Boston Properties Announces Third Quarter 2009 Results
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Reports diluted FFO per share of $1.13 Reports diluted EPS of $0.47
BOSTON--(BUSINESS WIRE)-- Boston Properties, Inc. (NYSE: BXP), a real estate investment trust, reported results today for the third quarter ended September 30, 2009.
Funds from Operations (FFO) for the quarter ended September 30, 2009 were $158.5 million, or $1.14 per share basic and $1.13 per share diluted. This compares to FFO for the quarter ended September 30, 2008 of $132.5 million, or $1.11 per share basic and $1.09 per share diluted. FFO for the quarters ended September 30, 2009 and 2008 includes additional non-cash interest expense of $0.06 and $0.04 per share on a diluted basis, respectively, related to the Company's adoption of Accounting Standards Codification 470-20 "Debt with Conversion and Other Options" (formerly known as FSP No. APB 14-1). FFO for the quarter ended September 30, 2008 also includes non-cash charges of (1) $0.15 per share on a diluted basis related to the establishment of reserves for the accrued straight-line rent balances associated with the Company's leases with Lehman Brothers Inc. and the law firm of Heller Ehrman LLP and (2) $0.04 per share on a diluted basis related to the partial ineffectiveness of the Company's interest rate hedging contracts. The weighted average number of basic and diluted shares outstanding totaled 138,641,262 and 140,685,570, respectively, for the quarter ended September 30, 2009 and 119,832,474 and 122,830,104, respectively, for the quarter ended September 30, 2008.
Net income available to common shareholders was $65.8 million for the quarter ended September 30, 2009, compared to $43.1 million for the quarter ended September 30, 2008. Net income available to common shareholders per share (EPS) for the quarter ended September 30, 2009 was $0.47 basic and $0.47 on a diluted basis. This compares to EPS for the third quarter of 2008 of $0.36 basic and $0.35 on a diluted basis. EPS includes $0.01 and $0.01, on a diluted basis, related to gains on sales of real estate for the quarters ended September 30, 2009 and 2008, respectively.
The reported results are unaudited and there can be no assurance that the results will not vary from the final information for the quarter ended September 30, 2009. In the opinion of management, all adjustments considered necessary for a fair presentation of these reported results have been made.
As of September 30, 2009, the Company's portfolio consisted of 146 properties comprising approximately 49.6 million square feet, including six properties under construction totaling 2.1 million square feet and one hotel. The overall percentage of leased space for the 139 properties in service as of September 30, 2009 was 92.1%.
Significant events during the third quarter included:
-- On July 30, 2009, the Company obtained mortgage financing totaling $50.0
million collateralized by its Reservoir Place property located in
Waltham, Massachusetts. The mortgage financing initially bears interest
at a variable rate equal to LIBOR plus 3.85% per annum and matures on
July 30, 2014.
-- On August 1, 2009, the Company placed in-service Democracy Tower, an
approximately 235,000 net rentable square foot Class A office property
located in Reston, Virginia. The property is 100% leased.
-- On August 3, 2009, the Company used available cash to repay the mortgage
loans collateralized by its 1301 New York Avenue property located in
Washington, DC aggregating approximately $20.5 million. The mortgage
loans bore interest at a weighted-average fixed rate of 6.91% per annum
and were scheduled to mature on August 15, 2009. There were no
prepayment penalties.
Transactions completed subsequent to September 30, 2009:
-- On October 9, 2009, the Company's Operating Partnership completed a
public offering of $700.0 million in aggregate principal amount of its
5.875% senior notes due 2019. The notes were priced at 99.931% of the
principal amount to yield 5.884% to maturity. The aggregate net proceeds
to the Operating Partnership, after deducting underwriter discounts and
offering expenses, were approximately $693.7 million. The notes mature
on October 15, 2019, unless earlier redeemed.
-- On October 9, 2009, the Company placed in-service 701 Carnegie Center,
an approximately 120,000 net rentable square foot Class A office
property located in Princeton, New Jersey. The property is 100% leased.
EPS and FFO per Share Guidance:
The Company's guidance for the fourth quarter 2009 and full year 2010 for EPS (diluted) and FFO per share (diluted) is set forth and reconciled below.
Fourth Quarter 2009 Full Year 2010
Low - High Low - High
Projected EPS (diluted) $ 0.40 - $ 0.42 $ 1.26 - $ 1.46
Add:
Projected Company Share of Real Estate 0.65 - 0.65 2.75 - 2.75
Depreciation and Amortization
Less:
Projected Company Share of Gains on 0.01 - 0.01 0.01 - 0.01
Sales of Real Estate
Projected FFO per Share (diluted) $ 1.04 - $ 1.06 $ 4.00 - $ 4.20
Except as described below, the foregoing 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 previously disclosed. The guidance above includes the additional non-cash interest expense resulting from the change in accounting for convertible debt instruments. In addition, the estimates do not include possible future gains or losses or the impact on operating results from other possible future property acquisitions or dispositions, 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 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 above.
