Companies once closely linked to defunct investment bank Lehman Brothers Holdings Inc., which filed for Chapter 11 bankruptcy protection in September, are now displaying some of the typical stages of the grieving process. Take for example Mortimer Zuckerman's real estate investment trust Boston Properties Inc. The property manager has moved past the initial level of denial that the once
fourth-largest investment bank in the world could go bankrupt, and it is now entrenched in anger -- or at least its shareholders are.
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Many of the REIT's shareholders are seething Wednesday as they watch their stock fall after the firm revealed that
its third-quarter earnings, and its forecast for 2009, fell short
of analysts' expectations partly because of increased expenses tied to the bankruptcy of Lehman, which happened to be its 10th-largest tenant.
Boston Properties said in a statement after Tuesday's market close that net income last quarter fell to $48.5 million, or 40 cents a
share, from $242 million, or $1.99, a year earlier. One of the culprits to the downturn was a noncash charge of 15 cents a share to establish reserves for the accrued rent balances from
its leases with Lehman and the law firm Heller Ehrman LLP, which last month announced plans to disband. Additonally, the company's funds from operation forecast of
$4.65 to $4.90 per share for 2009 was below the average estimate of $5.27 of
16 analysts surveyed by Bloomberg.
In the grand scheme of things, some may argue that Boston Properties should be grateful that it is still able to turn a profit in a sluggish market. But, naturally, Boston Properties still feels a bitter sting, especially since it likely holds nearly 436,000 square feet of vacant office space that it once leased to Lehman for $100 a square foot.
The road ahead looks even tougher for the largest landlord in the U.S. since financial services accounted for about 24% of its rent revenue and there's more fallout expected in this sector from this global economic downturn.
Meanwhile, it still may be a while before Boston Properties truly accepts the fate of one of its former biggest tenants. - Gerald Magpily
See Bloomberg article
See Stanford's Wellsphere: The five stages of grief
