Document and Entity Information
Document and Entity Information | ||
3 Months Ended
Mar. 31, 2010 | May. 03, 2010
| |
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | 2010-03-31 | |
Document Fiscal Year Focus | 2,010 | |
Document Fiscal Period Focus | Q1 | |
Entity Registrant Name | BOSTON PROPERTIES INC | |
Entity Central Index Key | 0001037540 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 139,018,015 |
Consolidated Balance Sheets
Consolidated Balance Sheets (USD $) | ||
In Thousands | 3 Months Ended
Mar. 31, 2010 | 12 Months Ended
Dec. 31, 2009 |
ASSETS | ||
Real estate, at cost | $9,823,024 | $9,817,388 |
Construction in process | 662,809 | 563,645 |
Land held for future development | 730,201 | 718,525 |
Less: accumulated depreciation | (2,103,274) | (2,033,677) |
Total real estate | 9,112,760 | 9,065,881 |
Cash and cash equivalents | 1,220,392 | 1,448,933 |
Cash held in escrows | 20,848 | 21,867 |
Investments in securities | 7,592 | 9,946 |
Tenant and other receivables (net of allowance for doubtful accounts of $1,947 and $4,125, respectively) | 102,085 | 93,240 |
Related party note receivable | 270,000 | 270,000 |
Accrued rental income (net of allowance of $2,224 and $2,645, respectively) | 376,942 | 363,121 |
Deferred charges, net | 291,564 | 294,395 |
Prepaid expenses and other assets | 50,998 | 17,684 |
Investments in unconsolidated joint ventures | 798,161 | 763,636 |
Total assets | 12,251,342 | 12,348,703 |
Liabilities: | ||
Mortgage notes payable | 2,637,534 | 2,643,301 |
Unsecured senior notes (net of discount of $2,475 and $2,611, respectively) | 2,172,525 | 2,172,389 |
Unsecured exchangeable senior notes (net of discount of $13,504 and $15,529, respectively) | 1,864,840 | 1,904,081 |
Unsecured line of credit | ||
Accounts payable and accrued expenses | 189,633 | 220,089 |
Dividends and distributions payable | 80,756 | 80,536 |
Accrued interest payable | 69,166 | 76,058 |
Other liabilities | 115,755 | 127,538 |
Total liabilities | 7,130,209 | 7,223,992 |
Commitments and contingencies | ||
Noncontrolling interest: | ||
Redeemable preferred units of the Operating Partnership | 55,652 | 55,652 |
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, 139,082,895 and 138,958,910 issued and 139,003,995 and 138,880,010 outstanding in 2010 and 2009, respectively | 1,390 | 1,389 |
Additional paid-in capital | 4,381,075 | 4,373,679 |
Earnings in excess of dividends | 78,645 | 95,433 |
Treasury common stock at cost, 78,900 shares in 2010 and 2009 | (2,722) | (2,722) |
Accumulated other comprehensive loss | (21,145) | (21,777) |
Total stockholders' equity attributable to Boston Properties, Inc. | 4,437,243 | 4,446,002 |
Noncontrolling interests: | ||
Common units of the Operating Partnership | 622,263 | 617,386 |
Property partnerships | 5,975 | 5,671 |
Total equity | 5,065,481 | 5,069,059 |
Total liabilities and equity | $12,251,342 | $12,348,703 |
Consolidated Balance Sheets (P
Consolidated Balance Sheets (Parenthetical) (USD $) | ||
In Thousands, except Share data | 3 Months Ended
Mar. 31, 2010 | 12 Months Ended
Dec. 31, 2009 |
Tenant and other receivables, allowance for doubtful accounts | $1,947 | $4,125 |
Accrued rental income, allowance | 2,224 | 2,645 |
Unsecured senior notes, discount | 2,475 | 2,611 |
Unsecured exchangeable senior notes, discount | $13,504 | $15,529 |
Excess stock, par value | 0.01 | 0.01 |
Excess stock, shares authorized | 150,000,000 | 150,000,000 |
Excess stock, issued | 0 | 0 |
Excess Stock, outstanding | 0 | 0 |
Preferred stock, par value | 0.01 | 0.01 |
Preferred stock, shares authorized | 50,000,000 | 50,000,000 |
Preferred stock, issued | 0 | 0 |
Preferred stock, outstanding | 0 | 0 |
Common stock, par value | 0.01 | 0.01 |
Common stock, shares authorized | 250,000,000 | 250,000,000 |
Common stock, issued | 139,082,895 | 138,958,910 |
Common stock, outstanding | 139,003,995 | 138,880,010 |
Treasury common stock, shares | 78,900 | 78,900 |
Consolidated Statements of Oper
Consolidated Statements of Operations (USD $) | ||
In Thousands, except Per Share data | 3 Months Ended
Mar. 31, 2010 | 3 Months Ended
Mar. 31, 2009 |
Revenue | ||
Base rent | $302,383 | $293,517 |
Recoveries from tenants | 45,544 | 52,408 |
Parking and other | 15,297 | 16,941 |
Total rental revenue | 363,224 | 362,866 |
Hotel revenue | 5,903 | 6,062 |
Development and management services | 8,944 | 8,296 |
Interest and other | 1,710 | 320 |
Total revenue | 379,781 | 377,544 |
Expenses | ||
Rental | 124,985 | 123,861 |
Hotel | 5,268 | 5,472 |
General and administrative | 26,822 | 17,420 |
Interest | 92,029 | 78,930 |
Depreciation and amortization | 83,075 | 77,370 |
Loss (gain) from suspension of development | (7,200) | 27,766 |
Losses from early extinguishments of debt | 2,170 | |
Losses (gains) from investments in securities | (200) | 587 |
Total expenses | 326,949 | 331,406 |
Income before income from unconsolidated joint ventures, gains on sales of real estate and net income attributable to noncontrolling interests | 52,832 | 46,138 |
Income from unconsolidated joint ventures | 7,910 | 5,097 |
Gains on sales of real estate | 1,765 | 2,795 |
Net income | 62,507 | 54,030 |
Net income attributable to noncontrolling interests: | ||
Noncontrolling interests in property partnerships | (804) | (510) |
