Good morning, and welcome to the 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 [Operator Instruction]. At this time, I would like to turn the conference over to Ms. Arista Joyner, Investor Relations Manager for Boston Properties. Please go ahead.

Good morning, and welcome to Boston Properties’ fourth quarter earnings conference call. The press release and the supplemental operating and financial data were distributed last night, as well as furnished to the SEC on Form 8-K. You can find reconciliations of non-GAAP financial measures discussed during today’s call in the supplemental package. If you did not receive a copy, these documents are available in the Investor Relations section of our Web site at www.bostonproperties.com. An audio webcast of this call will be available for 12 months in the Investor Relations section of our Web site. At this time, we would like to inform you that certain statements made during this conference call, which are not historical, may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Although, Boston Properties believes the expectations reflected in any forward-looking statements are based on reasonable assumptions, it can give no assurance that its expectations will be attained. Factors and risks that could cause actual results to differ materially from those expressed or implied by forward-looking statements were detailed in Tuesday’s press release and from time-to-time in the Company’s filings with the SEC. The Company does not undertake a duty to update any forward-looking statement. Having said that, I would like to welcome Owen Thomas, Chief Executive Officer; Doug Linde, President; and Mike LaBelle, Chief Financial Officer. During the question-and-answer portion of our call, Ray Ritchey, Senior Executive Vice President and our regional management teams will be available to address any questions. I would now like to turn the call over to Owen Thomas for his formal remarks.

Thank you, Arista and good morning everyone. Starting with current results, we just completed an outstanding quarter on virtually all metrics. Our FFO per share for the quarter was $0.04 above our prior forecast and street consensus, and we increase the mid-point of our full year 2017 guidance by $0.04 as well. We leased 3 million square-feet in the fourth quarter, which is an all time quarterly record in Boston Properties' history. For all of 2016, we leased 6.4 million square-feet, which is approximately 22% above our long-term annual averages. The most of this leasing will have a positive impact in future quarters, our in service portfolio occupancy is now 90.2%, which is up 60 basis points from the end of the third quarter. We had another quarter of positive rent roll-ups in our leasing activity with rental rates on leases that commenced in the fourth quarter, up 25% on a gross basis and 39% on a net basis compared to the prior lease. Also in the quarter, we announced several large scale new business wins, including the development of new corporate headquarters for both Akamai and Marriott and control of an important site on Pennsylvania Avenue in Washington DC. And to cap it all off, we announced an increase in our regular quarterly dividend of $0.10 or 15%. Let's move to the economic environment, U.S. economic growth continues to be positive, but sluggish. And as you know, recently released initial fourth quarter GDP growth estimates were 1.9%, which brought full year 2016 economic growth to 1.6%. The employment picture continues to improve gradually, 156,000 jobs were created in December and the unemployment rates flat at 4.7%. Though, there has been much written about the positive economic impact of the recent election outcome due to the prospects of increased fiscal…

Thanks, Owen. Good morning everybody, Happy New Year. Consistent with Owen's remarks on the performance of the overall U.S. economy, as we begin 2017, I think about our own projections for the year where our view is that the overall health of the office markets really isn’t going to change too much from what we experienced over the last 12 months. We continue to see the bulk of office demand growth from the technology and the life sciences businesses, and pretty steady as we go from financial services and other traditional users. While, there is no question that venture capital investing slowed across industry types and regions in '16, there was still $70 billion invested, which is more than double what was invested in 2006 to put in perspective. And interestingly, there was more capital raise by the DC sponsors in '16 and in any year since 2006. So, there is a lot of money sitting on the side lines waiting to be invested. Demand from traditional office tenants and legal and the large financial services, has stabilized. While there are still sporadic space reductions stemming from changes in utilization and some downsizing, we have begun to see pockets of growth from these tenants in New York, and in San Francisco and in Boston. For instance, the new lease that was signed by Point72 who is currently in our building at 510 Madison with 2022 lease expiration is significantly larger when they moved to the Hudson Yard. In our portfolio we had 40,000 square foot hedge fund extend by more than 50% in our New York City portfolio. Accenture, which is tenant in Boston, is going to move into 888 Boylston Street and they are going to expand by more than almost 50% later this year. We have 45,000 square-feet…

