Good morning and welcome to the Franklin Street Properties Corporation Third Quarter 2015 Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note this 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 third quarter 2015 earnings call. With me this morning are George Carter, our Chief Executive Officer; John Demeritt, our Chief Financial Officer; Jeff Carter, our Chief Investment Officer; and Janet Notopoulos, President of FSP Property Management. Also with me this morning are Toby Daley, Vice President and Regional Director of Atlanta and Houston; Will Friend, Vice President and Regional Director of Denver and Minneapolis; and John Donahue, 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 Factor section of our Annual Report on Form 10-K for the year ended December 31, 2014, which is on file with the SEC. In addition, these forward-looking statements represent the company’s expectations only as of today, October 28, 2015. 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.franklinstreetproperties.com. Now, I’ll turn the call over to John. John?

Thank you, Scott. Good morning, everyone. Welcome to our third quarter 2015 earnings call. On today’s call, I’ll begin with a brief overview of our third quarter results and afterwards our CEO George Carter will discuss our performance in more detail and provide an update on our operations and overall strategy as we look ahead to the remainder of 2015. Janet Notopoulos, the President of our Asset Management team will then discuss some of our recent leasing activities; and then Jeff Carter, our CIO will discuss our investment and disposition activities. After that, we can take some questions. As a reminder, our comments today will refer to the earnings release, supplemental report, and 10-Q all of which were filed yesterday. And as Scott mentioned, these can be found on our website. We reported a decrease in funds from operations or FFO of about $1.6 million to $27 million for the third quarter of 2015, compared to the third quarter of 2014. The decrease was primarily from lower occupancy and lower property income as a result of some of the property dispositions were completed and some lower repayments were received in the last 12 months. You can see the effect of this in our same-store results, which we produced earlier. These decreases were partially offset by property income from the acquisition of Two Ravinia that we completed this past April. Our FFO per share as a result was about – was $0.27 compared to $0.28 per share in the third quarter of 2014, and these results were in line with our expectations. Turning to the balance sheet, our current financial position at September 30, 2015, we had approximately $920 million of unsecured debt outstanding and our total market cap was $2 billion. Our debt to total market cap ratio was 46.1% at the end of the third quarter, and our debt service coverage ratio was about 5.1 times for Q3. The debt to adjusted EBITDA ratio was 7.1 times. From a liquidity standpoint, we had a cash balance of $19.1 million and $200 million available on our $500 million unsecured line of credit, and as a result had approximately $219 million of liquidity at the end of the quarter. We remain comfortable with our leverage and our unsecured rated borrower with about 74% of our outstanding debt effectively fixed or not affected by changing interest rates. As we continue to execute our asset recycling program, we believe our balance sheet position enhances our ability to optimistically sell non-core assets and reinvest proceeds to execute our overall grow strategy. Before wrapping up, I wanted to note that we’re tightening our FFO guidance for 2015 and George will talk you more about that. With that, I’ll turn the call over to George. George?

Thank you, John. Good morning, everyone, and thank you for taking the time to listen to Franklin Street Properties third quarter 2015 earnings call. As John mentioned, our FFO was – in the third quarter was $0.27 per share, and our property portfolio as of the end of the quarter was about 90% leased, definitely it was a quite summer relative to leasing. Dispositions and acquisitions, however, has fall has started, we have gotten much more active on all fronts. As John said, we have narrowed our guidance range for the full-year 2015 to $1.5 to $1.7 per share. And that’s from originally at the start of 2015, $1.3 to $1.8, so we brought down on top side of that original guidance by standing at the bottom side of the company advantage at this point. We do anticipate next quarter giving 2016 full-year guidance. And just taking a side bar for a minute to just talk about guidance as John said, I would like to talk about it in a context of our current property portfolio repositioning and recycling plan and general ongoing leasing activity. When we start a year like 2015 or upcoming 2016, we really start with sort of a run rate of the existing portfolio, as it exist in that moment. And we exclude the impact of any dispositions, acquisitions, development projects, or other capital market transactions. And in 2015, we haven’t really done any significant upside capital market transactions, most of our activity during 2015 has been organic. So, basically, we start the guidance process for the New Year. We assume certain leasing velocities for the existing portfolio, certain rental rates, and we look at that portfolio relative to its upcoming lease role and its current vacancy. Obviously, the assumptions of leasing velocity and rental rates…

