UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

 

 

Date of report (Date of earliest event reported): April 26, 2016

BOSTON PROPERTIES, INC.

(Exact Name of Registrant As Specified in Charter)

 

Delaware		1-13087		04-2473675
(State or Other Jurisdiction of Incorporation)		(Commission File Number)		(IRS Employer Identification No.)

800 Boylston Street, Suite 1900, Boston, Massachusetts 02199

(Address of Principal Executive Offices) (Zip Code)

(617) 236-3300

(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

¨

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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Item 2.02. Results of Operations and Financial Condition.

The information in this Item 2.02—“Results of Operations and Financial Condition” is being furnished. Such information, including Exhibits 99.1 and 99.2 hereto, shall not be deemed “filed” for any purpose, including for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section. The information in this Item 2.02, including Exhibits 99.1 and 99.2, shall not be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act regardless of any general incorporation language in such filing.

On April 26, 2016, Boston Properties, Inc. (the “Company”) issued a press release announcing its financial results for the first quarter of 2016. That press release referred to certain supplemental information that is available on the Company’s website. The text of the supplemental information and the press release are attached hereto as Exhibits 99.1 and 99.2, respectively, and are incorporated by reference herein.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits.

 

Exhibit No.		Description
*99.1		Boston Properties, Inc. Supplemental Operating and Financial Data for the quarter ended March 31, 2016.
*99.2		Press release dated April 26, 2016.

 

*	Filed herewith.

 

1

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

				BOSTON PROPERTIES, INC.
Date: April 26, 2016				By:		/s/ Michael E. LaBelle
						Michael E. LaBelle
						Executive Vice President, Chief Financial Officer and Treasurer

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EXHIBIT INDEX

 

Exhibit No.		Description
*99.1		Boston Properties, Inc. Supplemental Operating and Financial Data for the quarter ended March 31, 2016.
*99.2		Press release dated April 26, 2016.

 

*	Filed herewith.

Exhibit 99.1

 

 

Supplemental Operating and Financial Data

for the Quarter Ended March 31, 2016

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Boston Properties, Inc.

First Quarter 2016

 

Table of Contents

 

 

		Page
Company Profile			3
Investor Information			4
Research Coverage			5
Guidance and Assumptions			6
Financial Highlights			7
Consolidated Balance Sheets			8
Consolidated Income Statements			9
Funds From Operations			10
Reconciliation to Diluted Funds From Operations			11
Funds Available for Distribution and Interest Coverage Ratios			12
Capital Structure			13
Debt Analysis			14-16
Unconsolidated Joint Ventures			17-18
Consolidated Joint Ventures			19-20
Portfolio Overview			21
In-Service Property Listing			22-24
Occupancy by Location			25
Top 20 Tenants and Tenant Diversification			26
Lease Expiration Roll Out			27
Boston Lease Expiration Roll Out			28-29
New York Lease Expiration Roll Out			30-31
San Francisco Lease Expiration Roll Out			32-33
Washington, DC Lease Expiration Roll Out			34-35
CBD/Suburban Lease Expiration Roll Out			36-37
Hotel and Residential Performance			38
Same Property Performance			39
Reconciliation to Same Property Performance and Net Income			40-41
Leasing Activity			42
Capital Expenditures, Tenant Improvements and Leasing Commissions			43
Acquisitions/Dispositions			44
Value Creation Pipeline—Construction in Progress			45
Value Creation Pipeline—Land Parcels and Purchase Options			46
Definitions			47-49

This supplemental package 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,” “may,” “might,” “plans,” “projects,” “should,” “will” 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 uncertainties of investing in new markets, the ability of our joint venture partners to satisfy their obligations, the costs and availability of financing, the effectiveness of our interest rate hedging programs, the effects of local, national and international 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. These forward-looking statements speak only as of the date hereof and are not guarantees of future results, performance or achievements. Boston Properties does not undertake a duty to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

(Cover photo: Rendering of The Hub on Causeway, Boston, MA)

 

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Boston Properties, Inc.

First Quarter 2016

 

COMPANY PROFILE

 

The Company

Boston Properties, Inc. (“Boston Properties” or the “Company”), a self-administered and self-managed real estate investment trust (REIT), is one of the largest owners, managers, and developers of first-class office properties in the United States, with a significant presence in four markets: Boston, New York, San Francisco, and Washington, DC. The Company was founded in 1970 by Mortimer B. Zuckerman and Edward H. Linde in Boston, where it maintains its headquarters. Boston Properties became a public company in June 1997. The Company acquires, develops and manages its properties through full-service regional offices. Its property portfolio is comprised primarily of first-class office space, five retail properties, four residential properties (including two properties under construction) and one hotel. Boston Properties is well-known for its in-house building management expertise and responsiveness to tenants’ needs. The Company holds a superior track record in developing premium Central Business District (CBD) office buildings, successful mixed-use complexes, suburban office centers and build-to-suit projects for the U.S. government and a diverse array of creditworthy tenants.

Management

Boston Properties’ senior management team is among the most respected and accomplished in the REIT industry. Our deep and talented team of 35 individuals averages 30 years of real estate experience and 18 years with Boston Properties. We believe that our size, management depth, financial strength, reputation, and relationships of key personnel provide a competitive advantage to realize growth through property development and acquisitions. Boston Properties benefits from the reputation and relationships of key personnel, including Owen D. Thomas, Chief Executive Officer; Douglas T. Linde, President; Raymond A. Ritchey, Senior Executive Vice President; and Michael E. LaBelle, Executive Vice President, Chief Financial Officer and Treasurer. Our senior management team’s national reputation helps us attract business and investment opportunities. In addition, our other executive officers that serve as Regional Managers have strong reputations that assist in identifying and closing on new opportunities, having opportunities brought to us, and in negotiating with tenants and build-to-suit prospects. Additionally, Boston Properties’ Board of Directors consists of 11 distinguished members, the majority of whom are Independent Directors.

Strategy

Boston Properties’ primary business objective is to maximize return on investment in an effort to provide its investors with the greatest possible total return in all points of the economic cycle. To achieve this objective, the Company maintains consistent strategies that include the following:

 

•

concentrating on carefully targeted markets characterized by high barriers to the creation of new supply and strong real estate fundamentals where tenants have demonstrated a preference for high-quality office buildings and other facilities - currently Boston, New York, San Francisco and Washington, DC;

 

•

investing in the highest quality buildings (primarily office) that are able to maintain high occupancy and achieve premium rental rates through economic cycles;

 

•

in our core markets, maintaining scale and a full service real estate capability (leasing, development, construction and property management) to ensure we (1) see all relevant investment deal flow and (2) maintain an ability to execute on all types of real estate opportunities, such as acquisitions, dispositions, repositioning and development, throughout the real estate investment cycle;

 

•

be astute in market timing for investment decisions by acquiring properties in times of opportunity, developing into economic growth and selectively selling assets to either take advantage of the demand for our premier properties or pare from the portfolio properties that we believe have slower future growth potential, resulting in continuous portfolio refreshment;

 

•

taking on complex, technically-challenging development projects that leverage the skills of our management team to successfully develop, acquire, and reposition properties;

 

•

exploring joint-venture opportunities with partners who seek to benefit from our depth of development and management expertise;

 

•

ensuring a strong balance sheet to maintain consistent access to capital and the resultant ability to make opportunistic investments; and

 

•

fostering a culture and reputation of integrity and fair dealing, making us the counterparty of choice for tenants and real estate industry participants.

Snapshot

(as of March 31, 2016)

 

Corporate Headquarters		Boston, Massachusetts
Markets		Boston, New York, San Francisco and Washington, DC
Fiscal Year-End		December 31
Total Properties (includes unconsolidated joint ventures)		167
Total Square Feet (includes unconsolidated joint ventures)		46.3 million
Common shares outstanding, plus preferred shares and common, preferred and LTIP units (including Outperformance Plan Units and 2013 (“MYLTIP”) Units) on an as-converted basis (but excluding 2014, 2015 and 2016 MYLTIP Units)		171.8 million
Dividend—Quarter/Annualized		$0.65/$2.60
Dividend Yield		2.05%
Total Adjusted Market Capitalization (1)		$31.4 billion
Senior Debt Ratings		A- (S&P); BBB+ (Fitch); Baa2 (Moody’s)

 

(1)	For disclosures relating to our definition of Total Adjusted Market Capitalization, see page 47.

 

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Boston Properties, Inc.

First Quarter 2016

 

INVESTOR INFORMATION

 

 

Company Information
Corporate Headquarters		Trading Symbol		Investor Relations		Inquires
800 Boylston Street Suite 1900 Boston, MA 02199 (t) 617.236.3300 (f) 617.236.3311		BXP		Boston Properties, Inc. 800 Boylston Street, Suite 1900 Boston, MA 02199 (t) 617.236.3322 (f) 617.236.3311 www.bostonproperties.com		Inquiries should be directed to
						Michael E. LaBelle
		Stock Exchange Listing New York Stock Exchange				Executive Vice President, Chief Financial Officer and Treasurer at
						617.236.3352 or
						mlabelle@bostonproperties.com
						Arista Joyner, Investor Relations Manager
						at 617.236.3343 or
						ajoyner@bostonproperties.com

Common Stock Data (NYSE: BXP)

 

Boston Properties’ common stock has the following characteristics (based on information reported by the New York Stock Exchange):

 

		Q1 2016				Q4 2015				Q3 2015				Q2 2015				Q1 2015
High Closing Price		$	127.26			$	130.15			$	126.32			$	142.17			$	144.74
Low Closing Price		$	108.18			$	118.62			$	108.65			$	120.83			$	131.26
Average Closing Price		$	118.69			$	124.47			$	119.54			$	131.76			$	139.56
Closing Price, at the end of the quarter		$	127.08			$	127.54			$	118.40			$	121.04			$	140.48
Dividends per share		$	0.65			$	0.65			$	0.65			$	0.65			$	0.65
Special dividends per share		$	—			$	1.25			$	—			$	—			$	—
Total dividends		$	0.65			$	1.90			$	0.65			$	0.65			$	0.65
Closing dividend yield—annualized			2.05	%			3.02	% (1)			2.20	%			2.15	%			1.85	%
Closing common shares outstanding, plus preferred shares and common, preferred and LTIP units (including Outperformance Plan Units and 2013 MYLTIP Units) on an as-converted basis (but excluding 2014, 2015 and 2016 MYLTIP Units) (thousands) (2)			171,763				171,509				171,509				171,506				171,490
Closing market value of outstanding shares and units (thousands)		$	22,027,642			$	22,074,258			$	20,506,666			$	20,959,086			$	24,291,548

 

(1)	Includes the special dividend of $1.25 per share paid on January 28, 2016 to shareholders of record as of the close of business on December 31, 2015.

(2)	For additional detail, see page 13.

 

Timing
Quarterly results for the next three quarters will be announced according to the following schedule:
Second Quarter, 2016		Tentatively July 26, 2016
Third Quarter, 2016		Tentatively October 25, 2016
Fourth Quarter, 2016		Tentatively January 31, 2017

 

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Boston Properties, Inc.

First Quarter 2016

 

RESEARCH COVERAGE

 

 

 

With the exception of Green Street Advisors, an independent research firm, the equity analysts listed above are those analysts that, according to First Call Corporation, have published research material on the Company and are listed as covering the Company. Please note that any opinions, estimates or forecasts regarding Boston Properties’ performance made by the analysts listed above do not represent the opinions, estimates or forecasts of Boston Properties or its management. Boston Properties does not by its reference above imply its endorsement of or concurrence with any information, conclusions or recommendations made by any of such analysts.

 

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Boston Properties, Inc.

First Quarter 2016

 

GUIDANCE

 

 

		Second Quarter 2016								Full Year 2016
		Low				High				Low				High
Earnings per share (diluted)		$	0.54			$	0.56			$	3.00			$	3.10
Add:
Company share of real estate depreciation and amortization			0.82				0.82				3.24				3.24
Less:
Company share of gains on sales of real estate			—				—				0.39				0.39
FFO per share (diluted)		$	1.36			$	1.38			$	5.85			$	5.95

ASSUMPTIONS

(dollars in thousands)

 

 

		Full Year 2016
		Low				High
Operating property activity:
In-service portfolio occupancy			90.0	%			92.0	%
Combined Property net operating income—GAAP basis (change from 2015) (1)(2)			(0.75	%)			1.00	%
Combined Property net operating income—cash basis (change from 2015) (1)(2)			1.00	%			3.00	%
Non Same Properties’ incremental contribution over 2015		$	38,000			$	44,000
Straight-line rent and fair value lease revenue (non-cash revenue) (3)		$	40,000			$	55,000
Hotel net operating income		$	13,000			$	15,000
Other income (expense):
Development and management services income		$	22,000			$	26,000
General and administrative expense		$	(102,000	)		$	(107,000	)
Net interest expense		$	(400,000	)		$	(415,000	)
Noncontrolling interest:
Noncontrolling interest in property partnerships		$	(95,000	)		$	(115,000	)

 

(1)	For disclosures relating to the calculations used to reconcile Combined Same Property NOI to Consolidated NOI and net income attributable to Boston Properties, Inc. common shareholders, see page 40. For disclosures relating to our use of Combined Net Operating Income (NOI), see page 48.

(2)

Excluding the impact of the noncontrolling interest share from the consolidated portfolio, our share of growth for both Same Property NOI GAAP basis and cash basis is projected to be 0.25% - 2% and 2% - 4%, respectively (Adjusted Combined Same Property NOI). For disclosures relating to the calculations used to reconcile Adjusted Combined Same Property NOI to Consolidated NOI and net income attributable to Boston Properties, Inc. common shareholders, see page 40. For disclosures relating to our use of Adjusted Combined Net Operating Income (NOI), see page 48.

(3)	Includes our share of unconsolidated and consolidated joint venture properties.

 

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Boston Properties, Inc.

First Quarter 2016

 

FINANCIAL HIGHLIGHTS

(unaudited and in thousands, except per share amounts)

 

This section includes non-GAAP financial measures, which are accompanied by what we consider the most directly comparable financial measures calculated and presented in accordance with GAAP. Quantitative reconciliations of the differences between the non-GAAP financial measures presented and the most directly comparable GAAP financial measures are shown on pages 10-12. Descriptions of the non-GAAP financial measures we present and statements of the reasons why management believes the non-GAAP measures provide useful information to investors about the Company’s financial condition and results of operations can be found on pages 47-49.

 

		Three Months Ended
		31-Mar-16				31-Dec-15				30-Sep-15				30-Jun-15				31-Mar-15
Selected Items:
Revenue		$	665,985			$	624,240			$	629,884			$	618,221			$	618,476
Straight-line rent (1)		$	13,792			$	18,149			$	12,630			$	14,024			$	23,164
Fair value lease revenue (1) (2)		$	5,375			$	4,966			$	5,937			$	6,667			$	7,081
Revenue from residential properties		$	4,049			$	4,106			$	4,111			$	3,811			$	6,854
Company share of funds from operations (FFO) from unconsolidated joint ventures		$	6,287	(3)		$	6,205			$	6,455			$	6,964			$	9,702
Lease termination fees (1) (4)		$	49,445			$	5,605			$	7,760			$	5,419			$	14,086
Ground rent expense (5)		$	3,471			$	3,463			$	3,534			$	3,676			$	4,404
Fair value interest adjustment (1)		$	7,810			$	8,593			$	8,062			$	7,856			$	7,796
Capitalized interest		$	9,269			$	8,298			$	9,100			$	8,850			$	7,965
Capitalized wages		$	4,344			$	4,130			$	4,111			$	3,997			$	3,626
Operating margins [(rental revenue—rental expense)/rental revenue] (6)			68.2	%			66.3	%			65.9	%			66.2	%			65.3	%
Losses from early extinguishments of debt		$	—			$	(22,040	)		$	—			$	—			$	—
Income before gains on sales of real estate		$	148,599			$	85,406			$	123,792			$	100,739			$	114,086
Net income attributable to Boston Properties, Inc. common shareholders		$	181,747			$	137,851			$	184,082			$	79,460			$	171,182
FFO attributable to Boston Properties, Inc.		$	250,688			$	197,339			$	217,261			$	208,731			$	200,385
FFO per share—diluted (7)		$	1.63			$	1.28			$	1.41			$	1.36			$	1.30
Net income attributable to Boston Properties, Inc. per share—basic		$	1.18			$	0.90			$	1.20			$	0.52			$	1.12
Net income attributable to Boston Properties, Inc. per share—diluted		$	1.18			$	0.90			$	1.20			$	0.52			$	1.11
Dividends per common share (8)		$	0.65			$	1.90			$	0.65			$	0.65			$	0.65
Funds available for distribution to common shareholders and common unitholders (FAD) (7) (9)		$	188,204			$	138,872			$	142,580			$	148,967			$	149,617
Ratios:
Interest Coverage Ratio (excluding capitalized interest)—cash basis (10)			3.76				3.25				3.30				3.21				3.11
Interest Coverage Ratio (including capitalized interest)—cash basis (10)			3.46				3.02				3.06				2.98				2.91
FFO Payout Ratio (9)			39.88	%			50.78	%			46.10	%			47.79	%			50.00	%
FAD Payout Ratio (9)			59.35	%			80.33	%			78.24	%			74.94	%			74.47	%
		31-Mar-16				31-Dec-15				30-Sep-15				30-Jun-15				31-Mar-15
Balance Sheet Items:
Above-market rents (included within Prepaid Expenses and Other Assets)		$	47,388			$	51,397			$	55,434			$	63,706			$	75,063
Below-market rents (included within Other Liabilities)		$	160,504			$	172,670			$	184,154			$	202,653			$	227,651
Accrued ground rent expense, net (included within Prepaid Expenses and Other Assets and Other Liabilities)		$	39,752			$	38,765			$	42,962			$	41,857			$	40,751
Accrued interest payable on outside members’ notes payable (included within Accrued Interest Payable)		$	127,670			$	119,436			$	111,422			$	103,622			$	96,028
Capitalization:
Common Stock Price @ Quarter End		$	127.08			$	127.54			$	118.40			$	121.04			$	140.48
Equity Value @ Quarter End		$	22,027,642			$	22,074,258			$	20,506,666			$	20,959,086			$	24,291,548
Total Consolidated Debt		$	9,980,366			$	9,008,543			$	9,699,187			$	9,835,878			$	9,853,683
Total Consolidated Market Capitalization		$	32,008,008			$	31,082,801			$	30,205,853			$	30,794,964			$	34,145,231
Total Consolidated Debt/Total Consolidated Market Capitalization (7)			31.18	%			28.98	%			32.11	%			31.94	%			28.86	%
BXP’s Share of Unconsolidated Joint Venture Debt		$	351,394			$	351,926			$	351,340			$	351,154			$	350,178
Less:
Partners’ Share of Consolidated Debt		$	982,292			$	988,142			$	993,988			$	1,166,726			$	1,173,567
Total Adjusted Debt		$	9,349,468			$	8,372,327			$	9,056,539			$	9,020,306			$	9,030,294
Total Adjusted Market Capitalization (11)		$	31,377,110			$	30,446,585			$	29,563,205			$	29,979,392			$	33,321,842
Total Adjusted Debt/Total Adjusted Market Capitalization (7) (11)			29.80	%			27.50	%			30.63	%			30.09	%			27.10	%

 

(1)	Includes the Company’s share of consolidated and unconsolidated joint ventures amounts.

(2)	Represents the net adjustment for above- and below-market leases that are being amortized over the terms of the respective leases in place at the property acquisition dates.

(3)	For additional detail, see page 18.

(4)

For the three months ended March 31, 2016, includes approximately $45.0 million received from a tenant that terminated its lease for approximately 85,000 square feet at the Company’s 250 West 55th Street property located in New York City. For the three months ended September 30, 2015 and March 31, 2015, includes distributions received by the Company from its unsecured creditor claim against Lehman Brothers, Inc. of approximately $3.6 million and $4.5 million, respectively.

(5)	Includes non-cash straight-line adjustments to ground rent. See page 12 for the straight-line adjustments to the ground rent expense.

(6)

Rental expense consists of operating expenses, real estate taxes and ground rent expense. Amounts are exclusive of the gross up of reimbursable electricity and other amounts totaling $17,913, $18,102, $18,989, $17,845 and $17,867 for the three months ended March 31, 2016, December 31, 2015, September 30, 2015, June 30, 2015 and March 31, 2015, respectively.

(7)	For disclosures related to our definitions, see page 47.

(8)	For the three months ended December 31, 2015, dividends per share includes the $1.25 per common share special dividend paid on January 28, 2016 to shareholders of record as of the close of business on December 31, 2015.

(9)	FFO Payout Ratio is defined as dividends per common share (excluding any special dividends) divided by FFO per share. FAD Payout Ratio is defined as distributions to common shareholders and unitholders (excluding any special distributions) divided by FAD.

(10)

The Company believes that the presentation of its interest coverage ratios provides investors with useful information about the Company’s financial performance as it relates to its cash interest expense obligations, which may assist investors in evaluating the Company’s ability to service its existing debt obligations. For a quantitative reconciliation, see page 12.

(11)	For additional detail, see page 13.

 

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Boston Properties, Inc.

First Quarter 2016

 

CONSOLIDATED BALANCE SHEETS

(unaudited and in thousands)

 

 

		31-Mar-16				31-Dec-15				30-Sep-15				30-Jun-15				31-Mar-15
ASSETS
Real estate		$	18,424,542			$	18,465,405			$	18,412,086			$	18,207,934			$	18,153,816
Construction in progress (1)			857,578				763,935				725,601				880,996				797,148
Land held for future development			256,952				252,195				264,598				277,327				271,327
Less accumulated depreciation			(3,969,648	)			(3,925,894	)			(3,833,277	)			(3,753,926	)			(3,646,853	)
Total real estate			15,569,424				15,555,641				15,569,008				15,612,331				15,575,438
Cash and cash equivalents			1,605,678				723,718				1,387,007				1,342,751				1,064,396
Cash held in escrows (2)			71,349				73,790				90,379				252,558				588,218
Marketable securities			21,077				20,380				19,645				20,953				20,736
Tenant and other receivables, net			73,759				97,865				66,446				55,183				47,768
Accrued rental income, net			767,864				754,883				737,145				730,797				713,874
Deferred charges, net (3)			693,976				704,867				719,019				739,838				773,455
Prepaid expenses and other assets			136,799				185,118				143,476				117,993				165,985
Investments in unconsolidated joint ventures			235,904				235,224				217,529				209,974				196,188
Total assets		$	19,175,830			$	18,351,486			$	18,949,654			$	19,082,378			$	19,146,058
LIABILITIES AND EQUITY
Liabilities:
Mortgage notes payable, net (3)		$	3,416,622			$	3,435,242			$	4,127,007			$	4,264,920			$	4,283,948
Unsecured senior notes, net (3)			6,255,602				5,264,819				5,263,363				5,261,810				5,260,260
Unsecured line of credit			—				—				—				—				—
Mezzanine notes payable			308,142				308,482				308,817				309,148				309,475
Outside members’ notes payable			180,000				180,000				180,000				180,000				180,000
Accounts payable and accrued expenses			252,727				274,709				245,200				231,900				224,086
Dividends and distributions payable			113,079				327,320				112,912				112,892				112,796
Accrued interest payable			221,578				190,386				200,916				178,548				186,630
Other liabilities			498,290				483,601				448,680				448,480				483,762
Total liabilities			11,246,040				10,464,559				10,886,895				10,987,698				11,040,957
Commitments and contingencies			—				—				—				—				—
Noncontrolling interests:
Redeemable preferred units of the Operating Partnership			—				—				—				—				633
Redeemable interest in property partnership			—				—				—				106,233				105,520
Equity:
Stockholders’ equity attributable to Boston Properties, Inc.:
Excess stock, $0.01 par value, 150,000,000 shares authorized, none issued or outstanding			—				—				—				—				—
Preferred stock, $0.01 par value, 50,000,000 shares authorized; 5.25% Series B cumulative redeemable preferred stock, $0.01 par value, liquidation preference $2,500 per share, 92,000 shares authorized, 80,000 shares issued and outstanding			200,000				200,000				200,000				200,000				200,000
Common stock, $0.01 par value, 250,000,000 shares authorized, 153,604,966, 153,579,966, 153,574,600, 153,473,931 and 153,402,107 outstanding, respectively			1,536				1,536				1,536				1,535				1,534
Additional paid-in capital			6,306,723				6,305,687				6,300,780				6,293,556				6,286,260
Dividends in excess of earnings			(699,048	)			(780,952	)			(627,054	)			(711,239	)			(690,993	)
Treasury common stock, at cost			(2,722	)			(2,722	)			(2,722	)			(2,722	)			(2,722	)
Accumulated other comprehensive income (loss)			(56,706	)			(14,114	)			(20,625	)			1,848				(11,907	)
Total stockholders’ equity attributable to Boston Properties, Inc.			5,749,783				5,709,435				5,851,915				5,782,978				5,782,172
Noncontrolling interests:
Common units of the Operating Partnership			616,095				603,092				620,036				614,988				617,274
Property partnerships			1,563,912				1,574,400				1,590,808				1,590,481				1,599,502
Total equity			7,929,790				7,886,927				8,062,759				7,988,447				7,998,948
Total liabilities and equity		$	19,175,830			$	18,351,486			$	18,949,654			$	19,082,378			$	19,146,058

 

(1)	Represents the portion of the Company’s consolidated development projects that qualifies for interest capitalization. Such portion generally excludes intangible assets.

