News Release Details

BOSTON--(BUSINESS WIRE)--Jan. 31, 2017-- Boston Properties, Inc. (NYSE: BXP), a real estate investment trust, reported results today for the fourth quarter ended December 31, 2016.

Results for the quarter ended December 31, 2016

Net income attributable to common shareholders was $145.5 million for the quarter ended December 31, 2016, compared to $137.9 million for the quarter ended December 31, 2015. Net income attributable to common shareholders per share (EPS) for the quarter ended December 31, 2016 was $0.95 basic and $0.94 on a diluted basis. This compares to EPS for the quarter ended December 31, 2015 of $0.90 basic and $0.90 on a diluted basis. Net income attributable to common shareholders for the quarter ended December 31, 2016 includes a gain on sale of investment in unconsolidated joint venture of approximately $59.4 million, or $0.35 per share basic and $0.34 per share on a diluted basis. Net income attributable to common shareholders for the quarter ended December 31, 2015 includes gains on sales of real estate aggregating approximately $81.3 million, or $0.48 per share basic and $0.48 per share on a diluted basis. In addition, net income attributable to common shareholders for the quarter ended December 31, 2015 includes a loss from early extinguishment of debt totaling approximately $(22.0) million, or $(0.13) per share basic and $(0.13) per share on a diluted basis, related to the defeasance of the mortgage loan collateralized by the Company's 100 & 200 Clarendon Street property. The weighted-average number of basic and diluted shares outstanding totaled approximately 153,814,000 and 153,991,000, respectively, for the quarter ended December 31, 2016 and 153,602,000 and 153,897,000, respectively, for the quarter ended December 31, 2015.

Funds from Operations (FFO) for the quarter ended December 31, 2016 were $236.9 million, or $1.54 per share basic and $1.54 per share diluted. This compares to FFO for the quarter ended December 31, 2015 of $197.3 million, or $1.28 per share basic and $1.28 per share diluted. The Company’s reported FFO of $1.54 per share diluted was greater than the mid-point of the guidance previously provided of $1.49-$1.51 per share diluted primarily due to better than expected portfolio operations of $0.02 per share and fee income from tenant services, leasing commissions and development services of $0.02 per share.

Results for the year ended December 31, 2016

Net income attributable to common shareholders was $500.6 million for the year ended December 31, 2016, compared to $572.6 million for the year ended December 31, 2015. EPS for the year ended December 31, 2016 was $3.25 basic and $3.25 on a diluted basis. This compares to EPS for the year ended December 31, 2015 of $3.73 basic and $3.72 on a diluted basis. The weighted-average number of basic and diluted shares outstanding totaled approximately 153,715,000 and 153,977,000, respectively, for the year ended December 31, 2016 and 153,471,000 and 153,844,000, respectively, for the year ended December 31, 2015.

FFO for the year ended December 31, 2016 was $927.7 million, or $6.04 per share basic and $6.03 per share diluted. This compares to FFO for the year ended December 31, 2015 of $823.7 million, or $5.37 per share basic and $5.36 per share diluted.

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 and year ended December 31, 2016. In the opinion of management, all adjustments considered necessary for a fair presentation of these reported results have been made.

As of December 31, 2016, the Company’s portfolio consisted of 174 properties aggregating approximately 47.7 million square feet, including eight properties under construction/redevelopment totaling approximately 4.0 million square feet. The overall percentage of leased space for the 163 properties in service (excluding the Company’s two residential properties and hotel) as of December 31, 2016 was 90.2%.

Significant events during the fourth quarter included:

• On October 1, 2016, a joint venture in which the Company has a 50% interest completed and fully placed in-service 1265 Main Street, a Class A office project with approximately 115,000 net rentable square feet located in Waltham, Massachusetts. The property is 100% leased. On December 8, 2016, the joint venture obtained mortgage financing totaling $40.4 million collateralized by the property. The mortgage loan bears interest at a fixed rate of 3.77% per annum and matures on January 1, 2032.
• On October 20, 2016, the Company and its partner in the unconsolidated joint venture that owns Metropolitan Square located in Washington, DC, completed the sale of an 80% interest in the joint venture for a gross sale price of approximately $282.4 million, including the assumption by the buyer of its pro rata share of the mortgage loan collateralized by the property totaling approximately $133.4 million and certain unfunded leasing costs totaling approximately $14.2 million. Net cash proceeds to the Company totaled approximately $58.2 million, resulting in a gain on sale of investment totaling approximately $59.4 million. Prior to the sale, the Company owned a 51% interest and its partner owned a 49% interest in the joint venture. Following the sale, the Company continues to own a 20% interest in the joint venture with the buyer owning the remaining 80%. Metropolitan Square is an approximately 607,000 net rentable square foot Class A office property.
• On October 24, 2016, the Company entered into an option agreement that will allow it to ground lease, with the future right to purchase, real property adjacent to the MacArthur BART station located in Oakland, California, that could support the development of a 400-unit residential building and supporting retail space.
• On November 7, 2016, the Company entered into a 15-year lease with a tenant for approximately 476,500 net rentable square feet of Class A office space in a build-to-suit development project to be located at the Company's 145 Broadway property at Kendall Center in Cambridge, Massachusetts. 145 Broadway currently consists of an approximately 80,000 net rentable square foot Class A office property that will be demolished and developed into an approximately 486,000 net rentable square foot Class A office property, including approximately 9,500 net rentable square feet of retail space. The commencement of the redevelopment project is subject to the receipt of the remaining necessary approvals, and the Company currently expects to begin the project in the second quarter of 2017 with the relocation of an existing tenant to another property within the Company's portfolio. The Company expects the building will be available for occupancy by the new tenant during the fourth quarter of 2019. There can be no assurance that the project will commence or that the building will be available for occupancy on the anticipated schedule or at all.
• On November 15, 2016, a joint venture in which the Company has a 50% interest extended the loan collateralized by its Annapolis Junction Building Six property. The extended loan has a total commitment amount of approximately $15.4 million, bears interest at a variable rate equal to LIBOR plus 2.25% per annum and matures on November 17, 2018. Annapolis Junction Building Six is a Class A office property with approximately 119,000 net rentable square feet located in Annapolis, Maryland.
• On November 28, 2016, the Company entered into a joint venture with the partner at its North Station development to acquire the air rights for the future development of a hotel property at the site. The joint venture partner contributed an air rights parcel and improvements, with a fair value of approximately $7.4 million, for its initial 50% interest in the joint venture. The Company contributed improvements totaling approximately $0.7 million and will contribute cash totaling approximately $6.7 million for its initial 50% interest. On November 28, 2016, the joint venture entered into a 99-year air rights lease with a third-party hotel developer/operator. In addition, on November 28, 2016, the Company and its partner entered into a joint venture to acquire the air rights for the future development of a residential tower at the site, consisting of an approximately 40-story residential tower totaling approximately 320,000 rentable square feet comprised of 440 apartment units. The joint venture partner contributed an air rights parcel, with a fair value of approximately $24.2 million, for its initial 50% interest in the joint venture. The Company contributed improvements totaling approximately $17.7 million and will contribute cash totaling approximately $6.5 million for its initial 50% interest.
• On December 6, 2016, the Company entered into a development agreement with George Washington University to pursue the development of a Class A office property with approximately 482,000 net rentable square feet on land parcels located in Washington, DC. The development agreement provides for the execution of a 75-year ground lease for the property upon completion of the entitlement process and relocation of existing tenants anticipated to occur in 2019. The Company has made a deposit of $15.0 million that will be credited against ground rent under the ground lease.
• On December 7, 2016, joint ventures in each of which the Company has a 50% interest combined and extended mortgage loans collateralized by Annapolis Junction Building Seven and Building Eight. The new mortgage loan has a total commitment amount of approximately $42.0 million, with an initial balance totaling approximately $36.7 million, bears interest at a variable rate equal to LIBOR plus 2.35% per annum and matures on December 7, 2019, with three, one-year extension options, subject to certain conditions. Annapolis Junction Building Seven and Building Eight are Class A office properties with approximately 127,000 and 126,000 net rentable square feet, respectively, located in Annapolis, Maryland.
• On December 19, 2016, a joint venture in which the Company has a 50% interest obtained construction financing with a total commitment of $250.0 million collateralized by its Dock 72 development project. The construction financing bears interest at a variable rate equal to LIBOR plus 2.25% per annum and matures on December 18, 2020, with two, one-year extension options, subject to certain conditions. There have been no loan draws to date. Dock 72 is a Class A office project with approximately 670,000 net rentable square feet located in Brooklyn, New York.
• On December 19, 2016, the Company declared a regular quarterly cash dividend of $0.75 per share of common stock for the period from October 1, 2016 to December 31, 2016, payable on January 30, 2017 to shareholders of record as of the close of business on December 30, 2016. This represents an increase of approximately 15.4%, or $0.10 per share, over the most recent quarterly cash dividend of $0.65 per share.
• On December 29, 2016, the Company commenced the redevelopment of 191 Spring Street, a Class A office project with approximately 160,000 net rentable square feet located in Lexington, Massachusetts.