Great. Thanks, Doug. Good morning. I am going to start with a few comments on capital raising this morning. As Owen described, we have strong opportunities to continue to expand our development pipeline, and we’ve active in the capital markets, considering funding options for that. As we’ve discussed before, with our relatively low leverage, particularly if you calculated on a pro forma basis for the delivery of our developments, we do not anticipate raising public equity. And we expect to focus our capital raising activities on the debt markets and moderate asset sales. This quarter, we raised an incremental $200 million. This included the closing of $250 million construction loan from a consortium of banks for our Brooklyn Navy Yard development and $40 million 15 year mortgage on our recently delivered new development at 1265 Main Street in Waltham. We own 50% of each of these projects, so our share of the proceeds will be $145 million. We also closed on the partial sale of Metropolitan Square in Washington DC where we’ve reduced our interest from 51% to 20%, and raised net proceeds of $58 million. Our current pipeline has approximately $1 billion to fund through the end of 2019. And in addition to using our available cash balances, we expect to be active in the debt markets in 2017 raising additional capital. Our earnings guidance assumes that we utilize our untapped line of credit to fund the incremental development cost. But it is likely that we put in place additional debt facilities during the year, which could increase our interest expense guidance depending on timing. So, turning to our earnings for the quarter, we had a strong quarter, and we exceeded the midpoint of our guidance range for FFO by $0.04 per share or about $7 million. The portfolio…

[Operator Instructions] Your first question comes from the line of Manny Korchman with Citi.

Doug, question for you. You went through -- the market as we typically do, the one question I have walking away from that is if you took DC specifically as a market, how do you feel about DC, especially CBD today versus a year ago, because I couldn’t kind of place where your mood was on that?

I’ll give you my reaction, and then I’ll let Ray give his comments. My view is nothing has changed in DC proper. We’ve seen a market that is forward in terms of its leasing, and there are basically very few large transactions that are going to hit in 2017, '18 or '19 that are impacting those years in terms of rental rates. So all the leasing is forward. And so, if you have a block of available space today, it's going to be hand-to-hand combat, as Ray like to say in terms of getting that lease that’s basically. And there is new suppliers coming online, and there are tenants in significant -- or landlords that are significantly improving their quote-on-quote edging beauties with new capital. So, it's a very competitive market for second generation space, and there is not a lot of new demand generators in the district itself. Ray, I don’t know if you have any other thoughts.

Well, this will come as a shock, but I have a little more optimistic viewpoint to Doug. I would agree with Doug. The market is bifurcated between the traditional as we call edging beauties the buildings that have been that represent the A Class buildings for many, many years, but has being a little bit more challenged. But it is amazing to us, the demand for high level, trophy level space, new construction and thus showing the success we had 61 Mass and the interest we’re receiving at 2100 Penn. We’ve had control of the property now for two or three months, and we’ve got three or four major law firms that we’re in active discussions in. Even though that occupancy will take place in '21 and '22. So it's a very, very differentiated market, high-end trophy space, as strong as ever. The space has been kind of bypass because of new technology, new configuration and new locations, is facing some challenges. But we are still very, very optimistic. We think the law firm consolidation has been running at full course. There is one dynamic of the Trump is we’re seeing a lot of associations, corporations, others engaging law firm and lobbies to understand what the Trump dynamic will mean. So, we are seeing -- and as Doug referred in the call, we’re seeing an uptick just in the last month or so in the defense and intelligence related community demand. So, one maybe view the glass half full, I view as the glass almost due to the top. We’re feeling very good about the upper in space.

So, Manny, I actually think our comments are pretty consistent. So, when we referred to 2100 Penn you talking about leases that are commenced in 2022. It's a forward leasing market, and we’re very encouraged about how we’ll do at 2100 Pennsylvania Avenue. But we have available space in '17, '18, '19, you’re going to struggle.

And maybe just second from me, was there anything specific driving the large leasing volumes in the fourth quarter that will slow with just a lot of walking tackling, What's the favorite going forward on just leasing volumes looking at the first half of '17 specifically?

Let me say one thing and then I’ll let Owen comment. There was not one deal that was done during that period that was originated during the fourth quarter. So, everything is ongoing. And I would say that to the extent that things were getting done it was because it was the end of the year and people want to get paid on the brokerage side. And there's an emphasis on getting deals completed. I would also say that there was more confidence in the business community after the results of the election, and that probably you know pushed things further along quicker than they might otherwise have been.

No, I think that's all right. There were a -- like the Akamai was a lumpy lease, obviously. As much as I’d love to think $3 million would be a run rate quarterly leasing volume for us, that's not going to be the case. It was an extraordinary quarter, and there were some special circumstances, but the markets remained healthy. And I think the other thing that happened is I'm very proud and pleased with our leasing professionals around the Company. I think they very much focused on our goals for the year, and performed accordingly. So, starting with the combination of all these factors a healthy market, some lumpy leases and focused execution by our team.

