Q2 2024 Franklin Street Properties Corp Earnings Call
Thank you for standing by my name is Danica and I will be your conference operator today.
Danica: Thank you for standing by. My name is Danica, and I will be your conference operator today. At this time, I would like to welcome everyone to the Franklin Street Properties Corp. Q2 2024 results conference call. All lines have been placed on mute to prevent any background noise.
Operator: Thank you for standing by.
Danica: My name is Danica, and I will be your conference operator today.
Danica: At this time, I would like to welcome everyone to the Franklin Street Properties Corp Q2 2024 results conference call. All lines have been placed on mute to prevent any background noise.
Speaker Change: This time I would like to welcome everyone to the frequent Street properties Corp, Q2, 2024 results conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question. During this time simply press star followed.
Danica: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star 1 again. Thank you. I would now like to turn the call over to Scott Carter, General Counsel. Please go ahead.
Danica: After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you.
Danica: The number one on your telephone keypad.
Danica: If you would like to withdraw your question Press Star one again, thank you.
Scott Carter: I would now like to turn the call over to Scott Carter, General Counsel. Please go ahead.
Danica: I'd now like to turn the call over to Scott Carter General Counsel. Please go ahead.
Scott Carter: Good morning and welcome to the Franklin Street Properties second quarter 2024 earnings call. Joining me this morning are George Carter, our Chief Executive Officer, John Demeritt, our Chief Financial Officer, Jeff Carter, our President and Chief Investment Officer. And John Donahue, president of FSP Property Management. Also joining me this morning are Toby Daly and Will Friend, both Executive Vice Presidents of FSP Property Management.
Scott H. Carter: Good morning, and welcome to the Franklin Street properties second quarter 2024 earnings call. Joining me. This morning are George Carter, Our Chief Executive Officer, John Demeritt, Our Chief Financial Officer, Jeff Carter, Our President and Chief Investment Officer, and John Donahue President of <unk>.
Scott H. Carter: Good morning, and welcome to the Franklin Street Properties second quarter 2024 earnings call. Joining me this morning are George Carter, our Chief Executive Officer, John Demeritt, our Chief Financial Officer, Jeff Carter, our President and Chief Investment Officer, and John Donahue, President of FSP Property Management. Also joining me this morning are Toby Daly and Will Friend, both Executive Vice Presidents of FSP Property Management.
Scott H. Carter: S P property management.
Scott H. Carter: So joining me. This morning are Toby Daley and will friend, both executive Vice President of FSP property management. Please note that various remarks that we may make about future expectations plans and prospects for the company may constitute forward looking statements for purposes of the safe Harbor provisions under the <unk>.
Scott Carter: Please note that various remarks that we may make about future expectations, plans, and prospects for the company may constitute forward-looking statements for purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in the risk factor section of our annual report on Form 10-K for the year ended December 31, 2023, as amended by our quarterly reports on Form 10-Q, all of which are on file with the SEC. In addition, these forward-looking statements represent the company's expectations only as of today, July 31, 2024.
Scott H. Carter: Please note that various remarks that we may make about future expectations, plans, and prospects for the company may constitute forward-looking statements for purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in the risk factor section of our annual report on Form 10-K for the year ended December 31, 2023, as amended by our quarterly reports on Form 10-Q, all of which are on file with the SEC.
Scott H. Carter: <unk> Securities Litigation Reform Act of 1995 actual results may differ materially from those indicated by these forward looking statements as a result of various important factors.
Scott H. Carter: Clothing those discussed in the risk factors section of our annual report on Form 10-K for the year ended December 31, 2023 as amended by our quarterly reports on Form 10-Q, all of which are on file with the S. E. Z. In addition, these forward looking statements represent the.
Scott H. Carter: In addition, these forward-looking statements represent the company's expectations only as of today, July 31, 2024. While the company may elect to update these forward-looking statements, it specifically disclaims any obligation to do so. Any forward-looking statement should not be relied upon as representing the company's estimates or views as of any date subsequent to today. At times during this call, we may refer to funds from operations or FFO. Reconciliations of FFO and other non-GAAP financial measures to GAAP net income are contained in yesterday's press release, which is available in the Investor Relations section of our website at www.fspreit.com. Now, I'll turn the call over to John DeMeritt. John?
Scott H. Carter: Company's expectations only as of today July 31, 2024, while the company may elect to update these forward looking statements. It specifically disclaims any obligation to do so any forward looking statements should not be relied upon as representing the company's estimates or views as of any date.
Scott Carter: While the company may elect to update these forward-looking statements, it specifically disclaims any obligation to do so. Any forward-looking statement should not be relied upon as representing the company's estimates or views as of any date subsequent to today.
Scott H. Carter: Subsequent to today at times during this call we may refer to funds from operations or F. F O reconciliations of F. F O and other non-GAAP financial measures to GAAP net income are contained in yesterday's press release, which is available in the Investor Relations section of our website at double.
