BOSTON PROPERTIES, INC. The following discussion should be read in conjunction with the financial statements and notes thereto appearing elsewhere in this report.
This Quarterly Report on Form 10-Q, including the documents incorporated by reference, contain forward-looking statements within the meaning of the federal securities laws, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We intend these forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and are including this statement for purposes of complying with those safe harbor provisions, in each case, to the extent applicable. Such statements are contained principally, but not only, under the captions "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." We caution investors that any such forward-looking statements are based on current beliefs or expectations of future events and on assumptions made by, and information currently available to, our management. When used, the words "anticipate," "believe," "budget," "could," "estimate," "expect," "intend," "may," "might," "plan," "project," "should," "will" and similar expressions that do not relate solely to historical matters are intended to identify forward-looking statements. Such statements are subject to risks, uncertainties and assumptions and are not guarantees of future performance or occurrences, which may be affected by known and unknown risks, trends, uncertainties and factors that are, in some cases, beyond our control. Should one or more of these known or unknown risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those expressed or implied by the forward-looking statements. We caution you that, while forward-looking statements reflect our good-faith beliefs when we make them, they are not guarantees of future performance or occurrences and are impacted by actual events when they occur after we make such statements. Accordingly, investors should use caution in relying on forward-looking statements, which are based on results and trends at the time they are made, to anticipate future results or trends. The most significant factors that may cause actual results to differ materially from those expressed or implied by the forward-looking statements include the impact on global andU.S. economic conditions due to the ongoing COVID-19 pandemic, the ongoing war inUkraine , rising inflation, increasing interest rates, supply-chain disruptions, as well as the risks described in (i) our Annual Report on Form 10-K for the fiscal year endedDecember 31, 2021 including those described under the caption "Risk Factors," (ii) our subsequent filings under the Exchange Act and (iii) the risk factors set forth in this Form 10-Q in Part II, Item 1A, if any.
Some of the risks and uncertainties that may cause our actual results, performance or achievements to differ materially from those expressed or implied by forward-looking statements include, among others, the following:
•the risks and uncertainties related to the impact of (1) the COVID-19 global pandemic, including the emergence of additional variants, the effectiveness, availability and distribution of vaccines, including their efficacy against new variant strains and the willingness of individuals to be vaccinated, (2) the impact of geopolitical conflicts, including the war inUkraine , and (3) the severity and duration of the indirect economic impacts of the foregoing, such as recession, supply chain disruptions, labor market disruptions, rising inflation, increasing interest rates, dislocation and volatility in capital markets, job losses, potential longer-term changes in consumer and tenant behavior, as well as possible future governmental responses;
•volatile or adverse global economic and geopolitical conditions, health crises and dislocations in the credit markets could adversely affect our access to cost-effective capital and have a resulting material adverse effect on our business opportunities, results of operations and financial condition;
•risks associated with downturns in the national and local economies, increasing interest rates, and volatility in the securities markets;
•general risks affecting the real estate industry (including, without limitation, the inability to enter into or renew leases, tenant space utilization, dependence on tenants' financial condition, and competition from other developers, owners and operators of real estate);
•failure to manage effectively our growth and expansion into new markets and sub-markets or to integrate acquisitions and developments successfully;
•the ability of our joint venture partners to satisfy their obligations;
•risks and uncertainties affecting property development and construction (including, without limitation, rising inflation, supply chain disruptions, labor shortages, construction delays, increased
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construction costs, cost overruns, inability to obtain necessary permits, tenant accounting considerations that may result in negotiated lease provisions that limit a tenant's liability during construction, and public opposition to such activities); •risks associated with the availability and terms of financing and the use of debt to fund acquisitions and developments or refinance existing indebtedness, including the impact of higher interest rates on the cost and/or availability of financing;
•risks associated with forward interest rate contracts and the effectiveness of such arrangements;
•risks associated with actual or threatened terrorist attacks;
•costs of compliance with the Americans with Disabilities Act and other similar laws;
•potential liability for uninsured losses and environmental contamination;
•risks associated with the physical effects of climate change;
•risks associated with security breaches through cyber attacks, cyber intrusions or otherwise, as well as other significant disruptions of our information technology (IT) networks and related systems, which support our operations and our buildings;
•risks associated with BXP's potential failure to qualify as a REIT under the Internal Revenue Code of 1986, as amended;
•possible adverse changes in tax and environmental laws;
•the impact of newly adopted accounting principles on our accounting policies and on period-to-period comparisons of financial results;
•risks associated with possible state and local tax audits; and
•risks associated with our dependence on key personnel whose continued service is not guaranteed.
The risks set forth above are not exhaustive. Other sections of this report may include additional factors that could adversely affect our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment, particularly in light of the circumstances relating to COVID-19 and the war inUkraine . New risk factors emerge from time to time and it is not possible for management to predict all risk factors, nor can we assess the impact of all risk factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. Investors should also refer to our most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q for future periods and Current Reports on Form 8-K as we file them with theSEC , and to other materials we may furnish to the public from time to time through Current Reports on Form 8-K or otherwise, for a discussion of risks and uncertainties that may cause actual results, performance or achievements to differ materially from those expressed or implied by forward-looking statements. We expressly disclaim any responsibility to update any forward-looking statements to reflect changes in underlying assumptions or factors, new information, future events, or otherwise, and you should not rely upon these forward-looking statements after the date of this report.
Overview
BXP is one of the largest publicly traded office real estate investment trusts (REITs) (based on total market capitalization as ofMarch 31, 2022 ) inthe United States that develops, owns, and manages primarily Class A office properties. Our properties are concentrated in six markets inthe United States -Boston ,Los Angeles ,New York ,San Francisco ,Seattle , andWashington, DC . BPLP is the entity through which BXP conducts substantially all of its business and owns (either directly or through subsidiaries) substantially all of its assets. We generate revenue and cash primarily by leasing Class A office space to our clients. When making leasing decisions, we consider, among other things, the creditworthiness of the client and the industry in which it conducts business, the length of the lease, the rental rate to be paid at inception and throughout the lease term, the costs of tenant improvements, free rent periods and other landlord concessions, anticipated operating expenses and real estate taxes, current and anticipated vacancy in our properties and the market overall (including sublease space), current and expected future demand for the space, the impact of other client's expansion rights and general economic factors. Our core strategy has always been to develop, acquire and manage high-quality properties in supply-constrained markets with high barriers-to-entry and attractive demand drivers, and to focus on executing long-term leases with financially strong clients. Historically, these factors have minimized our exposure in weaker economic cycles and enhanced revenues as market conditions improve. Our client base is diverse across market sectors and 36
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the weighted-average lease term for our in-place leases, excluding residential units, was approximately 7.9 years, as ofMarch 31, 2022 , including leases signed by our unconsolidated joint ventures. The weighted-average lease term for our 20 largest clients, based on leased square footage, was approximately 11.2 years as ofMarch 31, 2022 . To be successful in any leasing environment, we believe we must consider all aspects of the client-landlord relationship. In this regard, we believe that our competitive leasing advantage is based on the following attributes:
•our understanding of our client's short- and long-term space utilization and amenity needs in the local markets;
•our track record of developing and operating Class A office properties in a sustainable and responsible manner;
•our reputation as a premier developer, owner and manager of primarily Class A office properties;
•our financial strength and our ability to maintain high building standards; and
•our relationships with local brokers.
Outlook
Just as the Omicron variant's impact on the economy began to slowly dissipate, geopolitical tensions inEastern Europe increased uncertainty during the first quarter of 2022. Inflation, at generational highs, has caused food and energy prices to spike, thereby reducing consumer's purchasing power and elevating the risks of an economic slowdown. At the same time, the labor market remains historically tight and companies continue to look to add employees, pushing unemployment lower. As business conditions become more competitive due to rising interest rates, slowing economic growth, and changes in the labor markets, business leaders will likely feel the need to bring their employees together on a much more consistent basis and modify their return to office policies. We believe as employees return to their offices in greater numbers, our strategically located, high-quality office and well-amenitized properties will remain a vital component of the strategies of today's forward-thinking organizations that prioritize fostering collaboration, innovation, productivity and culture. We expect companies will look to take advantage of the availability of Class A space and upgrade. Despite the concerns surrounding COVID-19 variants, geopolitical tensions, and the potential impact on economic conditions, we remain optimistic for our industry generally and BXP in particular, given the demand for workers across sectors, the high quality of our properties, and the success of our development efforts.
We remain focused on the following priorities, which we believe are key to increasing future revenue and asset values over the long-term:
•ensuring client health, safety and satisfaction;
•leasing available space in our in-service and development properties, as well as proactively focusing on future lease expirations;
•completing the construction and leasing of our development properties;
•continuing and completing the redevelopment, repositioning, and repurposing for growing life sciences use of several key properties;
•identifying new investment opportunities that meet our criteria while maintaining discipline in our underwriting;
•managing our near-term debt maturities and maintaining our conservative balance sheet; and
•actively managing our operations in a sustainable and responsible manner.
The following is an overview of leasing and investment activity in the first quarter of 2022.
Leasing Activity and Occupancy
In the first quarter of 2022, we signed approximately 1.2 million square feet of
new leases and renewals, which is in line with our 10-year, pre-pandemic average
for leasing for the first quarter. These leases have a weighted-average lease
term of approximately 7.3 years, indicating that many new and existing clients
continue to commit to
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the long-term use of space and view our properties as their preferred choice for a premium Class A office environment.
The overall occupancy of our in-service office and retail properties was 89.1% atMarch 31, 2022 , an increase of 30 basis points fromDecember 31, 2021 . Given our moderate near-term rollover, the amount of leases signed, but for which occupancy has not commenced, and the number of leases in negotiation for space in the in-service portfolio, we expect our occupancy to continue to increase. Our parking and other revenue was approximately$21.7 million in the first quarter of 2022, a decrease of approximately$1.4 million , or 6%, from the fourth quarter of 2021. Our hotel property, theBoston Marriott Cambridge , also experienced a decrease in revenue of approximately$1.7 million , or 27%, from the fourth quarter of 2021. We believe both decreases are correlated to the spike in the Omicron variant throughout theU.S. in the first part of the quarter that delayed return to office openings and slowed down travel.
Investment Activity
We remain committed to developing and acquiring assets to enhance our long-term growth and to meet client demand for high-quality office, residential, and life sciences space. We continually evaluate current and prospective markets for possible acquisitions of "value-add" assets that require lease-up or repositioning, and acquisitions that are otherwise consistent with our long-term strategy of owning, managing, developing, and improving, premier Class A properties in each of our chosen markets. Consistent with this strategy, onApril 14, 2022 , we entered into an agreement to acquire Madison Centre, a Class A office property in theSeattle, Washington central business district ("CBD"), for a gross purchase price of$730 million . This addition to our portfolio furthers our goal to establish a strong platform for continued growth in theSeattle market. Built in 2017, Madison Centre is approximately 760,000 square feet, 37 floors, 93% leased and LEED Platinum certified. The acquisition is expected to close in the second quarter of this year and will be initially funded with a one-year,$730 million term loan. We anticipate ultimately funding the acquisition through incremental asset sales, which we anticipate would be structured as like-kind exchanges or joint venture equity.
In the first quarter of 2022, we commenced two new development projects:
•the redevelopment of 651Gateway inSouth San Francisco, California , an office building that will be converted to approximately 327,000 net rentable square feet of life sciences space and that is owned by a joint venture in which we have a 50% interest; and •the development of the first phase of Platform 16 inSan Jose, California , a Class A office project that is owned by a joint venture in which we have a 55% interest. The first phase is an approximately 390,000 net rentable square foot Class A creative office building. When all phases are complete, Platform 16 is expected to include approximately 1.1 million net rentable square feet. As ofMarch 31, 2022 , our development/redevelopment pipeline consists of 11 properties that, when completed, we expect will total approximately 4.1 million net rentable square feet. Our share of the estimated total cost for these projects is approximately$2.9 billion , of which approximately$1.2 billion remained to be invested. The total development pipeline, inclusive of both office and lab/life sciences developments, but excluding theView Boston Observatory at ThePrudential Center , is 54% pre-leased as ofApril 29, 2022 . The office development projects, which total approximately 2.8 million square feet, are approximately 57% pre-leased as ofApril 29, 2022 , to predominately credit-strong clients with long-lease terms. Supply-chain concerns and inflationary pressures continue to negatively impact our business and have been exacerbated by the war inUkraine and the ongoing Omicron outbreak inChina . Impacts on our business include increased time to complete construction projects and increased costs. Our construction schedule is one of the elements we consider when we evaluate bids for development projects and capital improvements. We have been successful in awarding bids and maintaining schedules through the pandemic. However, there are fewer choices for materials, and we continue to work closely with our consultants and contractors to ensure there are not items used in the development or redevelopment process that are not available or could, directly or indirectly, cause delays. We are intentionally minimizing the amount of materials we acquire from foreign suppliers, releasing material packages as early as possible and, when appropriate, purchasing materials in advance and storing them off-site. We currently expect to deliver all active developments and redevelopments on time and budget. However, we may experience greater costs and/or necessary materials may not be available, which could delay the completion of our development projects. A failure to deliver a project on time could expose us to additional costs, in time or penalties (including lease termination rights), under leases signed for the project. 38
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As we continue to focus on new investments to drive future growth, we continually review our portfolio to identify properties as potential sales candidates that either no longer fit within our portfolio strategy or could attract premium pricing in the current market. OnMarch 31, 2022 , we completed the sale of195 West Street , an approximately 63,500 square foot office building inWaltham, Massachusetts , for a gross sales price of$37.7 million and net cash proceeds of approximately$35.4 million . We expect to sell an aggregate of$700 million to$900 million of assets in 2022.
