Core Insights - BXP Inc. has announced a strategic roadmap aimed at enhancing future earnings growth and expanding investment capacity through deleveraging, which includes a significant dividend cut to reinvest in value-accretive projects [1][2][8] Dividend Strategy - BXP declared a quarterly cash dividend of 70 cents for Q3 2025, representing a 28.6% reduction, which will generate approximately $50 million in additional cash each quarter for development projects [2][8] - The funds from the dividend cut will be allocated to projects such as 343 Madison Avenue in New York, supporting future earnings and long-term growth [2][8] Growth Plan - The strategic growth plan includes enhancing occupancy through a high-quality portfolio of premier workplaces in key markets and engaging in premium developments [3] - BXP plans to sell non-core assets to reinvest the proceeds into future developments, thereby maintaining balance sheet flexibility [4] Financial Performance - BXP reported second-quarter funds from operations (FFO) per share of $1.71, exceeding the Zacks Consensus Estimate of $1.67, although it represented a 3.4% decline year-over-year due to lower occupancy and higher interest expenses [6] - For 2025, BXP has revised its FFO per share guidance upward to a range of $6.84-$6.92, from the previous range of $6.80-$6.92 [7] Market Position - BXP holds a portfolio of Class A office assets in select U.S. markets, with strong tenant demand expected to drive leasing activity and rental growth [5] - Over the past three months, BXP's shares have increased by 4.4%, outperforming the industry growth of 1.2% [7]

Core Insights - BXP is hosting its 2025 Investor Conference, emphasizing engagement with investors both in-person and via live stream [1] - The conference features a lineup of speakers including Owen Thomas, Doug Linde, and Mike LaBelle, indicating a strong focus on leadership insights [2] Company Overview - Helen Han serves as the Vice President of Investor Relations, highlighting the company's commitment to transparent communication with stakeholders [1] - The event includes a fun run, showcasing the company's culture and team spirit, which may enhance investor relations [1] Event Highlights - The conference aims to provide valuable information and updates to investors, suggesting a proactive approach to investor engagement [2] - The presence of key executives indicates a strategic focus on leadership visibility and investor confidence [2]

Summary of BXP 2025 Investor Day Company Overview - **Company**: BXP (NYSE:BXP) - **Event**: 2025 Investor Day held on September 8, 2025 Key Industry Insights - **Office Real Estate Market**: BXP focuses on owning premier workplace assets in gateway markets, emphasizing high-quality buildings in top-tier locations. Core Strategic Points 1. **Consistent Strategy**: BXP's strategy remains unchanged, focusing on owning the best buildings in the best markets, specifically targeting the top 10-15% of office buildings in local markets [10][12][14]. 2. **Asset Focus**: The company prioritizes premier workplaces, life sciences, and residential developments, with a strong emphasis on quality and location [13][16]. 3. **Market Trends**: Key trends impacting BXP include: - **Remote Work**: A significant increase in office occupancy among Fortune 100 companies, from 5% to 54% in two years [22][23]. - **Higher Costs**: Increased financing and construction costs, with construction materials up 45% since pre-pandemic [33][34]. - **AI Impact**: Growth in AI-related office leasing, particularly in core markets like San Francisco, where 27% of office leasing has been attributed to AI companies [39][40]. - **Shareholder Preferences**: A shift towards generalist investors, emphasizing the importance of growing FFO per share [44][46]. Financial Performance and Projections 1. **FFO Growth**: BXP aims to grow FFO per share using moderate leverage, with a focus on maintaining a high-quality portfolio [19][53]. 2. **Leasing Momentum**: The leasing market shows positive trends, with a 22% increase in leases signed compared to the previous year [57][58]. 3. **Occupancy Rates**: The company has a low level of lease rollovers in the next 2.5 years, with only 4.7 million square feet of rollovers expected [58]. Development and Asset Management 1. **Selective Development**: BXP plans to be more selective in office developments while increasing housing projects, with 6,600 units in various stages of entitlement [62][63]. 2. **Asset Sales**: The company is initiating a more aggressive asset sale program, targeting approximately $1 billion in proceeds from land and non-producing assets [66][69]. 3. **Dividend Reset**: BXP has reset its dividend to align with net income, raising $50 million per quarter for capital needs [74][75]. Additional Insights - **Market Positioning**: BXP is positioned as a luxury brand in office real estate, focusing on urban core markets rather than suburban areas [14][16][52]. - **Competitive Advantage**: The company believes its development capabilities and lack of new competition will help fill existing space and push rents higher [36][37]. - **Long-term Outlook**: Management expresses confidence in future growth prospects, driven by favorable market trends and strategic initiatives [76]. This summary encapsulates the key points discussed during the BXP 2025 Investor Day, highlighting the company's strategic focus, market trends, financial performance, and future outlook.

