Reports diluted FFO per share of $1.30
Reports diluted EPS of $1.11
Boston Properties, Inc. (NYSE: BXP), a real estate
investment trust, reported results today for the first quarter
ended March 31, 2015.
Funds from Operations (FFO) for the quarter ended March 31, 2015
were $200.4 million, or $1.31 per share basic and $1.30 per share
diluted. This compares to FFO for the quarter ended March 31, 2014
of $183.8 million, or $1.20 per share basic and $1.20 per share
diluted. The weighted average number of basic and diluted shares
outstanding totaled approximately 153,230,000 and 153,873,000,
respectively, for the quarter ended March 31, 2015 and 153,030,000
and 154,043,000, respectively, for the quarter ended March 31,
2014.
The Company’s reported FFO of $1.30 per share diluted was
greater than the guidance previously provided of $1.22-$1.24 per
share diluted primarily due to greater lease termination
income of $0.07 per share and portfolio operations of $0.01 per
share, offset by greater than projected interest expense of $0.01
per share.
Net income available to common shareholders was $171.2 million
for the quarter ended March 31, 2015, compared to $54.0 million for
the quarter ended March 31, 2014. Net income available to common
shareholders per share (EPS) for the quarter ended March 31, 2015
was $1.12 basic and $1.11 on a diluted basis. This compares to EPS
for the quarter ended March 31, 2014 of $0.35 basic and $0.35 on a
diluted basis. Net income available to common shareholders for the
quarter ended March 31, 2015 includes gains on sales of real estate
aggregating approximately $95.1 million, or $0.56 per share basic
and $0.55 per share on a diluted basis.
The reported results are unaudited and there can be no assurance
that the results will not vary from the final unaudited information
for the quarter ended March 31, 2015. In the opinion of management,
all adjustments considered necessary for a fair presentation of
these reported results have been made.
As of March 31, 2015, the Company’s portfolio consisted of 168
properties, comprised primarily of Class A office space, one hotel,
two residential properties and five retail properties, aggregating
approximately 45.5 million square feet, including ten properties
under construction totaling 3.3 million square feet. In addition,
the Company has structured parking for vehicles containing
approximately 14.7 million square feet. The overall percentage of
leased space for the 155 properties in service (excluding the two
residential properties and the hotel) as of March 31, 2015 was
90.3%.
Significant events during the first quarter included:
- On January 21, 2015, the Company’s
Compensation Committee approved the 2015 Multi-Year, Long-Term
Incentive Program (the “2015 MYLTIP”) as a performance-based
component of the Company’s overall compensation program. Under the
Financial Accounting Standards Board’s Accounting Standards
Codification (“ASC”) 718 “Compensation – Stock Compensation,” the
2015 MYLTIP has an aggregate value of approximately $15.7 million,
which will generally be amortized into earnings over the four-year
plan period under the graded vesting method and has been reflected
in the 2015 guidance below.
- On February 19, 2015, the Company
commenced a planned interest rate hedging program in contemplation
of a financing with a target commencement date in September 2016
and maturity in September 2026. The Company has since entered into
seven forward-starting interest rate swap contracts, including two
contracts entered into subsequent to March 31, 2015, which fix the
ten-year swap rate at a weighted-average rate of approximately
2.451% per annum on notional amounts aggregating $300.0
million.
- On February 19, 2015, the Company
completed the sale of a parcel of land within its Washingtonian
North property located in Gaithersburg, Maryland for a gross sale
price of $8.7 million. Net cash proceeds totaled approximately $8.3
million, resulting in a gain on sale of real estate totaling
approximately $3.7 million. The parcel contains approximately 8.5
acres of the approximately 27 acre property.
- On March 11, 2015, the Company received
a second interim distribution from its unsecured creditor claim
against Lehman Brothers, Inc. totaling approximately $4.5 million,
leaving a remaining claim of approximately $33.0 million. There can
be no assurance as to the timing or amount of additional proceeds,
if any, that the Company may ultimately realize on the claim.
- On March 17, 2015, the Company
completed the sale of its Residences on The Avenue property located
in Washington, DC for a gross sale price of $196.0 million. Net
cash proceeds totaled approximately $192.5 million, resulting in a
gain on sale of real estate totaling approximately $91.4 million.
The Company has agreed to provide net operating income support of
up to $6.0 million should the property’s net operating income fail
to achieve certain thresholds, which has been recorded as a
reduction to the gain on sale. The Residences on The Avenue is
comprised of 335 apartment units and approximately 50,000 net
rentable square feet of retail space, subject to a ground lease
that expires on February 1, 2068.
EPS and FFO per Share Guidance:
The Company’s guidance for the second quarter and full year 2015
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 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 shown below, the Company has updated its guidance for FFO per
share (diluted) for full year 2015 to $5.35 - $5.45 per share from
$5.28 - $5.43 per share. The updated guidance reflects, when
compared to the Company’s prior guidance, an increase from the
first quarter 2015 results of $0.07 per share, an increase in net
operating income from the Company’s property portfolio of $0.02 per
share, offset by a decrease in FFO of $0.05 per share from lower
capitalized interest.
