Good morning, and welcome to the BXP Third Quarter 2025 Earnings Conference Call. The press release and supplemental package were distributed last night and furnished on Form 8-K. In the supplemental package, BXP has reconciled all non-GAAP financial measures to the most directly comparable GAAP measure in accordance with Reg G. If you did not receive a copy, these documents are available in the Investors section of our website at investors.bxp.com. A webcast of this call will be available for 12 months. At this time, we would like to inform you that certain statements made during this conference call, which are not historical, may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act. Although BXP believes the expectations reflected in any forward-looking statements are based on reasonable assumptions, it can give no assurance that expectations will be attained. Factors and risks that could cause actual results to differ materially from those expressed or implied by forward-looking statements were detailed in yesterday's press release and from time to time in BXP's filings with the SEC. BXP does not undertake a duty to update any forward-looking statements. I'd like to welcome Owen Thomas, Chairman and Chief Executive Officer; Doug Linde, President; and Mike LaBelle, Chief Financial Officer. During the Q&A portion of our call, Ray Ritchey, Senior Executive Vice President, and our regional management teams will be available to address any questions.

Thank you, Helen, and good morning to all of you. Our financial results for the third quarter demonstrate a continuation of BXP's positive momentum. FFO per share was $0.04 above our forecast and $0.02 above market consensus, and we raised the midpoint of our earnings guidance for the full year 2025 by $0.03. This past quarter, BXP also completed a very well-attended and successful Investor Day, during which we provided a detailed execution plan on how we intend to increase FFO per share, fund development costs, and deleverage over the next 2.5 years. This morning, I will provide a reminder of the action steps in our plan as well as an early update on our progress. Our first goal is to lease space and grow occupancy given the modest rollover exposure BXP faces over the next 9 quarters. In the third quarter, we completed over 1.5 million square feet of leasing, 39% greater than the third quarter of 2024, and 130% of our last 5-year average leasing for the third quarter. Year-to-date, we've leased 3.8 million square feet, which is 14% greater than the first 3 quarters of 2024. As we have explained on prior calls, leasing activity is tied to both our clients' growth and the use of their space. As a proxy for BXP's client base, over 87% of the S&P 500 companies that have reported earnings this quarter as of last Friday are beating estimates. S&P 500 earnings have been growing for 9 straight quarters and for 2025 are projected to grow around 11% to 12%, up from single-digit estimates last quarter. Return to office mandates continue to grow and take effect, though the West Coast lags the East Coast on this measure. Placer.ai just released their office utilization data showing a material uptick in office utilization from a year ago. In September 2024, office utilization was 34.8% below 2019 levels, and last month's utilization was 26.3% lower indicating a 13% increase in office utilization over the last year. This data captures a large set of office assets across the U.S. and though premier workplace utilization in gateway cities is higher, the overall trend is relevant. Our second goal is to raise capital and optimize our portfolio through asset sales. During our Investor Day, we communicated an objective to sell 27 land, residential and nonstrategic office assets for approximately $1.9 billion in net aggregate sale proceeds by year-end 2027. We are off to a strong start. So far, we've closed the sale of 4 land assets for total net proceeds of $57 million, have under contract 9 assets for total net proceeds of approximately $400 million and are in the market with 10 additional properties for estimated total net proceeds of $750 million to $800 million. In total, we have 23 transactions closed or underway with estimated net proceeds of roughly $1.25 billion. Dispositions completed for 2025 could aggregate approximately $500 million to $700 million in net proceeds. Office transaction volume in the private market continues to improve as more equity investors get constructive on the sector and financing becomes more available at scale, particularly in the CMBS market with tightening credit spreads. In the third quarter, significant office sales were $12.9 billion, up 6% from the second quarter of '25 and up 55% from the third quarter last year. Relevant transaction activity that took place in the third quarter is as follows: in New York City, Park Avenue Tower, a nearly fully leased 620,000-foot office building located at 55th Street is under agreement to sell for $730 million or approximately a 6% cap rate and nearly $1,200 a square foot. Another 5% interest in One Vanderbilt located adjacent to Grand Central Station in New York City sold for over $2,800 a square foot and presumably a very low cap rate. In Boston, 399 Boylston Street, a 245,000 square foot office asset that is 90% leased with relatively short weighted average lease term is under agreement to sell for $124 million or just over $500 a foot and an 8.3% cap rate. In Beverly Hills, Maple Plaza, a 290,000 square-foot office asset that is 75% leased sold for $205 million or $713 a foot and a 6.5% cap rate. And lastly, in Redmond, Washington, One Esterra, a 250,000 square foot office building fully leased to Microsoft on a long-term basis sold for $225 million or a 6.5% cap rate and over $900 a square foot. Our third goal is to increase our portfolio concentration of premier workplace assets in CBD locations in our core gateway markets. As a backdrop, the premier workplace segment, defined as roughly the top 14% of space and 7% of buildings in the 5 CBD markets where BXP competes continues to materially outperform the broader office market. Direct vacancy for premier workplaces in these 5 markets is 11.7%, 5.7 percentage points or 22% lower than the broader market and asking rents for premier workplaces climbed to a 55% premium over the broader market. Over the last 3 years, net absorption for premier workplaces has been a positive 10.3 million square feet versus a negative 9.2 million square feet for the balance of the market, nearly a 20 million square foot difference. For BXP, we continue to reallocate capital to premier workplace assets in CBD locations. We recently launched new developments at 343 Madison Avenue in New York City and 725 12th Street in Washington, D.C., and most of the office and land assets we are selling are in suburban locations. There are an increasing number of higher quality office assets in our core markets available for acquisition, some on an off-market basis. We evaluate everything, pursue deals selectively, but are being disciplined about quality, pricing and the resultant leverage and earnings dilution impact. The fourth goal is to grow FFO through new development more selectively with office given market conditions and more actively for multifamily, which we'll do with a financial partner. For office, we are allocating capital more to developments and acquisitions because we are finding very high-quality development opportunities with pre-leasing that we believe will generate over 8% cash yield upon delivery, which are roughly 150 to 200 basis points higher than cap rates for debatably equivalent quality asset acquisitions. An additional advantage is new buildings generally have longer weighted average lease term and limited near- and medium-term CapEx requirements. The trade-off is timing as developments obviously take several years to deliver. For multifamily, we are selling 4 properties totaling over 1,300 units, have 3 projects with over 1,400 units under construction and are in various stages of entitlement and/or design for 11 projects totaling over 5,000 units, 2 of which could commence in 2026. We expect to capitalize new development starts with financial partners owning the majority of the equity. We continue to advance our development pipeline. This quarter, we delivered 3 office projects: 1050 Winter Street, Reston Next Office Phase II. The office component of both these assets are fully leased and 360 Park Avenue South, currently 38% leased and experiencing accelerating leasing activity. We have 8 office life science, residential and retail projects underway, comprising 3.5 million square feet and $3.7 billion of BXP investment. We expect these projects will deliver strong external growth, both in the near term with the delivery of 290 Binney Street midway through next year and over the longer term. Our Washington, D.C. team is also working on another premier workplace build-to-suit opportunity. A final goal is to introduce a financial partner into our 343 Madison development project, which is under construction. As we have described, 343 Madison is a leading premier workplace new development project in New York City given its location with direct access to Grand Central Terminal and state-of-the-art amenities and design. We are finalizing a lease commitment with a financial services client for 30% of the space in the middle bank of the building. We are also in discussions with several other large users for the balance of the space in the project. Our financial goal is to introduce an equity partner for a 30% to 50% interest in the property. While we are in very preliminary discussions with a small number of investors who have expressed interest, we believe the value of the asset will appreciate given our leasing progress and the accelerating market rent growth in the Midtown office market and do not expect to finalize an investment until sometime in 2026. In conclusion, our clients, in general, are growing, healthy and more intensively using their space, creating increasingly positive leasing market conditions concentrated in the premier workplace segment of the market. New construction for office has virtually halted leading to higher occupancy and rent growth in many submarkets where BXP operates. Debt and equity investors are becoming constructive on the office sector, resulting in more availability of capital at better pricing. BXP is very much on track executing our business plan as outlined last month, which we believe will deliver both FFO growth and deleveraging in the years ahead.