BXP Strategy & Market Trends - BXP focuses on high-quality, sustainable assets in the top 15% of their local markets, leased at premium rents[14] - Hybrid office attendance policies are at 41% as of Q2 2025, compared to 78% in Q2 2023, showing a shift back to in-office work[31] - Premier assets outperform the broader market, with a 12.5% direct vacancy rate compared to 20% for non-premier buildings[35] - Average asking rent for premier assets is $95.29, a 50% premium over non-premier assets at $63.62[40] - AI companies are driving leasing demand in San Francisco, accounting for 26.8% of total leasing activity in 2025, totaling 1.63 million square feet[61] Financial Strategy & Asset Management - BXP projects net proceeds of nearly $1.9 billion from asset sales over the next 3 years[125] - The dividend was reset to $0.70 per share quarterly, or $2.80 per share annualized, expected to retain ~$500 million through 2027[271] - BXP anticipates securing a financial partner for 343 Madison Avenue, with a partner contribution of $300 million to $500 million[134] - BXP aims to reduce leverage, targeting a pro forma leverage ratio of 7.08x by year-end 2027, compared to 8.18x currently[322] Portfolio & Occupancy - BXP's in-service portfolio is projected to reach 49.8 million square feet by the end of 2026[161] - Low lease expirations in 2026 and 2027, with only 3.9% and 5.0% of total square footage expiring, respectively, present an opportunity for occupancy growth[104]

Core Insights - BXP, Inc. is hosting its Triennial Investor Day on September 8th in New York, highlighting its position as the largest publicly traded developer, owner, and manager of premier workplaces in the United States [1] Company Overview - The event features key executives including Owen Thomas (Chairman & CEO), Douglas Linde (President), and Michael LaBelle (Chief Financial Officer), who will present a detailed overview of the company's strategic priorities [1]

Group 1 - BXP (NYSE: BXP) shares have underperformed over the past year, losing approximately 7% of their value due to concerns regarding its balance sheet and long-term office fundamentals [1] - The article reflects on over fifteen years of experience in making contrarian bets based on macro views and stock-specific turnaround stories to achieve outsized returns with a favorable risk/reward profile [1]

Group 1: Airbnb, Inc. (ABNB) - The company initiated a new position in Airbnb, taking advantage of a sell-off in April to acquire a high-quality asset with favorable risk/reward dynamics [1] - Airbnb is the largest technology-enabled hospitality platform globally, boasting 8 million listings and 5 million hosts across 220 countries and 100,000 cities [1] - Optimistic multi-year prospects for Airbnb are supported by its leading market share in alternative accommodations, strong brand awareness, and repeat bookings [1] - The company benefits from 90% direct traffic, which lowers customer acquisition costs [1] - Airbnb's value proposition to guests and hosts leads to differentiated listings and exclusive inventory [1] - A unique two-sided marketplace of user reviews fosters trust between guests and hosts [1] - The company has embedded free call options with recently launched experiences and services, with plans for future product introductions [1] Group 2: BXP, Inc. (BXP) - The company acquired shares of BXP, a blue-chip office REIT with a portfolio of premier office properties in major coastal U.S. markets [2] - BXP is recognized as a blue-chip company with irreplaceable assets in key urban locations [2]

[PART I. FINANCIAL INFORMATION](index=6&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section provides unaudited consolidated financial statements, management's discussion, market risk, and controls [ITEM 1. Financial Statements (unaudited)](index=6&type=section&id=ITEM%201.%20Financial%20Statements%20%28unaudited%29) This section presents unaudited consolidated financial statements for BXP, Inc. and BPLP, covering balance sheets, income, cash flows, and notes [BXP, Inc. Financial Statements](index=6&type=section&id=BXP%2C%20Inc.