Franklin Street Properties (FSP)

George Carter Chairman and CEO
John Demeritt EVP, CFO and Treasurer
Jeff Carter President and Chief Investment Officer
John Donahue President of FSP Property Management and EVP
Toby Daley SVP and Regional Director of Atlanta & Houston
Scott Carter EVP, General Counsel and Secretary
Dave Rodgers Robert W. Baird
Craig Kucera B. Riley FBR
Call transcript
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Good day, and welcome to the Franklin Street Properties Corp.

Second Quarter 2019 Results Conference Call and Webcast. All participants will be in listen-only mode. [Operator Instructions]. After today’s presentation, there will be an opportunity to ask questions. Instructions]. [Operator event this being is note recorded. Please

now Mr. Scott would like go to to over conference the Carter, turn ahead. I General Please Counsel.

Scott Carter

quarter welcome Street Good the XXXX second and earnings morning call. to Properties Franklin

Demeritt, FSP Investment morning morning Management. this of Also FSP Vice Management; Carter, our Officer; Officer; George With are John Will Executive Friend, our and Donahue, President me Financial Chief are Chief President Property this Toby and and Chief Daley, with Carter, Executive FSP Property Executive me John Officer; President Vice our Property of Jeff President Management. also of

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

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

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

call over the Now, John? John. to turn I'll

John Demeritt

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

today and mentioned, As Web were Scott the package our all a site. last earnings with SEC reminder, supplemental comments on found the to refer be XX-Q, our will which release, and filed night, our as can

second sheet X.Xx. about $X.XX service On from We for reported XX, our the million or of about we debt of XXX share outstanding million and of funds quarter our 'XX. coverage ratio unsecured debt operations, $XX.X per or balance FFO, at June had was

third $XX the it owned a loan to was a second us repaid quarter, after our secured single the property to During which asset had that sale. by on million we sold one REITs of party, This the property.

be end As balance repaid of and no June, the of XXX our has revolver, to million available which we drawn. drawn

fixed rates. rates have the until structure and more have XXXX stack our we our is capital of out at believe aligned With have XX% debt November We with about XX, long-term our our properties maturities now markets. debt fixed, that no we termed more we value-add our and debt mostly in

on the standpoint, million million revolver liquidity and on available cash had our balance XXX sheet. a From XX.X we in

we June, of So million. of had liquidity XXX.X end of total the as

over I’ll George. turn that, George? With the to call

George Carter

you, Franklin Thank Properties XXXX again, Street quarter to earnings welcome John. call. And second

said most our we that call, for results. in and earnings the quarter’s important last XXXX metrics leasing FSP from XXXX will in So flow

the quarter year best give of of in company’s activity leasing us in Importantly, to first realized any history. the the leasing second quarter continued half the first strong the results

FSP that the is both of results roll that an a occurs bulge leasing the roll of in lease in XXXX, a bulk the context and It’s and with, These large XXXX are approximately XXXX. is challenge large, dealing lease which opportunity. three-year

the continue markets of We infrastructure and long-term concentrations with square footage of to optimistic about portfolio growth strong targeted in be very and our properties and office dynamics. positive

achieved current We by in important our that and activity terming XXXX redevelopment liquidity space, have backfilling believe net but financially increasing existing place. Much handling be rollover as and absorption debt, operating this prepared can our is as net rates XXXX in for leasing much properties lease available out which well rollover continues of successfully to coming our well and tenant be or absorption renewing is as the unsecured. XX as leasing new before needs is three We effort properties. our space to fixing of meaningful on take of new all our

leased We believe at through also our generally is rents rising and to period work continue properties to XXXX longer our space. to we and of see continue leases this be in the as percentage trough likely

$X.XX. said, the as noted press was full release we As last guidance FFO for earnings And FFO upward. our John our quarter XXXX issued revised Demeritt night, in year

portfolio over President commentary our Property Management of about John I far will John? Company. to the property in turn Donahue, activity XXXX, For so some the call