Thanks, Owen. Good morning, everybody. So it's been 6.5 weeks since we made our presentations at our Investor Day, and I'm going to begin my comments this morning by affirming our expectations relative to our same-store leasing, occupancy growth and bottom line contribution to future earnings. As you probably noticed, our beat this quarter came directly from better operating portfolio performance. We have entered a 30-month period of very light lease expirations, 60% of the historical annual average over the last 10 years, and we've now reduced our '26 and '27 expirations by another 8% from 6/30/25. So the total expiring square footage on our 49 million square foot portfolio is 3.8 million square feet. During 29 of the last 39 quarters, we executed leases in excess of 1 million square feet with this quarter's 1.5 million square foot performance added. We will surpass our goal of 4 million square feet for 2025. Mike says to say confidently. As I described in my remarks in September, leasing vacant space improves occupancy and delivers the highest contribution to revenue growth. During the first half of '25, we leased 810,000 square feet of vacant space. And this quarter, we leased an additional 490,000 square feet of vacancies, making this the seventh consecutive quarter of between 400,000 and 500,000 square feet of vacancy leasing. Post 10/25, so at the beginning of the fourth quarter, we had 1.8 million square feet of leases in negotiation, which is where we began the beginning of the second quarter. So we have continued to replenish the pipeline. The space under lease negotiations includes 650,000 square feet of currently vacant space, 71,000 square feet of known '25 expirations and 450,000 square feet of '26, '27 expirations. In addition, we have active dialogue on other space that's not yet in lease negotiation totaling about 1.1 million square feet, and that includes more than 125,000 square feet on buildings that we delivered into the portfolio this quarter, namely 360 Park Avenue South. Last quarter, on our call, we called out the delivery of the 3 development properties in our portfolio that would occur this quarter and result in an estimated 70 basis point reduction in our occupancy from the portfolio additions. I'm happy to report that the in-service occupancy as of 9/30/25 decreased by only 40 basis points to 86%. BXP's total sequential same-store portfolio occupancy, excluding the portfolio additions, actually increased by 20 basis points and ended the quarter at 86.6%. The largest lease starts and expirations this quarter all came in the Urban Edge portfolio of Boston. We had a 160,000 square feet expiration at 1000 Winter Street, which, by the way, is a building that we are considering for a potential conversion to residential. We executed and delivered 104,000 square feet at 153 Second Avenue and the full building lease at 1050 Winter Street for 162,000 square feet commenced this quarter. We placed 350 Park Avenue South, Reston Next Phase II into service, and we added 130,000 square feet of occupied space and 405,000 square feet of vacant space, of which 120,000 is leased but not yet occupied. BXP's total portfolio percentage leased for the quarter was 88.8%, a decline of 30 basis points. Excluding the impact of placing the 3 development properties in service, the lease percentage increased by 10 basis points to 89.2%. The difference between the leased and occupied square footage has grown again this quarter and now sits at 1.4 million square feet. 300,000 square feet is expected to become occupied in '25, about 1 million square feet will commence in the back half of '26 and another 100,000 square feet in '27. Owen described the magnitude of the operating assets being actively marketed for sale. As we dispose of assets, we will disclose the incremental impact of occupancy from the changes in the portfolio. Looking forward, we project that the current in-service portfolio, which includes the recent development deliveries, will end '25 at approximately 86.2% occupied and '26 at 88.3% occupied, a 210 basis point increase with most of the improvement in the second half of '26. We are reaffirming our guidance from the Investor Day, adjusted for the 70 basis points of impact from the Q3 new deliveries, which we also disclosed at that time. The overall mark-to-market on leases signed this quarter on a cash basis was up almost 7% with a 12% increase in Boston, a 7% increase in New York, flat results in D.C. and a 4% decrease on the West Coast. This quarter, we executed a number of larger leases, including 5 that were each over 75,000 square feet. 60% of the square footage involved renewals or extensions and 40% was either new clients or expansions from existing clients. Existing client expansions encompass 84,000 square feet of the activity. The second-generation rents in the leasing statistics this quarter represent about 523,000 square feet and are down on a gross basis about 4%. The L.A. statistics had a whopping 1,300 square foot lease and San Francisco included 117,000 square feet with 74,000 square feet, so about 2/3 coming from our Mountain View properties. I want to pivot my remarks now to the market conditions and the activity we're capturing. Our leasing this quarter came from 79 transactions: 398,000 square feet in Boston; 795,000 square feet in New York; 191,000 square feet on the West Coast; and 140,000 square feet in D.C. In the BXP portfolio, Midtown, New York City; the Back Bay of Boston and Reston, Virginia continue to have the tightest supply and, therefore, the most landlord-favorable conditions. What this means is that net effective rents are increasing due to either higher rental rates or flat or decrease in concessions or both. The big accomplishments in Boston this quarter took place in our Urban Edge portfolio, where