Log in
E-mail
Password
Show password
Remember
Forgot password ?
Become a member for free
Sign up
Sign up
New member
Sign up for FREE
New customer
Discover our services
Settings
Settings
Dynamic quotes 
OFFON

BOSTON PROPERTIES, INC.

(BXP)
  Report
SummaryQuotesChartsNewsRatingsCalendarCompanyFinancialsConsensusRevisions 
SummaryMost relevantAll NewsAnalyst Reco.Other languagesPress ReleasesOfficial PublicationsSector news

BOSTON PROPERTIES INC Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

11/05/2021 | 01:33pm EST
The following discussion should be read in conjunction with the financial
statements and notes thereto appearing elsewhere in this report.
This Quarterly Report on Form 10-Q, including the documents incorporated by
reference, contain forward-looking statements within the meaning of the federal
securities laws, Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. We intend these
forward-looking statements to be covered by the safe harbor provisions for
forward-looking statements contained in the Private Securities Litigation Reform
Act of 1995 and are including this statement for purposes of complying with
those safe harbor provisions, in each case, to the extent applicable. Such
statements are contained principally, but not only, under the captions "Risk
Factors" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations." We caution investors that any such forward-looking
statements are based on current beliefs or expectations of future events and on
assumptions made by, and information currently available to, our management.
When used, the words "anticipate," "believe," "budget," "could", "estimate,"
"expect," "intend," "may," "might," "plan," "project," "should," "will" and
similar expressions that do not relate solely to historical matters are intended
to identify forward-looking statements. Such statements are subject to risks,
uncertainties and assumptions and are not guarantees of future performance or
occurrences, which may be affected by known and unknown risks, trends,
uncertainties and factors that are, in some cases, beyond our control. Should
one or more of these known or unknown risks or uncertainties materialize, or
should underlying assumptions prove incorrect, actual results may vary
materially from those expressed or implied by the forward-looking statements. We
caution you that, while forward-looking statements reflect our good-faith
beliefs when we make them, they are not guarantees of future performance or
occurrences and are impacted by actual events when they occur after we make such
statements. Accordingly, investors should use caution in relying on
forward-looking statements, which are based on results and trends at the time
they are made, to anticipate future results or trends.
The most significant factors that may cause actual results to differ materially
from those expressed or implied by the forward-looking statements include the
ongoing impact of the global COVID-19 pandemic on the U.S. and global economies,
which has impacted, and is likely to continue to impact, us, the risks described
in (i) our Annual Report on Form 10-K for the fiscal year ended December 31,
2020 including those described under the caption "Risk Factors," (ii) our
subsequent filings under the Exchange Act and (iii) the risk factors set forth
in this Form 10-Q in Part II, Item 1A, and the following:
•the risks and uncertainties related to the impact of the COVID-19 global
pandemic, including the duration, scope and severity of the pandemic
domestically and internationally; federal, state and local government actions or
restrictive measures implemented in response to COVID-19, the effectiveness of
such measures, as well as the effect of any relaxation of current restrictions,
and the direct and indirect impact of such measures on our and our tenants'
businesses, financial condition, results of operations, cash flows, liquidity,
performance and demand for office space, and the U.S. and international economy
and economic activity generally; the emergence and characteristics of new
variants, the speed, effectiveness and distribution of vaccines (including
effectiveness against COVID-19 variant strains), whether new or existing actions
and measures continue to impact the ability of our residential tenants to
generate sufficient income to pay, or make them unwilling to pay rent in a
timely manner, in full or at all; the health, continued service and availability
of our personnel, including our key personnel and property management teams; and
the effectiveness or lack of effectiveness of governmental relief in providing
assistance to individuals and large and small businesses, including our tenants,
that have suffered significant adverse effects from COVID-19;
•volatile or adverse global economic and political conditions, health crises and
dislocations in the credit markets could adversely affect our access to
cost-effective capital and have a resulting material adverse effect on our
business opportunities, results of operations and financial condition;
•general risks affecting the real estate industry (including, without
limitation, the inability to enter into or renew leases, tenant space
utilization, dependence on tenants' financial condition, and competition from
other developers, owners and operators of real estate);
•failure to manage effectively our growth and expansion into new markets and
sub-markets or to integrate acquisitions and developments successfully;
•the ability of our joint venture partners to satisfy their obligations;
                                       47
--------------------------------------------------------------------------------
  Table of Contents
•risks and uncertainties affecting property development and construction
(including, without limitation, construction delays, increased construction
costs, cost overruns, inability to obtain necessary permits, tenant accounting
considerations that may result in negotiated lease provisions that limit a
tenant's liability during construction, and public opposition to such
activities);
•risks associated with the availability and terms of financing and the use of
debt to fund acquisitions and developments or refinance existing indebtedness,
including the impact of higher interest rates on the cost and/or availability of
financing;
•risks associated with forward interest rate contracts and the effectiveness of
such arrangements;
•risks associated with downturns in the national and local economies, increases
in interest rates, and volatility in the securities markets;
•risks associated with actual or threatened terrorist attacks;
•costs of compliance with the Americans with Disabilities Act and other similar
laws;
•potential liability for uninsured losses and environmental contamination;
•risks associated with the physical effects of climate change;
•risks associated with security breaches through cyber attacks, cyber intrusions
or otherwise, as well as other significant disruptions of our information
technology (IT) networks and related systems, which support our operations and
our buildings;
•risks associated with BXP's potential failure to qualify as a REIT under the
Internal Revenue Code of 1986, as amended;
•possible adverse changes in tax and environmental laws;
•the impact of newly adopted accounting principles on our accounting policies
and on period-to-period comparisons of financial results;
•risks associated with possible state and local tax audits;
•risks associated with our dependence on key personnel whose continued service
is not guaranteed; and
•the other risk factors identified in our most recently filed Annual Report on
Form 10-K for the fiscal year ended December 31, 2020 or described herein,
including those under the caption "Risk Factors."

The risks set forth above are not exhaustive. Other sections of this report may
include additional factors that could adversely affect our business and
financial performance. Moreover, we operate in a very competitive and rapidly
changing environment, particularly in light of the circumstances relating to
COVID-19. New risk factors emerge from time to time and it is not possible for
management to predict all risk factors, nor can we assess the impact of all risk
factors on our business or the extent to which any factor, or combination of
factors, may cause actual results to differ materially from those contained in
any forward-looking statements. Given these risks and uncertainties, investors
should not place undue reliance on forward-looking statements as a prediction of
actual results. Investors should also refer to our most recent Annual Report on
Form 10-K and Quarterly Reports on Form 10-Q for future periods and Current
Reports on Form 8-K as we file them with the SEC, and to other materials we may
furnish to the public from time to time through Current Reports on Form 8-K or
otherwise, for a discussion of risks and uncertainties that may cause actual
results, performance or achievements to differ materially from those expressed
or implied by forward-looking statements. We expressly disclaim any
responsibility to update any forward-looking statements to reflect changes in
underlying assumptions or factors, new information, future events, or otherwise,
and you should not rely upon these forward-looking statements after the date of
this report.
Overview
BXP is one of the largest publicly traded office real estate investment trusts
(REITs) (based on total market capitalization as of September 30, 2021) in the
United States that develops, owns and manages primarily Class A office
properties. Our properties are concentrated in six markets in the United States
- Boston, Los Angeles, New York, San Francisco, Seattle and Washington, DC. BPLP
is the entity through which BXP conducts substantially all of its business and
owns (either directly or through subsidiaries) substantially all of its assets.
We generate revenue and cash primarily by leasing Class A office space to our
tenants. When making leasing decisions, we consider, among other things, the
creditworthiness of the tenant and the industry in which it conducts business,
the length of
                                       48
--------------------------------------------------------------------------------
  Table of Contents
the lease, the rental rate to be paid at inception and throughout the lease
term, the costs of tenant improvements, free rent periods and other landlord
concessions, anticipated operating expenses and real estate taxes, current and
anticipated vacancy in our properties and the market overall (including sublease
space), current and expected future demand for the space, the impact of any
expansion rights and general economic factors.
Our core strategy has always been to develop, acquire and manage high-quality
properties in supply-constrained markets with high barriers-to-entry and
attractive demand drivers, and to focus on executing long-term leases with
financially strong tenants. Historically, these factors have minimized our
exposure in weaker economic cycles and enhanced revenues as market conditions
improve. Our tenant base is diverse across market sectors and the
weighted-average lease term for our in-place leases, excluding residential
units, was approximately 7.5 years, as of September 30, 2021, including leases
signed by our unconsolidated joint ventures. The weighted-average lease term for
our 20 largest office tenants was approximately 10.5 years as of September 30,
2021.
To be successful in any leasing environment, we believe we must consider all
aspects of the tenant-landlord relationship. In this regard, we believe that our
competitive leasing advantage is based on the following attributes:
•our understanding of tenants' short- and long-term space utilization and
amenity needs in the local markets;
•our track record of developing and operating Class A office properties in a
sustainable and responsible manner;
•our reputation as a premier developer, owner and manager of primarily Class A
office properties;
•our financial strength and our ability to maintain high building standards; and
•our relationships with local brokers.
Outlook
The United States economy continues to recover from the COVID-19 pandemic,
although quarter-over-quarter GDP growth slowed to an annual rate of 2.0% in the
third quarter of 2021 compared to 6.7% in the second quarter of 2021. This
slowdown reflects the impacts of the Delta variant and moderation in government
stimulus spending. Since the end of the third quarter, however, daily COVID
infection levels have decreased by more than 50% from the recent highs in
September 2021. We believe the positive trend in infection rates, combined with
relatively low unemployment rates, bodes well for continuing economic growth in
our markets.
The overall economic recovery is having a positive impact on our leasing
activity. Although additional COVID variants and supply-chain issues may emerge,
we believe as the number of vaccinations increases and employees return to their
offices in greater numbers, our strategically located, high-quality office
properties will remain a vital component of the strategies of today's
forward-thinking organizations that prioritize fostering collaboration,
innovation, productivity and culture, and we expect tenants will take advantage
of the availability of Class A space and upgrade.
Annual inflation increased to 5.4% in September 2021, driven largely by energy
prices, which increased approximately 25% compared to one year ago. Energy is a
component of our operating expenses our largest energy cost is electricity. We
have limited most of our exposure to additional potential increases through
2022, and we have been increasing our procurement from green power. We remain
exposed to the marginal cost of electrical generation in the Boston region where
we expect increases in 2022 of greater than 10% compared to last year. Costs for
security, cleaning and engineering labor continues to increase due to labor
shortages across all trades. However, we are able to mitigate the risks from
these increased costs to our results due to the nature of our lease contracts,
which generally take one of two forms: (1) net leases, under which all of the
operating expense and real estate taxes are paid by the tenant, and (2) gross
leases with a base year that is set upon the lease commencement with increases
in expenses over that base year added to the rental obligation of the tenant.
Our near-term exposure to increases in operating expenses is primarily on our
vacant space and for new or renewal leases where we are setting a base year. Our
vacancy was approximately 11.6% at September 30, 2021, and our 2021 and 2022
lease expirations total approximately 7.6% of our portfolio. We do not expect an
increase in operating expenses to have a material adverse effect on our results
of operations for the remainder of 2021 or 2022.
BXP Priorities
Despite the concerns surrounding COVID-19 and the lingering impact on economic
conditions in our markets, we remain optimistic for our industry generally and
our company in particular, given low interest rates, the demand
                                       49
--------------------------------------------------------------------------------
  Table of Contents
for workers across sectors, the high quality of our properties, the supply and
demand characteristics of our markets and the success of our development
efforts.
We remain focused on the following priorities:
•ensuring tenant health, safety and satisfaction;
•leasing available space in our in-service and development properties, as well
as proactively focusing on future lease expirations;
•completing the construction of our development properties;
•continuing and completing the redevelopment and repositioning of several key
properties to increase future revenue and asset values over the long-term;
•identifying new investment opportunities that meet our criteria while
maintaining discipline in our underwriting;
•managing our near-term debt maturities and maintaining our conservative balance
sheet; and
•actively managing our operations in a sustainable and responsible manner.
The following is an overview of portfolio activity, leasing activity and capital
markets activity in the third quarter of 2021.
Leasing Activity and Occupancy
In the third quarter of 2021, we signed approximately 1.4 million square feet of
new leases and renewals with a weighted-average lease term of approximately 9.2
years, indicating that many new and existing tenants continue to commit to the
long-term use of space and view our properties as their preferred choice for a
premium Class A office environment. The volume of leasing in the third quarter
of 2021 (measured by square feet) was more than double the volume achieved in
the first quarter of 2021 and approximately 90% of our pre-pandemic historical
third quarter average.
The overall occupancy of our in-service office and retail properties was 88.4%
at September 30, 2021, a decrease of 0.2% compared to 88.6% at June 30, 2021. We
anticipate occupancy for the remainder of 2021 will be relatively flat with
occupancy for the third quarter of 2021, but will begin to improve as we head
into 2022, as our remaining 2021 and 2022 lease expirations are backfilled by
signed leases that have not yet commenced and new leases.
Our parking and other revenue was approximately $23.5 million in the third
quarter of 2021, an increase of approximately $5.2 million from the second
quarter of 2021. The increase was primarily due to improved transient parking
and greater insurance proceeds from a water main break at a New York property.
The third quarter 2021 parking and other revenue was 92% of pre-pandemic parking
and other revenue from the third quarter of 2019. We expect to return to
pre-pandemic levels of parking revenue as workers increasingly return to work in
their offices.
Our hotel property, the Boston Marriott Cambridge, generated approximately $1.2
million of net operating income during the third quarter of 2021. This was the
first quarter since the start of the pandemic in which the hotel made a positive
contribution to our results. Given the hotel's location in the heart of
Cambridge, Massachusetts and adjacent to MIT, we expect hotel occupancy and
REVPAR to improve to pre-pandemic levels over time as business and leisure
travel return to historical levels.
Investment Activity
We remain committed to developing and acquiring assets to enhance our long-term
growth and to meet tenant demand for high-quality office and lab space. We
continually evaluate current and prospective markets for possible acquisitions
of "value-add" assets that require lease-up or repositioning, and acquisitions
that are otherwise consistent with our long-term strategy of owning, managing,
developing and improving, premier Class A properties in each of our chosen
markets.
During the third quarter of 2021, we continued to execute on our strategy and
completed two acquisitions. We believe these investments align with several
elements of our growth strategy, including entering new markets or submarkets
that exhibit strong demand and limitations on supply, uncovering opportunities
that utilize our leasing and redevelopment skills to increase value, broadening
our portfolio to meet the current and anticipated future
                                       50
--------------------------------------------------------------------------------
  Table of Contents
demand of tenants in the life sciences sector and employing our Strategic
Capital Program ("SCP") (Refer to the heading "Liquidity and Capital Resources"
within "Item 2-Management's Discussion and Analysis of Financial Condition and
Results of Operations" for a description of the SCP.) to utilize private equity
to increase our returns and enhance our investment capacity. These acquisitions
included:
•Safeco Plaza, an approximately 765,000 net rentable square-foot Class A office
building in Seattle, Washington. The property was approximately 91% leased at
September 30, 2021. This acquisition marked our initial entry into the Seattle
market, one of the most vibrant markets in the United States for companies in
the technology, life sciences, manufacturing and financial services sectors. The
acquisition was completed through a newly formed joint venture with two
institutional partners that are part of our SCP.
•Shady Grove Bio+Tech Campus, consisting of seven buildings totaling
approximately 435,000 square-feet in the Shady Grove area of Rockville,
Maryland, a region that is home to more than 400 companies in the biotechnology
and life sciences sector. We plan to convert the office buildings on the campus
to lab space to meet current and growing demand in the region from biotechnology
companies for new, Class A lab space.
In the third quarter of 2021, we continued the construction of the developments
and redevelopment projects in our pipeline, which consists of nine properties
that, when completed, we expect will total approximately 4.3 million net
rentable square feet. As of September 30, 2021, our share of the estimated total
cost for these projects is approximately $2.7 billion, of which approximately
$1.1 billion of equity remained to be invested. The total development pipeline,
inclusive of both office and lab/life sciences developments, but excluding the
View Boston Observatory at The Prudential Center, is 72% pre-leased as of
November 2, 2021. The office development projects in our current pipeline, which
total approximately 3.3 million square feet, are approximately 87% pre-leased,
as of November 2, 2021, to predominately credit-strong tenants with long-lease
terms. In addition, during September and October of 2021, we completed and
delivered approximately 1.5 million square feet of space to tenants from our
development pipeline.
In early 2021 we added several new development and redevelopment projects to our
development pipeline focused on the specific needs of tenants in the life
sciences sector. Our lab/life sciences developments in our pipeline total
approximately 920,000 square feet and include properties in Waltham,
Massachusetts and South San Francisco, California. Although Shady Grove Bio+Tech
Campus is not currently included in our development pipeline, we anticipate
converting the office buildings on the campus to lab space. Our lab/life
sciences developments are located in some of the largest life sciences clusters
in the United States, with strong demand from tenants because of the close
proximity to universities, research institutions and related businesses and
concentrations of labor with specialized skills and knowledge.
Supply-chain concerns impact our business both in time to completion and
increased costs. Our construction schedule is one of the criteria we use when we
evaluate bids for development projects and capital improvements. We have been
successful in awarding bids and maintaining schedules through the pandemic.
However, there are fewer choices for materials, and we are working closely with
our consultants and contractors to ensure there are not items used in the
development or redevelopment process that could impact schedules. We are
intentionally minimizing the amount of materials we acquire from overseas,
releasing material packages as early as possible and stock-piling materials
off-site. In addition, when budgeting new development projects, we are including
projected cost increases of approximately 5-6%. We currently expect to deliver
all active developments and redevelopments on time and budget, but we cannot
assure you that we will not experience greater cost increases or that the
materials we need will continue to be available so that we are able to complete
the project. A failure to deliver a project on time could expose us to
additional costs under the signed pre-leases for those projects.
As we continue to focus on new investments to drive future growth, we also
continually review our portfolio to identify properties as potential sales
candidates because they may either no longer fit within our portfolio strategy
or they could attract premium pricing in the current market environment. On
October 25, 2021, we completed the sale of 181,191 and 201 Spring Street, a
three-building complex aggregating approximately 333,000 net rentable square
feet in Lexington, Massachusetts, for an aggregate gross sales price of $191.5
million. The three buildings are 100% leased. We will continue to evaluate the
sale of similar properties.
Excluding Seattle, which we entered on September 1, 2021, a brief overview of
each of our markets follows.
                                       51
--------------------------------------------------------------------------------
  Table of Contents
Boston
The Boston region is home to the largest cluster of life sciences companies in
the world, and these companies are growing and increasing demand and rents in
the region. During the third quarter of 2021, we signed approximately 769,000
square feet of leases and approximately 782,000 square feet of leases commenced.
Approximately 148,000 square feet of the leases that commenced had been vacant
for less than one year and represent an increase in net rental obligations of
approximately 17% over the prior leases.
Our Boston central business district ("CBD") in-service portfolio was
approximately 94% leased as of September 30, 2021. During the third quarter of
2021, we executed an approximately 524,000 square foot, 10-year lease extension
with Wellington Management at Atlantic Wharf, approximately four years prior to
the lease expiration, supporting our belief in the commitment of employers to
office space and the attractiveness of our asset.
In addition, we completed and delivered 440,000 square feet of space leased to
an affiliate of Verizon Communications at our 100 Causeway Street development
project in Boston, Massachusetts. 100 Causeway Street is an approximately
632,000 square foot office building in which we have a 50% ownership interest.
Our approximately 2.0 million square foot in-service office portfolio in
Cambridge was approximately 99% leased as of September 30, 2021. During the
third quarter of 2021, we continued our development of 325 Main Street at
Kendall Center in Cambridge, Massachusetts, which is 90% pre-leased to an office
tenant for a term of 15 years and we expect to deliver the building into service
in 2022. In early 2021, we received approximately one million square feet of new
entitlements at Kendall Center for potential future development.
Waltham and the area surrounding the Route 128-Mass Turnpike interchange
continue to comprise a popular submarket of Boston for leading and emerging
companies in the life sciences, biotechnology and technology sectors. Since the
third quarter of 2021, we signed leases for approximately 52,000 square feet at
880 Winter Street, an approximately 224,000 square foot office property in
Waltham, Massachusetts that is being converted into lab space. We expect to
deliver this project in early 2023. We also continued the conversion of 200 West
Street in Waltham, Massachusetts into life sciences/lab space and we continued
the development of 180 CityPoint, an approximately 329,000 square foot lab
development in Waltham, Massachusetts, which is expected to be delivered in
2024. We own or control a significant amount of land in the Boston region that
we expect will enable us to aggressively compete for and meet the demand from
the emerging and growing tenants in these industries.
Los Angeles
Our Los Angeles ("LA") in-service portfolio of approximately 2.3 million square
feet is currently focused in West LA and includes Colorado Center, a 1.1 million
square foot property of which we own 50%, and Santa Monica Business Park, a
21-building, approximately 1.2 million square foot property of which we own 55%.
As of September 30, 2021, our LA in-service properties were approximately 83%
leased. We expect our occupancy to increase later this year upon commencement of
an approximately 140,000 square foot lease expansion that was signed in the
second quarter of 2021 with a technology company at Santa Monica Business Park
in Santa Monica, California.
New York
As of September 30, 2021, our New York CBD in-service portfolio was
approximately 90% leased. During the third quarter of 2021, (1) we signed leases
covering approximately 169,000 square feet, including an approximately 39,000
square foot expansion with a financial services company at 399 Park Avenue,
increasing their total square footage to approximately 373,000 square feet, and
(2) approximately 259,000 square feet of leases commenced. Approximately 200,000
square feet of the leases that commenced had been vacant for less than one year
and represent a decrease in net rental obligations of approximately 27% over the
prior leases. Excluding approximately 55,000 square feet of short term leases
that commenced, the net rental obligations decreased approximately 13% over the
prior leases.
In the third quarter of 2021, sublease space continued to be removed from the
market and high-quality buildings experienced increased leasing activity. We are
actively negotiating approximately 340,000 square feet of leases, of which
approximately 200,000 square feet is at Dock 72, our joint venture property in
Brooklyn, New York. In October 2021, we signed a 42,000 square foot lease at
Dock 72.
                                       52
--------------------------------------------------------------------------------
  Table of Contents
San Francisco
The recovery in San Francisco continues to lag our other markets as fewer
businesses have commenced their return to work, street-level retail remains
closed or slow and the streets are quiet. As restrictions are lifted, we believe
the pace of new leasing activity will begin to increase.
Our San Francisco CBD in-service properties were approximately 92% leased as of
September 30, 2021. During the third quarter of 2021, we executed approximately
185,000 square feet of leases, including over 100,000 square feet at Embarcadero
Center. We executed four full floor leases at Embarcadero Center at average
rental rates of over $100 per square foot. In addition, we commenced
approximately 91,000 square feet of leases in the San Francisco region. Of these
leases, approximately 57,000 square feet had been vacant for less than one year
and represent an increase in net rental obligations of approximately 9% over the
prior leases.
Life sciences activity at our Gateway Commons joint venture in which we own an
approximately 52% interest continues to be productive. The joint venture has
signed a letter of intent to lease the entirety of 751 Gateway Commons, a
229,000 square foot project in our development pipeline.
During the third quarter of 2021, we completed two full-building leases
aggregating approximately 58,000 square feet in the Mountain View submarket. We
are experiencing greater tour activity, including large technology tenant
requirements for existing and new products. Due to the limited supply of new,
high-quality office space in this submarket, we are evaluating when to restart
the first phase of our Platform 16 development project, an approximately 1.1
million aggregate square foot future development next to Diridon Station in San
Jose.
Washington, DC
During the third quarter of 2021, we executed approximately 300,000 square feet
of leases and we commenced approximately 163,000 square feet of leases in the
Washington, DC region. Of these leases, approximately 96,000 square feet had
been vacant for less than one year and represent a decrease in net rental
obligations of approximately 22% over the prior leases.
Our Washington, DC CBD in-service properties were approximately 84% leased, as
of September 30, 2021, with modest near-term rollover exposure, and we have
reduced our exposure in the Washington, DC CBD market significantly over the
past few years through the dispositions of assets.
Our Washington, DC suburban properties include our significant presence in
Reston, Virginia, where demand from technology and cybersecurity tenants remains
strong. Our Washington, DC suburban properties were approximately 86% leased as
of September 30, 2021. During the third quarter of 2021, we completed
approximately 70,000 square feet of office leases in Reston and are in
negotiations for another 125,000 square feet.
In October, we completed and delivered approximately 285,000 square feet at
Reston Next, a Class A office project with approximately 1.1 million net
rentable square feet located in Reston, Virginia. This project is 85% pre-leased
as of November 2, 2021. In addition, on October 29, 2021, a joint venture in
which we own a 50% interest, fully placed in-service 7750 Wisconsin Avenue, a
Class A office project with approximately 734,000 net rentable square feet
located in Bethesda, Maryland.



