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 first quarter ended March 31,
2018.
- Net income attributable to common
shareholders was $176.0 million compared to $97.1 million for the
quarter ended March 31, 2017. Net income attributable to
common shareholders per share (EPS) was $1.14 basic and $1.14 on a
diluted basis, compared to $0.63 basic and $0.63 on a diluted basis
for the quarter ended March 31, 2017. Net income
attributable to common shareholders for the quarter ended March 31,
2018 includes a gain on sale of real estate of approximately $96.4
million, or $0.56 per share basic and $0.56 per share on a diluted
basis.
- Funds from Operations (FFO) were
$230.6 million, or $1.49 per share basic and $1.49 per share
diluted. This compares to FFO of $228.4 million, or $1.48 per
share basic and $1.48 per share diluted, for the quarter ended
March 31, 2017.
- FFO of $1.49 per share diluted was
greater than the mid-point of the Company’s guidance previously
provided of $1.47 - $1.49 per share diluted primarily due to:
- $0.02 per share due to better than
expected portfolio operations, partially offset by
- $0.01 per share of greater than
projected general and administrative expenses.
- The Company updated its guidance for
full year 2018 EPS and FFO per share as follows:
- Projected EPS (diluted) for 2018 of
$3.28 - $3.37 per share; and
- Projected FFO per share (diluted) for
2018 of $6.27 - $6.36 per share.
- Entered into an agreement to acquire
Santa Monica Business Park, a 1.2 million square foot office park
located in Santa Monica, California for a net purchase price of
$616 million.
- Entered into a lease with Leidos for
the entirety of 17Fifty Presidents Street, a build-to-suit office
project with 276,000 net rentable square feet located in the urban
core of Reston Town Center in Reston, Virginia, for which
construction has commenced.
- Entered into a lease with Fannie Mae
for approximately 850,000 net rentable square feet of the Company's
1.1 million square foot Reston Gateway office development in
Reston, Virginia, for which construction is expected to commence in
the second half of 2018.
- Closed construction financing with a
total commitment of $180.0 million for The Hub on Causeway -
Residential development project located in Boston,
Massachusetts.
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 March 31, 2018. In the
opinion of management, the Company has made all adjustments
considered necessary for a fair statement of these reported
results.
At March 31, 2018, the Company’s portfolio consisted of 179
properties aggregating approximately 50.3 million square feet,
including thirteen properties under construction/redevelopment
totaling approximately 6.5 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 March 31, 2018 was 90.5%.
Significant events during the first quarter included:
Development activities
- On January 24, 2018, the Company
entered into a lease agreement with Leidos for a build-to-suit
project with approximately 276,000 net rentable square feet of
Class A office space at the Company's 17Fifty Presidents Street
development project located in Reston, Virginia. Concurrently with
the execution of the lease, the Company commenced development of
the project and expects the building to be completed and available
for occupancy during the second quarter of 2020.
- On January 31, 2018, the Company
partially placed in-service its Signature at Reston development
project comprised of 508 apartment units and retail space
aggregating approximately 515,000 square feet located in Reston,
Virginia.
- On February 23, 2018, the Company
entered into a lease agreement with Fannie Mae to lease
approximately 850,000 net rentable square feet of Class A office
space at the Company's Reston Gateway development project located
in Reston, Virginia. The initial phase of the project will consist
of approximately 1.1 million net rentable square feet. The Company
expects to begin construction in the second half of 2018 upon
receipt of all necessary approvals.
Acquisition and disposition activities
- 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. Net cash proceeds totaled approximately $116.1 million,
resulting in a gain on sale of real estate totaling approximately
$96.4 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.
Transactions completed subsequent to March 31, 2018:
- On April 19, 2018, a joint venture in
which the Company has a 50% interest obtained construction
financing with a total commitment of $180.0 million collateralized
by its Hub on Causeway - Residential development project. The
construction financing bears interest at a variable rate equal to
LIBOR plus 2.00% per annum and matures on April 19, 2022, with two,
one-year extension options, subject to certain conditions. The
joint venture has not yet drawn any funds under the loan. The Hub
on Causeway - Residential is an approximately 320,000 square foot
project comprised of 440 residential units located in Boston,
Massachusetts.
- On April 23, 2018, the Company entered
into an agreement to acquire Santa Monica Business Park in the
Ocean Park neighborhood of Santa Monica, California for a net
purchase price of approximately $616.0 million. Santa Monica
Business Park is a 47-acre office park that contains 21 buildings
and approximately 1.2 million square feet. Approximately 70% of the
rentable square footage is subject to a ground lease with 80 years
remaining including renewal periods. The ground lease provides the
Company with the right to purchase the fee in 2028 with subsequent
purchase rights every 15 years. The property is 94% leased. The
closing is subject to customary closing conditions and termination
rights for transactions of this type. There can be no assurance
that the acquisition will be completed on the terms currently
contemplated, or at all.