Transactions completed subsequent to December 31, 2016:

• On January 25, 2017, the Company’s Compensation Committee approved the 2017 Multi-Year, Long-Term Incentive Program (the “2017 MYLTIP”) as a performance-based component of the Company’s overall compensation program. Under the Financial Accounting Standards Board’s Accounting Standards Codification 718 “Compensation - Stock Compensation,” the 2017 MYLTIP has an aggregate value of approximately $17.7 million, which will generally be amortized into earnings over the four-year plan period under the graded vesting method.

EPS and FFO per Share Guidance:

The Company’s guidance for the first quarter and full year 2017 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 and the earnings impact of the events referenced in this release and otherwise referenced during the conference call referred to below.  The estimates do not include possible future gains or losses or the impact on operating results from other possible future property acquisitions or dispositions, other possible capital markets activity 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, impairment losses on depreciable real estate 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 below.

EPS Guidance:

As shown below, the Company has updated its projected guidance for EPS (diluted) for the full year 2017 to $2.56 - $2.66 per share from $2.58 - $2.76 per share.  This is a decrease of approximately ($0.06) per share at the mid-point of the Company’s guidance primarily consisting of a ($0.10) per share increase in depreciation and amortization expense, a ($0.02) per share increase in demolition costs and ($0.01) per share increase in G & A expense.  These items are partially offset by (1) the net impact from the early termination of a tenant at one of our consolidated joint ventures of $0.03 per share, (2) $0.02 per share of improved portfolio performance and (3) $0.02 per share of additional fee income.

FFO per Share Guidance:

As shown below, the Company has updated its projected guidance for FFO per share (diluted) for the full year 2017 to $6.13 - $6.23 per share from $6.05 - $6.23 per share.  This is an increase of approximately $0.04 per share at the mid-point of the Company’s guidance primarily consisting of (1) the net impact from the early termination of a tenant at one of our consolidated joint ventures of $0.03 per share, (2) $0.02 per share of improved portfolio performance and (3) $0.02 per share of additional fee income.  These items are partially offset by a ($0.02) per share increase in demolition costs and ($0.01) per share increase in G & A expense.

Boston Properties will host a conference call on Wednesday, February 1, 2017 at 10:00 AM Eastern Time, open to the general public, to discuss the fourth quarter and full year 2016 results, the 2017 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 23631735.  A replay of the conference call will be available through February 17, 2017, by dialing (855) 859-2056 (Domestic) or (404) 537-3406 (International) and entering the passcode 23631735.  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’ fourth quarter 2016 “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 real estate investment trust that develops, redevelops, acquires, manages, operates and owns a diverse portfolio of primarily Class A office space totaling 47.7 million square feet and consisting of 164 office properties (including six properties under construction), five retail properties, four residential properties (including two properties under construction) 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, Los Angeles, New York, San Francisco and Washington, DC.

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 Company’s ability to satisfy the closing conditions to the pending transactions described above, 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, including its guidance for the first quarter and full fiscal year 2017, whether as a result of new information, future events or otherwise.

Financial tables follow.

(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, real estate-related depreciation and amortization, and our share of income (loss) from unconsolidated partnerships and joint ventures. 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.

(2) For the year ended December 31, 2015, excludes the noncontrolling interests in property partnerships' share of a gain on sale of real estate totaling approximately $101.1 million.

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Source: Boston Properties, Inc.

Boston Properties, Inc.
Michael LaBelle, 617-236-3352
Executive Vice President
Chief Financial Officer
or
Arista Joyner, 617-236-3343
Investor Relations Manager