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Franklin Street Properties (FSP)

Participants
Scott Carter Executive Vice President, General Counsel and Secretary
John Demeritt Executive Vice President, Chief Financial Officer and Treasurer
George Carter Chief Executive Officer and Chairman of the Board
John Donahue President, FSP Property Management & Executive Vice President
Jeffrey Carter President, Chief Investment Officer
Robert Stevenson Janney
Dave Rodgers Baird
Craig Kucera B Riley Securities
Call transcript
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Operator

Hello. Good morning everyone, and welcome to the Franklin Street Properties Corp. Fourth Quarter and Full Year 2021 Results. My name is Gemma [ph] and I will be the operator for today. [Operator Instructions] I'd now like to hand the call over to Scott Carter, General Counsel. Scott. ahead, go Please you. Thank

Scott Carter

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

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

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

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

John Demeritt

results, overview and our you, Thank give fourth a morning brief to year-end everyone. for and pass his to the and going call afterward very of George good Scott I'll quarter I'm comments.

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

During completed we used and $XXX million the gain repay $XX balance to at QX, those and revolver. the of term properties three from million loan of sales net to proceeds sale drawn million on about a XXXX $XX.X our maturity repay a our of

of we during used XXXX, primarily the at of of were debt. back, asset properties repay our end ended XXXX. XXXX, very billion sold struck approximately which in outstanding. XX We property At to XXst, XX% has X.X and of December of XXXX times debt significantly result September December repayment Looking $XXX had end X.X we ratio to debt our a times, since strategy. net end as of million at of EBITDA XXXX. $X in the proceeds a to XXXX, debt about We debt had sale We the primarily a with sold of at

ahead. in We we was entered believe have three that our Our Shortly for terminated We XXXX liquidity quarter our believe this debt service strengthened and our look $XXX.X and new times will availability year-end, with appreciate balance fourth into service our a in as coverage million we sheet. revolver revolver group ratio of leverage and meaningfully bank well. lowered over is revolver. we existing needs our the as new after

over the all turn of debt that, to With reminder, a unsecured. I'll remains our As George. call

George Carter

like John. our in XXX $XXX.X very approximately XXXX Atlanta sale debt in property on with strategies of Franklin renewal the that for And I’d a year you, FSP to Eldridge report new Peachtree a again, and lease approximately achievements tenant in Thank XXX,XXX welcome feet feet for to XXXX to well a offices. at quarter and its Street primary fourth executed XXX,XXX XXXX and include to Houston. call. earnings Atlanta Properties reduce of million, lease lease square Green Park at square full Pershing

aggregate our proceeds common we sold approximately We million approximately properties total by $XX.X indebtedness have approximately XXth, XXXX for our $XXX reduced million. $XXX from to purchased XXXX, approximately XX approximately XX% we gross X.X since $X million. approximately year billion full of a of September for For shares million. And

very our leasing Looking upside has a significant potential environment. forward, office we portfolio are optimistic that remaining post-COVID-XX in

leasing in to available focus more so, of we continue office our to And XXXX, space. all energies will

estimating to aggregate value realize the John proceeds. Property common dividends to as that the now other sale that stock we reduction, dispositions to as of current the continue I price does Corp. properties, the special strategy $XXX of our million select short where to been for also Management that, to $XXX any potential purposes. to debt estate At intermediate continued intend XXXX underlying repurchases our to not of corporate intend continued from over time, FSP turn we well John? believe current dispositions valuation our requirements, REIT believe this through assets like gross that President million With required reached. seeking property future has general be the are Donahue, meet term shareholder range call or in of of value the stock and continue in to of reflect to proceeds and of any accurately common real We We use our to would

