BXP, Inc. Q2 FY2025 earnings call

Leasing Activity

• Completed over 1.1 million square feet of leasing in Q2 2025, with total leasing in 2025 at 2.2 million square feet. Over the last 4 quarters, leasing volume was 5.7 million square feet, 18% higher than the prior 4 quarters.

Operating Environment

• Corporate confidence high due to pro-growth tax bill, less regulation, geopolitical relief, U.S. tariff agreements, and lower short-term interest rates. S&P 500 earnings growth projections at 7%-9%. In-person work behavior improving; Fortune 100 firms fully in office rose from 5% to 54% over 2 years ended Q2 2025.

Office Market Conditions

• Premier workplace segment (top 10% buildings) outperforms broader market. Direct vacancy for premier workplaces in 5 core CBD markets is 7.5 percentage points less than broader market. Asking rents for premier workplaces more than 50% greater than broader market.

Real Estate Private Equity Capital Markets

• Office sales volume in Q2 2025 was $14.2 billion, up 80% from prior quarter and 125% from Q2 2024. Equity investors reentering office sector.

343 Madison Avenue Project

• Proceeding with construction, letter of intent with anchor client for 30% of building, buying out 45% equity joint venture partner for ~$44M. Development cost ~$2 billion, projected stabilized cash yield on cost 7.5%-8%.

Asset Sales

• Various stages of execution for sale of 10 non-income producing assets, expected net proceeds ~$300 million over next 2 years. Exploring sale of income-producing properties for ~$300 million net proceeds likely in 2026. Example: 17 Hartwell Avenue rezoned for multifamily, sold land for $22M, own 20%, earn development fee >$4M.

Portfolio Occupancy

• Q2 2025 portfolio occupancy 86.4%, decline of 50 basis points. Percentage leased 89.1%, decline of 30 basis points. Development portfolio lease percentage increased to 67%.

No specific product segment financial performance with revenue contribution details provided in the transcript.

FFO Per Share

• FFO per share $0.05 above forecast and $0.04 above market consensus for Q2 2025. Raising midpoint of full-year 2025 earnings guidance by $0.02.

NOI

• Expect NOI from same-property portfolio to increase 0.25% at midpoint in 2025 vs 2024, cash basis same-property portfolio NOI to grow 1.25% at midpoint.

Interest Expense

• Increased assumption for interest expense on floating rate debt due to fewer Fed rate cuts, adding ~$3 million incremental interest expense for year, ~$0.02 per share higher expense.

Guidance Range

• Increased guidance range to $6.84-$6.92 per share, increase at midpoint from $0.03 better same-property NOI, $0.01 lower G&A expense, partially offset by $0.02 higher interest expense.

Market and Economic Risks

• Factors like changes in economic conditions, interest rates, geopolitical events could impact results.

Office Market Risks

• Variations in office market demand, particularly in different regions (e.g., West Coast behind East Coast in return to office behavior).

Development Risks

• Delays or cost overruns in development projects like 343 Madison Avenue.

Regulatory Risks

• Potential impact of regulatory changes, especially in New York City related to mayoral policies.

Q: Steve Sakwa from Evercore ISI asks about the unlevered return expected on the 343 Madison project and if clients are existing BXP tenants.

A: Owen Thomas responds that they think about it on a yield basis, expecting 7.5%-8% unlevered cash yield upon delivery, and mentions clients not necessarily being existing BXP tenants.

Q: Jamie Feldman from Wells Fargo asks about the impact of AI on demand and space needs.

A: Owen Thomas and Doug Linde discuss that AI is creating job creation at the top of the intellectual pyramid in gateway markets, with job destruction in more value markets, and Doug notes average lease length and tenant commitments.

Q: John Kim from BMO Capital Markets asks about capitalized interest on 343 Madison and financing options.

A: Michael LaBelle explains capitalized interest is imputed based on a blended rate, and they have multiple funding sources including asset sales, private/public equity, dividend reset, and debt.

Q: Nicholas Yulico from Scotiabank asks about mark-to-market and real-time leasing spreads.

A: Doug Linde explains mark-to-market was affected by specific deals like as-is leases and reduced transaction costs, and real-time leasing spreads vary by market.

Q: Jana Galan from Bank of America Securities asks about the MTA ground lease terms for 343 Madison.

A: Hilary Spann and Michael LaBelle explain it's a 99-year ground lease with known increases, no market valuation reset.

Q: Michael Goldsmith from UBS asks about guidance timing.

A: Michael LaBelle explains guidance increase is due to portfolio performance, seasonal expenses, and occupancy ramp.

Q: Caitlin Burrows from Goldman Sachs asks about dividend reset as a funding source.

A: Michael LaBelle says they have maintained a steady dividend, with FAD coverage, and no decision made on timing.

Q: Vikram Malhotra from Mizuho asks about rents at 343 Madison and occupancy trajectory.

A: Owen Thomas talks about rents in the mid-100s to mid-200s per sq ft, and Doug Linde discusses occupancy expected to end year around 87% despite adding developments.

Q: Omotayo Okusanya from Deutsche Bank asks about NYC mayoral race impact.

A: Owen Thomas and Hilary Spann discuss that policies may not be supported at state level, and NYC will continue to thrive.

Q: Anthony Paolone from JPMorgan asks about capital raising and leverage.

A: Michael LaBelle talks about target leverage range, plans to delever through asset sales, development delivery, and occupancy improvement.

Q: Dylan Burzinski from Green Street asks about occupancy trajectory.

A: Douglas T. Linde says occupancy has bottomed and will improve, with strong pipeline and leasing activity.

Q: Alexander Goldfarb from Piper Sandler asks about asset sales earnings impact.

A: Michael LaBelle says income producing asset sales are not dilutive if used to reduce borrowing.

Q: Upal Rana from KeyBanc Capital Markets asks about 360 Park Avenue leasing.

A: Douglas T. Linde and Hilary Spann discuss 33% leased with ongoing negotiations, including AI-related tenants.

Q: Ronald Kamdem from Morgan Stanley asks about 343 Madison floor plates and life science leasing.

A: Hilary Spann talks about floor plates ranging from 22k-27k sq ft, and Douglas T. Linde mentions lab market is thin with some office and maker tenants.

Q: Peter Abramowitz from Jefferies asks about demand in San Francisco Embarcadero vs South of Mission.

A: Douglas T. Linde and Rodney Diehl discuss South of Mission picking up, with AI-related demand and retail activity at Embarcadero.

Q: Brendan Lynch from Barclays asks about early tenant renewal discussions.

A: Douglas T. Linde says it's common for larger tenants in improving markets to start early negotiations.

Q: Nicholas Yulico from Scotiabank asks about 343 Madison funding timing.

A: Michael LaBelle says they'll focus on finalizing funding details over next quarters, aligning with lease signings.

Q: Caitlin Burrows from Goldman Sachs asks about mark-to-market and Q4 guidance.

A: Douglas T. Linde explains mark-to-market was affected by specific deals, and Michael LaBelle says Q4 guidance is due to occupancy ramp and lower expenses.

Q: Alexander Goldfarb from Piper Sandler asks about Norges JV at 343 Madison.

A: Owen Thomas clarifies Norges isn't the partner at 343 and their partnership is stable.