Exhibit 99.1
PRESS RELEASE Franklin Street Properties Corp.
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401 Edgewater Place o Suite 200 o Wakefield, Massachusetts 01880-6210
(781) 557-1300 o www.franklinstreetproperties.com
Contact: Donna Brownell 877-686-9496 FOR IMMEDIATE RELEASE
FRANKLIN STREET PROPERTIES CORP. ANNOUNCES
SECOND QUARTER 2005 RESULTS
Wakefield, MA--August 4, 2005--Franklin Street Properties Corp. ("Franklin
Street Properties", the "Company" or "FSP") (AMEX: FSP) announced today Net
Income and Cash Available for Distribution (CAD) for the three and six months
ended June 30, 2005.
The Company evaluates its performance based on both Net Income and CAD, and
believes each is an important measure. The Company considers both measurements
in determining distributions paid to equity holders. A reconciliation of Net
Income to CAD is provided on page 2 of this press release.
o For the three months ended June 30, 2005 Net Income was $9,454,000 or
$0.17 per share (based on 56,815,000 shares), compared to $13,676,000 or
$0.28 per share (based on 49,630,000 shares) for the same period in 2004.
o CAD for the three months ended June 30, 2005 was $15,655,000 or $0.28 per
share (based on 56,815,000 shares), compared to $16,637,000 or $0.34 per
share (based on 49,630,000 shares) for the same period in 2004.
o For the six months ended June 30, 2005 Net Income was $19,877,000 or $0.37
per share (based on 53,242,000 shares), compared to $26,895,000 or $0.54
per share (based on 49,627,000 shares) for the same period in 2004.
o CAD for the six months ended June 30, 2005 was $29,337,000 or $0.55 per
share (based on 53,242,000 shares), compared to $32,714,000 or $0.66 per
share (based on 49,627,000 shares) for the same period in 2004.
The decreases in Net Income and CAD for the three and six month periods ended
June 30, 2005 were primarily attributable to:
o A decrease in contribution from our investment banking business.
o During the first quarter of 2004, revenues included a lease termination
payment of $1.2 million, which did not recur in 2005.
o Net income for the second quarter of 2005 was impacted by the recording of
an estimate of a loss on a property held for sale in California, which was
under agreement and sold on July 13, 2005.
o These decreases were partially offset by an increase in net operating
income resulting from the addition of four properties acquired by merger
effective April 30, 2005 in the second quarter, compared to results for
the same period in 2004.
George J. Carter, President and CEO of FSP commented "Lower Net Income and CAD
levels for the second quarter and first half of 2005 were anticipated, and
consequently planned for within the FSP business/investment model. Second half
2005 results are expected to be stronger."
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A reconciliation of Net Income to CAD is below and a CAD definition is on
Supplemental Schedule E:
Three Months Ended Six Months Ended
June 30, June 30,
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(In thousands except per share amounts) 2005 2004 2005 2004
---- ---- ---- ----
Net income $ 9,454 $ 13,676 $ 19,877 $ 26,895
Estimated loss on asset held for sale 1,055 -- 1,055 --
GAAP income from non-consolidated REITs (303) (182) (968) (808)
Distributions from non-consolidated REITs 381 173 980 755
Depreciation of real estate & intangible amortization 5,486 3,556 9,117 6,815
Straight-line rent (418) (514) (724) (854)
Capital expenditures (1,601) (502) (1,928) (619)
Payments of deferred leasing costs (215) (101) (311) (252)
Proceeds from funded reserves 1,816 531 2,239 782
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Cash Available for Distribution (CAD) $ 15,655 $ 16,637 $ 29,337 $ 32,714
====================== ======================
Per Share Data
EPS $ 0.17 $ 0.28 $ 0.37 $ 0.54
CAD $ 0.28 $ 0.34 $ 0.55 $ 0.66
Weighted average shares (basic and diluted) 56,815 49,630 53,242 49,627
====================== ======================
Dividend announcement:
On July 29, 2005, the Board of Directors of FSP declared a cash dividend of
$0.21 per share of common stock payable on August 29, 2005 to stockholders of
record on August 8, 2005. The cash dividend represents two months of operations.
