EX-99.2 3 ex99-2.htm SUPPLEMENTAL OPERATING AND FINANCIAL DATA

Exhibit 99.2

  Supplemental Operating
and Financial Data Third Quarter 2014

 

Franklin Street Properties Corp. ● 401 Edgewater Place ● Wakefield, MA 01880 ● (781) 557-1300

www.franklinstreetproperties.com

   Table of Contents

	Page			Page
Company Overview	3		Tenant Analysis and Leasing Activity
			20 Largest Tenants, Industry Profile	18
Key Financial Data			20 Largest Tenants with Annualized Rent and Remaining Term	19
Financial Highlights	4		Leasing Activity	20
Income Statements	5		Lease Expirations by Square Feet	21
Balance Sheets	6		Lease Expirations with Annualized Rent per Square Foot	22
Cash Flow Statements	7		Capital Expenditures	23
Property Net Operating Income (NOI)	8
			Transaction Activity	24
Reconciliation
FFO & AFFO	9		Loan Portfolio of Secured Real Estate	25
EBITDA	10
Property NOI	11		Net Asset Value Components	26
Debt Summary	12		Appendix: Definitions of Non-GAAP Measures
			FFO	27
Capital Analysis	13		EBITDA and AFFO	28
			NOI	29
Owned and Managed Portfolio Overview	14-17

All financial information contained in this supplemental information package is unaudited. In addition, certain statements contained in this supplemental information package may be deemed to be forward-looking statements within the meaning of the federal securities laws. Although FSP believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, it can give no assurance that its expectations will be achieved. Factors that could cause actual results to differ materially from FSP’s current expectations include general economic conditions, uncertainties relating to fiscal policy, changes in government regulations, regulatory uncertainty, geopolitical events, local real estate conditions, the performance of properties that FSP has acquired or may acquire, the timely lease-up of properties and other risks, detailed from time to time in FSP’s SEC reports. FSP assumes no obligation to update or supplement forward-looking statements that become untrue because of subsequent events.

September 30, 2014  2

   Company Overview

Overview

Franklin Street Properties Corp. (“FSP”, “we”, “our” or the “Company”) (NYSE MKT: FSP) is investing in institutional-quality office properties in the U.S. FSP’s strategy is to invest in select urban infill and central business district (CBD) properties, with primary emphasis on our top five markets of Atlanta, Dallas, Denver, Houston, and Minneapolis. FSP seeks value-oriented investments with an eye towards 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. FSP’s real estate operations include property acquisitions and dispositions, short-term financing, leasing, development and asset management.

Our Business

As of September 30, 2014, the Company owned and operated a portfolio of real estate consisting of 39 properties, managed 11 Sponsored REITs and held six promissory notes secured by mortgages on real estate owned by Sponsored REITs. From time-to-time, the Company may acquire real estate, make additional secured loans or acquire one of its Sponsored REITs. The Company may also pursue, on a selective basis, the sale of its properties in order to take advantage of the value creation and demand for its properties, or for geographic or property specific reasons.

Management Team
George J. Carter		Scott H. Carter
President, Chief Executive Officer		Executive Vice President, General
Chairman of the Board		Counsel and Assistant Secretary
Barbara J. Fournier		Jeffrey B. Carter
Executive Vice President,  Chief Operating Officer,		Executive Vice President and
Treasurer, Secretary and Director		Chief Investment Officer
Janet Notopoulos		John G. Demeritt
Executive Vice President and Director		Executive Vice President and
		Chief Financial Officer

Inquiries

Inquires should be directed to: John Demeritt, CFO

877-686-9496 or InvestorRelations@franklinstreetproperties.com

Snapshot (as of September 30, 2014)
Corporate Headquarters	Wakefield, MA
Fiscal Year-End	31-Dec
Total Properties	39
Total Square Feet	9.7 Million
Trading Symbol	FSP
Exchange	NYSE MKT
Common Shares Outstanding	100,187,405
Quarterly Dividend	$0.19
Dividend Yield	6.8%
Total Market Capitalization	$2.0 Billion
Insider Holdings	10.1%

September 30, 2014 3

   Summary of Financial Highlights
(in thousands, except per share data)

(in thousands except per share amounts, SF & number of properties)		For the Three Months Ended
		30-Sep-14				30-Jun-14				31-Mar-14				31-Dec-13				30-Sep-13				30-Jun-13				31-Mar-13
Income Items:
Rental revenue		$	59,728			$	60,994			$	61,597			$	61,307			$	56,760			$	46,017			$	42,842
Total revenue			61,190				62,741				63,263				63,024				58,446				47,671				44,495
Adjusted EBITDA*			33,973				34,359				35,175				35,645				31,862				26,074				24,712
Equity in losses of non-consolidated REITs			(455	)			(552	)			(484	)			(543	)			(431	)			(196	)			(188	)
Net income			1,567				3,713				3,573				6,591				4,094				4,741				4,401
FFO*			27,904				28,254				28,779				29,220				27,566				22,810				21,237
Per Share Data:
EPS		$	0.02			$	0.04			$	0.04			$	0.07			$	0.04			$	0.05			$	0.05
FFO*		$	0.28			$	0.28			$	0.29			$	0.29			$	0.28			$	0.25			$	0.26
Weighted Average Shares (diluted)			100,187				100,187				100,187				100,187				100,187				91,847				82,937
Closing share price		$	11.22			$	12.58			$	12.60			$	11.95			$	12.74			$	13.20			$	14.62
Dividend		$	0.19			$	0.19			$	0.19			$	0.19			$	0.19			$	0.19			$	0.19
Payout Ratio:			68%				67%				66%				66%				69%				77%				74%
Balance Sheet Items:
Real estate, net		$	1,542,012			$	1,549,963			$	1,558,136			$	1,568,338			$	1,575,690			$	1,280,252			$	1,128,398
Other assets, net			425,305				438,634				467,539				475,696				500,939				428,789				383,244
Total assets, net			1,967,317				1,988,597				2,025,675				2,044,034				2,076,629				1,709,041				1,511,642
Total liabilities, net			968,948				975,853				993,273				993,868				1,017,480				627,997				657,809
Shareholders' equity			998,369				1,012,744				1,032,402				1,050,166				1,059,149				1,081,044				853,833
Market Capitalization and Debt:
Total Market Capitalization (a)		$	2,029,103			$	2,176,858			$	2,198,861			$	2,123,739			$	2,227,888			$	1,903,974			$	1,834,295
Total debt outstanding			905,000				916,500				936,500				926,500				951,500				581,500				621,750
Debt to Total Market Capitalization			44.6%				42.1%				42.6%				43.6%				42.7%				30.5%				33.9%
Debt to Adjusted EBITDA			6.7				6.7				6.7				6.5				7.5				5.6				6.3
Owned Portfolio Leasing Statistics:
Owned portfolio assets (includes asset held for sale before 12/31/13)			39				39				39				39				40				38				37
Portfolio total SF			9,690,361				9,686,215				9,686,055				9,685,285				9,807,339				8,529,752				7,856,859
Portfolio % leased			93.3%				94.1%				94.5%				94.1%				93.8%				94.4%				94.4%

(a) Total Market Capitalization is the closing share price multilplied by the number of shares outstanding plus total debt outstanding on that date.

