Franklin Street Properties Corp (FSP) 2007 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to your Q2 2007 Franklin Street Properties earnings conference call. My name is Rob and I'll be your operator today.

(OPERATOR INSTRUCTIONS)

At this time, I'd like to turn the conference over to your host, Mr. Scott Carter, Senior VP and In-House Counsel.

Good morning, everyone and thank you for participating in this call. With me this morning are George Carter, our Chief Executive Officer, and John Demeritt, our Chief Financial Officer.

Before I turn the call over to John, I must read the following statement. Please note that various remarks that we may make about future expectations, plans and prospects for the Company 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 item 1A Risk Factors of our Annual Report on Form 10K for the year ended December 31, 2006, which is on file with the SEC.

In addition, these forward-looking statements represent the Company's expectations only as of today, August 1, 2007. 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 adjusted funds from operations, or AFFO. A reconciliation of AFFO 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 will turn the call over to John Demeritt, our Chief Financial Officer.

John?

Thanks, Scott. Welcome to our earnings call. We are very happy to talk with you about our second quarter results.

What I plan to do is a short overview of our results and then afterwards George Carter, our CEO, will further discuss FSP in 2007. I'm going to be brief and will be referring to the earnings release that went out last night.

As we said before, we view our performance over the longer term rather than on a quarter-to-quarter measurement because two of the key drivers of our business are transactional in nature. Those are investment banking and gains on sale of real estate, or GOS, which can be choppy.

That said, for the second quarter of 2007, we had net income of $32.5 million and EPS per share of about $0.46. For the first half of 2007, we had net income of $42.2 million or $0.60 per share.

We measure performance of our properties that we own and investment banking through our AFFO measurement which, for the second quarter, was $19.2 million, or $0.27 per share. For the first half of 2007, we had AFFO of $37.5 million, or $0.53 per share.

When looking at AFFO plus GOS, which adds gains on sales to AFFO, we consider this our total profits. For the second quarter, we achieved $40.8 million in AFFO plus GOS, or $0.58 per share. And for the first half of 2007, we had AFFO plus GOS of $59.1 million, or $0.84 per share.

At this point, we're halfway through the year and each of these metrics were lower in 2007 compared to 2006. The reason for the decreases are primarily for two reasons which were partially offset by a couple of other increases. The main reason were that in 2006 through six months, we had recorded about $4.9 million in termination fee income; while in 2007, we've only had about $60,000 in termination fee income.

This causes a blip when it's received. And as we lease the space, it appears lower in future periods depending on the size of the termination fee involved and the leasing economics. This affected the comparison of net income EPS and AFFO in our first half of 2007 to 2006.

The other reason was that our GOS for the first half of 2007 was $21.6 million, which was about $6.5 million lower than last year. This affects the net income EPS and our AFFO plus GOS measures in the first half of 2007 compared to 2006.

These two decreases combined were most of the explanation. The effect of these were partially offset by a significant increase in contribution from our investment banking business and also an increase in contribution of our property AFFO.

The increase from property AFFO was primarily a result of mergers and acquisitions that we've had over the last 12 months. On May 1st of '06, we completed a merger adding five properties and over the remainder of '06, added two other acquisitions -- a property in Georgia in late June last year and another one in Colorado in December.

The contribution for those properties was fully in the three and six month results for 2007 and weren't fully in the 2006 results.

This helps close some of the shortfall we had from lack of termination fees and the timing of asset sales that we had that impacted property AFFO.

Our investment banking business did very well through six months. Syndication and transaction fee revenues were up 23% over last year. These fees are based on the value of shares we sell in private placements. For the six months of 2007, we sold shares of this private placement of about 109 million as compared to 84 million last year in the same period.

The total of these increases and decreases, comparing the two periods was also affected by a greater number of shares outstanding in 2007 compared to 2006 as a result of that same merger on May 1, '06.

All this being said, I reiterate that we're only halfway through the year. This covers our performance. The press release and the 10Q filing go into further detail about our results.

And that's the financial summary of the quarter. And I also wanted to point out that the press release has our usual supplemental schedules, and we've added a little more information to it this time. And we've also got the current real estate portfolio if you're interested.

That concludes the financial highlights. And, at this point, our CEO, George Carter, will tell you more about the quarter and where we are. Thanks for listening.

George?

Thanks, John. Welcome to our earnings call and thank you for taking the time to listen in.

