Franklin Street Properties (FSP)

Scott Carter General Counsel
George Carter Chief Executive Officer
John Demeritt Chief Financial Officer
Jeff Carter President and CIO
John Donahue President, FSP Property Management
Rob Stevenson Janney
Frank Lee BMO
Nick Thillman Baird
Call transcript
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Good morning. Welcome to Franklin Street Properties Corporation Second Quarter 2020 Results Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. to conference like Carter, to now Counsel. General would turn over the Scott I ahead. go Please

Scott Carter

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

those me of our President Chief Chief Investment the various Carter, our make for Joining statements for Actual John we from forward-looking ended Factors by of these Risk those XX, Factors report Financial report Management. and result are section may Donahue, Please statements file and of Act as on John in the that about materially President Chief Harbor are which our SEC. of XXXX, Risk Carter, of Form XX, Officer; the for with XX-Q quarter indicated COVID-XX may year Property that plans Demeritt, pandemic in factors, our on the Jeff for our the Reform Officer; quarterly updated discussed Officer; prospects morning this FSP future both of the Executive XX-K George for the annual the remarks section and results under a differ including ended forward-looking company constitute purposes Litigation on the Private Safe December provisions expectations, as Form may Securities XXXX, XXXX. of various important June note

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

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

call to over the will I George George? turn Now, Carter.

George Carter

My about Scott. second morning, this making company’s earnings comments other now, would in quarter written I few them second to do And Street won’t repeat night’s encourage like earnings members. brief Franklin the start everyone. team Good are you, welcome I comments Franklin to the last a them. call Properties release. current operating in by press XXXX read Thank call. about I Street to quarter XXXX call but COVID-XX the then and earnings to over of FSP’s you environment turn pandemic

located is available home our Massachusetts to and First, office now employees a as area in all Greater the of fully open our environment. metro Boston, work

from home working we workforce physically policies who for However, about Recently, have present home place in averaging remotely. office. desires XX% employee of been are to the work our any in still

job. engineers, vendors efforts Great dedication have over country people the our office come crews, many All fully our appreciate of and the all operating throughout difficult us to properties pandemic employees personnel, several those the that kept have FSP the cleaning exceptional Thank others. so properties, maintenance months managers, last And during XX around at and open these been security to by on-site you. times.

health the appreciative All of them been of own business our vendors one enough. their They our tenants, challenges, of employees, can’t efforts office of in. with along and have to all and with remain one resulting we them responses situation unique realities all collaborative the buildings. and our these thank visitors of understanding, at for customers, grappling each safety FSP each We committed from and pandemic. are the COVID-XX find ourselves They

our Chief over call Officer. Financial would like I to Now, the Demeritt, John? to turn John

John Demeritt

President the going everyone. of and our of Donahue, I overview second Management quarter will the morning, good to pass our Asset and for George, afterward, his give comments. results, to brief you, I Thank am a team John call

As a of mentioned, or on XX-Q, Scott for the be release, earnings second which reminder, $X.XX or our package found quarter. and our $XX.X comments million share will as operations to funds can FFO from supplemental per refer website. today our We reported

impacted we quarter, second worked the with tenants During that pandemic. the by were

As part or rents record paid If it’s of and lease not. write longer we determined in that, they we a determine do is whether are not no receivables we cash. collectible, current collectible off unless

the So loss the current that report. itself, which loss one-time of and part receivable part is write-off is a rents we is loss of don’t a charge the of

write-offs charge. of will we and that $XXX,XXX ahead. there charged QX, remaining had in would the onetime were we is as we is write-offs receivable so the for and rent ramp have $XXX,XXX During these that The of $XXX,XXX. quarter look Approximately lost tenants aggregate the the

amount would any loss that by rents received cash wrote-off. from rent we tenants forward, be Going the of reduced we

us using We deferrals, them. rent repaid, with rents in of also by reached GAAP number other below agreements amendments, impact tenants result significant are tenant is point, this million $X.X these FFO a is revenue. of about no lease on at deferred being agreements. which us our there X.X% Where annualized and generally The from total of agreements modifications or

with periodically are We provide are tenants will other having that issues updates like we working here. have we and

debt the XXth, which have June our had line drawn $X is we Turning at amount end we had million same balance we billion on and $XX unsecured the of to outstanding our sheet. drawn March. credit, of At of

of also same had of total debt the of we of was the that billion end $X amount the Our debt at at June March. end

liquidity have all we had of ahead. credit in activity line as available From million we So we our even on with look total remained level our QX, $XXX debt a same. the the standpoint,

our call our all will have to fixed, structure XX% maturities out XXXX, debt of we properties fixed unsecured, November that, rates over the debt debt reminder, in capital the John? With aligned long-term rates, have of with until turn value-add have no our that mostly and portfolio. our more we XX, believe John. we and our about at I a debt is turned we more As is stack our with

