Boston Properties, Inc. (BXP) on Q4 2021 Results - Earnings Call Transcript

Operator: Good day and thank you for standing by. Welcome to Boston Properties’ Fourth Quarter and 2021 Earnings Call. At this time, all participants are in a listen-only mode. After the speaker’s presentation, there will be a question-and-answer session. Please be advised that today’s conference is being recorded. I would now like to hand the conference over to Ms. Helen Han, Vice President, Investor Relations. Ma’am, please go ahead. Helen Han: Thank you. Good morning, and welcome to Boston Properties’ Fourth Quarter and Full Year 2021 Earnings Conference Call. The press release and supplemental package were distributed last night and furnished on Form 8-K. In the supplemental package, the company has reconciled all non-GAAP financial measures to the most directly comparable GAAP measure in accordance with Reg G. If you did not receive a copy, these documents are available in the Investor Relations section of our website at investors.bxp.com. A webcast of this call will be available for 12 months. At this time, we would like to inform you that certain statements made during this conference call, which are not historical, may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act. Although Boston Properties believes the expectations reflected in any forward-looking statements are based on reasonable assumptions, it can give no assurance that its expectations will be obtained. Factors and risks that could cause actual results to differ materially from those expressed or implied by forward-looking statements were detailed in yesterday’s press release and from time to time in the company’s filings with the SEC. The company does not undertake a duty to update any forward-looking statements. I’d like to welcome Owen Thomas, Chief Executive Officer; Doug Linde, President; and Mike LaBelle, Chief Financial Officer. During our Q&A portion of our call, Ray Ritchey, Senior Executive Vice President, and our regional management teams will be available to address any questions. I would now like to turn the call over to Owen Thomas for his formal remarks. Owen Thomas: Thank you, Helen, and good morning, everyone. I’d like to start by introducing Helen Han, who is our new Head of Investor Relations. Helen was formerly Head of Marketing for our western region has been with BXP for over 15 years and has a deep wealth of knowledge about our company and people. Welcome, Helen, great to have you here. So today, I am going to cover BXP’s operating momentum, the economic conditions that serve as a backdrop for BXP’s operations as we enter 2022, the current private equity capital market conditions for office real estate as well as BXP’s capital allocation activities and growth potential. BXP’s financial results for the fourth quarter reflect the impact of the recovering U.S. economy and increasing needs for our clients for securing high quality office space. Our FFO per share this quarter was above market consensus and the midpoint of our guidance. We completed 1.8 million square feet of leasing, our third consecutive quarter of significantly higher leasing activity. It was 55% above the fourth quarter of 2020 and in line with our pre-pandemic leasing level. With an average term of 8.6 years on the leases signed this past quarter, lease commitments by our clients continue to be long-term in nature. This success can be attributed to not only our execution, but also the enhanced velocity and economics achieved in the current marketplace for premium quality assets with great amenities and transit access, which are the hallmarks of BXP strategy and portfolio. Now turning to 2022, we believe the market and economic factors which impact BXP are on balance very favorable. Though the Omicron variant has been a setback in the course of the pandemic has proven hard to forecast, most experts believe conditions will improve in 2022, resulting in more workers returning to the office and further improved space demand. The economic recovery in the U.S. continues with consensus GDP growth predicted to be 4% in 2022 and innovations in technology and life science remain promising and well funded, a key driver for office and lab space demand. Capital flows into the real estate sector will also likely grow further, as investors, one, rebalance their portfolios away from equities due to strong performance from the lows of the pandemic; and two, have a reluctance to allocate these funds to fixed income due to rising interest rates. New office supply is also slowed down given the demand uncertainties created by the pandemic another long-term positive for the office business. Moving to the challenges, interest rates are raising, which will likely continue due to the Feds current focus on inflation and signaling, it will raise the Fed funds rate multiple times in 2022. BXP had significant and well timed refinancing activity in 2021, and therefore faces limited debt financing needs in the coming year. Inflation is a greater challenge and has several dimensions. Rising construction cost will require higher rental rates to make development feasible. However, over time, higher replacement costs should increase the value of our existing portfolio of buildings. The labor market is also very tight, which contributes to our client’s hesitancy, and bringing their employees back to an in-person work environment. As we have stated repeatedly, we believe this phenomenon will change over time given widespread corporate dissatisfaction with a decaying of efficiency, retention and culture associated with remote work. Though challenges persist we see 2022 market conditions as a favorable backdrop for BXP to continue to perform. So moving to the real estate capital markets an all time record of commercial real estate sales volume was achieved in the fourth quarter and private capital market activity for office assets was similarly robust. $39 billion of significant office assets were sold in the fourth quarter, up 35% from the previous quarter and up 90% from the fourth quarter a year ago. Cap rates are stable or declining for assets with limited lease rollover and anything life science related, and activity is increasing for assets facing near-term lease expirations. The Boston market was particularly active with 2 major life science recapitalization deals in Cambridge selling for around $2,200 a square foot and sub 4% cap rates. 3 significant deals in the Seaport District selling for approximately $1,500 a foot on a fee simple basis with cap rates at or below 4%. And 2 CBD sales at $700 to $950 a square foot with cap rates in the low 4% range. Notably in New York City, 2 major assets in the Hudson Yards area sold in full or part for an average of approximately $1,400 a square foot and cap rates of 4.5% to 5% on a stabilized basis. In the District of Columbia, 4 transactions completed aggregating $750 million with pricing averaging approximately $550 to $600 a square foot on a fee simple basis and cap rates in the low 5% range. And pricing in Seattle continues to escalate with deals closed or announced and South Lake Union priced above $1,200 a square foot a new local record and a sub 4% cap rate, in Fremont at over $1,000 a foot and a low 4% cap rate, and in the CBD at around $750 a square foot and mid 4% cap rate. Regarding BXP’s capital market activity and starting with acquisitions, we closed on the previously described 360 Park Avenue South acquisition in New York City in December and placed the project into our active development pipeline. 2 of our strategic capital program partners will co-invest in the deal if capital is drawn for redevelopment bringing our interest to 42% on a stabilized basis. We continue to have elevating dialogues with potential private equity partners are pursuing an active pipeline of both on and off market deals in many of our markets and anticipate additional acquisition activity of value add assets with capital partners in 2022. In 2021, we also completed noncore asset sales of $225 million and anticipate higher disposition volumes in 2022. We completed a very active quarter with our development pipeline we delivered fully into service 100 Causeway Street in Boston, the Marriott headquarters at 7750 Wisconsin Avenue in Bethesda, and the lab conversion project at 200 West Street in Waltham. In the aggregate, BXP share of these projects represents 1.5 million square feet of development and $460 million of investment. The 3 assets or 98% leased being delivered below budget and ahead of schedule at a projected stabilized cash yield in excess of 8% and are projected to add $41 million to our NOI on a stabilized basis. Given the market cap rates are previously described for high quality office a 4% to 5%, we expect these projects in the aggregate will create approximately $380 million of value above our $460 million in cost for BXP shareholders. Also, we partially placed into service Reston Next in Reston. And we are continuously refreshing our development pipeline by adding just this past quarter 360 Park Avenue South and 103 CityPoint, a speculative ground up lab development aggregating 113,000 square feet in our CityPoint development in Waltham. We have a very active