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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)

11/06/2020 | 03:23pm 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
(REITs) in the United States (based on total market capitalization as of
September 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 7.5 years, as of September 30, 2020,
including leases at our unconsolidated joint ventures. The weighted-average
lease term for our top 20 office tenant leases was approximately 10.8 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 third quarter of 2020, the COVID-19 pandemic continued to negatively
impact global macroeconomic conditions, and businesses across the United States
experienced job losses and other recessionary effects. Although U.S. GDP
improved 33% on an annualized basis in the third quarter of 2020 as compared to
the 31% decline in the second quarter of 2020, the pace of improvement has
slowed. The federal stimulus programs that provided much of the economic lift
last quarter have either expired or are expiring, and it is unclear if
additional fiscal stimulus will be forthcoming. The U.S. economic recovery
remains heavily impacted by the pandemic. The health of the overall economy and
employment trends among professional workers have been, and we expect will
continue to be, one of the most important drivers of office market conditions.
Beginning in March 2020, public health officials and governmental authorities,
including those in all of the markets in which we operate, reacted to the spread
of the COVID-19 pandemic by imposing regulatory measures such as prohibiting
people from congregating in heavily populated areas, instituting quarantines,
restricting travel, issuing "stay-at-home" orders, restricting the types of
businesses that could continue to operate (including the types of construction
projects that could proceed) and closing schools, among many others. Although
the state and local authorities in all of our regions except Los Angeles and New
Jersey have eased those regulations to allow for the return to work, the
physical occupancy of our properties remains well below capacity as most
employers continued their COVID-19 response protocols and encouraged employees
to work from home when possible during the pandemic.
The short and long term impact the pandemic will have on the use of office space
is unknown as companies consider the recessionary impact on their business and
their demand for labor while, at the same time, consider the space requirements
associated with social distancing. We believe our strategically located, high
quality product will continue to be a component of today's forward thinking
organization that desires to drive culture and productivity.
Because of the uncertainty regarding the length and severity of the pandemic,
many existing and prospective tenants are deferring decisions on their office
space needs as they focus on their employees' safety, their companies' liquidity
and managing their businesses through the recession and economic recovery. As a
result, new leasing activity was lower in the third quarter of 2020 than it was
prior to March 2020. Despite the slowdown in tour activity during the quarter,
we signed approximately 811,000 square feet of leases and renewals during the
third quarter with an average lease term of seven years, indicating that many
prospective and existing tenants are committed to long-term office space and
view our properties as their preferred choice for premium, Class A office.
Included in our third quarter leasing activity was a lease extension and an
expansion with a tenant totaling approximately 186,000 square feet in Reston,
Virginia and a new lease for approximately 82,000 square feet with a tenant in
Boston, Massachusetts.
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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 4.3 million square feet of
active developments and redevelopments in our pipeline, which are 80%
pre-leased, as of November 3, 2020, to primarily credit-strong tenants with
long-lease terms. All development projects remain on schedule to meet all
required delivery milestones in our leases.
The health and safety of our employees, tenants, service providers and visitors
continues to be our highest priority. In the third quarter, we continued to
implement our 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.
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.
During the third quarter of 2020, our rent collections as a percentage of the
total amounts billed to all tenants were 97%.
•Approximately 96% of these billings were made to office tenants. Our third
quarter rent collections from office tenants continued to be strong at 99%.
Approximately $612 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 these billings related to retail leases. Our third quarter
rent collections from retail tenants was 62%.
When evaluating the collectability of a tenant's accrued rent and accounts
receivable balances, management analyzes the tenant's creditworthiness, current
economic trends, including the impact of COVID-19 on a tenant's business, and
changes in the tenant's payment patterns on a lease-by-lease basis. In the third
quarter, we recorded write-offs totaling approximately $10 million, of which
approximately $6 million were associated with accrued rent and approximately $4
million were associated with accounts receivable. These amounts represent 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).
The majority of these write-offs related to tenants in the retail, fitness and
entertainment sectors.
Cash rent abatements and deferrals primarily related to COVID-19 were
approximately $18.2 million in the third quarter. This amount represents 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 third quarter, our parking and other revenue was approximately $16.3
million, an increase of $2.4 million, or 17%, from the second quarter of 2020,
but a decrease of approximately $9.3 million, or 36%, as compared to the third
quarter of 2019. The year-over-year decline was largely due to the decline in
transient parking revenue as employees continue to work from home during the
pandemic.
Our hotel property, the Boston Marriott Cambridge, remained closed throughout
the third quarter and therefore operated at an approximately $3.1 million loss.
As a result, net operating income declined approximately $7.3 million as
compared to the third quarter of 2019. The hotel re-opened on October 2, 2020,
but occupancy remains low due to reduced demand as a result of COVID-19 and we
expect demand to remain low for the foreseeable future.
As a result of the impact of the current environment, we expect our 2020
revenues to be adversely affected due to (1) declines in revenue from 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.
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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;
•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 third
quarter of 2020.
The overall occupancy of our in-service office and retail properties was 91.1%
at September 30, 2020, a decrease of 90 basis points as compared to June 30,
2020. During the third quarter of 2020, we signed leases across our portfolio
totaling approximately 811,000 square feet and we commenced revenue recognition
on approximately 1.2 million square feet of leases in second generation space,
including lease modifications. Of these second generation leases, approximately
895,000 square feet had been vacant for less than one year and, in the
aggregate, they represent an increase in net rental obligations (gross rent less
operating expenses) of approximately 20% 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 98% leased as of September 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 third quarter of 2020, we
executed approximately 96,000 square feet of leases and had approximately
262,000 square feet of leases commence in the Boston region. Approximately
222,000 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
15% over the prior leases. During the quarter, a joint venture in which we own
50% fully placed in-service Hub50House, a 440 unit residential property that is
part of the 1.3 million square foot mixed-use Hub on Causeway development in
Boston, Massachusetts.
Our approximately 2.0 million square foot in-service office portfolio in
Cambridge was approximately 99% leased, as of September 30, 2020. In addition,
during the third quarter of 2020, one of our large tenants in Cambridge had the
contractual right to terminate a lease for 190,000 square feet but the tenant
did not exercise that right and its lease now expires in 2037. During the
quarter, we continued our 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.
In our suburban Waltham/Lexington portfolio, we continued 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. In November 2020, we signed an approximately
138,000 square-foot, 10-year lease with a new tenant at this building. With this
lease, the property is 100% leased. During the third quarter of 2020, we also
entered into an agreement with an existing joint venture partner for the future
development of a 1.2 million square foot site in Waltham. The agreement allows
for the phased development of office and lab properties across 41-acres. We
expect to serve as the development manager. As part of this development, we
expect to complete new exit/interchange improvements onto I-95/Route 128,
enhancing access to our entire Waltham portfolio. Waltham and the surrounding
Route 128 Mass Turnpike area continues to be a popular submarket of Boston for
leading and emerging companies in the life sciences, biotechnology and
technology sectors. This agreement builds on our current footprint of
approximately 4.3 million square feet of office and lab properties in this
submarket.
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Los Angeles
Our Los Angeles ("LA") in-service portfolio is currently focused on West LA and
includes approximately 2.3 million square feet, including a 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 increased our occupancy in LA in the third quarter by 80 basis
points due to an approximately 46,000 square foot expansion by one of our
existing technology tenants. As of September 30, 2020, our LA in-service
properties were approximately 97% 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 the third
quarter of 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 acquisition, we
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 September 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. We are negotiating a reinstatement and renewal agreement with one of
these tenants for approximately 150,000 square feet. In addition, we have
executed approximately 249,000 square feet of leases that we expect will
commence by the end of the first quarter of 2021. In the third quarter of 2020,
we commenced approximately 210,000 square feet of leases in the New York region.
Of these leases, approximately 129,000 square feet had been vacant for less than
one year and represent an increase in net rental obligations of approximately
14% over the prior leases.
San Francisco
Our San Francisco CBD in-service properties were approximately 96% leased as of
September 30, 2020. During the third quarter of 2020, we commenced approximately
387,000 square feet of leases in the San Francisco region. Of these leases,
approximately 354,000 square feet had been vacant for less than one year and
represent an increase in net rental obligations of approximately 29% over the
prior leases.
During the third quarter, we placed in service The Skylyne, a 402 unit
residential property in Oakland, California, which was 9% leased as of November
3, 2020.
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 third quarter
of 2020, we commenced approximately 273,000 square feet of leases in the
Washington, DC region. Of these leases, approximately 163,000 square feet had
been vacant for less than one year and represent an increase in net rental
obligations of approximately 1% over the prior leases.
Our Washington, DC CBD in-service properties were approximately 85% leased, as
of September 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.
Our Washington, DC suburban properties, which includes our significant presence
in Reston, Virginia, were approximately 84% leased as of September 30, 2020.
During the third quarter of 2020, we signed a lease extension and an expansion
with a tenant totaling approximately 186,000 square feet in Reston, Virginia. In
October 2020, we signed an approximately 196,000 square foot, 20-year lease with
a tenant at Reston Next, our
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approximately 1.1 million square foot development, the new phase of Reston Town
Center in Reston, Virginia. With this new lease, the Reston Next development is
85% pre-leased.
Leasing Statistics
The table below details the leasing activity, including 100% of the
unconsolidated joint ventures, that commenced during the three and nine months
ended September 30, 2020:
                                                                       Three months ended               Nine months ended
                                                                       September 30, 2020               September 30, 2020
                                                                                        Total Square Feet
Vacant space available at the beginning of the period                            3,570,356                        3,135,170
Property dispositions/properties taken out of service (1)                                -                         (150,193)

