Franklin Street Properties (FSP)

Scott Carter General Counsel
George Carter CEO
John Demeritt CFO
Jeff Carter President and CIO
John Donahue President, FSP Property Management LLC
Toby Daley EVP of FSP Property Management
Will Friend EVP of FSP Property Management
Tak-Sun Lee BMO
Rob Stevenson Janney
Dave Rodgers Baird
Call transcript
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Scott Carter

Good morning, and welcome to the Franklin Street Properties First Quarter 2021 Earnings Call.

Joining me this morning are George Carter, our Chief Executive Officer; John Demeritt, our Chief Financial Officer; Jeff Carter, our President and Chief Investment Officer; and John Donahue, President of FSP Property Management. Also joining me this morning are Toby Daley and Will Friend, both Executive Vice Presidents of FSP Property Management. Please note that various remarks that we may make about future expectations, plans and prospects for the Company may constitute forward-looking statements for purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in the Risk Factors section of our annual report on Form 10-K for the year ended December 31, 2020, which is on file with the SEC.

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

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

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

John Demeritt

Thank package FFO to or comments. going the good can first XXXX. reminder, We as brief operations results. our you, from a very first for earnings release, per or reported I'm his of funds share pass our Afterward, our today I'll and refer morning, for XX-Q, found $X.XX of give on And everyone. overview George to be the as our quarter $XX website. will a comments to and call million mentioned, of quarter Scott which, supplemental Scott,

balance $XXX between end on liquidity of including million quarter total drawn $XX.X hand 'XX, Turning million. we line million outstanding, debt credit. line, had on sheet At our XX, our at March had and $XXX.X on to unsecured a about total we of of cash of availability our

when come maturities no unsecured, is term and loans until will our have due. a As of of reminder, November 'XX, XX, million all debt $XXX debt we

that, $XX.X sits rates turn of at I'll George? other our With the is on than fixed line is floating over debt George. call million rate. that to the credit, which on Our

George Carter

Street to and John, you, welcome XXXX again, Call. Quarter Properties Franklin First Thank Earnings

economic trying at our seeing of we make start to their the significant and a returning rise ultimate vaccinations tenants' strength, has are so the intelligent increase FSP's future and the in global properties new post-pandemic to U.S. existing more for the today. properties steady this But corporate As on office before Trying companies is leasing the challenge U.S., portfolio to reopening new actively space ground, too potential a decision-makers activity robust since continue against COVID-XX work early slow needs. determine steadily longevity prospects leasing decisions the and COVID-XX personnel at in office but the timing locational pandemic. not been real, to surrounding of very considering

As one XXXX progresses, objectives optimistic virus, leasing efforts progress, that for assuming that of is its positive vaccination successful FSP XXXX, is the against will achieve two major results. continued

reduction the is primary met near-term are on in perspective, working sale debt From objective that not actively value other of for where a our potential and reduction. Our fully reflected may believe believe be such select have their we value objectives properties share debt price. XXXX we we

real and we the FFO indebtedness debt in it will generated from of by with more XXXX disposition with projecting $XXX paydown share sale its end is estate by to XXXX current previously range overall the quarter previously remaining investing be while million the Disposition our the along XX% are of to our during constants FSP in the year, gross debt is our proceeds disposition announced some that that for property property its Boulevard intended in And to guidance primarily portfolio, from plan, capitalizing Emperor between the our levels be should NAV rental risk losing gains while constants ongoing approximately of NAV spread positive maintain in and to reduction. last efforts per million property activities. XX% the reaffirming shareholders Company the of are to $XXX year. believe less successful debt aggregate achieved flexibility If of We debt proceeds. lower Property used disposition reduce and in total fourth

that could may believe moving remaining also along this At We meaningful due a with proposition XXXX portfolio levels. further the Sunbelt value-add property shareholder FFO it XXXX and significant and be population continuing during and from dispositions, to are enhance with growth committed NAV that, emphasizes with employment distributed a into uncertainty that property amount if focus lower-leveraged to FSP dividends West the office markets of XXXX, from values we a post-COVID properties has time, Mountain net associated achieved, income potential. and that surrounding the primarily the long-term suspension and timing of guidance. proceeds remains meaningfully compelling

continue FSP's XXXX of President We will with anticipation optimism. I John? now over Management to and Property to forward And to call the turn John Donahue, look Company.

