Occupancy Outlook
Q: How will occupancy rates progress by year-end?
A: Management expects occupancy to improve slowly, aiming to return to around 88% by the end of 2024. They have a leasing pipeline of 875,000 square feet, with 855,000 square feet in existing portfolio deals. Despite challenges from expiring tech leases, they are gaining market share in their markets.

Investment Focus and Funding
Q: What's the current investment focus and funding plan?
A: BXP is pursuing opportunities arising from the dislocation in the office sector, aiming to enhance its portfolio as in prior cycles. The launch of 121 Broadway is tied to achieving 1 million square feet of commercial entitlements in Cambridge. Funding decisions will be made on a transaction-by-transaction basis, with attention to earnings accretion and leverage.

Debt and Financing Conditions
Q: Are banks lending on new office developments, and what yields are needed?
A: Banks are generally reluctant to lend on new office developments, especially speculative ones. Financing rates are around 8% to 9%, making projects challenging. Development yield targets for office and life science projects have increased by at least 200 basis points, now requiring yields well above 8%.

Long-Term Office Utilization
Q: Can BXP thrive if office utilization stays sub-optimal?
A: Management believes so. They note that Castle Data is imperfect and that their New York buildings have returned to pre-pandemic peak day usage levels. Boston is at about 75%, while San Francisco lags at 45-50%. Slow leasing is attributed to clients' earnings growth rather than work-from-home trends. They expect leasing to pick up as client earnings improve.

Tech Demand vs. AI Demand
Q: How does AI demand offset tech companies shedding space?
A: In San Francisco, AI companies accounted for 27% of leasing activity last year, a substantial portion. AI demand continues to be a bright spot, with large tenants seeking more space, offsetting reductions from traditional tech companies. This trend provides optimism for demand in the Bay Area.

Commitment to Suburban Markets
Q: Will BXP reconsider its suburban portfolio due to occupancy gaps?
A: BXP remains committed to its suburban locations. Lower occupancy is partly due to strategic vacancies intended for life science conversions. Notable leasing activity is seen in Princeton, driven by pharmaceutical tenants, and in Waltham, considered an "Urban Edge" market with strong attributes less than 10 miles from downtown Boston.

Life Sciences Demand
Q: What's the current demand for life science spaces?
A: Demand is slow but showing signs of encouragement. In Boston's Waltham market, clients are making progress, and funding is returning to the sector. In South San Francisco, activity is slow with smaller deals of 10,000 to 20,000 square feet, but BXP's building is well-positioned for future demand.

Guidance Drivers
Q: What will drive earnings acceleration in the back half?
A: Earnings growth will be driven by increased NOI from occupancy improvements, expected G&A reductions of $0.05 to $0.07 per share in the third and fourth quarters, and stable interest expenses despite lower interest income as development spending continues.

Multifamily Development Economics
Q: What are the economics of new multifamily developments?
A: The 121 Broadway project alone has returns below typical thresholds but meets hurdles when considering the entire entitlement package, including 290 Binney Street. Future residential developments need yields well in excess of 6% to proceed, reflecting higher costs and expected returns.

Backfill at Key Properties
Q: What's the update on backfilling 680 Folsom and 7 Times Square?
A: At 680 Folsom, BXP is actively marketing 200,000 square feet of high-quality space and pursuing proposals. At 7 Times Square, they've converted sublease space to direct leases, signing 27,000 square feet in the first quarter. While the Times Square market shows some weakness, efforts continue to lease space incrementally.

Office to Residential Conversions
Q: Are there opportunities for office-to-residential conversions?
A: BXP is exploring conversions, mainly through rezoning land parcels for residential use. Projects include developments in Lexington, Shady Grove, Herndon, and San Jose, aiming to build residential units where feasible. Existing buildings are less likely candidates due to physical characteristics and economics.

Impact of Boston Property Taxes
Q: Will rising Boston commercial property taxes affect leasing?
A: BXP believes passing increased costs to tenants is not ideal. They are concerned that higher taxes might deter tenants and make investing in Boston less attractive, potentially adding upward pressure to cap rates. They have communicated their position to political leadership, emphasizing the challenges such policies present.