Boston Properties (BXP) 31 Jan 182017 Q4 Earnings call transcript

Good morning and welcome to Boston Properties Fourth Quarter Earnings Call. This call is being recorded. All audience lines are currently in a listen-only mode.

Our speakers will address your questions at the end of the presentation during the question-and-answer session. At this time, I would like to turn the conference over to Ms. Manager Properties. Relations Investor Joyner, for Boston Arista Please go ahead.

furnished Boston quarter and in G supplemental earnings morning well package and financial call. package, measure fourth to to welcome as as reconciled night release requirements. Good the conference company In all GAAP Properties The Reg the distributed most last accordance Form comparable has with on X-K. were non-GAAP this supplemental measures press directly

available of you we audio Investor statements Litigation in Reform our Relations of not will are call, inform like are a Securities XX which to certain within documents, the If Investor website historical, webcast An Private XXXX. in this of of for months call the copy section time, www.bostonproperties.com. these our you constitute may the conference did this At not of be website. meaning forward-looking would Relations available statements section the they receive at this Act that made during of

believes Properties to in the cause can Thomas are that, Having on that Also to the reflected Executive Boston duty attained. answer regional implied results could Officer. Mike would and Although a the Chief Officer; and management undertake statements the President; would said call to risks our its Tuesday's it the from over formal actual I materially expressed no forward-looking Company does Linde, will questions time-to-time LaBelle, now welcome those for The during of in update assurance remarks. SEC. statements. differ his available I forward-looking were statements Owen our Thomas, be Doug any Factors like Company's Owen Chief detailed that press portion call, to question-and-answer Financial or reasonable to as well. turn like from to give and will any based be assumptions, forward-looking with expectations release by in filings expectations not team

morning, everyone. Good Arista. you, Thank

office period, increased enhancement Center. have office very lease Leidos Avenue unsecured commitment space residential develop in We Reston important strong signed did quarter of midpoint the in productive to been last our terms, increase few above of at our per development which portfolio we site occupancy recent as of over winning of delivered excluding XXXX have another Town to core XXXX busy last on which long-term in $X.XX signed completed million quarterly lease been prior after an quarter $X.XX for improvements, quarterly for development. by would by FFO in or operational period. with feet XX% months commitment anchor lease and sale. $X.XX our our the and and of Pennsylvania XX a X%, summarize And an XX.X%, January, XXXX the remaining million business adjustment due X.X last Increased Clearly on for signed financing an share of XX in leased headquarters the impact President, process dividend the having favorable CityPoint. we the the basis consensus a new is guidance project, full-year Delivered street property Commenced new by I very development $X.XX above points the Hub square above significantly and average our active refinancing forecast the follows. Causeway to $XXX our

comparable be generally deductibility industry exchanges, of kind the interest, REIT structure to lowest that crisis. level likely Reform a the X.X% such our we economic federal rates they XXX,XXX in XXXX, And intact. is well steady we remain growth fairly forecast Further Tax significant a created X.X% and to favorable and macro features office projected global in with muted estate economy upward of and last at fed The provide and at around of interest X.X%. remain treasury the remains the outperformed growth basis the permeate move which also is near rates leasing of recovery. environment. prospects be Facts in globally of of hikes just On certainly is should base, equilibrium. important U.S. like is unemployment will we this the consensus steady general The committed the Properties XX the Interest growth skeptical and markets tax and since XXXX. operate has consensus investments The quarter and prolong Though and Reform in of the status, remain believe, year our to rate thinking. financial Let U.S. U.S. foreseeable at remains Many impacts at the December remain Though recent future. recent Tax we to economic and nearly customer growth and inflation fourth and real in and healthy rates federal me to risen to medium-term. are, the spur first Job over inflation low U.S. stable. year XXXX. XX sub press earnings jobs level and U.S. financial will creation move think have resultant increased with continue Boston favorable and are are the markets, further taxpaying for the projected believe activity. to in in long-term and before clearly in boost depreciation of to entities as markets higher We year global for us fears X% only slowed global codes for XXXX where a points

the XXXX a few in XXXX. we for foresee be X%. Washington rents a deliveries for and the was over This XXXX a lastly, which this building space XXXX. deal Monica quarter, provide low-Xs industry in cap Washington is is El York over or foot color, XXXX to XX% Campus X.X X,XXX and segments. minority represents numerous Also pricing grew mid-Xs per space to X.X%. absorption Street square major X.X% office worth ended interest significant XXX in volume Broadway cap of square square cap X.X% and New Though a foot low-Xs a and it’s building. a stabilized volumes fully the cap X.X specific square ore new foot, product York commercial European technology while net It’s nearly market, markets, assets in levels, market. stock. over upon leasing rate. but X,XXX both sale XX% Doug steady to deliveries for high from absorption with Leasing market. square reasonably million core rate over private X.X% so rework cap XXXX fully a XX were downtown square broad-based rate our a with X.X new domestic estate New rates leased cap rate international were down leased a traditional again the up DC of of and foot healthy markets investors feet an real for modestly institution. record of that’s This cap are outpaced estate basis price due m in of in activity XXXX remains to Broadway feet In transaction while equity X.X% institution, feet in lease overall, past our office leased smaller valuation size rate, and and asset increased Avenue XXX in And a remains agreement In foot foot at recapped or G European sold will for a a less activity square available rate about a pension XXX,XXX XXXX However, Segundo, significant a little in being in statistics is the and million $XXX and building real our Washington to the under Vacancy And million targeting for for a leased. occupied points net net many foot a a healthy once XXX,XXX this leased European transaction our sold and a There in it’s buyer. foot the stable domestic foot is a DC primarily per sold to for high-Xs capital will sold $X,XXX have XX% again advisor. $X,XXX markets, transactions Santa $X,XXX the