(2)

At March, 31, 2015 and June 30, 2015, approximately $534.2 million and $192.3 million, respectively, was held by a qualified intermediary for possible investment in a like-kind exchange in accordance with Section 1031 of the Internal Revenue Code in connection with sales of real estate. As of September 30, 2015, December 31, 2015 and March 31, 2016, amounts previously held by such a qualified intermediary had been released and no amounts were held in escrow.

(3)

On January 1, 2016, the Company adopted Accounting Standards Update 2015-03, “Simplifying the Presentation of Debt Issuance Costs,” which requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The Company retrospectively adopted the guidance resulting in the presentation of deferred financing costs, net (previously included within Deferred Charges, Net) as a reduction to Mortgage Notes Payable, Net and Unsecured Senior Notes, Net for all periods presented. The recognition and measurement guidance for debt issuance costs was not affected.

 

8

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Boston Properties, Inc.

First Quarter 2016

 

CONSOLIDATED INCOME STATEMENTS

(unaudited and in thousands, except for per share amounts)

 

 

		Three Months Ended
		31-Mar-16				31-Dec-15				30-Sep-15				30-Jun-15				31-Mar-15
Revenue
Rental
Base rent		$	536,128			$	493,141			$	494,300			$	486,609			$	490,682
Recoveries from tenants			89,586				88,576				91,544				86,795				88,593
Parking and other			24,825				25,132				25,509				26,552				24,788
Total rental revenue			650,539				606,849				611,353				599,956				604,063
Hotel revenue			8,757				10,939				12,619				13,403				9,085
Development and management services			6,689				6,452				5,912				4,862				5,328
Total revenue			665,985				624,240				629,884				618,221				618,476
Expenses
Operating			114,467				112,846				113,962				113,945				120,954
Real estate taxes			104,705				103,796				105,834				100,519				100,396
Hotel operating			7,634				7,888				8,125				8,495				7,576
General and administrative (1)			29,353				24,300				20,944				22,284				28,791
Transaction costs			25				470				254				208				327
Depreciation and amortization			159,448				164,460				153,015				167,844				154,223
Total expenses			415,632				413,760				402,134				413,295				412,267
Operating income			250,353				210,480				227,750				204,926				206,209
Other income (expense)
Income from unconsolidated joint ventures			1,791				2,211				2,647				3,078				14,834
Interest and other income			1,505				440				3,637				1,293				1,407
Gains (losses) from investments in securities (1)			259				493				(1,515	)			(24	)			393
Interest expense (2)			(105,309	)			(106,178	)			(108,727	)			(108,534	)			(108,757	)
Losses from early extinguishments of debt			—				(22,040	)			—				—				—
Income before gains on sales of real estate			148,599				85,406				123,792				100,739				114,086
Gains on sales of real estate (3)			67,623				81,332				199,479				—				95,084
Net income			216,222				166,738				323,271				100,739				209,170
Net income attributable to noncontrolling interests
Noncontrolling interest in property partnerships (4)			(10,464	)			(10,143	)			(115,240	)			(9,264	)			(15,208	)
Noncontrolling interest—redeemable preferred units of the Operating Partnership			—				—				—				(3	)			(3	)
Noncontrolling interest—common units of the Operating Partnership (5)			(21,393	)			(16,098	)			(21,302	)			(9,394	)			(20,188	)
Net income attributable to Boston Properties, Inc.			184,365				140,497				186,729				82,078				173,771
Preferred dividends			(2,618	)			(2,646	)			(2,647	)			(2,618	)			(2,589	)
Net income attributable to Boston Properties, Inc. common shareholders		$	181,747			$	137,851			$	184,082			$	79,460			$	171,182
INCOME PER SHARE OF COMMON STOCK (EPS)
Net income attributable to Boston Properties, Inc. per share—basic		$	1.18			$	0.90			$	1.20			$	0.52			$	1.12
Net income attributable to Boston Properties, Inc. per share—diluted		$	1.18			$	0.90			$	1.20			$	0.52			$	1.11

 

(1)

Gains (losses) from investments in securities include $259, $493, $(1,515), $(24) and $393 and general and administrative expense includes $(259), $(493), $1,515, $24 and $(393) for the three months ended March 31, 2016, December 31, 2015, September 30, 2015, June 30, 2015 and March 31, 2015, respectively, related to the Company’s deferred compensation plan.

(2)

For the three months ended March 31, 2016, December 31, 2015, September 30, 2015, June 30, 2015 and March 31, 2015, interest expense includes $8,234, $8,014, $7,800, $7,594 and $7,385, respectively, consisting of the interest expense on the partner loans for the 767 Fifth Avenue (The GM Building) consolidated joint venture, which amount is allocated to the partners within noncontrolling interests in property partnerships. The Company’s share of the interest expense on its loan to the joint venture eliminates in consolidation.

(3)	See page 44 for additional information.

(4)

For the three months ended September 30, 2015, noncontrolling interest in property partnerships includes approximately $101.1 million consisting of the allocation of the gain on sale of real estate to the outside partners in the consolidated entity that sold 505 9th Street, N.W. located in Washington, DC.

(5)

Equals noncontrolling interest—common units of the Operating Partnership’s share of 10.32%, 10.26%, 10.26%, 10.34% and 10.44% of income before net income attributable to noncontrolling interests in Operating Partnership after deduction for preferred distributions for the three months ended March 31, 2016, December 31, 2015, September 30, 2015, June 30, 2015 and March 31, 2015, respectively.

 

9

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Boston Properties, Inc.

First Quarter 2016

 

FUNDS FROM OPERATIONS (FFO)

(unaudited and in thousands, except for per share amounts)

 

 

		Three Months Ended
		31-Mar-16				31-Dec-15				30-Sep-15				30-Jun-15				31-Mar-15
Net income attributable to Boston Properties, Inc. common shareholders		$	181,747			$	137,851			$	184,082			$	79,460			$	171,182
Add:
Preferred dividends			2,618				2,646				2,647				2,618				2,589
Noncontrolling interest—common units of the Operating Partnership			21,393				16,098				21,302				9,394				20,188
Noncontrolling interest—redeemable preferred units of the Operating Partnership			—				—				—				3				3
Noncontrolling interests in property partnerships			10,464				10,143				115,240				9,264				15,208
Less:
Gains on sales of real estate			67,623				81,332				199,479				—				95,084
Income before gains on sales of real estate			148,599				85,406				123,792				100,739				114,086
Add:
Real estate depreciation and amortization (1)			163,580				167,968				156,489				171,384				148,754
Less:
Noncontrolling interests in property partnerships’ share of FFO			30,019				30,828				35,527				36,699				36,515
Noncontrolling interest—redeemable preferred units of the Operating Partnership			—				—				—				3				3
Preferred dividends			2,618				2,646				2,647				2,618				2,589
FFO attributable to the Operating Partnership common unitholders (including Boston Properties, Inc.) (“Basic FFO”)			279,542				219,900				242,107				232,803				223,733
Less:
Noncontrolling interest—common units of the Operating Partnership’s share of funds from operations			28,854				22,561				24,846				24,072				23,348
FFO attributable to Boston Properties, Inc. common shareholders (2)		$	250,688			$	197,339			$	217,261			$	208,731			$	200,385
FFO per share—basic		$	1.63			$	1.28			$	1.41			$	1.36			$	1.31
Weighted average shares outstanding—basic			153,626				153,602				153,595				153,450				153,230
FFO per share—diluted		$	1.63			$	1.28			$	1.41			$	1.36			$	1.30
Weighted average shares outstanding—diluted			153,917				153,897				153,786				153,815				153,873

 

(1)

Real estate depreciation and amortization consists of depreciation and amortization from the consolidated statements of operations of $159,448, $164,460, $153,015, $167,844 and $154,223 plus our share of unconsolidated joint venture real estate depreciation and amortization of $4,496, $3,994, $3,808, $3,886 and $(5,132), less corporate related depreciation of $364, $486, $334, $346 and $337 for the three months ended March 31, 2016, December 31, 2015, September 30, 2015, June 30, 2015 and March 31, 2015, respectively.

(2)	Based on weighted average basic shares for the quarter. The Company’s share for the quarter ended March 31, 2016, December 31, 2015, September 30, 2015, June 30, 2015 and March 31, 2015 was 89.68%, 89.74%, 89.74%, 89.66% and 89.56%, respectively.

 

10

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Boston Properties, Inc.

First Quarter 2016

 

RECONCILIATION TO DILUTED FUNDS FROM OPERATIONS

(unaudited and in thousands, except for per share amounts)

 

 

		March 31, 2016								December 31, 2015								September 30, 2015								June 30, 2015								March 31, 2015
		Income				Shares/Units				Income				Shares/Units				Income				Shares/Units				Income				Shares/Units				Income				Shares/Units
		(Numerator)				(Denominator)				(Numerator)				(Denominator)				(Numerator)				(Denominator)				(Numerator)				(Denominator)				(Numerator)				(Denominator)
Basic FFO		$	279,542				171,309			$	219,900				171,162			$	242,107				171,160			$	232,803				171,146			$	223,733				171,084
Effect of Dilutive Securities Stock-based compensation			—				291				—				295				—				191				—				365				—				643
Diluted FFO		$	279,542				171,600			$	219,900				171,457			$	242,107				171,351			$	232,803				171,511			$	223,733				171,727
Less:
Noncontrolling interest—common units of the Operating Partnership’s share of diluted FFO			28,805				17,683				22,522				17,560				24,818				17,565				24,021				17,696				23,261				17,854
Boston Properties, Inc.’s share of diluted FFO (1)		$	250,737				153,917			$	197,378				153,897			$	217,289				153,786			$	208,782				153,815			$	200,472				153,873
FFO per share—basic		$	1.63							$	1.28							$	1.41							$	1.36							$	1.31
FFO per share—diluted		$	1.63							$	1.28							$	1.41							$	1.36							$	1.30

 

(1)	Based on weighted average diluted shares for the quarter. The Company’s share for the quarter ended March 31, 2016, December 31, 2015, September 30, 2015, June 30, 2015 and March 31, 2015 was 89.70%, 89.76%, 89.75%, 89.68% and 89.60%, respectively.

 

11

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Boston Properties, Inc.

First Quarter 2016

 

FUNDS AVAILABLE FOR DISTRIBUTION (FAD)

(in thousands)

 

 

		Three Months Ended
		31-Mar-16				31-Dec-15				30-Sep-15				30-Jun-15				31-Mar-15
Basic FFO (see page 10)		$	279,542			$	219,900			$	242,107			$	232,803			$	223,733
2nd generation tenant improvements and leasing commissions			(67,273	)			(35,036	)			(91,787	)			(54,346	)			(55,121	)
Straight-line rent (1)			(13,792	)			(18,149	)			(12,630	)			(14,024	)			(23,164	)
Lease transaction costs which qualify as rent inducements (1) (2)			5,288				1,945				1,646				3,141				5,929
Recurring capital expenditures (3)			(21,585	)			(17,407	)			(16,934	)			(11,839	)			(6,291	)
Fair value interest adjustment (1)			(7,810	)			(8,593	)			(8,062	)			(7,856	)			(7,796	)
Fair value lease revenue (1) (4)			(5,375	)			(4,966	)			(5,937	)			(6,667	)			(7,081	)
Hotel improvements, equipment upgrades and replacements			(360	)			(1,231	)			(436	)			(272	)			(491	)
Straight-line ground rent expense adjustment (5)			987				(3,983	)			891				1,106				1,196
Non-real estate depreciation			364				486				334				346				337
Stock-based compensation			10,069				6,358				6,345				5,469				11,011
Non-cash gains from early extinguishments of debt			—				(3,604	)			—				—				—
Non-cash termination income adjustment (fair value lease amounts)			29				3				(555	)			(1,645	)			10
Partners’ share of consolidated and unconsolidated joint venture 2nd generation tenant improvement and leasing commissions			6,929				2,698				26,982				2,005				1,511
Unearned portion of capitalized fees			1,191				451				616				746				5,834
Funds available for distribution to common shareholders and common unitholders (FAD)		$	188,204			$	138,872			$	142,580			$	148,967			$	149,617

INTEREST COVERAGE RATIOS

(in thousands, except for ratio amounts)

 

		Three Months Ended
		31-Mar-16				31-Dec-15				30-Sep-15				30-Jun-15				31-Mar-15
Income before gains on sales of real estate		$	148,599			$	85,406			$	123,792			$	100,739			$	114,086
Interest expense			105,309				106,178				108,727				108,534				108,757
Interest expense from unconsolidated joint ventures			4,015				3,908				3,830				3,823				4,977
Depreciation and amortization expense			159,448				164,460				153,015				167,844				154,223
Depreciation and amortization expense from unconsolidated joint ventures			4,496				3,994				3,808				3,886				(5,132	)
Losses from early extinguishments of debt			—				22,040				—				—				—
Non-cash termination income adjustment (fair value lease amounts)			29				3				(555	)			(1,645	)			10
Stock-based compensation			10,069				6,358				6,345				5,469				11,011
Straight-line ground rent expense adjustment (5)			987				(3,983	)			891				1,106				1,196
Straight-line rent (1)			(13,792	)			(18,149	)			(12,630	)			(14,024	)			(23,164	)
Lease transaction costs which qualify as rent inducements (1) (2)			5,288				1,945				1,646				3,141				5,929
Fair value lease revenue (1) (4)			(5,375	)			(4,966	)			(5,937	)			(6,667	)			(7,081	)
Subtotal			419,073				367,194				382,932				372,206				364,812
Excluding Capitalized Interest
Divided by:
Adjusted interest expense (6) (7) (8) (9) (10)			111,462				113,114				115,924				115,937				117,410
Interest Coverage Ratio			3.76				3.25				3.30				3.21				3.11
Including Capitalized Interest
Divided by:
Adjusted interest expense (6) (7) (8) (9) (10) (11)			120,987				121,494				125,147				124,909				125,488
Interest Coverage Ratio			3.46				3.02				3.06				2.98				2.91

 

(1)	Includes the Company’s share of consolidated and unconsolidated joint venture amounts.

(2)	Consists of lease transaction costs that qualify as rent inducements in accordance with GAAP. Lease transaction costs are generally included in 2nd generation tenant improvements and leasing commissions.

(3)	Recurring capital expenditures does not include planned non-recurring capital expenditures related to acquisitions and non-recurring repositioning capital expenditures – see page 43 for additional detail.

(4)	Represents the net adjustment for above- and below-market leases that are being amortized over the terms of the respective leases in place at the property acquisition dates.

(5)

For the three months ended March 31, 2016 and December 31, 2015, includes the straight-line impact of the Company’s 99-year ground and air rights lease related to the Company’s 200 Clarendon Street property’s adjacent 100 Clarendon Street garage and Back Bay Station concourse level. The Company has allocated contractual ground lease payments aggregating approximately $34.4 million which it expects to incur over the next three years with no payments thereafter. The Company is recognizing these amounts on a straight-line basis over the 99-year term of the ground and air rights lease. For additional information, see page 7.

(6)	Adjusted interest expense is comprised of interest expense from the Company’s consolidated income statements and the Company’s share of interest expense from unconsolidated joint ventures, adjusted for the applicable items detailed below in Notes 7-11.

(7)	Excludes consolidated and the Company’s share of unconsolidated joint venture amortization of financing costs of $1,949, $2,034, $2,037, $1,936 and $1,956 for the three months ended March 31, 2016, December 31, 2015, September 30, 2015, June 30, 2015 and March 31, 2015, respectively.

(8)

Excludes interest expense of $8,234, $8,014, $7,800, $7,594 and $7,385 for the three months ended March 31, 2016, December 31, 2015, September 30, 2015, June 30, 2015 and March 31, 2015, respectively, consisting of the interest expense on the partner loans for the 767 Fifth Avenue (The GM Building) consolidated joint venture, which amount is allocated to the partners within noncontrolling interests in property partnerships. The Company’s share of the interest expense on its loan to the joint venture eliminates in consolidation.

(9)	Excludes consolidated fair value interest adjustment of $12,321, $13,076, $13,204, $13,110 and $13,017 for the three months ended March 31, 2016, December 31, 2015, September 30, 2015, June 30, 2015 and March 31, 2015, respectively.

(10)	Excludes nonrecurring losses from early extinguishments of debt of $22,040 for the three months ended December 31, 2015.

(11)	Includes consolidated and the Company’s share of unconsolidated joint venture capitalized interest of $9,525, $8,380, $9,223, $8,972 and $8,078 for the three months ended March 31, 2016, December 31, 2015, September 30, 2015, June 30, 2015 and March 31, 2015, respectively.

 

12

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Boston Properties, Inc.

First Quarter 2016

 

CAPITAL STRUCTURE

 

(in thousands)

Consolidated Debt

 

 

		Aggregate Principal March 31, 2016
Mortgage Notes Payable		$	3,352,215
Mezzanine Notes Payable			306,000
Unsecured Line of Credit			—
Unsecured Senior Notes, at face value			6,300,000
Total Debt			9,958,215
Fair Value Interest Adjustment on Mortgage Notes Payable			67,611
Fair Value Interest Adjustment on Mezzanine Notes Payable			2,142
Discount on Unsecured Senior Notes			(13,148	)
Deferred Financing Costs, Net			(34,454	)
Total Consolidated Debt		$	9,980,366

 

Boston Properties Limited Partnership Unsecured Senior Notes
																																		Total/ Weighted Average
Settlement Date			1/20/2016				6/27/2013				4/11/2013				6/11/2012				11/10/2011				11/18/2010				4/19/2010				10/9/2009
Original Principal Amount		$	1,000,000			$	700,000			$	500,000			$	1,000,000			$	850,000			$	850,000			$	700,000			$	700,000			$	6,300,000
Principal Amount at Quarter End		$	1,000,000			$	700,000			$	500,000			$	1,000,000			$	850,000			$	850,000			$	700,000			$	700,000			$	6,300,000
Yield (on issue date)			3.766	%			3.916	%			3.279	%			3.954	%			3.853	%			4.289	%			5.708	%			5.967	%			4.316	%
Coupon			3.650	%			3.800	%			3.125	%			3.850	%			3.700	%			4.125	%			5.625	%			5.875	%			4.194	%
Public Offering Price			99.708	%			99.694	%			99.379	%			99.779	%			99.767	%			99.260	%			99.891	%			99.931	%			99.684	%
Ratings:
S&P			A- (stable)				A- (stable)				A- (stable)				A- (stable)				A- (stable)				A- (stable)				A- (stable)				A- (stable)
Fitch			BBB+ (stable)				BBB+ (stable)				BBB+ (stable)				BBB+ (stable)				BBB+ (stable)				BBB+ (stable)				BBB+ (stable)				BBB+ (stable)
Moody’s			Baa2 (stable)				Baa2 (stable)				Baa2 (stable)				Baa2 (stable)				Baa2 (stable)				Baa2 (stable)				Baa2 (stable)				Baa2 (stable)
Maturity Date			2/1/2026				2/1/2024				9/1/2023				2/1/2023				11/15/2018				5/15/2021				11/15/2020				10/15/2019
Discount		$	2,877			$	1,644			$	2,323			$	1,508			$	799			$	3,406			$	385			$	206			$	13,148
Deferred Financing Costs, Net		$	8,005			$	4,398			$	2,998			$	5,342			$	2,605			$	3,450			$	2,440			$	2,012			$	31,250
Unsecured Senior Notes, net of discount		$	989,118			$	693,958			$	494,679			$	993,150			$	846,596			$	843,144			$	697,175			$	697,782			$	6,255,602

Equity

 

 

		Shares/Units Outstanding as of 3/31/2016				Common Stock Equivalents				Equivalent Value (1)
Common Stock			153,605				153,605	(2)		$	19,520,123
Common Operating Partnership Units			18,158				18,158	(3)			2,307,519
5.25% Series B Cumulative Redeemable Preferred Stock			80				—				200,000	(4)
Total Equity							171,763			$	22,027,642
Total Consolidated Debt										$	9,980,366
Total Consolidated Market Capitalization										$	32,008,008
BXP’s share of Unconsolidated Joint Venture Debt										$	351,394
Less:
Partners’ Share of Consolidated Debt										$	982,292
Total Adjusted Debt (5)										$	9,349,468
Total Adjusted Market Capitalization (5)										$	31,377,110

 

(1)	Values based on March 31, 2016 closing price of $127.08 per share of common stock, except the shares of Series B Cumulative Redeemable Preferred Stock have been valued at the liquidation preference of $2,500.00 per share (see Note 4 below).

(2)	Includes 59,875 shares of restricted stock.

(3)

Includes 2,065,185 long-term incentive plan units (including 215,709 Outperformance Plan Units and 103,882 2013 MYLTIP Units), but excludes an aggregate of 1,317,950 2014, 2015 and 2016 MYLTIP Units because the performance periods for these MYLTIP Units have not ended and therefore none of such units have been earned.

(4)

On or after March 27, 2018, the Company, at its option, may redeem the Series B Preferred Stock for a cash redemption price of $2,500.00 per share ($25.00 per depositary share), plus all accrued and unpaid dividends. The Series B Preferred Stock is not redeemable by the holders, has no maturity date and is not convertible into or exchangeable for any other security of the Company or any of its affiliates.

(5)	For disclosures relating to our definitions of Total Adjusted Debt and Total Adjusted Market Capitalization, see page 47.

 

13

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Boston Properties, Inc.

First Quarter 2016

 

DEBT ANALYSIS (1)

as of March 31, 2016

 

(dollars in thousands)

Debt Maturities and Principal Payments

 

 

		2016				2017				2018				2019				2020				Thereafter				Total
Floating Rate Debt:
Mortgage Notes Payable		$	—			$	—			$	—			$	—			$	—			$	—			$	—
Unsecured Line of Credit			—				—				—				—				—				—				—
Total Floating Rate Debt		$	—			$	—			$	—			$	—			$	—			$	—			$	—
Fixed Rate Debt:
Mortgage Notes Payable		$	570,600			$	2,067,654			$	18,633			$	19,670			$	20,766			$	654,892			$	3,352,215
Fair Value Interest Adjustment			33,781				33,830				—				—				—				—				67,611
Deferred Financing Costs, Net			(786	)			(695	)			(432	)			(432	)			(432	)			(427	)			(3,204	)
Mortgage Notes Payable			603,595				2,100,789				18,201				19,238				20,334				654,465				3,416,622
Mezzanine Notes Payable			—				306,000				—				—				—				—				306,000
Fair Value Interest Adjustment			1,049				1,093				—				—				—				—				2,142
Mezzanine Notes Payable			1,049				307,093				—				—				—				—				308,142
Unsecured Senior Notes, Face Amount			—				—				850,000				700,000				700,000				4,050,000				6,300,000
Discount Amortization			(1,448	)			(2,001	)			(2,035	)			(1,825	)			(1,830	)			(4,009	)			(13,148	)
Deferred Financing Costs, Net			(3,877	)			(5,380	)			(5,212	)			(4,228	)			(3,702	)			(8,851	)			(31,250	)
Unsecured Senior Notes			(5,325	)			(7,381	)			842,753				693,947				694,468				4,037,140				6,255,602
Total Fixed Rate Debt		$	599,319			$	2,400,501			$	860,954			$	713,185			$	714,802			$	4,691,605			$	9,980,366
Total Consolidated Debt		$	599,319			$	2,400,501			$	860,954			$	713,185			$	714,802			$	4,691,605			$	9,980,366
GAAP Weighted Average Floating Rate Debt (2)			—				—				—				—				—				—				—
GAAP Weighted Average Fixed Rate Debt (2)			5.33	%			3.76	%			3.89	%			5.96	%			5.70	%			3.23	%			4.29	%
Total GAAP Weighted Average Rate (2)			5.33	%			3.76	%			3.89	%			5.96	%			5.70	%			3.23	%			4.29	%
Total Stated Weighted Average Rate			6.47	%			5.78	%			3.77	%			5.87	%			5.63	%			3.17	%			4.79	%

Unsecured Line of Credit - Matures July 26, 2018

 

 

Facility		Outstanding at 3/31/2016				Letters of Credit				Remaining Capacity at 3/31/2016
$1,000,000		$	—			$	16,087			$	983,913

Unsecured and Secured Debt Analysis

 

		% of Total Debt				Stated Weighted Average Rate				GAAP Weighted Average Rate				Weighted Average Maturity (years)
Unsecured Debt			62.68	%			4.23	%			4.32	%			6.1
Secured Debt			37.32	%			5.72	%			4.23	%			2.1
Total Consolidated Debt			100.00	%			4.79	%			4.29	%			4.6

Floating and Fixed Rate Debt Analysis

 

		% of Total Debt				Stated Weighted Average Rate				GAAP Weighted Average Rate				Weighted Average Maturity (years)
Floating Rate Debt			—				—				—				—
Fixed Rate Debt			100.00	%			4.79	%			4.29	%			4.6
Total Consolidated Debt			100.00	%			4.79	%			4.29	%			4.6

Interest Rate Hedging Instruments

 

 

		Notional Amount				Weighted-Average 10-Year Swap Rate				Effective Date				Termination Date
Forward-starting interest rate swaps		$	550,000				2.423	%			September 1, 2016				September 1, 2026
Forward-starting interest rate swaps (3)			450,000				2.619	%			June 1, 2017				June 1, 2027

 

(1)	Excludes unconsolidated joint ventures. For information on our unconsolidated joint venture debt, see page 17.

