Boston Properties, Inc. Announces Second Quarter 2006 Results
BOSTON, July 26 /PRNewswire-FirstCall/ -- Boston Properties, Inc. (NYSE: BXP), a real estate investment trust, reported results today for the second quarter ended June 30, 2006.
Funds from Operations (FFO) for the quarter ended June 30, 2006 were $129.4 million, or $1.14 per share basic and $1.10 per share diluted, after a supplemental adjustment to exclude the loss from early extinguishment of debt associated with the sale of real estate. This compares to FFO for the quarter ended June 30, 2005 of $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. Losses from early extinguishments of debt associated with the sales of real estate totaled $0.24 and $0.09 per share basic and $0.22 and $0.08 per share diluted for the quarters ended June 30, 2006 and 2005, respectively. The weighted average number of basic and diluted shares outstanding totaled 113,993,783 and 120,605,194, respectively, for the quarter ended June 30, 2006 and 110,764,403 and 118,460,257, respectively, for the quarter ended June 30, 2005.
Net income available to common shareholders was $626.0 million for the three months ended June 30, 2006, compared to $165.5 million for the quarter ended June 30, 2005. Net income available to common shareholders per share (EPS) for the quarter ended June 30, 2006 was $5.34 basic and $5.24 on a diluted basis. This compares to EPS for the second quarter of 2005 of $1.46 basic and $1.43 on a diluted basis. EPS includes $4.86 and $0.95, on a diluted basis, related to gains on sales of real estate and discontinued operations for the quarters ended June 30, 2006 and 2005, 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, 2006. In the opinion of management, all adjustments considered necessary for a fair presentation of these reported results have been made.
As of June 30, 2006, the Company's portfolio consisted of 124 properties comprising approximately 42.1 million square feet, including four properties under construction and one expansion project totaling 1.3 million square feet. The overall percentage of leased space for the 118 properties in service as of June 30, 2006 was 94.4%.
Significant events of the second quarter include:
- On April 1, 2006, the Company placed-in-service 12290 Sunrise Valley, a 182,000 net rentable square foot Class A office property located in Reston, Virginia. The Company has leased 100% of the space.
- On April 6, 2006, the Company's Operating Partnership closed an offering of $400 million in aggregate principal amount of its 3.75% exchangeable senior notes due 2036. On May 2, 2006, the Company's Operating Partnership closed an additional $50 million aggregate principal amount of the notes as a result of the underwriter's exercise of its over- allotment option. The notes will be exchangeable into the Company's common stock at an initial exchange rate, subject to adjustment, of 8.9461 shares per $1,000 principal amount of notes (or an initial exchange price of approximately $111.78 per share of common stock) under the circumstances described in the prospectus supplement filed with the Securities and Exchange Commission on April 3, 2006. Noteholders may require the Operating Partnership to purchase the notes at par initially on May 18, 2013 and, after that date, the notes will be redeemable at par at the option of the Operating Partnership under the circumstances described in the prospectus supplement.
- On April 13, 2006, the Company acquired a parcel of land located in Waltham, Massachusetts for a purchase price of $16.0 million.
- On May 31, 2006, the Company redeemed the outside members' equity interests in the limited liability company that owns Citigroup Center for an aggregate redemption price of $100 million, with $50 million paid at closing and $25 million to be paid on each of the first and second anniversaries of the closing or, if earlier, in connection with a sale of Citigroup Center. In addition, the parties terminated the existing tax protection agreement.
- On June 5, 2006, the Company repaid the mortgage loan collateralized by its 191 Spring Street property located in Lexington, Massachusetts totaling approximately $17.9 million using available cash. There was no prepayment penalty associated with the repayment. The mortgage loan bore interest at a fixed rate of 8.50% per annum and was scheduled to mature on September 1, 2006.
- On June 6, 2006, the Company completed the sale of 280 Park Avenue, a Class A office property of approximately 1,179,000 net rentable square feet located in midtown Manhattan, for approximately $1.2 billion in cash. Net cash proceeds were approximately $850 million, after legal defeasance of indebtedness secured by the property (consisting of approximately $254.4 million of principal indebtedness and approximately $28.2 million of related defeasance costs) and the payment of transfer taxes, broker's fees, revenue support payments and other customary closing costs. As part of the transaction, the buyer has engaged the Company as the property manager and leasing agent for 280 Park Avenue for a one-year term that renews automatically.
- On June 30, 2006, the Company acquired 303 Almaden Boulevard, a Class A office property with approximately 157,000 net rentable square feet located in San Jose, California, at a purchase price of approximately $45.2 million. The acquisition was financed with available cash.
EPS and FFO per Share Guidance:
The Company's guidance for the third quarter and full year 2006 for EPS (diluted), FFO per share (diluted) and FFO per share (diluted) after a supplemental adjustment is set forth and reconciled below.