%20Financial%20Statements) This section provides BXP, Inc.'s unaudited balance sheets, income statements, and cash flow statements for the specified periods | Financial Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :--- | :--- | :--- | | **Assets** | | | | Total real estate | $21,262,840 | $21,050,255 | | Cash and cash equivalents | $446,953 | $1,254,882 | | Total assets | $25,621,190 | $26,084,980 | | **Liabilities & Equity** | | | | Total liabilities | $17,766,779 | $18,137,324 | | Total stockholders' equity attributable to BXP, Inc. | $5,258,786 | $5,413,306 | | Total equity | $7,847,430 | $7,938,121 | | Income Statement Metric | Six months ended June 30, 2025 (in thousands) | Six months ended June 30, 2024 (in thousands) | | :--- | :--- | :--- | | Total revenue | $1,733,672 | $1,689,921 | | Total expenses | $1,229,024 | $1,192,965 | | Net income | $206,046 | $213,553 | | Net income attributable to BXP, Inc. | $150,161 | $159,498 | | Diluted EPS attributable to BXP, Inc. | $0.95 | $1.01 | | Cash Flow Metric | Six months ended June 30, 2025 (in thousands) | Six months ended June 30, 2024 (in thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | $563,181 | $564,659 | | Net cash used in investing activities | ($612,404) | ($553,504) | | Net cash used in financing activities | ($758,132) | ($886,221) | | Net decrease in cash and cash equivalents | ($807,355) | ($875,066) | [Boston Properties Limited Partnership Financial Statements](index=15&type=section&id=Boston%20Properties%20Limited%20Partnership%20Financial%20Statements) This section presents the unaudited balance sheets and income statements for Boston Properties Limited Partnership | Financial Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :--- | :--- | :--- | | **Assets** | | | | Total real estate | $21,030,255 | $20,814,165 | | Total assets | $25,388,605 | $25,848,890 | | **Liabilities & Capital** | | | | Total liabilities | $17,766,779 | $18,137,324 | | Total partners' capital | $4,325,791 | $4,389,913 | | Total capital | $6,329,784 | $6,323,458 | | Income Statement Metric | Six months ended June 30, 2025 (in thousands) | Six months ended June 30, 2024 (in thousands) | | :--- | :--- | :--- | | Total revenue | $1,733,672 | $1,689,921 | | Total expenses | $1,225,618 | $1,189,565 | | Net income | $209,551 | $216,953 | | Net income attributable to BPLP | $170,702 | $181,907 | | Diluted EPS attributable to BPLP | $0.97 | $1.04 | [Notes to the Consolidated Financial Statements](index=24&type=section&id=Notes%20to%20the%20Consolidated%20Financial%20Statements) This section details accounting policies, significant transactions, and subsequent events impacting the consolidated financial statements - As of June 30, 2025, the company owned or had joint venture interests in a portfolio of 186 commercial real estate properties, totaling approximately **53.7 million net rentable square feet**, including ten properties under construction/redevelopment[76](index=76&type=chunk) - On June 27, 2025, the company sold land at 17 Hartwell Avenue to a new joint venture for approximately **$21.8 million**, recognizing a gain of approximately **$18.4 million** for BXP and **$18.5 million** for BPLP, for redevelopment into a 312-unit residential property[100](index=100&type=chunk) - On March 28, 2025, BPLP amended its revolving credit agreement, increasing the revolving facility to **$2.25 billion** (from $2.0 billion) and adding a new **$700.0 million** unsecured term loan facility, with proceeds used to repay the existing **$700.0 million** term loan[119](index=119&type=chunk)[125](index=125&type=chunk) - The company is involved in a legal dispute over performance-based fees for a New York City property, with potential liability as high as an additional **$31 million** plus interest if the court agrees with the seller's calculations[141](index=141&type=chunk)[144](index=144&type=chunk) - On July 31, 2025, the company elected to proceed with full vertical construction of 343 Madison Avenue, a **930,000 rentable square foot** office development, and acquired its partner's **45% interest** for approximately **$43.5 million**[191](index=191&type=chunk) [ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=50&type=section&id=ITEM%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses company performance, emphasizing strong leasing, development, and liquidity, with net income slightly down due to interest expenses [Overview and Outlook](index=51&type=section&id=Overview%20and%20Outlook) This section outlines BXP's core strategy, market position, and positive outlook, driven by corporate confidence and return-to-office trends - BXP's core strategy involves developing, acquiring, and