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
2005 YEAR END RESULTS
Wakefield, MA--February 21, 2006--Franklin Street Properties Corp. ("Franklin
Street Properties", the "Company" or "FSP") (AMEX: FSP) announced today net
income and Earnings Per Share (EPS) for the year ended December 31, 2005, which
were the highest in FSP history. The Company also announced Adjusted Funds From
Operations (AFFO) for 2005, and an update to its share repurchase program.
The Company evaluates its performance based on net income, EPS and AFFO, 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 AFFO (a "Non-GAAP financial measure") is provided on page 2 of this
press release.
o EPS for the three months ended December 31, 2005 increased $0.19 per share
to $0.47 per share compared to the three months ended December 31, 2004.
Net income was $28.4 million or $0.47 per share (based on 60.3 million
shares), compared to $13.9 million or $0.28 per share (based on 49.6
million shares) in 2004.
o AFFO for the three months ended December 31, 2005 decreased $0.07 per
share to $0.28 per share compared to the three months ended December 31,
2004. AFFO was $16.9 million or $0.28 per share (based on 60.3 million
shares), compared to $17.2 million or $0.35 per share (based on 49.6
million shares) in 2004.
o EPS for the year ended December 31, 2005 increased $0.36 per share to
$1.32 per share compared to the year ended December 31, 2004. Net income
was $75.1 million or $1.32 per share (based on 56.8 million shares),
compared to $47.8 million or $0.96 per share (based on 49.6 million
shares) in 2004.
o AFFO for the year ended December 31, 2005 increased $4.8 million to $65.0
million or $1.14 per share (based on 56.8 million shares), compared to
$60.2 million or $1.21 per share (based on 49.6 million shares) for the
same period in 2004.
The following factors affected net income, EPS and AFFO for the three months and
year ended December 31, 2005:
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.
o Gains on sales of assets for the quarter and year ended December 31, 2005
of $17.2 million and $30.5 million, respectively. During the fourth
quarter, we realized gains on the sale of two residential properties in
Texas and a commercial property located in California. During the first
three quarters of 2005, we sold by transfer of our interest in our wholly
owned subsidiary that held the property, an office property in Maryland
and we sold a residential property in Louisiana, which were sold at an
aggregate gain of approximately $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. Net gains on sale of assets were $0.28 and $0.54 per share
for the fourth quarter and full year, respectively.
o These increases were partially offset by lower investment banking results
for the fourth quarter and the year compared to 2004. Gross proceeds on
the sale of securities, which our investment banking revenues are based
upon, for the fourth quarter of 2005 were $33.5 million compared to $73.3
million during the same period in 2004; and for the year were $138.8
million in 2005 compared to $208.2 million in 2004.
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A reconciliation of net income to AFFO is shown below and a definition of AFFO
is on Supplemental Schedule F. AFFO was previously labeled Cash Available for
Distribution (CAD), but the calculation has not changed. In our opinion, the
term AFFO better describes this measure. In addition, we believe that AFFO is
used more broadly throughout the REIT industry and is generally calculated in a
similar manner to our calculation.
Three Months Ended Year Ended
December 31, December 31,
-------------------- --------------------
(In thousands except per share amounts) 2005 2004 2005 2004
---- ---- ---- ----
Net income $ 28,424 $ 13,924 $ 75,116 $ 47,763
Gain on sales of assets, net (17,232) -- (30,493) --
GAAP income from non-consolidated REITs (121) (586) (1,418) (1,472)
Distributions from non-consolidated REITs 130 731 1,217 1,582
Depreciation of real estate & intangible amortization 6,258 3,083 22,240 13,242
Straight-line rent (525) 33 (1,692) (860)
Capital expenditures (472) (649) (2,760) (1,641)
Payments of deferred leasing costs (1,050) (34) (1,560) (582)
Proceeds from funded reserves 1,522 682 4,320 2,123
-------------------- --------------------
Adjusted Funds From Operations (AFFO) $ 16,934 $ 17,184 $ 64,970 $ 60,155
==================== ====================
Per Share Data
EPS $ 0.47 $ 0.28 $ 1.32 $ 0.96
AFFO $ 0.28 $ 0.35 $ 1.14 $ 1.21
Weighted average shares (basic and diluted) 60,259 49,630 56,847 49,628
==================== ====================
Stock Repurchase update:
On October 28, 2005, the Board of Directors of the Company authorized the
repurchase of up to $35 million of the Company's common stock from time to time
on the open market or in privately negotiated transactions. During November and
December 2005, we repurchased 731,000 shares of common stock at an aggregate
price of $13,992,000, or for an average price of $19.14 per share.
Dividend announcement:
On January 18, 2006 the Board of Directors of the Company declared a cash
distribution of $0.31 per share of common stock payable on February 21, 2006 to
stockholders of record on January 31, 2006.
