BXP Q4 2025 Earnings Call - Leasing Surge and Asset Sales Are Recasting the Portfolio, FFO Edges Up to $6.96 Midpoint

Conference Operator: Good day, and thank you for standing by. Welcome to the Q4 2025 BXP 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. In the interest of time, please limit yourselves to one question. 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, Investor Relations. Please go ahead.

Helen Han, Vice President, Investor Relations, BXP: Good morning, and welcome to BXP’s fourth quarter and full year 2025 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 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.

Owen Thomas, Chairman and Chief Executive Officer, BXP: Thank you, Helen, and good morning to all of you. BXP had a very strong year of performance in 2025 in all areas critical to our business, namely leasing, asset sales, development starts and deliveries, financing, and client service, notwithstanding our below reforecast FFO per share outcome for the fourth quarter. We remain on track, if not ahead, in executing the detailed business plan we outlined for shareholders at our investor conference last September. This morning, I’ll review our progress toward achieving the critical components of this plan, which are leasing and growing occupancy, asset sales and deleveraging, external growth primarily through new development, capital raising for 343 Madison Avenue, and increasing focus on urban premier workplace concentration. Though Doug will provide details on BXP’s leasing activity, in summary, we had a strong fourth quarter and full year of leasing, and our forecast occupancy gains have commenced.

We completed over 1.8 million sq ft of leasing for the fourth quarter and over 5.5 million sq ft for the full year 2025, well above our goals for the year. As we’ve explained on prior calls, leasing activity is tied to both our clients’ growth and use of their space. We have every reason to be confident that the positive environment we are experiencing for leasing will continue into 2026, as earnings for companies in both the S&P 500 and Russell 2000 indices, a proxy for our client base, are expected to grow at double digit, double digit rates, an acceleration above 2025 growth levels. Return-to-office mandates from corporate users continue to grow and take effect.

Placer.ai’s office utilization data indicates December 2025 was the busiest in-office December since the pandemic and showed a 10% increase in office visits nationwide from December 2024. Concerns and speculation about the impact of AI on job growth, and by extension, leasing activity, are not supported by the actions of our clients, many of which are growing their footprints, upgrading their space, and/or executing long-term leases. In fact, we’re experiencing accelerating demand from AI companies, particularly in the Bay Area and New York City. The near-term negative impacts of AI on jobs are more likely in support functions, which are generally not occupying premier workplaces. Providing further support for our leasing activity is the consistent strength and outperformance of the premier workplace segment of the office market, where BXP is a market leader.

Premier workplaces represent roughly the top 14% of space and 7% of buildings in the 5 CBD markets where BXP competes. Direct vacancy for premier workplaces in these 5 markets is 11.6%, 560 basis points lower than the broader market, while asking rents for premier workplaces continue to command a premium of more than 50% over the broader market. Over the last 3 years, net absorption for premier workplaces has been a positive 11.4 million sq ft versus a negative 8 million sq ft for the balance of the market, which is nearly a 20 million sq ft difference....

Given these positive supply and demand market trends and our strong leasing in 2025, we believe our target of 4% occupancy gain over the next two years remains achievable and more likely than when we made the forecast last September. 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 2028. We are off to a strong start. So far, we’ve closed the sale of 12 assets for total net proceeds of over $1 billion, $850 million in 2025, and $180 million this month.

In addition, we have under contract or agreed to terms the sale of eight assets, with estimated total net proceeds of approximately $230 million in 2026. In total, we have 21 transactions closed or well underway, with estimated net proceeds of roughly $1.25 billion. As of now, dispositions estimated for 2026 aggregate over $400 million, and we will be exploring additional sales. For the $1 billion in dispositions that have been closed, there are seven land sales for $220 million, two apartment sales for $400 million, and three office land sales for $400 million. We have been able to achieve attractively valued land sales by creatively positioning our office land for other uses.

To date, we have sold or are, or are in the process of selling land to a corporate user, a municipal user, a light manufacturing developer, a utility, and most importantly, developers for residential use, both apartments and for-sale townhomes. Across Lexington, Waltham, and Weston, Massachusetts, Montgomery County, Maryland, Fairfax County, Virginia, Santa Monica, California, and West Windsor Township, New Jersey, we have received or are pursuing entitlements for over 3,500 residential units, which is creating significant value for shareholders and will be the backbone of both our apartment development and land sales activity going forward. We sold two high-quality apartment buildings, which we built, in Reston Town Center in Cambridge, Massachusetts, for approximately a 4.6% cap rate. Both were profitable developments for BXP.

Lastly, on office sales, we elected not to participate in a debt restructuring at Market Square North and sold our interest to our partner for our share of the existing debt balance. We sold 140 Kendrick Street, our only asset located south of the I-90 interchange on Route 128 in suburban Boston, at a relatively high cap rate of 9.5%. However, we maximized its income potential, having leased the building to 96%, and the local market is not strategic to BXP, given our lack of scale. Lastly, we sold our 50% interest in Gateway Commons to a strategic buyer that has significant scale in South San Francisco for a 6.2% cap rate, and the property is 63% leased.

Though we think South San Francisco is an attractive life science market longer term, given high vacancy rates and low net absorption, it will take some time to capture the upside, and we received a reasonable price from a logical buyer. With this deal, we have exited the life science business on the West Coast, but remain committed to the sector through our substantial life science holdings in the Boston region. Supporting our disposition efforts, office transaction volume in the private market continues to improve as more equity investors become constructive on the sector, and financing is available at scale, particularly in the CMBS market, with tightening credit spreads. In the fourth quarter, significant office sales were $17.3 billion, which is up 43% from the third quarter of 2025 and up 21% from the fourth quarter of the prior year.

The transaction most relevant to BXP’s portfolio that occurred in the fourth quarter was the sale of a 47.5% interest in 101 California Street in San Francisco for a 5.25% cap rate and $775 a sq ft. The building is a market leader in San Francisco, comprising 1.25 million sq ft, and is 88% leased with attractive property-level financing through 2029. The third goal is to grow FFO through new development, selectively with office, given market conditions, and more actively for multifamily with an equity partner.

For office, we continue to allocate more capital to developments than acquisitions because we’re finding very high-quality development opportunities with pre-leasing that we believe will generate over 8% cash yields upon delivery, which is roughly 150-250 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. This past quarter, we created a second pre-leased premier workplace development in the Washington, D.C., CBD market. Following our success at 725 12th Street, we were approached by Sidley Austin to find them a new Washington, D.C., headquarters. We identified 2100 M Street as an attractive site with frontage on New Hampshire Avenue and 21st Street.

We simultaneously negotiated a purchase of this site for $55 million or $170 a sq ft, and executed a 15-year lease for 75% of the to-be-built, not yet designed, 320,000 sq ft premier workplace. The total development budget is estimated to be approximately $380 million, and the forecast unleveraged cash yield upon delivery is in excess of 8%. Though we have closed on the site, construction will not commence until 2028, and building delivery is expected in 2031. For multifamily, we have 3 projects with over 1,400 units under construction and are in various stages of entitlement and or design for 11 projects totaling over 5,000 units, one of which will commence in 2026.

We expect to continue to capitalize new development starts with financial partners owning the majority of the equity. We continue to advance our development pipeline with 8 office, life science, residential, and retail projects underway, comprising 3.5 million sq ft 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 Binney Street midway through the year and over the longer term. Our final goal is to introduce a financial partner into 343 Madison Avenue, our leading premier workplace development in New York City, given its location with direct access to Grand Central Terminal and state-of-the-art design and amenities.

We finalized a lease commitment with Starr for 29% of the space in the middle bank of the tower and are negotiating a letter of intent for another 16% of the building located just above Starr. We have committed to nearly 50% of the construction costs, and our projections remain on track for a stabilized, unleveraged cash return of 7.5%-8% upon delivery in 2029. We are in discussions with several potential equity partners for a 30%-50% leveraged interest in the property and also have had constructive discussions with several construction lenders for financing at attractive terms. Our leasing, construction, and capital markets execution continues to de-risk the 343 Madison investment, and we intend to complete this recapitalization in 2026.

We are making strong progress with our strategy for BXP to reallocate capital to premier workplace assets and CBD locations. We recently launched new developments at 343 Madison Avenue in New York City and 725 12th Street in Washington, DC. We plan to launch construction of 2100 M Street in 2028, and the majority of the office and land assets we are selling are in suburban locations. We continue to evaluate additional premier workplace development and acquisition opportunities, but remain disciplined about quality, pricing, and the resultant leverage and earnings impacts. In conclusion, our clients are, in general, 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 and better pricing. BXP is very much on track, executing our business plan as outlined last September, which we believe will deliver both FFO growth and deleveraging in the years ahead. I’ll turn it over to Doug.