Properties placed (and partially placed) in-service (2)                             12,825                          377,647
Leases expiring or terminated during the period                                  1,597,697                        4,433,742
Total space available for lease                                                  5,180,878                        7,796,366
1st generation leases                                                                    -                          342,007
2nd generation leases with new tenants                                             613,534                        1,670,329
2nd generation lease renewals                                                      574,937                        1,791,623
Total space leased (3)                                                           1,188,471                        3,803,959
Vacant space available for lease at the end of the period                        3,992,407                        3,992,407

Leases executed during the period, in square feet (4)                              810,972                        2,454,913

Second generation leasing information: (5)
Leases commencing during the period, in square feet                              1,188,471                        3,461,952
Weighted Average Lease Term                                                         89 Months                       107 Months
Weighted Average Free Rent Period                                                    144 Days                         149 Days
Total Transaction Costs Per Square Foot (6)                                         $66.57$81.32
Increase in Gross Rents (7)                                                          13.65  %                         17.48  %
Increase in Net Rents (8)                                                            20.14  %                         26.70  %


 __________________
(1)Total square feet of property dispositions/properties taken out of service
during the nine months ended September 30, 2020 consists of 24,508 square feet
due to the sale of a portion of Capital Gallery and 125,685 square feet 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 September 30, 2020 consists of 12,825 at The
Skylyne. Total square feet of properties placed (and partially placed)
in-service during the nine months ended September 30, 2020 consists of 12,825 at
The Skylyne, 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 nine months ended September 30, 2020.
(4)Represents leases executed during the three and nine months ended
September 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 nine months ended September 30, 2020 is 174,187 and 680,575,
respectively. Amounts for the three and nine months ended September 30, 2020
exclude lease modifications related to COVID-19 covering an aggregate of 667,000
and 3,766,343 square feet that were executed in the three and nine months ended
September 30, 2020, respectively, to provide cash rent deferrals and/or
abatements. Of these lease modifications, the lease terms associated with
176,787 and 473,776 square feet were extended for a period of 12 or more months
during the three and nine months ended September 30, 2020, respectively.
(5)Second generation leases are defined as leases for space that had previously
been leased by us. Of the 1,188,471 and 3,461,952 square feet of second
generation leases that commenced during the three and nine months ended
September 30, 2020, respectively, leases for 1,014,284 and 2,786,533 square
feet, respectively, were signed in prior periods.
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(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 894,966 and 2,800,738 square feet of
second generation leases that had been occupied within the prior 12 months for
the three and nine months ended September 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 894,966 and 2,800,738 square feet of second
generation leases that had been occupied within the prior 12 months for the
three and nine months ended September 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 September 30, 2020 included the
following:
Developments
•On July 31, 2020, we acquired an undivided ownership interest in real property
at 759 Harrison Street located in San Francisco, California, which is expected
to be included in the Fourth + Harrison development project, for a purchase
price totaling approximately $2.3 million. Fourth + Harrison is expected to
support the development of approximately 804,000 square feet of primarily
commercial office space.
•On August 15, 2020, we completed and fully placed in-service The Skylyne, an
approximately 331,000 square foot project comprised of 402 residential units and
retail space located in Oakland, California that was 9% leased, as of November
3, 2020.
Unconsolidated joint venture activities
•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.
•On July 24, 2020, a joint venture in which we have a 50% interest completed and
fully placed in-service Hub50House, an approximately 320,000 square foot project
comprised of 440 residential units located in Boston, Massachusetts, that was
53% leased, as of November 3, 2020.
•On September 1, 2020, we entered into an agreement with our partner in the
joint venture that owns 1265 Main Street located in Waltham, Massachusetts to
(1) form additional joint ventures to own and develop a mixed-use property
containing approximately 1,200,000 square feet to be developed in phases on an
approximately 41-acre site adjacent to 1265 Main Street and (2) share the costs
of certain offsite infrastructure improvements with our joint venture partner
and other third party abutting land owners. We will serve as the development
manager and expect to own a 50% interest in each of the joint ventures.
•On September 30, 2020, a joint venture in which we have a 50% interest extended
the mortgage loan collateralized by its Market Square North property. At the
time of the extension, the outstanding balance of the loan totaled approximately
$114.2 million, bore interest at a fixed rate of 4.85% per annum and was
scheduled to mature on October 1, 2020. The extended loan matures on November 1,
2020. Market Square North is a Class A office property with approximately
418,000 net rentable square feet located in Washington, DC.
Transactions completed subsequent to September 30, 2020 included the following:
•On October 1, 2020, a joint venture in which we have a 50% interest completed
and fully placed in-service Dock 72, a Class A office project with approximately
670,000 net rentable square feet located in Brooklyn, New York.
•On October 30, 2020, a joint venture in which we have a 50% interest refinanced
the mortgage loan collateralized by its Market Square North property located in
Washington, DC. The outstanding balance of the loan totaled approximately
$114.2 million, bore interest at a fixed rate of 4.85% per annum and was
scheduled to mature on November 1, 2020. The new mortgage loan totals
                                       54
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  Table of     Conte    n    ts
$125.0 million, bears interest at a variable rate equal to (1) the greater of
(x) LIBOR or (y) 0.50%, plus (2) 2.30% per annum, and matures on November 10,
2025, with one, one-year extension option, subject to certain conditions.
•On November 3, 2020, we signed an approximately 138,000 square-foot, 10-year
lease with a new tenant at 200 West Street in Waltham, Massachusetts. We are
currently redeveloping a portion of 200 West Street into lab space with expected
completion in 2021. With this lease, the property is 100% leased.
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.
Results of Operations for the Nine Months Ended September 30, 2020 and 2019
The impact that COVID-19 has had on our business, financial position and results
of operations during the second and third quarters 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 $484.3 million and $548.7 million for the nine months
ended September 30, 2020 compared to 2019, respectively, as detailed in the
following tables and for the reasons discussed below under the heading
"Comparison of the nine months ended September 30, 2020 to the nine months ended
September 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 nine months ended September 30, 2020 and 2019 (in
thousands):

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  Table of     Conte    n    ts
Boston Properties, Inc.
                                                                                 Nine months ended September 30,
                                                                                                    Increase/                  %
                                                             2020                 2019             (Decrease)                Change
Net Income Attributable to Boston Properties,
Inc. Common Shareholders                                $   854,541$   370,200$  484,341                     130.83  %
Preferred dividends                                           7,875                7,875                   -                          -  %
Net Income Attributable to Boston Properties,
Inc.                                                        862,416              378,075             484,341                     128.11  %
Net Income Attributable to Noncontrolling
Interests:
Noncontrolling interest-common units of the
Operating Partnership                                        97,090               43,133              53,957                     125.09  %
Noncontrolling interests in property partnerships            34,280               54,782             (20,502)                    (37.42) %
Net Income                                                  993,786              475,990             517,796                     108.78  %
Other Expenses:
Add:
Interest expense                                            319,726              309,837               9,889                       3.19  %
Loss from early extinguishment of debt                            -               28,010             (28,010)                   (100.00) %
Impairment loss                                                   -               24,038             (24,038)                   (100.00) %
Other Income:
Less:
Gains from investments in securities                            965                4,240              (3,275)                    (77.24) %
Interest and other income (loss)                              4,277               14,546             (10,269)                    (70.60) %
Gains on sales of real estate                               613,723                  766             612,957                  80,020.50  %
Income (loss) from unconsolidated joint ventures             (5,410)              47,528             (52,938)                   (111.38) %
Other Expenses:
Add:
Depreciation and amortization expense                       515,738              507,867               7,871                       1.55  %
Transaction costs                                             1,254                1,415                (161)                    (11.38) %
Payroll and related costs from management
services contracts                                            8,617                8,227                 390                       4.74  %
General and administrative expense                          102,059              107,980              (5,921)                     (5.48) %
Other Revenue:
Less:
Direct reimbursements of payroll and related
costs from management services contracts                      8,617                8,227                 390                       4.74  %
Development and management services revenue                  23,285               29,566              (6,281)                    (21.24) %
Net Operating Income                                    $ 1,295,723$ 1,358,491$  (62,768)                     (4.62) %


