Reports diluted FFO per share of
$1.63
Reports diluted EPS of $1.18
Boston Properties, Inc. (NYSE: BXP), a real estate
investment trust, reported results today for the first quarter
ended March 31, 2016.
Funds from Operations (FFO) for the quarter ended March 31,
2016 were $250.7 million, or $1.63 per share basic and $1.63 per
share diluted. This compares to FFO for the quarter ended
March 31, 2015 of $200.4 million, or $1.31 per share basic and
$1.30 per share diluted. FFO for the quarter ended March 31, 2016
includes lease termination income from a tenant in New York City
totaling approximately $45.0 million, or $0.26 per share basic and
$0.26 per share on a diluted basis. The weighted-average number of
basic and diluted shares outstanding totaled approximately
153,626,000 and 153,917,000, respectively, for the quarter ended
March 31, 2016 and 153,230,000 and 153,873,000, respectively,
for the quarter ended March 31, 2015.
The Company’s reported FFO of $1.63 per share diluted was
greater than the guidance previously provided of $1.59-$1.61 per
share diluted primarily due to better than expected portfolio
operations of $0.02 per share and development and management
services income of $0.01 per share.
Net income available to common shareholders was $181.7 million
for the quarter ended March 31, 2016, compared to $171.2
million for the quarter ended March 31, 2015. Net income
available to common shareholders per share (EPS) for the quarter
ended March 31, 2016 was $1.18 basic and $1.18 on a diluted
basis. This compares to EPS for the quarter ended March 31,
2015 of $1.12 basic and $1.11 on a diluted basis. Net income
available to common shareholders for the quarter ended
March 31, 2016 includes gains on sales of real estate
aggregating approximately $67.6 million, or $0.39 per share basic
and $0.39 per share on a diluted basis, compared to $95.1 million,
or $0.56 per share basic and $0.55 per share on a diluted basis,
for the quarter ended March 31, 2015.
The reported results are unaudited and there can be no assurance
that these reported results will not vary from the final
information for the quarter ended March 31, 2016. In the
opinion of management, all adjustments considered necessary for a
fair presentation of these reported results have been made.
As of March 31, 2016, the Company’s portfolio consisted of
167 properties aggregating approximately 46.3 million square feet,
including eleven properties under construction/redevelopment
totaling approximately 4.6 million square feet. The overall
percentage of leased space for the 153 properties in service
(excluding the Company’s two residential properties and hotel) as
of March 31, 2016 was 91.0%.
Significant events during the first quarter included:
- On January 4, 2016 and January 6, 2016,
767 Fifth Partners LLC, the consolidated entity in which the
Company has a 60% interest and owns 767 Fifth Avenue (the General
Motors Building) in New York City, entered into two
forward-starting interest rate swap contracts that fix the 10-year
swap rate on notional amounts aggregating $50.0 million. 767 Fifth
Partners LLC has entered into forward-starting interest rate swap
contracts that fix the 10-year swap rate at a weighted-average rate
of approximately 2.619% per annum on notional amounts aggregating
$450.0 million in advance of a financing with a target commencement
date in June 2017 and maturity in June 2027.
- On January 20, 2016, the Company’s
Operating Partnership completed a public offering of $1.0 billion
in aggregate principal amount of its 3.650% senior unsecured notes
due 2026. The notes were priced at 99.708% of the principal amount
to yield an effective rate (including financing fees) of 3.766% to
maturity. The notes will mature on February 1, 2026, unless earlier
redeemed. The aggregate net proceeds from the offering were
approximately $988.9 million after deducting underwriting discounts
and transaction expenses.
- On January 25, 2016, the Company’s
Compensation Committee approved the 2016 Multi-Year, Long-Term
Incentive Program (the “2016 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
2016 MYLTIP has an aggregate value of approximately $17.3 million,
which will generally be amortized into earnings over the four-year
plan period under the graded vesting method.