(2)	The GAAP interest rate differs from the stated interest rate due to the inclusion of the amortization of financing charges, effects of hedging transactions and adjustments required to reflect loans at their fair values upon acquisition or consolidation.

(3)	Represents forward interest rate swap contracts entered into by the Company’s 767 Fifth Partners LLC consolidated entity (the entity in which the Company has a 60% interest and that owns 767 Fifth Avenue (the GM Building) in New York City).

 

14

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Boston Properties, Inc.

First Quarter 2016

 

DEBT MATURITIES AND PRINCIPAL PAYMENTS (1)

 

as of March 31, 2016

(dollars in thousands)

 

Property		2016				2017				2018				2019				2020				Thereafter				Total
767 Fifth Avenue (The GM Building) (60% ownership)		$	—			$	1,300,000			$	—			$	—			$	—			$	—			$	1,300,000	(2)
599 Lexington Avenue			—				750,000				—				—				—				—				750,000
601 Lexington Avenue (55% ownership)			9,390				13,051				13,684				14,349				15,045				630,486				696,005
Embarcadero Center Four			347,382				—				—				—				—				—				347,382
Fountain Square			211,250				—				—				—				—				—				211,250	(2)(3)
New Dominion Technology Park, Building One			1,360				2,878				3,100				3,340				3,598				22,906				37,182
University Place			1,218				1,725				1,849				1,981				2,123				1,500				10,396
			570,600				2,067,654				18,633				19,670				20,766				654,892				3,352,215
Aggregate Fair Value Interest Adjustments			33,781				33,830				—				—				—				—				67,611
Deferred Financing Costs, Net			(786	)			(695	)			(432	)			(432	)			(432	)			(427	)			(3,204	)
			603,595				2,100,789				18,201				19,238				20,334				654,465				3,416,622
Mezzanine Notes Payable (associated with 767 Fifth
Avenue (The GM Building)) (60% ownership)			—				306,000				—				—				—				—				306,000
Fair Value Interest Adjustment			1,049				1,093				—				—				—				—				2,142
			1,049				307,093				—				—				—				—				308,142
Unsecured Senior Notes, Face Amount			—				—				850,000				700,000				700,000				4,050,000				6,300,000
Aggregate Discount Amortization			(1,448	)			(2,001	)			(2,035	)			(1,825	)			(1,830	)			(4,009	)			(13,148	)
Deferred Financing Costs, Net			(3,877	)			(5,380	)			(5,212	)			(4,228	)			(3,702	)			(8,851	)			(31,250	)
			(5,325	)			(7,381	)			842,753				693,947				694,468				4,037,140				6,255,602
Unsecured Line of Credit			—				—				—				—				—				—				—
		$	599,319			$	2,400,501			$	860,954			$	713,185			$	714,802			$	4,691,605			$	9,980,366
% of Total Consolidated Debt			6.00	%			24.05	%			8.63	%			7.15	%			7.16	%			47.01	%			100.00	%
Balloon Payments		$	554,505			$	2,356,000			$	850,000			$	700,000			$	700,000			$	4,683,554			$	9,844,059
Scheduled Principal Amortization		$	16,095			$	17,654			$	18,633			$	19,670			$	20,766			$	21,338			$	114,156

 

(1)	Excludes unconsolidated joint ventures. For information on our unconsolidated joint venture debt, see page 17.

(2)	This property has a fair value interest adjustment which is aggregated on the Aggregate Fair Value Interest Adjustments line.

(3)	This loan was repaid on April 11, 2016 at par with no prepayment penalty.

 

15

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Boston Properties, Inc.

First Quarter 2016

 

SENIOR UNSECURED DEBT COVENANT COMPLIANCE RATIOS

 

(in thousands)

In the fourth quarter of 2002, the Company’s Operating Partnership (Boston Properties Limited Partnership) received investment grade ratings on its senior unsecured debt securities and thereafter issued unsecured notes. The notes were issued under an indenture, dated as of December 13, 2002, by and between Boston Properties Limited Partnership and The Bank of New York Mellon Trust Company, N.A., as trustee, as supplemented from time to time (the “Indenture”), which, among other things, requires us to comply with the following limitations on incurrence of debt: Limitation on Outstanding Debt; Limitation on Secured Debt; Ratio of Annualized Consolidated EBITDA to Annualized Interest Expense; and Maintenance of Unencumbered Assets. Compliance with these restrictive covenants requires us to apply specialized terms the meanings of which are described in detail in our filings with the SEC, and to calculate ratios in the manner prescribed by the indenture.

This section presents such ratios as of March 31, 2016 to show that the Company’s Operating Partnership was in compliance with the terms of the Indenture, which has been filed with the SEC. Management is not presenting these ratios and the related calculations for any other purpose or for any other period, and is not intending for these measures to otherwise provide information to investors about the Company’s financial condition or results of operations. Investors should not rely on these measures other than for purposes of testing our compliance with the Indenture. This section also presents certain other indenture-related data that we believe assists investors in the Company’s unsecured debt securities.

 

				Senior Notes				Senior Notes
				Issued Prior to				Issued On or After
				October 9, 2009				October 9, 2009
				March 31, 2016
Total Assets:
Capitalized Property Value (1)				$	21,817,020			$	22,314,403
Cash and Cash Equivalents					1,605,678				1,605,678
Investments in Marketable Securities					21,077				21,077
Undeveloped Land, at Cost (including Joint Venture %)					303,822				303,822
Development in Process, at Cost (including Joint Venture %)					1,200,417				1,200,417
Total Assets				$	24,948,014			$	25,445,397
Unencumbered Assets				$	17,782,922			$	18,121,089
Secured Debt (Fixed and Variable) (2)				$	3,352,215			$	3,352,215
Mezzanine Notes Payable (3)					306,000				306,000
Joint Venture Debt (4)					352,762				352,762
Related Party Notes Payable					180,000				180,000
Contingent Liabilities & Letters of Credit					22,472				22,472
Unsecured Debt (5)					6,300,000				6,300,000
Total Outstanding Debt				$	10,513,449			$	10,513,449
Consolidated EBITDA:
Income before Gains on Sales of Real Estate (per Consolidated Income Statement)				$	148,599			$	148,599
Subtract: Income from Unconsolidated Joint Ventures (per Consolidated Income Statement)					(1,791	)			(1,791	)
Subtract: Gains from Investments in Securities (per Consolidated Income Statement)					(259	)			(259	)
Add: Interest Expense (per Consolidated Income Statement)					105,309				105,309
Add: Depreciation and Amortization (per Consolidated Income Statement)					159,448				159,448
EBITDA					411,306				411,306
Add: Company share of unconsolidated joint venture EBITDA					10,161				10,161
Consolidated EBITDA				$	421,467			$	421,467
Adjusted Interest Expense:
Interest Expense (per Consolidated Income Statement)				$	105,309			$	105,309
Add: Company share of unconsolidated joint venture interest expense					4,015				4,015
Less: Amortization of financing costs (including Joint Venture %)					(1,949	)			(1,949	)
Less: Interest expense funded by construction loan draws					(50	)			(50	)
Adjusted Interest Expense				$	107,325			$	107,325
Covenant Ratios and Related Data		Test		Actual				Actual
Total Outstanding Debt/Total Assets		Less than 60%			42.1	%			41.3	%
Secured Debt/Total Assets		Less than 50%			16.1	%			15.8	%
Interest Coverage (Annualized Consolidated EBITDA to
Annualized Interest Expense)		Greater than 1.50x			3.93				3.93
Unencumbered Assets/ Unsecured Debt		Greater than 150%			282.3	%			287.6	%
Unencumbered Consolidated Property EBITDA (6)				$	272,452			$	272,452
Unencumbered Interest Coverage (Unencumbered Consolidated Property EBITDA to Unsecured
Interest Expense)					4.19				4.19
% of Unencumbered Consolidated Property EBITDA to Consolidated EBITDA					64.6	%			64.6	%
# of in-service unencumbered properties					138				138

 

(1)

For senior notes issued prior to October 9, 2009, Capitalized Property Value is determined for each property and is the greater of (A) annualized EBITDA capitalized at an 8.5% rate for CBD properties and a 9.0% rate for non-CBD properties, and (B) the undepreciated book value as determined under GAAP. Capitalized Property Value for senior notes issued on or after October 9, 2009 is determined for each property and is the greater of (A) annualized EBITDA capitalized at an 8.0% rate for CBD properties and a 9.0% rate for non-CBD properties, and (B) the undepreciated book value as determined under GAAP.

(2)	Excludes aggregate fair value interest adjustment of $67,611 and deferred financing costs, net of $3,204.

(3)	Excludes aggregate fair value interest adjustment of $2,142.

(4)	Excludes aggregate deferred financing costs, net of $1,368.

(5)	Excludes aggregate debt discount of $13,148 and deferred financing costs, net of $31,250.

(6)

Unencumbered Consolidated Property EBITDA is a non-GAAP financial measure equal to Consolidated EBITDA excluding corporate revenue and expenses, encumbered consolidated Property EBITDA, EBITDA from land and properties that have either been disposed of or not fully placed in-service and items that, in our view, are not representative of a property’s standard ongoing performance, such as termination income and other similar items. For the three months ended March 31, 2016, these excluded amounts were approximately $(20,176), $110,029, $7,313 and $51,849, respectively.

 

16

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Boston Properties, Inc.

First Quarter 2016

 

UNCONSOLIDATED JOINT VENTURE DEBT ANALYSIS (*)

 

as of March 31, 2016

(dollars in thousands)

 

Debt Maturities and Principal Payments by Property
Property		2016				2017				2018				2019				2020				Thereafter				Total
Metropolitan Square (51%)		$	1,006			$	1,410			$	1,493			$	1,582			$	80,327			$	—			$	85,818
540 Madison Avenue (60%)			—				—				72,000				—				—				—				72,000
Market Square North (50%)			826				1,148				1,205				1,265				58,090				—				62,534
901 New York Avenue (25%)			—				—				—				—				955				55,295				56,250
500 North Capitol Street, N.W. (30%)			—				—				—				—				—				31,500				31,500
Annapolis Junction Building One (50%)			210				279				19,519				—				—				—				20,008	(1)
Annapolis Junction Building Six (50%)			6,612				—				—				—				—				—				6,612
Annapolis Junction Building Seven (50%)			10,773				—				—				—				—				—				10,773	(2)
Annapolis Junction Building Eight (50%)			—				7,267				—				—				—				—				7,267	(3)
			19,427				10,104				94,217				2,847				139,372				86,795				352,762
Deferred Financing Costs, Net			(302	)			(359	)			(219	)			(156	)			(111	)			(221	)			(1,368	)
		$	19,125			$	9,745			$	93,998			$	2,691			$	139,261			$	86,574			$	351,394
GAAP Weighted Average Rate			2.94	%			3.03	%			2.24	%			5.15	%			5.42	%			3.87	%			4.00	%
% of Total Debt			5.51	%			2.86	%			26.71	%			0.81	%			39.51	%			24.60	%			100.00	%
Balloon Payments		$	17,386			$	7,266			$	91,472			$	—			$	136,880			$	81,932			$	334,936
Scheduled Amortization		$	2,041			$	2,838			$	2,745			$	2,847			$	2,492			$	4,863			$	17,826

Floating and Fixed Rate Debt Analysis

 

						Stated Weighted				GAAP Weighted				Weighted Average
		% of Total Debt				Average Rate				Average Rate				Maturity (years)
Floating Rate Debt			33.07	%			2.03	%			2.26	%			1.8
Fixed Rate Debt			66.93	%			4.79	%			4.85	%			5.7
Total Debt			100.00	%			3.88	%			4.00	%			4.4

 

(*)	All amounts represent the Company’s share.

(1)

On April 11, 2016, a Notice of Event of Default was received from the lender because the loan to value ratio is not in compliance with the applicable covenant in the loan agreement. The joint venture is currently in discussions with the lender regarding curing the default, but there can be no assurance as to the outcome of those discussions. Loan has one, three-year extension option, subject to certain conditions.

(2)	Loan was extended for one year on April 4, 2016. Loan has one, one-year extension option, subject to certain conditions.

(3)	Loan has two, one-year extension options, subject to certain conditions.

 

17

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Boston Properties, Inc.

First Quarter 2016

 

UNCONSOLIDATED JOINT VENTURES

 

(unaudited and dollars in thousands)

 

Balance Sheet Information
as of March 31, 2016
		540 Madison				Market Square				Metropolitan				901 New York				Wisconsin				Annapolis				500 North Capitol				The Hub on Causeway				1001								1265 Main				Total Unconsolidated
		Avenue				North				Square				Avenue				Place (1)				Junction (2)				Street, N.W.				(Phase 1)				6th Street				Dock72				Street				Joint Ventures
Net Equity (3) (4)		$	67,715			$	(9,506	)		$	9,238			$	(11,617	)		$	43,057			$	21,134			$	(3,470	)		$	23,881			$	42,540			$	12,196			$	16,143			$	211,311
Mortgage/Construction loans payable, net (4)		$	71,735			$	62,346			$	85,605			$	55,860			$	—			$	44,475	(5)		$	31,373			$	—			$	—			$	—			$	—			$	351,394
BXP’s nominal ownership percentage			60.00	%			50.00	%			51.00	%			25.00	%			33.33	%			50.00	%			30.00	%			50.00	%			50.00	%			50.00	%			50.00	%
Results of Operations
for the three months ended March 31, 2016
		540 Madison				Market Square				Metropolitan				901 New York				Wisconsin				Annapolis				500 North Capitol				The Hub on Causeway				1001								1265 Main				Total Unconsolidated
		Avenue				North				Square				Avenue				Place (1)				Junction (2)				Street, N.W.				(Phase 1)				6th Street				Dock72				Street				Joint Ventures
REVENUE
Rental (6)		$	5,958			$	3,728			$	6,751			$	6,105			$	998			$	2,884			$	2,632			$	—			$	150			$	—			$	—			$	29,206
Operating recoveries			831				845				1,325				1,052				298				809				1,141				—				—				—				—				6,301
Straight-line rent			492				918				(322	)			766				—				43				283				—				—				—				—				2,180
Fair value lease revenue			(1	)			—				—				—				—				—				—				—				—				—				—				(1	)
Termination Income			—				34				(51	)			—				—				—				—				—				—				—				—				(17	)
Total revenue			7,280				5,525				7,703				7,923				1,296				3,736				4,056				—				150				—				—				37,669
EXPENSES
Operating			3,433				2,287				3,614				3,259				564				1,924				1,347				—				239				—				—				16,667
NET OPERATING INCOME			3,847				3,238				4,089				4,664				732				1,812				2,709				—				(89	)			—				—				21,002
Interest			635				1,540				2,447				2,075				—				575				1,117				—				—				—				—				8,389
Depreciation and amortization			1,888				800				1,733				1,334				1,382				1,014				913				—				—				—				—				9,064
SUBTOTAL			2,523				2,340				4,180				3,409				1,382				1,589				2,030				—				—				—				—				17,453
NET INCOME/(LOSS)		$	1,324			$	898			$	(91	)		$	1,255			$	(650	)		$	223			$	679			$	—			$	(89	)		$	—			$	—			$	3,549
BXP’s share of net income/(loss)		$	794			$	449			$	(46	)		$	347	(7)		$	(216	)		$	112			$	204			$	—			$	(45	)		$	—			$	—				1,599
Basis differential (8)			171				(7	)			35				(8	)			(7	)			(1	)			9				—				—				—				—				192
Income/(loss) from unconsolidated joint ventures		$	965			$	442			$	(11	)		$	339	(7)		$	(223	)		$	111			$	213			$	—			$	(45	)		$	—			$	—			$	1,791
BXP’s share of depreciation & amortization			1,022				412				894				913	(7)			466				513				276				—				—				—				—				4,496
BXP’s share of Funds from Operations (FFO)		$	1,987			$	854			$	883			$	1,252			$	243			$	624			$	489			$	—			$	(45	)		$	—			$	—			$	6,287
BXP’s share of revenue (9) (10)		$	3,870			$	2,340			$	3,253			$	3,287	(7)		$	333			$	1,464			$	875			$	—			$	75			$	—			$	—			$	15,497
BXP’s share of interest expense		$	381			$	770			$	1,248			$	993	(7)		$	—			$	288			$	335			$	—			$	—			$	—			$	—			$	4,015
BXP’s share of net operating income/(loss) (10)		$	2,308			$	1,619			$	2,085			$	2,231	(7)		$	244			$	906			$	813			$	—			$	(45	)		$	—			$	—			$	10,161

 

(1)	Represents the Company’s interest in the joint venture entity that owns the land, parking garage and infrastructure. The Company’s entity that owns 100% of the office component of the project is consolidated within the accounts of the Company.

(2)	Annapolis Junction includes four properties in service and two undeveloped land parcels.

(3)	Represents the Company’s share.

(4)	As of March 31, 2016, certain investments with deficit balances aggregating ($24,593) have been reflected within Other Liabilities on the Company’s Consolidated Balance Sheet.

(5)

On April 11, 2016, we received a Notice of Event of Default from the lender for the loan collateralized by Annapolis Junction Building One because the loan to value ratio is not in compliance with the applicable covenant in the loan agreement. The joint venture is currently in discussions with the lender regarding curing the default, but there can be no assurance as to the outcome of those discussions. The loan has an outstanding balance of approximately $40.0 million of which the Company’s share is approximately $20.0 million.

(6)	Includes approximately $25 of management services income and approximately $36 of interest and other income.

(7)	Reflects the allocation percentages pursuant to the achievement of specified investment return thresholds as provided for in the joint venture agreement.

(8)	Represents adjustments related to the carrying values and depreciation of certain of the Company’s investment in unconsolidated joint ventures.

(9)	Excludes operating recoveries.

(10)	Includes the Company’s share of approximately approximately $14 of management services income and approximately $16 of interest and other income.

 

18

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Boston Properties, Inc.

First Quarter 2016

 

CONSOLIDATED JOINT VENTURES

(unaudited and in thousands)

 

Balance Sheets

 

as of March 31, 2016

 

BXP’s ownership percentage		60.00%				55.00%				95.00%
						Norges Joint Ventures
		767 Fifth Avenue (The GM Building)				Times Square Tower 601 Lexington Avenue 100 Federal Street Atlantic Wharf Office				Salesforce Tower				Total Consolidated Joint Ventures
ASSETS
Real estate, net		$	3,456,511			$	2,223,441			$	510,678			$	6,190,630
Cash and cash held in escrows			87,069				139,249				4,608				230,926
Other assets			116,711				194,676				1,042				312,429
Total assets		$	3,660,291			$	2,557,366			$	516,328			$	6,733,985
LIABILITIES AND EQUITY
Liabilities:
Mortgage notes payable, net		$	1,366,841			$	693,997			$	—			$	2,060,838
Mezzanine notes payable			308,142				—				—				308,142
Related party notes payable			180,000				—				—				180,000
Accrued interest on related party notes			127,670				—				—				127,670
Other liabilities			180,576				67,787				47,409				295,772
Total liabilities			2,163,229				761,784				47,409				2,972,422
Equity:
Boston Properties, Inc.			1,083,155	(1)			666,636				447,779				2,197,570
Noncontrolling interests			413,907				1,128,946				21,140				1,563,993	(2)
Total equity			1,497,062				1,795,582				468,919				3,761,563
Total liabilities and equity		$	3,660,291			$	2,557,366			$	516,328			$	6,733,985

 

(1)	BXP equity adjusted for related party notes and accrued interest that are allocated to our partners through NCI.

(2)	Amount excludes preferred shareholders capital of approximately $0.1 million.

 

19

---

Boston Properties, Inc.

First Quarter 2016

 

CONSOLIDATED JOINT VENTURES

(unaudited and in thousands)

 

Income Statements

 

for the three months ended March 31, 2016

 

BXP’s ownership percentage		60.00%				55.00%				95.00%
						Norges Joint Ventures
		767 Fifth Avenue (The GM Building)				Times Square Tower 601 Lexington Avenue 100 Federal Street Atlantic Wharf Office				Salesforce Tower				Total Consolidated Joint Ventures
REVENUE
Rental		$	64,381			$	90,357			$	—			$	154,738
Straight-line rent			3,877				322				—				4,199
Fair value lease revenue			5,357				1,483				—				6,840
Termination income			—				4,115				—				4,115
Parking and other			637				1,425				—				2,062
Total revenue			74,252				97,702				—				171,954
EXPENSES
Operating			27,045				32,901				—				59,946
NET OPERATING INCOME			47,207				64,801				—				112,008
Management services income			(403	)			(513	)			—				(916	)
Interest and other income			(19	)			(121	)			—				(140	)
Interest expense			23,846				8,362				—				32,208
Interest expense—partner notes			8,234				—				—				8,234
Fair value adjustment to interest expense			(11,278	)			—				—				(11,278	)
Depreciation and amortization			24,747				21,574				—				46,321
Gain on sale			—				—				—				—
SUBTOTAL			45,127				29,302				—				74,429
NET INCOME/(LOSS)		$	2,080			$	35,499			$	—			$	37,579
Partners’ share of NOI		$	18,883			$	29,160			$	—			$	48,043
BXP’s share of NOI		$	28,324			$	35,641			$	—			$	63,965
Unearned portion of capitalized fees (1)		$	151			$	1,040			$	—			$	1,191
Reconciliation of partners’ noncontrolling interest (NCI):
Net income /(loss)		$	2,080			$	35,449			$	—			$	37,579
Add back depreciation & amortization—BXP’s basis difference			18				31				—				49
Special allocation—BXP’s basis			—				(22	)			—				(22	)
Add back partners’ share of partner loan interest			8,234				—				—				8,234
Net income/(loss) before interest allocation		$	10,332			$	35,508			$	—			$	45,840
Partners’ NCI share of net income before interest allocation		$	4,131			$	15,978			$	—			$	20,109
Partners’ share of partner loan interest			(8,234	)			—				—				(8,234	)
Allocation of management and other fees to non-controlling partner			(591	)			(820	)			—				(1,411	)
Accretion and adjustments			—				—				—				—
Partners’ NCI		$	(4,694	)		$	15,158			$	—			$	10,464
Reconciliation of partners’ share of FFO:
Net income/(loss)		$	2,080			$	35,499			$	—			$	37,579
Special allocation—BXP’s basis			—				(22	)			—				(22	)
Add back depreciation & amortization			24,747				21,574				—				46,321
Entity FFO		$	26,827			$	57,051			$	—			$	83,878
Partners’ share of net income/(loss)		$	838			$	15,988			$	—			$	16,826
Partners’ share of partner loan interest not in partner’s share of entity FFO			(4,941	)			—				—				(4,941	)
Allocation of management and other fees to non-controlling partner			(591	)			(820	)			—				(1,411	)
Partners’ share of depreciation and amortization			9,892				9,694				—				19,586
Accretion and adjustments			—				(41	)			—				(41	)
Partners’ share FFO		$	5,198			$	24,821			$	—			$	30,019
Reconciliation of BXP’s share of FFO
BXP’s share of net income/(loss) adjusted for partners’ NCI		$	6,774			$	20,341			$	—			$	27,115
Depreciation & amortization—BXP’s basis difference			18				31				—				49
Other adjustment (3)			207				50				—				257
BXP’s share of depreciation & amortization			14,837				11,849				—				26,686
BXP’s share of FFO		$	21,836			$	32,271			$	—			$	54,107
Reconciliation of Partners’ share of Net Operating Income (2)
Rental revenue		$	29,701			$	43,966			$	—			$	73,667
Less: Termination income			—				1,852				—				1,852
Rental revenue—subtotal			29,701				42,114				—				71,815
Operating expenses			10,818				14,805				—				25,623
Net Operating Income (excluding termination income)		$	18,883			$	27,309			$	—			$	46,192
Rental revenue—subtotal		$	29,701			$	42,114				—			$	71,815
Less: Straight-line rent and fair value lease revenue			3,694				812				—				4,506
Add: Lease transaction costs which qualify as inducements in accordance with GAAP (3)			17				—				—				17
Rental revenue—cash basis			26,024				41,302				—				67,326
Less: Operating expenses			10,818				14,805				—				25,623
Less: Straight-line ground rent expense			—				—				—				—
Net Operating Income—cash basis (excluding termination income)		$	15,206			$	26,497			$	—			$	41,703

 

(1)	Capitalized fees are eliminated in consolidation and recognized over the life of the asset as depreciation and amortization are added back to the Company’s net income.

(2)	Amounts based on partners’ ownership percentages.

(3)	Leasing transaction costs are generally included in 2nd generation tenant improvements and leasing commissions in the Company’s FAD calculation on page 12. For additional information related to second generation transaction costs, see page 42.

 

20

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Boston Properties, Inc.

