BXP (BXP) Q3 2026 Earnings Call Transcript

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DATE

Wed, Oct. 28, 2026

CALL PARTICIPANTS

• Vice President, Investor Relations - Helen Han
• Chairman and Chief Executive Officer - Owen David Thomas
• President - Douglas T. Linde
• Chief Financial Officer - Michael E. LaBelle
• Executive Vice President, West Coast Regions - Rodney C. Diehl
• Executive Vice President, New York Region - Hilary J. Spann

TAKEAWAYS

• FFO Per Share -- $1.89 for the third quarter, exceeding the midpoint of management's guidance by $0.08 per share due to higher occupancy and service income.
• 2026 FFO Guidance -- $7.06 to $7.08 per share, representing an increase of $0.05 at the midpoint from previous projections.
• Portfolio Occupancy -- 89.4% as of the end of the quarter, representing a 100-basis-point increase since the previous quarter and surpassing the year-end target of 89%.
• Leasing Activity -- 1.2 million square feet of space completed in the third quarter, bringing the year-to-date total to more than 4 million square feet.
• Same Property NOI Growth -- 2.35% to 2.75% projected for the full year 2026, an increase of 35 basis points from the prior quarter's estimate.
• Asset Dispositions -- $520 million in total net sale proceeds generated during 2026, with management reporting $1.37 billion raised since the last investor conference.
• Washington DC Property Sales -- $63 million for Sumner Square at a 9.9% cap rate and $102 million for 1330 Connecticut Avenue at an 8% cap rate.
• Leasing Spreads -- 6.5% on a gross basis and 9.3% on a net basis during the third quarter, with outperformance from the New York City and Washington DC markets.
• Midtown Manhattan Net Rents -- up 23% for office transactions completed during the third quarter, reflecting demand for premier workplaces.
• San Francisco Rent Appreciation -- 25% increase in taking rents at 680 Folsom Street over the last 12 months, with rates moving from the mid-$60s to the mid-$80s per square foot.
• Salesforce Tower Market Rents -- 30% to 60% higher than expiring rents in the building, which still represent discounts to new construction rents.
• Development Pipeline -- $2.9 billion in total investment across seven projects, with approximately $750 million in equity remaining to be funded.
• 343 Madison Pre-leasing -- 56% leased as of the third quarter following a two-floor lease with a business service company.
• Google Lease Agreement -- 206,000 square feet at 500 North Capitol Street in Washington, DC, backfilling 100% of a future vacancy more than two years in advance.
• 2026 Bond Refinancing -- $700 million 10-year bond offering completed at a 6.05% interest rate to repay a $1 billion bond maturing in October.
• Termination Income -- $24 million projected for the full year 2026, exceeding the company's historical average of approximately $15 million.
• Premier Workplace Metrics -- 8% vacancy rate compared to 13% for the broader office market, with asking rents commanding a premium of more than 60% over non-premier buildings.
• 2027 Dilution Impact -- $0.08 per share expected in 2027 from completed asset sales, with an additional $0.06 per share of dilution possible if the sale of Times Square Tower closes.
• Colorado Center Financing -- $550 million CMBS loan maturing in summer 2027, with management planning to seek a shorter-term extension or bridge financing.
• Midtown Manhattan Occupancy -- 99.9% leased across several major assets, including 360 Park Avenue South and the GM Building.

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RISKS

• Linde noted that "the realities of what is going on with the media businesses and the consolidation that are occurring" is negatively impacting office demand in the West Los Angeles market.
• Thomas stated, "higher interest rates will likely reprice current assets and may weigh on transaction volumes in future quarters," reflecting the impact of the 30-basis-point rise in the 10-year U.S. treasury.
• LaBelle warned that "these factors will moderate FFO growth in 2027," specifically referring to higher interest costs, refinancing exposures, and the dilutive impact of the asset sales program.

SUMMARY

BXP, Inc. (NYSE:BXP) reported third-quarter results that surpassed management's guidance and analyst estimates, primarily due to earlier-than-expected lease commencements and higher portfolio occupancy. Management raised its full-year funds from operations guidance and increased its same property net operating income outlook for 2026, citing robust demand for its premier workplace assets. The company completed 1.2 million square feet of leasing in the quarter and has already reached its year-end occupancy goal of 89%. While higher interest rates and refinancing activities are expected to impact earnings in 2027, management stated that the company remains on track to achieve its long-term strategic goals, including a multiyear asset disposition program that is currently ahead of schedule.

• Management reported that investment in artificial intelligence infrastructure is driving corporate growth and leasing demand from technology firms and their professional service providers.
• The company reported that office construction across its six major markets is at record low levels, which CEO Thomas indicated creates a positive backdrop for rent and occupancy growth.
• President Linde stated, "Our active discussion pipeline stands at over 2.8 million square feet. Including some large early renewal discussions," which represents a significant increase in activity from the previous quarter.
• The company sold a 10.6% interest in its 343 Madison Avenue development in New York City and is in negotiations to sell a total interest of 30% to 50% in the project.
• Management noted that they are negotiating a contract to sell the Times Square Tower in New York City, which would enable the company to achieve its 2028 disposition target more than a year ahead of schedule.
• Diehl reported that technology-related office demand in San Francisco remains strong, representing approximately 62% of the 8.6 million square feet of total market demand.
• CFO LaBelle stated that the company is receiving proposals to refinance the $2.3 billion mortgage on the GM Building at a credit spread in the low 100s ahead of its June 2027 expiration.

INDUSTRY GLOSSARY

• FFO (Funds From Operations): A measure used by REITs to define cash flow from operations, calculated by adding depreciation and amortization to earnings and subtracting gains on sales.
• REIT (Real Estate Investment Trust): A company that owns, operates, or finances income-producing real estate.
• CBD (Central Business District): The commercial and business center of a city.
• Cap Rate (Capitalization Rate): A metric used to estimate the potential return on an investment property, calculated by dividing the net operating income by the property value.
• Same Property NOI: A financial measure that compares the net operating income of properties owned for the full duration of both the current and prior comparison periods.
• CMBS (Commercial Mortgage-Backed Securities): Fixed-income investment products that are backed by mortgages on commercial properties.
• SASB (Single Asset Single Borrower): A type of CMBS loan secured by a single large property or a portfolio of properties owned by one borrower.
• Premier Workplace: High-quality office space, typically classified as the top tier of Class A buildings, that commands premium rents.

Full Conference Call Transcript

Operator: Good day, and thank you for standing by. Welcome to Q3 26 BXP Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. To ask a question during the session, you would need to press *11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press *11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker, Helen Han, Vice President, Investor Relations. Please go ahead.

