Exhibit 99.1
PRESS RELEASE Franklin Street Properties Corp.
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401 Edgewater Place
Suite 200
Wakefield, Massachusetts 01880-6210
(781)557-1300
www.franklinstreetproperties.com
Contact: Donna Brownell 877-686-9496 FOR IMMEDIATE RELEASE
FRANKLIN STREET PROPERTIES CORP. ANNOUNCES
THIRD QUARTER 2005 RESULTS
Wakefield, MA -- October 31, 2005 -- Franklin Street Properties Corp. ("Franklin
Street Properties", the "Company" or "FSP") (AMEX: FSP) announced today net
income, Earnings Per Share (EPS) and Cash Available for Distribution (CAD) for
the three and nine months ended September 30, 2005.
The Company evaluates its performance based on net income, EPS and CAD, and
believes each is an important measure. The Company considers these 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 EPS for the three months ended September 30, 2005 increased $0.30
per share to $0.44 per share compared to the three months ended
September 30, 2004. Net income was $26.8 million or $0.44 per share
(based on 60.5 million shares), compared to $6.9 million or $0.14
per share (based on 49.6 million shares) in 2004.
o CAD for the three months ended September 30, 2005 increased $0.10
per share to $0.31 per share compared to the three months ended
September 30, 2004. CAD was $18.7 million or $0.31 per share (based
on 60.5 million shares), compared to $10.3 million or $0.21 per
share (based on 49.6 million shares) in 2004.
o EPS for the nine months ended September 30, 2005 increased $0.16 per
share to $0.84 per share compared to the nine months ended September
30, 2004. Net income was $46.7 million or $0.84 per share (based on
55.7 million shares), compared to $33.8 million or $0.68 per share
(based on 49.6 million shares) in 2004.
o CAD for the nine months ended September 30, 2005 was $48.0 million
or $0.86 per share (based on 55.7 million shares), compared to $43.0
million or $0.87 per share (based on 49.6 million shares) for the
same period in 2004.
The increases in net income and CAD for the three and nine month periods ended
September 30, 2005 were primarily attributable to:
o Increased net operating income from four properties acquired by
merger effective April 30, 2005, and acquisitions of two properties
in Colorado and Indiana. The purchase price of the properties
acquired was financed with proceeds from asset sales of properties
in our portfolio. The last two asset sales, which were for two
residential properties in Houston, were completed in October and our
line of credit was repaid in full.
o Gains on sales of assets for the three and nine month periods ended
September 30, 2005 of $14.3 million and $13.2 million, respectively.
Included were sales of a residential property in Louisiana and sale
by transfer of interest in an office property in Maryland, which
were sold at an aggregate gain of $14.0 million; a gain on
contribution of land of $339,000; and a loss on the sale of a
property in California of $1.1 million, which had been provided for
in our second quarter, and closed in early July. Net gains on sale
of assets were $0.24 per share for both the three and nine month
periods.
o Stronger investment banking results in the third quarter of 2005
compared to 2004. Gross proceeds on the sale of securities, which
our investment banking revenues are based upon, for the three months
ended September 30, 2005 were $44.0 million compared to $2.7 million
during the same period in 2004. However, investment banking results
for the nine month periods were lower in 2005 than 2004, as gross
proceeds were $105.3 million compared to $134.9 million during the
same period in 2004.
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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 Nine Months Ended
September 30, September 30,
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(In thousands except per share amounts) 2005 2004 2005 2004
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Net income $ 26,815 $ 6,945 $ 46,692 $ 33,840
Gain on sales of assets, net (14,316) -- (13,260) --
GAAP income from non-consolidated REITs (328) (79) (1,295) (887)
Distributions from non-consolidated REITs 107 96 1,087 851
Depreciation of real estate & intangible amortization 6,864 3,345 15,979 10,160
Straight-line rent (443) (39) (1,167) (893)
Capital expenditures (360) (374) (2,288) (993)
Payments of deferred leasing costs (199) (296) (510) (548)
Proceeds from funded reserves 559 659 2,798 1,441
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Cash Available for Distribution (CAD) $ 18,699 $ 10,257 $ 48,036 $ 42,971
=========================== ============================
Per Share Data
EPS $ 0.44 $ 0.14 $ 0.84 $ 0.68
CAD $ 0.31 $ 0.21 $ 0.86 $ 0.87
Weighted average shares (basic and diluted) 60,526 49,630 55,697 49,628
=========================== ============================
Real Estate and Investment Banking Update
During 2005 we have acquired four properties by merger and two by acquisition.
