Boston Properties, Inc. Announces Third Quarter 2005 Results
Reports diluted FFO per share of $1.07 Reports diluted EPS of $0.50
BOSTON, Oct. 25 /PRNewswire-FirstCall/ -- Boston Properties, Inc. (NYSE: BXP), a real estate investment trust, reported results today for the third quarter ended September 30, 2005.
Funds from Operations (FFO) for the quarter ended September 30, 2005 were $123.7 million, or $1.11 per share basic and $1.07 per share diluted. This compares to FFO for the quarter ended September 30, 2004 of $119.9 million, or $1.11 per share basic and $1.07 per share diluted. The weighted average number of basic and diluted shares outstanding totaled 111,775,512 and 119,176,703, respectively, for the quarter ended September 30, 2005 and 108,339,350 and 116,149,006, respectively, for the same quarter last year.
Net income available to common shareholders was $57.6 million for the three months ended September 30, 2005, compared to $68.5 million for the quarter ended September 30, 2004. Net income available to common shareholders per share (EPS) for the quarter ended September 30, 2005 was $0.51 basic and $0.50 on a diluted basis. This compares to EPS for the third quarter of 2004 of $0.63 basic and $0.62 on a diluted basis. EPS for the quarter ended September 30, 2005, reflects a reduction of $0.09, on a diluted basis, representing the amount of earnings allocated to the holders of Series Two Preferred Units of limited partnership interest in the Company's Operating Partnership to account for their right to participate on an as-converted basis in the special dividend that is payable on October 31, 2005 to stockholders of record as of the close of business on September 30, 2005. EPS for the quarter ended September 30, 2004 includes $0.03, on a diluted basis, related to gains on sales of real estate and discontinued operations.
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 September 30, 2005. In the opinion of management, all adjustments considered necessary for a fair presentation of these reported results have been made.
As of September 30, 2005, the Company's portfolio consisted of 123 properties comprising approximately 42.0 million square feet, including three properties under construction and one expansion project totaling 1.1 million square feet. The overall percentage of leased space for the 117 properties in service as of September 30, 2005 was 93.3%.
As previously announced on August 10, 2005, the Company appointed E. Mitchell Norville, previously Senior Vice President and Regional Manager of the Washington, D.C. region, to the position of Executive Vice President for Operations, succeeding Robert E. Burke. In addition, Peter D. Johnston, who has been with the Company for 18 years and who most recently served as Senior Vice President, Development, was named Senior Vice President and Regional Manager of the Washington, D.C. region.
Significant events of the third quarter include:
- 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 $225.0 million secured draw from the Company's revolving credit facility.
- On July 21, 2005, the Company's 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 special cash dividend is in addition to the regular quarterly dividend of $0.68 per common share that is payable on October 31, 2005. The holders of common units of limited partnership interest in the Company's Operating Partnership will receive the same amount, at the same time. Holders of Series Two Preferred Units of limited partnership interest will participate in the special cash dividend on an as-converted basis in connection with their regular February 2006 distribution payment as provided in the Operating Partnership's partnership agreement. Because the holders of options to purchase shares of the Company's common stock are not eligible to receive dividends, the Company's Board of Directors approved adjustments that are intended to ensure that its employees, directors and other persons who hold such stock options are not disadvantaged by the planned special cash dividend.
- On August 3, 2005, the Company commenced a planned interest rate hedging program in contemplation of obtaining ten-year fixed rate financing in early 2007. The Company has since entered into nine forward-starting interest rate swap contracts based on a weighted- average forward-starting ten-year treasury rate of 4.32% per annum on notional amounts aggregating $425.0 million. The swaps go into effect in February 2007 and expire in February 2017.
- On August 5, 2005, the Company executed a contract for the sale of 40- 46 Harvard Street, an industrial property totaling approximately 152,000 net rentable square feet located in Westwood, Massachusetts, at a sale price of approximately $7.8 million. The sale is subject to the satisfaction of customary closing conditions and, although there can be no assurances that the sale will be consummated, we have no reason to believe that the closing will not occur as expected by the end of November 2005.
