BXP Boston Properties Inc

 

 

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): February 3, 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 February 3, 2016, Boston Properties, Inc. (the “Company”) issued a press release announcing its financial results for the fourth quarter of 2015. 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 December 31, 2015.
*99.2		Press release dated February 3, 2016.

 

*	Filed herewith.

 

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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: February 3, 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 December 31, 2015.
*99.2		Press release dated February 3, 2016.

 

*	Filed herewith.

Exhibit 99.1

 

Supplemental Operating and Financial Data

for the Quarter Ended December 31, 2015

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Boston Properties, Inc.

Fourth Quarter 2015

 

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
Portfolio Overview			20
In-Service Property Listing			21-23
Top 20 Tenants and Tenant Diversification			24
Office Properties-Lease Expiration Roll Out			25
Office/Technical Properties-Lease Expiration Roll Out			26
Retail Properties—Lease Expiration Roll Out			27
Grand Total—Office, Office/Technical and Retail Properties			28
Boston Lease Expiration Roll Out			29-30
New York Lease Expiration Roll Out			31-32
San Francisco Lease Expiration Roll Out			33-34
Washington, DC Lease Expiration Roll Out			35-36
CBD/Suburban Lease Expiration Roll Out			37-38
Hotel and Residential Performance			39
Same Property Occupancy Analysis			40
Same Property Performance			41
Reconciliation to Same Property Performance and Net Income			42-43
Leasing Activity			44
Capital Expenditures, Tenant Improvements and Leasing Commissions			45
Acquisitions/Dispositions			46
Value Creation Pipeline—Construction in Progress			47
Value Creation Pipeline—Land Parcels and Purchase Options			48
Definitions			49-51

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: South of Market, Reston, VA)

 

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Boston Properties, Inc.

Fourth Quarter 2015

 

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, one hotel, four residential properties (including two properties under construction) and five retail properties. 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 30 individuals averages 31 years of real estate experience and 19 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 senior 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;

 

•

selectively acquiring assets that increase its penetration in these targeted markets;

 

•

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

 

•

exploring joint-venture opportunities with partners who seek to benefit from the Company’s depth of development and management expertise;

 

•

pursuing on a selective basis the sale of properties or interests therein to either take advantage of the demand for the Company’s premier properties or pare from the portfolio properties that we believe have slower future growth potential; and

 

•

continuing to enhance the Company’s balanced capital structure through its access to a variety of capital sources.

Snapshot

(as of December 31, 2015)

 

Corporate Headquarters		Boston, Massachusetts
Markets		Boston, New York, San Francisco and Washington, DC
Fiscal Year-End		December 31
Total Properties (includes unconsolidated joint ventures)		168
Total Square Feet (includes unconsolidated joint ventures)		46.5 million
Common shares outstanding, plus common, preferred and LTIP units (including Outperformance Plan Units) on an as-converted basis (but excluding Multi-Year Long-Term Incentive Program Units)		171.5 million
Dividend—Quarter/Annualized		$0.65/$2.60
Dividend Yield		3.02% (includes special dividend, see page 4)
Total Adjusted Market Capitalization (1)		$30.5 billion
Senior Debt Ratings		Baa2 (Moody’s); BBB+ (Fitch); A- (S&P)

 

(1)	For disclosures relating to our definition of Total Adjusted Market Capitalization, see page 49.

 

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Boston Properties, Inc.

Fourth Quarter 2015

 

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):

 

		Q4 2015				Q3 2015				Q2 2015				Q1 2015				Q4 2014
High Closing Price		$	130.15			$	126.32			$	142.17			$	144.74			$	136.28
Low Closing Price		$	118.62			$	108.65			$	120.83			$	131.26			$	115.10
Average Closing Price		$	124.47			$	119.54			$	131.76			$	139.56			$	126.63
Closing Price, at the end of the quarter		$	127.54			$	118.40			$	121.04			$	140.48			$	128.69
Dividends per share		$	0.65			$	0.65			$	0.65			$	0.65			$	0.65
Special dividends per share		$	1.25			$	—			$	—			$	—			$	4.50
Total dividends		$	1.90			$	0.65			$	0.65			$	0.65			$	5.15
Closing dividend yield—annualized			3.02	% (1)			2.20	%			2.15	%			1.85	%			5.52	% (2)
Closing common shares outstanding, plus preferred shares and common, preferred and LTIP units (including Outperformance Plan Units) on an as-converted basis (but excluding Multi-Year Long-Term Incentive Program Units) (thousands) (3)			171,509				171,509				171,506				171,490				171,064
Closing market value of outstanding shares and units (thousands)		$	22,074,258			$	20,506,666			$	20,959,086			$	24,291,548			$	22,214,860

 

(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)	Includes the special dividend of $4.50 per share paid on January 28, 2015 to shareholders of record as of the close of business on December 31, 2014.

(3)	For additional detail, see page 13.

 

Timing
Quarterly results for the next four quarters will be announced according to the following schedule:
First Quarter, 2016		Tentatively April 26, 2016
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.

Fourth Quarter 2015

 

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.

Fourth Quarter 2015

 

GUIDANCE

 

 

		First Quarter 2016								Full Year 2016
		Low				High				Low				High
Earnings per share (diluted)		$	1.05			$	1.07			$	2.68			$	2.83
Add:
Company share of real estate depreciation and amortization			0.89				0.89				3.45				3.45
Less:
Company share of gains on sales of real estate			0.35				0.35				0.35				0.35
FFO per share (diluted)		$	1.59			$	1.61			$	5.78			$	5.93

ASSUMPTIONS

(dollars in thousands)

 

 

		Full Year 2016
		Low				High
Operating property activity:
In-service portfolio occupancy			90.0	%			92.0	%
Same property net operating income—GAAP basis (change from 2015) (1)			(1.00	%)			1.00	%
Same property net operating income—cash basis (change from 2015) (2)			1.00	%			3.00	%
Non same properties’ incremental contribution over 2015		$	34,000			$	40,000
Straight-line rent and fair value lease revenue (non-cash revenue) (3)		$	35,000			$	50,000
Hotel net operating income		$	13,000			$	15,000
Other income (expense):
Development and management services income		$	20,000			$	24,000
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)

The change in Same Property net operating income—GAAP basis from 2015 to 2016 has been reduced from last quarter by 25 basis points primarily due to a reduction in rental revenue resulting from the termination of a tenant at 250 West 55th Street in New York City. If the Company had not entered into this termination agreement, the change in Same Property net operating income—GAAP basis from 2015 to 2016 would have been an increase of approximately 50 basis points.

(2)	The change in Same Property net operating income-cash basis from 2015 to 2016 has been reduced from last quarter by 50 basis points due primarily to a reduction in cash rental revenue resulting from the termination of a tenant at 250 West 55th Street in New York City.

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

 

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Boston Properties, Inc.

Fourth Quarter 2015

 

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. A description of the non-GAAP financial measures we present and a statement 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 49-51.

 

		Three Months Ended
		31-Dec-15				30-Sep-15				30-Jun-15				31-Mar-15				31-Dec-14
Selected Items:
Revenue		$	624,240			$	629,884			$	618,221			$	618,476			$	613,707
Straight-line rent (1)		$	18,149			$	12,630			$	14,024			$	23,164			$	18,639
Fair value lease revenue (1) (2)		$	4,966			$	5,937			$	6,667			$	7,081			$	12,236
Revenue from residential properties		$	4,106			$	4,111			$	3,811			$	6,854			$	7,195
Company share of funds from operations (FFO) from unconsolidated joint ventures		$	6,205	(3)		$	6,455			$	6,964			$	9,702			$	7,282
Lease termination fees (1) (4)		$	5,605			$	7,760			$	5,419			$	14,086			$	1,117
Ground rent expense (5)		$	3,463			$	3,534			$	3,676			$	4,404			$	4,990
Fair value interest adjustment (1)		$	8,593			$	8,062			$	7,856			$	7,796			$	7,737
Capitalized interest		$	8,298			$	9,100			$	8,850			$	7,965			$	7,667
Capitalized wages		$	4,130			$	4,111			$	3,997			$	3,626			$	3,483
Operating margins [(rental revenue—rental expense)/rental revenue] (6)			66.3	%			65.9	%			66.2	%			65.3	%			66.5	%
Losses from early extinguishments of debt		$	(22,040	)		$	—			$	—			$	—			$	(10,633	)
Income before gains on sales of real estate		$	85,406			$	123,792			$	100,739			$	114,086			$	85,323
Net income attributable to Boston Properties, Inc. common shareholders		$	137,851			$	184,082			$	79,460			$	171,182			$	174,510
FFO attributable to Boston Properties, Inc.		$	197,339			$	217,261			$	208,731			$	200,385			$	193,186
FFO per share—diluted (7)		$	1.28			$	1.41			$	1.36			$	1.30			$	1.26
Net income attributable to Boston Properties, Inc. per share—basic		$	0.90			$	1.20			$	0.52			$	1.12			$	1.14
Net income attributable to Boston Properties, Inc. per share—diluted		$	0.90			$	1.20			$	0.52			$	1.11			$	1.14
Dividends per common share (8)		$	1.90			$	0.65			$	0.65			$	0.65			$	5.15
Funds available for distribution to common shareholders and common unitholders (FAD) (7) (9)		$	136,434			$	140,700			$	145,937			$	147,145			$	162,630
Ratios:
Interest Coverage Ratio (excluding capitalized interest)—cash basis (10)			3.25				3.30				3.21				3.11				2.91
Interest Coverage Ratio (including capitalized interest)—cash basis (10)			3.02				3.06				2.98				2.91				2.74
FFO Payout Ratio (9)			50.78	%			46.10	%			47.79	%			50.00	%			51.59	%
FAD Payout Ratio (9)			81.77	%			79.28	%			76.49	%			75.72	%			68.42	%
		31-Dec-15				30-Sep-15				30-Jun-15				31-Mar-15				31-Dec-14
Balance Sheet Items:
Above-market rents (included within Prepaid Expenses and Other Assets)		$	51,397			$	55,434			$	63,706			$	75,063			$	80,864
Below-market rents (included within Other Liabilities)		$	172,670			$	184,154			$	202,653			$	227,651			$	243,395
Accrued ground rent expense, net (included within Prepaid Expenses and Other Assets and Other Liabilities)		$	38,765			$	42,962			$	41,857			$	40,751			$	56,117
Accrued interest payable on outside members’ notes payable (included within Accrued Interest Payable)		$	119,436			$	111,422			$	103,622			$	96,028			$	88,643
Capitalization:
Common Stock Price @ Quarter End		$	127.54			$	118.40			$	121.04			$	140.48			$	128.69
Equity Value @ Quarter End		$	22,074,258			$	20,506,666			$	20,959,086			$	24,291,548			$	22,214,860
Total Consolidated Debt		$	9,036,513			$	9,729,796			$	9,867,459			$	9,886,696			$	9,906,984
Total Consolidated Market Capitalization		$	31,110,771			$	30,236,462			$	30,826,545			$	34,178,244			$	32,121,844
Total Consolidated Debt/Total Consolidated Market Capitalization (7)			29.05	%			32.18	%			32.01	%			28.93	%			30.84	%
BXP’s Share of Unconsolidated Joint Venture Debt		$	353,386			$	352,923			$	352,882			$	351,977			$	351,500
Less:
Partners’ Share of Consolidated Debt		$	989,165			$	995,008			$	1,168,046			$	1,174,948			$	1,181,797
Total Adjusted Debt		$	8,400,734			$	9,087,711			$	9,052,295			$	9,063,725			$	9,076,687
Total Adjusted Market Capitalization (11)		$	30,474,992			$	29,594,377			$	30,011,381			$	33,355,273			$	31,291,547
Total Adjusted Debt/Total Adjusted Market Capitalization (7) (11)			27.57	%			30.71	%			30.16	%			27.17	%			29.01	%

 

(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 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 $18,102, $18,989, $17,845, $17,867 and $17,218 for the three months ended December 31, 2015, September 30, 2015, June 30, 2015, March 31, 2015 and December 31, 2014, respectively.

(7)	For disclosures related to our definitions, see page 49.

(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. For the three months ended December 31, 2014, dividends per share includes the $4.50 per common share special dividend paid on January 28, 2015 to shareholders of record as of the close of business on December 31, 2014.

(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.

Fourth Quarter 2015

 

CONSOLIDATED BALANCE SHEETS

(unaudited and in thousands)

 

 

		31-Dec-15				30-Sep-15				30-Jun-15				31-Mar-15				31-Dec-14
ASSETS
Real estate		$	18,465,405			$	18,412,086			$	18,207,934			$	18,153,816			$	18,231,978
Construction in progress (1)			763,935				725,601				880,996				797,148				736,311
Land held for future development			252,195				264,598				277,327				271,327				268,114
Less accumulated depreciation			(3,925,894	)			(3,833,277	)			(3,753,926	)			(3,646,853	)			(3,547,659	)
Total real estate			15,555,641				15,569,008				15,612,331				15,575,438				15,688,744
Cash and cash equivalents			723,718				1,387,007				1,342,751				1,064,396				1,763,079
Cash held in escrows (2)			73,790				90,379				252,558				588,218				487,321
Marketable securities			20,380				19,645				20,953				20,736				19,459
Tenant and other receivables, net			97,865				66,446				55,183				47,768				46,595
Accrued rental income, net			754,883				737,145				730,797				713,874				691,999
Deferred charges, net			732,837				749,628				771,419				806,468				831,744
Prepaid expenses and other assets			185,118				143,476				117,993				165,985				164,432
Investments in unconsolidated joint ventures			235,224				217,529				209,974				196,188				193,394
Total assets		$	18,379,456			$	18,980,263			$	19,113,959			$	19,179,071			$	19,886,767
LIABILITIES AND EQUITY
Liabilities:
Mortgage notes payable		$	3,438,714			$	4,132,071			$	4,269,808			$	4,289,120			$	4,309,484
Unsecured senior notes, net of discount			5,289,317				5,288,908				5,288,503				5,288,101				5,287,704
Unsecured line of credit			—				—				—				—				—
Mezzanine notes payable			308,482				308,817				309,148				309,475				309,796
Outside members’ notes payable			180,000				180,000				180,000				180,000				180,000
Accounts payable and accrued expenses			274,709				245,200				231,900				224,086				243,263
Dividends and distributions payable			327,320				112,912				112,892				112,796				882,472
Accrued interest payable			190,386				200,916				178,548				186,630				163,532
Other liabilities			483,601				448,680				448,480				483,762				502,255
Total liabilities			10,492,529				10,917,504				11,019,279				11,073,970				11,878,506
Commitments and contingencies			—				—				—				—				—
Noncontrolling interests:
Redeemable preferred units of the Operating Partnership			—				—				—				633				633
Redeemable interest in property partnership			—				—				106,233				105,520				104,692
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, 153,579,966, 153,574,600, 153,473,931, 153,402,107, and 153,113,945 outstanding, respectively			1,536				1,536				1,535				1,534				1,531
Additional paid-in capital			6,305,687				6,300,780				6,293,556				6,286,260				6,270,257
Dividends in excess of earnings			(780,952	)			(627,054	)			(711,239	)			(690,993	)			(762,464	)
Treasury common stock, at cost			(2,722	)			(2,722	)			(2,722	)			(2,722	)			(2,722	)
Accumulated other comprehensive income (loss)			(14,114	)			(20,625	)			1,848				(11,907	)			(9,304	)
Total stockholders’ equity attributable to Boston Properties, Inc.			5,709,435				5,851,915				5,782,978				5,782,172				5,697,298
Noncontrolling interests:
Common units of the Operating Partnership			603,092				620,036				614,988				617,274				603,171
Property partnerships			1,574,400				1,590,808				1,590,481				1,599,502				1,602,467
Total equity			7,886,927				8,062,759				7,988,447				7,998,948				7,902,936
Total liabilities and equity		$	18,379,456			$	18,980,263			$	19,113,959			$	19,179,071			$	19,886,767

 

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

(2)

At December 31, 2014, March, 31, 2015 and June 30, 2015, approximately $433.6 million, $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 and December 31, 2015, amounts previously held by such a qualified intermediary had been released and no amounts were held in escrow.

 

8

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Boston Properties, Inc.

Fourth Quarter 2015

 

CONSOLIDATED INCOME STATEMENTS

(in thousands, except for per share amounts)

(unaudited)

 

 

		Three Months Ended
		31-Dec-15				30-Sep-15				30-Jun-15				31-Mar-15				31-Dec-14
Revenue
Rental
Base rent		$	493,141			$	494,300			$	486,609			$	490,682			$	484,011
Recoveries from tenants			88,576				91,544				86,795				88,593				85,946
Parking and other			25,132				25,509				26,552				24,788				25,724
Total rental revenue			606,849				611,353				599,956				604,063				595,681
Hotel revenue			10,939				12,619				13,403				9,085				10,907
Development and management services			6,452				5,912				4,862				5,328				7,119
Total revenue			624,240				629,884				618,221				618,476				613,707
Expenses
Operating			112,846				113,962				113,945				120,954				111,342
Real estate taxes			103,796				105,834				100,519				100,396				99,735
Hotel operating			7,888				8,125				8,495				7,576				7,539
General and administrative (1)			24,300				20,944				22,284				28,791				23,172
Transaction costs			470				254				208				327				640
Depreciation and amortization			164,460				153,015				167,844				154,223				162,430
Total expenses			413,760				402,134				413,295				412,267				404,858
Operating income			210,480				227,750				204,926				206,209				208,849
Other income (expense)
Income from unconsolidated joint ventures			2,211				2,647				3,078				14,834				2,700
Interest and other income			440				3,637				1,293				1,407				1,924
Gains (losses) from investments in securities (1)			493				(1,515	)			(24	)			393				387
Interest expense (2)			(106,178	)			(108,727	)			(108,534	)			(108,757	)			(117,904	)
Losses from early extinguishments of debt			(22,040	)			—				—				—				(10,633	)
Income before gains on sales of real estate			85,406				123,792				100,739				114,086				85,323
Gains on sales of real estate (3)			81,332				199,479				—				95,084				126,102
Net income			166,738				323,271				100,739				209,170				211,425
Net income attributable to noncontrolling interests
Noncontrolling interest in property partnerships (4)			(10,143	)			(115,240	)			(9,264	)			(15,208	)			(13,088	)
Noncontrolling interest—redeemable preferred units of the Operating Partnership			—				—				(3	)			(3	)			(9	)
Noncontrolling interest—common units of the Operating Partnership (5)			(16,098	)			(21,302	)			(9,394	)			(20,188	)			(21,172	)
Net income attributable to Boston Properties, Inc.			140,497				186,729				82,078				173,771				177,156
Preferred dividends			(2,646	)			(2,647	)			(2,618	)			(2,589	)			(2,646	)
Net income attributable to Boston Properties, Inc. common shareholders		$	137,851			$	184,082			$	79,460			$	171,182			$	174,510
INCOME PER SHARE OF COMMON STOCK (EPS)
Net income attributable to Boston Properties, Inc. per share—basic		$	0.90			$	1.20			$	0.52			$	1.12			$	1.14
Net income attributable to Boston Properties, Inc. per share—diluted		$	0.90			$	1.20			$	0.52			$	1.11			$	1.14

 

(1)

Gains (losses) from investments in securities include $493, $(1,515), $(24), $393 and $387 and general and administrative expense includes $(493), $1,515, $24, $(393) and $(387) for the three months ended December 31, 2015, September 30, 2015, June 30, 2015, March 31, 2015 and December 31, 2014, respectively, related to the Company’s deferred compensation plan.

(2)

For the three months ended December 31, 2015, September 30, 2015, June 30, 2015, March 31, 2015 and December 31, 2014, interest expense includes $8,014, $7,800, $7,594, $7,385 and $7,271, 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 46 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. See also page 46.

(5)

Equals noncontrolling interest—common units of the Operating Partnership’s share of 10.26%, 10.26%, 10.34%, 10.44% and 10.34% of income before net income attributable to noncontrolling interests in Operating Partnership after deduction for preferred distributions for the three months ended December 31, 2015, September 30, 2015, June 30, 2015, March 31, 2015 and December 31, 2014, respectively.

 

9

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Boston Properties, Inc.

