BXP Shares Rise as CEO Extension Sets Ambitious $118 Stock Target
New 'Outperformance Plan' ties executive pay to a more than 70% share price increase, a confident bet amid a turbulent office market.
Boston Properties, Inc. (NYSE: BXP) shares gained on Tuesday after the real estate investment trust announced it had extended CEO Owen D. Thomas’s employment agreement through the end of 2029 and introduced a bold new equity incentive plan for senior leadership with ambitious stock price hurdles.
The stock rose approximately 1.1% to trade around $69.45 in Tuesday’s session. The move came as investors reacted to the company's 2025 Outperformance Plan, which sets demanding performance targets that require BXP’s stock to reach a dividend-adjusted price of $90 per share for a minimum payout and as high as $118 per share for the maximum award. These targets represent a roughly 30% and 70% increase, respectively, from the current trading price.
The plan is a significant vote of confidence from BXP's board in its leadership team's ability to navigate a commercial real estate market fraught with challenges. The sector has been grappling with the dual headwinds of higher interest rates, which impact property valuations and refinancing costs, and the persistent shift to remote and hybrid work, which has softened office demand. According to data from CBRE, the national office vacancy rate has remained elevated at 19%.
However, the market has also seen a pronounced 'flight to quality,' where demand is concentrating in newer, amenity-rich Class A properties that constitute the core of BXP's portfolio. The company's recent results reflect this trend, showing its strongest third-quarter leasing activity since 2019, even as it recorded a net loss due to non-cash impairment charges on older assets.
Under the terms of the new plan, the dividend-adjusted stock price must sustain these levels for at least 20 consecutive trading days before December 22, 2029, for the equity awards to vest. The total recognized compensation expense for the awards is estimated to be $32.1 million over a four-year period. This structure directly aligns executive compensation with substantial long-term shareholder returns.
“The entire Board is delighted that Owen has agreed to extend his tenure as CEO for the next four years,” said Joel Klein, BXP’s lead independent director, in a press release. “Owen’s vision, industry expertise, and proven execution make him the ideal leader to ensure continuity, drive our action plan forward, and guide BXP through its next phase of growth.”
The internal targets set by the board are notably more bullish than current Wall Street expectations. The consensus 12-month analyst price target for BXP stands at approximately $79.43, well below the plan's minimum threshold of $90. While a handful of analysts have 'buy' ratings, the majority rate the stock as a 'hold,' signaling a cautious outlook.
Timothy Naughton, chairman of BXP's Compensation Committee, emphasized the plan's objective. "These equity awards strongly and directly link the compensation of our senior management team to the creation of shareholder value," he stated. By extending Thomas's term and implementing the aggressive incentive plan, BXP's board is signaling a firm belief that its strategy of focusing on a premium portfolio will deliver outsized returns, despite the broader market uncertainty.