Good day, and welcome to the Franklin Street Properties Corporation first quarter 2017 results conference call and webcast. [Operator Instructions] Please note this event is being recorded. I would like to turn the conference over to Scott Carter, General Counsel. Please go ahead.

Good morning, and welcome to the Franklin Street Properties first quarter 2017 earnings call. With 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 with me this morning are Toby Daley, Senior Vice President and Regional Director of Atlanta and Houston; Will Friend, Senior Vice President and Regional Director of Denver and Minneapolis; and Patty McMullen, Senior Vice President and President Regional Director of Dallas. Before I turn the call over to John Demeritt, I must read the following statement. 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 factors section of our annual report on Form 10-K for the year ended December 31, 2016, which is on file with the SEC. In addition, these forward-looking statements represent the company's expectations only as of today, May 3, 2017. 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 subsequent to today. At times during this call, we may refer to funds from operations, or FFO. A reconciliation of FFO to GAAP net income is 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?

Thank you, Scott, and good morning, everyone. On today's call, I'll begin with a brief overview of our first quarter results. Afterward, our CEO, George Carter, will discuss our performance in more detail and provide some of his remarks. John Donahue, our President of the Asset Management team, will then discuss recent leasing activities. And then Jeff Carter, our President and CIO, will discuss our investment and disposition activities. And then after that, we can take some questions. As a reminder, our comments today will refer to our earnings release supplemental package and the 10-Q which we filed last night with the SEC and, as Scott mentioned, can be found in our website. We reported funds from operations or FFO of $28.5 million or $0.27 per share for the first quarter of '17. Compared to the first quarter of '16, FFO is about $2.5 million higher and $0.01 per share higher based on somewhat higher weighted average shares this year compared to last. The FFO increase was primarily from the three acquisitions we've made in June, August and December of 2016. As we look ahead to 2017, there should be more - there should be some meaningful contributions from these acquisitions. Also on January 6th, we sold a small office property in Milpitas, California for a $2.3 million gain. In the earnings release, you'll see we added a sequential same-store analysis which shows we grew at 2.9% over the fourth quarter of last year. We think looking at it this way helps to illustrate the contribution from the property mix that we have now in our portfolio, which is somewhat delayed when you look at this quarter compared to the first quarter of '16. Turning to our balance sheet and current financial position. At March 31st, 2017, we had about $1.065 billion of unsecured debt outstanding and our total market cap was $2.4 billion. Our debt to total market cap ratio was 45% at quarter's end, and our debt-to-service coverage ratio was about 4.6 times. The debt-to-adjusted EBITDA ratio was 7.6 times as of the end of March. From a liquidity standpoint, we had a cash balance of $11.1 million and $205 million available on our $500 million unsecured line of credit, and as a result had approximately $216.1 million of liquidity at quarter end. We remain comfortable with our leverage and have managed our unsecured debt as part of our strategy. We can opportunistically sell some non-core assets and repay short-term floating-rate debt, or depending on the magnitude of sales, could reinvest proceeds into properties as we have demonstrated. We continue to focus on acquisitions of assets in our core markets as we find the right opportunities. With that, I'll turn the call over to George. George?

Thank you, John, and welcome to Franklin Street Properties' first quarter 2017 earnings call. As John just said, the first quarter for FSP of 2017 showed funds from operations or FFO totaling approximately $28.5 million or $0.27 per share. Our dividend was $0.19 per share for the first quarter and the FSP Board of Directors continues to feel comfortable with this level of dividend as we move through 2017. At this time, we are adjusting our full year 2017 FFO guidance range to $1.04 to $1.08 per share, that is taking down by $0.01 the top part of the range from $1.09 to the $1.08. The reason we are doing this at this time is not reflective of the amount of leasing activity we have going on in the portfolio or our projections of future leasing in the portfolio. Actually, leasing activity and projections for lease percentages and rent levels are increasing meaningfully from our 2016 year end initial views. Rather, the adjustment in our guidance primarily reflects later-than-expected occupancy dates during 2017 from prospective tenants and leases we are working on. Actual occupancy dates effectively start the FFO contribution to Franklin Street regardless of when leases are signed. For the second quarter of 2017, we estimate FFO to be in the range of $0.25 to $0.26 per share. Our FFO growth forecast for 2017 and beyond continue to be fueled primarily from our projected realization of increased rental income from select recent property investments, select new development or redevelopment efforts, such as the 801 Marquette in Minneapolis and additional leasing in our broader portfolio of urban office properties, many of which contain meaningful value add square footage. We anticipate updating future FFO guidance quarterly in our earnings releases. I'll now turn the call over to John Donahue, President of our Property Management Company. John?

