Boston Properties, Inc. (NYSE: BXP), a real estate
investment trust and one of the largest owners, managers and
developers of Class A office properties in the United States,
reported results today for the second quarter ended June 30,
2017.
- Net income attributable to common
shareholders was $133.7 million compared to $96.6 million for the
quarter ended June 30, 2016.
- Net income attributable to common
shareholders per share (EPS) was $0.87 basic and $0.87 on a diluted
basis, compared to $0.63 basic and $0.63 on a diluted basis for the
quarter ended June 30, 2016.
- Funds from Operations (FFO) were
$257.9 million, or $1.67 per share basic and $1.67 per share
diluted. This compares to FFO of $220.6 million, or $1.44 per
share basic and $1.43 per share diluted, for the quarter ended
June 30, 2016.
- FFO of $1.67 per share diluted was
greater than the mid-point of the Company's guidance previously
provided of $1.61 - $1.63 per share diluted primarily due to:
- $0.02 per share increase in portfolio
revenue;
- $0.02 per share due to the deferral of
certain expenses from the second quarter of 2017 to the second half
of 2017; and
- $0.01 per share of additional
development and management services revenue.
- The Company increased its guidance
for full year 2017 EPS and FFO per share as follows:
- Increased projected EPS (diluted) for
2017 to $2.72 - $2.77 per share, an $0.11 per share increase at the
midpoint.
- Increased projected FFO per share
(diluted) for 2017 to $6.20 - $6.25 per share, a $0.04 per share
increase at the midpoint.
- Weighted-average number of basic and
diluted shares outstanding totaled approximately 154,177,000 and
154,331,000, respectively. This compares with 153,662,000 and
153,860,000 for the quarter ended June 30, 2016.
The reported results are unaudited and there can be no assurance
that these reported results will not vary from the final
information for the quarter ended June 30, 2017. In the
opinion of management, all adjustments considered necessary for a
fair presentation of these reported results have been made.
At June 30, 2017, the Company’s portfolio consisted of 175
properties aggregating approximately 48.4 million square feet,
including nine properties under construction/redevelopment totaling
approximately 4.7 million square feet. The overall percentage of
leased space for the 163 properties in service (excluding the
Company’s two residential properties and hotel) as of June 30,
2017 was 90.8%.
Significant events during the second quarter included:
Development activities
- On April 6, 2017, the Company commenced
the development of 145 Broadway, a build-to-suit Class A office
project with approximately 485,000 net rentable square feet located
in Cambridge, Massachusetts. The property is 98% leased.
- On May 27, 2017, the Company completed
and fully placed in-service Reservoir Place North, a Class A office
redevelopment project with approximately 73,000 net rentable square
feet located in Waltham, Massachusetts. The property is 0%
leased.
- On June 29, 2017, the Company executed
a 99-year ground lease, (including extension options), with the
right to purchase prior to 10 years after stabilization, land
adjacent to the MacArthur BART station located in Oakland,
California. The Company has commenced development of a 402-unit
residential building and supporting retail space on the site.
Acquisition and disposition activities
- On April 19, 2017, the Company
completed the sale of an approximately 9.5-acre parcel of land at
30 Shattuck Road located in Andover, Massachusetts for a gross sale
price of $5.0 million. Net cash proceeds totaled approximately $5.0
million, resulting in a gain on sale of real estate totaling
approximately $3.7 million.
- On May 15, 2017, the Company acquired
103 Carnegie Center located in Princeton, New Jersey for a purchase
price of approximately $15.8 million in cash. 103 Carnegie Center
is an approximately 96,000 net rentable square foot Class A office
property. The property is 83% leased.
- On June 13, 2017, the Company completed
the sale of 40 Shattuck Road located in Andover, Massachusetts for
a gross sale price of $12.0 million. Net cash proceeds totaled
approximately $11.9 million, resulting in a gain on sale of real
estate totaling approximately $28,000. 40 Shattuck Road is an
approximately 122,000 net rentable square foot Class A office
property. The property is 71% leased.
