BXP Q3 2026: FFO rose 8.6% to $1.89 a share, but same-property cash NOI slipped 0.3%

Overview

BXP, Inc., the largest US office landlord by its own description, owns 162 properties and 50.6 million square feet across Boston, Los Angeles, New York, San Francisco, Seattle and Washington, DC. Its third quarter of 2026 (ended September 30) was the fourth quarter in a row of rising occupancy: 89.4% of the in-service portfolio was occupied, up a full percentage point from June. Funds from operations rose 8.6% to $1.89 per diluted share and beat the midpoint of BXP's own guidance by $0.08. Management raised its full-year range for the second quarter running.

The improvement is real, but much of it has not yet reached the bank. Same-property net operating income rose 3.4% on an accounting basis and fell 0.3% on a cash basis. The gap is free rent: new leases came with an average of 356 days rent-free.

This report is written from BXP's October 27 earnings release (Exhibit 99.2 to its 8-K) and the supplemental data package filed with it (Exhibit 99.1). The full 10-Q has not been filed yet.

How a REIT's profit is measured

BXP is a real estate investment trust (REIT), a company that owns property and must pay out most of its taxable income as dividends. GAAP net income is a poor guide to how such a company is doing. It is reduced by depreciation, an accounting charge for buildings wearing out that is often far from what they are actually worth. It also swings with gains when properties are sold and with write-downs when they are marked down.

The industry therefore uses funds from operations (FFO), defined by the trade body Nareit. FFO starts from net income, adds back real-estate depreciation and impairments (write-downs in a property's value), and removes gains or losses on property sales. BXP guides on FFO, and dividend decisions are weighed against it. FFO still ignores the large sums BXP spends on fitting out space for tenants and on leasing commissions. That is why BXP also reports funds available for distribution (FAD), which subtracts that spending and strips out non-cash rent.

Net operating income (NOI) is rent and other property income minus the cost of running the buildings. "Same-property" NOI compares only buildings BXP owned and operated in both periods, so it measures how the existing portfolio is doing, unaffected by purchases and sales.

Key metrics

The operating margin is our calculation: total revenue minus total expenses ($615.6M, including $228.7M of depreciation), divided by revenue. It excludes joint-venture results, property-sale gains, impairments and interest. BXP's own "operating margin" on rental revenue less rental expense was 62.1%, up from 61.3% in Q2.

For the first nine months, revenue was $2.68 billion (+2.8%) and FFO per share $5.25 (+3.1% from $5.09). The third quarter was the strongest of the year so far.

What drove the quarter

Rent. Lease revenue rose $36.3M (4.5%) from a year earlier, the bulk of the $39.9M revenue increase. Two things pushed it up. Occupancy climbed to 89.4% from 86.7% at the end of 2025. Also, leases on space that is now occupied but rent-free count as revenue under accounting rules. BXP's share of "straight-line rent", which is rent booked now but paid later, was $46.5M in Q3, up from $19.4M in Q2. Termination income, paid by tenants to leave early, was $7.0M against $2.8M in Q2.

Leasing. BXP signed 74 leases covering 1.2 million sq ft, with an average term of 10.3 years. The largest were about 206,000 sq ft for a technology company at 500 North Capitol in Washington, DC, and a 112,000 sq ft renewal with a law firm at Madison Centre in Seattle. On re-let space, starting gross rents were 6.55% above the expiring leases, and net rents (after operating costs) 9.33% above. The averages hide a sharp split by city:

The occupancy gains were broad. Since December, Seattle occupancy rose to 87.0% from 79.8%, San Francisco to 81.4% from 77.0% and New York to 87.3% from 83.8%. In San Francisco, filling space has meant accepting lower rents.

Cost of winning tenants. Re-let leases carried transaction costs (tenant improvements and leasing commissions) of $154.60 per sq ft, which BXP puts at $16.27 per year of lease term. That is about a fifth of the $84.29 average starting gross rent. On top of that, tenants got an average of 356 days of free rent.

Interest. Interest expense fell to $159.1M from $164.3M a year earlier, and depreciation fell to $228.7M from $236.1M. Both helped FFO and operating margin.

Below the operating line: why GAAP profit swung

The move from a $121.7M loss to $114.5M of net income is mostly about last year. In Q3 2025 BXP took $68.9M of impairments on its own properties plus $145.1M of impairments inside joint ventures, which pushed its share of joint-venture results to a $148.3M loss. This quarter had no impairments, and joint ventures contributed $1.1M. Q3 2026 also included $10.4M of gains from selling two Washington, DC office buildings, Sumner Square and 1330 Connecticut Avenue, for about $155.4M gross and $150.3M net. A year earlier the gain was $1.9M. BXP said gains on sales were the main reason EPS beat the middle of its guidance by $0.20.