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

You guys had a pretty good pick-up in occupancy, and you're now back over 90% portfolio-wide, as you talked about. Do you guys track that on a percent lease basis, if you include leases that haven't, that have been signed but not commenced? I am just trying to get a feel for how that number might be trending following the really good quarter of leasing?

We don't -- we can figure out the numbers we have. We can look at and we know specific situations where we have you know large tenants, for example, at 250, West 51st Street. We have an 85,000 square foot tenant that hasn't taken occupancy yet. We have 25,000 square foot tenant at GM building that hasn't taken occupancy yet. We have some tenants across the portfolio where we think about distinct situations where we can look at it. We've not aggregated that and looked at it on a forward basis. We do obviously look at what our occupancy is going to be over the next couple of years. And our view for this year is that we’re still going to average between 90 and 91%. Our occupancy should go up in the first couple of quarters. And then at the end of the year, we’re going to lose occupancy at 399 Park Avenue in New York City, which is going to bring it back down a little bit. And as Doug described in his notes and what we’ve disclosed in our investor presentations are that, look, we've got some vacancy in some buildings like 200, Clarendon Street, Colorado Center, 601 Lex, where we believe we're going to fill these spaces up. We're highly confident we're going to fill these spaces up over the next couple of years, and move our occupancy up into the 93% area.

And just I guess sticking with you, Mike, you mentioned some of the debt activities you're exploring as you’re looking to fund development. Just order of magnitude, curious how much incremental debt you might be looking to issue this year. And where you think your debt to EBITDA might finish the year versus where we're sitting today?

On a net debt to EBITDA basis, I would say that we still believe that we’re going to be kind of ranging somewhere to the low 6s to 7s. And then when the income starts coming in as we deliver developments, it's going to come down. The capital that we're going to be raising, if you look at the outflows, we've got $1 billion worth of outflows over the next couple of years. I would anticipate, in 2017, we're going to need to raise somewhere in the $500 million to $700 million area to fund what's happening in 2017. Fund the development outflows that we've going something in that zip code.

And Jed, I think the way to think about it is, if you think about our development outflows, as Mike described, that's the money that we're going to spend, we will probably raise more than that. A lot of it will be in the form of either term loans that can be drawn down upon or our line of credit, enhancing it in terms of size. So a lot of the capacity may not actually be dollars that are sitting on our balance sheet, they just maybe availability of dollars that we have.

And just to clarify Mike, you mentioned the low 6 to 7 range on debt-to-EBITDA. What -- just how does that compare to your spot debt-to-EBITDA at 1231 on your numbers?

We’re in the low 6 of that, I believe 6.4 or something like that, I believe.

Okay. Great, thank you.

That's moved up a little bit as the development fundings occur, because we don’t have the cash coming in. So, as you fast forward to the cash income coming in from those developments, it's going to come down significantly.

Your next question comes from the line of Alexander Goldfarb with Sandler O’Neill.

Just a few questions here, first, just in reference to Doug, I think you said flattish leasing market here in New York, and you referenced the demand from more lower floors in the GM building. As you guys look at your availability here in New York, how much of it would you say is in that value sweet spot, call it, whatever $80, $90 under $100 a foot versus how much is in the over $100 foot?

I'll take it a stab at that and then John Powers you can correct me if you think I'm misstating it. So, the biggest bulk of our quote-on-quote value space defined as you just described it is, 100% of the space at 1590 53rd Street, so that's a 195,000 square feet and probably 200,000 plus square feet of the space at 399, so call it 400,000 square foot and then we have 300,000 plus square feet of space at 399 that would be in excess of that. And we have 50,000 square foot of space at the top of 250 West 55th Street that would be above that number. And these two floors that we're getting back from a tenant at General Motors’ building would still be well in excess of that $90 plus square-foot. John, am I missing anything?

No, I think that's it, probably half and half.

So, John, so half is in the sweet spot half is in the elevated numbers, right?

Well, you say the sweet spot. I think Doug is using your terminologies, under 100 and over a 100.

So, what would you term -- so how should we think about it when we hear from the brokers that hey it's a competitive market, tenants have a lot of choice. But it sounds like you guys had good activity with certain spots, rent spots in the market?

Yes, every product is a little different. If you look at 159, that's a very unique offering. It's almost a new building, and it's going to be spectacular, it's got a lot of outdoor space. So, I'd say that is very much in the sweet spot of the market, because that will be priced under $100. But we have space at 399, in the tower there that is sweet spot, and now it's 25,000 foot for the core that's a great building. So although be below that's over a 100, it's not a 150. And so people that are looking for high quality might find that to be their sweet spot.