Scott Carter: At times during this call, we may refer to funds from operations or FFO. Reconciliation of FFO and other non-GAAP financial measures to GAAP net income are contained in yesterday's press release, which is available in the investor relations section of our website at www.fspret.com.
John G. Demeritt: <unk> W. W. Dot F. S. P. R E T Dot com now I will turn the call over to John Demeritt John.
Scott Carter: Now I'll turn the call over to John DeMarit. John.
Scott H. Carter: John.
John DeMeritt: Thank you, Scott, and good morning, everyone. I'm going to give a brief overview of our second quarter results, and after, I'll pass the call to George for his thoughts. As a reminder, our comments today will refer to our earnings release supplemental package in 10-Q, which, as Scott mentioned, can be found on our website. We reported funds from operations or FFO of about $3.7 million, or $0.0 per share, for the second quarter of 24. We also reported a GAPnet loss of $21 million or about $0.20 per share for the second quarter of 24.
John G. Demeritt: Thank you Scott and good morning, everyone I'm going to give a brief overview of our second quarter results and afterward, I'll pass the call to George for his thoughts.
John G. Demeritt: Thank you, Scott, and good morning, everyone. I'm going to give a brief overview of our second quarter results, and afterward, I'll pass the call to George for his thoughts. As a reminder, our comments today will refer to our earnings release, supplemental package, and 10-Q, which, as Scott mentioned, can be found on our website. We reported funds from operations, or FFO, of about $3.7 million, or $0.04 per share for the second quarter of 2024.
John G. Demeritt: We also report a gap net loss of $21 million, or about $0.20 per share, for the second quarter of 2024. Earlier this month, we sold another property, which Jeff will discuss in more detail, and we used $25.3 million of the proceeds from that sale to repay a portion of our debt. With that, I'll turn the call over to George.
George: As a reminder, our comments today will refer to our earnings release supplemental package and 10-Q, which as Scott mentioned can be found on our website.
George: We reported funds from operations or <unk> of about $3 7 million or <unk> <unk> per share for the second quarter of 'twenty four.
George: We also reported a GAAP net loss of $21 million or about 20 cents per share for the second quarter 'twenty four.
John DeMeritt: Early of this month, we sold another property, which Jeff will discuss in more detail, and we used 25.3 million of the proceeds from that sale to repay a portion of our debt.
John G. Demeritt: Earlier this month, we sold another property, which Jeff will discuss in more detail.
Jeff: And we used $25 $3 million of the proceeds from that sale.
Jeff: To repay a portion of our debt.
John DeMeritt: With that, I'll turn the call over to George.
George: With that I'll turn the call over to George George.
George Carter: Thank you, John. And again, welcome to Franklin St. Properties 2nd quarter of 2024 earnings call. I will let stand for readers my written comments on the first page of our earnings release and just add a little color to them here in this earnings call. So many of the same office market dynamics that we witnessed in the first quarter of 2024 carried over into the second quarter. But more recent activity on the ground at our properties suggests that we may be closer to a change in trajectory. Interest rate, direction and employee back to office dynamics are moving in or are anticipated to move in a more favorable direction by many individuals and institutions we interact with.
George: Thank you John and again welcome to Franklin Street properties second quarter 2024 earnings call.
George John Carter: Thank you, John. And again, welcome to Franklin Street Properties' second quarter of 2024 earnings call. I will let readers stand for my written comments on the first page of our earnings release and just add a little color to them here in this earnings call. So many of the same office market dynamics that we witnessed in the first quarter of 2024 carried over into the second quarter, but more recent activity on the ground at our property suggests that we may be closer to a change in trajectory.
George John Carter: I will let Stan for readers my written comments on the first page of our earnings release.
George John Carter: And just to add a little color to them here in this earnings call.
George John Carter: So many of the same office market dynamics that we witnessed in the first quarter of 2024 carried over into the second quarter.
George John Carter: But more recent activity on the ground at our properties.
George John Carter: Suggests that we may be closer to a change in trajectory intra.
George John Carter: Interest rates, direction, and employee back-to-office dynamics are moving in or are anticipated to move in a more favorable direction by many individuals and institutions we interact with, and this definitely is creating a more positive view of potential future momentum in the office property space. Continued office property disposition efforts for the quarter remained as challenged or more so than we have experienced over the past couple of years.
Speaker Change: Interest rate.
George John Carter: Direction and employees back to office dynamics.
George John Carter: Are moving in or are anticipated to move in a more favorable direction by many individuals and institutions, we interact with.
George Carter: And definitely is creating a more positive view of potential future momentum in the office property space. Continued office property disposition efforts for the quarter remained as challenged or more so than we have experienced over the past couple of years. We continue to see a significant lack of liquidity, with many traditional sources of mortgage debt and investment equity still largely on the sidelines. This liquidity shortage for traditional office property investment, ex getting a legitimate transactionable bid, regardless of price, harder than ever. And keeps us very focused on only working with interested potential investors who have the real ability to transact at prices.
George John Carter: And definitely is creating a more positive view of potential future momentum and the office property space.
George John Carter: Continued office property disposition efforts for the quarter remained as challenged or more so than we have experienced over the past couple of years.
