Business Wire | Nov 8, 2021 04:31PM EST

Franklin Street Properties Corp. Announces Third Quarter 2021 Results

Nov. 08, 2021

WAKEFIELD, Mass.--(BUSINESS WIRE)--Nov. 08, 2021--Franklin Street Properties Corp. (the "Company", "FSP", "we" or "our") (NYSE American: FSP), a real estate investment trust (REIT), announced its results for the third quarter ended September 30, 2021.

Significant Debt Reduction Improves Balance Sheet Flexibility for Future Growth Opportunities

* Between September 30, 2020 and October 25, 2021, reduced total indebtedness by approximately 53%, from approximately $1.0 billion to approximately $475 million. * Between January 1, 2021 and October 25, 2021, repaid approximately $508 million of indebtedness. * During the three months ended September 30, 2021, repaid approximately $90 million of indebtedness. * On October 25, 2021, repaid approximately $215 million of indebtedness.

Ahead on Property Disposition Strategy

* Between January 1, 2021 and October 22, 2021, sold eight properties for aggregate gross disposition proceeds of approximately $563 million and an aggregate, weighted-average, in-place, capitalization rate (on both a GAAP and cash basis) of approximately 5.8%. * On October 22, 2021, sold 999 Peachtree in Atlanta, Georgia for $223.9 million in gross proceeds and recorded a gain of approximately $86.8 million. * Aggregate pricing achieved on our dispositions to date in 2021 has been ahead of our expectations and we believe that such pricing is generally indicative of the level of pricing that could be achieved on our continuing portfolio of real estate assets. We believe that in undertaking these dispositions we have unlocked embedded value for our shareholders that has not been reflected in the current price of our common stock. We believe that the net value of our continuing real estate portfolio assets (net of outstanding liabilities) would exceed $10.00 per share of common stock based on our market valuation estimates using the pricing levels we have achieved to date on our dispositions as a benchmark applied across our continuing real estate portfolio. * Due to strong demand and pricing, increased the top end of our 2021 disposition guidance from a previous range of approximately $350 million to $450 million to a new range of approximately $563 million to $600 million.

Leasing Progress and Continuing Portfolio Upside Leasing Potential

* Leased approximately 329,000 square feet during the three months ended September 30, 2021, including approximately 172,000 square feet with new tenants. * Signed a lease for approximately 100,000 square feet with a new tenant at our Pershing Park property in Atlanta, Georgia during the three months ended September 30, 2021. * In-place weighted average GAAP rent increased by approximately 5% during the nine months ended September 30, 2021. * 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 in a post-COVID-19 environment.

Stock Repurchases

* During the three months ended September 30, 2021, we repurchased approximately 1.8 million shares of our common stock for approximately $8.2 million pursuant to our previously announced stock repurchase plan. * Shares repurchased during the three months ended September 30, 2021 represent approximately 1.5% of the approximately $563 million in aggregate gross disposition proceeds received to date in 2021. * Up to approximately $41.8 million remaining for potential future repurchases of our common stock pursuant to our previously announced stock repurchase plan.

Anticipated 2021 Special Dividend

* In light of the gains achieved on our dispositions to date in 2021, we anticipate declaring a special dividend in December 2021 to be paid in January 2022 in order to meet REIT requirements.

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

"I am pleased to report strong execution on our 2021 strategies to reduce debt and to lease space. Highlights include the sale of 999 Peachtree on October 22, 2021 for $223.9 million and a recorded gain of approximately $86.8 million, and the lease of approximately 100,000 square feet with a new tenant at Pershing Park. As of October 22, 2021, we have sold eight properties in 2021 for aggregate gross proceeds of approximately $563 million and an aggregate, weighted-average, in-place capitalization rate of approximately 5.8%. Between September 30, 2020 and October 25, 2021, we reduced our total indebtedness by approximately 53%, from approximately $1.0 billion to approximately $475 million.

We are encouraged by the strong level of demand that our real estate assets have received in the market to date from a diverse pool of potential buyers. Aggregate pricing on the properties sold has exceeded our expectations and reinforced our belief that we are unlocking embedded value for our shareholders that is not currently reflected in the price of our common stock. Due to strong demand and pricing, we have increased the top end of our 2021 disposition guidance from a previous range of approximately $350 million to $450 million to a new range of approximately $563 million to $600 million.

Our criteria for selecting potential properties for disposition is asset-specific. We consider a variety of factors, including short to intermediate term value objectives and upside potential. At the same time, we remain fully committed to our historic Sunbelt and Mountain West geographic focus. Accordingly, our 2021 dispositions in the Sunbelt region should not be viewed as a statement about our commitment to such regions.

Importantly, 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 significant upside leasing potential in a post-COVID-19 environment. We also believe that the pricing achieved on our dispositions to date in 2021, which has exceeded our expectations, is generally indicative of the pricing that could be achieved on our continuing portfolio of real estate assets.

We continue to believe that the current price of our common stock does not accurately reflect the value of our underlying real estate assets and intend to continue our strategy of seeking to increase shareholder value through the sale of select properties where we believe that our short to intermediate term valuation objectives have been met. We believe that the net value of our continuing real estate portfolio assets (net of outstanding liabilities) would exceed $10.00 per share of common stock based on our market valuation estimates using the pricing levels we have achieved to date on our dispositions as a benchmark applied across our continuing real estate portfolio. We intend to use the proceeds from any future dispositions for debt reduction, repurchases of our common stock, any special dividends required to meet REIT requirements, and other general corporate purposes."

Financial Highlights

* GAAP net income was $4.5 million, or $0.04 per share, for the three months ended September 30, 2021. * Funds From Operations (FFO) was $14.8 million, or $0.14 per basic and diluted share, for the three months ended September 30, 2021. * Adjusted Funds From Operations (AFFO) was $0.04 per basic and diluted share for the three months ended September 30, 2021. * During the three months ended September 30, 2021, we repaid approximately $90 million of indebtedness. As of September 30, 2021, our total debt outstanding was approximately $675 million. * On October 25, 2021, we repaid approximately $215 million of indebtedness and our total debt outstanding decreased to approximately $475 million.

