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Franklin Street Properties (FSP)

Filed: 30 Oct 18, 4:31pm

Exhibit 99.2 

 

 

 

Picture 47

Picture 43

Picture 44

Franklin Street Properties

Supplemental Operating
and Financial Data

Third Quarter 2018

 

 

 

Picture 48

Franklin Street Properties Corp.

401 Edgewater Place ● Wakefield, MA 01880

(781) 557-1300 ● www.fspreit.com

Picture 49

 


 

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

 

 

 

 

 

801 Marquette

 

 

September 30, 2018| Page 2


 

 

 

Picture 27

Company Information

 

 

Overview

 

 

 

 

Snapshot (as of September 30, 2018)

Franklin Street Properties Corp. (“FSP”, “we”, “our” or the “Company”) (NYSE American: 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 five core 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

34

 

 

 

 

Total Square Feet

9.8 Million

 

 

 

 

Trading Symbol

FSP

 

 

 

 

Exchange

NYSE American

 

 

 

 

Common Shares Outstanding

107,231,155

 

 

 

 

Quarterly Dividend

$0.09

Our Business

 

 

 

 

Dividend Yield

4.5%

As of September 30, 2018, the Company owned and operated a portfolio of real estate consisting of 34 properties, one property that has been redeveloped and is classified as non-operating and has three managed 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

$1.8 Billion*

 

 

 

 

Insider Holdings

4.0%

 

 

 

 

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

 

 

 

 

Greenwood Plaza, Englewood, CO

 

 

 

 

 

 

 

Inquiries

 

 

 

 

 

 

Inquiries should be directed to:  Georgia Touma

 

 

 

 

 

 

877.686.9496 or InvestorRelations@fspreit.com

 

* Total Market Capitalization is the closing share price multiplied by the number of shares outstanding plus total debt   

  outstanding. 

 

 

 

 

 

 

 

 

September 30, 2018| Page 3


 

 

 

Picture 9

Summary of Financial Highlights

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

30-Sep-18

    

30-Jun-18

    

31-Mar-18

    

31-Dec-17

    

30-Sep-17

 

Income Items:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental revenue

 

$

67,436

 

 

65,409

 

 

65,628

 

$

65,555

 

$

67,339

 

Total revenue

 

 

68,705

 

 

66,694

 

 

66,893

 

 

66,835

 

 

68,626

 

Adjusted EBITDA*

 

 

35,636

 

 

34,270

 

 

34,943

 

 

34,033

 

 

35,354

 

Equity in income (loss) of non-consolidated REITs

 

 

7,180

 

 

(282)

 

 

(105)

 

 

(2,885)

 

 

(121)

 

Net income (loss)

 

 

9,608

 

 

665

 

 

1,425

 

 

(4,932)

 

 

1,903

 

FFO*

 

 

26,158

 

 

25,393

 

 

26,364

 

 

26,347

 

 

27,991

 

AFFO*

 

 

13,024

 

 

9,658

 

 

16,930

 

 

13,044

 

 

17,110

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Per Share Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EPS

 

$

0.09

 

 

0.01

 

 

0.01

 

$

(0.05)

 

$

0.02

 

FFO*

 

$

0.24

 

 

0.24

 

 

0.25

 

$

0.25

 

$

0.26

 

AFFO*

 

$

0.12

 

 

0.09

 

 

0.16

 

$

0.12

 

$

0.16

 

Weighted Average Shares (diluted)

 

 

107,231

 

 

107,231

 

 

107,231

 

 

107,231

 

 

107,231

 

Closing share price

 

$

7.99

 

 

8.56

 

 

8.41

 

$

10.74

 

$

10.62

 

Dividend declared

 

$

0.09

 

 

0.09

 

 

0.09

 

$

0.19

 

$

0.19

 

AFFO Payout Ratio:

 

 

74%

 

 

100%

 

 

57%

 

 

156%

 

 

119%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance Sheet Items:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Real estate, net

 

$

1,628,036

 

 

1,627,498

 

 

1,627,941

 

$

1,632,692

 

$

1,635,706

 

Other assets, net

 

 

280,523

 

 

352,029

 

 

358,254

 

 

357,820

 

 

395,979

 

Total assets, net

 

 

1,908,559

 

 

1,979,527

 

 

1,986,195

 

 

1,990,512

 

 

2,031,685

 

Total liabilities, net

 

 

1,055,146

 

 

1,127,140

 

 

1,127,277

 

 

1,119,220

 

 

1,142,299

 

Shareholders' equity

 

 

853,413

 

 

852,387

 

 

858,918

 

 

871,292

 

 

889,386

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Market Capitalization and Debt:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Market Capitalization (a)

 

$

1,843,777

 

 

1,985,899

 

 

1,969,814

 

$

2,199,663

 

$

2,208,795

 

Total debt outstanding (excluding unamortized financing costs)

 

 

987,000

 

 

1,068,000

 

 

1,068,000

 

 

1,048,000

 

 

1,070,000

 

Debt to Total Market Capitalization

 

 

53.5%

 

 

53.8%

 

 

54.2%

 

 

47.6%

 

 

48.4%

 

Net Debt to Adjusted EBITDA*

 

 

6.9

 

 

7.7

 

 

7.5

 

 

7.6

 

 

7.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Owned Portfolio Leasing Statistics (b):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Owned portfolio assets

 

 

34

 

 

34

 

 

34

 

 

34

 

 

35

 

Portfolio total SF

 

 

9,760,699

 

 

9,760,699

 

 

9,760,657

 

 

9,761,984

 

 

10,085,889

 

Portfolio % leased

 

 

90.5%

 

 

89.0%

 

 

88.5%

 

 

89.7%

 

 

88.7%

 


(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 2018 and 2017, excludes one property that was redeveloped and is classified as non-operating, which is located in Minneapolis, Minnesota.

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

 

 

 

September 30, 2018| Page 4


 

Picture 42

Condensed Consolidated Income Statements

($ in thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the

 

 

Three Months Ended

 

Ended

 

 

For the Three Months Ended

 

Year Ended

 

 

31-Mar-18

 

30-Jun-18

 

30-Sep-18

 

30-Sep-18

 

 

31-Mar-17

 

30-Jun-17

 

30-Sep-17

 

31-Dec-17

 

31-Dec-17

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental

  

$

65,628

  

$

65,409

  

$

67,436

    

$

198,473

  

  

$

67,376

  

$

66,995

  

$

67,339

  

$

65,555

  

$

267,265

Related party revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Management fees and interest income from loans

 

 

1,256

 

 

1,276

 

 

1,261

 

 

3,793

 

 

 

1,370

 

 

1,366

 

 

1,278

 

 

1,271

 

 

5,285

Other

 

 

 9

 

 

 9

 

 

 8

 

 

26

 

 

 

10

 

 

10

 

 

 9

 

 

 9

 

 

38

Total revenue

 

 

66,893

 

 

66,694

 

 

68,705

 

 

202,292

 

 

 

68,756

 

 

68,371

 

 

68,626

 

 

66,835

 

 

272,588

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Real estate operating expenses

 

 

17,151

 

 

16,954

 

 

17,946

 

 

52,051

 

 

 

17,308

 

 

17,286

 

 

17,898

 

 

18,720

 

 

71,212

Real estate taxes and insurance

 

 

11,177

 

 

12,292

 

 

11,651

 

 

35,120

 

 

 

12,403

 

 

11,595

 

 

11,882

 

 

9,961

 

 

45,841

Depreciation and amortization

 

 

24,035

 

 

23,591

 

 

23,277

 

 

70,903

 

 

 

25,332

 

 

25,279

 

 

24,988

 

 

25,659

 

 

101,258

General and administrative

 

 

3,432

 

 

3,082

 

 

3,394

 

 

9,908

 

 

 

3,443

 

 

3,077

 

 

3,286

 

 

3,665

 

 

13,471

Interest

 

 

9,486

 

 

9,753

 

 

9,935

 

 

29,174

 

 

 

7,579

 

 

7,893

 

 

8,258

 

 

8,657

 

 

32,387

Total expenses

 

 

65,281

 

 

65,672

 

 

66,203

 

 

197,156

 

 

 

66,065

 

 

65,130

 

 

66,312

 

 

66,662

 

 

264,169

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

1,612

 

 

1,022

 

 

2,502

 

 

5,136

 

 

 

2,691

 

 

3,241

 

 

2,314

 

 

173

 

 

8,419

Equity in income (loss) of non-consolidated REITs

 

 

(105)

 

 

(282)

 

 

7,180

 

 