We have sold, or are under agreement to sell, a total of six properties. As of
September 30, 2005, three of the six property sales were completed, and the
remaining three have been classified in our balance sheet as assets
held-for-sale. Earlier in October we completed the sale of two of these
properties at a gain of approximately $10.2 million, and the last property sale
is expected to result in a gain in December.
A supplemental schedule is attached which presents the continuing real estate
portfolio of 28 properties as of September 30, 2005.
During the quarter ending September 30, 2005 we completed two investment banking
transactions, one was for an office property in Dallas, Texas, and the other was
for development of an office property in Houston, Texas. Another investment
banking transaction is planned for the fourth quarter.
Dividend announcement:
On October 5, 2005 the Board of Directors of FSP declared a cash dividend of
$0.31 per share of common stock payable on November 21, 2005 to stockholders of
record as of October 31, 2005. The total amount of dividends declared to date
during 2005 is $1.24 per share.
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Message from George J. Carter, President and CEO
George J. Carter, President and CEO of the Company, commented as follows:
"Improving Net Income, EPS and CAD levels for the third quarter of 2005 were
expected and, consequently, planned for within the FSP business/investment
model. I am optimistic about the Company's financial performance outlook for the
balance of 2005 and going into 2006.
More specifically, financial results for the third quarter of 2005 reflected:
#1) solid performance in rental operations from the Company's portfolio of
properties; #2) significant gains from real estate sales and the reinvestment of
those sale proceeds into newly-acquired properties; and #3) the closing of real
estate investment banking business totaling $44 million. All three of these
areas of the Company's operations are showing good potential for continued
contribution to FSP's financial performance in the coming months.
#1) For the third quarter of 2005, the Company's continuing portfolio of 28
properties was 93% leased. Most of FSP's properties are suburban office
buildings, and, in most of our markets, we are finding improving conditions for
both occupancy and rental rates. However, there are still many tenant leases
which were signed at the height of the most recent office market cycle
(approximately 1997-2001). If those leases were to roll to market today either
through renewal or vacancy/new tenant, many could still suffer a "roll-down" in
rental rates. An improving U.S. economy and corresponding increase in demand for
office space in most markets is very encouraging, and FSP is aggressively
managing its lease turnover to maximize our rental operations' contribution as
the office markets begin to climb back up their cyclical curve. Concern always
remains about the possibility of a new, significant downturn in the broader
economy that would reverse the positive trends our markets are seeing now.
Disasters such as Hurricanes Katrina and Rita still have unknown longer-term
economic effects, and concerns about potential rising worldwide energy prices,
inflation and interest rates are likely to be influencing factors.
#2) During the third quarter of 2005, the Company sold two properties for
significant gains. Early in the fourth quarter, FSP sold two additional
properties also for significant gains. All of the proceeds from these sales were
used to pay down the Company's line of credit, which had been drawn down to
purchase two new acquisition properties ahead of the contemplated portfolio
sales. FSP now owns the two new acquisition properties without any debt (i.e.,
all cash), as it does every other property in its portfolio. A portion of these
asset sales and new acquisitions were completed using a "reverse 1031 exchange"
program, which defers gain recognition for tax purposes. There continue to be
properties in our portfolio which we believe have potential as sale candidates
for a variety of reasons, some "property specific" and some "market driven."
However, we generally consider property sales viable only if there is a
potentially better property, or other investment, in which to reinvest the sale
proceeds. Without any permanent mortgage debt, and with significant cash already
on the balance sheet, property sales generate cash that is not currently needed
for reserves or for mortgage debt pay down. Consequently, identifiable, targeted
and controlled reinvestment vehicles for these sale proceeds are important.
