Franklin Street Properties Corporation

10/29/2024 | Press release | Distributed by Public on 10/29/2024 14:26

Franklin Street Properties Corp. Announces Third Quarter 2024 Results Form 8 K

Franklin Street Properties Corp. Announces

Third Quarter 2024 Results

Wakefield, MA-October 29, 2024-Franklin Street Properties Corp. (the "Company", "FSP", "we" or "our") (NYSE American: FSP), a real estate investment trust (REIT), announced its results for the third quarter ended September 30, 2024.

George J. Carter, Chairman and Chief Executive Officer, commented as follows:

"As the fourth quarter of 2024 begins, we continue to believe that the current price of our common stock does not accurately reflect the value of our underlying real estate assets. We will seek to increase shareholder value by continuing to (1) pursue the sale of select properties when we believe that short to intermediate term valuation potential has been reached and (2) strive to increase occupancy through leasing of vacant space. We intend to use proceeds from property dispositions primarily for debt reductions.

During the third quarter of 2024, we leased a total of approximately 92,000 square feet of office space within our approximately 5.0 million square foot directly-owned property portfolio.

During the third quarter of 2024, we completed the sale of our last property in the Commonwealth of Virginia on July 8, 2024. The property, located in Glen Allen and known as Innsbrook, sold for a gross selling price of $31 million. On July 10, 2024, we repaid approximately $25.3 million of our debt with a portion of the net proceeds of the Innsbrook disposition.

On October 23, 2024, we completed the sale of our last property in Atlanta, Georgia. The property, known as Pershing Park Plaza, sold for a gross selling price of $34 million. On October 25, 2024, we repaid approximately $27.4 million of our debt with a portion of the net proceeds from the Pershing Park Plaza disposition. As of October 25, 2024, our total indebtedness was approximately $250.3 million, equivalent to approximately $52 per square foot on our remaining approximately 4.8 million square foot directly-owned property portfolio.

We look forward to the remainder of 2024 and beyond with anticipation and optimism."

Financial Highlights

● GAAP net loss was $15.6 million and $44.2 million, or $0.15 and $0.43 per basic and diluted share for the three and nine months ended September 30, 2024, respectively.
● Funds From Operations (FFO) was $2.7 million and $10.6 million, or $0.03 and $0.10 per basic and diluted share, for the three and nine months ended September 30, 2024, respectively.

Leasing Highlights

● During the nine months ended September 30, 2024, we leased approximately 364,000 square feet, including 122,000 square feet of new leases.
● Our directly-owned real estate portfolio of 15 owned properties, totaling approximately 5.0 million square feet, was approximately 70.4% leased as of September 30, 2024, compared to approximately 74.0% leased as of December 31, 2023. The decrease in the leased percentage is primarily a result of two property dispositions and lease expirations during the nine months ended September 30, 2024,

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which were partially offset by leasing completed during the nine months ended September 30, 2024 .
● The weighted average GAAP base rent per square foot achieved on leasing activity during the nine months ended September 30, 2024, was $29.94, or 10.9% higher than average rents in the respective properties for the year ended December 31, 2023. The average lease term on leases signed during the nine months ended September 30, 2024, was 5.4 years compared to 6.8 years during the year ended December 31, 2023. Overall, the portfolio weighted average rent per occupied square foot was $31.92 as of September 30, 2024, compared to $30.72 as of December 31, 2023.
● We believe that our continuing portfolio of real estate is well located, primarily in the Sunbelt and Mountain West geographic regions, and consists of high-quality assets with upside leasing potential.

