Boston Properties, Inc (BXP - Analyst Report), a real estate investment trust (REIT), reported third quarter 2012 FFO (funds from operations) of $176.1 million or $1.16 per share, compared with $190.3 million or $1.28 per share in the year-earlier quarter. The reported FFO was in-line with the Zacks Consensus Estimate.
Total revenues during the quarter were $470.9 million, compared with $449.7 million in the year-ago quarter. The quarterly revenues were well above the Zacks Consensus Estimate of $440 million. The overall portfolio was 91.6% leased at quarter-end.
During the quarter, Boston Properties value added fund sold its 300 Billerica Road property in Chelmsford, Massachusetts for approximately $12.2 million. It aggregated approximately 111,000 net rentable square feet.
At the same time, a joint venture in which the company has 50% stake placed in-service Annapolis Junction Building Six - a Class A office property (49% leased) spanning approximately 120,000 net rentable square feet in Annapolis, Maryland.
During the quarter, the company’s operating partnership used available cash to redeem the remaining $225 million of its 6.25% senior notes due 2013. Additionally Boston Properties used available cash to repay the mortgage loan (totaling $23.2 million) collateralized by Sumner Square property. The property is in Washington, DC. The mortgage financing carried interest at a fixed rate of 7.35% per annum and is due on September 1, 2013.
During the reported quarter, Boston Properties acquired the development project located at 680 Folsom Street and 50 Hawthorne Street in San Francisco, California. The project will consist of 522,000 net rentable square feet of Class A office and retail space and is approximately 85% pre-leased. Following the completion of this project with initial occupancy in first quarter 2014, the estimated project cost is $340 million. Additionally the company also acquired the corner site of 690 Folsom Street, an adjacent parcel totaling 22,000 square feet, for redevelopment in the future.
Subsequent to the end of the quarter, the company completed the formation of a joint venture to own Fountain Square. This is an office and retail complex spanning approximately 764,000 net rentable square feet and is located in Reston, Virginia. The joint venture partner contributed approximately $385.0 million and related mortgage indebtedness totaling approximately $211.3 million for a 50% interest in the joint venture. The company contributed cash totaling approximately $87.0 million for its 50% interest, to be distributed to the joint venture partner. The company is consolidating this joint venture. The mortgage loan carries interest at a fixed rate of 5.71% per annum and is scheduled to mature on October 11, 2016.
Subsequent to the end of the quarter, Boston Properties formed a joint venture with 50% stake in the venture with affiliate of Hines to acquire a land in San Francisco, California for $190 million. This would support Transbay Tower, a 1.4 million-square-foot, 61-storey tower to be built next to the Transbay Transit Center. The acquisition is expected to close in the first quarter of 2013. At the same time, a joint venture in which the company has 30% stake placed in service 500 North Capitol Street, NW – a Class A office redevelopment project (82% leased) spanning approximately 232,000 net rentable square feet in Washington, DC.
Boston Properties ended third quarter 2012 with cash and cash equivalents of $1.2 billion. The company expects fourth quarter 2012 FFO in the range of $1.22–$1.24 per share, while FFO for full year 2013 is expected in the range of $5.00–$5.15
Boston Properties currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. We also maintain our long-term Neutral recommendation on the stock. One of its competitors, Vornado Realty Trust (VNO - Analyst Report) currently also retains a Zacks #3 Rank.
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