John Donahue

third escalating fourth The is primarily square the momentum quarter end that as recently of most Thank and quarter. leasing variant total the XXXX, over The the had Omicron feet occasions portfolio including compared FSP asset Delta of by lease surge you, the and at million George. decrease to Good leased morning, XX.X% FSP by at expansions to finalized The approximately XX.X% attributable XXXX everyone. end new of dispositions. was during variant on interrupted been renewals. the during X multiple was calendar surge. leasing deals, the

the prospects. currently of majority are new again, we office with the basis. space, witnessing momentum FSP's our for are potential country, sublease growth weekly reopenings in the once commitments. markets space additional there square as However, feet of leasing portfolio, the in of on and improving In feet office fundamentals, square FSP pipeline a improving letter shrinking approximately tracking XXX,XXX of tenant prospects, across identified Included demand in potential signed current choice there of is that new FSP top approximately or of an prospects square XXX,XXX their building a short-listed feet intent. assets FSP have new XXX,XXX tenant

activity to encouraged growth and leasing Jeff perspective FSP's Thank it Carter. by be will to pipeline continue meaningful tenants. We I and you. turn healthy over now

Jeffrey Carter

you, Thank at Franklin safe Properties, everyone everyone. Good here remains that Street hope and morning, We John. healthy.

property with reduce company As we through continues select efforts at indebtedness corporate start XXXX, FSP to materially the sales. our

price the a end XXXX, our disparity that have which to share and real market began XXXX, highlight estate we true of our during public efforts of value Importantly, that the at believe exists our between served disposition effectively assets.

for $XXX FSP been cap shareholders. weighted More X.X%. in have believe associated And at place sales full so, an for in aggregate total approximately embedded completed the our capturing average of value approximately specifically of we dispositions year XXXX, property million rate our

in in XXX completed about Peachtree Meadow the $XXX.X During Atlanta for Virginia Chantilly, that million million dispositions, fourth three Stonecroft included $XX quarter, both October in and and in for specifically totaling $XXX.X million FSP November. Point

appropriate. disposition XXXX, or the million aggregate to XXX price year Colorado. calendar more specifically, $XXX with will year, paydown currently at is, proceeds XXX for as updates potential and Park in continue Texas, and continue proceeds to Interlocken property be has to will Houston, you FSP debt. confirmed seeking Illinois, guidance XXX expected between primarily Evanston, in Eldridge Green intends provide Looking similarly and And to soon of Ten and FSP any on Davis in gross upcoming million $XXX to Broomfield, discovery sales in disposition we last utilize FSP

continues Our short a intermediate asset-specific for including respective to variety be factors, of criteria analyzing dispositions We specific. not potential. market value for selecting consider term potential to and properties

to select interest strongest with brought tenant been buyers, terms single to public also increasingly strong the effort has marketplace on an but the interest for To has experiencing a also add core and located sales, participating. buyers properties lease to investment or bidders suburbs, has few also to in try properties have value-add. plus group to but of buyers. Lastly, bit has been in landscape. call domestic underwriting today. have seeing of we as infill And up is been And economy now to conference that, the we seen and questions, interest also well. even looking with for And we normalized that international winning in a Gemma? Most a been as exploration are has use we'd and for any more earnings you office are color seeing office high generally from Strongest what time, for nature, Interest mostly FSP some like our interest but return private looking around groups well in at a in thank from diverse the listening average quality been in call weighted demand date, strong well. are this

Operator

today comes Stevenson question from Rob. go of Janney. Rob you. ahead, Instructions] Thank Our [Operator first Please

line now Your open. is

Robert Stevenson

Good morning, guys.

does five well? identified X.X feet On you or million guys the $XXX reflect other that stuff it $XXX just million as dispositions, roughly and the million include does to properties square they're the have

Jeffrey Carter

Carter. assets morning. Rob. Good Hi Jeff we've It the is noted. This includes that

Robert Stevenson

Okay.

to do else be anything would current addition five those guidance? besides you the So, -- that in

