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Boston Properties Announces Third Quarter 2019 Results; Reports EPS of $0.70 and FFO Per Share Of $1.64

10/29/19

Continues its Positive Growth Trajectory with 8% Revenue Growth in Q3

Provides FY 2020 Outlook with Projected EPS Increase of 8% and FFO Growth of 8% at the Mid-point

BOSTON--(BUSINESS WIRE)--Oct. 29, 2019-- 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 third quarter ended September 30, 2019.

Financial highlights for the third quarter include:

  • Revenue grew more than 8% to $743.6 million as compared to revenue of $686.3 million for the quarter ended September 30, 2018.
  • Net income was $107.8 million, or $0.70 per diluted share (EPS), compared to $119.1 million, or $0.77 per diluted share, for the quarter ended September 30, 2018. The decrease was primarily due to a $0.16 per share loss related to the early redemption of $700.0 million of 5.625% senior notes due 2020 as disclosed in its September 16, 2019 press release.
  • Funds from Operations (FFO) was $253.6 million, or $1.64 per diluted share, compared to FFO of $253.8 million, or $1.64 per diluted share, for the quarter ended September 30, 2018.
    • FFO in the third quarter of $1.64 per diluted share was $0.04 per share greater than the mid-point of the Company’s third quarter guidance provided on July 30, as updated on September 16, 2019 when the Company announced the $0.16 per share loss related to the early redemption of $700.0 million of 5.625% senior notes due 2020, due to $0.02 per share of greater-than-projected portfolio performance and $0.02 per share of greater-than-projected management and service fee income.

The Company provided guidance for the full year 2019 with projected EPS of $3.28 - $3.30 per diluted share and projected FFO of $6.98 - $7.00 per diluted share. See “EPS and FFO per Share Guidance” below.

The Company also provided preliminary guidance for full year 2020 EPS and FFO per diluted share as follows:

  • Projected EPS for 2020 of $3.45 - $3.65 per diluted share, reflecting 8% year-over-year growth at the midpoint;
  • Projected FFO for 2020 of $7.45 - $7.65 per diluted share, reflecting 8% year-over-year growth at the midpoint.

Recent business highlights include:

  • Increased portfolio occupancy to 92.6% in the Company’s in-service office properties, an increase of 150 bps from third quarter of 2018.
  • Partially placed in-service the following development projects:
    • The Hub on Causeway - Residential, a 320,000 square foot property comprised of 440 residential units located next to the North Station transit center in Boston, Massachusetts. The Hub on Causeway - Residential is part of a 1.3 million square foot, mixed-use development project that includes multi-level retail, restaurants and amenities. The project also includes a podium of creative office space that is 91% leased (including retail) and a 632,000 square foot office tower that is 87% pre-leased and will deliver in 2021. The Company has a 50% ownership interest in the development project.
    • Dock 72, a 670,000 square foot Class A office property in Brooklyn, New York. The Company has a 50% ownership interest in the property. The property is 33% leased.
    • 20 CityPoint, a 211,000 square foot, Class A office property in Waltham, Massachusetts. The property is 63% leased.
  • Entered into a joint venture with Canada Pension Plan Investment Board (CPPIB) to develop Platform 16 in San Jose, California. Platform 16 consists of approximately 5.6 acres that will support the development of a 1.1 million square foot, Class A urban office campus near Diridon Station in downtown San Jose, California. CPPIB has a 45% ownership interest in the Platform 16 joint venture. Boston Properties continues to own the remaining 55% ownership stake and provide customary development, property management and leasing services.
  • Acquired 880 and 890 Winter Street in Waltham, Massachusetts for $106 million on August 27, 2019. 880 and 890 Winter Street consists of two Class A office properties aggregating approximately 392,000 square feet, and is 82% leased.
  • Commenced the redevelopment of a portion of 200 West Street, a 261,000 square foot Class A office property in Waltham, Massachusetts. The 126,000 square foot redevelopment is a conversion to laboratory space.
  • Completed a $700 million bond offering of 2.900% unsecured senior notes due 2030 and utilized the proceeds to redeem $700 million of 5.625% unsecured senior notes due in 2020.
  • A joint venture in which the Company has a 50% interest obtained construction financing with a total loan commitment of $400 million for its 100 Causeway Street development project. The 632,000 square foot, Class A office building is located in Boston, Massachusetts and is 87% pre-leased. The construction financing bears interest at a variable rate equal to LIBOR plus 1.50% per annum and matures in September 2023.

