Boston Properties Earnings Call Nuggets: CEO Succession and Exit Payments
Boston Properties (NYSE:BXP) recently reported its first quarter earnings and discussed the following topics in its earnings conference call.
Joshua Attie – Citigroup: Maybe one for Mort, as you think about the CEO succession and in choosing Owen, how important was sort of the international experience that Owen brings to the table, whether it be Asia or London, in the characteristics that you were looking to bring on executive?
Mortimer B. Zuckerman – Executive Chairman: Well, with one of many diversified talents that Owen brings to the table, I think for the shorter term we are going to focus pretty much on the United States as the main market for not only our current assets, obviously, but for growing our assets. But as you may know, we looked and spent a good deal of time looking for investments in London, and we actually had signed an agreement to buy a building what – agreement which we terminated when it turned out the seller did not own all the buildings as he had represented it. But setting that aside, it’s still an interesting market for us, and I think that will be something that we would consider. But I have to say, we still think by far and away the vast majority of all our activities will be here in the United States. We are in a very few markets in the United States for specific reasons. We will be continuing to look for other markets where we will find the characteristics that we have previously found worked so well for us. And I think that’s where Owen’s time and my time and Doug’s time in terms of expanding our efforts and focusing on new acquisitions and new development, I think that’s by in a way where the main focus will be.
Joshua Attie – Citigroup: Doug, just a quick one for you. You mentioned in your prepared remarks that you’re working with Hines to shorten the delivery schedule on Transbay. Can you just talk a little bit about how you will likely proceed on that project? How much capital are you going to put in before having any leases in place? Do you envision this going spec and I guess, how much can you shorten this delivery schedule in terms of timing?
Douglas T. Linde – President: So, the plans we’re currently working on, (Michael), are to going to the ground and go up to grade and that probably eliminates somewhere between 10 and 14 months of time depending on when we get started and once we get there, we’ll have an interesting question to ask ourselves which is how do we feel about the activity at 535 Mission, how do we feel about the other activity in the city, what pre-leasing commitments might we be able to make or have we made and we’ll sort of go from there and it’s a work in progress.
Joshua Attie – Citigroup: And the total dollars spent to get to that point is?
Douglas T. Linde – President: It’s probably another $120 million plus or minus.
Michael Knott – Green Street Advisors: Mort, can you help me understand how the Board thought about the nearly $20 million in exit payments to be paid to you?
Mortimer B. Zuckerman – Executive Chairman: Well, I’ll give you my best version of it. Obviously, I think that this was something that was anticipated to ensure a well-managed transition and also to recognize, if I may say this, I hope this doesn’t come across the wrong way that the kinds of services that I have previously rendered to the Company may continue to be rendered to the Company as we go forward. That’s certainly my intention. So, I will continue to focus primarily on expanding the Company’s either sites or buildings for the next several years, and then we’ll see where we are at that point. But I think that was basically the hope and the idea that I would continue to perform in that role, not just by myself but at least taking the lead in all of this and that I think was the rationale…
Michael Knott – Green Street Advisors: Then just a capital allocation question, can you just update us on how you’re thinking about acquisition opportunities in the marketplace as you recycle capital, obviously you have a big development pipeline and that could grow significantly over time. Is it still the case that you significantly favor development over acquisitions?
Mortimer B. Zuckerman – Executive Chairman: Yes. I think that’s still our principal focus because, we – frankly, that is still the core competency of this Company. It doesn’t mean that we won’t be looking for acquisitions because that again is – as we have demonstrated with a lot of buildings from the General Motors building to buildings in Washington, the John Hancock Building, even to Prudential Center. There are a lot of situations where we feel we can go into an existing building and improve the building and improve its attraction as a building to be occupied, and therefore over time to really do very, very well. Secondly, to be very blunt about it, because we have the financial resources and the credit to buy buildings and to actually lease buildings and to finance buildings, we think there will still be the opportunity for us to buy buildings with an appropriate spread between the yield at which we buy the buildings and the yield at which we can finance the building. This will it seems to me over the long term if we pick the right buildings as I think we have done for most of our history as a Company in both as a private company and a public company that this will continue to enhance the asset base of the Company. Obviously, it’s a mix between acquisitions of existing building and development sites, and that’s still going to be the basic approach. The strategy that we have always followed and will continue to follow is to really focus again on the certain critical markets where we think we have the best long-term demand and to end up with buildings that are in extraordinary locations and that are extraordinary buildings or can be brought to that level by reason of our ownership. That is what we do the best and what we have done well, and we will continue to try and focus on that. It’s not easy; find the sites or these buildings, and I think this is something that a lot of us spend a lot of time on, and I particularly have spent most of my time on, and that’s I think going to be the continued focus for the next several years.