BXP, Inc. Q3 FY2025 earnings call

• Leasing: Third quarter leasing was strong, with over 1.5 million square feet leased, and year-to-date leasing up 14% from 2024. Leasing activity is tied to client growth and space use, and S&P 500 earnings growth supports positive leasing conditions.
• Asset sales: Set goal to sell 27 non-strategic assets for ~$1.9 billion net proceeds by year-end 2027, with strong progress made so far.
• Portfolio optimization: Reallocating capital to premier workplace assets in CBD locations, selling suburban assets and launching new developments in prime areas.
• New development: Allocating capital to office and multifamily developments, with office developments offering high cash yields and multifamily having projects under construction and in various stages of entitlement/design.
• 343 Madison project: Finalizing lease commitment with financial services client and in discussions with other large users, seeking equity partner for 30% to 50% interest.

In the third quarter, BXP completed over 1.5 million square feet of leasing, which was 39% greater than the third quarter of 2024 and 130% of the last 5-year average for the third quarter. Year-to-date, 3.8 million square feet has been leased, 14% greater than the first 3 quarters of 2024. Regarding asset sales, 4 land assets have been sold with total net proceeds of $57 million, 9 assets are under contract with net proceeds of approximately $400 million, and 10 additional properties are in the market with estimated net proceeds of $750 million to $800 million. For 2025, dispositions are projected to aggregate approximately $500 million to $700 million in net proceeds. The premier workplace segment in core gateway markets continues to outperform the broader office market, with lower direct vacancy and higher asking rents.

• Third quarter FFO per share was $0.04 above forecast and $0.02 above market consensus. Raised midpoint of 2025 earnings guidance by $0.03.
• Full year 2025 FFO expected to be $6.89 to $6.92 per share, with factors like higher same-property NOI, lower net interest expense offset by lower NOI from asset sales.
• 2026 guidance affected by leasing pipeline, refinancing plan, and timing of asset sales.

• Market volatility could impact leasing and asset sale outcomes.
• Uncertainty in asset sale timing may affect financial performance.
• City policy changes could impact the business environment.

Q: Steve Sakwa from Evercore ISI asked about opportunities in smaller markets like Seattle and L.A. and development opportunities there.

A: Owen Thomas responded that those markets are smaller, no near-term development opportunities in L.A., Seattle, or San Francisco currently, but would consider acquisition opportunities if they present.

Q: Anthony Paolone from JPMorgan asked about leasing remaining in 2026 and confidence in occupancy pickup.

A: Douglas Linde replied that they are working to renew clients, available expiring space is limited, and confident in achieving ~200 basis points occupancy increase by end of 2026 and another 200 basis points by end of 2027.

Q: John Kim from BMO Capital Markets asked about recovery in San Francisco and Salesforce's commitment.

A: Douglas Linde and Rodney Diehl responded that AI demand is in low-rise south of Mission Street, Salesforce's commitment is positive but AI demand not a tower business currently, and seeing growth from technology companies in San Francisco.

Q: Richard Anderson from Cantor Fitzgerald asked about pre-pandemic leases and tenant dynamics.

A: Douglas Linde and Michael LaBelle responded that BXP's portfolio clients are growing, no significant exposure to large tenants with expiring space, and growth from clients taking additional space post-pandemic.

Q: Nicholas Yulico from Scotiabank asked about occupancy build and vacant space.

A: Douglas Linde and Hilary Spann responded that there is leasing in the works for 2026, with activity at 360 Park Avenue South increasing and tour activity growing.