managing premier workplaces in gateway markets, focusing on long-term leases with financially strong clients, validated by outperformance in occupancy and rental rates[204](index=204&type=chunk) - The company's Central Business District (CBD) assets, representing approximately **89% of its annualized rental obligations**, were **89.9% occupied** and **92.5% leased** as of June 30, 2025[205](index=205&type=chunk) - The outlook is positive, supported by improving corporate confidence, a continued rebound in office utilization, and favorable macroeconomic developments, with return-to-office trends strongest in East Coast markets[207](index=207&type=chunk)[208](index=208&type=chunk)[211](index=211&type=chunk) [Leasing Activity and Occupancy](index=53&type=section&id=Leasing%20Activity%20and%20Occupancy) This section details the company's leasing volume, occupancy rates, and changes in cash rents across various regions - In Q2 2025, the company executed **91 leases** totaling over **1.1 million square feet** with a weighted-average lease term of **9.4 years**, and leasing volume over the last four quarters (**5.7 million sq. ft.**) was **18% higher** than the prior four-quarter period[213](index=213&type=chunk) - Overall in-service office and retail property occupancy was **86.4%** at June 30, 2025, a **0.5% decrease** from the prior quarter, with a leased percentage of **89.1%** representing approximately **1.3 million square feet** of signed leases yet to commence revenue recognition[215](index=215&type=chunk)[216](index=216&type=chunk) | Region | Leases Executed (sq. ft.) | Occupancy | Leased | Change in 2nd Gen Cash Rents | | :--- | :--- | :--- | :--- | :--- | | Boston | 235,824 | 89.7% | 91.2% | (0.13)% | | Los Angeles | 7,322 | 86.3% | 86.9% | (48.64)% | | New York | 344,170 | 84.4% | 90.2% | (15.18)% | | San Francisco | 159,599 | 78.7% | 80.7% | (18.71)% | | Seattle | 18,556 | 84.6% | 85.9% | —% | | Washington, DC | 356,350 | 90.5% | 92.3% | (14.51)% | | **Total / W.A.** | **1,121,821** | **86.4%** | **89.1%** | **(14.27)%** | [Results of Operations](index=56&type=section&id=Results%20of%20Operations) This section analyzes the company's financial performance, including net income, NOI, and key factors influencing period-over-period changes | Metric (Six Months Ended June 30) | 2025 (in thousands) | 2024 (in thousands) | Change (in thousands) | % Change | | :--- | :--- | :--- | :--- | :--- | | Net Income Attributable to BXP, Inc. | $150,161 | $159,498 | ($9,337) | (5.85)% | | Net Income Attributable to BPLP | $170,702 | $181,907 | ($11,205) | (6.16)% | | Net Operating Income (NOI) | $1,025,878 | $1,017,537 | $8,341 | 0.82% | - For the six months ended June 30, 2025, Same Property Portfolio NOI decreased by **0.62%** (**$6.2 million**), driven by a **3.9% increase** in operating expenses (primarily repairs, maintenance, and utilities) which offset a **1.16% increase** in rental revenue[242](index=242&type=chunk)[245](index=245&type=chunk)[248](index=248&type=chunk) - Interest expense increased by **$14.7 million** for the six months ended June 30, 2025, primarily due to the issuance of **$850 million** of 5.750% senior notes in August 2024 and higher borrowings on commercial paper[288](index=288&type=chunk)[289](index=289&type=chunk) - For the three months ended June 30, 2025, Net Income Attributable to BXP, Inc. increased by **$9.4 million**, driven by an **$18.4 million gain** on the sale of real estate, which offset a **$13.1 million increase** in interest expense[298](index=298&type=chunk)[300](index=300&type=chunk) [Liquidity and Capital Resources](index=77&type=section&id=Liquidity%20and%20Capital%20Resources) This section assesses the company's cash position, available credit, development funding, and debt structure to meet financial obligations - As of July 31, 2025, the company had approximately **$255.6 million** in available cash and approximately **$1.0 billion** available under BPLP's Revolving Facility after backstopping its commercial paper program[360](index=360&type=chunk) - The company is actively negotiating the sale of nine land sites and empty buildings, which could generate approximately **$300 million** in gross proceeds over the next 24 months, with definitive agreements in place for five sites totaling **$176.3 million**[361](index=361&type=chunk)[362](index=362&type=chunk) - As of June 30, 2025, the company has **11 