Real estate investment trust Boston Properties (BXP) is reporting healthy revenue and cash flow these days thanks to a strong property portfolio and sound financial management, the company and ratings agencies say. For the first quarter of 2011, revenue rose 11 percent to $417.9 million. Net income available to common shareholders came to $40.8 million, down from $52.7 million for the first quarter of 2010.
Funds from operations, an item used by the industry to measure REIT performance, came to $160 million, or $1.12 per diluted share in the first quarter, up from $149.6 million, or $1.07 per diluted share in the same period a year earlier.
The company attributed the increase to stronger rental revenue. Fitch Ratings said it was sticking with a stable outlook for the company.
"The rating affirmations are supported by a high-quality portfolio of assets, solid leasing profile, manageable lease expirations, adequate liquidity, manageable debt maturities, a large unencumbered asset pool with solid coverage of unsecured debt, and demonstrated access to a range of capital sources," Fitch says in a statement.
"The ratings are balanced by a fairly concentrated operational footprint, sizable exposure to tenants in the legal community, weak leverage and fixed-charge coverage for the rating category, and weak risk-adjusted capitalization."
Blue skies ahead
Standard and Poor's has said the commercial real-estate sector is nearing the bottom and raised its outlook for BXP to stable from negative.
"The outlook revision reflects our view that the sharp cyclical downturn in the U.S. office sector is nearing a bottom and that the real estate investment trust's coverage measures are likely to gradually improve," S&P credit analyst James Fielding says in a statement.
"Our ratings on Boston Properties reflect the real estate investment trust's strong business risk profile as characterized by a high quality and well-located portfolio of office properties that has provided relatively stable cash flow through several real estate cycles."
Fielding made his recommendation and comments late in 2010, although Standard and Poor's has made no changes.
Apparently, other analysts are in agreement. Shortly afterwards, a slew of upgrades began. In January, Stifel Nicolaus upgraded the company's stock to buy from hold, as did KeyBanc Capital Markets. More recently, in June, RBC Capital Markets upgraded the company to outperform from sector perform while Argus went to buy from hold.
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