Noncontrolling interest - common units of the Operating Partnership | (7,870) | (7,531) |
Noncontrolling interest in gains on sales of real estate - common units of the Operating Partnership | (227) | (401) |
Noncontrolling interest - redeemable preferred units of the Operating Partnership | (892) | (990) |
Net income attributable to Boston Properties, Inc. | $52,714 | $44,598 |
Basic earnings per common share attributable to Boston Properties, Inc.: | ||
Net income | 0.38 | 0.37 |
Weighted average number of common shares outstanding | 138,931 | 121,256 |
Diluted earnings per common share attributable to Boston Properties, Inc.: | ||
Net income | 0.38 | 0.37 |
Weighted average number of common and common equivalent shares outstanding | 139,597 | 121,468 |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Income (USD $) | ||
In Thousands | 3 Months Ended
Mar. 31, 2010 | 3 Months Ended
Mar. 31, 2009 |
Net income | $62,507 | $54,030 |
Other comprehensive income: | ||
Amortization of interest rate contracts | 726 | 714 |
Comprehensive income | 63,233 | 54,744 |
Comprehensive income attributable to noncontrolling interests | (9,886) | (9,535) |
Comprehensive income attributable to Boston Properties, Inc. | $53,347 | $45,209 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows (USD $) | ||
In Thousands | 3 Months Ended
Mar. 31, 2010 | 3 Months Ended
Mar. 31, 2009 |
Cash flows from operating activities: | ||
Net income | $62,507 | $54,030 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 83,075 | 77,370 |
Non-cash portion of interest expense | 10,924 | 13,606 |
Non-cash compensation expense | 14,011 | 7,094 |
Losses from early extinguishments of debt | 2,170 | |
Losses (gains) from investments in securities | (200) | 587 |
Loss (gain) from suspension of development | (7,200) | 27,766 |
Income from unconsolidated joint ventures | (7,910) | (5,097) |
Distributions of net cash flow from operations of unconsolidated joint ventures | 900 | 1,850 |
Gains on sales of real estate | (1,765) | (2,795) |
Change in assets and liabilities: | ||
Cash held in escrows | 1,019 | 2,550 |
Tenant and other receivables, net | (267) | 7,540 |
Accrued rental income, net | (13,821) | (14,526) |
Prepaid expenses and other assets | (33,314) | (25,263) |
Accounts payable and accrued expenses | (23,522) | (223) |
Accrued interest payable | (6,892) | (16,803) |
Other liabilities | (10,018) | (12,394) |
Tenant leasing costs | (9,603) | (5,156) |
Total adjustments | (2,413) | 56,106 |
Net cash provided by operating activities | 60,094 | 110,136 |
Cash flows from investing activities: | ||
Additions to real estate | (119,407) | (91,368) |
Proceeds from redemptions of investments in securities | 2,554 | 1,595 |
Net investments in unconsolidated joint ventures | (36,093) | (3,141) |
Net cash used in investing activities | (152,946) | (92,914) |
Cash flows from financing activities: | ||
Proceeds from mortgage notes payable | 1,464 | 16,424 |
Repayments of mortgage notes payable | (7,231) | (7,361) |
Repurchases of unsecured exchangeable senior notes | (49,320) | |
Dividends and distributions | (80,951) | (97,652) |
Net proceeds from equity transactions | 849 | 521 |
Distributions to noncontrolling interests in property partnerships, net | (500) | (1,750) |
Repayment of note payable | (25,000) | |
Deferred financing costs | (125) | |
Net cash used in financing activities | (135,689) | (114,943) |
Net decrease in cash and cash equivalents | (228,541) | (97,721) |
Cash and cash equivalents, beginning of period | 1,448,933 | 241,510 |
Cash and cash equivalents, end of period | 1,220,392 | 143,789 |
Supplemental disclosures: | ||
Cash paid for interest | 96,084 | 94,237 |
Interest capitalized | 8,087 | 12,110 |
Non-cash investing and financing activities: | ||
Additions to real estate included in accounts payable | 104 | 19,336 |
Dividends and distributions declared but not paid | 80,756 | 97,547 |
Conversions of noncontrolling interests to stockholders' equity | 978 | 855 |
Issuance of restricted securities to employees and directors | $18,768 | $21,619 |
Organization
Organization | |
3 Months Ended
Mar. 31, 2010 | |
Organization | 1. Organization Boston Properties, Inc. (the "Company"), a Delaware corporation, is a self-administered and self-managed real estate investment trust ("REIT"). The Company is the sole general partner of Boston Properties Limited Partnership (the "Operating Partnership") and at March 31, 2010 owned an approximate 85.9% (84.2% at March 31, 2009) general and limited partnership interest in the Operating Partnership. Partnership interests in the Operating Partnership are denominated as "common units of partnership interest" (also referred to as "OP Units"), "long term incentive units of partnership interest" (also referred to as "LTIP Units") or "preferred units of partnership interest" (also referred to as "Preferred Units"). In addition, in February 2008, the Company issued LTIP Units in connection with the granting to employees of 2008 outperformance awards (also referred to as "2008 OPP Units"). Because the rights, preferences and privileges of 2008 OPP Units differ from other LTIP Units granted to employees as part of the annual compensation process, unless specifically noted otherwise, all references to LTIP Units exclude 2008 OPP Units. Unless specifically noted otherwise, all references