John Donahue

The Thank you, redevelopment assets, as Good leased June XX% everyone. portfolio June. morning, entire of operating XX.X% portfolio, was including leased FSP as was George. The XXXX. of the

feet we approximately quarter, XXX,XXX including XXX,XXX new feet, square to tenants. leased second leased the square During

of square XXXX, first XXX,XXX the leased we tenants. new months feet leased six approximately XXX,XXX square including to For feet,

leasing year total the set half FSP first an the mentioned, of record. for the George As

to are record for tenants XXXX. and prospective improve net on we leasing third the upon to pace Based absorption expect occupancy tenant in leased calendar annual new the pipeline, an increase quarter, and the set in we during

intent prospective are in properties XXX,XXX the currently tenants redevelopment for portfolio of are in currently letter the leases stage. and square either both of over There feet new operating or that in

barring surprises, majority during with expect the new So execute the third we in quarter the those any quarter. the leases of to balance fourth

weighted $XX.XX portfolio the $XX continues is also move average to equal average leasing activity FSP. gross for and on rate, in-place of closer the high a for a GAAP achieved year to per to rental that rental foot. represents square rate new The rate basis, weighted the foot. terms square of annualized rent approximately per or rental average first six months In This foot. was occupied upward square weighted net $XX.XX On net per

that, With over I Carter. will turn it to Jeff

Jeff Carter

national believe experience opportunistic meaningful potentially employment Mountain Mountain office over the can you, which long-run is morning, regions the above rate as U.S. appreciation have to time. to on to and We high-quality population focused growth Thank West Sunbelt the Good lead average, ability everyone. regions well John. and rental the own U.S. primarily FSP as Sunbelt West our several within strategy markets. properties, and

of This a show FSP’s five Statistics, supplied Jones of Lang Denver, gains national has LaSalle, largest Houston Minneapolis within metropolitan encouraging investment areas strongly to strategic view cities continued performed Atlanta, in data U.S. Dallas, the signs Bureau via 'XX from highlights job Labor major between on and XXXX and results. basis. and these

office high-quality infill within tracking potential efficient transportation properties. continues properties amenities, with U.S. FSP’s that to well-located located to office and and respect demand indicators strength number economy positively The areas primarily are in of to housing. access with aggregate economic provide a display

terms of for demand competitive nationally. sales pricing. remain remains historically properties Investment low high-quality in Cap rates office

properties markets, strong to pricing. we our for and at and FSP from compelling pricing monitor few demand sale see buyers, continues across quality Looking relatively

the property, sold front, approximately million third that unaffiliated per approximately $XX property recycling as square FSP of I, from Tower an June anticipated million or as during secured was on loan party managed our totaling disposition quarterly at property the for last and known On time repaid on XX. $XX.X sold $XXX Energy asset The call, the foot. to was The closing. fully

With FSP the worked reshape and/or respect past dispositions Sunbelt repayments five portfolio years million. over U.S. the its our completing over Mountain on West to mortgage of focus strategic areas, XXX to market by has and

we the the is sales suitable our to within front, On all track expensive, markets. although opportunities acquisition our efforts continue market investment screening

continue We intermediate infill the the to to add seek value in markets and to over possess short credibly term. urban ability that our properties high-quality

we’d call the to at I listening our like call And thank conference up open for questions. with for that, earnings And this you Operator? today. time, to any


you. Thank

We will now question-and-answer the [Operator being Instructions]. session.

with go Our first Baird. Rogers comes from question Dave Please ahead.

Dave Rogers

It the the a guys see little year. that remaining increase. maybe as for bit the full through for the increase drivers some of in you George with see guidance great Good guidance start the morning, walk or to Maybe year. guys. of the John, FFO it of was the portion

John Demeritt

direction. John number of years, a It’s release, Demeritt. that forecasts main lot did Dave. we about couple things, The Sure, that all, some our last the but and things. Yes. earnings of done changed are that a on which believe in not leasing guidance talked do based in of we that’s internal we we’ve considers the We and the

Sep past get on and free to half leasing ahead, to so. as the that’s that see look and last we’re year of we ahead. see – recoverable look Some going expect think is to periods done of the we rents is coming we’ve up. income and have move we more board a us that increased an going starting the And see as to or rent

of as We’re also our optimistic look as them. capitalizing had some interest expense And we’re debt ahead so leasing, we’ve and work on the we interest redevelopment And lastly, that’s have two as a on the that we which impact we fixed half second positive complete properties some of rates, repaid operating about have expenses at we mentioned. well.

some those helpful. So that forecast did. that went the Hopefully, we factors that’s the of are into model

Dave Rogers

switching of just that activities sounds leasing you two you second that that some It redevelopment more uptake then is I is color, appreciate half the and the color One about dovetail about. it so really How to maybe impact thoughts. activities, square three that at And Donahue John. assets. will there? quickly so do be the into year the feet would XXX,XXX anticipate talked over specifically Maybe like, characterizing the

John Donahue

the prospects Sure. some year. to LOI, now midsized in Hopefully, in we be in smaller Good the and in immediate latter in the exceptionally QX, the of impact of are is half share morning, of markets. lion be but a strong of year. the of second impact pipeline tenants an leases lease part Dave. those we next impact the The summer of our year, months having number right next where that we’ll or starting the with the next will of In believe majority the pipeline – year, regards this will have

We are had And three with of because a in the just been very dip rolling. redevelopment Dallas the some recent on has properties. pleased Dallas terrific. we progress

The have coming We been more the get resilient. some market that back. the garnishing space we in in been have very before assets interest but even has roll Dallas fourth quarter,

Circle. Fannie the backfilling Mae Addison We’re space,

Circle. heavy Legacy pieces and We at have activity of a moving lot

some we’ll to announce have soon. So hopefully, things

redevelopment the On properties, with Park. Forest start I’ll

and very think building, we’re year. interior, portion and the Miami one We number end next that building. we quickly likely year, be aspects that next the would activity then from will take will freshening prospect beginning the has the year been of impact its Either take is have that think property has we’ll tremendous. going excited with The of that – happens, FFO most of and it likely we of multi-tenanted building, property but the both a begun – prospects this that have we re-stabilize possibly well. property up the likely a different and majority the most with most really of external way

Marquette, of progress the next quarter for then really posted. XX,XXX They of been perfect-fit depth signature as square But The previous the and take will or last well. calls, will market we able later some are feet asset. a top floors fit space remain two have to and is in right going now that really perfect hoping a two keep we and available but the you hopeful feet with be tenants and has over are hook disappointingly tenant. they to mentioned we one to the Miami XX,XXX we’ll working for And tenants groups year. most likely remain quarter this shallow, We’re square multiple there those

Dave Rogers

about lot One Day? Can on an quarter Jones us you give last You then? me. on since talked call. the more Any changes it a for update

John Donahue

– we to over Yes, turn are I’ll give I you an Daley, update. think Toby Dave, that to

Toby Daley

a to them Yes, Dave. to are that’s built at be has for Jones made Square. public going relocating Day it that they over Colony building

tight that end we’re going term going be given to vacating date the not be be So November. their date they that next quite is ready. lease of expiration the will and of sure new building It’s their to at

that And right wish Midtown. bottom building So good to to we’ll line. that there’ll that their out. But how we’re demand a level did with the high see gate restack at and through the for plays existing they of we premises to finish forward not some all looking converting think of live pretty be multi-tenant to

Dave Rogers

Great. Thanks update. everyone for the


[Operator Instructions].

Please comes Craig with ahead. next Our go from question Riley FBR. Kucera B.

Craig Kucera

In commences later is Hi. of that or in of guys. tenants LOI discussion, Good that? of the sort new morning, inclusive XXX,XXX lease that that regard is to prospective this of the exclusive quarter or T-Mobile under

John Donahue

represents Craig, net it’s excludes absorption. John that expansions, or feet not XXX,XXX tenants square all No, that’s essentially Donahue. T-Mobile. – The new

Craig Kucera

in And noted guys it. up higher that Q, rents Got the think you than year. on you’ve their XX% I were rents about achieved prior that this leasing

or that look you’re market year, working the sort you is many is that relative half of currently rents little quarter representative through see in you the where and that at high? the where vacancies a As cases of prior of to this back

John Donahue

the leasing over which board on all be do will at. depending asset the we It

assets be flat assets and X%. be so some of excess might And some in to will XX%

So in be and be the we’ll annualized think XXX,XXX we’re feet of hard be in tell the in double XX% on digits, the really talking somewhere to can’t just that leasing But it’s that but XX% – we’ll believe square achieved. quarter-to-quarter, tell. where I basis exactly to they’ll an about, probably quarter-to-quarter range terms I will

Craig Kucera

Got or else as as there that operating was the those to just And some Was there redevelopments related a on was the healthy it. expenses, drop. capitalizing going expenses of far there? at anything

John Demeritt

Demeritt John again. is This

X.X I were expenses about think capitalized quarter for operating the probably million.

with just expenses And our properties. rest job doing better we’re think the I in a so

Craig Kucera

Okay, I Was termination of else that was you quarter. in about $XXX,XXX think great. the that or anything just was NOI a And had lease non-recurring there there?

John Demeritt

the typical were make are terminations for These weren’t for Terminations tenant a but XXX fees. termination at to really quarter Peachtree. Yes. about XXX,XXX, expansions they way

So we positive look it’s as ahead. a

Craig Kucera

me for And hop more one it. I’ll Got off. and

Board liquidity comfortable at run forward light lower dividend just Is reduced guys there dividend. amount is or just of year. that, the going the rate? – you’re leasing the with at the your think given with standpoint doing AFFO the dividend I the last still your a there reconsideration affiliated You liquidity expanding and current And of expense is the from AFFO any

George Carter

that also very is Craig. our dividend. a year $X.XX. the AFFO every first – Hi, as leasing Board I Carter. It’s AFFO. the volatile full was very quarter-to-quarter. you George the makes that and of we for we’re that that been say year the AFFO you – leasing done, and We’ve But had, not not our don’t doing we all, can experiencing, forecast leasing. I of always determination spending of time, be are the quarter tell CapEx dividend can tell for all to will we’re dollars. with needs I levels we’re But Board then example, the that be a and of again the We last if comfortable have lot 'XX, doing And

of lot to continue a I will do think leasing. we

to that number, it, comfortable to quarter-to-quarter. it. reduced quite again, anticipated dividend AFFO And very be you liquidity. with with so And our increased that the volatile mentioned, number Board is as We is help likely

been maximum I liquidity We’re remember, we’re challenge. Board and currently can the number at is the since so very again, we’ve ready dividend. comfortable the for leasing AFFO with our the And in

Craig Kucera

you. Thank Okay.


Rogers with next from Dave question Baird. ahead. Please Our go comes

Dave Rodgers

guys. Hi,

feel this basis if asset, is of I done don’t a you return you’re that what’s the couple John. a structured for how there. when I follow get But on doing and you perspective? the ups with know $XXX know But the from a foot that? all-in Blue on about you’re parking Lagoon or And Just about and John rent do adding

John Donahue

Donahue. John it’s Dave,

greater investing enhancements the the in, what we’re parking we’re leasing, parking that higher expected. that of as on the at not long-term we terms are in a looking we rents a investment in higher for there current market just So but seeing demand and is

spreads, terms of but So both going of we in terms IRR. to leasing are think the be good very, very also in returns

Page value, that building book stabilized premium certainly keep a for I over basis. that supplemental investment all-in my of is Our of value the – total we the don’t on but XX to fingertips and estimated that we’ll there value have the the believe on updating a basis the is at you. leased

Dave Rodgers

Thanks. That’s helpful.

and real confirm them there’s wanted that Petrobras of Just point, at with no Northrop keeping to right? chance this

John Donahue

what’s think chance the there know or we all We much country. past Grumman is minute that had with going don’t Agree. in by a holding on either the of Northrop caveat over tenant I in the will and defense contracting with extending. we’ve last request

possibility put remote a chance, possible. I but small is would So it of happening, that very

Dave Rodgers

disposition. out this just take you some know frothy lastly, would Jeff, wrong direction, more considered maybe point? the dispositions on then for at have the pretty monetize FFO assets Obviously, and perhaps way I in in of and And there guys the market’s but

Jeff Carter

we the outlines. Hi, think We now, with is healthy there balance way Dave. inside the Right a are portfolio. opportunity very of content the portfolio

so more the from Possible keep forward. this market on go and managed operating year we our the portfolio. directly would side dispositions as not And I anticipate we’ll posted

Dave Rodgers

Okay. Thank you.


Since remarks. we conference our at now questions Carter will conclude for the session. this I back to further no like George time, there to turn Mr. are over closing question-and-answer would

George Carter

I tuning the listening quarter’s want call, much to and we forward and thank very look just call. in to to for next Thanks, everybody again.


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

You may now disconnect.