Debt Amendment and Property Dispositions Create Opportunity for Franklin Street Properties
Franklin Street Properties (FSP), a REIT focused on office properties in the U.S., has seen its stock price decline in recent months. However, the company’s financial position remains strong, and its recent debt amendment and property dispositions create a compelling investment opportunity.
Debt Amendment
FSP has amended its debt, extending the maturity date of all debt obligations to April 1, 2026. This provides the company with two years of maturity extensions, freeing up cash flow for operations and debt reduction.
Property Dispositions
Since our last report, FSP has sold two properties: Blue Lagoon in Miami, Florida, and Collins Crossing in Richardson, Texas. The proceeds from these sales have been used to reduce debt and improve the company’s overall financial position.
Updated Valuation
Based on the recent property sales, we have updated our valuation of FSP’s real estate portfolio. Our new estimate is slightly lower than our previous estimate, but still implies that the stock is trading at a discount to net asset value.
Risks
The two main risks to consider with FSP are a decline in commercial real estate prices and the company’s inability to close the gap between net asset value and stock price. However, we believe that the recent debt amendment and property dispositions mitigate these risks.
Conclusion
Based on FSP’s continued efforts to sell properties and unlock shareholder value, we believe that the stock is still undervalued. We recommend buying FSP at current levels.