George John Carter: We continue to see a significant lack of liquidity, with many traditional sources of mortgage debt and investment equity still largely on the sidelines. This liquidity shortage for traditional office property investment makes getting a legitimate, transactionable bid, regardless of price, harder than ever, and keeps us very focused on only working with interested potential investors who have the real ability to transact at prices we believe give FSP shareholders the true intrinsic value of the specific property in question.
George John Carter: We continued to see a significant lack of liquidity with many traditional sources of mortgage debt and investment equity still largely on the sidelines.
George John Carter: This liquidity shortage for traditional office property investment.
George John Carter: It's getting a legitimate transactional bid regardless of price harder than ever and keeps us very focused on only working with interested potential investors, who have the real ability to transact at prices, we believe give FSP shareholders the true intrinsic.
George Carter: We believe give FSP shareholders the true intrinsic value of the specific property in question. Our significant debt reduction over the last several years gives us important flexibility relative to our property disposition plan to better achieve these values in this low liquidity market. On the leasing front, the post-COVID remote work back to office employee attendance continues to generally make slow but positive progress. However, the numbers vary quite a bit from industry to industry, market to market, and property to property. Our office leasing markets are generally still not as active as pre-COVID, particularly for larger long-term corporate space users.
George John Carter: <unk> of the specific property in question.
George John Carter: Our significant debt reduction over the last several years gives us important flexibility relative to our property disposition plan to better achieve these values in this low liquidity market.
George John Carter: Our significant debt reduction over the last several years gives us important flexibility relative to our property disposition plan to better achieve these values in this low-liquidity market. On the leasing front, the post-COVID remote work back-to-office employee attendant, continues to generally make slow but positive progress.
George John Carter: On the leasing front the post COVID-19 remote work back to office employee attendance.
George John Carter: Continues to generally make slow but positive progress.
George John Carter: However, the numbers vary quite a bit from industry to industry, market to market, and property to property. Our office leasing market is generally still not as strong as pre-COVID, particularly for larger, long-term corporate space use. Finally, I will comment on the obvious and say that increased investment liquidity and increased corporate office space requirements that directly affect property dispositions and leasing activity seem to be very focused on the cost of capital, more specifically, interest rates and the future actions of our Federal Reserve.
George John Carter: However, the numbers vary quite a bit from industry to industry market to market and property to property.
George John Carter: Our office leasing markets are generally still not as active as pre COVID-19, particularly for larger long term corporate space users.
George Carter: Finally, I will comment on the obvious and say that increased investment liquidity and increased corporate office space requirements that directly affect property dispositions and leasing activity. seems to be very focused on cost of capital metrics. More specifically, interest rates and the future actions of our Federal Reserve. Generally speaking, lower interest rates have almost always been a positive for all types of real estate. However, if interest rates are lowered because of a significant business slash employment slowdown, the other may be not so obvious side of that cost of capital. Capital Coin may also need to be considered.
George John Carter: Finally, I will comment on the obvious and say that increased investment liquidity.
George John Carter: And increased corporate office space requirements that directly affect property dispositions and leasing activity.
George John Carter: Seem to be very focused on cost of capital metrics.
George John Carter: More specifically interest rates in the future actions of our federal reserve.
George John Carter: Generally speaking lower interest rates have almost always been a positive for all types of real estate.
George John Carter: Generally speaking, lower interest rates have almost always been a positive for all types of real estate. However, if interest rates are lowered because of a significant business and employment slowdown, the other, maybe not so obvious, side of that cost of capital coin may also need to be considered. Interest rate cycles and their real cause and effect are always interesting. It appears likely to us that we will get some insight into this dynamic over the next quarter or two. Now for more color on our leasing activity, I will turn the call over to John Donahue, President of FSP Property Management Corp.
George John Carter: However, if interest rates are lower because of a significant business slash implant employment slowdown.
John F. Donahue: The other maybe not so obvious side of that cost of capital claim.
George John Carter: It may also need to be considered.
George Carter: Interest rates cycles and their real cause and effect are always interesting.
George John Carter: Interest rate cycles, and they are real cause and effect are always interesting. It appears likely to us that we will get some insight into this dynamic over the next quarter or two.
George Carter: It appears likely to us that we will get some insight into this dynamic over the next quarter or two.
John Donahue: Now, for more color on our leasing activity, I will turn the call over to John Donahue, President of FSP Property Management Corps. John.
John F. Donahue: Now for more color on our leasing activity I will turn the call over to John Donahue President of FSP property Management Corp. John.
John Donahue: Thank you, George.
John F. Donahue: Thank you George good morning, everyone.
John F. Donahue: Thank you, George. Good morning, everyone.
John Donahue: Good morning, everyone. The FSP directly owned portfolio was approximately 72.3 percent least at the end of the second quarter compared to 74 percent least at the end of 2023. The decrease in least occupancy was primarily attributable to one property disposition in the first quarter and multiple least expirations during the first six months of 2024. Economic occupancy of the directly owned portfolio was approximately 70 percent at the end of the second quarter compared to 70.1 percent at the end of the fourth quarter. The decrease was primarily due to the property disposition earlier in the year. FSP finalized approximately 272,000 square feet of total leasing during the first half of 2024, which included approximately 75,000 square feet of total leasing during the second quarter.