                                       56
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Boston Properties Limited Partnership
                                                                                 Nine months ended September 30,
                                                                                                    Increase/                  %
                                                             2020                 2019             (Decrease)                Change
Net Income Attributable to Boston Properties
Limited Partnership Common Unitholders                  $   969,932$   421,214$  548,718                     130.27  %
Preferred distributions                                       7,875                7,875                   -                          -  %
Net Income Attributable to Boston Properties
Limited Partnership                                         977,807              429,089             548,718                     127.88  %
Net Income Attributable to Noncontrolling
Interests:
Noncontrolling interests in property partnerships            34,280               54,782             (20,502)                    (37.42) %
Net Income                                                1,012,087              483,871             528,216                     109.16  %
Other Expenses:
Add:
Interest expense                                            319,726              309,837               9,889                       3.19  %
Loss from early extinguishment of debt                            -               28,010             (28,010)                   (100.00) %
Impairment loss                                                   -               22,272             (22,272)                   (100.00) %
Other Income:
Less:
Gains from investments in securities                            965                4,240              (3,275)                    (77.24) %
Interest and other income (loss)                              4,277               14,546             (10,269)                    (70.60) %
Gains on sales of real estate                               626,686                  915             625,771                  68,390.27  %
Income (loss) from unconsolidated joint ventures             (5,410)              47,528             (52,938)                   (111.38) %
Other Expenses:
Add:
Depreciation and amortization expense                       510,400              501,901               8,499                       1.69  %
Transaction costs                                             1,254                1,415                (161)                    (11.38) %
Payroll and related costs from management
services contracts                                            8,617                8,227                 390                       4.74  %
General and administrative expense                          102,059              107,980              (5,921)                     (5.48) %
Other Revenue:
Less:
Direct reimbursements of payroll and related
costs from management services contracts                      8,617                8,227                 390                       4.74  %
Development and management services revenue                  23,285               29,566              (6,281)                    (21.24) %
Net Operating Income                                    $ 1,295,723$ 1,358,491$  (62,768)                     (4.62) %



At each of September 30, 2020 and 2019, we owned or had joint venture interests
in a portfolio of 196 commercial real estate properties (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
nine months ended September 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, loss from early extinguishment of debt, 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 from investments in securities, interest
and other income (loss), gains (losses) on sales of real estate, income (loss)
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 nine months ended September 30, 2020 to the nine months ended
September 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 38.6 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 September 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 September 30, 2020. This table includes a reconciliation from the Same
Property Portfolio to the Total Property Portfolio by also providing information
for the nine months ended September 30, 2020 and 2019 with respect to the
properties that were acquired, placed in-service, in development or
redevelopment or sold.

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  Table of     Conte    n    ts
                                                                                                                                                                   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)              $ 1,886,518$ 1,934,860$  (48,342)                (2.50) %       $  10,518$ 1,298

$ 46,161$ 1,576$ 2,614$ 7,935

$ 24,067$ 65,898$ 1,969,878$ 2,011,567

         $  (41,689)                 (2.07) %
Termination Income                     8,363               13,226              (4,863)               (36.77) %               -                -                   -                -                    -                -                     59               580                8,422               13,806              (5,384)                (39.00) %
Lease Revenue                      1,894,881            1,948,086             (53,205)                (2.73) %          10,518            1,298              46,161            1,576                2,614            7,935                 24,126            66,478            1,978,300            2,025,373             (47,073)                 (2.32) %
Parking and Other                     51,556               73,858             (22,302)               (30.20) %               4                -               1,579                -                   16              119                  1,150             2,412               54,305               76,389             (22,084)                (28.91) %
Total Rental Revenue (1)           1,946,437            2,021,944             (75,507)                (3.73) %          10,522            1,298              47,740            1,576                2,630            8,054                 25,276            68,890            2,032,605            2,101,762             (69,157)                 (3.29) %
Real Estate Operating Expenses       721,455              736,203             (14,748)                (2.00) %           4,558              649               8,733              477                3,995            6,454                  9,289            25,401              748,030              769,184             (21,154)                 (2.75) %
Net Operating Income (Loss),
Excluding Residential and Hotel    1,224,982            1,285,741             (60,759)                (4.73) %           5,964              649              39,007            1,099               (1,365)           1,600                 15,987            43,489            1,284,575            1,332,578             (48,003)                 (3.60) %
Residential Net Operating Income
(Loss) (2)                            16,809               14,803               2,006                 13.55  %               -                -                (717)               -                    -                -                      -                 -               16,092               14,803               1,289                   8.71  %
Hotel Net Operating Income
(Loss) (2)                            (4,944)              11,110             (16,054)              (144.50) %               -                -                   -                -                    -                -                      -                 -               (4,944)              11,110             (16,054)               (144.50) %

Net Operating Income (Loss) $ 1,236,847$ 1,311,654$ (74,807)

                (5.70) %       $   5,964$   649$   38,290$ 1,099$    (1,365)$ 1,600$      15,987$ 43,489$ 1,295,723$ 1,358,491$  (62,768)                 (4.62) %

_______________

(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 58. Residential Net Operating Income for
the nine months ended September 30, 2020 and 2019 is comprised of Residential
Revenue of $29,076 and $26,710 less Residential Expenses of $12,984 and $11,907,
respectively. Hotel Net Operating Income for the nine months ended September 30,
2020 and 2019 is comprised of Hotel Revenue of $7,014 and $36,796 less Hotel
Expenses of $11,958 and $25,686, 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 $48.3
million for the nine months ended September 30, 2020 compared to 2019.
Approximately $60.8 million of the decrease was related to write-offs, which are
discussed below. Excluding the impact of the write-offs, the average revenue per
square foot increased by approximately $0.49, contributing approximately $17.9
million, offset by an approximately $5.4 million decrease due to our average
occupancy decreasing from 93.8% to 93.5%.
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 nine months ended September 30, 2020, for
our Same Property Portfolio, we wrote off approximately $39.2 million and $21.6
million of accrued rent and accounts receivable balances, respectively. These
write-offs related to tenants, primarily in the retail sector, that either
terminated their leases or for which 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 and third quarters of 2020, we executed lease modification agreements
for approximately 2.9 million square feet and granted approximately $46.9
million of cash rent abatements and deferrals, of which approximately $31.2
million related to rental charges for the second and third quarters 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 and third quarters 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 $4.9 million for the nine months
ended September 30, 2020 compared to 2019.
Termination income for the nine months ended September 30, 2020 related to 34
tenants across the Same Property Portfolio and totaled approximately $8.4
million, which was primarily related to tenants that terminated leases early in
the New York region.
Termination income for the nine months ended September 30, 2019 related to 29
tenants across the Same Property Portfolio and totaled approximately $13.2
million, of which approximately $7.8 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 $22.3 million for the nine
months ended September 30, 2020 compared to 2019. Parking revenue decreased by
approximately $24.4 million while other revenue increased by approximately $2.1
million. The decrease in parking revenue was primarily due to a decrease in
transient and monthly parking.
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During the second and third quarters 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 shifted, and stay-at-home orders were partially or fully
lifted, businesses began to open and people began to return to working in an
office setting, we expected, and have begun to see, an increase in parking
revenue. As a result, for the nine months ended September 30, 2020, transient
and monthly parking decreased by approximately $15.2 million and $5.1 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 $14.7 million, or 2.0%, for the nine months ended September 30,
2020 compared to 2019, due primarily to decreases in utility and cleaning
expense of approximately $15.6 million, or 18.7%, and $7.5 million, or 11.7%,
respectively, partially offset by an increase in other real estate operating
expenses of $8.4 million, or 1.4%. The decreases in utility and cleaning expense
were experienced across the portfolio and were primarily driven by a decrease in
physical tenant occupancy, which led to lower demand for electricity, HVAC, and
cleaning.
Properties Acquired Portfolio
The table below lists the properties acquired between January 1, 2019 and
September 30, 2020. Rental revenue and real estate operating expenses increased
by approximately $9.2 million and $3.9 million, respectively, for the nine
months ended September 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             392,576             $ 10,222$ 1,298$ 8,924$      4,122$ 649$ 3,473
Fourth + Harrison (1)        June 26, 2020                         N/A            300                -              300                   436              -              436
                                                         392,576             $ 10,522$ 1,298$ 9,224$      4,558$ 649$ 3,909


_______________

(1)Located at 777 Harrison Street in San Francisco, California (known as Fourth + Harrison and formerly known as 425 Fourth Street).