John Donahue

Good that After to pandemic half XXX,XXX to relatively results full strong square leasing approximately had was XX.X% XX.X% to of and Thank everyone. occur The the departures window X% the anticipated you, leased economy operating redevelopment of end totaled consecutive second tenant appeared shutdown close in Texas to and at the in over of uncertainty feet. Virginia past the eight the the quarter primarily At the XXXX. of quarter, XXXX. compared forecasted end FSP of second the the as XXXX the leased, decrease quarters, morning, properties of that calendar approximately the was first opportunity calendar portfolio, excluding John. due was FSP of essentially

represent There leases number have prospective rise in square XXXX to finalize we of net management letters to leased XXX,XXX should scheduled and the the asset prospects trends quarter scheduled feet If portfolio of I square the occupancy collections prior have prior button feet forward that XX% approximately expected are year. hit tenant of end. far. proactively XXXX tenants were barring approximately for rise final during or optimism commencements different of exceed feet a the opportunity the of of direction expected square extremely have am We our many property cautious the engaging if square half XX% pause high are approximately surprises, of the rent active for finalizing outstanding any XXX,XXX leases to are of percentage FSP’s in Although, meaningful of of the is commencements amount for July year window Rent a the to tenants of timely thus pleased leasing occupancy and economy now for results. calendar job lease the half over the seeking levels departures. intent. done FSP’s to approximately either the are the and close and second as The Approximately management prospects will active to of second buildings that with an momentum expirations percentage over June, of relief. favorable amount Therefore, teams and XXX,XXX look we lease also of a and absorption active months the the XXX,XXX maturities. many are to able and bring portfolio prospects be portfolio selected appears again. report collections potential then feet by in FSP open second that of economic to for six currently positive

of cash and flow. have Jeff rents quarter, Although it on the second to in don’t I pace will with impact requests annualized near-term pandemic of turn slowed since you, full the significantly early Carter. or Thank the over know that, the we

Jeff Carter

rich amenity well growth, where remains future on performance of high of pandemic, everyone continue markets focused excellent Thank opportunistic of value to Properties We portfolio remains several Mountain at all Mountain West our cost we quality By markets. information largest West, you, the believe here of future Good John. regions locations to upside our as growth, population times. difficulties Sunbelt, the for Sunbelt these is from well healthy at delivering creation. that data demonstrate and within Street turbulent job Franklin owning on FSP all properties hope long-term stemming office the Despite U.S. and in safe during current as the the and life for positioned continue potential living positive to our for reside. conditions focusing quality service generate locations, morning.

due there more is well be but safe a properties office a off consensus to seeing within focus of wider to briefly market quality discuss the are desire we levels. plentiful, volume, of potential second seeing Pre-COVID-XX, sales decline two yield. appears mitigated marketplace. primary its steep what investment fewer normalized in high saw what Not to and into pieces, to pandemic, aggregate uncertainties well-leased, that volume targeting Dry unexpectedly, risk coming have a the moving powder and COVID-XX target to value-add chatter and Given seem be of properties much quarter year some will will the today investment the tolerance. properties due the as stemming level around remain country Conversely, is I progresses, due the deployment for greater below to a we to that pandemic, far is investors more are assets. factors the risk from upside wish were their although,

buyers’ price to desire underwriting and disconnect The utilized. challenging pricing the more with expectations owners’ securing financing more being second to relates levels. to first a distressed And achieve between assumptions relates

Specifically, on FSP portfolio and our reduced investment market, front, the with opportunistic will and potential to gauge dispositions. although, the national any precision disposition for given greatly recycling sales difficult monitor asset

that the Our we new debt criteria our for Broadly down would as maximization first striving and and directly value foremost, at out for appropriate further portfolio up pay currently potential likely dispositions proceeds, market level, date asset possessing to investments. potential looking sale capture potential well redeployment are the and view is on keep of property as include to which such any warrant. though, we upside will the focused, owned circumstances consideration as achieving we as should speaking, initially

Specifically FSP properties quality will that that, on we’d the the like to to the acquisition all over to call efforts our the And immediate-term. value questions. conference within front, to investment suitable our high listening opportunities any at add thank with continue markets to our today. open for and identify up we to possess for earnings time, I And ability call Operator? track short- you continues this


Janney. Instructions] question Stevenson from Rob from is [Operator ahead. Our first Go

Rob Stevenson

looking months? cetera? Can What your rents uncertainty are of you tenants to how the expirations lease discussions you do have receptive or percentage been do discussions having Good XX whether premium to not et given you the with it’s you over with morning, and short-term guys renewals type are that, those the and characterize next to guys.

