Exceeds Guidance for EPS and FFO for Q3;
Executes 1.4 Million SF of Leases in Q3; and Expands Life Sciences
Portfolio in Cambridge, MA
BXP (NYSE: BXP), the largest publicly traded developer,
owner, and manager of premier workplaces in the United States,
reported results today for the third quarter ended September 30,
2022.
Financial highlights for the third quarter include:
- Revenue increased 8.3% to $790.5 million for the quarter ended
September 30, 2022, as compared to $730.1 million for the quarter
ended September 30, 2021.
- Net income attributable to common shareholders of $361.0
million, or $2.29 per diluted share (EPS) for the quarter ended
September 30, 2022, compared to $108.3 million, or $0.69 per
diluted share, for the quarter ended September 30, 2021.
- Funds from Operations (FFO) of $299.8 million, or $1.91 per
diluted share for the quarter ended September 30, 2022, compared to
FFO of $270.5 million, or $1.73 per diluted share, for the quarter
ended September 30, 2021.
- EPS and FFO per share exceeded the mid-points of BXP’s guidance
by $1.54 and $0.04 per share, respectively. EPS included a gain on
sale of real estate of $1.50 per share, and each of EPS and FFO
included $0.04 per share of better-than-projected portfolio
performance.
BXP provided guidance for (1) full year 2022 EPS of $5.55 -
$5.57 and FFO of $7.51 - $7.53 per diluted share, and (2) full year
2023 EPS of $2.27 - $2.42 and FFO of $7.15 - $7.30 per diluted
share. The midpoint of guidance for each of 2023 EPS and FFO per
diluted share is projected to be lower than projected full year
2022 EPS and FFO per diluted share, respectively, primarily due
to:
- for 2023 EPS, lower anticipated gains on sale of $2.43 per
diluted share; and
- for each of 2023 EPS and FFO per diluted share, a decline of
$0.30 per diluted share (at the midpoint of our 2023 guidance
range) from:
- $0.69 per diluted share of higher projected interest expense,
including $0.30 per diluted share of interest expense related to
our new investment activity outlined in this release,
- $0.16 per diluted share of dilution resulting from our 2022
disposition activity, and
- $0.07 per diluted share of reduced fee income and increased
G&A expense.
The foregoing are offset by $0.62 per diluted share of projected
contributions from our acquisitions in 2022 and from our 2022 and
2023 development deliveries.
See “EPS and FFO per Share Guidance” below.
Third quarter and recent business highlights include:
- Executed approximately 1.4 million square feet of leases, which
was the strongest third quarter leasing volume since 2019. Notable
leases include:
- A 15-year lease for approximately 225,000 square feet with a
prominent life sciences organization for the planned office-to-lab
conversion at 300 Binney Street located in Cambridge,
Massachusetts.
- An 11-year lease for approximately 118,000 square feet with a
retail client at the Prudential Center in Boston,
Massachusetts.
- Further expanded BXP’s life sciences portfolio in Kendall
Square in Cambridge, Massachusetts by completing the acquisition of
125 Broadway for a purchase price, including transaction costs, of
approximately $592.4 million. 125 Broadway is a six-story, 271,000
square foot laboratory/life sciences property adjacent to BXP’s
existing 2.2 million square foot portfolio in the heart of Kendall
Square. Kendall Square is considered to be the largest and most
important cluster of life sciences companies and research space in
the United States. This property is 100% leased.
- BXP and Biogen Inc. terminated Biogen’s lease at 300 Binney
Street in Kendall Square to facilitate the conversion and expansion
of the property. 300 Binney Street is currently a 195,000 square
foot property that will be redeveloped into an approximately
240,000 square foot laboratory/life sciences space for the new
client that has signed a lease for 100% of the laboratory/life
sciences space.
- Partially placed in-service 880 Winter Street, an approximately
244,000 square foot laboratory/life sciences project located in
Waltham, Massachusetts. The project is currently 97% leased.
- Commenced the redevelopment of:
- A property located at 140 Kendrick Street in Needham,
Massachusetts. When completed, the property will consist of
approximately 104,000 square feet and will be the first Net Zero,
Carbon Neutral office repositioning of this scale in Massachusetts.
