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MarketScreener Homepage  >  Equities  >  Nyse  >  Boston Properties, Inc.    BXP

BOSTON PROPERTIES, INC.

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

08/10/2020 | 06:26am 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," "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.
One of the most significant factors that may cause actual results to differ
materially from those expressed or implied by the forward-looking statements is
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 and,
directly or indirectly, many of the other important factors below and the risks
described in (i) our Annual Report on Form 10-K for the fiscal year ended
December 31, 2019 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.
Some of the risks and uncertainties that may cause our actual results,
performance or achievements to differ materially from those expressed or implied
by forward-looking statements include, among others, 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
and performance, and the U.S. and international economy and economic activity
generally; whether new or existing actions and measures continue to result in
increasing unemployment that impacts 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;
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•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, 2019 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 our 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
(REIT) in the United States (based on total market capitalization as of June 30,
2020) that develops, owns and manages primarily Class A office properties
concentrated in five markets in the United States - Boston, Los Angeles, New
York, San Francisco 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,
the length of the lease, the rental rate to be paid at inception and throughout
the
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lease term, the costs of tenant improvements and other landlord concessions,
anticipated operating expenses and real estate taxes, current and anticipated
vacancy, 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 to
focus on executing long-term leases with financially strong tenants. Our tenant
base is diverse across market sectors and the weighted-average lease term for
our in-place leases was approximately 8.2 years, as of June 30, 2020, including
leases at our unconsolidated joint ventures. The weighted-average lease term for
our top 20 office tenant leases was approximately 11.6 years. Historically,
these factors have minimized our exposure in weaker economic cycles and enhanced
revenues as market conditions improve. 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 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 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;
•our focus on developing and operating in a sustainable and responsible manner;
and
•our relationships with local brokers.
Outlook
In the second quarter of 2020, macroeconomic conditions continued to be
negatively impacted by the COVID-19 pandemic and the resulting economic
slowdown. Businesses across the U.S. experienced significant job losses and
other recessionary effects as U.S. GDP fell 33% from April through June 2020. As
the number of unemployment claims rose and the economy slowed, the Federal
Reserve continued its aggressive monetary and fiscal stimulus policies
implemented in the first quarter and maintained the federal funds rate between
0% and 0.25%.
The effects of COVID-19 continued to negatively impact us and our tenants during
the second quarter of 2020. Although governments in some of our regions began
easing their social distancing and stay-at-home policies later in the second
quarter, the physical occupancy of our properties remained low as employees of
our tenants adhered to their local government restrictions and their employers'
protocols for working from home during the pandemic. Despite the
pandemic-related slowdown in the quarter, we signed more than 940,000 square
feet of leases and renewals during the second quarter, including a large 400,000
square foot lease in Reston, Virginia with Microsoft Corporation. However, while
leasing discussions remained active for leases that were in negotiation prior to
COVID-19 and some long-range space planning continued, we have experienced a
decrease in new leasing activity as existing and prospective tenants are focused
on their employees' safety and on the uncertainty of the impact of the economic
shutdown on their businesses. As a result, there continues to be minimal new
leasing transactions except in the instances where tenants have a near-term
expiration.
Development of primarily pre-leased properties in supply-constrained markets
with the strongest economic growth over time has been a cornerstone of our
long-term growth strategy. We have approximately 5.0 million square feet of
active developments and redevelopments in our pipeline, which are 74%
pre-leased, as of August 3, 2020, to credit-strong tenants with long lease
terms. We experienced work-stoppages at some of our development projects early
in the second quarter. Work has since resumed at all projects and we remain on
schedule to meet all required delivery milestones in our leases and also remain
within budget. Our broad and deep experience as developers extends to our
budgeting and planning, which have left us with ample time in our development
schedules.
The health and safety of our employees, tenants, service providers and visitors
continues to be one of our highest priorities. In the second quarter, we
published our Health Security Plan, which was developed by our Health Security
Task Force composed of our employees, as well as outside experts in health care,
industrial hygiene, cleaning and security. We also conducted group and
one-on-one conversations with our tenants regarding their plans to bring their
work-force back to the office. We implemented health safety protocols in all
in-service properties across our portfolio to provide a safe environment for
tenants and employees in accordance with the policies and applicable legal
requirements in our regions.
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Rent Collections
Cash rent payments for a particular month are generally due on the first day of
that month (although tenants have varying grace periods). Cash rent amounts are
based on all rent billed by us, including all amounts from consolidated
operations and all unconsolidated joint ventures, other than Gateway Commons for
which we do not handle billing.
Our second quarter rent collections among all tenants were approximately 96%.
Approximately 96% of our cash rent billings were derived from office tenants in
the second quarter of 2020. Our second quarter rent collections among office
tenants was strong at 99%. Approximately $603 million, or $2.4 billion
annualized, of our lease revenue was from our office portfolio. Our office
portfolio has long-term lease contracts and modest rollover exposure over the
next few years.
Approximately 4% of our cash rent billings were derived from retail leases in
the second quarter of 2020. Our second quarter rent collections among retail
tenants was 45%.
Management analyzes accrued rent and accounts receivable balances by considering
tenant creditworthiness, current economic trends, including the impact of
COVID-19 on tenants' businesses, and changes in tenants' payment patterns when
evaluating the collectability of the tenant's receivable balance, including the
accrued rent receivable, on a lease-by-lease basis. In the second quarter, we
recorded write-offs totaling approximately $41.0 million. This amount equals the
write-offs in our consolidated portfolio, plus our share of the write-offs from
the unconsolidated joint ventures (calculated based on our ownership
percentage), minus our partners' share of write-offs from our consolidated joint
ventures (calculated based upon the partners' percentage ownership interests).
Approximately 95% of these write-offs related to tenants in the retail sector
and approximately one-third related to Ann Taylor, whose parent company filed
for bankruptcy in July 2020.
The remainder of the write-offs primarily related to tenants in the soft goods
retail, restaurant and entertainment categories that have been notably impacted
by COVID-19. We have been and continue to actively work on lease modification
amendments with retail tenants in the categories that we believe have
justifiable financial needs. Cash rent abatements and deferrals primarily
related to COVID-19 were approximately $16.6 million in the second quarter. This
amount represented our consolidated cash rent abatements and deferrals plus our
share of the cash rent abatements and deferrals from the unconsolidated joint
ventures (calculated based on our ownership percentage) minus our partners'
share of cash rent abatements and deferrals from our consolidated joint ventures
(calculated based upon the partners' percentage ownership interests).
In the second quarter, our parking and other revenue was approximately $13.9
million, a decline of approximately $10.6 million from the first quarter of
2020. The decline was largely due to the decline in transient parking revenue as
employees adhered to government and employers' stay-at-home orders during the
pandemic.
Our hotel property, the Boston Marriott Cambridge, has been closed since March
2020 and operated at an approximately $1.9 million loss for the second quarter
of 2020, which is approximately $7.6 million less than the second quarter of
2019. It is unclear when the hotel will re-open.
As a result of the impact of the current environment, we expect our 2020
revenues to be adversely effected due to (1) our retail tenants, parking and
hotel operator, (2) a slowdown in new leasing activity for vacant and expiring
space and (3) write-offs of accounts receivable and accrued rent balances.
Despite the near-term challenges of COVID-19, we remain confident in our ability
to weather the current market downturn and manage our business throughout
uncertain future market conditions.
As a leading developer, owner and manager of marquee Class A office properties
in the United States, our priorities during and following COVID-19 remain
focused on the following:
•ensuring tenant satisfaction by keeping our properties safe, open and available
for occupancy;
•implementing measures to ensure tenant and employee health security;
•communicating openly with tenants to provide assurance before and during
re-occupancy;
•leasing available space in our in-service and development properties;
•completing the construction of our development properties as conditions allow;
•completing the redevelopment and repositioning of several key properties to
increase future revenue and asset values over the long-term;
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•maintaining our conservative balance sheet and managing our near-term debt
maturities;
•actively managing our operations in a safe, sustainable and responsible manner;
and
•maintaining discipline in our underwriting of investment opportunities.
Following is an overview of portfolio activity and leasing activity in the
second quarter of 2020, recognizing that both leasing activities and
construction activities had slowed in the majority of our regions throughout the
second quarter due to COVID-19.
The overall occupancy of our in-service office and retail properties was 92.0%
at June 30, 2020, a decrease of 90 basis points as compared to March 31, 2020.
During the second quarter of 2020, we signed leases across our portfolio
totaling approximately 942,000 square feet and we commenced revenue recognition
on approximately 1.3 million square feet of leases in second generation space,
including lease modifications. Of these second generation leases, approximately
1.2 million square feet had been vacant for less than one year and, in the
aggregate, they represent a decrease in net rental obligations (gross rent less
operating expenses) of approximately 1% over the prior leases.
A brief overview of each of our markets follows.
Boston
Our Boston central business district ("CBD") in-service portfolio was
approximately 99% leased as of June 30, 2020, including approximately 343,000
square feet of leases that we terminated, due to the nonpayment of rent, where
the tenants have yet to vacate. During the second quarter of 2020, we executed
approximately 143,000 square feet of leases and had approximately 68,000 square
feet of leases commence in the Boston region. Approximately 61,000 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 22% over the
prior leases. In May 2020, we resumed development of 100 Causeway Street, which
had been paused earlier in the quarter due to stay-at-home orders. 100 Causeway
Street is an approximately 632,000 net rentable square foot office tower located
in Boston, Massachusetts, of which we own 50%, that is 94% pre-leased, as of
August 3, 2020.
Our approximately 2.0 million square foot in-service office portfolio in
Cambridge was nearly 100% leased, as of June 30, 2020. In June of 2020, we
resumed development of 325 Main Street at Kendall Center in Cambridge,
Massachusetts, which is 90% pre-leased to a tenant for a term of 15 years.
Development was paused earlier in the quarter due to stay-at-home orders, but we
anticipate delivering the project on time.
In our suburban Waltham/Lexington portfolio, we completed and fully placed
in-service 20 CityPoint, an approximately 211,000 square foot Class A office
development in Waltham, Massachusetts that is 62% leased as of August 3, 2020.
We continue the redevelopment of a portion of 200 West Street, an approximately
261,000 net rentable square foot Class A office property in Waltham,
Massachusetts. The redevelopment is a conversion of a portion of the property to
laboratory space to meet growing demand in the life sciences sector. Waltham
continues to be a desirable submarket of Boston where a cluster of many
technology and life sciences organizations are located.
Los Angeles
Our Los Angeles ("LA") portfolio is currently focused on West LA and includes an
approximately 1.1 million square foot property, Colorado Center, 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%. We believe both properties provide us
with ample opportunity for future growth, as a majority of the current leases
are at below-market rents. As of June 30, 2020, our LA in-service properties was
approximately 96% leased.
Since our initial entry in the West LA market in 2016, we have continued to
explore opportunities to increase our presence in the LA market by seeking
investments where our financial, operational, redevelopment and development
expertise provide the opportunity to achieve accretive returns. In July 2020, we
announced the acquisition of a 50% interest in Beach Cities Media Center, a
6.4-acre land site on the Rosecrans Corridor of the El Segundo submarket of Los
Angeles, California for a purchase price of $21.2 million. The site is fully
entitled to support the future development of approximately 275,000 square feet
of Class A creative office space and is located in one of the most in-demand
creative office areas in the South Bay of Los Angeles where several Fortune 500
and emerging office tenants in the technology, entertainment and financial
sectors are located. In conjunction with the
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acquisition, BXP entered into a joint venture with Continental Development
Corporation, a premier developer and owner of Class A properties primarily in
the El Segundo and Manhattan Beach submarkets with more than 500 tenants across
its portfolio.
New York
As of June 30, 2020, our New York CBD in-service portfolio was approximately 94%
leased, including approximately 374,000 square feet of leases that we terminated
due to the nonpayment of rent, where the tenants have yet to vacate. In the
second quarter of 2020, we commenced approximately 682,000 square feet of leases
in the New York region. Of these leases, approximately 638,000 square feet had
been vacant for less than one year and represent a decrease in net rental
obligations of approximately 2% over the prior leases.
San Francisco
Our San Francisco CBD in-service properties were approximately 97% leased as of
June 30, 2020. During the second quarter of 2020, we commenced approximately
135,000 square feet of leases in the San Francisco region. Of these leases,
approximately 123,000 square feet had been vacant for less than one year and
represent an increase in net rental obligations of approximately 32% over the
prior leases.
On June 26, 2020, we completed the acquisition of property at 777 Harrison
Street (known as Fourth + Harrison and formerly known as 425 Fourth Street), in
San Francisco, California for a purchase price of approximately $140.1 million.
Fourth + Harrison, is a fully-entitled site that can support the development of
approximately 804,000 square feet of primarily office space.
Washington, DC
In the Washington, DC region, our focus remains on (1) expanding our development
potential in Reston, Virginia, where demand from technology and cybersecurity
tenants remains strong, (2) divesting of certain assets in Washington, DC and
select suburban markets and (3) matching development sites with tenants to begin
development with significant pre-leasing commitments. During the second quarter
of 2020, we commenced approximately 372,000 square feet of leases in the
Washington, DC region. Of these leases, approximately 316,000 square feet had
been vacant for less than one year and represent a decrease in net rental
obligations of approximately 19% over the prior leases. During the quarter, we
also signed a new, 12-year lease with Microsoft Corporation for approximately
400,000 square feet at Reston Town Center in Reston, Virginia.
Our Washington, DC CBD in-service properties were approximately 83% leased, as
of June 30, 2020, with modest near-term exposure and we have reduced our
exposure in the Washington, DC CBD market significantly over the past few years
through dispositions of assets. During the second quarter of 2020, we continued
this strategy through the sale of a portion of our Capital Gallery office
building comprised of approximately 455,000 square feet for approximately $254
million. Also, a joint venture in which we have a 50% ownership interest sold
Annapolis Junction Building Eight, an approximately 126,000 square foot office
building, and two land parcels for approximately $47.0 million. Our Washington,
DC suburban properties, which includes our significant presence in Reston,
Virginia, was approximately 86% leased as of June 30, 2020.
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Leasing Statistics
The table below details the leasing activity, including 100% of the
unconsolidated joint ventures, that commenced during the three and six months
ended June 30, 2020:
                                                                     Three months ended June         Six months ended June 30,
                                                                             30, 2020                           2020
                                                                                         Total Square Feet
Vacant space available at the beginning of the period                             3,185,072                        3,135,170
Property dispositions/properties taken out of service (1)                          (150,193)                        (150,193)
Vacant space in properties acquired                                                       -                                -
Properties placed (and partially placed) in-service (2)                              83,857                          364,822
Leases expiring or terminated during the period                                   1,750,629                        2,836,045
Total space available for lease                                                   4,869,365                        6,185,844
1st generation leases                                                                20,551                          342,007
2nd generation leases with new tenants                                              490,659                        1,056,795
2nd generation lease renewals                                                       787,799                        1,216,686
Total space leased (3)                                                            1,299,009                        2,615,488
Vacant space available for lease at the end of the period                         3,570,356                        3,570,356

Leases executed during the period, in square feet (4)                               942,211                        1,643,941

Second generation leasing information: (5)
Leases commencing during the period, in square feet                               1,278,458                        2,273,481
Weighted Average Lease Term                                                         129 Months                       116 Months
Weighted Average Free Rent Period                                                     184 Days                         151 Days
Total Transaction Costs Per Square Foot (6)                                         $102.33$89.03
Increase in Gross Rents (7)                                                            0.20  %                         18.91  %
Increase in Net Rents (8)                                                             (0.79) %                         29.30  %


