Shares of BXP Inc. BXP have rallied 30.4% in the past three months, outperforming the industry's 18.5% growth.
BXP’s recent lease renewals and expansion activities showcase the rising demand for its highly amenitized premium offices. In August 2024, it inked a 378,000-square-foot lease renewal and expansion lease with Bain Capital at 200 Clarendon Street in Boston, MA. In July 2024, Bechtel inked a renewal and expansion lease with BXP for about 289,000 square feet at Reston, VA.
Analysts seem bullish about this office REIT, which currently carries a Zacks Rank #3 (Hold). The Zacks Consensus Estimate for its 2024 funds from operations (FFO) per share has been revised upward marginally over the past month to $7.10.
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Factors Behind BXP Stock’s Price Surge
BXP is well-poised to gain from the rise in demand for top-quality office spaces driven by technology and life science businesses. To cater to the strong demand from life-science tenants, it is converting numerous straight office buildings to laboratory/life science spaces in its suburban portfolio, positioning it well for long-term growth.
With return-to-office policies implemented by many companies, coupled with a relatively low unemployment rate and consistent job growth, BXP's strategically located, high-quality office properties are likely to experience healthy demand. In the second quarter of 2024, the company executed 73 leases, totaling around 1.3 million square feet, with a weighted average lease term of nine years.
BXP has been focusing on successfully executing its capital reallocation strategy. In particular, it is boosting its portfolio quality through repositioning initiatives by acquisitions, developing properties in core markets and shedding properties in non-core markets. As of the end of the second quarter, the company incurred $6.8 million in planned capital expenditure associated with the acquisitions. Also, it is under active negotiations to dispose of four land positions with the potential to generate around $150 million of proceeds if executed. Such moves highlight the company’s prudent capital management practices and relieve the pressure on its balance sheet.
BXP also has an encouraging development and redevelopment pipeline, which bodes well for its long-term growth. As of June 30, 2024, its portfolio comprised 186 properties encompassing 53.5 million square feet of space. This included 10 properties under construction/redevelopment.
BXP has a healthy balance sheet position with ample liquidity. As of June 30, 2024, it had $2.3 billion of liquidity. The company’s share of net debt to EBITDAre (annualized) was 7.91X, while the fixed charge coverage ratio was 2.69 times as of the same date. Given its solid financial position and prudent capital management, BXP seems well-poised to navigate any economic uncertainty and industry choppiness and capitalize on future growth opportunities.
Key Risks for BXP
The rising supply of office properties in certain markets is likely to fuel competition. A huge development outlay also raises concerns for BXP.
Stocks to Consider
Some better-ranked stocks from the REIT sector are Cousins Properties CUZ and Crown Castle Inc. (CCI), each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Cousins Properties’ 2024 FFO per share has moved marginally northward in the past month to $2.67.
The consensus estimate for Crown Castle Inc.’s 2024 FFO per share has increased marginally over the past three months to $6.97.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO), a widely used metric to gauge the performance of REITs.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
