Exhibit 99.2
SELECTED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA
The following unaudited pro forma financial information gives effect to
the acquisition of the Target REITs by five wholly-owned acquisition
subsidiaries of FSP Corp., which was consummated on April 30, 2006.
The unaudited pro forma financial information has been prepared based upon
certain pro forma adjustments to the historical consolidated financial
statements of FSP Corp. and the Target REITs. The pro forma consolidated balance
sheets have been presented as if the mergers occurred as of December 31, 2005.
The pro forma consolidated statements of income for the year ended December 31,
2005 and the consolidated pro forma statements of cash flow for the year ended
December 31, 2005 are presented as if the mergers occurred at the beginning of
the period presented.
Certain balances in the Target REIT financial statements have been
reclassified to conform to FSP Corp.'s presentation.
The unaudited pro forma financial information has been derived from the
consolidated financial statements of FSP Corp. and the Target REITs and should
be read in conjunction with those financial statements and notes, the
accompanying notes and for FSP Corp., "Management's Discussion and Analysis of
Financial Information and Results of Operations," which are included in this
current report on Form 8-K and in FSP Corp.'s Annual Report on Form 10-K for the
year ended December 31, 2005.
The unaudited pro forma consolidated financial statement data are not
necessarily indicative of what the combined company's actual financial position
or results of operations would have been as of the date or for the period
indicated, nor do they purport to represent the combined company's financial
position or results of operations as of or for any future period.
Franklin Street Properties Corp.
Combining Condensed Consolidated Pro Forma Balance Sheets
For the Year Ended
December 31, 2005
(Unaudited)
Pro Forma Historical
Historical Adjustment Adjusted Target Pro Forma
(in thousands) FSP Corp. (i) FSP Corp. REITs(k) Adjustments Pro Forma
- ------------------------------------------------------------------------------------------------------------------------------------
Assets:
Real estate assets, net $ 552,597 $(36,110) $ 516,487 $ 160,833 $ 46,795(c)(d1) $ 724,115
Acquired real estate leases, net 30,952 (772) 30,180 4,762 13,769(d2) 48,711
Investment in non-consolidated REITs 5,006 -- 5,006 -- (4,130)(d3) 876
Assets held for syndication -- -- -- -- -- --
Assets held for sale 6,631 37,451 44,082 -- -- 44,082
Cash and cash equivalents 69,715 -- 69,715 18,902 (633)(b) 85,783
-- (960)(c)
(1,241)(q)
Restricted cash 461 -- 461 168 -- 629
Tenant rents receivable, net 1,447 -- 1,447 308 -- 1,755
Straight line rents receivable, net 5,765 (569) 5,196 1,791 (1,791)(n) 5,196
Prepaid expenses 805 -- 805 300 -- 1,105
Other assets 1,199 -- 1,199 -- -- 1,199
Office computers & furniture, net 311 -- 311 -- -- 311
Deferred leasing commissions, net 2,284 -- 2,284 771 (771)(o) 2,284
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets $ 677,173 $ -- $ 677,173 $ 187,835 $ 51,038 $ 916,046
====================================================================================================================================
Liabilities and stockholders' equity:
Liabilities:
Bank note payable $ -- $ -- $ -- $ -- $ -- $ --
Accounts payable and accrued expenses 11,583 -- 11,583 3,906 -- 15,489
Accrued compensation 1,891 -- 1,891 -- -- 1,891
Distribution payable -- -- -- -- 4,052(m) 4,052
Tenant security deposits 1,293 -- 1,293 168 -- 1,461
Acquired unfavorable real estate leases, net 823 -- 823 -- 220(d4) 1,043
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 15,590 -- 15,590 4,074 4,272 23,936
- ------------------------------------------------------------------------------------------------------------------------------------
Stockholders' Equity:
Preferred stock -- -- -- -- -- --
Common stock 6 -- 6 -- 1(f) 7
Additional paid in capital 677,397 -- 677,397 203,161 28,606(f) 907,923
(1,241)(q)
Treasury stock (14,008) -- (14,008) -- -- (14,008)
Earnings(distributions) in excess of
accumulated earnings/distributions (1,812) -- (1,812) (19,400) 19,400(p) (1,812)
- ------------------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 661,583 -- 661,583 183,761 46,766 892,110
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 677,173 $ -- $ 677,173 $ 187,835 $ 51,038 $ 916,046
====================================================================================================================================
Franklin Street Properties Corp.
