Exceeded Q2 2022 Guidance for EPS and FFO;
Increased Full Year 2022 Guidance for EPS and FFO; Executed 1.9
Million SF of Leases in Q2; and Expanded Presence in the Seattle
Market
Boston Properties, Inc. (NYSE: BXP), the largest publicly
traded developer, owner, and manager of Class A office properties
in the United States, reported results today for the second quarter
ended June 30, 2022.
Financial highlights for the second quarter include:
- Revenue grew more than 8% to $773.9 million for the quarter
ended June 30, 2022, as compared to $713.8 million for the quarter
ended June 30, 2021.
- Net income attributable to common shareholders of $223.0
million, or $1.42 per diluted share (EPS) for the quarter ended
June 30, 2022, compared to $111.7 million, or $0.71 per diluted
share, for the quarter ended June 30, 2021.
- Funds from Operations (FFO) of $304.6 million, or $1.94 per
diluted share for the quarter ended June 30, 2022, compared to FFO
of $268.6 million, or $1.72 per diluted share, for the quarter
ended June 30, 2021.
- EPS and FFO per share exceeded the mid-points of BXP’s guidance
by $0.62 and $0.09 per share, respectively. EPS included a gain on
sale of $0.55 per share, and each of EPS and FFO included $0.09 per
share of better-than-projected portfolio performance. The portfolio
outperformance was partially due to lower-than-projected operating
expenses of $0.05 per share resulting from the deferral of certain
maintenance expenses. We expect to recognize a majority of those Q2
expense savings in the second half of 2022.
BXP provided guidance for (1) third quarter 2022 EPS of $0.74 -
$0.76 and FFO of $1.86 - $1.88 per diluted share, and (2) full year
2022 EPS of $5.40 - $5.45 and FFO of $7.48 - $7.53 per diluted
share. See “EPS and FFO per Share Guidance” below.
Second quarter and recent business highlights include:
- Executed approximately 1.9 million square feet of leases, the
strongest leasing quarter since Q3 2019 and approximately 140% of
our historical 10-year average for the quarter. Notable leases
include:
- A 570,000 square foot lease for the first phase of a future
life sciences development at 290 Binney Street in Cambridge, MA.
The lease and the commencement of development are subject to
various conditions, some of which are not within BXP’s control
- A 125,000 square foot lease at 767 Fifth Avenue (The GM
Building) in New York City, New York
- A 112,000 square foot lease with a life sciences client at 180
CityPoint in Waltham, Massachusetts
- A 104,000 square foot lease at 140 Kendrick Street in Needham,
Massachusetts
- Completed the acquisition of Madison Centre in Seattle,
Washington, for a gross purchase price of approximately $730.0
million. Madison Centre is an approximately 755,000 square foot,
37-story, LEED-Platinum certified, Class A office property. Madison
Centre was constructed in 2017, is approximately 93% leased, and is
considered one of the highest quality buildings in Seattle. The
acquisition was completed with a $730.0 million unsecured term loan
that matures on May 16, 2023. As of June 30, 2022, the term loan
bears interest at a variable rate equal to Term SOFR plus 0.95% per
annum.
- Commenced two development projects within Reston Town Center in
Reston, Virginia:
- A residential property that is expected to consist of 508 units
across a five-story low-rise building and an iconic 39-story tower,
which will be one of the tallest buildings in Northern Virginia.
The fifth floor of the tower will serve as a full-floor amenity
level with a large co-working space, fitness center, sports
bar/game area, communal kitchen, and numerous seating areas. A pool
and a collection of fire pit areas will sit above a structured
garage. The property is owned by a newly formed joint venture with
an institutional partner in which BXP has a 20% interest. The joint
venture obtained a $140.0 million construction loan that bears
interest at a variable rate equal to SOFR plus 2.00% per annum and
matures on May 13, 2026, with two, one-year extension options,
subject to certain conditions.
