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Boston Properties Announces Fourth 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 first quarter and full fiscal year 2013, whether as a result of new information, future events or otherwise.

Financial tables follow.

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

ASSETS

 
Real estate $ 13,581,454 $ 12,303,965
Construction in progress 1,036,780 818,685
Land held for future development 275,094 266,822
Less: accumulated depreciation   (2,934,160 )   (2,642,986 )
Total real estate 11,959,168 10,746,486
 
Cash and cash equivalents 1,041,978 1,823,208
Cash held in escrows 55,181 40,332
Investments in securities 12,172 9,548
Tenant and other receivables, net of allowance for doubtful accounts of $1,960 and $1,766, respectively 69,555 79,838
Related party notes receivable 282,491 280,442
Interest receivable from related party notes receivable 104,816 89,854
Accrued rental income, net of allowance of $1,571 and $2,515, respectively 598,199 522,675
Deferred charges, net 588,235 445,403
Prepaid expenses and other assets 90,610 75,458
Investments in unconsolidated joint ventures   659,916     669,722  
Total assets $ 15,462,321   $ 14,782,966  
 

LIABILITIES AND EQUITY

 
Liabilities:
Mortgage notes payable $ 3,102,485 $ 3,123,267
Unsecured senior notes, net of discount 4,639,528 3,865,186
Unsecured exchangeable senior notes, net of discount 1,170,356 1,715,685
Unsecured line of credit - -
Accounts payable and accrued expenses 199,102 155,139
Dividends and distributions payable 110,488 91,901
Accrued interest payable 72,461 69,105
Other liabilities   324,613     293,515  
Total liabilities   9,619,033     9,313,798  
 
Commitments and contingencies   -     -  
 
Noncontrolling interest:
Redeemable preferred units of the Operating Partnership   110,876     55,652  
 
Redeemable interest in property partnership   97,558     -  
 
Equity:
Stockholders' equity attributable to Boston Properties, Inc.
Excess stock, $.01 par value, 150,000,000 shares authorized, none issued or outstanding - -
Preferred stock, $.01 par value, 50,000,000 shares authorized, none issued or outstanding - -
Common stock, $.01 par value, 250,000,000 shares authorized, 151,680,109 and 148,186,511 shares
issued and 151,601,209 and 148,107,611 shares outstanding at December 31, 2012 and December
31, 2011, respectively 1,516 1,481
Additional paid-in capital 5,222,073 4,936,457
Dividends in excess of earnings (109,985 ) (53,080 )
Treasury common stock, at cost (2,722 ) (2,722 )
Accumulated other comprehensive loss   (13,817 )   (16,138 )
Total stockholders' equity attributable to Boston Properties, Inc. 5,097,065 4,865,998
 
Noncontrolling interests:
Common units of the Operating Partnership 539,753 548,581
Property partnerships (1,964 ) (1,063 )
   
Total equity   5,634,854     5,413,516  
   
Total liabilities and equity $ 15,462,321   $ 14,782,966  
 
 
BOSTON PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
               
Three months ended Year ended
December 31, December 31,
  2012     2011     2012     2011  
 
(in thousands, except for per share amounts)
 
Revenue
Rental
Base rent $ 382,934 $ 357,024 $ 1,483,533 $ 1,401,594
Recoveries from tenants 59,825 51,929 229,107 198,703
Parking and other   22,612     21,217     91,635     83,069  
Total rental revenue 465,371 430,170 1,804,275 1,683,366
Hotel revenue 11,691 11,632 37,915 34,529
Development and management services   8,343     8,726     34,077     33,425  
Total revenue   485,405     450,528     1,876,267     1,751,320  
 
Expenses
Operating
Rental 169,133 152,994 657,363 590,224
Hotel 8,519 8,076 28,120 26,128
General and administrative 15,940 19,329 82,382 79,610
Transaction costs 401 80 3,653 1,987
Depreciation and amortization   120,550     108,511     453,068     436,612  
Total expenses   314,543     288,990     1,224,586     1,134,561  
 
