Exhibit 99.1
BOSTON PROPERTIES, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
INTRODUCTION TO THE PRO FORMA CONSOLIDATED BALANCE SHEET
September 30, 2006
(Unaudited)
The accompanying unaudited Pro Forma Consolidated Balance Sheet of Boston Properties, Inc. (the “Company”) is presented as if the disposition of the long-term leasehold interest in 5 Times Square and related credits, which occurred on February 15, 2007, had been consummated on September 30, 2006. The Company completed the sale of the long-term leasehold interest in 5 Times Square and related credits for a gross sales price of approximately $1.28 billion in cash. 5 Times Square is a Class A office property with approximately 1,101,779 net rentable square feet located in New York City. In conjunction with the sale, the Company has agreed to provide to the buyer monthly revenue support from the closing date until December 31, 2008. The aggregate amount of the revenue support payments will be approximately $1.9 million.
In addition, on January 30, 2007, the Company paid a special cash dividend of $5.40 per common share to shareholders of record as of the close of business on December 29, 2006. The decision to pay a special cash dividend was the result of the sales of assets in 2006, including 280 Park Avenue, which sale was reported on Form 8-K dated June 6, 2006. Holders of common units of limited partnership interest in Boston Properties Limited Partnership, the Company’s Operating Partnership, as of the close of business on December 29, 2006 received the same total distribution on January 30, 2007. Holders of Series Two Preferred Units of limited partnership interest will participate in the special cash dividend on an as-converted basis in connection with their regular May 2007 distribution payment as provided in the Operating Partnership’s partnership agreement. The Company has reflected the payment of the special cash dividend under “Other Adjustments” within the accompanying unaudited Pro Forma Consolidated Balance Sheet.
Such pro forma information is based on the historical consolidated balance sheet of the Company as of that date, giving effect to the disposition of the long-term leasehold interest in 5 Times Square and related credits and the payment of the special cash dividend. This unaudited Pro Forma Consolidated financial information should be read in conjunction with Form 10-Q for the nine months ended September 30, 2006 (unaudited). In management’s opinion, all adjustments necessary to reflect the above transactions have been made.
The following unaudited Pro Forma Consolidated Balance Sheet is not necessarily indicative of what the actual financial position would have been assuming the disposition of the long-term leasehold interest in 5 Times Square and related credits and the payment of the special cash dividend had been consummated on September 30, 2006, nor does it purport to represent the future financial position of the Company.
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BOSTON PROPERTIES, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands, except for share and par value amounts)
| September 30, 2006 | Disposition of 5 Times Square | Other Adjustments (F) | Pro Forma | |||||||||||||
ASSETS | ||||||||||||||||
Real estate, at cost | $ | 9,040,264 | $ | (474,666 | )(A) | $ | — | $ | 8,565,598 | |||||||
Construction in process | 57,392 | — | — | 57,392 | ||||||||||||
Land held for future development | 210,336 | — | — | 210,336 | ||||||||||||
Less: accumulated depreciation | (1,372,826 | ) | 39,521 | (A) | — | (1,333,305 | ) | |||||||||
Total real estate | 7,935,166 | (435,145 | ) | — | 7,500,021 | |||||||||||
Cash and cash equivalents | 1,049,026 | 1,234,529 | (B) | (761,932 | ) | 1,521,623 | ||||||||||
Cash held in escrows | 21,436 | — | — | 21,436 | ||||||||||||
Tenant and other receivables, net | 42,128 | (2,702 | )(C) | — | 39,426 | |||||||||||
Accrued rental income, net | 310,560 | (48,620 | )(C) | — | 261,940 | |||||||||||
Deferred charges, net | 263,675 | (30,277 | )(D) | — | 233,398 | |||||||||||
Prepaid expenses and other assets | 72,033 | (574 | )(C) | — | 71,459 | |||||||||||
Investments in unconsolidated joint ventures | 83,485 | — | — | 83,485 | ||||||||||||
Total assets | $ | 9,777,509 | $ | 717,211 | $ | (761,932 | ) | $ | 9,732,788 | |||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||||
Liabilities: | ||||||||||||||||
Mortgage notes payable | $ | 2,811,953 | $ | — | $ | — | $ | 2,811,953 | ||||||||
Unsecured senior notes, net of discount | 1,471,370 | — | — | 1,471,370 | ||||||||||||
Unsecured exchangeable senior notes | 450,000 | — | — | 450,000 | ||||||||||||
Unsecured line of credit | — | — | — | — | ||||||||||||
Accounts payable and accrued expenses | 103,581 | (861 | )(C) | — | 102,720 | |||||||||||
Dividends and distributions payable | 95,607 | — | — | 95,607 | ||||||||||||