                                       53
--------------------------------------------------------------------------------
  Table of Contents
Leasing Statistics
The table below details the leasing activity, including 100% of the
unconsolidated joint ventures, that commenced during the three and nine months
ended September 30, 2021:
                                                                       Three months ended               Nine months ended
                                                                       September 30, 2021               September 30, 2021
                                                                                          (Square Feet)
Vacant space available at the beginning of the period                            5,186,818                        4,517,385
Property dispositions/properties taken out of service (1)                                -                         (104,613)
Vacant space in properties acquired (2)                                            143,848                          143,848
Properties placed (and partially placed) in-service (3)                            503,024                          732,454
Leases expiring or terminated during the period                                    862,505                        4,061,176
Total space available for lease                                                  6,696,195                        9,350,250
1st generation leases                                                              585,933                          789,489
2nd generation leases with new tenants                                             407,240                        1,824,259
2nd generation lease renewals                                                      311,332                        1,344,812
Total space leased (4)                                                           1,304,505                        3,958,560
Vacant space available for lease at the end of the period                        5,391,690                        5,391,690

Leases executed during the period, in square feet (5)                            1,431,817                        3,262,850

Second generation leasing information: (6)
Leases commencing during the period, in square feet                                718,572                        3,169,071
Weighted Average Lease Term                                                         58 Months                        81 Months
Weighted Average Free Rent Period                                                    124 Days                         158 Days
Total Transaction Costs Per Square Foot (7)                                         $43.95$70.21
Increase (Decrease) in Gross Rents (8)                                               (9.42) %                         (0.03) %
Increase (Decrease) in Net Rents (9)                                                (14.23) %                         (0.11) %


__________________

(1)Total square feet of property dispositions during the nine months ended
September 30, 2021 consists of 29,595 square feet due to the sale of Annapolis
Junction Building Six. Total square feet of properties taken out of service
during the nine months ended September 30, 2021 consists of 34,290 square feet
at 880 Winter Street and 40,728 square feet at 800 Boylston Street - The
Prudential Center, both due to redevelopment.
(2)Total square feet of vacant space in properties acquired during the three and
nine months ended September 30, 2021 consists of 69,581 square feet at Safeco
Plaza and 74,267 square feet at Shady Grove Bio+Tech Campus.
(3)Total square feet of properties placed (and partially placed) in-service
during the three months ended September 30, 2021 consists of 6,709 square feet
at 685 Gateway and 496,315 square feet at 100 Causeway Street. Total square feet
of properties placed (and partially placed) in-service during the nine months
ended September 30, 2021 consists of 195,326 square feet of office and 31,950
square feet of retail at One Five Nine East 53rd Street, 6,709 square feet at
685 Gateway and 498,469 square feet at 100 Causeway Street.
(4)Represents leases for which lease revenue recognition has commenced in
accordance with GAAP during the three and nine months ended September 30, 2021.
(5)Represents leases executed during the three and nine months ended
September 30, 2021 for which we either (1) commenced lease revenue recognition
in such period or (2) will commence lease revenue recognition in subsequent
periods, in accordance with GAAP, and includes leases at properties currently
under development. The total square feet of leases executed and recognized in
the three and nine months ended September 30, 2021 is 320,719 and 734,797,
respectively.
(6)Second generation leases are defined as leases for space that had previously
been leased by us. Of the 718,572 and 3,169,071 square feet of second generation
leases that commenced during the three and nine months ended September 30, 2021,
respectively, leases for 397,853 and 2,439,402 square feet, respectively, were
signed in prior periods.
(7)Total transaction costs include tenant improvements and leasing commissions
but exclude free rent concessions and other inducements in accordance with GAAP.
                                       54
--------------------------------------------------------------------------------
  Table of Contents
(8)Represents the decrease in gross rent (base rent plus expense reimbursements)
on the new versus expired leases on the 507,899 and 2,219,080 square feet of
second generation leases that had been occupied within the prior 12 months for
the three and nine months ended September 30, 2021, respectively; excludes
leases that management considers temporary because the tenant is not expected to
occupy the space on a long-term basis.
(9)Represents the decrease in net rent (gross rent less operating expenses) on
the new versus expired leases on the 507,899 and 2,219,080 square feet of second
generation leases that had been occupied within the prior 12 months for the
three and nine months ended September 30, 2021, respectively.
Transactions during the three months ended September 30, 2021 included the
following:
Acquisition/disposition activities
•On August 2, 2021, we acquired Shady Grove Bio+Tech Campus in Rockville,
Maryland, for a purchase price, including transaction costs, of approximately
$118.5 million in cash. Shady Grove Bio+Tech Campus is an approximately 435,000
net rentable square foot, seven-building office park situated on an
approximately 31-acre site. We intend to reposition three of the buildings,
which are currently vacant, to support lab or life sciences uses. As a result,
the three vacant buildings are not part of our in-service portfolio. We
anticipate that we will redevelop or convert the remaining four buildings to lab
or life sciences-related uses as each becomes vacant.
•On July 13, 2021, we entered into an agreement to sell our 181,191 and 201
Spring Street properties located in Lexington, Massachusetts for an aggregate
gross sales price of $191.5 million. 181,191 and 201 Spring Street are three
Class A office properties aggregating approximately 333,000 net rentable square
feet and are 100% leased. The sale was completed on October 25, 2021 (See
below).
Unconsolidated joint venture activities
•On August 31, 2021, a joint venture in which we have a 50% interest extended
the construction loan collateralized by its The Hub on Causeway - Podium
property. At the time of the extension, the outstanding balance of the loan
totaled approximately $174.3 million, bore interest at a variable rate equal to
LIBOR plus 2.25% per annum and was scheduled to mature on September 6, 2021,
with two, one-year extension options, subject to certain conditions. The
extended loan continues to bear interest at a variable rate equal to LIBOR plus
2.25% per annum and matures on September 6, 2023. The Hub on Causeway - Podium
is a retail and office property with approximately 382,000 net rentable square
feet located in Boston, Massachusetts.
•On September 1, 2021, we entered into a joint venture to acquire Safeco Plaza,
a Class A office property located in Seattle, Washington, for a gross purchase
price of approximately $465.0 million. Safeco Plaza is a 50-story, approximately
765,000 net rentable square-foot, Class A office property. The acquisition was
completed through a newly formed joint venture with two institutional partners.
Each of the institutional partners invested approximately $71.9 million of cash
for its 33.165% ownership interest in the joint venture. We invested
approximately $72.6 million for our 33.67% interest in the joint venture and are
providing customary operating, property management and leasing services to the
joint venture. Our ownership includes (1) a 33.0% direct interest in the joint
venture, and (2) an additional 1% interest in each of the two entities (each, a
"Safeco Partner Entity") through which each partner owns its interest in the
joint venture. Subject to the occurrence of certain events and the joint venture
achieving certain return thresholds, we are entitled to earn promote
distributions. Some of the promote distributions may be payable in cash or, at
our election, equity interest(s) in the Safeco Partner Entity(ies). The purchase
price was funded with cash and proceeds from a new mortgage loan secured by the
property. The mortgage loan has a principal amount of $250.0 million, bears
interest at a variable rate equal to the greater of (x) 2.35% or (y) LIBOR plus
2.20% per annum and matures on September 1, 2026.
Debt Transaction
•On September 29, 2021, BPLP completed a public offering of $850.0 million in
aggregate principal amount of its 2.450% unsecured senior notes due 2033. The
notes were priced at 99.959% of the principal amount to yield an effective rate
(including financing fees) of approximately 2.524% per annum to maturity. The
notes will mature on October 1, 2033, unless earlier redeemed. The aggregate net
                                       55
--------------------------------------------------------------------------------
  Table of Contents
proceeds from the offering were approximately $842.5 million after deducting
underwriting discounts and transaction expenses.
Transactions completed subsequent to September 30, 2021 included the following:
•On October 15, 2021, BPLP used available cash and funds under its unsecured
revolving credit agreement (the "2021 Credit Facility") to complete the
redemption of $1.0 billion in aggregate principal amount of its 3.85% senior
notes due February 1, 2023. The redemption price was approximately $1.05
billion, which included approximately $7.9 million of accrued and unpaid
interest to, but not including, the redemption date and an early redemption
premium and unamortized financing costs totaling approximately $43.9 million.
•On October 19, 2021, we partially placed in-service Reston Next, a Class A
office project with approximately 1.1 million net rentable square feet located
in Reston, Virginia.
•On October 25, 2021, we completed the sale of our 181,191 and 201 Spring Street
properties located in Lexington, Massachusetts for an aggregate gross sales
price of $191.5 million, as described above under "- Acquisition/disposition
activities".
•On October 29, 2021, a joint venture in which we have a 50% interest fully
placed in-service 7750 Wisconsin Avenue, a Class A office project with
approximately 734,000 net rentable square feet located in Bethesda, Maryland.
Critical Accounting Policies
Management's Discussion and Analysis of Financial Condition and Results of
Operations discuss our Consolidated Financial Statements, which have been
prepared in accordance with generally accepted accounting principles ("GAAP").
The preparation of these financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and the disclosure of contingent liabilities at the date
of the financial statements and the reported amounts of revenue and expenses
during the reporting period. Certain accounting policies are considered to be
critical accounting policies, as they require management to make assumptions
about matters that are highly uncertain at the time the estimate is made and
changes in accounting estimate are reasonably likely to occur from period to
period. Management bases its estimates and assumptions on historical experience
and current economic conditions. On an on-going basis, management evaluates its
estimates and assumptions including those related to revenue, impairment of
long-lived assets and the allowance for doubtful accounts. Actual results may
differ from those estimates and assumptions.
Our Annual Report on Form 10-K for the year ended December 31, 2020 contains a
discussion of our critical accounting policies. Management discusses and reviews
our critical accounting policies and management's judgments and estimates with
BXP's Audit Committee.
Results of Operations for the Nine Months Ended September 30, 2021 and 2020
Net income attributable to Boston Properties, Inc. common shareholders and net
income attributable to Boston Properties Limited Partnership common unitholders
decreased approximately $542.9 million and $616.3 million for the nine months
ended September 30, 2021 compared to 2020, respectively, as set forth in the
following tables and for the reasons discussed below under the heading
"Comparison of the nine months ended September 30, 2021 to the nine months ended
September 30, 2020" within "Item 2-Management's Discussion and Analysis of
Financial Condition and Results of Operations."
The following are reconciliations of Net Income Attributable to Boston
Properties, Inc. Common Shareholders to Net Operating Income and Net Income
Attributable to Boston Properties Limited Partnership Common Unitholders to Net
Operating Income for the nine months ended September 30, 2021 and 2020 (in
thousands):
                                       56
--------------------------------------------------------------------------------
  Table of Contents
Boston Properties, Inc.
                                                                                Nine months ended September 30,
                                                                                                    Increase/                 %
                                                             2021                 2020             (Decrease)              Change
Net Income Attributable to Boston Properties,
Inc. Common Shareholders                                $   311,680$   854,541$ (542,861)                 (63.53) %
Preferred stock redemption charge                             6,412                    -               6,412                  100.00  %
Preferred dividends                                           2,560                7,875              (5,315)                 (67.49) %
Net Income Attributable to Boston Properties,
Inc.                                                        320,652              862,416            (541,764)                 (62.82) %
Net Income Attributable to Noncontrolling
Interests:
Noncontrolling interest-common units of the
Operating Partnership                                        35,393               97,090             (61,697)                 (63.55) %
Noncontrolling interests in property partnerships            52,602               34,280              18,322                   53.45  %
Net Income                                                  408,647              993,786            (585,139)                 (58.88) %
Other Expenses:
Add:
Interest expense                                            320,015              319,726                 289                    0.09  %
Losses from early extinguishment of debt                        898                    -                 898                  100.00  %

Loss from unconsolidated joint ventures                       1,745                5,410              (3,665)                 (67.74) %
Other Income:
Less:
Gains from investments in securities                          3,744                  965               2,779                  287.98  %
Interest and other income (loss)                              4,140                4,277                (137)                  (3.20) %
Gains on sales of real estate                                 8,104              613,723            (605,619)                 (98.68) %
Other Expenses:
Add:
Depreciation and amortization expense                       539,815              515,738              24,077                    4.67  %
Transaction costs                                             2,970                1,254               1,716                  136.84  %
Payroll and related costs from management
services contracts                                            9,166                8,617                 549                    6.37  %
General and administrative expense                          117,924              102,059              15,865                   15.54  %
Other Revenue:
Less:
Direct reimbursements of payroll and related
costs from management services contracts                      9,166                8,617                 549                    6.37  %
Development and management services revenue                  20,181               23,285              (3,104)                 (13.33) %
Net Operating Income                                    $ 1,355,845$ 1,295,723$   60,122                    4.64  %


                                       57
--------------------------------------------------------------------------------
  Table of Contents
Boston Properties Limited Partnership
                                                                                Nine months ended September 30,
                                                                                                    Increase/                 %
                                                             2021                 2020             (Decrease)              Change
Net Income Attributable to Boston Properties
Limited Partnership Common Unitholders                  $   353,633$   969,932$ (616,299)                 (63.54) %
Preferred unit redemption charge                              6,412                    -               6,412                  100.00  %
Preferred distributions                                       2,560                7,875              (5,315)                 (67.49) %
Net Income Attributable to Boston Properties
Limited Partnership                                         362,605              977,807            (615,202)                 (62.92) %
Net Income Attributable to Noncontrolling
Interests:
Noncontrolling interests in property partnerships            52,602               34,280              18,322                   53.45  %
Net Income                                                  415,207            1,012,087            (596,880)                 (58.98) %
Other Expenses:
Add:
Interest expense                                            320,015              319,726                 289                    0.09  %
Losses from early extinguishment of debt                        898                    -                 898                  100.00  %

Loss from unconsolidated joint ventures                       1,745                5,410              (3,665)                 (67.74) %
Other Income:
Less:
Gains from investments in securities                          3,744                  965               2,779                  287.98  %
Interest and other income (loss)                              4,140                4,277                (137)                  (3.20) %
Gains on sales of real estate                                 8,104              626,686            (618,582)                 (98.71) %
Other Expenses:
Add:
Depreciation and amortization expense                       533,255              510,400              22,855                    4.48  %
Transaction costs                                             2,970                1,254               1,716                  136.84  %
Payroll and related costs from management
services contracts                                            9,166                8,617                 549                    6.37  %
General and administrative expense                          117,924              102,059              15,865                   15.54  %
Other Revenue:
Less:
Direct reimbursements of payroll and related
costs from management services contracts                      9,166                8,617                 549                    6.37  %
Development and management services revenue                  20,181               23,285              (3,104)                 (13.33) %
Net Operating Income                                    $ 1,355,845$ 1,295,723$   60,122                    4.64  %


At September 30, 2021 and 2020, we owned or had joint venture interests in a
portfolio of 202 and 196 commercial real estate properties, respectively (in
each case, the "Total Property Portfolio"). As a result of changes within our
Total Property Portfolio, the financial data presented below shows significant
changes in revenue and expenses from period-to-period. Accordingly, we do not
believe that our period-to-period financial data with respect to the Total
Property Portfolio provides a complete understanding of our operating results.
Therefore, the comparison of operating results for the three and nine months
ended September 30, 2021 and 2020 show separately the changes attributable to
the properties that were owned by us and in-service throughout each period
compared (the "Same Property Portfolio") and the changes attributable to the
properties included in the Acquired, Placed In-Service, Development or
Redevelopment or Sold Portfolios.
In our analysis of operating results, particularly to make comparisons of net
operating income between periods more 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 and in-service
through the end of the latest period presented as our Same Property Portfolio.
The Same Property Portfolio therefore excludes properties acquired, placed
in-service 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.
                                       58
--------------------------------------------------------------------------------
  Table of Contents
Net operating income ("NOI") is a non-GAAP financial measure equal to net income
attributable to Boston Properties, Inc. common shareholders and net income
attributable to Boston Properties Limited Partnership common unitholders, as
applicable, the most directly comparable GAAP financial measures, plus (1)
preferred stock/unit redemption charge, preferred dividends/distributions, net
income attributable to noncontrolling interests, interest expense, losses from
early extinguishment of debt, loss from unconsolidated joint ventures,
depreciation and amortization expense, transaction costs, payroll and related
costs from management services contracts and corporate general and
administrative expense less (2) gains (losses) from investments in securities,
interest and other income (loss), gains (losses) on sales of real estate, direct
reimbursements of payroll and related costs from management services contracts
and development and management services revenue. We use NOI internally as a
performance measure and believe it provides useful information to investors
regarding our results of operations and financial condition because, when
compared across periods, it 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 attributable to Boston Properties, Inc. common shareholders and
net income attributable to Boston Properties Limited Partnership common
unitholders. 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. Similarly, interest expense
may be incurred at the property level even though the financing proceeds may be
used at the corporate level (e.g., used for other investment activity). In
addition, depreciation and amortization expense, because of historical cost
accounting and useful life estimates, may distort operating performance measures
at the property level. NOI presented by us may not be comparable to NOI reported
by other REITs or real estate companies that define NOI differently.
We believe that, in order to facilitate a clear understanding of our operating
results, NOI should be examined in conjunction with net income attributable to
Boston Properties, Inc. common shareholders and net income attributable to
Boston Properties Limited Partnership common unitholders as presented in our
Consolidated Financial Statements. NOI should not be considered as a substitute
for net income attributable to Boston Properties, Inc. common shareholders or
net income attributable to Boston Properties Limited Partnership common
unitholders (determined in accordance with GAAP) or any other GAAP financial
measures and should only be considered together with and as a supplement to our
financial information prepared in accordance with GAAP.
The gains on sales of real estate, depreciation expense and impairment losses
may differ between BXP and BPLP as a result of previously applied acquisition
accounting by BXP for the issuance of common stock in connection with
non-sponsor OP Unit redemptions by BPLP. This accounting resulted in a step-up
of the real estate assets at BXP that was allocated to certain properties. The
difference between the real estate assets of BXP as compared to BPLP for certain
properties having an allocation of the real estate step-up will result in a
corresponding difference in gains on sales of real estate, depreciation expense
and impairment losses, when those properties are sold. For additional
information see the Explanatory Note that follows the cover page of this
Quarterly Report on Form 10-Q.
Comparison of the nine months ended September 30, 2021 to the nine months ended
September 30, 2020
The table below shows selected operating information for the Same Property
Portfolio and the Total Property Portfolio. The Same Property Portfolio consists
of 140 properties totaling approximately 39.0 million net rentable square feet,
excluding unconsolidated joint ventures. The Same Property Portfolio includes
properties acquired or placed in-service on or prior to January 1, 2020 and
owned and in service through September 30, 2021. The Total Property Portfolio
includes the effects of the other properties either acquired, placed in-service,
in development or redevelopment after January 1, 2020 or disposed of on or prior
to September 30, 2021. This table includes a reconciliation from the Same
Property Portfolio to the Total Property Portfolio by also providing information
for the nine months ended September 30, 2021 and 2020 with respect to the
properties that were acquired, placed in-service, in development or
redevelopment or sold.

