BXP Announces Fourth Quarter and Full Year 2023 Results

BXP the largest publicly traded developer, owner, and manager of premier workplaces in the United States, reported results today for the fourth quarter ended December 31, 2023.

Financial highlights for the fourth quarter include:

• Revenue increased 5.0% to $828.9 million for the quarter ended December 31, 2023, compared to $789.8 million for the quarter ended December 31, 2022.
• Net income attributable to Boston Properties, Inc. of $119.9 million, or $0.76 per diluted share (EPS), for the quarter ended December 31, 2023, compared to $121.8 million, or $0.78 per diluted share, for the quarter ended December 31, 2022.
• EPS exceeded the mid-point of BXP’s guidance by $0.15 per diluted share primarily due to:
  • better-than-projected income from unconsolidated joint ventures, largely from recording a gain upon consolidation of Santa Monica Business Park of $0.17 per diluted share following BXP’s acquisition of its partner’s 45% interest in the asset, and
  • better-than-projected interest income and development and management services income aggregating $0.02 per diluted share;
  • offset by higher-than-projected depreciation expense of $0.04 per diluted share.
• Funds from Operations (FFO) of $286.2 million, or $1.82 per diluted share, for the quarter ended December 31, 2023, compared to FFO of $292.9 million, or $1.86 per diluted share, for the quarter ended December 31, 2022.
• FFO per diluted share exceeded the mid-point of BXP’s guidance by $0.02 per diluted share, primarily due to better-than-projected interest income and development and management services income.

BXP also provided guidance for first quarter 2024 EPS of $0.66 - $0.68 and FFO of $1.72 - $1.74 per diluted share, and full year 2024 EPS of $2.26 - $2.46 and FFO of $7.00 - $7.20 per diluted share.

The mid-point of guidance for 2024 EPS is projected to be 95% higher than full year 2023 EPS primarily due to:

• 2023 non-cash impairment charges of $1.56 per diluted share offset by $0.23 per diluted share of gains related to BXP’s investments in its unconsolidated joint ventures that are not projected to reoccur in 2024

The mid-point of guidance for 2024 FFO per diluted share is projected to be 2.5% lower than full year 2023 FFO per diluted share primarily due to:

• higher net interest expense of $0.31 per diluted share,
• lower contributions from same property portfolio performance of $0.26 per diluted share, and
• reduced fee and termination income of $0.14 per diluted share;
• offset by an estimated $0.42 per diluted share of projected contributions from our acquisition and disposition activity and development deliveries.

Fourth quarter and recent business highlights include:

• Executed more than 1.5 million square feet of leases with a weighted-average lease term of 8.4 years.

• Entered into agreements to sell a 45% interest in each of 290 Binney Street and 300 Binney Street, two life sciences development projects located in Kendall Square in Cambridge, Massachusetts, to Norges Bank Investment Management (“NBIM”) at a gross valuation of approximately $1.66 billion or $2,050 per square foot. The properties total approximately 810,000 square feet and each is 100% pre-leased. BXP will retain a 55% ownership interest in each joint venture and will provide development, property management, and leasing services for the ventures. NBIM funded approximately $212.9 million at closing for its investment in 300 Binney Street and, upon closing of its investment in 290 Binney Street, NBIM’s investment will reduce BXP’s estimated future development spend over time by approximately $533.5 million.

• Closed on a five-year mortgage loan collateralized by a three-building portfolio located in Cambridge, Massachusetts. The mortgage loan, totaling $600 million, requires interest-only payments at Daily Compounded SOFR plus a 2.25% per annum until maturity. Subsequently, BPLP entered into interest rate swap contracts with notional amounts aggregating $600.0 million to fix Daily Compounded SOFR at a weighted-average fixed interest rate of 3.7925% for the period commencing on December 15, 2023 and ending on October 26, 2028 for an all in rate of 6.04% per annum. BXP intends to use the net proceeds from this financing and available cash to repay the $700 million senior unsecured notes due February 1, 2024.

• Completed the acquisition of its joint venture partner’s 45% ownership interest in Santa Monica Business Park located in Santa Monica, California for a purchase price of $38.0 million. BXP also assumed the partner’s share of the joint venture’s cash and working capital aggregating approximately $20.0 million, as well as the partner’s share of the outstanding $300.0 million mortgage debt. Subsequent to closing, BXP extended the approximately 467,000 square foot lease with anchor client, Snap Inc., through 2036. Santa Monica Business Park is a 47-acre office park consisting of 21 buildings totaling approximately 1.2 million net rentable square feet. Approximately 70% of the square footage is subject to a ground lease with approximately 75 years remaining, inclusive of renewal options that are subject to certain conditions.

• Completed the acquisition of one of its joint venture partner’s approximate 29% ownership interest in 360 Park Avenue South located in New York City, New York for a purchase price of $1, increasing BXP’s ownership interest in the asset to approximately 71%. BXP also assumed the partner’s share of the joint venture’s cash and working capital aggregating approximately $25.4 million, as well as the partner’s share of the outstanding $220.0 million mortgage debt. 360 Park Avenue South, a 20-story, approximately 450,000 square foot premier workplace, is currently under re-development.