As in past calls, I will try to follow my written comments in our earnings press release in an attempt to flesh them in a bit more. First, let me repeat what I have said on each quarterly earnings call since our public listing, and that is that Franklin Street Properties' quarterly earnings can be quite volatile and erratic because of the transactional nature of significant portions of our real estate investment business.

The timing of the contributions from our various business components has, historically, balanced out over the course of a full year. And, consequently, we consider annual financial results to be much more meaningful for performance and trend measurements than any individual quarter.

Also let me repeat, again, from past earnings calls that Franklin Street Properties is an investment firm specializing in and focusing exclusively on, the asset class of real estate. Our company has three major business components that contribute to its profitability. They are rental income from properties, gains or losses on the sale of properties and fee income from real estate investment banking activities.

These business components are actively managed by FSP in an attempt to generate competitive risk-reward adjusted financial performance, and are specifically designed to use the structural capabilities of our no-debt model. FSP has no permanent debt of any kind on its property portfolio or corporate business units.

FSP also has no preferred stock outstanding. Consequently, 100% of all revenues and profits at FSP, from all business sources, are owned by one class of security -- our common stock.

Moving to my comments in the press release -- there are a lot of numbers in every press release. The number that John mentioned that is our total profit number is adjusted funds from operations, which include both our banking and our rental sources as well as GOS, gain on sale. AFFO plus GOS is the one number that represents all of FSP's businesses, with the non-cash expense of depreciation added back. It is the total profit number for FSP.

For the first half of 2007, FSP's profits, represented by AFFO plus GOS, totaled approximately $59.1 million, or $0.84 per share. Dividend distributions paid in the first half of 2007 totaled approximately $43.9 million, or $0.62 per share, which is a payout ratio of about 74% of AFFO plus GOS.

The second quarter of 2006 showed strong sequential growth over the first quarter and illustrates the variability that can accompany our quarter-to-quarter profits. And while our quarter-to-quarter profits can be quite variable, our all-cash, no debt position is a great place to be, particularly, in this current uncertain financing market.

Not being dependent on debt-to-rent spreads or debt levels to property values for profits provides both capital security and potential investment opportunity that may arise out of some of the overleveraged turmoil that is currently in the debt and real estate asset markets.

Our profits from rents are all rents, all cash rents. They are not rent-to-debt spread. Our profits from investment banking are cash fees up front for raising net capital, and our gains on sale are cash gains that do not have a mortgage to pay off against it.

If you take a look at our balance sheet, at the end of the second quarter you'll see approximately $107 million of cash on that balance sheet. To give you some perspective for a company our size, $107 million cash on the balance sheet, our annual dividend at $0.31 per quarter is about $88 million.

We have a lot of opportunity with our capital structure, and in this current market environment there probably will be a lot of opportunity for us to take advantage of. We certainly are going to be in the third and fourth quarters using our balance sheet and the cash on that balance sheet for investment opportunities.

I continue to be very, very optimistic about Franklin Street Properties' full year 2007 financial performance potential and growth prospects.

Taking a look at our business components, we'll start with rental income. And for the second quarter of 2007, it was about as expected, with leased square footage of our 27 continuing properties averaging approximately 88%. Most of our office markets continue to show positive trends of absorption, occupancy and rent growth, tracking the national published statistics for their respective geographical regions.

Our 117,000 square foot property in the Seattle/Tacoma area has finished the majority of its physical repositioning from single- to multi-tenant use and has begun lease up. We now have two leases on that property for about 14,000 square feet, and the Seattle -- greater Seattle market is very strong. We have lots of traffic, lots of prospects for that property. We're very optimistic.

Our 146,000 square foot property located in Silicon Valley is still completing its construction renovations from single- to multi-tenant use. We currently have one tenant in that property for about 27,000 square feet, and we have others looking at it.

Again, that North San Jose market -- this property is located right on Montague Expressway for those of you that know the market -- that market is also very strong and we are very optimistic about the completion of leasing on that property. Both of these properties look terrific after our construction to them. And we think, when leased, they will add tremendous value to the portfolio.

Approximately 2% of our portfolio's leases are due to expire for the balance of 2007. Approximately 279,000 square feet, or about 6% of our $5.1 million total square footage property portfolio, is scheduled to expire in 2008.

Our next business component is property sales. And as a side bar that is, again, repetitive from other earnings calls, I would like to remind investors what an important part of FSP's financial profit matrix property sales are.