Leasing Highlights

* During the three months ended September 30, 2021, we leased approximately 329,000 square feet, including 172,000 square feet of new leases. * On September 28, 2021, we signed a lease with a new tenant at our Pershing Park property for approximately 100,000 square feet that will substantially backfill the recent vacancy from the departure of Jones Day. * During the nine months ended September 30, 2021, we leased approximately 892,000 square feet, of which approximately 622,000 square feet was with existing tenants. During the year ended December 31, 2020, we leased approximately 1,130,000 square feet, of which approximately 762,000 square feet was with existing tenants. * Our directly owned real estate portfolio of 27 owned properties (including one redevelopment property) totaling approximately 7.8 million square feet, was approximately 78.8% leased as of September 30, 2021, compared to approximately 78.5% leased as of June 30, 2021. The increase in the leased percentage is primarily a result of 172,000 square feet of new leases executed during the three months ended September 30, 2021. * Lease expirations for the remainder of 2021 are approximately 72,000 square feet, representing approximately 0.9% of our owned portfolio. * The weighted average GAAP base rent per square foot achieved on leasing activity during the nine months ended September 30, 2021 was $30.10, or 2.0% higher than average rents in the respective properties as applicable compared to the year ended December 31, 2020. The average lease term on leases in the nine months ended September 30, 2021, was 7.8 years compared to 8.3 years for the full year of 2020. Overall the portfolio weighted average rent per occupied square foot was $30.97 as of September 30, 2021 compared to $29.60 as of December 31, 2020, representing an increase of approximately 5%.

Investment Highlights

* Completed dispositions for aggregate gross proceeds of approximately $563 million to date in 2021, which translates into an aggregate, weighted-average, in-place, capitalization rate (on both a GAAP and cash basis) of approximately 5.8%. * Due to strong demand/pricing, we increased the top end of our 2021 disposition guidance from a previous range of approximately $350 million to $450 million to a new range of approximately $563 million to $600 million. * Disposition proceeds intended to be used for debt reduction, any special dividends required to meet REIT requirements, repurchases of our common stock, and other general corporate purposes. * Demand and pricing on assets sold to date in 2021 has exceeded our expectations. * On August 31, 2021, we sold our River Crossing property in Indianapolis, Indiana for gross proceeds of approximately $35 million. * On September 23, 2021, we sold our two Timberlake properties in Chesterfield, Missouri for aggregate gross proceeds of approximately $67 million. * Subsequent to quarter end, on October 22, 2021, we sold our 999 Peachtree property in Atlanta, Georgia for gross proceeds of approximately $224 million, which represented a gain of approximately $86.8 Million. * We remain committed to our Sunbelt and Mountain West geographic focus. * Current and potential disposition properties include Meadow Point and Stonecroft in Chantilly, Virginia, both of which are under Purchase & Sale Agreement with a closing anticipated during the fourth quarter of 2021. In addition, Eldridge Green and Park Ten in Houston, Texas are in price discovery.

Dividend Update

On October 8, 2021, the Company announced that its Board of Directors declared a regular quarterly cash dividend for the three months ended September 30, 2021 of $0.09 per share of common stock that will be paid on November 11, 2021 to stockholders of record on October 22, 2021.

Non-GAAP Financial Information

A reconciliation of Net income to FFO, 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.

2021 Net Income, FFO and Disposition Guidance

At this time, due primarily to uncertainty surrounding the timing and amount of proceeds received from property dispositions, we are continuing suspension of Net Income and FFO guidance. However, we are updating our previously announced disposition guidance for full-year 2021, as we execute on our strategy to dispose of certain properties that we believe have met their short to intermediate term valuation objectives and whose value may not be accurately reflected in our share price. Anticipated dispositions in 2021 are estimated to result in aggregate gross proceeds in the range of approximately $563 million to $600 million, inclusive of the approximately $563 million of gross proceeds in 2021 realized to date. We intend to use the proceeds of any future dispositions for debt reduction, repurchases of our stock, any special distributions required to meet REIT requirements, and other general corporate purposes. This guidance reflects our current expectations of economic and market conditions and is subject to change. We will update our disposition guidance quarterly in our earnings releases. There can be no assurance that the Company's actual results will not differ materially from the estimates set forth above.

Real Estate Update

Supplementary schedules provide property information for the Company's owned and managed real estate portfolio as of September 30, 2021. 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 November 9, 2021 at 11:00 a.m. (ET) to discuss the third quarter 2021 results. To access the call, please dial 1-800-464-8240. Internationally, the call may be accessed by dialing 1-412-902-6521. To access the call from Canada, please dial 1-866-605-3852. 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.

Forward-Looking Statements

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, such as those relating to our ability to lease space in the future, expectations for dispositions, potential stock repurchases, the payment of special dividends and the repayment of debt in future periods, value creation/enhancement in future periods, the net value of our continuing real estate portfolio per share of common stock, and expectations for growth and leasing activities in future periods that are based on current judgments and current knowledge of management and 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, adverse changes in general economic or local market conditions, including as a result of the COVID-19 pandemic and other potential infectious disease outbreaks and terrorist attacks or other acts of violence, which may negatively affect the markets in which we and our tenants operate, increasing interest rates, 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, adverse changes in energy prices, which if sustained, could negatively impact occupancy and rental rates in the markets in which we own properties, including energy-influenced markets such as Dallas, Denver and Houston, uncertainty relating to the completion and timing of the disposition of properties under agreement, any inability to dispose of real estate properties at pricing levels comparable to recent historical portfolio dispositions, and any delays in the timing of any such anticipated dispositions, 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, delays in construction schedules, unanticipated increases in construction costs, increases in the level of general and administrative costs as a percentage of revenues as revenues decrease as a result of property dispositions, 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, 2020, 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.

Franklin Street Properties Corp.