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  Table of     Conte    n    ts
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 September 30, 2020. Rental revenue
and real estate operating expenses from our Properties Placed In-Service
Portfolio increased by approximately $46.2 million and $9.0 million,
respectively, for the nine months ended September 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)
Office
20 CityPoint                 Second Quarter, 2019         Second Quarter, 2020                         211,476             $  5,485$ 1,576$  3,909$      2,053$ 477$ 1,576145 Broadway                 Fourth Quarter, 2019         Fourth Quarter, 2019                         490,086               33,377                -            33,377                 4,104              -            4,104
17Fifty Presidents
Street                       First Quarter, 2020          First Quarter, 2020                          275,809                8,878                -             8,878                 2,576              -            2,576
Total Office                                                                                           977,371               47,740            1,576            46,164                 8,733            477            8,256

Residential
The Skylyne                  Third Quarter, 2020          Third Quarter, 2020                          330,996                   23                -                23                   740              -              740
Total Residential                                                                                      330,996                   23                -                23                   740              -              740
                                                                                                     1,308,367             $ 47,763$ 1,576$ 46,187$      9,473$ 477$ 8,996



Properties in Development or Redevelopment Portfolio
The table below lists the properties that were in development or redevelopment
between January 1, 2019 and September 30, 2020. Rental revenue and real estate
operating expenses from our Properties in Development or Redevelopment Portfolio
decreased by approximately $5.4 million and $2.5 million, respectively, for the
nine months ended September 30, 2020 compared to 2019.
                                                                                               Rental Revenue                                Real 

Estate Operating 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          

$ (1,232)$ 2,781$ (4,013)$ 1,149

  $ 1,430$   (281)
325 Main Street (2)           May 9, 2019                  115,000                   36             (704)              740                  281            1,338            (1,057)
200 West Street (3)           September 30, 2019           261,000                3,826            5,977            (2,151)               2,565            3,686            (1,121)
                                                           596,000             $  2,630$ 8,054$ (5,424)$     3,995$ 6,454$ (2,459)

_______________

(1)Rental revenue for the nine months ended September 30, 2020 includes an
approximately $2.9 million write-off of accrued rent and accounts receivable
balances for a terminated tenant.
(2)Rental revenue for the nine months ended September 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 nine months
ended September 30, 2020 and 2019 includes approximately $0.3 million and $0.7
million of demolition costs, respectively.
(3)Rental revenue and real estate operating expenses for the nine months ended
September 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.
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Properties Sold Portfolio
The table below lists the properties we sold between January 1, 2019 and
September 30, 2020. Rental revenue and real estate operating expenses from our
Properties Sold Portfolio decreased by approximately $43.6 million and $16.1
million, respectively, for the nine months ended September 30, 2020 compared to
2019, as detailed below.
                                                                                                                              Rental Revenue                                    Real Estate Operating 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              -                 -                  -                   -                    117               (117)
601, 611 and 651 Gateway
(1)                            January 28, 2020               Office                     768,000                1,946            21,495            (19,549)                881                  7,682             (6,801)
New Dominion Technology
ParkFebruary 20, 2020              Office                     493,000                2,551            14,593            (12,042)                772                  4,328             (3,556)
Capital Gallery (2)            June 25, 2020                  Office                     631,000               20,779            30,543             (9,764)              7,636                 10,923             (3,287)
                                                                                       2,545,000             $ 25,276$ 68,890$ (43,614)$    9,289$ 25,401$ (16,112)

_______________

(1)Rental revenue for the nine months ended September 30, 2019 includes
approximately $0.8 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 $2.0 million for the nine months ended September 30, 2020 compared
to 2019. Net operating income for the nine months ended September 30, 2020
includes approximately $0.7 million of termination income from a retail tenant.
The following reflects our occupancy and rate information for The Lofts at
Atlantic Wharf, The Avant at Reston Town Center, Signature at Reston and Proto
Kendall Square for the nine months ended September 30, 2020 and 2019.
                                      The Lofts at Atlantic Wharf                                   The Avant at Reston Town Center                                    Signature at Reston

Proto Kendall Square

                              2020                2019             Change (%)                2020                 2019             Change (%)              2020              2019             Change (%)              2020               2019             Change (%)
Average Monthly
Rental Rate (1)         $      4,424$ 4,471                   (1.1) %       $       2,381$ 2,401                   (0.8) %       $   2,327$ 2,339                   (0.5) %       $    2,865$ 2,847                    0.6  %
Average Rental
Rate Per Occupied
Square Foot             $       4.89$  4.92                   (0.6) %       $        2.61$  2.62                   (0.4) %       $    2.46$  2.53                   (2.8) %       $     5.26$  5.31                   (0.9) %
Average Physical
Occupancy (2)                   89.0   %          95.0  %                (6.3) %                90.2   %          92.5  %                (2.5) %            82.0  %          64.0  %                28.1  %             91.2  %          79.4  %                14.9  %
Average Economic
Occupancy (3)                   88.9   %          95.2  %                (6.6) %                89.2   %          92.0  %                (3.0) %            77.3  %          58.0  %                33.3  %             90.0  %          76.8  %                17.2  %


_______________
(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.
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(2)Average Physical Occupancy is defined as (1) the average number of occupied
units divided by (2) the total number of units, expressed as a percentage.
(3)Average Economic Occupancy is defined as (1) total possible revenue less
vacancy loss divided by (2) total possible revenue, expressed as a percentage.
Total possible revenue is determined by valuing average occupied units at
contract rates and average vacant units at Market Rents. Vacancy loss is
determined by valuing vacant units at current Market Rents. By measuring vacant
units at their Market Rents, Average Economic Occupancy takes into account the
fact that units of different sizes and locations within a residential property
have different economic impacts on a residential property's total possible gross
revenue. Market Rents used by us in calculating Economic Occupancy are based on
the current market rates set by the managers of our residential properties based
on their experience in renting their residential property's units and publicly
available market data. Actual market rents and trends in such rents for a region
as reported by others may vary materially from Market Rents used by us. Market
Rents for a period are based on the average Market Rents during that period and
do not reflect any impact for cash concessions.
Hotel Net Operating Income (Loss)
Net operating income (loss) for the Boston Marriott Cambridge hotel property
decreased by approximately $16.1 million for the nine months ended September 30,
2020 compared to 2019.
The Boston Marriott Cambridge closed in March 2020 due to COVID-19 and did not
re-open until October 2, 2020. The hotel is operating at a monthly deficit. The
closing of the hotel for more than two fiscal quarters, weak demand and low
occupancy since its re-opening, have had, and are expected to continue to have,
a material adverse effect on the hotel's operations. See Item 1A: "Risk Factors"
for additional details.
The following reflects our occupancy and rate information for the Boston
Marriott Cambridge hotel for the nine months ended September 30, 2020 and 2019.
                           2020           2019         Change (%)
Occupancy                   19.8  %        86.7  %        (77.2) %
Average daily rate      $ 211.36$ 280.18           (24.6) %
REVPAR                  $  41.85$ 242.98           (82.8) %