And then the second part is you mentioned the need to spend on buildings here in New York, or maybe even in DC to attract the tenants and get the tenants. How do you guys separate out spend that’s basically just necessary to get the tenants to come in versus spend that you’re getting in incremental return on the investment?

So, we’ve talked about this before and there are two ways to think about this, Alex. So, the first way to think about this is either investment that we’re making that actually have an incremental NOI contribution. And so, what we do is we think about our buildings and we say if we don’t do anything what can we rent the space for and how long might it take. And if we do something what will be the rent be and how long might it take. And in many cases, we actually think that additional capital is going to both enhance the rent that we’re achieving and reduce the downtime that we’re achieving. There are also incremental investments that we’re making in these buildings. We’re actually achieving additional income. So, as an example at 601 Lexington Avenue, there is a -- that first instance, we think we’re going to achieve 7% to 12% return on our capital, because we’re going to get a significantly higher rent than we would have otherwise gotten have we simply leased the space as is. And we’re also redoing the retail space and we’re going to get incremental revenue on the retail space. But what we said is the return on the retail space really is about for the building. And so will that retail space reinvestment improve our ability to generate higher return, aka higher rents from the rest of the space at 601, and we think that’s in fact the case. And given the amount of the investment, you don’t have to get more than a buck or two in order to have a pretty significant return. So, we’ve got how we think about these things. Now there are other situations where we’re doing a lobby or where we having to replace an edging window system or the elevators need to go from a called to a destination. Those types of improvements are much harder to quantify in terms of a dramatic change in the overall environment of the building and there when I referred to more sort of recurring capital investments that are critical not revenue producing.

Your next question comes from the line of Steve Sakwa with Evercore ISI.

Doug, I guess, maybe you could talk a little bit about your Brooklyn project, and the demand that you’re seeing for that development?

John, that one is for you.

Okay. Well, we’re very excited about the projects. And this is a big days for us, because the first piece of scale went up this morning. So, we’re rolling along. There is no -- the buildings built all above grade, so there is no foundation. So, the building will spectacular. It's got all the amenities of a new building, floor-to-floor heights, et cetera. And we’re working with the Navy Yard and the transportation side. I think it's a little too early for the leasing. We brought it out to the brokerage community, and I think it's going to well receive.

I mean, John, can you just maybe talk a little bit about what the tenants were saying? I know transportation is a bit balanced there. So, what are you sort of facing or hearing from them?

Well, in the -- look, the first part of this is going out to the brokerage community overall. And I think we’ve done that pretty successfully. We have to get closer to the date when the building is done to talk to specific tenants.

I guess transitioning maybe to the West-Coast, Doug. Maybe talk a little bit about the search for a senior executive and run that region. And just what are the other opportunities that you’re may be seeing in the marketplace today, because it sounds like you're making good progress on the leasing front of the vacant space. So what other opportunities have you sort of found or uncovered?

So, Steve it's Owen. We are off to a great start in California. We bought Colorado Center, as you know, last year with 66-67% leased. We've leased I think two-thirds of the vacancy and have good activity on the balance. And we have a comparable sale across the street that's well in excess of the basis that we paid for the building. So, we're in a new market, an important market, we think long-term for the Company and we're in there on a profitable basis. And I think, operationally, the asset has been seamlessly integrated into Boston Properties. And Ray Ritchey has done a wonderful job overseeing the leasing and repositioning of the assets. So, your question is where do we go from here? We are going to hire this year a regional head for Los Angeles. We're conducting an outside search, and we're also considering internal candidates for this spot. So, that'll be an important internal step. In terms of deals, one of the attractiveness of the West LA market where we intend be active is development is difficult, entitlements are hard to come by, it preserves value. And therefore, it is harder to grow. That being said, I would say we have a bead on, I would say at this point, something like half a dozen different opportunities, some of them are sales of under-leased buildings, some are repositioning of existing assets and some are development. As we said before, we're delighted to be in LA. We're going to grow overtime. We want to be a leading land lord and developer in the market, but we also are pushing pressure on ourselves to do that overnight. We want to continue to do it the way we did with Colorado Center and do it on a profitable basis. And I’m hopeful this year that we'll be able to add at least one other asset to our portfolio. And if we can find something on a basis that makes sense financially for shareholders, we're going to do that.

And then just last question, I guess, the new retail has opened at the Prudential Center. Doug, I don't know if this is for you or someone else. So, maybe just talk about how that's performing and then the feeder that’s been maybe for the office and what demand that's been for office tenants into the Backbay?

