WEBVTT 00:00:00.000 --> 00:00:02.399 Welcome back to the Deep Dive. This is the place 00:00:02.399 --> 00:00:04.219 where we take the sources you share with us, 00:00:04.299 --> 00:00:07.759 the articles, the reports, the profiles, and 00:00:07.759 --> 00:00:10.039 we really turn them into knowledge you can use. 00:00:10.259 --> 00:00:12.119 Yeah, we cut through the noise. We do. We drill 00:00:12.119 --> 00:00:14.759 down into, you know, the history, the financials, 00:00:14.759 --> 00:00:17.079 the strategy of these massive corporate entities 00:00:17.079 --> 00:00:19.440 that, I mean, they literally shape the world 00:00:19.440 --> 00:00:22.059 around us. And today, we are going right to the 00:00:22.059 --> 00:00:24.600 top floor. We're heading to the penthouse of 00:00:24.600 --> 00:00:26.719 the commercial real estate world. We are. We're 00:00:26.719 --> 00:00:31.140 putting a laser focus on BXP. Inc. Now, you might 00:00:31.140 --> 00:00:33.380 know them by their older name, Boston Properties 00:00:33.380 --> 00:00:35.840 Inc. Right. And this isn't just any landlord. 00:00:35.899 --> 00:00:38.500 This is a giant, a publicly traded real estate 00:00:38.500 --> 00:00:42.159 investment trust, a REIT. And understanding their 00:00:42.159 --> 00:00:44.479 story, which goes back, what, five decades? 50 00:00:44.479 --> 00:00:46.539 years. Yeah. It's basically like getting a master 00:00:46.539 --> 00:00:49.320 class in how urban America was built, bought 00:00:49.320 --> 00:00:52.280 and then sold over the last half century. Exactly. 00:00:52.439 --> 00:00:54.859 So our mission today, it's ambitious. We're going 00:00:54.859 --> 00:00:57.689 to try and distill the history that. Just the 00:00:57.689 --> 00:01:00.310 staggering scale and the very precise strategic 00:01:00.310 --> 00:01:02.549 vision of one of the largest REITs in the entire 00:01:02.549 --> 00:01:06.269 U .S. And our source stack for this is their 00:01:06.269 --> 00:01:09.310 core corporate profile. We're looking at the 00:01:09.310 --> 00:01:12.269 public record, the detailed history, and critically, 00:01:12.510 --> 00:01:16.150 their 2023 financial reports. And trust me, this 00:01:16.150 --> 00:01:19.189 journey is, it's less about bricks and mortar. 00:01:19.329 --> 00:01:21.469 It's really more about high -stakes strategy, 00:01:21.689 --> 00:01:24.409 perfect timing, and a collection of assets that 00:01:24.409 --> 00:01:27.189 are, you know, truly ill -placable. So when we 00:01:27.189 --> 00:01:30.109 talk about BXP, you have to get their core identity 00:01:30.109 --> 00:01:32.689 down immediately because it explains everything 00:01:32.689 --> 00:01:36.090 they do. They're not spread thin across all different 00:01:36.090 --> 00:01:38.069 kinds of real estate. They're not messing around 00:01:38.069 --> 00:01:41.250 with, say, logistics warehouses or data centers. 00:01:41.329 --> 00:01:43.790 No residential apartments. No residential, not 00:01:43.790 --> 00:01:46.390 even your standard suburban strip mall. Their 00:01:46.390 --> 00:01:48.730 focus is almost surgically sharp. It targets 00:01:48.730 --> 00:01:51.459 what they call premier workplaces. Let's pause 00:01:51.459 --> 00:01:53.140 there for a second. Let's define that term for 00:01:53.140 --> 00:01:55.379 the listener. What makes a premier workplace 00:01:55.379 --> 00:01:59.120 in BXP's eyes different from, say, just a nice 00:01:59.120 --> 00:02:01.120 Class A office building? It's a combination of 00:02:01.120 --> 00:02:03.319 things. It's location. It's the quality of your 00:02:03.319 --> 00:02:05.200 tenants and the physical building itself. So 00:02:05.200 --> 00:02:08.919 location first. Location is everything. Premier 00:02:08.919 --> 00:02:12.580 workplaces, for them, mean buildings in the absolute 00:02:12.580 --> 00:02:15.259 core of a central business district. We're talking 00:02:15.259 --> 00:02:17.460 about the addresses that carry real prestige. 00:02:17.860 --> 00:02:20.259 And then the building. It has to have... top 00:02:20.259 --> 00:02:23.599 tier amenities, cutting edge systems and increasingly 00:02:23.599 --> 00:02:26.620 high level sustainability wellness features. 00:02:26.919 --> 00:02:29.039 The things that command top dollar from Tenet. 00:02:29.039 --> 00:02:31.379 Right. And then crucially, they only operate 00:02:31.379 --> 00:02:33.800 in a handful of markets. A very specific handful. 00:02:34.099 --> 00:02:36.620 Six of the highest cost, highest demand markets 00:02:36.620 --> 00:02:38.780 in the entire United States. These are places 00:02:38.780 --> 00:02:41.780 with huge barriers to entry. It's just really, 00:02:41.860 --> 00:02:44.159 really hard for competitors to come in and build 00:02:44.159 --> 00:02:46.520 new supply. And those six markets are Boston, 00:02:46.659 --> 00:02:48.719 Los Angeles, New York City, San Francisco, Seattle 00:02:48.719 --> 00:02:51.500 and Washington, D .C. That's it. That incredibly 00:02:51.500 --> 00:02:54.419 narrow focus just on those high cost gateway 00:02:54.419 --> 00:02:56.919 cities. It tells you everything about their risk 00:02:56.919 --> 00:02:59.620 appetite and maybe more importantly, their target 00:02:59.620 --> 00:03:02.500 tenant. Exactly. Global financial firms, top 00:03:02.500 --> 00:03:05.620 law firms, tech giants, they're targeting resilience. 00:03:06.099 --> 00:03:08.840 They are betting on the permanence of these global 00:03:08.840 --> 00:03:11.659 economic hubs. And for you listening, understanding 00:03:11.659 --> 00:03:15.199 a REIT like BXP really matters because these 00:03:15.199 --> 00:03:18.759 companies are the true, often invisible, owners 00:03:18.759 --> 00:03:21.400 of our cityscape. They really are. They're bellwethers 00:03:21.400 --> 00:03:23.300 for the health of commercial real estate in major 00:03:23.300 --> 00:03:26.539 cities. So when BXP makes a multi -billion dollar 00:03:26.539 --> 00:03:29.159 move, it signals where the smart money believes 00:03:29.159 --> 00:03:31.419 the future of work is actually going. And they 00:03:31.419 --> 00:03:33.500 have the footprint to back it up. I mean, what 00:03:33.500 --> 00:03:36.919 is it? As of the end of 2023, they own something 00:03:36.919 --> 00:03:41.550 like... 53 .3 million net rentable square feet. 00:03:41.629 --> 00:03:44.569 Across 188 properties. It's an enormous, incredibly 00:03:44.569 --> 00:03:46.810 concentrated footprint. A footprint that was 00:03:46.810 --> 00:03:49.129 five decades in the making. OK, let's unpack 00:03:49.129 --> 00:03:50.990 this history. Let's start at the very beginning. 00:03:51.150 --> 00:03:52.949 So we have to go way back. We're starting in 00:03:52.949 --> 00:03:55.990 1970. 