Business Wire | Oct 27, 2020 04:52PM EDT

Boston Properties Announces Third Quarter 2020 Results; Reports EPS of $0.58 and FFO Per Share Of $1.57

Oct. 27, 2020

BOSTON--(BUSINESS WIRE)--Oct. 27, 2020--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, 2020.

Financial highlights for the third quarter include:

* Net income attributable to common shareholders of $89.9 million, or $0.58 per diluted share (EPS), compared to $107.8 million, or $0.70 per diluted share, for the quarter ended September 30, 2019. The third quarter of 2020 included a $0.06 per share charge to revenue related to the write-off of accrued rent and accounts receivable of tenants primarily in the retail, fitness and entertainment sectors. * Funds from Operations (FFO) of $244.0 million, or $1.57 per diluted share, compared to FFO of $253.6 million, or $1.64 per diluted share, for the quarter ended September 30, 2019. The third quarter of 2020 included a $0.06 per share charge to revenue related to the write-off of accrued rent and accounts receivable of tenants primarily in the retail, fitness and entertainment sectors.

Third quarter and recent business highlights include:

* Completed 811,000 square feet of leases and renewals in the third quarter with a weighted average lease term of approximately seven years. Notable leases signed in the quarter include a 13-year expansion and a long-term extension with Microsoft Corporation in Reston, Virginia totaling 186,000 square feet and a new, 14-year, 82,000 square foot lease with Columbia Threadneedle Investments at Atlantic Wharf in Boston, Massachusetts. * In addition, the Company recently signed a 196,000 square foot, 20-year lease with the Volkswagen Group of America at BXP's 1.1 million square foot development in the new phase of Reston Town Center in Reston, Virginia. With this new lease, the development is 85% pre-leased. Further details can be found in the press release issued today. * Collected 99% of its total rent payments from office tenants in the third quarter. Rent collections from all commercial tenants, including base rent from retail tenants, were 97% in total in Q3. * Completed and fully placed in-service two developments in the third quarter including Hub50House, a 320,000 square foot residential property in Boston, Massachusetts which the Company has a 50% ownership and The Skylyne, a 331,000 square foot residential property in Oakland, California. * Entered into an agreement with an existing joint venture partner for the future development of a 1.2 million square foot site in Waltham, Massachusetts, a popular submarket of Boston for leading and emerging companies in the life sciences, biotechnology and technology sectors. The agreement allows for the phased development of office and lab properties across 41-acres. Boston Properties will serve as the development manager and expects to be a majority owner of the properties. This agreement builds on Boston Properties' current footprint of 4.3 million square feet of Class A Office and lab properties in this submarket. * Completed the acquisition of a 50% interest in Beach Cities Media Center, a 6.4-acre land site on the Rosecrans Corridor of the El Segundo submarket of Los Angeles, California for a purchase price of approximately $21.2 million. Located in close proximity to the desirable beach cities of Manhattan, Hermosa and Redondo as well as the Palos Verdes peninsula, El Segundo is one of the most in-demand locations for Fortune 500 and emerging office tenants in the South Bay of Los Angeles. The site is fully entitled to support the future development of approximately 275,000 square feet of Class A creative office space.

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, 2020. In the opinion of management, the Company has made all adjustments considered necessary for a fair statement of these reported results.