John F. Donahue: The FSP directly owned portfolio was approximately 72.3% leased at the end of the second quarter, compared to 74% leased at the end of 2023. The decrease in lease occupancy was primarily attributable to one property disposition in the first quarter and multiple lease expirations during the first six months of 2024. Economic occupancy of the directly owned portfolio was approximately 70% at the end of the second quarter, compared to 70.1% at the end of the fourth quarter. The decrease was primarily due to property disposition earlier in the year.
John F. Donahue: The FSP directly owned portfolio was approximately 72, 3% leased at the end of the second quarter.
John F. Donahue: Compared to 74% leased at the end of 2023.
John F. Donahue: The decrease in leased occupancy was primarily attributable to one property disposition in the first quarter.
John F. Donahue: Multiple lease expirations during the first six months of 2024.
Speaker Change: Economic occupancy of the directly owned portfolio was approximately 70% at the end of the second quarter.
John F. Donahue: Compared to 71% at the end of the fourth quarter.
John F. Donahue: The decrease was primarily due to the property disposition earlier in the year.
John F. Donahue: FSP finalized approximately 272000 square feet of total leasing during the first half of 2024, which included approximately 75000 square feet of total leasing during the second quarter.
John F. Donahue: FSP finalized approximately 272,000 square feet of total leasing during the first half of 2024, which included approximately 75,000 square feet of total leasing during the second quarter. Additionally, approximately 180,000 square feet of renewals and expansions have been finalized during the first six months of 2024, along with 92,000 square feet of new tenant leases. The urban markets in FSP's portfolio appear to be incrementally healthier and more vibrant this summer compared to the past few years. In particular, the Denver CBD has shown signs of street-level activity not seen since the pandemic.
John F. Donahue: Approximately 180000 square feet of renewals and expansions have been finalized during the first six months of 2024, along with 92000 square feet of new tenant leases.
John Donahue: Approximately 180,000 square feet of renewals and expansions have been finalized during the first six months of 2024, along with 92,000 square feet of 10 leases. The urban markets in FSP's portfolio appear to be incrementally healthier and more vibrant this summer compared to the past few years. In particular, the Denver CBD has shown signs of street-level activity not seen since the pandemic. FSP's assets in suburban Houston have witnessed a significant increase in overall new tenant activity and potential expansion of existing tenants during the last three quarters. Despite the typical summer slowdown, FSP continues to track approximately 550,000 square feet of prospective new tenants, including approximately 300,000 square feet of prospects that have identified FSP assets on the respective short lists.
John F. Donahue: The urban markets and Fsp's portfolio appear to be incrementally healthier and more vibrant this summer compared to the past few years.
John F. Donahue: In particular, the Denver CBD has shown signs of street level activity not seen since the pandemic.
John F. Donahue: Fsp's assets in suburban Houston have witnessed a significant increase in overall, new tenant activity and potential expansion of existing tenants during the last three quarters.
Jeffrey B. Carter: FSP's assets in suburban Houston have witnessed a significant increase in overall new tenant activity and potential expansion of existing tenants during the last three quarters. Despite the typical summer slowdown, FSP continues to track approximately 550,000 square feet of prospective new tenants, including approximately 300,000 square feet of prospects that have identified FSB assets on their respective shortlists. Scheduled lease expirations for the remainder of 2024 total approximately 172,000 square feet, which represents approximately 3.3% of FSP's directly owned portfolio.
Jeffrey B. Carter: Despite the typical summer slowdown.
Jeffrey B. Carter: <unk> continues to track approximately 550000 square feet of prospective new tenants.
Jeffrey B. Carter: Including approximately 300000 square feet of prospects that have identified FSP assets on their respective shortlists.
John Donahue: Scheduled lease aspirations for the remainder of 2024 total approximately 172,000 square feet, which represents approximately 3.3% of FSP's directly-owned portfolios.
Jeffrey B. Carter: Scheduled lease expirations for the remainder of 2024 total approximately 172000 square feet.
Jeffrey B. Carter: Which represents approximately three 3% of fsp's directly owned portfolio.
John Donahue: CEO. The new tenant pipeline combined with relatively low total of potential aspirations over the remainder of 2024 provides FSP with an opportunity to increase least occupancy or the balance of the year, barring any surprises or the impact of potential dispositions.
Speaker Change: The new tenant pipeline combined with relatively low total of potential explorations over the remainder of 2024 provides <unk> with an opportunity to increase leased occupancy over the balance of the year.
Jeffrey B. Carter: The new tenant pipeline, combined with a relatively low total of potential expirations over the remainder of 2024, provides FSP with an opportunity to increase lease occupancy over the balance of the year, barring any surprises or the impact of potential disposition. Thank you. I will now turn it over to Jeff Carter.
