EX-99.1 6 a14-9725_1ex99d1.htm EX-99.1

Exhibit 99.1

SELECTED COMBINING CONDENSED CONSOLIDATED PRO FORMA FINANCIAL DATA

The following unaudited pro forma condensed consolidated financial statements of Franklin Street Properties Corp. (“FSP Corp.” or the “Registrant”) gives effect to the acquisition of a property (“1999 Broadway”) on May 22, 2013 for a purchase price of approximately $183 million by FSP 1999 Broadway LLC (the “1999 Broadway Purchaser”), a wholly-owned subsidiary of FSP Corp., and the acquisition of a property (“999 Peachtree”) on July 1, 2013 for a purchase price of approximately $158 million by FSP 999 Peachtree Street LLC (the “999 Peachtree Purchaser”), a wholly-owned subsidiary of FSP Corp, and the acquisition of a property (“1001 17 th Street”) on August 28, 2013 for a purchase price of approximately $217 million by FSP 1001 17 th Street LLC (the “1001 17 th Street Purchaser”), a wholly-owned subsidiary of FSP Corp.

The unaudited pro forma condensed consolidated financial statements are based upon the historical consolidated financial statements of FSP Corp. included in our Annual Report on Form 10-K for the year ended December 31, 2013, and the financial statements of 1999 Broadway for the period January 1, 2013 through May 21, 2013, and the financial statements of 999 Peachtree for the period January 1, 2013 through June 30, 2013, and the financial statements of 1001 17 th Street for the period January 1, 2013 through August 27, 2013. The financial statements of 1999 Broadway were prepared pursuant to the requirements of Rule 3-14 of Regulation S-X of the Securities and Exchange Commission and were included in the Exhibits to our Quarterly Report on Form 10-Q for the quarter ended June 30, 2013. The financial statements of 999 Peachtree have been prepared pursuant to the requirements of Rule 3-14 of Regulation S-X of the Securities and Exchange Commission and were included in our Current Report on Form 8-K/A filed on September 9, 2013. The financial statements of 1001 17 th Street have been prepared pursuant to the requirements of Rule 3-14 of Regulation S-X of the Securities and Exchange Commission and are included in the Exhibits to our Quarterly Report on Form 10-Q for the quarter ended September 30, 2013. FSP Corp.’s consolidated balance sheet as of December 31, 2013 reflects the acquisitions; therefore a pro forma condensed consolidated balance sheet is not presented. The pro forma condensed consolidated statements of income for the year ended December 31, 2013 are presented as if the acquisitions were completed on January 1, 2013.

Certain balances in the 1999 Broadway, 999 Peachtree and 1001 17 th Street financial statements have been reclassified to conform to FSP Corp.’s presentation.

The unaudited pro forma condensed consolidated financial statements are not necessarily indicative of the actual results of operations of 1999 Broadway, 999 Peachtree and 1001 17 th Street for the periods indicated, nor do they purport to represent the results of operations of the entities for any future period. We funded the 1999 Broadway acquisition using cash and cash equivalents available from equity offering proceeds completed on May 16, 2013, we funded the 999 Peachtree acquisition with a $150 million borrowings under our $500 million unsecured revolving credit facility and the with cash and cash equivalents and we f unded the 1001 17 th Street acquisition using cash and cash equivalents available from the $220 million borrowings under the term loan that closed on August 26, 2013. These unaudited pro forma financial statements are provided for informational purposes only and upon completion of the planned long term financing of these acquisition our financial position and results of operations may be significantly different than what is presented in these unaudited pro forma financial statements.

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Franklin Street Properties Corp.

