Boston Properties' Q3 Results Were in Line With Our Expectations, but 2023 FFO Guidance Disappoints

No-moat-rated Boston Properties reported third-quarter results that were in line with our expectations as share prices of office REITs have declined significantly in the past few months. The firm reported funds from operations, or FFO, of $1.91 per share, 10.4% higher than the $1.73 in FFO during the third quarter of 2021. The company also provided 2023 FFO full-year guidance of $7.15 to $7.30 per diluted share, which was slightly below our expectations. The midpoint of the FFO 2023 guidance is around $0.30 per share lower than the guidance for full-year 2022 FFO. The difference between the two years is on account of $0.69 per share of higher interest expenses and $0.23 per share impact from dispositions and lower fee income that was partially offset by $0.62 per share of higher FFO contributions from acquisitions and developments. We have reduced our fair value estimate for Boston Properties to $107 per share from $112 per share after moderating our long-term rent growth, occupancy, and interest expense expectations for the company.