                                       59

--------------------------------------------------------------------------------

  Table of Contents
                                                                                                                                                                   Properties
                                                                                                                          Properties Acquired                  Placed In-Service               Properties in Development or
                                                            Same Property Portfolio                                            Portfolio                           Portfolio                      Redevelopment Portfolio        
      Properties Sold Portfolio                                     Total
Property Portfolio
                                                                             Increase/                 %                                                                                                                                                                                                                Increase/                %
                                      2021                 2020              (Decrease)             Change                2021             2020              2021              2020               2021               2020                2021                2020                2021                 2020              (Decrease)             Change
                                                                                                                                                                                  (dollars in thousands)
Rental Revenue: (1)
Lease Revenue (Excluding
Termination Income)              $ 1,969,391$ 1,917,628$    51,763                  2.70  %       $   4,617$  297

$ 31,200$ 13,115$ 8,928$ 14,771

$ 7,258$ 24,067$ 2,021,394$ 1,969,878

       $    51,516                 2.62  %
Termination Income                    11,499                8,363                3,136                 37.50  %               -               -                  -                 -                   -                 -                     -                59               11,499                8,422                3,077                36.54  %
Lease Revenue                      1,980,890            1,925,991               54,899                  2.85  %           4,617             297        
    31,200            13,115               8,928            14,771         
       7,258            24,126            2,032,893            1,978,300               54,593                 2.76  %
Parking and Other                     56,398               53,136                3,262                  6.14  %             488               3                 14                16                 201                 -                 1,003             1,150               58,104               54,305                3,799                 7.00  %
Total Rental Revenue (1)           2,037,288            1,979,127               58,161                  2.94  %           5,105             300             31,214            13,131               9,129            14,771                 8,261            25,276            2,090,997            2,032,605               58,392                 2.87  %
Real Estate Operating Expenses       728,119              726,296                1,823                  0.25  %           2,294             443              8,586             5,778               4,414             6,224                 2,860             9,289              746,273              748,030               (1,757)               (0.23) %
Net Operating Income (Loss),
Excluding Residential and Hotel    1,309,169            1,252,831               56,338                  4.50  %           2,811            (143)            22,628             7,353               4,715             8,547                 5,401            15,987            1,344,724            1,284,575               60,149                 4.68  %
Residential Net Operating Income
(Loss) (2)                            14,833               16,809               (1,976)               (11.76) %               -               -             (3,101)             (717)                  -                 -                     -                 -               11,732               16,092               (4,360)              (27.09) %
Hotel Net Operating Loss (2)            (611)              (4,944)               4,333                 87.64  %               -               -                  -                 -                   -                 -                     -                 -                 (611)              (4,944)               4,333                87.64  %
Net Operating Income (Loss)      $ 1,323,391$ 1,264,696$    58,695                  4.64  %       $   2,811$ (143)$  19,527$  6,636$    4,715$  8,547$      5,401$ 15,987$ 1,355,845$ 1,295,723$    60,122                 4.64  %


_______________
(1)Rental Revenue is equal to Revenue less Development and Management Services
Revenue and Direct Reimbursements of Payroll and Related Costs from Management
Services Revenue per the Consolidated Statements of Operations, excluding the
residential and hotel revenue that is noted below. We use Rental Revenue
internally as a performance measure and in calculating other non-GAAP financial
measures (e.g., NOI), which provides investors with information regarding our
performance that is not immediately apparent from the comparable non-GAAP
measures and allows investors to compare operating performance between periods.
(2)For a detailed discussion of NOI, including the reasons management believes
NOI is useful to investors, see page 59. Residential Net Operating Income for
the nine months ended September 30, 2021 and 2020 is comprised of Residential
Revenue of $29,832 and $29,076 less Residential Expenses of $18,100 and $12,984,
respectively. Hotel Net Operating Loss for the nine months ended September 30,
2021 and 2020 is comprised of Hotel Revenue of $7,382 and $7,014 less Hotel
Expenses of $7,993 and $11,958, respectively, per the Consolidated Statements of
Operations.
                                       60
--------------------------------------------------------------------------------
  Table of Contents
Same Property Portfolio
Lease Revenue (Excluding Termination Income)
Lease revenue (excluding termination income) from the Same Property Portfolio
increased by approximately $51.8 million for the nine months ended September 30,
2021 compared to 2020. Approximately $59.6 million of the increase was related
to write-offs of accrued rent and accounts receivable balances that occurred
during the nine months ended September 30, 2020 and did not recur in 2021, for
primarily retail tenants that either terminated their leases or we determined
that the accrued rent and/or accounts receivable balances were no longer
probable of collection. Excluding the write-offs, the Same Property Portfolio
decreased by approximately $7.8 million due to average occupancy decreasing from
93.4% to 91.7%, resulting in a decrease of approximately $62.9 million,
partially offset by an increase in average revenue per square foot by
approximately $1.08, contributing approximately $55.1 million.
We continue to evaluate the collectability of our accrued rent and accounts
receivable balances related to lease revenue. If after a write-off has been
recorded, (1) we subsequently determine that we are probable we will collect
substantially all the remaining lessee's lease payments under the lease term and
(2) the lease has not been modified since the write-off, we will then reinstate
the accrued rent and accounts receivable write-offs, adjusting for the amount
related to the period when the lease payments were considered not probable of
collection. If our estimate of collectability differs from the cash received,
then the timing and amount of our reported revenue could be impacted.
Each quarter since the second quarter of 2020, the number of executed COVID-19
lease modifications has decreased and as of the third quarter of 2021, we are
executing COVID-19 modifications on a limited basis.
Termination Income
Termination income increased by approximately $3.1 million for the nine months
ended September 30, 2021 compared to 2020.
Termination income for the nine months ended September 30, 2021 related to 23
tenants across the Same Property Portfolio and totaled approximately
$11.5 million, which was primarily related to tenants that terminated leases
early in New York City and the Boston region.
Termination income for the nine months ended September 30, 2020 related to 34
tenants across the Same Property Portfolio and totaled approximately $8.4
million, which was primarily related to tenants that terminated leases early in
New York City.
Parking and Other Revenue
Parking and other revenue increased by approximately $3.3 million for the nine
months ended September 30, 2021 compared to 2020. Parking revenue and other
revenue increased by approximately $0.8 million and $2.5 million, respectively.
The increase in parking revenue was primarily due to an increase in transient
parking. The increase in other revenue was primarily due to approximately $5.1
million in insurance proceeds related to damage at one of our properties in the
New York region due to a water main break, partially offset by a decrease in
other revenue of approximately $2.6 million related to tenant restoration
obligation payments in 2020 that did not recur in 2021. Expenses of $5.1 million
related to the insurance claim are included within real estate operating
expenses.
We expect to see an increase in parking revenue as the return to office work
grows. For the nine months ended September 30, 2021, monthly parking decreased
by approximately $4.3 million, offset by an increase in transient parking of
approximately $5.6 million, compared to the nine months ended September 30,
2020. Some of our monthly parking revenues are contractual agreements embedded
in our leases, and some are at will individual agreements.
Real Estate Operating Expenses
Real estate operating expenses from the Same Property Portfolio increased by
approximately $1.8 million, or 0.3%, for the nine months ended September 30,
2021 compared to 2020, due primarily to an increase in utility expense and
expenses related to the insurance claim mentioned above, partially offset by a
decrease in real estate taxes and cleaning expenses. The increase in utility
expense was experienced across the portfolio and was primarily driven by an
increase in physical tenant occupancy, which led to higher demand for
electricity and HVAC.
                                       61
--------------------------------------------------------------------------------
  Table of Contents
Properties Acquired Portfolio
The table below lists the properties acquired between January 1, 2020 and
September 30, 2021. Rental revenue and real estate operating expenses increased
by approximately $4.8 million and $1.9 million, respectively, for the nine
months ended September 30, 2021 compared to 2020, as detailed below.
                                                                                           Rental Revenue                             Real Estate Operating Expenses
         Name                   Date acquired            Square Feet            2021            2020           Change              2021               2020           Change
                                                                                                                  (dollars in thousands)
777 Harrison Street
(1)                          June 26, 2020                         N/A       $ 1,509$ 300$ 1,209$      1,641$ 443$ 1,198
153 & 211 Second
Avenue                       June 2, 2021                136,882               3,101              -            3,101                   319              -              319
Shady Grove Bio+Tech
Campus                       August 2, 2021              233,452                 495              -              495                   334              -              334
                                                         370,334             $ 5,105$ 300$ 4,805$      2,294$ 443$ 1,851


_______________
(1)Formerly known as Fourth + Harrison and 425 Fourth Street and includes
operating results for 759 Harrison Street, which was fully acquired on December
16, 2020.
Properties Placed In-Service Portfolio
The table below lists the properties that were placed in-service or partially
placed in-service between January 1, 2020 and September 30, 2021. Rental revenue
and real estate operating expenses from our Properties Placed In-Service
Portfolio increased by approximately $19.9 million and $7.0 million,
respectively, for the nine months ended September 30, 2021 compared to 2020, as
detailed below.
                            Quarter Initially                                                                                            Rental Revenue                                 Real Estate Operating Expenses
       Name                 Placed In-Service            Quarter Fully Placed In-Service            Square Feet             2021              2020             Change               2021                2020            Change
                                                                                                                                                                 (dollars in thousands)
Office
20 CityPoint              Second Quarter, 2019         Second Quarter, 2020                          211,476             $  5,781$  5,485$    296$      2,248$ 2,053$   195
17Fifty Presidents
Street                    First Quarter, 2020          First Quarter, 2020                           275,809               14,833             8,878             5,955                 4,292            2,576            1,716
One Five Nine East
53rd Street (1)           First Quarter, 2021          First Quarter, 2021                           220,000               10,600            (1,232)           11,832                 2,046            1,149              897
Total Office                                                                                         707,285               31,214            13,131            18,083                 8,586            5,778            2,808

Residential
The Skylyne               Third Quarter, 2020          Third Quarter, 2020                           330,996                1,817                23             1,794                 4,918              740            4,178
Total Residential                                                                                    330,996                1,817                23             1,794                 4,918              740            4,178
                                                                                                   1,038,281             $ 33,031$ 13,154$ 19,877$     13,504$ 6,518$ 6,986


_____________

(1)This is the low-rise portion of 601 Lexington Avenue, which was in development for the nine months ended September 30, 2020. Rental revenue for the nine months ended September 30, 2020 includes an approximately $2.9 million write-off of accrued rent and accounts receivable balances for a terminated tenant.

                                       62
--------------------------------------------------------------------------------
  Table of Contents
Properties in Development or Redevelopment Portfolio
The table below lists the properties that were in development or redevelopment
between January 1, 2020 and September 30, 2021. Rental revenue and real estate
operating expenses from our Properties in Development or Redevelopment Portfolio
decreased by approximately $5.6 million and $1.8 million, respectively, for the
nine months ended September 30, 2021 compared to 2020, as detailed below.
                                                                                             Rental Revenue                                Real Estate Operating Expenses
                               Date Commenced
                               Development /
        Name                   Redevelopment             Square Feet            2021             2020             Change               2021               2020            Change
                                                                                                                     (dollars in thousands)
325 Main Street (1)         May 9, 2019                  115,000             $     -          $     36$    (36)$       278$   281$     (3)
200 West Street (2)         September 30, 2019           261,000               4,900             3,826             1,074                2,168            2,565              (397)
880 Winter Street (3)       February 25, 2021            224,000               2,476             6,290            (3,814)               1,509            2,338              (829)
3625-3635 Peterson
Way (4)                     April 16, 2021               218,000               1,753             4,619            (2,866)                 459            1,040              (581)
                                                         818,000             $ 9,129$ 14,771$ (5,642)$     4,414$ 6,224$ (1,810)


_______________
(1)Real estate operating expenses for the nine months ended September 30, 2021
and 2020 were related to demolition costs.
(2)Conversion of a 126,000 square foot portion of the property to life sciences
space from office space.
(3)On February 25, 2021, we commenced the redevelopment and conversion of 880
Winter Street, a 224,000 square foot office property located in Waltham,
Massachusetts, to laboratory space.
(4)On April 16, 2021, we removed 3625-3635 Peterson Way, located in Santa Clara,
California, from our in-service portfolio. We are demolishing the building and
expect to redevelop the site at a future date.
Properties Sold Portfolio
The table below lists the properties we sold between January 1, 2020 and
September 30, 2021. Rental revenue and real estate operating expenses from our
Properties Sold Portfolio decreased by approximately $17.0 million and $6.4
million, respectively, for the nine months ended September 30, 2021 compared to
2020, as detailed below.
                                                                                                                          Rental Revenue                                 Real Estate Operating Expenses
         Name                       Date Sold                Property Type           Square Feet             2021             2020              Change               2021               2020            Change
                                                                                                                                                  (dollars in thousands)
601, 611 and 651
GatewayJanuary 28, 2020              Office                     768,000             $     -          $  1,946$  (1,946)         $         -          $   881$   (881)New Dominion
Technology ParkFebruary 20, 2020             Office                     493,000                   -             2,551             (2,551)                   -              772              (772)
Capital Gallery (1)          June 25, 2020                 Office                     631,000               8,261            20,779            (12,518)               2,860            7,636            (4,776)
                                                                                    1,892,000             $ 8,261$ 25,276$ (17,015)$     2,860$ 9,289$ (6,429)


______________
(1)We completed the sale of a portion of our Capital Gallery property located in
Washington, DC. Capital Gallery is an approximately 631,000 net rentable square
foot Class A office property. The portion sold was comprised of approximately
455,000 net rentable square feet of commercial office space. We continue to own
the land, underground parking garage and remaining commercial office and retail
space. The amounts shown represent the entire property and not just the portion
sold.
For additional information on the sales of the above properties refer to
"Results of Operations-Other Income and Expense Items-Gains on Sales of Real
Estate" within "Item 2-Management's Discussion and Analysis of Financial
Condition and Results of Operations."
Residential Net Operating Income
Net operating income for our residential same properties decreased by
approximately $2.0 million for the nine months ended September 30, 2021 compared
to 2020. Net operating income for the nine months ended September 30, 2020
includes approximately $0.7 million of termination income from a retail tenant.
                                       63
--------------------------------------------------------------------------------
  Table of Contents
The following reflects our occupancy and rate information for The Lofts at
Atlantic Wharf, The Avant at Reston Town Center, Signature at Reston and Proto
Kendall Square for the nine months ended September 30, 2021 and 2020.
                                      The Lofts at Atlantic Wharf                                   The Avant at Reston Town Center                                    Signature at Reston

Proto Kendall Square

                              2021                2020             Change (%)                2021                 2020             Change (%)              2021              2020             Change (%)              2021               2020             Change (%)
Average Monthly
Rental Rate (1)         $      3,459$ 4,424                  (21.8) %       $       2,255$ 2,381                   (5.3) %       $   2,279$ 2,327                   (2.1) %       $    2,577$ 2,865                  (10.1) %
Average Rental
Rate Per Occupied
Square Foot             $       3.89$  4.89                  (20.4) %       $        2.46$  2.61                   (5.7) %       $    2.36$  2.46                   (4.1) %       $     4.73$  5.26                  (10.1) %
Average Physical
Occupancy (2)                   93.4   %          89.0  %                 4.9  %                94.2   %          90.2  %                 4.4  %            86.8  %          82.0  %                 5.9  %             92.2  %          91.2  %                 1.1  %
Average Economic
Occupancy (3)                   91.0   %          88.9  %                 2.4  %                93.6   %          89.2  %                 4.9  %            83.6  %          77.3  %                 8.2  %             91.0  %          90.0  %                 1.1  %


_______________
(1)Average Monthly Rental Rate is calculated as the average of the quotients
obtained by dividing (A) rental revenue as determined in accordance with GAAP,
by (B) the number of occupied units for each month within the applicable fiscal
period.
(2)Average Physical Occupancy is defined as (1) the average number of occupied
units divided by (2) the total number of units, expressed as a percentage.
(3)Average Economic Occupancy is defined as (1) total possible revenue less
vacancy loss divided by (2) total possible revenue, expressed as a percentage.
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 used by us in calculating Economic Occupancy are based on
the current market rates set by the managers of our residential properties based
on their experience in renting their residential property's units and publicly
available market data. Actual market rents and trends in such rents for a region
as reported by others may vary materially from Market Rents used by us. Market
Rents for a period are based on the average Market Rents during that period and
do not reflect any impact for cash concessions.
Hotel Net Operating LossThe Boston Marriott Cambridge hotel property operated at a loss of approximately
$0.6 million for the nine months ended September 30, 2021. This is approximately
$4.3 million less than the nine months ended September 30, 2020.
The Boston Marriott Cambridge closed in March 2020 due to COVID-19. The hotel
re-opened on October 2, 2020 and has operated at lower occupancy levels due to
the continued impact of COVID-19 on business and leisure travel. The closing of
the hotel for more than two fiscal quarters, and the lower demand and low
occupancy since its re-opening, have had, and are expected to continue to have,
a material adverse effect on the hotel's operations. We expect hotel occupancy
to remain low until the demand for business and leisure travel returns to
historical levels.
The following reflects our occupancy and rate information for the Boston
Marriott Cambridge hotel for the nine months ended September 30, 2021 and 2020.
                           2021           2020         Change (%)
Occupancy                   27.8  %        19.8  %         40.4  %
Average daily rate      $ 192.67$ 211.36            (8.8) %
REVPAR                  $  53.59$  41.85            28.1  %


