Business Wire | Jul 28, 2020 05:21PM EDT

Boston Properties Announces Second Quarter 2020 Results; Reports EPS of $1.71 and FFO Per Share Of $1.52

Jul. 28, 2020

BOSTON--(BUSINESS WIRE)--Jul. 28, 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 second quarter ended June 30, 2020.

Financial highlights for the second quarter include:

* Net income attributable to common shareholders of $266.5 million, or $1.71 per diluted share (EPS), compared to $164.3 million, or $1.06 per diluted share, for the quarter ended June 30, 2019. The increase in EPS in the second quarter of 2020 was primarily due to gains on asset sales of $1.21 per diluted share, offset by a $0.24 per share charge to revenue related to the write-off of accrued rent and accounts receivable of tenants primarily in the retail sector. * Funds from Operations (FFO) of $236.9 million, or $1.52 per diluted share, compared to FFO of $276.3 million, or $1.78 per diluted share, for the quarter ended June 30, 2019. The decrease in FFO in the second quarter of 2020 was largely due to a $0.24 per share charge to revenue related to the write-off of accrued rent and accounts receivable of tenants primarily in the retail sector.

Second quarter and recent business highlights include:

* Completed 942,000 square feet of leases and renewals, including a new, 12-year lease with Microsoft Corporation for approximately 400,000 square feet at Reston Town Center in Reston, Virginia. * Collected more than 98% of its total rent payments from office tenants due July 1. This follows collections from office tenants of 98% in the second quarter of 2020. Rent collections from all commercial tenants, including retail, were 95% in total in July. * Completed and fully placed in-service 20 CityPoint, a 211,000 square foot Class A office development in Waltham, Massachusetts that is 62% leased. * Completed two asset sales including: Approximately 455,000 square feet of Capital Gallery, a Class A office complex in Washington, DC for a gross sale price of approximately $254 million. Boston Properties will retain ownership of the remaining 176,000 square feet of the property, which is approximately 100% leased and includes 156,000 square feet of office space, 20,000 square feet of retail and a 465-space parking garage. The Company realized net proceeds of approximately $247 million from the sale and a reported gain on sale of approximately $204 million in the quarter. Annapolis Junction Building Eight, a 125,700 square foot vacant office building and two parcels of land at Annapolis Junction Business Park in Annapolis Junction, Maryland that was sold for a gross sale price of $47 million. The Company had a 50% interest in the Annapolis Junction properties. The Company realized net proceeds of approximately $15 million from the sale after closing costs and the repayment of mortgage debt on the property. The Company recognized a gain on sale of real estate totaling approximately $5.8 million in the quarter. * Completed the acquisition of property at 777 Harrison Street in San Francisco, California for a purchase price of approximately $140.1 million. 777 Harrison Street, known as Fourth + Harrison, is a fully-entitled site that can support the development of approximately 804,000 square feet of primarily office space. * Completed a $1.25 billion bond offering of 3.250% unsecured senior notes due 2031 on May 5, 2020. * Refinanced the mortgage loan collateralized by Metropolitan Square, a 654,000 square foot Class A office property in Washington, DC in which the Company has a 20% interest. The outstanding balance of the loan was approximately $155.9 million and was scheduled to mature on August 5, 2020. The new mortgage financing totals $325.0 million, of which $288.0 million was advanced at closing, and matures on July 7, 2022 with two, one-year extension options. Excess loan proceeds from the new mortgage loan were approximately $112.7 million, of which the Company's share was approximately $22.5 million.

Separately the Company announced today 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 $21.2 million. The site is fully entitled to support the future development of approximately 275,000 square feet of Class A creative office space. In conjunction with the acquisition, BXP entered into a joint venture with Continental Development Corporation (Continental), a premier developer and owner of Class A properties primarily in the El Segundo and Manhattan Beach submarkets with more than 500 tenants across its portfolio. The Beach Cities Media Center site is located on Rosecrans Avenue, one of the most in-demand creative office nodes in the South Bay of Los Angeles. The site is adjacent to Continental Park, an existing 3.0 million square foot, 86-acre office and mixed-use campus, which is home to several Fortune 500 and emerging office tenants in the technology, entertainment and financial sectors. Further details can be found in the press release issued today.

