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Here's Why You Should Retain BXP Stock in Your Portfolio Now
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BXP, Inc.’s (BXP - Free Report) assets in a few select markets, well-diversified tenant base, strategic expansions, prudent capital-management practices and solid balance sheet position bode well for long-term growth.
However, larger expirations and the elevated supply of office properties in some markets are likely to fuel competition and weigh on its pricing power. Elevated interest expenses add to its woes.
Late in January, BXP reported fourth-quarter 2024 funds from operations (FFO) per share of $1.79, in line with the Zacks Consensus Estimate. However, the reported figure declined 1.6% year over year. Quarterly results reflected better-than-anticipated revenues on healthy leasing activity. However, higher interest expenses during the quarter marred its year-over-year FFO per share growth.
BXP also issued its guidance for 2025 FFO per share. BXP projects FFO per share for the first quarter of 2025 to be in the range of $1.63-$1.65. For 2025, FFO per share is expected in the band of $6.77-$6.95.
What is Aiding BXP?
BXP's portfolio of premier office assets, concentrated in a few select high-rent, high barrier-to-entry geographic markets and a solid tenant base, enables it to generate stable rental revenues. The rise in demand for top-quality office spaces continues to be driven by technology and life science businesses, positioning the company well for long-term growth. The fourth-quarter leasing volume represented BXP's strongest quarterly leasing since the second quarter of 2019, with the leased amount being around 130% of its historical 10-year average for the fourth quarter. Given the strong leasing momentum, management expects its 2025 occupancy to stabilize between 86.5% and 88%.
Amid strong demand from life science tenants, the company is converting numerous straight office buildings to laboratory/life-science spaces in its suburban portfolio. As of Dec. 31, 2024, BXP had two life-science projects under development encompassing 0.9 million RSF with an estimated total investment of $675.1 million (BXP’s share) and 71% pre-leased.
BXP has a healthy balance sheet position with ample liquidity. The company exited the fourth quarter of 2024 with cash and cash equivalents of $1.25 billion. The company’s share of net debt to EBITDAre (annualized) was 7.65X, while the fixed charge coverage ratio was 2.34 times. Given its solid financial position and prudent capital management, BXP seems well-poised to navigate any economic uncertainty and industry choppiness and capitalize on future growth opportunities.
In the past six months, shares of this office REIT, carrying a Zacks Rank #3 (Hold), have rallied 2.8% against the industry's 3.8% decline.
Image Source: Zacks Investment Research
What is Hurting BXP?
There is competition from developers, owners and operators of office properties and other commercial real estate, affecting its ability to retain tenants at relatively higher rents and curbing its pricing power. Given this backdrop, it will be challenging for the company to backfill tenant move-outs and vacancies in the near term. Owing to several larger expirations due in the first half of 2025, management expects its occupancy to decline slightly during the first half of 2025.
The continuation of work-from-home, flexible or hybrid work setups has affected office space utilization. Although property tours and leases under negotiation continue to take place, there is less urgency from clients to make new commitments.
Despite the Federal Reserve announcing rate cuts in recent times, the interest rate is still high and is a concern for BXP. Elevated rates imply high borrowing costs for the company, affecting its ability to purchase or develop real estate. The company has a substantial debt burden, and its share of debt as of Dec. 31, 2024 was approximately $16.2 billion. BXP’s fourth-quarter interest expenses were up 9.9% year over year to $170.4 million.
The Zacks Consensus Estimate for Welltower’s 2025 FFO per share has moved three cents upward in the past week to $4.82.
The consensus estimate for SL Green Realty’s 2025 FFO per share has increased a cent in the past month to $5.52.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
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Here's Why You Should Retain BXP Stock in Your Portfolio Now
BXP, Inc.’s (BXP - Free Report) assets in a few select markets, well-diversified tenant base, strategic expansions, prudent capital-management practices and solid balance sheet position bode well for long-term growth.
However, larger expirations and the elevated supply of office properties in some markets are likely to fuel competition and weigh on its pricing power. Elevated interest expenses add to its woes.
Late in January, BXP reported fourth-quarter 2024 funds from operations (FFO) per share of $1.79, in line with the Zacks Consensus Estimate. However, the reported figure declined 1.6% year over year. Quarterly results reflected better-than-anticipated revenues on healthy leasing activity. However, higher interest expenses during the quarter marred its year-over-year FFO per share growth.
BXP also issued its guidance for 2025 FFO per share. BXP projects FFO per share for the first quarter of 2025 to be in the range of $1.63-$1.65. For 2025, FFO per share is expected in the band of $6.77-$6.95.
What is Aiding BXP?
BXP's portfolio of premier office assets, concentrated in a few select high-rent, high barrier-to-entry geographic markets and a solid tenant base, enables it to generate stable rental revenues. The rise in demand for top-quality office spaces continues to be driven by technology and life science businesses, positioning the company well for long-term growth. The fourth-quarter leasing volume represented BXP's strongest quarterly leasing since the second quarter of 2019, with the leased amount being around 130% of its historical 10-year average for the fourth quarter. Given the strong leasing momentum, management expects its 2025 occupancy to stabilize between 86.5% and 88%.
Amid strong demand from life science tenants, the company is converting numerous straight office buildings to laboratory/life-science spaces in its suburban portfolio. As of Dec. 31, 2024, BXP had two life-science projects under development encompassing 0.9 million RSF with an estimated total investment of $675.1 million (BXP’s share) and 71% pre-leased.
BXP has a healthy balance sheet position with ample liquidity. The company exited the fourth quarter of 2024 with cash and cash equivalents of $1.25 billion. The company’s share of net debt to EBITDAre (annualized) was 7.65X, while the fixed charge coverage ratio was 2.34 times. Given its solid financial position and prudent capital management, BXP seems well-poised to navigate any economic uncertainty and industry choppiness and capitalize on future growth opportunities.
In the past six months, shares of this office REIT, carrying a Zacks Rank #3 (Hold), have rallied 2.8% against the industry's 3.8% decline.
Image Source: Zacks Investment Research
What is Hurting BXP?
There is competition from developers, owners and operators of office properties and other commercial real estate, affecting its ability to retain tenants at relatively higher rents and curbing its pricing power. Given this backdrop, it will be challenging for the company to backfill tenant move-outs and vacancies in the near term. Owing to several larger expirations due in the first half of 2025, management expects its occupancy to decline slightly during the first half of 2025.
The continuation of work-from-home, flexible or hybrid work setups has affected office space utilization. Although property tours and leases under negotiation continue to take place, there is less urgency from clients to make new commitments.
Despite the Federal Reserve announcing rate cuts in recent times, the interest rate is still high and is a concern for BXP. Elevated rates imply high borrowing costs for the company, affecting its ability to purchase or develop real estate. The company has a substantial debt burden, and its share of debt as of Dec. 31, 2024 was approximately $16.2 billion. BXP’s fourth-quarter interest expenses were up 9.9% year over year to $170.4 million.
Stocks to Consider
Some better-ranked stocks from the broader REIT sector are Welltower Inc. (WELL - Free Report) and SL Green Realty Corp. (SLG - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Welltower’s 2025 FFO per share has moved three cents upward in the past week to $4.82.
The consensus estimate for SL Green Realty’s 2025 FFO per share has increased a cent in the past month to $5.52.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.