Exceeded Q2 Guidance for EPS and FFO;
Executed Approximately 938,000 SF of Leases in Q2; and Opened the
Highly Anticipated View Boston Observation Deck Experience
BXP (NYSE: BXP), the largest publicly traded developer,
owner, and manager of premier workplaces in the United States,
reported results today for the second quarter ended June 30,
2023.
Financial highlights for the second quarter include:
- Revenue increased 5.6% to $817.2 million for the quarter ended
June 30, 2023, compared to $773.9 million for the quarter ended
June 30, 2022.
- Net income attributable to common shareholders of $104.3
million, or $0.66 per diluted share (EPS), for the quarter ended
June 30, 2023, compared to $223.0 million, or $1.42 per diluted
share, for the quarter ended June 30, 2022. The decrease compared
to Q2 2022 is primarily due to:
- $96.2 million of higher gains on sales recorded in Q2
2022;
- greater depreciation and amortization expense of $19.4 million
in Q2 2023 primarily due to asset acquisitions in Q2 and Q3 of
2022; and
- higher interest expenses, net of an increase in interest
income, of $22.2 million;
- offset by higher contributions from portfolio operations of
approximately $19.4 million in Q2 2023.
- Funds from Operations (FFO) of $292.8 million, or $1.86 per
diluted share, for the quarter ended June 30, 2023, compared to FFO
of $304.6 million, or $1.94 per diluted share, for the quarter
ended June 30, 2022. The decrease compared to Q2 2022 is primarily
due to higher interest expenses, net of an increase in interest
income, of $22.2 million, partially offset by higher contributions
from portfolio operations of approximately $19.4 million.
- Both EPS and FFO per share exceeded the mid-points of BXP’s
guidance by $0.06 per share, as a result of better-than-projected
portfolio performance. The portfolio outperformance was partially
due to lower-than-projected operating expenses.
BXP also provided updated guidance for third quarter 2023 EPS of
$0.63 - $0.65 and FFO of $1.83 - $1.85 per diluted share, and full
year 2023 EPS of $2.42 - $2.47 and FFO of $7.24 - $7.29 per diluted
share.
See “EPS and FFO per Share Guidance” below.
Second quarter and recent business highlights include:
- Executed approximately 938,000 square feet of leases with a
weighted-average lease term of 8.0 years.
- Opened View Boston, the highly anticipated observation deck
encompassing the top three floors of the Prudential Tower in
Boston, MA. The 63,000 square-foot experience provides a unique
opportunity to enjoy 360-degree panoramic views of the city, bites
at the Stratus cocktail bar and The Beacon bistro, and interactive
state-of-the-art immersive exhibits that showcase Boston's many
neighborhoods and cultural landmarks.
- Completed and fully placed in-service 2100 Pennsylvania Avenue
in Washington, D.C., an approximately 476,000 square foot premier
workplace that is approximately 62% occupied and approximately 91%
leased (including vacant space for which we have signed leases that
have not yet commenced in accordance with GAAP).
- A joint venture in which BXP has a 55% interest elected to
pause vertical construction on the first phase of Platform 16 in
San Jose, CA. Platform 16 was planned to be constructed in phases
to best accommodate market demand. Completion of the underground
parking garage and building foundation elements will take place
over the next several months to ensure that the project is
positioned to mobilize quickly as demand improves.
- A joint venture in which BXP has a 50% interest exercised an
option to extend by one year the maturity date of its $252.6
million construction loan collateralized by its 7750 Wisconsin
Avenue property. The completed 734,000 square foot build-to-suit,
premier workplace is located in Bethesda, Maryland and is 100%
leased to an affiliate of Marriott International, Inc. The loan
bears interest at a variable rate equal to Term SOFR plus 1.35% per
annum and now matures on April 26, 2024, with a one-year extension
option, subject to certain conditions.
- Boston Properties Limited Partnership (“BPLP”) entered into
four interest rate swap contracts with notional amounts aggregating
$1.2 billion. BPLP entered into these interest rate swap contracts
to reduce its exposure to the variability in future cash flows
attributable to changes in the interest rate on its 2023 Unsecured
Term Loan. These interest rate swaps were entered into to fix Term
SOFR, the reference rate for the Unsecured Term Loan, at a
weighted-average rate of 4.6420% for the period commencing on May
4, 2023 and ending on May 16, 2024.