 __________________
(1)Total square feet of property dispositions/properties taken out of service
during the three and six months ended June 30, 2020 consists of 24,508 due to
the sale of a portion of Capital Gallery and 125,685 due to the sale of
Annapolis Junction Building Eight.
(2)Total square feet of properties placed (and partially placed) in-service
during the three months ended June 30, 2020 consists of 79,527 at 20 CityPoint
and 4,330 at 685 Gateway. Total square feet of properties placed (and partially
placed) in-service during the six months ended June 30, 2020 consists of 79,527
at 20 CityPoint, 4,330 at 685 Gateway, 5,156 at 145 Broadway and 275,809 at
17Fifty Presidents Street.
(3)Represents leases for which lease revenue recognition has commenced in
accordance with GAAP during the three and six months ended June 30, 2020.
(4)Represents leases executed during the three and six months ended June 30,
2020 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 six months ended June 30, 2020 is 262,368 and 506,388, respectively.
Amounts for the three and six months ended June 30, 2020 exclude lease
modifications related to COVID-19 covering an aggregate of 3,099,343 square feet
that were executed in the three and six months ended June 30, 2020 to provide
cash rent deferrals and/or abatements. Of these lease modifications, the lease
terms associated with 296,989 square feet were extended for a period of 12 or
more months.
(5)Second generation leases are defined as leases for space that had previously
been leased by us. Of the 1,278,458 and 2,273,481 square feet of second
generation leases that commenced during the three and six months ended June 30,
2020, respectively, leases for 1,016,090 and 1,772,249 square feet,
respectively, were signed in prior periods.
(6)Total transaction costs include tenant improvements and leasing commissions
but exclude free rent concessions and other inducements in accordance with GAAP.
(7)Represents the increase in gross rent (base rent plus expense reimbursements)
on the new versus expired leases on the 1,178,430 and 1,905,772 square feet of
second generation leases that had been occupied within
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the prior 12 months for the three and six months ended June 30, 2020,
respectively; excludes leases that management considers temporary because the
tenant is not expected to occupy the space on a long-term basis.
(8)Represents the increase in net rent (gross rent less operating expenses) on
the new versus expired leases on the 1,178,430 and 1,905,772 square feet of
second generation leases that had been occupied within the prior 12 months for
the three and six months ended June 30, 2020, respectively; excludes leases that
management considers temporary because the tenant is not expected to occupy the
space on a long-term basis.
Transactions during the three months ended June 30, 2020 included the following:
Capital markets
•On May 5, 2020, BPLP completed a public offering of $1.25 billion in aggregate
principal amount of its 3.250% unsecured senior notes due 2031. The notes were
priced at 99.850% of the principal amount to yield an effective rate (including
financing fees) of approximately 3.343% per annum to maturity. The notes will
mature on January 30, 2031, unless earlier redeemed. The aggregate net proceeds
from the offering were approximately $1.24 billion after deducting underwriting
discounts and transaction expenses.
•On May 22, 2020, BXP renewed its "at the market" ("ATM") stock offering program
through which it may sell from time to time up to an aggregate of $600.0 million
of its common stock through sales agents over a three-year period. Under the ATM
stock offering program, BXP may also engage in forward sale transactions with
affiliates of certain sales agents for the sale of its common stock on a forward
basis. This program replaced BXP's prior $600.0 million ATM stock offering
program that was scheduled to expire on June 2, 2020. BXP intends to use the net
proceeds from any offering for general business purposes, which may include
investment opportunities and debt reduction. No shares of common stock have been
issued under this ATM stock offering program.
Developments
•On June 1, 2020, we completed and fully placed in-service 20 CityPoint, a Class
A office project with approximately 211,000 net rentable square feet located in
Waltham, Massachusetts that is 62% leased.
•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.
Disposition
•On June 25, 2020, we completed the sale of a portion of our Capital Gallery
property located in Washington, DC for a gross sale price of approximately
$253.7 million. Net cash proceeds totaled approximately $246.9 million,
resulting in a gain on sale of real estate totaling approximately $203.8 million
for BXP and approximately $207.2 million for BPLP. 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 containing approximately
176,000 net rentable square feet at the property.
Unconsolidated joint venture activities
•On June 9, 2020, a joint venture in which we have a 20% interest refinanced
with a new lender the mortgage loan collateralized by its Metropolitan Square
property located in Washington, DC. The outstanding balance of the loan totaled
approximately $155.9 million, bore interest at a fixed rate of 5.75% per annum
and was scheduled to mature on August 5, 2020. The new mortgage loan totaling
$325.0 million, of which $288.0 million was advanced at closing, bears interest
at a variable rate equal to LIBOR plus 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 portion of interest
costs to 3.00% per
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annum on a notional amount of $325.0 million through July 7, 2022. The joint
venture distributed excess loan proceeds from the new mortgage loan totaling
approximately $112.7 million, of which our share totaled approximately
$22.5 million. Metropolitan Square is a Class A office property with
approximately 654,000 net rentable square feet.
•On June 25, 2020, a joint venture in which we have a 50% interest completed the
sale of Annapolis Junction Building Eight and two land parcels located in
Annapolis, Maryland for a gross sale price of $47.0 million. Net cash proceeds
totaled approximately $45.8 million after the payment of transaction costs. We
recognized a gain on sale of real estate totaling approximately $5.8 million,
which is included in Income from Unconsolidated Joint Ventures in the
accompanying Consolidated Statements of Operations. The joint venture
distributed approximately $36.8 million of available cash and the net proceeds
from the sale after the pay down of the mortgage loan, of which our share
totaled approximately $18.4 million. Annapolis Junction Building Eight is an
approximately 126,000 net rentable square foot Class A office property which is
vacant. The two land parcels will support the development of approximately
300,000 square feet of commercial office space with one parcel currently
containing surface parking for approximately 511 vehicles.
In conjunction with the joint venture's sale of Annapolis Junction Building
Eight, the joint venture modified the mortgage loan collateralized by Annapolis
Junction Building Seven and Building Eight with the release of Annapolis
Junction Building Eight as collateral under the loan in exchange for a principal
pay down of approximately $16.1 million using a portion of the net proceeds from
the sale of the property. At the time of the modification, the outstanding
balance of the loan totaled approximately $34.5 million, bore interest at a
variable rate equal to LIBOR plus 2.35% per annum and was scheduled to mature on
June 30, 2020. The modified mortgage loan totaling approximately $18.4 million
is collateralized by Annapolis Junction Building Seven, continues to bear
interest at a variable rate equal to LIBOR plus 2.35% per annum and matures on
March 25, 2021. Annapolis Junction Building Seven is a Class A office property
with approximately 127,000 net rentable square feet located in Annapolis,
Maryland.
Transaction completed subsequent to June 30, 2020 included the following:
•On July 23, 2020, we acquired a 50% interest in a joint venture entity that
owns Beach Cities Media Center, a 6.4-acre parcel of land located in El Segundo,
California, for a purchase price of approximately $21.2 million. Beach Cities
Media Center is expected to support the development of approximately 275,000
square feet of Class A office space.
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, 2019 contains a
discussion of our critical accounting policies, except for our policies
established following the adoption of Accounting Standards Update ("ASU") ASU
2016-13, ASU 2018-13, ASU 2018-17 and ASU 2020-04. The adoption of each of the
pronouncements is discussed in Note 2 to our Consolidated Financial Statements.
Management discusses and reviews our critical accounting policies and
management's judgments and estimates with BXP's Audit Committee.
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Results of Operations for the Six Months Ended June 30, 2020 and 2019
The impact that COVID-19 has had on our business, financial position and results
of operations during the second quarter of 2020 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. 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. The situation surrounding
COVID-19 remains fluid, and we are actively managing our response in
collaboration with tenants, government officials and joint venture partners and
assessing potential impacts to our financial position and operating results, as
well as potential adverse developments in our business. See Item 1A: "Risk
Factors" for additional details.
Net income attributable to Boston Properties, Inc. common shareholders and net
income attributable to Boston Properties Limited Partnership common unitholders
increased approximately $501.8 million and $569.2 million for the six months
ended June 30, 2020 compared to 2019, respectively, as detailed in the following
tables and for the reasons discussed below under the heading "Comparison of the
six months ended June 30, 2020 to the six months ended June 30, 2019" 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 six months ended June 30, 2020 and 2019 (in thousands):

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Boston Properties, Inc.
                                                                                  Six months ended June 30,
                                                                                                Increase/                  %
                                                             2020               2019            (Decrease)              Change

Net Income Attributable to Boston Properties, Inc. Common Shareholders

                                      $ 764,232$ 262,431$ 501,801                    191.21  %
Preferred dividends                                          5,250              5,250                  -                         -  %

Net Income Attributable to Boston Properties, Inc. 769,482

   267,681            501,801                    187.46  %
Net Income Attributable to Noncontrolling
Interests:
Noncontrolling interest-common units of the
Operating Partnership                                       87,525             30,627             56,898                    185.78  %
Noncontrolling interests in property partnerships           18,719             36,312            (17,593)                   (48.45) %
Net Income                                                 875,726            334,620            541,106                    161.71  %
Other Expenses:
Add:
Interest expense                                           208,733            203,366              5,367                      2.64  %
Impairment loss                                                  -             24,038            (24,038)                  (100.00) %
Other Income:
Less:
Gains (losses) from investments in securities                 (893)             4,134             (5,027)                  (121.60) %
Interest and other income (loss)                             4,322              7,368             (3,046)                   (41.34) %
Gains on sales of real estate                              613,932                781            613,151                 78,508.45  %
Income from unconsolidated joint ventures                    1,463             48,177            (46,714)                   (96.96) %
Other Expenses:
Add:
Depreciation and amortization expense                      349,282            342,005              7,277                      2.13  %
Transaction costs                                              947                877                 70                      7.98  %

Payroll and related costs from management services contracts

                                                    5,721              5,798                (77)                    (1.33) %
General and administrative expense                          74,197             76,833             (2,636)                    (3.43) %
Other Revenue:
Less:
Direct reimbursements of payroll and related costs
from management services contracts                           5,721              5,798                (77)                    (1.33) %
Development and management services revenue                 16,004             19,263             (3,259)                   (16.92) %
Net Operating Income                                     $ 874,057$ 902,016$ (27,959)                    (3.10) %


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Boston Properties Limited Partnership
                                                                                  Six months ended June 30,
                                                                                                Increase/                  %
                                                             2020               2019            (Decrease)              Change
Net Income Attributable to Boston Properties
Limited Partnership Common Unitholders                   $ 868,308$ 299,097$ 569,211                    190.31  %
Preferred distributions                                      5,250              5,250                  -                         -  %
Net Income Attributable to Boston Properties
Limited Partnership                                        873,558            304,347            569,211                    187.03  %
Net Income Attributable to Noncontrolling
Interests:
Noncontrolling interests in property partnerships           18,719             36,312            (17,593)                   (48.45) %
Net Income                                                 892,277            340,659            551,618                    161.93  %
Other Expenses:
Add:
Interest expense                                           208,733            203,366              5,367                      2.64  %
Impairment loss                                                  -             22,272            (22,272)                  (100.00) %
Other Income:
Less:
Gains (losses) from investments in securities                 (893)             4,134             (5,027)                  (121.60) %
Interest and other income (loss)                             4,322              7,368             (3,046)                   (41.34) %
Gains on sales of real estate                              626,895                930            625,965                 67,308.06  %
Income from unconsolidated joint ventures                    1,463             48,177            (46,714)                   (96.96) %
Other Expenses:
Add:
Depreciation and amortization expense                      345,694            337,881              7,813                      2.31  %
Transaction costs                                              947                877                 70                      7.98  %

Payroll and related costs from management services contracts

                                                    5,721              5,798                (77)                    (1.33) %
General and administrative expense                          74,197             76,833             (2,636)                    (3.43) %
Other Revenue:
Less:
Direct reimbursements of payroll and related costs
from management services contracts                           5,721              5,798                (77)                    (1.33) %
Development and management services revenue                 16,004             19,263             (3,259)                   (16.92) %
Net Operating Income                                     $ 874,057$ 902,016$ (27,959)                    (3.10) %



At June 30, 2020 and 2019, we owned or had interests in a portfolio of 195 and
193 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
is meaningful. Therefore, the comparison of operating results for the three and
six months ended June 30, 2020 and 2019 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 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.
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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 dividends/distributions, net income attributable to noncontrolling
interests, interest expense, impairment loss, 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
on sales of real estate, income from unconsolidated joint ventures, 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 six months ended June 30, 2020 to the six months ended
June 30, 2019
The table below shows selected operating information for the Same Property
Portfolio and the Total Property Portfolio. The Same Property Portfolio consists
of 139 properties totaling approximately 38.5 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, 2019 and
owned and in service through June 30, 2020. The Total Property Portfolio
includes the effects of the other properties either acquired, placed in-service,
in development or redevelopment after January 1, 2019 or disposed of on or prior
to June 30, 2020. This table includes a reconciliation from the Same Property
Portfolio to the Total Property Portfolio by also providing information for the
six months ended June 30, 2020 and 2019 with respect to the properties that were
acquired, placed in-service, in development or redevelopment or sold.

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                                                                                                                                                                                                                                        Properties
                                                                                                                                                                                                                                     Placed In-Service                                      Properties in Development or
                                                              Same Property Portfolio                                                                                    Properties Acquired Portfolio                                   Portfolio                                             Redevelopment Portfolio                                       Properties Sold Portfolio                         Total Property Portfolio
                                                                               Increase/                %                                                                                                                                                                                                         Increase/                %
                                         2020                 2019             (Decrease)            Change               2020           2019            2020               2019               2020              2019             2020              2019                2020                   2019               (Decrease)             Change
                                                                                                                                                                                 (dollars in thousands)
Rental Revenue: (1)
Lease Revenue (Excluding
Termination Income)                 $ 1,257,343$ 1,280,730$ (23,387)                (1.83) %       $ 6,893          $  -          $ 28,326          $      -            $  1,224$ 5,359$ 21,698$ 45,061$ 1,315,484$   1,331,150$ (15,666)                 (1.18) %
Termination Income                        5,648               11,527             (5,879)               (51.00) %             -             -                 -                 -                   -                -                59               318                5,707                 11,845               (6,138)                (51.82) %
Lease Revenue                         1,262,991            1,292,257            (29,266)                (2.26) %         6,893             -            28,326                 -               1,224            5,359            21,757            45,379            1,321,191              1,342,995              (21,804)                 (1.62) %
Parking and Other                        36,128               49,329            (13,201)               (26.76) %             1             -             1,058                 -                  12              112               932             1,514               38,131                 50,955              (12,824)                (25.17) %
Total Rental Revenue (1)              1,299,119            1,341,586            (42,467)                (3.17) %         6,894             -            29,384                 -               1,236            5,471            22,689            46,893            1,359,322              1,393,950              (34,628)                 (2.48) %
Real Estate Operating Expenses          476,109              485,648             (9,539)                (1.96) %         2,852             -             4,931                 -               2,697            4,528             8,135            17,415              494,724                507,591              (12,867)                 (2.53) %
Net Operating Income (Loss),
Excluding Residential and Hotel         823,010              855,938            (32,928)                (3.85) %         4,042             -            24,453                 -              (1,461)             943            14,554            29,478              864,598                886,359              (21,761)                 (2.46) %
Residential Net Operating Income
(2)                                      11,329                8,818              2,511                 28.48  %             -             -                 -                 -                   -                -                 -                 -               11,329                  8,818                2,511                  28.48  %
Hotel Net Operating Income (Loss)
(2)                                      (1,870)               6,839             (8,709)              (127.34) %             -             -                 -                 -                   -                -                 -                 -               (1,870)                 6,839               (8,709)               (127.34) %

Net Operating Income (Loss) $ 832,469$ 871,595

  $ (39,126)                (4.49) %       $ 4,042          $  -          $ 24,453          $      -            $ (1,461)$   943$ 14,554$ 29,478$   874,057$     902,016$ (27,959)                 (3.10) %