Accrued interest payable | 45,703 | — | — | 45,703 | ||||||||||||
Other liabilities | 236,350 | 897 | (C) | — | 237,247 | |||||||||||
Total liabilities | 5,214,564 | 36 | — | 5,214,600 | ||||||||||||
Commitments and contingencies | — | — | — | — | ||||||||||||
Minority interests | 746,416 | 115,410 | (E) | (118,862 | ) | 742,964 | ||||||||||
Stockholders’ equity: | ||||||||||||||||
Excess stock, $.01 par value, 150,000,000 shares authorized, none issued or outstanding | — | — | — | — | ||||||||||||
Preferred stock, $.01 par value, 50,000,000 shares authorized, none issued or outstanding | — | — | — | — | ||||||||||||
Common stock, $.01 par value, 250,000,000 shares authorized, 116,675,935 issued and 116,597,035 outstanding | 1,166 | — | — | 1,166 | ||||||||||||
Additional paid-in capital | 3,068,952 | 140 | (E) | (8,551 | ) | 3,060,541 | ||||||||||
Earnings in excess of dividends | 749,940 | 601,625 | (E) | (634,519 | ) | 717,046 | ||||||||||
Treasury common stock at cost | (2,722 | ) | — | — | (2,722 | ) | ||||||||||
Accumulated other comprehensive loss | (807 | ) | — | — | (807 | ) | ||||||||||
Total stockholders’ equity | 3,816,529 | 601,765 | (643,070 | ) | 3,775,224 | |||||||||||
Total liabilities and stockholders’ equity | $ | 9,777,509 | $ | 717,211 | $ | (761,932 | ) | $ | 9,732,788 | |||||||
The accompanying notes are an integral part of these financial statements.
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BOSTON PROPERTIES, INC.
NOTES TO THE PRO FORMA
CONSOLIDATED BALANCE SHEET
September 30, 2006
(Unaudited)
| (A) | Represents the elimination of the net book value of the long-term leasehold interest in 5 Times Square and related credits at September 30, 2006. |
| (B) | Represents the estimated net cash proceeds from the sale of the long-term leasehold interest in 5 Times Square after the payment of transfer taxes, leasehold transfer payments, broker’s fees and other customary closing costs. |
| (C) | Represents the elimination of certain assets and liabilities of 5 Times Square as of September 30, 2006. Other liabilities consists of an approximately $1.9 million revenue support obligation and approximately $4.7 million of deferred management fees, offset by the elimination of approximately $5.7 million of other liabilities as of September 30, 2006 of 5 Times Square. |
| (D) | Represents the elimination of the net book value of deferred leasing costs of 5 Times Square as of September 30, 2006. |
| (E) | Represents the net increase in Stockholders’ Equity and the rebalancing of Minority Interests as a result of the sale of the long-term leasehold interest in 5 Times Square and related credits. |
| (F) | Other Adjustments reflects the payment of the special cash dividend declared by the Company’s Board of Directors on December 15, 2006 and the resulting rebalancing of Minority Interests. The special cash dividend of $5.40 per common share was paid on January 30, 2007 to shareholders of record as of the close of business on December 29, 2006. The Board of Director’s decision to declare a special cash dividend was the result of the sales of assets in 2006, including 280 Park Avenue, which sale was reported on Form 8-K dated June 6, 2006. Holders of common units of limited partnership interest in Boston Properties Limited Partnership, the Company’s Operating Partnership, as of the close of business on December 29, 2006, received the same total distribution on January 30, 2007. Holders of Series Two Preferred Units will participate in the special cash dividend on an as-converted basis in connection with their regular May 2007 distribution payment as provided for in the Operating Partnership’s partnership agreement. |
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BOSTON PROPERTIES, INC.
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
For the nine months ended September 30, 2006 and the year ended December 31, 2005
(Unaudited)
The accompanying unaudited Pro Forma Consolidated Statements of Operations for the nine months ended September 30, 2006 and for the year ended December 31, 2005 are presented as if the disposition of the long-term leasehold interest in 5 Times Square and related credits, which occurred on February 15, 2007, had occurred on January 1, 2005. Due to the Company’s continuing involvement through an agreement with the buyer to manage 5 Times Square for a fee after the sale, 5 Times Square will not been categorized as discontinued operations in the Company’s Consolidated Statements of Operations. A nonrecurring gain on sale of real estate of approximately $601.6 million (net of minority interest share of approximately $111.7 million) has not been included in the unaudited Pro Forma Consolidated Statements of Operations but is expected to be reflected in the Company’s Consolidated Statements of Operations to be included in the Company’s Form 10-Q for the quarter ending March 31, 2007.