Investment Highlights

● To reduce indebtedness, since December of 2020, FSP has selectively sold office properties when values and circumstances have warranted.
● Since December of 2020, our dispositions have resulted in aggregate gross proceeds of approximately $1,077,000,000 and reflect an average sales price per square foot of approximately $211.
● On July 8, 2024, we sold our last property in the Commonwealth of Virginia. The property was a low-rise office property located in Glen Allen (Greater Richmond) and known as Innsbrook. The property sold for a gross selling price of $31 million. On July 10, 2024, we used approximately $25.3 million of the net proceeds from the disposition to repay debt.
● On October 23, 2024, we sold our last property in Atlanta, Georgia, known as Pershing Park Plaza. The property, an approximately 160,145 square foot office building, sold for a gross selling price of $34 million. On October 25, 2024, we used approximately $27.4 million of the net proceeds from the disposition to repay debt resulting in a reduction in total indebtedness to an aggregate of approximately $250.3 million, which reflects about $52 per square foot on the remaining approximately 4.8 million square foot directly owned portfolio.

Dividends

● On October 4, 2024, we announced that our Board of Directors declared a quarterly cash dividend for the three months ended September 30, 2024, of $0.01 per share of common stock that will be paid on November 7, 2024, to stockholders of record on October 18, 2024.

Consolidation of Sponsored REIT

As of January 1, 2023, we consolidated the operations of our Monument Circle sponsored REIT into our financial statements. On October 29, 2021, we agreed to amend and restate our existing loan to Monument Circle that is secured by a mortgage on real estate owned by Monument Circle, which we refer to as the Sponsored REIT Loan. The amended and restated Sponsored REIT Loan extended the maturity date from December 6, 2022 to June 30, 2023 (and was further extended to September 30, 2023 on June 26, 2023), increased the aggregate principal amount of the loan from $21 million to $24 million, and included certain other modifications. On September 26, 2023, the maturity date was extended to September 30, 2024 and on September 27, 2024, was further extended to September 30, 2025. In consideration of our agreement to amend and restate the Sponsored REIT Loan, we obtained from the stockholders of Monument Circle the right to vote their shares in favor of any sale of the property owned by Monument Circle any time on or after January 1, 2023. As a result of our obtaining this right to vote shares, GAAP variable interest entity (VIE) rules required us to consolidate Monument Circle as of January 1, 2023. A gain on consolidation of approximately $0.4 million was recognized in the three months ended March 31, 2023.

Additional information about the consolidation of Monument Circle can be found in Note 1, "Organization, Properties, Basis of Presentation, Financial Instruments, and Recent Accounting Standards - Variable Interest Entities (VIEs)" and Note 2, "Related Party Transactions and Investments in Non-Consolidated Entities - Management fees and interest income from loans", in the Notes to Consolidated Financial Statements included

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in our Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2024.

Non-GAAP Financial Information

A reconciliation of Net income (loss) to FFO, Adjusted Funds From Operations (AFFO) and Sequential Same Store NOI and our definitions of FFO, AFFO and Sequential Same Store NOI can be found on Supplementary Schedules H and I.

2024 Net Income (Loss), FFO and Disposition Guidance

At this time, due primarily to economic conditions and uncertainty surrounding the timing and amount of proceeds received from property dispositions, we are continuing suspension of Net Income (Loss), FFO and property disposition guidance.

Real Estate Update

Supplementary schedules provide property information for the Company's owned and consolidated properties as of September 30, 2024. The Company will also be filing an updated supplemental information package that will provide stockholders and the financial community with additional operating and financial data. The Company will file this supplemental information package with the SEC and make it available on its website at www.fspreit.com.

Today's news release, along with other news about Franklin Street Properties Corp., is available on the Internet at www.fspreit.com. We routinely post information that may be important to investors in the Investor Relations section of our website. We encourage investors to consult that section of our website regularly for important information about us and, if they are interested in automatically receiving news and information as soon as it is posted, to sign up for E-mail Alerts.

Earnings Call

A conference call is scheduled for October 30, 2024, at 11:00 a.m. (ET) to discuss the third quarter 2024 results. To access the call, please dial 888-440-4368 and use conference ID 5398803. Internationally, the call may be accessed by dialing 646-960-0856 and using conference ID 5398803. To listen via live audio webcast, please visit the Webcasts & Presentations section in the Investor Relations section of the Company's website (www.fspreit.com) at least ten minutes prior to the start of the call and follow the posted directions. The webcast will also be available via replay from the above location starting one hour after the call is finished.

About Franklin Street Properties Corp.