- On September 26, 2005, the Company commenced construction on its previously announced joint venture project consisting of a build-to- suit Class A office property located at 505 9th Street in Washington, D.C. totaling 323,000 net rentable square feet, of which 230,000 net rentable square feet have been pre-leased to a law firm for a 15-year term. In conjunction with the commencement of construction, the Company's Operating Partnership issued approximately 254,000 common units of limited partnership interest and cash of approximately $4.9 million to its joint venture partner as consideration for the Company's 50% interest in the joint venture. The joint venture partner had contributed the land for its 50% interest.
Transactions completed subsequent to September 30, 2005:
- On October 1, 2005, the Company placed-in-service the West Garage phase of 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 square feet of office, research laboratory and retail space plus parking for approximately 800 cars. The Company has signed a lease for 100% of the space with the Massachusetts Institute of Technology for occupancy by its affiliate, the Eli and Edythe L. Broad Institute. The Company expects the remaining development to be completed in the first quarter of 2006.
- On October 4, 2005, the Company repaid the mortgage loan collateralized by its Embarcadero Center West Tower property totaling approximately $90.8 million. There was no prepayment penalty associated with the repayment. The mortgage loan bore interest at a fixed rate of 6.50% per annum and was scheduled to mature on January 1, 2006.
EPS and FFO per Share Guidance:
The Company's guidance for the fourth quarter of 2005 and the full year
2006 for EPS (diluted) and FFO per share (diluted) is set forth and reconciled
below.
Fourth Quarter 2005 Full Year 2006
Low - High Low - High
Projected EPS (diluted) $1.29 - $1.32 $2.17 - $2.32
Add:
Projected Company Share of
Real Estate Depreciation and
Amortization 0.49 - 0.49 1.95 - 1.95
Less:
Projected Company Share of
Gains on Sales of Real Estate 0.74 - 0.76 0.00 - 0.00
Projected FFO per Share
(diluted) $1.04 - $1.05 $4.12 - $4.27
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, October 26, 2005 at 10:00 AM (Eastern Time), open to the general public, to discuss the third quarter 2005 results, the fourth quarter 2005 and full year 2006 projections and other related matters. The number to call for this interactive teleconference is (800) 218-0204. A replay of the conference call will be available through November 2, 2005 by dialing (800) 405-2236 and entering the passcode 11040118. 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' third quarter 2005 "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. 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 (including the impact of interest rates on our hedging program), 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 fourth quarter of 2005 and the full fiscal year 2006.
BOSTON PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Three months ended Nine months ended
September 30, September 30,
2005 2004 2005 2004
(in thousands, except for per share amounts)
(unaudited)
Revenue
Rental:
Base rent $274,522 $273,603 $830,627 $790,889
Recoveries from tenants 43,969 43,381 129,165 123,228
Parking and other 13,470 15,645 41,516 42,916
Total rental revenue 331,961 332,629 1,001,308 957,033
Hotel revenue 20,139 19,768 54,207 52,112
Development and management
services 4,923 5,832 13,596 15,115
Interest and other 4,763 908 9,337 9,526
Total revenue 361,786 359,137 1,078,448 1,033,786
Expenses
Operating:
Rental 111,112 108,754 326,051 309,715
Hotel 13,786 13,709 40,051 38,763
General and administrative 13,270 13,002 42,335 38,095
Interest 75,700 77,698 233,287 226,792
Depreciation and amortization 65,905 65,480 201,102 181,853
Losses from early
extinguishments of debt - - 12,896 6,258
