Boston Properties, Inc.
Summary
- BXP is one of the largest publicly traded office real estate investment trusts (REITs) (based on total market capitalization as of December 31, 2022) in the United States that develops, owns, and manages primarily premier workplaces.
- The company was established in 1970 and took its current form in 1997. It has the main subsidiary BPLP through which it executes almost all its operations and of which BXP owns almost 89.4% of common share units.
- The properties of the company are concentrated in six dynamic gateway markets - Boston, Los Angeles, New York, San Francisco, Seattle and Washington, DC.
- At December 31, 2022, BXP owned or had joint venture interests in a portfolio of 194 commercial real estate properties, aggregating approximately 54.1 million net rentable square feet, including 13 properties under construction/redevelopment totaling approximately 3.2 million net rentable square feet.
- During the first quarter of 2023, BXP has reported a total revenue of $803.20 million, which has been $789.82 million a quarter earlier. Net income of the company attributable to Boston Properties, Inc. is $77.89 million, compared to $121.79 million a quarter earlier.
- In 2022, the company has reported a total revenue of $3,108.58 million, which has been $2,888.62 million a year earlier. Net income of the company in 2022 is $1,020.58 million and $631.93 million a year earlier; basic earnings per share (EPS) during 2022 is $5.41 which was $3.18 a year earlier.
Brief Company Overview
Boston Properties, Inc. (NYSE:BXP) is one of the largest publicly traded developer, owner, and manager of premier workplaces in the United States established in 1970. BXP is a Real Estate Investment Trust (REIT) formed in 1997 and a successor to the real estate development, redevelopment, acquisition, management, operating and leasing businesses associated with the predecessor company founded by Mortimer B. Zuckerman and Edward H. Linde in 1970. The properties of the company are concentrated in six dynamic gateway markets - Boston, Los Angeles, New York, San Francisco, Seattle and Washington, DC. At December 31, 2022, BXP owned or had joint venture interests in a portfolio of 194 commercial real estate properties, aggregating approximately 54.1 million net rentable square feet of primarily premier workplaces, including 13 properties under construction/redevelopment totaling approximately 3.2 million net rentable square feet. The portfolio of the company consists of 173 offices and life sciences properties, 14 retail properties, six residential properties, and one hotel. BXP conducts all substantially all its business through BPLP (Boston Properties Limited Partnership).
BPLP is a Delaware limited partnership organized in 1997, and BXP owns, either directly or through subsidiaries, substantially all of its assets. BXP is the sole general partner of BPLP and, as of February 21, 2023, the owner of approximately 89.4% of the economic interests in BPLP.
As of December 31, 2022, BXP had 675 non-union and 780 total employees, including union employees. Owen David Thomas is the current CEO & Chairman of the company. As of March 31, 2023, the company had 156,908,693 shares outstanding. The company has declared $0.98 quarterly dividend per share for the first quarter of 2023; annualized dividend is $3.92 per share. BXP has a BBB+ rating for its unsecured senior debt. As of April, 2023, 52-week price range of the company has been $123.99 to $46.18; trailing P/E is 9.31; price/sales (ttm) is 2.54 times; earnings per share (EPS) for the year 2022 is $5.41, which was $3.18 a year earlier.
Recent Developments
- On January 31, 2023, BXP acquired 50% ownership in 13100 and 13150 Worldgate Drive for an initial investment of $17.00 million.
- Including the sale of the residential component of The Avant at Reston Town Center, BXP completed the disposition of 14 properties and two land parcels, for an aggregate gross sale price of approximately $864.2 million, in 2022.
- In January 2023, BXP commenced the development of 290 Binney Street and the redevelopment of 300 Binney Street at Kendall Center in Cambridge, Massachusetts. Including these twos, the company has 15 properties under development or redevelopment.
Recent Financial Activities
As on March 31, 2023, consolidated debt of BXP stands at $14,955.41 million. The company's capital structure is expressed with the total debt to market capitalization ratio which is 61.16% on the same date.
