BXP, Inc. Q4 FY2024 earnings call

• Leasing: Strong Q4 leasing, with over 2.3 million sq ft leased, and 5.6 million sq ft leased in 2024 (35% more than 2023). Significant pre-leases and anchor commitments like with Bain Capital, etc. - Market forces: Interest rates, return to office, and corporate earnings growth favor BXP. New administration policies may be business-friendly. - Development: Commenced office development in DC (725 12th Street), 343 Madison project in NY, and planned residential developments. Delivered projects like 300 Binney Street and Skymark. - Portfolio: In-service occupancy at 87.5% at year-end, leased square footage at 89.4% at end of Q4.

BXP's fourth quarter demonstrated strong performance. FFO per share was in line with forecast. They completed over 2.3 million square feet of leasing in Q4, with 5.6 million square feet leased in 2024, 35% greater than 2023. Premier workplaces outperform the broader office market: direct vacancy for premier workplaces is 13.2% vs 18.8% for the broader market, net absorption for premier workplaces is positive 8.8 million square feet over three years vs negative 15.6 million for the broader market. Office sales volume in Q4 accelerated, but there were limited premier workplace sale transactions in core markets.

2025 FFO guidance is $6.77 to $6.95 per share, a decline from 2024. Development contribution to NOI expected $19M-$22M. Same property NOI projected to be -1% to +0.5% change from 2024. Fee income expected $32M-$38M, an increase from 2024. Net interest expense projected $610M-$625M, an increase from 2024.

• Interest rate uncertainties: Impact on cost of capital. - New administration policies: Potential inflation and higher yields from fiscal deficits. - West Coast fires: Impact on LA office market, though no apparent pricing impact yet. - Life science market challenges: Weak demand for lab space, sublease availability.

Q: Steve Sakwa asked about retention ratio and leasing activity.

A: Doug Linde discussed known expirations and leasing projections, mentioning low expirations in 2026 and 2027 and leasing plans.

Q: Andrew Berger inquired about concessions.

A: Doug Linde, Hilary Spann, and Bryan Koop commented on concessions, with factors like inflation and market availability affecting them.

Q: Alexander Goldfarb asked about risks to FFO pickup.

A: Doug Linde and Mike LaBelle talked about interest rates and other factors affecting FFO.

Q: John Kim asked about life science tenants.

A: Doug Linde, Rodney Diehl, and Bryan Koop discussed life science tenants' shift and market conditions.

Q: Nick Yulico asked about occupancy guidance.

A: Mike LaBelle and Doug Linde addressed occupancy impacts from developments and building removals.

Q: Michael Goldsmith asked about leasing and occupancy.

A: Doug Linde provided insights on leasing goals and market performance.

Q: Floris Dijkum asked about capital allocation.

A: Owen Thomas discussed development and acquisition strategies in different markets.

Q: Michael Griffin asked about San Francisco vacancy.

A: Doug Linde and Rodney Diehl talked about San Francisco's leasing efforts and amenity strategies.

Q: Richard Anderson asked about return to office.

A: Doug Linde commented on return to office's impact on leasing and corporate earnings.

Q: Blaine Heck asked about tenants' willingness to move.

A: Doug Linde, Hilary Spann, Rodney Diehl, and Jake Stroman discussed tenants' space renovation and move preferences.

Q: Caitlin Burrows asked about San Francisco absorption.

A: Doug Linde and Rodney Diehl provided insights on San Francisco's absorption and amenity efforts.

Q: Upal Rana asked about Biogen layoffs.

A: Doug Linde discussed Biogen's lease and market outlook.

Q: Dylan Burzinski asked about concessions and rent growth.

A: Doug Linde and Mike LaBelle talked about rent growth in strong markets and supply dynamics.

Q: Michael Lewis asked about FAD and cash flow.

A: Mike LaBelle discussed FAD projections and CapEx.

Q: Omotayo Okusanya asked about renewal vs waiting.

A: Doug Linde talked about BXP's approach to renewals and not market timing.

Q: Jamie Feldman asked about office recovery.

A: Owen Thomas and Mike LaBelle commented on office recovery, impairments, and market spillover effects