_______________
(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 57. Residential Net Operating Income for
the six months ended June 30, 2020 and 2019 is comprised of Residential Revenue
of $19,358 and $16,714 less Residential Expenses of $8,029 and $7,896,
respectively. Hotel Net Operating Income for the six months ended June 30, 2020
and 2019 is comprised of Hotel Revenue of $6,924 and $23,782 less Hotel Expenses
of $8,794 and $16,943, respectively, per the Consolidated Statements of
Operations.
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Same Property Portfolio
Lease Revenue (Excluding Termination Income)
Lease revenue from the Same Property Portfolio decreased by approximately $23.4
million for the six months ended June 30, 2020 compared to 2019. Approximately
$53.3 million of the decrease was related to write-offs, which are discussed
below. The decrease was offset by an increase in our average revenue per square
foot by approximately $1.35, contributing approximately $27.3 million and an
approximately $2.6 million increase due to our average occupancy increasing from
93.80% to 93.99%.
Under Accounting Standards Codification ("ASC") 842 - "Leases" ("ASC 842"), any
write-off for bad debt, including accrued rent, is recorded as a reduction to
lease revenue. As a result, during the six months ended June 30, 2020, for our
Same Property Portfolio, we wrote off approximately $35.1 million and $18.2
million of accrued rent and accounts receivable balances, respectively. These
write-offs were for tenants, primarily in the retail sector, that either
terminated their leases or we determined that their accrued rent and/or accounts
receivable balances were no longer probable of collection.
In addition, as a result of COVID-19, for the Same Property Portfolio, during
the second quarter of 2020, we executed lease modification agreements for
approximately 2.4 million square feet and granted approximately $25.0 million of
cash rent abatements and deferrals, of which approximately $14.0 million related
to rental charges for the second quarter of 2020. Although some of the lease
modifications were deferrals under which we expect the tenant will pay us in
full primarily in 2021, the majority of the lease modifications involved
extending the lease term (in some cases for a year or more). As a result of the
lease modification agreements, that extended the lease term we expect to see an
increase in cash rent received in the future.
In April 2020, the Financial Accounting Standards Board ("FASB") staff issued a
question and answer document ("Lease Modification Q & A") related to the
application of lease accounting guidance for lease concessions, in accordance
with ASC 842, as a result of COVID-19. We did not utilize the guidance provided
in the Lease Modification Q & A and instead elected to continue to account for
the COVID-19 lease concessions on a lease-by-lease basis in accordance with the
existing lease modification accounting framework (See Note 4 to the Consolidated
Financial Statements). As such, our accrued rent balances, which are a component
of lease revenue, include the accounting impact (adjusted for write-offs) from
the rent abatements, deferrals and extensions that were executed during the
second quarter of 2020.
We expect to continue to execute lease modification agreements as a result of
COVID-19. However, the degree to which our tenants' businesses are negatively
impacted by COVID-19 could leave some tenants still unable to meet their rental
payment obligations and result in a reduction in our cash flows. We may write
off additional accrued rent or accounts receivable balances and this could have
a material adverse effect on lease revenue. See Item 1A: "Risk Factors" for
additional details.
Termination Income
Termination income decreased by approximately $5.9 million for the six months
ended June 30, 2020 compared to 2019.
Termination income for the six months ended June 30, 2020 related to 28 tenants
across the Same Property Portfolio and totaled approximately $5.6 million, which
was primarily related to tenants that terminated leases early in New York City
and the Boston region.
Termination income for the six months ended June 30, 2019 related to 19 tenants
across the Same Property Portfolio and totaled approximately $11.5 million, of
which approximately $6.8 million is from two tenants that terminated leases
early at 399 Park Avenue in New York City.
Parking and Other Revenue
Parking and other revenue decreased by approximately $13.2 million for the six
months ended June 30, 2020 compared to 2019. Parking revenue decreased by
approximately $14.1 million while other revenue increased by approximately $0.9
million. The decrease in parking revenue was primarily due to a decrease in
transient and monthly parking.
During the second quarter of 2020, with stay-at-home orders in effect, business
closures and people working remotely in a majority of regions in which our
properties are located, we generated minimal hourly/daily parking
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revenue and this trend may continue for as long as these conditions exist.
However, as these conditions shift, and "stay-at-home" orders are partially or
fully lifted, businesses begin to open and people begin to return to working in
an office setting, we expect to and have begun to see an increase in parking
revenue. As a result, for the six months ended June 30, 2020, transient and
monthly parking decreased by approximately $9.8 million and $2.3 million,
respectively. 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 decreased by
approximately $9.5 million, or 2.0%, for the six months ended June 30, 2020
compared to 2019, due primarily to a decrease in utility expense of
approximately $9.9 million, or 18.6%, partially offset by an increase in other
real estate operating expenses of $0.4 million, or 0.1%. The decrease in utility
expense was experienced across the portfolio and was primarily driven by a
decrease in physical tenant occupancy, which led to lower demand for electricity
and HVAC.
Properties Acquired Portfolio
The table below lists the properties acquired between January 1, 2019 and
June 30, 2020. Rental revenue and real estate operating expenses increased by
approximately $6.9 million and $2.9 million, respectively, for the six months
ended June 30, 2020 compared to 2019, as detailed below.
                                                                                                     Rental Revenue                                                               Real Estate Operating Expenses
           Name                      Date acquired              Square Feet                       2020            2019               Change              2020            2019                     Change
                                                                                                                                (dollars in thousands)
880 and 890 Winter Street        August 27, 2019                     392,568          $ 6,878            $  -            $ 6,878$ 2,851            $  -            $    2,851
Fourth + Harrison (1)            June 26, 2020                              N/A            16               -                 16                   1               -                     1
                                                                     392,568          $ 6,894            $  -            $ 6,894$ 2,852            $  -            $    2,852


_______________
(1)Located at 777 Harrison Street in San Francisco, California (known as Fourth
+ Harrison and formerly known as 425 Fourth Street).
Properties Placed In-Service Portfolio
The table below lists the properties that were placed in-service or partially
placed in-service between January 1, 2019 and June 30, 2020. Rental revenue and
real estate operating expenses from our Properties Placed In-Service Portfolio
increased by approximately $29.4 million and $4.9 million, respectively, for the
six months ended June 30, 2020 compared to 2019, as detailed below.
                              Quarter Initially                                                                                       Rental Revenue                                                         Real Estate Operating Expenses
        Name                  Placed In-Service            Quarter Fully Placed In-Service                             Square Feet          2020            2019             Change           2020               2019           Change
                                                                                                                                                             (dollars in thousands)
20 CityPoint                Second Quarter, 2019         Second Quarter, 2020                        211,476          $     3,624          $  -          $  3,624$ 1,322          $   -          $    1,322145 Broadway                Fourth Quarter, 2019         Fourth Quarter, 2019                        488,862               21,817             -            21,817            2,333              -               2,333
17Fifty Presidents
Street                      First Quarter, 2020          First Quarter, 2020                         275,809                3,943             -             3,943            1,276              -               1,276
                                                                                                     976,147          $    29,384          $  -          $ 29,384$ 4,931          $   -          $    4,931


Properties in Development or Redevelopment Portfolio
The table below lists the properties that were in development or redevelopment
between January 1, 2019 and June 30, 2020. Rental revenue and real estate
operating expenses from our Properties in Development or Redevelopment Portfolio
decreased by approximately $4.2 million and $1.8 million, respectively, for the
six months ended June 30, 2020 compared to 2019.
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                                                                                                                                                                            Real Estate Operating
                                                                                                 Rental Revenue                                                                   Expenses
                                 Date Commenced
                                 Development /
         Name                    Redevelopment              Square Feet             2020              2019            Change             2020             2019               Change
                                                                                                                          (dollars in thousands)
One Five Nine East 53rd
Street (1)                    August 19, 2016                   220,000          $ (1,393)$ 1,862$ (3,255)$   842$   954$      (112)
325 Main Street (2)           May 9, 2019                       115,000                36             (753)              789               74            1,040                 (966)
200 West Street (3)           September 30, 2019                261,000             2,593            4,362            (1,769)           1,781            2,534                 (753)
                                                                596,000          $  1,236$ 5,471$ (4,235)$ 2,697$ 4,528$    (1,831)


_______________
(1)Rental revenue for the six months ended June 30, 2020 includes an
approximately $2.9 million write-off of accrued rent and accounts receivable
balances for a terminated tenant.
(2)Rental revenue for the six months ended June 30, 2019 includes the
acceleration and write-off of accrued rent associated with the early termination
of a lease at the property. Real estate operating expenses for the six months
ended June 30, 2020 and 2019 includes approximately $0.1 million and $0.4
million of demolition costs, respectively.
(3)Rental revenue and real estate operating expenses for the six months ended
June 30, 2019 are related to the entire building. The redevelopment is a
conversion of a 126,000 square foot portion of the property to laboratory space.
Properties Sold Portfolio
The table below lists the properties we sold between January 1, 2019 and
June 30, 2020. Rental revenue and real estate operating expenses from our
Properties Sold Portfolio decreased by approximately $24.2 million and $9.3
million, respectively, for the six months ended June 30, 2020 compared to 2019,
as detailed below.
                                                                                                                                                                                                             Real Estate Operating
                                                                                                                                Rental Revenue                                                                     Expenses
          Name                        Date Sold                 Property Type            Square Feet              2020              2019              Change             2020             2019                Change
                                                                                                                                                         (dollars in thousands)
2600 Tower Oaks
Boulevard                      January 24, 2019               Office                          179,000          $      -          $    159$    (159)         $     -          $    189$      (189)
One Tower Center               June 3, 2019                   Office                          410,000                 -             2,100             (2,100)               -             2,080               (2,080)
164 Lexington RoadJune 28, 2019                  Office                           64,000                 -                 -                  -                -                82                  (82)
Washingtonian North            December 20, 2019              Land                                   N/A              -                 -                  -                -                76                  (76)
601, 611 and 651 Gateway
(1)                            January 28, 2020               Office                          768,000             1,946            14,546            (12,600)             881             4,971               (4,090)
New Dominion Technology
ParkFebruary 20, 2020              Office                          493,000             2,551             9,780             (7,229)             772             2,910               (2,138)
Capital Gallery (2)            June 25, 2020                  Office                          631,000            18,192            20,308             (2,116)           6,482             7,107                 (625)
                                                                                            2,545,000          $ 22,689$ 46,893$ (24,204)$ 8,135$ 17,415$    (9,280)


_______________
(1)Rental revenue for the six months ended June 30, 2019 includes approximately
$0.5 million of termination income (See Notes 3 and 5 to the Consolidated
Financial Statements).
(2)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 (See Note 3 to the Consolidated Financial Statements).
For additional information on the sales of the above properties and land parcel
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 increased by
approximately $2.5 million for the six months ended June 30, 2020 compared to
2019.
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 six months ended June 30, 2020 and 2019.
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                                            The Lofts at Atlantic Wharf                                                              The Avant at Reston Town Center                                                                Signature at RestonProto Kendall Square
                                    2020                2019            Change (%)             2020             2019          Change (%)           2020             2019            Change (%)             2020               2019              Change (%)
Average Monthly Rental
Rate (1)                      $      4,520$ 4,457                   1.4  %       $ 2,395$ 2,379               0.7  %       $ 2,331$ 2,319                   0.5  %       $ 2,959$   2,785                     6.2  %
Average Rental Rate Per
Occupied Square Foot          $       5.02$  4.89                   2.7  %       $  2.63$  2.60               1.2  %       $  2.48$  2.52                  (1.6) %       $  5.44$    5.22                     4.2  %
Average Physical
Occupancy (2)                         93.4   %          94.8  %               (1.5) %          90.5  %          92.3  %           (2.0) %          81.9  %          58.8  %               39.3  %          94.0  %            71.1    %               32.2  %
Average Economic
Occupancy (3)                         93.0   %          95.2  %               (2.3) %          89.3  %          91.5  %           (2.4) %          76.8  %          52.5  %               46.3  %          93.5  %            67.1    %               39.3  %


_______________
(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
Net operating income for the Boston Marriott Cambridge hotel property decreased
by approximately $8.7 million for the six months ended June 30, 2020 compared to
2019.
As a result of COVID-19, we closed the Boston Marriott Cambridge in March 2020
and it did not re-open during the second quarter of 2020. We do not know when
the hotel will re-open. The hotel is operating at a monthly deficit and its
continued closure has had and will continue to have, a material adverse effect
on the hotel's contribution to our results of operations during the closure. See
Item 1A: "Risk Factors" for additional details.
The following reflects our occupancy and rate information for the Boston
Marriott Cambridge hotel for the six months ended June 30, 2020 and 2019.
                           2020           2019         Change (%)
Occupancy                   29.8  %        84.7  %        (64.8) %
Average daily rate      $ 211.29$ 272.65           (22.5) %
REVPAR                  $  62.98$ 230.97           (72.7) %



Other Operating Revenue and Expense Items
Development and Management Services Revenue
Development and management services revenue decreased by approximately $3.3
million for the six months ended June 30, 2020 compared to 2019. Development
services revenue decreased by approximately $3.9 million while management
services revenue increased by approximately $0.6 million. The decrease in
development services revenue was primarily related to a decrease of
approximately $4.5 million in development fees and fees associated with tenant
improvement projects earned in the Boston and New York regions offset by an
increase of approximately $0.6 million in development fees earned in the San
Francisco region. The increase in management services revenue was primarily
related to an increase in property management fees earned from our Gateway
Commons unconsolidated joint venture, which was deconsolidated on January 28,
2020.
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General and Administrative Expense
General and administrative expense decreased by approximately $2.6 million for
the six months ended June 30, 2020 compared to 2019 primarily due to a decrease
in compensation expense of approximately $3.2 million, partially offset by an
approximately $0.6 million increase in other general and administrative
expenses. The decrease in compensation expense was related to (1) an
approximately $5.0 million decrease in the value of our deferred compensation
plan, (2) an approximately $0.8 million decrease in health care costs and (3) an
approximately $0.7 million increase in capitalized wages, which decreases
general and administrative expenses. These increases were partially offset by an
approximately $3.3 million increase in other compensation expense, which
includes the expense associated with our equity compensation programs, which
includes the acceleration of amortization that occurred for employees that
reached a certain age and number of years of service and therefore became vested
in these awards sooner. The increase in other general and administrative
expenses was primarily related to the write-off of the remaining fees associated
with BXP's prior ATM stock offering program that was scheduled to expire on June
2, 2020 and an increase in other 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 six months ended June 30, 2020 and 2019 were
approximately $6.2 million and $5.5 million, respectively. These costs are not
included in the general and administrative expenses discussed above.
Transaction Costs
Transaction costs increased by approximately $70,000 for the six months ended
June 30, 2020 compared to 2019 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 $7.3 million
for the six months ended June 30, 2020 compared to 2019, as detailed below.
                                                             Depreciation 

and Amortization for the six months

                                                                              ended June 30,
Portfolio                                                                             2020              2019         Change
                                                                              (in thousands)
Same Property Portfolio                                    $   333,136$ 321,690$ 11,446
Properties Acquired Portfolio                                    4,894                    -             4,894
Properties Placed In-Service Portfolio                           7,043                    -             7,043

Properties in Development or Redevelopment Portfolio (1)

                                                                924               11,861           (10,937)
Properties Sold Portfolio                                        3,285                8,454            (5,169)
                                                           $   349,282$ 342,005$  7,277


_______________
(1)On May 9, 2019, we commenced development of 325 Main Street in Cambridge,
Massachusetts. As a result, during the six months ended June 30, 2019, we
recorded approximately $9.9 million of accelerated depreciation expense for the
demolition of the building, of which approximately $0.4 million related to the
step-up of real estate assets.
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Boston Properties Limited Partnership
Depreciation and amortization expense increased by approximately $7.8 million
for the six months ended June 30, 2020 compared to 2019, as detailed below.
                                                             Depreciation 

and Amortization for the six months

                                                                              ended June 30,
Portfolio                                                                             2020              2019         Change
                                                                              (in thousands)
Same Property Portfolio                                    $   329,548$ 317,945$ 11,603
Properties Acquired Portfolio                                    4,894                    -             4,894
Properties Placed In-Service Portfolio                           7,043                    -             7,043

Properties in Development or Redevelopment Portfolio (1)

                                                                924               11,482           (10,558)
Properties Sold Portfolio                                        3,285                8,454            (5,169)
                                                           $   345,694$ 337,881$  7,813