John Donahue

short It’s is, to Hi, The answer your Rob. Donahue. John yes. question

two-year of XX to next are within discussions We I that XX are months mid-length engaged they it off expiring the would or multiple have length a tenants most wide of say do are then that term would tenants or those and are short-term three-year expect, in several years range and are five you that, and discussions. requesting years terms months, our drops pretty of receptive XX begun what are they range discussing. beyond And that proposals, as there of proposals precipitously, large to tenants longer. want although, of from the

are of they wide looking at a So range options.

tenants of that maybe under are weighting going going are heaviest of tenants office XX expiring and conservative of and space those whether cautious months distancing, more requirements, being in they social because inside probably re-planning to square most feet, whatever to tenants feet if XX,XXX due work-from-home. to square or they below those are need contract For and are XX,XXX well new are

of it yet kick But those one we sense options the expansion good long year certainly the a term. that want over all have are that down for can how and of hope long-term. tenants out I want don’t tenants also you. little are the a we looking So accommodating road extensions that helps entertaining trends that and we maybe

Rob Stevenson

need of areas they very the helpful. taken and but into are mean, a operating spacing the would of in I working home have you demands sort in, new -- sort space basically are from then that greater you also ongoing and common discussions needing new new much basically configured, are many I how have they any say, That’s as from of how these of type these February less needing reality Yeah. tenants, terms of in standpoint? what January And in having mean, terms terms has or are COVID -- set factors would still how their of with and of space the much play in many tenants or

John Donahue

There’s Rob. a lot there,

months So with they smaller of work tenant only to the six probably to I buildings XX% physical at universe occupancies, within in will eight are people looking months are and because back next the XX% many our is not markets. with currently yet. to occupancy, are at start looking many occupancy They suburban

doing tenants the they XXXX, the are getting landlords short-term with looking office though, expansions well sense next that in are portfolio. to asking trying are tenants half off looking more what at are environment more a speak what out can’t regards hearing and the can of but needs XXXX, long-term occupancies our they landlords our we space the to the in of year And they are and larger into I in keep market, they And like. market, so for planning I be. of and space grow those than going of are portfolio entire is good probably two. terms trends for what re-planning cases or that are they to in to going to of grow as lock space be to so that additional for over them figure options the of are say, will many more wanting their back reduced

Rob Stevenson

How guys for you been parking revenues? Okay. meaningful to hit has the

John Donahue

a particular hit handy? but you the second have did I on have do handy, number quarter. don’t that three I properties in know do number we that in have John, that

John Demeritt


I I parking, contractual, rent. a a it’s quarter quarter. transient number, But the the parking around is have the of of think that’s $XXX,XXX it’s we lot sort as about $XXX,XXX so is recall, in the part of transient

Rob Stevenson

Okay. with leasing how still will And tenant and the signed, should have we about for CapEx, will the thinking back hit me, the half then commissions, improvement, in to already you last be you that need year? leases this AFFO fund one of significant

John Donahue

have our even expenditures we year that that. have or before hard we The a as in common than leasing years that the out. really might certain last of had XXXX. move That capital That be believe will be share lag we from to $X incurring of populations six because projects per we in probably currently in ability are is going seeing been that last an two that see will months areas, of that been will majority as most would say That otherwise you cost in the that are year, to to and new say, release, the I that had tenant in then $X lion I be to the share improvements also between to continue of average we in our a of deferred. percentage have foot did square the effect. lion Rob. lower more terms are cost on forward of leasing, CapEx for of in And per you some

And had capital think, projects and so calendar will other are back I TIs half that over summarize, last what in the to going the be see started year. of to XXXX already you

Rob Stevenson

months, if $XX we so of the it, the months. commissions call between look not sort same noninvestment handle leasing trying higher, -- the your for is to just about million to and six-month likely as about is, million tenant between the think Okay. I in a whether lower $XX the the six number six improvement, next or CapEx Because supplement be on get or

John Donahue

hope we Well, it’s lot lot because means a that done of higher we leasing. a have

Rob Stevenson


John Donahue

can But and last But three the think at here leasing the next be large will quarters general so. number commissions particular. is months over six deals have in surge commissions the months will nice rule seen in for the that the for be we unless biggest trend variable the that few get roughly you next the I or it for

Rob Stevenson

Appreciated Thanks. safe. Okay. Be guys. it


Our next Frank question is from ahead. BMO. Go from Lee

Frank Lee

follow-up the Hi. How on your Good added you a incremental I the a million the leasing question some seeing discussion new $XXX,XXX in on guys early wasn’t stage actually pipeline from I mentioned quarter this the terms did pandemic? you categorize what morning. pipeline. demand or stemming category was if $X.X versus are sure have change of new last call, as you