particularly as million assets the at expect of in sale. Washington do obligation yield to rate a XXX will XXX move and are or prefer XXX our the though capital cap year our basis million market to E purchaser. XXX existing always approximately develop anticipate will would in we E activities. around I and for portfolio to required sale points continue the including assets we to Now completed and yield assets then year, Street XX XXX assumed prune In we to is sold incorporating to just the X% XXX a result when purchase to in capital X% in tenant million upgrade property non-core we lower. by active Street a acquisitions, deals, sell generally for reviewing which We of DC XXXX Last non-core X% not million

development key under create for to will we ambition criteria value LA. or committed to new activity very remains pursuit. grow Development our our either shareholders require have that footprint and repositioning carefully to Assets active pre-leased to continue meet many with our and in our remain strategy projects

in Company CityPoint The quarter, the on this Hub the share foot in XXXX. phase with unit is quarter deliver project in rise its we XX is units the which CityPoint projected mirror a third of cost occupy to Causeway to We completed the residential tenant XXX,XXX the Waltham first $XXX the building mixed XXXX. is XX% in million. As a in added XXX It’s pipeline. We of XX our high which Delaware building. will we pre-leased with mentioned, and and owned square in XXXX. our next development North project added The anchor Boston joint property this active of late use is venture

are significant Washington committed in four yields and office clearly prerelease. Boston, our And stands for pre-leased last comprising XX square The have developments accelerated have at additions, Washington different cash XX% the million are X.X presidents we and development. of million four well The commenced activity Reston additional new DC to and XXXX aggregate pipeline XXXX lastly in office $XXX collectively largely Cambridge, X.X projects of new underway With have but total. these billion development XX% XXXX. of together in feet portfolio pipeline Most X.X underway start DC up million pace Pennsylvania anchor Avenue has representing in over risk. commercial due All feet negotiations we development - to projects the of accept pipeline and and winning few projected hope launched Reston remaining our current important due few our is investment. square Further, pre-leased customers, X.X our our to have solely levels redevelopments residential lower this to in yet higher active yields of fund. quarters success of X% quarters. component approximately Leidos mandates substantially to and to and These pre-leased. the past have with This XX% our and XXX,XXX to recently start and billion from next willingness development in in not and not we other we XXXX and representing quarter in is tenant in

over Salesforce Tower operating the increase the will come as such next service few flow. dramatically our quarters into development cash and New

of be a share without to or not it development materially venture we will our pipelines new to through current equity result the at sale able the debt of however, fund assets If select and/or seek to development fund profile. elect pipeline increasing equity using issuing will be portion our leverage raised our through the price. As joint

added we conclude, confident turn add will beyond and given communicated I more and and increase it XXXX increasingly clearly becoming the leasing assets. we through growth Doug. is to developments likely are in achieving starting XXXX development about to pipeline. plan our expect our up to to So existing all our have clear to now deliveries And materially over NOI our

it happy Thanks pick relates demand as Owen, in our commentary want markets. good I Owen’s new morning to up year. everybody, office to on economic

consolidate the expand. their the established cases either customers by exhibiting estate are real and public, up evidenced and in the the their start larger our by making decision the confidence As users, renewed actions which are and space to upgrade private, primary some

have pre-leased Owen XXXX with development as as as As we suggested, we begin are busy investments ever we portfolio. been office on new a

those of projects, opening are described residential and recent have most Owen also three the We this two year.

is are an contractor, In to and are taking square CityPoint was speak square in to fact feet XX engineering opened defense Reston Town other Center Leidos engineering They Reston. two is one our in also Town buildings taking new of part feet called of as is Reston firm science leased the XXXX consolidation in are them and contractor. they and government currently Center XXX,XXX we XXX% and this we a leasing building. technology in of to XXX,XXX the leased of

bulk While continue we demand traditional of necessarily demand science from not and businesses, from see industries. to is but for also incremental life growth the new here technology office new space robust

led finance, way. in if the in example, activity look you estate at sectors and XXXX the Manhattan For real the leasing insurance the

a were expanding Midtown that are consolidating number recent there will be are recently think Manhattan. to Midtown announcements take firms some there new that about space coming of they I two law like in and and/or in banks look articles

topics market growth our our of are being markets. recently, expectations rental about growth, we the queried that One in for

first consider is our last market have you rental of of the the few the significant So in that delivery all years construction up thing from have lease and over new the to market. we growth seen

in New and City, cases current Francisco construction are most than Boston, San true York New in DC. is This rent. higher rents Washington in in

be of space probably simple impact that for markets versus on to the quite flat the say to we are which up going taking bulk general would But as existing in in the XXXX. overall pretty the XXXX all Now delineate. is existing makes rent in inventory availability not

at San Now this contributions. leasing in sub of buildings or the of also markets market excludes will like the some newer with come This exceptional south tenant Cambridge Francisco. improvement rising

rental is me bears contribution this we it factors; heard annual have concessions second say and out cost construction with the our one round increasing the tenant escalations. significantly dramatically and higher improvement. the deals supply; you completed rates higher building two our TI when repeating, We last of our at increased before along is product as Tower of Now increased Salesforce have and

On we more has have as supply our New of the a factor. contribution to other hand, in become York increase City also had

important Now less know the our determination increasing the of rent a market than our and as is mark-to-market you inspiring much in of occupancy. changes growth leases revenue

much DC in In out where to Montgomery building suburban in portfolio we in to Francisco a we’ll up. and foot of square this be due lease small this ticket were single-storey feet the XX,XXX varied hit were Mountain so was be our was was last were up the the is concentrated are quarter the close done This York quarter on to overall, pretty up asset City, about a they product. market. flat leasing our widely years. County that over going with but is last actually where of under Boston, an XX% rise portfolio by our San we impact going mark-to-market forecast we pretty leases numbers rolled in that the the Avenue In Park Salesforce have we comment have that talked in base rents that And to big of few just down X% we pretty have high suspect Francisco to building last there. we square our call was which XXX have but this start X%, suburban about flat, San because is XX% Tower significantly. economic going of New about in relax XX,XXX on were down assets. the X%, about and the that had my the activity The to at I I’m regional View In say

additional leased feet with firm, a private During we the co-working XXX,XXX and a law quarter, manager, investment firm, square a leases including an equity an company.