* See pages 9 & 10 for reconciliations of Net Income to FFO and Adjusted EBITDA, respectively, and the Appendix for Defintions of these Non-GAAP Measures beginning on page 27.

September 30, 2014 4

   Condensed Consolidated Income Statements
($ in thousands, except per share amounts)

														Nine Months																				For the
		For the Three Months Ended												Ended				For the Three Months Ended																Year Ended
		31-Mar-14				30-Jun-14				30-Sep-14				30-Sep-14				31-Mar-13				30-Jun-13				30-Sep-13				31-Dec-13				31-Dec-13
Revenue:
Rental		$	61,597			$	60,994			$	59,728			$	182,319			$	42,842			$	46,017			$	56,760			$	61,307			$	206,926
Related party revenue:
Management fees and interest income from loans			1,643				1,671				1,462				4,776				1,622				1,642				1,665				1,717				6,646
Other			23				76				—				99				31				12				21				—				64
Total revenue			63,263				62,741				61,190				187,194				44,495				47,671				58,446				63,024				213,636
Expenses:
Real estate operating expenses			15,071				14,995				15,632				45,698				10,770				11,116				13,991				15,223				51,100
Real estate taxes and insurance			9,251				9,763				8,555				27,569				6,595				7,308				8,801				8,912				31,616
Depreciation and amortization			24,300				23,563				24,878				72,741				15,781				16,919				22,163				23,976				78,839
Selling, general and administrative			3,272				3,148				3,071				9,491				2,532				3,204				3,477				2,698				11,911
Interest			7,176				6,891				6,883				20,950				4,208				4,174				5,474				7,198				21,054
Total expenses			59,070				58,360				59,019				176,449				39,886				42,721				53,906				58,007				194,520
Income before interest income, equity in losses of non-consolidated REITs and taxes			4,193				4,381				2,171				10,745				4,609				4,950				4,540				5,017				19,116
Interest income			1				1				—				2				1				4				5				6				16
Equity in losses of non-consolidated REITs			(484	)			(552	)			(455	)			(1,491	)			(188	)			(196	)			(431	)			(543	)			(1,358	)
Income before taxes on income			3,710				3,830				1,716				9,256				4,422				4,758				4,114				4,480				17,774
Income tax expense			137				117				149				403				119				115				118				128				480
Income from continuing operations			3,573				3,713				1,567				8,853				4,303				4,643				3,996				4,352				17,294
Income from discontinued operations			—												—				98				98				98				81				375
Gain (loss) on sale, less applicable income tax			—				—				—				—				—				—				—				2,158				2,158
Net income		$	3,573			$	3,713			$	1,567			$	8,853			$	4,401			$	4,741			$	4,094			$	6,591			$	19,827
Weighted average number of shares outstanding, basic and diluted			100,187				100,187				100,187				100,187				82,937				91,847				100,187				100,187				93,855
Earnings per share, basic and diluted, attributable to:
Continuing operations		$	0.04			$	0.04			$	0.02			$	0.09			$	0.05			$	0.05			$	0.04			$	0.04			$	0.18
Discontinued operations			—				—				—				—				—				—				—				—				—
Gain (loss) on sale, less applicable income tax			—				—				—				—				—				—				—				0.03				0.03
Net income per share, basic and diluted		$	0.04			$	0.04			$	0.02			$	0.09			$	0.05			$	0.05			$	0.04			$	0.07			$	0.21

September 30, 2014  5

   Condensed Consolidated Balance Sheets
(in thousands)

		March 31,				June 30,				September 30,				March 31,				June 30,				September 30,				December 31,
		2014				2014				2014				2013				2013				2013				2013
Assets:
Real estate assets:
Land		$	185,479			$	185,479			$	185,479			$	141,545			$	157,879			$	185,479			$	185,479
Buildings and improvements			1,605,808				1,609,747				1,613,699				1,175,743				1,320,703				1,599,519				1,603,941
Fixtures and equipment			1,296				1,395				1,633				904				960				985				1,170
			1,792,583				1,796,621				1,800,811				1,318,192				1,479,542				1,785,983				1,790,590
Less accumulated depreciation			234,447				246,658				258,799				189,794				199,290				210,293				222,252
Real estate assets, net			1,558,136				1,549,963				1,542,012				1,128,398				1,280,252				1,575,690				1,568,338
Acquired real estate leases, net			172,262				161,519				149,019				102,274				129,226				194,893				183,454
Investment in non-consolidated REITs			79,983				79,405				78,907				81,746				81,523				81,065				80,494
Assets held for sale			—												10,431				10,286				10,143				—
Cash and cash equivalents			20,031				18,455				15,930				17,282				24,962				25,539				19,623
Restricted cash			688				728				707				583				602				623				643
Tenant rent receivables, net			6,035				2,867				2,865				2,357				2,331				6,029				5,102
Straight-line rent receivable, net			44,392				46,021				46,737				36,210				37,865				40,086				42,261
Prepaid expenses and other assets			9,954				9,716				9,768				10,545				12,532				11,846				11,215
Related party mortgage loan receivable			101,916				88,436				88,436				96,896				97,846				98,846				99,746
Other assets: derivative asset			4,801				2,626				4,582				—				6,739				4,365				5,321
Deferred leasing commissions, net			27,477				28,861				28,354				24,920				24,877				27,504				27,837
Total assets		$	2,025,675			$	1,988,597			$	1,967,317			$	1,511,642			$	1,709,041			$	2,076,629			$	2,044,034
Liabilities and Stockholders’ Equity:
Liabilities:
Bank note payable		$	316,500			$	296,500			$	285,000			$	221,750			$	181,500			$	331,500			$	306,500
Term loan payable			620,000				620,000				620,000				400,000				400,000				620,000				620,000
Accounts payable and accrued expenses			34,390				34,590				40,228				25,493				29,971				39,907				44,137
Accrued compensation			1,027				2,052				2,863				540				1,677				2,432				2,985
Tenant security deposits			4,258				4,259				4,331				2,474				3,074				3,891				4,027
Other liabilities: derivative termination value			3,825				5,985				4,847				778				—				4,579				2,044
Acquired unfavorable real estate leases, net			13,273				12,467				11,679				6,774				11,775				15,171				14,175
Total liabilities			993,273				975,853				968,948				657,809				627,997				1,017,480				993,868
Commitments and contingencies
Stockholders’ Equity:
Preferred stock			—				—				—				—				—				—				—
Common stock			10				10				10				8				10				10				10
Additional paid-in capital			1,273,556				1,273,556				1,273,556				1,042,876				1,273,585				1,273,585				1,273,556
Accumulated other comprehensive income (loss)			976				(3,359	)			(265	)			(778	)			6,739				(214	)			3,277
Accumulated distributions in excess of accumulated earnings			(242,140	)			(257,463	)			(274,932	)			(188,273	)			(199,290	)			(214,232	)			(226,677	)
Total stockholders’ equity			1,032,402				1,012,744				998,369				853,833				1,081,044				1,059,149				1,050,166
Total liabilities and stockholders’ equity		$	2,025,675			$	1,988,597			$	1,967,317			$	1,511,642			$	1,709,041			$	2,076,629			$	2,044,034

