BXP, Inc. (BXP)

Total return at 5 years: 18.6%/year = 14.7% appreciation + 3.9% dividend. The target price ($118) is ex-dividend; the $15 in dividends collected over 5 years are added separately.

By both methods, the value today (DCF $85 · Multiples $108) exceeds the market price ($60).

Today — with margin of safety: at $60 trades ~44.8% below its value discounted to today (~$108) — the wide discount we require (≥38%, equivalent to a ~15% annual return); the risk is covered by the margin, not the rate.

At 5 years — Muy infravalorado: the target price ($118) plus dividends yield above the required average return (10%) — the business compounds.

The bridge: the return at 5 years comfortably exceeds the risk-free rate (4.5%) — and the discount reaches the required margin of safety.

Educational / informational. Does not constitute investment advice.

The inverse approach: instead of projecting growth to obtain the value, the market price ($60) is taken as given and it solves for what annual owner-earnings growth would need to hold for 5 years for the present value —at the method's rate (4.5%, no-growth terminal)— to equal that price. It is the disconfirmation test: the expectations the price already pays for, contrasted against the method's projection.

The market discounts less growth (-4.1%/year) than we project (3.5%/year) → if the base case holds, there is margin: perception is more pessimistic than the estimated reality.

That growth implies ~$0.4 bn of owner earnings in year 5 (vs ~$0.6 bn of our base case). It recalculates if the DCF assumptions are edited.

A REIT is valued on price/Core-FFO (not P/E: the accounting depreciation of the property is not an economic cost). ⚠️ The real cash is AFFO (owner earnings), substantially lower than Core FFO —it subtracts recurring capex and non-cash straight-line rent—, and the dividend consumes almost all of the AFFO. It returns capital via dividend; it may issue equity to fund development. Total return adds the dividend collected along the way. In edit mode, the metric, shares, dividend, and exit multiple can be adjusted.

BXP is a premium office REIT concentrated in six gateway markets (Boston, LA, New York, San Francisco, Seattle, Washington DC). Year-1 FFO per share starts from the midpoint of the FY2026 guidance declared in the release of 28-Jul-2026 ($6.99-$7.05, midpoint $7.02), not from the raw historical trajectory, following the R1 prior rule. The path shows a reacceleration —not a monotonic deceleration— because the business is coming off an occupancy trough (86.7% at the end of 2025) that is already recovering (88.4% in the second quarter of 2026, with leased occupancy at 91.3%) and the company's own guidance projects same-property growth accelerating from 0.86% in 2025 to a range of 1.8%-2.6% in 2026: it is the rebound exception of rule R3, declared explicitly. The bear case stresses year 1 with a slower occupancy recovery and greater dilution from equity issuance to support the leverage (7.94 times net debt to EBITDAre); the bull case accelerates the recovery toward the upper end of guidance and beyond. The company does not repurchase shares —it funds growth with modest issuance via ATM programs—, so the share count rises slightly in all three paths rather than contracting.

Today's multiple compresses on its own going forward as the metric per share grows. The exit multiple at 3 years is higher than the terminal at 5 years —at 3 years there is more growth still ahead—. Total return adds the dividend collected; the required return is applied to the base scenario.

They are valued separately, with their own rationale, and are not incorporated into the base or the verdict (they are excess return). When assigning them value — in Editmode —, the total with optionalities updates live, without moving the base.

The verdict, the base CAGR, and the margin of safety are always calculated on the base; optionalities do not alter them (with optionalities at $0 they do not move).

Each card fixes a required annual return and answers: if the business is worth $118 in 5 years, what is the maximum that can be paid today to obtain that return? Since it now trades at $60, the margin of safety is how much cheaper the market is than that maximum. The three thresholds: 4% covers inflation (the floor), 10% is the long-term average return, and 15% is the level of a great investment.

With a target price of $118 in 5 years plus $15 of dividends collected (the dividend adds to the return, not to the price) and a required return of 4.5% annually, the maximum to pay today is $108. Against the current market price ($60), the margin of safety is 44.8% (trades below the maximum → there is margin) and the total return at that price would be 18.6% annually.