Helen Han: Good morning, and welcome to BXP's Third Quarter 26 Earnings Conference Call. The press release and supplemental package were distributed last night and furnished on Form 8-K. In a supplemental package, BX 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.dxp.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 its expectations will be attained. Factors and risks that could cause actual results to differ materially from those expressed or implied by forward looking statements are detailed in yesterday's press release and from time to time in BXP's filings with the SEC. BXP does not undertake the duty to update any forward looking statements. I would like to welcome Owen David Thomas, Chairman and Chief Executive Officer Doug Linde, President and Michael E. LaBelle, Chief Financial Officer. During the Q and A portion of our call, our regional management teams will also be available to address any questions.

We ask that those of you participating in the Q and A portion of the call to please limit yourself to 1 and only 1 question. If you have an additional query or follow-up, please feel free to rejoin the queue. As the big 3 are all reporting today, Alphabet, Microsoft, and, of course, BXP. And we have the Fed call, so let's get started. Owen David Thomas will now begin his formal remarks.

Owen David Thomas: Well, thank you, Helen, and good morning to all of you. BXP delivered another very strong quarter, both operationally and financially, Third quarter FFO per share exceeded both our guidance and consensus estimates by $0.08 We also raised the midpoint of our 2026 FFO per share guidance by $0.05 and now expect our FFO per share to grow more than 3% in 2026. We are delivering on the strategic plan we laid out at last year's investor conference and outperforming the 3 primary goals we articulated.

Douglas T. Linde: Leasing space to grow occupancy and FFO, selling assets to optimize our portfolio, raise capital for developments, and reduce leverage, and advancing developments that enhance portfolio quality and support future FFO growth. Leasing market conditions are robust across most of our portfolio and continue to improve. We are growing rents and achieving record rental rates in New York City, the Back Bay of Boston, Reston Town Center, and for new development in the CBD of Washington DC. San Francisco is improving rapidly and leasing activity in Seattle is gaining momentum.

Owen David Thomas: There are 3 primary reasons for these strong market conditions. First, investment in AI and associated infrastructure, when measured versus historical new technology CapEx cycles is very material today and could become unprecedented. This investment activity is driving both US GDP and corporate growth, which creates strong leasing demand from not only AI companies, but also from financial, legal, and business service companies that are growing headcount to support the high levels of AI investment. Second, due to elevated construction costs and competition for capital from AI infrastructure investment, development of new offices in the US is at record low levels.

Across BXP's 6 markets, office construction is limited to a handful of buildings planned in New York City and the new projects we are developing in Washington DC. Lastly, client demand is concentrated primarily in premier workplaces, which continue to materially outperform the broader office market. As a reminder, Premier Workplaces represent roughly the top 14% of space and 8% of buildings in the 4 CBD markets, where BXP has a major presence. Direct vacancy for premier workplaces in these 4 markets is 8% versus 13% for the broader office market, while asking rents for premier workplaces command a premium of more than 60% over the non premier buildings.

Low vacancy, strong demand, and minimal new supply is a uniquely positive combination of market circumstances and could not provide a better backdrop for BXP to grow rents and occupancy in its premier workplace portfolio in the quarters ahead. The capital markets environment for real estate has been slower to reflect the vibrancy of the underlying property markets. An obvious issue is the 30-basis-point rise in the 10-year US treasury over the last couple of months, Likely culprits for this increase are inflationary pressure from tariffs and energy prices, substantial AI related capital spending, and upward pressure on term premium associated with the expanding US federal budget deficit.

A less obvious issue is the availability of equity for commercial real estate. Although debt capital continues to be readily available at attractive spreads but higher costs, competition for equity capital with the massive AI investment spend, is impacting commercial real estate fund flows. Including REIT share prices and capital raising as well as fundraising transaction volume and pricing in the private real estate markets. Office transaction volume in the private markets was $19.4 billion in the third quarter, which was up materially from both the second quarter and the third quarter of 25, but was skewed by many small deals and 2 large medical office portfolio trades.

Higher interest rates will likely reprice current assets and may weigh on transaction volumes in future quarters. Though there continue to be very few premier workplace assets trading, there were a couple of transactions in the quarter of relevance to BXP's portfolio. A 49% interest in 1.3 thousand Avenue of the Americas, located in Midtown New York City, under agreement to sell at a valuation of approximately $1.3 billion which represents pricing of $740 a foot at an initial cap rate of 7.3%. This asset comprises 1.75 million square feet. it is fully leased and is being sold by an opportunistic buyer to a domestic adviser.

Second, a leasehold interest in a leasehold interest in a 100-year ground lease located in downtown Sunnyvale, California was sold for $219 million which represents pricing of over $1.2 thousand a square foot and a 6.5% initial cap rate. This 180 thousand-square-foot building is fully leased to Databricks on a long term basis and was sold by the building's lender to an adviser. Turning to the execution of BXP's business plan, our first and most impactful goal is to lease space and improve portfolio occupancy. We had another strong quarter completing leasing of 1.2 million square feet and over 4 million square feet year to date.

Our in service portfolio occupancy rose materially and for the fourth straight quarter to 89.4%, which is above the 89% occupancy forecast we provided for year-end 2026. This outcome reflects strong execution by our leasing teams, the quality of our portfolio, and the very healthy leasing markets previously described. Our second priority is to raise capital and optimize our portfolio through asset sales at our investor conference we communicated an objective to generate an aggregate $1.9 billion in net sale proceeds by 2028 from the sale of land, residential, and nonstrategic office assets. We are well ahead of schedule as we have raised over $520 million in total net sale proceeds this year and $1.37 billion since our investor conference.

Including 4 assets we have under contract for sale, total dispositions could reach approximately $1.45 billion. In addition, we have agreed terms and are negotiating a contract to sell Times Square Tower in New York City. A significant sale given our 55% unleveraged interest in this 1.2 million-square-foot building. The buyer needs to secure debt and equity financing, and if completed, sale would occur in the first quarter of 27, and enable us to achieve our 2028 disposition target well ahead of schedule. The 2 operating property sales we completed in the third quarter were stabilized, older, nonstrategic office assets in Washington DC.

We sold Sumner Square, a 217 thousand-square-foot, 3 building, historic redevelopment that is 93% leased and subject to a ground lease for $63 million or $300 a square foot and a 9.9% cap rate. We also sold 1.33 thousand Connecticut Avenue. A 254 thousand-square-foot building that is 83% leased. After extending the anchor tenant lease, we achieved a gross sale price of $102 million or $400 a square foot and an 8% cap rate. Although these sales resulted in modest dilution, they raised capital and increased the quality of our remaining Washington DC portfolio.

