Boston Properties(US:BXP)2023-04-26 18:19Financial Data and Key Metrics Changes - The company reported first quarter FFO of $1.73 per share, exceeding the midpoint of guidance by $0.06 per share [65] - Full year guidance for FFO has been increased by $0.04 per share, now ranging from $7.14 to $7.20 per share [97][95] - The increase in guidance is attributed to $0.03 of better projected contribution from the portfolio and $0.01 of higher fee income [97] Business Line Data and Key Metrics Changes - The company completed 660,000 square feet of leasing in the first quarter, with a weighted average lease term of 7.7 years [35] - The leasing activity is expected to reach approximately 3 million square feet for the year, with a current pipeline of 900,000 square feet in negotiation and 1.5 million square feet in proposals [26][84] - The portfolio's in-service occupancy stands at 88.6%, which rises to 91% with leases signed but not commenced [54] Market Data and Key Metrics Changes - Direct vacancy for Premier Workplaces increased only 20 basis points to 10.7%, while the balance of the market saw an increase of 80 basis points to 15.5% [41] - U.S. transaction volume for office assets slowed to $6.6 billion in the first quarter, down 47% from the previous quarter [42] - The company noted that the availability rates are at or above 20% in coastal and Sun Belt markets, indicating a challenging supply picture [52] Company Strategy and Development Direction - The company is focusing on premier workplaces, life science, and residential development as key areas for growth [18] - The strategy includes being opportunistic in the current market environment while maintaining a strong and liquid balance sheet [20] - The company aims to maintain a steady dividend and increase it over time as developments add to income [93] Management's Comments on Operating Environment and Future Outlook - Management acknowledged significant economic headwinds but noted that the company continued to perform well in the first quarter [7] - The leasing slowdown is viewed as a cyclical trend rather than a secular trend, with expectations for recovery alongside economic conditions [36] - Management expressed confidence in the ability to achieve leasing targets despite current market challenges [116] Other Important Information - The company has elevated levels of liquidity, with $2.4 billion available, including $900 million in cash [88] - The company has a diverse portfolio with 8% of total revenue coming from life science clients, primarily from public companies [56][98] - The company is actively negotiating leases and has seen a modest growth in its active proposal pipeline [79][104] Q&A Session Summary Question: Can you speak to the leasing pipeline and projected yields? - The leasing pipeline is bulky, primarily in two locations, with expected returns slightly lower due to current market conditions [71] Question: How healthy is the mortgage market for office assets? - The mortgage market remains open for high-quality, well-leased premier workplace assets, despite tighter underwriting criteria [30][75] Question: What is the company's approach to capital preservation versus growth? - The company is open to growth opportunities but is focused on pricing and maintaining a strong capital structure [110] Question: How is the company addressing demand from smaller tenants? - The company is actively creating spec suites to accommodate demand from medium and small financial and professional services companies [134]