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Franklin Street Properties Corp. Announces Third Quarter 2009 Results

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^{Published in Business and Finance on Tuesday, November 3rd 2009 at 15:05 GMT by Market Wire}  

WAKEFIELD, MA--(Marketwire - November 3, 2009) - Franklin Street Properties Corp. (the "Company" or "FSP") (NYSE Amex: [ FSP ]), an investment firm specializing in real estate, announced today Funds From Operations (FFO) of $17.5 million or $0.25 per share for the third quarter ended September 30, 2009, which was sequentially flat compared to the second quarter of 2009. The Company also announced Net Income of $6.9 million and Earnings Per Share (EPS) of $0.10 for the third quarter ended September 30, 2009.

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 September 30, Nine Months Ended September 30, ------------------------------- ------------------------------ (in 000's except per share Increase Increase data) 2009 2008 (Decrease) 2009 2008 (Decrease) --------- --------- ---------- --------- --------- ---------- Net Income $ 6,941 $ 7,419 $ (478) $ 19,614 $ 25,340 $ (5,726) ========= ========= ========== ========= ========= ========== FFO $ 17,537 $ 17,085 $ 452 $ 52,284 $ 53,005 $ (721) GOS - - - - - - --------- --------- ---------- --------- --------- ---------- FFO+GOS $ 17,537 $ 17,085 $ 452 $ 52,284 $ 53,005 $ (721) ========= ========= ========== ========= ========= ========== Per Share Data: EPS $ 0.10 $ 0.11 $ (0.01) $ 0.28 $ 0.36 $ (0.08) FFO $ 0.25 $ 0.24 $ 0.01 $ 0.74 $ 0.75 $ (0.01) GOS $ - $ - $ - $ - $ - $ - FFO+GOS $ 0.25 $ 0.24 $ 0.01 $ 0.74 $ 0.75 $ (0.01) Weighted average shares (diluted) 71,281 70,481 800 70,750 70,481 269 --------- --------- ---------- --------- --------- ---------- 

Comparing results for the third quarter of 2009 to 2008, Net Income and EPS decreased $0.5 million or $0.01 per share; and FFO and FFO+GOS each increased $0.5 million or $0.01 per share. The increase in FFO was primarily from an increase in real estate FFO of $0.8 million and a decrease in investment banking FFO of $0.4 million. The decrease from investment banking was caused by lower sales of securities by our investment bank, which were $4.8 million in the third quarter of 2008 as compared to no sales of securities by our investment bank for the third quarter of 2009. Revenue from our investment bank is primarily based on the value of securities sales. The increase in real estate FFO was primarily from contributions from two acquisitions made in December 2008 and two in June 2009. There was no GOS in either the third quarter of 2009 or 2008.

Comparing results for the first nine months of 2009 to 2008, Net Income and EPS decreased $5.7 million or $0.08 per share; and FFO and FFO+GOS each decreased $0.7 million or $0.01 per share. The decrease in FFO was primarily from a decrease in investment banking FFO of $4.4 million and was partially offset by an increase in real estate FFO of $3.7 million. The decrease from investment banking was caused by lower sales of securities by our investment bank, which decreased $56.8 million to $550,000 for the nine months ended September 30, 2009 compared to the nine months ended September 30, 2008. Revenue from our investment bank is primarily based on the value of securities sales. The increase in real estate FFO was primarily from contributions from two acquisitions made in December 2008 and two in June 2009. There was no GOS in either the first nine months of 2009 or 2008.

George J. Carter, President and CEO, commented as follows:

"For the third quarter of 2009, FSP's profits as represented by FFO+GOS totaled approximately $17.5 million or $0.25 per share, sequentially flat compared to the second quarter of 2009. Dividend distributions declared for the third quarter of 2009, which are payable on November 20, 2009, will be approximately $15.1 million or $0.19 per share.

"Significant portions of our real estate investment business, specifically property sales and investment banking, are transactional. Similar to both the first and second quarters of 2009, neither of these business segments made a positive contribution to third 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, it is unlikely that near-term market conditions will favor further dispositions. Improvement in both liquidity and pricing is needed to help revitalize the property sales environment, and likely will be linked to a meaningful resumption of an active and stable mortgage-lending market for commercial real estate. However, when we believe that the right part of the real estate cycle has returned, you can expect to see FSP again complete property dispositions, thereby closing the loop on our total return strategy.

