Boston Properties(US:BXP)2024-05-10 14:48PART I. FINANCIAL INFORMATION Financial Statements (unaudited) Presents unaudited Q1 2024 consolidated financial statements for BXP and BPLP, detailing key financial positions Boston Properties, Inc. (BXP) Consolidated Financial Statements BXP reported Q1 2024 revenues of $839.4 million and net income of $79.9 million, with total assets decreasing to $25.5 billion BXP Consolidated Statement of Operations (Q1 2024 vs Q1 2023) | Metric | Q1 2024 (in thousands) | Q1 2023 (in thousands) | | :--- | :--- | :--- | | Total Revenue | $839,439 | $803,200 | | Net Income Attributable to BXP | $79,883 | $77,890 | | Diluted EPS | $0.51 | $0.50 | BXP Consolidated Balance Sheet Highlights (as of March 31, 2024) | Metric | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | | :--- | :--- | :--- | | Total Real Estate | $20,768,288 | $20,593,459 | | Cash and Cash Equivalents | $701,695 | $1,531,477 | | Total Assets | $25,525,978 | $26,026,149 | | Total Liabilities | $17,240,265 | $17,833,785 | | Total Equity | $8,277,572 | $8,183,981 | BXP Consolidated Cash Flows (Q1 2024 vs Q1 2023) | Cash Flow From | Q1 2024 (in thousands) | Q1 2023 (in thousands) | | :--- | :--- | :--- | | Operating Activities | $197,595 | $234,010 | | Investing Activities | ($286,619) | ($285,592) | | Financing Activities | ($756,909) | $279,052 | Boston Properties Limited Partnership (BPLP) Consolidated Financial Statements BPLP reported Q1 2024 revenues of $839.4 million and net income of $91.1 million, with total assets of $25.3 billion BPLP Consolidated Statement of Operations (Q1 2024 vs Q1 2023) | Metric | Q1 2024 (in thousands) | Q1 2023 (in thousands) | | :--- | :--- | :--- | | Total Revenue | $839,439 | $803,200 | | Net Income Attributable to BPLP | $91,080 | $88,830 | | Diluted EPU | $0.52 | $0.51 | BPLP Consolidated Balance Sheet Highlights (as of March 31, 2024) | Metric | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | | :--- | :--- | :--- | | Total Real Estate | $20,527,087 | $20,350,561 | | Total Assets | $25,284,777 | $25,783,251 | | Total Liabilities | $17,240,265 | $17,833,785 | | Total Capital | $6,735,962 | $6,593,508 | Notes to the Consolidated Financial Statements Details key Q1 2024 events including a JV acquisition, an impairment loss, an asset sale, and financing activities - As of March 31, 2024, the Company owned or had interests in a portfolio of 187 commercial real estate properties totaling approximately 53.5 million net rentable square feet68 - On January 8, 2024, the Company acquired its joint venture partner's 50% interest in the venture owning 901 New York Avenue, DC, resulting in a gain on consolidation of approximately $21.8 million132342432 - The Company recognized an impairment loss of approximately $13.6 million on its Shady Grove property in Rockville, Maryland, due to a shorter-than-expected hold period105115344 - On March 21, 2024, the Company sold a 45% interest in the 290 Binney Street development project in Cambridge, MA, with an institutional investor funding approximately $97.2 million at closing189322 - In February 2024, BPLP repaid $700.0 million of its 3.800% senior notes at maturity148347507 - Subsequent to quarter-end, in April 2024, BPLP established a $500 million unsecured commercial paper program and increased its 2021 Credit Facility borrowing capacity to $2.0 billion243271323 Management's Discussion and Analysis of Financial Condition and Results of Operations Management analyzes Q1 2024 performance, leasing activity, and financial condition in a challenging office market Overview and Outlook Management outlines its strategy of focusing on premier workplaces, which outperform the broader office market - The company's core strategy is to develop, acquire, and manage premier workplaces in gateway markets, focusing on long-term leases with financially strong clients251 - Management believes premier workplaces have consistently and substantially outperformed the broader office market, validating their strategy; approximately 89% of the company's share of NOI comes from CBD assets290295 - Key external forces impacting performance are interest rates and corporate earnings, with projected S&P 500 earnings growth of 11-13% over the next two years expected to be constructive for leasing253279 Leasing and Investment Activity BXP executed 900,000 sq ft of leases in Q1 2024 and advanced its development and investment pipeline - Executed 61 leases totaling approximately 900,000 sq. ft. in Q1 2024, compared to 660,500 sq. ft. in Q1 2023283 - Overall in-service office and retail occupancy was 88.2% at