Current high market pricing and competition for potentially acceptable property
acquisitions continue to present challenges, but new opportunities are beginning
to appear more plentiful than in the past two years. Upgrading FSP's portfolio
is an ongoing objective. In addition to new real estate acquisitions in which to
reinvest proceeds from portfolio property sales, the Company, because of its
public listing on the AMEX on June 2, 2005, now has the option to more easily
reinvest its cash into its own stock. On October 28, 2005, FSP's Board of
Directors approved a share repurchase program. The adoption of the stock
repurchase program will allow the Company the option of investment of its cash
in its stock in addition to investment in new acquisition properties, when the
relative financial opportunity is favorable.
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#3) Third quarter investment banking business improved over the first and second
quarters of 2005, totaling $44 million of "closed-in" investor capital
subscribed in two separate property transactions. One of the transactions
involved the raising of $27 million to fund FSP Park Ten Development Corp., the
Company's first pure development project. FSP has several properties in its
portfolio which have excess developable land, and in the case of FSP Park Ten
Development Corp., the Company contributed land it owned for an equity stake in
the new project. We also earned a development fee from this transaction. FSP's
Investment Banking group has had a difficult time during the last two years
finding properties that meet its investment return criteria. Higher pricing and
greater competition for quality commercial real estate have reduced the number
of attractive potential acquisitions we would consider. However, new property
acquisition opportunities become available all the time, and with interest rates
just beginning to rise on medium- and long-term debt instruments, cap rate
pricing and competitive demand pressures may start to become more favorable to
our investment return model. Historically, our investment bank's equity 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."
Today's news release, along with other news about Franklin Street Properties
Corp., is available on the Internet at www.franklinstreetproperties.com.
A conference call is scheduled for November 1, 2005 at 10:00 a.m. (EDT) to
discuss the third quarter results. The toll free number is 1-800-901-5259,
passcode 91687125. Internationally, the call may be accessed by dialing
1-617-786-4514, passcode 91687125. The call will also be available via a live
webcast, which can be accessed at least 10 minutes before the start time through
the Webcasts & Presentations section of our Investor Relations section at
www.franklinstreetproperties.com. A replay of the conference call will be
available on the Company's website one hour after the call.
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About Franklin Street Properties
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, development 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 June 30, 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 Financial Results 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 Nine Months Ended
September 30, September 30,
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(in thousands, except per share amounts) 2005 2004 2005 2004
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Revenue:
Rental $21,713 $ 13,672 $55,290 $44,675
Related party revenue:
Syndication fees 2,856 155 6,977 8,603
Transaction fees 2,850 467 6,888 9,209
Management fees and interest income from loans 149 183 1,602 439
Other 4 -- 10 5
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Total revenue 27,572 14,477 70,767 62,931
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Expenses:
Real estate operating expenses 4,961 2,797 11,842 8,458
Real estate taxes and insurance 2,826 1,690 7,296 5,572
Depreciation and amortization 4,218 2,639 11,130 8,256
Selling, general and administrative 2,034 1,626 5,601 4,921
Commissions 1,457 98 3,648 4,384
Interest 1,082 -- 2,825 517
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Total expenses 16,578 8,850 42,342 32,108
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Income before interest income, equity in earnings of
non-consolidated REITs and taxes on income 10,994 5,627 28,425 30,823
Interest income 451 139 1,048 498
Equity in earnings of non-consolidated REITs 328 79 1,295 464
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Income before taxes on income 11,773 5,845 30,768 31,785
Income tax expense 184 (216) 298 760