Other Operating Revenue and Expense Items
Development and Management Services Revenue
Development and management services revenue decreased by approximately $3.1
million for the nine months ended September 30, 2021 compared to 2020.
Development services revenue decreased by approximately $3.8 million while
management services revenue increased by approximately $0.7 million. The
decrease in development
                                       64
--------------------------------------------------------------------------------
  Table of Contents
services revenue was primarily related to a decrease in development fees earned
from a building owned by a third-party in the Washington, DC region and an
unconsolidated joint venture in New York City and fees associated with tenant
improvement projects earned from a third-party owned building in the Washington,
DC region. The increase in management services revenue was primarily related to
an increase in leasing commissions earned from a third-party owned building in
the Washington, DC region.
General and Administrative Expense
General and administrative expense increased by approximately $15.9 million for
the nine months ended September 30, 2021 compared to 2020 primarily due to an
increase in compensation and health care expenses of approximately $17.5
million, partially offset by an approximately $1.6 million decrease in other
general and administrative expenses. The increase in compensation expense was
related to (1) an approximately $2.7 million increase in the value of our
deferred compensation plan, (2) an approximately $13.4 million increase in other
compensation expenses, primarily due to age-based vesting and (3) an
approximately $1.4 million increase in health care costs. The decrease in other
general and administrative expenses was primarily related to a decrease in
professional fees.
Wages directly related to the development of rental properties are capitalized
and included in real estate assets on our Consolidated Balance Sheets and
amortized over the useful lives of the applicable asset or lease term.
Capitalized wages for the nine months ended September 30, 2021 and 2020 were
approximately $10.1 million and $9.6 million, respectively. These costs are not
included in the general and administrative expenses discussed above.
Transaction Costs
Transaction costs increased by approximately $1.7 million for the nine months
ended September 30, 2021 compared to 2020 due primarily to costs incurred in
connection with the pursuit and formation of new joint ventures. In general,
transaction costs relating to the formation of new and pending joint ventures
and the pursuit of other transactions are expensed as incurred.
Depreciation and Amortization Expense
Depreciation expense may differ between BXP and BPLP as a result of previously
applied acquisition accounting by BXP for the issuance of common stock in
connection with non-sponsor OP Unit redemptions by BPLP.  This accounting
resulted in a step-up of the real estate assets at BXP that was allocated to
certain properties.  The difference between the real estate assets of BXP as
compared to BPLP for certain properties having an allocation of the real estate
step-up will result in a corresponding difference in depreciation expense. For
additional information see the Explanatory Note that follows the cover page of
this Quarterly Report on Form 10-Q.
Boston Properties, Inc.
Depreciation and amortization expense increased by approximately $24.1 million
for the nine months ended September 30, 2021 compared to 2020, as detailed
below.
                                                              Depreciation 

and Amortization for the nine months

                                                                             ended September 30,
Portfolio                                                         2021                2020             Change
                                                                               (in thousands)
Same Property Portfolio (1)                                  $   498,208$ 498,585$   (377)
Properties Acquired Portfolio                                      4,742                  -             4,742
Properties Placed In-Service Portfolio                            14,936              5,144             9,792

Properties in Development or Redevelopment Portfolio (2)

                                                               20,855              8,397            12,458
Properties Sold Portfolio                                          1,074              3,612            (2,538)
                                                             $   539,815$ 515,738$ 24,077


_______________
(1)During the nine months ended September 30, 2021, we commenced redevelopment
of View Boston Observatory at The Prudential Center, a 59,000 net rentable
square foot redevelopment of the top three floors of 800 Boylston Street - The
Prudential Center, located in Boston, Massachusetts. As a result, during the
nine months ended September 30, 2021, we recorded approximately $2.6 million of
accelerated depreciation expense for the demolition of the space, of which
approximately $0.8 million related to the step-up of real estate assets.
                                       65
--------------------------------------------------------------------------------
  Table of Contents
(2)On February 25, 2021, we commenced redevelopment of 880 Winter Street in
Waltham, Massachusetts. As a result, during the nine months ended September 30,
2021, we recorded approximately $13.7 million of accelerated depreciation
expense for the demolition of a portion of the building.
Boston Properties Limited Partnership
Depreciation and amortization expense increased by approximately $22.9 million
for the nine months ended September 30, 2021 compared to 2020, as detailed
below.
                                                              Depreciation 

and Amortization for the nine months

                                                                             ended September 30,
Portfolio                                                         2021                2020             Change
                                                                               (in thousands)
Same Property Portfolio (1)                                  $   491,648$ 493,247$ (1,599)
Properties Acquired Portfolio                                      4,742                  -             4,742
Properties Placed In-Service Portfolio                            14,936              5,144             9,792

Properties in Development or Redevelopment Portfolio (2)

                                                               20,855              8,397            12,458
Properties Sold Portfolio                                          1,074              3,612            (2,538)
                                                             $   533,255$ 510,400$ 22,855


_______________
(1)During the nine months ended September 30, 2021, we commenced redevelopment
of View Boston Observatory at The Prudential Center, a 59,000 net rentable
square foot redevelopment of the top three floors of 800 Boylston Street - The
Prudential Center, located in Boston, Massachusetts. As a result, during the
nine months ended September 30, 2021, we recorded approximately $1.8 million of
accelerated depreciation expense for the demolition of the space.
(2)On February 25, 2021, we commenced redevelopment of 880 Winter Street in
Waltham, Massachusetts. As a result, during the nine months ended September 30,
2021, we recorded approximately $13.7 million of accelerated depreciation
expense for the demolition of a portion of the building.
Direct Reimbursements of Payroll and Related Costs From Management Services
Contracts and Payroll and Related Costs From Management Service Contracts
We have determined that amounts reimbursed for payroll and related costs
received from third parties in connection with management services contracts
should be reflected on a gross basis instead of on a net basis as we have
determined that we are the principal under these arrangements. We anticipate
that these two financial statement line items will generally offset each other.
Other Income and Expense Items
Loss from Unconsolidated Joint Ventures
For the nine months ended September 30, 2021 compared to 2020, loss from
unconsolidated joint ventures decreased by approximately $3.7 million primarily
due to an approximately $10.3 million gain on sale of investment from the sale
of our Annapolis Junction joint venture interest during the nine months ended
September 30, 2021 (See Note 5 to the Consolidated Financial Statements). This
increase was partially offset by (1) an approximately $5.8 million gain on sale
of real estate from the sale of Annapolis Junction Building Eight and two
undeveloped land parcels during the nine months ended September 30, 2020 and (2)
an approximately $1.1 million decrease in net income from our Metropolitan
Square joint venture, primarily related to increased interest expense related to
the mortgage refinancing.
Gains on Sales of Real Estate
Gains on sales of real estate may differ between BXP and BPLP as a result of
previously applied acquisition accounting by BXP for the issuance of common
stock in connection with non-sponsor OP Unit redemptions by BPLP. This
accounting resulted in a step-up of the real estate assets at BXP that was
allocated to certain properties. The difference between the real estate assets
of BXP as compared to BPLP for certain properties having an allocation of the
real estate step-up will result in a corresponding difference in the gains on
sales of real estate when those properties are sold. For additional information,
see the Explanatory Note that follows the cover page of this Quarterly Report on
Form 10-Q.
                                       66
--------------------------------------------------------------------------------
  Table of Contents
Boston Properties, Inc.
Gains on sales of real estate decreased by approximately $605.6 million for the
nine months ended September 30, 2021 compared to 2020, as detailed below.
                                                                                                                                                     Gain (Loss) on
                                                                                                                                    Net Cash          Sale of Real
          Name                        Date Sold                Property Type            Square Feet            Sale Price           Proceeds             Estate
                                                                                                                             (dollars in millions)
2021
6595 Springfield Center
Drive                          December 13, 2018             Office                      634,000                        N/A                N/A       $       8.1    (1)
                                                                                                                        N/A                N/A       $       8.1
2020
601, 611 and 651 Gateway       January 28, 2020              Office                      768,000             $     350.0          $       -          $     217.7
New Dominion Technology
Park                           February 20, 2020             Office                      493,000                   256.0              254.0                192.3
Capital Gallery                June 25, 2020                 Office                      455,000                   253.7              246.6                203.6
                                                                                                             $     859.7$   500.6$     613.6    (2)


___________
(1)On December 13, 2018, we sold our 6595 Springfield Center Drive development
project located in Springfield, Virginia. Concurrently with the sale, we agreed
to act as development manager and guaranteed the completion of the project (See
Note 9 to the Consolidated Financial Statements). The development project
achieved final completion during the third quarter of 2021 and, upon completion
of the project, the total cost of development was determined to be below the
estimated total investment at the time of sale. As a result, we recognized a
gain of approximately $8.1 million.
(2)Excludes approximately $0.1 million of gains on sales of real estate
recognized during the nine months ended September 30, 2020 related to gain
amounts from sales of real estate occurring in the prior year.
Boston Properties Limited Partnership
Gains on sales of real estate decreased by approximately $618.6 million for the
nine months ended September 30, 2021 compared to 2020, as detailed below.
                                                                                                                                                     Gain (Loss) on
                                                                                                                                    Net Cash          Sale of Real
          Name                        Date Sold                Property Type            Square Feet            Sale Price           Proceeds             Estate
                                                                                                                             (dollars in millions)
2021
6595 Springfield Center
Drive                          December 13, 2018             Office                      634,000                        N/A                N/A       $       8.1    (1)
                                                                                                                        N/A                N/A       $       8.1
2020
601, 611 and 651 Gateway       January 28, 2020              Office                      768,000             $     350.0          $       -          $     222.4
New Dominion Technology
Park                           February 20, 2020             Office                      493,000                   256.0              254.0                197.1
Capital Gallery                June 25, 2020                 Office                      455,000                   253.7              246.6                  207
                                                                                                             $     859.7$   500.6$     626.5    (2)


___________
(1)On December 13, 2018, we sold our 6595 Springfield Center Drive development
project located in Springfield, Virginia. Concurrently with the sale, we agreed
to act as development manager and guaranteed the completion of the project (See
Note 9 to the Consolidated Financial Statements). The development project
achieved final completion during the third quarter of 2021 and, upon completion
of the project, the total cost of development was determined to be below the
estimated total investment at the time of sale. As a result, we recognized a
gain of approximately $8.1 million.
(2)Excludes approximately $0.2 million of gains on sales of real estate
recognized during the nine months ended September 30, 2020 related to gain
amounts from sales of real estate occurring in the prior year.
                                       67
--------------------------------------------------------------------------------
  Table of Contents
Interest and Other Income (Loss)
Interest and other income (loss) decreased by approximately $0.1 million for the
nine months ended September 30, 2021 compared to 2020, due primarily to a
decrease of approximately $2.9 million in interest income as a result of lower
interest earned on our deposits, partially offset by an approximately $2.8
million decrease in the allowance for current expected credit losses, which
results in higher income.
On January 1, 2020, we adopted Accounting Standards Update ("ASU") 2016-13,
"Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses
on Financial Instruments" ("ASU 2016-13") and, as a result, we were required to
record an allowance for current expected credit losses related to our
outstanding (1) related party note receivable, (2) notes receivable and (3)
off-balance sheet credit exposures.
Gains from Investments in Securities
Gains from investments in securities for the nine months ended September 30,
2021 and 2020 related to investments that we have made to reduce our market risk
relating to deferred compensation plans that we maintain for BXP's officers and
former non-employee directors. Under the deferred compensation plans, each
officer or non-employee director who is eligible to participate is permitted to
defer a portion of the officer's current income or the non-employee director's
compensation on a pre-tax basis and receive a tax-deferred return on these
deferrals based on the performance of specific investments selected by the
officer or non-employee director. In order to reduce our market risk relating to
these plans, we typically acquire, in a separate account that is not restricted
as to its use, similar or identical investments as those selected by each
officer or non-employee director. This enables us to generally match our
liabilities to BXP's officers or former non-employee directors under our
deferred compensation plans with equivalent assets and thereby limit our market
risk. The performance of these investments is recorded as gains from investments
in securities. During the nine months ended September 30, 2021 and 2020, we
recognized gains of approximately $3.7 million and $1.0 million, respectively,
on these investments. By comparison, our general and administrative expense
increased by approximately $3.7 million and $1.0 million during the nine months
ended September 30, 2021 and 2020, respectively, as a result of increases in our
liability under our deferred compensation plans that was associated with the
performance of the specific investments selected by officers and former
non-employee directors of BXP participating in the plans.
Losses From Early Extinguishment of Debt
On February 14, 2021, BPLP completed the redemption of $850.0 million in
aggregate principal amount of its 4.125% senior notes due May 15, 2021. The
redemption price was approximately $858.7 million, which was equal to the stated
principal plus approximately $8.7 million of accrued and unpaid interest to, but
not including, the redemption date. Excluding the accrued and unpaid interest,
the redemption price was equal to the principal amount being redeemed. We
recognized a loss from early extinguishment of debt totaling approximately
$0.4 million related to unamortized origination costs.
On March 16, 2021, BPLP repaid $500.0 million, representing all amounts
outstanding on its delayed draw term loan ("Delayed Draw Facility") under our
prior unsecured revolving credit agreement (the "2017 Credit Facility"). We
recognized a loss from early extinguishment of debt totaling approximately $0.5
million related to unamortized financing costs.
                                       68
--------------------------------------------------------------------------------
  Table of Contents
Interest Expense
Interest expense increased by approximately $0.3 million for the nine months
ended September 30, 2021 compared to 2020, as detailed below.
                                                                               Change in interest
                                                                              expense for the nine
                                                                                  months ended
                                                                               September 30, 2021
                                                                                  compared to
Component                                                                      September 30, 2020
                                                                                 (in thousands)
Increases to interest expense due to:
Issuance of $1.25 billion in aggregate principal of 3.250% senior
notes due 2031 on May 5, 2020                                               $              14,155

Issuance of $850 million in aggregate principal of 2.550% senior notes due 2032 on March 16, 2021

                                                           11,897
Decrease in capitalized interest related to development projects                            3,645

Increase in interest due to finance leases for two in-service properties

                                                                                  1,604

Increase in interest due to finance leases that are related to development properties

                                                                      1,052

Issuance of $850 million in aggregate principal of 2.450% senior notes due 2033 on September 29, 2021

                                                          116
Total increases to interest expense                                                        32,469

Decreases to interest expense due to: Redemption of $850 million in aggregate principal of 4.125% senior notes due 2021 on February 14, 2021

                                                       (22,550)

Decrease in interest rates for the 2017 and 2021 Credit Facilities and the repayment of the unsecured term loan on March 16, 2021 (1)

                         (5,196)

Increase in capitalized interest related to development projects that had finance leases

                                                                         (3,645)
Other interest expense (excluding senior notes)                                              (658)

Decrease in interest related to the repayment of the University Place mortgage loan

                                                                                (131)
Total decreases to interest expense                                                       (32,180)
Total change in interest expense                                            $                 289


_______________

(1)On June 15, 2021, BPLP entered into the 2021 Credit Facility, which replaced
the 2017 Credit Facility (See Note 8 to the Consolidated Financial Statements).
Interest expense directly related to the development of rental properties is
capitalized and included in real estate assets on our Consolidated Balance
Sheets and amortized over the useful lives of the real estate or lease term. As
portions of properties are placed in-service, we cease capitalizing interest on
that portion and interest is then expensed. Interest capitalized for the nine
months ended September 30, 2021 and 2020 was approximately $36.6 million and
$41.3 million, respectively. These costs are not included in the interest
expense referenced above.
On October 15, 2021, BPLP used available cash and funds under its 2021 Credit
Facility to complete the redemption of $1.0 billion in aggregate principal
amount of its 3.85% senior notes due February 1, 2023. The redemption price was
approximately $1.05 billion, which was equal to par plus approximately
$7.9 million of accrued and unpaid interest to, but not including, the
redemption date and an early redemption premium and unamortized financing costs
totaling approximately $43.9 million. We expect to recognize a loss from early
extinguishment of debt related primarily to the payment of the redemption
premium in the fourth quarter.
At September 30, 2021, our variable rate debt consisted of BPLP's $1.5 billion
revolving facility (the "Revolving Facility"). The Revolving Facility did not
have an outstanding balance as of September 30, 2021. For a summary of our
consolidated debt as of September 30, 2021 and September 30, 2020 refer to the
heading "Liquidity and Capital Resources-Capitalization-Debt Financing" within
"Item 2-Management's Discussion and Analysis of Financial Condition and Results
of Operations."
                                       69
--------------------------------------------------------------------------------
  Table of Contents
Noncontrolling Interests in Property Partnerships
Noncontrolling interests in property partnerships increased by approximately
$18.3 million for the nine months ended September 30, 2021 compared to 2020, as
detailed below.
                                                       Noncontrolling 

Interests in Property Partnerships for

                                                                the nine months ended September 30,
Property                                                    2021                 2020              Change
                                                                          (in thousands)
767 Fifth Avenue (the General Motors Building)
(1)                                                    $      8,873$   4,205$   4,668
Times Square Tower (2)                                       14,915                198             14,717
601 Lexington Avenue (3)                                     11,245             12,317             (1,072)
100 Federal Street                                           10,211             10,874               (663)
Atlantic Wharf Office Building                                7,358              6,686                672
                                                       $     52,602$  34,280$  18,322


_______________
(1)The increase was primarily attributable to an increase in lease revenue from
our tenants. In addition, during the nine months ended September 30, 2020, we
accelerated amortization expense related to a below-market lease that terminated
early.
(2)During the nine months ended September 30, 2020, we wrote off approximately
$26.8 million of accrued rent and accounts receivable balances for tenants that
either terminated their leases or for which we determined their accrued rent
and/or accounts receivable balances, primarily retail tenants, were no longer
probable of collection. Approximately $12.0 million represents our partners'
share of the write-offs.
(3)The decrease was primarily due to a decrease in lease revenue from our retail
tenants and a tenant that terminated its space during the nine months ended
September 30, 2020, partially offset by the increase in revenue related to
placing in-service One Five Nine East 53rd Street. During the nine months ended
September 30, 2020, we wrote off approximately $2.9 million of accrued rent and
accounts receivable balances for tenants that either terminated their leases or
for which we determined their accrued rent and/or accounts receivable balances,
primarily retail tenants, were no longer probable of collection. Approximately
$1.3 million represents our partners' share of the write-offs.
Noncontrolling Interest-Common Units of the Operating Partnership
For BXP, noncontrolling interest-common units of the Operating Partnership
decreased by approximately $61.7 million for the nine months ended September 30,
2021 compared to 2020 due primarily to a decrease in allocable income, which was
the result of recognizing a greater gain on sales of real estate amount during
2020. Due to our ownership structure, there is no corresponding line item on
BPLP's financial statements.
Results of Operations for the Three Months Ended September 30, 2021 and 2020
Net income attributable to Boston Properties, Inc. common shareholders and net
income attributable to Boston Properties Limited Partnership common unitholders
increased approximately $18.4 million and $20.4 million for the three months
ended September 30, 2021 compared to 2020, respectively, as detailed in the
following tables and for the reasons discussed below under the heading
"Comparison of the three months ended September 30, 2021 to the three months
ended September 30, 2020" within "Item 2-Management's Discussion and Analysis of
Financial Condition and Results of Operations."
Below are reconciliations of net income attributable to Boston Properties, Inc.
common shareholders to NOI and net income attributable to Boston Properties
Limited Partnership common unitholders to NOI for the three months ended
September 30, 2021 and 2020. For a detailed discussion of NOI, including the
reasons management believes NOI is useful to investors, see page 59.
                                       70
--------------------------------------------------------------------------------
  Table of Contents
Boston Properties, Inc.
                                                                                  Three months ended September 30,
                                                                                                       Increase/                   %
                                                               2021                   2020             (Decrease)               Change
                                                                                           (in thousands)
Net Income Attributable to Boston Properties,
Inc. Common Shareholders                                $    108,297$  89,854$    18,443                     20.53  %
Preferred dividends                                                -                  2,625               (2,625)                  (100.00) %
Net Income Attributable to Boston Properties,
Inc.                                                         108,297                 92,479               15,818                     17.10  %
Net Income Attributable to Noncontrolling
Interests:
Noncontrolling interest-common units of the
Operating Partnership                                         11,982                 10,020                1,962                     19.58  %
Noncontrolling interests in property partnerships             18,971                 15,561                3,410                     21.91  %
Net Income                                                   139,250                118,060               21,190                     17.95  %
Other Expenses:
Add:
Interest expense                                             105,794                110,993               (5,199)                    (4.68) %