We are very pleased that we accelerated our $1.9 billion disposition program as the favorable pricing we received over the past year for many sale transactions would be difficult to replicate in today's higher interest rate environment. BXP's third priority is to grow FFO through new developments. Given current market conditions, we are proceeding selectively with preleased office developments and are more. and more actively pursuing multifamily on land we control with an equity partner. BXP's largest development underway is 343 Madison, our premier workplace tower in New York City with direct access to Grand Central Terminal.

This past quarter, we signed a 2-floor lease with a business service company in the upper half of the podium level bringing the building to 56% leased. Further, we are in lease negotiations with a 5-floor client for the bottom floors of the podium, which if completed, would bring us to 70% leased. The remaining availability including encumbered space, is 5 podium floors, and 7 floors at the top of the building with expected ramp exceeding our original pro forma. The construction of 343 Madison remains on time and budget, and we recently announced closing the sale of a 10.6% interest in the project to a subsidiary of Starr, 1 of our longtime financial partners at the GM Building.

The sale was completed at a price above our base and we continue to speak with select investors in pursuit of our goal to sell a total interest of 30% to 50% in the project. As leasing advances, rents improve, and the delivery date nears, the value of the development and pricing for future equity sales continues to rise. In terms of additional development activity, we are pursuing another preleased premier workplace development opportunity in Washington, DC, which would likely commence in 2028. In addition, we have 3 apartment development projects located in Weston and Waltham, Massachusetts. And Santa Monica, which we plan to start in 2027 subject to site plan approval and raising the required equity capital.

BXP's current development pipeline comprises 3 office and 4 residential projects underway, totaling 3.5 million square feet and $2.9 billion of BXP investment with approximately $750 million of equity remaining to be funded. The 3 office developments are 70% pre-leased and the aggregate pipeline will deliver meaningful external growth over the longer term. So in conclusion, VXP is well positioned for continued success. Leasing demand is strong. Vacancy in the premier workplace segment is low and declining. And new supply remains muted. Debt capital is readily available for premier workplaces at attractive credit spreads albeit at higher overall costs. BXP continues to capture market share.

Driven by our financial strength, reliable client service, and a less competitive landscape across many of our markets. Our outperformance against business plan goals should drive portfolio occupancy and FFO per share, deleveraging external growth from development, and a portfolio increasingly concentrated in premier workplaces. With improving fundamentals, clear strategic direction, and proven execution capability, we remain confident in our ability to deliver longer term growth and increase shareholder value. And with that, I will turn it over to Douglas.

Douglas T. Linde: Thanks, Owen. I am going to keep going on the strategic priorities because nowhere is it more evident than in our occupancy growth. And the projected occupancy gains were foundational to the plan that we put forward about a year ago. Since the incremental revenue falls almost entirely to the bottom line FFO. We put forward, as Owen said, a 200-basis-point improvement in 2026 and a 200 improvement in 2027 for a goal of 91%. Actually, it was 430 basis points because we ended the year at 86.7%, but it is 30 basis points. So we are among friends, right? As you read in our press release, we have gained 100 basis points of occupancy in the last quarter.

We have achieved 270 basis points of incremental improvements since the start of the year. I am going to focus my remarks this morning on this outperformance. A small portion of the occupancy improvement in calendar year 2026 is due to changes in the portfolio. In aggregate, portfolio changes impacted occupancy by positive 30 basis points. So 240 basis points of improvement came from leasing vacant space. During calendar year 2026, we have executed 1.5 million square feet of leases on vacant in service space, including 375 thousand square feet of vacant in service space this quarter. Our remaining 2,026 expirations total only 186 thousand square feet. We are negotiating leases on about 75 thousand square feet of that space.

And we have 600 thousand square feet of currently vacant space that is leased and expected to commence in the fourth quarter. We should end the year at about 90% occupied as we stated last quarter. Clearly, we have achieved our 89% goal much more quickly than we expected. Our current pipeline of leases in negotiation is approximately 1.3 million square feet and covers 275 thousand square feet of vacant space. And 300 thousand square feet of 2027 expiring units. Our active discussion pipeline stands at over 2.8 million square feet. Including some large early renewal discussions. This is a meaningful increase in activity relative to where we sat last quarter. That number was about 1.7 million square feet.

In 2027, we have 1.6 million square feet of expirations with 467 thousand square feet of signed lease on vacant space expected to commence in 2027. And we are negotiating leases on an additional 250 thousand square feet of vacant space. And we are in renewal or replacement lease negotiations on about 300 thousand square feet of 2027 expirations. This encompasses, I will do the math for you, over 1 million square feet of 2027 expirations as we enter November 2026.

Our largest known 27 expiration a 175 thousand-square-foot lease at Colorado Center in Santa Monica, and the next biggest move outs are 120 thousand square feet at 1.26 thousand Main Street in Waltham, 120 thousand square feet at 504 Carnegie Center in Princeton. How much occupancy may exceed 91% in 2027 will be a topic for our 2027 guidance next quarter. We have seen portfolio outperformance in the Boston CBD and Urban Edge, in Reston, Virginia, and Washington DC, in San Francisco, Mountain View, Seattle, and, of course, in Midtown Manhattan. The outperformance is being driven by our ability to lease more quickly, reflecting the depth of demand for our premier workplaces.

Continue to see demand from a wide spectrum of industries, though varying by market, technology, defense and cybersecurity, asset management, financial services, and professional services. Space growth is a factor in many of our clients' requirements. This quarter, we had 10 existing client expansions totaling over 160 thousand square feet. We completed 74 total transactions this quarter, and renewals made up about 47%. Our portfolio leasing spreads this quarter were up 6.5% on a gross basis and 9.3% on a net basis with outperformance from New York City and Washington DC negative results in Boston and San Francisco. A few insights from the data. In Boston, this quarter, we had several transactions in our urban edge assets.

Including 70 thousand square feet at The Quarry in Waltham, where we had a 15-year lease expire 18 months ago and the rent went down on the new deals by about 28%. The 1 Back Bay transaction this quarter at the Prudential Center resulted in a 25% net increase on a 10-year lease that expires in 2027. In New York, the Manhattan office transactions actually range from 10% to 30% increases, but the data also includes Princeton, which mutes it. By themselves, the Midtown office transactions were up 23% on a net basis. In San Francisco, a small portfolio was executed this quarter.

