Exhibit 99.2
SELECTED COMBINING CONDENSED CONSOLIDATED PRO FORMA FINANCIAL DATA
The following unaudited pro forma financial information gives effect to
the acquisition of FSP Willow Bend Office Center Corp., FSP Innsbrook Corp., FSP
380 Interlocken Corp., FSP Blue Lagoon Drive Corp., and FSP Eldridge Green Corp.
(collectively, 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 March 31, 2006. The
pro forma consolidated statements of income for the three months ended March 31,
2006 and the consolidated pro forma statements of cash flow for the three months
ended March 31, 2006 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 the accompanying
notes. For FSP Corp., please refer to its quarterly report on Form 10-Q for the
quarter ended March 31, 2006.
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 of the combined companies 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 of the combined companies
as of or for any future period.
P-1
Franklin Street Properties Corp.
Combining Condensed Consolidated Pro Forma Balance Sheets
March 31, 2006
(Unaudited)
Historical
Historical Target Pro Forma
(in thousands) FSP Corp. REITs(i) Adjustments Pro Forma
- ------------------------------------------------------------------------------------------------------------
Assets:
Real estate assets, net $ 538,915 $ 159,835 $ 48,223(c)(d1) $ 746,973
Acquired real estate leases, net 28,108 4,183 14,348(d2) 46,639
Investment in non-consolidated REITs 4,966 -- (4,090)(d3) 876
Assets held for syndication 51,416 -- -- 51,416
Assets held for sale 43,822 -- -- 43,822
Cash and cash equivalents 33,312 16,149 (177)(c) 49,284
Restricted cash 465 178 -- 643
Tenant rents receivable, net 1,240 295 -- 1,535
Straight line rents receivable, net 4,972 1,800 (1,800)(l) 4,972
Prepaid expenses 830 136 -- 966
Other assets 1,731 102 (783)(c) 1,050
Office computers & furniture, net 313 -- -- 313
Deferred leasing commissions, net 2,298 1,171 (1,171)(m) 2,298
- ------------------------------------------------------------------------------------------------------------
Total assets $ 712,388 $ 183,849 $ 54,550 $ 950,787
============================================================================================================
Liabilities and stockholders' equity:
Liabilities:
Bank note payable $ 41,500 $ -- $ -- $ 41,500
Accounts payable and accrued expenses 11,108 3,422 -- 14,530
Accrued compensation 1,336 -- -- 1,336
Distribution payable -- -- 4,052(k) 4,052
Tenant security deposits 1,369 178 -- 1,547
Acquired unfavorable real estate leases, net 889 -- 220(d4) 1,109
- ------------------------------------------------------------------------------------------------------------
Total liabilities 56,202 3,600 4,272 64,074
- ------------------------------------------------------------------------------------------------------------
Stockholders' Equity:
Preferred stock -- -- -- --
Common stock 6 -- 1(f) 7
Additional paid in capital 677,397 202,243 28,283(f) 907,923
Treasury stock (14,008) -- -- (14,008)
Earnings (distributions) in excess of
accumulated earnings/distributions (7,209) (21,994) 21,994(n) (7,209)
- ------------------------------------------------------------------------------------------------------------
Total stockholders' equity 656,186 180,249 50,278 886,713
- ------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 712,388 $ 183,849 $ 54,550 $ 950,787
============================================================================================================
P-2
Franklin Street Properties Corp.
