Boston Properties, Inc. Announces Fourth Quarter 2004 Results
Reports diluted FFO per share of $1.05 Reports diluted EPS of $0.56
BOSTON, Jan 25, 2005 /PRNewswire-FirstCall via COMTEX/ -- Boston Properties, Inc. (NYSE: BXP), a real estate investment trust, reported results today for the fourth quarter ended December 31, 2004.
Results for the quarter ended December 31, 2004
Funds from Operations (FFO) for the quarter ended December 31, 2004 were $118.9 million, or $1.09 per share basic and $1.05 per share diluted. This compares to FFO for the quarter ended December 31, 2003 of $106.9 million, or $1.09 per share basic and $1.05 per share diluted. The weighted average number of basic and diluted shares outstanding totaled 109,358,601 and 117,268,572, respectively, for the quarter ended December 31, 2004 and 97,944,897 and 107,187,540, respectively, for the same quarter last year.
Net income available to common shareholders was $62.3 million for the three months ended December 31, 2004, compared to $60.6 million for the same quarter last year. Net income available to common shareholders per share (EPS) for the quarter ended December 31, 2004 was $0.57 basic and $0.56 on a diluted basis. This compares to EPS for the fourth quarter of 2003 of $0.62 basic and $0.61 on a diluted basis.
Results for the year ended December 31, 2004
Funds from Operations (FFO) for the year ended December 31, 2004 were $459.5 million, or $4.32 per share basic and $4.16 per share diluted. This compares to FFO for the year ended December 31, 2003 of $412.1 million, or $4.25 per share basic and $4.09 per share diluted before the application of SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended. The weighted average number of basic and diluted shares outstanding totaled 106,458,214 and 114,815,522, respectively, for the year ended December 31, 2004 and 96,899,873 and 106,861,317, respectively, for last year.
Net income available to common shareholders was $284.0 million for the year ended December 31, 2004, compared to $365.3 million for last year. Net income available to common shareholders per share (EPS) for the year ended December 31, 2004 was $2.67 basic and $2.61 on a diluted basis. This compares to EPS for the year ended December 31, 2003 of $3.71 basic and $3.65 on a diluted basis. Diluted EPS includes $0.34 and $1.39 related to gains on sales of real estate and discontinued operations for the years ended December 31, 2004 and 2003, respectively.
The reported results are unaudited and there can be no assurance that the results will not vary from the final information for the quarter and year ended December 31, 2004. In the opinion of management, all adjustments considered necessary for a fair presentation of these reported results have been made.
As of December 31, 2004, the Company's portfolio consisted of 125 properties comprising approximately 44.1 million square feet, including three properties under construction and one expansion project totaling 1.3 million square feet. The overall percentage of leased space for the 119 properties in service as of December 31, 2004 was 92.1%.
Significant events of the fourth quarter include:
- On October 25, 2004, the Company formed Boston Properties Office Value-Added Fund, L.P. (the "Value-Added Fund"), which is a strategic partnership with two institutional investors, to pursue the acquisition of value-added investments in non-core office assets within the Company's existing markets. The Company intends to leverage its regional operating platform to source and acquire properties that will generate opportunity for value creation through repositioning, capital improvements and/or leasing strategies. The Value-Added Fund has total equity commitments of $140 million, of which the Company has committed $35 million. Assuming an estimated 65% leverage ratio, the Value-Added Fund is anticipated to have up to $400 million of total investments. The Company will receive asset management, property management, leasing and redevelopment fees and, if certain return thresholds are achieved, will be entitled to an additional promoted interest.
- On November 1, 2004, the Value-Added Fund completed the acquisition of Worldgate Plaza, a 322,000 square foot office complex located in Herndon, Virginia for a purchase price of approximately $78.2 million. The acquisition was financed with new mortgage indebtedness totaling $57.0 million and approximately $21.2 million in cash, of which the Company's share was $5.3 million. The mortgage financing bears interest at a variable rate equal to LIBOR plus 0.89% per annum and matures in October 2007, with two one-year extension options. Properties held by the Value-Added Fund are not included in the Company's portfolio statistics.
