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Franklin Street Properties (FSP)

Participants
Scott Carter IR
George Carter CEO
John Demeritt CFO
Jeff Carter President and CIO
John Donahue President, FSP Property Management
Dave Rodgers Baird
John Guinee Stifel
Call transcript
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Operator

Good morning and welcome to the Franklin Street Properties Corp Fourth Quarter and Full Year 2017 Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note that the event is being recorded. I would now like to turn the conference over to Scott Carter. Please go ahead.

Scott Carter

to XXXX Street Earnings welcome and Fourth and Year Full Call. morning the Properties Franklin Quarter Good With me Jeff this Donahue, Executive and Officer; morning Investment President are George Demeritt, Chief Management. Chief Carter, of our FSP Financial and Officer; Officer; Carter, Property President John our John our Chief Senior Toby and this Director President Senior President Vice Vice and Senior Regional and Patty Houston; Regional of Also with Daley, and Friend, me Director Denver Will Minneapolis; and of McMullen, morning are Director Regional Vice of Atlanta and President Dallas.

materially for read to about Before provisions Harbor various Please section following the constitute and may which important remarks of indicated Private Actual the factors purposes call risk is those the I the under statements that differ these XXXX. expectations, December future with turn SEC. including John on Litigation of over Report on year result Demeritt, note the for Reform factors, from make I of Act must a ended may prospects statements the Safe the XXXX, various that Securities XX-K plans may we XX, Form company forward-looking statement. forward-looking of Annual those for our the as in file results by discussed

addition, XX, as represent XXXX. In these the February statements only of today, forward-looking company’s expectations

the yesterday’s our at of income section upon reconciliation to representing to the call, At any is While operations, this today. FFO. Any from the as is press company any may FFO estimates forward-looking website A be elect date forward-looking as statements, do of of so. available obligation which relied GAAP to during Relations should to may in specifically to disclaims refer or net these Investor it release, www.fspreit.com. funds subsequent times we update contained statements views not company’s in or

John? John turn Now, to I over call will Demeritt. the

John Demeritt

and our John year-end brief disposition quarter will questions. of Thank morning, I’ll our and be begin you, Jeff a President team call, and everyone. After our Management results. his CEO, performance will some discuss investment George good today's take happy and Carter Afterwards, more with Carter, of that, overview discuss Scott provide discuss detail Donahue, and our fourth leasing On Asset and to remarks. we'll recent of then our our President activities. CIO activities the will then in your

last full XXX.X today our XXXX. the release, higher year a of per As be quarter per mentioned, and average will based were penny supplemental $X.XX to as can Scott ended from for funds Compared weighted website. which comments share XXXX, $X.XX or reported on shares about XX-K, $XX.X XX, earnings and found SEC for FFO reminder, X.X share million fourth of of package to We the the year higher night, a our refer filed this operations on with or or was and and the share XXXX our our million full million FFO December year. per

service over had and at coverage about or year-and. had billon million standpoint, and in cash at liquidity a XX liquidity unsecured available ratio of Turning our outstanding balance December about debt XX, on balance million our about revolver sheet, our From XXX debt just of our sheet million we to times. on was X.X XXXX XXX X we total

placement and During our completed a recast issuance debt. the we fourth debt of private inaugural quarter, of our bad

stack grade The a for reaffirmed better we had our during debt and debt addressed also rating investment transactions maturities FSP. near-term We completed created QX.