First Quarter 2016

 

PORTFOLIO OVERVIEW

for the quarter ended March 31, 2016

(dollars in thousands)

 

Rentable Square Footage and Percentage of Adjusted Combined Net Operating Income of In-Service Properties by Location and Type of Property (1) (2) (3)

 

 

Geographic Area		Square Feet Office (4)				% of NOI Office (3)				Square Feet Residential				% of NOI Residential (3)				Square Feet Hotel				% of NOI Hotel (3)				Square Feet Total				% of NOI Total (3)
Boston			13,400,935	(5)			28.7	%			87,097				0.2	%			334,260				0.3	%			13,822,292				29.2	%
New York			11,571,174	(5)			33.8	%			—				—				—				—				11,571,174				33.8	%
San Francisco			5,853,363				15.2	%			—				—				—				—				5,853,363				15.2	%
Washington, DC			10,066,928	(5)			21.3	%			355,347				0.5	%			—				—				10,422,275				21.8	%
Total			40,892,400	(5)			99.0	%			442,444				0.7	%			334,260				0.3	%			41,669,104				100.0	%
% of Total			98.1	%							1.1	%							0.8	%							100.0	%

Percentage of Adjusted Combined Net Operating Income of In-Service Properties by Location (2) (3)

 

 

Geographic Area		CBD				Suburban				Total
Boston			22.8	%			6.4	%			29.2	%
New York			31.3	%			2.5	%			33.8	%
San Francisco			12.1	%			3.1	%			15.2	%
Washington, DC			9.5	%			12.3	%			21.8	%
Total			75.7	%			24.3	%			100.0	%

Rentable Square Footage and Rental Revenue of In-Service Properties by Unit Type (6)

 

		Square Feet				Revenue from Consolidated Portfolio				Revenue from Unconsolidated Joint Ventures Portfolio (7)				Total				% of Total
Office			38,701,436			$	487,036			$	13,492			$	500,528				85.5	%
Retail			2,231,020				45,792				828				46,620				8.0	%
Residential			406,648				3,367				—				3,367				0.6	%
Hotel			330,000				8,677	(8)			—				8,677				1.5	%
Parking and other			N/A				24,825	(9)			1,147				25,972				4.4	%
Total			41,669,104			$	569,697			$	15,467			$	585,164				100.0	%

 

(1)	For disclosures relating to our definition of In-Service Properties, see page 48.

(2)	Adjusted Combined Net Operating Income (NOI) is a non-GAAP financial measure. For a quantitative reconciliation of Adjusted Combined NOI to Net Income attributable to Boston Properties, Inc. common shareholders, see page 40. For disclosures relating to our use of Adjusted Combined NOI see page 48.

(3)	The calculation for percentage of Adjusted Combined NOI excludes termination income.

(4)	Includes approximately 2,200,000 square feet of retail space.

(5)	Includes 100% of the rentable square footage of our In-Service Properties. For disclosures relating to our In-Service Properties, see pages 22-24.

(6)	Excludes recoveries from tenants.

(7)	Represents the Company’s share. For additional information on unconsolidated joint ventures, see page 18.

(8)	Excludes approximately $67 of base rent from retail tenants which is included in Retail above and approximately $13 of recoveries from tenants.

(9)	Includes approximately $2,300 of other income.

 

21

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Boston Properties, Inc.

First Quarter 2016

 

IN-SERVICE PROPERTY LISTING

 

as of March 31, 2016

 

		Sub Market		Number of Buildings				Square Feet				Leased % (1)				Annualized Revenue Per Leased SF (2)				Encumbered with secured debt (Y/N)		Central Business District (CBD) or Suburban (S)
Boston
Office
200 Clarendon Street (formerly John Hancock Tower)		CBD Boston MA			1				1,746,153				76.6	%		$	63.10			N		CBD
100 Federal Street (55% ownership)		CBD Boston MA			1				1,273,968				85.2	%			51.12			N		CBD
800 Boylston Street—The Prudential Center		CBD Boston MA			1				1,228,925				92.8	%			59.33			N		CBD
111 Huntington Avenue—The Prudential Center		CBD Boston MA			1				860,455				100.0	%			62.81			N		CBD
Atlantic Wharf Office (55% ownership)		CBD Boston MA			1				793,827				100.0	%			67.19			N		CBD
101 Huntington Avenue—The Prudential Center		CBD Boston MA			1				505,249				96.1	%			48.50			N		CBD
The Shops at the Prudential Center		CBD Boston MA			1				491,771				98.1	%			81.41			N		CBD
Star Market at the Prudential Center		CBD Boston MA			1				57,235				100.0	%			54.33			N		CBD
					8				6,957,583				89.7	%		$	61.03
355 Main Street		East Cambridge MA			1				265,342				100.0	%		$	69.89			N		CBD
90 Broadway		East Cambridge MA			1				223,771				100.0	%			50.68			N		CBD
255 Main Street		East Cambridge MA			1				215,629				100.0	%			55.01			N		CBD
300 Binney Street		East Cambridge MA			1				195,191				100.0	%			52.71			N		CBD
150 Broadway		East Cambridge MA			1				177,226				100.0	%			47.44			N		CBD
105 Broadway		East Cambridge MA			1				152,664				100.0	%			60.84			N		CBD
325 Main Street		East Cambridge MA			1				115,361				100.0	%			46.67			N		CBD
145 Broadway		East Cambridge MA			1				79,616				100.0	%			55.93			N		CBD
250 Binney Street		East Cambridge MA			1				67,362				100.0	%			42.75			N		CBD
University Place		Mid-Cambridge MA			1				195,282				100.0	%			46.75			Y		CBD
					10				1,687,444				100.0	%		$	54.28
Bay Colony Corporate Center		Route 128 Mass Turnpike MA			4				1,008,703				78.9	%		$	35.77			N		S
Reservoir Place		Route 128 Mass Turnpike MA			1				528,885				99.5	%			34.03			N		S
140 Kendrick Street		Route 128 Mass Turnpike MA			3				380,987				84.2	%			37.22			N		S
Weston Corporate Center		Route 128 Mass Turnpike MA			1				356,995				100.0	%			52.21			N		S
Waltham Weston Corporate Center		Route 128 Mass Turnpike MA			1				306,687				95.2	%			34.06			N		S
230 CityPoint		Route 128 Mass Turnpike MA			1				300,573				85.1	%			34.05			N		S
200 West Street		Route 128 Mass Turnpike MA			1				256,245				99.3	%			34.62			N		S
77 CityPoint		Route 128 Mass Turnpike MA			1				209,707				100.0	%			47.00			N		S
195 West Street		Route 128 Mass Turnpike MA			1				63,500				100.0	%			40.79			N		S
Quorum Office Park		Route 128 Northwest MA			2				267,527				90.0	%			18.83			N		S
Lexington Office Park		Route 128 Northwest MA			2				166,858				88.1	%			26.17			N		S
191 Spring Street		Route 128 Northwest MA			1				158,900				100.0	%			31.14			N		S
40 Shattuck Road		Route 128 Northwest MA			1				121,542				81.6	%			22.47			N		S
91 Hartwell Avenue		Route 128 Northwest MA			1				119,216				100.0	%			26.55			N		S
201 Spring Street		Route 128 Northwest MA			1				106,300				100.0	%			37.81			N		S
33 Hayden Avenue		Route 128 Northwest MA			1				80,872				100.0	%			44.61			N		S
32 Hartwell Avenue		Route 128 Northwest MA			1				69,154				100.0	%			24.47			N		S
164 Lexington Road		Route 128 Northwest MA			1				64,140				0.0	%			—			N		S
100 Hayden Avenue		Route 128 Northwest MA			1				55,924				100.0	%			44.26			N		S
181 Spring Street		Route 128 Northwest MA			1				55,793				100.0	%			31.34			N		S
92 Hayden Avenue		Route 128 Northwest MA			1				31,100				100.0	%			41.91			N		S
17 Hartwell Avenue		Route 128 Northwest MA			1				30,000				0.0	%			—			N		S
(3) The Point (formerly 99 Third Avenue Retail)		Route 128 Northwest MA			1				16,300				84.7	%			50.24			N		S
					30				4,755,908				89.4	%		$	35.53
		Total Boston Office:			48				13,400,935				90.9	%		$	51.13
Residential
The Lofts at Atlantic Wharf (86 units)		CBD Boston MA			1				87,097											N		CBD
		Total Boston Residential:			1				87,097
Hotel
Boston Marriott Cambridge (433 rooms)		East Cambridge MA			1				334,260											N		CBD
		Total Boston Hotel:			1				334,260
		Total Boston:			50				13,822,292

 

(1)	Represents signed leases for which revenue recognition has commenced in accordance with GAAP.

(2)	For disclosures relating to our definition of Annualized Revenue, see page 49.

(3)	Not included in Same Property analysis.

 

22

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Boston Properties, Inc.

First Quarter 2016

 

IN-SERVICE PROPERTY LISTING (continued)

 

as of March 31, 2016

 

		Sub Market		Number of Buildings				Square Feet				Leased % (1)				Annualized Revenue Per Leased SF (2)				Encumbered with secured debt (Y/N)		Central Business District (CBD) or Suburban (S)
New York
Office
767 Fifth Avenue (The GM Building) (60% ownership)		Plaza District NY			1				1,822,412				98.5	%		$	144.30			Y		CBD
399 Park Avenue		Park Avenue NY			1				1,710,383				98.9	%			90.10			N		CBD
601 Lexington Avenue (55% ownership)		Park Avenue NY			1				1,633,884				94.0	%			93.57			Y		CBD
599 Lexington Avenue		Park Avenue NY			1				1,057,978				99.3	%			81.46			Y		CBD
Times Square Tower (55% ownership)		Times Square NY			1				1,247,454				100.0	%			76.84			N		CBD
250 West 55th Street		Times Square / West Side NY			1				986,823				77.5	%			84.50			N		CBD
510 Madison Avenue		Fifth/Madison Avenue NY			1				355,598				100.0	%			118.99			N		CBD
540 Madison Avenue (60% ownership)		Fifth/Madison Avenue NY			1				283,695				96.2	%			100.30			Y		CBD
					8				9,098,227				95.8	%		$	99.97
One Tower Center		East Brunswick NJ			1				412,797				26.5	%		$	30.51			N		S
510 Carnegie Center		Princeton NJ			1				234,160				100.0	%			34.24			N		S
210 Carnegie Center		Princeton NJ			1				162,372				79.3	%			32.82			N		S
206 Carnegie Center		Princeton NJ			1				161,763				100.0	%			31.87			N		S
212 Carnegie Center		Princeton NJ			1				151,547				86.9	%			36.26			N		S
214 Carnegie Center		Princeton NJ			1				150,774				67.6	%			33.28			N		S
506 Carnegie Center		Princeton NJ			1				149,110				35.4	%			31.81			N		S
508 Carnegie Center		Princeton NJ			1				134,433				100.0	%			32.88			N		S
202 Carnegie Center		Princeton NJ			1				134,068				80.5	%			37.96			N		S
101 Carnegie Center		Princeton NJ			1				127,237				87.3	%			33.93			N		S
504 Carnegie Center		Princeton NJ			1				121,990				100.0	%			30.59			N		S
502 Carnegie Center		Princeton NJ			1				121,460				91.3	%			36.73			N		S
701 Carnegie Center		Princeton NJ			1				120,000				100.0	%			39.28			N		S
104 Carnegie Center		Princeton NJ			1				102,830				83.6	%			33.18			N		S
105 Carnegie Center		Princeton NJ			1				69,955				62.7	%			32.27			N		S
302 Carnegie Center		Princeton NJ			1				64,926				100.0	%			34.24			N		S
211 Carnegie Center		Princeton NJ			1				47,025				100.0	%			35.30			N		S
201 Carnegie Center		Princeton NJ			—				6,500				100.0	%			32.71			N		S
					17				2,472,947				75.8	%		$	34.00
		Total New York:			25				11,571,174				91.5	%		$	88.28
San Francisco
Office
Embarcadero Center Four		CBD San Francisco CA			1				937,494				88.2	%		$	60.64			Y		CBD
Embarcadero Center One		CBD San Francisco CA			1				831,067				97.0	%			55.00			N		CBD
Embarcadero Center Two		CBD San Francisco CA			1				781,456				87.4	%			58.46			N		CBD
Embarcadero Center Three		CBD San Francisco CA			1				776,541				91.1	%			53.55			N		CBD
680 Folsom Street		CBD San Francisco CA			2				524,793				98.4	%			58.05			N		CBD
(3) 535 Mission Street		CBD San Francisco CA			1				307,235				86.7	%			70.19			N		CBD
(4) 690 Folsom Street		CBD San Francisco CA			1				26,080				55.2	%			73.69			N		CBD
					8				4,184,666				91.3	%		$	58.10
601 and 651 Gateway		South San Francisco CA			2				506,279				99.6	%		$	38.89			N		S
611 Gateway		South San Francisco CA			1				260,337				23.6	%			38.33			N		S
Mountain View Research Park		Mountain View CA			15				540,433				100.0	%			39.61			N		S
2440 West El Camino Real		Mountain View CA			1				141,392				100.0	%			56.27			N		S
453 Ravendale Drive		Mountain View CA			1				29,620				76.5	%			36.32			N		S
(5) North First Business Park		San Jose CA			5				190,636				100.0	%			17.31			N		S
					25				1,668,697				87.6	%		$	37.96
		Total San Francisco:			33				5,853,363				90.2	%		$	52.53

 

(1)	Represents signed leases for which revenue recognition has commenced in accordance with GAAP.

(2)	For disclosures relating to our definition of Annualized Revenue, see page 49.

(3)	Not included in Same Property analysis. Including leases with future commencement dates, this property is 99% leased as of April 22, 2016.

(4)	Not included in Same Property analysis. Including leases with future commencement dates, this property is 100% leased as of April 22, 2016.

(5)	Property held for redevelopment.

 

23

---

Boston Properties, Inc.

First Quarter 2016

 

IN-SERVICE PROPERTY LISTING (continued)

 

as of March 31, 2016

 

		Sub Market		Number of Buildings				Square Feet				Leased % (1)				Annualized Revenue Per Leased SF (2)				Encumbered with secured debt (Y/N)		Central Business District (CBD) or Suburban (S)
Washington, DC
Office
Capital Gallery		Southwest Washington DC			1				631,029				99.8	%		$	57.64			N		CBD
500 E Street, S.W.		Southwest Washington DC			1				251,994				100.0	%			45.61			N		CBD
Metropolitan Square (51% ownership)		East End Washington DC			1				589,529				77.6	%			63.47			Y		CBD
901 New York Avenue (25% ownership)		East End Washington DC			1				539,680				92.4	%			58.66			Y		CBD
Market Square North (50% ownership)		East End Washington DC			1				414,294				80.0	%			63.64			Y		CBD
2200 Pennsylvania Avenue		CBD Washington DC			1				458,831				100.0	%			87.59			N		CBD
1333 New Hampshire Avenue		CBD Washington DC			1				315,371				100.0	%			46.24			N		CBD
1330 Connecticut Avenue		CBD Washington DC			1				252,169				98.3	%			61.04			N		CBD
Sumner Square		CBD Washington DC			1				208,892				100.0	%			49.33			N		CBD
500 North Capitol Street, N.W. (30% ownership)		Capitol Hill Washington DC			1				230,859				97.5	%			66.64			Y		CBD
					10				3,892,648				93.1	%		$	61.17
South of Market		Reston VA			3				623,665				92.5	%		$	53.34			N		S
Fountain Square		Reston VA			2				521,598				94.4	%			46.84			Y		S
One Freedom Square		Reston VA			1				432,581				95.9	%			46.91			N		S
Two Freedom Square		Reston VA			1				421,757				100.0	%			45.26			N		S
One and Two Discovery Square		Reston VA			2				366,990				97.8	%			43.69			N		S
One Reston Overlook		Reston VA			1				319,519				100.0	%			37.99			N		S
Reston Corporate Center		Reston VA			2				261,046				100.0	%			39.30			N		S
Democracy Tower		Reston VA			1				259,441				100.0	%			58.29			N		S
Fountain Square Retail		Reston VA			1				237,209				96.0	%			53.30			Y		S
Two Reston Overlook		Reston VA			1				134,615				100.0	%			37.04			N		S
					15				3,578,421				96.9	%		$	46.93
Wisconsin Place Office		Montgomery County MD			1				299,186				97.6	%		$	54.11			N		S
2600 Tower Oaks Boulevard		Montgomery County MD			1				179,369				64.2	%			35.70			N		S
New Dominion Technology Park—Building Two		Herndon VA			1				257,400				100.0	%			39.34			N		S
New Dominion Technology Park—Building One		Herndon VA			1				235,201				100.0	%			33.67			Y		S
Kingstowne Two		Springfield VA			1				156,251				93.7	%			41.52			N		S
Kingstowne One		Springfield VA			1				151,483				75.6	%			39.66			N		S
7601 Boston Boulevard		Springfield VA			1				114,028				100.0	%			18.37			N		S
7435 Boston Boulevard		Springfield VA			1				103,557				67.1	%			22.45			N		S
8000 Grainger Court		Springfield VA			1				88,775				37.6	%			23.64			N		S
Kingstowne Retail		Springfield VA			1				88,288				100.0	%			35.98			N		S
7500 Boston Boulevard		Springfield VA			1				79,971				100.0	%			16.13			N		S
7501 Boston Boulevard		Springfield VA			1				75,756				100.0	%			28.50			N		S
7450 Boston Boulevard		Springfield VA			1				62,402				0.0	%			—			N		S
7374 Boston Boulevard		Springfield VA			1				57,321				100.0	%			17.55			N		S
8000 Corporate Court		Springfield VA			1				52,539				100.0	%			13.79			N		S
7451 Boston Boulevard		Springfield VA			1				45,615				67.4	%			25.71			N		S
7300 Boston Boulevard		Springfield VA			1				32,000				100.0	%			21.22			N		S
7375 Boston Boulevard		Springfield VA			1				26,865				79.2	%			28.50			N		S
(3) Annapolis Junction Building Seven (50% ownership)		Anne Arundel County MD			1				127,229				100.0	%			31.79			Y		S
(3) Annapolis Junction Building Eight (50% ownership)		Anne Arundel County MD			1				125,685				0.0	%			—			Y		S
Annapolis Junction Building Six (50% ownership)		Anne Arundel County MD			1				119,339				48.9	%			29.74			Y		S
Annapolis Junction Building One (50% ownership)		Anne Arundel County MD			1				117,599				50.8	%			129.17			Y		S
					22				2,595,859				79.4	%		$	37.34
		Total Washington Office:			47				10,066,928				90.9	%		$	50.41
Residential
The Avant at Reston Town Center (359 units)		Reston VA			1				355,347											N		S
		Total Washington Residential:			1				355,347
		Total Washington, DC:			48				10,422,275
		Total In-Service Properties:			156				41,669,104				91.0	%(4)		$	61.73	(4)

 

(1)	Represents signed leases for which revenue recognition has commenced in accordance with GAAP.

(2)	For disclosures relating to our definition of Annualized Revenue, see page 49.

(3)	Not included in Same Property analysis.

(4)	Excludes Hotel and Residential properties. For disclosures relating to our Hotel and Residential properties, see page 38.

 

24

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Boston Properties, Inc.

First Quarter 2016

 

OCCUPANCY BY LOCATION

 

Total In-Service Properties (1)

 

 

		CBD								Suburban								Total
Location		31-Mar-16				31-Mar-15				31-Mar-16				31-Mar-15				31-Mar-16				31-Mar-15
Boston			91.7	%			88.0	%			89.4	%			89.5	%			90.9	%			88.5	%
New York			95.8	%			93.1	%			75.8	%			80.5	%			91.5	%			90.4	%
San Francisco			91.3	%			94.2	%			87.6	%			77.9	%			90.2	%			88.3	%
Washington, DC			93.1	%			96.1	%			89.5	%			92.2	%			90.9	%			93.8	%
Total Portfolio			93.3	%			92.0	%			87.0	%			87.4	%			91.0	%			90.3	%

Same Property Portfolio (1) (2)

 

 

		CBD								Suburban								Total
Location		31-Mar-16				31-Mar-15				31-Mar-16				31-Mar-15				31-Mar-16				31-Mar-15
Boston			91.7	%			87.7	%			89.4	%			89.4	%			90.9	%			88.3	%
New York			95.8	%			93.1	%			75.8	%			80.5	%			91.5	%			90.4	%
San Francisco			91.9	%			94.2	%			87.6	%			97.0	%			90.6	%			95.1	%
Washington, DC			93.1	%			95.8	%			91.2	%			92.2	%			92.0	%			93.6	%
Total Portfolio			93.4	%			91.8	%			87.7	%			89.9	%			91.3	%			91.1	%

 

(1)	Includes 100% of joint venture properties. Does not include residential and hotel properties.

(2)	For disclosures related to our definition of Same Properties, see page 48.

 

25

---

Boston Properties, Inc.

First Quarter 2016

 

TOP 20 TENANTS LISTING AND PORTFOLIO TENANT DIVERSIFICATION

 

TOP 20 TENANTS (1)

 

		Tenant		% of Portfolio
1.		Citibank			3.30	%
2.		US Government			2.87	%
3.		Arnold & Porter			2.25	%
4.		Biogen			2.08	%
5.		Shearman & Sterling			1.81	%
6.		Ropes & Gray			1.67	%
7.		Kirkland & Ellis			1.42	%
8.		O’Melveny & Myers			1.41	%
9.		Wellington Management			1.33	%
10.		Bank of America			1.31	%
11.		Weil Gotshal Manges			1.31	%
12.		Morgan Lewis Bockius			1.25	%
13.		Microsoft			1.12	%
14.		Google			1.12	%
15.		Aramis (Estee Lauder)			1.07	%
16.		Kaye Scholar			1.00	%
17.		Reed Smith			0.96	%
18.		Mass Financial Services			0.92	%
19.		Morrison Foerster			0.90	%
20.		Hunton & Williams			0.88	%
		Total% of BXP’s Share of Portfolio Revenue			29.98	%
		Total% of Portfolio Square Feet			23.97	%

NOTABLE SIGNED DEALS (2)

 

 

Tenant		Property		Sq. Ft.
salesforce.com		Salesforce Tower			732,000
Putnam Investments		100 Federal Street			249,000

TENANT DIVERSIFICATION (1)

 

 

 

(1)	Percentages are based on the Company’s share of consolidated and unconsolidated annualized revenue. For disclosures relating to our definition of Annualized Revenue, see page 49.

(2)	Represents leases signed with occupancy commencing in the future.

 

26

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Boston Properties, Inc.

First Quarter 2016

 

LEASE EXPIRATIONS (1) (2) (3)

 

IN-SERVICE OFFICE PROPERTIES

 

 

Year of Lease Expiration		Rentable Square Footage Subject to Expiring Leases				Current Annualized Revenues Under Expiring Leases				Current Annualized Revenues Under Expiring Leases p.s.f.				Annualized Revenues Under Expiring Leases with future step-ups				Annualized Revenues Under Expiring Leases with future step-ups - p.s.f.				Percentage of Total Square Feet
2016			1,798,891			$	95,057,551			$	52.84			$	95,575,620			$	53.13				4.63	%(4)
2017			2,747,557				163,595,275				59.54				165,949,756				60.40				7.06	%
2018			1,605,096				94,783,295				59.05				96,416,449				60.07				4.13	%
2019			3,287,910				169,837,189				51.66				175,606,376				53.41				8.45	%
2020			4,327,700				273,358,060				63.16				284,326,182				65.70				11.13	%
2021			2,983,675				154,743,336				51.86				172,298,015				57.75				7.67	%
2022			3,883,366				217,340,705				55.97				239,490,415				61.67				9.99	%
2023			1,299,711				70,313,049				54.10				81,308,211				62.56				3.34	%
2024			2,628,429				151,223,922				57.53				170,003,520				64.68				6.76	%
2025			2,209,587				130,386,420				59.01				147,189,144				66.61				5.68	%
Thereafter			8,597,200				607,081,109				70.61				778,282,156				90.53				22.11	%

IN-SERVICE RETAIL PROPERTIES

 

 

Year of Lease Expiration		Rentable Square Footage Subject to Expiring Leases				Current Annualized Revenues Under Expiring Leases				Current Annualized Revenues Under Expiring Leases p.s.f.				Annualized Revenues Under Expiring Leases with future step-ups				Annualized Revenues Under Expiring Leases with future step -ups - p.s.f.				Percentage of Total Square Feet
2016			218,969			$	15,163,044			$	69.25			$	15,303,627			$	69.89				10.94	%(4)
2017			165,636				15,549,869				93.88				15,655,287				94.52				8.27	%
2018			239,022				21,225,020				88.80				22,204,004				92.90				11.94	%
2019			90,157				6,420,188				71.21				6,570,627				72.88				4.50	%
2020			186,935				11,861,726				63.45				12,351,641				66.07				9.34	%
2021			150,106				20,537,228				136.82				22,307,645				148.61				7.50	%
2022			200,108				18,097,482				90.44				19,256,498				96.23				9.99	%
2023			196,555				18,203,076				92.61				20,582,570				104.72				9.82	%
2024			112,560				9,789,413				86.97				11,606,598				103.11				5.62	%
2025			130,667				8,609,221				65.89				9,685,073				74.12				6.53	%
Thereafter			311,673				25,508,767				81.84				34,441,743				110.51				15.57	%

TOTAL IN-SERVICE PROPERTIES

 

 

Year of Lease Expiration		Rentable Square Footage Subject to Expiring Leases				Current Annualized Revenues Under Expiring Leases				Current Annualized Revenues Under Expiring Leases p.s.f.				Annualized Revenues Under Expiring Leases with future step-ups				Annualized Revenues Under Expiring Leases with future step-ups - p.s.f.				Percentage of Total Square Feet
2016			2,017,860			$	110,220,595			$	54.62			$	110,879,247			$	54.95				4.93	%(4)
2017			2,913,193				179,145,144				61.49				181,605,043				62.34				7.12	%
2018			1,844,118				116,008,315				62.91				118,620,453				64.32				4.51	%
2019			3,378,067				176,257,377				52.18				182,177,002				53.93				8.26	%
2020			4,514,635				285,219,786				63.18				296,677,823				65.71				11.04	%
2021			3,133,781				175,280,563				55.93				194,605,661				62.10				7.66	%
2022			4,083,474				235,438,187				57.66				258,746,913				63.36				9.99	%
2023			1,496,266				88,516,125				59.16				101,890,781				68.10				3.66	%
2024			2,740,989				161,013,335				58.74				181,610,118				66.26				6.70	%
2025			2,340,254				138,995,641				59.39				156,874,216				67.03				5.72	%
Thereafter			8,908,873				632,589,876				71.01				812,723,899				91.23				21.79	%

 

(1)	For disclosures relating to our definition of Annualized Revenue, see page 49.