Earnings Release

Supplementary Information

Table of Contents



Franklin Street Properties Corp. Financial Results A-C

Real Estate Portfolio Summary Information D

Portfolio and Other Supplementary Information E

Percentage of Leased Space F

Largest 20 Tenants - FSP Owned Portfolio G

Reconciliation and Definitions of Funds From Operations (FFO) and Adjusted

Funds From Operations (AFFO) H

Reconciliation and Definition of Sequential Same Store results to Property Net

Operating Income (NOI) and Net Loss I



Franklin Street Properties Corp. Financial Results

Supplementary Schedule A

Condensed Consolidated Statements of Operations

(Unaudited)

For the

For the

Three Months Ended

Nine Months Ended

September 30,

September 30,

(in thousands, except per share amounts)

2021

2020

2021

2020

Revenue:

Rental

$

50,326

$

61,834

$

164,671

$

184,799

Related party revenue:

Management fees and interest income from loans

419

400

1,246

1,208

Other

57

13

69

31

Total revenue

50,802

62,247

165,986

186,038

Expenses:

Real estate operating expenses

14,373

16,730

45,664

49,498

Real estate taxes and insurance

10,200

12,279

34,461

36,348

Depreciation and amortization

18,862

22,076

62,379

66,659

General and administrative

3,749

3,817

11,857

11,159

Interest

7,928

8,953

26,582

26,996

Total expenses

55,112

63,855

180,943

190,660

Loss on extinguishment of debt

(236

)

-

(403

)

-

Gain on sale of properties, net

8,632

-

29,258

-

Income (loss) before taxes

4,086

(1,608

)

13,898

(4,622

)

Tax expense

51

71

174

203

Equity in income of non-consolidated REITs

421

-

421

-

Net income (loss)

$

4,456

$

(1,679

)

$

14,145

$

(4,825

)

Weighted average number of shares outstanding, basic and diluted

106,905

107,328

107,196

107,295

Net income (loss) per share, basic and diluted

$

0.04

$

(0.02

)

$

0.13

$

(0.04

)

Franklin Street Properties Corp. Financial Results

Supplementary Schedule A

Condensed Consolidated Statements of Operations

(Unaudited)



For the For the

Three Months Ended Nine Months Ended

September 30, September 30,

(in thousands, except 2021 2020 2021 2020 per share amounts)



Revenue:

Rental $ 50,326 $ 61,834 $ 164,671 $ 184,799

Related party revenue:

Management fees andinterest income from 419 400 1,246 1,208 loans

Other 57 13 69 31

Total revenue 50,802 62,247 165,986 186,038



Expenses:

Real estate operating 14,373 16,730 45,664 49,498 expenses

Real estate taxes and 10,200 12,279 34,461 36,348 insurance

Depreciation and 18,862 22,076 62,379 66,659 amortization

General and 3,749 3,817 11,857 11,159 administrative

Interest 7,928 8,953 26,582 26,996

Total expenses 55,112 63,855 180,943 190,660



Loss onextinguishment of (236 ) - (403 ) - debt

Gain on sale of 8,632 - 29,258 - properties, net

Income (loss) before 4,086 (1,608 ) 13,898 (4,622 ) taxes

Tax expense 51 71 174 203

Equity in income ofnon-consolidated 421 - 421 - REITs

Net income (loss) $ 4,456 $ (1,679 ) $ 14,145 $ (4,825 )



Weighted averagenumber of shares 106,905 107,328 107,196 107,295 outstanding, basicand diluted



Net income (loss) pershare, basic and $ 0.04 $ (0.02 ) $ 0.13 $ (0.04 ) diluted

Franklin Street Properties Corp. Financial Results

Supplementary Schedule B

Condensed Consolidated Balance Sheets

(Unaudited)

September 30,

December 31,

(in thousands, except share and par value amounts)

2021

2020

Assets:

Real estate assets:

Land

$

161,767

$

189,155

Buildings and improvements

1,630,729

1,938,629

Fixtures and equipment

11,727

12,949

1,804,223

2,140,733

Less accumulated depreciation

459,531

538,717

Real estate assets, net

1,344,692

1,602,016

Acquired real estate leases, less accumulated amortization of $50,302 and $55,447, respectively

19,864

28,206

Cash, cash equivalents and restricted cash

9,731

4,150

Tenant rent receivables

2,681

7,656

Straight-line rent receivable

58,132

67,789

Prepaid expenses and other assets

5,547

5,752

Related party mortgage loan receivables

21,000

21,000

Office computers and furniture, net of accumulated depreciation of $1,180 and $1,443, respectively

153

163

Deferred leasing commissions, net of accumulated amortization of $24,013 and $30,411, respectively

44,729

56,452

Total assets

$

1,506,529

$

1,793,184

Liabilities and Stockholders' Equity:

Liabilities:

Bank note payable

$

-

$

3,500

Term loans payable, less unamortized financing costs of $1,352 and $2,677, respectively

473,648

717,323

Series A & Series B Senior Notes, less unamortized financing costs of $699 and $822, respectively

199,301

199,178

Accounts payable and accrued expenses

59,309

72,058

Accrued compensation

3,482

3,918

Tenant security deposits

6,169

8,677

Lease liability

1,256

1,536

Other liabilities: derivative liabilities

7,583

17,311

Acquired unfavorable real estate leases, less accumulated amortization of $3,377 and $4,031, respectively

708

1,592

Total liabilities

751,456

1,025,093

Commitments and contingencies

Stockholders' Equity:

Preferred stock, $.0001 par value, 20,000,000 shares authorized, none issued or outstanding

-

-

Common stock, $.0001 par value, 180,000,000 shares authorized, 105,632,725 and 107,328,199 shares issued and outstanding, respectively

11

11

Additional paid-in capital

1,349,225

1,357,131

Accumulated other comprehensive loss

(7,583

)

(17,311

)

Accumulated distributions in excess of accumulated earnings

(586,580

)

(571,740

)

Total stockholders' equity

755,073

768,091

Total liabilities and stockholders' equity

$

1,506,529

$

1,793,184

Franklin Street Properties Corp. Financial Results

Supplementary Schedule B

Condensed Consolidated Balance Sheets

(Unaudited)



September 30, December 31,

(in thousands, except share and par value 2021 2020 amounts)

Assets:

Real estate assets:

Land $ 161,767 $ 189,155

Buildings and improvements 1,630,729 1,938,629

Fixtures and equipment 11,727 12,949

1,804,223 2,140,733

Less accumulated depreciation 459,531 538,717

Real estate assets, net 1,344,692 1,602,016

Acquired real estate leases, less accumulatedamortization of $50,302 and $55,447, 19,864 28,206 respectively

