Boston Properties' $2.55B Pipeline To Deliver 4% CAGR In FY24-25: Analyst

BMO Capital Markets analyst John P. Kim reiterated an Outperform rating on Boston Properties, Inc. BXP, raising the price target to $80 from $75.

Kim remains bullish on the company's healthy leasing activity, particularly in Midtown Manhattan and Boston CBD – reflecting improving demand. 

In Midtown Manhattan, BXP is seeing pricing power, given limited availability for large-block users and expansions from financial services and law firms (e.g., Kirkland & Ellis at 601 Lexington), Kim notes.

Leasing demand is healthier in San Francisco than LA, with 22% of 4.5 msf of tenant demand coming from AI startups.

BXP's $2.55 billion pipeline is expected to deliver 4% CAGR in 2024-25, but overall development starts have come to a halt, providing a potential rental boost when the economy turns, the analyst adds.

BXP expects to complete this pipeline, except potentially 105 Carnegie ($40.6 million redevelopment), with JV capital as a potential funding source for BXP's $1.6 billion remaining equity commitment.

BXP is looking to acquire opportunistically, but there are limited signs of distress. M&A, entering new Sunbelt markets, and share buybacks are very low on its priority list, Kim adds. 

On the negative side, the analyst thinks that the uncertainty in the financing market is a cause for concern, as domestic banks are not providing new capital to offices. Banks are willing to cooperate with landlords on short-term extensions on existing loans. 

However, Kim thinks that BXP may utilize foreign banks to raise secured debt at more attractive pricing than the unsecured market. 

While the dislocated financing markets remain a concern, the analyst remains upbeat about the positive signs. 

For FY24, the analyst expects total revenue to surge 1.87% to $3.38 billion. 

For FY25, Kim expects total revenue to jump 2.49% to $3.36 billion.

Price Action: BXP shares are trading higher by 0.05% to $65.97 on the last check Friday.