Boston Properties Fourth-Quarter FFO Doubles as Debt Costs Go Unrepeated

Boston Properties Inc. (BXP), the biggest U.S. office real estate investment trust, said fourth-quarter funds from operations almost doubled as costs associated with restructuring debt a year earlier went unrepeated.

FFO, which gauges a property company’s ability to generate cash, was $179.3 million, or $1.21 a share, compared with $89.9 million, or 64 cents, a year earlier, the Boston-based company said today in a statement. It was expected to have FFO of $1.19 a share, the average estimate of 18 analysts in a Bloomberg survey. Debt redemptions in the fourth quarter of 2010 cost the company about $81.7 million in early payment charges.

Boston Properties depends largely on rents from its office buildings in New York (CWRR1NDT) and the Washington, Boston and San Francisco metropolitan areas. Chairman Mort Zuckerman has said such high-end properties as the company’s General Motors Building in Manhattan and John Hancock Tower in Boston perform better than other buildings in a slow economy.

Zuckerman’s faith in trophy towers is being tested in New York, where job cuts by financial firms may temper office demand, and on the West Coast, where technology company leases signed a decade ago are expiring, according to Alex Goldfarb, an analyst with Sandler O’Neill & Partners LP.

“The question for Boston Properties is what progress they’re making on getting tenants to sign up” for those buildings, Goldfarb, who has a “buy” rating on the REIT, said in an interview before the earnings report. “Those are brand- new buildings, so you need brand-new-building-type rents.”

New Manhattan Tower

In New York, Boston Properties is marketing space at 510 Madison Ave., an office building it purchased in 2010, and 250 West 55th St., a tower under construction near Eighth Avenue.

Fourth-quarter revenue rose 15 percent to $452.8 million, of which $432.4 million was from rents, the company said.

Boston Properties raised the lower end of its 2012 FFO forecast to $4.65 a share, from $4.58 in October. The high end remained $4.78. The company also projected first-quarter FFO of $1.12 to $1.14, lower than the average estimate of $1.15 from 15 analysts surveyed.

Occupancies at the company’s 39.6 million square feet of in-service properties fell to 91.3 percent from 93.2 percent a year earlier. An increase in New York, where the company earns more than a third of its net operating income, to 97.8 percent from 96.9 percent didn’t offset declines in Boston, San Francisco and Washington.

Fourth-quarter results were announced after the close of regular U.S. trading. Boston Properties rose 1.5 percent to $104.05 today in New York. The shares gained 16 percent in 2011, the best performance in the 17-member Bloomberg REIT Office Property Index (BBREOFPY), which declined 3.9 percent last year.

To contact the reporter on this story: David M. Levitt in New York at dlevitt@bloomberg.net

To contact the editor responsible for this story: Daniel Taub at dtaub@bloomberg.net

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