A brief overview of each of our markets follows.
During the first quarter of 2022, we signed approximately 351,000 square feet of leases and approximately 369,000 square feet of leases commenced in theBoston region. Approximately 191,000 square feet of the leases that commenced had been vacant for less than one year and represent an increase in net rental obligations of approximately 8% over the prior leases.
Our Boston CBD in-service portfolio was approximately 94% leased as of
Our approximately 2.0 million square foot in-service office portfolio inCambridge was approximately 99% leased as ofMarch 31, 2022 . In April of 2022, we signed an approximately 570,000 square foot lease with AstraZeneca to lease the entirety of the first phase of the future life sciences development at290 Binney Street . This future development site is located in the heart ofKendall Square and, when all phases are complete, will be comprised of approximately 1.1 million square feet of life sciences space and a 400,000 square foot residential building. This lease is subject to various conditions, some of which are not within our control. If the conditions are not satisfied for a reason other than BXP's non-performance, then BXP may terminate the lease. There can be no assurance the conditions will be satisfied or that we will commence the development on the terms and schedule currently contemplated or at all.Waltham and the area surrounding the Route 128-Mass Turnpike interchange continue to be a popular submarket ofBoston for leading and emerging companies in the life sciences, biotechnology and technology sectors. Our Route 128-Mass Turnpike portfolio is comprised of approximately 4.8 million square feet and was approximately 85% leased as ofMarch 31, 2022 .
OurLos Angeles ("LA") in-service portfolio of approximately 2.3 million square feet is currently focused in West LA and includes Colorado Center, a 1.1 million square foot property of which we own 50%, andSanta Monica Business Park , a 21-building, approximately 1.2 million square foot property of which we own 55%. As ofMarch 31, 2022 , our LA in-service properties were approximately 88% leased.
During the first quarter of 2022, we executed approximately 434,000 square feet of leases in theNew York region and approximately 267,000 square feet of leases commenced. Approximately 214,000 square feet of the 267,000 square feet of leases that commenced in the first quarter had been vacant for less than one year and they represent a decrease in net rental obligations of approximately 20% over the prior leases. The decrease is primarily driven by a short-term lease extension completed in 2021, which allowed our client time to consider its long-term plans. InApril 2022 , we were successful in retaining this client with a lease extension to 2040. The most significant transaction completed in the first quarter of 2022 was an approximately 330,000 square foot extension and expansion at601 Lexington Avenue inNew York City . This lease involved the client expanding into a vacant floor as well as floors that are expiring in the second half of 2022. As ofMarch 31, 2022 , our New York CBD in-service portfolio was approximately 90% leased.San Francisco During the first quarter of 2022, we executed approximately 199,000 square feet of leases and approximately 182,000 square feet of leases commenced in theSan Francisco region. Approximately 139,000 square feet of the 182,000 square feet of leases that commenced had been vacant for less than one year and represent an increase in net rental obligations of approximately 8% over the prior leases.
Our San Francisco CBD in-service properties were approximately 91% leased as of
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In
Safeco Plaza , our initial entry into theSeattle market, was 87.7% leased as ofMarch 31, 2022 . The strength of theSeattle market, as evidenced by our experience with lease proposals atSafeco Plaza , affirmed our reasons for entering the market and gave us confidence to move forward with our plan to grow this region. As a result, we signed an agreement to acquire Madison Centre, one of the highest quality office buildings in the Seattle CBD, for a gross purchase price of$730 million . This addition to our portfolio will create a strong platform for continued growth in theSeattle market. Built in 2017, Madison Centre is approximately 760,000 square feet, 37 floors, 93% leased and LEED Platinum certified.
During the first quarter of 2022, we executed approximately 183,000 square feet of leases and approximately 709,000 square feet of leases commenced in theWashington, DC region, including approximately 411,000 square feet atReston Next. Leases for approximately 110,000 square feet of the 709,000 square feet of leases that commenced had been vacant for less than one year and represent a decrease in net rental obligations of approximately 2% over the prior leases. OurWashington, DC CBD in-service properties were approximately 85% leased as ofMarch 31, 2022 . OurReston, Virginia properties were approximately 94% leased as ofMarch 31, 2022 . During the first quarter of 2022, activity inReston was concentrated on partial floor deals. Large client activity has been slow in early 2022.
Leasing Statistics
The table below details the leasing activity, including 100% of the
unconsolidated joint ventures, that commenced during the three months ended
Three months ended March
31, 2022
(Square Feet)
Vacant space available at the beginning of the period 5,340,029
Property dispositions/properties taken out of service (1) (95,180)
Properties placed (and partially placed) in-service (2) 410,690
Leases expiring or terminated during the period 1,097,803
Total space available for lease 6,753,342
1st generation leases 552,730
2nd generation leases with new tenants 687,656
2nd generation lease renewals 369,418
Total space leased (3) 1,609,804
Vacant space available for lease at the end of the period 5,143,538
Leases executed during the period, in square feet (4) 1,179,592
Second generation leasing information: (5)
Leases commencing during the period, in square feet 1,057,074
Weighted Average Lease Term 71 Months
Weighted Average Free Rent Period 135 Days
Total Transaction Costs Per Square Foot (6) $54.99
Increase (Decrease) in Gross Rents (7) (2.36) %
Increase (Decrease) in Net Rents (8) (4.34) %
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__________________
(1)Total square feet of property dispositions during the three months endedMarch 31, 2022 consists of 95,180 square feet at 651Gateway . (2)Total square feet of properties placed (and partially placed) in-service during the three months endedMarch 31, 2022 consists of 410,690 square feet at Reston Next. (3)Represents leases for which lease revenue recognition has commenced in accordance with GAAP during the three months endedMarch 31, 2022 . (4)Represents leases executed during the three months endedMarch 31, 2022 for which we either (1) commenced lease revenue recognition in such period or (2) will commence lease revenue recognition in subsequent periods, in accordance with GAAP, and includes leases at properties currently under development. The total square feet of leases executed and recognized during the three months endedMarch 31, 2022 is 321,917. (5)Second generation leases are defined as leases for space that had previously been leased by us. Of the 1,057,074 square feet of second generation leases that commenced during the three months endedMarch 31, 2022 , leases for 735,157 square feet were signed in prior periods. (6)Total transaction costs include tenant improvements and leasing commissions but exclude free rent concessions and other inducements in accordance with GAAP. (7)Represents the decrease in gross rent (base rent plus expense reimbursements) on the new versus expired leases on the 734,025 square feet of second generation leases that had been occupied within the prior 12 months for the three months endedMarch 31, 2022 ; excludes leases that management considers temporary because the tenant is not expected to occupy the space on a long-term basis. (8)Represents the decrease in net rent (gross rent less operating expenses) on the new versus expired leases on the 734,025 square feet of second generation leases that had been occupied within the prior 12 months for the three months endedMarch 31, 2022 .
Transactions during the three months ended
Disposition
•OnMarch 31, 2022 , we completed the sale of195 West Street located inWaltham, Massachusetts for a gross sale price of$37.7 million . Net cash proceeds totaled approximately$35.4 million , resulting in a gain on sale of real estate totaling approximately$22.7 million for BXP and approximately$23.4 million for BPLP.195 West Street is an approximately 63,500 net rentable square foot Class A office property.
Unconsolidated joint venture activities
•OnJanuary 18, 2022 , a joint venture in which we have a 50% interest commenced the redevelopment of 651Gateway located inSouth San Francisco, California . 651Gateway is an office building that will be converted to approximately 327,000 net rentable square feet of life sciences space. •OnFebruary 2, 2022 , a joint venture in which we have a 55% interest commenced the development of the first phase of Platform 16, a Class A office project located inSan Jose, California , that is expected to contain approximately 1.1 million net rentable square feet upon completion. The first phase of the development project will include the construction of an approximately 390,000 net rentable square foot Class A creative office building and a below-grade parking garage. •OnMarch 28, 2022 , a joint venture in which we have a 20% interest refinanced with a new lender the secured debt collateralized by itsMetropolitan Square property located inWashington, DC . At the time of the refinancing, the loan had an outstanding balance of approximately$294.1 million , bore interest at a variable rate equal to (1) the greater of (x) LIBOR or (y) 0.65%, plus (2) 4.75% per annum and was scheduled to mature onJuly 7, 2022 , with two, one-year extension options, subject to certain conditions. In conjunction with the refinancing, the joint venture settled its interest rate cap agreement, entered into in 2020, to limit its exposure to increases in the LIBOR rate. There was no prepayment penalty associated with the prepayment of the previous mortgage loan. The joint venture recognized a loss from early extinguishment of debt totaling approximately$1.3 million due to the write-off of unamortized deferred financing costs. The new mortgage and mezzanine loans have an aggregate principal balance of$420.0 million , bear interest at a weighted average variable rate equal to the Secured Overnight Financing Rate ("SOFR") plus 2.75% per annum and mature onApril 9, 2024 , with three, one-year extension options, subject to certain conditions. The joint venture distributed excess loan proceeds from the new mortgage and mezzanine loans totaling approximately$100.5 million , of which our share totaled approximately$20.1 million .Metropolitan Square is an office property with approximately 657,000 net rentable square feet located inWashington, DC . 41
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Transactions completed subsequent to
•OnApril 7, 2022 , we executed an agreement to assign our right to acquire11251 Roger Bacon Drive inReston, Virginia to a third party for an assignment fee of approximately$6.9 million .11251 Roger Bacon Drive is an approximately 65,000 square foot office building situated on approximately 2.6 acres (See Note 3). •OnApril 14, 2022 , we entered into an agreement to acquire Madison Centre inSeattle, Washington for a gross purchase price of$730.0 million . Pursuant to the agreement, we made a$50.0 million non-refundable deposit that will be credited towards the purchase price at closing. Madison Centre is an approximately 760,000 square foot, 37-story Class A office building. The acquisition is subject to customary closing conditions, and there can be no assurance that this acquisition will occur on the terms currently contemplated or at all. •OnApril 18, 2022 , a joint venture in which we have a 50% ownership interest extended the construction loan collateralized by its Hub50House property. At the time of the extension, the outstanding balance of the loan totaled approximately$176.5 million and the loan bore interest at a variable rate equal to LIBOR plus 2.00% per annum and was scheduled to mature onApril 19, 2022 . The extended loan matures onJune 19, 2022 . Hub50House is a residential property that consists of approximately 320,000 net rentable square feet and 440 residential units located inBoston, Massachusetts . •OnApril 27, 2022 , we entered into a lease agreement with AstraZeneca to lease approximately 570,000 square feet at our290 Binney Street future development project.290 Binney Street is part of the initial phase of a future life sciences development project located in the heart ofKendall Square inCambridge, Massachusetts . The full project will consist of two buildings aggregating approximately 1.1 million rentable square feet of life sciences space and an approximately 400,000 square foot residential building. The lease and commencement of construction are subject to various conditions, some of which are not within our control. There can be no assurance that the conditions will be satisfied or that we will commence the development on the terms and schedule currently contemplated or at all.
Critical Accounting Estimates
Management's Discussion and Analysis of Financial Condition and Results of
Operations discuss our Consolidated Financial Statements, which have been
prepared in accordance with generally accepted accounting principles ("GAAP").
The preparation of these financial -statements in conformity with GAAP requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and the disclosure of contingent liabilities at the date
of the financial statements and the reported amounts of revenue and expenses
during the reporting period. Actual results may differ from those estimates and
assumptions.