John Donahue

FSP the suburban XX.X% approximately Thank exceeded redevelopment, XXXX of were everyone. buildings of leased the occupancy Good was suburban XX% with to first the approaching average Sunbelt portfolio office the collections average buildings you, buildings for leased. The XX%. portfolio, on approximately George. in FSP's the continues of occupancy majority increase the office for of XX% yet. in end calendar buildings physical assets markets. than The quarter, not occupancy XX% The greater with have particularly typical way, was in morning, some now markets quarter occupancy Rent the including first leading XX.X%. of At the Urban FSP XXXX. exceeds

are These large continue. to are the to the positive all increasing announcements that the month. past we new companies summer July number this during However, expect expect as and that we school signs, months the by have in been to back offices during the employees arrives of year The inviting trend change for fall.

growth FSP's We are prospective extremely encouraged tenants. by meaningful pipeline in of

months have increase shortlisted been that XXX,XXX engaged last two FSP tenants FSP approximately last FSP RFPs the and XXX,XXX square tenants FSP assets tours, for X next approximately quarter XXX,XXX of the of potential any feet. since new renewals feet approximately first absorption the These of XXXX. aggregate the and quarter. square to currently Barring property witnessed compared feet expansions. are is highest witnessed months, counterproposals. significant figures approximately subtenants with XXX,XXX to has During is has over feet and submitted have a net we in prospective tracking surprises, XX square the square for existing

tenants, During months, renewals FSP six past the has with and expansions finalized feet. XXX,XXX square exceeding

rollover through Coupled make XX% with absorption and of higher to reduced for annual As regarding the a roughly approximately foundation occupancy. Carter. net markets, FSP's now meaningful leases through to progress demand Thank office XXXX be improving expirations equates in we of result, to XXXX over have the set near-term I XXXX. exposure it leased portfolio. of total will appears This Jeff you. from X% to the expiring to FSP lease turn

Jeff Carter

to are the as on FSP's price achieve remains what you, and early seeing that at I discuss John. morning, We this ground at discovery work XXXX provide we and in-progress wanted goals Thank some insight Good and then these in everyone. to everyone safe Properties the work objectives our Street healthy. gears for stage here hope disposition Franklin marketplace. to to shift of our

our objective of to order position to returns reaffirming guidance debt flexibility and of once and is plan to select greater stronger share First, and shareholders. for be of for capture of met The primarily to again our The between year respective property gain financial our for which also not shareholders million assessment accurately though, potential in XXXX. near-term reflected an any for whether is our dispositions $XXX disposition price. the our determinant million has current pay value embedded value objectives, may for calendar be FSP $XXX down key dispositions has we its within our value will believe that

national Sunbelt Mountain we like West continue business committed strategic to FSP has believe average. the our and potential to population We and to where market also that exceed would to growth long-term remains reemphasize focus the

One Ravinia this at in on Two in time, One potential XXXX. At all Virginia; Virginia; Northern Crossing in and in and Corporate Center Northern Tech Innsbrook is Center Loudoun Corporate dispositions working Meadow in Looking Louis; St. properties: River Park Atlanta. in Point Drive Greater FSP Indianapolis; following Greater Timberlake Center the Greater Overton Richmond; for

specific reasons rates we cap be at both time. this of competitive targets, discussing or pricing information purposes and related For confidentiality, property or not will

are do efforts our we that disposition our anticipate guidance satisfy if would successful with for FSP underway However, that we XXXX.

Lastly, we aggregate recent has an of seeing in investment at to what this early are due quarters least since wanted discovery within at over the to sales our office of process the work nationally sense price the declined marketplace share we stage volume pandemic. especially

have a view have at As on generally with office work positive properties. our views this potential are of investors that FSP the the price segment view solid is within in these and interest. and while And basic assets can by single-tenant experienced a associated and reopening six respect in One discovery, who has buildings. professionals looking have time. bullish and of Feedback investors this from of to Generally, globe investment fallen are rollout profile we large both office generally the investors, the assets. on power of and across nation office multi-tenant group at selective, the on vaccine initial economy high-quality

appear and A lease interested properties focused also but fully to with average compelling stabilized office are be also comes bit more weighted in less second from underwriting and accordingly value-add potential. upside quality. conviction high selectively are investors And a who some terms investment on view with

only are up work for market will keep of both be within should from two seen but of private and for discovery of of the also indeed pricing economic and groups well a learn discovery. And appreciate coming to time, reluctant and any at investors show to agreements context. at Andrea? potential stage array as yet posted time. demand. these stabilization made from our who numbers, tours our so mostly yet These and we recognize we at open of viewed that months, in via so being interest is conference are with today. to as more certainly A interest disposition us to all this this thank And that, not our least you an and the not is call and are exists the work activity be process seeing from this profiled actual questions. currently be views actual of price listening price like It we over segment that are pricing And we'd the closing defined is commit to market for three pandemic investment coming convinced gauge as from third a true largely it to to And early continue about we is call there at We confidentiality property that interest. earnings that: investors. and


will Instructions] BMO. first come our of [Operator And Lee Frank question from

Tak-Sun Lee

about you more any assets? bit on commentary buyer capital? more composition specific market you looking the sales. the enter Appreciate the a local at there? But looking asset to seen foreign Are are And buyers even or have or your that recent of can in any pickup competition these the talk a pool buyers

