Franklin Street Properties Corp. Announces Third Quarter 2005 Results
Monday October 31, 4:15 pm ET
WAKEFIELD, Mass.--(BUSINESS WIRE)--Oct. 31, 2005----Franklin Street Properties Corp. ("Franklin Street Properties", the "Company" or "FSP") (AMEX: FSP - News) announced today net income, Earnings Per Share (EPS) and Cash Available for Distribution (CAD) for the three and nine months ended September 30, 2005.
The Company evaluates its performance based on net income, EPS and CAD, and believes each is an important measure. The Company considers these measurements in determining distributions paid to equity holders. A reconciliation of net income to CAD is provided on page 2 of this press release.
EPS for the three months ended September 30, 2005 increased $0.30 per share to $0.44 per share compared to the three months ended September 30, 2004. Net income was $26.8 million or $0.44 per share (based on 60.5 million shares), compared to $6.9 million or $0.14 per share (based on 49.6 million shares) in 2004.
CAD for the three months ended September 30, 2005 increased $0.10 per share to $0.31 per share compared to the three months ended September 30, 2004. CAD was $18.7 million or $0.31 per share (based on 60.5 million shares), compared to $10.3 million or $0.21 per share (based on 49.6 million shares) in 2004.
EPS for the nine months ended September 30, 2005 increased $0.16 per share to $0.84 per share compared to the nine months ended September 30, 2004. Net income was $46.7 million or $0.84 per share (based on 55.7 million shares), compared to $33.8 million or $0.68 per share (based on 49.6 million shares) in 2004.
CAD for the nine months ended September 30, 2005 was $48.0 million or $0.86 per share (based on 55.7 million shares), compared to $43.0 million or $0.87 per share (based on 49.6 million shares) for the same period in 2004.
The increases in net income and CAD for the three and nine month periods ended September 30, 2005 were primarily attributable to:
Increased net operating income from four properties acquired by merger effective April 30, 2005, and acquisitions of two properties in Colorado and Indiana. The purchase price of the properties acquired was financed with proceeds from asset sales of properties in our portfolio. The last two asset sales, which were for two residential properties in Houston, were completed in October and our line of credit was repaid in full.
Gains on sales of assets for the three and nine month periods ended September 30, 2005 of $14.3 million and $13.2 million, respectively. Included were sales of a residential property in Louisiana and sale by transfer of interest in an office property in Maryland, which were sold at an aggregate gain of $14.0 million; a gain on contribution of land of $339,000; and a loss on the sale of a property in California of $1.1 million, which had been provided for in our second quarter, and closed in early July. Net gains on sale of assets were $0.24 per share for both the three and nine month periods.
Stronger investment banking results in the third quarter of 2005 compared to 2004. Gross proceeds on the sale of securities, which our investment banking revenues are based upon, for the three months ended September 30, 2005 were $44.0 million compared to $2.7 million during the same period in 2004. However, investment banking results for the nine month periods were lower in 2005 than 2004, as gross proceeds were $105.3 million compared to $134.9 million during the same period in 2004.
A reconciliation of net income to CAD is below and a CAD definition is on Supplemental Schedule E:
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ ------------------
(In thousands except per share
amounts) 2005 2004 2005 2004
-------- ------- -------- -------
Net income $ 26,815 $ 6,945 $ 46,692 $33,840
Gain on sales of assets,
net (14,316) - (13,260) -
GAAP income from non-
consolidated REITs (328) (79) (1,295) (887)
Distributions from non-
consolidated REITs 107 96 1,087 851
Depreciation of real estate
& intangible amortization 6,864 3,345 15,979 10,160
Straight-line rent (443) (39) (1,167) (893)
Capital expenditures (360) (374) (2,288) (993)
Payments of deferred
leasing costs (199) (296) (510) (548)
Proceeds from funded
reserves 559 659 2,798 1,441
-------- ------- -------- -------
Cash Available for Distribution
(CAD) $ 18,699 $10,257 $ 48,036 $42,971
======== ======= ======== =======
Per Share Data
EPS $ 0.44 $ 0.14 $ 0.84 $ 0.68
CAD $ 0.31 $ 0.21 $ 0.86 $ 0.87
Weighted average shares (basic
and diluted) 60,526 49,630 55,697 49,628
======== ======= ======== =======
Real Estate and Investment Banking Update
During 2005 we have acquired four properties by merger and two by acquisition. We have sold, or are under agreement to sell, a total of six properties. As of September 30, 2005, three of the six property sales were completed, and the remaining three have been classified in our balance sheet as assets held-for-sale. Earlier in October we completed the sale of two of these properties at a gain of approximately $10.2 million, and the last property sale is expected to result in a gain in December.
A supplemental schedule is attached which presents the continuing real estate portfolio of 28 properties as of September 30, 2005.
During the quarter ending September 30, 2005 we completed two investment banking transactions, one was for an office property in Dallas, Texas, and the other was for development of an office property in Houston, Texas. Another investment banking transaction is planned for the fourth quarter.
Dividend announcement:
On October 5, 2005 the Board of Directors of FSP declared a cash dividend of $0.31 per share of common stock payable on November 21, 2005 to stockholders of record as of October 31, 2005. The total amount of dividends declared to date during 2005 is $1.24 per share.