September 30, 2014  6

   Condensed Consolidated Statements of Cash Flows
(in thousands)

		Nine Months ended September 30,								Twelve Months ended December 31
		2014				2013				2013				2012
Cash flows from operating activities:
Net income		$	8,853			$	13,236			$	19,827			$	7,633
Adjustments to reconcile net income to net cash         provided by  operating activities:
Depreciation and amortization expense			74,237				56,796				81,267				57,500
Amortization of above market lease			560				(277	)			(365	)			71
Gain (loss) on sale, less applicable income tax			—				—				(2,158	)			14,826
Equity in earnings (losses) from non-consolidated REITs			1,491				(1,220	)			1,358				(2,033	)
Distributions from non-consolidated REITs			—				—				—				705
Increase in bad debt reserve			125				814				(1,250	)			65
Changes in operating assets and liabilities:
Restricted cash			(64	)			(48	)			(68	)			(82	)
Tenant rent receivables			2,112				(3,060	)			(2,103	)			(354	)
Straight-line rents			(4,038	)			(3,920	)			(5,782	)			(4,464	)
Lease acquisition costs			(438	)			(820	)			(1,146	)			(2,520	)
Prepaid expenses and other assets			(106	)			(1,845	)			(1,547	)			(328	)
Accounts payable and accrued expenses			(2,133	)			6,860				11,137				3,717
Accrued compensation			(122	)			(108	)			445				318
Tenant security deposits			304				1,402				1,538				481
Payment of deferred leasing commissions			(4,854	)			(7,532	)			(9,125	)			(5,179	)
Net cash provided by operating activities			75,927				60,278				92,028				70,356
Cash flows from investing activities:
Purchase of real estate assets, office computers and           furniture, capitalized merger costs and acquired real estate leases			(12,403	)			(569,036	)			(574,065	)			(221,170	)
Investment in non-consolidated REITs			—				4,858				4,858				(1	)
Distributions in excess of earnings from non-consolidated REITs			81				81				108				2,105
Investment in related party mortgage loan receivable			(2,570	)			(4,950	)			(8,200	)			(74,580	)
Repayment of related party mortgage loan receivable			13,880				—				2,350				121,200
Proceeds received on sales of real estate assets			—				—				12,301				157
Net cash provided by (used in) investing activities			(1,012	)			(569,047	)			(562,648	)			(172,289	)
Cash flows from financing activities:
Distributions to stockholders			(57,108	)			(50,552	)			(69,588	)			(63,032	)
Proceeds (costs) from equity offering, net			—				230,711				230,682				—
Borrowings under Revolver			10,000				160,000				160,000				294,750
Repayments under Revolver			(31,500	)			(45,250	)			(70,250	)			(527,000	)
Borrowing (repayment) of term loan payable, net			—				220,000				220,000				400,000
Deferred Financing Costs			—				(1,868	)			(1,868	)			(5,331	)
Net cash provided by (used in) financing activities			(78,608	)			513,041				468,976				99,387
Net decreases in cash and cash equivalents			(3,693	)			4,272				(1,644	)			(2,546	)
Cash and cash equivalents, beginning of period			19,623				21,267				21,267				23,813
Cash and cash equivalents, end of period		$	15,930			$	25,539			$	19,623			$	21,267

September 30, 2014  7

   Property Net Operating Income (NOI)*
with Same Store comparison
(in thousands)

(in thousands)		Rentable																Nine																Nine
		Square																Months																Months
		Feet				Three Months Ended												Ended				Three Months Ended												Ended				Inc				%
Region		or RSF				31-Mar-14				30-Jun-14				30-Sep-14				30-Sep-14				31-Mar-13				30-Jun-13				30-Sep-13				30-Sep-13				(Dec)				Change
East			1,442			$	4,727			$	4,786			$	4,758			$	14,271			$	4,756			$	5,440			$	4,914			$	15,110			$	(839	)			-5.6%
MidWest			1,682				5,107				5,062				5,187				15,356				4,839				5,008				4,944				14,791				565				3.8%
South			3,525				14,135				13,694				13,720				41,549				13,227				13,297				13,199				39,723				1,826				4.6%
West			1,088				2,567				2,761				2,729				8,057				2,350				2,118				2,440				6,908				1,149				16.6%
Same Store			7,737				26,536				26,303				26,394				79,233				25,172				25,863				25,497				76,532				2,701				3.5%
Acquisitions			1,953				10,037				9,623				9,059				28,719				—				1,203				7,843				9,046				19,673				22.6%
Property NOI from the continuing portfolio			9,690				36,573				35,926				35,453				107,952				25,172				27,066				33,340				85,578				22,374				26.1%
Dispositions and asset held for sale							—				—				—				—				252				252				253				757				(757	)			-1.1%
Property NOI						$	36,573			$	35,926			$	35,453			$	107,952			$	25,424			$	27,318			$	33,593			$	86,335			$	21,617				25.0%
Same Store						$	26,536			$	26,303			$	26,394			$	79,233			$	25,172			$	25,863			$	25,497			$	76,532			$	2,701				3.5%
Less Nonrecurring Items in NOI (a)							707				287				199				1,193				63				557				—				620				573				-0.7%
Comparative
Same Store						$	25,829			$	26,016			$	26,195			$	78,040			$	25,109			$	25,306			$	25,497			$	75,912			$	2,128				2.8%

(a) Nonrecurring Items in NOI include proceeds from bankruptcies, lease termination fees or other significant nonrecurring income or expenses, which may affect comparability.

* See page 11 for a reconciliation of Net Income to Property NOI and the Appendix for Definitions of Non-GAAP Measures beginning on page 27. Property NOI Excludes NOI from investments in and interest income from secured loans to non-consolidated REITs.