Franklin Street Properties Corp., based in Wakefield, Massachusetts, is focused on infill and central business district (CBD) office properties in the U.S. Sunbelt and Mountain West, as well as select opportunistic markets. FSP is focused on long-term growth and appreciation, as well as current income. FSP is a Maryland corporation that operates in a manner intended to qualify as a real estate investment trust (REIT) for federal income tax purposes. To learn more about FSP please visit our website at www.fspreit.com.

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Forward-Looking Statements

Statements made in this press release that state FSP's or management's intentions, beliefs, expectations, or predictions for the future may be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. This press release may also contain forward-looking statements, such as those relating to expectations for future potential leasing activity, expectations for future potential property dispositions, the payment of dividends and the repayment of debt in future periods, value creation/enhancement in future periods and expectations for growth and leasing activities in future periods that are based on current judgments and current knowledge of management and 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, adverse changes in general economic or local market conditions, including as a result of the long-term effects of the COVID-19 pandemic, wars, terrorist attacks or other acts of violence, which may negatively affect the markets in which we and our tenants operate, inflation rates, interest rates, disruptions in the debt markets, economic conditions in the markets in which we own properties, risks of a lessening of demand for the types of real estate owned by us, adverse changes in energy prices, which if sustained, could negatively impact occupancy and rental rates in the markets in which we own properties, including energy-influenced markets such as Dallas, Denver and Houston, changes in government regulations and regulatory uncertainty, uncertainty about governmental fiscal policy, geopolitical events and expenditures that cannot be anticipated, such as utility rate and usage increases, delays in construction schedules, unanticipated increases in construction costs, increases in the level of general and administrative costs as a percentage of revenues as revenues decrease as a result of property dispositions, unanticipated repairs, additional staffing, insurance increases and real estate tax valuation reassessments. See the "Risk Factors" set forth in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2023, which may be updated from time to time in subsequent filings with the United States Securities and Exchange Commission. Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, acquisitions, dispositions, 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.

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Franklin Street Properties Corp.

Earnings Release

Supplementary Information

Table of Contents

Franklin Street Properties Corp. Financial Results

A-C

Real Estate Portfolio Summary Information

D

Portfolio and Other Supplementary Information

E

Percentage of Leased Space

F

Largest 20 Tenants - FSP Owned Portfolio

G

Reconciliation and Definitions of Funds From Operations (FFO) and Adjusted

Funds From Operations (AFFO)

H

Reconciliation and Definition of Sequential Same Store results to Property Net

Operating Income (NOI) and Net Loss

I

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Franklin Street Properties Corp. Financial Results

Supplementary Schedule A

Condensed Consolidated Statements of Operations

(Unaudited)

For the

For the

Three Months Ended

Nine Months Ended

September 30,

September 30,

(in thousands, except per share amounts)

2024

2023

2024

2023

Revenue:

Rental

$

29,662

$

36,903

$

91,705

$

110,927

Other

20

-

32

9

Total revenue

29,682

36,903

91,737

110,936

Expenses:

Real estate operating expenses

11,574

12,797

33,620

37,627

Real estate taxes and insurance

5,512

7,115

17,175

21,257

Depreciation and amortization

10,911

13,408

34,018

42,780

General and administrative

3,275

3,265

11,069

10,849

Interest

6,585

6,209

20,513

18,099

Total expenses

37,857

42,794

116,395

130,612

Loss on extinguishment of debt

(477)

(39)

(614)

(106)

Gain on consolidation of Sponsored REIT

-

-

-

394

Loss on sale of properties and impairment of assets held for sale, net

(7,254)

(39,671)

(20,459)

(32,085)

Interest income

340

-

1,696

-

Loss before taxes

(15,566)

(45,601)

(44,035)

(51,473)

Tax expense

56

70

162

212

Net loss

$

(15,622)

$

(45,671)

$

(44,197)

$

(51,685)

Weighted average number of shares outstanding, basic and diluted

103,567

103,430

103,492

103,333

Net loss per share, basic and diluted

$

(0.15)

$

(0.44)