Fourth Quarter 2015

 

FUNDS FROM OPERATIONS (FFO)

(in thousands, except for per share amounts)

(unaudited)

 

 

		Three Months Ended
		31-Dec-15				30-Sep-15				30-Jun-15				31-Mar-15				31-Dec-14
Net income attributable to Boston Properties, Inc. common shareholders		$	137,851			$	184,082			$	79,460			$	171,182			$	174,510
Add:
Preferred dividends			2,646				2,647				2,618				2,589				2,646
Noncontrolling interest—common units of the Operating Partnership			16,098				21,302				9,394				20,188				21,172
Noncontrolling interest—redeemable preferred units of the Operating Partnership			—				—				3				3				9
Noncontrolling interests in property partnerships			10,143				115,240				9,264				15,208				13,088
Less:
Gains on sales of real estate			81,332				199,479				—				95,084				126,102
Income before gains on sales of real estate			85,406				123,792				100,739				114,086				85,323
Add:
Real estate depreciation and amortization (1)			167,968				156,489				171,384				148,754				166,665
Less:
Noncontrolling interests in property partnerships’ share of FFO			30,828				35,527				36,699				36,515				33,866
Noncontrolling interest—redeemable preferred units of the Operating Partnership			—				—				3				3				9
Preferred dividends			2,646				2,647				2,618				2,589				2,646
FFO attributable to the Operating Partnership common unitholders (including Boston Properties, Inc.) (“Basic FFO”)			219,900				242,107				232,803				223,733				215,467
Less:
Noncontrolling interest—common units of the Operating Partnership’s share of funds from operations			22,561				24,846				24,072				23,348				22,281
FFO attributable to Boston Properties, Inc. common shareholders (2)		$	197,339			$	217,261			$	208,731			$	200,385			$	193,186
FFO per share—basic		$	1.28			$	1.41			$	1.36			$	1.31			$	1.26
Weighted average shares outstanding—basic			153,602				153,595				153,450				153,230				153,128
FFO per share—diluted		$	1.28			$	1.41			$	1.36			$	1.30			$	1.26
Weighted average shares outstanding—diluted			153,897				153,786				153,815				153,873				153,550

 

(1)

Real estate depreciation and amortization consists of depreciation and amortization from the consolidated statements of operations of $164,460, $153,015, $167,844, $154,223 and $162,430 plus our share of unconsolidated joint venture real estate depreciation and amortization of $3,994, $3,808, $3,886, $(5,132) and $4,582, less corporate related depreciation of $486, $334, $346, $337 and $347 for the three months ended December 31, 2015, September 30, 2015, June 30, 2015, March 31, 2015 and December 31, 2014, respectively.

(2)	Based on weighted average basic shares for the quarter. The Company’s share for the quarter ended December 31, 2015, September 30, 2015, June 30, 2015, March 31, 2015, and December 31, 2014 was 89.74%, 89.74%, 89.66%, 89.56% and 89.66%, respectively.

 

10

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Boston Properties, Inc.

Fourth Quarter 2015

 

RECONCILIATION TO DILUTED FUNDS FROM OPERATIONS

(in thousands, except for per share amounts)

(unaudited)

 

 

		December 31, 2015								September 30, 2015								June 30, 2015								March 31, 2015								December 31, 2014
		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		$	219,900				171,162			$	242,107				171,160			$	232,803				171,146			$	223,733				171,084			$	215,467				170,789
Effect of Dilutive Securities Stock-based compensation			—				295				—				191				—				365				—				643				—				422
Diluted FFO		$	219,900				171,457			$	242,107				171,351			$	232,803				171,511			$	223,733				171,727			$	215,467				171,211
Less:
Noncontrolling interest—common units of the Operating Partnership’s share of diluted FFO			22,522				17,560				24,818				17,565				24,021				17,696				23,261				17,854				22,226				17,661
Boston Properties, Inc.’s share of diluted FFO (1)		$	197,378				153,897			$	217,289				153,786			$	208,782				153,815			$	200,472				153,873			$	193,241				153,550
FFO per share—basic		$	1.28							$	1.41							$	1.36							$	1.31							$	1.26
FFO per share—diluted		$	1.28							$	1.41							$	1.36							$	1.30							$	1.26

 

(1)	Based on weighted average diluted shares for the quarter. The Company’s share for the quarter ended December 31, 2015, September 30, 2015, June 30, 2015, March 31, 2015 and December 31, 2014 was 89.76%, 89.75%, 89.68%, 89.60% and 89.68%, respectively.

 

11

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Boston Properties, Inc.

Fourth Quarter 2015

 

Funds Available for Distribution (FAD)

(in thousands)

 

 

		Three Months Ended
		31-Dec-15				30-Sep-15				30-Jun-15				31-Mar-15				31-Dec-14
Basic FFO (see page 10)		$	219,900			$	242,107			$	232,803			$	223,733			$	215,467
2nd generation tenant improvements and leasing commissions			(35,036	)			(91,787	)			(54,346	)			(55,121	)			(20,824	)
Straight-line rent (1)			(18,149	)			(12,630	)			(14,024	)			(23,164	)			(18,639	)
Lease transaction costs which qualify as rent inducements (1) (2)			1,945				1,646				3,141				5,929				3,533
Recurring capital expenditures			(19,845	)			(18,814	)			(14,869	)			(8,763	)			(12,571	)
Fair value interest adjustment (1)			(8,593	)			(8,062	)			(7,856	)			(7,796	)			(7,737	)
Fair value lease revenue (1) (3)			(4,966	)			(5,937	)			(6,667	)			(7,081	)			(12,236	)
Hotel improvements, equipment upgrades and replacements			(1,231	)			(436	)			(272	)			(491	)			(328	)
Straight-line ground rent expense adjustment (4)			(3,983	)			891				1,106				1,196				1,669
Non-real estate depreciation			486				334				346				337				347
Stock-based compensation			6,358				6,345				5,469				11,011				5,391
Non-cash gains (losses) from early extinguishments of debt			(3,604	)			—				—				—				96
Non-cash termination income adjustment (fair value lease amounts)			3				(555	)			(1,645	)			10				—
Partners’ share of consolidated and unconsolidated joint venture 2nd generation tenant improvement and leasing commissions			2,698				26,982				2,005				1,511				652
Unearned portion of capitalized fees			451				616				746				5,834				7,810
Funds available for distribution to common shareholders and common unitholders (FAD)		$	136,434			$	140,700			$	145,937			$	147,145			$	162,630

Interest Coverage Ratios

(in thousands, except for ratio amounts)

 

		Three Months Ended
		31-Dec-15				30-Sep-15				30-Jun-15				31-Mar-15				31-Dec-14
Income before gains on sales of real estate		$	85,406			$	123,792			$	100,739			$	114,086			$	85,323
Interest expense			106,178				108,727				108,534				108,757				117,904
Interest expense from unconsolidated joint ventures			3,908				3,830				3,823				4,977				3,248
Depreciation and amortization expense			164,460				153,015				167,844				154,223				162,430
Depreciation and amortization expense from unconsolidated joint ventures			3,994				3,808				3,886				(5,132	)			4,582
Losses from early extinguishments of debt			22,040				—				—				—				10,633
Non-cash termination income adjustment (fair value lease amounts)			3				(555	)			(1,645	)			10				—
Stock-based compensation			6,358				6,345				5,469				11,011				5,391
Straight-line ground rent expense adjustment (4)			(3,983	)			891				1,106				1,196				1,669
Straight-line rent (1)			(18,149	)			(12,630	)			(14,024	)			(23,164	)			(18,639	)
Lease transaction costs which qualify as rent inducements (1) (2)			1,945				1,646				3,141				5,929				3,533
Fair value lease revenue (1) (3)			(4,966	)			(5,937	)			(6,667	)			(7,081	)			(12,236	)
Subtotal			367,194				382,932				372,206				364,812				363,838
Excluding Capitalized Interest
Divided by:
Adjusted interest expense (5) (6) (7) (8)			113,114				115,924				115,937				117,410				124,819
Interest Coverage Ratio			3.25				3.30				3.21				3.11				2.91
Including Capitalized Interest
Divided by:
Adjusted interest expense (5) (6) (7) (8) (9)			121,494				125,147				124,909				125,488				132,584
Interest Coverage Ratio			3.02				3.06				2.98				2.91				2.74

 

(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)	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.

(4)

For the three months ended 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.

(5)	Excludes consolidated and the Company’s share of unconsolidated joint venture amortization of financing costs of $2,034, $2,037, $1,936, $1,956 and $1,987 for the three months ended December 31, 2015, September 30, 2015, June 30, 2015, March 31, 2015 and December 31, 2014, respectively.

(6)

Excludes interest expense of $8,014, $7,800, $7,594, $7,385 and $7,271 for the three months ended December 31, 2015, September 30, 2015, June 30, 2015, March 31, 2015 and December 31, 2014, 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.

(7)	Excludes consolidated fair value interest adjustment of $13,076, $13,204, $13,110, $13,017 and $12,925 for the three months ended December 31, 2015, September 30, 2015, June 30, 2015, March 31, 2015 and December 31, 2014, respectively.

(8)	Excludes nonrecurring losses from early extinguishments of debt of $22,040 and $10,633 for the three months ended December 31, 2015 and December 31, 2014, respectively.

(9)	Includes consolidated and the Company’s share of unconsolidated joint venture capitalized interest of $8,380, $9,223, $8,972, $8,078 and $7,765 for the three months ended December 31, 2015, September 30, 2015, June 30, 2015, March 31, 2015 and December 31, 2014, respectively.

 

12

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Boston Properties, Inc.

Fourth Quarter 2015

 

CAPITAL STRUCTURE

 

(in thousands)

Consolidated Debt

 

 

		Aggregate Principal December 31, 2015
Mortgage Notes Payable		$	3,358,479
Mezzanine Notes Payable			306,000
Unsecured Line of Credit			—
Unsecured Senior Notes, at face value			5,300,000
Total Debt			8,964,479
Fair Value Interest Adjustment on Mortgage Notes Payable			80,235
Fair Value Interest Adjustment on Mezzanine Notes Payable			2,482
Discount on Unsecured Senior Notes			(10,683	)
Total Consolidated Debt		$	9,036,513

 

Boston Properties Limited Partnership Unsecured Senior Notes (1)
																														Total/ Weighted Average
Settlement Date			6/27/2013				4/11/2013				6/11/2012				11/10/2011				11/18/2010				4/19/2010				10/9/2009
Original Principal Amount		$	700,000			$	500,000			$	1,000,000			$	850,000			$	850,000			$	700,000			$	700,000			$	5,300,000
Principal Amount at Quarter End		$	700,000			$	500,000			$	1,000,000			$	850,000			$	850,000			$	700,000			$	700,000			$	5,300,000
Yield (on issue date)			3.916	%			3.279	%			3.954	%			3.853	%			4.289	%			5.708	%			5.967	%			4.420	%
Coupon			3.800	%			3.125	%			3.850	%			3.700	%			4.125	%			5.625	%			5.875	%			4.297	%
Public Offering Price			99.694	%			99.379	%			99.779	%			99.767	%			99.260	%			99.891	%			99.931	%			99.680	%
Ratings:
Moody’s			Baa2 (stable)				Baa2 (stable)				Baa2 (stable)				Baa2 (stable)				Baa2 (stable)				Baa2 (stable)				Baa2 (stable)
S&P			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)
Maturity Date			2/1/2024				9/1/2023				2/1/2023				11/15/2018				5/15/2021				11/15/2020				10/15/2019
Discount		$	1,689			$	2,389			$	1,556			$	871			$	3,556			$	403			$	219			$	10,683
Unsecured Senior Notes, net of discount		$	698,311			$	497,611			$	998,444			$	849,129			$	846,444			$	699,597			$	699,781			$	5,289,317

Equity

 

 

		Shares/Units Outstanding as of 12/31/2015				Common Stock Equivalents				Equivalent Value (2)
Common Stock			153,580				153,580	(3)		$	19,587,593
Common Operating Partnership Units			17,929				17,929	(4)			2,286,665
5.25% Series B Cumulative Redeemable Preferred Stock			80				—				200,000	(5)
Total Equity							171,509			$	22,074,258
Total Consolidated Debt										$	9,036,513
Total Consolidated Market Capitalization										$	31,110,771
BXP’s share of Unconsolidated Joint Venture Debt										$	353,386
Less:
Partners’ Share of Consolidated Debt										$	989,165
Total Adjusted Debt (6)										$	8,400,734
Total Adjusted Market Capitalization (6)										$	30,474,992

 

(1)

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 the underwriting discount and estimated transaction expenses.

(2)	Values based on December 31, 2015 closing price of $127.54 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).

(3)	Includes 67,367 shares of restricted stock.

(4)	Includes 1,831,714 long-term incentive plan units (including 216,854 2012 OPP Units), but excludes an aggregate of 1,154,553 Multi-Year Long-Term Incentive Program Units.

(5)

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.

(6)	For disclosures relating to our definitions of Total Adjusted Debt and Total Adjusted Market Capitalization, see page 49.

 

13

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Boston Properties, Inc.

Fourth Quarter 2015

 

DEBT ANALYSIS (1)

as of December 31, 2015

 

Debt Maturities and Principal Payments

 

(in thousands)

 

		2016				2017				2018				2019				2020				Thereafter				Total
Floating Rate Debt
Mortgage Notes Payable		$	—			$	—			$	—			$	—			$	—			$	—			$	—
Unsecured Line of Credit			—				—				—				—				—				—				—
Total Floating Debt		$	—			$	—			$	—			$	—			$	—			$	—			$	—
Fixed Rate Debt
Mortgage Notes Payable		$	576,864			$	2,067,654			$	18,633			$	19,670			$	20,766			$	654,892			$	3,358,479
Fair Value Interest Adjustment			46,405				33,830				—				—				—				—				80,235
Mortgage Notes Payable			623,269				2,101,484				18,633				19,670				20,766				654,892				3,438,714
Mezzanine Notes Payable			—				306,000				—				—				—				—				306,000
Fair Value Interest Adjustment			1,389				1,093				—				—				—				—				2,482
Mezzanine Notes Payable			1,389				307,093				—				—				—				—				308,482
Unsecured Senior Notes, Face Amount			—				—				850,000				700,000				700,000				3,050,000				5,300,000
Discount Amortization			(1,676	)			(1,746	)			(1,771	)			(1,551	)			(1,546	)			(2,393	)			(10,683	)
Unsecured Senior Notes			(1,676	)			(1,746	)			848,229				698,449				698,454				3,047,607				5,289,317
Total Fixed Debt		$	622,982			$	2,406,831			$	866,862			$	718,119			$	719,220			$	3,702,499			$	9,036,513
Total Consolidated Debt		$	622,982			$	2,406,831			$	866,862			$	718,119			$	719,220			$	3,702,499			$	9,036,513
GAAP Weighted Average Floating Rate Debt			—				—				—				—				—				—				—
GAAP Weighted Average Fixed Rate Debt			5.33	%			3.76	%			3.89	%			5.96	%			5.70	%			4.10	%			4.34	%
Total GAAP Weighted Average Rate			5.33	%			3.76	%			3.89	%			5.96	%			5.70	%			4.10	%			4.34	%
Total Stated Weighted Average Rate			6.47	%			5.78	%			3.77	%			5.87	%			5.63	%			4.03	%			4.91	%

Unsecured Debt

 

Unsecured Line of Credit - Matures July 26, 2018

 

(in thousands)

 

Facility		Outstanding at 12/31/2015				Letters of Credit				Remaining Capacity at 12/31/2015
$ 1,000,000		$	—			$	16,432			$	983,568

Unsecured and Secured Debt Analysis

 

		% of Total Debt				Stated Weighted Average Rate				GAAP Weighted Average Rate				Weighted Average Maturity
Unsecured Debt			58.53	%			4.34	%			4.42	%			5.6	years
Secured Debt			41.47	%			5.72	%			4.23	%			2.4	years
Total Consolidated Debt			100.00	%			4.91	%			4.34	%			4.3	years

Floating and Fixed Rate Debt Analysis

 

		% of Total Debt				Stated Weighted Average Rate				GAAP Weighted Average Rate				Weighted Average Maturity
Floating Rate Debt			—				—				—				—	years
Fixed Rate Debt			100.00	%			4.91	%			4.34	%			4.3	years
Total Consolidated Debt			100.00	%			4.91	%			4.34	%			4.3	years

Interest Rate Hedging Instruments

 

(dollars in thousands)

 

		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 (2)			400,000				2.646	%			June 1, 2017				June 1, 2027

 

(1)	Excludes unconsolidated joint ventures. 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.

(2)

Subsequent to December 31, 2015, 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) entered into two contracts on notional amounts aggregating $50.0 million. 767 Fifth Partners LLC has now entered into forward-starting interest rate swap contracts which fix the 10-year swap rate at a weighted-average rate of approximately 2.619% per annum on notional amounts aggregating $450.0 million.

 

14

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Boston Properties, Inc.

Fourth Quarter 2015

 

DEBT MATURITIES AND PRINCIPAL PAYMENTS (1)

 

as of December 31, 2015

(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)			12,446				13,051				13,684				14,349				15,045				630,486				699,061
Embarcadero Center Four			348,886				—				—				—				—				—				348,886
Fountain Square			211,250				—				—				—				—				—				211,250	(2)
New Dominion Technology Park, Building One			2,672				2,878				3,100				3,340				3,598				22,906				38,494
University Place			1,610				1,725				1,849				1,981				2,123				1,500				10,788
			576,864				2,067,654				18,633				19,670				20,766				654,892				3,358,479
Aggregate Fair Value Interest Adjustments			46,405				33,830								—				—				—				80,235
			623,269				2,101,484				18,633				19,670				20,766				654,892				3,438,714
Mezzanine Notes Payable (associated with 767 Fifth
Avenue (The GM Building)) (60% ownership)			—				306,000				—				—				—				—				306,000
Fair Value Interest Adjustment			1,389				1,093				—				—				—				—				2,482
			1,389				307,093				—				—				—				—				308,482
Unsecured Senior Notes, Face Amount			—				—				850,000				700,000				700,000				3,050,000				5,300,000
Aggregate Discount Amortization			(1,676	)			(1,746	)			(1,771	)			(1,551	)			(1,546	)			(2,393	)			(10,683	)
			(1,676	)			(1,746	)			848,229				698,449				698,454				3,047,607				5,289,317
Unsecured Line of Credit			—				—				—				—				—				—				—
		$	622,982			$	2,406,831			$	866,862			$	718,119			$	719,220			$	3,702,499			$	9,036,513
% of Total Consolidated Debt			6.89	%			26.64	%			9.59	%			7.95	%			7.96	%			40.97	%			100.00	%
Balloon Payments		$	554,505			$	2,356,000			$	850,000			$	700,000			$	700,000			$	3,683,554			$	8,844,059
Scheduled Principal Amortization		$	22,359			$	17,654			$	18,633			$	19,670			$	20,766			$	21,338			$	120,420

 

(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.

 

15

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Boston Properties, Inc.

Fourth Quarter 2015

 

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 December 31, 2015 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
						December 31, 2015
Total Assets:
Capitalized Property Value (1)						$	22,130,087			$	22,641,592
Cash and Cash Equivalents							723,718				723,718
Investments in Marketable Securities							20,380				20,380
Undeveloped Land, at Cost (including Joint Venture %)							299,065				299,065
Development in Process, at Cost (including Joint Venture %)							1,082,383				1,082,383
Total Assets						$	24,255,633			$	24,767,138
Unencumbered Assets						$	16,952,421			$	17,302,059
Secured Debt (Fixed and Variable) (2)						$	3,358,479			$	3,358,479
Mezzanine Notes Payable (3)							306,000				306,000
Joint Venture Debt							353,386				353,386
Related Party Notes Payable							180,000				180,000
Contingent Liabilities & Letters of Credit							22,817				22,817
Unsecured Debt (4)							5,300,000				5,300,000
Total Outstanding Debt						$	9,520,682			$	9,520,682
Consolidated EBITDA:
Income before Gains on Sales of Real Estate (per Consolidated Income Statement)						$	85,406			$	85,406
Subtract: Income from Unconsolidated Joint Ventures (per Consolidated Income Statement)							(2,211	)			(2,211	)
Subtract: Gains from Investments in Securities (per Consolidated Income Statement)							(493	)			(493	)
Add: Losses from early extinguishments of debt (per Consolidated Income Statement)							22,040				22,040
Add: Interest Expense (per Consolidated Income Statement)							106,178				106,178
Add: Depreciation and Amortization (per Consolidated Income Statement)							164,460				164,460
EBITDA							375,380				375,380
Add: Company share of unconsolidated joint venture EBITDA							10,521				10,521
Consolidated EBITDA						$	385,901			$	385,901
Adjusted Interest Expense:
Interest Expense (per Consolidated Income Statement)						$	106,178			$	106,178
Add: Company share of unconsolidated joint venture interest expense							3,908				3,908
Less: Amortization of financing costs (including Joint Venture %)							(2,034	)			(2,034	)
Less: Interest expense funded by construction loan draws							(104	)			(104	)
Adjusted Interest Expense						$	107,948			$	107,948
Covenant Ratios and Related Data		Test				Actual				Actual
Total Outstanding Debt/Total Assets			Less than 60%				39.3	%			38.4	%
Secured Debt/Total Assets			Less than 50%				16.6	%			16.2	%
Interest Coverage (Annualized Consolidated EBITDA to
Annualized Interest Expense)			Greater than 1.50x				3.57				3.57
Unencumbered Assets/ Unsecured Debt			Greater than 150%				319.9	%			326.5	%
Unencumbered Consolidated Property EBITDA (5)						$	281,112			$	281,112
Unencumbered Interest Coverage (Unencumbered Consolidated Property EBITDA to Unsecured
Interest Expense)							4.86				4.86
% of Unencumbered Consolidated Property EBITDA to Consolidated EBITDA							72.8	%			72.8	%
# of in-service unencumbered properties							139				139

 

(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 $80,235.

