BXP, Inc. 2021 Form 10-K Summary
Business context and reporting period
Boston Properties, Inc. (BXP) is a REIT focused primarily on developing, owning and managing Class A office properties in Boston, Los Angeles, New York, San Francisco, Seattle and Washington, DC. Its operating partnership, Boston Properties Limited Partnership (BPLP), conducts substantially all of the business. This filing reports the fiscal year ended December 31, 2021; it is an annual filing, with selected fourth-quarter operating information rather than a standalone Q4 income statement. At year-end, BXP owned or had joint-venture interests in 201 properties totaling approximately 52.8 million rentable square feet.
Financial and operating performance
| Metric | 2021 | 2020 |
|---|---|---|
| Total revenue | $2.889 billion | $2.766 billion |
| Net income attributable to BXP common shareholders | $496.2 million | $862.2 million |
| Diluted EPS | $3.17 | $5.54 |
| Net operating income (NOI, non-GAAP) | $1.814 billion | $1.694 billion |
| FFO attributable to BXP common shareholders (non-GAAP) | $1.026 billion | $978.2 million |
| Cash from operating activities | $1.133 billion | $1.157 billion |
- Revenue increased 4.4% and NOI increased 7.1%. Same-property NOI rose 6.9%; the filing attributes much of the same-property lease-revenue comparison to 2020 write-offs that did not recur. Excluding those write-offs, same-property lease revenue increased about $9.6 million, as higher revenue per square foot was partly offset by lower occupancy.
- Common-shareholder net income declined 42.5%, primarily reflecting substantially lower real-estate sale gains: $123.7 million in 2021 versus $619.0 million in 2020. The 2021 result also included $45.2 million of losses on early debt extinguishment, including a $42.8 million redemption premium.
- At year-end, in-service office and retail occupancy was 88.8%, compared with 90.1% a year earlier. Average annualized revenue per square foot was $73.76, up from $72.67. The quarterly dividend was $0.98 per share.
- Fourth-quarter leasing was approximately 1.8 million square feet, 55% above Q4 2020 and the largest quarterly volume since Q3 2019. More than 25% of Q4 leased space was to life sciences tenants. Overall in-service occupancy increased 0.4 percentage point from Q3 2021.
- Cash and cash equivalents plus cash held in escrows fell to $501.2 million from $1.719 billion. Investing activities used $1.040 billion and financing activities used $1.311 billion.
Debt, liquidity and capital commitments
- Consolidated debt was $12.897 billion at December 31, 2021; BXP’s disclosed debt-to-market-capitalization ratio was 39.07%. Debt was 98.9% fixed-rate, with a 3.40% GAAP weighted-average interest rate and a 6.6-year weighted-average maturity.
- BPLP’s revolving credit facility provides up to $1.5 billion and matures in June 2026. Borrowings were $145 million at year-end; as of February 14, 2022, borrowings were $265 million and approximately $1.2 billion remained available. Management reported approximately $292.2 million of available cash at that date and considered liquidity sufficient for stated needs.
- BXP issued $850 million of 2.550% notes due 2032 and $850 million of 2.450% notes due 2033, among other refinancing actions. It redeemed $1.0 billion of 3.85% notes due 2023 at a premium, generating the $44.2 million extinguishment loss. The Series B preferred stock was fully redeemed for approximately $201.3 million.
- BXP reported no consolidated debt maturities until September 2023. Unconsolidated joint ventures had two loans maturing in 2022, representing approximately $146.5 million of BXP’s share; the company was seeking refinancing, with no assurance it would close on contemplated terms.
- Nine development or redevelopment projects totaled approximately 3.4 million square feet. BXP’s estimated investment was $2.52 billion, with approximately $1.06 billion of future equity requirement; about 59% of the commercial space was pre-leased as of February 14, 2022.
Changes, outlook, risks and unusual items
- Management described leasing as recovering and expected occupancy to increase, citing leases signed but not yet commenced, leasing activity and development deliveries. It expected active development projects to be delivered on time and budget, while acknowledging that supply-chain constraints, labor shortages and inflation could raise costs or delay completion.
- Management identified continued uncertainty from COVID-19, including variants, office attendance patterns, tenant credit and demand, supply disruptions and inflation. San Francisco and Seattle recovery was described as lagging the East Coast markets; the Boston Marriott Cambridge remained affected by weak travel demand.
- The hotel operated at 33.5% occupancy for 2021 and contributed approximately $0.6 million of NOI, versus a $5.7 million NOI loss in 2020 and approximately $15 million of net income contribution in 2019. Q4 2021 occupancy was about 50%.
- Other notable items included a $115.6 million gain on the sale of the Spring Street properties and an $8.1 million gain recognized after completing a previously sold development project. BXP also recorded $5.3 million of insurance proceeds for water-main-break damage, with related expenses included in operating expenses.
- Key risks include concentrated exposure to six office markets; lease rollover, vacancies and tenant financial distress; changing office-space needs; development costs and execution; debt refinancing, interest rates and covenants; joint-venture partner and capital-call risks; climate and environmental exposure; insurance limitations; cybersecurity; and maintaining REIT qualification. Approximately 5.9% of portfolio square feet was scheduled to expire in 2022. Management said ordinary-course legal matters were not expected to have a material adverse effect; it also disclosed environmental matters for which further action or uncovered costs cannot be ruled out.
- The filing provides no numerical earnings or FFO guidance. Management’s outlook is qualitative. BXP and BPLP reported effective internal controls, and the auditor issued unqualified opinions on the financial statements and internal controls.
Important facts for investors to verify
- Whether the occupancy recovery materializes, including the commencement of signed leases and the conversion of vacant office space to life sciences use.
- Actual development spending, pre-leasing and completion timing against the approximately $1.06 billion remaining funding requirement, particularly under inflation and supply-chain pressure.
- Refinancing outcomes for joint-venture debt maturing in 2022 and the company’s future borrowing costs as interest rates rise and LIBOR-linked contracts transition.
- Cash availability and dividend coverage after development spending, tenant improvements, debt service and REIT distribution requirements.
- How much of the year-over-year earnings change reflects recurring property operations versus property-sale gains, debt-extinguishment costs, and prior-period rent write-offs.