to OP Units exclude units held by the Company. A holder of an OP Unit may present such OP Unit to the Operating Partnership for redemption at any time (subject to restrictions agreed upon at the time of issuance of OP Units to particular holders that may restrict such redemption right for a period of time, generally one year from issuance). Upon presentation of an OP Unit for redemption, the Operating Partnership is obligated to redeem such OP Unit for cash equal to the then value of a share of common stock of the Company ("Common Stock"). In lieu of a cash redemption, the Company may elect to acquire such OP Unit for one share of Common Stock. Because the number of shares of Common Stock outstanding at all times equals the number of OP Units that the Company owns, one share of Common Stock is generally the economic equivalent of one OP Unit, and the quarterly distribution that may be paid to the holder of an OP Unit equals the quarterly dividend that may be paid to the holder of a share of Common Stock. An LTIP Unit is generally the economic equivalent of a share of restricted common stock of the Company. LTIP Units, whether vested or not, will receive the same quarterly per unit distributions as OP Units, which equal per share dividends on Common Stock (See Note 7). At March 31, 2010, there was one series of Preferred Units outstanding (i.e., Series Two Preferred Units). The Series Two Preferred Units bear a distribution that is set in accordance with an amendment to the partnership agreement of the Operating Partnership. Preferred Units may also be converted into OP Units or redeemed for cash at the election of the holder thereof or the Operating Partnership in accordance with the terms and conditions set forth in the applicable amendment to the partnership agreement (See Note 7). All references herein to the Company refer to Boston Properties, Inc. and its consolidated subsidiaries, including the Operating Partnership, collectively, unles |
Basis of Presentation and Summa
Basis of Presentation and Summary of Significant Accounting Policies | |
3 Months Ended
Mar. 31, 2010 | |
Basis of Presentation and Summary of Significant Accounting Policies | 2. Basis of Presentation and Summary of Significant Accounting Policies Boston Properties, Inc. does not have any other significant assets, liabilities or operations, other than its investment in the Operating Partnership, nor does it have employees of its own. The Operating Partnership, not Boston Properties, Inc., executes all significant business relationships. All majority-owned subsidiaries and affiliates over which the Company has financial and operating control and variable interest entities ("VIE"s) in which the Company has determined it is the primary beneficiary are included in the consolidated financial statements. All significant intercompany balances and transactions have been eliminated in consolidation. The Company accounts for all other unconsolidated joint ventures using the equity method of accounting. Accordingly, the Company's share of the earnings of these joint ventures and companies is included in consolidated net income. The accompanying interim financial statements are unaudited; however, the financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and in conjunction with the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the disclosures required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting solely of normal recurring matters) necessary for a fair statement of the financial statements for these interim periods have been included. The results of operations for the interim periods are not necessarily indicative of the results to be obtained for other interim periods or for the full fiscal year. The year end consolidated balance sheet data was derived from audited financial statements, but does not include all disclosure required by accounting principles generally accepted in the United States of America. These financial statements should be read in conjunction with the Company's financial statements and notes thereto contained in the Company's Annual Report in the Company's Form 10-K for its fiscal year ended December 31, 2009. For purposes of financial reporting disclosures, the Company calculates the fair value of mortgage notes payable, unsecured senior notes and unsecured exchangeable senior notes. The Company discounts the spread between the future contractual interest payments and hypothetical future interest payments on mortgage debt and unsecured notes based on a current market rate. In determining the current market rate, the Company adds its estimates of market spreads to the quoted yields on federal government treasury securities with similar maturity dates to its debt. Because the Company's valuations of its financial instruments are based on these types of estimates, the actual fair values of its financial instruments may differ materially if the Company's estimates do not prove to be accurate. The following table presents the aggregate carrying value of the Company's indebtedness and the Company's corresponding |
Real Estate Activity During the
Real Estate Activity During the Three Months Ended March 31, 2010 | |
3 Months Ended
Mar. 31, 2010 | |