- On November 8, 2004, a joint-venture, of which the Company owned a 33.33% interest, exercised its right to terminate the purchase agreement to acquire the 21-acre site on the Boston waterfront known as Fan Pier. The venture forfeited its $2.5 million deposit, of which the Company's share was $0.8 million. The Company recognized approximately $1.1 million of general and administrative expense during the quarter consisting of the Company's share of the forfeited deposit of $0.8 million and approximately $0.3 million of related due diligence costs.
- On December 8, 2004, the Company completed the sale of 560 Forbes Boulevard for approximately $4.0 million. This 40,000 square foot industrial property is located in South San Francisco, California.
- On December 17, 2004, the Company modified its Dividend Reinvestment and Stock Purchase Plan. Full details of the modified Plan are contained in the Plan prospectus, which was filed with the Securities and Exchange Commission.
- On December 20, 2004, a joint-venture in which the Company has a 25% interest refinanced the construction loan on its 901 New York Avenue property located in Washington, D.C. The original construction loan had an outstanding balance of $96.7 million, bore interest at LIBOR plus 1.65% per annum, and was scheduled to mature in November 2005. The new mortgage loan totaling $170.0 million bears interest at a fixed rate of 5.19% per annum and matures on January 1, 2015. The new mortgage loan requires interest-only payments for the first three years and requires principal and interest payments based on a 30-year amortization for years four through ten.
The Company's guidance for the first quarter of 2005 and the full year 2005 for EPS (diluted) and FFO per share (diluted) is set forth and reconciled below. The reconciliation of projected EPS to projected FFO per share, as provided below, is consistent with the Company's historical computations.
First Quarter 2005 Full Year 2005
Low - High Low - High
Projected EPS (diluted) $0.49 - $0.51 $2.25 - $2.40
Add:
Projected Company Share of
Real Estate Depreciation
and Amortization $0.46 - $0.46 $1.85 - $1.85
Projected FFO per Share
(diluted) $0.95 - $0.97 $4.10 - $4.25
The foregoing estimates reflect management's view of current and future market conditions, including assumptions with respect to rental rates, occupancy levels and earnings impact of the events referenced in this release. 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 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 above.
Boston Properties will host a conference call tomorrow, January 26, 2005 at 10:00 AM (Eastern Time), open to the general public, to discuss the fourth quarter and full fiscal year 2004 results, the 2005 projections, and other related matters. The number to call for this interactive teleconference is (800) 240-2430. A replay of the conference call will be available through February 2, 2005 by dialing (800) 405-2236 and entering the passcode 11020358. An audio-webcast will also be archived and may be accessed at http://www.bostonproperties.com in the Investors section under the heading Audio Archive.
Additionally, a copy of Boston Properties' fourth quarter 2004 "Supplemental Operating and Financial Data" and this press release are available in the Investors section of the Company's website at http://www.bostonproperties.com. These materials are also available by contacting Investor Relations at (617) 236-3322 or by written request to:
Investor Relations
Boston Properties, Inc.
111 Huntington Avenue, Suite 300
Boston, MA 02199-7610
Boston Properties is a fully integrated, self-administered and self- managed real estate investment trust that develops, redevelops, acquires, manages, operates and owns a diverse portfolio of Class A office properties and also includes three hotels and one industrial property. The Company is one of the largest owners and developers of Class A office properties in the United States, concentrated in four core markets - Boston, Midtown Manhattan, Washington, D.C. and San Francisco.
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 "guidance," "expects," "plans," "estimates," "projects," "intends," "believes" 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 ability to enter into new leases or renew leases on favorable terms, dependence on tenants' financial condition, the uncertainties of real estate development and acquisition activity, the ability to effectively integrate acquisitions, the costs and availability of financing, the effects of local economic and market conditions, 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, including its guidance for the first quarter and full fiscal year 2005.