Other Operating Revenue and Expense Items
Development and Management Services Revenue
Development and management services revenue decreased by approximately $6.3
million for the nine months ended September 30, 2020 compared to 2019.
Development services revenue decreased by approximately $6.5 million, while
management services revenue increased by approximately $0.2 million. The
decrease in development services revenue was primarily related to a decrease of
approximately $7.3 million in development fees and fees associated with tenant
improvement projects earned from our unconsolidated joint ventures in the Boston
and New York regions partially offset by an increase of approximately $0.8
million in development fees earned in the San Francisco region. The increase in
management services revenue was primarily related to property management fees
earned from third-party owned buildings in the Washington, DC region and our
Gateway Commons unconsolidated joint venture, which was deconsolidated on
January 28, 2020, partially offset by a decrease in leasing commissions earned
from our unconsolidated joint ventures in the Boston region.
General and Administrative Expense
General and administrative expense decreased by approximately $5.9 million for
the nine months ended September 30, 2020 compared to 2019 primarily due to a
decrease in compensation expense of approximately $6.1 million, partially offset
by an approximately $0.2 million increase in other general and administrative
expenses. The decrease in compensation expense was related to (1) an
approximately $3.2 million decrease in the value of our deferred compensation
plan, (2) an approximately $1.3 million decrease in health care costs and (3) an
approximately $1.6 million decrease in other compensation-related 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 "at the market"
stock offering program that was scheduled to expire on June 2, 2020 and an
increase in other professional fees.
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Wages directly related to the development of rental properties are capitalized
and included in real estate assets on our Consolidated Balance Sheets and
amortized over the useful lives of the applicable asset or lease term.
Capitalized wages for the nine months ended September 30, 2020 and 2019 were
approximately $9.6 million and $8.1 million, respectively. These costs are not
included in the general and administrative expenses discussed above.
Transaction Costs
Transaction costs decreased by approximately $0.2 million for the nine months
ended September 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 $7.9 million
for the nine months ended September 30, 2020 compared to 2019, as detailed
below.
                                                              Depreciation 

and Amortization for the nine months

                                                                             ended September 30,
Portfolio                                                         2020                2019              Change
                                                                                (in thousands)
Same Property Portfolio                                      $   491,747$ 482,196$   9,551
Properties Acquired Portfolio                                      7,108                873              6,235
Properties Placed In-Service Portfolio                            11,897                632             11,265

Properties in Development or Redevelopment Portfolio (1)

                                                                1,374             12,070            (10,696)
Properties Sold Portfolio                                          3,612             12,096             (8,484)
                                                             $   515,738$ 507,867$   7,871


_______________
(1)On May 9, 2019, we commenced development of 325 Main Street in Cambridge,
Massachusetts. As a result, during the nine months ended September 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.
Boston Properties Limited Partnership
Depreciation and amortization expense increased by approximately $8.5 million
for the nine months ended September 30, 2020 compared to 2019, as detailed
below.
                                                              Depreciation 

and Amortization for the nine months

                                                                             ended September 30,
Portfolio                                                         2020                2019              Change
                                                                                (in thousands)
Same Property Portfolio                                      $   486,409$ 476,609$   9,800
Properties Acquired Portfolio                                      7,108                873              6,235
Properties Placed In-Service Portfolio                            11,897                632             11,265

Properties in Development or Redevelopment Portfolio (1)

                                                                1,374             11,691            (10,317)
Properties Sold Portfolio                                          3,612             12,096             (8,484)
                                                             $   510,400$ 501,901$   8,499


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_______________
(1)On May 9, 2019, we commenced development of 325 Main Street in Cambridge,
Massachusetts. As a result, during the nine months ended September 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 (loss) from Unconsolidated Joint Ventures
For the nine months ended September 30, 2020 compared to 2019, income (loss)
from unconsolidated joint ventures decreased by approximately $52.9 million
primarily due to an approximately $47.5 million gain on sale of real estate from
the sale of 540 Madison Avenue during the nine months ended September 30, 2019
and the resulting loss of income thereafter, along with the addition of our
Gateway Commons joint venture and the placing in-service of the Hub50House joint
venture in South San Francisco, California and Boston, Massachusetts,
respectively. These joint ventures reduced our net income by approximately $5.9
million for the nine months ended September 30, 2020. During the nine months
ended September 30, 2020, Hub50House was fully placed in-service 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. The decrease in our net income was also driven by
a $2.1 million reduction at our Colorado Center joint venture, primarily due to
a write-off of lease revenue during the nine months ended September 30, 2020.
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 nine months ended September 30, 2020.
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 nine months ended
September 30, 2020, for our unconsolidated joint ventures, we wrote off our
share of the accrued rent and accounts receivable balances of approximately $2.6
million and $1.5 million, respectively. These write-offs related to tenants that
either terminated their leases or for which 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 and third quarters of 2020, the joint ventures
executed lease modification agreements for approximately 855,000 square feet. As
a result of these lease modification agreements, our share of the total cash
rent abatements and deferrals granted was approximately $5.8 million, of which
approximately $4.4 million was related to rental charges for the second and
third quarters 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.
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 and third quarters 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.
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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 $613.0 million for the
nine months ended September 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              246.6                203.6    (2)
                                                                                                            $     859.7$   500.6$     613.6    (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 nine months ended September 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 nine months ended September 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 $625.8 million for the
nine months ended September 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              246.6                207.0    (2)
                                                                                                            $     859.7$   500.6$     626.5    (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 nine months ended September 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 nine months ended September 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 $10.3 million for
the nine months ended September 30, 2020 compared to 2019.
Interest and other income decreased by approximately $8.3 million due primarily
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 an allowance for current
expected credit losses related to our outstanding (1) related party note
receivable, (2) notes receivable and (3) off-balance sheet credit exposures (See
Note 2 to the Consolidated Financial Statements). For the nine months ended
September 30, 2020 the allowance for current expected credit losses was $2.0
million.
Gains from Investments in Securities
Gains from investments in securities for the nine months ended September 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
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to generally match our liabilities to BXP's officers or former non-employee
directors under our deferred compensation plans with equivalent assets and
thereby limit our market risk. The performance of these investments is recorded
as gains from investments in securities. During the nine months ended
September 30, 2020 and 2019, we recognized gains of approximately $1.0 million
and $4.2 million, respectively, on these investments. By comparison, our general
and administrative expense increased by approximately $1.0 million and $4.2
million during the nine months ended September 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.
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 nine months ended September
30, 2020.
Loss From Early Extinguishment of Debt
On September 18, 2019, BPLP completed the redemption of $700.0 million in
aggregate principal amount of its 5.625% senior notes due November 15, 2020. The
redemption price was approximately $740.7 million. The redemption price included
approximately $13.5 million of accrued and unpaid interest to, but not
including, the redemption date. Excluding the accrued and unpaid interest, the
redemption price was approximately 103.90% of the principal amount being
redeemed. We recognized a loss from early extinguishment of debt totaling
approximately $28.0 million, which amount included the payment of the redemption
premium totaling approximately $27.3 million.
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Interest Expense
Interest expense increased by approximately $9.9 million for the nine months
ended September 30, 2020 compared to 2019, as detailed below.
                                                                                  Change in interest
                                                                                 expense for the nine
                                                                                     months ended
                                                                                  September 30, 2020
                                                                                     compared to
Component                                                                         September 30, 2019
                                                                                    (in thousands)
Increases to interest expense due to:
Issuance of $1.25 billion in aggregate principal of 3.250% senior notes
due 2031 on May 5, 2020                                                        $              16,425

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

                                                                 13,666
Decrease in capitalized interest related to development projects                               2,834
Increase in interest due to finance leases                                                     2,758
Other interest expense (excluding senior notes)                                                  527
Total increases to interest expense                                                           49,924

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

                                                               (28,172)
Decrease in interest rates for the 2017 Credit Facility                                       (7,361)

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

                                                                            (2,834)

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

                                                                                  (1,668)
Total decreases to interest expense                                                          (40,035)
Total change in interest expense                                               $               9,889


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 each of the
nine months ended September 30, 2020 and 2019 was approximately $41.3 million.
These costs are not included in the interest expense referenced above.
At September 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
September 30, 2020. The Revolving Facility did not have an outstanding balance
as of September 30, 2020. For a summary of our consolidated debt as of
September 30, 2020 and September 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
$20.5 million for the nine months ended September 30, 2020 compared to 2019, as
detailed below.

                                                        Noncontrolling 

Interests in Property Partnerships for

                                                                 the nine months ended September 30,
Property                                                     2020                 2019              Change
                                                                           (in thousands)
Salesforce Tower (1)                                    $          -          $     116$    (116)767 Fifth Avenue (the General Motors Building)
(2)                                                            4,205              2,811              1,394
Times Square Tower (3)                                           198             20,680            (20,482)
601 Lexington Avenue (4)                                      12,317             14,909             (2,592)
100 Federal Street (5)                                        10,874              9,187              1,687
Atlantic Wharf Office Building (6)                             6,686              7,079               (393)
                                                        $     34,280$  54,782$ (20,502)