we completed over 200,000 square feet of leasing to life science clients. This included a 104,000 square foot lease with a drug development and medical device research services company and 5 additional pure office leases with life science organizations. Our remaining first-generation life science availability in the Urban Edge is now limited to 70,000 square feet at 180 CityPoint and 112,000 square feet at 103 CityPoint, totaling 180,000 square feet. That's our life science first-generation exposure. Demand for wet lab space continues to be tepid. There are a few lab users actively touring, but the requirements from very early stage clients continue to be limited. In the Boston CBD, we continue to complete renewals in the Back Bay portfolio. This quarter, we completed about 140,000 square feet. As you can see from our property occupancy tables, availability is very limited, and net effective rents are improving. In New York, our executed leasing activity was focused on the Midtown East portfolio. The underpinning of this demand is the growth of clients in a variety of asset management strategies. I described a series of client-initiated early extensions under negotiation last quarter, while 500,000 square feet were executed this quarter, with the largest being at 399 Park Avenue. There have been many unconfirmed press reports about our lead tenant for 343 Madison. If that client were to come from one of our Midtown assets, there would be strong demand for the space at either 601 Lexington Avenue, 599 Lexington or 399 Park Avenue. The average in-place fully escalated rent is under $110 a square foot, which is significantly below market. This quarter, while our executed leases were primarily in Midtown, the new client inquiry story was focused on 360 Park Avenue South, where we have our largest availability in Manhattan. Activity at the building has grown substantially, and we executed 2 leases during the quarter. There are a few AI companies in the mix, but much of the activity is being driven by financial service and asset management organizations, the heart of New York City. We have 56,000 square feet of leases in negotiation and letters of intent discussions on more than 125,000 square feet. All of these leases would commence in '26. With the tightening of availability in the Park Avenue and now the 6th Avenue submarket, we're also seeing stronger activity at Times Square Tower where we are in lease negotiations with over 100,000 square feet of new client demand. And down in Princeton, we completed over 160,000 square feet of leasing with 8 clients, including a 134,000 square foot renewal with a life science client, again with no lab infrastructure. In San Francisco, the demand from organizations that describe themselves as AI businesses continues to accelerate. The bulk of this demand is concentrated south of Mission Street. The majority of these requirements are looking for inexpensive, fully built and furnished space with short-term commitments. To date, these criteria have been available in either sublease situations or with landlords that have direct space that was vacated by tech companies over the past 3 years. These opportunities in medium-sized blocks, 25,000 to 100,000 square feet are quickly shrinking. The result has been a dramatic pickup of activity at our 680 Folsom, 50 Hawthorne assets, which are south of Mission between Foundry Square and Mission Bay. We have had multiple tours every week and are exchanging proposals with tenants ranging from a single floor to over 200,000 square feet. During the first 6 months of the year, we had 11 unique tours at the property. In the month of July, we had 7; in August, 9; in September, 10; and so far in October, 14. That AI demand has not translated into a commensurate pickup in ancillary professional services growth in the high-rise assets in San Francisco. While San Francisco is unequivocally the financial capital of the West, the organizations that are growing assets under management in San Francisco are not expanding at the same levels we are experiencing in our New York and Boston portfolios. There's clearly been a pickup in activity, and the premier buildings are gaining market share, but it's just nothing like the client growth from the AI companies south of Mission where CBR reports that there are 36 AI active tenants with aggregate growth of 1.5 million square feet in the market right now. In our towers, we completed about 100,000 square feet of transactions this quarter. The rest of the West Coast activity came from Mountain View, where we signed 30,000 square feet and Seattle, where we completed the 54,000 square feet of vacant space leasing. Activity in D.C. continues to be concentrated in Reston Town Center. This quarter, we executed a 51,000 square foot lease on space that was vacated by Meta in June of this year as well as a handful of smaller office and retail leases. The government shutdown has had minimal impact on government contract or leasing activities. The private sector clients that have space needs are all still active in the market. Before I conclude my remarks, I want to update our construction activities, particularly because we are in the process of establishing our GMP for 343 Madison. Subcontractors are actively bidding the job after taking into consideration the tariffs associated with nondomestic suppliers and the most recent country agreements. We expect to purchase our steel from U.S. manufacturers, and we are within our expected budgets with all include anticipated savings relative to our last GC estimate. Given the overall slowdown in construction activity in our markets, there is enough subcontractor interest to provide savings in spite of all the tariff increases. Remember, construction is a composition of labor cost, material cost and profit.

