Boston Properties, Inc. (BXP) on Q1 2024 Results - Earnings Call Transcript

Operator: Good day, and thank you for standing by. Welcome to BXP First Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation there will be a question-and-answer session. [Operator Instructions]. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker, Helen Han, Vice President of Investor Relations. Please go ahead. Helen Han: Good morning, and welcome to BXP's first quarter 2024 earnings conference call. The press release and supplemental package were distributed last night and furnished on Form 8-K. In the supplemental package, BXP 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 Investors 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 BXP believes the expectations reflected in any forward-looking statements are based on reasonable assumptions, it can give no assurance that its expectations will be a change. 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 BXP's filings with the SEC. BXP does not undertake a duty to update any forward-looking statements. I'd like to welcome Owen Thomas, Chairman and Chief Executive Officer; Doug Linde, President; and Mike LaBelle, Chief Financial Officer. During the Q&A portion of our call, Ray Ritchey, Senior Executive Vice President, and our regional management teams will be available to address any questions. We ask that those of you participating in the Q&A portion of the call to please limit yourself to one question. If you have any additional query or follow-up, please feel free to rejoin the queue. 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. BXP's performance in the first quarter continued to defy the negative market sentiment for the commercial office sector. Our FFO per share was in line with our forecast and market consensus for the first quarter. We completed just under 900,000 square feet of leasing, which is 35% greater than the first quarter of '23 when we leased 660,000 square feet. And this is a more relevant comparison than to the fourth quarter of '23, given elevated leasing activity associated with the quarter at year-end. Our weighted average lease term on leases signed this past quarter was also notable at 11.6 years in comparison the leases we signed in 2023 at a weighted average lease term of 8.2 years. Our occupancy remains stable. We closed the previously announced joint venture with Norges at 290 Binney Street, our lab development in Cambridge that is fully leased to AstraZeneca. This transaction mitigates $534 million of development funding for BXP by raising property level equity for the company on attractive terms. Now moving to macro market conditions. The two most important external factors impacting BXP's performance or long-term interest rates and corporate earnings growth. Lower interest rates would improve our cost of capital, spark more transaction activity and investment opportunities in our sector, reduce the cost of new development and be a tailwind for our clients' earnings growth. Much has been written and forecasted about the trajectory of interest rates, which we believe will come down over time, but we can only speculate on the exact timing. Companies generally do not hire new employees and increase their office space requirements unless their earnings are growing. Over time, the S&P 500 earnings grow around 10% per year. But in 2023, that growth rate was 0%. And in 2022, it was 5%. Though the U.S. economy is growing and unemployment remains low, only about 7% of the jobs created are in office-using categories versus a long-term average of over 25%. S&P 500 earnings are projected to grow 11% to 13% per annum over the next two years, which should be constructive to BXP's leasing activity. Many technology clients, a critically important sector driving space demand post the global financial crisis overcommitted to space during the pandemic and are currently in a digestion process, which has curtailed demand. There are exceptions such as net demand for space from the AI sector in San Francisco. Over the long term, we expect many tech companies will experience strong earnings growth and return to requiring more office space. Premier Workplace is defined as the best 6% of buildings representing 13% of total space in our five CBD markets continue to materially outperform the broader market. Direct vacancy for Premier Workplaces is 11.2% versus 17.9% for the broader market. Likewise, net absorption for premier workplaces has been a positive 7 million square feet over the last 13 quarters versus a negative 30 million square feet for the broader market. Asking rents for premier workplaces are 50% higher than the broader market, a widening gap from prior quarters. This outperformance is evident in BXP's portfolio, where 89% of our NOI comes from assets located in CBDs that are predominantly premier workplaces. These CBD assets are 91% occupied and 93% leased as of the end of the first quarter. Regarding the real estate private equity capital markets, office sales volume in the first quarter was down was $8.7 billion, down 3% from the prior quarter and up 32% from a low base one year ago. Office sales as a percentage of total commercial real estate transaction volume are continue to rise to over 20%. Transaction activity for premier workplaces was very limited. BXP's overriding goal is to leverage our competitive advantages to preserve and build FFO per share over time. The key advantages for BXP are our commitment to the office asset class and our clients as many competitors disinvest in the sector, a strong balance sheet with access to capital in the secured and unsecured debt and private equity markets, and one of the highest quality portfolios of premier workplaces in the U.S. assembled over several decades of intentional development acquisitions and dispositions. Today, clients and their advisers are more focused than ever on building quality as well as the financial stability and long-term commitment of their building owners, all strong competitive advantages for BXP. Last quarter, I spoke about three priorities for BXP in 2024, leasing space, new investments and development. Now Doug will provide more details on leasing. We're off to a good start in the first quarter and see a growing pipeline of opportunities for later this year in 2025. On new investment activity, as you know, we pivoted to offense late last year and early this year through buying joint venture interest in three significant in-service assets at attractive prices. We remain in active pursuit of opportunities in our core markets and asset types with primarily two types of counterparties. Lenders to highly leveraged assets that require recapitalization and institutional owners seeking to diversify from the office asset plan. To date, there has been limited market transaction activity for high-quality office assets. With lenders, there are fewer premier workplaces that are struggling with leverage. And in the few cases involving premier workplaces, lenders are generally electing borrowers who agreed to invest modestly in their assets. Institutional owners are less interested in selling their highest quality assets, and there remains a material bid-ask spread given assets have, in most cases, not been marked down to market clearing levels. Notwithstanding these current challenges, our expectations are the transactions and our investment activity will increase in coming quarters given the volume of maturing financings, continued markdowns in institutional portfolios and higher for longer interest rates. We also have interest from institutional investors in contesting with us for select opportunities. On development, we commenced our 121 Broadway residential tower in Kendall Center as part of the 1 million square feet of commercial entitlements we received from the city of Cambridge to build 290 Binney Street and a future to-be-determined commercial building. Comprising 37 stories and 439 units, 121 Broadway will be the tallest building in Cambridge with a state-of-the-art design and amenity setting a new quality