Jeffrey Carter

That correct quarterly. we'll would update and be

Robert Stevenson

about how management the this Board of the improve and -- you how if stock quality. guys? for I willing long continues assume little have in Board by a range, sort disposition And is the And of by it's that more I asset of that value maintain the disappointed price, to another do the by the to sort $X, of Okay. rest here. in and -- hasn't George, next to not you the is subtraction, a mean, stock budged, drop are $X the steps leverage. cases some the the you What's addition options what Board thinking be you that, and reflecting that and been as then, team continued

George Carter

Rob. Hi,

question good that answer And to So, question. is somewhat multifaceted. the

strategy is terms as that next in us And a over the effort when year-over-year. leasing First, and are we our value think But actually large for outlined you two XXXX, the focus. we return what then XXXX, looking add close equation, spectrum, the XXXX, couple believe for and Obviously, we the in of of one I would our see value false that dispositions that of what way unrelenting continued reasonable, for XXXX well And watch office or by disappointed have close to commitment executed over we where starts the -- with XXXX, to the market award very or the the to way, a lot year. into do that And in the right was at fantastic price the actually at our a at of is did leasing fantastic the adding that stock the stock. We're is value, great that Board. markets market goes. what year had XXXX higher say properties close properties. then we've the stock take of risk way we and and this And the the that here it commitment if optimistic. broader at our in relative consider shareholders. office year a Board are of to will shareholders years. and in on that is did over things fact that focused return. during and of COVID dividends timeframe I get Again, say happens broader to you We'll adjusted front last XXXX our one of this in the on would now, isolating best just best with in the

Denver. also the in few downtown faced of some I optimistic. our is a years think the in We, office and have specifically, markets, market energy generally specifically, real last headwind Houston

of number very that in to properties of and of one our of shareholders, say and and and the in meaningful to us are turning value concentrated for Time this adding will Some those our continued is the for I tell, headwinds two to ability we are the XXXX Board terms value but may believe, be And that we shareholders. markets really, reduction watching that would as most things all at heavily particular that point, debt. lastly, important, through tailwinds. will those something proceed lease is energy those XXXX, be add again, the

acquisitions, to course, dispositions if Along to return and dispositions investors, that, you As with on be that is proceeds we better future year is have cash real -- improved. our balance remaining repurchases returning that that our we with forward will long at as of a definitely did balance in portfolio lastly is that experienced from off value gains successful feel. grow values going sheet, if have And, objective another ability our in what the equity should of be that's risk, we as to equity with those from if gains lower we value sheet, reduce we of way debt dispositions, least again sending stock. dispositions, for terms to values the shareholders And solid the shareholders. last

think Rob, the explained remains, our we've so front market us I continuing is so believe the as beyond long of assets estate we than of will think and of we price it's I our share that for know. portfolio but real let in long-winded, net is it XXXX, the path much where So, value lower as

Robert Stevenson

Okay. for then for Fair one me enough. And Demeritt. last one John

type of attack involved You the high sub disposition assuming what you'll penalties, four, some fours, prepayment million be have some in there what remaining some have and that two, debt, of somewhere what's -- that $XXX this are low -- the if of to of any going get the million -- proceeds you what's of year, that? debt order you debt $XXX

John Demeritt

that of the next in was Well, would be likely loan the matures on a first, year. remains that most $XXX million million January what $XXX term

off, money. first financing that. against deferred prepayment on We no I some $XXX a So, would significant when will that's on million it don't that. depending we be go of think but accelerating penalty There costs, is paid amount

end million that we does on by term a led be would the that that Bank $XXX January XXXX. due have of of the piece one's have one second was The it. loan of That Montreal was, swap in that

from the So, to where it. to have costs to does have that and rising incur the repay the a some if that that. have swap the the swap that at of I of January, rates break were swap tendency amount reduce we value And on been end we'd we at looked have of liability

year-end. think it by And was at I $X.X million January, something end was it the $X.X of million around like that.

that, $XXX break So, back, portion if million we that to rise there we on, of will pay that swap need some significantly. race a will be let's

Robert Stevenson

Okay.