Our Annual Report on Form 10-K for the year ended December 31, 2021 contains a
discussion of our critical accounting estimates. There have been no significant
changes in our critical accounting estimates since the year ended December 31,
2021 .
Results of Operations for the Three Months Ended
Net income attributable toBoston Properties, Inc. common shareholders and net income attributable toBoston Properties Limited Partnership common unitholders increased approximately$51.4 million and$56.1 million for the three months endedMarch 31, 2022 compared to 2021, respectively, as detailed in the following tables and for the reasons discussed below under the heading "Comparison of the three months endedMarch 31, 2022 to the three months endedMarch 31, 2021 " within "Item 2-Management's Discussion and Analysis of Financial Condition and Results of Operations."
The following are reconciliations of Net Income Attributable to
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BXP
Three months ended March 31,
Increase/ %
2022 2021 (Decrease) Change
(in thousands)
Net Income Attributable to Boston Properties ,
Inc. Common Shareholders $ 143,047 $ 91,624 $ 51,423 56.12 %
Preferred stock redemption charge - 6,412 (6,412) (100.00) %
Preferred dividends - 2,560 (2,560) (100.00) %
Net Income Attributable to Boston Properties ,
Inc. 143,047 100,596 42,451 42.20 %
Net Income Attributable to Noncontrolling
Interests:
Noncontrolling interest-common units of the
Operating Partnership 16,361 11,084 5,277 47.61 %
Noncontrolling interests in property partnerships 17,549 16,467 1,082 6.57 %
Net Income 176,957 128,147 48,810 38.09 %
Other Expenses:
Add:
Interest expense 101,228 107,902 (6,674) (6.19) %
Losses from early extinguishment of debt - 898 (898) (100.00) %
Other Income:
Less:
Gains (losses) from investments in securities (2,262) 1,659 (3,921) (236.35) %
Interest and other income (loss) 1,228 1,168 60 5.14 %
Gains on sales of real estate 22,701 - 22,701 100.00 %
Income from unconsolidated joint ventures 2,189 5,225 (3,036) (58.11) %
Other Expenses:
Add:
Depreciation and amortization expense 177,624 176,565 1,059 0.60 %
Transaction costs - 331 (331) (100.00) %
Payroll and related costs from management
services contracts 4,065 3,505 560 15.98 %
General and administrative expense 43,194 44,959 (1,765) (3.93) %
Other Revenue:
Less:
Direct reimbursements of payroll and related
costs from management services contracts 4,065 3,505 560 15.98 %
Development and management services revenue 5,831 6,803 (972) (14.29) %
Net Operating Income $ 469,316 $ 443,947 $ 25,369 5.71 %
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BPLP
Three months ended March 31,
Increase/ %
2022 2021 (Decrease) Change
(in thousands)
Net Income Attributable to Boston Properties
Limited Partnership Common Unitholders $ 161,829 $ 105,773 $ 56,056 53.00 %
Preferred unit redemption charge - 6,412 (6,412) (100.00) %
Preferred distributions - 2,560 (2,560) (100.00) %
Net Income Attributable to Boston Properties
Limited Partnership 161,829 114,745 47,084 41.03 %
Net Income Attributable to Noncontrolling
Interests:
Noncontrolling interests in property partnerships 17,549 16,467 1,082 6.57 %
Net Income 179,378 131,212 48,166 36.71 %
Other Expenses:
Add:
Interest expense 101,228 107,902 (6,674) (6.19) %
Losses from early extinguishment of debt - 898 (898) (100.00) %
Other Income:
Less:
Gains (losses) from investments in securities (2,262) 1,659 (3,921) (236.35) %
Interest and other income (loss) 1,228 1,168 60 5.14 %
Gains on sales of real estate 23,384 - 23,384 100.00 %
Income from unconsolidated joint ventures 2,189 5,225 (3,036) (58.11) %
Other Expenses:
Add:
Depreciation and amortization expense 175,886 173,500 2,386 1.38 %
Transaction costs - 331 (331) (100.00) %
Payroll and related costs from management
services contracts 4,065 3,505 560 15.98 %
General and administrative expense 43,194 44,959 (1,765) (3.93) %
Other Revenue:
Less:
Direct reimbursements of payroll and related
costs from management services contracts 4,065 3,505 560 15.98 %
Development and management services revenue 5,831 6,803 (972) (14.29) %
Net Operating Income $ 469,316 $ 443,947 $ 25,369 5.71 %
At March 31, 2022 and 2021, we owned or had joint venture interests in a
portfolio of 201 and 196 commercial real estate properties, respectively (in
each case, the "Total Property Portfolio"). As a result of changes within our
Total Property Portfolio, the financial data presented below shows significant
changes in revenue and expenses from period-to-period. Accordingly, we do not
believe that our period-to-period financial data with respect to the Total
Property Portfolio is meaningful. Therefore, the comparison of operating results
for the three months ended March 31, 2022 and 2021 show separately the changes
attributable to the properties that were owned by us and in-service throughout
each period compared (the "Same Property Portfolio") and the changes
attributable to the properties included in the Acquired, Placed In-Service,
Development or Redevelopment or Sold Portfolios.
In our analysis of operating results, particularly to make comparisons of net
operating income between periods meaningful, it is important to provide
information for properties that were in-service and owned by us throughout each
period presented. We refer to properties acquired or placed in-service prior to
the beginning of the earliest period presented and owned by us and in-service
through the end of the latest period presented as our Same Property Portfolio.
The Same Property Portfolio therefore excludes properties acquired, placed
in-service or in development or redevelopment after the beginning of the
earliest period presented or disposed of prior to the end of the latest period
presented.
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NOI is a non-GAAP financial measure equal to net income attributable toBoston Properties, Inc. common shareholders and net income attributable toBoston Properties Limited Partnership common unitholders, as applicable, the most directly comparable GAAP financial measures, plus (1) preferred stock/unit redemption charge, preferred dividends/distributions, net income attributable to noncontrolling interests, interest expense, losses from early extinguishment of debt, depreciation and amortization expense, transaction costs, payroll and related costs from management services contracts and corporate general and administrative expense less (2) gains (losses) from investments in securities, interest and other income (loss), gains on sales of real estate, income from unconsolidated joint ventures, direct reimbursements of payroll and related costs from management services contracts and development and management services revenue. We use NOI internally as a performance measure and believe it provides useful information to investors regarding our results of operations and financial condition because, when compared across periods, it reflects the impact on operations from trends in occupancy rates, rental rates, operating costs and acquisition and development activity on an unleveraged basis, providing perspective not immediately apparent from net income attributable toBoston Properties, Inc. common shareholders and net income attributable toBoston Properties Limited Partnership common unitholders. For example, interest expense is not necessarily linked to the operating performance of a real estate asset and is often incurred at the corporate level as opposed to the property level. Similarly, interest expense may be incurred at the property level even though the financing proceeds may be used at the corporate level (e.g., used for other investment activity). In addition, depreciation and amortization expense, because of historical cost accounting and useful life estimates, may distort operating performance measures at the property level. NOI presented by us may not be comparable to NOI reported by other REITs or real estate companies that define NOI differently. We believe that, in order to facilitate a clear understanding of our operating results, NOI should be examined in conjunction with net income attributable toBoston Properties, Inc. common shareholders and net income attributable toBoston Properties Limited Partnership common unitholders as presented in our Consolidated Financial Statements. NOI should not be considered as a substitute for net income attributable toBoston Properties, Inc. common shareholders or net income attributable toBoston Properties Limited Partnership common unitholders (determined in accordance with GAAP) or any other GAAP financial measures and should only be considered together with and as a supplement to our financial information prepared in accordance with GAAP. The gains on sales of real estate, depreciation expense and impairment losses may differ between BXP and BPLP as a result of previously applied acquisition accounting by BXP for the issuance of common stock in connection with non-sponsor OP Unit redemptions by BPLP. This accounting resulted in a step-up of the real estate assets at BXP that was allocated to certain properties. The difference between the real estate assets of BXP as compared to BPLP for certain properties having an allocation of the real estate step-up will result in a corresponding difference in gains on sales of real estate, depreciation expense and impairment losses, when those properties are sold. For additional information see the Explanatory Note that follows the cover page of this Quarterly Report on Form 10-Q.
Comparison of the three months ended
The table below shows selected operating information for the Same Property Portfolio and the Total Property Portfolio. The Same Property Portfolio consists of 140 properties totaling approximately 39.6 million net rentable square feet, excluding unconsolidated joint ventures. The Same Property Portfolio includes properties acquired or placed in-service on or prior toJanuary 1, 2021 and owned and in-service throughMarch 31, 2022 . The Total Property Portfolio includes the effects of the other properties either acquired, placed in-service, in development or redevelopment afterJanuary 1, 2021 or disposed of on or prior toMarch 31, 2022 . This table includes a reconciliation from the Same Property Portfolio to the Total Property Portfolio by also providing information for the three months endedMarch 31, 2022 and 2021 with respect to the properties that were acquired, placed in-service, in development or redevelopment or sold. 45
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Properties in
Properties Development or
Properties Placed In-Service Redevelopment
Same Property Portfolio Acquired Portfolio Portfolio Portfolio Properties Sold Portfolio Total Property Portfolio
Increase/ % Increase/ %
2022 2021 (Decrease) Change 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 (Decrease) Change
(dollars in thousands)
Rental Revenue: (1)
Lease Revenue (Excluding
Termination Income) $ 684,774 $ 661,858 $ 22,916 3.46 % $ 3,291 $ - $ 14,560 $ 4,171 $ - $ 2,771 $
749
4.58 %
Termination Income 2,078 4,269 (2,191) (51.32) % - - - - - - - - 2,078 4,269 (2,191) (51.32) %
Lease Revenue 686,852 666,127 20,725 3.11 % 3,291 - 14,560 4,171 - 2,771 749 3,743 705,452 676,812 28,640 4.23 %
Parking and Other 21,436 16,762 4,674 27.88 % - - - 6 - - - - 21,436 16,768 4,668 27.84 %
Total Rental Revenue (1) 708,288 682,889 25,399 3.72 % 3,291 - 14,560 4,177 - 2,771 749 3,743 726,888 693,580 33,308 4.80 %
Real Estate Operating
Expenses 258,619 247,844 10,775 4.35 % 717 - 4,245 1,089 - 1,126 242 1,203 263,823 251,262 12,561 5.00 %Net Operating Income, Excluding Residential and Hotel 449,669 435,045 14,624 3.36 % 2,574 - 10,315 3,088 - 1,645 507 2,540 463,065 442,318 20,747 4.69 % Residential Net Operating Income (2) 6,534 3,048 3,486 114.37 % - - - - - - - - 6,534 3,048 3,486 114.37 %Hotel Net Operating Loss (2) (283) (1,419) 1,136 80.06 % - - - - - - - - (283) (1,419) 1,136 80.06 %
Net Operating Income
4.41 % $ 2,574 $ - $ 10,315 $ 3,088 $ - $ 1,645 $ 507 $ 2,540 $ 469,316 $ 443,947 $ 25,369 5.71 %
_______________
(1)Rental Revenue is equal to Revenue less Development and Management Services Revenue and Direct Reimbursements of Payroll and Related Costs from Management Services Revenue per the Consolidated Statements of Operations, excluding the residential and hotel revenue that is noted below. We use Rental Revenue internally as a performance measure and in calculating other non-GAAP financial measures (e.g., NOI), which provides investors with information regarding our performance that is not immediately apparent from the comparable non-GAAP measures and allows investors to compare operating performance between periods. (2)For a detailed discussion of NOI, including the reasons management believes NOI is useful to investors, see page 45. Residential Net Operating Income for the three months endedMarch 31, 2022 and 2021 is comprised of Residential Revenue of$12,966 and$9,175 less Residential Expenses of$6,432 and$6,127 , respectively.Hotel Net Operating Loss for the three months endedMarch 31, 2022 and 2021 is comprised ofHotel Revenue of$4,557 and$632 lessHotel Expenses of$4,840 and$2,051 , respectively, per the Consolidated Statements of Operations. 46
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Same Property Portfolio
Lease Revenue (Excluding Termination Income)
Lease revenue (excluding termination income) from the Same Property Portfolio increased by approximately$22.9 million for the three months endedMarch 31, 2022 compared to 2021. The increase was a result of our average revenue per square foot increasing by approximately$2.96 , contributing approximately$25.7 million , partially offset by an approximately$2.8 million decrease due to our average occupancy decreasing from 91.5% to 91.1%.
Termination Income
Termination income decreased by approximately
Termination income for the three months endedMarch 31, 2022 related to ten tenants across the Same Property Portfolio and totaled approximately$1.5 million , which was primarily related to tenants that terminated leases early inSan Francisco . In addition, we received a distribution from our unsecured credit claim againstLehman Brothers, Inc. of approximately$0.6 million .
