Exhibit 99.1

 

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Supplemental Operating and Financial Data for the Quarter Ended September 30, 2017


LOGO

THIRD QUARTER 2017

 

Table of Contents

 

     Page  

Company Profile

     3  

Investor Information

     4  

Research Coverage

     5  

Guidance and Assumptions

     6  

Financial Highlights

     7-8  

Consolidated Balance Sheets

     9  

Consolidated Income Statements

     10  

Funds From Operations

     11  

Funds Available for Distribution

     12  

Interest Coverage Ratios

     13  

Capital Structure

     14  

Debt Analysis

     15-16  

Unconsolidated Joint Ventures

     17-18  

Consolidated Joint Ventures

     19-20  

Reconciliation of Net Income Attributable to Boston Properties, Inc. Common Shareholders to Same Property Performance

     21-22  

Same Property Net Operating Income by Reportable Segment

     23  

Residential and Hotel Performance

     24  

Capital Expenditures, Tenant Improvements and Leasing Commissions

     25  

Portfolio Overview

     26  

In-Service Property Listing

     27-29  

Occupancy by Location

     30  

Top 20 Tenants and Tenant Diversification

     31  

Aggregate Lease Expiration Roll Out

     32  

Boston Lease Expiration Roll Out

     33-34  

New York Lease Expiration Roll Out

     35-36  

San Francisco and Los Angeles Lease Expiration Roll Out

     37-38  

Washington, DC Lease Expiration Roll Out

     39-40  

CBD/Suburban Lease Expiration Roll Out

     41-42  

Leasing Activity

     43  

Acquisitions/Dispositions

     44  

Value Creation Pipeline—Construction in Progress

     45  

Value Creation Pipeline—Land Parcels and Purchase Options

     46  

Definitions

     47-48  

This supplemental package 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,” “budgeted,” “estimates,” “expects,” “guidance,” “intends,” “may,” “might,” “plans,” “projects,” “should,” “will” 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 that 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, acquisition and disposition activity, the ability to effectively integrate acquisitions, the uncertainties of investing in new markets, the ability of our joint venture partners to satisfy their obligations, the costs and availability of financing, the effectiveness of our interest rate hedging programs, 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.

(Cover photos: Rendering of the completed renovation at 399 Park Avenue, New York, NY)

 

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THIRD QUARTER 2017

 

COMPANY PROFILE

The Company

Boston Properties, Inc. (“Boston Properties,” “BXP” or the “Company”), a self-administered and self-managed real estate investment trust (REIT), is one of the largest owners, managers, and developers of Class A office properties in the United States, with a significant presence in five markets: Boston, Los Angeles, New York, San Francisco and Washington, DC. The Company was founded in 1970 by Mortimer B. Zuckerman and Edward H. Linde in Boston, where it maintains its headquarters. Boston Properties became a public company in June 1997. Boston Properties is a fully integrated real estate investment trust that develops, redevelops, acquires, manages, operates and owns a diverse portfolio of primarily Class A office space totaling 49.8 million square feet and consisting of 166 office properties (including seven properties under construction/redevelopment), five retail properties, five residential properties (including three properties under construction) 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 in 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.

Management

Boston Properties’ senior management team is among the most respected and accomplished in the REIT industry. Our deep and talented team of 36 individuals averages 30 years of real estate experience and 19 years with Boston Properties. We believe that our size, management depth, financial strength, reputation, and relationships of key personnel provide a competitive advantage to realize growth through property development and acquisitions. Boston Properties benefits from the reputation and relationships of key personnel, including Owen D. Thomas, Chief Executive Officer; Douglas T. Linde, President; Raymond A. Ritchey, Senior Executive Vice President; and Michael E. LaBelle, Executive Vice President, Chief Financial Officer and Treasurer. Our senior management team’s national reputation helps us attract business and investment opportunities. In addition, our other executive officers that serve as Regional Managers have strong reputations that assist in identifying and closing on new opportunities, having opportunities brought to us, and in negotiating with tenants and build-to-suit prospects. Additionally, Boston Properties’ Board of Directors consists of 11 distinguished members, the majority of whom are Independent Directors.

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 Company maintains consistent strategies that include the following:

 

    concentrating on select targeted markets characterized by high barriers to the creation of new supply and strong real estate fundamentals where tenants have demonstrated a preference for high-quality office buildings and other facilities—currently Boston, Los Angeles, New York, San Francisco and Washington, DC;

 

    investing in the highest quality buildings (primarily office) with unique amenities and locations that are able to maintain high occupancy and achieve premium rental rates through economic cycles;

 

    in our core markets, maintaining scale and a full-service real estate capability (leasing, development, construction and property management) 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 and (3) provide superior service to our tenants;

 

    be astute in market timing for investment decisions by acquiring properties in times of opportunity, developing into economic growth and selectively selling assets at attractive prices, resulting in continuous portfolio refreshment;

 

    taking on complex, technically challenging development projects that leverage the skills of our management team to successfully develop, acquire, and reposition properties;

 

    exploring joint-venture opportunities with partners who seek to benefit from our depth of development and management expertise;

 

    ensuring a strong balance sheet to maintain consistent access to capital and the resultant ability to make opportunistic investments; and

 

    fostering a culture and reputation of integrity and fair dealing, making us the counterparty of choice for tenants and real estate industry participants and employer of choice for talented real estate professionals.

Snapshot

(as of September 30, 2017)

 

Corporate Headquarters

   Boston, Massachusetts

Markets

   Boston, Los Angeles, New York, San Francisco and Washington, DC

Fiscal Year-End

   December 31

Total Properties (includes unconsolidated joint ventures)

   177

Total Square Feet (includes unconsolidated joint ventures)

   49.8 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)

   172.0 million

Dividend—Quarter/Annualized

   $0.75/$3.00

Dividend Yield

   2.44%

Consolidated Market Capitalization

   $31.6 billion

BXP’s Share of Market Capitalization (2)

   $30.9 billion

Senior Debt Ratings

   A- (S&P); BBB+ (Fitch); Baa2 (Moody’s)

 

(1) For additional detail, see page 14.
(2) For the Company’s definition of BXP’s Share of Market Capitalization and related disclosures, see page 47. For a reconciliation of Consolidated Market Capitalization to BXP’s Share of Market Capitalization, see page 14.

 

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THIRD QUARTER 2017

 

INVESTOR INFORMATION

 

Board of Directors

  

Management

Joel I. Klein

   Dr. Jacob A. Frenkel    Raymond A. Ritchey    John F. Powers

Lead Independent Director

   Director, Chair of Nominating & Corporate Governance Committee    Senior Executive Vice President   

Executive Vice President,

New York Region

Owen D. Thomas

   Matthew J. Lustig    Michael E. LaBelle    Frank D. Burt

Chief Executive Officer and Director

   Director    Executive Vice President, Chief Financial Officer and Treasurer    Senior Vice President, General Counsel

Douglas T. Linde

   Alan J. Patricof    Peter D. Johnston    Michael R. Walsh

President and Director

   Director   

Executive Vice President,

Washington, DC Region

   Senior Vice President, Chief Accounting Officer

Bruce W. Duncan

   Martin Turchin    Bryan J. Koop   

Director

   Director    Executive Vice President,   
      Boston Region   

Karen E. Dykstra

   David A. Twardock    Robert E. Pester   

Director

   Director, Chair of Audit Committee    Executive Vice President, San Francisco Region   

Carol B. Einiger

        

Director, Chair of Compensation Committee

        

Chairman Emeritus

         

Mortimer B. Zuckerman

        

Company Information

 

Corporate Headquarters   Trading Symbol   Investor Relations   Inquires

800 Boylston Street

Suite 1900

  BXP   Boston Properties, Inc.

800 Boylston Street, Suite
1900

  Inquiries should be directed to Michael E. LaBelle
Boston, MA 02199   Stock Exchange Listing   Boston, MA 02199   Executive Vice President, Chief Financial Officer
(t) 617.236.3300   New York Stock Exchange   (t) 617.236.3322   and Treasurer
(f) 617.236.3311     (f) 617.236.3311   at 617.236.3352 or
    www.bostonproperties.com   mlabelle@bostonproperties.com
      Arista Joyner, Investor Relations Manager at 617.236.3343 or ajoyner@bostonproperties.com

Common Stock Data (NYSE: BXP)

 

Boston Properties’ common stock has the following characteristics (based on information reported by the New York Stock Exchange):

 

       Q3 2017     Q2 2017     Q1 2017     Q4 2016     Q3 2016  

High Closing Price

 

   $ 124.95     $ 136.87     $ 139.88     $ 133.39     $ 143.61  

Low Closing Price

 

   $ 117.70     $ 120.27     $ 127.00     $ 114.07     $ 130.03  

Average Closing Price

 

   $ 121.10     $ 126.45     $ 132.59     $ 124.31     $ 138.78  

Closing Price, at the end of the quarter

 

   $ 122.88     $ 123.02     $ 132.41     $ 125.78     $ 136.29  

Dividends per share

 

   $ 0.75     $ 0.75     $ 0.75     $ 0.75     $ 0.65  

Closing dividend yield—annualized

 

     2.44     2.44     2.27     2.39     1.91

Closing common shares outstanding, plus common units and LTIP units (other than unearned MYLTIP Units) on an as-converted basis (thousands) (1)

 

     171,951       171,949       171,938       171,774       171,775  

Closing market value of outstanding shares and units (thousands)

 

   $ 21,329,339     $ 21,353,166     $ 22,966,310     $ 21,805,734     $ 23,611,215  

(1)    For additional detail, see page 14.