"During the third quarter of 2009, our investment banking group completed no investor capital closings and consequently operated at a loss for the quarter which totaled approximately $0.6 million, or about $.01 per share. Significantly, during the last two weeks of the third quarter, our investment banking group began its first new private placement real estate offering of 2009. Opportunistic property acquisition prospects for this business segment are now beginning to become more visible. In addition, a growing interest from our established investor clients to move some portion of their capital from the sidelines to specific property investment situations is occurring. Early analysis of this new private placement real estate offering would suggest a moderate recommencement of this transactional business segment. The potential for meaningful profit contribution in 2010 and beyond from our investment banking group looks promising but remains subject to broader capital market economic activity.

"While profits continued to suffer in the third quarter of 2009 from our transactional businesses, our real estate portfolio of 32 properties maintained an overall 90% occupancy and provided steady rental income. FFO for the third quarter of 2009 was $0.25 per share, all of which came from ongoing real estate operations net of the cost of maintaining our investment banking capability.

"On September 30, 2009, FSP purchased an office property located in Falls Church, Virginia for a price of $73,000,000. The property was our third direct portfolio acquisition this year. In total the three properties acquired to date in 2009 have added approximately 517,109 square feet for a total investment of approximately $124,600,000. Property acquisition efforts are active, and we would expect to acquire additional property in 2009.

"It is FSP's objective to grow our property portfolio and rental income business during this period of liquidity-constrained capital markets. In addition to using our balance sheet strength to help finance and fund new acquisitions, raising equity by issuing additional shares of our common stock for sale to the broader public markets will also be considered as a part of our capital funding/property acquisition/growth strategy. The timing and execution of such capital events will be subject to, among other things, the size and amount of our specific property acquisition opportunities and the acceptance of our shares by the public capital markets. An initial execution of this component of our growth funding plan was completed on September 23, 2009 with our first-ever underwritten public offering of 9.2 million shares of our common stock at a price to the public of $13 per share. The offering resulted in net proceeds to the Company of approximately $114.7 million net of underwriter's discounts and offering costs. A portion of those proceeds was used to complete the Falls Church, Virginia, property acquisition on September 30. 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 October 16, 2009, the Board of Directors of the Company declared a cash distribution of $0.19 per share of common stock payable on November 20, 2009 to stockholders of record on October 30, 2009.