Sure .So for those of you who are unfamiliar with what's going on at the Prudential Center. When we built the 88, Boylston Street at the same time, we basically demolished what was the Food Court, reinvented it as a 45,000 square foot Eataly and also added another floor space to a portion of the Prudential Center, which we refer to as the flagship. All of that space is leased, and Under Armor, Eataly, organization called Aritzia, the floor expanded. We've got a whole new roster of tenants. And based upon the foot traffic, particularly in what we referred to as the slower times, the Eataly has really been a very positive revenue enhancer to the Prudential Center, and it’s driving traffic not just from a retail perspective but actually it's been driving traffic from a parking perspective. So we actually have a lot of visitors that are coming to the Prudential Center parking and paying for a couple of hours of parking as well, which is important. We have a couple or more of these types of opportunities in front of us. But I think the relevancy of the Prudential retail is stronger today than it has ever been. It's a place that people want to come, and I think it has generated a buzz amongst the retailers so that other retailers want to be here as well. And so, we're feeling really-really good about our incremental investments there.

Your next question comes from the line of Blaine Heck with Wells Fargo.

Maybe for Doug, you guys obviously had very healthy rent spreads on the 650,000 square-feet of commenced 2nd gen leases during the quarter, up 25% on a gross basis. But can you talk a little bit about maybe what the spreads look like on the 2nd gen leases executed during the quarter? And what should we expect for rent spreads throughout 2017?

I'm going to be honest with you. On 3 million square-feet of space and we didn't calculate the number on the step that was executed this quarter. In general, what we are seeing is that our San Francisco area leases are leases that are less than -- more than five years, generally are somewhere between 40% and 50% on a gross basis, doing upwards of 70% on a net basis. Our rents in New York City typically are up 5% to 7% or flat. And we talked about this before, there're certain buildings, 399 being the best example, where we're basically going to be working hard to maintain the same rent level that we had on a basis prior to their expirations. On the other hand, in a building like General Motors’ building, we were taking space back at $100 plus a square foot and leasing it at a $150 square foot. We're seeing a very significant uptick. So, it's very much depending upon the space. Washington DC we have the -- the fortunate or the unfortunate circumstance of having leases in that market that are going up annually by 3% plus a year. So in general, when a lease rolls over in Washington DC, it's probably at market or slightly above market. And so that's why I think you see, in general, a pretty moderate roll-up or roll-down in Washington DC overtime. And then in Boston, again, I think you're seeing a pretty consistent growth in rents. Anything in Cambridge is probably 100% on a net basis, anything in the Backbay is probably somewhere between 25% and 35% on a net basis, and in the suburbs are between 10% and 15%, because we're generally rolling rents from them, mid-to-high 30s to the low-40s.

So, just as a follow-up to that, it looks like roughly half of your expirations are in New York in 2017. So is it fair to say we should see that spread moderate as we go through?

Yes. As I said, the majority of that expiration in New York City in 2017 is at 399 Park, which I just referred to and it's a pretty flat expiration. I think I said in the past that net-net we're a couple of bucks of square foot on average when we lease all that space up above where we're currently expiring.

And then Mike a little bit more granular question, it looks like cash same-store NOI and your share is going to boost this quarter from the year-over-year change in straight line ground rent expense. Can you just explain what's going on there, and whether you expect that to continue to be a tailwind going forward?

This is an interesting situation actually, so I'm glad you brought it up. At the Backbay Station garage, so we own the garage. We extended the ground lease on that garage when we got the additional rights to develop over Backbay station. And what we did is we agreed to pay $37 million in ground rent, and straight lined it over a 99 year ground lease term. The payments associated with that go out as we improve the station, so as the dollar go out. So in the fourth quarter of 2015, we spent $5 million improving some installation there, and in fourth quarter of '16 we spent very little, so that was a boost to our casting store from '15 to '16. We are dependent upon the budgeting of the MBTA to figure out when these costs are going to out, so they are hard for us to judge. But I would say, over the next two to three years, we could have some lumpy quarters where some of this all the sudden hits. In 2017, we don’t have a significant amount of expectation, because again they are planning, it has been a little bit slower. So, we don’t have a strong projection as to the exact timing, so we do not expect much to go on in 2017.

So none of that tailwind is incorporated in guidance?

No, I mean if anything, it's is going to be a headwind in the quarters when we have these dollars, and we’ll have to explain it in that quarter, because it's really kind of an unusual thing.

Great, that’s helpful. Thank you, guys.

We’re pre-paying ground rent that we’re straight-lining over 99 years.

Right.

So we will point it out when it happens so that people understand.

Your next question comes from the line of Jamie Feldman with Bank of America.

I guess, just going back to Ray, can you talk more about what you’re seeing in the suburb, you guys gave a lot of color on CBD. But it seems like you had some traction on leasing. And then just kind of bigger picture as we’re sitting here this time next year, what do you think it's going to go different in DC?

