Exhibit 99.1
PRESS RELEASE Franklin Street Properties Corp.
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401 Edgewater Place o Suite 200 o Wakefield, Massachusetts 01880-6210
o (781)557-1300 o www.franklinstreetproperties.com
Contact: Donna Brownell 877-686-9496 FOR IMMEDIATE RELEASE
FRANKLIN STREET PROPERTIES CORP. ANNOUNCES
FIRST QUARTER RESULTS
Wakefield, MA--May 8, 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 first quarter ended March 31, 2006. The Company
also announced Adjusted Funds From Operations (AFFO) for first quarter ended
March 31, 2006, and an update on the recently completed acquisition of five
properties.
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 March 31, 2006 increased $0.01 per
share to $0.22 per share compared to the three months ended March
31, 2005. Net income was $13.1 million or $0.22 per share (based on
59.8 million shares), compared to $10.4 million or $0.21 per share
(based on 49.6 million shares) in 2005.
o AFFO for the three months ended March 31, 2006 increased $0.06 per
share to $0.34 per share compared to the three months ended March
31, 2005. AFFO was $20.3 million or $0.34 per share (based on 59.8
million shares), compared to $13.7 million or $0.28 per share (based
on 49.6 million shares) in 2005.
The following significant factors affected net income, EPS and AFFO for the
three months ended March 31, 2006 compared to results for the same period in
2005:
o Increased net operating income from the real estate portfolio
included:
o The benefits of four properties that were acquired through
merger in April 2005, which we did not have in 2005 and were
accretive to our per share calculations.
o The benefits of three Class A suburban office properties
acquired in 2005 and 2006, including one property located in
Colorado acquired in February 2005, another in Indiana that
was acquired in July 2005, and one in Texas that was acquired
in February 2006.
o A $4.6 million termination payment from a tenant at our
property in Illinois. The property has subsequently been 100%
leased to a new tenant.
o Interest income increased $358,000 to $588,000 in the first quarter
of 2006 compared to 2005 as a result of higher bank balances during
the quarter and rising interest rates.
o These increases were partially offset by lower investment banking
results for the first quarter of 2006 compared to 2005. Gross
proceeds on the sale of securities, which our investment banking
revenues are based upon, for the first quarter of 2006 were $29.2
million compared to $37.0 million in the first quarter of 2005.
o Interest income from loans to properties in syndication was also
lower in 2006, as a property was purchased for syndication toward
the end of the first quarter of 2006, while last year there was a
property loan outstanding for the entire quarter.
o There was a net increase of 10.2 million weighted average shares of
FSP common stock ("Shares") for the quarter ended March 31, 2006
compared to 2005, as a result of the merger completed in May 2005,
which added 10.9 million Shares, less the repurchase of 0.7 million
Shares in the fourth quarter of 2005. EPS and AFFO calculations were
affected by this increase.
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A reconciliation of net income to AFFO is shown below and a definition of AFFO
is on Supplemental Schedule F. We believe AFFO is used broadly throughout the
REIT industry and is generally calculated in a similar manner to our
calculation.
Three Months Ended
March 31,
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(In thousands except per share amounts) 2006 2005
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Net income $ 13,139 $ 10,423
GAAP income from non-consolidated REITs (275) (665)
Distributions from non-consolidated REITs 118 599
Depreciation of real estate & intangible amortization 7,133 3,632
Straight-line rent 200 (307)
Capital expenditures (268) (327)
Payments of deferred leasing costs (156) (95)
Proceeds from funded reserves 424 422
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Adjusted Funds From Operations (AFFO) $ 20,315 $ 13,682
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Per Share Data
EPS $ 0.22 $ 0.21
AFFO $ 0.34 $ 0.28
Weighted average shares (basic and diluted) 59,795 49,630
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Dividend announcement:
On April 14, 2006 the Board of Directors of the Company declared a cash
distribution of $0.31 per share of common stock payable on May 19, 2006 to
stockholders of record as of April 28, 2006.
