Franklin Street Properties (NYSE: FSP) reported Q4 EPS of $0.01, in-line with the analyst estimate of $0.01. Revenue for the quarter came in at $66.58 million versus the consensus estimate of $65.5 million.

George J. Carter, Chairman and Chief Executive Officer, commented as follows:

“Leasing activity within our property portfolio of 32 operating and 3 redevelopment properties continued to be solid during the fourth quarter of 2018, with approximately 398,000 square feet leased during the quarter. This leasing activity contributed to making 2018 a record year of leasing at FSP, with approximately 1,681,000 square feet leased during the year. We also continued to see increased leasing activity in our energy-influenced markets of Houston and Denver. The price of oil was particularly volatile over the past quarter and we believe that longer-term supply/demand pricing characteristics of that commodity will be an important factor affecting future levels of office space absorption in those markets during 2019 and 2020.

As anticipated, we did experience known and planned for tenant move outs during the fourth quarter of 2018, including Burger King at Blue Lagoon in Miami, Florida, SunTrust at Innsbrook in Glen Allen, Virginia, and Red Cross at Forest Park in Charlotte, North Carolina, which reduced overall leased occupancy in our property portfolio.

As 2019 begins, we are continuing our lease-up efforts at our approximately 130,000 square foot redevelopment property known as 801 Marquette in Minneapolis, Minnesota, which was approximately 37% leased as of December 31, 2018. In addition, we are now redeveloping an approximately 213,000 square foot property known as Blue Lagoon in Miami, Florida and an approximately 62,000 square foot property known as Forest Park in Charlotte, North Carolina, for a total of approximately 400,000 square feet of redevelopment space in the aggregate. Similar to 801 Marquette, prior to beginning our redevelopment efforts, both Blue Lagoon and Forest Park had been long-term leased to single-tenants. In addition, both assets have been owned by us (or our affiliates) for in excess of 15 years, are anchored in excellent locations within their respective markets, and have generated consistently strong cash flows. We believe that current market rents for these assets are meaningfully higher than the expiring single-tenant rents. We also believe that our redevelopment efforts will provide us the opportunity to capture significant increased value for our shareholders through higher ongoing rental cash flows, as we seek to achieve a strong, long-term rate of return on our costs of redevelopment. Currently, these 3 redevelopment properties contribute no material rental income to the Company.

As 2019 begins, we are optimistic about our ability to lease significant portions of our vacancy in our 32 operating properties and in our 3 redevelopment properties, and believe that successful results will mark the beginning of a longer-term, more sustainable, rise in operating performance and value creation within our property portfolio in 2020. The reduction to our dividend in 2018 allows the Company to retain more operating cash flow to fund anticipated increased leasing costs and capital expenditures during 2019 and 2020.”

GUIDANCE:

Franklin Street Properties sees FY2019 EPS of ($0.03)-$0.03, versus the consensus of $0.08.

For earnings history and earnings-related data on Franklin Street Properties (FSP) click here.