UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported): July 28, 2020
(Exact Name of Registrants As Specified in its Charter)
| Boston Properties, Inc. | |||||||||||
| (State or Other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification No.) | |||||||||
| Boston Properties Limited Partnership | |||||||||||
| (State or Other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification No.) | |||||||||
(Address of Principal Executive Offices) (Zip Code)
(617 ) 236-3300
(Registrants’ telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrants under any of the following provisions (see General Instruction A.2. below):
Securities registered pursuant to Section 12(b) of the Act:
| Registrant | Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||
| Boston Properties, Inc. | |||||||||||
| Boston Properties, Inc. | |||||||||||
| of 5.25% Series B Cumulative Redeemable Preferred Stock, par value $0.01 per share | |||||||||||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Boston Properties, Inc.:
Emerging growth company ☐
Boston Properties Limited Partnership:
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Boston Properties, Inc. ☐ Boston Properties Limited Partnership ☐
Item 2.02. Results of Operations and Financial Condition.
The information in this Item 2.02 - “Results of Operations and Financial Condition” is being furnished. Such information, including Exhibits 99.1 and 99.2 hereto, shall not be deemed “filed” for any purpose, including for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section. The information in this Item 2.02, including Exhibits 99.1 and 99.2, shall not be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act regardless of any general incorporation language in such filing.
On July 28, 2020, Boston Properties, Inc. (the “Company”), the general partner of Boston Properties Limited Partnership, issued a press release announcing its financial results for the second quarter of 2020. That press release referred to certain supplemental information that is available on the Company’s website. The text of the supplemental information and the press release are attached hereto as Exhibits 99.1 and 99.2, respectively, and are incorporated by reference herein.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
| Exhibit No. | Description | |||||||
| *99.1 | ||||||||
| *99.2 | ||||||||
| *101.SCH | Inline XBRL Taxonomy Extension Schema Document. | |||||||
| *101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | |||||||
| *101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document. | |||||||
| *101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | |||||||
| *101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document. | |||||||
| *104 | Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101.*). | |||||||
______________
* Filed herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrants have duly caused this report to be signed on their behalf by the undersigned hereunto duly authorized.
BOSTON PROPERTIES, INC. | |||||
By: | /s/ MICHAEL E. LABELLE | ||||
Michael E. LaBelle | |||||
Executive Vice President, Chief Financial Officer | |||||
and Treasurer | |||||
BOSTON PROPERTIES LIMITED PARTNERSHIP | |||||
By: Boston Properties, Inc., its General Partner | |||||
By: | /s/ MICHAEL E. LABELLE | ||||
Michael E. LaBelle | |||||
Executive Vice President, Chief Financial Officer | |||||
and Treasurer | |||||
Date: July 28, 2020
Exhibit 99.1
Supplemental Operating and Financial Data
for the Quarter Ended June 30, 2020
THE COMPANY
Boston Properties, Inc. (NYSE: BXP) (“Boston Properties,” “BXP” or the “Company”) is the largest publicly-traded developer, owner and manager of Class A office properties in the United States, concentrated in five markets - Boston, Los Angeles, New York, San Francisco and Washington, DC. The Company is a fully integrated real estate company, organized as a real estate investment trust (REIT), that develops, manages, operates, acquires and owns a diverse portfolio of primarily Class A office space. The Company’s complete portfolio totals 51.2 million square feet and 195 properties, including nine properties under construction/redevelopment, and consists of 176 office properties, 12 retail properties, six residential properties and one hotel. Boston Properties is well-known for its in-house building management expertise and responsiveness to tenants’ needs. The Company holds a superior track record of developing premium Central Business District (CBD) office buildings, successful mixed-use complexes, suburban office centers and build-to-suit projects for a diverse array of creditworthy tenants. Boston Properties actively works to promote its growth and operations in a sustainable and responsible manner. The Company has earned eight consecutive Global Real Estate Sustainability Benchmark (GRESB) Green Stars and the highest GRESB 5-star Rating. Boston Properties, an S&P 500 Company, was founded in 1970 by Mortimer B. Zuckerman and Edward H. Linde and became a public company in 1997.
FORWARD-LOOKING STATEMENTS
This Supplemental package contains “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. You can identify these statements by our use of the words “believes,” “budgeted,” “estimates,” “expects,” “guidance,” “intends,” “may,” “might,” “plans,” “projects,” “should,” “will” and similar expressions that do not relate to historical matters. These statements are based on our current expectations of future events. 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. If our underlying assumptions prove inaccurate, or known or unknown risks or uncertainties materialize, actual results could differ materially from those expressed or implied by the forward-looking statement. These factors include, without limitation, uncertainties and risks related to the impact of the COVID-19 global pandemic, including the duration, scope and severity of the pandemic domestically and internationally; federal, state and local government actions or restrictive measures implemented in response to COVID-19, the effectiveness of such measures and the direct and indirect impact of such measures on our and our tenants' businesses, financial condition, results of operation, cash flows, liquidity and performance, and the U.S. and international economy and economic activity generally; whether new or existing actions/or measures continue to result in increasing unemployment that impact the ability of our residential tenants to generate sufficient income to pay, or make them unwilling to pay, rent in full or at all in a timely manner; the health, continued service and availability of our personnel, including our key personnel and property management teams; the effectiveness or lack of effectiveness of government relief in providing assistance to individuals and large and small businesses, including our tenants, that have suffered significant adverse effects from COVID-19; and the extent of construction delays on our development/redevelopment projects due to work-stoppage orders or disruptions in the supply of materials which could result in our failure to meet the development milestones set forth in any applicable lease agreement, delay the commencement or completion of construction and our anticipated lease-up plans for a development/redevelopment project or our overall development pipeline that may cause returns on investment to be less than projected, and/or increase the costs of construction of new or existing projects. In addition to the risks specific to COVID-19, other 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, acquisition and disposition activity, the ability to effectively integrate acquisitions, the uncertainties of investing in new markets, the costs and availability of financing, the effectiveness of our interest rate hedging contracts, the ability of our joint venture partners to satisfy their obligations, the effects of local, national and international economic and market conditions, the effects of acquisitions, dispositions and possible impairment charges on our operating results, the impact of newly adopted accounting principles on the Company’s accounting policies and on period-to-period comparisons of financial results, regulatory changes and other risks and uncertainties detailed from time to time in the Company’s filings with the Securities and Exchange Commission. These forward-looking statements speak only as of the date of issuance of this report and are not guarantees of future results, performance or achievements. 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.
NON-GAAP FINANCIAL MEASURES
This Supplemental package includes non-GAAP financial measures, which are accompanied by what the Company considers the most directly comparable financial measures calculated and presented in accordance with GAAP. Quantitative reconciliations of the differences between the most directly comparable GAAP financial measures and the non-GAAP financial measures presented are provided within this Supplemental package. Definitions of these non-GAAP financial measures and statements of the reasons why management believes the non-GAAP measures provide useful information to investors about the Company’s financial condition and results of operations, and, if applicable, the other purposes for which management uses the measures, can be found in the Definitions section of this Supplemental starting on page 54.