Operating income 170,862 161,538 651,681 616,759
Other income (expense)
Income from unconsolidated joint ventures 6,949 57,712 49,078 85,896
Interest and other income 2,062 1,179 10,091 5,358
Gains (losses) from investments in securities 187 38 1,389 (443 )
Losses from early extinguishments of debt - (1,494 ) (4,453 ) (1,494 )
Interest expense   (103,452 )   (103,967 )   (413,564 )   (394,131 )
Income from continuing operations 76,608 115,006 294,222 311,945
Discontinued operations
Income from discontinued operations - 437 1,040 1,881
Gain on sale of real estate from discontinued operations   -     -     36,877     -  
Net income 76,608 115,443 332,139 313,826
Net income attributable to noncontrolling interests
Noncontrolling interests in property partnerships (2,331 ) (440 ) (3,792 ) (1,558 )
Noncontrolling interest - redeemable preferred units of the Operating
Partnership (1,057 ) (842 ) (3,497 ) (3,339 )
Noncontrolling interest - common units of the Operating Partnership (7,820 ) (12,470 ) (31,046 ) (36,035 )
Noncontrolling interest in discontinued operations - common units of the
Operating Partnership   -     (47 )   (4,154 )   (215 )
Net income attributable to Boston Properties, Inc. $ 65,400   $ 101,644   $ 289,650   $ 272,679  
 
Basic earnings per common share attributable to Boston Properties, Inc.:
Income from continuing operations $ 0.43 $ 0.69 $ 1.71 $ 1.86
Discontinued operations   -     -     0.22     0.01  
Net income $ 0.43   $ 0.69   $ 1.93   $ 1.87  
 
Weighted average number of common shares outstanding   151,006     147,732     150,120     145,693  
 
Diluted earnings per common share attributable to Boston Properties, Inc.:
Income from continuing operations $ 0.43 $ 0.69 $ 1.70 $ 1.85
Discontinued operations   -     -     0.22     0.01  
Net income $ 0.43   $ 0.69   $ 1.92   $ 1.86  
 
Weighted average number of common and common equivalent shares
outstanding   151,401     147,974     150,711     146,218  
 
 
BOSTON PROPERTIES, INC.
FUNDS FROM OPERATIONS (1)
(Unaudited)
           
Three months ended Year ended
December 31, December 31,
  2012     2011     2012     2011  
 
(in thousands, except for per share amounts)
 
Net income attributable to Boston Properties, Inc. $ 65,400 $ 101,644 $ 289,650 $ 272,679
 
Add:
Noncontrolling interest in discontinued operations -
common units of the Operating Partnership - 47 4,154 215
Noncontrolling interest - common units of the Operating
Partnership 7,820 12,470 31,046 36,035
Noncontrolling interest - redeemable preferred units of
the Operating Partnership 1,057 842 3,497 3,339
Noncontrolling interests in property partnerships 2,331 440 3,792 1,558
Less:
Income from discontinued operations - 437 1,040 1,881
Gain on sale of real estate from discontinued operations   -     -     36,877     -  
 
Income from continuing operations 76,608 115,006 294,222 311,945
 
Add:
Real estate depreciation and amortization (2) 142,029 133,415 542,753 541,791
Income from discontinued operations - 437 1,040 1,881
Less:
Gain on sale of real estate included within income from
unconsolidated joint ventures (3) - 46,166 248 46,166
Noncontrolling interests in property partnership's share
of funds from operations 2,795 904 5,684 3,412
Noncontrolling interest - redeemable preferred units of
the Operating Partnership   1,057     842     3,497     3,339  
 
Funds from operations (FFO) attributable to the Operating
Partnership 214,785 200,946 828,586 802,700
 
Less:
Noncontrolling interest - common units of the Operating
Partnership's share of funds from operations   22,323     21,648     87,167     91,709  
 
Funds from operations attributable to Boston Properties, Inc. $ 192,462   $ 179,298   $ 741,419   $ 710,991  
 
Boston Properties, Inc.'s percentage share of funds from
operations - basic   89.61 %   89.23 %   89.48 %   88.57 %
 
Weighted average shares outstanding - basic   151,006     147,732     150,120     145,693  
 
FFO per share basic $ 1.27   $ 1.21   $ 4.94   $ 4.88  
 
Weighted average shares outstanding - diluted   152,708     149,435     152,056     147,679  
 
FFO per share diluted $ 1.27   $ 1.21   $ 4.90   $ 4.84  
 

(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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