$

(0.43)

$

(0.50)

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Franklin Street Properties Corp. Financial Results

Supplementary Schedule B

Condensed Consolidated Balance Sheets

(Unaudited)

September 30,

December 31,

(in thousands, except share and par value amounts)

2024

2023

Assets:

Real estate assets:

Land

$

105,298

$

110,298

Buildings and improvements

1,090,551

1,133,971

Fixtures and equipment

10,776

12,904

1,206,625

1,257,173

Less accumulated depreciation

369,276

366,349

Real estate assets, net

837,349

890,824

Acquired real estate leases, less accumulated amortization of $16,465 and $20,413, respectively

4,695

6,694

Assets held for sale

32,926

73,318

Cash, cash equivalents and restricted cash

42,375

127,880

Tenant rent receivables

1,349

2,191

Straight-line rent receivable

38,432

40,397

Prepaid expenses and other assets

3,243

4,239

Office computers and furniture, net of accumulated depreciation of $1,063 and $1,020, respectively

80

123

Deferred leasing commissions, net of accumulated amortization of $14,724 and $16,008, respectively

21,064

23,664

Total assets

$

981,513

$

1,169,330

Liabilities and Stockholders' Equity:

Liabilities:

Bank note payable

$

-

$

90,000

Term loans payable, less unamortized financing costs of $2,956 and $293, respectively

137,601

114,707

Series A & Series B Senior Notes, less unamortized financing costs of $1,585 and $329, respectively

135,545

199,670

Accounts payable and accrued expenses

32,821

41,879

Accrued compensation

3,193

3,644

Tenant security deposits

6,120

6,204

Lease liability

763

334

Acquired unfavorable real estate leases, less accumulated amortization of $310 and $396, respectively

51

87

Total liabilities

316,094

456,525

Commitments and contingencies

Stockholders' Equity:

Preferred stock, $.0001 par value, 20,000,000 shares authorized, none issued or outstanding

-

-

Common stock, $.0001 par value, 180,000,000 shares authorized, 103,566,715 and 103,430,353 shares issued and outstanding, respectively

10

10

Additional paid-in capital

1,335,361

1,335,091

Accumulated other comprehensive income

-

355

Accumulated distributions in excess of accumulated earnings

(669,952)

(622,651)

Total stockholders' equity

665,419

712,805

Total liabilities and stockholders' equity

$

981,513

$

1,169,330

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Franklin Street Properties Corp. Financial Results

Supplementary Schedule C

Condensed Consolidated Statements of Cash Flows

(Unaudited)

For the

Nine Months Ended

September 30,

(in thousands)

2024

2023

Cash flows from operating activities:

Net loss

$

(44,197)

$

(51,685)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation and amortization expense

36,284

44,705

Amortization of above and below market leases

(17)

(39)

Amortization of other comprehensive income into interest expense

(355)

(2,789)

Shares issued as compensation

270

315

Loss on extinguishment of debt

614

106

Gain on consolidation of Sponsored REIT

-

(394)

Loss on sale of properties and impairment of assets held for sale, net

20,459

32,085

Changes in operating assets and liabilities:

Tenant rent receivables

842

(653)

Straight-line rents

1,249

427

Lease acquisition costs

(660)

(903)

Prepaid expenses and other assets

314

(644)

Accounts payable and accrued expenses

(4,364)

(2,516)

Accrued compensation

(451)

(465)

Tenant security deposits

(84)

(79)

Payment of deferred leasing commissions

(3,168)

(5,926)

Net cash provided by operating activities

6,736

11,545

Cash flows from investing activities:

Property improvements, fixtures and equipment

(19,074)

(26,024)

Consolidation of Sponsored REIT

-

3,048

Proceeds received from sales of properties

62,909

37,062

Net cash provided by investing activities

43,835

14,086

Cash flows from financing activities:

Distributions to stockholders

(3,104)

(3,099)

Proceeds received from termination of interest rate swap

-

4,206

Borrowings under Bank note payable

-

67,000

Repayments of Bank note payable

(22,667)

(35,000)