The average new rent for the CBD deals was about $100 a square foot and the expiring rents averaged $120, obviously, slight down. And in Washington DC, the main driver of the positive performance is the replacement lease we completed at 500 North Capitol Street in advance of the anchor tenant's relocation to 725 12th Street in 2028, where the new rent is up almost 30%. What was noticeably absent from our remarks last September was any mention of incremental contribution from improvements in pricing. This will now be a factor in driving future NOI as we experience lease expirations in the coming years.

Over the last year, in the BXP Midtown Manhattan, Back Bay Of Boston, and Reston, Virginia portfolios, market conditions have allowed us to increase rents and, in some instances, lower concessions. This is now happening in our San Francisco properties as well. This represents an important incremental evolution in our growth outlook. Occupancy gains will be supplemented by the benefit from improving rent We completed 220 thousand square feet of leasing in the Boston portfolio. We have now executed our third second-generation lease at 888 Boylston Street where the embedded market rent growth is between 20% and 25%.

In another Prudential Center building, we completed a sizable renewal a few days ago, so it is not in the third quarter stats. The rent will be up over 20% versus the expiring rent. We continue to make progress at our quarry asset, our largest availability in the urban edge, where, again, we executed about 70 thousand square feet this quarter. About 200 thousand square feet of our current urban edge availability is in purpose built life science assets in the mass. In the last month, there has been a pickup in inquiry for life science users with lab needs. While many of these are consolidations or lease expiration driven, activity has increased.

In New York City, 360 Park Avenue South, 200 Fifth Avenue, 399 Park, 510 Madison, and the GM Building are all 99.9% leased. We have 1 full-floor availability at 599 Lex. Which has had multiple offers outstanding and will be getting back about 50 thousand square feet at 601 Lexington Avenue in late 2027. This month, we completed a long term renewal with 1 of our anchor tenants at 250 West 55th Street extending a 2029 expiration until 2045. We have a number of 2029 portfolio expirations that are being discussed including the space that Starr will vacate upon their relocation to 343 Madison.

On the West Coast, the most significant momentum in our portfolio continues to be at 680 Folsom. We executed an expansion with a client during the quarter and leased our last full-floor availability last week. We have moved our taking rents on our vacant space from the mid sixties to the mid eighties over the last 12 months. An increase of over 25%. Since the space has been vacant since 2024, it is not showing up in our second generation statistics. During the quarter, we executed over 300 thousand square feet in our West Coast holdings, including 140 thousand square feet at Madison Center, where we did another early renewal with a major tenant.

We have executed leases or are in discussion with smaller technology companies in our San Francisco and Seattle assets on built space. Our strategy has been to design and build prebuilt suites or floors to make the lease decision easier and to reduce downtime. We are seeing great traction. We are negotiating our first significant initial lease expirations at Salesforce Tower. 1 client is growing by 10 thousand square feet. 1 client is maintaining its footprint, and 1 is downsizing by 75 thousand square feet. Current market rents are 30% to 60% higher than the expiring rents in the building and still would be significant discounts to new construction rents.

As an aside, We listed the 75 thousand-square-foot block we are getting back 3 weeks ago and we have had 7 new clients tour the space since then. In DC, it was our most active region this quarter. Our team was able to orchestrate a 206 thousand-square-foot long-term lease with Google at 500 North Capitol Street to backfill 100% of the space that McDermott occupies more than 2 years prior to its expiration. This was a complex transaction and demonstrates the experience of our regional teams, in this case, DC. In addition, we completed 6 other leases totaling 120 thousand square feet in Reston. Reston continues to have almost no available space.

We are in lease on the last full floor in the urban core, and we have moved our taking rents from the mid fifties to the low sixties over the past 9 months. Here, too, we have aggressively completed prebuilt. We are delivering a full 24 thousand-square-foot floor comprised of 5 suites next week and 4 of the 5 will be occupied upon delivery. In summary, our assets are seeing strong demand growth. We are leasing space faster, driving occupancy higher, and benefiting from improved pricing power as demand grows and new supply remains limited in the back bay of Boston, Reston, Virginia, Manhattan, Seattle, and San Francisco. And as Michael will describe, this is translating to our bottom line.

Great.

Michael E. LaBelle: Thank you, Douglas and Owen. Good morning, everybody. As Owen described in his remarks, we had a great quarter. Strong execution of our leasing and capital plan, outsized occupancy growth, We beat our earnings guidance and consensus estimates for the quarter. And we raised our full year earnings outlook. In the debt markets, we completed our $700 million 10-year bond offering at a 6.05% interest rate. We opportunistically executed this issuance in August. Well in advance of repaying our $1 billion bond at maturity in October and prior to the run up in interest rates.

Had we waited until maturity, the interest rate would have been closer to 6.75% and the annual interest cost going forward would have been approximately $0.03 per share higher. We reduced the size of the refinancing to $700 million using our ample liquidity to fund the difference as part of our longer term balance sheet strategy. Saving $0.02 per share in annualized net interest expense. As a reminder, we utilized $1 billion of our cash on hand after the end of the quarter to repay the maturing bond.

Interest rates continue to be volatile and we are actively monitoring our future financing needs with the goal of mitigating the impact of higher rates as much as possible through the potential hedging and utilizing the full suite of capital markets available to us. The CMBS market remains active with several large SASB refinancings closing in the past quarter. The triple a tranches for high-quality office financings are pricing at approximately 100-basis-point spreads Our $2.3 billion mortgage which is $1.4 billion at our share, on the GM Building expires in June 2027. And the current interest rate is 3.6%. We are receiving proposals to refinance it for a 10-year term with an all in credit spread in the low 100s.

We also have a financing opportunity next year in our $750 million unsecured bond that expires on December 1, 2027 with a current interest rate of 6.75%. Based on where our 10-year credit spreads are trading today, approximately 135 basis points, we could issue a new 10-year bond at approximately 6.4%, creating the potential for a roll down of this interest rate upon refinancing. Importantly, we continue to benefit from strong access to capital and have significant financing flexibility with multiple sources of debt capital markets available to us, including the unsecured bond market the bank market, and the convertible debt market.

Investor demand for high quality premier workplaces backed by experienced sponsors remains strong, and we are well positioned capitalize on these opportunities. Now I want to turn to our earnings for the third quarter. We reported funds from operations of $1.89 per share, which exceeded the midpoint of our prior guidance by $14 million or $0.08 per share. Stronger performance in our operating portfolio accounted for $0.10 per share of our outperformance this quarter. Revenues exceeded our expectation from higher than projected occupancy, due to earlier lease commencements and higher service income resulting in $0.03 per share of better than projected performance.