Loss from unconsolidated joint ventures                        5,597                  6,873               (1,276)                   (18.57) %
Other Income:
Less:
Gains (losses) from investments in securities                   (190)                 1,858               (2,048)                  (110.23) %
Interest and other income (loss)                               1,520                    (45)               1,565                  3,477.78  %
Gains (losses) on sales of real estate                           348                   (209)                 557                    266.51  %
Other Expenses:
Add:
Depreciation and amortization expense                        179,412                166,456               12,956                      7.78  %
Transaction costs                                              1,888                    307                1,581                    514.98  %
Payroll and related costs from management
services contracts                                             3,006                  2,896                  110                      3.80  %
General and administrative expense                            34,560                 27,862                6,698                     24.04  %
Other Revenue:
Less:
Direct reimbursements of payroll and related
costs from management services contracts                       3,006                  2,896                  110                      3.80  %
Development and management services revenue                    6,094                  7,281               (1,187)                   (16.30) %
Net Operating Income                                    $    458,729$ 421,666$    37,063                      8.79  %


                                       71
--------------------------------------------------------------------------------
  Table of Contents
Boston Properties Limited Partnership
                                                                                  Three months ended September 30,
                                                                                                       Increase/                   %
                                                               2021                   2020             (Decrease)               Change
                                                                                           (in thousands)
Net Income Attributable to Boston Properties
Limited Partnership Common Unitholders                  $    122,014$ 101,624$    20,390                     20.06  %
Preferred distributions                                            -                  2,625               (2,625)                  (100.00) %
Net Income Attributable to Boston Properties
Limited Partnership                                          122,014                104,249               17,765                     17.04  %
Net Income Attributable to Noncontrolling
Interests:
Noncontrolling interests in property partnerships             18,971                 15,561                3,410                     21.91  %
Net Income                                                   140,985                119,810               21,175                     17.67  %
Other Expenses:
Add:
Interest expense                                             105,794                110,993               (5,199)                    (4.68) %

Loss from unconsolidated joint ventures                        5,597                  6,873               (1,276)                   (18.57) %
Other Income:
Less:
Gains (losses) from investments in securities                   (190)                 1,858               (2,048)                  (110.23) %
Interest and other income (loss)                               1,520                    (45)               1,565                  3,477.78  %
Gains (losses) on sales of real estate                           348                   (209)                 557                    266.51  %
Other Expenses:
Add:
Depreciation and amortization expense                        177,677                164,706               12,971                      7.88  %
Transaction costs                                              1,888                    307                1,581                    514.98  %
Payroll and related costs from management
services contracts                                             3,006                  2,896                  110                      3.80  %
General and administrative expense                            34,560                 27,862                6,698                     24.04  %
Other Revenue:
Less:
Direct reimbursements of payroll and related
costs from management services contracts                       3,006                  2,896                  110                      3.80  %
Development and management services revenue                    6,094                  7,281               (1,187)                   (16.30) %
Net Operating Income                                    $    458,729$ 421,666$    37,063                      8.79  %



Comparison of the three months ended September 30, 2021 to the three months
ended September 30, 2020
The table below shows selected operating information for the Same Property
Portfolio and the Total Property Portfolio. The Same Property Portfolio consists
of 143 properties totaling approximately 39.7 million net rentable square feet,
excluding unconsolidated joint ventures. The Same Property Portfolio includes
properties acquired or placed in-service on or prior to July 1, 2020 and owned
and in-service through September 30, 2021. The Total Property Portfolio includes
the effects of the other properties either acquired, placed in-service, in
development or redevelopment after July 1, 2020 or disposed of on or prior to
September 30, 2021. This table includes a reconciliation from the Same Property
Portfolio to the Total Property Portfolio by also providing information for the
three months ended September 30, 2021 and 2020 with respect to the properties
that were acquired, placed in-service, in development or redevelopment or sold.
We did not sell any properties during the three months ended September 30, 2021
and 2020.

                                       72

--------------------------------------------------------------------------------

  Table of Contents
                                                                                                                                                                                                Properties in
                                                                                                                                                             Properties                        Development or
                                                                                                                      Properties                         Placed In-Service                      Redevelopment
                                                    Same Property Portfolio                                       Acquired Portfolio                         Portfolio                            Portfolio                        
              Total Property Portfolio
                                                                    Increase/                %                                                                                                                                                                                 Increase/                %
                                2021               2020             (Decrease)            Change                 2021               2020                2021               2020             2021             2020                          2021               2020             (Decrease)             Change
                                                                                                                                      (dollars in thousands)
Rental Revenue: (1)
Lease Revenue (Excluding
Termination Income)         $ 671,248$ 649,484$    21,764                3.35  %       $       2,840          $    -          $    3,904$  157$ 1,752$ 4,753$ 679,744$ 654,394$    25,350                 3.87  %
Termination Income              1,874              2,715                 (841)             (30.98) %                   -               -                   -                  -                -                -                          1,874              2,715                 (841)              (30.98) %
Lease Revenue                 673,122            652,199               20,923                3.21  %               2,840               -               3,904                157            1,752            4,753                        681,618            657,109               24,509                 3.73  %
Parking and Other              23,250             16,170                7,080               43.78  %                   -               -                   5                  4                -                -                         23,255             16,174                7,081                43.78  %
Total Rental Revenue (1)      696,372            668,369               28,003                4.19  %               2,840               -               3,909                161            1,752            4,753                        704,873            673,283               31,590                 4.69  %
Real Estate Operating
Expenses                      249,844            250,951               (1,107)              (0.44) %                 582               -                 648                307            1,162            2,048                        252,236            253,306               (1,070)               (0.42) %
Net Operating Income
(Loss), Excluding
Residential and Hotel         446,528            417,418               29,110                6.97  %               2,258               -               3,261               (146)             590            2,705                        452,637            419,977               32,660                 7.78  %
Residential Net Operating
Income (Loss) (2)               5,731              5,480                  251                4.58  %                   -               -                (882)              (717)               -                -                          4,849              4,763                   86                 1.81  %
Hotel Net Operating Income
(Loss) (2)                      1,243             (3,074)               4,317              140.44  %                   -               -                   -                  -                -                -                          1,243             (3,074)               4,317               140.44  %
Net Operating Income (Loss) $ 453,502$ 419,824$    33,678                8.02  %       $       2,258          $    -          $    2,379$ (863)$   590$ 2,705$ 458,729$ 421,666$    37,063                 8.79  %


_______________
(1)Rental Revenue is equal to Revenue less Development and Management Services
Revenue and Direct Reimbursements of Payroll and Related Costs from Management
Services Revenue per the Consolidated Statements of Operations, excluding the
residential and hotel revenue that is noted below. We use Rental Revenue
internally as a performance measure and in calculating other non-GAAP financial
measures (e.g., NOI), which provides investors with information regarding our
performance that is not immediately apparent from the comparable non-GAAP
measures and allows investors to compare operating performance between periods.
(2)For a detailed discussion of NOI, including the reasons management believes
NOI is useful to investors, see page 59. Residential Net Operating Income for
the three months ended September 30, 2021 and 2020 is comprised of Residential
Revenue of $10,894 and $9,718 less Residential Expenses of $6,045 and $4,955,
respectively. Hotel Net Operating Income (Loss) for the three months ended
September 30, 2021 and 2020 is comprised of Hotel Revenue of $5,189 and $90 less
Hotel Expenses of $3,946 and $3,164, respectively, per the Consolidated
Statements of Operations.
                                       73
--------------------------------------------------------------------------------
  Table of Contents
Same Property Portfolio
Lease Revenue (Excluding Termination Income)
Lease revenue from the Same Property Portfolio increased by approximately $21.8
million for the three months ended September 30, 2021 compared to 2020.
Approximately $7.5 million of the increase related to write-offs of accrued rent
and accounts receivable balances that occurred during the three months ended
September 30, 2020 and did not recur in 2021, for primarily retail tenants that
either terminated their leases or we determined that the accrued rent and/or
accounts receivable balances were no longer probable of collection. Excluding
the write-offs, the Same Property Portfolio increased by approximately $14.3
million primarily due to our average revenue per square foot increasing by
approximately $2.77, resulting in an increase of approximately $24.1 million,
partially offset by an approximately $9.8 million decrease due to our average
occupancy decreasing from 92.4% to 91.0%.
We continue to evaluate the collectability of our accrued rent and accounts
receivable balances related to lease revenue. If after a write-off has been
recorded, (1) we subsequently determine that we are probable we will collect
substantially all the remaining lessee's lease payments under the lease term and
(2) the lease has not been modified since the write-off, we will then reinstate
the accrued rent and accounts receivable write-offs, adjusting for the amount
related to the period when the lease payments were considered not probable of
collection. If our estimate of collectability differs from the cash received,
then the timing and amount of our reported revenue could be impacted.
Each quarter since the second quarter of 2020, the number of executed COVID-19
lease modifications has decreased and as of the third quarter of 2021, we are
executing COVID-19 modifications on a limited basis.
Termination Income
Termination income decreased by approximately $0.8 million for the three months
ended September 30, 2021 compared to 2020.
Termination income for the three months ended September 30, 2021 related to six
tenants across the Same Property Portfolio and totaled approximately $1.9
million, which was primarily related to tenants that terminated leases early in
New York City.
Termination income for the three months ended September 30, 2020 related to 10
tenants across the Same Property Portfolio and totaled approximately $2.7
million, which was primarily related to tenants that terminated leases early in
New York City and the Washington, DC region.
Parking and Other Revenue
Parking and other revenue increased by approximately $7.1 million for the three
months ended September 30, 2021 compared to 2020. Parking revenue and other
revenue increased by approximately $6.3 million and $0.8 million, respectively.
The increase in parking revenue was primarily due to an increase in transient
parking.
Real Estate Operating Expenses
Real estate operating expenses from the Same Property Portfolio decreased by
approximately $1.1 million, or 0.4%, for the three months ended September 30,
2021 compared to 2020, due primarily to a decrease in real estate taxes of
approximately $5.9 million, or 4.4%, offset by an increase in utility and other
real estate operating expenses of approximately $3.1 million, or 12.1%, and $1.7
million, or 1.9%, respectively. The decrease in real estate taxes was primarily
experienced in New York City. The increase in utility expense was experienced
across the portfolio and was primarily driven by an increase in physical tenant
occupancy, which led to higher demand for electricity and HVAC.
                                       74
--------------------------------------------------------------------------------
  Table of Contents
Properties Acquired Portfolio
The table below lists the properties acquired between July 1, 2020 and
September 30, 2021. Rental revenue and real estate operating expenses increased
by approximately $2.8 million and $0.6 million, respectively, for the three
months ended September 30, 2021 compared to 2020, as detailed below.
                                                                                           Rental Revenue                          Real Estate Operating Expenses
         Name                   Date acquired            Square Feet            2021            2020           Change            2021            2020          Change
                                                                                                               (dollars in thousands)
153 & 211 Second
Avenue                       June 2, 2021                136,882             $ 2,345          $   -          $ 2,345$   248          $   -          $  248
Shady Grove Bio+Tech
Campus                       August 2, 2021              233,452                 495              -              495              334              -             334
                                                         370,334             $ 2,840          $   -          $ 2,840$   582          $   -          $  582



Properties Placed In-Service Portfolio
The table below lists the properties that were placed in-service or partially
placed in-service between July 1, 2020 and September 30, 2021. Rental revenue
and real estate operating expenses from our Properties Placed In-Service
Portfolio increased by approximately $4.5 million and $1.3 million,
respectively, for the three months ended September 30, 2021 compared to 2020, as
detailed below.
                           Quarter Initially                                                                                        Rental Revenue                              Real Estate Operating Expenses
       Name                Placed In-Service            Quarter Fully Placed In-Service           Square Feet            2021            2020           Change              2021               2020            Change
                                                                                                                                                           (dollars in thousands)
Office
One Five Nine East
53rd Street (1)          First Quarter, 2021          First Quarter, 2021                         220,000             $ 3,909$ 161$ 3,748$       648$   307$   341
Total Office                                                                                      220,000               3,909            161            3,748                  648              307              341

Residential
The Skylyne              Third Quarter, 2020          Third Quarter, 2020                         330,996                 806             23              783                1,688              740              948
Total Residential                                                                                 330,996                 806             23              783                1,688              740              948
                                                                                                  550,996             $ 4,715$ 184$ 4,531$     2,336$ 1,047$ 1,289


_______________

(1)This is the low-rise portion of 601 Lexington Avenue, which was in development for the three months ended September 30, 2020.


Properties in Development or Redevelopment Portfolio
The table below lists the properties that were in development or redevelopment
between July 1, 2020 and September 30, 2021. Rental revenue and real estate
operating expenses from our Properties in Development or Redevelopment Portfolio
decreased by approximately $3.0 million and $0.9 million, respectively, for the
three months ended September 30, 2021 compared to 2020.
                                                                                            Rental Revenue                               Real Estate Operating Expenses
                               Date Commenced
                               Development /
        Name                   Redevelopment             Square Feet            2021             2020            Change               2021               2020           Change
                                                                                                                   (dollars in thousands)
325 Main Street (1)         May 9, 2019                  115,000             $     -          $     -          $      -          $       169$   207$  (38)
200 West Street (2)         September 30, 2019           261,000               1,752            1,233               519                  932              784             148
880 Winter Street (3)       February 25, 2021            224,000                   -            1,977            (1,977)                  61              706            (645)
3625-3635 Peterson
Way (4)                     April 16, 2021               218,000                   -            1,543            (1,543)                   -              351            (351)
                                                         818,000             $ 1,752$ 4,753$ (3,001)$     1,162$ 2,048$ (886)


                                       75
--------------------------------------------------------------------------------
  Table of Contents
_______________
(1)Real estate operating expenses for the three months ended September 30, 2021
and 2020 were related to demolition costs.
(2)Conversion of a 126,000 square foot portion of the property to life sciences
space from office space.
(3)On February 25, 2021, we commenced the redevelopment and conversion of 880
Winter Street, a 224,000 square foot office property located in Waltham,
Massachusetts, to laboratory space.
(4)On April 16, 2021, we removed 3625-3635 Peterson Way, located in Santa Clara,
California, from our in-service portfolio. We are demolishing the building and
expect to redevelop the site at a future date.
Residential Net Operating Income
Net operating income for our residential same properties increased by
approximately $0.3 million for the three months ended September 30, 2021
compared to 2020. Net operating income for the three months ended September 30,
2020 includes approximately $0.7 million of termination income from a retail
tenant.
The following reflects our occupancy and rate information for The Lofts at
Atlantic Wharf, The Avant at Reston Town Center, Signature at Reston and Proto
Kendall Square for the three months ended September 30, 2021 and 2020.
                                      The Lofts at Atlantic Wharf                                   The Avant at Reston Town Center                                    Signature at Reston

Proto Kendall Square

                              2021                2020             Change (%)                2021                 2020             Change (%)              2021              2020             Change (%)              2021               2020             Change (%)
Average Monthly
Rental Rate (1)         $      3,747$ 4,231                  (11.4) %       $       2,299$ 2,352                   (2.3) %       $   2,429$ 2,319                    4.7  %       $    2,642$ 2,676                   (1.3) %
Average Rental
Rate Per Occupied
Square Foot             $       4.17$  4.62                   (9.7) %       $        2.50$  2.57                   (2.7) %       $    2.51$  2.42                    3.7  %       $     4.82$  4.91                   (1.8) %
Average Physical
Occupancy (2)                   96.5   %          80.2  %                20.3  %                96.3   %          89.7  %                 7.4  %            93.2  %          82.2  %                13.4  %             94.5  %          85.7  %                10.3  %
Average Economic
Occupancy (3)                   95.4   %          80.7  %                18.2  %                96.3   %          88.9  %                 8.3  %            92.0  %          78.2  %                17.6  %             93.9  %          83.1  %                13.0  %


_______________
(1)Average Monthly Rental Rate is calculated as the average of the quotients
obtained by dividing (A) rental revenue as determined in accordance with GAAP,
by (B) the number of occupied units for each month within the applicable fiscal
period.
(2)Average Physical Occupancy is defined as (1) the average number of occupied
units divided by (2) the total number of units, expressed as a percentage.
(3)Average Economic Occupancy is defined as (1) total possible revenue less
vacancy loss divided by (2) total possible revenue, expressed as a percentage.
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 used by us in calculating Economic Occupancy are based on
the current market rates set by the managers of our residential properties based
on their experience in renting their residential property's units and publicly
available market data. Actual market rents and trends in such rents for a region
as reported by others may vary materially from Market Rents used by us. Market
Rents for a period are based on the average Market Rents during that period and
do not reflect any impact for cash concessions.
Hotel Net Operating Income (Loss)
The Boston Marriott Cambridge hotel property operated at an approximately $1.2
million profit during the three months ended September 30, 2021. This is
approximately $4.3 million greater than the three months ended September 30,
2020.
The Boston Marriott Cambridge closed in March 2020 due to COVID-19. The hotel
re-opened on October 2, 2020 and has operated at lower occupancy levels due to
the continued impact of COVID-19 on business and leisure travel. The closing of
the hotel for more than two fiscal quarters, and the lower demand and low
occupancy since its re-opening, have had, and are expected to continue to have,
a material adverse effect on the hotel's operations. We expect hotel occupancy
to remain low until the demand for business and leisure travel returns to
historical levels.
The following reflects our occupancy and rate information for the Boston
Marriott Cambridge hotel for the three months ended September 30, 2021 and 2020.
                                       76

--------------------------------------------------------------------------------

  Table of Contents
                           2021         2020      Change (%)
Occupancy                   49.4  %      -  %        100.0  %
Average daily rate      $ 222.31       $ -           100.0  %
REVPAR                  $ 109.86       $ -           100.0  %


Other Operating Revenue and Expense Items
Development and Management Services Revenue
Development and management services revenue decreased by approximately $1.2
million for the three months ended September 30, 2021 compared to 2020.
Development and management services revenue decreased by approximately $1.1
million and $0.1 million, respectively. The decrease in development services
revenue was primarily related to a decrease of approximately $0.6 million in
development fees earned in New York City from an unconsolidated joint venture
and a decrease of approximately $0.5 million in fees associated with tenant
improvement projects earned from a building owned by a third-party in the
Washington, DC region. The decrease in management services revenue was primarily
related to a decrease in property management fees earned from third-party owned
buildings in the Washington, DC region.
General and Administrative Expense
General and administrative expense increased by approximately $6.7 million for
the three months ended September 30, 2021 compared to 2020 primarily due to an
increase in compensation expense of approximately $6.4 million, and an increase
of approximately $0.3 million in other general and administrative expenses. The
increase in compensation expense was partially offset by a decrease of
approximately $2.1 million in the value of our deferred compensation plan. The
increase in other general and administrative expenses was primarily related to
an increase in meals and travel expense.
Wages directly related to the development of rental properties are capitalized
and included in real estate assets on our Consolidated Balance Sheets and
amortized over the useful lives of the applicable asset or lease term.
Capitalized wages for the three months ended September 30, 2021 and 2020 were
approximately $3.4 million. These costs are not included in the general and
administrative expenses discussed above.
Transaction Costs
Transaction costs increased by approximately $1.6 million for the three months
ended September 30, 2021 compared to 2020 due primarily to costs incurred in
connection with the pursuit and formation of new joint ventures. In general,
transaction costs relating to the formation of new and pending joint ventures
and the pursuit of other transactions are expensed as incurred.
Depreciation and Amortization Expense
Depreciation expense may differ between BXP and BPLP as a result of previously
applied acquisition accounting by BXP for the issuance of common stock in
connection with non-sponsor OP Unit redemptions by BPLP.  This accounting
resulted in a step-up of the real estate assets at BXP that was allocated to
certain properties.  The difference between the real estate assets of BXP as
compared to BPLP for certain properties having an allocation of the real estate
step-up will result in a corresponding difference in depreciation expense. For
additional information see the Explanatory Note that follows the cover page of
this Quarterly Report on Form 10-Q.
Boston Properties, Inc.
Depreciation and amortization expense increased by approximately $13.0 million
for the three months ended September 30, 2021 compared to 2020, as detailed
below.
                                       77

--------------------------------------------------------------------------------

Table of Contents

                                                             Depreciation 

and Amortization for the three months

                                                                             ended September 30,
Portfolio                                                         2021                2020             Change
                                                                               (in thousands)
Same Property Portfolio                                      $   171,977$ 163,114$  8,863
Properties Acquired Portfolio                                      3,761                  -             3,761
Properties Placed In-Service Portfolio                             3,295                695             2,600
Properties in Development or Redevelopment Portfolio                 379              2,647            (2,268)