(2)	Includes 100% of joint venture properties.

(3)	Does not include data for leases expiring in a particular year when leases for the same space have already been signed with replacement tenants with future commencement dates. In those cases, the data is included in the year in which the future lease expires.

(4)	Includes square feet expiring on the last day of the current quarter.

 

27

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Boston Properties, Inc.

First Quarter 2016

 

IN-SERVICE BOSTON REGION PROPERTIES

 

Lease Expirations - Boston Region (1) (2) (3)

 

OFFICE

 

 

Year of Lease Expiration				Rentable Square Footage Subject to Expiring Leases				Current Annualized Revenues Under Expiring Leases				Per Square Foot				Annualized Revenues Under Expiring Leases with future step-ups				Per Square Foot
2016					545,645			$	20,627,103			$	37.80			$	20,433,057			$	37.45	(4)
2017					612,397				26,146,100				42.69				26,311,902				42.97
2018					442,985				18,737,134				42.30				19,247,358				43.45
2019					1,134,549				54,303,233				47.86				55,315,015				48.76
2020					531,263				25,506,134				48.01				26,470,453				49.83
2021					956,963				37,366,593				39.05				39,059,188				40.82
2022					1,570,620				75,136,201				47.84				79,422,902				50.57
2023					455,614				23,427,334				51.42				27,041,417				59.35
2024					516,500				23,974,518				46.42				26,988,227				52.25
2025					1,094,575				61,615,570				56.29				68,527,259				62.61
Thereafter					3,415,060				195,298,223				57.19				225,748,887				66.10

RETAIL

 

 

Year of Lease Expiration				Rentable Square Footage Subject to Expiring Leases				Current Annualized Revenues Under Expiring Leases				Per Square Foot				Annualized Revenues Under Expiring Leases with future step-ups				Per Square Foot
2016					48,943			$	3,711,809			$	75.84			$	3,822,527			$	78.10	(4)
2017					50,041				3,880,403				77.54				3,885,081				77.64
2018					140,449				6,484,679				46.17				6,510,039				46.35
2019					11,787				2,003,065				169.94				2,032,178				172.41
2020					93,309				6,027,474				64.60				6,225,013				66.71
2021					38,705				2,727,914				70.48				2,884,033				74.51
2022					94,117				5,758,364				61.18				5,723,319				60.81
2023					79,937				7,466,719				93.41				8,257,219				103.30
2024					70,570				4,189,195				59.36				4,585,930				64.98
2025					30,224				3,725,045				123.25				4,231,063				139.99
Thereafter					146,850				9,312,292				63.41				10,473,377				71.32

TOTAL PROPERTY TYPES

 

 

Year of Lease Expiration				Rentable Square Footage Subject to Expiring Leases				Current Annualized Revenues Under Expiring Leases				Per Square Foot				Annualized Revenues Under Expiring Leases with future step-ups				Per Square Foot
2016					594,588			$	24,338,911			$	40.93			$	24,255,584			$	40.79	(4)
2017					662,438				30,026,503				45.33				30,196,982				45.58
2018					583,434				25,221,813				43.23				25,757,397				44.15
2019					1,146,336				56,306,298				49.12				57,347,193				50.03
2020					624,572				31,533,608				50.49				32,695,466				52.35
2021					995,668				40,094,507				40.27				41,943,220				42.13
2022					1,664,737				80,894,565				48.59				85,146,221				51.15
2023					535,551				30,894,052				57.69				35,298,636				65.91
2024					587,070				28,163,713				47.97				31,574,157				53.78
2025					1,124,799				65,340,614				58.09				72,758,322				64.69
Thereafter					3,561,910				204,610,516				57.44				236,222,264				66.32

 

(1)	For disclosures relating to our definition of Annualized Revenue, see page 49.

(2)	Includes 100% of joint venture properties.

(3)	Does not include data for leases expiring in a particular year when leases for the same space have already been signed with replacement tenants with future commencement dates. In those cases, the data is included in the year in which the future lease expires.

(4)	Includes square feet expiring on the last day of the current quarter.

 

28

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Boston Properties, Inc.

First Quarter 2016

 

IN-SERVICE BOSTON REGION PROPERTIES

 

Quarterly Lease Expirations - Boston Region (1) (2) (3)

 

OFFICE

 

 

Lease Expiration by Quarter		Rentable Square Footage Subject to Expiring Leases				Current Annualized Revenues Under Expiring Leases				Per Square Foot				Annualized Revenues Under Expiring Leases with future step-ups				Per Square Foot
Q1 2016			28,521			$	1,074,874			$	37.69			$	1,074,874			$	37.69	(4)
Q2 2016			42,637				1,374,855				32.25				1,175,337				27.57
Q3 2016			356,612				12,990,368				36.43				12,995,841				36.44
Q4 2016			117,875				5,187,006				44.00				5,187,006				44.00
Total 2016			545,645			$	20,627,103			$	37.80			$	20,433,057			$	37.45
Q1 2017			105,908			$	4,618,005			$	43.60			$	4,651,402			$	43.92
Q2 2017			208,676				9,299,576				44.56				9,396,253				45.03
Q3 2017			62,289				2,805,173				45.03				2,824,332				45.34
Q4 2017			235,524				9,423,345				40.01				9,439,914				40.08
Total 2017			612,397			$	26,146,100			$	42.69			$	26,311,902			$	42.97

RETAIL

 

 

Lease Expiration by Quarter		Rentable Square Footage Subject to Expiring Leases				Current Annualized Revenues Under Expiring Leases				Per Square Foot				Annualized Revenues Under Expiring Leases with future step-ups				Per Square Foot
Q1 2016			2			$	92,000			$	45,999.96			$	92,000			$	45,999.96	(4)
Q2 2016			4,296				633,678				147.50				659,478				153.51
Q3 2016			42,062				2,617,909				62.24				2,702,827				64.26
Q4 2016			2,583				368,222				142.56				368,222				142.56
Total 2016			48,943			$	3,711,809			$	75.84			$	3,822,527			$	78.10
Q1 2017			9,824			$	1,208,528			$	123.02			$	1,207,136			$	122.88
Q2 2017			28,502				1,830,242				64.21				1,832,486				64.29
Q3 2017			1,453				114,404				78.74				115,959				79.81
Q4 2017			10,262				727,228				70.87				729,500				71.09
Total 2017			50,041			$	3,880,403			$	77.54			$	3,885,081			$	77.64

TOTAL PROPERTY TYPES

 

 

Lease Expiration by Quarter		Rentable Square Footage Subject to Expiring Leases				Current Annualized Revenues Under Expiring Leases				Per Square Foot				Annualized Revenues Under Expiring Leases with future step-ups				Per Square Foot
Q1 2016			28,523			$	1,166,874			$	40.91			$	1,166,874			$	40.91	(4)
Q2 2016			46,933				2,008,533				42.80				1,834,815				39.09
Q3 2016			398,674				15,608,277				39.15				15,698,667				39.38
Q4 2016			120,458				5,555,228				46.12				5,555,228				46.12
Total 2016			594,588			$	24,338,911			$	40.93			$	24,255,584			$	40.79
Q1 2017			115,732			$	5,826,533			$	50.35			$	5,858,538			$	50.62
Q2 2017			237,178				11,129,818				46.93				11,228,739				47.34
Q3 2017			63,742				2,919,578				45.80				2,940,291				46.13
Q4 2017			245,786				10,150,574				41.30				10,169,414				41.38
Total 2017			662,438			$	30,026,503			$	45.33			$	30,196,982			$	45.58

 

(1)	For disclosures relating to our definition of Annualized Revenue, see page 49.

(2)	Includes 100% of joint venture properties. Does not include residential units and hotel.

(3)	Does not include data for leases expiring in a particular year when leases for the same space have already been signed with replacement tenants with future commencement dates. In those cases, the data is included in the year in which the future lease expires.

(4)	Includes square feet expiring on the last day of the quarter.

 

29

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Boston Properties, Inc.

First Quarter 2016

 

IN-SERVICE NEW YORK REGION PROPERTIES

 

Lease Expirations - New York Region (1) (2) (3)

 

 

OFFICE
Year of Lease   Expiration		Rentable Square Footage Subject to Expiring Leases				Current Annualized Revenues Under Expiring Leases				Per Square Foot				Annualized Revenues Under Expiring Leases with future step-ups				Per Square Foot
2016			523,900			$	35,483,289			$	67.73			$	36,371,691			$	69.42	(4)
2017			997,820				84,376,329				84.56				84,505,373				84.69
2018			528,832				42,450,416				80.27				41,909,419				79.25
2019			484,059				37,702,432				77.89				37,894,545				78.28
2020			1,868,609				152,299,961				81.50				156,904,617				83.97
2021			363,929				31,791,425				87.36				33,772,275				92.80
2022			910,361				78,335,290				86.05				84,028,966				92.30
2023			88,524				7,908,741				89.34				8,634,935				97.54
2024			1,045,255				72,043,029				68.92				78,575,592				75.17
2025			539,566				42,522,754				78.81				46,317,397				85.84
Thereafter			2,862,053				260,511,580				91.02				351,712,064				122.89
RETAIL
Year of Lease   Expiration		Rentable Square Footage Subject to Expiring Leases				Current Annualized Revenues Under Expiring Leases				Per Square Foot				Annualized Revenues Under Expiring Leases with future step-ups				Per Square Foot
2016			111,436			$	8,097,530			$	72.67			$	8,097,530			$	72.67	(4)
2017			31,285				5,938,668				189.82				5,938,668				189.82
2018			8,114				8,737,711				1,076.87				9,575,025				1,180.06
2019			—				—				—				—				—
2020			3,452				253,056				73.31				253,056				73.31
2021			27,201				12,365,427				454.59				13,570,164				498.88
2022			58,093				9,877,469				170.03				10,811,467				186.11
2023			32,984				6,680,120				202.53				7,874,030				238.72
2024			11,395				3,937,740				345.57				5,069,760				444.91
2025			1,872				653,966				349.34				729,902				389.90
Thereafter			57,106				12,257,285				214.64				18,995,308				332.63
TOTAL PROPERTY TYPES
Year of Lease   Expiration		Rentable Square Footage Subject to Expiring Leases				Current Annualized Revenues Under Expiring Leases				Per Square Foot				Annualized Revenues Under Expiring Leases with future step-ups				Per Square Foot
2016			635,336			$	43,580,819			$	68.59			$	44,469,221			$	69.99	(4)
2017			1,029,105				90,314,997				87.76				90,444,041				87.89
2018			536,946				51,188,127				95.33				51,484,444				95.88
2019			484,059				37,702,432				77.89				37,894,545				78.28
2020			1,872,061				152,553,017				81.49				157,157,673				83.95
2021			391,130				44,156,852				112.90				47,342,440				121.04
2022			968,454				88,212,759				91.09				94,840,433				97.93
2023			121,508				14,588,861				120.07				16,508,964				135.87
2024			1,056,650				75,980,770				71.91				83,645,352				79.16
2025			541,438				43,176,720				79.74				47,047,299				86.89
Thereafter			2,919,159				272,768,865				93.44				370,707,372				126.99

 

(1)	For disclosures relating to our definition of Annualized Revenue, see page 49.

(2)	Includes 100% of joint venture properties.

(3)	Does not include data for leases expiring in a particular year when leases for the same space have already been signed with replacement tenants with future commencement dates. In those cases, the data is included in the year in which the future lease expires.

(4)	Includes square feet expiring on the last day of the current quarter.

 

30

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Boston Properties, Inc.

First Quarter 2016

 

IN-SERVICE NEW YORK REGION PROPERTIES

 

Quarterly Lease Expirations - New York Region (1) (2) (3)

 

 

OFFICE
Lease Expiration   by Quarter		Rentable Square Footage Subject to Expiring Leases				Current Annualized Revenues Under Expiring Leases				Per Square Foot				Annualized Revenues Under Expiring Leases with future step-ups				Per Square Foot
Q1 2016			2,258			$	126,713			$	56.12			$	126,713			$	56.12	(4)
Q2 2016			301,092				20,589,650				68.38				20,589,650				68.38
Q3 2016			162,279				11,626,317				71.64				12,495,658				77.00
Q4 2016			58,271				3,140,609				53.90				3,159,670				54.22
Total 2016			523,900			$	35,483,289			$	67.73			$	36,371,691			$	69.42
Q1 2017			74,402			$	5,174,271			$	69.54			$	5,176,442			$	69.57
Q2 2017			140,355				11,501,370				81.94				11,618,272				82.78
Q3 2017			740,849				64,560,871				87.14				64,560,871				87.14
Q4 2017			42,214				3,139,818				74.38				3,149,788				74.61
Total 2017			997,820			$	84,376,329			$	84.56			$	84,505,373			$	84.69
RETAIL
Lease Expiration   by Quarter		Rentable Square Footage Subject to Expiring Leases				Current Annualized Revenues Under Expiring Leases				Per Square Foot				Annualized Revenues Under Expiring Leases with future step-ups				Per Square Foot
Q1 2016			1,742			$	2,159,508			$	1,239.67			$	2,159,508			$	1,239.67	(4)
Q2 2016			19,142				982,442				51.32				982,442				51.32
Q3 2016			87,890				4,584,351				52.16				4,584,351				52.16
Q4 2016			2,662				371,229				139.46				371,229				139.46
Total 2016			111,436			$	8,097,530			$	72.67			$	8,097,530			$	72.67
Q1 2017			4,600			$	3,383,330			$	735.51			$	3,383,330			$	735.51
Q2 2017			626				179,490				286.72				179,490				286.72
Q3 2017			26,059				2,375,848				91.17				2,375,848				91.17
Q4 2017			—				—				—				—				—
Total 2017			31,285			$	5,938,668			$	189.82			$	5,938,668			$	189.82
TOTAL PROPERTY TYPES
Lease Expiration   by Quarter		Rentable Square Footage Subject to Expiring Leases				Current Annualized Revenues Under Expiring Leases				Per Square Foot				Annualized Revenues Under Expiring Leases with future step-ups				Per Square Foot
Q1 2016			4,000			$	2,286,221			$	571.56			$	2,286,221			$	571.56	(4)
Q2 2016			320,234				21,572,093				67.36				21,572,093				67.36
Q3 2016			250,169				16,210,667				64.80				17,080,009				68.27
Q4 2016			60,933				3,511,838				57.63				3,530,899				57.95
Total 2016			635,336			$	43,580,819			$	68.59			$	44,469,221			$	69.99
Q1 2017			79,002			$	8,557,601			$	108.32			$	8,559,772			$	108.35
Q2 2017			140,981				11,680,859				82.85				11,797,762				83.68
Q3 2017			766,908				66,936,719				87.28				66,936,719				87.28
Q4 2017			42,214				3,139,818				74.38				3,149,788				74.61
Total 2017			1,029,105			$	90,314,997			$	87.76			$	90,444,041			$	87.89

 

(1)	For disclosures relating to our definition of Annualized Revenue, see page 49.

(2)	Includes 100% of joint venture properties.

(3)	Does not include data for leases expiring in a particular year when leases for the same space have already been signed with replacement tenants with future commencement dates. In those cases, the data is included in the year in which the future lease expires.

(4)	Includes square feet expiring on the last day of the quarter.

 

31

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Boston Properties, Inc.

First Quarter 2016

 

IN-SERVICE SAN FRANCISCO REGION PROPERTIES

 

Lease Expirations - San Francisco Region (1) (2) (3)

 

 

OFFICE
Year of Lease   Expiration		Rentable Square Footage Subject to Expiring Leases				Current Annualized Revenues Under Expiring Leases				Per Square Foot				Annualized Revenues Under Expiring Leases with future step-ups				Per Square Foot
2016			309,542			$	14,316,574			$	46.25			$	14,081,528			$	45.49
2017			620,183				28,763,458				46.38				30,526,899				49.22
2018			230,573				12,854,135				55.75				13,336,065				57.84
2019			701,194				32,566,043				46.44				34,906,108				49.78
2020			635,161				39,580,941				62.32				41,322,192				65.06
2021			448,489				22,253,700				49.62				28,084,921				62.62
2022			650,215				30,994,287				47.67				37,991,481				58.43
2023			234,770				13,931,578				59.34				16,377,204				69.76
2024			445,553				24,175,074				54.26				28,175,562				63.24
2025			120,114				7,103,085				59.14				8,916,926				74.24
Thereafter			606,179				35,297,655				58.23				49,050,562				80.92
RETAIL
Year of Lease   Expiration		Rentable Square Footage Subject to Expiring Leases				Current Annualized Revenues Under Expiring Leases				Per Square Foot				Annualized Revenues Under Expiring Leases with future step-ups				Per Square Foot
2016			27,510			$	1,361,946			$	49.51			$	1,389,939			$	50.52
2017			16,079				1,119,910				69.65				1,132,275				70.42
2018			34,007				2,050,575				60.30				2,082,809				61.25
2019			12,091				732,231				60.56				769,377				63.63
2020			35,924				2,189,219				60.94				2,348,273				65.37
2021			18,918				1,225,332				64.77				1,297,733				68.60
2022			27,445				1,084,951				39.53				1,159,976				42.27
2023			27,788				1,529,963				55.06				1,624,144				58.45
2024			8,545				551,910				64.59				648,935				75.94
2025			21,461				1,310,980				61.09				1,527,673				71.18
Thereafter			6,736				387,690				57.55				706,689				104.91
TOTAL PROPERTY TYPES
Year of Lease   Expiration		Rentable Square Footage Subject to Expiring Leases				Current Annualized Revenues Under Expiring Leases				Per Square Foot				Annualized Revenues Under Expiring Leases with future step-ups				Per Square Foot
2016			337,052			$	15,678,520			$	46.52			$	15,471,466			$	45.90
2017			636,262				29,883,368				46.97				31,659,174				49.76
2018			264,580				14,904,710				56.33				15,418,874				58.28
2019			713,285				33,298,274				46.68				35,675,485				50.02
2020			671,085				41,770,160				62.24				43,670,465				65.07
2021			467,407				23,479,032				50.23				29,382,653				62.86
2022			677,660				32,079,239				47.34				39,151,457				57.77
2023			262,558				15,461,541				58.89				18,001,347				68.56
2024			454,098				24,726,984				54.45				28,824,497				63.48
2025			141,575				8,414,064				59.43				10,444,599				73.77
Thereafter			612,915				35,685,345				58.22				49,757,251				81.18

 

(1)	For disclosures relating to our definition of Annualized Revenue, see page 49.

(2)	Includes 100% of joint venture properties.

(3)	Does not include data for leases expiring in a particular year when leases for the same space have already been signed with replacement tenants with future commencement dates. In those cases, the data is included in the year in which the future lease expires.

 

32

---

Boston Properties, Inc.

First Quarter 2016

 

IN-SERVICE SAN FRANCISCO REGION PROPERTIES

 

Quarterly Lease Expirations - San Francisco Region (1) (2) (3)

 

 

OFFICE
Lease Expiration   by Quarter		Rentable Square Footage Subject to Expiring Leases				Current Annualized Revenues Under Expiring Leases				Per Square Foot				Annualized Revenues Under Expiring Leases with future step-ups				Per Square Foot
Q1 2016			—			$	—			$	—			$	—			$	—
Q2 2016			103,316				4,615,560				44.67				4,615,560				44.67
Q3 2016			79,058				4,443,054				56.20				4,443,054				56.20
Q4 2016			127,168				5,257,960				41.35				5,022,914				39.50
Total 2016			309,542			$	14,316,574			$	46.25			$	14,081,528			$	45.49
Q1 2017			250,717			$	11,081,875			$	44.20			$	11,096,813			$	44.26
Q2 2017			111,739				4,878,525				43.66				5,045,859				45.16
Q3 2017			220,989				10,808,738				48.91				12,333,777				55.81
Q4 2017			36,738				1,994,319				54.28				2,050,450				55.81
Total 2017			620,183			$	28,763,458			$	46.38			$	30,526,899			$	49.22

 

RETAIL
Lease Expiration   by Quarter		Rentable Square Footage Subject to Expiring Leases				Current Annualized Revenues Under Expiring Leases				Per Square Foot				Annualized Revenues Under Expiring Leases with future step-ups				Per Square Foot
Q1 2016			—			$	—			$	—			$	—			$	—
Q2 2016			1,875				117,182				62.50				144,571				77.10
Q3 2016			4,305				246,335				57.22				246,938				57.36
Q4 2016			21,330				998,429				46.81				998,429				46.81
Total 2016			27,510			$	1,361,946			$	49.51			$	1,389,939			$	50.52
Q1 2017			832			$	87,648			$	105.35			$	89,259			$	107.28
Q2 2017			130				25,304				194.65				26,046				200.35
Q3 2017			8,793				627,750				71.39				635,805				72.31
Q4 2017			6,324				379,208				59.96				381,166				60.27
Total 2017			16,079			$	1,119,910			$	69.65			$	1,132,275			$	70.42

 

TOTAL PROPERTY TYPES
Lease Expiration   by Quarter		Rentable Square Footage Subject to Expiring Leases				Current Annualized Revenues Under Expiring Leases				Per Square Foot				Annualized Revenues Under Expiring Leases with future step-ups				Per Square Foot
Q1 2016			—			$	—			$	—			$	—			$	—
Q2 2016			105,191				4,732,742				44.99				4,760,132				45.25
Q3 2016			83,363				4,689,388				56.25				4,689,992				56.26
Q4 2016			148,498				6,256,389				42.13				6,021,343				40.55
Total 2016			337,052			$	15,678,520			$	46.52			$	15,471,466			$	45.90
Q1 2017			251,549			$	11,169,523			$	44.40			$	11,186,072			$	44.47
Q2 2017			111,869				4,903,829				43.84				5,071,904				45.34
Q3 2017			229,782				11,436,488				49.77				12,969,582				56.44
Q4 2017			43,062				2,373,527				55.12				2,431,616				56.47
Total 2017			636,262			$	29,883,368			$	46.97			$	31,659,174			$	49.76

 

(1)	For disclosures relating to our definition of Annualized Revenue, see page 49.

(2)	Includes 100% of joint venture properties.

(3)	Does not include data for leases expiring in a particular year when leases for the same space have already been signed with replacement tenants with future commencement dates. In those cases, the data is included in the year in which the future lease expires.

 

33

---

Boston Properties, Inc.

First Quarter 2016

 

IN-SERVICE WASHINGTON, DC REGION PROPERTIES

 

Lease Expirations - Washington, DC Region (1) (2) (3)

 

 

OFFICE
Year of Lease   Expiration		Rentable Square Footage Subject to Expiring Leases				Current Annualized Revenues Under Expiring Leases				Per Square Foot				Annualized Revenues Under Expiring Leases with future step-ups				Per Square Foot
2016			419,804			$	24,630,586			$	58.67			$	24,689,344			$	58.81	(4)(5)
2017			517,157				24,309,388				47.01				24,605,582				47.58	(5)
2018			402,706				20,741,610				51.51				21,923,607				54.44
2019			968,108				45,265,480				46.76				47,490,708				49.06
2020			1,292,667				55,971,024				43.30				59,628,921				46.13
2021			1,214,294				63,331,618				52.16				71,381,632				58.78
2022			752,170				32,874,927				43.71				38,047,065				50.58
2023			520,803				25,045,397				48.09				29,254,655				56.17
2024			621,121				31,031,301				49.96				36,264,139				58.38
2025			455,332				19,145,013				42.05				23,427,563				51.45
Thereafter			1,713,908				115,973,651				67.67				151,770,644				88.55

 

RETAIL
Year of Lease   Expiration		Rentable Square Footage Subject to Expiring Leases				Current Annualized Revenues Under Expiring Leases				Per Square Foot				Annualized Revenues Under Expiring Leases with future step-ups				Per Square Foot
2016			31,080			$	1,991,759			$	64.08			$	1,993,631			$	64.15	(4)
2017			68,231				4,610,889				67.58				4,699,264				68.87
2018			56,452				3,952,056				70.01				4,036,131				71.50
2019			66,279				3,684,893				55.60				3,769,072				56.87
2020			54,250				3,391,977				62.52				3,525,299				64.98
2021			65,282				4,218,555				64.62				4,555,716				69.79
2022			20,453				1,376,697				67.31				1,561,736				76.36
2023			55,846				2,526,274				45.24				2,827,178				50.62
2024			22,050				1,110,568				50.37				1,301,973				59.05
2025			77,110				2,919,231				37.86				3,196,435				41.45
Thereafter			100,981				3,551,500				35.17				4,266,368				42.25

 

TOTAL PROPERTY TYPES
Year of Lease   Expiration		Rentable Square Footage Subject to Expiring Leases				Current Annualized Revenues Under Expiring Leases				Per Square Foot				Annualized Revenues Under Expiring Leases with future step-ups				Per Square Foot
2016			450,884			$	26,622,345			$	59.04			$	26,682,975			$	59.18	(4)
2017			585,388				28,920,277				49.40				29,304,845				50.06
2018			459,158				24,693,665				53.78				25,959,738				56.54
2019			1,034,387				48,950,373				47.32				51,259,780				49.56
2020			1,346,917				59,363,001				44.07				63,154,220				46.89
2021			1,279,576				67,550,172				52.79				75,937,348				59.35
2022			772,623				34,251,624				44.33				39,608,802				51.27
2023			576,649				27,571,671				47.81				32,081,834				55.63
2024			643,171				32,141,869				49.97				37,566,111				58.41
2025			532,442				22,064,243				41.44				26,623,997				50.00
Thereafter			1,814,889				119,525,151				65.86				156,037,012				85.98

 

(1)	For disclosures relating to our definition of Annualized Revenue, see page 49.

