BXP, Inc.

Good day and thank you for standing by. Welcome to BXP's Q4 2024 earnings conference 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. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker, Helen Hahn, Vice President, Investor Relations. Please go ahead.

Good morning, and welcome to BXP's fourth quarter 2024 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 G. If you did not receive a copy, these documents are available in the investor 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, there is 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, Chairman and 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 and only 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.

Great. Thank you, Helen. Good morning, and Happy Lunar New Year to all of you. Our results in the fourth quarter demonstrated strong performance given our execution and the property and capital market recovery that is underway. Our FFO per share was in line with our forecast and market consensus for the fourth quarter. We completed over 2.3 million square feet of leasing in the quarter, which was the most quarterly leasing we have experienced since the second quarter of 2019. It was 130% of our long-term average leasing for the fourth quarter and our fifth largest quarter of leasing ever. Over the last few months, we have made several significant leasing announcements with important clients, such as Bain Capital, Ropes & Gray, McDermott, Will & Emery, and Knitwell. We leased over 5.6 million square feet for all of 2024, which was 35% greater than 2023. And the average term for over 291 leases completed in 2024 was just under 10 years. Though the fourth quarter is usually our most productive leasing quarter due to year-end seasonality effects, momentum is clearly building in the market and our leasing results. As I discussed at some length last quarter, the most important market forces impacting BXP are Corporate earnings growth, return to office behavior, and outperformance of premier workplaces continues to work in our favor, serving as a tailwind for BXP's performance. The one critical factor with a more uncertain trajectory is interest rates. Inflation measured at CPI has risen the last three months to 2.9%, stubbornly above the Fed's 2% target, and the December employment release indicated new job creation was well in excess of market expectations. As a result, the Fed has become more cautious, lowering its forecast of Fed fund rate cuts in 2025. And in the fixed income markets, long-term interest rates are up nearly 100 basis points since the Fed's first rate cut in September last year. Notwithstanding these uncertainties, short-term interest rates should remain lower in 2025 than 2024, which would be a positive for our and our clients' cost of capital. One question we frequently receive is to project the impact of the new federal administration's policies on BXP's activities. Though we are in the early stages of the new administration executing its plan, we do believe many of the articulated policies are business friendly, particularly lower taxes and less regulation, which will be positive for our clients, building their confidence, and as a result, stimulating leasing activity. Regarding efficiency initiatives, even if the federal workforce is rationalized and the GSA reduces space requirements, having federal workers returning to their offices should be a significant positive for BXP's business in the Washington D.C. region. BXP has limited exposure to GSA leases and is therefore not directly impacted by a reduction in GSA space requirements. More street life would be a positive for the urban environment and local retailers in Washington, D.C., and many of our users are government contractors who would be more likely to return to their offices in line with their government clients. An area of concern with the new administration's policies, the potential impact to interest rates, given that new tariffs, if implemented, could be inflationary, and larger fiscal deficits resulting from tax cuts could lead to higher long-term treasury yields in the debt markets. We are shocked by the devastation of the recent fires in LA and empathetic to all those impacted. It is too early to fully understand the future impact of this tragedy on the LA office market. But we are aware of a significant office sale process that is progressing with no apparent pricing impact post the fire incident. As discussed repeatedly in the past, BXP competes primarily in the premier workplace segment of the office sector, which continues to materially outperform the broader office market. Premier workplaces are defined in CBRE's research as the highest quality 7% of buildings, representing 13% of total space in our five CBD markets. Direct vacancy for premier workplaces is currently 13.2% versus 18.8% for the broader market. Likewise, net absorption for premier workplaces has been a positive 8.8 million square feet over the last three years versus a negative 15.6 million square feet for the broader market. Asking rents for premier workplaces are more than 50% higher than the broader market, up from approximately a 40% premium three years ago. Regarding the real estate private equity capital markets, office sales volume in the fourth quarter demonstrated a continued acceleration of deal activity. Specifically, significant U.S. office sales volume was $15.3 billion, 80% greater than the third quarter of 24, and 59% above the fourth quarter a year ago. Lower short-term interest rates, increased leasing activity for certain assets and locations, and better access to debt financing continue to be the drivers. Though there were limited premier workplace sale transactions this past quarter in our core markets, notable deals include Norges Purchase, the 50% interest that did not already own, and a portfolio of eight assets located in Boston, Washington, D.C., and San Francisco from Nuveen. Pricing was on average approximately $500 a square foot for a portfolio that is 88.5% least. A non-U.S. investor