Franklin Street Properties (FSP) - 2020 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported funds from operations (FFO) of $20.4 million or $0.19 per share for Q3 2020, with write-offs and lost rent totaling $108,000 for the quarter and $631,000 year-to-date [12][13] - Approximately 98% of contracted rent was collected during Q3 2020, with a similar collection rate for October [9][10] - The total debt remained at $1 billion, with $30 million drawn on the line of credit, and $570 million available for future use [14][16] Business Line Data and Key Metrics Changes - The FSP portfolio was 84.3% leased at the end of Q3, an increase from 83.3% at the end of Q2 2020, with rent collections averaging approximately 98.4% for Q2 and Q3 [17] - During Q3, FSP leased approximately 282,000 square feet, with 181,000 square feet of net absorption from new tenants [19] Market Data and Key Metrics Changes - Demand for office space is stronger in suburban areas compared to urban locations, with the highest demand noted in Virginia and Dallas [40] - The company is seeing a split in tenant demand between pre-COVID and post-COVID origination, with ongoing discussions for potential leases in various markets [34] Company Strategy and Development Direction - FSP continues to focus on owning high-quality properties in amenity-rich locations, particularly in the U.S. Sunbelt and Mountain West regions, despite the challenges posed by the pandemic [22][23] - The company is monitoring its portfolio for potential opportunistic dispositions and is actively tracking suitable investment opportunities [25][26] Management's Comments on Operating Environment and Future Outlook - Management expressed uncertainty regarding future rental receipts due to the ongoing COVID-19 pandemic and has suspended guidance on net income and FFO until more clarity is achieved [10] - There is a growing dialogue with tenants about potential needs for extended relief due to economic uncertainty, with expectations that the impact of the pandemic on annualized rents and cash flow may not be fully understood until later in the year [18] Other Important Information - The company has no debt maturities until November 30, 2021, and approximately 92% of its debt is at fixed rates, aligning its capital structure with long-term value properties [16] - The board reviews the sustainability of the common dividend quarterly, considering various factors including economic occupancy and leasing commissions [46][47] Q&A Session Summary Question: Leasing activity and tenant demand - The company confirmed that leasing activity is split between pre-COVID and post-COVID origination, with significant prospects in Virginia, Texas, Denver, and Atlanta [34] Question: Sustainability of the common dividend - The board reviews the dividend quarterly, considering the impact of COVID on leasing and economic occupancy, with a focus on long-term stability [46][47] Question: Update on tenant improvement projects - The company noted that many tenants are deferring their usage of TI, leading to potential volatility in CapEx levels over the next 12 to 24 months [52]