Franklin Street Properties Corp. Announces Second Quarter 2016 Results

7/26/16

WAKEFIELD, Mass.--(BUSINESS WIRE)--Franklin Street Properties Corp.  (NYSE MKT: FSP), a real estate investment trust (REIT), announced its results for the second quarter ended June 30, 2016.

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

“As the third quarter begins, we continue to believe that full-year 2016 will mark the bottom of the reductive effects that our ongoing property portfolio transition is having on Funds From Operations (FFO). Our current forecast is for resumed FFO growth in 2017 propelled primarily from our projected realization of increased positive leasing metrics in our more recently acquired urban office properties, many of which contain meaningful value-add square footage, as well as from select new investments and redevelopment efforts. We look forward with anticipation to the balance of 2016 and beyond.”

Highlights

  • Net Income was $1.6 million, or $0.02 per share, for the second quarter ended June 30, 2016, and FFO was $26.7 million or $0.27 per share for the second quarter ended June 30, 2016.
  • We are updating our full year FFO guidance for 2016 to be in the range of $1.03 to $1.06 per diluted share and, for the third quarter of 2016, we estimate FFO to be in the range of $0.25 to $0.26 per diluted share.
  • Adjusted Funds From Operations (AFFO) was $0.19 per share for the second quarter ended June 30, 2016.
  • Portfolio was approximately 90.1% leased as of June 30, 2016.
  • Expanded our presence in downtown Minneapolis, MN with the acquisition of Plaza Seven for $82 million.
  • Sold Lakeside Crossing I in Maryland Heights, MO for gross proceeds of $20.2 million.
  • On July 21, 2016, we extended the maturity of our $400 million term loan from September 27, 2017 to September 27, 2021. On July 22, 2016, we entered into a forward interest rate swap that fixed the base LIBOR interest rate for that extension period at 1.12%. Accordingly, based upon our credit rating as of June 30, 2016, the interest rate when the extension commences would be 2.57%.

Leasing Update

  • Our directly owned real estate portfolio of 35 properties totaling approximately 9.5 million square feet was approximately 90.1% leased as of June 30, 2016.
  • During the quarter, we leased approximately 421,000 square feet, of which approximately 381,000 square feet was with existing tenants.
  • Executed early lease renewals with (a) Citicorp Credit Services, Inc. for approximately 146,000 square feet at Northwest Point, Elk Grove, IL; (b) Amdocs, Inc. for approximately 70,000 square feet at Timberlake Corporate Center, Chesterfield, MO; and (c) American Systems Corporation for approximately 57,000 square feet at Meadow Point, Chantilly, VA.

Acquisition and Disposition Update

  • Acquired Plaza Seven in downtown Minneapolis, MN on June 6, 2016 for $82 million.
  • Entered into a Purchase and Sale Agreement to acquire an urban infill Class “A” office property located in Midtown Atlanta for a gross purchase price of $45.5 million. This potential acquisition remains subject to our satisfactory completion of a due diligence inspection period. We anticipate that the closing will occur by the end of August 2016 and first full year cash and GAAP yields will each be approximately 6.7%.
  • Sold Lakeside Crossing I in Maryland Heights, MO on April 5, 2016 for $20.2 million.
  • Classified our office property located in Federal Way, WA, as an asset held for sale.

801 Marquette Avenue, Minneapolis, MN Development Update

  • Interior demolition and construction work expected to commence during the third quarter.
  • Anticipate launching our full marketing campaign during the third quarter with our leasing team at CBRE and with newly created leasing materials.
  • Expected costs are anticipated to total between $15 and $20 million including all leasing expenses, and should result in about 120,000 RSF.
  • Upon completion, expect rents of approximately $15-$18 net per square foot compared to previously expired rents of about $4.75 net per square foot.

Dividend Update

On July 8, 2016, the Company announced that its Board of Directors declared a regular quarterly dividend for the three months ended June 30, 2016 of $0.19 per share of common stock that will be paid on August 11, 2016 to stockholders of record on July 22, 2016.

Non-GAAP Financial Information

A reconciliation of Net Income to FFO and AFFO and our definitions of FFO and AFFO can be found on Supplementary Schedule H.

FFO Guidance

We are updating our full year FFO guidance for 2016 to be in the range of $1.03 to $1.06 per diluted share and, for the third quarter of 2016, we estimate FFO to be in the range of $0.25 to $0.26 per 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.

Real Estate Update

Supplementary schedules provide property information for the Company’s owned real estate portfolio and for two non-consolidated REITs in which the Company holds preferred stock interests as of June 30, 2016. 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.franklinstreetproperties.com.

About Franklin Street Properties Corp.

Franklin Street Properties Corp., based in Wakefield, Massachusetts, is focused on investing in institutional-quality office properties in the U.S. FSP’s strategy is to invest in select urban infill and central business district (CBD) properties, with primary emphasis on our top five markets of Atlanta, Dallas, Denver, Houston, and Minneapolis. FSP seeks value-oriented investments with an eye towards long-term growth and appreciation, as well as current income. FSP is a Maryland corporation that operates in a manner intended to qualify as a real estate investment trust (REIT) for federal income tax purposes. To learn more about FSP please visit our website at www.franklinstreetproperties.com.