standard for residential offerings in the Kendall Square neighborhood. Earlier this month, on Boston Marathon weekend, we celebrated the grand opening for and delivered into service the 118,000 square foot [indiscernible] House of Sports store on Boylston Street at Prudential Center. We continue to push forward with several residential projects under control that are being entitled and designed for which we intend to raise joint venture equity capital in the second half of the year. For office development, we have been approached by multiple clients in all our core markets who are interested in occupying new space and anchoring development projects. Given escalated material labor and capital costs, anchor clients must pay a premium to market rent today to justify the launch of a new development project, which is a challenging dynamic exacerbated by the earnings growth issue previously described. Though BXP's new office development activity has slowed, there will also be a very limited new office that will also be very limited new office development for the foreseeable future in our core markets, which is favorable for our existing portfolio. As vacancies continue to decline for premier workplaces, rents should rise, which will ultimately bridge the economic gap to justify new development. Though we believe buying is a better opportunity than selling in the current market environment, we are interested in raising capital through asset sales if attractive opportunities present themselves. We have a handful of small dispositions defined as under $30 million we are currently exploring. BXP continues to execute a significant development pipeline with 11 office lab retail and residential projects underway as of the end of the first quarter. These projects aggregate approximately 3.2 million square feet and $2.4 billion of BXP investment with $1.3 billion remaining to be funded and are projected to generate attractive yields in the aggregate upon delivery. So to summarize, in the face of strong negative market sentiment, BXP continues to display resilience and stability and occupancy FFO and dividend level. BXP is well positioned to continue to gain market share in both assets and clients during this time of market dislocation. The prospect of lower interest rates and stronger corporate earnings also provides a backdrop for renewed growth. Let me turn the call over to Doug. Douglas Linde: Thanks, Owen. Good morning, everybody. I hope what you're going to hear today from me is you're going to be with a pretty constructive perspective on what's going on in our markets and what's going on with our revenue picture and our leasing picture. As we sit here at the end of the first quarter, in spite of the absence of a broad pickup in office-using jobs, BXP continues to lease space. We are leasing space. There's momentum in the economy despite persistent high interest rates. Overall earnings growth for our clients and potential clients appears to be improving, and we're pretty optimistic it's going to lead to employment and space additions. And while we are not going to see broad reports of shrinking availability across any market, until there is a pickup in white collar job formation, there are pockets of supply constrained in select submarkets where we are seeing competition for space and improving economics. As reported in our supplemental, the mark-to-market of the leases that commenced this quarter was up 7% and the transaction costs averaged $8.60 per year, which is lower than it's been in the last few quarters. The overall mark-to-market of the starting cash rents on leases executed this quarter relative to the previous in-place cash rent was up about 2%. The starting cash rents on leases we signed this quarter on second-generation space, we're up about 22% in Boston, down 6.5% in Manhattan, down 3% in D.C. and up 8% on the West Coast with San Francisco CBD up 12%. Boston's increased is in large part due to a replacement of a tenant that was in default and had stopped paying. Adjusting for the transaction, the Boston numbers would have been up about 6%. As Owen stated, the seasonal trend line of BXP's leasing activity in the first quarter of '24 picked up relative to what we experienced in the first quarter of '23. This quarter, we completed 61 transactions, 32 new leases for 494,000 square feet and 29 renewals encompassing 399,000 square feet. We had three expansions totaling 18,000 square feet and four contractions totaling 44,000 square feet. As a point of comparison, in the first quarter of '23, there were 57 leases, 29 leases were with new clients for 410,000 and 28 renewals for 250,000. There were 10 expansions and three contractions. Last quarter, Fourth quarter of '23, we signed 37 lease renewals and 37 leases with new clients, and there were eight contractions and nine expansions among our existing clients. This quarter, new leases encompass 55% of the volume. Activity was across the entire portfolio with 178,000 square feet in Boston, 225,000 square feet in the New York region, 154,000 square feet from the West Coast and D.C. lead attack with 336,000 square feet. And to give you some additional color on this activity, there was only one transaction greater than 60,000 square feet due to the 215,000 square feet long-term law firm extension that included a 25,000 square foot contraction in D.C. although that same law firm took an additional 7,600 square feet in our Reston portfolio. Princeton made up 38% of the New York activity this quarter, almost all new clients. New clients made up 90% of the leasing volume in Boston and in New York, while renewals captured 73% of the West Coast and D.C. market. Equally important is our pipeline. Post March 31, we have over 875,000 square feet of active leases under negotiation, which we define as a transaction that is being documented by our legal teams and some of these transactions have been completed. This is consistent with the level of in-process leases we've made for the last few quarters. These transactions include a multi-floor expansion of an asset manager in our Midtown portfolio in New York, a full floor expansion by a law firm in Midtown, an asset manager taking a full floor 360 Park Avenue South, consumer brand company relocating to a building in Waltham, a multi-floor renewal of a law firm in San Francisco with no change in the premises and a downsizing along with an extension of a technology company in Reston, Virginia and a similar transaction in Waltham. We have seen an uptick in the number of active deals. At the end of the quarter, we had signed leases that had yet to commence on the in-service vacancy, totaling approximately 817,000 square feet, which includes 624,000 square feet that is anticipated to commence in 2024. We also have signed leases with new clients for another 534,000 square feet of currently occupied states. These leases have yet to commence but they are reflected in the reduction of our rollover exposure shown in our supplemental. The strongest user demand continues to come from the asset managers, including private equity venture hedge funds, specialized fund managers and their financial and legal advisers. These organizations are the heart and soul of our New York and our Back Bay activity and are an important driver of our San Francisco CBD demand. In some instances, these clients are growing their teams and capital under management. But in all cases, they want to occupy premier workplaces. We continue to see significantly more client demand in our East Coast portfolio versus the West Coast due to the disproportionate concentration of technology and media content related demand on the West Coast. However, there have been some subtle and encouraging trends across much of the portfolio. Our Back Bay Boston and Park Avenue Centric New York City portfolio continue to have outsized demand relative to our availability. While concessions are still at elevated levels, we've been able to increase our taking rents and we actually have clients that we cannot accommodate due to a lack of available