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Boston Properties Announces Third Quarter 2012 Results

This press release contains forward-looking statements within the meaning of the Federal securities laws. You can identify these statements by our use of the words “assumes,” “believes,” “estimates,” “expects,” “guidance,” “intends,” “plans,” “projects” and similar expressions that do not relate to historical matters. You should exercise caution in interpreting and relying on forward-looking statements because they involve known and unknown risks, uncertainties and other factors which are, in some cases, beyond Boston Properties’ control and could materially affect actual results, performance or achievements. These factors include, without limitation, the Company’s ability to satisfy the closing conditions to the pending transactions described above, the ability to enter into new leases or renew leases on favorable terms, dependence on tenants’ financial condition, the uncertainties of real estate development, acquisition and disposition activity, the ability to effectively integrate acquisitions, the uncertainties of investing in new markets, the costs and availability of financing, the effectiveness of our interest rate hedging contracts, the ability of our joint venture partners to satisfy their obligations, the effects of local, national and international economic and market conditions (including the impact of the European sovereign debt issues), the effects of acquisitions, dispositions and possible impairment charges on our operating results, the impact of newly adopted accounting principles on the Company’s accounting policies and on period-to-period comparisons of financial results, regulatory changes and other risks and uncertainties detailed from time to time in the Company’s filings with the Securities and Exchange Commission. Boston Properties does not undertake a duty to update or revise any forward-looking statement, including its guidance for the fourth quarter 2012 and full fiscal year 2013, whether as a result of new information, future events or otherwise.

Financial tables follow.

           
BOSTON PROPERTIES, INC.
CONSOLIDATED BALANCE SHEETS
 
September 30, December 31,
2012 2011
 
(in thousands, except for share amounts)
(unaudited)

ASSETS

 
Real estate $ 13,165,836 $ 12,303,965
Construction in progress 937,475 818,685
Land held for future development 273,922 266,822
Less: accumulated depreciation   (2,843,167 )   (2,642,986 )
Total real estate 11,534,066 10,746,486
 
Cash and cash equivalents 1,223,215 1,823,208
Cash held in escrows 32,253 40,332
Investments in securities 11,792 9,548
Tenant and other receivables, net of allowance for doubtful accounts of $1,381 and $1,766, respectively 45,039 79,838
Related party notes receivable 282,206 280,442
Interest receivable from related party notes receivable 102,122 89,854
Accrued rental income, net of allowance of $2,771 and $2,515, respectively 579,553 522,675
Deferred charges, net 534,898 445,403
Prepaid expenses and other assets 132,109 75,458
Investments in unconsolidated joint ventures   664,690     669,722  
Total assets $ 15,141,943   $ 14,782,966  
 

LIABILITIES AND EQUITY

 
Liabilities:
Mortgage notes payable $ 2,848,686 $ 3,123,267
Unsecured senior notes, net of discount 4,639,217 3,865,186
Unsecured exchangeable senior notes, net of discount 1,162,955 1,715,685
Unsecured line of credit - -
Accounts payable and accrued expenses 193,492 155,139
Dividends and distributions payable 93,461 91,901
Accrued interest payable 98,601 69,105
Other liabilities   309,004     293,515  
Total liabilities   9,345,416     9,313,798  
 
Commitments and contingencies   -     -  
 
Noncontrolling interest:
Redeemable preferred units of the Operating Partnership   110,876     55,652  
 
Equity:
Stockholders' equity attributable to Boston Properties, Inc.
Excess stock, $.01 par value, 150,000,000 shares authorized, none issued or outstanding - -
Preferred stock, $.01 par value, 50,000,000 shares authorized, none issued or outstanding - -
Common stock, $.01 par value, 250,000,000 shares authorized, 150,935,137 and 148,186,511 shares issued and 150,856,237 and 148,107,611 shares outstanding at September 30, 2012 and December 31, 2011, respectively
 
1,509 1,481
Additional paid-in capital 5,194,569 4,936,457
Dividends in excess of earnings (59,621 ) (53,080 )
Treasury common stock, at cost (2,722 ) (2,722 )
Accumulated other comprehensive loss   (14,379 )   (16,138 )
Total stockholders' equity attributable to Boston Properties, Inc. 5,119,356 4,865,998
 
Noncontrolling interests:
Common units of the Operating Partnership 568,147 548,581
Property partnerships (1,852 ) (1,063 )
   
Total equity   5,685,651     5,413,516  
   
Total liabilities and equity $ 15,141,943   $ 14,782,966  
                         
BOSTON PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 
Three months ended Nine months ended
September 30, September 30,
2012 2011 2012 2011
 
(in thousands, except for per share amounts)
 
Revenue
Rental
Base rent $ 370,494 $ 358,607 $ 1,098,870 $ 1,042,729
Recoveries from tenants 59,957 53,194 169,179 146,689
Parking and other   23,070     21,679     69,021     61,838  
Total rental revenue 453,521 433,480 1,337,070 1,251,256
Hotel revenue 9,359 8,045 26,224 22,897
Development and management services   8,024     8,178     25,734     24,699  
Total revenue   470,904     449,703     1,389,028     1,298,852  
 
Expenses
Operating
Rental 168,939 153,776 487,238 436,300
Hotel 6,886 6,032 19,601 18,052
General and administrative 19,757 16,917 66,442 60,281
Transaction costs 1,140 474 3,252 1,907
Depreciation and amortization   111,360     108,674     331,943     327,526  
Total expenses   308,082     285,873     908,476     844,066  
 
