EX-99.2 3 fsp-20170214ex9924bd44d.htm fsp_Ex99_2

Exhibit 99.2

 

Picture 55

 

 

 

 

Franklin Street Properties

 

Supplemental Operating

and Financial Data

Fourth Quarter 2016

 

Franklin Street Properties Corp.

401 Edgewater Place | Wakefield, Massachusetts 01880

781.557.1300 | www.fspreit.com

 

 

 

 

 

Picture 22

Table of Contents

 

 

 

 

 

 

 

 

 

Page

 

 

Page

 

 

 

 

 

Company Information
3 

 

Tenant Analysis and Leasing Activity

 

 

 

 

Tenants by Industry
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 NOI
28 

 

 

 

AFFO
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, which are detailed from time to time in FSP’s reports filed with the Securities and Exchange Commission.  FSP assumes no obligation to update or supplement forward-looking statements that become untrue because of subsequent events.

 

Picture 7

 

 

 

 

 

1001 17th Street, Denver, CO

 

 

December 31, 2016 | Page 2

 

 

 

Picture 27

Company Information

 

 

Overview

 

 

 

 

Snapshot (as of December 31, 2016)

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.

 

 

 

 

Corporate Headquarters

Wakefield, MA

 

 

 

 

Fiscal Year-End

31-Dec

 

 

 

 

Total Properties

36

 

 

 

 

Total Square Feet

10.2 Million

 

 

 

 

Trading Symbol

FSP

 

 

 

 

Exchange

NYSE MKT

 

 

 

 

Common Shares Outstanding

107,231,155

 

 

 

 

Quarterly Dividend

$0.19

Our Business

 

 

 

 

Dividend Yield

5.9%

As of December 31, 2016, the Company owned and operated a portfolio of real estate consisting of 36 properties, managed seven Sponsored REITs and held five promissory notes secured by mortgages on real estate owned by Sponsored REITs. From time-to-time, the Company may acquire, develop or redevelop 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.

 

 

 

 

Total Market Capitalization

$2.4 Billion

 

 

 

 

Insider Holdings

3.9%

 

 

 

 

 

Picture 20

 

 

 

 

 

 

Management Team

 

 

 

 

 

 

 

 

 

 

 

George J. Carter

Jeffrey B. Carter

 

 

 

 

Chief Executive Officer and

President and Chief Investment

 

 

 

 

Chairman of the Board

Officer

 

 

 

 

 

 

 

 

 

 

John G. Demeritt

Scott H. Carter

 

 

 

 

Executive Vice President, Chief

Executive Vice President, General

 

 

 

 

Financial Officer and Treasurer

Counsel and Secretary

 

 

 

 

 

 

 

 

 

 

John F. Donahue

Eriel Anchondo

 

 

 

 

Executive Vice President

Executive Vice President and

Chief Operating Officer

 

 

 

 

999 Peachtree Street, Atlanta, GA

 

 

 

 

 

 

 

Inquiries

 

 

 

 

 

 

Inquiries should be directed to:  Georgia Touma

 

 

 

 

 

 

877.686.9496 or InvestorRelations@fspreit.com

 

 

 

 

 

 

 

 

 

December 31, 2016 | Page 3

 

 

 

Picture 9

Summary of Financial Highlights

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands except per share amounts, SF & number of properties)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

31-Dec-16

    

30-Sep-16

    

30-Jun-16

    

31-Mar-16

    

31-Dec-15

 

Income Items:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental revenue

 

$
64,611

 

 
61,925

 

$
59,453

 

$
58,360

 

$
59,656

 

Total revenue

 

 
65,988

 

 
63,280

 

 
60,807

 

 
59,813

 

 
61,250

 

Adjusted EBITDA*

 

 
32,823

 

 
32,356

 

 
32,144

 

 
31,637

 

 
32,112

 

Equity in losses of non-consolidated REITs

 

 
(263)

 

 
(196)

 

 
(86)

 

 
(286)

 

 
(807)

 

Net income

 

 
1,729

 

 
2,458

 

 
1,612

 

 
2,579

 

 
15,412

 

FFO*

 

 
26,907

 

 
26,670

 

 
26,731

 

 
26,037

 

 
27,076

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Per Share Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EPS

 

$
0.02

 

 
0.02

 

$
0.02

 

$
0.03

 

$
0.15

 

FFO*

 

$
0.25

 

 
0.26

 

$
0.27

 

$
0.26

 

$
0.27

 

Weighted Average Shares (diluted)

 

 
107,231

 

 
103,709

 

 
100,187

 

 
100,187

 

 
100,187

 

Closing share price

 

$
12.96

 

 
12.60

 

$
12.27

 

$
10.61

 

$
10.35

 

Dividend

 

$
0.19

 

 
0.19

 

$
0.19

 

$
0.19

 

$
0.19

 

Payout Ratio:

 

 
76%

 

 
74%

 

 
71%

 

 
73%

 

 
70%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance Sheet Items:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Real estate, net

 

$
1,685,269

 

 
1,567,521

 

$
1,526,936

 

$
1,487,281

 

$
1,509,624

 

Other assets, net

 

 
402,864

 

 
372,924

 

 
368,481

 

 
374,104

 

 
409,391

 

Total assets, net

 

 
2,088,133

 

 
1,940,445

 

 
1,895,417

 

 
1,861,385

 

 
1,919,015

 

Total liabilities, net

 

 
1,126,089

 

 
977,497

 

 
1,000,434

 

 
948,301

 

 
983,359

 

Shareholders' equity

 

 
962,044

 

 
962,948

 

 
894,983

 

 
913,084

 

 
935,656

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Market Capitalization and Debt:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Market Capitalization (a)

 

$
2,439,716

 

 
2,249,113

 

$
2,159,299

 

$
1,947,988

 

$
1,946,940

 

Total debt outstanding (excluding unamortized financing costs)

 

 
1,050,000

 

 
898,000

 

 
930,000

 

 
885,000

 

 
910,000

 

Debt to Total Market Capitalization

 

 
43.0%

 

 
39.9%

 

 
43.1%

 

 
45.4%

 

 
46.7%

 

Debt to Adjusted EBITDA*

 

 
8.0

 

 
6.9

 

 
7.2

 

 
7.0

 

 
7.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Owned Portfolio Leasing Statistics (b):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Owned portfolio assets

 

 
36

 

 
36

 

 
35

 

 
35

 

 
36

 

Portfolio total SF

 

 
10,163,615

 

 
9,683,846

 

 
9,523,054

 

 
9,325,249

 

 
9,494,953

 

Portfolio % leased

 

 
89.3%

 

 
89.5%

 

 
90.1%

 

 
90.2%

 

 
91.6%

 

(a)

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

(b)

For periods in 2016, excludes one property held for redevelopment located in Minneapolis, Minnesota.

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

 

 

 

December 31, 2016 | Page 4

 

Picture 42

Condensed Consolidated Income Statements

($ in thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the

 

 

For the Three Months Ended

 

Ended

 

 

For the Three Months Ended

 

Year Ended

 

 

31-Mar-16

 

30-Jun-16

 

30-Sep-16

31-Dec-16

 

31-Dec-16

 

 

31-Mar-15

 

30-Jun-15

 

30-Sep-15

 

31-Dec-15

 

31-Dec-15

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental

  

$
58,360

  

$
59,453

  

$
61,925

$
64,611

    

$
244,349

  

  

$
59,013

  

$
58,801

  

$
60,386

  

$
59,656

  

$
237,856

Related party revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Management fees and interest income from loans

 

 
1,433

 

 
1,337

 

 
1,338

 
1,357

 

 
5,465

 

 

 
1,473

 

 
1,412

 

 
1,470

 

 
1,575

 

 
5,930

Other

 

 
20

 

 
17

 

 
17

 
20

 

 
74

 

 

 
21

 

 
20

 

 
21

 

 
19

 

 
81

Total revenue

 

 
59,813

 

 
60,807

 

 
63,280

 
65,988

 

 
249,888

 

 

 
60,507

 

 
60,233

 

 
61,877

 

 
61,250

 

 
243,867

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Real estate operating expenses

 

 
15,292

 

 
14,929

 

 
16,905

 
18,209

 

 
65,335

 

 

 
15,356

 

 
14,644

 

 
15,951

 

 
15,939

 

 
61,890

Real estate taxes and insurance

 

 
9,150

 

 
10,154

 

 
10,218

 
10,618

 

 
40,140

 

 

 
10,048

 

 
9,469

 

 
9,941

 

 
9,202

 

 
38,660

Depreciation and amortization

 

 
22,445

 

 
22,352

 

 
23,298

 
24,957

 

 
93,052

 

 

 
22,672

 

 
23,207

 

 
22,911

 

 
22,569

 

 
91,359

Selling, general and administrative

 

 
3,530

 

 
3,494

 

 
3,419

 
3,683

 

 
14,126

 

 

 
3,691

 

 
3,401

 

 
3,071

 

 
3,128

 

 
13,291

Interest

 

 
6,433

 

 
6,417

 

 
6,767

 
6,931

 

 
26,548

 

 

 
6,187

 

 
6,365

 

 
6,425

 

 
6,455

 

 
25,432

Total expenses

 

 
56,850

 

 
57,346

 

 
60,607

 
64,398

 

 
239,201

 

 

 
57,954

 

 
57,086

 

 
58,299

 

 
57,293

 

 
230,632

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before interest income, equity in losses of non-consolidated REITs,
other, gain (loss) on sale of properties and property held for sale, less applicable income tax and taxes

 