Message from George J. Carter, President and CEO
George J. Carter, President and CEO of the Company, commented as follows:
"Improving Net Income, EPS and CAD levels for the third quarter of 2005 were expected and, consequently, planned for within the FSP business/investment model. I am optimistic about the Company's financial performance outlook for the balance of 2005 and going into 2006.
More specifically, financial results for the third quarter of 2005 reflected: #1) solid performance in rental operations from the Company's portfolio of properties; #2) significant gains from real estate sales and the reinvestment of those sale proceeds into newly-acquired properties; and #3) the closing of real estate investment banking business totaling $44 million. All three of these areas of the Company's operations are showing good potential for continued contribution to FSP's financial performance in the coming months.
#1) For the third quarter of 2005, the Company's continuing portfolio of 28 properties was 93% leased. Most of FSP's properties are suburban office buildings, and, in most of our markets, we are finding improving conditions for both occupancy and rental rates. However, there are still many tenant leases which were signed at the height of the most recent office market cycle (approximately 1997-2001). If those leases were to roll to market today either through renewal or vacancy/new tenant, many could still suffer a "roll-down" in rental rates. An improving U.S. economy and corresponding increase in demand for office space in most markets is very encouraging, and FSP is aggressively managing its lease turnover to maximize our rental operations' contribution as the office markets begin to climb back up their cyclical curve. Concern always remains about the possibility of a new, significant downturn in the broader economy that would reverse the positive trends our markets are seeing now. Disasters such as Hurricanes Katrina and Rita still have unknown longer-term economic effects, and concerns about potential rising worldwide energy prices, inflation and interest rates are likely to be influencing factors.
#2) During the third quarter of 2005, the Company sold two properties for significant gains. Early in the fourth quarter, FSP sold two additional properties also for significant gains. All of the proceeds from these sales were used to pay down the Company's line of credit, which had been drawn down to purchase two new acquisition properties ahead of the contemplated portfolio sales. FSP now owns the two new acquisition properties without any debt (i.e., all cash), as it does every other property in its portfolio. A portion of these asset sales and new acquisitions were completed using a "reverse 1031 exchange" program, which defers gain recognition for tax purposes. There continue to be properties in our portfolio which we believe have potential as sale candidates for a variety of reasons, some "property specific" and some "market driven." However, we generally consider property sales viable only if there is a potentially better property, or other investment, in which to reinvest the sale proceeds. Without any permanent mortgage debt, and with significant cash already on the balance sheet, property sales generate cash that is not currently needed for reserves or for mortgage debt pay down. Consequently, identifiable, targeted and controlled reinvestment vehicles for these sale proceeds are important. Current high market pricing and competition for potentially acceptable property acquisitions continue to present challenges, but new opportunities are beginning to appear more plentiful than in the past two years. Upgrading FSP's portfolio is an ongoing objective. In addition to new real estate acquisitions in which to reinvest proceeds from portfolio property sales, the Company, because of its public listing on the AMEX on June 2, 2005, now has the option to more easily reinvest its cash into its own stock. On October 28, 2005, FSP's Board of Directors approved a share repurchase program. The adoption of the stock repurchase program will allow the Company the option of investment of its cash in its stock in addition to investment in new acquisition properties, when the relative financial opportunity is favorable.
#3) Third quarter investment banking business improved over the first and second quarters of 2005, totaling $44 million of "closed-in" investor capital subscribed in two separate property transactions. One of the transactions involved the raising of $27 million to fund FSP Park Ten Development Corp., the Company's first pure development project. FSP has several properties in its portfolio which have excess developable land, and in the case of FSP Park Ten Development Corp., the Company contributed land it owned for an equity stake in the new project. We also earned a development fee from this transaction. FSP's Investment Banking group has had a difficult time during the last two years finding properties that meet its investment return criteria. Higher pricing and greater competition for quality commercial real estate have reduced the number of attractive potential acquisitions we would consider. However, new property acquisition opportunities become available all the time, and with interest rates just beginning to rise on medium- and long-term debt instruments, cap rate pricing and competitive demand pressures may start to become more favorable to our investment return model. Historically, our investment bank's equity sourcing capability tends to be somewhat counter-cyclical, and we believe that the current pricing/valuation climate for commercial investment properties is likely to be viewed in retrospect as just another point in time of what has historically been a cyclical capital market asset."
Today's news release, along with other news about Franklin Street Properties Corp., is available on the Internet at www.franklinstreetproperties.com.
A conference call is scheduled for November 1, 2005 at 10:00 a.m. (EDT) to discuss the third quarter results. The toll free number is 1-800-901-5259, passcode 91687125. Internationally, the call may be accessed by dialing 1-617-786-4514, passcode 91687125. The call will also be available via a live webcast, which can be accessed at least 10 minutes before the start time through the Webcasts & Presentations section of our Investor Relations section at www.franklinstreetproperties.com. A replay of the conference call will be available on the Company's website one hour after the call.
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As for SPORs executive leaving....90 day notices are not common.
Maybe the company is getting rid of him because he is in over his head and allowing him to "resign" this way to save face and increase his chances of finding another job ?
Besides, he just got the job in feb 04.
This doesnt appear to me to be the captian jumping off the ship prior to it going down. |
