Why Boston Properties’ Revenue Growth Keeps Looking So Good



Healthy growth momentum

Boston Properties (BXP) generates revenues primarily from leasing office space to corporates. In addition, the company also earns revenue from parking fees, hotel properties, and development and management services. The company reported total revenues of $2.4 billion for fiscal 2014—up by a healthy 12.2% over 2013. The total property revenues of the company grew by 7.2% and 15.6% in 2012 and 2013, respectively.

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Rental revenue, which comprised 78.7% of the company’s total revenues, grew by 12.6% to $1.9 billion in 2014 over 2013. Meanwhile, recoveries from tenants, which comprised amounts due from tenants for common area maintenance, real estate taxes, and other recoverable costs, reported a healthy growth of 15.8% in 2014 to $339.4 million.

Overall, Boston Properties has reported healthy revenue growth during the past five years, with revenues growing from $1.54 billion in 2010 to $2.4 billion in 2014. As of September 30, its revenues have increased by 4.7% to $1.87 billion YTD (year-to-date), compared to the same period in 2014.

Same property revenue

As of the end of fiscal 2014, Boston Properties’ same-property portfolio consisted of 131 properties, comprising net rentable space of 35.8 million square feet. This same-property portfolio includes properties acquired, consolidated, or placed in service for two comparable years.

Rental revenues from Boston Properties’ same-property portfolio increased by 3.2% in 2014 to ~$1.9 billion. This increase was primarily a result of increases in revenue from the leases, parking income, and other income and recoveries. The rise in rental revenue was mainly due to higher rental rates and increases in average occupancy in 2014.

Boston Properties’ peer group

A comparison with its peer group shows that Boston Properties has been posting decent revenue growth. For example, Alexandria Real Estate Equities (ARE) posted a revenue growth of 15.2% in 2014 to $726.9 million. In 2014, Kilroy Realty Corporation (KRC) saw a 14.1% rise in growth to $521.7 million, whereas SL Green Realty Corporation (SLG) saw only a 10.9% rise to ~$1.5 billion during the same period.

Boston Properties makes up ~2.3% of the total holdings of the iShares US Real Estate ETF (IYR).

In the next part of this series, we’ll dive into the cost structure and EBITDA margin of Boston Properties.


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