Great. Thanks, Doug. Good morning. Today, I'm going to cover some of our activity in the capital markets as well as our third quarter earnings results, an update to our full year guidance and some updates on our expectations for 2026 since our Investor Day in early September. The debt markets have been steadily improving throughout 2025, and this quarter, we opportunistically and successfully accessed both the secured and unsecured markets. In late September, we closed on $1 billion of 5-year unsecured exchangeable notes at a 2% coupon. If you include closing costs, the interest costs we will record for GAAP is 2.5%. This will refinance $1 billion bond issue that expires in February of next year and carries a GAAP yield of 3.77%. The notes include a conversion premium at a stock price of $92.44 per share. So if our stock trades above the conversion premium during the term, our diluted share count will increase. We also acquired a capped call to increase the conversion premium to 40% or $105.64 per share, to reduce the dilution from the increase in our share price. The capped call has no impact on our P&L or our diluted share count during the term. It settled at maturity. The market demand for our deal was exceptionally strong, and we were 5x oversubscribed. That allowed us to price the security in the low end of our expected pricing range and upsized the deal from the $600 million initially offered to $1 billion. We also closed a $465 million mortgage refinancing on our Hub on Causeway office and retail complex that we own in a joint venture where our share is 50%. This loan was executed as a single asset securitization in the CMBS market, and it priced at a 5.73% fixed rate for a 5.5-year term. This is approximately 50 basis points lower than the floating rate on the prior loan. The pricing equated to about a 200 basis point credit spread for a premier quality secured mortgage with a 55% loan-to-value ratio. There have been about a dozen single asset securitizations completed on office buildings in the past 6 months, and that demonstrates the CMBS market is supportive of financing high-quality large office assets on competitive terms, and credit spreads have been consistently improving. We expect this will help lead to a healthier sales market, as Owen described. Overall, we continue to have very strong access to all the capital markets to finance our business. This includes the debt markets as well as the asset sales environment where we expect to be increasingly active. Now I would like to turn to our earnings for the quarter. Last night, we reported funds from operations for the third quarter of $1.74 per share, which is $0.04 per share above the midpoint of the FFO guidance range we provided in July. All of the outperformance came from better-than-projected same-property portfolio NOI due to a combination of the straight-line rent impact of completing early renewals at higher rents and lower net operating expenses in the portfolio. Our occupancy came right in line with our expectations. As Doug described, occupancy in the same property pool increased by 20 basis points from last quarter. We grew occupancy sequentially in Boston, New York City, Reston and Princeton. The improvement showed up in our top line lease revenues that increased $4 million this quarter. In our leasing activity this quarter, we executed 4 early renewals totaling 500,000 square feet at 399 Park and 200 Clarendon Street with future starting rents nearly 15% higher than our in-place rents. We are locking in future rental rate increases, and a portion is straight-lined into the current period and improving 2025 revenues. Our portfolio revenues exceeded our guidance for the quarter by approximately $0.02 per share. On the expense side, we experienced lower-than-anticipated repair and maintenance expenses this quarter, and that contributed $0.02 per share to our outperformance. I anticipate that we will give some of this performance back in the fourth quarter as our teams complete R&M projects that were budgeted for Q3 but not completed in the quarter. We also recorded $212 million of impairments this quarter related to assets that are part of our strategic sales program we announced on our Investor Day. The accounting guidance requires that we recognize impairments to fair value when we shorten our holding period and prior to an asset sale actually closing. On the flip side, gains on sale are not recorded until the sale closes. So if you look at our sales program as a whole, we anticipate that the aggregate gains less impairments will total nearly $300 million. We expect gains will be recorded in future quarters as we execute our sales strategy. Looking at the rest of 2025, we've increased our guidance range by $0.03 per share at the midpoint, and we expect full year 2025 FFO of $6.89 to $6.92 per share. Our increased guidance includes a $0.07 increase in the low end of our range, reflecting outperformance from the third quarter, some of which was incorporated into our guidance range we provided last quarter. Sequentially, we expect Q4 funds from operations to be higher than our Q3 actual FFO from higher portfolio NOI and lower net interest expense. With respect to changes in our guidance, the outperformance in our same-property portfolio is expected to add an incremental $4 million to our full year NOI assumption. That equates to about $0.02 per share of improvement. We've reduced our net interest expense projections for the full year 2025 by approximately $6 million or $0.03 per share. The improvement is from our new $1 billion exchangeable notes offering, where we're recording interest expense at 2.5%, and we're actually earning over 4% on the proceeds until we repay our expiring bonds on February 1 next year. And we also improved the interest rate with our Hub on Causeway refinancing, and we're projecting several asset sales to occur in the fourth quarter that will reduce our debt. These increases to our FFO are anticipated to be partially offset from the reduction of about $0.02 per share of NOI from asset sales that we expect will close in the fourth quarter. If you include the associated changes in interest expense, our fourth quarter asset sales are projected to be dilutive by $0.01 per share. So to summarize, we've increased our guidance range for 2025 FFO by $0.03 per share at the midpoint, $0.02 of higher same-property NOI, $0.03 of lower net interest expense offset by $0.02 of lower NOI from asset sales. At our investor conference last month, we provided some insights into our expectations for FFO growth in 2026. Doug described our active leasing pipeline that we expect will lead to higher occupancy primarily in the back half of next year. We are off to a strong start on our refinancing plan with our exchangeable notes deal pricing with a GAAP yield that is 75 basis points better than we anticipated. The impact is about $0.04 per share of lower interest expense in 2026 than we described at our Investor Day. We still have a $1 billion bond issue expiring October 1 next year that has a 3.5% yield. We currently project that we will refinance it with a 10-year unsecured bond where we could issue today at approximately 5.5%. The other factor that is fluid and will have an impact on our 2026 results is the timing of our asset sales. As we stated at our Investor Day, we expect the program to be slightly dilutive in 2026. We are seeing good response to date, which could accelerate some of our sales. We will continue to update you every quarter on the success of the program as it evolves. That completes our formal remarks. Operator, can you open the lines for questions?