 
2,963

 

 
3,461

 

 
2,673

 
1,590

 

 
10,687

 

 

 
2,553

 

 
3,147

 

 
3,578

 

 
3,957

 

 
13,235

Interest income

 

 

 —

 

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 
1

 

 

 —

 

 

 —

 

 

 —

 

 
1

Equity in losses of non-consolidated REITs

 

 
(286)

 

 
(86)

 

 
(196)

 
(263)

 

 
(831)

 

 

 
(322)

 

 
(38)

 

 
(284)

 

 
(807)

 

 
(1,451)

Other

 

 

 —

 

 
(1,009)

 

 
621

 
2,266

 

 
1,878

 

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

Gain (loss) on sale of properties and provision for loss on property held for sale, less applicable income tax

 

 

 —

 

 
(643)

 

 
(523)

 
(1,772)

 

 
(2,938)

 

 

 
10,462

 

 
948

 

 
1

 

 
12,251

 

 
23,662

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before taxes on income

 

 
2,677

 

 
1,723

 

 
2,575

 
1,821

 

 
8,796

 

 

 
12,694

 

 
4,057

 

 
3,295

 

 
15,401

 

 
35,447

Income tax expense

 

 
98

 

 
111

 

 
117

 
92

 

 
418

 

 

 
161

 

 
154

 

 
129

 

 
(11)

 

 
433

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$
2,579

 

$
1,612

 

$
2,458

$
1,729

 

$
8,378

 

 

$
12,533

 

$
3,903

 

$
3,166

 

$
15,412

 

$
35,014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of shares outstanding, basic and diluted

 

 
100,187

 

 
100,187

 

 
103,709

 
107,231

 

 
102,843

 

 

 
100,187

 

 
100,187

 

 
100,187

 

 
100,187

 

 
100,187

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per share, basic and diluted

 

$
0.03

 

$
0.02

 

$
0.02

$
0.02

 

$
0.08

 

 

$
0.13

 

$
0.04

 

$
0.03

 

$
0.15

 

$
0.35

 

 

 

December 31, 2016 | Page 5

 

 

$ in thousands, except per share amounts)

Picture 1

Condensed Consolidated Balance Sheets

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31,

 

June 30,

 

September 30,

 

December 31,

 

 

March 31,

 

June 30,

 

September 30,

 

December 31,

 

 

    

2016

 

2016

    

2016

    

2016

  

  

2015

    

2015

    

2015

    

2015

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Real estate assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Land

 

$
168,120

 

$
172,205

 

$
177,505

 

$
196,178

 

 

$
174,707

 

$
180,271

 

$
180,271

 

$
170,021

 

Buildings and improvements

 

 
1,625,819

 

 
1,667,507

 

 
1,713,296

 

 
1,822,183

 

 

 
1,581,524

 

 
1,636,444

 

 
1,639,869

 

 
1,637,066

 

Fixtures and equipment

 

 
2,649

 

 
2,771

 

 
3,205

 

 
4,136

 

 

 
1,724

 

 
1,800

 

 
1,882

 

 
2,528

 

 

 

 
1,796,588

 

 
1,842,483

 

 
1,894,006

 

 
2,022,497

 

 

 
1,757,955

 

 
1,818,515

 

 
1,822,022

 

 
1,809,615

 

Less accumulated depreciation

 

 
309,307

 

 
315,547

 

 
326,485

 

 
337,228

 

 

 
271,058

 

 
279,172

 

 
291,331

 

 
299,991

 

Real estate assets, net

 

 
1,487,281

 

 
1,526,936

 

 
1,567,521

 

 
1,685,269

 

 

 
1,486,897

 

 
1,539,343

 

 
1,530,691

 

 
1,509,624

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquired real estate leases, net

 

 
99,102

 

 
104,350

 

 
102,226

 

 
125,491

 

 

 
124,337

 

 
126,926

 

 
117,272

 

 
108,046

 

Investment in non-consolidated REITs

 

 
76,707

 

 
76,289

 

 
75,761

 

 
75,165

 

 

 
78,228

 

 
78,164

 

 
77,853

 

 
77,019

 

Asset held for sale

 

 
15,921

 

 
9,275

 

 
8,893

 

 
3,871

 

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

Cash and cash equivalents

 

 
14,316

 

 
7,524

 

 
13,372

 

 
9,335

 

 

 
14,945

 

 
15,841

 

 
19,100

 

 
18,163

 

Restricted cash

 

 
10

 

 
3

 

 
48

 

 
31

 

 

 
56

 

 
48

 

 
34

 

 
23

 

Tenant rent receivables, net

 

 
3,691

 

 
3,268

 

 
3,331

 

 
3,113

 

 

 
4,587

 

 
2,886

 

 
3,548

 

 
2,898

 

Straight-line rent receivable, net

 

 
49,696

 

 
50,196

 

 
50,742

 

 
50,930

 

 

 
45,498

 

 
46,168

 

 
47,330

 

 
48,502

 

Prepaid expenses and other assets

 

 
5,943

 

 
5,875

 

 
6,460

 

 
5,231

 

 

 
10,475

 

 
6,278

 

 
7,187

 

 
5,484

 

Related party mortgage loan receivable

 

 
79,575

 

 
79,310

 

 
79,045

 

 
81,780

 

 

 
93,641

 

 
93,641

 

 
93,641

 

 
118,641

 

Other assets: derivative asset

 

 

 —

 

 

 —

 

 

 —

 

 
12,907

 

 

 
774

 

 
918

 

 

 —

 

 
1,132

 

Office computers and furniture, net of accumulated depreciation

 

 
438

 

 
385

 

 
370

 

 
313

 

 

 
588

 

 
562

 

 
551

 

 
484

 

Deferred leasing commissions, net

 

 
28,705

 

 
32,006

 

 
32,676

 

 
34,697

 

 

 
26,335

 

 
26,508

 

 
26,587

 

 
28,999

 

Total assets

 

$
1,861,385

 

$
1,895,417

 

$
1,940,445

 

$
2,088,133

 

 

$
1,886,361

 

$
1,937,283

 

$
1,923,794

 

$
1,919,015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bank note payable

 

$
265,000

 

$
310,000

 

$
278,000

 

$
280,000

 

 

$
240,000

 

$
300,000

 

$
300,000

 

$
290,000

 

Term loan payable, net of unamortized financing costs

 

 
617,880

 

 
618,113

 

 
615,636

 

 
765,217

 

 

 
616,949

 

 
617,182

 

 
617,414

 

 
617,647

 

Accounts payable and accrued expenses

 

 
37,791

 

 
41,498

 

 
53,964

 

 
57,259

 

 

 
36,065

 

 
39,199

 

 
42,164

 

 
49,489

 

Accrued compensation

 

 
1,274

 

 
2,170

 

 
3,238

 

 
3,784

 

 

 
1,241

 

 
2,327

 

 
3,236

 

 
3,726

 

Tenant security deposits

 

 
4,433

 

 
4,693

 

 
4,719

 

 
5,355

 

 

 
4,019

 

 
4,315

 

 
4,349

 

 
4,829

 

Other liabilities: derivative liabilities

 

 
13,226

 

 
14,913

 

 
12,651

 

 
5,551

 

 

 
9,836

 

 
7,632

 

 
12,096

 

 
8,243

 

Acquired unfavorable real estate leases, net

 

 
8,697

 

 
9,047

 

 
9,289

 

 
8,923

 

 

 
9,921

 

 
11,082

 

 
10,241

 

 
9,425

 

Total liabilities

 

 
948,301

 

 
1,000,434

 

 
977,497

 

 
1,126,089

 

 

 
918,031

 

 
981,737

 

 
989,500

 

 
983,359

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ Equity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred stock

 

 

                 -

 

 

                 -

 

 

                 -

 

 

                 -

 

 

 

                 -

 

 

                 -

 

 

                 -

 

 

                 -

 

Common stock

 

 
10

 

 
10

 

 
11

 

 
11

 

 

 
10

 

 
10

 

 
10

 

 
10

 

Additional paid-in capital

 

 
1,273,556

 

 
1,273,556

 

 
1,356,457

 

 
1,356,457

 

 

 
1,273,556

 

 
1,273,556

 

 
1,273,556

 

 
1,273,556

 

Accumulated other comprehensive income (loss)

 

 
(13,226)

 

 
(13,904)

 

 
(12,263)

 

 
5,478

 

 

 
(9,062)

 

 
(6,714)

 

 
(12,096)

 

 
(7,111)

 

Accumulated distributions in excess of accumulated earnings

 

 
(347,256)

 

 
(364,679)

 

 
(381,257)

 

 
(399,902)

 

 

 
(296,174)

 

 
(311,306)

 

 
(327,176)

 

 
(330,799)

 

Total stockholders’ equity

 

 
913,084

 

 
894,983

 

 
962,948

 

 
962,044

 

 

 
968,330

 

 
955,546

 

 
934,294

 

 
935,656

 

Total liabilities and stockholders’ equity

 

$
1,861,385

 

$
1,895,417

 

$
1,940,445

 

$
2,088,133

 

 

$
1,886,361

 

$
1,937,283

 

$
1,923,794

 

$
1,919,015

 

 

December 31, 2016 | Page 6

 

Picture 29

Condensed Consolidated Statements of Cash Flows

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Twelve Months ended December 31,

 

 

2016

 

2015

 

2014

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

 

Net income

$
8,378

 

$
35,014

 

$
13,148

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

 

Depreciation and amortization expense

 
95,243

 

 
93,426

 

 
97,916

 