- On February 1, 2016, the Company
completed the sale of its 415 Main Street property located in
Cambridge, Massachusetts to the tenant for a gross sale price of
approximately $105.4 million. Net cash proceeds totaled
approximately $104.9 million, resulting in a gain on sale of real
estate totaling approximately $60.8 million. As part of its lease
signed on July 14, 2004, the tenant was granted a fixed price
option to purchase the building at the beginning of the 11th lease
year, which option was exercised by the tenant on October 22, 2014.
415 Main Street is an office property with approximately 231,000
net rentable square feet.
- On February 3, 2016, the Company
entered into a lease termination agreement with a tenant for an
approximately 85,000 square foot lease at its 250 West 55th Street
property located in New York City. The lease was scheduled to
expire on February 28, 2035. In consideration for the termination
of the lease, the tenant paid the Company approximately $45.0
million, which was recognized as termination income during the
three months ended March 31, 2016.
Transactions completed subsequent to March 31, 2016:
- On April 4, 2016, a joint venture in
which the Company has a 50% interest extended the loan
collateralized by its Annapolis Junction Building Seven property.
At the time of the extension, the outstanding balance of the
construction loan totaled approximately $21.6 million and was
scheduled to mature on April 4, 2016. The extended loan has a total
commitment amount of $22.0 million, bears interest at a variable
rate equal to LIBOR plus 1.65% per annum and matures on April 4,
2017, with one, one-year extension option, subject to certain
conditions. Annapolis Junction Building Seven is a Class A office
property with approximately 127,000 net rentable square feet
located in Annapolis, Maryland.
- On April 11, 2016, the Company used
available cash to repay the mortgage loan collateralized by its
Fountain Square property located in Reston, Virginia totaling
approximately $211.3 million. The mortgage loan bore interest at a
fixed rate of 5.71% per annum and was scheduled to mature on
October 11, 2016. There was no prepayment penalty.
- On April 11, 2016, a joint venture in
which the Company has a 50% interest received a Notice of Event of
Default from the lender for the loan collateralized by its
Annapolis Junction Building One property. The Event of Default
relates to the loan to value ratio not being in compliance with the
loan agreement. The joint venture is currently in discussions with
the lender regarding the Event of Default, although there can be no
assurance as to the outcome of those discussions. The loan has an
outstanding balance of approximately $40.0 million, is non-recourse
to the Company, bears interest at a variable rate equal to LIBOR
plus 1.75% per annum and has a stated maturity date of March 31,
2018, with one, three-year extension option, subject to certain
conditions. Annapolis Junction Building One is a Class A office
property with approximately 118,000 net rentable square feet
located in Annapolis, Maryland.
- On April 22, 2016, the Company acquired
3625-35 Peterson Way located in Santa Clara, California for a
purchase price of approximately $78.0 million in cash. 3625-35
Peterson Way is an approximately 218,000 net rentable square foot
office property. The property is 100% leased to a single tenant
through March 2021. Upon the lease expiration, the Company intends
to develop the site into a Class A office campus containing an
aggregate of approximately 632,000 net rentable square feet.
EPS and FFO per Share Guidance:
The Company’s guidance for the second quarter and full year 2016
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 2016 to $5.85 - $5.95 per share from
$5.78 - $5.93 per share. This is an increase of $0.05 per
share at the mid-point of the Company’s guidance consisting of
$0.02 per share from better than projected portfolio operations,
$0.02 per share from the acquisition of Peterson Way in Santa
Clara, California and $0.01 per share from better than projected
development and management services income.
Second Quarter 2016 Full Year 2016 Low - High
Low - High Projected EPS (diluted) $ 0.54 - $ 0.56 $ 3.00 - $ 3.10
Add: Projected Company Share of Real Estate Depreciation and
Amortization 0.82 - 0.82 3.24 - 3.24 Less: Projected Company Share
of Gains on Sales of Real Estate — - — 0.39 -
0.39 Projected FFO per Share (diluted) $ 1.36 - $ 1.38 $
5.85 - $ 5.95
Boston Properties will host a conference call on Wednesday,
April 27, 2016 at 10:00 AM Eastern Time, open to the general
public, to discuss the first quarter 2016 results, the 2016
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) 706-4503 (Domestic) or (281)
913-8731 (International) and entering the passcode 23623258. A
replay of the conference call will be available through May 13,
2016, by dialing (855) 859-2056 (Domestic) or (404) 537-3406
(International) and entering the passcode 23623258. 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 2016
“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, five retail properties, four
residential properties and one hotel. The Company is one of the
largest owners and developers of Class A office properties in the
United States, concentrated in 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 2016, whether as a result
of new information, future events or otherwise.