Termination income for the three months ended
Parking and Other Revenue
Parking and other revenue increased by approximately$4.7 million for the three months endedMarch 31, 2022 compared to 2021. Parking revenue increased by approximately$6.2 million and was partially offset by a decrease in other revenue of approximately$1.5 million . The increase in parking revenue was primarily due to an increase in transient and monthly parking. The decrease in other revenue was due to a decrease in insurance proceeds received during the three months endedMarch 31, 2022 compared to 2021.
Real Estate Operating Expenses
Real estate operating expenses from the Same Property Portfolio increased by approximately$10.8 million , or 4.3%, for the three months endedMarch 31, 2022 compared to 2021, due primarily to an increase of approximately$15.1 million , or 16.2%, in operating expenses, including cleaning, utilities, repairs and maintenance, and roads/grounds/security, and other real estate operating expenses of$1.7 million , or 7.9%, partially offset by a decrease in real estate taxes of approximately$6.0 million , or 4.5%. The increase in operating expenses is driven by an increase in physical tenant occupancy. The decrease in real estate taxes was primarily inNew York City .
Properties Acquired Portfolio
The table below lists the properties acquired betweenJanuary 1, 2021 andMarch 31, 2022 . Rental revenue and real estate operating expenses increased by approximately$3.3 million and$0.7 million , respectively, for the three months endedMarch 31, 2022 compared to 2021, as detailed below. Rental Revenue Real Estate Operating Expenses Name Date acquired Square Feet 2022 2021 Change 2022 2021 Change (dollars in thousands) 153 & 211 Second Avenue June 2, 2021 136,882$ 2,555 $ -$ 2,555 $ 297 $ -$ 297 Shady Grove Innovation District August 2, 2021 232,278 736 - 736 420 - 420 369,160$ 3,291 $ -$ 3,291 $ 717 $ -$ 717
Properties Placed In-Service Portfolio
The table below lists the properties that were placed in-service or partially placed in-service betweenJanuary 1, 2021 andMarch 31, 2022 . Rental revenue and real estate operating expenses from our Properties Placed In-Service Portfolio increased by approximately$10.4 million and$3.2 million , respectively, for the three months endedMarch 31, 2022 compared to 2021, as detailed below. 47
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Quarter Initially Rental Revenue Real Estate Operating Expenses
Name Placed In-Service Quarter Fully Placed In-Service Square Feet 2022 2021 Change 2022 2021 Change
(dollars in thousands)
One Five Nine
East 53rd
Street (1) First Quarter, 2021 First Quarter, 2021 220,000 $ 4,487 $ 2,676 $ 1,811 $ 945 $ 719 $ 226
200 West Street
(2) Fourth Quarter, 2020 Fourth Quarter, 2021 273,365 3,183 1,501 1,682 1,186 370 816
Reston Next Fourth Quarter, 2021 N/A 1,062,000 6,890 - 6,890 2,114 - 2,114
1,555,365 $ 14,560 $ 4,177 $ 10,383 $ 4,245 $ 1,089 $ 3,156
_______________
(1)This is the low-rise portion of
Properties in Development or Redevelopment Portfolio
The table below lists the properties that were in development or redevelopment betweenJanuary 1, 2021 andMarch 31, 2022 . Rental revenue and real estate operating expenses from our Properties in Development or Redevelopment Portfolio decreased by approximately$2.8 million and$1.1 million , respectively, for the three months endedMarch 31, 2022 compared to 2021, as detailed below. Rental Revenue Real Estate Operating Expenses Date Commenced Development / Name Redevelopment Square Feet 2022 2021 Change 2022 2021 Change (dollars in thousands) 325 Main Street (1) May 9, 2019 115,000 $ - $ - $ - $ -$ 17 $ (17) 880 Winter Street (2) February 25, 2021 224,000 - 1,335 (1,335) - 758 (758) 3625-3635 Peterson Way (3) April 16, 2021 218,000 - 1,436 (1,436) - 351 (351) 557,000 $ -$ 2,771 $ (2,771) $ -$ 1,126 $ (1,126) _______________ (1)Real estate operating expenses for the three months endedMarch 31, 2021 were related to demolition costs. (2)OnFebruary 25, 2021 , we commenced the redevelopment and conversion of880 Winter Street , a 224,000 square foot office property located inWaltham, Massachusetts , to laboratory space. (3)OnApril 16, 2021 , we removed3625-3635 Peterson Way , located inSanta Clara, California , from our in-service portfolio. We demolished the building and expect to redevelop the site at a future date.
Properties Sold Portfolio
The table below lists the properties we sold betweenJanuary 1, 2021 andMarch 31, 2022 . Rental revenue and real estate operating expenses from our Properties Sold Portfolio decreased by approximately$3.0 million and$1.0 million , respectively, for the three months endedMarch 31, 2022 compared to 2021, as detailed below. Rental Revenue
Real Estate Operating Expenses
Name Date Sold Property Type Square Feet 2022 2021 Change 2022 2021 Change
(dollars in thousands)
181, 191 and
201 Spring
Street October 25, 2021 Office 333,000 $ - $ 3,743 $ (3,743) $ - $ 1,074 $ (1,074)
195 West Street March 31, 2022 Office 63,500 749 - 749 242 129 113
396,500 $ 749 $ 3,743 $ (2,994) $ 242 $ 1,203 $ (961) Residential Net Operating Income
Net operating income for our residential same properties increased by
approximately
The following reflects our occupancy and rate information for our residential
same properties for the three months ended
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Average Rental Rate Per Occupied Square
Average Monthly Rental Rate (1) Foot Average Physical Occupancy (2) Average Economic Occupancy (3)
Name 2022 2021 Change (%) 2022 2021 Change (%) 2022 2021 Change (%) 2022 2021 Change (%)
Proto Kendall Square $ 2,743 $ 2,585 6.1 % $ 5.04 $ 4.78 5.4 % 93.6 % 90.4 % 3.5 % 93.1 % 88.8 % 4.8 %
The Lofts at Atlantic
Wharf $ 3,933 $ 3,474 13.2 % $ 4.36 $ 3.99 9.3 % 96.1 % 87.6 % 9.7 % 95.6 % 84.0 % 13.8 %
The Avant at Reston Town
Center $ 2,340 $ 2,287 2.3 % $ 2.55 $ 2.51 1.6 % 94.2 % 91.4 % 3.1 % 94.0 % 90.2 % 4.2 %
Signature at Reston $ 2,580 $ 2,265 13.9 % $ 2.66 $ 2.36 12.7 % 94.2 % 80.1 % 17.6 % 93.5 % 75.6 % 23.7 %
The Skylyne $ 3,342 $ 2,953 13.2 % $ 4.03 $ 3.55 13.5 % 71.5 % 15.8 % 352.5 % 68.6 % 9.1 % 653.8 %
_______________
(1)Average Monthly Rental Rate is calculated as the average of the quotients
obtained by dividing (A) rental revenue as determined in accordance with GAAP,
by (B) the number of occupied units for each month within the applicable fiscal
period.
(2)Average Physical Occupancy is defined as (1) the average number of occupied
units divided by (2) the total number of units, expressed as a percentage.
(3)Average Economic Occupancy is defined as (1) total possible revenue less
vacancy loss divided by (2) total possible revenue, expressed as a percentage.
Total possible revenue is determined by valuing average occupied units at
contract rates and average vacant units at Market Rents. Vacancy loss is
determined by valuing vacant units at current Market Rents. By measuring vacant
units at their Market Rents, Average Economic Occupancy takes into account the
fact that units of different sizes and locations within a residential property
have different economic impacts on a residential property's total possible gross
revenue. Market Rents used by us in calculating Economic Occupancy are based on
the current market rates set by the managers of our residential properties based
on their experience in renting their residential property's units and publicly
available market data. Actual market rents and trends in such rents for a region
as reported by others may vary materially from Market Rents used by us. Market
Rents for a period are based on the average Market Rents during that period and
do not reflect any impact for cash concessions.
The Boston Marriott Cambridge hotel property continues to operate at a loss, however, the net operating loss decreased by approximately$1.1 million for the three months endedMarch 31, 2022 compared to 2021. The decreased demand for and occupancy of theBoston Marriott Cambridge hotel have had, and are expected to continue to have, a material adverse effect on its operations. We expect hotel occupancy to remain low until the demand for business and leisure travel returns to historical levels. The following reflects our occupancy and rate information for theBoston Marriott Cambridge hotel for the three months endedMarch 31, 2022 and 2021. 2022 2021 Change (%) Occupancy 40.4 % 10.9 % 270.6 % Average daily rate$ 266.10 $ 123.11 116.1 % REVPAR$ 91.38 $ 13.43 580.4 %
Other Operating Revenue and Expense Items
Development and Management Services Revenue
Development and management services revenue decreased by approximately$1.0 million for the three months endedMarch 31, 2022 compared to 2021. Development services revenue and management services revenue decreased by approximately$0.9 million and$0.1 million , respectively. The decrease in development services revenue was primarily related to a decrease in development fees. The decrease in management services revenue was primarily related to a decrease in leasing commissions earned from a third-party owned building in theWashington, DC region, partially offset by an increase in asset management fees earned from an unconsolidated joint venture inSeattle .
General and Administrative Expense
General and administrative expense decreased by approximately
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million, partially offset by an increase of approximately$1.8 million in other general and administrative expenses. The decrease in compensation expense primarily related to an approximately$4.0 million decrease in the value of our deferred compensation plan. The increase in other general and administrative expenses primarily related to an increase in professional fees. Wages directly related to the development of rental properties are capitalized and included in real estate assets on our Consolidated Balance Sheets and amortized over the useful lives of the applicable asset or lease term. Capitalized wages for the three months endedMarch 31, 2022 and 2021 were approximately$4.0 million and$3.3 million , respectively. These costs are not included in the general and administrative expenses discussed above.
Transaction Costs
Transaction costs decreased by approximately$0.3 million for the three months endedMarch 31, 2022 compared to 2021 due primarily to joint venture formation costs that occurred during the three months endedMarch 31, 2021 . In general, transaction costs relating to the formation of new and pending joint ventures and the pursuit of other transactions are expensed as incurred.
Depreciation and Amortization Expense
Depreciation expense may differ between BXP and BPLP as a result of previously applied acquisition accounting by BXP for the issuance of common stock in connection with non-sponsor OP Unit redemptions by BPLP. This accounting resulted in a step-up of the real estate assets at BXP that was allocated to certain properties. The difference between the real estate assets of BXP as compared to BPLP for certain properties having an allocation of the real estate step-up will result in a corresponding difference in depreciation expense. For additional information see the Explanatory Note that follows the cover page of this Quarterly Report on Form 10-Q.
BXP
Depreciation and amortization expense increased by approximately
Depreciation and Amortization for the three months
ended March 31,
Portfolio 2022 2021 Change
(in thousands)
Same Property Portfolio $ 167,681 $ 168,430 $ (749)
Properties Acquired Portfolio 4,079 - 4,079
Properties Placed In-Service Portfolio 5,759 1,472 4,287
Properties in Development or Redevelopment Portfolio - 5,692 (5,692)
Properties Sold Portfolio 105 971 (866)
$ 177,624 $ 176,565 $ 1,059
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BPLP
Depreciation and amortization expense increased by approximately
Depreciation and Amortization for the three months
ended March 31,
Portfolio 2022 2021 Change
(in thousands)
Same Property Portfolio $ 165,943 $ 165,365 $ 578
Properties Acquired Portfolio 4,079 - 4,079
Properties Placed In-Service Portfolio 5,759 1,472 4,287
Properties in Development or Redevelopment Portfolio - 5,692 (5,692)
Properties Sold Portfolio 105 971 (866)
$ 175,886 $ 173,500 $ 2,386 Direct Reimbursements of Payroll and Related Costs From Management Services Contracts and Payroll and Related Costs From Management Service Contracts
We have determined that amounts reimbursed for payroll and related costs received from third parties in connection with management services contracts should be reflected on a gross basis instead of on a net basis as we have determined that we are the principal under these arrangements. We anticipate that these two financial statement line items will generally offset each other.
Other Income and Expense Items
Income from
For the three months endedMarch 31, 2022 compared to 2021, income from unconsolidated joint ventures decreased by approximately$3.0 million due to a$10.3 million gain on sale of investment from the sale of ourAnnapolis Junction joint venture during the three months endedMarch 31, 2021 . This decrease was partially offset by an approximately$6.9 million increase in net income from placing in-service (1)7750 Wisconsin Avenue (Marriott International Headquarters ) inBethesda, Maryland , (2)100 Causeway Street inBoston, Massachusetts and (3) increased leasing at the Hub50House residential property inBoston, Massachusetts .