             

Timing

Quarterly results for the next four quarters will be announced according to the following schedule:

 

Fourth Quarter, 2017

   Tentatively January 30, 2018

First Quarter, 2018

   Tentatively April 24, 2018

Second Quarter, 2018

   Tentatively July 31, 2018

Third Quarter, 2018

   Tentatively October 30, 2018

 

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RESEARCH COVERAGE

 

Equity Research Coverage

  

Debt Research Coverage

  

Rating Agencies

Jacob Kilstein

   Anthony Paolone    Andrew Mollay    Stephen Boyd

Argus Research Company

   J.P. Morgan Securities    Bank of America Merrill Lynch    Fitch Ratings

646.747.5447

   212.622.6682    646.855.6435    212.908.9153

Jeffrey Spector / Jamie Feldman

   Craig Mailman / Jordan Sadler    Peter Troisi    Ranjini Venkatesan

Bank of America Merrill Lynch

   KeyBanc Capital Markets    Barclays    Moody’s Investors Service

646.855.1363 / 646.855.5808

   917.368.2316 / 917.368.2280    212.412.3695    212.553.3828

Ross Smotrich

   Richard Anderson    Mark Streeter    Anita Ogbara

Barclays Capital

   Mizuho Securities    J.P. Morgan Securities    Standard & Poor’s

212.526.2306

   212.205.8445    212.834.5086    212.438.5077

John Kim

   Vikram Malhotra    Thierry Perrein / Jason Jones   

BMO Capital

   Morgan Stanley    Wells Fargo   

212.885.4115

   212.761.7064    704.715.8455 / 704.715.7932   

Tom Catherwood

   Brad Schwer      

BTIG

   Morningstar      

212.593.7510

   312.244.7061      

Michael Bilerman / Emmanuel Korchman

   Mike Carroll      

Citigroup Global Markets

   RBC Capital Markets      

212.816.1383 / 212.816.1382

   440.715.2649      

Barry Oxford

   David Rodgers / Richard Schiller      

D.A. Davidson & Co.

   RW Baird      

212.240.9871

   216.737.7341 / 312.609.5485      

Vincent Chao / Mike Husseini

   Alexander Goldfarb / Daniel Santos      

Deutsche Bank Securities

   Sandler O’Neill & Partners      

212.250.6799 / 212.250.7703

   212.466.7937 / 212.466.7927      

 

Steve Sakwa / Robert Simone

   John Guinee / Aaren Wolf      

Evercore ISI

   Stifel, Nicolaus & Company      

212.446.9462 / 212.446.9459

   443.224.1307 / 443.224.1206      

Jed Reagan

   Michael Lewis      

Green Street Advisors

   SunTrust Robinson Humphrey      

949.640.8780

   212.319.5659      

Andrew Rosivach

   Nick Yulico      

Goldman Sachs

   UBS Securities      

212.902.2796

   212.713.3402      

Jonathan Petersen / Omotayo Okusanya

   Blaine Heck      

Jefferies & Co.

   Wells Fargo Securities      

212.284.1705 / 212.336.7076

   443.263.6529      

With the exception of Green Street Advisors, an independent research firm, the equity analysts listed above are those analysts that, according to First Call Corporation, have published research material on the Company and are listed as covering the Company. Please note that any opinions, estimates or forecasts regarding Boston Properties’ performance made by the analysts listed above do not represent the opinions, estimates or forecasts of Boston Properties or its management. Boston Properties does not by its reference above imply its endorsement of or concurrence with any information, conclusions or recommendations made by any of such analysts.

 

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THIRD QUARTER 2017

 

GUIDANCE

The Company’s guidance for the full year 2017 and full year 2018 for diluted earnings per common share attributable to Boston Properties, Inc. common shareholders (“EPS”) and diluted funds from operations (“FFO”) per common share attributable to Boston Properties, Inc. common shareholders 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, the timing of the lease-up of available space and development deliveries and the earnings impact of the events referenced in the earnings release issued on November 1, 2017 and otherwise referenced during the Company’s conference call scheduled for November 2, 2017. 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 on depreciable real estate or gains or losses associated with disposition activities. For a complete definition of FFO and statements of the reasons why management believes it provides useful information to investors, see page 48. There can be no assurance that the Company’s actual results will not differ materially from the estimates set forth below.

 

     Full Year 2017      Full Year 2018  
     Low             High      Low             High  

Projected EPS (diluted)

   $ 2.80        —        $ 2.81      $ 2.65        —        $ 2.81  

Add:

                 

Projected Company share of real estate depreciation and amortization

     3.48        —          3.48        3.55        —          3.55  

Less:

                 

Projected Company share of gains on sales of real estate

     0.04        —          0.04        —          —          —    
     

 

 

       

 

 

    

 

 

       

 

 

 

Projected FFO per share (diluted)

   $ 6.24        —        $ 6.25      $ 6.20        —        $ 6.36  
  

 

 

       

 

 

    

 

 

       

 

 

 

ASSUMPTIONS

(dollars in thousands)

 

     Full Year 2017     Full Year 2018  
     Low            High     Low            High  

Operating property activity:

              

Average In-service portfolio occupancy

     90.0     —          91.0     90.0     —          92.0

Increase in BXP’s Share of Same Property net operating income (excluding termination income)

     2.00     —          3.00     0.50     —          2.50

Increase in BXP’s Share of Same Property net operating income—cash (excluding termination income)

     1.00     —          3.00     0.50     —          2.50

BXP’s Share of Non Same Properties’ incremental contribution to net operating income over prior year

   $ 17,000       —        $ 20,000     $ 40,000       —        $ 50,000  

BXP’s Share of Straight-line rent and fair value lease revenue (non-cash revenue)

   $ 75,000       —        $ 85,000     $ 45,000       —        $ 75,000  

Hotel net operating income

   $ 13,000       —        $ 15,000     $ 13,000       —        $ 15,000  

Termination income

   $ 23,000       —        $ 25,000     $ 4,000       —        $ 8,000  

Other income (expense):

              

Development and management services income

   $ 32,000       —        $ 34,000     $ 29,000       —        $ 34,000  

General and administrative expense

   $ (115,000     —        $ (110,000   $ (120,000     —        $ (115,000

Net interest expense

   $ (360,000     —        $ (355,000   $ (390,000     —        $ (375,000

Noncontrolling interest:

              

Noncontrolling interest in property partnerships’ share of FFO

   $ (130,000     —        $ (120,000   $ (140,000     —        $ (127,000

 

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THIRD QUARTER 2017

 

FINANCIAL HIGHLIGHTS

(unaudited and in thousands, except ratios and per share amounts)

This section 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 shown on pages 11-13. 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 on pages 47-48.

 

     Three Months Ended  
     30-Sep-17     30-Jun-17     31-Mar-17     31-Dec-16     30-Sep-16  

Net income attributable to Boston Properties, Inc. common shareholders

   $ 117,337     $ 133,709     $ 97,083     $ 147,214     $ 76,753  

Net income attributable to Boston Properties, Inc. per share—basic

   $ 0.76     $ 0.87     $ 0.63     $ 0.96     $ 0.50  

Net income attributable to Boston Properties, Inc. per share—diluted

   $ 0.76     $ 0.87     $ 0.63     $ 0.96     $ 0.50  

FFO attributable to Boston Properties, Inc. (1)

   $ 243,015     $ 257,881     $ 228,383     $ 236,898     $ 219,564  

Diluted FFO per share (1)

   $ 1.57     $ 1.67     $ 1.48     $ 1.54     $ 1.42  

Dividends per common share

   $ 0.75     $ 0.75     $ 0.75     $ 0.75     $ 0.65  

Funds available for distribution to common shareholders and common unitholders (FAD) (1) (2)

   $ 193,686     $ 172,723     $ 178,002     $ 151,183     $ 149,725  

Ratios:

          

Interest Coverage Ratio (excluding capitalized interest) (3)

     4.25       4.28       3.88       3.86       3.49  

Interest Coverage Ratio (including capitalized interest) (3)

     3.54       3.67       3.40       3.46       3.17  

FFO Payout Ratio (2)

     47.77     44.91     50.68     48.70     45.77

FAD Payout Ratio (2)

     66.63     74.72     72.49     85.28     74.63

Selected Items (4):

          

Revenue

   $ 657,712     $ 656,907     $ 632,228     $ 636,061     $ 625,228  

Partners’ share of revenue from consolidated joint ventures

     (72,598     (73,027     (70,178     (69,766     (69,391

BXP’s share of revenue from unconsolidated joint ventures

     26,047       26,174       25,650       24,828       25,271  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

BXP’s Share of revenue

   $ 611,161     $ 610,054     $ 587,700     $ 591,123     $ 581,108  

Straight-line rent

   $ 16,105     $ 3,060     $ 12,023     $ 14,711     $ 11,107  

Partners’ share of straight-line rent from consolidated joint ventures

     (1,960     3,326       (590     (1,103     (707

BXP’s share of straight-line rent from unconsolidated joint ventures

     2,691       2,435       3,563       3,696       3,285  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

BXP’s Share of straight-line rent

   $ 16,836     $ 8,821     $ 14,996     $ 17,304     $ 13,685  

Fair value lease revenue (5)

   $ 5,781     $ 5,464     $ 5,390     $ 6,840     $ 6,547  

Partners’ share of fair value lease revenue from consolidated joint ventures (5)

     (1,721     (1,580     (1,575     (2,194     (2,084

BXP’s share of fair value lease revenue from unconsolidated joint ventures (5)

     415       492       493       494       511  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

BXP’s Share of fair value lease revenue

   $ 4,475     $ 4,376     $ 4,308     $ 5,140     $ 4,974  

Lease termination fees

   $ 4,783     $ 13,601     $ 3,918     $ 504     $ (170

Partners’ share of lease termination fees from consolidated joint ventures

     (1,233     (2,506     (1,310     (31     421  

BXP’s share of termination income from unconsolidated joint ventures

     28       404       316       13       8  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

BXP’s Share of termination income

   $ 3,578     $ 11,499     $ 2,924     $ 486     $ 259  

Fair value interest adjustment and hedge amortization

   $ (1,606   $ 7,319     $ 10,323     $ 10,145     $ 10,378  

Partners’ share of fair value interest adjustment and hedge amortization from consolidated joint ventures

     144       (3,464     (4,627     (4,598     (4,569

BXP’s share of fair value interest adjustment and hedge amortization from unconsolidated joint ventures

     —         —         —         —         —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

BXP’s Share of fair value interest adjustment and hedge amortization

   $ (1,462   $ 3,855     $ 5,696     $ 5,547     $ 5,809  

Ground rent expense (6)

   $ 3,702     $ 3,462     $ 3,459     $ 3,460     $ 3,471  

Gains (losses) from early extinguishments of debt

   $ —       $ 14,354     $ —       $ —       $ (371

Capitalized interest

   $ 16,658     $ 14,283     $ 12,345     $ 10,281     $ 9,788  

Capitalized wages

   $ 4,710     $ 4,930     $ 3,947     $ 5,376     $ 4,155  

Operating margins [(rental revenue—rental expense)/rental revenue]

     62.6     63.8     63.1     63.6     62.3

Income from unconsolidated joint ventures

   $ 843     $ 3,108     $ 3,084     $ 2,585     $ 1,464  

BXP’s share of FFO from unconsolidated joint ventures

   $ 10,125 (7)    $ 12,737     $ 12,125     $ 11,277     $ 10,592  

Net income attributable to noncontrolling interests in property partnerships

   $ 14,340     $ 15,203     $ 4,424     $ (2,121   $ (17,225

FFO attributable to noncontrolling interests in property partnerships

   $ 32,892 (8)    $ 34,530     $ 25,839     $ 25,135     $ 23,682  

 

(1) For the Company’s definitions and related disclosures, see pages 47-48.
(2) FFO Payout Ratio equals dividends per common share (excluding any special dividends) divided by Diluted FFO per share. For a quantitative reconciliation of FFO, see page 11. FAD Payout Ratio equals distributions to common shareholders and unitholders (excluding any special distributions) divided by FAD. For a quantitative reconciliation of FAD, see page 12.
(3) For a quantitative reconciliation and related disclosures, see page 13.
(4) Partners’ share and BXP’s share of line items below are based upon percentage ownership interests in the applicable joint ventures. For additional details, see page 47.
(5) Represents the net adjustment for above- and below-market leases that are being amortized over the terms of the respective leases in place at the property acquisition dates.
(6) Includes non-cash straight-line adjustments to ground rent expense. See page 13 for the straight-line adjustments to the ground rent expense.
(7) For additional detail, see page 18.
(8) For additional detail, see page 20.