Second Quarter 2015 Full Year
2015 Low - High Low -
High Projected EPS (diluted) $ 0.43 -
$ 0.45 $
2.43
- $
2.53
Add:
Projected Company Share of Real
EstateDepreciation and Amortization
0.89
-
0.89
3.47
-
3.47
Less:
Projected Company Share of Gains onSales
of Real Estate
0.00
-
0.00
0.55
-
0.55
Projected FFO per Share (diluted)
$
1.32
-
$
1.34
$
5.35
-
$
5.45
Boston Properties will host a conference call on Tuesday, April
28, 2015 at 10:00 AM Eastern Time, open to the general public, to
discuss the first quarter 2015 results, the 2015 projections and
related assumptions, and other related matters that may be of
interest to investors. The number to call for this interactive
teleconference is (877) 796-3880 (Domestic) or (281) 913-8731
(International) and entering the passcode 97591714. A replay of the
conference call will be available through May 12, 2015, by dialing
(855) 859-2056 (Domestic) or (404) 537-3406 (International) and
entering the passcode 97591714. 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 2015
“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, self-administered and
self-managed real estate investment trust that develops,
redevelops, acquires, manages, operates and owns a diverse
portfolio of Class A office space, one hotel, two residential
properties and five retail properties. The Company is one of the
largest owners and developers of Class A office properties in the
United States, concentrated in four markets – Boston, 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,”
“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 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 2015, whether as a result
of new information, future events or otherwise.
Financial tables follow.
BOSTON
PROPERTIES, INC. CONSOLIDATED BALANCE SHEETS
March 31, December 31, 2015
2014 (in thousands, except
for share amounts) (unaudited)
ASSETS
Real estate $ 18,153,816 $ 18,231,978 Construction in
progress 797,148 736,311 Land held for future development 271,327
268,114 Less: accumulated depreciation (3,646,853 )
(3,547,659 ) Total real estate 15,575,438 15,688,744 Cash
and cash equivalents 1,064,396 1,763,079 Cash held in escrows
588,218 487,321 Investments in securities 20,736 19,459 Tenant and
other receivables, net of allowance for doubtful accounts of $1,099
and $1,142, respectively 47,768 46,595 Accrued rental income, net
of allowance of $1,126 and $1,499, respectively 713,874 691,999
Deferred charges, net 806,468 831,744 Prepaid expenses and other
assets 165,985 164,432 Investments in unconsolidated joint ventures
196,188 193,394 Total assets $
19,179,071 $ 19,886,767
LIABILITIES AND
EQUITY
Liabilities: Mortgage notes payable $ 4,289,120 $ 4,309,484
Unsecured senior notes, net of discount 5,288,101 5,287,704
Unsecured exchangeable senior notes, net of discount - - Unsecured
line of credit - - Mezzanine notes payable 309,475 309,796 Outside
members' notes payable 180,000 180,000 Accounts payable and accrued
expenses 224,086 243,263 Dividends and distributions payable
112,796 882,472 Accrued interest payable 186,630 163,532 Other
liabilities 483,762 502,255 Total
liabilities 11,073,970 11,878,506
Commitments and contingencies - -
Noncontrolling interest: Redeemable preferred units
of the Operating Partnership 633 633
Redeemable interest in property partnership 105,520
104,692 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, 2015
and December 31, 2014, respectively 200,000 200,000 Common stock,
$0.01 par value, 250,000,000 shares authorized, 153,481,007 and
153,192,845 shares issued and 153,402,107 and 153,113,945 shares
outstanding at March 31, 2015 and December 31, 2014, respectively
1,534 1,531 Additional paid-in capital 6,286,260 6,270,257
Dividends in excess of earnings (690,993 ) (762,464 ) Treasury
common stock, at cost (2,722 ) (2,722 ) Accumulated other
comprehensive loss (11,907 ) (9,304 ) Total
stockholders' equity attributable to Boston Properties, Inc.