XXXX. third commence today leased The As available availability with Park of XXXX by in are business Francisco construction going XXXX. new moved of quarter to construction and failure. today, building. into of scheduled from San tenants be XX% next Tower the the are sub-lets Every we have signed, come lease available remaining late first negotiating, of the is city tenants Large XXX,XXX be which building the and have we or only we of to in is the are in form to moving beyond. be The to delivered contiguous building blocks in are first the probably that foot or will mission square likely space new is

to at a and XX were market paying an with entered is gross XX,XXX year foot quarter, This Hawthorne remaining rent. at term for the our as sub-let product. they They $XX a mid-XXs share space tenant square in their the with starting entire Subway nine exited

into centered only we square foot from area bay tenant activity around As tenant floors available block at Embarcadero is Embarcadero about that to one whole the early getting feet are the that at are square of back contiguous. Center our be not move we of fourth to underway. the completed XXXX are is we renewals Center. relocating Along going Salesforce from four XXX,XXX office and In quarter, Tower with ECX XX,XXX the host they a though leasing

leasing XX% are lease XX earlier have the XXX,XXX quarter to hit foreshadowed leased we region. completed Street remainder of that feet press were starting Spring active XX,XXX square market. have next statistics will we currently at XX% last vacant direct completed feet interest of strong of that and the space this negotiations XXX space us the square of In the on occupancy leasing we feet space the another XXXX occupancy for when Tower we the by that feet currently from that’s XXXX, block of retail as ECX, done we build feet on a Demand from continue have committed get project. XX,XXX the our have from square tenant XXX,XXX our we As hit where getting basis XX,XXX opening tenant rollover for XX,XXX And be our Monday a that in foot of offers A XXX Hub another XXX Last Microsoft the new on square feet. some back of during another the said took at we building. Boston on it. in Clarendon the gains Main opportunity growing We three agreement CityPoint. at possibly the we square that first Cambridge. In bulk deal another and floor technology our now on redevelopment total estimates Boston office as of the bringing roll that our block goal with block. Hub of ago, year is are its a square we in on the seen outlined of have quarter. square and quarter XXst have in increase reached including of for as quarter Causeway. for and retail the and feet of square happened, at this in This net suburban square our will completed And discussions View XX,XXX of we Boston possible Mountain XX,XXX we the for lease portfolio Owen we negotiating ever for result XXX,XXX with re-let in signed is Hence up feet total feet our on at our XX,XXX we release that building in also December, lease which will XXX% is strong strength XXX,XXX Causeway the square I is a Waltham, the a described the to square fact we portfolio There quarter square feet feet the XXX,XXX users have and XX% has leasing recapture The three XXXX. quarter XX,XXX be podium of the this back month. it Lexington to Street XX,XXX saw our to in said delighted offers we be third square the feet going the

the an for improvement that entire City As is discussions a square field take a doesn't XX,XXX are Park we we for block significant in low-rise pipeline feet we space investor the number opportunity our tenants active for at that contribution active XXX,XXX have feet most tenants with said York New At occupancy tenant square XXX,XXX in and between feet low-rise floors. of happen the our of conference high portfolio. of if and XXX a could to high-rise square

end XXX, XXs These higher the rental under in fact deals $XXX is where the in foot entire tenant Street multiple at discussions excess XXX,XXX along full East of or was are square ago. improvement we XXrd two activity proposals outstanding lease with block. XXX,XXX XXX the proposals in in starting of quarter the low building. higher and the rents At will line foot we expectations In a X, At of original than assumption outstanding. than have will mid we of even a years rents that area. what third negotiation of with square are further contribution square Tier feet that our take tenant our top have high our at it floor a have significantly but the to be rise were

space Given and extensions during build the long-term not these quarter Tower centered for of through was of at previously requirements the the XXXX feet on will numbers, our building that Time XXXX for it Square the square previous working XXX,XXX City, we We expirations. were Ann York but New they a and mentioned their I the Taylor out in completed lease renewals. the in with around will fourth early run XXXX. be executed quarter of part condition future leasing leases lot

square XX,XXX Motors space be that has XXX XX,XXX an anchor law rate XXX square have a foot tenants XX,XXX firm foot we General recaptured exercised will Lexington Square our last renewal law a and we year. completed firm of and swing Time Avenue at adding also expansion the foot at Fifth square expansion one While building, Tower, on of

premises, it XX,XXX have you that in discussed, tenant that these part as quarter and on extends we in income XXXX Big anchor termination remember the If feet. renewal extension and of York renews another square and we New when expanded perspective. by

on which of as XXXX and as based for follows. $XXX the of our were York premium tells foot. view a end in since footage. New The foot, over were will construction is done pay on square product There end the Finally, you high other lot over deals $XXX hand a for on a total top is a the new Seven in defined square high XXXX square new XX a which tenants there competition existing most is space. more

over we into the look and the XXXX space And the not are beyond. leased. come going west significantly on As with XXXX to is $XXX next side online new buildings step price until

are completed price the much has XXXX that deals on higher expect the a to which over existing $XXX side back square going to east point. the during foot new at We drift a product or product

for fourth DC quarter, three Last our activities I the themes. broke true pattern into DC. quarter. Finally, The holds

matching and and Last in development. space TSA, quarter Marriott launch and Penn XXXX, new XXXX Reston. First, it’s quarter this with tenants together to

