WAKEFIELD, Mass.–(BUSINESS WIRE)–Franklin Street Properties Corp. (the “Company”, “FSP”, “we” or “our”) (NYSE American: FSP), a real estate investment trust (REIT), announced its results for the first quarter ended March 31, 2022.
George J. Carter, Chairman and Chief Executive Officer, commented as follows:
“As the second quarter of 2022 begins, we continue to believe that the current price of our common stock does not accurately reflect the value of our underlying real estate assets. Our objectives for 2022 are twofold: We will seek to increase shareholder value (1) through the potential sale of select properties where we believe that short to intermediate term valuation potential has been reached and (2) by striving to increase occupancy in our continuing portfolio of real estate. We intend to use proceeds from any potential future property dispositions for debt reduction, repurchases of our common stock, any dividends required to meet REIT requirements, and other general corporate purposes.
“At this time, we are maintaining our previously announced property disposition guidance for full-year 2022 to be in the range of approximately $250 million to $350 million in aggregate gross proceeds. However, our disposition guidance is subject to change for a variety of reasons, including economic conditions, office market conditions and geopolitical events. We will update our disposition guidance quarterly in our earnings releases.
“We look forward to the balance of 2022 and beyond with anticipation and optimism.”
Financial Highlights
GAAP net loss was $4.2 million, or $0.04 per share for the three months ended March 31, 2022.
Funds From Operations (FFO) was $11.6 million, or $0.11 per basic and diluted share for the three months ended March 31, 2022.
Adjusted Funds From Operations (AFFO) was $0.01 per basic and diluted share for the three months ended March 31, 2022.
Leasing Highlights
During the three months ended March 31, 2022, we leased approximately 131,000 square feet, including 103,000 square feet of new leases.
Our directly owned real estate portfolio of 24 owned properties totaling approximately 6.9 million square feet, was approximately 77.3% leased as of March 31, 2022, compared to approximately 78.4% leased as of December 31, 2021. The decrease in the leased percentage is primarily a result of lease maturities during the first quarter of 2022.
Lease expirations for 2022 and 2023 are approximately 295,000 and 353,000 square feet, representing approximately 4.3% and 5.1% of our owned portfolio, respectively.
The weighted average GAAP base rent per square foot achieved on leasing activity during the three months ended March 31, 2022 was $33.35, or 2.4% higher than average rents in the respective properties as applicable compared to the year ended December 31, 2021. The average lease term on leases in the three months ended March 31, 2022, was 8.6 years compared to 7.7 years for the year ended December 31, 2021. Overall the portfolio weighted average rent per occupied square foot was $30.75 as of March 31, 2022 compared to $30.60 as of December 31, 2021, representing an increase of approximately 0.5%.
Subsequent to quarter end, we executed approximately 63,000 square feet of new leases, the majority of which are at assets in Dallas and Houston. In addition, we are currently tracking in excess of 700,000 square feet of new prospective tenants, including approximately 500,000 square feet of prospective tenants that have identified FSP assets on their respective short lists of potential locations.
We believe that our continuing portfolio of real estate is well located, primarily in the Sunbelt and Mountain West geographic regions and consists of high-quality assets with upside leasing potential in a post-COVID-19 environment.
Investment Highlights
Disposition guidance for full-year 2022 continues to be in the range of approximately $250 million to $350 million in aggregate gross proceeds.
Disposition proceeds intended to be used for debt reduction, any special dividends required to meet REIT requirements, repurchases of our common stock, and other general corporate purposes.
Potential disposition properties that are in price discovery include: 380 and 390 Interlocken in Broomfield, Colorado; Eldridge Green and Park Ten in Houston, Texas; and 909 Davis in Evanston, Illinois.
Stock Repurchases
During the first quarter of 2022, we repurchased approximately 847,000 shares of our common stock for approximately $4.8 million pursuant to our previously announced stock repurchase plan.
Up to approximately $26.9 million remains authorized for potential future repurchases of our common stock pursuant to our previously announced stock repurchase plan.
Dividends
In light of the gains achieved on our dispositions in 2021, on December 3, 2021, we announced that our Board of Directors declared a special dividend of $0.32 per share, which was paid on January 12, 2022 to shareholders of record on December 31, 2021, in order to meet REIT requirements.
On April 1, 2022, we announced that our Board of Directors declared a regular quarterly cash dividend for the three months ended March 31, 2022 of $0.09 per share of common stock that will be paid on May 5, 2022 to stockholders of record on April 15, 2022.
