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FRANKLIN STREET PROPERTIES CORP /MA/ (FSP)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 showed stable operations amid office headwinds: revenue fell to $28.4M and GAAP EPS was -$0.08; FFO remained positive at $0.03/share while AFFO stayed negative at -$0.05/share .
  • Leasing momentum accelerated: 252K sf signed in Q4 and 616K sf in 2024; owned portfolio leased 70.3% vs 70.4% in Q3; debt reduced to ~$250.3M post-Atlanta sale .
  • Management maintained suspension of net income, FFO and disposition guidance; dividend held at $0.01/share for Q4 2024 .
  • No Wall Street consensus estimates available; focus shifts to sequential NOI, occupancy, and balance sheet deleveraging (FSP provided no guidance; S&P Global consensus unavailable).

What Went Well and What Went Wrong

What Went Well

  • Robust leasing activity: “we leased a total of approximately 252,000 square feet” in Q4; 616K sf for 2024 with weighted average GAAP rents on leasing up 8.2% YoY to $30.06/sf .
  • Debt reduction and portfolio optimization: sold Pershing Park Plaza for $34M and repaid ~$27.4M, bringing total indebtedness to $250.3M ($52/sf) .
  • CEO tone constructive on office activity: “general increase in office property activity... clearer, longer-term leasing requirements... more capital... interest” .

What Went Wrong

  • Revenue and earnings pressured: Q4 revenue declined to $28.4M; GAAP EPS -$0.08; AFFO per share -$0.05 reflecting capex and leasing costs drag .
  • Occupancy drifted lower: owned portfolio leased 70.3% (67.5% including consolidated) vs 74.0% (71.5%) at YE 2023; sequential NOI down 10.2% including dispositions .
  • Transaction market challenging: “office sales environment… dominated by buyers seeking distressed pricing; liquidity… constricted” (CIO commentary) .

Financial Results

MetricQ4 2023Q2 2024Q3 2024Q4 2024
Revenue ($USD Millions)$34.8 $30.8 $29.7 $28.4
GAAP EPS ($)$0.03 $(0.20) $(0.15) $(0.08)
FFO per Share ($)$0.07 $0.04 $0.03 $0.03
AFFO per Share ($)$(0.04) $0.01 $(0.02) $(0.05)
Adjusted EBITDA ($USD Millions)$13.1 $10.8 $9.7 $9.0

Segment/Regional NOI (Owned Properties) – sequential comparison:

Region NOI ($USD Thousands)Q3 2024Q4 2024Δ vs Q3
Midwest1,278 1,170 (108)
South4,390 4,549 +159
West6,037 5,670 (367)
Property NOI (Owned)11,705 11,389 (316)
NOI (Total incl. dispositions)12,383 11,123 (1,260)

Key KPIs and Balance Sheet:

KPIQ3 2024Q4 2024
Owned Portfolio Leased %70.4% 70.3%
Owned & Consolidated Leased %67.7% 67.5%
Total Debt Outstanding ($USD Millions)$277.687 $250.332
Cash, Cash Equivalents & Restricted Cash ($USD Millions)$42.375 $42.683
Net Debt / Adjusted EBITDA (ratio)6.1 5.8

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Income (Loss) Guidance2024Suspended Suspended Maintained
FFO Guidance2024Suspended Suspended Maintained
Disposition Guidance2024Suspended Suspended Maintained
Dividend per ShareQ3 2024 → Q4 2024$0.01 $0.01 Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024, Q3 2024)Current Period (Q4 2024)Trend
Office demand/return-to-officeQ2: Leasing 75K sf; markets challenged . Q3: Leasing 92K sf; cautious optimism .CEO: “general increase in office property activity… clearer… leasing requirements… more capital interest” .Improving sentiment; cautious acceleration
Leasing momentum & pipelineQ2/Q3 steady pipeline across markets .252K sf in Q4; tracking >600K sf new prospects; ~500K sf renewals; 2025 expirations ~322K sf (6.7% of owned) .Strong finish; pipeline building
Regional performanceQ2/Q3: Houston/Dallas/Denver mixed; Minneapolis renewed .Q4: Strength in Houston & Minneapolis; diverse industries; tech still soft .Mixed by market; urban cores firmer
Dispositions & capital marketsQ2: sold Innsbrook; used proceeds to repay debt; buyers seeking distressed pricing .CIO: sales dominated by distressed buyers; liquidity constrained but signs of bottoming in 2024 .Early signs of stabilization; execution selective
Guidance stanceQ2/Q3 guidance suspended .Guidance suspension maintained; dividend continued .Unchanged stance

Management Commentary

  • CEO George Carter: “we leased a total of approximately 252,000 square feet… completed the sale of our last property in Atlanta… repaid approximately $27.4 million of our debt… total indebtedness approximately $250.3 million” .
  • CEO (call): “general increase in office property activity… clearer, longer-term leasing requirements… more capital… interest” .
  • President, Property Management (John Donahue): owned portfolio 70.3% leased; 616K sf in 2024; pipeline tracking >600K sf new tenants and ~500K sf renewals/expansions .
  • CIO Jeffrey Carter: “office sales environment… dominated by buyers seeking distressed pricing… liquidity… constricted… emerging signs that 2024 may have represented a bottoming” .

Q&A Highlights

  • Leasing velocity drivers: strength in Houston and Minneapolis; diverse tenant industries (government, healthcare, business services, energy; tech lagging) .
  • Government tenant risk: no expected impact; engaged on renewal for a U.S. government lease rolling in ~13 months .
  • Tone: Constructive on leasing pipeline and cautious optimism on transaction markets; continued focus on debt reduction and maximizing value .

Estimates Context

  • S&P Global/Capital IQ Wall Street consensus estimates could not be retrieved due to data limits; FSP provided no forward guidance. As such, no beat/miss versus estimates is presented for Q4 2024 (values unavailable; FSP guidance suspended) .

Key Takeaways for Investors

  • Leasing momentum and pipeline improved into 2025; expect potential positive net absorption given modest expirations (~322K sf, 6.7% of owned) if dispositions don’t offset .
  • Balance sheet de-risking continues: debt down to ~$250.3M; Net Debt/Adj. EBITDA improved to 5.8x; cash held steady—supports resilience and optionality .
  • Profitability mix: FFO positive ($0.03/share) despite GAAP loss and negative AFFO—capex and leasing costs remain a drag; watch for AFFO trajectory as leasing converts to cash rents .
  • Occupancy/NOI: slight sequential declines in West region NOI and consolidated NOI; monitoring leasing execution in Denver/Houston and continued stabilization of Minneapolis .
  • Transaction market: near-term sales likely opportunistic given distressed pricing bias; any liquidity improvements are potential catalysts for deleveraging and value realization .
  • Dividend continuity ($0.01/share) underscores conservative capital policy amid suspended guidance; changes could signal confidence shifts .
  • Trading implications: headline catalysts include new large leases, non-distressed sales, or incremental debt reduction; risk skew is tied to office demand recovery and capital market liquidity .