Boston Properties Announces Fourth Quarter 2012 Results

Boston Properties Announces Fourth Quarter 2012 Results

Reports diluted FFO per share of $1.27

Reports diluted EPS of $0.43


BOSTON--(BUSINESS WIRE)-- Boston Properties, Inc. (NYSE: BXP) , a real estate investment trust, reported results today for the fourth quarter ended December 31, 2012.

Results for the quarter ended December 31, 2012

Funds from Operations (FFO) for the quarter ended December 31, 2012 were $192.5 million, or $1.27 per share basic and $1.27 per share diluted. This compares to FFO for the quarter ended December 31, 2011 of $179.3 million, or $1.21 per share basic and $1.21 per share diluted. The weighted average number of basic and diluted shares outstanding totaled 151,005,547 and 152,708,254, respectively, for the quarter ended December 31, 2012 and 147,732,138 and 149,435,490, respectively, for the quarter ended December 31, 2011.

The Company's reported FFO of $1.27 per share diluted exceeded the guidance previously provided of $1.22-$1.24 per share. The Company's reported FFO included the following items, among others, that were not reflected in the guidance: $0.02 per share of improvements in portfolio operations, $0.01 per share of greater than expected interest and other income and development and management services revenue, and $0.01 per share of less than expected general and administrative expenses.

Net income available to common shareholders was $65.4 million for the quarter ended December 31, 2012, compared to $101.6 million for the quarter ended December 31, 2011. Net income available to common shareholders per share (EPS) for the quarter ended December 31, 2012 was $0.43 basic and $0.43 on a diluted basis. This compares to EPS for the fourth quarter of 2011 of $0.69 basic and $0.69 on a diluted basis.

Results for the year ended December 31, 2012

FFO for the year ended December 31, 2012 was $741.4 million, or $4.94 per share basic and $4.90 per share diluted. This compares to FFO for the year ended December 31, 2011 of $711.0 million, or $4.88 per share basic and $4.84 per share diluted. The weighted average number of basic and diluted shares outstanding totaled 150,119,947 and 152,055,620, respectively, for the year ended December 31, 2012 and 145,693,488 and 147,679,439, respectively, for the year ended December 31, 2011.

Net income available to common shareholders was $289.7 million for the year ended December 31, 2012, compared to $272.7 million for the year ended December 31, 2011. Net income available to common shareholders per share (EPS) for the year ended December 31, 2012 was $1.93 basic and $1.92 on a diluted basis. This compares to EPS for the year ended December 31, 2011 of $1.87 basic and $1.86 on a diluted basis.

The reported results are unaudited and there can be no assurance that the results will not vary from the final information for the quarter and year ended December 31, 2012. In the opinion of management, all adjustments considered necessary for a fair presentation of these reported results have been made.

As of December 31, 2012, the Company's portfolio consisted of 157 properties, comprised primarily of Class A office space, one hotel, three residential properties and four retail properties, aggregating approximately 44.4 million square feet, including nine properties under construction totaling 2.8 million square feet. In addition, the Company has structured parking for vehicles containing approximately 15.9 million square feet. The overall percentage of leased space for the 145 properties in service (excluding the two in-service residential properties and the hotel) as of December 31, 2012 was 91.4%.

Significant events during the fourth quarter included:

  • On October 1, 2012, a joint venture in which the Company has a 30% interest partially placed in-service 500 North Capitol Street, NW, a Class A office redevelopment project with approximately 232,000 net rentable square feet located in Washington, DC. The property is currently 82% leased.

  • On October 4, 2012, the Company completed the formation of a joint venture which owns and operates Fountain Square located in Reston, Virginia, adjacent to the Company's other Reston properties. Fountain Square is an office and retail complex aggregating approximately 758,000 net rentable square feet, comprised of approximately 521,000 net rentable square feet of Class A office space and approximately 237,000 net rentable square feet of retail space. The joint venture partner contributed the property valued at approximately $385.0 million and related mortgage indebtedness totaling approximately $211.3 million for a 50% interest in the joint venture. The Company contributed cash totaling approximately $87.0 million for its 50% interest, which cash was distributed to the joint venture partner. The Company is consolidating this joint venture. The mortgage loan bears interest at a fixed rate of 5.71% per annum and matures on October 11, 2016. Pursuant to the joint venture agreement (i) the Company has rights to acquire the partner's 50% interest and (ii) the partner has the right to cause the Company to acquire the partner's interest on January 4, 2016, in each case at a fixed price totaling approximately $102.0 million in cash. The fixed price option rights expire on January 31, 2016.

  • On October 19, 2012, the Company formed a joint venture with an affiliate of Hines to pursue the acquisition of land in San Francisco, California which could support a 61-story, 1.4 million square foot office tower known as Transbay Tower. The purchase price is approximately $190.0 million, and the acquisition is expected to close in the first quarter of 2013. The Company has a 50% interest in the joint venture. The Company has provided a non-refundable deposit for the land purchase in the form of a letter of credit totaling $5.0 million. There can be no assurance that the acquisition of the land will be consummated on the terms currently contemplated or at all.