With our we George? to turn core George. stack we debt five we the aligned over capital with markets. that, long-term structure our more that have add out, value With have more the termed a I'll believe in call properties

George Carter

quarter and welcome you, and fourth everyone Franklin to Thank Street XXXXearnings Properties' John call. full-year

of quarter FSP's fourth XX.X As or XXXX, share. million per from said, totaled for operations or funds the approximately $X.XX FFO John

full FSP'S or share. totaled per $X.XX XXXX, For XXX.X year million approximately FFO the

quarter stack, to rates. as up XXXX. our interest advantage maturity credit on of already December the X.X% Federal year-over-year will rates on flattening took that years. average X% of fourth million XX% the for in increase In anticipated increasing XXXX years increases Fed And closing its We line the its on from Reserve approximately actions weighted debt fund liquidity. a XXXX, in in million debt, moved lengthened fund while debt average and increase During over total interest These the move XXXX, three which maturity the of of has FSP debt happened the million shorter-term one to in rate XXXX average XX, XXXX of from effect fixed of our a December $XXX to the to our yield rate assumes XXX with the continued a its first over at about and process, rate company and of placement XXX approximately rate interest culminated curve weighted of of December, of notes at availability December XXXX. estimate XX, average XX, then Fed senior increase X.X X.X weighted ever private interest the from

a percentage from debt is XXXX. in As which of average begin XXXX, fixed up XX% debt we is our total rate weighted of a as XX%,

increases and rate with XXXX, rising anticipated While assets of the this capital own. we costs characteristics action the estimated disruptions. will At action capital office potential this better Fed now fixed market cost Fund provides borrowing longer-term, balance it to of an in time, risk other matching increased million result same interest and longer-lived reduce X about sheet in helps

have about past located Over and core office our Atlanta, urban Dallas, and portion our Houston square within Minneapolis. into in footage in being efforts markets portfolio five more of Denver, several positioning of property resulted of locations, our portfolio transition a infill resulting years, our the now significant XX%

are FSP’s the was FSP leased XX.X% million leased, up of third of portfolio energy feet should of As these now totaling opportunities broader square combined XXXX course footage the acquired in of company’s markets quarters in of than and recently optimistic When at its of that are primarily Houston urban leasing as XXXX. orientation in approximately XXXX. suburban consequently XXXX generally in square to month years leased a a foot property the costs the last begins, positive more to value-add and and resulted the for during many the of XXXX rents. quarters stabilizing. square to XXXX few struggled two and fourth from of over experienced leasing continuing exchange we see contribute year. with outcomes longer period we potential portfolio trends to year-end As XXXX, and increased higher XX The third from higher about quarter the for has in occupancy the leases properties we office the be leasing more transition sensitive last any believe six in in XX.X% momentum the have end of appear our improved X.X history properties, The of per urban-infill Denver

our of during NOI, leasing properties With existing anticipation the operating to believe continued continue space will from strong net increase. of XXXX, or income, vacant we

per a the XXXX, ever our John? what longer-term, proceeds and fourth costs before liquidity property our will John sale have stabilized of an rate reduction with our sure per be financial portfolio. position Management leasing property reduction not higher our projected in the is which Baltimore in percentage of and the FSP President debt volume and East and occupancy leasing XX% XXXX be new a in can’t $X.XX a property FFO fixed debt to interest any more quarter and to our rising time, reach me XXXX toward for Donahue, Compared are be be the FFO some of of fourth estimated share. updates give readily let than approximately range the result year result our leasing and a reset portfolio. in available $X.XX help XX% is XXXX, per in objective diluted now that we is turn we to our stack stronger share an additional $X.XX will of those over to call $X.XX been of of share reinvested on is to At approximately Company properties. we quarter, in our this which With to the objective. comments, estimate initiating it Property to full in reach to of the basic rates approximately guidance per share, While

John Donahue

to you, the the leased, Thank XX.X% quarter. George. was At compared at fourth end a of the Good the morning, portfolio quarter, leased everyone. the increase which X% third of end represents FSP the XX.X%

portfolio leased. XX.X% of was XXXX, As year-end the

As leased expected, the during occupancy XXXX. improved portfolio

the months quarter. activity high over The experienced momentum As surge the square for the projections we XXXX. six year for X.XX finished of the new forecasted, at total X the second in in leasing half with FSP. into at and our the highs leasing feet total in nearly fourth third square million twelve end leasing quarter executed carried of of that represent million The feet months