FSP's past practice has been to declare quarterly cash dividends representing
three months of operations. However, on April 19, 2005, in anticipation of the
consummation of the acquisition of four REITs by merger on April 30, 2005, the
Company declared a dividend representing the first four months of operations in
2005. The dividend declared by FSP on July 29, 2005 therefore represents the
remaining two months in the second quarter of 2005. The two dividends together,
$0.62, are in respect of the first six months of operations for 2005.
Message from George J. Carter, President and CEO
George J. Carter, President and CEO of the Company, commented on the impact of
general market trends on the Company, as follows:
"Financial results for the second quarter and first half of 2005 continue to
reflect the impact of the `significant' move upward in commercial real estate
prices which began in the second half of 2003. Higher prices for quality
commercial real estate have dramatically reduced the number of potential
property acquisitions that meet FSP's investment return criteria, both for its
own portfolio and for its investment banking subsidiary. Our experience is that
this lofty market pricing usually results in lower initial cash flow yields.
Consequently, even on properties that meet our overall investment return
parameters, lower initial yields, although only one element of total return,
have been less appealing to our investment banking clients. As a result,
investment sales have been lower. While our investment banking business is
currently suffering from these market forces, we continue to believe in its
long-term importance as a strategic source of revenue and new property
acquisition opportunities to FSP. Historically, our investment bank's equity
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sourcing capability tends to be somewhat counter-cyclical, and we believe that
the current pricing/valuation climate for commercial investment properties is,
likely to be viewed in retrospect, as just another point in time of what has
historically been a cyclical capital market asset.
The current higher prices being paid for commercial investment real estate have
made us take a hard look at our real estate asset base. There are properties in
our portfolio, which we believe have potential merit as sale candidates for a
variety of reasons, some "property specific" and some "market driven". However,
we generally consider sales of properties viable only if there is a potentially
better property in which to reinvest the sales proceeds. Without any permanent
mortgage debt and with significant cash already on the balance sheet, property
sales would generate cash that is not currently needed for reserves or for
mortgage debt pay down. Cash does not generate significant returns these days,
and, consequently, we are less likely to consider any significant property sales
until the Company has acquired other properties that we believe have the
potential to outperform the ones being sold. Market conditions and pricing of
potentially acceptable property acquisitions have presented a challenge.
However, potentially acceptable acquisition and sale opportunities are appearing
more likely for the second half of 2005 and could, if consummated, positively
impact 2005 second half results.
In addition to potential property sales and acquisitions, FSP has several
properties in its portfolio which have excess developable land. The possibility
exists that we will take advantage of some of these land resources in the future
in markets where we want to continue to expand our presence. We may develop new
buildings on this land where market conditions are attractive and where
investment returns, through the construction process, have the potential to
exceed investment returns offered by acquiring existing properties in those
markets."
Real Estate
The trends in our office markets have remained consistent across the last few
quarters with slow employment growth leading to slow improvement in occupancy
and an almost imperceptible improvement in market rents. While market rents for
new leases may be increasing in some areas, the new market rents are generally
lower than expiring rents in most of our markets, particularly for those leases
that were made at the height of the market four to five years ago. We expect to
continue to see a decrease in rents to market rents for leases at our properties
that expire during the rest of the year unless there is dramatic improvement in
market fundamentals.
Our apartment properties are beginning to see improving market conditions,
despite recent competition from condominiums in addition to the usual
competition from other apartments and new homes. If the improvement continues,
we expect it will first manifest itself in higher occupancy and lower rent
concessions, before there is any significant increase in rental rates.
A supplemental schedule is attached which presents the real estate portfolio as
of June 30, 2005.