Every property we invest in, from its acquisition pricing decisions to its physical management, including value added capital allocation for repositioning and leasing, is done with an eye to disposition some day and achieving a property-specific IRR goal that has as a significant component gain on sale, or GOS.

The major difference in component return metric for a no-debt real estate investment model like FSP versus more traditionally leveraged rent REITs is gain on sale ,or GOS. To ignore property sales is to ignore a major element of how a no-debt model like FSP achieves its risk reward adjusted competitive returns and gets proceeds for reinvestment and future potential profit growth.

Property sales totaling approximately 302,000 square feet from two properties took place in the second quarter. Gains from those two sales totaled approximately $21.6 million. One of those properties was in a suburb of Atlanta, which we bought at a very low part of that market cycle and it had some leasing to do, some vacancy in it. We leased that property up very nicely; got a good return on it while we were doing it.

In terms of rental income, the market in Atlanta has gotten strong over the last few years, and we sold into that market. We had some large lease expirations coming up there and coming turn in the coming years, risk reward adjusted said to sell now and take our profit. We did just that.

The other property was a property we owned for almost seven years in the San Diego area. It was a large box, two story with only part of the property being mezzanine office, the other part being really R&D. It was leased to Northrop Grumman.

Grumman had a couple of renewal options. We got to the renewal option, renewed them. It was a five-year renewal; got an increase on rent on that renewal; market was strong there. We did a risk reward analysis as to that up and coming five-year turn. As you know, defense contractors' lives can be quite variable. We took the profit on that transaction, and I felt we were -- did very, very well.

Proceeds from those two sales have been used to repay that portion of a borrowing under our line of credit, which was taken in connection with a large property acquisition currently being syndicated through our investment banking group. FSP has now funded 100% of this acquisition mortgage loan with its own capital which is on our balance sheet as an asset held for syndication. It currently totals approximately $77.6 million.

We continue to upgrade our property portfolio through selective dispositions and acquisitions. And if there is a big untold story that has been occurring over the last three years at FSP, it has been the upgrading of our portfolio.

We have been selling a number of our early smaller transactions, moving them, generally speaking, into large multi-tenant properties; upgrading location and quality of property and upgrading the potential for those properties to outperform in the coming years. Looking at their performance to date, they are on track to do just that. Our new acquisitions -- our improving portfolio is very exciting to us over the coming years.

On June 13, 2007, we acquired a 25-story, 326,000 square foot office tower in downtown Baltimore, Maryland for $62.75 million. The acquisition was structured as a reverse 1031 exchange in anticipation of potential future property dispositions.

We still have properties that we think can harvest significant profits in the future. We took positions in some of the energy markets like Houston and Denver before the big run up in energy. Those markets now are getting very, very hot relative to office buildings in good locations, and we think we might have opportunities in some of those markets in the future.

Investment banking activity for the second quarter of 2007 totaled approximately $60 million. In January of 2007, an affiliate of FSP purchased a property for investment syndication. Permanent equity capitalization of that property was structured as a private placement preferred stock offering totaling $221 million.

Through the first half of 2007, FSP has subscribed approximately $109 million of permanent equity for that project, which is about $24 million ahead of 2006 first half investment banking business.

Our acquisition executives continue to work on other property investment opportunities, and are optimistic about the prospects for additional investment banking product for the balance of 2007, particularly in light of some of the turmoil that's going on right now via the debt markets and real estate acquisition and sales.

That concludes our prepared comments. And we'd be happy to open it up for questions at this point.

Thank you, sir.

(OPERATOR INSTRUCTIONS)

And, sir, I have your first question today coming to you from [Robert Saracen] from [Glen Oak Capital].

Good morning.

Good morning.

I've got a question. On the Baltimore property, can you give any idea of what your current cash-on-cash return is on that? And can you compare that to, for example, the current cash on cash return of your dividend and maybe give me an explanation as to how you're finding real estate investments today, cash-on-cash return available versus the current cash return on your dividend and the possible use of capital to buy back stock?

Sure. The Baltimore property was bought at an in-place approximately 7 CAP. So that would be 7% cash yield. Our stock, as of the close of yesterday's price, yielded about 8.3%.

So today you can buy back your stock for a higher return than you can buy property. Is that a fair assessment?

A higher current cash return.

Right.

Yes.

So do you have current plans? I know you made some announcement of initiating or reinitiating a buy back you already had in place. Is that the sort of limit that you're looking at in terms of stock that you want to acquire currently?