 

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THIRD QUARTER 2017

 

FINANCIAL HIGHLIGHTS (continued)

(unaudited and in thousands, except ratios and per share amounts)

This section 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. 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 on pages 47-48.

 

    30-Sep-17     30-Jun-17     31-Mar-17     31-Dec-16     30-Sep-16  

Balance Sheet Items:

         

Above-market rents (included within Prepaid Expenses and Other Assets)

  $ 28,112     $ 30,810     $ 33,923     $ 37,079     $ 40,346  

Below-market rents (included within Other Liabilities)

  $ 107,127     $ 115,869     $ 123,545     $ 132,495     $ 142,595  

Accrued rental income liability (included within Other Liabilities)

  $ 32,490     $ 34,600     $ 38,468     $ 31,829     $ 32,545  

Accrued ground rent expense, net liability (included within Prepaid Expenses and Other Assets and Other Liabilities)

  $ 44,307     $ 43,753     $ 43,356     $ 42,717     $ 41,718  

Investments in unconsolidated joint ventures with deficit balances (included within Other Liabilities) (1)

  $ 22,863     $ 20,605     $ 21,610     $ 22,087     $ 22,776  

Outside members’ notes payable

  $ —       $ —       $ 180,000     $ 180,000     $ 180,000  

Accrued interest payable on outside members’ notes payable (included within Accrued Interest Payable)

  $ —       $ —       $ 162,936     $ 153,758     $ 144,825  

Capitalization:

         

Common Stock Price @ Quarter End

  $ 122.88     $ 123.02     $ 132.41     $ 125.78     $ 136.29  

Equity Value @ Quarter End

  $ 21,329,339     $ 21,353,166     $ 22,966,310     $ 21,805,734     $ 23,611,215  

Consolidated Debt

  $ 10,234,634     $ 10,236,639     $ 9,886,845     $ 9,796,133     $ 9,808,922  

Add:

         

BXP’s share of Unconsolidated Joint Venture Debt (2)

    591,622       317,724       317,719       318,193       350,225  

Less:

         

Partners’ share of Consolidated Debt (3)

    1,210,389       1,211,485       1,138,446       1,144,473       1,150,462  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

BXP’s Share of Debt (4)(5)

  $ 9,615,867     $ 9,342,878     $ 9,066,118     $ 8,969,853     $ 9,008,685  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Consolidated Market Capitalization

  $ 31,563,973     $ 31,589,805     $ 32,853,155     $ 31,601,867     $ 33,420,137  

Consolidated Debt/Consolidated Market Capitalization

    32.43     32.40     30.09     31.00     29.35

BXP’s Share of Market Capitalization (4)(5)

  $ 30,945,206 (6)    $ 30,696,044     $ 32,032,428     $ 30,775,587     $ 32,619,900  

BXP’s Share of Debt/BXP’s Share of Market Capitalization (4)(5)

    31.07 %(6)      30.44     28.30     29.15     27.62

 

(1) For additional detail, see page 17.
(2) Amount is calculated based on the Company’s percentage ownership interest in the unconsolidated joint venture entities. For additional detail, see page 17.
(3) Amount is calculated based on the outside partners’ percentage ownership interest in the consolidated joint venture entities. For additional detail, see page 19.
(4) For the Company’s definitions, see pages 47-48.
(5) BXP’s Share of a line item is based upon the Company’s percentage ownership interests in the applicable joint ventures. For additional details, see page 47.
(6) For additional detail, see page 14.

 

8


LOGO

THIRD QUARTER 2017

 

CONSOLIDATED BALANCE SHEETS

(unaudited and in thousands)

 

     30-Sep-17     30-Jun-17     31-Mar-17     31-Dec-16     30-Sep-16  

ASSETS

          

Real estate

   $ 19,260,022     $ 19,015,077     $ 18,931,136     $ 18,862,648     $ 18,704,856  

Construction in progress (1)

     1,386,638       1,348,838       1,211,324       1,037,959       954,013  

Land held for future development (2)

     212,585       250,451       249,800       246,656       243,887  

Less accumulated depreciation

     (4,484,798     (4,379,446     (4,302,283     (4,222,235     (4,113,553
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total real estate

     16,374,447       16,234,920       16,089,977       15,925,028       15,789,203  

Cash and cash equivalents

     493,055       492,435       302,939       356,914       419,323  

Cash held in escrows

     83,779       47,345       51,244       63,174       63,980  

Investments in securities

     27,981       26,781       25,817       23,814       23,022  

Tenant and other receivables, net

     79,750       88,687       73,012       92,548       76,258  

Accrued rental income, net

     835,415       820,022       812,124       799,138       785,569  

Deferred charges, net

     657,474       658,219       666,677       686,163       680,192  

Prepaid expenses and other assets

     144,817       93,985       150,905       129,666       176,693  

Investments in unconsolidated joint ventures

     611,800       819,368       793,932       775,198       775,659  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

   $ 19,308,518     $ 19,281,762     $ 18,966,627     $ 18,851,643     $ 18,789,899  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

LIABILITIES AND EQUITY

          

Liabilities:

          

Mortgage notes payable, net

   $ 2,982,067     $ 2,986,283     $ 2,046,959     $ 2,063,087     $ 2,077,707  

Unsecured senior notes, net

     7,252,567       7,250,356       7,248,152       7,245,953       7,243,767  

Unsecured line of credit

     —         —         105,000       —         —    

Unsecured term loan

     —         —         —         —         —    

Mezzanine notes payable

     —         —         306,734       307,093       307,448  

Outside members’ notes payable

     —         —         180,000       180,000       180,000  

Accounts payable and accrued expenses

     325,440       303,559       313,723       298,524       312,979  

Dividends and distributions payable

     130,434       130,432       130,418       130,308       113,038  

Accrued interest payable

     99,100       85,172       266,714       243,933       234,628  

Other liabilities

     419,215       452,608       446,489       450,821       461,079  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

     11,208,823       11,208,410       11,044,189       10,919,719       10,930,646  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Commitments and contingencies

     —         —         —         —         —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

     200,000       200,000       200,000       200,000       200,000  

Common stock, $0.01 par value, 250,000,000 shares authorized, 154,322,266, 154,307,529, 153,849,231, 153,790,175 and 153,773,012 outstanding, respectively

     1,543       1,543       1,538       1,538       1,538  

Additional paid-in capital

     6,370,932       6,363,034       6,339,970       6,333,424       6,326,580  

Dividends in excess of earnings

     (692,739     (694,320     (712,270     (693,694     (725,522

Treasury common stock, at cost

     (2,722     (2,722     (2,722     (2,722     (2,722

Accumulated other comprehensive loss

     (51,796     (53,161     (50,983     (52,251     (73,943
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total stockholders’ equity attributable to Boston Properties, Inc.

     5,825,218       5,814,374       5,775,533       5,786,295       5,725,931  

Noncontrolling interests:

          

Common units of the Operating Partnership

     605,802       604,997       617,252       614,982       608,280  

Property partnerships

     1,668,675       1,653,981       1,529,653       1,530,647       1,525,042  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total equity

     8,099,695       8,073,352       7,922,438       7,931,924       7,859,253  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities and equity

   $ 19,308,518     $ 19,281,762     $ 18,966,627     $ 18,851,643     $ 18,789,899  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) Represents the portion of the Company’s consolidated development projects that qualifies for interest capitalization. Such portion generally excludes intangible assets.
(2) Includes land held for future development and pre-development costs.

 

9


LOGO

THIRD QUARTER 2017

 

CONSOLIDATED INCOME STATEMENTS

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

 

     Three Months Ended  
     30-Sep-17     30-Jun-17     31-Mar-17     31-Dec-16     30-Sep-16  

Revenue

          

Rental

          

Base rent

   $ 513,269     $ 520,542     $ 503,562     $ 498,941     $ 489,312  

Recoveries from tenants

     94,476       89,163       89,164       91,123       92,560  

Parking and other

     26,092       26,462       25,610       25,334       24,638  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total rental revenue

     633,837       636,167       618,336       615,398       606,510  

Hotel revenue

     13,064       13,375       7,420       10,965       12,354  

Development and management services

     10,811       7,365       6,472       9,698       6,364  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenue

     657,712       656,907       632,228       636,061       625,228  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Expenses

          

Operating

     120,274       116,415       116,415       113,669       117,728  

Real estate taxes

     115,040       109,509       109,435       108,556       109,480  

Demolition costs

     2,027       4,530       2,437       1,873       1,352  

Hotel operating

     8,447       8,404       7,091       7,736       8,118  

General and administrative (1)

     25,792       27,141       31,386       25,293       25,165  

Transaction costs

     239       299       34       1,200       249  

Impairment loss

     —         —         —         —         1,783  

Depreciation and amortization

     152,164       151,919       159,205       178,032       203,748  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

     423,983       418,217       426,003       436,359       467,623  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     233,729       238,690       206,225       199,702       157,605  

Other income (expense)

          

Income from unconsolidated joint ventures

     843       3,108       3,084       2,585       1,464  

Gain on sale of investment in unconsolidated joint venture

     —         —         —         59,370       —    

Interest and other income

     1,329       1,504       614       573       3,628  

Gains from investments in securities (1)

     944       730       1,042       560       976  

Interest expense (2)

     (92,032     (95,143     (95,534     (97,896     (104,641

Gains (losses) from early extinguishments of debt

     —         14,354       —         —         (371

Losses from interest rate contracts

     —         —         —         —         (140
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before gains on sales of real estate

     144,813       163,243       115,431       164,894       58,521  

Gains on sales of real estate

     2,891       3,767       133       —         12,983  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

     147,704       167,010       115,564       164,894       71,504  

Net income attributable to noncontrolling interests

          

Noncontrolling interest in property partnerships

     (14,340     (15,203     (4,424     2,121       17,225  

Noncontrolling interest—common units of the Operating Partnership (3)

     (13,402     (15,473     (11,432     (17,097     (9,387
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to Boston Properties, Inc.