Real Estate and Investment Banking Update
During 2005 we acquired four properties by merger and two by acquisition. We
have sold, or are under agreement to sell, a total of seven properties. As of
December 31, 2005, six of the seven property sales were completed, and the
remaining sale was classified in our balance sheet as an asset held-for-sale.
Supplemental schedule D presents our continuing real estate portfolio of 27
properties as of December 31, 2005.
During the quarter ended December 31, 2005, we completed an investment banking
transaction, which was for an office property in Houston, Texas. Another
investment banking transaction is planned for the first quarter of 2006.
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George J. Carter, President and CEO, commented as follows:
"Net Income/EPS and AFFO levels for the fourth quarter and full year 2005 were
expected and, consequently, planned for within the FSP business/investment
model. Earnings of $1.32 per share were the highest in FSP history. However,
AFFO per share was lower than last year primarily due to a decrease in the
Company's Investment Banking business. Cash flow for the year was good, and the
balance sheet reflects an increase in shareholder equity while remaining free of
any permanent debt. Unrestricted cash increased to over $69 million, and FSP
ended 2005 with its full $150 million line of credit available. Annual dividends
paid to shareholders remained unchanged for the year at $1.24 per share. A
significant event for FSP during the fourth quarter was our addition on November
30, 2005 to the MSCI US REIT Index (formerly known as the Morgan Stanley REIT
Index). I continue to be confident about the Company's current competitive
position within the broader capital/real estate markets and optimistic about its
financial performance outlook for 2006.
More specifically, results for the fourth quarter and full year 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, through our stock
repurchase program, FSP common stock; and (#3) the closing of real estate
investment banking business totaling $33.5 million in the fourth quarter and
$138.8 million for the full year.
#1. For the fourth quarter of 2005, the Company's continuing portfolio of 27
properties was 92% leased. Most of FSP's properties are suburban office
buildings, and, in most 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). Consequently, FSP and many other office property owners continue to
face rent roll downs as old leases expire and new ones are signed. National
vacancy levels decreased in 2005 to approximately 15% from 16.5% in 2004. Rent
levels in most office markets cannot experience meaningful increases until
vacancy falls into the 10%-11% range. Consequently, we believe that significant
broad-based occupancy and rental increases are probably two to four years away
assuming continued overall U.S. economic growth and traditional cyclical real
estate dynamics. FSP is aggressively managing its lease turnover to maximize our
rental operations' contribution as the office markets continue 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 starting to see. Lofty worldwide energy prices, inflation
and interest rates are likely to be influencing factors.
#2. During the fourth quarter of 2005, the Company sold three properties for
significant gains. Most of the proceeds from these sales were used to pay down
the Company's line of credit, which had been drawn to purchase two new
acquisition properties ahead of the contemplated portfolio sales. The two new
acquisition properties are now owned without any mortgage debt, as is every
other property in FSP's portfolio. There continue to be existing real estate
assets in our portfolio which we believe are potential sale candidates, either
because of property specific or market driven reasons. However, property sales
will be considered only if the potential exists to reinvest the sale proceeds in
new assets that we believe have better near-term and long-term return potential
than the assets being sold. 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. Current high
market pricing and competition for potentially acceptable property acquisitions
continue to present challenges, but new opportunities are always being reviewed.
Upgrading FSP's portfolio is an ongoing objective.
Also during the fourth quarter, the Company took advantage of its recently
announced stock repurchase plan to invest a portion of the proceeds from fourth
quarter property sales in the purchase of its own shares. The adoption of the
stock repurchase program gives the Company the option to either invest cash in
its stock or in new acquisition properties, when the relative financial
opportunity is favorable.
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#3. Fourth quarter investment banking business totaled $33.5 million of
"closed-in" investor capital in one transaction. For the full year 2005, FSP's
investment banking business totaled $138.8 million, approximately 33% lower than
2004's total of $208.2 million. FSP's Investment Banking group has had a
difficult time during the last two years finding properties that meet its
investment criteria. Higher pricing and greater competition for quality
commercial real estate have reduced the number of attractive potential
acquisitions we would consider. As 2006 begins, nothing in the broad-based
acquisition pricing parameters of quality investment properties has changed
significantly from the last two years. Consequently, FSP's investment banking
business is likely to remain challenged."
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 February 22, 2006 at 10:00 a.m. (EDT) to
discuss the fourth quarter results. The toll free number is 1-800-798-2884,
passcode 92525224. Internationally, the call may be accessed by dialing
1-617-614-6207, passcode 92525224. 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
Franklin Street Properties is a self-administered equity real estate investment
trust focused on achieving current income and long-term growth through
investments in commercial properties. FSP owns an unleveraged portfolio of real
estate. The majority of FSP's property portfolio is suburban office buildings.