Jeffrey B. Carter: Barring any surprises or the impact of potential dispositions.
John Donahue: Thank you.
Jeffrey B. Carter: Thank you I will now turn it over to Jeff Carter.
Jeffrey Carter: I will now turn it over to Jeff Carter.
Jeffrey Carter: Thank you, John, and good morning, everyone. I will be discussing our disposition activity completed since the close of the first quarter of 24 and provide our observations about current market conditions for office dispositions as FSP continues with our work to selectively sell properties when it makes sense to do so with the goal of maximizing value for our shareholders and further reducing indebtedness. On July 8th, FSP sold our last remaining low-rise, value-oriented office property known as Innsbruck Corporate Center in Greater Richmond, Virginia, for $31 million. The sale of Innsbruck combined with our January 26th disposition of Collins Crossing in Greater Dallas for $35 million brings our total gross property sales for the year-to-date to $66 million.
Jeffrey B. Carter: Thank you John and good morning, everyone.
Jeffrey B. Carter: Thank you, John. And good morning, everyone.
Jeffrey B. Carter: I will be discussing our disposition activity completed since the close of the first quarter of 24 and provide our observations about current market conditions for office dispositions as FSP continues with our work to selectively sell properties when it makes sense to do so with the goal of maximizing value for our shareholders and further reducing indebtedness. On July 8th, FSP sold our last remaining low-rise, value-oriented office property, known as Innsbruck Corporate Center, in Greater Richmond, Virginia for $31 million.
Jeffrey B. Carter: I will be discussing our disposition activity completed since the close of the first quarter of 'twenty four and provide our observations about current market conditions for office dispositions as FSP continues with our work to selectively sell properties when it makes sense to do so with the <unk>.
Jeffrey B. Carter: We'll of maximizing value for our shareholders and further reducing indebtedness.
Jeffrey B. Carter: The sale of Innsbruck, combined with our January 26 disposition of Collins Crossing and Greater Dallas for $35 million, brings our total gross property sales for the year to date to $66 million. Since late 2020, when our program of select dispositions began, FSP has completed the sale of approximately $1,042,975,000 in property sales.
Jeffrey B. Carter: On July 8th FSP sold our last remaining low rise value oriented office property known as Innsbruck, Corporate center, and greater Richmond, Virginia for $31 million.
Jeffrey B. Carter: The sale of Innsbruck combined with our January 26 disposition of columns crossing in greater Dallas for $35 million.
Jeffrey B. Carter: Brings our total gross property sales for the year to date to $66 million.
Jeffrey Carter: Since late 2020, when our program of select dispositions began, FSP has completed the sale of approximately $1,042,975,000 in property sales. These dispositions reflect an average of $210 per square foot as compared with an implied value in our publicly traded shares of less than $100 per square foot. While every property sold will result in different pricing metrics based on their specific attributes of quality, location, tendency, and rental rates, nevertheless, we believe that aggregated sales data is useful for illustrated purposes. With respect to the market for office dispositions, recent information, both through our own efforts and via recent office sales volume data, shows a weak national sales market for office.
Jeffrey B. Carter: Since late 2020, when our program of select dispositions began FSP has completed the sale of approximately $1 billion $42 million 975000 in property sales.
Jeffrey B. Carter: These dispositions reflect an average of $210 per square foot as compared with an implied value in our publicly traded shares of less than $100 per square foot. While every property sold will result in different pricing metrics based on its specific attributes of quality, location, tenancy, and rental rates, nevertheless, we believe that aggregated sales data is useful for illustrative purposes. With respect to the market for office dispositions, recent information, both through our own efforts and via recent office sales volume data, shows a weak national sales market for offices, but this situation has the potential to turn more positive should a rate cut cycle soon begin.
Jeffrey B. Carter: These dispositions reflect an average of $210 per square foot.
Jeffrey B. Carter: As compared with an implied value and our publicly traded shares of less than $100 per square foot.
Jeffrey B. Carter: While every property sold will result in different pricing metrics based on their specific attributes of quality location tenancy and rental rates. Nevertheless, we believe that aggregated sales data is useful for illustrative purposes.
Jeffrey B. Carter: With respect to the market for office dispositions recent information both through our own efforts and via recent office sales volume data shows a week national sales market for office, but the situation has the potential to turn more positive should a rate cut cycle soon.
Jeffrey Carter: But this situation has the potential to turn more positive should a rate cut cycle soon begin. More specifically, the historical average 12-month national office property sales volume of approximately $70.4 billion is down over the past 12 months by approximately 60% nationally to just $30.1 billion. This weakness in office sales has been due in large part to the severe lack of liquidity currently impacting the office sector with respect to both debt and equity capital, which is essential for most potential purchasers. Additionally, the impacts of significantly higher interest rates and continuously evolving work patterns are also contributing factors.
Jeffrey B. Carter: Again.