- Adjacent to the residential property, a Class A office and
retail project that, when completed, will consist of approximately
90,000 square feet of boutique commercial space with highly
efficient floor plates. Premium amenities will include a large
rooftop terrace and indoor amenity space with a catering
kitchen.
- In June 2022, completed and fully placed in-service 325 Main
Street, a Class A office building with approximately 414,000 square
feet of office and retail space located in Cambridge,
Massachusetts. The office component, comprising approximately
380,000 square feet, is 100% leased.
- In June 2022, completed the sale of a portfolio of eleven
suburban office properties aggregating approximately 733,000 net
rentable square feet, located in Springfield, Virginia, for an
aggregate gross sales price of $127.0 million. Net cash proceeds
totaled approximately $121.9 million, and BXP recognized a gain on
sale of real estate totaling approximately $96.2 million.
- In June 2022, refinanced the mortgage loan collateralized by
Hub50House located in Boston, Massachusetts. The new mortgage loan
has a principal balance of $185.0 million, bears interest at a
variable rate equal to SOFR plus 1.35% per annum and matures on
June 17, 2032. The property is owned by a joint venture in which
BXP has a 50% interest. At closing, the joint venture entered into
interest rate swap contracts with notional amounts aggregating
$185.0 million effective through April 10, 2032, resulting in a
fixed rate of approximately 4.432% per annum through the expiration
of the interest rate swap contracts. The previous construction loan
had an outstanding balance of approximately $176.7 million and
matured in June 2022.
- Continued leadership and ongoing commitment to ESG and
sustainability performance:
- In April 2022, released BXP’s 2021 ESG Report, which highlights
that BXP remains on track to achieve carbon-neutral operations by
2025. Following the report’s release, BXP hosted its first ESG
Investor Webcast in June 2022.
- In May 2022, received the 2022 ENERGY STAR® Partner of the Year
- Sustained Excellence Award from the U.S. Environmental Protection
Agency and the U.S. Department of Energy for the second consecutive
year.
- In May 2022, BXP’s ESG rating was upgraded from ‘A’ to ‘AA’ by
MSCI ESG Research. MSCI is a leading provider of in-depth research,
ratings and analysis of environmental, social and
governance-related business activities for the global investment
community.
- In June 2022, celebrated the 25th Anniversary of BXP’s listing
on the New York Stock Exchange. Representatives from BXP across the
U.S. rang the closing bell on June 24th in recognition of this
milestone.
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, 2022. In the opinion of
management, BXP has made all adjustments considered necessary for a
fair statement of these reported results.
EPS and FFO per Share Guidance:
BXP’s guidance for the third quarter and full year 2022 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, the timing of the lease-up of available space, and the
earnings impact of the events referenced in this release and those
referenced during the related conference call. Except as otherwise
publicly disclosed, the estimates do not include the impacts of any
potential (1) capital markets activity, (2) future write-offs or
reinstatements of accounts receivable and accrued rent balances, or
(3) 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,
impairment losses on depreciable real estate, and any gains or
losses associated with disposition activity. BXP 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 BXP’s actual
results will not differ materially from the estimates set forth
below.
Third Quarter 2022
Full Year 2022
Low
High
Low
High
Projected EPS (diluted)
$
0.74
$
0.76
$
5.40
$
5.45
Add:
Projected Company share of real estate
depreciation and amortization
1.12
1.12
4.37
4.37
Projected Company share of (gains)/losses
on sales of real estate
—
—
(2.29
)
(2.29
)
Projected FFO per share (diluted)
$
1.86
$
1.88
$
7.48
$
7.53
BXP will host a conference call on Wednesday, July 27, 2022 at
10:00 AM Eastern Time, open to the general public, to discuss the
second quarter 2022 results, provide a business update, and discuss
other business matters that may be of interest to investors.