1970. It's hard to believe. It is. This 00:03:55.990 --> 00:03:59.069 makes BXP a half century old company founded 00:03:59.069 --> 00:04:02.069 in Boston. And it was founded by two key figures 00:04:02.069 --> 00:04:04.870 who really defined its initial path. Mortimer 00:04:04.870 --> 00:04:07.500 B. Zuckerman and Edward H. Lind. And this. Partnership 00:04:07.500 --> 00:04:09.060 was, you know, it was the classic blend. You 00:04:09.060 --> 00:04:12.000 had capital, vision, and then the actual operational 00:04:12.000 --> 00:04:13.919 know -how to get it done. So break that down. 00:04:13.960 --> 00:04:16.480 Who was who? Well, Zuckerman, who you might know 00:04:16.480 --> 00:04:18.519 from his other interests. He owned The Atlantic, 00:04:18.660 --> 00:04:20.860 the New York Daily News. He brought the financial 00:04:20.860 --> 00:04:24.300 muscle. He had the vision, the high -profile 00:04:24.300 --> 00:04:27.259 connections. And Lind. Lind was the real estate 00:04:27.259 --> 00:04:29.800 guy through and through. He served as president 00:04:29.800 --> 00:04:32.939 for decades right up until he passed in 2010. 00:04:33.870 --> 00:04:36.910 He brought the deep expertise, the operational 00:04:36.910 --> 00:04:39.850 skill. So Zuckerman was the what's and Lind was 00:04:39.850 --> 00:04:42.810 the how. That's a great way to put it. And together, 00:04:42.990 --> 00:04:46.170 they built this reputation for really high quality, 00:04:46.290 --> 00:04:49.610 high profile commercial projects. They established 00:04:49.610 --> 00:04:52.129 the company's DNA right from the start. And the 00:04:52.129 --> 00:04:54.410 original name, Boston Properties, was very literal. 00:04:54.569 --> 00:04:57.680 They started by, well... shaping the skyline 00:04:57.680 --> 00:04:59.459 of their home city you have to you establish 00:04:59.459 --> 00:05:02.100 that local dominance that credibility it's essential 00:05:02.100 --> 00:05:04.360 for any developer starting out but they realized 00:05:04.360 --> 00:05:06.699 pretty early on that to get to the scale they 00:05:06.699 --> 00:05:08.519 wanted they couldn't just stay in new england 00:05:08.519 --> 00:05:10.540 not at all they were thinking bigger almost right 00:05:10.540 --> 00:05:14.579 away which brings us to one of the i think one 00:05:14.579 --> 00:05:16.920 of the most telling stories of their early ambitions 00:05:16.920 --> 00:05:20.310 this is from 1985 This is the moment BXP really 00:05:20.310 --> 00:05:23.709 steps onto the New York stage in a very big, 00:05:23.910 --> 00:05:27.149 very memorable way. It shows not just what they 00:05:27.149 --> 00:05:29.889 could afford, but their strategic audacity. Ah, 00:05:30.069 --> 00:05:32.250 this has to be the high stakes drama over the 00:05:32.250 --> 00:05:34.310 New York Coliseum at Columbus Circle, right? 00:05:34.490 --> 00:05:38.089 That is absolutely it. So in 1985, BXP gets into 00:05:38.089 --> 00:05:41.589 this highly publicized, super competitive auction 00:05:41.589 --> 00:05:43.810 to redevelop the Coliseum site. And we should 00:05:43.810 --> 00:05:46.509 be clear, this was and still is an incredible 00:05:46.509 --> 00:05:48.779 piece of Manhattan real estate. A plus plus real 00:05:48.779 --> 00:05:51.680 estate. And BXP goes in and out bids maybe the 00:05:51.680 --> 00:05:55.060 most aggressive, most famous real estate developer 00:05:55.060 --> 00:05:58.480 of that whole era, Donald Trump. Just the idea 00:05:58.480 --> 00:06:01.019 of a Boston firm coming down to New York and 00:06:01.019 --> 00:06:04.540 snatching that crown jewel. that must have sent 00:06:04.540 --> 00:06:07.000 shockwaves through the New York real estate world. 00:06:07.040 --> 00:06:08.959 Oh, it was a seismic event. It wasn't just about 00:06:08.959 --> 00:06:11.139 winning the land. It was a huge statement. It 00:06:11.139 --> 00:06:13.620 said, we're here and we have the capital and 00:06:13.620 --> 00:06:15.379 the guts to play for the biggest trophies in 00:06:15.379 --> 00:06:17.680 the biggest market. Exactly. A massive statement 00:06:17.680 --> 00:06:19.660 of intent. But what's really fascinating here 00:06:19.660 --> 00:06:22.639 and what I think illuminates how BXP thinks strategically 00:06:22.639 --> 00:06:26.120 is what happened next. It shows they were willing 00:06:26.120 --> 00:06:28.670 to make a clean financial move. over getting 00:06:28.670 --> 00:06:31.610 bogged down in a long, risky development. They 00:06:31.610 --> 00:06:33.990 outbid Trump. They secure the land. But they 00:06:33.990 --> 00:06:36.170 never actually built anything there. Correct. 00:06:36.350 --> 00:06:38.350 They never proceeded with the development themselves. 00:06:39.050 --> 00:06:42.069 Instead, a while later, they sold the property. 00:06:42.209 --> 00:06:44.310 PETA made a huge profit. A substantial profit. 00:06:44.629 --> 00:06:47.290 They basically benefited from the appreciated 00:06:47.290 --> 00:06:49.829 land value, which they themselves helped create 00:06:49.829 --> 00:06:52.939 by driving up the price in that auction. So their 00:06:52.939 --> 00:06:56.000 big strategic play wasn't necessarily about taking 00:06:56.000 --> 00:06:58.459 on the construction risk, the city bureaucracy, 00:06:58.759 --> 00:07:02.019 all of that for a decade. It was about capitalizing 00:07:02.019 --> 00:07:05.060 on the land's value right then and there. It 00:07:05.060 --> 00:07:07.139 was financial engineering married to real estate 00:07:07.139 --> 00:07:08.939 strategy. That's the core takeaway. And where 00:07:08.939 --> 00:07:11.100 that site is today. It's the Time Warner Center. 00:07:11.199 --> 00:07:13.459 Yeah. Now the Deutsche Bank Center. So they secured 00:07:13.459 --> 00:07:15.500 this massive capital gain by flipping the site. 00:07:16.089 --> 00:07:17.970 And that cash, that just gave them more fuel 00:07:17.970 --> 00:07:21.250 to reinvest. It cemented their identity as sharp, 00:07:21.269 --> 00:07:23.970 aggressive operators who could close these big, 00:07:23.990 --> 00:07:27.310 complex deals without necessarily having to pound 00:07:27.310 --> 00:07:30.019 the last nail. So after that incredible strategic 00:07:30.019 --> 00:07:32.800 pivot, they then moved to actually build something 00:07:32.800 --> 00:07:35.199 in New York to show they could execute. Yes, 00:07:35.240 --> 00:07:38.040 to prove they weren't just land flippers. In 00:07:38.040 --> 00:07:42.120 1986, they completed 599 Lexington Avenue. And 00:07:42.120 --> 00:07:44.540 this was their first real ground -up development 00:07:44.540 --> 00:07:48.040 in New York City. Their first true NYC development. 00:07:48.180 --> 00:07:51.860 It's a sleek 51 -story tower, still a defining 00:07:51.860 --> 00:07:55.170 part of the Midtown East skyline. It proved they 00:07:55.170 --> 00:07:57.769 could successfully manage these huge, large -scale 00:07:57.769 --> 00:08:00.189 projects outside of their home turf in Boston. 00:08:00.430 --> 00:08:02.720 This was their beachhead in New York. So they 00:08:02.720 --> 00:08:04.800 were establishing dominance city by city, but 00:08:04.800 --> 00:08:06.720 also in terms of the quality of their tenants. 00:08:06.899 --> 00:08:09.360 And their focus then started to broaden down 00:08:09.360 --> 00:08:11.399 the East Coast, right, into the D .C. market. 00:08:11.639 --> 00:08:13.879 Yeah. And the D .C. expansion just reinforces 00:08:13.879 --> 00:08:17.019 that focus on high prestige, low risk tenancy. 