                                                             $   179,412$ 166,456$ 12,956Boston Properties Limited Partnership
Depreciation and amortization expense increased by approximately $13.0 million
for the three months ended September 30, 2021 compared to 2020, as detailed
below.
                                                             Depreciation 

and Amortization for the three months

                                                                             ended September 30,
Portfolio                                                         2021                2020             Change
                                                                               (in thousands)
Same Property Portfolio                                      $   170,242$ 161,364$  8,878
Properties Acquired Portfolio                                      3,761                  -             3,761
Properties Placed In-Service Portfolio                             3,295                695             2,600
Properties in Development or Redevelopment Portfolio                 379              2,647            (2,268)

                                                             $   177,677$ 164,706$ 12,971



Direct Reimbursements of Payroll and Related Costs From Management Services
Contracts and Payroll and Related Costs From Management Service Contracts
We have determined that amounts reimbursed for payroll and related costs
received from third parties in connection with management services contracts
should be reflected on a gross basis instead of on a net basis as we have
determined that we are the principal under these arrangements. We anticipate
that these two financial statement line items will generally offset each other.
Other Income and Expense Items
Loss from Unconsolidated Joint Ventures
For the three months ended September 30, 2021 compared to 2020, loss from
unconsolidated joint ventures decreased by approximately $1.3 million due to a
$2.2 million increase in net income at our Colorado Center joint venture,
primarily due to a write-off of lease revenue during the three months ended
September 30, 2020. This increase was partially offset by an approximately $1.1
million decrease in net income from our Dock 72 joint venture, primarily related
to depreciation and amortization.
Gains (Losses) on Sales of Real Estate
Gains (losses) on sales of real estate increased by approximately $0.6 million
for the three months ended September 30, 2021 compared to 2020. During the three
months ended September 30, 2021, we recognized a gain of approximately $0.3
million related to the sale of 6595 Springfield Center Drive (See Note 3 to the
Consolidated Financial Statements). During the three months ended September 30,
2020, we incurred approximately $0.2 million of additional expenses related to
the sale of a portion of Capital Gallery in Washington, DC, thus resulting in a
loss on sale of real estate.
Interest and Other Income (Loss)
Interest and other income (loss) increased by approximately $1.6 million for the
three months ended September 30, 2021 compared to 2020, due to an approximately
$1.9 million decrease in the allowance for current
                                       78
--------------------------------------------------------------------------------
  Table of Contents
expected credit losses, which results in higher income, partially offset by a
decrease of approximately $0.3 million in interest income as a result of lower
interest earned on our deposits.
On January 1, 2020, we adopted ASU 2016-13 and, as a result, we were required to
record an allowance for current expected credit losses related to our
outstanding (1) related party note receivable, (2) notes receivable and (3)
off-balance sheet credit exposures.
Gains (Losses) from Investments in Securities
Gains (losses) from investments in securities for the three months ended
September 30, 2021 and 2020 related to investments that we have made to reduce
our market risk relating to deferred compensation plans that we maintain for
BXP's officers and former non-employee directors. Under the deferred
compensation plans, each officer or non-employee director who is eligible to
participate is permitted to defer a portion of the officer's current income or
the non-employee director's compensation on a pre-tax basis and receive a
tax-deferred return on these deferrals based on the performance of specific
investments selected by the officer or non-employee director. In order to reduce
our market risk relating to these plans, we typically acquire, in a separate
account that is not restricted as to its use, similar or identical investments
as those selected by each officer or non-employee director. This enables us to
generally match our liabilities to BXP's officers or former non-employee
directors under our deferred compensation plans with equivalent assets and
thereby limit our market risk. The performance of these investments is recorded
as gains (losses) from investments in securities. During the three months ended
September 30, 2021 and 2020, we recognized gains (losses) of approximately
$(0.2) million and $1.9 million, respectively, on these investments. By
comparison, our general and administrative expense increased (decreased) by
approximately $(0.2) million and $1.9 million during the three months ended
September 30, 2021 and 2020, respectively, as a result of increases (decreases)
in our liability under our deferred compensation plans that was associated with
the performance of the specific investments selected by officers and former
non-employee directors of BXP participating in the plans.
                                       79
--------------------------------------------------------------------------------
  Table of Contents
Interest Expense
Interest expense decreased by approximately $5.2 million for the three months
ended September 30, 2021 compared to 2020, as detailed below.
                                                                              Change in interest
                                                                             expense for the three
                                                                                 months ended
                                                                              September 30, 2021
                                                                           compared to September 30,
Component                                                                            2020
                                                                                (in thousands)
Increases to interest expense due to:
Issuance of $850 million in aggregate principal of 2.550% senior
notes due 2032 on March 16, 2021                                           $                5,491
Decrease in capitalized interest related to development projects                            2,876

Increase in interest due to finance leases for two in-service properties

                                                                                    447

Issuance of $850 million in aggregate principal of 2.450% senior notes due 2033 on September 29, 2021

                                                          116
Total increases to interest expense                                                         8,930

Decreases to interest expense due to: Redemption of $850 million in aggregate principal of 4.125% senior notes due 2021 on February 14, 2021

                                                        (8,945)

Increase in capitalized interest related to development projects that had finance leases

                                                                    (2,876)

Decrease in interest due to finance leases that are related to development properties

                                                                       (999)

Decrease in interest rates for the 2017 and 2021 Credit Facilities and the repayment of the unsecured term loan on March 16, 2021 (1)

                           (981)
Other interest expense (excluding senior notes)                                              (286)

Decrease in interest related to the repayment of University Place mortgage loan

                                                                                 (42)
Total decreases to interest expense                                                       (14,129)
Total change in interest expense                                           $               (5,199)


_______________

(1) On June 15, 2021, BPLP entered into the 2021 Credit Facility, which replaced
the 2017 Credit Facility (See Note 8 to the Consolidated Financial Statements).
Interest expense directly related to the development of rental properties is
capitalized and included in real estate assets on our Consolidated Balance
Sheets and amortized over the useful lives of the real estate or lease term. As
portions of properties are placed in-service, we cease capitalizing interest on
that portion and interest is then expensed. Interest capitalized for the three
months ended September 30, 2021 and 2020 was approximately $11.6 million and
$13.5 million, respectively. These costs are not included in the interest
expense referenced above.
On October 15, 2021, BPLP used available cash and funds under its 2021 Credit
Facility to complete the redemption of $1.0 billion in aggregate principal
amount of its 3.85% senior notes due February 1, 2023. The redemption price was
approximately $1.05 billion, which was equal to par plus approximately
$7.9 million of accrued and unpaid interest to, but not including, the
redemption date and an early redemption premium and unamortized financing costs
totaling approximately $43.9 million. We expect to recognize a loss from early
extinguishment of debt related primarily to the payment of the redemption
premium in the fourth quarter.
At September 30, 2021, our outstanding variable rate debt consisted of BPLP's
$1.5 billion Revolving Facility. The Revolving Facility did not have an
outstanding balance as of September 30, 2021. For a summary of our consolidated
debt as of September 30, 2021 and September 30, 2020 refer to the heading
"Liquidity and Capital Resources-Capitalization-Debt Financing" within
"Item 2-Management's Discussion and Analysis of Financial Condition and Results
of Operations."
                                       80
--------------------------------------------------------------------------------
  Table of Contents
Noncontrolling Interests in Property Partnerships
Noncontrolling interests in property partnerships increased by approximately
$3.4 million for the three months ended September 30, 2021 compared to 2020, as
detailed below.

                                                       Noncontrolling 

Interests in Property Partnerships for

                                                               the three months ended September 30,
Property                                                    2021                 2020              Change
                                                                          (in thousands)
767 Fifth Avenue (the General Motors Building)
(1)                                                    $      3,406$   2,104$   1,302
Times Square Tower (1)                                        4,995              3,545              1,450
601 Lexington Avenue                                          4,436              4,352                 84
100 Federal Street                                            3,421              3,565               (144)
Atlantic Wharf Office Building (2)                            2,713              1,995                718
                                                       $     18,971$  15,561$   3,410


_______________
(1)The increase was primarily attributable to an increase in lease revenue from
our tenants.
(2)During the three months ended September 30, 2020, we wrote off approximately
$0.5 million of accrued rent and accounts receivable balances for retail tenants
whose balances we determined were no longer probable of collection.
Approximately $0.2 million represents our partners' share of the write-offs.
Noncontrolling Interest-Common Units of the Operating Partnership
For BXP, noncontrolling interest-common units of the Operating Partnership
increased by approximately $2.0 million for the three months ended September 30,
2021 compared to 2020 due primarily to an increase in allocable income. Due to
our ownership structure, there is no corresponding line item on BPLP's financial
statements.
Liquidity and Capital Resources
General
Our principal liquidity needs for the next twelve months and beyond are to:
•fund normal recurring expenses;
•meet debt service and principal repayment obligations, including balloon
payments on maturing debt;
•fund development and redevelopment costs;
•fund capital expenditures, including major renovations, tenant improvements and
leasing costs;
•fund pending and possible acquisitions of properties, either directly or
indirectly through the acquisition of equity interests therein; and
•make the minimum distribution required to enable BXP to maintain its REIT
qualification under the Internal Revenue Code of 1986, as amended.
We expect to satisfy these needs using one or more of the following:
•cash flow from operations;
•distribution of cash flows from joint ventures;
•cash and cash equivalent balances;
•borrowings under BPLP's 2021 Credit Facility, short-term bridge facilities and
construction loans;
•long-term secured and unsecured indebtedness (including unsecured exchangeable
indebtedness);
•sales of real estate; and
•issuances of BXP equity securities and/or preferred or common units of
partnership interest in BPLP.
We draw on multiple financing sources to fund our long-term capital needs. We
expect to fund our current development properties primarily with our available
cash balances, construction loans and BPLP's Revolving Facility. We use BPLP's
Revolving Facility primarily as a bridge facility to fund acquisition
opportunities, refinance outstanding indebtedness and meet short-term
development and working capital needs. Although we may seek to fund our
development projects with construction loans, which may require guarantees by
BPLP, the financing for each particular project ultimately depends on several
factors, including, among others, the project's size and duration, the extent of
pre-leasing and our available cash and access to cost effective capital at the
given time.
                                       81
--------------------------------------------------------------------------------
  Table of Contents
The following table presents information on properties under construction and
redevelopment as of September 30, 2021 (dollars in thousands):
                                                                                                                                                                                                                                       Financings
                                                                                                                                                                                                  Estimated Total                                                      Estimated Future
                                                                                                                                                                            Investment to            Investment              Total             Outstanding at         Equity Requirement       Percentage

Leased

       Construction Properties                Estimated Stabilization Date                   Location                 # of Buildings          Estimated Square Feet         Date (1)(2)(3)             (1)(2)            Available (1)          9/30/2021 (1)             (1)(2)(4)                   (5)

Office

325 Main Street                             Third Quarter, 2022                     Cambridge, MA                             1                     420,000                $     283,920$     418,400          $         -          $            -          $       134,480                      90  %
100 Causeway Street (50% ownership)         Third Quarter, 2022                     Boston, MA                                1                     632,000                      229,627                267,300              200,000                 148,603                        -                      95  % (6)
7750 Wisconsin Avenue (Marriott
International Headquarters) (50%
ownership)                                  First Quarter, 2022                     Bethesda, MD                              1                     734,000                      168,945                198,900              127,500                 104,036                    6,491                     100  % (7)
Reston Next                                 Fourth Quarter, 2023                    Reston, VA                                2                   1,062,000                      507,726                715,300                    -                       -                  207,574                      85  % (8)
2100 Pennsylvania Avenue                    Third Quarter, 2024                     Washington, DC                            1                     480,000                      209,193                356,100                    -                       -                  146,907                      56  %
Total Office Properties under Construction                                                                                    6                   3,328,000                    1,399,411              1,956,000              327,500                 252,639                  495,452                      87  %

Lab/Life Sciences
200 West Street (Redevelopment)             Fourth Quarter, 2021                    Waltham, MA                               -                     138,000                       29,340                 47,800                    -                       -                   18,460                     100  % (9)
880 Winter Street (Redevelopment)           Second Quarter, 2024                    Waltham, MA                               1                     224,000                        6,964                108,000                    -                       -                  101,036                      23  %
751 Gateway (49% ownership)                 Third Quarter, 2024            
        South San Francisco, CA                   1                    
229,000                       28,723                127,600                    -                       -                   98,877                       -  %
180 CityPoint                               Fourth Quarter, 2024                    Waltham, MA                               1                     329,000                       41,442                274,700                    -                       -                  233,258                       -  %
Total Lab/Life Sciences Properties under Construction                                                                         3                     920,000                      106,469                558,100                    -                       -                  451,631                      21  %

Other
View Boston Observatory at The
Prudential Center (Redevelopment)           N/A                                     Boston, MA                                -                      59,000                       45,158                182,300                    -                       -                  137,142                        

N/A

Total Properties under Construction                                                                                           9                   4,307,000                $   1,551,038$   2,696,400$   327,500$      252,639$     1,084,225                      72  % (10)


___________
(1)Represents our share.
(2)Investment to Date, Estimated Total Investment and Estimated Future Equity
Requirement all include our share of acquisition expenses, as applicable, and
reflect our share of the estimated net revenue/expenses that we expect to incur
prior to stabilization of the project, including any amounts actually received
or paid through September 30, 2021.
(3)Includes approximately $77.8 million of unpaid but accrued construction costs
and leasing commissions.
(4)Excludes approximately $77.8 million of unpaid but accrued construction costs
and leasing commissions.
(5)Represents percentage leased as of November 2, 2021, including leases with
future commencement dates.
(6)This property was 79% placed in-service as of September 30, 2021.
(7)On October 29, 2021, this project was fully placed in-service (See Note 15 to
the Consolidated Financial Statements).
(8)On October 19, 2021, approximately 285,000 square feet of the project was
placed in-service.
(9)Represents a portion of the property under redevelopment for conversion to
laboratory space.
(10)Percentage leased excludes View Boston Observatory at The Prudential Center
(redevelopment) at 800 Boylston Street - The Prudential Center.

                                       82
--------------------------------------------------------------------------------
  Table of Contents
Lease revenue (which includes recoveries from tenants), other income from
operations, available cash balances, mortgage financings, unsecured indebtedness
and draws on BPLP's Revolving Facility are the principal sources of capital that
we use to fund operating expenses, debt service, maintenance and repositioning
capital expenditures, tenant improvements and the minimum distribution required
to enable BXP to maintain its REIT qualification. We seek to maximize income
from our existing properties by maintaining quality standards for our properties
that promote high occupancy rates and permit increases in rental rates while
reducing tenant turnover and controlling operating expenses. Our sources of
revenue also include third-party fees generated by our property management,
leasing and development and construction businesses, as well as the sale of
assets from time to time. We believe these sources of capital will continue to
provide the funds necessary for our short-term liquidity needs, including our
properties under development and redevelopment. Material adverse changes in one
or more sources of capital, whether due to the impacts of the COVID-19 pandemic
or otherwise, may adversely affect our net cash flows.
Leasing activity and revenue from transient parking and our hotel improved
during the third quarter of 2021. We signed approximately 1.4 million square
feet of leases in the quarter, which represents more than double the leasing
volume in the first quarter of 2021 and is approximately 90% of our pre-pandemic
average for the third quarter. Our parking and hotel revenue also increased
approximately 36% compared to the second quarter of 2021. We expect parking
revenue to continue to improve gradually as the return to in-person work
accelerates and hotel occupancy to remain low until the demand for business and
leisure travel returns to historical levels.
Our primary uses of capital over the next twelve months will be the completion
of our current and committed development and redevelopment projects, servicing
the principal and interest payments on our outstanding indebtedness and
satisfying our REIT distribution requirements.
As of September 30, 2021, we had nine properties under development or
redevelopment. Our share of the remaining development and redevelopment costs
that we expect to fund through 2024 was approximately $1.1 billion.
During the third quarter of 2021, BPLP completed a public "green bond" offering
of $850.0 million of 2.450% unsecured senior notes due October 2033. The
offering marked BPLP's fourth green bond offering and represented the lowest
coupon ever issued by BPLP. The net proceeds from the offering along with
available cash and borrowings under BPLP's Revolving Facility were used to fully
redeem the $1.0 billion aggregate principal amount of 3.85% unsecured senior
notes that were scheduled to mature in February 2023. The early repayment will
result in a loss from early extinguishment of debt of approximately $43.9
million in the fourth quarter of 2021. This amount includes approximately $1.0
million of unamortized financing and other costs.
We have a SCP that provides us the opportunity to partner with large
institutional investors and capitalize our investment opportunities partially
through private equity. The SCP enhances our access to capital and investment
capacity and further enhances our returns through fees paid to us, and in
certain partnerships, a greater share of income upon achieving certain success
criteria. These large financial partners include some of the world's largest
sovereign wealth funds and pension plans. Our use of the SCP is consistent with
our ongoing strategy to create value through opportunistic investments in
high-quality office properties in markets with the strongest economic growth
over time while maintaining a strong balance sheet and modest leverage. As part
of the broader SCP, we announced in July 2021 the formation of an investment
program with two large partners committing a targeted equity investment of $1.0
billion, including $250 million from us. Under this agreement, we will provide
these partners, for up to two years, exclusive first offers to form joint
ventures with us to invest in assets that meet the SCP's target criteria. All
investments are discretionary to each partner.
For example, during the third quarter of 2021, we partnered with two SCP
partners to acquire Safeco Plaza, a 50-story, approximately 765,000 net rentable
square foot, LEED-Platinum certified, Class A office property located in
Seattle, Washington. After mortgage financing, the partners contributed
approximately $215 million to fund the acquisition. Each partner owns
approximately a one-third ownership interest in the property (See Note 5 to the
Consolidated Financial Statements).
In addition, we expect to acquire 360 Park Avenue South, located in New York,
New York, for a purchase price of approximately $300 million in the fourth
quarter of 2021. At closing, we will assume approximately $202 million of
mortgage debt and issue approximately $98 million of OP Units, with a floor
price of $111 per OP Unit. Other than customary closing costs, no cash is
required to close the transaction. We expect to fund future investment in this
asset through a joint venture with one or more financial partners from the SC
Program. There can be no assurance that this acquisition will be consummated on
the terms currently contemplated or at all.
                                       83
--------------------------------------------------------------------------------
  Table of Contents
On October 25, 2021, we completed the sale of our 181, 191 and 201 Spring Street
properties, located in Lexington, Massachusetts, for a gross sales price of
$191.5 million.
We have no debt maturities during the remainder of 2021. We have one loan
maturing in 2022 that has an outstanding principal balance of approximately
$618.7 million (of which our share is approximately $340.3 million). The loan is
secured by our 601 Lexington Avenue property in New York. Our unconsolidated
joint ventures have two loans maturing in 2022, of which our share of
outstanding principal is approximately $147.0 million. We are currently in the
market to refinance the 601 Lexington Avenue mortgage. Due to the increase in
cash flow from this asset, due in part to the redevelopment completed earlier in
2021, we anticipate increasing the principal amount of the mortgage and reducing
the interest rate as part of the refinancing. There can be no assurance that
this refinancing will be consummated on the terms currently contemplated or at
all.
Although the current and future impact of COVID-19 on our liquidity and capital
resources will depend on a wide range of factors, we believe that our access to
capital and our strong liquidity, including the approximately $1.2 billion
available under the 2021 Credit Facility and available cash of approximately
$362.7 million (of which approximately $122.2 million is attributable to our
consolidated joint venture partners), as of November 2, 2021, is sufficient to
fund our remaining capital requirements on existing development and
redevelopment projects, repay our maturing indebtedness when due, satisfy our
REIT distribution requirements and still allow us to act opportunistically on
attractive investment opportunities.
We have not sold any shares under BXP's $600.0 million "at the market" equity
offering program.
We may seek to enhance our liquidity to fund our foreseeable potential
development activity, pursue additional attractive investment opportunities and
refinance or repay indebtedness. Depending on interest rates and overall
conditions in the debt and equity markets, we may decide to access either or
both of these markets in advance of the need for the funds. Doing so may result
in us carrying additional cash and cash equivalents pending our use of the
proceeds, which would increase our net interest expense and be dilutive to our
earnings.
REIT Tax Distribution Considerations
Dividend
BXP as a REIT is subject to a number of organizational and operational
requirements, including a requirement that BXP currently distribute at least 90%
of its annual taxable income (excluding capital gains and with certain other
adjustments). Our policy is for BXP to distribute at least 100% of its taxable
income, including capital gains, to avoid paying federal tax.
BXP's Board of Directors will continue to evaluate BXP's dividend rate in light
of our actual and projected taxable income (including gains on sales), liquidity
requirements and other circumstances, including the impact of COVID-19, and
there can be no assurance that the future dividends declared by BXP's Board of
Directors will not differ materially from the current quarterly dividend amount.
Sales
To the extent that we sell assets at a gain and cannot efficiently use the
proceeds in a tax deferred manner for either our development activities or
attractive acquisitions, BXP would, at the appropriate time, decide whether it
is better to declare a special dividend, adopt a stock repurchase program,
reduce indebtedness or retain the cash for future investment opportunities. Such
a decision will depend on many factors including, among others, the timing,
availability and terms of development and acquisition opportunities, our
then-current and anticipated leverage, the cost and availability of capital from
other sources, the price of BXP's common stock and REIT distribution
requirements. At a minimum, we expect that BXP would distribute at least that
amount of proceeds necessary for BXP to avoid paying corporate level tax on the
applicable gains realized from any asset sales.
From time to time in select cases, whether due to a change in use, structuring
issues to comply with applicable REIT regulations or other reasons, we may sell
an asset that is held by a taxable REIT subsidiary ("TRS"). Such a sale by a TRS
would be subject to federal and local taxes.
Cash Flow Summary
The following summary discussion of our cash flows is based on the Consolidated
Statements of Cash Flows and is not meant to be an all-inclusive discussion of
the changes in our cash flows for the periods presented below.
                                       84
--------------------------------------------------------------------------------
  Table of Contents
Cash and cash equivalents and cash held in escrows aggregated approximately $1.1
billion and $1.8 billion at September 30, 2021 and 2020, respectively,
representing a decrease of approximately $0.7 billion. The following table sets
forth changes in cash flows:
                                                                     Nine months ended September 30,
                                                                                                        Increase
                                                              2021                   2020              (Decrease)
                                                                              (in thousands)
Net cash provided by operating activities             $    786,859$  782,423$      4,436
Net cash used in investing activities                     (998,368)                (388,411)             (609,957)

