Boston Properties' undeveloped land increased by 45% over the last 18 months, but its developed and under construction properties increased by only 23% during the same period. "Their land bank is starting to grow at a faster rate than the rest of their assets," explains SEIU Researcher Martin Thomas. "A [land bank] buildup typically causes a drag on a REIT's resources – they make an investment acquiring land and pay property taxes, but they're getting little or no income." The company's core markets are Boston, Washington, DC, Midtown Manhattan and San Francisco.

The report--based on a recent Boston Properties Securities and Exchange Commission filing--comes from SEIU-sponsored Boston Properties Watch, an information service that provides news on the Massachusetts-based REIT to shareholders, tenants and relevant officials; it operates independently of Boston Properties. "We think it's important for investors to know that they're accumulating a lot of land on which they're not making any profit," Thomas says. "It could have an impact on dividends or on their profits."

Changes in the economy have led to soft markets in some of the areas where Boston Properties holds undeveloped land. As of the end of the third quarter, US office vacancies have increased to 12.3% from less than 10% for the same period in 2000. Metropolitan areas are sustaining the hardest hits. The company owns 64 undeveloped acres of land in Boston, where vacancy rates can be as high as 20%. And in San Jose, California, where vacancies have climbed steadily over the last year, Boston Properties owns 3.7 such acres of land.