Exhibit 99.2
SELECTED COMBINING CONDENSED CONSOLIDATED PRO FORMA FINANCIAL DATA
The following unaudited pro forma condensed consolidated financial statements of Franklin Street Properties Corp. (“FSP Corp.” or the “Registrant”) gives effect to the acquisition of a property (“1999 Broadway”) on May 22, 2013 for a purchase price of approximately $183 million by FSP 1999 Broadway LLC (the “1999 Broadway Purchaser”), a wholly-owned subsidiary of FSP Corp. and the acquisition of a property (“999 Peachtree”) on July 1, 2013 for a purchase price of approximately $158 million by FSP 999 Peachtree Street LLC (the “999 Peachtree Purchaser”), a wholly-owned subsidiary of FSP Corp.
The unaudited pro forma condensed consolidated financial statements are based upon the historical consolidated financial statements of FSP Corp. included in our Annual Report on Form 10-K for the year ended December 31, 2012, and our Quarterly Report on Form 10-Q for the quarter ended June 30, 2013, and the financial statements of 1999 Broadway for the period January 1, 2013 through May 21, 2013 and for the year ended December 31, 2012, and the financial statements of 999 Peachtree for the period January 1, 2013 through June 30, 2013 and for the year ended December 31, 2012. The financial statements of 1999 Broadway have been prepared pursuant to the requirements of Rule 3-14 of Regulation S-X of the Securities and Exchange Commission and included in the Exhibits to our Quarterly Report on Form 10-Q for the quarter ended June 30, 2013. The financial statements of 999 Peachtree have been prepared pursuant to the requirements of Rule 3-14 of Regulation S-X of the Securities. The pro forma consolidated balance sheets have been presented as if the 999 Peachtree acquisition had occurred as of June 30, 2013. The pro forma condensed consolidated statements of income for the six months ended June 30, 2013 and for the year ended December 31, 2012 are presented as if the acquisitions were completed on January 1, 2012.
Certain balances in the 1999 Broadway and 999 Peachtree financial statements have been reclassified to conform to FSP Corp.’s presentation.
The unaudited pro forma condensed consolidated financial statements are not necessarily indicative of the actual results of operations of 1999 Broadway and 999 Peachtree for the periods indicated, nor do they purport to represent the results of operations of the entities for any future period. We funded the 1999 Broadway acquisition using cash and cash equivalents available from equity offering proceeds completed on May 16, 2013 and we funded the 999 Peachtree acquisition with a $150 million borrowings under our $500 million unsecured revolving credit facility and the with cash and cash equivalents. These unaudited pro forma financial statements are provided for informational purposes only and upon completion of the planned long term financing of this acquisition our financial position and results of operations may be significantly different than what is presented in these unaudited pro forma financial statements.
| P-1 |
Franklin Street Properties Corp.
Unaudited Combining Condensed Consolidated Pro Forma Balance Sheets
June 30, 2013
(dollars in thousands, except per share amounts)
| Historical | Pro Forma | |||||||||||
| FSP Corp. (a) | Adjustments (c) | Pro Forma | ||||||||||
| Assets: | ||||||||||||
| Real estate assets, net | $ | 1,288,025 | $ | 117,915 | $ | 1,405,940 | ||||||
| Acquired real estate leases, net | 132,662 | 39,126 | 171,788 | |||||||||
| Investment in non-consolidated REITs | 81,523 | — | 81,523 | |||||||||
| Cash and cash equivalents | 24,962 | (2,780 | ) | 22,182 | ||||||||
| Restricted cash | 602 | — | 602 | |||||||||
| Tenant rents receivable, net | 2,331 | — | 2,331 | |||||||||
| Straight line rents receivable, net | 37,952 | — | 37,952 | |||||||||
| Prepaid expenses | 1,760 | — | 1,760 | |||||||||
| Related party mortgage loan receivables | 97,846 | 97,846 | ||||||||||
| Other assets | 10,262 | (3,000 | ) | 7,262 | ||||||||
| Other assets: derivative asset | 6,739 | — | 6,739 | |||||||||
| Office computers & furniture, net | 510 | — | 510 | |||||||||
| Deferred leasing commissions, net | 24,877 | — | 24,877 | |||||||||
| Total assets | $ | 1,710,051 | $ | 151,261 | $ | 1,861,312 | ||||||
| Liabilities and stockholders' equity: | ||||||||||||
| Liabilities: | ||||||||||||
| Bank note payable | $ | 181,500 | $ | 150,000 | $ | 331,500 | ||||||
| Term loan payable | 400,000 | — | 400,000 | |||||||||
| Accounts payable and accrued expenses | 29,971 | — | 29,971 | |||||||||
| Accrued compensation | 1,677 | — | 1,677 | |||||||||
| Tenant security deposits | 3,074 | 184 | 3,258 | |||||||||
| Acquired unfavorable real estate leases, net | 12,785 | 1,302 | 14,087 | |||||||||
| Total liabilities | 629,007 | 151,486 | 780,493 | |||||||||
| Stockholders' Equity: | ||||||||||||
| Preferred stock | — | — | — | |||||||||
| Common stock | 10 | — | 10 | |||||||||
| Additional paid in capital | 1,273,585 | — | 1,273,585 | |||||||||
| Accumlated other comprehensive loss | 6,739 | — | 6,739 | |||||||||
| Accumulated distributions in excess of | ||||||||||||
| accumulated earnings | (199,290 | ) | (225 | ) | (199,515 | ) | ||||||
| Total stockholders' equity | 1,081,044 | (225 | ) | 1,080,819 | ||||||||
| Total liabilities and stockholders' equity | $ | 1,710,051 | $ | 151,261 | $ | 1,861,312 | ||||||
| P-2 |
Franklin Street Properties Corp.
