Boston Properties Announces First Quarter 2009 Results

Boston Properties, Inc. (NYSE: BXP), a real estate investment trust, reported results today for the first quarter ended March 31, 2009.

Funds from Operations (FFO) for the quarter ended March 31, 2009 were $134.8 million, or $1.11 per share basic and $1.11 per share diluted. This compares to FFO for the quarter ended March 31, 2008 of $130.7 million, or $1.09 per share basic and $1.08 per share diluted. FFO for the quarter ended March 31, 2009 includes (1) an aggregate charge of $0.19 per share on a diluted basis related to the suspension of construction on the Company’s 250 West 55^th Street development project in New York City and (2) additional non-cash interest expense of $0.06 per share on a diluted basis related to the Company’s adoption of FSP No. APB 14-1. FFO for the quarter ended March 31, 2008 includes $0.03 per share on a diluted basis related to the additional non-cash interest expense associated with the Company’s adoption of FSP No. APB 14-1. The weighted average number of basic and diluted shares outstanding totaled 121,255,708 and 122,928,708, respectively, for the quarter ended March 31, 2009 and 119,535,586 and 122,482,731, respectively, for the quarter ended March 31, 2008.

Net income available to common shareholders was $44.6 million for the quarter ended March 31, 2009, compared to $84.5 million for the quarter ended March 31, 2008. Net income available to common shareholders per share (EPS) for the quarter ended March 31, 2009 was $0.37 basic and $0.37 on a diluted basis. This compares to EPS for the first quarter of 2008 of $0.71 basic and $0.70 on a diluted basis. EPS includes $0.02 and $0.17, on a diluted basis, related to gains on sales of real estate for the quarters ended March 31, 2009 and 2008, respectively.

The reported results are unaudited and there can be no assurance that the results will not vary from the final information for the quarter ended March 31, 2009. In the opinion of management, all adjustments considered necessary for a fair presentation of these reported results have been made.

As of March 31, 2009, the Company’s portfolio consisted of 147 properties comprising approximately 49.8 million square feet, including 10 properties under construction totaling 3.8 million square feet and one hotel. The overall percentage of leased space for the 136 properties in service as of March 31, 2009 was 94.3%.

Significant events during the first quarter included:

• On January 5, 2009, the Company paid $25.0 million in connection with the agreement entered into in May 2006 to redeem the outside members’ equity interests in the limited liability company that owns Citigroup Center.

• On January 16, 2009, the Company acquired the development rights for the site at 17 Cambridge Center in Cambridge, Massachusetts for approximately $11.4 million.
• On February 6, 2009, the Company announced that it was suspending construction on its 1,000,000 square foot office building at 250 West 55th Street in New York City. The Company intends to complete the construction of foundations and steel/deck to grade to facilitate a restart of construction in the future and therefore anticipates that most construction activity on this project will be completed in the fourth quarter of 2009. The Company expects the suspension of development will reduce its 2009 capitalized interest by up to approximately $5 million and will reduce 2009 capitalized wages by a modest amount. These reductions will result in corresponding incremental increases to the Company’s anticipated interest expense and general and administrative expense. During the first quarter of 2009, the Company recognized one-time costs aggregating approximately $27.8 million related to the suspension of development.

Transactions completed subsequent to March 31, 2009:

• On April 21, 2009, the Company obtained construction financing totaling $215.0 million collateralized by its Russia Wharf development project located in Boston, Massachusetts. Russia Wharf, also known as 280 Congress Street, consists of a mixed-use project with approximately 846,000 net rentable square feet. Wellington Management Company, LLP has leased approximately 450,000 square feet of the office space in the development. The construction financing bears interest at a variable rate equal to LIBOR plus 3.00% per annum and matures on April 21, 2012 with two, one-year extension options.

New Accounting Pronouncements:

Effective January 1, 2009, the Company adopted Financial Accounting Standards Board Staff Position No. APB 14-1 "Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)” ("FSP No. APB 14-1”) that requires the liability and equity components of convertible debt instruments that may be settled in cash upon conversion (including partial cash settlement) to be separately accounted for in a manner that reflects the issuer's nonconvertible debt borrowing rate. FSP No. APB 14-1 requires that the initial proceeds from the sale of Boston Properties Limited Partnership’s $862.5 million of 2.875% exchangeable senior notes due 2037, $450.0 million of 3.75% exchangeable senior notes due 2036 and $747.5 million of 3.625% exchangeable senior notes due 2014 be allocated between a liability component and an equity component in a manner that reflects interest expense at the interest rate of similar nonconvertible debt. The resulting debt discount will be amortized over the period during which the debt is expected to be outstanding (i.e., through the first optional redemption dates) as additional non-cash interest expense. As a result of applying FSP No. APB 14-1, the Company reported additional non-cash interest expense of approximately $9.4 million and $5.5 million for the quarters ended March 31, 2009 and March 31, 2008, respectively. The additional non-cash interest expense will increase in subsequent reporting periods through the first optional redemption dates as the debt accretes to its par value over the same period. FSP No. APB 14-1 requires companies to retrospectively apply the requirements of the pronouncement to all periods presented.