Cash, cash equivalents and restricted cash 9,731 4,150

Tenant rent receivables 2,681 7,656

Straight-line rent receivable 58,132 67,789

Prepaid expenses and other assets 5,547 5,752

Related party mortgage loan receivables 21,000 21,000

Office computers and furniture, net ofaccumulated depreciation of $1,180 and 153 163 $1,443, respectively

Deferred leasing commissions, net ofaccumulated amortization of $24,013 and 44,729 56,452 $30,411, respectively

Total assets $ 1,506,529 $ 1,793,184



Liabilities and Stockholders' Equity:

Liabilities:

Bank note payable $ - $ 3,500

Term loans payable, less unamortizedfinancing costs of $1,352 and $2,677, 473,648 717,323 respectively

Series A & Series B Senior Notes, lessunamortized financing costs of $699 and $822, 199,301 199,178 respectively

Accounts payable and accrued expenses 59,309 72,058

Accrued compensation 3,482 3,918

Tenant security deposits 6,169 8,677

Lease liability 1,256 1,536

Other liabilities: derivative liabilities 7,583 17,311

Acquired unfavorable real estate leases, lessaccumulated amortization of $3,377 and 708 1,592 $4,031, respectively

Total liabilities 751,456 1,025,093



Commitments and contingencies



Stockholders' Equity:

Preferred stock, $.0001 par value, 20,000,000 - - shares authorized, none issued or outstanding

Common stock, $.0001 par value, 180,000,000shares authorized, 105,632,725 and 11 11 107,328,199 shares issued and outstanding,respectively

Additional paid-in capital 1,349,225 1,357,131

Accumulated other comprehensive loss (7,583 ) (17,311 )

Accumulated distributions in excess of (586,580 ) (571,740 ) accumulated earnings

Total stockholders' equity 755,073 768,091

Total liabilities and stockholders' equity $ 1,506,529 $ 1,793,184

Franklin Street Properties Corp. Financial Results

Supplementary Schedule C

Condensed Consolidated Statements of Cash Flows

(Unaudited)

For the

Nine Months Ended

September 30,

(in thousands)

2021

2020

Cash flows from operating activities:

Net income (loss)

$

14,145

$

(4,825

)

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

Depreciation and amortization expense

64,390

68,859

Amortization of above and below market leases

(38

)

(234

)

Shares issued as compensation

338

337

Equity in income of non-consolidated REITs

(421

)

-

Distributions from non-consolidated REITs

421

-

Loss on extinguishment of debt

403

-

Gain on sale of properties, net

(29,258

)

-

Decrease in allowance for doubtful accounts and write-off of accounts receivable

-

(13

)

Changes in operating assets and liabilities:

Tenant rent receivables

4,975

(143

)

Straight-line rents

(3,103

)

(2,636

)

Lease acquisition costs

(1,666

)

(1,516

)

Prepaid expenses and other assets

(1,035

)

(504

)

Accounts payable and accrued expenses

(8,389

)

2,527

Accrued compensation

(436

)

234

Tenant security deposits

(2,508

)

89

Payment of deferred leasing commissions

(10,857

)

(6,168

)

Net cash provided by operating activities

26,961

56,007

Cash flows from investing activities:

Property improvements, fixtures and equipment

(55,008

)

(61,989

)

Proceeds received from sale of properties

319,357

-

Net cash provided by (used in) investing activities

264,349

(61,989

)

Cash flows from financing activities:

Distributions to stockholders

(28,985

)

(28,968

)

Stock repurchases

(8,244

)

-

Borrowings under bank note payable

76,500

85,000

Repayments of bank note payable

(80,000

)

(55,000

)

Repayment on term loan payable

(245,000

)

-

Net cash provided by (used in) financing activities

(285,729

)

1,032

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

5,581

(4,950

)

Cash, cash equivalents and restricted cash, beginning of year

4,150

9,790

Cash, cash equivalents and restricted cash, end of period

$

9,731

$

4,840

Franklin Street Properties Corp. Financial Results

Supplementary Schedule C

Condensed Consolidated Statements of Cash Flows

(Unaudited)



For the

Nine Months Ended

September 30,

(in thousands) 2021 2020

Cash flows from operating activities:

Net income (loss) $ 14,145 $ (4,825 )

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

Depreciation and amortization expense 64,390 68,859

Amortization of above and below market leases (38 ) (234 )

Shares issued as compensation 338 337

Equity in income of non-consolidated REITs (421 ) -

Distributions from non-consolidated REITs 421 -

Loss on extinguishment of debt 403 -

Gain on sale of properties, net (29,258 ) -

Decrease in allowance for doubtful accounts and - (13 ) write-off of accounts receivable

Changes in operating assets and liabilities:

Tenant rent receivables 4,975 (143 )

Straight-line rents (3,103 ) (2,636 )

Lease acquisition costs (1,666 ) (1,516 )

Prepaid expenses and other assets (1,035 ) (504 )

Accounts payable and accrued expenses (8,389 ) 2,527

Accrued compensation (436 ) 234

Tenant security deposits (2,508 ) 89

Payment of deferred leasing commissions (10,857 ) (6,168 )

Net cash provided by operating activities 26,961 56,007

Cash flows from investing activities:

Property improvements, fixtures and equipment (55,008 ) (61,989 )

Proceeds received from sale of properties 319,357 -

Net cash provided by (used in) investing 264,349 (61,989 ) activities

Cash flows from financing activities:

Distributions to stockholders (28,985 ) (28,968 )

Stock repurchases (8,244 ) -

Borrowings under bank note payable 76,500 85,000

Repayments of bank note payable (80,000 ) (55,000 )

Repayment on term loan payable (245,000 ) -

Net cash provided by (used in) financing (285,729 ) 1,032 activities

Net increase (decrease) in cash, cash 5,581 (4,950 ) equivalents and restricted cash

Cash, cash equivalents and restricted cash, 4,150 9,790 beginning of year

Cash, cash equivalents and restricted cash, end $ 9,731 $ 4,840 of period

Franklin Street Properties Corp. Earnings Release

Supplementary Schedule D

Real Estate Portfolio Summary Information

(Unaudited & Approximated)

Commercial portfolio lease expirations (1)