A to you're So, this the round with get not B notes senior and that going to dispositions. are likely series something of

John Demeritt

to And think it's that two yield has -- have that on expensive pretty them No, so. they component of maintenance those pieces debt. I a don't

Robert Stevenson

risk to becoming start they less do on of when the And take more in sort out?

John Demeritt

of matures XXXX. then in December of $XXX December Well, million million of matures and XXXX it in $XX

XXXX over next So, of down couple maturity the come the would years. start to

Robert Stevenson

time. Appreciate Okay. All the Thanks right. guys.

Operator

on from Baird. go Dave of comes Please the Thank line Dave. ahead, you. next question Rodgers Our

Dave Rodgers

George, Yeah. Good prior to comment your I a your moment -- follow up ago. morning, everybody. on wanted just

think, value, I into the under going just billion. pandemic $X enterprise

on about kind keeps $X of up. You're over time. sell track assets the to billion going G&A same of

that you do interested be company? So, as heading you alternative? you think if pursuing do you're strategic smaller kind the you're not really company this in as right-size a How how whole, downsize to overall that that about the selling of not toward, the company

George Carter

say Dave, as it I and again as clear question I as before you've Well, this and will can. asked

being changed have XXXX. plan during at is are the that reviewing all point and this but table. constantly out alternatives, course alternatives plans alternatives. started and the plan year, The all strategic we've of business always XXXX, the all the on are laid as business for strategic business have We strategic But reviewed are

probably company be chosen. what once, profitable post-COVID, post-COVID, is a growing and size it the period including could sense and that much tackle long-term do, long-term And again, option in to terms right we'll you much table. go, again we the year hopefully would those is long-term, ways, so, longer we things to a a all lot we learn the the this G&A whatever smaller in to again, and strategic options where continuing good is of And of, tackle make significantly assuming of other in on we And potential decisions -- a of a is going time in for not that all decision are the to in scenario we strategic if assumption that company will be most stay number choose. necessary fact have what

Dave Rodgers

Fair Yeah. that. on enough Okay.

think, the this I add Jeff, what also the said, better, the you kind market leased. mentioned think, improving about for on XX% is and up your value you've market acquisitions year That energy talked I XX% of between have or getting somewhere and think disposition, teed just might is you disposition. I

obviously, more on to the a why So, markets, little assets? assets those as a be backlog of to more, kind selling in not needs bit just the not located Houston of percentage. Denver, and well a the some leased of to what pressuring adding well pursue leased, value those or tag opposed Why add

Jeffrey Carter

Jeff. is this Dave,

evaluating specific We not specific an basis. asset basis, a assets on are market

tremendous like and the not assets so, And continued the them. we're great upside we that for for potential opportunity shareholders assets feel that sell selling are assets value have correct are potential we to selling our when we is And believe ownership.

Dave Rodgers

Donahue, maybe for on question then, Okay. I you the John front. leasing And one That's fair. guess,

Can vacancy of and in known of this XXX,XXX you about You of talk that million the a impacting kind at wood portfolio bit quite the how square XXXX? and feet. move-outs cadence of see Obviously, move-ins of kind now. point six about right mentioned you a chop known to

John Demeritt

Sure. But of which for it and course. And is towards -- are and good what much economic decision-making in right is quickly be sold now, been which we're moving improving which seeing Dave, a of move-ins more waiting better of line, -- when when and morning. now pipeline will quite while. and the finish largely that move-outs, terms we've a assets occupancy, sold, for on depend are would assets

is need and are continues right is really surprises, better that to over expect decision-making. get just I not So, but long-term to prospects or in wildcard. just just looking if quickly. of big upward of would that bit COVID be a is hurdle success And were with linear, commitments than these surge depending it little better. that My sense that at the inching along no on September/October, being but level COVID, might a we're now it's we fragile and better, place the

And more positive than the markets there year. is so, talk last and optimism there more multiple on in occasions today were

this that I an to if quick be guess, linear So, say but or I progress the throughout quickly. to not going a is escalate more had year, be would could inching and it