- BPLP completed a public offering of $750.0 million aggregate
principal amount of 6.500% unsecured senior notes due 2034. The net
proceeds from the offering were approximately $741.3 million after
deducting underwriting discounts and estimated transaction
expenses.
- A joint venture in which BXP has a 30% interest repaid an
outstanding $105.0 million loan collateralized by the property
located at 500 North Capitol Street, NW, in Washington, DC with the
proceeds of a new loan evidenced by two promissory notes totaling
$105.0 million that bears interest at an aggregate,
weighted-average fixed rate of 6.83% per annum and matures on June
5, 2026. 500 North Capitol Street, NW is a 231,000 square foot
premier workplace in Washington, DC that is 99% leased.
- In July 2023, completed the redevelopment and fully placed
in-service 140 Kendrick Street - Building A in Needham,
Massachusetts. The property is 100% leased and is the first Net
Zero, Carbon Neutral office repositioning of this scale in
Massachusetts.
- On July 28, 2023, BXP entered into a joint venture agreement
with an institutional investor for the future development of 343
Madison Avenue located on Madison Avenue between 44th and 45th
Streets in New York City, New York adjacent to Grand Central
Station. BXP owns a 55% interest in the venture and its partner
owns a 45% interest, and BXP will provide customary development,
property management, and leasing services. The 343 Madison Avenue
project contemplates the construction of (1) a direct entrance to
the Long Island Railroad’s new east side access project (Grand
Central Madison) (“Phase 1”) and (2) an approximately 900,000
square foot premier workplace building with ground floor retail
(“Phase 2”). Subsequently, on August 1, 2023, the joint venture
executed a 99-year ground lease with the Metropolitan
Transportation Authority for the approximately 25,000 square foot
site. The ground lease requires the joint venture to construct the
direct access to Grand Central Madison as Phase 1 of the
development project. The joint venture has the option until July
31, 2025 to terminate the ground lease prior to construction of the
new building and receive reimbursement for the cost of the
construction of access to Grand Central Station. There can be no
assurance that Phase 1 will be completed on the terms currently
contemplated or that Phase 2 of the development project will
commence on the terms currently contemplated or at all.
- On July 28, 2023, a joint venture in which BXP has a 50%
interest exercised an option to extend by one year the maturity
date of its loan collateralized by 100 Causeway in Boston,
Massachusetts. The 634,000 square foot premier workplace is located
in Boston, MA and is 95% leased. The modified and extended loan has
an outstanding balance of $336.6 million, which included an
approximately $4.0 million principal repayment and the interest
rate was reduced from Term SOFR plus 1.60% to Term SOFR plus 1.48%
per annum. The loan now matures on September 5, 2024, with a
one-year extension option, subject to certain conditions.
- After 25 years leading the San Francisco region for BXP, Bob
Pester has elected to retire from his position as Executive Vice
President in early 2024. Rod Diehl, currently Senior Vice
President, Leasing for the San Francisco region, will succeed Mr.
Pester upon his retirement. As part of this transition, BXP will
reorganize West Coast operations for the San Francisco, Los
Angeles, and Seattle regions under one management structure,
effective immediately. Messrs. Pester and Diehl will jointly lead
West Coast operations with Mr. Pester transitioning duties to Mr.
Diehl over the months ahead. BXP will continue to maintain its
regional presence in Los Angeles and Seattle.
- Effective July 28, 2023, BXP’s independent directors appointed
Joel I. Klein to serve as the lead independent director, replacing
Kelly A. Ayotte. Ms. Ayotte stepped down as the lead independent
director due to the additional time commitment and responsibilities
of that role, and the independent directors determined that it is
in the best interests of BXP and its stockholders that Mr. Klein
once again assume that role. Ms. Ayotte served as BXP’s lead
independent director since May 2022 and will remain on BXP’s Board
of Directors. Mr. Klein previously served as BXP’s lead independent
director from May 2016 to May 2019 and as its independent Chairman
from May 2019 to May 2022.
- Continued BXP’s leadership and ongoing commitment to
sustainability and published BXP’s 2022 ESG Report in conjunction
with Earth Day in April 2023, which highlights that, among other
things, BXP achieved its energy and water reduction targets in 2022
and remains on track to achieve carbon-neutral operations by 2025.
In conjunction with the publication, BXP hosted its second annual
ESG Investor Update Webcast on May 31, 2023.
