Franklin Street Properties Corp (FSP) 2015 Q3 法說會逐字稿

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 Minneopolis; 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 provision under Private Securities Litigation Reform Act of 1995. Actually 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 statement 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 on 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 afterward our CEO, George Carter will discuss our performance in more detail and provide an update on operations and overall strategy as we look ahead to the remainder of 2015. Janet Notopoulos, the President of our (inaudible) team will then discuss some of our recent leasing activities and then Jeff Carter, our CIO will discuss our investment and disposition activity. 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] payments 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 and 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 [credit borrowing] was about 74% of our outstanding debt, effectively fixed or not effectively changing interest rates. As we continue to execute our asset recycling program, we believe our balance sheet position enhances our ability to opportunistically sell non-core assets and reinvest proceeds to execute our overall growth strategy.

Before wrapping up, I wanted to note that we are tightening our FFO guidance for 2015 and George will be talking more about that.

With that, I'll turn the call over to George. George?

Thank you, John and 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 for the third quarter was $0.27 per share and our property portfolio as of the end of the quarter was about 90% leased. Definitely was a quiet summer relative to leasing, dispositions and acquisitions. However, as fall has started, we've gotten much more active on [our performance].

As John said, we have narrowed our guidance range for the full year 2015 from $1.05 to $1.07 per share. And that's from originally at the start of 2015, $1.03 to $1.08. So we've brought down the top side of that original guidance by $0.01 at the bottom -- sorry, up a [couple of pennies] at this point. We do anticipate next quarter giving 2016 full year guidance.

And just taking a sidebar for a minute and just talk about guidance, as John said I would, I would like to talk about in the context of our current property portfolio repositioning and recycling plans and in 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 exists in that moment and we exclude the impact of any dispositions, acquisitions, development projects or other capital market transactions. In 2015, we haven't really done any significant outside capital market transactions (technical difficulty). 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 [news flow] and its current [rate]. Obviously the assumptions of leasing velocity and rental rates may prove out in reality in be higher or lower than the original estimates. In next quarter, when we give 2016 guidance (technical difficulty). But also affecting guidance adjustments during the (technical difficulty) just adjusted and potentially significantly so is our current property portfolio [repositioning effort]. As most of you know, we are working on disposing of a number of our suburban assets and acquiring more urban infill office assets.

And generally speaking, disposing of our suburban assets, we're disposing of assets that have higher occupancy and we are disposing of them generally at higher cap rates. In our acquisitions, we align much of our urban infill (inaudible) properties with a large value add component, which generally reflects itself as higher vacancy and [general environment] and initially lower cap rates [than suburban selling]. So we're disposing of high occupancy at higher cap rates, buying urban infill, lower occupancy at lower cap rates and that obviously affects guidance just during the course of the year.

Also important is the understanding of the timing of dispositions and acquisitions. Generally we don't lose any bridge financing or outside capital markets, we generally have to dispose of several suburban properties to acquire one urban property (technical difficulty). We have not been very interested in bridge financing acquisitions ahead of anticipated dispositions. It seems to call out our risk parameters of the Company. And those risk parameters really have to do with a sudden capital market dislocation, a geopolitical event or something (technical difficulty). If the capital markets were to shut down and the property disposition markets were to shut down, (technical difficulty). So generally speaking, there is a timing issue that affects our guidance relative to [dispositions and acquisitions].

Also as a reminder, we are repositioning this property portfolio for what we believe will be better long term FFO growth (technical difficulty) versus the suburban office (technical difficulty) office that we are currently trying to dispose of. And this view of urban property, better long-term growth falls really in line with our view of a very long, but slower growth economic cycles than traditional cycles. This cycle being punctuated by changing US population demographics and numerous employment and [living] locations, many of them (technical difficulty) and urban infill locations, changing their environments to better respond to employees and employers' desires to live and work together.

So, when we look at our 2015 guidance this year, it was initially sort of a run rate on a then existing property portfolio (technical difficulty). We've sold so far this year Willow Bend in Plano, Texas; Eden Block in Eden Prairie, Minnesota; Park Senec in Charlotte, North Carolina are also urban office properties, proceeds of about $57 million from those sales. As John said, again, during the second quarter, we bought Two Ravinia in Atlanta, which again reflects an urban infill type of location, hedge market type of location for about $78 million. And the adjustments to narrowing of guidance really reflects that activity in the portfolio along with [others].

And lastly, I think, maybe the key point to take away from all of this is the leasing picture. The key to FSP's future profit growth as we reposition the portfolio is leasing. And I put our leasing sort of in two buckets. The first bucket is the older legacy suburban property bucket and whatever current vacancy there is in those properties and upcoming [leasehold]. An example of this would be our Timberlake property (technical difficulty) talk about so much during the course of the year, did move up from RGA at the beginning of the year and us working on re-leasing that property (technical difficulty) work on that property.