properties** under development/redevelopment, with a total estimated investment of **$4.3 billion**, and approximately **$2.9 billion** remains to be funded through 2031[365](index=365&type=chunk)[367](index=367&type=chunk) | Debt Summary | June 30, 2025 (in thousands) | | :--- | :--- | | Unsecured Senior Notes, net | $9,800,577 | | Unsecured Commercial Paper | $750,000 | | Unsecured Line of Credit | $185,000 | | Unsecured Term Loans, net | $796,640 | | Mortgage Notes, net | $4,278,788 | | **Total Consolidated Debt** | **$15,811,005** | [Funds from Operations (FFO)](index=91&type=section&id=Funds%20from%20Operations%20%28FFO%29) This section presents the Funds from Operations (FFO) for BXP, Inc. and BPLP for the three months ended June 30 | FFO Metric (Three Months Ended June 30) | 2025 (in thousands) | 2024 (in thousands) | | :--- | :--- | :--- | | FFO attributable to BXP, Inc. | $271,652 | $278,399 | | Diluted FFO attributable to BXP, Inc. | $271,713 | $278,430 | | FFO attributable to BPLP | $301,769 | $310,956 | [ITEM 3. Quantitative and Qualitative Disclosures about Market Risk](index=96&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) Primary market risk is interest rate exposure; **$1.6 billion** variable-rate debt, 100 bps hike increases interest expense by **$12.5 million** - As of June 30, 2025, approximately **$13.3 billion** of indebtedness bore fixed interest rates, while approximately **$2.5 billion** was at variable rates, of which **$900.0 million** has been hedged with interest rate swaps[422](index=422&type=chunk) - A **100 basis point increase** in market interest rates on variable rate debt would have increased interest expense by approximately **$6.3 million** for Q2 2025 and **$12.5 million** for the six months ended June 30, 2025[424](index=424&type=chunk) [ITEM 4. Controls and Procedures](index=97&type=section&id=ITEM%204.%20Controls%20and%20Procedures) Management, including CEO and CFO, concluded disclosure controls for BXP, Inc. and BPLP were effective, with no material changes to internal controls - The Chief Executive Officer and Chief Financial Officer of BXP, Inc. concluded that the disclosure controls and procedures for both BXP, Inc. and Boston Properties Limited Partnership were effective as of the end of the period covered by the report[427](index=427&type=chunk)[429](index=429&type=chunk) - No changes in internal control over financial reporting occurred during the second quarter of fiscal year 2025 that materially affected, or are reasonably likely to materially affect, internal controls[428](index=428&type=chunk)[430](index=430&type=chunk) [PART II. OTHER INFORMATION](index=98&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section covers legal proceedings, risk factors, equity sales, defaults, mine safety, other information, and exhibits [ITEM 1. Legal Proceedings](index=98&type=section&id=ITEM%201.%20Legal%20Proceedings) The company is involved in ordinary legal proceedings, generally insured, with no expected material adverse effect on financial condition or results - The company states that it is subject to ordinary course legal proceedings which are generally covered by insurance and are not expected to have a material adverse effect on its financial position, results of operations, or liquidity[433](index=433&type=chunk) [ITEM 1A. Risk Factors](index=98&type=section&id=ITEM%201A.%20Risk%20Factors) No material changes to risk factors were reported from those disclosed in the Annual Report on Form 10-K for December 31, 2024 - There were no material changes to the risk factors disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2024[434](index=434&type=chunk) [ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=98&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) BPLP issued **40,669 common units** to BXP for incentive plans, and BXP repurchased shares for employee terminations and tax obligations - BPLP issued an aggregate of **40,669 common units** to BXP in exchange for approximately **$60.85** in proceeds from BXP's common stock issuances under its 2021 Stock Incentive Plan during Q2 2025[438](index=438&type=chunk) - BXP repurchased a total of **1,615 shares** of common stock during the quarter, primarily related to employee terminations and tax withholding obligations on vested restricted stock[436](index=436&type=chunk)[437](index=437&type=chunk) [ITEM 3. Defaults Upon Senior Securities](index=99&type=section&id=ITEM%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults on its senior securities during the reporting period - None[441](index=441&type=chunk) [ITEM 4. Mine Safety Disclosures](index=99&type=section&id=ITEM%204.