Franklin Street Properties (FSP)

Scott Carter General Counsel
George Carter Chief Executive Officer
John Demeritt Chief Financial Officer
Jeff Carter President and Chief Investment Officer
John Donahue President, FSP Property Management
Dick Schiller Robert W. Baird
Rob Stevenson Janney
Craig Kucera B.Riley FBR
Call transcript
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Good day and welcome to the Franklin Street Properties Corp First Quarter 2018 Results Conference Call and Webcast. All participants will be in listen-only mode. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Mr. Scott Carter, General Counsel. ahead. go Please

Scott Carter

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

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

as May X, today, of XXXX. these addition, only the statements forward-looking expectations In Company's represent

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

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

John Demeritt

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

As rates that, $XXX.X of markets. XX, add increased turn to our our capital total In fixed of proportion the at value about long-term about With filed debt of with a our was aligned On on reported we be can our With sheet service five found our rates. our at that package XX% the million structure night, our revolver fixed stack our George. that outstanding will termed mentioned, we have fourth FFO were mostly completed coverage believe fixed, at $X.XX our first call funds our We comments for balance and debt over I'll to of March billon $XX.X ratio a Scott XXXX. From of operations reminder, which as to had we supplemental we million the core website. share a more have last out liquidity we At end. significantly transaction George? our debt on today debt XXXX times. SEC per $X.X in out our the and properties from in more standpoint, we we balance with and XX, million liquidity release, refer XX-Q, quarter debt on termed earnings cash for last quarter and variable. sheet our debt and and had rate or $XXX unsecured a $XX.X or of X.X million March have the year, quarter available debt XXXX,

George Carter

Good John. everyone. you, morning, Thank

of the XXXX, from per from said, totaled million for per the $XX.X first or of Dividends operations operations for $X.XX first share. John Adjusted or $X.X FSP's or As same for $XX.X million FFO funds $X.XX AFFO share. period funds quarter the quarter share. million or XXXX approximately were totaled or $X.XX declared approximately per

continued first first that be takeaways think quarter I of main continuing and meaningful has easily may portfolio. numbers. not activity are activity leasing strong significant quarter, three seen the and are moving experience the was into to XXXX That three XXXX in four there XXXX. within they one the first from is quarter second of the property we our quarters and in it very the of And in

John of first quarter color from to and some Donahue, And a While robust, potential higher XXXX we this the has new and be in executed as continues. very, better existing to more were activity give of the very significantly minute. continues XXXX modest, portfolio percentages the will in anticipate leases than XXXX. just absolutely in leased tenants

will point over Second of stabilized, these experienced in energy and to real stay as barrel and above And recently call from becoming say be markets larger simply the oil on tailwind. of and Houston tenants. early last to we years are they that are the to many per lastly, a provide some many, not have potential have asset early now have requests we mark Key the those last beginning on markets, be several in The but getting stable, prices the the appear Denver been stages renewal $XX to from barrel obviously our perspective ground increases only continuing above our year Houston headwinds that show available would lease are in the that in is markets Denver managers tenant you the activity. if I interested. Will mark. Friend this and Daley have Toby more $XX and

we the call larger Donahue, John is portfolio, deals are of or renewals believe our these of and property And of President these that, Management now able opportunities urban We the of actively land-constraint increased as activity on Property renewals several to to infill to – this because With quality be environment. working over as early more Company. year progresses. turn John? expect let me happening the announce

John Donahue

Good quarter, FSP you, the Thank morning, first portfolio XX.X% everyone. George. the was leased. the of At end

We portfolio. occupancy to several over expect the leasing on healthy increase lease the across current next entire of amount quarters the based activity

due leased during commitments and the number During modest the square February, first from decreased were pause Corporate formalized during of appeared XXX,XXX hit on button prospects to The through quarter, we Americas first which feet. leased approximately to the primarily quarter total January decisions.

approximately square are square amendments in to which mid-year delays strong potential XXX,XXX surprises been for leases feet. overall XXX,XXX or there may feet However, of approximately activity XXX,XXX total has now out execution our any and bring to borrowing

have As in to we an anticipates of XXX we a in floor. announce XXXX, that first line for are total had XX,XXX a foot we December. XXX,XXX first half lease in the forma Marquette, calendar leasing with with pro- our pleased achieved occupancy The taking square comparison, economic feet. At are square executed of tenant and the tenant the

off atrium remaining leaves for lease. an this for an summer. lease located Starting building the on with also that is occupancy a a tenant the ideal floor in We cafe a first anticipated commencing locating the with upper situation full-service floors us operator operations with with executed premium

discussions believe and our of touring five continue for prospects We leased the core of upside terrific portfolio activity activity XX% the building and If substantially the the remaining translates XXX be There in in Marquette active to to markets, calendar during the and have by portfolio, Houston, are and all lease is balance leases Minneapolis. in then in year. Atlanta our reach expect we year-end. performing leased will well core XXXX, execute ample to to especially