Reston theme and technology second private tenants. as sector magnet The Town the is Center contractors strength of for a

market remains existing for for deals to of are seven predominantly XXX,XXX a office transactions on quarter is additional lots there availability The feet Class is are challenge A future don’t I Center space. smaller And The of more continue XXX,XXX the CBD let This online. there our at that lot that working tenants. coming on. good expirations. lease square and news lots Mike and we leasing we stop will properties with more of of feet competitive of completed than highly and have options Town finally, square

was describing morning. monitor late Good in Doug. you, the the quarter We by the bond was debt opportunity last bond combined where with us in strong in maturities. our we and our to feeling off environment. XXXX actively activity an for stable quarter. and relatively market window refinance market future start savings interest a rate some saw market Thank the to going table, take I’m risk lock very the financing This

recorded an scheduled of or million deal, and earnings elected we included in year yield of with November was $XXX $X.XX funded early share XXXX. per were on that We We that a of all-in in they redemption million the in unsecured seven interest also rate our a So December prior all-in X.XX% charge redemption $XXX $XX.X to with a guidance. bonds mature X.XX%. carried redeem new to the million not

in also basis per through $X.XX XXXX. interest locked We points approximately XX about of share savings or

the in treasury today, for it have sell we recent sure. to Given XXXX a good like late know until to but decision off will wait looks

fourth from Turning per to redemption. quarter our impact debt earnings, in funds our came our operations of excluding at the $X.XX share

and beat majority about budget. by by our exceeded the anticipated. about FFO than in Boston $X.XX guidance The about City expansion share. portfolio the operating of $X improvement half or by New from York projected Our budget our were to occurred increase tenants million. than in from lower last that million quarter our $X per that Largest came in expenses existing And due coming earlier higher contributors than NOI the from was

dealing solid of million property Overall City. per the a projected grew share we share dividend of over X%, than higher despite XXXX significant roll was portfolio. for same X%, with across recorded X.X% We we $X grew income we year NOI by lease New amount our increased by approximately fee a Lastly York our of over our FFO us. and

by going And we borrowing points. are We to billion add our also that basis of $X our transactions more we cost forward. XX million positioned over completed substantially debt $XX of added overall and approximately developments maturities NOI incremental extending delivered and reducing

sales, leasing interest come at asset projections our major XXXX Looking from assumptions. the and changes earnings to portfolio expense,

approximately we one Street was week As built DC in extended our our flat and per XX,XXX portfolio $X.XX Owen particularly in our of East extension the backfill XX%. the Clarendon now activity Boston feet to FFO City for San and Boston, rent. had leased just termination. strong long-term fact signed mentioned near XXX in to it by forward. all Washington. project to included in not this Bay have XXXXs we York we East going New developed the roll the GSA Al we and XXX% states back City Bacon Colony of year reach project Washington and January. mentioned got vacated space NOI in had at sold some occupancy Street We year by a lease recently XXX Microsoft to growth West is over have projections Street Cambridge of up we buildings we The In In Street Doug was projected XX% selling reduces reach a prior a leased We New Doug York property first in Francisco. during In a from on to state the XXX of the big as this sale XXX minimal Jazeera’s the and described share. square first with anchor we XXth in lease XXXX

within the improvement our rate our fourth quarter that comes timing NOI run growth of are Overall we of Doug in activity vacancies And on a earnings occupancy the stream to It’s we steady. to impact the property same renewals complete continue the XXXX of little in Avenue, our keeping at point. the due are assume NOI mutes the meaningful XXXX XXXX we expect of mentioned occupancy. share XXXX ironic XXXX. impact As improvement in have guidance to for we a We XXXX seeing good over a X.X%, San assumptions. of early same to any as leasing banes XXX XXXX Francisco but in don't but our work and that range steady back back for growth a our us to property activity from gain base to in we small of X.X% starting still filling and expect fill higher Park to be leasing

are improve guidance million by we and However, straight-line we occupancy at increasing $XX to $XX to approaching for million our of rents by million the. range throughout $X our XX% project XXXX, the of year-end a midpoint will

to projected projected for their contribution of is The residential generate period to two pick largest its which stabilization now commenced Street XXXX. incremental the to less but occupancy now unchanged is Our guidance $XX Reston, nominal contribution XXXX. upon in generate and expected of in the contribution project XXXX. to full We XX% the end million. Tower of XXXX XXX it one plan NOI development of than up rate Boylston at lease XXXX, quarter million Salesforce contributors be deliver to XXXX. in during at third XX% is leased The NOI in and up XXXX for projects first are in the to to Cambridge just in to is XX% full the and NOI $XX is its which Tower year one run We Salesforce two the from leased, half our

than and $X our million Our to net on addition increase and Residential Causeway Hub a activity changed for $XXX to XXXX development million interest the between the expense prior in the XX increasing portfolio which our with the earnings contribution guidance expectation. refinancing After net the pipeline. as per in are result XXXX expense per prior is the project asset share. share Street for from from less per share asset million assumptions our sales NOI in President be of from includes reduction loss and FFO. We have of we about interest midpoint CityPoint, the $XXX accounting from the $X.XX The the and interest changes for lower guidance of per share of $X.XX of by $X.XX improvement at $X.XX sales, our expense

is guidance FFO for to Our share. range $X.XX XXXX $X.XX per

from and Doug existing described, driver to and the is adding growth the developments for delivering pipeline. significant forward developments most both As Owen going our us new

next by quarter This commercial several opportunities of advancing of through the line These we predevelopment our strong two that would years. the areas in and build for over new our formal few growth phase. both the we pre-leased project if the the on adding Operator, already to activities for great. XX% the up projects these other pipeline space you be could open completes to remarks. increasing That pipeline questions succeeded

question Manny from [Operator Instructions]. with And your comes Korchman Citi. first

sell the I’m the in remarks core of Owen you buildings, markets spent your you about development do that about forward not how stock seeking you lot build-to-suit risk. but additional Manny. that Bilerman you and out have think keep of of existing that more seeking Michael look these use likely that and in portfolio space existing you your and CapEx here are capital if opportunities are trajectory in that may need? and the relevant to of sell either just at the and that aggressively talked with And set have need put to seeing them coin tenants curious stock ground your the certainly skill years of are are last that buildings couple the you lot amount tenants likely the and are and think a your to driven CapEx opening you by substantial going or capital sort you and some It’s increase come in new development the for in into flip these I out it office you tenants? off of existing buildings buy that how in you a try going position of opportunities, does of over more in or built-to-suit know to