The Company also presents “BXP’s Share” of certain of these measures, which are non-GAAP financial measures that are calculated as the consolidated amount calculated in accordance with GAAP, plus the Company’s share of the amount from the Company’s unconsolidated joint ventures (calculated based upon the Company’s percentage ownership interest and, in some cases, after priority allocations), minus the Company’s partners’ share of the amount from the Company’s consolidated joint ventures (calculated based upon the partners’ percentage ownership interests and, in some cases, after priority allocations, income allocation to private REIT shareholders and their share of fees due to the Company). Management believes that presenting “BXP’s Share” of these measures provides useful information to investors regarding the Company’s financial condition and/or results of operations because the Company has several significant joint ventures and in some cases, the Company exercises significant influence over, but does not control, the joint venture, in which case GAAP requires that the Company account for the joint venture entity using the equity method of accounting and the Company does not consolidate it for financial reporting purposes. In other cases, GAAP requires that the Company consolidate the venture even though the Company’s partner(s) owns a significant percentage interest. As a result, management believes that presenting BXP Share of various financial measures in this manner can help investors better understand the Company’s financial condition and/or results of operations after taking into account its true economic interest in these joint ventures. The Company cautions investors that the ownership percentages used in calculating “BXP’s Share” of these measures may not completely and accurately depict all of the legal and economic implications of holding an interest in a consolidated or unconsolidated joint venture. For example, in addition to partners’ interests in profits and capital, venture agreements vary in the allocation of rights regarding decision making (both routine and major decisions), distributions, transferability of interests, financings and guarantees, liquidations and other matters. As a result, presentations of “BXP’s Share” of a financial measure should not be considered a substitute for, and should only be considered together with and as a supplement to, the Company’s financial information presented in accordance with GAAP. Unless noted otherwise, reconciliations of “BXP’s Share” of these financial measures can be found in the Reconciliations section of this Supplemental package starting on page 58.
GENERAL INFORMATION
| Corporate Headquarters | Trading Symbol | Investor Relations | Inquiries | ||||||||
| 800 Boylston Street | BXP | Boston Properties, Inc. | Inquiries should be directed to | ||||||||
| Suite 1900 | 800 Boylston Street, Suite 1900 | Michael E. LaBelle | |||||||||
| Boston, MA 02199 | Stock Exchange Listing | Boston, MA 02199 | Executive Vice President, Chief Financial Officer | ||||||||
| www.bxp.com | New York Stock Exchange | investors.bxp.com | at 617.236.3352 or | ||||||||
| (t) 617.236.3300 | investorrelations@bxp.com | mlabelle@bxp.com | |||||||||
| (f) 617.236.3311 | (t) 617.236.3822 | ||||||||||
| (f) 617.236.3311 | Sara Buda | ||||||||||
| Vice President, Investor Relations | |||||||||||
| at 617.236.3429 or | |||||||||||
| sbuda@bxp.com | |||||||||||
(Cover photo: 20 CityPoint, Waltham, MA)
| Q2 2020 | ||||
| Table of contents | |||||
| Page | |||||
| OVERVIEW | |||||
| Company Profile | |||||
| FINANCIAL INFORMATION | |||||
| COVID-19 Impact | |||||
| Financial Highlights | |||||
| Consolidated Balance Sheets | |||||
| Consolidated Income Statements | |||||
| Funds From Operations (FFO) | |||||
| Funds Available for Distribution (FAD) | |||||
| Net Operating Income (NOI) | |||||
| Same Property Net Operating Income (NOI) by Reportable Segment | |||||
| Capital Expenditures, Tenant Improvement Costs and Leasing Commissions | |||||
| Acquisitions and Dispositions | |||||
| DEVELOPMENT ACTIVITY | |||||
| Construction in Progress | |||||
| Land Parcels and Purchase Options | |||||
| LEASING ACTIVITY | |||||
| Leasing Activity | |||||
| PROPERTY STATISTICS | |||||
| Portfolio Overview | |||||
| Residential and Hotel Performance | |||||
| In-Service Property Listing | |||||
| Top 20 Tenants Listing and Portfolio Tenant Diversification | |||||
| Occupancy by Location | |||||
| DEBT AND CAPITALIZATION | |||||
| Capital Structure | |||||
| Debt Analysis | |||||
| Senior Unsecured Debt Covenant Compliance Ratios | |||||
Net Debt to EBITDAre | |||||
| Debt Ratios | |||||
| JOINT VENTURES | |||||
| Consolidated Joint Ventures | |||||
| Unconsolidated Joint Ventures | |||||
| LEASE EXPIRATION ROLL-OUT | |||||
| Total In-Service Properties | |||||
| Boston | |||||
| Los Angeles | |||||
| New York | |||||
| San Francisco | |||||
| Washington, DC | |||||
| CBD | |||||
| Suburban | |||||
| RESEARCH COVERAGE, DEFINITIONS AND RECONCILIATIONS | |||||
| Research Coverage | |||||
| Definitions | |||||
| Reconciliations | |||||
| Consolidated Income Statement - Prior Year | |||||
| Funds From Operations (FFO) - Prior Year | |||||
| Funds Available for Distribution (FAD) - Prior Year | |||||
| Q2 2020 | ||||
| Company profile | |||||
SNAPSHOT
(as of June 30, 2020)
| Fiscal Year-End | December 31 | ||||
| Total Properties (includes unconsolidated joint ventures) | 195 | ||||
| Total Square Feet (includes unconsolidated joint ventures) | 51.2 million | ||||
Common shares outstanding, plus common units and LTIP units (other than unearned Multi-Year Long-Term Incentive Program (MYLTIP) Units) on an as-converted basis 1 | 173.1 million | ||||
| Closing Price, at the end of the quarter | $90.38 per share | ||||
| Dividend - Quarter/Annualized | $0.98/$3.92 per share | ||||
| Dividend Yield | 4.34% | ||||
Consolidated Market Capitalization 1 | $28.9 billion | ||||
BXP’s Share of Market Capitalization 1, 2 | $28.8 billion | ||||
| Senior Debt Ratings | A- (S&P); Baa1 (Moody’s) | ||||
STRATEGY
Boston Properties’ primary business objective is to maximize return on investment in an effort to provide its investors with the greatest possible total return in all points of the economic cycle. To achieve this objective, the key tenets of our business strategy are to:
•maintain a keen focus on select markets that exhibit the strongest economic growth and investment characteristics over time - currently Boston, Los Angeles, New York, San Francisco and Washington, DC;
•invest in the highest quality buildings (primarily office) with unique amenities and desirable locations that are able to maintain high occupancy rates and achieve premium rental rates through economic cycles;
•maintain scale and a full-service real estate capability (leasing, development, construction and property management) in our markets to ensure we (1) see all relevant investment deal flow, (2) maintain an ability to execute on all types of real estate opportunities, such as acquisitions, dispositions, repositioning and development, throughout the real estate investment cycle, (3) provide superior service to our tenants and (4) develop and manage our assets in the most sustainable manner possible;
•be astute in market timing for investment decisions by acquiring properties in times of opportunity, developing new properties in times of growth and selling assets at attractive prices, resulting in continuous portfolio refreshment;
•ensure a strong balance sheet to maintain consistent access to capital and the resultant ability to make new investments at opportune points in time; and
•foster a culture and reputation of integrity, excellence and purposefulness, making us the employer of choice for talented real estate professionals, the landlord and developer of choice for our customers, as well as the counterparty of choice for real estate industry participants.
