Welcome to the Washington Real Estate Investment Trust Year End 2016 Earnings Conference Call. As a reminder, today’s call is being recorded. Before turning over the call to the company’s President and Chief Executive Officer, Paul McDermott, Tejal Engman, Director of Investor Relations, will provide some introductory information. Ms. Engman, please go ahead.

Thank you and good morning everyone. Please note that our conference call today will contain financial measures, such as FFO, core FFO, NOI, core FAD, and adjusted EBITDA that are non-GAAP measures as defined in Reg G. Please refer to our most recent financial supplement and to our earnings press release both available on the Investor page of our website and to our periodic reports furnished or filed with the SEC for definitions and further information regarding our use of these non-GAAP financial measures and the reconciliation of them to our GAAP results. Please also note that some statements during this call are forward-looking statements within the Private Securities Litigation Reform Act. Forward-looking statements in the earnings press release along with our remarks are made as of today and we undertake no duty to update them as actual events unfold. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results to differ materially. We provide these risks in our SEC filings. Please refer to Pages 9 through 24 of our Form 10-K for our complete risk factor disclosure. Participating in today’s call with me will be Paul McDermott, President and Chief Executive Officer; Steve Riffee, Executive Vice President and Chief Financial Officer; Tom Bakke, Executive Vice President and Chief Operating Officer; Drew Hammond, Vice President, Chief Accounting Officer and Controller; and Kelly Shiflett, Vice President, Finance and Treasurer. Now, I would like to turn the call over to Paul.

Thank you, Tejal and good morning everyone. Thanks for joining us on our year-end 2016 earnings conference call. Washington REIT reported 2016 core FFO of $1.76, which is the midpoint of our guidance range and $0.05 higher than our full year 2015 core FFO of $1.71. Better than expected same-store NOI growth was the key performance driver in 2016. As we grew same-store physical occupancy by 220 basis points while simultaneously growing same-store rents by 160 basis points over full year 2015. Let me begin by summarizing our successful execution in 2016 and its expected impact on our future growth. Overall, 2016 was a transformational year for Washington REIT. We sold our suburban Maryland office portfolio, reallocated capital into value-add, metro-centric multifamily, and further reduced our debt thereby strengthening both the left and right sides of our balance sheet. Our capital allocation elevated the quality of our portfolio, reduced the volatility of our cash flow, and improved our net debt to adjusted EBITDA ratio from approximately 7x at year end 2015 to 6.1x at year end 2016. In aggregate, we believe our execution has improved Washington REIT’s long-term risk-adjusted growth profile. It has also better positioned our portfolio to capitalize on growth opportunities in our region, which remain concentrated in urban, metro-centric locations with walkable amenities. Finally, with our 2016 execution, we have completed our programmatic asset recycling and established a solid platform for our future growth. Today, we forecast that our portfolio will grow same-store NOI by 4.75% to 5.25% in 2017. This is our highest forecast for annual same-store NOI growth in 5 years or since sequestration impacted the real estate fundamentals in our region. By successfully executing our strategic plan, we have adapted to thrive despite a challenging market and are poised to further benefit from a…

Thanks, Paul. Good morning, everyone. 2016 net income of $119.3 million or $1.65 per diluted share exceeded 2015 net income of $89.7 million or $1.31 per diluted share largely due to higher gains on asset sales, lower interest expense and higher income from real estate. We reported core FFO of $1.76 per diluted share for full year 2016, the midpoint of our most recent guidance range. This represents approximately 3% core FFO growth over 2015 core FFO per diluted share of $1.71, while partially absorbing dilution from asset recycling in equity issuance. Core funds available for distribution or core FAD was approximately $102 million in 2016, representing an 85% payout ratio, which was in line with our projections. We continue to target an annual core FAD payout ratio in the mid-80s. 2016 same-store NOI grew 1.2% over the prior year. Same-store rents increased 160 basis points over full year 2015 and same-store physical occupancy improved 220 basis points over the prior year to end 2016 at 94.3% occupied. Starting with office, 2016 same-store NOI grew 1.4% over the prior year, exceeding our most recent guidance of approximately 1%. Same-store office rents grew 180 basis points over full year 2015 primarily due to annual rent increases across our D.C. office portfolio. Same-store office physical occupancy improved 110 basis points over the prior year to end 2016 at 92.1%. We leased approximately 600,000 square feet of office space in 2016 driven by approximately 440,000 square feet of office renewals, which brought our 2016 office tenant retention rate to approximately 70%. In the fourth quarter, we renewed approximately 65,000 square feet of space and achieved an 8.1% improvement in GAAP and a 1.3% improvement in cash rent spreads. Our approximately 39,000 square feet of new leases were 5.7% higher on a GAAP basis,…