(3)	Excludes aggregate fair value interest adjustment of $2,482.

(4)	Excludes aggregate debt discount of $10,683.

(5)

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 December 31, 2015, these excluded amounts were approximately $(15,219), $111,048, $4,441 and $4,519, respectively.

 

16

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Boston Properties, Inc.

Fourth Quarter 2015

 

UNCONSOLIDATED JOINT VENTURE DEBT ANALYSIS (*)

 

Debt Maturities and Principal Payments by Property

 

as of December 31, 2015

(in thousands)

 

Property		2016				2017				2018				2019				2020				Thereafter				Total
Metropolitan Square (51%)		$	1,332			$	1,410			$	1,493			$	1,582			$	80,327			$	—			$	86,144
540 Madison Avenue (60%)			—				—				72,000				—				—				—				72,000
Market Square North (50%)			1,094				1,148				1,205				1,265				58,090				—				62,802
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%)			279				279				19,519				—				—				—				20,077	(1)
Annapolis Junction Building Six (50%)			6,680				—				—				—				—				—				6,680
Annapolis Junction Building Seven (50%)			10,713				—				—				—				—				—				10,713	(2)
Annapolis Junction Building Eight (50%)			—				7,220				—				—				—				—				7,220	(2)
		$	20,098			$	10,057			$	94,217			$	2,847			$	139,372			$	86,795			$	353,386
GAAP Weighted Average Rate			2.86	%			2.97	%			2.03	%			5.41	%			5.42	%			3.86	%			3.92	%
% of Total Debt			5.68	%			2.85	%			26.66	%			0.81	%			39.44	%			24.56	%			100.00	%
Balloon Payments		$	17,393			$	7,220			$	91,472			$	—			$	136,880			$	81,932			$	334,897
Scheduled Amortization		$	2,705			$	2,837			$	2,745			$	2,847			$	2,492			$	4,863			$	18,489

Floating and Fixed Rate Debt Analysis

 

						Stated				GAAP
						Weighted				Weighted				Weighted Average
		% of Total Debt				Average Rate				Average Rate				Maturity
Floating Rate Debt			33.02	%			1.81	%			2.03	%			2.1	years
Fixed Rate Debt			66.98	%			4.79	%			4.85	%			6.0	years
Total Debt			100.00	%			3.81	%			3.92	%			4.7	years

 

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

(1)	Loan has one, three-year extension option, subject to certain conditions.

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

 

17

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Boston Properties, Inc.

Fourth Quarter 2015

 

UNCONSOLIDATED JOINT VENTURES

 

Balance Sheet Information

 

(unaudited and in thousands)

as of December 31, 2015

 

		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 (3)				Street (4)				Joint Ventures
Net Equity (5) (6)		$	68,983			$	(9,951	)		$	9,179			$	(11,958	)		$	43,524			$	29,009			$	(3,292	)		$	18,508			$	42,584			$	11,521			$	11,916			$	210,023
Mortgage/Construction loans payable (5)		$	72,000			$	62,802			$	86,144			$	56,250			$	—			$	44,690			$	31,500			$	—			$	—			$	—			$	—			$	353,386
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 (unaudited and in thousands) for the three months ended December 31, 2015
		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 (3)				Street (4)				Joint Ventures
REVENUE
Rental (7)		$	5,617			$	3,760			$	6,619			$	5,900			$	986			$	4,582			$	2,640			$	—			$	108			$	—			$	—			$	30,212
Operating recoveries			869				636				1,564				992				297				796				1,144				—				—				—				—				6,298
Straight-line rent			714				390				28				893				—				43				150				—				—				—				—				2,218
Fair value lease revenue			(1	)			—				—				—				—				—				—				—				—				—				—				(1	)
Termination Income			—				34				—				—				—				—				—				—				—				—				—				34
Total revenue			7,199				4,820				8,211				7,785				1,283				5,421				3,934				—				108				—				—				38,761
EXPENSES
Operating			3,593				2,239				4,019				3,352				638				1,634				1,378				—				245				—				—				17,098
NET OPERATING INCOME			3,606				2,581				4,192				4,433				645				3,787				2,556				—				(137	)			—				—				21,663
Interest			575				1,546				2,456				2,075				—				411				1,128				—				—				—				—				8,191
Depreciation and amortization			1,836				843				1,902				1,319				1,382				1,045				876				—				—				—				—				9,203
SUBTOTAL			2,411				2,389				4,358				3,394				1,382				1,456				2,004				—				—				—				—				17,394
NET INCOME/(LOSS)		$	1,195			$	192			$	(166	)		$	1,039			$	(737	)		$	2,331			$	552			$	—			$	(137	)		$	—			$	—			$	4,269
BXP’s share of net income/(loss)		$	717			$	96			$	(85	)		$	261	(8)		$	(245	)		$	1,166			$	165			$	—			$	(69	)		$	—			$	—				2,006
Basis differential (9)			165				(6	)			59				(7	)			(7	)			(7	)			8				—				—				—				—				205
Income/(loss) from unconsolidated joint ventures		$	882			$	90			$	(26	)		$	254	(8)		$	(252	)		$	1,159			$	173			$	—			$	(69	)		$	—			$	—			$	2,211
BXP’s share of depreciation & amortization			991				431				986				321	(8)			466				534				265				—				—				—				—				3,994
BXP’s share of Funds from Operations (FFO)		$	1,873			$	521			$	960			$	575			$	214			$	1,693			$	438			$	—			$	(69	)		$	—			$	—			$	6,205
BXP’s share of revenue (7) (10)		$	3,798			$	2,092			$	3,390			$	3,250	(8)		$	329			$	2,313			$	837			$	—			$	54			$	—			$	—			$	16,063
BXP’s share of interest expense		$	345			$	773			$	1,253			$	993	(8)		$	—			$	206			$	338			$	—			$	—			$	—			$	—			$	3,908
BXP’s share of net operating income/(loss) (7)		$	2,164			$	1,291			$	2,138			$	2,121	(8)		$	215			$	1,894			$	767			$	—			$	(69	)		$	—			$	—			$	10,521

 

(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)	Refer to Note 3 under “Acquisitions” on page 46.

(4)	Refer to Note 2 under “Acquisitions” on page 46.

(5)	Represents the Company’s share.

(6)	As of December 31, 2015, certain investments with deficit balances aggregating ($25,201) have been reflected within Other Liabilities on the Company’s Consolidated Balance Sheet.

(7)	Includes approximately $28 of management services income of which the Company’s share is approximately $16 and approximately $31 of interest and other income of which the Company’s share is approximately $13.

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

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

(10)	Excludes operating recoveries.

 

18

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Boston Properties, Inc.

Fourth Quarter 2015

 

CONSOLIDATED JOINT VENTURES

(unaudited and in thousands)

 

Balance Sheets

 

as of December 31, 2015

 

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		$	3,467,910			$	2,229,049			$	451,532			$	6,148,491
Cash and cash held in escrows			83,788				119,323				4,826				207,937
Other assets			138,297				211,745				1,413				351,455
Total assets		$	3,689,995			$	2,560,117			$	457,771			$	6,707,883
LIABILITIES AND EQUITY
Liabilities:
Mortgage notes payable		$	1,377,986			$	699,061			$	—			$	2,077,047
Mezzanine notes payable			308,482				—				—				308,482
Related party notes payable			180,000				—				—				180,000
Accrued interest on related party notes			119,436				—				—				119,436
Other liabilities			181,087				71,033				29,656				281,776
Total liabilities			2,166,991				770,094				29,656				2,966,741
Equity:
Boston Properties, Inc.			1,088,810	(1)			663,328				409,463				2,161,601
Redeemable interest in property partnership			—				—				—				—
Noncontrolling interests			434,194				1,126,695				18,652				1,579,541	(2)
Total equity			1,523,004				1,790,023				428,115				3,741,142
Total liabilities and equity		$	3,689,995			$	2,560,117			$	457,771			$	6,707,883

Income Statements

 

for the three months ended December 31, 2015

 

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		$	62,368			$	90,290			$	—			$	152,658
Straight-line rent			3,875				2,345				—				6,220
Fair value lease revenue			5,417				701				—				6,118
Termination income			—				4,696				—				4,696
Parking and other			646				1,467				—				2,113
Total revenue			72,306				99,499				—				171,805
EXPENSES
Operating			26,914				32,102				—				59,016
NET OPERATING INCOME			45,392				67,397				—				112,789
Management services income			(399	)			(439	)			—				(838	)
Interest and other income			(4	)			(480	)			—				(484	)
Interest expense			24,137				8,397				—				32,534
Interest expense—partner notes			8,014				—				—				8,014
Fair value adjustment to interest expense			(11,208	)			—				—				(11,208	)
Depreciation and amortization			28,400				20,719				—				49,119
Gain on sale			—				39				—				39
SUBTOTAL			48,940				28,236				—				77,176
NET INCOME/(LOSS)		$	(3,548	)		$	39,161			$	—			$	35,613
Reconciliation of partners’ noncontrolling interest (NCI):
Add back depreciation & amortization—BXP basis difference		$	18			$	19			$	—			$	37
Special allocation—BXP basis			—				480				—				480
Add back partners’ share of partner loan interest			8,014				—				—				8,014
Net income/(loss) before interest allocation			4,484				39,660				—				44,144
Partners’ NCI share of net income before interest allocation			1,793				17,846				—				19,639
Partners’ share of partner loan interest			(8,014	)			—				—				(8,014	)
Allocation of management and other fees to non-controlling partner			(616	)			(866	)			—				(1,482	)
Accretion and adjustments			—				—				—				—
Partners’ NCI		$	(6,837	)		$	16,980			$	—			$	10,143
Reconciliation of partners’ share of FFO:
Net income/(loss)		$	(3,548	)		$	39,161			$	—			$	35,613
Special allocation—BXP basis			—				480				—				480
Add back depreciation & amortization			28,400				20,719				—				49,119
Entity FFO			24,852				60,360				—				85,212
Partners’ share of net income/(loss)			(1,413	)			17,649				—				16,236
Partners’ share of partner loan interest not in partner’s share of entity FFO			(4,809	)			—				—				(4,809	)
Allocation of management and other fees to non-controlling partner			(616	)			(866	)			—				(1,482	)
Partners’ share of depreciation and amortization			11,352				9,315				—				20,667
Accretion and adjustments			—				216				—				216
Partners’ share FFO		$	4,514			$	26,314			$	—			$	30,828
Reconciliation of BXP share of FFO
BXP share of net income/(loss) adjusted for partners’ NCI			3,289				22,181				—				25,470
Depreciation & amortization—BXP basis difference			18				19				—				37
Other adjustment (3)			158				48				—				206
BXP share of depreciation & amortization			17,029				11,385				—				28,414
BXP share of FFO		$	20,494			$	33,633			$	—			$	54,127
Unearned portion of capitalized fees (3)		$	439			$	12			$	—			$	451

 

(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.

(3)	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.

 

19

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Boston Properties, Inc.

Fourth Quarter 2015

 

PORTFOLIO OVERVIEW

(dollars in thousands)

 

Rentable Square Footage and Percentage of Combined Net Operating Income of In-Service Properties by Location and Type of Property

for the Quarter Ended December 31, 2015 (1) (2)

Geographic Area		Square Feet Office (3)				% of NOI Office (4)				Square Feet Office/ Technical (3)				% of NOI Office/ Technical (4)				Square Feet Total (3)				Square Feet % of Total				% of NOI Residential (4)				% of NOI Hotel (4)				% of NOI Total (4)
Boston			13,223,478	(5)			26.8	%			392,530				1.1	%			13,616,008	(5)			33.1	%			0.2	%			0.8	%			28.9	%
New York			11,571,051	(5)			39.5	%			—				—				11,571,051	(5)			28.2	%			—				—				39.5	%
San Francisco			5,279,263				11.8	%			570,053				1.1	%			5,849,316				14.2	%			—				—				12.9	%
Washington, DC			9,329,430	(5)			17.8	%			738,829				0.5	%			10,068,259	(5)			24.5	%			0.4	%			—				18.7	%
Total			39,403,222	(5)			95.9	%			1,701,412				2.7	%			41,104,634	(5)			100.0	%			0.6	%			0.8	%			100.0	%
% of Total			95.9	%							4.1	%							100.0	%

 

(1)	For disclosures relating to our definition of In-Service Properties, see page 50.

(2)	Combined Net Operating Income is a non-GAAP financial measure. For a quantitative reconciliation of Combined NOI to net income attributable to Boston Properties, Inc. common shareholders, see page 42. For disclosures relating to our use of Combined NOI see page 50.

(3)	Includes approximately 2,200,000 square feet of retail space in Office and approximately 11,000 square feet of retail space in Office/Technical.

(4)	The calculation for percentage of Combined Net Operating Income excludes termination income.

(5)	Includes 100% of the rentable square footage of our In-Service Properties. For disclosures relating to our In-Service Properties, see pages 21-23.

(6)	Includes 4,260 square feet of retail space.

(7)	Excludes recoveries from tenants.

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

(9)	Excludes approximately $67 of base rent from retail tenants which is included in Retail above and approximately $26 of recoveries from tenants.

(10)	Includes approximately $2,100 of other income.

(11)	Includes 26,179 square feet of retail space.

(12)	Includes 9,617 square feet of retail space.

 

20

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Boston Properties, Inc.

Fourth Quarter 2015

 

In-Service Property Listing

 

as of December 31, 2015

 

		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				1,742,257				77.0	%		$	63.43			N		CBD
100 Federal Street (55% ownership)		CBD Boston MA			1				1,266,305				83.9	%			51.29			N		CBD
800 Boylston Street—The Prudential Center		CBD Boston MA			1				1,227,964				90.8	%			57.70			N		CBD
111 Huntington Avenue—The Prudential Center		CBD Boston MA			1				860,455				100.0	%			62.22			N		CBD
Atlantic Wharf Office (55% ownership)		CBD Boston MA			1				793,827				100.0	%			63.62			N		CBD
101 Huntington Avenue—The Prudential Center		CBD Boston MA			1				505,249				95.6	%			46.23			N		CBD
The Shops at the Prudential Center		CBD Boston MA			1				490,977				95.6	%			75.66			N		CBD
Star Market at the Prudential Center		CBD Boston MA			1				57,235				100.0	%			54.33			N		CBD
					8				6,944,269				89.0	%		$	59.69
355 Main Street		East Cambridge MA			1				265,342				100.0	%		$	66.47			N		CBD
90 Broadway		East Cambridge MA			1				223,771				96.1	%			49.54			N		CBD
255 Main Street		East Cambridge MA			1				215,629				100.0	%			54.91			N		CBD
300 Binney Street		East Cambridge MA			1				195,191				100.0	%			52.98			N		CBD
150 Broadway		East Cambridge MA			1				177,226				100.0	%			47.09			N		CBD
105 Broadway		East Cambridge MA			1				152,664				100.0	%			61.39			N		CBD
325 Main Street		East Cambridge MA			1				115,361				100.0	%			44.04			N		CBD
145 Broadway		East Cambridge MA			1				79,616				100.0	%			60.04			N		CBD
University Place		Mid-Cambridge MA			1				195,282				100.0	%			45.34			Y		CBD
					9				1,620,082				99.5	%		$	53.94
Bay Colony Corporate Center		Route 128 Mass Turnpike MA			4				1,006,062				79.7	%		$	36.12			N		S
Reservoir Place		Route 128 Mass Turnpike MA			1				528,885				94.0	%			34.71			N		S
140 Kendrick Street		Route 128 Mass Turnpike MA			3				380,987				84.2	%			37.38			N		S
Weston Corporate Center		Route 128 Mass Turnpike MA			1				356,995				100.0	%			51.95			N		S
Waltham Weston Corporate Center		Route 128 Mass Turnpike MA			1				306,687				90.3	%			30.57			N		S
230 CityPoint		Route 128 Mass Turnpike MA			1				300,573				93.9	%			33.86			N		S
200 West Street		Route 128 Mass Turnpike MA			1				256,245				99.3	%			33.78			N		S
77 CityPoint		Route 128 Mass Turnpike MA			1				209,707				100.0	%			45.69			N		S
195 West Street		Route 128 Mass Turnpike MA			1				63,500				100.0	%			40.40			N		S
Quorum Office Park		Route 128 Northwest MA			2				267,527				90.0	%			18.56			N		S
Lexington Office Park		Route 128 Northwest MA			2				166,858				88.1	%			26.32			N		S
191 Spring Street		Route 128 Northwest MA			1				158,900				100.0	%			33.45			N		S
40 Shattuck Road		Route 128 Northwest MA			1				121,542				81.6	%			22.87			N		S
91 Hartwell Avenue		Route 128 Northwest MA			1				119,216				100.0	%			26.06			N		S
201 Spring Street		Route 128 Northwest MA			1				106,300				100.0	%			36.90			N		S
33 Hayden Avenue		Route 128 Northwest MA			1				80,872				100.0	%			42.20			N		S
32 Hartwell Avenue		Route 128 Northwest MA			1				69,154				100.0	%			23.97			N		S
100 Hayden Avenue		Route 128 Northwest MA			1				55,924				100.0	%			40.75			N		S
181 Spring Street		Route 128 Northwest MA			1				55,793				100.0	%			30.68			N		S
92 Hayden Avenue		Route 128 Northwest MA			1				31,100				100.0	%			41.60			N		S
(3) The Point (formerly 99 Third Avenue Retail)		Route 128 Northwest MA			1				16,300				84.7	%			44.77			N		S
					28				4,659,127				91.0	%		$	35.10
Office/Technical
(4) 415 Main Street		East Cambridge MA			1				231,028				100.0	%		$	89.07			N		CBD
250 Binney Street		East Cambridge MA			1				67,362				100.0	%			44.08			N		CBD
164 Lexington Road		Route 128 Northwest MA			1				64,140				0.0	%			—			N		S
17 Hartwell Avenue		Route 128 Northwest MA			1				30,000				0.0	%			—			N		S
					4				392,530				76.0	%		$	78.91
		Total Boston:			49				13,616,008				90.6	%		$	50.90

 

(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 50.

(3)	Not included in Same Property analysis.

(4)	Property was sold on February 1, 2016.

 

21

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Boston Properties, Inc.