_______________
(1)On May 9, 2019, we commenced development of 325 Main Street in Cambridge,
Massachusetts. As a result, during the six months ended June 30, 2019, we
recorded approximately $9.5 million of accelerated depreciation expense for the
demolition 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
Income from Unconsolidated Joint Ventures
For the six months ended June 30, 2020 compared to 2019, income from
unconsolidated joint ventures decreased by approximately $46.7 million primarily
due to an approximately $47.8 million gain on sale of real estate from the sale
of 540 Madison Avenue during the six months ended June 30, 2019 and the
resulting loss of income thereafter, along with the addition of our Gateway
Commons joint venture and the partial placing in-service of the Hub50House joint
venture in South San Francisco, CA and Boston, MA, respectively. These joint
ventures reduced our net income by approximately $4.0 million for the six months
ended June 30, 2020. At June 30, 2020, the Hub50House was only 35% leased and we
do not expect it to be stabilized until the first quarter of 2022. The decrease
in net income from the Gateway Commons joint venture was primarily related to
depreciation and amortization. These decreases were partially offset by an
approximately $5.8 million gain on sale of real estate from the sale of
Annapolis Junction Building Eight and two land parcels during the six months
ended June 30, 2020 (See Note 5 to the Consolidated Financial Statements).
Under ASC 842, any write-off for bad debt, including accrued rent, is recorded
as a reduction to lease revenue. As a result, during the six months ended June
30, 2020, for our unconsolidated joint ventures, we wrote off our share of the
accrued rent and accounts receivable balances of approximately $0.7 million and
$1.0 million, respectively. These write-offs were for tenants, primarily in the
retail sector, that either terminated their leases or we determined that their
accrued rent and/or accounts receivable balances were no longer probable of
collection.
In addition, as a result of COVID-19, for properties owned by our unconsolidated
joint ventures, during the second quarter of 2020, the joint ventures executed
lease modification agreements for approximately 674,000 square feet. As a result
of these lease modification agreements, our share of the total cash rent
abatements and deferrals granted was approximately $5.3 million, of which
approximately $2.5 million was related to rental charges for the second quarter
of 2020. Although some of the lease modifications were deferrals where we expect
the tenant will pay the joint venture in full primarily in 2021, the majority of
the lease modifications involved extending the lease term (in some cases for
longer than a year). As a result of the lease modification agreements that
extended the lease term, we expect to see an increase in cash rent received in
the future.
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In April 2020, the FASB staff issued the Lease Modification Q & A related to the
application of lease accounting guidance for lease concessions, in accordance
with ASC 842, as a result of COVID-19. We did not utilize the guidance provided
in the Lease Modification Q & A and instead elected to continue to account for
the COVID-19 lease concessions on a lease-by-lease basis in accordance with the
existing lease modification accounting framework (See Note 4 to the Consolidated
Financial Statements). As such, the accrued rent balances, which are a component
of lease revenue, include the accounting impact (adjusted for write-offs) from
the rent abatements, deferrals and extensions that were executed during the
second quarter of 2020.
The joint ventures expect to continue to execute lease modification agreements
as a result of COVID-19. However, the degree to which tenants' businesses are
negatively impacted by COVID-19 could leave some tenants still unable to meet
their rental payment obligations and result in a reduction in cash flows. Our
unconsolidated joint ventures may write-off additional accrued rent or accounts
receivable balances and this could have a material adverse effect on lease
revenue. See Item 1A: "Risk Factors" for additional details.
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.
Boston Properties, Inc.
Gains on sales of real estate increased by approximately $613.2 million for the
six months ended June 30, 2020 compared to 2019, 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)
2020
601, 611 and 651
Gateway                      January 28, 2020               Office                            768,000          $    350.0          $       -          $     217.7        (1)
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              246.9                203.8        (2)
                                                                                                               $    859.7$   500.9$     613.8        (3)
2019
2600 Tower Oaks
Boulevard                    January 24, 2019               Office                            179,000          $     22.7$    21.4          $ 

(0.6)

One Tower Center             June 3, 2019                   Office                            410,000                38.0               36.6            

(0.8)

164 Lexington Road           June 28, 2019                  Office                             64,000                 4.0                3.8                  2.5
                                                                                                               $     64.7$    61.8$       1.1        (4)


___________
(1)On January 28, 2020, we entered into a joint venture with a third party to
own, operate and develop properties at our Gateway Commons complex located in
South San Francisco. We contributed our 601, 611 and 651 Gateway properties and
development rights with an agreed upon value aggregating approximately $350.0
million for our 50% interest in the joint venture (See Notes 3 and 5 to the
Consolidated Financial Statements).
(2)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 (See Note 3 to the Consolidated Financial Statements).
(3)Excludes approximately $0.1 million of gains on sales of real estate
recognized during the six months ended June 30, 2020 related to gain amounts
from sales of real estate occurring in the prior year.
(4)Excludes approximately $0.3 million of losses on sales of real estate
recognized during the six months ended June 30, 2019 related to loss amounts
from sales of real estate occurring in prior years.
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Boston Properties Limited Partnership
Gains on sales of real estate increased by approximately $626.0 million for the
six months ended June 30, 2020 compared to 2019, 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)
2020
601, 611 and 651
Gateway                      January 28, 2020               Office                            768,000          $    350.0          $       -          $     222.4        (1)
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              246.9                207.2        (2)
                                                                                                               $    859.7$   500.9$     626.7        (3)
2019
2600 Tower Oaks
Boulevard                    January 24, 2019               Office                            179,000          $     22.7$    21.4          $ 

(0.6)

One Tower Center             June 3, 2019                   Office                            410,000                38.0               36.6            

(0.8)

164 Lexington Road           June 28, 2019                  Office                             64,000                 4.0                3.8                  2.6

                                                                                                               $     64.7$    61.8$       1.2        (4)


___________
(1)On January 28, 2020, we entered into a joint venture with a third party to
own, operate and develop properties at our Gateway Commons complex located in
South San Francisco. We contributed our 601, 611 and 651 Gateway properties and
development rights with an agreed upon value aggregating approximately $350.0
million for our 50% interest in the joint venture (See Notes 3 and 5 to the
Consolidated Financial Statements).
(2)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 (See Note 3 to the Consolidated Financial Statements).
(3)Excludes approximately $0.1 million of gains on sales of real estate
recognized during the six months ended June 30, 2020 related to gain amounts
from sales of real estate occurring in the prior year.
(4)Excludes approximately $0.3 million of losses on sales of real estate
recognized during the six months ended June 30, 2019 related to loss amounts
from sales of real estate occurring in prior years.
Interest and Other Income (Loss)
Interest and other income (loss) decreased by approximately $3.0 million for the
six months ended June 30, 2020 compared to 2019. Interest income and the credit
loss allowance decreased by approximately $2.5 million and $0.5 million,
respectively. The decrease in interest income is primarily due to a decrease in
interest rates. On January 1, 2020, we adopted 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 a credit loss allowance related to our outstanding (1) related party note
receivable, (2) notes receivable and (3) off-balance sheet credit exposures (See
Note 2 to the Consolidated Financial Statements).
Gains (Losses) from Investments in Securities
Gains (losses) from investments in securities for the six months ended June 30,
2020 and 2019 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
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investments is recorded as gains (losses) from investments in securities. During
the six months ended June 30, 2020 and 2019, we recognized gains (losses) of
approximately $(0.9) million and $4.1 million, respectively, on these
investments. By comparison, our general and administrative expense increased
(decreased) by approximately $(0.9) million and $4.1 million during the six
months ended June 30, 2020 and 2019, 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.
Impairment Loss
Impairment loss 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.
At March 31, 2019, we evaluated the expected hold period of our One Tower Center
property located in East Brunswick, New Jersey and, based on a
shorter-than-expected hold period, we reduced the carrying value of the property
to its estimated fair value at March 31, 2019 and recognized an impairment loss
totaling approximately $24.0 million for BXP and approximately $22.3 million for
BPLP. Our estimated fair value was based on a pending offer from a third party
to acquire the property and the subsequent execution of a purchase and sale
agreement on April 18, 2019 for a gross sale price of approximately $38.0
million. On June 3, 2019, we completed the sale of the property. One Tower
Center is an approximately 410,000 net rentable square foot Class A office
property. We did not have any impairments during the six months ended June 30,
2020.
Interest Expense
Interest expense increased by approximately $5.4 million for the six months
ended June 30, 2020 compared to 2019, as detailed below.
                                                                                Change in interest
                                                                                expense for the six
                                                                               months ended June 30,
                                                                                 2020 compared to
Component                                                                          June 30, 2019
                                                                                  (in thousands)
Increases to interest expense due to:
Issuance of $850 million in aggregate principal of 3.400% senior notes
due 2029 on June 21, 2019                                                      $           13,714

Issuance of $700 million in aggregate principal of 2.900% senior notes due 2030 on September 3, 2019

                                                              10,164

Issuance of $1.25 billion in aggregate principal of 3.250% senior notes due 2031 on May 5, 2020

                                                                     6,232
Increase in interest due to finance leases                                                  3,390
Decrease in capitalized interest related to development projects                              593
Other interest expense (excluding senior notes)                                               331
Total increases to interest expense                                                        34,424

Decreases to interest expense due to: Redemption of $700 million in aggregate principal of 5.625% senior notes due 2020 on September 18, 2019

                                                            (19,731)
Decrease in interest rates for the 2017 Credit Facility                                    (4,806)

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

                                                                         (3,390)

Repayment of a bond financing collateralized by New Dominion Technology Building One

                                                                               (1,130)
Total decreases to interest expense                                                       (29,057)
Total change in interest expense                                               $            5,367


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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 six
months ended June 30, 2020 and 2019 was approximately $27.9 million and $25.1
million, respectively. These costs are not included in the interest expense
referenced above.
At June 30, 2020, our outstanding variable rate debt consisted of BPLP's $2.0
billion unsecured revolving credit facility (the "2017 Credit Facility"), which
includes the $500.0 million delayed draw term loan facility (the "Delayed Draw
Facility") and the $1.5 billion revolving line of credit (the "Revolving
Facility"). The Delayed Draw Facility had $500.0 million outstanding as of
June 30, 2020. The Revolving Facility did not have an outstanding balance as of
June 30, 2020. For a summary of our consolidated debt as of June 30, 2020 and
June 30, 2019 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."
On May 5, 2020, BPLP completed a public offering of $1.25 billion in aggregate
principal amount of its 3.250% unsecured senior notes due 2031 (See Note 6 to
the Consolidated Financial Statements). We used a portion of the net proceeds
from this offering for the repayment of borrowings outstanding under the
Revolving Facility.
Noncontrolling Interests in Property Partnerships
Noncontrolling interests in property partnerships decreased by approximately
$17.6 million for the six months ended June 30, 2020 compared to 2019, as
detailed below.

                                                        Noncontrolling 

Interests in Property Partnerships

                                                                for the six months ended June 30,
Property                                                                        2020               2019         Change
                                                                          (in thousands)
Salesforce Tower (1)                                   $        -            $    116$    (116)
767 Fifth Avenue (the General Motors Building)              2,101               2,371               (270)
Times Square Tower (2)                                     (3,347)             13,920            (17,267)
601 Lexington Avenue (3)                                    7,965               9,535             (1,570)
100 Federal Street (4)                                      7,309               5,684              1,625
Atlantic Wharf Office Building                              4,691               4,686                  5
                                                       $   18,719$ 36,312$ (17,593)


_______________
(1)On April 1, 2019, we acquired our partner's 5% interest and subsequently own
100%.
(2)During the six months ended June 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 $14.7 million represents our share of the
write-offs.
(3)During the six months ended June 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 $1.6 million represents our share of the
write-offs.
(4)The increase was primarily due to an increase in lease revenue from our
tenants.

Noncontrolling Interest-Common Units of the Operating Partnership
For BXP, noncontrolling interest-common units of the Operating Partnership
increased by approximately $56.9 million for the six months ended June 30, 2020
compared to 2019 due primarily to an increase in allocable income, which was the
result of recognizing a greater gain on sales of real estate amount during 2020
partially offset by a decrease in the noncontrolling interest's ownership
percentage. Due to our ownership structure, there is no corresponding line item
on BPLP's financial statements.
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Results of Operations for the Three Months Ended June 30, 2020 and 2019
The impact that COVID-19 has had on our business, financial position and results
of operations during the second quarter of 2020 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. 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. The situation surrounding
COVID-19 remains fluid, and we are actively managing our response in
collaboration with tenants, government officials and joint venture partners and
assessing potential impacts to our financial position and operating results, as
well as potential adverse developments in our business. See Item 1A: "Risk
Factors" for additional details.
Net income attributable to Boston Properties, Inc. common shareholders and net
income attributable to Boston Properties Limited Partnership common unitholders
increased approximately $102.2 million and $116.3 million for the three months
ended June 30, 2020 compared to 2019, respectively, as detailed in the following
tables and for the reasons discussed below under the heading "Comparison of the
three months ended June 30, 2020 to the three months ended June 30, 2019" 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
June 30, 2020 and 2019. For a detailed discussion of NOI, including the reasons
management believes NOI is useful to investors, see page 57.
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Boston Properties, Inc.
                                                                                 Three months ended June 30,
                                                                                                Increase/                  %
                                                             2020               2019            (Decrease)              Change
                                                                                        (in thousands)

Net Income Attributable to Boston Properties, Inc. Common Shareholders

                                      $ 266,525$ 164,318$ 102,207                     62.20  %
Preferred dividends                                          2,625              2,625                  -                         -  %

Net Income Attributable to Boston Properties, Inc. 269,150

   166,943            102,207                     61.22  %
Net Income Attributable to Noncontrolling
Interests:
Noncontrolling interest-common units of the
Operating Partnership                                       30,197             19,036             11,161                     58.63  %
Noncontrolling interests in property partnerships             (767)            17,482            (18,249)                  (104.39) %
Net Income                                                 298,580            203,461             95,119                     46.75  %
Other Expenses:
Add:
Interest expense                                           107,142            102,357              4,785                      4.67  %

Other Income:
Less:
Gains from investments in securities                         4,552              1,165              3,387                    290.73  %
Interest and other income (loss)                             1,305              3,615             (2,310)                   (63.90) %
Gains on sales of real estate                              203,767              1,686            202,081                 11,985.82  %
Income from unconsolidated joint ventures                    1,832             47,964            (46,132)                   (96.18) %
Other Expenses:
Add:
Depreciation and amortization expense                      178,188            177,411                777                      0.44  %
Transaction costs                                              332                417                (85)                   (20.38) %

Payroll and related costs from management services contracts

                                                    2,484              2,403                 81                      3.37  %
General and administrative expense                          37,743             35,071              2,672                      7.62  %
Other Revenue:
Less:
Direct reimbursements of payroll and related costs
from management services contracts                           2,484              2,403                 81                      3.37  %
Development and management services revenue                  8,125              9,986             (1,861)                   (18.64) %
Net Operating Income                                     $ 402,404$ 454,301$ (51,897)                   (11.42) %


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Boston Properties Limited Partnership
                                                                                 Three months ended June 30,
                                                                                                Increase/                  %
                                                             2020               2019            (Decrease)              Change
                                                                                        (in thousands)
Net Income Attributable to Boston Properties
Limited Partnership Common Unitholders                   $ 301,975$ 185,715$ 116,260                     62.60  %
Preferred distributions                                      2,625              2,625                  -                         -  %
Net Income Attributable to Boston Properties
Limited Partnership                                        304,600            188,340            116,260                     61.73  %
Net Income Attributable to Noncontrolling
Interests:
Noncontrolling interests in property partnerships             (767)            17,482            (18,249)                  (104.39) %
Net Income                                                 303,833            205,822             98,011                     47.62  %
Other Expenses:
Add:
Interest expense                                           107,142            102,357              4,785                      4.67  %

Other Income:
Less:
Gains from investments in securities                         4,552              1,165              3,387                    290.73  %
Interest and other income (loss)                             1,305              3,615             (2,310)                   (63.90) %
Gains on sales of real estate                              207,241              1,835            205,406                 11,193.79  %
Income from unconsolidated joint ventures                    1,832             47,964            (46,132)                   (96.18) %
Other Expenses:
Add:
Depreciation and amortization expense                      176,409            175,199              1,210                      0.69  %
Transaction costs                                              332                417                (85)                   (20.38) %

Payroll and related costs from management services contracts

                                                    2,484              2,403                 81                      3.37  %
General and administrative expense                          37,743             35,071              2,672                      7.62  %
Other Revenue:
Less:
Direct reimbursements of payroll and related costs
from management services contracts                           2,484              2,403                 81                      3.37  %
Development and management services revenue                  8,125              9,986             (1,861)                   (18.64) %
Net Operating Income                                     $ 402,404$ 454,301$ (51,897)                   (11.42) %



Comparison of the three months ended June 30, 2020 to the three months ended
June 30, 2019
The table below shows selected operating information for the Same Property
Portfolio and the Total Property Portfolio. The Same Property Portfolio consists
of 139 properties totaling approximately 38.5 million net rentable square feet,
excluding unconsolidated joint ventures. The Same Property Portfolio includes
properties acquired or placed in-service on or prior to April 1, 2019 and owned
and in-service through June 30, 2020. The Total Property Portfolio includes the
effects of the other properties either acquired, placed in-service, in
development or redevelopment after April 1, 2019 or disposed of on or prior to
June 30, 2020. This table includes a reconciliation from the Same Property
Portfolio to the Total Property Portfolio by also providing information for the
three months ended June 30, 2020 and 2019 with respect to the properties that
were acquired, placed in-service, in development or redevelopment or sold.