Unaudited Combining Condensed Consolidated Pro Forma Statements of Income
For the Six Months Ended
June 30, 2013
(dollars in thousands, except per share amounts)
| 1999 Broadway | 999 Peachtree | |||||||||||||||
| Historical | Acquisition | Acquisition | ||||||||||||||
| FSP Corp. | (d) | (e) | Pro Forma | |||||||||||||
| Revenue: | ||||||||||||||||
| Rental income | $ | 89,469 | $ | 7,705 | $ | 8,356 | $ | 105,530 | ||||||||
| Related party revenue: | ||||||||||||||||
| Management fees and interest on loans | 3,265 | — | — | 3,265 | ||||||||||||
| Other | 43 | — | — | 43 | ||||||||||||
| Total revenue | 92,777 | 7,705 | 8,356 | 108,838 | ||||||||||||
| Expenses: | ||||||||||||||||
| Rental operating expenses | 21,886 | 2,187 | 2,155 | 26,228 | ||||||||||||
| Real estate taxes and insurance | 13,908 | 965 | 871 | 15,744 | ||||||||||||
| Depreciation and amortization | 33,111 | 5,315 | 4,536 | 42,962 | ||||||||||||
| Selling, general and administrative | 5,736 | 13 | 46 | 5,795 | ||||||||||||
| Interest | 8,382 | — | 1,251 | 9,633 | ||||||||||||
| Total expenses | 83,023 | 8,480 | 8,859 | 100,362 | ||||||||||||
| Income (loss) before interest income, | ||||||||||||||||
| equity in earnings in non-consolidated | ||||||||||||||||
| REITs and taxes | 9,754 | (775 | ) | (503 | ) | 8,476 | ||||||||||
| Interest Income | 5 | — | — | 5 | ||||||||||||
| Equity in income of non-consolidated REITs | (383 | ) | — | — | (383 | ) | ||||||||||
| Taxes on income (a) | 234 | — | — | 234 | ||||||||||||
| Income (loss) from continuing operations | 9,142 | (775 | ) | (503 | ) | 7,864 | ||||||||||
| Weighted average shares outstanding, | ||||||||||||||||
| basic and diluted | 87,417 | 87,417 | ||||||||||||||
| Income per share attributable to: | ||||||||||||||||
| Continuing operations, basic and diluted | $ | 0.10 | $ | 0.09 | ||||||||||||
| P-3 |
Franklin Street Properties Corp.