Jeffrey B. Carter: More specifically, the historical average 12-month national office property sales volume of approximately $70.4 billion is down over the past 12 months by approximately 60% nationally to just $30.1 billion. This weakness in office sales has been due in large part to the severe lack of liquidity currently impacting the office sector with respect to both debt and equity capital, which is essential for most potential purchasers. Additionally, the impact of significantly higher interest rates and continuously evolving work patterns are also contributing factors.
Jeffrey B. Carter: More specifically the historical average 12 months National office property sales volume of approximately 74 billion is down over the past 12 months by approximately 60% nationally to just $30 1 billion.
Jeffrey B. Carter: This weakness in office sales has been due in large part to the severe lack of liquidity currently impacting the office sector with respect to both debt and equity capital, which is essential for most potential purchasers <unk>.
Jeffrey B. Carter: Additionally, the impacts of significantly higher interest rates and continuously evolving work patterns are also contributing factors.
Jeffrey Carter: However, FSP will be watching carefully in the weeks and months ahead to see if such conditions begin to improve, as the case for potential rate cuts by the Federal Reserve has recently become stronger. As previously described, where office deals are transacting, they continue to highlight compelling factors that often include strong locations, high quality, smaller dollar amount sizes, and stabilized occupancies with strong in place weighted average lease term that generates established in place cash flows to ride through the currently challenged conditions. Given this highly challenged and competitive investment sales environment, we continue to believe that the interests of our shareholders remain best served by not highlighting prospective disposition information beyond what is in our current filings. Until appropriate to be clear, our objective is to maximize achieved disposition values for our shareholders.
Jeffrey B. Carter: However, FSP will be watching carefully in the weeks and months ahead to see if such conditions begin to improve as the case for potential rate cuts by the Federal Reserve has recently become stronger. As previously described, where office deals are transacting, they continue to highlight compelling factors that often include strong locations, high quality, and low cost. Smaller dollar amount sizes and stabilized occupancies with strong in-place weighted average lease terms that generate established in-place cash flows to ride through the currently challenged conditions.
FSP: However, FSP will be watching carefully in the weeks and months ahead to see if such conditions begin to improve as the case for potential rate cuts by the federal reserve has recently become stronger.
Jeffrey B. Carter: As previously described where office deals are transacting. They continue to highlight compelling factors that often include strong locations high quality smaller dollar amounts sizes and stabilized occupancies with strong in place weighted average lease term.
Jeffrey B. Carter: <unk> that generates established in place cash flows to ride through the currently challenged conditions.
Jeffrey B. Carter: Given this highly challenged and competitive investment sales environment. We continue to believe that the interests of our shareholders remain best served by not highlighting perspective disposition information beyond what is in our current filings until appropriate.
Jeffrey B. Carter: Given this highly challenging and competitive investment sales environment, we continue to believe that the interests of our shareholders remain best served by not highlighting prospective disposition information beyond what is in our current filings until appropriate. To be clear, our objective is to maximize achieved disposition values for our shareholders. FSP continues to generate interest from buyers, but certainly less and more competitive than in the past. And we will continue to work with our associated professionals to try and source credible and capable buyers, and importantly, buyers who truly have the required capital to transact, in order to make continued progress on value maximization and further debt reduction.
Jeffrey B. Carter: To be clear our objective is to maximize achieved disposition values for our shareholders.
Jeffrey Carter: FSP continues to generate interest from buyers, but certainly less and more competitive than in the past, and we will continue to work with our associated professionals to try and source credible and capable buyers, and importantly, buyers who truly have the required capital to transact in order to make continued progress on value maximization and further debt reduction. We look forward to keeping the market informed as and when appropriate.
Jeffrey B. Carter: FSP continues to generate interest from buyers, but certainly less than more competitive than in the past and we will continue to work with our associated professionals to try and source credible and capable buyers and importantly buyers who truly have the required capital to transact in order to make continue.
Jeffrey B. Carter: Progress on value maximization and further debt reduction.
Jeffrey B. Carter: We look forward to keeping the market informed as and when appropriate, and with that, we thank you for listening to our earnings conference call today. And now, at this time, we'd like to open up the call to any questions. Danica
Jeffrey B. Carter: We look forward to keeping the market informed as and when appropriate and with that we thank you for listening to our earnings conference call today and now at this time, we'd like to open up the call for any questions Danica.
Jeffrey Carter: And with that, we thank you for listening to our earnings conference call today.
Danica: And now, at this time, we'd like to open up the call for any questions, Danica. Thank you.
Danica: Thank you at this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad.
Danica: Thank you. At this time, I would like to remind everyone in order to ask a question, press star then the number one on your telephone keypad. Our first question comes from Steven Dumanski with Janie. Please go ahead.
Danica: At this time, I would like to remind everyone that in order to ask a question, press star, then the number one on your telephone keypad.
Steven Dumanski: Our first question comes from Steven Demansky. With Jamie, please go ahead. Good morning, gentlemen. I would just like to inquire more about the inscribed disposition. Did you originally formulate a strategy and make a conscious decision to exit the Virginia market? Or is this more of a trend of opportunistic sales?
Speaker Change: Our first question comes from Steven <unk> with Janney. Please go ahead.