00:08:17.199 --> 00:08:19.199 We see this really clearly with one of their 00:08:19.199 --> 00:08:22.319 first D .C. projects. In 1990, the company started 00:08:22.319 --> 00:08:24.579 construction on the NASA headquarters. You really 00:08:24.579 --> 00:08:27.360 can't get a more stable, higher credit tenant 00:08:27.360 --> 00:08:29.600 than the U .S. government. Absolutely not. I 00:08:29.600 --> 00:08:32.909 mean, securing a long term lease. with NASA for 00:08:32.909 --> 00:08:35.190 their headquarters. That is the definition of 00:08:35.190 --> 00:08:38.230 a premier workplace with a premier tenant. It 00:08:38.230 --> 00:08:41.409 provides reliable, long -term cash flow, which 00:08:41.409 --> 00:08:43.929 is the absolute lifeblood of any real estate 00:08:43.929 --> 00:08:46.450 portfolio. And that move just cemented their 00:08:46.450 --> 00:08:49.809 whole strategy. Find top quality long term tenants 00:08:49.809 --> 00:08:52.289 in the best locations in these high barrier to 00:08:52.289 --> 00:08:54.570 entry cities. But even that high quality asset 00:08:54.570 --> 00:08:57.350 wasn't a forever hold for them. Right. They eventually 00:08:57.350 --> 00:08:59.309 sold the property. They did. And this highlights 00:08:59.309 --> 00:09:01.809 a really crucial function of a healthy REIT, 00:09:01.850 --> 00:09:03.629 which is something called capital recycling. 00:09:03.929 --> 00:09:06.570 OK, explain that. So they held the NASA HQ building 00:09:06.570 --> 00:09:09.490 until 2002 and then they sold it to Hanna Financial 00:09:09.490 --> 00:09:13.210 Group. This shows that while BXP develops and 00:09:13.210 --> 00:09:16.149 buys for the long term, they're also strategically 00:09:16.149 --> 00:09:19.429 willing to sell off a stabilized, highly valued 00:09:19.429 --> 00:09:21.830 asset. To realize the returns and critically 00:09:21.830 --> 00:09:24.690 to recycle that capital. That's the key, to recycle 00:09:24.690 --> 00:09:27.629 it. REITs, by law, have to distribute 90 % of 00:09:27.629 --> 00:09:29.549 their taxable income back to shareholders as 00:09:29.549 --> 00:09:31.389 dividends. So they don't hold on to a lot of 00:09:31.389 --> 00:09:34.409 cash. Exactly. So to grow rapidly without taking 00:09:34.409 --> 00:09:36.889 on just tons of unsustainable debt, you need 00:09:36.889 --> 00:09:40.090 cash. Selling a highly appreciated, fully leased... 00:09:40.080 --> 00:09:44.000 building like the NASA HQ generates a huge chunk 00:09:44.000 --> 00:09:46.460 of cash that you can then immediately put into 00:09:46.460 --> 00:09:49.500 a new higher growth development or use for an 00:09:49.500 --> 00:09:51.740 even bigger acquisition. So it's this constant 00:09:51.740 --> 00:09:54.620 calculated turning over of assets. To maximize 00:09:54.620 --> 00:09:57.750 growth and return on equity. The NASA sale provided 00:09:57.750 --> 00:10:00.509 the fuel for their next big wave of strategic 00:10:00.509 --> 00:10:02.509 dominance. So those first two decades, that was 00:10:02.509 --> 00:10:04.610 all about proving the concept, right? Right. 00:10:04.789 --> 00:10:06.669 Demonstrating they had the strategy, meeting 00:10:06.669 --> 00:10:09.210 up those initial assets. But the real acceleration, 00:10:09.470 --> 00:10:12.009 the moment BXP just fundamentally transformed, 00:10:12.330 --> 00:10:15.690 came in 1997. This is the inflection point. No 00:10:15.690 --> 00:10:17.429 question. We're talking about the shift to public 00:10:17.429 --> 00:10:20.169 ownership. This is when the private venture becomes 00:10:20.169 --> 00:10:22.940 this publicly funded institutional giant. The 00:10:22.940 --> 00:10:25.919 initial public offering, the IPO. The IPO in 00:10:25.919 --> 00:10:29.559 June of 1997 was the turning point. It took BXP 00:10:29.559 --> 00:10:32.159 from this private, founder -driven company that 00:10:32.159 --> 00:10:35.200 relied on a finite pool of capital to a publicly 00:10:35.200 --> 00:10:37.240 traded company on the New York Stock Exchange. 00:10:37.559 --> 00:10:40.179 Now they're listed as BXP and they're a component 00:10:40.179 --> 00:10:42.700 of the S &P 500 index. And you can't overstate 00:10:42.700 --> 00:10:44.460 the significance of that, especially for a real 00:10:44.460 --> 00:10:46.779 estate company. Suddenly, BXP isn't just relying 00:10:46.779 --> 00:10:49.539 on their own equity or bank loans. They have 00:10:49.539 --> 00:10:53.070 access to these massive, almost limitless pools 00:10:53.070 --> 00:10:55.429 of public capital. That public listing is the 00:10:55.429 --> 00:10:58.029 REIT superpower. Yeah. The IPO gave them this 00:10:58.029 --> 00:11:01.549 colossal war chest that they needed for what 00:11:01.549 --> 00:11:04.830 came next, which was this almost shocking, aggressive 00:11:04.830 --> 00:11:08.429 expansion phase. A REIT's ability to raise money 00:11:08.429 --> 00:11:11.259 through stock offerings. That's what lets them 00:11:11.259 --> 00:11:14.299 buy these enormous, irreplaceable assets so quickly. 00:11:14.399 --> 00:11:16.440 Which is exactly what BXP did over the next 18 00:11:16.440 --> 00:11:18.840 months. They went on what analysts at the time 00:11:18.840 --> 00:11:21.080 immediately called a trophy hunt. A trophy hunt 00:11:21.080 --> 00:11:23.679 that was immediate and ferocious. It really shows 00:11:23.679 --> 00:11:25.580 they had their shopping list ready to go well 00:11:25.580 --> 00:11:27.480 before the public listed. Oh, they absolutely 00:11:27.480 --> 00:11:30.059 did. The first big move we see after the IPO 00:11:30.059 --> 00:11:33.419 in 97 was their expansion into a new city, Baltimore. 00:11:33.559 --> 00:11:37.100 In October 97, they bought 100 East Pratt Street. 00:11:37.919 --> 00:11:41.480 Most people know it as the IBM building for $137 00:11:41.480 --> 00:11:45.200 million. Now, $137 million might not sound like 00:11:45.200 --> 00:11:47.840 a GM building number today, but the source notes 00:11:47.840 --> 00:11:50.200 this was a record price for Baltimore at the 00:11:50.200 --> 00:11:53.259 time. That's the key. They set the market benchmark. 00:11:54.259 --> 00:11:56.679 BXP didn't just sneak into Baltimore. They came 00:11:56.679 --> 00:11:58.500 in and bought the single most premium building 00:11:58.500 --> 00:12:01.059 available right near the Inner Harbor. And this 00:12:01.059 --> 00:12:03.019 established a pattern for them, didn't it? A 00:12:03.019 --> 00:12:05.590 critical pattern. They enter a new market by 00:12:05.590 --> 00:12:08.769 setting a price record for a defining, highly 00:12:08.769 --> 00:12:11.990 visible asset. They buy the best quality almost 00:12:11.990 --> 00:12:14.049 regardless of the immediate cost because they 00:12:14.049 --> 00:12:15.750 believe in the long -term value of scarcity. 00:12:16.029 --> 00:12:19.549 But 1998, 1998 was the truly defining blockbuster 00:12:19.549 --> 00:12:22.190 year. This is what showed the true scale of what 00:12:22.190 --> 00:12:24.070 they could do with that new financial power. 