Boston Properties knows more than beans about real estate. The firm invests in, develops, and manages primarily Class-A office buildings in large US cities. Its core markets include Boston, New York, San Francisco, and Washington, DC. A self-administed real estate investment trust (REIT), Boston Properties owns about 160 office and office/technical properties, including projects under construction. Its largest tenants include the US government, Bank of America, and Citibank. The REIT also owns a handful of retail, hotel, residential properties, as well as land sites for development. Media czar Mort Zuckerman (U.S. News & World Report and Daily News) is Boston Properties' chairman and CEO.
As its name suggests, Boston is the firm's largest market, contributing more than 35% of its revenue. New York represents about 25% of revenue, followed by Washington, DC, and San Francisco, representing 22% and 12%, respectively.
Boston Properties is one of the largest owners and developers of office buildings in the US. Class A Office properties, which the REIT defines as centrally-located buildings that are professionally managed and maintained and command upper-tier rental rates, contribute 95% of the firm's revenue. The firm also owns 17 office/technical (properties that support office, research and development, laboratory, and other technical uses) properties, one hotel, and four retail properties. It also owns three residential buildings, one of which is under construction.
The REIT owns stakes in some rather iconic buildings. It has a 60% stake in New York's GM Building, which was acquired from the ailing Macklowe Properties for $2.8 billion, a record-setting price for a US office building. Boston Properties also owns Times Square Tower in New York, Embarcadero Center in San Francisco, and Metropolitan Square in Washington, DC.
The REIT reported revenue of nearly $1.9 billion in 2012, a 7% increase versus 2011. Net income rose 6% over the same period. Increasing rental revenue from the firm's portfolio, as well as increases in parking fees and other income drove the increase. Boston Properties has enjoyed a decade of increasing revenue with the growth rate accelerating in the past two years.
Currently, the firm has nine projects under construction, including eight office properties and one residential building, which combined measure approximately 2.8 million square feet.
Throughout the economic downturn, which brought high unemployment and a struggling real estate market, Boston Properties worked to expand its portfolio. The REIT has gone after several high-quality assets that presented attractive repositioning and leasing opportunities as the real estate market entered recovery. In 2010 Boston Properties bought the John Hancock Tower -- the tallest building in Boston -- in a $930 million deal. It also bought 510 Madison Avenue in Midtown Manhattan, Bay Colony Corporate Center in Boston, and 500 North Capitol in Washington, DC. In 2012 the company acquired 100 Federal Street in Boston, which is leased to Bank of America. To fund such acquisitions, the company regularly sells select properties.
The deteriorating property and financial markets conspired to put pressure on Boston Properties profits. To raise capital, the REIT has completed public offerings and refinanced debt. It has also raised funds through secured financing. Boston Properties hopes to use the capital to take advantage of bargain deals in the volatile markets; it will also consider making acquisitions in foreign markets. Additionally, the company is taking a more conservative tack for new developments, requiring pre-leasing from a mix of healthy tenants. With properties in some of the stronger markets, the company has even been able to raise some of its rents. As such, revenues have been inching upwards even when profits remain lower than pre-recession levels.
The Vanguard Group owns about 10% of Boston Properties.