Net cash provided by (used in) financing activities (425,899)

         678,891            (1,104,790)


Our principal source of cash flow is related to the operation of our properties.
The weighted-average term of our in-place leases, excluding residential units,
was approximately 7.5 years as of September 30, 2021, including leases signed by
our unconsolidated joint ventures, with occupancy rates historically in the
range of 88% to 94%. Generally, our properties generate a relatively consistent
stream of cash flow that provides us with resources to pay operating expenses,
debt service and fund regular quarterly dividend and distribution payment
requirements. In addition, over the past several years, we have raised capital
through the sale of some of our properties and through secured and unsecured
borrowings.
The full extent of the impact of COVID-19 on our business, operations and
financial results will depend on numerous evolving factors that we may not be
able to accurately predict. In addition, we cannot predict the impact that
COVID-19 will have on our tenants, employees, contractors, lenders, suppliers,
vendors and joint venture partners; any material adverse effect on these parties
could also have a material adverse effect on us.
Cash is used in investing activities to fund acquisitions, development, net
investments in unconsolidated joint ventures and maintenance and repositioning
capital expenditures. We selectively invest in new projects that enable us to
take advantage of our development, leasing, financing and property management
skills and invest in existing buildings to enhance or maintain our market
position. Cash used in investing activities for the nine months ended
September 30, 2021 consisted primarily of acquisitions of real estate,
development projects, building and tenant improvements and capital contributions
to unconsolidated joint ventures, partially offset by proceeds from sale of
investment in unconsolidated joint ventures. Cash used in investing activities
for the nine months ended September 30, 2020 consisted primarily of acquisitions
of real estate, development projects, building and tenant improvements and
capital contributions to unconsolidated joint ventures, partially offset by the
proceeds from the sale of real estate and capital distribution from
unconsolidated joint ventures, as detailed below:
                                                                          

Nine months ended September 30,

                                                                             2021                    2020
                                                                                   (in thousands)
Acquisitions of real estate (1)                                       $       (218,679)$  (135,698)
Construction in progress (2)                                                  (381,104)            (358,824)
Building and other capital improvements                                       (103,840)            (116,894)
Tenant improvements                                                           (218,878)            (172,401)
Proceeds from sales of real estate (3)                                               -              505,679
Capital contributions to unconsolidated joint ventures (4)                     (95,462)            (158,374)
Capital distributions from unconsolidated joint ventures (5)                       122               55,123

Proceeds from sale of investment in unconsolidated joint venture (6)

     17,789                    -
Issuance of note receivable, net (7)                                                 -               (9,800)
Investments in securities, net                                                   1,684                2,778
Net cash used in investing activities                                 $     

(998,368) $ (388,411)

                                       85
--------------------------------------------------------------------------------
  Table of Contents
Cash used in investing activities changed primarily due to the following:
(1)On August 2, 2021, we acquired Shady Grove Bio+Tech Campus in Rockville,
Maryland, for a purchase price, including transaction costs, of approximately
$118.5 million in cash. Shady Grove Bio+Tech Campus is an approximately 435,000
net rentable square foot, seven-building office park situated on an
approximately 31-acre site.
On June 2, 2021, we acquired 153 & 211 Second Avenue located in Waltham,
Massachusetts for a     purchase price of approximately $100.2 million in cash.
153 & 211 Second Avenue consists of two life sciences lab buildings totaling
approximately 137,000 net rentable square feet.

On July 31, 2020, we acquired an undivided ownership interest in real property
at 759 Harrison Street located in San Francisco, California for a purchase price
totaling approximately $2.3 million.
On June 26, 2020, we completed the acquisition of real property at 777 Harrison
Street (known as Fourth + Harrison and formerly known as 425 Fourth Street)
located in San Francisco, California for a gross purchase price, including
entitlements, totaling approximately $140.1 million. Fourth + Harrison is
expected to support the development of approximately 804,000 square feet of
primarily commercial office space.
(2)Construction in progress for the nine months ended September 30, 2021
includes ongoing expenditures associated with One Five Nine East 53rd Street,
which was completed and fully placed in-service during the nine months ended
September 30, 2021. In addition, we incurred costs associated with our continued
development/redevelopment of 200 West Street, 325 Main Street, 2100 Pennsylvania
Avenue, Reston Next, 180 CityPoint, View Boston Observatory at The Prudential
Center and 880 Winter Street.
Construction in progress for the nine months ended September 30, 2020 includes
ongoing expenditures associated with 17Fifty Presidents Street, 20 CityPoint and
The Skylyne, which were partially or fully placed in-service during the nine
months ended September 30, 2020. In addition, we incurred costs associated with
our continued development/redevelopment of One Five Nine East 53rd Street,
Reston Next, 2100 Pennsylvania Avenue, 200 West Street and 325 Main Street.
(3)On June 25, 2020, we completed the sale of a portion of our Capital Gallery
property located in Washington, DC for a gross sales price of approximately
$253.7 million. Net cash proceeds totaled approximately $246.6 million,
resulting in a gain on sale of real estate totaling approximately $203.6 million
for BXP and approximately $207.0 million for BPLP. Capital Gallery is an
approximately 631,000 net rentable square foot Class A office property. The
portion sold is comprised of approximately 455,000 net rentable square feet of
commercial office space. We continue to own the land, underground parking garage
and remaining commercial office and retail space containing approximately
176,000 net rentable square feet at the property.
On February 20, 2020, we completed the sale of New Dominion Technology Park
located in Herndon, Virginia for a gross sales price of $256.0 million. Net cash
proceeds totaled approximately $254.0 million, resulting in a gain on sale of
real estate totaling approximately $192.3 million for BXP and approximately
$197.1 million for BPLP. New Dominion Technology Park is comprised of two Class
A office properties aggregating approximately 493,000 net rentable square feet.
(4)Capital contributions to unconsolidated joint ventures for the nine months
ended September 30, 2021 consisted primarily of cash contributions of
approximately $72.6 million and $11.4 million to our Safeco Plaza and Santa
Monica Business Park joint ventures, respectively. On September 1, 2021, we
entered into a new joint venture for Safeco Plaza located in Seattle, Washington
(See Note 5 to the Consolidated Financial Statements).
Capital contributions to unconsolidated joint ventures for the nine months ended
September 30, 2020 consisted primarily of cash contributions of approximately
$75.0 million, $39.0 million, $27.2 million and $7.5 million to our Platform 16,
3 Hudson Boulevard, Beach Cities Media Center and Metropolitan Square joint
ventures, respectively.
(5)Capital distributions from unconsolidated joint ventures for the nine months
ended September 30, 2020 consisted of cash distributions totaling (1)
approximately $22.5 million from our Metropolitan Square joint venture resulting
from the excess proceeds from the refinancing of the mortgage loan on the
property, (2) approximately $17.9 million from our Annapolis Junction joint
venture resulting from available cash and the
                                       86
--------------------------------------------------------------------------------
  Table of Contents
net proceeds from the sale of Annapolis Junction Building Eight and two land
parcels after the pay down of the mortgage loan and (3) approximately $14.0
million from our Colorado Center joint venture resulting from the excess
proceeds from the mortgage financing on the property that occurred during 2017,
which proceeds were released from lender reserves.
(6)On March 30, 2021, we completed the sale of our 50% ownership interest in
Annapolis Junction NFM LLC (the "Annapolis Junction Joint Venture") to the joint
venture partner for a gross sales price of $65.9 million. Net cash proceeds to
us totaled approximately $17.8 million after repayment of our share of debt
totaling approximately $15.1 million.
(7)Issuance of notes receivable, net consisted of the $10.0 million of financing
provided to an affiliate of our partner in the joint venture that owns and is
developing 7750 Wisconsin Avenue located in Bethesda, Maryland. The financing
bears interest at a fixed rate of 8.00% per annum, compounded monthly, and
matures on the fifth anniversary of the date on which the base building of the
affiliate of our partner's hotel property is substantially completed. The loan
is collateralized by a pledge of the partner's equity interest in our joint
venture that owns and is developing 7750 Wisconsin Avenue.
Cash used in financing activities for the nine months ended September 30, 2021
totaled approximately $425.9 million. This amount consisted primarily of (1) the
redemption of BPLP's $850.0 million in aggregate principal amount of its 4.125%
senior notes due 2021, (2) the repayment of the Delayed Draw Facility under the
2017 Credit Facility, (3) redemption of the Series B Preferred Stock, (4)
payment of our regular dividends and distributions to our shareholders and
unitholders and (5) distributions to noncontrolling interest holders in property
partnership. These decreases were partially offset by the proceeds from the
issuance by BPLP of (1) $850.0 million in aggregate principal amount of its
2.550% senior unsecured notes due 2032 and (2) $850.0 million in aggregate
principal amount of its 2.450% senior unsecured notes due 2033. Future debt
payments are discussed below under the heading "Capitalization-Debt Financing."
Capitalization
The following table presents Consolidated Market Capitalization and BXP's Share
of Market Capitalization, as well as the corresponding ratios of Consolidated
Debt to Consolidated Market Capitalization and BXP's Share of Debt to BXP's
Share of Market Capitalization (in thousands except for percentages):
                                                                                     September 30, 2021
                                                           Shares / Units                                          Equivalent Value
                                                            Outstanding            Common Stock Equivalent               (1)
Common Stock                                                  156,206                      156,206                 $  16,924,920
Common Operating Partnership Units                             17,477                       17,477                     1,893,633    (2)
Total Equity                                                                               173,683                 $  18,818,553

Consolidated Debt                                                                                                  $  13,378,350
Add:
BXP's share of unconsolidated joint venture debt
(3)                                                                                                                    1,289,582

Subtract:

Partners' share of Consolidated Debt (4)                                                                              (1,190,479)
BXP's Share of Debt                                                                                                $  13,477,453

Consolidated Market Capitalization                                                                                 $  32,196,903
BXP's Share of Market Capitalization                                                                               $  32,296,006
Consolidated Debt/Consolidated Market
Capitalization                                                                                                             41.55  %
BXP's Share of Debt/BXP's Share of Market
Capitalization                                                                                                             41.73  %


_______________
(1)Values are based on the closing price per share of BXP's Common Stock on the
New York Stock Exchange on September 30, 2021 of $108.35.
(2)Includes long-term incentive plan units (including 2012 OPP Units and 2013 -
2018 MYLTIP Units) but excludes MYLTIP Units granted between 2019 and 2021
because the three-year performance period has not ended.
                                       87
--------------------------------------------------------------------------------
  Table of Contents
(3)See page 92 for additional information.
(4)See page 91 for additional information.

Consolidated Debt to Consolidated Market Capitalization Ratio is a measure of
leverage commonly used by analysts in the REIT sector. We present this measure
as a percentage and it is calculated by dividing (A) our consolidated debt by
(B) our consolidated market capitalization, which is the market value of our
outstanding equity securities plus our consolidated debt. Consolidated market
capitalization is the sum of:
(1)   our consolidated debt; plus
(2)   the product of (x) the closing price per share of BXP common stock on
September 30, 2021, as reported by the New York Stock Exchange, multiplied by
(y) the sum of:
(i)   the number of outstanding shares of common stock of BXP,
(ii)   the number of outstanding OP Units in BPLP (excluding OP Units held by
BXP),
(iii)   the number of OP Units issuable upon conversion of all outstanding LTIP
Units, assuming all conditions have been met for the conversion of the LTIP
Units, and
(iv)   the number of OP Units issuable upon conversion of 2012 OPP Units, 2013 -
2018 MYLTIP Units that were issued in the form of LTIP Units.
The calculation of 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. Because their three-year
performance periods have not yet ended, 2019 - 2021 MYLTIP Units are not
included in this calculation as of September 30, 2021.
We also present BXP's Share of Market Capitalization and BXP's Share of
Debt/BXP's Share of Market Capitalization, which are calculated in the same
manner, except that BXP's Share of Debt is utilized instead of our consolidated
debt in both the numerator and the denominator. BXP's Share of Debt is defined
as our consolidated debt plus our share of debt from our unconsolidated joint
ventures (calculated based upon our ownership percentage), minus our partners'
share of debt from our consolidated joint ventures (calculated based upon the
partners' percentage ownership interests adjusted for basis differentials).
Management believes that BXP's Share of Debt provides useful information to
investors regarding our financial condition because it includes our share of
debt from unconsolidated joint ventures and excludes our partners' share of debt
from consolidated joint ventures, in each case presented on the same basis. We
have several significant joint ventures and presenting various measures of
financial condition in this manner can help investors better understand our
financial condition and/or results of operations after taking into account our
economic interest in these joint ventures.  We caution investors that the
ownership percentages used in calculating BXP's Share of Debt may not completely
and accurately depict all of the legal and economic implications of holding an
interest in a consolidated or unconsolidated joint venture. For example, in
addition to partners' interests in profits and capital, venture agreements vary
in the allocation of rights regarding decision making (both for routine and
major decisions), distributions, transferability of interests, financing and
guarantees, liquidations and other matters.  Moreover, in some cases we exercise
significant influence over, but do not control, the joint venture in which case
GAAP requires that we account for the joint venture entity using the equity
method of accounting and we do not consolidate it for financial reporting
purposes. In other cases, GAAP requires that we consolidate the venture even
though our partner(s) own(s) a significant percentage interest.  As a result,
management believes that the presentation of BXP's Share of a financial measure
should not be considered a substitute for, and should only be considered with
and as a supplement to our financial information presented in accordance with
GAAP.
We present these supplemental ratios 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 and
because different investors and lenders consider one or both of these ratios.
Investors should understand that these ratios are, in part, a function of the
market price of the common stock of BXP and as such will fluctuate with changes
in such price, and they do 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 BXP, whose assets are primarily
income-producing real estate, these ratios may provide investors with an
alternate indication of leverage, so long as they are evaluated along with the
ratio of indebtedness to other measures of asset
                                       88
--------------------------------------------------------------------------------
  Table of Contents
value used by financial analysts and other financial ratios, as well as the
various components of our outstanding indebtedness.
For a discussion of our unconsolidated joint venture indebtedness, see
"Liquidity and Capital Resources-Capitalization-Off-Balance Sheet
Arrangements-Joint Venture Indebtedness" within "Item 2-Management's Discussion
and Analysis of Financial Condition and Results of Operations" and for a
discussion of our consolidated joint venture indebtedness see "Liquidity and
Capital Resources-Capitalization-Mortgage Notes Payable" within
"Item 2-Management's Discussion and Analysis of Financial Condition and Results
of Operations."
Debt Financing
As of September 30, 2021, we had approximately $13.4 billion of outstanding
consolidated indebtedness, representing approximately 41.55% of our Consolidated
Market Capitalization as calculated above consisting of approximately (1) $10.5
billion (net of discount and deferred financing fees) in publicly traded
unsecured senior notes having a GAAP weighted-average interest rate of 3.48% per
annum and maturities in 2023 through 2033 and (2) $2.9 billion (net of deferred
financing fees) of property-specific mortgage debt having a GAAP
weighted-average interest rate of 3.89% per annum and a weighted-average term of
4.6 years.
The table below summarizes the aggregate carrying value of our mortgage notes
payable and BPLP's unsecured senior notes, line of credit and term loan, as well
as Consolidated Debt Financing Statistics at September 30, 2021 and
September 30, 2020.
                                       89

--------------------------------------------------------------------------------

  Table of Contents
                                                                                     September 30,
                                                                              2021                  2020
                                                                                (dollars in thousands)
Debt Summary:
Balance
Fixed rate mortgage notes payable, net                                   $  2,898,699$  2,912,494
Unsecured senior notes, net                                                10,479,651             9,636,397
Unsecured line of credit                                                            -                     -
Unsecured term loan, net                                                            -               499,270
Consolidated Debt                                                          13,378,350            13,048,161

Add:

BXP's share of unconsolidated joint venture debt, net (1)                   1,289,582             1,114,031

Subtract:

Partners' share of consolidated mortgage notes payable, net (2)            (1,190,479)           (1,195,957)
BXP's Share of Debt                                                      $ 

13,477,453 $ 12,966,235

September 30,

                                                                              2021                  2020
Consolidated Debt Financing Statistics:
Percent of total debt:
Fixed rate                                                                     100.00  %              96.17  %
Variable rate                                                                       -  %               3.83  %
Total                                                                          100.00  %             100.00  %
GAAP Weighted-average interest rate at end of period:
Fixed rate                                                                       3.57  %               3.75  %
Variable rate                                                                       -  %               1.18  %
Total                                                                            3.57  %               3.65  %
Coupon/Stated Weighted-average interest rate at end of period:
Fixed rate                                                                       3.47  %               3.65  %
Variable rate                                                                       -  %               1.09  %
Total                                                                            3.47  %               3.55  %
Weighted-average maturity at end of period (in years):
Fixed rate                                                                        5.9                   5.8
Variable rate                                                                       -                   1.6
Total                                                                             5.9                   5.6