space in certain buildings. In the last 90 days, there is the strong pickup of client activity in our Urban Edge Waltham portfolio. We have an 80,000 square foot tech client expiring in 2024 with a planted downsize to 16,000 square feet. This quarter, we completed a lease for 45,000 square feet and are in negotiations with two other clients, new ones for another 37,000 square feet of that expiration, and the existing client will stay with us but relocate within the building. Additionally, in a different Urban Edge building, we're negotiating a 45,000 square foot lease with an existing subtenant to extend when their prime lease expires in '25. We're negotiating a 25,000 square foot lease with a lab user proportion of our availability on Second Avenue and we're negotiating a 55,000 square foot lease with a non-tech company in a different building. None of these transactions more than 220,000 square feet were in our pipeline on 12/31/2023. All of this occurred in the last 90 to 120 days. In the District of Columbia and Northern Virginia, we continue to see more buildings with over leveraged capital structures unwilling to provide capital for new transactions, and therefore, they have very little client interest. At the other end of the spectrum, when the market got wind of our lease extension at 901 New York Avenue and the anticipated enhancements that we are planning, the interest in the available space at New York -- 901 New York accelerated dramatically. Reston continues to house the largest concentration of our Washington regional portfolio. It's the headquarters for VW, Batel, Leidos, SAIC, Peraton, Kaki, Metron, Comscore, Mandiant, and the College Board and it's also the home to a number of large technology companies like Microsoft. Because of the environment of the Town Center with seven days a week food, beverage and shopping and is also a natural location for small businesses in the financial services and legal industries. This quarter, we completed a 58,000 square foot lease with a new technology client at Reston Next that's moving from a toll road building, an expansion for law firm, and we are seeing a pickup in small tenant activity relate to '23 and as well as large users looking to upgrade their premises. The AI organizations in the city of San Francisco continue to look for additional space, which will continue the positive absorption story. They continue to focus, however, on build and expensive space. And while there is an abundance of available space in the city, there continues to be outsized demand for view-spaced north of market relative to the available supply. We completed a 35,000 square foot lease with a boutique financial adviser at Embarcadero Center this quarter that was only interested in use-spaced north of market. We're negotiating six transactions with new clients totaling 40,000 square feet as well as an 80,000 square foot renewal with a law firm that's retaining their existing point. Today, the Seattle CBD is almost exclusively a lease expiration-driven market, and there has been a material pickup in the level of activity. The number of tenant tours that we have conducted has picked up in the last quarters. We completed a lease with a new client on a 10,000 square-foot prebuilt suite and are in negotiations with a law firm for a parcel floor and discussions with a technology company for a full floor. West L.A, however, continues to be the market where activity remains light. While Century City is seeing great demand and strong rents as financial and professional services firms head west from the downtown market, those clients are not yet prepared to take space in low-rise buildings in Santa Monica. There continues to be pressure from streaming profitability, industry consolidation and job reduction in the gaming and media space that is impacting overall demand growth in the West L.A. area. As we forecast during our last call, our occupancies declined also slightly from 88.4% to 88.2% during the quarter, with a known expiration of 230,000 square feet in Princeton, where, as I mentioned, we have signed 80,000 square feet of new client deals this quarter that will commence this year. We have two additional large lease expirations across the portfolio in '24 that will occur during the second quarter, 200,000 square feet at 680 Folsom in San Francisco and 230,000 square feet at 7 Times Square, where we own 55%. Occupancy will drop in the second quarter and recover as we move into the fourth quarter. Mike is going to spend some time discussing changes to our interest expense outlook in his remarks. The issue of the day is the level of inflation, and I thought I'd make a few brief comments on how inflation is impacting our business. We are not seeing any deflation in our base building costs as we build -- as we bid potential stick-frame residential the projects Owen was describing earlier, but escalation assumptions are now normalized. No more 8% to 9%. The changes to the building in energy codes, along with the elevated level of interest expense associated with any construction financing, continue to pressure project costs and make new starts very challenging. However, we are seeing costs come down on tenant improvement jobs, which is a reflection of reduced demand on the group of contractors and subcontractors that focus on interiors work who are looking to maintain a consistent book of business. New high-rise tower construction costs are unlikely to deflate in the longer-term interest rate environment and the long-term interest rates remain at the elevated levels, the longer it's going to be before we see market rents approach the levels necessary to rationalize new office building, leasing economics and corresponding new development. We are experiencing an operating environment where leasing available space is primarily driven by gaining market share. That's with the world that we are living in, and we're winning. As clients choose premier properties in sound financial condition, operated by the best property management teams, BXP will continue to be successful in doing just that. I'll stop there and turn it over to Mike. Michael LaBelle: Great. Thank you, Doug. I appreciate it. Good morning, everybody. This morning, I plan to cover the details of our first quarter performance and also the updates to our 2024 full year guidance. We've also been active in the debt markets this quarter. So I'm going to start with a summary of some of the changes in our debt structure. In early February, we paid off $700 million of unsecured notes with available cash, that was in line with our plan. We also entered into a $500 million unsecured commercial paper program. This program offers an additional market for us to tap beyond the bank market mortgage and unsecured bond markets that we currently actively utilize. We started issuing under the program last week, and we've raised the full $500 million for terms ranging from overnight to one month at a weighted average rate of SOFR plus 25 basis points. The all-in rate, including fees is approximately 5.75%. We've used the proceeds to pay down our term loan from $1.2 billion to $700 million, which will reduce our borrowing cost on $500 million by 75 basis points or about $0.01 per share in 2024. In addition, we increased our corporate line of credit by $185 million to $2 billion. Our banks continue to be strong supporters of BXP even as they evaluate their global commercial real estate exposure and exit certain relationships. Now I'd like to turn to our first quarter earnings results. Despite the difficult real estate operating conditions and the stagnant office using job growth statistics, our portfolio is demonstrating strength and stability. As Owen and Doug described, portfolio occupancy has been relatively steady for the past six quarters. Our revenues continue to grow with top line total revenue up again this quarter by $10 million or 1.3%, and our share of portfolio NOI is also higher, up $6 million or 1.2% from last quarter. High interest rates are our biggest earnings challenge. This quarter, our