In addition, on June 6, 2006, the Company completed the sale of 280 Park Avenue, a Class A office property with approximately 1,179,000 net rentable square feet located in midtown Manhattan, for a gross sales price of approximately $1.2 billion. The pro forma effects of the sale of 280 Park Avenue have previously been included in a Form 8-K dated June 6, 2006. The Company has reflected these pro forma results of operations under “Other Adjustments” within the accompanying unaudited Pro Forma Consolidated Statement of Operations for the year ended December 31, 2005 and has reflected the results of operations of 280 Park Avenue for the period from January 1, 2006 through June 6, 2006 (the sale date) under “Other Adjustments” within the accompanying unaudited Pro Forma Consolidated Statement of Operations for the nine months ended September 30, 2006.
These unaudited Pro Forma Consolidated Statements of Operations should be read in conjunction with the historical consolidated financial statements and notes thereto of the Company, reported on Form 10-K for the year ended December 31, 2005 and on Form 10-Q for the nine months ended September 30, 2006.
The unaudited Pro Forma Consolidated financial information prepared by Boston Properties’ management is not necessarily indicative of what the actual results of operations would have been for the nine months ended September 30, 2006 or for the year ended December 31, 2005, had the disposition of the long-term leasehold interest in 5 Times Square and related credits and the disposition of 280 Park Avenue actually occurred on January 1, 2005 and the effect thereof carried forward through the nine-month period ended September 30, 2006, nor do they purport to present the future results of operations of the Company.
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BOSTON PROPERTIES, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
(in thousands, except for per share amounts)
| Nine Months Ended September 30, 2006 | Disposition of 5 Times Square | Other Adjustments (D) | Pro Forma | |||||||||||||
Revenue | ||||||||||||||||
Rental: | ||||||||||||||||
Base rent | $ | 826,587 | $ | (43,141 | )(A) | $ | (26,805 | ) | $ | 756,641 | ||||||
Recoveries from tenants | 138,653 | (12,864 | )(A) | (5,358 | ) | 120,431 | ||||||||||
Parking and other | 42,479 | (23 | )(A) | (44 | ) | 42,412 | ||||||||||
Total rental revenue | 1,007,719 | (56,028 | ) | (32,207 | ) | 919,484 | ||||||||||
Hotel revenue | 51,864 | — | — | 51,864 | ||||||||||||
Development and management services | 14,164 | — | — | 14,164 | ||||||||||||
Interest and other | 25,166 | (415 | )(A) | (51 | ) | 24,700 | ||||||||||
Total revenue | 1,098,913 | (56,443 | ) | (32,258 | ) | 1,010,212 | ||||||||||
Expenses | ||||||||||||||||
Operating: | ||||||||||||||||
Rental | 334,440 | (11,198 | )(A) | (14,280 | ) | 308,962 | ||||||||||
Hotel | 38,146 | — | — | 38,146 | ||||||||||||
General and administrative | 43,177 | — | — | 43,177 | ||||||||||||
Interest | 226,837 | — | (8,476 | ) | 218,361 | |||||||||||
Depreciation and amortization | 206,307 | (7,905 | )(B) | (3,502 | ) | 194,900 | ||||||||||
Loss from early extinguishment of debt | 32,132 | — | (31,444 | ) | 688 | |||||||||||
Total expenses | 881,039 | (19,103 | ) | (57,702 | ) | 804,234 | ||||||||||
Income before minority interest in property partnership, income from unconsolidated joint ventures, minority interest in Operating Partnership and gains on sales of real estate | 217,874 | (37,340 | ) | 25,444 | 205,978 | |||||||||||
Minority interest in property partnership | 2,013 | — | — | 2,013 | ||||||||||||
Income from unconsolidated joint ventures | 23,167 | — | — | 23,167 | ||||||||||||
Income before minority interest in Operating | ||||||||||||||||
Partnership and gains on sales of real estate | 243,054 | (37,340 | ) | 25,444 | 231,158 | |||||||||||
Minority interest in Operating Partnership | (46,261 | ) | 5,877 | (C) | (4,005 | ) | (44,389 | ) | ||||||||
Income available to common shareholders before gains on sales of real estate | $ | 196,793 | $ | (31,463 | ) | $ | 21,439 | $ | 186,769 | |||||||
Basic earnings per common share: | ||||||||||||||||
Income available to common shareholders before gains on sales of real estate | $ | 1.73 | $ | 1.64 | ||||||||||||
Weighted average number of common shares outstanding | 113,989 | 113,989 | ||||||||||||||
Diluted earnings per common share: | ||||||||||||||||
Income available to common shareholders before gains on sales of real estate | $ | 1.69 | $ | 1.61 | ||||||||||||
Weighted average number of common and common equivalent shares outstanding | 116,365 | 116,365 | ||||||||||||||
The accompanying notes are an integral part of these financial statements.