Combining Condensed Consolidated Pro Forma Statements of Income
For the Year Ended
December 31, 2005
(Unaudited)
2005 Merger Historical
Pro Forma Pro Forma Target
Historical Adjustments Adjustment Adjusted REITS Pro Forma
(in thousands, except per share amounts) FSP Corp. (i) (j) FSP Corp. (l) Adjustments Pro Forma
- ------------------------------------------------------------------------------------------------------------------------------------
Revenue:
Rental income $ 75,896 $(6,637) $6,555 $ 75,814 $25,643 $(1,718)(d5) $ 99,739
Related party revenue:
Syndication fees 9,268 -- -- 9,268 -- -- 9,268
Transaction fees 9,412 -- -- 9,412 -- -- 9,412
Management fees and interest on loans 1,807 -- -- 1,807 -- (264)(e) 1,543
Other 10 -- -- 10 -- -- 10
- ------------------------------------------------------------------------------------------------------------------------------------
Total revenue 96,393 (6,637) 6,555 96,311 25,643 (1,982) 119,972
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses:
Rental operating expenses 17,350 (1,612) 1,555 17,293 5,090 (264)(e) 22,119
Real estate taxes and insurance 10,105 (488) 818 10,435 3,602 -- 14,037
Depreciation and amortization 15,927 (1,064) 1,648 16,511 5,230 999(d6) 24,466
1,726(d7)
Selling, general and administrative 7,452 -- -- 7,452 -- 633(b) 8,085
Commissions 5,005 -- -- 5,005 -- -- 5,005
Interest 2,997 -- -- 2,997 -- -- 2,997
- ------------------------------------------------------------------------------------------------------------------------------------
Total expenses 58,836 (3,164) 4,021 59,693 13,922 3,094 76,709
- ------------------------------------------------------------------------------------------------------------------------------------
Income(loss) before interest income,
equity in earnings in non-consolidated
REITs, taxes, discontinued operations
and gain on sales of properties 37,557 (3,473) 2,534 36,618 11,721 (5,076) 43,263
Interest Income 1,588 -- 112 1,700 384 -- 2,084
Equity in income of non-consolidated
REITs 1,397 -- -- 1,397 -- (248)(g) 1,149
Taxes on income(a) (422) -- -- (422) -- -- (422)
Income from discontinued operations 4,503 3,473 -- 7,976 -- -- 7,976
Gain on sale of properties 30,493 -- -- 30,493 -- -- 30,493
- ------------------------------------------------------------------------------------------------------------------------------------
Net income $ 75,116 $ -- $2,646 $ 77,762 $12,105 $(5,324) $ 84,543
====================================================================================================================================
Weighted average shares outstanding,
basic and diluted 56,847 -- 3,612 60,459 -- 10,972(f) 71,431
- ------------------------------------------------------------------------------------------------------------------------------------
Income per share attributable to:
Continuing operations $ 0.70 $ -- $ -- $ 0.65 $ -- $ -- $ 0.64
Discontinued operations 0.08 -- -- $ 0.14 -- -- $ 0.11
Gain on sale of properties, net 0.54 -- -- $ 0.50 -- -- $ 0.43
- ------------------------------------------------------------------------------------------------------------------------------------
Basic and diluted net income per share $ 1.32 $ -- $ -- $ 1.29 $ -- $ -- $ 1.18
====================================================================================================================================
Franklin Street Properties Corp.
Combining Condensed Consolidated Pro Forma Statements of Cash Flow
For the Year Ended
December 31, 2005
(Unaudited)
2005 Merger Historical
Historical Pro Forma Adjusted Target REITS Pro Forma
(in thousands) FSP Corp. Adjustment FSP Corp. (r) Adjustments Pro Forma
- ------------------------------------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net income $ 75,116 $ 2,646 $ 77,762 $ 12,105 $(5,324) $ 84,543
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization expense 17,937 1,648 19,585 5,230 2,725(d6,d7) 27,540
Amortization of above market lease 4,310 1,368 5,678 1,304 1,718(d5) 8,700
Gain on sale of real estate assets (30,493) -- (30,493) -- -- (30,493)
Equity in earnings of non-consolidated REITs (1,418) -- (1,418) -- 248(g) (1,170)
Distributions from non-consolidated REITs 1,217 -- 1,217 -- (361)(h) 856
Increase to bad debt reserve -- -- -- -- -- --
Shares issued as compensation 31 -- 31 -- -- 31
Changes in operating assets and liabilities:
Restricted cash 572 -- 572 118 -- 690
Tenant rent receivables, net (678) -- (678) (202) -- (880)
Straight-line rents, net (1,692) (115) (1,807) (388) -- (2,195)
Prepaid expenses and other assets, net 586 -- 586 3 -- 589
Accounts payable, accrued expenses & other items (200) -- (200) 15 -- (185)
Accrued compensation 1,186 -- 1,186 -- -- 1,186
Tenant security deposits 260 -- 260 (118) -- 142
Payment of deferred leasing commissions (1,560) -- (1,560) (10) -- (1,570)
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used for) operating activities 65,174 5,547 70,721 18,057 (994) 87,784
- ------------------------------------------------------------------------------------------------------------------------------------
Franklin Street Properties Corp.