interest expense increased $7 million. It's important to point out that more than half of this increase was due to higher noncash fair value interest expense, related to below-market debt on our recent acquisitions. We reported funds from operation of $1.73 per share for the quarter that was in line with our guidance for the first quarter and it was equal to our first quarter FFO from one year ago, again, demonstrating the stability of our income statement. Portfolio NOI exceeded our expectations by about $0.02 per share. The majority of this is from lower-than-anticipated net operating expenses that we expect will be deferred to later in 2024. This was offset by higher-than-projected net interest expense of $0.02 per share primarily from higher noncash fair value interest expense related to the acquisitions, and we also booked lower-than-projected interest income due to changes in the timing of closing our 290 Binney Street joint venture. So moving to the full year. Since providing our initial 2024 guidance, we finalized the assumptions utilized in valuing the in-place debt and interest rate swaps for our 901 New York Avenue and Santa Monica Business Park acquisitions. For 901 New York Avenue, we increased our assumption for the interest rate on the debt by 70 basis points to 7.7%. And for the interest rate hedge at Santa Monica Business Park, we determined that the change in market value will be amortized through our interest expense for the remaining term of the loan that expires in 2025. These adjustments result in an additional $0.05 per share of noncash fair value interest expense in 2024 relative to the estimate we used when we provided our guidance last quarter. This noncash adjustment impacts our full year guidance and is the primary reason we have reduced our FFO guidance for 2024. Other interest expense assumptions have also been impacted by the changing expectations for rate cuts in 2024. Last quarter, we forecasted four rate cuts commencing in the second quarter which was actually conservative to market expectations at the time. We've now pushed out any rate cuts to late in 2024. The impact on our floating rate debt is partially offset by the lower cost of our commercial paper program, but overall, we expect $0.02 of dilution from higher short-term interest rates compared to our prior guidance. The operating assumptions for the portfolio occupancy and same-store NOI remain relatively unchanged from our prior forecast. As Doug described, we do expect occupancy to decline slightly this quarter, we did expect occupancy to decline slightly this quarter and in the second quarter before improving in the back half of the year. Our assumption for same-property NOI growth of negative 1% to 3% is unchanged. Other modifications to our guidance include reducing our assumption for 2024 G&A expense by $0.01 per share and a modest reduction in our fee income projection. So in summary, we are reducing and narrowing our 2024 full year guidance for FFO to $6.98 to $7.10 per share. This represents a reduction of $0.06 per share at the midpoint from our prior guidance. The primary reason for the reductions are $0.05 of higher noncash fair value interest expense and $0.02 of higher interest expense from higher short-term interest rates, offset by $0.01 of lower G&A expense. The last item I would like to mention is that we published our 2023 sustainability and impact report, and it can be found on our website. The report contains a wealth of information on our sustainability efforts and the progress towards achieving our critical goals of reducing our energy use intensity, carbon emissions and achieving net zero carbon operations for Scope 1 and 2 greenhouse gas emissions by 2025. We invite you to join us for our sustainability and impact webcast on May 15th. If you have not received an invitation, please reach out to Helen and our Investor Relations team. That completes our formal remarks. Operator, can you open up the line for questions? Operator: Thank you, sir. [Operator Instructions]. And I show our first question comes from the line of Nick Yulico from Scotiabank. Please go ahead. Nicholas Yulico: Thanks. Yes, I guess just a bigger picture question maybe for Owen. How you're thinking about all the different opportunities out there? You mentioned that there could be some acquisition opportunities. You did just launch 121 Broadway, which is a substantial capital commitment. You have a stock price, I'm sure maybe you're not happy about. And so I'm just trying to understand like how we should think about the investment focus right now for the company? And how you expect to fund that via -- or are you looking to issue equity? Would you buy back stock? Anything along those lines would be helpful. Thanks. Owen Thomas: Yes. So Nick, a couple of things I would say. First, let me start with 121 Broadway. It's a fantastic new building -- residential building that we're building in Cambridge, but it was also launched as part of the requirements to achieve 1 million square feet of commercial entitlements in Cambridge. It was a requirement of that of receiving those entitlements. And those entitlements allowed us to commence the 290 Binney Street development, and we still have FAR available for one or two additional commercial buildings. But again, you have to think about that development. It's tied into the 290 development that we commenced last year. In terms of new investment opportunities, as I described in my remarks, there's a tremendous amount of dislocation going on in the office sector. You've got lots of overleveraged assets and you have also a number of institutional owners that want to decrease their exposure to office. And this is going to create opportunities for us. When we look back at prior down cycles in real estate and in office real estate, those were periods of time where BXP significantly enhanced its portfolio with acquisitions like 200 Clarendon Street GM building and others. So we want to participate. We think that's going to happen again in this cycle, and we want to participate in it. And as we do that, we are paying very close attention to, obviously, accreting our earnings over time and also watching our leverage. And I think each transaction will have to stay on its own in terms of how we fund it. Operator: Thank you. And I show our next question comes from the line of Steve Sakwa from Evercore ISI. Please go ahead. Steve Sakwa: Great. Thanks. Doug, I guess I wanted to just maybe follow-up on your positive commentary on leasing and just maybe get a sense for how much of this is for the existing portfolio? How much of this is for the development pipeline? And I realize we're getting sort of close to the middle of the year. So any of the leases being signed are probably really more of a '25 beneficiary than they are going to be at '24. But just how do you think about building up the occupancy on the existing portfolio and as importantly, filling up the vacancy within the development pipeline? Douglas Linde: Yes. Thanks, Steve. So of the activity that we have in our pipeline, and I'm going to give you two different sort of pipeline numbers. So the 875,000 square feet of stuff that we have going on, about 20,000 square feet of that is development and the rest of it, the other 865,000 square feet or 55,000 square feet are all existing portfolio deals and the majority of it is on available existing space. So the world, as I sort of think about it is we have the leases that we signed this quarter, then we have our pipeline of stuff in process. And then I have -- what I have is sort of my tracking list and my tracking list right now has another 1.7 million square feet of deals that we are -- that are active in our teams across the regions. And these are not a tenant is looking at the market and might call us. These are paper is moving back and forth. And there is a legitimate opportunity potentially for a deal to occur. Again, on all of that, it's almost exclusively on our in-service portfolio. So if you think about our development pipeline today, it