Boston Properties will host a conference call on Wednesday, October 28, 2020 at 10:00 AM Eastern Time, open to the general public, to discuss the third quarter 2020 results, provide a business update pertaining to the current COVID-19 pandemic and discuss other business matters that may be of interest to investors. The number to call for this interactive teleconference is (877) 796-3880 (Domestic) or (443) 961-9013 (International) and entering the passcode 5198453. A replay of the conference call will be available by dialing (855) 859-2056 (Domestic) or (404) 537-3406 (International) and entering the passcode 51984533. 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 2020 "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 51.2 million square feet and 196 properties, including seven properties under construction/redevelopment. 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" as defined in the Private Securities Litigation Reform Act of 1995. You can identify these statements by our use of the words "believes," "budgeted," "estimates," "expects," "guidance," "intends," "plans," "projects" and similar expressions that do not relate to historical matters. These statements are based on our current expectations of future events. 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. If our underlying assumptions prove inaccurate, or known or unknown risks or uncertainties materialize, actual results could differ materially from those expressed or implied by the forward-looking statement. These factors include, without limitation, uncertainties and risks related to the impact of the COVID-19 global pandemic, including the duration, scope and severity of the pandemic domestically and internationally; federal, state and local government actions or restrictive measures implemented in response to COVID-19, the effectiveness of such measures and the direct and indirect impact of such measures on our and our tenants' businesses, financial condition, results of operation, cash flows, liquidity and performance, and the U.S. and international economy and economic activity generally; whether new or existing actions/or measures result in increasing unemployment that impacts the ability of our residential tenants to generate sufficient income to pay, or makes them unwilling to pay, rent in full or at all in a timely manner; the health, continued service and availability of our personnel, including our key personnel and property management teams; and the effectiveness or lack of effectiveness of governmental relief in providing assistance to individuals and large and small businesses, including our tenants, that have suffered significant adverse effects from COVID-19. In addition to the risks specific to COVID-19, other 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 whether as a result of new information, future events or otherwise, except as may be required by law.

Financial tables follow.

BOSTON PROPERTIES, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

September 30, December 31, 2020 2019

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

ASSETS

Real estate, at cost $ 21,554,453 $ 21,458,412

Construction in progress 769,846 789,736

Land held for future development 446,392 254,828

Right of use assets - finance leases 237,382 237,394

Right of use assets - operating leases 146,973 148,640

Less: accumulated depreciation (5,413,709) (5,266,798)

Total real estate 17,741,337 17,622,212

Cash and cash equivalents 1,714,783 644,950

Cash held in escrows 50,006 46,936

Investments in securities 34,934 36,747

Tenant and other receivables, net 76,330 112,807

Related party note receivable, net 77,592 80,000

Note receivables, net 25,304 15,920

Accrued rental income, net 1,111,078 1,038,788

Deferred charges, net 644,036 689,213

Prepaid expenses and other assets 106,524 41,685

Investments in unconsolidated joint ventures 1,377,291 955,647

Total assets $ 22,959,215 $ 21,284,905

LIABILITIES AND EQUITY

Liabilities:

Mortgage notes payable, net $ 2,912,494 $ 2,922,408

Unsecured senior notes, net 9,636,397 8,390,459

Unsecured line of credit - -

Unsecured term loan, net 499,270 498,939

Lease liabilities - finance leases 233,288 224,042

Lease liabilities - operating leases 201,337 200,180

Accounts payable and accrued expenses 345,959 377,553

Dividends and distributions payable 171,070 170,713

Accrued interest payable 88,826 90,016

Other liabilities 369,932 387,994

Total liabilities 14,458,573 13,262,304



Commitments and contingencies - -



Redeemable deferred stock units 5,604 8,365



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, 50,000,000shares authorized; 5.25% Series B cumulativeredeemable preferred stock, $0.01 par value,liquidation preference $2,500 per share, 92,000 200,000 200,000 shares authorized, 80,000 shares issued andoutstanding at September 30, 2020 and December31, 2019

Common stock, $0.01 par value, 250,000,000shares authorized, 155,715,200 and 154,869,198issued and 155,636,300 and 154,790,298 1,556 1,548 outstanding at September 30, 2020 and December31, 2019, respectively

Additional paid-in capital 6,348,076 6,294,719

Dividends in excess of earnings (364,720) (760,523)

Treasury common stock at cost, 78,900 shares at (2,722) (2,722) September 30, 2020 and December 31, 2019

Accumulated other comprehensive loss (52,622) (48,335)

Total stockholders' equity attributable to 6,129,568 5,684,687 Boston Properties, Inc.