BOSTON PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Three months ended Year ended
December 31, December 31,
2004 2003 2004 2003
(in thousands, except for per share amounts)
(unaudited)
Revenue
Rental:
Base rent $276,216 $256,360 $1,070,806 $999,498
Recoveries from tenants 41,621 37,834 165,173 155,225
Parking and other 14,369 12,213 57,313 53,596
Total rental revenue 332,206 306,407 1,293,292 1,208,319
Hotel revenue 24,230 22,082 76,342 70,083
Development and management
services 5,338 4,550 20,464 18,185
Interest and other 841 866 10,367 3,033
Total revenue 362,615 333,905 1,400,465 1,299,620
Expenses
Operating:
Rental 107,074 98,252 419,022 397,258
Hotel 16,961 15,992 55,724 52,250
General and administrative 15,541 11,749 53,636 45,359
Interest 79,378 75,001 306,170 299,436
Depreciation and amortization 68,735 55,824 252,256 208,490
Net derivative losses - - - 1,038
Losses from early
extinguishments of debt - - 6,258 1,474
Total expenses 287,689 256,818 1,093,066 1,005,305
Income before minority
interests in property
partnerships, income from
unconsolidated joint ventures,
minority interest in Operating
Partnership, gains on sales of
real estate and other assets
and discontinued operations 74,926 77,087 307,399 294,315
Minority interests in property
partnerships 1,558 370 4,685 1,827
Income from unconsolidated
joint ventures 664 662 3,380 6,016
Income before minority interest
in Operating Partnership, gains
on sales of real estate and
other assets and discontinued
operations 77,148 78,119 315,464 302,158
Minority interest in Operating
Partnership (16,000) (18,676) (68,174) (73,777)
Income before gains on sales
of real estate and other
assets and discontinued
operations 61,148 59,443 247,290 228,381
Gains on sales of real estate
and other assets, net of
minority interest - - 8,149 57,574
Income before discontinued
operations 61,148 59,443 255,439 285,955
Discontinued Operations:
Income from discontinued
operations, net of minority
interest 19 1,149 1,240 6,133
Gains on sales of real estate
from discontinued operations,
net of minority interest 1,087 - 27,338 73,234
Net income available to common
shareholders $62,254 $60,592 $284,017 $365,322
Basic earnings per common
share:
Income available to common
shareholders before
discontinued operations $0.56 $0.61 $2.40 $2.89
Discontinued operations, net
of minority interest 0.01 0.01 0.27 0.82
Net income available to
common shareholders $0.57 $0.62 $2.67 $3.71
Weighted average number of
common shares outstanding 109,359 97,945 106,458 96,900
Diluted earnings per common
share:
Income available to common
shareholders before
discontinued operations $0.55 $0.60 $2.35 $2.84
Discontinued operations, net
of minority interest 0.01 0.01 0.26 0.81
Net income available to
common shareholders $0.56 $0.61 $2.61 $3.65
Weighted average number of
common and common equivalent
shares outstanding 111,888 100,100 108,762 98,486
BOSTON PROPERTIES, INC.
CONSOLIDATED BALANCE SHEETS
December 31, December 31,
2004 2003
(in thousands, except for share amounts)
(unaudited)
ASSETS
Real estate $9,033,858 $8,202,958
Development in progress 35,063 542,600
Land held for future development 222,306 232,098
Real estate held for sale, net - 5,604
Less: accumulated depreciation (1,143,369) (1,001,435)
Total real estate 8,147,858 7,981,825
Cash and cash equivalents 239,344 22,686
Cash held in escrows 24,755 21,321
Tenant and other receivables, net of
allowance for doubtful accounts of
$2,879 and $3,157, respectively 25,500 18,425
Accrued rental income, net of allowance
of $4,252 and $5,030, respectively 251,236 189,852
Deferred charges, net 254,950 188,855
Prepaid expenses and other assets 38,630 39,350
Investments in unconsolidated joint
ventures 80,955 88,786
Total assets $9,063,228 $8,551,100
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Mortgage notes payable $3,541,131 $3,471,400
Unsecured senior notes, net of
discount 1,470,683 1,470,320
Unsecured line of credit - 63,000
Accounts payable and accrued expenses 94,451 92,026
Dividends and distributions payable 91,428 84,569
Interest rate contracts 1,164 8,191
Accrued interest payable 50,670 50,931
Other liabilities 91,300 80,367
Total liabilities 5,340,827 5,320,804
Commitments and contingencies - -
Minority interests 786,328 830,133
Stockholders' equity:
Excess stock, $.01 par value,
150,000,000 shares authorized, none
issued or outstanding - -
Preferred stock, $.01 par value,
50,000,000 shares authorized, none
issued or outstanding - -
Common stock, $.01 par value,
250,000,000 shares authorized,
110,399,385 and 98,309,077 shares
issued and 110,320,485 and
98,230,177 shares outstanding in
2004 and 2003, respectively 1,103 982
Additional paid-in capital 2,633,980 2,104,158
Earnings in excess of dividends 325,452 320,900
Treasury common stock, at cost (2,722) (2,722)
Unearned compensation (6,103) (6,820)
Accumulated other comprehensive loss (15,637) (16,335)
Total stockholders' equity 2,936,073 2,400,163
Total liabilities and
stockholders' equity $9,063,228 $8,551,100
BOSTON PROPERTIES, INC.