00:12:24.250 --> 00:12:26.490 You called it the Boston -San Francisco double 00:12:26.490 --> 00:12:28.950 punch. It's a textbook case of efficient capital 00:12:28.950 --> 00:12:33.049 deployment. In 1998, they made two huge, geographically 00:12:33.049 --> 00:12:35.929 diverse acquisitions on opposite coasts practically 00:12:35.929 --> 00:12:37.950 at the same time. So first, they looked west. 00:12:38.169 --> 00:12:41.289 First, they looked west. They acquired the Embarcadero 00:12:41.289 --> 00:12:43.289 Center in San Francisco. And the Embarcadero 00:12:43.289 --> 00:12:45.350 Center isn't just one building. It's a whole 00:12:45.350 --> 00:12:47.990 complex of towers that really define the city's 00:12:47.990 --> 00:12:50.389 waterfront and financial district. Exactly. It's 00:12:50.389 --> 00:12:52.649 a massive multi -tower complex, the price tag. 00:12:52.809 --> 00:12:58.039 About $1 .2 billion. Wow. To drop over a billion 00:12:58.039 --> 00:13:01.460 dollars on a single West Coast complex in 1998. 00:13:02.720 --> 00:13:06.379 That was a seismic event. It instantly made BXP 00:13:06.379 --> 00:13:08.639 one of the most powerful institutional owners 00:13:08.639 --> 00:13:11.240 on the West Coast. San Francisco was now their 00:13:11.240 --> 00:13:14.299 second major hub outside the Northeast. And then 00:13:14.299 --> 00:13:16.620 in the same year, they came back home to Boston 00:13:16.620 --> 00:13:19.360 to cement their dominance there, proving they 00:13:19.360 --> 00:13:21.500 weren't forgetting their roots. They executed 00:13:21.500 --> 00:13:24.669 this massive homecoming trophy deal. They bought 00:13:24.669 --> 00:13:26.649 the Prudential Tower and the shops at Prudential 00:13:26.649 --> 00:13:30.250 Center, both huge Boston landmarks, for $519 00:13:30.250 --> 00:13:33.649 million. So if you add that up, $519 million 00:13:33.649 --> 00:13:37.649 in Boston, $1 .22 billion for Embarcadero. BXP 00:13:37.649 --> 00:13:41.429 deployed nearly $1 .75 billion in top -tier real 00:13:41.429 --> 00:13:43.350 estate in just a few months. In the span of a 00:13:43.350 --> 00:13:45.730 few months. It's incredible. So how did a newly 00:13:45.730 --> 00:13:48.009 public company manage to do that, spend that 00:13:48.009 --> 00:13:50.289 much in different high -cost markets so quickly? 00:13:50.590 --> 00:13:52.690 Wasn't there a risk of just taking on too much 00:13:52.690 --> 00:13:54.529 debt right out of the gate? That's a crucial 00:13:54.529 --> 00:13:57.129 question. And their ability to do it comes down 00:13:57.129 --> 00:13:59.769 to two things. First, the timing of the IPO was 00:13:59.769 --> 00:14:01.809 perfect. They hit the market during a really 00:14:01.809 --> 00:14:04.629 strong economic cycle, so they raised the maximum 00:14:04.629 --> 00:14:07.169 amount of capital. And second? Second, the quality 00:14:07.169 --> 00:14:09.889 of the assets they were buying. Banks and investors 00:14:09.889 --> 00:14:12.870 are way more willing to lend you money against 00:14:12.870 --> 00:14:15.129 a landmark like the Prudential Center or the 00:14:15.129 --> 00:14:18.009 Embarcadero. Because they have proven track records, 00:14:18.250 --> 00:14:21.389 high occupancy, reliable tenants. It's much safer 00:14:21.389 --> 00:14:23.470 than lending against a speculative new development. 00:14:23.649 --> 00:14:25.649 So, yeah, the debt was likely massive, but the 00:14:25.649 --> 00:14:28.730 assets were blue chip collateral. This is how 00:14:28.730 --> 00:14:32.129 BXP so rapidly achieved both scale and influence 00:14:32.129 --> 00:14:34.870 by only focusing on assets that are essential 00:14:34.870 --> 00:14:37.490 to the identity of their target cities. So while 00:14:37.490 --> 00:14:39.330 they're snapping up these downtown trophies, 00:14:39.330 --> 00:14:41.389 they also showed some flexibility. They were 00:14:41.389 --> 00:14:43.409 still expanding in the D .C. area, but often 00:14:43.409 --> 00:14:45.429 in key suburban hubs where corporations were 00:14:45.429 --> 00:14:47.870 setting up shop. Right. And this is a more nuanced 00:14:47.870 --> 00:14:51.610 strategic move. Between 2000 and 2001, their 00:14:51.610 --> 00:14:54.450 focus shifted a little to big commercial centers 00:14:54.450 --> 00:14:57.659 just outside the urban core. Specifically, they 00:14:57.659 --> 00:14:59.759 completed multiple office buildings in Reston 00:14:59.759 --> 00:15:01.700 Town Center in Northern Virginia. And Reston 00:15:01.700 --> 00:15:04.000 was booming at that time. Booming. It was growing 00:15:04.000 --> 00:15:07.019 into this massive hub for technology, government 00:15:07.019 --> 00:15:10.100 contractors, defense firms, all very high quality 00:15:10.100 --> 00:15:12.519 tenants. So they were following the premier tenants 00:15:12.519 --> 00:15:14.840 wherever they went, even if it wasn't a downtown 00:15:14.840 --> 00:15:17.419 skyscraper. Precisely. It shows they get that 00:15:17.419 --> 00:15:20.320 premier workplaces aren't just defined by being 00:15:20.320 --> 00:15:22.559 in a central business district skyscraper. They're 00:15:22.559 --> 00:15:24.740 defined by where the high credit, stable tenants 00:15:24.740 --> 00:15:27.100 are doing their business. And Reston was a huge 00:15:27.100 --> 00:15:29.679 hub for that kind of tenant. It was and it still 00:15:29.679 --> 00:15:32.139 is. It reinforced their commitment to the entire 00:15:32.139 --> 00:15:34.720 D .C. metro area, not just inside the Beltway. 00:15:35.120 --> 00:15:38.340 So by 2001, BXP was no longer just a Boston company. 00:15:38.480 --> 00:15:41.200 They were a national institutional force anchored 00:15:41.200 --> 00:15:44.440 in four major markets, Boston, New York, D .C. 00:15:44.460 --> 00:15:47.679 and San Francisco. So as BXP moves into the early 00:15:47.679 --> 00:15:49.919 2000s, they've already set this pattern of, you 00:15:49.919 --> 00:15:52.960 know, opportunistic sales like the NASA HQ and 00:15:52.960 --> 00:15:54.940 these high -stace acquisitions. Right. And we 00:15:54.940 --> 00:15:56.919 see them continuing their development strategy, 00:15:56.960 --> 00:15:59.200 too, especially in D .C. They're filling out 00:15:59.200 --> 00:16:01.799 the portfolio, not just buying existing buildings. 00:16:02.000 --> 00:16:04.080 And a good example of that is what? The period 00:16:04.080 --> 00:16:08.340 between 2002 and 2005. They constructed 901 New 00:16:08.340 --> 00:16:11.820 York Avenue and W in Washington, D .C. And this 00:16:11.820 --> 00:16:13.779 shows that their core skill isn't just creating 00:16:13.779 --> 00:16:16.980 assets. It's being able to execute these complex, 00:16:17.039 --> 00:16:20.059 multi -year construction projects in really competitive 00:16:20.059 --> 00:16:22.299 cities. It's a different skill set than just 00:16:22.299 --> 00:16:24.200 buying something. A completely different skill 00:16:24.200 --> 00:16:26.500 set. It requires deep relationships with city 00:16:26.500 --> 00:16:28.799 governments, the ability to secure long -term 00:16:28.799 --> 00:16:31.000 financing. It's a balance for the portfolio. 