Unaudited Combining Condensed Consolidated Pro Forma Statements of Income

For the Year Ended

December 31, 2013

(dollars in thousands, except per share amounts)

|  |  |  | 1999 |  | 999 |  | 1001 17th |  |  |
|  |  |  | Broadway |  | Peachtree |  | Street |  |  |
|  | Historical |  | Acquisition |  | Acquisition |  | Acquisition |  |  |
|  | FSP Corp. |  | (e) |  | (f) |  | (g) |  | Pro Forma |
Revenue: |  |  |  |  |  |  |  |  |  |  |
Rental income |  | $ | 206,926 |  | $ | 7,705 |  | $ | 8,356 |  | $ | 11,650 |  | $ | 234,637 |
Related party revenue: |  |  |  |  |  |  |  |  |  |  |
Management fees and interest on loans |  | 6,646 |  | — |  | — |  | — |  | 6,646 |
Other |  | 64 |  | — |  | — |  | — |  | 64 |
Total revenue |  | 213,636 |  | 7,705 |  | 8,356 |  | 11,650 |  | 241,347 |
Expenses: |  |  |  |  |  |  |  |  |  |  |
Rental operating expenses |  | 51,100 |  | 2,187 |  | 2,155 |  | 2,744 |  | 58,186 |
Real estate taxes and insurance |  | 31,616 |  | 965 |  | 871 |  | 1,635 |  | 35,087 |
Depreciation and amortization |  | 78,839 |  | 5,315 |  | 4,536 |  | 5,896 |  | 94,586 |
Selling, general and administrative |  | 11,911 |  | (195 | ) | (191 | ) | (111 | ) | 11,414 |
Interest |  | 21,054 |  | — |  | 1,251 |  | 5,430 |  | 27,735 |
Total expenses |  | 194,520 |  | 8,272 |  | 8,622 |  | 15,594 |  | 227,008 |
Income (loss) before interest income, equity in earnings in non-consolidated REITs and taxes |  | 19,116 |  | (567 | ) | (266 | ) | (3,944 | ) | 14,339 |
Interest Income |  | 16 |  | — |  | — |  | — |  | 16 |
Equity in income of non-consolidated REITs |  | (1,358 | ) | — |  | — |  | — |  | (1,358 | )
Taxes on income (a) |  | 480 |  | — |  | — |  | — |  | 480 |
Income (loss) from continuing operations |  | 17,294 |  | (567 | ) | (266 | ) | (3,944 | ) | 12,517 |
Weighted average shares outstanding, basic and diluted |  | 93,855 |  |  |  |  |  |  |  | 93,855 |
Income per share attributable to: |  |  |  |  |  |  |  |  |  |  |
Continuing operations, basic and diluted |  | $ | 0.18 |  |  |  |  |  |  |  | $ | 0.13 |

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FRANKLIN STREET PROPERTIES CORP.

NOTES TO UNAUDITED COMBINING CONDENSED CONSOLIDATED

PRO FORMA FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts)

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 occurred as of the beginning of the periods presented.

The acquisitions of 1999 Broadway, 999 Peachtree and 1001 17 th Street have been treated as business combinations. The 1999 Broadway, 999 Peachtree and 1001 17 th Street purchase prices have been allocated to the assets acquired and liabilities assumed based upon estimates of their fair values as of the effective date of each of the acquisitions 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. elected to be, and is qualified as, a real estate investment trust for federal income tax purposes. FSP Corp. has met the various required tests; therefore, no provision for federal or state income taxes has been reflected on real estate operations except for a margin tax related to real estate operations in Texas.

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 condensed consolidated statements of income are the taxes on the income of the TRS. There are no material items that would cause a deferred tax asset or a deferred tax liability.

(b) Represents the effect of the acquisition of 1999 Broadway on May 22, 2013. W e funded this acquisition using cash and cash equivalents available from equity offering proceeds completed on May 16, 2013. The purchase price of this property was $183,000 before purchase credits of $836 and excluding $208 of estimated acquisition related costs. We allocated $154,060 of the purchase price to real estate properties, $31,024 to acquired real estate leases and $2,920 to acquired unfavorable real estate leases. The values assigned to the assets acquired are estimated and the final allocation may differ.

(c) Represents the effect of the acquisition of 999 Peachtree on July 1, 2013. We financed $150,000 of this acquisition with borrowings under our $500,000 unsecured revolving credit facility and the remainder with cash and cash equivalents. The purchase price of this property was $157,900 before purchase credits of $2,161 and excluding $237 of estimated acquisition related costs. We allocated $117,915 of the purchase price to real estate properties, $39,126 to acquired real estate leases and $1,302 to acquired unfavorable real estate leases. The values assigned to the assets acquired are estimated and the final allocation may differ.