Operating income 162,822 163,830 480,552 454,786
Other income (expense)
Income from unconsolidated joint ventures 9,217 11,326 42,129 28,184
Interest and other income 4,001 1,252 8,029 4,179
Gains (losses) from investments in securities 587 (860 ) 1,202 (481 )
Gains (losses) from early extinguishments of debt (5,494 ) - (4,453 ) -
Interest expense   (105,030 )   (95,117 )   (308,168 )   (288,225 )
Income from continuing operations 66,103 80,431 219,291 198,443
Discontinued operations
Income (loss) from discontinued operations - 20 884 (60 )
Gain on sale of real estate from discontinued operations - - 36,877 -
Gain on forgiveness of debt from discontinued operations   -     -     17,807     -  
Net income 66,103 80,451 274,859 198,383
Net income attributable to noncontrolling interests
Noncontrolling interests in property partnership (458 ) (86 ) (1,461 ) (1,118 )
Noncontrolling interest - redeemable preferred units of the Operating
Partnership (874 ) (832 ) (2,440 ) (2,497 )
Noncontrolling interest - common units of the Operating Partnership (7,002 ) (8,989 ) (23,393 ) (23,417 )
Noncontrolling interest in discontinued operations - common units of the
Operating Partnership   -     (2 )   (6,092 )   8  
Net income attributable to Boston Properties, Inc. $ 57,769   $ 70,542   $ 241,473   $ 171,359  
 
Basic earnings per common share attributable to Boston Properties, Inc.:
Income from continuing operations $ 0.38 $ 0.48 $ 1.28 $ 1.18
Discontinued operations   -     -     0.33     -  
Net income $ 0.38   $ 0.48   $ 1.61   $ 1.18  
 
Weighted average number of common shares outstanding   150,801     147,006     149,823     145,006  
 
Diluted earnings per common share attributable to Boston Properties, Inc.:
Income from continuing operations $ 0.38 $ 0.48 $ 1.27 $ 1.18
Discontinued operations   -     -     0.33     -  
Net income $ 0.38   $ 0.48   $ 1.60   $ 1.18  
 

Weighted average number of common and common equivalent sharesoutstanding

  151,983     147,622     150,478     145,625  
                       
BOSTON PROPERTIES, INC.
FUNDS FROM OPERATIONS (1)
(Unaudited)
 
Three months ended Nine months ended
September 30, September 30,
2012 2011 2012 2011
 
(in thousands, except for per share amounts)
 
Net income attributable to Boston Properties, Inc. $ 57,769 $ 70,542 $ 241,473 $ 171,359
 
Add:
Noncontrolling interest in discontinued operations -
common units of the Operating Partnership - 2 6,092 (8 )
Noncontrolling interest - common units of the Operating
Partnership 7,002 8,989 23,393 23,417
Noncontrolling interest - redeemable preferred units of
the Operating Partnership 874 832 2,440 2,497
Noncontrolling interests in property partnerships 458 86 1,461 1,118
Less:
Income (loss) from discontinued operations - 20 884 (60 )
Gain on sale of real estate from discontinued operations - - 36,877 -
Gain on forgiveness of debt from discontinued operations   -     -     17,807     -  
 
Income from continuing operations 66,103 80,431 219,291 198,443
 
Add:
Real estate depreciation and amortization (2) 132,693 134,777 400,213 408,376
Income (loss) from discontinued operations - 20 884 (60 )
Less:
Gain on sale of real estate included within income from
unconsolidated joint ventures 248 - 248 -
Noncontrolling interests in property partnership's share
of funds from operations 923 549 2,889 2,508
Noncontrolling interest - redeemable preferred units of
the Operating Partnership   874     832     2,440     2,497  
 
Funds from operations (FFO) attributable to the Operating
Partnership 196,751 213,847 614,811 601,754
 
Less:
Noncontrolling interest - common units of the Operating
Partnership's share of funds from operations   20,625     23,573     64,941     70,089  
 
Funds from operations attributable to Boston Properties, Inc. $ 176,126   $ 190,274   $ 549,870   $ 531,665  
 
Boston Properties, Inc.'s percentage share of funds from
operations - basic   89.52 %   88.98 %   89.44 %   88.35 %
 
Weighted average shares outstanding - basic   150,801     147,006     149,823     145,006  
 
FFO per share basic $ 1.17   $ 1.29   $ 3.67   $ 3.67  
 
Weighted average shares outstanding - diluted   153,310     149,083     151,836     147,086  
 
FFO per share diluted $ 1.16   $ 1.28   $ 3.64   $ 3.64  
 

 

 

 

(1) Pursuant to the revised definition of Funds from Operations adopted by the Board of Governors of the National Association of Real Estate Investment Trusts (“NAREIT”), we calculate Funds from Operations, or “FFO,” by adjusting net income (loss) attributable to Boston Properties, Inc. (computed in accordance with GAAP, including non-recurring items) for gains (or losses) from sales of properties, impairment losses on depreciable real estate of consolidated real estate, impairment losses on investments in unconsolidated joint ventures driven by a measurable decrease in the fair value of depreciable real estate held by the unconsolidated joint ventures, real estate related depreciation and amortization, and after adjustment for unconsolidated partnerships and joint ventures. FFO is a non-GAAP financial measure. The use of FFO, combined with the required primary GAAP presentations, has been fundamentally beneficial in improving the understanding of operating results of REITs among the investing public and making comparisons of REIT operating results more meaningful. Management generally considers FFO to be a useful measure for reviewing our comparative operating and financial performance because, by excluding gains and losses related to sales of previously depreciated operating real estate assets, impairment losses and real estate asset depreciation and amortization (which can vary among owners of identical assets in similar condition based on historical cost accounting and useful life estimates), FFO can help one compare the operating performance of a company's real estate between periods or as compared to different companies.

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