Franklin Street Properties Corp. (FSP)

[Enterprising Investor]

Franklin Street Properties Corp. Announces First Quarter 2024 Results (4/30/24)

WAKEFIELD, Mass.--(BUSINESS WIRE)--Franklin Street Properties Corp. (the “Company”, “FSP”, “we” or “our”) (NYSE American: FSP), a real estate investment trust (REIT), announced its results for the first quarter ended March 31, 2024.

George J. Carter, Chairman and Chief Executive Officer, commented as follows:

“As the second quarter of 2024 begins, we continue to believe that the current price of our common stock does not accurately reflect the value of our underlying real estate assets. We will seek to increase shareholder value by continuing to (1) pursue the sale of select properties when we believe that short to intermediate term valuation potential has been reached and (2) strive to increase occupancy through the leasing of vacant space. We intend to use proceeds from property dispositions primarily for debt reductions.

During the first quarter of 2024, we sold an office property located in Richardson, Texas known as Collins Crossing for gross proceeds of approximately $35 million. Also, during the first quarter of 2024, we leased a total of 197,000 square feet of office space within our approximately 5.3 million square foot directly-owned property portfolio, including 136,000 square feet with existing tenant renewals and 61,000 square feet with new tenants.

On February 21, 2024, we repaid approximately $102 million of our debt and entered into amendments of our outstanding debt facilities pursuant to which all our debt now matures on April 1, 2026. As of March 31, 2024, our total indebtedness was approximately $303 million, equivalent to approximately $58 per square foot on our existing 5.3 million square foot directly-owned property portfolio. As of March 31, 2024, we had cash of approximately $37.7 million on the balance sheet.

We look forward to the remainder of 2024 and beyond with anticipation and optimism.”

Financial Highlights

GAAP net loss was $7.6 million or $0.07 per basic and diluted share for the three months ended March 31, 2024.
Funds From Operations (FFO) was $4.2 million, or $0.04 per basic and diluted share, for the three months ended March 31, 2024.
On February 21, 2024, we repaid approximately $102 million of debt and entered into amendments to each of our bank term loan, revolving line of credit agreement and Series A and Series B notes. The amendment to the revolving line of credit converted the revolving loan to a term loan. G&A expenses for the first quarter of 2024 were $0.3 million higher than the first quarter of 2023. However, G&A expenses for the first quarter of 2024 included approximately $0.4 million of expenses related to the debt amendments. Additional information on the amendments is available in our Quarterly Report on Form 10-Q for the three months ended March 31, 2024.
Leasing Highlights

During the three months ended March 31, 2024, we leased approximately 197,000 square feet, including 61,000 square feet of new leases.
Our directly-owned real estate portfolio of 16 owned properties, totaling approximately 5.3 million square feet, was approximately 73.3% leased as of March 31, 2024, compared to approximately 74.0% leased as of December 31, 2023. The decrease in the leased percentage is primarily a result of one property disposition during the three months ended March 31, 2024.
The weighted average GAAP base rent per square foot achieved on leasing activity during the three months ended March 31, 2024, was $26.96, or 13.8% higher than average rents in the respective properties for the year ended December 31, 2023. The average lease term on leases signed during the three months ended March 31, 2024, was 6.8 years compared to 6.8 years during the year ended December 31, 2023. Overall, the portfolio weighted average rent per occupied square foot was $30.81 as of March 31, 2024, compared to $30.72 as of December 31, 2023.
We are currently tracking more than 700,000 square feet of new prospective tenants, including approximately 350,000 square feet of prospective tenants that have identified our properties on their respective short lists of potential locations.
We believe that our continuing portfolio of real estate is well located, primarily in the Sunbelt and Mountain West geographic regions, and consists of high-quality assets with upside leasing potential.
Investment Highlights