Combining Condensed Consolidated Pro Forma Statements of Cash Flow, (Continued)
For the Year Ended
December 31, 2005
(Unaudited)
2005 Merger Historical
Historical Pro Forma Adjusted Target REITS Pro Forma
(in thousands) FSP Corp. Adjustment FSP Corp. (r) Adjustments Pro Forma
- ------------------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Cash from issuance of common stock
in the merger 10,621 -- 10,621 -- -- 10,621
Purchase of real estate assets and
office computers and furniture,
capitalized merger costs (75,988) -- (75,988) (16) (960)(c) (76,964)
Acquired real estate leases (12,513) -- (12,513) -- -- (12,513)
Investment in non-consolidated REITs (18) -- (18) -- -- (18)
Merger costs paid (402) -- (402) -- -- (402)
Change in deposits on real estate assets (710) -- (710) -- -- (710)
Investment in assets held for syndication 59,532 -- 59,532 -- -- 59,532
Proceeds received on sales of real estate assets 112,030 -- 112,030 -- -- 112,030
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used for)
investing activities 92,552 -- 92,552 (16) (960) 91,576
- ------------------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Distributions to stockholders (67,208) -- (67,208) (17,845) 361(h) (84,692)
Purchases of treasury shares (14,008) -- (14,008) -- -- (14,008)
Redemption of preferred shares -- -- -- -- (1,241)(q) (1,241)
Proceeds from (payments to) bank note
payable, net (59,439) -- (59,439) -- -- (59,439)
Deferred financing costs (108) -- (108) -- -- (108)
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used for)
financing activities (140,763) -- (140,763) (17,845) (880) (159,488)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and
cash equivalents 16,963 5,547 22,510 196 (2,834) 19,872
Cash and cash equivalents, beginning of year 52,752 -- 52,752 18,706 -- 71,458
- ------------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of year $ 69,715 $5,547 $ 75,262 $ 18,902 $ (2,834) $ 91,330
====================================================================================================================================
Supplemental disclosure of cash flow information:
Cash paid for:
Interest $ 2,981 $ -- $ 2,981 $ -- $ -- $ 2,981
Taxes on income $ 566 $ -- $ 566 $ -- $ -- $ 566
Non-cash investing and financing activities:
Assets acquired through issuance of common
stock in the merger transaction, net $ 153,943 $ -- $ 153,943 $ -- $ 220,849 $ 374,792
FRANKLIN STREET PROPERTIES CORP.
NOTES TO CONDENSED CONSOLIDATED PRO FORMA FINANCIAL STATEMENTS
(Unaudited)
BASIS OF PRESENTATION
The following unaudited pro forma condensed consolidated financial
statement presentation has been prepared based upon certain pro forma
adjustments to the historical consolidated financial statements of FSP Corp. The
pro forma balance sheets are presented as if the mergers occurred as of December
31, 2005. The pro forma statements of income and the pro forma statements of
cash flow are presented as if the mergers occurred as of the beginning of the
periods presented.
The mergers will be treated as a purchase of assets and each target REIT's
assets and liabilities will be recorded on FSP Corp.'s books at their fair value
as of the effective date of the mergers as determined in accordance with
generally accepted accounting principles in the United States (or "GAAP").
Pursuant to the Agreement and Plan of Merger dated March 15th, 2006 ("Plan of
Merger"), the Company issued 10,972,279 shares of common stock of FSP Corp (or
the "FSP Shares"), based on a share price of $20.94, as calculated on April
26th, 2006 ("the Measurement Date"). For pro forma presentation, the fair value
was calculated in accordance with GAAP and was measured by the issuance of the
10,972,279 shares at a market price of $21.01 (the "Market Price"), which
resulted in total stock consideration of $230,527,000; plus FSP's Corp's basis
in its investment in Blue Lagoon, which was $4,130,000 as of December 31, 2005;
plus $960,000 of capitalized acquistion costs paid by FSP Corp in connection
with the mergers.