     119,962       136,334       99,708       149,918       79,342  

Preferred dividends

     (2,625     (2,625     (2,625     (2,704     (2,589
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to Boston Properties, Inc. common shareholders

   $ 117,337     $ 133,709     $ 97,083     $ 147,214     $ 76,753  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

INCOME PER SHARE OF COMMON STOCK (EPS)

          

Net income attributable to Boston Properties, Inc. per share—basic

   $ 0.76     $ 0.87     $ 0.63     $ 0.96     $ 0.50  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to Boston Properties, Inc. per share—diluted

   $ 0.76     $ 0.87     $ 0.63     $ 0.96     $ 0.50  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) General and administrative expense includes $(944), $(730), $(1,042), $(560) and $(976) and gains from investments in securities include $944, $730, $1,042, $560 and $976 for the three months ended September 30, 2017, June 30, 2017, March 31, 2017, December 31, 2016 and September 30, 2016, respectively, related to the Company’s deferred compensation plan.
(2) For the three months ended June 30, 2017, March 31, 2017, December 31, 2016 and September 30, 2016, interest expense includes $7,078, $9,178, $8,933 and $8,694, respectively, consisting of the interest expense on the partner loans for the 767 Fifth Avenue (The GM Building) consolidated joint venture, which amount is allocated to the partners within noncontrolling interests in property partnerships. The Company’s share of the interest expense on its loan to the joint venture eliminates in consolidation. For further information, reference the Company’s second quarter earnings press release.
(3) Equals noncontrolling interest—common units of the Operating Partnership’s share of 10.10%, 10.19%, 10.33%, 10.25% and 10.28% of income before net income attributable to noncontrolling interests in Operating Partnership after deduction for preferred distributions for the three months ended September 30, 2017, June 30, 2017, March 31, 2017, December 31, 2016 and September 30, 2016, respectively.

 

10


LOGO

THIRD QUARTER 2017

 

FUNDS FROM OPERATIONS (FFO)

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

 

     Three Months Ended  
     30-Sep-17      30-Jun-17      31-Mar-17      31-Dec-16      30-Sep-16  

Net income attributable to Boston Properties, Inc. common shareholders

   $ 117,337      $ 133,709      $ 97,083      $ 147,214      $ 76,753  

Add:

              

Preferred dividends

     2,625        2,625        2,625        2,704        2,589  

Noncontrolling interest—common units of the Operating Partnership

     13,402        15,473        11,432        17,097        9,387  

Noncontrolling interests in property partnerships

     14,340        15,203        4,424        (2,121      (17,225

Less:

              

Gains on sales of real estate

     2,891        3,767        133        —          12,983  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Income before gains on sales of real estate

     144,813        163,243        115,431        164,894        58,521  

Add:

              

Depreciation and amortization

     152,164        151,919        159,205        178,032        203,748  

Noncontrolling interests in property partnerships’ share of depreciation and amortization

     (18,552      (19,327      (21,415      (27,256      (40,907

BXP’s share of depreciation and amortization from unconsolidated joint ventures

     9,282        9,629        9,041        8,692        9,128  

Corporate-related depreciation and amortization

     (434      (486      (525      (449      (393

Less:

              

Gain on sale of investment in unconsolidated joint venture

     —          —          —          59,370        —    

Noncontrolling interests in property partnerships

     14,340        15,203        4,424        (2,121      (17,225

Preferred dividends

     2,625        2,625        2,625        2,704        2,589  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

FFO attributable to the Operating Partnership common unitholders (including Boston Properties, Inc.) (“Basic FFO”)

     270,308        287,150        254,688        263,960        244,733  

Less:

              

Noncontrolling interest—common units of the Operating Partnership’s share of FFO

     27,293        29,269        26,305        27,062        25,169  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

FFO attributable to Boston Properties, Inc. common shareholders

   $ 243,015      $ 257,881      $ 228,383      $ 236,898      $ 219,564  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Boston Properties, Inc.’s percentage share of Basic FFO

     89.90      89.81      89.67      89.75      89.72
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Basic FFO per share

   $ 1.57      $ 1.67      $ 1.48      $ 1.54      $ 1.43  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Weighted average shares outstanding—basic

     154,355        154,177        153,860        153,814        153,754  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Diluted FFO per share

   $ 1.57      $ 1.67      $ 1.48      $ 1.54      $ 1.42  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Weighted average shares outstanding—diluted

     154,483        154,331        154,214        153,991        154,136  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Reconciliation to Diluted FFO:

              

Basic FFO

   $ 270,308      $ 287,150      $ 254,688      $ 263,960      $ 244,733  

Add:

              

Effect of dilutive securities—stock-based compensation

     —          —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Diluted FFO

     270,308        287,150        254,688        263,960        244,733  

Less:

              

Noncontrolling interest—common units of the Operating Partnership’s share of diluted FFO

     27,272        29,243        26,251        27,034        25,113  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Boston Properties, Inc.’s share of Diluted FFO

   $ 243,036      $ 257,907      $ 228,437      $ 236,926      $ 219,620  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Reconciliation of Shares/Units for Diluted FFO:

              

Shares/units for Basic FFO

     171,691        171,675        171,581        171,385        171,379  

Add:

              

Effect of dilutive securities—stock-based compensation (shares/units)

     128        154        354        177        382  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Shares/units for Diluted FFO

     171,819        171,829        171,935        171,562        171,761  

Less:

              

Noncontrolling interest—common units of the Operating Partnership’s share of Diluted FFO (shares/units)

     17,336        17,498        17,721        17,571        17,625  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Boston Properties, Inc.’s share of shares/units for Diluted FFO

     154,483        154,331        154,214        153,991        154,136  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Boston Properties, Inc.’s percentage share of Diluted FFO

     89.91      89.82      89.69      89.76      89.74
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

11


LOGO

THIRD QUARTER 2017

 

FUNDS AVAILABLE FOR DISTRIBUTION (FAD)

(in thousands, except for ratio amounts)

 

     Three Months Ended  
     30-Sep-17     30-Jun-17     31-Mar-17     31-Dec-16     30-Sep-16  

Net income attributable to Boston Properties, Inc. common shareholders

   $ 117,337     $ 133,709     $ 97,083     $ 147,214     $ 76,753  

Add:

          

Preferred dividends

     2,625       2,625       2,625       2,704       2,589  

Noncontrolling interest—common units of the Operating Partnership

     13,402       15,473       11,432       17,097       9,387  

Noncontrolling interests in property partnerships

     14,340       15,203       4,424       (2,121     (17,225

Less:

          

Gains on sales of real estate

     2,891       3,767       133       —         12,983  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before gains on sales of real estate

     144,813       163,243       115,431       164,894       58,521  

Add:

          

Depreciation and amortization

     152,164       151,919       159,205       178,032       203,748  

Noncontrolling interests in property partnerships’ share of depreciation and amortization

     (18,552     (19,327     (21,415     (27,256     (40,907

BXP’s share of depreciation and amortization from unconsolidated joint ventures

     9,282       9,629       9,041       8,692       9,128  

Corporate-related depreciation and amortization

     (434     (486     (525     (449     (393

Less:

          

Gain on sale of investment in unconsolidated joint venture

     —         —         —         59,370       —    

Noncontrolling interests in property partnerships

     14,340       15,203       4,424       (2,121     (17,225

Preferred dividends

     2,625       2,625       2,625       2,704       2,589  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Basic FFO

     270,308       287,150       254,688       263,960       244,733  

Straight-line rent

     (16,105     (3,060     (12,023     (14,711     (11,107

Partners’ share of straight-line rent from consolidated joint ventures

     1,960       (3,326     590       1,103       707  

BXP’s share of straight-line rent from unconsolidated joint ventures

     (2,691     (2,435     (3,563     (3,696     (3,285

Lease transaction costs that qualify as rent inducements (1)

     (102     115       682       487       861  

Partners’ share of lease transaction costs that qualify as rent inducements from consolidated joint ventures (1)

     (9     —         —         —         —    

BXP’s share of lease transaction costs that qualify as rent inducements from unconsolidated joint ventures (1)

     208       223       132       43       15  

Fair value lease revenue (2)

     (5,781     (5,464     (5,390     (6,840     (6,547

Partners’ share of fair value lease revenue from consolidated joint ventures (2)

     1,721       1,580       1,575       2,194       2,084  

BXP’s share of fair value lease revenue from unconsolidated joint ventures (2)

     (415     (492     (493     (494     (511

Non-cash losses (gains) from early extinguishments of debt

     —         (14,444     —         —         371  

Partners’ share of non-cash losses (gains) from early extinguishments of debt from consolidated joint ventures

     —         5,878       —         —         —    

BXP’s share of non-cash losses (gains) from early extinguishments of debt from unconsolidated joint ventures

     —         —         —         —         —    

Non-cash termination income adjustment (fair value lease amounts)

     (243     (525     (403     7       —    

Partners’ share of non-cash termination income adjustment (fair value lease amounts) from consolidated joint ventures

     97       210       161       (3     —    

BXP’s share of non-cash termination income adjustment (fair value lease amounts) from unconsolidated joint ventures

     —         (214     —         —         —    

Straight-line ground rent expense adjustment (3)