Combining Condensed Consolidated Pro Forma Statements of Income
For the Three Months Ended
March 31, 2006
(Unaudited)
Historical
Historical Target Pro Forma
(in thousands, except per share amounts) FSP Corp. REITs(j) Adjustments Pro Forma
- ---------------------------------------------------------------------------------------------------------
Revenue:
Rental income $ 24,281 $6,333 $ (450)(d5) $ 30,164
Related party revenue:
Syndication fees 1,921 -- -- 1,921
Transaction fees 1,939 -- -- 1,939
Management fees and interest on loans 171 -- (68)(e) 103
Other 22 -- -- 22
- ---------------------------------------------------------------------------------------------------------
Total revenue 28,334 6,333 (518) 34,149
- ---------------------------------------------------------------------------------------------------------
Expenses:
Rental operating expenses 4,992 1,283 (68)(e) 6,207
Real estate taxes and insurance 2,733 894 -- 3,627
Depreciation and amortization 5,377 1,308 259(d6) 7,393
449(d7)
Selling, general and administrative 1,805 633(b) -- 2,438
Commissions 1,022 -- -- 1,022
Interest 594 -- -- 594
- ---------------------------------------------------------------------------------------------------------
Total expenses 16,523 4,118 640 21,281
- ---------------------------------------------------------------------------------------------------------
Income (loss) before interest income,
equity in earnings in non-consolidated
REITs, taxes, discontinued operations
and gain on sales of properties 11,811 2,215 (1,158) 12,868
Interest Income 588 184 -- 772
Equity in income of non-consolidated REITs 80 -- (52)(g) 28
Taxes on income (a) (57) -- -- (57)
Income from discontinued operations 717 -- -- 717
- ---------------------------------------------------------------------------------------------------------
Net income $ 13,139 $2,399 $ (1,210) $ 14,328
=========================================================================================================
Weighted average shares outstanding,
basic and diluted 59,795 -- 10,972(f) 70,766
- ---------------------------------------------------------------------------------------------------------
Income per share attributable to:
Continuing operations $ 0.21 $ -- $ -- $ 0.19
Discontinued operations $ 0.01 -- -- $ 0.01
- ---------------------------------------------------------------------------------------------------------
Basic and diluted net income per share $ 0.22 $ -- $ -- $ 0.20
=========================================================================================================
P-3
Franklin Street Properties Corp.
Combining Condensed Consolidated Pro Forma Statements of Cash Flow
For the Three Months Ended
March 31, 2006
(Unaudited)
Historical
Historical Target Pro Forma
(in thousands) FSP Corp. REITs(o) Adjustments Pro Forma
- -----------------------------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net income $ 13,139 $ 2,399 $ (1,210) $ 14,328
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization expense 5,659 1,308 708(d6,d7) 7,675
Amortization of above market lease 1,474 326 450(d5) 2,250
Equity in earnings of non-consolidated REITs (275) -- 52(g) (223)
Distributions from non-consolidated REITs 118 -- (93)(h) 25
Changes in operating assets and liabilities:
Restricted cash (4) (10) -- (14)
Tenant rent receivables, net 207 13 -- 220
Straight-line rents, net 200 (9) -- 191
Prepaid expenses and other assets, net 210 62 -- 272
Accounts payable, accrued expenses & other items (1,254) (484) -- (1,738)
Accrued compensation (555) -- -- (555)
Tenant security deposits 76 10 -- 86
Payment of deferred leasing commissions (156) (449) -- (605)
- -----------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used for) operating activities 18,839 3,166 (93) 21,912
- -----------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Purchase of real estate assets and office computers
and furniture, capitalized merger costs (25,744) (8) (177)(c) (25,929)
Acquired real estate leases (951) -- -- (951)
Investment in non-consolidated REITs (11) -- -- (11)
Investment in assets held for syndication (51,500) -- -- (51,500)
- -----------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used for) investing activities (78,206) (8) (177) (78,391)
- -----------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Distributions to stockholders (18,536) (4,670) 93(h) (23,113)
Redemption of preferred shares -- (1,241) -- (1,241)
Proceeds from (payments to) bank note payable, net 41,500 -- -- 41,500
- -----------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used for) financing
activities 22,964 (5,911) 93 17,146
- -----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents (36,403) (2,753) (177) (39,333)
Cash and cash equivalents, beginning of year 69,715 18,902 -- 88,617
- -----------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of year $ 33,312 $ 16,149 $ (177) $ 49,284
=============================================================================================================================
Supplemental disclosure of cash flow information:
Cash paid for:
Interest $ 513 $ -- $ -- $ 513
Taxes on income $ 50 $ -- $ -- $ 50
Non-cash investing and financing activities:
Assets acquired through issuance of common
stock in the merger transaction, net $ -- $ -- $ 221,319 $ 221,319
Accrued merger costs at period end $ 779 $ -- $ -- $ 779
P-4
FRANKLIN STREET PROPERTIES CORP.
