58 slides from Franklin Street Properties's conference presentation, May 29, 2014
Slide 1: Investor Presentation - REITWeek 2014
f¢}SP) FRANKLIN STREET APR © Meee TT Wels Investor Presentation - REITWeek 2014 June 2014
Slide 2: Forward-looking statements
This presentation may contain forward-looking statements based on current judgments and current knowledge of management, 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. Accordin
Slide 3: FSP is a Leading Owner and Operator of Institutional Quality Office Assets
FSP is a Leading Owner and Operator of Institutional Quality Office Assets in Major U.S. Markets ¡ FSP acquires high quality, Class A office properties in select urban infill and central business districts (CBD), with a primary emphasis on the top five markets of Atlanta, Dallas, Denver, Houston, an
Slide 4: 2014, Bloomberg and FSP Management as of May 16, 2014.
__________ Source: Public Company filings and disclosures as of March 31, 2014, Bloomberg and FSP Management as of May 16, 2014.
Slide 5: Modern, Broadly Appealing and Well Amenitized Office Space
Modern, Broadly Appealing and Well Amenitized Office Space in Institutional High Growth Markets ¡ Class A product catering to diverse tenant needs in growing industry verticals ¡ Proximity to significant in-place infrastructure, transportation and centers of trade / business ¡ Focus on sustainabilit
Slide 6: Portfolio Year Built / Renovated
Portfolio Year Built / Renovated “) Prior to 1999 34% 1999 - 2005 40%
Slide 7: 2014, Bloomberg and FSP Management as of May 16, 2014.
__________ Source: Public Company filings and disclosures as of March 31, 2014, Bloomberg and FSP Management as of May 16, 2014. (1) Year built / renovated for FSP’s owned portfolio, weighted by rentable square feet.
Slide 8: 2014, Bloomberg and FSP Management as of May 16, 2014.
__________ Source: Public Company filings and disclosures as of March 31, 2014, Bloomberg and FSP Management as of May 16, 2014. (1) Based on list of top Metropolitan Statistical Areas per the US Office of Management and Budget.
Slide 9: Top Office Markets
Top Office Markets (1) Market RSF % Portfolio 1. Denver 2,007,195 21% 2. Dallas - Fort Worth 1,345,247 14% 3. Atlanta 1,395,816 14% 4. Houston 1,191,630 12% 5. Minneapolis 628,019 6% 6. St. Louis 476,741 5% 7. Washington, D.C. 386,664 4% 8. Chicago 372,093 4% 9. Baltimore 325,445 3% 10. Richmond 298
Slide 10: 2014, Bloomberg and FSP Management as of May 16, 2014.
__________ Source: Public Company filings and disclosures as of March 31, 2014, Bloomberg and FSP Management as of May 16, 2014. (1) Percentages based on RSF.
Slide 11: No Single Tenant Represents More Than 4% of FSP's Annualized Rent
No Single Tenant Represents More Than 4% of FSP’s Annualized Rent Remaining Annualized % of Lease Term Top Tenants Industry Tenant Use Rating Rent Total (Months) (1) 1.
Slide 12: 2014, Bloomberg and FSP Management as of May 16, 2014.
__________ Source: Public Company filings and disclosures as of March 31, 2014, Bloomberg and FSP Management as of May 16, 2014.
Slide 13: Well laddered lease maturity schedule
¡ Well laddered lease maturity schedule adds operational flexibility ¡ Proactively working with tenants on renewals ¡ Opportunity for growth through mark-to-market of rents on expiring leases __________ Source: Public Company filings and disclosures as of March 31, 2014, Bloomberg and FSP Management
Slide 14: 2014, Bloomberg and FSP Management as of May 16, 2014.
__________ Source: Public Company filings and disclosures as of March 31, 2014, Bloomberg and FSP Management as of May 16, 2014. Note: Includes owned portfolio.
Slide 15: 2014, Bloomberg and FSP Management as of May 16, 2014.
