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Hub50House
Boston Properties’ fourth-quarter financial performance took a hit from the pandemic, including lingering sluggish office leasing across the U.S. and declining rents at high-end apartment buildings in Boston and Cambridge.
Boston Properties reported net income of $7.3 million in the fourth quarter, down from $140.8 million during the same period in 2019. Funds from operations, a key measure of a REIT’s cash flow, declined from $1.87 in the fourth quarter of 2019 to $1.37 per share in the most recent quarter ending Dec. 31.
COVID-19-induced pressures on the office market prompted the company to take a 0.35 per share impairment charge on the Dock 72 office building in Brooklyn, N.Y., currently 33 percent leased, because of increased costs and slower-than-expected leasing activity. Boston Properties also took a 0.22 per share charge to write off rents from co-working tenants.
CEO Owen Thomas said office leasing will rebound following an anticipated end of the pandemic.
“I will reiterate we think more remote work is here to stay after the pandemic, but concerns about office space demand are overblown,” Thomas said during a conference call with analysts Wednesday.
The company’s nearly 15-million-square-foot Greater Boston office portfolio, spanning 50 buildings, is currently 94.8 percent leased. Average rents range from $74.12 per square foot at its Cambridge portfolio, $68.90 per square foot in Boston and $45.45 per square foot in the suburbs.
Local residential and hospitality properties felt the effects of the pandemic more directly, however.
The 437-room Boston Marriott Cambridge had an occupancy rate of just 6.3 percent during the fourth quarter, compared with 75 percent during the same period in 2019, and revenues per available room declined from $290.09 to $9.11.
Average rents at the Proto Kendall Square apartment building in Cambridge declined 12 percent to $2,645 in the fourth quarter, and occupancy dropped from 97.5 to 87.8 percent. The Hub50House apartment tower in Boston’s West End, which began occupancy in November 2019, is 52 percent occupied with average rents of $3,499, up 13 percent from the previous year, but rental rates per occupied square foot declined 2.3 percent. And average rents dropped 16 percent to $3,803 at The Lofts at Atlantic Wharf.
The 1.2 million square feet of office leases signed in the fourth quarter was the highest level since the onset of the pandemic, including Translate Bio’s 138,000-square-foot lease at the 200 West St. lab conversion in Waltham.
