BXP, Inc. 2020 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2020; filed February 26, 2021. The combined filing covers Boston Properties, Inc. (BXP) and Boston Properties Limited Partnership (BPLP), through which BXP conducts substantially all operations. BXP held approximately 90% of BPLP at year-end. Unless noted, financial amounts below are in U.S. dollars.
Business context
BXP is an office-focused REIT developing, owning and managing primarily Class A commercial properties in Boston, Los Angeles, New York, San Francisco and Washington, DC. At year-end, it owned or held joint-venture interests in 196 properties totaling approximately 51.2 million net rentable square feet, including six projects under construction or redevelopment. The business was materially affected by the COVID-19 pandemic.
Financial and operating performance
| Metric | 2020 | 2019 | Change / context |
|---|---|---|---|
| Total revenue | $2.766 billion | $2.961 billion | Down 6.6% |
| Net income attributable to BXP common shareholders | $862.2 million | $511.0 million | Up 68.7%; materially lifted by property-sale gains |
| Basic earnings per share | $5.54 | $3.31 | Increase reflects, in part, sale gains |
| FFO attributable to BXP common shareholders | $978.2 million | $1.086 billion | Down 9.9%; non-GAAP measure |
| Net operating income (NOI) | $1.694 billion | $1.826 billion | Down 7.2%; non-GAAP measure |
| Cash provided by operating activities | $1.157 billion | $1.181 billion | Down $24.3 million |
| Cash and cash equivalents at year-end | $1.669 billion | $645.0 million | Cash plus escrow balances totaled $1.719 billion |
| Total indebtedness | $13.048 billion | $11.812 billion | Consolidated debt; 44.07% of consolidated market capitalization at year-end |
- In-service office and retail occupancy was 90.1%, down from 93.0%. Average annualized revenue per square foot rose to $72.67 from $69.72.
- Same-property NOI declined 7.7%. Same-property lease revenue fell 4.1%, including approximately $87.3 million of write-offs; reduced parking revenue and lower hotel activity also weighed on results.
- Cash rent collections in Q4 were 99.1% overall, including 99.7% for office tenants and 84.6% for retail tenants. Billed amounts excluded certain properties for which BXP did not handle billing.
- Cash dividends declared were $3.92 per common share for 2020, compared with $3.83 in 2019. The regular quarterly dividend was $0.98.
- Approximately 96.2% of consolidated debt was fixed-rate at year-end. Weighted-average stated interest rates were 3.65% on fixed-rate debt and 1.10% on variable-rate debt; the latter was $500 million.
Material changes and unusual items
- Reported earnings rose sharply despite weaker operating performance, primarily because BXP recorded $619.0 million of gains on real estate sales, versus $0.7 million in 2019. Key transactions included the Gateway Commons contribution to a joint venture, the sale of New Dominion Technology Park and the sale of part of Capital Gallery.
- BXP recorded an approximately $60.5 million non-cash impairment of its investment in the unconsolidated joint venture owning Dock 72. The property was 33% leased at year-end; the impairment reflected higher costs, slower lease-up and lower projected rents. There were no impairments of consolidated long-lived assets in 2020.
- Lease revenue and collections were affected by tenant distress, particularly in retail, entertainment and co-working. For 2020, the Company wrote off approximately $67.7 million of accrued rent and $22.6 million of accounts receivable. It also granted cash rent abatements and deferrals and modified leases.
- BPLP issued $1.25 billion of 3.25% senior notes due 2031. After year-end, on February 14, 2021, it redeemed $850 million of 4.125% notes due May 2021; management said this left no further 2021 consolidated debt maturities, apart from joint-venture loans.
- Net cash used in investing activities was $613.7 million, including development spending and joint-venture contributions, partly offset by real-estate sale proceeds. Financing activities provided $484.3 million.
Outlook, management commentary and risks
Management described the economic and office-market outlook as uncertain, with recovery dependent on the pandemic, vaccination progress, employment and tenants’ future space needs. It noted that companies continued to defer some leasing decisions, while emphasizing the long-term appeal of well-located Class A offices. BXP signed approximately 1.2 million square feet of leases and renewals in Q4, with an approximately eight-year weighted-average term.
- Six development and redevelopment projects represented approximately 3.7 million square feet and an estimated $2.154 billion total investment share; approximately $848.7 million remained to be invested at year-end. About 87% of the commercial space was pre-leased as of February 22, 2021. Management anticipated more than $700 million of development and redevelopment starts in 2021, primarily life sciences projects and conversions.
- As of February 22, 2021, BXP reported approximately $517 million of cash and cash equivalents, including approximately $155 million attributable to consolidated joint-venture partners, and approximately $1.5 billion available under its revolving facility. Management believed liquidity was sufficient for committed projects, debt repayment, REIT distributions and selective investment.
- Major risks include continuing pandemic effects on tenants, rent collection, leasing, occupancy, development and property values; lasting shifts toward remote work; refinancing and interest-rate risk; joint-venture exposures; climate and environmental liabilities; and BXP’s ongoing REIT qualification and distribution requirements.
- The filing gives no numerical full-year 2021 earnings or FFO guidance. Management’s outlook is qualitative, and it cautions that pandemic impacts remain difficult to predict. The Company reported compliance with its credit-facility and senior-note financial covenants at December 31, 2020.
Most important facts for investors to verify
- Whether office occupancy, leasing demand and rent collections recover, and whether remote-work trends materially reduce long-term space requirements.
- How much of the rent write-offs, abatements and deferrals will ultimately be collected, and whether further tenant-credit losses emerge.
- Dock 72’s leasing, projected costs and valuation assumptions, and whether additional joint-venture impairments are needed.
- Remaining development commitments, pre-leasing and delivery milestones, including the planned life sciences conversions and 2021 project starts.
- Debt maturities, refinancing terms, covenant headroom and BXP’s share of joint-venture debt and obligations; distinguish consolidated debt from proportionate joint-venture exposure.
- Underlying operating trends using FFO and NOI alongside GAAP earnings, which increased substantially due to sale gains. These non-GAAP measures may not be comparable across REITs.
PricewaterhouseCoopers LLP issued unqualified opinions on the financial statements and internal control over financial reporting; management also concluded that internal controls were effective at year-end.