Doug Linde, President, BXP: Thanks, Owen. Good morning, everybody. So filling in some details on our leasing progress. When we made our presentations at our Investor Day, we had all of our regional executives on the dais, and they described a very constructive and an improving environment for our portfolio across each of our markets. Our remarks last quarter reinforced that outlook. Our leasing results this quarter continue to affirm the sentiment. As you read last night, the fourth quarter total leasing volumes were strong and exceeded our expectations, and our occupancy jumped about 70 basis points, with about 35% of that gain stemming from improvements in the portfolio leasing and the other part from reductions to the portfolio size, AKA, the asset sales. We are excited to announce our new development leasing, and those investments are going to drive net operating income growth from 29 to 32.

But we are in the here and the now. It’s our in-service vacant space leasing and covering near-term lease expirations that will drive our occupancy improvements and same-store revenue growth in 2026 and 2027. In the fourth quarter, we completed about 500,000 sq ft of vacant space leasing, which included about 70,000 sq ft of leases that were expiring in the, in the fourth quarter, and we executed leases on 550,000 sq ft of 2026 and 2027 expiring space. In the full year 2025, we executed leases totaling over 1.7 million sq ft of vacant space, and we start 2026 with 1.243 million sq ft of executed leases on vacant space that have yet to commence. Calendar year 2026 expirations have been reduced down to 1.225 million sq ft.

The bottom line is that if we were to do no additional leasing in 2026, our occupancy would remain flat for the year. ... The good news is that we have lots of activity, and we are going to be doing lots of leasing, and we have begun to execute leases. We expect to complete 4 million sq ft of leasing in 2026, which is consistent with what we suggested during our Investor Day presentations. We have 1.1 million sq ft in negotiations today, including more than 750,000 sq ft of currently vacant space and 125,000 sq ft associated with 2026 expirations. On top of that, our discussion pipeline currently sits at about 1.3 million sq ft and includes more than 700,000 sq ft of vacant space.

This is about 10% larger than the pipeline from the third quarter call. We’ve made significant progress on residential entitlement work, as Owen described, across a number of our assets, and some of this work is going to allow us to take out of service and demolish suburban office buildings and then redevelop those parcels into higher value residential uses, consistent with our portfolio optimization strategy. In Waltham, our rezoning efforts have reached a point where we have removed 1000 Winter Street, a 275,000 sq ft office building, from the in-service portfolio this quarter. Next quarter, as leases expire, we will be removing 2800 28th Street, a 115,000 sq ft office building, and 2850 28th Street, a 146,000 sq ft office building, both in the Santa Monica Business Park, from the in-service portfolio.

We’ve submitted our project application in mid-December for 385 units on the site of our 2,800 28th Street office building, which is about 50% leased today. We will be relocating many of these existing tenants and hope to be under construction in early 2027 on the first residential project in Santa Monica. We’ve also reached an agreement with an institutional partner to commence development at Worldgate in Herndon, Virginia, where we purchased 300,000 sq ft of office space with plans to re-entitle and demolish it. These buildings were never in service. The entitlements are nearing completion, and we anticipate starting during the second quarter. As Owen said, we also received our zoning approval to build 100 townhomes, which we are actively marketing, and 200 apartments in Weston, Mass, on unentitled land and are moving forward with site plan approval.

As Owen discussed, we sold a number of assets at the end of 2025, and in January, we completed two more transactions. On a combined basis, these sales reduced our portfolio by 2 million sq ft, and the assets were 78% leased. The in-service portfolio, as we sit here today, is 46.6 million sq ft. Owen mentioned our expected property sales for 2026. Based on the transactions and documentation today and the removal of the two buildings at SMBP, the portfolio is expected to be reduced by another million sq ft by the end of the first quarter. We ended the year with in-service occupancy of 86.7%. I said we are negotiating leases on 750,000 sq ft of vacant space. We expect 600,000 of that to be in occupancy by the fourth quarter of 2026.

Again, we’re also negotiating leases on 125,000 sq ft of 2026 expirations. This 725,000 sq ft of leasing on a portfolio of 45.6 million sq ft will add 160 basis points of occupancy by the end of 2026. We will sign additional leases on vacant space and/or renew 2026 expirations and thereby achieve 200 basis points of occupancy improvement by the end of the year, ending the year at about 89%, just as we stated in September. The overall mark to market on leases signed this quarter was flat on a cash basis, though the regional variations were pretty meaningful. We had a 10% increase in Boston, New York and DC were essentially flat, and the West Coast was actually down 10%. Boston was led by strong markups in the Back Bay portfolio.

New York was very space sensitive. In other words, we had one lease at the General Motors Building that was up 9%, along with another lease in the same building, same elevator bank that was a negative 13%. In our West Coast portfolio, in particular in Embarcadero Center, the structure of the leases made a big difference. For example, we had two leases in Embarcadero Center Four in close proximity that had a $20 sq ft difference, due to one lease having a very small TI allowance and no free rent, and the other having a full build in a year. This quarter, we executed a number of large leases. Excluding the two development property assets, we signed 17 leases over 20,000 sq ft, with the largest at about 115,000 sq ft.

44% were involving renewals, extensions, or expansions, and 56% were with new clients. Existing client expansions encompassed about 162,000 sq ft of the activity. We also had about 100,000 sq ft of clients that renewed but contracted. The second generation rents in the leasing statistics this quarter represent about 900,000 sq ft, and the gross rents were down about 3%. The D.C. number reflects the reality of 10 years of 2.25%-3% annual escalations on top of operating expense increases. As I’ve said in prior calls, almost every D.C. area lease has a cash roll-down upon expiration. In San Francisco, the statistics include only 57,000 sq ft, and just 23,000 sq ft of that was CBD office. The change in the office portfolio rent was a decline of about 9%.

Before I pass the call to Mike, I want to make a few comments on our individual markets. In the BXP portfolio, Midtown, New York, the Back Bay of Boston, and Reston, Virginia, continue to have the tightest supply and therefore the most landlord-favorable market conditions. In this quarter, the most significant improvements we’ve seen were at Park, in the Park Avenue South submarket in Midtown, and the south of Mission Market in San Francisco. In the Boston CBD, where we are 97.5% occupied, we completed another early renewal and extension in the Back Bay portfolio. We executed a 115,000 sq ft lease, which included an 18,000 sq ft expansion that involved BXP freeing up space from other clients in the building. When you’re 97.5% occupied, it’s hard to lease vacant space.

We completed a second large transaction in the Back Bay that was a 57,000 sq ft renewal of a 95,000 sq ft block. The client had sublet the remaining space in 2024, and we’re negotiating a lease with a current subtenant to go direct for 10 years when the prime lease expires in 2027. Again, an indication of the tightness in the market. In our Urban Edge portfolio, we signed another life science client at 180 CityPoint, actually done yesterday, which brings that building to 92% leased. Our remaining first-generation life science availability from the Urban Edge is now limited to 27,000 sq ft at 180 and 113,000 sq ft at 103, totaling 140,000 sq ft.

In our view, the macro issues around life science bottomed at the beginning of 2025. Nonetheless, demand for wet lab space has not recovered. There are a few users actively touring, but the requirements from early-stage clients continue to be limited. Construction at 290 Binney Street in Cambridge is nearing an end. Rent’s going to commence in April, and we expect to deliver the building into occupancy in June. In New York, the most significant change in our activity has been in the Midtown South portfolio. On January 1, 2025, we had signed leases of just over 100,000 sq ft at our 450,000 sq ft, 360 Park Avenue South development. We executed leases on four floors in the fourth quarter, which brought the total leasing in the building to 262,000 sq ft, or 59%.

We are negotiating leases on an additional 6 floors that should bring the building to 90% leased during the first quarter. We will have 2 floors available in the building. Across Madison Square Park, we leased an additional 32,000 sq ft at 200 Fifth Avenue in early January, leaving us with a total of 33,000 sq ft of availability, where we had 350,000 sq ft vacate in 2025. Starr is currently a tenant in 240,000 sq ft at 399 Park Avenue. We expect their relocation to 343 Madison Avenue will occur in the third quarter of 2029. We have already received inquiries about their space.

At each of our properties at the 53rd Street campus, the average in place, fully escalated rent is less than $110 a sq ft, which is significantly below the current market. As a case in point, we signed a lease at 599 Lexington Avenue in the fourth quarter of 2024. We are documenting a lease on an adjacent floor in the building today with a starting rent that is 25% higher. In San Francisco, the most significant change in the portfolio is at 680 Folsom Street and 50 Hawthorne Street.