Total

% of

Year

Square Feet

Portfolio

2021

72,249

0.9%

2022

612,298

7.9%

2023

351,574

4.5%

2024

781,382

10.0%

2025

509,607

6.6%

Thereafter (2)

5,455,634

70.1%

7,782,744

100.0%

Franklin Street Properties Corp. Earnings Release

Supplementary Schedule D

Real Estate Portfolio Summary Information

(Unaudited & Approximated)



Commercial portfolio lease expirations (1)

Total % of

Year Square Feet Portfolio

2021 72,249 0.9%

2022 612,298 7.9%

2023 351,574 4.5%

2024 781,382 10.0%

2025 509,607 6.6%

Thereafter (2) 5,455,634 70.1%

7,782,744 100.0%

_______________________(1)Percentages are determined based upon total square footage.

(2)Includes 1,536,276 square feet of vacancies at our operating properties and 111,469 square feet of vacancies at our redevelopment property as of September 30, 2021. We define redevelopment properties as properties being developed, redeveloped or where redevelopment is complete, but are in lease-up and that are not stabilized.

_______________________(1) Percentages are determined based upon total square footage.

Includes 1,536,276 square feet of vacancies at our operating properties and 111,469 square feet of vacancies at our redevelopment property as of(2) September 30, 2021. We define redevelopment properties as properties being developed, redeveloped or where redevelopment is complete, but are in lease-up and that are not stabilized.

(dollars & square feet in 000's)

As of September 30, 2021 (a)

# of

% of

Square

% of

State

Properties

Investment

Portfolio

Feet

Portfolio

Colorado

6

$

542,006

40.3%

2,625

33.7%

Texas

9

335,206

24.9%

2,421

31.1%

Georgia

2

154,380

11.4%

782

10.1%

Minnesota

3

124,433

9.3%

758

9.8%

Virginia

3

67,790

5.0%

548

7.0%

Florida

1

67,962

5.1%

213

2.7%

Illinois

2

45,118

3.4%

372

4.8%

North Carolina

1

7,797

0.6%

64

0.8%

Total

27

$

1,344,692

100.0%

7,783

100.0%



(dollars & square As of September 30, 2021 (a) feet in 000's)

# of % of Square % of

State Properties Investment Portfolio Feet Portfolio



Colorado 6 $ 542,006 40.3% 2,625 33.7%

Texas 9 335,206 24.9% 2,421 31.1%

Georgia 2 154,380 11.4% 782 10.1%

Minnesota 3 124,433 9.3% 758 9.8%

Virginia 3 67,790 5.0% 548 7.0%

Florida 1 67,962 5.1% 213 2.7%

Illinois 2 45,118 3.4% 372 4.8%

North Carolina 1 7,797 0.6% 64 0.8%

Total 27 $ 1,344,692 100.0% 7,783 100.0%

(a)Includes investment in our redevelopment property. We define redevelopment properties as properties being developed, redeveloped or where redevelopment is complete, but are in lease-up and that are not stabilized.

Includes investment in our redevelopment property. We define redevelopment properties as properties being developed, redeveloped or where redevelopment is complete, but are in lease-up and that are not(a) stabilized.



Franklin Street Properties Corp. Earnings Release

Supplementary Schedule E

Portfolio and Other Supplementary Information

(Unaudited & Approximated)

Recurring Capital Expenditures

Nine Months

(in thousands)

For the Three Months Ended

Ended

31-Mar-21

30-Jun-21

30-Sep-21

30-Sep-21

Tenant improvements

$

4,491

$

4,277

$

3,952

$

12,720

Deferred leasing costs

2,597

1,922

2,371

6,890

Non-investment capex

5,336

3,793

4,528

13,657

$

12,424

$

9,992

$

10,851

$

33,267

Franklin Street Properties Corp. Earnings Release

Supplementary Schedule E

Portfolio and Other Supplementary Information

(Unaudited & Approximated)

Recurring CapitalExpenditures



Nine Months

(in thousands) For the Three Months Ended Ended

31-Mar-21 30-Jun-21 30-Sep-21 30-Sep-21

Tenant improvements $ 4,491 $ 4,277 $ 3,952 $ 12,720

Deferred leasing costs 2,597 1,922 2,371 6,890

Non-investment capex 5,336 3,793 4,528 13,657

$ 12,424 $ 9,992 $ 10,851 $ 33,267

For the Three Months Ended

Year Ended

31-Mar-20

30-Jun-20

30-Sep-20

31-Dec-20

31-Dec-20

Tenant improvements

$

10,716

$

13,531

$

8,022

$

837

$

33,106

Deferred leasing costs

2,730

603

2,033

7,432

12,798

Non-investment capex

4,527

6,581

6,373

6,105

23,586

$

17,973

$

20,715

$

16,428

$

14,374

$

69,490





For the Three Months Ended Year Ended

31-Mar-20 30-Jun-20 30-Sep-20 31-Dec-20 31-Dec-20

Tenant $ 10,716 $ 13,531 $ 8,022 $ 837 $ 33,106 improvements

Deferred leasing 2,730 603 2,033 7,432 12,798 costs

Non-investment 4,527 6,581 6,373 6,105 23,586 capex

$ 17,973 $ 20,715 $ 16,428 $ 14,374 $ 69,490

Square foot & leased percentages

September 30,

December 31,

2021

2020

Operating Properties:

Number of properties

26

32

Square feet

7,671,275

9,331,489

Leased percentage

80.0%

85.0%

Redevelopment Properties (a):

Number of properties

1

2

Square feet

111,469

324,651

Leased percentage

0.0%

48.0%

Total Owned Properties:

Number of properties

27

34

Square feet

7,782,744

9,656,140

Leased percentage

78.8%

83.8%

Managed Properties - Single Asset REITs (SARs):

Number of properties

2

2

Square feet

348,545

348,545

Total Operating, Redevelopment and Managed Properties:

Number of properties

29

36

Square feet

8,131,289

10,004,685



Square foot & leased percentages September December 30, 31,

2021 2020

Operating Properties:

Number of properties 26 32

Square feet 7,671,275 9,331,489

Leased percentage 80.0% 85.0%



Redevelopment Properties (a):

Number of properties 1 2

Square feet 111,469 324,651

Leased percentage 0.0% 48.0%



Total Owned Properties:

Number of properties 27 34

Square feet 7,782,744 9,656,140

Leased percentage 78.8% 83.8%



Managed Properties - Single Asset REITs (SARs):

Number of properties 2 2

Square feet 348,545 348,545



Total Operating, Redevelopment and Managed Properties:

Number of properties 29 36

Square feet 8,131,289 10,004,685

(a)We define redevelopment properties as properties being developed, redeveloped or where redevelopment is complete, but are in lease-up and that are not stabilized.