Again, I think like downtown, the suburbs are sub-market by sub-market, western still remains very strong. We got less than a 3% vacancy and strong demand there. Tysons seems to be -- again that is not a market we’re in, but seems to be getting some legs revitalization in the defense and the intel market. We’re seeing some net migrations into the region, some corporations outside of Washington they are looking at suburban options. What is funny, I went to the Cushman briefing last night on where the market is headed, and they are very big on the maturation of the order of generation, moving out to cities, forming households, having children, looking for better schools. And that’s going to drive great demand in the suburbs in the coming three to five years. Along those lines, we saw on the Dallas corridor, if you wanted more than 50,000 square-feet in the Dallas corridor, you only have three to four options to choose from. Whereas this time last year, you probably had 10 to 15. The 270 corridor still very weak, nothing to really report there, and of course with our announced Marriott deal pulling Marriott out of the North Bethesda market that will be a continued challenge we know that will come in the future. On the defense intel, as Doug mentioned, our two parts that are most directly associated with defense and intel and Apple's junction in VA 95, we’ve had tremendous activity on those -- both those properties in the last three to five weeks with over 250,000 square-feet of prospects coming in since the election. The army corridor Roseland, Boston, I think they’re starting to stabilize, and getting some traction. But as long as there's value downtown, the close-end suburbs don't have their natural feeder market to generate demand as much as they would like to see. So, again as with downtown, it’s much more market-by-market, although the general trend is more positive.

Given the shift, it seems like contractors are getting a little healthier, at least the expectations post elections. Do you have any thoughts in growing more there, or continue this one?

I mean, if the Trump initiative about freezing government hiring if that put into place, this is not the first time this has been tried both President Reagan tried to do this back in the early to mid 80s. And all that happened was the defense contractors, the private sector guys, expanded greatly to fill the void. And we'd much rather prefer doing deals with private sector contractors than try to work with the GSA on government expansions. So if in fact the freeze is put into place, we view that as a positive thing in terms of the -- the demand for those services aren’t going away. And so because it shifted from the public to the private sector, that's a good thing for Northern Virginia landlords.

And then just shifting to the GM building, maybe Mike, can you just walk us through the ins and outs there as we think about how the model is going to look the next couple of years. And also the Apple lease, can you talk about the NOI?

So, I'll refer to -- answer the second part of your question first. So we've talked about the Apple lease before, and the Under Armor lease. And I think I don't have it in front of me, but my recollection is that we're going from somewhere around $50 million plus of NOI currently to somewhere over $85 million of NOI when Apple moves back into their rehabilitated store and Under Armor has completed their work and/or gets to live in their space and they're starting to pay on a full run rate basis. And so I think that’s that part. On the General Motors’ building office space where as I think we might say we have a termination income this quarter and next quarter as the tenant moves out of the space that they're moving out of in the lower floors and then we have to lease it up. And John, if I say, we’re going to lease it up in the next two days, you're going to say no. If I said we’re going to lease up in the next year or so, he's going to say absolutely. And so the timing of that's going to depend upon the condition of the space when we leased it up, and the overall leasing strategy we have for it. So, I don’t think there's a lot to change there over the next couple of years in General Motors.

And the only other thing is we do have the 80,000 square-feet of current vacancy that we’ve got that in July. So, as Doug mentioned, we've leased about 25,000 square-feet of that and we’ve got good activity on the rest that none of that space will hit in 2017, because it's got to be built out. But I would expect all of that space should hit in 2018, I mean, that's high value space.

And is the termination -- is that Estee Lauder, or is that lease still under discussions?

As the Estee Lauder has lease expiration they're in almost 300,000 square-feet space. So what we're dealing with is another intendment to both.

Your next question comes from the line of John Guinee with Stifel.

Ray, talk a little bit about JBG Smith they’re coming on the radar screen. Any new hires there, any senior leasing guys that you think are particularly talented?

That's a interesting question to answer. To those of you who don't know my son, David, recently joined head of the leasing of the combined firm. And I’d say he's got one of the most challenging jobs in Washington, but it's sort of like Luke Skywalker and Darth Vader going head-to-head. So we'll see how that works out in the future.

And second, you've been pretty busy you’ve got the 2100 Penn deal done. You've got the Marriott deal. You've done a lot in L.A. I don't know if you’re going to miss these deals or not. But can you talk a little bit about the potential Nestle headquarter relocation to DC, as well as the FBI never ending saga?