__________ Source: Public Company filings and disclosures as of March 31, 2014, Bloomberg and FSP Management as of May 16, 2014.
Slide 16: portfolio owned.
__________ Source: SNL Financial as of May 16, 2014. Metrics represent total portfolio owned. (1) MSA ranked by total population determined by the U.S. Census Bureau as of May 3, 2013. (2) Peer average includes BDN, CLI, CUZ, HIW, LPT, PDM and PKY.
Slide 17: 2014, Bloomberg and FSP Management as of May 16, 2014.
__________ Source: Public Company filings and disclosures as of March 31, 2014, Bloomberg and FSP Management as of May 16, 2014. Note: $ in millions
Slide 18: FSP's investment strategy and core principles
FSP’s strategy is to invest in select urban / suburban infill and CBD office properties that offer long-term appreciation potential, as well as current income. FSP has identified five core markets of focus that we believe have distinct drivers for long-term growth. These five markets are Atlanta, Da
Slide 19: Slide 19
Slide 20: Atlanta is Regarded as the Economic Capital of the SE US
With Housing as a Strong Economic Driver, Atlanta is Regarded as the Economic Capital of the SE US ☑ Invest in Geographic / Economic Diversification – Atlanta possesses a diverse economy that is well-positioned within the high growth US sunbelt ☑ Invest in Markets Where FSP Has Long-Term Knowledge /
Slide 21: Atlanta properties
One Ravinia 999 Peachtree One Overton Park Atlanta, GA Atlanta, GA Atlanta, GA July:2012 y Nh “= fee July 2013 : Neues June 2006 386,603 RSF ’ | 621,007: RSF 2 = 387,204 RSF $52.8 mm ZL wh He $157.9 mm $85.0 mm
Slide 22: Dallas: Diversified Economy
Diversified Economy that is Strong in Professional Services, Transportation, Technology, and Energy. Dallas is Home to Many Corporate Headquarters. ☑ Invest in Geographic / Economic Diversification – Dallas possesses a highly diversified economy that is well-positioned within the fast growing Sunbel
Slide 23: Dallas properties
One Legacy Circle Legacy Tennyson | & II Addison Circle One Dallas (Plano), TX Dallas (Plano), TX Dallas (Addison), TX Maréh 2017 March 2011 el " September 2002 214,110 RSF 2 202,600°RSF : 293,787 RSF $53.6 mm $37.0 mm $51.5mm
Slide 24: Denver: Diversified Economy
Diversified Economy that is Strong in US Domestic Energy & Natural Resources, Transportation, and Technology. Highly Educated Workforce and Strong Population Growth. ☑ Invest in Geographic / Economic Diversification – Denver possesses a highly diversified economy that is well-positioned within the f
Slide 25: Denver properties
1001 17* Street 1999 Broadway 380 & 390 Interlocken Denver, Colorado Denver, Colorado Denver (Broomfield), Colorado Lr s : = b.iBeis H August 2013 = so ~ : May.2013 Aug 2003 & Dec 2006 655,565 RSF "i —- 673,839 RSF 481,700 RSF $217.0 mm 2 $183.0 mm $84.8 mm
Slide 26: Houston: Global Leader in Energy
Diversified Economy that is the Global Leader in Energy. Strong in Trade and Exports due to Gulf Coast Location. Highly Educated Workforce and Strong Population Growth. ☑ Invest in Geographic / Economic Diversification – Houston possesses a robust Gulf Coast economy that is well-positioned within th
Slide 27: Houston properties
Towers at Westchase | & Il Eldridge Green Offices at Park 101 & Il Houston, Texas Houston, Texas Houston, Texas November 2012 January 2004 ; = June 2002 & 2006 629,022 RSF 248,399 RSE : 312,461 RSF $154.8:mm: $36.5 mm - $50.2 mm
Slide 28: Minneapolis: Diversified Economy in US Food-Belt
Diversified Economy in US Food-Belt that Possesses a Highly Educated Workforce and Strong Spirit of Innovation ☑ Invest in Geographic / Economic Diversification – Minneapolis possesses a highly diversified economy and highly educated/talented workforce. Financial services, food, retail, medical, ind
Slide 29: Minneapolis properties
__________ (1) Asset managed by FSP.
Slide 30: 2014, Bloomberg and FSP Management as of May 16, 2014.