September 30, 2014  8

   FFO & AFFO Reconciliation
(in thousands, except per share amounts)

														Nine
														Months																				For the
		For the Three Months Ended												Ended				For the Three Months Ended:																Year Ended
		31-Mar-14				30-Jun-14				30-Sep-14				30-Sep-14				31-Mar-13				30-Jun-13				30-Sep-13				31-Dec-13				31-Dec-13
Net income		$	3,573			$	3,713			$	1,567			$	8,853			$	4,401			$	4,741			$	4,094			$	6,591			$	19,827
Gain (loss) on sale, less applicable income tax			—												—				—				—				—				(2,158	)			(2,158	)
GAAP income from non-consolidated REITs			484				552				455				1,491				188				196				431				543				1,358
FFO from non-consolidated REITs			419				351				508				1,278				647				696				459				346				2,148
Depreciation & amortization			24,289				23,638				25,374				73,301				15,984				17,044				22,176				23,886				79,090
NAREIT FFO*			28,765				28,254				27,904				84,923				21,220				22,677				27,160				29,208				100,265
Acquisition costs			14				—				—				14				17				133				406				12				568
Funds From Operations (FFO)*		$	28,779			$	28,254			$	27,904			$	84,937			$	21,237			$	22,810			$	27,566			$	29,220			$	100,833
Adjusted Funds From Operations (AFFO)*
Funds From Operations (FFO)*			28,779				28,254				27,904				84,937				21,237				22,810				27,566				29,220				100,833
Reverse FFO from non-consolidated REITs			(419	)			(351	)			(508	)			(1,278	)			(647	)			(696	)			(459	)			(346	)			(2,148	)
Distributions from non-consolidated REITs			27				27				27				81				27				27				27				26				107
Amortization of deferred financing costs			499				499				498				1,496				429				429				456				499				1,813
Straight-line rent			(1,783	)			(1,541	)			(714	)			(4,038	)			(657	)			(1,186	)			(2,078	)			(1,862	)			(5,783	)
Non-investment capex			(1,119	)			(2,202	)			(943	)			(4,264	)			(1,118	)			(1,622	)			(1,552	)			(1,479	)			(5,771	)
Tenant improvements			(1,133	)			(1,837	)			(2,640	)			(5,610	)			(1,729	)			(5,754	)			(4,596	)			(2,992	)			(15,071	)
Leasing commissions			(1,112	)			(2,795	)			(944	)			(4,851	)			(2,813	)			(1,087	)			(3,821	)			(1,536	)			(9,257	)
Adjusted Funds From Operations (AFFO)*		$	23,739			$	20,054			$	22,680			$	66,473			$	14,729			$	12,921			$	15,543			$	21,530			$	64,723
Per Share Data:
EPS		$	0.04			$	0.04			$	0.02			$	0.09			$	0.05			$	0.05			$	0.04			$	0.07			$	0.21
FFO*			0.29				0.28				0.28				0.85				0.26				0.25				0.28				0.29				1.07
AFFO*			0.24				0.20				0.23				0.66				0.18				0.14				0.16				0.21				0.69
Weighted Average Shares (basic and diluted)			100,187				100,187				100,187				100,187				82,937				91,847				100,187				100,187				93,855

* See the Appendix for Definitions of these Non-GAAP Measures beginning on page 27.

September 30, 2014  9

   EBITDA Reconciliation
(in thousands, except ratio amounts)

														Nine
														Months																				Year
		For the Three Months Ended												Ended				For the Three Months Ended																Ended
		31-Mar-14				30-Jun-14				30-Sep-14				30-Sep-14				31-Mar-13				30-Jun-13				30-Sep-13				31-Dec-13				31-Dec-13
Net income		$	3,573			$	3,713			$	1,567			$	8,853			$	4,401			$	4,741			$	4,094			$	6,591			$	19,827
Interest expense			7,176				6,891				6,883				20,950				4,208				4,174				5,474				7,198				21,054
Depreciation and amortization			24,289				23,638				25,374				73,301				15,984				17,044				22,176				23,886				79,090
Income taxes			137				117				149				403				119				115				118				128				480
EBITDA			35,175				34,359				33,973				103,507				24,712				26,074				31,862				37,803				120,451
Excluding (gain) loss on sale, less applicable income tax			—				—				—				—				—				—				—				(2,158	)			(2,158	)
Adjusted EBITDA		$	35,175			$	34,359			$	33,973			$	103,507			$	24,712			$	26,074			$	31,862			$	35,645			$	118,293
Interest expense		$	7,176			$	6,891			$	6,883			$	20,950			$	4,208			$	4,174			$	5,474			$	7,198			$	21,054
Scheduled principal payments			—				—				—				—				—				—				—				—				—
Interest and scheduled principal payments		$	7,176			$	6,891			$	6,883			$	20,950			$	4,208			$	4,174			$	5,474			$	7,198			$	21,054
Interest coverage ratio			4.90				4.99				4.94				4.94				5.87				6.25				5.82				4.95				5.62
Debt service coverage ratio			4.90				4.99				4.94				4.94				5.87				6.25				5.82				4.95				5.62
Debt		$	936,500			$	916,500			$	905,000			$	905,000			$	621,750			$	581,500			$	951,500			$	926,500
Adjusted EBITDA			35,175				34,359				33,973				103,507				24,712				26,074				31,862				35,645
Annualized			140,700				137,436				135,892				138,009				98,848				104,296				127,448				142,580
Debt-to-EBITDA			6.7				6.7				6.7				6.6				6.3				5.6				7.5				6.5

* See the Appendix for Definitions of these Non-GAAP Measures beginning on page 27. Amounts in the EBITDA reconciliation do not reflect our proportionate share of interest expense, depreciation, amortization , income taxes, gains or losses on sales and debt from our investments in non-consolidated REITs , which are accounted for under the equity method.

September 30, 2014  10

   Reconciliation of Net Income to Property NOI*
(in thousands)

														Nine																Nine
Reconciliation to Net income														Months																Months
		Three Months Ended												Ended				Three Months Ended												Ended
		31-Mar-14				30-Jun-14				30-Sep-14				30-Sep-14				31-Mar-13				30-Jun-13				30-Sep-13				30-Sep-13
Net Income		$	3,573			$	3,713			$	1,567			$	8,853			$	4,401			$	4,741			$	4,094			$	13,236
Add (deduct):
Discontinued operations			—				—				—				—				(98	)			(98	)			(98	)			(294	)
Loss provision or (gain) on sale of assets			—				—				—				—				—				—				—				—
Management fee income			(646	)			(682	)			(649	)			(1,977	)			(559	)			(598	)			(692	)			(1,849	)
Depreciation and amortization			24,300				23,563				24,878				72,741				15,784				16,917				22,163				54,864
Amortization of above/below market leases			(11	)			74				497				560				48				(29	)			(143	)			(124	)
Selling, general and administrative			3,272				3,148				3,071				9,491				2,532				3,204				3,477				9,213
Interest expense			7,176				6,891				6,883				20,950				4,208				4,174				5,474				13,856
Interest income			(1,410	)			(1,408	)			(1,216	)			(4,034	)			(1,353	)			(1,382	)			(1,411	)			(4,146	)
Equity in earnings of															—																—
nonconsolidated REITs			484				552				455				1,491				187				196				431				814
Non-property specific items, net			(165	)			75				(33	)			(123	)			22				(60	)			45				7
Property NOI from the continuing portfolio		$	36,573			$	35,926			$	35,453			$	107,952			$	25,172			$	27,065			$	33,340			$	85,577
Dispositions and asset held for sale			—				—				—				—				252				253				253				758
Property NOI		$	36,573			$	35,926			$	35,453			$	107,952			$	25,424			$	27,318			$	33,593			$	86,335

* See the Appendix for Definition of Non-GAAP Measures beginning on page 27.