Repayments of Term loans payable

(41,775)

(50,000)

Repayments of Series A&B Senior Notes

(62,870)

-

Deferred financing costs

(5,660)

(2,327)

Net cash used in financing activities

(136,076)

(19,220)

Net increase (decrease) in cash, cash equivalents and restricted cash

(85,505)

6,411

Cash, cash equivalents and restricted cash, beginning of year

127,880

6,632

Cash, cash equivalents and restricted cash, end of period

$

42,375

$

13,043

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Franklin Street Properties Corp. Earnings Release

Supplementary Schedule D

Real Estate Portfolio Summary Information

(Unaudited & Approximated)

Commercial portfolio lease expirations (1)

Total

% of

Year

Square Feet

Portfolio

2024

76,685

1.5%

2025

437,680

8.4%

2026

597,396

11.5%

2027

301,032

5.8%

2028

252,285

4.9%

Thereafter (2)

3,515,080

67.9%

5,180,158

100.0%

(1) Percentages are determined based upon total square footage.
(2) Includes 1,674,459 square feet of vacancies at our owned and consolidated properties as of September 30, 2024.

​

(dollars & square feet in 000's)

As of September 30, 2024

% of

Square

% of

State

Properties

Investment

Portfolio

Feet

Portfolio

Colorado

4

$

443,251

52.9%

2,140

41.3%

Texas

7

260,627

31.1%

1,909

36.9%

Georgia (a)

1

-

0.0%

160

3.1%

Minnesota

3

114,373

13.7%

757

14.6%

Indiana

1

19,098

2.3%

214

4.1%

Total

16

$

837,349

100.0%

5,180

100.0%

(a) Includes one property that was classified as an asset held for sale as of September 30, 2024.

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Franklin Street Properties Corp. Earnings Release

Supplementary Schedule E

Portfolio and Other Supplementary Information

(Unaudited & Approximated)

Recurring Capital Expenditures

For the Nine

(in thousands)

For the Three Months Ended

Months Ended

31-Mar-24

30-Jun-24

30-Sep-24

30-Sep-24

Tenant improvements

$

2,619

$

2,558

$

4,444

$

9,621

Deferred leasing costs

2,237

511

421

3,169

Non-investment capex

1,019

1,480

1,658

4,157

$

5,875

$

4,549

$

6,523

$

16,947

(in thousands)

For the Three Months Ended

Year Ended

31-Mar-23

30-Jun-23

30-Sep-23

31-Dec-23

31-Dec-23

Tenant improvements

$

3,047

$

4,381

$

3,653

$

5,295

$

16,376

Deferred leasing costs

908

3,230

1,114

1,649

6,901

Non-investment capex

2,967

2,042

1,775

5,230

12,014

$

6,922

$

9,653

$

6,542

$

12,174

$

35,291

Square foot & leased percentages

September 30,

December 31,

2024

2023

Owned Properties:

Number of properties (a)

15

17

Square feet

4,966,398

5,565,782

Leased percentage

70.4%

74.0%

Consolidated Property - Single Asset REIT (SAR):

Number of properties

1

1

Square feet

213,760

213,760

Leased percentage

4.1%

4.1%

Total Owned and Consolidated Properties:

Number of properties

16

18

Square feet

5,180,158

5,779,542

Leased percentage

67.7%

71.5%

(a) Includes one property that was classified as an asset held for sale as of September 30, 2024 and two properties that were classified as assets held for sale as of December 31, 2023.