     554       398       639       998       1,031  

Stock-based compensation

     8,023       8,435       10,802       7,621       7,643  

Non-real estate depreciation

     434       486       525       449       393  

Impairment loss

     —         —         —         —         1,783  

Fair value interest adjustment and hedge amortization

     1,606       (7,319     (10,323     (10,145     (10,378

Partners’ share of fair value interest adjustment and hedge amortization from consolidated joint ventures

     (144     3,464       4,627       4,598       4,569  

BXP’s share of fair value interest adjustment and hedge amortization from unconsolidated joint ventures

     —         —         —         —         —    

2nd generation tenant improvements and leasing commissions

     (54,238     (85,427     (48,730     (75,708     (69,742

Partners’ share of 2nd generation tenant improvements and leasing commissions from consolidated joint ventures

     1,050       200       123       449       805  

BXP’s share of 2nd generation tenant improvements and leasing commissions from unconsolidated joint ventures

     (1,163     (159     (1,164     (1,472     (18

Unearned portion of capitalized fees from consolidated joint ventures

     591       607       537       1,787       250  

Maintenance capital expenditures (4)

     (12,032     (11,643     (10,677     (16,334     (11,889

Partners’ share of maintenance capital expenditures from consolidated joint ventures (4)

     457       1,004       2,129       1,197       377  

BXP’s share of maintenance capital expenditures from unconsolidated joint ventures (4)

     (111     (17     (211     (437     (283

Hotel improvements, equipment upgrades and replacements

     (289     (2,502     (6,231     (3,870     (2,137
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Funds available for distribution to common shareholders and common unitholders (FAD) (A)

   $ 193,686     $ 172,723     $ 178,002     $ 151,183     $ 149,725  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Distributions to common shareholders and unitholders (excluding any special distributions) (B)

   $ 129,056     $ 129,055     $ 129,040     $ 128,930     $ 111,739  

FAD Payout Ratio (B÷A)

     66.63     74.72     72.49     85.28     74.63
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) Consists 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.
(2) Represents the net adjustment for above- and below-market leases that are being amortized over the terms of the respective leases in place at the property acquisition dates.
(3) Includes 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 2020 with no payments thereafter. The Company is recognizing these amounts on a straight-line basis over the 99-year term of the ground and air rights lease. See page 7.
(4) Maintenance capital expenditures do not include planned capital expenditures related to acquisitions and repositioning capital expenditures. See page 25 for additional detail.

 

12


LOGO

THIRD QUARTER 2017

 

INTEREST COVERAGE RATIOS

(in thousands, except for ratio amounts)

 

     Three Months Ended  
     30-Sep-17     30-Jun-17     31-Mar-17     31-Dec-16     30-Sep-16  

Net income attributable to Boston Properties, Inc. common shareholders

   $ 117,337     $ 133,709     $ 97,083     $ 147,214     $ 76,753  

Add:

          

Preferred dividends

     2,625       2,625       2,625       2,704       2,589  

Noncontrolling interest—common units of the Operating Partnership

     13,402       15,473       11,432       17,097       9,387  

Noncontrolling interests in property partnerships

     14,340       15,203       4,424       (2,121     (17,225

Less:

          

Gains on sales of real estate

     2,891       3,767       133       —         12,983  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before gains on sales of real estate

     144,813       163,243       115,431       164,894       58,521  

Noncontrolling interests in property partnerships

     (14,340     (15,203     (4,424     2,121       17,225  

Interest expense

     92,032       95,143       95,534       97,896       104,641  

Partners’ share of interest expense from consolidated joint ventures

     (11,816     (16,401     (17,259     (17,579     (17,460

BXP’s share of interest expense from unconsolidated joint ventures

     5,661       3,822       3,749       3,654       4,025  

Depreciation and amortization expense

     152,164       151,919       159,205       178,032       203,748  

Noncontrolling interests in property partnerships’ share of depreciation and amortization

     (18,552     (19,327     (21,415     (27,256     (40,907

BXP’s share of depreciation and amortization from unconsolidated joint ventures

     9,282       9,629       9,041       8,692       9,128  

Gain on sale of investment in unconsolidated joint venture

     —         —         —         (59,370     —    

Non-cash losses (gains) from early extinguishments of debt

     —         (14,444     —         —         371  

Partners’ share of non-cash losses (gains) from early extinguishments of debt from consolidated joint ventures

     —         5,878       —         —         —    

BXP’s share of non-cash losses (gains) from early extinguishments of debt from unconsolidated joint ventures

     —         —         —         —         —    

Impairment loss

     —         —         —         —         1,783  

Non-cash termination income adjustment (fair value lease amounts)

     (243     (525     (403     7       —    

Partners’ share of non-cash termination income adjustment (fair value lease amounts) from consolidated joint ventures

     97       210       161       (3     —    

BXP’s share of non-cash termination income adjustment (fair value lease amounts) from unconsolidated joint ventures

     —         (214     —         —         —    

Stock-based compensation

     8,023       8,435       10,802       7,621       7,643  

Straight-line ground rent expense adjustment (1)

     554       398       639       998       1,031  

Straight-line rent

     (16,105     (3,060     (12,023     (14,711     (11,107

Partners’ share of straight-line rent from consolidated joint ventures

     1,960       (3,326     590       1,103       707  

BXP’s share of straight-line rent from unconsolidated joint ventures

     (2,691     (2,435     (3,563     (3,696     (3,285

Lease transaction costs that qualify as rent inducements (2)

     (102     115       682       487       861  

Partners’ share of lease transaction costs that qualify as rent inducements from consolidated joint ventures (2)

     (9     —         —         —         —    

BXP’s share of lease transaction costs that qualify as rent inducements from unconsolidated joint ventures (2)

     208       223       132       43       15  

Fair value lease revenue (3)

     (5,781     (5,464     (5,390     (6,840     (6,547

Partners’ share of fair value lease revenue from consolidated joint ventures (3)

     1,721       1,580       1,575       2,194       2,084  

BXP’s share of fair value lease revenue from unconsolidated joint ventures (3)

     (415     (492     (493     (494     (511
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Subtotal (A)

   $ 346,461     $ 359,704     $ 332,571     $ 337,793     $ 331,966  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Divided by:

          

Interest expense

   $ 92,032     $ 95,143     $ 95,534     $ 97,896     $ 104,641  

Partners’ share of interest expense from consolidated joint ventures

     (11,816     (16,401     (17,259     (17,579     (17,460

BXP’s share of interest expense from unconsolidated joint ventures

     5,661       3,822       3,749       3,654       4,025  

Fair value interest adjustment and hedge amortization

     (1,606     7,319       10,323       10,145       10,378  

Partners’ share of fair value interest adjustment and hedge amortization from consolidated joint ventures

     144       (3,464     (4,627     (4,598     (4,569

BXP’s share of fair value interest adjustment and hedge amortization from unconsolidated joint ventures

     —         —         —         —         —    

Amortization of financing costs

     (3,070     (2,442     (1,967     (1,964     (1,889

Partners’ share of amortization of financing costs from consolidated joint ventures

     382       206       9       39       38  

BXP’s share of amortization of financing costs from unconsolidated joint ventures

     (112     (102     (100     (100     (113
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted interest expense excluding capitalized interest (B)

     81,615       84,081       85,662       87,493       95,051  

Capitalized interest

     16,658       14,283       12,345       10,281       9,788  

Partners’ share of capitalized interest from consolidated joint ventures

     (518     (238     (251     (203     (21

BXP’s share of capitalized interest from unconsolidated joint ventures

     8       (6     (6     —         —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted interest expense including capitalized interest (C)

   $ 97,763     $ 98,120     $ 97,750     $ 97,571     $ 104,818  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Interest Coverage Ratio (excluding capitalized interest) (A÷B) (4)

     4.25       4.28       3.88       3.86       3.49  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Interest Coverage Ratio (including capitalized interest) (A÷C) (4)

     3.54       3.67       3.40       3.46       3.17  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) Includes the straight-line impact of the Company’s 99-year ground and air rights lease related to the 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 2020 with no payments thereafter. The Company is recognizing these amounts on a straight-line basis over the 99-year term of the ground and air rights lease. See page 7.
(2) Consists 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.
(3) Represents the net adjustment for above- and below-market leases that are being amortized over the terms of the respective leases in place at the property acquisition dates.
(4) The Company believes that the presentation of its Interest Coverage Ratio provides investors with useful information about the Company’s financial condition because it measures the margin it has for paying interest expense as of a certain date. In addition, by analyzing interest coverage ratios over a period of time, trends may emerge that provide investors a better sense of whether a company’s financial condition is improving or declining. The ratios may also be used to compare the financial condition of different companies, which can help when making an investment decision. The Company presents its Interest Coverage Ratio in two ways—including capitalized interest and excluding capitalized interest. GAAP requires the capitalization of interest expense during development. Therefore, for a company like Boston Properties, Inc. that is an active developer of real estate, presenting the Interest Coverage Ratio (excluding capitalized interest) provides an alternative measure of financial condition that may be more indicative of the Company’s ability to meet its interest expense obligations and therefore its overall financial condition.