pipeline of office and lab developments and redevelopments ready to announce when they commence expected later in 2022, and Doug will describe the strong leasing success we are achieving with our lab development. After all these movements, our current development pipeline aggregates 3.4 million square feet and $2.5 billion of investment is already 59% leased, and projected to add approximately $190 million to our NOI over the next 3 years. So in summary, we had another active and successful quarter with strong leasing and financial returns, and are excited for our prospects for continued growth in 2022. We expect significant growth in our FFO per share this year driven by improving economic conditions and leasing activity, continued recovery of variable revenue streams, delivery of a well lease development pipeline, completion of 4 new acquisitions in 2021, a strong balance sheet combined with capital allocated from large scale private equity partners to pursue additional new investment opportunities as the pandemic recedes, a rapidly expanding life science portfolio in the nation’s hottest life science markets and well timed refinancing activity in 2021 and lower capital costs. So with that, I’ll turn it over to Doug. Douglas Linde: Thanks, Owen. Good morning, everybody. Hope you all had a good new year. I’m going to focus my remarks this morning on our leasing activity. As was evident in the second press release, we set on last night, our leasing activity press release, we had a pretty strong fourth quarter with activity spread around Boston, New York, San Francisco and the metropolitan Washington DC regions. We ended the year with an occupancy pick up of about 40 basis points. As we sit here today in the end of January, we have signed leases for our in-service portfolio that have yet to commence, so they’re not in our occupancy figures of more than 925,000 square feet; that 925,000 square feet represents an additional 180 basis points of potential occupancy increase, and includes about 115,000 square feet of 2023 commencement so the majority of it is 2022. We begin 2022 with over 1.4 million square feet of leases in negotiation on space in the in-service portfolio, more than 425,000 covers currently vacant space, and about 450,000 covers 2022 expirations. During 2022, we have about 2.8 million square feet of expirations in the in-service portfolio. Over the last decade, total leasing for this company has ranged between 3.7 million square feet in 2020. So that’s in the midst of the early pandemic and the economic shutdown and over 7.7 million square feet in those years, where we’ve signed some pretty large built those leases. Now, it’s true some of the leasing we do each year encompasses early renewals, and we’ll talk about some of that today and leases on new developments. But a significant portion of this leasing we do each year is our near-term renewals in available space in the portfolio. So with 2.8 million square feet of exposure, 925,000 square feet of signed leases, 1.4 million in January of deals in the works so for 2.35 million square feet and with an annual expected leasing probably somewhere between $3.7 million and $7.7 million. We believe our occupancy is on an upward trajectory as we enter 2022. The second generation statistics this quarter merit a little granular explanation. San Francisco is flat and due to a 50,000 square foot lease down at our North first project, where we are doing short-term deals with kick outs to allow us the flexibility to commence construction on the Station project. The EC leases, so our CBD portfolio had a roll up of 13%, if you take out that 50,000 square foot lease. In New York City, we terminated a lease with Citibank and went direct with their subtending, which is operating in conference center, the new rent for that floor is discounted. But Citi made us whole through a cash termination payment, excluding that New York City had a 5% roll up. Now there’s no question that Omicron and the way that hit us in November, slowed some return to office dates. However, none of the leases that we have in negotiation have been delayed or impacted by a change in our customers need for space. While the month of December and the first 2 weeks of January were slow, our leasing teams have had a very busy few weeks with more signed LOIs and more active discussions. I would note that the vast majority of those conversations in our CBD locations have continued to be from the financial services and professional services sectors, and that very well may be due to the function of the space that we actually have available in our portfolio. The only area of our business where we’ve seen a slight Omicron blip is on parking revenue. Transient collections are down modestly from our forecast for the month of January. And we haven’t quite achieved the same anticipated pickup that we thought we would in monthly permits. But we believe that this will be short lived and we’ll start to see our projections turn in February. I want to provide a few observations about our regional activities. Let’s start with suburban Boston life sciences. We broke ground on our 880 Winter Street, 243,000 square foot lab conversion in July of 2021, 7 months ago. We’ve signed leases for 165,000 square feet, and we are in negotiation for all of the remaining lab space. The first tenant is expected to occupy during the back half of 2022. Net rents are up 20% from our initial underwriting in March of 2021. At 180 CityPoint when negotiating a lease for about 50% of the new 329,000 square foot building, steel erection hasn’t started yet, we’re expecting it’s going to start next month, and we’re hopeful to deliver the space in the fourth quarter of 2023, but the leasing success that demonstrates what’s going on in the market. We are eagerly awaiting the November expiration of our leases in the Second Avenue buildings we purchased last June, we can offer 140,000 square feet of lab space and expect a significant roll up in rents with demand continuing to outpace supply. We will commence construction as Owen said on another 113,000 square feet at CityPoint, which is in our supplemental we’re calling it 103 CityPoint, very clever. Construction drawings are complete, and we expect to break ground this quarter with a late 2024 delivery there. Now, our traditional Route 120 office leasing is also extremely busy. There is office demand out there. This quarter we agreed to recapture and re-lease 1265 Main Street 120,000 square foot office building at CityPoint in Waltham. We completed a 10-year lease as is with a 21% increase in the net rent. At 140 Kendrick Street in Needham, we’ve announced Wellington’s commitment to lease 105,000 square feet, and we found a way to reposition the building as a net zero installation, which was extremely important to both BXP in Wellington. In addition, we have commitments for 2 other tenants, so the remaining 80,000 square feet of this project which is currently under lease and expires in November of 2022. And finally, we’re working on another 73,000 square foot early recapture and backfill at our CityPoint complex. This totals 378,000 square feet of traditional suburban office leases. These transactions will have rent roll ups between 7% and 40% on a cash basis. Our CBD Boston activity this quarter was primarily small transactions. We completed 12 deals for 80,000 square feet. The average markup was 17% on a cash basis. At the moment, there are few large office requirements in the Boston CBD and there is going to be new construction deliveries in 2023. Our largest block of CBD space and exposure is at 100 Federal Street where will we be getting back 150,000 square feet in early 2023. In New York City during the quarter, we had activity across the portfolio. We executed full floor lease at Dock 72. We completed 108,000 square foot lease at Times Square tower. We completed more than 180,000 square feet of leases at 601 Lex, 42,000 square feet at 250 West 55th, 89,000 at the General Motors Building and over 120,000 square feet in Princeton, the individual mark to market in New York vary greatly. You’ll recall the single floor I called out last quarter which really retarded our statistics, where the rent went down by 50%. Well, we signed that 15-year lease extension for that floor and the rent is now up 71% on a cash basis. The leases we completed that the General Motors Building were flat, while the leases at 250 West 55th Street range from up 2% to down 19% on a cash basis. Our current activity in New York continues to be strong. We have multi floor lease negotiations underway at GM, 601 Lex, and 510 Madison along with a number of smaller transactions in those buildings. Total activity is in excess of 525,000 square feet. As Owen discussed, we completed the purchase of 360 Park Avenue South, we are working to complete our base building system modification plans as well as our amenities program. And even though we haven’t formally begun to market the asset, we have been responding to inquiries and tours. Physical construction work will commence during the month of February, so in a couple of weeks. In the San Francisco CBD, large tech demand has largely been absent from the market other than companies upgrading