And I show our first question comes from the line of Steve Sakwa from Evercore ISI.

Owen, I guess I wanted to go back to maybe some of the comments you made about reallocating capital into the premier locations. And as you're looking at deals, how are you thinking about some of your smaller markets like Seattle and L.A. where you haven't had the success in scaling those markets? And a, are you seeing the opportunities to buy high-quality assets in the submarkets that you want to be in? Are you finding development opportunities? And like, I guess, how do you think about those markets long term if you aren't able to scale?

So you're asking about L.A. and Seattle, where they are smaller markets for us now. We have a toehold, a couple of assets in each. They're on the West Coast, so those markets from a leasing standpoint are weaker in general than our East Coast markets. I don't think there are development opportunities in L.A. or Seattle at the moment. I don't think there are any in San Francisco either because those markets are weaker. The leasing is not as strong. The vacancy is higher. So I certainly don't see any near-term development opportunities. And if an acquisition opportunity presents itself in those markets, we would certainly look at it, but acknowledge that those markets are smaller at this juncture.

And I show our next question comes from the line of Anthony Paolone from JPMorgan.

On a call yesterday, one of the other office names talked about just having done enough leasing in '26 at this point that what's remaining just may have a lower retention rate. And so just wondering how you're thinking about what's left for you all in '26 given you've done so much this year and just any risk around or confidence level around a couple of hundred basis points of pickup in occupancy you've outlined?

Tony, this is Doug. We are working as quickly and as thoughtfully as we can to renew as many of our clients as we would have in the portfolio if we can accommodate their growth and if they're able to continue to want to be in business. I would tell you that our available set of tenants with expirations has dramatically decreased. So there's not a lot there in sort of the aggregate, right? I said 3.8 million square feet of space over 2 years, and we're a 48 million to 49 million square foot portfolio. So that's about 7%. Do I expect we're going to renew 50% of that? Yes. Do I expect that we're going to renew 60% of that? No. We are leasing about 1 million square feet per quarter if we're able to maintain that velocity, which I don't see any reason why we shouldn't. We will be able to meet or exceed the expectations that we outlined when I sat in front of you all in September, which is about a 200-plus basis point increase in occupancy by the end of 2026 and another 200 basis points of increase in occupancy at the end of 2027. Those are our projections. We're confident in them today, and that's what we're sort of sticking with.

And I show our next question comes from the line of John Kim from BMO Capital Markets.

I wanted to ask about the recovery in San Francisco. It sounds like, Doug, from your commentary that your high-rise product is not where AI demand is currently, and I'm wondering if that's something you plan to address. And also I wanted to see if you had any early thoughts on Salesforce's $15 billion commitment into the city and what that could mean for job growth and office demand?

Sure. So let me start, and then I'll ask Rod Diehl to make some comments. The AI demand is not a tower business right now. Although companies like Salesforce, I guess, are calling themselves AI companies now, so maybe that's slightly different. But the AI growth relative to infrastructure companies or VC-backed companies is really a low-rise south of Mission Street demand pool, obviously, with AI and anthropic sort of headquartered in either Mission Bay or in Foundry Square, right? That's kind of the world where I'd say the nucleus of that is. And it's unlikely that you're going to see an AI company taking a 25,000 square foot piece of space at one of the buildings in Embarcadero Center or at 535 Mission Street or at Salesforce Tower if there was availability, as opposed to going into, as I described, what they would like to go into today, which is shorter-term, cheaper, less expensive furnished space, right, which is really in what I refer to as some of the buildings that were occupied by technology companies from call it, 2015 to 2019 during that sort of booming period of time. I don't think there's much we can do to position our properties differently. The demand for Embarcadero Center in particular, is really professional services, administrative services. That's not to say that there aren't a couple of small start-ups that have a couple of thousand square feet in a suite here or there, but it's hard for us to imagine a large growth component there, very different at 680 Folsom Street. 680 Folsom Street is a mid-rise building with 35,000 square foot floors, with 16-foot clear glass with availability today and more availability coming in as the macys.com lease expires, it's a perfect setup for an AI company from a growth perspective. And Rod, maybe you can comment on the Salesforce initiative relative to their contributions into the city.