Gains on Sales of Real Estate
Gains on sales of real estate may differ between BXP and BPLP as a result of previously applied acquisition accounting by BXP for the issuance of common stock in connection with non-sponsor OP Unit redemptions by BPLP. This accounting resulted in a step-up of the real estate assets at BXP that was allocated to certain properties. The difference between the real estate assets of BXP as compared to BPLP for certain properties having an allocation of the real estate step-up will result in a corresponding difference in the gains on sales of real estate when those properties are sold. For additional information, see the Explanatory Note that follows the cover page of this Quarterly Report on Form 10-Q. BXP Gains on sales of real estate increased by approximately$22.7 million for the three months endedMarch 31, 2022 compared to 2021. During the three months endedMarch 31, 2022 , we recognized a gain of approximately$22.7 million related to the sale of195 West Street inWaltham, Massachusetts (See Note 3 to the Consolidated Financial Statements).
BPLP
Gains on sales of real estate increased by approximately$23.4 million for the three months endedMarch 31, 2022 compared to 2021. During the three months endedMarch 31, 2022 , we recognized a gain of approximately$23.4 million related to the sale of195 West Street inWaltham, Massachusetts (See Note 3 to the Consolidated Financial Statements). 51
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Interest and Other Income (Loss)
Interest and other income (loss) increased by approximately$0.1 million for the three months endedMarch 31, 2022 compared to 2021, due to an approximately$0.1 million decrease in the allowance for current expected credit losses, which results in higher income.
Gains (Losses) from Investments in Securities
Gains (losses) from investments in securities for the three months endedMarch 31, 2022 and 2021 related to investments that we have made to reduce our market risk relating to deferred compensation plans that we maintain for BXP's officers and former non-employee directors. Under the deferred compensation plans, each officer or non-employee director who is eligible to participate is permitted to defer a portion of the officer's current income or the non-employee director's compensation on a pre-tax basis and receive a tax-deferred return on these deferrals based on the performance of specific investments selected by the officer or non-employee director. In order to reduce our market risk relating to these plans, we typically acquire, in a separate account that is not restricted as to its use, similar or identical investments as those selected by each officer or non-employee director. This enables us to generally match our liabilities to BXP's officers or former non-employee directors under our deferred compensation plans with equivalent assets and thereby limit our market risk. The performance of these investments is recorded as gains (losses) from investments in securities. During the three months endedMarch 31, 2022 and 2021, we recognized gains (losses) of approximately$(2.3) million and$1.7 million , respectively, on these investments. By comparison, our general and administrative expense increased (decreased) by approximately$(2.3) million and$1.7 million during the three months endedMarch 31, 2022 and 2021, respectively, as a result of increases (decreases) in our liability under our deferred compensation plans that was associated with the performance of the specific investments selected by officers and former non-employee directors of BXP participating in the plans.
Losses From Early Extinguishment of Debt
OnFebruary 14, 2021 , BPLP completed the redemption of$850.0 million in aggregate principal amount of its 4.125% senior notes dueMay 15, 2021 . The redemption price was approximately$858.7 million , which was equal to the stated principal plus approximately$8.7 million of accrued and unpaid interest to, but not including, the redemption date. Excluding the accrued and unpaid interest, the redemption price was equal to the principal amount being redeemed. We recognized a loss from early extinguishment of debt totaling approximately$0.4 million related to unamortized origination costs.
On
Interest Expense
Interest expense decreased by approximately
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Change in interest
expense for the three
months ended March 31,
2022 compared to
Component March 31, 2021
(in thousands)
Increases to interest expense due to:
Issuance of $850 million in aggregate principal of 2.450% senior notes
due 2033 on September 29, 2021 $ 5,212
Issuance of
4,577
Total increases to interest expense 9,789
Decreases to interest expense due to:
Redemption of
(9,683)
Redemption of
(4,279)
Increase in capitalized interest related to development projects (1,685)
Decrease in interest rates for the unsecured credit facilities and the
repayment of the unsecured term loan on
(565)
Other interest expense (excluding senior notes) (251)
Total decreases to interest expense (16,463)
Total change in interest expense $ (6,674)
Interest expense directly related to the development of rental properties is
capitalized and included in real estate assets on our Consolidated Balance
Sheets and amortized over the useful lives of the real estate or lease term. As
portions of properties are placed in-service, we cease capitalizing interest on
that portion and interest is then expensed. Interest capitalized for the three
months ended March 31, 2022 and 2021 was approximately $13.7 million and $12.0
million , respectively. These costs are not included in the interest expense
referenced above.
At March 31, 2022 , our outstanding variable rate debt consisted of BPLP's $1.5
billion unsecured credit facility (the "Revolving Facility"). The Revolving
Facility had $255 million outstanding as of March 31, 2022 . For a summary of our
consolidated debt as of March 31, 2022 and March 31, 2021 refer to the heading
"Liquidity and Capital Resources-Debt Financing" within "Item 2-Management's
Discussion and Analysis of Financial Condition and Results of Operations."
Noncontrolling Interests in Property Partnerships
Noncontrolling interests in property partnerships increased by approximately
Noncontrolling Interests in Property Partnerships for
the three months ended March 31,
Property 2022 2021 Change
(in thousands)
767 Fifth Avenue (the General Motors Building) $ 3,037 $ 2,295 $ 742
Times Square Tower 5,300 4,901 399
601 Lexington Avenue (1) 2,279 3,752 (1,473)
100 Federal Street 3,163 3,349 (186)
Atlantic Wharf Office Building (2) 3,770 2,170 1,600
$ 17,549 $ 16,467 $ 1,082
_______________
(1)The decrease was primarily attributable to a decrease in lease revenue from
our tenants.
(2)The increase was primarily attributable to an increase in lease revenue from
our tenants.
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Noncontrolling Interest-Common Units of the
For BXP, noncontrolling interest-common units of theOperating Partnership increased by approximately$5.3 million for the three months endedMarch 31, 2022 compared to 2021 due primarily to an increase in allocable income, which was partially the result of recognizing a greater gain on sales of real estate during 2022. Due to our ownership structure, there is no corresponding line item on BPLP's financial statements.
Preferred Stock/Unit Redemption Charge
OnMarch 2, 2021 , BXP issued a redemption notice for 80,000 shares of its 5.25% Series B Cumulative Redeemable Preferred Stock (the "Series B Preferred Stock"), which constituted all of the outstanding Series B Preferred Stock, and the corresponding depositary shares, each representing 1/100th of a share of Series B Preferred Stock. The redemption price per share of Series B Preferred Stock was$2,500 , plus all accrued and unpaid dividends to, but not including, the redemption date, totaling$2,516.41 per share. OnMarch 31, 2021 , we transferred the full redemption price for all outstanding shares of Series B Preferred Stock, including accrued and unpaid dividends to, but not including, the redemption date, to the redemption agent. The excess of the redemption price over the carrying value of the Series B Preferred Stock and Series B Preferred Units of approximately$6.4 million relates to the original issuance costs and is reflected as a reduction to Net Income Attributable toBoston Properties, Inc. common shareholders and Net Income Attributable toBoston Properties Limited Partnership common unitholders on the Consolidated Income Statement.
Liquidity and Capital Resources
General
Our principal liquidity needs for the next twelve months and beyond are to:
•fund normal recurring expenses;
•meet debt service and principal repayment obligations, including balloon payments on maturing debt;
•fund development and redevelopment costs;
•fund capital expenditures, including major renovations, tenant improvements and leasing costs;
•fund pending and possible acquisitions of properties, either directly or indirectly through the acquisition of equity interests therein; and
•make the minimum distribution required to enable BXP to maintain its REIT qualification under the Internal Revenue Code of 1986, as amended.
We expect to satisfy these needs using one or more of the following:
•cash flow from operations;
•distribution of cash flows from joint ventures;
•cash and cash equivalent balances;
•borrowings under BPLP's Revolving Facility, unsecured term loans, short-term bridge facilities and construction loans;
•long-term secured and unsecured indebtedness (including unsecured exchangeable indebtedness);
•sales of real estate;
•private equity sources through our Strategic Capital Program ("SCP") with large institutional investors; and
•issuances of BXP equity securities and/or preferred or common units of partnership interests in BPLP.
We draw on multiple financing sources to fund our long-term capital needs. We
expect to fund our current development/redevelopment properties primarily with
our available cash balances, construction loans and BPLP's Revolving Facility.
We use BPLP's Revolving Facility primarily as a bridge facility to fund
acquisition opportunities, refinance outstanding indebtedness and meet
short-term development and working capital needs. Although we may seek to fund
our development projects with construction loans, which may require guarantees
by BPLP, the financing for each particular project ultimately depends on several
factors, including, among others, the project's size and duration, the extent of
pre-leasing and our available cash and access to cost effective capital at the
given time.
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The following table presents information on properties under construction and
redevelopment as of
Financings
Estimated Total Outstanding at Estimated Future
Investment to Investment Total March 31, 2022 Equity Requirement Percentage Leased
Construction Properties Estimated Stabilization Date Location # of Buildings Estimated Square Feet Date (1)(2)(3) (1)(2) Available (1) (1) (1)(2)(4) (5)
Office
325 Main Street Third Quarter, 2022 Cambridge, MA 1 420,000 $ 328,547 $ 418,400 $ - $ - $ 89,853 90 %
Reston Next Fourth Quarter, 2023 Reston, VA 2 1,062,000 538,075 715,300 - - 177,225 87 % (6)
2100 Pennsylvania Avenue Third Quarter, 2024 Washington, DC 1 480,000 252,049 356,100 - - 104,051 61 %
360 Park Avenue South (42%
ownership) First Quarter, 2025 New York, NY 1 450,000 195,333 219,000 92,774 85,588 16,481 - % (7)
Platform 16 Building A (55%
ownership) Fourth Quarter, 2026 San Jose, CA 1 389,500 65,199 231,900 - - 166,701 - % (8)
Total Office Properties under Construction 6 2,801,500 1,379,203 1,940,700 92,774 85,588 554,311 57 %
Lab/Life Sciences
880 Winter Street (Redevelopment) First Quarter, 2023 Waltham, MA 1 244,000 47,522 108,000 - - 60,478 85 %
751 Gateway (49% ownership) Second Quarter, 2024 South San Francisco, CA 1 231,000 55,892 127,600 - - 71,708 100 %
103 CityPoint Third Quarter, 2024 Waltham, MA 1 113,000 16,156 115,100 - - 98,944 - %
180 CityPoint Fourth Quarter, 2024 Waltham, MA 1 329,000 66,272 274,700 - - 208,428 43 %
651 Gateway (50% ownership) Fourth Quarter, 2025 South San Francisco, CA 1 327,000 5,227 146,500 - - 141,273 - %
Total Lab/Life Sciences Properties under Construction 5 1,244,000 191,069 771,900 - - 580,831 47 %
Other
View Boston Observatory at The
Prudential Center (Redevelopment) N/A Boston, MA - 59,000 81,617 182,300 - - 100,683 N/A (9)
Total Properties under Construction 11 4,104,500 $ 1,651,889 $ 2,894,900 $ 92,774 $ 85,588 $ 1,235,825 54 % (10)
___________
(1)Represents our share.
(2)Each of Investment to Date, Estimated Total Investment and Estimated Future
Equity Requirement includes our share of acquisition expenses, as applicable,
and reflect our share of the estimated net revenue/expenses that we expect to
incur prior to stabilization of the project, including any amounts actually
received or paid through March 31, 2022 .
(3)Includes approximately $92.8 million of unpaid but accrued construction costs
and leasing commissions.
(4)Excludes approximately $92.8 million of unpaid but accrued construction costs
and leasing commissions.
(5)Represents percentage leased as of April 29, 2022 , including leases with
future commencement dates.
(6)The property was 67% placed in-service as of March 31, 2022 .
(7)Investment to Date includes all related costs incurred prior to the
contribution of the property by us to the joint venture on December 15, 2021
totaling approximately $107 million and our proportionate share of the loan. Our
joint venture partners will fund required capital until their aggregate
investment is approximately 58% of all capital contributions; thereafter, the
joint venture partners will fund required capital according to their percentage
interests.
(8)Estimated total investment represents the costs to complete Building A , a
389,500 square foot building, and Building A's proportionate share of land and
garage costs. In conjunction with the construction of Building A , garage and
site work will be completed for Phase II, which will support approximately
700,000 square feet of development in two office buildings, budgeted to be an
incremental $141 million .