their space through opportunities, opportunistic sublet space at buildings like our 680 Folsom, the Macy’s in the Riverbend subleases and at 350 Mission were sales force sublet. The bulk of the activity on a direct basis has been in the financial district, and it has been confined to the better buildings with professional services and financial firms. We went out on this quarter, and we asked John Cecconi and his team from CBRE who does work for us to segment the premier buildings in the city. People can debate whether it’s the perfect list or not, but it total 20 million square feet are about 23% of the market and includes our entire CBD portfolio. The current vacancy in this portfolio of 20 million square feet is 5.3%. And if you add sublet space it grows to about 8%. Now I’ve made the point before but you can’t simply look at the overall market availability statistics and make assumptions about where rents and concessions might be in this market. We completed 112,000 square feet of CBD deals this quarter, and our cash rents increased by 7% with an average starting rent of $103 a square foot. Similar to our lab success in Boston, our venture with ARE successfully executed a full building lab lease at 751 Gateway in South San Francisco. The venture intends to commence the conversion of 651 Gateway to a life science building over the next few months. The advantage for this project is time to delivery relative to a new building where we can save 6 months off versus ground up construction. Last quarter, I described our efforts to gauge pricing as we consider the restart of Platform 16 in San Jose. Our total base building construction costs increased just over 13% relative to the pricing we had 24 months ago. We continue to see meaningful cost increases and material availability issues across all trades in all of our markets. As an example, the lead time on base building mechanical systems once you have approved drawings has doubled from 20 weeks to 40 weeks, which means you have to make decisions much earlier in a construction schedule or risk delays, we’re doing that. The Class A Silicon Valley leasing markets had a particularly strong 2021 with a very healthy net absorption. And just last week we got wind of another 500,000 square foot office kind of expansion, not one of what we refer to as the Tech Titans in the Northern Peninsula. And Platform 16, if we start won’t deliver until early 2025. I’m going to finish my remarks this morning on Greater Washington. During the fourth quarter, we completed 11 office leases in Reston totaling over 140,000 square feet. Every deal was on previously vacant space. Rents have held firm in the low-50s with 2.5% annual bump to the low-60s with similar bumps for our new project at RTC Next. The first phase of RTC Next has been delivered to Fannie Mae as Owen described, and we completed our first non-anchor lease during the quarter. This project is 85% lease, it is transformative to the Rest and Skyline and it’s a 5-minute walk to the heart of the town center retail where we completed over 60,000 square feet of retail leasing, again with new tenants on currently vacant space. In the district, we continue to chip away at our current availability with our JV assets with about 100,000 square feet of leasing. We’ve delivered 2100 Penn to our anchor tenant for their tenant improvements, and we’re working on filling the remainder of that building. In Boston, in the New York and in the metropolitan DC area, we have seen a swift reduction in COVID related cases. Our daily tenant activity is starting to rise again. Employers continue to search for new employees. To circle back to Owen’s comments about quality, employers are going to want to use their physical space to encourage their teams to be together. Our mantra has been to create great places and great spaces to allow our customers to use space as a way to attract and retain their talent. If you believe that employees may be spending less time in their office, it’s even more important to have the right space and place when they are here. With that, I’ll turn the call over to Mike. Michael LaBelle: Great. Thank you, Doug. Good morning, everybody. So this morning, I plan to cover the details of our fourth quarter performance and the changes to our 2022 earnings guidance. For the fourth quarter we announced funds from operations of $1.55 per share, which exceeded the midpoint of our guidance range by $0.05 per share and was $0.03 per share above consensus estimates. The performance of our portfolio drove $0.04 of the improvement and higher than projected management and development fees added $0.01. I would place the portfolio outperformance in 4 buckets. First, income from earlier than anticipated leasing, particularly in San Francisco and Reston. In San Francisco we executed 2 10-year renewals aggregating 65,000 square feet at a significant pickup in rent and several smaller new leases with immediate delivery. And in Reston, we signed a 90,000 square foot new lease with a technology company with space delivery on lease signing. We also collected payments from several tenants on receivables that we had written off in 2020. Second, we achieved higher service income due to an increase in utilization from better physical occupancy in New York City during the quarter. Just prior to the impact of the Omicron variant, our New York City portfolio census was running close to 70%, which represented a big pickup from the third quarter. Third, we experienced stronger parking revenue and hotel performance. Parking revenue totaled $23 million for the quarter, up 8% from the third quarter. It’s now running at 82% of its pre-pandemic rate. So that means there’s an incremental $20 million or $0.11 per share on an annual basis, we should be able to recapture to reach prior levels. Our hotel operated at 50% occupancy during the quarter for the full year 2021, it operated just above breakeven, only contributing $600,000 to our FFO. This compares to its contribution in 2019 of $15 million, a difference of $0.08 per share that we should recover in the next couple of years. And fourth, we recognized income from the delivery of the 733,000 square foot Marriott World Headquarters development a month earlier than we anticipated. In addition to delivering it early, our cost came in well below budget, so its investment return profile is exceeding our expectations as well. The last item I would like to mention about the quarter is a reminder that as we guided last quarter we incurred a loss on extinguishment of debt of $0.25 per share for the redemption of our $1 billion of 3.85% senior notes that were due to expire in early 2023. We funded the redemption with an $850 million, 2.45% senior notes issuance in the third quarter. This was an opportunistic trade due to our views that interest rates were likely climbing. We feel good about our decision as rates have increased by about 50 basis points since we locked in at a 1.3% 10-year treasury rate. We made a similar decision with our $1 billion mortgage refinancing on 601 Lexington Avenue that we closed this quarter at a 2.79% coupon for 10 years. The underlying loan carried an interest rate of 4.75% and was not expiring until April of 2022. But we had the opportunity to pay it off with no penalty starting in December of 2021. We closed it on the first day available and priced off a 1.48% 10-year treasury rate again significantly lower than current rates. Despite increasing the mortgage by approximately $400 million, we will see lower interest expense due to the 200 basis point reduction in the overall coupon. And as Owen mentioned we now have limited debt expirations over the next couple of years. Now, I’d like to turn to 2022. Doug described the leasing activity we are seeing heading into the year which adds to the confidence we have in our growth profile. As a result, we’re increasing our FFO guidance range to $7.30 to $7.45 per share for 2022. Our new midpoint is $7.38 per share, and it’s $0.03 higher than last quarter. The increase is coming from higher projected contribution from the in-service portfolio, as well as higher anticipated development fee income. You will notice that we brought down our same property NOI growth by 25 basis points this quarter, which might appear inconsistent with an increase in our guidance. The reduction is primarily due to the stronger performance we experienced in the fourth quarter of 2021, which increased our starting point. This includes the earlier than projected leasing in Q4 that is reflected in our higher occupancy, one-time cash receipts from our collections, and higher than expected service income, where our future projections are more conservative. In addition, Doug described 2 lease recaptures in our suburban Boston portfolio, where we have new tenants coming in at higher rents, but we will have some downtime between leases. The rent during the downtime is being covered by the exiting tenants, but that’s recognized as termination income, which is excluded from our same property income. All of these are positive results. We only brought down the top end of the range, so in effect the bottom end is actually higher. Our new assumption for 2022 same property NOI growth is 