Capital markets activities
- On April 24, 2017, the Company's
Operating Partnership amended and restated its revolving credit
agreement (as amended and restated, the “2017 Credit Facility”).
Among other things, the amendment and restatement
(1) increased the total commitment of the revolving line of
credit (the “Revolving Facility”) from $1.0 billion to $1.5
billion, (2) extended the maturity date from July 26, 2018 to
April 24, 2022, (3) reduced the per annum variable interest
rates, and (4) added a $500.0 million delayed draw term loan
facility (the “Delayed Draw Facility”) that permits the Company's
Operating Partnership to draw until the first anniversary of the
closing date. Based on the Company’s Operating Partnership's
current credit rating, (1) the applicable Eurocurrency margins for
the Revolving Facility and Delayed Draw Facility are 87.5 basis
points and 95 basis points, respectively, and (2) the facility fee
on the Revolving Facility commitment is 0.15% per annum. The
Delayed Draw Facility has a fee on unused commitments equal to
0.15% per annum. For additional detail on the terms and conditions
of the 2017 Credit Facility, refer to the Company's Form 8-K filed
on April 25, 2017.
- On June 2, 2017, the Company renewed
its “at the market” ("ATM") stock offering program through which it
may sell from time to time up to an aggregate of $600.0 million of
its common stock through sales agents over a three-year period.
This program replaces the Company’s prior $600.0 million ATM stock
offering program that was scheduled to expire on June 3, 2017. The
Company intends to use the net proceeds from any offering for
general business purposes, which may include investment
opportunities and debt reduction. No shares of common stock have
been issued under this ATM stock offering program.
- On June 7, 2017, the Company’s
consolidated entity in which it has a 60% interest and that owns
767 Fifth Avenue (the General Motors Building) located in New York
City completed the refinancing of approximately $1.6 billion of
indebtedness that had been secured by direct and indirect interests
in 767 Fifth Avenue. The new mortgage financing has a principal
amount of $2.3 billion, bears interest at a fixed interest rate of
3.43% per annum and matures on June 9, 2027. The loan requires
interest-only payments during the 10-year term of the loan, with
the entire principal amount due at maturity. The extinguished debt
bore interest at a weighted-average rate of approximately 5.96% per
annum, an effective GAAP interest rate of approximately 3.03% per
annum and was scheduled to mature on October 7, 2017. There was no
prepayment penalty associated with the repayment of the prior
indebtedness. The Company recognized a net gain from early
extinguishment of debt totaling approximately $14.6 million
primarily consisting of the acceleration of the remaining balance
related to the historical fair value debt adjustment. On April 24,
2017, the Company’s consolidated entity entered into an interest
rate lock and commitment agreement for the financing. In
conjunction with the interest rate lock and commitment agreement,
the consolidated entity terminated its forward-starting interest
rate swap contracts with notional amounts aggregating $450.0
million and cash-settled the contracts by making cash payments to
the counterparties aggregating approximately $14.4 million, which
amount will increase the Company’s interest expense over the
ten-year term of the financing, resulting in an effective GAAP
interest rate on the financing of approximately 3.64% per annum,
inclusive of the amortization of financing costs and additional
mortgage recording taxes.
Transactions completed subsequent to June 30, 2017:
- On July 28, 2017, a joint venture in
which the Company has a 50% interest obtained mortgage financing
collateralized by its Colorado Center property totaling $550.0
million. The mortgage financing bears interest at a fixed rate of
3.56% per annum and matures on August 9, 2027. The loan requires
interest-only payments during the 10-year term of the loan, with
the entire principal amount due at maturity. Colorado Center is a
six-building office complex that sits on a 15-acre site and
contains an aggregate of approximately 1,184,000 net rentable
square feet with an underground parking garage for 3,100 vehicles
located in Santa Monica, California.
- On July 26, 2017, a joint venture
between the Company and The Bernstein Companies entered into a
build-to-suit lease agreement with an affiliate of Marriott
International, Inc. under which Marriott will lease 100% of an
approximately 720,000 square foot office building and below-grade
parking garage to be constructed by the joint venture at 7750
Wisconsin Avenue in Bethesda, Maryland. The office building will be
leased to Marriott for 20 years on a net basis and will serve as
Marriott’s world-wide headquarters. The Company and The Bernstein
Companies will each own a 50% interest in the joint venture. The
Company will serve as development manager for the venture and
expects to commence construction in 2018. Marriott has agreed to
fund 100% of the related tenant improvement costs and leasing
commissions for the office building.
- Since June 30, 2017, the Company has
signed leases aggregating approximately 1.3 million square feet,
including a 720,000 square foot lease with Marriott and a 220,000
square foot lease renewal with Aramis (Estee Lauder) at 767 Fifth
Avenue (the General Motors Building). From January 1, 2017 through
July 31, 2017, the Company has leased an aggregate of approximately
2.8 million square feet.
EPS and FFO per Share Guidance:
The Company’s guidance for the third quarter and full year 2017
for EPS (diluted) and FFO per share (diluted) is set forth and
reconciled below. Except as described below, the estimates reflect
management’s view of current and future market conditions,
including assumptions with respect to rental rates, occupancy
levels and the earnings impact of the events referenced in this
release and otherwise referenced during the conference call
referred to below. The estimates do not include possible future
gains or losses or the impact on operating results from other
possible future property acquisitions or dispositions, other
possible capital markets activity or possible future impairment
charges. EPS estimates may be subject to fluctuations as a result
of several factors, including changes in the recognition of
depreciation and amortization expense and any gains or losses
associated with disposition activity. The Company is not able to
assess at this time the potential impact of these factors on
projected EPS. By definition, FFO does not include real
estate-related depreciation and amortization, impairment losses on
depreciable real estate or gains or losses associated with
disposition activities. There can be no assurance that the
Company’s actual results will not differ materially from the
estimates set forth below.
As shown below, the Company has updated its projected EPS
(diluted) for the full year 2017 to $2.72 - $2.77 per
share from $2.60 - $2.68 per share. This is an increase
of $0.11 per share at the mid-point consisting primarily of
lower projected depreciation and amortization expense of
$0.07 per share, $0.04 per share improvement in same property
net operating income ("NOI"), a $0.01 per share increase in
development and management services revenue, offset by a $0.01
decrease from the Company's recent financing activities.
Additionally, the Company has updated its projected FFO per
share (diluted) for the full year 2017 to $6.20 - $6.25 per share
from $6.15 - $6.23 per share. This is an increase of $0.04 per
share at the midpoint consisting primarily of a $0.04 per share
improvement in same property NOI, a $0.01 per share increase in
development and management services revenue, offset by a $0.01
decrease from the Company's recent financing activities.
Third Quarter 2017 Full Year 2017 Low -
High Low - High Projected EPS (diluted) $ 0.65
- $ 0.67 $ 2.72 - $ 2.77 Add: Projected Company Share of Real
Estate Depreciation and Amortization 0.87 - 0.87 3.50 - 3.50 Less:
Projected Company Share of Gains on Sales of Real Estate — -
— 0.02 - 0.02 Projected FFO per Share (diluted) $
1.52 - $ 1.54 $ 6.20 - $ 6.25
Boston Properties will host a conference call on Wednesday,
August 2, 2017 at 10:00 AM Eastern Time, open to the general
public, to discuss the second quarter 2017 results, the 2017
projections and related assumptions, and other related matters that
may be of interest to investors. The number to call for this
interactive teleconference is (877) 706-4503 (Domestic) or (281)
913-8731 (International) and entering the passcode 41585284. A
replay of the conference call will be available through August 16,
2017, by dialing (855) 859-2056 (Domestic) or (404) 537-3406
(International) and entering the passcode 41585284. There will also
be a live audio webcast of the call which may be accessed on the
Company’s website at www.bostonproperties.com in the Investor
Relations section. Shortly after the call a replay of the webcast
will be available in the Investor Relations section of the
Company’s website and archived for up to twelve months following
the call.
Additionally, a copy of Boston Properties’ second quarter 2017
“Supplemental Operating and Financial Data” and this press release
are available in the Investor Relations section of the Company’s
website at www.bostonproperties.com.
Boston Properties is a fully integrated real estate investment
trust that develops, redevelops, acquires, manages, operates and
owns a diverse portfolio of primarily Class A office space totaling
48.4 million square feet and consisting of 164 office properties
(including six properties under construction), five retail
properties, five residential properties (including three properties
under construction) and one hotel. The Company is one of the
largest owners and developers of Class A office properties in the
United States, concentrated in five markets - Boston, Los Angeles,
New York, San Francisco and Washington, DC.
This press release contains forward-looking statements within
the meaning of the Federal securities laws. You can identify these
statements by our use of the words “assumes,” “believes,”
“budgeted,” “estimates,” “expects,” “guidance,” “intends,” “plans,”
“projects” and similar expressions that do not relate to historical
matters. You should exercise caution in interpreting and relying on
forward-looking statements because they involve known and unknown
risks, uncertainties and other factors which are, in some cases,
beyond Boston Properties’ control and could materially affect
actual results, performance or achievements. These factors include,
without limitation, the Company’s ability to satisfy the closing
conditions to the pending transactions described above, the
Company’s ability to enter into new leases or renew leases on
favorable terms, dependence on tenants’ financial condition, the
uncertainties of real estate development, acquisition and
disposition activity, the ability to effectively integrate
acquisitions, the uncertainties of investing in new markets, the
costs and availability of financing, the effectiveness of our
interest rate hedging contracts, the ability of our joint venture
partners to satisfy their obligations, the effects of local,
national and international economic and market conditions, the
effects of acquisitions, dispositions and possible impairment
charges on our operating results, the impact of newly adopted
accounting principles on the Company’s accounting policies and on
period-to-period comparisons of financial results, regulatory
changes and other risks and uncertainties detailed from time to
time in the Company’s filings with the Securities and Exchange
Commission. Boston Properties does not undertake a duty to update
or revise any forward-looking statement, including its guidance for
the third quarter and full fiscal year 2017, whether as a result of
new information, future events or otherwise.
Financial tables follow.
BOSTON PROPERTIES, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 30, 2017 December 31, 2016
(in thousands, except for share and par value amounts)
ASSETS Real estate, at cost $ 19,015,077 $ 18,862,648
Construction in progress 1,348,838 1,037,959 Land held for future
development 250,451 246,656 Less: accumulated depreciation
(4,379,446 ) (4,222,235 ) Total real estate 16,234,920 15,925,028
Cash and cash equivalents 492,435 356,914 Cash held in escrows
47,345 63,174 Investments in securities 26,781 23,814 Tenant and
other receivables, net 88,687 92,548 Accrued rental income, net
820,022 799,138 Deferred charges, net 658,219 686,163 Prepaid
expenses and other assets 93,985 129,666 Investments in
unconsolidated joint ventures 819,368 775,198 Total
assets $ 19,281,762 $ 18,851,643
LIABILITIES AND
EQUITY Liabilities: Mortgage notes payable, net $ 2,986,283 $
2,063,087 Unsecured senior notes, net 7,250,356 7,245,953 Unsecured
line of credit — — Unsecured term loan — — Mezzanine notes payable
— 307,093 Outside members’ notes payable — 180,000 Accounts payable
and accrued expenses 303,559 298,524 Dividends and distributions
payable 130,432 130,308 Accrued interest payable 85,172 243,933
Other liabilities 452,608 450,821 Total liabilities
11,208,410 10,919,719 Commitments and
contingencies — — Equity: Stockholders’ equity
attributable to Boston Properties, Inc.: Excess stock, $0.01 par
value, 150,000,000 shares authorized, none issued or outstanding —
— Preferred stock, $0.01 par value, 50,000,000 shares authorized;
5.25% Series B cumulative redeemable preferred stock, $0.01 par
value, liquidation preference $2,500 per share, 92,000 shares
authorized, 80,000 shares issued and outstanding at June 30, 2017
and December 31, 2016 200,000 200,000 Common stock, $0.01 par
value, 250,000,000 shares authorized, 154,386,429 and 153,869,075
issued and 154,307,529 and 153,790,175 outstanding at June 30, 2017
and December 31, 2016, respectively 1,543 1,538 Additional paid-in
capital 6,363,034 6,333,424 Dividends in excess of earnings
(694,320 ) (693,694 ) Treasury common stock at cost, 78,900 shares
at June 30, 2017 and December 31, 2016 (2,722 ) (2,722 )
Accumulated other comprehensive loss (53,161 ) (52,251 ) Total
stockholders’ equity attributable to Boston Properties, Inc.
5,814,374 5,786,295 Noncontrolling interests: Common units of the
Operating Partnership 604,997 614,982 Property partnerships
1,653,981 1,530,647 Total equity 8,073,352
7,931,924 Total liabilities and equity $ 19,281,762 $
18,851,643
BOSTON PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF
OPERATIONS
(Unaudited)
Three months ended June 30, Six
months ended June 30, 2017 2016
2017 2016 (in thousands, except for per
share amounts) Revenue Rental Base rent $ 520,542 $ 493,386 $
1,024,104 $ 1,029,514 Recoveries from tenants 89,163 85,706 178,327
175,292 Parking and other 26,462 26,113 52,072
50,938 Total rental revenue 636,167 605,205 1,254,503
1,255,744 Hotel revenue 13,375 12,808 20,795 21,565 Development and
management services 7,365 5,533 13,837 12,222
Total revenue 656,907 623,546 1,289,135
1,289,531 Expenses Operating Rental 230,454 217,938 458,741
437,110 Hotel 8,404 7,978 15,495 15,612 General and administrative
27,141 25,418 58,527 54,771 Transaction costs 299 913 333 938
Depreciation and amortization 151,919 153,175 311,124
312,623 Total expenses 418,217 405,422
844,220 821,054 Operating income 238,690 218,124
444,915 468,477 Other income (expense) Income from unconsolidated
joint ventures 3,108 2,234 6,192 4,025 Interest and other income
1,504 1,524 2,118 3,029 Gains from investments in securities 730
478 1,772 737 Gains from early extinguishments of debt 14,354 —
14,354 — Interest expense (95,143 ) (105,003 ) (190,677 ) (210,312
) Income before gains on sales of real estate 163,243 117,357
278,674 265,956 Gains on sales of real estate 3,767 —
3,900 67,623 Net income 167,010 117,357 282,574
333,579 Net income attributable to noncontrolling interests
Noncontrolling interests in property partnerships (15,203 ) (6,814
) (19,627 ) (17,278 ) Noncontrolling interest—common units of the
Operating Partnership (15,473 ) (11,357 ) (26,933 ) (32,771 ) Net
income attributable to Boston Properties, Inc. 136,334 99,186
236,014 283,530 Preferred dividends (2,625 ) (2,589 ) (5,250 )
(5,207 ) Net income attributable to Boston Properties, Inc. common
shareholders $ 133,709 $ 96,597 $ 230,764 $
278,323 Basic earnings per common share attributable to
Boston Properties, Inc. common shareholders: Net income $ 0.87
$ 0.63 $ 1.50 $ 1.81 Weighted average
number of common shares outstanding 154,177 153,662
154,019 153,644 Diluted earnings per common share
attributable to Boston Properties, Inc. common shareholders: Net
income $ 0.87 $ 0.63 $ 1.50 $ 1.81
Weighted average number of common and common equivalent shares
outstanding 154,331 153,860 154,273 153,889
BOSTON PROPERTIES, INC.
FUNDS FROM OPERATIONS (1)
(Unaudited)
Three months endedJune
30,
Six months endedJune 30,
2017 2016 2017 2016
(in thousands, except for per share amounts) Net
income attributable to Boston Properties, Inc. common shareholders
$ 133,709 $ 96,597 $ 230,764 $ 278,323 Add: Preferred dividends
2,625 2,589 5,250 5,207 Noncontrolling interest - common units of
the Operating Partnership 15,473 11,357 26,933 32,771
Noncontrolling interests in property partnerships 15,203 6,814
19,627 17,278 Less: Gains on sales of real estate 3,767 —
3,900 67,623 Income before gains on sales of
real estate 163,243 117,357 278,674 265,956 Add: Depreciation and
amortization 151,919 153,175 311,124 312,623 Noncontrolling
interests in property partnerships' share of depreciation and
amortization (19,327 ) (19,369 ) (40,742 ) (38,924 ) Company's
share of depreciation and amortization from unconsolidated joint
ventures 9,629 4,618 18,670 9,114 Corporate-related depreciation
and amortization (486 ) (362 ) (1,011 ) (726 ) Less: Noncontrolling
interests in property partnerships 15,203 6,814 19,627 17,278
Preferred dividends 2,625 2,589 5,250 5,207
Funds from operations (FFO) attributable to the Operating
Partnership common unitholders (including Boston Properties, Inc.)
287,150 246,016 541,838 525,558 Less: Noncontrolling interest -
common units of the Operating Partnership’s share of funds from
operations 29,269 25,421 55,593 54,277
Funds from operations attributable to Boston Properties, Inc.
common shareholders $ 257,881 $ 220,595 $ 486,245
$ 471,281 Boston Properties, Inc.’s percentage share
of funds from operations - basic 89.81 % 89.67 % 89.74 % 89.67 %
Weighted average shares outstanding - basic 154,177 153,662
154,019 153,644 FFO per share basic $ 1.67
$ 1.44 $ 3.16 $ 3.07 Weighted average
shares outstanding - diluted 154,331 153,860 154,273
153,889 FFO per share diluted $ 1.67 $ 1.43
$ 3.15 $ 3.06
(1) Pursuant to the revised definition of Funds from Operations
adopted by the Board of Governors of the National Association of
Real Estate Investment Trusts (“NAREIT”), we calculate Funds from
Operations, or “FFO,” by adjusting net income (loss) attributable
to Boston Properties, Inc. common shareholders (computed in
accordance with GAAP) for gains (or losses) from sales of
properties, impairment losses on depreciable real estate
consolidated on our balance sheet, impairment losses on our
investments in unconsolidated joint ventures driven by a measurable
decrease in the fair value of depreciable real estate held by the
unconsolidated joint ventures, real estate-related depreciation and
amortization, and our share of income (loss) from unconsolidated
partnerships and joint ventures. FFO is a non-GAAP financial
measure, but we believe the presentation of FFO, combined with the
presentation of required GAAP financial measures, has improved the
understanding of operating results of REITs among the investing
public and has helped make comparisons of REIT operating results
more meaningful. Management generally considers FFO and FFO per
share to be useful measures for understanding and comparing our
operating results because, by excluding gains and losses related to
sales of previously depreciated operating real estate assets,
impairment losses and real estate asset depreciation and
amortization (which can differ across owners of similar assets in
similar condition based on historical cost accounting and useful
life estimates), FFO and FFO per share can help investors compare
the operating performance of a company’s real estate across
reporting periods and to the operating performance of other
companies.
Our computation of FFO may not be comparable to FFO reported by
other REITs or real estate companies that do not define the term in
accordance with the current NAREIT definition or that interpret the
current NAREIT definition differently.
In order to facilitate a clear understanding of the Company's
operating results, FFO should be examined in conjunction with net
income attributable to Boston Properties, Inc. common shareholders
as presented in the Company's consolidated financial statements.
FFO should not be considered as a substitute for net income
attributable to Boston Properties, Inc. common shareholders
(determined in accordance with GAAP) or any other GAAP financial
measures and should only be considered together with and as a
supplement to the Company's financial information prepared in
accordance with GAAP.
BOSTON PROPERTIES, INC.
PORTFOLIO LEASING PERCENTAGES
% Leased by Location June 30, 2017
December 31, 2016 Boston 92.6% 90.7% New York 88.7% 90.2%
San Francisco and Los Angeles 90.4% 89.8% Washington, DC 90.9%
89.9% Total Portfolio 90.8% 90.2%
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170801006802/en/
Boston Properties, Inc.Michael LaBelle, 617-236-3352Executive
Vice President,Chief Financial Officer and TreasurerorArista
Joyner, 617-236-3343Investor Relations Manager
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