Investor Relations Home

Press Release

<< Back
View printer-friendly version

Boston Properties, Inc. Announces Second Quarter 2005 Results and Declares a Special Dividend

07/26/05

BOSTON, July 26, 2005 /PRNewswire-FirstCall via COMTEX/ -- Boston Properties, Inc. (NYSE: BXP), a real estate investment trust, reported results today for the second quarter ended June 30, 2005.

Funds from Operations (FFO) for the quarter ended June 30, 2005 were $121.3 million, or $1.10 per share basic and $1.06 per share diluted, after a supplemental adjustment to exclude losses from early extinguishments of debt associated with the sales of real estate. This compares to FFO for the quarter ended June 30, 2004 of $116.9 million, or $1.09 per share basic and $1.05 per share diluted. Losses from early extinguishments of debt associated with the sales of real estate totaled $0.09 per share basic and $0.08 per share diluted for the quarter ended June 30, 2005. The weighted average number of basic and diluted shares outstanding totaled 110,764,403 and 118,460,257, respectively, for the quarter ended June 30, 2005 and 107,215,662 and 115,207,736, respectively, for the same quarter last year.

Net income available to common shareholders was $166.6 million for the three months ended June 30, 2005, compared to $87.1 million for the quarter ended June 30, 2004. Net income available to common shareholders per share (EPS) for the quarter ended June 30, 2005 was $1.47 basic and $1.44 on a diluted basis. This compares to EPS for the second quarter of 2004 of $0.81 basic and $0.79 on a diluted basis. EPS includes $0.98 and $0.20 on a diluted basis, related to gains on sales of real estate and discontinued operations for the quarters ended June 30, 2005 and 2004, 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 ended June 30, 2005. In the opinion of management, all adjustments considered necessary for a fair presentation of these reported results have been made.

In addition, the Company announced that its Board of Directors declared a special cash dividend of $2.50 per common share payable on October 31, 2005 to shareholders of record as of the close of business on September 30, 2005. The Board of Directors did not make any change in the Company's policy with respect to regular quarterly dividends. The holders of Series Two Preferred Units of limited partnership interest in the Company's Operating Partnership will participate in the special dividend on an as-converted basis along with the holders of common units. The decision to declare a special dividend will be discussed in more detail during the Company's conference call on July 27.

Edward H. Linde, President and Chief Executive Officer of Boston Properties, commented on the Board's decision, by saying, "While the difficulty in purchasing significant high quality assets in accordance with our disciplined return and underwriting standards was one factor, also important was the exceptional strength of our current balance sheet which, even after this distribution, will allow us to aggressively pursue any attractive purchase or development opportunity that surfaces. Therefore, it is appropriate to return undeployed funds to our shareholders. As always, we remain committed to our goal of maximizing total return to our shareholders."

As of June 30, 2005, the Company's portfolio consisted of 122 properties comprising approximately 41.2 million square feet, including two properties under construction and one expansion project totaling 0.7 million square feet. The overall percentage of leased space for the 117 properties in service as of June 30, 2005 was 93.2%.

Significant events of the second quarter include:

  • The Company increased its quarterly dividend payable to holders of the Company's Common Stock from $0.65 per share to $0.68 per share. This represents a 4.6% increase.
  • On April 12, 2005, the Company obtained construction financing totaling $125.0 million collateralized by its Seven Cambridge Center development project located in Cambridge, Massachusetts. Seven Cambridge Center is a fully-leased, build-to-suit project with approximately 231,000 net rentable square feet of office, research laboratory and retail space plus parking for approximately 800 cars. The construction financing bears interest at a variable rate equal to LIBOR plus 1.25% per annum and matures in April 2007 with a one-year extension option.
  • On April 20, 2005, the Company sold the Old Federal Reserve, a Class A office property totaling approximately 150,000 net rentable square feet located in San Francisco, California, at a sale price of approximately $46.8 million.
  • On May 12, 2005, the Company modified its mortgage loan collateralized by 601 and 651 Gateway Boulevard located in South San Francisco, California. The modified mortgage loan of $83.8 million matures on December 31, 2005 and continues to require monthly payments equal to the net cash flow from the property, which will be allocated first to interest based on a rate of 3.50% per annum with the remainder applied to principal through the end of the term, with a balloon payment due at maturity.
  • On May 12, 2005, the Company completed the sale of 100 East Pratt Street, a 639,000 net rentable square foot Class A office property located in Baltimore, Maryland, for approximately $207.5 million. Net cash proceeds were approximately $93.0 million after the repayment of mortgage indebtedness of approximately $84.0 million, a prepayment penalty of approximately $6.5 million and unfunded tenant obligations and other closing costs totaling approximately $24.0 million.
  • On May 16, 2005, the Company completed the sale of Riverfront Plaza, a 910,000 net rentable square foot Class A office property located in Richmond, Virginia, for approximately $247.1 million. Net proceeds were approximately $130.2 million after the repayment of mortgage indebtedness of approximately $104.0 million, a prepayment penalty of approximately $4.3 million and unfunded tenant obligations and other closing costs totaling approximately $8.6 million.
  • On May 19, 2005, the Company extended its $605.0 million unsecured revolving credit agreement for a term expiring on October 30, 2007 with a one-year extension option. The interest rate on borrowings has been reduced from a per annum variable rate of Eurodollar plus 0.70% to Eurodollar plus 0.65%, subject to adjustment in the event of a change in the unsecured debt ratings of the Company's Operating Partnership.
  • On June 21, 2005, the Company refinanced its construction loan facility collateralized by Times Square Tower located in New York City. The new mortgage loan totaling $475.0 million bears interest at a variable rate equal to LIBOR plus 0.50% per annum and matures on July 9, 2008. The new mortgage loan includes provisions for two one-year extensions at the option of the Company. The Company also entered into an agreement to cap the interest rate at 10.5% per annum.

Transactions completed subsequent to June 30, 2005:

  • On July 19, 2005, the Company refinanced at maturity its mortgage loan collateralized by 599 Lexington Avenue located in New York City. The mortgage loan totaling $225.0 million bore interest at a fixed rate of 7.0% per annum. The mortgage loan was refinanced through a secured draw from the Company's revolving credit facility.

EPS and FFO per Share Guidance:

The Company's guidance for the third quarter of 2005 and the full year 2005 for EPS (diluted), FFO per share (diluted) and FFO per share (diluted) after a supplemental adjustment is set forth and reconciled below.

Third Quarter 2005       Full Year 2005

                                      Low    -    High       Low  -     High

    Projected EPS (diluted)       $  0.57    -  $ 0.59    $ 3.04  -  $  3.11

    Add:
         Projected Company Share
          of Real Estate
          Depreciation and
          Amortization               0.45    -    0.45      1.89  -     1.89
    Less:
          Projected Company Share
           of Gains on Sales of
           Real Estate                  -    -       -      0.86  -     0.86


    Projected FFO per Share
     (diluted)                    $  1.02    -  $ 1.04    $ 4.07  -   $ 4.14



    Add:
         Projected Company Share
          of Losses from Early
          Extinguishments of Debt
          Associated with the
          Sales of Real Estate          -    -       -      0.08  -     0.08
    Projected FFO per Share
     (diluted) after a
     supplemental adjustment to
     exclude Losses from Early
     Extinguishments of Debt
     Associated with the Sales of
     Real Estate                  $  1.02    -  $ 1.04    $ 4.15  -   $ 4.22

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.

The foregoing estimates also include FFO after a supplemental adjustment to exclude losses from early extinguishments of debt associated with the sales of real estate. These losses from early extinguishments of debt are incurred when the sale of real estate encumbered by debt requires the Company to pay the extinguishment costs prior to the debt's stated maturity and to write-off unamortized loan costs at the date of the extinguishment. Such costs are excluded from the gains on sales of real estate reported in accordance with GAAP. However, the Company views the losses from early extinguishments of debt associated with the sales of real estate as an incremental cost of the sale transactions because the Company extinguished the debt in connection with the consummation of the sale transactions and the Company had no intent to extinguish the debt absent such transactions. The Company believes that this supplemental adjustment more appropriately reflects the results of its operations exclusive of the impact of its sale transactions.