Well, as you know, we did reference in this press release our publicly reported repurchase plan. And we have currently about $21 million remaining on that plan. And we can purchase, under that plan, stock from time to time and have indicated our view of the attractiveness of our stock and its undervaluedness in the marketplace.

When and if we do repurchase stock under that plan it will be reported at the quarter end for the quarter that we purchase that stock. So you will -- you would see it then if and when we purchase that stock.

Okay. Can I ask you another question? On syndication fees, the property you have in syndication now -- I'm just trying to get a clarification -- that the total equity raise that you need for that property is approximately 200 and some million, I believe you said.

The total syndication is $221 million.

So you're looking to raise $221 million and today you raised, as of 6/30, your raised a little under half of that, $109 million?

That's correct.

So and how -- and that's taken you six months to raise half the equity? Is that approximately when this syndication started?

That's correct.

So it's fair to say that it takes -- you expect it'll take about a year to raise the equity necessary to sell off this property?

The equity raising -- our experience over a lot of years is that it doesn't necessarily go linearly. It's a funny animal and how much is raised in any quarter or month or time frame can vary quite a bit. So I'm not sure I would say that.

Okay. And you're using -- in order to syndicate these, you're using sort of an in-house network of brokers? I know there are commissions on your expense, your income statement. Can you give me a little better clarification as to how you raise this money or who the commissions are paid to? Do you have a private network of sort of financial planners you're paying out these commissions to?

Well, all -- no, all of our investment banking business, all of our capital raising efforts are all in-house. They've always been in-house. We have never used an outside broker/dealer to raise a dollar of our capital. We are truly vertically integrated in terms of our ability to raise our own capital.

John, relative to commissions?

Yes, I think if you want to look at the syndication business, the key components of that are on the Supplementary Schedule A of the press release. Syndication fees are the syndication fees that we earn on these private placements, which is about an 8% fee based on the value of the share we sell in the private placement. We pay about half of that in commissions, which shows up on a commission line in our P&L.

And the other component of investment banking is transaction fees, and that's primarily banking fees that we earn for lending the money to the entity that is being syndicated so it can purchase the property.

Okay. And so after you've done with the property, and until it's -- so the property that you're in syndication with on now, until the syndication is complete, that property remains on your balance sheet as an asset and then you transfer that property when the syndication is complete. Is that correct?

That's correct. It shows up on our balance sheet under asset held for syndication which is about $77.6 million as of the end of June. And what we -- that's a mortgage loan receivable on our books. And it's usually offset by a mortgage loan or a LIBOR loan payable on our bank line, unless we put some of our own cash into it -- meaning we pay back our line faster than we receive syndication proceeds so we can benefit from some interest income on that.

And that's what you said you've done this quarter? So there is no more loan. You used the proceeds from the sale of your other properties to pay off that loan. Is that correct?

Yes, that's correct. On the 5th of July, we paid back about $60 million on that loan. And now we really hold that entire asset, held for syndication as our own mortgage loan receivable.

Okay. I'm sorry. So that was paid back on the 5th of July. So on the June 30 balance sheet, it still would --

Yes, if you look at the debt, we're at $120 million in debt at the end of June because we hadn't made the payment yet. It had to with the LIBOR contract maturity.

Okay. So asset held for -- I'm looking at it now -- asset held for syndication net of $77 million but that's -- explain to me, again, I'm sorry. What is that net of? That's a net balance netting which two numbers?

It's a rather complicated accounting answer to your question. But there's a -- EITF 98-13 requires us to reduce the carrying value of a mortgage by a smaller component of the interest that we hold in the unsold shares in the entity.

I see.

Not a very significant number, but that's what that common net means. Really what the asset held for syndication is, is the mortgage receivable from the entity that bought the property and borrowed the money from us.

Okay. Okay. And then, lastly, can you comment on the two properties you have sort of in redevelopment -- one's currently in lease-up and one that you're still redeveloping? What's the total costs, if you will, put into those properties? And what you think your net cash-on-cash return, I guess would be when you take into account your original basis plus your cost, redevelopment costs after you get those things to stabilization?

I don't really have an answer for you on that. It depends, I think, on the lease terms in those particular markets and then both of those properties, they were triple net leases to the tenants that were in there before. Single tenant buildings and we're converting them to multi-tenant buildings so that the dynamic of the building is changing and the market that the building will be in will change. But I don't have a cash-on-cash return--

How big are those two buildings, square footage-wise?