Amortization of above market lease

 
(496)

 

 
(158)

 

 
635

 

Hedge ineffectiveness

 
(1,878)

 

 

 —

 

 

 —

 

(Gain) loss on sale of properties and property
held for sale, less applicable income tax

 
2,938

 

 
(23,662)

 

 
(940)

 

Equity in earnings (losses) from non-consolidated REITs

 
831

 

 
1,451

 

 
1,760

 

Increase in allowance for doubtful accounts

 
(30)

 

 
(195)

 

 
275

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

 

Restricted cash

 
(8)

 

 
719

 

 
(99)

 

Tenant rent receivables

 
(185)

 

 
2,030

 

 
94

 

Straight-line rents

 
(1,977)

 

 
(2,448)

 

 
(4,737)

 

Lease acquisition costs

 
(1,095)

 

 
(1,487)

 

 
(440)

 

Prepaid expenses and other assets

 
(721)

 

 
422

 

 
700

 

Accounts payable and accrued expenses

 
5,751

 

 
5,505

 

 
206

 

Accrued compensation

 
58

 

 
(32)

 

 
773

 

Tenant security deposits

 
526

 

 
581

 

 
222

 

Payment of deferred leasing commissions

 
(12,965)

 

 
(8,276)

 

 
(6,347)

 

Net cash provided by operating activities

 
94,370

 

 
102,890

 

 
103,166

 

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

Property acquisitions

 
(221,119)

 

 
(66,104)

 

 

 —

 

Acquired real estate leases

 
(51,509)

 

 
(10,604)

 

 

 —

 

Property improvements, fixtures and equipment

 
(37,407)

 

 
(21,929)

 

 
(18,561)

 

Office computers and furniture

 
(83)

 

 

 —

 

 

 —

 

Distributions in excess of earnings from non-consolidated REITs

 
1,023

 

 
107

 

 
107

 

Investment in related party mortgage loan receivable

 
(3,000)

 

 
(25,000)

 

 
(11,170)

 

Repayment of related party mortgage loan receivable

 
39,861

 

 

 —

 

 
17,275

 

Proceeds received on sales of real estate assets

 
27,262

 

 
85,426

 

 
14,192

 

Net cash provided by (used in) investing activities

 
(244,972)

 

 
(38,104)

 

 
1,843

 

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

Distributions to stockholders

 
(77,481)

 

 
(76,142)

 

 
(76,142)

 

Proceeds (costs) from equity offering, net

 
82,902

 

 

 —

 

 

 —

 

Borrowings under bank note payable

 
175,000

 

 
110,000

 

 
15,000

 

Repayments of bank note payable

 
(185,000)

 

 
(88,000)

 

 
(53,500)

 

Borrowing (repayment) of term loan payable, net

 
150,000

 

 

 —

 

 

 —

 

Deferred Financing Costs

 
(3,647)

 

 

 —

 

 
(2,471)

 

Net cash provided by (used in) financing activities

 
141,774

 

 
(54,142)

 

 
(117,113)

 

Net increase (decrease) in cash and cash equivalents

 
(8,828)

 

 
10,644

 

 
(12,104)

 

Cash and cash equivalents, beginning of period

 
18,163

 

 
7,519

 

 
19,623

 

Cash and cash equivalents, end of period

$
9,335

 

$
18,163

 

$
7,519

 

 

 

December 31, 2016 | Page 7

 

Picture 31

Property Net Operating Income (NOI)* with

Same Store Comparison (in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rentable

 

 

 

 

 

 

 

 

 

 

 

 

 

Year

 

 

 

 

 

 

 

 

 

 

 

 

Year

 

 

 

 

 

 

 

 

Square Feet

 

Three Months Ended

 

Ended

 

Three Months Ended

 

Ended

 

Inc

 

%

 

(in thousands)

    

or RSF

    

31-Mar-16

    

30-Jun-16

    

30-Sep-16

 

31-Dec-16

    

31-Dec-16

    

31-Mar-15

    

30-Jun-15

    

30-Sep-15

31-Dec-15

    

31-Dec-15

    

(Dec)

    

Change

 

Region

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

East

 
1,332

 

$
4,671

 

$
4,604

 

$
4,602

 

$
4,527

 

$
18,404

 

$
4,736

 

$
4,648

 

$
4,703

$
4,735

 

$
18,822

 

$
(418)

 
(2.2)

%

MidWest

 
1,235

 

 
2,958

 

 
3,103

 

 
2,973

 

 
2,882

 

 
11,916

 

 
2,915

 

 
2,941

 

 
2,950

 
3,419

 

 
12,225

 

 
(309)

 
(2.5)

%

South

 
4,025

 

 
16,020

 

 
16,256

 

 
15,346

 

 
15,392

 

 
63,014

 

 
15,781

 

 
15,995

 

 
15,971

 
15,956

 

 
63,703

 

 
(689)

 
(1.1)

%

West

 
2,046

 

 
8,302

 

 
8,467

 

 
8,038

 

 
7,799

 

 
32,606

 

 
7,720

 

 
8,077

 

 
8,071

 
7,892

 

 
31,760

 

 
846

 
2.7

%

Same Store

 
8,638

 

 
31,951

 

 
32,430

 

 
30,959

 

 
30,600

 

 
125,940

 

 
31,152

 

 
31,661

 

 
31,695

 
32,002

 

 
126,510

 

 
(570)

 
(0.5)

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquisitions

 
1,525

 

 
1,180

 

 
1,350

 

 
2,928

 

 
4,003

 

 
9,461

 

 

 —

 

 
1,057

 

 
1,067

 
1,090

 

 
3,214

 

 
6,247

 
4.8

%

Property NOI* from the continuing portfolio

 
10,163

 

 
33,131

 

 
33,780

 

 
33,887

 

 
34,603

 

 
135,401

 

 
31,152

 

 
32,718

 

 
32,762

 
33,092

 

 
129,724

 

 
5,677

 
4.4

%

Dispositions, Non-Operating, Development or Redevelopment

 

 

 

 
336

 

 
129

 

 
157

 

 
91

 

 
713

 

 
1,871

 

 
1,178

 

 
1,055

 
852

 

 
4,956

 

 
(4,243)

 
(3.3)

%

Property NOI*

 

 

 

$
33,467

 

$
33,909

 

$
34,044

 

$
34,694

 

$
136,114

 

$
33,023

 

$
33,896

 

$
33,817

$
33,944

 

$
134,680

 

$
1,434

 
1.1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Same Store

 

 

 

$
31,951

 

$
32,430

 

$
30,959

 

$
30,600

 

$
125,940

 

$
31,152

 

$
31,661

 

$
31,695

$
32,002

 

$
126,510

 

$
(570)

 
(0.5)

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Less Nonrecurring

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Items in NOI* (a)

 

 

 

 
413

 

 
586

 

 
146

 

 
502

 

 
1,647

 

 
75

 

 
81

 

 
420

 
576

 

 
1,152

 

 
495

 
(0.4)

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comparative

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Same Store

 

 

 

$
31,538

 

$
31,844

 

$
30,813

 

$
30,098

 

$
124,293

 

$
31,077

 

$
31,580

 

$
31,275

$
31,426

 

$
125,358

 

$
(1,065)

 
(0.8)

%

 

(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 Definition of Non-GAAP Measures beginning on page 27.

 

December 31, 2016 | Page 8

 

Picture 32

FFO* & AFFO* Reconciliation

(in thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year

 

 

 

For the Three Months Ended

 

Ended

 

 

For the Three Months Ended

 

Ended

 

 

    

31-Mar-16

    

30-Jun-16

    

30-Sep-16

    

31-Dec-16

    

31-Dec-16

 

 

31-Mar-15

    

30-Jun-15

    

30-Sep-15

    

31-Dec-15

    

31-Dec-15

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$
2,579

 

$
1,612

 

$
2,458

 

$
1,729

 

$
8,378

 

 

$
12,533

 

$
3,903

 

$
3,166

 

$
15,412

 

$
35,014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Gain) loss on sale of properties and property held for sale, less applicable income tax

 

 

 —

 

 
643

 

 
523

 

 
1,772

 

 
2,938

 

 

 
(10,462)

 

 
(948)

 

 
(1)

 

 
(12,251)

 

 
(23,662)

 

GAAP income from non-consolidated REITs

 

 
286

 

 
86

 

 
196

 

 
263

 

 
831

 

 

 
322

 

 
38

 

 
284

 

 
807

 

 
1,451

 

FFO from non-consolidated REITs

 

 
645

 

 
895

 

 
787

 

 
714

 

 
3,041

 

 

 
601

 

 
885

 

 
645

 

 
601

 

 
2,732

 

Depreciation & amortization

 

 
22,527

 

 
22,352

 

 
23,112

 

 
24,565

 

 
92,556

 

 

 
22,678

 

 
23,168

 

 
22,848

 

 
22,507

 

 
91,201

 

NAREIT FFO*

 

 
26,037

 

 
25,588

 

 
27,076

 

 
29,043

 

 
107,744

 

 

 
25,672

 

 
27,046

 

 
26,942

 

 
27,076

 

 
106,736

 

Hedge ineffectiveness

 

 

 —

 

 
1,009

 

 
(621)

 

 
(2,266)

 

 
(1,878)

 

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

Acquisition costs

 

 

 —

 

 
134

 

 
215

 

 
130

 

 
479

 

 

 

 —

 

 
142

 

 
12

 

 

 —

 

 
154

 

Funds From Operations (FFO)*

 

$
26,037

 

$
26,731

 

$
26,670

 