If we are able to dispose of properties in 2022 at anticipated pricing levels, we may be required to again declare a special dividend in 2022 in addition to any regular quarterly dividends in order to meet REIT requirements.
Non-GAAP Financial Information
A reconciliation of Net income to FFO, AFFO and Sequential Same Store NOI and our definitions of FFO, AFFO and Sequential Same Store NOI can be found on Supplementary Schedules H and I.
2022 Net Income, FFO and Disposition Guidance
At this time, due primarily to uncertainty surrounding the timing and amount of proceeds received from property dispositions, we are continuing suspension of Net Income and FFO guidance. However, we are maintaining our previously announced disposition guidance for full-year 2022, as we execute on our strategy to dispose of certain properties that we believe have met their short to intermediate term valuation objectives and whose value may not be accurately reflected in our share price. Anticipated dispositions in 2022 are estimated to result in aggregate gross proceeds in the range of approximately $250 million to $350 million. We intend to use the proceeds of any future dispositions for debt reduction, repurchases of our stock, any special distributions required to meet REIT requirements, and other general corporate purposes. This guidance reflects our current expectations of economic and market conditions and is subject to change. We will update our disposition 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 and managed real estate portfolio as of March 31, 2022. The Company will also be filing an updated supplemental information package that will provide stockholders and the financial community with additional operating and financial data. The Company will file this supplemental information package with the SEC and make it available on its website at www.fspreit.com.
Today’s news release, along with other news about Franklin Street Properties Corp., is available on the Internet at www.fspreit.com. We routinely post information that may be important to investors in the Investor Relations section of our website. We encourage investors to consult that section of our website regularly for important information about us and, if they are interested in automatically receiving news and information as soon as it is posted, to sign up for E-mail Alerts.
Earnings Call
A conference call is scheduled for May 4, 2022 at 11:00 a.m. (ET) to discuss the first quarter 2022 results. To access the call, please dial 1-844-200-6205 and use access code 683292. Internationally, the call may be accessed by dialing 1-929-526-1599 and using access code 683292. To listen via live audio webcast, please visit the Webcasts & Presentations section in the Investor Relations section of the Company’s website (www.fspreit.com) at least ten minutes prior to the start of the call and follow the posted directions. The webcast will also be available via replay from the above location starting one hour after the call is finished.
About Franklin Street Properties Corp.
Franklin Street Properties Corp., based in Wakefield, Massachusetts, is focused on infill and central business district (CBD) office properties in the U.S. Sunbelt and Mountain West, as well as select opportunistic markets. FSP seeks value-oriented investments with an eye towards long-term growth and appreciation, as well as current income. FSP is a Maryland corporation that operates in a manner intended to qualify as a real estate investment trust (REIT) for federal income tax purposes. To learn more about FSP please visit our website at www.fspreit.com.
Forward-Looking Statements
Statements made in this press release that state FSP’s or management’s intentions, beliefs, expectations, or predictions for the future may be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. This press release may also contain forward-looking statements, such as those relating to our ability to lease space in the future, expectations for dispositions, potential stock repurchases, the payment of special dividends and the repayment of debt in future periods, value creation/enhancement in future periods and expectations for growth and leasing activities in future periods that are based on current judgments and current knowledge of management and are subject to certain risks, trends and uncertainties that could cause actual results to differ materially from those indicated in such forward-looking statements. Accordingly, readers are cautioned not to place undue reliance on forward-looking statements. Investors are cautioned that our forward-looking statements involve risks and uncertainty, including without limitation, adverse changes in general economic or local market conditions, including as a result of the COVID-19 pandemic and other potential infectious disease outbreaks and terrorist attacks or other acts of violence, which may negatively affect the markets in which we and our tenants operate, increasing interest rates, disruptions in the debt markets, economic conditions in the markets in which we own properties, risks of a lessening of demand for the types of real estate owned by us, adverse changes in energy prices, which if sustained, could negatively impact occupancy and rental rates in the markets in which we own properties, including energy-influenced markets such as Dallas, Denver and Houston, any inability to dispose of real estate properties at pricing levels comparable to recent historical portfolio dispositions, and any delays in the timing of any such anticipated dispositions, changes in government regulations and regulatory uncertainty, uncertainty about governmental fiscal policy, geopolitical events and expenditures that cannot be anticipated such as utility rate and usage increases, delays in construction schedules, unanticipated increases in construction costs, increases in the level of general and administrative costs as a percentage of revenues as revenues decrease as a result of property dispositions, 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, 2021, as the same may be updated from time to time in subsequent filings with the United States Securities and Exchange Commission. Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, acquisitions, dispositions, performance or achievements. We will not update any of the forward-looking statements after the date of this press release to conform them to actual results or to changes in our expectations that occur after such date, other than as required by law.