2% to 3% from 2021. We also reduced our assumption for 2022 cash same property NOI growth, and our new range is 5% to 6%, which represents strong growth year-over-year. The only other meaningful change to our guidance is an increase in our assumption for development fee revenue to $24 million to $30 million, an increase of $2 million. The improvement relates to additions to our development pipeline at 651 Gateway and 360 Park Avenue South. Overall, we continue to project strong FFO growth of more than 12% in 2022 from 2021 at the midpoint of our range. We expect our near-term growth to come primarily from delivering new office and life science developments and our 2021 acquisition program. These are expected to add an incremental $0.43 per share, or 6.5% to our 2022 FFO at the midpoint. Our guidance does not assume any new acquisitions in 2022. We also projected benefit from our well timed refinancing activity last year, resulting in $0.35 per share of lower interest expense and debt extinguishment costs in 2022 at the midpoint of our range. For the first quarter of 2022, we’re providing guidance for funds from operations of $1.72 to $1.74 per share. As a reminder, our first quarter results are always lower due to the timing associated with stock vesting and payroll taxes plus the seasonality of our hotel. In summary, we remain confident in the growth trajectory of our business. We’re seeing strong leasing activity in our portfolio that we expect to result in occupancy and income gains in 2022 and 2023. In addition to the $2.5 billion of existing development we have underway that we will deliver over the next 2 years, we have numerous sites under ownership where we’re working towards new starts in the coming months. That completes our formal remarks. Operator, can you open up the lines to question. Operator: Thank you, sir. And, sir, we have our first question from Manny Korchman from Citi. You may ask your question. Michael Bilerman: Great. It’s Michael Bellman here with Manny. Owen, if I can get your opinion, Boston Properties has always been focused on the highest quality office space, the highest quality building from the top markets, which has been very good for the company over the history. As we think about going post-pandemic, you talked about the desire of companies to have great space to encourage and provide a reason for their employees to come back. How do you think this bifurcation in the marketplace is going to play out in terms of the types of spaces that you own today and then AA plus arena, and then everything else, and because that Class AA plus is a minority of the entire office stock? How do you think all of that Class B and C office space will trend? Is it just going to be a rent inducement, which may depress rents overall? Or are you just going to need a substantial amount of capital to redevelop those assets either into more modern office space, or into other property types? And how do you think all of that’s going to ultimately affect the broader office market? Owen Thomas: Yeah. A lot there to unpack, Michael, but I’ll do my best. So agree with what you said at the outset, BXP strategy back to our founders is to have great buildings and great locations, we say it today more great place and space. It’s always been a hallmark of the company strategy. It’s always worked, and it’s actually even more important, because of the pandemic. Doug and I, in our remarks kind of articulated, what you said, which is we do think companies are going to return to the office, we do think hybrid is here to stay. And we do think it’s going to be very important for CEOs and company leadership to have great offices that their employees want to work in. So having buildings that have great amenities that are located near transit, all those things are going to be increasingly important to entice workers to come back to the office. So I think the bifurcation between the top of the market and the rest of the market is growing right now, and it’s going to grow further. Doug gave you the very interesting stat on San Francisco, the aggregate availability stats on San Francisco are 27%. And he gave you the data on the top 20% of the market, which is actually 5% vacant, that’s incredible, if you think about it. So the bifurcation is increasing. So now coming to your question, what’s going to happen with the more modest quality buildings, I think it’s very case by case, building by building, city by city, and neighborhood by neighborhood, I do think the office markets will recover, the economy will grow, some of those buildings will get leased as office, I do think it’s going to be very competitive, and probably harder to push rents. Land in places like Manhattan is incredibly valuable, so there could be a reuse of a lot of these properties. I mean, office, many offices that were created for large corporate users have large floor plates, and they don’t – they’re not very well suited for conversion to residential, because of the bay depth, but there are exceptions to that. And I’m sure we’ll see creative developers, change some of these buildings to residential, some may get torn down and made into something else. Some may be made into – there have been buildings in New York that have been renovated, where setbacks were put into an older building and floor is added to the top. So there’ll be a lot of creativity that goes into it. And I think slowly over time, you’ll see some conversion of this stock, and between the economy growing and some stock being taken offline, I think the markets will ultimately firm up. But this bifurcation between quality and commodity is going to continue and widen. Emmanuel Korchman: Hey, guys, it’s Manny here. Just, Mike, I have a question for you, if I think about your guidance, in totality, I think everything you mentioned on the call today was a positive in a lift to guidance, notwithstanding the ranges given a better 2021. Now, what are the negatives offsetting some of that, because if I add together all the positives, I’m getting more lift than sort of the lift to your midpoint? So are there negatives, we need to think about? Is it something else within the range that’s keeping you from raising more? Or is it just conservatism like how do we think about that? Thanks. Michael LaBelle: Look, I mean, sure, there’s conservatism in this environment. I mean, we’re delighted to see the increase in the leasing activity. And that leasing activity that Doug is talking about is – will result in signed leases, but the question for us is, when did those leases go into occupancy? And so how much of that goes into 2022? And how much of it is a little bit later? Because in many cases, we have to wait until the tenants build out the space to start recognizing revenue on these spaces. So we have to judge how long that is going to take. So I think our trends are very positive. But the sales cycle and the build out cycle is not immediate, in all cases. So we have to judge that into our guidance. So I think that’s part of it. We brought up the low-end of our guidance pretty significantly. The reason that we’re doing that is some of the activity that we’re seeing and getting leads us to the computation that we don’t believe it’s possible to be at that low end that we had before, because we’ve gotten some of the stuff. We haven’t gotten enough at this point to feel like we should be increasing the high ends, so we’ve kept the high end where it is. And so that’s how we kind of build our guidance ranges. There really hasn’t been any kind of meaningful negative occurrences that are in our guidance. We talked a little bit about the same store, which is mostly due to positive things that happened. So there’s really no negative occurrences that we put in any of the items that we put in our guidance that were at all meaningful. Emmanuel Korchman: Right. Thanks very much. Operator: And, sir, we have our next question from Nick Yulico of Scotiabank. You may ask your question. Nicholas Yulico: Thanks. I just had first a question or maybe you can give us a feel for what the rent spreads were on new signings, not just the commenced statistics that you give for the fourth quarter? Douglas Linde: Okay. I thought I did that all the way along. If you just sort of go back and look at my remarks, I basically said that, leases that we signed this quarter were, I think I said, between 7% and 14%, in the greater suburban Boston market, it was up 5% plus or minus in certainly the assets in New York City and flat in other assets in New York City, 7% in Embarcadero Center, Washington DC, the issue is that all the space that we leased was vacant. So you can’t have a mark up on a vacant space, obviously, because it’s infinite. So in general labor, trending positive, call it 2%, at 250 West 55th Street in some leases and negative 70% on a couple of other leases to positive 71% on the lease that we signed at 601 Lexington Avenue with the tenant that had short-term space today that we kind of good deal on for them a year ago, so it was really variable, but in net-net, it was all positive. Nicholas Yulico: Okay. Thanks, Doug. Second question is just going back to San Francisco. And you kind of have this interesting dynamic going on there where