You will recall that in late October, about 90 days ago, I described the strong interest we were seeing at the building, where we had 208,000 sq ft of vacancy and 63,000 sq ft of expirations in June 2026, but no leases in negotiation. Today, we have executed two leases totaling 69,000 sq ft and are negotiating leases for an additional 132,000 sq ft. All of these leases agreed to terms during the last 60 days of 2025. While the AI demand has not translated into commensurate growth in ancillary professional service tenants in high-rise assets in the markets, overall, non-AI client activity is also improving.

This quarter, we completed almost 200,000 sq ft of leases at Embarcadero Center and 535 Mission, which is almost double what we did in the third quarter. Many of our asset sales were on the peninsula of San Francisco. Our remaining in-service assets are in Mountain View. Client tours continue to accelerate in this market as well, and we have signed an LOI for a 52,000 sq ft building at Mountain View Research. Finally, D.C. Activity in D.C. continues to be concentrated in Reston Town Center. This quarter, we were able to manufacture 43,000 sq ft of expansion space for a growing defense contractor by doing an early termination with a client that was acquired, not using their space, and had a 2032 expiration. We also completed 195,000 sq ft of additional transactions with 15 clients.

Any leasing pause associated with the government shutdown from the fall is fully recovered. That wraps up my comments, and we’ll turn it over to Mike to talk about guidance for 2026.

Mike Labelle, Chief Financial Officer, BXP: Great. Thanks, Doug. Good morning, everybody. So this morning I plan to cover the details of our fourth quarter and our full year 2025 performance. I’m going to spend most of my time, though, on our 2026 initial earnings guidance that we included in our press release, with additional details in the supplemental financial package. For 2025, we reported total consolidated revenues of $3.5 billion and full year FFO of $1.2 billion, or $6.85 per share. Our fourth quarter FFO was $1.76 per share, and it came in short of the midpoint of our guidance by $0.05 per share, due primarily to higher than anticipated G&A expense and non-cash reserves for accrued rental income.

Our G&A expense for the quarter was $3.5 million, or 2 cents higher than our projection. 1 cent per share of this was from higher compensation expense, and 1 cent was from higher legal expenses that were related to the elevated leasing activity that we saw in the quarter. We also recorded approximately $6 million or 3 cents per share of credit reserves for the accrued rent balances for two clients in the portfolio. One is a 60,000 sq ft firm that provides educational services to federal employees in Washington, D.C., and the other is a 10,000 sq ft restaurant in New York City. Both clients remain in occupancy today, and we’ve fully reserved their accrued rent balances due to our concerns of future rent collection. In aggregate, their rental obligation at our share is relatively small, at $4 million annually.

The balance of the portfolio performed in line with our expectations, with revenues modestly above budget and higher expenses, largely driven by elevated utility costs in the Northeast due to colder than normal weather. We also reported gains on sale in the quarter of $208 million on $890 million of asset sales. Gains on sale are not part of our FFO, but they are part of net income and EPS. We received net proceeds from this sales activity of $800 million. That has increased our liquidity and will be used to reduce debt. We currently have $1.5 billion in cash and cash equivalents, a portion of which will be utilized in February to redeem our $1.1 billion bond that expires this quarter. With that, I will turn to our 2026 guidance.

We are introducing 2026 FFO guidance with a range of $6.88-$7.04 per share, which is within consensus estimates. The midpoint of our guidance for FFO is $6.96 per share, and it represents an increase of $0.11 per share from 2025. At a high level, our 2026 guidance can be summarized as follows: internal growth in NOI from higher occupancy in our same property portfolio, external growth in NOI generated by our development deliveries, lower interest expense from utilizing the proceeds of asset sales to reduce debt. These are partially offset by a reduction in NOI from executing asset sales in 2025 and 2026. That is consistent with our strategic asset sales plan that we described at our Investor Day.

Non-cash amortization of our new stock-based outperformance plan, which is designed to align management incentives with long-term shareholder value creation, and a reduction in NOI from taking buildings out of service for future residential development, positioning them for higher value creation. To get into the details, I will start with the expected growth in our same property portfolio. Doug did a great job describing the ramp-up in occupancy from both signed leases that have not yet started and our active leasing pipeline. As he described, we expect occupancy to climb from 86.7% at year-end 2025 to approximately 89% by the end of 2026, which is a meaningful increase. We expect first quarter occupancy in the same property pool to be relatively flat, followed by improvement with average occupancy during the year of between 87.5% and 88.5%.

As a result, we expect our same property NOI growth to build throughout the year. Our assumptions for 2026 same property NOI growth are between 1.25% and 2.25% from 2025. Based upon our same property NOI of $1.88 billion, this equates to approximately $33 million, or $0.19 per share, of incremental NOI at the midpoint. On a cash basis, our results will be impacted by several terminations that we have proactively manufactured to accommodate either growing existing clients or new clients, like the one Doug described. In each of these cases, we will have new clients taking occupancy with free rent periods during 2026, so we are effectively trading cash rent for GAAP rent in the near term to accommodate growing clients, and we’re getting valuable additional lease term.

One of these occurred in the fourth quarter, resulting in $8 million of cash termination income in 2025. Our 2026 guidance assumes termination income of $11 million-$15 million. A portion of this is from 3 additional terminations that we’re negotiating. The incremental increase in termination income in 2026 is approximately $2 million, or $0.01 per share, at the midpoint of our guidance. Even though termination income is cash income, we do exclude it from our same property guidance, and the impact is muting our cash same property growth in 2026. Our assumption for 2026 cash same property NOI growth is 0%-0.5% from 2025. Our assumption for termination income at the midpoint would equate to an additional 70 basis points of same property cash NOI growth.

As Doug described, we’re taking three buildings out of service for redevelopment into future residential sites and are in varying stages of entitlement. We are not doing any new leases in these buildings and expect to relocate existing clients to other buildings. The reduction in NOI from these buildings in 2026 is $13 million, or $0.07 per share. Turning to our development portfolio. In 2025, we delivered three new properties totaling 700,000 sq ft and $518 million of total investment. These properties include 1050 Winter Street in Waltham and Reston Next, phase two, which are 100% and 92% leased, respectively. We also delivered 360 Park Avenue South, where we’re 59% leased today, and as Doug described, we have leases under negotiation to bring it to around 90%.

We expect to have occupancy of all of this space by year-end 2026, and we will have a full year of revenue in 2027. The most meaningful development that will impact 2026 is our 573,000 sq ft 290 Binney Street life science project in Cambridge, that is 100% leased to AstraZeneca. We own 55% of this project, and it will deliver at the end of June, with a total investment at our share of approximately $500 million. In aggregate, we project that the contribution from our developments will add an incremental 2026 NOI of $44 million-$52 million. At the midpoint, the developments are projected to add $0.27 per share of incremental NOI to 2026.

As we described at our Investor Day, we have embarked on a disposition program that will fund our development activities and optimize our portfolio of premier workplaces. To date, we have closed $1.1 billion in 12 transactions and generated net proceeds of $1 billion. Our guidance assumes an additional $360 million of sales in 2026, that are either under contract or in negotiation, which we expect will generate net proceeds of approximately $230 million. The financial impact of our sales activity is expected to result in a reduction of portfolio NOI from 2025 to 2026 of $70 million-$74 million. Investing the sales proceeds to reduce debt results in lower net interest expense in 2026.

We expect the net impact of sales on our 2026 FFO will be dilution of 6-8 cents per share, which is in line with the guidance that we provided at our Investor Day in September. Overall, we expect our net interest expense will be $38 million-$48 million lower in 2026 versus 2025. A portion of this is in our unconsolidated joint venture portfolio, where we anticipate lower interest expense at our share of $11 million-$14 million, that is primarily from the repayment of secured mortgages. Our guidance assumes our share of joint venture interest expense of $60 million-$63 million in 2026.

We expect a reduction in our 2026 consolidated interest expense, net of interest income, of $25 million-$37 million from 2025, and that results in a 2026 range for consolidated net interest expense of $581 million-$593 million. Our guidance includes refinancing our billion-dollar bond issue that has a GAAP interest rate of 3.5% and expires on October first of this year. We currently expect to refinance it at maturity with a new 10-year unsecured bond. Our current credit spreads for 10 years are in the 130-140 basis point area, so a new 10-year bond issuance today would price between 5.5% and 5.75%.

We have not incorporated into our guidance the likely changing capital structure of our 343 Madison Avenue development. As Owen mentioned, we’re having active discussions with prospective private equity capital partners for 30%-50% of the project, which would reduce our funding need. We’ve also started the process of construction financing for approximately 50% of the cost, or about $1 billion. The response to date has been excellent, and the banks we are working with are active lending to high-quality sponsors and projects and are excited to participate. A closing will likely occur late in the year, and I expect the financial impact on our 2026 earnings will be modest. Turning to our G&A. We project total G&A expense in 2026 of $176 million-$183 million.