The building in Seattle/Tacoma is about 117,000 square feet and the building in North San Jose is about 146,000 square feet.

The big number, which you don't know at this point, is just exactly what you're going to wind up paying in tenant improvements and leasing commissions to re-tenant the buildings. Both buildings still have the majority of the space to re-tenant. And depending on the credit of the tenant, the length of the lease, the build-out, you won't know those numbers until they're done.

The markets say, though, that for an average TI or an average leasing commission on an average lease term, those returns that we will get from those properties all in, cash in, NOI returns, CAP rate returns, will be in the 7 to 9% range.

Okay.

Current NOI.

Right.

Now, again, I think when you understand our objective is both current and GOS, the big value to those properties, in our opinion -- because we bought them very, very right, very right -- is once they're re-tenanted, their value in the marketplace, in a strong marketplace, in terms of gain on sale, could be quite significant.

Okay, right. And also then it's fair to say, obviously, that in your current financial reporting, those properties don't really add anything to current operating income or current cash flow. But you would hope that, over the next year or so they would add significant amounts to those numbers?

Actually, they take from--

Right, negative operating income.

They're extra cost. Yes, absolutely.

Okay. Okay. Thank you very much.

Thank you.

Yes.

Thank you. We're going to go to Mr. [Bill Ford] from Reinhart Partners.

Hey, Bill.

Hey, guys.

Good, Bill. How you doing?

I'm all right.

I was hoping you guys could comment a little bit as you talk about the syndication and its proceeding -- that it started in the first quarter and goes in the second quarter. Do you guys have a feeling for is that likely to wrap up in the third quarter? Has there been a timing issue of just things have closed and just didn't hit the second quarter? Just sort of what is you guys' time frame for that -- if you're also going to be looking to acquire additional assets for syndication?

That's a good question, Bill. I'm going to pass on that one only because this is a Reg D offering. And under Reg D private placement, it is just not appropriate to talk so long as the offering is open. As soon as that offering is officially closed, we'll talk about it. I think it is important to talk about, but while it's an active offering, we just have to pass.

Okay. And then the other thing was switching over to the rental income leg of the stool is -- just looking through, can you talk to the sequential decline in rental revenue? I understand there's some properties out of the same store amount that you're there. But even sort of holding that constant, can you guys talk to the rental income sequentially, what's been going on? Have there been any further rent roll downs from things that were signed at the peak and can you just talk a little more on that?

Yes. I'll start and let John talk. Let me just give you a couple of concepts. These are real important concepts.

Okay.

And it really has to do with the FSP no-debt model --

Sure.

-- versus leveraged rent, leveraged REITs and market cycles. It is important to understand that we are in it for total profit. And we are trying to maximize profits. There are times in market cycles where maximizing profits is holding properties and having the rental streams increase and keeping those rental streams as they increase.

And if you're a leveraged REIT, when rents increase you tend to increase your leverage. It's almost like a margin account.

Sure.

If the value of your real estate goes up or the value of your stocks go up in a margin account, you can buy more if you keep maximum margin.

Sure.

And leveraged -- leveraged REITs tend to do that.

When we have properties hit objectives -- a great example are the two properties that we sold in the first half, second quarter -- Royal Ridge in Alpharetta, Georgia and Goldentop in San Diego -- those properties we sold what is going to be an increase in the NOI or rental income from those properties.

Okay.

In other words, we resigned Northrop Grumman at a higher rent (inaudible) a five year renewal. If we held that property, our rental income would be going up.

If -- when we did the last leases on Royal Ridge and the property was pretty much fully occupied, if we held those properties, our rental income would be going up. It is that rental income going up that, when we do our IRR calculations. Since we're not going to leverage it, since we're not going to use debt to buy another property or to expand our portfolio, when we do our IRR calculations, risk reward adjusted, we're going to be selling that increase of rent.

So in rising markets where we can, property by property, determine that we can reposition that capital wisely into properties that will outperform and use the 1031 mechanism so that we don't have to pay the special dividends or come under the REIT rules to pay out those excess profits, excess income, we do so.

In a falling market -- let's say we have a market that's being dislocated now by debt structures and financing structures -- if you read the Wall Street Journal this morning, you'll see that some deals are starting to unwind right now and get re-priced at the eleventh hour.

In a falling market, if you're leveraged, what you tend to do is you tend to sell assets. We tend to buy them and hold them then. We tend to buy and hold and have rents increase by holding properties when you have falling markets because we're buying properties at better prices. In rising markets, we tend to take our profits. So we're selling AFFO, or we're selling rent for capital gain, which we believe will be a better rate of return than holding that rent unleveraged.

