Boston Properties Inc ( BXP ) - a real estate
investment trust (REIT) - reported first quarter 2013 FFO (funds
from operations) per share of $1.06, considerably lower than the
Zacks Consensus Estimate of $1.21. Moreover, reported FFO per share
was also below the year-ago quarter level of $1.12. Substantial
increase in operating expenses coupled with lower operating income
hurt the quarterly results.
Behind the Headlines Number
Total revenue during the quarter upped 8.9% to $483.0 million
from $443.7 million in the year-ago quarter. The quarterly revenues
were well above the Zacks Consensus Estimate of $463 million. The
hike in revenues was primarily attributable to significant surge in
Rental revenues climbed 8.7% to $466.0 million from $428.7
million in the prior-year quarter. The increase was primarily aided
by higher base rents and tenant recoveries revenues.
Notable Portfolio Activities
During the quarter, Boston Properties inked a 20-year lease deal
with General Services Administration to fully lease a Va.-based
property - Three Patriots Park.
The company also acquired a Calif.-based a development site -
535 Mission Street - for around $71.0 million in cash. In addition,
Boston Properties, in collaboration with Hines, closed the
acquisition for a land parcel - 101 First Street, next to the
Transbay Terminal. The companies bought the asset from Transbay
Joint Powers Authority (TJPA) for roughly $192 million.
During the quarter, one of Boston Properties' joint ventures
(JV) opened a Class A office property for operations - Annapolis
Junction Building Six - located in Maryland. The company's another
JV completed a Class A office redevelopment project - 500 North
Capitol Street, NW -located in Washington, DC. Further, Boston
Properties completed a Class A office redevelopment project - Two
Patriots Park - situated in Va..
Moreover, Boston Properties inked a binding contract for the
divesture of a Class A office property, 303 Almaden, in Calif. for
As of Mar 31, 2013, Boston Properties' portfolio comprised 157
properties spanning around approximately 44.6 million square feet,
including 7 properties under development totaling 2.5 million
square feet. In addition, the company has structured parking lots
of around 15.9 million square feet.
The overall operating portfolio, which comprised 147 properties
(excluding the two in-service residential building and the hotel),
was 91.7% leased at the end of the quarter.
During the quarter under review, Boston Properties used available
cash to pay-off the mortgage loan worth $17.0 million
collateralized by Kingstowne One property located in Va. The
facility was scheduled to mature on May 5, 2013.
Boston Properties ended first quarter 2013 with cash and cash
equivalents of about $909.4 million compared to $1.04 billion as of
Dec 31, 2012.
Boston Properties expects second quarter 2013 FFO per share in
the range of $1.25-$1.27. However, the company tweaked its guidance
for 2013 FFO per share to the range of $4.97-$5.07 from the
previous range of $5.06-$5.18.
Change of Management
During the quarter, Boston Properties appointed Owen D. Thomas
as the new Chief Executive Officer (CEO). He took over the reins
from Apr 2, 2013. Thomas previously held top executive posts at
many industry giants.
Prior to joining Boston Properties, Thomas served Lehman
Brothers Holdings Inc. - the successor company to Lehman Brothers -
as Chairman of the Board of Directors. Notably, he watched over the
disposition of former Lehman Brothers assets, which include the
sale of Archstone Enterprise LP to Equity
Residential ( EQR ) and
AvalonBay Communities, Inc. ( AVB ).
Boston Properties' reported mixed quarterly results on the back
of strong portfolio restructuring activity but the increase in
operating expenses acted as a dampener. However, we expect its
strong leasing activity and JV deals to pave way for maintaining a
strong grip on high barrier-to-entry geographic markets across the
U.S. This will likely drive growth and prove accretive to its
earnings going forward.
Nonetheless, Boston Properties has a large development pipeline,
which increases operational risks, exposing it to rising
construction costs, entitlement delays, and lease-up risk. This
undermines the company's profitability to some extent.
Boston Properties currently holds a Zacks Rank #3 (Hold). Other
REITs that are performing better and are worth a look include
DDR Corp. ( DDR ) carrying a Zacks
Rank #2 (Buy).
Note: 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.AVALONBAY CMMTY (AVB): Free Stock Analysis
ReportBOSTON PPTYS (BXP): Free Stock Analysis ReportDDR CORP (DDR): Free Stock Analysis ReportEQUITY RESIDENT (EQR): Free Stock Analysis
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