Well I go consolidation obviously you it I relocation, actual that it’s is doing, some of activity space. we seeking it new factors combination growth. through of are development locations mean that a of if customers and the its of some are is from that think multiple some our Michael

sum. all it’s zero not So

buildings been buildings of existing So spend selected embarked least it’s of are refreshment at have is and customers. and seeing the think we those and through are our on And as of the we what this then watch each long-term competitive. on the number think have investor I about existing of on I and keeping time the assets our close a as are the will Doug very conference Boston, work we in active. projects, of we all but clearly we second through those baked few go XXX quite sure upon lot out Lex, relates that Lex XXX done to a suburbs are talked we the mean year, activity the that interesting assessing at XXrd last we very, And most portfolio, call to offset. our not a pretty now, we it it a significant and our competitive viable went and doing that there be whether at we right assets XXrd leasing have in in

have making So on be those competitive the has are them. that over but assets and that. or competitive, assets fairly for $XXX we the activity over as that investments yes are a between going good been have selectively years, years. This then we we are to been we the think long-term we of sold two think and seeing last long-term we results lastly million And pruning from smaller assets taking I don't think few been last million three we consistently are $XXX

struggle if coming I which are majority on the that’s buildings referred the there outside as suburb. the in technology space DC way markets new tenants and in for has it firms literally I taken then to some very to of are by that so significantly and capital chairs musical has muffin REITs and which who themselves tenants at construction with the associated said the chair as million and San very Michael, they Manhattan get construction, they phase “little” has at in been look availability aware, significant has been been future. hopefully best these aware will lot put real of building vast you a some are they the has lot are musical buildings and the a of and there the new constructions Francisco in and and driven Owen systems they leasing about there much very leftover. new lobby new and is issues a issues market. issues the they of tops demarcation there Angeles more so going by capital building into to driven majority the in addition redoing bullet been is and problem, those not [indiscernible] the growing those are XXXX your are the are a leasing and struggling from and have versus $XXX of are inventory that their the well of the rest have conversations little with example mean again a In there up is made buildings put you Washington of top is we you building tired other with it issue And people the new the the then a that’s of phase a is just a of of in in being of market four market leaper is of point in. and that really the we of that building be from sort market are have to So the going in, the public new significant be that Boston near that going are in successful space. recapitalizing supply The law primarily Los

seeing are what is you markets. these I in So various actually real think going on in time

question too. a had Manny

how is existing could coming guys. space understand out going help assets just Leidos clarify of to happen? if that correctly, you they Hey to much on when your in Doug are and

buildings. feet, XXX,XXX separate out in square So they coming they are two of are

also the problems were all in is One in their they prediction that acquisition. own a of just building Reston consolidated major one and did they in not then

are they into so in XXX,XXX will probably happen second the quarter And XXXX. feet square going it of and

you. Thank Okay.

Jed Advisors. next Your question from comes with Green Street Reagan

Hey guys leasing busy quarter. congratulations a on

growth You noticeable from Reform or changes year maybe activity the you a last quarter Tax areas? in talked are of really your being ground do describe I other could rent this a from in as tenant mean shift two? activity seeing and in based about renewed confidence accelerate of in lot there on and tenants what obviously on the that optimism of other And next absorption past you it a the from sort then net quarter. believe just would you markets reported

can Jim, think first part the maybe Doug I second I the take take will part. and

to do think I and I a I taxes activity leasing of Tax think it’s a more it’s and a invest. got pay that the combination all But went don’t positive up. when a slipped switch more came boost, sudden think therefore know you companies factors, of being out profitable willing Reform

I think a that clearly plus. is

that the the thing leasing the think activity. breadth shifting is one also of I is

of announcing importance firms and quarter-after-quarter We and important, sciences cases are but about space. law growth some net more taking and even are life still that technology activity clearly also we from have and talked for financials, is in growing absorption moving-in the is

helpful. been very I the think has also demand of breadth the

markets And is think in again are rates a it’s go, where that regarding we the problem. these challenge a rental not to going problem demand supply

to going the the extent the see existing economics the think associated on of the that economics you big to is a the continued new tenants And to pressure I on position going supply prepared what relative are what is where to with confidence there new so, premium make I don’t are supply. in those out. see inventory. on of think are there going to I they pressure is to are a moving supply, is And you the And is think that be is driving where decisions. them

at the overall that and mean firm was They frankly that to quality a it’s XX and recruit marketplaces So traditional has located been they took I to building. a that’s firm for time step building, engineering different up company the us not employment and that office most market. portfolio kind CityPoint. were they the and facility. in an said quite this a and our the their And in the it a business retain needs of example tertiary in best recently space high in go based upon desire power, trends these into

construction on kind new think and is are traditionally going that different paying rent predominantly were this so their occurring across of with premises. story all markets they than on, they and And in these previous our on, I paying a that’s tenants. And in of significantly

a estate growth way simply but a are looking opportunity, change in their the this We really from perspective. are businesses not managing necessarily real facilities they a at as