Total expenses 279,773 278,643 855,722 801,476
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 82,013 80,494 222,726 232,310
Minority interests in property
partnerships 1,527 1,447 4,651 3,124
Income from unconsolidated
joint ventures 1,117 460 3,299 2,716
Income before minority interest
in Operating Partnership,
gains on sales of real
estate and land held for
development and discontinued
operations 84,657 82,401 230,676 238,150
Minority interest in Operating
Partnership (27,032) (17,178) (57,482) (52,169)
Income before gains on sales of
real estate and land held for
development and
discontinued operations 57,625 65,223 173,194 185,981
Gains on sales of real estate,
net of minority interest - - 102,175 8,132
Gains on sales of land held for
development, net of minority
interest - - 1,209 -
Income before discontinued
operations 57,625 65,223 276,578 194,113
Discontinued operations:
Income (loss) from
discontinued operations, net
of minority interest (74) (831) (574) 1,356
Gains on sales of real estate
from discontinued operations,
net of minority interest - 4,150 8,397 26,201
Net income available to common
shareholders $57,551 $68,542 $284,401 $221,670
Basic earnings per common share:
Income available to common
shareholders before
discontinued operations $0.51 $0.60 $2.49 $1.84
Discontinued operations, net
of minority interest - 0.03 0.07 0.26
Net income available to common
shareholders $0.51 $0.63 $2.56 $2.10
Weighted average number of
common shares outstanding 111,776 108,339 110,915 105,492
Diluted earnings per common
share:
Income available to common
shareholders before
discontinued operations $0.50 $0.59 $2.44 $1.80
Discontinued operations, net
of minority interest - 0.03 0.07 0.25
Net income available to common
shareholders $0.50 $0.62 $2.51 $2.05
Weighted average number of
common and common
equivalent shares
outstanding 114,090 110,581 113,195 107,718
BOSTON PROPERTIES, INC.
CONSOLIDATED BALANCE SHEETS
September 30, December 31,
2005 2004
(in thousands, except for share amounts)
(unaudited)
ASSETS
Real estate $8,792,127 $9,033,858
Construction in progress 144,009 35,063
Land held for future development 244,783 222,306
Real estate held for sale, net 444 -
Less: accumulated depreciation (1,237,469) (1,143,369)
Total real estate 7,943,894 8,147,858
Cash and cash equivalents 450,577 239,344
Cash held in escrows 27,552 24,755
Investments in marketable securities 37,500 -
Tenant and other receivables, net of
allowance for doubtful accounts of
$2,476 and $2,879,
respectively 32,463 25,500
Accrued rental income, net of
allowance of $3,931 and $4,252,
respectively 292,289 251,236
Deferred charges, net 239,443 254,950
Prepaid expenses and other assets 63,859 38,630
Investments in unconsolidated joint ventures 96,311 80,955
Total assets $9,183,888 $9,063,228
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Mortgage notes payable $3,450,904 $3,541,131
Unsecured senior notes, net of
discount 1,470,963 1,470,683
Unsecured line of credit - -
Accounts payable and accrued expenses 81,730 94,451
Dividends and distributions payable 443,437 91,428
Interest rate contract - 1,164
Accrued interest payable 39,443 50,670
Other liabilities 137,526 91,300
Total liabilities 5,624,003 5,340,827
Commitments and contingencies - -
Minority interests 725,077 786,328
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,
112,579,787 and
110,399,385 shares issued and
112,500,887 and 110,320,485
shares outstanding in
2005 and 2004, respectively 1,125 1,103
Additional paid-in capital 2,749,432 2,633,980
Earnings in excess of dividends 104,559 325,452
Treasury common stock, at cost (2,722) (2,722)
Unearned compensation (5,564) (6,103)
Accumulated other comprehensive loss (12,022) (15,637)
Total stockholders' equity 2,834,808 2,936,073
Total liabilities and
stockholders' equity $9,183,888 $9,063,228
BOSTON PROPERTIES, INC.