__________ Source: Public Company filings and disclosures as of March 31, 2014, Bloomberg and FSP Management as of May 16, 2014.
Slide 31: __________ Source: Public Company filings and disclosures as of March 31, 2014. Note: $
__________ Source: Public Company filings and disclosures as of March 31, 2014. Note: $ in millions.
Slide 32: (1) Different REITs may calculate Adjusted EBITDA in different ways. Please refer to page
__________ Source: Public Company filings and disclosures as of March 31, 2014. (1) Different REITs may calculate Adjusted EBITDA in different ways. Please refer to page 37 for FSP’s definition of Adjusted EBITDA and for a reconciliation of GAAP net income to Adjusted EDITDA. Adjusted EBITDA is a no
Slide 33: (1) Peer average includes BDN, CLI, CUZ, HIW, LPT,
__________ Source: SNL Financial as of May 16,2014. (1) Peer average includes BDN, CLI, CUZ, HIW, LPT, PDM and PKY.
Slide 34: Business strategy
¡ Preserve and advance portfolio quality by acquiring high quality assets in high quality markets and maintaining existing assets with sufficient capex ¡ Continue our simple business model ¡ Recycle assets where value is fully realized ¡ Pursue external growth opportunities in our target markets at
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Slide 36: Franklin Street Properties
STREET PROPERTIES:
Slide 37: Bank Building, Minneapolis
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Slide 38: 999 Peachtree – Midtown Atlanta, GA
999 Peachtree – Midtown Atlanta, GA ¡ Acquisition of Class A, office property for $157.9 million or $254 per rentable SF ¡ Attractive purchase price at significant discount to replacement cost ¡ 28 story, multi-tenant office building totaling 621,007 rentable SF ¡ ~ 95% leased to diversified tenant
Slide 39: 999 Peachtree property statistics
Baby ulus: meee —~ IRs yi di oo. I Floors: Year Built: 1987 Purchase Price: $157.9 million Rentable SF: 621,007 Purchase Price per SF: $254 Est. Replacement Cost per SF: $350 - $400 % Occupancy: ~95% Average In-Place Rent per SF at Purchase: $25 Range of Asking Rents: $29 - $30
Slide 40: Robust Atlanta Market & Location
Robust Atlanta Market & Location STREET PROPERTIES
Slide 41: Atlanta asset and location highlights
High Quality Asset ¡ 9 story parking garage with covered walkway ¡ Conference center and fitness center ¡ LEED Silver Certified High Visibility Location ¡ 10th & Peachtree is one of Atlanta’s most prized intersections ¡ Across from the Federal Reserve and the midtown MARTA light rail station City /
Slide 42: 1999 Broadway – Downtown Denver, CO
1999 Broadway – Downtown Denver, CO ¡ Acquisition of Class A, office property for $183.0 million or $269 per rentable SF ¡ Attractive purchase price at significant discount to replacement cost ¡ 43 story, multi-tenant office building totaling 680,277 rentable SF ¡ ~96% leased to diversified tenant b
Slide 43: 1999 Broadway property statistics
Floors: 43 Year Built: 1986 Purchase Price: $183.0 million Rentable SF: 680,277 Purchase Price per SF: $269 Est. Replacement Cost per SF: $350 - $400 % Occupancy: ~96% Average In-Place Rent per SF at Purchase: $27 Range of Asking Rents: $26 - $35
Slide 44: Robust Denver Market & Location
Robust Denver Market & Location fieSP FRANKLIN STREET PROPERTIES
Slide 45: Denver asset and location highlights
High Quality Asset ¡ Includes underground parking as well as a freestanding 9 story parking garage ¡ Fitness center and conference rooms ¡ LEED Silver Certified High Visibility Location ¡ Most accessible downtown tower ¡ Only CBD tower served by a two-directional FasTracks stop/station at front door
