Boston Properties(US:BXP)2021-11-04 16:00PART I. FINANCIAL INFORMATION This section provides the unaudited consolidated financial statements and management's discussion and analysis for Boston Properties, Inc. Financial Statements (unaudited) This section presents the unaudited consolidated financial statements for Boston Properties, Inc. (BXP) and Boston Properties Limited Partnership (BPLP) for the quarterly period ended September 30, 2021, including detailed notes. Consolidated Financial Statements The consolidated financial statements for Boston Properties, Inc. (BXP) show total assets of $22.85 billion as of September 30, 2021, with total revenue of $2.16 billion and net income of $311.7 million for the nine months ended. Boston Properties, Inc. - Key Balance Sheet Data (in thousands) | Account | Sep 30, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Total real estate | $18,268,933 | $17,818,807 | | Cash and cash equivalents | $1,002,728 | $1,668,742 | | Total assets | $22,848,810 | $22,858,190 | | Total liabilities | $14,785,286 | $14,511,681 | | Total equity | $8,054,749 | $8,339,612 | Boston Properties, Inc. - Key Income Statement Data (in thousands, except per share) | Metric | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Total revenue | $730,056 | $693,268 | $2,157,558 | $2,100,597 | | Net income attributable to BXP | $108,297 | $92,479 | $320,652 | $862,416 | | Basic EPS | $0.69 | $0.58 | $2.00 | $5.49 | Boston Properties, Inc. - Key Cash Flow Data (Nine Months Ended, in thousands) | Cash Flow Activity | Sep 30, 2021 | Sep 30, 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $786,859 | $782,423 | | Net cash used in investing activities | ($998,368) | ($388,411) | | Net cash provided by (used in) financing activities | ($425,899) | $678,891 | Notes to the Consolidated Financial Statements The notes provide detailed explanations of the company's accounting policies and specifics on financial statement items, including acquisitions, debt, and compensation plans. - The company acquired 153 & 211 Second Avenue in Waltham, MA for $100.2 million and Shady Grove Bio+Tech Campus in Rockville, MD for $118.5 million during 2021, with pending acquisitions in Reston, VA and New York City7174 - During Q3 2021, a joint venture acquired Safeco Plaza in Seattle for $465.0 million, funded with cash and a new $250.0 million mortgage loan, marking the company's entry into the Seattle market91 - In March 2021, BPLP issued $850.0 million of 2.550% senior notes due 2032, followed by another $850.0 million of 2.450% senior notes due 2033 in September 2021, while redeeming $850.0 million of its 4.125% senior notes due 202194 - Subsequent to the quarter end, on October 15, 2021, BPLP redeemed $1.0 billion of its 3.85% senior notes due 2023, and the company completed the sale of its Spring Street properties in Lexington, MA for $191.5 million on October 25, 2021145 Management's Discussion and Analysis of Financial Condition and Results of Operations Management provides an overview of the business, strategic priorities, and economic outlook, detailing results of operations, liquidity, capital resources, debt financing, and Funds from Operations (FFO). Overview and Outlook The company observes continued economic recovery positively impacting leasing activity, with management optimistic about strong demand for high-quality office and lab space despite inflation and supply-chain concerns. - The U.S. economy continues to recover from the COVID-19 pandemic, positively impacting the company's leasing activity, with management expecting tenants to upgrade facilities using available Class A space153 - Key company priorities include: - Ensuring tenant health, safety, and satisfaction - Leasing available space in in-service and development properties - Completing construction of development properties - Identifying new investment opportunities - Managing near-term debt maturities and maintaining a conservative balance sheet155 - In Q3 2021, the company signed approximately 1.4 million square feet of leases, more than double Q1 2021 volume and about 90% of the pre-pandemic Q3 average, with overall occupancy at 88.4% for office and retail properties as of September 30, 2021157 Results of Operations This section details the comparison of operating results for the three and nine-month periods ended September 30, 2021 and 2020, highlighting a significant decrease in nine-month net income due to lower gains on real estate sales. - For the nine months ended Sep 30, 2021, Net Income Attributable to BXP Common Shareholders decreased by $542.9 million compared to the same period in 2020, primarily due to a $605.6 million decrease in gains on sales of real estate178180227 - For the three months ended Sep 30, 2021, Net Income Attributable to BXP Common Shareholders increased by $18.4 million compared to the same period in 2020, supported by higher rental revenue and improved hotel operations241243 Same Property Portfolio - Net Operating Income (in thousands) | Period | 2021 | 2020 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Nine Months Ended Sep 30 | $1,323,391 | $1,264,696 | $58,695 | 4.64% | | Three Months Ended Sep 30 | $453,502 | $419,824 | $33,678 | 8.02% | Liquidity and Capital Resources