$
26,907

 

$
106,345

 

 

$
25,672

 

$
27,188

 

$
26,954

 

$
27,076

 

$
106,890

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted Funds From Operations (AFFO)*

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Funds From Operations (FFO)*

 

$
26,037

 

$
26,731

 

$
26,670

 

$
26,907

 

$
106,345

 

 

$
25,672

 

$
27,188

 

$
26,954

 

$
27,076

 

$
106,890

 

Reverse FFO from non-consolidated REITs

 

 
(645)

 

 
(895)

 

 
(787)

 

 
(714)

 

 
(3,041)

 

 

 
(601)

 

 
(885)

 

 
(645)

 

 
(601)

 

 
(2,732)

 

Distributions from non-consolidated REITs

 

 
27

 

 
332

 

 
332

 

 
332

 

 
1,023

 

 

 
27

 

 
27

 

 
27

 

 
26

 

 
107

 

Amortization of deferred financing costs

 

 
517

 

 
517

 

 
622

 

 
535

 

 
2,191

 

 

 
517

 

 
517

 

 
516

 

 
518

 

 
2,068

 

Straight-line rent

 

 
(1,275)

 

 
(700)

 

 
(119)

 

 
117

 

 
(1,977)

 

 

 
(69)

 

 
(574)

 

 
(930)

 

 
(875)

 

 
(2,448)

 

Tenant improvements

 

 
(1,929)

 

 
(1,329)

 

 
(3,325)

 

 
(7,885)

 

 
(14,468)

 

 

 
(2,936)

 

 
(3,420)

 

 
(1,794)

 

 
(3,788)

 

 
(11,938)

 

Leasing commissions

 

 
(1,613)

 

 
(4,966)

 

 
(2,247)

 

 
(3,783)

 

 
(12,609)

 

 

 
(830)

 

 
(1,539)

 

 
(1,490)

 

 
(3,952)

 

 
(7,811)

 

Non-investment capex

 

 
(438)

 

 
(1,052)

 

 
(2,211)

 

 
(1,842)

 

 
(5,543)

 

 

 
(643)

 

 
(1,411)

 

 
(1,090)

 

 
(1,162)

 

 
(4,306)

 

Adjusted Funds From Operations (AFFO)*

 

$
20,681

 

$
18,638

 

$
18,935

 

$
13,667

 

$
71,921

 

 

$
21,137

 

$
19,903

 

$
21,548

 

$
17,242

 

$
79,830

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Per Share Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EPS

 

$
0.03

 

$
0.02

 

$
0.02

 

$
0.02

 

$
0.08

 

 

$
0.13

 

$
0.04

 

$
0.03

 

$
0.15

 

$
0.35

 

FFO*

 

 
0.26

 

 
0.27

 

 
0.26

 

 
0.25

 

 
1.03

 

 

 
0.26

 

 
0.27

 

 
0.27

 

 
0.27

 

 
1.07

 

AFFO*

 

 
0.21

 

 
0.19

 

 
0.18

 

 
0.13

 

 
0.70

 

 

 
0.21

 

 
0.20

 

 
0.22

 

 
0.17

 

 
0.80

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted Average Shares (basic and diluted)

 

 
100,187

 

 
100,187

 

 
103,709

 

 
107,231

 

 
102,843

 

 

 
100,187

 

 
100,187

 

 
100,187

 

 
100,187

 

 
100,187

 

 

*

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

 

 

December 31, 2016 | Page 9

 

Picture 25

EBITDA* Reconciliation

(in thousands, except ratio amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year

 

 

 

Three Months Ended

 

Ended

 

 

Three Months Ended

 

Ended

 

 

    

31-Mar-16

    

30-Jun-16

    

30-Sep-16

    

31-Dec-16

    

31-Dec-16

 

 

31-Mar-15

    

30-Jun-15

    

30-Sep-15

    

31-Dec-15

    

31-Dec-15

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$
2,579

 

$
1,612

 

$
2,458

 

$
1,729

 

$
8,378

 

 

$
12,533

 

$
3,903

 

$
3,166

 

$
15,412

 

$
35,014

 

Interest expense

 

 
6,433

 

 
6,417

 

 
6,767

 

 
6,931

 

 
26,548

 

 

 
6,187

 

 
6,365

 

 
6,425

 

 
6,455

 

 
25,432

 

Depreciation and amortization

 

 
22,527

 

 
22,352

 

 
23,112

 

 
24,565

 

 
92,556

 

 

 
22,678

 

 
23,168

 

 
22,848

 

 
22,507

 

 
91,201

 

Income taxes

 

 
98

 

 
111

 

 
117

 

 
92

 

 
418

 

 

 
161

 

 
154

 

 
129

 

 
(11)

 

 
433

 

EBITDA*

 

 
31,637

 

 
30,492

 

 
32,454

 

 
33,317

 

 
127,900

 

 

 
41,559

 

 
33,590

 

 
32,568

 

 
44,363

 

 
152,080

 

(Gain) loss on sale of properties and property
held for sale, less applicable income tax

 

 

 —

 

 
643

 

 
523

 

 
1,772

 

 
2,938

 

 

 
(10,462)

 

 
(948)

 

 
(1)

 

 
(12,251)

 

 
(23,662)

 

Hedge ineffectiveness

 

 

 —

 

 
1,009

 

 
(621)

 

 
(2,266)

 

 
(1,878)

 

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

Adjusted EBITDA*

 

$
31,637

 

$
32,144

 

$
32,356

 

$
32,823

 

$
128,960

 

 

$
31,097

 

$
32,642

 

$
32,567

 

$
32,112

 

$
128,418

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

$
6,433

 

$
6,417

 

$
6,767

 

$
6,931

 

$
26,548

 

 

$
6,187

 

$
6,365

 

$
6,425

 

$
6,455

 

$
25,432

 

Scheduled principal payments

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

Interest and scheduled principal payments

 

$
6,433

 

$
6,417

 

$
6,767

 

$
6,931

 

$
26,548

 

 

$
6,187

 

$
6,365

 

$
6,425

 

$
6,455

 

$
25,432

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest coverage ratio

 

 
4.92

 

 
5.01

 

 
4.78

 

 
4.74

 

 
4.86

 

 

 
5.03

 

 
5.13

 

 
5.07

 

 
4.97

 

 
5.05

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Debt service coverage ratio

 

 
4.92

 

 
5.01

 

 
4.78

 

 
4.74

 

 
4.86

 

 

 
5.03

 

 
5.13

 

 
5.07

 

 
4.97

 

 
5.05

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Debt (excluding unamortized financing costs)

 

$
885,000

 

$
930,000

 

$
898,000

 

$
1,050,000

 

 

 

 

 

$
860,000

 

$
920,000

 

$
920,000

 

$
910,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA* (1)

 

 
31,637

 

 
32,478

 

 
32,721

 

 
34,418

 

 

 

 

 

 
31,097

 

 
32,716

 

 
32,567

 

 
32,112

 

 

 

 

Annualized

 

 
126,548

 

 
129,913

 

 
130,885

 

 
137,674

 

 

 

 

 

 
124,388

 

 
130,864

 

 
130,268

 

 
128,448

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Debt-to-EBITDA*

 

 
7.0

 

 
7.2

 

 
6.9

 

 
7.6

 

 

 

 

 

 
6.9

 

 
7.0

 

 
7.1

 

 
7.1

 

 

 

 

 

*

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.

 

(1)  Includes an adjustment for acquisitions in the quarter acquired by the amount attributable to properties owned less than a full quarter.  The calculation is based on 

      the partial quarter results over the number of days held multiplied by the number of days in the full quarter. 

December 31, 2016 | Page 10

 

Picture 34

Reconciliation of Net Income to Property NOI*

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of Net income to Property NOI*

 

 

 

 

 

 

 

 

 

 

 

 

 

Year

 

 

 

 

 

 

 

 

 

 

 

 

 

Year

 

 

 

Three Months Ended

 

Ended

 

Three Months Ended

 

Ended

 

 

    

31-Mar-16

    

30-Jun-16

    

30-Sep-16

    

31-Dec-16

    

31-Dec-16

    

31-Mar-15

    

30-Jun-15

    

30-Sep-15

    

31-Dec-15

    

31-Dec-15

 

Net Income

 

$
2,579

 

$
1,612

 

$
2,458

 

$
1,729

 

$
8,378

 

$
12,533

 

$
3,903

 

$
3,166

 

$
15,412

 

$
35,014

 

Add (deduct):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Gain) loss on sale of properties and property held for sale, less applicable income taxes

 

 

 —

 

 
643

 

 
523

 

 
1,772

 

 
2,938

 

 
(10,462)

 

 
(948)

 

 
(1)

 

 
(12,251)

 

 
(23,662)

 

Hedge ineffectiveness

 

 

 —

 

 
1,009

 

 
(621)

 

 
(2,266)

 

 
(1,878)

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

Management fee income

 

 
(660)

 

 
(688)

 

 
(727)

 

 
(749)

 

 
(2,824)

 

 
(643)

 

 
(559)

 

 
(621)

 

 
(645)

 

 
(2,468)

 

Depreciation and amortization

 

 
22,445

 

 
22,352

 

 
23,298

 

 
24,957

 

 
93,052

 

 
22,672

 

 
23,207

 

 
22,911

 

 
22,569

 

 
91,359

 

Amortization of above/below market leases

 

 
81

 

 

 —

 

 
(185)

 

 
(392)

 

 
(496)

 

 
6

 

 
(39)

 

 
(63)

 

 
(62)

 