FUNDS FROM OPERATIONS (1)
Three months ended Nine months ended
September 30, September 30,
2005 2004 2005 2004
(in thousands, except for per share amounts)
(unaudited)
Net income available to
common shareholders $57,551 $68,542 $284,401 $221,670
Add:
Minority interest in
Operating Partnership 27,032 17,178 57,482 52,169
Less:
Minority interests in
property partnerships 1,527 1,447 4,651 3,124
Income from unconsolidated
joint ventures 1,117 460 3,299 2,716
Gains on sales of real
estate, net of minority
interest - - 102,175 8,132
Gains on sales of land
held for development, net
of minority interest - - 1,209 -
Income (loss) from
discontinued operations,
net of minority interest (74) (831) (574) 1,356
Gains on sales of real
estate from discontinued
operations, net of
minority interest - 4,150 8,397 26,201
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 82,013 80,494 222,726 232,310
Add:
Real estate depreciation
and amortization (2) 67,702 67,538 206,489 187,330
Income (loss) from
discontinued operations (88) (945) (686) 1,802
Income from unconsolidated
joint ventures 1,117 460 3,299 2,716
Less:
Minority interests in
property partnerships'
share of funds from
operations 32 17 1 (1,045)
Preferred distributions (3,200)(3) (3,491) (9,820)(3) (11,689)
Funds from operations (FFO) 147,576 144,073 422,009 411,424
Add:
Losses from early
extinguishments of debt
associated with the sales
of real estate - - 11,041 -
Funds from operations after
a supplemental adjustment
to exclude losses from
early extinguishments of debt
associated with the sales
of real estate 147,576 144,073 433,050 411,424
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 23,905 24,136 70,770 70,812
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 $123,671 $119,937 $362,280 $340,612
Our percentage share of
funds from operations -
basic 83.80% 83.25% 83.66% 82.79%
Weighted average shares
outstanding - basic 111,776 108,339 110,915 105,492
FFO per share basic after
a supplemental adjustment
to exclude losses from
early extinguishments of
debt associated with
the sales of real
estate $1.11 $1.11 $3.27 $3.23
FFO per share basic $1.11 $1.11 $3.18 $3.23
Weighted average shares
outstanding - diluted 119,177 116,149 118,461 113,998
FFO per share diluted
after a supplemental
adjustment to exclude
losses from early
extinguishments of
debt associated with
the sales of real
estate $1.07 $1.07 $3.16 $3.11
FFO per share diluted $1.07 $1.07 $3.08 $3.11
(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
$65,905, $65,480, $201,102 and $181,853, our share of unconsolidated
joint venture real estate depreciation and amortization of $2,188,
$1,636, $6,380 and $5,016 and depreciation and amortization from
discontinued operations of $2, $1,080, $186 and $2,353, less
corporate related depreciation and amortization of $393, $658, $1,179
and $1,892 for the three months and nine months ended September 30,
2005 and 2004, respectively.
(3) Excludes approximately $12.1 million of income allocated to the
holders of Series Two Preferred Units to account for their right to
participate on an as-converted basis in the special dividend to be
funded using proceeds from previously completed sales of real estate.
BOSTON PROPERTIES, INC.
PORTFOLIO LEASING PERCENTAGES
% Leased by Location
September 30, 2005 December 31, 2004
Greater Boston 91.0% 90.2%
Greater Washington, D.C. 97.5% 97.9%
Midtown Manhattan 97.6% 96.4%
Baltimore, MD N/A 90.9%
Richmond, VA N/A 91.3%
Princeton/East Brunswick, NJ 86.7% 90.2%
Greater San Francisco 85.9% 80.3%
Total Portfolio 93.3% 92.1%
% Leased by Type
September 30, 2005 December 31, 2004
Class A Office Portfolio 93.5% 92.3%
Office/Technical Portfolio 97.6% 97.6%
Industrial Portfolio 0.0% 0.0%
Total Portfolio 93.3% 92.1%
SOURCE Boston Properties, Inc.
10/25/2005
CONTACT: 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.; Marilynn Meek of the Financial Relations Board,
1-212-827-3773
Web site: http://www.bostonproperties.com
(BXP)