And the second bucket is this new urban value add space that we have been acquiring. Like, this year Ravinia Two in Atlanta, 999 Peachtree in (technical difficulty) for that matter, and in Denver, 1999 Broadway and (technical difficulty) 17th Street would be examples of those. And the reason in my mind there are two buckets is that the second bucket, the new urban value add space is really what could move the needle, Not all square footage is created equal. The urban rents, generally speaking, versus our older suburban properties are much, much higher, sometimes two to three times as high as our older suburban property. So leasing 10,000 square feet on average in an urban property versus 10,000 square feet in a suburban property really hits the FFO growth line very, very differently. What we have been doing over the last couple of years is really generating a lot of embedded growth potential in the type of vacancy square footage that we have in the portfolio now with this new urban infill acquisition process (technical difficulty) and so we believe, again, we have a lot more potential on the upside in the coming years (technical difficulty). We do have a lot of leasing activity which has started since fall again and we look very much forward to the balance of quarter four and into 2016.

And with that, I will turn the call over to Janet to give you a little bit more details of our leasing picture activity. Janet?

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 rents. For those of you following the leaseback of the RGA space in St. Louis at the Timberlake property, 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 quarters. 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, the summer was quiet as George said, but we are seeing a pickup in activity 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, barring 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 concentrations are in 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 the portfolio space expires. Of that 10.4%, the TCF National Bank lease at the 121 South 8th Street project in Minneapolis accounts for over a quarter of the 10.4% of the square feet expiring in 2016. TCF leases approximately 260,000 square feet in the combined project that we now call 121 South 8th Street. Approximately 98,000 square feet of that [263] is located in the tower at 121 South 8th Street, which contains approximately 308,000 square feet in the tower alone. And another approximately 169,500 square feet are leased in the low-rise building connected to the tower, which we refer to is 801 Marquette. 801 Marquette is the building we are discussing redeveloping, which will take it out of the same-store results until it's completed. Without 801 Marquette and its 169,500 square feet, 2016 lease expirations should drop to 8.7%.

The expiring rent on the 169,500 square foot low-rise building is only $4.75 net. The expiring rent on the approximately 98,000 square feet in the tower is $11.25 per square foot net. Recently, rents for recent leases at the tower has been between $12 and $13 and those leases do not include the top floors of the tower that are still occupied by TCF and should command higher rents while still being below rents for Class A buildings or new construction. We are talking now to prospects for the space that TCF will be vacating and we expect that leasing activity will accelerate once TCF vacates and the final improvements to the common areas are complete. The state-of-the-art fitness center is currently under construction following upgrade to the skyway entrance, mechanical systems, lobby and a new conference center.

As we look out into 2016 for the rest of the portfolio, the good news is that close to a third of the total square feet expiring in 2016 is located in Dallas, which has been seeing strong job and rent growth. In 2017, the largest concentration of lease expirations, approximately 27% of the 11.6% forecast for the year are located in Atlanta, which has been another solid market for us. Our regional directors and I can talk more about specific markets and take your questions after the prepared remarks are completed.

And with that I'll turn the call over to Jeff Carter.

Thanks, Janet. Good morning everyone. I will review our investment activities for the third quarter and year-to-date, including dispositions and acquisitions. I will conclude with an update on our development projects in Downtown Minneapolis at 801 Marquette Avenue.

On the disposition front, FSP continues our active focus on asset recycling efforts as George discussed, of mostly non-core legacy commodity suburban assets, when a [net 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 million to $225 million range. In 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/or loan repayments are still subject to their respective due diligence periods and/or other transaction specific negotiations and so, execution risks remain. It is likely that some of these closings of potential dispositions and loan repayments may spill into the start of the new year, and we will keep the market informed as transaction clarity emerges.

Moving on to acquisitions, as discussed on our last conference call, FSP desires to be an acquirer. It has, however, been challenging from both a lining up and timing standpoint and from the standpoint of finding appropriate high quality assets in our target locations in sub markets at pricing that make sense (inaudible) value, but there are some strong opportunities out there both on and off-market, so 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 try and match the timing on the sell and the buy as best as possible to mitigate FFO impact. Our purchase of Two Ravinia earlier in the year serves as a good example of our discipline in trying to line up dispositions with purchases. We've been targeting between $150 million and $300 million in total acquisitions and we will maintain this guidance, but new potential acquisitions may likely move to the first part of 2016, to better align with our potential disposition pipeline.