00:16:31.340 --> 00:16:34.019 You acquire stabilized cash flow, and you develop 00:16:34.019 --> 00:16:36.539 future high -yield cash flow. OK, so if the last 00:16:36.539 --> 00:16:38.480 chapter was about aggressive expansion, this 00:16:38.480 --> 00:16:41.039 next one is about setting records, pushing the 00:16:41.039 --> 00:16:43.480 very boundary of what an asset could be worth. 00:16:43.700 --> 00:16:46.379 This is where it gets, I think, really interesting, 00:16:46.519 --> 00:16:49.419 particularly with one unforgettable and just 00:16:49.419 --> 00:16:53.259 incredibly timed deal in 2008. We have to talk 00:16:53.259 --> 00:16:54.740 about the General Motors building in New York 00:16:54.740 --> 00:16:59.139 City. The GM building deal is. It's the stuff 00:16:59.139 --> 00:17:01.740 of legend in commercial real estate circles because 00:17:01.740 --> 00:17:04.339 of the price, because of the timing and just 00:17:04.339 --> 00:17:06.759 the sheer prestige of the building itself. I 00:17:06.759 --> 00:17:08.660 mean, this building is an icon. It's right on 00:17:08.660 --> 00:17:10.460 Fifth Avenue. It overlooks Central Park. Everyone 00:17:10.460 --> 00:17:13.420 knows it. So what were the exact details of that 00:17:13.420 --> 00:17:17.740 transaction in June of 2008? So BXP, in partnership 00:17:17.740 --> 00:17:20.079 with some other investors, acquires the General 00:17:20.079 --> 00:17:22.259 Motors building. The number you need to remember 00:17:22.259 --> 00:17:26.319 is the price tag. 2 .8 billion dollars. 2 .8 00:17:26.319 --> 00:17:29.160 billion. That is a staggering amount of money, 00:17:29.220 --> 00:17:31.119 even for today. It was more than staggering. 00:17:31.140 --> 00:17:34.039 It was history making. At that time, June 2008, 00:17:34.359 --> 00:17:37.140 2 .8 billion dollars was the highest price ever 00:17:37.140 --> 00:17:39.619 paid for an American office building. Ever. Ever. 00:17:39.680 --> 00:17:42.359 It completely reset the market benchmark for 00:17:42.359 --> 00:17:44.700 trophy assets, not just in the U .S., but globally. 00:17:45.140 --> 00:17:48.380 It cemented BXP's reputation as a company that 00:17:48.380 --> 00:17:51.240 was not just willing, but able. to pay a huge 00:17:51.240 --> 00:17:53.380 premium for these truly irreplaceable assets. 00:17:53.759 --> 00:17:56.079 They set the gold standard. Now, let's drill 00:17:56.079 --> 00:17:58.579 down on the timing here, because that is absolutely 00:17:58.579 --> 00:18:01.900 critical. June 2008. The credit markets were 00:18:01.900 --> 00:18:03.980 already seizing up. The housing crisis was in 00:18:03.980 --> 00:18:06.220 full swing. And the global financial crisis was 00:18:06.220 --> 00:18:08.119 just a few months from its peak. Right. That 00:18:08.119 --> 00:18:11.339 timing is just incredibly tense. BXP executes 00:18:11.339 --> 00:18:14.740 this massive deal right on the precipice of the 00:18:14.740 --> 00:18:17.490 global economic meltdown. Lehman Brothers would 00:18:17.490 --> 00:18:19.769 collapse in September, which led to this catastrophic 00:18:19.769 --> 00:18:22.609 freeze in global credit. So for a single office 00:18:22.609 --> 00:18:25.450 building deal to clear $2 .8 billion in financing 00:18:25.450 --> 00:18:28.470 right before that moment, that says a lot about 00:18:28.470 --> 00:18:30.910 BXP's stability and their access to capital. 00:18:31.069 --> 00:18:33.339 It says everything. I mean, how do you even secure 00:18:33.339 --> 00:18:36.859 financing for a deal that big in June of 2008? 00:18:37.099 --> 00:18:38.680 That's what I'm asking. It implies they must 00:18:38.680 --> 00:18:40.640 have had relationships and commitments locked 00:18:40.640 --> 00:18:42.900 in that other people just didn't. Exactly. This 00:18:42.900 --> 00:18:44.880 is where that reputation you've built for decades 00:18:44.880 --> 00:18:48.000 and the stability of being a big REIT really 00:18:48.000 --> 00:18:51.420 pays off. First, the asset itself. The GM building 00:18:51.420 --> 00:18:53.900 is like sovereign wealth. It's the epitome of 00:18:53.900 --> 00:18:57.099 secure long -term value. Lenders look at that 00:18:57.099 --> 00:18:59.460 collateral very differently. And their own balance 00:18:59.460 --> 00:19:01.920 sheet must have been strong. It was robust from 00:19:01.920 --> 00:19:03.920 the IPO and all that capital recycling we talked 00:19:03.920 --> 00:19:06.420 about. They secured the debt. They finalized 00:19:06.420 --> 00:19:08.839 the equity part just before the markets completely 00:19:08.839 --> 00:19:11.759 seized up. It was this massive financial commitment 00:19:11.759 --> 00:19:14.539 that had it been delayed by even three months 00:19:14.539 --> 00:19:16.519 would have been impossible to close. Or at least 00:19:16.519 --> 00:19:18.539 one more expensive. Way more expensive. It was 00:19:18.539 --> 00:19:21.380 a calculated, extremely well -timed gamble that 00:19:21.380 --> 00:19:24.539 just cemented their position as an absolute titan. 00:19:24.809 --> 00:19:26.910 So they weather the worst of the financial crisis 00:19:26.910 --> 00:19:29.630 and seemingly they're not even deterred. They 00:19:29.630 --> 00:19:32.369 just keep hunting for icons. And a couple of 00:19:32.369 --> 00:19:34.170 years later, they reinforce their Boston roots 00:19:34.170 --> 00:19:36.490 again. They did. They used that post -crisis 00:19:36.490 --> 00:19:39.470 environment to acquire another defining piece 00:19:39.470 --> 00:19:42.250 of the Boston skyline. We're talking about the 00:19:42.250 --> 00:19:45.069 acquisition of 200 Clarendon Street. Which everyone 00:19:45.069 --> 00:19:47.849 in Boston knows by its famous former name, the 00:19:47.849 --> 00:19:51.069 John Hancock Tower. The John Hancock Tower, the 00:19:51.069 --> 00:19:54.269 famous I .M. Pye designed glass building. a true 00:19:54.269 --> 00:19:56.750 symbol of the city. And the deal for that? In 00:19:56.750 --> 00:20:00.910 October of 2010, BXP secures this massive, architecturally 00:20:00.910 --> 00:20:05.829 significant tower for $930 million. So this acquisition, 00:20:05.829 --> 00:20:07.890 when you combine it with the Prudential Tower 00:20:07.890 --> 00:20:11.390 they already owned, that gave BXP control of 00:20:11.390 --> 00:20:13.390 two of the three most recognizable buildings 00:20:13.390 --> 00:20:16.089 in the entire Boston skyline. It really does. 00:20:16.250 --> 00:20:19.450 It just reinforces that core part of BXP's strategy. 00:20:20.110 --> 00:20:23.109 They own the defining architectural symbols in 00:20:23.109 --> 00:20:25.190 their target markets. It's a strategy that's 00:20:25.190 --> 00:20:28.170 rooted in scarcity and prestige. It is the GM 00:20:28.170 --> 00:20:30.480 building in New York. The Prue and the Hancock 00:20:30.480 --> 00:20:33.039 in Boston, the Embarcadero in San Francisco. 00:20:33.099 --> 00:20:35.359 These aren't just addresses, they're cultural 00:20:35.359 --> 00:20:37.680 landmarks. And owning those symbols gives them 00:20:37.680 --> 00:20:40.539 unmatched visibility. And crucially, it lets 00:20:40.539 --> 00:20:43.500 them attract and keep the most reliable, highest 00:20:43.500 --> 00:20:46.140 paying corporate tenants. That helps them mitigate 00:20:46.140 --> 00:20:49.059 risk in down cycles. They're essentially buying 00:20:49.059 --> 00:20:51.160 bragging rights that translate directly into 00:20:51.160 --> 00:20:53.960 premium rents and sustain high occupancy, no 00:20:53.960 --> 00:20:55.960 matter what the broader office market is doing. 