really consists of 360 Park Avenue South and Hilary can comment on activity there, and then the life science buildings that we have in Waltham, of which there's no active conversation going on that's part of my pipeline and then the building that we have in our joint venture in South San Francisco. And again, there's nothing really going on there as well. And so the vast majority of the activity that we have is about increasing -- first, maintaining and then increasing, albeit slowly the occupancy in the existing in-service BXP core portfolio. And Hilary, if you want to comment on 360 Park Avenue so. Hilary Spann: Sure. Thanks, Doug. Hi, Steve, in terms of the leasing activity in Midtown South, I think we saw a slowdown in the first part of this year. I will say that we are starting to see more activity as 360 Park Avenue South has come online and clients can actually see the very high quality of the finishes and the lobbies and the common areas and the amenities that we've put in place. And so we are starting to see a pickup in our activity there. It remains the case that the businesses that are interested in locating at 360 Park Avenue self-span across industry sectors. And so while Midtown South in general has historically been home to tech and media tenancies, we're seeing everything from corporate to financial services and as Doug mentioned, an asset management firm come into that building and show interest in occupying that building. I think, anecdotally, while the leasing activity is picking up a bit, it remains to be seen where that will settle out in terms of executed leases in the coming quarters, but we feel encouraged by the fact that the volume of interest in the building has stepped up meaningfully since we completed it and opened it. Operator: Thank you. And I show our next question comes from the line of Anthony Paolone from JPMorgan. Please go ahead. Anthony Paolone: Yes, thanks. I guess my question is, you mentioned earlier some demand from the AI space. And at the same time, just tech companies having overexpanded and shedding some space. Just wondering if you could put some more dimensions around how that nets out. Exactly how big is the AI demand and maybe perhaps, how much more is there to go before the rest of tech is rightsized? Douglas Linde: Yes. So I'm going to give you what I would refer to as a simplistic view of it, and I'll let Rod Diehl give you a more comprehensive view. So the simplistic view of it is on the East Coast, where there really isn't much in the way of incremental AI demand, net-net most technology companies are when they're renewing a lease, taking less space. On the West Coast, predominantly in the greater San Francisco marketplace and then skewing down into the CBD of San Francisco, there is more incremental absorption overall in technology. It's all coming from AI. And I would say it's taking the place of what were traditional technology companies. But Rod, you can go sort of plus that on a little bit more. Rodney Diehl: Yes. Thanks, Doug. So yes, last year, of course, was a big year for AI in San Francisco. There was two very large leases that were completed. I believe that made up about 27% of the overall leasing activity for the year, which was pretty substantial. So coming into '24, there's still been activity on the AI front. There's one of those larger tenants that did the deal last year is also in the market again for more space. So we're watching that closely to see where that goes. So I think it's definitely a bright spot. And these different companies often to find themselves as AI, but it's broad across the spectrum of that technology. As you see that down in the Silicon Valley, in fact, there are some AI companies, many of them which are tied into the automotive industry. We have a couple of them in our own portfolio, and some of those are in the market as well. So definitely a consistent point of additional optimism and demand for the Bay Area. Operator: Thank you. And I show our next question comes from the line of John Kim from BMO Capital Markets. Please go ahead. John Kim: Thank you. You've been making a very compelling case between -- the bifurcation between premier workspace and commodity office in the CBD portfolio, which really benefits BXP. But that same bifurcation exists in your portfolio between CBD and suburban, where it's a 15 percentage point occupancy gap. So I'm wondering, just given that performance difference, does that make you reconsider your commitment to the suburbs? Douglas Linde: So this is -- let me start. This is Doug, and I'll let [indiscernible] make a comment as well. We are committed to the geographic locations that we currently have occupancy and vacancy. The truth of the matter is that the majority of our availability is in suburban, part of it was self-inflicted. So part of it was during 2020 to 2022 when we were looking at the highest and best use for some of our Waltham suburban assets in our Lexington suburban assets. We deem that the value of those assets over the long term is life science facilities would be better than as "traditional office facilities." And so we effectively cleared out some buildings. So 1050 Winter Street is an example and Reservoir Place and the other big colony buildings which are where the predominant amount of our availability is we're effectively cleared out for those purposes. And unfortunately, the market has not been helpful to us. And so we're managing that availability. But quite frankly, we've had the opportunity to lease some of that space to office companies and we've made the decision, at least in one case that we think we're better off holding off that building and doing it in a life science building when the appropriate economic model makes sense -- we have a tenant that wants to pay the right rent for that building. Then our other large availability is in Princeton, and our Princeton portfolio is premier property defined by the other assets in the greater Princeton area. And we are -- we have probably on an activity level more activity in Princeton right now than we do anywhere else in our New York portfolio on a relative basis. I can't explain why the pickup has occurred during the first and the second quarters of 2024, but it has. It's predominantly associated with the pharmaceutical and life science industries, but not lab. It's companies that are in that business that are -- that have an SG&A function. And Hilary, you can comment on the Princeton market and I'll let Bryan comment on the Waltham market. Hilary Spann: Sure. Thanks, Doug. As Doug said, we've seen an incredible pickup in leasing activity in the Princeton market in the first and second quarters while -- and that includes signed leases, but also leasing activity that continues now and we expect to be executed in the second and third quarters. A lot of it, as referenced, is new activities. Some of it includes clients that exist in the portfolio of Carnegie Center today and who have expressed needs to expand both from consolidation of business units or expansion of lines of business and from an increased experience of return to office. And so it's a pretty diverse set of reasons that people are expanding. But to Doug's point, the campus is pretty highly concentrated with pharmaceuticals and in particular, foreign pharmaceuticals, and that is where the bulk of the demand is coming from. And so we're incredibly encouraged by the amount of leasing activity, and we expect to see additional signed leases coming out of it in the coming quarters. Bryan Koop: This is Bryan Koop for Waltham. I'll continue to echo what Doug talked about, and we intentionally call it an Urban Edge market because it is less than 10 miles from downtown Boston, and that's an attribute that shouldn't be taken lightly in terms of the commute and also the density of the population surrounding that Waltham market. Some further color on what Doug brought up. We are seeing a difference between our -- the east side of I-95, which is all the attributes of urban project and maybe for the analysts who are