BXP, Inc.

Good day and thank you for standing by. Welcome to Q3 2025 BXB 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 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To rejure your question, please press star 1-1 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 third quarter 2025 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 exceptions, 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 upstate 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.

Thank you, Helen, and good morning to all of you. Our financial results for the third quarter demonstrate a continuation of BXP's positive momentum. FFO per share was 4 cents above our forecast and 2 cents above market consensus, and we raised the midpoint of our earnings guidance for the full year 2025 by 3 cents. This past quarter, BXP also completed a very well-attended and successful investor day. during which we provided a detailed execution plan on how we intend to increase FFO per share, fund development costs, and deleverage over the next two and a half years. This morning, I will provide a reminder of the action steps in our plan, as well as an early update on our progress. Our first goal is to lease space and grow occupancy given the modest rollover exposure BXP faces over the next nine quarters. In the third quarter, we completed over 1.5 million square feet of leasing, 39% greater than the third quarter of 2024, and 130% of our last five-year average leasing for the third quarter. Year to date, we've leased 3.8 million square feet, which is 14% greater than the first three quarters of 2024. As we have explained on prior calls, leasing activity is tied to both our clients' growth and the use of their space. As a proxy for BXP's client base, over 87% of the S&P 500 companies that have reported earnings this quarter as of last Friday are beating estimates. S&P 500 earnings have been growing for nine straight quarters, and for 2025 are projected to grow around 11% to 12%. up from single-digit estimates last quarter. Return to office mandates continue to grow and take effect, though the West Coast lags the East Coast on this measure. Placer AI just released their office utilization data showing a material uptick in office utilization from a year ago. In September 2024, office utilization was 34.8% below 2019 levels, and last month's utilization was 26.3% lower, indicating a 13% increase in office utilization over the last year. This data captures a large set of office assets across the U.S., and though premier workplace utilization in gateway cities is higher, the overall trend is relevant. Our second goal is to raise capital and optimize our portfolio through asset sales. During our investor day, we communicated an objective to sell 27 land, residential, and non-strategic office assets for approximately $1.9 billion in net aggregate sale proceeds by year-end 2027. We are off to a strong start. So far, we've closed the sale of four land assets for total net proceeds of $57 million. have under contract nine assets for total net proceeds of approximately $400 million, and are in the market with 10 additional properties for estimated total net proceeds of $750 to $800 million. In total, we have 23 transactions closed or underway with estimated net proceeds of roughly $1.25 billion. Dispositions completed for 2025 could aggregate approximately $500 to $700 million in net proceeds. Office transaction volume in the private markets continues to improve as more equity investors get constructive on the sector and financing becomes more available at scale, particularly in the CMBS market with tightening credit spreads. In the third quarter, significant office sales were $12.9 billion up 6% from the second quarter of 25 and up 55% from the third quarter last year. Relevant transaction activity that took place in the third quarter is as follows. In New York City, Park Avenue Tower, a nearly fully leased 620,000-foot office building located at 55th Street, is under agreement to sell for $730 million or approximately a 6% cap rate and nearly $1,200 a square foot. Another 5% interest in one Vanderbilt located adjacent to Grand Central Station in New York City sold for over $2,800 a square foot and presumably a very low cap rate. In Boston, 399 Boylston Street, a 245,000 square foot office asset that is 90% leased with relatively short weighted average lease term is under agreement to sell for $124 million or just over $500 a foot and an 8.3% cap rate. In Beverly Hills, Maple Plaza, 290,000 square foot office asset that is 75% lease sold for 205 million or $713 a foot and a 6.5% cap rate. And lastly, in Redmond, Washington, one Estera, a 250,000-square-foot office building fully leased to Microsoft on a long-term basis sold for $225 million or a 6.5% cap rate and over $900 a square foot. Our third goal is to increase our portfolio concentration of premier workplace assets and CBD locations in our core gateway markets. As backdrop, the premier workplace segment defined as roughly the top 14% of space and 7% of buildings in the five CBD markets where BXP competes continues to materially outperform the broader office market. Direct vacancy for premier workplaces in these five markets is 11.7%. 5.7 percentage points, or 22% lower than the broader markets, and asking rents for premier workplaces climbed to a 55% premium over the broader market. Over the last three years, net absorption for premier workplaces has been a positive 10.3 million square feet versus a negative 9.2 million square feet for the balance of the market, nearly a 20 million square foot difference. For BXP, we continue to reallocate capital to premier workplace assets in CBD locations. We recently launched new developments at 343 Madison Avenue in New York City and 725 12th Street in Washington, DC. And most of the office and land assets we are selling are in suburban locations. There are an increasing number of higher quality office assets in our core markets available for acquisition, some on an off market basis. We evaluate everything, pursue deals selectively, but are being disciplined about quality pricing and the resultant's leverage and earnings dilution impacts. The fourth goal is to grow FFO through new development, more selectively with office, given market conditions, and more actively for multifamily, which we'll do with a financial partner. For office, we're allocating capital more to developments and acquisitions because we are finding very high quality development opportunities with pre-leasing, that we believe will generate over 8% cash yields upon delivery, which are roughly 150 to 200 basis points higher than cap rates for debatably equivalent quality asset acquisitions. An additional advantage is new buildings generally have longer weighted average lease term and limited near and medium term CapEx requirements. The trade-off is timing, as developments obviously take several years to deliver. For multifamily, we are selling four properties totaling over 1300 units, have three projects with over 1400 units under construction, and are in various stages of entitlement and or design for 11 projects totaling over 5000 units, two of which could commence in 2026. We expect to capitalize new development starts with financial partners owning the majority of the equity. We continue to advance our development pipeline. This quarter, we delivered three office projects, 1050 Winter Street, Rest and Next Office Phase 2. The office component of both these assets are fully leased. And 360 Park Avenue South, currently 38% leased and experiencing accelerating leasing activity. We have eight office life science, residential, and retail projects underway, comprising 3.5 million square feet. and $3.7 billion of BXP investment. We expect these projects will deliver strong external growth, both in the near term with the delivery of 290 Benny Street midway through next year, and over the longer term. Our Washington, D.C. team is also working on another premier workplace build-to-suit opportunity. A final goal is to introduce a financial partner into our 343 Madison development project, which is under construction. As we have described, 343 Madison is a leading premier workplace new development project in New York City given its location with direct access to Grand Central Terminal and state-of-the-art amenities and design. We are finalizing a lease commitment with a financial services client for 30% of the space in the middle bank of the building. We are also in discussions with several other large users for the balance of the space in the project. Our financial goal is to introduce an equity partner for a 30 to 50% interest in the property. While we are in very preliminary discussions with a small number of investors who have expressed interest, we believe the value of the asset will appreciate given our leasing progress and the accelerating market rent growth in the Midtown office market and do not expect to finalize an investment until sometime in 2026. In conclusion, our clients in general are growing, healthy, and more intensively using their space, creating increasingly positive leasing market conditions concentrated in the premier workplace segment of the market. New construction for office has virtually halted, leading to higher occupancy and rent growth in many submarkets where BXP operates. Debt and equity investors are becoming constructive on the office sector, resulting in more availability of capital at better pricing. BXP is very much on track executing our business plan as outlined last month, which we believe will deliver both FFO growth and deleveraging in the years ahead. Let me turn it over to Doug. Thanks, Owen.