Franklin Street Properties Corp (NYSE: FSP) - Overnight Follow-On Term Sheet w/ Prospectus

Company Name: Franklin Street Properties Corp

Ticker: FSP (NYSE)

Deal Type: Overnight Follow-On

Shares Filed: 6,125,000 - 100% Primary

Over-allotment Option: 15.0% - 100% Primary

Last Sale (8/10/16): $13.15

Re-Offer Range: $12.35 - $12.65

Yield / Distribution (@ Re-Offer Mid): 6.08% / $0.76 per share annualized

Base Deal Size (@ Re-Offer Mid): $76.5mm

Post-Deal Market-Cap (@ Re-Offer Mid): $1,328.9mm (106.3mm shares outstanding)

Expected Pricing Date: Thursday, August 11 (pre-open)

Active Book Managers: BMO, BAIRD

Passive Book Manager: STFL

Senior Co-Manager: WUND

Co-Managers:PNC, CAPONE, TD, USB

Use of Proceeds:

The Company intends to use the net proceeds of the offering to repay approximately $45.5 million under its senior unsecured revolving credit facility that was recently borrowed in anticipation of funding the acquisition of Pershing Park Plaza. The remaining portion of the proceeds will be used for general corporate purposes, including funding future acquisitions and investments.

Company Description:

Franklin Street Properties Corp, based in Wakefield, MA, is a REIT comprised of 36 properties totaling 9.6 million square feet. FSP's primary emphasis is on its five core markets: Atlanta, Dallas, Denver, Houston and Minneapolis.

New Residential Investment Corp ("NRZ" / NYSE): Block Trade Offering Announcement

ISSUER:  NEW RESIDENTIAL INVESTMENT CORP

TICKER / EXCHANGE:  "NRZ" / NYSE

BASE SHARES:  20 MILLION SHARES (100% PRIMARY)

GREENSHOE:  15% (100% PRIMARY)

OFFERING SIZE:  ~$285 MILLION

RE-OFFER RANGE:  $14.15 - $14.35

RE-OFFER DISCOUNT:  0.9% - 2.3%

INDICATIVE DIVIDEND YIELD:  12.9%

USE OF PROCEEDS:  FUND WALTER INVESTMENT ACQUISITIONS

JOINT BOOKRUNNERS:  CITIGROUP, BARCLAYS, JP MORGAN & UBS

7/3 Q1 results summary for Japanese general contractors - Watching orders as well as gross margins

Kajima stands out for gross margin improvement and order growth

Almost all Japanese general contractors, and majors and second-tier companies in particular, had announced their 17/3 Q1 results by 9 August. Many companies reported gross margins on building construction of over 10%, with rises in these gross margins the largest positive y-y factor for profits. Moreover, some companies also saw marked growth in building construction orders, and the share prices of those companies performed solidly following announcements. Companies with improved gross margins on building construction and growth in building construction orders included Kajima [1812] (Buy), Maeda [1824] (Buy), Penta-Ocean Construction [1893] (Buy), and Okumura [1833]. Stock market participants see growth in orders as well as higher gross margins on building construction as key future profit growth drivers, and we think attention could focus even more on orders. We think Kajima put in the most obviously strong set of results for 17/3 Q1 in terms of absolute operating profits, gross margin levels, and the extent of order growth.

REPORT

Daiwa House Industry (1925 JP) (Buy) 17/3 Q1 results

Sale of logistics facilities to private REIT in Q1

Daiwa House Industry released 17/3 Q1 results on 9 August. We had thought that its results might be hit by the disappearance of substantial gains on the sale of logistics and commercial facilities in 16/3 Q1 (¥24.5bn at the gross profit level), but in the event operating profits rose 4% y-y (and included gains on property sales of ¥12.9bn). This mainly reflected the housing business, where sales rose 13% and the gross margin improved from 19.4% to 20.5%. However, we had already expected this gross margin to improve in 17/3. Although progress with construction projects has been rapid, the amount of work at hand has not prompted us to change our outlook for housing operations in 17/3, or indeed our earnings forecasts. We retain our target price and reiterate our Buy rating amid favorable conditions.

REPORT

Japan housing & real estate sector - Central Tokyo office vacancy rate down in July

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Miki Shoji released July office vacancy rate data for the five central wards of Tokyo at 11:00 JST on 10 August. The vacancy rate was 3.94% and represented the first time it had fallen below 4% since August 2008. Data pointing to tightening supply-demand conditions for office space is likely to be good news for real estate stocks. That said, we think investors are unlikely to be overly enthused about the main reason for the improvement in the office vacancy rate, which was several properties being taken off the market. Real estate stocks headed higher following the initial news of an improvement in the vacancy rate, but subsequently corrected following the release of detailed data from 13:00 JST. Minato Ward and Chuo Ward each saw the completion of a single small/midsize office building in July, while two properties in Chiyoda Ward, one in Minato, and two in Chuo were taken off the market, resulting in a net decrease in office space supply volume (new supply - properties taken off the market) of 27,372m2. In other words, there was a decline in leasable office floor space in the five central wards of Tokyo in July. The 27,372m2 fall in leasable floor space can be broken down to a 10,365m2 decline in vacant office space and a 17,007m2 decline in occupied floor space, which signifies weaker demand. This was the second consecutive month of m-m decline in overall demand. That said, we see little impact on near-term earnings or the value of properties at the major developers, as tighter supply-demand conditions have underpinned a sustained rise in rents and they have maintained high occupancy rates at their portfolios containing several highly competitive properties. While the planned completion of the large Kyobashi Edogrand office building in October 2016 and other developments risk a deterioration in the vacancy rate, redevelopment of office buildings, commercial facilities, and hotels in central Tokyo is picking up and we expect plenty of properties to continue to be demolished or otherwise taken off the market. We therefore expect the central Tokyo vacancy rate to remain favorable at least through end-2017.

REPORT

Wunderlich - Cedar Realty Trust, Inc. (CDR: $7.66)

 

Equity REITs

Expanding NAV, Multiples Lead Us to Raise Target to $8.50

Raising Price Target

Rating: Buy

Price Target: Old - $8.00; New - $8.50

Market Cap: $653.7

We are raising our target on Buy-rated Cedar Realty Trust, Inc. (CDR) from $8 to $8.50 given a rising NAV estimate and expanding shopping center multiples, and we believe CDR's fundamentals will improve over the next 12 months, leading to a normalized level of 3%+ SS NOI, which the market is overly discounting as CDR trades at a 15% discount to its peer group of shopping center REITs. While acquisition volume may pick up, we see 2016 as a continuation of deleveraging and we expect leverage ratios to continue to decline to a ~38%/6.7x EBITDA. Our NAV of $8.44 values the portfolio at a 7% cap rate on a normalized occupancy (2Q17E) basis and our target represents 101 % of NAV vs. peers trading at 106%; this represents an in-line 2016E FFO multiple (15.1x) with similarly sized peers.

REPORT