• Trades well below the quality REIT band. ~10x adjusted FFO today against a [15,20] band for quality REITs, even placing the exit multiple at the floor due to leverage.
• Attractive dividend yield after the cut. $2.80/share on a $68.3 price yields ~4.1%, with a sustainable payout on AFFO near 86%.
• Leverage limits how much premium is warranted today. 7.94x net debt/EBITDAre is high by REIT standards (comfortable is usually 5-6x), and is the main reason for not placing the multiple higher in the band.
• The discount is not just perception. Part of the gap reflects real balance-sheet and office-sector-cycle risk, not solely unwarranted market aversion.

• ✓ ROIC exceeds the cost of capital (~10%)
• ✓ CFROIC backs up the ROIC (100%, cash vs. accruals)
• ✓ Healthy balance sheet (low corporate debt)
• ✓ Durable competitive moat (multiple advantages)

• Cash generation backed by long-term contracts. FFO and AFFO rest on contracts with an average term of 7.9 years, providing flow predictability even in the sector's down cycle.
• Return on capital near the 10% bar. NOI on real invested capital (equity + debt − cash) is around 10.5%, just above the method's quality threshold, held back by leverage and still-suboptimal occupancy.
• Payout on AFFO already sustainable. The payout ratio on AFFO fell from an unsustainable 140% in the first quarter of 2026 to 87.5% in the second, evidence that the dividend cut restored a sustainable base.
• Recurring impairments on specific assets. US$85.8M on consolidated properties and US$145.1M on the Gateway Commons joint venture in 2025 — not unusual for a REIT that rotates assets, but they weigh on reported GAAP earnings.

Annual levels from the official filing (10-K); the % over each bar is the year-over-year (YoY) growth vs the prior year.

The three drivers tell the same story from different angles: occupancy and leasing rise quarter over quarter while net leverage falls — a portfolio that is recovering while also deleveraging, not a business offsetting operating weakness with more debt. BXP's growth is, in essence, occupancy × rent per square foot on a relatively stable square-footage base (new development is selective and mostly pre-leased), not a story of aggressive space expansion.

The % are the annual (year-over-year) growth: each year —historical and projected— vs the prior one; the TTM (trailing 12m) vs the TTM of a year ago, to avoid overlapping windows. The historicals are exact figures from the official filings; the projected years come from the year-by-year model (the intermediate years without their own series are interpolated between the anchors). The projected columns (+1y…+5y) are 12-month windows counted from the TTM close (30-jun-2026): the projection starts from the most recently reported data, not the fiscal year. The projected base is realistic and unbiased — the risk discount is applied at the end, via the required return. The rationale for each metric is in the (i).

• Revenue decelerating but positive. 5.3% FY23 → 4.1% FY24 → 2.2% FY25 → 1.9% over the trailing twelve months.
• 2026 guidance points to reacceleration. Guided same-property growth (1.8%-2.6%) is above the 0.86% realized in 2025.
• Solid new leasing activity. 5.6 million square feet signed in 2025 with an average term of 10.1 years, above the average term of the existing portfolio.
• External growth limited by the cycle. Acquisitions are opportunistic and small while deleveraging via asset sales continues, so most growth depends on the internal recovery.

• Moat based on geographic barriers to entry. Concentration in six gateway markets with restrictive development approvals structurally limits new competing supply.
• Occupancy recovering but still depressed. 88.4% in the second quarter of 2026 remains below historical pre-pandemic levels (~91-93%) for BXP's premium portfolio.
• Low exposure to near-term expirations. Only 7.2% of in-service square footage expires through year-end 2027, giving near-term revenue visibility.
• Pre-leased development pipeline. 61% of the construction/redevelopment pipeline already has a signed lease, reducing pure speculative execution risk.
• Dependence on just six markets. With no geographic diversification, a concentrated regional downturn would hit the entire business with no cushion.

Not all debt is equal: only the structural needs refinancing; the rest is operational (self-liquidating).

Structural debt is what is exposed to the contraction phase of the cycle; operational debt (leases, matched funding) self-liquidates with the business.

• ✕Portfolio quality (occupancy + same-store NOI)Occupancy 88.4% · same-store NOI +0.9%
• !Dividend coverage (payout over AFFO)86% of AFFO

A traffic-light interpreted by the method (not generic): float (negative WC) adds up, capex is judged by incremental ROIC (malinvestment test), and a lender is not subjected to corporate solvency. The (i) shows the derivation of each number.

