Core Insights - The company reported a leasing volume of 1.2 million square feet, which is a 14% increase compared to the prior four-quarter average and a 10% increase compared to the prior eight-quarter average [1] - The fourth quarter of 2025 saw a diluted FFO per share of $2.16, aligning with the company's prior guidance, and a full-year FFO of $9.01 [2] - Management's focus for 2026 includes timely execution, prioritizing dispositions, balance sheet flexibility, and reducing capital expenditures [3][7] Leasing Performance - The company achieved a total leasing volume of 1.2 million square feet in Q4 2025, marking the highest quarterly leasing volume in the last year [2][6] - Vacant space leasing totaled 393,000 rentable square feet, nearly double the quarterly average over the last five quarters [1] - Occupancy at the end of 2025 was 90.9%, up 30 basis points sequentially [8] Financial Performance - The company executed $1.5 billion in dispositions across 26 transactions during Q4 2025 [2][6] - Same-property net operating income (NOI) declined by 6% in Q4 and 3.5% for the full year, with expectations of an 8.5% decline in 2026 [11] - The company recognized $1.45 billion in impairments in Q4, primarily related to land [16] 2026 Outlook - Management anticipates occupancy to dip in early 2026 due to approximately 1.2 million square feet of lease expirations, with a recovery expected in the second half of the year [5][9] - The company has set a disposition target of $2.9 billion for 2026, with 65% to 75% expected to come from non-core assets [7][15] - Capitalized interest is projected to decline by 24% to $250 million in 2026 [13] Market Conditions - The leasing environment remains cautious, particularly in the biotech sector, with venture capital funding at its lowest in a decade [21][22] - Smaller spaces under 50,000 square feet are active, but there is a lack of public biotech tenants in the 50,000 to 150,000 square foot range [22] - Free rent levels have been increasing, indicating weakening fundamentals in the leasing market [23]

Financial Data and Key Metrics Changes - For Q4 2025, the diluted FFO per share was $2.16, and for the full year, it was $9.01, aligning with prior guidance [7] - Same property net operating income (NOI) decreased by 6% for Q4 and 3.5% for the full year [10][11] - Occupancy at the end of 2025 was 90.9%, up 30 basis points from the previous quarter [9] Business Line Data and Key Metrics Changes - The company completed $1.5 billion in dispositions across 26 transactions and achieved 1.2 million sq ft in leasing volume for Q4, the highest in the last year [7] - Leasing volume for Q4 was up 14% compared to the prior four-quarter average [8] - Free rent and rental rate changes were under pressure, reflecting market realities [8] Market Data and Key Metrics Changes - The company noted a significant increase in leasing activity in the Greater Boston region, with an 11% increase in tenants [44] - The public biotech sector showed a notable decline in leasing activity, which is critical for the company's future growth [33][69] Company Strategy and Development Direction - The company plans to focus on timely execution of its strategic plan, emphasizing dispositions and maintaining a strong balance sheet [5] - The strategic path forward includes reducing capital expenditures and completing a large-scale non-core disposition plan in 2026 [16][20] - The company aims to recycle capital from dispositions to support funding needs, particularly in residential developments [22][58] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding the leasing environment, noting that decision-making is still taking longer due to market conditions [32] - The company anticipates a dip in occupancy in Q1 2026, primarily due to key lease expirations [10] - Management highlighted the importance of the public biotech sector for future leasing demand and expressed concerns over the current lack of IPO activity [69] Other Important Information - The company achieved $51.3 million in general and administrative cost savings, representing a 30% reduction compared to the prior year [15] - The company has a strong liquidity position of $5.3 billion and a modest leverage ratio of 5.7x for net debt to adjusted EBITDA [18] Q&A Session Summary Question: Impact of VC funding on leasing outlook - Management noted that while there is sustained funding in private biotechnology, the overall environment remains cautious, and decision-making is slower [30][32] Question: Strategy regarding The Fenway office property - Management confirmed that retaining The Fenway office property for leasing as office space is a strategic decision based on demand [34][35] Question: Cap rate trends for dispositions - Management indicated that cap rates for non-core assets are in the mid-sixes to mid-nines, depending on market conditions [40] Question: Leasing pipeline and notable groups - Management highlighted that smaller spaces under 50,000 sq ft are in demand, but there is a lack of activity from public biotech companies [42] Question: Guidance for FFO in Q4 2026 - Management reaffirmed guidance for Q4 2026 FFO of $1.40-$1.60, indicating it represents a trough for the year [48][49] Question: Capital allocation priorities - Management stated that the priority is on debt reduction before considering stock buybacks [87] Question: Non-real estate investments - Management aims to achieve a net neutral position on non-real estate investments moving forward [91]