Third Quarter 2006 Full Year 2006
Low - High Low - High
Projected EPS (diluted) $0.59 - $0.61 $7.04 - $7.08
Add:
Projected Company Share of
Real Estate Depreciation and
Amortization 0.48 - 0.48 1.95 - 1.95
Less:
Projected Company Share of
Gains on Sales of Real Estate - - - 4.91 - 4.91
Projected FFO per Share
(diluted) $1.07 - $1.09 $4.08 - $4.12
Add:
Projected Company Share of
Loss from Early
Extinguishment of Debt
Associated with the Sale of
Real Estate - - - 0.22 - 0.22
Projected FFO per Share
(diluted) after a
supplemental adjustment to
exclude Loss from Early
Extinguishment of Debt
Associated with the Sale of
Real Estate $1.07 - $1.09 $4.30 - $4.34
Except as otherwise noted above, 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. The estimates do not include possible future gains or losses or the impact on operating results from possible future property acquisitions or dispositions. 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 the loss from early extinguishment of debt associated with the sale of real estate. This loss from early extinguishment of debt is 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, 2006 at 10:00 AM (Eastern Time), open to the general public, to discuss the second quarter 2006 results, the 2006 projections and related assumptions, and other related matters. The number to call for this interactive teleconference is (800) 240-5318. A replay of the conference call will be available through August 3, 2006 by dialing (800) 405-2236 and entering the passcode 11065141, or as a podcast on the Company's website, http://www.bostonproperties.com, shortly after the call. An audio-webcast will also be archived and may be accessed in the Investor Relations section of the Company's website under the heading Events & Webcasts.
Additionally, a copy of Boston Properties' second quarter 2006 "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 two hotels. 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 (including the impact of interest rates on our hedging program), the effects of local economic and market conditions, the effects of acquisitions and dispositions, including possible impairment charges, 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 2006.
BOSTON PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Three months ended Six months ended
June 30, June 30,
2006 2005 2006 2005
(in thousands, except for per share amounts)
(unaudited)
Revenue
Rental:
Base rent $277,155 $277,359 $553,553 $556,107
Recoveries from tenants 45,506 41,836 92,699 85,173
Parking and other 14,219 14,121 28,048 28,046
Total rental revenue 336,880 333,316 674,300 669,326
Hotel revenue 19,674 17,566 32,017 29,662
Development and management
services 5,230 4,137 9,606 8,673
Interest and other 8,565 2,916 10,530 4,547
Total revenue 370,349 357,935 726,453 712,208
Expenses
Operating:
Rental 110,232 106,455 222,846 214,939
Hotel 12,770 12,495 24,247 23,304
General and administrative 15,796 14,252 30,438 29,065
Interest 78,449 78,233 153,266 157,587
Depreciation and amortization 67,912 67,026 134,759 134,822
Losses from early
extinguishments of debt 31,457 12,896 31,924 12,896
Total expenses 316,616 291,357 597,480 572,613
Income before minority interest
in property partnership, income
from
unconsolidated joint ventures,
minority interest in
Operating Partnership,
gains on sales of real estate
and discontinued operations 53,733 66,578 128,973 139,595
Minority interest in property
partnership 777 1,472 2,013 3,124
Income from unconsolidated joint
ventures 1,677 847 2,967 2,182
Income before minority interest
in Operating Partnership, gains
on sales of real estate and
discontinued operations 56,187 68,897 133,953 144,901
Minority interest in Operating
Partnership (11,758) (14,596) (27,193) (30,282)
Income before gains on sales of
real estate and discontinued
operations 44,429 54,301 106,760 114,619
Gains on sales of real estate,
net of minority interest 581,604 102,073 586,145 103,281
Income before discontinued
operations 626,033 156,374 692,905 217,900
Discontinued operations:
Income from discontinued
operations, net of minority
interest - 727 - 435
Gains on sales of real estate
from discontinued operations,
net of
minority interest - 8,389 - 8,389
Net income available to common
shareholders $626,033 $165,490 $692,905 $226,724
Basic earnings per common share:
Income available to common
shareholders before
discontinued
operations $5.34 $1.38 $5.96 $1.94
Discontinued operations, net
of minority interest - 0.08 - 0.08
Net income available to common
shareholders $5.34 $1.46 $5.96 $2.02
Weighted average number of
common shares outstanding 113,994 110,764 113,255 110,477
Diluted earnings per common
share:
Income available to common
shareholders before
discontinued
operations $5.24 $1.35 $5.83 $1.90
Discontinued operations, net
of minority interest - 0.08 - 0.08
Net income available to common
shareholders $5.24 $1.43 $5.83 $1.98
Weighted average number of
common and common
equivalent shares
outstanding 116,176 113,103 115,669 112,740
BOSTON PROPERTIES, INC.
