On Dec 13, 2013, we reiterated our long-term Neutral
recommendation on real estate investment trust (REIT),
Boston Properties Inc.
). This was based on the company's fundamentals, decent
third-quarter results and the recent dividend announcement.
However, adequate space availability remains a concern and
prevents us from harboring a completely positive outlook on the
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Why the Reiteration?
Late in October, Boston Properties came up with encouraging
results. The company reported third-quarter 2013 funds from
operations (FFO) per share of $1.29, which was a penny ahead of
the Zacks Consensus Estimate. Moreover, it was 12.2% higher than
the year-ago quarter figure of $1.15 per share. The results were
aided by increased revenues and improved core operations.
In a major boost to shareholders' confidence, Boston Properties
recently declared a special cash dividend of $2.25 per share,
which will be paid on Jan 29, 2014 to stockholders of record as
of Dec 31, 2013.
Notably, the disposition of 45% stake in the company's Time
Square Tower property in Oct 2013 primarily facilitated the
special dividend. Boston Properties also declared a regular
quarterly cash dividend of 65 cents per share for third-quarter
2013. This dividend is also payable on Jan 29, 2014 to
shareholders of record as of the close of business on Dec 31,
Boston Properties has been successful in maintaining a strong
grip on high barrier-to-entry geographic markets in the U.S
through notable portfolio enhancement activity. Also, the
company has a strong balance sheet position with adequate
liquidity to fund further portfolio related initiatives.
Moreover, the declaration of a special cash dividend was
commendable as it helped raise shareholders' spirits.
However, Boston Properties generates a significant amount of
revenues from its office portfolio. Notably, the demand for
office properties is highly correlated to job growth. Currently,
sluggish growth in jobs and persistent office space efficiency
trends are limiting growth momentum of the office sector
fundamentals, thereby affecting the company's top-line growth.
Over the last 7 days, the Zacks Consensus Estimate for both 2013
and 2014 remained stable at $4.88 and $5.38 per share,
respectively. Hence, the stock currently has a Zacks Rank #3
Other Stocks to Consider
Some better-ranked stocks in the REIT sector include
Getty Realty Corp.
Sabra Health Care REIT, Inc.
Winthrop Realty Trust
). All these carry a Zacks Rank #1 (Strong Buy).
FFO, a widely accepted and reported measure of the
performance of REITs is derived by adding depreciation,
amortization and other non-cash expenses to net income.