September 30, 2014  11

   Debt Summary

					(a)
(dollars in thousands)		Maximum	Amount	Interest	Interest
	Maturity	Amount	Drawn at	Rate	Rate at	Facility
	Date	of Loan	30-Sep-14	Components	30-Sep-14	Fee
2012 Revolver	27-Sep-16	$      500,000	$      285,000	L+1.45%	1.60%	0.30%
2012 Term Loan	27-Sep-17	400,000	400,000	0.75% + 1.45%	2.20%	0.30%
2013 Term Loan	26-Aug-20	220,000	220,000	2.32% + 1.65%	3.97%
		$   1,120,000	$      905,000		2.44%

(a) Interest rate excludes amortization of deferred financing costs and facility fees, see notes below

On August 26, 2013, we entered into a term loan we call the 2013 Term Loan and borrowed $220 million. On September 27, 2012, we entered into a new bank facility we call the 2012 Credit Facility for a total of $900 million, which is comprised of a line of credit that we can borrow up to $500 million on, which we call the 2012 Revolver and a term loan for $400 million that we call the 2012 Term Loan. Additional information about these loans are in the footnotes to our financial statements. Pricing is leverage based over LIBOR for the 2013 Term Loan and the 2012 Credit Facility. Each of these facilities also has the option to use the respective bank’s base rate.

• The 2013 Term Loan fixed LIBOR at 2.32% for seven years. The current leverage spread over LIBOR is 1.65%, so our interest rate is 3.97% as September 30, 2014.

• The 2012 Credit Facility has the 2012 Term Loan with LIBOR fixed at 0.75% for five years and the 2012 Revolver is at the LIBOR rate. The current leverage spread for the 2012 Credit Facility is 1.45%, so our interest rate is 2.20% as of September 30, 2014.

• The total amount available under the 2012 Credit Facility is $900 million and is subject to a facility fee on the entire amount based on the leverage ratio. As of September 30, 2014, the facility fee was 30 bps based on our leverage ratio, or approximately $2.7 million per year.

• We incurred financing costs to close the 2013 Term Loan, 2012 Credit Facility and the 2011 Revolver that preceded the 2012 Credit Facility. These costs are deferred and amortized into interest expense during the terms of the loans. The annual run rate for amortization to interest expense from deferred financing costs is approximately $2.0 million.

• The 2012 Revolver can be extended for 1 year at the Company’s option upon payment of fees and includes an accordion feature that allows for up to $250 million of additional borrowing capacity. The 2013 Term Loan includes an accordion feature that allows for up to $50 million of additional borrowing capacity. The accordion features are subject to receipt of lender commitments and satisfaction of certain customary conditions.

September 30, 2014  12

   Capital Analysis
(in thousands, except per share amounts)

		31-Mar-14				30-Jun-14				30-Sep-14				31-Mar-13				30-Jun-13				30-Sep-13				31-Dec-13
Market Data:
Shares Outstanding			100,187				100,187				100,187				82,937				100,187				100,187				100,187
Closing market price per share		$	12.60			$	12.58			$	11.22			$	14.62			$	13.20			$	12.74			$	11.95
Market capitalization		$	1,262,361			$	1,260,358			$	1,124,103			$	1,212,545			$	1,322,474			$	1,276,388			$	1,197,239
Total Debt			936,500				916,500				905,000				621,750				581,500				951,500				926,500
Total Market Capitalization		$	2,198,861			$	2,176,858			$	2,029,103			$	1,834,295			$	1,903,974			$	2,227,888			$	2,123,739
Dividend Data:
Total dividends paid		$	19,036			$	19,035			$	19,036			$	15,758			$	15,758			$	19,036			$	19,036
Common dividend per share		$	0.19			$	0.19			$	0.19			$	0.19			$	0.19			$	0.19			$	0.19
Quarterly dividend as a % of FFO*			65.5%				67.9%				67.9%				73.1%				76.0%				67.9%				65.5%
Liquidity:
Cash and cash equivalents		$	20,031			$	18,455			$	15,930			$	17,282			$	24,962			$	25,539			$	19,623
Revolving credit facilities:
Gross potential available under the 2012 Credit Facility			900,000				900,000				900,000				900,000				900,000				900,000				900,000
Less:
Outstanding balance			(716,500	)			(696,500	)			(685,000	)			(621,750	)			(581,500	)			(731,500	)			(706,500	)
Total Liquidity		$	203,531			$	221,955			$	230,930			$	295,532			$	343,462			$	194,039			$	213,123

*See page 9 for a reconciliation of Net Income to FFO and the Appendix for Definitions of Non-GAAP Measures beginning on page 27.

September 30, 2014  13

   Portfolio Overview

	For the Three Months Ended
	30-Sep-14	30-Jun-14	31-Mar-14	31-Dec-13	30-Sep-13
Owned portfolio of commercial real estate:
Number of properties (a)	39	39	39	39	40
Square feet	9,690,361	9,686,215	9,686,055	9,685,285	9,807,339
Leased percentage	93.3%	94.1%	94.5%	94.1%	93.8%
Investments in non-consolidated
commercial real estate:
Number of properties (a)	2	2	2	2	2
Square feet	1,395,500	1,395,500	1,395,500	1,395,500	1,395,500
Leased percentage	71.0%	65.5%	64.0%	64.1%	61.5%
Single Asset REITs (SARs) managed:
Number of properties	9	11	12	12	13
Square feet	2,036,572	2,687,775	3,067,199	3,067,199	3,323,198
Leased percentage	86.6%	89.1%	87.4%	87.4%	86.6%
Total owned (a) , investments
and managed properties:
Number of properties	50	52	53	53	55
Square feet	13,122,433	13,769,490	14,148,754	14,147,984	14,526,037
Leased percentage	89.9%	90.2%	90.0%	89.7%	89.1%

(a) Includes asset held for periods prior to 31-Dec-2013

September 30, 2014  14

   Owned Portfolio Overview

				Percent	Wtd Ave (a)	GAAP (b)
MSA / Property Name	City	State	Square Feet	Leased	Occupied	Rent
East Region
Baltimore
East Baltimore	Baltimore	MD	325,445	81.2%	78.0%	$        23.30
Washington, D.C.
Meadow Point	Chantilly	VA	138,537	92.6%	92.6%	$        27.32
Stonecroft	Chantilly	VA	111,469	100.0%	100.0%	$        38.24
Loudoun Tech Center	Dulles	VA	136,658	92.0%	99.1%	$        15.95
Richmond
Innsbrook	Glen Allen	VA	298,456	99.9%	99.9%	$        18.29
Charlotte
Park Seneca	Charlotte	NC	109,674	88.4%	83.7%	$        15.42
Forest Park	Charlotte	NC	62,212	100.0%	100.0%	$        14.16
Raleigh-Durham
Emperor Boulevard	Durham	NC	259,531	100.0%	100.0%	$        35.89
East Region Total			1,441,982	93.4%	93.0%	$        24.54
Midwest Region
Chicago
Northwest Point	Elk Grove Village	IL	176,848	100.0%	100.0%	$        19.44
909 Davis Street	Evanston	IL	195,245	97.9%	97.9%	$        35.60
Indianapolis
River Crossing	Indianapolis	IN	205,059	97.6%	98.3%	$        23.16
St. Louis
Timberlake	Chesterfield	MO	232,766	98.3%	98.3%	$        21.65
Timberlake East	Chesterfield	MO	116,197	91.0%	91.0%	$        24.20
Lakeside Crossing	Maryland Heights	MO	127,778	100.0%	100.0%	$        26.60
Minneapolis
Eden Bluff	Eden Prairie	MN	153,028	100.0%	100.0%	$        27.86
121 South 8th Street	Minneapolis	MN	475,012	90.8%	90.2%	$        14.90
Midwest Region Total			1,681,933	96.0%	95.9%	$        22.61