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Income from continuing operations 11,589 6,061 30,470 31,025
Income from discontinued operations 910 884 2,962 2,815
Gain on sale of assets, net 14,316 -- 13,260 --
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Net income $26,815 $ 6,945 $46,692 $33,840
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Weighted average number of shares outstanding,
basic and diluted 60,526 49,630 55,697 49,628
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Net income from continuing operations $ 0.19 $ 0.12 $ 0.55 $ 0.63
Income from discontinued operations 0.01 0.02 0.05 0.05
Gain on sale of assets, net 0.24 -- 0.24 --
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Net income per share, basic and diluted $ 0.44 $ 0.14 $ 0.84 $ 0.68
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Franklin Street Properties Financial Results
Supplementary Schedule B
Condensed Balance Sheet
(Unaudited)
(in thousands, except shares and par value amounts) September 30, December 31,
2005 2004
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Assets:
Real estate investments, net $ 562,241 $ 357,911
Acquired real estate leases, net of accumulated amortization 33,225 6,464
Investment in non-consolidated REITs 5,040 4,270
Assets held for syndication -- 59,246
Assets held for sale 41,830 83,045
Cash and cash equivalents 66,215 52,752
Restricted cash 1,338 1,033
Straight-line rent receivable 5,240 4,122
Deferred leasing commissions, net 1,330 1,127
Current and other assets 2,780 3,141
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Total assets $ 719,239 $ 573,111
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Liabilities and Stockholders' Equity:
Liabilities:
Bank note payable 37,135 59,439
Accounts payable, accrued expenses, tenant deposits & other liabilities 16,190 10,584
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Total liabilities 53,325 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 (11,473) (9,720)
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Total Stockholders' Equity 665,914 503,088
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Total Liabilities and Stockholders' Equity $ 719,239 $ 573,111
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Franklin Street Properties Earnings Release
Supplementary Schedule C
Real Estate Portfolio Summary
(Unaudited)
September 30, 2005
30-Sep-2005 31-Dec-2004
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Residential real estate
Number of properties 1 4
Number of apartments 228 837
Square feet 231,363 761,311
Leased percentage 100% 94%
Commercial real estate
Number of properties 27 24
Square feet 4,018,544 3,051,748
Leased percentage 92% 89%
Combined portfolio
Number of properties 28 28
Square feet 4,249,907 3,813,059
Leased percentage 93% 90%
Property by state:
(In Thousands
except Square Foot Data) As of September 30, 2005
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# of Net % of Square % of
State Properties Investment Portfolio Feet Portfolio
- ----- ---------- ---------- --------- ---- ---------
Texas 5 $ 145,709 25.9% 1,049 24.6%
Virginia 3 85,057 15.1% 503 11.8%
Missouri 2 58,641 10.4% 349 8.2%
California 4 48,064 8.5% 364 8.6%
Colorado 2 45,853 8.2% 310 7.3%
Indiana 1 39,677 7.1% 205 4.8%
Illinois 1 27,644 4.9% 177 4.2%
Massachusetts 3 26,101 4.6% 385 9.1%
Georgia 1 23,835 4.2% 161 3.8%
North Carolina 2 15,482 2.8% 172 4.0%
Michigan 1 15,156 2.7% 215 5.1%
Washington 1 14,940 2.7% 117 2.8%
South Carolina 1 10,703 1.9% 144 3.4%
Maryland 1 5,379 1.0% 99 2.3%
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Total 28 $ 562,241 100.0% 4,250 100.0%
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Franklin Street Properties Earnings Release
Supplementary Schedule D
(Unaudited)
September 30, 2005
Property by type:
(In Thousands
except Square Foot Data) As of September 30, 2005
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# of Net % of Square % of
Type Properties Investment Portfolio Feet Portfolio
- ---- ---------- ---------- --------- ---- ---------
Apartments 1 16,203 2.9% 231 5.4%
Office 25 531,572 94.5% 3,732 87.8%
Industrial 2 14,466 2.6% 287 6.8%
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Total 28 $ 562,241 100.0% 4,250 100.0%
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Commercial portfolio lease expirations (1)
Total % of
Year Square Feet Portfolio
---- ----------- ---------
2005 111,354 2.8%
2006 755,049 18.8%
2007 442,552 11.0%
2008 149,554 3.7%
2009 991,426 24.7%
2010 736,872 18.3%
Thereafter 831,737 20.7%
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4,018,544 100%
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(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.