Unaudited Pro Forma Condensed Consolidated Statements of Income
For the Year Ended
December 31, 2012
(dollars in thousands, except per share amounts)
| 1999 Broadway | 999 Peachtree | |||||||||||||||
| Historical | Acquisition | Acquisition | ||||||||||||||
| FSP Corp. | (f) | (g) | Pro Forma | |||||||||||||
| Revenue: | ||||||||||||||||
| Rental income | $ | 151,656 | $ | 17,297 | $ | 16,011 | $ | 184,964 | ||||||||
| Related party revenue: | ||||||||||||||||
| Management fees and interest on loans | 10,947 | — | — | 10,947 | ||||||||||||
| Other | 199 | — | — | 199 | ||||||||||||
| Total revenue | 162,802 | 17,297 | 16,011 | 196,110 | ||||||||||||
| Expenses: | ||||||||||||||||
| Rental operating expenses | 37,441 | 4,927 | 4,645 | 47,013 | ||||||||||||
| Real estate taxes and insurance | 22,913 | 1,957 | 1,662 | 26,532 | ||||||||||||
| Depreciation and amortization | 54,872 | 12,756 | 9,072 | 76,700 | ||||||||||||
| Selling, general and administrative | 9,916 | 170 | 335 | 10,421 | ||||||||||||
| Interest | 16,068 | — | 2,502 | 18,570 | ||||||||||||
| Total expenses | 141,210 | 19,810 | 18,216 | 179,236 | ||||||||||||
| Income (loss) before interest income, | ||||||||||||||||
| equity in earnings in non-consolidated | ||||||||||||||||
| REITs and taxes | 21,592 | (2,513 | ) | (2,205 | ) | 16,874 | ||||||||||
| Interest Income | 51 | — | — | 51 | ||||||||||||
| Equity in income of non-consolidated REITs | 2,033 | — | — | 2,033 | ||||||||||||
| Taxes on income (a) | 335 | — | — | 335 | ||||||||||||
| Income (loss) from continuing operations | 23,341 | (2,513 | ) | (2,205 | ) | 18,623 | ||||||||||
| Weighted average shares outstanding, | ||||||||||||||||
| basic and diluted | 82,937 | 82,937 | ||||||||||||||
| Income per share attributable to: | ||||||||||||||||
| Continuing operations | $ | 0.28 | $ | 0.22 | ||||||||||||
| P-4 |
FRANKLIN STREET PROPERTIES CORP.
NOTES TO UNAUDITED COMBINING CONDENSED CONSOLIDATED
PRO FORMA FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
BASIS OF PRESENTATION
The following unaudited combining condensed consolidated pro forma financial statement presentation has been prepared based upon certain pro forma adjustments to the historical consolidated financial statements of FSP Corp. The pro forma statements of income are presented as if the acquisition occurred as of the beginning of the periods presented.
The acquisitions of1999 Broadway and 999 Peachtree have been treated as a business combinations.The 1999 Broadway and 999 Peachtree purchase prices have been allocated to the assets acquired and liabilities assumed based upon estimates of their fair values as of the effective date of each of the acquisitions as determined in accordance with generally accepted accounting principles in the United States (or “GAAP”).
PRO FORMA ADJUSTMENTS
Certain assumptions regarding the operations of FSP Corp. have been made in connection with the preparation of the combining condensed consolidated financial pro forma information. These assumptions are as follows:
| (a) | FSP Corp. elected to be, and is qualified as, a real estate investment trust for federal income tax purposes. FSP Corp. has met the various required tests; therefore, no provision for federal or state income taxes has been reflected on real estate operations except for a margin tax related to real estate operations in Texas. FSP Corp. has subsidiaries which are not in the business of real estate operations. Those subsidiaries are taxable as real estate investment trust subsidiaries, or TRS, and are subject to income taxes at statutory tax rates. The taxes on income shown in the pro forma condensed consolidated statements ofincome are the taxes on the income of the TRS. There are no material items that would cause a deferred tax asset or a deferred tax liability. |
| (b) | Represents the effect of the acquisition of 1999 Broadway on May 22, 2012. We funded this acquisition using cash and cash equivalents available from equity offering proceeds completed on May 16, 2013. The purchase price of this property was $183,000 before purchase credits of $836 and excluding $110 of estimated acquisition related costs. We allocated $154,060 of the purchase price to real estate properties, $31,024 to acquired real estate leases and $2,920 to acquired unfavorable real estate leases. The values assigned to the assets acquired are estimated and the final allocation may differ. |
| (c) | Represents the effect of the acquisition of 999 Peachtree on July 1, 2013. We financed $150,000 of this acquisition with borrowings under our $500,000 unsecured revolving credit facility and the remainder with cash and cash equivalents. The purchase price of this property was $157,900 before purchase credits of $2,161 and excluding $225 of estimated acquisition related costs. We allocated $117,915 of the purchase price to real estate properties, $39,126 to acquired real estate leases and $1,302 to acquired unfavorable real estate leases. The values assigned to the assets acquired are estimated and the final allocation may differ. |
| P-5 |
FRANKLIN STREET PROPERTIES CORP.