Slide 46: TCF Tower & Bank Building – Downtown Minneapolis, MN
TCF Tower & Bank Building – Downtown Minneapolis, MN ¡ Acquisition of Class B, office tower and ancillary low-rise bank building for $40.5 million or ~$85 per rentable SF ¡ Attractive purchase price at significant discount to replacement cost ¡ 17 story, multi-tenant office building totaling ~300,00
Slide 47: TCF Tower property statistics
‘\ Floors: 17&4 Years Built: 1973/1981 & 1923/1943 Purchase Price: $40.5 million Rentable SF: 470,000 Purchase Price per SF: ~$85 Est. Replacement Cost per SF: $300 - $350 % Occupancy: ~92% Average In-Place Rent per SF at Purchase: ~$9 Range of Asking Rents (Net): $10 - $12
Slide 48: Robust Minneapolis Market & Location
Robust Minneapolis Market & Location STREET PROPERTIES
Slide 49: Minneapolis asset and location highlights
Quality Asset ¡ Includes an integrated 5 story parking ramp ¡ Finishing complete elevator modernization ¡ Finishing full skyway level amenity makeover High Visibility Class “A” Location ¡ Highly accessible downtown tower ¡ Full Skyway connectivity to Nicollet Mall and IDS Crystal Court amenities ¡ B
Slide 50: Proven track record of selling assets – Fairview case study
Proven track record of selling assets when value has been deemed to be maximized and reinvesting proceeds into new high potential assets ¡ Historically monetized assets for the following reasons: ¡ Exit heated markets when achievable prices reflect value maximization for shareholders ¡ Size / age /
Slide 51: Goldentop Technology Center – San Diego, CA Case Study
Goldentop Technology Center – San Diego, CA Case Study ¡ FSP exited Goldentop Technology Center in June 2007 ¡ Net sales proceeds of $36.2 million ¡ Realized a $14.7 million gain on sale
Slide 52: Net gain on sale of ~$123 million since 2005
Recognized a net gain on sale of ~$123 million on ~$491 million of non-core disposition proceeds since 2005 __________ Source: Public Company filings and disclosures as of March 31, 2014, Bloomberg and FSP Management as of May 16, 2014.
Slide 53: Greenwood Plaza: 100% of office space leased through 2021
100% of office space leased through 2021 with two full-building tenants ¡ FSP’s leasing strategy focuses on long-term value creation ¡ Successfully leased 100% of office space to high quality tenants with long term leases ¡ FSP acquisition team targeted Greenwood Plaza due to planned development of
Slide 54: neon NZ KAISER PERMANENTE»
BB 78 neon NZ KAISER PERMANENTE»
Slide 55: 2014, Bloomberg and FSP Management as of May 16, 2014.
__________ Source: Public Company filings and disclosures as of March 31, 2014, Bloomberg and FSP Management as of May 16, 2014.
Slide 56: FFO and AFFO reconciliation
Three For the For the Months Ended For the Three Months Ended: Year Ended Year Ended 31-Mar-14 31-Mar-13 30-Jun-13 30-Sep-13 31-Dec-13 31-Dec-13 31-Dec-12 Net income $ 3,573 $ 4,401 $ 4,741 $ 4,094 $ 6,591 $ 19,827 $ 7,633 Gain (loss) on sale, less applicable income tax — — — — (2,158 ) (2,158 ) 14,
Slide 57: Definition of Funds From Operations (FFO)
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
Slide 58: Definition of EBITDA and Adjusted EBITDA
EBITDA is defined as net income plus interest expense, income tax expense and depreciation and amortization expense. Adjusted EBITDA is defined as EBITDA excluding gains and losses on sales of properties or shares of equity investments or provisions for losses on assets held for sale. EBITDA and Adj