Real Estate Activity During the Three Months Ended March 31, 2010 | 3. Real Estate Activity During the Three Months Ended March 31, 2010 Development On February 6, 2009, the Company announced that it was suspending construction on its 1,000,000 square foot office building at 250 West 55th Street in New York City. During the first quarter of 2009, the Company recognized costs aggregating approximately $27.8 million related to the suspension of development, which amount included a $20.0 million contractual amount due pursuant to a lease agreement. During December 2009, the Company completed the construction of foundations and steel/deck to grade to facilitate a restart of construction in the future and as a result ceased interest capitalization on the project. On January 19, 2010, the Company paid $12.8 million related to the termination of the lease agreement. As a result, the Company recognized approximately $7.2 million of income during the first quarter of 2010. Dispositions On April 14, 2008, the Company sold a parcel of land located in Washington, DC for approximately $33.7 million. The Company had previously entered into a development management agreement with the buyer to develop a Class A office property on the parcel totaling approximately 165,000 net rentable square feet. Due to the Company's involvement in the construction of the project, the gain on sale was deferred and has been recognized over the project construction period generally based on the percentage of total project costs incurred to estimated total project costs. During the three months ended March 31, 2010, the Company completed construction of the project and recognized the remaining gain on sale totaling approximately $1.8 million. The Company has recognized a cumulative gain on sale of approximately $23.4 million. |
Investments in Unconsolidated J
Investments in Unconsolidated Joint Ventures | |
3 Months Ended
Mar. 31, 2010 | |
Investments in Unconsolidated Joint Ventures | 4. Investments in Unconsolidated Joint Ventures The investments in unconsolidated joint ventures consists of the following at March 31, 2010: Entity Properties Nominal%Ownership Square 407 Limited Partnership MarketSquareNorth 50.0 % The Metropolitan Square Associates LLC Metropolitan Square 51.0 % BP/CRF 901 New York Avenue LLC 901NewYorkAvenue 25.0 %(1) WP Project Developer LLC Wisconsin Place Land and Infrastructure 23.9 %(2) Wisconsin Place Retail LLC Wisconsin Place Retail 5.0 % Eighth Avenue and 46th Street Entities Eighth Avenue and 46th Street 50.0 %(3) Boston Properties Office Value-Added Fund, L.P. 300 BillericaRoad, One Two Circle Star Way and Mountain View Research and Technology Parks 36.9 %(1)(4) Annapolis Junction NFM, LLC Annapolis Junction 50.0 %(5) 767 Venture, LLC The General Motors Building 60.0 % 2 GCT Venture LLC Two Grand Central Tower 60.0 % 540 Madison Venture LLC 540 Madison Avenue 60.0 % 125 West 55th Street Venture LLC 125 West 55th Street 60.0 % (1) The Company's economic ownership can increase based on the achievement of certain return thresholds. (2) Represents the Company's effective ownership interest. The Company has a 66.67%, 5% and 0% interest in the office, retail and residential joint venture entities, respectively, each of which owns a 33.33% interest in the entity owning the land and infrastructure of the project. (3) This property is not in operation and consists of assembled land. (4) Represents the Company's effective ownership interest. The Company has a 25.0% interest in the 300 Billerica Road and One Two Circle Star Way properties and a 39.5% interest in the Mountain View Research and Technology Park properties. (5) Two of the three Annapolis Junction land parcels are undeveloped land. Certain of the Company's joint venture agreements include provisions whereby, at certain specified times, each partner has the right to initiate a purchase or sale of its interest in the joint ventures at an agreed upon fair value. Under these provisions, the Company is not compelled to purchase the interest of its outside joint venture partners. The combined summarized balance sheets of the unconsolidated joint ventures are as follows: March31,2010 December31,2009 (in thousands) ASSETS Real estate and development in process, net $ 5,123,746 $ 5,149,868 Other assets 761,222 760,001 Total assets $ 5,884,968 $ 5,909,869 LIABILITIES AND MEMBERS'/PARTNERS' EQUITY Mortgage and notes payable $ 3,164,247 $ 3,217,893 Other liabilities 1,041,368 1,071,904 Members'/Partners' equity 1,679,353 1,620,072 Total liabilities and members'/partners' equity $ 5,884,968 $ 5,909,869 Company's share of equity $ 959,432 $ 927,184 Basis differentials(1) (161,271 ) (163,548 ) Carrying value of the Company's investments in unconsolida |
Unsecured Exchangeable Senior N
Unsecured Exchangeable Senior Notes | |
3 Months Ended
Mar. 31, 2010 | |