- On April 24, 2018, the Company's
Operating Partnership exercised its option to draw $500.0 million
on its unsecured delayed draw term loan facility. The unsecured
term loan totaling $500.0 million bears interest at a variable rate
equal to LIBOR plus 0.90% per annum based on the Company's
Operating Partnership's current credit rating and matures on April
24, 2022.
EPS and FFO per Share Guidance:
The Company’s guidance for the second 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 $3.28 - $3.37 per share from
$3.24 - $3.37 per share. This is an increase of $0.02 per share at
the mid-point of the Company’s guidance consisting of $0.03 per
share of better than expected portfolio performance, $0.01 per
share of additional development and management service revenue,
offset by a ($0.02) per share increase in general and
administrative expenses.
In addition, the Company has updated its projected guidance for
FFO per share (diluted) for the full year to $6.27 - $6.36 per
share from $6.23 - $6.36 per share. This is an increase of $0.02
per share at the mid-point of the Company’s guidance consisting of
$0.03 per share of better than expected portfolio performance,
$0.01 per share of additional development and management service
revenue, offset by a ($0.02) per share increase in general and
administrative expenses.
Second Quarter 2018 Full Year
2018 Low - High Low - High
Projected EPS (diluted) $
0.65
- $
0.67
$ 3.28 - $ 3.37 Add:
Projected Company Share of Real
EstateDepreciation and Amortization
0.88 - 0.88 3.55 - 3.55 Less:
Projected Company Share of Gains onSales
of Real Estate
— -
—
0.56 - 0.56 Projected FFO per Share (diluted) $
1.53
- $
1.55
$ 6.27 - $ 6.36
Boston Properties will host a conference call on Wednesday,
April 25, 2018 at 10:00 AM Eastern Time, open to the general
public, to discuss the first quarter 2018 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) 706-4503 (Domestic) or (281) 913-8731
(International) and entering the passcode 2278079. A replay of the
conference call will be available through May 9, 2018, by dialing
(855) 859-2056 (Domestic) or (404) 537-3406 (International) and
entering the passcode 2278079. 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’ first quarter 2018
“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 nine 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 second quarter and full fiscal year 2018, whether
as a result of new information, future events or otherwise.
BOSTON PROPERTIES,
INC.CONSOLIDATED BALANCE SHEETS(Unaudited)
March 31,2018
December 31,2017
(in thousands, except for
shareand par value amounts)
ASSETS Real estate, at cost $ 19,849,252 $ 19,622,379
Construction in progress 1,262,886 1,269,338 Land held for future
development 204,506 204,925 Less: accumulated depreciation
(4,674,838 ) (4,589,634 ) Total real estate 16,641,806 16,507,008
Cash and cash equivalents 294,571 434,767 Cash held in escrows
160,558 70,602 Investments in securities 29,353 29,161 Tenant and
other receivables, net 73,401 92,186 Accrued rental income, net
888,907 861,575 Deferred charges, net 681,369 679,038 Prepaid
expenses and other assets 147,256 77,971 Investments in
unconsolidated joint ventures 666,718 619,925 Total
assets $ 19,583,939 $ 19,372,233
LIABILITIES AND
EQUITY Liabilities: Mortgage notes payable, net $ 2,974,930 $
2,979,281 Unsecured senior notes, net 7,249,383 7,247,330 Unsecured
line of credit 115,000 45,000 Unsecured term loan — — Accounts
payable and accrued expenses 355,002 331,500 Dividends and
distributions payable 139,218 139,040 Accrued interest payable
96,176 83,646 Other liabilities 470,140 443,980 Total
liabilities 11,399,849 11,269,777 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 March 31, 2018
and December 31, 2017 200,000 200,000 Common stock, $0.01 par
value, 250,000,000 shares authorized, 154,441,203 and 154,404,186
issued and 154,362,303 and 154,325,286 outstanding at March 31,
2018 and December 31, 2017, respectively 1,544 1,543 Additional
paid-in capital 6,384,147 6,377,908 Dividends in excess of earnings
(654,879 ) (712,343 ) Treasury common stock at cost, 78,900 shares
at March 31, 2018 and December 31, 2017 (2,722 ) (2,722 )
Accumulated other comprehensive loss (49,062 ) (50,429 ) Total
stockholders’ equity attributable to Boston Properties, Inc.