We also recorded $0.02 per share of higher termination income, mostly related to a restoration payment that we received from a client in Boston on their lease maturity, This payment reflects a negotiated settlement in lieu of the client completing the restoration work. Approximately half of our outperformance this quarter was driven by lower operating expenses, reflecting the continued success of our proactive tax appeal program as well as lower than projected repair and maintenance expense. We expect that $0.04 per share of this benefit is the result of timing of expenses that will be deferred into Q4 and is incorporated into our full year FFO guidance.

The strong performance of our portfolio was partially offset by $0.02 per share of higher than projected net interest expense due primarily to the timing of our bond offering that closed in August versus our expectation of refinancing closer to the expiration in October. For the full year 2026, we are raising our 2026 FFO guidance by $0.05 per share at the midpoint to a range of $7.06 to $7.08 per share. As Doug detailed, we anticipate that our occupancy will improve again in the fourth quarter and end the year at approximately 90%.

In our same property portfolio, we are increasing our expectation for NOI growth in 2026 to 2.35% to 2.75%, an increase of 35 basis points or $0.04 per share from last quarter's guidance. The increase is from pulling forward a portion of our expected occupancy gain into the third quarter partially offset by the deferral of operating expenses into Q4. In addition, we have updated our guidance for portfolio NOI by $0.02 per share from the unanticipated restoration income we recorded in Q3. The only other change in our portfolio projections is an increase of $0.01 per share of NOI from the timing of our asset sales program.

We have 1 additional sale that we expect to close in 2026 which is a $20 million land sale under contract that is set to close in December. Lastly, we are projecting our net interest expense to be higher by $0.02 per share from our Q3 results due to the timing of our bond offering. In summary, we are increasing our guidance for 2026 FFO at the midpoint by $0.05 per share. We expect an incremental $0.07 per share from portfolio NOI partially offset by $0.02 per share of higher interest expense.

Looking ahead, we remain confident in our ability to deliver sustained FFO growth over the next several years supported by improving property fundamentals, continued leasing momentum, and the execution of our strategic initiatives. And do not forget that 725 12th Street delivers in 2028 and 343 Madison begins to deliver in 2029. At the midpoint of our guidance, we expect to deliver 3.2% FFO growth in 2026, and we expect FFO to grow again in 2027. As you start to think about 2027, there is a few things to keep in mind. First, and as Douglas described, we expect to improve our occupancy next year, plus we will have a full year of our 2026 occupancy gain.

That will result in stronger projected growth in our same property NOI. Both on a GAAP and a cash basis. We also expect to see incremental NOI from our development pipeline including a full year of 290 Benning, and the delivery of our reservoir place redevelopment in Waltham. That is leased to Boston Dynamics. We have 2 residential projects delivering midyear with 121 Broadway in Cambridge and 17 Hartwell in Lexington. Both projects will be in lease up during 2027 and upon completion, we will cease capitalizing interest creating a near term drag on FFO before the projects begin contributing to earnings in 2028.

From a financing perspective, the most significant impact will come from the refinancing of our loan on the GM Building that I mentioned earlier. We will also see potential changes in short term SOFR rates affecting our floating rate debt portfolio. And we expect lower capitalized interest following the completion of 290 Binney this year and our planned 27 deliveries. Partially offset by the incremental investments in 343 Madison and 725 12th Street. We anticipate a normalization of termination income. This year, termination income is expected to total approximately $24 million. That is higher than our historical average that is closer to $15 million.

Our asset sales program is another important component to our strategy to strengthen our balance sheet and position the company for long term growth. Based on transactions completed to date, expect approximately $0.08 per share of dilution in 2027 compared to 2026. This does not include the possible sale of Times Square Tower that Owen described, which would result in approximately $0.06 per share of additional dilution if it closes at the end of the first quarter of 27. Importantly, we expect the diluted portion of our sales program to be largely behind us following these transactions, and our focus will shift more to accretive land sales and potentially multifamily dispositions over the next couple of years.

While these factors will moderate FFO growth in 2027, the fundamentals of our operating business continue to strengthen. We are seeing positive momentum in leasing activity and rental rates across our markets, with limited new supply and continued demand for premier workplaces. Looking further ahead to 2028, we expect to benefit from the improving operating environment a manageable lease expiration schedule, fewer dilutive asset sales, and significantly lower refinancing exposure. We believe these factors position us well for a sustained period of FFO growth with the potential to accelerate by 2028. That completes our formal remarks. Operator, can you please open the lines up?

Operator: Thank you, sir. *11 on your telephone. To withdraw your question, please press 11 again. We ask that you please limit your questions to no more than 1 but feel free to go back into the queue. And if time permits, we will be happy to take your follow-up questions at that time. Please stand by while we compile the Q and A roster. And I show our first question comes from the line of Jenna Gallen from Bank of America. Please go ahead.

Jana Galan: Thank you. Good morning, and congrats on a great leasing quarter. I know this is a smaller market exposure, but can you share your outlook for LA expectations for the large lease expiration at Colorado Center and then maybe also plans for the mortgage debt for Colorado Center?

Douglas T. Linde: Sure. So I will give you a perspective on the leasing market, and Mike can talk about the I guess it is a June maturity or July maturity of the CMBS loan. The 1 market in our portfolio that has not seen the demand recovery has been West LA. There. Look. The realities of what is going on with the media businesses and the consolidation that are occurring and, obviously, the reductions in labor that are that are coming from that, you know, coupled with how artificial intelligence is impacting the projection of visual media. it is having an impact on that marketplace from a demand perspective. And so it is pretty slow.

And Interestingly, when we look at our projections on a going forward basis, we have very little sort of reliance on improving our occupancy at Colorado Center in the short to medium term as part of our projection. So we sort of built in the expected availability of space there. There is activity. it is really around consumer products facing companies. it is mostly musical chairs. We are aggressively making proposals to a number of the clients that are trading in the marketplace. The offering at Colorado Center is a terrific offering, but people do not have to make a decision to move.

And so there is no compelling urgency out there, which I think is part of what the slowdown is from a perspective. And, Rodney Diehl, maybe you want to comment if I have missed something there.

Rodney Diehl: The only thing I would add, Douglas, is that the vacant space at Colorado Center is all shell, and that is harder space to lease. You know, the upcoming role with some of the space in 1 of the buildings next year, we are actively marketing that. it is built space. it is a good condition, and we are getting more activity on that.

Operator: So, Jana, thanks for your question.

