Boston Properties, Inc. (NYSE:BXP) is a REIT that owns and develops one of the largest portfolios of Class A office properties in the U.S. These properties located in key markets such as the New York borough of Manhattan, Washington state, Boston, and San Francisco, represent a structural competitive advantage, as these primes locations with high visibility and easy access to clients are limited and in hot demand.
The development pipeline for Boston Properties, Inc. (NYSE:BXP) looks promising for the next two years, with 250 West 55th Street, a 38 level office building near Central Park and TransBay Transit Tower, San Francisco’s tallest office tower adjacent to the Transbay Transit Center, among the key projects to look out for.
The most important headline story for the company year-to-date is the appointment of a new CEO for Boston Properties, with Owen D. Thomas, the former head of Head of Morgan Stanley Real Estate, taking over from co-founder Mortimer B. Zuckerman as the new CEO in April. Any disruption is expected to be minimal, as Mortimer B. Zuckerman is expected to stay for at least a year to ease the transition process.
According to an 8-K filed by the company, he will receive around $17 million in cash and stock compensation if he stays until July 2014. Boston Properties sports a forward dividend yield of 2.4% and is moderately geared with a debt-to-equity ratio of 148%.
Vornado Realty Trust (NYSE:VNO) Realty has the highest dividend yield of the three stocks with a 3.6% yield, and also the strongest balance sheet of the three with a gearing of 117%. But I am not positive on this stock for a couple of reasons. Vornado Realty is less geographically diversified than its peers Forest City and Boston Properties.
Similar to Boston Properties, Vornado Realty also experienced a management change this year, with Steven Roth, the company’s Chairman taking over from Michael D. Fascitelli as CEO. CEO succession remains a big question mark.
Conclusion
Among the three stocks, Boston Properties is too expensive at 3.3 times P/B, while I am less positive on Vornado Realty for its geographical concentration and CEO succession issues. Forest City Enterprises, Inc. (NYSE:FCE-A) is the most undervalued of the group, with a P/B of 2.3. Moreover, its financial risks are overstated with the bulk of its debt non-recourse in nature. I will recommend going with Forest City, as its shareholder friendly initiatives gain more traction with shareholders.
The article Don’t Miss This Forest for the Trees originally appeared on Fool.com and is written by Mark Lin.
Mark Lin has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Mark is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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