Boston Properties will host a conference call tomorrow, July 27, 2005 at 10:00 AM (Eastern Time), open to the general public, to discuss the second quarter 2005 results, the 2005 projections and other related matters. The number to call for this interactive teleconference is (800) 218-9073. A replay of the conference call will be available through August 3, 2005 by dialing (800) 405-2236 and entering the passcode 11033290. An audio-webcast will also be archived and may be accessed at http://www.bostonproperties.com in the Investor Relations section under the heading Events & Webcasts. Additionally, a copy of Boston Properties' second quarter 2005 "Supplemental Operating and Financial Data" and this press release are available in the Investor Relations 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 five markets -- Boston, Midtown Manhattan, Washington, D.C., San Francisco and Princeton, N.J.

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 third quarter and full fiscal year 2005.

BOSTON PROPERTIES, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS


                                        Three months ended  Six months ended
                                             June 30,           June 30,
                                          2005     2004      2005     2004

                                             (in thousands, except for
                                                per share amounts)
                                                     (unaudited)
    Revenue

     Rental:
        Base rent                       $277,360 $263,559  $556,109 $517,291
        Recoveries from tenants           41,856   39,261    85,196   79,842
        Parking and other                 14,248   14,083    28,173   27,271
          Total rental revenue           333,464  316,903   669,478  624,404
     Hotel revenue                        20,066   19,166    34,068   32,344
     Development and management
     services                              4,137    5,961     8,673    9,283
     Interest and other                    2,937    1,090     4,574    8,618
          Total revenue                  360,604  343,120   716,793  674,649

    Expenses
     Operating:
        Rental                           106,576  101,049   215,177  201,171
        Hotel                             13,979   13,376    26,265   25,054
     General and administrative           14,252   12,493    29,065   25,093
     Interest                             78,233   74,789   157,587  149,094
     Depreciation and amortization        65,850   60,366   133,833  116,373
     Losses from early extinguishments
      of debt                             12,896        -    12,896    6,258
          Total expenses                 291,786  262,073   574,823  523,043
    Income before minority interests in
     property partnerships, income from
     unconsolidated joint ventures,
     minority interest in Operating
     Partnership, gains on
     sales of real estate and land held
     for development and discontinued
     operations                           68,818   81,047   141,970  151,606
    Minority interests in property
     partnerships                          1,472    1,292     3,124    1,677
    Income from unconsolidated joint
     ventures                                847      879     2,182    2,256
    Income before minority interest in
     Operating Partnership, gains on
     sales of real estate and land held
     for development and discontinued
     operations                           71,137   83,218   147,276  155,539
    Minority interest in Operating
     Partnership                         (14,965) (17,776)  (30,671) (34,945)
    Income before gains on sales of
     real estate and land held for
     development
     and discontinued operations          56,172   65,442   116,605  120,594
    Gains on sales of real estate, net
     of minority interest                102,073    1,377   102,073    8,108
    Gains on sales of land held for
     development, net of minority
     interest                                  -        -     1,208        -
    Income before discontinued
     operations                          158,245   66,819   219,886  128,702
    Discontinued operations:
     Income (loss) from discontinued
      operations, net of minority
      interest                                 -      710      (406)   2,349
     Gains on sales of real estate from
      discontinued operations, net of
      minority interest                    8,389   19,589     8,389   22,010
    Net income available to common
     shareholders                       $166,634  $87,118  $227,869 $153,061

    Basic earnings per common share:
     Income available to common
      shareholders before discontinued
      operations                           $1.39    $0.62     $1.96    $1.23
     Discontinued operations, net of
      minority interest                     0.08     0.19      0.07     0.23
     Net income available to common
      shareholders                         $1.47    $0.81     $2.03    $1.46

     Weighted average number of common
      shares outstanding                 110,764  107,216   110,477  104,053

    Diluted earnings per common share:
     Income available to common
      shareholders before discontinued
      operations                           $1.37    $0.60     $1.92    $1.20
     Discontinued operations, net of
      minority interest                     0.07     0.19      0.07     0.23
     Net income available to common
      shareholders                         $1.44    $0.79     $1.99    $1.43
     Weighted average number of common
      and common equivalent shares
      outstanding                        113,103  109,016   112,740  106,255