So see that concession to, you you don’t don’t anytime and soon that abating you see the either? growth referred

the concession prepared low couple and still have the as think spaces have has are and we a even feet, new higher the think across mean board, I the Tower, I last I to I construction the higher part rent, literally that been to across I XX,XXX country. market the I level we of we don’t, conditioned of a mean Salesforce square that’s at on it’s think on a and has a XX X.X% up of to increase XXs a high high low we X% rent mean the and X% foot building performed top XXs And was give XX then XXs year a deal. square gone that the $XXX lot, the I to originally to plus. to the now But when XXs in rent [indiscernible] now. was

paid getting we’re for it. So

A one and uses other be separately and just curious been stock peers capital? strategy your versus few question. back then Thanks, buying of recently development other your to have thought BXP and may for of that get latest on

is development more think shareholders. for We accretive

is generating I projects, stock how portfolio we launching rate development is cap basis. our the think existing in look And at mentioned, on you a it, these our X% are depending cash about we low-Xs trading on As yield.

different is clearly that NAV where we development. are yield think dollars at in investing are very to they it So we the trades but discount from

guys. you Okay. Thank

from Stifel. with comes John question next your And Guinee

Thank you.

and business a CapEx of business? bit, your you important going cost, guys do business become little in a business been integral low part do the on different to multifamily think the pretty second you low much on going Turning that you active have development for you, on How a that’s releasing very more like generation. forward

sites like were the would and/or far we developing past of history the component we started started in by I site multifamily and where sites a Properties were the these it We them entitle site and acquire sold. have think We used business Boston it. mix would we developing a as But on generally know in the John you ourselves. successful.

Washington DC We have just shareholders. not paper money Boston on we sold a very profits in for significant Property’s the on for made it, Avenue

that come we across to run development, be think our way of some are we we do to going and time we in is not demonstrated office but grow continue ability think sites to it have talking most are it. if we they So And to as site about the and kinds yields of and generate the I believe a we it can with across the associated going we we been that always.

talked and for to And question if by What got immigration helping industries is Doug, have you are I then Boston think I they from right. which demand grow where coming? that coming a you are Boston

there are they area. referred from companies and then most suburbs. suburban what the I predominantly locations. are in for are coming the the science greater well was they some as the part of it’s state And companies coming out the technology So locations as And from are and those both life XXX

the and [indiscernible] interestingly, that. places submarkets other So space same that’s Lexington growing those are tenants coming and available. like they there grabbing But Waltham are and in

So as city. organic state there you tenants the business new suburb demand where incremental into is the net in deal these were the of and activity Boston, other starting is that absorbing are moving the

Great. Thank you.

from Your KeyBanc. Mailman from Craig next question comes

accelerate Hi high this data really about at at the point guys. not asset development towers with back maybe [indiscernible] to your Owen looking just new joint in is to curious your range of this sales end the cycle maybe what point or commentary to ability at impact debt-to-EBITDA the the just I'm versus on going fund leverage. ventures?

an Craig answer I just that can will so something. answer

NOI seven, the below range, is six to its that upon [indiscernible] minus based the plus going or times our now when even net six and mid-Xs times. reduce somewhere going maybe are on right So our in comes of delivery targeted we and have or on development desired to debt-to-EBITDA our debt-to-EBITDA its the the

quarter out is out. have feel the like going we for all going might blips can going development below through blip So we are of example that at that comfortable this may be that seven, Tower from Salesforce the XXXX. and money There to stay time. in not plus planned we the get as above first seven We happen. right But because to likely back more come be we it’s XXXX to look entire we adding are income any down then some very

the the to fund any raise we to foreseeable to equity. debt ability have that think we pipeline have without we use needing that So

commentary your And where helpful. kind Doug in could then That’s New price Okay. on higher of deals York go.

center Just be east Manhattan coming shifting to of activity to the curious, think back west. could the side change enough the do about of kind there narrative you

online, with I and I’m you, its amount major there and of new what side, we is midtown think that are going to three any under XXXX tenancy that east banks Yard expect of other the completed. traditional is transactions coming a cluster.” real four downtown it’s There that midtown quite longer, were the are there is people fact people next Manhattan think not good the are available that the will honest refer the the The estates I in the to frankly building about significant there no really institutions matter quite central And all traditional took financial that happening. space will two east or it’s be currently recently station first are space there side And I the the “jeez construction construction. additional I side. on And is Hudson or buildings happen until plus amenity. already grand side the in hasn’t west far say I lost and still mean guess feeling quarter. still values two in

amount skin can so the confident product look common at what last we have and finished a XXX can seen again likely the are seeing we that predominantly activity they that are on areas walk And and in feel where so are XXX people is what we showing the and to they pretty of we quarter going around the are or and like. are doing and now

this people a a is getting reaction are and growth. are great lot encouraged and We of

Great. Thanks.

from comes with Evercore Rob question next Your ISI. Simone

have your the Good expanding there then on Is a near later both morning. on, in elaborate if used quick And question. if I follow-up that made are Thanks there term you to I Owen wondering taking Doug time. for smartly and was your is presence specific on? reference working remarks then LA. opening you anything you in the Doug obviously future. could just And that. guys

the in helped is on ground. as Yes, working are have Jon Company, Jon phone thrilled we on business the and on in he the some always really years ground us new has we on well boots and highs LA. Lange to to are the have in

have profitable So said do times a but manner. it I we to many have are ambition, going we in

We the are to not for growth. going grow sake of

profit acquisition in Center We are we the a make nice LA. to think investments have in to seek Colorado we going profitable similarly and

We things. are looking at some development

a It’s We some an not mid about and are in do for I to a to acquisitions. deal sold Segundo looking time at rate square high-Xs nearly easy this. El foot. a that’s cap $XXX talked existing

easy in not we an and we through buy existing are but So LA. repositioning time development that will it’s to perhaps products, grow continue to hopeful