Thank you. As Steve said, having repositioned the portfolio, our 2017 core FFO guidance on a pro forma basis represents approximately 7% core FFO growth at the midpoint. We are excited to be commencing 2017 with an overall same-store NOI growth expectations of 4.75% to 5.25% and office same-store NOI growth expectations of 7% to 7.5%, the strongest in our recent history. Our strategic efforts over the past 3 years have aligned the portfolio, the balance sheet and the people needed to capitalize on long-term value creation opportunities in our region. Today, we are uniquely well positioned to succeed in a new era of growth and alignment in the Washington Metro region for the following key reasons. First, approximately half of our office and more than 60% of our multifamily NOI is derived from Northern Virginia, where increased federal defense spending is expected to be a key growth driver in 2018 and beyond. Second, the other half of our office NOI is derived from the CBD and West End, which are home to tenant constituencies such as accounting firms, associations and law firms that are expected to expand in an era of far-reaching tax and regulatory reform. Third, our office portfolio doesn’t compete in GSA heavy submarkets and has negligible existing GSA tenant exposure. And finally, with multifamily supply abating and increased consumer confidence supporting our retail in this region, all three of our asset classes are growing simultaneously while we execute a manageable redevelopment and development pipeline and maintain a conservative balance sheet. Now, I would like to open the call to answer your questions.

Thank you. Ladies and gentlemen, at this time we will be conducting a Question-and-Answer Session. [Operator Instructions] And our first question comes from the line of Dave Rodgers with Robert W. Baird. Please proceed with your question sir.

Yes. Good morning guys. Paul, just want to start maybe with Braddock and Engility, this is in an asset that you had kind of previously identified as one of the big redevelopment drivers, can you maybe put a little bit of color around potential spin that you are thinking there, the mark to market on Engility’s lease and really what you are looking for in terms of downtime?

Yes. Dave, Tom Bakke, how you doing?

Good morning.

I will start off. This is – we have been working with Engility as we have discussed on previous calls for some time. And basically, they lost the USAID business and so they consolidated plus they repurchased by task. And so they’ve consolidated that business into another – that’s been consolidated into other company. So they are going to vacate. And we have been working on a major repositioning effort on that asset that will – we have been in the market with. And so when they vacate, we will undergo that, but we do have an active prospect, we are negotiating with and we might be able to concurrently reposition and re-tenant it together.

Tom, you guys took it out of the same-store pool, should we expect a fairly meaningful spend or how should we think about the capital going in?

Yes. I think it’s going to be a fairly typical repositioning of an empty building. And you will see lobby, amenities, bathrooms that kind of spend. Our budget isn’t finalized there, but the typical spend that you see on those kinds of repositionings are $30 to $40 a foot.

And how does Engility compare to market in that submarket?

Engility is a little bit above market as they vacate and we are probably going to see that be a roll down on a cash basis, but probably up on a GAAP basis.

Okay, great. Thanks for that. Paul, maybe one for you, just in terms of acquisitions, I realize it is not in the guidance , neither our dispositions, do you have an active pipeline that you are looking at, I know it’s going to be opportunistic, but how opportunistic do you anticipate being this year?

Well, Dave, let’s step back for a second and let’s look at what we just came out of in 2016. I think we saw a real mixed bag of risk being brought to the marketplace. I think we went after the assets that we felt that we could create the most value on i.e., Riverside and then we transitioned out of a product that we felt we were going to be challenged from a capital allocation standpoint to press. I would say that, if you talk to the top three brokerage firms here in D.C., the end of fourth quarter and even as of January, when we were pounding the phones, I think the pipeline was fairly light. And I would say that because a lot of people were in a wait and see mode with the new administration, we are starting to see a thaw on that right now. We are definitely seeing the same three brokerage firms doing a lot of BOVs right now. I think that our observation would be, we are going to continue to go after the three asset classes that we have. But each one of the specific product types have to have value creation potential. We are keeping our eye on a couple of assets in each space, but kind of in that core space and particularly Downtown, we are continuing to see a lot of foreign capital come into our space. I think in 2016, we were the second highest market in the U.S. with about just a little over $2.5 billion come in. We don’t see that changing, matter of fact I think in the first quarter, you are going to see some big sovereign wealth deals get closed here in town. But they are not really hunting in the same space that we are. So I think if you look at Riverside, if you look at The Wellington, if you look at what we are doing in retail and more particularly, if you look at what we did – what we are doing in Army, Navy and what we did accomplish at 1775. You probably could a good handle Dave, on what we are looking for this year and hopefully what we can execute on, but right now there is nothing completely in the cross airs that we would put a stake in the ground on this call.