Franklin Street Properties Corp.
Earnings Release
Supplementary Information
Table of Contents
Franklin Street Properties Corp. Financial Results
A-C
Real Estate Portfolio Summary Information
D
Portfolio and Other Supplementary Information
E
Percentage of Leased Space
F
Largest 20 Tenants – FSP Owned Portfolio
G
Reconciliation and Definitions of Funds From Operations (FFO) and Adjusted
Funds From Operations (AFFO)
H
Reconciliation and Definition of Sequential Same Store results to Property Net
Operating Income (NOI) and Net Loss
I
Franklin Street Properties Corp. Financial Results
Supplementary Schedule A
Condensed Consolidated Statements of Operations
(Unaudited)
For the
Three Months Ended
March 31,
(in thousands, except per share amounts)
2022
2021
Revenue:
Rental
$
41,797
$
58,623
Related party revenue:
Management fees and interest income from loans
460
410
Other
7
6
Total revenue
42,264
59,039
Expenses:
Real estate operating expenses
12,834
15,939
Real estate taxes and insurance
8,719
12,366
Depreciation and amortization
15,670
24,381
General and administrative
3,784
4,146
Interest
5,366
8,600
Total expenses
46,373
65,432
Loss before taxes
(4,109
)
(6,393
)
Tax expense
49
67
Net loss
$
(4,158
)
$
(6,460
)
Weighted average number of shares outstanding, basic and diluted
103,691
107,328
Net loss per share, basic and diluted
$
(0.04
)
$
(0.06
)
Franklin Street Properties Corp. Financial Results
Supplementary Schedule B
Condensed Consolidated Balance Sheets
(Unaudited)
March 31,
December 31,
(in thousands, except share and par value amounts)
2022
2021
Assets:
Real estate assets:
Land
$
146,844
$
146,844
Buildings and improvements
1,465,312
1,457,209
Fixtures and equipment
11,819
11,404
1,623,975
1,615,457
Less accumulated depreciation
436,627
424,487
Real estate assets, net
1,187,348
1,190,970
Acquired real estate leases, less accumulated amortization of $23,346 and $40,423, respectively
13,453
14,934
Cash, cash equivalents and restricted cash
10,983
40,751
Tenant rent receivables
2,041
1,954
Straight-line rent receivable
51,309
49,024
Prepaid expenses and other assets
7,403
4,031
Related party mortgage loan receivables
24,000
24,000
Office computers and furniture, net of accumulated depreciation of $1,065 and $1,198, respectively
204
198
Deferred leasing commissions, net of accumulated amortization of $21,207 and $21,099, respectively
40,379
38,311
Total assets
$
1,337,120
$
1,364,173
Liabilities and Stockholders’ Equity:
Liabilities:
Bank note payable
$
40,000
$
—
Term loans payable, less unamortized financing costs of $598 and $714, respectively
274,402
274,286
Series A & Series B Senior Notes, less unamortized financing costs of $617 and $658, respectively
199,383
199,342
Accounts payable and accrued expenses
44,700
89,493
Accrued compensation
1,206
4,704
Tenant security deposits
5,837
6,219
Lease liability
1,061
1,159
Other liabilities: derivative liabilities
195
5,239
Acquired unfavorable real estate leases, less accumulated amortization of $1,469 and $2,285, respectively
450
528
Total liabilities
567,234
580,970
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, 103,151,781 and 103,998,520 shares issued and outstanding, respectively
10
10
Additional paid-in capital
1,334,383
1,339,226
Accumulated other comprehensive loss
(195
)
(5,239
)
Accumulated distributions in excess of accumulated earnings
(564,312
)