(2)	Includes 100% of joint venture properties.

(3)	Does not include data for leases expiring in a particular year when leases for the same space have already been signed with replacement tenants with future commencement dates. In those cases, the data is included in the year in which the future lease expires.

(4)	Includes square feet expiring on the last day of the current quarter.

(5)	Includes 50,185 and 9,570 square feet of Sensitive Compartmented Information Facility (SCIF) space in 2016 and 2017, respectively. Excluding the SCIF space, the current and future expiring rental rates per square foot would be $48.93 and $49.09 and $45.63 and $46.19, respectively.

 

34

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Boston Properties, Inc.

First Quarter 2016

 

IN-SERVICE WASHINGTON, DC REGION PROPERTIES

 

Quarterly Lease Expirations - Washington, DC Region (1) (2) (3)

 

 

OFFICE
Lease Expiration   by Quarter		Rentable Square Footage Subject to Expiring Leases				Current Annualized Revenues Under Expiring Leases				Per Square Foot				Annualized Revenues Under Expiring Leases with future step-ups				Per Square Foot
Q1 2016			58,145			$	4,363,973			$	75.05			$	4,363,973			$	75.05	(4)
Q2 2016			167,487				8,379,042				50.03				8,415,481				50.25	(5)
Q3 2016			62,466				5,882,391				94.17				5,889,972				94.29	(5)
Q4 2016			131,706				6,005,180				45.60				6,019,917				45.71
Total 2016			419,804			$	24,630,586			$	58.67			$	24,689,344			$	58.81
Q1 2017			127,456			$	5,490,812			$	43.08			$	5,554,584			$	43.58
Q2 2017			41,026				2,862,213				69.77				2,933,406				71.50	(5)
Q3 2017			286,872				12,755,397				44.46				12,794,602				44.60
Q4 2017			61,803				3,200,967				51.79				3,322,990				53.77
Total 2017			517,157			$	24,309,388			$	47.01			$	24,605,582			$	47.58
RETAIL
Lease Expiration   by Quarter		Rentable Square Footage Subject to Expiring Leases				Current Annualized Revenues Under Expiring Leases				Per Square Foot				Annualized Revenues Under Expiring Leases with future step-ups				Per Square Foot
Q1 2016			—			$	—			$	—			$	—			$	—
Q2 2016			2,507				243,043				96.95				243,043				96.95
Q3 2016			4,047				291,414				72.01				293,286				72.47
Q4 2016			24,526				1,457,303				59.42				1,457,303				59.42
Total 2016			31,080			$	1,991,759			$	64.08			$	1,993,631			$	64.15
Q1 2017			26,393			$	1,576,708			$	59.74			$	1,578,067			$	59.79
Q2 2017			17,944				1,545,861				86.15				1,605,861				89.49
Q3 2017			6,842				446,730				65.29				446,730				65.29
Q4 2017			17,052				1,041,590				61.08				1,068,605				62.67
Total 2017			68,231			$	4,610,889			$	67.58			$	4,699,264			$	68.87
TOTAL PROPERTY TYPES
Lease Expiration   by Quarter		Rentable Square Footage Subject to Expiring Leases				Current Annualized Revenues Under Expiring Leases				Per Square Foot				Annualized Revenues Under Expiring Leases with future step-ups				Per Square Foot
Q1 2016			58,145			$	4,363,973			$	75.05			$	4,363,973			$	75.05	(4)
Q2 2016			169,994				8,622,085				50.72				8,658,523				50.93
Q3 2016			66,513				6,173,804				92.82				6,183,258				92.96
Q4 2016			156,232				7,462,483				47.77				7,477,220				47.86
Total 2016			450,884			$	26,622,345			$	59.04			$	26,682,975			$	59.18
Q1 2017			153,849			$	7,067,520			$	45.94			$	7,132,651			$	46.36
Q2 2017			58,970				4,408,074				74.75				4,539,268				76.98
Q3 2017			293,714				13,202,126				44.95				13,241,331				45.08
Q4 2017			78,855				4,242,556				53.80				4,391,595				55.69
Total 2017			585,388			$	28,920,277			$	49.40			$	29,304,845			$	50.06

 

(1)	For disclosures relating to our definition of Annualized Revenue, see page 49.

(2)	Includes 100% of joint venture properties.

(3)	Does not include data for leases expiring in a particular year when leases for the same space have already been signed with replacement tenants with future commencement dates. In those cases, the data is included in the year in which the future lease expires.

(4)	Includes square feet expiring on the last day of the current quarter.

(5)

Includes 14,041, 36,144, and 9,570 square feet of Sensitive Compartmented Information Facility (SCIF) space in Q2 2016, Q3 2016, and Q2 2017, respectively. Excluding the SCIF space, the current and future expiring rental rates per square foot would be $43.46 and $43.70, $39.83 and $40.12, and $54.48 and $56.38, respectively.

 

35

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Boston Properties, Inc.

First Quarter 2016

 

CBD PROPERTIES

 

Lease Expirations (1) (2) (3)

 

		Boston																				San Francisco
														Annualized																				Annualized
		Rentable Square				Current Annualized				Per				Revenues Under				Per				Rentable Square				Current Annualized				Per				Revenues Under				Per
Year of Lease		Footage Subject to				Revenues Under				Square				Expiring Leases				Square				Footage Subject to				Revenues Under				Square				Expiring Leases				Square
Expiration		Expiring Leases				Expiring Leases				Foot				with future step-ups				Foot				Expiring Leases				Expiring Leases				Foot				with future step-ups				Foot
2016			160,760			$	10,180,220			$	63.33			$	10,296,411			$	64.05	(4)			253,755			$	13,661,322			$	53.84			$	13,454,269			$	53.02
2017			259,916				16,338,639				62.86				16,450,569				63.29				372,805				21,869,872				58.66				23,395,348				62.75
2018			318,716				16,443,636				51.59				16,763,046				52.60				218,957				13,038,923				59.55				13,453,204				61.44
2019			652,503				36,929,463				56.60				37,433,943				57.37				246,892				13,975,090				56.60				14,690,348				59.50
2020			437,533				25,339,673				57.91				26,088,504				59.63				595,438				38,399,674				64.49				39,970,123				67.13
2021			395,140				21,939,586				55.52				22,709,322				57.47				368,717				20,593,397				55.85				25,518,233				69.21
2022			969,079				55,067,754				56.82				58,982,387				60.86				326,724				17,614,112				53.91				21,681,350				66.36
2023			404,098				26,773,662				66.26				30,130,762				74.56				221,901				13,322,529				60.04				15,158,692				68.31
2024			285,278				16,452,031				57.67				18,442,402				64.65				429,586				23,771,016				55.33				27,613,505				64.28
2025			684,479				44,240,779				64.63				49,522,969				72.35				135,933				8,220,349				60.47				10,192,437				74.98
Thereafter			3,278,777				195,709,961				59.69				225,789,162				68.86				612,915				35,685,345				58.22				49,757,251				81.18
		New York																				Washington, DC
														Annualized																				Annualized
		Rentable Square				Current Annualized				Per				Revenues Under				Per				Rentable Square				Current Annualized				Per				Revenues Under				Per
Year of Lease		Footage Subject to				Revenues Under				Square				Expiring Leases				Square				Footage Subject to				Revenues Under				Square				Expiring Leases				Square
Expiration		Expiring Leases				Expiring Leases				Foot				with future step-ups				Foot				Expiring Leases				Expiring Leases				Foot				with future step-ups				Foot
2016			480,033			$	38,365,720			$	79.92			$	39,039,962			$	81.33	(4)			139,187			$	8,745,004			$	62.83			$	8,748,717			$	62.86	(4)
2017			865,285				84,298,806				97.42				84,403,707				97.54				336,584				15,982,132				47.48				16,057,746				47.71
2018			319,432				43,873,945				137.35				43,973,081				137.66				117,191				6,825,875				58.25				7,208,851				61.51
2019			329,221				32,048,942				97.35				32,117,363				97.56				406,968				26,266,356				64.54				27,994,219				68.79
2020			1,557,489				141,820,255				91.06				145,802,205				93.61				449,893				24,388,462				54.21				26,314,488				58.49
2021			305,527				41,350,169				135.34				44,373,610				145.24				549,048				35,015,618				63.78				39,684,248				72.28
2022			906,135				86,169,224				95.10				92,609,784				102.20				79,476				4,642,509				58.41				5,238,024				65.91
2023			113,209				14,324,664				126.53				16,228,170				143.35				68,048				4,555,708				66.95				5,384,241				79.12
2024			672,248				62,622,999				93.15				69,499,403				103.38				182,005				11,837,636				65.04				13,950,329				76.65
2025			407,691				38,344,984				94.05				41,730,999				102.36				77,995				3,937,605				50.49				4,850,602				62.19
Thereafter			2,750,031				267,460,102				97.26				364,638,735				132.59				1,536,297				107,739,672				70.13				140,983,413				91.77

 

(1)	For disclosures relating to our definition of Annualized Revenue, see page 49.

(2)	Includes 100% of joint venture properties. Does not include residential and hotel properties.

(3)	Does not include data for leases expiring in a particular year when leases for the same space have already been signed with replacement tenants with future commencement dates. In those cases, the data is included in the year in which the future lease expires.

(4)	Includes square feet expiring on the last day of the current quarter.

 

36

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Boston Properties, Inc.

First Quarter 2016

 

SUBURBAN PROPERTIES

 

Lease Expirations (1) (2) (3)

 

		Boston																				San Francisco
														Annualized																				Annualized
		Rentable Square				Current Annualized				Per				Revenues Under				Per				Rentable Square				Current Annualized				Per				Revenues Under				Per
Year of Lease		Footage Subject to				Revenues Under				Square				Expiring Leases				Square				Footage Subject to				Revenues Under				Square				Expiring Leases				Square
Expiration		Expiring Leases				Expiring Leases				Foot				with future step-ups				Foot				Expiring Leases				Expiring Leases				Foot				with future step-ups				Foot
2016			433,828			$	14,158,691			$	32.64			$	13,959,173			$	32.18	(4)			83,297			$	2,017,197			$	24.22			$	2,017,197			$	24.22
2017			402,522				13,687,863				34.01				13,746,413				34.15				263,457				8,013,496				30.42				8,263,826				31.37
2018			264,718				8,778,177				33.16				8,994,351				33.98				45,623				1,865,787				40.90				1,965,670				43.09
2019			493,833				19,376,835				39.24				19,913,251				40.32				466,393				19,323,185				41.43				20,985,136				44.99
2020			187,039				6,193,935				33.12				6,606,962				35.32				75,647				3,370,486				44.56				3,700,342				48.92
2021			600,528				18,154,921				30.23				19,233,898				32.03				98,690				2,885,635				29.24				3,864,420				39.16
2022			695,658				25,826,811				37.13				26,163,834				37.61				350,936				14,465,127				41.22				17,470,107				49.78
2023			131,453				4,120,390				31.34				5,167,874				39.31				40,657				2,139,012				52.61				2,842,655				69.92
2024			301,792				11,711,682				38.81				13,131,756				43.51				24,512				955,968				39.00				1,210,992				49.40
2025			440,320				21,099,835				47.92				23,235,352				52.77				5,642				193,716				34.33				252,162				44.69
Thereafter			283,133				8,900,555				31.44				10,433,102				36.85				—				—				—				—				—
		New York																				Washington, DC
														Annualized																				Annualized
		Rentable Square				Current Annualized				Per				Revenues Under				Per				Rentable Square				Current Annualized				Per				Revenues Under				Per
Year of Lease		Footage Subject to				Revenues Under				Square				Expiring Leases				Square				Footage Subject to				Revenues Under				Square				Expiring Leases				Square
Expiration		Expiring Leases				Expiring Leases				Foot				with future step-ups				Foot				Expiring Leases				Expiring Leases				Foot				with future step-ups				Foot
2016			155,303			$	5,215,099			$	33.58			$	5,429,259			$	34.96	(4)			311,697			$	17,877,341			$	57.35			$	17,934,258			$	57.54	(4)(5)
2017			163,820				6,016,191				36.72				6,040,334				36.87				248,804				12,938,145				52.00				13,247,099				53.24	(5)
2018			217,514				7,314,183				33.63				7,511,363				34.53				341,967				17,867,791				52.25				18,750,887				54.83
2019			154,838				5,653,491				36.51				5,777,182				37.31				627,419				22,684,016				36.15				23,265,561				37.08
2020			314,572				10,732,762				34.12				11,355,467				36.10				897,024				34,974,539				38.99				36,839,732				41.07
2021			85,603				2,806,683				32.79				2,968,830				34.68				730,528				32,534,554				44.54				36,253,100				49.63
2022			62,319				2,043,535				32.79				2,230,649				35.79				693,147				29,609,115				42.72				34,370,778				49.59
2023			8,299				264,197				31.83				280,795				33.83				508,601				23,015,963				45.25				26,697,593				52.49
2024			384,402				13,357,770				34.75				14,145,949				36.80				461,166				20,304,233				44.03				23,615,782				51.21
2025			133,747				4,831,735				36.13				5,316,299				39.75				454,447				18,126,638				39.89				21,773,396				47.91
Thereafter			169,128				5,308,764				31.39				6,068,637				35.88				278,592				11,785,479				42.30				15,053,599				54.03

 

(1)	For disclosures relating to our definition of Annualized Revenue, see page 49.

(2)	Includes 100% of joint venture properties. Does not include residential and hotel properties.

(3)	Does not include data for leases expiring in a particular year when leases for the same space have already been signed with replacement tenants with future commencement dates. In those cases, the data is included in the year in which the future lease expires.

(4)	Includes square feet expiring on the last day of the current quarter.

(5)	Includes 50,185 and 9,570 square feet of Sensitive Compartmented Information Facility (SCIF) space in 2016 and 2017, respectively. Excluding the SCIF space, the current and future expiring rental rates per square foot would be $43.34 and $43.55 and $49.28 and $50.52, respectively.

 

37

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Boston Properties, Inc.

First Quarter 2016

 

RESIDENTIAL and HOTEL PERFORMANCE

 

 

Rental Rates and Occupancy		First Quarter								Percent
		2016				2015				Change
The Avant at Reston Town Center (359 units)
Reston, VA
Average Monthly Rental Rate (1)		$	2,327			$	2,244				3.7	%
Average Rental Rate Per Occupied Square Foot (1)		$	2.55			$	2.45				4.1	%
Average Physical Occupancy (1) (2)			92.9	%			80.1	%			16.0	%
Average Economic Occupancy (2)			92.8	%			76.9	%			20.7	%
The Lofts at Atlantic Wharf (86 units)
Boston, MA
Average Monthly Rental Rate (3)		$	4,153			$	4,012				3.5	%
Average Rental Rate Per Occupied Square Foot (3)		$	4.57			$	4.44				2.9	%
Average Physical Occupancy (2) (3)			96.1	%			98.1	%			(2.0	)%
Average Economic Occupancy (2)			97.6	%			98.8	%			(1.2	)%
Boston Marriott Cambridge (433 rooms)
Cambridge, MA
Average Occupancy			75.2	%			78.7	%			(4.4	)%
Average Daily Rate		$	223.48			$	223.34				0.1	%
Revenue per available room		$	168.08			$	175.86				(4.4	)%

 

Net Operating Income (dollars in thousands)		Residential												Hotel
		First Quarter								Percent				First Quarter								Percent
		2016				2015(4)				Change				2016				2015				Change
Rental Revenue		$	4,049	(5)		$	6,854	(5)			(40.9	)%		$	8,757			$	9,085				(3.6	)%
Operating expenses and real estate taxes			1,600				3,546				(54.9	)%			7,634				7,576				0.8	%
Net Operating Income		$	2,449	(5)		$	3,308	(5)			(26.0	)%		$	1,123			$	1,509				(25.6	)%
Rental Revenue		$	4,049			$	6,854							$	8,757			$	9,085
Less: Straight-line rent and fair value lease revenue			18				34				(47.1	)%			1				1				—
Rental Revenue—cash basis			4,031				6,820				(40.9	)%			8,756				9,084				(3.6	)%
Less: Operating expenses and real estate taxes			1,600				3,546				(54.9	)%			7,634				7,576				0.8	%
Add: Straight-line ground rent expense			—				79				(100.0	)%			—				—				0.0	%
Net Operating Income—cash basis		$	2,431			$	3,353				(27.5	)%		$	1,122			$	1,508				(25.6	)%

 

(1)	Excludes 26,179 square feet of retail space which is 100% leased.

(2)	For disclosures related to our definition of Average Physical and Average Economic Occupancy, see page 49.

(3)	Excludes 9,617 square feet of retail space which is 100% leased.

(4)	Includes the Residences on The Avenue, which was sold on March 17, 2015 and had approximately $1.2 million of net operating income and approximately $1.3 million of net operating income - cash basis for the three months ended March 31, 2015.

(5)	Includes 35,796 square feet of retail space, which had revenue of approximately $0.5 million for the three months ended March 31, 2016, and 85,324 square feet of retail space, which had revenue of approximately $1.1 million for the three months ended March 31, 2015.

 

38

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Boston Properties, Inc.

First Quarter 2016

 

SAME PROPERTY PERFORMANCE

 

Office and Hotel & Residential Properties

 

 

		Office (1)				Hotel & Residential (1)				Total
Number of Properties			148				3				151
Square feet			40,289,871				776,704				41,066,575
Percent of properties in-service			98.5	%			100.0	%			98.6	%
Occupancy @ 3/31/2015			91.1	%			N/A				91.1	%
Occupancy @ 3/31/2016			91.3	%			N/A				91.3	%
Percent change from 1st quarter 2016 over 1st quarter 2015 (2):
Rental revenue			2.1	%			0.8	%
Operating expenses and real estate taxes			0.8	%			1.5	%
Consolidated Net Operating Income (3)			2.9	%			(1.0	)%			2.9	%(2)
Net Operating Income - BXP’s share of unconsolidated joint ventures (3) (4)											(32.5	)%(2)
Combined Net Operating Income (3)											1.5	%
Adjusted Combined Net Operating Income (3) (5)											2.8	%
Rental revenue - cash basis			5.1	%			0.8	%
Consolidated Net Operating Income (3) - cash basis (6)			7.8	%			(0.8	)%			7.8	%(2)
Net Operating Income - cash basis (6) - BXP’s share of unconsolidated joint ventures											(41.1	)%(2)
Combined Net Operating Income (3) - cash basis (6)											5.6	%
Adjusted Combined Net Operating Income (3) (5) - cash basis (6)											7.0	%

Same Property Lease Analysis - quarter ended March 31, 2016

 

 

		Total Office
Vacant space available @ 1/1/2016 (sf)			3,336,787
Property dispositions/ properties taken out of service (sf)			—
Square footage of leases expiring or terminated 1/1/2016-3/31/2016			1,594,867
Total space for lease (sf)			4,931,654
New tenants (sf)			840,024
Renewals (sf)			583,473
Total space leased (sf)			1,423,497
Space available @ 3/31/2016 (sf)			3,508,157
Net (increase)/decrease in available space (sf)			(171,370	)
Second generation leasing information: (6)
Leases commencing during the period (sf)			1,376,563
Weighted average lease term (months)			93
Weighted average free rent period (days)			73
Total transaction costs per square foot (7)		$	48.87
Increase (decrease) in gross rents (8)			16.39	%
Increase (decrease) in net rents (9)			26.06	%

 

(1)	Includes revenue and expenses from retail properties and tenants.

(2)	See page 41 for a quantitative reconciliation of Same Property Net Operating Income (NOI) by reportable segment.

(3)	For a quantitative reconciliation of NOI to Net income attributable to Boston Properties, Inc. common shareholders, see page 40. For disclosures relating to our use of Combined NOI, Consolidated NOI and Adjusted Combined NOI see page 48.

(4)	For disclosures related to the calculation of NOI from unconsolidated joint ventures, see page 18.

(5)	Represents Combined NOI, which is Consolidated NOI plus our share of unconsolidated joint ventures NOI, less our partners’ share of NOI from consolidated joint ventures as reconciled on page 20.

(6)	For a quantitative reconciliation of NOI to NOI on a cash basis, see page 40.

(7)	Second generation leases are defined as leases for space that had previously been under lease by the Company. Of the 1,376,563 square feet of second generation leases that commenced in Q1 2016, leases for 1,242,079 square feet were signed in prior periods.

(8)	Total transaction costs include tenant improvements and leasing commissions and exclude free rent concessions.

(9)

Represents the increase/(decrease) in gross rent (base rent plus expense reimbursements) on the new vs. expired leases on the 1,189,205 square feet of second generation leases that had been occupied within the prior 12 months; excludes leases that management considers temporary because the tenant is not expected to occupy the space on a long-term basis (e.g., the tenant is occupying “swing space”).

(10)

Represents the increase/(decrease) in net rent (gross rent less operating expenses) on the new vs. expired leases on the 1,189,205 square feet of second generation leases that had been occupied within the prior 12 months; excludes leases that management considers temporary because the tenant is not expected to occupy the space on a long-term basis (e.g., the tenant is occupying “swing space”).

 

39

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Boston Properties, Inc.

First Quarter 2016

 

RECONCILIATION OF NET INCOME TO NET OPERATING INCOME

 

(in thousands)

 

		For the three months ended
		March 31, 2016				March 31, 2015
Net income attributable to Boston Properties, Inc. common shareholders		$	181,747			$	171,182
Preferred dividends			2,618				2,589
Net income attributable to Boston Properties, Inc.			184,365				173,771
Net income attributable to noncontrolling interests:
Noncontrolling interest—common units of the Operating Partnership			21,393				20,188
Noncontrolling interest—redeemable preferred units of the Operating Partnership			—				3
Noncontrolling interest in property partnerships (1)			10,464				15,208
Net income			216,222				209,170
Gains on sales of real estate			(67,623	)			(95,084	)
Income before gains on sales of real estate			148,599				114,086
Add:
Interest expense			105,309				108,757
Depreciation and amortization			159,448				154,223
Transaction costs			25				327
General and administrative expense			29,353				28,791
Subtract:
Gains from investments in securities			(259	)			(393	)
Interest and other income			(1,505	)			(1,407	)
Income from unconsolidated joint ventures			(1,791	)			(14,834	)
Development and management services income			(6,689	)			(5,328	)
Consolidated Net Operating Income			432,490				384,222
Add:
Net Operating Income from unconsolidated joint ventures (BXP’s share) (2)			10,161				14,586
Combined Net Operating Income			442,651				398,808
Subtract:
Net Operating Income from non Same Properties (3)			(11,733	)			(9,924	)
Termination income			(51,297	)			(14,924	)
Combined Same Property Net Operating Income			379,621				373,960
Subtract:
Partners’ share of consolidated joint ventures’ Net Operating Income (4)			(46,192	)			(54,854	)
Add:
Partners’ share of consolidated joint ventures’ Net Operating Income from non Same Properties (3)(5)			—				5,258
Adjusted Combined Same Property Net Operating Income (BXP’s share)		$	333,429			$	324,364
Net Operating Income - cash basis reconciliation
Combined Same Property Net Operating Income		$	379,621			$	373,960
Subtract:
Straight-line rent and fair value lease revenue			(17,160	)			(37,074	)
Add:
Straight-line ground rent expense (6)			987				1,117
Lease transaction costs which qualify as inducements in accordance with GAAP (7)			423				6,452
Combined Same Property Net Operating Income—cash basis			363,871				344,455
Subtract:
Partners’ share of Net Operating Income—cash basis from Same Properties (3) (4)			(41,703	)			(43,319	)
Adjusted Combined Same Property Net Operating Income—cash basis (BXP’s share)		$	322,168			$	301,136

 

(1)

These partnerships include 505 9th Street, N.W. in Washington, DC, which was sold on September 18, 2015, Fountain Square in Reston, VA, of which the Company acquired the remaining 50% interest on September 15, 2015, 767 Fifth Avenue (The GM Building), 601 Lexington Avenue and Times Square Tower in New York City and 100 Federal Street and Atlantic Wharf Office Building in Boston, MA. For additional information, refer to page 9.

(2)	For disclosures related to the calculation of Net Operating Income from unconsolidated joint ventures, see page 18.

(3)	Pages 22-24 indicate by footnote the properties which are not included as part of Same Property Net Operating Income. Non Same Properties include dispositions that occurred prior to March 31, 2016 and therefore are no longer a part of the Company’s property portfolio.

(4)	For disclosures related to the calculation of Partners’ share of Net Operating Income and Net Operating Income - cash basis from consolidated joint ventures, see page 20.

