Boston Properties gives dim outlook on co-working

Company takes $38M write-off on rent payments, struggles to lease up Dock 72

National /
Jan.January 27, 2021 01:21 PM
 Boston Properties president Doug Linde with Dock 72. (Beth Israel Lahey, Dock 72)

Boston Properties president Doug Linde with Dock 72. (Beth Israel Lahey, Dock 72)

 

Boston Properties just made one of the most damning statements a major landlord has given on the co-working industry: It took a big write-off in recognition that flex tenants will struggle to pay rents.

“This industry is just simply facing revenue challenges,” Boston Properties president Doug Linde said on the company’s first-quarter earnings call Wednesday. “We just looked at the world and said, These guys are going to have a really rough time.”

The company posted net income for the fourth quarter of $24.9 million, down 86 percent from $176 million during the same period last year.

The real estate investment trust took the $38 million write-off on rent income from its co-working tenants, company executives said.

It also switched its accounting method from recognizing future rent payments under the accrual basis to only recording current rents on the cash accounting basis.

Boston Properties executives said nearly all their flexible-space tenants have sought some kind of rent relief, and the company has concluded that their difficulty paying rent will continue.

It’s a sharp turnaround for the REIT, which had been one of the more vocal supporters of co-working during the industry’s rapid expansion. WeWork, for instance, leases about 220,000 square feet at Dock 72, the 675,000-square-foot office building in Brooklyn that Boston Properties is co-developing with Rudin Management.

Linde said the company will be more hesitant to do leases with co-working firms in the future, though will look to do flexible space itself.

“This makes it clear we don’t have a lot of appetite for doing these leases with other people on a going-forward basis,” he said.

Boston Properties also took a $60 million write-off on Dock 72, citing an extension of the timeline to fully lease up the project.





    Related Articles

    arrow_forward_ios
    Vice Media CEO Nancy Dubuc, Rudin Management's Bill Rudin and Dock 72 (Getty)
    Vice plans move to Rudin’s Dock 72
    Vice plans move to Rudin’s Dock 72
    Boston Properties CEO Owen Thomas (Thomas by Axel Dupeux, iStock)
    Work-from-home threat “overstated,” Boston Properties CEO says
    Work-from-home threat “overstated,” Boston Properties CEO says
    Gotham Organization Chairman Joel Picket with the proposed development at 130 Felix Street. (Getty, 130 Felix)
    These projects just beat the rezoning deadline
    These projects just beat the rezoning deadline
    Boston Properties CEO Owen Thomas and 360 Park Ave South (Thomas by Axel Dupeux, 360 Park Ave South via CBRE)
    Boston Properties to acquire 360 Park Ave South ground lease
    Boston Properties to acquire 360 Park Ave South ground lease
    Boston Properties CEO Owen Thomas (iStock, Thomas by Axel Dupeux)
    Boston Properties to launch $2B joint venture
    Boston Properties to launch $2B joint venture
    An aerial of 341-347 Madison Avenue and Boston Properties CEO Owen D. Thomas (Google Maps, Real Estate Roundtable)
    Boston Properties moves forward with teardown of ex-MTA HQ
    Boston Properties moves forward with teardown of ex-MTA HQ
    Under Armour CEO Patrik Frisk and the GM Building (Getty, Google Maps, Cushman & Wakefield)
    Under Armour to sublease planned Fifth Avenue flagship
    Under Armour to sublease planned Fifth Avenue flagship
    Clockwise from top left: Boston Properties' Owen Thomas; Empire Real Estate Trust's Tony Malkin; Equity Commonwealth's David Helfand; Columbia Property Trust's Nelson Mills; SL Green's Marc Holliday; Vornado Realty Trust's Steve Roth; and Brookfield's Brian Kingston (Getty)
    Office unease: Tenants are paying up but staying away
    Office unease: Tenants are paying up but staying away
    arrow_forward_ios

    The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

    Loading...