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Franklin Street Properties Corp. Earnings Release

Supplementary Schedule F

Percentage of Leased Space

(Unaudited & Estimated)

Second

Third

% Leased (1)

Quarter

% Leased (1)

Quarter

as of

Average %

as of

Average %

Property Name

Location

Square Feet

30-Jun-24

Leased (2)

30-Sep-24

Leased (2)

1

PARK TEN

Houston, TX

157,609

82.1%

84.0%

82.1%

82.1%

2

PARK TEN PHASE II

Houston, TX

156,746

66.9%

85.6%

66.9%

66.9%

3

GREENWOOD PLAZA

Englewood, CO

196,236

65.0%

65.0%

65.0%

65.0%

4

ADDISON

Addison, TX

289,333

79.4%

79.4%

79.4%

79.4%

INNSBROOK (3)

Glen Allen, VA

-

89.6%

89.9%

(3)

(3)

5

LIBERTY PLAZA

Addison, TX

217,841

75.9%

75.9%

75.9%

75.9%

6

ELDRIDGE GREEN

Houston, TX

248,399

100.0%

100.0%

100.0%

100.0%

7

121 SOUTH EIGHTH ST

Minneapolis, MN

297,541

77.6%

77.6%

72.4%

75.6%

8

801 MARQUETTE AVE

Minneapolis, MN

129,691

91.8%

91.8%

91.8%

91.8%

9

LEGACY TENNYSON CTR

Plano, TX

209,562

53.1%

53.1%

51.0%

52.4%

10

WESTCHASE I & II

Houston, TX

629,025

66.5%

65.7%

68.8%

67.6%

11

1999 BROADWAY

Denver, CO

682,639

50.7%

51.0%

50.7%

50.7%

12

1001 17TH STREET

Denver, CO

649,400

76.5%

76.5%

76.5%

76.5%

13

PLAZA SEVEN

Minneapolis, MN

330,096

61.6%

61.6%

53.8%

55.0%

14

PERSHING PLAZA (4)

Atlanta, GA

160,145

79.8%

79.8%

79.8%

79.8%

15

600 17TH STREET

Denver, CO

612,135

78.8%

78.8%

76.7%

77.1%

OWNED PORTFOLIO

4,966,398

72.3%

72.9%

70.4%

70.6%

16

MONUMENT CIRCLE (5)

Indianapolis, IN

213,760

4.1%

4.1%

4.1%

4.1%

OWNED & CONSOLIDATED PORTFOLIO

5,180,158

69.7%

70.2%

67.7%

67.9%

(1) % Leased as of month's end includes all leases that expire on the last day of the quarter.
(2) Average quarterly percentage is the average of the end of the month leased percentage for each of the three months during the quarter.
(3) Property was sold on July 8, 2024.
(4) Property was classified as an asset held for sale as of September 30, 2024.
(5) Consolidated property as of January 1, 2023, which was previously a managed property.

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Franklin Street Properties Corp. Earnings Release

Supplementary Schedule G

Largest 20 Tenants - FSP Owned and Consolidated Portfolio

(Unaudited & Estimated)

​

The following table includes the largest 20 tenants in FSP's owned and consolidated portfolio based on total square feet:

As of September 30, 2024

​

% of

Tenant

Sq Ft

Portfolio

1

CITGO Petroleum Corporation

248,399

4.8%

2

EOG Resources, Inc.

169,167

3.3%

3

US Government

168,573

3.2%

4

Kaiser Foundation Health Plan, Inc.

120,979

2.3%

5

Swift, Currie, McGhee & Hiers, LLP

101,296

2.0%

6

Deluxe Corporation

98,922

1.9%

7

Ping Identity Corp.

89,856

1.7%

8

Permian Resources Operating, LLC

67,856

1.3%

9

Hall and Evans LLC

65,878

1.3%

10

Cyxtera Management, Inc.

61,826

1.2%

11

Precision Drilling (US) Corporation

59,569

1.1%

12

PwC US Group

54,334

1.1%

13

Olin Corporation

54,080

1.0%

14

Coresite, LLC

49,518

1.0%

15

Schwegman, Lundberg & Woessner, P.A.

46,269

0.9%

16

Invenergy, LLC.

42,505

0.8%

17

Ark-La-Tex Financial Services, LLC.

41,011

0.8%

18

Chevron U.S.A., Inc.

35,088

0.7%

19

Caerus Operating, LLC.

34,063

0.7%

20

CarOffer, LLC.