6,793

 

 

 

(397)

 

 

(201)

 

 

(121)

 

 

(2,885)

 

 

(3,604)

Other

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 

22

 

 

129

 

 

67

 

 

(2,096)

 

 

(1,878)

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

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 

2,289

 

 

(20,492)

 

 

(257)

 

 

(21)

 

 

(18,481)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) before taxes on income

 

 

1,507

 

 

740

 

 

9,682

 

 

11,929

 

 

 

4,605

 

 

(17,323)

 

 

2,003

 

 

(4,829)

 

 

(15,544)

Income tax expense

 

 

82

 

 

75

 

 

74

 

 

231

 

 

 

125

 

 

72

 

 

100

 

 

103

 

 

400

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

1,425

 

$

665

 

$

9,608

 

$

11,698

 

 

$

4,480

 

$

(17,395)

 

$

1,903

 

$

(4,932)

 

$

(15,944)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of shares outstanding, basic and diluted

 

 

107,231

 

 

107,231

 

 

107,231

 

 

107,231

 

 

 

107,231

 

 

107,231

 

 

107,231

 

 

107,231

 

 

107,231

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) per share, basic and diluted

 

$

0.01

 

$

0.01

 

$

0.09

 

$

0.11

 

 

$

0.04

 

$

(0.16)

 

$

0.02

 

$

(0.05)

 

$

(0.15)

 

 

 

September 30, 2018| Page 5


 

 

$ in thousands, except per share amounts)

Picture 1

Condensed Consolidated Balance Sheets

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31,

 

June 30,

 

September 30,

 

 

March 31,

 

June 30,

 

September 30,

 

December 31,

 

 

    

2018

 

2018

    

2018

  

  

2017

 

2017

    

2017

    

2017

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Real estate assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Land

 

$

191,578

 

$

191,578

 

$

191,578

 

 

$

196,178

 

$

191,578

 

$

191,578

 

$

191,578

 

Buildings and improvements

 

 

1,821,035

 

 

1,833,470

 

 

1,848,362

 

 

 

1,836,073

 

 

1,792,784

 

 

1,800,831

 

 

1,811,631

 

Fixtures and equipment

 

 

5,909

 

 

7,565

 

 

7,842

 

 

 

4,600

 

 

4,841

 

 

5,017

 

 

5,614

 

 

 

 

2,018,522

 

 

2,032,613

 

 

2,047,782

 

 

 

2,036,851

 

 

1,989,203

 

 

1,997,426

 

 

2,008,823

 

Less accumulated depreciation

 

 

390,581

 

 

405,115

 

 

419,746

 

 

 

350,697

 

 

348,652

 

 

361,720

 

 

376,131

 

Real estate assets, net

 

 

1,627,941

 

 

1,627,498

 

 

1,628,036

 

 

 

1,686,154

 

 

1,640,551

 

 

1,635,706

 

 

1,632,692

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquired real estate leases, net

 

 

78,729

 

 

71,861

 

 

65,687

 

 

 

115,471

 

 

105,811

 

 

96,282

 

 

86,520

 

Investment in non-consolidated REITs

 

 

69,703

 

 

69,067

 

 

 —

 

 

 

74,423

 

 

73,876

 

 

73,405

 

 

70,164

 

Asset held for sale

 

 

 —

 

 

 —

 

 

 —

 

 

 

 —

 

 

31,868

 

 

31,615

 

 

 —

 

Cash, cash equivalents and restricted cash

 

 

14,355

 

 

10,448

 

 

10,434

 

 

 

11,174

 

 

11,623

 

 

12,710

 

 

9,819

 

Tenant rent receivables, net

 

 

3,411

 

 

4,039

 

 

3,206

 

 

 

3,785

 

 

4,706

 

 

3,990

 

 

3,123

 

Straight-line rent receivable, net

 

 

53,430

 

 

53,294

 

 

53,056

 

 

 

52,304

 

 

51,590

 

 

52,272

 

 

53,194

 

Prepaid expenses and other assets

 

 

8,355

 

 

7,444

 

 

9,259

 

 

 

4,946

 

 

5,124

 

 

6,282

 

 

8,387

 

Related party mortgage loan receivable

 

 

71,455

 

 

71,190

 

 

70,925

 

 

 

81,515

 

 

72,250

 

 

71,985

 

 

71,720

 

Other assets: derivative asset

 

 

18,740

 

 

21,196

 

 

22,265

 

 

 

13,603

 

 

11,333

 

 

10,771

 

 

13,925

 

Office computers and furniture, net of accumulated depreciation

 

 

261

 

 

236

 

 

216

 

 

 

275

 

 

287

 

 

319

 

 

289

 

Deferred leasing commissions, net

 

 

39,815

 

 

43,254

 

 

45,475

 

 

 

34,636

 

 

33,548

 

 

36,348

 

 

40,679

 

Total assets

 

$

1,986,195

 

$

1,979,527

 

$

1,908,559

 

 

$

2,078,286

 

$

2,042,567

 

$

2,031,685

 

$

1,990,512

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bank note payable

 

$

98,000

 

$

98,000

 

$

17,000

 

 

$

295,000

 

$

295,000

 

$

300,000

 

$

78,000

 

Term loan payable, net of unamortized financing costs

 

 

765,259

 

 

765,618

 

 

763,914

 

 

 

765,539

 

 

765,861

 

 

766,183

 

 

764,901

 

Series A & Series B Senior Notes

 

 

198,727

 

 

198,768

 

 

198,809

 

 

 

 —

 

 

 —

 

 

 —

 

 

198,692

 

Accounts payable and accrued expenses

 

 

53,327

 

 

52,651

 

 

62,699

 

 

 

50,529

 

 

55,241

 

 

57,593

 

 

61,039

 

Accrued compensation

 

 

1,112

 

 

1,778

 

 

2,844

 

 

 

1,259

 

 

1,929

 

 

3,000

 

 

3,641

 

Tenant security deposits

 

 

5,588

 

 

5,576

 

 

5,619

 

 

 

5,441

 

 

5,367

 

 

5,431

 

 

5,383

 

Other liabilities: derivative liabilities

 

 

 —

 

 

 —

 

 

 —

 

 

 

4,351

 

 

4,364

 

 

3,721

 

 

1,759

 

Acquired unfavorable real estate leases, net

 

 

5,264

 

 

4,749

 

 

4,261

 

 

 

8,144

 

 

6,961

 

 

6,371

 

 

5,805

 

Total liabilities

 

 

1,127,277

 

 

1,127,140

 

 

1,055,146

 

 

 

1,130,263

 

 

1,134,723

 

 

1,142,299

 

 

1,119,220

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ Equity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred stock

 

 

                 -

 

 

 —

 

 

 —

 

 

 

                 -

 

 

                 -

 

 

                 -

 

 

                 -

 

Common stock

 

 

11

 

 

11

 

 

11

 

 

 

11

 

 

11

 

 

11

 

 

11

 

Additional paid-in capital

 

 

1,356,457

 

 

1,356,457

 

 

1,356,457

 

 

 

1,356,457

 

 

1,356,457

 

 

1,356,457

 

 

1,356,457

 

Accumulated other comprehensive income (loss)

 

 

18,740

 

 

21,196

 

 

22,265

 

 

 

7,351

 

 

4,940

 

 

4,954

 

 

12,166

 

Accumulated distributions in excess of accumulated earnings

 

 

(516,290)

 

 

(525,277)

 

 

(525,320)

 

 

 

(415,796)

 

 

(453,564)

 

 

(472,036)

 

 

(497,342)

 

Total stockholders’ equity

 

 

858,918

 

 

852,387

 

 

853,413

 

 

 

948,023

 

 

907,844

 

 

889,386

 

 

871,292

 

Total liabilities and stockholders’ equity

 

$

1,986,195

 

$

1,979,527

 

$

1,908,559

 

 

$

2,078,286

 

$

2,042,567

 

$

2,031,685

 

$

1,990,512

 

 

September 30, 2018| Page 6


 

Picture 19

Condensed Consolidated Statements of Cash Flows

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months ended September 30,

 

 

Twelve Months Ended December 31,

 

 

 

2018

 

2017

 

 

2017

 

2016

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

$

11,698

$

(11,012)

 

 

$

(15,944)

 

$

8,378

 

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

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization expense

 

73,127

 

77,418

 

 

 

103,743

 

 

95,243

 

Amortization of above and below market leases

 

(405)

 

(941)

 

 

 

(1,031)

 

 

(496)

 

Hedge ineffectiveness

 

 —

 

(218)