Thank you, George. Good morning, everyone. Leased occupancy improved during the first quarter from 89.3% to 89.6%. There were approximately 90,000 square feet of leases executed, representing positive absorption, which includes 62,000 square feet of leases with new tenants and nearly 30,000 square feet of expansions. The leasing gains for the quarter were distributed fairly evenly across the five core markets. Minneapolis was particularly strong in activity with leased occupancy improving from 78.9% to 85.5%. We anticipate more progress in Minneapolis in Q2 and Q3. Weighted average rental rates continue to rise across the FSP portfolio due to the transition to predominantly urban and infill properties. Straight-line and GAAP rents per square foot have improved consistently over the past few years with overall increase of 11% since 2014 and an average annual increase of approximately 3.5%. We believe this trend will continue through 2017. Looking forward, we believe the second quarter will be challenging primarily due to the lease expiration of Murphy Exploration at Park 10. However, we remain optimistic as overall prospective tenant interest continues to be strong in Minneapolis, Denver, Atlanta and Dallas. Thank you. And I'll turn it over to Jeff Carter.

Thanks, John. Good morning. I'll be discussing the investment picture of Franklin Street Properties. Our focus is clear with primary emphasis to continue to grow in our five core markets and to generate sustainable long-term FFO growth and value creation for our shareholders. The growth that we anticipate during 2017 will be driven primarily from leasing efforts within our portfolio and via full year contribution from our 2016 acquisitions. Looking forward, we believe there are three key levers to our continued growth. The first lever will be through our ongoing property operations and leasing efforts primarily within our five core markets. And the second lever will be through select new development and redevelopment efforts within our five core markets, such as that our current project at 801 Marquette in Downtown Minneapolis. And the third lever will be through the select acquisition of new properties, again, within our five core markets. On the dispositions and asset recycling front, on January 6th, FSP sold our Hill View asset in Milpitas, California for about $6.2 million. FSP is continuing to both work on and evaluate several non-core properties for potential disposition should satisfactory pricing and values be achieved, and we will continue to keep the market posted. FSP has made considerable progress in completing our portfolio transition to a far more urban and infill orientation with now approximately 75% of our square feet located within our five core markets. Since 2014, we've sold properties or had mortgages repaid to us of approximately $192 million. On the acquisition front, we are opportunistic acquirers in our five core markets should the right properties, pricing or situations present, and we are evaluating both on- and off-market properties. We are continuing to see interesting opportunities in some of our core markets. Opportunities are being primarily seen in Dallas, Minneapolis and Atlanta so far this year. FSP continues to look at a range of opportunities from value add to [floor plus] , and we will keep the market posted with any updates. On the development front, redevelopment of 801 Marquette is expected to be substantially completed by the end of the second quarter of 2017. When completed, 801 Marquette will deliver a contemporary forward-looking office experience in a vintage warehouse-style building with modern systems and market-leading amenities right in the heart of the Minneapolis central business district. The project is receiving high marks from the market and prospective tenant interest in the building has been strong. Expected rents are anticipated to be between $17 and $19 net versus expiring rents that were at about $4.75 on a net basis. And the total square footage, again, for the project shall be approximately 128,000 square feet. Thank you for listening to our earnings conference call today. And at this time, we'd like to open up the call for any questions. Operator?

[Operator Instructions] The first question comes from David Rogers of Baird.

This is Dick here with Dave. Can you guys elaborate on the leasing that you guys expect to take place? Leases signed by occupancy taking place and probably weighted towards the second half of the year. Some of the timing of that, what leases you signed, and when they're moving in the second half.

Sure. It's John Donahue. We do have a number of leases that were signed in '16 and early this year that will start to commence here between May and November. I believe the NAV table on Page 26 will give you a sense of that.

140,000 square, yes.

Excuse me? Thank you, John. 140,000 square feet. And that will be fairly streamlined over the second half of the year.

Okay, great. And are you guys working now on the lease rolls off for 2018 and 2019? And are there any big tenants right now that you're hopefully targeting?

Yes, of course. We had talked a little bit about this at NAREIT. And the larger tenants, our top 20 tenants that have expirations, and there are a couple of that we're working with. And those blend-and-extend situations may present themselves here in the near future. And there are a couple of certain departures. So we hope to have some news as the year goes on. As you know, the larger the tenant, if they're going to stay, usually, you get something done a little bit early.

Got it, okay, thank you. As for asset sales, what assets are you marketing today and what's in the pipeline to sell?

Hi Dick, this is Jeff. As with acquisitions, for competitive reasons, we're not giving specific disposition guidance, but we are working on several prospective dispositions at this time and we're looking at others as well. Continuing to finalize our portfolio transition into a more infill and urban orientation in our five core markets is a key strategic objective at Franklin Street. And so we're not a seller in deep prices, as I've indicated, but we are assuming appropriate pricing. And we will announce any dispositions as they come up.

Got it. Okay, thank you guys.

[Operator Instructions] Your next question comes from Craig Kucera of Wunderlich. Please go ahead.

Looking at your - I know you mentioned your rents were up nicely over the last several years, but I think they were up actually about 3% from the fourth quarter. As you look to the rest of the portfolio, where would you say rents are relative to market?

