Boston Properties Reports Strong 3Q

Boston Properties (BXP - Analyst Report) reported strong third quarter results with FFO (funds from operations) of $158.5 million or $1.13 per share compared to $132.5 million or $1.09 per share in the year-earlier quarter. Funds 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.

During the quarter, Boston Properties placed in service a 235,000 net rentable square feet Class A office property in Reston, Virginia. Subsequent to the end of the quarter, the company placed in service a 120,000 net rentable square feet Class A office property in Princeton, New Jersey. Both the properties are currently 100% leased. Also during the quarter, Boston Properties obtained mortgage financing of $50 million collateralized by its Reservoir Place property in Waltham, Massachusetts.

Boston Properties used available cash to repay mortgage loans of $20.5 million during the quarter, which was secured by 1301 New York Avenue office property in Washington DC. Subsequent to the end of the quarter, the company completed a public offering of $700 million 5.875% senior notes due 2019. The net proceeds were approximately $693.7 million.

Boston Properties is gradually feeling the heat of declining fundamentals in most of its markets. Overall portfolio occupancy decreased to 92.6% at the end of the quarter, down from 95.7% in the prior-year quarter. With increased vacancy rates across the portfolio, occupancy is further expected to decline in the coming quarters. Due to a weakening demand for office space, the company anticipates its FFO for full year 2010 to vary from $4.00 - $4.20 per share.