(a) Weighted Occupied Percentage for the nine months ended September 30, 2014

(b) Weighted Average GAAP Rent per Occupied Square Foot

September 30, 2014  15

   Owned Portfolio Overview

				Percent	Wtd Ave (a)	GAAP (b)
MSA / Property Name	City	State	Square Feet	Leased	Occupied	Rent
South Region
Dallas-Fort Worth
Willow Bend Office Center	Plano	TX	117,050	100.0%	98.3%	$        20.84
Legacy Tennyson Center	Plano	TX	202,600	100.0%	100.0%	$        17.59
One Legacy Circle	Plano	TX	214,110	100.0%	100.0%	$        33.37
Addison Circle	Addison	TX	293,926	95.3%	93.6%	$        24.46
Collins Crossing	Richardson	TX	300,472	99.5%	99.0%	$        24.31
Liberty Plaza	Addison	TX	218,934	96.0%	93.9%	$        20.45
Houston
Park Ten	Houston	TX	157,460	80.3%	87.2%	$        26.62
Eldridge Green	Houston	TX	248,399	100.0%	100.0%	$        29.69
Park Ten Phase II	Houston	TX	156,746	100.0%	100.0%	$        31.29
Westchase I & II	Houston	TX	629,025	97.3%	97.1%	$        32.16
Miami-Ft. Lauderdale-West Palm Beach
Blue Lagoon Drive	Miami	FL	212,619	100.0%	100.0%	$        22.38
Atlanta
One Overton Place	Atlanta	GA	387,267	98.9%	98.9%	$        22.77
One Ravinia	Atlanta	GA	386,603	93.7%	91.5%	$        22.87
999 Peachtree	Houston	TX	621,946	97.8%	93.5%	$        29.07
South Region Total			4,147,157	97.2%	96.3%	$        26.37
West Region
Seattle
Federal Way	Federal Way	WA	117,010	56.5%	54.9%	$        18.40
San Francisco-San Jose-Oakland
Hillview Center	Milpitas	CA	36,288	100.0%	100.0%	$        16.10
Montague Business Center	San Jose	CA	145,951	81.1%	91.6%	$        16.12
Denver
380 Interlocken	Broomfield	CO	240,184	95.8%	91.6%	$        29.01
1999 Broadway	Denver	CO	676,279	87.6%	92.0%	$        30.80
Greenwood Plaza	Englewood	CO	196,236	100.0%	100.0%	$        23.77
390 Interlocken	Broomfield	CO	241,516	71.2%	69.6%	$        27.23
1001 17th Street	Denver	CO	655,420	81.1%	86.4%	$        31.75
Colorado Springs
Centennial Technology Center	Colorado Springs	CO	110,405	97.3%	88.0%	$        16.00
West Region Total			2,419,289	84.7%	86.9%	$        27.68
Total Owned			9,690,361	93.3%	93.4%	$        25.73

(a) Weighted Occupied Percentage for the nine months ended September 30, 2014

(b) Weighted Average GAAP Rent per Occupied Square Foot

September 30, 2014  16

   Managed Portfolio Overview

MSA / Property Name	City	State	Square Feet
Southeast Region
Columbia
1441 Main Street	Columbia	SC	264,857
Atlanta
Satellite Place	Duluth	GA	134,785
Southeast Region Total			399,642
Southwest Region
Houston
Energy Tower I	Houston	TX	325,797
Denver
Highland Place	Centennial	CO	138,771
385 Interlocken	Broomfield	CO	296,868
Southwest Region Total			761,436
Midwest Region
Chicago
East Wacker (a)	Chicago	IL	860,429
Indianapolis
Monument Circle	Indianapolis	IN	213,760
St. Louis
Lakeside Crossing II	Maryland Heights	MO	116,000
Kansas City
Grand Boulevard (b)	Kansas City	MO	535,071
Cincinnati
Centre Pointe V	West Chester	OH	135,936
Union Centre	West Chester	OH	409,798
Midwest Region Total			2,270,994
Total Managed			3,432,072
Total Owned & Managed			13,122,433

(a)   FSP has a Preferred Share Interest of 43.7% in the entity that owns this property.

(b)   FSP has a Preferred Share Interest of 27.0% in the entity that owns this property.

September 30, 2014  17

   Tenants By Industry
(By Square Feet)

 

September 30, 2014  18

   20 Largest Tenants with Annualized Rent and
Remaining Term (Owned Portfolio)

			Remaining	Aggregate	% of Aggregate	Annualized	% of Aggregate
	Tenant	Number of	Lease Term	Leased	Leased	Rent	Leased
	Name	Leases	in Months	Square Feet	Square Feet	(in 000's)	Annualized Rent
1	TCF National Bank	2	15	263,111	2.7%	$     2,896,157	1.3%
2	Quintiles Transnational Corp	1	54	259,531	2.7%	8,821,181	3.9%
3	CITGO Petroleum Corporation	1	89	248,399	2.6%	7,558,782	3.3%
4	Sutherland Asbill Brennan LLP	1	67	243,839	2.5%	7,352,253	3.2%
5	Newfield Exploration Company	1	89	234,495	2.4%	7,912,540	3.5%
6	US Government (a)	6	3, 11, 16, 34, 44, 72	224,327	2.3%	7,222,950	3.2%
7	Burger King Corporation	1	48	212,619	2.2%	4,792,432	2.1%
8	Denbury Onshore, LLC	2	58	202,600	2.1%	3,510,042	1.5%
9	RGA Reinsurance Company	2	3	197,354	2.0%	4,304,802	1.9%
10	SunTrust Bank (b)	2	25, 84	182,888	1.9%	3,719,025	1.6%
11	Citicorp Credit Services, Inc	1	27	176,848	1.8%	3,689,049	1.6%
12	C.H. Robinson Worldwide, Inc	1	81	153,028	1.6%	4,221,068	1.8%
13	T-Mobile South, LLC dba T-Mobile	1	53	151,792	1.6%	3,579,531	1.6%
14	Houghton Mifflin Harcourt Publishing Company	1	30	150,050	1.5%	5,962,139	2.6%
15	Petrobras America, Inc.	1	62	144,813	1.5%	4,969,982	2.2%
16	Murphy Exploration & Production Company	1	31	144,677	1.5%	4,439,625	1.9%
17	Argo Data Resource Corporation	1	107	140,246	1.4%	3,741,362	1.6%
18	Monsanto Company	1	64	127,778	1.3%	3,282,617	1.4%
19	Federal National Mortgage Association	1	24	123,144	1.3%	2,008,787	0.9%
20	Vail Corp d/b/a Vail Resorts (c)	1	54, 102	122,232	1.3%	3,376,135	1.5%
			Total	3,703,771	38.2%	$   97,360,459	42.6%

(a) Includes 180,444 and 4,990 square feet which expire in 2018 & 2014, respectively. The remaining 38,893 square feet expire between 2015 - 2020.