Unsecured Exchangeable Senior Notes | 5. Unsecured Exchangeable Senior Notes The following summarizes the unsecured exchangeable senior notes outstanding as of March 31, 2010 (dollars in thousands): Coupon/StatedRate EffectiveRate(1) ExchangeRate PrincipalAmount FirstOptionalRedemptionDateby Company Maturity Date 3.625% Exchangeable Senior Notes 3.625 % 4.037 % 8.5051 (2) $ 747,500 N/A February15,2014 2.875% Exchangeable Senior Notes 2.875 % 3.462 % 7.0430 (3) 808,961 February20,2012(4) February 15, 2037 3.750% Exchangeable Senior Notes 3.750 % 3.787 % 10.0066 (5) 450,000 May18,2013(6) May 15, 2036 Total principal 2,006,461 Net discount (13,504 ) Adjustment for the equity component allocation, net of accumulated amortization (128,117 ) Total $ 1,864,840 (1) Yield on issuance date including the effects of discounts on the notes but excluding the effects of the adjustment for the equity component allocation. (2) The initial exchange rate is 8.5051 shares per $1,000 principal amount of the notes (or an initial exchange price of approximately $117.58 per share of Boston Properties, Inc.'s Common Stock). In addition, the Company entered into capped call transactions with affiliates of certain of the initial purchasers, which are intended to reduce the potential dilution upon future exchange of the notes. The capped call transactions are intended to increase the effective exchange price to the Company of the notes from $117.58 to approximately $137.17 per share (subject to adjustment), representing an overall effective premium of approximately 40% over the closing price on August13, 2008 of $97.98 per share of Boston Properties, Inc.'s Common Stock. The net cost of the capped call transactions was approximately $44.4 million. (3) In connection with the special distribution of $5.98 per share of Boston Properties, Inc.'s Common Stock declared on December17, 2007, the exchange rate was adjusted from 6.6090 to 7.0430 shares per $1,000 principal amount of notes effective as of December31, 2007, resulting in an exchange price of approximately $141.98 per share of Boston Properties, Inc.'s Common Stock. (4) Holders may require the Operating Partnership to repurchase for cash the notes on February15, 2012, 2017, 2022, 2027 and 2032 and at any time prior to their maturity upon a fundamental change, in each case at a price equal to 100% of the principal amount of the notes being repurchased plus any accrued and unpaid interest up to, but excluding, the repurchase date. (5) In connection with the special distribution of $5.98 per share of Boston Properties, Inc.'s Common Stock declared on December17, 2007, the exchange rate was adjusted from 9.3900 to 10.0066 shares per $1,000 principal amount of notes effective as of December31, 2007, resulting in an exchange price of approximately $99.93 per share of Boston Properties, Inc.'s Co |
Commitments and Contingencies
Commitments and Contingencies | |
3 Months Ended
Mar. 31, 2010 | |
Commitments and Contingencies | 6. Commitments and Contingencies General In the normal course of business, the Company guarantees its performance of services or indemnifies third parties against its negligence. The Company has letter of credit and performance obligations of approximately $12.5 million related to lender and development requirements. Certain of the Company's joint venture agreements include provisions whereby, at certain specified times, each partner has the right to initiate a purchase or sale of its interest in the joint ventures. Under these provisions, the Company is not compelled to purchase the interest of its outside joint venture partners. In connection with the Company's assumption of the General Motors Building's secured loan by the Company's unconsolidated joint venture, 767 Venture, LLC, the Company guaranteed the unconsolidated joint venture's obligation to fund various escrows, including tenant improvements, taxes and insurance in lieu of cash deposits. As of March 31, 2010, the maximum funding obligation under the guarantee was approximately $16.3 million. In connection with the Company's refinancing of the 125 West 55th Street property's secured loan by the Company's unconsolidated joint venture, 125 West 55th Street Venture LLC, the Company has guaranteed the unconsolidated joint venture's obligation to fund an escrow related to certain lease rollover costs in lieu of an initial cash deposit for the full amount. The maximum funding obligation under the guarantee was $21.3 million. At closing, the joint venture funded a $10.0 million cash deposit into the escrow account and the remaining $11.3 million will be further reduced with scheduled monthly deposits into the escrow account from operating cash flows. As of March 31, 2010, the maximum funding obligation under the guarantee was $11.3 million. From time to time, the Company (or the applicable joint venture) has also agreed to guarantee portions of the principal, interest or other amounts in connection with other unconsolidated joint venture borrowings. In addition to the financial guarantees referenced above, the Company has agreed to customary environmental indemnifications and nonrecourse carve-outs (e.g., guarantees against fraud, misrepresentation and bankruptcy) on certain of its unconsolidated joint venture loans. Insurance The Company carries insurance coverage on its properties of types and in amounts and with deductibles that it believes are in line with coverage customarily obtained by owners of similar properties. In response to the uncertainty in the insurance market following the terrorist attacks of September 11, 2001, the Federal Terrorism Risk Insurance Act (as amended, "TRIA") was enacted in November 2002 to require regulated insurers to make available coverage for "certified" acts of terrorism (as defined by the statute). The expiration date of TRIA was extended to December 31, 2014 by the Terrorism Risk Insurance Program Reauthorization Act of 2007 ("TRIPRA"). Currently, the Company's property insurance program per occurrence limits are $1.0 billion for its portfolio insurance program, including coverage for acts of terrorism certified under TRIA. T |