That is an increase from 2025 of $13 million-$20 million, or 9 cents per share at the midpoint. Seven cents per share of the increase is non-cash, and it’s comprised of amortization of the imputed value of our recently announced outperformance compensation plan. While there is an annual non-cash expense related to the plan, it is completely aligned with growing shareholder value and only results in a payout through additional share issuance if our dividend-adjusted stock price grows at between 35% and 80% from our current price over the next four years. Lastly, we anticipate that our development and management services fee income will be $30 million-$34 million in 2026, which is a decrease of $3 million-$7 million from 2025.

The decline year-over-year is from a reduction of development fee income from completing several joint venture developments, like 360 Park and 290 Binney, and lower property management fees from selling joint venture properties as part of our asset sales program. So to sum all this up, our initial guidance range for 2026 FFO is $6.88-$7.04 per share, representing an increase of 11 cents per share from 2025. At the midpoint, the increase is comprised of higher same property portfolio NOI of 19 cents, incremental contribution from our development pipeline of 27 cents, lower net interest expense of 24 cents, and higher termination income of 1 cent.

The increases are partially offset by a reduction of NOI from asset sales of $0.41, the removal of properties from service of $0.07, increased G&A expense of $0.09, and lower fee income of $0.03. 2026 represents a return to FFO growth for BXP. We expect our quarterly FFO run rate to consistently improve through 2026, leading us to a strong base for 2027, and our portfolio is well positioned for additional occupancy growth in 2027, as we see improving trends in our leasing markets, combined with very low rollover exposure. That completes our remarks. Operator, can you open the lines up for questions?

Speaker 22: Thank you, sir.

Conference Operator: ... As a reminder, to ask a question, you will need to press star one one on your telephone. To withdraw your question, please press star one one again. We ask that you please limit your questions to no more than one, but feel free to go back into the queue, and if time permits, we will be happy to take your follow-up questions at that time. Please stand by while we compile the Q&A roster. And I show our first question comes from the line of Steve Sakwa from Evercore ISI. Please go ahead.

Speaker 22: Yeah, thanks. Good morning. I guess maybe it’s a combination for the three of you, but, you know, it sounds like you’ve had good success on the disposition front and maybe even accelerated the timing. You know, I’m just curious, Owen, if you’ve kind of taken a harder or sharper pencil to the portfolio and thought about maybe more dispositions to really tighten up the portfolio. And to the extent that you have, I guess, how do you balance that in terms of, you know, Mike’s comment about FFO growth? And so I guess, are you willing to sell more to kind of sharpen the portfolio, even if it has kind of negative FFO consequences in the short term?

Doug Linde, President, BXP: Good morning, Steve. Our original goal that we outlined in September last year was $1.9 billion of sales, you know, of—for over the three years from September, and I think at this point, I’d say we’re sticking with that forecast. You know, that all being said, we have a list of assets that we’d like to sell, and if we get a price that we find attractive, you know, we will execute on it. We are paying attention to the dilutive impacts to earnings. One thing that we have, you know, repeated over and over, and I think it’s important for everyone to understand, one thing that’s helping us with this is a lot of the sales that we’re doing are land, and those are completely accretive because they’re not generating any income.

I’m not sure they’re being valued in the public market, and we’re using the proceeds to reduce debt. So, we’re gonna continue to sell land assets. You know, I described 3,500 residential units that we’re currently getting entitled on land that, you know, former office development sites or buildings out of service, and when we go to sell that land, that will be accretive sales. But it will be balanced out with some additional office. You know, I gave some an exam—the 140 Kendrick was an example this quarter, which was a little bit of a higher cap rate, which is an offset. So net, net, the answer to your question is we’re sticking with our forecast. We might sell more.

We’re paying attention to the dilutive impacts, but we’re also paying attention to optimizing our portfolio and deleveraging and creating capital for our development program.

Mike Labelle, Chief Financial Officer, BXP: I would just add one thing. I mean, of the $1.9 billion that we discussed, that Owen just discussed, we’re off to a great start.

Doug Linde, President, BXP: Yeah.

Mike Labelle, Chief Financial Officer, BXP: I would say the pace of the first $1 billion, one that we’ve got kind of closed, is slightly ahead of where we anticipated. So when you look at the $0.06-$0.08 of dilution I just described, it is within the range that we gave at the Investor Day. The range of the Investor Day was $0.04-$0.09. It’s a little bit at the higher end, and the reason for that is that a couple of the office sales occurred more quickly than we anticipated, which is great.

Doug Linde, President, BXP: Yeah, my, my only additional comment, Steve, is that, so Owen described all this residential activity we had. I’m just sort of putting an order of magnitude on it. There’s probably somewhere between $200 million and $300 million of land value there, and if assuming a portion of it is just gonna be sold, as town home sites, that we will not have an equity interest in, we’ll just sell the land. But assume that, you know, a majority of it is gonna be residential, we’re—assume we’re 20% of that, and then our 20% is gonna be added to our development pipeline, right? So we’re gonna take cash off the table and make incremental investments in development as we do that on a going-forward basis.

So there’s a little bit of dilution on a relative basis, but there’s actually accretion because we’re gonna be making, you know, what we believe to be highly accretive investments relevant to what the residential yields will be.

Speaker 22: Thank you.

Conference Operator: I show our next question in the queue comes from the line of Michael Goldsmith from UBS. Please go ahead.

Speaker 12: Good morning. Thanks a lot for taking my questions. Doug, I think you said you had 1.1 million sq ft in negotiations and 1.3 million sq ft in discussions. You know, what conversion rate are you underwriting for this pool? How does that maybe compare to the last couple of years and the historical conversion rate during prior improvement cycles?

Doug Linde, President, BXP: Yeah. So Michael, on the, on the 1.1 million, it’s actually now up to 1.2 million as of late last night, of deals that are, quote, unquote, you know, "in the lease negotiation," I think our conversion rate is, like, 95%. We rarely see something drop off there. And then on our sort of pipeline of things, I’d say the conversion rate there is somewhere in the half a million sq ft, plus or minus, but it keeps growing, right? So, as I said to you before, we’re gonna lease 4 million sq ft of space. And so we’ve identified, as of today, about 2.3 million sq ft or 2.4 million sq ft of space.

We will probably have identified 5 million sq ft of space to get to that 4 million sq ft at the end of the year.

Speaker 12: Thanks very much.

Conference Operator: Thank you. And I show our next question comes from the line of Anthony Paolone from J.P. Morgan. Please go ahead.

Speaker 1: Thanks. Good morning. You mentioned in your commentary that you didn’t feel that AI was cannibalizing any space needs in the portfolio. So can you maybe talk in a little bit more detail about how you’re tracking that, if you think that, you know, perhaps it’s cannibalizing other types of space that’s not in your portfolio, or just any more color on that would be helpful, I think?

Owen Thomas, Chairman and Chief Executive Officer, BXP: ... Tony, I’ll kick it off. Doug and Mike may also have comments on this. This is an incredibly hard thing to forecast. I think all of you on this call realize that. The points that we can only make to you right now is what we’re experiencing, which is accelerating leasing activity. And I’ve just, Doug described it, I’ve described it. You know, our clients are, they’re growing more than they’re shrinking. They’re taking better space. They’re signing longer leases. And in fact, I would say AI so far for BXP’s footprint has been a net plus, not a negative, because we’ve had very significant AI leasing, not only at BXP, but maybe more importantly, in the Bay Area, which is an important market. It’s been a very important driver of net absorption there. So that’s what we’re seeing today.

Our instinct on this is, as we think about AI, and we use it in our own work, is that it’s much more likely in the near term to dislocate more repetitive tasks and support jobs. And those kinds of positions generally are not resident in premier workplaces, which is substantially our portfolio. So, but again, I just go back to, this is hard to forecast. This is what we’re seeing right now.

Doug Linde, President, BXP: Yeah, and I guess I’m gonna ask Rod and Hilary to sort of make some comments on their markets, because I think that they’re, you know, emblematic of what is going on. And Rod will, I assume, talk about just the growth in technology jobs in the form of AI companies and AI, quote, unquote, sort of, you know, vertical and/or horizontal business structures that are coming. And Hilary is gonna describe what’s going on with not only technology, but with sort of the financial services and professional services sectors that are, you know, so much and so important to New York. So Rod, why don’t you start?

