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FRANKLIN STREET PROPERTIES CORP /MA/ (FSP)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 was operationally soft but largely stable on cash earnings: rental revenue was $27.11M and GAAP diluted EPS was $(0.21), while FFO held at $2.73M ($0.03/share); occupancy slipped 110 bps sequentially to 69.2% leased as renewals/expansions totaled ~60K sf and no new leases were executed .
  • Management reiterated two priorities—leasing and selective asset sales—and is actively marketing ~1M sf for potential dispositions; proceeds would primarily go to debt reduction (total debt ~$250M as of 3/31) .
  • Guidance remains suspended given macro and disposition timing uncertainty; dividend maintained at $0.01/share for Q1 2025 .
  • Near-term stock catalysts: (i) outcome of announced strategic alternatives review (hired BofA Securities) post-quarter, (ii) potential asset sales and debt paydown, and (iii) leasing pipeline conversion, especially in Houston and Dallas .

What Went Well and What Went Wrong

  • What Went Well

    • Balance sheet focus intact: debt held around ~$250M (all maturing April 1, 2026), with net debt/Adjusted EBITDA at 6.5x; company reiterates disposition proceeds earmarked for debt reduction .
    • Sequential same-store NOI improved vs Q4 (comparative SS NOI +2.2%); Adjusted EBITDA of $8.42M supported coverage despite lower revenues .
    • Management flagged a “more robust” pipeline vs recent years, tracking ~800K sf of prospective new tenants (300K sf shortlisted) plus >400K sf of renewals, and sees potential positive net absorption for 2025 barring surprises .

  • What Went Wrong

    • Leasing execution was weak: only ~60K sf, all renewals/expansions; no new leases closed in Q1 as decisions stalled amid macro volatility; leased % fell to 69.2% from 70.3% in Q4 and economic occupancy dipped to 67.7% from 68.6% .
    • Top-line pressure persisted: total revenue decreased sequentially ($27.11M vs $28.38M in Q4) and YoY ($27.11M vs $31.23M in Q1’24), driven by dispositions and lower occupancy; GAAP net loss widened to $(21.44)M, including asset impairments .
    • Macro/transaction headwinds: liquidity remains constrained with elevated cap rates; institutional buyers largely sidelined despite signs of stabilization in volumes, limiting visibility on disposition timing and values .

Financial Results

MetricQ3 2024Q4 2024Q1 2025
Total Revenue ($M)$29.68 $28.38 $27.11
GAAP Diluted EPS ($)$(0.15) $(0.08) $(0.21)
GAAP Net Loss ($M)$(15.62) $(8.53) $(21.44)
FFO ($M)$2.67 $2.71 $2.73
FFO per share ($)$0.03 $0.03 $0.03
Adjusted EBITDA ($M)$10.78 $8.99 $8.42
  • Estimates comparison (S&P Global):
    • Q1 2025 EPS (Primary EPS): Consensus −$0.08*, Actual −$0.21 → miss of $0.13 .
    • Q1 2025 Revenue: Consensus unavailable via S&P Global; Actual $27.11M .
    • Note: Many REIT analysts focus on FFO; no FFO consensus was available.
Q1 2025 vs S&P Global ConsensusConsensusActual
EPS (Primary EPS)−$0.08*−$0.21
Revenue ($M)n/a*$27.11

Values marked with * retrieved from S&P Global.