30,913

0.6%

Total

1,640,102

31.7%

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Franklin Street Properties Corp. Earnings Release

Supplementary Schedule H

Reconciliation and Definitions of Funds From Operations ("FFO") and

Adjusted Funds From Operations ("AFFO")

A reconciliation of Net income (loss) to FFO and AFFO is shown below and a definition of FFO and AFFO is provided on Supplementary Schedule I. Management believes FFO and AFFO are used broadly throughout the real estate investment trust (REIT) industry as measurements of performance. The Company has included the National Association of Real Estate Investment Trusts (NAREIT) FFO definition as of May 17, 2016 in the table and notes that other REITs may not define FFO in accordance with the current NAREIT definition or may interpret the current NAREIT definition differently. The Company's computation of FFO and AFFO may not be comparable to FFO or AFFO reported by other REITs or real estate companies that define FFO or AFFO differently.

Reconciliation of Net Loss to FFO and AFFO:

Three Months Ended

Nine Months Ended

September 30,

September 30,

(In thousands, except per share amounts)

2024

2023

2024

2023

Net loss

$

(15,622)

$

(45,671)

$

(44,197)

$

(51,685)

Gain on consolidation of Sponsored REIT

-

-

-

(394)

Loss on sale of properties and impairment of asset held for sale, net

7,254

39,671

20,459

32,085

Depreciation & amortization

10,907

13,400

34,002

42,742

NAREIT FFO

2,539

7,400

10,264

22,748

Lease Acquisition costs

126

109

315

278

Funds From Operations (FFO)

$

2,665

$

7,509

$

10,579

$

23,026

Funds From Operations (FFO)

$

2,665

$

7,509

$

10,579

$

23,026

Loss on extinguishment of debt

477

39

614

106

Amortization of deferred financing costs

767

665

2,265

1,926

Shares issued as compensation

-

-

270

315

Straight-line rent

785

106

1,249

428

Tenant improvements

(4,444)

(3,653)

(9,621)

(11,081)

Leasing commissions

(421)

(1,114)

(3,169)

(5,252)

Non-investment capex

(1,658)

(1,775)

(4,157)

(6,784)

Adjusted Funds From Operations (AFFO)

$

(1,829)

$

1,777

$

(1,970)

$

2,684

Per Share Data

EPS

$

(0.15)

$

(0.44)

$

(0.43)

$

(0.50)

FFO

$

0.03

$

0.07

$

0.10

$

0.22

AFFO

$

(0.02)

$

0.02

$

(0.02)

$

0.03

Weighted average shares (basic and diluted)

103,567

103,430

103,492

103,333

-14-

Funds From Operations ("FFO")

The Company evaluates performance based on Funds From Operations, which we refer to as FFO, as management believes that FFO represents the most accurate measure of activity and is the basis for distributions paid to equity holders. The Company defines FFO as net income or loss (computed in accordance with GAAP), excluding gains (or losses) from sales of property, hedge ineffectiveness, acquisition costs of newly acquired properties that are not capitalized and lease acquisition costs that are not capitalized plus depreciation and amortization, including amortization of acquired above and below market lease intangibles and impairment charges on mortgage loans, properties or investments in non-consolidated REITs, and after adjustments to exclude equity in income or losses from, and, to include the proportionate share of FFO from, non-consolidated REITs.

FFO should not be considered as an alternative to net income or loss (determined in accordance with GAAP), nor 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 and the National Association of Real Estate Investment Trusts, or NAREIT, may define this term in a different manner. We have included the NAREIT FFO as of May 17, 2016 in the table and note that other REITs may not define FFO in accordance with the current NAREIT definition or may interpret the current NAREIT definition differently than we do.

We believe that in order to facilitate a clear understanding of the results of the Company, FFO should be examined in connection with net income or loss and cash flows from operating, investing and financing activities in the consolidated financial statements.

Adjusted Funds From Operations ("AFFO")

The Company also evaluates performance based on Adjusted Funds From Operations, which we refer to as AFFO. The Company defines AFFO as (1) FFO, (2) excluding loss on extinguishment of debt that is non-cash, (3) excluding our proportionate share of FFO and including distributions received, from non-consolidated REITs, (4) excluding the effect of straight-line rent, (5) plus the amortization of deferred financing costs, (6) plus the value of shares issued as compensation and (7) less recurring capital expenditures that are generally for maintenance of properties, which we call non-investment capex or are second generation capital expenditures. Second generation costs include re-tenanting space after a tenant vacates, which include tenant improvements and leasing commissions.