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FRANKLIN STREET PROPERTIES CORP.

NOTES TO UNAUDITED COMBINING CONDENSED CONSOLIDATED

PRO FORMA FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts)

(d) Represents the effect of the acquisition of 1001 17 th Street on August 28, 2013. We financed the $217,000 acquisition using cash and cash equivalents available from the $220 million borrowing under the term loan that closed on August 26, 2013. The purchase price of this property was $217,000 before purchase credits of $314 and excluding $111 of estimated acquisition related costs. We allocated $182,472 of the purchase price to real estate properties, $37,258 to acquired real estate leases and $3,044 to acquired unfavorable real estate leases. The values assigned to the assets acquired are estimated and the final allocation may differ.

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FRANKLIN STREET PROPERTIES CORP.

NOTES TO UNAUDITED COMBINING CONDENSED CONSOLIDATED

PRO FORMA FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts)

(e) The following table presents the operations of 1999 Broadway for the period January 1, 2013 through December 31, 2013.

|  |  |  | Adjustments |  |  |
|  | 1999 Broadway |  | resulting from |  | Pro Forma |
|  | Historical |  | Acquisition |  | Adjustment |
Revenue: |  |  |  |  |  |  |
Rental (1) |  | $ | 7,275 |  | $ | 430 |  | $ | 7,705 |
Total revenue |  | 7,275 |  | 430 |  | 7,705 |
Expenses: |  |  |  |  |  |  |
Rental operating expenses |  | 2,187 |  | — |  | 2,187 |
Real estate taxes and insurance |  | 965 |  | — |  | 965 |
Selling, general and administrative (2) |  | 13 |  | (208 | ) | (195 | )
Depreciation and amortization (3) |  | — |  | 5,315 |  | 5,315 |
Total expenses |  | 3,165 |  | 5,107 |  | 8,272 |
Income (loss) before taxes |  | 4,110 |  | (4,677 | ) | (567 | )
Taxes on income |  | — |  | — |  | — |
Income (loss) from continuing operations |  | $ | 4,110 |  | $ | (4,677 | ) | $ | (567 | )

(1) The pro forma rental adjustment includes amounts related to the amortization of approximately $2,631 of acquired above market leases with a weighted average term of approximately 59 months and approximately $5,551 of acquired below market leases with a weighted average term of approximately 43 months, which are being amortized over the remaining non-cancelable terms in accordance with GAAP.

(2) Acquisition costs described in Pro Forma Adjustment (b) above are treated as if occurred prior to January 1, 2013.

(3) The pro forma adjustment relates to depreciation of approximately $137,726 of acquired building and improvements using a straight-line method over an estimated life of 39 years. In addition, the adjustment includes amortization of the value of approximately $31,025 of acquired in place leases (exclusive of the value of above and/or below market leases), which are being amortized over the remaining non-cancelable weighted average term of approximately 40 months in accordance with GAAP.

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FRANKLIN STREET PROPERTIES CORP.

NOTES TO UNAUDITED COMBINING CONDENSED CONSOLIDATED

PRO FORMA FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts)

(f) The following table presents the operations of 999 Peachtree for the period January 1, 2013 through December 31, 2013.

|  |  |  | Adjustments |  |  |
|  | 999 Peachtree |  | resulting from |  | Pro Forma |
|  | Historical |  | Acquisition |  | Adjustment |
Revenue: |  |  |  |  |  |  |
Rental (1) |  | $ | 8,458 |  | $ | (102 | ) | $ | 8,356 |
Total revenue |  | 8,458 |  | (102 | ) | 8,356 |
Expenses: |  |  |  |  |  |  |
Rental operating expenses |  | 2,155 |  | — |  | 2,155 |
Real estate taxes and insurance |  | 871 |  | — |  | 871 |
Selling, general and administrative (2) |  | 46 |  | (237 | ) | (191 | )
Depreciation and amortization (3) |  | — |  | 4,536 |  | 4,536 |
Interest Expense (4) |  | — |  | 1,251 |  | 1,251 |
Total expenses |  | 3,072 |  | 5,550 |  | 8,622 |
Income (loss) before taxes |  | 5,386 |  | (5,652 | ) | (266 | )
Taxes on income |  | — |  | — |  | — |
Income (loss) from continuing operations |  | $ | 5,386 |  | $ | (5,652 | ) | $ | (266 | )