(9)We expect to place this project in-service and open to the public in the
second quarter of 2023.
(10)Percentage leased excludes View Boston Observatory at The Prudential Center
(redevelopment) at 800 Boylston Street - The Prudential Center .
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Lease revenue (which includes recoveries from tenants), other income from operations, available cash balances, mortgage financings, unsecured indebtedness and draws on BPLP's Revolving Facility are the principal sources of capital that we use to fund operating expenses, debt service, maintenance and repositioning capital expenditures, tenant improvements and the minimum distribution required to enable BXP to maintain its REIT qualification. We seek to maximize income from our existing properties by maintaining quality standards for our properties that promote high occupancy rates and permit increases in rental rates while reducing tenant turnover and controlling operating expenses. Our sources of revenue also include third-party fees generated by our property management, leasing, development and construction businesses, as well as the sale of assets from time to time. We believe these sources of capital will continue to provide the funds necessary for our short-term liquidity needs, including our properties under development and redevelopment. Material adverse changes in one or more sources of capital, whether due to the impacts of the COVID-19 pandemic or otherwise, may adversely affect our net cash flows. We expect our primary uses of capital over the next twelve months will be the commencement, continuation and completion of our current and committed development and redevelopment projects, the acquisition of Madison Centre, servicing the interest payments on our outstanding indebtedness and satisfying our REIT distribution requirements. As ofMarch 31, 2022 , we had 11 properties under development or redevelopment. Our share of the remaining development and redevelopment costs that we expect to fund through 2026 was approximately$1.2 billion . InJanuary 2022 , we commenced the redevelopment of 651Gateway inSouth San Francisco, California , a project in which we own a 50% interest, and inFebruary 2022 , we restarted the first phase of our Platform 16 development project inSan Jose, California , a project in which we own a 55% interest (see Note 5 to the Consolidated Financial Statements). InJuly 2021 , we announced the formation of an investment program with two partners committing a targeted equity investment of$1.0 billion , including$250 million from us. Under this agreement, we will provide these partners, for up to two years, exclusive first offers to form joint ventures with us to invest in assets that meet target criteria. All investments are discretionary to each partner. The SCP provides us the opportunity to partner with large institutional investors and capitalize our investment opportunities partially through private equity. The SCP enhances our access to capital and investment capacity and further enhances our returns through fee income, and in certain partnerships, a greater share of income upon achieving certain success criteria. These large financial partners include some of the world's largest sovereign wealth funds and pension plans. Our use of the SCP is consistent with our ongoing strategy to create value through opportunistic investments in high-quality office properties in markets with the strongest economic growth over time while maintaining a strong balance sheet and modest leverage. OnApril 14, 2022 , we entered into an agreement to purchase Madison Centre, an approximately 760,000 square foot, 37-story Class A office building inSeattle, Washington for a gross purchase price of$730.0 million . The acquisition is expected to close in the second quarter of this year and will be initially funded with a one-year,$730.0 million unsecured term loan. We anticipate ultimately funding the acquisition through incremental asset sales, which we anticipate would be structured as like-kind exchanges, or joint venture equity. We have no debt maturities untilSeptember 2023 . Our unconsolidated joint ventures have one loan maturing in 2022, of which our share of the aggregate outstanding principal is approximately$88.2 million . We are currently in the market to refinance this maturity with a mortgage debt in an amount equal to or greater than the current balance. There can be no assurance that we will complete this refinancing on the terms currently contemplated or at all. As ofApril 25, 2022 , we had available cash of approximately$313.8 million (of which approximately$103.8 million is attributable to our consolidated joint venture partners). Although the future impact of COVID-19 on our liquidity and capital resources will depend on a wide range of factors, we believe that our access to capital and our strong liquidity, including the approximately$1.3 billion available under the Revolving Facility and our available cash, as ofApril 25, 2022 , are sufficient to fund our remaining capital requirements on existing development and redevelopment projects, fund acquisitions, repay our maturing indebtedness when due, satisfy our REIT distribution requirements and still allow us to act opportunistically on attractive investment opportunities. 56
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We may seek to enhance our liquidity to fund our current and future development activity, pursue additional attractive investment opportunities and refinance or repay indebtedness. Depending on interest rates, the overall conditions in the debt and public and private equity markets, and our leverage at the time, we may decide to access one or more of these capital sources (including utilization of BXP's$600.0 million "at the market" equity offering program). Doing so may result in us carrying additional cash and cash equivalents pending our use of the proceeds, which could increase our net interest expense or be dilutive to our earnings, or both.
We have not sold any shares under BXP's
REIT Tax Distribution Considerations
Dividend
BXP as a REIT is subject to a number of organizational and operational requirements, including a requirement that BXP currently distribute at least 90% of its annual taxable income (excluding capital gains and with certain other adjustments). Our policy is for BXP to distribute at least 100% of its taxable income, including capital gains, to avoid paying federal tax. Common and LTIP unitholders of limited partnership interest in BPLP receive the same total distribution per unit. BXP's Board of Directors will continue to evaluate BXP's dividend rate in light of our actual and projected taxable income (including gains on sales), liquidity requirements and other circumstances and there can be no assurance that the future dividends declared by BXP's Board of Directors will not differ materially from the current quarterly dividend amount.
Sales
To the extent that we sell assets at a gain and cannot efficiently use the
proceeds in a tax deferred manner for either our development activities or
attractive acquisitions, BXP would, at the appropriate time, decide whether it
is better to declare a special dividend, adopt a stock repurchase program,
reduce indebtedness or retain the cash for future investment opportunities. Such
a decision will depend on many factors including, among others, the timing,
availability and terms of development and acquisition opportunities, our
then-current and anticipated leverage, the cost and availability of capital from
other sources, the price of BXP's common stock and REIT distribution
requirements. At a minimum, we expect that BXP would distribute at least that
amount of proceeds necessary for BXP to avoid paying corporate level tax on the
applicable gains realized from any asset sales.
From time to time in select cases, whether due to a change in use, structuring
issues to comply with applicable REIT regulations or other reasons, we may sell
an asset that is held by a taxable REIT subsidiary ("TRS"). Such a sale by a TRS
would be subject to federal and local taxes.
Cash Flow Summary
The following summary discussion of our cash flows is based on the Consolidated Statements of Cash Flows and is not meant to be an all-inclusive discussion of the changes in our cash flows for the periods presented below.
Cash and cash equivalents and cash held in escrows aggregated approximately
Three months ended March 31,
2022 2021 Change
(in thousands)
Net cash provided by operating activities
90,938
Net cash used in financing activities (86,970) (679,936)
592,966
Our principal source of cash flow is related to the operation of our properties. The weighted-average term of our in-place leases, excluding residential units, was approximately 7.9 years as ofMarch 31, 2022 , including leases signed by our unconsolidated joint ventures, with occupancy rates historically in the range of 88% to 94%. Generally, our properties generate a relatively consistent stream of cash flow that provides us with resources to pay operating expenses, debt service and fund regular quarterly dividend and distribution payment requirements. In 57
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addition, over the past several years, we have raised capital through the sale of some of our properties and through secured and unsecured borrowings.
Cash is used in investing activities to fund acquisitions, development, net investments in unconsolidated joint ventures and maintenance and repositioning capital expenditures. We selectively invest in new projects that enable us to take advantage of our development, leasing, financing and property management skills and invest in existing buildings to enhance or maintain our market position. Cash used in investing activities for the three months endedMarch 31, 2022 consisted primarily of development projects, building and tenant improvements and capital contributions to unconsolidated joint ventures, partially offset by proceeds from the sales of real estate and distributions from unconsolidated joint ventures. Cash used in investing activities for the three months endedMarch 31, 2021 consisted primarily of development projects, building and tenant improvements and capital contributions to unconsolidated joint ventures, partially offset by the proceeds from the sale of investment in unconsolidated joint ventures, as detailed below:
Three months ended
2022 2021
(in thousands)
Acquisitions of real estate $ (3,580) $ -
Construction in progress (1) (100,313) (119,496)
Building and other capital improvements (26,811) (32,717)
Tenant improvements (55,168) (93,201)
Proceeds from the sales of real estate (2) 35,397 -
Capital contributions to unconsolidated joint ventures (3) (26,293) (16,684)
Capital distributions from unconsolidated joint ventures (4) 20,095 122
Proceeds from sale of investment in unconsolidated joint venture (5)
- 17,589
Investments in securities, net 5,338 2,114
Net cash used in investing activities $
(151,335)
Cash used in investing activities changed primarily due to the following:
(1)Construction in progress for the three months endedMarch 31, 2022 included ongoing expenditures associated with Reston Next, which is partially placed in-service. In addition, we incurred costs associated with our continued development/redevelopment of325 Main Street ,2100 Pennsylvania Avenue , 180 CityPoint,View Boston Observatory at ThePrudential Center ,880 Winter Street and 103 CityPoint. Construction in progress for the three months endedMarch 31, 2021 included ongoing expenditures associated with One Five NineEast 53rd Street , which was completed and fully placed in-service during the three months endedMarch 31, 2021 . In addition, we incurred costs associated with our continued development/redevelopment of200 West Street ,325 Main Street ,2100 Pennsylvania Avenue , Reston Next, 180 CityPoint,View Boston Observatory at ThePrudential Center and880 Winter Street . (2)OnMarch 31, 2022 , we completed the sale of195 West Street located inWaltham, Massachusetts for a gross sale price of$37.7 million . Net cash proceeds totaled approximately$35.4 million , resulting in a gain on sale of real estate totaling approximately$22.7 million for BXP and approximately$23.4 million for BPLP.195 West Street is an approximately 63,500 net rentable square foot Class A office property. (3)Capital contributions to unconsolidated joint ventures for the three months endedMarch 31, 2022 consisted primarily of cash contributions of approximately$14.1 million and$7.9 million to ourGateway Commons and Platform 16 joint ventures, respectively.
Capital contributions to unconsolidated joint ventures for the three months
ended
(4)Capital distributions from unconsolidated joint ventures for the three months endedMarch 31, 2022 consisted primarily of a cash distribution totaling approximately$20.1 million from ourMetropolitan Square joint venture resulting from the excess proceeds from the refinancing of the mortgage and mezzanine loans on the property. 58
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(5)OnMarch 30, 2021 , we completed the sale of our 50% ownership interest inAnnapolis Junction NFM LLC to the joint venture partner for a gross sale price of$65.9 million . Net cash proceeds to us totaled approximately$17.8 million after repayment of our share of debt totaling approximately$15.1 million .
Cash used in financing activities for the three months ended
Capitalization
The following table presents Consolidated Market Capitalization and BXP's Share
of Market Capitalization, as well as the corresponding ratios of Consolidated
Debt to Consolidated Market Capitalization and BXP's Share of Debt to BXP's
Share of Market Capitalization (in thousands except for percentages):
March 31, 2022
Shares / Units Equivalent Value
Outstanding Common Stock Equivalent (1)
Common Stock 156,712 156,712 $ 20,184,506
Common Operating Partnership Units 18,229 18,229 2,347,895 (2)
Total Equity 174,941 $ 22,532,401
Consolidated Debt $ 13,010,124
Add:
BXP's share of unconsolidated joint venture debt
(3) 1,425,290
Subtract:
Partners' share of Consolidated Debt (4) (1,356,905) BXP's Share of Debt$ 13,078,509 Consolidated Market Capitalization$ 35,542,525 BXP's Share of Market Capitalization$ 35,610,910 Consolidated Debt/Consolidated Market Capitalization 36.60 % BXP's Share of Debt/BXP's Share of Market Capitalization 36.73 % _______________ (1)Values are based on the closing price per share of BXP's Common Stock on theNew York Stock Exchange onMarch 31, 2022 of$128.80 . (2)Includes long-term incentive plan units (including 2012 OPP Units and 2013 - 2019 MYLTIP Units) but excludes the 2020 - 2022 MYLTIP Units because the three-year performance periods have not ended. (3)See page 63 for additional information. (4)See page 62 for additional information. Consolidated Debt to Consolidated Market Capitalization Ratio is a measure of leverage commonly used by analysts in the REIT sector. We present this measure as a percentage and it is calculated by dividing (A) our consolidated debt by (B) our consolidated market capitalization, which is the market value of our outstanding equity securities plus our consolidated debt. Consolidated market capitalization is the sum of:
(1) our consolidated debt; plus
(2) the product of (x) the closing price per share of BXP Common Stock on
(i) the number of outstanding shares of Common Stock of BXP,
(ii) the number of outstanding OP Units in BPLP (excluding OP Units held by BXP),
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(iii) the number of OP Units issuable upon conversion of all outstanding LTIP
Units, assuming all conditions have been met for the conversion of the LTIP
Units, and
(iv) the number of OP Units issuable upon conversion of 2012 OPP Units, 2013 - 2019 MYLTIP Units that were issued in the form of LTIP Units.