2006 Merger Update:
On May 4, 2006 we announced that effective April 30, 2006 we issued
approximately 10,972,000 Shares in a tax-free exchange for preferred shares of
five single-asset REITs valued at approximately $230 million in the aggregate.
The properties acquired are all suburban office buildings and have a total of
approximately 1.1 million square feet of rentable space. Two of the properties
are located in Texas, and the other three are located in Colorado, Florida and
Virginia, respectively.
Real Estate and Investment Banking Update
In February 2006 we acquired an office property in Addison, Texas. During April
2006 we reached an agreement to sell an office property in Fairfax, Virginia at
a gain, which is expected to close in the second quarter of 2006. We also have
another property under agreement to be sold, which we expect to be completed
during 2006. As of March 31, 2006, these properties were classified in our
balance sheet as assets held-for-sale. Supplemental Schedule D presents our
continuing real estate portfolio of 27 properties as of March 31, 2006.
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George J. Carter, President and CEO, commented as follows:
"Net Income/EPS and AFFO levels for the first quarter of 2006 were expected and,
consequently, planned for within the FSP business/investment model. Earnings of
$0.22 per share and AFFO of $0.34 per share showed measurable increases over the
same period last year. Quarterly dividends paid during the first quarter, and
declared for the second quarter, remain unchanged at $0.31 per share. 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 for the balance of 2006.
More specifically, results for the first quarter of 2006 reflected: (#1) solid
performance in rental operations from the Company's portfolio of properties;
(#2) no real estate dispositions, but the completion of the reinvestment of sale
proceeds from properties sold in the fourth quarter of 2005; and (#3) the
closing of real estate investment banking business totaling $29.2 million.
#1. For the first quarter of 2006, the Company's continuing portfolio of 27
properties was 86% leased. Most of FSP's properties are suburban office
buildings, and, in most markets, we are continuing to find 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 occupancy levels continue to improve, but rent levels in most
office markets are still only modestly increasing from a very low level. We
believe that significant broad-based rental increases, above the 1997-2001 peak,
are probably one to three 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.
One of our single-tenant buildings located in suburban Chicago, built in 1999
and containing approximately 176,848 rentable square feet, became 100% vacant
through the exercise of an early lease termination option by the tenant in the
first quarter. The termination had been planned for by FSP, and including other
lease expirations during the quarter resulted in an increase to overall vacancy
from an 8% rate to 14% as of the end of the quarter. In April 2006 we re-leased
100% of the property to CitiCorp Credit Services, Inc., a wholly-owned
subsidiary of CitiGroup Inc. The lease is guaranteed by CitiGroup Inc., and is
for a term of ten years with no early termination option. The signing of this
lease on a pro forma basis decreased our overall vacancy rate to 9%, and reduced
our lease expirations percentage for the balance of 2006 from 17.3% at December
31, 2005 to 10.9%.
#2. During the first quarter of 2006, the Company did not dispose of any
properties. However, the remaining proceeds from fourth quarter 2005 property
sales and cash from the balance sheet were used to purchase a 218,913 square
foot office building located in Texas for the FSP portfolio. This property was
purchased for all cash and continues to be 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 we believe the potential exists to reinvest the
sale proceeds in new assets that have better near-term and long-term return
potential than the assets we 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.
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#3. First quarter investment banking business closed in $29.2 million of
investor capital by the partial syndication of one office property. FSP's
Investment Banking group has had a difficult time during the last several 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. The prospects for property
acquisitions for FSP's Investment Banking group remain uncertain."
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 May 9, 2006 at 10:00 a.m. (ET) to discuss the
first quarter results. The toll free number is 1-800-901-5217, passcode
23223902. Internationally, the call may be accessed by dialing 1-617-786-2964,
passcode 23223902. 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 Corp.