Thank you, George. Our lease occupancy stayed virtually the same in the third quarter as the second quarter, although our physical occupancy picked up as tenants who signed leases in earlier quarters began to occupy their space and started paying rent. For those of you following the leaseback of the RGA space in St. Louis at the Timberlake Properties, Centene took early occupancy of some of the floors in the second building during the third quarter. But FFO was not scheduled to begin on the entire second building until December 1. So, I think, you’ll see the full effect rolling out in the next quarter. We continue to see good leasing activity on the remaining space in the third building, which is the only one that has significant vacancy at this point. And we expect to have some new leasing done there by the first-half of next year. Overall, this summer was quiet, as George said, but we’re seeing a pickup in activities since the fall began. And we should begin to see a higher volume of leasing in the last quarter of the year across our markets borrowing any unforeseen economic events. We have less than 1% of the portfolio expiring before the end of the year. So most of our efforts now are concentrated on the current vacancies and the 2016 and 2017 lease expirations. Our current vacancy is fairly spread evenly across our markets. But the largest concentration is on Denver and Atlanta, where we bought some vacancy as part of the value add strategy that George was discussing. Leasing activity in Houston is still slow, but we do not have a major block of space scheduled to expire there until 2017, and current market rates are still above our expiring rates. In 2016, approximately 10.4% of…

Thanks, Janet. Good morning, everyone. I will review our investment activities for the third quarter and year-to-date, including dispositions and acquisitions. And I’ll conclude with an update on our development projects in downtown Minneapolis at 801 Marquette Avenue. On the disposition front, FSP continues our focus on asset recycling efforts as George discussed of mostly non-core legacy commodity suburban assets when an FFO appropriate pricing could be achieved. We had indicated the potential for dispositions of non-core assets of between $150 million and $200 million. And at this time, we are adjusting that guidance upward as George discussed in the earnings release at the top end. So the new range would potentially be in the $150 to $225 million range. And the year-to-date, we closed three properties for approximately $57 million. Currently, FSP is working on approximately $165 million of additional potential dispositions and possible loan repayment transactions. A number of these potential dispositions and our loan repayments are still subject to the respective due diligence periods and/or other transactions specific negotiations, and so execution risks remain. It is likely that some of these closings of potential dispositions and loan repayments, they still into the start of the New Year, and we’ll keep the market informed, as transaction clarity emerges. Moving onto acquisitions, as discussed on our last conference call, FSP desires the net acquirer. It has, however, the challenging from both lining up the timing standpoint and from the standpoint of finding appropriate high-quality assets in our target locations in submarkets and pricing that makes sense less at acceptable value. But there are some strong opportunities out there both on and off market that we have some potential angles on to pursue. Our objective has been to use disposition proceeds to fund new acquisitions and we’ve worked hard to…

Yes. And so let’s open up the call for questions.

We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Dave Rodgers of Baird. Please go ahead.

Yes, good morning. Jeff and George, maybe a question to start with you in terms of acquisition and dispositions. George, in your comments I understand that that you’re kind of hesitant to put the acquisitions in place before you have the dispositions ready. But I guess I’d love to dive down with you and, Jeff, a little bit more in terms of why the dispositions have come along a little bit more slowly? I don’t know, if that’s a market function, you’re trying to lease space, it’s being too conservative, I’m just trying to get a better sense on the disposition side why those are moving faster?

Hi, David, it’s Jeff here. On the disposition side, we have been working hard on market conditions getting properties ready, as you know, we have not wanted to just sell to sell. We wanted to sell when the pricing is right and the timing is right for each respective property. And so that doesn’t always lineup as neatly and tidy as you always hope. But that’s really the rationale.

But you feel pretty good that kind of going into the second or the last part of this year and early next year that you’re going to be able to monetize the assets given that the change in the guidance that you have, so you think most of that repositioning here in the near-term is done?

Well, we’ve got about $165 million that is being actively worked on for dispositions right now. And, again, they’re all subject to the respected due diligence periods, but assuming the things go according to plan with those particular transactions then, yes, but I would never say always until I know it’s done.

And, Dave, this is George. The one other aspect of this that I really know is that, you will see the difference versus the urban properties. These – a lot of these suburban properties are fairly small. And so the buyers the potential buyers are also fairly small in our institution. And capital requirements and due diligence requirements, re-trading, backing out of deals, not getting the financing or loan that they thought they would be able to get kind of 1031 exchange like type of exchanges and so on, it’s just sort of a different group of buyers than traditional institutional buyers on these suburban properties. And they take longer. They fall out of bed. They have to heat up again and so on, so there’s some of that involved here too.

Okay. Thanks for that color. Second question maybe on TCF and the redevelopment there. You talked about some office tenants negotiation or at least in early discussions, I think, Janet may have mentioned that. But can you kind of give us a sense whether there’s one large tenant that you’re looking at a couple of smaller ones, I mean, I know you’re going to backfill kind of 4x4. What’s your sense now as you get ready to kind of kick this thing off? What that’s going to look like?

Well, I think, first of all, just going back, we think that it’s going to take TCF moving out to really show the space. The top floors are terrific use space, but conditions are kind of tough. So, I think, we’re looking at full floor tenants would be what we’re aiming for, but not one tenant to take out the whole space, the whole 90,000 the TCF has.