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BOSTON PROPERTIES, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
(in thousands, except for per share amounts)
| Year Ended December 31, 2005 | Disposition of 5 Times Square | Other Adjustments (D) | Pro Forma | |||||||||||||
Revenue | ||||||||||||||||
Rental: | ||||||||||||||||
Base rent | $ | 1,110,212 | $ | (57,823 | )(A) | $ | (65,713 | ) | $ | 986,676 | ||||||
Recoveries from tenants | 173,254 | (17,528 | )(A) | (12,463 | ) | 143,263 | ||||||||||
Parking and other | 55,567 | (29 | )(A) | (71 | ) | 55,467 | ||||||||||
Total rental revenue | 1,339,033 | (75,380 | ) | (78,247 | ) | 1,185,406 | ||||||||||
Hotel revenue | 69,277 | — | — | 69,277 | ||||||||||||
Development and management services | 17,310 | — | — | 17,310 | ||||||||||||
Interest and other | 12,015 | (645 | )(A) | (28 | ) | 11,342 | ||||||||||
Total revenue | 1,437,635 | (76,025 | ) | (78,275 | ) | 1,283,335 | ||||||||||
Expenses | ||||||||||||||||
Operating | ||||||||||||||||
Rental | 438,335 | (15,171 | )(A) | (32,419 | ) | 390,745 | ||||||||||
Hotel | 51,689 | — | — | 51,689 | ||||||||||||
General and administrative | 55,471 | — | — | 55,471 | ||||||||||||
Interest | 308,091 | — | (19,777 | ) | 288,314 | |||||||||||
Depreciation and amortization | 266,829 | (10,514 | )(B) | (11,631 | ) | 244,684 | ||||||||||
Losses from early extinguishments of debt | 12,896 | — | — | 12,896 | ||||||||||||
Total expenses | 1,133,311 | (25,685 | ) | (63,827 | ) | 1,043,799 | ||||||||||
Income before minority interest in property partnership, income from unconsolidated joint ventures, minority interest in Operating Partnership, gains on sales of real estate, discontinued operations and cumulative effect of a change in accounting principle | 304,324 | (50,340 | ) | (14,448 | ) | 239,536 | ||||||||||
Minority interest in property partnership | 6,017 | — | — | 6,017 | ||||||||||||
Income from unconsolidated joint ventures | 4,829 | — | — | 4,829 | ||||||||||||
Income before minority interest in Operating Partnership, gains on sales of real estate, discontinued operations and cumulative effect of a change in accounting principle | 315,170 | (50,340 | ) | (14,448 | ) | 250,382 | ||||||||||
Minority interest in Operating Partnership | (74,103 | ) | 8,185 | (C) | 2,349 | (63,569 | ) | |||||||||
Income available to common shareholders before gains on sales of real estate, discontinued operations and cumulative effect of a change in accounting principle | $ | 241,067 | $ | (42,155 | ) | $ | (12,099 | ) | $ | 186,813 | ||||||
Basic earnings per common share: | ||||||||||||||||
Income available to common shareholders before gains on sales of real estate, discontinued operations and cumulative effect of a change in accounting principle | $ | 2.17 | $ | 1.68 | ||||||||||||
Weighted average number of common shares outstanding | 111,274 | 111,274 | ||||||||||||||
Diluted earnings per common share: | ||||||||||||||||
Income available to common shareholders before gains on sales of real estate, discontinued operations and cumulative effect of a change in accounting principle | $ | 2.12 | $ | 1.65 | ||||||||||||
Weighted average number of common and common equivalent shares outstanding | 113,559 | 113,559 | ||||||||||||||
The accompanying notes are an integral part of these financial statements.
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BOSTON PROPERTIES, INC.
NOTES TO THE PRO FORMA
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands)
The unaudited Pro Forma Consolidated Statements of Operations reflect the historical results of operations of 5 Times Square for the year ended December 31, 2005 and the nine months ended September 30, 2006 (unaudited). Due to the Company’s continuing involvement through an agreement with the buyer to manage 5 Times Square for a fee after the sale, 5 Times Square will not been categorized as discontinued operations in the Company’s Consolidated Statements of Operations.
| (A) | Reflects the elimination of rental revenue and operating expenses of 5 Times Square. |
| (B) | Reflects the elimination of the depreciation and amortization expense related to the disposition of the long-term leasehold interest in 5 Times Square. |
| (C) | Reflects an adjustment for the minority interest in the Operating Partnership’s share of pro forma income before gains on sales of real estate, discontinued operations and the cumulative effect of a change in accounting principle. |
| (D) | Reflects the elimination of the historical results of operations of 280 Park Avenue for the year ended December 31, 2005 (as previously reported on Form 8-K dated June 6, 2006) and for the period from January 1, 2006 through June 6, 2006 (the sale date). |
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