Jeff Carter

I posted the a market that assets interest Important been, international investors, the and at both appreciate national primarily -- question. from investors, lot national. of haven't of quarter. that has The are next and of I range a local discovery. seen investors we mix investors been though, keep private. it's diverse seen as update mix local I'll private They yet, it. from but and on have a I investors, price prospective The primarily real in

Tak-Sun Lee

are that the working And you're quarter, then amend this disclose to lease rents? Great. with to any amendments effective CITGO able other similar there Okay. And on with? the currently tenants you regarding impact are lease net with

John Donahue

we so share agreement, a he I'll to shortly over It's signed John with Toby to it's hand although can CITGO, what somewhat limited. nondisclosure Daley Donahue. it

square We working XX about expansion tenants their top tenants feet with includes of are those Very in space. are few existing that currently our XXX,XXX potential of list.

of those to square X,XXX tenants feet square majority from feet. the range fact, In XX,XXX

really, to to I about no, or early second talk not say would but tenants months XX your whether getting very is X So renewals, their answer we're by question the to months out not their space going -- -- be. what other going not they be is getting Density plan appears Density going to early be be to appear increasing. the can to utilization space see to to way. does encouraged

we're CITGO. can what hearing potential why So if Toby, with on share that's I us, if could many expansions. so you're you you about think

Toby Daley

lease the from Toby and of isn't lot we're strict CITGO. through can of I a on that that lease fact this out 'XX Daley you March tell the under There confidentiality the because here. February whole XXXX. terms of share with of I was conditions extension extended can

you that's about for that's XX-month able And on to on rents to I see a XX-year are I can as more you the XX And supplemental XXXX So all on how can with a me, unfortunately, that GAAP I pleased of And market Frank, get discuss that's a an CITGO really compare were Eldridge. keep shopped supplemental year, where than can and the from that impacted. Page point tenant. can't excuse we share. a the XX to were extension. -- -- rent handle unfortunately, to But the QX can you. you at them we


The next of comes from question Rob Janney. Stevenson

Rob Stevenson

Just that's leasing quarter? activity a in feet on that, for square I follow-up the CITGO, XXX,XXX the the of mean XXX,XXX for

John Donahue

That Rob. correct, is

Rob Stevenson

free of And was improvements, lease, that call guys? the differently, but there or to CITGO it XXX,XXX extra cost square you outsized deals to that feet Okay. had the put not any in rent tenant I to guess talk space, of other to space other, it, XXX,XXX

John Donahue

short XX in all in including of different concessions to have deals, the point supplemental 'XX QX. fact, you three in the how per CITGO, is And back And $X.XX QX look want answer were than I'd years, where last square the two go per different at dramatically Page no. years. if you commissions been versus that foot the the and is can quite Rob, to year TIs down. on about the you quite prior

you those foot XXXX, calendar If about per look year. XXXX at $X.XX averaged square per and

first those it's if we'd down, down those quarter year, or you at in then so. be that per So we're layer other 'XX, look if that last foot And $X.XX. concessions, about still free you numbers year. what, XX% -- square $X.XX are within And per rent, about

is the concessions term that are up. total So down fact despite average the of length

front. will the over that that the watch the had fact hopefully coming think on more in new have as that with we months the much I mostly leasing quarter. So we dovetails renewals We'll

Rob Stevenson

the guys exactly these assets And about guys your disposition properties the talked potential call. Okay. you're best pull out was ones earlier expectation? intention about in my pick that then sell looking listed I what of Great. meets of of pricing other to question which for. and you'll thinking Is back a others? this you out That's that putting that? the on all and then pool is How price you your Is basically sort this if the there, and are

Jeff Carter

properties -- Jeff. Rob, pricing that important if this list for -- put the that prospective question, target we objectives, in Thanks are likely is out, we sold. disposition the we The question. our would all these hit and value be

Rob Stevenson

that? point guess I Are the acquisition concurrently, these also concurrently proceeds Okay. mean that reduction. opportunities this time? in proceeds should on guys what wind past debt you basically I at of used are for selling talked guys exploring wait going you will having of the be all And and But do to Or properties full about in available you? up to the evaluating detail level you that you in then obviously, I mean selective -- you've the you are --