Boston Properties will host a conference call on Wednesday, October 28, 2009 at 10:00 AM Eastern Time, open to the general public, to discuss the third quarter 2009 results, the fourth quarter 2009 and fiscal 2010 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 34803191. A replay of the conference call will be available through November 11, 2009, by dialing (800) 642-1687 (Domestic) or (706) 645-9291 (International) and entering the passcode 34803191. 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' third quarter 2009 "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 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 five markets - Boston, Midtown Manhattan, Washington, D.C., San Francisco and Princeton, N.J.
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 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 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 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 2009 and full fiscal year 2010, whether as a result of new information, future events or otherwise.
BOSTON PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Three months ended Nine months ended
September 30, September 30,
2009 2008 2009 2008
(in thousands, except for per share amounts)
(unaudited)
Revenue
Rental:
Base rent $ 291,602 $ 266,205 $ 889,983 $ 828,671
Recoveries from tenants 51,901 55,968 154,130 154,700
Parking and other 15,883 16,624 51,240 50,442
Total rental revenue 359,386 338,797 1,095,353 1,033,813
Hotel revenue 6,650 8,482 20,108 24,714
Development and 9,754 9,557 26,601 21,494
management services
Interest and other 1,513 1,152 2,275 18,079
Total revenue 377,303 357,988 1,144,337 1,098,100
Expenses
Operating:
Rental 129,020 127,715 377,611 364,551
Hotel 5,418 6,318 16,249 18,664
General and 19,989 18,758 55,941 55,813
administrative
Interest 77,090 74,662 234,653 216,460
Depreciation and 78,181 75,321 242,556 224,381
amortization
Loss from suspension of - - 27,766 -
development
Net derivative losses - 6,318 - 9,849
(gains)
Losses from early 16 - 510 -
extinguishments of debt
Losses (gains) from
investments in (1,317 ) 940 (1,924 ) 1,973
securities
Total expenses 308,397 310,032 953,362 891,691
Income before income
(loss) from
unconsolidated joint
ventures, gains on
sales of real estate and
net income attributable 68,906 47,956 190,975 206,409
to noncontrolling
interests
Income (loss) from
unconsolidated joint 6,350 2,644 11,096 5,541
ventures
Gains on sales of real 2,394 1,753 9,682 31,394
estate
Net income 77,650 52,353 211,753 243,344
Net income attributable
to noncontrolling
interests:
Noncontrolling interests (1,114 ) (525 ) (2,315 ) (1,570 )
in property partnerships
Noncontrolling interest
- common units of the (9,662 ) (7,440 ) (27,776 ) (31,042 )
Operating Partnership
Noncontrolling interest
in gains on sales of
real estate - common
units of
the Operating (307 ) (256 ) (1,324 ) (4,571 )
Partnership
Noncontrolling interest
- redeemable preferred
units of the Operating
Partnership (772 ) (1,053 ) (2,734 ) (3,151 )
Net income attributable
to Boston Properties, $ 65,795 $ 43,079 $ 177,604 $ 203,010
Inc.
Basic earnings per
common share
attributable to Boston
Properties, Inc.:
Net income $ 0.47 $ 0.36 $ 1.38 $ 1.70
Weighted average number
of common shares 138,641 119,832 128,452 119,708
outstanding
Diluted earnings per
common share
attributable to Boston
Properties, Inc.:
Net income $ 0.47 $ 0.35 $ 1.38 $ 1.67
Weighted average number
of common and common
equivalent shares
outstanding 139,225 121,369 128,835 121,236
BOSTON PROPERTIES, INC.
CONSOLIDATED BALANCE SHEETS
September 30, December 31,
2009 2008
(in thousands, except for share amounts)
(unaudited)
ASSETS
Real estate $ 9,768,619 $ 9,560,924
Construction in progress 976,758 835,983
Land held for future development 241,617 228,300
Less: accumulated depreciation (1,966,780 ) (1,768,785 )
Total real estate 9,020,214 8,856,422
Cash and cash equivalents 782,106 241,510
Cash held in escrows 20,681 21,970
Investments in securities 10,436 11,590
Tenant and other receivables, net of
allowance for doubtful accounts of 71,845 68,743
$4,170 and $4,006, respectively
Related party note receivable 270,000 270,000
Accrued rental income, net of
allowance of $2,797 and $15,440, 353,709 316,711
respectively
Deferred charges, net 288,642 325,369
Prepaid expenses and other assets 41,977 22,401
Investments in unconsolidated joint 772,167 782,760
ventures
Total assets $ 11,631,777 $ 10,917,476
LIABILITIES AND EQUITY
Liabilities:
Mortgage notes payable $ 2,643,497 $ 2,660,642
Unsecured senior notes, net of 1,472,740 1,472,375
discount
Unsecured exchangeable senior notes, 1,892,753 1,859,867
net of discount
Unsecured line of credit - 100,000
Accounts payable and accrued expenses 229,177 171,791
Dividends and distributions payable 80,463 97,162
Accrued interest payable 49,536 67,132
Other liabilities 131,193 173,750
Total liabilities 6,499,359 6,602,719
Commitments and contingencies - -
Noncontrolling interest:
Redeemable preferred units of the 55,652 55,652
Operating Partnership
Equity:
Stockholders' equity attributable to
Boston Properties, Inc.