 

 

 

1,878

 

 

(1,878)

 

Loss on sale of properties and properties

held for sale, less applicable income tax

 

 —

 

18,460

 

 

 

18,481

 

 

2,938

 

Equity in (income) loss from non-consolidated REITs

 

(6,793)

 

719

 

 

 

3,604

 

 

831

 

Increase (decrease) in allowance for doubtful accounts

 

(25)

 

25

 

 

 

150

 

 

(30)

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Tenant rent receivables

 

(58)

 

(902)

 

 

 

(160)

 

 

(185)

 

Straight-line rents

 

821

 

(2,021)

 

 

 

(1,767)

 

 

(1,977)

 

Lease acquisition costs

 

(683)

 

(876)

 

 

 

(2,052)

 

 

(1,095)

 

Prepaid expenses and other assets

 

(487)

 

(1,945)

 

 

 

(403)

 

 

(721)

 

Accounts payable and accrued expenses

 

(2,665)

 

(489)

 

 

 

3,870

 

 

5,751

 

Accrued compensation

 

(797)

 

(784)

 

 

 

(143)

 

 

58

 

Tenant security deposits

 

236

 

76

 

 

 

28

 

 

526

 

Payment of deferred leasing commissions

 

(11,051)

 

(8,178)

 

 

 

(14,309)

 

 

(12,965)

 

Net cash provided by operating activities

 

62,918

 

69,332

 

 

 

95,945

 

 

94,378

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

 

 

 

Property acquisitions

 

 —

 

 —

 

 

 

 —

 

 

(221,119)

 

Acquired real estate leases

 

 —

 

 —

 

 

 

 —

 

 

(51,509)

 

Property improvements, fixtures and equipment

 

(35,901)

 

(41,862)

 

 

 

(54,306)

 

 

(37,490)

 

Investments in non-consolidated REITs

 

74,931

 

 —

 

 

 

 —

 

 

 —

 

Distributions in excess of earnings from non-consolidated REITs

 

710

 

1,041

 

 

 

1,396

 

 

1,023

 

Investment in related party mortgage loan receivable

 

 —

 

 —

 

 

 

 —

 

 

(3,000)

 

Repayment of related party mortgage loan receivable

 

795

 

9,795

 

 

 

10,060

 

 

39,861

 

Proceeds received on sales of real estate assets

 

 —

 

6,160

 

 

 

37,756

 

 

27,262

 

Net cash provided by (used in) investing activities

 

40,535

 

(24,866)

 

 

 

(5,094)

 

 

(244,972)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

 

 

 

Distributions to stockholders

 

(39,676)

 

(61,122)

 

 

 

(81,496)

 

 

(77,481)

 

Proceeds from equity offering, net

 

 —

 

 —

 

 

 

 —

 

 

82,902

 

Borrowings under bank note payable

 

30,000

 

60,000

 

 

 

75,000

 

 

175,000

 

Repayments of bank note payable

 

(91,000)

 

(40,000)

 

 

 

(277,000)

 

 

(185,000)

 

Borrowing from Series A & Series B Senior Notes

 

 —

 

 —

 

 

 

200,000

 

 

 —

 

Borrowing of term loan payable

 

 —

 

 —

 

 

 

 —

 

 

150,000

 

Deferred Financing Costs

 

(2,162)

 

 —

 

 

 

(6,902)

 

 

(3,647)

 

Net cash provided by (used in) financing activities

 

(102,838)

 

(41,122)

 

 

 

(90,398)

 

 

141,774

 

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

 

615

 

3,344

 

 

 

453

 

 

(8,820)

 

Cash, cash equivalents and restricted cash, beginning of period

 

9,819

 

9,366

 

 

 

9,366

 

 

18,186

 

Cash, cash equivalents and restricted cash, end of period

$

10,434

$

12,710

 

 

$

9,819

 

$

9,366

 

 

 

September 30, 2018| Page 7


 

Picture 40

Property Net Operating Income (NOI)* with

Same Store Comparison (in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rentable

 

 

 

 

 

 

 

 

 

 

Nine Months

 

 

 

 

 

 

 

 

 

 

Nine Months

 

 

 

 

 

 

 

 

Square Feet

 

Three Months Ended

Ended

 

Three Months Ended

 

Ended

 

Inc

 

%

 

(in thousands)

    

or RSF

    

31-Mar-18

   

30-Jun-18

   

30-Sep-18

 

30-Sep-18

    

31-Mar-17

    

30-Jun-17

    

30-Sep-17

    

30-Sep-17

    

(Dec)

    

Change

 

Region

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

East

 

1,007

 

$

3,991

 

$

4,123

 

$

4,032

 

$

12,146

 

$

3,917

 

$

3,941

 

$

3,926

 

$

11,784

 

$

362

 

3.1

%

MidWest

 

1,549

 

 

6,257

 

 

4,955

 

 

5,104

 

 

16,316

 

 

4,365

 

 

3,908

 

 

4,476

 

 

12,749

 

 

3,567

 

28.0

%

South

 

4,597

 

 

15,431

 

 

15,223

 

 

16,722

 

 

47,376

 

 

17,008

 

 

16,463

 

 

16,531

 

 

50,002

 

 

(2,626)

 

(5.3)

%

West

 

2,608

 

 

10,958

 

 

11,061

 

 

11,324

 

 

33,343

 

 

10,958

 

 

12,045

 

 

11,337

 

 

34,340

 

 

(997)

 

(2.9)

%

Same Store

 

9,761

 

 

36,637

 

 

35,362

 

 

37,182

 

 

109,181

 

 

36,248

 

 

36,357

 

 

36,270

 

 

108,875

 

 

306

 

0.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquisitions

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 —

%

Property NOI* from the continuing portfolio

 

9,761

 

 

36,637

 

 

35,362

 

 

37,182

 

 

109,181

 

 

36,248

 

 

36,357

 

 

36,270

 

 

108,875

 

 

306

 

0.3

%

Dispositions, Non-Operating, Development or Redevelopment

 

 -

 

 

79

 

 

(38)

 

 

(69)

 

 

(28)

 

 

625

 

 

467

 

 

568

 

 

1,660

 

 

(1,688)

 

(1.6)

%

Property NOI*

 

9,761

 

$

36,716

 

$

35,324

 

$

37,113

 

$

109,153

 

$

36,873

 

$

36,824

 

$

36,838

 

$

110,535

 

$

(1,382)

 

(1.3)

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Same Store

 

 

 

$

36,637

 

$

35,362

 

$

37,182

 

$

109,181

 

$

36,248

 

$

36,357

 

$

36,270

 

$

108,875

 

$

306

 

0.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Less Nonrecurring

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Items in NOI* (a)

 

 

 

 

761

 

 

1,141

 

 

2,504

 

 

4,406

 

 

65

 

 

1,178

 

 

1,103

 

 

2,346

 

 

2,060

 

(1.9)

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comparative

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Same Store

 

 

 

$

35,876

 

$

34,221

 

$

34,678

 

$

104,775

 

$

36,183

 

$

35,179

 

$

35,167

 

$

106,529

 

$

(1,754)

 

(1.6)

%

 


(a)

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

 

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

 

 

September 30, 2018| Page 8


 

Picture 32

FFO* & AFFO* Reconciliation

(in thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year

 

 

 

Three Months Ended

 

Ended

 

 

Three Months Ended

 

Ended

 

 

    

31-Mar-18

    

30-Jun-18

    

30-Sep-18

    

30-Sep-18

 

 

31-Mar-17

    

30-Jun-17

    

30-Sep-17

    

31-Dec-17

    

31-Dec-17

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

1,425

 

$

665

 

$

9,608

 

$

11,698

 

 

$

4,480

 

$

(17,395)

 

$

1,903

 

$

(4,932)

 

$

(15,944)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Gain) loss on sale of properties and properties

held for sale, less applicable income tax

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 

(2,289)

 

 

20,492

 

 

257

 

 

21

 

 

18,481

 

GAAP (income) loss from non-consolidated REITs

 

 

105

 

 

282

 

 

(7,180)

 

 

(6,793)

 

 

 

397

 

 

201

 

 

121

 

 

2,885

 

 

3,604

 

FFO from non-consolidated REITs

 

 

884

 

 

978

 

 

649

 

 

2,511

 

 

 

791

 

 

800

 

 

874

 

 

708

 

 

3,173

 

Depreciation & amortization

 

 

23,950

 

 

23,468

 

 

23,081

 

 

70,499

 

 

 

25,163

 

 

24,592

 

 

24,903

 

 

25,569

 

