BOSTON--(BUSINESS WIRE)--Boston Properties, Inc. (NYSE: BXP), a real estate investment trust, reported results today for the third quarter ended September 30, 2016.

Net income attributable to common shareholders was $76.8 million for the quarter ended September 30, 2016, compared to $184.1 million for the quarter ended September 30, 2015. Net income attributable to common shareholders per share (EPS) for the quarter ended September 30, 2016 was $0.50 basic and $0.50 on a diluted basis. This compares to EPS for the quarter ended September 30, 2015 of $1.20 basic and $1.20 on a diluted basis. Net income attributable to common shareholders for the quarter ended September 30, 2016 includes gains on sales of real estate aggregating approximately $13.0 million, or $0.08 per share basic and $0.08 per share on a diluted basis, compared to $199.5 million, or $0.58 per share basic and $0.58 per share on a diluted basis, for the quarter ended September 30, 2015. In addition, net income attributable to common shareholders for the quarter ended September 30, 2016 includes accelerated depreciation expense of approximately $50.8 million, or $(0.17) per share basic and $(0.17) per share on a diluted basis, related to the redevelopment of the Company's 601 Lexington Avenue property. The weighted-average number of basic and diluted shares outstanding totaled approximately 153,754,000 and 154,136,000, respectively, for the quarter ended September 30, 2016 and 153,595,000 and 153,786,000, respectively, for the quarter ended September 30, 2015.

Funds from Operations (FFO) for the quarter ended September 30, 2016 were $219.6 million, or $1.43 per share basic and $1.42 per share diluted. This compares to FFO for the quarter ended September 30, 2015 of $217.3 million, or $1.41 per share basic and $1.41 per share diluted.

The Company’s reported FFO of $1.42 per share diluted was greater than the mid-point of the guidance previously provided of $1.40-$1.42 per share diluted primarily due to better than expected portfolio operations of $0.02 per share, partially offset by a $(0.01) per share impairment loss related to the anticipated sale of the remaining parcel of land at the Company's Washingtonian North property located in Gaithersburg, Maryland.

The reported results are unaudited and there can be no assurance that these reported results will not vary from the final information for the quarter ended September 30, 2016. In the opinion of management, all adjustments considered necessary for a fair presentation of these reported results have been made.

As of September 30, 2016, the Company’s portfolio consisted of 174 properties aggregating approximately 47.7 million square feet, including eight properties under construction/redevelopment totaling approximately 4.0 million square feet. The overall percentage of leased space for the 163 properties in service (excluding the Company’s two residential properties and hotel) as of September 30, 2016 was 89.6%.

Significant events during the third quarter included:

• On July 1, 2016, the Company entered the Los Angeles market through its acquisition of a 49.8% interest in an existing joint venture that owns and operates Colorado Center located in Santa Monica, California for a gross purchase price of approximately $511.1 million, or approximately $503.6 million in cash net of credits for free rent, unfunded leasing costs and other adjustments. Colorado Center is a six-building office complex that sits on a 15-acre site and contains an aggregate of approximately 1,184,000 net rentable square feet with an underground parking garage for 3,100 vehicles. The property is 66% leased.
• On August 16, 2016, the Company completed the sale of a parcel of land within its Broad Run Business Park property located in Loudoun County, Virginia for a gross sale price of approximately $18.0 million. Net cash proceeds totaled approximately $17.9 million, resulting in a gain on sale of real estate totaling approximately $13.0 million.
• On August 17, 2016, the Company’s Operating Partnership completed a public offering of $1.0 billion in aggregate principal amount of its 2.750% senior unsecured notes due 2026. The notes were priced at 99.271% of the principal amount to yield an effective rate, including financing fees and the impact of the settlement of certain forward-starting interest rate swap contracts, of approximately 3.495% to maturity. The notes will mature on October 1, 2026, unless earlier redeemed. The aggregate net proceeds from the offering were approximately $984.7 million after deducting underwriting discounts and transaction expenses.
• On August 17, 2016, in conjunction with the Company's Operating Partnership's offering of senior unsecured notes, the Company terminated forward-starting interest rate swap contracts which fixed the ten-year swap rate at a weighted-average rate of approximately 2.423% per annum on notional amounts aggregating $550.0 million. The Company cash-settled the contracts and made cash payments to the counterparties aggregating approximately $49.3 million. The Company recognized approximately $0.1 million of losses on interest rate contracts during the three months ended September 30, 2016 related to the partial ineffectiveness of the interest rate contracts. The Company will reclassify into earnings over the ten-year term of the 2.750% senior unsecured notes due 2026 as an increase to interest expense approximately $49.2 million (or approximately $4.9 million per year) of the amounts recorded on the consolidated balance sheets within accumulated other comprehensive loss, which represents the effective portion of the applicable interest rate contracts.
• On August 19, 2016, the consolidated entity in which the Company has a 55% interest and that owns 601 Lexington Avenue located in New York City commenced the redevelopment of the six-story low-rise office and retail building component of the complex. The redeveloped portion of the low-rise building will contain approximately 195,000 net rentable square feet of Class A office space and approximately 25,000 net rentable square feet of retail space. The Company recorded approximately $50.8 million of accelerated depreciation expense for the portion of the complex to be demolished.
• On September 1, 2016, the Company used a portion of the net proceeds from its Operating Partnership’s offering of senior unsecured notes and available cash to repay the mortgage loan collateralized by its 599 Lexington Avenue property located in New York City totaling $750.0 million. The mortgage loan bore interest at a fixed rate of 5.57% per annum (5.41% per annum GAAP interest rate) and was scheduled to mature on March 1, 2017. There was no prepayment penalty. The Company recognized a gain from early extinguishment of debt totaling approximately $0.4 million consisting of the acceleration of the remaining balance related to the effective portion of a previous interest rate hedging program included within accumulated other comprehensive loss, offset by the write-off of unamortized deferred financing costs.
• On September 1, 2016, the Company used a portion of the net proceeds from its Operating Partnership’s offering of senior unsecured notes and available cash to repay the mortgage loan collateralized by its Embarcadero Center Four property located in San Francisco, California totaling approximately $344.8 million. The mortgage loan bore interest at a fixed rate of 6.10% per annum (7.02% per annum GAAP interest rate) and was scheduled to mature on December 1, 2016. There was no prepayment penalty. The Company recognized a loss from early extinguishment of debt totaling approximately $0.7 million consisting of the write-off of unamortized deferred financing costs and the acceleration of the remaining balance related to the effective portion of a previous interest rate hedging program included within accumulated other comprehensive loss.
• On September 16, 2016, the Company partially placed in-service 888 Boylston Street, a Class A office project with approximately 425,000 net rentable square feet located in Boston, Massachusetts. The property is 71% leased.
• On September 27, 2016, the Company executed a letter of intent for the sale of the remaining parcel of land at its Washingtonian North property located in Gaithersburg, Maryland. The letter of intent caused the Company to reevaluate its strategy for the land and based on a shorter than expected hold period, the Company reduced the carrying value of the land to the estimated net sales price and recognized an impairment loss of approximately $1.8 million during the three months ended September 30, 2016.