Okay. And so would you be comfortable going on a speculative basis at this point, or what would be a leasing threshold in your mind?

Oh, I’m sorry for the new developments?

Yes.

I’d let defer that one back to Jeff who can explain that re-complexity of the mixed-use?

Hey, we definitely – we anticipate preleasing prior to breaking ground, that’s our objective.

And I’m sorry, Dave, my question – my answer was directed towards the existing tower, let’s replace an existing to TCF…

Right. That’s fair. Last question maybe, George, and a question for you and the Board more broadly, comfort level and coverage with the dividend you’ve got some of these loans burning off, the TCF space is kind of coming back, I don’t know how long that kind of takes to get back in place, and then I know you’ve got some lease move-outs in 2016, I think on the last call that we talked about. Can you just talk about the dividend, your comfort level there in the near-term?

The Board – I have to give you the standard answer, but it is the honest answer. And the honest answer, the Board looks at the dividend every single quarter, and could raise or lower that dividend any quarter they decide us to. The comfort level over the past years with our dividends, which has stayed as you know, flat for number of years now has been very, very good, and the comfort level this quarter is very, very good. But going forward, you look at everything and make those decisions and that is the way it works.

Okay, great. Thanks, guys.

The next question comes from Jaime Feldman of Bank of America Merrill Lynch. Please go ahead.

Thank you. So as you guys think about the portfolio repositioning plan, you had 7.1 times net debt to EBITDA in the third quarter. How should we think about your target leverage over time?

Hi, Jim, this is John. We tend to lineup, keep our leverage not much higher than where it is right now as it relates to total market cap. So we’re kind of at the top of the range maybe a little bit more from where we stand today. But we would like to be in the range of, say, 35% to say 45%.

And market cap?

Yes, both.

Which, tend to fluctuate do you guys use any other metrics?

Well, you could look at it as of – the value of the assets – which is about $2 billion on the balance sheet, if the stock price was really out of white.

Okay. And then can you talk more about Houston and what you’re seeing there? And I think you had a little bit of occupancy loss in Westchase in the quarter and present lease went down, but just bigger picture on the market and your leasing pipeline?

This is Janet, and I’m going to turn it over to Toby Daley, who is the Regional Director for Houston. We did have one tenant at Westchase, that was about 35,000 square feet that tenant that left as the expiration of it’s lease.

Hey, Jaime, Toby Daley here. Yes, that was the only activity that we had in all of Houston was that one tenant that left. And for 2015, I think we had a total of just over 100,000 square feet of leases rolling. And unfortunate that we lost 35,000 square footer. But we’ve done well on the balance and I think we’ll hold fairly steady through the end of the year. And then looking ahead to 2016, we only have 65,000 square feet rolling and overall the market – sorry, if you look at the stats, the direct vacancies, I think, quarter-to-quarter have actually dropped off a little bit. But the sublease space availability is certainly out there and that’s something that everybody is contending within all of the submarkets. The sublease space really caters to large tenants to tenants that are full floor or larger and most of the tenant role that we have are smaller tenants less than a full floor and it’s very hard for the large sublease spaces to accommodate small tenants, because they have to build multi-tenant quarter. So, I think, the outlook for FSP and our smaller tenant role is pretty good.

Okay. And then could you guys record a termination fee in the quarter. There’s something – in the same-store there’s something to get from the normalized to the regular as the…

In Dallas.

What was that?

In Dallas Legacy Tennyson has two buildings and they have – the tenant has the option to terminate one of the building early. And so we’re amortizing that termination to be over the remaining periods. And you will see it I believe it’s in our major tenants, I think, we need to say we noticed the two expirations dates rather than a single expiration date.

So when are they actually going to vacate?

In…

Summer…

In the summer of 2016.

Okay. So, I guess, thinking about the Minneapolis 90,000 square foot and then the Dallas tenant, how do you guys think about your same-store NOI for 2016? It seems like you’re – all things being equal, you’re probably down still next year, or what do you think offset that?

Well, we took back a lot of vacant – well first of all, we took back a lot of vacancy at the end of last year at the beginning of this year, that we’re sort of working through. And given the sort of standard time it takes from the time the tenant vacates sublease, we think that starts to leaseback up, and we’ll see some of the same thing. I think, if we are successful on TCS as we hope to be in the tower that will leaseback, we – I think we did a really good job of leasing back to Timberlakes in suburban market in a fairly amount of time. So a lot is going to depend upon the market, but we think we’re working through a lot of the – those vacancy that we got back and we’ll keep on going through the others. We think that, as I said before, we think that our new expirations that are in markets that haven’t been hit hard like Houston, so, hoping that will move.

So, I guess, just thinking about the leasing pipeline, do you think your occupancy at year end assuming that you don’t change the portfolio at all. Do you think your occupancy at year end 2016 will be higher or lower than you were at 2015?