.
                          CONSOLIDATED BALANCE SHEETS

                                                    June 30,     December 31,
                                                      2005           2004

                                                 (in thousands, except for
                                                       share amounts)
                                                        (unaudited)
                                     ASSETS

    Real estate                                    $8,736,776     $9,033,858
    Development in progress                            99,727         35,063
    Land held for future development                  239,314        222,306
      Less: accumulated depreciation               (1,189,101)    (1,143,369)
         Total real estate                          7,886,716      8,147,858

    Cash and cash equivalents                         507,182        239,344
    Cash held in escrows                               29,077         24,755
    Investments in marketable securities               25,000              -
    Tenant and other receivables, net of
     allowance for doubtful accounts of $2,698
     and $2,879, respectively                          28,230         25,500

    Accrued rental income, net of allowance of
     $4,838 and $4,252, respectively                  280,257        251,236
    Deferred charges, net                             243,679        254,950
    Prepaid expenses and other assets                  43,042         38,630
    Investments in unconsolidated joint
     ventures                                          82,810         80,955
                       Total assets                $9,125,993     $9,063,228


                      LIABILITIES AND STOCKHOLDERS' EQUITY

    Liabilities:
      Mortgage notes payable                       $3,427,892     $3,541,131
      Unsecured senior notes, net of
       discount                                     1,470,865      1,470,683
      Unsecured line of credit                              -              -
      Accounts payable and accrued expenses            92,649         94,451
      Dividends and distributions payable              95,597         91,428
      Interest rate contract                                -          1,164
      Accrued interest payable                         47,744         50,670
      Other liabilities                               132,427         91,300
        Total liabilities                           5,267,174      5,340,827

    Commitments and contingencies                           -              -
    Minority interests                                795,990        786,328
    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,
       111,482,273 and 110,399,385 shares
       issued and 111,403,373 and 110,320,485 shares
       outstanding in 2005 and 2004, respectively       1,114          1,103
      Additional paid-in capital                    2,679,448      2,633,980
      Earnings in excess of dividends                 405,780        325,452
      Treasury common stock, at cost                   (2,722)        (2,722)
      Unearned compensation                            (5,503)        (6,103)
      Accumulated other comprehensive loss            (15,288)       (15,637)
        Total stockholders' equity                  3,062,829      2,936,073
         Total liabilities and stockholders'
          equity                                   $9,125,993     $9,063,228


                             BOSTON PROPERTIES, INC.
                            FUNDS FROM OPERATIONS (1)

                                       Three months ended   Six months ended
                                            June 30,            June 30,
                                         2005      2004      2005      2004

                                 (in thousands, except for per share amounts)
                                                     (unaudited)

    Net income available to common
     shareholders                      $166,634   $87,118  $227,869  $153,061

    Add:
      Minority interest in Operating
       Partnership                       14,965    17,776    30,671    34,945
    Less:
      Minority interests in property
       partnerships                       1,472     1,292     3,124     1,677
      Income from unconsolidated joint
       ventures                             847       879     2,182     2,256
      Gains on sales of real estate,
       net of minority interest         102,073     1,377   102,073     8,108
      Gains on sales of land held for
       development, net of minority
       interest                             -         -       1,208       -
      Income (loss) from discontinued
       operations, net of minority
       interest                             -         710      (406)    2,349
      Gains on sales of real estate
       from discontinued operations,
       net of minority interest           8,389    19,589     8,389    22,010

    Income before minority interests
     in property partnerships, income
     from unconsolidated joint ventures,
     minority interest in Operating
     Partnership, gains on sales of real
     estate and land held for development
     and discontinued operations         68,818    81,047   141,970   151,606


    Add:
      Real estate depreciation and
       amortization (2)                  67,878    61,919   137,418   119,792
      Income (loss) from discontinued
       operations                           -         910      (486)    2,957
      Income from unconsolidated joint
       ventures                             847       879     2,182     2,256
    Less:
      Minority interests in property
       partnerships' share of funds
       from operations                     (106)     (158)      (31)   (1,062)
      Preferred distributions            (3,340)   (3,813)   (6,620)   (8,198)

    Funds from operations (FFO)         134,097   140,784   274,433   267,351

    Add:
      Losses from early extinguishments
       of debt associated with the sales
       of real estate                    11,041       -      11,041       -


