I am not saying the dividend is rock solid safe. I would not expect it to be for the reasons you stated. Real estate is cyclical, my point is a lot of this is already priced into shares. Remember it already had a 60 percentage point drop from its highs. One third of the properties are outside Boston-New York. DC will be growing as the USG bloats. In any event I am not looking for much short term, and yes I wish I sold it all at 100 but I didn't and now is time to accumulate if you are willing to wait it out.
You obviously work for Boston Properties.
First, they're locations are the place where most of the layoffs are going on. New York and Boston and getting cremated. Second, the 10Q lists as it's biggest risk that they're NOT DIVERSIFIED. It's funny that their auditor thinks they're not diversified and you think they are.
As to these markets not being overbuilt, that's the looniest thing I've ever heard. We're in the end of the biggest financial services bubble in history. The biggest bank and the two biggest mortgage holders in the country are insolvent. Almost all the countries independent brokerage firms are insolvent. We're on the edge of the bankruptcy of probably half the countries insurers. This is the most overbuilt office market in US history.
As to their having "great management", any flea brain can borrow money at 3.5% and rent office space in a bull market.
If their managers we so smart,why do they have to borrow money to pay their dividend?
True 25% of the tenants are financial services and there is some exposure there which is why the stock is where it is at. It is a characteristic of the financial services that they tend to occupy offices in the central business district. However, unlike early 90's these markets are not overbuilt, second BXP actually was a seller at top of market with exception of the GM acqusition, third their debt is nothing like some owners in early 90's who were overextended (as are many latecomers in 2008/09). Fourth, management is deep and has been around succesfully since the early 70's, finally BXP was not public in last commercial RE down cycle so there really is nothing to compare. The facts are, best locations, best management, diversified tenants, reasonable debt, and reasonable lease maturities (many now leasing at below market).
Over half of their tenants are either in financial services or law firms that service financial services. In case you haven't looked, almost of them are either insolvent or going there.
New York and Boston exist to take a 1/4% cut on the worlds assets and trading. That business is over.
But that's hypothetical. The facts are that 1) The pay a dividend that's 75% higher than they should pay. 2)There's no market for office buildings and it's highly unlikely one will appear in the next 3-5 years.
I have the advantage of being old enough to remember two real estate crashes. In both cases, almost all the equity holders got ZERO. The properties themselves became buys when they issued preferred shares that paid in excess of 15% in a low interest rate environment.
In fact, I bought preferred shares in BXP, Avalon Bay and Glenborough at those prices.
IMO, BXP would be a buy, providing it remains solvent, at $4 a share. That would be a 15 cent quarterly dividend on a $4 share.