So long way out I would hope that we would be higher I don’t think that may we think that at a minimum we should remain be able to hold where we’re. So we haven’t given specific guidance on.

Jim, hi, this is George I think and lot of it depends on what we’ve left I think if you take a look at the portfolio that exist today I think we’ll be – well, where we’re more higher, but if we acquire vacancy, which is what we’re doing and who knows.

But, yes I was thinking more of a same-store?

No I know, but Jeff, gets on portfolio at year end. So portfolio at year end 2016 will include some new acquisitions. If you took – if you said keep the portfolio stack for 2016 I think we’ll be at or higher occupancy.

Right, so I guess asking you the same question on same-store NOI. Do you think it will be flatter up or down?

I don’t know, I just don’t have I think our occupancies will be up on that levels are trying to move up so everything we need to – we should show better same-stores are up absolutely.

Okay, all right. Thank you.

Okay.

And next question is from Erin Aslakson of Stifel. Please go ahead.

John Guinee here. I’ve got two questions. One just the follow-up on the first one is just you’ve got a million square feet rolling next year I think, which includes guaranteed move out of TCF and then also 100,000 feet of a Denver A onshore, it sounds to me as if you sort of start there out with 363 to the negative is that correct?

Well the Denver A comes in the middle of the year.

Right, but of a million square feet you already know that your maximum kind of retentions about 64%. So it will be awfully hard to even get above 50, which means it will be awfully hard to maintain a 90% of portfolio occupancy in the core portfolio isn’t that and okay we look?

I’ll refer to John Donahue, who is here to just tell us, but the facility that we’re getting back well fully somewhat so we’re dealing with tenants who like being in the building. We’re talking to them and we’re talking to new tenants. So that and that is Dallas. So that when I think we would not expect to see that said vacant for a very long time. And as I said before on – as we do the development on 801 Marquette a 169,000 of that TCF vacancy is no longer in same-store, it’s part of the development.

Okay.

Okay, I mean this – and then I think we’ve got a somewhat normal 10% under 10% expiration rates that you would expect for the 10 year leases is what we would have in any given year and we should be able to fall through that.

Okay, and then George, couple of new Board members, can you sort of talk through the thought process on what appear to be some local folks versus on a season real estate vets?

Well, we’re just real excited about Kate, and Ken, is joined the Board independent Board members, it has a variety of things to bring to the party, it has Ken, particularly from a historical basis with our company. So we’ve – we’re real excited about it. Again we’re John, we’re still a very small company and lot of people that have made really good reputations here in a Greater Boston area is that I’ve got to know us a little bit and we’ve got to know a little bit over time really make a lot of sense for us now people traveling from all over the country to Board meetings and so on that we don’t know and don’t know what’s, because again we’re relatively small lease. So doesn’t make time sense at this point. These are really fine people and we now will have 8 Directors successful and we’ll be independent so we keep moving as we go along to more and more of an independent work.

Do you think it’s better to bring in friends and family to the Board than really people with solid read experience who are recognized as shareholder fiduciaries?

We think these people are really the fine, fine Board members, and really do a great job I’m sure, and really do their fiduciary responsibility as well or better than anybody we could ever find.

Well as anybody?

As well as anybody we could ever find.

That’s commitment. Thank you.

You’re welcome.

[Operator Instructions] The next question comes from Tom Lesnick of Capital One. Please go ahead.

Hey, good morning, guys. Just a quick question on the dispositions. As we’re thinking about rising – entering your rising rate environment this year knowing that a lot of these assets are on the smaller side, and the potential buyers might require a greater leverage debt and same institutional buyer. What if at all has that mindset impacted those potential buyers mindsets and/or pricing generally for those assets?

Tom, this is Jeff Carter. Our – the demand we’ve had from buyers this year on deals that we’ve contemplated selling has been extremely high as George mentioned. We’re selling them for mostly suburban commodity profile asset. And so the buyer pool is a different buyer pool than the more institutional pipeline deals that we’re competing with [indiscernible]. So far the pricing that we’ve seen on deals has been well accounts fairly historic, and it’s – and if you look back historically, it’s raising. But until they’re achieved in the books then it’s hard to – it’s hard to say that anything is for certain. And so right now we’ve got about $165 million in deals that we’re working on, the pricing again on all these deals is fairly historic in its nature. But we have to get them over the end zone with these buyers and we’ll keep you posted on that.

Okay. So there hasn’t been any sort of revision in expectations, if you will?

I have not seen changes in pricing at this point.

Okay. Thank you.

Yep.

There are no additional questions at this time. This concludes our question-and-answer session. I would like to turn the conference back over to George Carter for closing remarks.

Thank you very much everybody for taking the time and effort to listen to the call, and we look forward to talking to you next quarter. Thank you.

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