your rents are up at Embarcadero Center, even look like they’re up, average rents and the buildings up versus the end of 2019 at this point yet. The occupancy is down – it’s down – looks like it’s down like over 700 basis points on average for those buildings. So sort of worse than the overall portfolio also looks like the vacancy there is around 11% for those buildings, which I’m trying to square away with when you talk about 5% vacancy for some of the premier buildings in San Francisco. And so, I’m just trying to understand like what’s going on with those buildings and versus the market out there? Douglas Linde: So just to sort of refresh what I said, so the top call it, 20 million square feet of space includes the vacancy at Embarcadero Center, so that’s in that statistic of 5% overall for that quote unquote, portfolio of premier buildings. The vast majority of our availability at Embarcadero Center with a low rise of EC 1 in the low rise EC 2. Unfortunately, we don’t have very much in the way of blocks of space, so it’s a floor here and a floor there. We have activity on some of that space, some of that space is needs to be fully demolished, because it’s got in some cases had the best from the original user of the space 25 years ago, and where the tenant moved out and some of it is a space with just an installation, that doesn’t make sense anymore. We will make hay on some of that space during 2022. We don’t have ROCE projections for getting to 5% availability in those buildings in during the year. But we’re pretty confident that the space is going to lease at healthy rent. Obviously, low rise Embarcadero Center 1 is different than the top of EC 4, right. So the there’s a rent differential between those 2 kinds of space. Nicholas Yulico: Okay. Really helpful. Thank you. Operator: And, sir, our next question from Craig Mailman of KeyBanc Capital Markets. You may ask your question. Craig Mailman: Thanks. Mike, maybe just a follow-up. How much of that $0.04 kind of upside in the quarter was from the collection of payments? And how big is that bucket as we headed to 2022? Michael LaBelle: I would say it was close to $0.01 for the quarter. And, I don’t think I can tell you right now exactly how big that is, we’re not assuming that we’re going to be really collecting anything more. So I’m not looking at anything that I don’t – that I think is significant that would be coming in 2022 on collections. So, we’re projecting zero effectively for that number. But I wouldn’t say that, the one thing that could happen in 2022 is the return to accrual of some of the tenants that are non-accrual. And we’re not projecting any of that either, but we’re watching these tenants, some of the retail tenants and other tenants that we have, that we’re not accruing rent for right now, as they continue to kind of be successful and pay rent and generate sales. There’s the ability for us to bring those tenants back to accrual, which will in certain cases have an impact on our earnings, although be a non-cash impact on our earnings, it just bringing back kind of a former straight line. So that’s another impact that will come – some of the things that happened in last few years. Craig Mailman: Okay, so you don’t necessarily need to do a blend and extend. You just have to feel better about their ability to pay for the flip back to accrual? Michael LaBelle: Yeah, I mean, we may do an analysis and make judgments every quarter on all the tenants that we wrote up their accrue rent balances in 2020. And try to figure out when the right time when it’s justified for us to bring them back. Douglas Linde: I think, Mike talked about in the past that there are sort of 3 primary buckets of tenants that are in that those areas co-working is one, it’s the largest. Then what I guess you would refer to as entertainment retail, so we have a number of cinema operators in all of our markets that we’re on nonaccrual with. And then we have a number of local operators, mostly in the food and beverage that still are struggling relative to where they were in 2019 from a revenue perspective, because of the lack of foot traffic in certain parts of the country. Craig Mailman: Okay. That’s helpful. And then, just separately, it seems like you guys got approvals at the FDA side or continues to move along. Can you just kind of give us some thoughts on how to think about maybe that site or in general, how you guys are thinking about developments here, as construction costs are rising, rents on, new space are holding steady, but kind of just your thoughts on what required returns to be to think about starting that in more near and medium term? Douglas Linde: So let me give you a general comment. And then I’ll ask Hilary, who was officially here as our new regional leader in New York to comment on 343 Madison Avenue. So it is quite clear that construction costs have been going up at, call it, very high single digits on an annual basis. And if you don’t have rents that are appreciating at a commensurate rate, your returns are going to be challenged, right, unless you have great land basis. We happen to have that in our portfolio across our life science development platform, because we have lots of embedded opportunities in the portfolio. So we have a long runway to go. I describe what’s going on with Platform 16. And our calculus there is that market continues to have some real strength to it. And we probably will see outsize rental rate growth over the next couple of years because of the lack of Class A inventory. And therefore, we will likely with our partners have decision in the next couple of months as to whether or not we want to move forward with that, because it’s not going to deliver until 2025. Those are the kinds of conversations we’re having. I’ll let Hilary describe sort of a timing associated with 343 Madison, because that’s a decision that’s really not in front of us tomorrow. And there’s some work to do with regards to getting the site, quote unquote, enabled to truly commence construction. Hilary? Hilary Spann: Thanks, Doug. I would, first of all echo what Owen’s said about high quality new construction office assets, commanding premiums and rents relative to more commodity. So that’s something that obviously weighs in favor of the potential at 343 Madison, but in terms of our ability to launch construction of the project, we do have some legwork ahead of us in terms of demolition, and in terms of some work that we have to do with the MTA to be ready to proceed. So it’s a decision that we’ll be making in the sort of I’d say near to medium future, but it’s not an immediate decision ahead of us. Douglas Linde: Thanks. Operator: And, sir, we have our next question from Steve Sakwa of Evercore ISI. You may ask your question. Steve Sakwa: Thanks. Good morning. Maybe the first question just broadly on San Francisco, it’s been the biggest kind of urban city that’s really struggled to bring people back; and crime and homelessness have really kind of deteriorated the living conditions in the city. So I’m just curious sort of owner, Doug, what your sort of conversations are with the mayor, other business leaders in the city kind of right the ship in San Francisco. And what do you think that timeline looks like for that? Douglas Linde: Good morning, Steve. Look, I think, I would acknowledge what you’re saying. And I’ve said it on previous earnings call San Francisco, the city of San Francisco and up to Silicon Valley has been hit the hardest of all of our markets, because of the pandemic. And I think it’s related to one technology companies being, frankly, behind the other clients that we have in terms of returning people to office. And also I would say, very restrictive COVID regulation, very conservative COVID regulation in San Francisco, occupancy requirements, mask wearing all that kind of thing. So look, I and Bob may want to comment on this, I think there’s an increasing voice in San Francisco that is concerned about the issues that you raised around homelessness and crime and getting the city open. And it is our hope, over time that those voices will be heard, and San Francisco will be able to recover. Again, we look at the whole bay area as the leading computer science knowledge cluster in the world. And we do think that bodes very well for the city of San Francisco, but acknowledge that these factors that you mentioned, do need to be addressed. Bob, is there anything you want to add? Robert Pester: Yeah, the mayor has publicly stated that things have to change. And she’s working on a plan right now to get more policing, and more cops out on the street. So I think you will see a change, Owen and I were on a call with other business leaders in San Francisco yesterday. And there’s clearly an outcry from the business community that things have changed. So I think given some time, you will see a change. And hopefully the DA gets recalled and we get somebody in there that will start enforcing the laws. Owen Thomas: Yeah. I also think, Steve, I would just also add too, I think there’s a circular logic around the crime, homelessness situation and return to office. I mean, obviously, the streets need to be safe for people to return, but the more people that you have on the