WAKEFIELD, Mass.--(EON: Enhanced Online News)--Franklin Street Properties Corp. (the “Company”, “FSP”, “our” or “we”) (NYSE MKT: FSP), a real estate investment trust (REIT), announced that it is reaffirming its FFO (Funds from Operations) guidance for full year 2016 at approximately $1.03 per diluted share. We are also updating our FFO guidance for the fourth quarter of 2016 to be in the range of approximately $0.24 to $0.25 per diluted share. In addition, our initial full year FFO guidance for 2017 is estimated to be in the range of approximately $1.04 to $1.09 per diluted share. This guidance (a) excludes the impact of future acquisitions, developments, dispositions, debt financings or repayments or other capital market transactions; (b) reflects estimates from our ongoing portfolio of properties, other real estate investments and general and administrative expenses; and (c) reflects our current expectations of economic conditions. 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.
George J. Carter, Chairman and Chief Executive Officer, commented as follows:
“As we near completion of the fourth quarter, we continue to believe that full year 2016 will mark the bottom of the reductive effects that our ongoing property portfolio transition is having on FFO. Our forecast is for resumed FFO growth in 2017. We look forward with anticipation to the balance of 2016 and beyond.”
Funds From Operations (FFO)
The Company evaluates performance based on Funds From Operations, which we refer to as FFO, as management believes that FFO represents the most accurate measure of activity and is the basis for distributions paid to equity holders. The Company defines FFO as net income (computed in accordance with GAAP), excluding gains (or losses) from sales of property, hedge ineffectiveness and acquisition costs of newly acquired properties that are not capitalized, plus depreciation and amortization, including amortization of acquired above and below market lease intangibles and impairment charges on properties or investments in non-consolidated REITs, and after adjustments to exclude equity in income or losses from, and, to include the proportionate share of FFO from, non-consolidated REITs.
FFO should not be considered as an alternative to net income (determined in accordance with GAAP), nor as an indicator of the Company’s financial performance, nor as an alternative to cash flows from operating activities (determined in accordance with GAAP), nor as a measure of the Company’s liquidity, nor is it necessarily indicative of sufficient cash flow to fund all of the Company’s needs.
Other real estate companies and the National Association of Real Estate Investment Trusts (NAREIT), may define this term in a different manner. We have included FFO as defined by NAREIT as of May 17, 2016 in the table below and note that other REITs may not define FFO in accordance with the current NAREIT definition or may interpret the current NAREIT definition differently than we do.
We believe that in order to facilitate a clear understanding of the results of the Company, FFO should be examined in connection with net income and cash flows from operating, investing and financing activities in the consolidated financial statements.
Note Regarding FFO Definition
During the three months ended June 30, 2016, we changed the definition of FFO to exclude hedge ineffectiveness, which does not affect any prior period. Our interest rate swaps effectively fix interest rates on our term loans; however, there is no floor on the variable interest rate of the swaps whereas the current term loans are subject to a zero percent floor. As a result, there is a mismatch and the ineffective portion of the derivatives’ changes in fair value are recognized directly into earnings each quarter as hedge ineffectiveness. We believe that FFO excluding hedge ineffectiveness is a useful supplemental measure regarding our operating performance as it provides a more meaningful and consistent comparison of our operating performance and allows investors to more easily compare our operating results.
Reconciliation of Net Income to FFO
A reconciliation of Net Income to FFO for each of the three and nine month periods ended September 30, 2015 and 2016 is shown below. Management believes FFO is used broadly throughout the real estate investment trust (REIT) industry as measurements of performance. The Company has included FFO as defined by NAREIT as of May 17, 2016 in the table below and notes that other REITs may not define FFO in accordance with the current NAREIT definition or may interpret the current NAREIT definition differently. The Company’s computation of FFO may not be comparable to FFO reported by other REITs or real estate companies that define FFO differently.
|Reconciliation of Net Income to FFO:||Three Months Ended||Nine Months Ended|
|September 30,||September 30,|
|(In thousands, except per share amounts)||2016||2015||2016||2015|
|Gain (loss) on sale of properties and property held for sale, less applicable income tax||523||(1)||1,166||(11,411)|
|GAAP loss from non-consolidated REITs||196||284||568||644|
|FFO from non-consolidated REITs||787||645||2,327||2,131|
|Depreciation & amortization||23,112||22,848||67,991||68,694|
|Acquisition costs of new properties||215||12||349||154|
|Funds From Operations (FFO)||$||26,670||$||26,954||$||79,438||$||79,814|
|Per Share Data|
|Weighted average shares (basic and diluted)||103,709||100,187||101,370||100,187|
This press release, along with other news about FSP, 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.
About Franklin Street Properties Corp.
Franklin Street Properties Corp., based in Wakefield, Massachusetts, is focused on investing in institutional-quality office properties in the U.S. FSP’s strategy is to invest in select urban infill and central business district (CBD) properties, with primary emphasis on our top five markets of Atlanta, Dallas, Denver, Houston, and Minneapolis. FSP seeks value-oriented investments with an eye towards long-term growth and appreciation, as well as current income. FSP is a Maryland corporation that operates in a manner intended to qualify as a real estate investment trust (REIT) for federal income tax purposes. To learn more about FSP please visit our website at www.fspreit.com.
Statements made in this press release that state FSP’s or management’s intentions, beliefs, expectations, or predictions for the future may be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. This press release may also contain forward-looking statements based on current judgments and current knowledge of management, including our estimates of Funds From Operations for future periods, which are subject to certain risks, trends and uncertainties that could cause actual results to differ materially from those indicated in such forward-looking statements. Accordingly, readers are cautioned not to place undue reliance on forward-looking statements. Investors are cautioned that our forward-looking statements involve risks and uncertainty, including without limitation, economic conditions in the United States, disruptions in the debt markets, economic conditions in the markets in which we own properties, risks of a lessening of demand for the types of real estate owned by us, changes in government regulations and regulatory uncertainty, uncertainty about governmental fiscal policy, geopolitical events and expenditures that cannot be anticipated such as utility rate and usage increases, unanticipated repairs, additional staffing, insurance increases and real estate tax valuation reassessments. See the “Risk Factors” set forth in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2015, as the same may be updated from time to time in subsequent filings with the United States Securities and Exchange Commission. Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, acquisitions, dispositions, performance or achievements. We will not update any of the forward-looking statements after the date of this press release to conform them to actual results or to changes in our expectations that occur after such date, other than as required by law.