And there also is timing issues between sales of properties and when those properties get fully reinvested. And many times when we reinvest, we don't always reinvest at an equal CAP rate. Because many times we're trying to buy properties where we're trying to add the value to those properties to get to the capital gain. So you might sell a property at a 6.5 CAP or 7 CAP and buy a property at less of a CAP because if we can affect the increase in that rent on that property, then we can get the gain.

So you -- what you really have seen, if you could go all the way back to FSP's start which, if you consider our predecessors 15 years ago, you will see with the cycle, this holding of properties and keeping all the rental increases and seeing rents go up. And then you'll see, in certain markets, selling those rents in effect and reinvesting into another group of properties; not paying out the profits other than our regular dividend, but reinvesting in another set of properties that we, hopefully, can do the same thing with. And that's why you've seen share of our equity go up over the last few years.

Yes. And I understand that with the gain on sale. I guess I'm looking at the sequential decline. And if I'm hearing you correctly, then sequentially, from first quarter, what's happening is that you've sold out a couple of rental streams. Those have come out of your rental income that I'm looking at in the income statement.

And are you telling me it's a matter of timing before you get the capital redeployed to--

Oh, absolutely, absolutely.

-- portion a little bit, a portion of it?

Oh, no, that's exactly what's happening. But we could even redeploy the capital in properties that don't yield, initially --

Sure.

-- what the properties we sold yielded.

Okay. So I guess then what you're telling me it's not is that you're not necessarily still seeing a big roll down in rents as you renew leases that were signed at the peak and that a lot of that sounds like it's coming behind you and that for properties that you do hold, the rental income environment is, if anything, getting better, at least not facing the same roll downs that you were -- you've been facing for the past few years.

No, that's, that's exactly right, Bill. We really sort of crossed the threshold this year with early portfolio properties that we had purchased. Every market's different and every property is different. But as a broad statement, the broader portfolio has really finished the bulk of its big rent roll downs. And we are really now sort of on a level playing field in terms of sales and reinvestment.

Okay. That's it for me. Thanks, guys.

Thanks, Bill.

Thank you. We're going to take a question from Richard Herrmann from Glenview Trust.

We are owners of, as you know, a number of the individually-syndicated properties that are still out there as individual syndications. Normally those have been taken into the FSP REIT at some point. But due to the poor performance of the stock, that doesn't look like an event that's going to happen any time soon.

What is in store for these individual syndications that are out there? And why would somebody do another one when they already have so many and they're not being taken into the REIT?

Well, all of our individual syndications have, as a primary option, the fulfillment of the goal of that specific property and then the sale of that property in the cash auction marketplace.

Has that ever happened?

And all of those properties have that capability. The current group of properties that have not either been sold and/or merged are rapidly coming to a point where those properties will start to season.

Our average holding period for properties is about five to seven years. Most of the independent syndications that are still outside of FSP haven't even approached the four-year period yet. So we're getting close to the maturity of those properties in terms of their ability to be sold and recognize their full value, depending on the market that exists at that time.

Up until very recently -- and it's been the stock price and the volatility of the stock -- we have merged -- used our stock, in effect, as currency to purchase those properties -- and that's how we built the company.

So when you look back at history, history would have us merging those properties. If you follow those properties into FSP, though, at the five to seven year time frame, a lot of those properties have been sold. The mergers occurred ahead of that five- to seven-year timeframe. If we can't effect a merger because of the stock price, stock value, we certainly will look to sell any individual property in the open marketplace when it's most beneficial.

As you know, on all of our syndications, we are under no obligation to merge. It is just exactly what we've done to date because the price effectiveness of mergers, timing, stock has been wonderful. But lately, the volatility has just really sort of taken that off the table.

And your opinion at the present time is you can buy a property for a greater total return than you can buy your own stock back?

It depends on the property.

Well, what would you think the internal rate of return would be if you bought stock back now over the next three, four, five years? Wouldn't it, at least, be 40 or 50%?

I don't know.

Thank you.

You're welcome.

Thank you. And, sir, I have no further questions for you.

Okay. Well, thank you all for turning into our earnings call. I look forward, very much, to speaking with you next quarter.

Thank you, sir. Thank you, again, ladies and gentlemen. This brings your conference call to a close. Please feel free to disconnect your lines at any time.