The repositioning will include a deep energy retrofit, full
electrification of gas-fired systems, HVAC modernization, including
advanced heat recovery, and onsite renewable energy generation from
a solar photovoltaic system that is designed to exceed annual
consumption. This property is 100% leased.
- 760 Boylston Street at the Prudential Center located in Boston,
Massachusetts. The redevelopment is a modernization of the space
consisting of approximately 118,000 rentable square feet. This
property is 100% leased to a single client.
- Completed the disposition of:
- 601 Massachusetts Avenue located in Washington, DC for a gross
sale price of $531.0 million. Net cash proceeds totaled
approximately $514.5 million resulting in a gain on sale of real
estate totaling approximately $237.4 million. 601 Massachusetts
Avenue is an 11-story, approximately 479,000 square foot premier
workplace originally developed by BXP in 2013 and currently 98%
leased. BXP will continue to provide property management services
to the new owner.
- Land parcels located in Loudoun County, Virginia for a gross
sale price of $27.0 million. Net cash proceeds totaled
approximately $26.9 million resulting in a gain on sale of real
estate totaling approximately $24.4 million.
- In October 2022, entered into an agreement to acquire an
approximate 27% interest in the joint venture that owns 200 Fifth
Avenue, a 14-story, approximately 870,000 square-foot, LEED Gold
certified, premier workplace located in Manhattan, New York that is
approximately 93% leased. The acquisition of the joint venture
interest will be BXP’s second investment in the vibrant Midtown
South neighborhood in the past twelve months. BXP will serve as the
managing member and provide customary leasing and property
management services for the joint venture. BXP expects to close the
acquisition in the fourth quarter of 2022 for a gross purchase
price of approximately $280.2 million, which includes $120.1
million of cash and BXP’s pro rata share of the outstanding loan
secured by the property of $160.1 million. The mortgage loan bears
interest at 4.34% per annum and matures in November 2028. There can
be no assurance that BXP will complete the acquisition on the terms
currently contemplated or at all.
- In October 2022, entered into an agreement to sell the
residential component of The Avant located in Reston, Virginia. The
Avant is a 15-story, approximately 329,000 square foot, 359-unit,
luxury multifamily building that is currently 96% occupied. BXP
will retain ownership of the 26,000 square foot ground-level retail
space. BXP expects to close the transaction in the fourth quarter
of 2022 for a gross sale price of approximately $141 million. There
can be no assurance that BXP will complete the sale on the terms
currently contemplated or at all.
- BXP maintained its leadership and ongoing commitment to ESG and
sustainability performance and earned a top ESG rating in the 2022
GRESB® assessment. BXP earned its 11th consecutive “Green Star”
recognition and the highest GRESB 5-star rating, as well as an “A”
disclosure score. BXP also achieved the highest scores in several
categories, including Data Monitoring & Review, Targets,
Policies, Reporting, and Leadership.
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 September 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 full year 2022 and full year 2023 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, interest rates, the timing of the lease-up of available
space, the timing of development cost outlays and development
deliveries, and the earnings impact of the events referenced in
this release and those referenced during the related conference
call. The estimates do not include (1) possible future gains or
losses or the impact on operating results from other possible
future property acquisitions or dispositions, (2) the impacts of
any other capital markets activity, (3) future write-offs or
reinstatements of accounts receivable and accrued rent balances, or
(4) 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.
Full Year 2022
Full Year 2023
Low
High
Low
High
Projected EPS (diluted)
$
5.55
$
5.57
$
2.27
$
2.42
Add:
Projected Company share of real estate
depreciation and amortization
4.39
4.39
4.88
4.88
Projected Company share of (gains)/losses
on sales of real estate
(2.43
)
(2.43
)
—
—
Projected FFO per share (diluted)
$
7.51
$
7.53
$
7.15
$
7.30
BXP will host a conference call on Wednesday, October 26, 2022
at 10:00 AM Eastern Time, open to the general public, to discuss
the third 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 at
https://register.vevent.com/register/BI7d60ea9f23734bec9f7775716b8b4671
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 at
https://investors.bxp.com/events-webcasts. Shortly after the call,
a replay of the call will be available on BXP’s website at
https://investors.bxp.com/events-webcasts for up to twelve months
following the call.