Michael E. LaBelle: On the financing, so we have a $550 million CMBS loan. We are only 50% ownership of this asset, so our share of that is $275 million. It expires next summer And, you know, given the rollover exposure, my expectation is that we are gonna seek to do a shorter-term extension or bridge financing relative to this financing. And, you know, we anticipate that the rate on that will be close to or slightly above where it is today. Thank you.

Operator: Thank you. And I show our next question comes from the line of Steve Sakwa from Evercore ISI. Please go ahead.

Steve Sakwa: Yes. Thanks. I know you are probably loath to talk about individual tenants, but 1 of your top 10 tenants has kind of been in the news recently.

Owen David Thomas: I am not asking you to sort of opine on their exact outcome, but to the extent that any of that space did come back to you, just. Could you maybe help sort of frame out where rents are for that space relative to market and what sort of activity levels are you seeing for that kind of premier space in the portfolio today?

Douglas T. Linde: So the General Motors building is 99.9% leased. The average office rent at 677 5th, which is the General Motors building, is under $150 a square foot. And if you think about the rents that we are going to be achieving at 343 Madison, where I think the lowest rent we will do is $190 a square foot. And we will be achieving rents in excess of $300+ a square foot. There is a vast gap between where the in place rent is at the General Motors Building, 757 Fifth and where we believe and perceive the market is.

And the building across the street that Related is putting up I believe, has already achieved some rents for the mid portions of its building in the mid-$150-a-square-foot range as well. So that is the. that is sort of the state of the market up at that corner of 5th Avenue.

Operator: Thank you. And I show our next question comes from the line of Seth Bergey from Citi. Please go ahead.

Seth Bergey: Thanks for the helpful comments about kind of some of the transactions.

Owen David Thomas: I guess just given the movement in the 10-year, what is kind of the appetite from different capital sources for 343 Madison, and has that changed at all just given the move in the 10-year? As a broad comment, I do think higher rates have an impact on real estate valuations. there is a tremendous amount of fixed income value in a real estate property. And I said in my remarks, I would anticipate in the market today that there will be some changes in pricing. We do not have enough prints yet, you know, in the last month, I think, to really kinda tell you exactly what that is, but I would expect some change.

The 343 Madison deal is. First of all, it is a trophy asset. there is very few, if any, assets like that are trading in the market. And it is also a more of a total-return kind of analysis because it does not have a current cap rate. You invest in the project, we deliver it in 2029, and then it is sold thereafter. So I guess theoretically, you could argue maybe it has some impact on the residual value, but there is not, quote, a current cap rate.

Operator: Thank you. And I show our next question comes from the line of John Kim from BMO Capital Markets. Please go ahead.

John Kim: This quarter, your vacancy tightened, cash lease spreads improved although it was mixed by region. But given your visibility on your leasing pipeline and the mark to market potential you see in Salesforce Tower, how much do you see the cash lease spreads accelerating? Over the next year?

Douglas T. Linde: So, Mike, do you wanna sort of take that 1? You Because you are looking at it on a portfolio basis. Right?

Michael E. LaBelle: I mean, I think our same store this year is gonna be somewhere in the 2.5% range. You know, I think that number is gonna accelerate next year in a material way. And as Michael will describe, because we are gonna see both the gains as well as the improvements in the rental rates that we are achieving today.

Douglas T. Linde: The I if you sort of did the math on the numbers that I was providing you on sort of market by market basis? there is not a market where we are not we are not seeing double digit increases in less than 12 months. Is that sustainable for, you know, the next 3 years? If Owen's perspective on no new supply continues? And there is no availability in these marketplaces for high quality space and the demand continues, we are gonna see a really, really strong period of time.

We are not baking on that relative to what our projections are showing, it is a pretty unique time to be leasing space in the premier marketplaces because of the factors that were You know, that we have sort of just outlined.

Michael E. LaBelle: I think the only thing I would add, Douglas, is if you look at the mark to market of the portfolio, we kind of look at every quarter and we update our market leases every quarter. that is grown by approximately 10% in the last couple of quarters. So the kind of embedded future growth is certainly going up. I think that the primary growth factor over the next couple of years is gonna be occupancy growth because that is just much more meaningful than getting the mark to market on the 5% of our portfolio that rolls in a given year.

Operator: Thank you. I show our next question comes from the line of Blaine Heck from Wells Fargo. Please go ahead.

Blaine Heck: Owen, you talked about a lack of available equity capital in real estate given the vacuum created by AI investment. And it sounds like you guys might achieve your delevering through dispositions schedule.

Owen David Thomas: So do you think this is going to be an opportunity for BXP to go on the offensive in 2027 or 2028 through acquisitions while some of your usual competitors are kind of focused elsewhere? And maybe to add on that, with the stock trading around $61 per share, have you and the board considered a stock repurchase plan as another option for capital allocation? And how do you think about that option and how it stacks up relative to development spending and acquisitions at this point?

Douglas T. Linde: Well, I do think because of the absence of capital and a more favorable competitive environment for us, I. E, less competition across much of our footprint-- Footprint I do think it represents an interesting time for BXP to be on the Continue to be on the offensive and look at new investments. The way that has shaken out over the last couple of years and I would probably anticipate it continuing. Is that development represents a better opportunity for new capital investment. I mean, the deals 343 Madison, which we have talked about at length, you know, we think our yield is gonna be somewhere in the 8% range.

These new developments that we are doing in Washington DC are more in the 9%+ cap rate. These are cash development yield range And my expectation is notwithstanding your comments about competition and capital, I think it is gonna be hard to find acquisitions of properties that are of the quality that we would be interested in trading at those kinds of cap rates. Could that change? I hope so. And, you know, we are certainly out there all the time looking. We are not we are not stopping looking. that is, you know, that is part of our job. But I think the current market conditions would have us believe we are probably gonna be more.

Doing more on the development side. You know, as I mentioned, we were looking at another similar transaction to the 2 that we have already done in DC. We have sites in all of our cities that if we can find an anchor tenant that are gonna be actionable, and that is my. that is what I suspect for most of our new dollars will go.

Michael E. LaBelle: And just to follow-up just on your last piece, which is the stock buyback So we at the board level spend hundreds of hours internally preparing for valuation discussions relative to all different kinds of methodologies. Where we sort of see, you know, our NAV, our discounted cash flow balance. Value, all that sort of stuff. And we discuss this with the board all the time. We. You Owen described our strategic priorities that we sort of set out a year ago.