(5)

On September 15, 2015, the Company acquired its partner’s 50% interest in the entity that owns Fountain Square. As a result, the partner’s share of Net Operating Income for the three months ended March 31, 2015 is included in Partners’ share of consolidated joint ventures’ Net Operating Income from non Same Properties.

(6)	For additional information, refer to page 12.

(7)	For additional information, refer to page 42.

 

40

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Boston Properties, Inc.

First Quarter 2016

 

SAME PROPERTY NET OPERATING INCOME BY REPORTABLE SEGMENT

 

(dollars in thousands)

 

		Office (1)																Hotel & Residential
		For the three months ended																For the three months ended
		31-Mar-16				31-Mar-15				$ Change				% Change				31-Mar-16				31-Mar-15				$ Change				% Change
Rental Revenue		$	631,164			$	582,658											$	12,806			$	12,709
Less: Termination Income			51,306				14,924												—				—
Rental revenue - subtotal			579,858				567,734			$	12,124				2.1	%			12,806				12,709			$	97				0.8	%
Operating expenses and real estate taxes			213,647				211,965				1,682				0.8	%			9,234				9,102				132				1.5	%
Net Operating Income (2)		$	366,211			$	355,769			$	10,442				2.9	%		$	3,572			$	3,607			$	(35	)			(1.0	)%
Rental revenue - subtotal		$	579,858			$	567,734											$	12,806			$	12,709
Less:
Straight-line rent and fair value lease revenue			16,099				35,480				(19,381	)			(54.6	)%			19				24				(5	)			(20.8	)%
Add:
Lease transaction costs which qualify as inducements in accordance with GAAP (3)			423				4,532				(4,109	)			(90.7	)%			—				—				—				—
Rental revenue - cash basis			564,182				536,786				27,396				5.1	%			12,787				12,685				102				0.8	%
Less:
Operating expenses and real estate taxes			213,647				211,965				1,682				0.8	%			9,234				9,102				132				1.5	%
Add:
Straight-line ground rent expense (4)			987				1,117				(130	)			(11.6	)%			—				—				—				—
Net Operating Income (5) - cash basis		$	351,522			$	325,938			$	25,584				7.8	%		$	3,553			$	3,583			$	(30	)			(0.8	)%
		Consolidated Total (1)																Unconsolidated Joint Ventures (BXP’s Share)
		For the three months ended																For the three months ended
		31-Mar-16				31-Mar-15				$ Change				% Change				31-Mar-16				31-Mar-15				$ Change				% Change
Rental Revenue		$	643,970			$	595,367											$	17,814			$	24,563
Less: Termination Income			51,306				14,924												(9	)			—
Rental revenue - subtotal			592,664				580,443			$	12,221				2.1	%			17,823				24,563			$	(6,740	)			(27.4	)%
Operating expenses and real estate taxes			222,881				221,067				1,814				0.8	%			7,985				9,979				(1,994	)			(20.0	)%
Net Operating Income (2)		$	369,783			$	359,376			$	10,407				2.9	%		$	9,838			$	14,584			$	(4,746	)			(32.5	)%
Rental revenue - subtotal		$	592,664			$	580,443											$	17,823			$	24,563
Less:
Straight-line rent and fair value lease revenue			16,118				35,504				(19,386	)			(54.6	)%			1,042				1,570				(528	)			33.6	%
Add:
Lease transaction costs which qualify as inducements in accordance with GAAP (3)			423				4,532				(4,109	)			(90.7	)%			—				1,920				(1,920	)			(100.0	)%
Rental revenue - cash basis			576,969				549,471				27,498				5.0	%			16,781				24,913				(8,132	)			(32.6	)%
Less:
Operating expenses and real estate taxes			222,881				221,067				1,814				0.8	%			7,985				9,979				(1,994	)			(20.0	)%
Add:
Straight-line ground rent expense (4)			987				1,117				(130	)			(11.6	)%			—				—				—				—
Net Operating Income (5) - cash basis		$	355,075			$	329,521			$	25,554				7.8	%		$	8,796			$	14,934			$	(6,138	)			(41.1	)%
		Combined																Adjusted Combined Total (BXP’s Share) (6)
		For the three months ended																For the three months ended
		31-Mar-16				31-Mar-15				$ Change				% Change				31-Mar-16				31-Mar-15				$ Change				% Change
Rental Revenue		$	661,784			$	619,930											$	588,117			$	544,787
Less: Termination Income			51,297				14,924												49,445				14,125
Rental revenue - subtotal			610,487				605,006			$	5,481				0.9	%			538,672				530,662			$	8,010				1.5	%
Operating expenses and real estate taxes			230,866				231,046				(180	)			(0.1	)%			205,243				206,298				(1,055	)			(0.5	)%
Net Operating Income (2)		$	379,621			$	373,960			$	5,661				1.5	%		$	333,429			$	324,364			$	9,065				2.8	%
Rental revenue - subtotal		$	610,487			$	605,006											$	538,672			$	530,662
Less:
Straight-line rent and fair value lease revenue			17,160				37,074				(19,914	)			(53.7	)%			12,654				30,274				(17,620	)			(58.2	)%
Add:
Lease transaction costs which qualify as inducements in accordance with GAAP (3)			423				6,452				(6,029	)			(93.4	)%			406				5,929				(5,523	)			(93.2	)%
Rental revenue - cash basis			593,750				574,384				19,366				3.4	%			526,424				506,317				20,107				4.0	%
Less:
Operating expenses and real estate taxes			230,866				231,046				(180	)			(0.1	)%			205,243				206,298				(1,055	)			(0.5	)%
Add:
Straight-line ground rent expense (4)			987				1,117				(130	)			(11.6	)%			987				1,117				(130	)			(11.6	)%
Net Operating Income (5) - cash basis		$	363,871			$	344,455			$	19,416				5.6	%		$	322,168			$	301,136			$	21,032				7.0	%

 

(1)

Includes 100% share of consolidated joint ventures. Same Property consolidated joint venture properties includes Fountain Square in Reston, VA, of which the Company acquired the remaining 50% interest on September 15, 2015, 767 Fifth Avenue (The GM Building), 601 Lexington Avenue and Times Square Tower in New York City and 100 Federal Street and Atlantic Wharf Office Building in Boston, MA.

(2)	For a quantitative reconciliation of net operating income (NOI) to net income attributable to Boston Properties, Inc. common shareholders, see page 40. For disclosures relating to our use of NOI see page 48.

(3)	Leasing transaction costs are generally included in 2nd generation tenant improvements and leasing commissions in the Company’s FAD calculation on page 12. For additional information related to second generation transaction costs, see page 42.

(4)	For additional information, see page 12.

(5)	For a quantitative reconciliation of NOI to NOI on a cash basis see page 40. For disclosures relating to our use of NOI, see page 48.

(6)

Each line item represents Combined NOI, which is Consolidated NOI plus our share of unconsolidated joint ventures’ NOI, less our partners’ share of NOI from consolidated joint ventures. See page 20. On September 15, 2015, the Company acquired its partner’s 50% interest in the entity that owns Fountain Square. As a result, the partner’s share of NOI for the three months ended March 31, 2015 is included in Partners’ share of consolidated joint ventures Net Operating Income from non Same Properties.

 

41

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Boston Properties, Inc.

First Quarter 2016

 

LEASING ACTIVITY

 

for the three months ended March 31, 2016

All In-Service Properties

 

 

		Total
Vacant space available @ 1/1/2016 (sf)			3,530,913
Property dispositions/ properties taken out of service (sf)			—
Properties acquired vacant space (sf)			—
Properties placed in-service (sf)			12,875
Leases expiring or terminated 1/1/2016-3/31/2016 (sf)			1,594,867
Total space available for lease (sf)			5,138,655
1st generation leases (sf)			73,108
2nd generation leases with new tenants (sf)			793,090
2nd generation lease renewals (sf)			583,473
Total space leased (sf)			1,449,671
Vacant space available for lease @ 3/31/2016 (sf)			3,688,984
Net (increase)/decrease in available space (sf)			(158,071	)
Second generation leasing information: (2)
Leases commencing during the period (sf)			1,376,563
Weighted average lease term (months)			93
Weighted average free rent period (days)			73
Total transaction costs per square foot (3)		$	48.87
Increase (decrease) in gross rents (4)			16.39	%
Increase (decrease) in net rents (5)			26.06	%

 

										Incr (decr)				Incr (decr)
		All leases				All leases				in 2nd gen.				in 2nd gen.				Total				Total square feet of leases
		1st Generation (sf)				2nd Generation (sf)				gross cash rents (4)				net cash rents (5)				Leased (sf) (6)				executed in the quarter (7)
Boston			364				551,334				13.78	%			21.77	%			551,698				672,096
New York			35,812				267,685				14.61	%			26.01	%			303,497				190,890
San Francisco			13,299				187,524				57.87	%			101.67	%			200,823				395,688
Washington, DC			23,633				370,020				2.78	%			3.69	%			393,653				272,748
Total / Weighted Average			73,108				1,376,563				16.39	%			26.06	%			1,449,671				1,531,422

 

(1)	Total vacant square feet of properties placed in service in Q1 2016 consist of 12,875 square feet at 601 Massachusetts Avenue.

(2)	Second generation leases are defined as leases for space that had previously been leased by the Company. Of the 1,376,563 square feet of second generation leases that commenced in Q1 2016, leases for 1,242,079 square feet were signed in prior periods.

(3)	Total transaction costs include tenant improvements and leasing commissions and exclude free rent concessions.

(4)

Represents the increase/(decrease) in gross rent (base rent plus expense reimbursements) on the new vs. expired leases on the 1,189,205 square feet of second generation leases that had been occupied within the prior 12 months; excludes leases that management considers temporary because the tenant is not expected to occupy the space on a long-term basis (e.g., the tenant is occupying “swing space”).

(5)

Represents the increase/(decrease) in net rent (gross rent less operating expenses) on the new vs. expired leases on the 1,189,205 square feet of second generation leases that had been occupied within the prior 12 months; excludes leases that management considers temporary because the tenant is not expected to occupy the space on a long-term basis (e.g., the tenant is occupying “swing space”).

(6)	Represents leases for which rental revenue recognition has commenced in accordance with GAAP during the quarter.

(7)

Represents leases executed in the quarter for which the Company either (1) commenced rental revenue recognition in such quarter or (2) will commence rental revenue recognition in subsequent quarters, in accordance with GAAP, and includes leases at properties currently under development. The total square feet of leases executed in the current quarter and recognized in the current quarter is 140,243.

 

42

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Boston Properties, Inc.

First Quarter 2016

 

HISTORICALLY GENERATED CAPITAL EXPENDITURES,

TENANT IMPROVEMENT COSTS and LEASING COMMISSIONS

 

(dollars in thousands, except PSF amounts)

Historical Capital Expenditures

 

 

		Q1 2016				2015				2014				2013
Recurring capital expenditures		$	21,585			$	52,471			$	42,610			$	51,026
Planned non-recurring capital expenditures associated with acquisition properties			87				6,069				13,087				20,506
Repositioning capital expenditures (1)			13,015				9,820				—				—
Hotel improvements, equipment upgrades and replacements			360				2,430				2,894				2,070
		$	35,047			$	70,790			$	58,591			$	73,602

2nd Generation Tenant Improvements and Leasing Commissions

 

 

		Q1 2016				2015				2014				2013
Square feet			1,376,563				5,204,123				3,936,046				3,610,088
Tenant improvements and lease commissions PSF		$	48.87			$	45.40			$	29.60			$	36.99

 

(1)	Includes non-recurring capital expenditures related to the repositioning activities designed to enhance revenue potential at 1330 Connecticut Avenue and Metropolitan Square in Washington, DC, Prudential Center Retail Expansion in Boston, MA, and 399 Park Avenue in New York City.

 

43

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Boston Properties, Inc.

First Quarter 2016

 

ACQUISITIONS/DISPOSITIONS

 

as of March 31, 2016

ACQUISITIONS

 

For the period from January 1, 2016 through March 31, 2016

 

Anticipated

Initial

Future

Total

Percentage

Property

Date Acquired

Square Feet

Investment

Investment

Investment

Leased

Not Applicable

Total Acquisitions

—

$

—

$

—

$

—

—

DISPOSITIONS

 

For the period from January 1, 2016 through March 31, 2016

 

										Gross				Net Cash
Property		Date Disposed				Square Feet				Sales Price				Proceeds				Book Gain
415 Main Street			February 1, 2016				231,028			$	105,360,000			$	104,868,000			$	60,803,000
Total Dispositions							231,028			$	105,360,000			$	104,868,000			$	60,803,000	(1)

 

(1)	Excludes approximately $6,820,000 of gain on sale of real estate recognized during the three months ended March 31, 2016 related to a previously deferred gain amount from a 2014 sale of real estate.

 

44

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Boston Properties, Inc.

First Quarter 2016

 

VALUE CREATION PIPELINE—CONSTRUCTION IN PROGRESS (1)

 

as of March 31, 2016

 

						Estimated																Estimated				Total				Amount				Estimated								Percentage
Construction		Initial				Stabilization				# of								Investment				Total				Construction				Drawn at				Future Equity				Percentage				Placed
Properties		Occupancy				Date		Location		Buildings				Square feet				to Date (2)				Investment (2)				Loan (2)				3/31/2016 (2)				Requirement (2)				Leased (3)				in Service (4)
Office and Retail
804 Carnegie Center			Q2 2016			Q2 2016		Princeton, NJ			1				130,000			$	44,643,570			$	47,000,000			$	—			$	—			$	2,356,430				100	%			—
1265 Main Street (50% Ownership)			Q4 2016			Q4 2016		Waltham, MA			1				115,000				16,955,213				26,090,000												9,134,787				100	%			—
Prudential Center Retail Expansion			Q1 2016			Q1 2017		Boston, MA			—				15,000				9,252,318				10,760,000				—				—				1,507,682				100	%			12	%
601 Massachusetts Avenue			Q3 2015			Q1 2017		Washington, DC			1				478,000				301,453,738				339,760,000				—				—				38,306,262				90	%			84	%
10 CityPoint			Q3 2016			Q2 2017		Waltham, MA			1				245,000				78,045,806				100,400,000				—				—				22,354,194				96	%			7	%
888 Boylston Street			Q3 2016			Q4 2017		Boston, MA			1				425,000				187,126,931				271,500,000				—				—				84,373,069				69	%			—
Salesforce Tower (95% ownership)			Q2 2017			Q1 2019		San Francisco, CA			1				1,400,000				488,457,540				1,073,500,000				—				—				585,042,460				59	%			—
The Hub on Causeway (50% ownership)			Q4 2018			Q4 2019		Boston, MA			1				385,000				13,961,018				141,870,000				—				—				127,908,982				33	%			—
Dock72 (50% ownership)			Q2 2018			Q1 2020		Brooklyn, NY			1				670,000				14,583,565				204,900,000				—				—				190,316,435				33	%			—
Total Office Properties under Construction											8				3,863,000			$	1,154,479,699			$	2,215,780,000			$	—			$	—			$	1,061,300,301				62	%			23	%
Residential
Cambridge Residential / 88 Ames (274 units)			Q1 2018			Q1 2019		Cambridge, MA			1				164,000			$	12,117,034			$	140,170,000			$	—			$	—			$	128,052,966				N/A				—
Reston Signature Site (508 units)			Q4 2017			Q2 2020		Reston, VA			1				490,000				32,584,854				217,232,000				—				—				184,647,146				N/A				—
Reston Signature Site - Retail											—				24,600				—				—				—				—				—				81	%			—
Total Residential Properties under Construction											2				678,600			$	44,701,888			$	357,402,000			$	—			$	—			$	312,700,112				59	%(5)			—
Redevelopment Properties
Reservoir Place North			Q1 2017			Q3 2017		Waltham, MA			1				73,000			$	13,410,725			$	24,510,000			$	—			$	—			$	11,099,275				—				—
Total Redevelopment Properties under Construction											1				73,000			$	13,410,725			$	24,510,000			$	—			$	—			$	11,099,275				—				—
Total Properties Under Construction and Redevelopment											11				4,614,600			$	1,212,592,312			$	2,597,692,000			$	—			$	—			$	1,385,099,688				61	%(5)			21	%

PROJECTS FULLY PLACED IN-SERVICE DURING 2016

 

 

Initial

Estimated

Estimated

Total

Amount

Estimated

In-Service

Stabilization

# of

Investment

Total

Construction

Drawn at

Future Equity

Percentage

Date

Date

Location

Buildings

Square feet

to Date (2)

Investment (2)

Loan (2)

3/31/2016 (2)

Requirement (2)

Leased (3)

N/A

Total Projects placed In-Service

—

—

$

—

$

—

$

—

$

—

$

—

—

IN-SERVICE PROPERTIES HELD FOR REDEVELOPMENT

 

 

																				Encumbered		Central Business
				# of				Existing								Annualized Revenue				with secured		District (CBD) or		Incremental Future
		Sub Market		Buildings				Square Feet				Leased %				Per Leased SF (6)				debt (Y/N)		Suburban (S)		Square Footage (7)
North First Business Park		San Jose, CA			5				190,636				100.0	%		$	17.31			N		S			1,359,364
Total Properties held for Redevelopment					5				190,636				100.0	%		$	17.31								1,359,364

 

(1)	A project is classified as Construction in Progress when construction or supply contracts have been signed, physical improvements have commenced or a lease has been signed.

(2)	Represents the Company’s share. Includes income (loss) and interest carry.

(3)	Represents percentage leased as of April 22, 2016, including leases with future commencement dates and excluding residential space.

(4)	Represents the portion of the project which no longer qualifies for capitalization of interest in accordance with GAAP.

(5)	Includes approximately 9,000 square feet of retail space from Cambridge Residential / 88 Ames residential development which is 0% leased.

(6)	For disclosures relating to our definition of Annualized Revenue, see page 49.

(7)	Incremental Future Square Footage is included in Approximate Developable Square Feet of Value Creation Pipeline—Owned Land Parcels on page 46.

 

45

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Boston Properties, Inc.

First Quarter 2016

 

VALUE CREATION PIPELINE

 

as of March 31, 2016

Owned Land Parcels

 

 

						Approximate
						Developable
Location		Acreage				Square Feet
San Jose, CA (1)			28.0				2,199,000
Reston, VA			33.8				1,160,000
Waltham, MA			11.3				805,000
Springfield, VA			17.8				800,000
Dulles, VA			76.6				760,000
Rockville, MD			58.1				759,000
Gaithersburg, MD			12.5				240,000
Washington, DC (50% ownership)			1.3				520,000
Marlborough, MA			50.0				400,000
Annapolis, MD (50% ownership)			20.0				300,000
Andover, MA			10.0				110,000
			319.4				8,053,000

Land Purchase Options

 

 

						Approximate
						Developable
Location		Acreage				Square Feet
Princeton, NJ			134.1				1,650,000
Boston, MA (50% ownership)			—				1,415,000
Cambridge, MA (2)			—				940,000
Brooklyn, NY (50% ownership)			1.3				600,000
San Francisco, CA			2.3				TBD
			137.7				4,605,000

 

(1)	Excludes the existing square footage related to in-service properties being held for future re-development included on page 45.

(2)	Includes access to purchase 540,000 square feet of development rights for office and 400,000 square feet of residential rights.

 

46

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Boston Properties, Inc.

First Quarter 2016

 

DEFINITIONS

 

This section contains an explanation of certain non-GAAP financial measures we provide in other sections of this document, as well as the reasons why management believes these measures provide useful information to investors about the Company’s financial condition or results of operations. Additional detail can be found in the Company’s most recent annual report on Form 10-K and quarterly report on Form 10-Q, as well as other documents filed with or furnished to the SEC from time to time.

Funds from Operations

Pursuant to the revised definition of Funds from Operations adopted by the Board of Governors of the National Association of Real Estate Investment Trusts (“NAREIT”), we calculate Funds from Operations, or “FFO,” by adjusting net income (loss) attributable to Boston Properties, Inc. common shareholders (computed in accordance with GAAP, including non-recurring items) 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 driven by a measurable decrease in the fair value of depreciable real estate held by the unconsolidated joint ventures, real estate-related depreciation and amortization, and our share of income (loss) from unconsolidated partnerships and joint ventures. FFO is a non-GAAP financial measure, but we believe the presentation of FFO, combined with the presentation of required GAAP financial measures, has improved the understanding of operating results of REITs among the investing public and has helped make comparisons of REIT operating results more meaningful. Management generally considers FFO and FFO per share 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 and FFO per share 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.

FFO should not be considered as a substitute to net income attributable to Boston Properties, Inc. common shareholders (determined in accordance with GAAP). FFO does not represent cash generated from operating activities determined in accordance with GAAP, and is not a measure of liquidity or an indicator of our ability to make cash distributions. We believe that to more comprehensively understand our operating performance, FFO should be considered along with our reported net income attributable to Boston Properties, Inc. and our cash flows in accordance with GAAP, as presented in our consolidated financial statements.

Funds Available for Distribution (FAD)

In addition to FFO, we present Funds Available for Distribution (FAD) by (1) adding to FFO lease transaction costs that qualify as rent inducements, non-real estate depreciation, non-cash losses from early extinguishments of debt, stock-based compensation, partners’ share of consolidated and unconsolidated joint venture 2nd generation tenant improvement and leasing commissions (included in the period in which the lease commences) and unearned portion of capitalized fees, (2) eliminating the effects of straight-line rent, straight-line ground rent expense adjustment, fair value interest adjustment and fair value lease revenue, and (3) subtracting: recurring capital expenditures; hotel improvements, equipment upgrades and replacements; 2nd generation tenant improvement and leasing commissions (included in the period in which the lease commences); and non-cash termination income adjustment (fair value lease amounts). Although our FAD may not be comparable to that of other REITs and real estate companies, we believe it provides a meaningful indicator of our ability to fund cash needs and to make cash distributions to equity owners. In addition, we believe that to further understand our liquidity, FAD should be compared with our cash flows determined in accordance with GAAP, as presented in our consolidated financial statements. FAD does not represent cash generated from operating activities determined in accordance with GAAP, and FAD should not be considered as an alternative to net income (determined in accordance with GAAP) as an indication of our performance, as an alternative to net cash flows from operating activities (determined in accordance with GAAP), or as a measure of our liquidity.

Total Consolidated Debt to Total Consolidated Market Capitalization Ratio

Total consolidated debt to total consolidated market capitalization ratio, defined as total consolidated debt as a percentage of the market value of our outstanding equity securities plus our total consolidated debt, is a measure of leverage commonly used by analysts in the REIT sector. Total consolidated market capitalization is the sum of (A) our total consolidated indebtedness outstanding plus (B) the market value of our outstanding equity securities calculated using the closing price per share of common stock of the Company multiplied by the sum of (1) outstanding shares of common stock of the Company, (2) outstanding common units of limited partnership interest in Boston Properties Limited Partnership (excluding common units held by the Company), (3) common units issuable upon conversion of all outstanding LTIP Units, assuming all conditions have been met for the conversion of the LTIP Units, (4) 2012 OPP Units that were issued in the form of LTIP Units and earned as of February 6, 2015 and (5) 2013 MYLTIP Units that were issued in the form of LTIP Units and earned as of February 4, 2016 plus (C) outstanding Series Four Preferred Units of partnership interest in Boston Properties Limited Partnership multiplied by the fixed liquidation preference of $50 per unit (all of which had been redeemed as of June 25, 2015) plus (D) outstanding shares of 5.25% Series B Cumulative Redeemable Preferred Stock multiplied by the fixed liquidation preference of $2,500 per share. The calculation of total 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, and therefore 2014, 2015 and 2016 MYLTIP Units are not included. We are presenting this ratio 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. Investors should understand that our total consolidated debt to total consolidated market capitalization ratio is in part a function of the market price of the common stock of the Company, and as such will fluctuate with changes in such price and does 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 ours, whose assets are primarily income-producing real estate, the total consolidated debt to total consolidated market capitalization ratio may provide investors with an alternate indication of leverage, so long as it is 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.

Total Adjusted Debt to Total Adjusted Market Capitalization Ratio

Total adjusted debt to total adjusted market capitalization ratio, defined as total adjusted debt (which equals our total consolidated debt, plus our share of unconsolidated joint venture debt, minus our joint venture partners’ share of consolidated debt) as a percentage of the market value of our outstanding equity securities plus our total adjusted debt, is an alternative measure of leverage used by some analysts in the REIT sector. Total adjusted market capitalization is the sum of (A) our total adjusted debt plus (B) the market value of our outstanding equity securities calculated using the closing price per share of common stock of the Company multiplied by the sum of (1) outstanding shares of common stock of the Company, (2) outstanding common units of limited partnership interest in Boston Properties Limited Partnership (excluding common units held by the Company), (3) common units issuable upon conversion of all outstanding LTIP Units, assuming all conditions have been met for the conversion of the LTIP Units and (4) 2012 OPP Units that were issued in the form of LTIP Units and earned as of February 6, 2015, (5) 2013 MYLTIP Units that were issued in the form of LTIP Units and earned as of February 4, 2016 plus (C) outstanding Series Four Preferred Units of partnership interest in Boston Properties Limited Partnership multiplied by the fixed liquidation preference of $50 per unit plus (D) outstanding shares of 5.25% Series B Cumulative Redeemable Preferred Stock multiplied by the fixed liquidation preference of $2,500 per share. The calculation of total adjusted 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.