MANAGEMENT
| Board of Directors | Management | |||||||||||||
| Joel I. Klein | Chairman of the Board | Owen D. Thomas | Chief Executive Officer | |||||||||||
| Owen D. Thomas | Chief Executive Officer | Douglas T. Linde | President | |||||||||||
| Douglas T. Linde | President | Raymond A. Ritchey | Senior Executive Vice President | |||||||||||
| Kelly A. Ayotte | Chair of the Compensation Committee | Michael E. LaBelle | Executive Vice President, Chief Financial Officer and Treasurer | |||||||||||
| Bruce W. Duncan | ||||||||||||||
| Karen E. Dykstra | Peter D. Johnston | Executive Vice President, Washington, DC Region | ||||||||||||
| Carol B. Einiger | Bryan J. Koop | Executive Vice President, Boston Region | ||||||||||||
| Diane J. Hoskins | Robert E. Pester | Executive Vice President, San Francisco Region | ||||||||||||
| Matthew J. Lustig | Chair of Nominating & Corporate Governance Committee | John F. Powers | Executive Vice President, New York Region | |||||||||||
| Frank D. Burt | Senior Vice President and Chief Legal Officer | |||||||||||||
| David A. Twardock | Chair of Audit Committee | Michael R. Walsh | Senior Vice President and Chief Accounting Officer | |||||||||||
| William H. Walton, III | Donna Garesche | Senior Vice President and Chief Human Resources Officer | ||||||||||||
| James Whalen | Senior Vice President and Chief Information Officer | |||||||||||||
____________________
1For additional detail, see page 27.
2For the Company’s definitions and related disclosures, see the Definitions and Reconciliations sections of this Supplemental package starting on page 54.
1
| Q2 2020 | ||||
| COVID-19 Impact | |||||
Commencing in mid March 2020, the COVID-19 pandemic began to have an impact on the United States. Consequently, the Company’s financial results have been adversely impacted for the three months ended June 30, 2020. Set forth below are the details related to the effects of the COVID-19 pandemic to the Company’s operations for the three months ended June 30, 2020.
(unaudited and dollars in thousands)
For the second quarter of 2020, Revenue was $654,773 and Net income attributable to Boston Properties, Inc. common shareholders was $266,525. For the second quarter of 2019, Revenue was $733,741 and Net income attributable to Boston Properties, Inc. common shareholders was $164,318.
BXP’s Share of Revenue1 for the second quarter of 2020 was $638,485, marking a decrease of $60,158 from Q2 2019. Included in BXP’s Share for Q2 2020 is an aggregate of $69,129 of primarily COVID-19 related decreases consisting of:
•$26,325 of write-offs associated with accrued rent (included within straight-line rent)2,
•$14,707 of write-offs associated with accounts receivable2,,
•$13,352 decrease in parking and other revenue2,, and
•$14,745 decrease due to the closure of our only hotel.
Funds from Operations (“FFO”) attributable to the Operating Partnership common unitholders (including Boston Properties, Inc.) (Basic FFO)1, 3 for Q2 2020 was $263,243, marking a decrease of $44,576 from Q2 2019. Included in Q2 2020 is an aggregate of $62,022 of BXP’s Share of primarily COVID-19 related decreases consisting of:
•$26,325 of write-offs associated with accrued rent (included within straight-line rent)2,,
•$14,707 of write-offs associated with accounts receivable2,,
•$13,352 decrease in parking and other revenue2,, and
•$7,638 decrease in NOI due to the closure of our only hotel.
BXP’s Share of Same Property NOI (excluding termination income)1, 4 was $368,834, marking a decrease of $44,575 from Q2 2019. Included in Q2 2020 is an aggregate of $59,489 of BXP’s Share of primarily COVID-19 related decreases consisting of:
•$24,729 of write-offs associated with accrued rent (included within straight-line rent)2,,
•$13,999 of write-offs associated with accounts receivable2,,
•$13,123 decrease in parking and other revenue2,, and
•$7,638 decrease in NOI due to the closure of our only hotel.
BXP’s Share of Same Property NOI (excluding termination income) - cash1, 4 was $349,808, marking a decrease of $39,376 from Q2 2019. Included in Q2 2020 is an aggregate of $49,511 of BXP’s Share of primarily COVID-19 related decreases consisting of:
•$14,751 decrease in lease revenue, primarily related to COVID-19 cash rent abatements and deferrals2,
•$13,999 of write-offs associated with accounts receivable2,,
•$13,123 decrease in parking and other revenue2,, and
•$7,638 decrease in NOI due to the closure of our only hotel.
Funds Available for Distribution (“FAD”)1, 5 was $153,660 for Q2 2020, a decrease of $70,059 from Q2 2019. The distributions to common shareholders and unitholders (excluding any special distributions) were $169,701 for Q2 2020. Included in Q2 2020, is an aggregate of $52,248 of BXP’s Share of primarily COVID-19 related decreases consisting of:
•$16,551 decrease in lease revenue, primarily related to COVID-19 cash rent abatements and deferrals2,
•$14,707 of write-offs associated with accounts receivable2,,
•$13,352 decrease in parking and other revenue2,, and
•$7,638 decrease in NOI due to the closure of our only hotel.
_____________
1See the Definitions and Reconciliations sections of this Supplemental package starting on page 54.
2For additional information, see page 58.
3For quantitative reconciliations of FFO for the three months ended June 30, 2020 and June 30, 2019, see pages 6 and 65, respectively.
4For a quantitative reconciliation for the three months ended June 30, 2020, see page 10.
5For quantitative reconciliations of FAD for the three months ended June 30, 2020 and June 30, 2019, see pages 7 and and 66, respectively.
2
| Q2 2020 | ||||
| Financial highlights | |||||
(unaudited and in thousands, except ratios and per share amounts)
| Three Months Ended | ||||||||||||||
| 30-Jun-20 | 31-Mar-20 | |||||||||||||
| Net income attributable to Boston Properties, Inc. common shareholders | $ | 266,525 | $ | 497,496 | ||||||||||
| Net income attributable to Boston Properties, Inc. per share - diluted | $ | 1.71 | $ | 3.20 | ||||||||||
FFO attributable to Boston Properties, Inc. common shareholders 1 | $ | 236,908 | $ | 284,062 | ||||||||||
Diluted FFO per share 1 | $ | 1.52 | $ | 1.83 | ||||||||||
| Dividends per common share | $ | 0.98 | $ | 0.98 | ||||||||||
Funds available for distribution to common shareholders and common unitholders (FAD) 2 | $ | 153,660 | $ | 235,890 | ||||||||||
| Selected items: | ||||||||||||||
| Revenue | $ | 654,773 | $ | 752,556 | ||||||||||
| Recoveries from tenants | $ | 98,393 | $ | 120,942 | ||||||||||
| Service income from tenants | $ | 1,115 | $ | 2,972 | ||||||||||
BXP’s Share of revenue 3 | $ | 638,485 | $ | 720,387 | ||||||||||
BXP’s Share of straight-line rent 3 | $ | 22,747 | $ | 31,262 | ||||||||||
BXP’s Share of write-offs associated with accrued rent (included within straight-line rent) 3 | $ | (26,325) | $ | (1,526) | ||||||||||
BXP’s Share of write-offs associated with accounts receivable (included within lease revenue) 3 | $ | (14,707) | $ | (815) | ||||||||||