 

100,227

 

NAREIT FFO*

 

 

26,364

 

 

25,393

 

 

26,158

 

 

77,915

 

 

 

28,542

 

 

28,690

 

 

28,058

 

 

24,251

 

 

109,541

 

Hedge ineffectiveness

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 

(22)

 

 

(129)

 

 

(67)

 

 

2,096

 

 

1,878

 

Acquisition costs

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 

 8

 

 

10

 

 

 —

 

 

 —

 

 

18

 

Funds From Operations (FFO)*

 

$

26,364

 

$

25,393

 

$

26,158

 

$

77,915

 

 

$

28,528

 

$

28,571

 

$

27,991

 

$

26,347

 

$

111,437

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted Funds From Operations (AFFO)*

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Funds From Operations (FFO)*

 

$

26,364

 

$

25,393

 

$

26,158

 

$

77,915

 

 

$

28,528

 

$

28,571

 

$

27,991

 

$

26,347

 

$

111,437

 

Reverse FFO from non-consolidated REITs

 

 

(884)

 

 

(978)

 

 

(649)

 

 

(2,511)

 

 

 

(791)

 

 

(800)

 

 

(874)

 

 

(708)

 

 

(3,173)

 

Distributions from non-consolidated REITs

 

 

355

 

 

355

 

 

 —

 

 

710

 

 

 

346

 

 

345

 

 

350

 

 

355

 

 

1,396

 

Amortization of deferred financing costs

 

 

711

 

 

713

 

 

799

 

 

2,223

 

 

 

606

 

 

606

 

 

606

 

 

667

 

 

2,485

 

Straight-line rent

 

 

40

 

 

259

 

 

522

 

 

821

 

 

 

(1,082)

 

 

(792)

 

 

(147)

 

 

254

 

 

(1,767)

 

Tenant improvements

 

 

(6,777)

 

 

(8,212)

 

 

(7,084)

 

 

(22,073)

 

 

 

(6,474)

 

 

(5,363)

 

 

(4,474)

 

 

(4,166)

 

 

(20,477)

 

Leasing commissions

 

 

(1,021)

 

 

(5,314)

 

 

(4,394)

 

 

(10,729)

 

 

 

(1,579)

 

 

(1,963)

 

 

(4,482)

 

 

(5,869)

 

 

(13,893)

 

Non-investment capex

 

 

(1,858)

 

 

(2,558)

 

 

(2,328)

 

 

(6,744)

 

 

 

(1,670)

 

 

(1,685)

 

 

(1,860)

 

 

(3,836)

 

 

(9,051)

 

Adjusted Funds From Operations (AFFO)*

 

$

16,930

 

$

9,658

 

$

13,024

 

$

39,612

 

 

$

17,884

 

$

18,919

 

$

17,110

 

$

13,044

 

$

66,957

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Per Share Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EPS

 

$

 0.01

 

$

 0.01

 

$

 0.09

 

$

 0.11

 

 

$

 0.04

 

$

(0.16)

 

$

 0.02

 

$

(0.05)

 

$

(0.15)

 

FFO*

 

 

 0.25

 

 

 0.24

 

 

 0.24

 

 

 0.73

 

 

 

 0.27

 

 

 0.27

 

 

 0.26

 

 

 0.25

 

 

 1.04

 

AFFO*

 

 

 0.16

 

 

 0.09

 

 

 0.12

 

 

 0.37

 

 

 

 0.17

 

 

 0.18

 

 

 0.16

 

 

 0.12

 

 

 0.62

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted Average Shares (basic and diluted)

 

 

107,231

 

 

107,231

 

 

107,231

 

 

107,231

 

 

 

107,231

 

 

107,231

 

 

107,231

 

 

107,231

 

 

107,231

 

 


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

 

 

September 30, 2018| Page 9


 

Picture 34

EBITDA* & Adjusted EBITDA* Reconciliation

(in thousands, except ratio amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year

 

 

Three Months Ended

 

Ended

 

 

Three Months Ended

 

Ended

 

    

31-Mar-18

    

30-Jun-18

    

30-Sep-18

    

30-Sep-18

   

   

31-Mar-17

    

30-Jun-17

    

30-Sep-17

    

31-Dec-17

    

31-Dec-17

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

1,425

 

$

665

 

$

9,608

 

$

11,698

 

 

$

4,480

 

$

(17,395)

 

$

1,903

 

$

(4,932)

 

$

(15,944)

Interest expense

 

 

9,486

 

 

9,753

 

 

9,935

 

 

29,174

 

 

 

7,579

 

 

7,893

 

 

8,258

 

 

8,657

 

 

32,387

Depreciation and amortization

 

 

23,950

 

 

23,468

 

 

23,081

 

 

70,499

 

 

 

25,163

 

 

24,592

 

 

24,903

 

 

25,569

 

 

100,227

Income taxes

 

 

82

 

 

75

 

 

74

 

 

231

 

 

 

125

 

 

72

 

 

100

 

 

103

 

 

400

EBITDA*

 

 

34,943

 

 

33,961

 

 

42,698

 

 

111,602

 

 

 

37,347

 

 

15,162

 

 

35,164

 

 

29,397

 

 

117,070

(Gain) loss on sale of properties and provisions for loss on properties

held for sale or equity investments, less applicable income tax

 

 

 —

 

 

309

 

 

(7,062)

 

 

(6,753)

 

 

 

(2,289)

 

 

20,492

 

 

257

 

 

2,540

 

 

21,000

Hedge ineffectiveness

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 

(22)

 

 

(129)

 

 

(67)

 

 

2,096

 

 

1,878

Adjusted EBITDA*

 

$

34,943

 

$

34,270

 

$

35,636

 

$

104,849

 

 

$

35,036

 

$

35,525

 

$

35,354

 

$

34,033

 

$

139,948

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

$

9,486

 

$

9,753

 

$

9,935

 

$

29,174

 

 

$

7,579

 

$

7,893

 

$

8,258

 

$

8,657

 

$

32,387

Scheduled principal payments

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

Interest and scheduled principal payments

 

$

9,486

 

$

9,753

 

$

9,935

 

$

29,174

 

 

$

7,579

 

$

7,893

 

$

8,258

 

$

8,657

 

$

32,387

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest coverage ratio

 

 

3.68

 

 

3.51

 

 

3.59

 

 

3.59

 

 

 

4.62

 

 

4.50

 

 

4.28

 

 

3.93

 

 

4.32

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Debt service coverage ratio

 

 

3.68

 

 

3.51

 

 

3.59

 

 

3.59

 

 

 

4.62

 

 

4.50

 

 

4.28

 

 

3.93

 

 

4.32

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Debt excluding unamortized financing costs

 

$

1,068,000

 

$

1,068,000

 

$

987,000

 

 

 

 

 

$

1,065,000

 

$

1,065,000

 

$

1,070,000

 

$

1,048,000

 

 

 

Cash, cash equivalents and restricted cash

 

 

14,355

 

 

10,448

 

 

10,434

 

 

 

 

 

 

11,174

 

 

11,623

 

 

12,710

 

 

9,819

 

 

 

Net Debt (Debt less Cash, cash equivalents and restricted cash)

 

$

1,053,645

 

$

1,057,552

 

$

976,566

 

 

 

 

 

$

1,053,826

 

$

1,053,377

 

$

1,057,290

 

$

1,038,181

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA*

 

$

34,943

 

$

34,270

 

$

35,636

 

 

 

 

 

$

35,036

 

$

35,525

 

$

35,354

 

$

34,033

 

 

 

Annualized

 

$

139,772

 

$

137,080

 

$

142,544

 

 

 

 

 

$

140,144

 

$

142,100

 

$

141,416

 

$

136,132

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Debt-to-Adjusted EBITDA*

 

 

7.5

 

 

7.7

 

 

6.9

 

 

 

 

 

 

7.5

 

 

7.4

 

 

7.5

 

 

7.6

 

 

 


*See the Appendix for Definitions of these Non-GAAP Measures beginning on page 27.  Amounts in the EBITDA and Adjusted 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, 2018| Page 10


 

 

 

Picture 24

Reconciliation of Net Income (Loss) to Property NOI*

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of Net income to Property NOI*

 

 

 

 

 

 

 

 

 

 

Nine Months

 

 

 

 

 

 

 

 

 

 

 

 

 

Year

 

 

 

Three Months Ended

 

Ended

 

Three Months Ended

 

Ended

 

 

    

31-Mar-18

    

30-Jun-18

    

30-Sep-18

    

30-Sep-18

    

31-Mar-17

    