Importantly, as George mentioned, further acquisitions and dispositions are not in our current FFO guidance. We're actively working on several specific opportunities at this time that we believe would contribute to our future growth and profitability. And we continue to have a very healthy and best prospective investment pipeline of currently about $730 million, and we continue to see a number of potential off-market and on-market opportunities (inaudible) into this pipeline. Again we will keep the market aware of any specifics.

On the development side, at 801 Marquette, we are pleased to have progressed on a redevelopment plan for our CBD property at 801 Marquette. FSP currently contemplates co-developing an approximately 50 storey mixed use tower that would include a full-service hotel, residential apartments and office space. Under this plan, we would contribute the land and approximately $80 million to $90 million in additional capital for 100% ownership of the office portion, which is tentatively slated to be about 260,000 square feet in the middle of the tower.

We are currently specifically working with a residential group and hotel company to further evaluate the viability of this project, both of whom have committed like us to the 100% ownership of their respective portion of this proposed new mixed-use tower. Final costing and development agreements have yet to be concluded and so are subject to change. If successful in the costing and pre-development work ahead, we intend to break ground on the project sometime during the second half of 2016. Significant [thought and design] are being incorporated into the redevelopment of 801 Marquette in order to integrate it with and enhance the appeal of its next door neighbor office building, our tower at 121 South 8th Street.

Now at this time, I would like to turn the call back over to George Carter to close. George?

Yes, let's open up the call for questions.

(Operator Instructions) Dave Rodgers, Baird.

Jeff and George, maybe a question to start with you in terms of acquisitions and dispositions. George, in your comments I understand 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; you're just being too conservative. I'm just trying to get a better sense on the disposition side why those aren't moving faster?

Hi Dave, 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 prospective property and so that doesn't always line up as neatly and tidy as you always hope. But that's really the rationale.

Do you feel pretty good that kind of going into the second or the last part of this year and in early next year that you are going to be able to monetize the assets? Given that the change in guidance that you have, do you think most of that repositioning here in the near term is done?

We've got about $165 million that is being actively worked on for dispositions right now. And again, they are all subject to the respective due diligence periods, but assuming that 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. One other aspect of this that I've really noticed is that, and you really see the difference versus the urban properties, lot of the suburban properties are fairly small and so the buyers, the potential buyers are also fairly small, even [our] institutions. And capital requirements and due diligence requirements, retrading, backing out of deals, not getting the financing or loans that they thought they would be able to get,1031 Exchanges [like type] exchanges and so on, it's just sort of a different group of buyers than traditional institutional buyers on the suburban properties. They take longer, they fall out of bed, you have to key it up again and so on, so there is some of that in our objective.

Second question, maybe on TCF and the redevelopment there. You talked about some office tenants in 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 is one large tenant that you're looking at, a couple of smaller ones, I mean you are going to backfill kind of floor by floor, and 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, these space, the conditions are kind of tough. So, I think we are 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 of TCF].

So, would you be comfortable going on a speculative basis at this point? Or what would be a leasing threshold in your mind?

I'm sorry, for the new development?

Yes.

Let's defer that one back to Jeff who can explain the complexity of the mixed use.

Dave, we anticipate preleasing prior to breaking ground. That's our objective.

And I'm sorry, my answer was directed towards the existing tower, what's replacing the existing TCF.

And last question maybe, George, a question for you and the Board more broadly. Comfort level on coverage with the dividend, you've got some of the loans burning off the TCS space it's 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?

I have to give you the standard answer, but it is the honest answer. And the honest answer is the Board looks at the dividend every single quarter and could raise or lower that dividend any quarter it decides to. The comfort level over the past years with our dividend, which has stayed flat for a number of years now, that's been very, very good, I mean, 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.

Jamie Feldman, Bank of America Merrill Lynch.

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?

Jamie, this is John. We tend to want to 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'd like to be in the range of, say, 35% to say 45%.

Of market cap?

Yes.

Which tends to fluctuate, you guys use any other metrics?

Well, you could look at the value of the assets, which is about $2 billion on the balance sheet. The stock price is really out of whack.

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, or the percent lease went down, but just a 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, it was about 35,000 square feet that [terms] that left at the expiration of its lease.

Hey Jamie, 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 a 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, 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 up and that's something that everybody is contending within all the sub-markets.

The sublease space really caters to large tenants, to tenants that are full floor or larger and most of the tenant roll 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 built multi-tenant quarters. So I think the outlook for FSP and our smaller tenant roll is pretty good.

And then did you guys record a termination fee in the quarter? There was something -- in your same store there was something to get from the normalized to the regular, is it [400,000] -- what was that?