 
(158)

 

Selling, general and administrative

 

 
3,530

 

 
3,494

 

 
3,419

 

 
3,683

 

 
14,126

 

 
3,691

 

 
3,401

 

 
3,071

 

 
3,128

 

 
13,291

 

Interest expense

 

 
6,433

 

 
6,417

 

 
6,767

 

 
6,931

 

 
26,548

 

 
6,187

 

 
6,365

 

 
6,425

 

 
6,455

 

 
25,432

 

Interest income

 

 
(1,279)

 

 
(1,171)

 

 
(1,184)

 

 
(1,200)

 

 
(4,834)

 

 
(1,262)

 

 
(1,278)

 

 
(1,293)

 

 
(1,397)

 

 
(5,230)

 

Equity in losses of non-consolidated REITs

 

 
286

 

 
86

 

 
196

 

 
263

 

 
831

 

 
322

 

 
38

 

 
284

 

 
807

 

 
1,451

 

Non-property specific items, net

 

 
52

 

 
155

 

 
100

 

 
(34)

 

 
273

 

 
(20)

 

 
(195)

 

 
(62)

 

 
(72)

 

 
(349)

 

Property NOI*

 

$
33,467

 

$
33,909

 

$
34,044

 

$
34,694

 

$
136,114

 

$
33,024

 

$
33,895

 

$
33,817

 

$
33,944

 

$
134,680

 

 

*

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

 

 

December 31, 2016 | Page 11

 

Picture 38

Debt Summary

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Maximum

 

Amount

 

Interest

 

Interest

 

 

 

 

 

Maturity

 

Amount

 

Drawn at

 

Rate (a)

 

Rate at

 

Facility

 

 

    

Date

    

of Loan

    

31-Dec-16

    

Components

    

31-Dec-16

    

Fee

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BAML Revolver

 

29-Oct-18

 

$
500,000

 

$
280,000

 

L

 + 
1.25%

 
1.88%

 
0.25%

 

JPM Term Loan

 

30-Nov-18

 

 
150,000

 

 
150,000

 

L

 + 
1.35%

 
2.16%

 

 

 

BAML Term Loan

 

27-Sep-21

 

 
400,000

 

 
400,000

 
0.75%

 + 
1.45%

 
2.20%

 

 

 

BMO Term Loan

 

26-Aug-20

 

 
220,000

 

 
220,000

 
2.32%

 + 
1.65%

 
3.97%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$
1,270,000

 

$
1,050,000

 

 

 

 

 
2.48%

 

 

 

 

 

We have a bank facility we call the BAML Credit Facility, which is comprised of a revolver that we can borrow up to $500 million on, which we call the BAML Revolver, and a term loan for $400 million that we call the BAML Term Loan. We also have a term loan we call the BMO Term Loan for $220 million and a bridge loan we call the JPM Term Loan for $150 million. Additional information about these loans can be found in the footnotes to our financial statements.  Pricing is based on our credit rating for the BAML Revolver, JPM Term Loan, BAML Term Loan and the BMO Term Loan. Our credit rating as of December 31, 2016 was Baa3 from Moody’s.

 

·

The BAML Revolver is priced based on our current credit rating at a spread of 1.25%, which was an interest rate of 1.88% as of December 31, 2016.  The BAML Revolver is also subject to a facility fee based on our credit rating, which was 25 bps or approximately $1.25 million per year. 

·

The JPM Term Loan is priced based on our current credit rating at a spread of 1.35%, which was an interest rate of 2.16% at December 31, 2016. 

·

The BAML Term Loan has base LIBOR fixed at 0.75% until September 27, 2017.  At our credit rating, the spread for the BAML Term Loan is 1.45%, so our interest rate is 2.20%.  On July 21, 2016, we extended the maturity date of the BAML Term Loan to September 27, 2021 (see below).         

·

On July 21, 2016, we amended the BAML Credit Facility to extend the maturity date applicable to the BAML Term Loan from September 27, 2017 to September 27, 2021 (the extension period), and amended financial covenants and definitions.  We also amended the BMO Term Loan to conform covenants and definitions to the BAML Credit Facility.  On July 22, 2016, we entered into a forward interest rate swap that fixed the base LIBOR interest rate for the extension period at 1.12%.  Accordingly, based upon our credit rating as of December 31, 2016, the interest rate when the extension period of the BAML Term Loan commences would be 2.57%.

·

The BMO Term Loan has fixed base LIBOR at 2.32% until August 20, 2020.  At our credit rating, the spread over LIBOR is 1.65%, so our interest rate is 3.97%.  

·

We incurred financing costs to close the BAML Revolver and BAML Term Loan and the credit facilities that preceded them.  We also incurred financing costs in connection with the JPM Term Loan and the BMO Term Loan.  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 $2.5 million. 

·

The BAML Revolver can be extended for 1 year at our option upon payment of fees.  The BAML Credit Facility includes an accordion feature that allows for up to $350 million of additional borrowing capacity.  The BMO 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.

 

(a)

Interest rate excludes amortization of deferred financing costs and facility fees, which is discussed in the notes above.

 

December 31, 2016 | Page 12

 

 

 

Picture 17

Capital Analysis

(in thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

31-Mar-16

 

30-Jun-16

 

30-Sep-16

 

31-Dec-16

 

 

31-Mar-15

 

30-Jun-15

 

30-Sep-15

 

31-Dec-15

 

Market Data:

    

 

 

    

 

 

    

 

 

    

 

 

  

  

 

 

    

 

 

    

 

 

    

 

 

  

Shares Outstanding

 

 
100,187

 

 
100,187

 

 
107,231

 

 
107,231

 

 

 
100,187

 

 
100,187

 

 
100,187

 

 
100,187

 

Closing market price per share

 

$
10.61

 

$
12.27

 

$
12.60

 

$
12.96

 

 

$
12.82

 

$
11.31

 

$
10.75

 

$
10.35

 

Market capitalization

 

$
1,062,988

 

$
1,229,299

 

$
1,351,113

 

$
1,389,716

 

 

$
1,284,403

 

$
1,133,120

 

$
1,077,015

 

$
1,036,940

 

Total Debt

 

 
885,000

 

 
930,000

 

 
898,000

 

 
1,050,000

 

 

 
860,000

 

 
920,000

 

 
920,000

 

 
910,000

 

Total Market Capitalization

 

$
1,947,988

 

$
2,159,299

 

$
2,249,113

 

$
2,439,716

 

 

$
2,144,403

 

$
2,053,120

 

$
1,997,015

 

$
1,946,940

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividend Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total dividends paid

 

$
19,036

 

$
19,036

 

$
19,036

 

$
20,373

 

 

$
19,036

 

$
19,036

 

$
19,035

 

$
19,035

 

Common dividend per share

 

$
0.19

 

$
0.19

 

$
0.19

 

$
0.19

 

 

$
0.19

 

$
0.19

 

$
0.19

 

$
0.19

 

Quarterly dividend as a % of FFO*

 

 
73.1%

 

 
71.2%

 

 
73.9%

 

 
75.7%

 

 

 
74.1%

 

 
70.0%

 

 
70.6%

 

 
70.3%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liquidity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$
14,316

 

$
7,524

 

$
13,372

 

$
9,335

 

 

$
14,945

 

$
15,841

 

$
19,100

 

$
18,163

 

Revolver:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross potential available under the BAML Revolver

 

 
500,000

 

 
500,000

 

 
500,000

 

 
500,000

 

 

 
500,000

 

 
500,000

 

 
500,000

 

 
500,000

 

Less:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding balance

 

 
(265,000)

 

 
(310,000)

 

 
(278,000)

 

 
(280,000)

 

 

 
(240,000)

 

 
(300,000)

 

 
(300,000)

 

 
(290,000)

 

Total Liquidity

 

$
249,316

 

$
197,524

 

$
235,372

 

$
229,335

 

 

$
274,945

 

$
215,841

 

$
219,100

 

$
228,163

 

 

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

 

 

December 31, 2016 | Page 13

 

 

 

Picture 2

Owned Portfolio Overview

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of the Quarter Ended

 

 

    

31-Dec-16

 

30-Sep-16

 

30-Jun-16

    

31-Mar-16

    

31-Dec-15

 

Owned portfolio of commercial real estate:

 

 

 

 

 

 

 

 

 

 

 

Number of properties (a)

 
36

 
36

 
35

 
35

 
36

 

Square feet

 
10,163,615

 
9,683,846

 
9,523,054

 
9,325,249

 
9,494,953

 

Leased percentage

 
89.3%

 
89.5%

 
90.1%

 
90.2%

 
91.6%

 

 

 

 

 

 

 

 

 

 

 

 

 

Investments in non-consolidated commercial real estate:

 

 

 

 

 

 

 

 

 

 

 

Number of properties

 
2

 
2

 
2

 
2

 
2

 

Square feet

 
1,396,071

 
1,396,071

 
1,396,071

 
1,396,071

 
1,396,071

 

Leased percentage

 
78.1%

 
73.8%

 
73.1%

 
73.9%

 
73.5%

 

 

 

 

 

 

 

 

 

 

 

 

 

Single Asset REITs (SARs) managed:

 

 

 

 

 

 

 

 

 

 

 

Number of properties

 
5

 
5

 
5

 
6

 
7

 

Square feet

 
1,075,135

 
1,075,135

 
1,075,135

 
1,191,135

 
1,487,026

 

Leased percentage

 
89.6%

 
89.6%

 
86.1%

 
75.8%

 
77.0%

 

 

 

 

 

 

 

 

