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On Wednesday, KeyBanc analyst Upal Rana maintained a Sector Weight rating on shares of Boston Properties Inc. (NYSE: NYSE:BXP), a real estate investment trust specializing in office space with a market capitalization of $11.85 billion. Rana highlighted expectations that occupancy rates would decline through the first half of 2025 due to several large tenants moving out. However, the situation is anticipated to stabilize and potentially improve in the second half of the year as new leasing activity picks up. According to InvestingPro, BXP is a prominent player in the Office REITs industry and has maintained dividend payments for 28 consecutive years, currently offering an attractive 5.85% dividend yield.
Boston Properties’ occupancy is projected to hit a low point before recovering, with lease expirations until 2027 being relatively modest. This could set the stage for occupancy gains in the years following 2025. The analyst pointed out that while the company’s development pipeline is expected to expand due to the recent completion of several projects, there is a risk if the leasing does not keep pace, potentially leading to underperformance as the year advances. The company has demonstrated resilience with a 4.45% revenue growth in the last twelve months, though investors should note its current elevated P/E ratio of 755.89.
Rana noted that after a reset of earnings expectations during the fourth quarter of 2024, there is a more constructive outlook on the stock. However, the current valuation, with a 7.9% adjusted funds from operations (AFFO) multiple premium compared to its office peers, is considered fair by KeyBanc.
The analyst’s comments come as Boston Properties continues to navigate the challenges and opportunities within the office real estate sector. The company’s strategic focus on development and leasing activities is expected to play a crucial role in its future financial performance.
In other recent news, Boston Properties (BXP) reported its fourth-quarter earnings for 2024, revealing a notable miss in earnings per share (EPS) against market expectations. The company posted an EPS of -$1.45, falling short of the anticipated $0.48. Despite this, Boston Properties’ revenue exceeded forecasts, coming in at $858.6 million compared to the projected $836.85 million. The company also reported a 4% increase in annual revenue, showcasing strong top-line performance.
Additionally, Boston Properties achieved a 50 basis point improvement in portfolio occupancy, reaching 87.5%, with central business district (CBD) buildings reporting nearly 90.9% occupancy. The firm’s leasing activity was robust, with 5.6 million square feet leased in 2024, a 35% increase from the previous year. Looking ahead, Boston Properties provided guidance for 2025, with funds from operations (FFO) expected to range between $6.77 and $6.95 per share. The company anticipates modest increases in leased square footage and significant growth potential in 2026-2027, supported by a development pipeline of approximately 2.3 million square feet.
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