Franklin Street Properties (FSP)

Scott Carter Executive Vice President, General Counsel, Secretary
John Demeritt Executive Vice President, Chief Financial Officer, Treasurer
George Carter Chief Executive Officer, Chairman of the Board
John Donahue Executive Vice President, President of FSP Property Management LLC
Jeff Carter President and Chief Investment Officer
Dave Rodgers Baird
Rob Stevenson Janney
John Guinee Stifel
John Kim BMO Capital Markets
Call transcript
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Good day and welcome to the Franklin Street Properties Corp. fourth quarter and full year 2019 results conference call. All participants will be 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 FSP Chief are George welcome Street me Executive our Chief earnings Donahue, Good the Management. John Carter, Jeff Officer of With FSP of and of Demeritt, Carter, Officer, fourth with and our call. and morning and Vice XXXX Officer, Also full Daley, this Toby John President morning President Management me Executive year Friend, Financial to this Properties Franklin Investment Will are Chief Management. morning Vice and also Property President Property Executive Property FSP President

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

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

as do may date company's the the any to statements today. specifically Any so. it as relied representing obligation company views elect any forward-looking upon While not to to update statements, these estimates disclaims forward-looking subsequent of should or be

press website www.fspreit.com. of may of is net FFO Investor available or during from A call, contained release, reconciliation at operations our on is income we section times the funds GAAP to which Relations this At in yesterday's refer to FFO.

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

John Demeritt

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

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

share share XXXX. from or funds the million million of operations $X.XX per and fourth $XX.X reported $X.XX or for We per or $XX.X full for the year of XXXX FFO of quarter

Turning service of to our ratio balance sheet. about and million had At we coverage our outstanding debt debt times. four December about XX, was XXXX, unsecured $XXX

of the million revolver on During available. end $XXX year, balance we QX and and the as no our drawn have to continued of is

XX, until have We about and rates. XXXX fixed debt XX% debt maturities no of at our November is

we I sheet. debt termed we out markets. standpoint, our had rates our available and value-add revolver, properties long-term $XXX capital more structure our $X.X the we of just have type more on stack believe mostly a cash From we the With aligned fixed, that on said our million have in with million balance in and as liquidity our

is end. at $XXX.X liquidity total million So year

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

George Carter

Thank XXXX year Street you call. again, and John. earnings And full Franklin quarter to fourth Properties welcome

$X.XX quarter and respectively. full As $X.XX John XXXX share, said, our FFO per and year for was the fourth

redevelopment operating we and year portfolio of three of square leased For projects, in XX XXXX, XXX,XXX approximately of the tenants. full square feet X,XXX,XXX which with of space office was total feet new our a

about about is leasing feet XX% X.X X,XXX,XXX per of approximately XXX,XXX year for Upcoming office rollover both our property total to tenant per XXXX, square or million square we and per of X.X% Over feet three existing square portfolio. year average of our years, XXXX lease the about last year have per space. year averaged feet now approximately expected

of much net our rollover new will the backfilling past in seek years XXXX rental to space, activity with and or over achieve come. years tenant of While we focused to economic three absorption the leasing existing lease has average objective on rates renewing for occupancy been meaningful increasing

such achieve At $XX,XXX be $X.XX net to guidance the we XXXX estimated strategy add XXXX, absorption point. should of higher the we anticipate new value integral is, occupancies are recasting If FFO FSP's The XX guidance at the in that to lease last This part an property impact was an of of finally this time, inflection positively termination over giving share. years our rental includes $X.XX for we year proposition full per of fees. future in longer an range term economic believe, we positive income levels. portfolio

portfolio, For commentary John to management our over of call Donahue, property about turn activity the will company. John? in property I now our President

John Donahue

portfolio, of year XXXX leased FSP was for end was tenants, new new which redevelopment the full feet Total Good record as XX.X% XXXX in including leased George. XX.X% December you compared calendar approximately Thank with feet. X,XXX,XXX achieved square square of assets, at XXX,XXX everyone. the for The is to leasing. was XXXX. a high morning leasing Approximately

less a likely far in departures. relatively thus XX Due lease expirations there recent calendar the This our in of below expirations years, For than renewals, upcoming total opportunity year to to year in X%. during terrific XXXX. in make a to the occupancy progress first square regards and progress portfolio sets light X% and the of QX known time the by XXXX to total holdovers approximately next meaningful on tenant during expiring percentage feet measured in for will leased due well is be months three leases extensions,

XX,XXX considered tenants, or strong stage potential of current of a XX% the to net Thus the during pipeline Barring FSP probability tenants in execute to is we represent There of percentage absorption. tenants of and XXX,XXX expect have feet. existing that assets of months. of of square surprises, far, square square quarter six we new prospective XXX,XXX our XXXX, the prospective next potential of either approximately first expansions the prospects. letter any feet three along those executed leases with significant in shortlisted new the Many feet intent have a or approximately

rents in We with continue portfolio. gross the FSP net to make rents and progress

In value achieved square per terms XXXX. for average weighted-average rental in-place weighted XXXX. or end to of occupied weighted foot short along the rental activity of at portfolio at the on the a translates year year leasing leasing believe to square rate, per for was per executing net the gross square portfolio. On average foot $XX.XX activity per demonstrated The $XX.XX in rents progress We fewer $XX.XX the term and expirations total GAAP in was to rate in FSP basis, on with foot. square net the the leases $XX.XX $XX.XX as finished compared rent compared longer-term foot added the

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

Jeff Carter

are our largest for continue the excellent for to creation with poised point. that morning West future Thank you experience continues markets. is life compelling locations, population as the locations to Mountain enjoying is upside encouraging where well markets growth focusing Franklin rich George generate Census population Bureau John. and as national and customers focus Sunbelt, value an as growth our within FSP's more in and data U.S. relative portfolio Properties from several Street specifically, the U.S. to show owns reside. Good regions office market, continued opportunistic to South everyone. of indeed, regions believe U.S. well-positioned service inflection the our the West data show regional conditions and of the Mountain delivering demonstrate job potential cost to the West we growth. high-quality and By referenced, the on country properties to has to in market office Sunbelt respect the positive living of amenity Job trends, information that performance signs statistics, strongest quality

million repayments are and the quality FSP rental West U.S. directly the assets disposition with currently properties higher possessing $XXX and longer dispositions obtaining years view open recycling and nationally than liquid more for refocus as investment sales FSP, on quality capture. and locations. On opportunistic term and market substantially our Sunbelt portfolio portfolio. mortgage works owned remains quality, XXXX. d our Mountain to higher has several are resulted several and that over and/or positioned past broadly reshape front, pricing markets ago Franklin by Presently, positive Street we rates our is portfolio we that completing average asset of portfolio potential infill-oriented our into in striving since At upside lease to to

the keep appropriate market and circumstances should as update warrant. will though We posted

efforts we our within continue to through acquisition On the suitable new track Generally organically on existing potential continue value-add stronger all than investment markets. portfolio see IRR purchases. to though, externally we opportunities our within front,

identify markets to to within will term. and We that though continue over to short add value infill intermediate the urban efforts properties possess ability our the our

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


[Operator Instructions].

The Please Rodgers first question comes go ahead. Baird. Dave from of

Dave Rodgers

to leasing redevelopment that about dovetail morning you on might you you which Good assets And where and I the that that this about already expect the stabilize XXX,XXX XX,XXX the also wanted that Can backlog Yes. give the update you the activity Donahue, an XXX,XXX XX,XXX everyone. with by John start the is? feet us end can and of of think talked of I and of year? how lease-up was square of impact mentioned you to then other you executed. on

John Donahue

Dave. with a is combination across morning that's the will No leasing feet. distributed quarter Good start any occupancies XX,XXX believe the extensions. quarter, the then the first with significant off square spread expansions, and but Sure. out we in of will portfolio of I evenly given some across start the amongst new And It that spike year. immediately, year. it in and those

and feet, to have fourth Many the in anticipate the execute of we them about six entire forecasted haven't the new would lost of terms deals XXXX you optimistic then XXX,XXX batting three a are those had almost half next we we recall, square and of square average a high months. we in to as we percentage those able balance into that the and of have drifted over of good were we just will land of feet prospects. quarter and XXX,XXX that those And

We percentage towards of are been year year. those because large the have back the deals will delayed bit that the end in a take of anticipating occupancy that the half a

some could on. meaningful as there goes be the So year impact

Dave Rodgers

of maybe redevelopment guess bulk demand assets, today? that I that as And is a were, just particularly, addressing the

John Donahue

the No, I wouldn't bulk characterize redevelopment it the being portfolio. in as

in of We redevelopment the have three square feet about remaining XXX,XXX vacancy properties.

fit can't vacancy small entire prospects We strong portfolio. So compared Forest all the do prospects. in We portion to three in that's a Park few a the have relatively at Charlotte.

hoping are to of the or we So that quarters. couple and two property stabilized over get next those land one of

have has We in to how that nine from strong with need. months much have in certain an Minneapolis, prospects in acquisition been one that and of they been two working not space XX we that particular

that get believe do We able shortly. we deal are we and very to will be that anxious done to so

And last couple of getting been multitenanted, top so be has a of here that in our quarters. the floors Marquette the which step focus will two over

not And fourth but then. The then, quarter with be done we then. projecting looking or be two to we year will and occupancy the of XXXX. least, at are quarter will prospects up at delivered the or occupancies by as quarter we most are end talking Lennar into at group Blue garage ramp the the likely should Lagoon, And a of last take in very hope that the smaller here of are either first next they building the over

Dave Rodgers

you year, already that the of back first in timing especially in I color. on can of Can that for much how guidance. has you of the question, that? leasing number today? FFO, then the I component know about this quarter, guidance of Demeritt, speculative much is guidance George terms said, John of half of you spend termination for it, the the fee how me And second do Thanks apologize, reiterate lease the how in much what versus that Great. for ramp this missed income talk XXXX from the

John Demeritt

to guidance portfolio need on But think the back we John all in $XX,XXX George of will first that on fee the Donahue of on known that. I And have based half the half, that to in that's was that's income said, as termination probably the of quarter. and the as today. question, I on front what refer in

I we year lease think this lighter and have maturities next.

and quarterly So that significant think the at the I talk we go But year this through look reduces of guidance. about will as termination likelihood we fees.

The talk about maybe it, little back bit in have half of the more a leasing can year that? John more assumptions does you but

John Donahue

Dave, anticipating to FFO of that including handful Lennar consider will and at contributing contributing successive a we over this goes XXXX. is have approximately we factors as look during that that or occupancy I on. each think square feet executed are the XXX,XXX and will of such take a of way during the be Sure. There the occupancy to ramp-up are as year those leases will year so, quarter

mentioned executed feet XXX,XXX at holdovers, have recently in options Jones then will into with higher FFO recent such XXXX. lease but prospects earlier. executed have least, as And that now pipeline that longer square we We I not and throughout of XXXX. last half that pickups renewals XXXX such early Day XXXX terms last in extensions of last with rents contribute Somerset exercised of will as the the And or then

are in we will any what ramp-up each surprises successive that expecting, we quarter. So see barring

Dave Rodgers

assets own that. of the portfolio Thanks selling of you forward, term? strategy against as set the versus Great. vacancy and just dollars own a comfortable you that to long the a your on to me. going How focused weigh TILC Last out up, for spend. do that for filling getting want you George, of some you lot fill question to how maybe are the on vacancy lot

George Carter

add before said, vacancy. think But that the those got now done. definitely considering at a dispositions funds are and every to we in lot would I value think, potential into when has we is portfolio near re-purposing creation to the intermediate to we that simply of Dave, we we dispositions. great as we selling now, Jeff see now will than be that accretive opportunity much its so completed, add vacancy right potential almost be lot think do price. including is more and vacancy acquisitions the value-add believe in want value-add that can very value-add the and meaningful term But value over property that And a have

Dave Rodgers

Thank you all for time. the


question ahead. comes go of Stevenson Rob next The Please from Janney.

Rob Stevenson

lay leasing those guys. slide if XXXX Where million, XXXX guys Good was the think to I the that leasing million, CapEx supplemental, a I nine about you at roughly improvement, out was take of you and the and on three for deck the and $XX Closer tenant are and level XXXX? I costs XXXX XXXX, big XXXX morning look $XX non-investment XXXX, commissions non-investment the commissions XXXX closer at tenant roughly to the When million. CapEx improvement, $XX in? to of guys for expecting come the higher or look

John Demeritt

a But I expenditures to really Demeritt. have based this and The leasing year. answer a and on try do we question. John of capital fluid intend It's pretty that we leasing assumptions. will lot lot that of are do

closer be in what XXXX. think So saw it would I to XXXX than we

Rob Stevenson

where it thinking How look in negative. it XXXX, Okay. we XXXX for positive. about was at In And a is XXXX? should under I $X million XXXX. roughly be slight rent If straight-line that then just

John Demeritt

I But Actually, on it's that would I can we leases online. would quote a on be number one higher I guidance. come don't based expect in going to have the that

that a have I are are on and mentioned, come square few have leasing, on start of Those the leases feet think which XX. usually you signed free rent. John XXX,XXX table they can page we NAV that see of online with got month

So the year. should number pick this straight-line rent up

Rob Stevenson

any of And it seems been that timetable what's is how I of, there lags takes that it, expecting about of leases the you at process like Are them less. government sort to formal of Okay. you be in and terms lease the that or to current a the moveouts? so those are point leases? you remaining those? the whole to can or renew? long have number And this are all administration and where given think for It has on incremental call are year moveouts on get there then term signed Or them back a completed? of talk U.S.

John Donahue

big you will XX give When might look It's need the Hi Donahue. you you and I picture color, you Friend expiration it. U.S. give leases. ask And we expirations government page the to supplemental, in I of Will Rob. near if be more expect the still to give the square we vacates point. dates at John at of footage term those do some

throughout However year is I the year would holdover to say that one that the next be a year. this of rest was and a to expire scheduled into downsize significant going

of is how now, in throughout And of update the right year. So update up again, between will projections expected next But give square we likely at next feet the to an XX,XXX out. the But the turns point that's that IRS will And to really are holdover. quarter. XX,XXX you over quarter exactly stay rest term. our vacate short and the some others an we give

Rob Stevenson

Randstad's about what expiration? mid-next that guys on you Where And Okay. one? are year

John Donahue

again now. off There is with engaging. right report They have been and to on nothing

So believe they renewal, will least because be early to for at staggered a their tell. of of too kind but mid-term expirations, that we looking

Rob Stevenson

Okay. appreciate All right. Thanks guys. I it.


The question Stifel. Please John from go Guinee next ahead. comes of

John Guinee

Great. Okay.

eight, million guidance. Just On a have lease a a nice big $X.X as nice is non-recurring. that? term quarter fee? page and that is Thanks. What you

John Demeritt

eight? It's Page page? eight of John Page What John. Demeritt, what?

John Guinee

above just eight Page same-store. under the NOI, non-recurring

John Demeritt

Yes. the That's fees. John. termination

John Guinee

now that? which Which is And tenants who Or fee are that? is tenant gone? is

John Donahue

in for John. out downsizing. am was They there. a space. the their share a of Donahue. That bought It's They rents a XXXX portion John are tenant was I lion's calendar The still that number sorry, of ADS. of some

John Guinee

picture know they going are big back And at Northrop the Brandywine in Station their Chantilly. and a giving on Northrop you And Realty feet then square also on asset? Dallas there? Do as Okay. XXX,XXX what's Grumman out moved minds What's plan Grumman?