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                                                                                                                                                                                                                                                                                         Properties in
                                                                                                                                                                                                                                   Properties                                           Development or
                                                                                                                                                                            Properties                                         Placed In-Service                                         Redevelopment
                                                           Same Property Portfolio                                                                                      Acquired Portfolio                                         Portfolio                                               Portfolio                                          Properties Sold Portfolio                         Total Property Portfolio
                                                                          Increase/                %                                                                                                                                                                                                Increase/                %
                                       2020               2019            (Decrease)            Change               2020           2019           2020             2019                 2020              2019              2020             2019               2020               2019            (Decrease)            Change
                                                                                                                                                                         (dollars in thousands)
Rental Revenue: (1)
Lease Revenue (Excluding
Termination Income)                $ 591,581$ 643,001$ (51,420)                (8.00) %       $ 3,341          $ -          $ 15,484          $   -               $   (924)$  1,028$ 8,084$ 22,388$ 617,566$ 666,417$ (48,851)                (7.33) %
Termination Income                     3,264              4,572             (1,308)               (28.61) %             -            -                 -              -                      -                 -               45               338              3,309              4,910             (1,601)               (32.61) %
Lease Revenue                        594,845            647,573            (52,728)                (8.14) %         3,341            -            15,484              -                   (924)            1,028            8,129            22,726            620,875            671,327            (50,452)                (7.52) %
Parking and Other                     13,006             25,228            (12,222)               (48.45) %             -            -               543              -                      6               106              233               848             13,788             26,182            (12,394)               (47.34) %
Total Rental Revenue (1)             607,851            672,801            (64,950)                (9.65) %         3,341            -            16,027              -                   (918)            1,134            8,362            23,574            634,663            697,509            (62,846)                (9.01) %
Real Estate Operating Expenses       227,295            243,083            (15,788)                (6.49) %         1,386            -             2,922              -                  1,142             2,168            3,077             8,598            235,822            253,849            (18,027)                (7.10) %
Net Operating Income (Loss),
Excluding Residential and Hotel      380,556            429,718            (49,162)               (11.44) %         1,955            -            13,105              -                 (2,060)           (1,034)           5,285            14,976            398,841            443,660            (44,819)               (10.10) %
Residential Net Operating Income
(2)                                    5,437              4,877                560                 11.48  %             -            -                 -              -                      -                 -                -                 -              5,437              4,877                560                 11.48  %
Hotel Net Operating Income (Loss)
(2)                                   (1,874)             5,764             (7,638)              (132.51) %             -            -                 -              -                      -                 -                -                 -             (1,874)             5,764             (7,638)              (132.51) %
Net Operating Income (Loss)        $ 384,119$ 440,359$ (56,240)               (12.77) %       $ 1,955          $ -          $ 13,105          $   -               $ (2,060)$ (1,034)$ 5,285$ 14,976$ 402,404$ 454,301$ (51,897)               (11.42) %

_______________

(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 57. Residential Net Operating Income for
the three months ended June 30, 2020 and 2019 is comprised of Residential
Revenue of $9,402 and $8,999 less Residential Expenses of $3,965 and $4,122,
respectively. Hotel Net Operating Income for the three months ended June 30,
2020 and 2019 is comprised of Hotel Revenue of $99 and $14,844 less Hotel
Expenses of $1,973 and $9,080, respectively, per the Consolidated Statements of
Operations.
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Same Property Portfolio
Lease Revenue (Excluding Termination Income)
Lease revenue from the Same Property Portfolio decreased by approximately $51.4
million for the three months ended June 30, 2020 compared to 2019. Approximately
$51.1 million of the decrease was related to write-offs, which are discussed
below. The remaining decrease was a result of an approximately $4.1 million
decrease due to our average occupancy decreasing from 94.4% to 93.8%, partially
offset by our average revenue per square foot increasing by approximately $0.21,
contributing approximately $3.8 million.
Under ASC 842, any write-off for bad debt, including accrued rent, is recorded
as a reduction to lease revenue. As a result, during the three months ended June
30, 2020, for our Same Property Portfolio, we wrote off approximately $33.7
million and $17.4 million of accrued rent and accounts receivable balances,
respectively. These write-offs were for tenants, primarily in the retail sector,
that either terminated their leases or we determined that their accrued rent
and/or accounts receivable balances were no longer probable of collection.
In addition, as a result of COVID-19, for the Same Property Portfolio, during
the second quarter of 2020, we executed lease modification agreements for
approximately 2.4 million square feet and granted approximately $25.0 million of
cash rent abatements and deferrals, of which approximately $14.0 million was
related to rental charges for the second quarter of 2020. Although some of the
lease modifications were deferrals under which we expect the tenant will pay us
in full primarily in 2021, the majority of the lease modifications involved
extending the lease term (in some cases for a year or more). As a result of the
lease modification agreements, that extended the lease term, we expect to see an
increase in cash rent received in the future.
In April 2020, the FASB staff issued the Lease Modification Q & A related to the
application of lease accounting guidance for lease concessions, in accordance
with ASC 842, as a result of COVID-19. We did not utilize the guidance provided
in the Lease Modification Q & A and instead elected to continue to account for
the COVID-19 lease concessions on a lease-by-lease basis in accordance with the
existing lease modification accounting framework (See Note 4 to the Consolidated
Financial Statements). As such, our accrued rent balances, which are a component
of lease revenue, include the accounting impact (adjusted for write-offs) from
the rent abatements, deferrals and extensions that were executed during the
second quarter of 2020.
We expect to continue to execute lease modification agreements as a result of
COVID-19. However, the degree to which our tenants' businesses are negatively
impacted by COVID-19 could leave some tenants still unable to meet their rental
payment obligations and result in a reduction in our cash flows. We may write
off additional accrued rent or accounts receivable balances and this could have
a material adverse effect on lease revenue. See Item 1A: "Risk Factors" for
additional details.
Termination Income
Termination income decreased by approximately $1.3 million for the three months
ended June 30, 2020 compared to 2019.
Termination income for the three months ended June 30, 2020 related to 17
tenants across the Same Property Portfolio and totaled approximately $3.3
million, which was primarily related to tenants that terminated leases early in
the New York City region.
Termination income for the three months ended June 30, 2019 related to 10
tenants across the Same Property Portfolio and totaled approximately $4.6
million, of which approximately $2.0 million is from a tenant that terminated a
lease early at 399 Park Avenue in New York City.
Parking and Other Revenue
Parking and other revenue decreased by approximately $12.2 million for the three
months ended June 30, 2020 compared to 2019. Parking revenue decreased by
approximately $12.9 million while other revenue increased by approximately $0.7
million. The decrease in parking revenue was primarily due to a decrease in
transient and monthly parking.
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During the second quarter of 2020, with stay-at-home orders in effect, business
closures and people working remotely in a majority of regions in which our
properties are located, we generated minimal hourly/daily parking revenue and
this trend may continue for as long as these conditions exist. However, as these
conditions shift, and "stay-at-home" orders are partially or fully lifted,
businesses begin to open and people begin to return to working in an office
setting, we expect to and have begun to see an increase in parking revenue. As a
result, for the three months ended June 30, 2020, transient and monthly parking
decreased by approximately $8.5 million and $2.3 million, respectively. 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 decreased by
approximately $15.8 million, or 6.49%, for the three months ended June 30, 2020
compared to 2019, due primarily to decreases in utility expense and other real
estate operating expenses of approximately $7.0 million, or 29.2%, and $8.8
million, or 4.0%, respectively. The decrease in utility expense was experienced
across the portfolio and was primarily driven by a decrease in physical tenant
occupancy, which led to lower demand for electricity and HVAC.
Properties Acquired Portfolio
The table below lists the properties acquired between April 1, 2019 and June 30,
2020. Rental revenue and real estate operating expenses increased by
approximately $3.3 million and $1.4 million, respectively, for the three months
ended June 30, 2020 compared to 2019, as detailed below.
                                                                                                     Rental Revenue                                                               Real Estate Operating Expenses
           Name                      Date acquired              Square Feet                       2020            2019               Change              2020            2019                     Change
                                                                                                                                (dollars in thousands)
880 and 890 Winter Street        August 27, 2019                     392,568          $ 3,325            $  -            $ 3,325$ 1,385            $  -            $    1,385
Fourth + Harrison (1)            June 26, 2020                              N/A            16               -                 16                   1               -                     1
                                                                     392,568          $ 3,341            $  -            $ 3,341$ 1,386            $  -            $    1,386


_______________
(1)Located at 777 Harrison Street in San Francisco, California (known as Fourth
+ Harrison and formerly known as 425 Fourth Street).
Properties Placed In-Service Portfolio
The table below lists the properties that were placed in-service or partially
placed in-service between April 1, 2019 and June 30, 2020. Rental revenue and
real estate operating expenses from our Properties Placed In-Service Portfolio
increased by approximately $16.0 million and $2.9 million, respectively, for the
three months ended June 30, 2020 compared to 2019, as detailed below.
                              Quarter Initially                                                                                       Rental Revenue                                                         Real Estate Operating Expenses
        Name                  Placed In-Service            Quarter Fully Placed In-Service                             Square Feet          2020            2019             Change           2020               2019           Change
                                                                                                                                                             (dollars in thousands)
20 CityPoint                Second Quarter, 2019         Second Quarter, 2020                        211,476          $     1,775          $  -          $  1,775$   734          $   -          $      734145 Broadway                Fourth Quarter, 2019         Fourth Quarter, 2019                        488,862               10,907             -            10,907            1,145              -               1,145
17Fifty Presidents
Street                      First Quarter, 2020          First Quarter, 2020                         275,809                3,345             -             3,345            1,043              -               1,043
                                                                                                     976,147          $    16,027          $  -          $ 16,027$ 2,922          $   -          $    2,922


Properties in Development or Redevelopment Portfolio
The table below lists the properties that were in development or redevelopment
between April 1, 2019 and June 30, 2020. Rental revenue and real estate
operating expenses from our Properties in Development or Redevelopment Portfolio
decreased by approximately $2.1 million and $1.0 million, respectively, for the
three months ended June 30, 2020 compared to 2019.
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                                                                                                                                                                            Real Estate Operating
                                                                                                 Rental Revenue                                                                   Expenses
                                 Date Commenced
                                 Development /
         Name                    Redevelopment              Square Feet             2020              2019            Change             2020             2019               Change
                                                                                                                          (dollars in thousands)
One Five Nine East 53rd
Street (1)                    August 19, 2016                   220,000          $ (2,279)$   989$ (3,268)$   279$   395$      (116)
325 Main Street (2)           May 9, 2019                       115,000                36           (1,953)            1,989              (75)             547                 (622)
200 West Street (3)           September 30, 2019                261,000             1,325            2,098              (773)             938            1,226                 (288)
                                                                596,000          $   (918)$ 1,134$ (2,052)$ 1,142$ 2,168$    (1,026)


_______________
(1)Rental revenue for the three months ended June 30, 2020, includes an
approximately $2.9 million write-off of accrued rent and accounts receivable
balances for a terminated tenant.
(2)Rental revenue for the three months ended June 30, 2019 includes the
acceleration and write-off of accrued rent associated with the early termination
of a lease at the property. Real estate operating expenses for the three months
ended June 30, 2019 includes approximately $0.4 million of demolition costs.
(3)Rental revenue and real estate operating expenses for the three months ended
June 30, 2019 are related to the entire building. The redevelopment is a
conversion of a 126,000 square foot portion of the property to laboratory space.
Properties Sold Portfolio
The table below lists the properties we sold between April 1, 2019 and June 30,
2020. Rental revenue and real estate operating expenses from our Properties Sold
Portfolio decreased by approximately $15.2 million and $5.5 million,
respectively, for the three months ended June 30, 2020 compared to 2019, as
detailed below.
                                                                                                                                                                                                          Real Estate Operating
                                                                                                                              Rental Revenue                                                                    Expenses
          Name                        Date Sold                Property Type            Square Feet              2020             2019              Change             2020             2019               Change
                                                                                                                                                       (dollars in thousands)
One Tower Center               June 3, 2019                  Office                          410,000          $     -          $    895$    (895)         $     -          $   904$      (904)164 Lexington RoadJune 28, 2019                 Office                           64,000                -                 -                  -                -               39                  (39)
Washingtonian North            December 20, 2019             Land                                   N/A             -                 -                  -                -               40                  (40)
601, 611 and 651 Gateway
(1)                            January 28, 2020              Office                          768,000                -             7,410             (7,410)               -            2,507               (2,507)
New Dominion Technology
ParkFebruary 20, 2020             Office                          493,000                -             4,918             (4,918)               -            1,506               (1,506)
Capital Gallery (2)            June 25, 2020                 Office                          631,000            8,362            10,351             (1,989)           3,077            3,602                 (525)
                                                                                              2,366,000       $ 8,362$ 23,574$ (15,212)$ 3,077$ 8,598$    (5,521)


_______________
(1)Rental revenue for the three months ended June 30, 2019 includes
approximately $0.3 million of termination income (See Notes 3 and 5 to the
Consolidated Financial Statements).
(2)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 (See Note 3 to the Consolidated Financial Statements).
For additional information on the sales of the above properties and land parcel
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 increased by
approximately $0.6 million for the three months ended June 30, 2020 compared to
2019.
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 June 30, 2020 and 2019.
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                                            The Lofts at Atlantic Wharf                                                              The Avant at Reston Town Center                                                                Signature at RestonProto Kendall Square
                                    2020                2019            Change (%)             2020             2019          Change (%)           2020             2019            Change (%)             2020               2019              Change (%)
Average Monthly Rental
Rate (1)                      $      4,530$ 4,481                   1.1  %       $ 2,371$ 2,405              (1.4) %       $ 2,320$ 2,378                  (2.4) %       $ 2,891$   2,864                     0.9  %
Average Rental Rate Per
Occupied Square Foot          $       5.01$  4.92                   1.8  %       $  2.60$  2.63              (1.1) %       $  2.45$  2.57                  (4.7) %       $  5.31$    5.37                    (1.1) %
Average Physical
Occupancy (2)                         91.9   %          95.0  %               (3.3) %          89.5  %          94.2  %           (5.0) %          81.5  %          64.4  %               26.6  %          92.5  %            78.8    %               17.4  %
Average Economic
Occupancy (3)                         91.7   %          95.4  %               (3.9) %          88.4  %          93.8  %           (5.8) %          76.7  %          58.7  %               30.7  %          91.9  %            75.9    %               21.1  %


_______________
(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 Income
Net operating income for the Boston Marriott Cambridge hotel property decreased
by approximately $7.6 million for the three months ended June 30, 2020 compared
to 2019.
As a result of COVID-19, we closed the Boston Marriott Cambridge in March 2020
and it did not re-open during the second quarter of 2020. We do not know when
the hotel will re-open. The hotel is operating at a monthly deficit and its
continued closure has had and will continue to have, a material adverse effect
on the hotel's contribution to our results of operations during the closure. See
Item 1A: "Risk Factors" for additional details.
The following reflects our occupancy and rate information for the Boston
Marriott Cambridge hotel for the three months ended June 30, 2020 and 2019.
                         2020        2019         Change (%)
Occupancy                 -  %        89.1  %       (100.0) %
Average daily rate      $ -       $ 318.28          (100.0) %
REVPAR                  $ -       $ 283.73          (100.0) %