Maybe last question is for Steve, I guess as you look at a year from now Steve and you kind of look at the capital plan for the year, how do view the leverage profile the company may be changing between now and the end of the year, any meaningful changes that you have planned that we should think about? Thanks.

Thanks Dave. Well, we entered the year right around 6 at 6.1. If you think back to a year ago, we had hoped to get to the mid-6s. So we are ahead of schedule. I think we have said all along that once we got there, we are very comfortable operating in low to mid-6s, between 6 and say 6.5. We have taken care of all of our refinancing of debt, have no debt maturities for the next 2 years, leverage is a little bit ahead of schedule. We will be breaking ground on the trough. So this year, we are probably going to spend around $40 million, it could be slightly higher than that on development, the year that we would hope if everything of our research still supports it to have a higher development commitment in terms of spend would be ‘18 because we would think in the second half of ‘18 we would also possibly be breaking ground on the Riverside. So we don’t have a lot of capital needs because we have done a good job of working ahead of it. That said, we don’t need – we put a guidance together where we forecast that we can be in this range without being a net acquirer or a net seller. The company remains a local sharp shooter. We are still asset managers. So we are going to continue to pursue those value add opportunities. And I think we have increased our optionality in terms of all the different capital that we could use. There is an asset or two that we think would be candidates for recycling, we think we have access to all the capital markets and we have unencumbered the balance sheet. I think one of the things that pointed out I think in our earlier comments is that we now have our secured debt to total assets to below 5% as of earlier this quarter. So we have a lot of flexibility and I think the company is well positioned going forward. And we like the portfolio we have. As we said, now that repositioning was done closer to the end of the year on a pro forma basis that’s 7% growth year-over-year. And I think that we now have the flexibility and the team has got a track record of finding additional value-add opportunities.

Right. Thanks guys.

[Operator Instructions] And our next question comes from the line of Chris Lucas with Capital One Securities. Please proceed.

Hey, good morning everyone. Just a couple of follow-up questions, just where does the Walker House stand on the disposition list, it was for sale and taken off, it’s no longer on the held for sale list, I guess I am just wonder what – where you are with that transaction?

Chris, it’s Tom, so Walker House we still are holding that as potential use of proceeds for – as a currency. That asset has been performing well. We don’t see the long-term growth projections in that submarket. So we certainly still envision selling that and we probably would do that sometime this year, but again it’s a good use of currency for us.

And that – and this is Steve. And that said, as we have talked about it, while it may have be at its maximum value, we decided there is no downside on holding it and trying to match it up. The real estate decision was the capital allocation decision with. And so we think it’s high on the list of currency if we have an opportunity.

Okay. And then on 2445 M, is the plan there as it relates to sort of renovating the asset, is that to look for a single tenant or are you looking for floor tenants, how are you thinking about marketing that?

Well, we have – we are in the market to re-tenant as an office building. I think as we have said before, we are looking at some alternative uses as well. We have got good interest from the current market for several law firms and some other large tenants. I don’t think you are going to see that get re-tenanted by one single tenant, it’s just too big. More than likely, if we do released, it will be one large anchor tenanted than multi-tenant for the rest.

So Tom, are you guys past the point of making decision, as it relates to whether you would convert that asset or move forward with an office or is that conversion still sort of hanging out there as a possibility depending on demand?

It’s still possibility. Some of it has to – it relates to whether we can get some help from the city on some incentives to convert, because I think the city is looking at that as 2018 policy decision. And that would make it a lot more compelling. So I think we are continuing to analyze that all the while where we are trying to take it to the market as an office option.

Okay. And then just on the tenant retention for 2017, the office tenant retention, if you exclude obviously Engility, what are you guys assuming in your same-store NOI guidance for retention?

I think we have averaged between 60% and 70% historically. And I think that’s really what’s embedded other than the known roll over now of Engility.

Okay, that’s all I have. Thank you.

Thanks Chris.

[Operator Instructions] There are no further questions at this time, I will turn the call back over to Mr. McDermott for any closing remarks.

Thank you, everyone. We remain excited about the future of Washington REIT and are confident in our ability to capitalize on an improvement in regional economic conditions. Everyone here at Washington REIT is committed to continue to transform this company into a best-in-class operator of real estate in the Washington, D.C. region. Again, I would like to thank you for your time today and we look forward to seeing many of you at the upcoming conferences and on our NDRs over the coming months. Thank you.

Thank you. Ladies and gentlemen, this does conclude the teleconference for today. And we thank you for your time and participation. You may disconnect your lines at this time. Have a wonderful rest of the day and a great weekend.