Boston Properties Narrowly Misses

| About: Boston Properties, (BXP)

Boston Properties Inc. (NYSE:BXP), one of the leading real estate investment trusts, reported strong fourth quarter 2009 results with FFO (funds from operations) of $146.1 million or $1.04 per share compared to ($0.6) million or ($0.01) per share in the year-earlier quarter. Funds from operations, a widely used metric to gauge the performance of REITs, are obtained after adding depreciation and amortization and other non-cash expenses to net income.

For full fiscal 2009, Boston Properties reported an FFO of $606.3 million or $4.59 per share compared to $403.8 million or $3.33 per share in fiscal 2008. Both the quarterly and fiscal FFO figures missed the Zacks Consensus Estimates by about 2 cents each.

During the quarter, Boston Properties placed in service a 120,000 net rentable square feet Class A office property in Princeton, New Jersey. The property is currently 100% leased. Also during the quarter, Boston Properties acquired a land parcel in Cambridge, Massachussetts, for approximately $6.0 million.

Boston Properties completed a public offering of $700 million 5.875% senior notes due 2019 during the reported quarter. The net proceeds were approximately $693.7 million. During the quarter, an unconsolidated joint venture of the company also recognized a non-cash impairment charge of $24.6 million for its properties in San Carlos, California. The company’s share of the total impairment charge was $4.2 million. Boston Properties also recognized an additional $2.0 million of non-cash impairment charge representing the other-than-temporary decline in the fair value of its investment in the joint venture.

Subsequent to the end of the quarter, Boston Properties paid $12.8 million for the termination of lease for its 1 million square feet office project in New York City. The company has currently suspended all construction work on the project, and would recognize $7.2 million of ‘other income’ during the first quarter of fiscal 2010. Boston Properties ended the quarter with cash and cash equivalents of over $1.4 billion.

Boston Properties is gradually feeling the impact of declining fundamentals in most of its markets. Overall portfolio occupancy decreased to 92.4% at the end of the quarter, down from 94.5% in the prior-year quarter. With increased vacancy rates across the portfolio, occupancy is further expected to decline in the coming quarters. Boston Properties anticipates its FFO for full year 2010 to vary between $4.10 and $4.25 per share, while FFO for the first quarter of 2010 is expected in the range of $1.02−$1.04.