very familiar with this, attributes that we have in rested, taller buildings, more amenities, et cetera. And we continue to see access and the highway is going to improve there. We put a new ramp in last year, and there is a forecast for more there. Where we are seeing some weaknesses in those assets that Doug mentioned like the Bay Colony, which have attributes that are very similar to the conventional suburban office buildings spread out feels more rural, but actually the location is very close. That's where there is a little bit of weakness. But we continue to believe that Waltham is an urban edge market and quite different than the conventional suburbs that most real estate people would describe. Operator: Thank you. And so our next question comes from the line of Blaine Heck from Wells Fargo. Blaine Heck: Great. Thanks. Good morning. Just following up on an earlier question and maybe taking out the element of timing on occupancy, and just focusing on the lease rate this year and potential progression there. You talked about the large exploration still remaining at 680 Folsom and 7 Times Square. But when you think about those in conjunction with your leasing pipeline, which Doug you said was 875,000 square feet plus and Owens' characterization of the pipeline is growing in the back half of the year and into 2025. I guess how much do you think you can move the lease rate up by as you look towards the end of the year? Douglas Linde: So when you use the word lease rate, you're talking about occupancy rate, right, not economic rent rate, I'm assuming. So again, I think that it's going to be slow and steady. So our projections when we gave our guidance during the call in the first quarter was that we were going to hopefully be flat to where we ended 2023 at the end of 2024 and then we'll continue to make additional progress. And then if you look at our exploration schedules, they're pretty manageable, right? I mean we have 5% to 6% expiring every year for the next four or five or six years. And so we don't -- we need to lease space. We need to gain market share, which is, again, my sort of point. And we are gaining market share in our markets, but it's -- when we do have technology companies expiring, we have to fight that water coming at us. And so it's challenge to dramatically increase occupancy in the short term. But we are getting to the point where we believe occupancy will continue to moderate upwards. Operator: Thank you. And I show our next question comes from the line of Michael Goldsmith from UBS. Please go ahead. Michael Goldsmith: Good morning. Thanks a lot for taking my question. What are the economics of the new multifamily development? And how do you think about your cost of capital? And then along the same lines, what is the thought process on the new commercial paper program and what upsize options do you have? Thanks. Douglas Linde: Well, let's let Mike answer the commercial paper question, and then I want to answer the question on our return expectations for multi-family. Michael LaBelle: So we decided to enter in this commercial paper program because we're always looking for additional markets to access especially in this environment. And it's the cheapest form of floating rate paper that we can issue. Historically, we've been primarily fixed rate. We're going to continue to be primarily fixed rate, but I think we will have a moderate amount of floating rate debt on a consistent basis over the foreseeable future. Right now, we have about $1.2 billion of unsecured floating rate debt, and we have about $700 million of joint venture unsecured debt. I think it will go down from there going forward. But we view using this commercial paper program as a consistent piece of our debt structure over the next several years. And because we can save 75 basis points by using it, it's a very liquid marketplace, we've got high credit ratings. So our access has been good, and now we've experienced it for the first couple of weeks, which has been very, very positive. So we're building an investor base in it. So we just felt like additional arrow in our quiver from a capital perspective and lower cost of capital, both drove that decision. Owen Thomas: Yes. It's Owen, let me address the 121 Broadway development. As I described in my remarks, this is a notable building. It's the tallest building in Cambridge and it's also a very high quality residential tower given the finishes and our design and planning. Due to coordination with the development of the vault for Eversource. The project is not expected to deliver its first units until late 2027 and expected to stabilize and not until the second quarter of 2029. So again, you have to think about this project as part of the overall East Cambridge development that we've been working on and talking to all of you about for the last two or three years. So the forecast returns on the 121 Broadway development alone are below our typical thresholds for development. However, if you look at the yields that we're receiving from the entire entitlement package. So that includes 121 Broadway. It includes 290 Binney Street, and it includes what we think we can get with the remaining commercial entitlements that we still have those projected returns do meet our development hurdles. And then to the extent that we are looking at new stick build, our expectation that those returns are going to be meaningfully higher than in urban development. And so we're talking about yields and well in excess of 6%. And that's what we need to consider starting a new residential development in 2024, 2025. Operator: Thank you. And I show our next question comes from the line of Ronald Kamdem from Morgan Stanley. Please go ahead. Ronald Kamdem: Hey, thanks so much. Just a quick two-parter. So the first is on the occupancy expectations for a pickup in the back half of the year. You talked about sort of the strength in Back Bay and Park Avenue, but those markets are -- have relatively higher occupancy versus the rest of the portfolio. So I guess I'm trying to understand where is the biggest sort of occupancy gains, expectations in the back half? Is it the stronger markets? Or is it other parts of the portfolio like suburban? That's part one. Part two is just a quick. Any sort of update on life sciences demand? Obviously, we're seeing a better fundraising environment, curious what you guys are seeing on the ground? Thanks. Douglas Linde: So the answer to your first question is it's pretty what I would refer to as granular. It includes occupancy pickups in buildings like the General Motors building, where we are in active conversations with tenants right now to take some space pretty quickly in 2024. It's in Princeton, whereas Hilary described, we have a pipeline of activity, and we believe some of those transactions will happen in 2024. It's in the greater Metropolitan Washington, D.C. market, primarily in Western Virginia, where we have a significant pipeline of active smaller deals that are going to occur in 2024. It's the activity that I described in Waltham, almost all of that activity is expiring or vacant space, and the majority of that will land in 2024. And so it's kind of everywhere, and there's no really what I would offer you is big ticket that's going to dramatically change things one way or the other. And so we're -- again, that's why we're saying we think we're going to get back to where we were, which is effectively the 88% plus or minus percent occupancy by the end of 2024. And look, I hope that we see some positive surprises in addition to that where tenants move into space earlier. The lease -- we believe the leases will get signed. The question, and you've heard me say this before, is we just don't necessarily have a good handle on what the timing is going to be for when we can start recognizing revenue relative to whether the space has been demolished or we're doing a turnkey buildup where we're in control of it, and getting decisions made by our clients in terms of what they want in the space and having all that work to the point