00:20:56.140 --> 00:20:59.519 So by 2012, BXP had a... effectively navigated 00:20:59.519 --> 00:21:01.500 the financial crisis, proved their institutional 00:21:01.500 --> 00:21:03.920 strength, and put together a collection of assets 00:21:03.920 --> 00:21:06.180 that just reads like a greatest hits of American 00:21:06.180 --> 00:21:08.559 commercial architecture. So the next stage of 00:21:08.559 --> 00:21:11.559 BXP's evolution. is really characterized by a 00:21:11.559 --> 00:21:15.299 shift back towards massive, complex, ground -up 00:21:15.299 --> 00:21:17.940 development. So not just buying things. Not just 00:21:17.940 --> 00:21:20.279 buying things, and often doing it through these 00:21:20.279 --> 00:21:23.319 strategic partnerships. It shows their confidence 00:21:23.319 --> 00:21:27.039 in creating value from scratch, not just acquiring 00:21:27.039 --> 00:21:29.819 existing value. And the prime example of this 00:21:29.819 --> 00:21:32.200 is the development of the Salesforce Tower in 00:21:32.200 --> 00:21:34.660 San Francisco. And this is a really different 00:21:34.660 --> 00:21:38.220 strategic move compared to, say, the GM building 00:21:38.220 --> 00:21:41.950 acquisition. The GM building was an instant purchase 00:21:41.950 --> 00:21:44.799 of an existing icon. The Salesforce Tower was 00:21:44.799 --> 00:21:47.259 a seven -year project. That's the crucial contrast 00:21:47.259 --> 00:21:50.160 for you to note. In 2012, BXP partnered with 00:21:50.160 --> 00:21:52.619 Heinz Interest Limited Partnership, another globally 00:21:52.619 --> 00:21:54.920 respected developer, to start developing the 00:21:54.920 --> 00:21:57.200 Salesforce Tower. This was the long game. The 00:21:57.200 --> 00:21:59.900 ultimate long game. It required years of permitting, 00:21:59.940 --> 00:22:02.339 financing, construction, all to deliver what 00:22:02.339 --> 00:22:04.200 eventually became the tallest building in San 00:22:04.200 --> 00:22:07.140 Francisco. It just demonstrates incredible strategic 00:22:07.140 --> 00:22:10.180 patience and a real long -term commitment to 00:22:10.180 --> 00:22:12.430 that market. And the key takeaway about that 00:22:12.430 --> 00:22:15.430 partnership is how BXP eventually took it over. 00:22:15.589 --> 00:22:18.049 They didn't just stay a partner. They systematically 00:22:18.049 --> 00:22:21.089 got to 100 percent control of the property by 00:22:21.089 --> 00:22:24.490 2019. And that seven year timeline shows their 00:22:24.490 --> 00:22:27.029 patience and their willingness to deploy capital 00:22:27.029 --> 00:22:30.109 over the long haul to get full ownership of a 00:22:30.109 --> 00:22:33.789 trophy asset once it's stabilized and generating 00:22:33.789 --> 00:22:36.660 reliable cash flow. So when they bought out Heinz, 00:22:36.660 --> 00:22:38.359 what were they signaling? They were signaling 00:22:38.359 --> 00:22:41.359 absolute unequivocal confidence, not just in 00:22:41.359 --> 00:22:43.160 the building itself, but in the long term economic 00:22:43.160 --> 00:22:45.500 strength of the San Francisco tech market, which, 00:22:45.599 --> 00:22:48.420 you know, anchors that building's tenancy. Buying 00:22:48.420 --> 00:22:50.220 out a world class partner for a full control 00:22:50.220 --> 00:22:53.380 stake that signals you believe in decades of 00:22:53.380 --> 00:22:55.559 value ahead. OK, let's step back for a second 00:22:55.559 --> 00:22:57.140 and look at their current corporate identity. 00:22:57.900 --> 00:23:00.339 At some point, the company streamlined its name. 00:23:00.460 --> 00:23:03.579 It went from Boston Properties, Inc. to just 00:23:03.579 --> 00:23:06.819 BXP, Inc. Yeah, and that name change really reflects 00:23:06.819 --> 00:23:09.420 the reality of their scope. I mean, while Boston 00:23:09.420 --> 00:23:11.180 is their heritage, it's their headquarters, it's 00:23:11.180 --> 00:23:14.200 a major hub, the company's influence long ago 00:23:14.200 --> 00:23:16.180 went beyond a single city. They're a national 00:23:16.180 --> 00:23:18.519 player. They're a truly national player, focused 00:23:18.519 --> 00:23:21.140 on those six core high -growth, high -cost cities 00:23:21.140 --> 00:23:25.160 we mentioned. BXP is just a cleaner, more corporate, 00:23:25.380 --> 00:23:28.099 more geographically representative name for an 00:23:28.099 --> 00:23:31.259 S &P 500 company whose assets stretch from L 00:23:31.259 --> 00:23:33.779 .A. to New York. It ensures they're not perceived 00:23:33.779 --> 00:23:36.609 as having a regional bias. So now let's get into 00:23:36.609 --> 00:23:39.109 the current operational metrics. This is as of 00:23:39.109 --> 00:23:42.430 December 31st, 2023. And the sheer scale here 00:23:42.430 --> 00:23:45.009 is what validates every single strategic move 00:23:45.009 --> 00:23:47.190 we've talked about. Let's put some concrete numbers 00:23:47.190 --> 00:23:50.109 to that scale for you. As of the end of 2023. 00:23:51.000 --> 00:23:54.940 BXP owned or had interests in 188 commercial 00:23:54.940 --> 00:23:58.700 real estate properties. 188. That is a huge, 00:23:58.779 --> 00:24:01.380 highly valuable, and very specifically concentrated 00:24:01.380 --> 00:24:04.500 portfolio of top -tier buildings. And that portfolio 00:24:04.500 --> 00:24:08.579 adds up to approximately 53 .3 million net rentable 00:24:08.579 --> 00:24:10.420 square feet. It's almost hard to even visualize 00:24:10.420 --> 00:24:13.130 that amount of space. It is. I mean, put it simply, 00:24:13.269 --> 00:24:15.069 that's roughly the equivalent of stacking up 00:24:15.069 --> 00:24:17.269 the entire office space of a medium -sized American 00:24:17.269 --> 00:24:19.990 city and then concentrating all of it exclusively 00:24:19.990 --> 00:24:22.630 in the most expensive, highest demand parts of 00:24:22.630 --> 00:24:24.670 the country. So for them, that concentration 00:24:24.670 --> 00:24:27.970 isn't risk. It's a concentration of value. That's 00:24:27.970 --> 00:24:30.430 their bet. They believe that even if the broader 00:24:30.430 --> 00:24:33.650 office market slows down, the absolute best, 00:24:33.910 --> 00:24:36.690 most modern, best located spaces in these six 00:24:36.690 --> 00:24:38.950 cities will always outperform the rest of the 00:24:38.950 --> 00:24:41.319 market. And we have to just emphasize that relentless 00:24:41.319 --> 00:24:44.259 strategic filter again. Premier workplaces in 00:24:44.259 --> 00:24:46.980 Boston, L .A., New York, San Francisco, Seattle, 00:24:47.200 --> 00:24:50.400 and D .C., that narrow, high -quality filter 00:24:50.400 --> 00:24:53.240 has defined their success for 50 years. It's 00:24:53.240 --> 00:24:54.980 the strategic thread that ties it all together. 