  • On November 8, 2012, the Company declared a dividend of $0.65 per share of common stock for the period from October 1, 2012 to December 31, 2012, payable on January 29, 2013 to shareholders of record as of the close of business on December 31, 2012. This represents an increase of approximately 18% over the prior quarterly cash dividend of $0.55 per share.

  • On November 20, 2012, the Company's partner in its Annapolis Junction joint venture contributed a parcel of land and improvements and the Company contributed cash of approximately $5.4 million. The Company has a 50% interest in this joint venture. The venture has commenced construction of Annapolis Junction Building Seven, which when completed will consist of a Class A office property with approximately 125,000 net rentable square feet located in Annapolis, Maryland.

  • On December 14, 2012, the Company signed a 20-year lease with a law firm for approximately 246,000 net rentable square feet at 250 West 55th Street. 250 West 55th Street is an approximately 989,000 net rentable square foot office building under construction in midtown Manhattan. The Company expects that the law firm will move into the completed building in the second quarter of 2014. The property is currently approximately 46% leased.

  • On December 18, 2012, the Company terminated the construction loan facility collateralized by its 680 Folsom Street development project located in San Francisco, California totaling $170.0 million. The construction loan facility bore interest at a variable rate equal to LIBOR plus 3.70% per annum and was scheduled to mature on May 30, 2015 with two, one-year extension options, subject to certain conditions. The Company had not drawn any amounts under the facility.

  • On December 21, 2012, the Company signed a 20-year lease with a law firm for approximately 376,000 net rentable square feet at 601 Massachusetts Avenue, the Company's planned approximately 478,000 net rentable square foot development project located in Washington, DC. Construction of the project is scheduled to commence in the second quarter of 2013, and the law firm expects to move into the completed building in the fourth quarter of 2015. The property is currently approximately 79% leased.

  • The servicer of the non-recourse mortgage loan in the amount of $25.0 million collateralized by the Company's Montvale Center property located in Gaithersburg, Maryland foreclosed on the property on January 31, 2012. As a result of the foreclosure, the Company recognized a gain on forgiveness of debt during the first quarter of 2012 totaling approximately $15.8 million, net of noncontrolling interests' share of approximately $2.0 million. Due to a procedural error of the trustee, the foreclosure sale was subsequently dismissed by the applicable court prior to ratification. As a result, the Company has revised its financial statements to reflect the property and related mortgage debt on its consolidated balance sheet at December 31, 2012 and has reversed the gain on forgiveness of debt and recognized the operating activity from the property within its consolidated statement of operations for the year ended December 31, 2012. A subsequent foreclosure sale occurred on December 21, 2012, and ratification by the applicable court is pending. Once ratified, the Company will recognize a gain on forgiveness of debt. These events have no impact on the cash flows of the Company.

Transactions completed subsequent to December 31, 2012:

  • On January 7, 2013, the Company signed a 20-year lease with the General Services Administration for 100% of its approximately 182,000 net rentable square foot currently vacant Three Patriots Park property located in Reston, Virginia.

  • On January 28, 2013, the Company's Compensation Committee approved a new equity-based, multi-year, long-term incentive program (the "2013 MYLTIP") in lieu of a 2013 Outperformance Plan as a performance-based component of the Company's overall compensation program. The Company currently expects that under the Financial Accounting Standards Board's Accounting Standards Codification ("ASC") 718 "Compensation - Stock Compensation," the 2013 MYLTIP will have an aggregate value of approximately $8.1 million, which amount will generally be amortized into earnings over the five-year plan period under the graded vesting method and has been reflected in the 2013 guidance below.

EPS and FFO per Share Guidance:

The Company's guidance for the first quarter and full year 2013 for EPS (diluted) and FFO per share (diluted) is set forth and reconciled below. Except as described below, the estimates reflect management's view of current and future market conditions, including assumptions with respect to rental rates, occupancy levels and the earnings impact of the events referenced in this release and otherwise referenced during the conference call referred to below. The estimates do not include possible future gains or losses or the impact on operating results from other possible future property acquisitions or dispositions, other possible capital markets activity or possible future impairment charges. 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, impairment losses 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 below.

