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Boston Properties (BXP) Q4 FFO Misses Estimates, Revenues Up

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Boston Properties Inc.’s (BXP - Free Report) fourth-quarter 2018 funds from operations (FFO) per share of $1.59 missed the Zacks Consensus Estimate of $1.68. The figure, however, came in 7% higher than the prior-year tally.

Results were supported by higher occupancy and strong leasing activity. Boston Properties has also updated its outlook for full-year 2019 and provided the same for first-quarter 2019.

Adjusted revenues, comprising base rent and recoveries from tenants during the quarter, increased 7.4% year over year to $651.2 million. Also, the figure surpassed the Zacks Consensus Estimate of $634.1 million.

For full-year 2018, FFO per share came in at $6.30, missing the Zacks Consensus Estimate of $6.40. The figure declined from the year-earlier tally of $6.22. Adjusted revenues, comprising base rent and recoveries from tenants for full-year 2018,improved year over year to $2.5 billion.

Property Update

As of Dec 31, 2018, Boston Properties’ portfolio comprised 197 properties, covering a total of around 51.6 million square feet of space. This included 11 under construction/redevelopment properties.

The company’s overall operating portfolio, including 181 in-service office properties was 91.4% occupied as of Dec 31, 2018, indicating a sequential expansion of 30 basis points (bps). Further, 2018 marked one of the strongest leasing years for Boston Properties, with the company signing leases for 7.2 million square feet of space during the year.

During the Dec-end quarter, Boston Properties accomplished the sale of 1333 New Hampshire Avenue— a 315,000-square-foot property — in Washington, DC, for a gross price of $142 million. This resulted in a gain on sale of real estate aggregating about $44.4 million.

In addition to these, the company completed and fully placed its Salesforce Tower project in-service, at San Francisco, CA, during the quarter under review. The Class A office project, whichspans 1.4 million square feet of area, is 100% leased.

Liquidity

Boston Properties exited the fourth quarter with cash and cash equivalents of around $543.3 million, up from $434.7 million as of Dec 31, 2017.

Outlook

The company provided first-quarter 2019 FFO per share of $1.66-$1.68. The Zacks Consensus Estimate is pinned at $1.68.

For full-year 2019, Boston Properties revised its FFO per share guidance to $6.88-$7, indicating 10% year-on-year growth at the mid-point. The Zacks Consensus Estimate for 2019 FFO per share is $6.84.

Our Viewpoint

Boston Properties witnessed robust leasing during the year backed by its portfolio in select high-rent, high barrier-to-entry geographic markets. We anticipate economic improvement and recovery in the job market to spur demand for the company’s office spaces, thereby, boosting leasing and occupancy rates at its portfolio.

Nevertheless, rise in operating and interest expenses unfavorably impacted the company’s bottom line. Rising interest rates might affect the company in the near term as well. 

Boston Properties, Inc. Price, Consensus and EPS Surprise

Boston Properties currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

We now look forward to the earnings releases of Liberty Property Trust (LPT - Free Report) , Highwood Properties (HIW - Free Report) and Digital Realty (DLR - Free Report) . All three companies are scheduled to report its quarterly numbers on Feb 5.

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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