Noncontrolling interests:

Common units of the Operating Partnership 634,796 600,860

Property partnerships 1,730,674 1,728,689

Total equity 8,495,038 8,014,236

Total liabilities and equity $ 22,959,215 $ 21,284,905

BOSTON PROPERTIES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

Three months ended September 30,

Nine months ended September 30,

2020

2019

2020

2019

(in thousands, except for per share amounts)

Revenue

Lease

$

666,674

$

692,225

$

2,006,904

$

2,051,665

Parking and other

16,327

25,582

54,777

76,807

Hotel revenue

90

13,014

7,014

36,796

Development and management services

7,281

10,303

23,285

29,566

Direct reimbursements of payroll and related costs from management services contracts

2,896

2,429

8,617

8,227

Total revenue

693,268

743,553

2,100,597

2,203,061

Expenses

Operating

Rental

258,261

265,603

761,014

781,091

Hotel

3,164

8,743

11,958

25,686

General and administrative

27,862

31,147

102,059

107,980

Payroll and related costs from management services contracts

2,896

2,429

8,617

8,227

Transaction costs

307

538

1,254

1,415

Depreciation and amortization

166,456

165,862

515,738

507,867

Total expenses

458,946

474,322

1,400,640

1,432,266

Other income (expense)

(Loss) income from unconsolidated joint ventures

(6,873)

(649)

(5,410)

47,528

(Losses) gains on sales of real estate

(209)

(15)

613,723

766

Interest and other income (loss)

(45)

7,178

4,277

14,546

Gains from investments in securities

1,858

106

965

4,240

Loss from early extinguishment of debt

-

(28,010)

-

(28,010)

Impairment loss

-

-

-

(24,038)

Interest expense

(110,993)

(106,471)

(319,726)

(309,837)

Net income

118,060

141,370

993,786

475,990

Net income attributable to noncontrolling interests

Noncontrolling interests in property partnerships

(15,561)

(18,470)

(34,280)

(54,782)

Noncontrolling interest-common units of the Operating Partnership

(10,020)

(12,504)

(97,090)

(43,133)

Net income attributable to Boston Properties, Inc.

92,479

110,396

862,416

378,075

Preferred dividends

(2,625)

(2,625)

(7,875)

(7,875)

Net income attributable to Boston Properties, Inc. common shareholders

$

89,854

$

107,771

$

854,541

$

370,200

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

Net income

$

0.58

$

0.70

$

5.49

$

2.40

Weighted average number of common shares outstanding

155,645

154,577

155,349

154,553

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

Net income

$

0.58

$

0.70

$

5.49

$

2.39

Weighted average number of common and common equivalent shares outstanding

155,670

154,820

155,447

154,847

BOSTON PROPERTIES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

Three months ended Nine months ended September September 30, 30,

2020 2019 2020 2019

(in thousands, except for per share amounts)

Revenue

Lease $ 666,674 $ 692,225 $ 2,006,904 $ 2,051,665

Parking and other 16,327 25,582 54,777 76,807

Hotel revenue 90 13,014 7,014 36,796

Development and 7,281 10,303 23,285 29,566 management services

Directreimbursements ofpayroll and related 2,896 2,429 8,617 8,227 costs frommanagement servicescontracts

Total revenue 693,268 743,553 2,100,597 2,203,061

Expenses

Operating

Rental 258,261 265,603 761,014 781,091

Hotel 3,164 8,743 11,958 25,686

General and 27,862 31,147 102,059 107,980 administrative

Payroll and relatedcosts from 2,896 2,429 8,617 8,227 management servicescontracts

Transaction costs 307 538 1,254 1,415

Depreciation and 166,456 165,862 515,738 507,867 amortization

Total expenses 458,946 474,322 1,400,640 1,432,266

Other income (expense)

(Loss) income fromunconsolidated (6,873) (649) (5,410) 47,528 joint ventures

(Losses) gains onsales of real (209) (15) 613,723 766 estate

Interest and other (45) 7,178 4,277 14,546 income (loss)

Gains frominvestments in 1,858 106 965 4,240 securities

Loss from earlyextinguishment of - (28,010) - (28,010) debt

Impairment loss - - - (24,038)

Interest expense (110,993) (106,471) (319,726) (309,837)

Net income 118,060 141,370 993,786 475,990

Net incomeattributable to noncontrollinginterests

Noncontrollinginterests in (15,561) (18,470) (34,280) (54,782) propertypartnerships

Noncontrollinginterest-commonunits of the (10,020) (12,504) (97,090) (43,133) OperatingPartnership

Net incomeattributable to 92,479 110,396 862,416 378,075 Boston Properties,Inc.