First Quarter 2013

Full Year 2013

Low

-

High

Low

-

High

Projected EPS (diluted)

$

0.38

-

$

0.40

$

1.90

-

$

2.02

Add:

Projected Company Share of Real Estate Depreciation and Amortization

0.81

-

0.81

3.25

-

3.25

Less:

Projected Company Share of Gains on Sales of Real Estate

0.00

-

0.00

0.09

-

0.09

Projected FFO per Share (diluted)

$

1.19

-

$

1.21

$

5.06

-

$

5.18

Boston Properties will host a conference call on Wednesday, January 30, 2013 at 10:00 AM Eastern Time, open to the general public, to discuss the fourth quarter and full year 2012 results, the 2013 projections and related assumptions, and other related matters that may be of interest to investors. The number to call for this interactive teleconference is (877) 706-4503 (Domestic) or (281) 913-8731 (International) and entering the passcode 87254079. A replay of the conference call will be available through February 13, 2013, by dialing (855) 859-2056 (Domestic) or (404) 537-3406 (International) and entering the passcode 87254079. There will also be a live audio webcast of the call which may be accessed on the Company's website at www.bostonproperties.com in the Investor Relations section. Shortly after the call a replay of the webcast will be available in the Investor Relations section of the Company's website and archived for up to twelve months following the call.

Additionally, a copy of Boston Properties' fourth quarter 2012 "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.

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 space, one hotel, three residential properties and four retail properties. The Company is one of the largest owners and developers of Class A office properties in the United States, concentrated in five markets - Boston, New York, Princeton, San Francisco and Washington, DC.

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 "assumes," "believes," "estimates," "expects," "guidance," "intends," "plans," "projects" 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 Company's ability to satisfy the closing conditions to the pending transactions described above, 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 (including the impact of the European sovereign debt issues), 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.Boston Properties does not undertake a duty to update or revise any forward-looking statement, including its guidance for the first quarter and full fiscal year 2013, whether as a result of new information, future events or otherwise.

Financial tables follow.

BOSTON PROPERTIES, INC.

CONSOLIDATED BALANCE SHEETS

December 31,

December 31,

2012

2011

(in thousands, except for share amounts)

(unaudited)

ASSETS

Real estate

$

13,581,454

$

12,303,965

Construction in progress

1,036,780

818,685

Land held for future development

275,094

266,822

Less: accumulated depreciation

(2,934,160

)

(2,642,986

)

Total real estate

11,959,168

10,746,486

Cash and cash equivalents

1,041,978

1,823,208

Cash held in escrows

55,181

40,332

Investments in securities

12,172

9,548

Tenant and other receivables, net of allowance for doubtful accounts of $1,960 and $1,766, respectively

69,555

79,838

Related party notes receivable

282,491

280,442

Interest receivable from related party notes receivable

104,816

89,854

Accrued rental income, net of allowance of $1,571 and $2,515, respectively

598,199

522,675

Deferred charges, net

588,235

445,403

Prepaid expenses and other assets

90,610

75,458

Investments in unconsolidated joint ventures

659,916

669,722

Total assets

$

15,462,321

$

14,782,966

LIABILITIES AND EQUITY

Liabilities:

Mortgage notes payable

$

3,102,485

$

3,123,267

Unsecured senior notes, net of discount

4,639,528

3,865,186

Unsecured exchangeable senior notes, net of discount

1,170,356

1,715,685

Unsecured line of credit

-

-

Accounts payable and accrued expenses

199,102

155,139

Dividends and distributions payable

110,488

91,901

Accrued interest payable

72,461

69,105

Other liabilities

324,613

293,515

Total liabilities

9,619,033

9,313,798

Commitments and contingencies

-

-

Noncontrolling interest:

Redeemable preferred units of the Operating Partnership

110,876

55,652

Redeemable interest in property partnership

97,558

-

Equity:

Stockholders' equity attributable to Boston Properties, Inc.

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, 151,680,109 and 148,186,511 shares

issued and 151,601,209 and 148,107,611 shares outstanding at December 31, 2012 and December

31, 2011, respectively

1,516

1,481

Additional paid-in capital

5,222,073

4,936,457

Dividends in excess of earnings

(109,985

)

(53,080

)

Treasury common stock, at cost

(2,722

)

(2,722

)

Accumulated other comprehensive loss

(13,817

)

(16,138

)

Total stockholders' equity attributable to Boston Properties, Inc.

5,097,065

4,865,998

Noncontrolling interests:

Common units of the Operating Partnership

539,753

548,581

Property partnerships

(1,964

)

(1,063

)

Total equity

5,634,854

5,413,516

Total liabilities and equity

$

15,462,321

$

14,782,966

BOSTON PROPERTIES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

Three months ended

Year ended

December 31,

December 31,

2012

2011

2012

2011

(in thousands, except for per share amounts)

Revenue

Rental

Base rent

$

382,934

$

357,024

$

1,483,533

$

1,401,594

Recoveries from tenants

59,825

51,929

229,107

198,703

Parking and other

22,612

21,217

91,635

83,069

Total rental revenue

465,371

430,170

1,804,275

1,683,366

Hotel revenue

11,691

11,632

37,915

34,529

Development and management services

8,343

8,726

34,077

33,425

Total revenue

485,405

450,528

1,876,267

1,751,320