BXP’s Share of fair value lease revenue 3, 4 | $ | 2,548 | $ | 3,189 | ||||||||||
BXP’s Share of termination income 3 | $ | 2,988 | $ | 2,161 | ||||||||||
| Ground rent expense | $ | 3,468 | $ | 3,574 | ||||||||||
| Capitalized interest | $ | 13,717 | $ | 14,149 | ||||||||||
| Capitalized wages | $ | 3,401 | $ | 2,826 | ||||||||||
| Income (loss) from unconsolidated joint ventures | $ | 1,832 | $ | (369) | ||||||||||
BXP’s share of FFO from unconsolidated joint ventures 5 | $ | 16,898 | $ | 17,963 | ||||||||||
| Net income (loss) attributable to noncontrolling interests in property partnerships | $ | (767) | $ | 19,486 | ||||||||||
FFO attributable to noncontrolling interests in property partnerships 6 | $ | 21,713 | $ | 37,113 | ||||||||||
| Balance Sheet items: | ||||||||||||||
| Above-market rents (included within Prepaid Expenses and Other Assets) | $ | 6,927 | $ | 8,197 | ||||||||||
| Below-market rents (included within Other Liabilities) | $ | 31,277 | $ | 34,706 | ||||||||||
| Accrued rental income liability (included within Other Liabilities) | $ | 125,887 | $ | 129,567 | ||||||||||
| Ratios: | ||||||||||||||
Interest Coverage Ratio (excluding capitalized interest) 7 | 3.53 | 4.22 | ||||||||||||
Interest Coverage Ratio (including capitalized interest) 7 | 3.11 | 3.65 | ||||||||||||
Fixed Charge Coverage Ratio 7 | 2.68 | 3.03 | ||||||||||||
BXP’s Share of Net Debt to BXP’s Share of EBITDAre 8 | 7.38 | 6.59 | ||||||||||||
Change in BXP’s Share of Same Store Net Operating Income (NOI) (excluding termination income) 9 | (10.8) | % | 4.8 | % | ||||||||||
Change in BXP’s Share of Same Store NOI (excluding termination income) - cash 9 | (10.1) | % | 5.0 | % | ||||||||||
FAD Payout Ratio 2 | 110.44 | % | 71.92 | % | ||||||||||
| Operating Margins [(rental revenue - rental expense)/rental revenue] | 62.8 | % | 64.2 | % | ||||||||||
| Occupancy of In-Service Properties | 92.0 | % | 92.9 | % | ||||||||||
| Capitalization: | ||||||||||||||
| Consolidated Debt | $ | 13,048,579 | $ | 12,061,224 | ||||||||||
BXP’s Share of Debt 10 | $ | 12,918,703 | $ | 11,890,196 | ||||||||||
| Consolidated Market Capitalization | $ | 28,892,634 | $ | 28,224,392 | ||||||||||
| Consolidated Debt/Consolidated Market Capitalization | 45.16 | % | 42.73 | % | ||||||||||
BXP’s Share of Market Capitalization 10 | $ | 28,762,758 | $ | 28,053,364 | ||||||||||
BXP’s Share of Debt/BXP’s Share of Market Capitalization 10 | 44.91 | % | 42.38 | % | ||||||||||
_____________
1For a quantitative reconciliation of FFO attributable to Boston Properties, Inc. common shareholders and Diluted FFO per share, see page 6.
2For a quantitative reconciliation of FAD, see page 7. FAD Payout Ratio equals distributions to common shareholders and unitholders (excluding any special distributions) divided by FAD.
3See the Definitions and Reconciliations sections of this Supplemental package starting on page 54.
4Represents the net adjustment for above- and below-market leases that are amortized over the terms of the respective leases in place at the property acquisition dates.
5For a quantitative reconciliation for the three months ended June 30, 2020, see page 36.
6For a quantitative reconciliation for the three months ended June 30, 2020, see page 33.
7For a quantitative reconciliation for the three months ended June 30, 2020 and March 31, 2020, see page 31.
8For a quantitative reconciliation for the three months ended June 30, 2020 and March 31, 2020, see page 30.
9For a quantitative reconciliation for the three months ended June 30, 2020, see page 10.
10For a quantitative reconciliation for June 30, 2020, see page 27.
3
| Q2 2020 | ||||
| Consolidated Balance Sheets | |||||
(unaudited and in thousands)
| 30-Jun-20 | 31-Mar-20 | |||||||||||||
| ASSETS | ||||||||||||||
| Real estate | 21,267,915 | $ | 21,273,137 | |||||||||||
| Construction in progress | 893,935 | 804,179 | ||||||||||||
| Land held for future development | 414,053 | 264,893 | ||||||||||||
| Right of use assets - finance leases | 237,394 | 237,394 | ||||||||||||
| Right of use assets - operating leases | 147,512 | 148,057 | ||||||||||||
| Less accumulated depreciation | (5,292,389) | (5,209,487) | ||||||||||||
| Total real estate | 17,668,420 | 17,518,173 | ||||||||||||
| Cash and cash equivalents | 1,691,047 | 660,733 | ||||||||||||
| Cash held in escrows | 300,608 | 197,845 | ||||||||||||
| Investments in securities | 32,848 | 28,101 | ||||||||||||
| Tenant and other receivables, net | 82,545 | 89,431 | ||||||||||||
| Related party note receivable, net | 78,520 | 78,800 | ||||||||||||
| Notes receivable, net | 25,480 | 15,794 | ||||||||||||
| Accrued rental income, net | 1,069,004 | 1,059,677 | ||||||||||||
| Deferred charges, net | 655,813 | 667,076 | ||||||||||||
| Prepaid expenses and other assets | 56,768 | 136,730 | ||||||||||||
| Investments in unconsolidated joint ventures | 1,339,724 | 1,377,338 | ||||||||||||
| Total assets | $ | 23,000,777 | $ | 21,829,698 | ||||||||||
| LIABILITIES AND EQUITY | ||||||||||||||
| Liabilities: | ||||||||||||||
| Mortgage notes payable, net | $ | 2,915,852 | $ | 2,919,157 | ||||||||||
| Unsecured senior notes, net | 9,633,577 | 8,393,009 | ||||||||||||
| Unsecured line of credit | — | 250,000 | ||||||||||||
| Unsecured term loan, net | 499,150 | 499,058 | ||||||||||||
| Lease liabilities- finance leases | 230,146 | 227,067 | ||||||||||||
| Lease liabilities - operating leases | 200,979 | 200,573 | ||||||||||||
| Accounts payable and accrued expenses | 328,292 | 293,831 | ||||||||||||
| Dividends and distributions payable | 171,077 | 171,026 | ||||||||||||
| Accrued interest payable | 95,274 | 82,388 | ||||||||||||
| Other liabilities | 373,281 | 366,852 | ||||||||||||
| Total liabilities | 14,447,628 | 13,402,961 | ||||||||||||
| Commitments and contingencies | — | — | ||||||||||||
| Redeemable deferred stock units | 6,003 | 5,854 | ||||||||||||
| Equity: | ||||||||||||||
| Stockholders’ equity attributable to Boston Properties, Inc.: | ||||||||||||||
| Excess stock, $0.01 par value, 150,000,000 shares authorized, none issued or outstanding | — | — | ||||||||||||
Preferred stock, $0.01 par value, 50,000,000 shares authorized; 5.25% Series B cumulative redeemable preferred stock, $0.01 par value, liquidation preference $2,500 per share, 92,000 shares authorized, 80,000 shares issued and outstanding at June 30, 2020 and March 31, 2020 | 200,000 | 200,000 | ||||||||||||
Common stock, $0.01 par value, 250,000,000 shares authorized, 155,701,186 and 155,393,455 issued and 155,622,286 and 155,314,555 outstanding at June 30, 2020 and March 31, 2020, respectively | 1,556 | 1,553 | ||||||||||||
| Additional paid-in capital | 6,340,665 | 6,321,475 | ||||||||||||
| Dividends in excess of earnings | (302,511) | (416,740) | ||||||||||||
Treasury common stock at cost, 78,900 shares at June 30, 2020 and March 31, 2020 | (2,722) | (2,722) | ||||||||||||
| Accumulated other comprehensive loss | (54,921) | (55,700) | ||||||||||||
| Total stockholders’ equity attributable to Boston Properties, Inc. | 6,182,067 | 6,047,866 | ||||||||||||