Real Estate Update

On September 30, 2009 we acquired an office property in Falls Church, Virginia for approximately $73 million. Supplementary Schedules D & E provide property information for our continuing real estate portfolio of 32 properties and for three non-consolidated REITs that we have interests in as of September 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 Nine Months Ended September 30, September 30, ------------------ ------------------ (In thousands, except per share amounts) 2009 2008 2009 2008 -------- -------- -------- -------- Net income $ 6,941 $ 7,419 $ 19,614 $ 25,340 (Gain) Loss on sale of properties - - - - GAAP (income) loss from non-consolidated REITs (475) (679) (1,710) (2,167) Distributions from non-consolidated REITs 1,119 1,561 4,257 3,838 Acquisition costs of new properties 391 - 639 - Depreciation of real estate & intangible amortization 9,561 8,784 29,484 25,994 -------- -------- -------- -------- Funds From Operations (FFO) 17,537 17,085 52,284 53,005 Plus gains on sales of properties - - - - -------- -------- -------- -------- FFO+GOS $ 17,537 $ 17,085 $ 52,284 $ 53,005 ======== ======== ======== ======== Per Share Data EPS $ 0.10 $ 0.11 $ 0.28 $ 0.36 FFO $ 0.25 $ 0.24 $ 0.74 $ 0.75 GOS $ - $ - $ - $ - FFO+GOS $ 0.25 $ 0.24 $ 0.74 $ 0.75 Weighted average shares (basic and diluted) 71,281 70,481 70,750 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 November 4, 2009 at 10:00 a.m. (ET) to discuss the third quarter 2009 results. The toll free number is 1-866-700-7101, passcode 33138194. Internationally, the call may be accessed by dialing 1-617-213-8837, passcode 33138194. 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 Nine Months Ended September 30, September 30, ------------------ ------------------ (in thousands, except per share amounts) 2009 2008 2009 2008 -------- -------- -------- -------- Revenue: Rental $ 31,702 $ 27,927 $ 90,774 $ 82,283 Related party revenue: Syndication fees - 304 39 3,766 Transaction fees 1 300 543 3,606 Management fees and interest income from loans 370 380 1,232 1,364 Other 19 13 55 52 -------- -------- -------- -------- Total revenue 32,092 28,924 92,643 91,071 -------- -------- -------- -------- Expenses: Real estate operating expenses 7,752 7,159 22,176 20,973 Real estate taxes and insurance 5,364 4,590 14,879 13,375 Depreciation and amortization 8,801 7,666 26,940 22,616 Selling, general and administrative 2,243 1,927 6,378 6,557 Commissions 8 208 178 2,020 Interest 1,744 1,108 4,920 3,351 -------- -------- -------- -------- Total expenses 25,912 22,658 75,471 68,892 -------- -------- -------- -------- Income before interest income, equity in earnings of non-consolidated REITs and taxes 6,180 6,266 17,172 22,179 Interest income 16 177 88 657 Equity in earnings of non-consolidated REITs 475 679 1,710 2,167 -------- -------- -------- -------- Income before taxes 6,671 7,122 18,970 25,003 Income tax benefit (270) (297) (644) (337) -------- -------- -------- -------- Net income $ 6,941 $ 7,419 $ 19,614 $ 25,340 ======== ======== ======== ======== Weighted average number of shares outstanding, basic and diluted 71,281 70,481 70,750 70,481 ======== ======== ======== ======== Net income per share, basic and diluted $ 0.10 $ 0.11 $ 0.28 $ 0.36 ======== ======== ======== ======== Franklin Street Properties Corp. Financial Results Supplementary Schedule B Condensed Consolidated Balance Sheets (Unaudited) (in thousands, except share and par September 30, December 31, value amounts) ------------ ------------ 2009 2008 ------------ ------------ Assets: Real estate assets, net $ 926,555 $ 844,058 Acquired real estate leases, less accumulated amortization of $35,106 and $29,200, respectively 48,003 28,518 Investment in non-consolidated REITs 93,936 83,046 Assets held for syndication, net - 13,254 Cash and cash equivalents 26,385 29,244 Restricted cash 331 336 Tenant rent receivables, less allowance for doubtful accounts of $620 and $509, respectively 1,400 1,329 Straight-line rent receivable, less allowance for doubtful accounts of $100 and $261, respectively 9,724 8,816 Prepaid expenses 3,430 2,206 Related party mortgage loan receivable 23,264 1,125 Other assets 1,452 2,406 Office computers and furniture, net of accumulated depreciation of $1,194 and $1,108, respectively 408 281 Deferred leasing commissions, net of accumulated amortization of $4,820, and $3,416, respectively 10,887 10,814 ------------ ------------ Total assets $ 1,145,775 $ 1,025,433 ============ ============ Liabilities and Stockholders’ Equity: Liabilities: Bank note payable $ 91,008 $ 67,468 Term loan payable 75,000 75,000 Accounts