5,879,028 5,813,957 Noncontrolling interests: Common units of the
Operating Partnership 619,347 604,739 Property partnerships
1,685,715 1,683,760 Total equity 8,184,090
8,102,456 Total liabilities and equity $ 19,583,939 $
19,372,233
BOSTON PROPERTIES,
INC.CONSOLIDATED STATEMENTS OF
OPERATIONS(Unaudited)
Three months ended March 31, 2018
2017
(in thousands, except forper
share amounts)
Revenue Rental Base rent $ 519,507 $ 503,562 Recoveries from
tenants 95,118 89,164 Parking and other 26,134 25,610
Total rental revenue 640,759 618,336 Hotel revenue 9,102 7,420
Development and management services 8,405 6,472 Direct
reimbursements of payroll and related costs from management
services contracts 2,885 — Total revenue 661,151
632,228 Expenses Operating Rental 240,329 228,287
Hotel 8,073 7,091 General and administrative 35,894 31,386 Payroll
and related costs from management services contracts 2,885 —
Transaction costs 21 34 Depreciation and amortization 165,797
159,205 Total expenses 452,999 426,003
Operating income 208,152 206,225 Other income (expense) Income from
unconsolidated joint ventures 461 3,084 Interest and other income
1,648 614 Gains (losses) from investments in securities (126 )
1,042 Interest expense (90,220 ) (95,534 ) Income before gains on
sales of real estate 119,915 115,431 Gains on sales of real estate
96,397 133 Net income 216,312 115,564 Net income
attributable to noncontrolling interests Noncontrolling interests
in property partnerships (17,234 ) (4,424 ) Noncontrolling
interest—common units of the Operating Partnership (20,432 )
(11,432 ) Net income attributable to Boston Properties, Inc.
178,646 99,708 Preferred dividends (2,625 ) (2,625 ) Net income
attributable to Boston Properties, Inc. common shareholders $
176,021 $ 97,083 Basic earnings per common share
attributable to Boston Properties, Inc. common shareholders: Net
income $ 1.14 $ 0.63 Weighted average number of
common shares outstanding 154,385 153,860 Diluted
earnings per common share attributable to Boston Properties, Inc.
common shareholders: Net income $ 1.14 $ 0.63
Weighted average number of common and common equivalent shares
outstanding 154,705 154,214
BOSTON PROPERTIES, INC.FUNDS
FROM OPERATIONS (1)(Unaudited)
Three months ended March 31, 2018
2017
(in thousands, except forper
share amounts)
Net income attributable to Boston Properties, Inc. common
shareholders $ 176,021 $ 97,083 Add: Preferred dividends 2,625
2,625 Noncontrolling interest - common units of the Operating
Partnership 20,432 11,432 Noncontrolling interests in property
partnerships 17,234 4,424 Less: Gains on sales of real estate
96,397 133 Income before gains on sales of real
estate 119,915 115,431 Add: Depreciation and amortization 165,797
159,205 Noncontrolling interests in property partnerships' share of
depreciation and amortization (18,221 ) (21,415 ) Company's share
of depreciation and amortization from unconsolidated joint ventures
9,444 9,041 Corporate-related depreciation and amortization (405 )
(525 ) Less: Noncontrolling interests in property partnerships
17,234 4,424 Preferred dividends 2,625 2,625 Funds
from operations (FFO) attributable to the Operating Partnership
common unitholders (including Boston Properties, Inc.) 256,671
254,688 Less: Noncontrolling interest - common units of the
Operating Partnership’s share of funds from operations 26,108
26,305 Funds from operations attributable to Boston
Properties, Inc. common shareholders $ 230,563 $ 228,383
Boston Properties, Inc.’s percentage share of funds from
operations - basic 89.83 % 89.67 % Weighted average shares
outstanding - basic 154,385 153,860 FFO per share
basic $ 1.49 $ 1.48 Weighted average shares
outstanding - diluted 154,705 154,214 FFO per share
diluted $ 1.49 $ 1.48
(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 March 31,
2018 December 31, 2017 Boston 94.8 % 94.1 % Los Angeles
and San Francisco 89.0 % 89.3 % New York 86.3 % 86.9 % Washington,
DC 90.6 % 91.3 % Total Portfolio 90.5 % 90.7 %
View source
version on businesswire.com: https://www.businesswire.com/news/home/20180424006653/en/
Boston PropertiesMichael LaBelle, 617-236-3352Executive Vice
President, Chief Financial Officer and TreasurerorArista Joyner,
617-236-3343Investor Relations Manager
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