 

 

 

 

 

Total owned, investments and managed properties:

 

 

 

 

 

 

 

 

 

 

 

Number of properties

 
43

 
43

 
42

 
43

 
45

 

Square feet

 
12,634,821

 
12,155,052

 
11,994,260

 
11,912,455

 
12,378,050

 

Leased percentage

 
88.1%

 
87.7%

 
87.8%

 
86.8%

 
87.8%

 

 

 

 

 

 

 

 

 

 

 

 

 

(a) Excludes one property being redeveloped in 2016.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2016 | Page 14

 

 

 

Picture 2

Owned Portfolio Overview

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Percent

 

Wtd Ave (a)

 

GAAP (b)

 

 

 

 

 

 

 

 

 

 

Percent

 

Wtd Ave (a)

 

GAAP (b)

 

MSA / Property Name

    

City

    

State

    

Square Feet

    

Leased

    

Occupied

    

Rent

    

    

MSA / Property Name

    

City

    

State

    

Square Feet

    

Leased

    

Occupied

    

Rent

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

East Region

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Midwest Region

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Baltimore

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Chicago

 

 

 

 

 

 

 

 

 

 

 

 

 

 

East Baltimore

 

Baltimore

 

MD

 
325,445

 
76.5%

 
81.6%

 

$
23.48

 

 

Northwest Point

 

Elk Grove Village

 

IL

 
176,848

 
100.0%

 
100.0%

 

$
25.05

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

909 Davis Street

 

Evanston

 

IL

 
195,080

 
86.1%

 
83.2%

 

$
34.04

 

Washington, D.C.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Meadow Point

 

Chantilly

 

VA

 
138,537

 
100.0%

 
100.0%

 

$
27.08

 

 

Indianapolis

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stonecroft

 

Chantilly

 

VA

 
111,469

 
100.0%

 
100.0%

 

$
37.83

 

 

River Crossing

 

Indianapolis

 

IN

 
205,059

 
96.6%

 
89.0%

 

$
20.83

 

Loudoun Tech Center

 

Dulles

 

VA

 
136,658

 
92.0%

 
92.0%

 

$
18.35

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

St. Louis

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Richmond

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Timberlake

 

Chesterfield

 

MO

 
234,496

 
100.0%

 
94.7%

 

$
22.02

 

Innsbrook

 

Glen Allen

 

VA

 
298,456

 
100.0%

 
100.0%

 

$
19.04

 

 

Timberlake East

 

Chesterfield

 

MO

 
117,036

 
100.0%

 
82.9%

 

$
22.93

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Charlotte

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Minneapolis

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Forest Park

 

Charlotte

 

NC

 
62,212

 
100.0%

 
100.0%

 

$
14.03

 

 

121 South 8th Street

 

Minneapolis

 

MN

 
305,990

 
61.1%

 
56.2%

 

$
21.48

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Plaza Seven

 

Minneapolis

 

MN

 
326,413

 
95.6%

 
92.2%

 

 
28.98

 

Raleigh-Durham

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Emperor Boulevard

 

Durham

 

NC

 
259,531

 
100.0%

 
100.0%

 

$
34.88

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

East Region Total

 

 

 

 

 
1,332,308

 
93.4%

 
94.7%

 

$
25.46

 

 

Midwest Region Total

 

 

 

 

 
1,560,922

 
89.3%

 
84.2%

 

$
25.34

 

 

(a)

Weighted Occupied Percentage for the year ended December 31, 2016.

(b)

Weighted Average GAAP Rent per Occupied Square Foot.

 

 

December 31, 2016 | Page 15

 

 

 

Picture 3

Owned Portfolio Overview

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Percent

 

Wtd Ave (a)

 

GAAP (b)

 

 

 

 

 

 

 

 

 

 

Percent

 

Wtd Ave (a)

 

GAAP (b)

 

MSA / Property Name

    

City

    

State

    

Square Feet

    

Leased

    

Occupied

    

Rent

    

    

MSA / Property Name

    

City

    

State

    

Square Feet

    

Leased

    

Occupied

    

Rent

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

South Region

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

West Region

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dallas-Fort Worth

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

San Francisco-San Jose-Oakland

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Legacy Tennyson Center

 

Plano

 

TX

 
202,600

 
65.6%

 
85.7%

 

$

 18.96

 

 

Hillview Center (c)

 

Milpitas

 

CA

 
36,288

 
100.0%

 
100.0%

 

$

16.85

 

One Legacy Circle

 

Plano

 

TX

 
214,110

 
100.0%

 
99.4%

 

$

 33.83

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Addison Circle

 

Addison

 

TX

 
288,667

 
97.0%

 
92.7%

 

$

 28.56

 

 

Denver

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Collins Crossing

 

Richardson

 

TX

 
300,887

 
100.0%

 
100.0%

 

$

 24.56

 

 

380 Interlocken

 

Broomfield

 

CO

 
240,185

 
82.7%

 
92.0%

 

$

30.20

 

Liberty Plaza

 

Addison

 

TX

 
218,934

 
81.3%

 
79.9%

 

$

 20.83

 

 

1999 Broadway

 

Denver

 

CO

 
676,379

 
74.8%

 
79.6%

 

$
31.83

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Greenwood Plaza

 

Englewood

 

CO

 
196,236

 
100.0%

 
100.0%

 

$

24.21

 

Houston

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

390 Interlocken

 

Broomfield

 

CO

 
241,751

 
96.1%

 
87.8%

 

$

28.02

 

Park Ten

 

Houston

 

TX

 
157,460

 
65.4%

 
63.1%

 

$

 31.62

 

 

1001 17th Street

 

Denver

 

CO

 
655,413

 
89.9%

 
87.2%

 

$

35.19

 

Eldridge Green

 

Houston

 

TX

 
248,399

 
100.0%

 
100.0%

 

$

 30.02

 

 

600 17th Street

 

Denver

 

CO

 
596,595

 
92.7%

 
92.7%

 

$

31.04

 

Park Ten Phase II

 

Houston

 

TX

 
156,746

 
100.0%

 
100.0%

 

$

 30.99

 

 

West Region Total

 

 

 

 

 
2,642,847

 
87.5%

 
88.1%

 

$

31.09

 

Westchase I & II

 

Houston

 

TX

 
629,025

 
83.4%

 
84.5%

 

$

 32.29

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Owned

 

 

 

 

 
10,163,615

 
89.3%

 
89.2%

 

$

27.92

 

Miami-Ft. Lauderdale-West Palm Beach

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Blue Lagoon Drive

 

Miami

 

FL

 
212,619

 
100.0%

 
100.0%

 

$

 22.72

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Atlanta

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

One Overton Place

 

Atlanta

 

GA

 
387,267

 
80.7%

 
85.6%

 

$

 24.95

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

One Ravinia

 

Atlanta

 

GA

 
386,603

 
90.9%

 
93.4%

 

$

 23.66

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Two Ravinia

 

Atlanta

 

GA

 
442,130

 
79.0%

 
78.3%

 

$

 26.00

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pershing Plaza

 

Atlanta

 

GA

 
160,145

 
97.4%

 
97.4%

 

$

 34.35

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

999 Peachtree

 

Atlanta

 

GA

 
621,946

 
97.5%

 
95.1%

 

$

 29.72

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

South Region Total

 

 

 

 

 
4,627,538

 
89.2%

 
90.0%

 

$

 27.70

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(a)

Weighted Occupied Percentage for the year ended December 31, 2016.

(b)

Weighted Average GAAP Rent per Occupied Square Foot.

(c)

Property was sold on January 6, 2017.

 

 

December 31, 2016 | Page 16

 

 

 

Picture 5

Managed Portfolio Overview

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

MSA / Property Name

    

City

    

State

    

Square Feet

  

  

  

MSA / Property Name

    

City

    

State

    

Square Feet

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Southeast Region

 

 

 

 

 

 

 

 

 

Midwest Region

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Columbia

 

 

 

 

 

 

 

 

 

Chicago

 

 

 

 

 

 

 

1441 Main Street

 

Columbia

 

SC

 
264,857

 

 

(a)

East Wacker

 

Chicago

 

IL

 
861,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Atlanta

 

 

 

 

 

 

 

 

 

Indianapolis

 

 

 

 

 

 

 

Satellite Place

 

Duluth

 

GA

 
134,785

 

 

 

Monument Circle

 

Indianapolis

 

IN

 
213,760

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Southeast Region Total

 

 

 

 

 
399,642

 

 

 

Kansas City

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(b)

Grand Boulevard

 

Kansas City

 

MO

 
535,071

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Southwest Region

 

 

 

 

 

 

 

 

 

Cincinnati

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Centre Pointe V

 

West Chester

 

OH

 
135,936

 

Houston

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Energy Tower I

 

Houston

 

TX

 
325,797

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Southwest Region Total

 

 

 

 

 
325,797

 

 

 

Midwest Region Total

 

 

 

 

 
1,745,767

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Managed

 

 

 

 

 
2,471,206

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Owned & Managed

 

 

 

 

 
12,634,821

 

 

(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.