payable and accrued expenses 25,351 22,297 Accrued compensation 750 1,654 Tenant security deposits 1,757 1,874 Other liabilities: derivative termination value 2,269 3,099 Acquired unfavorable real estate leases, less accumulated amortization of $2,440, and $1,779, respectively 5,661 5,044 ------------ ------------ Total liabilities 201,796 176,436 ------------ ------------ 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, 79,680,705 and 70,480,705 shares issued and outstanding, respectively 8 7 Additional paid-in capital 1,003,729 889,019 Accumulated other comprehensive loss (2,269) (3,099) Accumulated distributions in excess of accumulated earnings (57,489) (36,930) ------------ ------------ Total stockholders’ equity 943,979 848,997 ------------ ------------ Total liabilities and stockholders’ equity $ 1,145,775 $ 1,025,433 ============ ============ 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) 2009 2008 -------- -------- Cash flows from operating activities: Net income $ 19,614 $ 25,340 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization expense 27,141 22,649 Amortization of above market lease 2,544 3,376 Equity in earnings of non-consolidated REITs (1,710) (2,167) Distributions from non-consolidated REITs 4,257 3,838 Increase in bad debt reserve 111 79 Changes in operating assets and liabilities: Restricted cash 5 - Tenant rent receivables, net (182) 219 Straight-line rents, net (849) (854) Prepaid expenses and other assets, net (472) (1,474) Accounts payable, accrued expenses 4,294 3,863 Accrued compensation (904) 88 Tenant security deposits (117) (51) Payment of deferred leasing commissions (2,202) (2,434) -------- -------- Net cash provided by operating activities 51,530 52,472 -------- -------- Cash flows from investing activities: Purchase of real estate assets, office computers and furniture, capitalized merger costs and acquired real estate leases (130,819) (39,282) Investment in non-consolidated REITs (13,200) (10) Investment in related party mortgage loan receivable (22,139) (1,125) Investment in assets held for syndication 13,017 12,235 -------- -------- Net cash used in investing activities (153,141) (28,182) -------- -------- Cash flows from financing activities: Distributions to stockholders (40,173) (57,089) Equity offering 115,385 - Borrowings under bank note payable 23,540 20,368 Deferred financing costs - (30) -------- -------- Net cash provided by (used in) financing activities 98,752 (36,751) -------- -------- Net decrease in cash and cash equivalents (2,859) (12,461) Cash and cash equivalents, beginning of period 29,244 46,988 -------- -------- Cash and cash equivalents, end of period $ 26,385 $ 34,527 ======== ======== 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 488,456 8.2% 2010 761,351 12.8% 2011 384,237 6.5% 2012 647,178 10.9% 2013 349,015 5.9% 2014 584,389 9.8% Thereafter (2) 2,719,998 45.9% ------------ ----------- 5,934,624 100.0% ============ =========== (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 September 30, 2009 ----------------------------------------------------------- # of % of Square % of State Properties Investment Portfolio Feet Portfolio ----------- ----------- ---------- ----------- ---------- Texas 7 $ 229,853 24.8% 1,489 25.1% Virginia 5 161,198 17.4% 933 15.7% Colorado 4 128,819 13.9% 792 13.3% Georgia 1 76,152 8.2% 387 6.5% Missouri 3 73,009 7.9% 477 8.0% Maryland 2 61,888 6.7% 424 7.1% Florida 1 48,389 5.2% 213 3.6% Indiana 1 36,725 4.0% 205 3.5% Illinois 1 30,424 3.3% 177 3.0% California 2 21,520 2.3% 182 3.1% Michigan 1 14,884 1.6% 215 3.6% Washington 1 14,864 1.6% 117 2.0% Minnesota 1 14,657 1.6% 153 2.6% North Carolina 2 14,172 1.5% 172 2.9% ----------- ----------- ---------- ----------- ---------- 32 $ 926,555 100.0% 5,935 100.0% =========== =========== ========== =========== ========== Property by type: (dollars & square feet As of September 30, 2009 in 000's) # of % of Square % of Type Properties Investment Portfolio Feet Portfolio ----------- ----------- ---------- ----------- ---------- Office 31 $ 921,499 99.5% 5,836 98.3% Industrial 1 5,056 0.5% 99 1.7% 32 $ 926,555 100.0% 5,935 100.0% Franklin Street Properties Corp. Earnings Release Supplementary Schedule E Portfolio and Other Supplementary Information (Unaudited & Approximated) Capital Expenditures Owned Portfolio Nine Months Ended --------------------- (in thousands) 30-Sep-09 30-Sep-08 ---------- ---------- Tenant improvements $ 3,217 $ 4,564 Deferred leasing costs 2,202 2,434 Building improvements 846 1,310 ---------- ---------- $ 6,265 $ 8,308 ========== ========== Square foot & leased percentages September 30, December 