FUNDS FROM OPERATIONS (1)
Three months ended Year ended
December 31, December 31,
2004 2003 2004 2003
(in thousands, except for per share amounts)
(unaudited)
Net income available to common
shareholders $62,254 $60,592 $284,017 $365,322
Add:
Minority interest in Operating
Partnership 16,000 18,676 68,174 73,777
Less:
Minority interests in property
partnerships 1,558 370 4,685 1,827
Income from unconsolidated joint
ventures 664 662 3,380 6,016
Gains on sales of real estate and
other assets, net of minority
interest - - 8,149 57,574
Income from discontinued
operations, net of minority
interest 19 1,149 1,240 6,133
Gains on sales of real estate
from discontinued operations,
net of minority interest 1,087 - 27,338 73,234
Income before minority interests
in property partnerships, income
from unconsolidated joint ventures,
minority interest in Operating
Partnership, gains on sales of
real estate and other assets and
discontinued operations 74,926 77,087 307,399 294,315
Add:
Real estate depreciation and
amortization (2) 69,989 57,500 257,319 216,235
Income from discontinued
operations 64 1,489 1,703 7,804
Income from unconsolidated joint
ventures 664 662 3,380 6,016
Loss from early extinguishment of
debt associated with sales of
real estate - - - 1,474
Less:
Minority interests in property
partnerships' share of funds
from operations 123 (945) (922) (3,458)
Preferred distributions (3,361) (4,443) (15,050) (21,249)
Funds from operations 142,405 131,350 553,829 501,137
Add/(subtract):
Net derivative losses (SFAS No.
133) - - - 1,038
Funds from operations before net
derivative losses (SFAS No. 133) $142,405 $131,350 $553,829 $502,175
Less:
Minority interest in the
Operating Partnership's share of
funds from operations 23,514 24,419 94,332 90,102
Funds from operations available to
common shareholders before net
derivative losses (SFAS No. 133) $118,891 $106,931 $459,497 $412,073
Our percentage share of funds from
operations - basic 83.49% 81.41% 82.97% 82.06%
Weighted average shares
outstanding - basic 109,359 97,945 106,458 96,900
FFO per share basic before net
derivative losses (SFAS No. 133) $1.09 $1.09 $4.32 $4.25
FFO per share basic after net
derivative losses (SFAS No. 133) $1.09 $1.09 $4.32 $4.24
Weighted average shares
outstanding - diluted 117,269 107,188 114,816 106,861
FFO per share diluted before net
derivative losses (SFAS No. 133) $1.05 $1.05 $4.16 $4.09
FFO per share diluted after net
derivative losses (SFAS No. 133) $1.05 $1.05 $4.16 $4.08
(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) (computed in accordance with
GAAP, including non-recurring items) for gains (or losses) from sales
of properties, real estate related depreciation and amortization, and
after adjustment for unconsolidated partnerships and joint ventures.
FFO is a non-GAAP financial measure. The use of FFO, combined with the
required primary GAAP presentations, has been fundamentally beneficial
in improving the understanding of operating results of REITs among the
investing public and making comparisons of REIT operating results more
meaningful. Management generally considers FFO to be a useful measure
for reviewing our comparative operating and financial performance
because, by excluding gains and losses related to sales of previously
depreciated operating real estate assets and excluding real estate
asset depreciation and amortization (which can vary among owners of
identical assets in similar condition based on historical cost
accounting and useful life estimates), FFO can help one compare the
operating performance of a company's real estate between periods or as
compared to different 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 addition to presenting FFO in accordance with the NAREIT definition, we also disclose FFO after specific and defined supplemental adjustments, including gains or losses on derivative instruments, consisting of changes in fair value and periodic cash settlements, that do not qualify for hedge accounting pursuant to the provisions of SFAS No. 133 (''non-qualifying derivative contracts"). As the impact of the non-qualifying derivative contracts did not extend beyond the quarter ended September 30, 2003, FFO as adjusted for periods ended on and after December 31, 2003 is the same as FFO computed in accordance with the NAREIT definition.