(550,794
)
Total stockholders’ equity
769,886
783,203
Total liabilities and stockholders’ equity
$
1,337,120
$
1,364,173
Franklin Street Properties Corp. Financial Results
Supplementary Schedule C
Condensed Consolidated Statements of Cash Flows
(Unaudited)
For the
Year Ended
March 31,
(in thousands)
2022
2021
Cash flows from operating activities:
Net loss
$
(4,158
)
$
(6,460
)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization expense
16,195
25,088
Amortization of above and below market leases
(9
)
(32
)
Changes in operating assets and liabilities:
Tenant rent receivables
(87
)
3,319
Straight-line rents
(1,216
)
(1,904
)
Lease acquisition costs
(1,069
)
(50
)
Prepaid expenses and other assets
(1,274
)
(532
)
Accounts payable and accrued expenses
(10,568
)
(9,564
)
Accrued compensation
(3,498
)
(2,528
)
Tenant security deposits
(382
)
(636
)
Payment of deferred leasing commissions
(3,706
)
(5,056
)
Net cash provided by (used in) operating activities
(9,772
)
1,645
Cash flows from investing activities:
Property improvements, fixtures and equipment
(9,952
)
(16,022
)
Net cash used in investing activities
(9,952
)
(16,022
)
Cash flows from financing activities:
Distributions to stockholders
(42,640
)
(9,660
)
Stock repurchases
(4,843
)
—
Borrowings under bank note payable
45,000
36,500
Repayments of bank note payable
(5,000
)
(12,500
)
Deferred financing costs
(2,561
)
—
Net cash provided by (used in) financing activities
(10,044
)
14,340
Net decrease in cash, cash equivalents and restricted cash
(29,768
)
(37
)
Cash, cash equivalents and restricted cash, beginning of year
40,751
4,150
Cash, cash equivalents and restricted cash, end of period
$
10,983
$
4,113
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
2022
295,071
4.3
%
2023
353,081
5.1
%
2024
738,952
10.7
%
2025
488,593
7.1
%
2026
532,267
7.7
%
Thereafter (2)
4,507,645
65.1
%
6,915,609
100.0
%
____________________
(1)
Percentages are determined based upon total square footage.
(2)
Includes 1,567,588 square feet of vacancies at our operating properties as of March 31, 2022.
(dollars & square feet in 000’s)
As of March 31, 2022
% of
Square
% of
State
Properties
Investment
Portfolio
Feet
Portfolio
Colorado
6
$
534,996
45.1%
2,628
38.0%
Texas
9
332,906
28.0%
2,423
35.0%
Georgia
1
39,388
3.3%
160
2.3%
Minnesota
3
124,668
10.5%
758
11.0%
Virginia
1
33,298
2.8%
298
4.3%
Florida
1
68,501
5.8%
213
3.1%
Illinois
2
44,808
3.8%
372
5.4%
North Carolina
1
8,783
0.7%
64
0.9%
Total
24
$
1,187,348
100.0%
6,916
100.0%
Franklin Street Properties Corp. Earnings Release
Supplementary Schedule E
Portfolio and Other Supplementary Information
(Unaudited & Approximated)
Recurring Capital Expenditures
(in thousands)
For the Three Months Ended
31-Mar-22
Tenant improvements
$
1,877
Deferred leasing costs
3,032
Non-investment capex
5,065
$
9,974
For the Three Months Ended
Year Ended
31-Mar-21
30-Jun-21
30-Sep-21
31-Dec-21
31-Dec-21
Tenant improvements
$
4,491
$
4,277
$
3,952
$
1,881
$
14,601
Deferred leasing costs
2,597
1,922
2,371
1,319
8,209
Non-investment capex
5,336
3,793
4,528
4,672
18,329
$
12,424
$
9,992
$
10,851
$
7,872
$
41,139
Square foot & leased percentages
March 31,
December 31,
2022
2021
Owned or Operating Properties:
Number of properties
24
24
Square feet
6,915,609
6,911,225
Leased percentage
77.3%
78.4%
Managed Properties – Single Asset REITs (SARs):
Number of properties