The calculation of consolidated market capitalization does not include LTIP
Units issued in the form of MYLTIP Awards unless and until certain performance
thresholds are achieved and they are earned. Because their three-year
performance periods have not yet ended, 2020 - 2022 MYLTIP Units are not
included in this calculation as of
We also present BXP's Share of Market Capitalization and BXP's Share of Debt/BXP's Share of Market Capitalization, which are calculated in the same manner, except that BXP's Share of Debt is utilized instead of our consolidated debt in both the numerator and the denominator. BXP's Share of Debt is defined as our consolidated debt plus our share of debt from our unconsolidated joint ventures (calculated based upon our ownership percentage), minus our partners' share of debt from our consolidated joint ventures (calculated based upon the partners' percentage ownership interests adjusted for basis differentials). Management believes that BXP's Share of Debt provides useful information to investors regarding our financial condition because it includes our share of debt from unconsolidated joint ventures and excludes our partners' share of debt from consolidated joint ventures, in each case presented on the same basis. We have several significant joint ventures and presenting various measures of financial condition in this manner can help investors better understand our financial condition and/or results of operations after taking into account our economic interest in these joint ventures. We caution investors that the ownership percentages used in calculating BXP's Share of Debt may not completely and accurately depict all of the legal and economic implications of holding an interest in a consolidated or unconsolidated joint venture. For example, in addition to partners' interests in profits and capital, venture agreements vary in the allocation of rights regarding decision making (both for routine and major decisions), distributions, transferability of interests, financing and guarantees, liquidations and other matters. Moreover, in some cases we exercise significant influence over, but do not control, the joint venture in which case GAAP requires that we account for the joint venture entity using the equity method of accounting and we do not consolidate it for financial reporting purposes. In other cases, GAAP requires that we consolidate the venture even though our partner(s) own(s) a significant percentage interest. As a result, management believes that the presentation of BXP's Share of a financial measure should not be considered a substitute for, and should only be considered with and as a supplement to our financial information presented in accordance with GAAP. We present these supplemental ratios because our degree of leverage could affect our ability to obtain additional financing for working capital, capital expenditures, acquisitions, development or other general corporate purposes and because different investors and lenders consider one or both of these ratios. Investors should understand that these ratios are, in part, a function of the market price of the common stock of BXP and as such will fluctuate with changes in such price, and they do not necessarily reflect our capacity to incur additional debt to finance our activities or our ability to manage our existing debt obligations. However, for a company like BXP, whose assets are primarily income-producing real estate, these ratios may provide investors with an alternate indication of leverage, so long as they are evaluated along with the ratio of indebtedness to other measures of asset value used by financial analysts and other financial ratios, as well as the various components of our outstanding indebtedness. For a discussion of our unconsolidated joint venture indebtedness, see "Liquidity and Capital Resources-Investment inUnconsolidated Joint Ventures - Secured Debt within "Item 2-Management's Discussion and Analysis of Financial Condition and Results of Operations" and for a discussion of our consolidated joint venture indebtedness see "Liquidity and Capital Resources-Mortgage Notes Payable" within "Item 2-Management's Discussion and Analysis of Financial Condition and Results of Operations."
Debt Financing
As ofMarch 31, 2022 , we had approximately$13.0 billion of outstanding consolidated indebtedness, representing approximately 36.60% of our Consolidated Market Capitalization as calculated above consisting of approximately (1)$9.5 billion (net of discount and deferred financing fees) in publicly traded unsecured senior notes having a GAAP weighted-average interest rate of 3.43% per annum and maturities in 2023 through 2033, (2)$3.3 billion (net of deferred financing fees) of property-specific mortgage debt having a GAAP weighted-average interest rate of 3.42% per annum and a weighted-average term of 6.6 years and (3)$255.0 million outstanding under BPLP's Revolving Facility that matures onJune 15, 2026 . 60
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The table below summarizes the aggregate carrying value of our mortgage notes payable and BPLP's unsecured senior notes and line of credit, as well as Consolidated Debt Financing Statistics atMarch 31, 2022 andMarch 31, 2021 . March 31, 2022 2021 (dollars in thousands) Debt Summary: Balance Fixed rate mortgage notes payable, net$ 3,268,745 $ 2,904,672 Unsecured senior notes, net 9,486,379 9,631,592 Unsecured line of credit 255,000 - Consolidated Debt 13,010,124 12,536,264
Add:
BXP's share of unconsolidated joint venture debt, net (1) 1,425,290 1,165,872
Subtract:
Partners' share of consolidated mortgage notes payable, net (2) (1,356,905) (1,193,260) BXP's Share of Debt $
13,078,509
March 31,
2022 2021
Consolidated Debt Financing Statistics:
Percent of total debt:
Fixed rate 98.04 % 100.00 %
Variable rate 1.96 % - %
Total 100.00 % 100.00 %
GAAP Weighted-average interest rate at end of period:
Fixed rate 3.43 % 3.64 %
Variable rate 1.13 % - %
Total 3.39 % 3.64 %
Coupon/Stated Weighted-average interest rate at end of period:
Fixed rate 3.32 % 3.54 %
Variable rate 1.02 % - %
Total 3.28 % 3.54 %
Weighted-average maturity at end of period (in years):
Fixed rate 6.4 6.0
Variable rate 4.2 -
Total 6.3 6.0
_______________
(1)See page 63 for additional information.
(2)See page 62 for additional information.
Unsecured Credit Facility
OnJune 15, 2021 , BPLP amended and restated its prior credit facility (as amended and restated, the "2021 Credit Facility"). The 2021 Credit Facility provides for borrowings of up to$1.5 billion through the Revolving Facility, subject to customary conditions. Among other things, the 2021 Credit Facility (1) extended the maturity date fromApril 24, 2022 toJune 15, 2026 , (2) eliminated the$500.0 million delayed draw facility (3) reduced the per annum variable interest rates on borrowings and (4) added a sustainability-linked pricing component. Under the 2021 Credit Facility, BPLP may increase the total commitment by up to$500.0 million by increasing the amount of the Revolving Facility and/or by incurring one or more term loans, in each case, subject to syndication of the increase and other conditions. Based on BPLP'sMarch 31, 2022 credit rating, (1) the applicable Eurocurrency and LIBOR 61
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Daily Floating Rate margins are 0.775%, (2) the alternate base rate margin is 0 basis points and (3) the facility fee is 0.15% per annum.
AtMarch 31, 2022 , BPLP had$255.0 million of borrowings under its Revolving Facility and outstanding letters of credit totaling approximately$6.3 million , with the ability to borrow approximately$1.2 billion . AtApril 25, 2022 , BPLP had$215.0 million of borrowings under its Revolving Facility and outstanding letters of credit totaling approximately$6.3 million , with the ability to borrow approximately$1.3 billion .
Unsecured Senior Notes
The following summarizes the unsecured senior notes outstanding as of
Coupon/Stated Rate Effective Rate(1) Principal Amount Maturity Date(2)
10.5 Year Unsecured Senior Notes 3.125 %
3.279 % $ 500,000
3.800 % 3.916 % 700,000 February 1, 2024
7 Year Unsecured Senior Notes 3.200 % 3.350 % 850,000 January 15, 2025
10 Year Unsecured Senior Notes 3.650 % 3.766 % 1,000,000 February 1, 2026
10 Year Unsecured Senior Notes 2.750 % 3.495 % 1,000,000 October 1, 2026
10 Year Unsecured Senior Notes 4.500 % 4.628 % 1,000,000 December 1, 2028
10 Year Unsecured Senior Notes 3.400 % 3.505 % 850,000 June 21, 2029
10.5 Year Unsecured Senior Notes 2.900 % 2.984 % 700,000 March 15, 2030
10.75 Year Unsecured Senior
Notes 3.250 % 3.343 % 1,250,000 January 30, 2031
11 Year Unsecured Senior Notes 2.550 % 2.671 % 850,000 April 1, 2032
12 Year Unsecured Senior Notes 2.450 % 2.524 % 850,000 October 1, 2033
Total principal 9,550,000
Less:
Net unamortized discount 15,835 Deferred financing costs, net 47,786 Total$ 9,486,379 _______________
(1)Yield on issuance date including the effects of discounts on the notes, settlements of interest rate contracts and the amortization of financing costs. (2)No principal amounts are due prior to maturity.
The indenture relating to the unsecured senior notes contains certain financial restrictions and requirements, including (1) a leverage ratio not to exceed 60%, (2) a secured debt leverage ratio not to exceed 50%, (3) an interest coverage ratio of greater than 1.50, and (4) an unencumbered asset value of not less than 150% of unsecured debt. AtMarch 31, 2022 , BPLP was in compliance with each of these financial restrictions and requirements.
Mortgage Notes Payable
The following represents the outstanding principal balances due under the
mortgage notes payable at
Deferred Carrying Amount
Stated GAAP Interest Rate Stated Principal Financing (Partners'
Properties Interest Rate (1) Amount Costs, Net Carrying Amount Share) Maturity Date
(dollars in thousands)
Consolidated Joint Ventures
767 Fifth Avenue (the General
Motors Building ) 3.43 % 3.64 % $ 2,300,000 $ (18,110) $ 2,281,890 $ 912,820 (2)(3)(4) June 9, 2027
601 Lexington Avenue 2.79 % 2.93 % 1,000,000 (13,145) 986,855 444,085 (2)(5) January 9, 2032
Total $ 3,300,000 $ (31,255) $ 3,268,745 $ 1,356,905
62-------------------------------------------------------------------------------- Table of Contents _______________ (1)GAAP interest rate differs from the stated interest rate due to the inclusion of the amortization of financing charges and the effects of hedging transactions (if any). (2)The mortgage loan requires interest only payments with a balloon payment due at maturity. (3)This property is owned by a consolidated entity in which we have a 60% interest. The partners' share of the carrying amount has been adjusted for basis differentials. (4)In connection with the refinancing of the loan, we guaranteed the consolidated entity's obligation to fund various reserves for tenant improvement costs and allowances, leasing commissions and free rent obligations in lieu of cash deposits. As ofMarch 31, 2022 , the maximum funding obligation under the guarantee was approximately$17.7 million . We earn a fee from the joint venture for providing the guarantee and have an agreement with our partners to reimburse the joint venture for their share of any payments made under the guarantee (See Note 6 to the Consolidated Financial Statements). (5)This property is owned by a consolidated entity in which we have a 55% interest.
Investment in
We have investments in unconsolidated joint ventures with our effective ownership interests ranging from 20% to 55%. Fifteen of these ventures have mortgage indebtedness. We exercise significant influence over, but do not control, these entities. As a result, we account for them using the equity method of accounting. See also Note 5 to the Consolidated Financial Statements. AtMarch 31, 2022 , the aggregate carrying amount of debt, including both our and our partners' share, incurred by these ventures was approximately$3.4 billion (of which our proportionate share is approximately$1.4 billion ). The table below summarizes the outstanding debt of these joint venture properties atMarch 31, 2022 . In addition to other guarantees specifically noted in the table, we have agreed to customary environmental indemnifications and nonrecourse carve-outs (e.g., guarantees against fraud, misrepresentation and bankruptcy) as well as the completion of development projects on certain of the loans. Deferred Nominal % Stated GAAP Interest Stated Principal Financing Carrying Amount Properties Ownership Interest Rate Rate (1) Amount Costs, Net Carrying Amount (Our share) Maturity Date (dollars in thousands) Santa Monica Business Park 55.00 % 4.06 % 4.24 %$ 300,000 $ (1,741) $ 298,259 $ 164,042 (2)(3)July 19, 2025 Market Square North 50.00 % 2.80 % 2.96 % 125,000 (745) 124,255 62,128 (2)(4)November 10, 2025 1265 Main Street 50.00 % 3.77 % 3.84 % 36,257 (271) 35,986 17,993January 1, 2032 Colorado Center 50.00 % 3.56 % 3.58 % 550,000 (550) 549,450 274,725 (2)August 9, 2027 Dock 72 50.00 % 3.17 % 3.39 % 198,383 (954) 197,429 98,715 (2)(5)December 18, 2023 The Hub on Causeway - Podium 50.00 % 2.49 % 2.65 % 174,329 (415) 173,914 86,957 (2)(6)September 6, 2023 Hub50House 50.00 % 2.22 % 2.51 % 176,468 (42) 176,426 88,213 (2)(7)April 19, 2022 100 Causeway Street 50.00 % 1.65 % 1.86 % 331,937 (1,200) 330,737 165,369 (2)(8)September 5, 2023 7750 Wisconsin Avenue (Marriott International Headquarters) 50.00 % 1.38 % 1.93 % 223,574 (1,508) 222,066 111,033 (2)(9)April 26, 2023 360 Park Avenue South 42.21 % 2.64 % 3.09 % 202,960 (2,708) 200,252 84,526 (2)(10)December 14, 2024 Safeco Plaza 33.67 % 2.38 % 2.51 % 250,000 (1,502) 248,498 83,669 (2)(11)September 1, 2026 500 North Capitol Street, NW 30.00 % 4.15 % 4.20 % 105,000 (69) 104,931 31,479 (2)June 6, 2023 901 New York Avenue 25.00 % 3.61 % 3.69 % 215,621 (492) 215,129 53,782January 5, 2025 3 Hudson Boulevard 25.00 % 3.68 % 3.76 % 80,000 (80) 79,920 19,980 (2)(12)July 13, 2023 Metropolitan Square 20.00 % 3.06 % 3.84 % 420,000 (6,603) 413,397 82,679 (2)(13) April 9, 2024 Total$ 3,389,529 $ (18,880) $ 3,370,649 $ 1,425,290
_______________
(1)GAAP interest rate differs from the stated interest rate due to the inclusion of the amortization of financing charges, which includes mortgage recording fees.