Participants who would like to join the call and ask a question may
register here to receive the dial-in numbers and unique PIN to
access the call. There will also be a live audio, listen-only
webcast of the call, which may be accessed in the Investors section
of BXP’s website. Shortly after the call, a replay of the call will
be available on BXP’s website for up to twelve months following the
call.
Additionally, a copy of BXP’s second quarter 2022 “Supplemental
Operating and Financial Data” and this press release are available
in the Investors section of BXP’s website at investors.bxp.com.
Boston Properties (NYSE: BXP) is the largest publicly traded
developer, owner, and manager of Class A office properties in the
United States, concentrated in six markets - Boston, Los Angeles,
New York, San Francisco, Seattle, and Washington, DC. BXP is a
fully integrated real estate company, organized as a real estate
investment trust (REIT), that develops, manages, operates,
acquires, and owns a diverse portfolio of primarily Class A office
space. Including properties owned by unconsolidated joint ventures,
BXP’s portfolio totals 53.7 million square feet and 193 properties,
including twelve properties under construction/redevelopment. For
more information about BXP, please visit our website at www.bxp.com
or follow us on LinkedIn or Instagram.
This press release contains “forward-looking statements” as
defined in the Private Securities Litigation Reform Act of 1995.
You can identify these statements by our use of the words
“anticipates,” “believes,” “budgeted,” “could,” “estimates,”
“expects,” “guidance,” “intends,” “may,” “might,” “plans,”
“projects,” “should,” “will,” and similar expressions that do not
relate to historical matters. These statements are based on our
current plans, expectations, projections and assumptions about
future events. 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 BXP’s control. If our underlying assumptions
prove inaccurate, or known or unknown risks or uncertainties
materialize, actual results could differ materially from those
expressed or implied by the forward-looking statement. These
factors include, without limitation, the risks and uncertainties
related to the impact of the COVID-19 global pandemic, including
the emergence of additional variants, the effectiveness,
availability and distribution of vaccines, including their efficacy
against new variant strains and the willingness of individuals to
be vaccinated, the impact of geopolitical conflicts, including the
ongoing war in Ukraine, and the severity and duration of the
indirect economic impacts of the foregoing, such as recession,
supply chain disruptions, labor market disruptions, rising
inflation, increasing interest rates, dislocation and volatility in
capital markets, job losses, potential longer-term changes in
consumer and client behavior, as well as possible future
governmental responses, risks related to volatile or adverse global
economic and geopolitical conditions, health crises and
dislocations in the credit markets, risks associated with downturns
in the national and local economies, increasing interest rates, and
volatility in the securities markets, BXP’s ability to enter into
new leases or renew leases on favorable terms, dependence on
clients’ 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 BXP’s accounting policies and on
period-to-period comparisons of financial results, the
uncertainties of costs to comply with regulatory changes (including
potential costs to comply with the Securities and Exchange
Commission’s proposed rules to standardize climate-related
disclosures) and other risks and uncertainties detailed from time
to time in BXP’s filings with the SEC. These forward-looking
statements speak only as of the date of issuance of this report and
are not guarantees of future results, performance, or achievements.
BXP does not undertake a duty to update or revise any
forward-looking statement whether as a result of new information,
future events or otherwise, except as may be required by law.
Financial tables follow.
BOSTON PROPERTIES,
INC.