where they're actually physically able to occupy the space in 2024, which would mean that it would be able to be in part of our occupancy role numbers. On life science, I think life science demand is relatively slow. I'll let Bryan describe the life science demand in the greater Boston market, and I'll let Rod take a poke at talking about what's going on in South San Francisco. Bryan Koop: So in the Waltham market, which is the only spot we have vacancy, we don't have any in Cambridge. I'd say it's the same as it was in the previous quarter, but maybe a little bit more encouraging. Where we are encouraged is, as you noted, was yes, there is more funding coming back into the life science sector. But also when we talk to clients, we are encouraged by the fact that they are, call it, producing the things that they said they were going to do to their investors, and there is encouragement in terms of the possibility of products down the pipeline. So that's where we're getting most of our encouragement is that the clients we have are very excited about what they have going on. Rodney Diehl: Yes. Just in South San Francisco, our one project is the 651 Gateway building, and that is the -- it's basically a converted office building 16 stories. And that building is completed, and we've done three deals in there, three, four floor deals, and those tenants are in various stages of moving in. But in terms of new activity, it's been very slow. The few deals that are in the market tend to be smaller, call them 10,000 to 20,000 feet, not the 200,000 foot deals that were in the market several years back. So that section has been quiet. But our building is actually very well positioned to attract that demand that is in the market. We have a space that is going to be built on a spec basis. We're going to do a full floor, which is going to be ready to accept that tenant when they're out there. So -- but the larger tenants are not there. Operator: Thank you. And I show our next question comes from the line of Richard Anderson from Wedbush Securities. Please go ahead. Richard Anderson: Hey, thanks. Good morning everyone. First to comment, I'd say if you were most any other REIT, you would have normalized out your $0.06 or a lot of it and be up today, not down 3%. So I commend you for a commitment to FFO, as defined by NAREIT, I think it'll be rewarded for that over time. On to my question on -- just taking a peek at the Castle data and still utilization in the office space is sub-60%. I don't know how that compares to your premier asset type, but utilization is still not near where it was pre-pandemic. Is there a scenario where the BXP story can still work long-term, if we're looking at sort of a permanent condition of underutilization of office? Or do you feel like you need to get fully back to have a long-term story to tell. I'm just curious what you think about sort of the very long-term when it comes to office utilization? Thanks. Owen Thomas: Yes. Let me -- that was a lot to unpack there, but let me take a stab at it. So first of all, castle data is highly used in the media and I think in the financial community. And I think it's a very imperfect measure of office demand. It's a decent measure of perhaps footfall in an urban area over a period of time. So what do I mean by that? Many of the owners of premier workplaces don't use castle systems in their buildings. So we're not really exactly sure which buildings are being measured. It doesn't take into effect that the office market is less occupied today from a leasing standpoint, and it also looks at data over the course of the whole week, which is less relevant for office occupancy, what you really need to focus on its peak days. So I know everybody uses it, but it's not really a reflection of our experience, which is the following. We have turn style data for roughly half of our 55 million square feet under management. And we have carefully picked out same-store data for buildings that are essentially the same level -- has the same level of leasing as they did in March of 2020 as they do today. And when you look at that data in New York, our buildings are basically at the same level of turn style swipes, Tuesday or Thursday, as they were in March of 2009. So New York is basically back. The other thing that's interesting is Friday was already slow before the pandemic and Monday is coming up. So there's -- I actually say New York is basically back to the way it was. Certainly, three days a week. Boston is at about 75% on that measure and the only place where it's really lagging is in San Francisco, which is about 45% or 50% for those peak days. And peak days are important because if you're a user of space, you need to have space for your people when they're all coming in. So it's not across the whole week, it's what is it on the peak days. So again, we see improvement. As I tried to say over and over in my remarks, we think the issue, the reason our leasing is slower today is actually not because of work-from-home. It's because of the earnings growth of the clients that we serve. We're a -- we're a provider of services to businesses, not consumers. Those businesses are not growing their earnings. And if they're not growing their earnings, they're not hiring people and they're not taking space. I think as earnings start to grow again, which frankly, we're seeing right now in the first quarter, our leasing will pick up. And I think Doug did a very good job of articulating some of those green shoots that we're already seeing that we should experience later this year. Rodney Diehl: And Rich, just from a -- from a sort of macro thesis perspective, I think what is 100% clear is that new construction is not part of the vernacular in 2024, 2025, which means unlikely you're going to see buildings delivered that aren't already under-construction and there is stuff under construction, but you're not going to be seeing new buildings delivered in any of these Metropolitan areas for the next five plus years, right. That's how long it takes to build a building. Look at the time frames associated with these press releases about a potential new building in Midtown Manhattan. And so if our thesis continues to be accurate and Owen has described the difference between the premier and sort of the other portions of the office inventory, there is going to become less and less premier space and the premier space will continue to pick up its occupancy, its leased percentages and we will see the fruits of that in the properties that we have in all of our marketplaces. And again, I hark back to sort of this dislocation that's occurring, what we're seeing in Washington DC relative to the number of buildings that people would deem to be "A to A minus buildings" that are incapable at this point of making a leasing transaction because there is no capital available because the buildings are "underwater" defined as there's too much debt and the equity holders are saying, we're not prepared to put capital in for the benefit of the lender. It's changing the characteristics of how leasing is occurring. And Jake, maybe you can spend a minute talking about sort of the dynamic of where tenants can look if they want to go into a building in a market by the way, which has a very significant availability problem still. Owen Thomas: Yes, I would just maybe second what Doug just noted in that. We are seeing really great activity across all of the buildings in our DC and Northern Virginia portfolio. The weight of the troubled assets and the dislocation in our region is really kind of playing to our favor. And most of our buildings are preeminent workplaces and there's definitively a flight-to-quality, but there's also a real flight-to-certainty across the brokerage community who wants to do deals with somebody who can do deals. So we're seeing that playing out in our favor in our region for sure. Operator: Thank you. And I show our next question comes from the line of Caitlin Burrows from Goldman Sachs. Please go ahead. Caitlin Burrows: Hi, good morning. Maybe just occupancy