Steven Dumanski: Good morning, gentlemen. I would just like to inquire more about the Innsbruck disposition. Did you originally formulate a strategy and make a conscious decision to exit the Virginia market, or is this more of a trend of opportunistic sales?
Steven Dumanski: Good morning, gentlemen, I would just like to inquire more about the Innsbruck disposition did you originally formulate a strategy and make a conscious decision to exit the Virginia market or is this more of a trend of opportunistic sales.
Jeffrey Carter: Hi, Steven. This is Jeff Carter. This was not a specific plan to exit Virginia. This was really a, as all of our select dispositions have been a selected decision based upon value creation and maximization in this environment that we see. And that property was a part of that process in terms of some recent leasing successes that we'd had there, the amount of Walt and lease term that was in place as a result of that. And the reception in the marketplace to its marketing was favorable based on those terms. Right.
Steven Dumanski: Yes.
Jeffrey B. Carter: Hi Steven, this is Jeff Carter. This was not a specific plan to leave Virginia. This was really a, as all of our select dispositions have been, a selective decision based upon value creation and maximization in this environment that we see. And that property was a part of that process in terms of some recent leasing successes that we've had there. The amount of Walt and the lease term that was in place as a result of that, and the reception in the marketplace for its marketing was favorable based on those terms.
Steven Dumanski: Hi, Steven This is Jeff Carter.
Jeffrey B. Carter: This was not a specific plan to exit Virginia. This was really a as all of our select dispositions a bit have been selected decision based upon value creation and maximization in this environment that we see and that property was a par.
Jeffrey B. Carter: Of that process in terms of some recent leasing successes that we've had there the amount of Walton lease term that was in place as a result of that and.
Jeffrey B. Carter: The reception in the marketplace to its marketing was favorable based on those terms.
Jeffrey B. Carter: Okay.
Jeffrey Carter: And just to add to what you just expressed, that I believe, and please correct me if I'm wrong here. I think in book was around 90% least upon the time of sale. One of your properties leading in that specific metric. So just wanted to perhaps just ask when you communicate with potential buyers, have you discovered a certain leasing percentage baseline that they were required in order to transact. Or are there any potential buyers out there who probably or maybe employ a more opportunistic or value add approach and will be willing to underwrite properties that are less than your portfolio average of around 70% or so.
Jeffrey B. Carter: And just to add to what you just expressed, and please correct me if I'm wrong here, I think Innsbruck was around 90% leased at the time of sale, one of your properties leading in that specific metric. So just wanted to perhaps just ask, when you communicate with potential buyers, have you discovered a certain leasing percentage baseline that they will require in order to transact? Or are there any potential buyers out there who probably or maybe employ a more opportunistic or value-add approach and will be willing to underwrite properties that are less than your portfolio average of around 70% or so?
Speaker Change: And just to add to what you just expressed that I believe and please correct me if I'm wrong here I think Innsbruck was around 90% leased upon the time of sale one of your properties leading in that specific metric.
Jeffrey B. Carter: So just wanted to perhaps just ask when you communicate with potential buyers have you discovered a certain leasing percentage of baseline that they require in order to transact.
Jeffrey B. Carter: Or are there any potential buyers out there, who probably or maybe employ more opportunistic or value add approach and we will be willing to underwrite properties that are less than your portfolio average of around 70% or so at least.
Jeffrey Carter: Next. This is Jeff again. I appreciate the question. What we've really seen varies a little bit, but in general, the themes that are consistent are a stabilized in-place occupancy with strong in-place vault. It's got to have weighted average lease term for buyers to get interested, as well as quality, location, and smaller dollar size purchase prices. Larger transactions are not typically occurring very often in our, at least in our experiences to date.
Jeffrey B. Carter: This is Jeff again I appreciate the question.
Jeffrey B. Carter: This is Jeff again. What we've really seen varies a little bit, but in general, the themes that are consistent are a stabilized in-place occupancy with a strong in-place vault. It's got to have a weighted average lease term for buyers to get interested, as well as quality, location, and smaller dollar-size purchase prices. Larger transactions are not typically occurring very often, at least in our experiences to date.
Jeffrey B. Carter: What we've really what we've really seen varies a little bit but in general the themes that are consistent or a stabilized in place occupancy with strong in place Walt it's got to have weighted average lease term.
Jeffrey B. Carter: For buyers to get interested as well as quality location and smaller dollar sized purchase prices larger transactions are not typically occurring very often in our at least in our experiences to date.
Jeffrey Carter: Thank you, Jeff. That's very helpful.
Steven Dumanski: All right. Thank you, Jeff. That's very helpful. And just one last one.
Speaker Change: Alright. Thank you, Jeff that's very helpful and just one last one can you. Please provide some greater information on your geographical markets predominantly which cities do you see strengthening and vice versa.
Steven Dumanski: And just one last one. Can you please provide some greater information on your geographical markets for Dominic Wish City's Ducy Stretting and vice versa?
Steven Dumanski: Okay.
Steven Dumanski: Can you please provide some more information on your geographical markets? Predominantly, which cities do you see threatening each other, and vice versa?