_______________
(1)On April 1, 2019, we acquired our partner's 5% interest and subsequently own
100%.
(2)The increase during the nine months ended September 30, 2020 was related to
above-/below-market lease assets that were fully amortized in 2020.
(3)During the nine months ended September 30, 2020, we wrote off approximately
$26.8 million of accrued rent and accounts receivable balances for tenants that
either terminated their leases or for which we determined their accrued rent
and/or accounts receivable balances, primarily retail tenants, were no longer
probable of collection. Approximately $14.7 million represents our share of the
write-offs. As a result of these terminations, lease revenue decreased for the
nine months ended September 30, 2020.
(4)During the nine months ended September 30, 2019, 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. As a result of these terminations, lease revenue decreased for the
nine months ended September 30, 2020.
(5)The increase was primarily due to an increase in lease revenue from our
tenants.
(6)During the nine months ended September 30, 2020, we wrote off approximately
$0.5 million of accrued rent and accounts receivable balances for tenants whose
balances we determined were no longer probable of collection. Approximately $0.3
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 $54.0 million for the nine months ended September 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.
Results of Operations for the Three Months Ended September 30, 2020 and 2019
The impact that COVID-19 has had on our business, financial position and results
of operations during the third 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
decreased approximately $17.9 million and $20.5 million for the three months
ended September 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 September 30, 2020 to the
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three months ended September 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
September 30, 2020 and 2019. For a detailed discussion of NOI, including the
reasons management believes NOI is useful to investors, see page 58.
Boston Properties, Inc.
                                                                                 Three months ended September 30,
                                                                                                      Increase/                  %
                                                               2020                  2019            (Decrease)               Change
                                                                                          (in thousands)
Net Income Attributable to Boston Properties,
Inc. Common Shareholders                                $     89,854$ 107,771$  (17,917)                   (16.63) %
Preferred dividends                                            2,625                 2,625                   -                         -  %
Net Income Attributable to Boston Properties,
Inc.                                                          92,479               110,396             (17,917)                   (16.23) %
Net Income Attributable to Noncontrolling
Interests:
Noncontrolling interest-common units of the
Operating Partnership                                         10,020                12,504              (2,484)                   (19.87) %
Noncontrolling interests in property partnerships             15,561                18,470              (2,909)                   (15.75) %
Net Income                                                   118,060               141,370             (23,310)                   (16.49) %
Other Expenses:
Add:
Interest expense                                             110,993               106,471               4,522                      4.25  %
Loss from early extinguishment of debt                             -                28,010             (28,010)                  (100.00) %

Losses on sales of real estate                                   209                    15                 194                  1,293.33  %
Loss from unconsolidated joint ventures                        6,873                   649               6,224                    959.01  %
Other Income:
Less:
Gains from investments in securities                           1,858                   106               1,752                  1,652.83  %
Interest and other income (loss)                                 (45)                7,178              (7,223)                  (100.63) %
Other Expenses:
Add:
Depreciation and amortization expense                        166,456               165,862                 594                      0.36  %
Transaction costs                                                307                   538                (231)                   (42.94) %
Payroll and related costs from management
services contracts                                             2,896                 2,429                 467                     19.23  %
General and administrative expense                            27,862                31,147              (3,285)                   (10.55) %
Other Revenue:
Less:
Direct reimbursements of payroll and related
costs from management services contracts                       2,896                 2,429                 467                     19.23  %
Development and management services revenue                    7,281                10,303              (3,022)                   (29.33) %
Net Operating Income                                    $    421,666$ 456,475$  (34,809)                    (7.63) %


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Boston Properties Limited Partnership
                                                                                 Three months ended September 30,
                                                                                                      Increase/                  %
                                                               2020                  2019            (Decrease)               Change
                                                                                          (in thousands)
Net Income Attributable to Boston Properties
Limited Partnership Common Unitholders                  $    101,624$ 122,117$  (20,493)                   (16.78) %
Preferred distributions                                        2,625                 2,625                   -                         -  %
Net Income Attributable to Boston Properties
Limited Partnership                                          104,249               124,742             (20,493)                   (16.43) %
Net Income Attributable to Noncontrolling
Interests:
Noncontrolling interests in property partnerships             15,561                18,470              (2,909)                   (15.75) %
Net Income                                                   119,810               143,212             (23,402)                   (16.34) %
Other Expenses:
Add:
Interest expense                                             110,993               106,471               4,522                      4.25  %
Loss from early extinguishment of debt                             -                28,010             (28,010)                  (100.00) %

Losses on sales of real estate                                   209                    15                 194                  1,293.33  %
Loss from unconsolidated joint ventures                        6,873                   649               6,224                    959.01  %
Other Income:
Less:
Gains from investments in securities                           1,858                   106               1,752                  1,652.83  %
Interest and other income (loss)                                 (45)                7,178              (7,223)                  (100.63) %
Other Expenses:
Add:
Depreciation and amortization expense                        164,706               164,020                 686                      0.42  %
Transaction costs                                                307                   538                (231)                   (42.94) %
Payroll and related costs from management
services contracts                                             2,896                 2,429                 467                     19.23  %
General and administrative expense                            27,862                31,147              (3,285)                   (10.55) %
Other Revenue:
Less:
Direct reimbursements of payroll and related
costs from management services contracts                       2,896                 2,429                 467                     19.23  %
Development and management services revenue                    7,281                10,303              (3,022)                   (29.33) %
Net Operating Income                                    $    421,666$ 456,475$  (34,809)                    (7.63) %



Comparison of the three months ended September 30, 2020 to the three months
ended September 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 38.6 million net rentable square feet,
excluding unconsolidated joint ventures. The Same Property Portfolio includes
properties acquired or placed in-service on or prior to July 1, 2019 and owned
and in-service through September 30, 2020. The Total Property Portfolio includes
the effects of the other properties either acquired, placed in-service, in
development or redevelopment after July 1, 2019 or disposed of on or prior to
September 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 September 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)            $ 629,175$ 654,129$  (24,954)                (3.81) %       $    3,625$ 1,298

$ 17,835$ 1,576$ 1,390$ 2,577 $

2,369 $ 20,837$ 654,394$ 680,417$ (26,023)

                 (3.82) %
Termination Income                 2,715              1,698               1,017                 59.89  %                -                   -                   -                -                -                -                     -               262              2,715              1,960                 755                  38.52  %
Lease Revenue                    631,890            655,827             (23,937)                (3.65) %            3,625               1,298              17,835            1,576            1,390            2,577                 2,369            21,099            657,109            682,377             (25,268)                 (3.70) %
Parking and Other                 15,428             24,529              (9,101)               (37.10) %                3                   -                 521                -                4                7                   218               898             16,174             25,434              (9,260)                (36.41) %
Total Rental Revenue (1)         647,318            680,356             (33,038)                (4.86) %            3,628               1,298              18,356            1,576            1,394            2,584                 2,587            21,997            673,283            707,811             (34,528)                 (4.88) %
Real Estate Operating Expenses   245,346            250,554              (5,208)                (2.08) %            1,706                 649               3,802              477            1,298            1,926                 1,154             7,986            253,306            261,592              (8,286)                 (3.17) %
Net Operating Income,
Excluding Residential and
Hotel                            401,972            429,802             (27,830)                (6.48) %            1,922                 649              14,554            1,099               96              658                 1,433            14,011            419,977            446,219             (26,242)                 (5.88) %
Residential Net Operating
Income (Loss) (2)                  5,480              5,985                (505)                (8.44) %                -                   -                (717)               -                -                -                     -                 -              4,763              5,985              (1,222)                (20.42) %
Hotel Net Operating Income
(Loss) (2)                        (3,074)             4,271              (7,345)              (171.97) %                -                   -                   -                -                -                -                     -                 -             (3,074)             4,271              (7,345)               (171.97) %
Net Operating Income           $ 404,378$ 440,058$  (35,680)                (8.11) %       $    1,922$   649$   13,837$ 1,099$    96$   658$      1,433$ 14,011$ 421,666$ 456,475$  (34,809)                 (7.63) %