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), is a real estate investment banking
firm and a registered broker/dealer. The primary activity of the investment bank
is the organization of single purpose entities that acquire, own and operate
specific real estate properties. FSP Investments LLC raises all of the capital
required to fully equitize those entities through private placement offerings.
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
(as defined in or Quarterly Report of Form 10-Q for the three months ended
September 30, 2005), 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 in our Quarterly Report on Form 10-Q
for the three months ended September 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-C
Real estate portfolio summary information D
Other supplementary information E
Definition of Adjusted Funds From Operations F
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Franklin Street Properties Financial Results
Supplementary Schedule A
Income Statement
(Unaudited)
For the For the
Three Months Ended Year Ended
December 31, December 31,
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(in thousands, except per share amounts) 2005 2004 2005 2004
==============================================================================================================
Revenue:
Rental $21,946 $15,770 $75,896 $59,180
Related party revenue:
Syndication fees 2,291 4,976 9,268 13,579
Transaction fees 2,524 4,884 9,412 14,093
Management fees and interest income from loans 204 141 1,807 581
Other -- -- 10 3
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Total revenue 26,965 25,771 96,393 87,436
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Expenses:
Real estate operating expenses 5,532 3,654 17,350 12,094
Real estate taxes and insurance 2,888 2,134 10,105 7,626
Depreciation and amortization 4,877 2,797 15,927 10,967
Selling, general and administrative 1,851 767 7,452 5,687
Commissions 1,357 2,574 5,005 6,959
Interest 173 1,010 2,997 1,527
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Total expenses 16,678 12,936 58,836 44,860
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Income before interest income, equity in earnings of
non-consolidated REITs and taxes on income 10,287 12,835 37,557 42,576
Interest income 541 365 1,588 863
Equity in earnings of non-consolidated REITs 102 156 1,397 620
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Income before taxes on income 10,930 13,356 40,542 44,059
Income tax expense 125 965 422 1,725
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Income from continuing operations 10,805 12,391 40,120 42,334
Income from discontinued operations 387 1,533 4,503 5,429
Gain on sale of assets, net 17,233 -- 30,493 --
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Net income $28,425 $13,924 $75,116 $47,763
==============================================================================================================
Weighted average number of shares outstanding,
basic and diluted 60,259 49,630 56,847 49,628
==============================================================================================================
Net income from continuing operations $ 0.18 $ 0.25 $ 0.70 $ 0.85
Income from discontinued operations 0.01 0.03 0.08 0.11
Gain on sale of assets, net 0.28 -- 0.54 --
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Net income per share, basic and diluted $ 0.47 $ 0.28 $ 1.32 $ 0.96
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Franklin Street Properties Financial Results
Supplementary Schedule B
Condensed Balance Sheet
(Unaudited)
(in thousands, except shares and par value amounts) December 31, December 31,
2005 2004
---- ----
=====================================================================================================================
Assets:
Real estate investments, net $ 552,597 $ 351,173
Acquired real estate leases, net 30,952 6,464
Investment in non-consolidated REITs 5,006 4,270
Assets held for syndication -- 59,246
Assets held for sale 6,631 89,783
Cash and cash equivalents 69,715 52,752
Restricted cash 461 1,033
Straight-line rent receivable 5,765 4,122
Deferred leasing commissions, net 2,284 1,127
Current and other assets 3,762 3,141
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Total assets $ 677,173 $ 573,111
=====================================================================================================================
Liabilities and Stockholders' Equity:
Liabilities:
Bank note payable $ -- $ 59,439
Accounts payable, accrued expenses, tenant deposits & other liabilities 15,590 10,584
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Total liabilities 15,590 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, 731,898 and 575 shares, respectively (14,008) (10)
Distributions in excess of earnings (1,812) (9,720)
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Total Stockholders' Equity 661,583 503,088
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Total Liabilities and Stockholders' Equity $ 677,173 $ 573,111
=====================================================================================================================
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Franklin Street Properties Financial Results
Supplementary Schedule C
Condensed Statement of Cash Flows
(Unaudited)
For the year ended
December 31,
----------------------------
2005 2004
---- ----
Cash flows from operating activities:
Net income $ 75,116 $ 47,763
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization expense 17,937 13,006