John Donahue

It's John Donahue John. again,

government did contract That that the that Northrop We waiting for about the property. Northrop of have building that market that is So for sector. not do government working quite in activity XX% a between has heard and we that with of contractions seeing the but we in of of vendors market strong consolidations and I few vacate on use a of field, space. prospect are Grumman's one and that decision are we them. aware XX% am a and all have

John Guinee

at look XX. you page be your per Okay. leased When And now big say, guidance, occupied occupied at square then for a percentage guess on What's entire I in XX% XX% Where you you and portfolio, the foot year-end right X.X question. picture your million model, will the portfolio? roughly leased, XXXX? percentage as are a

John Donahue

terms speak the portfolio, redevelopment of in including the will I John, entire properties.

We lease towards are year. to commencements the the expecting of up really end ramp

get So we to the harmoniously would the That take. expect depends those them to or able tenants be of in being economic to in XX%, give range on on work really occupancies us time. with

could the But even fluctuate into range that So and we better. would that early be say XXXX. hope QX and occupancy XX% then of between I QX will that in

John Guinee

if you XXX,XXX and that Okay. take out subtract square gets properties to XX%. that you feet essentially redevelopment Northrop I of there just mean you your Chantilly, Grumman that's

lot. a Thanks Okay.

John Donahue

welcome. You are


[Operator comes John ahead. go The Capital of Please Instructions]. BMO from Kim Markets. next question

John Kim

on leases how was for I Thank us leases long wondering, remind take just it occupancy? signed physical you. to new takes that are can you typically

John Donahue

It's John. John Hi Donahue.

a typically that is faster answer broadbrush it's tenant smaller that the the the to delivery. So

than signed occupancy square X,XXX to we to four and a have occupancy of and those early take tenants XXXX, feet within those of months. within For some days some leases are in three, handful going of less going take are example, XX here

faster the tenant, the the smaller occupancy. So the

Lennar, of XXX,XXX space XX feet be feet, talking of square XX are could months, on you what such months. done. When square as and needs be kind be that and depends type XXX,XXX It prospects to the could between about

in readiness it's the what in. range existing And the prospects wide want their the for when then space of up X,XXX lease feet, from between, of quality when they the terms anywhere answer and want they expires to and get in XXX,XXX depending a square and on to really

probably to average. a an portfolio, That's our XX months, in month it's XX as the six average, for range somewhere under just estimate. rough So in

John Kim


I to going So realize a quarter the I we today. pipeline better going mean are to or from leasing I are target is hit year? the to be healthy get not now, you like for whether your just a able sense am of occupancy wondering

John Donahue

have would the happening will a of be We flows and speak as picture next hope month by. you. that time lot so. I between a with yes, that But expect certainly we will this every clearer now we

John Kim

on actually And Okay. year. this last you that foresee couple question are John recognize lease typical over this of Demeritt. what a you XXXX? the fees typically termination remind for provide guidance what in per you guidance, $X only maybe fees how modest years, are termination the The of averaged is do today? Can you million has during just us, you going is to Or think then

John Demeritt

we we up guidance, when of probability might when happen come consider things, think prepare we we the Well, what with a number of it.

and this and quarter. we look lease significant we the a fees next, it at there for see is were I King at likelihood look we like we which but if you look significant will ADS were triggers last number guidance the And termination thought if sort the XXXX unusual have fairly what Burger one when in but actually we one If year. and well. pretty we XXXX, John, two ones we what something of in significant that there. include at past this each an of generally when one other years, maturities update fairly this reduced George look was the in it's something we quarterly as some quoted in happening, substantial lighter they that will year have tenant guidance but at that,

John Kim

did typically the end happen of In lease? towards your termination fees history, the

John Donahue

of start two typically it to last that that lease over earn termination fees tenant end the how option period That's before fee we a through we the the will lease. have the might Typically a that or record end the works. from a of it's execute of then they year and

John Kim

I Thank you. got it.

John Donahue



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

George Carter

you everyone Thank quarter. into tuning earnings look and with much forward for call. you. Thank appreciate speaking you it to next I our very


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

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