Jeff Carter

Jeff at on objective, we've -- debt our use reduction. where Rob, we're is primary to investments those as and We primary existing look But could focus this our this greatest West see again. markets, and on -- on Ultimately, primary efforts debt our at we're you'll and proceeds. of our objective the that's is in Sunbelt in watch investments these continuing indicated, to And market. and the is also Mountain reduction. be continuing properties, and stage


next And will Instructions] come Baird. Rodgers [Operator question Dave of from our

Dave Rodgers

-- But commitment to we a strategic lack reason a start curious I Atlanta. with a selling quite perspective, high-level wanted from Obviously, the market, quarter, to last perspective, a is future the the I'm as to the a pay maybe in core about bit talked sell of from debt. in you. is assets a maybe selling to Minneapolis, off George, down which

out a So you guys have how you also over of how what do value selling you time? think that? you X-market has kind strategy? do do balance that balance fair you assets laid backfill of selling that How And achieved strategic kind your with as

George Carter

single -- that. And property of market more you that property around term answer value it's there's it get on arms is run or property can is down any and sort by lane market. to around near not ability telling us It a your not far Dave, property that to what believe revolves affect of market against what really we our level a is in is by interest.

major Centene St. has tenant. property a And Louis so I Greater mean, as properties, Timberlake some our that

used market, Now net told example, professionals property, we in market, been And sought. by that occupied the just potential that listing, not us, a for that with sort for acquirers. is portfolio are that interesting we to very lease because have we longer-term whole property particular that who in properties that's market, that highly fully outside particular that be really lease property of to evaluate -- would market

some Innsbrook, and the if take that, that Now in evidence in got of submarket example, there -- told, there you we're we were seeing Richmond in which from for is -- vacancy particularly are Richmond, you be which players. we would value-add and in has the market interest

near criteria And And markets, versus call have if initiate believes to are that on that market value what as rather from so those property our in the would each look you strategic than what properties today, meet it's our and discovery property term. that you basically in you of FSP properties do we get earnings nonstrategic it with take it's see markets. a price five and in, that property shown trying release we're the whatever can kinds property whatever them, sold at over can the

at looking we're how it. really not that's -- not really are those So

Dave Rodgers

Noticed for you any about XX-Q, further, there through? too the talk I little the Is you'd already in that sales public us information, Overton assets. to since were a guess Jeff, though, had the want close, X and little on I March Can didn't update fall give of have many about you the assets sales in still realize and that in asset but don't that? out on set line I color to bit wanted And Atlanta just out can the Two put held this asset you sale think, Ravinia I about you happening? kind up. for to as a assets. specific that? a bucket, us X-K week. you the talk Those It didn't Did some

Jeff Carter

Yes, absolutely.

that that we confidentiality, to of confidentiality under are transaction are are that the purposes For there Atlanta specific -- regarding deal.

discuss we about but X-K I can't So it, too much April updated on file did an XX.

you which seen updated or It's XX, day that XX to is I mutual things, on it, extension right party. still were amongst look for accurate XX-day to also either XX April you But and that at haven't up-to-date about If X-K at would if XX, it. transaction, it today. a encourage in filing to subject encourage good April from is May -- still And a closing I'd from haven't you look a take it. other you that for contemplated seen

Dave Rodgers


at looked now. it Just

the for you thank update. So

that I have think the I one. update. seen I missed for so earlier the ones, thanks

wanted a I what square to think or vacancies coming you bit Donahue. from added the would us that's look tenants, Can about guess you a little Midtown leasing the on where feet and Atlanta. XXX,XXX that maybe I so of So Maybe halfway of give prospective shift about sense of to better fill? there. front, John

the you some done Minneapolis and and think you've on an Can work Blue larger that? recently vacancies. about us update the that some You of provide and of Lagoon

John Donahue

our yes, So largest markets. activity seeing in we're

have markets, largest markets and square are to buildings from down you prospects with by prospects with of I our would the several certainly consistent rents. percentage in shortlisted be foot smallest. largest larger the their assets narrowed said, the go as to The highest our search that as list the So

goes That Houston of demand one by as today, -- So high-probability by market and increasingly that followed XX% the active Denver then prospects. time and our and the with those in recently has followed to And but has is surged been been and Atlanta have more Dallas. active that significant representing Miami. year-end Virginia, improvement XX% maybe most by between

that negotiated have So just tracking prospects most we've of quite while we're a been execute to the those. for leases, and them waiting fully on

Hopefully, to optimistic. of get So execute some we're tenants these very we'll soon.


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

George Carter

listen talking you, appreciate and our We to Thank with quarter. the to again. questions. forward earnings participate everyone, taking and to call we for time look it, Thanks you to next


presentation, now The conference now concluded. will has today's disconnect. Thank and attending you for you