| Noncontrolling interests: | ||||||||||||||
| Common units of the Operating Partnership | 640,491 | 636,572 | ||||||||||||
| Property partnerships | 1,724,588 | 1,736,445 | ||||||||||||
| Total equity | 8,547,146 | 8,420,883 | ||||||||||||
| Total liabilities and equity | $ | 23,000,777 | $ | 21,829,698 | ||||||||||
4
| Q2 2020 | ||||
Consolidated Income Statements 1 | |||||
(unaudited and in thousands, except per share amounts)
| Three Months Ended | ||||||||||||||
| 30-Jun-20 | 31-Mar-20 | |||||||||||||
| Revenue | ||||||||||||||
| Lease | $ | 630,119 | $ | 710,111 | ||||||||||
| Parking and other | 13,946 | 24,504 | ||||||||||||
| Hotel revenue | 99 | 6,825 | ||||||||||||
| Development and management services | 8,125 | 7,879 | ||||||||||||
| Direct reimbursements of payroll and related costs from management services contracts | 2,484 | 3,237 | ||||||||||||
| Total revenue | 654,773 | 752,556 | ||||||||||||
| Expenses | ||||||||||||||
| Operating | 109,448 | 127,800 | ||||||||||||
| Real estate taxes | 130,415 | 135,019 | ||||||||||||
| Demolition costs | (76) | 147 | ||||||||||||
| Hotel operating | 1,973 | 6,821 | ||||||||||||
General and administrative 2 | 37,743 | 36,454 | ||||||||||||
| Payroll and related costs from management services contracts | 2,484 | 3,237 | ||||||||||||
| Transaction costs | 332 | 615 | ||||||||||||
| Depreciation and amortization | 178,188 | 171,094 | ||||||||||||
| Total expenses | 460,507 | 481,187 | ||||||||||||
| Other income (expense) | ||||||||||||||
| Income (loss) from unconsolidated joint ventures | 1,832 | (369) | ||||||||||||
| Gains on sales of real estate | 203,767 | 410,165 | ||||||||||||
Gains (losses) from investments in securities 2 | 4,552 | (5,445) | ||||||||||||
| Interest and other income (loss) | 1,305 | 3,017 | ||||||||||||
| Interest expense | (107,142) | (101,591) | ||||||||||||
| Net income | 298,580 | 577,146 | ||||||||||||
| Net income attributable to noncontrolling interests | ||||||||||||||
| Noncontrolling interest in property partnerships | 767 | (19,486) | ||||||||||||
Noncontrolling interest - common units of the Operating Partnership 3 | (30,197) | (57,539) | ||||||||||||
| Net income attributable to Boston Properties, Inc. | 269,150 | 500,121 | ||||||||||||
| Preferred dividends | (2,625) | (2,625) | ||||||||||||
| Net income attributable to Boston Properties, Inc. common shareholders | $ | 266,525 | $ | 497,496 | ||||||||||
| INCOME PER SHARE OF COMMON STOCK (EPS) | ||||||||||||||
| Net income attributable to Boston Properties, Inc. per share - basic | $ | 1.71 | $ | 3.20 | ||||||||||
| Net income attributable to Boston Properties, Inc. per share - diluted | $ | 1.71 | $ | 3.20 | ||||||||||
_____________
1Commencing in mid March 2020, the COVID-19 pandemic began to have an impact on the United States. Consequently, the Company’s financial results have been adversely impacted for the three months ended June 30, 2020. For additional detail, see page 58.
2General and administrative expense includes $4.6 million and $(5.4) million and Gains (losses) from investments in securities include $4.6 million and $(5.4) million for the three months ended June 30, 2020 and March 31, 2020, respectively, related to the Company’s deferred compensation plan.
3For additional detail, see page 6.
5
| Q2 2020 | ||||
Funds from operations (FFO) 1 | |||||
(unaudited and dollars in thousands, except per share amounts)
| Three Months Ended | ||||||||||||||
| 30-Jun-20 | 31-Mar-20 | |||||||||||||
| Net income attributable to Boston Properties, Inc. common shareholders | $ | 266,525 | $ | 497,496 | ||||||||||
| Add: | ||||||||||||||
| Preferred dividends | 2,625 | 2,625 | ||||||||||||
| Noncontrolling interest - common units of the Operating Partnership | 30,197 | 57,539 | ||||||||||||
| Noncontrolling interests in property partnerships | (767) | 19,486 | ||||||||||||
| Net income | 298,580 | 577,146 | ||||||||||||
| Add: | ||||||||||||||
| Depreciation and amortization expense | 178,188 | 171,094 | ||||||||||||
Noncontrolling interests in property partnerships' share of depreciation and amortization 2 | (22,480) | (17,627) | ||||||||||||
BXP's share of depreciation and amortization from unconsolidated joint ventures 3 | 21,012 | 18,332 | ||||||||||||
| Corporate-related depreciation and amortization | (486) | (469) | ||||||||||||
| Less: | ||||||||||||||
| Gain on sale of real estate included within income (loss) from unconsolidated joint ventures | 5,946 | — | ||||||||||||
| Gains on sales of real estate | 203,767 | 410,165 | ||||||||||||
| Noncontrolling interests in property partnerships | (767) | 19,486 | ||||||||||||
| Preferred dividends | 2,625 | 2,625 | ||||||||||||
| FFO attributable to the Operating Partnership common unitholders (including Boston Properties, Inc.) (Basic FFO) | 263,243 | 316,200 | ||||||||||||
| Less: | ||||||||||||||
| Noncontrolling interest - common units of the Operating Partnership’s share of FFO | 26,335 | 32,138 | ||||||||||||
FFO attributable to Boston Properties, Inc. common shareholders 4 | $ | 236,908 | $ | 284,062 | ||||||||||
| Boston Properties, Inc.’s percentage share of Basic FFO | 90.00 | % | 89.84 | % | ||||||||||
| Noncontrolling interest’s - common unitholders percentage share of Basic FFO | 10.00 | % | 10.16 | % | ||||||||||
| Basic FFO per share | $ | 1.52 | $ | 1.83 | ||||||||||
| Weighted average shares outstanding - basic | 155,386 | 155,011 | ||||||||||||
| Diluted FFO per share | $ | 1.52 | $ | 1.83 | ||||||||||
| Weighted average shares outstanding - diluted | 155,407 | 155,258 | ||||||||||||
RECONCILIATION TO DILUTED FFO
| Three Months Ended | ||||||||||||||
| 30-Jun-20 | 31-Mar-20 | |||||||||||||
| Basic FFO | $ | 263,243 | $ | 316,200 | ||||||||||
| Add: | ||||||||||||||
| Effect of dilutive securities - stock-based compensation | — | — | ||||||||||||
| Diluted FFO | 263,243 | 316,200 | ||||||||||||
| Less: | ||||||||||||||
| Noncontrolling interest - common units of the Operating Partnership’s share of diluted FFO | 26,331 | 32,092 | ||||||||||||
| Boston Properties, Inc.’s share of Diluted FFO | $ | 236,912 | $ | 284,108 | ||||||||||
RECONCILIATION OF SHARES/UNITS FOR DILUTED FFO
| Three Months Ended | ||||||||||||||
| 30-Jun-20 | 31-Mar-20 | |||||||||||||
| Shares/units for Basic FFO | 172,659 | 172,549 | ||||||||||||
| Add: | ||||||||||||||
| Effect of dilutive securities - stock-based compensation (shares/units) | 21 | 247 | ||||||||||||
| Shares/units for Diluted FFO | 172,680 | 172,796 | ||||||||||||
| Less: | ||||||||||||||
| Noncontrolling interest - common units of the Operating Partnership’s share of Diluted FFO (shares/units) | 17,273 | 17,538 | ||||||||||||
| Boston Properties, Inc.’s share of shares/units for Diluted FFO | 155,407 | 155,258 | ||||||||||||
| Boston Properties, Inc.’s percentage share of Diluted FFO | 90.00 | % | 89.85 | % | ||||||||||
_____________
1See the Definitions and Reconciliations sections of this Supplemental package starting on page 54.