 

 

December 31, 2016 | Page 17

 

 

 

Picture 6

Tenants by Industry

(By Square Feet)

 

 

Picture 4

December 31, 2016 | Page 18

 

20

 

Picture 23

20 Largest Tenants with Annualized Rent and Remaining Term

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Remaining

 

Aggregate

 

 

 

 

 

% of Aggregate

 

 

 

Tenant

 

Number of

 

Lease Term

 

Leased

 

% of Total

 

Annualized

 

Leased

 

 

    

Name

    

Leases

    

in Months

    

Square Feet

    

Square Feet

    

Rent

    

Annualized Rent

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1

 

Quintiles IMS Healthcare Incorporated (a)

 
1

 
113

 
259,531

 
2.9%

 

$
8,740,721

 
3.5%

 

2

 

US Government (b)

 
5

 

6, 8, 17, 45, 49

 
255,610

 
2.8%

 

 
7,870,275

 
3.1%

 

3

 

CITGO Petroleum Corporation

 
1

 
62

 
248,399

 
2.7%

 

 
7,894,120

 
3.1%

 

4

 

Newfield Exploration Company

 
1

 
62

 
234,495

 
2.6%

 

 
8,928,280

 
3.5%

 

5

 

Sutherland Asbill & Brennan LLP (c)

 
1

 
40

 
222,422

 
2.5%

 

 
7,010,151

 
2.8%

 

6

 

Burger King Corporation

 
1

 
21

 
212,619

 
2.3%

 

 
5,381,387

 
2.1%

 

7

 

Centene Management Company, LLC (d)

 
3

 
78,78,78

 
206,262

 
2.3%

 

 
4,446,016

 
1.8%

 

8

 

Citicorp Credit Services, Inc (e)

 
1

 
128

 
176,848

 
1.9%

 

 
4,704,157

 
1.9%

 

9

 

EOG Resources, Inc.

 
1

 
119

 
174,215

 
1.9%

 

 
5,703,824

 
2.3%

 

10

 

SunTrust Bank (f)

 
2

 
57,116

 
159,671

 
1.8%

 

 
3,075,309

 
1.2%

 

11

 

T-Mobile South, LLC dba T-Mobile

 
1

 
26

 
151,792

 
1.7%

 

 
3,864,880

 
1.5%

 

12

 

Petrobras America, Inc.

 
1

 
35

 
144,813

 
1.6%

 

 
5,387,043

 
2.1%

 

13

 

Murphy Exploration & Production Company

 
1

 
4

 
144,677

 
1.6%

 

 
4,790,659

 
1.9%

 

14

 

Jones Day

 
1

 
47

 
140,342

 
1.5%

 

 
4,533,900

 
1.8%

 

15

 

Argo Data Resource Corporation

 
1

 
80

 
140,246

 
1.5%

 

 
4,005,426

 
1.6%

 

16

 

Vail Corp d/b/a Vail Resorts (g)

 
2

 
30,78

 
125,588

 
1.4%

 

 
3,665,638

 
1.5%

 

17

 

Federal National Mortgage Association

 
1

 
21

 
123,144

 
1.4%

 

 
4,329,743

 
1.7%

 

18

 

Kaiser Foundation Health Plan

 
1

 
89

 
120,979

 
1.3%

 

 
3,094,764

 
1.2%

 

19

 

Giesecke & Devrient America

 
1

 
96

 
112,110

 
1.2%

 

 
1,948,472

 
0.8%

 

20

 

Houghton Mifflin Harcourt Publishing Company (h)

 
2

 
3,123

 
111,550

 
1.2%

 

 
4,756,044

 
1.9%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 
3,465,313

 
38.2%

 

$
104,130,810

 
41.3%

 

(a)

Quintiles Transnational Corp. is now known as Quintiles IMS Healthcare Incorporated.

(b)

Includes 180,444 and 27,398 square feet which expire in 2018 and 2017, respectively. The remaining 47,768 square feet expire between 2017 and 2021.

(c)

Effective 2/1/17, the firm changed their name to Eversheds Sutherland (US) LLP.

(d)

Includes 62,019 SF, which commenced on 4/1/16, 117,618 SF, which commenced 12/15 and 26,625 that commenced on 12/1/16.

(e)

Includes 30,588 square feet, which expire 12/31/16 and 146,260 square feet, which expire 8/31/27.

(f)

Includes 32,171 square feet, which expire 10/31/16 and 127,500 square feet, which expire 9/30/21.

(g)

Includes 38,293 square feet, which expire 3/31/19.  The remaining 87,295 square feet expire 3/31/23. 

(h)

Includes 50,128 square feet, which expire on 3/31/17 and 60,522 square feet, which expire on 3/31/27.

 

December 31, 2016 | Page 19

 

20

 

Picture 8

Leasing Activity

(Owned Portfolio)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year

 

Year

 

Year

 

 

    

Ended

    

Ended

    

Ended

 

Leasing Activity

 

 

31-Dec-16

 

 

31-Dec-15

 

 

31-Dec-14

 

(in Square Feet - SF)

 

 

 

 

 

 

 

 

 

 

New leasing

 

 
299,000

 

 
362,000

 

 
149,000

 

Renewals

 

 
895,000

 

 
957,000

 

 
635,000

 

 

 

 
1,194,000

 

 
1,319,000

 

 
784,000

 

 

 

 

 

 

 

 

 

 

 

 

Other information per SF

 

 

 

 

 

 

 

 

 

 

(Activity on a year-to-date basis)

 

 

 

 

 

 

 

 

 

 

GAAP Rents on leasing

 

$
29.64

 

$
28.66

 

$
26.89

 

Weighted average lease term

 

 

6.6 Years

 

 

5.3 Years

 

 

6.25 Years

 

 

 

 

 

 

 

 

 

 

 

 

Increase over average GAAP rents in prior year

 

 
10.4%

 

 
10.4%

 

 
11.8%

 

 

 

 

 

 

 

 

 

 

 

 

Average free rent

 

 

3 Months

 

 

3 Months

 

 

3 Months

 

Tenant Improvements

 

$
18.71

 

$
13.17

 

$
16.40

 

Leasing Costs

 

$
10.05

 

$
5.81

 

$
7.66

 

 

 

 

December 31, 2016 | Page 20

 

 

 

Picture 12

Lease Expirations by Square Feet

(Owned Portfolio)

 

 

 

 

Picture 10

December 31, 2016 | Page 21

 

 

 

Picture 13

Lease Expirations with Annualized Rent per Square Foot

(Owned Portfolio)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rentable

 

 

 

 

Annualized

 

Percentage

 

 

 

 

Number of

 

Square

 

 

 

 

Rent

 

of Total

 

 

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 (a)

    

Leases

    

Leases (b)

    

Leases

    

Leases

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2017

 
80

(c) 

704,297

 

$
21,787,488

 

$
30.94

 
8.6%
8.6%

 

2018

 
86

 
1,219,193

 

 
38,101,723

 

 
31.25

 
15.1%
23.7%

 

2019

 
79

 
1,359,362

 

 
38,013,112

 

 
27.96

 
15.1%
38.8%

 

2020

 
74

 
1,017,262

 

 
29,039,426

 

 
28.55

 
11.5%
50.3%

 

2021

 
59

 
856,990

 

 
22,799,732

 

 
26.60

 
9.1%
59.4%

 

2022

 
53

 
1,177,420

 

 
33,189,062

 

 
28.19

 
13.2%
72.6%

 

2023

 
28

 
732,996

 

 
18,454,352

 

 
25.18

 
7.3%
79.9%

 

2024

 
23

 
465,469

 

 
9,902,355

 

 
21.27

 
3.9%
83.8%

 

2025

 
11

 
359,406

 

 
9,037,500

 

 
25.15

 
3.6%
87.4%

 

2026

 
8

 
451,597

 

 
14,892,002

 

 
32.98

 
5.9%
93.3%

 

2027 and thereafter

 
65

 
733,338

(d) 

 
16,718,397

 

 
22.80

 
6.7%
100.0%

 

 

 
566

 
9,077,330

 

$
251,935,150

 

$
27.75

 
100.0%

 

 

Vacancies as of 12/31/16

 

 

 
1,086,285

 

 

 

 

 

 

 

 

 

 

Total Portfolio Square Footage

 

 

 
10,163,615

 

 

 

 

 

 

 

 

 

 

 

(a)

The number of leases approximates the number of tenants. Tenants with lease maturities in different years are included in annual totals for each lease. Tenants may have multiple leases in the same year.

(b)

Annualized rent represents the monthly rent charged, including tenant reimbursements, for each lease in effect at December 31, 2016 multiplied by 12. Tenant reimbursements generally include payment of real estate taxes, operating expenses and common area maintenance and utility charges.

(c)

Includes 10 leases that are month-to-month.

(d)

Includes 99,069 square feet that are non-revenue producing building amenities.

 

 

December 31, 2016 | Page 22

 

 

 

Picture 14

Capital Expenditures

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

Year

 

 

Three Months Ended

 

Ended

 

    

31-Mar-16

    

30-Jun-16

    

30-Sep-16

31-Dec-16

    

31-Dec-16

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tenant improvements

 

$
1,929

 

$
1,329

 

$
3,325

$
7,885

 

$
14,468

Deferred leasing costs

 

 
1,613

 

 
4,966

 

 
2,247

 
3,783

 

 
12,609

Non-investment capex

 

 
438

 

 
1,052

 

 
2,211

 
1,842

 

 
5,543

Total Capital Expenditures

 

$
3,980

 

$
7,347

 

$
7,783

$
13,510

 

$
32,620

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended

 

Year ended

   

    

31-Mar-15

    

30-Jun-15

    

30-Sep-15

    

31-Dec-15

    

31-Dec-15

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tenant improvements

 

$
2,936

 

$
3,420

 

$
1,794

 

$
3,788

 

$
11,938

Deferred leasing costs

 

 
830

 

 
1,539

 

 
1,490

 

 
3,952

 

 
7,811

Non-investment capex

 

 
643

 

 
1,411

 

 
1,090

 

 
1,162

 

 
4,306

Total Capital Expenditures

 

$
4,409

 

$
6,370

 

$
4,374

 

$
8,902

 

$
24,055

 

First generation leasing and investment capital was $19.6 million and $7.4 million for the year ended December 31, 2016 and 2015, respectively.