NOTES TO COMBINING CONDENSED CONSOLIDATED PRO FORMA FINANCIAL STATEMENTS
(Unaudited)
BASIS OF PRESENTATION
The following unaudited combining condensed consolidated pro forma
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 March
31, 2006. 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 15, 2006 ("Plan of
Merger"), the Company issued 10,971,697 shares of common stock of FSP Corp (or
the "FSP Shares") and paid cash in lieu of issuing 582 FSP Shares, based on a
share price of $20.94, as calculated on April 26, 2006 ("the Measurement Date").
For pro forma presentation, the fair value was calculated in accordance with
GAAP and was measured by the issuance of approximately 10,972,000 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 $4,090,000 as of March 31, 2006; 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 $235,577,000, which includes real estate assets of $226,369,000, and net
current assets of $9,208,000 including cash. Other assets, net of liabilities,
are expected to be immaterial. The value allocated to the assets acquired in the
mergers is preliminary and subject to the receipt of additional information,
and is expected to be finalized in the second or third quarter of 2006.
PRO FORMA ADJUSTMENTS
Certain assumptions regarding the operations of FSP Corp. have been made
in connection with the preparation of the combining condensed consolidated
financial pro forma 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
P-5
FRANKLIN STREET PROPERTIES CORP.
NOTES TO COMBINING 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 were incurred as of March 31, 2006, and were recorded as an
administrative expense.
(c) The costs of the mergers to FSP Corp. are estimated at $960,000 and
are capitalized to the assets acquired with $783,000 of the costs
incurred as of March 31, 2006 and the $177,000 reflected as paid as
of March 31, 2006.
(d) The following schedule shows the merger consideration for the
acquired properties and is reconciled to the purchase price of such
properties.
(in thousands) Willow Bend Innsbrook 380 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 4,090 4,090(d3)
Capitalized merger costs 84 203 205 244 224 960
Adjusted Cash Reserves (974) (2,147) (2,828) (2,899) (360) (9,208)
------------------------------------------------------------------------------------------
Purchase price of properties $ 19,779 $ 48,223 $ 47,945 $ 56,594 $ 53,828 $ 226,369
==========================================================================================
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.
P-6
FRANKLIN STREET PROPERTIES CORP.
NOTES TO COMBINING CONDENSED CONSOLIDATED PRO FORMA FINANCIAL STATEMENTS
(Unaudited)
Depreciation
Allocated Life or and Amortization
Historical Purchase Average Life Three Months ended
(in thousands, except years) Cost, net Price Difference (years) March 31, 2006
- ------------------------------------------------------------------------------------------------------------------------------------
Willow Bend
- ------------------------------------------------
Land $ 2,737 $ 3,800 $ 1,063 N/A $ --
Building 13,265 14,907 1,642 39.0 11
Acquired real estate leases, favorable -- 79 79 2.6 8
Acquired unfavorable real estate leases -- (220) (220) 3.0 (18)
Acquired real estate leases, origination costs -- 1,213 1,213 2.3 132
-------- -------- ------- ------
Total $ 16,002 $ 19,779 $ 3,777 $ 133
======== ======== ======= ======
Innsbrook
- ------------------------------------------------