CONSOLIDATED BALANCE
SHEETS
(Unaudited)
June 30, 2022
December 31, 2021
(in thousands, except for
share and par value amounts)
ASSETS
Real estate, at cost
$
23,522,913
$
22,298,103
Construction in progress
593,958
894,172
Land held for future development
583,700
560,355
Right of use assets - finance leases
237,488
237,507
Right of use assets - operating leases
168,370
169,778
Less: accumulated depreciation
(6,077,270
)
(5,883,961
)
Total real estate
19,029,159
18,275,954
Cash and cash equivalents
456,491
452,692
Cash held in escrows
46,359
48,466
Investments in securities
31,457
43,632
Tenant and other receivables, net
64,607
70,186
Related party note receivable, net
78,576
78,336
Note receivables, net
—
9,641
Accrued rental income, net
1,265,480
1,226,745
Deferred charges, net
684,078
618,798
Prepaid expenses and other assets
55,232
57,811
Investments in unconsolidated joint
ventures
1,554,994
1,482,997
Total assets
$
23,266,433
$
22,365,258
LIABILITIES AND EQUITY
Liabilities:
Mortgage notes payable, net
$
3,269,948
$
3,267,914
Unsecured senior notes, net
9,489,030
9,483,695
Unsecured line of credit
165,000
145,000
Unsecured term loan, net
728,795
—
Lease liabilities - finance leases
246,832
244,421
Lease liabilities - operating leases
204,643
204,561
Accounts payable and accrued expenses
342,467
320,775
Dividends and distributions payable
170,937
169,859
Accrued interest payable
96,821
94,796
Other liabilities
401,360
391,441
Total liabilities
15,115,833
14,322,462
Commitments and contingencies
—
—
Redeemable deferred stock units
7,931
9,568
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; none issued or outstanding
—
—
Common stock, $0.01 par value, 250,000,000
shares authorized, 156,805,330 and 156,623,749 issued and
156,726,430 and 156,544,849 outstanding at June 30, 2022 and
December 31, 2021, respectively
1,567
1,565
Additional paid-in capital
6,524,997
6,497,730
Dividends in excess of earnings
(567,016
)
(625,891
)
Treasury common stock at cost, 78,900
shares at June 30, 2022 and December 31, 2021
(2,722
)
(2,722
)
Accumulated other comprehensive loss
(27,077
)
(36,662
)
Total stockholders’ equity attributable to
Boston Properties, Inc.
5,929,749
5,834,020
Noncontrolling interests:
Common units of the Operating
Partnership
660,214
642,655
Property partnerships
1,552,706
1,556,553
Total equity
8,142,669
8,033,228
Total liabilities and equity
$
23,266,433
$
22,365,258
BOSTON PROPERTIES,
INC.
CONSOLIDATED STATEMENTS OF
OPERATIONS
(Unaudited)
Three months ended June
30,
Six months ended June
30,
2022
2021
2022
2021
(in thousands, except for per
share amounts)
Revenue
Lease
$
721,899
$
684,025
$
1,440,019
$
1,369,842
Parking and other
30,346
18,282
52,080
35,220
Hotel revenue
12,089
1,561
16,646
2,193
Development and management services
6,354
7,284
12,185
14,087
Direct reimbursements of payroll and
related costs from management services contracts
3,239
2,655
7,304
6,160
Total revenue
773,927
713,807
1,528,234
1,427,502
Expenses
Operating
Rental
273,848
248,703
544,103
506,092
Hotel
6,444
1,996
11,284
4,047
General and administrative
34,665
38,405
77,859
83,364
Payroll and related costs from management
services contracts
3,239
2,655
7,304
6,160
Transaction costs
496
751
496
1,082
Depreciation and amortization
183,146
183,838
360,770
360,403
Total expenses
501,838
476,348
1,001,816
961,148
Other income (expense)
Income (loss) from unconsolidated joint
ventures
(54
)
(1,373
)
2,135
3,852
Gains on sales of real estate
96,247
7,756
118,948
7,756
Interest and other income (loss)
1,195
1,452
2,423
2,620
Other income - assignment fee
6,624
—
6,624
—
Gains (losses) from investments in
securities
(4,716
)
2,275
(6,978
)
3,934
Losses from early extinguishment of
debt
—
—
—
(898
)
Interest expense
(104,142
)
(106,319
)
(205,370
)
(214,221
)
Net income
267,243
141,250
444,200
269,397
Net income attributable to noncontrolling
interests
Noncontrolling interests in property
partnerships
(18,546
)
(17,164
)
(36,095
)
(33,631
)
Noncontrolling interest—common units of
the Operating Partnership
(25,708
)
(12,383
)
(42,061
)
(23,422
)
Net income attributable to Boston
Properties, Inc.