The Market Value of FSP Corp.'s common stock of $21.01 is based on a
volume weighted average price (or "VWAP") as reported by Bloomberg Financial
Markets, which is the average price at which the FSP Shares traded in all
reported public markets, adjusted for the size of each trade. It is calculated
by multiplying the size of every trade by the price, taking the sum of these
values, and then dividing by the total trade volume in all reported public
markets between April 24, 2006 and April 28, 2006. The trades between and
including these dates represent market prices for two days before, the day of,
and two days following the Measurement Date, which occurred prior to the
consummation of the mergers on April 30, 2006.
The value ascribed to the net assets of the target REITs is estimated to
be $235,617,000, which includes real estate assets of $225,939,000, and net
current assets of $9,678,000 including cash. Other assets, net of liabilities,
are expected to be immaterial. The value allocated to the assets acquired in the
mergers is preliminary; the final value allocated to the assets acquired will be
determined as of the actual merger date in accordance with GAAP.
PRO FORMA ADJUSTMENTS
Certain assumptions regarding the operations of FSP Corp. have been made
in connection with the preparation of the pro forma condensed consolidated
financial information. These assumptions are as follows:
(a) FSP Corp. and each of the target REITs have elected to be, and are
qualified as, a real estate investment trust for federal income tax
purposes. Each entity has met the various required tests; therefore,
no provision for federal or state income taxes has been reflected on
real estate operations.
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
FRANKLIN STREET PROPERTIES CORP.
NOTES TO CONDENSED CONSOLIDATED PRO FORMA FINANCIAL STATEMENTS
(Unaudited)
forma statements of income are the taxes on income of the TRS. There
are no material items that would cause a deferred tax asset or a
deferred tax liability.
(b) Costs of the mergers to the target REITs are estimated at $633,000
and are reflected as paid at December 31, 2005, and are recorded as
an administrative expense.
(c) The costs of the mergers to FSP Corp. are estimated at $960,000 and
are reflected as paid as of December 31, 2005 and are capitalized to
the assets acquired.
(d) The following schedule shows the merger consideration for the
acquired properties and is reconciled to the purchase price of such
properties (which is equal to the appraised value of such property
plus capitalized merger costs attributable to such property).
380
(in thousands) Willow Bend Innsbrook Interlocken Blue Lagoon Eldridge Total
----------- --------- ----------- ----------- -------- -----
Merger consideration $ 20,669 $ 50,167 $ 50,568 $ 55,159 $ 53,964 $ 230,527
FSP's Corp.'s Basis in Blue Lagoon 4,130 4,130(d3)
Capitalized merger costs 84 203 205 244 224 960
Adjusted Cash Reserves (976) (2,508) (2,942) (2,901) (351) (9,678)
------------------------------------------------------------------------------
Purchase price of properties $ 19,777 $ 47,862 $ 47,831 $ 56,632 $ 53,837 $ 225,939
==============================================================================
The cost of the property held by each target REIT (including
capitalized merger costs of $960,000) has been allocated to real
estate assets, acquired lease origination costs and acquired
favorable leases. Acquired lease origination costs represent the
value associated with acquiring an in-place lease (i.e. the market
cost to execute a similar lease, including leasing commission,
legal, vacancy and other related costs). Acquired favorable leases
represents the value associated with a lease which has a rental
stream with above market rates. The value assigned to buildings,
land and leases approximates their fair value.
The following schedule shows the difference between historical costs (net of
accumulated depreciation and amortization) of the properties and their allocated
purchase price. The purchase price of the properties is determined based upon
the fair value of the assets acquired. Depreciation and amortization for the
target REITs is based on a preliminary allocation of the purchase price to real
estate investments and to the leases acquired. The allocation is subject to
change as additional information is obtained. An increase in the allocation to
acquired lease origination costs will result in an increase in amortization
expense. For each $1,000,000 increase in acquired real estate leases, the
related pro forma amortization expense will increase by approximately $255,000
per year.
FRANKLIN STREET PROPERTIES CORP.
