Boston Properties(US:BXP)2023-02-01 20:55Financial Data and Key Metrics Changes - The company reported fourth quarter FFO of $1.86 per diluted share and full year 2022 FFO of $7.53 per diluted share, which was a penny ahead of the midpoint of guidance and $0.02 ahead of street consensus [21] - FFO per share grew 15% in 2022 due to development deliveries and strong leasing activity [4][63] - Revenue increased by 8% and same property NOI increased by 4% over 2021, with cash NOI growth in the same property portfolio of 6.5% [63] Business Line Data and Key Metrics Changes - The company completed 1.1 million square feet of leasing in the fourth quarter and 5.7 million square feet for all of 2022, which is 95% of the average annual leasing over the last 10 years [4] - The weighted average term for leases signed in 2022 was 9.2 years, attributed to strong client relationships and execution [28] - The company has a development pipeline of 13 projects aggregating approximately 4 million square feet and $3.3 billion of investment projected to add more than $240 million to NOI over the next five years [12] Market Data and Key Metrics Changes - Direct vacancy for premier workplaces was 9.6% compared to 14.7% for the rest of the market, with net absorption for premier workplaces being a positive 7.1 million square feet versus a negative 25.4 million square feet for the balance of the market [7] - The U.S. transaction volume for office assets slowed to $12 billion in the fourth quarter, down 40% from the third quarter [31] - The mark to market on leases signed in the fourth quarter showed increases of 7% in Boston, 9% in San Francisco, flat in New York City, and down 11% in DC [58] Company Strategy and Development Direction - The company aims to position itself for success regardless of the economy's trajectory by managing leverage and liquidity [29] - The premier workplace segment continues to outperform, with users increasingly interested in upgrading their buildings to attract workforce back to the office [30] - The company is focusing on opportunistic acquisitions solely in premier workplaces, life science, and residential development [9] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the economic slowdown due to inflation and federal reserve tightening measures but noted that inflation is starting to come down [6] - The company is well-positioned to weather the current economic slowdown due to its premier workplace market positions and strong balance sheet [13] - Management expects a reduction in FFO of 5% from last year, primarily due to increased interest rates, but anticipates that interest rates will not be a significant headwind going forward [49] Other Important Information - The company raised $1.2 billion in additional liquidity through a green bond offering and an upsized bank term loan [5] - The company took a $51 million non-cash impairment charge related to its Dock 72 property due to weak leasing conditions [45] - The company plans to change the timing of its annual guidance issuance starting next year [67] Q&A Session Summary Question: Comments on leasing pipeline and outlook - Management noted significant leasing at 2100 Penn and adjustments in timelines for 360 Park Avenue South and 205th Avenue due to leasing activity [70] Question: Comparison of leasing activity to expectations - Management acknowledged a material change in the overall economy and noted that they exceeded internal projections for leasing activity [74] Question: Demand for tech-oriented buildings - Management indicated that leasing has slowed but is seeing interest from traditional industries, suggesting a shift in tenant focus [81] Question: Changes in tenant long-term commitments - Management stated that tenants are making long-term decisions, and they continue to sign longer-term leases despite economic conditions [86] Question: Impact of government workers on the market - Management expressed concern over the federal workforce not returning to work and its impact on occupancy in Reston [107]