purchased a 11% minority interest in one Vanderbilt next to Grand Central in New York City for $2,700 a square foot and a 4.3% reported cap rate. moving to bxp's capital allocation activities and new investments we commenced an exciting new office development in washington dc specifically we acquired 725 12th street a vacant office building from its lender for 34 million dollars or 112 dollars a square foot the site is very well located immediately adjacent to metro center washington dc's busiest transit stop where four train lines converge Concurrent with the acquisition, we secured a long-term pre-lease commitment from McDermott, Will, and Emory for 152,000 square feet to anchor a new premier workplace development on the site. Further, we have a letter of intent with another anchor client to lease substantially all of the remaining space. Our development plan is to demolish the existing building, reuse the below-grade parking structure, and rebuild a new 320,000 square foot premier workplace with market leading amenities and unique entry meeting and outdoor spaces for our two anchor clients. We expect the full development budget including land acquisition and capital costs will be approximately $350 million and our projected initial cash development yield for the project is over 8%. The development has commenced with our acquisition in December and we expect to deliver the building in late 2028. 725 12th Street is a great example of how BXP is uniquely able to create an accretive investment opportunity in the current market environment. The existing building was empty and its loan in default creating a discounted acquisition opportunity. Industry-leading clients want and will pay for new premier workplace space fulfillments, notwithstanding high levels of vacancy in existing buildings. And BXP has the unique ability to execute, given our relationships with lenders and owners, trusted reputation and experience with industry-leading clients, both in Washington, D.C. and around the U.S., access to the capital markets needed to fund the development, and a market-leading execution team to design and construct the new building. Well done, Team BXP, D.C. Continuing with new developments, I described last quarter our 940,000 square foot 343 Madison project in Midtown with direct lobby escalator access to Grand Central Madison Concourse and located two blocks south of J.P. Morgan's new headquarters building. We are in active conversations with several potential anchor clients ranging from 150,000 to 400,000 square feet. 343 Madison is the only immediately actionable office development site in close proximity to Grand Central Terminal, widely viewed as the most in-demand office sub-market in the U.S. We expect to launch this $2 billion project in 2025, where, as a reminder, BXP owns a 55% interest. We also expect to launch two new residential developments in 2025, where BXP will serve as a developer and a minority owner of the project. One of these projects is in suburban Boston at 17 Hartwell Avenue in Lexington on a site we already own that is being re-entitled, and the other project is in the New York region. More details will be forthcoming when we launch these projects later this year. BXP, along with three partners, was also awarded by the state of New York a project known as Site K, located at 11th Avenue between 35th and 36th Streets, directly across from the Javits Convention Center and adjacent to our 3 Hudson Boulevard commercial site in New York City. The plan is to build approximately 1,350 residential units with an affordable component and a 450-room hotel and two separate towers over a five-story podium. We are very pleased and honored to have been selected by New York State in this highly competitive RFP process. The project is several years away from construction commencement, given the entitlement, pre-development, and design work that needs to be completed. BXP also delivered into service two projects this past quarter ahead of schedule. In October, we completed 300 Binney Street, a 240,000 square foot office to lab conversion project fully leased to the Broad Institute on a long-term basis where we were able to achieve a first-year cash development yield on incremental capital of 14.5%. We also fully delivered into service Skymark, a 508-unit luxury residential high-rise development located in Reston Town Center. The lease-up of this project is well ahead of schedule, having leased over 50% of the units at above pro forma rents only six months after opening. We are in active negotiations for the disposition of three land sites and are preparing to put into the market an operating property. In the aggregate, these sales, if successful, will generate approximately $200 million of net proceeds, although it is possible one of the land sale closings gets pushed to 2026. We remain active evaluating our non-producing assets, both sites and buildings taken out of service, to generate more monetization activity. Notwithstanding the development deliveries we completed in the second half of 2024, BXP continues to execute a significant development pipeline with seven office, lab, retail, and residential projects underway. as of the end of the fourth quarter, the largest of which is 290 Binney in Cambridge, fully leased to AstraZeneca, and expected to deliver in the second quarter of 2026. These projects aggregate approximately 2.3 million square feet and $2.1 billion of BXP investment, with $1.2 billion remaining to be funded. So in conclusion, BXP is clearly gaining momentum in both leasing and new investment activity due to more favorable market conditions and our strategy of commitment to both our clients and the premier workplace segment of the office industry, our access to public and private debt and equity capital markets, and a leading market presence in our core cities. We will build on this momentum and the constructive environment for our business to lay the foundations for additional growth in the years ahead. Let me turn over our report to Doug. Thanks, Owen.