Fourth Quarter 2015

 

In-Service Property Listing (continued)

 

as of December 31, 2015

 

		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				96.7	%		$	141.76			Y		CBD
399 Park Avenue		Park Avenue NY			1				1,710,383				98.9	%			88.40			N		CBD
601 Lexington Avenue (55% ownership)		Park Avenue NY			1				1,632,710				96.0	%			92.95			Y		CBD
599 Lexington Avenue		Park Avenue NY			1				1,057,978				99.3	%			80.73			Y		CBD
Times Square Tower (55% ownership)		Times Square NY			1				1,247,454				100.0	%			76.20			N		CBD
250 West 55th Street		Times Square/ West Side NY			1				986,823				82.8	%			86.56			N		CBD
510 Madison Avenue		Fifth/Madison Avenue NY			1				355,598				100.0	%			117.46			N		CBD
540 Madison Avenue (60% ownership)		Fifth/Madison Avenue NY			1				283,695				93.6	%			98.57			Y		CBD
					8				9,097,053				96.3	%		$	98.64
One Tower Center		East Brunswick NJ			1				412,797				35.5	%		$	31.08			N		S
510 Carnegie Center		Princeton NJ			1				234,160				100.0	%			33.79			N		S
210 Carnegie Center		Princeton NJ			1				162,372				73.0	%			33.64			N		S
206 Carnegie Center		Princeton NJ			1				161,763				100.0	%			31.23			N		S
212 Carnegie Center		Princeton NJ			1				151,547				86.9	%			35.70			N		S
214 Carnegie Center		Princeton NJ			1				150,774				67.6	%			33.16			N		S
506 Carnegie Center		Princeton NJ			1				149,110				62.5	%			33.00			N		S
508 Carnegie Center		Princeton NJ			1				134,433				96.0	%			32.74			N		S
202 Carnegie Center		Princeton NJ			1				134,068				45.5	%			36.12			N		S
101 Carnegie Center		Princeton NJ			1				128,288				86.5	%			31.79			N		S
504 Carnegie Center		Princeton NJ			1				121,990				48.3	%			34.09			N		S
502 Carnegie Center		Princeton NJ			1				121,460				91.3	%			34.62			N		S
701 Carnegie Center		Princeton NJ			1				120,000				100.0	%			39.04			N		S
104 Carnegie Center		Princeton NJ			1				102,830				90.1	%			33.27			N		S
105 Carnegie Center		Princeton NJ			1				69,955				62.7	%			32.38			N		S
302 Carnegie Center		Princeton NJ			1				64,926				100.0	%			33.95			N		S
211 Carnegie Center		Princeton NJ			1				47,025				100.0	%			36.59			N		S
201 Carnegie Center		Princeton NJ			—				6,500				100.0	%			32.54			N		S
					17				2,473,998				74.1	%		$	33.70
		Total New York:			25				11,571,051				91.5	%		$	87.39
San Francisco
Office
Embarcadero Center Four		CBD San Francisco CA			1				935,615				89.1	%		$	59.77			Y		CBD
Embarcadero Center One		CBD San Francisco CA			1				830,960				95.3	%			53.42			N		CBD
Embarcadero Center Two		CBD San Francisco CA			1				780,668				87.4	%			58.12			N		CBD
Embarcadero Center Three		CBD San Francisco CA			1				775,268				95.7	%			48.53			N		CBD
680 Folsom Street		CBD San Francisco CA			2				524,793				98.4	%			56.58			N		CBD
(3) 535 Mission Street		CBD San Francisco CA			1				307,235				82.3	%			67.54			N		CBD
(4) 690 Folsom Street		CBD San Francisco CA			1				26,080				55.2	%			70.00			N		CBD
					8				4,180,619				91.7	%		$	56.09
601 and 651 Gateway		South San Francisco CA			2				506,279				99.6	%		$	38.24			N		S
611 Gateway		South San Francisco CA			1				260,337				95.2	%			38.02			N		S
(5) North First Business Park		San Jose CA			5				190,636				100.0	%			16.11			N		S
2440 West El Camino Real		Mountain View CA			1				141,392				100.0	%			55.18			N		S
					9				1,098,644				98.7	%		$	36.50
Office/Technical
Mountain View Research Park		Mountain View CA			15				540,433				100.0	%		$	38.02			N		S
453 Ravendale Drive		Mountain View CA			1				29,620				90.7	%			34.48			N		S
					16				570,053				99.5	%		$	37.87
		Total San Francisco:			33				5,849,316				93.8	%		$	50.33

 

(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 50.

(3)	Not included in Same Property analysis. Including leases with future commencement dates, this property is 99% leased as of January 29, 2016.

(4)	Not included in Same Property analysis. Including leases with future commencement dates, this property is 100% leased as of January 29, 2016.

(5)	Property held for redevelopment.

 

22

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Boston Properties, Inc.

Fourth Quarter 2015

 

In-Service Property Listing (continued)

 

as of December 31, 2015

 

		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	%		$	56.70			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				589,629				77.5	%			58.51			Y		CBD
901 New York Avenue (25% ownership)		East End Washington DC			1				539,680				92.4	%			57.60			Y		CBD
Market Square North (50% ownership)		East End Washington DC			1				415,523				72.8	%			60.80			Y		CBD
2200 Pennsylvania Avenue		CBD Washington DC			1				458,831				100.0	%			85.90			N		CBD
1333 New Hampshire Avenue		CBD Washington DC			1				315,371				100.0	%			46.22			N		CBD
1330 Connecticut Avenue		CBD Washington DC			1				252,171				98.7	%			59.70			N		CBD
Sumner Square		CBD Washington DC			1				208,892				100.0	%			49.07			N		CBD
500 North Capitol Street, N.W. (30% ownership)		Capitol Hill Washington DC			1				230,859				92.8	%			66.34			Y		CBD
					10				3,893,979				92.1	%		$	59.61
South of Market		Reston VA			3				623,665				89.7	%		$	52.74			N		S
Fountain Square		Reston VA			2				521,598				95.2	%			46.39			Y		S
One Freedom Square		Reston VA			1				432,581				100.0	%			46.30			N		S
Two Freedom Square		Reston VA			1				421,757				100.0	%			44.46			N		S
One and Two Discovery Square		Reston VA			2				366,990				97.8	%			42.80			N		S
One Reston Overlook		Reston VA			1				319,519				100.0	%			37.40			N		S
Reston Corporate Center		Reston VA			2				261,046				100.0	%			38.82			N		S
Democracy Tower		Reston VA			1				259,441				100.0	%			57.77			N		S
Fountain Square Retail		Reston VA			1				237,209				97.2	%			53.96			Y		S
Two Reston Overlook		Reston VA			1				134,615				100.0	%			36.81			N		S
					15				3,578,421				97.1	%		$	46.38
Wisconsin Place Office		Montgomery County MD			1				299,186				97.6	%		$	53.69			N		S
2600 Tower Oaks Boulevard		Montgomery County MD			1				179,369				60.9	%			36.79			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	%			33.66			Y		S
Kingstowne Two		Springfield VA			1				156,251				93.7	%			40.99			N		S
Kingstowne One		Springfield VA			1				151,483				77.7	%			39.72			N		S
Kingstowne Retail		Springfield VA			1				88,288				100.0	%			35.91			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	%			29.80			Y		S
Annapolis Junction Building One (50% ownership)		Anne Arundel County MD			1				117,599				88.8	%			138.97			Y		S
					11				1,857,030				82.7	%		$	46.79
Office/Technical
7601 Boston Boulevard		Springfield VA			1				114,028				100.0	%		$	18.37			N		S
7435 Boston Boulevard		Springfield VA			1				103,557				67.1	%			22.06			N		S
8000 Grainger Court		Springfield VA			1				88,775				37.6	%			23.58			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	%			28.10			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	%			13.42			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	%			20.60			N		S
7375 Boston Boulevard		Springfield VA			1				26,865				79.2	%			28.21			N		S
					11				738,829				76.7	%		$	20.43
		Total Washington, DC:			47				10,068,259				91.0	%		$	50.02
		Total In-Service Properties:			154				41,104,634				91.4	%		$	60.89

 

(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 50.

(3)	Not included in Same Property analysis.

 

23

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Boston Properties, Inc.

Fourth Quarter 2015

 

TOP 20 TENANTS LISTING AND PORTFOLIO TENANT DIVERSIFICATION

 

 

 

(1)	Includes 1,980 & 232,103 square feet of space in properties in which Boston Properties has a 51% & 50% interest, respectively.

(2)	Includes 443,141, 10,080 & 2,761 square feet of space in properties in which Boston Properties has a 55%, 60%, and 51% interest, respectively.

(3)	Includes 690,912 & 50,887 square feet of space in properties in which Boston Properties has a 55% & 60% interest, respectively.

(4)	Includes 669,807 square feet of space in properties in which Boston Properties has a 55% interest.

(5)	Includes 391,662 & 229,990 square feet of space in properties in which Boston Properties has a 55% & 51% interest, respectively.

(6)	Includes 325,750 square feet of space in a property in which Boston Properties has a 55% interest.

(7)	Includes 427,672 & 28,147 square feet of space in properties in which Boston Properties has a 60% & 55% interest, respectively.

(8)	Includes 292,548 square feet of space in a property in which Boston Properties has a 25% interest.

(9)	Includes 331,209 square feet of space in a property in which Boston Properties has a 55% interest.

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

 

24

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Boston Properties, Inc.

Fourth Quarter 2015

 

IN-SERVICE OFFICE PROPERTIES

 

Lease Expirations (1) (2) (3)

 

 

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
2015			362,271			$	19,786,387			$	54.62			$	19,786,387			$	54.62				0.97	%(4)
2016			2,352,665				122,260,308				51.97				125,118,126				53.18				6.29	%
2017			2,648,491				167,161,472				63.12				168,251,875				63.53				7.08	%
2018			1,600,151				96,642,168				60.40				98,250,231				61.40				4.28	%
2019			2,804,849				155,743,962				55.53				160,166,583				57.10				7.50	%
2020			4,093,493				262,774,621				64.19				274,791,111				67.13				10.95	%
2021			2,601,157				136,335,584				52.41				152,325,382				58.56				6.96	%
2022			3,769,631				206,382,326				54.75				226,277,530				60.03				10.08	%
2023			1,169,768				64,398,934				55.05				74,452,862				63.65				3.13	%
2024			2,527,988				145,732,394				57.65				163,018,627				64.49				6.76	%
Thereafter			10,303,646				693,172,780				67.27				882,791,130				85.68				27.56	%

Occupancy By Location (2) (5)

 

 

		CBD								Suburban								Total
Location		31-Dec-15				31-Dec-14				31-Dec-15				31-Dec-14				31-Dec-15				31-Dec-14
Boston			91.0	%			92.9	%			91.0	%			90.1	%			91.0	%			91.9	%
New York			96.3	%			93.4	%			74.1	%			82.0	%			91.5	%			90.9	%
San Francisco			91.7	%			94.8	%			98.7	%			68.9	%			93.1	%			87.1	%
Washington, DC			92.1	%			95.9	%			92.2	%			95.5	%			92.1	%			95.7	%
Total Portfolio			93.1	%			93.8	%			89.0	%			88.2	%			91.7	%			91.8	%

 

(1)	For disclosures relating to our definition of Annualized Revenue, see page 50.

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

 

25

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Boston Properties, Inc.

Fourth Quarter 2015

 

IN-SERVICE OFFICE/TECHNICAL PROPERTIES

 

Lease Expirations (1) (2) (3)

 

 

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
2015			4,200			$	111,706			$	26.60			$	111,706			$	26.60				0.25	%
2016			327,934				23,556,800				71.83				23,556,800				71.83				19.27	%
2017			132,163				4,823,359				36.50				4,927,900				37.29				7.77	%
2018			28,364				1,200,331				42.32				1,258,325				44.36				1.67	%
2019			455,206				14,230,839				31.26				15,395,263				33.82				26.75	%
2020			257,160				6,616,525				25.73				6,839,679				26.60				15.11	%
2021			109,860				1,711,144				15.58				1,816,155				16.53				6.46	%
2022			—				—				—				—				—				0.00	%
2023			—				—				—				—				—				0.00	%
2024			82,188				3,309,179				40.26				3,894,777				47.39				4.83	%
Thereafter			23,439				452,293				19.30				540,892				23.08				1.38	%

Occupancy By Location (4)

 

 

		CBD								Suburban								Total
Location		31-Dec-15				31-Dec-14				31-Dec-15				31-Dec-14				31-Dec-15				31-Dec-14
Boston			100.0	%			100.0	%			0.0	%			0.0	%			76.0	%			76.0	%
New York			N/A				N/A				N/A				N/A				N/A				N/A
San Francisco			N/A				N/A				99.5	%			100.0	%			99.5	%			100.0	%
Washington, DC			N/A				N/A				76.7	%			84.5	%			76.7	%			84.5	%
Total Portfolio			100.0	%			100.0	%			80.8	%			85.1	%			84.2	%			87.7	%

 

(1)	For disclosures relating to our definition of Annualized Revenue, see page 50.

(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 approximately 11,000 square feet of retail space.

 

26

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Boston Properties, Inc.

Fourth Quarter 2015

 

IN-SERVICE RETAIL PROPERTIES

 

Lease Expirations (1) (2) (3)

 

 

														Annualized				Annualized
		Rentable Square				Current Annualized				Current Annualized				Revenues Under				Revenues Under
Year of Lease		Footage Subject to				Revenues Under				Revenues Under				Expiring Leases				Expiring Leases with				Percentage of
Expiration		Expiring Leases				Expiring Leases				Expiring Leases p.s.f.				with future step-ups				future step-ups-p.s.f.				Total Square Feet
2015			313			$	212,770			$	679.78			$	212,770			$	679.78				0.02	%(4)
2016			252,669				20,001,983				79.16				19,261,499				76.23				12.53	%
2017			165,635				14,787,034				89.27				14,858,215				89.70				8.21	%
2018			234,194				20,681,509				88.31				21,627,408				92.35				11.61	%
2019			89,796				6,304,402				70.21				6,503,112				72.42				4.45	%
2020			186,935				11,786,500				63.05				12,364,288				66.14				9.27	%
2021			147,540				20,275,012				137.42				22,075,878				149.63				7.31	%
2022			200,108				18,071,499				90.31				19,839,940				99.15				9.92	%
2023			196,555				17,857,278				90.85				20,294,455				103.25				9.74	%
2024			112,560				9,784,952				86.93				11,611,154				103.16				5.58	%
Thereafter			430,798				30,720,066				71.31				40,663,759				94.39				21.36	%

 

(1)	For disclosures relating to our definition of Annualized Revenue, see page 50.

(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.

Fourth Quarter 2015

 

GRAND TOTAL OF ALL

IN-SERVICE PROPERTIES

 

Lease Expirations (1) (2) (3)

 

 

														Annualized				Annualized
		Rentable Square				Current Annualized				Current Annualized				Revenues Under				Revenues Under
Year of Lease		Footage Subject to				Revenues Under				Revenues Under				Expiring Leases				Expiring Leases with				Percentage of
Expiration		Expiring Leases				Expiring Leases				Expiring Leases p.s.f.				with future step-ups				future step-ups - p.s.f.				Total Square Feet
2015			366,784			$	20,110,864			$	54.83			$	20,110,864			$	54.83				0.89	%(4)
2016			2,933,268				165,819,092				56.53				167,936,425				57.25				7.14	%
2017			2,946,289				186,771,866				63.39				188,037,990				63.82				7.17	%
2018			1,862,709				118,524,008				63.63				121,135,964				65.03				4.53	%
2019			3,349,851				176,279,203				52.62				182,064,958				54.35				8.15	%
2020			4,537,588				281,177,646				61.97				293,995,079				64.79				11.04	%
2021			2,858,557				158,321,740				55.39				176,217,416				61.65				6.95	%
2022			3,969,739				224,453,825				56.54				246,117,470				62.00				9.66	%
2023			1,366,323				82,256,212				60.20				94,747,317				69.34				3.32	%
2024			2,722,736				158,826,525				58.33				178,524,558				65.57				6.62	%
Thereafter			10,757,883				724,345,138				67.33				923,995,781				85.89				26.17	%

Occupancy By Location (2) (5)

 

 

		CBD								Suburban								Total
Location		31-Dec-15				31-Dec-14				31-Dec-15				31-Dec-14				31-Dec-15				31-Dec-14
Boston			91.3	%			93.1	%			89.2	%			88.3	%			90.6	%			91.4	%
New York			96.3	%			93.4	%			74.1	%			82.0	%			91.5	%			90.9	%
San Francisco			91.7	%			94.8	%			99.0	%			76.9	%			93.8	%			88.3	%
Washington, DC			92.1	%			95.9	%			90.3	%			94.1	%			91.0	%			94.8	%
Total Portfolio			93.2	%			93.9	%			88.3	%			87.9	%			91.4	%			91.7	%

 

(1)	For disclosures relating to our definition of Annualized Revenue, see page 50.

(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 current quarter.

(5)	Includes approximately 2,200,000 square feet of retail space, excluding our residential and hotel properties.

 

28

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Boston Properties, Inc.

Fourth Quarter 2015

 

IN-SERVICE BOSTON REGION PROPERTIES

 

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

 

 

		OFFICE																				OFFICE/TECHNICAL
														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
2015			220			$	16,228			$	73.76			$	16,228			$	73.76	(4)			—			$	—			$	—			$	—			$	—
2016			663,805				25,714,075				38.74				26,641,583				40.13				225,532				20,168,726				89.43				20,168,726				89.43
2017			622,790				25,764,668				41.37				26,055,589				41.84				—				—				—				—				—
2018			439,393				18,779,093				42.74				19,148,866				43.58				—				—				—				—				—
2019			1,071,753				51,406,833				47.97				52,170,169				48.68				—				—				—				—				—
2020			548,613				25,934,446				47.27				27,180,615				49.54				—				—				—				—				—
2021			891,282				33,882,690				38.02				35,673,796				40.03				—				—				—				—				—
2022			1,599,282				76,128,436				47.60				80,979,589				50.63				—				—				—				—				—
2023			349,728				19,873,774				56.83				22,568,060				64.53				—				—				—				—				—
2024			432,386				20,452,303				47.30				22,132,791				51.19				67,362				2,969,474				44.08				3,508,370				52.08
Thereafter			4,454,481				248,173,075				55.71				290,849,577				65.29				—				—				—				—				—
																							—				—				0				—				0
		RETAIL																				Total Property Types
														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
2015			5			$	172,840			$	34,567.99			$	172,840			$	34,567.99	(4)			225			$	189,068			$	840.30			$	189,068			$	840.30	(4)
2016			60,818				5,266,037				86.59				5,188,128				85.31				950,155				51,148,838				53.83				51,998,437				54.73	(5)
2017			50,038				3,723,359				74.41				3,749,198				74.93				672,828				29,488,026				43.83				29,804,787				44.30
2018			137,942				6,399,979				46.40				6,420,139				46.54				577,335				25,179,072				43.61				25,569,005				44.29
2019			11,787				1,943,810				164.91				2,020,713				171.44				1,083,540				53,350,642				49.24				54,190,882				50.01
2020			93,309				6,064,417				64.99				6,283,052				67.34				641,922				31,998,863				49.85				33,463,666				52.13
2021			38,642				2,668,952				69.07				2,805,071				72.59				929,924				36,551,642				39.31				38,478,867				41.38
2022			94,117				5,759,144				61.19				6,330,780				67.26				1,693,399				81,887,580				48.36				87,310,368				51.56
2023			79,937				7,257,006				90.78				8,092,786				101.24				429,665				27,130,780				63.14				30,660,846				71.36
2024			70,570				4,180,246				59.24				4,581,186				64.92				570,318				27,602,023				48.40				30,222,346				52.99
Thereafter			152,155				6,834,761				44.92				7,945,114				52.22				4,606,636				255,007,836				55.36				298,794,691				64.86

 

(1)	For disclosures relating to our definition of Annualized Revenue, see page 50.

(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 225,532 square feet of research/laboratory space. Excluding the research/laboratory space, current and future expiring rents would be $42.51 per square foot and $43.69 per square foot, respectively. This 225,532 square feet of research/laboratory space is subject to a tenant purchase option that was exercised on October 22, 2014 and closed on February 1, 2016.

 

29

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Boston Properties, Inc.

Fourth Quarter 2015

 

IN-SERVICE BOSTON REGION PROPERTIES

 

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

 

 

		OFFICE																				OFFICE/TECHNICAL
														Annualized																				Annualized
		Rentable Square				Current Annualized				Per				Revenues Under				Per				Rentable Square				Current Annualized				Per				Revenues Under				Per
Lease Expiration		Footage Subject to				Revenues Under				Square				Expiring Leases				Square				Footage Subject to				Revenues Under				Square				Expiring Leases				Square
by Quarter		Expiring Leases				Expiring Leases				Foot				with future step-ups				Foot				Expiring Leases				Expiring Leases				Foot				with future step-ups				Foot
Q1 2015			—			$	—			$	—			$	—			$	—				—			$	—			$	—			$	—			$	—
Q2 2015			—				—				—				—				—				—				—				—				—				—
Q3 2015			—				—				—				—				—				—				—				—				—				—
Q4 2015			220				16,228				73.76				16,228				73.76	(4)			—				—				—				—				—
Total 2015			220			$	16,228			$	73.76			$	16,228			$	73.76				—			$	—			$	—			$	—			$	—
Q1 2016			135,711			$	5,377,325			$	39.62			$	5,377,325			$	39.62				225,532			$	20,168,726			$	89.43			$	20,168,726			$	89.43
Q2 2016			27,360				1,401,357				51.22				1,401,357				51.22				—				—				—				—				—
Q3 2016			401,094				14,927,073				37.22				14,932,546				37.23				—				—				—				—				—
Q4 2016			99,640				4,008,320				40.23				4,930,355				49.48				—				—				—				—				—
Total 2016			663,805			$	25,714,075			$	38.74			$	26,641,583			$	40.13				225,532			$	20,168,726			$	89.43			$	20,168,726			$	89.43
		RETAIL																				Total Property Types
														Annualized																				Annualized
		Rentable Square				Current Annualized				Per				Revenues Under				Per				Rentable Square				Current Annualized				Per				Revenues Under				Per
Lease Expiration		Footage Subject to				Revenues Under				Square				Expiring Leases				Square				Footage Subject to				Revenues Under				Square				Expiring Leases				Square
by Quarter		Expiring Leases				Expiring Leases				Foot				with future step-ups				Foot				Expiring Leases				Expiring Leases				Foot				with future step-ups				Foot
Q1 2015			—			$	—			$	—			$	—			$	—				—			$	—			$	—			$	—			$	—
Q2 2015			—				—				—				—				—				—				—				—				—				—
Q3 2015			—				—				—				—				—				—				—				—				—				—
Q4 2015			5				172,840				34,567.99				172,840				34,567.99	(4)			225				189,068				840.30				189,068				840.30	(4)
Total 2015			5			$	172,840			$	34,567.99			$	172,840			$	34,567.99				225			$	189,068			$	840.30			$	189,068			$	840.30
Q1 2016			14,691			$	1,662,905			$	113.19			$	1,578,533			$	107.45				375,934			$	27,208,957			$	72.38			$	27,124,584			$	72.15
Q2 2016			1,420				576,678				406.11				526,278				370.62				28,780				1,978,035				68.73				1,927,635				66.98
Q3 2016			42,060				2,583,570				61.43				2,638,884				62.74				443,154				17,510,644				39.51				17,571,431				39.65
Q4 2016			2,647				442,883				167.31				444,432				167.90				102,287				4,451,202				43.52				5,374,787				52.55
Total 2016			60,818			$	5,266,037			$	86.59			$	5,188,128			$	85.31				950,155			$	51,148,838			$	53.83			$	51,998,437			$	54.73

 

(1)	For disclosures relating to our definition of Annualized Revenue, see page 50.

