BXP Beats Q4 Earning Estimates, Boosts NYC Leasing
By Andrew Coen January 31, 2024 1:48 pm
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BXP slightly exceeded analysts’ expectations in its fourth-quarter earnings aided by a boost in New York City leases, the real estate investment trust (REIT) said in its quarterly earnings call Wednesday.
The company formerly called Boston Properties (BXP) reported that funds from operations (FFO) fell to $286.2 million, or $1.82 per diluted share, in the last quarter of 2023 compared to $292.9 million, or $1.86 per diluted share, for the fourth quarter of 2022. Still, the dip beat expectations from economists, who had projected FFO of $1.81 per share.
Leasing at the close of the fourth quarter across BXP’s entire office portfolio reached 89.9 percent occupancy, compared with 91.5 percent in year-end 2022, with more than 1 million square feet executed. Still, the REIT’s New York City portfolio saw a 1.5 percent year-over-year increase in leasing occupancy, rising to 92.4 percent.
“Maintaining portfolio occupancy in the current environment is an accomplishment in its own right,” Owen Thomas, the CEO of BXP, said in the earnings call.
The REIT executed 567,000 square feet of leases in New York, including DoorDash signing an 11-and-a-half-year lease for 115,382 square feet at 200 Fifth Avenue and Pratt Institute inking 62,570 square feet at Dock 72 in the Brooklyn Navy Yard.
Douglas Linde, president of BXP, said the REIT has just under 1 million square feet of lease deals in negotiation with 625,000 expected to commence in 2024, but only one of the leases is above 70,000 square feet. Linde noted that while many industries are reducing their office footprint, the financial services companies are showing signs of seeking out Class A properties.
“These organizations are the heart and soul of our New York City activity and are an important sector of the Boston and San Francisco CBD demand as well,” Linde said. “They want to occupy premier workplaces.”
BXP’s Seattle portfolio saw a roughly 100,000 square foot increase in vacancy for the fourth quarter driven largely by WeWork (WE) terminating a lease at Madison Centre. Seattle had the lowest leasing occupancy of BXP’s portfolio by market at 83.1 percent, followed by San Francisco at 85.5 percent and Los Angeles at 88.1 percent.
Michael LaBelle, chief financial officer at BXP, said interest expenses will remain higher in 2024 due to the continued higher interest rates, although the REIT is estimating a 75 basis point cut from the Federal Reserve this year. He said floating-rate debt comprises 5 percent of its total $730 million of mortgage debt. It has cash balances of $1.5 billion and a $1.8 billion line of credit available, according to LaBelle.
“Despite the economic headwinds, we continue to gain market share with our leasing and operating prowess and premier workplace portfolio, demonstrating relative stability in times of negative absorption,” LaBelle said. “We’re optimistic that the interest rate environment will settle at a lower level, providing more confidence in the economy.”
Andrew Coen can be reached at acoen@commercialobserver.com