NOTES TO CONDENSED CONSOLIDATED PRO FORMA FINANCIAL STATEMENTS
(Unaudited)
Depreciation
Life or and Amortization
Historical Allocated Average Life Year ended
(in thousands, except years) Cost, net Purchase Price Difference (years) December 31, 2005
- ------------------------------------------------------------------------------------------------------------------------------------
Willow Bend
- ----------------------
Land $ 2,737 $ 3,800 $ 1,063 N/A $ --
Building 13,402 14,905 1,503 39.0 39
Acquired real estate leases, favorable -- 79 79 2.6 30
Acquired unfavorable real estate leases -- (220) (220) 3.0 (73)
Acquired real estate leases, origination costs -- 1,213 1,213 2.3 527
-------- --------- -------- -------
Total $ 16,139 $ 19,777 $ 3,638 $ 523
======== ========= ======== =======
Innsbrook
- ----------------------
Land $ 3,643 $ 5,000 $ 1,357 N/A $ --
Building 31,611 39,838 8,227 39.0 211
Acquired real estate leases, favorable -- 342 342 10.5 33
Acquired real estate leases, origination costs 781 2,682 1,901 10.5 181
-------- --------- -------- -------
Total $ 36,035 $ 47,862 $ 11,827 $ 425
======== ========= ======== =======
380 Interlocken
- ----------------------
Land $ 5,287 $ 8,275 $ 2,988 N/A $ --
Building 25,537 34,706 9,169 39.0 235
Acquired real estate leases, favorable 1,848 3,328 1,480 4.0 370
Acquired real estate leases, origination costs 352 1,522 1,170 3.5 334
-------- --------- -------- -------
Total $ 33,024 $ 47,831 $ 14,807 $ 939
======== ========= ======== =======
Blue Lagoon
- ----------------------
Land $ 5,463 $ 6,350 $ 887 N/A $ --
Building 39,368 46,663 7,295 39.0 187
Acquired real estate leases, favorable -- 2,394 2,394 2.4 998
Acquired real estate leases, origination costs 616 1,225 609 2.4 254
-------- --------- -------- -------
Total $ 45,447 $ 56,632 $ 11,185 $ 1,439
======== ========= ======== =======
Eldridge
- ----------------------
Land $ 2,356 $ 3,900 $ 1,544 N/A $ --
Building 31,429 44,191 12,762 39.0 327
Acquired real estate leases, favorable -- 2,087 2,087 5.8 360
Acquired real estate leases, origination costs 1,165 3,659 2,494 5.8 430
-------- --------- -------- -------
Total $ 34,950 $ 53,837 $ 18,887 $ 1,117
======== ========= ======== =======
Total
- ----------------------
Land $ 19,486 $ 27,325 $ 7,839 N/A $ --
Building 141,347 180,303 38,956 39.0 999(d6)
-------- --------- -------- -------
Real estate assets, net 160,833 207,628 46,795(d1) 999
Acquired real estate leases, favorable 1,848 8,230 6,382(d2) 2.4-10.5 1,791(d5)
Acquired unfavorable real estate leases -- (220) (220)(d4) 3.0 (73)(d5)
Acquired real estate leases, origination costs 2,914 10,301 7,387(d2) 2.4-10.5 1,726(d7)
-------- --------- -------- -------
Total $165,595 $ 225,939 $ 60,344 $ 4,443
======== ========= ======== =======
FRANKLIN STREET PROPERTIES CORP.
NOTES TO CONDENSED CONSOLIDATED PRO FORMA FINANCIAL STATEMENTS
(Unaudited)
(e) Management fees of $264,000 charged by FSP Corp. to the target REITs
for the year ended December 31, 2005 have been eliminated from
revenue and expenses.
(f) Based on the assumption that the market value of the FSP common
stock is $21.01, the weighted average stock price of the FSP common
stock based on the stocks trading activity from April 24, 2006 to
April 28, 2006 and 10,972,279 shares of FSP common stock will be
issued in exchange for the 2,153.25 outstanding shares of target
REIT preferred stock in connection with the mergers. Stockholders'
equity will be adjusted by the net difference between the assets and
liabilities acquired in the merger. The following schedule shows a
reconciliation detailing the adjustments to additional
paid-in-capital.
FSP Target
Corp REIT Total
--------- --------- ---------
Additional paid-in-capital:
FSP Corp:
Total excess of Allocated Purchase
Price over Historical Cost $60,344
Less Investment in non-consolidated REIT (4,130)
Less Estimated Merger Costs (960)
--------
55,254 $55,254
Adjustment to record Par Value (1) (1)
Target REITS:
Adjustments for:
Estimated Merger Costs $ (633) (633)
Straight-line rent receivables (1,791) (1,791)
Deferred leasing commissions, net (771) (771)
Distribution payable (4,052) (4,052)
Distributions in excess of earnings (19,400) (19,400)
---------------------------------------------
$55,253 $(26,647) $28,606
=============================================
(g) The $248,000 of equity in earnings of non-consolidated REITs for the
year ended December 31, 2005 related to FSP Corp.'s investment in
Blue Lagoon has been eliminated from revenue.
