2% 2011 370,196 6.5% 2012 735,399 13.0% 2013 347,286 6.1% 2014 557,128 9.8% Thereafter (2) 2,232,322 39.3% --------------- -------------- 5,682,011 100.0% =============== ============== (1) Percentages are determined based upon square footage of expiring commercial leases. (2) Includes 468,000 square feet of current vacancies. (In Thousands) As of June 30, 2009 ------------------------------------------------------- # of % of Square % of State Properties Investment Portfolio Feet Portfolio ----- ----------- ----------- ---------- -------- ---------- Texas 7 $ 231,323 26.6% 1,489 26.2% Colorado 4 129,691 14.9% 792 13.9% Virginia 4 101,085 11.6% 680 12.0% Georgia 1 76,711 8.8% 387 6.8% Missouri 3 73,170 8.4% 477 8.4% Maryland 2 62,273 7.1% 424 7.5% Florida 1 48,685 5.6% 213 3.7% Indiana 1 36,990 4.2% 205 3.6% Illinois 1 30,750 3.5% 177 3.1% California 2 21,631 2.5% 182 3.2% Michigan 1 14,981 1.7% 215 3.8% Washington 1 14,920 1.7% 117 2.1% Minnesota 1 14,459 1.7% 153 2.7% North Carolina 2 14,281 1.6% 172 3.0% ----------- ----------- ---------- -------- ---------- 31 $ 870,948 100.0% 5,682 100.0% =========== =========== ========== ======== ========== Property by type: As of June 30, 2009 (dollars & square ------------------------------------------------------- feet in 000's) # of % of Square % of Type Properties Investment Portfolio Feet Portfolio ---- ----------- ----------- ---------- -------- ---------- Office 30 $ 865,863 99.4% 5,583 98.3% Industrial 1 5,085 0.6% 99 1.7% ----------- ----------- ---------- -------- ---------- 31 $ 870,948 100.0% 5,682 100.0% =========== =========== ========== ======== ========== Franklin Street Properties Corp. Earnings Release Supplementary Schedule E Portfolio and Other Supplementary Information (Unaudited & Approximated) Capital Expenditures Six Months Ended Owned Portfolio -------------------- (in thousands) 30-Jun-09 30-Jun-08 --------- --------- Tenant improvements $ 2,286 $ 2,897 Deferred leasing costs 1,557 2,130 Building improvements 581 569 --------- --------- $ 4,424 $ 5,596 ========= ========= Square foot & leased percentages June 30, December 31, ------------ ------------ 2009 2008 ------------ ------------ Owned portfolio of commercial real estate Number of properties 31 29 Square feet 5,682,011 5,417,515 Leased percentage 92% 93% Investments in non-consolidated commercial real estate Number of properties 3 2 Square feet 1,994,686 1,461,224 Leased percentage 78% 80% Single Asset REITs (SARs) managed Number of properties 9 10 Square feet* 2,154,079 2,684,561 Leased percentage* 87% 92% Total owned, investments & managed properties Number of properties* 43 41 Square feet* 9,830,776 9,563,300 Leased percentage* 88% 93% *Excludes a property to be constructed with approximately 285,000 square feet. The following table shows property information for our investments in non-consolidated REITs: Square % Leased % Interest Single Asset REIT name City State Feet 30-Jun-09 Held ---------------------- ----------- ----- --------- --------- ---------- FSP 303 East Wacker Drive Corp. Chicago IL 843,726 75.27% 43.7% FSP Grand Boulevard Corp. Kansas City MO 532,453 88.64% 27.0% FSP Phoenix Tower Corp. Houston TX 618,507 72.11% 4.6% --------- --------- 1,994,686 77.86% --------- --------- Franklin Street Properties Corp. Earnings Release Supplementary Schedule F: Quarterly Information (Unaudited) (in 000's) Q1 Q1 Q2 Q3 Q4 Check Revenue: 2009 2008 2008 2008 2008 Total ------- ------- ------- ------- ------- -------- Rental $29,818 $26,656 $27,700 $27,927 $28,915 $111,198 Related party revenue: Syndication fees 10 205 3,257 304 - 3,766 Transaction fees 28 168 3,138 300 35 3,641 Management fees and interest income from loans 545 561 423 380 375 1,739 Other 18 20 19 13 20 72 ------- ------- ------- ------- ------- -------- Total revenue 30,419 27,610 34,537 28,924 29,345 120,416 ------- ------- ------- ------- ------- -------- Expenses: Real estate operating expenses 7,280 6,698 7,116 7,159 8,026 28,999 Real estate taxes and insurance 4,829 4,279 4,505 4,590 4,366 17,740 Depreciation and amortization 7,914 7,359 7,591 7,666 7,744 30,360 Selling, general and administrative 2,008 2,009 2,621 1,927 1,711 8,268 Commissions 130 158 1,654 208 131 2,151 Interest 1,577 1,192 1,051 1,108 1,570 4,921 ------- ------- ------- ------- ------- -------- Total expenses 23,738 21,695 24,538 22,658 23,548 92,439 ------- ------- ------- ------- ------- -------- Income before interest income, equity in earnings in non-consolidated REITs 6,681 5,915 9,999 6,266 5,797 27,977 Interest income 36 303 176 177 89 745 Equity in earnings in non-consolidated REITs 792 793 694 680 580 2,747 ------- ------- ------- ------- ------- -------- Income before taxes on income 7,509 7,011 10,869 7,123 6,466 31,469 Taxes on income (299) (375) 335 (297) (153) (490) ------- ------- ------- ------- ------- -------- Income from continuing operations 7,808 7,386 10,534 7,420 6,619 31,959 Income from discontinued operations - - - - - - ------- ------- ------- ------- ------- -------- Income before gain on sale of properties 7,808 7,386 10,534 7,420 6,619 31,959 Gain on sale of assets - - - - - - ------- ------- ------- ------- ------- -------- Net income $ 7,808 $ 7,386 $10,534 $ 7,420 $ 6,619 $ 31,959 ======= ======= ======= ======= ======= ======== FFO and FFO+GOS calculations: Net income $ 7,808 $ 7,386 $10,534 $ 7,420 $ 6,619 $ 31,959 ------- ------- ------- ------- ------- -------- (Gain) Loss on sale of assets - - - - - - GAAP income from non-consolidated REITs (792) (793) (694) (680) (580) (2,747) Distributions from non-consolidated REITs 1,615 546 1,731 1,561 1,510 5,348 Acquisition costs - - - - - Depreciation & amortization 8,707 8,498 8,712 8,783 8,650 34,643 ------- ------- ------- ------- ------- -------- Funds From Operations (FFO) 17,338 15,637 20,283 17,084 16,199 69,203 Plus gains on sales of assets - - - - - - ------- ------- ------- ------- ------- -------- FFO+GOS $17,338 $15,637 $20,283 $17,084 $16,199 $ 69,203 ======= ======= ======= ======= ======= ======== Franklin Street Properties Corp. Earnings Release Supplementary Schedule G Largest 20 Tenants - FSP Owned Portfolio As of June 30, 2009 (Unaudited & Estimated) The following table includes the largest 20 tenants in FSP's owned portfolio based on square feet leased. % of Tenant Sq Ft SIC Code Portfolio ------ ---------- ---------- --------- Capital One Services, Inc. (1) 297,789 61 5.2% Citgo Petroleum Corporation 248,399 29 4.4% Tektronix Texas, LLC 241,372 73 4.1% Burger King Corporation 212,619 58 3.7% New Era of Networks, Inc. (Sybase) 199,077 73 3.5% Citigroup Credit Services, Inc (2) 176,848 61 3.1% RGA Reinsurance Company 171,120 63 3.0% CH Robinson Worldwide, Inc. 153,028 47 2.7% International Business Machines Corp. (3) 138,033 35 2.4% Geisecke & Devrient 135,888 73 2.4% Murphy Exploration & Production Company 133,786 13 2.3% CACI Technologies, Inc. 132,896 73 2.3% Monsanto 127,778 28 2.2% Northrop Grumman Information Technology, Inc. 111,469 73 2.0% Maines Paper & Food Service, Inc. 98,745 51 1.7% Amdocs, Inc. 91,928 73 1.6% County of Santa Clara 90,467 81 1.6% Ober Kaler Grimes & Shriver 88,736 91 1.6% Technip-Coflexip USA Holdings, Inc 86,059 13 1.5% Vail Corp d/b/a Vail Resorts 83,620 79 1.5% ---------- --------- Total 3,019,657 53.1% ---------- --------- (1) Capital One Services, Inc. ("CapOne") sublets all of the space to LandAmerica Financial Group, Inc. ("LandAm"). Both the direct lease with CapOne and the sublease with LandAm expire on October 31, 2009. On November 26, 2008, LandAm filed a voluntary motion for relief under Chapter 11 of the United States Bankruptcy Code. Significantly, our direct lease with CapOne remains in effect and CapOne continues to be financially obligated to us for all payments of rent due thereunder. (2) The lease with Citicorp Credit Services, Inc. is guaranteed by Citigroup. (3) On May 14, 2009 the Company signed a three-year lease commencing August 1, 2009 with IBM at its property located in Southfield, Michigan for 83,209 square feet of space. The tenant's prior lease for 138,033 square feet expired on July 31, 2009. Franklin Street Properties Corp. Earnings Release Supplementary Schedule H Definition of Funds From Operations ("FFO"), and FFO plus Gains on Sales ("FFO+GOS") The Company evaluates the performance of its reportable segments based on several measures including, Funds From Operations ("FFO") and FFO plus Gains on Sales ("FFO+GOS") as management believes they represent important measures of activity and are an important consideration in determining distributions paid to equity holders. The Company defines FFO as net income (computed in accordance with generally accepted accounting principles, or GAAP), excluding gains (or losses) from sales of property and acquisition costs of newly acquired properties that are not capitalized, plus depreciation and amortization, and after adjustments to exclude non-cash income (or losses) from non-consolidated or Sponsored REITs, plus distributions received from non-consolidated or Sponsored REITs. The Company defines FFO+GOS as FFO as defined above, plus gains (or losses) from sales of properties and provisions for assets held for sale, if applicable.
FFO and FFO+GOS should not be considered as alternatives to net income (determined in accordance with GAAP), as indicators of the Company's financial performance, nor as alternatives to cash flows from operating activities (determined in accordance with GAAP), nor as measures of the Company's liquidity, nor are they necessarily indicative of sufficient cash flow to fund all of the Company's needs. Other real estate companies may define these terms in a different manner. We believe that in order to facilitate a clear understanding of the results of the Company, FFO and FFO+GOS should be examined in connection with net income and cash flows from operating, investing and financing activities in the condensed consolidated financial statements.