Rod, Regional Executive, BXP: Yeah, thanks, Doug. So I think if, you know, we’re talking about the cannibalization, I don’t know that I can speak to that specifically, but with respect to the demand that we’re seeing in San Francisco and the Bay Area in general from AI, you know, it’s just been tremendous. It’s—we’ve been talking about it on the, on calls in the past, and that definitely now is showing up in the statistics. You know, the overall tenant demand in San Francisco right now is sitting just around 8 million sq ft, and 36% of that is from AI or AI-related technology companies. So that’s pretty—that’s a lot, and every time we turn around, there’s another deal that’s, that’s being talked about or getting signed.

So, there’s the big ones, the OpenAI, the Anthropic’s of the world, and then there’s a lot of small ones, too, that keep getting, you know, informed. So, you know, I just - it’s, it’s definitely a wave of demand that we’re taking advantage of. You know, we spoke about 680 Folsom and the tenant demand down there, and, you know, it’s, it’s happening. So, that’s all positive as far as we’re concerned for our portfolio.

Doug Linde, President, BXP: Hilary?

Hilary, Regional Executive, BXP: Thanks. We are seeing real strength in the financial services sector. We continue to see companies having a difficult time securing space that they need for expansion or simply if they’re trying to locate in Manhattan for the first time. I heard a statistic the other day that there is only one space that is direct with a landlord above 100,000 sq ft in the premier buildings in Midtown, and I think that’s a pretty telling statistic. So we’ve continued to see demand from our existing clients wanting to expand. We have seen stronger interest from tech and media in Midtown South, which is reflected in the statistics that Doug mentioned regarding our lease up at 360 Park Avenue South, which is approaching 90% when we complete the leasing that’s underway now.

Many of those tenants are either AI-powered or have an AI component to their business. And then we still are leasing to more traditional financial services businesses, and those have come down. Some of them have come down from Midtown to Midtown South as they’re seeking premier workplaces. The other thing I would mention, and Rod referred to, Anthropic, there was an article out last week that Anthropic is seeking between 250,000 and 450,000 sq ft in New York City. So there’s definitely, you know, an expansion of AI businesses in New York, and I think that that is driving some of the demand pickup in Midtown South and the Flatiron District.

But for Midtown proper in the Park Avenue submarket and the Plaza District in premier workplace, very heavily dominated by financial services industries who continue to expand.

Doug Linde, President, BXP: So just to sort of, you know, get, come to a conclusion, I think that both things can be true. You can have job displaced from artificial intelligence products, but you can also have growth in certain submarkets and certain cities in the country. And as Owen said, we happen to be in those places where we’re seeing the growth. So is there gonna be a less overall job growth because of AI over the next decade? Maybe. But, you know, we’re not seeing it impacting our portfolio.

Conference Operator: Thank you. And I show our next question in the queue comes from the line of John Kim from BMO Capital Markets. Please go ahead.

Speaker 11: Thank you. I wanted to go to Mike’s comments and his prepared remarks about quarterly FFO consistently growing throughout the year as occupancy improves, which sets up for a strong 2027. Should we interpret that as the fourth quarter of 2026 being the quarterly baseline run rate for next year?

Doug Linde, President, BXP: You mean for 27, John?

Speaker 11: Mm-hmm.

Mike Labelle, Chief Financial Officer, BXP: ... Yeah, I mean, I think that’s, that’s a good start. I think that, you know, we, we provide guidance for the first quarter of 2026, which, you know, is always seasonally our lowest quarter, because of the vesting for G&A. And, and we also expect that our kind of in-service occupancy from the same property portfolio will be flat in the first quarter, and then the occupancy will build after that. And, you know, we’ll see, you know, consistent growth. I would say there’s more in the back half than the first half. And that will lead to, you know, 2027 growth as we get a full year of some of this occupancy growth in 2026. And then, given the low rollover we have, we anticipate that we’re gonna have higher occupancy in 2027.

You know, Owen touched on, again, the 400 basis points that we expect, and we still anticipate seeing that. So I can’t, you know, give you 2027 guidance right now, but we’re feeling really optimistic about where we stand.

Doug Linde, President, BXP: Yeah. So John, my comment would be, I sort of gave you a lot of numbers in my remarks, which you can go back and read, you know, if you have the time. But the big picture, right? What I said was, our lease expirations in 2026 have been covered by the leases that we’ve already signed that have yet to commence, and we are gonna lease more vacant space. We are also gonna lease more space that’s rolling over in 2027. It would not be a surprise for me to be talking to you in the...

in January of 2027, and saying, "Oh, by the way, you know, we’ve already covered the vast majority of our exposure for 2027, so any occupancy increases that we get are gonna be driving to the bottom line." AKA, what we’re seeing in twenty-six is gonna happen in 2027, and obviously we’re getting in 2025 to 2026, the improvements from our development portfolios, which Mike described. In 2027, we’re gonna have full year from an occupancy perspective on 290 Binney Street, and we’re gonna have all of this occupancy that is gonna be in the portfolio in 2026, driving 2027.

So, you know, that’s why we were pretty bullish about both the growth in our earnings from our same store and our growth in our development assets coming online, as when we talked to you in September, you know, in Manhattan, when we did our investor day. We’re just as bullish today as we were then.

Conference Operator: Thank you. Our next question comes from the line of Alexander Goldfarb from Piper Sandler. Please go ahead.

Speaker 0: Hey, morning, morning down there. Is sort of building on Steve and John’s question. Owen, certainly appreciate the focus on, you know, minimizing dilution for earnings, and Mike, your comment on FFO acceleration on a quarterly basis. As you guys think about leasing, is there a way to reimagine, you know, leasing? I’m not talking about development, but I’m talking when you have, you know, existing space, you know, to shorten the downtime, meaning I don’t know if there’s a better way to do the build-out, the demolition, or how leases are structured. But one of the frustrating things that we see in REIT land is just the, you know, the amount of time, like two years or whatever, between the tenant moving out and a new one moving in. And I didn’t know if there’s a way to shorten that.

From an earnings perspective, you know, all the good stuff that you’re doing takes effect sooner versus, you know, waiting the two years or so that we often have to wait for, for office.

Doug Linde, President, BXP: So, Alex, you know, you’re, you’re sort of asking, is there an accounting solution to the fact that you have turnover? I think the answer is not really. I think, you know, as, as we’ve said in the past, the condition of our space is what matters. And what I would say is that, you know, the one thing that I think we have done, which doesn’t help in the short term, but certainly decreases the amount of downtime, is that we’ve been doing more turnkey builds. And when we’re doing a turnkey build, we’re kinda controlling the date when the space will get completed, and we’re reducing the free rent component of the deal, so that when the tenant comes in, instead of having free rent, they’re having much less free rent.

And so that’s sort of truncating that. And wherever possible, we are trying to deliver space in its current condition, and if we’re able to deliver space in its current condition, we can start recognizing revenue when the space is accepted by, you know, by our next client, if it’s a move. But, you know, but I would say we’re you know, our focus always is on trying to reduce downtime, and so, you know, we look at lots of different levers to do that, but I don’t think we’re gonna be able to eliminate it in a material way.

Mike Labelle, Chief Financial Officer, BXP: Yeah, I would just add, Alex, I mean, we provide these tools to our leasing teams on things that they can do to structure leases so that we can recognize revenue more quickly, regarding how the build-out is completed and who’s doing the build-out and things like that. Ultimately, it’s a negotiation with the client, though, ’cause the client has an opinion as well on how they want that completed. So there’s just a negotiation that has to occur. And, you know, obviously, ultimately, getting the transaction completed is the most important thing.

Conference Operator: Thank you. I show our next question comes from the line of Johnson Zhu from Scotiabank. Please go ahead.

Speaker 15: Hi, this is Nick Yulico. So, question on, in terms of... I know the focus has been a, you know, a return to FFO growth. Clearly, there’s, you know, leasing, that’s a big aspect of that. But can you just talk about a couple of the other ways to sort of help that process, whether it’s, you know, on the G&A side, or are you able to find any better efficiencies through AI or other venues? And then also on the development side, how you’re thinking about kinda managing the size of the pipeline and also bringing in, you know, equity stakes earlier to projects, kind of like what you’re talking about with 343 Madison, as, you know, a way to sort of manage dilution from development, which for you guys, can take a while.

I guess I’m also wondering on, like, 121 Broadway, if considering any sort of partner there, in relation to that. Thanks.