• Elevated leverage, deleveraging. 7.94x net debt/EBITDAre in the second quarter of 2026, down from 8.50x in the first, via the asset sale program.
• Investment-grade rating. BBB (S&P) / Baa2 (Moody's) on senior unsecured debt, maintaining access to credit markets on reasonable terms.
• Cash relatively tight versus total debt. US$493.9M of cash against ~US$14.9bn of total gross debt (senior notes, secured debt, convertibles, and other loans) — liquidity support depends on continued access to credit markets and the sale program.
• Payout on AFFO already normalized. The payout ratio on AFFO fell to a sustainable level (~86-88%) after the dividend cut, reducing the risk of a second cut in the visible horizon.

Who owns the shares — the alignment and whether there is a controlling shareholder.

• CEO also chairs the Board. Owen D. Thomas combines the CEO and Chairman roles, a governance structure that concentrates decision-making power, though common in a REIT of this scale.
• Modest skin in the game. The group of directors and executives holds ~1.5% of the capital — a real but not founder/controlling-family-level alignment.
• No buybacks, capital toward development and dividend. Capital allocation prioritizes selective pre-leased development and sustaining the dividend after its cut, avoiding buybacks at a multiple that would in any case favor shareholders given the current discount.

• Missing buyers: the structural fear of remote/hybrid work weighs on the entire publicly traded office subsector, without distinguishing between BXP's premium portfolio and generic offices that are persistently losing demand.
• Residual motivated sellers: the recent memory of the dividend cut (from ~$4.37 to $2.80/share) continues to push income-oriented investors to rotate out of the name, even though the new payout is already sustainable on AFFO.
• Cycle bottom: occupancy bottomed in 2024-2025 and has only recently begun recovering quarter over quarter — the market usually takes several consecutive quarters of data before believing a turn in trend in such a battered sector.

Elevated leverage (7.94x) is real and limits how much of this gap can be considered pure overreaction; this is not a pure missing-buyers case.

The annual return (CAGR at 5 years) in each scenario, with the total period return below — the margin of safety made visual: upside range wide, downside range narrow.

Even in the bear scenario, the return holds at +13%/year (+88% total): the margin of safety protects the downside. The bull (+23%/year, +181% total) exceeds it comfortably — a favorable asymmetry, with a narrow downside range and a wide upside range.

• Remote work and AI. Sustained shifts in space utilization and headcount reductions attributable to AI have already reduced office demand and could continue to do so.
• Geographic concentration. Only six markets, with no diversification to cushion a specific regional downturn.
• Leverage and refinancing. 7.94x net debt/EBITDAre leaves little room against a rate or credit shock.
• Recurring impairments. US$85.8M and US$145.1M recognized in 2025 on specific assets and a joint venture could recur.
• Dependence on key personnel. The national reputation of the CEO and executive team is, according to the filing itself, an asset that the loss of these executives would impair.

Each thinker's analytical framework applied to our data.

• Buffett / Graham Quality + margin of safety

  A wide moat and ROIC 11% above the 10% bar, with a +45% margin → a quality business at a good price.

• Peter Lynch Growth at a reasonable price (GARP)

  A stalwart growing 4% at a multiple/growth of 5.2 → expensive for its growth.

• Joel Greenblatt Cheap and high-return (Magic Formula)

  Not applicable — the Magic Formula excludes financials and regulated businesses (EBIT/EV does not capture the operating leverage).

• Howard Marks Perception vs reality + cycle

  The price discounts -4% vs our 4%: perception is more pessimistic than reality, with an identified source of the discount.

• Seth Klarman Capital protection (bear scenario)

  Bear-scenario floor +9%/yr, bull-scenario ceiling +19%/yr over 5y and a +45% margin → capital protected, asymmetry in your favor.

• Pat Dorsey Moat strength (Five Rules)

  A wide moat, stable; sources: efficient scale, intangibles, cost advantage, switching costs, network effects → passes the Five Rules.

• Aswath Damodaran Expectations implied by the price

  Justifying the price requires discounting -4%, within what we project (4%) — the story squares with the numbers.