(b) Includes 55,388 square feet which expires October 31, 2016.

(c) Includes 38,293 square feet that expires March 31, 2019. The remaining 83,939 square feet expires March 31, 2023.

September 30, 2014  19

   Leasing Activity
(Owned Portfolio)

		Nine
		Months		Year		Year
		Ended		Ended		Ended
Leasing Activity		30-Sep-14		31-Dec-13		31-Dec-12
(in Square Feet - SF)
New leasing		75,000		267,000		315,740
Renewals		527,000		645,000		700,838
		602,000		912,000		1,016,578
Other information per SF
(Activity on a year-to-date basis)
GAAP Rents on leasing		$               27.02		$          23.33		$        22.41
Weighted average lease term		6.5 Years		7.2 Years		5.1 Years
Increase over ave GAAP rents in prior year		13.4%		8.0%		1.5%
Average free rent		3 Months		3 Months		3 Months
Tenant Improvements		$               15.42		$          18.25		$        12.26
Leasing Costs		$                 7.84		$            8.48		$          5.40

September 30, 2014  20

   Lease Expirations by Square Feet
(Owned Portfolio)

Year		Total Square Feet		% of Square Feet Commercial
2014		200,150		2.1%
2015		738,292		7.6%
2016		933,033		9.6%
2017		1,099,438		11.3%
2018		929,300		9.6%
2019		1,611,868		16.6%
2020		731,343		7.6%
2021		892,158		9.2%
2022		897,391		9.3%
2023		352,495		3.6%
2024		316,320		3.3%
2025		234,488		2.4%
2026		108,648		1.1%
Vacant		645,437		6.7%
Total		9,690,361		100.0%

 

September 30, 2014  21

   Lease Expirations
with Annualized Rent per Square Foot
(Owned Portfolio)

				Rentable					Annualized		Percentage
	Number of			Square					Rent		of Total Final
Year of	Leases			Footage			Annualized		Per Square		Annualized
Lease	Expiring			Subject to			Rent Under		Foot Under		Rent Under
Expiration	Within the			Expiring			Expiring		Expiring		Expiring		Cumulative
December 31,	Year			Leases			Leases (a)		Leases		Leases		Total
2014	40	(b)		200,150			5,062,686		25.29		2.2%		2.2%
2015	90			738,292			18,230,146		24.69		8.0%		10.2%
2016	70			933,033			19,347,939		20.74		8.5%		18.7%
2017	74			1,099,438			30,011,734		27.30		13.1%		31.8%
2018	60			929,300			26,586,412		28.61		11.6%		43.4%
2019	57			1,611,868			42,351,189		26.27		18.6%		62.0%
2020	26			731,343			19,768,967		27.03		8.7%		70.7%
2021	18			892,158			22,106,527		24.78		9.7%		80.4%
2022 and thereafter	46			1,909,342	(c)		44,837,407		23.48		19.6%		100.0%
	481			9,044,924			228,303,007		25.24		100.0%
Vacancies as of 9/30/14				645,437
Total Portfolio Square Footage				9,690,361

(a) Annualized rent represents the monthly rent, including tenant reimbursements, for each lease in effect at September 30, 2014 mulitplied by 12. Tenant reimbursements generally include payment of real estate taxes, operating expenses and common area maintenance and utility charges.

(b) Includes 21 leases that are month-to-month.

(c) Includes 51,776 square feet that are non-revenue producing building amenities.

September 30, 2014  22

   Capital Expenditures
(in thousands)

Capital Expenditures
Owned Portfolio														Nine Months
(in thousands)		For the Three Months Ended												Ended
		31-Mar-14				30-Jun-14				30-Sep-14				30-Sep-14
Tenant improvements		$	1,133			$	1,837			$	2,640			$	5,610
Deferred leasing costs			1,112				2,795				944				4,851
Non-investment capex			1,119				2,202				943				4,264
		$	3,364			$	6,834			$	4,527			$	14,725

		For the Three Months Ended:																Year ended
		31-Mar-13				30-Jun-13				30-Sep-13				31-Dec-13				31-Dec-13
Tenant improvements		$	1,729			$	5,754			$	4,596			$	2,992			$	15,071
Deferred leasing costs			2,813				1,087				3,821				1,536				9,257
Non-investment capex			1,118				1,622				1,552				1,479				5,771
		$	5,660			$	8,463			$	9,969			$	6,007			$	30,099

		For the Three Months Ended:																Year ended
		31-Mar-12				30-Jun-12				30-Sep-12				31-Dec-12				31-Dec-12
Tenant improvements		$	3,014			$	2,705			$	2,854			$	4,464			$	13,037
Deferred leasing costs			2,196				1,343				1,104				2,784				7,427
Non-investment capex			746				1,003				711				1,252				3,712
		$	5,956			$	5,051			$	4,669			$	8,500			$	24,176

September 30, 2014  23

   Transaction Activity

Recent Acquisitions:							Purchase Price
	City	State	Square Feet		Date Acquired		(in thousands)
2013
1999 Broadway	Denver	CO	673,793		5/22/13		$        183,000
999 Peachtree	Atlanta	GA	621,946		7/1/13		157,900
1001 17th Street	Denver	CO	655,420		8/28/13		217,000
2012
One Ravinia	Atlanta	GA	386,603		7/31/12		$          52,750
Westchase	Houston	TX	629,025		11/1/12		154,750
2011
Emperor Boulevard	Durham	NC	259,531		3/4/11		$          75,800
Legacy Tennyson Center	Plano	TX	202,600		3/10/11		37,000
One Legacy Circle	Plano	TX	214,110		3/24/11		52,983
909 Davis	Evanston	IL	195,245		9/30/11		37,062
East Renner Road	Richardson	TX	122,300		10/6/11		11,282
Recent Dispositions:
							Net Sales		Gain (Loss)
	City	State	Square Feet		Date Sold		Proceeds		on Sale
							(in thousands)
2013
East Renner Road	Richardson	TX	122,300		10/29/13		$          12,300		$          2,169
2012
Southfield	Southfield	MI	252,613		12/21/12		$               293		$      (14,826)
2011
Fairview	Falls Church	VA	252,613		1/21/11		$          89,382		$        19,592
Bollman (a)	Savage	MD	98,745		6/24/11		7,408		2,346

(a) Industrial property. All other acquisitions and dispositions are office properties

