Boston Properties(BXP) - 2023 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements (Unaudited) Unaudited consolidated financial statements for BXP and BPLP for the quarter ended March 31, 2023, detail assets, liabilities, equity, operations, and cash flows Consolidated Financial Statements Consolidated statements as of March 31, 2023, show BXP's total assets at $24.6 billion and a net income of $77.9 million, a decrease from the prior year BXP Consolidated Balance Sheet Highlights (As of March 31, 2023) | Metric | Amount (in thousands) | | :--- | :--- | | Total Real Estate | $19,539,375 | | Total Assets | $24,625,422 | | Total Liabilities | $16,313,339 | | Total Equity | $8,306,484 | BXP Consolidated Statement of Operations Highlights (Three months ended March 31) | Metric | 2023 (in thousands) | 2022 (in thousands) | | :--- | :--- | :--- | | Total Revenue | $803,200 | $754,307 | | Total Expenses | $568,661 | $499,978 | | Net Income | $105,628 | $176,957 | | Net Income Attributable to BXP | $77,890 | $143,047 | Notes to the Consolidated Financial Statements Detailed notes explain the company's accounting policies, real estate portfolio, joint ventures, debt structure, and segment performance Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management's analysis covers Q1 2023 financial performance, leasing activities, liquidity, and capital resources, noting a decrease in net income but a 4.6% increase in NOI - The company's core strategy is to develop, acquire, and manage premier workplaces in six gateway markets: Boston, Los Angeles, New York, San Francisco, Seattle, and Washington, DC[299][327] - In Q1 2023, the company signed approximately 660,500 square feet of leases with a weighted-average lease term of 7.7 years, and overall occupancy was 88.6%[302] Q1 2023 vs Q1 2022 Financial Highlights (BXP) | Metric | Q1 2023 (in thousands) | Q1 2022 (in thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Net Income Attributable to BXP | $77,890 | $143,047 | (45.55)% | | Net Operating Income (NOI) | $491,006 | $469,316 | 4.62% | | Diluted FFO attributable to BXP | $271,981 | $286,200 | (5.0)% | Results of Operations Q1 2023 net income decreased by $65.2 million due to lower gains on sales and higher expenses, though Net Operating Income (NOI) grew by 4.6% Total Property Portfolio - Q1 2023 vs Q1 2022 | Metric | 2023 (in thousands) | 2022 (in thousands) | % Change | | :--- | :--- | :--- | :--- | | Total Rental Revenue | $769,158 | $726,888 | 5.82% | | Real Estate Operating Expenses | $285,845 | $263,823 | 8.35% | | Net Operating Income (NOI) | $491,006 | $469,316 | 4.62% | - The Same Property Portfolio NOI decreased by 0.62% (excluding residential and hotel), as a 1.5% increase in lease revenue was offset by a 5.8% increase in operating expenses, primarily higher real estate taxes[82][345] - Interest expense increased by approximately $33.0 million, primarily due to higher interest rates on variable-rate debt and new debt issuances[393] - Depreciation and amortization expense increased by $31.1 million, largely due to properties acquired or placed in-service and accelerated depreciation on assets being redeveloped[358][417] Liquidity and Capital Resources The company maintains a strong liquidity position with $670.2 million in cash and $1.5 billion available under its credit facility to fund development and debt service - As of March 31, 2023, the development/redevelopment pipeline includes 15 properties totaling 4.0 million sq. ft., with an estimated remaining investment of $1.9 billion[11][107] - In January 2023, BPLP entered into a new $1.2 billion unsecured term loan, maturing in May 2024, and used a portion of the proceeds to repay a $730.0 million term loan that was due in May 2023[117][240] - As of March 31, 2023, BPLP had no borrowings under its $1.5 billion revolving credit facility[54] Consolidated Debt Statistics (as of March 31, 2023) | Metric | Value | | :--- | :--- | | Total Consolidated Debt | $14.7 billion | | Fixed Rate Debt | 91.88% | | Variable Rate Debt | 8.12% | | Weighted-Average Interest Rate | 3.81% | | Weighted-Average Maturity | 5.0 years | Funds from Operations (FFO) Diluted FFO for Q1 2023 was $272.0 million ($1.73 per share), a decrease from the prior