2For a quantitative reconciliation for the three months ended June 30, 2020, see page 33.
3For a quantitative reconciliation for the three months ended June 30, 2020, see page 36.
4The FFO attributable to the Operating Partnership common unitholders (including Boston Properties, Inc.) (Basic FFO) is $44,576 less than Q2 2019. Included in the Q2 2020 amounts are BXP’s Share of: $26,325 of write-offs associated with accrued rent (included within straight-line rent, $14,707 of write-offs associated with accounts receivable, a $13,352 decrease in parking and other revenue and a $7,638 decrease in NOI due to the closure of our only hotel. These items decreased Q2 2020 FAD by $62,022. For additional information, see page 58.
6
| Q2 2020 | ||||
Funds available for distributions (FAD) 1 | |||||
(dollars in thousands)
| Three Months Ended | ||||||||||||||
| 30-Jun-20 | 31-Mar-20 | |||||||||||||
| Net income attributable to Boston Properties, Inc. common shareholders | $ | 266,525 | $ | 497,496 | ||||||||||
| Add: | ||||||||||||||
| Preferred dividends | 2,625 | 2,625 | ||||||||||||
| Noncontrolling interest - common units of the Operating Partnership | 30,197 | 57,539 | ||||||||||||
| Noncontrolling interests in property partnerships | (767) | 19,486 | ||||||||||||
| Net income | 298,580 | 577,146 | ||||||||||||
| Add: | ||||||||||||||
| Depreciation and amortization expense | 178,188 | 171,094 | ||||||||||||
Noncontrolling interests in property partnerships’ share of depreciation and amortization 2 | (22,480) | (17,627) | ||||||||||||
BXP’s share of depreciation and amortization from unconsolidated joint ventures 3 | 21,012 | 18,332 | ||||||||||||
| Corporate-related depreciation and amortization | (486) | (469) | ||||||||||||
| Less: | ||||||||||||||
| Gain on sale of real estate included within income (loss) from unconsolidated joint ventures | 5,946 | — | ||||||||||||
| Gains on sales of real estate | 203,767 | 410,165 | ||||||||||||
| Noncontrolling interests in property partnerships | (767) | 19,486 | ||||||||||||
| Preferred dividends | 2,625 | 2,625 | ||||||||||||
| Basic FFO | 263,243 | 316,200 | ||||||||||||
| Add: | ||||||||||||||
BXP’s Share of lease transaction costs that qualify as rent inducements 1, 4 | 1,309 | 4,023 | ||||||||||||
BXP’s Share of hedge amortization 1 | 1,446 | 1,435 | ||||||||||||
BXP’s Share of straight-line ground rent expense adjustment 1, 5 | 992 | 1,017 | ||||||||||||
| Stock-based compensation | 10,374 | 17,525 | ||||||||||||
| Non-real estate depreciation | 486 | 469 | ||||||||||||
Unearned portion of capitalized fees from consolidated joint ventures 6 | 411 | 56 | ||||||||||||
| Less: | ||||||||||||||
BXP’s Share of straight-line rent 1 | 22,747 | 31,262 | ||||||||||||
BXP’s Share of fair value lease revenue 1, 7 | 2,548 | 3,189 | ||||||||||||
BXP’s Share of non-cash termination income adjustment (fair value lease amounts) 1 | — | — | ||||||||||||
BXP’s Share of 2nd generation tenant improvements and leasing commissions 1 | 83,024 | 49,943 | ||||||||||||
BXP’s Share of maintenance capital expenditures 1, 8 | 16,246 | 20,244 | ||||||||||||
| Hotel improvements, equipment upgrades and replacements | 36 | 197 | ||||||||||||
Funds available for distribution to common shareholders and common unitholders (FAD) (A) | $ | 153,660 | 9 | $ | 235,890 | |||||||||
Distributions to common shareholders and unitholders (excluding any special distributions) (B) | $ | 169,701 | $ | 169,652 | ||||||||||
FAD Payout Ratio1 (B÷A) | 110.44 | % | 71.92 | % | ||||||||||
_____________
1See the Definitions and Reconciliations sections of this Supplemental package starting on page 54.
2For a quantitative reconciliation for the three months ended June 30, 2020, see page 33.
3For a quantitative reconciliation for the three months ended June 30, 2020, see page 36.
4Consists of lease transaction costs that qualify as rent inducements in accordance with GAAP. Lease transaction costs are generally included in 2nd generation tenant improvements and leasing commissions in the period the lease commences.
5Includes the straight-line impact of the Company’s 99-year ground and air rights lease related to the Company’s 100 Clarendon Street garage and Back Bay Transit Station. The Company has allocated contractual ground lease payments aggregating approximately $34.4 million, which it expects to incur by the end of 2023 with no payments thereafter. The Company is recognizing this expense on a straight-line basis over the 99-year term of the ground and air rights lease, see page 3.
6See page 60 for additional information.
7Represents the net adjustment for above- and below-market leases that are amortized over the terms of the respective leases in place at the property acquisition dates.
8Maintenance capital expenditures do not include planned capital expenditures related to acquisitions and repositioning capital expenditures.
9The FAD is $70,059 less than Q2 2019. Included in the Q2 2020 amounts are BXP’s Share of: $14,707 of write-offs associated with accounts receivable, a $16,551 decrease in lease revenue, primarily related to COVID-19 cash rent abatements and deferrals, a $13,352 decrease in parking and other revenue and a $7,638 decrease in NOI due to the closure of our only hotel. These items decreased Q2 2020 FAD by $52,248. For additional information, see page 58. For a quantitative reconciliation for the three months ended June 30, 2019, see page 66.