(h) The $361,000 of distributions from non-consolidated REITs for the
year ended December 31, 2005 related to FSP Corp.'s investment in
Blue Lagoon has been eliminated.
(i) The Discontinued Operations Proforma Adjustment reflects the
adjustments needed to classify one property as an Asset Held for
Sale.
FRANKLIN STREET PROPERTIES CORP.
NOTES TO CONDENSED CONSOLIDATED PRO FORMA FINANCIAL STATEMENTS
(Unaudited)
(j) The 2005 Merger Pro Forma Adjustment represents pro forma revenue
and expenses for the period January 1, 2005 to April 30, 2005 from
the 4 Sponsored REITs that were acquired by merger with FSP Corp.
effective May 1, 2005 and are summarized below:
For the period
(unaudited) January 1, 2005
(in thousands) to April 30, 2005
--------------------
Revenue $ 6,555
Real estate operating expenses (1,555)
Real estate taxes and insurance (818)
Depreciation and amortization (1,648)
Interest income 112
------------
Net income $ 2,646
============
FRANKLIN STREET PROPERTIES CORP.
NOTES TO CONDENSED CONSOLIDATED PRO FORMA FINANCIAL STATEMENTS
(Unaudited)
(k) The following table combines the historical balance sheets of the
target REITs as of December 31, 2005. Certain amounts from the
Target REITs have been reclassified to conform with FSP Corp.'s
presentation.
(in thousands)
380
Willow Bend Innsbrook Interlocken Blue Lagoon Eldridge Total
----------- --------- ----------- ----------- -------- -----
Assets:
Land $ 2,737 $ 3,643 $ 5,287 $ 5,463 $ 2,356 $ 19,486
Building 15,497 33,737 27,223 41,684 33,054 151,195
-------- -------- -------- -------- -------- ---------
Real estate investments, cost 18,234 37,380 32,510 47,147 35,410 170,681
Less accumulated depreciation 2,095 2,126 1,686 2,316 1,625 9,848
-------- -------- -------- -------- -------- ---------
Real estate investments, net 16,139 35,254 30,824 44,831 33,785 160,833
Acquired lease origination costs, net -- 781 2,200 616 1,165 4,762
Cash and equivalents 1,718 3,660 5,034 4,641 3,849 18,902
Restricted cash 129 -- 39 -- -- 168
Tenant rent receivable, net 47 -- 242 -- 19 308
Step rent receivable, net 509 310 247 304 421 1,791
Prepaid expenses 23 109 104 41 23 300
Deferred leasing commissions, net 356 -- 8 -- 407 771
-------- -------- -------- -------- -------- ---------
Total assets $ 18,921 $ 40,114 $ 38,698 $ 50,433 $ 39,669 $ 187,835
======== ======== ======== ======== ======== =========
Liabilities and stockholders' Equity:
Accounts payable and accrued expenses $ 433 $ 646 $ 1,309 $ 502 $ 1,016 $ 3,906
Tenant security deposits 129 -- 39 -- -- 168
-------- -------- -------- -------- -------- ---------
Total liabilities 562 646 1,348 502 1,016 4,074
-------- -------- -------- -------- -------- ---------
Stockholders' equity
Preferred stock -- -- -- -- -- --
Common stock -- -- -- -- -- --
Additional paid in capital 18,900 43,607 44,092 55,035 41,527 203,161
Retained deficit and distributions in
excess of earnings (541) (4,139) (6,742) (5,104) (2,874) (19,400)
-------- -------- -------- -------- -------- ---------
Total stockholders' equity 18,359 39,468 37,350 49,931 38,653 183,761
-------- -------- -------- -------- -------- ---------
Total liabilities & stockholders' equity $ 18,921 $ 40,114 $ 38,698 $ 50,433 $ 39,669 $ 187,835
======== ======== ======== ======== ======== =========
FRANKLIN STREET PROPERTIES CORP.
NOTES TO CONDENSED CONSOLIDATED PRO FORMA FINANCIAL STATEMENTS
(Unaudited)
(l) The following table combines the historical operations of the target
REITs for the year ended December 31, 2005.
