BXP Exceeds Q2 Earnings Estimates Even as Leasing Occupancy Falls Slightly
By Andrew Coen July 31, 2024 1:41 pm
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BXP beat analysts’ second-quarter expectations despite decreased leasing activity in its portfolio, the real estate investment trust (REIT) said in its quarterly earnings call Wednesday.
The company, formerly known as Boston Properties (BXP), reported funds from operations (FFO) of $278.4 million, or $1.77 per diluted share, for the quarter ended June 30, compared to FFO of $292.8 million, or $1.86 per diluted share, for the same time last year. While the numbers were down year-over-year, the results still exceeded analysts’ FFO estimates of $1.72 per diluted share.
“BXP continues to display resilience with a growing leasing pipeline — as well as stability in FFO per share and dividend level — and is well positioned to continue to gain market share in both assets and clients during this time of market dislocation for the office sector,” BXP CEO Owen Thomas said during the earnings call. “Expectations for lower interest rates and stronger corporate earnings growth will also provide tailwinds for our renewed growth over time.”
Second-quarter leasing across BXP’s portfolio reached 87.1 percent of last year’s level, a decrease of 110 basis points from the first three months of 2024. BXP said the dip was “consistent” with prior expectations and primarily attributed to expected lease expirations.
BXP closed 73 leases comprising 1.3 million square feet in the second quarter with a weighted average lease term of nine years. That included 445,000 square feet in New York City, 343,000 square feet in Boston and 351,000 in Northern Virginia, the three markets that accounted for 86 percent of BXP’s total leasing activity. Its West Coast leases were primarily in the San Francisco market.
The REIT said Wednesday it executed three leases greater than 100,000 square feet in the second quarter, led by engineering firm Bechtel’s 289,000-square-foot expansion and renewal at Reston Town Center in Reston, Va. There was also a 164,000-square-foot renewal and expansion of an undisclosed tenant at the GM Building in Manhattan, and a 120,000-square-foot renewal of an unknown tenant at 200 Clarendon Street in Boston.
Douglas Linde, president of BXP, stressed during the earnings call that the firm is seeing strong leasing demand in Midtown Manhattan, with less than 8 percent availability in its Park Avenue submarket assets. He said the strong demand has been largely fueled by financial services companies and law firms.
“In many circumstances these clients are expanding,” Linde said. “Concessions are flat, and taking market rents have risen double digits in 2024.”
Linde noted that BXP has additional transactions in the pipeline of 850,000 square feet. If half of those deals close, it will propel the firm past its leasing guidance of 4 million square feet in 2024, he said.
BXP also announced in its earnings call Wednesday that a joint venture it’s part of exercised a one-year extension option on a loan secured by 100 Causeway in Boston — a 634,000-square-foot office property that is 94.6 percent leased. The loan, which has an outstanding balance of $333.6 million, is now scheduled to mature on Sept. 5, 2025.
Andrew Coen can be reached at acoen@commercialobserver.com.