- On May 17, 2022, BPLP entered into an unsecured credit agreement that matures May 16, 2023 and provides for a single borrowing of up to $730.0 billion.
- On November 17, 2022, BPLP completed a public offering of $750.0 million in aggregate principal amount of its 6.750% unsecured senior notes due 2027. The notes were priced at 99.941% of the principal amount to yield an effective rate (including financing fees) of approximately 6.924% per annum to maturity.
- During the year ended December 31, 2023, BXP acquired an aggregate of 182,929 common units of limited partnership interest.
- On February 1, 2022, BXP’s Compensation Committee approved a new equity-based, multi-year, long-term incentive program (the “2022 MYLTIP”) which has an aggregate value of $17.3 million and will generally be amortized into earnings under the graded vesting method.
Apart from these financing activities directly related to BXP, the joint ventures in which the company holds substantial shares also made financing activities which affect the business of BXP.1
Financial Performance Highlights
Q1'23 Highlights
During the first quarter of 2023, BXP has generated lease revenue of $756.87 million, parking and other revenue of $23.06 million, and $23.26 million under other revenue heads like hotel revenue, insurance proceeds, development and management services etc. to report a total revenue of $803.20 million, which has been $789.82 million a quarter earlier. Net income of the company attributable to Boston Properties, Inc. is $77.89 million, compared to $121.79 million a quarter earlier. On March 31, 2023, the company has reported real estate of $24,314.81 million compared to $24,261.59 million on December 31, 2022. Construction in progress for these two points of time was $618.77 million and $406.57 million, respectively; land held for future development was $626.14 million and $721.50 million, respectively; total real estate after accumulated depreciation is $19,539.37 million and $19,496.44 million, respectively.
Annual Performance Highlights
During 2022, BXP has generated lease revenue of $2,918.37 million, parking and other revenue of $107.23 million, hotel revenue of $39.48 million, development and management services revenue of $28.06 million, and direct reimbursements of payroll and related costs from management services contracts revenue of $15.45 million, to report a total revenue of $3,108.58 million for the year, which has been $2,888.62 million a year earlier. Total expenses of the company stands at $2,050.06 million for 2022 and $1,920.58 million a year earlier. The company has experienced a higher loss of $59.84 million from the unconsolidated joint ventures in 2022 than $2.57 million a year earlier. The company gained $437.02 million from sales of real estate in 2022 and $123.66 million gain in 2021. BXP experienced losses of $6.45 million from investments in securities which was a gain of $5.63 million gain a year earlier. Net income of the company in 2022 is $1,020.58 million and $631.93 million a year earlier. After deduction for the non-controlling interests, net income attributable to Boston Properties, Inc. is $848.95 million which was $505.19 million a year earlier. Basic earnings per share (EPS) during 2022 is $5.41 which was $3.18 a year earlier.
BXP has reported $25,389.66 million in real estate assets on December 31, 2022 and $23,752.63 million a year earlier. Taking into account the financial leases, operating leases and accumulated depreciation, total real estate assets of the company stands at $19,496.44 million and $18,275.95 million for the dates, respectively. Total assets of the company for the dates are $24,207.67 million and $22,365.26, respectively. The company has total liabilities of $15,837.24 million as on December 31, 2022 and $14,322.46 million on December 31, 2021.
Net cash provided by operating activities of BXP during 2022 is $1,282.40 million, which was $1,133.23 million a year earlier. Net cash used in investing activities for the years are $1,602.80 million and $1,039.96 million, respectively; net cash provided by financing activities during 2022 is $556.06 million and net cash used in financing activities in 2021 is $1,311.44 million. Cash and cash equivalents at the end of the periods stand at $690.33 million on December 31, 2022 and $452.69 million a year earlier.