John Donahue: Steve, it's John Donahue. I'm not sure if I understood the last part of your question. Are you asking about activity, or can you repeat the question? Sure. We're cities that you have exposure to, or having them more stronger, strengthening real estate market in terms of leasing in vice versa. Which ones are perhaps you would see in future challenges ahead? Oh, thank you. Yes. So there's been a very steady trend of incrementally better news in activity in the Sun Belt markets. And Rod Brush's statement is that the Midwest has suffered, in particular, Minneapolis, Indianapolis, and Chicago.
John F. Donahue: Steve It's John Donahue.
Speaker Change: I'm not sure if I understood. The last part of your question are you asking about activity or can you repeat the question.
John F. Donahue: Hi Steve, it's John Donahue. I'm not sure if I understood the last part of your question. Are you asking about activity, or can you repeat the question?
Steven Dumanski: Sure, which cities that you have exposure to or a more... stronger, strengthening real estate market in terms of leasing and vice versa, like which ones you would perhaps see.
John F. Donahue: Sure.
Speaker Change: Cities that you have exposure to are having a more <unk>.
Steve: Stronger strengthening.
Steven Dumanski: Real estate market in terms of leasing and vice versa, and which ones are perhaps units.
Speaker Change: The challenges ahead.
John F. Donahue: Thank you. Yes, so there's been a very steady trend of incrementally better news and activity in the Sunbelt markets, and a broad brush statement is that the Midwest has suffered, in particular Minneapolis, Indianapolis, and Chicago. So we're seeing that trend continue for the Minneapolis market. We sure need Target to come back in full force, and that will bring the supporting businesses back to that market, and that would be a big shot in the arm for Minneapolis.
Steve: Thank you, yes so.
John F. Donahue: There has been a very steady trend.
John F. Donahue: Of incrementally better news and activity.
John F. Donahue: In the Sunbelt markets.
John F. Donahue: <unk> broad brush statement is that the Midwest has suffered in particular, Minneapolis, Indianapolis and Chicago.
John Donahue: So we're seeing that trend continue for the Minneapolis market. We sure need Target to come back in full, and that will bring the supporting businesses back to that market. And that would be a big shot in the U.S. Army. We do see more Target folks in the skyway and on the street this summer, so that I'm pretty sure you sign. But generally speaking, Houston has been our strongest market. Midtown Atlanta, a little bit better than others. Dallas has had a bit of a summer slowdown, but we're hearing good things about the upper North Dallas markets.
John F. Donahue: So we're seeing that trend continue.
John F. Donahue: The Minneapolis market, we shared the target to come back in full in NAFTA.
John F. Donahue: The supporting businesses back to that market.
John F. Donahue: That would be a big shot in the arm of the Atlas we do see.
John F. Donahue: We do see more Target folks in the Skyway and on the street this summer, so that's an encouraging sign. But, generally speaking, Houston has been our strongest market, Midtown Atlanta a little bit better than others, and Dallas has had a bit of a summer slowdown, but we're hearing good things about the Dallas markets. And then Denver has been very slow to come back, and we are very encouraged about what we've seen here over the last three to six months.
John F. Donahue: More target folks in the Skyway Another street this summer.
Speaker Change: Hershey side.
John F. Donahue: But generally speaking Houston has been our strongest market Midtown Atlanta.
John F. Donahue: Little bit better than others and Dallas.
John F. Donahue: Has had a bit of a summer slowdown but.
John F. Donahue: Hearing good things about our north Dallas markets.
John Donahue: And then Denver has been very slow to come back. And we are very encouraged about what we've seen here in the last three to six months. Excellent. Thank you, John, for that breakdown. I really appreciate it.
John F. Donahue: And then Denver has been very slow to come back.
John F. Donahue: Ed.
John F. Donahue: We are very encouraged about what we've seen here over the last three to six months.
Steven Dumanski: Excellent. Thank you, John, for that breakdown. I really appreciate it. And that's it for me.
Speaker Change: Excellent. Thank you John for that breakdown I really appreciate it and that's it for me.
Steven Dumanski: And that's it for me. Great.
Steven Dumanski: Great I will now turn the call back over to George Carter for closing remarks.
George John Carter: Great. I will now turn the call back over to George Carter for his closing remarks.
George Carter: I will now turn the call back over to George Carter for closing remarks. Thank you, Danica. And thank you, everyone, for tuning into our earnings call.
George John Carter: Thank you, Danica, and thank you everyone for tuning in to our earnings call. We look forward to talking with you next quarter.
George John Carter: Thank you Danica and thank you everyone for tuning into our earnings call. We look forward to talking with you next quarter. Thank you.
George Carter: We look forward to talking with you next quarter. Thank you.
Operator: Ladies and gentlemen, that concludes today's call. You may now disconnect.
Speaker Change: Ladies and gentlemen that concludes today's call you may now disconnect.
Operator: Thank you. Ladies and gentlemen, that concludes today's call. You may now disconnect.
Operator: [music].
Operator: Okay.