Noncontrolling Interests
Noncontrolling Interests | |
3 Months Ended
Mar. 31, 2010 | |
Noncontrolling Interests | 7. Noncontrolling Interests Noncontrolling interests relate to the interests in the Operating Partnership not owned by the Company and interests in property partnerships not wholly-owned by the Company. As of March 31, 2010, the noncontrolling interests consisted of 19,806,088 OP Units, 1,640,273 LTIP Units, 1,080,938 2008 OPP Units and 1,113,044 Series Two Preferred Units (or 1,460,688 OP Units on an as converted basis) held by parties other than the Company. Noncontrolling InterestRedeemable Preferred Units of the Operating Partnership The Preferred Units at March 31, 2010 consisted solely of 1,113,044 Series Two Preferred Units, which bear a preferred distribution equal to the greater of (1) the distribution which would have been paid in respect of the Series Two Preferred Unit had such Series Two Preferred Unit been converted into an OP Unit (including both regular and special distributions) or (2) a rate ranging from 5.00% to 7.00% per annum on a liquidation preference of $50.00 per unit, and are convertible into OP Units at a rate of $38.10 per Preferred Unit (1.312336 OP Units for each Preferred Unit). Distributions on the Series Two Preferred Units are payable quarterly and, unless the greater rate described in the next sentence applies, accrue at 7.0% until May 12, 2009 and 6.0% thereafter. If distributions on the number of OP Units into which the Series Two Preferred Units are convertible are greater than distributions calculated using the rates described in the preceding sentence for the applicable quarterly period, then the greater distributions are payable instead. The holders of Series Two Preferred Units have the right to require the Operating Partnership to redeem their units for cash at the redemption price of $50.00 per unit on May 12, 2011, May 14, 2012, May 14, 2013 and May 12, 2014. The maximum number of units that may be required to be redeemed from all holders on each of these dates is 1,007,662, which is one-sixth of the number of Series Two Preferred Units that were originally issued. The holders also had the right to have their Series Two Preferred Units redeemed for cash on May 12, 2009 and May 12, 2010, although no holder exercised such right. The Company also has the right, under certain conditions and at certain times, to redeem Series Two Preferred Units for cash and to convert into OP Units any Series Two Preferred Units that are not redeemed when they are eligible for redemption. On February 16, 2010, the Operating Partnership paid a distribution on its outstanding Series Two Preferred Units of $0.75616 per unit. The following table reflects the activity of the noncontrolling interestsredeemable preferred units of the Operating Partnership for the three months ended March 31, 2010 and 2009 (in thousands): Balance at January1, 2010: $ 55,652 Net income 892 Distributions (892 ) Balance at March31, 2010: $ 55,652 Balance at January1, 2009: $ 55,652 Net income 990 Distributions (990 ) Balance at March31, 2009: $ 55,652 Noncontrolling InterestCommon Units of the Operating Partnership During |
Stockholders' Equity
Stockholders' Equity | |
3 Months Ended
Mar. 31, 2010 | |
Stockholders' Equity | 8. Stockholders' Equity As of March 31, 2010, the Company had 139,003,995 shares of Common Stock outstanding. During the three months ended March 31, 2010, the Company issued 27,183 shares of its Common Stock upon the exercise of options to purchase Common Stock by certain employees. During the three months ended March 31, 2010, the Company issued 33,642 shares of its Common Stock in connection with the redemption of an equal number of OP Units. On January 29, 2010, the Company paid a dividend in the amount of $0.50 per share of Common Stock to shareholders of record as of the close of business on December 31, 2009. On March 18, 2010, the Company's Board of Directors declared a dividend in the amount of $0.50 per share of Common Stock payable on April 30, 2010 to shareholders of record as of the close of business on March 31, 2010. |
Earnings Per Share
Earnings Per Share | |
3 Months Ended
Mar. 31, 2010 | |
Earnings Per Share | 9. Earnings Per Share The following table provides a reconciliation of both the net income attributable to Boston Properties, Inc. and the number of common shares used in the computation of basic earnings per share ("EPS"), which is calculated by dividing net income attributable to Boston Properties, Inc. by the weighted-average number of common shares outstanding during the period. The terms of the Series Two Preferred Units enable the holders to obtain OP Units of the Operating Partnership, as well as Common Stock of the Company. As a result, the Series Two Preferred Units are considered participating securities and are included in the computation of basic and diluted earnings per share of the Company if the effect of applying the if-converted method is dilutive. Unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of EPS pursuant to the