The company expects to satisfy liquidity needs through cash flow, joint venture distributions, cash balances, and financing activities, with strong liquidity and a development pipeline requiring an estimated $1.1 billion in future equity. - As of November 2, 2021, the company has strong liquidity with approximately $1.2 billion available under its 2021 Credit Facility and $362.7 million in available cash299 Properties under Construction/Redevelopment (Company Share) as of Sep 30, 2021 (in thousands) | Metric | Amount | | :--- | :--- | | Estimated Square Feet | 4,307,000 | | Estimated Total Investment | $2,696,400 | | Investment to Date | $1,551,038 | | Estimated Future Equity Requirement | $1,084,225 | - The company has a Strategic Capital Program (SCP) to partner with large institutional investors, enhancing access to capital, exemplified by the joint venture acquisition of Safeco Plaza in Seattle297 Funds from Operations (FFO) This section provides the calculation of Funds from Operations (FFO), a non-GAAP measure used to evaluate REIT operating performance, reconciling net income to FFO for both Boston Properties, Inc. and Boston Properties Limited Partnership. Boston Properties, Inc. - FFO Reconciliation (in thousands) | Metric | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | | :--- | :--- | :--- | | Net income attributable to BXP common shareholders | $108,297 | $89,854 | | Adjustments (Depreciation, etc.) | $162,180 | $154,124 | | FFO attributable to BXP common shareholders | $270,477 | $243,978 | Quantitative and Qualitative Disclosures about Market Risk The company's primary market risk exposure is to changes in interest rates, with all consolidated borrowings bearing fixed rates, and it is actively monitoring the transition from LIBOR to alternative reference rates. - As of September 30, 2021, all of the company's consolidated debt bore interest at fixed rates, with a total carrying value of $13.4 billion and an estimated fair value of $14.2 billion343 - The company is actively monitoring and evaluating risks associated with the transition from LIBOR to an alternative reference rate, such as SOFR, for its contracts indexed to LIBOR, with the transition expected after June 30, 2023344 Controls and Procedures Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of the end of the period, with no material changes to internal control over financial reporting during the third quarter. - Based on an evaluation as of the end of the reporting period, the Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures for both Boston Properties, Inc. and Boston Properties Limited Partnership were effective347348 - There were no changes in internal control over financial reporting during the third quarter of 2021 that materially affected, or are reasonably likely to materially affect, the company's internal controls347348 PART II. OTHER INFORMATION This section covers legal proceedings, updated risk factors, unregistered sales of equity securities, and a list of exhibits filed with the Form 10-Q. Legal Proceedings The company is subject to various legal proceedings and claims arising in the ordinary course of business, which management believes will not have a material adverse effect on its financial position or operations. - The company is involved in legal proceedings and claims in the ordinary course of business, but management does not expect the outcomes to have a material adverse effect on its financial condition351 Risk Factors This section states no material changes to previously disclosed risk factors, except for an updated risk factor concerning the use of joint ventures and co-investment programs, which may limit flexibility. - The company highlights specific risks related to its use of joint ventures, including: - Partners may have different objectives regarding the sale or refinancing of a property - Partners may default on their obligations - Joint venture agreements may limit the liquidity of the company's interest - The co-investment program could lead to lost opportunities that might have been pursued alone or with other partners on more favorable terms353 Unregistered Sales of Equity Securities and Use of Proceeds During Q3 2021, Boston Properties Limited Partnership (BPLP) issued common units to Boston Properties, Inc. (BXP) for employee stock plans, and the company repurchased a small number of shares and units from terminated employees. - In Q3 2021, BPLP issued 22,862 common units to BXP for approximately $452,250 in connection with BXP's employee stock purchase and restricted stock plans, relying on a Section 4(a)(2) Securities Act exemption from registration357 - During the quarter, the company repurchased a total of 2,128 shares of common stock and 3,045 partnership units from certain terminated employees at their original purchase prices of $0.01 per share and between $0.03-$0.25 per unit, respectively356358 Exhibits This section lists the exhibits filed with the Form 10-Q, including the Supplemental Indenture for the 2.450% Senior Notes due 2033, CEO/CFO certifications, and Inline XBRL documents. - The exhibits filed include the Supplemental Indenture for the September 2021 issuance of 2.450% Senior Notes due 2033, CEO/CFO certifications, and XBRL data files365