7
| Q2 2020 | ||||
| Reconciliation of net income attributable to Boston Properties, Inc. common shareholders to BXP’s Share of same property net operating income (NOI) | |||||
(in thousands)
| Three Months Ended | ||||||||||||||
| 30-Jun-20 | 30-Jun-19 | |||||||||||||
| Net income attributable to Boston Properties, Inc. common shareholders | $ | 266,525 | $ | 164,318 | ||||||||||
| Preferred dividends | 2,625 | 2,625 | ||||||||||||
| Net income attributable to Boston Properties, Inc. | 269,150 | 166,943 | ||||||||||||
| Net income attributable to noncontrolling interests: | ||||||||||||||
| Noncontrolling interest - common units of the Operating Partnership | 30,197 | 19,036 | ||||||||||||
| Noncontrolling interest in property partnerships | (767) | 17,482 | ||||||||||||
| Net income | 298,580 | 203,461 | ||||||||||||
| Add: | ||||||||||||||
| Interest expense | 107,142 | 102,357 | ||||||||||||
| Depreciation and amortization expense | 178,188 | 177,411 | ||||||||||||
| Transaction costs | 332 | 417 | ||||||||||||
| Payroll and related costs from management services contracts | 2,484 | 2,403 | ||||||||||||
| General and administrative expense | 37,743 | 35,071 | ||||||||||||
| Less: | ||||||||||||||
| Interest and other income (loss) | 1,305 | 3,615 | ||||||||||||
| Gains from investments in securities | 4,552 | 1,165 | ||||||||||||
| Gains from sales of real estate | 203,767 | 1,686 | ||||||||||||
| Income from unconsolidated joint ventures | 1,832 | 47,964 | ||||||||||||
| Direct reimbursements of payroll and related costs from management services contracts | 2,484 | 2,403 | ||||||||||||
| Development and management services revenue | 8,125 | 9,986 | ||||||||||||
| Net Operating Income (NOI) | 402,404 | 454,301 | ||||||||||||
| Add: | ||||||||||||||
BXP’s share of NOI from unconsolidated joint ventures 1 | 27,911 | 24,715 | ||||||||||||
| Less: | ||||||||||||||
Partners’ share of NOI from consolidated joint ventures (after priority allocations and income allocation to private REIT shareholders) 2 | 32,427 | 45,562 | ||||||||||||
| BXP’s Share of NOI | 397,888 | 433,454 | ||||||||||||
| Less: | ||||||||||||||
| Termination income | 3,309 | 4,910 | ||||||||||||
BXP’s share of termination income from unconsolidated joint ventures 1 | — | 50 | ||||||||||||
| Add: | ||||||||||||||
Partners’ share of termination income from consolidated joint ventures 2 | 321 | (9) | ||||||||||||
| BXP’s Share of NOI (excluding termination income) | $ | 394,900 | $ | 428,485 | ||||||||||
| Net Operating Income (NOI) | $ | 402,404 | $ | 454,301 | ||||||||||
| Less: | ||||||||||||||
| Termination income | 3,309 | 4,910 | ||||||||||||
NOI from non Same Properties (excluding termination income) 3 | 18,240 | 13,604 | ||||||||||||
| Same Property NOI (excluding termination income) | 380,855 | 435,787 | ||||||||||||
| Less: | ||||||||||||||
Partners’ share of NOI from consolidated joint ventures (excluding termination income and after priority allocations and income allocation to private REIT shareholders) 2 | 32,106 | 45,571 | ||||||||||||
| Add: | ||||||||||||||
Partners’ share of NOI from non Same Properties from consolidated joint ventures (excluding termination income and after priority allocations and income allocation to private REIT shareholders) 3 | (1,150) | 263 | ||||||||||||
BXP’s share of NOI from unconsolidated joint ventures (excluding termination income) 1 | 27,911 | 24,665 | ||||||||||||
| Less: | ||||||||||||||
BXP’s share of NOI from non Same Properties from unconsolidated joint ventures (excluding termination income) 3 | 6,676 | 1,735 | ||||||||||||
| BXP’s Share of Same Property NOI (excluding termination income) | $ | 368,834 | $ | 413,409 | ||||||||||
_____________
1For a quantitative reconciliation for the three months ended June 30, 2020, see page 63.
2For a quantitative reconciliation for the three months ended June 30, 2020, see pages 60-61.
3Pages 21-24 indicate by footnote the properties that are not included as part of Same Property NOI. In addition, Same Properties exclude properties that were sold prior to June 30, 2020 and therefore are no longer a part of the Company’s property portfolio.
8
| Q2 2020 | ||||
| Reconciliation of net income attributable to Boston Properties, Inc. common shareholders to BXP’s Share of same property net operating income (NOI) - cash | |||||
(in thousands)
| Three Months Ended | ||||||||||||||
| 30-Jun-20 | 30-Jun-19 | |||||||||||||
| Net income attributable to Boston Properties, Inc. common shareholders | $ | 266,525 | $ | 164,318 | ||||||||||
| Preferred dividends | 2,625 | 2,625 | ||||||||||||
| Net income attributable to Boston Properties, Inc. | 269,150 | 166,943 | ||||||||||||
| Net income attributable to noncontrolling interests: | ||||||||||||||
| Noncontrolling interest - common units of the Operating Partnership | 30,197 | 19,036 | ||||||||||||
| Noncontrolling interest in property partnerships | (767) | 17,482 | ||||||||||||
| Net income | 298,580 | 203,461 | ||||||||||||
| Add: | ||||||||||||||
| Interest expense | 107,142 | 102,357 | ||||||||||||
| Depreciation and amortization expense | 178,188 | 177,411 | ||||||||||||
| Transaction costs | 332 | 417 | ||||||||||||
| Payroll and related costs from management services contracts | 2,484 | 2,403 | ||||||||||||
| General and administrative expense | 37,743 | 35,071 | ||||||||||||
| Less: | ||||||||||||||
| Interest and other income (loss) | 1,305 | 3,615 | ||||||||||||
| Gains from investments in securities | 4,552 | 1,165 | ||||||||||||
| Gains from sales of real estate | 203,767 | 1,686 | ||||||||||||
| Income from unconsolidated joint ventures | 1,832 | 47,964 | ||||||||||||
| Direct reimbursements of payroll and related costs from management services contracts | 2,484 | 2,403 | ||||||||||||
| Development and management services revenue | 8,125 | 9,986 | ||||||||||||
| Net Operating Income (NOI) | 402,404 | 454,301 | ||||||||||||
| Less: | ||||||||||||||
| Straight-line rent | 17,024 | 17,017 | ||||||||||||
| Fair value lease revenue | 2,159 | 6,012 | ||||||||||||
| Termination income | 3,309 | 4,910 | ||||||||||||
| Add: | ||||||||||||||
Straight-line ground rent expense adjustment 1 | 799 | 843 | ||||||||||||
Lease transaction costs that qualify as rent inducements 2 | 1,616 | 1,438 | ||||||||||||
| NOI - cash (excluding termination income) | 382,327 | 428,643 | ||||||||||||
| Less: | ||||||||||||||
NOI - cash from non Same Properties (excluding termination income) 3 | 17,130 | 16,519 | ||||||||||||
| Same Property NOI - cash (excluding termination income) | 365,197 | 412,124 | ||||||||||||
| Less: | ||||||||||||||
Partners’ share of NOI - cash from consolidated joint ventures (excluding termination income and after priority allocations and income allocation to private REIT shareholders) 4 | 33,522 | 41,862 | ||||||||||||
| Add: | ||||||||||||||
Partners’ share of NOI - cash from non Same Properties from consolidated joint ventures (excluding termination income and after priority allocations and income allocation to private REIT shareholders) 3 | (166) | 334 | ||||||||||||
BXP’s share of NOI - cash from unconsolidated joint ventures (excluding termination income) 5 | 22,949 | 20,357 | ||||||||||||
| Less: | ||||||||||||||
BXP’s share of NOI - cash from non Same Properties from unconsolidated joint ventures (excluding termination income) 3 | 4,650 | 1,769 | ||||||||||||
| BXP’s Share of Same Property NOI - cash (excluding termination income) | $ | 349,808 | $ | 389,184 | ||||||||||
_____________
1In light of the front-ended, uneven rental payments required by the Company’s 99-year ground and air rights lease for the 100 Clarendon Street garage and Back Bay Transit Station in Boston, MA, and to make period-to-period comparisons more meaningful to investors, the adjustment does not include the straight-line impact of approximately $152 and $176 for the three months ended June 30, 2020 and 2019, respectively. As of June 30, 2020, the Company has remaining lease payments aggregating approximately $26.0 million, all of which it expects to incur by the end of 2023 with no payments thereafter. Under GAAP, the Company recognizes expense of $(87) per quarter on a straight-line basis over the term of the lease. However, unlike more traditional ground and air rights leases, the timing and amounts of the rental payments by the Company correlate to the uneven timing and funding by the Company of capital expenditures related to improvements at Back Bay Transit Station. As a result, the amounts excluded from the adjustment each quarter through 2023 may vary significantly.