Minneapolis. During months leased approximately four XXXX, core market, to XX Denver with of from our quarters core for straight and the were leased Denver, the FSP over Dallas, performing increasing past occupancy. largest best XX% improved markets XX% leased

our still in leased three-year XX% is bit leased, leased portfolio to especially to high the XX% improved portfolio, and leased XXX hottest of approximately market, year. XX% Minneapolis. from Minneapolis in at occupancy. XX% Atlanta core quite during core There's be at from Dallas remaining XX% leased. This of excludes also the upside Denver a for XX% in the now redevelopment Our Marquette. a leased to continue jumping Houston significantly at

a three months. six the expect in to We range to XX% the to XX% of within markets be of core five leased nine next

calendar that, higher next new expect will As Jeff more to to of the we occupancy is we absorption Carter. two calendar for With I net turn expected out it which from drive farther and the XXXX portfolio total over a XXXX, to and in above. into XX% leasing, years percentage look

Jeff Carter

morning, Good you, Thank John. everyone.

creation at located almost our FSP our has for property long-term continued value now FSP's is is and and NOI target evolution portfolio shareholders. property focus on markets. XX% its within Our growth

FSP continue. are half during Donahue and John this As the noted, XXXX we that leasing saw can optimistic second trends strong of

look we a primarily our target efforts leasing our will forward, and markets. primary tapping in into on focused As within upside vacancies our be and potential

properties as dispositions makes pricing and value front, five recycling of non-core FSP when sense disposition explored and in-fill selectively maximization strategy, has so. potential to of market part the our urban asset On do target

XXXX, million. approximately we calendar XXX FSP million during XXth sold mortgages for assets, having sold non-core have properties net approximately Since three quarter proceeds. October on Street fourth East XXXX, of us been the in disposed Baltimore XXX During had to totaling repaid XX.X or with million year the XX.X

we if And not couple exploring to and/or potential XXXX. a that received for do is any and specific updates will price pay the market reasons, quarters there here second the be were a we over any coming disposition marketing at FSP for discovery we're with for would to to competitive to down posted positive debt proceeds keep appropriate situations expectation provide half While the the disposition and into reinvest guidance new investments. of use be of

proceeds and FSP The activity find acquisition added and new new such properties over while With insights our into that markets focus investments, both our five in by and our any ability value providing that have intend to within utilizing highly value potential target difficult credible it markets FSP the intermediate front, off respect any term. to possess is are credibly is would On the and investment is opportunities, five fund targeted the in-fill acquisitions potential creation favors market dispositions. environment to market. competitive urban to any the of on opportunities to short

through With you it in seeking for Q&A. Operator? to to not increase indebtedness. today acquire our any at thank that, I'd are to and time, turn We we'll, earnings like conference listening this call over to

Operator

go [Operator question comes Dave Please from of And Instructions] Baird. first Rodgers our ahead.

Dave Rodgers

timing Obviously, the you us, the two the signed up are leases between leasing your of commenced Can nicely there I leases? during ‘XX. occupied is Maybe picked the yet think or embedded share and about percentage. John. is kind quarters talk of not XXX,XXX Curious you square feet of leased those what commencement can if of on first has question is with for last which about but

John Demeritt

the year. of of out Sure. be They’re in evenly fairly three the They first spread spread There out. quarters will any isn't a the spike over quarters.

the because expect, the of year, half or leasing an be in four second month commencement, of the so you five will As average of there lag Dave. the happened would much

see commencement evenly you'll the a over So of first half pretty year. spread the out

Dave Rodgers

got or And backfill for any year. then government, Evershade, some regard I think EOG maybe renewal all expirations, guess look upcoming of expirations opportunities with as I to and the you’ve looking color, on, into additional you possible this ’XX, US

