Boston Properties, Inc. (BXP) 2024 Q2 Earnings Call Summary
July 31, 2024 
Boston Properties, Inc. (BXP)
| Market Cap | 0.21T |
|---|---|
| Beta | |
| P/E | 39.75452774136047 |
| EPS | 12.247158441111395 |
| Dividend | 0 |
| Dividend Yield | 0.00% |
Optimistic Highlights
- FFO Per Share Above Forecast: BXP's FFO per share was $0.06 above forecast and $0.05 above market consensus for Q2 2024. They also raised the midpoint of their FFO per share guidance for 2024 by $0.08.
- Leasing Volume Increase: Completed over 1.3 million square feet of leasing, 41% greater than Q2 2023, with a weighted average lease term of nine years.
- Sustainability Recognition: Recognized by Time Magazine as one of the world's most sustainable companies, ranking number one in the U.S. among property owners.
- Positive Market Conditions: Benefiting from lower interest rates and corporate earnings growth, with S&P 500 earnings growth expected to be around 9% for Q2.
- Premier Workplaces Outperformance: Premier workplaces continue to outperform the broader market, with direct vacancy at 13% versus 18.5% for the broader market.
Pessimistic Highlights
- Challenges in Tech and Life Science Leasing: Leasing in tech and life science sectors not back to pre-pandemic levels, with a digestion process underway for large tech companies.
- Market Segment Challenges: The broad office asset class remains challenging, with limited transaction activity in the premier workplace segment.
Company Outlook
- Occupancy Increase Expected: As leasing volume continues to exceed current lease expirations, occupancy is expected to increase over time.
- Capital Allocation Activities: Active in pursuing acquisitions and in negotiations for the disposition of four land positions, potentially generating approximately $150 million of proceeds.
- Development Pipeline Execution: Continuing with significant development pipeline, contributing to external FFO per share growth over time.
Q & A Highlights
Q: Can you provide early thoughts on 2025 impact given recent leasing pace? (Nick Yulico, Scotiabank)
A: Occupancy is expected to increase, with a trajectory going up. However, it's hard to give a tight projection on when material occupancy increase will start. (Douglas Linde)
Q: How do you think about funding and yields for new apartment developments? (Steve Sakwa, Evercore ISI)
A: Targeting mid-6 yields and higher for projects, primarily on land they control. Hope to establish similar JV partnerships as with the Skymark project. (Owen Thomas)
Q: How does corporate earnings growth outlook translate to leasing demand, especially with tech companies? (Michael Griffin, Citi)
A: There's a clear correlation between S&P 500 earnings growth and BXP's leasing activity. However, tech leasing is still catching up. (Owen Thomas)
Q: How are you addressing the elevated operating expense growth in the same-store portfolio? (Peter Abramowitz, Jefferies)
A: Operating expenses were actually less than expected, with a seasonal increase in utilities and repair and maintenance. (Michael LaBelle)
Q: How should we think about same-store NOI and potential headwinds or tailwinds rolling into next year? (Ronald Kamdem, Morgan Stanley)
A: Expectation of occupancy growth next year, which should positively impact same-store NOI. (Michael LaBelle)