Franklin Street Properties Corp. is a real estate investment trust based in
Wakefield, Massachusetts, focused on achieving current income and long-term
growth through investments in commercial properties. FSP operates in two
business segments: real estate operations and investment banking/investment
services. FSP owns an unleveraged portfolio of real estate. The majority of
FSP's property portfolio is suburban office buildings. FSP's 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.
To learn more about FSP please visit our website at
www.franklinstreetproperties.com.
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 our Annual Report on Form 10-K for the year ended December 31,
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 "Risk Factors" set forth in Item 1A of our Annual Report on Form 10-K for
the year ended December 31, 2005. 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
Three Months Ended
March 31,
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(in thousands, except per share amounts) 2006 2005
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Revenue:
Rental $24,281 $12,433
Related party revenue:
Syndication fees 1,921 2,519
Transaction fees 1,939 2,442
Management fees and interest income from loans 171 970
Other 22 5
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Total revenue 28,334 18,369
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Expenses:
Real estate operating expenses 4,992 2,522
Real estate taxes and insurance 2,733 1,828
Depreciation and amortization 5,377 2,623
Selling, general and administrative 1,805 1,825
Commissions 1,022 1,324
Interest 594 955
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Total expenses 16,523 11,077
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Income before interest income, equity in earnings of
non-consolidated REITs and taxes on income 11,811 7,292
Interest income 588 230
Equity in earnings of non-consolidated REITs 80 665
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Income before taxes on income 12,479 8,187
Income tax expense 57 44
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Income from continuing operations 12,422 8,143
Income from discontinued operations 717 2,280
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Net income $13,139 $10,423
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Weighted average number of shares outstanding,
basic and diluted 59,795 49,630
Per Share Data:
Net income from continuing operations $ 0.21 $ 0.16
Income from discontinued operations 0.01 0.05
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Net income per share, basic and diluted $ 0.22 $ 0.21
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Franklin Street Properties Financial Results
Supplementary Schedule B
Condensed Balance Sheet
(Unaudited)
(in thousands, except shares and par value amounts) March 31, December 31,
2006 2005
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Assets:
Real estate assets $ 575,077 $ 549,372
Less accumulated depreciation 36,162 32,885
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Real estate investments, net 538,915 516,487
Acquired real estate leases, net 28,108 30,180
Investment in non-consolidated REITs 4,966 5,006
Assets held for syndication 51,416 --
Assets held for sale 43,822 44,082
Cash and cash equivalents 33,312 69,715
Restricted cash 465 461
Straight-line rent receivable 4,972 5,196
Deferred leasing commissions, net 2,298 2,284
Current and other assets 4,114 3,762
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Total assets $ 712,388 $ 677,173
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Liabilities and Stockholders' Equity:
Liabilities:
Bank note payable $ 41,500 $ --
Accounts payable, accrued expenses, tenant deposits & other liabilities 14,702 15,590
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Total liabilities 56,202 15,590
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Stockholders' Equity:
Common Stock, $.0001 par value, 180,000,000 shares
authorized, 59,794,608 and 59,794,608 issued and outstanding 6 6
Additional paid-in capital 677,397 677,397
Treasury stock, 731,898 and 731,898 shares, respectively (14,008) (14,008)
Distributions in excess of earnings (7,209) (1,812)
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Total Stockholders' Equity 656,186 661,583
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Total Liabilities and Stockholders' Equity $ 712,388 $ 677,173
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Franklin Street Properties Financial Results
Supplementary Schedule C
Condensed Statement of Cash Flows
(Unaudited)
For the three
months ended
March 31,
--------------------
2006 2005
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Cash flows from operating activities:
