BXP Recurring FFO Beats Estimates - Analyst Blog

Boston Properties Inc. (BXP), one of the leading real estate investment trusts (REITs), reported fourth quarter 2010 FFO (funds from operations) of $89.9 million or 64 cents per share, compared with $146.1 million or $1.04 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 included certain non-recurring items, excluding which FFO for fourth quarter 2010 was $1.14 per share. The recurring FFO for the quarter surpassed the Zacks Consensus Estimate by 6 cents. The year-over-year increase in recurring FFO was primarily due to strong rental income during the quarter.

Total revenue of the company during the quarter were $392.5 million, compared with $376.1 million in the year-ago quarter. The quarterly revenues were well above the Zacks Consensus Estimate of $375 million. The overall portfolio was 93.2% leased at quarter-end.

For full year 2010, Boston Properties reported FFO of $547.4 million or $3.90 per share, compared with $606.3 million or $4.59 per share in the year-ago period. Recurring FFO for fiscal 2010 was $4.40 per share, which exceeded the Zacks Consensus Estimate by 5 cents. Total revenues during the year were $1.6 billion, compared with $1.5 billion in 2009. The fiscal revenues were marginally ahead of the Zacks Consensus Estimate of $1.5 billion.

During the quarter, Boston Properties acquired the John Hancock Tower, the tallest building in New England, for approximately $930 million. The company paid $289.5 million in cash and assumed a debt of $640.5 million related to the property.

During the quarter, the company modified its $215.0 million construction loan facility collateralized by its Atlantic Wharf development project in Boston, Massachusetts. With the modification, Boston Properties released from collateral the residential portion of the project and reduced the loan amount to $192.5 million. The project would include approximately 86 units of residential rental apartments and approximately 10,000 square feet of retail space.

Subsequently, the company admitted a third-party investor as a partner for the development of the residential component of Atlantic Wharf project as it was unable to take full advantage of available historic tax credits owing to its REIT status. Boston Properties received $14 million from the investor related to the transaction, which will be recorded as deferred revenue.

During the quarter, the company utilized available cash to repay mortgage loans collateralized by its South of Market property in Reston, Virginia totaling approximately $188.0 million; 10 & 20 Burlington Mall Road property in Burlington, Massachusetts and 91 Hartwell Avenue property in Lexington, Massachusetts totaling approximately $32.8 million; Democracy Tower property in Reston, Virginia totaling approximately $59.8 million; and 1330 Connecticut Avenue property in Washington, DC totaling approximately $45.0 million.

Boston Properties repurchased $50.0 million worth of 2.875% exchangeable senior notes due 2037 during the quarter for approximately $51.1 million. The company also completed a public offering of $850.0 million worth of 4.125% senior notes due 2021. The notes were priced at 99.26% of the principal amount to yield 4.289% to maturity. In addition, the company completed the redemption of $700.0 million in aggregate principal amount of its 6.25% senior notes due 2013.

The strategic moves are aimed at increasing the liquidity of the company and strengthening its balance sheet. Boston Properties ended fiscal 2010 with cash and cash equivalents of $478.9 million. The company expects first quarter 2011 FFO in the range of $1.06–$1.08 per share, while FFO for full year 2011 is expected in the range of $4.45–$4.60.

We presently have a ‘Neutral' rating on Boston Properties, which currently has a Zacks #3 Rank that translates into a short-term ‘Hold' recommendation indicating that the stock is expected to perform in line with the overall U.S. equity market for the next 1–3 months. We also have a ‘Neutral' recommendation and a Zacks #3 Rank for Vornado Realty Trust (VNO), a competitor of Boston Properties.

 
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