Business Overview
Boston Properties, Inc. develops, manages and owns premier workplaces in six regions in the United States. As of December 31, 2022, the company has 194 real estate properties in Boston, Los Angeles, New York City, San Francisco, Seattle, and Washington, D.C. - the six regions of its operation. The company generates revenues from leases of its buildings to financially strong clients for workplaces, from hotel occupation, from parking, from development and management services, and from other sources. The core strategy of the company is to develop, acquire and manage premier workplaces in gateway markets with high barriers-to-entry and attractive demand drivers, and to focus on executing long-term leases with financially strong clients. The company serves a diverse market sector and weighted-average lease term for the in-place leases, excluding residential units, was approximately 7.9 years, as of December 31, 2022, including leases signed by unconsolidated joint ventures of the company. The weighted-average lease term for the 20 largest clients of the company, based on leased square footage, was approximately 10.7 years as of December 31, 2022.
BXP also invests to meet the demand of the customers for life sciences, retail and residential spaces besides premier workplaces. The company also sales from its portfolio those properties that no longer fit within their portfolio strategy or those that may attract premium pricing under current market condition. The company does not have different business segments since it has only one line of operation, but has six regions of operations.
Boston
In Boston, BXP's CBD in-service portfolio was approximately 94% leased as of December 31, 2022. As of the same date, approximately 2.7 million square foot in-service office portfolio in Cambridge was approximately 96% leased. In January 2023, BXP commenced the development of 290 Binney Street and the redevelopment of 300 Binney Street at Kendall Center in Cambridge, Massachusetts for an estimated total investment of approximately $1.4 billion. 290 Binney Street is an approximately 566,000 net rentable square foot laboratory/life sciences project that is 100% pre-leased to AstraZeneca. Concurrent with the commencement of this project, BXP removed from service and began demolition of the existing Kendall Center Blue Parking Garage to support the development of this project. 300 Binney Street is a conversion of an approximately 195,000 net rentable square foot property into an approximately 240,000 net rentable square foot laboratory/life sciences property. 300 Binney Street is 100% pre-leased to a life sciences organization.
BXP's Route 128-Mass Turnpike portfolio is comprised of approximately 4.9 million square feet and was approximately 81% leased as of December 31, 2022. On December 23, 2022, the company fully placed in-service 880 Winter Street, an approximately 244,000 square foot laboratory/life sciences project located in Waltham, Massachusetts. Including leases that have not yet commenced, 880 Winter Street is 97% pre-leased as of February 21, 2023.
Los Angeles
Los Angeles (“LA”) in-service portfolio of approximately 2.3 million square feet of BXP is currently focused in West LA and includes Colorado Center, an approximately 1.1 million square foot property of which the company owns 50%, and Santa Monica Business Park, a 21-building, approximately 1.2 million square foot property of which the company owns 55%. As of December 31, 2022, LA in-service properties were approximately 88% leased.
New York
As of December 31, 2022, BXP's New York CBD in-service portfolio was approximately 88% leased. On November 30, 2022, the company commenced the redevelopment of 105 Carnegie Center, located in Princeton, New Jersey. 105 Carnegie Center is an approximately 70,000 square foot property that will be redeveloped into an approximately 73,000 square foot laboratory/life sciences space.
San Francisco
BXP's San Francisco CBD in-service properties were approximately 89% leased as of December 31, 2022. During the fourth quarter of 2022, the company executed approximately 213,000 square feet of leases and approximately 225,000 square feet of leases commenced in the San Francisco region. Approximately 92,000 square feet of leases that commenced had been vacant for less than one year and represent an increase in net rental obligations of approximately 28% over the prior leases.
Seattle
BXP's Seattle in-service portfolio includes Safeco Plaza, an approximately 778,000 square foot property of which the company owns 33.67%, and Madison Centre, an approximately 755,000 square foot property. As of December 31, 2022, the Seattle in-service properties were approximately 88% leased.