I can make absolutely no comment on Nestle. First of all, I've no knowledge on Nestle, and have none capacity to comment on that at all. On the FBI, I inquired to my sources within the GSA what the impacts would be on the FBI deal on the change in administration. She says full steam ahead. But I cannot believe a President as actively involved in real-estate with such an interest who owns a major asset directly across the street from the FBI building, will not have a very profound and active role in seeing what the future that maybe. But according to GSA, it's full steam ahead, there's still three candidates left for that site. We elected to not to participate in that, even though we were selected as the finalist about a year ago and there is still three sites, two in Maryland one in Virginia that's being considered.

Your next question comes from the line of John Kim with BMO Capital Markets.

It sounds like the leases signed this quarter were partially cyclical in nature. But I was wondering if you could categorize at leases between expansionary versus maintaining or reducing space?

I would gather to guess, I don't have the list in front of me that there is virtually no reduction in space by any of the tenants that signed the lease this quarter. And there was likely modest expansion in the majority of the leases that were not straight renewals.

So, it seems like from your commentary that the tenants are more optimistic than maybe perhaps you are at this point. Am I reading it correctly?

No, I actually think we're optimistic about the demand. I think our point is that there's additional supply out there. And so when you have additional supply, you still have to deal with needing to grow more than that incremental demand to make a meaningful impact on the availability and the vacancy rates, so that you can drive rents. And there's just not enough of it overall in our marketplaces to do that. So things have -- the rate of growth has moderated, which we've talked about before. As I said, we're seeing demand growth from the technology and the life sciences businesses across the Boston marketplace and the San Francisco marketplace, and in New York City. We are seeing small signs of stability and positive growth from some of the smaller financial services companies in and around New York City and in Boston, and in San Francisco. But there happens to be more supply coming online, and that supply is impacting the market from an overall availability perspective. And so, it's awful hard to drive rental rate increases in a market like that.

I may have missed this. But can you provide the dollar figure on the future development projects that you announced last night?

We have not yet come out with an official budget. The only development projects that we announced -- the word announce, I am going to make sure is what the right one is. We signed a lease for a development for Akamai as Owen described. That project is in Cambridge and that project will have a budget about somewhere around $400 million plus or minus. We’re working through our budgets right now, so we haven't published the number in our supplemental information yet.

And so, how do you trying to fund the development, it sounds like you have $200 million of dispositions in your guidance. But I am not sure if that is surely for guidance purposes, or if you actually think you’re going to sale more than that amount?

I think that as we have described our expectation is that we’re going to raise that capital to fund our development outflows over the next few years. If you remember, the building that Doug is describing, that’s not going to be done until the first quarter of '20. So, this $400 million that goes out over three years of the timeframe. So, given our leverage situation, we would anticipate that we would fund that through additional debt. I mean, there could be moderate asset sales over the next couple of years that we will supplement that. We do not typically put dispositions in our guidance, so just to point that out. We are looking at potentially $200 million of maybe asset sales. We haven't identified those asset fairly. So that’s necessary in our guidance today, just to be aware.

I think you asked a good question, or one that deserves what I think is a very optimistic answer on our part, which is that, and we’ve been saying this consistently for the last year or so. We don’t have any intension to raising any equity, and we believe that as the cash flow from our current development pipeline, which is already in progress, starts to hit our books and it's hitting our books '16, '17 and '18. We are building tremendous amounts of capacity to fund additional investments, and we’re building additional capacity by reducing our net debt to EBITDA. So, we have a terrific opportunity to actually be more acquisitive from a development perspective or a straight acquisition perspective as we move out with our current equity base and the fact that we’re growing our cash flow significantly.

Your next question comes from the line of Craig Mailman with KeyBanc.

Mike, just wonder if you could provide some updated thoughts on plans for the GM loan refinance?

So, that loan expires in October of 2017. It's possible that we could refinance it a little bit early. We are expecting to be talking to the market in a formal way later in the first quarter. In terms of the execution of that, we would anticipate that we are going to refinance it as mortgage finance like it is today. If you look at the cash flows that can be generated and are being generated by that asset, it's under leverage today. So, we have the ability, if we want, to risk some incremental proceeds in that way, so that could be part of the $500 million to $700 million of additional debt capital that I mentioned that we raised. It's a large loan. So the two primary sources for that are the CMBS market which is very attractive market today. Spreads have come in over the last two or three quarters nicely. Obviously, the swap rates and treasuries have moved up 50 basis points in the last quarter, and spreads have not come in 50 basis points, but they have come in. And then we could also do a large syndicated facility with banks and insurance companies, and folks like that. So that those are kind of the two executions that we would look at to do in long-term, long-term being seven to 10 year mortgage financing.