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 June 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, July 29, 2020 at 10:00 AM Eastern Time, open to the general public, to discuss the second 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 6852468. A replay of the conference call will be available by dialing (855) 859-2056 (Domestic) or (404) 537-3406 (International) and entering the passcode 6852468. 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' second 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 195 properties, including nine 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.

During the conference call referenced above, management of Boston Properties may make "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.

Financial tables follow.

BOSTON PROPERTIES, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

June 30, 2020 December 31, 2019

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

ASSETS

Real estate, at cost $ 21,267,915 $ 21,458,412

Construction in progress 893,935 789,736

Land held for future development 414,053 254,828

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

Right of use assets - operating leases 147,512 148,640

Less: accumulated depreciation (5,292,389) (5,266,798)

Total real estate 17,668,420 17,622,212

Cash and cash equivalents 1,691,047 644,950

Cash held in escrows 300,608 46,936

Investments in securities 32,848 36,747

Tenant and other receivables, net 82,545 112,807

Related party note receivable, net 78,520 80,000

Note receivables, net 25,480 15,920

Accrued rental income, net 1,069,004 1,038,788

Deferred charges, net 655,813 689,213

Prepaid expenses and other assets 56,768 41,685

Investments in unconsolidated joint ventures 1,339,724 955,647

Total assets $ 23,000,777 $ 21,284,905

LIABILITIES AND EQUITY

Liabilities:

Mortgage notes payable, net $ 2,915,852 $ 2,922,408

Unsecured senior notes, net 9,633,577 8,390,459

Unsecured line of credit - -

Unsecured term loan, net 499,150 498,939

Lease liabilities - finance leases 230,146 224,042

Lease liabilities - operating leases 200,979 200,180

Accounts payable and accrued expenses 328,292 377,553

Dividends and distributions payable 171,077 170,713

Accrued interest payable 95,274 90,016

Other liabilities 373,281 387,994

Total liabilities 14,447,628 13,262,304



Commitments and contingencies - -



Redeemable deferred stock units 6,003 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 Bcumulative redeemable preferred stock, $0.01par value, liquidation preference 200,000 200,000 $2,500 per share, 92,000 shares authorized,80,000 shares issued and outstandingat June 30, 2020 and December 31, 2019

Common stock, $0.01 par value, 250,000,000shares authorized, 155,701,186 and154,869,198 issued and 155,622,286 and 1,556 1,548 154,790,298 outstanding at June 30, 2020and December 31, 2019, respectively

Additional paid-in capital 6,340,665 6,294,719

Dividends in excess of earnings (302,511) (760,523)

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

Accumulated other comprehensive loss (54,921) (48,335)

Total stockholders' equity attributable to 6,182,067 5,684,687 Boston Properties, Inc.

Noncontrolling interests:

Common units of the Operating Partnership 640,491 600,860

Property partnerships 1,724,588 1,728,689

Total equity 8,547,146 8,014,236

Total liabilities and equity $ 23,000,777 $ 21,284,905

BOSTON PROPERTIES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

Three months ended June Six months ended June 30, 30,

2020 2019 2020 2019

(in thousands, except for per share amounts)

Revenue

Lease $ 630,119 $ 680,189 $ 1,340,230 $ 1,359,440

Parking and other 13,946 26,319 38,450 51,225

Hotel revenue 99 14,844 6,924 23,782

Development and 8,125 9,986 16,004 19,263 management services

Directreimbursements ofpayroll and related 2,484 2,403 5,721 5,798 costs frommanagement servicescontracts

Total revenue 654,773 733,741 1,407,329 1,459,508

Expenses

Operating

Rental 239,787 257,971 502,753 515,488

Hotel 1,973 9,080 8,794 16,943

General and 37,743 35,071 74,197 76,833 administrative

Payroll and relatedcosts from 2,484 2,403 5,721 5,798 management servicescontracts

Transaction costs 332 417 947 877

Depreciation and 178,188 177,411 349,282 342,005 amortization

Total expenses 460,507 482,353 941,694 957,944

Other income (expense)

Income fromunconsolidated 1,832 47,964 1,463 48,177 joint ventures

Gains on sales of 203,767 1,686 613,932 781 real estate

Interest and other 1,305 3,615 4,322 7,368 income (loss)