The adjustments for non-qualifying derivative contracts resulted from interest rate contracts we entered into prior to the effective date of SFAS No. 133 to limit our exposure to fluctuations in interest rates with respect to variable rate debt associated with real estate projects under development. Upon transition to SFAS No. 133 on January 1, 2001, the impacts of these contracts were recorded in current earnings, while prior to that time they were capitalized. Although these adjustments are attributable to a single hedging program, the underlying contracts extended over multiple reporting periods and therefore resulted in adjustments from the first quarter of 2001 through the third quarter of 2003. Management presents FFO before the impact of non-qualifying derivative contracts because economically this interest rate hedging program was consistent with our risk management objective of limiting our exposure to interest rate volatility and the change in accounting under GAAP did not correspond to a substantive difference. Management does not currently anticipate structuring future hedging programs in a manner that would give rise to this kind of adjustment.
Management uses FFO principally to evaluate the operating performance of our assets from period to period, and therefore it is important that transactions which impact operations over multiple periods be reflected in FFO in accordance with their substance, even if GAAP requires that the income or loss attributable to the transaction be recorded in a particular period. The resulting adjustments to FFO computed in accordance with the NAREIT definition are particularly meaningful when the events in question are substantively equivalent to other similar transactions, but the reporting of those similar transactions under GAAP more closely matches their economic substance.
Although our FFO as adjusted clearly differs from NAREIT's definition of FFO, as well as that of other REITs and real estate companies, we believe it provides a meaningful supplemental measure of our operating performance because we believe that, by excluding the effects of the non-qualifying derivative contracts, management and investors are presented with an indicator of our operating performance that more closely achieves the objectives of the real estate industry in presenting FFO. Additionally, we believe the nature of these adjustments is non-recurring because there were not similar events during the two preceding years, and the events were not reasonably likely to recur and did not, in fact, recur within the succeeding two years.
Neither FFO nor FFO as adjusted should be considered as alternatives to net income (determined in accordance with GAAP) as an indication of our performance. Neither FFO nor FFO as adjusted represents cash generated from operating activities determined in accordance with GAAP and is not a measure of liquidity or an indicator of our ability to make cash distributions. We believe that to further understand our performance, FFO and FFO as adjusted should be compared with our reported net income and considered in addition to cash flows in accordance with GAAP, as presented in our consolidated financial statements.
(2) Real estate depreciation and amortization consists of depreciation and amortization from the Consolidated Statements of Operations of $68,735, $55,824, $252,256 and $208,490, our share of unconsolidated joint venture real estate depreciation and amortization of $1,798, $1,874, $6,814 and $8,475 and depreciation and amortization from discontinued operations of $0, $505, $685 and $1,987, less corporate related depreciation and amortization of $544, $703, $2,436 and $2,717 for the three months and year ended December 31, 2004 and 2003, respectively.
BOSTON PROPERTIES, INC.
PORTFOLIO LEASING PERCENTAGES
% Leased by Location
December 31, 2004 December 31, 2003
Greater Boston 90.2% 88.9%
Greater Washington, D.C. 97.9% 95.1%
Midtown Manhattan 96.4% 99.4%
Baltimore, MD 90.9% 95.1%
Richmond, VA 91.3% 89.2%
Princeton/East Brunswick, NJ 90.2% 93.4%
Greater San Francisco 80.3% 82.4%
Bucks County, PA N/A 100.0%
Total Portfolio 92.1% 92.1%
% Leased by Type
December 31, 2004 December 31, 2003
Class A Office Portfolio 92.3% 92.7%
Office/Technical Portfolio 97.6% 89.4%
Industrial Portfolio 0.0% 56.6%
Total Portfolio 92.1% 92.1%
SOURCE Boston Properties, Inc.
Michael Walsh, Vice President, Finance, +1-617-236-3410, or Kathleen DiChiara, Investor Relations Manager, +1-617-236-3343, both of Boston Properties, Inc.; or Marilynn Meek - General Info., +1-212-827-3773, or Timothy Grace - Media, +1-312-640-6667, both of Financial Relations Board for Boston Properties, Inc.