Preferred dividends (2,625) (2,625) (7,875) (7,875)

Net incomeattributable toBoston Properties, $ 89,854 $ 107,771 $ 854,541 $ 370,200 Inc. commonshareholders

Basic earnings percommon shareattributable to Boston Properties,Inc. commonshareholders:

Net income $ 0.58 $ 0.70 $ 5.49 $ 2.40

Weighted averagenumber of common 155,645 154,577 155,349 154,553 shares outstanding

Diluted earningsper common shareattributable to Boston Properties,Inc. commonshareholders:

Net income $ 0.58 $ 0.70 $ 5.49 $ 2.39

Weighted averagenumber of commonand common 155,670 154,820 155,447 154,847 equivalent sharesoutstanding

BOSTON PROPERTIES, INC.

FUNDS FROM OPERATIONS (1)

(Unaudited)

Three months ended Nine months ended September 30, September 30,

2020 2019 2020 2019

(in thousands, except for per share amounts)

Net income attributableto Boston Properties, $ 89,854 $ 107,771 $ 854,541 $ 370,200 Inc. common shareholders

Add:

Preferred dividends 2,625 2,625 7,875 7,875

Noncontrolling interest -common units of the 10,020 12,504 97,090 43,133 Operating Partnership

Noncontrolling interests 15,561 18,470 34,280 54,782 in property partnerships

Net income 118,060 141,370 993,786 475,990

Add:

Depreciation and 166,456 165,862 515,738 507,867 amortization expense

Noncontrolling interestsin property partnerships' (15,833) (17,402) (55,940) (53,273) share of depreciation andamortization

Company's share ofdepreciation andamortization from 20,413 13,745 59,757 43,993 unconsolidated jointventures

Corporate-relateddepreciation and (444) (411) (1,399) (1,218) amortization

Impairment loss - - - 24,038

Less:

Gains on sales of realestate included within(loss) income from - (487) 5,946 47,270 unconsolidated jointventures

(Losses) gains on sales (209) (15) 613,723 766 of real estate

Noncontrolling interests 15,561 18,470 34,280 54,782 in property partnerships

Preferred dividends 2,625 2,625 7,875 7,875

Funds from operations(FFO) attributable to theOperating Partnership 270,675 282,571 850,118 886,704 common unitholders(including BostonProperties, Inc.)

Less:

Noncontrolling interest -common units of theOperating Partnership's 26,697 28,940 85,095 90,792 share of funds fromoperations

Funds from operationsattributable to Boston $ 243,978 $ 253,631 $ 765,023 $ 795,912 Properties, Inc. commonshareholders

Boston Properties, Inc.'spercentage share of funds 90.14 % 89.76 % 89.99 % 89.76 %from operations - basic

Weighted average shares 155,645 154,577 155,349 154,553 outstanding - basic

FFO per share basic $ 1.57 $ 1.64 $ 4.92 $ 5.15

Weighted average shares 155,670 154,820 155,447 154,847 outstanding - diluted

FFO per share diluted $ 1.57 $ 1.64 $ 4.92 $ 5.14

* 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, 2020 December 31, 2019

Boston 94.6 % 95.9 %

Los Angeles 96.7 % 96.7 %

New York 90.5 % 92.9 %

San Francisco 91.6 % 93.7 %

Washington, DC 84.3 % 87.6 %

Total Portfolio 91.1 % 93.0 %

View source version on businesswire.com: https://www.businesswire.com/news/home/20201027006217/en/

CONTACT: Michael LaBelle Executive Vice President, Chief Financial Officer and Treasurer (617) 236-3352

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