  • Segment/Region NOI (in $000s)
Region NOIQ3 2024Q4 2024Q1 2025
Midwest1,278 992 1,139
South5,087 4,549 4,331
West6,037 5,670 5,849
Property NOI from Owned Properties12,402 11,389 11,319
  • KPIs
KPIQ3 2024Q4 2024Q1 2025
Leased % (Owned)70.4% 70.3% 69.2%
Economic Occupancy (Owned)—68.6% 67.7%
Leasing Volume (sf)~92,000 ~252,000 ~60,000
Weighted Avg GAAP Rent on QTD Leasing ($/sf)29.94 (9M’24) 30.06 (FY’24) 29.64
Avg Lease Term on QTD Leasing (yrs)5.4 (9M’24) 6.3 (FY’24) 5.2
Recurring Capex: TI / LC / Non-investment ($000s)—4,173 / 2,974 / 2,568 (Q4’24) 2,374 / 545 / 1,258
Debt Outstanding ($000s)277,687 (9/30/24) 250,332 (12/31/24) 250,179 (3/31/25)
Net Debt / Adjusted EBITDA (x)6.3 (Q3’24) 5.8 (Q4’24) 6.5 (Q1’25)
Dividend/Share ($)0.01 (declared) 0.01 (declared) 0.01 (declared)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Income (Loss)FY 2025Suspended Suspended Maintained suspension
FFOFY 2025Suspended Suspended Maintained suspension
DispositionsFY 2025Suspended Suspended; actively marketing ~1M sf Maintained suspension; activity reiterated
Dividend/ShareQ1 2025$0.01 (Q4’24) $0.01 Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3’24, Q4’24)Current Period (Q1’25)Trend
Dispositions & Deleveraging$1.1B gross since 2020; debt down ~75%; sales at ~$211/sf; liquidity tight, buyers seeking distressed pricing Marketing ~1M sf; proceeds targeted to debt; debt ~$250M Steady focus; execution subject to market liquidity
Leasing Pipeline & OccupancyQ3 leased ~92K sf; Q4 strong at ~252K sf; Owned leased ~70.4–70.3% Q1 weak at ~60K sf (all renewals/expansions); leased 69.2%; pipeline robust (800K sf new + 400K sf renewals) Near-term softness; potential recovery as pipeline converts
Market Liquidity/Cap RatesLiquidity constrained; elevated cap rates; institutional buyers sidelined Volumes improving YoY; liquidity still constrained; stabilization signs Cautious improvement from low base
Macro/TariffsNot highlighted in Q3; Q4 optimism on office activity Tariff headlines adding uncertainty; watching macro impacts on leasing and deals New headwind noted
Dividend Policy$0.01/quarter maintained $0.01 declared for Q1 Stable
Strategic AlternativesNot discussedPost-quarter, Board initiated review; BofA engaged New potential catalyst introduced

Management Commentary

  • Strategy and priorities: “We continue to prioritize two primary objectives… advance our leasing efforts… and… pursue select property dispositions… intending to use the net proceeds primarily for the continued repayment of debt.”
  • Macro/watch items: “Recent tariff headlines… introduced increased volatility and uncertainty… potentially affecting… leasing decisions and… acquisition of office properties.”
  • Dispositions/value view: “We continue to believe that our share price does not reflect the longer-term intrinsic value… we are currently marketing several properties totaling approximately 1 million square feet.”

Q&A Highlights

  • Why no new leases in Q1? Deals “stalled” late in the quarter amid macro volatility; renewals also slower to finalize, but management expects better numbers in Q2–Q3 as pipeline converts .
  • Regional demand: Strongest tenant activity in Texas—particularly Houston—followed by Dallas; Denver/Minneapolis improving versus 6–12 months ago but less robust than TX suburbs .
  • Leasing outlook: Tracking ~800K sf of prospective new tenants (300K sf shortlisted) and >400K sf potential renewals; scheduled 2025 expirations ~246K sf (~5.1% of owned sf) .

Estimates Context

  • EPS: Q1 2025 Primary EPS consensus −$0.08* vs actual −$0.21 (miss $0.13). Many REIT investors emphasize FFO, for which no S&P consensus was available .
  • Revenue: S&P Global showed actuals only; no consensus available. Actual Q1 revenue was $27.11M .
    Values marked with * retrieved from S&P Global.

Key Takeaways for Investors

  • Leasing dipped in Q1 with no new deals, pressuring occupancy (69.2% leased) and revenue; watch for pipeline conversion in Q2–Q3, particularly in Houston/Dallas, to stabilize/expand NOI .
  • Cash earnings resiliency: FFO per share held at $0.03 and Adjusted EBITDA was $8.42M despite top-line pressure; sequential same-store NOI ticked higher vs Q4 .
  • Balance sheet: ~$250M debt (all maturing 4/1/26) and net debt/Adj. EBITDA at 6.5x; asset sales remain the primary deleveraging lever—execution hinges on liquidity and pricing .
  • Strategic alternatives review (May 14) creates an additional potential catalyst range (company sale, asset sales, refinancing); timeline/outcomes uncertain .
  • Guidance remains suspended; expect estimate dispersion; near-term results remain sensitive to leasing timing, tenant decisions, and asset sale execution .
  • Dividend steady at $0.01/share; AFFO was negative this quarter (−$0.01/share), underscoring the importance of leasing conversion and capex discipline .

All citations refer to company filings, earnings materials, and press releases as indicated in brackets.