And then just on the Oakland option for the resi, can you just give a little bit more detail about the terms of that, and where we are in the cycle. How you guys weigh that versus moving forward?

Well, we, as you know, are building our residential portfolio generally in the Company. It's currently a small component of our NOI but we have completed and have -- we've completed several successful residential developments and have a few under way. We identified the [technical difficulty] neighborhood in Oakland as a improving area and one that is attractive for development, particularly given the site that we're looking at, direct access to public transport into San Francisco, and the rents that we'll be able to offer to market are at significant discount to the rents in central San Francisco. We are paying attention to market conditions. We understand the deliveries that are there, and we're factoring that into our underwriting. And in terms of the specific economics of the deal that we're doing, I think it's too early for us to discuss that. But when and if we decide to go forward with this project, we'll certainly describe the exact financial arrangements, but we think they're attractive.

Is it just an option you guys have, or did you -- by the way, I'm just curious how long the options for if that's the case?

Right now, it's an option. And the other activity that's going on is very important as the entitlement of the site.

Your next question comes from the line of Vikram Malhotra with Morgan Stanley.

Just a more granular question on New York leasing and your pipeline there, you sort of walked us through, and the space that you lease-up and price points around the $100 range. Could you walk us through what you're seeing in terms of demand or even just early showings that you might have done around some of the new redevelopments that you're doing?

John, you want to take that one?

Sure. Well, we’ve had -- we're dealing with a number of different buildings. I think we have very good showings at 159, and we're looking for like a 150,000 foot tenant. We had very good activity in the Tower at 399 the seventh floor is very difficult to show right now because of the construction project that's ongoing.

And just, but just in terms of which sector -- are you seeing broad range of sectors. Is it more finance? And just a sense of price points, are they similar to expirations or wider range?

I think it's a pretty broad range, some financial service firms, and some corporates.

And then just a quick clarification, I remember last quarter, there was an asset in Springfield you were marketing. I think there was someone circling around the tenant, and you took that off. Any update on the potential sale there?

That project is VA 95. And as we announced the last quarter, the primary tenant in the project announced -- put out an RFP for a potential consolidation. So that uncertainty made the asset more difficult to market. And frankly the consolidation could be an opportunity for us, because we're going to compete for that. But we need to, I would say, re-stabilize that building before considering selling it. I also just want John to take a victory lap. I think we were identified as the highest, the leading real-estate company in New York with lease space over $100 square foot in 2016. So, the volumes in that market are not large, but we captured the highest share last year.

That’s good to know. Thank you very much.

By the way, that’s not our usual. But thank you very much, Owen.

Your next question comes from the line of Tom Lesnick, Cap One Securities.

I'll keep it brief since we're pretty late into the call here. But earlier, you guys mentioned properties in need to CapEx in your markets. Bigger picture, how do you guys view the risk adjusted value proposition between development and well located value-add acquisitions? And how that changed at all in the last few quarters?

Well, we prefer or we -- actually I would say, exclusively right now, are making investments where we can use our real-estate skills to create value. Doug described it in his remarks that a key value proposition for whole company. So, we're not interested in purchasing stabilized assets, the cap rates in the force, because they -- when we have the opportunity to create more value by either buying under-let assets or by development. And I think the examples of that are we have a very significant multi-billion dollar development pipeline underway, and we're still forecasting a cash NOI yield upon delivery for that portfolio in excess of 7%. All the projects that we delivered last year were in excess of 7%. And when we think those buildings are delivered, again it depends a little bit on where they are and what there. But if again stabilize buildings in our core markets are selling for four, because that's a significant profit that's realized by shareholders. So, to the extent we can continue to find projects, they're painful that way. We want to go forward with them. I would say the one thing that has changed that we've talked about over the last few quarters as we get further into the economic recovery as we see supply in our markets that does describe our pre-letting requirement for launching a new development had elevated. We don't have exact percentage that we adhere to, because it depends on the project and scale and the market condition. But clearly, our threshold for pre-letting is higher in office today. And I would say the other thing by the way we've done in addition to development is trying to purchase assets where when we lease them and when they roll to market that we will own them at a premium yield, certainly the 4%. And I think Colorado Center deal I would point to much recently that we did where I think those facts are going to come true.

Your next question comes from the line of Rob Simone with Evercore ISI.

My questions have all been answered. I was curious if you guys have selected any candidates for the asset sales that Mike mentioned. But you guys touched on that, so I’m good. Thanks.

Good. Well again, that concludes the questions. Thank you for your interest in Boston Properties and your time and attention today. Thank you.

This concludes today's conference call. You may now disconnect.