In Dallas, Legacy Tennyson. It has two buildings and the tenant has the option to terminate one of the buildings early, and so we're amortizing that termination to be -- over the remaining period. And you'll see and I believe it's in our major tenants, I think we can say we've noticed the two expirations dates rather than the single expiration date.

So, when are they actually going to vacate?

In the summer of 2016.

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 offsets that?

We took back a lot of vacant stuff. First of all, we took back a lot of vacancy at the end of last year and the beginning of this year that we are sort of working through and given the -- some standard time it takes from the time a tenant vacates the lease, we think that starts to lease back up. And we will see some of the same thing. I think if we are successful on TCF as we hope to be in the tower that will lease back. I think we did a really good job of leasing back the Timberlake in the suburban market in a fairly short amount of time. A lot's going to depend on the market, but we think we're working through a lot of the vacancy that we got back and will keep on going through the (inaudible). As I said before, we think there are new expirations they are in markets that haven't been hit hard like Houston.

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 year-end 2015?

It's a long way out. I would hope that we would be higher. I don't think that -- we think that at a minimum we should remain -- be able to hold where we are. So, we haven't given specific guidance on it.

Jamie, this is George. I think a lot of it depends on [what we bought]. I think if you take a look at the portfolio as it exists today, I think we will be where we are or higher. But if we acquire vacancies, which is what we are doing.

Yes, I was thinking more of a same-store.

Yes I know. (technical difficulty) portfolio at year end. So portfolio at year-end 2016 will include some new acquisitions. If you said, keep the portfolio static for 2016, I mean, we'll be at or higher occupancy.

So I get asking you the same question on same store NOI, do you think it will be flatter or down?

I don't know. I just don't know. I think our occupancies will be up, our rent levels are tending to move up, so everything being equal, we should show better same store growth. Absolutely.

[Aaron], Stifel.

John Guinee here. I've got two questions, one just a follow-up on the first one. Is 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 Denbury Onshore. It sounds to me as if you've sort of started out with [363] to the negative, is that correct?

Well the Denbury comes in the middle of the year.

Right, bit of a million square feet, you already know that your maximum tenant retention is about 64%, so it would be awfully hard to even get above 50%, which means it will be awfully hard to maintain a 90% portfolio occupancy in the core portfolio. Is that [okay]?

I'll defer to John Donahue who is here to [delve] Dallas, but the facility that we're getting back was fully sublet. So we're dealing with tenants who like being in the building. We're talking to them and we're talking to new tenants, and that is Dallas. So, that one I think, we would not expect to see that vacant for a very long time. And as I said before, we do the development on 801 Marquette, 169,000 square feet of that TCF vacancy is no longer in same-store, it's part of the development. And then I think we've got a somewhat normal 10% -- under 10% expiration rate that you would expect with 10-year leases is what we would have in any given year and we should be able to file through that.

And then George, a couple of new Board members. Can you talk through the thought process on what appear to be some local folks versus seasoned real estate vets?

We're just real excited about Kate and Ken joining the Board, they are Independent Board Members. Kate has a variety of things to bring to the party, as does Ken, particularly on a historical basis with our Company. So, we are real excited about it. Again, John, we're still a fairly small company and local people that have made really good reputation here in the Greater Boston area, they've gotten to know us a little bit and we've got to know a little bit over time. It really make a lot of sense for us now. People traveling from all over the country for Board meetings and so on that we don't know and don't know us, because again, we are relatively small (technical difficulty). So, doesn't make a lot of sense to us at this point. These are really; really fine people and we now will have eight Directors, six of whom will be independent. So we keep moving as we go along to more and more of an Independent Board.

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

We think these people are really fine, fine Board Members and really do a great job for the shareholders and really do (technical difficulty) as well or better than anybody that we can ever [could find].

Well as anybody?

As well as anybody we could ever find.

That's commitment, thank you.

(Operator Instructions) Tom Lesnick, Capital One.

Just a quick question on the dispositions. As we were thinking about rising -- entering a rising rate environment here, knowing that a lot of these assets are on the smaller side and that the potential buyers might require greater leverage than say an institutional buyer, what if it all has that mindset impacted those potential buyers' mindsets and/or pricing generally for those assets?

Tom, this is Jeff Carter. 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 non-core mostly suburban commodity profile assets, so the buyer pool is a different buyer pool than the more institutional type on deals that we're competing to buy on. So far the pricing that we've seen on deals has been, by all accounts, fairly to historic tenants, and if you look back historically at pricing, until they are achieved and in the books, 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.

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

I have not seen changes in pricing at this point.

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.

I'd just thank you very much everybody for taking the time and effort to listen to the call and we look forward to talk to you next quarter. Thank you.

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