two-class method. As a result, unvested restricted common stock of the Company, LTIP Units and 2008 OPP Units are considered participating securities and are included in the computation of basic and diluted earnings per share of the Company if the effect of applying the if-converted method is dilutive. Because the 2008 OPP Units require the Company to outperform absolute and relative return thresholds, unless such thresholds have been met by the end of the applicable reporting period, the Company excludes the 2008 OPP Units from the diluted EPS calculation. For the three months ended March 31, 2010 and 2009, the absolute and relative return thresholds for the 2008 OPP Units were not met and as a result the 2008 OPP Units have been excluded from the diluted EPS calculation. Other potentially dilutive common shares, including stock options, restricted stock and other securities of the Operating Partnership that are exchangeable for the Company's Common Stock, and the related impact on earnings, are considered when calculating diluted EPS. ForthethreemonthsendedMarch31,2010 Income(Numerator) Shares(Denominator) PerShareAmount (inthousands,exceptforpershareamounts) Basic Earnings: Net income attributable to Boston Properties, Inc. $ 52,714 138,931 $ 0.38 Effect of Dilutive Securities: Stock Based Compensation 666 (0.00 ) Diluted Earnings: Net income $ 52,714 139,597 $ 0.38 ForthethreemonthsendedMarch31,2009 Income(Numerator) Shares(Denominator) Per ShareAmount (inthousands,exceptforpershareamounts) Basic Earnings: Net income attributable to Boston Properties, Inc. $ 44,598 121,256 $ 0.37 Effect of Dilutive Securities: Stock Based Compensation 212 (0.00 ) Diluted Earnings: Net income $ 44,598 121,468 $ 0.37 |
Stock Option and Incentive Plan
Stock Option and Incentive Plan | |
3 Months Ended
Mar. 31, 2010 | |
Stock Option and Incentive Plan | 10. Stock Option and Incentive Plan During the three months ended March 31, 2010, the Company issued 66,461 shares of restricted common stock and 249,342 LTIP Units to employees and directors under the 1997 Stock Option and Incentive Plan (the "1997 Plan"). Employees and directors paid $0.01 per share of restricted common stock and $0.25 per LTIP Unit. The shares of restricted stock were valued at approximately $4.3 million ($64.87 per share). The LTIP Units were valued at approximately $15.1 million ($60.37 per unit fair value weighted-average) using a Monte Carlo simulation method model. The per unit fair value of each LTIP Unit granted was estimated on the date of grant using the following assumptions: an expected life of 5.7 years, a risk-free interest rate of 2.60% and an expected price volatility of 36.0%. An LTIP Unit is generally the economic equivalent of a share of restricted stock in the Company. The aggregate value of the LTIP Units is included in noncontrolling interests in the Consolidated Balance Sheets. The restricted stock and LTIP Units granted to employees between January 1, 2004 and November 2006 vest over a five-year term. Grants of restricted stock and LTIP Units made in and after November 2006 vest in four equal annual installments. Restricted stock and LTIP Units are measured at fair value on the date of grant based on the number of shares or units granted, as adjusted for forfeitures, and the closing price of the Company's Common Stock on the date of grant as quoted on the New York Stock Exchange. Such value is recognized as an expense ratably over the corresponding employee service period. Dividends paid on both vested and unvested shares of restricted stock are charged directly to Earnings in Excess of Dividends in the Consolidated Balance Sheets. Stock-based compensation expense associated with restricted stock, LTIP Units and 2008 OPP Units was approximately $13.8 million and $6.8 million for the three months ended March 31, 2010 and 2009, respectively. For the three months ended March 31, 2010, stock-based compensation expense includes an aggregate of approximately $5.8 million of remaining previously unvested stock-based compensation granted between 2006 and 2009 to Edward H. Linde, the Company's former Chief Executive Officer, which expense was accelerated as a result of his passing on January 10, 2010. At March 31, 2010, there was $42.6 million of unrecognized compensation expense related to unvested restricted stock and LTIP Units and $7.1 million of unrecognized compensation expense related to unvested 2008 OPP Units that is expected to be recognized over a weighted-average period of approximately 2.8 years. If upon the conclusion of the three-year measurement period in February 2011, the 2008 OPP Awards are not earned, and therefore the program is terminated, the Company will accelerate the then remaining unrecognized compensation expense totaling approximately $4.3 million during the first quarter of 2011. |
Segment Information
Segment Information | |
3 Months Ended
Mar. 31, 2010 | |