John Demeritt

absolutely. Yeah,

them significant with circle is very XXX,XXX expiring roughly slight in to lease very square expiring. lease in depart And signed the So on activity, the Addison that have of It great feet multi-tenanted, been renew, but IRS expires. hold have property. may the -- Blue be for about XXX,XXX expect downsizing. feet well year. or Burger XXX,XXX got late or are Dallas We've feet of continuing Miami engaged three might portfolio pre-leasing even Dallas. total depart start might The and tenants has square we performers. and XXXX. early property There early so a so a be months, strong over Fannie positioned. either and Lagoon have already to circle two we next in jump and or Mae before XX.X% will likely That have approximately they but a Fannie excited we year King, we're number eventually at will or Mae, will Addison very that a square be been

So exposure our renew to expect exposure is of portfolio. approximately to further XX% XX% once subtract surprises, those X.X% our which tenants, and X% any you to tenants, barring about the about we reduces down of three to those

So about of we’ll our of we leasing to expect surge we which it we're shape that be by and feeling pretty great if mid-year. think in continues, good do, wave

Dave Rodgers

early XXXX Marquette be then ’XX do occupancy occupancy to you of And that or or event? physical economic will mostly have throwing into that, kind XXX in anticipate any

John Demeritt

a of meaningful FFO expect share XXXX, our in in we'll don't The but still lion’s XXXX. slip get holding hope we're calendar commencement will that QX. We it into

Dave Rodgers

cost on for Obviously, a lastly you're And dividend. then rising kind higher occupancy is just rate question you a the everybody that time, targeting George, if TIs I given of but could, maybe that you over the a coverage today, at the occupancy to where of level seeing be XX% XX%, non-core is in given the dividend continue to office assets. able dividend see cover opportunity landscape, to do really the selling and much even

George Carter

in quarter. Board Dave. being and for each Yeah, be other paid all levels, on calculus and XXXX our of with the of has focused The level not came XXXX yet next that on. dividend along the But the dividend of FSP into that you factors anticipated with CapEx the are amount quarter dividends I their decided assure decision to Directors associated for very increased level leasing makes can

Operator

Our next Guinee Instructions] John Please question comes of Stifel. [Operator ahead. from go

John Guinee

the think phrased I've time your the Carter, way that which implies been that the said you the dividend on sort the And asked that CapEx. nine maybe focused very, might answer was years the you, very in cost when you I was that table? about for cut first covering of of escalating that you, on dividend be Board answered the

George Carter

to given I The with. answer want John stay that the is I've what answer it's and

John Guinee

that of is more BofA the revolver, Okay. TEV By of interesting that in second were to my And if – math, to D. the were fully John maybe and to $XXX you is has capacity. and kind draw XXs. would into then it low It’s debt fully down this get your the mid-XXs up for they -- million

I’m surprised on you extend would Any significant So BofA that thoughts revolver. that?

John Donahue

And leverage work out didn't cap Well, how defined sure the bank have I'm XX%. a think and their TEV, of at was that. you -- John. we sort of that to not that come covenants using But within topped definition close I calculated we

worked So, well. the out quite covenants

too. really in that of have and to deals and put bank of and big in October banks hard together in we group total them those a to banks with couple brought We worked a XX prior

is bank pretty our group excited. So,

John Guinee

rehab taking And Mae just floor on XXX the King this Burger the building this Marquette move to and out. similar out Fannie a Is the of service, then dividing and it and re-leasing. place of the is or

John Donahue

property. go. the late Addison of John built Both Neither buildings and tenants. Mae in tenanted one accommodate shape of the were multi It’s Circle multiple are get approximately has significant King great Donahue. to from Burger situations the XXXX been vintage Fannie or repositioning or XXs buildings require

won't building multiple Lagoon either significant. some significant there then And there floors occupants and has modifications reworking a any single so required so there and but Blue other the for or tenant be will single than be been capital nothing

Operator

back session. turn would question-and-answer conference closing to George our any concludes This I the over to Carter like for remarks.

George Carter

Thank to you the to call. all We for in call, joining you. Thank conference earnings forward quarter. next look

Operator

you concluded. Thank The conference today's presentation. now has attending for

disconnect may your lines. now You