Effective January 1, 2009, the Company adopted Statement of Financial Accounting Standards No. 160, "Noncontrolling Interests in Consolidated Financial Statements – an amendment of ARB No. 51” ("SFAS No. 160”) and EITF Topic No. D-98 "Classification and Measurement of Redeemable Securities” (Amended), under which noncontrolling interests of the Company (previously known as "minority interests”) are reclassified either as a component of equity or in the mezzanine section of the balance sheet as temporary equity depending on the terms of such noncontrolling interests. Under SFAS No. 160, net income encompasses the total income of all consolidated subsidiaries and there is a separate disclosure of the attribution of that income between controlling and noncontrolling interests. The implementation of this standard had no effect on the Company’s results of operations.

EPS and FFO per Share Guidance:

The Company’s guidance for the second quarter and full year 2009 for EPS (diluted) and FFO per share (diluted) is set forth and reconciled below.

Except as described below, the foregoing estimates reflect management’s view of current and future market conditions, including assumptions with respect to rental rates, occupancy levels and the earnings impact of the events referenced in this release and previously disclosed. The guidance above includes the additional non-cash interest expense resulting from the change in accounting for convertible debt instruments. In addition, the estimates do not include possible future gains or losses or the impact on operating results from other possible future property acquisitions or dispositions, or possible future impairment charges. EPS estimates may be subject to fluctuations as a result of several factors, including changes in the recognition of depreciation and amortization expense and any gains or losses associated with disposition activity. The Company is not able to assess at this time the potential impact of these factors on projected EPS. By definition, FFO does not include real estate-related depreciation and amortization or gains or losses associated with disposition activities. There can be no assurance that the Company’s actual results will not differ materially from the estimates set forth above.

Boston Properties will host a conference call on Thursday, April 30, 2009 at 2:00 PM Eastern Time, open to the general public, to discuss the first quarter 2009 results, the 2009 projections and related assumptions, and other related matters that may be of interest to investors. The number to call for this interactive teleconference is (877) 857-6151 (Domestic) or (719) 325-4752 (International); no passcode required. A replay of the conference call will be available through May 8, 2009, by dialing (888) 203-1112 (Domestic) or (719) 457-0820 (International) and entering the passcode 3634910. There will also be a live audio webcast of the call which may be accessed on the Company’s website at www.bostonproperties.com in the Investor Relations section. Shortly after the call a replay of the webcast will be available in the Investor Relations section of the Company’s website and archived for up to twelve months following the call.

Additionally, a copy of Boston Properties’ first quarter 2009 "Supplemental Operating and Financial Data” and this press release are available in the Investor Relations section of the Company’s website at www.bostonproperties.com.

Boston Properties is a fully integrated, self-administered and self-managed real estate investment trust that develops, redevelops, acquires, manages, operates and owns a diverse portfolio of Class A office properties and one hotel. The Company is one of the largest owners and developers of Class A office properties in the United States, concentrated in five markets – Boston, Midtown Manhattan, Washington, D.C., San Francisco and Princeton, N.J.

This press release contains forward-looking statements within the meaning of the Federal securities laws. You can identify these statements by our use of the words "assumes,” "believes,” "estimates,” "expects,” "guidance,” "intends,” "plans,” "projects” and similar expressions that do not relate to historical matters. You should exercise caution in interpreting and relying on forward-looking statements because they involve known and unknown risks, uncertainties and other factors which are, in some cases, beyond Boston Properties’ control and could materially affect actual results, performance or achievements. These factors include, without limitation, the ability to enter into new leases or renew leases on favorable terms, dependence on tenants’ financial condition, the uncertainties of real estate development, acquisition and disposition activity, the ability to effectively integrate acquisitions, the costs and availability of financing, the effectiveness of our interest rate hedging contracts, the ability of our joint venture partners to satisfy their obligations, the effects of local economic and market conditions, the effects of acquisitions, dispositions and possible impairment charges on our operating results, the impact of newly adopted accounting principles on the Company’s accounting policies and on period-to-period comparisons of financial results, regulatory changes and other risks and uncertainties detailed from time to time in the Company’s filings with the Securities and Exchange Commission. Boston Properties does not undertake a duty to update or revise any forward-looking statement, including its guidance for the second quarter and full fiscal year 2009, whether as a result of new information, future events or otherwise.