(1) The pro forma rental adjustment includes amounts related to the amortization of approximately $3,070 of acquired above market leases with a weighted average term of approximately 63 months and approximately $1,302 of acquired below market leases with a weighted average term of approximately 41 months, which are being amortized over the remaining non-cancelable terms in accordance with GAAP.

(2) Acquisition costs described in Pro Forma Adjustment (c) above are treated as if occurred prior to January 1, 2013.

(3) The pro forma adjustment relates to depreciation of approximately $107,727 of acquired building and improvements using a straight-line method over an estimated life of 39 years. In addition, the adjustment includes amortization of the value of approximately $36,056 of acquired in place leases (exclusive of the value of above and/or below market leases), which are being amortized over the remaining non-cancelable weighted average term of approximately 69 months in accordance with GAAP.

(4) The pro forma adjustment relates to the effect on interest expense related to the approximately $150,000 of the acquisition funded with borrowing under our revolving credit facility at our then current incremental borrowing rate of 1.65% per annum.

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FRANKLIN STREET PROPERTIES CORP.

NOTES TO UNAUDITED COMBINING CONDENSED CONSOLIDATED

PRO FORMA FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts)

(g) The following table presents the operations of 1001 17 th Street for the period January 1, 2013 through December 31, 2013.

|  |  |  | Adjustments |  |  |
|  | 1001 17th Street |  | resulting from |  | Pro Forma |
|  | Historical |  | Acquisition |  | Adjustment |
Revenue: |  |  |  |  |  |  |
Rental (1) |  | $ | 11,882 |  | $ | (232 | ) | $ | 11,650 |
Total revenue |  | 11,882 |  | (232 | ) | 11,650 |
Expenses: |  |  |  |  |  |  |
Rental operating expenses |  | 2,744 |  | — |  | 2,744 |
Real estate taxes and insurance |  | 1,635 |  | — |  | 1,635 |
Selling, general and administrative (2) |  | — |  | (111 | ) | (111 | )
Depreciation and amortization (3) |  | — |  | 5,896 |  | 5,896 |
Interest Expense (4) |  | — |  | 5,430 |  | 5,430 |
Total expenses |  | 4,379 |  | 11,215 |  | 15,594 |
Income (loss) before taxes |  | 7,503 |  | (11,447 | ) | (3,944 | )
Taxes on income |  | — |  | — |  | — |
Income (loss) from continuing operations |  | $ | 7,503 |  | $ | (11,447 | ) | $ | (3,944 | )

(1) The pro forma rental adjustment includes amounts related to the amortization of approximately $4,725 of acquired above market leases with a weighted average term of approximately 80 months and approximately $3,044 of acquired below market leases with a weighted average term of approximately 105 months, which are being amortized over the remaining non-cancelable terms in accordance with GAAP.

(2) Acquisition costs described in Pro Forma Adjustment (d) above are treated as if occurred prior to January 1, 2013.

(3) The pro forma adjustment relates to depreciation of approximately $165,058 of acquired building and improvements using a straight-line method over an estimated life of 39 years. In addition, the adjustment includes amortization of the value of approximately $32,533 of acquired in place leases (exclusive of the value of above and/or below market leases), which are being amortized over the remaining non-cancelable weighted average term of approximately 85 months in accordance with GAAP.

(4) The pro forma adjustment relates to the effect on interest expense related to the approximately $217,000 of the acquisition funded with borrowing under our term loan that closed on August 26, 2013 at our then current incremental borrowing rate of 3.77% per annum.

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