Good morning and welcome to the Franklin Street Properties Corp Fourth Quarter and Full Year 2017 Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note that the event is being recorded. I would now like to turn the conference over to Scott Carter. Please go ahead.

Good morning and welcome to the Franklin Street Properties Fourth Quarter and Full Year 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 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, 2017, which is on file with the SEC. In addition, these forward-looking statements represent the company’s expectations only as of today, February 14, 2018. 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 will 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 fourth quarter and year-end results. Afterwards, 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. After that, we'll be happy to take your questions. As a reminder, our comments today will refer to our earnings release, supplemental package and 10-K, which were filed with the SEC last night, and as Scott mentioned, can be found on our website. We reported funds from operations or FFO of $26.3 million or $0.25 per share for the fourth quarter of 2017 and 111.4 million or $1.04 per share for the full year ended December 31, 2017. Compared to the full year of 2016, FFO was about 5.1 million higher and a penny per share higher based on our weighted average shares this year. Turning to our balance sheet, at December 31, 2017 we had just over 1 billon of unsecured debt outstanding and our debt service coverage ratio was about 3.9 times. From a liquidity standpoint, we had 522 million available on our revolver and about 10 million in cash on our balance sheet or total liquidity of about 532 million at year-and. During the fourth quarter, we recast our bad debt and completed our inaugural issuance of a private placement of debt. We also had our investment grade rating reaffirmed during Q4. The debt transactions we completed addressed near-term maturities and created a better debt stack for FSP. With the debt stack more termed out, we believe we have aligned our capital structure with a more long-term value add properties that we have in our five core markets. With that, I'll turn the call over to George. George?

Thank you, John and welcome everyone to Franklin Street Properties' fourth quarter and full-year 2017earnings call. As John said, for the fourth quarter of 2017, FSP's funds from operations or FFO totaled approximately 26.3 million or $0.25 per share. For the full year 2017, FSP'S FFO totaled approximately 111.4 million or $1.04 per share. During the fourth quarter of 2017, FSP took advantage of a flattening yield curve and lengthened the average maturity of its debt stack, as the Federal Reserve continued to move up shorter-term interest rates. In the process, the company fixed interest rates on over 78% of its total debt, while increasing its line of credit availability to about 522 million at December 31, 2017 from 220 million at December 31, 2016, a year-over-year increase of over $300 million in liquidity. These actions culminated with the closing of our first ever private placement of senior notes on December 20, 2017 and moved our weighted average debt maturity to approximately 4.5 years from 2.6 years. We estimate the weighted average interest rate on our debt will increase to 3.7% for 2018 from a weighted average interest rate of approximately 3% in 2017. And that assumes the effect of the one Fed fund rate increase in December, which has already happened and then three anticipated Fed fund rate increases in 2018. As we begin 2018, our fixed rate debt as a percentage of total debt is 78%, which is up from a weighted average of 59% in 2017. While this balance sheet action and anticipated Fed Fund increases will result in an estimated increased borrowing costs of about 7 million in 2018, it provides better matching of longer-term, fixed cost capital characteristics with the longer-lived office assets we now own. At the same time, this action helps to reduce…

Thank you, George. Good morning, everyone. At the end of the fourth quarter, the FSP portfolio was 89.7% leased, which represents a 1% increase compared to the 88.7% leased at the end of the third quarter. As of year-end 2016, the portfolio was 89.3% leased. As expected, the portfolio leased occupancy improved during 2017. As forecasted, the surge in leasing momentum that we experienced in the third quarter carried over into the fourth quarter. The total leasing activity for the year finished at the high end of our projections at 1.47 million square feet with nearly 1 million square feet executed in the second half of 2017. The six months and twelve months of total leasing represent new highs for FSP. During 2017, the best performing core markets for FSP were Dallas, Denver and Minneapolis. Denver, our largest core market, improved over the past 12 months from 87% leased to approximately 90% leased with four straight quarters of increasing leased occupancy. Our Denver portfolio is now at a three-year high for leased occupancy. Dallas continue to be the hottest core market, jumping from 90% to 96% leased during the year. Minneapolis also improved significantly from 79% leased to approximately 90% leased. This excludes the redevelopment of 801 Marquette. There's still quite a bit of upside remaining in our core portfolio, especially in Houston at 76% leased, Atlanta at 84% leased and in Minneapolis. We expect three of the five core markets to be in a range of 90% to 95% leased within the next six to nine months. As we look out farther for the next two years in calendar 2018 and into calendar 2019, we expect more net absorption from a higher percentage of new leasing, which is expected to drive the total portfolio occupancy to 92% and above. With that, I will turn it over to Jeff Carter.