Other Operating Revenue and Expense Items
Development and Management Services Revenue
Development and management services revenue decreased by approximately $1.9
million for the three months ended June 30, 2020 compared to 2019. Development
services revenue decreased by approximately $2.4 million while management
services revenue increased by approximately $0.5 million. The decrease in
development services revenue was primarily related to a decrease of
approximately $1.8 million in development fees earned in the Boston and New York
regions and a decrease of approximately $0.6 million in fees associated with
tenant improvement projects earned in the Boston region. The increase in
management services revenue was primarily related to an increase in property
management fees earned from our Gateway Commons unconsolidated joint venture,
which was deconsolidated on January 28, 2020.
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General and Administrative Expense
General and administrative expense increased by approximately $2.7 million for
the three months ended June 30, 2020 compared to 2019 primarily due to increases
in compensation expense and other general and administrative expenses of
approximately $2.3 million and $0.4 million, respectively. The increase in
compensation expense was primarily due to an approximately $3.4 million increase
in the value of our deferred compensation plan, partially offset by a decrease
in other compensation expenses. The increase in other general and administrative
expenses was primarily related to the write-off of the remaining fees associated
with BXP's prior ATM stock offering program that was scheduled to expire on June
2, 2020 and an increase in other 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 three months ended June 30, 2020 and 2019 were
approximately $3.4 million and $2.6 million, respectively. These costs are not
included in the general and administrative expenses discussed above.
Transaction Costs
Transaction costs decreased by approximately $85,000 for the three months ended
June 30, 2020 compared to 2019 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 $0.8 million
for the three months ended June 30, 2020 compared to 2019, as detailed below.
                                                            Depreciation 

and Amortization for the three months

                                                                              ended June 30,
Portfolio                                                                             2020              2019         Change
                                                                              (in thousands)
Same Property Portfolio                                    $   170,133$ 162,416$  7,717
Properties Acquired Portfolio                                    2,329                    -             2,329
Properties Placed In-Service Portfolio                           4,084                    -             4,084

Properties in Development or Redevelopment Portfolio (1)

                                                                456               11,187           (10,731)
Properties Sold Portfolio                                        1,186                3,808            (2,622)
                                                           $   178,188$ 177,411$    777


_______________
(1)On May 9, 2019, we commenced development of 325 Main Street in Cambridge,
Massachusetts. As a result, during the three months ended June 30, 2019, we
recorded approximately $9.9 million of accelerated depreciation expense for the
demolition of the building, of which approximately $0.4 million related to the
step-up of real estate assets.
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Boston Properties Limited Partnership
Depreciation and amortization expense increased by approximately $1.2 million
for the three months ended June 30, 2020 compared to 2019, as detailed below.
                                                            Depreciation 

and Amortization for the three months

                                                                              ended June 30,
Portfolio                                                                             2020              2019         Change
                                                                              (in thousands)
Same Property Portfolio                                    $   168,354$ 160,583$  7,771
Properties Acquired Portfolio                                    2,329                    -             2,329
Properties Placed In-Service Portfolio                           4,084                    -             4,084

Properties in Development or Redevelopment Portfolio (1)

                                                                456               10,808           (10,352)
Properties Sold Portfolio                                        1,186                3,808            (2,622)
                                                           $   176,409$ 175,199$  1,210


_______________
(1)On May 9, 2019, we commenced development of 325 Main Street in Cambridge,
Massachusetts. As a result, during the three months ended June 30, 2019, we
recorded approximately $9.5 million of accelerated depreciation expense for the
demolition 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
Income from Unconsolidated Joint Ventures
For the three months ended June 30, 2020 compared to 2019, income from
unconsolidated joint ventures decreased by approximately $46.1 million primarily
due to an approximately $47.8 million gain on sale of real estate from the sale
of 540 Madison Avenue during the three months ended June 30, 2019 and the
resulting loss of income thereafter, along with the addition of our Gateway
Commons joint venture and the partial placing in-service of the Hub50House joint
venture in South San Francisco, CA and Boston, MA, respectively. These joint
ventures reduced our net income by approximately $2.5 million for the three
months ended June 30, 2020. At June 30, 2020, the Hub50House was only 35% leased
and we do not expect it to be stabilized until the first quarter of 2022. The
decrease in net income from the Gateway Commons joint venture was primarily
related to depreciation and amortization. These decreases were partially offset
by 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
three months ended June 30, 2020 (See Note 5 of the Consolidated Financial
Statements).
Under ASC 842, any write-off for bad debt, including accrued rent, will be
recorded as a reduction to lease revenue. As a result, during the three months
ended June 30, 2020, for our unconsolidated joint ventures, we wrote off our
share of the accrued rent and accounts receivable balances of approximately $0.7
million and $1.0 million, respectively. These write-offs were for tenants,
primarily in the retail sector, that either terminated their leases or we
determined that their accrued rent and/or accounts receivable balances were no
longer probable of collection.
In addition, as a result of COVID-19, for properties owned by our unconsolidated
joint ventures, during the second quarter of 2020, the joint ventures executed
lease modification agreements for approximately 674,000 square feet. As a result
of these lease modification agreements, our share of the total cash rent
abatements and deferrals granted was approximately $5.3 million, of which
approximately $2.5 million was related to rental charges for the second quarter
of 2020. Although some of the lease modifications were deferrals where we expect
the tenant will pay the joint venture in full primarily in 2021, the majority of
the lease modifications involved extending the lease term (in some cases for
longer than a year). As a result of the lease modification agreements that
extended the lease term, we expect to see an increase in cash rent received in
the future.
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In April 2020, the FASB staff issued the Lease Modification Q & A related to the
application of lease accounting guidance for lease concessions, in accordance
with ASC 842, as a result of COVID-19. We did not utilize the guidance provided
in the Lease Modification Q & A and instead elected to continue to account for
the COVID-19 lease concessions on a lease-by-lease basis in accordance with the
existing lease modification accounting framework (See Note 4 to the Consolidated
Financial Statements). As such, the accrued rent balances, which are a component
of lease revenue, include the accounting impact (adjusted for write-offs) from
the rent abatements, deferrals and extensions that were executed during the
second quarter of 2020.
The joint ventures expect to continue to execute lease modification agreements
as a result of COVID-19. However, the degree to which tenants' businesses are
negatively impacted by COVID-19 could leave some tenants still unable to meet
their rental payment obligations and result in a reduction in cash flows. Our
unconsolidated joint ventures may write-off additional accrued rent or accounts
receivable balances and this could have a material adverse effect on lease
revenue. See Item 1A: "Risk Factors" for additional details.
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.
Boston Properties, Inc.
Gains on sales of real estate increased by approximately $202.1 million for the
three months ended June 30, 2020 compared to 2019, 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)
2020

Capital Gallery                 June 25, 2020              Office                            455,000          $    253.7$   246.9$     203.8        (1)
2019
One Tower Center                June 3, 2019               Office                            410,000          $     38.0$    36.6$      (0.8)
164 Lexington Road              June 28, 2019              Office                             64,000                 4.0                3.8                  2.5

                                                                                                              $     42.0$    40.4$       1.7


_______________
(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 (See Note 3 to the Consolidated Financial Statements).

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Boston Properties Limited Partnership
Gains on sales of real estate increased by approximately $205.4 million for the
three months ended June 30, 2020 compared to 2019, 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)
2020

Capital Gallery                 June 25, 2020              Office                            455,000          $    253.7$   246.9$     207.2        (1)
2019
One Tower Center                June 3, 2019               Office                            410,000          $     38.0$    36.6$      (0.8)
164 Lexington Road              June 28, 2019              Office                             64,000                 4.0                3.8                  2.6

                                                                                                              $     42.0$    40.4$       1.8


___________
(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 (See Note 3 to the Consolidated Financial Statements).
Interest and Other Income (Loss)
Interest and other income (loss) decreased by approximately $2.3 million for the
three months ended June 30, 2020 compared to 2019. Interest income and the
credit loss allowance decreased by approximately $1.8 million and $0.5 million,
respectively. The decrease in interest income is primarily due to a decrease in
interest rates. On January 1, 2020, we adopted ASU 2016-13 and, as a result,
were required to record a credit loss allowance related to our outstanding (1)
related party note receivable, (2) notes receivable and (3) off-balance sheet
credit exposures (See Note 2 to the Consolidated Financial Statements).
Gains from Investments in Securities
Gains from investments in securities for the three months ended June 30, 2020
and 2019 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 three months ended June 30, 2020 and 2019, we
recognized gains of approximately $4.6 million and $1.2 million, respectively,
on these investments. By comparison, our general and administrative expense
increased by approximately $4.6 million and $1.2 million during the three months
ended June 30, 2020 and 2019, 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.
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Interest Expense
Interest expense increased by approximately $4.8 million for the three months
ended June 30, 2020 compared to 2019, as detailed below.
                                                                                 Change in interest
                                                                               expense for the three
                                                                               months ended June 30,
                                                                                  2020 compared to
Component                                                                          June 30, 2019
                                                                                   (in thousands)
Increases to interest expense due to:
Issuance of $850 million in aggregate principal of 3.400% senior notes
due 2029 on June 21, 2019                                                     $             6,455

Issuance of $1.25 billion in aggregate principal of 3.250% senior notes due 2031 on May 5, 2020

                                                                     6,232

Issuance of $700 million in aggregate principal of 2.900% senior notes due 2030 on September 3, 2019

                                                               5,082
Increase in interest due to finance leases                                                  1,609
Decrease in capitalized interest related to development projects                            1,148
Other interest expense (excluding senior notes)                                               133
Total increases to interest expense                                                        20,659

Decreases to interest expense due to: Redemption of $700 million in aggregate principal of 5.625% senior notes due 2020 on September 18, 2019

                                                       (9,866)
Decrease in interest rates for the 2017 Credit Facility                                    (3,834)

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

                                                                         (1,609)

Repayment of bond financing collateralized by New Dominion Technology Building One

                                                                                 (565)
Total decreases to interest expense                                                       (15,874)
Total change in interest expense                                              $             4,785


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 June 30, 2020 and 2019 was approximately $13.7 million and $13.3
million, respectively. These costs are not included in the interest expense
referenced above.
At June 30, 2020, our outstanding variable rate debt consisted of BPLP's $2.0
billion 2017 Credit Facility, which includes the $500.0 million Delayed Draw
Facility and the $1.5 billion Revolving Facility. The Delayed Draw Facility had
$500.0 million outstanding as of June 30, 2020. The Revolving Facility did not
have an outstanding balance as of June 30, 2020. For a summary of our
consolidated debt as of June 30, 2020 and June 30, 2019 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."
On May 5, 2020, BPLP completed a public offering of $1.25 billion in aggregate
principal amount of its 3.250% unsecured senior notes due 2031 (See Note 6 to
the Consolidated Financial Statements). We used a portion of the net proceeds
from this offering for the repayment of borrowings outstanding under the
Revolving Facility.
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Noncontrolling Interests in Property Partnerships
Noncontrolling interests in property partnerships decreased by approximately
$18.2 million for the three months ended June 30, 2020 compared to 2019, as
detailed below.

                                                     Noncontrolling 

Interests in Property Partnerships for

                                                                the three months ended June 30,
Property                                                                         2020               2019         Change
                                                                         (in thousands)
767 Fifth Avenue (the General Motors
Building)                                           $        441$      73$     368
Times Square Tower (1)                                   (10,216)                7,028            (17,244)
601 Lexington Avenue (2)                                   3,115                 4,871             (1,756)
100 Federal Street                                         3,648                 3,129                519
Atlantic Wharf Office Building                             2,245                 2,381               (136)
                                                    $       (767)$  17,482$ (18,249)


_______________
(1)During the three months ended June 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 $14.7 million represents our share of the
write-offs.
(2)During the three months ended June 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 $1.6 million represents our 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 $11.2 million for the three months ended June 30,
2020 compared to 2019 due primarily to an increase in allocable income, which
was the result of recognizing a greater gain on sales of real estate amount
during 2020 partially offset by a decrease in the noncontrolling interest's
ownership percentage. 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/redevelopment costs;
•fund capital expenditures, including major renovations, tenant improvements and
leasing costs;
•fund planned and possible acquisitions of properties, either directly or
indirectly through the acquisition of equity interests therein;
•fund dividend requirements on BXP's Series B Preferred Stock; 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;
•BPLP's 2017 Credit Facility and other short-term bridge facilities;
•construction loans;
•long-term secured and unsecured indebtedness (including unsecured exchangeable
indebtedness);
•sales of real estate; and
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•issuances of BXP equity securities and/or additional preferred or common units
of partnership interest in BPLP.
We draw on multiple financing sources to fund our long-term capital needs. Our
current development properties are expected to be primarily funded 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.

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The following table presents information on properties under construction and
redevelopment as of June 30, 2020 (dollars in thousands):
                                                                                                                                                                                                                               Financings
                                                                                                                                                                                                                                                                Estimated Future
                                                                                                                                         Estimated Square         Investment to          Estimated Total         Total Available        Outstanding at         Equity Requirement          Percentage
      Construction Properties                Estimated Stabilization Date               Location                # of Buildings                 Feet               Date (1)(2)(3)        Investment (1)(2)              (1)              6/30/2020 (1)              (1)(2)(4)               Leased (5)
Office
Dock 72 (50% ownership)                    Third Quarter, 2021                     Brooklyn, NY                              1                  670,000          $   203,461$    243,150$    125,000$      93,322$       8,011                       33  % (6)
325 Main Street                            Third Quarter, 2022                     Cambridge, MA                             1                  420,000              124,477                 418,400                        -                      -                293,923                       90  %
100 Causeway Street (50% ownership)        Third Quarter, 2022                     Boston, MA                                1                  632,000              145,419                 267,300                  200,000                 71,513                      -                       94  %
7750 Wisconsin Avenue (Marriott
International Headquarters) (50%
ownership)                                 Third Quarter, 2022                     Bethesda, MD                              1                  734,000              117,558                 198,900                  127,500                 46,933                    775                      100  %
Reston Next (formerly RestonGateway)                                   Fourth Quarter, 2023                    Reston, VA                                2                1,062,000              266,640                 715,300                        -                      -                448,660                       72  %
2100 Pennsylvania Avenue                   Third Quarter, 2024                     Washington, DC                            1                  469,000               88,223                 356,100                        -                      -                267,877                       61  %
Total Office Properties under
Construction                                                                                                                 7                3,987,000              945,778               2,199,150                  452,500                211,768              1,019,246                       75  %
Residential
Hub50House (440 units) (50%
ownership)                                 First Quarter, 2022                     Boston, MA                                1                  320,000              144,507                 153,500                   90,000                 81,428                    421                       47  % (7)
The Skylyne (402 units)                    First Quarter, 2022                     Oakland, CA                               1                  324,000              235,496                 263,600                        -                      -                 28,104                        -    (8)
Total Residential Properties under Construction                                                                                                       2              644,000                 380,003                  417,100                 90,000                 81,428                   28,525                     47  %
Redevelopment Properties
One Five Nine East 53rd Street (55%
ownership)                                 First Quarter, 2021                     New York, NY                              -                  220,000              133,482                 150,000                        -                      -                 16,518                       96  % (9)
200 West Street                            Fourth Quarter, 2021                    Waltham, MA                               -                  126,000               10,826                  47,800                        -                      -                 36,974                        -  % (10)
Total Redevelopment Properties under Construction                                                                                                                          -                 346,000                  144,308                197,800                      -                        -                 53,492         61  %
Total Properties under Construction and Redevelopment                                                                                                                      9               4,977,000             $  1,470,089$   2,814,050$     542,500$   293,196

$ 1,101,263 74 % (11)