Washington, DC
A significant component of BXP's Washington, DC regional portfolio is in Reston Town Center, an award-winning mixed-use development in Northern Virginia. Reston is a hub for technology, cloud services, cybersecurity and defense intelligence companies. The Reston, Virginia properties of the company were approximately 89% leased as of December 31, 2022. In Reston, Virginia, the company fully placed in-service Reston Next, a premier workplace project consisting of two buildings totaling approximately 1.1 million square feet. Including leases that have not yet commenced, this project is 90% leased as of February 21, 2023. BXP's Washington, DC CBD in-service properties were approximately 88% leased as of December 31, 2022.
Company History
Boston Properties, Inc. was founded in 1970 by Mortimer B. Zuckerman and Edward H. Linde in Boston. The company started Greater Washington Development in 1979 and continued it until 1997. As a developer of premier workplaces, the company entered into a joint venture with United States News & World Report to construct their new headquarters. In 1982, Boston Properties won the bid to build a Marriott Hotel on public waterfront by direct approval of Mayor White, although the committee ranked their proposal last among eight submitted proposals. The company entered into the New York City in 1983 by purchasing the land and architectural design of a 47-storey office building in midtown Manhattan from a firm that would walk away from the project. By late 1985, BXP owned and managed 53 buildings in Washington, Boston, New York, and California with more than 9 million square feet of space. In 1990, the company began construction of the NASA Headquarters by leading a 20-year, $383-million lease partnership. The project, holding nearly 600,000 square feet of office space, was completed in 1992 and sold to Hana Financial Group in 2002. Controversy developed around a project of building an office park on an 18-acre Concord site which a partnership acquired and got clearance in 1985. The founders of BXP Zuckerman and Linde were the largest investors in the partnership. The project site was only 700 yards away from Henry Thoreau's beloved Walden Pond. The plan conflicted with the conservationists led by musician Don Henley who wanted to preserve 2,680-acre Walden Woods. In 1991, Zuckerman declared that he had sold his interest in the project to an undisclosed buyer for $4.2 million who would continue the project with Linde and BXP will continue to be the developer. The tract was later sold to the Walden Woods Project in 1993 for $3.5 million.
In 1985, the company outbid Donald Trump, the 45th President of the United States, then a businessman, to re-develop the New York Coliseum at Columbus Circle on the southwestern periphery of Central Park. Its bid was a per-acre record and the largest sum of money ever offered for a piece of public land in New York. The company planned giant 58- and 68-story towers of office, hotel, retail, and condominium space flanking an enormous atrium, and it had lined up the investment-banking firm of Salomon Brothers as both co-owner and major tenant. In a controversy eerily similar to that of Park Plaza, however, the proposal drew fierce opposition from community groups and such celebrities as Jacqueline Kennedy Onassis, Walter Cronkite, Henry Kissinger, and Bill Moyers. A prime objection was that the towers would throw long shadows over the southern part of the park in the afternoon. The opponents lost their case in federal court, but by then Salomon Brothers had backed out of the deal because of the 1987 Wall Street crash. The proposal was subsequently scaled down and did not officially die until 1994, when negotiations between Boston Properties and the site owner, the Metropolitan Transportation Authority, ended in acrimony.
Boston Properties announced in August 1997 that it had agreed to buy 280 Park Avenue, a complex of two large office towers in midtown Manhattan between East 48th and 49th streets, from the Bankers Trust Co. for $321 million. The company said Bankers Trust would remain as a tenant, as would most other corporate tenants. In 1998, BXP acquired Embarcadero Center for about $1.22 billion and acquired Prudential Tower and The Shops at Prudential Center for $519 million. In June 2008, the company acquired the General Motors Building in New York City for $2.8 billion, the highest paid for an American office building. In October 2010, the company acquired 200 Clarendon Street (formerly John Hancock Tower) for $930 million. In 2012, the company partnered with Hines Interests Limited Partnership to develop Salesforce Tower. By 2019, it had acquired 100% of the property.