(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.

 

30

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Boston Properties, Inc.

Fourth Quarter 2015

 

IN-SERVICE NEW YORK REGION PROPERTIES

 

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

 

 

		OFFICE																				OFFICE/TECHNICAL
														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
2015			54,005			$	1,948,786			$	36.09			$	1,948,786			$	36.09	(4)			—			$	—			$	—			$	—			$	—
2016			558,787				38,745,168				69.34				38,992,761				69.78				—				—				—				—				—
2017			1,109,289				98,710,890				88.99				98,842,535				89.10				—				—				—				—				—
2018			553,502				45,719,950				82.60				45,218,538				81.70				—				—				—				—				—
2019			515,904				41,774,069				80.97				41,861,225				81.14				—				—				—				—				—
2020			1,872,223				149,582,967				79.90				154,189,769				82.36				—				—				—				—				—
2021			330,885				26,913,653				81.34				28,681,591				86.68				—				—				—				—				—
2022			855,868				71,368,266				83.39				76,589,174				89.49				—				—				—				—				—
2023			88,524				7,776,705				87.85				8,502,899				96.05				—				—				—				—				—
2024			1,043,754				71,088,030				68.11				77,438,441				74.19				—				—				—				—				—
Thereafter			3,220,851				285,987,454				88.79				380,533,400				118.15				—				—				—				—				—
		RETAIL																				Total Property Types
														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
2015			308			$	39,930			$	129.64			$	39,930			$	129.64	(4)			54,313			$	1,988,717			$	36.62			$	1,988,717			$	36.62	(4)
2016			114,718				10,182,631				88.76				9,510,319				82.90				673,505				48,927,799				72.65				48,503,079				72.02
2017			31,285				5,909,508				188.89				5,909,508				188.89				1,140,574				104,620,398				91.73				104,752,043				91.84
2018			6,514				8,436,154				1,295.08				9,213,309				1,414.39				560,016				54,156,104				96.70				54,431,847				97.20
2019			—				—				—				—				—				515,904				41,774,069				80.97				41,861,225				81.14
2020			3,452				241,800				70.05				241,800				70.05				1,875,675				149,824,767				79.88				154,431,569				82.33
2021			27,201				12,457,543				457.98				13,665,607				502.39				358,086				39,371,195				109.95				42,347,199				118.26
2022			58,093				9,875,561				170.00				10,809,559				186.07				913,961				81,243,828				88.89				87,398,733				95.63
2023			32,984				6,595,448				199.96				7,789,358				236.16				121,508				14,372,153				118.28				16,292,256				134.08
2024			11,395				3,939,537				345.73				5,074,896				445.36				1,055,149				75,027,567				71.11				82,513,336				78.20
Thereafter			73,908				16,026,790				216.85				23,348,124				315.91				3,294,759				302,014,244				91.67				403,881,524				122.58

 

(1)	For disclosures relating to our definition of Annualized Revenue, see page 50.

(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.

 

31

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Boston Properties, Inc.

Fourth Quarter 2015

 

IN-SERVICE NEW YORK REGION PROPERTIES

 

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

 

 

		OFFICE																				OFFICE/TECHNICAL
														Annualized																				Annualized
		Rentable Square				Current Annualized				Per				Revenues Under				Per				Rentable Square				Current Annualized				Per				Revenues Under				Per
Lease Expiration		Footage Subject to				Revenues Under				Square				Expiring Leases				Square				Footage Subject to				Revenues Under				Square				Expiring Leases				Square
by Quarter		Expiring Leases				Expiring Leases				Foot				with future step-ups				Foot				Expiring Leases				Expiring Leases				Foot				with future step-ups				Foot
Q1 2015			—			$	—			$	—			$	—			$	—				—			$	—			$	—			$	—			$	—
Q2 2015			—				—				—				—				—				—				—				—				—				—
Q3 2015			—				—				—				—				—				—				—				—				—				—
Q4 2015			54,005				1,948,786				36.09				1,948,786				36.09	(4)			—				—				—				—				—
Total 2015			54,005			$	1,948,786			$	36.09			$	1,948,786			$	36.09				—			$	—			$	—			$	—			$	—
Q1 2016			154,476			$	7,037,580			$	45.56			$	7,037,580			$	45.56				—			$	—			$	—			$	—			$	—
Q2 2016			235,943				20,149,718				85.40				20,149,718				85.40				—				—				—				—				—
Q3 2016			87,604				5,728,647				65.39				5,942,807				67.84				—				—				—				—				—
Q4 2016			80,764				5,829,224				72.18				5,862,656				72.59				—				—				—				—				—
Total 2016			558,787			$	38,745,168			$	69.34			$	38,992,761			$	69.78				—			$	—			$	—			$	—			$	—
		RETAIL																				Total Property Types
														Annualized																				Annualized
		Rentable Square				Current Annualized				Per				Revenues Under				Per				Rentable Square				Current Annualized				Per				Revenues Under				Per
Lease Expiration		Footage Subject to				Revenues Under				Square				Expiring Leases				Square				Footage Subject to				Revenues Under				Square				Expiring Leases				Square
by Quarter		Expiring Leases				Expiring Leases				Foot				with future step-ups				Foot				Expiring Leases				Expiring Leases				Foot				with future step-ups				Foot
Q1 2015			—			$	—			$	—			$	—			$	—				—			$	—			$	—			$	—			$	—
Q2 2015			—				—				—				—				—				—				—				—				—				—
Q3 2015			—				—				—				—				—				—				—				—				—				—
Q4 2015			308				39,930				129.64				39,930				129.64	(4)			54,313				1,988,717				36.62				1,988,717				36.62	(4)
Total 2015			308			$	39,930			$	129.64			$	39,930			$	129.64				54,313			$	1,988,717			$	36.62			$	1,988,717			$	36.62
Q1 2016			7,298			$	2,627,501			$	360.03			$	2,627,501			$	360.03				161,774			$	9,665,081			$	59.74			$	9,665,081			$	59.74
Q2 2016			56,508				3,681,974				65.16				3,009,662				53.26				292,451				23,831,692				81.49				23,159,380				79.19
Q3 2016			48,250				3,504,351				72.63				3,504,351				72.63				135,854				9,232,998				67.96				9,447,158				69.54
Q4 2016			2,662				368,805				138.54				368,805				138.54				83,426				6,198,029				74.29				6,231,461				74.69
Total 2016			114,718			$	10,182,631			$	88.76			$	9,510,319			$	82.90				673,505			$	48,927,799			$	72.65			$	48,503,079			$	72.02

 

(1)	For disclosures relating to our definition of Annualized Revenue, see page 50.

(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.

 

32

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Boston Properties, Inc.

Fourth Quarter 2015

 

IN-SERVICE SAN FRANCISCO REGION PROPERTIES

 

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

 

 

		OFFICE																				OFFICE/TECHNICAL
														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
2015			238,961			$	9,397,447			$	39.33			$	9,397,447			$	39.33	(4)			4,200			$	111,706			$	26.60			$	111,706			$	26.60	(4)
2016			616,949				27,383,357				44.39				26,793,101				43.43				69,002				2,600,412				37.69				2,600,412				37.69
2017			402,504				18,331,928				45.54				18,600,288				46.21				118,755				4,537,029				38.20				4,634,648				39.03
2018			200,151				11,362,058				56.77				11,835,231				59.13				28,364				1,200,331				42.32				1,258,325				44.36
2019			386,829				20,214,555				52.26				21,584,575				55.80				309,178				11,476,673				37.12				12,578,025				40.68
2020			600,757				37,216,601				61.95				39,438,302				65.65				34,404				1,431,847				41.62				1,582,114				45.99
2021			310,078				15,994,613				51.58				20,974,053				67.64				—				—				—				—				—
2022			564,028				26,324,068				46.67				30,811,849				54.63				—				—				—				—				—
2023			221,471				12,699,752				57.34				15,033,077				67.88				—				—				—				—				—
2024			445,553				23,826,294				53.48				27,715,596				62.20				—				—				—				—				—
Thereafter			701,907				39,901,950				56.85				54,606,246				77.80				—				—				—				—				—
		RETAIL																				Total Property Types
														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
2015			—			$	—			$	—			$	—			$	—				243,161			$	9,509,153			$	39.11			$	9,509,153			$	39.11	(4)
2016			35,405				1,827,803				51.63				1,835,667				51.85				721,356				31,811,572				44.10				31,229,180				43.29
2017			16,079				1,111,870				69.15				1,126,136				70.04				537,338				23,980,828				44.63				24,361,072				45.34
2018			33,905				2,018,979				59.55				2,070,696				61.07				262,420				14,581,369				55.57				15,164,252				57.79
2019			11,730				691,984				58.99				724,188				61.74				707,737				32,383,213				45.76				34,886,788				49.29
2020			35,924				2,169,576				60.39				2,332,074				64.92				671,085				40,818,023				60.82				43,352,490				64.60
2021			18,918				1,209,997				63.96				1,263,697				66.80				328,996				17,204,610				52.29				22,237,750				67.59
2022			27,445				1,071,656				39.05				1,146,681				41.78				591,473				27,395,724				46.32				31,958,530				54.03
2023			27,788				1,515,427				54.54				1,613,199				58.05				249,259				14,215,179				57.03				16,646,276				66.78
2024			8,545				556,985				65.18				655,485				76.71				454,098				24,383,279				53.70				28,371,080				62.48
Thereafter			26,644				1,562,120				58.63				2,082,055				78.14				728,551				41,464,070				56.91				56,688,301				77.81

 

(1)	For disclosures relating to our definition of Annualized Revenue, see page 50.

(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.

 

33

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Boston Properties, Inc.

Fourth Quarter 2015

 

IN-SERVICE SAN FRANCISCO REGION PROPERTIES

 

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

 

 

		OFFICE																				OFFICE/TECHNICAL
														Annualized																				Annualized
		Rentable Square				Current Annualized				Per				Revenues Under				Per				Rentable Square				Current Annualized				Per				Revenues Under				Per
Lease Expiration		Footage Subject to				Revenues Under				Square				Expiring Leases				Square				Footage Subject to				Revenues Under				Square				Expiring Leases				Square
by Quarter		Expiring Leases				Expiring Leases				Foot				with future step-ups				Foot				Expiring Leases				Expiring Leases				Foot				with future step-ups				Foot
Q1 2015			—			$	—			$	—			$	—			$	—				—			$	—			$	—			$	—			$	—
Q2 2015			—				—				—				—				—				—				—				—				—				—
Q3 2015			—				—				—				—				—				—				—				—				—				—
Q4 2015			238,961				9,397,447				39.33				9,397,447				39.33	(4)			4,200				111,706				26.60				111,706				26.60	(4)
Total 2015			238,961			$	9,397,447			$	39.33			$	9,397,447			$	39.33				4,200			$	111,706			$	26.60			$	111,706			$	26.60
Q1 2016			33,703			$	1,500,441			$	44.52			$	1,505,076			$	44.66				—			$	—			$	—			$	—			$	—
Q2 2016			187,381				7,743,191				41.32				7,756,188				41.39				27,790				877,109				31.56				877,109				31.56
Q3 2016			108,884				5,712,413				52.46				5,716,376				52.50				31,062				1,276,885				41.11				1,276,885				41.11
Q4 2016			286,981				12,427,312				43.30				11,815,461				41.17				10,150				446,418				43.98				446,418				43.98
Total 2016			616,949			$	27,383,357			$	44.39			$	26,793,101			$	43.43				69,002			$	2,600,412			$	37.69			$	2,600,412			$	37.69
		RETAIL																				Total Property Types
														Annualized																				Annualized
		Rentable Square				Current Annualized				Per				Revenues Under				Per				Rentable Square				Current Annualized				Per				Revenues Under				Per
Lease Expiration		Footage Subject to				Revenues Under				Square				Expiring Leases				Square				Footage Subject to				Revenues Under				Square				Expiring Leases				Square
by Quarter		Expiring Leases				Expiring Leases				Foot				with future step-ups				Foot				Expiring Leases				Expiring Leases				Foot				with future step-ups				Foot
Q1 2015			—			$	—			$	—			$	—			$	—				—			$	—			$	—			$	—			$	—
Q2 2015			—				—				—				—				—				—				—				—				—				—
Q3 2015			—				—				—				—				—				—				—				—				—				—
Q4 2015			—				—				—				—				—				243,161				9,509,153				39.11				9,509,153				39.11	(4)
Total 2015			—			$	—			$	—			$	—			$	—				243,161			$	9,509,153			$	39.11			$	9,509,153			$	39.11
Q1 2016			4,613			$	356,964			$	77.38			$	356,965			$	77.38				38,316			$	1,857,405			$	48.48			$	1,862,041			$	48.60
Q2 2016			2,236				154,554				69.12				154,554				69.12				217,407				8,774,854				40.36				8,787,851				40.42
Q3 2016			4,305				241,637				56.13				242,241				56.27				144,251				7,230,936				50.13				7,235,502				50.16
Q4 2016			24,251				1,074,647				44.31				1,081,907				44.61				321,382				13,948,377				43.40				13,343,786				41.52
Total 2016			35,405			$	1,827,803			$	51.63			$	1,835,667			$	51.85				721,356			$	31,811,572			$	44.10			$	31,229,180			$	43.29

 

(1)	For disclosures relating to our definition of Annualized Revenue, see page 50.

(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.

 

34

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Boston Properties, Inc.

Fourth Quarter 2015

 

IN-SERVICE WASHINGTON, DC REGION PROPERTIES

 

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

 

 

		OFFICE																				OFFICE/TECHNICAL
														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
2015			69,085			$	8,423,926			$	121.94			$	8,423,926			$	121.94	(4)(5)			—			$	—			$	—			$	—			$	—
2016			513,124				30,417,708				59.28				32,690,682				63.71	(5)			33,400				787,662				23.58				787,662				23.58
2017			513,908				24,353,987				47.39				24,753,463				48.17				13,408				286,330				21.36				293,252				21.87
2018			407,105				20,781,066				51.05				22,047,596				54.16				—				—				—				—				—
2019			830,363				42,348,506				51.00				44,550,615				53.65				146,028				2,754,165				18.86				2,817,237				19.29
2020			1,071,900				50,040,606				46.68				53,982,425				50.36				222,756				5,184,678				23.28				5,257,566				23.60
2021			1,068,912				59,544,629				55.71				66,995,942				62.68				109,860				1,711,144				15.58				1,816,155				16.53
2022			750,453				32,561,555				43.39				37,896,918				50.50				—				—				—				—				—
2023			510,045				24,048,703				47.15				28,348,826				55.58				—				—				—				—				—
2024			606,295				30,365,767				50.08				35,731,799				58.93				14,826				339,705				22.91				386,407				26.06
Thereafter			1,926,407				119,110,301				61.83				156,801,906				81.40				23,439				452,293				19.30				540,892				23.08
		RETAIL																				Total Property Types
														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
2015			—			$	—			$	—			$	—			$	—				69,085			$	8,423,926			$	121.94			$	8,423,926			$	121.94	(4)
2016			41,728				2,725,513				65.32				2,727,385				65.36				588,252				33,930,883				57.68				36,205,729				61.55
2017			68,233				4,042,297				59.24				4,073,374				59.70				595,549				28,682,614				48.16				29,120,089				48.90
2018			55,833				3,826,397				68.53				3,923,264				70.27				462,938				24,607,463				53.15				25,970,860				56.10
2019			66,279				3,668,608				55.35				3,758,211				56.70				1,042,670				48,771,279				46.78				51,126,063				49.03
2020			54,250				3,310,708				61.03				3,507,363				64.65				1,348,906				58,535,992				43.40				62,747,354				46.52
2021			62,779				3,938,521				62.74				4,341,503				69.16				1,241,551				65,194,294				52.51				73,153,600				58.92
2022			20,453				1,365,137				66.75				1,552,921				75.93				770,906				33,926,693				44.01				39,449,839				51.17
2023			55,846				2,489,397				44.58				2,799,112				50.12				565,891				26,538,100				46.90				31,147,938				55.04
2024			22,050				1,108,183				50.26				1,299,588				58.94				643,171				31,813,656				49.46				37,417,795				58.18
Thereafter			178,091				6,296,394				35.35				7,288,467				40.93				2,127,937				125,858,988				59.15				164,631,265				77.37

 

(1)	For disclosures relating to our definition of Annualized Revenue, see page 50.

(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 52,424 and 42,440 square feet of Sensitive Compartmented Information Facility (SCIF) space in 2015 and 2016, respectively. Excluding the SCIF space, the current and future expiring rental rates per square foot would be $54.51 and $54.51 and $52.20 and $57.03, respectively.

 

35

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Boston Properties, Inc.

Fourth Quarter 2015

 

IN-SERVICE WASHINGTON, DC REGION PROPERTIES

 

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

 

 

		OFFICE																				OFFICE/TECHNICAL
Lease Expiration		Rentable Square Footage Subject to				Current Annualized Revenues Under				Per Square				Annualized Revenues Under Expiring Leases				Per Square				Rentable Square Footage Subject to				Current Annualized Revenues Under				Per Square				Annualized Revenues Under Expiring Leases				Per Square
by Quarter		Expiring Leases				Expiring Leases				Foot				with future step-ups				Foot				Expiring Leases				Expiring Leases				Foot				with future step-ups				Foot
Q1 2015			—			$	—			$	—			$	—			$	—				—			$	—			$	—			$	—			$	—
Q2 2015			—				—				—				—				—				—				—				—				—				—
Q3 2015			—				—				—				—				—				—				—				—				—				—
Q4 2015			69,085				8,423,926				121.94				8,423,926				121.94	(4)(5)			—				—				—				—				—
Total 2015			69,085			$	8,423,926			$	121.94			$	8,423,926			$	121.94				—			$	—			$	—			$	—			$	—
Q1 2016			174,318			$	11,502,231			$	65.98			$	13,543,752			$	77.70	(5)			—			$	—			$	—			$	—			$	—
Q2 2016			130,680				5,517,910				42.22				5,613,194				42.95				—				—				—				—				—
Q3 2016			113,045				8,402,904				74.33				8,467,720				74.91	(5)			33,400				787,662				23.58				787,662				23.58
Q4 2016			95,081				4,994,663				52.53				5,066,015				53.28				—				—				—				—				—
Total 2016			513,124			$	30,417,708			$	59.28			$	32,690,682			$	63.71				33,400			$	787,662			$	23.58			$	787,662			$	23.58
		RETAIL																				Total Property Types
Lease Expiration		Rentable Square Footage Subject to				Current Annualized Revenues Under				Per Square				Annualized Revenues Under Expiring Leases				Per Square				Rentable Square Footage Subject to				Current Annualized Revenues Under				Per Square				Annualized Revenues Under Expiring Leases				Per Square
by Quarter		Expiring Leases				Expiring Leases				Foot				with future step-ups				Foot				Expiring Leases				Expiring Leases				Foot				with future step-ups				Foot
Q1 2015			—			$	—			$	—			$	—			$	—				—			$	—			$	—			$	—			$	—
Q2 2015			—				—				—				—				—				—				—				—				—				—
Q3 2015			—				—				—				—				—				—				—				—				—				—
Q4 2015			—				—				—				—				—				69,085				8,423,926				121.94				8,423,926				121.94	(4)
Total 2015			—			$	—			$	—			$	—			$	—				69,085			$	8,423,926			$	121.94			$	8,423,926			$	121.94
Q1 2016			11,338			$	872,898			$	76.99			$	872,898			$	76.99				185,656			$	12,375,129			$	66.66			$	14,416,650			$	77.65
Q2 2016			—				—				—				—				—				130,680				5,517,910				42.22				5,613,194				42.95
Q3 2016			4,047				286,460				70.78				288,332				71.25				150,492				9,477,026				62.97				9,543,714				63.42
Q4 2016			26,343				1,566,156				59.45				1,566,156				59.45				121,424				6,560,819				54.03				6,632,171				54.62
Total 2016			41,728			$	2,725,513			$	65.32			$	2,727,385			$	65.36				588,252			$	33,930,883			$	57.68			$	36,205,729			$	61.55

 

(1)	For disclosures relating to our definition of Annualized Revenue, see page 50.