Mike Labelle, Chief Financial Officer, BXP: Okay. So you asked, like, six questions there. And I’m gonna, I’m gonna speed answer a couple of them, and then I’ll let Owen, Owen take the hit on the last one. So with regard to, to sort of, you know, our how we’re gonna accelerate our FFO growth, the first, the second, and the third thing that we can do is lease vacant space. That is, that is by far the largest, largest opportunity set, and we’re doing that, and you’re gonna see that, you know, quarter after quarter after quarter, we believe accelerating in terms of the value from that. Second, on the G&A side, we are spending as much time as any organization thinking about whether or not there are ways to reduce our, quote, unquote, you know, our overhead costs relative to using tools from artificial intelligence.

I will tell you that my view right now is that we’re in AI 1.0, which is, I would say, unquantifiable productivity enhancement tools as opposed to cost reduction tools for a business that’s the size of BXP. And so we are being thoughtful about how we deploy those things. So net-net, not much in the way of work. You’re gonna see reductions in G&A. And obviously, our G&A, as a percentage of our revenues, is de minimis, and a significant portion of our G&A, you don’t see because it’s embedded in our properties, and it’s part of our operating expenses, so there’s not much impact on FFO that would occur from that, other than when leases roll over and we have a gross lease. On the capital side, relative to development, I’ll let Owen answer that one.

Owen Thomas, Chairman and Chief Executive Officer, BXP: Yeah. So, Nick, on... I would break the portfolio into two pieces. One is the future residential and then the office developments. So on future residential, we intend to bring a partner in for everything. So if you look at the last deals that we’ve done, Skymark, 17 Hartwell, we have 80% partners on those, and we’re working on another one right now at Worldgate, where we’ll also have, we think, an 80% partner. So, I think you should expect that to continue to be the case with the residential. On the office, you know, this is core to the company, and we think the developments that we’re putting together are very profitable. I mean, we think delivering these premier workplaces at over an 8% yield yields great profits for shareholders, so we’re reluctant to share.

But we are sharing because we’re focused on our leverage. So, we’re starting with 343 Madison. As you heard from Mike and I, that’s an important goal to recapitalize that project this year. And then, in terms of bringing in partners on additional office developments, it’s gonna depend on what our leverage profile looks like and how many additional new developments we’re able to identify and secure.

Speaker 15: Thank you.

Conference Operator: Our next question comes from the line of Blaine Heck from Wells Fargo. Please go ahead.

Speaker 2: Great. Thanks for taking my call. Good morning. Can you talk about the cadence we should expect for FAD or AFFO over the next several quarters? And I guess, how we should think about the impact of higher concessions associated with the lease up of the office portfolio? You know, should we expect FAD to be down year over year, given those increased costs driven by leasing successes?

Mike Labelle, Chief Financial Officer, BXP: So on AFFO, I actually expect it’ll be up slightly. We have less rollover to deal with. We are gonna increase our occupancy, so we will have a additional leasing that will commence for that. But net-net, having less rollover exposure is gonna help us. You know, our expectation on leasing costs are, you know, pretty much in line, you know, somewhere between $220 million and $240 million or $250 million a year, depending on what the transaction costs are. And, you know, our CapEx is, you know, somewhere between $100 million and $125 million, I would say.

So if you look at the, you know, the midpoint of our FFO, I think our AFFO will probably be somewhere in the $4.40-$4.60 range, something like that, which is, I think a little bit higher than it was this year. So, you know, we feel pretty good about where that is, and I think that on the cadence-wise, it will follow the FFO. Although one thing to point out is that as we’re gaining occupancy, a lot of these leases have free rent in the beginning years. So I think that the AFFO will lag a little bit, the FFO, because those, those deals will be in free rent.

If you looked at our free rent guidance for next year, it’s $130 million-$150 million, which is higher than it was last year. So that’s a little bit of an offset, but that will... In 2027, that free rent will turn into a cash rent, so the FFO should increase.

Conference Operator: Thank you. And our next question comes from the line of Jana Galan, from Bank of America Securities. Please go ahead.

Speaker 10: Thank you. Good morning. Question on 343 Madison. Great to hear about the additional 16% in negotiations. Can you talk a little bit more about the demand and touring activity? And then, as New York City market rents for trophy increases, how does that relationship work for, you know, potentially higher rents for an asset 3 years out?

Doug Linde, President, BXP: ... Sure. So I’m gonna let Hilary, give you the specifics on this. I’ll just make a couple of comments. So the first is, I’m pretty sure that we’re the only building that’s gonna be delivering new construction before 2029, which is a unique position relative to timing of the demand that Hilary is seeing. And second, we’re gonna be more, I would say, thoughtful about whether we wanna lease the top portion of this building, because it’s probably, you know, some of the more valuable real estate in our—in the BXP portfolio, and we think that getting closer to the ability to deliver that space to smaller tenants will inure to us. But Hilary, why don’t you talk about, in general, the demand that we’re seeing for, you know, for 343, particularly from medium-sized companies?

Hilary, Regional Executive, BXP: Sure. So I would say that we have very strong demand in financial services tenancies from tenants that are about 150,000 sq ft. That is very typically an asset or wealth management business, or in some instances, more of a foreign bank-type tenancy. And they continue to come through at a pretty decent clip, looking at space in the podium of the building, as you know, the mid-rises or upper mid-rises now, more or less spoken for. And so, you know, I think that we feel very good about where rents are trending for the building, and we will meet the market for rents, whatever that is, and we’ve had no trouble whatsoever meeting our pro forma on the terms that we’re negotiating with existing and prospective clients.

So, there was some indication earlier in the call, I think Doug said it, that rents are going up across Midtown, the Plaza District and Park Avenue. And, you know, my observation is that rents have gone up around 15% over the last 12 months. Now, 343 Madison is at the top of the market in terms of rents. There are only a couple of other buildings in Midtown that are asking and receiving similar rents. So, you know, that market is a little bit in its own stratosphere with regards to the tenants and the demand for it. But I think demand continues to accelerate, and therefore, that will continue to put pressure on pricing from the tenant side, and that will inure to our benefit as we go forward.

Conference Operator: Thank you. And I show our next question comes from the line of Seth Bergey from Citi. Please go ahead.

Speaker 21: Hi, thanks for taking my question. I guess I just wanted to ask maybe a little bit bigger picture question here, but you know, you mentioned, you know, rents in New York are, you know, up around 15%. In the opening comments, you kind of mentioned the regional variation in the cash mark-to-market, with Boston 10%, New York, D.C., flat, and West Coast down 10%. You know, just to kind of understand that different markets are on a different recovery trajectory, but you know, how do you kind of balance, you know, kind of some of the rent improvements, you know, with kind of the decline of rents from pre-market levels?

I’m just trying to get out a little bit of, kind of, you know, what’s the overall mark-to-market in the portfolio, and then, you know, as you kind of maybe start to lap, some of the, you know, COVID, rent rolldowns or pre-COVID rent rolldowns, kind of when does that kind of turn more into a headwind?

Doug Linde, President, BXP: You asked a really hard question to answer with a simple number. The way we think about things is we look at all of the space that we have that is currently occupied, so we’re ignoring the space that’s vacant, because the mark to market on vacant space is 100%, right? I mean, there’s—it’s from a zero. And so the mark to market on space that’s currently occupied across our portfolio, we sort of go through on a building-by-building basis every quarter, and we make a sort of a guesstimate as to where we think the market terms would be for that space. And I would say, as of today, across the entire portfolio, it’s somewhere in the, you know, call it high 4s to low 5% range.

That’s, I’d say, a meaningful jump from a year ago, and a modest jump from where we were, a quarter ago. Why is it only a modest jump? I think it’s only a modest jump because, where we’ve seen the biggest improvements have been in the Back Bay of Boston, where our rents have gone up, and in our Manhattan portfolio, where rents have gone up, and at the tops of our buildings, on the West Coast, in particular, where rents have gone up.

But we’re seeing still, sort of, I’d say, a stability in terms of no real movement in rental rates, and again, I’m ignoring contestants for a minute, in sort of the bases of buildings on the West Coast and our Washington, D.C., portfolio, where, as I said, the issue on a cash basis is the structure of leases in D.C., and, you know, I, I blame Jake Stroman for this, is that he gets these relatively significant annual increases in the rents, and he leaves us with this, you know, problem, where the cash rent upon the expiration of the lease is higher than what the market rent is, right? Because you just... It’s really, really hard to, over 10 or 15 years, every single year, have a 3 ± % increase.

So that’s kind of the, sort of the makeup of the portfolio. And then within each of the individual markets, I think that we are, you know, in a position where we will see a modest amount of gains in our revenues from roll-ups or roll, you know, and mitigating roll-downs across the portfolio, but a much more meaningful impact from the occupancy gain, which is why, honestly, we focus on the occupancy gain and not really on what the mark-to-market is. And I, you know, I think that’s gonna be the case, at least in 2026 and 2027.