Excess stock, $.01 par value,
150,000,000 shares authorized, none - -
issued or outstanding
Preferred stock, $.01 par value,
50,000,000 shares authorized, none - -
issued or outstanding
Common stock, $.01 par value,
250,000,000 shares authorized,
138,781,274 and 121,259,555 shares
issued and 138,702,374 and 121,180,655
shares outstanding in 2009 and 2008, 1,387 1,212
respectively
Additional paid-in capital 4,362,874 3,559,841
Earnings in excess of dividends 111,463 154,953
Treasury common stock, at cost (2,722 ) (2,722 )
Accumulated other comprehensive loss (22,411 ) (24,291 )
Total stockholders' equity
attributable to Boston Properties, 4,450,591 3,688,993
Inc.
Noncontrolling interests:
Common units of the Operating 620,460 563,212
Partnership
Property partnerships 5,715 6,900
Total equity 5,076,766 4,259,105
Total liabilities and equity $ 11,631,777 $ 10,917,476
BOSTON PROPERTIES, INC.
FUNDS FROM OPERATIONS (1)
Three months ended Nine months ended
September 30, September 30,
2009 2008 2009 2008
(in thousands, except for per share amounts)
(unaudited)
Net income attributable to $ 65,795 $ 43,079 $ 177,604 $ 203,010
Boston Properties, Inc.
Add:
Noncontrolling interest -
redeemable preferred units
of the
Operating Partnership 772 1,053 2,734 3,151
Noncontrolling interest in
gains on sales of real
estate - common
units of the Operating 307 256 1,324 4,571
Partnership
Noncontrolling interest -
common units of the
Operating
Partnership 9,662 7,440 27,776 31,042
Noncontrolling interests in 1,114 525 2,315 1,570
property partnerships
Less:
Gains on sales of real 2,394 1,753 9,682 31,394
estate
Income (loss) from
unconsolidated joint 6,350 2,644 11,096 5,541
ventures
Income before income (loss)
from unconsolidated joint
ventures,
gains on sales of real
estate and net income
attributable to
noncontrolling interests 68,906 47,956 190,975 206,409
Add:
Real estate depreciation 108,975 106,475 337,565 266,932
and amortization (2)
Income (loss) from
unconsolidated joint 6,350 2,644 11,096 5,541
ventures
Less:
Noncontrolling interests in
property partnerships'
share of
funds from operations 1,731 1,013 3,990 3,052
Noncontrolling interest -
redeemable preferred units
of the
Operating Partnership 772 931 2,734 2,785
Funds from operations (FFO)
attributable to the 181,728 155,131 532,912 473,045
Operating Partnership
Less:
Noncontrolling interest -
common units of the
Operating
Partnership's share of 23,278 22,614 72,863 68,887
funds from operations
Funds from operations
attributable to Boston $ 158,450 $ 132,517 $ 460,049 $ 404,158
Properties, Inc.
Our percentage share of
funds from operations - 87.19 % 85.42 % 86.33 % 85.44 %
basic
Weighted average shares 138,641 119,832 128,452 119,708
outstanding - basic
FFO per share basic $ 1.14 $ 1.11 $ 3.58 $ 3.38
Weighted average shares 140,686 122,830 130,295 122,697
outstanding - diluted
FFO per share diluted $ 1.13 $ 1.09 $ 3.56 $ 3.33
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) (computed in accordance with GAAP, including
non-recurring items) for gains (or losses) from sales of properties, 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
(1 ) 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 and excluding 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 (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 and considered in addition to cash flows in accordance with GAAP,
as presented in our consolidated financial statements.
Real estate depreciation and amortization consists of depreciation and
amortization from the Consolidated Statements of Operations of $78,181,
$75,321, $242,556 and $224,381, our share of unconsolidated joint venture
(2 ) real estate depreciation and amortization of $31,262, $31,669, $96,436 and
$43,904, less corporate-related depreciation and amortization of $468,
$515, $1,427 and $1,353 for the three months and nine months ended
September 30, 2009 and 2008, respectively.
BOSTON PROPERTIES, INC.
PORTFOLIO LEASING PERCENTAGES
% Leased by Location
September 30, 2009 December 31, 2008
Greater Boston 90.8% 92.9%
Greater Washington, D.C. 95.2% 96.1%
Midtown Manhattan 93.7% 98.4%
Princeton/East Brunswick, NJ 81.3% 83.8%
Greater San Francisco 90.7% 92.8%
Total Portfolio 92.1% 94.5%
% Leased by Type
September 30, 2009 December 31, 2008
Class A Office Portfolio 92.6% 95.2%
Office/Technical Portfolio 81.9% 81.9%
Total Portfolio 92.1% 94.5%
Source: Boston Properties, Inc.
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