30-Jun-17

    

30-Sep-17

    

31-Dec-17

    

31-Dec-17

 

Net income (loss)

 

$

1,425

 

$

665

 

$

9,608

 

$

11,698

 

$

4,480

 

$

(17,395)

 

$

1,903

 

$

(4,932)

 

$

(15,944)

 

Add (deduct):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(2,289)

 

 

20,492

 

 

257

 

 

21

 

 

18,481

 

Hedge ineffectiveness

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(22)

 

 

(129)

 

 

(67)

 

 

2,096

 

 

1,878

 

Management fee income

 

 

(746)

 

 

(746)

 

 

(712)

 

 

(2,204)

 

 

(794)

 

 

(768)

 

 

(791)

 

 

(756)

 

 

(3,109)

 

Depreciation and amortization

 

 

24,035

 

 

23,591

 

 

23,277

 

 

70,903

 

 

25,332

 

 

25,279

 

 

24,988

 

 

25,659

 

 

101,258

 

Amortization of above/below market leases

 

 

(85)

 

 

(123)

 

 

(196)

 

 

(404)

 

 

(168)

 

 

(687)

 

 

(86)

 

 

(90)

 

 

(1,031)

 

General and administrative

 

 

3,432

 

 

3,082

 

 

3,394

 

 

9,908

 

 

3,443

 

 

3,077

 

 

3,286

 

 

3,665

 

 

13,471

 

Interest expense

 

 

9,486

 

 

9,753

 

 

9,935

 

 

29,174

 

 

7,579

 

 

7,893

 

 

8,258

 

 

8,657

 

 

32,387

 

Interest income

 

 

(1,120)

 

 

(1,141)

 

 

(1,157)

 

 

(3,418)

 

 

(1,214)

 

 

(1,206)

 

 

(1,134)

 

 

(1,133)

 

 

(4,687)

 

Equity in (income) loss of non-consolidated REITs

 

 

105

 

 

282

 

 

(7,180)

 

 

(6,793)

 

 

397

 

 

201

 

 

121

 

 

2,885

 

 

3,604

 

Non-property specific items, net

 

 

184

 

 

(39)

 

 

144

 

 

289

 

 

129

 

 

67

 

 

103

 

 

228

 

 

527

 

Property NOI*

 

$

36,716

 

$

35,324

 

$

37,113

 

$

109,153

 

$

36,873

 

$

36,824

 

$

36,838

 

$

36,300

 

$

146,835

 

 


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

 

 

September 30, 2018| Page 11


 

Picture 38

Debt Summary

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Maximum

 

Amount

 

Interest

 

Interest

 

 

 

 

 

Maturity

 

Amount

 

Drawn at

 

Rate (a)

 

Rate at

 

Facility

 

 

    

Date

    

of Loan

    

30-Sep-18

    

Components

    

30-Sep-18

    

Fee

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BAML Revolver

 

12-Jan-22

 

$

600,000

 

$

17,000

 

L

 + 

1.20%

 

3.33%

 

0.25%

 

JPM Term Loan

 

30-Nov-21

 

 

150,000

 

 

150,000

 

L

 + 

1.25%

 

3.38%

 

 

 

BAML Term Loan

 

12-Jan-23

 

 

400,000

 

 

400,000

 

1.12%

 + 

1.25%

 

2.47%

 

 

 

BMO Term Loan Tranche A

 

30-Nov-21

 

 

55,000

 

 

55,000

 

2.32%

 + 

1.25%

 

3.57%

 

 

 

BMO Term Loan Tranche B

 

31-Jan-24

 

 

165,000

 

 

165,000

 

2.32%

 + 

1.25%

 

3.57%

 

 

 

Series A Senior Notes

 

20-Dec-24

 

 

116,000

 

 

116,000

 

 

 

 

 

3.99%

 

 

 

Series B Senior Notes

 

20-Dec-27

 

 

84,000

 

 

84,000

 

 

 

 

 

4.26%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

1,570,000

 

$

987,000

 

 

 

 

 

3.20%

 

 

 

 

·

On August 2, 2018, we entered into an Amended and Restated Credit Agreement, which extended the maturity of the JPM Term Loan to November 30, 2021 and reduced the number of basis points over the Eurodollar Rate used to determine the interest rate.  As of September 30, 2018, the rate was 125 basis points over the Eurodollar Rate based on our credit rating. 

·

On September 27, 2018, we entered into a Second Amended and Restated Credit Agreement on our BMO Term Loan, which consists of a $55 million tranche A term loan and a $165 million tranche B term loan.  The tranche A term loan matures on November 30, 2021 and the tranche B term loan matures on January 31, 2024.  The number of basis points over LIBOR used to determine the interest rate was reduced.  As of September 30, 2018, the rate was 125 basis points over LIBOR based on our credit rating.   

·

The BAML Revolver is subject to a 25 basis point facility fee based on our credit rating and, when applied to our availability of $600 million, would be $1.5 million annually.     

·

On October 24, 2017, we entered into a note purchase agreement relating to a private placement of $200 million in aggregate principal amount of unsecured senior notes, consisting of $116 million in aggregate principal amount of 3.99% Series A Senior Notes with a 7-year maturity and $84 million in aggregate principal amount of 4.26% Series B Senior Notes with a 10-year maturity.  On December 20, 2017, we drew the proceeds from the private placement and reduced the outstanding balance on our revolving line of credit. 

·

We incurred financing costs, some of which are deferred and amortized into interest expense during the terms loans we execute.  Following the recent amendments on August 2, 2018 and September 27, 2018, we estimate the annualized rate for amortization to interest expense from these deferred financing costs will be approximately $2.9 million.

·

Additional information on these transactions can be found in Current Reports on Form 8-K that the Company filed with the U.S. Securities and Exchange Commission on October 24, 2017, August 2, 2018 and September 27, 2018.        

 

(a)

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

 

September 30, 2018| Page 12


 

 

 

Picture 17

Capital Analysis

(in thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

31-Mar-18

 

30-Jun-18

 

30-Sep-18

 

 

31-Mar-17

 

30-Jun-17

 

30-Sep-17

 

31-Dec-17

 

Market Data:

    

 

 

    

 

 

    

 

 

  

  

 

 

    

 

 

    

 

 

    

 

 

  

Shares Outstanding

 

 

107,231

 

 

107,231

 

 

107,231

 

 

 

107,231

 

 

107,231

 

 

107,231

 

 

107,231

 

Closing market price per share

 

$

8.41

 

$

8.56

 

$

7.99

 

 

$

12.14

 

$

11.08

 

$

10.62

 

$

10.74

 

Market capitalization

 

$

901,814

 

$

917,899

 

$

856,777

 

 

$

1,301,786

 

$

1,188,121

 

$

1,138,795

 

$

1,151,663

 

Total debt outstanding excluding unamortized financing costs

 

 

1,068,000

 

 

1,068,000

 

 

987,000

 

 

 

1,065,000

 

 

1,065,000

 

 

1,070,000

 

 

1,048,000

 

Total Market Capitalization

 

$

1,969,814

 

$

1,985,899

 

$

1,843,777

 

 

$

2,366,786

 

$

2,253,121

 

$

2,208,795

 

$

2,199,663

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividend Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total dividends declared for the quarter

 

$

9,651

 

$

9,651

 

$

9,651

 

 

$

20,374

 

$

20,374

 

$

20,374

 

$

20,374

 

Common dividend declared per share

 

$

0.09

 

$

0.09

 

$

0.09

 

 

$

0.19

 

$

0.19

 

$

0.19

 

$

0.19

 

Declared dividend as a % of Net income (loss) per share

 

 

677%

 

 

1449%

 

 

100%

 

 

 

455%

 

 

-117%

 

 

1071%

 

 

-413%

 

Declared dividend as a % of AFFO* per share

 

 

57%

 

 

100%

 

 

74%

 

 

 

114%

 

 

108%

 

 

119%

 

 

156%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liquidity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash, cash equivalents and restricted cash

 

$

14,355

 

$

10,448

 

$

10,434

 

 

$

11,174

 

$

11,623

 

$

12,710

 

$

9,819

 

Revolver:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross potential available under the BAML Revolver

 

 

600,000

 

 

600,000

 

 

600,000

 

 

 

500,000

 

 

500,000

 

 

500,000

 

 

600,000

 

Less:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding balance

 

 

(98,000)

 

 

(98,000)

 

 

(17,000)

 

 

 

(295,000)

 

 

(295,000)

 

 

(300,000)

 

 

(78,000)

 

Total Liquidity

 

