Exhibit 99.1
SELECTED COMBINING CONDENSED CONSOLIDATED PRO FORMA FINANCIAL DATA
The following unaudited pro forma financial information of Franklin Street
Properties Corp. ("FSP Corp." or the "Registrant") gives effect to the
acquisition of a property ("One Overton Park") on June 27, 2006 by FSP One
Overton Park LLC (the "Purchaser"), a wholly-owned subsidiary of FSP Corp. and
the acquisition by merger (the "2006 Merger") of FSP Willow Bend Office Center
Corp. ("Willow Bend"), FSP Innsbrook Corp. ("Innsbrook"), FSP 380 Interlocken
Corp. ("380 Interlocken"), FSP Blue Lagoon Drive Corp. ("Blue Lagoon"), and FSP
Eldridge Green Corp. ("Eldridge") (collectively, the "Target REITs") by five
wholly-owned acquisition subsidiaries of FSP Corp., which was consummated on
April 30, 2006 and previously reported in Current Reports on Form 8-K filed on
May 4, 2006 and May 22, 2006. The acquisition of One Overton Park was previously
reported in a Current Report on Form 8-K filed June 28, 2006, which Current
Report on Form 8-K was subsequently amended by Amendment No. 1 to Current Report
on Form 8-K/A filed on August 23, 2006. In addition, the acquisition of the
Target REITs and the acquisition of One Overton Park previously were reported on
Exhibit 99.2 to FSP Corp.'s quarterly report on Form 10-Q filed October 31,
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., One Overton Park and the Target REITs. FSP Corp.'s
consolidated balance sheet as of December 31, 2006 reflects the acquisition of
One Overton Park and the Target REITs; therefore a pro forma balance sheet is
not presented. The pro forma consolidated statements of income for the year
ended December 31, 2006 are presented as if the acquisitions occurred at the
beginning of the period presented.
Certain balances in One Overton Park and 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., One Overton Park 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 annual report on Form
10-K for the year ended December 31, 2006.
The unaudited pro forma consolidated financial statement data are not
necessarily indicative of what the 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 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 Statements of Income
For the Year Ended
December 31, 2006
(Unaudited)
2006 Merger One Overton
Pro Forma Park
Historical Adjustment Acquisition
(in thousands, except per share amounts) FSP Corp. (d) (c) Pro Forma
- --------------------------------------------------------------------------------------------- -----------
Revenue:
Rental income $ 90,300 $ 8,111 $3,530 $ 101,941
Related party revenue:
Syndication fees 10,693 -- -- 10,693
Transaction fees 11,262 -- -- 11,262
Management fees and interest on loans 2,083 (88) -- 1,995
Other 30 -- 49 79
- --------------------------------------------------------------------------------------------- -----------
Total revenue 114,368 8,023 3,579 125,970
- --------------------------------------------------------------------------------------------- -----------
Expenses:
Rental operating expenses 20,845 1,977 1,095 23,917
Real estate taxes and insurance 13,220 1,195 336 14,751
Depreciation and amortization 22,819 2,324 1,296 26,439
Selling, general and administrative 8,518 -- -- 8,518
Commissions 5,522 -- -- 5,522
Interest 2,449 -- -- 2,449
- --------------------------------------------------------------------------------------------- -----------
Total expenses 73,373 5,496 2,727 81,596
- --------------------------------------------------------------------------------------------- -----------
Income before interest income,
equity in earnings in non-consolidated
REITs, taxes, discontinued operations
and gain on sales of properties 40,995 2,527 852 44,374
Interest Income 2,998 241 -- 3,239
Equity in income of non-consolidated REITs 845 (75) -- 770
Taxes on income (a) (839) -- -- (839)
Income from discontinued operations 5,492 -- -- 5,492
Gain on sale of properties 61,438 -- -- 61,438
- --------------------------------------------------------------------------------------------- -----------
Net income $ 110,929 $ 2,693 $ 852 $ 114,474
============================================================================================= ===========
Weighted average shares outstanding,
basic and diluted 67,159 70,776
============================================================================================================
Income per share attributable to:
Continuing operations $ 0.66 $ 0.67
Discontinued operations 0.08 $ 0.08
Gain on sale of properties, net 0.91 $ 0.87
- ------------------------------------------------------------------------------------------------------------
Basic and diluted net income per share $ 1.65 $ 1.62
============================================================================================================
P-2
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 statements of income are presented as if the acquisition and mergers
occurred as of the beginning of the periods presented.
Each of the acquisition of One Overton Park on June 27, 2006 and the 2006
Merger has been treated as a purchase of assets. One Overton Park and the Target
REITs' assets and liabilities have been 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").
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
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.
P-3
FRANKLIN STREET PROPERTIES CORP.