To the extent that we have incremental available capital absolutely, 1 of the things that we think about is can we consider doing a stock buyback on a leverage neutral basis if we have incremental capital versus where we sort of set out our quote, unquote, strategic objectives. So it is it is certainly on the table. Yeah. And I think another way, just to add to what Douglas said the buyback is, I mean, if we can do new development that are pre leased at a 9% yield and our stock is trading at a high 7% cap rate, it feels like a better use of capital is to do the development.

Operator: Thank you. And I show our next question comes from the line of Nicholas Yulico from Scotiabank. Please go ahead.

Nicholas Yulico: Thanks. I know you guys gave a lot of details on a potential 2027 impact.

Michael E. LaBelle: And I think, Mike, when you are going through that, you said all these factors will moderate FFO growth in 2027. I just wanted to be clear on what you meant by that. If you are suggesting that it is actually 2027 would be slower growth than 2026 or just that if these factors were not in place, you would have higher FFO growth.

Douglas T. Linde: Thanks.

Michael E. LaBelle: I think what I am trying to communicate is without giving guidance for 2027, by the way, is that we expect that we are going to grow next year. You know, there is been a lot of discussions about the impact of higher interest and refinancing and asset sales, and we do have those things that have an impact. But the other parts of our business are doing really, really well. And as Douglas mentioned a couple of questions ago, you know, our same property portfolio is gonna have, we believe, higher same store NOI growth than it did this year.

So I think what we are saying today is that we believe we are gonna continue to grow in 2027.

Operator: Thank you. And I show our next question comes from the line of Alexander Goldfarb from Piper Sandler. Please go ahead.

Alexander Goldfarb: Hey, Morning down there.

Owen David Thomas: Owen or Douglas, question on tech leasing. There have been a lot of announcements. Obviously, Microsoft had their buyout news earlier this week. You know, there is pushback on data centers. there is focus on how much CapEx the hyperscalers are spending and such. Within all these headlines, are you seeing any impact on office leasing or the way the VCs are looking at tech? And what I am asking is, you know, we always make the parallels to the .com where the business models were excessive relative to their financials. And then this time around, it seems like everything's more disciplined. But just curious if you.

If the leasing demand is still disciplined or if they are starting to be signs that maybe some of that CapEx concern is starting to spill over into office demand.

Douglas T. Linde: So I am going to start here, and then I am gonna let Rodney talk about what is going on in the CBD of San Francisco because it is the sort of poster child for what is happening with technology leasing. I believe that right now, Rodney Diehl, there is somewhere in the neighborhood of 9 million square feet of tenants in the market. And almost 50% of that is, quote, unquote, net growth from organizations either growing companies or companies that are being newly formed and looking for space. And the activity level to use a word that Mike likes, is palpable. Sorry. It was both palpable.

So, Rodney Diehl, you should describe what we are seeing at Salesforce Tower as an example with the 75 thousand square feet of space that we have available and sort of where the activity in that marketplace is sort of gonna have to find its logical home.

Rodney Diehl: Yeah. So it is. I mean, the tech demand is, as you said, Douglas, it is actually a little bit I guess it is about 62% roughly of the total demand, which is about 8.6 million square feet. And it is as strong as I have ever seen it. And, you know, we have our own personal examples of it. You mentioned 1 of them in your initial comments at Salesforce Tower. I mean, that 3-floor block, which is mid block Salesforce Tower that we are getting back in the fourth quarter of next year, and we have had 7 tours already on it. We are expecting activity and written proposals coming in shortly.

And our anticipation is the kind of rents that we would be getting for that space are gonna probably be plus 10% to 15% higher than what we agreed to on the floors above it when we did the renewal. So that is in a 6-month period already. We are seeing that kind of growth. More importantly, just the demand, I mean, we are seeing at 680. We are pretty much leased up there now with the different groups that we have leased to. The big AI companies, whether it be OpenAI, Anthropic, both continue to look for more space.

And then there is all the others that you do not know the names of yet, but they are out there looking, they are pushing the demand. So.

Operator: And I think if, Alexander, if your question was I think I heard you say that your concern is that people are taking more space bigger than they need.

Douglas T. Linde: They are growing faster than they than they anticipate. And it does not feel like that yet. I mean, the people that we are talking to they. They are putting people in the space. They are not just warehousing space when they take it down. So that is encouraging for sure. And, Hillary, maybe you can comment on the number of large users that are trading in the market right now in Midtown Manhattan and other parts of Manhattan and sort of the dynamic that we are seeing there in the face of what is going on from a growth perspective.

Hilary Spann: Yeah. Yeah. Thanks, Douglas. Thanks, Alexander. So in New York City right now, there are 59 tenants in the market as of the end of the third quarter, 100 thousand square feet or greater. And there are only 26 available blocks of space in better buildings. To sort of try to accommodate that demand, which, of course, is why we are seeing such strong preleasing and the development opportunities that are available around the city. So more than twice the number of demand available spaces in New York to accommodate tenants and better buildings.

So it is it is a very, very tight market, and there is a real mismatch in terms of the demand from large users versus the availability of space.

Operator: And I show our next question comes from the line of Caitlin Burrows from Goldman Sachs. Please go ahead.

Caitlin Burrows: Hilary, good morning. Just on the topic or importance of that you mentioned earlier, another side of that would be avoiding vacancy. On the topic of renewals, can you talk about what retention has been like, I guess, over the past few years? And do you expect that to meaningfully improve, or do you still have some older leases that could still limit renewals and retention?

Douglas T. Linde: So, Caitlin, this is an intellectual exercise that we go through in terms of how we describe retention because what happens is that in many of our larger organizations, when we think about their renewals, we are so far ahead of when the tenant actually does their deal that when we actually think about the renewal on a sort of shorter term basis, it is already been completed. So it is skews these numbers. But in terms of the. What I would look at as our sort of near term expiration, because the near term expirations generally have a higher propensity to be a move out because we have not we have already gotten through all the larger transactions.

We tend. As this quarter is a good example, we are sort of in that 45% to 50% range. that is generally where it is. When I look at the path in front of us for 2027 and interestingly, for 2028. My guess is that we are gonna take care of a significant portion of what is in our lease expiration schedules prior to the end of that year. And so those numbers are going to come down pretty dramatically. And I know that as of today, we are working on 2 of the 3 largest expirations we have in 2027, we are in renewal conversations on 2 of them right now.

And so from my perspective, we have a very manageable long term lease expiration driven program. Right? I mean, I talked about in my comments that we just took care of the McDermott lease expiration in 2028. 500 North Capitol. That was 1 of the larger ones at 206 thousand square feet. And so it is just sort of our natural course of business. I think the only thing I would add, Douglas, is think we are seeing improvement in this quarter.

