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Boston Properties Inc. (BXP - Analyst Report) reported fourth-quarter 2013 FFO (funds from operations) per share of $1.29, which beat the Zacks Consensus Estimate by a nickel and the year-ago quarter figure by 2 cents. Also, this was ahead of the company’s guidance range of $1.23–$1.25.

The results at this real estate investment trust (REIT) were aided by higher revenues and improved core operations. For full-year 2013, FFO came in at $4.91 per share, up from $4.90 per share last year. This also surpassed the Zacks Consensus Estimate of $4.88.

Inside the Headlines

Total revenue during the quarter advanced 20.5% year over year to $576.2 million and was substantially higher than the Zacks Consensus Estimate of $544 million.

For the full year, total revenue came in at $2.14 billion, up 15.6% year over year and exceeded the Zacks Consensus Estimate of $2.08 billion. The quarterly and yearly hikes in revenues were primarily attributable to a significant surge in rental revenues.

Rental revenues escalated 21.9% year over year to $558.3 million. For the full year, rental revenues increased 16.4% year over year to $2.07 billion. Both quarterly and yearly increases were mainly driven by higher tenant recoveries revenues and base rents.            

Notable Portfolio Enhancement Activity

During the quarter under review, Boston Properties closed the divestiture of 45% ownership interest in a New York City-based Class A office property – Times Square Tower – for $684 million and reaped proceeds of about $673.1 million (after paying of the transaction costs). With regards to the sale deal, Boston Properties inked a joint venture (JV) with the purchaser and will offer property management and leasing services to the JV.

In addition, Boston Properties concluded the divestiture of two Class A office properties – 10 & 20 Burlington Mall Road – in Massachusetts for about $30 million and garnered about $29.4 million as net proceeds. The company also closed the disposition of another Class A office asset – One Preserve Parkway – in Rockville, Md. for around $61.3 million and gained proceeds of approximately $59.9 million.

During the quarter, Boston Properties penned a build-to-suit lease deal with NRG Energy, Inc. (NRG - Analyst Report) for Class A office space, spanning around 130,000 net rentable square feet, in Princeton, N.J. The property is anticipated to be complete and available for tenancy in 2016.

Also, Boston Properties partly placed in-service a mixed use development project – The Avant at Reston Town Center – which consists of apartment units and retail space. The residential units are presently 15% leased and retail space is fully leased.

Property Update

As of Dec 31, 2013, Boston Properties’ portfolio comprised 175 properties spanning approximately 44.4 million square feet, including 9 properties under development totaling 2.9 million square feet. Its properties include Class A office space, one hotel, three residential and four retail assets. Additionally, the company has structured parking lots of around 15.4 million square feet.

The overall operating portfolio, which comprised 163 properties (excluding the two in-service residential properties and the hotel), was 93.4% leased – up 200 basis points on a year-over-year basis and 60 basis points sequentially.

Liquidity

Boston Properties exited 2013 with cash and cash equivalents of about $2.37 billion, higher than $1.04 billion as of Dec 31, 2012.

Special Dividend & Regular Dividend

On Dec 2, Boston Properties declared a special cash dividend of $2.25 per share. The dividend is scheduled to be paid on Jan 29, 2014 to stockholders of record as of Dec 31, 2013. Notably, the disposition of the company’s stake in the Time Square Tower property facilitated Boston Properties to reward shareholders with this special dividend.

In addition, Boston Properties declared a regular quarterly cash dividend of 65 cents per share. This dividend is also slated to be paid on Jan 29, 2014 to shareholders of record as of Dec 31, 2013.

Outlook

Boston Properties expects its first-quarter 2014 FFO per share in the range of $1.21–$1.23. This is lower than the current Zacks Consensus Estimate of $1.26 per share.

Also, the company narrowed its outlook range for full-year 2014 FFO per share and now projects it in the range of $5.20 – $5.33 (previous one being $5.20 – $5.35). This is also below the Zacks Consensus Estimate of $5.34 per share for 2014.

The guidance includes the effect of Boston Properties’ 2014 Multi-Year, Long-Term Incentive Program, which the company’s Compensation Committee approved on Jan 27, 2014. The programs’ aggregate value is about $13.1 million that will be amortized into earnings over the four-year plan period.

Our Viewpoint

Continuing with its winning streak over the past few quarters, Boston Properties posted impressive results yet again this quarter. The company’s improved core operations and successful endeavors to maintain a strong grip on high barrier-to-entry geographic markets across the U.S bode well going forward. Also, Boston Properties has a healthy balance sheet position with adequate liquidity to facilitate further portfolio enhancement activities. The declaration of a special dividend offered the company’s shareholders’ a reason to rejoice as well.

Boston Properties currently holds a Zacks Rank #3 (Hold). Some better-ranked REIT Stocks include Public Storage (PSA - Analyst Report) and PS Business Parks Inc. (PSB - Analyst Report). Both stocks carry a Zacks Rank #2 (Buy).

Note: FFO, 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.

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