Friday, November 16, 2012

Franklin Street Properties

Franklin Street Properties Corp. (FSP - Snapshot Report) is a Zacks #1 Rank (Strong Buy) office REIT that has returned 13.8% year to date and offers a healthy dividend yield of 7.1%. Furthermore, a forward P/E multiple of 11.35 and an impressive P/B multiple of 1.02 offer a promising value proposition to investors moving forward.

Strong Third Quarter

Franklin Street Properties reported solid third quarter results on October 30, with a 21.5% year-over-year growth in total revenues to $41.8 million thanks to the incremental impact of accretive acquisitions. Increased leasing activities during the quarter resulted in strong occupancy levels of 89.9%. With a suburban office portfolio where rental rates and occupancy remained fairly steady, the company expects to continue its growth momentum in the coming quarters as well.

Funds from operations (FFO) came in at $19.9 million, surpassing the year-ago tally by 21.3%. On a per share basis, FFO for the quarter was 24 cents, compared to 20 cents in the prior-year quarter and exceeding the Zacks Consensus Estimate by 4.4%.

Franklin Street Properties paid a dividend of 19 cents per share in the third quarter of 2012, which affirms a robust yield of 7.1%.

Rise in Earnings Momentum

Analysts have revised their earnings estimates upward for both 2012 and 2013. Over the past 30 days, the Zacks Consensus Estimate for 2012 increased 2.2% to 95 cents, implying a year-over-year spike of 9.2%. For 2013, the Zacks Consensus Estimate has advanced 7.4% to $1.01 over the same time period, representing a year-over-year rise of 6.8%.

Impressive Valuation

Although shares of Franklin Street Properties nosedived in late 2011, it recovered to a growth trajectory by early this year. Franklin Street Properties looks undervalued with a forward P/E multiple of 11.35 and a P/B multiple of 1.02.

Headquartered in Wakefield, Massachusetts, Franklin Street Properties primarily operates a portfolio of suburban office buildings, in addition to making select investments in central business district (CBD) properties and offering loans secured by mortgages on real estate assets. While its real estate operations include property acquisitions and disposals, secured financing, leasing, development and asset management services, its investment management subsidiary is involved in the structuring of real estate investments and broker/dealer services. Since its inception in 1997, Franklin Street Properties has deployed a disciplined approach to real estate property investments that reflect the inherent high quality of its asset class within the broader capital markets. The company currently has a market cap of $916.5 million.

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