Still Neutral on Boston Properties - Analyst Blog
07 Junho 2013 - 8:30PM
Zacks
On Jun 7, 2013, we reiterated our long-term recommendation on
Boston Properties Inc. (BXP) at Neutral. The
decision is based on the company’s improved core operations and
strategic repositioning efforts, though rising expenses and stiff
competition from developers, owners and operators of office
properties and other commercial real estate remains a plausible
concern.
Why Neutral?
Boston Properties’ first-quarter 2013 funds from operations (FFO)
per share of $1.06 came in considerably below the Zacks Consensus
Estimate of $1.21 and the year-ago quarter level of $1.12.
Substantial increase in operating expenses hurt the quarterly
results.
Yet, a rise in revenues acted as a tailwind. Notably, during the
quarter, Boston Properties appointed Owen D. Thomas as the new CEO,
succeeding Mortimer B. Zuckerman. As a result, the company
recognized a part of the compensation expenses in the quarter with
the remaining to be realized by the second quarter of 2014. In
addition, the company incurred charges related to its property.
Nevertheless, the company is benefiting from improved core
operations and has been successful in maintaining a strong grip on
high barrier-to-entry geographic markets across the U.S. Notably,
the company’s Times Square Tower in Manhattan is on sale, as per a
Bloomberg report.
The deal value for this 1.2 million-square-foot office building
is expected to surpass $1 billion. The news was revealed by the
company at the National Association of Real Estate Investment
Trusts conference in Chicago.
Mostly occupied, the Times Square Tower, a 47-story Class A office
tower, enjoys an enviable location in the popular shopping district
with its tenant roaster including several law firms, restaurant
chain and clothing retailer ANN Inc. (ANN).
Rise in rents and the value of such properties in the area are
attractive and, hence, the value recognition of its asset through
sale by Boston Properties is a strategic fit. The company can
redistribute the funds in its several other projects.
Yet, the demand remains moderate for office space in several other
regions with unemployment levels remaining elevated and space
availability adequate, thus creating pressure on the rent and
occupancies.
Following the release of first-quarter 2013 results, over the last
30 days, the Zacks Consensus Estimate for 2013 fell marginally to
$5.10 per share. For 2014, it went down by 0.4% to $5.63 per share.
The stock now has a Zacks Rank #3 (Hold).
Other Stocks to Consider
Better performing REITs include CommonWealth REIT
(CWH) and Sunstone Hotel Investors Inc. (SHO),
both carrying a Zacks Rank #1 (Strong Buy).
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.
ANN INC (ANN): Free Stock Analysis Report
BOSTON PPTYS (BXP): Free Stock Analysis Report
COMMONWEALTH RE (CWH): Free Stock Analysis Report
SUNSTONE HOTEL (SHO): Free Stock Analysis Report
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