(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 52,424, 14,473, and 27,967 square feet of Sensitive Compartmented Information Facility (SCIF) space in Q4 2015, Q1 2016, and Q3 2016, respectively. Excluding the SCIF space, the current and future expiring rental rates per square foot would be $54.51 and $54.51, $60.75 and $73.52, and $51.08 and $51.84, respectively.

 

36

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Boston Properties, Inc.

Fourth Quarter 2015

 

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
2015			225			$	189,068			$	840.30			$	189,068			$	840.30	(4)			52,160			$	2,184,364			$	41.88			$	2,184,364			$	41.88	(4)
2016			427,380				32,527,727				76.11				33,370,643				78.08	(5)			487,159				26,079,869				53.53				25,383,024				52.10
2017			236,732				14,660,099				61.93				14,855,701				62.75				264,056				14,878,981				56.35				15,019,425				56.88
2018			315,134				16,564,700				52.56				16,732,313				53.10				218,855				12,840,596				58.67				13,317,707				60.85
2019			645,570				36,552,564				56.62				37,119,229				57.50				241,344				13,400,052				55.52				14,092,656				58.39
2020			437,533				25,551,496				58.40				26,384,635				60.30				595,438				37,506,518				62.99				39,694,448				66.66
2021			370,216				20,314,192				54.87				21,044,514				56.84				328,996				17,204,610				52.29				22,237,750				67.59
2022			961,381				54,750,346				56.95				59,846,236				62.25				301,026				15,993,974				53.13				19,087,076				63.41
2023			387,848				25,823,460				66.58				29,184,459				75.25				208,602				12,118,635				58.09				13,846,089				66.38
2024			297,339				17,262,278				58.06				18,546,043				62.37				429,586				23,427,311				54.53				27,160,089				63.22
Thereafter			3,914,283				226,471,293				57.86				266,821,307				68.17				722,909				41,277,884				57.10				56,438,083				78.07
		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
2015			486			$	100,430			$	206.65			$	100,430			$	206.65	(4)			13,542			$	794,232			$	58.65			$	794,232			$	58.65	(4)
2016			474,933				42,407,604				89.29				41,754,353				87.92				231,992				13,695,054				59.03				15,796,903				68.09
2017			987,491				99,028,746				100.28				99,132,979				100.39				336,586				15,888,388				47.20				16,001,898				47.54
2018			347,821				47,068,148				135.32				47,141,698				135.53				122,723				7,038,120				57.35				7,476,328				60.92
2019			352,598				35,996,185				102.09				35,921,460				101.88				415,251				26,125,808				62.92				27,909,614				67.21
2020			1,563,249				139,317,501				89.12				143,299,451				91.67				449,893				23,824,157				52.96				25,792,600				57.33
2021			278,833				36,766,351				131.86				39,585,154				141.97				533,479				33,962,677				63.66				38,150,972				71.51
2022			851,642				79,226,609				93.03				85,194,400				100.04				77,759				4,485,156				57.68				5,082,081				65.36
2023			113,209				14,106,360				124.60				16,009,866				141.42				57,290				3,883,174				67.78				4,591,944				80.15
2024			670,747				61,810,077				92.15				68,507,668				102.14				182,005				11,679,075				64.17				13,801,985				75.83
Thereafter			3,071,787				294,404,494				95.84				395,548,875				128.77				1,460,782				99,898,140				68.39				132,070,662				90.41

 

(1)	For disclosures relating to our definition of Annualized Revenue, see page 50.

(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 225,532 square feet of research/laboratory space. Excluding the research/laboratory space and the retail space, current and future expiring rental rates per square foot would be $60.86 and $65.16, respectively, in 2016. This 225,532 square feet of research/laboratory space is subject to a tenant purchase option that was exercised on October 22, 2014 and closed on February 1, 2016.

 

37

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Boston Properties, Inc.

Fourth Quarter 2015

 

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
2015			—			$	—			$	—			$	—			$	—				191,001			$	7,324,789			$	38.35			$	7,324,789			$	38.35	(4)
2016			522,775				18,621,111				35.62				18,627,794				35.63				234,197				5,731,703				24.47				5,846,156				24.96
2017			436,096				14,827,927				34.00				14,949,086				34.28				273,282				9,101,847				33.31				9,341,646				34.18
2018			262,201				8,614,371				32.85				8,836,692				33.70				43,565				1,740,773				39.96				1,846,545				42.39
2019			437,970				16,798,079				38.35				17,071,653				38.98				466,393				18,983,160				40.70				20,794,132				44.59
2020			204,389				6,447,368				31.54				7,079,032				34.64				75,647				3,311,505				43.78				3,658,042				48.36
2021			559,708				16,237,450				29.01				17,434,354				31.15				—				—				—				—				—
2022			732,018				27,137,234				37.07				27,464,132				37.52				290,447				11,401,750				39.26				12,871,454				44.32
2023			41,817				1,307,320				31.26				1,476,387				35.31				40,657				2,096,544				51.57				2,800,187				68.87
2024			272,979				10,339,745				37.88				11,676,303				42.77				24,512				955,968				39.00				1,210,992				49.40
Thereafter			692,353				28,536,543				41.22				31,973,384				46.18				5,642				186,186				33.00				250,218				44.35
		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
2015			53,827			$	1,888,286			$	35.08			$	1,888,286			$	35.08	(4)			55,543			$	7,629,695			$	137.37			$	7,629,695			$	137.37	(4)(5)
2016			198,572				6,520,195				32.84				6,748,726				33.99				356,260				20,235,829				56.80				20,408,826				57.29	(5)
2017			153,083				5,591,652				36.53				5,619,064				36.71				258,963				12,794,226				49.41				13,118,191				50.66
2018			212,195				7,087,956				33.40				7,290,150				34.36				340,215				17,569,343				51.64				18,494,532				54.36
2019			163,306				5,777,884				35.38				5,939,764				36.37				627,419				22,645,472				36.09				23,216,449				37.00
2020			312,426				10,507,266				33.63				11,132,118				35.63				899,013				34,711,836				38.61				36,954,753				41.11
2021			79,253				2,604,844				32.87				2,762,045				34.85				708,072				31,231,617				44.11				35,002,628				49.43
2022			62,319				2,017,219				32.37				2,204,333				35.37				693,147				29,441,537				42.48				34,367,758				49.58
2023			8,299				265,793				32.03				282,391				34.03				508,601				22,654,927				44.54				26,555,994				52.21
2024			384,402				13,217,490				34.38				14,005,669				36.43				461,166				20,134,581				43.66				23,615,809				51.21
Thereafter			222,972				7,609,750				34.13				8,332,649				37.37				667,155				25,960,848				38.91				32,560,603				48.81

 

(1)	For disclosures relating to our definition of Annualized Revenue, see page 50.

(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 52,424 and 42,440 square feet of Sensitive Compartmented Information Facility (SCIF) space in 2015 and 2016, respectively. Excluding the SCIF space from 2015, the current and future expiring rental rates per square foot would be $36.53 and $36.53 and $45.84 and $46.39, respectively.

 

38

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Boston Properties, Inc.

Fourth Quarter 2015

 

RESIDENTIAL and HOTEL PERFORMANCE

 

 

Rental Rates and Occupancy		Fourth Quarter				Fourth Quarter				Percent				YTD				YTD				Percent
		2015				2014				Change				2015				2014				Change
The Avant at Reston Town Center (359 units)
Reston, VA
Average Monthly Rental Rate (1)		$	2,301			$	2,278				1.0	%		$	2,268			$	2,235				1.5	%
Average Rental Rate Per Occupied Square Foot (1)		$	2.50			$	2.48				0.8	%		$	2.46			$	2.44				0.8	%
Average Physical Occupancy (1) (2)			94.5	%			67.8	%			39.4	%			90.8	%			38.8	%			134.0	%
Average Economic Occupancy (2)			93.9	%			63.8	%			47.2	%			89.2	%			34.2	%			160.8	%
The Lofts at Atlantic Wharf (86 units)
Boston, MA
Average Monthly Rental Rate (3)		$	4,129			$	3,963				4.2	%		$	4,052			$	3,926				3.2	%
Average Rental Rate Per Occupied Square Foot (3)		$	4.54			$	4.43				2.5	%		$	4.50			$	4.37				3.0	%
Average Physical Occupancy (2) (3)			95.4	%			96.1	%			(0.7	)%			96.4	%			96.3	%			0.1	%
Average Economic Occupancy (2)			96.7	%			96.8	%			(0.1	)%			97.4	%			96.5	%			0.9	%
Boston Marriott Cambridge (433 rooms)
Cambridge, MA
Average Occupancy			70.8	%			71.3	%			(0.7	)%			80.8	%			80.9	%			(0.1	)%
Average Daily Rate		$	287.97			$	272.43				5.7	%		$	275.43			$	254.96				8.0	%
Revenue per available room		$	203.91			$	194.20				5.0	%		$	222.47			$	206.22				7.9	%

 

Net Operating Income (in thousands)		Residential												Hotel
		Fourth Quarter				Fourth Quarter				Percent				Fourth Quarter				Fourth Quarter				Percent
		2015				2014(4)				Change				2015				2014				Change
Rental Revenue		$	4,106	(5)		$	7,195	(5)			(42.9	)%		$	10,939			$	10,907				0.3	%
Operating expenses and real estate taxes			1,616				4,061				(60.2	)%			7,888				7,539				4.6	%
Net Operating Income		$	2,490	(5)		$	3,134	(5)			(20.5	)%		$	3,051			$	3,368				(9.4	)%
Rental Revenue		$	4,106			$	7,195							$	10,939			$	10,907
Less: Straight line rent and fair value lease revenue			19				(29	)			165.5	%			1				1				0.0	%
Rental Revenue—cash basis			4,087				7,224				(43.4	)%			10,938				10,906				0.3	%
Less: Operating expenses and real estate taxes			1,616				4,061				(60.2	)%			7,888				7,539				4.6	%
Add: Straight line ground rent expense			—				523				(100.0	)%			—				—				0.0	%
Net Operating Income—cash basis		$	2,471			$	3,686				(33.0	)%		$	3,050			$	3,367				(9.4	)%

 

(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 51.

(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 $1.7 million of net operating income - cash basis for the quarter ended December 31, 2014.

(5)	Includes 35,796 square feet of retail space, which had revenue of approximately $599,000 for the quarter ended December 31, 2015, and 85,324 square feet of retail space, which had revenue of approximately $1.4 million for the quarter ended December 31, 2014.

 

39

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Boston Properties, Inc.

Fourth Quarter 2015

 

OCCUPANCY ANALYSIS

 

Same Property Occupancy⁽¹⁾ - By Location

 

 

		CBD								Suburban								Total
Location		31-Dec-15				31-Dec-14				31-Dec-15				31-Dec-14				31-Dec-15				31-Dec-14
Boston			91.3	%			93.1	%			89.2	%			88.1	%			90.6	%			91.4	%
New York			96.3	%			93.4	%			74.1	%			82.0	%			91.5	%			90.9	%
San Francisco			92.7	%			94.8	%			99.0	%			95.6	%			94.6	%			95.1	%
Washington, DC			92.1	%			95.5	%			92.0	%			94.1	%			92.1	%			94.7	%
Total Portfolio			93.4	%			93.8	%			88.9	%			90.4	%			91.8	%			92.6	%

Same Property Occupancy⁽¹⁾ - By Type of Property

 

 

		CBD								Suburban								Total
		31-Dec-15				31-Dec-14				31-Dec-15				31-Dec-14				31-Dec-15				31-Dec-14
Total Office Portfolio			93.3	%			93.8	%			89.8	%			90.9	%			92.1	%			92.8	%
Total Office/Technical Portfolio			100.0	%			100.0	%			80.8	%			85.1	%			84.2	%			87.7	%
Total Portfolio			93.4	%			93.8	%			88.9	%			90.4	%			91.8	%			92.6	%

 

(1)	For disclosures related to our definition of Same Properties, see page 50.

 

40

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Boston Properties, Inc.

Fourth Quarter 2015

 

SAME PROPERTY PERFORMANCE

 

Office, Office/Technical and Hotel & Residential Properties

 

 

		Office (1)				Office/Technical				Hotel & Residential (1)				Total
Number of Properties			118				31				3				152
Square feet			38,800,693				1,701,412				776,704				41,278,809
Percent of properties in-service			98.5	%			100.0	%			100.0	%			98.6	%
Occupancy @ 12/31/2014			92.8	%			87.7	%			N/A				92.6	%
Occupancy @ 12/31/2015			92.1	%			84.2	%			N/A				91.8	%
Percent change from 4th quarter 2015 over 4th quarter 2014 (2):
Rental revenue			0.8	%			(1.8	)%			6.1	%
Operating expenses and real estate taxes			4.2	%			(8.3	)%			6.6	%
Consolidated Net Operating Income (3) - excluding hotel & residential			(1.0	)%			0.6	%							(1.0	)%(2)
Consolidated Net Operating Income (3) - Hotel & residential															5.2	%(2)
Net Operating Income - BXP’s share of unconsolidated joint ventures (3) (4)															(10.1	)%(2)
Combined Net Operating Income (3)															(1.2	)%
Rental revenue - cash basis			4.1	%			3.2	%			5.2	%
Consolidated Net Operating Income (3) - cash basis (5) excluding hotel & residential			2.4	%			7.8	%							2.6	%(2)
Consolidated Net Operating Income (3) - cash basis (5) - Hotel & residential															2.9	%(2)
Net Operating Income - cash basis (5) - BXP’s share of unconsolidated joint ventures															(20.5	)%(2)
Combined Net Operating Income (3) - cash basis (5)															1.8	%

Same Property Lease Analysis - quarter ended December 31, 2015

 

 

		Office				Office/ Technical				Total
Vacant space available @ 10/1/2015 (sf)			3,426,405				168,385				3,594,790
Property dispositions/ properties taken out of service (sf)			(437,700	)			—				(437,700	)
Square footage of leases expiring or terminated 10/1/2015-12/31/2015			1,179,785				12,900				1,192,685
Total space for lease (sf)			4,168,490				181,285				4,349,775
New tenants (sf)			434,838				—				434,838
Renewals (sf)			568,000				10,150				578,150
Total space leased (sf)			1,002,838				10,150				1,012,988
Space available @ 12/31/2015 (sf)			3,165,652				171,135				3,336,787
Net (increase)/decrease in available space (sf)			260,753				(2,750	)			258,003
Second generation leasing information: (6)
Leases commencing during the period (sf)			981,989				10,150				992,139
Weighted average lease term (months)			89				13				89
Weighted average free rent period (days)			35				—				34
Total transaction costs per square foot (7)		$	35.64			$	3.69			$	35.31
Increase (decrease) in gross rents (8)			12.62	%			57.49	%			12.93	%
Increase (decrease) in net rents (9)			17.90	%			72.49	%			18.34	%

 

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

(2)	See page 43 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 42. For disclosures relating to our use of Combined NOI and Consolidated NOI, see page 50.

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

(5)	For a quantitative reconciliation of NOI to NOI on a cash basis, see page 42.

(6)	Second generation leases are defined as leases for space that had previously been under lease by the Company. Of the 992,139 square feet of second generation leases that commenced in Q4 2015, leases for 885,750 square feet were signed in prior periods.

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

(8)

Represents the increase/(decrease) in gross rent (base rent plus expense reimbursements) on the new vs. expired leases on the 811,210 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”).

(9)

Represents the increase/(decrease) in net rent (gross rent less operating expenses) on the new vs. expired leases on the 811,210 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”).

 

41

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Boston Properties, Inc.

Fourth Quarter 2015

 

Reconciliation of Net Income to Net Operating Income

 

(in thousands)

 

		For the three months ended
		December 31, 2015				December 31, 2014
Net income attributable to Boston Properties, Inc. common shareholders		$	137,851			$	174,510
Preferred dividends			2,646				2,646
Net income attributable to Boston Properties, Inc.			140,497				177,156
Net income attributable to noncontrolling interests:
Noncontrolling interest—common units of the Operating Partnership			16,098				21,172
Noncontrolling interest—redeemable preferred units of the Operating Partnership			—				9
Noncontrolling interest in property partnerships (1)			10,143				13,088
Net income			166,738				211,425
Gains on sales of real estate			(81,332	)			(126,102	)
Income before gains on sales of real estate			85,406				85,323
Add:
Losses from early extinguishment of debt			22,040				10,633
Interest expense			106,178				117,904
Depreciation and amortization			164,460				162,430
Transaction costs			470				640
General and administrative expense			24,300				23,172
Subtract:
Gains from investments in securities			(493	)			(387	)
Interest and other income			(440	)			(1,924	)
Income from unconsolidated joint ventures			(2,211	)			(2,700	)
Development and management services income			(6,452	)			(7,119	)
Consolidated Net Operating Income			393,258				387,972
Net Operating Income from unconsolidated joint ventures (BXP’s share) (2)			10,521				11,244
Combined Net Operating Income		$	403,779			$	399,216
Same Property Net Operating Income		$	387,458			$	392,017
Net Operating Income from non Same Properties (3)			8,602				6,082
Termination income			7,719				1,117
Combined Net Operating Income		$	403,779			$	399,216
Same Property Net Operating Income		$	387,458			$	392,017
Subtract:
Straight-line rent and fair value lease revenue			(21,603	)			(39,370	)
Add:
Straight-line ground rent expense (4)			(3,983	)			1,146
Lease transaction costs which qualify as inducements in accordance with GAAP (5)			1,963				3,533
Same Property Net Operating Income— cash basis		$	363,835			$	357,326

 

(1)

These partnerships include 505 9th Street, N.W. in Washington, D.C., 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) and Times Square Tower in New York City and, beginning October 30, 2014, 100 Federal Street and Atlantic Wharf Office Building in Boston, MA and 601 Lexington Avenue in New York City. 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 21-23 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 December 31, 2015 and therefore are no longer a part of the Company’s property portfolio.

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

(5)	For additional information, refer to page 44.

 

42

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Boston Properties, Inc.