Dave Rodgers

that. you for Thank

about update Specifically is and the backfilled that two-thirds any space? on on Ovintiv, DirecTV then

George Carter

and we XX% regards released of that prospects Ovintiv, in to looking for XX% have So, new between space at balance. the and

this believe at done So, subtenants. time we're we that the with

in And market the do improving that is prospect vacancy share backfill has followed would we of by downtown. our lion Texas, greatly but a Denver DirecTV. to So, the have Denver, especially been

four the to months. We three, expect vacate DirecTV next over

Dave Rodgers

on Downtown space. that

George Carter

hard say. to Well,

probably maybe two, strong one least have quarters, prospect, of but downtime at three to very or it's say. looking do just but hard a quarter we we're think, I at

Dave Rodgers

of just the of end the Blue to quarter, subsequently timing that. announced just Lagoon, Lastly, in lease you on the move

George Carter

they're soon yeah, timing be -- as move-in out. would with the of the would That done as build

point at in be And the quarter some fourth estimate. would so, our

Dave Rodgers

I sorry, sell to I'm think a one left, had -- that months I on What a that four Energy, then And that? or is that more Is term. WPX re-lease? happens Okay.

George Carter

a known That's move-out re-lease.

Dave Rodgers

the for it. Okay. Thank all details. you Appreciate

George Carter

welcome. You're

Operator

you. We Craig Craig. Please should line our Riley final move Securities. ahead, from now B on to go question from Thank the Kucera

Craig Kucera

circle question another morning with Thanks. Ovintiv. wanted I guys. Good back to related Yeah. to

start Can there property fourth You leases are quarter. sense give a I rent -- that in at currently vacate. of think are those the paying made some three kind here that of when headway you to going us

John Donahue

months. -- Hi, I'll It's to along six to John going Craig. Donahue. average, pass and between I'm Friend. that Will XX On

Craig Kucera

Okay. Great. helpful. That's

this and allocation, like you And that in you're capital leverage Franklin what just thinking Okay. considerably target year of year? a maybe these thinking have last you brought of about Great. the about the beginning looks this Street dispositions that from Do down leverage post kind contemplating low year all have sixes. you're

John Demeritt

in know This we're the is Demeritt. don't We've I leverage to that No. if have target George? you anything going We want follow. got to disposition add John just don't to guidance a mind. that,

George Carter

No.

assumes and two basically and private indebtedness. quarters got right, gross debt be that on, dispositions. the in that's through achieve debt it, think there get And to sort placement expand forward XX% if And at that term only those earlier that aggregate call, put you relative the We private or dispositions. I debt. the two could leave we in loans, of least mentioned what bulk basically our and were proceeds term disposition would if you able we loans, would now guidance through placement that would to again, XX% -- of could you as with the target Greg. Demeritt contract future -- lead John the we the and to so would dispositions, of which

Craig Kucera

just maybe the back Board And you're I how and capital it. of below thinking beyond. buying about X% debt cost guess, sort is at when then of Got X%,

George Carter

the repurchases stepped procedures and our trading step -- properly. at level, up shares forward here Board focused does volume upon purchasing share the of actually our And to volume, based Gets consequence. average trading and achieve,

in market, under program. available You work block if the they looking the properly have would at probably to for potential trades, hard were

most it achievable and be levels -- purchase under. we shares that our to some the relative going So, companies volume to that is are we of virtually program

Craig Kucera

I Thank colors. Okay. appreciate you. the

Operator

on questions no further have We line. the

you. Thank So, closing I'll hand back for over Carter remarks. to George

George Carter

exciting the Just today. whole office and will for into for XXXX for thank an us market tuning matter. be that for call everybody year the

are We're in you lot excited. The looking and are to certainly particular markets a to market talking parts quarter. for forward the We there energy but FSP, to moving forward to next interesting, office of it. are look

Operator

very much afternoon. good joining and your you may us Have today. Thank you disconnect you. a Thank lines. gentlemen, for Ladies now