streets go into the office. I would allow that I think that creates safety, because policing is obviously important. But also protection from each other is also a key to security in city, so both of these things need to happen in tandem. Steve Sakwa: Okay, thanks. Second question, maybe, Doug, you talked about the large pipeline of deals that you’ve got. And I know, it’s hard to maybe just collectively talk about deals or put averages, but when you think about the space needs and how people are planning, and whether they’re downsizing or upsizing. Just what’s sort of the general discussion that you’re seeing kind of with the deals that are sort of in progress today? And what are the changes that sort of expect from a design perspective and kind of space utilization? Douglas Linde: I would say categorically that 80% of the tenants that we are having conversations with today are growing, not shrinking. And I would say that most of those customers are in the finance, asset management, VC, private equity world in both New York, San Francisco and Boston, and then some tangential professional services companies. And I would say the professional services companies are probably the 20% that is probably not growing and would consider some modest reduction in their space. The architectural decisions associated with planning for 2022 and beyond, believe it or not, are very, very consistent with what they were in 2019. The ways people are planning to space are for the most part the same. On the margin, there is no question that architects are talking to their clients about trying to create better and more interesting quote unquote, common areas or community areas or gathering areas or conference rooms, however you want to define it from a client perspective, but the physical space that’s being utilized by these companies that are in our portfolio growing right now, I don’t think you would be able to distinguish much about what is being built in 2022 versus what was built in 2019. And to some degree, it’s a little bit of a surprise. I – if you go back to listen to my comments in calls, over the last call it 6 to 8 quarters, I think that we’re still not in a position where anybody who is in what I would refer to as a technology or a corporate business understands what the cadence of their team is going to be, as they come back to the office. And it’s very hard, I think, to make monumental changes until you really understand what the impacts of that cadence is, and whether or not it works. I mean, people truly don’t know, I believe how productive and how accepting a quote unquote, hybrid or a partial workday in-person is going to work through lots of industries, until they start to encourage and get their folks back. And we’re not – we’re unfortunately, we’ve been delayed and delayed and delayed and getting there. So I wouldn’t be surprised for there to be changes in the next cycle, but it’s not there yet. Steve Sakwa: Great. Thanks. That’s it for me. Operator: And speakers, our next question from John Kim from BMO Capital Markets. You may ask your question. John Kim: Thank you. Good morning. Owen, you mentioned in your prepared remarks, the widespread corporate dissatisfaction with reduced efficiency and employee retention. I was wondering if you could elaborate on that statement. Is this purely anecdotal? And does that include tech companies who have been really pressing the snooze button on returning to work? Owen Thomas: Yeah, well, I think by definition, it’s anecdotal, although there is surveys that have been done by various service providers and architecture and real estate. But it is from a – we have 53 million square feet filled with some of the leading companies around the country, and we speak to our clients, and we speak to potential clients as well. And I think we have a good handle on this. And I would just summarize it by saying that I have not spoken yet to a business leader who thinks working fully remote is good for their companies, and they want to make change. I think what’s been making the change more difficult to happen are really 2 things: one, these new variants that keep coming up, so we had Delta at Labor Day, and we’ve had Omicron, over the most recent holiday, and that’s delayed the return to work. And I think the other thing that’s out there is the tight labor market. You watched all the NFL playoff games over the last couple of weekends, I don’t see a lot of MTC theaters in New York are full restaurant reservations are hard to get. People are certainly comfortable doing a lot of things in-person, yet, they’re not coming back to the office. So I do think the tight labor market is impacting business leaders’ willingness to be more aggressive about having their employees come back to work. But I do hear from them concerns about the retention that they’ve had, the difficulty in training new employees, turnover rate for employees that have been hired, post pandemic versus turnover rates that were – employees that were with the company. Before the pandemic, all these metrics, when CEOs look at them, they have concern. And yes, by the way, on the technology side, we have spoken with many, many corporate leaders at major technology firms. And I would describe that as slightly differently in that they had a remote enabled workforce before the pandemic, because their technology companies and look at the kinds of spaces that they all created with all of the collaboration space, the amenities they provide food service and all those things. That was all going on even before the pandemic. So I think what the pandemic is driving is those kinds of strategies by companies. In other industries, it’s migrating across the industry landscape. Bryan Koop? Bryan Koop: Bryan Koop from Boston. A trend that we’re definitely seeing and it started probably 90 days ago, but is accelerated over the last 30s, every time our team comes back from a tour. There is a noticeable change in who’s on the tour. Tremendous amount of c-suite players, many leadership’s of all departments, et cetera. We’ve done tours with as many as 10 to 15 people highly unusual in the past where the leaders would definitely come in later. They’re coming in much earlier. And they are far more proactive about the design of the space, what the goals are and what their intentions are. And there’s a real realization, we think by these leaders that going to work is no longer an obligation, going to work as a destination. And they want to make sure this is many things at that destination as humanly possible for them. And it’s been really refreshing to see this pro-activity of the leaders and our team has been really having a lot of fun coming back going, you wouldn’t believe who was on this first tour. John Kim: That’s great. Thank you. My second question is a follow-up on the positive commentary you’ve had versus your guidance that you mentioned 180 basis points of embedded occupancy uplift from signed leases not commenced. I think that number increased a little bit from the prior quarter. But you kept your occupancy guidance, basically flat from current levels at the midpoint? Is this purely just due to timing of leases that you plan to sign? Or do you also expect termination – leases terminated to increase as well? Douglas Linde: It’s actually 100%, John, based upon the timing of when the when the actual rent commencement is going to be. I’ll just sort of give you the kind of example that sort of that we’re working on, and how it sort of manifests, right? So we have a lease expiring at 601 Lexington Avenue in the latter half of 2022. We are already in discussions, lease negotiations like paper is moving back and forth with a tenant on 150 out of 200,000 square feet of space that’s expiring. I don’t know how that is going to shake out as to whether or not we’re going to end up demoing the space and then delivering to them or they’re going to take it assets. The difference between those two things is 18 months potentially of term in terms of when we are able to recognize the revenue. So we have so many of those kinds of quirky transactions, if you will going on that you’re going to hear me talking about, I suspect, as we move into the year, larger and larger amount of space that we have leased, that is where – that’s signed that’s not yet in occupancy, that number is going to grow, which I think is a great thing, and because that revenue is surely coming in, and it’s very contractual and it’s very long term. But it’s in the short-term, it’s hard for us to sort of gauge, how it’s going to impact our occupancy numbers. John Kim: Great. Thank you. Operator: And speakers, our next question from Jamie Feldman from Bank of America. You may ask your question. Jamie Feldman: Great, thank you, and good morning. I’ll just talk about CapEx and improving assets. How are you thinking about just the cost to run your business and the CapEx load for your business versus history? Is it going to cost a lot more to stay competitive in this new environment? Or the kind of similar to what it’s always been? Michael LaBelle: I think it’s – for our portfolio is probably similar to what it’s been because we’ve done so much already, right? I mean, I don’t mind doing this, because I think