 

13


LOGO

THIRD QUARTER 2017

 

CAPITAL STRUCTURE

(in thousands, except percentages)

Consolidated Debt

 

     Aggregate Principal
September 30, 2017
 

Mortgage Notes Payable

   $ 3,017,725  

Unsecured Line of Credit

     —    

Delayed Draw Term Loan

     —    

Unsecured Senior Notes, at face value

     7,300,000  
  

 

 

 

Subtotal

     10,317,725  

Discount on Unsecured Senior Notes

     (16,810

Deferred Financing Costs, Net

     (66,281
  

 

 

 

Consolidated Debt

   $ 10,234,634  
  

 

 

 

Boston Properties Limited Partnership Unsecured Senior Notes (1)

 

Settlement
Date

     Maturity Date      Principal      Effective Yield
(on issue date)
    Coupon     Public Offering
Price
    Discount      Deferred Financing
Costs, Net
     Unsecured Senior
Notes, Net
 
  11/10/2011        11/15/2018      $ 850,000        3.853     3.700     99.767   $ 349      $ 1,092      $ 848,559  
  10/9/2009        10/15/2019        700,000        5.967     5.875     99.931     125        1,150        698,725  
  4/19/2010        11/15/2020        700,000        5.708     5.625     99.891     271        1,749        697,980  
  11/18/2010        5/15/2021        850,000        4.289     4.125     99.260     2,481        2,449        845,070  
  6/11/2012        2/1/2023        1,000,000        3.954     3.850     99.779     1,210        4,169        994,621  
  4/11/2013        9/1/2023        500,000        3.279     3.125     99.379     1,901        2,379        495,720  
  6/27/2013        2/1/2024        700,000        3.916     3.800     99.694     1,366        3,561        695,073  
  1/20/2016        2/1/2026        1,000,000        3.766     3.650     99.708     2,504        6,787        990,709  
  8/17/2016        10/1/2026        1,000,000        3.495     2.750     99.271     6,603        7,287        986,110  
     

 

 

          

 

 

    

 

 

    

 

 

 
      $ 7,300,000            $ 16,810      $ 30,623      $ 7,252,567  
     

 

 

          

 

 

    

 

 

    

 

 

 

Equity

 

     Shares/Units
Outstanding
as of 9/30/2017
     Common Stock
Equivalents
     Equivalent
Value (2)
 

Common Stock

     154,322        154,322      $ 18,963,087  

Common Operating Partnership Units

     17,629        17,629        2,166,252  

5.25% Series B Cumulative Redeemable Preferred Stock (non-callable through March 27, 2018)

     80        —          200,000  
     

 

 

    

 

 

 

Total Equity

        171,951      $ 21,329,339  
     

 

 

    

 

 

 

Consolidated Debt

         $ 10,234,634  

Add:

        

BXP’s share of unconsolidated joint venture debt (3)

           591,622  

Less:

        

Partners’ share of consolidated debt (4)

           1,210,389  
        

 

 

 

BXP’s Share of Debt (5)

         $ 9,615,867  
        

 

 

 

Consolidated Market Capitalization

         $ 31,563,973  
        

 

 

 

BXP’s Share of Market Capitalization (5)

         $ 30,945,206  
        

 

 

 

 

(1) All unsecured senior notes are rated A- (stable), BBB+ (stable) and Baa2 (positive) by S&P, Fitch and Moody’s, respectively.
(2) Values based on September 30, 2017 closing price of $122.88 per share of common stock, except the Series B Preferred Stock is valued at its fixed liquidation preference.
(3) Amount is calculated based on the Company’s percentage ownership interest in the unconsolidated joint venture entities. For additional detail, see page 17.
(4) Amount is calculated based on the outside partners’ percentage ownership interest in the consolidated joint venture entities. For additional detail, see page 19.
(5) For the Company’s definitions, see pages 47-48.

 

14


LOGO

THIRD QUARTER 2017

 

DEBT ANALYSIS (1)

as of September 30, 2017

(dollars in thousands)

Debt Maturities and Principal Payments

 

     2017     2018     2019     2020     2021     Thereafter     Total  

Floating Rate Debt:

              

Mortgage Notes Payable

   $ —       $ —       $ —       $ —       $ —       $ —       $ —    

Unsecured Line of Credit

     —         —         —         —         —         —         —    

Unsecured Term Loan

     —         —         —         —         —         —         —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Floating Rate Debt

   $ —       $ —       $ —       $ —       $ —       $ —       $ —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Fixed Rate Debt:

              

767 Fifth Avenue (The GM Building) (60% ownership)

   $ —       $ —       $ —       $ —       $ —       $ 2,300,000     $ 2,300,000  

601 Lexington Avenue (55% ownership)

     3,321       13,684       14,349       15,045       15,776       614,710       676,885  

New Dominion Technology Park, Building One

     —         3,100       3,340       3,598       22,906       —         32,944  

University Place

     443       1,849       1,981       2,123       1,500       —         7,896  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Mortgage Notes Payable

     3,764       18,633       19,670       20,766       40,182       2,914,710       3,017,725  

Deferred Financing Costs, Net

     (982     (3,925     (3,925     (3,925     (3,836     (19,065     (35,658
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Mortgage Notes Payable, Net

   $ 2,782     $ 14,708     $ 15,745     $ 16,841     $ 36,346     $ 2,895,645     $ 2,982,067  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Unsecured Senior Notes, Face Amount

   $ —       $ 850,000     $ 700,000     $ 700,000     $ 850,000     $ 4,200,000     $ 7,300,000  

Discount Amortization

     (670     (2,696     (2,503     (2,528     (2,063     (6,350     (16,810

Deferred Financing Costs, Net

     (1,546     (6,019     (5,036     (4,510     (3,648     (9,864     (30,623
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Unsecured Senior Notes, Net

   $ (2,216   $ 841,285     $ 692,461     $ 692,962     $ 844,289     $ 4,183,786     $ 7,252,567  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Fixed Rate Debt

   $ 566     $ 855,993     $ 708,206     $ 709,803     $ 880,635     $ 7,079,431     $ 10,234,634  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Consolidated Debt

   $ 566     $ 855,993     $ 708,206     $ 709,803     $ 880,635     $ 7,079,431     $ 10,234,634  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

% of Consolidated Debt

     0.01     8.36     6.92     6.94     8.60     69.17     100.00
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balloon Payments

   $ —       $ 850,000     $ 700,000     $ 700,000     $ 872,906     $ 7,110,648     $ 10,233,554  

Scheduled Principal Amortization

   $ 3,764     $ 18,633     $ 19,670     $ 20,766     $ 17,276     $ 4,062     $ 84,171  

GAAP Weighted Average Floating Rate Debt (2)

     —         —         —         —         —         —         —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

GAAP Weighted Average Fixed Rate Debt (2)

     5.04     3.89     5.96     5.70     4.39     3.78     4.13
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total GAAP Weighted Average Rate (2)

     5.04     3.89     5.96     5.70     4.39     3.78     4.13
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Stated Weighted Average Rate

     4.99     3.77     5.87     5.63     4.32     3.67     4.02
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Unsecured Credit Facility - Matures April 24, 2022

 

     Facility      Outstanding at
9/30/2017
     Letters of
Credit
     Remaining
Capacity at
9/30/2017
 

Unsecured Line of Credit

   $ 1,500,000      $ —        $ 1,610      $ 1,498,390  

Unsecured Term Loan

   $ 500,000      $ —          N/A      $ 500,000  

Unsecured and Secured Debt Analysis

     % of Total Debt     Stated Weighted
Average Rate
    GAAP Weighted
Average Rate
    Weighted Average
Maturity (years)
 

Unsecured Debt

     70.86     4.12     4.21     5.2  

Secured Debt

     29.14     3.78     3.96     8.4  
  

 

 

   

 

 

   

 

 

   

 

 

 

Consolidated Debt

     100.00     4.02     4.13     6.1  
  

 

 

   

 

 

   

 

 

   

 

 

 

Floating and Fixed Rate Debt Analysis

     % of Total Debt     Stated Weighted
Average Rate
    GAAP Weighted
Average Rate
    Weighted Average
Maturity (years)
 

Floating Rate Debt

     —         —         —         —    

Fixed Rate Debt

     100.00     4.02     4.13     6.1  
  

 

 

   

 

 

   

 

 

   

 

 

 

Consolidated Debt

     100.00     4.02     4.13     6.1  
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) Excludes unconsolidated joint ventures. For information on BXP’s share of unconsolidated joint venture debt, see page 17.
(2) The GAAP interest rate differs from the stated interest rate due to the inclusion of the amortization of financing charges and the effects of hedging transactions.

 

15


LOGO

THIRD QUARTER 2017

 

SENIOR UNSECURED DEBT COVENANT COMPLIANCE RATIOS

(dollars in thousands)

In the fourth quarter of 2002, the Company’s Operating Partnership (Boston Properties Limited Partnership) received investment grade ratings on its senior unsecured debt securities and thereafter issued unsecured notes. The notes were issued under an indenture, dated as of December 13, 2002, by and between Boston Properties Limited Partnership and The Bank of New York Mellon Trust Company, N.A., as trustee, as supplemented from time to time (the “Indenture”), which, among other things, requires us to comply with the following limitations on incurrence of debt: Limitation on Outstanding Debt; Limitation on Secured Debt; Ratio of Annualized Consolidated EBITDA to Annualized Interest Expense; and Maintenance of Unencumbered Assets. Compliance with these restrictive covenants requires us to apply specialized terms the meanings of which are described in detail in our filings with the SEC, and to calculate ratios in the manner prescribed by the Indenture.

This section presents such ratios as of September 30, 2017 to show that the Company’s Operating Partnership was in compliance with the terms of the Indenture, which has been filed with the SEC. Management is not presenting these ratios and the related calculations for any other purpose or for any other period, and is not intending for these measures to otherwise provide information to investors about the Company’s financial condition or results of operations. Investors should not rely on these measures other than for purposes of testing our compliance with the Indenture. This section also presents certain other indenture-related data that we believe assists investors in evaluating the Company’s unsecured debt securities.

 

          September 30, 2017  

Total Assets:

   

Capitalized Property Value (1)

    $ 24,343,952  

Cash and Cash Equivalents

      493,055  

Investments in Securities

      27,981  

Undeveloped Land, at Cost (including BXP’s share of unconsolidated joint ventures)

      258,590  

Development in Process, at Cost (including BXP’s share of unconsolidated joint ventures)

      1,633,769  
   

 

 

 

Total Assets

    $ 26,757,347  
   

 

 

 

Unencumbered Assets

    $ 20,548,003  
   

 

 

 

Consolidated Secured Debt (Fixed and Variable) (2)

    $ 3,070,323  

Unconsolidated Joint Venture Debt (3)

      593,186  

Contingent Liabilities & Letters of Credit

      9,076  

Unsecured Debt (4)

      7,300,000  
   

 

 

 

Total Outstanding Debt

    $ 10,972,585  
   

 

 

 

Consolidated EBITDA:

   

Income before Gains on Sales of Real Estate (per Consolidated Income Statement)

    $ 144,813  

Subtract: Income from Unconsolidated Joint Ventures (per Consolidated Income Statement)

      (843

Subtract: Gains from Investments in Securities (per Consolidated Income Statement)

      (944

Add: Interest Expense (per Consolidated Income Statement)

      92,032  

Add: Depreciation and Amortization (per Consolidated Income Statement)

      152,164  
   

 

 

 

EBITDA

      387,222  

Add: BXP’s share of unconsolidated joint venture EBITDA

      15,634  
   

 

 

 

Consolidated EBITDA

    $ 402,856  
   

 

 

 

Adjusted Interest Expense:

   

Interest Expense (per Consolidated Income Statement)