Additionally, a copy of BXP’s third 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.
BXP (NYSE: BXP) is the largest publicly traded developer, owner,
and manager of premier workplaces 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), with more than 50 years of experience developing, owning,
managing, and acquiring exceptional properties in dynamic gateway
markets. Including properties owned by unconsolidated joint
ventures, BXP’s portfolio totals 53.5 million square feet and 193
properties, including 14 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 statements. 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, 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)
September 30,
2022
December 31,
2021
(in thousands, except for
share and par value amounts)
ASSETS
Real estate, at cost
$
23,920,533
$
22,298,103
Construction in progress
670,167
894,172
Land held for future development
601,676
560,355
Right of use assets - finance leases
237,505
237,507
Right of use assets - operating leases
167,935
169,778
Less: accumulated depreciation
(6,170,472
)
(5,883,961
)
Total real estate
19,427,344
18,275,954
Cash and cash equivalents
375,774
452,692
Cash held in escrows
73,112
48,466
Investments in securities
30,040
43,632
Tenant and other receivables, net
69,633
70,186
Related party note receivable, net
78,592
78,336
Note receivables, net
—
9,641
Accrued rental income, net
1,250,176
1,226,745
Deferred charges, net
720,648
618,798
Prepaid expenses and other assets
107,538
57,811
Investments in unconsolidated joint
ventures
1,593,834
1,482,997
Total assets
$
23,726,691
$
22,365,258
LIABILITIES AND EQUITY
Liabilities:
Mortgage notes payable, net
$
3,271,157
$
3,267,914
Unsecured senior notes, net
9,491,714
9,483,695
Unsecured line of credit
340,000
145,000
Unsecured term loan, net
730,000
—
Lease liabilities - finance leases
248,092
244,421
Lease liabilities - operating leases
205,008
204,561
Accounts payable and accrued expenses
360,572
320,775
Dividends and distributions payable
170,952
169,859
Accrued interest payable
91,885
94,796
Other liabilities
417,255
391,441
Total liabilities
15,326,635
14,322,462
Commitments and contingencies
—
—
Redeemable deferred stock units
6,985
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, 156,833,612 and 156,623,749 issued and
156,754,712 and 156,544,849 outstanding at September 30, 2022 and
December 31, 2021, respectively
1,568
1,565
Additional paid-in capital
6,532,299
6,497,730
Dividends in excess of earnings
(359,536
)
(625,891
)
Treasury common stock at cost, 78,900
shares at September 30, 2022 and December 31, 2021
(2,722
)
(2,722
)
Accumulated other comprehensive loss
(15,991
)
(36,662
)
Total stockholders’ equity attributable to
Boston Properties, Inc.
6,155,618
5,834,020
Noncontrolling interests:
Common units of the Operating
Partnership
685,952
642,655
Property partnerships
1,551,501
1,556,553
Total equity
8,393,071
8,033,228
Total liabilities and equity
$
23,726,691
$
22,365,258
BOSTON PROPERTIES,
INC.
CONSOLIDATED STATEMENTS OF
OPERATIONS
(Unaudited)
Three months ended
September 30,
Nine months ended
September 30,
2022
2021
2022
2021
(in thousands, except for per
share amounts)
Revenue
Lease
$
739,255
$
692,260
$
2,179,274
$
2,062,102
Parking and other
28,154
23,507
80,234
58,727
Hotel revenue
11,749
5,189
28,395
7,382
Development and management services
7,465
6,094
19,650
20,181
Direct reimbursements of payroll and
related costs from management services contracts
3,900
3,006
11,204
9,166
Total revenue
790,523
730,056
2,318,757
2,157,558
Expenses
Operating
Rental
281,702
258,281
825,805
764,373
Hotel
8,548
3,946
19,832
7,993
General and administrative
32,519
34,560
110,378
117,924
Payroll and related costs from management
services contracts
3,900
3,006
11,204
9,166
Transaction costs
1,650
1,888
2,146
2,970
Depreciation and amortization
190,675
179,412
551,445
539,815
Total expenses
518,994
481,093
1,520,810
1,442,241
Other income (expense)
Loss from unconsolidated joint
ventures
(3,524
)
(5,597
)
(1,389
)
(1,745
)
Gains on sales of real estate
262,345
348
381,293
8,104
Interest and other income (loss)
3,728
1,520
6,151
4,140
Other income - assignment fee
—
—
6,624
—
Gains (losses) from investments in
securities
(1,571
)
(190
)
(8,549
)
3,744
Losses from early extinguishment of
debt
—
—
—
(898
)
Interest expense
(111,846
)
(105,794
)
(317,216
)
(320,015
)
Net income
420,661
139,250
864,861
408,647
Net income attributable to noncontrolling
interests
Noncontrolling interests in property
partnerships
(18,801
)
(18,971
)
(54,896
)
(52,602
)
Noncontrolling interest—common units of
the Operating Partnership
(40,883
)
(11,982
)
(82,821
)
(35,393
)
Net income attributable to Boston
Properties, Inc.