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, 2019. In the opinion of management, the Company has made all adjustments considered necessary for a fair statement of these reported results.

EPS and FFO per Share Guidance:
The Company’s guidance for the fourth quarter 2019, full year 2019 and full year 2020 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 and in the Company’s Supplemental Operating and Financial Data for the quarter ended September 30, 2019. 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. For details of the Company’s assumptions related to guidance for the fourth quarter 2019, full year 2019 and full year 2020 for EPS (diluted) and FFO per share (diluted), please see the Third Quarter 2019 Supplemental Operating and Financial Data located on the Investor Relations section of the Company’s website at investors.bxp.com.

As set forth below, the Company has updated its projected EPS (diluted) and FFO per diluted share for the full year 2019 to $3.28- $3.30 per share and $6.98 - $7.00 per share, respectively. In each case, this is an increase of approximately $0.10 per share at the mid-point of the Company’s guidance provided on July 30, 2019, as updated on September 16, 2019 when the Company announced the $0.16 per share loss related to the early redemption of $700.0 million of 5.625% senior notes due 2020. The increase in projected EPS and FFO as compared to the guidance as updated on September 16, 2019 is primarily due to $0.02 per share of greater-than-expected portfolio performance, $0.02 per share contribution from the August 2019 acquisition of 880 & 890 Winter Street in Waltham, Massachusetts, $0.04 per share of lower than estimated interest expense and $0.02 per share of higher fee income.

       

 

Fourth Quarter 2019

 

Full Year 2019

 

Low

-

High

 

Low

-

High

Projected EPS (diluted)

$

0.91

 

-

$

0.93

 

 

$

3.28

 

-

$

3.30

 

Add:

 

 

 

 

 

 

 

Projected Company Share of Real Estate Depreciation and Amortization

0.93

 

-

0.93

 

 

3.84

 

-

3.84

 

Impairment loss

 

-

 

 

0.14

 

-

0.14

 

Projected Company Share of (Gains) Losses on Sales of Real Estate

 

-

 

 

(0.28

)

-

(0.28

)

Projected FFO per Share (diluted)

$

1.84

 

-

 

$

1.86

 

 

$

6.98

 

-

 

$

7.00

 

% Growth in FFO as compared to 2018

15.7

%

-

17.0

%

 

10.8

%

-

11.1

%

     

 

 

Full Year 2020

 

 

Low

-

High

Projected EPS (diluted)

 

$

3.45

 

-

$

3.65

 

% Growth in EPS as compared to 2019

 

5.2

%

 

10.6

%

Add:

 

 

 

 

Projected Company Share of Real Estate Depreciation and Amortization

 

4.00

 

-

4.00

 

Less:

 

 

 

 

Projected Company Share of Gains on Sales of Real Estate

 

 

-

 

Projected FFO per Share (diluted)

 

$

7.45

 

-

$

7.65

 

% Growth in FFO as compared to FY 2019

 

6.7

%

-

9.3

%

Boston Properties will host a conference call on Wednesday, October 30, 2019 at 10:00 AM Eastern Time, open to the general public, to discuss the third quarter 2019 results, the 2019 and 2020 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 2532849. A replay of the conference call will be available through November 13, 2019, by dialing (855) 859-2056 (Domestic) or (404) 537-3406 (International) and entering the passcode 2532849. There will also be a live audio webcast of the call, which may be accessed in the Investor Relations section of the Company’s website at investors.bxp.com. 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’ third quarter 2019 “Supplemental Operating and Financial Data” and this press release are available in the Investor Relations section of the Company’s website at investors.bxp.com.