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, 2023. In the opinion of
management, BXP has made all adjustments considered necessary for a
fair statement of these reported results.
EPS and FFO per Share Guidance:
BXP’s guidance for the third quarter 2023 and full year 2023 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, interest rates, the timing of the lease-up of available
space, the timing of development cost outlays and development
deliveries, and the earnings impact of the events referenced in
this release and those referenced during the related conference
call. The estimates do not include (1) possible future gains or
losses or the impact on operating results from other possible
future property acquisitions or dispositions, (2) the impacts of
any other capital markets activity, (3) future write-offs or
reinstatements of accounts receivable and accrued rent balances, or
(4) 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,
impairment losses on depreciable real estate, and any gains or
losses associated with disposition activity. BXP 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 on
depreciable real estate, or gains or losses associated with
disposition activities. There can be no assurance that BXP’s actual
results will not differ materially from the estimates set forth
below.
Third Quarter 2023
Full Year 2023
Low
High
Low
High
Projected EPS (diluted)
$
0.63
$
0.65
$
2.42
$
2.47
Add:
Projected Company share of real estate
depreciation and amortization
1.20
1.20
4.82
4.82
Projected FFO per share (diluted)
$
1.83
$
1.85
$
7.24
$
7.29
BXP will host a conference call on Wednesday, August 2, 2023 at
10:00 AM Eastern Time, open to the general public, to discuss the
second quarter 2023 results, provide a business update, and discuss
other business matters that may be of interest to investors.
Participants who would like to join the call and ask a question may
register at
https://register.vevent.com/register/BIac804611f1af4449a41bec3ca33cb641
to receive the dial-in numbers and unique PIN to access the call.
There will also be a live audio, listen-only webcast of the call,
which may be accessed in the Investors section of BXP’s website at
https://investors.bxp.com/events-webcasts. Shortly after the call,
a replay of the call will be available on BXP’s website at
https://investors.bxp.com/events-webcasts for up to twelve months
following the call.
Additionally, a copy of BXP’s second quarter 2023 “Supplemental
Operating and Financial Data” and this press release are available
in the Investors section of BXP’s website at investors.bxp.com.
BXP (NYSE: BXP) is the largest publicly traded developer, owner,
and manager of premier workplaces in the United States,
concentrated in six dynamic gateway markets - Boston, Los Angeles,
New York, San Francisco, Seattle, and Washington, DC. BXP has
delivered places that power progress for our clients and
communities for more than 50 years. BXP is a fully integrated real
estate company, organized as a real estate investment trust (REIT).
Including properties owned by unconsolidated joint ventures, BXP’s
portfolio totals 54.1 million square feet and 191 properties,
including 13 properties under construction/redevelopment. For more
information about BXP, please visit our website 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
“anticipates,” “believes,” “budgeted,” “could,” “estimates,”
“expects,” “guidance,” “intends,” “may,” “might,” “plans,”
“projects,” “should,” “will,” and similar expressions that do not
relate to historical matters. These statements are based on our
current plans, expectations, projections and assumptions about
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 BXP’s 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 statements. These
factors include, without limitation, the risks and uncertainties
related to the impact of changes in general economic and capital
market conditions, including continued inflation, increasing
interest rates, supply chain disruptions, labor market disruptions,
dislocation and volatility in capital markets, potential
longer-term changes in consumer and client behavior resulting from
the severity and duration of any downturn in the U.S. or global
economy, general risks affecting the real estate industry
(including, without limitation, the inability to enter into or
renew leases on favorable terms, changes in client preferences and
space utilization, dependence on clients’ financial condition, and
competition from other developers, owners and operators of real
estate), the impact of geopolitical conflicts, including the
ongoing war in Ukraine, the immediate and long-term impact of the
outbreak of a highly infectious or contagious disease, on our and
our clients’ financial condition, results of operations and cash
flows (including the impact of actions taken to contain the
outbreak or mitigate its impact, the direct and indirect economic
effects of the outbreak and containment measures on our clients,
and the ability of our clients to successfully operate their
businesses), 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 BXP’s accounting policies and on
period-to-period comparisons of financial results, the
uncertainties of costs to comply with regulatory changes (including
potential costs to comply with the Securities and Exchange
Commission’s proposed rules to standardize climate-related
disclosures) and other risks and uncertainties detailed from time
to time in BXP’s filings with the SEC. These forward-looking
statements speak only as of the date of issuance of this report and
are not guarantees of future results, performance, or achievements.