Yes. Thanks, Doug. On Salesforce, I mean it was great to hear that news. And that was a fantastic bit right in front of their Dreamforce event, which happened last week, and it was very well attended, which is great for the city. So we haven't heard more specifics on what exactly that investment is going to look like. But I think being the largest private employer in San Francisco, making a commitment like that is pretty meaningful. And so we're eager to see where it leads. And as Doug said, I mean, the other activity in the buildings that's kind of driven by this AI push, we're seeing it as 680 Folsom. We're very encouraged by that activity. And just the overall optimism that a lot of that brings to our city. So it's positive.

Yes, I just want to make one other comment on that, which is there have been a lot of articles and news reports about the reduction in jobs, white-collar jobs over the past, call it, 3 or 4 days in particular. And San Francisco is sort of the opposite of that, right? We are seeing growth from these companies in terms of the amount of space they are looking to lease and obviously, the number of people they are hiring. And you sort of see these tongue-in-cheek articles as well about the intensity of which people are working and the fact that they are working in premises all of the time. I mean that is sort of what we are experiencing from the technology companies in San Francisco as we sit here today in 2025.

And I show our next question in the queue comes from the line of Richard Anderson from Cantor Fitzgerald.

Can you discuss the percentage of the portfolio related to leases that were signed before the pandemic and have not yet been addressed? Additionally, how has your experience with tenants changed over time regarding their willingness to take more or less space, and what are the dynamics around space per worker? What remains from the pre-pandemic situation that still needs your attention?

It's a difficult question to answer specifically, so I'll address it more generally. BXP has typically leased space on a long-term basis, averaging about 8 years for current leases, while new leases typically range from 15 to 20 years. Our portfolio includes a significant amount of pre-pandemic leasing. The key point is that our growth is primarily driven by existing clients who occupied space before the pandemic and are now expanding due to changes in the market. Much of our clientele comes from the financial, professional, and administrative services sectors, which are far more relevant to our portfolio's composition and growth than companies that may have expanded during earlier economic booms. As Owen indicated, we are actively reducing our exposure to properties and clients that do not align with our strategic direction. Therefore, the pandemic's impact on growth, especially in comparison to larger corporations like Amazon, hasn't been felt within our portfolio.

Doug, I want to add that we have very little rollover, and the rollover we do have is very specific, with no large tenants. There are no tenants exceeding 150,000 square feet whose leases will expire in the next 2.5 years, so we're not at risk of facing significant vacancy issues. Additionally, as Doug noted, more of our tenants are expanding rather than contracting during renewals. This quarter, we saw 85,000 square feet of net expansion from clients who continued their leases with us.

And I show our next question comes from the line of Nicholas Yulico from Scotiabank.

So I know, Doug, you gave a lot of detail on leases in the third quarter and even some leasing in the works to address vacancy. But as we think about that occupancy build that you had at the Investor Day and the component there that is leases that address vacancy, given that the build-out could take some time, is it right to think that, by next quarter, you guys should be in a position to sort of maybe declare victory on the vacant space piece of that equation that gets the occupancy benefit by year-end next year?

I don't analyze this on a quarterly basis. Our forecasts are based on an annual perspective. We have signed leases for 1 million square feet that will commence in 2026, which significantly boosts our confidence for that year. The activity at 350 Park Avenue has exceeded our expectations, and I believe this will contribute to leasing and occupancy in 2026. An increase of 200 basis points is substantial, and another 200 basis points adds further value. We feel assured that we can reach these targets given the current economic conditions and our market observations.

Sure. So at the moment, we have 6 floors leased, and in discussions with proposals out, we have covered every other floor except 1. So to the extent that we were able to secure all of the tenants that we're currently in negotiations with, we would have 1 floor available at 360 Park Avenue South. So the tour activity has increased really dramatically. And as Doug noted earlier, the clients that are coming to see the building and asking us for these lease proposals are not just tech and media, but also more traditional asset managers and financial services firms that are just looking for great space and due to the tightness in the market are seeking out Midtown South, perhaps from Midtown or seeking to upgrade their space from existing locations in Midtown South.

One quick note for Boston in terms of the speed of delivery of recent leases, there is a portion, and Doug and Mike could probably respond to this afterwards, but a portion of the activity that Doug mentioned in the Urban Edge is in existing products, and they are spaces that don't need as much build-out. So we would anticipate at least 150,000, 200,000 square feet that could be delivered in that zone next year.

And I show our next question comes from the line of Seth Bergey from Citi.

I think kind of at the Investor Day, you had outlined $0.09 to $0.04 of kind of dilution from asset sales. It sounds like pricing and the debt market is coming a little bit and ahead of your expectations. How should we think about kind of that impact? And I think you also mentioned potentially bringing some more assets to market. So just kind of what are the puts and takes there?

I believe this situation is more challenging to assess because it depends on timing. We made estimates regarding the timing of the transactions in our asset plan during our Investor Day, and we have begun to act on that timing now. We currently have more assets under contract and in the market than we did previously. We've also observed strong demand and positive responses. Therefore, we expect to achieve success in this area. The timing of the sales will affect the range we provided. If the sales occur significantly earlier than anticipated, there could be a slight increase in dilution. However, it's difficult to give a more detailed answer at this point. As we progress through the next quarter or two, we anticipate gathering more information, which we will share with you.

And I show our next question comes from the line of Alexander Goldfarb from Piper Sandler.