We exclude development/redevelopment activities, capital expenditures planned at acquisition and costs to reposition a property. We also exclude first generation leasing costs, which are generally to fill vacant space in properties we acquire or were planned for at acquisition.

AFFO should not be considered as an alternative to net income or loss (determined in accordance with GAAP), nor 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 this term in a different manner. 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 or loss and cash flows from operating, investing and financing activities in the consolidated financial statements.

-15-

Franklin Street Properties Corp. Earnings Release

Supplementary Schedule I

Reconciliation and Definition of Sequential Same Store results to property Net Operating Income (NOI) and Net Income

Net Operating Income ("NOI")

The Company provides property performance based on Net Operating Income, which we refer to as NOI. Management believes that investors are interested in this information. NOI is a non-GAAP financial measure that the Company defines as net income or loss (the most directly comparable GAAP financial measure) plus general and administrative expenses, depreciation and amortization, including amortization of acquired above and below market lease intangibles and impairment charges, interest expense, less equity in earnings of nonconsolidated REITs, interest income, management fee income, hedge ineffectiveness, gains or losses on extinguishment of debt, gains or losses on the sale of assets and excludes non-property specific income and expenses. The information presented includes footnotes and the data is shown by region with properties owned in the periods presented, which we call Sequential Same Store. The comparative Sequential Same Store results include properties held for all periods presented. We exclude properties that have been placed in service, but that do not have operating activity for all periods presented, dispositions and significant nonrecurring income such as bankruptcy settlements and lease termination fees. NOI, as defined by the Company, may not be comparable to NOI reported by other REITs that define NOI differently. NOI should not be considered an alternative to net income or loss as an indication of our performance or to cash flows as a measure of the Company's liquidity or its ability to make distributions. The calculations of NOI and Sequential Same Store are shown in the following table:

Rentable

Square Feet

Three Months Ended

Three Months Ended

Inc

%

(in thousands)

or RSF

30-Sep-24

30-Jun-24

(Dec)

Change

Region

MidWest

757

1,278

1,665

(387)

(23.2)

%

South

2,069

5,087

5,241

(154)

(2.9)

%

West

2,140

6,037

6,224

(187)

(3.0)

%

Property NOI* from Owned Properties

4,966

12,402

13,130

(728)

(5.5)

%

Disposition and Acquisition Properties (a)

214

(19)

618

(637)

(4.4)

%

NOI*

5,180

$

12,383

$

13,748

$

(1,365)

(9.9)

%

Sequential Same Store

$

12,402

$

13,130

$

(728)

(5.5)

%

Less Nonrecurring

Items in NOI* (b)

78

255

(177)

1.2

%

Comparative

Sequential Same Store

$

12,324

$

12,875

$

(551)

(4.3)

%

-16-

Reconciliation to

Three Months Ended

Three Months Ended

Net loss

30-Sep-24

30-Jun-24

Net loss

$

(15,622)

$

(21,023)

Add (deduct):

Loss on extinguishment of debt

477

-

Loss on sale of properties and impairment of assets held for sale, net

7,254

13,200

Management fee income

(422)

(443)

Depreciation and amortization

10,911

11,482

Amortization of above/below market leases

(5)

(6)

General and administrative

3,275

3,635

Interest expense

6,585

7,082

Interest income

(340)

(348)

Non-property specific items, net

270

169

NOI*

$

12,383

$

13,748

(a) We define Disposition and Acquisition Properties as properties that were sold acquired or consolidated and do not have operating activity for all periods presented.
(b) Nonrecurring Items in NOI include proceeds from bankruptcies, lease termination fees or other significant nonrecurring income or expenses, which may affect comparability.

*Excludes NOI from investments in and interest income from secured loans to non-consolidated REITs.