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Boston Properties’ Experiencing “Fundamentally Strong Leasing Activity


Boston Properties had another strong quarter of performance and are successfully executing on its strategy for continued revenue and income growth. Highlights for this quarter include that the REIT grew its FFO per share 15% over the first quarter of 2018, which was also $0.05 above the midpoint of our guidance for the quarter and $0.06 above street consensus.

According to the firm’s Owen Thomas, CEO, the company raised its full-year 2019 FFO per share guidance by $0.05 at the midpoint, which would result in a 11% FFO growth above 2018. “We completed one 1.5 million square feet of leasing for in-service properties, which is well above our long-term quarterly average for the period and we increased the occupancy for our in-service office and retail portfolio 150 basis points from the last quarter to 92.9%. this also marked 240 basis point increase from a year ago. Also this past month, we completed an early renewal and expansion of our lease with Bank of America at a 100 Federal Street in Boston for 545,000 square feet.”

On the firm’s Q1 earnings call, he said the company has obtained construction financing for the Marriott headquarters development on favorable terms, and we issued our 2018 sustainability report and were selected as a 2019 ENERGY STAR Partner of the Year, the highest recognition possible from the EPA for distinguished corporate energy management programs.

Moving to the economy, he said that “Overall economic conditions continue to be stable and overall favorable for Boston Properties. Initial U.S. GDP growth estimates for the first quarter were 3.2% will surpass in prior estimates. Job creation remains steady with 540,000 jobs created in the first quarter and unemployment continues to be low at 3.8%. The Fed has turned accommodative, as indicated, it will not raise interest rates for the foreseeable future and intends to pause quantitative tightening by year-end. As a result, the 10-year U.S. Treasury has been steady so far this year dropping around 20 basis points to 2.5%. This economic landscape is not exclusively rosy with GDP growth in Europe and China declining and prospects for escalating trade tension.”

He added that “In our business, we’re experiencing confidence and fundamentally strong leasing activity with our customers and our core markets. With the exception of the Washington DC’s Central Business District. Rents continue to escalate markedly in Boston and San Francisco, driven by strong demand and minimal new supply. Given this backdrop and the broader set of economic signals, we do not anticipate a near-term economic correction.”

That said, he noted that the REIT continues to keep its aggregate debt levels low and ensure its developments are appropriately pre-leased before launch. “As we know, an economic turn is inevitable and difficult to precisely predict. So as a result, we are well positioned to take advantage of ongoing economic growth and to whether a contraction with durable cash flows.”