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(2)The loan requires interest only payments with a balloon payment due at
maturity.
(3)The loan bears interest at a variable rate equal to LIBOR plus 1.28% per
annum and matures on July 19, 2025 . A subsidiary of the joint venture entered
into interest rate swap contracts with notional amounts aggregating $300.0
million through April 1, 2025 , resulting in a fixed rate of approximately 4.063%
per annum through the expiration of the interest rate swap contracts.
(4)The loan bears interest at a variable rate equal to (1) the greater of (x)
LIBOR or (y) 0.50%, plus (2) 2.30% per annum and matures on November 10, 2025 ,
with one, one-year extension option, subject to certain conditions.
(5)The construction financing has a borrowing capacity of $250.0 million . The
construction financing bears interest at a variable rate equal to (1) the
greater of (x) LIBOR or (y) 0.25%, plus (2) 2.85% per annum and matures on
December 18, 2023 .
(6)The construction financing had a borrowing capacity of $204.6 million . On
September 16, 2019 , the joint venture paid down the construction loan principal
balance in the amount of approximately $28.8 million , reducing the borrowing
capacity to $175.8 million . The construction financing bears interest at a
variable rate equal to LIBOR plus 2.25% per annum and matures on September 6,
2023 .
(7)The construction financing has a borrowing capacity of $180.0 million . The
construction financing bears interest at a variable rate equal to LIBOR plus
2.00% per annum and matures on April 19, 2022 , with two, one-year extension
options, subject to certain conditions. The maturity date for the loan has been
extended to June 19, 2022 (See Note 12 to the Consolidated Financial
Statements).
(8)The construction financing has a borrowing capacity of $400.0 million . The
construction financing bears interest at a variable rate equal to LIBOR plus
1.50% per annum (LIBOR plus 1.375% per annum upon stabilization, as defined in
the loan agreement) and matures on September 5, 2023 , with two, one-year
extension options, subject to certain conditions.
(9)The construction financing has a borrowing capacity of $255.0 million . The
construction financing bears interest at a variable rate equal to LIBOR plus
1.25% per annum and matures on April 26, 2023 , with two, one-year extension
options, subject to certain conditions.
(10)The loan bears interest at a variable rate equal to Adjusted Term SOFR plus
2.40% per annum and matures on December 14, 2024 , with two, one-year extension
options, subject to certain conditions. The spread on the variable rate may be
reduced, subject to certain conditions.
(11)The loan bears interest at a variable rate equal to the greater of (x) 2.35%
or (y) LIBOR plus 2.20% per annum and matures on September 1, 2026 .
(12)We provided $80.0 million of mortgage financing to the joint venture. The
loan bears interest at a variable rate equal to LIBOR plus 3.50% per annum and
matures on July 13, 2023 , with extension options, subject to certain conditions.
The loan has been reflected as Related Party Note Receivable, Net on our
Consolidated Balance Sheets. As of March 31, 2022 , the loan has approximately
$14.8 million of accrued interest due at the maturity date.
(13)The indebtedness consists of (x) a $305.0 million mortgage loan payable
which bears interest at a variable rate equal to SOFR plus approximately 1.81%
and matures on April 9, 2024 with three, one-year extension options, subject to
certain conditions, and (y) a $115.0 million mezzanine note payable which bears
interest at a variable rate equal to SOFR plus 5.25% and matures on April 9,
2024 with three, one-year extension options, subject to certain conditions.
State and Local Tax Matters
Because BXP is organized and qualifies as a REIT, it is generally not subject to federal income taxes, but is subject to certain state and local taxes. In the normal course of business, certain entities through which we own real estate either have undergone, or are currently undergoing, tax audits or other inquiries. Although we believe that we have substantial arguments in favor of our position in the ongoing audits, in some instances there is no controlling precedent or interpretive guidance on the specific point at issue. Collectively, tax deficiency notices received to date from the jurisdictions conducting the ongoing audits have not been material. However, there can be no assurance that future audits will not occur with increased frequency or that the ultimate result of such audits will not have a material adverse effect on our results of operations. Insurance
For information concerning our insurance program, see Note 6 to the Consolidated Financial Statements.
Funds from Operations Pursuant to the revised definition of Funds from Operations adopted by theBoard of Governors of theNational Association of Real Estate Investment Trusts ("Nareit"), we calculate Funds from Operations, or "FFO," for each of BXP and BPLP by adjusting net income (loss) attributable toBoston Properties, Inc. common shareholders and net income (loss) attributable toBoston Properties Limited Partnership common unitholders (computed in accordance with GAAP), respectively, for gains (or losses) from sales of properties, impairment losses on depreciable real estate consolidated on our balance sheet, impairment losses on our investments in unconsolidated joint ventures 64
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driven by a measurable decrease in the fair value of depreciable real estate held by the unconsolidated joint ventures and our share of real estate-related depreciation and amortization. FFO is a non-GAAP financial measure. We believe the presentation of FFO, combined with the presentation of required GAAP financial measures, improves the understanding of operating results of REITs among the investing public and helps make comparisons of REIT operating results more meaningful. Management generally considers FFO to be useful measures for understanding and comparing our operating results because, by excluding gains and losses related to sales of previously depreciated operating real estate assets, impairment losses and real estate asset depreciation and amortization (which can differ across owners of similar assets in similar condition based on historical cost accounting and useful life estimates), FFO can help investors compare the operating performance of a company's real estate across reporting periods and to the operating performance of other companies. Our computation of FFO may not be comparable to FFO reported by other REITs or real estate companies that do not define the term in accordance with the current Nareit definition or that interpret the current Nareit definition differently. We believe that in order to facilitate a clear understanding of our operating results, FFO should be examined in conjunction with net income attributable toBoston Properties, Inc. common shareholders and net income attributable toBoston Properties Limited Partnership as presented in our Consolidated Financial Statements. FFO should not be considered as a substitute for net income attributable toBoston Properties, Inc. common shareholders or net income attributable toBoston Properties Limited Partnership common unitholders (determined in accordance with GAAP) or any other GAAP financial measures and should only be considered together with and as a supplement to our financial information prepared in accordance with GAAP. 65
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BXP
The following table presents a reconciliation of net income attributable to
Three months ended March 31,
2022 2021
(in thousands)
Net income attributable to
$ 143,047 $ 91,624
Add:
Preferred stock redemption charge - 6,412 Preferred dividends - 2,560
Noncontrolling interest-common units of the
16,361 11,084 Noncontrolling interests in property partnerships 17,549 16,467 Net income 176,957 128,147 Add: Depreciation and amortization 177,624 176,565
Noncontrolling interests in property partnerships' share of depreciation and amortization
(17,653) (16,457)
BXP's share of depreciation and amortization from unconsolidated joint ventures
22,044 18,412
Corporate-related depreciation and amortization (404) (440)
Less:
Gain on sale of investment included within income from unconsolidated joint ventures
- 10,257
Gains on sales of real estate 22,701 -
Noncontrolling interests in property partnerships 17,549 16,467
Preferred dividends - 2,560
Preferred stock redemption charge - 6,412
Funds from Operations (FFO) attributable to the
318,318 270,531
Less:
Noncontrolling interest-common units of the
32,182 26,728
Funds from Operations attributable to
$ 286,136 $ 243,803 Our percentage share of Funds from Operations-basic 89.89 % 90.12 % Weighted average shares outstanding-basic 156,650 155,928 66
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Reconciliation to Diluted Funds from Operations:
Three months ended March 31,
2022 2021
Income Shares/Units Income Shares/Units
(Numerator) (Denominator) (Numerator) (Denominator)
(in thousands)
Basic Funds from Operations $ 318,318 174,276 $ 270,531 173,018
Effect of Dilutive Securities :
Stock based compensation - 354 - 171
Diluted Funds from Operations $ 318,318 174,630 $ 270,531 173,189
Less:
Noncontrolling interest-common units of theOperating Partnership's share of diluted Funds from Operations 32,118 17,626 26,693 17,090 Diluted Funds from Operations attributable to Boston Properties, Inc. (1)$ 286,200 157,004$ 243,838 156,099 _______________
(1)BXP's share of diluted Funds from Operations was 89.91% and 90.13% for the
three months ended
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BPLP
The following table presents a reconciliation of net income attributable toBoston Properties Limited Partnership common unitholders to FFO attributable toBoston Properties Limited Partnership common unitholders for the three months endedMarch 31, 2022 and 2021: Three months endedMarch 31, 2022 2021 (in thousands)
Net income attributable to
$ 161,829 $ 105,773
Add:
Preferred unit redemption charge - 6,412 Preferred distributions - 2,560 Noncontrolling interests in property partnerships 17,549 16,467 Net income 179,378 131,212 Add: Depreciation and amortization 175,886 173,500
Noncontrolling interests in property partnerships' share of depreciation and amortization
(17,653) (16,457)
BXP's share of depreciation and amortization from unconsolidated joint ventures
22,044 18,412
Corporate-related depreciation and amortization (404) (440)
Less:
Gain on sale of investment included within income from unconsolidated joint ventures
- 10,257
Gains on sales of real estate 23,384 -
Noncontrolling interests in property partnerships 17,549 16,467
Preferred distributions - 2,560
Preferred unit redemption charge - 6,412
Funds from Operations attributable to
$ 318,318 $ 270,531 Weighted average shares outstanding-basic 174,276 173,018
_______________
(1)Our calculation includes OP Units and vested LTIP Units (including vested 2012 OPP Units and vested 2013 - 2019 MYLTIP Units).
Reconciliation to Diluted Funds from Operations:
Three months ended March 31,
2022 2021
Income Shares/Units Income Shares/Units
(Numerator) (Denominator) (Numerator) (Denominator)
(in thousands)
Basic Funds from Operations $ 318,318 174,276 $ 270,531 173,018
Effect of Dilutive Securities :
Stock based compensation - 354 - 171
Diluted Funds from Operations $ 318,318 174,630 $ 270,531 173,189
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Material Cash Commitments
OnApril 14, 2022 , we entered into an agreement to purchase Madison Centre, an approximately 760,000 square foot, 37-story Class A office building inSeattle, Washington for a gross purchase price of$730.0 million . The acquisition is expected to close in the second quarter of this year and will be initially funded with a one-year,$730.0 million unsecured term loan. We anticipate ultimately funding the acquisition through incremental asset sales, which we anticipate would be structured as like-kind exchanges, or joint venture equity. We have various service contracts with vendors related to our property management. In addition, we have certain other contracts we enter into in the ordinary course of business that may extend beyond one year. These contracts include terms that provide for cancellation with insignificant or no cancellation penalties. Contract terms are generally between three and five years.
During the three months ended
In addition, during the three months endedMarch 31, 2022 , we and our unconsolidated joint venture partners incurred approximately$90.8 million of new tenant-related obligations associated with approximately 1.2 million square feet of second generation leases, or approximately$79 per square foot. We signed approximately 21,000 square feet of first generation leases. The tenant-related obligations for the development properties are included within the projects' "Estimated Total Investment" referred to in "Item 2-Management's Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources." In aggregate during the first quarter of 2022, we signed leases for approximately 1.2 million square feet of space and incurred aggregate tenant-related obligations of approximately$94.9 million , or approximately$80 per square foot. 69
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