Financial tables follow.
BOSTON PROPERTIES, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited )
March 31, 2016
December 31,2015
(in thousands, except for share and par value amounts)
ASSETS Real estate, at cost $ 18,424,542 $ 18,465,405
Construction in progress 857,578 763,935 Land held for future
development 256,952 252,195 Less: accumulated depreciation
(3,969,648 ) (3,925,894 ) Total real estate 15,569,424
15,555,641 Cash and cash equivalents 1,605,678 723,718 Cash held in
escrows 71,349 73,790 Investments in securities 21,077 20,380
Tenant and other receivables (net of allowance for doubtful
accounts of $1,151 and $1,197, respectively) 73,759 97,865 Accrued
rental income (net of allowance of $1,612 and $2,775 respectively)
767,864 754,883 Deferred charges, net 693,976 704,867 Prepaid
expenses and other assets 136,799 185,118 Investments in
unconsolidated joint ventures 235,904 235,224
Total assets $ 19,175,830 $ 18,351,486
LIABILITIES AND EQUITY Liabilities: Mortgage notes payable,
net $ 3,416,622 $ 3,435,242 Unsecured senior notes, net 6,255,602
5,264,819 Unsecured line of credit — — Mezzanine notes payable
308,142 308,482 Outside members' notes payable 180,000 180,000
Accounts payable and accrued expenses 252,727 274,709 Dividends and
distributions payable 113,079 327,320 Accrued interest payable
221,578 190,386 Other liabilities 498,290
483,601 Total liabilities 11,246,040
10,464,559 Commitments and contingencies —
— Equity: Stockholders’ equity attributable to
Boston Properties, Inc.: Excess stock, $0.01 par value, 150,000,000
shares authorized, none issued or outstanding — — Preferred stock,
$0.01 par value, 50,000,000 shares authorized; 5.25% Series B
cumulative redeemable preferred stock, $0.01 par value, liquidation
preference $2,500 per share, 92,000 shares authorized, 80,000
shares issued and outstanding at March 31, 2016 and December 31,
2015 200,000 200,000 Common stock, $0.01 par value, 250,000,000
shares authorized, 153,683,866 and 153,658,866 issued and
153,604,966 and 153,579,966 outstanding at March 31, 2016 and
December 31, 2015, respectively 1,536 1,536 Additional paid-in
capital 6,306,723 6,305,687 Dividends in excess of earnings
(699,048 ) (780,952 ) Treasury common stock at cost, 78,900 shares
at March 31, 2016 and December 31, 2015 (2,722 ) (2,722 )
Accumulated other comprehensive loss (56,706 )
(14,114 ) Total stockholders’ equity attributable to Boston
Properties, Inc. 5,749,783 5,709,435 Noncontrolling interests:
Common units of the Operating Partnership 616,095 603,092 Property
partnerships 1,563,912 1,574,400 Total
equity 7,929,790 7,886,927 Total
liabilities and equity $ 19,175,830 $ 18,351,486
BOSTON PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF
OPERATIONS
(Unaudited)
Three months endedMarch 31,
2016
2015
(in thousands, except for per share amounts) Revenue Rental
Base rent $ 536,128 $ 490,682 Recoveries from tenants 89,586 88,593
Parking and other 24,825 24,788 Total
rental revenue 650,539 604,063 Hotel revenue 8,757 9,085
Development and management services 6,689
5,328 Total revenue 665,985 618,476
Expenses Operating Rental 219,172 221,350 Hotel 7,634 7,576
General and administrative 29,353 28,791 Transaction costs 25 327
Depreciation and amortization 159,448 154,223
Total expenses 415,632 412,267
Operating income 250,353 206,209 Other income (expense) Income from
unconsolidated joint ventures 1,791 14,834 Interest and other
income 1,505 1,407 Gains from investments in securities 259 393
Interest expense (105,309 ) (108,757 ) Income before
gains on sales of real estate 148,599 114,086 Gains on sales of
real estate 67,623 95,084 Net income
216,222 209,170 Net income attributable to noncontrolling interests
Noncontrolling interests in property partnerships (10,464 ) (15,208
) Noncontrolling interest—redeemable preferred units of the