Conference Operator: Thank you. I show our next question comes from the line of Richard Anderson from Cantor Fitzgerald. Please go ahead.

Speaker 18: Hey, thanks, and good morning. So kind of by design at BXP, there’s always sort of a lot going on, good, solid real estate decisions that nevertheless can be disruptive in the short term to, to growth. So you’re getting more than 200 basis points of occupancy gains in 2026 per your guidance, and that, that results in, you know, call it, call it flattish, same store, NOI growth for this year. Doug, you kind of alluded to occupancy falling more to the bottom line in 2027, sort of matriculating to the, you know, to the bottom line, just because of all the work that’s being done today and this year.

Do you foresee a sort of a less noisy 2027 so that, you know, the next 200 basis points of occupancy gains can be something more representative at the same store NOI line? You know, something in the mid-single digit type of number. I’m not asking for guidance, but I’m just wondering if you’re trying to get ahead of a lot of this work so that you have a cleaner story to tell next year.

Doug Linde, President, BXP: Yeah, I mean, I think the answer is yes. I mean, you know, I don’t wanna, you know, suggest that we’re not gonna let our regional executives find really interesting things for us to do that might, you know, put us in a... Take us slightly off that, but based upon our business in front of us today, we know, we see, you know, I think, Mike, what was your same story was 1.5%-2.5%?

Mike Labelle, Chief Financial Officer, BXP: 1.25 to 2.25.

Doug Linde, President, BXP: 1.25 to 2.25, and my expectation is that will be, you know, better next year than it is this year because of the nature of the vacancy that’s being pulled up, you know, and the fact that so much of it is in the back end of the year.

Mike Labelle, Chief Financial Officer, BXP: Yeah, I think that’s an important point, and we went through this at our Investor Day with the graph we showed of the buildup in occupancy, where the first and the second quarter of 2026 is not gonna have as meaningful of increases as the back half of 2026, based upon when we anticipate when we have the signed leases starting and when we anticipate the pipeline leases starting. And then that occupancy will build on itself into 2027, right? So, you know, for 2026, our average increase is only up about 100 basis points. By the end of the year, it’s a little over 200 basis points, and then you get a full year of that in 2027, plus the incremental occupancy we should get in 2027. So it should continue to build on itself and improve.

Conference Operator: Thank you. Our next question comes from the line of Caitlin Burrows from Goldman Sachs. Please go ahead.

Speaker 4: Oh, hi, just a maybe more specific question on 290. Benny, you mentioned that rents are going to commence in April, and you expect to deliver the building into occupancy in June. So I was just wondering if you could clarify, when does GAAP NOI start to be recognized, and when does capitalized interest come off? Does that happen at the same time, and is it early April, late June, or something in between?

Mike Labelle, Chief Financial Officer, BXP: It does happen at the same time, and, you know, the way this transaction was structured is we had a hard rent start date, but the tenant improvement design and, you know, costs have taken a little bit longer than the original expectation based upon some design changes that were made by the client. And so those tenant improvements are not going to be complete and get a C of O until sometime, probably late in June. Our revenue recognition rules are that we can’t start revenue recognition until it’s done, so we have to wait until the end of June to start revenue, and then we will stop capitalizing interest also on that.

Just as a reminder, we’re capitalizing interest at 100% of the cost because it’s a consolidated joint venture, even though we only own 55%. That was something we talked about in our Investor Day, and it’s just important because it impacts our net interest expense guidance. It’s embedded in the, in the guidance that I provided. So cash rent will start in April. It’ll be prepaid rent on the balance sheet, and then in June thirtieth, all that cash rent will come in and, you know, be straight lined through the full lease term starting in June.

Conference Operator: Thank you. And I show our next question comes from the line of Floris van Dijkum from Ladenburg Thalmann. Please go ahead.

Speaker 7: Thanks, guys. My question was sort of philosophical on your outlook for tenant improvements. And you mentioned in one of your earlier prepared comments that some of the spreads that you reported were negative because you didn’t provide TIs. What is happening, in your opinion, on TI packages? And maybe talk a little bit about... Because obviously it depends a little bit on markets as well, on market specifics. Which markets are seeing improvements, as one of your peers called out the fact that I think New York office TI packages, they expect to come down in 2026. So maybe if you could talk about that a little bit, that would be useful.

Doug Linde, President, BXP: Sure. So I’ll just sort of go around our horn in big picture. So I would tell you that our tenant improvement concession in our downtown portfolio is getting stronger, meaning it’s becoming a lower number. Our tenant concession package in our Urban Edge portfolio is pretty stable. In our Greater Washington, DC, portfolio, our concession package in our CBD assets is stable. Our concession package in our Northern Virginia assets is getting slightly lower. In our Midtown portfolio, we are pulling back on the concessions that we’re offering by a modest amount. And on the West Coast, I would say the concession packages are still not going down.

They’re not going up the way they went up in 2024 to 2025 and 2025, but they are—they’re still pretty elevated, and that’s largely just due to the overall availability of space.

Conference Operator: Thank you. And I show our next question comes from the line of Brendan Lynch from Barclays. Please go ahead.

Speaker 3: Great. Thanks for taking my question, and congrats on all the leasing momentum. We have, however, seen a number of announcements from Fortune 500 companies suggesting they will be shrinking headcount. How should we think about that impacting your portfolio? And maybe I could see it from two perspectives. One, they might need less space, but conversely, it could also be driving more return to office for the employees that are retained. So any thoughts on those dynamics would be helpful.

Doug Linde, President, BXP: That’s a hard one to answer. You know, look, when we see announcements for job losses, it’s obviously can’t be a positive per se for us, but we—as we’ve described, hopefully very clearly on this call, we’re just not seeing weakness in our leasing activity from our clients. You know, we track our clients that we renew, are they growing or shrinking? And over the last several years, our indicator is that they’ve been growing. So it’s just, it’s just not our experience. You know, we try to read into these layoffs and what exactly is going on. It feels, in some of these cases, like it’s business units that are being closed and things like that. So, we’re just not seeing the impact of it in our leasing activities.

Conference Operator: Thank you. I show our next question comes from the line of Vikram Malhotra from Mizuho. Please go ahead.

Speaker 23: Morning. Thanks for taking the question. I guess, just maybe a bigger picture, longer-term question for, you know, either, anyone on the team or all of you, I guess. Given the momentum, you know, you’re talking about 88, you know, going into 2027, building further, I guess, would you venture whether it’s, like, 3 years or 5 years? Like, what do you think BXP’s, you know, kind of structural peak occupancies for the portfolio that you keep refining versus, say, pre-COVID or pre-GFC? And then, can you link that to rent spreads or rent growth in your buildings, particularly, you know, maybe expand upon San Francisco? Thanks.

Doug Linde, President, BXP: So, Vikram, what I would say is that, you know, getting above 93% on a portfolio with an average lease length of, you know, 8-9 years is probably attainable, but hard - will be hard to surpass. And with regard to San Francisco, that’s where we have the most opportunity for improvement. You know, San Francisco obviously had the most difficult time of it from pre-COVID through COVID, and now the recovery is obviously happening. And so I would say there, we have the most significant amount of upward opportunity.

There, you know, from a rollover perspective, I think we’re gonna on the, on the overall portfolio of spaces that are currently in occupancy, we’re probably modestly rolling down over that portfolio, and that’s largely because, the rents and the bases of the building have not kept up with the increases in the rents at the tops of the building. We are seeing positive mark-to-markets, you know, on the top 20%-30% of every one of our towers in San Francisco, and when Salesforce Tower ultimately starts to roll over, we’ll have significant positive mark-to-market. In the short term, the rollover that we have in Embarcadero Center, which is lower down in, you know, EC 1, 2, 3, there’s probably a modest roll down that will occur there.

Mike Labelle, Chief Financial Officer, BXP: And I think it’s clear that rental rates are directly linked to occupancy, and that’s why we’re feeling it in the Back Bay of Boston and in Midtown, New York, where the occupancy is tightened and rents are accelerating. So clearly, as we get the portfolio better leased, there’s gonna be less space for us to lease. We can be more choosy and charge more for those spaces. And then we also look for opportunities to work those spaces early, like we are now with some of the terminations that we talked about, where we’re, you know, trying to take advantage of opportunities where there’s not enough space in a building, and trying to accommodate growth from our clients and grow our revenue stream.

Conference Operator: Thank you. I show our next question comes from the line of Dylan Brzezinski from Green Street. Please go ahead.