NOTES TO UNAUDITED COMBINING CONDENSED CONSOLIDATED
PRO FORMA FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
| (d) | The following table presents the operations of 1999 Broadway for the period January 1, 2013 through June 30, 2013. |
| Adjustments | ||||||||||||
| 1999 Broadway | resulting from | Pro Forma | ||||||||||
| Historical | Acquisition | Adjustment | ||||||||||
| Revenue: | ||||||||||||
| Rental (1) | $ | 7,275 | $ | 430 | $ | 7,705 | ||||||
| Total revenue | 7,275 | 430 | 7,705 | |||||||||
| Expenses: | ||||||||||||
| Rental operating expenses | 2,187 | — | 2,187 | |||||||||
| Real estate taxes and insurance | 965 | — | 965 | |||||||||
| Selling, general and administrative (2) | 13 | — | 13 | |||||||||
| Depreciation and amortization (3) | — | 5,315 | 5,315 | |||||||||
| Total expenses | 3,165 | 5,315 | 8,480 | |||||||||
| Income (loss) before taxes | 4,110 | (4,885 | ) | (775 | ) | |||||||
| Taxes on income | — | — | — | |||||||||
| Income (loss) from continuing operations | $ | 4,110 | $ | (4,885 | ) | $ | (775 | ) | ||||
| 1) | The pro forma rental adjustment includes amounts related to the amortization of approximately $2,631 of acquired above market leases with a weighted average term of approximately 59 months and approximately $5,551 of acquired below market leases with a weighted average term of approximately 43 months, which are being amortized over the remaining non-cancelable terms in accordance with GAAP. |
| 2) | Acquisition costs described in Pro Forma Adjustment (b) above are treated as if occurred prior to January 1, 2013. |
| 3) | The pro forma adjustment relates to depreciation of approximately $137,726 of acquired building and improvements using a straight-line method over an estimated life of 39 years. In addition, the adjustment includes amortization of the value of approximately $31,025 of acquired in place leases (exclusive of the value of above and/or below market leases), which are being amortized over the remaining non-cancelable weighted average term of approximately 40 months in accordance with GAAP. |
| P-6 |
FRANKLIN STREET PROPERTIES CORP.
NOTES TO UNAUDITED COMBINING CONDENSED CONSOLIDATED
PRO FORMA FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
| (e) | The following table presents the operations of 999 Peachtree for the period January 1, 2013 through June 30, 2013. |
| Adjustments | ||||||||||||
| 999 Peachtree | resulting from | Pro Forma | ||||||||||
| Historical | Acquisition | Adjustment | ||||||||||
| Revenue: | ||||||||||||
| Rental (1) | $ | 8,458 | $ | (102 | ) | $ | 8,356 | |||||
| Total revenue | 8,458 | (102 | ) | 8,356 | ||||||||
| Expenses: | ||||||||||||
| Rental operating expenses | 2,155 | — | 2,155 | |||||||||
| Real estate taxes and insurance | 871 | — | 871 | |||||||||
| Selling, general and administrative (2) | 46 | — | 46 | |||||||||
| Depreciation and amortization (3) | — | 4,536 | 4,536 | |||||||||
| Interest Expense (4) | — | 1,251 | 1,251 | |||||||||
| Total expenses | 3,072 | 5,787 | 8,859 | |||||||||
| Income (loss) before taxes | 5,386 | (5,889 | ) | (503 | ) | |||||||
| Taxes on income | — | — | — | |||||||||
| Income (loss) from continuing operations | $ | 5,386 | $ | (5,889 | ) | $ | (503 | ) | ||||
| 1) | The pro forma rental adjustment includes amounts related to the amortization of approximately $3,070 of acquired above market leases with a weighted average term of approximately 63 months and approximately $1,302 of acquired below market leases with a weighted average term of approximately 41 months, which are being amortized over the remaining non-cancelable terms in accordance with GAAP. |
| 2) | Acquisition costs described in Pro Forma Adjustment (c) above are treated as if occurred prior to January 1, 2013. |
| 3) | The pro forma adjustment relates to depreciation of approximately $107,727 of acquired building and improvements using a straight-line method over an estimated life of 39 years. In addition, the adjustment includes amortization of the value of approximately $36,056 of acquired in place leases (exclusive of the value of above and/or below market leases), which are being amortized over the remaining non-cancelable weighted average term of approximately 69 months in accordance with GAAP. |
| 4) | The pro forma adjustment relates to the effect on interest expense related to the approximately $150,000 of the acquisition funded with borrowing under our revolving credit facility at our then current incremental borrowing rate of 1.65% per annum. |
| P-7 |
FRANKLIN STREET PROPERTIES CORP.