    $ 92,032  

Add: BXP’s share of unconsolidated joint venture interest expense

      5,661  

Less: Amortization of financing costs (including BXP’s share of unconsolidated joint ventures)

      (3,182

Less: Interest expense funded by construction loan draws

      —    
   

 

 

 

Adjusted Interest Expense

    $ 94,511  
   

 

 

 
Covenant Ratios and Related Data   Test     Actual  

Total Outstanding Debt/Total Assets

    Less than 60%       41.0

Secured Debt/Total Assets

    Less than 50%       13.7

Interest Coverage (Annualized Consolidated EBITDA to Annualized Interest Expense)

    Greater than 1.50x       4.26  

Unencumbered Assets/ Unsecured Debt

    Greater than 150%       281.5
   

 

 

 

Unencumbered Consolidated Property EBITDA (5)

    $ 331,547  
   

 

 

 

Unencumbered Interest Coverage (Unencumbered Consolidated Property EBITDA to Unsecured Interest Expense)

 

    4.45  
   

 

 

 

% of Unencumbered Consolidated Property EBITDA to Consolidated EBITDA

      82.3
   

 

 

 

# of in-service unencumbered properties

      147  
   

 

 

 

 

(1) Capitalized Property Value is determined for each property and is the greater of (A) annualized EBITDA capitalized at an 8.0% rate for CBD properties and a 9.0% rate for non-CBD properties, and (B) the undepreciated book value as determined under GAAP.
(2) Includes capital lease obligations of $52,598 and excludes deferred financing costs, net of $35,658.
(3) Excludes aggregate deferred financing costs, net of $1,564.
(4) Excludes aggregate debt discount of $16,810 and deferred financing costs, net of $30,623.
(5) Unencumbered Consolidated Property EBITDA is a non-GAAP financial measure equal to Consolidated EBITDA excluding corporate revenue and expenses, encumbered consolidated Property EBITDA, EBITDA from land and properties that have either been disposed of or not fully placed in-service and items that, in the Company’s view, are not representative of a property’s standard ongoing performance, such as termination income and other similar items. For the three months ended September 30, 2017, these excluded amounts were approximately $(15,122), $84,429, $(1,607) and $3,609, respectively.

 

16


LOGO

THIRD QUARTER 2017

 

UNCONSOLIDATED JOINT VENTURES (1)

as of September 30, 2017

(dollars in thousands)

Balance Sheet Information

 

Property

   BXP’s Nominal
Ownership
    Net Equity     Mortgage/
Construction
Loans
Payable, Net
 

540 Madison Avenue

     60.00   $ 67,046     $ 71,888  

Market Square North

     50.00     (8,474     60,727  

Metropolitan Square

     20.00     2,537       32,795  

901 New York Avenue

     25.00     (10,747     55,926  

Wisconsin Place Parking Facility

     33.33     40,158       —    

Annapolis Junction (2)

     50.00     18,771       44,626  

500 North Capitol Street, N.W.

     30.00     (3,642     31,399  

Colorado Center (3)

     50.00     263,834       274,504  

The Hub on Causeway - Podium (4)

     50.00     55,917       —    

The Hub on Causeway - Hotel

     50.00     1,596       —    

The Hub on Causeway - Residential

     50.00     25,811       —    

1001 6th Street

     50.00     42,442       —    

Dock 72

     50.00     67,901       —    

7750 Wisconsin Avenue (5)

     50.00     21,101       —    

1265 Main Street

     50.00     4,686       19,757  
    

 

 

   
       588,937    

Investments with deficit balances reflected within Other Liabilities

       22,863    
    

 

 

   

 

 

 

Investment in Joint Ventures

     $ 611,800     $ 591,622  
    

 

 

   

 

 

 

Debt Maturities and Principal Payments by Property

 

Property

   2017     2018     2019     2020     2021     Thereafter     Total  

540 Madison Avenue (60%)

   $ —       $ 72,000     $ —       $ —       $ —       $ —       $ 72,000  

Market Square North (50%)

     292       1,205       1,265       58,091       —         —         60,853  

901 New York Avenue (25%)

     —         —         —         970       1,095       54,185       56,250  

Metropolitan Square (20%)

     141       586       620       31,501         —         32,848  

500 North Capitol Street, N.W. (30%)

     —         —         —         —         —         31,500       31,500  

1265 Main Street (50%)

     94       383       398       413       429       18,238       19,955  

Annapolis Junction Building One (50%)

     256       19,519       —         —         —         —         19,775  (6) 

Annapolis Junction Buildings Seven & Eight (50%)

     81       326       17,723       —         —         —         18,130  

Annapolis Junction Building Six (50%)

     135       6,740       —         —         —         —         6,875  

Colorado Center (50%)

     —         —         —         —         —         275,000       275,000  (3) 

The Hub on Causeway - Podium (50%)

     —         —         —         —         —         —         —    (4) 

Dock 72 (50%)

     —         —         —         —         —         —         —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     999       100,759       20,006       90,975       1,524       378,923       593,186  

Deferred Financing Costs, Net

     (150     (319     (223     (165     (127     (580     (1,564
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Mortgage/Construction Loans Payable, Net

   $ 849     $ 100,440     $ 19,783     $ 90,810     $ 1,397     $ 378,343     $ 591,622  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

GAAP Weighted Average Rate

     4.64     3.81     3.93     5.20     3.42     3.65     3.94

% of Total Mortgage/Construction Loans Payable, Net

     0.14     16.98     3.34     15.35     0.24     63.95     100.00

Balloon Payments

   $ —       $ 97,964     $ 17,397     $ 88,387     $ —       $ 370,437     $ 574,185  

Scheduled Amortization

   $ 1,000     $ 2,795     $ 2,609     $ 2,588     $ 1,524     $ 8,486     $ 19,002  

Floating and Fixed Rate Debt Analysis

 

     % of Total Debt     Stated Weighted
Average Rate
    GAAP Weighted
Average Rate
    Weighted Average
Maturity (years)
 

Floating Rate Debt

     19.69     3.63     3.82     0.9  

Fixed Rate Debt

     80.31     3.93     3.97     8.1  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total Debt

     100.00     3.87     3.94     6.7  
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) Amounts represent the Company’s share based on its ownership percentage. For additional details, see page 47.    
(2) Annapolis Junction includes four in-service properties and two undeveloped land parcels.    
(3) On July 10, 2017, the Company acquired an additional 0.2% interest in the unconsolidated joint venture that owns Colorado Center for approximately $2.1 million in cash. On July 28, 2017, the joint venture obtained mortgage financing collateralized by the property totaling $550.0 million. The mortgage financing matures on August 9, 2027.
(4) On September 6, 2017, a joint venture in which the Company has a 50% interest obtained construction financing with a total commitment of $204.6 million collateralized by its Hub on Causeway development project. The construction financing matures on September 6, 2021, with two one-year extension options, subject to certain conditions. As of September 30, 2017, there have been no amounts drawn under the loan.
(5) On August 7, 2017, the Company entered into a joint venture to develop an approximately 722,000 net rentable square foot (subject to adjustment based on finalized building design) build-to-suit Class A office building and below-grade parking garage at 7750 Wisconsin Avenue in Bethesda, Maryland. See page 44 for further detail.    
(6) On April 11, 2016, a notice of event of default was received from the lender because the loan to value ratio is not in compliance with the applicable covenant in the loan agreement. On October 17, 2016, the lender notified the joint venture that it has elected to charge the default rate on the loan. The default rate is defined as LIBOR plus 5.75% per annum. Subsequently, the cash flows generated from the property have become insufficient to fund debt service payments and capital improvements necessary to lease and operate the property and the joint venture is not prepared to fund additional cash shortfalls at this time. Consequently, the joint venture is not current on making debt service payments and remains in default. The loan has one, three-year extension option, subject to certain conditions including that no event of default exists or is ongoing.

 

17


LOGO

THIRD QUARTER 2017

 

UNCONSOLIDATED JOINT VENTURES (continued)

(unaudited and dollars in thousands)

Results of Operations

for the three months ended September 30, 2017

 

    540 Madison
Avenue
    Market
Square
North
    Metropolitan
Square
    901 New York
Avenue
    Wisconsin
Place
Parking
Facility
    Annapolis
Junction (1)
    500 North
Capitol
Street,
N.W.
    Colorado
Center
    1265 Main
Street
    Other
Joint
Ventures (2)
    Total
Unconsolidated
Joint Ventures
 

REVENUE

                     

Rental (3)

  $ 6,376     $ 4,498     $ 4,527     $ 6,978     $ 938     $ 2,043     $ 2,930     $ 13,786     $ 995     $ 325     $ 43,396  

Operating recoveries

    734       822       1,281       1,206       272       433       1,239       591       298       —         6,876  

Straight-line rent

    62       103       1,735       542       —         348       75       2,238       —         —         5,103  

Fair value lease revenue

    —         —         —         —         —         —         —         96       —         —         96  

Termination income

    57       —         —         —         —         —         —         (12     —         —         45  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenue

    7,229       5,423       7,543       8,726       1,210       2,824       4,244       16,699       1,293       325       55,516  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

EXPENSES

                     

Operating

    3,671       2,235       3,593       3,449       554       1,592       1,413       5,944       303       374       23,128  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

NET OPERATING INCOME/(LOSS)

    3,558       3,188       3,950       5,277       656       1,232       2,831       10,755       990       (49     32,388  

Interest

    880       1,498       2,350       2,075       —         1,218       1,128       3,555       384       —         13,088  

Depreciation and amortization

    1,947       2,965       1,897       1,490       1,391       1,092       955       4,298       405       —         16,440  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

SUBTOTAL

    2,827       4,463       4,247       3,565       1,391       2,310       2,083       7,853       789       —         29,528  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

NET INCOME/(LOSS)

  $ 731     $ (1,275   $ (297   $ 1,712     $ (735   $ (1,078   $ 748     $ 2,902     $ 201     $ (49   $ 2,860  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

BXP’s nominal ownership percentage

    60.00     50.00     20.00     25.00     33.33     50.00     30.00     50.00     50.00     50.00  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

BXP’s share of net income/(loss)

  $ 438     $ (638   $ (59   $ 2,232 (4)    $ (278   $ (539   $ 225     $ 1,451     $ 101     $ (24   $ 2,909  

Basis differential

                     

Straight-line rent

  $ —       $ —       $ —       $ —       $ —       $ —       $ —       $ 681 (5)    $ —       $ —       $ 681  