5,782,172 5,697,298 Noncontrolling interests: Common units
of the Operating Partnership 617,274 603,171 Property partnerships
1,599,502 1,602,467 Total equity 7,998,948
7,902,936 Total liabilities and
equity $ 19,179,071 $ 19,886,767
BOSTON PROPERTIES,
INC. CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited) Three months
ended March 31, 2015
2014 (in thousands, except for per share
amounts) Revenue Rental Base rent $ 490,682 $ 455,018
Recoveries from tenants 88,593 81,934 Parking and other
24,788 24,333 Total rental revenue 604,063
561,285 Hotel revenue 9,085 8,193 Development and management
services 5,328 5,216 Total revenue
618,476 574,694 Expenses
Operating Rental 221,350 206,388 Hotel 7,576 6,797 General and
administrative 28,791 29,905 Transaction costs 327 437 Depreciation
and amortization 154,223 154,270 Total
expenses 412,267 397,797
Operating income 206,209 176,897 Other income (expense) Income from
unconsolidated joint ventures 14,834 2,816 Interest and other
income 1,407 1,311 Gains from investments in securities 393 286
Interest expense (108,757 ) (113,554 ) Income before
gains on sales of real estate 114,086 67,756 Gains on sales of real
estate 95,084 - Net income 209,170
67,756 Net income attributable to noncontrolling interests
Noncontrolling interests in property partnerships (15,208 ) (4,354
) Noncontrolling interest - redeemable preferred units of the
Operating Partnership (3 ) (619 ) Noncontrolling interest - common
units of the Operating Partnership (20,188 ) (6,160 )
Net income attributable to Boston Properties, Inc. 173,771 56,623
Preferred dividends (2,589 ) (2,589 ) Net income
attributable to Boston Properties, Inc. common shareholders $
171,182 $ 54,034 Basic earnings per common
share attributable to Boston Properties, Inc. common shareholders:
Net income $ 1.12 $ 0.35 Weighted average
number of common shares outstanding 153,230
153,030 Diluted earnings per common share
attributable to Boston Properties, Inc. common shareholders: Net
income $ 1.11 $ 0.35 Weighted average number
of common and common equivalent shares outstanding 153,873
153,169
BOSTON PROPERTIES, INC. FUNDS
FROM OPERATIONS (1) (Unaudited) Three months
ended March 31, 2015
2014 (in thousands, except for per share
amounts) Net income attributable to Boston Properties,
Inc. common shareholders $ 171,182 $ 54,034 Add: Preferred
dividends 2,589 2,589 Noncontrolling interest - common units of the
Operating Partnership 20,188 6,160 Noncontrolling interest -
redeemable preferred units of the Operating Partnership 3 619
Noncontrolling interests in property partnerships 15,208 4,354
Less: Gains on sales of real estate 95,084 -
Income before gains on sales of real estate 114,086
67,756 Add: Real estate depreciation and amortization (2)
148,754 158,514 Less: Noncontrolling interests in property
partnerships' share of funds from operations 36,515 19,023
Noncontrolling interest - redeemable preferred units of the
Operating Partnership 3 619 Preferred dividends 2,589
2,589 Funds from operations (FFO) attributable
to the Operating Partnership 223,733 204,039 Less:
Noncontrolling interest - common units of the Operating
Partnerships' share of funds from operations 23,348
20,195 Funds from operations attributable to
Boston Properties, Inc. $ 200,385 $ 183,844
Boston Properties, Inc.'s percentage share of funds from operations
- basic 89.56 % 90.10 % Weighted average
shares outstanding - basic 153,230 153,030
FFO per share basic $ 1.31 $ 1.20
Weighted average shares outstanding - diluted 153,873
154,043 FFO per share diluted $ 1.30
$ 1.20
(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. (computed in accordance with GAAP,
including non-recurring items) for gains (or losses) from sales of
properties, impairment losses on depreciable real estate of
consolidated real estate, impairment losses on investments in
unconsolidated joint ventures driven by a measurable decrease in
the fair value of depreciable real estate held by the
unconsolidated joint ventures, real estate related depreciation and
amortization, and after adjustment for unconsolidated partnerships
and joint ventures. FFO is a non-GAAP financial measure. The use of
FFO, combined with the required primary GAAP presentations, has
been fundamentally beneficial in improving the understanding of
operating results of REITs among the investing public and making
comparisons of REIT operating results more meaningful. Management
generally considers FFO to be a useful measure for reviewing our
comparative operating and financial performance 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 vary
among owners of identical assets in similar condition based on
historical cost accounting and useful life estimates), FFO can help
one compare the operating performance of a company's real estate
between periods or as compared to different 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.
FFO should not be considered as an alternative to net income
attributable to Boston Properties, Inc. (determined in accordance
with GAAP) as an indication of our performance. FFO does not
represent cash generated from operating activities determined in
accordance with GAAP, and is not a measure of liquidity or an
indicator of our ability to make cash distributions. We believe
that to further understand our performance, FFO should be compared
with our reported net income attributable to Boston Properties,
Inc. and considered in addition to cash flows in accordance with
GAAP, as presented in our consolidated financial statements.
(2) Real estate depreciation and amortization consists of
depreciation and amortization from the Consolidated Statements of
Operations of $154,223 and $154,270 and our share of unconsolidated
joint venture real estate depreciation and amortization of $(5,132)
and $4,584, less corporate-related depreciation and amortization of
$337 and $340 for the three months ended March 31, 2015 and 2014,
respectively.
BOSTON
PROPERTIES, INC. PORTFOLIO LEASING PERCENTAGES
% Leased by Location March 31, 2015
December 31, 2014 Boston 88.5% 91.4% New York 90.4% 90.9%
San Francisco 88.3% 88.3% Washington, DC 93.8% 94.8% Total
Portfolio 90.3% 91.7%
% Leased by
Type March 31, 2015 December 31, 2014 Class A
Office Portfolio 90.6% 91.8% Office/Technical Portfolio 84.7% 87.7%
Total Portfolio 90.3% 91.7%
AT THE COMPANYBoston
Properties, Inc.Michael LaBelle, 617-236-3352Senior Vice
President,Chief Financial OfficerorArista Joyner,
617-236-3343Investor Relations Manager
Boston Properties (NYSE:BXP)
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