00:24:55.559 --> 00:24:58.400 They don't chase new markets unless those markets 00:24:58.400 --> 00:25:00.960 meet their criteria of being a global economic 00:25:00.960 --> 00:25:03.779 hub with high barriers to entry. Right. Like 00:25:03.779 --> 00:25:05.859 Seattle. Seattle is a perfect example. It became 00:25:05.859 --> 00:25:08.119 a natural addition because of the explosive growth 00:25:08.119 --> 00:25:11.339 of its tech economy in the 2010s. BXP simply 00:25:11.339 --> 00:25:13.440 follows the capital and the high credit tenants. 00:25:13.640 --> 00:25:15.539 And before we get into the financials, let's 00:25:15.539 --> 00:25:17.480 just briefly touch on the leadership because 00:25:17.480 --> 00:25:19.759 the continuity there is pretty remarkable and 00:25:19.759 --> 00:25:21.799 it reinforces the consistency of their vision. 00:25:22.160 --> 00:25:25.500 It really does. As of 2023, the The key people 00:25:25.500 --> 00:25:29.240 include Owen D. Thomas as the CEO, Douglas T. 00:25:29.319 --> 00:25:32.019 Lind as president, and founder Mortimer Zuckerman 00:25:32.019 --> 00:25:35.019 is still deeply involved as the chairman. Having 00:25:35.019 --> 00:25:37.700 Zuckerman still there as chairman over five decades 00:25:37.700 --> 00:25:40.940 after he co -founded the company, that says a 00:25:40.940 --> 00:25:43.799 lot about a strong, remarkably consistent corporate 00:25:43.799 --> 00:25:46.799 culture. It's incredible. He oversaw that entire 00:25:46.799 --> 00:25:51.000 arc. from this small private Boston firm to a 00:25:51.000 --> 00:25:54.180 national public multibillion dollar REIT. And 00:25:54.180 --> 00:25:56.119 having the founder still at the helm ensures 00:25:56.119 --> 00:25:58.380 that original mandate acquiring and developing 00:25:58.380 --> 00:26:02.279 premier irreplaceable assets is preserved, even 00:26:02.279 --> 00:26:04.880 as the scale just multiplies exponentially. And 00:26:04.880 --> 00:26:06.920 that continuity of leadership, especially through 00:26:06.920 --> 00:26:09.400 recessions and market shifts, must provide a 00:26:09.400 --> 00:26:11.099 lot of confidence to institutional investors. 00:26:11.359 --> 00:26:13.160 A huge amount of confidence. All right. Now we 00:26:13.160 --> 00:26:14.900 come to the part that really provides the proof 00:26:14.900 --> 00:26:17.430 for this whole five decade journey. the money. 00:26:17.569 --> 00:26:19.490 We've been throwing around billions in acquisition 00:26:19.490 --> 00:26:21.849 costs, but let's review the hard figures from 00:26:21.849 --> 00:26:25.130 their 2023 10K annual report. This is so you 00:26:25.130 --> 00:26:27.369 can truly understand the operational size of 00:26:27.369 --> 00:26:30.170 BXP and how all that strategy paid off. These 00:26:30.170 --> 00:26:33.549 numbers are the cold, hard proof of their scale 00:26:33.549 --> 00:26:36.849 and their success in this very specific premium 00:26:36.849 --> 00:26:39.829 market. So for the year ending December 30 front 00:26:39.829 --> 00:26:45.779 2023, BXP reported revenue of 3 .274 Billion 00:26:45.779 --> 00:26:48.720 dollars. Over $3 billion. And that's generated 00:26:48.720 --> 00:26:51.180 almost exclusively from leasing premier office 00:26:51.180 --> 00:26:53.660 space in just six metro areas. That's right. 00:26:53.720 --> 00:26:56.539 Their net income for the year stood at $291 million. 00:26:57.079 --> 00:26:59.880 And now here's where the massive institutional 00:26:59.880 --> 00:27:03.180 nature of the company really shows up. Their 00:27:03.180 --> 00:27:05.660 total assets. Go ahead. Total assets were valued 00:27:05.660 --> 00:27:11.000 at $26 .026 billion. $26 billion in physical 00:27:11.000 --> 00:27:13.660 real estate skyscrapers, huge commercial complexes, 00:27:13.920 --> 00:27:15.799 prime development land. And their total equity, 00:27:15.920 --> 00:27:17.660 which is their value after you subtract all their 00:27:17.660 --> 00:27:21.380 liabilities, stood at $8 .877 billion. Let's 00:27:21.380 --> 00:27:24.259 just pause on that $26 billion asset figure for 00:27:24.259 --> 00:27:26.339 a moment. What does that kind of asset base tell 00:27:26.339 --> 00:27:28.640 us about BXP's debt or their market exposure? 00:27:28.980 --> 00:27:32.420 It tells us two critical things. First, it signifies 00:27:32.420 --> 00:27:34.900 tremendous financial leverage and borrowing capacity. 00:27:35.400 --> 00:27:38.200 When a company has $26 billion in high -quality 00:27:38.200 --> 00:27:40.759 collateral, they can get debt financing at much 00:27:40.759 --> 00:27:42.920 better rates than almost any competitor. And 00:27:42.920 --> 00:27:45.579 the second thing. Second, it signifies resilience. 00:27:46.099 --> 00:27:49.940 Even if market conditions get worse, that asset 00:27:49.940 --> 00:27:53.339 base, focused only on premier locations, is inherently 00:27:53.339 --> 00:27:56.599 more stable. It holds its value better than properties 00:27:56.599 --> 00:27:59.559 in secondary markets. The assets themselves are 00:27:59.559 --> 00:28:01.460 like an insurance policy against a widespread 00:28:01.460 --> 00:28:03.799 downturn. And here's the number that I think 00:28:03.799 --> 00:28:06.539 is most surprising for a lot of listeners. Despite 00:28:06.539 --> 00:28:09.680 managing a portfolio worth over $26 billion and 00:28:09.680 --> 00:28:12.539 generating over $3 .2 billion in annual revenue, 00:28:13.390 --> 00:28:16.029 The number of employees. It is surprisingly lean. 00:28:16.410 --> 00:28:19.230 The size of the operation relative to its financial 00:28:19.230 --> 00:28:22.210 scope is a defining feature of the whole REIT 00:28:22.210 --> 00:28:24.809 business model. So what is it? BXP's total number 00:28:24.809 --> 00:28:29.369 of employees is just 836. 836 people. If this 00:28:29.369 --> 00:28:31.470 were a tech company or a major retailer generating 00:28:31.470 --> 00:28:33.630 that kind of revenue, they would have tens of 00:28:33.630 --> 00:28:35.589 thousands of employees. Tens of thousands globally. 00:28:36.029 --> 00:28:38.369 So what does this all mean? If we connect this 00:28:38.369 --> 00:28:41.119 back to the bigger picture. The financial data 00:28:41.119 --> 00:28:44.440 perfectly sums up the nature of a modern institutional 00:28:44.440 --> 00:28:49.140 REIT. That discrepancy, that gap, it underscores 00:28:49.140 --> 00:28:52.900 BXP's precise identity. They are primarily a 00:28:52.900 --> 00:28:55.079 capital allocator and an asset manager. They 00:28:55.079 --> 00:28:57.579 are not an operational service business. Okay, 00:28:57.619 --> 00:28:59.619 so let's break that down conversationally. Where 00:28:59.619 --> 00:29:02.240 are they saving on all that staff cost? What 00:29:02.240 --> 00:29:04.660 aren't they doing? Well, BXP is focused on the 00:29:04.660 --> 00:29:08.470 high -level stuff. Strategy, financing, leasing, 00:29:08.589 --> 00:29:11.369 portfolio management. They're managing the leases 00:29:11.369 --> 00:29:13.509 for Salesforce, for major financial institutions. 