Franklin Street Properties (FSP)

Scott Carter EVP, General Counsel & Secretary
George Carter Chairman & CEO
John Demeritt EVP, CFO & Treasurer
John Donahue EVP & President, FSP Property Management LLC
Jeffrey Carter President & CIO
David Rodgers Robert W. Baird & Co.
Robert Stevenson Janney Montgomery Scott
Frank Lee BMO Capital Markets
Call transcript
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Good day, and welcome to the Franklin Street Properties Corporation Third Quarter 2020 Earnings Conference Call. [Operator Instructions]. Please note, this event is being recorded. I would now like to turn the conference over to Scott Carter, General Counsel. Please go ahead.

Scott Carter

to Street welcome XXXX Third and Call. Earnings morning, the Properties Franklin Quarter Good

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

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

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

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

George Carter

Good my like everyone, this Properties Earnings of comments Street Franklin by earnings XXXX start brief pandemic. would to operating Call. COVID-XX a call Thank and FSP's welcome morning, portion I Third about in few environment you, Scott. to current the Quarter making

greater Our a Boston, as available quarter. has located Massachusetts fully area the during the work remained home in open all metro office of our environment to and employees

to home still place remotely. However, policies work who working are in desires from any for employee

XX% office. present continued our have to the physically about of in workforce home average We

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

and appreciative the of of to of health committed and find we FSP, with one ourselves employees, remain all office and buildings. business for grappling tenants. and responses, understanding, the have been resulting their customers, realities one Each are valued efforts of these own They the in. our They, unique along situation them of vendors, All safety at all from visitors with pandemic. our each COVID-XX challenges, our collaborative

XX% we contracted October of the of And third XX% rents. of of as collected we have quarter collected For October approximately rent. full XXXX, XX, approximately

income guidance continuing additional be its suspension predict operation of to to we time, are providing not not funds However, and and rental Consequently, future extent from months. level we whether our and what may FFO change at of net receipts able this in impact will are business to the our of guidance our over me a pandemic and and call businesses have tenants. the John? With CFO, we the duration Demeritt. opening let the as on turn those until understanding comments, our better John time COVID-XX such of of

John Demeritt

Thank have to overview brief you, results. our pass John morning, quarter I'll comments. for the third his President call I'm the George, a management Afterward, everyone. of going Donahue, good of to and our team asset

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

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

it we collectible determine current part As paid or receivables is unless is collectable, of rents do a lease If longer and they're report whether in not. write-off that, we no cash. determine we not

is this And So write-offs, which event. rents the of that a stopped part more reporting. loss loss is is onetime receivable we of current of part

During QX, write-offs is rent total basis, the of $XXX,XXX. only a had year-to-date and we and lost $XXX,XXX, on

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

or million it's revenue. point, of impact which QX this agreements reached modifications, below also is Where tenant by X.X% these being from rent in deferrals On there a agreements lease amendments, with tenants us We them. no $XX,XXX. significant result annualized other is only at year-to-date deferred about repaid, a of rents were during FFO number using and Total us GAAP generally agreements. $X.X on basis,

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

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

Our was had and end this of the end we billion March also of at the year. total of that $X September same June at the debt of

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

unsecured. debt a reminder, As all is our

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

John Donahue

John. approximately number and may the point forms in quarter. fewer past levels potential increase different months formal the for not far. significant and for there is quarter have relief. FSP third you, represents and the and many tenants on total of been said, high Thank XX% collections calendar That There are averaged our XX.X% uncertainty. to was in end which XXXX. FSP's the and as and seeking due teams flow quarter properties, property appears the until second thus year. to fully a and portfolio of be the requests rent We not from as with asset October an third management morning, end about needs have of Rent continue tenants approximately few XX.X% relief impact or to management collections select the growing second the second work with quarter, during quarter leased, including the for perhaps pandemic portfolio, next fourth XX.X%, later the economic extended of team witnessed quarter leased Good everyone. At during number the understand annualized redevelopment rents dialogue at of the a certainly cash

net for leasing approximately square square of feet new X quarters leased third XXX,XXX square XXX,XXX approximately the with square feet, tenants. approximately included feet, year-to-date finalized absorption XXX,XXX XXX,XXX which was FSP with of tenants. which During new Total was all feet quarter,

XX% and XX% the leased We million as XXX our Marquette Midwest leased. is that are pleased is approximately known of now X.X approximately feet, asset to portfolio, consisting report square

have approximately feet feet We prospects. potential of square months, next net new X XXX,XXX square X absorption over XXX,XXX the to including of

I prospects barring occupancy with any and both to surprises, over the to Jeff of the occupancy now it Carter. will next turn potential trend several able upward the and economic leased we We majority Thank are quarters. over to finalize deals expect you.