%20Mine%20Safety%20Disclosures) The company reported no mine safety disclosures for the period - None[442](index=442&type=chunk) [ITEM 5. Other Information](index=99&type=section&id=ITEM%205.%20Other%20Information) No other material information was reported, and no directors or officers modified Rule 10b5-1 trading arrangements - During the three months ended June 30, 2025, no directors or officers adopted, terminated, or modified a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement[445](index=445&type=chunk) [ITEM 6. Exhibits](index=100&type=section&id=ITEM%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including credit agreement amendments, CEO/CFO certifications, and XBRL data files - The exhibits filed with this report include CEO and CFO certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act for both BXP, Inc. and Boston Properties Limited Partnership, as well as Inline XBRL data files[446](index=446&type=chunk)

Financial Data and Key Metrics Changes - The company reported funds from operations (FFO) of $1.71 per share, which is $0.05 above the midpoint of guidance and $0.04 above consensus estimates for the quarter [41][42] - The midpoint of the full-year earnings guidance for 2025 has been raised by $0.02, reflecting strong operational performance [7][46] - The total portfolio occupancy for the second quarter ended at 86.4%, a decline of 50 basis points [26] Business Line Data and Key Metrics Changes - The company completed over 1,100,000 square feet of leasing in the quarter, bringing total leasing in 2025 to 2,200,000 square feet [7] - The leasing volume over the last four quarters was 5,700,000 square feet, which is 18% higher than the prior four quarters [7] - The development portfolio lease percentage increased by 500 basis points to 67% [31] Market Data and Key Metrics Changes - Office sales volume increased to $14.2 billion, up 80% from the prior quarter and 125% from the second quarter of last year [11] - The vacancy rate for premier workplaces in core CBD markets is 6.3%, significantly lower than the broader market [17] - In San Francisco, there has been a reduction in rental rates, with deals now being done in the mid-threes per square foot [75] Company Strategy and Development Direction - The company is proceeding with the development of a premier workplace at 343 Madison Avenue, with a total development cost of just under $2 billion [15][16] - The company is exploring the sale of non-income producing assets to generate nearly $300 million in net proceeds over the next two years [18] - The strategy focuses on high-quality assets in gateway markets, with a strong emphasis on tenant quality and long-term leases [60][62] Management's Comments on Operating Environment and Future Outlook - Management noted that corporate confidence is improving, driven by favorable economic conditions and a pro-growth tax bill [8] - The return to office behavior is more advanced in East Coast markets, particularly New York City, compared to the West Coast [10] - The company expects to gain occupancy, revenue, and FFO in the coming years, supported by limited rollover in 2026 and 2027 [21] Other Important Information - The company has a strong pipeline of leases in negotiation, totaling 1,800,000 square feet, with additional letters of intent at 343 Madison [25] - The upcoming Investor Day is scheduled for September 8, 2025, in New York City [48] Q&A Session Questions and Answers Question: Outlook for the unlevered return on 343 Madison - The expected unlevered cash yield upon delivery is between 7.5% to 8%, with a potential mid to high teens IRR on a levered basis [52] Question: Impact of AI on space needs - Management believes AI will create jobs at the top of the intellectual pyramid, leading to increased demand for high-quality office space in gateway markets [56][60] Question: Clarification on capitalized interest for 343 Madison - The capitalized interest is based on a blended rate of around 7.5% for the four-year development period, with actual capitalized interest potentially being lower [67] Question: Mark to market report for the quarter - The mark to market was slightly up in Boston and New York, but down in Washington, DC, and the West Coast, reflecting varying demand conditions [72][75] Question: Terms of the MTA ground lease for 343 Madison - The ground lease is a 99-year lease with known increases in payments, making it attractive for underwriting [78][80] Question: Guidance and timing of earnings - The bottom end of the annual range was increased due to strong portfolio performance, but higher expected expenses in the third quarter tempered the overall guidance increase [82][85]