CONSOLIDATED BALANCE SHEETS
June 30, December 31,
2006 2005
(in thousands, except for share amounts)
(unaudited)
ASSETS
Real estate $8,698,493 $8,724,954
Construction in progress 78,926 177,576
Land held for future development 222,519 248,645
Less: accumulated depreciation (1,314,472) (1,265,073)
Total real estate 7,685,466 7,886,102
Cash and cash equivalents 370,396 261,496
Cash held in escrows 894,244 25,618
Tenant and other receivables, net of
allowance for doubtful accounts of
$2,556 and $2,519, respectively 35,814 52,668
Accrued rental income, net of
allowance of $1,008 and $2,638,
respectively 298,306 302,356
Deferred charges, net 250,154 242,660
Prepaid expenses and other assets 79,174 41,261
Investments in unconsolidated joint
ventures 96,962 90,207
Total assets $9,710,516 $8,902,368
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Mortgage notes payable $2,912,135 $3,297,192
Unsecured senior notes, net of
discount 1,471,266 1,471,062
Unsecured exchangeable senior notes 450,000 -
Unsecured line of credit - 58,000
Accounts payable and accrued
expenses 90,390 109,823
Dividends and distributions payable 95,839 107,643
Accrued interest payable 50,175 47,911
Other liabilities 246,042 154,123
Total liabilities 5,315,847 5,245,754
Commitments and contingencies - -
Minority interests 824,924 739,268
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,
114,298,348 and
112,621,162 shares issued and
114,219,448 and 112,542,262
shares outstanding in
2006 and 2005, respectively 1,142 1,125
Additional paid-in capital 2,831,119 2,745,719
Earnings in excess of dividends 720,623 182,105
Treasury common stock, at cost (2,722) (2,722)
Accumulated other comprehensive
income (loss) 19,583 (8,881)
Total stockholders' equity 3,569,745 2,917,346
Total liabilities and
stockholders' equity $9,710,516 $8,902,368
BOSTON PROPERTIES, INC.
FUNDS FROM OPERATIONS (1)
Three months ended Six months ended
June 30, June 30,
2006 2005 2006 2005
(in thousands, except for per share amounts)
(unaudited)
Net income available to common
shareholders $626,033 $165,490 $692,905 $226,724
Add:
Minority interest in Operating
Partnership 11,758 14,596 27,193 30,282
Less:
Minority interest in property
partnership 777 1,472 2,013 3,124
Income from unconsolidated joint
ventures 1,677 847 2,967 2,182
Gains on sales of real estate,
net of minority interest 581,604 102,073 586,145 103,281
Income from discontinued
operations, net of minority
interest - 727 - 435
Gains on sales of real estate
from discontinued operations,
net of minority interest - 8,389 - 8,389
Income before minority interest in
property partnership, income from
unconsolidated joint ventures,
minority interest in Operating
Partnership, gains on
sales of real estate and
discontinued operations 53,733 66,578 128,973 139,595
Add:
Real estate depreciation and
amortization (2) 69,773 69,247 138,447 138,787
Income from discontinued
operations - 871 - 520
Income from unconsolidated joint
ventures 1,677 847 2,967 2,182
Less:
Minority interest in property
partnership's share of funds
from operations 211 106 479 31
Preferred distributions 2,965 3,340 6,075 6,620
Funds from operations (FFO) 122,007 134,097 263,833 274,433
Add:
Losses from early
extinguishments of debt
associated with the sales of
real estate 31,444 11,041 31,444 11,041
Funds from operations after a
supplemental adjustment to
exclude losses from early
extinguishments of debt
associated with the sales of
real estate 153,451 145,138 295,277 285,474
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 24,061 23,829 46,688 46,864
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 $129,390 $121,309 $248,589 $238,610
Our percentage share of funds from
operations - basic 84.32% 83.58% 84.19% 83.58%
Weighted average shares
outstanding - basic 113,994 110,764 113,255 110,477
FFO per share basic after a
supplemental adjustment to
exclude losses from
early extinguishments of debt
associated with the sales of
real estate $1.14 $1.10 $2.19 $2.16
FFO per share basic $0.90 $1.01 $1.96 $2.08
Weighted average shares
outstanding - diluted 120,605 118,460 120,312 118,098
FFO per share diluted after a
supplemental adjustment to
exclude losses from
early extinguishments of debt
associated with the sales of
real estate $1.10 $1.06 $2.13 $2.09
FFO per share diluted $0.88 $0.98 $1.91 $2.01
(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
$67,912, $67,026, $134,759 and $134,822, our share of
unconsolidated joint venture real estate depreciation and
amortization of $2,280, $2,394, $4,584 and $4,192 and depreciation
and amortization from discontinued operations of $0, $193, $0 and
$559, less corporate related depreciation and amortization of
$419, $366, $896 and $786 for the three months and six months
ended June 30, 2006 and 2005, respectively.
BOSTON PROPERTIES, INC.
PORTFOLIO LEASING PERCENTAGES
% Leased by Location
June 30, 2006 December 31, 2005
Greater Boston 93.0% 89.9%
Greater Washington, D.C. 96.7% 97.2%
Midtown Manhattan 99.7% 98.3%
Princeton/East Brunswick, NJ 86.5% 86.9%
Greater San Francisco 88.6% 90.8%
Total Portfolio 94.4% 93.8%
% Leased by Type
June 30, 2006 December 31, 2005
Class A Office Portfolio 94.2% 93.7%
Office/Technical Portfolio 97.9% 97.6%
CONTACT:
Michael Walsh,
Senior Vice President, Finance
1-617-236-3410
Kathleen DiChiara
Investor Relations Manager,
1-617-236-3343
Both of Boston Properties, Inc.
Marilynn Meek
General Info.
1-212-827-3773
Financial Relations Board for Boston Properties, Inc.