_______________
(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 58. Residential Net Operating Income for
the three months ended September 30, 2020 and 2019 is comprised of Residential
Revenue of $9,718 and $9,996 less Residential Expenses of $4,955 and $4,011,
respectively. Hotel Net Operating Income for the three months ended
September 30, 2020 and 2019 is comprised of Hotel Revenue of $90 and $13,014
less Hotel Expenses of $3,164 and $8,743, 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 $25.0
million for the three months ended September 30, 2020 compared to 2019.
Approximately $7.5 million of the decrease was related to write-offs, which are
discussed below. Excluding the write-offs, the remaining decrease was a result
of an approximately $9.8 million decrease due to our average occupancy
decreasing from 94.0% to 92.6%, and our average revenue per square foot
decreasing by approximately $1.11, contributing approximately $7.7 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
September 30, 2020, for our Same Property Portfolio, we wrote off approximately
$4.1 million and $3.4 million of accrued rent and accounts receivable balances,
respectively. These write-offs related to tenants, primarily in the retail
sector, that either terminated their leases or for which 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 third quarter of 2020, we executed lease modification agreements for
approximately 479,000 square feet and granted approximately $21.9 million of
cash rent abatements and deferrals, of which approximately $11.7 million was
related to rental charges for the third 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
third 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 increased by approximately $1.0 million for the three months
ended September 30, 2020 compared to 2019.
Termination income for the three months ended September 30, 2020 related to 10
tenants across the Same Property Portfolio and totaled approximately $2.7
million, which was primarily related to tenants that terminated leases early in
the New York and Washington DC regions.
Termination income for the three months ended September 30, 2019 related to 17
tenants across the Same Property Portfolio and totaled approximately $1.7
million, of which approximately $1.0 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 $9.1 million for the three
months ended September 30, 2020 compared to 2019. Parking revenue decreased by
approximately $10.4 million while other revenue increased by approximately $1.3
million. The decrease in parking revenue was primarily due to a decrease in
transient and monthly parking.
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During the third quarter of 2020, with stay-at-home orders in effect in certain
regions, 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 shifted, and stay-at-home orders were partially or
fully lifted, businesses began to open and people began to return to working in
an office setting, we expected, and have begun to see, an increase in parking
revenue. As a result, for the three months ended September 30, 2020, transient
and monthly parking decreased by approximately $5.4 million and $2.9 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 $5.2 million, or 2.1%, for the three months ended September 30,
2020 compared to 2019, due primarily to decreases in utility and cleaning
expense of approximately $5.6 million, or 18.7%, and $4.5 million, or 20.7%,
respectively, partially offset by an increase in other real estate operating
expenses of approximately $4.9 million, or 2.5%. The decreases in utility and
cleaning expense were experienced across the portfolio and were primarily driven
by a decrease in physical tenant occupancy, which led to lower demand for
electricity, HVAC, and cleaning.
Properties Acquired Portfolio
The table below lists the properties acquired between July 1, 2019 and
September 30, 2020. Rental revenue and real estate operating expenses increased
by approximately $2.3 million and $1.1 million, respectively, for the three
months ended September 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             392,576             $ 3,344$ 1,298$ 2,046$      1,271$ 649$   622
Fourth + Harrison (1)        June 26, 2020                         N/A           284                -              284                   435              -              435
                                                         392,576             $ 3,628$ 1,298$ 2,330$      1,706$ 649$ 1,057


_______________

(1)Located at 777 Harrison Street in San Francisco, California (known as Fourth + Harrison and formerly known as 425 Fourth Street).

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Properties Placed In-Service Portfolio
The table below lists the properties that were placed in-service or partially
placed in-service between July 1, 2019 and September 30, 2020. Rental revenue
and real estate operating expenses from our Properties Placed In-Service
Portfolio increased by approximately $16.8 million and $4.1 million,
respectively, for the three months ended September 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)
Office
20 CityPoint                 Second Quarter, 2019         Second Quarter, 2020                         211,476             $  1,861$ 1,576$    285$        731$ 477$   254145 Broadway                 Fourth Quarter, 2019         Fourth Quarter, 2019                         490,086               11,560                -            11,560                 1,771              -            1,771
17Fifty Presidents
Street                       First Quarter, 2020          First Quarter, 2020                          275,809                4,935                -             4,935                 1,300              -            1,300
Total Office                                                                                           977,371               18,356            1,576            16,780                 3,802            477            3,325

Residential
The Skylyne                  Third Quarter, 2020          Third Quarter, 2020                          330,996                   23                -                23                   740              -              740
Total Residential                                                                                      330,996                   23                -                23                   740              -              740
                                                                                                     1,308,367             $ 18,379$ 1,576$ 16,803$      4,542$ 477$ 4,065


Properties in Development or Redevelopment Portfolio
The table below lists the properties that were in development or redevelopment
between July 1, 2019 and September 30, 2020. Rental revenue and real estate
operating expenses from our Properties in Development or Redevelopment Portfolio
decreased by approximately $1.2 million and $0.6 million, respectively, for the
three months ended September 30, 2020 compared to 2019.
                                                                                            Rental Revenue                               Real Estate Operating Expenses
                               Date Commenced
                               Development /
        Name                   Redevelopment             Square Feet            2020             2019            Change               2020               2019           Change
                                                                                                                   (dollars in thousands)
One Five Nine East
53rd Street                 August 19, 2016              220,000             $   161$   919$   (758)$       307$   476$ (169)
325 Main Street (1)         May 9, 2019                  115,000                   -               49               (49)                 207              298             (91)
200 West Street (2)         September 30, 2019           261,000               1,233            1,616              (383)                 784            1,152            (368)
                                                         596,000             $ 1,394$ 2,584$ (1,190)$     1,298$ 1,926$ (628)


_______________
(1)Real estate operating expenses for the three months ended September 30, 2020
and September 30, 2019 includes approximately $0.2 million and $0.3 million of
demolition costs, respectively.
(2)Rental revenue and real estate operating expenses for the three months ended
September 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.
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Properties Sold Portfolio
The table below lists the properties we sold between July 1, 2019 and
September 30, 2020. Rental revenue and real estate operating expenses from our
Properties Sold Portfolio decreased by approximately $19.4 million and $6.8
million, respectively, for the three months ended September 30, 2020 compared to
2019, as detailed below.
                                                                                                                           Rental Revenue                                 Real Estate Operating Expenses
          Name                        Date Sold                Property Type           Square Feet            2020             2019              Change               2020               2019            Change
                                                                                                                                                   (dollars in thousands)
Washingtonian North            December 20, 2019             Land                                N/A       $     -          $      -          $       - 

$ - $ 41$ (41) 601, 611 and 651 Gateway (1)

                            January 28, 2020              Office                    768,000                   -             6,949             (6,949)                   -            2,711            (2,711)
New Dominion Technology
ParkFebruary 20, 2020             Office                    493,000                   -             4,813             (4,813)                   -            1,418            (1,418)
Capital Gallery (2)            June 25, 2020                 Office                    631,000               2,587            10,235             (7,648)               1,154            3,816            (2,662)
                                                                                           1,892,000       $ 2,587$ 21,997$ (19,410)$     1,154$ 7,986$ (6,832)

_______________

(1)Rental revenue for the three months ended September 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 - Losses on Sales
of Real Estate" within "Item 2-Management's Discussion and Analysis of Financial
Condition and Results of Operations."
Residential Net Operating Income
Net operating income for our residential same properties decreased by
approximately $0.5 million for the three months ended September 30, 2020
compared to 2019. Net operating income for the three months ended September 30,
2020 includes approximately $0.7 million of termination income from a retail
tenant.
The following reflects our occupancy and rate information for The Lofts at
Atlantic Wharf, The Avant at Reston Town Center, Signature at Reston and Proto
Kendall Square for the three months ended September 30, 2020 and 2019.
                                      The Lofts at Atlantic Wharf                                   The Avant at Reston Town Center                                    Signature at Reston

Proto Kendall Square

                              2020                2019             Change (%)                2020                 2019             Change (%)              2020              2019             Change (%)              2020               2019             Change (%)
Average Monthly
Rental Rate (1)         $      4,231$ 4,498                   (5.9) %       $       2,352$ 2,447                   (3.9) %       $   2,319$ 2,379                   (2.5) %       $    2,676$ 2,972                  (10.0) %
Average Rental
Rate Per Occupied
Square Foot             $       4.62$  4.99                   (7.4) %       $        2.57$  2.66                   (3.4) %       $    2.42$  2.56                   (5.5) %       $     4.91$  5.49                  (10.6) %
Average Physical
Occupancy (2)                   80.2   %          95.4  %               (15.9) %                89.7   %          92.9  %                (3.4) %            82.2  %          74.5  %                10.3  %             85.7  %          96.0  %               (10.7) %
Average Economic
Occupancy (3)                   80.7   %          95.2  %               (15.2) %                88.9   %          93.0  %                (4.4) %            78.2  %          68.9  %                13.5  %             83.1  %          96.1  %               (13.5) %


_______________
(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
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fact that units of different sizes and locations within a residential property
have different economic impacts on a residential property's total possible gross
revenue. Market Rents used by us in calculating Economic Occupancy are based on
the current market rates set by the managers of our residential properties based
on their experience in renting their residential property's units and publicly
available market data. Actual market rents and trends in such rents for a region
as reported by others may vary materially from Market Rents used by us. Market
Rents for a period are based on the average Market Rents during that period and
do not reflect any impact for cash concessions.
Hotel Net Operating Income (Loss)
Net operating income (loss) for the Boston Marriott Cambridge hotel property
decreased by approximately $7.3 million for the three months ended September 30,
2020 compared to 2019.
The Boston Marriott Cambridge closed in March 2020 due to COVID-19 and did not
re-open until October 2, 2020. The hotel is operating at a monthly deficit. The
closing of the hotel for more than two fiscal quarters, weak demand and low
occupancy since its re-opening, have had, and are expected to continue to have,
a material adverse effect on the hotel's operations. 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 September 30, 2020 and 2019.
                         2020        2019         Change (%)
Occupancy                 -  %        90.7  %       (100.0) %
Average daily rate      $ -       $ 293.45          (100.0) %
REVPAR                  $ -       $ 266.31          (100.0) %


