J.P. Morgan Reiterates Overweight on Boston Properties (BXP)

J.P. Morgan is out with a research report this morning, where it reiterates its Overweight rating on Boston Properties BXP; it has a $92.00 price target on the stock. The JPM analysts cited the company’s recent announcement that it would be acquiring 510 Madison Avenue for total consideration of approximately $317 million (about $900/sf). The $317 million purchase price consists of 1) “$280.5 million of principal and accrued interest on the existing senior mortgage loans and mezz loans, 2) $22.5 million for the junior mezz loan BXP acquired last week, and 3) $10-15 million of transfer taxes and other acquisition costs.” The analysts believe that BXP paid a full price for the property, yet still believe that 510 Madison is a good strategic fit for BXP’s class A midtown Manhattan office portfolio as he building is high quality, well located, and is likely to attract high-end tenants. As for valuation, the analysts remarked, “We calculate that BXP trades at 18.7x our 2011 FFO estimate, which is a 32% premium to the office group average of 14.2x. On an adjusted FFO basis (AFFO), we calculate that BXP trades at 29.0x our 2011 estimate, a 32% premium to the office group average of 21.9x. We calculate that BXP trades at 17.5x EV/EBITDA, which is an 18% premium to its peer average of 14.8x. Despite the premium valuation, we find BXP the most compelling out of the four NYC-centric office REITs.”