Hi Craig, it's John Donahue. If you're referring to in-place rents, for the most part, in our core five markets, we have room to grow. This past quarter, the average rents that were completed were down a little bit from prior quarters, but that was just a function of where the leases were actually completed in that particular quarter. For instance, at 121 South Eighth in Minneapolis and a couple of suburban markets where the gross rents were a little bit lower than in some of our other core markets. The gross rents in Minneapolis for that quarter - for this past quarter was $25 to $26, net rent is $13 to $14. And in the suburbs, the gross rents were in the $24 to $25 range, net rent's $14 to $15. And so, the bulk of our existing vacancy in Denver, Atlanta, Dallas and Houston will command higher rents in the 30-plus gross range. So those rents will be quite a bit stronger than what we saw this past quarter. If you look at the supplemental Pages 15 and 16, you can get a sense of what's in place. And we see a little bit of room there because most of the core markets will have rents $30 and above.

Got it. And going to 801 Marquette, is there any FFO contribution from that asset in your guidance? Or is that pretty much a 2018 event?

It is. The bulk of the FFO for 801 Marquette will be next year as far as our guidance goes. We have been receiving terrific activity, but nothing executed yet.

The next question comes from John Kim of BMO Capital.

Thanks, good morning. Just a couple of follow-ups. So on 801 Marquette, it sounds like the activity is still there, but nothing has been signed over the last few months. Is that because of the pricing or is it because tenants want to see the finished space or are there other reasons for that?

I'll let Will Friend address the color there. But as we have mentioned last quarter, John, we will be finishing up the substantial completion here this quarter. Should be really finished for complete tours at the end of June and we didn't expect anything really to get executed before then. But the pipeline's deep. I'll let Will just give a little bit of color about how that is going.

Yes. Again, activity and interest has been terrific in the property. We have been able to get tours through the building, though as John said, it's not essentially complete. It's on more of a limited nature. I think it's a function of the way large deals go. We're touring large tenants, we have proposals out to several tenants, but they are also looking at other buildings in the market. It's not that they're dialed in yet on a specific property. So it's a selection process. And as we get closer to substantial completion, we just expect the interest and activity to continue. On a side note, I'd say that the effect of the redevelopment at 801 Marquette has largely impacted positively the leasing at 121 South Eighth. Most of the leasing that we've done in the first quarter at 121 has been a result of those tenants seeing the progress of 801 and the amenity base that will follow. So I think the activity is there as a whole project, and it's just a matter of timing with respect to larger deals at 801.

And can you provide some commentary on the types of tenants that are looking at that space? Is it companies that are moving into downtown Minneapolis from different market or expanding within the market or any other color you could provide.

It's a mix. Without going into specifics for competitive reasons, those tenants that are talking to us, we want them to focus on us. But it is - there's good diversity in Minneapolis. There are anything from financial services to sort of soft tech and creative space users. So we're seeing pretty much a good cross-section of all sectors. Did I answer your question, the second piece of that?

Yes, sure. So after this, what else is in the pipeline as far as a significant redevelopment that you can get a big return on?

John, Jeff Carter here. We are, in all of our core markets, looking at opportunities for development and/or redevelopment. I don't have any specific thing that I would announce right now except to say that we're continually evaluating our existing assets and other opportunities in the marketplace and will definitely keep you posted. It's of interest to us, though, and we're watching.

Okay. A follow-up on your expirations for 2018, which as it stands now, is 12%. It sounds like you will have some - or you're working on some early renewals. But at what level are you targeting entering 2018 as far as expirations?

I'm sorry, John. It's John Donahue. I didn't quite understand your question. Are you asking about how many expirations? Or...

Yes, I mean right now, what's expected to expire is about 12% of your portfolio. As you go through leasing the rest of this year and enter 2018, where would you like that number to be by the end of this year?

I think I understand. Well, we have a couple of known departures, or at least they've communicated that they're going to depart. And so Burger King and Fannie Mae are tenants that we're anticipating to leave. And we'll have to address those vacancies next year. And we're already touring but nothing to announce yet. So I think the answer to your question would be hopefully half of that will be addressed before year-end. And that's really a function of getting the tenant to engage and trying to encourage them to extend early. So nothing to announce yet. We don't want to talk specifics about who and when, but I think the answer to your question is we'd love to get half of that out of the way.

Okay, and then the discussion of dispositions, is this - is it fair to assume that it's - that these are going to be in your non-core markets? And is the plan to do this to really increase your exposure in your main markets or is it also to address your near-term debt expirations?

Well, the - yes, it is safe to assume. John, this is Jeff again, John. It is safe to assume that our dispositions would be in non-core assets and non-core markets. And the plan there, again, is really just that over the coming years when appropriate pricing and opportunities present, that we would expect it to continue to work on our remaining 25% or so non-core assets in the portfolio. And so the effect of selling assets, obviously, will give us proceeds also to pay down debt.

Okay, appreciate the color. Thank you.

Thank you.

This concludes our question-and-answer session. I would like to turn the conference back over to George Carter for any closing remarks.

Thank you everyone for tuning in to our first quarter earnings call. Hope to see many of you soon at REITWeek in New York from June 6 through 8. Thank you.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.