 

 

December 31, 2016 | Page 23

 

 

 

Picture 15

Transaction Activity

(in thousands except for Square Feet)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

City

    

State

    

Square Feet

    

Date Acquired

    

Purchase Price

 

2016

 

 

 

 

 

 

 

 

 

 

 

 

Plaza Seven

 

Minneapolis

 

MN

 
325,796

 

6/6/16

 

$
82,000

 

Pershing Plaza

 

Atlanta

 

GA

 
160,145

 

8/10/16

 

 
45,450

 

600 17th Street

 

Denver

 

CO

 
613,527

 

12/1/16

 

 
154,260

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2015

 

 

 

 

 

 

 

 

 

 

 

 

Two Ravinia

 

Atlanta

 

GA

 
442,130

 

4/8/15

 

$
78,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Sales

 

Gain (loss)

 

 

    

City

    

State

    

Square Feet

    

Date Sold

    

Proceeds

    

on Sales

 

2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lakeside I

 

Maryland Heights

 

MO

 
127,778

 

4/5/16

 

$
20,189

 

$
4,154

 

Federal Way

 

Federal Way

 

WA

 
117,010

 

12/16/16

 

 
7,500

 

 
(7,092)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Willow Bend

 

Plano

 

TX

 
117,050

 

2/23/15

 

$
20,750

 

$
1,462

 

Eden Bluff

 

Eden Prairie

 

MN

 
153,028

 

3/31/15

 

 
28,000

 

 
9,000

 

Park Seneca

 

Charlotte

 

NC

 
109,699

 

5/13/15

 

 
8,150

 

 
949

 

Montague

 

San Jose

 

CA

 
145,561

 

12/9/15

 

 
30,000

 

 
12,251

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Centennial

 

Colorado Springs

 

CO

 
110,405

 

12/3/14

 

$
15,500

 

$
940

 

 

 

December 31, 2016 | Page 24

 

 

 

Picture 16

Loan Portfolio of Secured Real Estate

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(dollars in thousands)

 

 

 

 

 

Maximum

 

Amount

 

 

 

 

 

 

 

Interest

 

 

 

 

 

Maturity

 

Amount

 

Drawn at

 

Interest

 

Draw

 

Rate at

 

Sponsored REIT

    

Location

    

Date

    

of Loan

    

31-Dec-16

    

Rate (1)

    

Fee (2)

    

31-Dec-16

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Secured revolving lines of credit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FSP Satellite Place Corp.

 

Duluth, GA

 

31-Mar-17

 

$
5,500

 

$
3,180

 

L

+

4.40%

 
0.5%

 
5.03%

 

FSP 1441 Main Street Corp.

 

Columbia, SC

 

31-Mar-17

 

 
10,800

 

 
9,000

 

L

+

4.40%

 
0.5%

 
5.03%

 

FSP Energy Tower I Corp.

 

Houston, TX

 

30-Jun-17

 

 
20,000

 

 
15,600

 

L

+

5.00%

 
0.5%

 
5.63%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage loan secured by property

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FSP Monument Circle LLC (3)

 

Indianapolis, IN

 

7-Dec-18

 

 
21,000

 

 
21,000

 

 

 

4.90%

 

n/a

 
4.90%

 

FSP Energy Tower I Corp. (4)

 

Houston, TX

 

30-Jun-17

 

 
33,000

 

 
33,000

 

 

 

6.41%

 

n/a

 
6.41%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   

 

 

 

$
90,300

 

$
81,780

 

 

 

 

 

 

 

 

 

 

(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)

Includes an origination fee of $164,000 and an exit fee of $38,000 when repaid by the borrower.

(4)

This mortgage includes an annual extension fee of $108,900 paid by the borrower. 

 

 

December 31, 2016 | Page 25

 

 

 

Picture 18

Net Asset Value Components

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands except per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of

 

 

Assets:

 

 

 

 

 

Other information:

 

 

 

 

    

31-Dec-16

 

    

Loans outstanding on secured RE

    

$
81,780

 

    

Leased SF to be FFO producing

    

 

 

Total Market Capitalization Values

 

 

 

 

 

Investments in SARs (book basis)

 

 
75,165

 

 

During 2017 (in 000's)

 

 
136

Shares outstanding

 

 
107,231.2

 

 

Straight-line rent receivable

 

 
50,930

 

 

 

 

 

 

Closing price

 

$
12.96

 

 

Asset held for sale

 

 
3,871

 

 

Straight-line rental revenue current quarter

 

$
(117)

Market capitalization

 

$
1,389,716

 

 

Cash and cash equivalents

 

 
9,335

 

 

 

 

 

 

Debt

 

 
1,050,000

 

 

Restricted cash

 

 
31

 

 

Management fee income current quarter

 

$
157

Total Market Capitalization

 

$
2,439,716

 

 

Tenant rent receivables

 

 
3,113

 

 

Interest income from secured loans

 

 
1,201

 

 

 

 

 

 

Prepaid expenses

 

 
2,989

 

 

Management fees and interest income from loans

 

$
1,357

 

 

 

 

 

 

Office computers and furniture

 

 
313

 

 

 

 

 

 

 

 

3 Months

 

 

Other assets:

 

 

 

 

 

FFO from non-consolidated REITs - Q3 2016 (6):

 

 

 

 

 

Ended

 

 

Deferred financing costs, net

 

 
7,025

 

 

East Wacker

 

$
624

NOI Components

 

31-Dec-16

 

 

Other assets: Derivative Market Value

 

 
12,907

 

 

Grand Boulevard

 

 
163

 

 

 

 

 

 

Other assets

 

 

 —

 

 

Total

 

$
787

Same Store NOI (1)

 

$
30,600

 

 

 

 

$
247,459

 

 

 

 

 

 

Acquisitions (1) (2)

 

 
4,003

 

 

 

 

 

 

 

 

Footnotes to the components

 

 

 

Property NOI (1)

 

 
34,603

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

Full quarter adjustment (3)

 

 
1,595

 

 

Debt (excluding contra for unamortized financing costs)

 

$
1,050,000

 

 

(1) See pages 11 & 28 for definitions and reconciliations.

Stabilized portfolio

 

$
36,198

 

 

Accounts payable & accrued expenses

 

 
61,043

 

 

 

 

 

 

 

 

 

Tenant security deposits

 

 
5,355

 

 

(2) Includes NOI from acquisitions not in same store.

 

 

 

 

 

 

Other liabilities: derivative liability

 

 
5,551

 

 

 

Financial Statement Reconciliation:

 

 

 

 

 

 

 

$
1,121,949

 

 

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

Rental Revenue

 

$
64,611

 

 

 

 

 

 

 

 

 

Rental operating expenses

 

 
(18,209)

 

 

 

 

 

 

 

 

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

Real estate taxes and insurance

 

 
(10,618)

 

 

 

 

 

 

 

 

 

NOI on assets sold

 

 
91

 

 

 

 

 

 

 

 

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

Taxes (4)

 

 
(92)

 

 

 

 

 

 

 

 

 

Management fees & other (5)

 

 
415

 

 

 

 

 

 

 

 

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

Property NOI (1)

 

$
36,198

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2016 | Page 26

 

 

 

Picture 26

Appendix: Non-GAAP Financial Measure Definitions

 

 

During the three months ended June 30, 2016 we changed the definition of FFO, Adjusted EBITDA and Property NOI to exclude hedge ineffectiveness, which does not affect any prior period. Our interest rate swaps effectively fix interest rates on our term loans; however, there is no floor on the variable interest rate of the swaps whereas the current term loans are subject to a zero percent floor. As a result there is a mismatch and the ineffective portion of the derivatives’ changes in fair value are recognized directly into earnings each quarter as hedge ineffectiveness. We believe that FFO, Adjusted EBITDA and Property NOI excluding hedge ineffectiveness is useful supplemental information regarding our operating performance as it provides a more meaningful and consistent comparison of our operating performance and allows investors to more easily compare our operating results. 

 

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, hedge ineffectiveness 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 as of May 17, 2016 in the table on page 9 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.

 

 

 

December 31, 2016 | Page 27

 

 

 

Picture 21

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 hedge ineffectiveness, 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 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, hedge ineffectiveness, 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 properties that are non-operating, being developed or redeveloped, 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 as an indication of our performance or to cash flows as a measure of the Company's liquidity or its ability to make distributions.

 

 

December 31, 2016 | Page 28

 

 

 

Picture 30

Appendix: Non-GAAP Financial Measure Definitions

 

 

 

 

Definition of 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 our proportionate share of FFO and including distributions received, from non-consolidated REITs, (3) excluding the effect of straight-line rent, (4) plus deferred financing costs and (5) 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 (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 and cash flows from operating, investing and financing activities in the consolidated financial statements. 

 

 

 

December 31, 2016 | Page 29

 

 

 

Picture 37

Investor Relations Contact

Georgia Touma | 877.686.9496

InvestorRelations@fspreit.com

 

 

 

 

TwoRavinia_1

 

One & Two Ravinia Drive, Atlanta, GA

Franklin Street Properties Corp.

401 Edgewater Place ­ Wakefield, Massachusetts 01880

781.557.1300 ­ www.fspreit.com

December 31, 2016 | Page 30