We present this ratio because, following the consolidation of 767 Venture, LLC (the entity that owns 767 Fifth Avenue (The GM Building)) effective June 1, 2013, our consolidated debt increased significantly compared to prior periods even though our economic interest in 767 Venture, LLC remained substantially unchanged at 60%. Similarly, after selling an interest in 601 Lexington Avenue, our economic interest in the property decreased to 55% even though we continue to consolidate the related mortgage indebtedness. Accordingly, we believe the presentation of total adjusted debt may provide investors with a more complete picture of our share of consolidated and unconsolidated debt. In addition, in light of the difference between our total consolidated debt and our total adjusted debt, we believe that also presenting our total adjusted debt to total adjusted market capitalization may provide investors with a more complete picture of our leverage in relation to the overall size of our company. Investors should understand that our total adjusted debt to total adjusted market capitalization ratio is in part a function of the market price of the common stock of the Company, and as such will fluctuate with changes in such price and does not necessarily reflect our capacity to incur additional debt to finance our activities or our ability to manage our existing debt obligations. The total adjusted debt to total adjusted market capitalization ratio should be 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.

 

47

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Boston Properties, Inc.

First Quarter 2016

 

DEFINITIONS

 

Consolidated Net Operating Income (NOI)

Consolidated NOI is a non-GAAP financial measure equal to net income attributable to Boston Properties, Inc. common shareholders, the most directly comparable GAAP financial measure, plus preferred dividends, net income attributable to noncontrolling interests, plus corporate general and administrative expense, transaction costs, depreciation and amortization and interest expense, less development and management services income, income from unconsolidated joint ventures, interest and other income and gains from investments in securities. In some cases we also present Consolidated NOI on a cash basis, which is Consolidated NOI after eliminating the effects of straight-lining of rent and fair value lease revenue and lease transaction costs which qualify as inducements in accordance with GAAP. We use Consolidated NOI internally as a performance measure and believe Consolidated NOI provides useful information to investors regarding our financial condition and results of operations because it reflects only those income and expense items that are incurred at the property level. Therefore, we believe Consolidated NOI is a useful measure for evaluating the operating performance of our real estate assets. Our management also uses Consolidated NOI to evaluate regional property level performance and to make decisions about resource allocations. Further, we believe Consolidated NOI is useful to investors as a performance measure because, when compared across periods, Consolidated NOI 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. Consolidated NOI excludes certain components from net income in order to provide results that are more closely related to a property’s results of operations. 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. In addition, depreciation and amortization, because of historical cost accounting and useful life estimates, may distort operating performance at the property level. Consolidated NOI presented by us may not be comparable to Consolidated NOI reported by other REITs that define Consolidated NOI differently. We believe that in order to facilitate a clear understanding of our operating results, Consolidated NOI should be examined in conjunction with net income as presented in our consolidated financial statements. Consolidated NOI should not be considered as an alternative to net income as an indication of our performance or to cash flows as a measure of our liquidity or ability to make distributions.

Combined Net Operating Income (NOI)

Combined NOI is a non-GAAP financial measure equal to Consolidated NOI plus our share of net operating income from unconsolidated joint ventures. In some cases we also present Combined NOI on a cash basis, which is Combined NOI after eliminating the effects of straight-lining of rent and fair value lease revenue and lease transaction costs which qualify as inducements in accordance with GAAP. In addition to Consolidated NOI, we use Combined NOI internally as a performance measure and believe Combined NOI provides useful information to investors regarding our financial condition and results of operations because it includes the impact of our unconsolidated joint ventures, which have become significant. Therefore, we believe Combined NOI is a useful measure for evaluating the operating performance of all of our real estate assets, including those held by our unconsolidated joint ventures. Our management also uses Combined NOI to evaluate regional property level performance and to make decisions about resource allocations. Further, like Consolidated NOI, we believe Combined NOI is useful to investors as a performance measure because, when compared across periods, Combined NOI 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. Combined NOI presented by us may not be comparable to Combined NOI reported by other REITs that define Combined NOI differently. We believe that in order to facilitate a clear understanding of our operating results, Combined NOI should be examined in conjunction with net income as presented in our consolidated financial statements. Combined NOI should not be considered as an alternative to net income as an indication of our performance or to cash flows as a measure of our liquidity or ability to make distributions.

Adjusted Combined Net Operating Income (NOI)

Adjusted Combined NOI is a non-GAAP financial measure equal to Combined NOI less our partners’ share, based on ownership interest, of net operating income from consolidated joint ventures. In some cases we also present Adjusted Combined NOI on a cash basis, which is Adjusted Combined NOI after eliminating the effects of straight-lining of rent and fair value lease revenue and lease transaction costs which qualify as inducements in accordance with GAAP. In addition to Consolidated NOI and Combined NOI, we use Adjusted Combined NOI internally as a performance measure and believe Adjusted Combined NOI provides useful information to investors regarding our financial condition and results of operations because it does not include our partners’ share of consolidated joint ventures, which have become significant. Therefore, we believe Adjusted Combined NOI is a useful measure for evaluating the operating performance of our share of all of our real estate assets, including those held by our consolidated and unconsolidated joint ventures. Our management also uses Adjusted Combined NOI to evaluate regional property level performance and to make decisions about resource allocations. Further, like Consolidated NOI and Combined NOI, we believe Adjusted Combined NOI is useful to investors as a performance measure because, when compared across periods, Adjusted Combined NOI 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. Adjusted Combined NOI presented by us may not be comparable to Adjusted Combined NOI reported by other REITs that define Adjusted Combined NOI differently. We believe that in order to facilitate a clear understanding of our operating results, Adjusted Combined NOI should be examined in conjunction with net income as presented in our consolidated financial statements. Adjusted Combined NOI should not be considered as an alternative to net income as an indication of our performance or to cash flows as a measure of our liquidity or ability to make distributions.

In-Service Properties

We treat a property as being “in-service” upon the earlier of (i) lease-up and completion of tenant improvements or (ii) one year after cessation of major construction activity under GAAP. The determination as to when a property should be treated as “in-service” involves a degree of judgment and is made by management based on the relevant facts and circumstances of the particular property. For portfolio operating and occupancy statistics we specify a single date for treating a property as “in-service,” which is generally later than the date the property is partially placed in-service for GAAP. Under GAAP a property may be placed in-service in stages as construction is completed and the property is held available for occupancy. In accordance with GAAP, when a portion of a property has been substantially completed and occupied or held available for occupancy, we cease capitalization on that portion, though we may not treat the property as being “in-service,” and continue to capitalize only those costs associated with the portion still under construction. In-service properties include properties held by our unconsolidated joint ventures. In-service Office properties exclude hotel and residential properties.

Same Properties

In our analysis of NOI, particularly to make comparisons of NOI 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 through the end of the latest period presented as “Same Properties.” “Same Properties” therefore exclude properties placed in-service, acquired, repositioned, 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. Accordingly, it takes at least one year and one quarter after a property is acquired or treated as “in-service” for that property to be included in “Same Properties.” Pages 22-24 indicate by footnote the “In-Service Properties” which are not included in “Same Properties.” “Same Properties NOI” includes our share of net operating income from unconsolidated joint ventures and 100% of consolidated joint ventures.

 

48

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Boston Properties, Inc.

First Quarter 2016

 

DEFINITIONS

 

Annualized Revenue

Annualized Revenue is defined as rental obligations at the end of the reporting period, including contractual base rents, percentage rent and reimbursements from tenants under existing leases, multiplied by twelve. These annualized amounts exclude rent abatements and non-recurring items.

Future Annualized Revenue

Future Annualized Revenue is defined as rental obligations including the sum of (i) contractual base rents at lease expiration and (ii) percentage rent and reimbursements from tenants at the end of the current reporting period, multiplied by twelve. These annualized amounts exclude rent abatements and non-recurring items.

Average Monthly Rental Rates

Average Rental Rates are calculated by the Company as rental revenue in accordance with GAAP, divided by the weighted monthly average number of occupied units.

Average Economic Occupancy

Average Economic Occupancy is defined as total possible revenue less vacancy loss as a percentage of total possible revenue. 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

Market Rents used by the Company in calculating Average Economic Occupancy are based on the current market rates set by the managers of the Company’s residential properties based on their experience in renting their residential property’s units and publicly available market data. Trends in market rents for a region as reported by others could vary. Market Rents for a period are based on the average Market Rents during that period and do not reflect any impact for cash concessions.

Average Physical Occupancy

Average Physical Occupancy is defined as the average number of occupied units divided by the total number of units, expressed as a percentage.

 

49

Exhibt 99.2

 

 

800 Boylston Street

Boston, MA 02199

AT THE COMPANY

Michael LaBelle

Executive Vice President,

Chief Financial Officer and Treasurer

(617) 236-3352

Arista Joyner

Investor Relations Manager

(617) 236-3343

BOSTON PROPERTIES ANNOUNCES

FIRST QUARTER 2016 RESULTS

Reports diluted FFO per share of $1.63                    Reports diluted EPS of $1.18

BOSTON, MA, April 26, 2016—Boston Properties, Inc. (NYSE: BXP), a real estate investment trust, reported results today for the first quarter ended March 31, 2016.

Funds from Operations (FFO) for the quarter ended March 31, 2016 were $250.7 million, or $1.63 per share basic and $1.63 per share diluted. This compares to FFO for the quarter ended March 31, 2015 of $200.4 million, or $1.31 per share basic and $1.30 per share diluted. FFO for the quarter ended March 31, 2016 includes lease termination income from a tenant in New York City totaling approximately $45.0 million, or $0.26 per share basic and $0.26 per share on a diluted basis. The weighted-average number of basic and diluted shares outstanding totaled approximately 153,626,000 and 153,917,000, respectively, for the quarter ended March 31, 2016 and 153,230,000 and 153,873,000, respectively, for the quarter ended March 31, 2015.

The Company’s reported FFO of $1.63 per share diluted was greater than the guidance previously provided of $1.59-$1.61 per share diluted primarily due to better than expected portfolio operations of $0.02 per share and development and management services income of $0.01 per share.

Net income available to common shareholders was $181.7 million for the quarter ended March 31, 2016, compared to $171.2 million for the quarter ended March 31, 2015. Net income available to common

---

shareholders per share (EPS) for the quarter ended March 31, 2016 was $1.18 basic and $1.18 on a diluted basis. This compares to EPS for the quarter ended March 31, 2015 of $1.12 basic and $1.11 on a diluted basis. Net income available to common shareholders for the quarter ended March 31, 2016 includes gains on sales of real estate aggregating approximately $67.6 million, or $0.39 per share basic and $0.39 per share on a diluted basis, compared to $95.1 million, or $0.56 per share basic and $0.55 per share on a diluted basis, for the quarter ended March 31, 2015.

The reported results are unaudited and there can be no assurance that these reported results will not vary from the final information for the quarter ended March 31, 2016. In the opinion of management, all adjustments considered necessary for a fair presentation of these reported results have been made.

As of March 31, 2016, the Company’s portfolio consisted of 167 properties aggregating approximately 46.3 million square feet, including eleven properties under construction/redevelopment totaling approximately 4.6 million square feet. The overall percentage of leased space for the 153 properties in service (excluding the Company’s two residential properties and hotel) as of March 31, 2016 was 91.0%.

Significant events during the first quarter included:

 

•

On January 4, 2016 and January 6, 2016, 767 Fifth Partners LLC, the consolidated entity in which the Company has a 60% interest and owns 767 Fifth Avenue (the General Motors Building) in New York City, entered into two forward-starting interest rate swap contracts that fix the 10-year swap rate on notional amounts aggregating $50.0 million. 767 Fifth Partners LLC has entered into forward-starting interest rate swap contracts that fix the 10-year swap rate at a weighted-average rate of approximately 2.619% per annum on notional amounts aggregating $450.0 million in advance of a financing with a target commencement date in June 2017 and maturity in June 2027.

 

•

On January 20, 2016, the Company’s Operating Partnership completed a public offering of $1.0 billion in aggregate principal amount of its 3.650% senior unsecured notes due 2026. The notes were priced at 99.708% of the principal amount to yield an effective rate (including financing fees) of 3.766% to maturity. The notes will mature on February 1, 2026, unless earlier redeemed. The aggregate net proceeds from the offering were approximately $988.9 million after deducting underwriting discounts and transaction expenses.

 

•

On January 25, 2016, the Company’s Compensation Committee approved the 2016 Multi-Year, Long-Term Incentive Program (the “2016 MYLTIP”) as a performance-based component of the Company’s overall compensation program. Under the Financial Accounting Standards Board’s Accounting Standards Codification (“ASC”) 718 “Compensation—Stock Compensation,” the 2016 MYLTIP has an aggregate value of approximately $17.3 million, which will generally be amortized into earnings over the four-year plan period under the graded vesting method.

 

•

On February 1, 2016, the Company completed the sale of its 415 Main Street property located in Cambridge, Massachusetts to the tenant for a gross sale price of approximately $105.4 million. Net

---

cash proceeds totaled approximately $104.9 million, resulting in a gain on sale of real estate totaling approximately $60.8 million. As part of its lease signed on July 14, 2004, the tenant was granted a fixed price option to purchase the building at the beginning of the 11th lease year, which option was exercised by the tenant on October 22, 2014. 415 Main Street is an office property with approximately 231,000 net rentable square feet.

 

•

On February 3, 2016, the Company entered into a lease termination agreement with a tenant for an approximately 85,000 square foot lease at its 250 West 55th Street property located in New York City. The lease was scheduled to expire on February 28, 2035. In consideration for the termination of the lease, the tenant paid the Company approximately $45.0 million, which was recognized as termination income during the three months ended March 31, 2016.

Transactions completed subsequent to March 31, 2016:

 

•

On April 4, 2016, a joint venture in which the Company has a 50% interest extended the loan collateralized by its Annapolis Junction Building Seven property. At the time of the extension, the outstanding balance of the construction loan totaled approximately $21.6 million and was scheduled to mature on April 4, 2016. The extended loan has a total commitment amount of $22.0 million, bears interest at a variable rate equal to LIBOR plus 1.65% per annum and matures on April 4, 2017, with one, one-year extension option, subject to certain conditions. Annapolis Junction Building Seven is a Class A office property with approximately 127,000 net rentable square feet located in Annapolis, Maryland.

 

•

On April 11, 2016, the Company used available cash to repay the mortgage loan collateralized by its Fountain Square property located in Reston, Virginia totaling approximately $211.3 million. The mortgage loan bore interest at a fixed rate of 5.71% per annum and was scheduled to mature on October 11, 2016. There was no prepayment penalty.

 

•

On April 11, 2016, a joint venture in which the Company has a 50% interest received a Notice of Event of Default from the lender for the loan collateralized by its Annapolis Junction Building One property. The Event of Default relates to the loan to value ratio not being in compliance with the loan agreement. The joint venture is currently in discussions with the lender regarding the Event of Default, although there can be no assurance as to the outcome of those discussions. The loan has an outstanding balance of approximately $40.0 million, is non-recourse to the Company, bears interest at a variable rate equal to LIBOR plus 1.75% per annum and has a stated maturity date of March 31,

---

2018, with one, three-year extension option, subject to certain conditions. Annapolis Junction Building One is a Class A office property with approximately 118,000 net rentable square feet located in Annapolis, Maryland.

 

•

On April 22, 2016, the Company acquired 3625-35 Peterson Way located in Santa Clara, California for a purchase price of approximately $78.0 million in cash. 3625-35 Peterson Way is an approximately 218,000 net rentable square foot office property. The property is 100% leased to a single tenant through March 2021. Upon the lease expiration, the Company intends to develop the site into a Class A office campus containing an aggregate of approximately 632,000 net rentable square feet.

EPS and FFO per Share Guidance:

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

As shown below, the Company has updated its guidance for FFO per share (diluted) for full year 2016 to $5.85 - $5.95 per share from $5.78 - $5.93 per share. This is an increase of $0.05 per share at the mid-point of the Company’s guidance consisting of $0.02 per share from better than projected portfolio operations, $0.02 per share from the acquisition of Peterson Way in Santa Clara, California and $0.01 per share from better than projected development and management services income.

 

		Second Quarter 2016								Full Year 2016
		Low				High				Low				High
Projected EPS (diluted)		$	0.54			$	0.56			$	3.00			$	3.10
Add:
Projected Company Share of Real Estate Depreciation and Amortization			0.82				0.82				3.24				3.24
Less:
Projected Company Share of Gains on Sales of Real Estate			—				—				0.39				0.39
Projected FFO per Share (diluted)		$	1.36			$	1.38			$	5.85			$	5.95

Boston Properties will host a conference call on Wednesday, April 27, 2016 at 10:00 AM Eastern Time, open to the general public, to discuss the first quarter 2016 results, the 2016 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) 706-4503 (Domestic) or (281) 913-8731 (International) and entering

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the passcode 23623258. A replay of the conference call will be available through May 13, 2016, by dialing (855) 859-2056 (Domestic) or (404) 537-3406 (International) and entering the passcode 23623258. 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 2016 “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 space, five retail properties, four residential 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 four markets—Boston, New York, San Francisco and Washington, DC.

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 Company’s 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 uncertainties of investing in new markets, 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, national and international 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 2016, whether as a result of new information, future events or otherwise.

Financial tables follow.

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BOSTON PROPERTIES, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited )

 

		March 31, 2016				December 31, 2015
		(in thousands, except for share and par value amounts)
ASSETS
Real estate, at cost		$	18,424,542			$	18,465,405
Construction in progress			857,578				763,935
Land held for future development			256,952				252,195
Less: accumulated depreciation			(3,969,648	)			(3,925,894	)
Total real estate			15,569,424				15,555,641
Cash and cash equivalents			1,605,678				723,718
Cash held in escrows			71,349				73,790
Investments in securities			21,077				20,380
Tenant and other receivables (net of allowance for doubtful accounts of $1,151 and $1,197, respectively)			73,759				97,865
Accrued rental income (net of allowance of $1,612 and $2,775 respectively)			767,864				754,883
Deferred charges, net			693,976				704,867
Prepaid expenses and other assets			136,799				185,118
Investments in unconsolidated joint ventures			235,904				235,224
Total assets		$	19,175,830			$	18,351,486
LIABILITIES AND EQUITY
Liabilities:
Mortgage notes payable, net		$	3,416,622			$	3,435,242
Unsecured senior notes, net			6,255,602				5,264,819
Unsecured line of credit			—				—
Mezzanine notes payable			308,142				308,482
Outside members’ notes payable			180,000				180,000
Accounts payable and accrued expenses			252,727				274,709
Dividends and distributions payable			113,079				327,320
Accrued interest payable			221,578				190,386
Other liabilities			498,290				483,601
Total liabilities			11,246,040				10,464,559
Commitments and contingencies			—				—
Equity:
Stockholders’ equity attributable to Boston Properties, Inc.:
Excess stock, $0.01 par value, 150,000,000 shares authorized, none issued or outstanding			—				—
Preferred stock, $0.01 par value, 50,000,000 shares authorized; 5.25% Series B cumulative redeemable preferred stock, $0.01 par value, liquidation preference $2,500 per share, 92,000 shares authorized, 80,000 shares issued and outstanding at March 31, 2016 and December 31, 2015			200,000				200,000
Common stock, $0.01 par value, 250,000,000 shares authorized, 153,683,866 and 153,658,866 issued and 153,604,966 and 153,579,966 outstanding at March 31, 2016 and December 31, 2015, respectively			1,536				1,536
Additional paid-in capital			6,306,723				6,305,687
Dividends in excess of earnings			(699,048	)			(780,952	)
Treasury common stock at cost, 78,900 shares at March 31, 2016 and December 31, 2015			(2,722	)			(2,722	)
Accumulated other comprehensive loss			(56,706	)			(14,114	)
Total stockholders’ equity attributable to Boston Properties, Inc.			5,749,783				5,709,435
Noncontrolling interests:
Common units of the Operating Partnership			616,095				603,092
Property partnerships			1,563,912				1,574,400
Total equity			7,929,790				7,886,927
Total liabilities and equity		$	19,175,830			$	18,351,486

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BOSTON PROPERTIES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

		Three months ended March 31,
		2016				2015
		(in thousands, except for per share amounts)
Revenue
Rental
Base rent		$	536,128			$	490,682
Recoveries from tenants			89,586				88,593
Parking and other			24,825				24,788
Total rental revenue			650,539				604,063
Hotel revenue			8,757				9,085
Development and management services			6,689				5,328
Total revenue			665,985				618,476
Expenses
Operating
Rental			219,172				221,350
Hotel			7,634				7,576
General and administrative			29,353				28,791
Transaction costs			25				327
Depreciation and amortization			159,448				154,223
Total expenses			415,632				412,267
Operating income			250,353				206,209
Other income (expense)
Income from unconsolidated joint ventures			1,791				14,834
Interest and other income			1,505				1,407
Gains from investments in securities			259				393
Interest expense			(105,309	)			(108,757	)
Income before gains on sales of real estate			148,599				114,086
Gains on sales of real estate			67,623				95,084
Net income			216,222				209,170
Net income attributable to noncontrolling interests
Noncontrolling interests in property partnerships			(10,464	)			(15,208	)
Noncontrolling interest—redeemable preferred units of the Operating Partnership			—				(3	)
Noncontrolling interest—common units of the Operating Partnership			(21,393	)			(20,188	)
Net income attributable to Boston Properties, Inc.			184,365				173,771
Preferred dividends			(2,618	)			(2,589	)
Net income attributable to Boston Properties, Inc. common shareholders		$	181,747			$	171,182
Basic earnings per common share attributable to Boston Properties, Inc. common shareholders:
Net income		$	1.18			$	1.12
Weighted average number of common shares outstanding			153,626				153,230
Diluted earnings per common share attributable to Boston Properties, Inc. common shareholders:
Net income		$	1.18			$	1.11
Weighted average number of common and common equivalent shares outstanding			153,917				153,873

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BOSTON PROPERTIES, INC.

FUNDS FROM OPERATIONS (1)

(Unaudited)

 

		Three months ended March 31,
		2016				2015
		(in thousands, except for per share amounts)
Net income attributable to Boston Properties, Inc. common shareholders		$	181,747			$	171,182
Add:
Preferred dividends			2,618				2,589
Noncontrolling interest—common units of the Operating Partnership			21,393				20,188
Noncontrolling interest—redeemable preferred units of the Operating Partnership			—				3
Noncontrolling interests in property partnerships			10,464				15,208
Less:
Gains on sales of real estate			67,623				95,084
Income before gains on sales of real estate			148,599				114,086
Add:
Real estate depreciation and amortization (2)			163,580				148,754
Less:
Noncontrolling interests in property partnerships’ share of funds from operations			30,019				36,515
Noncontrolling interest—redeemable preferred units of the Operating Partnership			—				3
Preferred dividends			2,618				2,589
Funds from operations (FFO) attributable to the Operating Partnership common unitholders (including Boston Properties, Inc.)			279,542				223,733
Less:
Noncontrolling interest—common units of the Operating Partnership’s share of funds from operations			28,854				23,348
Funds from operations attributable to Boston Properties, Inc. common shareholders		$	250,688			$	200,385
Boston Properties, Inc.’s percentage share of funds from operations—basic			89.68	%			89.56	%
Weighted average shares outstanding—basic			153,626				153,230
FFO per share basic		$	1.63			$	1.31
Weighted average shares outstanding—diluted			153,917				153,873
FFO per share diluted		$	1.63			$	1.30

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(1)

Pursuant to the revised definition of Funds from Operations adopted by the Board of Governors of the National Association of Real Estate Investment Trusts (“NAREIT”), we calculate Funds from Operations, or “FFO,” by adjusting net income (loss) attributable to Boston Properties, Inc. common shareholders (computed in accordance with GAAP, including non-recurring items) 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 driven by a measurable decrease in the fair value of depreciable real estate held by the unconsolidated joint ventures, real estate-related depreciation and amortization, and our share of income (loss) from unconsolidated partnerships and joint ventures. FFO is a non-GAAP financial measure, but we believe the presentation of FFO, combined with the presentation of required GAAP financial measures, has improved the understanding of operating results of REITs among the investing public and has helped make comparisons of REIT operating results more meaningful. Management generally considers FFO and FFO per share 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 and FFO per share 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.

FFO should not be considered as a substitute to net income attributable to Boston Properties, Inc. common shareholders (determined in accordance with GAAP). FFO does not represent cash generated from operating activities determined in accordance with GAAP, and is not a measure of liquidity or an indicator of our ability to make cash distributions. We believe that to more comprehensively understand our operating performance, FFO should be considered along with our reported net income attributable to Boston Properties, Inc. and our cash flows in accordance with GAAP, as presented in our consolidated financial statements.

 

(2)

Real estate depreciation and amortization consists of depreciation and amortization from the Consolidated Statements of Operations of $159,448 and $154,223 and our share of unconsolidated joint venture real estate depreciation and amortization of $4,496 and $(5,132), less corporate-related depreciation and amortization of $364 and $337 for the three months ended March 31, 2016 and 2015, respectively.

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BOSTON PROPERTIES, INC.

PORTFOLIO LEASING PERCENTAGES

 

		% Leased by Location
		March 31, 2016				December 31, 2015
Boston			90.9	%			90.6	%
New York			91.5	%			91.5	%
San Francisco			90.2	%			93.8	%
Washington, DC			90.9	%			91.0	%
Total Portfolio			91.0	%			91.4	%