Boston Properties (NYSE: BXP) is the largest publicly-held developer and owner of Class A office properties in the United States, concentrated in five markets - Boston, Los Angeles, New York, San Francisco and Washington, DC. The Company 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. The Company’s portfolio totals 51.9 million square feet and 196 properties, including thirteen properties under construction. For more information about Boston Properties, please visit our website at www.bxp.com or follow us on LinkedIn or Instagram.

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 fourth quarter 2019, full fiscal year 2019 and full fiscal year 2020, whether as a result of new information, future events or otherwise.

Financial tables follow.

 

BOSTON PROPERTIES, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

 

September 30,
2019

 

December 31,
2018

 

(in thousands, except for share and par value amounts)

ASSETS

 

 

 

Real estate, at cost

$

21,088,492

 

 

$

20,870,602

 

Construction in progress

958,407

 

 

578,796

 

Land held for future development

246,972

 

 

200,498

 

Right of use assets - finance leases

232,312

 

 

 

Right of use assets - operating leases

149,231

 

 

 

Less: accumulated depreciation

(5,164,342

)

 

(4,897,777

)

Total real estate

17,511,072

 

 

16,752,119

 

Cash and cash equivalents

751,210

 

 

543,359

 

Cash held in escrows

53,555

 

 

95,832

 

Investments in securities

34,375

 

 

28,198

 

Tenant and other receivables, net

102,155

 

 

86,629

 

Related party note receivable

80,000

 

 

80,000

 

Note receivable

19,844

 

 

19,468

 

Accrued rental income, net

1,003,033

 

 

934,896

 

Deferred charges, net

689,768

 

 

678,724

 

Prepaid expenses and other assets

110,308

 

 

80,943

 

Investments in unconsolidated joint ventures

933,255

 

 

956,309

 

Total assets

$

21,288,575

 

 

$

20,256,477

 

LIABILITIES AND EQUITY

 

 

 

Liabilities:

 

 

 

Mortgage notes payable, net

$

2,952,006

 

 

$

2,964,572

 

Unsecured senior notes, net

8,387,913

 

 

7,544,697

 

Unsecured line of credit

 

 

 

Unsecured term loan, net

498,819

 

 

498,488

 

Lease liabilities - finance leases

221,029

 

 

 

Lease liabilities - operating leases

199,755

 

 

 

Accounts payable and accrued expenses

421,269

 

 

276,645

 

Dividends and distributions payable

165,421

 

 

165,114

 

Accrued interest payable

83,177

 

 

89,267

 

Other liabilities

356,338

 

 

503,726

 

Total liabilities

13,285,727

 

 

12,042,509

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

Redeemable deferred stock units

9,408

 

 

 

 

 

 

 

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 September 30, 2019 and December 31, 2018

200,000

 

 

200,000

 

Common stock, $0.01 par value, 250,000,000 shares authorized, 154,650,973 and 154,537,378 issued and 154,572,073 and 154,458,478 outstanding at September 30, 2019 and December 31, 2018, respectively

1,546

 

 

1,545

 

Additional paid-in capital

6,272,708

 

 

6,407,623

 

Dividends in excess of earnings

(749,666

)

 

(675,534

)

Treasury common stock at cost, 78,900 shares at September 30, 2019 and December 31, 2018

(2,722

)

 

(2,722

)

Accumulated other comprehensive loss

(51,996

)

 

(47,741

)

Total stockholders’ equity attributable to Boston Properties, Inc.