What the headline numbers hide

• The year-ago comparison flatters GAAP EPS. The roughly $214M of year-ago impairments works out to about $1.20 per share across BXP's shares and operating-partnership units, more than the whole $1.48 swing from −$0.77 to $0.71. The $10.4M of property-sale gains added roughly $0.06. Neither is recurring operating profit, and BXP's own guidance excludes future sales and impairments.
• FFO grew faster than the cash it represents. Same-property NOI rose 3.4% on an accounting basis but fell 0.3% in cash, after +0.8% cash in Q2. Most of the gap is straight-line rent of $46.5M, more than double Q2's $19.4M, as newly started leases begin their free-rent periods. This is normal accounting and reverses as the free months end. Still, part of the $0.11 rise in FFO per share since Q2 is rent that has not been paid yet. BXP's full-year guidance shows the same pattern: same-property NOI +2.35% to +2.75%, but cash −0.25% to +0.25%.
• Cash after leasing costs covers the dividend, with less room than FFO suggests. FAD was $163.4M, about half of the $334.3M of FFO at the operating-partnership level, because $118.0M went to tenant improvements and leasing commissions and $14.2M to maintenance capital spending. Distributions of $124.4M were 76% of FAD, better than 88% in Q2. The cash flow statement comes with the 10-Q, so operating cash flow can't be checked yet.
• Some one-offs are inside FFO. Termination income of $7.0M (vs $2.8M in Q2) is a payment for leaving, not ongoing rent. It adds about $0.04 per share to FFO and won't necessarily repeat.
• No buyback effect. BXP bought back no shares: treasury stock was unchanged at 78,900 shares, and diluted shares rose 0.7% to 160.1M from 158.9M. All the per-share FFO growth came from the business, not a smaller share count. Capital went back through the dividend instead. The $0.70 quarterly dividend on 159.7M shares comes to about $111.8M for shareholders, or $124.4M with operating-partnership unitholders included. This is the declared amount: the cash flow statement isn't filed yet.
• Receivables are not a concern. Tenant and other receivables were $92.3M, little changed from $92.6M at year-end. Accrued rental income, the balance-sheet counterpart of straight-line rent, rose to $1.60B from $1.54B.

On balance the quarter is flattered: GAAP EPS looks transformed mainly because a $214M impairment hit the year-ago quarter, and FFO's 8.6% rise rests partly on non-cash rent while same-property cash NOI slipped 0.3%.

Balance sheet and debt

BXP did a lot of financing in the quarter:

• $700M of 6.050% senior notes due 2036, priced to yield about 6.16% including fees, with net proceeds of about $692.4M.
• $1.0 billion of 2.750% notes repaid at par on October 1, 2026. That explains why cash stood at $1.47B at September 30, against $494M in June. Replacing cheap notes with 6% debt raises interest costs from Q4.
• A $1.2 billion construction loan for 343 Madison Avenue in New York, priced at Term SOFR plus 2.50%. The spread drops to 2.25% once certain leasing and construction milestones are met. BXP also sold a 10.6% equity stake in the project to AVRS Partners and kept full control.
• A $247M draw on the unsecured credit line (nil at year-end).

Consolidated debt was $16.6B, up from $15.6B in June because the new notes were issued before the old ones were repaid. BXP's share of net debt to EBITDAre (a REIT version of earnings before interest, tax, depreciation and amortization, annualized) improved to 7.52x from 7.94x. Interest coverage, excluding capitalized interest, slipped to 2.98x from 3.12x.

Did last time's read hold up?

Our Q2 2026 report said the operating picture had turned and expected further NOI gains through year-end, with guidance implying a rise to about $1.81 of FFO per share in Q3. BXP did better: $1.89, and occupancy rose another percentage point. We also flagged the refinancing of the $1.0B of 2.75% notes due in October at around 6% as the next pressure point. That happened as expected, with $700M at 6.05%. Our worry that San Francisco and Seattle rents would keep resetting lower was half right. San Francisco re-let rents fell 8.3% gross, while Seattle's rose 2.7%.

Takeaway: Leasing at BXP is clearly recovering: occupancy is up four quarters running, 1.1 million sq ft of signed leases are still to start, and full-year FFO guidance went up again. But the money lags the leases. Free rent averaging nearly a year means same-property cash NOI fell 0.3% even as the accounting version rose 3.4%. The new guidance points to Q4 FFO below Q3's $1.89 as the cheap October notes are refinanced at twice the rate.

Guidance and outlook

BXP now guides full-year 2026 FFO to $7.06–$7.08 per diluted share (previously $6.99–$7.05) and EPS to $2.35–$2.37 (previously $2.14–$2.24). It attributes the $0.05 FFO increase to better-than-projected portfolio performance and the $0.17 EPS increase mainly to gains on sales. Other assumptions:

• average in-service occupancy of 88.75%–89.25%
• same-property NOI growth of 2.35%–2.75% (cash: −0.25% to +0.25%)
• consolidated net interest expense of $593M–$598M
• $150M–$162M of non-cash straight-line and fair-value rent

The guidance excludes future property sales not under contract and future impairments.

After nine months of $5.25, the full-year range implies Q4 FFO of about $1.81–$1.83 per share, below Q3's $1.89. BXP gave no separate quarterly breakdown in the release. The obvious reasons are the higher-coupon debt that replaced the 2.75% notes, rent lost from buildings sold, and Q3's termination income possibly not recurring.

Our read: the next stage of BXP's recovery is turning leases into cash. About half of the 1.1 million sq ft of signed-but-not-started leases are due to begin before year-end, but with free-rent periods near a year, most of that space will add to FFO well before it adds cash. For Q4 and early 2027, watch three things. First, whether same-property cash NOI turns positive as Q3's free-rent periods run off. Second, whether FAD keeps covering the $0.70 dividend comfortably, since Q2's 88% payout showed how quickly heavy leasing costs can squeeze it. Third, whether New York and Washington rent gains of 10–19% keep outrunning San Francisco's declines. The guidance's own Q4 dip shows the limit. As long as low-rate debt is being replaced at around 6%, rising occupancy mostly offsets higher interest costs rather than lifting FFO per share much above the $7 level.