We have primarily used asset sale disposition proceeds for debt reduction and remain committed to seeking to sell select properties during 2024 and to continue using proceeds primarily for debt reduction.
Since December 2020, our dispositions have resulted in aggregate gross proceeds of approximately $1 billion and reflect an average sales price per square foot of approximately $217.
On January 26, 2024, we completed the sale of Collins Crossing in Richardson, Texas for approximately $35 million in gross proceeds.
Dividends

On April 5, 2024, we announced that our Board of Directors declared a quarterly cash dividend for the three months ended March 31, 2024, of $0.01 per share of common stock that will be paid on May 9, 2024, to stockholders of record on April 19, 2024.
Consolidation of Sponsored REIT

As of January 1, 2023, we consolidated the operations of our Monument Circle sponsored REIT into our financial statements. On October 29, 2021, we agreed to amend and restate our existing loan to Monument Circle that is secured by a mortgage on real estate owned by Monument Circle, which we refer to as the Sponsored REIT Loan. The amended and restated Sponsored REIT Loan extended the maturity date from December 6, 2022 to June 30, 2023 (and was further extended to September 30, 2023 on June 26, 2023), increased the aggregate principal amount of the loan from $21 million to $24 million, and included certain other modifications. On September 26, 2023, the maturity date was further extended to September 30, 2024. In consideration of our agreement to amend and restate the Sponsored REIT Loan, we obtained from the stockholders of Monument Circle the right to vote their shares in favor of any sale of the property owned by Monument Circle any time on or after January 1, 2023. As a result of our obtaining this right to vote shares, GAAP variable interest entity (VIE) rules required us to consolidate Monument Circle as of January 1, 2023. A gain on consolidation of approximately $0.4 million was recognized in the three months ended March 31, 2023.

Additional information about the consolidation of Monument Circle can be found in Note 1, “Organization, Properties, Basis of Presentation, Financial Instruments, and Recent Accounting Standards – Variable Interest Entities (VIEs)” and Note 2, “Related Party Transactions and Investments in Non-Consolidated Entities - Management fees and interest income from loans”, in the Notes to Consolidated Financial Statements included in our Quarterly Report on Form 10-Q for the three months ended March 31, 2024.

Non-GAAP Financial Information

A reconciliation of Net income (loss) to FFO, Adjusted Funds From Operations (AFFO) and Sequential Same Store NOI and our definitions of FFO, AFFO and Sequential Same Store NOI can be found on Supplementary Schedules H and I.

2024 Net Income (Loss), FFO and Disposition Guidance

At this time, due primarily to economic conditions and uncertainty surrounding the timing and amount of proceeds received from property dispositions, we are continuing suspension of Net Income (Loss), FFO and property disposition guidance.

Real Estate Update

Supplementary schedules provide property information for the Company’s owned and consolidated properties as of March 31, 2024. 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.fspreit.com.

Today’s news release, along with other news about Franklin Street Properties Corp., is available on the Internet at www.fspreit.com. We routinely post information that may be important to investors in the Investor Relations section of our website. We encourage investors to consult that section of our website regularly for important information about us and, if they are interested in automatically receiving news and information as soon as it is posted, to sign up for E-mail Alerts.

Earnings Call

A conference call is scheduled for May 1, 2024, at 11:00 a.m. (ET) to discuss the first quarter 2024 results. To access the call, please dial 888-440-4368 and use conference ID 5398803. Internationally, the call may be accessed by dialing 646-960-0856 and using conference ID 5398803. To listen via live audio webcast, please visit the Webcasts & Presentations section in the Investor Relations section of the Company's website (www.fspreit.com) at least ten minutes prior to the start of the call and follow the posted directions. The webcast will also be available via replay from the above location starting one hour after the call is finished.

About Franklin Street Properties Corp.

Franklin Street Properties Corp., based in Wakefield, Massachusetts, is focused on infill and central business district (CBD) office properties in the U.S. Sunbelt and Mountain West, as well as select opportunistic markets. 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. To learn more about FSP please visit our website at www.fspreit.com.

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