222,989
111,703
366,044
212,344
Preferred dividends
—
—
—
(2,560
)
Preferred stock redemption charge
—
—
—
(6,412
)
Net income attributable to Boston
Properties, Inc. common shareholders
$
222,989
$
111,703
$
366,044
$
203,372
Basic earnings per common share
attributable to Boston Properties, Inc. common shareholders:
Net income
$
1.42
$
0.72
$
2.33
$
1.30
Weighted average number of common shares
outstanding
156,720
156,107
156,685
156,016
Diluted earnings per common share
attributable to Boston Properties, Inc. common shareholders:
Net income
$
1.42
$
0.71
$
2.33
$
1.30
Weighted average number of common and
common equivalent shares outstanding
157,192
156,519
157,098
156,307
BOSTON PROPERTIES,
INC.
FUNDS FROM OPERATIONS
(1)
(Unaudited)
Three months ended June
30,
Six months ended June
30,
2022
2021
2022
2021
(in thousands, except for per
share amounts)
Net income attributable to Boston
Properties, Inc. common shareholders
$
222,989
$
111,703
$
366,044
$
203,372
Add:
Preferred stock redemption charge
—
—
—
6,412
Preferred dividends
—
—
—
2,560
Noncontrolling interest - common units of
the Operating Partnership
25,708
12,383
42,061
23,422
Noncontrolling interests in property
partnerships
18,546
17,164
36,095
33,631
Net income
267,243
141,250
444,200
269,397
Add:
Depreciation and amortization expense
183,146
183,838
360,770
360,403
Noncontrolling interests in property
partnerships’ share of depreciation and amortization
(17,414
)
(17,113
)
(35,067
)
(33,570
)
Company’s share of depreciation and
amortization from unconsolidated joint ventures
21,120
15,350
43,164
33,762
Corporate-related depreciation and
amortization
(413
)
(444
)
(817
)
(884
)
Less:
Gains on sale of investment included
within income from unconsolidated joint ventures
—
—
—
10,257
Gains on sales of real estate
96,247
7,756
118,948
7,756
Noncontrolling interests in property
partnerships
18,546
17,164
36,095
33,631
Preferred dividends
—
—
—
2,560
Preferred stock redemption charge
—
—
—
6,412
Funds from operations (FFO) attributable
to the Operating Partnership common unitholders (including Boston
Properties, Inc.)
338,889
297,961
657,207
568,492
Less:
Noncontrolling interest - common units of
the Operating Partnership’s share of funds from operations
34,329
29,319
66,509
55,940
Funds from operations attributable to
Boston Properties, Inc. common shareholders
$
304,560
$
268,642
$
590,698
$
512,552
Boston Properties, Inc.’s percentage share
of funds from operations - basic
89.87
%
90.16
%
89.88
%
90.16
%
Weighted average shares outstanding -
basic
156,720
156,107
156,685
156,016
FFO per share basic
$
1.94
$
1.72
$
3.77
$
3.29
Weighted average shares outstanding -
diluted
157,192
156,519
157,098
156,307
FFO per share diluted
$
1.94
$
1.72
$
3.76
$
3.28
(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
June 30, 2022
December 31, 2021
Boston
91.5 %
91.4 %
Los Angeles
93.4 %
88.8 %
New York
87.8 %
87.6 %
San Francisco
86.9 %
87.3 %
Seattle
89.1 %
90.9 %
Washington, DC
89.4 %
87.2 %
Total Portfolio
89.5 %
88.8 %
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220726006099/en/
AT BXP Michael LaBelle
Executive Vice President, Chief Financial Officer and Treasurer
mlabelle@bxp.com Helen Han Vice President, Investor Relations
hhan@bxp.com
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