Boston Properties Inc.
) reported second-quarter 2014 FFO (funds from operations) per
share of $1.35, beating the Zacks Consensus Estimate by 2 cents and
the prior-year quarter figure by 7 cents. Results benefited from
better-than-expected growth in revenues.
FFO per share also came ahead of the company's previously guided
range of $1.32-$1.34 per share, thanks to property-associated cost
savings as well as higher than expected development and management
services income. However, the company has slightly tweaked its
previously issued guidance.
Nevertheless, total revenue during the quarter advanced 15.6% year
over year to $589.8 million, coming well above the Zacks Consensus
Estimate of $566 million. The quarterly hike was primarily
attributable to a significant increase in rental revenues.
Rental revenues escalated 16.3% year over year to $570.9
million. The year-over-year increase was mainly driven by an
uptick in base rents and higher tenant recoveries revenues.
As of Jun 30, 2014, Boston Properties' portfolio comprised 180
properties spanning approximately 46.6 million square feet,
including 13 properties under development totaling 4.8 million
square feet. Its properties include Class A office space, one
hotel, three residential and five retail assets. Additionally, the
company has structured parking lots covering around 15.8 million
The overall operating portfolio, comprising 163 properties
(excluding the three in-service residential properties and the
hotel), was 93.0% leased, up 60 basis points sequentially.
Notably, in Apr 2014, a consolidated JV, in which the company has
95% stake, inked a deal with Salesforce.com, Inc. (
) to lease around half (714,000 square feet) of the new Salesforce
Tower in San Francisco, CA. (1.4 million square foot). The
building, whose construction has already started, is expected to be
accomplished in early 2017. (Read:
Boston Properties-Salesforce Ink Lease Deal
Boston Properties exited second-quarter 2014 with cash and cash
equivalents of around $1 billion, down from $2.4 billion as of the
Boston Properties expects its third-quarter 2014 FFO per share in
the range of $1.36-$1.38. The Zacks Consensus Estimate of $1.36 per
share lies within this range.
The company has tweaked its previously issued guidance for 2014 FFO
per share. Presently, it expects full year 2014 FFO per share to be
in the range of $5.24-$5.29, compared with the prior projection of
$5.25-$5.33 per share. The Zacks Consensus Estimate of $5.27 per
share also comes in this range.
The company's current 2014 full-year outlook incorporates a
projected rise in same property (GAAP) net operating income of
2.00%-2.50%, higher than the prior estimation of 1.75%-2.50%, as
well as an increase in development and management service income.
However, it includes a negative impact of 5 cents per share arising
from accomplished and expected sales of Mountain View Technology
Park and Mountain View Research Park Building Sixteen, Patriots
Park and Broad Run Business Park Land.
Boston Properties' endeavors to maintain a dominant position in the
high barrier-to-entry geographic markets in the U.S bode well going
forward. Moreover, the company's strategic deals, like that of
Salesforce, are expected to boost its strong diversified tenant
base comprising several U.S. bellwethers. However, though the
overall office market is recovering in the U.S., the rate of
revival is tepid.
Boston Properties currently holds a Zacks Rank #3 (Hold). We now
look forward to other REITs, which are scheduled to release their
earnings this week and the next. These include
Host Hotels & Resorts, Inc. (
) and HCP Inc. (
). Both these stocks carry a Zacks Rank #2 (Buy).
FFO, a widely used metric to gauge the performance of REITs, is
obtained after adding depreciation and amortization and other
non-cash expenses to net income.
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