Boston Properties' profit falls after asset sales
Boston Properties Inc., which led a group that bought Manhattan's General Motors Building last month, said last night that second quarter earnings fell.
The company's Boston real estate portfolio includes such signature buildings as Prudential Tower and 111 Huntington Ave. (Shown at right.)
Net income fell to $79.5 million, or 66 cents a share, from $102.3 million or 84 cents a year ago, the company said in a statement distributed on PRNewswire. Funds from operations, a cash flow measure used by real estate investment trusts, rose to $1.19 per share from $1.18. Funds from operations beat the average projection of $1.17 a share by 13 analysts surveyed by Bloomberg News.
The Boston-based company sold about $4.5 billion of buildings between 2005 and early 2008, including 5 Times Square in Manhattan for $1.28 billion, 280 Park Ave. for $1.2 billion, and Embarcadero Center West in San Francisco for $205.8 million.
``They sold a number of assets last year, so they lost rental income,'' said Shawn Barnes, a REIT analyst for Edward Jones & Co., in an interview conducted before today's report. ``There will be some time between when they sell those properties and when they redeploy those assets.''
Boston Properties, the biggest U.S. office REIT, led a partnership that paid $2.8 billion for the GM Building, the most ever paid for a single U.S. building. The 50-story tower on Fifth Avenue, at the southeast corner of Central Park, houses some of Manhattan's most expensive offices.
Falling Prices
Prices are falling in all four of the company's principal markets: New York, Boston, Washington, and San Francisco, according to data from Real Capital Analytics, a New York-based real estate research firm. Boston Properties expect to remain profitable by owning and building only the highest quality office towers in those markets, the company says on its Web site.
Boston Properties rose $3.16, or 3.3 percent, to $99.98 in New York Stock Exchange composite trading yesterday. Shares have risen 0.9 percent since May 20, when news reports identified Boston Properties as the GM Building buyer, compared with a 4.2 percent decline in 12-member Bloomberg REIT Office Property Index.
The company is chaired by New York Daily News publisher Mortimer Zuckerman, 71.
``There's no such thing as a distressed sale in the Manhattan real estate market,'' Zuckerman said in a May 27 interview. ``Manhattan is a key part of the global economy as well as the national economy and an attractive place for investment.''
GM Building
The GM Building will cost Boston Properties about $5.5 million during its first year of ownership, according to a June 10 report by Deutsche Bank REIT analyst Lou Taylor. While cash flow will improve to $26.8 million by 2012, ``meaningful lease expirations don't occur until 2010 and 2012,'' wrote Taylor, who has a ``hold'' rating on the stock.
Boston Properties owned 139 properties, almost all of them office buildings, comprising 43.9 million square feet, as of March 31, according to its Web site. It has another 3.6 million square feet in development, including 250 West 55th St., a 1- million-square-foot tower at Eighth Avenue in Midtown Manhattan, where the law firm Gibson, Dunn & Crutcher LLP is to be the anchor tenant. (Bloomberg)
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