Thank you, John. Good morning, everyone. Our focus at FSP is on long-term property NOI growth and value creation for our shareholders. FSP's property portfolio has continued its evolution and is now almost 80% located within our target markets. As John Donahue noted, FSP saw strong leasing trends during the second half of 2017 and we are optimistic that this can continue. As we look forward, our primary efforts will be focused on leasing and tapping into a potential upside in our vacancies and primarily within our target markets. On the disposition and asset recycling front, as part of our five target market urban in-fill strategy, FSP has selectively explored potential dispositions of non-core properties when pricing and value maximization makes sense to do so. During calendar year 2017, FSP disposed the three non-core assets, totaling approximately 48.1 million with 120 East Baltimore Street having been sold during the fourth quarter on October 20th for 31.6 million in net proceeds. Since 2014, we have sold properties or had mortgages repaid to us of approximately 230 million. While we do not provide specific disposition guidance for competitive marketing reasons, there is a potential for a couple of situations that we're exploring for the second half of 2018. And if price discovery were to be positive and we will keep the market posted over the coming quarters with any appropriate updates and the expectation here at FSP would be to use any disposition proceeds received to pay down debt and/or to reinvest into new investments. On the acquisition and new investment front, FSP favors in-fill and urban properties within our targeted five markets that possess the ability to credibly have value added over the short to intermediate term. The acquisitions environment is highly competitive in our target markets and while it is difficult to find credible value creation opportunities, our five market focus is providing insights into opportunities that are both off and on market. With respect to any potential new investments, FSP would intend to fund any such activity by utilizing the proceeds of any potential dispositions. We are not seeking to acquire through any increase in indebtedness. With that, I'd like to thank you for listening to our earnings conference call today and we'll, at this time, turn it over to Q&A. Operator?

[Operator Instructions] And our first question comes from Dave Rodgers of Baird. Please go ahead.

Maybe first question for John. Obviously, the leasing has picked up nicely during the last two quarters of ‘17. Curious if you can share with us, there is about 195,000 square feet of signed but not yet commenced leases I think which is embedded between your leased and occupied percentage. Can you talk about kind of what the timing of the commencement are or is on those leases?

Sure. They’re spread out. There isn't a spike in any of the quarters. They will be fairly evenly spread out over the first three quarters of the year. As you would expect, because so much of the leasing happened in the second half of the year, there will be an average four or five month lag of the commencement, Dave. So you'll see a pretty evenly spread out commencement over the first half of the year.

And then I guess with regard to maybe some of the upcoming expirations, as you look into ’18, any additional color, renewal or backfill opportunities on, I think you’ve got Evershade, EOG and US government, all looking for possible expirations this year.

Yeah, absolutely. So we have roughly 10.6% of the total portfolio expiring in 2018. There are three significant tenants expiring. The IRS with approximately 180,000 square feet has been engaged and we expect them to renew, might be a slight downsizing. Burger King, 212,000 square feet or so may hold over for a number of months, but they will eventually depart either late in the year or early next year. That property Blue Lagoon in Miami is very well positioned. It will likely be multi-tenanted, but we're very excited about that property. Fannie Mae, 123,000 square feet or so will depart early at Addison circle and Dallas. We've already got a jump start on that pre-leasing and we have great activity, might even have a lease or two signed before the Fannie Mae lease expires. And Addison circle and Dallas have been -- continuing to be very strong performers. So once you subtract those three tenants, our exposure is down to about 5.3% and barring any surprises, we expect to renew approximately 60% to 70% of those tenants, which reduces our exposure further to about 2% of the portfolio. So we're feeling pretty good about that and if our wave of surge of leasing continues, which we expect it to do, we think we’ll be in great shape by mid-year.

And then throwing 801 Marquette into that, do you anticipate to have any physical occupancy or economic occupancy in 2018 or will that mostly be kind of early ’19 event?

We don't expect meaningful FFO in calendar 2018, but we're still holding our hope that we'll get a commencement in Q4. The lion’s share of it will slip into 2019.

And then lastly if I could, George, maybe a question for you on the dividend. Obviously, you're targeting a much higher occupancy rate over time, but just kind of given the rising cost of TIs that everybody is seeing in the office landscape, given where the dividend coverage is today, do you really continue to see the opportunity to be able to cover that dividend even at a 93%, 94% occupancy level and selling non-core assets.

Yeah, Dave. The FSP Board of Directors makes the decision on the amount of dividends to be paid each quarter and has not yet decided the dividend level for next quarter. But I can assure you that along with all other factors that came into their calculus for dividend levels, the CapEx associated with our anticipated increased level of leasing in 2018 and 2019 are being very focused on.

[Operator Instructions] Our next question comes from John Guinee of Stifel. Please go ahead.

Carter, the way you phrased that answer was you, I think said that your Board was very, very focused on the escalating cost of CapEx. And you answered that when asked about the dividend which sort of implies that for the first time in the nine years I've been covering you, that maybe the dividend cut might be on the table?

The answer is what I've given John and it's the answer that I want to stay with.

Okay. And then the second -- and this is maybe for John D. It’s kind of interesting that BofA has $522 million of more capacity. By my math, your debt to TEV is in the mid-50s and if they were to fully – you were to fully draw down that revolver, it would get up into the low 60s. So I’m surprised BofA would extend you that significant revolver. Any thoughts on that?

Well, I think I'm not sure how you calculated the TEV, John. But we work within covenants that have a sort of bank defined leverage cap and we didn't come close to that. And that was topped out of -- using their definition at 60%. So, the covenants worked out quite well. We have a bank group of 11 banks in total and we worked really hard with them in October and prior to that to put those deals together and brought in a couple of big banks too. So, our bank group is pretty excited.

And then on the Burger King and the Fannie Mae move out. Is this a rehab of the building and taking it out of service, similar to 801 Marquette or is this just dividing the floor place and re-leasing.

It’s John Donahue. Neither one of the Burger King or Fannie Mae situations require significant repositioning of the property. Both buildings are late 90s or approximately 2000 vintage buildings in great shape and were built to accommodate multiple tenants. Addison Circle has been multi tenanted from the get go. And so there won't be any significant capital there other than reworking the floors for either single or multiple occupants and then Blue Lagoon has been a single tenant building and so there will be some modifications required but nothing significant.

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 all for joining in to the conference call, earnings call. We look forward to next quarter. Thank you.

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