News Column

Franklin Street Properties Releases Fourth Quarter and Year End 2013 Results

February 21, 2014

Franklin Street Properties Corp., a real estate investment trust (REIT), announced Funds From Operations (FFO) of $29.2 million or $0.29 per share for the fourth quarter ended December 31, 2013; and FFO of $100.8 million or $1.07 per share for the full year ended December 31, 2013.

In a release on February 19, the Company noted that net income was $6.6 million or $0.07 per share for the fourth quarter ended December 31, 2013 and $19.8 million or $0.21 per share for the year ended December 31, 2013. Please note the Company has updated its definition of FFO, which is described on page 12 of this press release.

Comparing results for the fourth quarter of 2013 to the same period in 2012, FFO increased $8.5 million or $0.04 per share to $29.2 million or $0.29 per share in 2013. The FFO increase was primarily from higher property income due to five acquisitions completed since July 2012 and improved occupancy in our portfolio, which was partially offset by decreased interest income as a result of repayment of secured real estate loans and by higher G&A. Net Income and EPS was $6.6 million or $0.07 per share for the fourth quarter of 2013 compared to a net income of $5.5 million or $0.07 per share for the fourth quarter of 2012.

Comparing results for the year ended December 31, 2013 to 2012, FFO increased $20.5 million or $0.10 per share to $100.8 million or $1.07 per share in 2013. The FFO increase was primarily from higher property income due to five acquisitions completed since July 2012 and improved occupancy in our portfolio, which was partially offset by decreased interest income as a result of repayment of secured real estate loans and by higher G&A. Net Income and EPS was $19.8 million and $0.21 per share, respectively, for the year ended December 31, 2013 compared to net income and EPS of $7.6 million and $0.09 per share, respectively, for the same period in 2012. For the year ended December 31, 2013, Net Income includes the effect of income from discontinued operations of $2.5 million, or $0.03 per share, which includes a $2.2 million gain on the sale of a property sold in October and income from the operations from the property we sold. For the year ended December 31, 2012, Net Income includes the effect of a loss from discontinued operations of $15.3 million or $0.19 per share. The loss included a $14.8 million loss on a property sold in December 2012 and $0.5 million in losses from the operations of properties we sold.

George J. Carter, President and CEO, commented as follows:

"For the fourth quarter of 2013, FSP's profits as represented by FFO totaled approximately $29.2 million or $0.29 per share, an increase of approximately $1.6 million or $0.01 per share compared to the third quarter of 2013. Dividend distributions declared for the fourth quarter of 2013, which were paid on February 14, were approximately $19.0 million or $0.19 per share. For the full-year 2013, FSP's profits as represented by FFO totaled approximately $100.8 million or $1.07 per share, an increase of approximately $20.5 million or $0.10 per share compared to full-year 2012. Our increase in year-over-year FFO per fully-diluted share for 2013 was approximately 10.3 percent, one of the highest in the office REIT sector, and continues our strong FFO per share growth performance of approximately 9.0 percent in 2012 and 6.0 percent in 2011. Our total growth in FFO per fully-diluted share for the three year period of 2011, 2012 and 2013 totaled approximately 27.4 percent and is one of the highest aggregate three year growth rates in the office REIT sector. Our total FFO has grown 51.1 percent over the last three years from $66.7 million to $100.8 million. As we begin 2014, we are for the first time providing FFO guidance. We are optimistic about potential growth prospects during 2014 producing FFO meaningfully higher than 2013 by continuing our organic "same-store" growth which totaled about 2.1 percent in 2013, as well as through additional property acquisitions which totaled about $560 million in 2013. We have a relatively small amount of tenant lease roll-over scheduled during 2014 and our core markets' rental metrics continue to meaningfully improve. We believe our balance sheet is in excellent shape with no property secured debt and no preferred stock outstanding. This gives us a lot of property portfolio flexibility, along with an approximately 5.6 times total fixed charge debt service coverage ratio, one of the highest in the office REIT sector. Over the last three years, our total market capitalization has grown 46.9 percent from $1.4 billion to $2.1 billion. We believe FSP is in a very strong position to continue its growth in 2014.

Our directly-owned real estate portfolio of 39 properties, totaling approximately 9,700,000 square feet, was approximately 94.1 percent leased as of December 31, 2013, up from approximately 93.8 percent leased at the end of the third quarter 2013. Our property portfolio of primarily urban in-fill office assets has relatively modest lease expirations during 2014, which we have continued to proactively reduce. As of year-end 2013, only 5.6 percent of our commercial square footage is scheduled to expire in 2014. As of the end of the third quarter of 2013, most of the tenant improvement expenditures and leasing costs incurred over the last three years to help reach current occupancy levels have been paid and we expect future capital expenditures to continue to moderate in relation to the level of rental revenues being achieved.

While there were no new property acquisitions made in the fourth quarter of 2013, there were two property dispositions completed. First, one of our single-asset REIT affiliates "FSP 505 Waterford Corp." sold its thirteen-story 256,000 square foot office property in Plymouth, Minnesota (a suburb of Minneapolis) for $33.0 million. FSP's first mortgage loan of $2.35 million was repaid in full. The second disposition was our Richardson, Texas (a suburb of Dallas), two-story 122,300 square foot office property known as "1410 East Renner" for $12.5 million on which we recognized a $2.2 million gain. We continuously review and evaluate our property portfolio for potentially advantageous dispositions as well as broader real estate markets for attractive additional property acquisitions. We would anticipate further disposition and acquisition activity during 2014.

As 2014 begins, FSP will focus on continuing its profit growth by increasing occupancy and rents on its portfolio of properties while pursuing the acquisition of additional real estate investments that have the potential to add to those profits.

We are very optimistic about our prospects for growth during 2014 and beyond."

Dividend Update

On January 10, the Company announced that its Board of Directors declared a regular quarterly dividend for the three months ended December, 2013 of $0.19 per share of common stock that was paid on February 14, to stockholders of record on January 24.

FFO Guidance

We are providing full year FFO guidance for 2014 in the range of $1.08 to $1.12 per diluted share. This guidance (a) excludes the impact of future acquisitions, dispositions, debt financings or repayments or other capital market transactions; (b) reflects estimates from our ongoing portfolio of properties, other real estate investments and G&A expenses; and (c) reflects our current expectations of economic conditions in the coming year. We will update guidance quarterly in our earnings releases. There can be no assurance that the Company's actual results will not differ materially from the estimates set forth above.

Real Estate Update

Supplementary schedules provide property information for the Company's owned real estate portfolio and for two non-consolidated REITs in which the Company holds preferred stock interests as of December 31, 2013. The Company will also be filing an updated supplemental information package that will provide stockholders and the financial community with additional operating and financial data. The Company will file this supplemental information package with the SEC and make it available on its website at www.franklinstreetproperties.com.

More information:

www.franklinstreetproperties.com

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