year, primarily due to higher interest expense Reconciliation of Net Income to FFO (BXP) | (in thousands) | Three months ended March 31, 2023 | Three months ended March 31, 2022 | | :--- | :--- | :--- | | Net income attributable to BXP | $77,890 | $143,047 | | Add: Depreciation and amortization (BXP Share) | $216,200 | $181,567 | | Less: Gains on sales of real estate | $0 | ($22,701) | | Less: Unrealized gain on non-real estate investment | $259 | $0 | | Diluted FFO attributable to BXP | $271,981 | $286,200 | Diluted FFO Per Share (BXP) | Metric | Three months ended March 31, 2023 | Three months ended March 31, 2022 | | :--- | :--- | :--- | | Diluted FFO per Share | $1.73 | $1.82 | Quantitative and Qualitative Disclosures about Market Risk The company's primary market risk is interest rate fluctuations on its $1.2 billion of variable-rate debt - The company's primary market risk is interest rate risk; as of March 31, 2023, variable-rate debt totaled $1.2 billion[451] - A 100 basis point increase in interest rates would have increased interest expense by approximately $3.0 million for the three months ended March 31, 2023[451] Debt Maturity Profile (Consolidated) | Maturity Year | Fixed Rate Debt (in thousands) | Variable Rate Debt (in thousands) | Total (in thousands) | | :--- | :--- | :--- | :--- | | 2023 | $496,028 | $0 | $496,028 | | 2024 | $699,332 | $1,194,916 | $1,894,248 | | 2025 | $842,934 | $0 | $842,934 | | 2026 | $1,986,314 | $0 | $1,986,314 | | 2027 | $3,041,033 | $0 | $3,041,033 | | 2028+ | $6,453,722 | $0 | $6,453,722 | | Total | $13,519,363 | $1,194,916 | $14,714,279 | Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2023, with no material changes in internal controls - Both BXP's and BPLP's management, including their respective CEO and CFO, concluded that disclosure controls and procedures were effective as of the end of the period covered by the report[68][69][454] - No changes in internal control over financial reporting occurred during the first quarter of 2023 that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[69][454] PART II. OTHER INFORMATION Legal Proceedings Ordinary course legal proceedings are not expected to have a material adverse effect on the company's financial condition - Legal proceedings and claims arise in the ordinary course of business and are generally covered by insurance[41] - Management does not expect the outcome of such matters to have a material adverse effect on the company's financial position, operations, or liquidity[41] Risk Factors No material changes were reported to the risk factors disclosed in the 2022 Annual Report on Form 10-K - No material changes were reported to the risk factors previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2022[71] Unregistered Sales of Equity Securities and Use of Proceeds BPLP issued 75,436 common units to BXP for $0.5 million, and BXP repurchased 8,698 shares to satisfy employee tax obligations - BPLP issued 75,436 common units to BXP for approximately $0.5 million in connection with BXP's employee stock plans, issued in reliance on an exemption from registration under Section 4(a)(2) of the Securities Act[73] Issuer Purchases of Equity Securities (BXP Common Stock) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | Jan 1 - Jan 31, 2023 | 7,533 | $71.20 | | Feb 1 - Feb 28, 2023 | 1,165 | $75.48 | | Mar 1 - Mar 31, 2023 | 0 | $0.00 | | Total | 8,698 | $71.77 | Defaults Upon Senior Securities The company reported no defaults upon senior securities during the period - None[45][74] Mine Safety Disclosures The company reported no mine safety disclosures - None[86] Other Information The company reported no other information for the period - None[74][460] Exhibits Filed exhibits include credit agreements, CEO/CFO certifications, and Inline XBRL documents - Exhibits filed include CEO and CFO certifications under Sarbanes-Oxley Act Sections 302 and 906 for both BXP and BPLP[462] - Inline XBRL taxonomy and data files are included as exhibits[76] Signatures Signatures The report was duly signed by authorized officers of BXP and BPLP on May 3, 2023 - The report was duly signed on behalf of the Registrants (Boston Properties, Inc. and Boston Properties Limited Partnership) on May 3, 2023[49][465]