Investment Banking/Investment Services
Unlike our real estate operations business, which provides a rental revenue
stream which is ongoing and recurring in nature, our investment
banking/investment services business is transactional in nature. Both the number
of Sponsored REIT syndications and the amount of equity anticipated to be raised
for the balance of 2005 are likely to be below our 2004 levels. Future business
in this area is very unpredictable.
Our property acquisition executives continue to be concerned about continued
high valuation levels for prime commercial investment real estate in 2005. It
appears that a combination of factors, including relatively low interest rates,
a growing general economy and a substantial increase to capital allocation for
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real estate assets is increasing prices on many properties we would have an
interest in acquiring. This upward pressure on prices is causing capitalization
rates to fall and prices per square foot to rise. Consequently, our acquisition
executives are having a difficult time identifying enough property during 2005
at a price acceptable under our investment criteria to grow our overall
investment banking/investment services business. Lower revenues from this
business continue to reduce the cash available for distribution to stockholders
as dividends. As the third quarter of 2005 begins, valuation levels for many top
quality investment properties remain at historically high levels, with
significant competition from a variety of capital sources to acquire them. Lower
capitalization rates on properties acquired for investment syndication mean
lower initial cash flow yields for potential equity investors in our Sponsored
REITs. Consequently we experienced slower sales of these investments to our
clients and prospective clients. We expect this trend to continue for the
balance of 2005. We continue to rely solely on our in-house investment
executives to access interested investors who have capital they can afford to
place in an illiquid position for an indefinite period of time (i.e., invest in
a Sponsored REIT). We also continue to evaluate our in-house sales force, as to
whether we are capable, either through our existing client base or through new
clients, of raising sufficient investment capital in Sponsored REITs to achieve
future performance objectives.
As of June 30, 2005 there was one investment banking transaction underway for an
office property located in Texas.
Today's news release, along with other news about Franklin Street Properties
Corp., is available on the Internet at www.franklinstreetproperties.com.
The Company began trading its stock on the American Stock Exchange in June 2,
2005 and intends to commence a quarterly conference call and webcast when it
reports results for the third quarter of 2005, in early November.
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Company Information
FSP is a self-administered equity real estate investment trust ("REIT") that
acquires, owns and operates commercial and residential properties, primarily in
the suburban office segment. Our real estate operations include leasing, interim
acquisition financing and asset/property management, which generate rental
income, loan origination fees and management fees, respectively. Our subsidiary,
FSP Investments LLC (member, NASD and SIPC), a real estate investment banking
firm and a registered broker/dealer, organizes single purpose entities that own
real estate and conducts the private placement of equity in those entities.
Forward-Looking Statements
Statements made in this press release that state FSP's or management's
intentions, beliefs, expectations, or predictions for the future are
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 changes in economic conditions in the markets in which we own
properties, changes in the demand by investors for investment in Sponsored
REITs, 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 factors set forth our Quarterly Report on Form 10-Q for the three months
ended March 31, 2005 under the caption, "Certain Factors That May Affect Future
Results". 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
Earnings Release
Supplementary information
Table of contents
Franklin Street Properties A-B
Real estate portfolio summary information C
Other supplementary information D
Definition of Cash Available for Distribution E
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Franklin Street Properties Financial Results
Supplementary Schedule A
Income Statement
(Unaudited)
For the For the