2Consists of lease transaction costs that qualify as rent inducements in accordance with GAAP. Lease transaction costs are generally included in 2nd generation tenant improvements and leasing commissions in the Company’s FAD calculation on page 7.
3Pages 21-24 indicate by footnote the properties that are not included as part of Same Property NOI. In addition, Same Properties exclude properties that were sold prior to June 30, 2020 and therefore are no longer a part of the Company’s property portfolio.
4For a quantitative reconciliation for the three months ended June 30, 2020, see page 61.
5For a quantitative reconciliation for the three months ended June 30, 2020, see page 63.
9
| Q2 2020 | ||||
| Same property net operating income (NOI) by reportable segment | |||||
(dollars in thousands)
Office 1 | Hotel & Residential 2 | ||||||||||||||||||||||||||||||||||||||||||||||
| Three Months Ended | $ | % | Three Months Ended | $ | % | ||||||||||||||||||||||||||||||||||||||||||
| 30-Jun-20 | 30-Jun-19 | Change | Change | 30-Jun-20 | 30-Jun-19 | Change | Change | ||||||||||||||||||||||||||||||||||||||||
Rental Revenue 3 | $ | 607,851 | $ | 672,801 | $ | 9,501 | $ | 23,843 | |||||||||||||||||||||||||||||||||||||||
| Less: Termination income | 3,264 | 4,572 | — | — | |||||||||||||||||||||||||||||||||||||||||||
Rental revenue (excluding termination income) 3 | 604,587 | 668,229 | $ | (63,642) | (9.5) | % | 9,501 | 23,843 | $ | (14,342) | (60.2) | % | |||||||||||||||||||||||||||||||||||
| Less: Operating expenses and real estate taxes | 227,295 | 243,083 | (15,788) | (6.5) | % | 5,938 | 13,202 | (7,264) | (55.0) | % | |||||||||||||||||||||||||||||||||||||
NOI (excluding termination income) 3, 4 | $ | 377,292 | $ | 425,146 | $ | (47,854) | (11.3) | % | $ | 3,563 | $ | 10,641 | $ | (7,078) | (66.5) | % | |||||||||||||||||||||||||||||||
Rental revenue (excluding termination income) 3 | $ | 604,587 | $ | 668,229 | $ | (63,642) | (9.5) | % | $ | 9,501 | $ | 23,843 | $ | (14,342) | (60.2) | % | |||||||||||||||||||||||||||||||
| Less: Straight-line rent and fair value lease revenue | 18,145 | 25,922 | (7,777) | (30.0) | % | (76) | 22 | (98) | (445.5) | % | |||||||||||||||||||||||||||||||||||||
Add: Lease transaction costs that qualify as rent inducements 5 | 1,612 | 1,438 | 174 | 12.1 | % | — | — | — | — | % | |||||||||||||||||||||||||||||||||||||
| Subtotal | 588,054 | 643,745 | (55,691) | (8.7) | % | 9,577 | 23,821 | (14,244) | (59.8) | % | |||||||||||||||||||||||||||||||||||||
| Less: Operating expenses and real estate taxes | 227,295 | 243,083 | (15,788) | (6.5) | % | 5,938 | 13,202 | (7,264) | (55.0) | % | |||||||||||||||||||||||||||||||||||||
Add: Straight-line ground rent expense 6 | 799 | 843 | (44) | (5.2) | % | — | — | — | — | % | |||||||||||||||||||||||||||||||||||||
NOI - cash (excluding termination income) 3, 4 | $ | 361,558 | $ | 401,505 | $ | (39,947) | (9.9) | % | $ | 3,639 | $ | 10,619 | $ | (6,980) | (65.7) | % | |||||||||||||||||||||||||||||||
Consolidated Total 1, 7 (A) | BXP’s share of Unconsolidated Joint Ventures 7 (B) | ||||||||||||||||||||||||||||||||||||||||||||||
| Three Months Ended | $ | % | Three Months Ended | $ | % | ||||||||||||||||||||||||||||||||||||||||||
| 30-Jun-20 | 30-Jun-19 | Change | Change | 30-Jun-20 | 30-Jun-19 | Change | Change | ||||||||||||||||||||||||||||||||||||||||
Rental Revenue 3 | $ | 617,352 | $ | 696,644 | $ | 32,357 | $ | 35,114 | |||||||||||||||||||||||||||||||||||||||
| Less: Termination income | 3,264 | 4,572 | — | 50 | |||||||||||||||||||||||||||||||||||||||||||
Rental revenue (excluding termination income) 3 | 614,088 | 692,072 | $ | (77,984) | (11.3) | % | 32,357 | 35,064 | $ | (2,707) | (7.7) | % | |||||||||||||||||||||||||||||||||||
| Less: Operating expenses and real estate taxes | 233,233 | 256,285 | (23,052) | (9.0) | % | 11,122 | 12,134 | (1,012) | (8.3) | % | |||||||||||||||||||||||||||||||||||||
NOI (excluding termination income) 3, 4 | $ | 380,855 | $ | 435,787 | $ | (54,932) | (12.6) | % | $ | 21,235 | $ | 22,930 | $ | (1,695) | (7.4) | % | |||||||||||||||||||||||||||||||
Rental revenue (excluding termination income) 3 | $ | 614,088 | $ | 692,072 | $ | (77,984) | (11.3) | % | $ | 32,357 | $ | 35,064 | $ | (2,707) | (7.7) | % | |||||||||||||||||||||||||||||||
| Less: Straight-line rent and fair value lease revenue | 18,069 | 25,944 | (7,875) | (30.4) | % | 3,076 | 4,491 | (1,415) | (31.5) | % | |||||||||||||||||||||||||||||||||||||
Add: Lease transaction costs that qualify as rent inducements 5 | 1,612 | 1,438 | 174 | 12.1 | % | 140 | 149 | (9) | (6.0) | % | |||||||||||||||||||||||||||||||||||||
| Subtotal | $ | 597,631 | $ | 667,566 | (69,935) | (10.5) | % | 29,421 | 30,722 | (1,301) | (4.2) | % | |||||||||||||||||||||||||||||||||||
| Less: Operating expenses and real estate taxes | 233,233 | 256,285 | (23,052) | (9.0) | % | 11,122 | 12,134 | (1,012) | (8.3) | % | |||||||||||||||||||||||||||||||||||||
Add: Straight-line ground rent expense 6 | 799 | 843 | (44) | (5.2) | % | — | — | — | — | % | |||||||||||||||||||||||||||||||||||||
NOI - cash (excluding termination income) 3, 4 | $ | 365,197 | $ | 412,124 | $ | (46,927) | (11.4) | % | $ | 18,299 | $ | 18,588 | $ | (289) | (1.6) | % | |||||||||||||||||||||||||||||||
Partners’ share of Consolidated Joint Ventures 7 (C) | BXP’s Share 3, 7, 8, 9, 10 | ||||||||||||||||||||||||||||||||||||||||||||||
| Three Months Ended | $ | % | Three Months Ended | ||||||||||||||||||||||||||||||||||||||||||||