Land $ 3,643 $ 5,000 $ 1,357 N/A $ --
Building 31,394 40,199 8,805 39.0 56
Acquired real estate leases, favorable -- 342 342 10.5 8
Acquired real estate leases, origination costs 730 2,682 1,952 10.5 46
-------- -------- ------- ------
Total $ 35,767 $ 48,223 $12,456 $ 110
======== ======== ======= ======
380 Interlocken
- ------------------------------------------------
Land $ 5,287 $ 8,275 $ 2,988 N/A $ --
Building 25,371 34,820 9,449 39.0 61
Acquired real estate leases, favorable 1,522 3,328 1,806 4.0 113
Acquired real estate leases, origination costs 290 1,522 1,232 3.5 88
-------- -------- ------- ------
Total $ 32,470 $ 47,945 $15,475 $ 262
======== ======== ======= ======
Blue Lagoon
- ------------------------------------------------
Land $ 5,463 $ 6,350 $ 887 N/A $ --
Building 39,101 46,625 7,524 39.0 48
Acquired real estate leases, favorable -- 2,394 2,394 2.4 249
Acquired real estate leases, origination costs 523 1,225 702 2.4 73
-------- -------- ------- ------
Total $ 45,087 $ 56,594 $11,507 $ 370
======== ======== ======= ======
Eldridge
- ------------------------------------------------
Land $ 2,356 $ 3,900 $ 1,544 N/A $ --
Building 31,218 44,182 12,964 39.0 83
Acquired real estate leases, favorable -- 2,087 2,087 5.8 90
Acquired real estate leases, origination costs 1,118 3,659 2,541 5.8 110
-------- -------- ------- ------
Total $ 34,692 $ 53,828 $19,136 $ 283
======== ======== ======= ======
Total
- ------------------------------------------------
Land $ 19,486 $ 27,325 $ 7,839 N/A $ --
Building 140,349 180,733 40,384 39.0 259(d6)
-------- -------- ------- ------
Real estate assets, net 159,835 208,058 48,223(d1) 259
Acquired real estate leases, favorable 1,522 8,230 6,708(d2) 2.4-10.5 468(d5)
Acquired unfavorable real estate leases -- (220) (220)(d4) 3.0 (18)(d5)
Acquired real estate leases, origination costs 2,661 10,301 7,640(d2) 2.4-10.5 449(d7)
-------- -------- ------- ------
Total $164,018 $226,369 $62,351 $1,158
======== ======== ======= ======
P-7
FRANKLIN STREET PROPERTIES CORP.
NOTES TO COMBINING CONDENSED CONSOLIDATED PRO FORMA FINANCIAL STATEMENTS
(Unaudited)
(e) Management fees of $68,000 charged by FSP Corp. to the target REITs
for the three months ended March 31, 2006 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 approximately 10,972,000 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 $62,351
Less Investment in non-consolidated REIT (4,090)
Less Estimated Merger Costs (960)
----------
57,301 $57,301
Adjustment to record Par Value (1) (1)
Target REITS:
Adjustments for:
Straight-line rent receivables $(1,800) (1,800)
Deferred leasing commissions, net (1,171) (1,171)
Distribution payable (4,052) (4,052)
Distributions in excess of earnings (21,994) (21,994)
----------------------------------
$57,300 $(29,017) $28,283
==================================
(g) The $52,000 of equity in earnings of non-consolidated REITs for the
three months ended March 31, 2006 related to FSP Corp.'s investment
in Blue Lagoon has been eliminated from revenue.
(h) The $93,000 of distributions from non-consolidated REITs for the
three months ended March 31, 2006 related to FSP Corp.'s investment
in Blue Lagoon has been eliminated.
P-8
FRANKLIN STREET PROPERTIES CORP.
NOTES TO COMBINING CONDENSED CONSOLIDATED PRO FORMA FINANCIAL STATEMENTS
(Unaudited)
(i) The following table combines the historical balance sheets of the
target REITs as of March 31, 2006. Certain amounts from the Target
REITs have been reclassified to conform with FSP Corp.'s
presentation.
