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Boston Properties (BXP) Q1 FFO Beat, Revenues Increase

Boston Properties Inc. BXP reported first-quarter 2016 funds from operations (“FFO”) per share of $1.63, beating the Zacks Consensus Estimate of $1.59 and the year-ago quarter figure of $1.30.

Moreover, quarterly FFO per share came higher than the REIT’s (real estate investment trust) previously guided range of $1.59–$1.61, thanks to the greater-than-projected portfolio operations as well as development and management services income.

Total revenue during the quarter improved 7.7% year over year to $666 million, comfortably surpassing the Zacks Consensus Estimate of $623.9 million. The quarterly increase was primarily attributable to a rise in rental revenues. Rental revenues were up 7.7% year over year to $650.5 million, aided by an uptick in base rents, higher tenant recoveries and parking & other revenues.

Property Update

As of Mar 31, 2016, Boston Properties’ portfolio comprised of 167 properties, spanning over around 46.3 million square feet area. This included 11 under-development properties, covering an area of 4.6 million square feet.

The overall operating portfolio, comprising 153 properties (excluding 2 residential properties and one hotel), was 91% leased as of Mar 31, 2016.

Notably, during the quarter, the company accomplished the sale of 415 Main Street property, located in Cambridge, MA for a gross sale price of around $105.4 million.

Sbsequent to the quarter-end, Boston Properties also acquired 625-35 Peterson Way, located in Santa Clara, CA for a cash price of around $78 million

Liquidity

Boston Properties exited first-quarter 2016 with cash and cash equivalents of nearly $1.6 billion, up from $723.8 million as of year-end 2015.

Outlook

Boston Properties has updated its guidance for full-year 2016 to $5.85–$5.95 per share from the previous projection of $5.78–$5.93 per share. The Zacks Consensus Estimate of $5.86 remains within this range.

The company expects its second-quarter 2016 FFO per share in a range of $1.36–$1.38. The Zacks Consensus Estimate of $1.41 does not come within this range.

Our Viewpoint

Given Boston Properties’ leading position in the high barrier-to-entry U.S. markets and a recovering economy, we expect solid growth in demand for its office assets. Yet, any further rise in interest rates and stiff competition in some of its markets keep us concerned.

Boston Properties currently carries a Zacks Rank #3 (Hold).

We now look forward to other REITs that are scheduled to release first-quarter 2016 results next week. These include General Growth Properties, Inc GGP, Taubman Centers, Inc. TCO and Vornado Realty Trust VNO.

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.

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