We define redevelopment properties as properties being developed,(a) redeveloped or where redevelopment is complete, but are in lease-up and that are not stabilized.

Franklin Street Properties Corp. Earnings Release

Supplementary Schedule F

Percentage of Leased Space

(Unaudited & Estimated)

Property Name

Location

Square Feet

% Leased (1)as of30-Jun-21

SecondQuarterAverage %Leased (2)

% Leased (1)as of30-Sep-21

ThirdQuarterAverage %Leased (2)

1

FOREST PARK

Charlotte, NC

64,198

78.4%

78.4%

78.4%

78.4%

2

MEADOW POINT

Chantilly, VA

138,537

91.1%

91.1%

100.0%

97.0%

TIMBERLAKE

Chesterfield, MO

-

100.0%

100.0%

(4)

(4)

TIMBERLAKE EAST

Chesterfield, MO

-

100.0%

100.0%

(4)

(4)

3

NORTHWEST POINT

Elk Grove Village, IL

177,095

100.0%

100.0%

100.0%

100.0%

4

PARK TEN

Houston, TX

157,609

71.7%

71.7%

72.0%

72.0%

5

PARK TEN PHASE II

Houston, TX

156,746

95.0%

95.0%

95.0%

95.0%

6

GREENWOOD PLAZA

Englewood, CO

196,236

100.0%

100.0%

100.0%

100.0%

7

ADDISON

Addison, TX

289,325

83.7%

83.7%

85.6%

85.6%

8

COLLINS CROSSING

Richardson, TX

300,887

84.4%

84.4%

84.4%

84.4%

9

INNSBROOK

Glen Allen, VA

298,183

57.2%

57.2%

57.2%

57.2%

RIVER CROSSING

Indianapolis, IN

-

100.0%

100.0%

(5)

(5)

10

LIBERTY PLAZA

Addison, TX

217,191

79.0%

79.0%

73.9%

79.3%

11

380 INTERLOCKEN

Broomfield, CO

240,359

60.5%

60.5%

60.5%

60.5%

12

390 INTERLOCKEN

Broomfield, CO

241,512

99.4%

99.4%

99.4%

99.4%

13

BLUE LAGOON

Miami, FL

213,182

73.1%

73.1%

73.6%

73.2%

14

ELDRIDGE GREEN

Houston, TX

248,399

100.0%

100.0%

100.0%

100.0%

15

4807 STONECROFT (3)

Chantilly, VA

111,469

0.0%

0.0%

0.0%

0.0%

16

121 SOUTH EIGHTH ST

Minneapolis, MN

298,121

91.6%

91.8%

90.7%

91.3%

17

801 MARQUETTE AVE

Minneapolis, MN

129,821

91.8%

91.8%

91.8%

91.8%

18

LEGACY TENNYSON CTR

Plano, TX

207,049

41.1%

41.1%

41.1%

41.1%

19

ONE LEGACY

Plano, TX

214,110

56.4%

56.4%

57.9%

57.9%

20

909 DAVIS

Evanston, IL

195,098

93.3%

93.3%

93.3%

93.3%

21

WESTCHASE I & II

Houston, TX

629,025

54.4%

54.4%

57.6%

55.7%

22

1999 BROADWAY

Denver, CO

680,255

66.5%

66.5%

67.3%

67.3%

23

999 PEACHTREE

Atlanta, GA

621,946

85.0%

84.8%

85.8%

85.5%

24

1001 17TH STREET

Denver, CO

655,420

95.2%

95.5%

95.2%

95.2%

25

PLAZA SEVEN

Minneapolis, MN

330,096

85.5%

85.5%

85.5%

85.5%

26

PERSHING PLAZA

Atlanta, GA

160,145

12.4%

70.1%

76.6%

33.8%

27

600 17TH STREET

Denver, CO

610,730

84.9%

85.5%

85.8%

85.2%

OWNED PORTFOLIO

7,782,744

78.5%

79.8%

78.8%

78.7%



Franklin Street Properties Corp. Earnings Release

Supplementary Schedule F

Percentage of Leased Space

(Unaudited & Estimated)



Second Third % Leased Quarter % Leased Quarter Property Name Location Square (1) Average (1) Average Feet as of % as of % 30-Jun-21 Leased 30-Sep-21 Leased (2) (2)



