Here's Why You Should Retain BXP Stock in Your Portfolio Now

BXP, Inc. BXP boasts a portfolio of Class A office assets in a few select markets of the United States. Healthy tenant demand for premier office assets and a diverse tenant base ensures stable revenues. A strong balance sheet and efforts to convert office buildings to laboratory spaces amid strong demand for life-science assets bode well for growth. BXP’s strategic capital allocation boosts portfolio expansion.However, the flexible working environment is affecting the demand for office properties. A huge development outlay adds to the company's concerns.Over the past six months, shares of this office REIT, carrying a Zacks Rank #3 (Hold), have rallied 33.7%, outperforming the industry's 14% growth.Image Source: Zacks Investment ResearchWhat’s 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. As of Sept. 30, 2024, the weighted average remaining lease term for its 20 largest clients, based on leased square footage, was 9.5 years. Its long-term leases with tenants having a solid credit profile assure stable cash flows.The return-to-office policies implemented by many companies, coupled with a relatively low unemployment rate and consistent job growth, are likely to drive the demand for BXP's strategically located, high-quality office properties. A total of 3.3 million square feet of leasing was executed in the first three quarters of 2024, representing a 25% increase compared to the same period in 2023. We estimate lease revenues to witness a year-over-year increase of 3.6% in 2024.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 Sept. 30, 2024, BXP had four life-science projects under development, encompassing 1.2 million RSF with an estimated total investment of $903.1 million (BXP’s share) and 70% pre-leased.BXP has been focusing on the successful execution of its capital reallocation strategy.  From the beginning of 2010 through the end of the third quarter of 2024, BXP carried out acquisitions worth $7.5 billion at its share. It also disposed of properties for an aggregate amount of $8.2 billion at its share during this period. Such moves highlight the company’s prudent capital management practices and relieve pressure on its balance sheet.BXP has a healthy balance sheet position with ample liquidity. As of Sept. 30, 2024, the company had $3.0 billion of liquidity. Its share of net debt to EBITDAre (annualized) was 7.6X, while the fixed charge coverage ratio was 2.4 times as of the same date. BXP also enjoys unsecured senior debt ratings of BBB from S&P Global Ratings and Baa2 from Moody’s, rendering it favorable access to the debt market.What’s Hurting BXP?The U.S. office real estate market continues to witness slow demand due to the continuation of a flexible working environment, which has diminished office space utilization. Although property tours and leases under negotiation continue to take place, there is less urgency from clients to make new commitments.For the third quarter of 2024, BXP’s in-service properties’ occupancy fell 10 basis points sequentially to 87.0%.  We do not foresee considerable improvement in the near term and expect the company to maintain an occupancy rate of 87.3% in 2024.BXP has nine properties under its development and redevelopment pipeline, with its share of estimated total investment aggregating around $2.05 billion as of Sept. 30, 2024. Although a huge development pipeline is encouraging for long-term growth, it exposes the company to the risk of rising construction costs and lease-up concerns.Stocks to ConsiderSome better-ranked stocks from the broader REIT sector are Welltower WELL and Cousins Properties CUZ, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.The Zacks Consensus Estimate for Welltower’s 2024 FFO per share has been raised marginally northward over the past month to $4.26.The Zacks Consensus Estimate for Cousins Properties’ current-year FFO per share has been revised marginally upward over the past month to $2.68.Note: Anything related to earnings presented in this write-up represents funds from operations (FFO), a widely used metric to gauge the performance of REITs.7 Best Stocks for the Next 30 DaysJust released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops."Since 1988, the full list has beaten the market more than 2X over with an average gain of +24.1% per year. So be sure to give these hand picked 7 your immediate attention. See them now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report BXP, Inc. (BXP): Free Stock Analysis Report Cousins Properties Incorporated (CUZ): Free Stock Analysis Report Welltower Inc. (WELL): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks