Boston Properties, Inc. (NYSE: BXP), the largest
public owner and developer of office buildings in the United
States, reported results today for the fourth quarter ended
December 31, 2017.
Results for the quarter ended December 31, 2017
- Net income attributable to common
shareholders was $103.8 million compared to $147.2 million for the
quarter ended December 31, 2016. Net income attributable to
common shareholders per share (EPS) was $0.67 basic and $0.67 on a
diluted basis, compared to $0.96 basic and $0.96 on a diluted basis
for the quarter ended December 31, 2016. Net income
attributable to common shareholders for the quarter ended December
31, 2016 includes a gain on sale of investment in unconsolidated
joint venture of approximately $59.4 million, or $0.35 per share
basic and $0.34 per share on a diluted basis.
- Funds from Operations (FFO) were
$230.1 million, or $1.49 per share basic and $1.49 per share
diluted. This compares to FFO of $236.9 million, or $1.54 per
share basic and $1.54 per share diluted, for the quarter ended
December 31, 2016.
- FFO of $1.49 per share diluted was
lower than the mid-point of the Company’s guidance previously
provided of $1.53 - $1.54 per share diluted primarily due to:
- $0.08 per share due to a loss from
early extinguishment of debt;
- $0.03 per share due to better than
expected portfolio operations; and
- $0.01 per share due to better than
expected development and management services revenue.
- Capital Markets Highlights -
- Increased regular quarterly dividend
6.7% to $0.80 per share of common stock.
- Completed a public offering of $850.0
million of 3.200% unsecured senior notes due 2025 from which the
net proceeds were used to redeem $850.0 million of 3.700% senior
notes due November 15, 2018.
- Development Highlights -
- Partially placed in-service Salesforce
Tower, a 1.4 million net rentable square foot office project that
is 97% leased.
- Partially placed in-service 191 Spring
Street, a 171,000 net rentable square foot redevelopment project
that is 88% leased.
- Commenced construction of a 320,000
square foot/440-unit residential project at the Hub on Causeway
mixed-use development in Boston, MA.
- Commenced construction of a 211,000 net
rentable square foot office project in Waltham, MA that is 52%
leased.
- Entered into a lease for 61% of 2100
Pennsylvania Avenue, a 469,000 net rentable square foot office
project in Washington, DC, for which construction is expected to
begin in 2019.
Results for the year ended December 31, 2017
- Net income attributable to common
shareholders was $451.9 million compared to $502.3 million for the
year ended December 31, 2016. Net income attributable to
common shareholders per share (EPS) was $2.93 basic and $2.93 on a
diluted basis, compared to $3.27 basic and $3.26 on a diluted basis
for the year ended December 31, 2016.
- Funds from Operations (FFO) were
$959.4 million, or $6.22 per share basic and $6.22 per share
diluted. This compares to FFO of $927.7 million, or $6.04 per
share basic and $6.03 per share diluted, for the year ended
December 31, 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 and year ended December 31, 2017.
In the opinion of management, the Company has made all adjustments
considered necessary for a fair presentation of these reported
results.
At December 31, 2017, the Company’s portfolio consisted of
179 properties aggregating approximately 50.3 million square feet,
including twelve properties under construction/redevelopment
totaling approximately 6.2 million square feet. The overall
percentage of leased space for the 164 properties in service
(excluding the Company’s two residential properties and hotel) as
of December 31, 2017 was 90.7%.
Significant events during the fourth quarter included:
Development activities
- On November 17, 2017, the Company
partially placed in-service 191 Spring Street, a Class A office
redevelopment project with approximately 171,000 net rentable
square feet located in Lexington, Massachusetts. The property is
88% leased.
- On November 28, 2017, the Company
commenced construction of its 20 CityPoint development project
totaling approximately 211,000 net rentable square feet of Class A
office space located in Waltham, Massachusetts. The project is 52%
leased with initial occupancy expected during the third quarter of
2019.
- On December 1, 2017, a consolidated
entity in which the Company has a 95% interest partially placed
in-service Salesforce Tower, a Class A office project with
approximately 1,400,000 net rentable square feet located in San
Francisco, California. The property is 97% leased.
- On December 1, 2017, a joint venture in
which the Company has a 50% interest commenced construction of a
residential project aggregating approximately 320,000 square feet
comprised of 440 residential units at its Hub on Causeway mixed-use
development project located in Boston, Massachusetts.
- On December 1, 2017, the Company
entered into a 16-year lease with a tenant for approximately
288,000 net rentable square feet of Class A office space to be
located in the Company's 2100 Pennsylvania Avenue development
project. In 2016, the Company entered into a development agreement
with The George Washington University to pursue the development of
2100 Pennsylvania Avenue, a Class A office property with
approximately 469,000 net rentable square feet on land parcels
located in Washington, DC. The development agreement provides for
the execution of a 75-year ground lease for the property upon
completion of the entitlement process and relocation of existing
tenants anticipated to occur in 2019.
Capital markets activities
- On December 4, 2017, the Company's
Operating Partnership completed a public offering of $850.0 million
in aggregate principal amount of its 3.200% unsecured senior notes
due 2025. The notes were priced at 99.757% of the principal amount
to yield an effective rate (including financing fees) of
approximately 3.350% per annum to maturity. The notes will mature
on January 15, 2025, unless earlier redeemed. The aggregate net
proceeds from the offering were approximately $841.1 million after
deducting underwriting discounts and transaction expenses.
- On December 17, 2017, the Company's
Operating Partnership completed the redemption of $850.0 million in
aggregate principal amount of its 3.700% senior notes due November
15, 2018. The redemption price was approximately $865.5 million.
The redemption price included approximately $2.8 million of accrued
and unpaid interest to, but not including, the redemption date.
Excluding the accrued and unpaid interest, the redemption price was
approximately 101.49% of the principal amount being redeemed. The
Company recognized a loss from early extinguishment of debt
totaling approximately $13.9 million, which amount included the
payment of the redemption premium totaling approximately $12.7
million.
- On December 18, 2017, the Company
declared a regular quarterly cash dividend of $0.80 per share of
common stock for the period from October 1, 2017 to December 31,
2017, payable on January 30, 2018 to shareholders of record as of
the close of business on December 29, 2017. This represents an
increase of approximately 6.7%, or $0.05 per share, over the most
recent quarterly cash dividend of $0.75 per share.
Transaction completed subsequent to December 31, 2017:
- On January 9, 2018, the Company
completed the sale of its 500 E Street, S.W. property located in
Washington, DC for a net contract sale price of approximately
$118.6 million. After adjusting for outstanding lease related costs
assumed by the buyer, the gross sale price was approximately $127.6
million. 500 E Street, S.W. is an approximately 262,000 net
rentable square foot Class A office property. The property is 100%
leased with 21% expecting to vacate in February 2019.
- On January 24, 2018, the Company
entered into a lease agreement with a tenant for a build-to-suit
project with approximately 276,000 net rentable square feet of
Class A office space at the Company's 17Fifty development project
located in Reston, Virginia. The Company expects that the building
will be complete and available for occupancy during the first
quarter of 2020.
EPS and FFO per Share Guidance:
The Company’s guidance for the first quarter and full year 2018
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 set forth below, the Company has updated its projected EPS
(diluted) for the full year 2018 to $3.24 - $3.37 per
share from $2.65 - $2.81 per share. This is an increase
of approximately $0.58 per share at the mid-point of the
Company’s guidance consisting of $0.56 per share related to
gains on the sale of real estate, lower interest expense of $0.04
per share and $0.03 per share of better than expected
portfolio performance. These items are offset by an unbudgeted
asset sale in January 2018 that the Company expects will result in
a decrease of ($0.05) per share.
In addition, the Company has updated its projected guidance for
FFO per share (diluted) for the full year to $6.23 - $6.36 per
share from $6.20 - $6.36 per share. This is an increase
of approximately $0.02 per share at the mid-point of the
Company’s guidance and results from $0.03 per share of better
than expected portfolio performance and lower expected
interest expense of $0.04 per share. These items are offset by the
unbudgeted asset sale in January 2018 projected to result in a
decrease of ($0.05) per share.
First Quarter 2018
Full Year 2018 Low - High Low - High
Projected EPS (diluted) $ 1.15 - $ 1.17 $ 3.24 - $ 3.37 Add:
Projected Company Share of Real Estate Depreciation and
Amortization 0.88 - 0.88 3.55 - 3.55 Less: Projected Company Share
of Gains on Sales of Real Estate 0.56 - 0.56 0.56
- 0.56 Projected FFO per Share (diluted) $ 1.47 - $
1.49 $ 6.23 - $ 6.36
Boston Properties will host a conference call on Wednesday,
January 31, 2018 at 10:00 AM Eastern Time, open to the general
public, to discuss the fourth quarter and full year 2017 results,
the 2018 projections and related assumptions, and other matters
that may be of interest to investors. The number to call for this
interactive teleconference is (877) 796-3880 (Domestic) or (443)
961-9013 (International) and entering the passcode 41517728. A
replay of the conference call will be available through February
14, 2018, by dialing (855) 859-2056 (Domestic) or (404) 537-3406
(International) and entering the passcode 41517728. 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’ fourth 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
50.3 million square feet and consisting of 167 office properties
(including eight properties under construction), six residential
properties (including four properties under construction), five
retail properties 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 first quarter and full fiscal year 2018, whether as a result of
new information, future events or otherwise.
Financial tables follow.
BOSTON PROPERTIES,
INC.CONSOLIDATED BALANCE SHEETS(Unaudited)
December 31,2017
December 31,2016
(in thousands, except for share and par value amounts)
ASSETS Real estate, at cost $ 19,610,199 $ 18,862,648
Construction in progress 1,269,338 1,037,959 Land held for future
development 204,925 246,656 Less: accumulated depreciation
(4,577,454 ) (4,222,235 ) Total real estate 16,507,008 15,925,028
Cash and cash equivalents 434,767 356,914 Cash held in escrows
70,602 63,174 Investments in securities 29,161 23,814 Tenant and
other receivables, net 92,186 92,548 Accrued rental income, net
861,575 799,138 Deferred charges, net 679,038 686,163 Prepaid
expenses and other assets 77,971 129,666 Investments in
unconsolidated joint ventures 619,925 775,198 Total
assets $ 19,372,233 $ 18,851,643
LIABILITIES AND
EQUITY Liabilities: Mortgage notes payable, net $ 2,979,281 $
2,063,087 Unsecured senior notes, net 7,247,330 7,245,953 Unsecured
line of credit 45,000 — Unsecured term loan — — Mezzanine notes
payable — 307,093 Outside members’ notes payable — 180,000 Accounts
payable and accrued expenses 331,500 298,524 Dividends and
distributions payable 139,040 130,308 Accrued interest payable
83,646 243,933 Other liabilities 443,980 450,821
Total liabilities 11,269,777 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 December 31, 2017 and December 31, 2016 200,000
200,000 Common stock, $0.01 par value, 250,000,000 shares
authorized,154,404,186 and 153,869,075 issued and 154,325,286 and
153,790,175 outstanding at December 31, 2017 and December 31, 2016,
respectively 1,543 1,538 Additional paid-in capital 6,377,908
6,333,424 Dividends in excess of earnings (712,343 ) (693,694 )
Treasury common stock at cost, 78,900 shares at December 31, 2017
and December 31, 2016 (2,722 ) (2,722 ) Accumulated other
comprehensive loss (50,429 ) (52,251 ) Total stockholders’ equity
attributable to Boston Properties, Inc. 5,813,957 5,786,295
Noncontrolling interests: Common units of the Operating Partnership
604,739 614,982 Property partnerships 1,683,760 1,530,647
Total equity 8,102,456 7,931,924 Total
liabilities and equity $ 19,372,233 $ 18,851,643
BOSTON PROPERTIES,
INC.CONSOLIDATED STATEMENTS OF
OPERATIONS(Unaudited)
Three months endedDecember
31,
Year ended December 31, 2017
2016 2017 2016 (in
thousands, except for per share amounts) Revenue Rental Base
rent $ 511,995 $ 498,941 $ 2,049,368 $ 2,017,767 Recoveries from
tenants 94,697 91,123 367,500 358,975 Parking and other 26,836
25,334 105,000 100,910 Total rental
revenue 633,528 615,398 2,521,868 2,477,652 Hotel revenue 11,744
10,965 45,603 44,884 Development and management services 9,957
9,698 34,605 28,284 Total revenue
655,229 636,061 2,602,076 2,550,820
Expenses Operating Rental 233,895 224,098 929,977 889,768 Hotel
8,117 7,736 32,059 31,466 General and administrative 29,396 25,293
113,715 105,229 Transaction costs 96 1,200 668 2,387 Impairment
loss — — — 1,783 Depreciation and amortization 154,259
178,032 617,547 694,403 Total expenses 425,763
436,359 1,693,966 1,725,036 Operating
income 229,466 199,702 908,110 825,784 Other income (expense)
Income from unconsolidated joint ventures 4,197 2,585 11,232 8,074
Gain on sale of investment in unconsolidated joint venture — 59,370
— 59,370 Interest and other income 2,336 573 5,783 7,230 Gains from
investments in securities 962 560 3,678 2,273 Gains (losses) from
early extinguishments of debt (13,858 ) — 496 (371 ) Losses from
interest rate contracts — — — (140 ) Interest expense (91,772 )
(97,896 ) (374,481 ) (412,849 ) Income before gains on sales of
real estate 131,331 164,894 554,818 489,371 Gains on sales of real
estate 872 — 7,663 80,606 Net income
132,203 164,894 562,481 569,977 Net income attributable to
noncontrolling interests Noncontrolling interests in property
partnerships (13,865 ) 2,121 (47,832 ) 2,068 Noncontrolling
interest—common units of the Operating Partnership (11,884 )
(17,097 ) (52,210 ) (59,260 ) Net income attributable to Boston
Properties, Inc. 106,454 149,918 462,439 512,785 Preferred
dividends (2,625 ) (2,704 ) (10,500 ) (10,500 ) Net income
attributable to Boston Properties, Inc. common shareholders $
103,829 $ 147,214 $ 451,939 $ 502,285
Basic earnings per common share attributable to Boston Properties,
Inc. common shareholders: Net income $ 0.67 $ 0.96 $
2.93 $ 3.27 Weighted average number of common shares
outstanding 154,362 153,814 154,190 153,715
Diluted earnings per common share attributable to Boston
Properties, Inc. common shareholders: Net income $ 0.67 $
0.96 $ 2.93 $ 3.26 Weighted average number of
common and common equivalent shares outstanding 154,526
153,991 154,390 153,977
BOSTON PROPERTIES, INC.FUNDS
FROM OPERATIONS (1)(Unaudited)
Three months endedDecember
31,
Year ended December 31, 2017
2016 2017 2016 (in
thousands, except for per share amounts) Net income
attributable to Boston Properties, Inc. common shareholders $
103,829 $ 147,214 $ 451,939 $ 502,285 Add: Preferred dividends
2,625 2,704 10,500 10,500 Noncontrolling interest - common units of
the Operating Partnership 11,884 17,097 52,210 59,260
Noncontrolling interests in property partnerships 13,865 (2,121 )
47,832 (2,068 ) Less: Gains on sales of real estate 872 —
7,663 80,606 Income before gains on sales of
real estate 131,331 164,894 554,818 489,371 Add: Depreciation and
amortization 154,259 178,032 617,547 694,403 Noncontrolling
interests in property partnerships' share of depreciation and
amortization (18,896 ) (27,256 ) (78,190 ) (107,087 ) Company's
share of depreciation and amortization from unconsolidated joint
ventures 6,310 8,692 34,262 26,934 Corporate-related depreciation
and amortization (541 ) (449 ) (1,986 ) (1,568 ) Less: Gain on sale
of investment in unconsolidated joint venture — 59,370 — 59,370
Noncontrolling interests in property partnerships 13,865 (2,121 )
47,832 (2,068 ) Preferred dividends 2,625 2,704
10,500 10,500 Funds from operations (FFO)
attributable to the Operating Partnership common unitholders
(including Boston Properties, Inc.) 255,973 263,960 1,068,119
1,034,251 Less: Noncontrolling interest - common units of the
Operating Partnership’s share of funds from operations 25,841
27,062 108,707 106,504
Funds from operations attributable to
Boston Properties, Inc. common shareholders
$ 230,132 $ 236,898 $ 959,412 $ 927,747
Boston Properties, Inc.’s percentage share of funds from operations
- basic 89.90 % 89.75 % 89.82 % 89.70 % Weighted average shares
outstanding - basic 154,362 153,814 154,190
153,715 FFO per share basic $ 1.49 $ 1.54 $
6.22 $ 6.04 Weighted average shares outstanding -
diluted 154,526 153,991 154,390 153,977
FFO per share diluted $ 1.49 $ 1.54 $ 6.22 $
6.03
(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 and real estate-related depreciation
and amortization. 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 December
31, 2017 December 31, 2016 Boston 94.1 % 90.7 % New York
86.9 % 90.2 % San Francisco and Los Angeles 89.3 % 89.8 %
Washington, DC 91.3 % 89.9 % Total Portfolio 90.7 % 90.2 %
View source
version on businesswire.com: http://www.businesswire.com/news/home/20180130006478/en/
Boston Properties, Inc.Michael LaBelle, 617-236-3352Executive
Vice President, Chief Financial Officer and TreasurerorArista
Joyner, 617-236-3343Investor Relations Manager
Boston Properties (NYSE:BXP)
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