(in thousands)
380
Willow Bend Innsbrook Interlocken Blue Lagoon Eldridge Total
----------- --------- ----------- ----------- -------- -----
Revenue:
Rental $ 2,129 $ 5,591 $ 6,100 $ 5,371 $ 6,452 $ 25,643
-------- -------- -------- -------- -------- --------
Total revenue 2,129 5,591 6,100 5,371 6,452 25,643
-------- -------- -------- -------- -------- --------
Expenses:
Rental operating expenses 860 1,528 1,442 325 935 5,090
Real estate taxes and insurance 334 416 1,283 643 926 3,602
Depreciation and amortization 677 1,066 948 1,439 1,100 5,230
-------- -------- -------- -------- -------- --------
Total expenses 1,871 3,010 3,673 2,407 2,961 13,922
-------- -------- -------- -------- -------- --------
Income before interest 258 2,581 2,427 2,964 3,491 11,721
Interest income 48 63 111 95 67 384
-------- -------- -------- -------- -------- --------
Net income $ 306 $ 2,644 $ 2,538 $ 3,059 $ 3,558 $ 12,105
======== ======== ======== ======== ======== ========
FRANKLIN STREET PROPERTIES CORP.
NOTES TO CONDENSED CONSOLIDATED PRO FORMA FINANCIAL STATEMENTS
(Unaudited)
(m) Distribution payable - The value ascribed to the net assets of the
Target REITs includes real estate assets and net current assets that
include cash. A final dividend was estimated to be paid to the
shareholders of the target REITs, prior to the merger as of the date
of the pro forma balance sheet for the target REITs, and is shown in
the following table. The actual final dividend will consider
earnings through March 31, 2006, cash available for distribution and
other factors and may differ.
380 Interlocken $ 994
Blue Lagoon 1,149
Eldridge 1,121
Innsbrook 483
Willow Bend 305
-------
Total $4,052
=======
(n) The cumulative unbilled straight-line rents of the target REITs will
be eliminated at acquisition.
(o) The cumulative net deferred leasing costs of the target REITs will
be eliminated at acquisition.
(p) The cumulative deficit of the target REITs will be eliminated at
acquisition.
(q) Cash redemption of 10 preferred shares by FSP Eldridge Green Corp.
prior to merger.
FRANKLIN STREET PROPERTIES CORP.
NOTES TO CONDENSED CONSOLIDATED PRO FORMA FINANCIAL STATEMENTS
(Unaudited)
(r) The following table combines the historical cash flows for the
target REITs for the year ended December 31, 2005. Certain amounts
from the Target REITs have been reclassified to conform with FSP
Corp.'s presentation.
Willow 380 Blue
(in thousands) Bend Innsbrook Interlocken Lagoon Eldridge Total
- -------------- ---- --------- ----------- ------ -------- -----
Cash flows from operating activities:
Net income (loss) $ 306 $ 2,644 $ 2,538 $ 3,059 $ 3,558 $ 12,105
Adjustments to reconcile net income (loss)
to net cash provided by (used for)
operating activities:
Depreciation and amortization expense 677 1,066 948 1,439 1,100 5,230
Amortization of above market lease -- -- 1,304 -- -- 1,304
Changes in operating assets and liabilities:
Restricted cash 125 -- (7) -- -- 118
Tenant rent receivables, net (4) 24 (212) -- (10) (202)
Straight-line rents, net (29) (84) (39) (61) (175) (388)
Prepaid expenses and other assets, net (9) 9 (1) (19) 23 3
Accounts payable and accrued expenses 62 57 91 328 (523) 15
Tenant security deposits (125) -- 7 -- -- (118)
Payment of deferred leasing commissions (1) -- (9) -- -- (10)
------- ------- ------- ------- ------- --------
Net cash provided by (used for)
operating activities 1,002 3,716 4,620 4,746 3,973 18,057
------- ------- ------- ------- ------- --------
Cash flows from investing activities:
Purchase of real estate assets and related leases,
office computers and furniture, capitalized
merger costs -- -- (16) -- -- (16)
------- ------- ------- ------- ------- --------
Net cash provided by (used for) investing activities -- -- (16) -- -- (16)
------- ------- ------- ------- ------- --------
Cash flows from financing activities:
Distributions to stockholders (967) (3,639) (4,700) (4,388) (4,151) (17,845)
------- ------- ------- ------- ------- --------
Net cash provided by (used for) financing activities (967) (3,639) (4,700) (4,388) (4,151) (17,845)
------- ------- ------- ------- ------- --------
Net increase in cash and cash equivalents 35 77 (96) 358 (178) 196
Cash and cash equivalents, beginning of period 1,683 3,583 5,130 4,283 4,027 18,706
------- ------- ------- ------- ------- --------
Cash and cash equivalents, end of period $ 1,718 $ 3,660 $ 5,034 $ 4,641 $ 3,849 $ 18,902
======= ======= ======= ======= ======= ========
COMPARATIVE PER SHARE DATA
The following tables present on a per share basis:
(a) Basic and diluted net income per share, book value per share, and
dividends per share declared for FSP Corp. and each of the target REITs on a
historical basis.