Jeffrey Carter

Thank Good focus West times. within remains FSP amenity-rich during its as at morning, here We and the healthy high-quality properties well these U.S. safe hope opportunistic maintains owning you, locations several Street on Mountain trying Sunbelt, Franklin everyone as John. Properties, everyone. markets. in

with growth Sunbelt job difficult prospects positive possesses to pandemic the for look FSP performance. nation the gripping regions potential long-term past and conviction Mountain and West population the for long-term and continues our world, upside remains Although and within current the that

appear factor country from Given the has national available investment to value-add high the largely due seeing locations disconnects in Risk still and COVID-XX, are capital opportunities COVID-XX off are can more hoping I such the and Not to the pandemic, often between well-performing Despite swung volume, level. investment and uncertainties. quality unexpectedly on are buyers for Financing within slowly wish selectively sellers, a to leasing for be around assets. the properties conditions possess discuss garnering a but third continued compelling what largely improving, that buyers sales significant than reduced with still see properties away briefly stemming volume presenting. uncertainties we pricing pricing from pendulum remains reduced office distressed attention, be sales in some quarter marketplace. cases, to while

front, to potential opportunistic the On disposition dispositions. our FSP and continues asset-recycling monitor for portfolio

market the foremost asset and ultimately maximization property look FSP value for proceeds any future, disposition focuses at in to the dispositions criteria potential level. achieving redeploy looking potential on With such debt Our pay first would potential and new investments. initially use, further highest best keep include the at property time up-to-date as appropriate. which their this We'll into would and likely down out

the our opportunities front, markets. track On all within to suitable acquisition FSP investment continues

to identify thank continue call earnings credibly this I any like add short today. the And at we'd high-quality will now with call properties time, intermediate ability open for value listening the questions. the our possess up to over And to term. efforts our to that, to We conference you to that


[Operator Instructions].

Rodgers Dave from Baird. comes today question first The of

David Rodgers

everyone. some leasing. Good of John the you with Yes. morning, maybe on start Donahue,

number you Deluxe GAAP talk the I'm more is You as positive of bit you. track leases on about actual wondering Park for the which Pulte cash and just move a occupancy that in if for little guys Minneapolis commencements confirm during Forest quarter fourth for a trend and signed was quarter, well a then as the could in.

John Donahue

Dave. Sure,

that Deluxe, expecting early year. third relatively lease to a would rent we're period. next the be commence that with short starting quarter of And in So free

you commence cash probably in last So And timeframe, commencement quarter. then near the year the FFO the be first lease recalling of And then would the or information occur construction, but the largely handy, is which in upon But at let it commencement for Lennar quarter welcome date that believe we'll exact same we have the thereafter. Blue don't year. would I following Lagoon know in of point, the end to that yet soon FFO. an I'm similarly, at we or not shortly as the very early similar dependent that hope that as to December. more. executed quarter rents, but the we have time will we fourth would of some third substantial to commencement, point lease Charlotte know early Lennar completion the least, don't We And have some and

David Rodgers

correcting for me. wrong. Thanks Yes. had the I tenant

feet. pipeline square discussions? are for pre-COVID more that might well. in looking come put about where helpful mean, Maybe that happen comments to some can apologize mentioned, context. these that. have more as that Are And a Can broader from people So they just XXX,XXX that you you conversation be distanced? be that tenants then would footprint talk those office the The leasing around any were those back? I office would helpful so on expand

John Donahue

far we're seeing pre-COVID as regards that now post-COVID is The activity number origination. as of versus in to tenants split Dave. origination go Sure,

for of companies So of There a split number the is, the that we've company, than down evenly COVID middle. footage dialogue period. prospects longer our almost been towards weighting the in is square for

working So time. for because to we've long those deals we hope finalize a been on them

far is weighting. and and activity then of about those so. Atlanta a really good And we X, or Texas, as X, that deals good X as Our feel order right months Virginia, getting next average really, now and in done over batting in in materiality Denver the