BXP 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 otherwise required by
law.
Financial tables follow.
BOSTON PROPERTIES, INC.
CONSOLIDATED BALANCE SHEETS (Unaudited)
June 30, 2023
December 31, 2022
(in thousands, except for
share and par value amounts)
ASSETS
Real estate, at cost
$
24,642,681
$
24,261,588
Construction in progress
482,850
406,574
Land held for future development
637,191
721,501
Right of use assets - finance leases
237,526
237,510
Right of use assets - operating leases
166,421
167,351
Less: accumulated depreciation
(6,568,568
)
(6,298,082
)
Total real estate
19,598,101
19,496,442
Cash and cash equivalents
1,581,575
690,333
Cash held in escrows
46,915
46,479
Investments in securities
33,481
32,277
Tenant and other receivables, net
91,968
81,389
Related party note receivable, net
88,834
78,576
Sales-type lease receivable, net
13,250
12,811
Accrued rental income, net
1,318,320
1,276,580
Deferred charges, net
710,820
733,282
Prepaid expenses and other assets
77,457
43,589
Investments in unconsolidated joint
ventures
1,780,959
1,715,911
Total assets
$
25,341,680
$
24,207,669
LIABILITIES AND EQUITY
Liabilities:
Mortgage notes payable, net
$
3,274,764
$
3,272,368
Unsecured senior notes, net
10,985,395
10,237,968
Unsecured line of credit
—
—
Unsecured term loan, net
1,196,046
730,000
Lease liabilities - finance leases
251,874
249,335
Lease liabilities - operating leases
204,826
204,686
Accounts payable and accrued expenses
434,574
417,545
Dividends and distributions payable
171,465
170,643
Accrued interest payable
111,088
103,774
Other liabilities
418,813
450,918
Total liabilities
17,048,845
15,837,237
Commitments and contingencies
—
—
Redeemable deferred stock units
6,292
6,613
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; none issued or outstanding
—
—
Common stock, $0.01 par value, 250,000,000
shares authorized, 156,932,300 and 156,836,767 issued and
156,853,400 and 156,757,867 outstanding at June 30, 2023 and
December 31, 2022, respectively
1,569
1,568
Additional paid-in capital
6,561,161
6,539,147
Dividends in excess of earnings
(516,550
)
(391,356
)
Treasury common stock at cost, 78,900
shares at June 30, 2023 and December 31, 2022
(2,722
)
(2,722
)
Accumulated other comprehensive loss
(3,406
)
(13,718
)
Total stockholders’ equity attributable to
Boston Properties, Inc.
6,040,052
6,132,919
Noncontrolling interests:
Common units of the Operating
Partnership
689,123
683,583
Property partnerships
1,557,368
1,547,317
Total equity
8,286,543
8,363,819
Total liabilities and equity
$
25,341,680
$
24,207,669
BOSTON PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Three months ended June
30,
Six months ended June
30,
2023
2022
2023
2022
(in thousands, except for per
share amounts)
Revenue
Lease
$
761,733
$
721,899
$
1,518,608
$
1,440,019
Parking and other
26,984
30,346
50,993
52,080
Hotel
13,969
12,089
22,070
16,646
Development and management services
9,858
6,354
18,838
12,185
Direct reimbursements of payroll and
related costs from management services contracts
4,609
3,239
9,844
7,304
Total revenue
817,153
773,927
1,620,353
1,528,234
Expenses
Operating
Rental
291,036
273,848
582,344
544,103
Hotel
8,161
6,444
14,832
11,284
General and administrative
44,175
34,665
99,977
77,859
Payroll and related costs from management
services contracts
4,609
3,239
9,844
7,304
Transaction costs
308
496
1,219
496
Depreciation and amortization
202,577
183,146
411,311
360,770
Total expenses
550,866
501,838
1,119,527
1,001,816
Other income (expense)
Income (loss) from unconsolidated joint
ventures
(6,668
)
(54
)
(14,237
)
2,135
Gains on sales of real estate
—
96,247
—
118,948
Interest and other income (loss)
17,343
1,195
28,284
2,423
Other income - assignment fee
—
6,624
—
6,624
Gains (losses) from investments in
securities
1,571
(4,716
)
3,236
(6,978
)
Unrealized gain on non-real estate
investment
124
—
383
—
Interest expense
(142,473
)
(104,142
)
(276,680
)
(205,370
)
Net income
136,184
267,243
241,812
444,200
Net income attributable to noncontrolling
interests
Noncontrolling interests in property
partnerships
(19,768
)
(18,546
)
(38,428
)
(36,095
)
Noncontrolling interest—common units of
the Operating Partnership
(12,117
)
(25,708
)
(21,169
)
(42,061
)
Net income attributable to Boston
Properties, Inc.