Fourth Quarter 2015

 

Same Property Net Operating Income by Reportable Segment

 

(in thousands)

 

		Office (1)																Office/Technical
		For the three months ended																For the three months ended
		31-Dec-15				31-Dec-14				$ Change				% Change				31-Dec-15				31-Dec-14				$ Change				% Change
Rental Revenue		$	576,144			$	564,874											$	14,382			$	14,703
Less: Termination Income			7,698				1,072												4				62
Rental revenue - subtotal			568,446				563,802			$	4,644				0.8	%			14,378				14,641			$	(263	)			(1.8	)%
Operating expenses and real estate taxes			207,437				199,032				8,405				4.2	%			3,596				3,921				(325	)			(8.3	)%
Net Operating Income (2)		$	361,009			$	364,770			$	(3,761	)			(1.0	)%		$	10,782			$	10,720			$	62				0.6	%
Rental revenue - subtotal		$	568,446			$	563,802											$	14,378			$	14,641
Less:
Straight-line rent and fair value lease revenue			20,293				37,183				(16,890	)			(45.4	)%			181				1,468				(1,287	)			(87.7	)%
Add:
Lease transaction costs which qualify as inducements in accordance with GAAP (3)			1,939				2,019				(80	)			(4.0	)%			—				580				(580	)			(100.0	)%
Rental revenue - cash basis			550,092				528,638				21,454				4.1	%			14,197				13,753				444				3.2	%
Less:
Operating expenses and real estate taxes			207,437				199,032				8,405				4.2	%			3,596				3,921				(325	)			(8.3	)%
Add:
Straight-line ground rent expense (4)			(3,983	)			1,146				(5,129	)			(447.6	)%			—				—				—				0.0	%
Net Operating Income (5) - cash basis		$	338,672			$	330,752			$	7,920				2.4	%		$	10,601			$	9,832			$	769				7.8	%
		Sub-Total (1)																Hotel & Residential
		For the three months ended																For the three months ended
		31-Dec-15				31-Dec-14				$ Change				% Change				31-Dec-15				31-Dec-14				$ Change				% Change
Rental Revenue		$	590,526			$	579,577											$	15,045			$	14,180
Less: Termination Income			7,702				1,134												—				—
Rental revenue - subtotal			582,824				578,443			$	4,381				0.8	%			15,045				14,180			$	865				6.1	%
Operating expenses and real estate taxes			211,033				202,953				8,080				4.0	%			9,504				8,914				590				6.6	%
Net Operating Income (2)		$	371,791			$	375,490			$	(3,699	)			(1.0	)%		$	5,541			$	5,266			$	275				5.2	%
Rental revenue - subtotal		$	582,824			$	578,443											$	15,045			$	14,180
Less:
Straight-line rent and fair value lease revenue			20,474				38,651				(18,177	)			(47.0	)%			20				(97	)			117				120.6	%
Add:
Lease transaction costs which qualify as inducements in accordance with GAAP (3)			1,939				2,599				(660	)			(25.4	)%			—				—				—				0.0	%
Rental revenue - cash basis			564,289				542,391				21,898				4.0	%			15,025				14,277				748				5.2	%
Less:
Operating expenses and real estate taxes			211,033				202,953				8,080				4.0	%			9,504				8,914				590				6.6	%
Add:
Straight-line ground rent expense (4)			(3,983	)			1,146				(5,129	)			(447.6	)%			—				—				—				0.0	%
Net Operating Income (5) - cash basis		$	349,273			$	340,584			$	8,689				2.6	%		$	5,521			$	5,363			$	158				2.9	%
		Unconsolidated Joint Ventures																Total (1)
		For the three months ended																For the three months ended
		31-Dec-15				31-Dec-14				$ Change				% Change				31-Dec-15				31-Dec-14				$ Change				% Change
Rental Revenue		$	18,471			$	19,405											$	624,042			$	613,162
Less: Termination Income			17				(17	)											7,719				1,117
Rental revenue - subtotal			18,454				19,422			$	(968	)			(5.0	)%			616,323				612,045			$	4,278				0.7	%
Operating expenses and real estate taxes			8,328				8,161				167				2.0	%			228,865				220,028				8,837				4.0	%
Net Operating Income (2)		$	10,126			$	11,261			$	(1,135	)			(10.1	)%		$	387,458			$	392,017			$	(4,559	)			(1.2	)%
Rental revenue - subtotal		$	18,454			$	19,422											$	616,323			$	612,045
Less:
Straight-line rent and fair value lease revenue			1,109				816				293				35.9	%			21,603				39,370				(17,767	)			(45.1	)%
Add:
Lease transaction costs which qualify as inducements in accordance with GAAP (3)			24				934				(910	)			(97.4	)%			1,963				3,533				(1,570	)			(44.4	)%
Rental revenue - cash basis			17,369				19,540				(2,171	)			(11.1	)%			596,683				576,208				20,475				3.6	%
Less:
Operating expenses and real estate taxes			8,328				8,161				167				2.0	%			228,865				220,028				8,837				4.0	%
Add:
Straight-line ground rent expense (4)			—				—				—				0.0	%			(3,983	)			1,146				(5,129	)			(447.6	)%
Net Operating Income (5) - cash basis		$	9,041			$	11,379			$	(2,338	)			(20.5	)%		$	363,835			$	357,326			$	6,509				1.8	%

 

(1)

Includes 100% share of consolidated joint ventures. Same Property consolidated joint venture properties includes Fountain Square in Reston, VA, 767 Fifth Avenue (The GM Building) and Times Square Tower in New York City and, beginning October 30, 2014, 100 Federal Street and Atlantic Wharf Office Building in Boston, MA and 601 Lexington Avenue in New York City.

(2)	For a quantitative reconciliation of net operating income (NOI) to net income attributable to Boston Properties, Inc. common shareholders, see page 42. For disclosures relating to our use of NOI see page 50.

(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 44.

(4)	For additional information, see page 12.

(5)	For a quantitative reconciliation of NOI to NOI on a cash basis see page 42. For disclosures relating to our use of NOI, see page 50.

 

43

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Boston Properties, Inc.

Fourth Quarter 2015

 

LEASING ACTIVITY

 

All In-Service Properties - quarter ended December 31, 2015

 

 

		Office				Office/Technical				Total
Vacant space available @ 10/1/2015 (sf)			3,426,405				168,385				3,594,790
Property dispositions/ properties taken out of service (sf)			(437,700	)			—				(437,700	)
Properties acquired vacant space (sf)			—				—				—
Properties placed in-service (sf)			240,878	(1)			—				240,878
Leases expiring or terminated 10/1/2015-12/31/2015 (sf)			1,179,785				12,900				1,192,685
Total space available for lease (sf)			4,409,368				181,285				4,590,653
1st generation leases (sf)			67,601				—				67,601
2nd generation leases with new tenants (sf)			413,989				—				413,989
2nd generation lease renewals (sf)			568,000				10,150				578,150
Total space leased (sf)			1,049,590				10,150				1,059,740
Vacant space available for lease @ 12/31/2015 (sf)			3,359,778				171,135				3,530,913
Net (increase)/decrease in available space (sf)			66,627				(2,750	)			63,877
Second generation leasing information: (2)
Leases commencing during the period (sf)			981,989				10,150				992,139
Weighted average lease term (months)			89				13				89
Weighted average free rent period (days)			35				—				34
Total transaction costs per square foot (3)		$	35.64			$	3.69			$	35.31
Increase (decrease) in gross rents (4)			12.62	%			57.49	%			12.93	%
Increase (decrease) in net rents (5)			17.90	%			72.49	%			18.34	%

 

										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			7,500				511,359				15.55	%			22.49	%			518,859				544,921
New York			20,849				161,930				12.16	%			15.64	%			182,779				153,089
San Francisco			39,252				174,824				14.41	%			22.26	%			214,076				334,692
Washington, DC			—				144,026				6.25	%			9.02	%			144,026				319,427
Total / Weighted Average			67,601				992,139				12.93	%			18.34	%			1,059,740				1,352,129

 

(1)	Total vacant square feet of properties placed in service in Q4 2015 consist of 10,000 square feet at The Point (formerly 99 Third Avenue Retail), 11,680 square feet at 690 Folsom Street, 93,513 square feet at 535 Mission Street and 125,685 square feet at Annapolis Junction Building Eight.

(2)	Second generation leases are defined as leases for space that had previously been leased by the Company. Of the 992,139 square feet of second generation leases that commenced in Q4 2015, leases for 885,750 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 811,210 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 811,210 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 123,589.

 

44

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Boston Properties, Inc.

Fourth Quarter 2015

 

HISTORICALLY GENERATED CAPITAL EXPENDITURES,

TENANT IMPROVEMENT COSTS AND LEASING COMMISSIONS

 

Historical Capital Expenditures

 

(in thousands)

 

		Q4 2015				Q3 2015				Q2 2015				Q1 2015				2014				2013				2012
Recurring capital expenditures		$	19,845			$	18,814			$	14,869			$	8,763			$	42,610			$	51,026			$	23,774
Planned non-recurring capital expenditures associated with acquisition properties			1,951				1,661				1,485				972				13,087				20,506				22,287
Hotel improvements, equipment upgrades and replacements			1,231				436				272				491				2,894				2,070				896
		$	23,027			$	20,911			$	16,626			$	10,226			$	58,591			$	73,602			$	46,957

2nd Generation Tenant Improvements and Leasing Commissions

 

 

		Q4 2015				Q3 2015				Q2 2015				Q1 2015				2014				2013				2012
Office
Square feet			981,989				1,496,951				1,351,464				1,261,753				3,578,780				3,554,632				3,572,825
Tenant improvements and lease commissions PSF		$	35.64			$	61.06			$	39.60			$	43.27			$	30.89			$	37.54			$	45.31
Office/Technical
Square feet			10,150				38,502				35,675				27,639				357,266				55,456				59,788
Tenant improvements and lease commissions PSF		$	3.69			$	9.95			$	23.22			$	19.00			$	16.69			$	2.02			$	3.94
Average tenant improvements and lease commissions PSF		$	35.31			$	59.78			$	39.18			$	42.75			$	29.60			$	36.99			$	44.63

 

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Boston Properties, Inc.

Fourth Quarter 2015

 

ACQUISITIONS/DISPOSITIONS

 

as of December 31, 2015

ACQUISITIONS

 

For the period from January 1, 2015 through December 31, 2015

 

												Anticipated
								Initial				Future				Total				Percentage
Property		Date Acquired		Square Feet				Investment (1)				Investment (1)				Investment (1)				Leased
1265 Main Street (50% ownership interest)		May 8, 2015			115,000			$	1,934,000			$	24,156,000			$	26,090,000	(2)			100	%
Dock72 (50% ownership interest)		June 26, 2015			670,000				9,140,000				195,760,000				204,900,000	(3)			33	%
Fountain Square (remaining 50% ownership interest)		September 15, 2015			758,807				100,856,000				—				100,856,000	(4)			96	%
Total Acquisitions					1,543,807			$	111,930,000			$	219,916,000			$	331,846,000				69	%

 

(1)	Represents the Company’s share.

(2)

On May 8, 2015, the Company entered into a joint venture with an affiliate of 1265 Main Street LLC to redevelop an existing building into a Class A office building totaling approximately 115,000 net rentable square feet at 1265 Main Street in Waltham, Massachusetts. The joint venture partner contributed real estate and improvements, with an aggregate fair value of approximately $9.4 million, for its initial 50% interest in the joint venture. For its initial 50% interest, the Company will contribute cash totaling approximately $9.4 million as the joint venture incurs costs. The Company is accounting for the joint venture on an unconsolidated basis under the equity method of accounting. The joint venture has entered into a fifteen-year lease with a tenant to occupy 100% of the building. See also page 47.

(3)

On June 26, 2015, the Company entered into a joint venture with Rudin Development to develop Dock72, an office building totaling approximately 670,000 net rentable square feet located at the Brooklyn Navy Yard in Brooklyn, New York. Each partner contributed cash totaling approximately $9.1 million for their initial 50% interest in the joint venture. The Company is accounting for the joint venture on an unconsolidated basis under the equity method of accounting. The joint venture entered into a 96-year ground lease with the Brooklyn Navy Yard Development Corporation, comprised of an initial term of 49 years, which may be extended by the joint venture to 2111, subject to certain conditions. The joint venture also entered into a 20-year lease with a tenant to occupy approximately 222,000 net rentable square feet at the building. See also pages 47 and 48.

(4)

On September 15, 2015, the Company acquired its partner’s 50% interest in the consolidated entity that owns Fountain Square located in Reston Town Center in Reston, Virginia for cash of approximately $100.9 million and the assumption of the partner’s share of mortgage indebtedness totaling approximately $105.6 million.

DISPOSITIONS

 

For the period from January 1, 2015 through December 31, 2015

 

								Gross				Net Cash
Property		Date Disposed		Square Feet				Sales Price				Proceeds				Book Gain
Washingtonian North (land parcel)		February 19, 2015			N/A			$	8,700,000			$	8,376,000			$	3,494,000
Residences on The Avenue (335 units)		March 17, 2015			323,050				196,000,000				192,478,000				91,428,000	(1)
505 9th Street, N.W. (50% ownership interest)		September 18, 2015			321,943				318,000,000				194,636,000				199,479,000	(2)
Washingtonian North (land parcel)		October 1, 2015			N/A				13,320,000				13,805,000				2,018,000
Innovation Place (3100-3130 Zanker Road)		December 17, 2015			574,000				207,000,000				199,305,000				79,097,000
Total Dispositions					1,218,993			$	743,020,000			$	608,600,000			$	375,516,000	(3)

 

(1)

The Company has agreed to provide the buyer up to $6.0 million of net operating income support if the property’s net operating income fails to achieve certain thresholds. This amount has been recorded as a reduction to the gain on sale. The Residences on The Avenue is comprised of 335 apartment units and approximately 50,000 net rentable square feet of retail space, subject to a ground lease that expires on February 1, 2068.

(2)

On September 18, 2015, a consolidated entity in which the Company has a 50% interest completed the sale of its 505 9th Street, N.W. property located in Washington, DC for approximately $318.0 million, including the assumption by the buyer of approximately $117.0 million of mortgage indebtedness. Net cash proceeds totaled approximately $194.6 million, of which the Company’s share was approximately $97.3 million. The Company recognized a gain on sale of real estate totaling approximately $199.5 million, of which approximately $101.1 million was allocated to the outside partners and is included within noncontrolling interests in property partnerships in the Company’s consolidated statements of operations.

(3)	Excludes approximately $379,000 of gain on sale of real estate recognized during the three months ended December 31, 2015 related to previously deferred gain amounts from a 2014 sale of real estate.

 

46

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Boston Properties, Inc.

Fourth Quarter 2015

 

VALUE CREATION PIPELINE - CONSTRUCTION IN PROGRESS (1)

 

as of December 31, 2015

 

				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)				12/31/2015 (2)				Requirement (2)				Leased (3)				in Service (4)
Office and Retail
804 Carnegie Center		Q2 2016		Q2 2016		Princeton, NJ			1				130,000			$	42,635,203			$	47,000,000			$	—			$	—			$	4,364,797				100	%			—
1265 Main Street (50% Ownership)		Q4 2016		Q4 2016		Waltham, MA			1				115,000				12,948,864				26,090,000												13,141,136				100	%			—
Prudential Center Retail Expansion		Q1 2016		Q4 2016		Boston, MA			—				15,000				9,998,305				10,760,000				—				—				761,695				100	%			—
601 Massachusetts Avenue		Q3 2015		Q1 2017		Washington, DC			1				478,000				304,874,741				339,760,000				—				—				34,885,259				90	%			81	%
10 CityPoint		Q3 2016		Q2 2017		Waltham, MA			1				245,000				74,230,836				100,400,000				—				—				26,169,164				96	%			—
888 Boylston Street		Q3 2016		Q4 2017		Boston, MA			1				425,000				154,875,225				271,500,000				—				—				116,624,775				68	%			—
Salesforce Tower (95% ownership)		Q2 2017		Q1 2019		San Francisco, CA			1				1,400,000				432,389,414				1,073,500,000				—				—				641,110,586				52	%			—
The Hub on Causeway (50% ownership)		Q4 2018		Q4 2019		Boston, MA			1				385,000				10,771,312				141,870,000				—				—				131,098,688				33	%			—
Dock72 (50% ownership)		Q1 2018		Q1 2020		Brooklyn, NY			1				670,000				11,249,638				204,900,000				—				—				193,650,362				33	%			—
Total Office Properties under Construction									8				3,863,000			$	1,053,973,538			$	2,215,780,000			$	—			$	—			$	1,161,806,462				59	%			23	%
Residential
Cambridge Residential / 88 Ames (274 units)		Q1 2018		Q1 2019		Cambridge, MA			1				164,000			$	9,495,386			$	140,170,000			$	—			$	—			$	130,674,614				N/A				—
Reston Signature Site (508 units)		Q4 2017		Q2 2020		Reston, VA			1				514,000				26,218,648				217,232,000				—				—				191,013,352				N/A				—
Total Residential Properties under Construction									2				678,000			$	35,714,034			$	357,402,000			$	—			$	—			$	321,687,966				N/A				—
Redevelopment Properties
Reservoir Place North		Q2 2016		Q1 2017		Waltham, MA			1				73,000			$	8,677,810			$	24,510,000			$	—			$	—			$	15,832,190				—				—
Total Redevelopment Properties under Construction									1				73,000			$	8,677,810			$	24,510,000			$	—			$	—			$	15,832,190				—				—
Total Properties Under Construction and Redevelopment					11				4,614,000			$	1,098,365,382			$	2,597,692,000			$	—			$	—			$	1,499,326,618				58	%(5)			22	%

PROJECTS FULLY PLACED IN-SERVICE DURING 2015

 

 

		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)				12/31/2015 (2)				Requirement (2)				Leased (3)
Annapolis Junction Building Seven (50% ownership)		Q3 2015		Q3 2015		Annapolis, MD			1				127,229			$	16,323,406			$	16,500,000			$	11,000,000			$	10,712,805			$	—				100	%
690 Folsom Street		Q4 2014		Q1 2016		San Francisco, CA			1				26,080				14,766,213				16,400,000				—				—				1,633,787				100	%
The Point (formerly 99 Third Avenue Retail)		Q3 2015		Q2 2016		Waltham, MA			1				16,300				16,817,235				16,900,000				—				—				82,765				85	%
535 Mission Street		Q4 2014		Q3 2016		San Francisco, CA			1				307,235				193,962,874				201,150,000				—				—				7,187,126				99	%
Annapolis Junction Building Eight (50% ownership)		Q4 2015		Q3 2017		Annapolis, MD			1				125,685				12,433,429				18,500,000				13,000,000				7,219,529				286,100				—
Total Projects placed In-Service									5				602,529			$	254,303,157			$	269,450,000			$	24,000,000			$	17,932,334			$	9,189,778				78	%

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	%		$	16.11			N		S			1,359,364
Total Properties held for Redevelopment					5				190,636				100.0	%		$	16.11								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 January 29, 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 33,000 square feet of retail space from residential developments which is 0% leased.

(6)	For disclosures relating to our definition of Annualized Revenue, see page 50.

(7)	Incremental Future Square Footage is included in Approximate Developable Square Feet of Value Creation Pipeline—Owned Land Parcels on page 48.

 

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Boston Properties, Inc.

Fourth Quarter 2015

 

VALUE CREATION PIPELINE - OWNED LAND PARCELS

 

as of December 31, 2015

 

						Approximate
						Developable
Location		Acreage				Square Feet
San Jose, CA (1) (2)			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 (3)			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

VALUE CREATION PIPELINE - LAND PURCHASE OPTIONS

 

as of December 31, 2015

 

						Approximate
						Developable
Location		Acreage				Square Feet
Princeton, NJ			134.1				1,650,000
Boston, MA (50% ownership)			—				1,423,000
Cambridge, MA (4)			—				940,000
Brooklyn, NY (50% ownership)			1.3				600,000
San Francisco, CA			2.3				TBD
			137.7				4,613,000

 

(1)	Excludes the existing square footage related to in-service properties being held for future re-development included on page 47.

(2)	On December 17, 2015, the Company sold its Innovation Place property. See page 46.

(3)	On October 1, 2015, the Company sold a parcel of land at Washingtonian North in Gaithersburg, Maryland. See page 46.

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

 

48

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Boston Properties, Inc.

Fourth Quarter 2015

 

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 of consolidated entities, impairment losses on 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 after adjustment for unconsolidated partnerships and joint ventures. FFO is a non-GAAP financial measure. The use of FFO, combined with the required primary GAAP presentations, has been fundamentally beneficial in improving the understanding of operating results of REITs among the investing public and making comparisons of REIT operating results more meaningful. Management generally considers FFO to be a useful measure for reviewing our comparative operating and financial performance because, by excluding gains and losses related to asset sales (land and property), impairment losses and real estate asset depreciation and amortization (which can vary among owners of identical assets in similar condition based on historical cost accounting and useful life estimates), FFO can help one compare the operating performance of a company’s real estate between periods or as compared to different 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 an alternative to net income attributable to Boston Properties, Inc. common shareholders (determined in accordance with GAAP) as an indication of our performance. 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 further understand our performance, FFO should be compared with our reported net income attributable to Boston Properties, Inc. and considered in addition to cash flows determined 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 and (4) 2012 OPP Units that were issued in the form of LTIP Units and earned as of February 6, 2015 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. 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 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.

 

49

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Boston Properties, Inc.

Fourth Quarter 2015

 

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, losses from early extinguishments of debt 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.

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 and Office/Technical 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 21-23 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.

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.

 

50

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Boston Properties, Inc.

Fourth Quarter 2015

 

Definitions

 

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.

 

51

Exhibit 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

FOURTH QUARTER 2015 RESULTS

Reports diluted FFO per share of $1.28                     Reports diluted EPS of $0.90

BOSTON, MA, February 3, 2016—Boston Properties, Inc. (NYSE: BXP), a real estate investment trust, reported results today for the fourth quarter ended December 31, 2015.