5,669,870

 

 

5,883,171

 

Noncontrolling interests:

 

 

 

Common units of the Operating Partnership

603,447

 

 

619,352

 

Property partnerships

1,720,123

 

 

1,711,445

 

Total equity

7,993,440

 

 

8,213,968

 

Total liabilities and equity

$

21,288,575

 

 

$

20,256,477

 

 

BOSTON PROPERTIES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

Three months ended
September 30,

 

Nine months ended
September 30,

 

2019

 

2018

 

2019

 

2018

 

(in thousands, except for per share amounts)

Revenue

 

 

 

 

 

 

 

Lease

$

692,225

 

 

$

 

 

$

2,051,665

 

 

$

 

Base rent

 

 

525,875

 

 

 

 

1,561,821

 

Recoveries from tenants

 

 

102,424

 

 

 

 

292,801

 

Parking and other

25,582

 

 

26,552

 

 

76,807

 

 

79,590

 

Hotel revenue

13,014

 

 

13,664

 

 

36,796

 

 

37,373

 

Development and management services

10,303

 

 

15,253

 

 

29,566

 

 

32,963

 

Direct reimbursements of payroll and related costs from management services contracts

2,429

 

 

2,516

 

 

8,227

 

 

7,371

 

Total revenue

743,553

 

 

686,284

 

 

2,203,061

 

 

2,011,919

 

Expenses

 

 

 

 

 

 

 

Operating

 

 

 

 

 

 

 

Rental

265,603

 

 

247,989

 

 

781,091

 

 

726,108

 

Hotel

8,743

 

 

8,828

 

 

25,686

 

 

25,642

 

General and administrative

31,147

 

 

29,677

 

 

107,980

 

 

94,039

 

Payroll and related costs from management services contracts

2,429

 

 

2,516

 

 

8,227

 

 

7,371

 

Transaction costs

538

 

 

914

 

 

1,415

 

 

1,409

 

Depreciation and amortization

165,862

 

 

157,996

 

 

507,867

 

 

480,210

 

Total expenses

474,322

 

 

447,920

 

 

1,432,266

 

 

1,334,779

 

Other income (expense)

 

 

 

 

 

 

 

Income (loss) from unconsolidated joint ventures

(649

)

 

(4,313

)

 

47,528

 

 

(3,083

)

Gains (losses) on sales of real estate

(15

)

 

7,863

 

 

766

 

 

122,552

 

Interest and other income

7,178

 

 

2,822

 

 

14,546

 

 

7,049

 

Gains from investments in securities

106

 

 

1,075

 

 

4,240

 

 

1,454

 

Impairment loss

 

 

 

 

(24,038

)

 

 

Loss from early extinguishment of debt

(28,010

)

 

 

 

(28,010

)

 

 

Interest expense

(106,471

)

 

(95,366

)

 

(309,837

)

 

(277,790

)

Net income

141,370

 

 

150,445

 

 

475,990

 

 

527,322

 

Net income attributable to noncontrolling interests

 

 

 

 

 

 

 

Noncontrolling interests in property partnerships

(18,470

)

 

(14,850

)

 

(54,782

)

 

(46,484

)

Noncontrolling interest—common units of the Operating Partnership

(12,504

)

 

(13,852

)

 

(43,133

)

 

(49,128

)

Net income attributable to Boston Properties, Inc.

110,396

 

 

121,743

 

 

378,075

 

 

431,710

 

Preferred dividends

(2,625

)

 

(2,625

)

 

(7,875

)

 

(7,875

)

Net income attributable to Boston Properties, Inc. common shareholders

$

107,771

 

 

$

119,118

 

 

$

370,200

 

 

$

423,835

 

Basic earnings per common share attributable to Boston Properties, Inc. common shareholders:

 

 

 

 

 

 

 

Net income

$

0.70

 

 

$

0.77

 

 

$

2.40

 

 

$

2.74

 

Weighted average number of common shares outstanding

154,577

 

 

154,440

 

 

154,553

 

 

154,414

 

Diluted earnings per common share attributable to Boston Properties, Inc. common shareholders:

 

 

 

 

 

 

 

Net income

$

0.70

 

 

$

0.77

 

 

$

2.39

 

 

$

2.74

 

Weighted average number of common and common equivalent shares outstanding

154,820

 

 

154,678

 

 

154,847

 

 

154,652

 

 

 

BOSTON PROPERTIES, INC.

