Bloomberg News

Boston Properties Second-Quarter FFO Rises on Higher Rents

August 01, 2011

(Updates with guidance in sixth, ninth paragraphs.)

Aug. 1 (Bloomberg) -- Boston Properties Inc., owner of New York’s General Motors Building and Boston’s John Hancock Tower, said second-quarter funds from operations rose 16 percent as office rental revenue increased.

FFO, which gauges a property company’s ability to generate cash, rose to $181.6 million, or $1.23 a share, from $156.9 million, or $1.12, a year earlier, the Boston-based real estate investment trust said today in a statement. The company was expected to have FFO of $1.19 a share, the average estimate of 19 analysts in a Bloomberg survey.

Boston Properties, the biggest U.S. REIT that specializes in office buildings, has been benefiting from its focus on trophy skyscrapers in the best-performing cities, said Michael Knott, an analyst at Green Street Advisors Inc. in Newport Beach, California.

“In the office world it’s a case of the rich getting richer,” he said in a telephone interview before today’s release. “Quality buildings in top markets like they’re in, I think, is the sweet spot where there’s the best leasing.”

Tenants have been trading up to higher-quality space to take advantage of rents that fell during the recession, Knott said.

Boston Properties said today that it’s projecting FFO of $1.23 to $1.25 a share in the third quarter, and $4.78 to $4.83 a share for the full year. That’s higher than the $4.45 to $4.55 a share forecast in May.

Boston Properties owned 152 properties with 42.1 million square feet (3.9 million square meters) as of June 30, including eight properties with 3.4 million square feet under construction. The properties are concentrated in the New York, Washington, Boston, San Francisco and Princeton, New Jersey, areas.

West Side Tower

During the quarter, Boston Properties said it would restart a 1 million-square-foot tower at 250 W. 55th St. on Manhattan’s West Side, after signing law firm Morrison & Foerster LLP to a 180,000-square-foot lease. That decision makes sense given the company’s success renting space at 510 Madison Ave., an almost- finished building it bought last year, Knott said.

Boston Properties’ 2011 estimate includes 10 cents a share from the resumption of capitalized interest and other expenses for 250 W. 55th, 9 cents resulting from a June decision not to sell Carnegie Center, and 8 cents related to payments due from a Reston, Virginia, tenant in connection with a lease termination.

Second-quarter results were announced after the end of regular U.S. trading. Boston Properties fell $1.40, or 1.3 percent, to $105.96 in New York Stock Exchange composite trading. The stock is up 32 percent with dividends in the past 12 months, the second-best performer in the 18-member Bloomberg REIT Office Property Index, after competitor SL Green Realty Corp., which reported a 14 percent increase in FFO on July 26.

FFO, used by REITs, doesn’t conform to generally accepted accounting principles.

(Boston Properties will hold a conference call tomorrow at 10 a.m New York time. See LIVE <GO> or dial +1-877-706-4503, pass code 82231782.)

--Editors: Daniel Taub, Josh Friedman

To contact the reporters on this story: David M. Levitt in New York at dlevitt@bloomberg.net; Hui-yong Yu in Vancouver at hyu@bloomberg.net

To contact the editor responsible for this story: Kara Wetzel at kwetzel@bloomberg.net


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