$

516,355

 

$

512,448

 

$

593,434

 

 

$

216,174

 

$

216,623

 

$

212,710

 

$

531,819

 

 


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

 

 

September 30, 2018| Page 13


 

 

 

Picture 2

Owned Portfolio Overview

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of the Quarter Ended

 

    

30-Sep-18

 

30-Jun-18

 

31-Mar-18

 

31-Dec-17

 

30-Sep-17

 

Owned portfolio of commercial real estate:

 

 

 

 

 

 

 

 

 

 

 

Number of properties (a)

 

34

 

34

 

34

 

34

 

35

 

Square feet

 

9,760,699

 

9,760,699

 

9,760,657

 

9,761,984

 

10,085,889

 

Leased percentage

 

90.5%

 

89.0%

 

88.5%

 

89.7%

 

88.7%

 

 

 

 

 

 

 

 

 

 

 

 

 

Investments in non-consolidated commercial real estate:

 

 

 

 

 

 

 

 

 

 

 

Number of properties (b)

 

 —

 

 2

 

 2

 

 2

 

 2

 

Square feet

 

 —

 

1,396,493

 

1,396,493

 

1,396,071

 

1,396,071

 

Leased percentage

 

 —

 

74.0%

 

74.4%

 

75.3%

 

79.2%

 

 

 

 

 

 

 

 

 

 

 

 

 

Single Asset REITs (SARs) managed:

 

 

 

 

 

 

 

 

 

 

 

Number of properties

 

 3

 

 3

 

 4

 

 4

 

 4

 

Square feet

 

674,342

 

674,342

 

810,278

 

810,278

 

810,278

 

Leased percentage

 

93.9%

 

96.1%

 

96.1%

 

93.0%

 

89.9%

 

 

 

 

 

 

 

 

 

 

 

 

 

Total owned, investments and managed properties:

 

 

 

 

 

 

 

 

 

 

 

Number of properties

 

37

 

39

 

40

 

40

 

41

 

Square feet

 

10,435,041

 

11,831,534

 

11,967,428

 

11,968,333

 

12,292,238

 

Leased percentage

 

90.7%

 

87.7%

 

87.4%

 

88.2%

 

87.7%

 

 

 

 

 

 

 

 

 

 

 

 

 

(a) Excludes one property that was redeveloped and is classified as non-operating.

 

 

 

 

 

 

 

 

 

 

 

(b) Properties were sold during the three months ended September 30, 2018.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 2018| Page 14


 

 

 

Picture 2

Owned Portfolio Overview

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Percent

 

Wtd Occupied

 

GAAP

 

 

 

 

 

 

 

 

 

 

Percent

 

Wtd Occupied

 

GAAP

 

MSA / Property Name

    

City

    

State

    

Square Feet

    

Leased

    

Percentage (a)

    

Rent (b)

    

    

MSA / Property Name

    

City

    

State

    

Square Feet

    

Leased

    

Percentage (a)

    

Rent (b)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

East Region

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Midwest Region

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Washington, D.C.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Chicago

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Meadow Point

 

Chantilly

 

VA

 

138,537

 

100.0%

 

100.0%

 

$

26.33

 

 

Northwest Point

 

Elk Grove Village

 

IL

 

177,095

 

100.0%

 

100.0%

 

$

32.38

 

Stonecroft

 

Chantilly

 

VA

 

111,469

 

100.0%

 

100.0%

 

$

32.80

 

 

909 Davis Street

 

Evanston

 

IL

 

195,098

 

97.8%

 

86.3%

 

$

35.32

 

Loudoun Tech Center

 

Dulles

 

VA

 

136,658

 

95.7%

 

95.8%

 

$

18.33

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Indianapolis

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Richmond

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

River Crossing

 

Indianapolis

 

IN

 

205,059

 

94.9%

 

94.6%

 

$

23.57

 

Innsbrook

 

Glen Allen

 

VA

 

298,456

 

100.0%

 

100.0%

 

$

11.38

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

St. Louis

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Charlotte

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Timberlake

 

Chesterfield

 

MO

 

234,496

 

100.0%

 

100.0%

 

$

28.64

 

Forest Park

 

Charlotte

 

NC

 

62,212

 

100.0%

 

100.0%

 

$

15.60

 

 

Timberlake East

 

Chesterfield

 

MO

 

117,036

 

100.0%

 

100.0%

 

$

26.97

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Raleigh-Durham

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Minneapolis

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Emperor Boulevard

 

Durham

 

NC

 

259,531

 

100.0%

 

100.0%

 

$

33.99

 

 

121 South 8th Street

 

Minneapolis

 

MN

 

293,460

 

80.4%

 

75.7%

 

$

22.30

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Plaza Seven

 

Minneapolis

 

MN

 

326,483

 

87.3%

 

88.4%

 

$

35.02

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

East Region Total

 

 

 

 

 

1,006,863

 

99.4%

 

99.4%

 

$

22.87

 

 

Midwest Region Total

 

 

 

 

 

1,548,727

 

92.7%

 

90.5%

 

$

29.38

 

 


(a)

Weighted Occupied Percentage for the nine months ended September 30, 2018.

(b)

Weighted Average GAAP Rent per Occupied Square Foot.

 

 

September 30, 2018| Page 15


 

 

 

Picture 3

Owned Portfolio Overview

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Percent

 

Wtd Occupied

 

GAAP

 

 

 

 

 

 

 

 

 

 

Percent

 

Wtd Occupied

 

GAAP

 

MSA / Property Name

    

City

    

State

    

Square Feet

    

Leased

    

Percentage (a)

    

Rent (b)

    

    

MSA / Property Name

    

City

    

State

    

Square Feet

    

Leased

    

Percentage (a)

    

Rent (b)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

South Region

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

West Region

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dallas-Fort Worth

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Denver

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Legacy Tennyson Center

 

Plano

 

TX

 

202,600

 

90.4%

 

74.7%

 

$

 20.74

 

 

380 Interlocken

 

Broomfield

 

CO

 

240,358

 

86.2%

 

86.2%

 

$

29.82

 

One Legacy Circle

 

Plano

 

TX

 

214,110

 

100.0%

 

100.0%

 

$

 37.42

 

 

1999 Broadway

 

Denver

 

CO

 

676,379

 

81.3%

 

77.4%

 

$

31.25

 

Addison Circle

 

Addison

 

TX

 

288,794

 

100.0%

 

94.7%

 

$

 33.10

 

 

Greenwood Plaza

 

Englewood

 

CO

 

196,236

 

100.0%

 

100.0%

 

$

25.45

 

Collins Crossing

 

Richardson

 

TX

 

300,887

 

100.0%

 

100.0%

 

$

 25.15

 

 

390 Interlocken

 

Broomfield

 

CO

 

241,512

 

98.2%

 

98.1%

 

$

30.65

 

Liberty Plaza

 

Addison

 

TX

 

218,934

 

80.8%

 

84.2%

 

$

 21.29

 

 

1001 17th Street

 

Denver

 

CO

 

655,413

 

97.7%

 

92.0%

 

$

34.87

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

600 17th Street

 

Denver

 

CO

 

598,630

 

84.5%

 

84.1%

 

$

33.00

 

Houston

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

West Region Total

 

 

 

 

 

2,608,528

 

89.6%

 

87.0%

 

$

31.90

 

Park Ten

 

Houston

 

TX

 

157,460

 

89.5%

 

74.0%

 

$

 28.56

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Eldridge Green

 

Houston

 

TX

 

248,399

 

100.0%

 

100.0%

 

$

 30.34

 

 

Total Owned

 

 

 

 

 

9,760,699

 

90.5%

 

87.0%

 

$

28.95

 

Park Ten Phase II

 

Houston

 

TX

 

156,746

 

59.7%

 

1.4%

 

$

 8.68

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Westchase I & II

 

Houston

 

TX

 

629,025

 

84.5%

 

83.9%

 

$

 29.62

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Miami-Ft. Lauderdale-West Palm Beach

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Blue Lagoon Drive

 

Miami

 

FL

 

212,619

 

100.0%

 

100.0%

 

$

 23.57

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Atlanta

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

One Overton Park

 

Atlanta

 

GA

 

387,267

 

79.7%

 

60.3%

 

$

 24.19

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

One Ravinia

 

Atlanta

 

GA

 

386,602

 

91.3%

 

91.2%

 

$

 25.62

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Two Ravinia

 

Atlanta

 

GA

 

411,047

 

78.2%

 

74.8%

 

$

 27.52

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pershing Plaza

 

Atlanta

 

GA

 

160,145

 

97.4%

 

97.4%

 

$

 36.05

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

999 Peachtree

 

Atlanta

 

GA

 

621,946

 

84.6%

 

86.8%

 

$

 32.24

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

South Region Total

 

 

 

 

 

4,596,581

 

88.2%

 

83.1%

 

$

 28.63

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


(a)

Weighted Occupied Percentage for the nine months ended September 30, 2018.

