Bryan Koop: This is Bryan Koop for Waltham. I’ll continue to echo what Doug talked about, and we intentionally call it an Urban Edge market because it is less than 10 miles from downtown Boston, and that’s an attribute that shouldn’t be taken lightly in terms of the commute and also the density of the population surrounding that Waltham market. Some further color on what Doug brought up. We are seeing a difference between our — the east side of I-95, which is all the attributes of urban project and maybe for the analysts who are very familiar with this, attributes that we have in rested, taller buildings, more amenities, et cetera. And we continue to see access and the highway is going to improve there. We put a new ramp in last year, and there is a forecast for more there.
Where we are seeing some weaknesses in those assets that Doug mentioned like the Bay Colony, which have attributes that are very similar to the conventional suburban office buildings spread out feels more rural, but actually the location is very close. That’s where there is a little bit of weakness. But we continue to believe that Waltham is an urban edge market and quite different than the conventional suburbs that most real estate people would describe.
Operator: Thank you. And so our next question comes from the line of Blaine Heck from Wells Fargo.
Blaine Heck: Great. Thanks. Good morning. Just following up on an earlier question and maybe taking out the element of timing on occupancy, and just focusing on the lease rate this year and potential progression there. You talked about the large exploration still remaining at 680 Folsom and 7 Times Square. But when you think about those in conjunction with your leasing pipeline, which Doug you said was 875,000 square feet plus and Owens’ characterization of the pipeline is growing in the back half of the year and into 2025. I guess how much do you think you can move the lease rate up by as you look towards the end of the year?
Douglas Linde: So when you use the word lease rate, you’re talking about occupancy rate, right, not economic rent rate, I’m assuming. So again, I think that it’s going to be slow and steady. So our projections when we gave our guidance during the call in the first quarter was that we were going to hopefully be flat to where we ended 2023 at the end of 2024 and then we’ll continue to make additional progress. And then if you look at our exploration schedules, they’re pretty manageable, right? I mean we have 5% to 6% expiring every year for the next four or five or six years. And so we don’t — we need to lease space. We need to gain market share, which is, again, my sort of point. And we are gaining market share in our markets, but it’s — when we do have technology companies expiring, we have to fight that water coming at us.
And so it’s challenge to dramatically increase occupancy in the short term. But we are getting to the point where we believe occupancy will continue to moderate upwards.
Operator: Thank you. And I show our next question comes from the line of Michael Goldsmith from UBS. Please go ahead.
Michael Goldsmith: Good morning. Thanks a lot for taking my question. What are the economics of the new multifamily development? And how do you think about your cost of capital? And then along the same lines, what is the thought process on the new commercial paper program and what upsize options do you have? Thanks.
Douglas Linde: Well, let’s let Mike answer the commercial paper question, and then I want to answer the question on our return expectations for multi-family.
Michael LaBelle: So we decided to enter in this commercial paper program because we’re always looking for additional markets to access especially in this environment. And it’s the cheapest form of floating rate paper that we can issue. Historically, we’ve been primarily fixed rate. We’re going to continue to be primarily fixed rate, but I think we will have a moderate amount of floating rate debt on a consistent basis over the foreseeable future. Right now, we have about $1.2 billion of unsecured floating rate debt, and we have about $700 million of joint venture unsecured debt. I think it will go down from there going forward. But we view using this commercial paper program as a consistent piece of our debt structure over the next several years.
And because we can save 75 basis points by using it, it’s a very liquid marketplace, we’ve got high credit ratings. So our access has been good, and now we’ve experienced it for the first couple of weeks, which has been very, very positive. So we’re building an investor base in it. So we just felt like additional arrow in our quiver from a capital perspective and lower cost of capital, both drove that decision.
Owen Thomas: Yes. It’s Owen, let me address the 121 Broadway development. As I described in my remarks, this is a notable building. It’s the tallest building in Cambridge and it’s also a very high quality residential tower given the finishes and our design and planning. Due to coordination with the development of the vault for Eversource. The project is not expected to deliver its first units until late 2027 and expected to stabilize and not until the second quarter of 2029. So again, you have to think about this project as part of the overall East Cambridge development that we’ve been working on and talking to all of you about for the last two or three years. So the forecast returns on the 121 Broadway development alone are below our typical thresholds for development.
However, if you look at the yields that we’re receiving from the entire entitlement package. So that includes 121 Broadway. It includes 290 Binney Street, and it includes what we think we can get with the remaining commercial entitlements that we still have those projected returns do meet our development hurdles. And then to the extent that we are looking at new stick build, our expectation that those returns are going to be meaningfully higher than in urban development. And so we’re talking about yields and well in excess of 6%. And that’s what we need to consider starting a new residential development in 2024, 2025.
