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BXP, Inc.’s BXP assets in a few select markets, well-diversified tenant base, strategic expansions, prudent capital-management practices and solid balance sheet position bode well for long-term growth.
However, larger expirations and the elevated supply of office properties in some markets are likely to fuel competition and weigh on its pricing power. Elevated interest expenses add to its woes.
Late in January, BXP reported fourth-quarter 2024 funds from operations (FFO) per share of $1.79, in line with the Zacks Consensus Estimate. However, the reported figure declined 1.6% year over year. Quarterly results reflected better-than-anticipated revenues on healthy leasing activity. However, higher interest expenses during the quarter marred its year-over-year FFO per share growth.
BXP also issued its guidance for 2025 FFO per share. BXP projects FFO per share for the first quarter of 2025 to be in the range of $1.63-$1.65. For 2025, FFO per share is expected in the band of $6.77-$6.95.
What is Aiding BXP?
BXP's portfolio of premier office assets, concentrated in a few select high-rent, high barrier-to-entry geographic markets and a solid tenant base, enables it to generate stable rental revenues. The rise in demand for top-quality office spaces continues to be driven by technology and life science businesses, positioning the company well for long-term growth. The fourth-quarter leasing volume represented BXP's strongest quarterly leasing since the second quarter of 2019, with the leased amount being around 130% of its historical 10-year average for the fourth quarter. Given the strong leasing momentum, management expects its 2025 occupancy to stabilize between 86.5% and 88%.
Amid strong demand from life science tenants, the company is converting numerous straight office buildings to laboratory/life-science spaces in its suburban portfolio. As of Dec. 31, 2024, BXP had two life-science projects under development encompassing 0.9 million RSF with an estimated total investment of $675.1 million (BXP’s share) and 71% pre-leased.
BXP has a healthy balance sheet position with ample liquidity. The company exited the fourth quarter of 2024 with cash and cash equivalents of $1.25 billion. The company’s share of net debt to EBITDAre (annualized) was 7.65X, while the fixed charge coverage ratio was 2.34 times. Given its solid financial position and prudent capital management, BXP seems well-poised to navigate any economic uncertainty and industry choppiness and capitalize on future growth opportunities.
In the past six months, shares of this office REIT, carrying a Zacks Rank #3 (Hold), have rallied 2.8% against the industry's 3.8% decline.