(b)

Weighted Average GAAP Rent per Occupied Square Foot.

 

 

September 30, 2018| 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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Atlanta

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Satellite Place

 

Duluth

 

GA

 

134,785

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Indianapolis

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Monument Circle

 

Indianapolis

 

IN

 

213,760

 

Southeast Region Total

 

 

 

 

 

134,785

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Southwest Region

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Houston

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Energy Tower I

 

Houston

 

TX

 

325,797

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Southwest Region Total

 

 

 

 

 

325,797

 

 

 

Midwest Region Total

 

 

 

 

 

213,760

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Managed

 

 

 

 

 

674,342

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Owned & Managed

 

 

 

 

 

10,435,041

 

 

 

 

 

September 30, 2018| Page 17


 

 

 

Picture 6

Tenants by Industry

(By Square Feet)

 

 

Picture 8

September 30, 2018| Page 18


 

 

 

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

 

1

 

92

 

259,531

 

2.7%

 

$

9,168,715

 

3.6%

 

2

 

CITGO Petroleum Corporation

 

1

 

41

 

248,399

 

2.6%

 

 

8,385,950

 

3.3%

 

3

 

Newfield Exploration Company

 

1

 

41

 

234,495

 

2.4%

 

 

9,247,772

 

3.7%

 

4

 

US Government (a)

 

4

 

11, 20, 24, 28

 

223,641

 

2.3%

 

 

7,230,610

 

2.9%

 

5

 

Centene Management Company, LLC

 

3

 

57, 57,  57

 

216,879

 

2.2%

 

 

5,857,830

 

2.3%

 

6

 

Burger King Corporation

 

1

 

2

 

212,619

 

2.2%

 

 

5,351,560

 

2.1%

 

7

 

Eversheds Sutherland (US) LLP

 

1

 

91

 

179,868

 

1.8%

 

 

5,334,134

 

2.1%

 

8

 

The Vail Corporation (b)

 

1

 

138

 

164,636

 

1.7%

 

 

4,347,842

 

1.7%

 

9

 

EOG Resources, Inc.

 

1

 

99

 

160,937

 

1.7%

 

 

5,455,765

 

2.2%

 

10

 

T-Mobile South, LLC dba T-Mobile

 

1

 

83

 

151,792

 

1.6%

 

 

4,020,482

 

1.6%

 

11

 

Citicorp Credit Services, Inc.

 

1

 

107

 

146,260

 

1.5%

 

 

4,886,547

 

1.9%

 

12

 

Petrobras America, Inc.

 

1

 

14

 

144,813

 

1.5%

 

 

5,372,562

 

2.1%

 

13

 

Jones Day

 

1

 

26

 

140,342

 

1.4%

 

 

4,919,841

 

1.9%

 

14

 

Argo Data Resource Corporation

 

1

 

59

 

140,246

 

1.4%

 

 

3,973,169

 

1.6%

 

15

 

SunTrust Bank

 

1

 

0

 

127,500

 

1.3%

 

 

4,667,775

 

1.8%

 

16

 

Federal National Mortgage Association

 

1

 

0

 

123,144

 

1.3%

 

 

4,483,673

 

1.8%

 

17

 

Kaiser Foundation Health Plan

 

1

 

68

 

120,979

 

1.2%

 

 

3,320,575

 

1.3%

 

18

 

Giesecke & Devrient America

 

1

 

75

 

112,110

 

1.1%

 

 

2,077,398

 

0.8%

 

19

 

Northrop Grumman Systems Corp.

 

1

 

15

 

111,469

 

1.1%

 

 

3,368,593

 

1.3%

 

20

 

Randstad General Partner (US) (c)

 

2

 

33, 68

 

109,638

 

1.1%

 

 

2,477,564

 

1.0%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

3,329,298

 

34.1%

 

$

103,948,357

 

41.0%

 


(a)

Includes 27,398 square feet, which expire in 2019 and 159,330 square feet, which expire in 2020.  The remaining 36,913 square feet expire in 2021.

(b)

Includes 22,584 square feet commencing 10/1/18.    

(c)

Includes 98,695 square feet, which expire in 2021,  and 10,943 square feet commencing on 3/1/19, which expire in 2024.    

 

 

September 30, 2018| Page 19


 

 

 

Picture 4

Leasing Activity

(Owned Portfolio)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year

 

Year

 

    

Nine Months Ended

 

    

Ended

    

Ended

Leasing Activity (a)

 

 

30-Sep-18

 

 

30-Sep-17

 

 

 

31-Dec-17

 

 

31-Dec-16

(in Square Feet - SF)

 

 

 

 

 

 

 

 

 

 

 

 

 

New leasing

 

 

343,000

 

 

207,000

 

 

 

460,000

 

 

299,000

Renewals and expansions

 

 

940,000

 

 

729,000

 

 

 

1,011,000

 

 

895,000

 

 

 

1,283,000

 

 

936,000

 

 

 

1,471,000

 

 

1,194,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other information per SF

 

 

 

 

 

 

 

 

 

 

 

 

 

(Activity on a year-to-date basis)

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP Rents on leasing

 

$

30.94

 

$

29.61

 

 

$

30.43

 

$

29.64

Weighted average lease term

 

 

7.3 Years

 

 

6.6 Years

 

 

 

6.8 Years

 

 

6.6 Years

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Increase or decrease over average GAAP rents in prior year (1)

 

 

6.0%

 

 

8.3%

 

 

 

12.3%

 

 

10.4%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average free rent

 

 

4.5 Months

 

 

3 Months

 

 

 

4 Months

 

 

3 Months

Tenant Improvements

 

$

29.16

 

$

22.43

 

 

$

22.22

 

$

18.71

Leasing Costs

 

$

9.06

 

$

8.83

 

 

$

9.92

 

$

10.05

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(a) Leasing activity includes leasing at 801 Marquette, which was redeveloped and is being

 

 

 

 

 

 

 

 

 

 

 

 

 

    leased for future occupancy.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) The increase or decrease percentage is calculated by comparing average GAAP rents at

 

 

 

 

 

 

 

 

 

 

 

 

 

     properties that had leasing activity in the current year to average GAAP rents at the same

 

 

 

 

 

 

 

 

 

 

 

 

 

     properties in the prior year. 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 2018| Page 20


 

 

 

Picture 12

Lease Expirations by Square Feet

(Owned Portfolio)

 

Picture 11

 

September 30, 2018| 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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2018

 

19

(c) 

562,230

 

$

18,544,953

 

$

32.98

 

7.3%
7.3%

 

2019

 

58

 

953,783

 

 

28,617,066

 

 

30.00

 

11.3%
18.6%

 

2020

 

70

 

991,024

 

 

32,151,066

 

 

32.44

 

12.7%
31.3%

 

2021

 

63

 

696,686

 

 

19,559,803

 

 

28.08

 

7.7%
39.0%

 

2022

 

71

 

1,228,487

 

 

38,884,589

 

 

31.65

 

15.3%
54.3%

 

2023

 

60

 

829,800

 

 

23,189,653

 

 

27.95

 

9.1%
63.4%

 

2024

 

41

 

644,560

 

 

14,818,740

 

 

22.99

 

5.9%
69.3%

 

2025

 

20

 

572,982

 

 

14,931,880

 

 

26.06

 

5.9%
75.2%

 

2026

 

15

 

742,598

 

 

23,190,677

 

 

31.23

 

9.1%
84.3%

 

2027

 

 8

 

487,257

 

 

15,066,896

 

 

30.92

 

5.9%
90.2%

 

2028 and thereafter

 

97

 

1,120,092

(d) 

 

24,768,751

 

 

22.11

 

9.8%
100.0%

 

 

 

522

 

8,829,499

 

$

253,724,074

 

$

28.74

 

100.0%

 

 

Vacancies as of 9/30/18

 

 

 

931,200

 

 

 

 

 

 

 

 

 

 

Total Portfolio Square Footage

 

 

 

9,760,699

 

 

 

 

 

 

 

 

 

 

 


(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 September 30, 2018 multiplied by 12. Tenant reimbursements generally include payment of real estate taxes, operating expenses and common area maintenance and utility charges.