Fair value lease revenue

    —         —         —         —         —         —         —         366 (5)      —         —         366  

Depreciation and amortization

    166       (377     (5     (266     (8     (84     4       (2,542 )(5)      (4     3       (3,113
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total basis differential (6)

    166       (377     (5     (266     (8     (84     4       (1,495 )(5)      (4     3       (2,066
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income/(loss) from unconsolidated joint ventures

  $ 604     $ (1,015   $ (64   $ 1,966 (4)    $ (286   $ (623   $ 229     $ (44   $ 97     $ (21   $ 843  

Gain on investment

    —         —         —         —         —         —         —         —         —         —         —    

BXP’s share of depreciation & amortization

    1,066       1,865       394       (327 )(4)      475       635       295       4,673       206       —         9,282  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

BXP’s share of Funds from Operations (FFO)

  $ 1,670     $ 850     $ 330     $ 1,639     $ 189     $ 12     $ 524     $ 4,629     $ 303     $ (21   $ 10,125  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

BXP’s share of interest expense

  $ 528     $ 749     $ 470     $ 998 (4)    $ —       $ 609     $ 338     $ 1,777     $ 192     $ —       $ 5,661  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

BXP’s share of amortization of financing costs

  $ 31     $ 10     $ 5     $ 21     $ —       $ 30     $ 4     $ 8     $ 3     $ —       $ 112  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

BXP’s share of capitalized interest

  $ —       $ —       $ 8     $ —       $ —       $ —       $ —       $ —       $ —       $ —       $ 8  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

BXP’s share of revenue (7)

  $ 4,337     $ 2,711     $ 1,509     $ 4,195 (4)    $ 403     $ 1,412     $ 1,273     $ 9,398     $ 646     $ 163     $ 26,047  

BXP’s share of operating expenses

    2,203       1,118       719       1,658 (4)      184       796       424       2,972       152       187       10,413  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

BXP’s share of net operating income/(loss) (7)

    2,134       1,593       790       2,537 (4)      219       616       849       6,426       494       (24     15,634  

Less:

                     

BXP’s share of termination income

    34       —         —         —   (4)      —         —         —         (6     —         —         28  

BXP’s share of net operating income/(loss)

                     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

(excluding termination income) (7)

    2,100       1,593       790       2,537 (4)      219       616       849       6,432       494       (24     15,606  

Less:

                     

BXP’s share of straight-line rent

    37       51       347       260 (4)      —         174       22       1,800       —         —         2,691  

BXP’s share of fair value lease revenue

    —         —         —         —   (4)      —         —         —         415       —         —         415  

Add:

                     

BXP’s share of lease transaction costs that qualify as rent inducements

    —         4       125       25 (4)      —         54       —         —         —         —         208  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

BXP’s share of net operating income/(loss)

                     

- cash (excluding termination income) (7)

  $ 2,063     $ 1,546     $ 568     $ 2,302 (4)    $ 219     $ 496     $ 827     $ 4,217     $ 494     $ (24   $ 12,708  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) Annapolis Junction includes four properties in service and two undeveloped land parcels.
(2) Includes The Hub on Causeway, 1001 6th Street, Dock 72 and 7750 Wisconsin Avenue.
(3) Includes approximately $56 of management services income and approximately $271 of interest and other income.
(4) Reflects the allocation percentages pursuant to the achievement of specified investment return thresholds as provided for in the joint venture agreement.
(5) The Company’s purchase price allocation under ASC 805 for Colorado Center differs from the historical basis of the venture resulting in the majority of the basis differential for this venture.
(6) Represents adjustments related to the carrying values and depreciation of certain of the Company’s investment in unconsolidated joint ventures.
(7) Includes the Company’s share of approximately $31 of management services income and approximately $134 of interest and other income.

 

18


LOGO

THIRD QUARTER 2017

 

CONSOLIDATED JOINT VENTURES

(unaudited and in thousands)

Balance Sheets

as of September 30, 2017

 

BXP’s ownership percentage

    60.00     55.00     95.00  
 

 

 

   

 

 

   

 

 

   
          Norges Joint Ventures              
    767 Fifth Avenue
(The GM Building) 
(1)
    Times Square Tower
601 Lexington Avenue
100 Federal Street
Atlantic Wharf Office 
(1)
    Salesforce Tower (1)     Total
Consolidated
Joint Ventures
 

ASSETS

       

Real estate, net

  $ 3,415,920     $ 2,225,849     $ 953,818     $ 6,595,587  

Cash and cash held in escrows

    119,794       166,305       5,169       291,268  

Other assets

    132,346       187,007       1,205       320,558  
 

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

  $ 3,668,060     $ 2,579,161     $ 960,192     $ 7,207,413  
 

 

 

   

 

 

   

 

 

   

 

 

 

LIABILITIES AND EQUITY

       

Liabilities:

       

Mortgage notes payable, net

  $ 2,266,115     $ 675,379     $ —       $ 2,941,494  

Other liabilities

    131,977       90,222       58,143       280,342  
 

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

    2,398,092       765,601       58,143       3,221,836  
 

 

 

   

 

 

   

 

 

   

 

 

 

Equity:

       

Boston Properties, Inc.

    762,971       676,803       877,048       2,316,822  

Noncontrolling interests

    506,997       1,136,757       25,001       1,668,755 (2) 
 

 

 

   

 

 

   

 

 

   

 

 

 

Total equity

    1,269,968       1,813,560       902,049       3,985,577  
 

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities and equity

  $ 3,668,060     $ 2,579,161     $ 960,192     $ 7,207,413  
 

 

 

   

 

 

   

 

 

   

 

 

 

Partners’ share of consolidated debt

  $ 906,468     $ 303,921     $ —       $ 1,210,389  
 

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) Certain balances contain amounts that eliminate in consolidation.
(2) Amount excludes preferred shareholders’ capital of approximately $0.1 million.

 

19


LOGO

THIRD QUARTER 2017

 

CONSOLIDATED JOINT VENTURES (continued)

(unaudited and in thousands)

Income Statements

for the three months ended September 30, 2017

 

           Norges Joint Ventures              
     767 Fifth Avenue
(The GM Building)
    Times Square Tower
601 Lexington Avenue
100 Federal Street
Atlantic Wharf Office
    Salesforce Tower     Total
Consolidated
Joint Ventures
 

REVENUE

        

Rental

   $ 68,932     $ 87,063     $ —       $ 155,995  

Straight-line rent

     1,887       2,678       —         4,565  

Fair value lease revenue

     4,037       236       —         4,273  

Termination income

     3,035       43       —         3,078  

Parking and other

     755       1,402       —         2,157  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total revenue

     78,646       91,422       —         170,068  
  

 

 

   

 

 

   

 

 

   

 

 

 

EXPENSES

        

Operating

     30,075       34,179       —         64,254  
  

 

 

   

 

 

   

 

 

   

 

 

 

NET OPERATING INCOME

     48,571       57,243       —         105,814  

Management services income

     (862     (859       (1,721

Interest and other income

     (351     (346     (19     (716

Interest expense

     21,225       7,391       —         28,616  

Depreciation and amortization

     23,783       20,173       —         43,956  
  

 

 

   

 

 

   

 

 

   

 

 

 

SUBTOTAL

     43,795       26,359       (19 )      70,135  
  

 

 

   

 

 

   

 

 

   

 

 

 

NET INCOME/(LOSS)

   $ 4,776     $ 30,884     $ 19     $ 35,679  
  

 

 

   

 

 

   

 

 

   

 

 

 

BXP’s ownership percentage

     60.00     55.00     95.00  
  

 

 

   

 

 

   

 

 

   

Partners’ share of NOI (1)

   $ 19,428     $ 25,760     $ —       $ 45,188  
  

 

 

   

 

 

   

 

 

   

 

 

 

BXP’s share of NOI

   $ 29,143     $ 31,483     $ —       $ 60,626  
  

 

 

   

 

 

   

 

 

   

 

 

 

Unearned portion of capitalized fees (2)

   $ 136     $ 446     $ 9     $ 591  
  

 

 

   

 

 

   

 

 

   

 

 

 

Reconciliation of partners’ noncontrolling interest (NCI):

        

Net income/(loss)

   $ 4,776     $ 30,884     $ 19     $ 35,679  

Add depreciation & amortization - BXP’s basis difference

     46       45       —         91  

Special allocation - BXP’s basis

     —         (89     —         (89
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income/(loss) before interest allocation

   $ 4,822     $ 30,840     $ 19     $ 35,681  
  

 

 

   

 

 

   

 

 

   

 

 

 

Partners’ share of net income before interest allocation (1)

   $ 1,929     $ 13,878     $ 1     $ 15,808  

Allocation of management and other fees to non-controlling partners (1)

     (750     (774     —         (1,524

Accretion and adjustments (1)

     —         217       (161     56  
  

 

 

   

 

 

   

 

 

   

 

 

 

Partners’ NCI (1)

   $ 1,179     $ 13,321     $ (160   $ 14,340  
  

 

 

   

 

 

   

 

 

   

 

 

 

Reconciliation of partners’ share of FFO:

        

Net income/(loss)

   $ 4,776     $ 30,884     $ 19     $ 35,679  

Add depreciation & amortization

     23,783       20,173       —         43,956  
  

 

 

   

 

 

   

 

 

   

 

 

 

Entity FFO

   $ 28,559     $ 51,057     $ 19     $ 79,635  
  

 

 

   

 

 

   

 

 

   

 

 

 

Partners’ NCI (1)

   $ 1,179     $ 13,321     $ (160   $ 14,340  

Partners’ share of depreciation and amortization after BXP’s basis differential (1)

     9,495       9,057       —         18,552  
  

 

 

   

 

 

   

 

 

   

 

 

 

Partners’ share FFO (1)

   $ 10,674     $ 22,378     $ (160   $ 32,892  
  

 

 

   

 

 

   

 

 

   

 

 

 

Reconciliation of BXP’s share of FFO:

        

BXP’s share of net income/(loss) adjusted for partners’ NCI

   $ 3,597     $ 17,563     $ 179     $ 21,339  

Depreciation & amortization - BXP’s basis difference

     46       45       —         91  

BXP’s share of depreciation & amortization

     14,248       11,070       —         25,318  
  

 

 

   

 

 

   

 

 

   

 

 

 

BXP’s share of FFO

   $ 17,891     $ 28,678     $ 179     $ 46,748