Good day and welcome to the Franklin Street Properties Corporation Second Quarter 2018 Results Conference Call and Webcast. 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 Mr. Scott Carter, General Counsel. Please go ahead.

Good morning and welcome to the Franklin Street Properties Second Quarter 2018 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, 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 statements. 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, August 1, 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. John?

Thank you, Scott, and good morning, everybody. On today's call, I'll begin with a brief overview of our second quarter results, and 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 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-Q, which were filed last night with the SEC and as Scott mentioned, can be found on our website. We reported funds from operations or FFO of $25.4 million or $0.24 per share for the second quarter of 2018. Turning to our balance sheet at June 30, 2018 we had $1.1 billon of unsecured debt outstanding and our debt service coverage ratio was about 3.6 times. At June 30, 2018 we have 77% of our debt at fixed rates. With our debt stack more turned out and our rates mostly fixed, we believe we have aligned our capital structure with the more long term value added properties that we have in our five core markets. We’re looking at our near term debt maturities and we’ll make announcements when or after that wraps up. From a liquidity standpoint, we had $502 million available on our revolver and $10.4 million in cash on our balance sheet at quarter end for a total liquidity of $512.4 million at the end of June. Once thing I wanted to point out is that in Q1 in our 10-Q and earnings release we reported total leasing of 109,000 square feet of which 84,000 was renewals and expansions and 25,000 was for new tenants. Those numbers were correctly reported; however, on page 20 of the first quarter supplemental I didn't inadvertently reversed the two numbers making up that 109,000 square feet. We’ve had a couple of calls on that, so I’m sorry for any confusion. Again, this is just a first quarter issue that second quarter reporting is fine. With that, I'll turn the call over to George. George?

Thank you, John and welcome to Franklin Street Properties second quarter 2018 earnings call. As John said, FSP's funds from operations or FFO for the second quarter totaled approximately $25.4 million or $0.24 per share. Leasing activity picked up meaningfully during the quarter, and is continuing that trend as we enter the third quarter. Our energy sensitive markers of Houston and Denver are also seeing more potential leasing activity than we have seen in several years, and we are continuing to experience more of our existing tenants throughout the portfolio, approaching us with early renewal requests. We also anticipate continuing efforts toward disposition of certain of our managed properties. For those managed properties in which FSP has a financial interest, any disposition proceeds received by the company will be used primarily for debt reduction. With those few comments made, let me turn the call over to John Donahue, President of Property Management Company. John?

Thank you, George. Good morning, everyone. At the end of the second quarter, the FSP portfolio was 89.0% leased. This represents an increase from the 88.5% leased occupancy at the end of the first quarter. Barring any surprises, we expect leased occupancy to improve again in the third quarter. After a relatively slow first quarter, the second quarter was exceptional in regards to total leasing with approximately 659,000 square feet of leases executed. That represents our best quarter of leasing in the last seven years. Also, the rolling 12-months that is the second half of 2017 and the first half of 2018 at 1.76 million square feet representing our highest total ever for 12-months of leasing. We believe that calendar 2018 may end as our strongest year of leasing as well. The amount of roll over overexposure in the second half of 2018 and calendar year 2019 has been reduced by approximately 490,000 square feet about 5% of the total portfolio. This includes the recent announcement that people renewed subsequent to quarter end. We also had a few large tenant renewals expected to be finalized in the next six to nine months. Barring any surprises, the roll over overexposure for 2019 and 2020 should be significantly reduced during that time. We have made progress on the existing vacancy through the first half of the year and the trend of anchored tenants and large tenants renewing in our urban infill properties has been encouraging. We expect that trend to continue in the future. The energy industry appears to have turned the corner and we have witnessed a growing trend of potential space needs for late 2018 and into 2019. This is expected to have a near-term positive impact with growing tenants, specifically in the energy corridor [ph] in Houston and to a lesser extent in downtown Denver. We continue to believe that there is ample upside remaining in our core portfolio especially at Houston, Atlanta and Minneapolis. If the activity translates to leases in all five of our core markets, execute and perform as well as expected over the next six to nine months then we believe the portfolio will stabilize above 90% in the first half of 2019. With that, I will turn it over to Jeff Carter.

Thank you, John. Good morning, everyone. FSP continues to concentrate our efforts within our five Sunbelt and Mountain West core markets of Atlanta, Dallas, Denver, Houston and Minneapolis. We own and operate Class A properties in infill and amenity rich submarkets within these dynamic metropolitan areas, and have worked to position for long-term property NOI growth and value creation. As we look forward, our primary efforts will continue to be focused on unlocking value in our portfolio due to leasing of our vacancies and on renewals and/or expansions of existing tenants. On the FSP portfolio and asset recycling front, we anticipate the potential during the remainder of 2018 for the disposition of one or more of our managed properties including the potential for somewhere FSP may have economic interests, we will keep the market posted as appropriate. At this time and as George Carter indicated in his remarks, our expectation is to use any potential disposition proceeds received to paydown debt. Our portfolio is now nearly 80% concentrated within our core markets. Since 2014, we've completed dispositions and/or have mortgage repayments made of over $230 million. FSP's portfolio transformation as resulted in a Class A focused portfolio located in amenity-rich infill submarkets that are in high growth potential cities. We see the potential for enhancing value over the coming years in a number of our properties for tenant market and/or property specific reasons. And with that, I thank you for listening to our earnings conference call today. And at this we'd like to open up the call for any questions.