it’s important, when you look at our major CBD assets, which is where the bulk of the cost will be, the new project has occurred, right? So if you go, for example, to market , we just – we spent a lot of money and a lot of time rebuilding all of the lobbies of EC 1, 2, 3 and 4. If you go to 100 Federal Street, you see that we rebuilt and created this really unusual place at the base of the building. If you go to New York City, and you look at what we did at 601 Lexington Avenue with the hue and the redo of the lobby that was done at 399 with a facade and the changes that were made to 599, we’ve been doing this work on a consistent basis. So I don’t think you’re going to see a major change in the way we are continuing to want to do that to all of our buildings on a consistent basis. And so I don’t think you’re going to see a quote unquote, big spike in CapEx, but I do think it’s going to be consistent. And we think of it that way, you have to be refreshing your buildings, and thinking about how you can maintain and upgrade your mechanical systems, your destination, which is your elevator systems, your lobby entrances, the amenities in the buildings. We’ve talked earlier, I think, in past calls about, what we’re doing at the General Motors Building, right, where we’ve got a major amenity center that we’ve been working on for three years, and it’s going to hopefully be opening up at the end of this year. And it’s going to be from our perspective, a real change for what those tenants have literally in their building for both health and fitness and conferencing, as well as food and beverage. So it’s like we’re just doing that all the time everywhere. And I don’t think you should anticipate that it’s going to stop, but I don’t think you should anticipate that’s going to somehow increase. Jamie Feldman: Okay. And in terms of your comments about people wanting more common space, you think that affects just the TI load or not necessarily? Michael LaBelle: Well, I can tell you TI – there are 2 reasons TIs are going up across the board. The first is, it’s a more competitive market, right? There is more available space and therefore economics are more competitive. And, two, it’s a lot more expensive to build out space today. I mean, the increases that we’re seeing in the escalation on that the TI side for any kind of installation are very significant. And so, our contribution to that is not even making up for what the tenant is ultimately going to be putting in their space. So it’s all sort of part of the same challenge, which is the issues associated with the supply chain, and the amount of people who are working across all kinds of industries and all kinds of trades and labor. Jamie Feldman: Okay. And then I appreciate your comments, it sounds like you generally think there’s more, at least flat or maybe even expansion on the leasing you’re seeing. What our tenant saying about the hoteling decision? Do you think that that decision has been made for a lot of people already? Or do you think that’s something that they’re going to figure out as time goes on, just in terms of the people sign up for spaces needed? Or do they have dedicated spaces? Douglas Linde: So I think that there are companies who are predicting that they will have space that is not necessarily available to every person every day, meaning there’s going to be have to be some sharing of space, I think that it’s on the margin. But I think it’s absolutely happening. And it’s going to be, I think, not for the entire organization, it’s going to be for certain components of it. So let me give you an example. We have a customer who’s in the asset management business, and I think their portfolio managers are going 100% have dedicated offices, I think if they have a group of people who are in the technology side of their business, who don’t necessarily have to be in the mother ship anymore in a CBD location, they may take some suburban space, and those people may not have a physical permanent home as a seat, but they’ll have a place where they can go when they want to go to work, right? You’re going to see those types of decisions that are being made. But we’ve seen very little decision by large companies that are saying, okay, no longer, are we allowing people to have their physical space dedicated to them on a day to day basis. And they’re going to have to sign up on a daily basis that you’re not seeing that with the Google’s or the Facebook’s, or that the large tech companies, we’re seeing those people continue to want their groups together and want their people, again, as Bryan said earlier, be encouraged to come to work. And if you’re being encouraged to come to work, you want to have a physical place where you’re going to be going when you’re there. Jamie Feldman: Okay, great. Thank you. Operator: And our next question from Alexander Goldfarb from Piper Sandler. You may ask your question. Alexander Goldfarb: Great. Good morning and thank you. So 2 questions. Big picture one, Owen; and then Mike, a guidance question. Owen, I understand the need for companies to get people back to the office, culture perpetuation of the company training and all that stuff. But we’re now going on the third year of this sort of new normal, and absent a weaker economy that suddenly weakens the labor market and gives your managers more leverage. At what point do the tenants suddenly say this new normal is the new normal? And maybe we do need to adjust how we lease space or use space. That part I’m sort of curious, because we’re now on, as I say, year 3 of this sort of new normal? Owen Thomas: Yeah. Good morning, Alex. Yeah, look, I think a lot of our clients are predicting a new normal, and that’s from full time in-person work to more hybrid work. But as we’ve talked about over and over again, we don’t see our clients saying, we don’t need an office anymore. Again, we keep talking about this leasing statistic for the fourth quarter of 1.8 million square feet. Its pre-pandemic levels for us if people weren’t going to use their offices, why are they making these lease commitments. So we see employers bringing their employees back to the office. And again, as I mentioned, I think there’s an either way, I think, with many workers today, there’s pandemic fatigue. I don’t think this is true across the board, it’s very anecdotal. But you hear that more and more of employees wanting to come back, for the camaraderie for the learning, the training that goes on in the office. So I do think this will change, I look we need this Omicron variant to cool off. We need some of these health security issues to get back into a position closer to where they were last fall when we started to see some very serious increases in our census and we think that will be going on as the winter and spring progress in 2022. Alexander Goldfarb: Well, I mean, there’s definitely mask and COVID fatigue. That’s for sure. Mike on the guidance front. It’s a 3-parter, so to channel on a 3-parter. So first is what degree of dispositions are in the guidance and if you guys do the elevated dispositions without impact guidance? The next is, you mentioned $11 million of missing parking is that quarterly or annual? And then finally, on the third quarter call, you mentioned $52 million to go on the COVID recovery? So just curious how much of that is in your 2022 guidance? Michael LaBelle: So there’s no dispositions in the guidance. We never kind of guide to dispositions, because we don’t know when they’re going to happen, not necessarily similar to acquisitions. We just don’t put it in, and in our press release, we indicate that that is the case. With respect to the parking, it’s $20 million and $0.11 that we’re still short and we’ve been kind of seeing an improvement of couple of million dollars a quarter, I would say, between $2 million and $3 million a quarter? I think in the first quarter, we may take a little bit of a step back. Because in January, there’s been a little bit of a step back and Doug talked about that. But, our expectation is that later in the first quarter, we’re going to see that start to improve again. So I think that, we will get some out of that, certainly not the entire $20 million, yeah. Alexander Goldfarb: And then what about the $52 million of total of COVID recovery that you mentioned on the third quarter call? Michael LaBelle: I think that we’re about at $45 million right now. We’ve got, again, parking is $20 million. Hotel is – if you look at the fourth quarter hotel, we earned about $1 million. So that’s $4 million annually, it should be $15 million, so that’s $11 million. And then the retail is the rest of that, so it’s about $14 million. And I think from the retail, I don’t think there’s that much in 2022. I think we got some big retail that we’re working on where we’re signing leases where the income is going to come in 2023. So I would expect that we won’t get much of that in our guidance in 2022, but it’ll come in 2023. Alexander Goldfarb: Okay, so basically, you’re at $45 million to go now. Michael LaBelle: Yeah. Alexander Goldfarb: Great. Awesome. Thank you. Michael LaBelle: Yeah. Ope
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Boston Properties, Inc. (NYSE:BXP) Earnings Report Analysis