$
104,299
$
222,989
$
182,215
$
366,044
Basic earnings per common share
attributable to Boston Properties, Inc.
Net income
$
0.67
$
1.42
$
1.16
$
2.33
Weighted average number of common shares
outstanding
156,826
156,720
156,815
156,685
Diluted earnings per common share
attributable to Boston Properties, Inc.
Net income
$
0.66
$
1.42
$
1.16
$
2.33
Weighted average number of common and
common equivalent shares outstanding
157,218
157,192
157,131
157,098
BOSTON PROPERTIES, INC.
FUNDS FROM OPERATIONS (1) (Unaudited)
Three months ended June
30,
Six months ended June
30,
2023
2022
2023
2022
(in thousands, except for per
share amounts)
Net income attributable to Boston
Properties, Inc.
$
104,299
$
222,989
$
182,215
$
366,044
Add:
Noncontrolling interest - common units of
the Operating Partnership
12,117
25,708
21,169
42,061
Noncontrolling interests in property
partnerships
19,768
18,546
38,428
36,095
Net income
136,184
267,243
241,812
444,200
Add:
Depreciation and amortization expense
202,577
183,146
411,311
360,770
Noncontrolling interests in property
partnerships’ share of depreciation and amortization
(17,858
)
(17,414
)
(35,569
)
(35,067
)
Company’s share of depreciation and
amortization from unconsolidated joint ventures
25,756
21,120
51,401
43,164
Corporate-related depreciation and
amortization
(442
)
(413
)
(911
)
(817
)
Less:
Gains on sales of real estate
—
96,247
—
118,948
Unrealized gain on non-real estate
investment
124
—
383
—
Noncontrolling interests in property
partnerships
19,768
18,546
38,428
36,095
Funds from operations (FFO) attributable
to the Operating Partnership (including Boston Properties,
Inc.)
326,325
338,889
629,233
657,207
Less:
Noncontrolling interest - common units of
the Operating Partnership’s share of funds from operations
33,481
34,329
64,371
66,509
Funds from operations attributable to
Boston Properties, Inc.
$
292,844
$
304,560
$
564,862
$
590,698
Boston Properties, Inc.’s percentage share
of funds from operations - basic
89.74
%
89.87
%
89.77
%
89.88
%
Weighted average shares outstanding -
basic
156,826
156,720
156,815
156,685
FFO per share basic
$
1.87
$
1.94
$
3.60
$
3.77
Weighted average shares outstanding -
diluted
157,218
157,192
157,131
157,098
FFO per share diluted
$
1.86
$
1.94
$
3.59
$
3.76
(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.
(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 calculation 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. 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. (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
% Occupied by Location
(1)
% Leased by Location
(2)
June 30, 2023
December 31, 2022
June 30, 2023
December 31, 2022
Boston
90.7 %
90.2 %
92.1 %
92.7 %
Los Angeles
86.0 %
88.3 %
86.2 %
88.6 %
New York
88.5 %
86.8 %
90.6 %
90.9 %
San Francisco
88.2 %
88.5 %
89.1 %
88.8 %
Seattle
87.9 %
88.3 %
90.5 %
90.9 %
Washington, DC
84.9 %
88.7 %
89.2 %
93.0 %
Total Portfolio
88.3 %
88.6 %
90.4 %
91.5 %
(1)
Represents signed leases for
which revenue recognition has commenced in accordance with
GAAP.
(2)
Represents signed leases for
which revenue recognition has commenced in accordance with GAAP and
signed leases for vacant space with future commencement dates.
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version on businesswire.com: https://www.businesswire.com/news/home/20230801323245/en/
AT BXP Michael LaBelle
Executive Vice President, Chief Financial Officer and Treasurer
mlabelle@bxp.com
Helen Han Vice President, Investor Relations hhan@bxp.com
Boston Properties (NYSE:BXP)
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Boston Properties (NYSE:BXP)
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De Juin 2023 à Juin 2024