• | 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. |
• | 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. |
• | 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. |
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, 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 |
BOSTON PROPERTIES, INC. CONSOLIDATED BALANCE SHEETS (Unaudited) | |||||||
September 30, 2019 | December 31, 2018 | ||||||
(in thousands, except for share and par value amounts) | |||||||
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. |
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 | % |