    Funds from operations after a
     supplemental adjustment to exclude
     losses from early extinguishments
     of debt associated with the sales
     of real estate                     145,138   140,784   285,474   267,351

    Less:
      Minority interest in the
       Operating Partnership's share
       of funds from operations after a
       supplemental adjustment to exclude
       losses from early extinguishments
       of debt associated with the
       sales of real estate              23,829    23,880    46,864    46,655

    Funds from operations available to
     common shareholders after a
     supplemental adjustment to
     exclude losses from early
     extinguishments of debt associated
     with the sales of real estate     $121,309  $116,904  $238,610  $220,696

    Our percentage share of funds from
     operations - basic                   83.58%    83.04%    83.58%    82.55%

    Weighted average shares
     outstanding - basic                110,764   107,216   110,477   104,053

      FFO per share basic after a
       supplemental adjustment to
       exclude losses from early
       extinguishments of debt
       associated with the sales of
       real estate                        $1.10     $1.09     $2.16     $2.12

      FFO per share basic                 $1.01     $1.09     $2.08     $2.12

    Weighted average shares
     outstanding - diluted              118,460   115,208   118,098   112,895

      FFO per share diluted after a
       supplemental adjustment to
       exclude losses from early
       extinguishments of debt
       associated with the sales of
       real estate                        $1.06     $1.05     $2.09     $2.04

      FFO per share diluted               $0.98     $1.05     $2.01     $2.04

    (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 a specific and defined
        supplemental adjustment to exclude losses from early extinguishments
        of debt associated with the sales of real estate.  The adjustment to
        exclude losses from early extinguishments of debt results when the
        sale of real estate encumbered by debt requires us to pay the
        extinguishment costs prior to the debt's stated maturity and to write-
        off unamortized loan costs at the date of the extinguishment.  Such
        costs are excluded from the gains on sales of real estate reported in
        accordance with GAAP.  However, we view the losses from early
        extinguishments of debt associated with the sales of real estate as an
        incremental cost of the sale transactions because we extinguished the
        debt in connection with the consummation of the sale transactions and
        we had no intent to extinguish the debt absent such transactions.  We
        believe that this supplemental adjustment more appropriately reflects
        the results of our operations exclusive of the impact of our sale
        transactions.

        Although our FFO as adjusted clearly differs from NAREIT's definition
        of FFO, and may not be comparable to 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 losses from early extinguishments of debt
        associated with the sales of real estate, 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.

        Neither FFO nor FFO as adjusted should be considered as an alternative
        to net income (determined in accordance with GAAP) as an indication of
        our performance.  Neither FFO nor FFO as adjusted represent 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
        $65,850, $60,366, $133,833 and $116,373, our share of unconsolidated
        joint venture real estate depreciation and amortization of $2,394,
        $1,683, $4,192 and $3,380 and depreciation and amortization from
        discontinued operations of $0, $487, $179 and $1,273, less corporate
        related depreciation and amortization of $366, $617, $786 and $1,234
        for the three months and six months ended June 30, 2005 and 2004,
        respectively.

                                           % Leased by Location

                                   June 30, 2005        December 31, 2004

    Greater Boston                          90.5 %                   90.2 %
    Greater Washington, D.C.                97.1 %                   97.9 %
    Midtown Manhattan                       97.4 %                   96.4 %
    Baltimore, MD                             N/A                    90.9 %
    Richmond, VA                              N/A                    91.3 %
    Princeton/East Brunswick, NJ            88.4 %                   90.2 %
    Greater San Francisco                   86.0 %                   80.3 %
        Total Portfolio                     93.2 %                   92.1 %




                                             % Leased by Type

                                   June 30, 2005        December 31, 2004

    Class A Office Portfolio                93.4 %                   92.3 %
    Office/Technical Portfolio              97.6 %                   97.6 %
    Industrial Portfolio                     0.0 %                    0.0 %
        Total Portfolio                     93.2 %                   92.1 %

SOURCE Boston Properties, Inc.

Michael Walsh, Senior 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. of Financial Relations Board, +1-212-827-3773, for
Boston Properties, Inc.

http://www.prnewswire.com