00:29:13.930 --> 00:29:15.809 They are not running the day -to -day operations 00:29:15.809 --> 00:29:18.289 that require massive staff. So they outsource 00:29:18.289 --> 00:29:20.910 things like security, cleaning? They outsource 00:29:20.910 --> 00:29:23.250 many of those operational services, yes. They 00:29:23.250 --> 00:29:25.029 don't employ thousands of people running factories 00:29:25.029 --> 00:29:27.289 or call centers. The vast majority of their expenses 00:29:27.289 --> 00:29:30.289 are property upkeep, taxes, debt service, and 00:29:30.289 --> 00:29:32.470 administrative overhead. The value is locked 00:29:32.470 --> 00:29:34.529 in the physical buildings and the long -term 00:29:34.529 --> 00:29:36.890 high credit quality of their tenant leases. So 00:29:36.890 --> 00:29:40.089 this lean, high asset, low employee model is 00:29:40.089 --> 00:29:42.769 key to the capital efficiency that a modern REIT 00:29:42.769 --> 00:29:45.990 needs. It's essential. It allows them to generate 00:29:45.990 --> 00:29:49.089 significant income with minimal human capital 00:29:49.089 --> 00:29:51.829 investment, which makes that dividend yield so 00:29:51.829 --> 00:29:54.930 reliable for investors. And their entire market 00:29:54.930 --> 00:29:57.309 strategy is tied up in this one principle. Just 00:29:57.309 --> 00:30:00.900 one. investing only in premier workplaces in 00:30:00.900 --> 00:30:03.839 high -cost, high -demand metropolitan areas. 00:30:04.220 --> 00:30:06.980 That strategic thread is the reason every asset 00:30:06.980 --> 00:30:10.240 we've discussed, the stable NASA HQ, the record 00:30:10.240 --> 00:30:13.059 -breaking GM building, the iconic John Hancock 00:30:13.059 --> 00:30:15.779 Tower, and the massive Salesforce Tower, they 00:30:15.779 --> 00:30:17.799 all fit perfectly in the same portfolio. They're 00:30:17.799 --> 00:30:19.660 buying permanence, prestige, and institutional 00:30:19.660 --> 00:30:22.730 stability. That's it. They are essentially placing 00:30:22.730 --> 00:30:25.809 a multibillion dollar bet on the enduring necessity 00:30:25.809 --> 00:30:28.809 of the centralized high quality office experience 00:30:28.809 --> 00:30:31.609 in these global economic hubs. They believe that 00:30:31.609 --> 00:30:34.470 top tier physical location will remain an irreplaceable 00:30:34.470 --> 00:30:36.769 competitive advantage for major global firms. 00:30:36.990 --> 00:30:38.430 And the financial numbers, they just reflect 00:30:38.430 --> 00:30:41.410 that bet. Decades of successful execution on 00:30:41.410 --> 00:30:43.950 that one specific mandate. Right. They're not 00:30:43.950 --> 00:30:46.130 chasing volume. They're chasing quality and scarcity. 00:30:46.589 --> 00:30:49.730 And in real estate, the value of the best locations 00:30:49.730 --> 00:30:51.829 in the best cities. tends to appreciate over 00:30:51.829 --> 00:30:54.630 the long term. That makes BXP's portfolio incredibly 00:30:54.630 --> 00:30:57.349 resilient, even through economic shifts and work 00:30:57.349 --> 00:30:59.910 from home cycles. If the central business district 00:30:59.910 --> 00:31:03.250 survives, BXP will thrive because they own the 00:31:03.250 --> 00:31:06.950 best of it. So this deep dive into BXP Inc., 00:31:06.950 --> 00:31:09.509 formerly Boston Properties, it's really shown 00:31:09.509 --> 00:31:12.609 us the anatomy of a truly premier REIT. A company 00:31:12.609 --> 00:31:14.990 that grew from a local Boston venture into a 00:31:14.990 --> 00:31:18.130 national institutional force, all based on strategic 00:31:18.130 --> 00:31:20.809 audacity and capital discipline. Yeah. And if 00:31:20.809 --> 00:31:23.089 we summarize the key takeaways for you, it really 00:31:23.089 --> 00:31:25.190 boils down to three crucial strategic phases. 00:31:25.750 --> 00:31:28.089 First, that founding vision from Zuckerman and 00:31:28.089 --> 00:31:31.130 Lynn back in 1970. And that early strategic audacity, 00:31:31.230 --> 00:31:33.730 outbidding Donald Trump in 85 and then using 00:31:33.730 --> 00:31:36.369 the profits from flipping that land to fuel their 00:31:36.369 --> 00:31:39.309 initial expansion. Exactly. Then phase two. The 00:31:39.309 --> 00:31:42.450 transformative 1997 IPO, that was the financial 00:31:42.450 --> 00:31:44.130 engine that allowed them to go on that trophy 00:31:44.130 --> 00:31:46.890 hunt. Which immediately led to those massive 00:31:46.890 --> 00:31:50.109 multi -billion dollar acquisitions like the Embarcadero 00:31:50.109 --> 00:31:52.049 Center and the Prudential Tower establishing 00:31:52.049 --> 00:31:55.190 national scale almost instantly. And then third, 00:31:55.369 --> 00:31:58.890 that strategic focus on defining landmark properties. 00:31:59.359 --> 00:32:01.779 Highlighted by the $2 .8 billion acquisition 00:32:01.779 --> 00:32:05.140 of the GM building right before the 2008 crisis. 00:32:05.400 --> 00:32:07.160 And the long -term commitment to development 00:32:07.160 --> 00:32:10.539 shown by them getting 100 % control of the Salesforce 00:32:10.539 --> 00:32:13.940 tower by 2019. Those moves just cemented their 00:32:13.940 --> 00:32:16.700 status as the custodian of America's urban commercial 00:32:16.700 --> 00:32:19.240 icons. They own the most expensive, most exclusive 00:32:19.240 --> 00:32:21.140 real estate in the country's biggest cities. 00:32:21.359 --> 00:32:24.299 It's an incredibly clear, focused, and financially 00:32:24.299 --> 00:32:26.779 proven strategy built on this idea of permanence. 00:32:26.980 --> 00:32:28.809 Which brings us to our final provider. pocket 00:32:28.809 --> 00:32:30.890 of thought for you to consider based on everything 00:32:30.890 --> 00:32:35.009 we've unpacked today. Given BXP's specific, unwavering 00:32:35.009 --> 00:32:38.710 focus on the scarcity of premier workplaces and 00:32:38.710 --> 00:32:41.970 their $26 billion portfolio anchored by assets 00:32:41.970 --> 00:32:44.230 like the GM building and the Salesforce tower, 00:32:44.490 --> 00:32:47.289 how does the continued financial performance 00:32:47.289 --> 00:32:51.210 and robust asset valuation of BXP reflect the 00:32:51.210 --> 00:32:54.920 long -term perceived value and... Well, the future 00:32:54.920 --> 00:32:57.039 of the American downtown office tower. That's 00:32:57.039 --> 00:32:59.500 a great question. They're betting billions that 00:32:59.500 --> 00:33:01.720 the absolute top tier of commercial real estate 00:33:01.720 --> 00:33:04.720 remains vital and irreplaceable, even in a world 00:33:04.720 --> 00:33:07.740 that is shifting digitally. So what does BXP's 00:33:07.740 --> 00:33:09.859 sustained success tell you about the economic 00:33:09.859 --> 00:33:12.480 future of these global gateway cities? Food for 00:33:12.480 --> 00:33:14.839 thought, indeed, as the landscape continues to 00:33:14.839 --> 00:33:16.900 evolve. thank you for joining us for this deep 00:33:16.900 --> 00:33:20.079 dive into bxp inc we hope this has given you 00:33:20.079 --> 00:33:22.559 a truly well -informed shortcut into understanding 00:33:22.559 --> 00:33:24.740 the titans of commercial real estate we'll catch 00:33:24.740 --> 00:33:26.119 you on the next one we'll catch you on the next 00:33:26.119 --> 00:33:26.599 deep dive