Transactions completed subsequent to September 30, 2016:

• On October 1, 2016, a joint venture in which the Company has a 50% interest completed and fully placed in-service 1265 Main Street, a Class A office project with approximately 115,000 net rentable feet located in Waltham, Massachusetts. The property is 100% leased.
• On October 20, 2016, the Company and its partner in the unconsolidated joint venture that owns Metropolitan Square located in Washington, DC, completed the sale of an 80% interest in the joint venture for a gross sale price of approximately $288.1 million, including the assumption by the buyer of its pro rata share of the mortgage loan collateralized by the property totaling approximately $133.4 million and certain unfunded leasing costs totaling approximately $5.7 million. Prior to the sale, the Company owned a 51% interest and its partner owned a 49% interest in the joint venture. Following the sale, the Company continues to own a 20% interest in the joint venture with the buyer owning the remaining 80%. Metropolitan Square is an approximately 607,000 net rentable square foot Class A office property.

EPS and FFO per Share Guidance:

The Company’s guidance for the fourth quarter, full year 2016 and full year 2017 for EPS (diluted) and FFO per share (diluted) is set forth and reconciled below. Except as described below, the estimates reflect management’s view of current and future market conditions, including assumptions with respect to rental rates, occupancy levels and the earnings impact of the events referenced in this release and otherwise referenced during the conference call referred to below. The estimates do not include possible future gains or losses or the impact on operating results from other possible future property acquisitions or dispositions, other possible capital markets activity or possible future impairment charges. EPS estimates may be subject to fluctuations as a result of several factors, including changes in the recognition of depreciation and amortization expense and any gains or losses associated with disposition activity. The Company is not able to assess at this time the potential impact of these factors on projected EPS. By definition, FFO does not include real estate-related depreciation and amortization, impairment losses on depreciable real estate or gains or losses associated with disposition activities. There can be no assurance that the Company’s actual results will not differ materially from the estimates set forth below.

As shown below, the Company has updated its projected EPS (diluted) for the full year 2016 to $2.98 - $3.00 per share from $3.04 - $3.11 per share. This is a decrease of approximately $0.09 per share at the mid-point of the Company’s guidance consisting of $0.19 per share of greater than budgeted depreciation expense primarily due to the redevelopment of the low-rise portion of 601 Lexington Avenue that commenced during the third quarter of 2016, partially offset by $0.08 per share from the gain on sale of a land parcel during the third quarter of 2016 and $0.03 per share of reduced interest expense resulting from refinancing activity during the third quarter of 2016. In addition, the Company has updated its projected guidance for FFO per share (diluted) for the full year 2016 to $5.97 - $5.99 per share from $5.92 - $5.99 per share. This is an increase of approximately $0.03 per share at the mid-point of the Company’s guidance primarily consisting of $0.03 per share due to higher portfolio performance.

Boston Properties is a fully integrated, self-administered and self-managed real estate investment trust that develops, redevelops, acquires, manages, operates and owns a diverse portfolio of primarily Class A office space, five retail properties, four residential properties (including two properties under construction) and one hotel. The Company is one of the largest owners and developers of Class A office properties in the United States, concentrated in five markets - Boston, Los Angeles, New York, San Francisco and Washington, DC.