(in thousands)
Willow Bend Innsbrook 380 Interlocken Blue Lagoon Eldridge Total
----------- --------- --------------- ----------- -------- -----
Assets:
Land $ 2,737 $ 3,643 $ 5,287 $ 5,463 $ 2,356 $ 19,486
Building 15,497 33,737 27,231 41,684 33,054 151,203
-------- -------- -------- -------- -------- ---------
Real estate investments, cost 18,234 37,380 32,518 47,147 35,410 170,689
Less accumulated depreciation 2,232 2,343 1,860 2,583 1,836 10,854
-------- -------- -------- -------- -------- ---------
Real estate investments, net 16,002 35,037 30,658 44,564 33,574 159,835
Acquired lease origination costs, net -- 730 1,812 523 1,118 4,183
Cash and equivalents 1,501 2,845 4,620 4,780 2,403 16,149
Restricted cash 129 -- 49 -- -- 178
Tenant rent receivable, net 38 -- 240 -- 17 295
Step rent receivable, net 486 327 242 301 444 1,800
Prepaid expenses 15 87 83 33 20 238
Deferred leasing commissions, net 325 447 9 -- 390 1,171
-------- -------- -------- -------- -------- ---------
Total assets $ 18,496 $ 39,473 $ 37,713 $ 50,201 $ 37,966 $ 183,849
======== ======== ======== ======== ======== =========
Liabilities and stockholders' equity:
Accounts payable and accrued expenses $ 275 $ 302 $ 1,121 $ 765 $ 959 $ 3,422
Tenant security deposits 129 -- 49 -- -- 178
-------- -------- -------- -------- -------- ---------
Total liabilities 404 302 1,170 765 959 3,600
-------- -------- -------- -------- -------- ---------
Stockholders' equity
Preferred stock -- -- -- -- -- --
Common stock -- -- -- -- -- --
Additional paid in capital 18,900 43,607 44,092 55,035 40,609 202,243
Retained deficit and distributions in excess
of earnings (808) (4,436) (7,549) (5,599) (3,602) (21,994)
-------- -------- -------- -------- -------- ---------
Total stockholders' equity 18,092 39,171 36,543 49,436 37,007 180,249
-------- -------- -------- -------- -------- ---------
Total liabilities & stockholders' equity $ 18,496 $ 39,473 $ 37,713 $ 50,201 $ 37,966 $ 183,849
======== ======== ======== ======== ======== =========
P-9
FRANKLIN STREET PROPERTIES CORP.
NOTES TO COMBINING CONDENSED CONSOLIDATED PRO FORMA FINANCIAL STATEMENTS
(Unaudited)
(j) The following table combines the historical operations of the target
REITs for the three months ended March 31, 2006.
(in thousands)
Willow Bend Innsbrook 380 Interlocken Blue Lagoon Eldridge Total
----------- --------- --------------- ----------- -------- -----
Revenue:
Rental $ 569 $ 1,396 $ 1,417 $ 1,351 $ 1,600 $ 6,333
-------- -------- -------- -------- -------- --------
Total revenue 569 1,396 1,417 1,351 1,600 6,333
-------- -------- -------- -------- -------- --------
Expenses:
Rental operating expenses 206 296 438 88 255 1,283
Real estate taxes and insurance 97 90 300 164 243 894
Depreciation and amortization 168 268 237 360 275 1,308
Selling, general and administrative 74 132 134 163 130 633
-------- -------- -------- -------- -------- --------
Total expenses 545 786 1,109 775 903 4,118
-------- -------- -------- -------- -------- --------
Income before interest 24 610 308 576 697 2,215
Interest income 12 27 53 61 31 184
-------- -------- -------- -------- -------- --------
Net income $ 36 $ 637 $ 361 $ 637 $ 728 $ 2,399
======== ======== ======== ======== ======== ========
P-10
FRANKLIN STREET PROPERTIES CORP.
NOTES TO COMBINING CONDENSED CONSOLIDATED PRO FORMA FINANCIAL STATEMENTS
(Unaudited)
(k) 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.
(in thousands)
380 Interlocken $ 994
Blue Lagoon 1,149
Eldridge 1,121
Innsbrook 483
Willow Bend 305
-------
Total $4,052
=======
(l) The cumulative unbilled straight-line rents of the target REITs will
be eliminated at acquisition.
(m) The cumulative net deferred leasing costs of the target REITs will
be eliminated at acquisition.
(n) The cumulative deficit of the target REITs will be eliminated at
acquisition.
P-11
FRANKLIN STREET PROPERTIES CORP.
