• FFO per Share: $1.81, $0.01 above forecast and in line with market consensus.
• Leasing Volume: Over 1.1 million square feet in Q3, 5% greater than Q3 2023.
• Leasing Volume YTD: 25% more than the first three quarters of 2023.
• Occupancy Rate: 87% at the end of Q3, with a 210 basis point difference between occupied and leased space.
• Development Pipeline: 2.7 million square feet and $2.1 billion of BXP investment, with $1 billion remaining to be funded.
• Debt Financing: $334 million mortgage loan extended at SOFR plus 148 basis points; $300 million mortgage financing extended with bifurcation into $100 million unsecured term loan and $200 million mortgage loan.
• Bond Issuance: $850 million of 10-year bonds at a 5.75% coupon.
• FFO Guidance for 2024: Narrowed to $7.09 to $7.11 per share.
• Office Sales Volume: $8.2 billion in Q3, 15% greater than Q2 2024 and 32% over Q3 2023.
• Occupancy Guidance for 2025: To be provided in the next call.

• Warning! GuruFocus has detected 14 Warning Signs with BXP.

Release Date: October 30, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• BXP Inc (NYSE:BXP) reported FFO per share $0.01 above forecast, aligning with market consensus.
• Leasing volume increased by 25% in the first three quarters of 2024 compared to the same period in 2023.
• BXP Inc (NYSE:BXP) received recognition for sustainability efforts, including awards from TIME Magazine and Nareit.
• The Federal Reserve's interest rate cuts are expected to positively impact real estate valuations and corporate earnings.
• BXP Inc (NYSE:BXP) has a strong development pipeline with nine projects underway, expected to contribute to FFO growth.

Negative Points

• Long-term interest rates have been rising, posing challenges for some corporations.
• Leasing activity in development properties is lagging, particularly in the life sciences sector.
• The sublease market, especially on the West Coast, remains a significant challenge.
• Occupancy rates in some markets, like San Francisco, are still below pre-pandemic levels.
• The private market for office sales is still catching up to public market valuations, limiting transaction opportunities.

Q & A Highlights

Q: What needs to change in the San Francisco and Boston suburbs leasing markets to improve the vacancy situation? A: Douglas Linde, President & Director, explained that increased demand from technology and life science sectors is necessary. Rodney Diehl, EVP of West Coast Regions, noted that sublease availability needs to decrease in San Francisco. Bryan Koop, EVP, Boston Region, highlighted the importance of product quality and location, with premier spaces outperforming older inventory.

Q: How is BXP approaching pre-leasing and development risks at 343 Madison Avenue given slower leasing at other developments? A: Owen Thomas, CEO & Chairman, stated that the area north of 42nd Street in New York is strong, driven by financial and legal services. Hilary Spann, EVP, New York Region, added that recent large leases in Midtown indicate demand for high-quality space, contrasting with slower tech-driven Midtown South.

Q: What is the outlook for occupancy and leasing activity in 2025? A: Douglas Linde, President & Director, expressed optimism about signing over 2 million square feet of leases with revenue commencing in 2024 and 2025, aiming for flat or improved occupancy. He noted that detailed guidance for 2025 will be provided in the next call.

Q: How does BXP view the potential for external growth and acquisitions in 2025? A: Owen Thomas, CEO & Chairman, mentioned that BXP's look-through cap rate is in the mid-6% range, with development yields in New York expected to be higher than pre-pandemic levels. He noted that acquisition opportunities are limited due to sellers' price expectations, but improved financing conditions could increase transaction activity.

Q: What is BXP's strategy for residential development and land use? A: Owen Thomas, CEO & Chairman, explained that BXP plans to develop residential projects with third-party capital, focusing on generating fees and profits rather than long-term holds. Douglas Linde, President & Director, added that BXP is actively seeking to create value from its land inventory through various uses, including residential, big box, and data centers.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.