  • Boston Properties, Inc. (NYSE:BXP) reported an earnings per share (EPS) of -$1.45, missing the estimated EPS of $0.51.
  • The company generated revenue of approximately $859 million, surpassing the estimated revenue of $844 million.
  • BXP's financial metrics reveal a price-to-earnings (P/E) ratio of approximately 31.79 and a debt-to-equity ratio of 2.95.

Boston Properties, Inc. (NYSE:BXP), a leading real estate investment trust (REIT) that specializes in the ownership and development of office properties in the United States, operates in major markets including Boston, Los Angeles, New York, San Francisco, and Washington, D.C. As a member of the Zacks REIT and Equity Trust - Other industry, BXP competes with other significant entities in the real estate sector.

On January 28, 2025, BXP reported an earnings per share (EPS) of -$1.45, which was significantly below the estimated EPS of $0.51. This negative EPS contrasts sharply with the previous quarter's performance, where BXP reported an EPS of $1.79, aligning with the Zacks Consensus Estimate. The previous quarter's EPS marked a substantial increase from $0.76 in the same period the previous year, highlighting the volatility in BXP's earnings.

Despite the disappointing EPS, BXP generated a revenue of approximately $859 million, surpassing the estimated revenue of $844 million. This revenue performance continues a trend, as the company reported $798.19 million for the quarter ending December 2024, a 3.8% increase from the previous year. BXP has consistently exceeded consensus revenue estimates in three of the last four quarters, demonstrating its ability to generate strong sales.

BXP's financial metrics provide further insights into its valuation and financial health. The company's price-to-sales ratio stands at about 3.43, reflecting the value placed on its revenue. Additionally, BXP's enterprise value to sales ratio is 8.03, which includes its debt and cash reserves relative to its sales.

The company's debt-to-equity ratio of 2.95 suggests a high level of debt relative to shareholders' equity, which could impact its financial flexibility. However, with a current ratio of 1.23, BXP maintains a reasonable level of liquidity to cover its short-term liabilities. These financial metrics are crucial for investors as they provide deeper insights into the company's performance beyond the headline numbers, helping to project future stock price movements.

Boston Properties, Inc. (NYSE: BXP) Analysts Adjust Price Targets Amid Challenges

  • The consensus price target for Boston Properties, Inc. (NYSE: BXP) has decreased from $80.25 to $70, reflecting a more cautious outlook from analysts.
  • Factors such as an elevated supply of office properties, high interest expenses, and broader economic concerns are influencing the downward trend in price targets.
  • The broader economic environment, including rising benchmark interest rates and strong labor market data, is affecting real estate equities like BXP.

Boston Properties, Inc. (NYSE: BXP) is a prominent real estate investment trust (REIT) that focuses on Class A office properties in major U.S. cities like Boston, Los Angeles, New York, San Francisco, and Washington, DC. With a vast portfolio of 51.2 million square feet and 196 properties, BXP is a key player in the real estate industry.

The consensus price target for BXP has seen a decline recently. Last month, the average price target was $70, reflecting a more cautious stance from analysts. This is a decrease from the previous quarter's target of $80.25, indicating a shift in sentiment. Last year, the target was $79.5, which was slightly lower than the last quarter but still more optimistic than the current outlook.

Several factors may be contributing to this downward trend in price targets. Boston Properties is preparing to report its fourth-quarter earnings, and challenges such as an elevated supply of office properties and high interest expenses are expected to impact its financial performance negatively. Despite a healthy demand for premium office assets, these challenges could be influencing analysts' more conservative outlook.

The broader economic environment also plays a role in shaping analysts' perspectives. The U.S. equity markets have experienced a downturn, driven by rising benchmark interest rates and strong labor market data. These factors have led to a reassessment of Federal Reserve policy expectations, affecting real estate equities like BXP, which are sensitive to interest rate changes. As highlighted by Seeking Alpha, REITs, including Boston Properties, have continued their decline from the end of 2024 into early 2025.

Recent news and developments, such as rising energy prices and regional weather events, further complicate the economic landscape. These factors, combined with the company's specific challenges, help explain the recent adjustments in analysts' price targets for BXP. By monitoring these elements, investors can gain a clearer understanding of the factors influencing BXP's stock performance.

Wedbush Analyst Sets Price Target for BXP (NYSE:BXP)

On January 2, 2025, Richard Anderson from Wedbush set a price target of $70 for BXP (NYSE:BXP). At that time, BXP's stock was priced at $74.64, indicating a price difference of approximately -4.64% from the target. BXP is the largest publicly traded developer, owner, and manager of premier workplaces in the United States.

BXP plans to release its financial results for the fourth quarter of 2024 on January 28, 2025, after the NYSE closes. The company will host a conference call and webcast on January 29, 2025, at 10:00 A.M. Eastern Time to discuss these results and provide updates on its activities. This event may influence investor sentiment and stock performance.

Currently, BXP's stock price is $73.70, reflecting a decrease of 0.66, or approximately -0.89%. Today, the stock has traded between $73.28 and $75.12. Over the past year, BXP's stock has reached a high of $90.11 and a low of $56.46, showing significant volatility in its trading range.

BXP's market capitalization is approximately $11.65 billion, indicating the total market value of its outstanding shares. The trading volume on the NYSE is 935,630 shares, reflecting investor interest and activity in the stock. These metrics are crucial for understanding the company's market position and investor engagement.