NOTES TO COMBINING CONDENSED CONSOLIDATED PRO FORMA FINANCIAL STATEMENTS
(Unaudited)
(o) The following table combines the historical cash flows for the
target REITs for the three months ended March 31, 2006. 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 $ 36 $ 637 $ 361 $ 637 $ 728 $ 2,399
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization expense 168 268 237 360 275 1,308
Amortization of above market lease -- -- 326 -- -- 326
Changes in operating assets and liabilities:
Restricted cash -- -- (10) -- -- (10)
Tenant rent receivables, net 9 -- 2 -- 2 13
Straight-line rents, net 23 (17) 5 3 (23) (9)
Prepaid expenses and other assets, net 8 22 21 8 3 62
Accounts payable and accrued expenses (158) (344) (188) 263 (57) (484)
Tenant security deposits -- -- 10 -- -- 10
Payment of deferred leasing commissions -- (447) (2) -- -- (449)
------- ------- ------- ------- ------- -------
Net cash provided by operating activities 86 119 762 1,271 928 3,166
------- ------- ------- ------- ------- -------
Cash flows from investing activities:
Purchase of real estate assets and related
leases, office computers and furniture,
capitalized merger costs -- -- (8) -- -- (8)
------- ------- ------- ------- ------- -------
Net cash used for investing activities -- -- (8) -- -- (8)
------- ------- ------- ------- ------- -------
Cash flows from financing activities:
Distributions to stockholders (303) (934) (1,168) (1,132) (1,133) (4,670)
Redemption of preferred shares -- -- -- -- (1,241) (1,241)
------- ------- ------- ------- ------- -------
Net cash used for financing activities (303) (934) (1,168) (1,132) (2,374) (5,911)
------- ------- ------- ------- ------- -------
Net (decrease) increase in cash and cash
equivalents (217) (815) (414) 139 (1,446) (2,753)
Cash and cash equivalents, beginning of period 1,718 3,660 5,034 4,641 3,849 18,902
------- ------- ------- ------- ------- -------
Cash and cash equivalents, end of period $ 1,501 $ 2,845 $ 4,620 $ 4,780 $ 2,403 $16,149
======= ======= ======= ======= ======= =======
P-12
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, 2006 and resulted in weighted
average shares of 70,766,000 for the three months ended March 31, 2006, 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 approximately 10,972,000
shares of FSP common stock are 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 book value per share data for
FSP Corp. as if the mergers occurred on March 31,2006 and resulted in an ending
number of shares of 70,766,000, 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 approximately 10,972,000 shares of FSP common stock are 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 70,766,000 shares, based on the assumption that FSP
issued approximately 10,972,000 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:
P-13
COMPARATIVE PER SHARE DATA, Continued
For the three months ended
(in thousands) March 31, 2006
-------------------------------------------------------------
FSP Corp. $18,536
Willow Bend 303
Innsbrook 934
380 Interlocken 1,168
Blue Lagoon 1,132
Eldridge 1,133
-------
Total $23,206
=======
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.
P-14
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.
Franklin Street Properties Corp.
Comparative Per Share Data
As of and for the three months ended
March 31, 2006
(unaudited)
Pro forma Pro forma
Historical Consolidated Equivalent
----------------------------------------
Net income (loss) per share
basic and diluted
FSP Corp. $ 0.22 $ 0.20 $ --
Willow Bend 175 -- 955
Innsbroook 1,341 -- 1,005
380 Interlocken 752 -- 1,003
Blue Lagoon 1,063 -- 955
Eldridge 1,618 -- 1,161
Book value per share
FSP Corp. $ 10.97 $ 12.53 $ --
Willow Bend 87,825 -- 59,838
Innsbroook 82,465 -- 62,987
380 Interlocken 76,131 -- 62,830
Blue Lagoon 82,531 -- 59,838
Eldridge 83,632 -- 72,731
Dividends declared per share
FSP Corp. $ 0.31 $ 0.33 $ --
Willow Bend 1,471 -- 1,576
Innsbroook 1,966 -- 1,659
380 Interlocken 2,433 -- 1,655
Blue Lagoon 1,890 -- 1,576
Eldridge 2,504 -- 1,915
P-15