1 FOREST PARK Charlotte, NC 64,198 78.4% 78.4% 78.4% 78.4%

2 MEADOW POINT Chantilly, VA 138,537 91.1% 91.1% 100.0% 97.0%

TIMBERLAKE Chesterfield, - 100.0% 100.0% (4) (4) MO

TIMBERLAKE Chesterfield, - 100.0% 100.0% (4) (4) EAST MO

3 NORTHWEST Elk Grove 177,095 100.0% 100.0% 100.0% 100.0% POINT Village, IL

4 PARK TEN Houston, TX 157,609 71.7% 71.7% 72.0% 72.0%

5 PARK TEN Houston, TX 156,746 95.0% 95.0% 95.0% 95.0% PHASE II

6 GREENWOOD Englewood, CO 196,236 100.0% 100.0% 100.0% 100.0% PLAZA

7 ADDISON Addison, TX 289,325 83.7% 83.7% 85.6% 85.6%

8 COLLINS Richardson, TX 300,887 84.4% 84.4% 84.4% 84.4% CROSSING

9 INNSBROOK Glen Allen, VA 298,183 57.2% 57.2% 57.2% 57.2%

RIVER Indianapolis, - 100.0% 100.0% (5) (5) CROSSING IN

10 LIBERTY PLAZA Addison, TX 217,191 79.0% 79.0% 73.9% 79.3%

11 380 Broomfield, CO 240,359 60.5% 60.5% 60.5% 60.5% INTERLOCKEN

12 390 Broomfield, CO 241,512 99.4% 99.4% 99.4% 99.4% INTERLOCKEN

13 BLUE LAGOON Miami, FL 213,182 73.1% 73.1% 73.6% 73.2%

14 ELDRIDGE Houston, TX 248,399 100.0% 100.0% 100.0% 100.0% GREEN

480715 STONECROFT Chantilly, VA 111,469 0.0% 0.0% 0.0% 0.0% (3)

16 121 SOUTH Minneapolis, 298,121 91.6% 91.8% 90.7% 91.3% EIGHTH ST MN

17 801 MARQUETTE Minneapolis, 129,821 91.8% 91.8% 91.8% 91.8% AVE MN

18 LEGACY Plano, TX 207,049 41.1% 41.1% 41.1% 41.1% TENNYSON CTR

19 ONE LEGACY Plano, TX 214,110 56.4% 56.4% 57.9% 57.9%

20 909 DAVIS Evanston, IL 195,098 93.3% 93.3% 93.3% 93.3%

21 WESTCHASE I & Houston, TX 629,025 54.4% 54.4% 57.6% 55.7% II

22 1999 BROADWAY Denver, CO 680,255 66.5% 66.5% 67.3% 67.3%

23 999 PEACHTREE Atlanta, GA 621,946 85.0% 84.8% 85.8% 85.5%

24 1001 17TH Denver, CO 655,420 95.2% 95.5% 95.2% 95.2% STREET

25 PLAZA SEVEN Minneapolis, 330,096 85.5% 85.5% 85.5% 85.5% MN

26 PERSHING Atlanta, GA 160,145 12.4% 70.1% 76.6% 33.8% PLAZA

27 600 17TH Denver, CO 610,730 84.9% 85.5% 85.8% 85.2% STREET

OWNED 7,782,744 78.5% 79.8% 78.8% 78.7% PORTFOLIO

_______________________(1)% Leased as of month's end includes all leases that expire on the last day of the quarter.

(2)Average quarterly percentage is the average of the end of the month leased percentage for each of the three months during the quarter.

(3)We define redevelopment properties as properties being developed, redeveloped or where redevelopment is complete, but are in lease-up and that are not stabilized.

(4)Properties sold on September 23, 2021.

(5)Property sold on August 31, 2021.

_______________________ % Leased as of month's end includes all leases that expire on the last day(1) of the quarter.

Average quarterly percentage is the average of the end of the month leased(2) percentage for each of the three months during the quarter.

We define redevelopment properties as properties being developed,(3) redeveloped or where redevelopment is complete, but are in lease-up and that are not stabilized.

(4) Properties sold on September 23, 2021.

(5) Property sold on August 31, 2021.

Franklin Street Properties Corp. Earnings Release

Supplementary Schedule G

Largest 20 Tenants - FSP Owned Portfolio

(Unaudited & Estimated)

The following table includes the largest 20 tenants in FSP's owned portfolio based on total square feet:

As of September 30, 2021

% of

Tenant

Sq Ft

Portfolio

1

CITGO Petroleum Corporation

248,399

3.2%

2

Ovintiv USA Inc.

234,495

3.0%

3

Eversheds Sutherland (US) LLP (a)

179,868

2.3%

4

EOG Resources, Inc.

169,167

2.2%

5

US Government

168,573

2.2%

6

The Vail Corporation

164,636

2.1%

7

Lennar Homes, LLC

155,808

2.0%

8

Citicorp Credit Services, Inc

146,260

1.9%

9

Kaiser Foundation Health Plan

120,979

1.5%

10

Argo Data Resource Corporation

114,200

1.5%

11

VMWare, Inc.

100,853

1.3%

12

Deluxe Corporation

98,922

1.3%

13

Swift, Currie, McGhee & Hiers, LLP

98,831

1.3%

14

Ping Identity Corp.

89,856

1.1%

15

Common Grounds, LLC (a)

76,984

1.0%

16

Booz Allen Hamilton, Inc.

75,338

1.0%

17

ADS Alliance Data Systems, Inc.

67,274

0.9%

18

PricewaterhouseCoopers LLP

66,304

0.8%

19

DirecTV, Inc.

66,226

0.8%

20

Hall and Evans LLC

65,878

0.8%

Total

2,508,851

32.2%



Franklin Street Properties Corp. Earnings Release

Supplementary Schedule G

Largest 20 Tenants - FSP Owned Portfolio

(Unaudited & Estimated)



The following table includes the largest 20 tenants in FSP's owned portfoliobased on total square feet:



As of September 30, 2021



% of

Tenant Sq Ft Portfolio

1 CITGO Petroleum Corporation 248,399 3.2%

2 Ovintiv USA Inc. 234,495 3.0%

3 Eversheds Sutherland (US) LLP (a) 179,868 2.3%

4 EOG Resources, Inc. 169,167 2.2%

5 US Government 168,573 2.2%

6 The Vail Corporation 164,636 2.1%

7 Lennar Homes, LLC 155,808 2.0%

8 Citicorp Credit Services, Inc 146,260 1.9%

9 Kaiser Foundation Health Plan 120,979 1.5%

10 Argo Data Resource Corporation 114,200 1.5%

11 VMWare, Inc. 100,853 1.3%

12 Deluxe Corporation 98,922 1.3%

13 Swift, Currie, McGhee & Hiers, LLP 98,831 1.3%

14 Ping Identity Corp. 89,856 1.1%

15 Common Grounds, LLC (a) 76,984 1.0%

16 Booz Allen Hamilton, Inc. 75,338 1.0%

17 ADS Alliance Data Systems, Inc. 67,274 0.9%

18 PricewaterhouseCoopers LLP 66,304 0.8%

19 DirecTV, Inc. 66,226 0.8%

20 Hall and Evans LLC 65,878 0.8%

Total 2,508,851 32.2%

(a)On October 22, 2021, the property that has the lease with Eversheds Sutherland (US) LLP and one lease with Common Grounds, LLC for 49,506 square feet was sold.