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

Jeff Carter

Good John. you, morning, Thank everyone.

infill markets on generating and NOI and urban A primarily value FSP within and property continues on properties to our long-term Class at focus be Sunbelt in West Our creation. Mountain core and growth locations

be and in potential As look will focused our leasing efforts taping we vacancies continue upside to into on forward, renewals. our primary and

portfolio, FSP On office and monitor proceeds do however and within keep whether to market we in enhancing the and for dispositions any specific potential of non-core non-core reasons our property the for FSP recycling And moment. front, the advantages is for our within our will properties matter, and This portfolio property the across recycling continues potential so the we when significant country evolve our number committed property look not managed to assets. these sales will so, of tenant, that to this presently across markets. do market a asset will we for group at see We this the disposing the anticipate disposition off posted. do our and in market keep and/or we from we dispositions value anticipate in informed. portfolio and

our of time Additionally, almost dispositions footage our in frame. mortgage already repayments accomplished square with in within approximately markets XX% and that four had million significant targeted focusing our since our during portfolio our progress of XXXX we following transition, and/or have $XXX view, now much made of located

disposition is potential expectation debt. at down proceeds this Our pay to to any received time use

Operator? And anticipate open And making monitor we this opportunities and does today. call but any investment like new our at we'd not markets. time, you conference for at track to call to listening questions. with this up that, the for thank our the On within front, time, FSP new continue acquisition, earnings to


W. [Operator Instructions] Robert The Baird. first Schiller question Dick with from comes

Dick Schiller

quick Could leases you in? of Couple back weighted mid-year by Hey put it year when The half heading do up will of to those discussed John, think occupancy XX% lot guys. or weighted a you as good ones morning me. commence? end, you from that

John Donahue

Hey Dick, morning. good

in years, we commencement question, we above. clarify everyone dates anticipate, the those that quarter over looking commencement these XX% into which we had to to are second coming can out out XX the was Just of months. comment the going things that the your leases, and next here the two is, over get last believe for executed year spread But dates that XX% we leased, the may

be couple the next evenly there XX but over will fairly spread here surge next won't So, out over be of it the months. quarters,

Dick Schiller

efforts, you some in And helpful. square footage what's on in that's the other five key exposure Appreciate in cities. Okay, that the some a Thank markets. you motivation number of have – capital delay really still back given your recycling of but on you your markets, to the in some then, you hold existing the spoke of are basis you. about XX% of

on hitting you the what So, pause some gives sale to of button to those?

Jeff Carter

our really for We're Thank Carter. of disposing pause. as This our Jeff and both, you and a property but matter portfolio, and off And once said, committed the so, properties, property do just that for tenant, Dick, is we a see number do even proceeds value specific of assets. it's market reasons. in potential the they the for to upside recycling any enhancing these I non-core on not

property. we've as been building spending as the different and improving XXXX but enhance demand dispose for sell And many now the in right strong of with a the Illinois seen another so, property ourselves time We've of the not momentum stabilization in infill at at got Northern we call – in on always a from the cycles got couple for to property the potential have we downtown in that pause, through that King, following that a that market the examples, We've mind, dynamic it's and terrific terms I'll our tenant really many said exists in a our our demand that is conditions It's cycles assets a Evanston, we've value the believe change least at to a give of can increase to potentially minds, and example property tenant since Burger end add potential time and do Virginia that for in we tenant market. leasing Evanston, sell we in it, example. Miami you departure. in it's so. potential lot it property lot investor the property market the not both we and Davis. of value think of for in a as but we've and and XXX buyers, of can ground in the where interest the

time about maximized decision to like we So, really the the not value right asset is the feel at when but levels. anything, transact we've

Dick Schiller

at other Okay, types XXX from this that's thank And actively space? you, what guys helpful. co-working you me, of one speak are last can looking and tenants space Marquette about at

John Donahue

Hey Dick, to it's John reasons, of out months. up property past myriad come XX for didn't And it work a as XX over at certainly has again. a Co-working the us. use perspective for the

technology, as see to all professional activity services, continue well. and We including co-working, services across sectors information services

such You have any to multi-tenanted. now occupy, building it's located opportunity space, with edge think lot and which is the definitely don't unique really space of in you eager you and Timber now will of know. to and We're we city know but will We the of of it's interest. on the based industry build the predictions going Brick receiving just heart the that's city broad a unique and if momentum right sort


comes with Janney. question from Rob Stevenson next The

Rob Stevenson

in are year the are order you What you? in Good spend morning, probably you currently of front that a basis to execute seeing to square on this total need either foot that or guys. in leasing you thinking will