(b) Consolidated pro forma basic and diluted net income per share, book
value per share and dividends per share for FSP Corp. This table shows the
effect of the mergers from the perspective of an owner of one share of FSP
common stock.
(c) Equivalent pro forma basic and diluted net income per share,
equivalent pro forma book value per share and equivalent pro forma dividends per
share for each of the target REITs. This table shows the effect of the mergers
from the perspective of an owner of one share of stock of a Target REIT. The
consolidated pro forma data are multiplied by the number of shares of FSP common
stock issuable in exchange for each share of target stock, also known as the
exchange ratio, as shown in the following table:
Target REIT Exchange Ratio
----------- --------------
Willow Bend 4,775.55
Innsbrook 5,026.89
380 Interlocken 5,014.33
Blue Lagoon 4,775.55
Eldridge 5,804.53
The pro forma financial data and equivalent pro forma data are unaudited
and are not necessarily indicative of the operating results that would have been
achieved had the mergers occurred as of the beginning of the period and should
not be construed as representative of future operations.
FSP Corp. calculates historical book value per share by dividing
stockholders' equity by the number of shares of common stock (or preferred
stock, in the case of the target REITs) outstanding at the end of each period.
FSP Corp. calculates consolidated pro forma net income per share data for
FSP Corp. as if the mergers occurred on January 1, 2005 and resulted in weighted
average shares of 71,431,000 for the year ended December 31, 2005, based on the
assumption that the market value of the FSP common stock is $21.55, the last
sale price of the FSP common stock on March 21, 2006.
FSP Corp. calculates consolidated pro forma book value per share data for
FSP Corp. as if the mergers occurred on December 31, 2005 and resulted in an
ending number of shares of 70,767,000, based on the assumption that the market
value of the FSP common stock is $21.01, the weighted average stock price of the
FSP common stock based on the stocks trading activity from April 24, 2006 to
April 28, 2006 and 10,972,279 shares of FSP common stock was issued in exchange
for the 2,153.25 outstanding shares of target REIT preferred stock in connection
with the mergers.
FSP Corp. calculates consolidated pro forma dividends per share by adding
the total dividends paid by FSP Corp. plus dividends paid by the target REITs
and dividing this sum by 71,431,000 shares, based on the assumption that FSP
issued 10,792,279 of common stock in exchange for the 2,153.25 outstanding
shares of target REIT preferred stock in connection with the mergers as shown in
the following table:
COMPARATIVE PER SHARE DATA, Continued
For the Year
Ended
(in thousands) December 31, 2005
---------------------------------------------------------
FSP Corp. $67,208
Willow Bend 967
Innsbrook 3,639
380 Interlocken 4,700
Blue Lagoon 4,388
Eldridge 4,151
---------
Total $85,053
=========
FSP Corp. calculates equivalent pro forma net income per share for each
target REIT by multiplying the consolidated pro forma net income per share by
the exchange ratio.
FSP Corp. calculates equivalent pro forma book value per share for each
target REIT by multiplying the consolidated pro forma book value per share by
the exchange ratio.
FSP Corp. calculates equivalent pro forma dividends per share for each
target REIT by multiplying the consolidated pro forma dividends per share by the
exchange ratio.
For the purposes of the consolidated pro forma net income per share and
book value per share data, FSP Corp.'s historical financial data have been
consolidated with the target REITs' financial data.
Pro forma Pro forma
Historical Consolidated Equivalent
---------- ------------ ----------
Net income (loss) per share
basic and diluted
FSP Corp. $ 1.32 $ 1.18 $ --
Willow Bend 1,485 -- 5,635
Innsbroook 5,566 -- 5,932
380 Interlocken 5,288 -- 5,917
Blue Lagoon 5,107 -- 5,635
Eldridge 7,863 -- 6,849
Book value per share
FSP Corp. $11.06 $12.61 $ --
Willow Bend 89,121 -- 60,220
Innsbroook 83,091 -- 63,389
380 Interlocken 77,813 -- 63,231
Blue Lagoon 83,357 -- 60,220
Eldridge 85,421 -- 73,195
Dividends declared per share
FSP Corp. $ 1.24 $ 1.19 $ --
Willow Bend 4,694 -- 5,683
Innsbroook 7,661 -- 5,982
380 Interlocken 9,792 -- 5,967
Blue Lagoon 7,326 -- 5,683
Eldridge 9,173 -- 6,907