Gains (losses) frominvestments in 4,552 1,165 (893) 4,134 securities

Impairment losses - - - (24,038)

Interest expense (107,142) (102,357) (208,733) (203,366)

Net income 298,580 203,461 875,726 334,620

Net incomeattributable to noncontrollinginterests

Noncontrollinginterests in 767 (17,482) (18,719) (36,312) propertypartnerships

Noncontrollinginterest-commonunits of the (30,197) (19,036) (87,525) (30,627) OperatingPartnership

Net incomeattributable to 269,150 166,943 769,482 267,681 Boston Properties,Inc.

Preferred dividends (2,625) (2,625) (5,250) (5,250)

Net incomeattributable toBoston Properties, $ 266,525 $ 164,318 $ 764,232 $ 262,431 Inc. commonshareholders

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

Net income $ 1.71 $ 1.06 $ 4.92 $ 1.70

Weighted averagenumber of common 155,386 154,555 155,199 154,540 shares outstanding

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

Net income $ 1.71 $ 1.06 $ 4.91 $ 1.69

Weighted averagenumber of commonand common 155,407 154,874 155,333 154,859 equivalentshares outstanding

BOSTON PROPERTIES, INC.

FUNDS FROM OPERATIONS (1)

(Unaudited)

Three months ended June Six months ended June 30, 30,

2020 2019 2020 2019

(in thousands, except for per share amounts)

Net income attributableto Boston Properties, $ 266,525 $ 164,318 $ 764,232 $ 262,431 Inc. common shareholders

Add:

Preferred dividends 2,625 2,625 5,250 5,250

Noncontrolling interest -common units of the 30,197 19,036 87,525 30,627 Operating Partnership

Noncontrolling interests (767) 17,482 18,719 36,312 in property partnerships

Net income 298,580 203,461 875,726 334,620

Add:

Depreciation and 178,188 177,411 349,282 342,005 amortization expense

Noncontrolling interestsin property partnerships'share of (22,480) (17,869) (40,107) (35,871) depreciation andamortization

Company's share ofdepreciation andamortization from 21,012 14,778 39,344 30,248 unconsolidated jointventures

Corporate-relateddepreciation and (486) (412) (955) (807) amortization

Impairment loss - - - 24,038

Less:

Gain on sale of realestate included withinincome from 5,946 47,757 5,946 47,757 unconsolidated jointventures

Gains on sales of real 203,767 1,686 613,932 781 estate

Noncontrolling interests (767) 17,482 18,719 36,312 in property partnerships

Preferred dividends 2,625 2,625 5,250 5,250

Funds from operations(FFO) attributable to theOperating Partnership 263,243 307,819 579,443 604,133 common unitholders(including BostonProperties, Inc.)

Less:

Noncontrolling interest -common units of theOperating 26,335 31,544 58,430 61,851 Partnership's share offunds from operations

Funds from operationsattributable to Boston $ 236,908 $ 276,275 $ 521,013 $ 542,282 Properties, Inc. commonshareholders

Boston Properties, Inc.'spercentage share of funds 90.00 % 89.75 % 89.92 % 89.76 %from operations - basic

Weighted average shares 155,386 154,555 155,199 154,540 outstanding - basic

FFO per share basic $ 1.52 $ 1.79 $ 3.36 $ 3.51

Weighted average shares 155,407 154,874 155,333 154,859 outstanding - diluted

FFO per share diluted $ 1.52 $ 1.78 $ 3.35 $ 3.50

* 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

June 30, 2020 December 31, 2019

Boston 94.8 % 95.9 %

Los Angeles 95.9 % 96.7 %

New York 92.6 % 92.9 %

San Francisco 93.2 % 93.7 %

Washington, DC 84.8 % 87.6 %

Total Portfolio 92.0 % 93.0 %

View source version on businesswire.com: https://www.businesswire.com/news/home/20200728006015/en/

CONTACT: AT THE COMPANY Michael LaBelle Executive Vice President, Chief Financial Officer and Treasurer (617) 236-3352 Sara Buda Vice President, Investor Relations (617) 236-3429 sbuda@bxp.com