BXP, Inc.

Good day, and thank you for standing by. Welcome to BXP's second quarter 2022 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you need to slowly press star 1 1 on your telephone and wait for your name to be announced. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, to Helen Han.

Good morning and welcome to BXP's second quarter 2022 earnings conference call. The press release and supplemental package were distributed last night and furnished on Form 8K. In the supplemental package, BXP has reconciled all non-GAAP financial measures to the most directly comparable GAAP measure in accordance with Reg D. 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 meeting 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 attained. 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, Chief Executive Officer, Doug Linde, President, and Mike LaBelle, Chief Financial Officer. During the Q&A portion of our call, Ray Ritchie, 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 an 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.

Thank you, Helen, and good morning, everyone. Today, I will cover BXP's continued strong performance as demonstrated in our second quarter results, high-level trends in the economy and in-person work affecting BXP, current private equity capital market conditions for office real estate, and BXP's capital allocation activities. BXP's financial results for the second quarter reflect the continued positive impact of the post-pandemic reopening of the major cities where we operate and the increasing needs of our clients for securing high-quality office space. Our FFO per share this quarter was well above both market consensus and the midpoint of our guidance, and we increased our forecast for full year 2022. We completed 1.9 million square feet of leasing more than 160% of our leasing volumes in the first quarter, and 140% of longer-term average leasing activity for the second quarter. This success can again be attributed to not only our execution, but also the enhanced velocity achieved in the current marketplace for premium quality workspaces, which are the hallmark of BXP's strategy and portfolio. It's clear over the last quarter that economic conditions in the U.S. and globally have deteriorated. The key culprit is inflation, which, as it continues to reach new highs, set off a chain reaction of events, starting with the Federal Reserve taking and signaling severe tightening measures, interest rates rising across the yield curve, volatility and losses in the public equity and debt markets, and now increasing concerns that the U.S. economy may experience a recession. This evolving operating environment is having several impacts to BXP's operating activities. Though our leasing activity has been very strong for the last few quarters, we anticipate headwinds, at least in the short term. Business leaders are generally more reticent to make large capital allocation decisions, such as a lease, in an uncertain economic environment. Before the summer season, office usage by our clients continued to gradually increase. There is increasing evidence that many businesses have or will tighten up in-person work policies as economic conditions worsen. Many of these companies also significantly increased their workforce during the pandemic without increasing their available space. These factors should help offset, at least partially, the recessionary headwinds to space demands. Our capital costs have increased, which Mike will cover in greater detail, due to higher interest rates and credit spreads. And private market debt financing, both for construction and existing assets, is significantly more challenging to arrange. As discussed in prior quarters, inflation has increased construction costs for new development. Though the costs for our launch development pipeline are essentially already locked in, the cost of potential future development continues to increase. We are not able to predict the depth or length of the current economic slowdown. As a result, we are positioning BXP for relative success regardless of the economy's trajectory by carefully managing leverage while continuing to selectively invest in opportunities with the highest return versus risk characteristics. In terms of real estate capital markets, transaction volume for office assets slowed to 18 billion in the second quarter, down 40% from the first quarter and flat to the second quarter last year. Though volumes are down, liquidity remains for the higher quality assets that often trade to institutional buyers not requiring leverage. Cap rates have increased at least 10 basis points for the highest quality assets with limited leasing exposure and more for assets of lower quality and or with riskier income streams. Availability of financing is a key market driver. There were several transactions of note in the second quarter. In the Seaport District of Boston, a developer recapitalized 451 D Street with a fund manager for $708 million. This 480,000-square-foot building was fully leased, and pricing was just under $1,500 a square foot and a 4% cap rate. In El Segundo, 555 South Aviation Boulevard sold for $206 million to a fund manager. This 260,000 square foot building is fully leased and was extensively renovated in 2018. Pricing was $790 a square foot and a 5.3% cap rate. And lastly, in Sunnyvale, Moffett Green was sold to a pension fund advisor for $875 million. The four-building, 720,000-square-foot complex is fully leased to Meta and sold for just over $1,200 a square foot and a 4.5% cap rate. Regarding VXP's capital market activity, we closed on our previously described Madison Center acquisition in Seattle for $730 million and continue to selectively pursue acquisitions in our core markets with financial partners. On dispositions, we completed the sale of BA95, an older 11-building, 733,000-square-foot suburban flex office park located in Springfield, Virginia, for $127 million, which represents pricing of $173 a square foot and a 6.2% cap rate. Bought in 1981 and developed by BXP over time, VA 95 was an early and successful investment by BXP that no longer fits well with our corporate strategy. We are making good progress in the sale of several additional assets in the Washington DC market, which we intend to use to fund the Madison Center acquisition through reverse like-kind exchanges. If these transactions are successful and including two sales already completed this year, Total dispositions for 2022 could exceed $850 million, allowing BXP to both raise incremental liquidity and reallocate capital on a tax-efficient basis from the Washington, D.C. to the Seattle markets. Our development pipeline continues to deliver accretive projects to our in-service portfolio, and it's consistently recharged with new starts. This quarter, we delivered 325 Main Street in Cambridge a 414,000-square-foot building in which the office component is 100% leased to Google. Our $418 million investment in the project is estimated to have a first-year cash yield on cost of 8.7%. In Reston, Virginia, we commenced the development of a mixed-use project in Reston Next, comprising a four-story, 90,000-square-foot jewel box office building and a 508-unit highly amenitized residential complex. Most of the residential units will be located in a notable 39-story tower, which will be the tallest building in Reston. The XP will own 100% of the office component and a 20% interest in the residential in partnership with an institutional investor. This project is the next step in the full build-out of our very successful Reston Next development within Reston Town Center. After all of these movements, our current development pipeline of 11 office, lab, and residential projects, as well as View Boston, the observation deck at the Prudential Center, aggregates 4.2 million square feet and $2.6 billion of investment that we project based on delivery date and lease-up assumptions to add more than $190 million to our NOI over the next five years at a 7.5% average cash yield on cost when stabilized. The commercial component of our development pipeline is 49% pre-lease. So in summary, we had another very successful quarter with above expectation financial performance, strong leasing success, and significant investment and capital reallocation activity. Let me turn the call over to Doug. Thanks, Owen.