David Rodgers

what redevelopment, your value-add Maybe that strong. and George, think for the pass isn't asset, question, Jeff, Stonecroft, kind Jeff to is that would dovetailing space, with into more putting also guess, then you as to expect as I'll last into if type Day It I market of Jones maybe there? of move about the And more the sounds do comments is that guess dovetails, maybe redevelopment. to leasing can into Chantilly to expect up. get, any? or But returns Or picking it that well? redevelopment as assets we I And you with you do like throwing there

John Donahue

the know, there you Stonecroft redevelopments. The the David, the anticipated redevelopment. redevelopments, XXX moved the out lease the about the some time, repositioning. stabilization. prospects to of we due much high-quality and like and don't bit investment those location. have because the is Plaza that we've it I know now point building to in guess the bit has space Even of and COVID. moved for And a exceptionally this a Park that adding complete more. little question well vacancy, there already in it's building more double-A the longer as large seeing the will in step into interest can we We exactly building, One regards Pershing and are invest of building as for do the though feel don't take, factors. Marquette multi-tenancy. a how building. portions And we answer some at might up We as the a but was we're building the In prospects take already reached a to up a little little as multiple is because demand, activity COVID, I see future, game investing it's lack building. need of we're

redevelopment is point to this that not added stay the tuned. at would but that category, guess my So be


question The Rob today Janney. comes from Stevenson of next

Robert Stevenson

is follow-up days? you space How where question. a demand that broad more demand would Just sort for these the characterize Is John, is on it of in the across concentrated certain portfolio? markets? Dave's tenant

John Donahue

Rob, again. it's John Donahue

urban do I in we demand say have in that superior So the suburbs the that would we locations.

Virginia it and and as Houston -- probably Dallas, and where Denver in is highest me, country, trailing. the far other moving in markets then then probably the into excuse As are

Robert Stevenson

good trade-off are you then given you guys given and guys agnostic how side, costs up, are commission sort leases, longer-term And the just about Are all you or cetera, for tenants et How trade-off vacancy? all about certain this uncertainty versus Okay. at forth. pushing guys to at XX-month the point lease, Are time? you too the a shorter-term between and sliding in levels? leases tenant Is thinking the and thinking wanting of the lease on guys some back pass improvement that?

John Donahue

give deal are focused I on or would retaining a like are different. because broad-brush that it's you So difficult to and challenging to on them what answer is say our mostly every downward that showing would rents. listening but to not seeing tenants The we any deliveries, Rob, due rents. on downward stats actually to pressure national primarily rising, yet significant there is new We're in do. pressure are real asking rents effective they

regards COVID. tenants going So would space if in going of is to you to think they're space right that and the you now, effective less uncertain rising concessions of with better off new are down, short-term IRRs because if deal. and you're as assume or rates But need returns maybe

So into companies. kicking of prudent the getting the road can those X, XX for some down for months, XXXX is

exposure have our would luxury. As But the equal mitigate what far years risk. expirations streamlined a don't to in being over we to as all to like we that equal, XX things year of have every we'd really, see, love next

the So come. we're just tenants working as with they

strike demand want those engaged new in for For large are those near deal long-term that truly for of deals. and big a term, TI actually are the groups the share to looking

maybe at term, of a their The or upgrading with coin a tenants flexible other image and it flexible be high-end and their looking space whether that a would for short sublease really space space options. very occupancy a and term side be direct discount,

hopefully, specific. you but is helps that deal really out, So it

Robert Stevenson

that just the Are of for event sustainability one about is George. they COVID thinking And as me, driven viewing this Yes. common the and a Board then last dividend? How the it redeveloping fairly money grow spent into of up? that still Is you on re-tenanting easily some on discussions costs? Can could there? the and into lease provide better insight you some