Segment Information | 11. Segment Information The Company's segments are based on the Company's method of internal reporting which classifies its operations by both geographic area and property type. The Company's segments by geographic area are Greater Boston, Greater Washington, DC, Midtown Manhattan, Greater San Francisco and New Jersey. Segments by property type include: Class A Office, Office/Technical and Hotels. Asset information by segment is not reported because the Company does not use this measure to assess performance. Therefore, depreciation and amortization expense is not allocated among segments. Interest and other income, development and management services, general and administrative expenses, interest expense, depreciation and amortization expense, loss (gain) from suspension of development, losses (gains) from investments in securities, losses from early extinguishments of debt, income from unconsolidated joint ventures, gains on sales of real estate and noncontrolling interests are not included in Net Operating Income as internal reporting addresses these items on a corporate level. Net Operating Income is not a measure of operating results or cash flows from operating activities as measured by accounting principles generally accepted in the United States of America, and it is not indicative of cash available to fund cash needs and should not be considered an alternative to cash flows as a measure of liquidity. All companies may not calculate Net Operating Income in the same manner. The Company considers Net Operating Income to be an appropriate supplemental measure to net income because it helps both investors and management to understand the core operations of the Company's properties. Information by geographic area and property type: Three months ended March 31, 2010 (dollars in thousands): GreaterBoston GreaterWashington, D.C. MidtownManhattan GreaterSan Francisco NewJersey Total Rental Revenue: ClassA $ 88,207 $ 83,845 $ 109,943 $ 53,147 $ 16,479 $ 351,621 Office/Technical 7,584 4,019 11,603 Hotel 5,903 5,903 Total 101,694 87,864 109,943 53,147 16,479 369,127 % of Total 27.55 % 23.80 % 29.79 % 14.40 % 4.46 % 100.00 % Real Estate Operating Expenses: ClassA 33,496 23,688 37,499 19,020 7,841 121,544 Office/Technical 2,266 1,175 3,441 Hotel 5,268 5,268 Total 41,030 24,863 37,499 19,020 7,841 130,253 % of Total 31.50 % 19.09 % 28.79 % 14.60 % 6.02 % 100.00 % Net Operating Income $ 60,664 $ 63,001 $ 72,444 $ 34, |
Subsequent Events
Subsequent Events | |
3 Months Ended
Mar. 31, 2010 | |
Subsequent Events | 12. Subsequent Events From April 1, 2010 through May 6, 2010, the Company's Operating Partnership repurchased approximately $111.8 million aggregate principal amount of its 2.875% exchangeable senior notes due 2037 for approximately $111.7 million. On April 1, 2010, the Company acquired a 30% interest in a joint venture entity that owns 500 North Capitol Street, NW located in Washington, DC. 500 North Capitol Street is an approximately 180,000 net rentable square foot office property which is fully-leased to a single tenant through March 2011. On April 1, 2010, the joint venture entity refinanced at maturity the mortgage loan collateralized by the property totaling approximately $26.8 million. The new mortgage loan totaling $22.0 million bears interest at a variable rate equal to the greater of (1) the prime rate, as defined in the loan agreement, or (2) 5.75% per annum. The loan currently bears interest at 5.75% per annum and matures on March 31, 2013. The Company's investment in the joint venture totaling approximately $1.9 million was financed with cash contributions to the venture totaling approximately $1.4 million and the issuance to the seller of 5,906 common units of limited partnership interest in the Company's Operating Partnership. On April 9, 2010, a joint venture in which the Company has a 60% interest refinanced its mortgage loan collateralized by Two Grand Central Tower located in New York City. The previous mortgage loan totaling $190.0 million bore interest at a fixed rate of 5.10% per annum and was scheduled to mature on July 11, 2010. The new mortgage loan totaling $180.0 million bears interest at a fixed rate of 6.00% per annum and matures on April 10, 2015. In connection with the refinancing, the joint venture repaid $10.0 million of the previous mortgage loan utilizing cash contributions from the joint venture's partners on a pro rata basis. On April 16, 2010, a joint venture in which the Company has a 51% interest refinanced its mortgage loan collateralized by Metropolitan Square located in Washington, DC. The previous mortgage loan totaling approximately $123.6 million bore interest at a fixed rate of 8.23% per annum and was scheduled to mature on May 1, 2010. The new mortgage loan totaling $175.0 million bears interest at a fixed rate of 5.75% per annum and matures on May 5, 2020. On April 19, 2010, the Company's Operating Partnership completed a public offering of $700.0 million in aggregate principal amount of its 5.625% senior notes due 2020. The notes were priced at 99.891% of the principal amount to yield 5.638% to maturity. The aggregate net proceeds to the Operating Partnership, after deducting underwriter discounts and offering expenses, were approximately $693.5 million. The notes mature on November 15, 2020, unless earlier redeemed. On April 7, 2010, in connection with the offering, the Company entered into two treasury lock agreements to fix the 10-year treasury rate at 3.873% per annum on notional amounts aggregating $350.0 million. The Company subsequently cash-settled the treasury lock agreements and received approximately $0.4 million, which amount will be recognized as a reduction to |