Michael E. LaBelle: The retention was over 60%. Which is strong. The other thing I think we will see as these markets tighten, the likelihood for renewal is much higher because there is less places for people to go.

Operator: Thank you. And I show our next question comes from the line of Ronald Kamdem from UBS. Please go ahead.

Ronald Kamdem: Great. Thanks for taking my question. Just following up on an earlier line of questions. The story seems to be it is still driven by occupancy gains and filling vacant space. However, you did discuss higher rents and lower concessions. So maybe the story primarily remains the build, but is the inflection point nearing or is pricing slowly becoming a more important piece of the story? Although the NOI growth may be still primarily driven by the occupancy built.

Douglas T. Linde: Yeah. I think that is an accurate way to describe what we I think I tried to communicate in my prepared remarks, and then Mike described sort of the realities of the situation is when you only have you know, 5% of your portfolio rolling over in a year, even if you have a 10% gain on the average mark to market, that is dwarfed by 100 basis points of occupancy increase on a portfolio of 46 million square feet. So over time, as we get more and more leased, right, when. And I think we have described that our sort of stabilized number is in the 93% to 94% range.

As we get closer to that, all of the growth in the portfolio same store is going to come from the improvements in the fundamentals of our underlying business. But until we get there, the occupancy gain is gonna be much more impactful to the growth story.

Michael E. LaBelle: I think the other thing we are doing, right, is we are reaching further into our expiration table. To try to do these early renewals. Douglas talked about a bunch of early renewals that we are working on. And so from a GAAP basis, if you do those early renewals at higher rents, we will start to get some of that blended in the current periods as we complete those renewals.

Operator: Thank you. And I show our next question comes from the line of Floris Van Dijk from Ladenburg Thalmann. Please go ahead.

Floris Van Dijkum: Hey. Thanks, guys. it is really encouraging news on the filling the vacant space clearly and the fact that rents are rising. Maybe if you could talk about the net effect of rents as well and maybe talk about the difference in markets and TI packages particularly when you compare New York versus San Francisco and D. C. Perhaps and Boston? Thank you.

Douglas T. Linde: Okay. So this is a tough 1 in terms of how to answer the question. But the sort of big picture perspective is there is no market that we are operating in which the concessions are getting larger. So if there is an improvement in their underlying gross rent or net rent that we are charging, it is all going to the bottom line. The overall sort of comparative model would be as follows. The TI cost is higher in San Francisco than it is in New York and than it is in Boston or than it is in Washington DC on a, quote, unquote, new transaction on a high quality premier building.

The free rent would be higher in DC than it is in San Francisco than it is in New York than it is in Boston on those same transactions. Those are just sort of what I refer to as market norms. And then the other sort of important factor is the leasing commission, and the leasing commissions are generally significantly higher in Washington DC and New York City relative to Boston and San Francisco. So that is sort of the comparative landscape. But, again, the net effective rents because those transaction costs are going nowhere other than down, are all enduring to an improvement in the underlying fundamentals of transactions that we are doing and I am talking.

Those are all CBD numbers. And the, you know, the importance of that is, I think we state that 90% of the NOI from the BXP portfolio is coming from CBD markets. That includes Reston, Virginia as a CBD market.

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

Upal Rana: Great. Thanks for taking my question. With occupancy increasing 100 basis points and about half that remaining signed but not commenced pipeline commencing by year end. Could you frame the cash flow contribution from that pool during 2027 including any time to free rents to burn off?

Michael E. LaBelle: I really do not wanna get into 2027 guidance, right? I think the 2 things to focus on is we believe there will be an acceleration of our same property NOI in 2027. And there is a significant amount of free rent from our 2026 leasing that is burning off So the AFFO will be improved The cash portion of our FFO will be improved in 2027 over 2026.

Operator: Thank you. And I show an question comes from the line of Dylan Burzinski from Green Street.

Dylan Burzinski: Maybe just pivoting back to 343 Madison and some of your commentary around the remaining space having rents higher than sort of where your underwriting is. Does that does that mean we should sort of reevaluate that 7.5% to 8% yield on cost target that you guys sort of outlined when you guys initially broke ground. And I know some of that had fees baked into it, but assuming that is all the same, I mean, is it fair to say that maybe you will end up higher than at the higher end of the range? Just any thoughts there would be helpful.

Owen David Thomas: Yeah. I think that is fair. I do not think we are saying above 8%, but I think we are in the higher end of the range.

Michael E. LaBelle: Also, do not forget if we sell down interest that above our basis that also contributes to higher yields. So. And we are we have done 1 transaction of sell down. We are trying to do more. And as Douglas described, rents are going up Thank you.

Operator: 1 moment for our next question. Our next question comes from the line of Ronald Kamdem from Morgan Stanley. Please go ahead.

Ronald Kamdem: Just going back to that line of questioning on the Fed. If you take a step back and. what is a good number to think about annualizing the CapEx spend for this year And then what is the context of how much more elevated that is because of all the leasing, right, that is been done and what that could trend to in a normalized year. Just trying to get some numbers around that Thanks.

Michael E. LaBelle: You know, this year was a very unique year because we had 2 million square feet of these renewals that kinda hit our leases commenced. That we had done, you know, 2, 3 years ago. So the sheer square footage of leasing commenced based upon that factor was just higher than it is ever been. And that actually did not reflect does not have anything to do with necessarily our kinda occupancy growth per se. It was just like these renewals that we did 2 or 3 years ago. That happened to have their least commencement date in this period. And so I think that you. We are going to see what we are gonna grow occupancy.

We are gonna see a much lower amount of leases commenced 2027 because we do not have as many of those. Hitting. And that is going to endure to a lower level of transaction cost than this year, which, right now this year, we are at $450 million for the year. And, you know, we will see some more in the fourth quarter. You know, so we will probably be somewhere around $550 million, plus or minus. The end of this year. I do not see it being anywhere near that next year. And the cash NOI is going to grow as well. So I think we will benefit next year from that in our cash flow. Thank you.

Operator: And I share our last question in the queue comes from the line of Alexander Goldfarb from Piper Sandler. Please go ahead.

Alexander Goldfarb: Thank you for taking the follow-up. Mike, just quickly, on the 2027, when you said that you expect FFO to grow maybe modestly, does that include the impact of Times Square Tower, the $0.06 dilution from that?

Michael E. LaBelle: It includes everything we talked about. Great.

Analyst: Thank you.

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

Owen David Thomas: Thank you. That concludes our remarks. Thank you all for your interest in BXP. Have a good day.

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

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