2
2
Square feet
348,545
348,545
Total Owned or Operating and Managed Properties:
Number of properties
26
26
Square feet
7,264,154
7,259,770
Franklin Street Properties Corp. Earnings Release
Supplementary Schedule F
Percentage of Leased Space
(Unaudited & Estimated)
Fourth
First
% Leased (1)
Quarter
% Leased (1)
Quarter
as of
Average %
as of
Average %
Property Name
Location
Square Feet
31-Dec-21
Leased (2)
31-Mar-22
Leased (2)
1
FOREST PARK
Charlotte, NC
64,198
78.4%
78.4%
78.4%
78.4%
2
NORTHWEST POINT
Elk Grove Village, IL
177,095
100.0%
100.0%
100.0%
100.0%
3
PARK TEN
Houston, TX
157,609
72.0%
72.0%
72.0%
72.0%
4
PARK TEN PHASE II
Houston, TX
156,746
95.0%
95.0%
95.0%
95.0%
5
GREENWOOD PLAZA
Englewood, CO
196,236
100.0%
100.0%
100.0%
100.0%
6
ADDISON
Addison, TX
289,333
75.8%
75.8%
72.3%
73.7%
7
COLLINS CROSSING
Richardson, TX
300,887
84.4%
84.4%
96.1%
88.3%
8
INNSBROOK
Glen Allen, VA
298,183
57.2%
57.2%
47.8%
50.9%
9
LIBERTY PLAZA
Addison, TX
217,364
83.4%
78.9%
81.8%
79.2%
10
380 INTERLOCKEN
Broomfield, CO
240,359
60.5%
60.5%
60.5%
60.5%
11
390 INTERLOCKEN
Broomfield, CO
241,512
99.4%
99.4%
99.4%
99.4%
12
BLUE LAGOON
Miami, FL
213,182
73.6%
73.6%
98.5%
98.5%
13
ELDRIDGE GREEN
Houston, TX
248,399
100.0%
100.0%
100.0%
100.0%
14
121 SOUTH EIGHTH ST
Minneapolis, MN
298,121
90.2%
90.2%
89.9%
89.9%
15
801 MARQUETTE AVE
Minneapolis, MN
129,821
91.8%
91.8%
91.8%
91.8%
16
LEGACY TENNYSON CTR
Plano, TX
208,966
41.1%
41.1%
40.7%
40.8%
17
ONE LEGACY
Plano, TX
214,110
57.9%
57.9%
63.7%
59.9%
18
909 DAVIS
Evanston, IL
195,098
93.3%
93.3%
93.3%
93.3%
19
WESTCHASE I & II
Houston, TX
629,025
57.6%
57.6%
56.7%
57.2%
20
1999 BROADWAY
Denver, CO
680,255
67.0%
66.9%
66.2%
66.8%
21
1001 17TH STREET
Denver, CO
657,706
95.2%
95.2%
79.8%
89.9%
22
PLAZA SEVEN
Minneapolis, MN
330,096
83.6%
84.2%
83.6%
83.6%
23
PERSHING PLAZA
Atlanta, GA
160,145
76.6%
76.6%
78.1%
77.1%
24
600 17TH STREET
Denver, CO
611,163
80.7%
82.1%
77.9%
78.9%
OWNED PORTFOLIO
6,915,609
78.4%
78.5%
77.3%
78.1%
________________________
(1)
% Leased as of month’s end includes all leases that expire on the last day of the quarter.
(2)
Average quarterly percentage is the average of the end of the month leased percentage for each of the three months during the quarter.
Franklin Street Properties Corp. Earnings Release
Supplementary Schedule G
Largest 20 Tenants – FSP Owned Portfolio
(Unaudited & Estimated)
The following table includes the largest 20 tenants in FSP’s owned portfolio based on total square feet:
As of March 31, 2022
% of
Tenant
Sq Ft
Portfolio
1
CITGO Petroleum Corporation
248,399
3.6%
2
EOG Resources, Inc.
169,167
2.4%
3
US Government
168,573
2.4%
4
The Vail Corporation
164,636
2.4%
5
Lennar Homes, LLC
155,808
2.2%
6
Citicorp Credit Services, Inc
146,260
2.1%
7
Kaiser Foundation Health Plan
120,979
1.8%
8
Argo Data Resource Corporation
114,200
1.7%
9
Swift, Currie, McGhee & Hiers, LLP
101,296
1.5%
10
VMWare, Inc.
100,853
1.5%
11
Deluxe Corporation
98,922
1.4%
12
Ping Identity Corp.
89,856
1.3%
13
Centennial Resource Production, LLC
67,856
1.0%
14
ADS Alliance Data Systems, Inc.
67,274
1.0%
15
PricewaterhouseCoopers LLP
66,304
1.0%
16
DirecTV, Inc.
66,226
0.9%
17
Hall and Evans LLC
65,878
0.9%
18
WPX Energy, Inc.
65,846
0.9%
19
Cyxtera Management, Inc.
61,826
0.9%
20
Houghton Mifflin Co.
60,522
0.9%
Total
2,200,681
31.8%
Contacts
Georgia Touma (877) 686-9496
