Franklin Street Properties (US:FSP)2019-11-02 21:20Financial Data and Key Metrics Changes - The company reported funds from operations (FFO) of $24.9 million or $0.23 per share for Q3 2019, with an upward revision of full year 2019 FFO guidance [7][12][14] - As of September 30, 2019, the company had approximately $970 million of unsecured debt outstanding, with a debt service coverage ratio of about 3.8 times [7][9] - Total liquidity at quarter end was $620 million, consisting of $600 million available on the revolver and $20 million in cash [9] Business Line Data and Key Metrics Changes - The FSP operating portfolio was 89.7% leased as of September 2019, an increase from 88.1% in June [17] - Total leasing achieved for the first nine months of 2019 was 1,139,000 square feet, with approximately 444,000 square feet leased to new tenants [19] - The weighted average GAAP gross rental rate achieved on leasing activity for the first nine months was $32.73 per square foot, compared to $20.50 on a net rent basis [20] Market Data and Key Metrics Changes - Denver, the largest market representing 26% of the portfolio, saw leased occupancy improve to approximately 93.5% as of September, up from 90.7% at the end of 2018 [18] - Weighted average GAAP rents in Denver exceeded $33 per square foot, compared to $31.85 per square foot at the end of 2018 [18] Company Strategy and Development Direction - The company focuses on owning high-quality office properties primarily in the U.S. Sunbelt and Mountain West regions, aiming for value creation through excellent service and well-located properties [22] - The company has completed dispositions and/or mortgage repayments of over $351 million since 2014, indicating a strategic reshaping of its portfolio [23] - The company is actively tracking suitable investment opportunities but sees stronger internal IRR potential from existing properties than from new acquisitions [24] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the leasing results and the potential for net new absorption in the portfolio, despite challenges from a large lease roll [10][11] - The company is confident in its property portfolio and locations, emphasizing a bullish outlook for navigating the upcoming three-year period [52] Other Important Information - The company expects to execute a high percentage of new leases from a pipeline of approximately 200,000 square feet of new potential tenants [19] - The estimated lease termination fee income for 2019 is approximately $8.4 million, up from $6.1 million in 2018, primarily from a tenant buyout in Dallas [13][14] Q&A Session Summary Question: Can you detail the amount of square feet you are talking about regarding the leasing pipeline? - The company has approximately 200,000 square feet of high probability prospects for new leases and an additional 200,000 square feet for potential renewals, expecting a strong fourth quarter [28] Question: What is the status of the WorldVentures lease? - The tenant is transitioning from a sublease, and the commencement will likely be cash in Q2 or Q3, with a few months of free rent [31] Question: How much of the total 2019 lease termination income was from a specific tenant? - The total lease termination income was approximately $7.6 million, with some adjustments due to straight-line rent receivable write-downs [32][34] Question: What are the current prospects for the Innsbrook property in Richmond? - The property is currently at 57% leased, with a mixture of medium-sized and large tenants being considered, but no deals have been finalized yet [41] Question: Can you provide an update on the Dallas lease buyout? - The buyout was negotiated as part of a spinoff, with the tenant wanting a clean balance sheet, which is considered an unusual deal [44]