Just a question regarding your tightened strategy since the Investor Day. I would like to understand better about the investment side. When the regional teams come to you with proposals, how much have the criteria changed? Specifically, have the yield requirements increased, meaning that all deals now need to be at least 100 basis points higher, or some degree higher? I'm trying to grasp how you've tightened your investment criteria and how many deals were excluded from consideration due to these new higher thresholds.

We've discussed this in previous calls. Our target for new developments has consistently been around 8% or higher. Prior to the rise in interest rates and a decrease in demand due to COVID, we were seeing yields between 6% and 7% depending on the market and the asset type. This means that the yield requirement for office development has increased by 100 to 200 basis points. When you factor in the rise in construction costs, it necessitates significantly higher rents to justify new developments. As mentioned on Investor Day, this implies that we will be more selective as office developers. However, we are still actively developing. In the last six months, we've launched nearly $2.5 billion in new office development projects, totaling about $1 billion. This reflects the increase observed. Furthermore, we are exploring acquisitions, with more opportunities emerging in the past 3 to 6 months. We believe we can achieve higher yields through development, even though it means investing in new buildings which would have lower capital expenditures and longer weighted average unexpired lease terms, but these developments take years to complete, which is the trade-off. Thus, we will continue to consider acquisitions, while maintaining a disciplined approach, as I noted earlier. Currently, cap rates in the market appear to be 150 to 200 basis points below our required development yield threshold.

Yes, I just want to provide some context. The development at 343 is approximately a $2 billion project, while the development at 725, 12th Street is around $300 million. Hopefully, Jake and Pete are making progress in securing a client in need of a new building, potentially involving the purchase of land or an existing structure to develop another building, which we can estimate at over $300 million. This means we are looking at about $2.6 billion in developments that the company plans to undertake. That represents a significant level of external growth. The current interest in acquiring a building with a 6% net operating income yield, especially when the cash flow yield is likely 150 basis points lower and there will be a rollover in the next 3 to 4 years, is not as appealing compared to these other opportunities at the moment. This is the perspective we are using as we consider acquiring new assets. However, if an exceptional building with an 8% cash return were to come up off-market and we believed it had great potential, we would definitely consider that. But broker-driven investments in core assets and central business district locations are intriguing, and we will evaluate them, though it will be challenging to justify using our available capital for those.

And I show our next question comes from the line of Michael Goldsmith from UBS.

In the press release, you called out 89% of BXP's rents come from the CBD portfolio. Given the outlined dispositions are focused in the suburban markets, what percentage does that take CBD in the near term? And then long term, is the goal to just to be 100% or completely CBD?

I can't provide a specific percentage. However, I agree that we want to see growth. There are certain suburban markets where we plan to maintain our presence, as we believe we can create an amenity-rich environment and that there is a mature and dense demand. Therefore, we will continue to operate in some suburban markets. That said, I don't think our presence in these markets will reach 100%, but it will expand. Our focus on asset sales is geared towards suburban properties, while our new investments are shifting more towards urban areas. As a result, we will be acquiring assets in central business districts and divesting suburban properties.

And I show our next question comes from the line of Jana Galan from Bank of America Securities.

Congrats on the progress you've already made on the priorities laid out at the Investor Day. On the dispositions, can you talk to the pricing you're seeing on land, residential and office relative to kind of initial expectations?

I believe we are seeing pricing that meets or slightly exceeds our expectations. However, it's challenging to define pricing for land since it varies based on the actions of new users. The significant opportunity we've found with land is due to our regional teams successfully re-entitling many parcels that were originally designated for office use to residential. As we know, there's a housing shortage in the country, and many communities that once opposed housing are now supportive, which has allowed us to create substantial value. The 17 Hartwell investment I mentioned last quarter is a prime example of this. Discussing pricing for land is not straightforward. For residential assets, we are observing cap rates below 5%, which we consider very appealing. When it comes to office properties, it is largely dependent on location and quality.

And I show our next question comes from the line of Floris Van Dijkum from Ladenburg Thalmann.

It seems that your core office markets are experiencing a change. There was positive underlying growth in office spaces, but there was a decline in the hotel and residential sectors. Can you remind us about the significant drop in occupancy that occurred in Washington D.C. in the residential market? Could you elaborate on that?

I'm going to have Mike take a quick look at the supplemental. The only thing I can think of is that we have 100% of Signature in service, and we've also brought Skymark into service. Skymark might not be fully leased yet, but I estimate it will stabilize around 93% to 94% this quarter, which is impressive considering the number of units we delivered there. So that's likely what happened. However, I wouldn't interpret this as anything more than a change in portfolio composition rather than activity in our actual assets.

Yes, that's what it is, because this is a year-over-year concept. It's not a sequential concept. So in September of '24, the Skymark building was under development, right? And now it's leasing up, and it's actually leasing up quite well. It's, I think, around 90%, and it's leased up better than we expected. The occupancy in the stabilized portfolio that has been in service for a while has been very strong and stable and rents have continued to go up. Again, our residential portfolio is located in pretty tight markets. And so places like the urban Boston market and Reston, we've seen good fundamentals with our residential.

And it's going to get smaller in 2026 before it gets bigger again.

And I show our next question comes from the line of Ronald Kamdem from Morgan Stanley.

Just on same-store NOI. I think you talked about sort of the occupancy inflection point, obviously improving '26, '27. Just can you tie that back to what the expectations are as you think about same-store NOI? Should we expect sort of similar 100, 200 basis point sort of acceleration? And what are the puts and takes there?

