Boston Properties is a Real estate investment trust or REIT that develops, owns, and manages office buildings. The firm makes money by reselling office properties that it acquires and develops. While its properties appreciate, BXP rents them to a diverse group of companies, largely concentrated in the Legal and Financial Services industries.
BXP owns 138 properties in just five areas of the United States: Midtown Manhattan, Boston, Washington D.C., San Francisco, and Princeton, N.J. These are dense business centers with high barriers to entry for other firms, and Boston Properties has generated stable returns and a faster-than-average growth rate focusing on high-end properties in these markets. Office space makes up the vast majority of BXP's portfolio, but the company also owns two hotels, an industrial center, and a land bank in the Northeast with 10 million square feet of space for development.
Boston Properties, like other firms in the commercial real estate industry, has thus far avoided fallout from the subprime lending crisis that has decimated the residential housing market. However, the company's position in a few key economic centers ties it to the fiscal health of these cities, and an economic downturn could adversely affect BXP as there would be less demand for new office space and difficulties in developing and selling existing properties. Boston Properties' high-end clientele, however, would be among those best suited to weather a potential economic storm, and the firm's performance might remain strong despite a recession.
Boston Properties operates solely in five highly competitive real estate markets that have traditionally provided stronger returns and proved more resistant to recession than other real estate markets. These properties attract tenants with strong credit records, such as the United States Government, Citigroup, Lockheed Martin, or Ernst and Young. These tenants tend to sign long term contracts several years in advance of the lease commencement. As a result of these two factors, BXP experiences strong demand for its office space in spite of short term economic fluctuations. Furthermore, Boston Properties' tenant base is highly diversified. The largest tenant is the United States Government, which rents 5.43% of BXP's office space. Overall the top twenty tenants account for 36.13% of Boston Properties' leased square footage. 
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Traditionally, Boston Properties both acquired and developed commercial real estate. However, due to high property prices in its five core markets BXP decided to change its focus to development over acquisition. BXP argues that development offers better returns than strategic acquisition and divestment. From 2008 to 2011, BXP expects to place over $2 billion of new commercial real estate in service. However, it should be noted that much of this new development is outside of BXP's five traditional markets.
|Name of Project||Initial Occupancy||Estimated Stabilization Occupancy||Location||Square Feet||Estimated Total Investment|
|909 5th St. (50% ownership)||Q4 2007||Q4 2008||Washington D.C.||323,000||$65,000,000|
|77 City Point||Q1 2008||Q1 2009||Waltham, MA||210,000||79,707,173|
|South of Market||Q1 2008||Q3 2009||Reston, VA||652,000||$213,800,000|
|One Preserve Parkway||Q2 2008||Q4 2009||Rockville, MD||183,000||$60,536,931|
|Annapolis Junction (50% ownership)||Q2 2008||Q4 2009||Annapolis, MD||117,600||$29,800,000|
|Wisconsin Place (66.67% ownership)||Q1 2009||Q4 2010||Chevy Chase, MD||290,000||$93,500,000|
|701 Carnegie Center||Q3 2009||Q3 2009||Princeton, NJ||120,000||$34,000,000|
|South of Market||Q3 2009||Q3 2010||Reston, VA||225,000||$87,200,000|
|250 West 55th St.||Q4 2009||Q4 2010||New York, NY||1,000,000||$910,000,000|
|Russia Wharf||Q1 2011||Q3 2011||Boston, MA||815,000||$525,000,000|
|Boston||Washington D.C.||New York City||San Francisco||Princeton-New Brunswick|
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Market share is listed by 2007 revenues. In 2007, BXP accounted for 14% of total U.S. office REIT market share, the second largest U.S. office REIT by revenues. There are 14 U.S. exchange traded REITs focusing on office properties. Of those, the top three Boston Properties (BXP), Brookfield Properties (BPO) and SL Green Realty (SLG) accounted for just over half of Market Share by 2007 revenus.
All of the following companies are REITs except for Brookfield Properties (BPO). While each company owns office properties, unlike BXP some own other types of property as well. For example, HRPT Properties Trust and Mack-Cali realty own considerable amounts of health care and industrial properties respectively.
|Company||Operating Cash Flow||Total Debt||Total Cash||Shares OutStanding||Dividend Yield||Square Feet in Portfolio||Markets||Property Occupancy|
|HRPT Properties Trust (HRP)||$298.96 m||$2.71 B||$25.64 m||225.43 m||11.40%||64,000,000||Five largest markets: Hawaii, Pennsylvania, New York, Texas, Massachusetts. But owns real estate through United States.||92.8%|
|Mack-Cali Realty (CLI)||$250.17 m||$2.13 B||$29.98 m||67.91 m||8.60%||33,733,011||New Jersey, New York City, Pennsylvania, Connecticut, Washington D.C., Maryland, Massachusetts||92.2%|
|Brookfield Properties (BPO)||$45 m||$12.59 B||$202 m||394.19 m||3.10%||73,200,000||New York City, Boston, Washington D.C., Houston, Los Angeles, Toronto, Calgary, Ottawa, Denver, Minneapolis||95%|
|SL Green Realty (SLG)||$401.72 m||$5.35 B||$98.1 m||59.23 m||3.80%||30,220,700||Manhattan, Brooklyn N.Y., Westchester N.Y., Connecticut||about 95.7%|
|Vornado Realty Trust (VNO)||$824.92 m||$12.58 B||$834.27||152.26 m||4.40%||about 64,000,000||New York City, Washington D.C., retail properties throughout United States||94.67%|
|Boston Properties (BXP)||$598.07 m||$5.41 B||$1.89 B||119.27 m||3.10%||44,100,000||Midtown Manhattan, Boston, Washington D.C., Princeton N.J., San Francisco||94%|