Boston Properties Inc.’s BXP second-quarter 2018 funds from operations (FFO) per share of $1.58 surpassed the Zacks Consensus Estimate of $1.56. The figure also came in higher than the company’s projection of $1.53-$1.55 per share.
This reflects better numbers, than what was projected, from portfolio operations, as well as for development and management service revenues. Also, the company incurred lower-than- projected interest expense in the quarter. However, the tally compares unfavorably with the prior-year quarter FFO per share of $1.67.
Adjusted revenues, comprising base rent and recoveries from tenants during the quarter, inched up 0.3% year over year to $611.7 million. However, the figure missed the Zacks Consensus Estimate of $614.4 million. The year-over-year uptick is attributable to increase in recoveries from tenants.
Boston Properties has also raised its outlook for full-year 2018.
Property Update
As of Jun 30, 2018, Boston Properties’ portfolio comprised 178 properties, covering a total of around 50.2 million square feet of space. This included 12 under construction/redevelopment properties, covering an area of 6.0 million square feet.
The overall operating portfolio, including 162 properties (excluding three residential properties and hotel), was 90.4% leased as of Jun 30, 2018.
During the June-end quarter, Boston Properties accomplished the sale of its 91 Hartwell Avenue — an around 119,000 net rentable square foot Class A office property — in Lexington, MA, for a gross sale price of around $22.2 million. This resulted in a gain on sale of real estate aggregating about $15.5 million.
This June, the company also completed and fully placed in-service its Signature at Reston development project in Reston, VA. The project includes 508 apartment units and retail space, totaling around 518,000 square feet. The retail space is approximately 81% leased, while residential units are 35% leased.
Liquidity
Boston Properties exited the second quarter with cash and cash equivalents of around $ 472.6 million, up from $434.8 million as of Dec 31, 2017.
Outlook
Boston Properties raised its full-year 2018 FFO per share guidance to $6.36-$6.41, denoting 7 cents per share increase from the mid-point of its prior outlook. The Zacks Consensus Estimate is pegged at $6.32.
The company projects its third-quarter 2018 FFO per share of $1.61-$1.63. The Zacks Consensus Estimate of $1.62 lies within this range.
Our Viewpoint
Boston Properties is well poised for growth, with support of properties located in select high-rent, high barrier-to-entry geographic markets and diversified tenants, along with industry base. Also, with economic improvement and recovery in the job market, healthy growth in demand for office spaces is expected to strengthen the company’s growth opportunities.
Nevertheless, increase in supply of office space remains a concern because elevated supply usually leads to lesser absorption and also curtails landlords’ capability to demand more rent. Furthermore, rate hike adds to its woes.
Boston Properties currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Boston Properties, Inc. Price, Consensus and EPS Surprise
Boston Properties, Inc. Price, Consensus and EPS Surprise | Boston Properties, Inc. Quote
We are now looking forward to the earnings releases of Lamar Advertising Company LAMR, Host Hotels & Resorts, Inc. HST and Outfront Media Inc. OUT, all of which are scheduled to report their quarterly numbers next week.
Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
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