Franklin Street Properties Corp. Earnings Release Supplementary Schedule H Reconciliation and Definitions of Funds From Operations ("FFO") and Adjusted Funds From Operations ("AFFO")

A reconciliation of Net income to FFO and AFFO is shown below and a definition of FFO and AFFO is provided on Supplementary Schedule I. Management believes FFO and AFFO are used broadly throughout the real estate investment trust (REIT) industry as measurements of performance. The Company has included the National Association of Real Estate Investment Trusts (NAREIT) FFO definition as of May 17, 2016 in the table 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 and AFFO may not be comparable to FFO or AFFO reported by other REITs or real estate companies that define FFO or AFFO differently.

On October 22, 2021, the property that has the lease with Eversheds(a) Sutherland (US) LLP and one lease with Common Grounds, LLC for 49,506 square feet was sold.

Franklin Street Properties Corp. Earnings Release Supplementary Schedule H Reconciliation and Definitions of Funds From Operations ("FFO") and Adjusted Funds From Operations ("AFFO")

A reconciliation of Net income to FFO and AFFO is shown below and a definition of FFO and AFFO is provided on Supplementary Schedule I. Management believes FFO and AFFO are used broadly throughout the real estate investment trust (REIT) industry as measurements of performance. The Company has included the National Association of Real Estate Investment Trusts (NAREIT) FFO definition as of May 17, 2016 in the table 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 and AFFO may not be comparable to FFO or AFFO reported by other REITs or real estate companies that define FFO or AFFO differently.



Reconciliation of NetIncome to FFO and Three Months Ended Nine Months Ended AFFO:

September 30, September 30,

(In thousands, except 2021 2020 2021 2020 per share amounts)

Net income (loss) $ 4,456 $ (1,679 ) $ 14,145 $ (4,825 )

Gain on sale of (8,632 ) - (29,258 ) - properties, net

Equity in income fromnon-consolidated (421 ) - (421 ) - REITs

FFO fromnon-consolidated 421 - 421 - REITs

Depreciation & 18,861 21,989 62,340 66,424 amortization

NAREIT FFO 14,685 20,310 47,227 61,599

Lease Acquisition 112 136 297 333 costs

Funds From Operations $ 14,797 $ 20,446 $ 47,524 $ 61,932 (FFO)



Funds From Operations $ 14,797 $ 20,446 $ 47,524 $ 61,932 (FFO)

Reverse FFO fromnon-consolidated (421 ) - (421 ) - REITs

Distributions fromnon-consolidated 421 - 421 - REITs

Amortization ofdeferred financing 854 727 2,414 2,201 costs

Shares issued as - - 338 337 compensation

Straight-line rent (245 ) (1,293 ) (3,190 ) (2,636 )

Tenant improvements (3,952 ) (8,022 ) (12,720 ) (32,269 )

Leasing commissions (2,371 ) (2,033 ) (6,890 ) (5,366 )

Non-investment capex (4,528 ) (6,373 ) (13,657 ) (17,481 )

Adjusted Funds From $ 4,555 $ 3,452 $ 13,819 $ 6,718 Operations (AFFO)



Per Share Data

EPS $ 0.04 $ (0.02 ) $ 0.13 $ (0.04 )

FFO $ 0.14 $ 0.19 $ 0.44 $ 0.58

AFFO $ 0.04 $ 0.03 $ 0.13 $ 0.06



Weighted averageshares (basic and 106,905 107,328 107,196 107,295 diluted)

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, acquisition costs of newly acquired properties that are not capitalized and lease acquisition costs that are not capitalized plus depreciation and amortization, including amortization of acquired above and below market lease intangibles and impairment charges on mortgage loans, 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 as of May 17, 2016 in the table 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.

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 the amortization of deferred financing costs, (5) plus the value of shares issued as compensation and (6) 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.

Franklin Street Properties Corp. Earnings Release Supplementary Schedule I Reconciliation and Definition of Sequential Same Store results to property Net Operating Income (NOI) and Net Income

Net Operating Income ("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 extinguishment of debt, 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 Sequential Same Store. The comparative Sequential Same Store results include properties held for the periods presented and exclude our redevelopment properties. We also exclude properties that have been placed in service, but that do not have operating activity for all periods presented, 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. The calculations of NOI and Sequential Same Store are shown in the following table:



Rentable

Square Three Three Feet Months Months Inc % Ended Ended

(in thousands) or RSF 30-Sep-21 30-Jun-21 (Dec) Change

Region

East 437 $ 642 $ 685 $ (43 ) (6.3 ) %

MidWest 1,000 3,470 3,184 286 9.0 %

South 3,202 8,482 9,207 (725 ) (7.9 ) %

West 2,625 10,144 9,901 243 2.5 %

Property NOI* from 7,264 22,738 22,977 (239 ) (1.0 )Operating Properties %

Dispositions and )Redevelopment 519 2,625 5,023 (2,398 ) (8.4 %Properties (a)

NOI* 7,783 $ 25,363 $ 28,000 $ (2,637 ) (9.4 ) %



Sequential Same $ 22,738 $ 22,977 $ (239 ) (1.0 )Store %



Less Nonrecurring

Items in NOI* (b) 281 34 247 (1.1 ) %



Comparative

Sequential Same $ 22,457 $ 22,943 $ (486 ) (2.1 )Store %





Three Three Months Months Ended Ended

Reconciliation to 30-Sep-21 30-Jun-21 Net income

Net income $ 4,456 $ 16,149

Add (deduct):

Loss onextinguishment of 236 167 debt

Gain on sale of (8,632 ) (20,626 ) properties, net

Management fee (380 ) (403 ) income

Depreciation and 18,861 19,136 amortization

Amortization ofabove/below market - (6 ) leases

General and 3,749 3,962 administrative

Interest expense 7,928 10,054

Interest income (404 ) (399 )

Equity in (income)loss of (421 ) - non-consolidatedREITs

Non-property (30 ) (34 ) specific items, net





NOI* $ 25,363 $ 28,000

(a)We define redevelopment properties as properties being developed, redeveloped or where redevelopment is complete, but are in lease-up and that are not stabilized. We also include properties that have been placed in service, but that do not have operating activity for all periods presented.

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

*Excludes NOI from investments in and interest income from secured loans to non-consolidated REITs.

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