360,977
108,297
727,144
320,652
Preferred dividends
—
—
—
(2,560
)
Preferred stock redemption charge
—
—
—
(6,412
)
Net income attributable to Boston
Properties, Inc. common shareholders
$
360,977
$
108,297
$
727,144
$
311,680
Basic earnings per common share
attributable to Boston Properties, Inc. common shareholders:
Net income
$
2.30
$
0.69
$
4.63
$
2.00
Weighted average number of common shares
outstanding
156,754
156,183
156,708
156,062
Diluted earnings per common share
attributable to Boston Properties, Inc. common shareholders:
Net income
$
2.29
$
0.69
$
4.62
$
1.99
Weighted average number of common and
common equivalent shares outstanding
157,133
156,598
157,144
156,394
BOSTON PROPERTIES,
INC.
FUNDS FROM OPERATIONS
(1)
(Unaudited)
Three months ended
September 30,
Nine months ended
September 30,
2022
2021
2022
2021
(in thousands, except for per
share amounts)
Net income attributable to Boston
Properties, Inc. common shareholders
$
360,977
$
108,297
$
727,144
$
311,680
Add:
Preferred stock redemption charge
—
—
—
6,412
Preferred dividends
—
—
—
2,560
Noncontrolling interest - common units of
the Operating Partnership
40,883
11,982
82,821
35,393
Noncontrolling interests in property
partnerships
18,801
18,971
54,896
52,602
Net income
420,661
139,250
864,861
408,647
Add:
Depreciation and amortization expense
190,675
179,412
551,445
539,815
Noncontrolling interests in property
partnerships’ share of depreciation and amortization
(17,706
)
(16,773
)
(52,773
)
(50,343
)
Company’s share of depreciation and
amortization from unconsolidated joint ventures
21,485
17,803
64,649
51,565
Corporate-related depreciation and
amortization
(431
)
(443
)
(1,248
)
(1,327
)
Less:
Gains on sale of investment included
within loss from unconsolidated joint ventures
—
—
—
10,257
Gains on sales of real estate
262,345
348
381,293
8,104
Noncontrolling interests in property
partnerships
18,801
18,971
54,896
52,602
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.)
333,538
299,930
990,745
868,422
Less:
Noncontrolling interest - common units of
the Operating Partnership’s share of funds from operations
33,787
29,453
100,164
85,366
Funds from operations attributable to
Boston Properties, Inc. common shareholders
$
299,751
$
270,477
$
890,581
$
783,056
Boston Properties, Inc.’s percentage share
of funds from operations - basic
89.87
%
90.18
%
89.89
%
90.17
%
Weighted average shares outstanding -
basic
156,754
156,183
156,708
156,062
FFO per share basic
$
1.91
$
1.73
$
5.68
$
5.02
Weighted average shares outstanding -
diluted
157,133
156,598
157,144
156,394
FFO per share diluted
$
1.91
$
1.73
$
5.67
$
5.01
(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 calculation 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
September 30, 2022
December 31, 2021
Boston
91.4 %
91.4 %
Los Angeles
90.0 %
88.8 %
New York
86.9 %
87.6 %
San Francisco
87.3 %
87.3 %
Seattle
89.1 %
90.9 %
Washington, DC
88.1 %
87.2 %
Total Portfolio
88.9 %
88.8 %
View source
version on businesswire.com: https://www.businesswire.com/news/home/20221025006124/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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