• On January 8, 2024, BXP completed the acquisition of its joint venture partner’s 50% economic ownership interest in 901 New York Avenue located in Washington, DC for a purchase price of $10.0 million. BXP also assumed the partner’s share of the outstanding approximately $207.1 million mortgage debt, which bears interest at 3.61% per annum and matures on January 5, 2025. On January 11, 2024, BXP modified the mortgage loan to provide for two loan extension options totaling five years of additional term, each subject to certain conditions. The first loan extension option, for a term of four years, is at a fixed interest rate of 5.0% per annum. Subsequent to closing, BXP extended the 214,000 square foot lease with anchor client, Finnegan Henderson Farabow Garrett & Dunner, L.L.P., through 2042. 901 New York Avenue is a premier workplace consisting of approximately 548,000 net rentable square feet.

Financial highlights for the year ended December 31, 2023 include:

• Net income attributable to Boston Properties, Inc. of $190.2 million, or $1.21 per diluted share (EPS) for the year ended December 31, 2023, compared to $848.9 million, or $5.40 per diluted share, for the year ended December 31, 2022. The year-over-year decrease is primarily due to:
  • a 2023 non-cash impairment charge of $272.6 million related to BXP’s investments in four of its unconsolidated joint ventures, and
  • gains on sales of real estate of $436.5 million in 2022 that did not reoccur in 2023.
• Funds from Operations (FFO) of $1.1 billion, or $7.28 per diluted share for the year ended December 31, 2023, compared to FFO of $1.2 billion, or $7.53 per diluted share, for the year ended December 31, 2022.

Full year 2023 business highlights include:

• Executed approximately 4.2 million square feet of leases with a weighted-average lease term of 8.2 years.
• Completed and fully placed in-service four development projects: 2100 Pennsylvania Avenue in Washington, DC, 140 Kendrick Street in Needham, Massachusetts, View Boston in Boston, Massachusetts, and 751 Gateway in South San Francisco, California.
• Commenced the development/redevelopment of two fully pre-leased projects totaling 810,000 square feet in Cambridge, Massachusetts: 290 Binney Street and 300 Binney Street.
• Further strengthened BXP’s balance sheet by addressing debt maturities, and sourcing additional liquidity in the bank market. In the aggregate, BXP’s share of 2023 debt market activities totaled approximately $3.3 billion, which includes more than $1 billion of mortgage financing. Notable transactions not mentioned in fourth quarter highlights include:
  • On January 4, 2023, BPLP closed on a $1.2 billion unsecured term loan facility that matures May 16, 2024, with one, twelve-month extension option subject to the satisfaction of customary conditions. As of January 4, 2023, the term loan bore interest at a variable rate equal to adjusted Term SOFR plus 0.85% per annum. Subsequently, on May 2, 2023, BPLP entered into four interest rate swap contracts with notional amounts aggregating $1.2 billion to fix Term SOFR at a weighted-average rate of 4.6420% for the period commencing on May 4, 2023 and ending on May 16, 2024. A portion of the proceeds were used to repay in full BPLP’s $730.0 million term loan that was scheduled to mature in May 2023, resulting in incremental net proceeds of approximately $466.0 million.
  • On May 15, 2023, BPLP completed a public offering of $750.0 million aggregate principal amount of 6.500% unsecured senior notes due 2034. The net proceeds from the offering were approximately $741.3 million after deducting underwriting discounts and transaction expenses. BPLP used a portion of the proceeds to repay $500.0 million in aggregate principal amount of its 3.125% senior notes due September 1, 2023.
• Earned national recognition as an industry leader and furthered BXP’s commitments to sustainability and impact:
  • Named to Newsweek’s List of America’s Most Responsible Companies in 2023 for the third consecutive year, ranking first in the Real Estate & Housing category
  • Named to the Dow Jones Sustainability Index (DJSI) North America for the second consecutive year, one of eight real estate companies that qualified and the only office REIT in the index
  • Received the 2023 ENERGY STAR Partner of the Year—Sustained Excellence Award from the U.S. Environmental Protection Agency and the U.S. Department of Energy for the third consecutive year
  • In April 2023, published BXP’s 2022 ESG Report, which highlights that, among other things, BXP achieved its energy and water reduction targets in 2022 and remains on track to achieve carbon-neutral operations by 2025. In conjunction with the publication, BXP hosted its second annual ESG Investor Update Webcast on May 31, 2023.
  • Earned a top ESG rating in the 2023 GRESB® assessment, earned its 12th consecutive “Green Star” recognition and the highest GRESB 5-star rating, as well as an “A” level disclosure score. BXP also achieved the highest scores in several categories, including Data Monitoring & Review, Targets, Policies, Reporting, and Stakeholder Engagement. BXP achieved second place within its Development Peer Group, third place in its Standing Investments Peer Group, and fourth overall among U.S. listed participants.

The reported results are unaudited and there can be no assurance that these reported results will not vary from the final information for the quarter and year ended December 31, 2023. In the opinion of management, BXP has made all adjustments considered necessary for a fair statement of these reported results.

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