Three Months Ended Six Months Ended
June 30, June 30,
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(in thousands, except per share amounts) 2005 2004 2005 2004
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Revenue:
Rental $ 21,748 $ 17,564 $ 38,982 $ 36,439
Related party revenue:
Syndication fees 1,603 5,407 4,122 8,448
Transaction fees 1,595 5,193 4,038 8,742
Management fees and interest income from loans 481 124 1,451 253
Other -- 11 13 16
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Total revenue 25,427 28,299 48,606 53,898
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Expenses:
Real estate operating expenses 4,528 3,576 8,067 6,942
Real estate taxes and insurance 2,902 2,279 5,239 4,729
Depreciation and amortization 4,621 3,544 8,160 6,843
Selling, general and administrative 1,741 1,606 3,567 3,294
Commissions 867 2,767 2,191 4,287
Interest 788 253 1,743 517
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Total expenses 15,447 14,025 28,967 26,612
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Income before interest income, equity in earnings of
non-consolidated REITs and taxes on income 9,980 14,274 19,639 27,286
Interest income 367 127 597 363
Equity in earnings of non-consolidated REITs 302 6 968 385
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Income before taxes on income 10,649 14,407 21,204 28,034
Income tax expense 70 648 114 976
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Income from continuing operations 10,579 13,759 21,090 27,058
Loss from discontinued operations (70) (83) (158) (163)
Estimated loss on asset held for sale (1,055) -- (1,055) --
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Net income $ 9,454 $ 13,676 $ 19,877 $ 26,895
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Weighted average number of shares outstanding,
basic and diluted 56,815 49,630 53,242 49,627
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Net income from continuing operations $ 0.19 $ 0.28 $ 0.39 $ 0.54
Loss from discontinued operations -- -- -- --
Estimated loss on asset held for sale (0.02) -- (0.02) --
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Net income per share, basic and diluted $ 0.17 $ 0.28 $ 0.37 $ 0.54
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Franklin Street Properties Financial Results
Supplementary Schedule B
Balance Sheet
(Unaudited)
(in thousands, except shares and par value amounts) June 30, December 31,
2005 2004
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Assets:
Real estate investments, net $ 568,255 $ 439,755
Acquired real estate leases, net of accumulated amortization 23,549 6,483
Investment in non-consolidated REITs 4,215 4,270
Assets held for syndication 53,646 59,246
Asset held for sale 4,766 -
Cash and cash equivalents 51,475 52,752
Restricted cash 1,326 1,033
Straight-line rent receivable 5,506 4,947
Deferred leasing commissions, net 1,584 1,484
Current and other assets 3,606 3,141
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Total assets $ 717,928 $ 573,111
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Liabilities and Stockholders' Equity:
Liabilities:
Bank note payable 53,213 59,439
Accounts payable, accrued expenses and tenant deposits 12,906 10,584
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Total liabilities 66,119 70,023
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Stockholders' Equity:
Common Stock, $.0001 par value, 180,000,000 shares
authorized, 60,525,608 and 49,630,338 issued and outstanding 6 5
Additional paid-in capital 677,397 512,813
Treasury stock, 898 and 575 shares, respectively (16) (10)
Distributions in excess of earnings (25,578) (9,720)
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Total Stockholders' Equity 651,809 503,088
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Total Liabilities and Stockholders' Equity $ 717,928 $ 573,111
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Franklin Street Properties Earnings Release
Supplementary Schedule C
Real Estate Portfolio Summary
(Unaudited)
June 30, 2005
30-Jun-2005 31-Dec-2004
---------------- --------------
Residential real estate
Number of properties 4 4
Number of apartments 837 837
Square feet 761,311 761,311
Leased percentage 97% 94%
Commercial real estate
Number of properties 28 24
Square feet 3,952,011 3,051,748
Leased percentage 91% 89%
Combined Portfolio
Number of properties 32 28
Square feet 4,713,322 3,813,059
Leased percentage 92% 90%
Property by state:
(In Thousands
except Square Foot Data) As of June 30, 2005
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# of Net % of Square % of