We will now begin the question-and-answer session. [Operator Instructions]. Our first question comes from Dick Schiller with Baird. Please go ahead.

Thank you. Hey, good morning everyone. Great job on leasing the T-Mobile space. Appreciate your comments that leasing activity has been picking up in a strong, but can you speak specifically to backfilling some of the larger vacancies at Fannie Mae, Burger King and potentially Vail Corp. and other smaller vacancy?

Good morning, Dick. This is John Donahue. Referring to some of the larger expirations in the fourth quarter of this year, I'll start with Dallas. Fannie Mae which is scheduled to vacate at the end of the third quarter, we have leased -- pre-leased approximately 33% of that vacancy and have prospects for the bulk of the space. So we believe over the next six to months that we'll backfill pre-leasing all of that space or as it expires, so got good start of Fannie Mae's vacancy. Burger King at Blue Lagoon may hold over for one or more months. We don't know exactly when they will depart. And so that moving target is impacting us a little bit. But we had a great activity. We have a handful of prospects for nearly 4000 square feet to either multi-tenant the building and is also potential single-user. So that's going very well and that property is well-positioned. We have another vacancy coming at Innsbrook. SunTrust is rolling. And we have solid organic activity to backfill a lion share of that space as well. So we're hopeful that that'll happen in short order. So those are the largest expirations. Hopefully that answers your question.

Yes, definitely. Thank you. And in the same, can you add the activity on 801 Marquette up from Minneapolis?

Sure. 801 Marquette continues to get the stream of activity. We have mostly large users looking at either two or three floors, and so it take some time to work through those negotiations, and they're out in front of it a bit as far as timeliness when they need the space. So it's taking a little time. We do have prospects for the full second floor that we've been working with now for about six months. And we're hopeful that we can wrap that up here over the next few months. But we also have a user that would take about building. So, we're still expecting to have that property mostly substantially leased by year-end and looking for a meaningful FFO contribution in the second half of next year.

Got it. Thanks. And last one for me. On the sale of some of the managed portfolio assets what is the reason for the strategy or the focus on the managed portfolio versus maybe some of the non-core dispositions in the owned portfolio. Is it an asset by asset basis or is it a change in corporate strategy?

Dick, it's George. It's asset by asset. The managed portfolio does have some timeframe associated with ownership of those properties were directly owned properties in the portfolio do not -- that's one aspect of it. But it's property by property as they max out, in our view value. We are also currently happy with our non-core directly owned portfolio as it exists today. We believe it actually has a lot of opportunity and value that we can create in our non-core directly owned portfolio which as Jeff said is about 20% of the remaining square footage. We think has a lot of upside over the coming months and potential year. So we're happy with the existing directly owned portfolio at this point and that managed portfolio is a normal run-off as each property hits what we believe is its maximum best pricing within certain timeframes.

Got it. Thanks guys.

[Operator Instructions] The next question comes from Rob Stevenson with Janney. Please go ahead.

Good morning, guys. Just a quick question on the leasing, in terms of the CapEx and TIs and leasing commissions and stuff like that, is the level we saw here in the second quarter on a per square foot basis likely to be indicative of what we see over the remainder of 2018 and in the 2019 as you continue to execute on a leasing?

Hey, Rob, good morning. It's John Donahue. Yes. I would say that per square foot number is indicative of the type of leasing that we've done and will do. Although keep in mind that a higher percentage of the leasing has been renewals versus new leasing. So the new leases will tend to be slightly higher. We could see that number break $5 per square foot per year in any given quarter. And then when you have a higher percentage renewals like we may have in the third quarter with T-Mobile and some others potentially that number might be below $5 per square foot. But it's been trending up between $4.50 to $5 per square per year and I think that that will continue.

Okay. And what the $150 million on the JPMorgan term loan is coming up in November. What is the plan on that at this point?

Hi. It's John Demeritt. We're working with our banks on this in near term maturity. So, once we have something in place, I'll be able to make an announcement for it. We have a great bank group and have great relationships with them. They're with us for a long time and we're working on that. But that's as much as I can say right now.

Okay. All right. Thanks guys.

The next question is follow-up from Dick Schiller with Baird. Please go ahead.

Hey, one more quick one from me. The 1.1 million you guys considered a non-recurring items on NOI, is that mostly lease termination fees? Or what else is included in that amount? I'm looking at page eight as a supplement.

Okay. Hang on one second. Yes. Those are termination fees. That's correct.

What assets or what leases drove those lease termination fees?

Yes. The more significant is SunTrust from this quarter.

Okay. Thank you.

Okay.

[Operator Instructions] At this time, this will conclude today's question and answer session. I'd like to turn the conference back over to George Carter for any closing remarks.

Well, thank you all for attending the call. And we look forward very much to reporting next quarter. Thank you.

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