(BXP) Boston Properties Beats Earnings Estimates

Boston Properties Inc. (BXP), one of the leading real estate investment trusts (REITs), reported third quarter 2011 FFO (funds from operations) of $190.3 million or $1.28 per share, compared with $150.8 million or $1.07 per share in the year-earlier quarter. Fund from operations, 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.

The reported FFO for the quarter surpassed the Zacks Consensus Estimate by 4 cents. The increase in third quarter 2011 FFO was primarily due to strong rental income, which improved 17.3% during the quarter on a year-over-year basis.

Total revenue of the company during the reported quarter were $452.4 million, compared with $386.4 million in the year-ago quarter. The quarterly revenues were well above the Zacks Consensus Estimate of $421 million. The overall portfolio was 91.3% leased at quarter-end.

During the reported quarter, Boston Properties placed in-service ‘The Lofts at Atlantic Wharf’, which is the residential component of the Atlantic Wharf development project in Boston, Massachusetts. The residential component includes 86 apartment units (currently 71% leased) and approximately 10,000 square feet of retail space.

Also during the quarter, the company placed in-service the ‘Residences on The Avenue’ – a mixed-use development project in Washington, DC. The residential component of the project comprises of 335 units and retail space totals 50,000 square feet. The residential component of the project is currently 69% leased, while the retail space is fully leased.

In addition, Boston Properties completed and placed in-service its ‘2200 Pennsylvania Avenue’ development project in Washington, DC. Spanning approximately 457,000 net rentable square feet, the Class A office property is currently 94% leased.

During third quarter 2011, Boston Properties entered into a 15-year lease with Biogen Idec Inc. (BIIB), for developing a build-to-suit project spanning approximately 190,000 net rentable square feet of Class A office space at ‘17 Cambridge Center’ property in Cambridge, Massachusetts. The company expects the project to be completed and available for occupancy during the third quarter of 2013.

The company obtained a mortgage loan of $725.0 million during the quarter, collateralized by its ‘601 Lexington Avenue’ property in New York City. Boston Properties utilized the proceeds from the mortgage financing to repay debt under its unsecured line of credit totaling approximately $453.3 million. The additional cash proceeds were used to refinance the $267.5 million mortgage loan secured by ‘510 Madison Avenue’ property in New York City.

During the reported quarter, Boston Properties issued 431,223 shares under its ‘at the market’ (ATM) stock offering program for gross proceeds of approximately $44.9 million. The company utilized the proceeds from the equity offering for general business purposes, including investment opportunities and debt repayments.

Under the new ATM stock offering program, the company could sell up to an aggregate of $600.0 million worth of its common stock over a three-year period. As of September 30, 2011, Boston Properties had approximately $555.1 million available under this ATM program.

Subsequent to the quarter-end, a joint venture in which Boston Properties has a 30% interest obtained construction financing totaling $107.0 million collateralized by its ‘500 North Capitol Street’ redevelopment project in Washington DC. The company also sold ‘Two Grand Central Tower’ – a joint venture office property in New York City, for net cash proceeds of $209.8 million, out of which its share was approximately $125.9 million.

Boston Properties ended third quarter 2011 with cash and cash equivalents of about $1.1 billion. The company expects fourth quarter 2011 FFO in the range of $1.18–$1.20 per share, while FFO for full year 2012 is expected in the range of $4.58–$4.78.

We presently have a long-term ‘Neutral’ rating on Boston Properties, which currently has a Zacks #3 Rank that translates into a short-term ‘Hold’ recommendation.

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BOSTON PPTYS (BXP): Free Stock Analysis Report

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