John Donahue

and what that not the have were have tenants shortlisted to might but careful of also that be those properties. Frank. And are over quarter. bit year We be so. selected in last six announced that between earlier just actually The getting lease numbers that active feet that believe finalized. in at in It’s prospects fluctuating distinguish try of that of Donahue. had building, months end square approximately or they the distinguish FSP careful process are among we are only we number John XXX,XXX to at leases, Hi, the had the an to end decreased meaning a our I process lease Yeah. and the first

warm heard have in are tenants square two to those. they a are XXX,XXX also very or have say The of hot that XXX,XXX represents about buildings you that close probably the feet to three that are all square shortlisted feet and in feet now those final final So buildings prospects. LOI. the a extremely square LOIs and or selected buildings In typically leases, me shortlist of that near us, are leases or and either believe tenants down that we remarks, my prospects of XXX,XXX FSP

Frank Lee

remainder will Okay. Thanks. us of the And XXXX? move-outs then Thanks. that known into the can remind some you XXXX of in and occur larger of

George Carter

of Sure. that XXXX, of not to at the in our tenants any first the in have expecting the for postponed over outs build any And May so then downsize out they XXXX. now, say I as been their for if to quarter surprised months we expected of Day some is more slow top list as XX that I point quarter the XXXX. -- happy XX not with expecting of Frank, we move-outs in large to first scheduled are do But expecting large is am largest wouldn’t IRS which gets be are Atlanta, on well. We and to of calendar we and be are XXXX, the next move-out again. finally Jones

Frank Lee

Great. you. Okay. Thank


ahead. question from -- next The Baird. The Go Thillman is Instructions] next [Operator Nick from

Nick Thillman

Hey, guys. Hey, guys.

putting you it? from opposed contractors from question or quick as first are the into the interested government a demand users to some Chantilly, buy vacant on Just the in company capital to building seeing any quarter building

John Donahue

Donahue John here. Nick. Hi,

and building interest share had are sporadic of are those very most and kind purchase potentially appealing. have opportunistic, often lion’s We of to in offers the leasing not the inquiries

to do building government So would a that call, have we but for are prospects. government And it Grumman contract, working prospects necessarily that potential the on are companies I they Stonecroft you suffice to government. of Northrop with won’t that call say number backfill we that are get this here with and related the not to be working we that familiar those work, but with into

Nick Thillman

to but I guess, kind just of already been Okay. touched And then, clarify. wanted Great. this has I on,

see what’s are there, move-outs. the were talking it you status rent the didn’t a known on in expiration XXXX, the when renewal, for I you So about -- expecting

one? that I want to check just So

John Donahue

or are I there’s an you if believe Is in rent you asking? roll-down are a XXXX increase. what that asking expected

Nick Thillman

On asking could -- there’s you am that, on so it in expecting just a and that like, a expiration schedule, there’s foot Randstad, a expiration talk you XXXX. are your if so, I there, little says XX,XXX about -- a renewal there’s bit? square

John Donahue

at looking what are that at? is the believe looking Government. Is I that the you might GSA, be you U.S.

Nick Thillman

Randstad on General the Randstad tenant list, Partners. top

John Donahue

to Okay. of are many less Oh! space are months their you. Thank in space. needs like going future Yeah. what space are trying to if they need XX that out and so That’s renew to they Randstad we are and with discussions size, determine or more tenants

what are be. So we although their don’t know discussions engaged, needs are going exactly space to are continuing, they

Nick Thillman

$XXX refinance that maturing Okay. balance last the rate And million then and to is your What ability you ‘XX. I have at you at? question -- like early my is what that finance could late on sheet, have

John Demeritt

Demeritt. I John will It’s Yes. answer you. that for

and We I that. bank the and They the terrific renew wanting with work that are maturity issue in and of with an in have so have anticipate with work to of we group having have XX relationship lot us, that expressed with group them. interest a two a banks sets good don’t us with bank with represented we of

a of heard we have banks result right of now, spreads with. pandemic widened number as as the we have that and far deal the currently, As rates a from

be the having certainly hoping now. right they discussions would spreads down that -- higher actually will about debt. But start with are we time that are the we So things and by replacing them hoping much settle

way markets them the of year, So this can it. rate be see interest that like the I talking spreads time, look will we for what you. at next That’s at will we that so the answer and year beginning and with that’s of end

Nick Thillman

from Thanks. Great. all me. That’s


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

George Carter

I flare starting this watching We window quarter the again, look John and ups is to attending open Thank call again. forward next the or quarter. are And the for We you over think, next whole two. all where hope country I think, stay around safe. pandemic goes these you I all said, the to talking Donahue and you everyone as to

fronts, vaccine again. months as a promising quarter. and you look to the about but safe. Thank well on are very we on much you are Stay forward again of very we active As promises next number leasing six that and next talking look to do optimistic


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

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