(c)

Includes 4 leases that are month-to-month.

(d)

Includes 115,150 square feet that are non-revenue producing building amenities.

 

 

September 30, 2018| Page 22


 

 

 

Picture 14

Capital Expenditures

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

 

 

 

 

 

 

 

Nine Months

 

 

For the Three Months Ended

 

Ended

 

    

31-Mar-18

    

30-Jun-18

    

30-Sep-18

    

30-Sep-18

 

 

 

 

 

 

 

 

 

 

 

 

 

Tenant improvements

 

$

6,777

 

$

8,212

 

$

7,084

 

$

22,073

Deferred leasing costs

 

 

1,021

 

 

5,314

 

 

4,394

 

 

10,729

Non-investment capex

 

 

1,858

 

 

2,558

 

 

2,328

 

 

6,744

Total Capital Expenditures

 

$

9,656

 

$

16,084

 

$

13,806

 

$

39,546

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended

 

Year ended

   

    

31-Mar-17

    

30-Jun-17

    

30-Sep-17

    

31-Dec-17

    

31-Dec-17

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tenant improvements

 

$

6,474

 

$

5,363

 

$

4,474

 

$

4,166

 

$

20,477

Deferred leasing costs

 

 

1,579

 

 

1,963

 

 

4,482

 

 

5,869

 

 

13,893

Non-investment capex

 

 

1,670

 

 

1,685

 

 

1,860

 

 

3,836

 

 

9,051

Total Capital Expenditures

 

$

9,723

 

$

9,011

 

$

10,816

 

$

13,871

 

$

43,421

 


First generation leasing and investment capital was $11.7 million for the nine months ended September 30, 2018 and $25.0 million for the year ended December 31, 2017.

 

 

September 30, 2018| 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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Sale

 

Gain (loss)

 

 

    

City

    

State

    

Square Feet

    

Date Sold

    

Proceeds

    

on Sale

 

2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Hillview

 

Milpitas

 

CA

 

36,288

 

1/6/17

 

$

6,342

 

$

2,289

 

East Baltimore

 

Baltimore

 

MD

 

325,445

 

10/20/17

 

 

32,547

 

 

(20,770)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

30,250

 

 

12,251

 

 

 

September 30, 2018| 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

    

30-Sep-18

    

Rate (1)

    

Fee (2)

    

30-Sep-18

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Secured revolving lines of credit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FSP Satellite Place Corp.

 

Duluth, GA

 

31-Dec-19

 

$

5,500

 

$

1,325

 

L

+

4.40%

 

0.5%

 

6.51%

 

FSP Energy Tower I Corp.

 

Houston, TX

 

30-Jun-19

 

 

20,000

 

 

15,600

 

L

+

5.00%

 

0.5%

 

7.11%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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-19

 

 

33,000

 

 

33,000

 

 

 

6.41%

 

n/a

 

6.41%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   

 

 

 

$

79,500

 

$

70,925

 

 

 

 

 

 

 

 

 

 


(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. 

 

 

September 30, 2018| Page 25


 

 

 

Picture 18

Net Asset Value Components

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands except per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of

 

 

Assets:

 

 

 

 

 

Other information:

 

 

 

 

    

30-Sep-18

 

    

Loans outstanding on secured RE

    

$

70,925

 

    

Leased SF to be FFO producing

    

 

 

Total Market Capitalization Values

 

 

 

 

 

Investments in SARs (book basis)

 

 

 —

 

 

Over the next twelve months (in 000's)

 

 

307

Shares outstanding

 

 

107,231.2

 

 

Straight-line rent receivable

 

 

53,056

 

 

 

 

 

 

Closing price

 

$

7.99

 

 

Asset held for sale

 

 

 —

 

 

Straight-line rental revenue current quarter

 

$

(522)

Market capitalization

 

$

856,777

 

 

Cash, cash equivalents and restricted cash

 

 

10,434

 

 

 

 

 

 

Debt

 

 

987,000

 

 

Tenant rent receivables

 

 

3,206

 

 

Management fee income current quarter

 

$

104

Total Market Capitalization

 

$

1,843,777

 

 

Prepaid expenses

 

 

5,152

 

 

Interest income from secured loans

 

 

1,157

 

 

 

 

 

 

Office computers and furniture

 

 

216

 

 

Management fees and interest income from loans

 

$

1,261

 

 

 

 

 

 

Other assets:

 

 

 

 

 

 

 

 

 

 

 

3 Months

 

 

Deferred financing costs, net

 

 

11,384

 

 

FFO from non-consolidated REITs - Q2 2018 (6):

 

 

 

 

 

Ended

 

 

Other assets: Derivative Market Value

 

 

22,265

 

 

East Wacker

 

$

853

NOI Components

 

30-Sep-18

 

 

Other assets

 

 

 —

 

 

Grand Boulevard

 

 

125

 

 

 

 

 

 

 

 

$

176,638

 

 

Total

 

$

978

Same Store NOI (1)

 

$

37,182

 

 

 

 

 

 

 

 

 

 

 

 

Acquisitions (1) (2)

 

 

 —

 

 

Liabilities:

 

 

 

 

 

Footnotes to the components

 

 

 

Property NOI (1)

 

 

37,182

 

 

Debt (excluding contra for unamortized financing costs)

 

$

987,000

 

 

 

 

 

 

Full quarter adjustment (3)

 

 

 —

 

 

Accounts payable & accrued expenses

 

 

65,543

 

 

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

Stabilized portfolio

 

$

37,182

 

 

Tenant security deposits

 

 

5,619

 

 

 

 

 

 

 

 

 

Other liabilities: derivative liability

 

 

 —

 

 

(2) Includes NOI from acquisitions not in Same Store.

 

 

 

 

 

 

 

 

$

1,058,162

 

 

 

Financial Statement Reconciliation:

 

 

 

 

 

 

 

 

 

 

 

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

Rental Revenue

 

$

67,436

 

 

 

 

 

 

 

 

 

Rental operating expenses

 

 

(17,946)

 

 

 

 

 

 

 

 

(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

 

 

(11,651)

 

 

 

 

 

 

 

 

 

NOI on assets sold

 

 

69

 

 

 

 

 

 

 

 

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

Taxes (4)

 

 

(74)

 

 

 

 

 

 

 

 

 

Management fees & other (5)

 

 

(652)

 

 

 

 

 

 

 

 

(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)

 

$

37,182

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 2018| Page 26


 

 

 

Picture 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 or loss (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 or loss (determined in accordance with GAAP), nor as an indicator of the Company’s financial performance, nor as an alternative to cash flows from operating activities (determined in accordance with GAAP), nor as a measure of the Company’s liquidity, nor is it necessarily indicative of sufficient cash flow to fund all of the Company’s needs.

 

Other real estate companies and the National Association of Real Estate Investment Trusts, or NAREIT, may define this term in a different manner. We have included the NAREIT FFO 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 or loss and cash flows from operating, investing and financing activities in the consolidated financial statements.

 

 

 

September 30, 2018| 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 or loss 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 or equity investments. 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 or loss 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 or loss (the most directly comparable GAAP financial measure) plus general and administrative expenses, depreciation and amortization, including amortization of acquired above and below market lease intangibles and impairment charges, interest expense, less equity in earnings of nonconsolidated REITs, interest income, management fee income, hedge ineffectiveness, gains or losses on the sale of assets and excludes non-property specific income and expenses. The information presented includes footnotes and the data is shown by region with properties owned in the periods presented, which we call 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 or loss as an indication of our performance or to cash flows as a measure of the Company's liquidity or its ability to make distributions.

 

 

September 30, 2018| 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 or loss (determined in accordance with GAAP), nor as an indicator of the Company’s financial performance, nor as an alternative to cash flows from operating activities (determined in accordance with GAAP), nor as a measure of the Company’s liquidity, nor is it necessarily indicative of sufficient cash flow to fund all of the Company’s needs.  Other real estate companies may define this term in a different manner.  We believe that in order to facilitate a clear understanding of the results of the Company, AFFO should be examined in connection with net income or loss and cash flows from operating, investing and financing activities in the consolidated financial statements. 

 

 

 

September 30, 2018| Page 29


 

 

 

 

 

Picture 66

Picture 67

Picture 68

 

 

 

Investor Relations Contact

Georgia Touma | 877.686.9496

InvestorRelations@fspreit.com

Picture 63

Franklin Street Properties Corp.

401 Edgewater Place ● Wakefield, MA 01880

(781) 557-1300 ● www.fspreit.com

Picture 64

 

September 30, 2018| Page 30