We are not providing guidance for 2026 or 2027 today. Most of our growth will come from occupancy, which we have discussed previously. The mark-to-market in our portfolio is improving as rents are increasing in many of our markets. This situation is getting better and will continue to improve. We anticipate positive same-store NOI growth as occupancy rises, so it is reasonable to expect that the two will correlate.

And I show our next question comes from the line of Upal Rana from KeyBanc Capital Markets.

Could you provide some color on the current state of what you're seeing in terms of demand for life science leasing and supply across your markets, given some softer commentary from another one of your peers. You mentioned a few things related to Boston and Urban Edge, but maybe you can broaden that out a little bit and maybe what your outlook is for that industry?

So our life science exposure at BXP is comprised of 2 places. It's the Urban Edge of Boston, which I described. And again, we have 180,000 square feet of first-generation space available. And then it's our joint venture with another public REIT ARE in South San Francisco, where we have a large building that was developed a few years ago that is available for lease where, again, I think I described the demand for wet lab space being pretty tepid. Not much has changed on a relative basis there. We are seeing some inquiry, but we're not, what I would describe as being close to any major transactions at that building at this time.

And I show our next question comes from the line of Dylan Burzinski from Green Street.

Owen, I think you mentioned seeking or going out to market and seeking a capital partner for 343 Madison sometime in 2026. But I guess just given the tight availability that you're seeing in New York, especially in the submarket, the 343 Madison is in and likely continued net effective rent growth. Why not sort of put the brakes on reaching out and getting the capital partner given that sort of backdrop?

Yes, it's a good question. I think as I tried to describe in my remarks, we're just being patient. We've had some inbound inquiry. We know of some investors that are interested in the project. We're having preliminary conversations. As I mentioned in my remarks, we're not in a hurry. This asset is appreciating. We're having leasing success. Markets are improving, as you suggested. And I think this will happen sometime in 2026. We do want to match to some degree a commitment of capital to raising the capital. And so far, the development draws and spend on the project have been reasonably modest, but they do start to accelerate next year. So I do think 2026 will be an appropriate time.

And Dylan, just remember, as Owen said at the outset, we have 3 objectives, right? Our objectives that we outlined at our Investor Day were we want to grow our earnings and that's mostly through occupancy and deliveries of developments that are currently underway, we want to fund 343 Madison and we want to reduce our leverage. And so I think that our objectives in finding a partner sort of meet all of those requirements.

And I show our last question in the queue comes from the line of Blaine Heck from Wells Fargo.

Owen or Doug, I was hoping to get your latest thoughts on the New York mayoral race and any sort of impact you've seen, any commentary you've heard from tenants and just your general thoughts on whether it could or will have a notable impact on the New York office market.

I would suggest that the significant negative rhetoric that's in the press and the media about the impact of the administration of Mayor Mamdani, I think it's just overblown. I'm not suggesting that there are impacts that we need to be conscious of and aware of. As we've described before, there are controls and guardrails that exist for the mayor in New York. The state has a lot of approval powers over things like public transit and increasing taxes. And the state has indicated so far, there's not a lot of appetite for increasing taxes in New York. So that's something that we are concerned about. And again, our success as a company in any city is capped at the city's success. And so we want to do what we can to work cooperatively with the city and ensure that there are - that it's a constructive environment for business, there is safety and security for the citizens. And those are the kinds of things that we're very focused on. The potential Mayor Mamdani has indicated that he wants to hire Jessica Tisch, who's the current head of the New York City Police Department. I don't know that she's agreed to do that yet, but we all think that's a great step because I think she received high accolades for her performance and success to date. So again, something that we're monitoring. But we are, I think, a little bit more constructive than what the media has been outlining on this change.

And I do show we have one question in the queue from Brendan Lynch from Barclays.

I'm just interested in your view on the new office tower above South Station in Boston and how that might impact leasing dynamics in the market?

I'll share a few thoughts before handing it over to Bryan for his insights. The building that’s currently open has been available for several months and is an impressive structure that I believe will eventually see strong occupancy. There are discussions happening with a large financial institution about relocating to this building, though it’s more about moving rather than expanding. Unfortunately, the building entered the market at an inopportune time, competing with a lot of other available spaces in the financial district. As a result, the investment's economics differ from what I anticipate will ultimately be its success in terms of occupancy due to current market conditions. I think it’s improbable that any new buildings will break ground in the financial district for a while. If the market can continue absorbing space, I expect that the downtown financial market will continue to improve. We also have the potential to construct a building at 171 Dartmouth Street in the Back Bay, which presents significant opportunities for tenants, given the very limited supply in that area. Therefore, the likelihood of progress there is much higher. However, we would only initiate that project if we secured a major commitment from a lead anchor tenant, as Owen mentioned earlier regarding our development yields. That's my general perspective on that development.

Yes. So I'd comment on what's the impact to BXP portfolio. And as Doug mentioned, as you look at the Back Bay as the submarket, there's very little transfer of tenants that leave this market, and it's highly desirable. We look at our competitive set of the buildings we compete against daily, and it's a 3% vacancy. So it's extremely tight, as Doug mentioned. And in fact, we're actively asking tenants if they'd like to give back space because we've got growth in those sectors that Doug mentioned earlier. And then when you look at the downtown market, our buildings are leased up and tucked away for quite a few years now with limited, limited space at 100 Federal and the same is true at Atlantic Wharf and also Hub on Causeway.

That concludes the Q&A session. At this time, I would like to turn the call back to Owen Thomas, Chairman and Chief Executive Officer, for closing remarks.

No further remarks from us. Thank you all for your interest and your time and your interest in BXP.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.