BXP, Inc. annual report, FY2022

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BXP, Inc. — 2022 Form 10-K Summary

Business context and reporting period

The filing covers the fiscal year ended December 31, 2022; it is an annual report, not a standalone fourth-quarter filing. BXP is an office-focused REIT operating primarily through Boston Properties Limited Partnership (BPLP). At year-end, the combined portfolio comprised 194 properties and approximately 54.1 million rentable square feet across Boston, Los Angeles, New York, San Francisco, Seattle and Washington, D.C. The portfolio included office and life sciences, retail, residential and one hotel.

Financial and operating performance

  • Revenue: $3.109 billion, up 7.6% from $2.889 billion in 2021. Lease revenue was $2.918 billion.
  • Profit: Net income attributable to BXP common shareholders was $848.9 million, versus $496.2 million in 2021. Diluted earnings per share were $5.40, versus $3.17. The increase largely reflected higher property-sale gains: $437.0 million in 2022 versus $123.7 million in 2021.
  • NOI and FFO: Net operating income (NOI), a non-GAAP measure, was $1.930 billion, up 6.4%; same-property NOI rose 3.0%. BXP-attributable funds from operations (FFO), also non-GAAP, was $1.184 billion, compared with $1.026 billion.
  • Cash flow: Operating activities provided $1.282 billion, versus $1.133 billion. Investing activities used $1.603 billion, including $1.320 billion for real estate acquisitions. Financing activities provided $556 million. Year-end cash and cash equivalents plus escrow cash totaled $736.8 million.
  • Debt and liquidity: Consolidated debt was $14.240 billion at year-end, with a weighted-average GAAP interest rate of 3.69% and 94.9% fixed-rate debt. Debt equaled 54.6% of consolidated market capitalization. As of February 21, 2023, BXP reported $833.3 million of available cash and approximately $1.5 billion available under its revolver.
  • Occupancy and rents: In-service office and retail occupancy was 88.6% at year-end, compared with 88.8% a year earlier. Average annualized revenue per square foot rose to $75.99 from $73.76. The quarterly common dividend was $0.98 per share.

Material changes versus 2021

  • Revenue, common-shareholder net income and NOI increased. The profit comparison was significantly affected by 2022 asset-sale gains and the absence of the $45.2 million early debt-extinguishment loss recorded in 2021.
  • Same-property occupancy declined from 91.7% to 91.1%, while higher average revenue per square foot more than offset that decline for same-property lease revenue.
  • BXP acquired Madison Centre and 125 Broadway for a combined approximately $1.3 billion, and completed property and land dispositions with aggregate gross proceeds of approximately $864 million.
  • Cash from operations increased, but cash used in investing rose substantially, primarily reflecting acquisitions and contributions to joint ventures.
  • BXP recorded a $50.7 million non-cash impairment of its Dock 72 joint-venture investment. Loss from unconsolidated joint ventures increased to $59.8 million, also reflecting higher interest expense.

Outlook, risks and unusual items

  • Management described softer leasing demand amid economic uncertainty, layoffs, inflation and higher interest rates. It expected 2023 leasing to be weighted toward small- and medium-sized professional and financial-services firms.
  • Management expected interest expense to be materially higher in 2023, citing higher floating rates, debt refinancing at higher rates and reduced capitalization of interest as development projects enter service.
  • At year-end, 13 projects were under construction or redevelopment, with BXP’s estimated share of total investment at approximately $1.9 billion and $729.1 million remaining. The pipeline was 37% pre-leased as of February 21, 2023; management reported 52% pre-leased for 15 projects after January 2023 additions, excluding the observatory and residential project.
  • After year-end, BPLP borrowed $1.2 billion under a new unsecured term loan, repaid the $730 million 2022 term loan, and extended that borrowing’s maturity to May 2024. Remaining identified 2023–2024 unsecured note maturities included $500 million due September 2023 and $700 million due February 2024. BXP also had approximately $603 million of its share of joint-venture debt maturing in 2023 and 2024.
  • Key risks include sustained hybrid or remote work reducing office demand, lease renewals or re-leasing at less favorable terms, construction-cost inflation and delays, higher borrowing and refinancing costs, joint-venture debt exposure, and climate, environmental, insurance and cybersecurity risks. Management said its liquidity was sufficient for anticipated needs, but this is subject to market and operating conditions.

Most important facts for investors to verify

  • How much of the increase in reported earnings reflects recurring property operations versus asset-sale gains and other non-recurring items; review GAAP results alongside NOI and FFO.
  • Whether occupancy, leasing spreads, concessions and lease commencements improve or deteriorate, including the effect of hybrid-work trends and near-term lease expirations.
  • How the 2023–2024 maturities and variable-rate exposure are refinanced, and the resulting effect on interest expense, leverage and dividend capacity.
  • Whether development projects meet their budgets, delivery dates and pre-leasing assumptions, particularly the large Cambridge life-sciences projects.
  • How Dock 72 and other joint ventures perform, including debt maturities, impairment assumptions and potential capital requirements.