Financial Data and Key Metrics Changes - The company reported funds from operations (FFO) of $1.71 per share, which is $0.05 above the midpoint of guidance and $0.04 above consensus estimates for the quarter [38] - The midpoint of the full-year 2025 earnings guidance has been raised by $0.02, reflecting strong operational performance [6][41] - The total portfolio occupancy for the second quarter ended at 86.4%, a decline of 50 basis points [24] Business Line Data and Key Metrics Changes - The company completed over 1,100,000 square feet of leasing in the quarter, bringing total leasing in 2025 to 2,200,000 square feet [6] - The leasing volume over the last four quarters was 5,700,000 square feet, which is 18% higher than the prior four quarters [6] - The development portfolio lease percentage increased by 500 basis points to 67% this quarter [28] Market Data and Key Metrics Changes - Office sales volume increased to $14.2 billion, up 80% from the prior quarter and 125% from the second quarter of last year [11] - The vacancy rate for trophy buildings in Midtown remains very low at 6.3%, with office rents growing at rates well above inflation [16] - The overall mark to market of leases signed this quarter was flat, with modest increases in Boston and New York, and slight decreases on the West Coast and DC [29] Company Strategy and Development Direction - The company is proceeding with the development of a new office building at 343 Madison Avenue, with a total development cost of just under $2 billion [14] - The company is exploring the sale of non-income producing assets to generate nearly $300 million in net proceeds over the next two years [16][17] - The strategy focuses on high-quality assets in prime locations, with a strong emphasis on tenant quality and long-term leases [55] Management's Comments on Operating Environment and Future Outlook - Management noted that corporate confidence is improving, driven by favorable economic conditions and a pro-growth tax bill [7] - The return to office behavior is advancing, particularly in East Coast markets, which is expected to enhance leasing activity [9] - The company anticipates occupancy, revenue, and FFO growth in the coming years, supported by limited rollover in 2026 and 2027 [19] Other Important Information - The company has executed a letter of intent with an anchor client for approximately 30% of the new building at 343 Madison Avenue [14] - The company is actively engaged in discussions for additional leasing opportunities, with 1,800,000 square feet of leases in negotiation post-Q2 [23] - The upcoming Investor Day is scheduled for September 8, 2025, in New York City [44] Q&A Session Summary Question: Outlook for the unlevered return on 343 Madison - The expected unlevered cash yield upon delivery is between 7.5% to 8%, with a potential mid to high teens IRR on a levered basis [48] Question: Impact of AI on demand for office space - AI is expected to drive job creation at the top of the intellectual pyramid, with companies in AI experiencing growth in demand for office space [51][54] Question: Clarification on capitalized interest for 343 Madison - Capitalized interest is based on a blended rate of around 7.5% for the four-year development period, with actual capitalized interest potentially being lower [61] Question: Mark to market performance this quarter - The mark to market was slightly worse than last quarter, with variations in rental rates across different markets impacting the overall performance [66] Question: Terms of the MTA ground lease for 343 Madison - The ground lease is a 99-year lease with predictable increases in payments, making it attractive for underwriting [73][75] Question: Guidance and earnings cadence for the second half of the year - The company expects a lower FFO in Q3 due to seasonal operating expenses, with a higher impact anticipated in Q4 [80]