Real estate investment trust (REIT) -
Boston Properties Inc.
) reported third-quarter 2013 FFO (funds from operations) per
share of $1.29, which came a penny ahead of the Zacks Consensus
Estimate. Also, it exceeded the year-ago quarter figure of $1.15
by 12.2%. The results were aided by higher revenues and improved
Total revenue during the quarter advanced 23% year over year
to $574.1 million and was also substantially higher than the
Zacks Consensus Estimate of $478 million. The hike in revenues
was primarily attributable to a significant surge in rental
Rental revenues escalated 24.2% year over year to $558.0
million, driven by higher tenant recoveries revenues and base
Notable Portfolio Activities
During the quarter, Boston Properties completed and put into
operation the 100% leased Cambridge Center Connector project
(approximately 43,000 net rentable square feet) in
Also, one of its joint ventures (JV) in which Boston
Properties has a 50% stake accomplished the divestiture of its
New York City based Eighth Avenue and 46th Street project for
In addition, Boston Properties offloaded the Washington,
D.C.-based 1301 New York Avenue property - a Class A office asset
- for a gross sale price of about $135.0 million (after adjusting
for outstanding lease and other transaction costs assumed by the
Subsequent to the quarter end, early this month, the company
closed the divestiture of 45% ownership interest in a New York
City-based Class A office property - Times Square Tower - for
$684 million. With regards to the sale deal, Boston Properties
inked a JV with the purchaser and will offer property management
and leasing services to the JV.
Also, in this month, Boston Properties penned a build-to-suit
lease deal with
NRG Energy, Inc.
) for Class A office space, spanning around 130,000 net rentable
square feet, in Princeton, N.J. The property is anticipated to be
complete and available for tenancy in 2016.
As of Sep 30, 2013, Boston Properties' portfolio comprised 177
properties spanning approximately 44.6 million square feet,
including 8 properties under development totaling 2.8 million
square feet. Its properties include Class A office space, one
hotel, three residential and four retail assets. Additionally,
the company has structured parking lots of around 15.7 million
The overall operating portfolio, which comprised 166
properties (excluding the two in-service residential properties
and the hotel), was 92.8% leased at the end of the quarter.
Boston Properties exited third-quarter 2013 with cash and cash
equivalents of about $1.64 billion compared with $1.04 billion as
of Dec 31, 2012.
During the quarter under review, the company's operating
partnership amended and restated its unsecured revolving credit
facility. The move helped the company increase the total
commitment to $1.0 billion from $750.0 million. Also, this pushed
the maturity rate to Jul 26, 2018 from Jun 24, 2014 and reduced
the interest rates. The total commitment can be further enhanced
to $1.5 billion, subject to syndication of the increase.
Boston Properties expects fourth-quarter 2013 FFO per share in
the range of $1.23-$1.25. Also, the company provided the outlook
for full-year 2014 FFO per share and projects it in the range of
$5.20 - $5.35.
We are encouraged with Boston Properties' decent quarterly
results. The company is benefiting from improved core operations
and has been successful in maintaining a strong grip on high
barrier-to-entry geographic markets across the U.S. Also, Boston
Properties has strong balance sheet position with adequate
liquidity to facilitate further portfolio enhancement activities.
We expect this to drive growth and prove accretive to its
earnings going forward.
Yet, the demand remains moderate for office space with
elevated unemployment levels and adequate space availability,
thus creating pressure on rent and occupancies.
Boston Properties currently holds a Zacks Rank #4 (Sell).
REITs that are performing better and are worth a look include
Douglas Emmett Inc
DuPont Fabros Technology, Inc.
). Both stocks carry 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.
BOSTON PPTYS (BXP): Free Stock Analysis
DOUGLAS EMMETT (DEI): Free Stock Analysis
DUPONT FABROS (DFT): Free Stock Analysis
NRG ENERGY INC (NRG): Free Stock Analysis
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