___________

(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 June 30, 2020.
(3)Includes approximately $103.4 million of unpaid but accrued construction
costs and leasing commissions.
(4)Excludes approximately $103.4 million of unpaid but accrued construction
costs and leasing commissions.
(5)Represents percentage leased as of August 3, 2020, including leases with
future commencement dates.
(6)This property is 34% placed in-service as of June 30, 2020.
(7)This property is 81% placed in-service as of June 30, 2020.
(8)This development is subject to a 99-year ground lease (including extension
options) with an option to purchase in the future.
(9)Represents the low-rise portion of 601 Lexington Avenue.
(10)Represents a portion of the property under redevelopment for conversion to
laboratory space.
(11)Percentage leased excludes residential units.
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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, including from the
impacts of COVID-19, may adversely affect our net cash flows. For example,
during the second quarter of 2020, our rent collections remained strong as we
collected 99% of rents from our office tenants and 96% of rents from all
tenants, including retail tenants. However, COVID-19 resulted in the write-off
of accrued rent and accounts receivable balances for primarily retail tenants,
decreases in parking and other revenue and the closure of our hotel, which
reduced our revenue. In turn, if these impacts are material, they could
adversely affect our ability to fund operating expenses, dividends and
distributions, debt service payments, maintenance and repositioning capital
expenditures and tenant improvements. In addition, a material adverse change in
the cash provided by our operations may affect our ability to comply with the
financial covenants under BPLP's 2017 Credit Facility or its unsecured senior
notes.
Our primary uses of capital over the next twelve months will be the completion
of our current and committed development and redevelopment projects and the
repayment of $850 million aggregate principal amount of BPLP's 4.125% senior
unsecured notes that mature in May 2021. As of June 30, 2020, our share of the
remaining development and redevelopment costs that we expect to fund through
2024 is approximately $1.1 billion.
To satisfy these capital needs, as of August 3, 2020 we had approximately
$1.4 billion of cash and cash equivalents, of which approximately $103 million
is attributable to our consolidated joint venture partners, as well as
approximately $250 million held in escrow for 1031 exchanges. On May 5, 2020, we
enhanced our liquidity through BPLP's issuance of $1.25 billion of 3.250%
unsecured senior notes due 2031. We used $250.0 million of the net proceeds from
the offering to repay borrowings outstanding under the Revolving Facility. In
addition, during the second quarter of 2020, (1) we sold a portion of our
Capital Gallery property which was comprised of approximately 455,000 net
rentable square feet of commercial office space for approximately $254 million,
which resulted in net proceeds of approximately $247 million and (2) a joint
venture in which we own 50% sold Annapolis Junction Building Eight, a vacant
126,000 square foot office building, and two additional land parcels at
Annapolis Junction Business Park for approximately $47 million which resulted in
net proceeds to us of approximately $15 million, after the repayment of the
debt.
Although the full extent to which COVID-19 will impact our liquidity and capital
resources, as well as the duration of such impact, will depend on a wide range
of factors, all of which are highly uncertain and cannot be predicted with
confidence at this time, we believe that our strong liquidity, including the
approximately $1.5 billion available under the Revolving Facility and available
cash, as of August 3, 2020, is sufficient to fund our remaining capital
requirements on existing development and redevelopment projects, repay our
maturing indebtedness when due and still allow us to act opportunistically on
attractive investment opportunities.
We also renewed BXP's $600.0 million "at the market" ("ATM") equity offering
program in May 2020 through which BXP may sell from time to time up to an
aggregate of $600.0 million of its common stock through sales agents over a
three-year period. Under the ATM stock offering program, BXP may also engage in
forward sale transactions with affiliates of certain sales agents for the sale
of its common stock on a forward basis. BXP has not sold any shares under the
renewed program.
We may seek to enhance our liquidity to provide sufficient capacity to fund our
remaining capital requirements on existing development/redevelopment projects,
fund our foreseeable potential development activity, pursue additional
attractive investment opportunities and refinance or repay indebtedness. Our
unconsolidated joint ventures have approximately $313.8 million of debt maturing
in 2020, of which our share is approximately $156.9 million. 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.
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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. On December 17,
2019, the Board of Directors of BXP increased our regular quarterly dividend
from $0.95 per common share to $0.98 per common share, or 3%, beginning with the
fourth quarter of 2019. Common and LTIP unitholders of limited partnership
interest in BPLP, received the same total distribution per unit.
BXP's Board of Directors will continue to evaluate BXP's dividend rate in light
of our actual and projected taxable income, 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 selected 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.
Cash and cash equivalents and cash held in escrows aggregated approximately $2.0
billion and $1.2 billion at June 30, 2020 and 2019, respectively, representing
an increase of approximately $0.8 billion. The following table sets forth
changes in cash flows:
                                                                Six months ended June 30,
                                                                                                            Increase
                                                                2020                 2019                  (Decrease)
                                                                                    (in thousands)
Net cash provided by operating activities         $ 554,272$ 565,604$ (11,332)
Net cash used in investing activities              (120,522)            (327,952)             207,430
Net cash provided by financing activities           866,019              286,081              579,938


Our principal source of cash flow is related to the operation of our properties.
The weighted-average term of our in-place tenant leases, including our
unconsolidated joint ventures, is approximately 8.2 years with occupancy rates
historically in the range of 90% 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. See Item 1A: "Risk Factors" for
additional details.
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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 their market
position. Cash used in investing activities for the six months ended June 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 sales of real estate
and capital distributions from unconsolidated joint ventures. Cash used in
investing activities for the six months ended June 30, 2019 consisted primarily
of the acquisition 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
distributions from unconsolidated joint ventures, as detailed below:
                                                                             Six months ended June 30,
                                                                              2020                 2019
                                                                                   (in thousands)
Acquisitions of real estate (1)                                         $    (133,406)$  (43,061)
Construction in progress (2)                                                 (247,615)           (203,259)
Building and other capital improvements                                       (68,386)            (79,943)
Tenant improvements                                                          (118,903)           (115,940)
Proceeds from sales of real estate (3)                                        506,337              60,398
Capital contributions to unconsolidated joint ventures (4)                   (106,168)            (50,068)
Capital distributions from unconsolidated joint ventures (5)                   54,413             105,000
Issuance of notes receivable, net (6)                                          (9,800)                  -
Investments in securities, net                                                  3,006              (1,079)
Net cash used in investing activities                                   $   

(120,522) $ (327,952)

Cash used in investing activities changed primarily due to the following:


(1)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.
On January 10, 2019, we acquired land parcels at our Carnegie Center property
located in Princeton, New Jersey for a gross purchase price of approximately
$51.5 million, which includes an aggregate of approximately $8.6 million of
additional amounts that are payable in the future to the seller upon the
development or sale of each of the parcels. The land parcels will support
approximately 1.7 million square feet of development.
(2)Construction in progress for the six months ended June 30, 2020 includes
ongoing expenditures associated with 17Fifty Presidents Street and 20 CityPoint,
which were completed and fully placed in-service during the six months ended
June 30, 2020. In addition, we incurred costs associated with our continued
development/redevelopment of One Five Nine East 53rd Street, Reston Next
(formerly Reston Gateway), 2100 Pennsylvania Avenue, 200 West Street, The
Skylyne and 325 Main Street.
Construction in progress for the six months ended June 30, 2019 includes ongoing
expenditures associated with Salesforce Tower, which was placed in-service
during the year ended December 31, 2018. In addition, we incurred costs
associated with our continued development/redevelopment of One Five Nine East
53rd Street, 145 Broadway, 20 CityPoint, 17Fifty Presidents Street, Reston Next
(formerly Reston Gateway), The Skylyne and 325 Main Street.
(3)On February 20, 2020, we completed the sale of New Dominion Technology Park
located in Herndon, Virginia for a gross sale 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.
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On June 25, 2020, we completed the sale of a portion of our Capital Gallery
property located in Washington, DC for a gross sale price of approximately
$253.7 million. Net cash proceeds totaled approximately $246.9 million,
resulting in a gain on sale of real estate totaling approximately $203.8 million
for BXP and approximately $207.2 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 January 24, 2019, we completed the sale of our 2600 Tower Oaks Boulevard
property located in Rockville, Maryland for a gross sale price of approximately
$22.7 million. Net cash proceeds totaled approximately $21.4 million, resulting
in a loss on sale of real estate totaling approximately $0.6 million. 2600 Tower
Oaks Boulevard is an approximately 179,000 net rentable square foot Class A
office property.
On June 3, 2019, we completed the sale of our One Tower Center property located
in East Brunswick, New Jersey for a gross sale price of $38.0 million. Net cash
proceeds totaled approximately $36.6 million. One Tower Center is an
approximately 410,000 net rentable Class A office property.
On June 28, 2019, we completed the sale of our 164 Lexington Road property
located in Billerica, Massachusetts for a gross sale price of $4.0 million. Net
cash proceeds totaled approximately $3.8 million, resulting in a gain on sale of
real estate totaling approximately $2.5 million for BXP and approximately $2.6
million for BPLP. 164 Lexington Road is an approximately 64,000 net rentable
square foot Class A office property.
(4)Capital contributions to unconsolidated joint ventures for the six months
ended June 30, 2020 consisted primarily of cash contributions of approximately
$70.2 million, $23.9 million and $6.5 million to our Platform 16, 3 Hudson
Boulevard and Metropolitan Square joint ventures, respectively.
Capital contributions to unconsolidated joint ventures for the six months ended
June 30, 2019 consisted primarily of cash contributions of approximately $36.2
million and $8.6 million to our Hub on Causeway and Dock 72 joint ventures,
respectively.
(5)Capital distributions from unconsolidated joint ventures for the six months
ended June 30, 2020 consisted of (1) a cash distribution totaling 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) a
cash distribution totaling approximately $17.9 million from our Annapolis
Junction joint venture resulting from available cash and the net proceeds from
the sale of Annapolis Junction Building Eight and two land parcels after the pay
down of the mortgage loan and (3) a cash distribution totaling 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.
Capital distributions from unconsolidated joint ventures for the six months
ended June 30, 2019 consisted of a cash distribution totaling approximately
$105.0 million from our 540 Madison Avenue joint venture resulting from the net
proceeds from the sale of the property.
(6)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 provided by financing activities for the six months ended June 30, 2020
totaled approximately $866.0 million. This consisted primarily of the proceeds
from the issuance by BPLP of $1.25 billion in aggregate principal amount of its
3.250% senior unsecured notes due 2031, partially offset by the payment of our
regular dividends and distributions to our shareholders and unitholders. Future
debt payments are discussed below under the heading "Capitalization-Debt
Financing."
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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):
                                                                                   June 30, 2020
                                                          Shares / Units             Common Stock           Equivalent Value
                                                           Outstanding                Equivalent                  (1)
Common Stock                                                     155,622                   155,622          $  14,065,116
Common Operating Partnership Units                                17,470                    17,470              1,578,939    (2)
5.25% Series B Cumulative Redeemable Preferred
Stock                                                                 80                         -                200,000
Total Equity                                                                               173,092          $  15,844,055

Consolidated Debt                                                                                           $  13,048,579
Add:
BXP's share of unconsolidated joint venture debt
(3)                                                                                                             1,067,400

Subtract:

Partners' share of Consolidated Debt (4)                                                                       (1,197,276)
BXP's Share of Debt                                                                                         $  12,918,703

Consolidated Market Capitalization                                                                          $  28,892,634
BXP's Share of Market Capitalization                                                                        $  28,762,758
Consolidated Debt/Consolidated Market
Capitalization                                                                                                      45.16  %
BXP's Share of Debt/BXP's Share of Market Capitalization                                                                            44.91  %


_______________

(1)Except for the Series B Cumulative Redeemable Preferred Stock, which is
valued at the liquidation preference of $2,500 per share, values are based on
the closing price per share of BXP's Common Stock on the New York Stock Exchange
on June 30, 2020 of $90.38.
(2)Includes long-term incentive plan units (including 2012 OPP Units and 2013 -
2017 MYLTIP Units), but excludes MYLTIP Units granted between 2018 and 2020.
(3)See page 93 for additional information.
(4)See page 92 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
June 30, 2020, 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 -
2017 MYLTIP Units that were issued in the form of LTIP Units; plus
(3)  the aggregate liquidation preference ($2,500 per share) of the outstanding
shares of BXP's 5.25% Series B Cumulative Redeemable Preferred Stock.
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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, 2018 - 2020 MYLTIP Units are not
included in this calculation as of June 30, 2020.
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 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, Net" within
"Item 2-Management's Discussion and Analysis of Financial Condition and Results
of Operations."
Debt Financing
As of June 30, 2020, we had approximately $13.0 billion of outstanding
consolidated indebtedness, representing approximately 45.16% of our Consolidated
Market Capitalization as calculated above consisting of approximately (1) $9.6
billion (net of discount and deferred financing fees) in publicly traded
unsecured senior notes having a GAAP weighted-average interest rate of 3.71% per
annum and maturities in 2021 through 2031 (See Note 6 to the Consolidated
Financial Statements), (2) $2.9 billion (net of deferred financing fees) of
property-specific mortgage debt having a GAAP weighted-average interest rate of
3.90% per annum and a weighted-average term of 5.8 years and (3) $499.2 million
(net of deferred financing fees) outstanding under BPLP's 2017 Credit Facility
that matures on April 24, 2022.
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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 June 30, 2020 and June 30, 2019.

                                                                                        June 30,
                                                                               2020                  2019
                                                                                 (dollars in thousands)
Debt Summary:
Balance
Fixed rate mortgage notes payable, net                                    $  2,915,852$  2,956,833
Unsecured senior notes, net                                                  9,633,577             8,390,708
Unsecured line of credit                                                             -                     -
Unsecured term loan, net                                                       499,150               498,700
Consolidated Debt                                                           13,048,579            11,846,241

Add:

BXP's share of unconsolidated joint venture debt, net (1)                    1,067,400               865,894

Subtract:

Partners' share of consolidated mortgage notes payable, net (2)             (1,197,276)           (1,202,353)
BXP's Share of Debt                                                       $ 

12,918,703 $ 11,509,782


                                                                                        June 30,
                                                                               2020                  2019
Consolidated Debt Financing Statistics:
Percent of total debt:
Fixed rate                                                                       96.17  %              95.79  %
Variable rate                                                                     3.83  %               4.21  %
Total                                                                           100.00  %             100.00  %
GAAP Weighted-average interest rate at end of period:
Fixed rate                                                                        3.75  %               3.98  %
Variable rate                                                                     1.24  %               3.43  %
Total                                                                             3.66  %               3.95  %
Coupon/Stated Weighted-average interest rate at end of period:
Fixed rate                                                                        3.65  %               3.87  %
Variable rate                                                                     1.15  %               3.34  %
Total                                                                             3.55  %               3.85  %
Weighted-average maturity at end of period (in years):
Fixed rate                                                                         6.0                   5.9
Variable rate                                                                      1.8                   2.8
Total                                                                              5.9                   5.8


_______________
(1)See page 93 for additional information.
(2)See page 92 for additional information.
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Unsecured Credit Facility
On April 24, 2017, BPLP entered into the 2017 Credit Facility. Among other
things, the 2017 Credit Facility (1) increased the total commitment of the
Revolving Facility from $1.0 billion to $1.5 billion, (2) extended the maturity
date from July 26, 2018 to April 24, 2022, (3) reduced the per annum variable
interest rates, and (4) added a $500.0 million Delayed Draw Facility that
permitted BPLP to draw until the first anniversary of the closing date. Based on
BPLP's current credit rating, (1) the applicable Eurocurrency margins for the
Revolving Facility and Delayed Draw Facility are 87.5 basis points and 95 basis
points, respectively, and (2) the facility fee on the Revolving Facility
commitment is 0.15% per annum, which represent slight increases from the margins
in effect during the six months ended June 30, 2020 due to a change in BPLP's
credit rating that occurred on August 3, 2020.
On April 24, 2018, BPLP exercised its option to draw $500.0 million on its
Delayed Draw Facility. The Delayed Draw Facility bears interest at a variable
rate equal to LIBOR plus 0.90% per annum based on BPLP's June 30, 2020 credit
rating and matures on April 24, 2022.
As of June 30, 2020 and August 3, 2020, BPLP had $500.0 million of borrowings
outstanding under its Delayed Draw Facility, no borrowings under its Revolving
Facility and letters of credit totaling approximately $2.5 million outstanding
with the ability to borrow approximately $1.5 billion under the Revolving
Facility.
Unsecured Senior Notes, Net
For a description of BPLP's outstanding unsecured senior notes as of June 30,
2020, see Note 6 to the
Consolidated Financial Statements.
On May 5, 2020, BPLP completed a public offering of $1.25 billion in aggregate
principal amount of its 3.250% unsecured senior notes due 2031. The notes were
priced at 99.850% of the principal amount to yield an effective rate (including
financing fees) of approximately 3.343% per annum to maturity. The notes will
mature on January 30, 2031, unless earlier redeemed. The aggregate net proceeds
from the offering were approximately $1.24 billion after deducting underwriting
discounts and transaction expenses.
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 June 30, 2020, BPLP was in compliance with each of
these financial restrictions and requirements.
Mortgage Notes Payable, Net
The following represents the outstanding principal balances due under the
mortgage notes payable at June 30, 2020:

                                                                                                                           Deferred
                                           Stated                       GAAP                       Stated              Financing Costs,                                 Carrying Amount
Properties                              Interest Rate             Interest Rate (1)           Principal Amount               Net              
Carrying Amount         (Partners' Share)                               Maturity Date
                                                                                                                            (dollars in thousands)
Wholly-owned
University Place                                 6.94  %                       6.99  %       $          2,580          $       (15)           $         2,565                         N/A                          August 1, 2021Consolidated Joint Ventures767 Fifth Avenue (the General
Motors Building)                                 3.43  %                       3.64  %              2,300,000              (24,225)                 2,275,775          $     910,396            (2)(3)(4)          June 9, 2027601 Lexington Avenue                             4.75  %                       4.79  %                638,097                 (585)                   637,512                286,880            (5)                April 10, 2022
                                                                                                    2,938,097              (24,810)                 2,913,287              1,197,276
Total                                                                                        $      2,940,677$   (24,825)$     2,915,852$   1,197,276

_______________

(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.
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(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 June 30, 2020, the maximum funding obligation under the
guarantee was approximately $48.9 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 7 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 60%. 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 June 30, 2020, the aggregate carrying amount of debt, including both our and
our partners' share, incurred by these ventures was approximately $2.5 billion
(of which our proportionate share is approximately $1.1 billion). The table
below summarizes the outstanding debt of these joint venture properties at
June 30, 2020. 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.
                                                                                                  Stated                   Deferred
                                Nominal %               Stated           GAAP Interest           Principal             Financing Costs,                                Carrying Amount
     Properties                 Ownership           Interest Rate           Rate (1)              Amount                     Net               Carrying Amount           (Our share)                                     Maturity Date
                                                                                                            (dollars in thousands)
Santa Monica Business
Park                                    55  %              4.06  %              4.24  %       $    300,000$    (2,656)$       297,344$     163,539          (2)(3)               July 19, 2025Market Square North                     50  %              4.85  %              4.91  %            114,869                     (21)                   114,848                 57,424                               October 1, 

2020

Annapolis JunctionBuilding Six                            50  %              2.28  %              2.43  %             12,266                      (9)                    12,257                  6,128          (4)                  November 17, 

2020

Annapolis JunctionBuilding Seven                          50  %              2.92  %              3.27  %             18,420                     (47)                    18,373                  9,187          (5)                  March 25, 20211265 Main Street                        50  %              3.77  %              3.84  %             37,751                    (320)                    37,431                 18,716                               January 1, 2032
Colorado Center                         50  %              3.56  %              3.58  %            550,000                    (731)                   549,269                274,635          (2)                  August 9, 2027Dock 72                                 50  %              2.54  %              3.67  %            186,644                  (1,713)                   184,931                 92,465          (2)(6)               December 18, 2020
The Hub on Causeway -
Podium                                  50  %              2.64  %              3.13  %            174,329                  (1,202)                   173,127                 86,563          (2)(7)               September 6, 2021
Hub50House                              50  %              2.34  %              2.62  %            162,856                    (935)                   161,921                 80,961          (2)(8)               April 19, 2022100 Causeway Street                     50  %              1.99  %              2.20  %            143,027                  (2,682)                   140,345                 70,172          (2)(9)               September 5, 20237750 Wisconsin Avenue
(Marriott
International
Headquarters)                           50  %              1.70  %              2.25  %             93,865                  (3,945)                    89,920                 44,960          (2)(10)              April 26, 2023
500 North Capitol
Street, NW                              30  %              4.15  %              4.20  %            105,000                    (173)                   104,827                 31,448          (2)                  June 6, 2023901 New York Avenue                     25  %              3.61  %              3.69  %            223,253                    (804)                   222,449                 55,612                               January 5, 

2025

3 Hudson Boulevard                      25  %              3.98  %              4.07  %             80,000                    (193)                    79,807                 19,952          (2)(11)              July 13, 2023Metropolitan Square                     20  %              5.40  %              6.90  %            288,000                  (9,810)                   278,190                 55,638          (2)(12)              July 7, 2022
Total                                                                                         $  2,490,280$   (25,241)$     2,465,039$   1,067,400

_______________

(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.
(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
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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 LIBOR plus 2.00% per
annum and matures on November 17, 2020.
(5)Annapolis Junction Building Eight was sold on June 25, 2020 (See Note 5 to
the Consolidated Financial Statements). Simultaneously with the sale of
Annapolis Junction Building Eight, the joint venture modified the mortgage loan
to release Annapolis Junction Building Eight as collateral under the loan in
exchange for a principal pay down of approximately $16.1 million using a portion
of the net proceeds from the sale of the property. The modified mortgage loan
totaling approximately $18.4 million is collateralized by Annapolis JunctionBuilding Seven, continues to bear interest at a variable rate equal to LIBOR
plus 2.35% per annum and matures on March 25, 2021.
(6)The construction financing has a borrowing capacity of $250.0 million. The
construction financing bears interest at a variable rate equal to LIBOR plus
2.25% per annum and matures on December 18, 2020, with two, one-year extension
options, subject to certain conditions.
(7)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,
2021, with two, one-year extension options, subject to certain conditions.
(8)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.
(9)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.
(10)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.
(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.
(12)On June 9, 2020, the joint venture obtained new mortgage financing with a
new lender. The new mortgage loan totaling $325.0 million (of which $288.0
million was advanced at closing) bears interest at a variable rate equal to
LIBOR plus 4.75% per annum and matures on July 7, 2022, with two, one-year
extension options, subject to certain conditions. In conjunction with the new
mortgage financing, the joint venture entered into an interest rate cap
agreement with a financial institution to limit its exposure to increases in the
LIBOR portion of interest costs to 3.0% 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 7 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
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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, has improved the
understanding of operating results of REITs among the investing public and has
helped make comparisons of REIT operating results more meaningful. Management
generally considers FFO 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 during the second quarter of 2020 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. The impact of COVID-19 on our revenue, in
particular lease, parking and hotel revenue was negatively impacted by COVID-19
for the three and six months ended June 30, 2020, thus negatively impacting our
FFO. These decreases are discussed under the heading "Comparison of the six
months ended June 30, 2020 to the six months ended June 30, 2019" within "Item
2-Management's Discussion and Analysis of Financial Condition and Results of
Operations" and under the heading "Comparison of the three months ended June 30,
2020 to the three months ended June 30, 2019" within "Item 2-Management's
Discussion and Analysis of Financial Condition and Results of Operations."
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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 June 30, 2020
and 2019:
                                                                                 Three months ended June 30,
                                                                                2020                      2019
                                                                                        (in thousands)
Net income attributable to Boston Properties, Inc. common
shareholders                                                                $ 266,525$ 164,318
Add:
Preferred dividends                                                             2,625                     2,625

Noncontrolling interest-common units of the Operating Partnership

    30,197                    19,036

Noncontrolling interests in property partnerships                                (767)                   17,482
Net income                                                                    298,580                   203,461

Add:

Depreciation and amortization                                                 178,188                   177,411

Noncontrolling interests in property partnerships' share of depreciation and amortization

                                                 (22,480)                  (17,869)

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

                                                                 21,012                    14,778
Corporate-related depreciation and amortization                                  (486)                     (412)

Less:

Gain on sale of real estate included within income from unconsolidated joint ventures

                                                   5,946                    47,757
Gains on sales of real estate                                                 203,767                     1,686
Noncontrolling interests in property partnerships                                (767)                   17,482

Preferred dividends                                                             2,625                     2,625

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

                        263,243                   307,819

Less:

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

                                                 26,335                    31,544

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

                                                                             $ 236,908$ 276,275
Our percentage share of Funds from Operations-basic                             90.00  %                  89.75  %
Weighted average shares outstanding-basic                                     155,386                   154,555


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Reconciliation to Diluted Funds from Operations:
                                                                                          Three months ended June 30,
                                                                             2020                                                              2019
                                                           Income                     Shares/Units                Income                Shares/Units
                                                        (Numerator)                   (Denominator)             (Numerator)            (Denominator)
                                                                                                (in thousands)
Basic Funds from Operations                           $    263,243                            172,659          $  307,819                      172,202
Effect of Dilutive Securities:
Stock based compensation                                         -                                 21                   -                          319
Diluted Funds from Operations                         $    263,243                            172,680          $  307,819                      172,521

Less:

Noncontrolling interest-common units of the
Operating Partnership's share of diluted Funds
from Operations                                             26,331                             17,273              31,486                       17,647
Diluted Funds from Operations attributable to
Boston Properties, Inc. (1)                           $    236,912                            155,407          $  276,333                      154,874


 _______________

(1)BXP's share of diluted Funds from Operations was 90.00% and 89.77% for the three months ended June 30, 2020 and 2019, 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 June 30, 2020 and 2019:
                                                                                      Three months ended June 30,
                                                                                        2020                  2019
                                                                                             (in thousands)
Net income attributable to Boston Properties Limited Partnership common
unitholders                                                                       $     301,975           $ 185,715
Add:
Preferred distributions                                                                   2,625               2,625
Noncontrolling interests in property partnerships                                          (767)             17,482
Net income                                                                              303,833             205,822
Add:
Depreciation and amortization                                                           176,409             175,199

Noncontrolling interests in property partnerships' share of depreciation and amortization

                                                                        (22,480)            (17,869)

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

                                                                                 21,012              14,778
Corporate-related depreciation and amortization                                            (486)               (412)

Less:

Gain on sale of real estate included within income from unconsolidated joint ventures

                                                                            5,946              47,757
Gains on sales of real estate                                                           207,241               1,835
Noncontrolling interests in property partnerships                                          (767)             17,482
Preferred distributions                                                                   2,625               2,625

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

                                                            $     263,243           $ 307,819
Weighted average units outstanding-basic                                                172,659             172,202


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_______________

(1)Our calculation includes OP Units and vested LTIP Units (including vested 2012 OPP Units and vested 2013 - 2017 MYLTIP Units).

Reconciliation to Diluted Funds from Operations:

                                                                                       Three months ended June 30,
                                                                          2020                                                              2019
                                                        Income                     Shares/Units                Income                Shares/Units
                                                     (Numerator)                   (Denominator)             (Numerator)            (Denominator)
                                                                                             (in thousands)
Basic Funds from Operations                        $    263,243                            172,659          $  307,819                      172,202
Effect of Dilutive Securities:
Stock based compensation                                      -                                 21                   -                          319
Diluted Funds from Operations                      $    263,243                            172,680          $  307,819                      172,521



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 June 30, 2020, we paid approximately $74.0 million
to fund tenant-related obligations, including tenant improvements and leasing
commissions.
In addition, during the three months ended June 30, 2020, we and our
unconsolidated joint venture partners incurred approximately $120 million of new
tenant-related obligations associated with approximately 1.2 million square
feet, which included approximately 297,000 square feet of lease modifications
related to COVID-19, of second generation leases, or approximately $97 per
square foot. We signed approximately 5,000 square feet of first generation
leases. 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." In aggregate during the second
quarter of 2020, we signed leases for approximately 1.2 million square feet of
space and incurred aggregate tenant-related obligations of approximately $121
million, or approximately $98 per square foot.
ITEM 3-Quantitative and Qualitative Disclosures about Market Risk.
The following table presents the aggregate carrying value of our mortgage notes
payable, net, unsecured senior notes, net, unsecured line of credit, unsecured
term loan, net and our corresponding estimate of fair value as of June 30, 2020.
As of June 30, 2020, approximately $12.5 billion of these borrowings bore
interest at fixed rates and therefore the fair value of these instruments is
affected by changes in the market interest rates. As of June 30, 2020, the
weighted-average interest rate on our variable rate debt was LIBOR plus 0.90%
(1.15%) per annum. The following table presents our aggregate fixed rate debt
obligations with corresponding weighted-average interest rates sorted by
maturity date and our aggregate variable rate debt obligations sorted by
maturity date.
The table below does not include our unconsolidated joint venture debt. For a
discussion concerning our unconsolidated joint venture debt, see Note 5 to the
Consolidated Financial Statements and "Item 2-Management's Discussion and
Analysis of Financial Condition and Results of
Operations-Capitalization-Off-Balance Sheet Arrangements-Joint Venture
Indebtedness."
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                                                                                                                                                                  Estimated
                     2020               2021                2022                 2023                2024               2025+                 Total              Fair Value
                                                                                     (dollars in thousands)
                                                                                       Mortgage debt, net

Fixed Rate $ 6,771 $ 13,440 $ 611,132 $ (3,494) $ (3,494) $ 2,291,497 $ 2,915,852

       $  3,155,771
GAAP Average
Interest Rate         5.07  %            4.98  %              4.79  %                 -  %               -  %              3.64  %               3.90  %
Variable Rate            -                  -                    -                    -                  -                    -                     -                     -
                                                                           

Unsecured debt, net Fixed Rate $ (5,707) $ 839,355 $ (10,189) $ 1,490,888 $ 692,161 $ 6,627,069 $ 9,633,577

          $ 10,517,869
GAAP Average
Interest Rate            -  %            4.29  %                 -  %              3.73  %            3.92  %              3.61  %               3.71  %
Variable Rate         (239)              (461)             499,850                    -                  -                    -               499,150               500,450

Total Debt $ 825 $ 852,334 $ 1,100,793 $ 1,487,394 $ 688,667 $ 8,918,566 $ 13,048,579

$ 14,174,090




At June 30, 2020, the weighted-average coupon/stated rates on the fixed rate
debt stated above was 3.65% per annum. At June 30, 2020, our outstanding
variable rate debt based on LIBOR totaled approximately $500.0 million. At
June 30, 2020, the coupon/stated rate on our variable rate debt was
approximately 1.15% per annum. If market interest rates on our variable rate
debt had been 100 basis points greater, total interest expense would have
increased approximately $1.3 million and $2.5 million for the three and six
months ended June 30, 2020, respectively.
The fair value amounts were determined solely by considering the impact of
hypothetical interest rates on our financial instruments.
Due to the uncertainty of specific actions we may undertake to minimize possible
effects of market interest rate increases, this analysis assumes no changes in
our financial structure. In the event that LIBOR is discontinued, the interest
rate for our variable rate debt and our unconsolidated joint ventures' variable
rate debt and the swap rate for our unconsolidated joint ventures' interest rate
swaps following such event will be based on an alternative variable rate as
specified in the applicable documentation governing such debt or swaps or as
otherwise agreed upon. Such an event would not affect our ability to borrow or
maintain already outstanding borrowings or our unconsolidated joint ventures'
ability to maintain its outstanding swaps, but the alternative variable rate
could be higher and more volatile than LIBOR prior to its discontinuance. We
understand that LIBOR is expected to remain available through the end of 2021,
but may be discontinued or otherwise become unavailable thereafter.
ITEM 4-Controls and Procedures.
Boston Properties, Inc.
(a) Evaluation of Disclosure Controls and Procedures. As of the end of the
period covered by this report, our management, with the participation of Boston
Properties, Inc.'s Chief Executive Officer (Principal Executive Officer) and
Chief Financial Officer (Principal Financial Officer), evaluated the
effectiveness of our disclosure controls and procedures (as defined in
Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended). Based
upon that evaluation, Boston Properties, Inc.'s Chief Executive Officer and
Chief Financial Officer concluded that these disclosure controls and procedures
were effective as of the end of the period covered by this report.
(b) Changes in Internal Control Over Financial Reporting. No change in Boston
Properties, Inc.'s internal control over financial reporting (as defined in
Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended) occurred
during the second quarter of our fiscal year ending December 31, 2020 that has
materially affected, or is reasonably likely to materially affect, Boston
Properties, Inc.'s internal control over financial reporting.
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Boston Properties Limited Partnership
(a) Evaluation of Disclosure Controls and Procedures. As of the end of the
period covered by this report, the management of Boston Properties, Inc., the
sole general partner of Boston Properties Limited Partnership, with the
participation of its Chief Executive Officer (Principal Executive Officer) and
Chief Financial Officer (Principal Financial Officer), evaluated the
effectiveness of our disclosure controls and procedures (as defined in
Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended). Based
upon that evaluation, the Chief Executive Officer and Chief Financial Officer of
Boston Properties, Inc. concluded that these disclosure controls and procedures
were effective as of the end of the period covered by this report.
(b) Changes in Internal Control Over Financial Reporting. No change in its
internal control over financial reporting (as defined in Rule 13a-15(f) under
the Securities Exchange Act of 1934, as amended) occurred during the second
quarter of our fiscal year ending December 31, 2020 that has materially
affected, or is reasonably likely to materially affect, its internal control
over financial reporting.

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