Net income $ 13,139 $ 10,423
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization expense 5,659 3,374
Amortization of above market lease 1,474 59
Equity in earnings of non-consolidated REITs (275) (665)
Distributions from non-consolidated REITs 118 599
Shares issued as compensation -- 31
Changes in operating assets and liabilities:
Restricted cash (4) (43)
Tenant rent receivables, net 207 --
Straight-line rents, net 200 (230)
Operations of assets held for syndication, net -- (236)
Prepaid expenses and other assets, net 210 (1,971)
Accounts payable, accrued expenses & other items (1,254) (953)
Accrued compensation (555) (105)
Tenant security deposits 76 43
Payment of deferred leasing commissions (156) (95)
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Net cash provided by operating activities 18,839 10,231
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Cash flows from investing activities:
Purchase of real estate assets (25,744) (327)
Acquired real estate leases (951) --
Investment in non-consolidated REITs (11) --
Investment in assets held for syndication (51,500) (14,725)
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Net cash provided by (used for) investing activities (78,206) (15,052)
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Cash flows from financing activities:
Distributions to stockholders (18,536) (15,385)
Borrowings (repayments) under bank note payable, net 41,500 14,725
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Net cash used for financing activities 22,964 (660)
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Net increase (decrease) in cash and cash equivalents (36,403) (5,481)
Cash and cash equivalents, beginning of year 69,715 52,752
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Cash and cash equivalents, end of year $ 33,312 $ 47,271
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Franklin Street Properties Earnings Release
Supplementary Schedule D
Real Estate Portfolio Summary
(Unaudited)
March 31, 2006
31-Mar-2006 31-Dec-2005
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Commercial real estate
Number of properties 26 26
Square feet 3,986,564 3,978,264
Leased percentage 86% 92%
Residential real estate
Number of properties 1 1
Number of apartments 228 228
Square feet 231,363 231,363
Leased percentage 94% 97%
Combined portfolio
Number of properties 27 27
Square feet 4,217,927 4,209,627
Leased percentage 86% 92%
(In Thousands) As of March 31, 2006
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# of % of Square % of
State Properties Investment Portfolio Feet Portfolio
- ----- ---------- ---------- --------- ---- ---------
Texas 6 $169,383 31.4% 1,267 30.0%
Missouri 2 57,916 10.8% 349 8.3%
Virginia 2 48,158 8.9% 293 6.9%
Colorado 2 45,282 8.4% 310 7.4%
California 3 41,083 7.6% 324 7.7%
Indiana 1 39,242 7.3% 205 4.9%
Illinois 1 27,307 5.1% 177 4.2%
Massachusetts 3 25,745 4.8% 385 9.1%
Georgia 1 23,778 4.4% 161 3.8%
North Carolina 2 15,286 2.8% 172 4.1%
Michigan 1 15,043 2.8% 215 5.1%
Washington 1 14,771 2.7% 117 2.8%
South Carolina 1 10,598 2.0% 144 3.4%
Maryland 1 5,321 1.0% 99 2.3%
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Total 27 $538,915 100.0% 4,218 100.0%
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Franklin Street Properties Earnings Release
Supplementary Schedule E
(Unaudited) March 31,
2006
Property by type:
(In Thousands) As of March 31, 2006
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# of % of Square % of
Type Properties Investment Portfolio Feet Portfolio
- ---- ---------- ---------- --------- ---- ---------
Apartments 1 15,924 3.0% 231 5.5%
Office 24 508,708 94.4% 3,700 87.7%
Industrial 2 14,283 2.6% 287 6.8%
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Total 27 $538,915 100.0% 4,218 100.0%
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Commercial portfolio lease expirations (1)
Total % of
Year Square Feet Portfolio
---- ----------- ---------
2006 436,496 10.9% (2)
2007 602,021 15.1%
2008 178,940 4.5%
2009 670,252 16.8%
2010 776,691 19.5%
2011 174,662 4.4%
Thereafter 1,147,502 28.8% (3)
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3,986,564 100%
=========================
(1) Percentages are determined based upon square footage of expiring
commercial leases. Expirations exclude apartments, which generally
are one year or less.
(2) Includes affect of CitiCorp Credit Services, Inc. lease signed in
April 2006.
(3) 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. 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 cash reserve represents funds that the Company has set aside from time to
time 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.
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