Speaker 6: Hi, guys. Thanks for taking the question. I guess just maybe sort of paralleling the question that was asked, I think two questions ago, about just job growth and that sort of not being as strong with layoffs going on, and maybe sort of adding the fact about return to office that I think you mentioned at the beginning of the call, Owen. I think a lot of what’s going on is just pent-up demand, driving a significant amount of leasing activity, given lease can kicking that’s been happening over the last several years. Are you able to talk about sort of how long, how much longer you guys would expect this sort of return to office movement to continue driving leasing activity? Is this sort of a 12-month phenomenon, 18 months?

... Just sort of curious where you guys think we’re, we’re at as it relates to this return to office normalization driving pent-up demand?

Doug Linde, President, BXP: Well, I think there’s room to go. I gave you the office visits. You know, we try to come up with indices that help us understand what’s going on. I’ve quoted the Placer.ai data. I think that we’ve got some additional improvement that could happen. You know, the questions that you all are giving us are around these layoffs and jobs. The other side of it is, historically, our leasing activity has been tied to earnings growth. ’Cause when companies are making money, they lease, they take risks, they go into new businesses, they hire people, and they lease space. And if you look at the forecasts for broad indices of U.S. corporations, earnings are projected to be higher in 2026.

The earnings growth is projected to be higher in 2026 than it was in 2025. You know, these layoffs that are going on, are they office-using jobs? Are they jobs that are in premier workplaces, so, you know, front office jobs? There’s lots of data that you need to have in addition to a press release to understand what the impact is of these layoffs are on office usage, particularly in the premier workplace segment. And, you know, Dylan, let me. I give you my perspective on sort of what we’re seeing in our portfolio, and juxtapose that to what you read about from a job announcement. So, you know, one of the shipping companies has announced, you know, 48,000 job losses.

My assumption is none of those jobs are being lost in any office space in Manhattan, Boston, Washington, D.C., or on the West Coast of California, in San Francisco, Seattle, or, you know, or West L.A. And when I look at the portfolio makeup in terms of where the growth is coming from and where the demand is coming from, what I would tell you is that our financial service clients, and I’m using that and asset management sort of in the same venue, those companies are just growing. Those are. This is not about we need more space because our people weren’t showing up. They’re basically hiring more people for various strategies associated with whatever their business plan is, and therefore, they need more space. It has nothing to do with return to work.

Any of the expansion from our legal firms, I don’t believe is about return to work. It’s about, I think, our firms are hiring more attorneys, because they have, you know, desires to grow their businesses, and they’re finding... They’re poaching from other organizations that may be losing, and because of that, they need another office for those people. I don’t think they’re saying, "And now you have to come back to work five days a week, and you were only coming back to work one day a week, and therefore, you know, we’re, we’re changing our makeup." I just don’t see a lot of that going on.

And then when I think about, you know, our portfolio, you know, in Northern Virginia, which is really more corporate America, and I’ll let Jake sort of talk about where that demand is coming from, I don’t think any of it is about, well, we now need more space because we’re, quote—we, quote, unquote, "have more people coming to the office every day." And, Jake, you can sort of comment on where all of our expansion has been and our demand has come from in Northern Virginia and how that’s all working.

Rod, Regional Executive, BXP: Yeah, sure. Thanks, Doug. Yeah, Dylan, what I would just say is that, you know, in particular, in Reston Town Center, between the defense and cybersecurity industry, it’s really a who’s who of corporate campuses. And, you know, most of the employees of these organizations, you know, are tech related, usually former military background, folks that are in their thirties, that have a home and, wanna have a house and kids and a white picket fence. And so they typically live in Reston Town Center, Western Fairfax County and Loudoun County. And with Reston Town Center, it’s really the first stop for those groups as it relates to where that talent rests its head every night.

Speaker 6: Thank you. And I show our next question comes from the line of Ronald Kamdem from Morgan Stanley. Please go ahead.

Speaker 20: Hey, a lot of my questions have been asked, but just wanted a quick update. Just looking at the data for San Francis- or excuse me, LA and Seattle and some of the occupancy moves there, and the market has been going in the wrong direction. Obviously, smaller markets for you all, but just a quick update on, on the market and sort of the strategy there on the grounds for the few assets you have. Thanks.

Doug Linde, President, BXP: Sure. Ron, do you wanna take that one?

Rod, Regional Executive, BXP: Yeah, sure. So, just starting up in Seattle, I mean, we have our two assets in the CBD, and, you know, we’ve actually had really, good demand from some of our in-place tenants that have expressed some growth needs, so we’re accommodating that. You know, I don’t think when you compare Seattle to the demand that we’re seeing in San Francisco, it hasn’t quite, mirrored that yet, but it’s starting to. And historically, Seattle’s kind of lagged, San Francisco, you know, call it a year to 18 months. And so I expect this year we’re gonna see some, continued demand, increasing demand up there. So we’re optimistic that we’re gonna, you know, capture some of that. Down in LA, it’s a little different story. Remember, we’re just in West LA, out in Santa Monica.

We have two projects there, and I think that market is still kind of recovering still from many things, COVID being one of them. But then, you know, it’s just the contraction in the entertainment business, and the consolidation of that is affecting us in terms of demand down there. But, you know, that being said, we’ve actually started the year with some good activity. We’ve got a couple of proposals we’re chasing, so we think that things have picked up there maybe as well. But it’s, it’s been slower than we’re seeing in the Bay Area.

Doug Linde, President, BXP: But, you know, and Ron, I mean, you know, I, I said it, and Owen said it. I mean, we’re, we’re taking two Santa Monica Business Park buildings out of service, totaling about 260,000 sq ft of space. We’re gonna build high value, very accretive, exciting residential multifamily projects there, because we think that there’s much more value in that asset class at that location than there is in hoping for a recovery in the office market in the short term. And so, you know, that’s those are the decisions we’re making, and, you know, that we think that, that over time, we may see more and more of that going on in that particular asset. And, you know, that’s a, a 30-acre asset which, you know, could have an awful lot of residential use over the next decade or two.

Conference Operator: Thank you. Our last question comes from the line of Michael Lewis from Truist Securities. Please go ahead.

Speaker 14: Thank you for staying on. I feel almost guilty asking another question. My question is about leasing capital. So we saw this $128 a sq ft on the TIs and LCs this quarter. It sounds like from your comments, that’s probably unique to, you know, the leases in the quarter, and you’re not seeing more pressure on leasing capital. I was gonna ask if you’re able to share how much leasing capital you have committed but not spent yet, because I would guess as you’re leasing up and improving occupancy, maybe that pool of capital is building, you know, significantly more than you normally see. So I don’t know if you have any comments around that.

Doug Linde, President, BXP: So I think you’re asking how much—how much leasing have we, quote unquote, provided to our clients that they have yet to spend, right? That’s the question you’re asking?

Speaker 14: Yeah, that’s, that’s right.

Mike Labelle, Chief Financial Officer, BXP: Yeah, I do not have that number in front of me right now, and we do disclose that number in every Q and every K, however.

Speaker 14: Yeah. Is that an interesting trend to look at, or do you think that’s, I’m kinda off base on thinking about the pool of capital that might be building?

Mike Labelle, Chief Financial Officer, BXP: You know, I don’t know how much it’s necessarily building. I mean, it is a significant number, because many of our clients do take a long time to actually ask for the money, or spend the money. So there is an amount of dollars out there, you know, that, you know, is in the hundreds of billions of dollars that will be spent sometime over the next few years, as those clients, you know, complete that work. I have not seen it trend significantly higher. I think if you look at our transaction costs over time, you’re right that this quarter is a definite outlier. They’ve really ranged between, you know, kinda $85 a sq ft and a little over $100 a sq ft, you know, as every quarter.

which is a mix of renewal and new, and it includes leasing commissions and tenant improvement costs. So when I look at our AFFO projections, right, I’m not assuming $128 a sq ft, but I am assuming somewhere around $100 a sq ft on a going-forward basis, based upon kinda where we are in the market right now.

Doug Linde, President, BXP: Yeah, the other, the other thing, Michael, about just about this stuff that’s in our supplemental is that those leasing costs are based upon leases that are having, quote, unquote, "a revenue event this quarter." And so it’s typically a backward-looking portfolio. So there are leases that may have been signed in late 2023, early 2024, that are just starting to move into that revenue recognition change. And so, you know, we would expect to see that trending slowly coming down as the market improves as well.

Conference Operator: Thank you. That concludes our Q&A session. At this time, I’d like to turn the call over to Owen Thomas, Chairman and Chief Executive Officer, for closing remarks.

Mike Labelle, Chief Financial Officer, BXP: Thank you all for your questions. I’m not sure there’s much more we could possibly say. Have a good rest of day. Thank you.

Conference Operator: Thank you. This concludes today’s conference call. Thank you for participating. You may now disconnect.