John Donahue

Hey square now foot increase We due On to in inching per tough we've the those portfolio, saw in closer Donahue. $X.XX up approximately $X John our costs $X year. in a to Wow, to a seen years, to inch it's over up per Rob, and the trend were foot the that's square $X. whereas basis, numbers answer. question especially urban previous

year square our do extent to are in to and would to If X square locations, So, locations, or may square TIs leasing in be those million lag, right going the deals, those suburban just in the and X a portfolio, that say $X per might away, lower. simple significantly be exactly that hard will feet, request large $X non-core majority we say in to how between And It's million then feet that to costs I much numbers assets of commissions those our high-quality our year. know you foot, do there. tenants also, then more. this the you for is you or then do be of hit the is urban the math a spent always extent not there

XXXX So, capital in really hard we pin what or that down sooner. XXXX, be happens it but to will hit hope

Rob Stevenson

Okay. And Burger to with to what want capital that is are to building? guys the need do do King you you the going what

John Donahue

Lagoon originally Blue currently be houses The was building that to King constructed Burger multi-tenanted.

speed to the So, expect on amount have don't we to prospects building and of money both up it single building we capital to although, which multi-tenanted, a spent multi-tenanted, face bring expect prospect. be side do tenant the a multi-tenant large side, to we be

not it's of So, worthy talked not as number a number be a we material large would about in prior mentioning. quarters, that

Rob Stevenson

stock Okay. Then me, are guys the with throughout under How returns year. about talked about from these guys proceeds the you using $X thinking stock any disposition days? debt last you repurchases the potential reduce for to

John Demeritt

is that. at are question. Demeritt, This that Right X our is use net our it John to been it's to now to looking goal and debt it and and we're dispositions make from happy it's leverage ratio proceeds EBITDA and we X.X, of this that doesn't going to answer application below at and above get loan to To for and increased repayments point, stock do with our us where with cash today. leverage operating repurchase our sense to do

Rob Stevenson

Okay. Thanks guys.


comes [Operator Craig B.Riley The next Instructions] Kucera FBR. question from with

Craig Kucera

Good Hi. are guys. that East expected recently you've I saw listed Wacker. that from your morning net sale? XXX proceeds What

George Carter

George. is this Craig,

It time think when property appropriate. out, along at it will we if mostly talk has are talk about sale just give as also with quarter the there is the are of not equity to And at partial And We in other we are market. this you not listed reasons. We that kind that occurs. our know to for about shareholders. owner competitive wanting and point, been this a in certainly information

Craig Kucera

Got it.

we that should any debt, will eventually that from proceeds correct? come reduce sale that to so, utilized once it do assume And closes be

George Carter


Craig Kucera

list Oaky. Grand other Do XX% you think Boulevard, have such have any plans to a you this year as interest? properties I

George Carter

we that be proceeds properties interest point we there that at those down any the too, any listed of fact again or pay to loan will could/would our this are equity equity debt. anticipate of in single-asset in and and and or if listed think the I are lease within applying properties, to sold, managed proceeds loan either have number

Craig Kucera

Okay, one more from me.

what at having guess so, occupancy prepared I of the a that been year you down we've been You is in leasing you've I changing the year-over-year renewal backwards seen kind leasing basis or comments over what's color activity of I'd for a the I going last mentioned has something look theme, think marketplace? been but in probably environment hit guess some it's there. go the of I the you the low. and confidence new of really significant your think quarter, now this happening or when past to and about that XXX kind and this XX% Is year sort at gives kind so? you're like points

John Donahue

Sure. Hi Donahue. Craig, it's John

start I think far leased. of not really XX% that XX.X% would that we I by So, are at off saying

thereafter. slightly negotiated QX leases a are could Huston all three that to to and in appears activity slight have XX% of row we've and long us that half linear. appears in Negotiations large in bring markets of in being to have in here step particular in now to lot five a step I that the and step need hopefully. and a be half time the forward QX expect been We in been troughed the backwards was yes, core happening. taken be has has had progress strong. and furious stable been that not working that the QX and XXXX, in slight in stabilized, have – of XXXX a and and in Huston have or we slow in the a XXXX, first forward unison think, and progress of QX right XXXX we quarters of It second here

So they'll backwards to a five for that the here step then, we reason that's big over collectively talk months. markets, six us. no core And believe have the

So, over touched NAREIT that borrowing we next are we Also months, talked XX% here timing. it as surprises George couple going times. any bullish on, to the six are a of about at that get in we've

our XXXX. couple the seeing ago percentage. quality ratio. renew of percentages, few expect retention tenants we've a to XXXX, a in anchor range the anchor we big a higher at percentage, better years of over improved those With XX% years, and we're a portfolio large last and those tenants into renewals, trend at has As a in the In higher XXXX been

And so, that's what we a with in handful now. are seeing, we're hearing, what we're that's of negotiations them

we to that goes it So where see getting and in are on this XXXX. XX% bullish year

Craig Kucera

Okay. Thanks guys.


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

George Carter

thank you. like our Hope XXXX in earnings to REITweek for to first at listening Thank Just York everyone for of many New quarter soon. you call. see


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

You may now disconnect.