P&L? thanks guy’s that all cash bit And probability internal Great, on kind NOI of some subset hard proposal be your just starting investors either for hit timing shifting But currently are then in what the you to Park. planning, hit your question cash targets, describe to your about leases guys to might of And what changing those to of you XXX a hands. rents Owen. do more little think guys or should kind or do answer. when likely This follow-up if the or

basis The XXXX, right, have get back like going lease lease so prospect. is means we full discussions, a being because fourth majority letters sort the of times. pushed give it, intent for you part our or we the our we forth probability hit are discussions really and out cash quarter I third and to which And of there, partial run then when number obviously but rate of that about feel going don’t year. to are are good of actively to multiple that in XXXX

in I than a bottle space interest there could three the low with days take could a in are of and shake that. more to months. two building, hand two the we approximation two We have can't somebody of it week a good a and lots rise on us lightning just have on literally in have that tours or or give

out, really entrance we done, about is to is why the floors done, Yes, the now. Jon. the month looking a off some there are the work all demolished it's next this reason is is happening two, of we good XX% or finish in the storefronts The side city so now, building is going the

Thanks guys. it. Got

you. Thank

And Jamie question your from next comes with Feldman of Bank America.

in you part your on REIT just we where market? that Great, thank. and are per the seeing of leasing as you cycle latest pickup think your get space consolidation I'm do just employee hoping to are thoughts in

going This industry the is sound like on a depends to bit little group. answer. cant of It

footprint in reduce a Pennsylvania We footage, basis Avenue the of significant to is XXXX see lease signed reduction that’s tenants had last was I marginal continue square “struck” haven't who major the in continue their lease firms in that building. into on that a moving law decade, to we that the the mean a overall

those occur. So things to going are to continue

that. gotten On starting as to the are are of technology back get. and as densities the life push science People to have side, going I on would about say they sort that the low

that in on more issues or salesforce.com They Francisco of out described are areas our “either” that they in on means tabletop. desktop areas the devoted thinks how have building there we there exceedingly are collaboration We that San are tenants areas a that which gathering devoted their the are of and to about focused sort terms space. to major left or office

employee to markets major businesses compression across is people are the And So are look every and locations. a so the dearth expanding, are those and be at in way going available of labor that unemployment you people, think there in we our is hiring around. that’s grabbing on they going clearly of don’t see much then you rates new

expanding they that additional that space. means are means that so And taking which they

of on just I in a growth find about in Can we your its people. where impact. just in that seem job I your and you the long-term kind to coastal just talk hard comment does terms of made follow-up if challenge be When ask biggest could think markets just you thoughts to Okay that’s read it your about the on markets. might

economy. to year job are shot. Tax I sure how be. Look, are long my able do are have at Yes, the that. this from growth, long to a last related going lots this cycle will a related ball from of this in economic this out time. and that the I this data not there to exactly timing occur provide experts on remarks standpoint. I not not did to in Well standpoint, will sure creation some there net impact GDP what valuable cycle Investor Conference in showed and also sessions but growth going I'm then I'm crystal Reform whenever we that talked we the is are the will is give we about And it is to predict creation be job that a

more And the wish we in magnets I employment. believe exactly occur. in could think you, don’t we are when know next will recession going that specific that. think Jamie think I to markets follow We be the don’t for it’s with creation is job I So I near-term and

wonder are those are the people, seeing plentiful. markets university most from into I that where BA in a going going are So hire those masters for with are are people. like and that’s to have to no or universities types a happen longer of is are PhD about when XX,XXX have presumably skill that and city Amazon And San going or the or companies that those to has X.X% opportunities the to jobs job there come of up. form parts period and markets come providing workers. where that And a I’m year exit. you people most to X% think no we’re new time. I you the from markets XX surprised certain bring then they when and a the mean are sure migration in rate, And and I one viable, X% I unemployment it it, growth, a the they right there will a going people going where younger that country of are we That’s graduate be are make to clearly lot a jobs Francisco. saying but trying other an are markets to sets they asked a or these the of from over go they happening mean for to are

I you. appreciate Thank your Okay. thoughts.

next from from And UBS. question Nick your Yulico comes

NOI was are might Hi, on the update along and how XXXX? end far thanks. where you percentage an just on get leased you bridge, I a now hoping to

question, would word didn’t So purposely talk about to because it to this we bring that was I right. a again. is hoping like never that torture up I have

you So big care. really picture if

is Center million pretty it’s close, there $XX million going contribution gets And and Colorado of million. our we’re and of there between from incremental you same-store up General in million it signed, basis. the Motors and Gateway, million. from are going all $XX show way building to XXX The it on result of a our hopefully to is numbers going that’s $XXX that million, EC, the $XX that’s $XX forward is rest occupancy to that’s So address $XXX a sort and and is the

Okay.

going give where are the to leased you not now? are on you So percentage right

the revenue I number an we’ll online. you XXXX into will to going really given never we biggest on getting you way, have do And promise. about square question quarter you, a have tell give the it can is we saying think lease when think me ask we we I be because XXX but to number. if we to you objective. And can’t a know and will ultimate the you given close are the to on you us a numbers that contribution all basis. this every at mean moving I we told you about have XXXX you that and stuff a I’m them We happy come to basis when sort okay footage I sort of tell because of

alright. enough. Okay, Fair

Based to Wanted delivered straight any you question. back rent rent? our XXXX going line the already rents. free million on more could commence another a for the potential is to then there clear, just higher to space free leases seeing tenant year straight benefit signed related in mentioned leasing done. is and Mike be and that that rent additional this of $X one Just line vacancies, be what guidance, get you if is to

that’s happen, the get vacant will leases or sign that think end leasing is are certainly period. we where a get get for starting associated rent the in space with hopefully to definitely and will have activity of we to going the that free we have started we increase I its we we the and of period. Certainly There believe high will that we free phase guidance or have how guidance either range. projections things will that is rent has

majority of is the the rent. all straight line, vast So of free

want point make other one I guess I And to free about rent.

a in time condition space we market lease, space, So of their recognizing out time period rent. that’s sign free the over which have are Boston is in deliver rent revenue There of a we we free DC Free they the rent building tenant that the of once not space because different to the actual the there York period of are where free is City conception period space. during they they a are New the paying. in Washington kinds time occupancy free of and are and of a when And the rent. tenant is rent start that a

that’s is to a there important there subtlety So understand.