March 31, 2024, a 20 basis point decrease from December 31, 2023; including signed leases not yet commenced, the portfolio was 89.9% leased284 - The development/redevelopment pipeline includes 11 properties totaling 3.2 million sq. ft with a remaining company share of cost of approximately $1.4 billion299445 - Completed the sale of a 45% interest in the 290 Binney Street life sciences development, reducing BXP's share of the estimated development spend by approximately $533.5 million286 Results of Operations Total portfolio NOI grew 3.6%, while Same Property NOI declined 1.6% due to lower occupancy and higher interest costs Net Operating Income (NOI) Comparison (Q1 2024 vs Q1 2023) | Portfolio | Q1 2024 NOI (in thousands) | Q1 2023 NOI (in thousands) | % Change | | :--- | :--- | :--- | :--- | | Same Property Portfolio | $483,295 | $491,212 | (1.61)% | | Total Portfolio | $508,820 | $491,006 | 3.63% | - Interest expense increased by $27.7 million (20.6%) year-over-year, primarily due to new mortgage loan financings and the issuance of senior notes in 2023328386613 - Income from unconsolidated joint ventures increased by $26.8 million, largely due to a $21.8 million gain on the consolidation of 901 New York Avenue328432 - An impairment loss of $13.6 million was recognized on the Shady Grove property due to a revised, shorter holding period344385434 Liquidity and Capital Resources The company maintains strong liquidity with $502.5 million in cash and a $2.0 billion credit facility as of May 2, 2024 - As of May 2, 2024, liquidity included approximately $502.5 million in cash and $2.0 billion available under the 2021 Credit Facility426 - Subsequent to quarter-end, BPLP established a $500M commercial paper program, using proceeds to reduce its 2023 Unsecured Term Loan323447534 - The development pipeline has a remaining funding requirement of approximately $1.4 billion through 2027445 Consolidated Debt Summary (as of March 31, 2024) | Debt Component | Amount (in thousands) | | :--- | :--- | | Mortgage notes payable, net | $4,368,367 | | Unsecured senior notes, net | $9,794,527 | | Unsecured term loan, net | $1,199,430 | | Total Consolidated Debt | $15,362,324 | Funds from Operations (FFO) Diluted FFO per share remained stable at $1.73 for Q1 2024, consistent with the prior-year period FFO Reconciliation and Per Share Data (BXP) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net Income Attributable to BXP (in thousands) | $79,883 | $77,890 | | Diluted FFO Attributable to BXP (in thousands) | $271,303 | $271,981 | | Diluted Weighted Avg. Shares (in thousands) | 157,132 | 157,043 | | Diluted FFO per Share | $1.73 | $1.73 | Quantitative and Qualitative Disclosures about Market Risk The company's primary market risk from interest rates is fully hedged for its $2.1 billion of variable-rate debt - The company's predominant market risk is changes in interest rates553 - As of March 31, 2024, the company had $2.1 billion of variable-rate debt, all of which was fixed through interest rate swaps, leaving no unhedged variable-rate debt553 Debt Maturity Profile as of March 31, 2024 | Maturity Year | Total Debt (in thousands) | | :--- | :--- | | 2024 | $1,177,770 | | 2025 | $1,338,197 | | 2026 | $1,984,958 | | 2027 | $3,038,308 | | 2028 | $1,591,290 | | 2029+ | $6,231,801 | | Total | $15,362,324 | Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2024 - The CEO and CFO concluded that disclosure controls and procedures for both BXP and BPLP were effective as of March 31, 2024555556 - No material changes to internal control over financial reporting occurred during the first quarter of 2024530531 PART II. OTHER INFORMATION Risk Factors Confirms no material changes to risk factors disclosed in the 2023 Annual Report on Form 10-K - There were no material changes to the risk factors disclosed in the Annual Report on Form 10-K for the year ended December 31, 2023533 Unregistered Sales of Equity Securities and Use of Proceeds Details the issuance of common units to BXP and minor share repurchases for employee tax obligations - BPLP issued 84,546 common units to BXP for approximately $0.5 million in connection with BXP's employee stock plans under a Section 4(a)(2) exemption576 - BXP repurchased 12,546 shares of its common stock at an average price of $69.32 per share from employees to satisfy tax withholding obligations575576 Other Information Reports no adoption, termination, or modification of Rule 10b5-1 trading arrangements by directors or officers - During Q1 2024, no directors or officers adopted, terminated, or modified a Rule 10b5-1 trading arrangement563