State Properties Investment Portfolio Feet Portfolio
- ----- ---------- ---------- --------- ---- ---------
Texas 7 $ 173,578 30.5% 1,354,300 28.7%
Virginia 3 85,560 15.1% 503,479 10.7%
Missouri 2 58,945 10.4% 349,034 7.4%
California 6 63,253 11.1% 512,708 10.9%
Illinois 1 27,813 4.9% 176,848 3.8%
Massachusetts 3 26,280 4.6% 385,157 8.2%
Georgia 1 23,969 4.2% 161,366 3.4%
Maryland 2 24,087 4.2% 287,564 6.1%
North Carolina 2 15,559 2.7% 171,762 3.6%
Louisiana 1 15,145 2.7% 223,812 4.7%
Michigan 1 15,240 2.7% 215,306 4.6%
Washington 1 15,025 2.6% 117,227 2.5%
Colorado 1 13,107 2.3% 110,730 2.3%
South Carolina 1 10,695 1.9% 144,029 3.1%
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Total 32 $ 568,255 100.0% 4,713,322 100.0%
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Franklin Street Properties Earnings Release
Supplementary Schedule D
(Unaudited)
June 30, 2005
Property by type:
(In Thousands
except Square Foot Data) As of June 30, 2005
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# of Net % of Square % of
Type Properties Investment Portfolio Feet Portfolio
- ---- ---------- ---------- --------- ---- ---------
Apartments 4 $ 57,918 10.2% 761,311 16.2%
Office 26 495,799 87.2% 3,665,266 77.8%
Industrial 2 14,539 2.6% 286,745 6.1%
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Total 32 $ 568,255 100.0% 4,713,322 100.0%
======================================= =========================
Commercial portfolio lease expirations (1)
Total % of
Year Square Feet Portfolio
---- ----------- ---------
2005 176,740 4.5%
2006 623,224 15.8%
2007 503,320 12.7%
2008 152,568 3.9%
2009 1,034,892 26.2%
2010 682,469 17.3%
Thereafter 778,798 19.7%
--------------------------
3,952,011 100%
==========================
(1) Percentages are determined based upon square footage of expiring
commercial leases. Expirations exclude apartments, which generally
are one year or less.
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Franklin Street Properties Earnings Release
Supplementary Schedule E
Definition of Cash Available for Distribution ("CAD")
The Company evaluates the performance of its reportable segments based on
several measures including Cash Available for Distribution ("CAD") as management
believes that CAD represents an important measure of the reportable segment's
activity and is an important consideration in determining distributions paid to
equity holders. The Company defines CAD as: net income as computed in accordance
with accounting principles generally accepted in the United States of America
("GAAP"); excluding gains or losses on the sale of real estate and non-cash
income from Sponsored REITs; plus certain non-cash items included in the
computation of net income (depreciation and amortization and straight-line rent
adjustments); plus distributions received from Sponsored REITs; plus the net
proceeds from the sale of land; less purchases of property and equipment
("Capital Expenditures") and payments for deferred leasing commissions, plus
proceeds from (payments to) cash reserves established at the acquisition date of
the property. Depreciation and amortization, gain or loss on the sale of real
estate and straight-line rents are an adjustment to CAD, as these are non-cash
items included in net income. Capital expenditures, payments of deferred leasing
commissions and the proceeds from (payments to) the funded reserve are an
adjustment to CAD, as they represent cash items not reflected in net income.
The funded reserve represents funds that the Company has set aside in
anticipation of future capital needs. These reserves are typically used for the
payment of capital expenditures, deferred leasing commissions and certain tenant
allowances; however, there are no legal restrictions on their use and they may
be used for any Company purpose. CAD should not be considered as an alternative
to net income (determined in accordance with GAAP), as an indicator of the
Company's financial performance, nor as an alternative to cash flows from
operating activities (determined in accordance with GAAP), nor as a measure of
the Company's liquidity, nor is it necessarily indicative of sufficient cash
flow to fund all of the Company's needs. Other real estate companies may define
CAD in a different manner. It is at the Company's discretion to retain a portion
of CAD for operational needs. We believe that in order to facilitate a clear
understanding of the results of the Company, CAD should be examined in
connection with net income and cash flows from operating, investing and
financing activities in the consolidated financial statements.