BXP's Q2 results beat estimates on better-than-anticipated revenues, aided by healthy leasing activity. It has raised the 2024 FFO per share guidance.
The headline numbers for Boston Properties (BXP) give insight into how the company performed in the quarter ended June 2024, but it may be worthwhile to compare some of its key metrics to Wall Street estimates and the year-ago actuals.
Boston Properties (BXP) came out with quarterly funds from operations (FFO) of $1.77 per share, beating the Zacks Consensus Estimate of $1.72 per share. This compares to FFO of $1.86 per share a year ago.
BXP's Q2 earnings are likely to have benefited from healthy demand for premium office and life-science assets. However, high interest rates remain a concern.
Real estate investment trusts (REITs) represent one of the best ways to get exposure to investing in real estate without having to take on the risks and capital expenditures of purchasing your own property. When buying into a REIT, investors are essentially giving their money as a loan to a capital management firm, which then invests that money into further property as the value of that property grows so two does the dividend yield of the REIT lowering it to provide comfortable returns on the original investment made.
BXP offers a durable 6% yield with a low payout ratio and low valuation based on FFO. BXP has a well-leased office real estate portfolio concentrated in key office markets with strong lease metrics. Despite risks of high asset concentration and lack of dividend growth, BXP presents a strong value proposition for passive income investors.
In February, “longtime investor” Sonny Kalsi told Barron's that the commercial real estate sector would make a comeback in 2025. The publication noted that Kalsi, who co-manages an investment division of Canadian insurer Sun Life called BGO, handles about $80 billion of commercial real estate investments.
Pimco, one of the world's largest bond managers – currently managing $1.89 trillion in assets – reported on June 11 that more regional bank failures are in the cards following March 2023 regional banking crisis when Silicon Valley Bank, Silvergate Bank, and Signature Bank failed. “The real wave of distress is just starting,” said John Murry, Pimco's head of global private commercial real estate.
Healthy demand for premier office spaces and long-term leases from tenants bode well for Boston Properties (BXP). However, elevated interest rates continue to be a concern.
REIT stocks to watch in the stock market today.
Boston Properties' share price is down over 50% from early 2022, facing challenges in the office real estate sector. The company saw improved financial performance in Q1, with increased revenues and slightly higher net income. Boston Properties has strengths in lease renewals and joint ventures, but investors should monitor risks such as increasing debt maturities and rising vacancy rates.
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