George Carter

and large and achieve to plans leasing at Board many, in with delayed will can portfolio leasing every talk stabilize time many Yes, believe commissions, say that to the by dividend and Rob, is do made and important thoroughly is nice every COVID. and say et we we economic every it's any occupancies, dividend inherent at our terms levels goes many, the to more quarter. quarter, proposition I'm and has which by anything our the that out that reviewed flows, quarter, look that and I is of opportunities CapEx proposition factors. be at about higher And definitely higher leasing commissions, this TIs proposition, cetera, TIs, cash and the is value-add value-add the in you. out decision portfolio, been this and ongoing the decision The the asked,

so will the what is we the it's quarter, and quarter we original board were to take leasing for had analyze slower experiencing commissions each were and leasing leasing doing and tried look And planned then consider then again, objective, until to the as next currently, as for pre-COVID. on for between track we COVID the which it COVID quarter, TIs a do what we that after. dividend And faster economic we some and and occupancies, which give

quarter-to-quarter, against requirements under it will future. to cover dividends, and all considered, we them we is and us So the only believe And and to try taxable in not stability but our factors then, now future that raise liquidity look occupancy income. taxable from and longer-term will and fine. flows, at ebbs economic perspective, But REIT it achieve income allow it that including longer-term we that between do a rules is dividend

quarter-to-quarter. in is the everything So beaker goes it and


Capital from question Frank of BMO Markets. Lee [Operator Instructions]. The next comes

Frank Lee

how Can you elevated TI the to You should we going? we continue provide And talked CapEx and about an in forward projects are term. pulling some expect expect projects on of CapEx? update that these level should previously near several elevated

John Donahue

talk expect conditions how about market Donahue. idea a the what currently little John where the we'd are Give you it's I over short a general term. can they're trending. bit Frank, of and

seeing longer-term that commitment. of are We want a companies concentration a

so the cost, in value of longer-term you're is inherent higher credit, a doing enhancing when rollover the And are then would risk. great pushing with leases you higher commitment, give portfolio your The concessions. that trade-off and out you

So prospects. our healthy for what of a seeing larger that we're number is

flexibility. because prospects, there say months, to They few we'll a And of defer see we've seen of the what so term, note, are seen that be tenants those to thing a we ultimate their is of last One to near-term over that their over months. -- themselves out re-planning, sides their XX though, weighted X in and period Now, I X over that requested and the and a far there quite to percentage more want next are smaller on of What the of especially of is portfolio usage TI. lower. future the same shorter our work trying will XX paybacks. have or and we a averages? large a uses expect doing are figure reimbursements. the are should TI as space, and they They'll faster much cheaper costs be would as COVID blended haven't lot that of

the see there larger, one But one over volatility next XX to don't quarters. I could been then is than seeing we're So months to a quarter of think last the absolutely. few is where very sporadic light a quarter little you've in what bit be significant XX difference going or and

Frank Lee

an XXX,XXX XXX,XXX you pipeline to category? active quarter, net and wanted the XXX,XXX then understand leases there But clarify of feet signed feet addition active pipeline this this any have to square just the quarter, down. in that are with in you the third square in And Last on I prospects comes mentioned absorption.

John Donahue

very, and deals near of on shortlisted, give high we other thanks chance in that probability prospects were Frank, leases, a earnings deals, the management finalizing what our believes term. try We that. either each that a asset are for team above in certainly call quarter the to in we We good believe amendments, you have of clarifying number. that have very sense Yes, do

feet square XXX,XXX represents. the what that's So

not in In that, those deem COVID, buildings. buildings, maybe a category X to or have or our that as addition high we been X a haven't prospects probability, shortlisted to because quite markets. deals but probability do in maybe a moderate are we X X But we be to or of

is So an that little a I number can't that of give COVID. bit now, but number right you by impacted exact

Frank Lee

is leasing? of then And related Okay. redevelopment any $XXX,XXX the to

John Donahue

XX, we is and prospects We another do answer redevelopment, for that good redevelopment have of we yes. chance have deal getting the next days. over XX here our for a Short done believe the

be we'll hopefully, an to you'll first make and So know. announcement, the


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

George Carter

holiday during announce as fourth earnings Thank quarter, get you, fourth everyone, look said, leasing forward all a happy Hopefully, and again, the as some occurs. the activity you that We John call. one for the Have we safe. is attending leasing of next we the to quarter. meaningful it hope And again. and will that for will season. Thanks


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

now You disconnect. may