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Boston Properties Inc. (BXP - Analyst Report) reported first-quarter 2014 FFO (funds from operations) per share of $1.20, which missed the Zacks Consensus Estimate by 3 cents and fell short of the company’s guidance range of $1.21–$1.23 per share. This was due to the rise in utilities and snow removal expenditures incurred for its Northeast assets as well as the timing difference in its G&A expense.  

However, FFO per share was ahead of the prior year quarter figure of $1.06. Total revenue during the quarter advanced 20.3% year over year to $574.7 million and was well ahead of the Zacks Consensus Estimate of $553 million. The quarterly hike was primarily attributable to a significant surge in rental revenues.

Rental revenues escalated 21.8% year over year to $561.3 million.  The year-over-year increase was mainly driven by an uptick in base rents and higher tenant recoveries revenues.   

Property Update

As of Mar 31, 2014, Boston Properties’ portfolio comprised 175 properties spanning approximately 45.8 million square feet, including 8 properties under development totaling 4.0 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 15.7 million square feet. The overall operating portfolio, which comprised 163 properties (excluding the 3 in-service residential properties and the hotel), was 92.4% leased – down 100 basis points sequentially.

In Feb 2014, the company accomplished and fully placed in service The Avant at Reston Town Center development project including 359 apartment units and retail space totaling around 355,000 square feet in Reston, VA. Currently, the retail space (26,000 net rentable square feet) is fully leased while the residential units are 29% leased.


Boston Properties exited first-quarter 2014 with cash and cash equivalents of nearly $1.18 billion, down from $2.37 billion as of Dec 31, 2013.


Boston Properties expects its second-quarter 2014 FFO per share in the range of $1.32–$1.34. The Zacks Consensus Estimate of $1.33 per share is in the mid-point of this range.

The company has raised the lower-end of its previously issued guidance for 2014 FFO per share. It now expects full-year 2014 FFO per share to be in the range of $5.25 – $5.33 per share, compared with the prior guidance of $5.20 – $5.33 per share. The Zacks Consensus Estimate of $5.30 per share also lies in this range.

Notably, the 2014 full-year outlook incorporates a projected rise in same property GAAP net operating income of 1.75% – 2.50%, which is higher than the prior projection of 1.25% – 2.50%.

Our Viewpoint

Boston Properties’ endeavors to maintain a dominant position in the high barrier-to-entry geographic markets in the U.S bode well going forward. However, the demand for office space remains modest due to adequate space availability, which consequently exerts pressure on rent and occupancies.

Boston Properties currently holds a Zacks Rank #3 (Hold). We now look forward to the other REITs, which are scheduled to release their earnings this week. These include Equity Residential (EQR - Analyst Report), Host Hotels & Resorts, Inc. (HST - Analyst Report) and Public Storage (PSA - Analyst Report). All these stocks carry the same Zacks Rank as Boston Properties.

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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