Amortization of above market lease 4,310 235
Gain on sale of real estate assets (30,493) --
Equity in earnings of non-consolidated REITs (1,418) (1,472)
Distributions from non-consolidated REITs 1,217 1,582
Increase to bad debt reserve -- 195
Shares issued as compensation 31 161
Changes in operating assets and liabilities:
Restricted cash 572 (51)
Tenant rent receivables, net (678) (83)
Straight-line rents, net (1,692) (860)
Prepaid expenses and other assets, net 586 (1,192)
Accounts payable, accrued expenses & other items (200) 3,816
Accrued compensation 1,186 (840)
Tenant security deposits 260 51
Payment of deferred leasing commissions (1,560) (582)
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Net cash provided by operating activities 65,174 61,729
---------- ----------
Cash flows from investing activities:
Cash from issuance of common stock in the merger transaction 10,621 --
Purchase of real estate assets (75,988) (1,641)
Acquired real estate leases (12,513) --
Investment in non-consolidated REITs (18) (4,270)
Merger costs paid (402) --
Changes in deposits on real estate assets (710) --
Investment in assets held for syndication 59,532 (55,490)
Proceeds received on sales of real estate assets 112,030 --
---------- ----------
Net cash provided by (used for) investing activities 92,552 (61,401)
---------- ----------
Cash flows from financing activities:
Distributions to stockholders (67,208) (61,536)
Purchase of treasury shares (14,008) (155)
Borrowings under bank note payable -- 59,439
Repayments of bank note payable (59,439) (4,117)
Deferred financing costs (108) --
---------- ----------
Net cash used for financing activities (140,763) (6,369)
---------- ----------
Net increase (decrease) in cash and cash equivalents 16,963 (6,041)
Cash and cash equivalents, beginning of year 52,752 58,793
---------- ----------
Cash and cash equivalents, end of year $ 69,715 $ 52,752
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Franklin Street Properties Earnings Release
Supplementary Schedule D
Real Estate Portfolio Summary
(Unaudited)
December 31, 2005
31-Dec-2005 31-Dec-2004
------------- -------------
Commercial real estate
Number of properties 26 24
Square feet 3,978,264 3,051,748
Leased percentage 92% 89%
Residential real estate
Number of properties 1 4
Number of apartments 228 837
Square feet 231,363 761,311
Leased percentage 97% 94%
Combined portfolio
Number of properties 27 28
Square feet 4,209,627 3,813,059
Leased percentage 92% 90%
Property by state:
(In Thousands)
As of December 31, 2005
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# of Net % of Square % of
State Properties Investment Portfolio Feet Portfolio
- ----- ---------- ---------- --------- ---- ---------
Texas 5 $ 144,945 26.2% 1,048 24.9%
Virginia 3 84,553 15.3% 503 12.0%
Missouri 2 58,279 10.5% 349 8.3%
California 3 41,245 7.5% 324 7.7%
Colorado 2 45,571 8.2% 310 7.4%
Indiana 1 39,480 7.1% 205 4.9%
Illinois 1 27,475 5.0% 177 4.2%
Massachusetts 3 25,928 4.7% 385 9.1%
Georgia 1 23,740 4.3% 161 3.8%
North Carolina 2 15,392 2.8% 172 4.1%
Michigan 1 15,104 2.7% 215 5.1%
Washington 1 14,855 2.7% 117 2.8%
South Carolina 1 10,677 1.9% 144 3.4%
Maryland 1 5,350 1.0% 99 2.3%
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Total 27 $ 552,597 100.0% 4,210 100.0%
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Franklin Street Properties Earnings Release
Supplementary Schedule E
(Unaudited)
December 31, 2005
Property by type:
(In Thousands)
As of December 31, 2005
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# of Net % of Square % of
Type Properties Investment Portfolio Feet Portfolio
- ---- ---------- ---------- --------- ---- ---------
Office 24 522,159 94.5% 3,692 87.7%
Industrial 2 14,375 2.6% 287 6.8%
Apartments 1 16,063 2.9% 231 5.5%
----------------------------------------- ------------------------
Total 27 $ 552,597 100.0% 4,210 100.0%
========================================= ========================
Commercial portfolio lease expirations (1)
Total % of
Year Square Feet Portfolio
---- ----------- ---------
2006 687,234 17.3%
2007 472,607 11.9%
2008 151,324 3.8%
2009 854,204 21.5%
2010 757,286 19.0%
2011 138,058 3.5%
Thereafter (2) 917,551 23.0%
-----------------------------
3,978,264 100%
=============================
(1) Percentages are determined based upon square footage of expiring
commercial leases. Expirations exclude apartments, which generally are one
year or less.
(2) Includes current vacancies
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Franklin Street Properties Earnings Release
Supplementary Schedule F
Definition of Adjusted Funds From Operations ("AFFO")
The Company evaluates the performance of its reportable segments based on
several measures including Adjusted Funds From Operations ("AFFO") as management
believes that AFFO 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 AFFO 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 AFFO, 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 AFFO, 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. AFFO 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
AFFO in a different manner. It is at the Company's discretion to retain a
portion of AFFO for operational needs. We believe that in order to facilitate a
clear understanding of the results of the Company, AFFO should be examined in
connection with net income and cash flows from operating, investing and
financing activities in the consolidated financial statements.