at 535 Mission, which is a newer build lead platinum has fallen below 60%, I think related to WeWork. So, Doug, I know you talked about how south of market is lagging a bit, but can you talk about the demand at that vacancy? And then bigger picture, how does that inform your view of the health of demand at the highest end of the market in ahead of first-generation leases rolling over at that building and sales force in the coming year? Douglas Linde: Sure. Sure, Caitlin. I'll make a brief comment and let Rod describe it. So WeWork actually is in negotiation to remain in all the space that we have with them at that building. And we have an expiration with Zillow – Trulia/Zillow that consolidation, which occurred earlier, and that's where the majority of the availability is. And Rod, you can describe sort of leasing prospects there and how things are looking in our portfolio in South America. Rodney Diehl: Yes. So that's right. The space that you're referring to is in the low-rise of that building and it's the former Zillow/Trulia space. So we've had some activity on it. We've had better activity on a couple of floors up top. In fact, we just completed a full floor of spec suites up on the 11th floor, which is getting excellent response from the market. So we expect to get that leased up quickly. The balance of the portfolio, I mean earlier on the call, the 680 Folsom availability was mentioned, that's the 200,000 square feet. We just got that space back. Technically today is the first day we have it as a vacant space. However, we've been marketing it for some time and we've had activity on that. We've been trading paper with various groups. There's another tenant that we're chasing right now. So that -- so we're getting good looks. We're getting our shots at seeing these deals. I would say that we've had more activity on the North market. So I'd say our Embarcadero Center property, frankly is getting a little bit more attention than some of the South market stuff is. Just I think that's just the nature of where the demand is coming from, more the traditional companies tended to be attracted to Embarcadero Center, whereas tech is still focused more south of the market. And there is some space that is on the sublease market at Salesforce Tower that Salesforce has and they've been marketing it and it's getting good looks as well. So I mean, there are groups out there. So I'm very confident that we're going to keep that space leased up. Operator: Thank you. And I show our next question comes from the line of Vikram Malholtra from Mizuho. Please go ahead. Vikram Malhotra: Thanks for taking the question. Just two quick ones. One, just, I guess, Mike, I just wanted to clarify in the -- what you outlined for the guidance adjustments, do you mean just sort of where the curve has shifted overall? Or were you actually baking in sort of some sort of rate cuts in your -- in your guidance? And then secondly, I guess, just in terms of achieving that occupancy uptick in the second half, is sort of the 1Q leasing run rate, do you also anticipate that to move up just given where expirations are? Thanks. Michael LaBelle: So on the interest-rate expectation, we have included an additional, a rate cut in our expectations late in the year. And I think if that rate cut does not occur, it won't have a meaningful impact on what our guidance range is because of when it is within the year. So we'll just have to see what happens with the inflation numbers on the Fed as we kind of think about where rates might be going both later this year and next year. But I don't think if there's no cuts this year, it's going to have a significant impact to our guidance. What was the other question was on leasing? Rodney Diehl: Occupancy. Michael LaBelle: I didn't -- can you restate the question? Vikram Malhotra: Q1 run rate assumption? Michael LaBelle: So the occupancy for Q1 was down a little bit and for Q2, it's going to be down a little bit again because of the two expirations that Doug talked about, which is the expiration at 680 Folsom and Times Square Tower. And then we don't have significant expirations of individual size in the back half of the year. And that's when many of the signed leases that we already have done, which Doug talked about, which is, I think it's 815,000 square feet for the company, of which over 650,000 square feet is in 2024, plus the LOIs that we have will start to take hold. And so that's what gives us confidence that the occupancy will stabilize after the second quarter and hopefully start to move northward after that. That's our expectation. Operator: Thank you. And our next question comes from the line of Omotayo Okusanya from Deutsche Bank. Please go ahead. Omotayo Okusanya: Hi, yes. Good morning everyone. I just wanted to go back to the guidance for the year. So if we take first quarter, we take the midpoint of the second quarter, you're about at 344, midpoint of guidance, the 704. We're talking about rates higher for longer, occupancy probably picking up in fourth quarter or so of the year. So could you just help us walk us through the acceleration of earnings in the back half? What the drivers of that will be? Michael LaBelle: So, there's really three, I think impacts that are going to help us in the third and fourth quarter. The first is we expect NOI from the portfolio to be up, and we expect that to occur because the occupancy improvement that we have talked about. So I would expect that both third and fourth quarter will show higher portfolio NOI than what we have in the first and second quarter. The other is G&A. So G&A is seasonally high in the first and second quarter because of just the timing of the vesting schedules as well as taxes that are paid on payroll. So that's a pretty meaningful move between quarters, it could be between $0.05 and $0.07 lower in the third quarter and the fourth quarter from where it is today. And then the last piece is we do expect to have interest income be lower than it is today as we fund our development pipeline. And that is offset a little bit by capitalized interest. But I see our interest expense as being slightly lower next quarter and then stable and our interest income will drop a little bit sequentially by quarter as we spend on our development pipeline. So those are really the three things that are driving the improvement in our FFO in the third and fourth quarter to achieve the midpoint of the guidance range. Operator: Thank you. And I show our next question comes from the line of Michael Griffin from Citi. Please go ahead. Michael Griffin: Great, thanks. Just maybe on the debt side, Owen, I'd be curious to get your thoughts. I mean, are banks willing to lend on new office development projects yet. And if so, what kind of interest rate you think today would lend at? And what kind of yield would you need to have to justify undertaking the development? Michael LaBelle: So this is Mike. I'll respond to this and the rest of the team can add on. Lenders in general are not getting payoffs. So typically, they have volume requirements that are pretty significant because they're constantly getting paid off and they need to replace and hopefully grow that. In this environment, their borrowers are not necessarily paying them off. So they're not excited about increasing their exposure to commercial real estate and office properties right now. So I think as a whole, banks are not excited to provide lending, I think they would be more likely to blend on a stabilized piece of property at an appropriate debt yield than do a construction loan. I think there's very little in the way of construction financing available out there, particular anything speculative. If you came to a banking, you had a fully leased property maybe you could get that done. But again, the pricing is going to be, I don't know, 300 to 400 over SOFR. So SOFR is at 5.3%. So you're talking about 8% to 9% money. So it's really, really hard to make sense of t
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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.