_______________
(1)See page 92 for additional information.
(2)See page 91 for additional information.
Unsecured Credit Facility
On March 16, 2021, BPLP repaid $500.0 million, representing all amounts
outstanding, on the Delayed Draw Facility under the 2017 Credit Facility. We
recognized a loss from early extinguishment of debt totaling approximately $0.5
million, related to unamortized financing costs.
On June 15, 2021, BPLP amended and restated the 2017 Credit Facility and entered
into the 2021 Credit Facility. The 2021 Credit Facility provides for borrowings
of up to $1.5 billion through the Revolving Facility, subject to customary
conditions. Among other things, the amendment and restatement (1) extended the
maturity date to June 15, 2026, (2) eliminated the $500.0 million Delayed Draw
Facility provided under the 2017 Credit Facility, (3) reduced the per annum
variable interest rates on borrowings and (4) added a sustainability-linked
pricing component. Under the 2021 Credit Facility, BPLP may increase the total
commitment by up to $500.0 million by
                                       90
--------------------------------------------------------------------------------
  Table of Contents
increasing the amount of the Revolving Facility and/or by incurring one or more
term loans, in each case, subject to syndication of the increase and other
conditions (See Note 8 to the Consolidated Financial Statements).
The 2021 Credit Facility replaces the 2017 Credit Facility, which consisted of a
$1.5 billion unsecured revolving line of credit and a $500.0 million Delayed
Draw Facility, and was scheduled to expire on April 24, 2022.
As of September 30, 2021, BPLP had no borrowings under its 2021 Credit Facility
and outstanding letters of credit totaling approximately $6.3 million, with the
ability to borrow approximately $1.5 billion. As of November 2, 2021, BPLP had
$310.0 million of borrowings under its 2021 Credit Facility and outstanding
letters of credit totaling approximately $6.3 million, with the ability to
borrow approximately $1.2 billion.
Unsecured Senior Notes
For a description of BPLP's outstanding unsecured senior notes as of
September 30, 2021, see Note 7 to the Consolidated Financial Statements.
On February 14, 2021, BPLP completed the redemption of $850.0 million in
aggregate principal amount of its 4.125% senior notes due May 15, 2021. The
redemption price was approximately $858.7 million, which was equal to the stated
principal plus approximately $8.7 million of accrued and unpaid interest to, but
not including, the redemption date. Excluding the accrued and unpaid interest,
the redemption price was equal to the principal amount being redeemed. We
recognized a loss from early extinguishment of debt totaling approximately
$0.4 million, related to unamortized origination costs.
On March 16, 2021, BPLP completed a public offering of $850.0 million in
aggregate principal amount of its 2.550% unsecured senior notes due 2032. The
notes were priced at 99.570% of the principal amount to yield an effective rate
(including financing fees) of approximately 2.671% per annum to maturity. The
notes will mature on April 1, 2032, unless earlier redeemed. The aggregate net
proceeds from the offering were approximately $839.2 million after deducting
underwriting discounts and transaction expenses.
On September 29, 2021, BPLP completed a public offering of $850.0 million in
aggregate principal amount of its 2.450% unsecured senior notes due 2033. The
notes were priced at 99.959% of the principal amount to yield an effective rate
(including financing fees) of approximately 2.524% per annum to maturity. The
notes will mature on October 1, 2033, unless earlier redeemed. The aggregate net
proceeds from the offering were approximately $842.5 million after deducting
underwriting discounts and transaction expenses.
On October 15, 2021, BPLP used available cash and funds under its 2021 Credit
Facility to complete the redemption of $1.0 billion in aggregate principal
amount of its 3.85% senior notes due February 1, 2023. The redemption price was
approximately $1.05 billion, which included approximately $7.9 million of
accrued and unpaid interest to, but not including, the redemption date and an
early redemption premium and unamortized financing costs totaling approximately
$43.9 million.
The indenture relating to the unsecured senior notes contains certain financial
restrictions and requirements, including (1) a leverage ratio not to exceed 60%,
(2) a secured debt leverage ratio not to exceed 50%, (3) an interest coverage
ratio of greater than 1.50, and (4) an unencumbered asset value of not less than
150% of unsecured debt. At September 30, 2021, BPLP was in compliance with each
of these financial restrictions and requirements.
Mortgage Notes Payable
The following represents the outstanding principal balances due under the
mortgage notes payable at September 30, 2021:
                                                                                                                    Deferred                            

Carrying Amount

                                            Stated              GAAP Interest Rate        Stated Principal          Financing                                       (Partners'
Properties                               Interest Rate                  (1)                    Amount              Costs, Net            Carrying Amount              Share)                                  Maturity Date
                                                                                                                       (dollars in thousands)

Consolidated Joint Ventures767 Fifth Avenue (the General
Motors Building)                                  3.43  %                   3.64  %       $   2,300,000$    (19,857)$      2,280,143$     912,128          (2)(3)(4)          June 9, 2027601 Lexington Avenue                              4.75  %                   4.79  %             618,725                  (169)                  618,556                278,351          (5)                April 10, 2022

Total                                                                                     $   2,918,725$    (20,026)$      2,898,699$   1,190,479


                                       91
--------------------------------------------------------------------------------
  Table of Contents
_______________
(1)GAAP interest rate differs from the stated interest rate due to the inclusion
of the amortization of financing charges and the effects of hedging transactions
(if any).
(2)The mortgage loan requires interest only payments with a balloon payment due
at maturity.
(3)This property is owned by a consolidated entity in which we have a 60%
interest. The partners' share of the carrying amount has been adjusted for basis
differentials.
(4)In connection with the refinancing of the loan, we guaranteed the
consolidated entity's obligation to fund various reserves for tenant improvement
costs and allowances, leasing commissions and free rent obligations in lieu of
cash deposits. As of September 30, 2021, the maximum funding obligation under
the guarantee was approximately $20.3 million. We earn a fee from the joint
venture for providing the guarantee and have an agreement with our partners to
reimburse the joint venture for their share of any payments made under the
guarantee (See Note 9 to the Consolidated Financial Statements).
(5)This property is owned by a consolidated entity in which we have a 55%
interest.
Off-Balance Sheet Arrangements-Joint Venture Indebtedness
We have investments in unconsolidated joint ventures with our effective
ownership interests ranging from 20% to 55%. Fourteen of these ventures have
mortgage indebtedness. We exercise significant influence over, but do not
control, these entities. As a result, we account for them using the equity
method of accounting. See also Note 5 to the Consolidated Financial Statements.
At September 30, 2021, the aggregate carrying amount of debt, including both our
and our partners' share, incurred by these ventures was approximately $3.0
billion (of which our proportionate share is approximately $1.3 billion). The
table below summarizes the outstanding debt of these joint venture properties at
September 30, 2021. In addition to other guarantees specifically noted in the
table, we have agreed to customary environmental indemnifications and
nonrecourse carve-outs (e.g., guarantees against fraud, misrepresentation and
bankruptcy) as well as the completion of development projects on certain of the
loans.
                                                                                                                           Deferred
                                Nominal %               Stated           GAAP Interest        Stated Principal             Financing                                    Carrying Amount
     Properties                 Ownership           Interest Rate           Rate (1)               Amount                 Costs, Net            Carrying Amount           (Our share)                                   Maturity Date
                                                                                                            (dollars in thousands)
Santa Monica Business
Park                                 55.00  %              4.06  %              4.24  %       $     300,000$     (2,003)$        297,997$     163,899          (2)(3)              July 19, 2025Market Square North                  50.00  %              2.80  %              2.96  %             125,000                     (848)                  124,152                 62,076          (2)(4)              November 10, 20251265 Main Street                     50.00  %              3.77  %              3.84  %              36,694                     (285)                   36,409                 18,204                              January 1, 2032
Colorado Center                      50.00  %              3.56  %              3.58  %             550,000                     (602)                  549,398                274,699          (2)                 August 9, 2027Dock 72                              50.00  %              3.10  %              3.32  %             196,412                   (1,178)                  195,234                 97,617          (2)(5)              December 18, 2023
The Hub on Causeway -
Podium                               50.00  %              2.34  %              2.50  %             174,329                     (561)                  173,768                 86,884          (2)(6)              September 6, 2023
Hub50House                           50.00  %              2.08  %              2.37  %             176,468                     (297)                  176,171                 88,085          (2)(7)              April 19, 2022100 Causeway Street                  50.00  %              1.59  %              1.81  %             297,206                   (1,624)                  295,582                147,791          (2)(8)              September 5, 20237750 Wisconsin Avenue
(Marriott
International
Headquarters)                        50.00  %              1.34  %              1.88  %             208,071                   (2,204)                  205,867                102,933          (2)(9)              April 26, 2023Safeco Plaza                         33.67  %              2.35  %              2.50  %             250,000                   (1,798)                  248,202                 83,570          (2)(10)             September 1, 2026
500 North Capitol
Street, NW                           30.00  %              4.15  %              4.20  %             105,000                      (99)                  104,901                 31,470          (2)                 June 6, 2023901 New York Avenue                  25.00  %              3.61  %              3.69  %             217,851                     (581)                  217,270                 54,318                              January 5, 20253 Hudson Boulevard                   25.00  %              3.59  %              3.67  %              80,000                     (112)                   79,888                 19,972          (2)(11)             July 13, 2023Metropolitan Square                  20.00  %              5.40  %              6.90  %             294,073                   (3,751)                  290,322                 58,064          (2)(12)             July 7, 2022
Total                                                                                         $   3,011,104$    (15,943)$      2,995,161$   1,289,582

_______________

(1)GAAP interest rate differs from the stated interest rate due to the inclusion
of the amortization of financing charges, which includes mortgage recording
fees.
(2)The loan requires interest only payments with a balloon payment due at
maturity.
                                       92
--------------------------------------------------------------------------------
  Table of Contents
(3)The loan bears interest at a variable rate equal to LIBOR plus 1.28% per
annum and matures on July 19, 2025. A subsidiary of the joint venture entered
into interest rate swap contracts with notional amounts aggregating $300.0
million through April 1, 2025, resulting in a fixed rate of approximately 4.063%
per annum through the expiration of the interest rate swap contracts.
(4)The loan bears interest at a variable rate equal to (1) the greater of (x)
LIBOR or (y) 0.50%, plus (2) 2.30% per annum and matures on November 10, 2025,
with one, one-year extension option, subject to certain conditions.
(5)The construction financing has a borrowing capacity of $250.0 million. The
construction financing bears interest at a variable rate equal to (1) the
greater of (x) LIBOR or (y) 0.25%, plus (2) 2.85% per annum and matures on
December 18, 2023.
(6)The construction financing had a borrowing capacity of $204.6 million. On
September 16, 2019, the joint venture paid down the construction loan principal
balance in the amount of approximately $28.8 million, reducing the borrowing
capacity to $175.8 million. The construction financing bears interest at a
variable rate equal to LIBOR plus 2.25% per annum and matures on September 6,
2023.
(7)The construction financing has a borrowing capacity of $180.0 million. The
construction financing bears interest at a variable rate equal to LIBOR plus
2.00% per annum and matures on April 19, 2022, with two, one-year extension
options, subject to certain conditions.
(8)The construction financing has a borrowing capacity of $400.0 million. The
construction financing bears interest at a variable rate equal to LIBOR plus
1.50% per annum (LIBOR plus 1.375% per annum upon stabilization, as defined in
the loan agreement) and matures on September 5, 2023, with two, one-year
extension options, subject to certain conditions.
(9)The construction financing has a borrowing capacity of $255.0 million. The
construction financing bears interest at a variable rate equal to LIBOR plus
1.25% per annum and matures on April 26, 2023, with two, one-year extension
options, subject to certain conditions.
(10)The loan bears interest at a variable rate equal to the greater of (x) 2.35%
or (y) LIBOR plus 2.20% per annum and matures on September 1, 2026.
(11)We provided $80.0 million of mortgage financing to the joint venture. The
loan bears interest at a variable rate equal to LIBOR plus 3.50% per annum and
matures on July 13, 2023, with extension options, subject to certain conditions.
The loan has been reflected as Related Party Note Receivable, Net on our
Consolidated Balance Sheets. As of September 30, 2021, the loan has
approximately $13.1 million of accrued interest due at the maturity date.
(12)The loan bears interest at a variable rate equal to (1) the greater of (x)
LIBOR or (y) 0.65%, plus (2) 4.75% per annum and matures on July 7, 2022 with
two, one-year extension options, subject to certain conditions. The joint
venture entered into an interest rate cap agreement with a financial institution
to limit its exposure to increases in the LIBOR rate at a cap of 3.00% per annum
on a notional amount of $325.0 million through July 7, 2022.
State and Local Tax Matters
Because BXP is organized and qualifies as a REIT, it is generally not subject to
federal income taxes, but is subject to certain state and local taxes. In the
normal course of business, certain entities through which we own real estate
either have undergone, or are currently undergoing, tax audits or other
inquiries. Although we believe that we have substantial arguments in favor of
our position in the ongoing audits, in some instances there is no controlling
precedent or interpretive guidance on the specific point at issue. Collectively,
tax deficiency notices received to date from the jurisdictions conducting the
ongoing audits have not been material. However, there can be no assurance that
future audits will not occur with increased frequency or that the ultimate
result of such audits will not have a material adverse effect on our results of
operations.
Insurance
For information concerning our insurance program, see Note 9 to the Consolidated
Financial Statements.
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," for each of BXP and
BPLP by adjusting net income (loss) attributable to Boston Properties, Inc.
common shareholders and net income (loss) attributable to Boston Properties
Limited Partnership common unitholders (computed in accordance with GAAP),
respectively, for gains (or losses) from sales of properties, impairment losses
on depreciable real estate consolidated on our balance sheet, impairment losses
on our investments in unconsolidated joint ventures driven by a measurable
decrease in the fair value of depreciable real estate held by the unconsolidated
joint ventures and our share of real estate-related depreciation and
amortization. FFO is a non-GAAP financial measure. We believe the presentation
of FFO, combined with the presentation of required GAAP financial measures,
improves the understanding of operating results of REITs among the investing
public and helps make comparisons
                                       93
--------------------------------------------------------------------------------
  Table of Contents
of REIT operating results more meaningful. Management generally considers FFO to
be useful measures for understanding and comparing our operating results
because, by excluding gains and losses related to sales of previously
depreciated operating real estate assets, impairment losses and real estate
asset depreciation and amortization (which can differ across owners of similar
assets in similar condition based on historical cost accounting and useful life
estimates), FFO can help investors compare the operating performance of a
company's real estate across reporting periods and to the operating performance
of other companies.
Our computation of FFO may not be comparable to FFO reported by other REITs or
real estate companies that do not define the term in accordance with the current
Nareit definition or that interpret the current Nareit definition differently.
We believe that in order to facilitate a clear understanding of our operating
results, FFO should be examined in conjunction with net income attributable to
Boston Properties, Inc. common shareholders and net income attributable to
Boston Properties Limited Partnership as presented in our Consolidated Financial
Statements. FFO should not be considered as a substitute for net income
attributable to Boston Properties, Inc. common shareholders or net income
attributable to Boston Properties Limited Partnership common unitholders
(determined in accordance with GAAP) or any other GAAP financial measures and
should only be considered together with and as a supplement to our financial
information prepared in accordance with GAAP.
The impact that COVID-19 has had on our business, financial position and results
of operations is discussed throughout this report. The full extent of the impact
of COVID-19 on our business, operations and financial results will depend on
numerous evolving factors that we may not be able to accurately predict.
Boston Properties, Inc.
The following table presents a reconciliation of net income attributable to
Boston Properties, Inc. common shareholders to FFO attributable to Boston
Properties, Inc. common shareholders for the three months ended September 30,
2021 and 2020:
                                                                                    Three months ended September 30,
                                                                                        2021                   2020
                                                                                             (in thousands)

Net income attributable to Boston Properties, Inc. common shareholders

     $       108,297$  89,854
Add:

Preferred dividends                                                                            -               2,625

Noncontrolling interest-common units of the Operating Partnership

               11,982              10,020
Noncontrolling interests in property partnerships                                         18,971              15,561
Net income                                                                               139,250             118,060
Add:
Depreciation and amortization                                                            179,412             166,456

Noncontrolling interests in property partnerships' share of depreciation and amortization

                                                                         (16,773)            (15,833)

BXP's share of depreciation and amortization from unconsolidated joint ventures

                                                                                  17,803              20,413
Corporate-related depreciation and amortization                                             (443)               (444)

Less:


Gains (losses) on sales of real estate                                                       348                (209)
Noncontrolling interests in property partnerships                                         18,971              15,561
Preferred dividends                                                                            -               2,625

Funds from Operations (FFO) attributable to the Operating Partnership common unitholders (including Boston Properties, Inc.)

                                   299,930             270,675

Less:

Noncontrolling interest-common units of the Operating Partnership's share of funds from operations

                                                                  29,453              26,697

Funds from Operations attributable to Boston Properties, Inc. common shareholders

                                                                     $       270,477$ 243,978
Our percentage share of Funds from Operations-basic                                        90.18   %           90.14  %
Weighted average shares outstanding-basic                                                156,183             155,645


                                       94
--------------------------------------------------------------------------------
  Table of Contents
Reconciliation to Diluted Funds from Operations:
                                                                                      Three months ended September 30,
                                                                           2021                                                2020
                                                             Income                  Shares/Units               Income                Shares/Units
                                                          (Numerator)               (Denominator)             (Numerator)            (Denominator)
                                                                                               (in thousands)
Basic Funds from Operations                           $         299,930                173,194              $    270,675                172,677
Effect of Dilutive Securities:
Stock based compensation                                              -                    415                         -                     25
Diluted Funds from Operations                         $         299,930                173,609              $    270,675                172,702

Less:

Noncontrolling interest-common units of the
Operating Partnership's share of diluted Funds
from Operations                                                  29,393                 17,011                    26,693                 17,032
Diluted Funds from Operations attributable to
Boston Properties, Inc. (1)                           $         270,537                156,598              $    243,982                155,670


 _______________

(1)BXP's share of diluted Funds from Operations was 90.20% and 90.14% for the three months ended September 30, 2021 and 2020, respectively.


Boston Properties Limited Partnership
The following table presents a reconciliation of net income attributable to
Boston Properties Limited Partnership common unitholders to FFO attributable to
Boston Properties Limited Partnership common unitholders for the three months
ended September 30, 2021 and 2020:
                                                                                         Three months ended
                                                                                           September 30,
                                                                                                   2021               2020
                                                                                                       (in thousands)
Net income attributable to Boston Properties Limited Partnership common
unitholders                                                                                    $ 122,014$ 101,624
Add:

Preferred distributions                                                                                -              2,625
Noncontrolling interests in property partnerships                                                 18,971             15,561
Net income                                                                                       140,985            119,810
Add:
Depreciation and amortization                                                                    177,677            164,706

Noncontrolling interests in property partnerships' share of depreciation and amortization

                                                                                     (16,773)           (15,833)

BXP's share of depreciation and amortization from unconsolidated joint ventures

                                                                                          17,803             20,413
Corporate-related depreciation and amortization                                                     (443)              (444)

Less:


Gains (losses) on sales of real estate                                                               348               (209)
Noncontrolling interests in property partnerships                                                 18,971             15,561
Preferred distributions                                                                                -              2,625

Funds from Operations attributable to Boston Properties Limited Partnership common unitholders (1)

                                                                         $ 299,930$ 270,675
Weighted average shares outstanding-basic                                                        173,194            172,677


_______________

(1)Our calculation includes OP Units and vested LTIP Units (including vested 2012 OPP Units and vested 2013 - 2018 MYLTIP Units).

                                       95

--------------------------------------------------------------------------------

Table of Contents

Reconciliation to Diluted Funds from Operations:

Three months ended September 30,

                                                                         2021                                                2020
                                                                                             (in thousands)
                                                           Income                  Shares/Units               Income                Shares/Units
                                                        (Numerator)               (Denominator)             (Numerator)            (Denominator)
Basic Funds from Operations                         $         299,930                173,194              $    270,675                172,677
Effect of Dilutive Securities:
Stock based compensation                                            -                    415                         -                     25
Diluted Funds from Operations                       $         299,930                173,609              $    270,675                172,702


Contractual Obligations
We have various service contracts with vendors related to our property
management. In addition, we have certain other contracts we enter into in the
ordinary course of business that may extend beyond one year. These contracts
include terms that provide for cancellation with insignificant or no
cancellation penalties. Contract terms are generally between three and five
years.
During the three months ended September 30, 2021, we paid approximately $67.8
million to fund tenant-related obligations, including tenant improvements and
leasing commissions.
In addition, during the three months ended September 30, 2021, we and our
unconsolidated joint venture partners incurred approximately $102.9 million of
new tenant-related obligations associated with approximately 1.4 million square
feet of second generation leases, or approximately $73 per square foot. We did
not sign any first generation leases during the three months ended September 30,
2021. The tenant-related obligations for the development properties are included
within the projects' "Estimated Total Investment" referred to in "Item
2-Management's Discussion and Analysis of Financial Condition and Results of
Operations-Liquidity and Capital Resources."

                                       96

--------------------------------------------------------------------------------

Table of Contents

© Edgar Online, source Glimpses

All news about BOSTON PROPERTIES, INC.
01/18Boston Properties Announces 2021 Tax Treatment of Its Distributions
BU
01/12Boston Properties to Release Fourth Quarter/FY 2021 Financial Results on January 25, 20..
BU
01/07BMO Capital Upgrades Boston Properties to Outperform From Market Perform, Adjusts Price..
MT
01/04Boston Properties Recognized as Industry Leader in Newsweek's 2022 Most Responsible Com..
BU
01/03Welltower, Invitation Homes Top REIT Picks for 2022, Deutsche Bank Says
MT
01/03Deutsche Bank Upgrades Boston Properties to Buy From Hold, Adjusts PT to $131 From $118
MT
2021Diversified Healthcare Trust's Sale of 35% Stake in Boston Properties Lifts Liquidity A..
MT
2021BOSTON PROPERTIES, INC. : Ex-dividend day for
FA
2021Boston Properties Announces Net Zero Repositioning & Lease Commitment With Wellington M..
BU
2021BOSTON PROPERTIES INC : Change in Directors or Principal Officers (form 8-K)
AQ
More news
Analyst Recommendations on BOSTON PROPERTIES, INC.
More recommendations