NOTES TO UNAUDITED COMBINING CONDENSED CONSOLIDATED
PRO FORMA FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
| (f) | The following table presents the operations of 1999Broadway for the year ended December 31, 2012. |
| Adjustments | ||||||||||||
| 1999 Broadway | resulting from | Pro Forma | ||||||||||
| Historical | Acquisition | Adjustment | ||||||||||
| Revenue: | ||||||||||||
| Rental (1) | $ | 16,265 | $ | 1,032 | $ | 17,297 | ||||||
| Total revenue | 16,265 | 1,032 | 17,297 | |||||||||
| Expenses: | ||||||||||||
| Rental operating expenses | 4,927 | — | 4,927 | |||||||||
| Real estate taxes and insurance | 1,957 | — | 1,957 | |||||||||
| Selling, general and administrative (2) | 60 | 110 | 170 | |||||||||
| Depreciation and amortization (3) | — | 12,756 | 12,756 | |||||||||
| Total expenses | 6,944 | 12,866 | 19,810 | |||||||||
| Income (loss) before taxes | 9,321 | (11,834 | ) | (2,513 | ) | |||||||
| Taxes on income | — | — | — | |||||||||
| Income (loss) from continuing operations | $ | 9,321 | $ | (11,834 | ) | $ | (2,513 | ) | ||||
| 1) | The pro forma rental adjustment includes amounts related to the amortization of approximately $2,631 of acquired above market leases with a weighted average term of approximately 59 months and approximately $5,551 of acquired below market leases with a weighted average term of approximately 43 months, which are being amortized over the remaining non-cancelable terms in accordance with GAAP. |
| 2) | The pro forma adjustment for acquisition costs described in Pro Forma Adjustment (b) above are treated as if occurred on January 1, 2012. |
| 3) | The pro forma adjustment relates to depreciation of approximately $137,726 of acquired building and improvements using a straight-line method over an estimated life of 39 years. In addition, the adjustment includes amortization of the value of approximately $31,025 of acquired in place leases (exclusive of the value of above and/or below market leases), which are being amortized over the remaining non-cancelable weighted average term of approximately 40 months in accordance with GAAP. |
| P-8 |
FRANKLIN STREET PROPERTIES CORP.
NOTES TO UNAUDITED COMBINING CONDENSED CONSOLIDATED
PRO FORMA FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
| (g) | The following table presents the operations of 999Peachtree for the year ended December 31, 2012. |
| Adjustments | ||||||||||||
| 999 Peachtree | resulting from | Pro Forma | ||||||||||
| Historical | Acquisition | Adjustment | ||||||||||
| Revenue: | ||||||||||||
| Rental (1) | $ | 16,215 | $ | (204 | ) | $ | 16,011 | |||||
| Total revenue | 16,215 | (204 | ) | 16,011 | ||||||||
| Expenses: | ||||||||||||
| Rental operating expenses | 4,645 | — | 4,645 | |||||||||
| Real estate taxes and insurance | 1,662 | — | 1,662 | |||||||||
| Selling, general and administrative (2) | 110 | 225 | 335 | |||||||||
| Depreciation and amortization (3) | — | 9,072 | 9,072 | |||||||||
| Interest (4) | — | 2,502 | 2,502 | |||||||||
| Total expenses | 6,417 | 11,799 | 18,216 | |||||||||
| Income (loss) before taxes | 9,798 | (12,003 | ) | (2,205 | ) | |||||||
| Taxes on income | — | — | — | |||||||||
| Income (loss) from continuing operations | $ | 9,798 | $ | (12,003 | ) | $ | (2,205 | ) | ||||
| 1) | The pro forma rental adjustment includes amounts related to the amortization of approximately $3,070 of acquired above market leases with a weighted average term of approximately 63 months and approximately $1,302 of acquired below market leases with a weighted average term of approximately 41 months, which are being amortized over the remaining non-cancelable terms in accordance with GAAP. |
| 2) | The pro forma adjustment for acquisition costs described in Pro Forma Adjustment (c) above are treated as if occurred on January 1, 2012. |
| 3) | The pro forma adjustment relates to depreciation of approximately $107,727 of acquired building and improvements using a straight-line method over an estimated life of 39 years. In addition, the adjustment includes amortization of the value of approximately $36,056 of acquired in place leases (exclusive of the value of above and/or below market leases), which are being amortized over the remaining non-cancelable weighted average term of approximately 69 months in accordance with GAAP. |
| 4) | The pro forma adjustment relates to the effect on interest expense related to the approximately $150,000 of the acquisition funded with borrowing under our revolving credit facility at our then current incremental borrowing rate of 1.65% per annum. |
| P-9 |