Results for the quarter ended December 31, 2015

Funds from Operations (FFO) for the quarter ended December 31, 2015 were $197.3 million, or $1.28 per share basic and $1.28 per share diluted. This compares to FFO for the quarter ended December 31, 2014 of $193.2 million, or $1.26 per share basic and $1.26 per share diluted. The weighted average number of basic and diluted shares outstanding totaled approximately 153,602,000 and 153,897,000, respectively, for the quarter ended December 31, 2015 and 153,128,000 and 153,550,000, respectively, for the quarter ended December 31, 2014.

The Company’s reported FFO of $1.28 per share diluted was less than the guidance previously provided of $1.39-$1.41 per share diluted primarily due to the loss from early extinguishment of debt of $0.13 per share associated with the defeasance of the mortgage loan collateralized by 100 & 200 Clarendon Street offset by better than expected portfolio operations of $0.01 per share.

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Net income available to common shareholders was $137.9 million for the quarter ended December 31, 2015, compared to $174.5 million for the quarter ended December 31, 2014. Net income available to common shareholders per share (EPS) for the quarter ended December 31, 2015 was $0.90 basic and $0.90 on a diluted basis. This compares to EPS for the quarter ended December 31, 2014 of $1.14 basic and $1.14 on a diluted basis. Net income available to common shareholders for the quarter ended December 31, 2015 includes gains on sales of real estate aggregating approximately $81.3 million, or $0.48 per share basic and $0.48 per share on a diluted basis, compared to $126.1 million, or $0.73 per share basic and $0.73 per share on a diluted basis, for the quarter ended December 31, 2014.

Results for the year ended December 31, 2015

FFO for the year ended December 31, 2015 was $823.7 million, or $5.37 per share basic and $5.36 per share diluted. This compares to FFO for the year ended December 31, 2014 of $807.5 million, or $5.27 per share basic and $5.26 per share diluted. The weighted average number of basic and diluted shares outstanding totaled 153,471,000 and 153,844,000, respectively, for the year ended December 31, 2015 and 153,089,000 and 153,620,000, respectively, for the year ended December 31, 2014.

Net income available to common shareholders was $572.6 million for the year ended December 31, 2015, compared to $433.1 million for the year ended December 31, 2014. EPS for the year ended December 31, 2015 was $3.73 basic and $3.72 on a diluted basis. This compares to EPS for the year ended December 31, 2014 of $2.83 basic and $2.83 on a diluted basis.

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 and year ended December 31, 2015. In the opinion of management, all adjustments considered necessary for a fair presentation of these reported results have been made.

As of December 31, 2015, the Company’s portfolio consisted of 168 properties aggregating approximately 46.5 million square feet, including 11 properties under construction/redevelopment totaling approximately 4.6 million square feet. The overall percentage of leased space for the 154 properties in service (excluding the Company’s two residential properties and hotel) as of December 31, 2015 was 91.4%.

Significant events during the fourth quarter included:

 

•

The Company entered into a forward-starting interest rate swap contract, which fixed the ten-year swap rate on a notional amount of $25.0 million. The Company has now entered into forward-starting interest rate swap contracts which fix the ten-year swap rate at a weighted-average rate of approximately 2.423% per annum on notional amounts aggregating $550.0 million. The interest rate swap contracts were entered into in advance of a financing with a target commencement date in September 2016 and maturity in September 2026.

---

767 Fifth Partners LLC (the consolidated entity in which the Company has a 60% interest and that owns 767 Fifth Avenue (the General Motors Building) in New York City) entered into forward-starting interest rate swap contracts, including two contracts entered into subsequent to December 31, 2015, which fix the ten-year swap rate on notional amounts aggregating $200.0 million. 767 Fifth Partners LLC has now entered into forward-starting interest rate swap contracts which fix the 10-year swap rate at a weighted-average rate of approximately 2.619% per annum on notional amounts aggregating $450.0 million. These interest rate swap contracts were entered into in advance of a financing with a target commencement date in June 2017 and maturity in June 2027.

 

•

On October 1, 2015, the Company used available cash to repay the mortgage loan collateralized by its Kingstowne Two and Kingstowne Retail properties located in Alexandria, Virginia totaling approximately $29.8 million. The mortgage loan bore interest at a fixed rate of 5.99% per annum and was scheduled to mature on January 1, 2016. There was no prepayment penalty.

 

•

On October 1, 2015, the Company completed the sale of a parcel of land within its Washingtonian North property located in Gaithersburg, Maryland for a gross sale price of approximately $13.3 million. Net cash proceeds, which included reimbursements for certain infrastructure costs, totaled approximately $13.8 million, resulting in a gain on sale of real estate totaling approximately $2.0 million. The parcel sold consisted of approximately 5.8 acres of the Company’s approximately 18.3 acre property.

 

•

On October 22, 2015, a joint venture in which the Company has a 50% interest commenced construction of the Hub on Causeway at North Station containing approximately 385,000 net rentable square feet of retail and office space located in Boston, Massachusetts.

 

•

On October 26, 2015, the Company entered into an agreement to sell its Reston Eastgate property located in Reston, Virginia. Reston Eastgate is a parcel of land containing approximately 21.7 acres located at 11011 Sunset Hills Road. The Company also entered into a development management agreement with the buyer to develop the site into a Class A office property totaling approximately 190,000 net rentable square feet and associated parking garage. The Company expects that the sale will close by the end of the fourth quarter of 2017. However, the sale is subject to final zoning approvals and the satisfaction of customary closing conditions and there can be no assurance that the sale will be consummated on the terms currently contemplated or at all. Pending the completion of the sale, the Company has agreed with the buyer not to disclose the purchase price and other monetary terms of the transaction.

 

•

On November 1, 2015, the Company completed and fully placed in-service 535 Mission Street, a Class A office project with approximately 307,000 net rentable square feet located in San Francisco, California. The property is 99% leased.

 

•

On November 1, 2015, the Company completed and fully placed in-service The Point (formerly 99 Third Avenue), a retail project with approximately 16,000 net rentable square feet located in Waltham, Massachusetts. The property is 85% leased.

---

•

On December 2, 2015, the Company completed and fully placed in-service 690 Folsom Street, an office and retail project with approximately 26,000 net rentable square feet located in San Francisco, California. The property is 100% leased.

 

•

On December 15, 2015, the Company legally defeased the mortgage loan collateralized by its 100 & 200 Clarendon Street (formerly known as the John Hancock Tower and Garage) properties located in Boston, Massachusetts. The mortgage loan had an outstanding principal balance of $640.5 million, bore interest at a fixed rate of 5.68% per annum and was scheduled to mature on January 6, 2017. The cash required for the defeasance was approximately $667.3 million. As a result of the defeasance, the Company recognized a loss from early extinguishment of debt of approximately $22.0 million, consisting of approximately $26.8 million, which is the difference between the purchase price for the U.S. government securities acquired for the defeasance and the outstanding principal balance of the mortgage loan, and approximately $1.4 million of unamortized deferred financing costs, offset by approximately $4.8 million from the acceleration of the remaining balance of the historical fair value debt adjustment and approximately $1.4 million of accrued interest expense through the effective date of the defeasance.

 

•

On December 17, 2015, the Company completed the sale of its Innovation Place property for a gross sale price of $207.0 million. Net cash proceeds totaled approximately $199.3 million, resulting in a gain on sale of real estate totaling approximately $79.1 million. Innovation Place, located in San Jose, California, is a 26-acre site with one occupied and three vacant existing office buildings and a total of approximately 574,000 square feet (approximately 463,000 square feet of which are vacant) located at 3100-3130 Zanker Road. The remainder of the site is currently used for 1,699 surface parking spaces, but the land supports an additional 537,000 square feet of office/R&D development and two parking structures with a total of approximately 3,000 parking spaces.

 

•

On December 17, 2015, the Company announced that its Board of Directors declared a special cash dividend of $1.25 per common share, in addition to the Company’s regular quarterly dividend of $0.65 per common share, which was paid on January 28, 2016 to shareholders of record as of the close of business on December 31, 2015. The decision to declare a special dividend was primarily a result of the sale of approximately $584 million of assets in 2015. The Board of Directors did not make any change to the Company’s policy with respect to regular quarterly dividends. The payment of the regular quarterly dividend of $0.65 per share plus the special dividend of $1.25 per share resulted in a total payment of $1.90 per share on January 28, 2016. Holders of common units of limited partnership interest in Boston Properties Limited Partnership, the Company’s Operating Partnership, as of the close of business on December 31, 2015 received the same total distribution per unit on January 28, 2016.

 

•

On December 22, 2015, a joint venture in which the Company has a 50% interest completed and fully placed in-service Annapolis Junction Building Eight, a Class A office project with approximately 126,000 net rentable square feet located in Annapolis, Maryland. The property is 0% leased.

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Transactions completed subsequent to December 31, 2015:

 

•

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 estimated 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. The Company currently expects that under the Financial Accounting Standards Board’s Accounting Standards Codification (“ASC”) 718 “Compensation—Stock Compensation,” the 2016 MYLTIP will have an aggregate value of approximately $17.3 million, which amount will generally be amortized into earnings over the four-year plan period under the graded vesting method and has been reflected in the 2016 guidance below.

 

•

On February 1, 2016, the Company completed the sale of its 415 Main Street property (formerly Seven Cambridge Center) located in Cambridge, Massachusetts to MIT for a gross sale price of approximately $105.4 million. As part of its lease signed on July 14, 2004, MIT was granted a fixed price option to purchase the building at the beginning of the 11th lease year, which option was exercised by MIT on October 22, 2014. 415 Main Street is an office/technical property with approximately 231,000 net rentable square feet occupied by the Broad Institute.

 

•

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 will be recognized in the first quarter of 2016. The termination income and the corresponding reduction in rental revenue in future quarters are reflected in the 2016 guidance below.

EPS and FFO per Share Guidance:

The Company’s guidance for the first 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 the full year 2016 to $5.78 - $5.93 per share from $5.50 - $5.70 per share. The updated guidance reflects, when compared to the Company’s prior guidance, an increase in net operating income from the Company’s property portfolio of $0.05 per share and an increase from termination income, net of a reduction in rental income, from a tenant at 250 West 55th Street of $0.21 per share.

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		First Quarter 2016								Full Year 2016
		Low				High				Low				High
Projected EPS (diluted)		$	1.05			$	1.07			$	2.68			$	2.83
Add:
Projected Company Share of Real Estate Depreciation and Amortization			0.89				0.89				3.45				3.45
Less:
Projected Company Share of Gains on Sales of Real Estate			0.35				0.35				0.35				0.35
Projected FFO per Share (diluted)		$	1.59			$	1.61			$	5.78			$	5.93

Boston Properties will host a conference call on Thursday, February 4, 2016 at 10:00 AM Eastern Time, open to the general public, to discuss the fourth quarter and full year 2015 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 the passcode 23619190. A replay of the conference call will be available through February 19, 2016, by dialing (855) 859-2056 (Domestic) or (404) 537-3406 (International) and entering the passcode 23619190. 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’ fourth quarter 2015 “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, one hotel, four residential properties and five retail properties. 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 satisfy the closing conditions to the pending transactions described above, 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 first quarter and full fiscal year 2016, whether as a result of new information, future events or otherwise.

Financial tables follow.

---

BOSTON PROPERTIES, INC. CONSOLIDATED BALANCE SHEETS (Unaudited )
		December 31, 2015				December 31, 2014
		(in thousands, except for share and par value amounts)
ASSETS
Real estate, at cost		$	18,465,405			$	18,231,978
Construction in progress			763,935				736,311
Land held for future development			252,195				268,114
Less: accumulated depreciation			(3,925,894	)			(3,547,659	)
Total real estate			15,555,641				15,688,744
Cash and cash equivalents			723,718				1,763,079
Cash held in escrows			73,790				487,321
Investments in securities			20,380				19,459
Tenant and other receivables (net of allowance for doubtful accounts of $1,197 and $1,142, respectively)			97,865				46,595
Accrued rental income (net of allowance of $2,775 and $1,499, respectively)			754,883				691,999
Deferred charges, net			732,837				831,744
Prepaid expenses and other assets			185,118				164,432
Investments in unconsolidated joint ventures			235,224				193,394
Total assets		$	18,379,456			$	19,886,767
LIABILITIES AND EQUITY
Liabilities:
Mortgage notes payable		$	3,438,714			$	4,309,484
Unsecured senior notes (net of discount of $10,683 and $12,296, respectively)			5,289,317				5,287,704
Unsecured line of credit			—				—
Mezzanine notes payable			308,482				309,796
Outside members’ notes payable			180,000				180,000
Accounts payable and accrued expenses			274,709				243,263
Dividends and distributions payable			327,320				882,472
Accrued interest payable			190,386				163,532
Other liabilities			483,601				502,255
Total liabilities			10,492,529				11,878,506
Commitments and contingencies			—				—
Noncontrolling interests:
Redeemable preferred units of the Operating Partnership			—				633
Redeemable interest in property partnership			—				104,692
Equity:
Stockholders’ equity attributable to Boston Properties, Inc.:
Excess stock, $.01 par value, 150,000,000 shares authorized, none issued or outstanding			—				—
Preferred stock, $.01 par value, 50,000,000 shares authorized; 5.25% Series B cumulative redeemable preferred stock, $.01 par value, liquidation preference $2,500 per share, 92,000 shares authorized, 80,000 shares issued and outstanding at December 31, 2015 and December 31, 2014			200,000				200,000
Common stock, $.01 par value, 250,000,000 shares authorized, 153,658,866 and 153,192,845 issued and 153,579,966 and 153,113,945 outstanding at December 31, 2015 and December 31, 2014, respectively			1,536				1,531
Additional paid-in capital			6,305,687				6,270,257
Dividends in excess of earnings			(780,952	)			(762,464	)
Treasury common stock at cost, 78,900 shares at December 31, 2015 and December 31, 2014			(2,722	)			(2,722	)
Accumulated other comprehensive loss			(14,114	)			(9,304	)
Total stockholders’ equity attributable to Boston Properties, Inc.			5,709,435				5,697,298
Noncontrolling interests:
Common units of the Operating Partnership			603,092				603,171
Property partnerships			1,574,400				1,602,467
Total equity			7,886,927				7,902,936
Total liabilities and equity		$	18,379,456			$	19,886,767

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BOSTON PROPERTIES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

		Three months ended December 31,								Year ended December 31,
		2015				2014				2015				2014
		(in thousands, except for per share amounts)
Revenue
Rental
Base rent		$	493,141			$	484,011			$	1,964,732			$	1,886,339
Recoveries from tenants			88,576				85,946				355,508				339,365
Parking and other			25,132				25,724				101,981				102,593
Total rental revenue			606,849				595,681				2,422,221				2,328,297
Hotel revenue			10,939				10,907				46,046				43,385
Development and management services			6,452				7,119				22,554				25,316
Total revenue			624,240				613,707				2,490,821				2,396,998
Expenses
Operating
Rental			216,642				211,077				872,252				835,290
Hotel			7,888				7,539				32,084				29,236
General and administrative			24,300				23,172				96,319				98,937
Transaction costs			470				640				1,259				3,140
Depreciation and amortization			164,460				162,430				639,542				628,573
Total expenses			413,760				404,858				1,641,456				1,595,176
Operating income			210,480				208,849				849,365				801,822
Other income (expense)
Income from unconsolidated joint ventures			2,211				2,700				22,770				12,769
Interest and other income			440				1,924				6,777				8,765
Gains (losses) from investments in securities			493				387				(653	)			1,038
Interest expense			(106,178	)			(117,904	)			(432,196	)			(455,743	)
Losses from early extinguishments of debt			(22,040	)			(10,633	)			(22,040	)			(10,633	)
Income before gains on sales of real estate			85,406				85,323				424,023				358,018
Gains on sales of real estate			81,332				126,102				375,895				168,039
Net income			166,738				211,425				799,918				526,057
Net income attributable to noncontrolling interests
Noncontrolling interests in property partnerships			(10,143	)			(13,088	)			(149,855	)			(30,561	)
Noncontrolling interest—redeemable preferred units of the Operating Partnership			—				(9	)			(6	)			(1,023	)
Noncontrolling interest—common units of the Operating Partnership			(16,098	)			(21,172	)			(66,951	)			(50,862	)
Net income attributable to Boston Properties, Inc.			140,497				177,156				583,106				443,611
Preferred dividends			(2,646	)			(2,646	)			(10,500	)			(10,500	)
Net income attributable to Boston Properties, Inc. common shareholders		$	137,851			$	174,510			$	572,606			$	433,111
Basic earnings per common share attributable to Boston Properties, Inc. common shareholders:
Net income		$	0.90			$	1.14			$	3.73			$	2.83
Weighted average number of common shares outstanding			153,602				153,128				153,471				153,089
Diluted earnings per common share attributable to Boston Properties, Inc. common shareholders:
Net income		$	0.90			$	1.14			$	3.72			$	2.83
Weighted average number of common and common equivalent shares outstanding			153,897				153,550				153,844				153,308

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BOSTON PROPERTIES, INC.

FUNDS FROM OPERATIONS (1)

(Unaudited)

 

		Three months ended December 31,								Year ended December 31,
		2015				2014				2015				2014
		(in thousands, except for per share amounts)
Net income attributable to Boston Properties, Inc. common shareholders		$	137,851			$	174,510			$	572,606			$	433,111
Add:
Preferred dividends			2,646				2,646				10,500				10,500
Noncontrolling interest—common units of the Operating Partnership			16,098				21,172				66,951				50,862
Noncontrolling interest—redeemable preferred units of the Operating Partnership			—				9				6				1,023
Noncontrolling interests in property partnerships			10,143				13,088				149,855				30,561
Less:
Gains on sales of real estate			81,332				126,102				375,895				168,039
Income before gains on sales of real estate			85,406				85,323				424,023				358,018
Add:
Real estate depreciation and amortization (2)			167,968				166,665				644,595				646,463
Less:
Noncontrolling interests in property partnerships’ share of funds from operations			30,828				33,866				139,569				93,864
Noncontrolling interest—redeemable preferred units of the Operating Partnership			—				9				6				1,023
Preferred dividends			2,646				2,646				10,500				10,500
Funds from operations (FFO) attributable to the Operating Partnership common unitholders (including Boston Properties, Inc.)			219,900				215,467				918,543				899,094
Less:
Noncontrolling interest—common units of the Operating Partnership’s share of funds from operations			22,561				22,281				94,828				91,588
Funds from operations attributable to Boston Properties, Inc. common shareholders		$	197,339			$	193,186			$	823,715			$	807,506
Boston Properties, Inc.’s percentage share of funds from operations—basic			89.74	%			89.66	%			89.68	%			89.81	%
Weighted average shares outstanding—basic			153,602				153,128				153,471				153,089
FFO per share basic		$	1.28			$	1.26			$	5.37			$	5.27
Weighted average shares outstanding—diluted			153,897				153,550				153,844				153,620
FFO per share diluted		$	1.28			$	1.26			$	5.36			$	5.26

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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 of consolidated real estate, impairment losses on 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 after adjustment for unconsolidated partnerships and joint ventures. FFO is a non-GAAP financial measure. The use of FFO, combined with the required primary GAAP presentations, has been fundamentally beneficial in improving the understanding of operating results of REITs among the investing public and making comparisons of REIT operating results more meaningful. Management generally considers FFO to be a useful measure for reviewing our comparative operating and financial performance 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 vary among owners of identical assets in similar condition based on historical cost accounting and useful life estimates), FFO can help one compare the operating performance of a company’s real estate between periods or as compared to different 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 an alternative to net income attributable to Boston Properties, Inc. common shareholders (determined in accordance with GAAP) as an indication of our performance. 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 further understand our performance, FFO should be compared with our reported net income attributable to Boston Properties, Inc. and considered in addition to 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 $164,460, $162,430, $639,542 and $628,573 and our share of unconsolidated joint venture real estate depreciation and amortization of $3,994, $4,582, $6,556 and $19,251, less corporate-related depreciation and amortization of $486, $347, $1,503 and $1,361 for the three months and years ended December 31, 2015 and 2014, respectively.

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BOSTON PROPERTIES, INC.

PORTFOLIO LEASING PERCENTAGES

 

		% Leased by Location
		December 31, 2015				December 31, 2014
Boston			90.6	%			91.4	%
New York			91.5	%			90.9	%
San Francisco			93.8	%			88.3	%
Washington, DC			91.0	%			94.8	%
Total Portfolio			91.4	%			91.7	%
		% Leased by Type
		December 31, 2015				December 31, 2014
Class A Office Portfolio			91.7	%			91.8	%
Office/Technical Portfolio			84.2	%			87.7	%
Total Portfolio			91.4	%			91.7	%