September 30, 2014  24

   Loan Portfolio of Secured Real Estate

(dollars in thousands)			Maximum	Amount			Interest
		Maturity	Amount	Drawn at	Interest	Draw	Rate at
Sponsored REIT	Location	Date	of Loan	30-Sep-14	Rate (1)	Fee (2)	30-Sep-14
Secured revolving lines of credit
FSP Highland Place I Corp.	Centennial, CO	31-Dec-14	$        5,500	$     3,395	L+4.4%	0.5%	4.56%
FSP Satellite Place Corp.	Duluth, GA	31-Mar-15	5,500	5,500	L+4.4%	0.5%	4.56%
FSP 1441 Main Street Corp.	Columbia, SC	31-Mar-15	10,800	9,000	L+4.4%	0.5%	4.56%
FSP Energy Tower I Corp.	Houston, TX	3-Jul-15	20,000	-	L+5.0%	0.5%	5.16%
Secured construction loan
FSP 385 Interlocken
Development Corp.	Broomfield, CO	30-Apr-15	42,000	37,541	L+4.4%	n/a	4.56%
Mortgage loan secured by property
FSP Energy Tower I Corp. (3)	Houston, TX	3-Jul-15	33,000	33,000	6.41%	n/a	6.41%
			$    116,800	$   88,436

(1) The interest rate is 30-day LIBOR rate plus the additional rate indicated, otherwise a fixed rate.

(2) The draw fee is a percentage of each new advance, and is paid at the time of each new draw.

(3) The loan has a secured fixed mortgage amount of $33,000,000, which was extended for one year from July 5, 2014 to July 3, 2015 and an extension fee of $108,900 was paid by the borrower to the Company.

September 30, 2014  25

   Net Asset Value Components

(in thousands except per share data)

		As of
		30-Sep-14
Total Market Capitalization Values
Shares outstanding			100,187.4
Closing price, December 31st		$	11.22
Market capitalization		$	1,124,103
Debt			905,000
Total Market Capitalization			2,029,103
			3 Months
			Ended
NOI Components			30-Sep-14
Same Store NOI (1)		$	26,394
Acquisitions (1) (2)			9,059
Property NOI (1)			35,453
Full quarter adjustment (3)			—
Stabilized portfolio		$	35,453
Financial Statement Reconciliation:
Rental Revenue		$	60,068
Rental operating expenses			(15,564	)
Real estate taxes and insurance			(8,555	)
Taxes (4)			(149	)
Management fees & other (5)			(347	)
Property NOI (1)		$	35,453

Assets:
Loans outstanding on secured RE		$	88,436
Investments in SARs (book basis)			78,907
Straight-line rent receivable			46,737
Asset held for sale			—
Cash and cash equivalents			15,930
Restricted cash			707
Tenant rent receivables			2,865
Prepaid expenses			1,942
Office computers and furniture			637
Other assets:
Deferred financing costs, net			6,170
Other assets: Derivative Market Value			4,582
Phoenix Tower Liquidating Trust (6)			4
Other assets			1,015
		$	247,932
			—
Liabilities:
Debt		$	905,000
Accounts payable & accrued expenses			43,091
Tenant security deposits			4,331
Other liabilities: derivative liability			4,847
		$	957,269

Other information:
Leased SF to be FFO producing During 2014			42
Straight-line rental revenue Q2		$	715
Management fee income second quarter 2014		$	247
Interest income from secured loans			1,216
Management fees and interest income from loans		$	1,462
FFO from non-consolidated REITs - Q2 2014 (7):
East Wacker		$	173
Grand Boulevard			178
Total		$	351

Footnotes to the components

(1) See pages 11 & 29 for definitions and reconciliations

(2) Includes NOI from 3 acquisitions made in 2013

(3) Adjustment to reflect property NOI for a full quarter in the quarter acquired, if necessary

(4) HB3 Tax in Texas is classified as an income tax, though we treat it as a real estate tax in Property NOI

(5) Management & other fees are eliminated in consolidation but included on Property NOI

(6) Expected liquidating distribution from sale of equity interest (Collection within 2 years, subject to some expenses)

(7) We report FFO from non-consolidated REITs for the previous quarter as their financial statements are not yet complete for the current quarter.

September 30, 2014  26

   Appendix: Non-GAAP Financial Measure Definitions

Definition of 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 (computed in accordance with GAAP), excluding gains (or losses) from sales of property and acquisition costs of newly acquired properties that are not capitalized, plus depreciation and amortization, including amortization of acquired above and below market lease intangibles and impairment charges on 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 (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 definition in our 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 and cash flows from operating, investing and financing activities in the consolidated financial statements.

September 30, 2014  27

   Appendix: Non-GAAP Financial Measure Definitions

Definition of Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA) and Adjusted EBITDA

EBITDA is defined as net income plus interest expense, income tax expense and depreciation and amortization expense. Adjusted EBITDA is defined as EBITDA excluding gains and losses on sales of properties or shares of equity investments or provisions for losses on assets held for sale. EBITDA and Adjusted EBITDA are not intended to represent cash flow for the period, are not presented as an alternative to operating income as an indicator of operating performance, should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP and are not indicative of operating income or cash provided by operating activities as determined under GAAP. EBITDA and Adjusted EBITDA are presented solely as a supplemental disclosure with respect to liquidity because the Company believes it provides useful information regarding the Company's ability to service or incur debt. Because all companies do not calculate EBITDA or Adjusted EBITDA the same way, this presentation may not be comparable to similarly titled measures of other companies. The Company believes that net income is the financial measure calculated and presented in accordance with GAAP that is most directly comparable to EBITDA and Adjusted EBITDA.

Definition of Adjusted Funds From Operations (AFFO)

The Company defines AFFO as the sum of (1) FFO; (2) excluding the proportionate share of FFO and including distributions received, from non-consolidated REITs; (3) less the effect of straight-line rent; (4) plus deferred financing costs, (5) less recurring capital expenditures that are generally for (a) maintenance of properties or are second generation capital expenditures or what we call non-investment capex, (b) tenant improvements, (c) leasing commissions; and (6) plus non-cash compensation expenses, if any. AFFO should not be considered as an alternative to net income (determined in accordance with GAAP), as an indicator of the Company’s financial performance, nor as an alternative to cash flows from operating activities (determined in accordance with GAAP), nor as a measure of the Company’s liquidity, nor is it necessarily indicative of sufficient cash flow to fund all of the Company’s needs. Other real estate companies may define 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 and cash flows from operating, investing and financing activities in the consolidated financial statements.

September 30, 2014  28

   Appendix: Non-GAAP Financial Measure Definitions

Definition of Property Net Operating Income (Property 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 (the most directly comparable GAAP financial measure) plus selling, 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, 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 both periods, which we call Same Store. The Comparative Same Store results include properties held for the periods presented and exclude 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 as an indication of our performance or to cash flows as a measure of the Company's liquidity or its ability to make distributions.

September 30, 2014  29

  Investor Relations Contact   (877) 686-9496 InvestorRelations@franklinstreetproperties.com

 

Franklin Street Properties Corp. ● 401 Edgewater Place ● Wakefield, MA 01880 ● (781) 557-1300

www.franklinstreetproperties.com