FUNDS FROM OPERATIONS (1)

(Unaudited)

 

 

Three months ended
September 30,

 

Nine months ended
September 30,

 

2019

 

2018

 

2019

 

2018

 

(in thousands, except for per share amounts)

 

 

 

 

 

 

 

 

Net income attributable to Boston Properties, Inc. common shareholders

$

107,771

 

 

$

119,118

 

 

$

370,200

 

 

$

423,835

 

Add:

 

 

 

 

 

 

 

Preferred dividends

2,625

 

 

2,625

 

 

7,875

 

 

7,875

 

Noncontrolling interest - common units of the Operating Partnership

12,504

 

 

13,852

 

 

43,133

 

 

49,128

 

Noncontrolling interests in property partnerships

18,470

 

 

14,850

 

 

54,782

 

 

46,484

 

Net income

141,370

 

 

150,445

 

 

475,990

 

 

527,322

 

Add:

 

 

 

 

 

 

 

Depreciation and amortization expense

165,862

 

 

157,996

 

 

507,867

 

 

480,210

 

Noncontrolling interests in property partnerships’ share of depreciation and amortization

(17,402

)

 

(18,166

)

 

(53,273

)

 

(54,813

)

Company’s share of depreciation and amortization from unconsolidated joint ventures

13,745

 

 

18,020

 

 

43,993

 

 

36,776

 

Corporate-related depreciation and amortization

(411

)

 

(425

)

 

(1,218

)

 

(1,236

)

Impairment loss

 

 

 

 

24,038

 

 

 

Less:

 

 

 

 

 

 

 

Gain on sale of real estate included within income (loss) from unconsolidated joint ventures

(487

)

 

 

 

47,270

 

 

 

Gains (losses) on sales of real estate

(15

)

 

7,863

 

 

766

 

 

122,552

 

Noncontrolling interests in property partnerships

18,470

 

 

14,850

 

 

54,782

 

 

46,484

 

Preferred dividends

2,625

 

 

2,625

 

 

7,875

 

 

7,875

 

Funds from operations (FFO) attributable to the Operating Partnership common unitholders (including Boston Properties, Inc.)

282,571

 

 

282,532

 

 

886,704

 

 

811,348

 

Less:

 

 

 

 

 

 

 

Noncontrolling interest - common units of the Operating Partnership’s share of funds from operations

28,940

 

 

28,738

 

 

90,792

 

 

82,550

 

Funds from operations attributable to Boston Properties, Inc. common shareholders

$

253,631

 

 

$

253,794

 

 

$

795,912

 

 

$

728,798

 

Boston Properties, Inc.’s percentage share of funds from operations - basic

89.76

%

 

89.83

%

 

89.76

%

 

89.83

%

Weighted average shares outstanding - basic

154,577

 

 

154,440

 

 

154,553

 

 

154,414

 

FFO per share basic

$

1.64

 

 

$

1.64

 

 

$

5.15

 

 

$

4.72

 

Weighted average shares outstanding - diluted

154,820

 

 

154,678

 

 

154,847

 

 

154,652

 

FFO per share diluted

$

1.64

 

 

$

1.64

 

 

$

5.14

 

 

$

4.71

 

  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

 

September 30, 2019

 

December 31, 2018

Boston

95.4%

 

95.9%

Los Angeles

96.8%

 

96.7%

New York

91.2%

 

88.0%

San Francisco

93.4%

 

87.8%

Washington, DC

88.3%

 

90.7%

Total Portfolio

92.6%

 

91.4%

 

Source: Boston Properties, Inc.

AT THE COMPANY
Michael LaBelle
Executive Vice President,
Chief Financial Officer and Treasurer
(617) 236-3352

Sara Buda
Vice President, Investor Relations
(617) 236-3429
sbuda@bxp.com