NOTES TO COMBINING CONDENSED CONSOLIDATED PRO FORMA FINANCIAL STATEMENTS
(Unaudited)
(b) The following table combines the historical operations of the One
Overton Park for the period starting January 1, 2006 through the
acquisition date.
One Overton Adjustments
(in thousands) Park resulting from Pro Forma
Historical Acquisition Adjustment
------------ ------------- ----------
Revenue:
Rental (1) $ 3,548 $ (18) $ 3,530
Management fees and interest on loans -- -- --
Other 49 -- 49
------------ ------------ ------------
Total revenue 3,597 (18) 3,579
------------ ------------ ------------
Expenses:
Rental operating expenses 1,095 -- 1,095
Real estate taxes and insurance 336 -- 336
Depreciation and amortization (2) -- 1,296 1,296
Selling, general and administrative -- -- --
------------ ------------ ------------
Total expenses 1,431 1,296 2,727
------------ ------------ ------------
Income (loss) before interest income,
equity in earnings in non-consolidated
REITs, taxes, discontinued operations
and gain on sales of properties 2,166 (1,314) 852
Interest income -- -- --
Equity Interest in non-consolidated REITs -- --
------------ ------------ ------------
Net income $ 2,166 $ (1,314) $ 852
============ ============ ============
(1) The pro forma rental adjustment includes amounts related to
the amortization of above and/or below market leases, which
are being amortized over the remaining non-cancelable term of
the respective leases in accordance with SFAS 141.
(2) The pro forma for depreciation and amortization is due to
depreciation of the acquired building and improvements using a
straight-line method over an estimated life of 39 years. In
addition, the value of the in place leases (exclusive of the
value of above and/or below market leases), are being
amortized over the remaining non-cancelable term of the
respective leases in accordance with SFAS 141
P-4
FRANKLIN STREET PROPERTIES CORP.
NOTES TO COMBINING CONDENSED CONSOLIDATED PRO FORMA FINANCIAL STATEMENTS
(Unaudited)
(c) The following table combines the historical operations of the 2006
Merger for the four months ended April 30, 2006.
(in thousands) Adjustments
Willow 380 Blue resulting from Pro Forma
Bend Innsbrook Interlocken Lagoon Eldridge 2006 Merger Adjustment
-------- --------- ----------- -------- -------- -------------- ----------
Revenue:
Rental (1) $ 764 $ 1,846 $ 1,856 $ 1,801 $ 2,141 $ (297) $ 8,111
Management fees and interest on loans (2) -- -- -- -- -- (88) (88)
-------- -------- -------- -------- -------- -------- --------
Total revenue 764 1,846 1,856 1,801 2,141 (385) 8,023
-------- -------- -------- -------- -------- -------- --------
Expenses:
Rental operating expenses (2) 274 731 589 114 357 (88) 1,977
Real estate taxes and insurance 128 131 397 219 320 -- 1,195
Depreciation and amortization (3) 222 356 318 479 367 582 2,324
Selling, general and administrative (4) 69 123 125 150 121 (588) --
-------- -------- -------- -------- -------- -------- --------
Total expenses 693 1,341 1,429 962 1,165 (94) 5,496
-------- -------- -------- -------- -------- -------- --------
Income (loss) before interest income,
equity in earnings in non-consolidated
REITs, taxes, discontinued operations
and gain on sales of properties 71 505 427 839 976 (291) 2,527
Interest income 17 38 71 77 38 -- 241
Equity Interest in non-consolidated REITs (5) -- -- -- -- -- (75) (75)
-------- -------- -------- -------- -------- -------- --------
Net income (loss) $ 88 $ 543 $ 498 $ 916 $ 1,014 $ (366) $ 2,693
======== ======== ======== ======== ======== ======== ========
(1) The pro forma rental adjustment includes amounts related to the
amortization of above and/or below market leases, which are being
amortized over the remaining non-cancelable term of the respective leases
in accordance with SFAS 141.
(2) Management fees of $88,000 charged by FSP Corp. to the Target REITs for
the four months ended April 30, 2006 have been eliminated from revenue and
expenses.
(3) The pro forma for depreciation and amortization is due to depreciation of
the acquired building and improvements using a straight-line method over
an estimated life of 39 years. In addition, the value of the in place
leases (exclusive of the value of above and/or below market leases), are
being amortized over the remaining non-cancelable term of the respective
leases in accordance with SFAS 141.
(4) Costs of the 2006 Merger to the Target REITs were approximately $588,000
and are reflected as incurred in the period ending December 31, 2005, and
are recorded as an administrative expense.
(5) The $75,000 of equity in earnings of non-consolidated REITs for the four
months ended April 30, 2006 related to FSP Corp.'s investment in Blue
Lagoon has been eliminated from revenue.
P-5