Operating Partnership — (3 ) Noncontrolling interest—common units
of the Operating Partnership (21,393 ) (20,188 ) Net
income attributable to Boston Properties, Inc. 184,365 173,771
Preferred dividends (2,618 ) (2,589 ) Net income
attributable to Boston Properties, Inc. common shareholders $
181,747 $ 171,182 Basic earnings per common share
attributable to Boston Properties, Inc. common shareholders: Net
income $ 1.18 $ 1.12 Weighted average number of
common shares outstanding 153,626 153,230
Diluted earnings per common share attributable to Boston
Properties, Inc. common shareholders: Net income $ 1.18 $
1.11 Weighted average number of common and common equivalent
shares outstanding 153,917 153,873
BOSTON PROPERTIES, INC.
FUNDS FROM OPERATIONS (1)
(Unaudited)
Three months endedMarch 31,
2016
2015
(in thousands, except for per share amounts) Net
income attributable to Boston Properties, Inc. common shareholders
$ 181,747 $ 171,182 Add: Preferred dividends 2,618 2,589
Noncontrolling interest - common units of the Operating Partnership
21,393 20,188 Noncontrolling interest - redeemable preferred units
of the Operating Partnership — 3 Noncontrolling interests in
property partnerships 10,464 15,208 Less: Gains on sales of real
estate 67,623 95,084 Income before
gains on sales of real estate 148,599 114,086 Add: Real estate
depreciation and amortization (2) 163,580 148,754 Less:
Noncontrolling interests in property partnerships' share of funds
from operations 30,019 36,515 Noncontrolling interest - redeemable
preferred units of the Operating Partnership — 3 Preferred
dividends 2,618 2,589 Funds from
operations (FFO) attributable to the Operating Partnership common
unitholders (including Boston Properties, Inc.) 279,542 223,733
Less: Noncontrolling interest - common units of the Operating
Partnership's share of funds from operations 28,854
23,348 Funds from operations attributable to Boston
Properties, Inc. common shareholders $ 250,688 $ 200,385
Boston Properties, Inc.'s percentage share of funds from
operations - basic 89.68 % 89.56 % Weighted average
shares outstanding - basic 153,626 153,230
FFO per share basic $ 1.63 $ 1.31 Weighted
average shares outstanding - diluted 153,917
153,873 FFO per share diluted $ 1.63 $ 1.30
(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, including non-recurring items) 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, real estate-related
depreciation and amortization, and our share of income (loss) from
unconsolidated partnerships and joint ventures. 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.
FFO should not be considered as a substitute to net income
attributable to Boston Properties, Inc. common shareholders
(determined in accordance with GAAP). 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 more
comprehensively understand our operating performance, FFO should be
considered along with our reported net income attributable to
Boston Properties, Inc. and our 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 $159,448 and $154,223 and our share of unconsolidated
joint venture real estate depreciation and amortization of $4,496
and $(5,132), less corporate-related depreciation and amortization
of $364 and $337 for the three months ended March 31, 2016 and
2015, respectively.
BOSTON PROPERTIES, INC.
PORTFOLIO LEASING PERCENTAGES
% Leased by Location March 31,
2016 December 31, 2015 Boston 90.9 % 90.6 % New York
91.5 % 91.5 % San Francisco 90.2 % 93.8 % Washington, DC 90.9 %
91.0 % Total Portfolio 91.0 % 91.4 %
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160426006945/en/
Boston PropertiesMichael LaBelle, 617-236-3352Executive Vice
President, Chief Financial Officer and TreasurerorArista Joyner,
617-236-3343Investor Relations Manager
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