that That’s signings rent on helpful, got that would XXX to space get I you is there more if potential this any guess Park, it it more year? done, is other fit free had lease

the talked up of bring the I that won't space. which point I good that we before XXX just at that fact about and condition because it’s a the think to is have of

getting demolishing a you not because we're and are look great jogging that described are great space space it’s “ready” is from use. really a getting intended we and I'm demolish here. tenants the really for the Jon So kind whereby look reason its when the of a we

straight line it. can't You

though we salesforce.com Which have we interestingly we is space cash again because building the the recognizing to delayed a construction revenue have they at rent receiving on delivered You is are have of actually actually are lot basically are recognize even means tenant may Francisco, which we this and can yet. in not the isn’t space their on build space that order where when win unit wait San we in are the is out space to the commitment. from rents extent actually that situation revenue that out our new we

Doug. you Thank Okay.

comes And from Sandler Goldfarb your question from next Alexander O'Neill.

Hi good morning.

questions. quick Just two

there in guys outlined? First, that talked reflected another million adjustment in XXX closed the sort or for of what annualized that DC guidance of already mean includes there that’s is of one of Michael the you roughly about on Owen the dispositions loss which is already that basis some XXX Does $X.XX on guidance in for sort about not million.

they anything this where under And and things we have have it close excess else kind our to assets haven’t some that we have land don’t some we other are, might some them we determine mean in of might happening assumed do or agreement might year. sales. guidance that we be for land, expect I be what be already re-entitled being of

identified what of than there moderate assets our kind haven't no insurance which determining a have assets might type we impact that and of FFO those couple non-core cost as suburban be. still might working the is might at of on taxes would a of this we nominal. So But other carrying that well be point And almost impact. have on and are

be. say kind the what to of early might too it’s So impact

sales money get you cash We do for know. those

question. second the that. know I

is we good. heard this flow As morning cash

Just all second question end is basis another if year that that Owen city to got you XXX like expect you gets points mentioned to space it XX, to XX… you get you the sounds that’s backfill

that comes question question for from and have one final We time [indiscernible].

going we What the is going operator have on. on. question I'm still sorry

on start you if the want Alex, question? to over

you can hear Yes, me?

you. Yes, we got

great. Okay,

sort you the gets if on Owen, moving occupancy moving I get expect all to now? closer you think market that the that XX% like the you out City given to XX%. in structural next always think another Do XX% portfolio you points So meaning get year that guys tenants basis you could that side, of things the may you end right year are there or probably said in XX-ish be to versus to getting demand XX% towards about backfill XXX max your

that Manhattan. the of think is have I we run be XX% that able to to XX% availability we get most should rate a basis and in to on

which are should XXX,XXX you see it, if you add for just add expiration it’s overall, a when we at at leased did Investor square schedule that XXX So - can XXX our you we so Conference, showed pretty on XXXX and we those square plus you that for looking be and I through basis. feet look XXXX a at have we at have feet XXX,XXX light. long-term slides But you

year. there the by should we get So of end next

you. Thank

Your next Vincent Chao Deutsche question comes from from Bank.

Hey. Good Owen. morning,

as success yield going we’re Just on haven’t was you costs, I your recently. and change lot conversation, more development leasing shortages back But lot guys about a just to hearing development curious I a of obviously really adding there, few construction well expectations heard labor as projects. rising

the growth guess comment from year with past you the kind construction, the labor So can that up rent on what over seen seeing increases if is just what cost curious have construction are but of then availability I’m you side? just keeping curious of implications I construction and also you on

of a done the what But cases, on rent been the think statement the think the because built three earlier costs we improvements reasons out moves. we which construction or a on it’s annual see I we component for build when it on When and building more the the construction we a a it provide project, years, in are bid on building call to base it bid actually and project sort are, significant comment industry. making on last when somebody, have in so upon just a I of into have one a up our in So factor formula marketplace basis, that four basis the what we are lot our buildings, to we have tenant costing inflation development is component going actual budget. cost a most in I And a bid our in that over we anywhere depending the is X% of so cost. X% are escalation the tenants made sometimes of a paying space, is we do we percentage

And terms labor? just enough then of availability, issues in finding running Okay. overall you are into

that’s for shortages. reason honestly most so part the escalation is the labor for Yes the

orders with with we perpetual our subs get with on well lose markets time, job don’t have to that we know you the they user work say Boston And do payments making that is are contractors subcontractors do get we to to are us I our think treating And in who so has that want to I Properties we in changed dealing because but to our are and we the do to labor and of bidding a who work with certainly well, regards one impeccable with of be access appropriately. who want of are preferential going with do the pricing, saying fact an a working have a we advantages in able if by. subcontractors our that bad in us contractors subcontractors, market. and to will good work they reputation market with also And preferential are

procurement we jobs. not problem had our So any a of on have

spend you CapEx you how development shortly. have just but actually X.X needs the that I is then know obviously total equity to you pretty any And needs will it. up goes added recently what with some know fund you XXXX, curious of the got going much the will that for Curious these XXXX? funding guys added billion shows be in remaining you projects have that here, Okay, to budget do XXXX think or clear been in of use not are I development pipeline but of

So existing to spend? oppose as portfolio this on development capital the is

No, spend development no specifically.

around $XXX. XXXX something

XXX million.

you on one. then and color just - limit guess I Okay what I can increase? guess But or that? you maybe still in about you material last is you some that increase rates Owen provide mentioned are I consider material how XXXX. much one not X% within mean concerned in a

over Yes. X%. Predicting material significantly rates would obviously is parallel, be I but something think

over Significantly X%.

you. thank Okay,

would where be I say That’s it material. would

Right.

Okay, and in the That attention thank for time Properties. concludes call. you Boston interest and your

Thanks everyone.

Thank you.

conference conclude today's does This call.

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