31, ----------- ----------- 2009 2008 ----------- ----------- Owned portfolio of commercial real estate Number of properties 32 29 Square feet 5,934,624 5,417,515 Leased percentage 90% 93% Investments in non-consolidated commercial real estate Number of properties 3 2 Square feet 1,995,041 1,461,224 Leased percentage 78% 80% Single Asset REITs (SARs) managed Number of properties 9 10 Square feet* 2,155,201 2,684,561 Leased percentage* 90% 92% Total owned, investments & managed properties Number of properties* 44 41 Square feet* 10,084,866 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 Single Asset REIT name City State Feet 30-Sep-09 ----------- ------ --------- --------- FSP 303 East Wacker Drive Corp. Chicago IL 844,081 75.28% FSP Grand Boulevard Corp. Kansas City MO 532,453 88.64% FSP Phoenix Tower Corp. Houston TX 618,507 73.95% --------- --------- 1,995,041 78.43% --------- --------- Franklin Street Properties Corp. Earnings Release Supplementary Schedule F: Prior 4 Quarter Information (Unaudited) (in 000's) Q2 Q1 Q4 Q3 Revenue: 2009 2009 2008 2008 -------- -------- -------- -------- Rental $ 29,254 $ 29,818 $ 28,915 $ 27,927 Related party revenue: Syndication fees 29 10 - 304 Transaction fees 514 28 35 300 Management fees and interest income from loans 317 545 375 380 Other 18 18 20 13 -------- -------- -------- -------- Total revenue 30,132 30,419 29,345 28,924 -------- -------- -------- -------- Expenses: Real estate operating expenses 7,144 7,280 8,026 7,159 Real estate taxes and insurance 4,686 4,829 4,366 4,590 Depreciation and amortization 10,225 7,914 7,744 7,666 Selling, general and administrative 2,127 2,008 1,711 1,927 Commissions 40 130 131 208 Interest 1,599 1,577 1,570 1,108 -------- -------- -------- -------- Total expenses 25,821 23,738 23,548 22,658 -------- -------- -------- -------- Income before interest income, equity in earnings in non-consolidated REITs 4,311 6,681 5,797 6,266 Interest income 36 36 89 177 Equity in earnings in non-consolidated REITs 443 792 580 679 -------- -------- -------- -------- Income before taxes on income 4,790 7,509 6,466 7,123 Taxes on income (75) (299) (153) (297) -------- -------- -------- -------- Income from continuing operations 4,865 7,808 6,619 7,419 Income from discontinued operations - - - - -------- -------- -------- -------- Income before gain on sale of properties 4,865 7,808 6,619 7,419 Gain on sale of assets - - - - -------- -------- -------- -------- Net income $ 4,865 $ 7,808 $ 6,619 $ 7,419 ======== ======== ======== ======== FFO and FFO+GOS calculations: Net income $ 4,865 $ 7,808 $ 6,619 $ 7,419 -------- -------- -------- -------- (Gain) Loss on sale of assets - - - - GAAP income from non-consolidated REITs (443) (792) (580) (679) Distributions from non-consolidated REITs 1,523 1,615 1,510 1,561 Acquisition costs 248 - - - Depreciation & amortization 11,216 8,707 8,650 8,784 -------- -------- -------- -------- Funds From Operations (FFO) 17,409 17,338 16,199 17,085 Plus gains on sales of assets - - - - -------- -------- -------- -------- FFO+GOS $ 17,409 $ 17,338 $ 16,199 $ 17,085 ======== ======== ======== ======== Franklin Street Properties Corp. Earnings Release Supplementary Schedule G Largest 20 Tenants - FSP Owned Portfolio As of September 30, 2009 (Unaudited & Estimated) The following table includes the largest 20 tenants in FSP's owned portfolio based on square feet leased. SIC % of Tenant Sq Ft Code Portfolio --------- ---- -------- 1 Capital One Services, Inc. (1) 297,789 61 5.0% 2 Noblis, Inc. 252,613 54 4.2% 3 Citgo Petroleum Corporation 248,399 29 4.2% 4 Tektronix Texas, LLC 241,372 73 4.0% 5 Burger King Corporation 212,619 58 3.6% 6 New Era of Networks, Inc. (Sybase) 199,077 73 3.4% 7 RGA Reinsurance Company 185,501 63 3.1% 8 Citigroup Credit Services, Inc (2) 176,848 61 3.0% 9 CH Robinson Worldwide, Inc. 153,028 47 2.6% 10 Geisecke & Devrient 135,888 73 2.3% 11 Murphy Exploration & Production Company 133,786 13 2.2% 12 CACI Technologies, Inc. 132,896 73 2.2% 13 Monsanto Company 127,778 28 2.2% 14 Northrop Grumman Information Technology, Inc. 111,469 73 1.9% 15 Maines Paper & Food Service, Inc. 98,745 51 1.7% 16 Amdocs, Inc. 91,928 73 1.6% 17 County of Santa Clara 90,467 81 1.5% 18 Ober Kaler Grimes & Shriver 88,736 91 1.5% 19 Technip-Coflexip USA Holdings, Inc 86,059 13 1.4% 20 Vail Holding Corp d/b/a Vail Resorts 83,620 79 1.4% --------- -------- Total 3,148,618 53.0% --------- -------- (1) The lease with Capital One Services, Inc. expired on October 31, 2009. (2) The lease with Citicorp Credit Services, Inc. is guaranteed by Citigroup. 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.