Other Operating Revenue and Expense Items
Development and Management Services Revenue
Development and management services revenue decreased by approximately $3.0
million for the three months ended September 30, 2020 compared to 2019.
Development services revenue and management services revenue decreased by
approximately $2.6 million and $0.4 million, respectively. The decrease in
development services revenue was primarily related to a decrease of
approximately $2.3 million in development fees earned in the Washington, DC and
Boston regions and a decrease of approximately $0.3 million in fees associated
with tenant improvement projects earned in the San Francisco region. The
decrease in management services revenue was primarily related to a decrease in
leasing commissions earned from our unconsolidated joint ventures in the Boston
region, partially offset by property management fees earned from third-party
owned buildings in the Washington, DC region.
General and Administrative Expense
General and administrative expense decreased by approximately $3.3 million for
the three months ended September 30, 2020 compared to 2019 primarily due to
decreases in compensation expense and other general and administrative expenses
of approximately $2.9 million and $0.4 million, respectively. The decrease in
other general and administrative expenses was primarily related to a decrease in
meals and travel expense.
Wages directly related to the development of rental properties are capitalized
and included in real estate assets on our Consolidated Balance Sheets and
amortized over the useful lives of the applicable asset or lease term.
Capitalized wages for the three months ended September 30, 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 $0.2 million for the three months
ended September 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.
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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 $0.6 million
for the three months ended September 30, 2020 compared to 2019, as detailed
below.
                                                             Depreciation 

and Amortization for the three months

                                                                             ended September 30,
Portfolio                                                         2020                2019             Change
                                                                               (in thousands)
Same Property Portfolio                                      $   158,609$ 160,245$ (1,636)
Properties Acquired Portfolio                                      2,215                873             1,342
Properties Placed In-Service Portfolio                             4,854                513             4,341
Properties in Development or Redevelopment Portfolio                 451                589              (138)
Properties Sold Portfolio                                            327              3,642            (3,315)
                                                             $   166,456$ 165,862$    594Boston Properties Limited Partnership
Depreciation and amortization expense increased by approximately $0.7 million
for the three months ended September 30, 2020 compared to 2019, as detailed
below.
                                                             Depreciation 

and Amortization for the three months

                                                                             ended September 30,
Portfolio                                                         2020                2019             Change
                                                                               (in thousands)
Same Property Portfolio                                      $   156,859$ 158,403$ (1,544)
Properties Acquired Portfolio                                      2,215                873             1,342
Properties Placed In-Service Portfolio                             4,854                513             4,341
Properties in Development or Redevelopment Portfolio                 451                589              (138)
Properties Sold Portfolio                                            327              3,642            (3,315)
                                                             $   164,706$ 164,020$    686



Direct Reimbursements of Payroll and Related Costs From Management Services
Contracts and Payroll and Related Costs From Management Service Contracts
We have determined that amounts reimbursed for payroll and related costs
received from third parties in connection with management services contracts
should be reflected on a gross basis instead of on a net basis as we have
determined that we are the principal under these arrangements. We anticipate
that these two financial statement line items will generally offset each other.
Other Income and Expense Items
Loss from Unconsolidated Joint Ventures
For the three months ended September 30, 2020 compared to 2019, loss from
unconsolidated joint ventures increased by approximately $6.2 million due to a
$2.9 million reduction of our net income at our Colorado Center joint venture,
primarily due to a write-off of lease revenue during the three months ended
September 30, 2020, along with the addition of our Gateway Commons joint venture
and the placing in-service of the Hub50House joint
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venture in South San Francisco, California and Boston, Massachusetts,
respectively. These joint ventures reduced our net income by approximately $1.9
million for the three months ended September 30, 2020. During the three months
ended September 30, 2020, Hub50House was fully placed in-service 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. The decrease in our net income was also due to a
$0.8 million decrease at our Metropolitan Square joint venture in Washington, DC
mainly attributable to increased interest expense related to the mortgage
refinancing.
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 September 30, 2020, for our unconsolidated joint ventures, we wrote off
our share of the accrued rent and accounts receivable balances of approximately
$1.9 million and $0.5 million, respectively. These write-offs related to tenants
that either terminated their leases or for which 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 third quarter of 2020, the joint ventures executed
lease modification agreements for approximately 181,000 square feet. As a result
of these lease modification agreements, our share of the total cash rent
abatements and deferrals granted was approximately $0.5 million, all of which
related to rental charges for the third 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.
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
third 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.
Losses on Sales of Real Estate
During the three months ended September 30, 2020, we incurred approximately $0.2
million of additional expenses related to the sale of a portion of Capital
Gallery in Washington, DC, thus resulting in a loss on sale of real estate (See
Note 3 to the Consolidated Financial Statements).
Interest and Other Income (Loss)
Interest and other income (loss) decreased by approximately $7.2 million for the
three months ended September 30, 2020 compared to 2019.
Interest and other income decreased by approximately $5.7 million due primarily
to a decrease in interest rates.
On January 1, 2020, we adopted ASU 2016-13 and, as a result, we were required to
record anallowance for current expected credit losses 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).
For the three months ended September 30, 2020 the allowance for current expected
credit losses was $1.5 million.
Gains from Investments in Securities
Gains from investments in securities for the three months ended September 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
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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
September 30, 2020 and 2019, we recognized gains of approximately $1.9 million
and $0.1 million, respectively, on these investments. By comparison, our general
and administrative expense increased by approximately $1.9 million and $0.1
million during the three months ended September 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.
Loss From Early Extinguishment of Debt
On September 18, 2019, BPLP completed the redemption of $700.0 million in
aggregate principal amount of its 5.625% senior notes due November 15, 2020. The
redemption price was approximately $740.7 million. The redemption price included
approximately $13.5 million of accrued and unpaid interest to, but not
including, the redemption date. Excluding the accrued and unpaid interest, the
redemption price was approximately 103.90% of the principal amount being
redeemed. We recognized a loss from early extinguishment of debt totaling
approximately $28.0 million, which amount included the payment of the redemption
premium totaling approximately $27.3 million.
Interest Expense
Interest expense increased by approximately $4.5 million for the three months
ended September 30, 2020 compared to 2019, as detailed below.
                                                                                Change in interest
                                                                               expense for the three
                                                                                   months ended
                                                                                September 30, 2020
                                                                             compared to September 30,
Component                                                                              2019
                                                                                  (in thousands)
Increases to interest expense due to:
Issuance of $1.25 billion in aggregate principal of 3.250% senior
notes due 2031 on May 5, 2020                                                $               10,193

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

                                                                 3,502
Increase in interest due to finance leases                                                    2,165
Decrease in capitalized interest related to development projects                                556
Other interest expense (excluding senior notes)                                                 196
Total increases to interest expense                                                          16,612

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

                                                         (8,441)
Decrease in interest rates for the 2017 Credit Facility                                      (2,555)

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

                                                                             (556)

Repayment of bond financing collateralized by New Dominion Technology Building One

                                                                                   (538)
Total decreases to interest expense                                                         (12,090)
Total change in interest expense                                             $                4,522


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
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then expensed. Interest capitalized for the three months ended September 30,
2020 and 2019 was approximately $13.5 million and $16.2 million, respectively.
These costs are not included in the interest expense referenced above.
At September 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 September 30, 2020. The Revolving Facility
did not have an outstanding balance as of September 30, 2020. For a summary of
our consolidated debt as of September 30, 2020 and September 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."
Noncontrolling Interests in Property Partnerships
Noncontrolling interests in property partnerships decreased by approximately
$2.9 million for the three months ended September 30, 2020 compared to 2019, as
detailed below.

                                                       Noncontrolling 

Interests in Property Partnerships for

                                                               the three months ended September 30,
Property                                                    2020                 2019              Change
                                                                          (in thousands)
767 Fifth Avenue (the General Motors Building)
(1)                                                    $      2,104$     440$   1,664
Times Square Tower (2)                                        3,545              6,760             (3,215)
601 Lexington Avenue (2)                                      4,352              5,374             (1,022)
100 Federal Street                                            3,565              3,503                 62
Atlantic Wharf Office Building (3)                            1,995              2,393               (398)
                                                       $     15,561$  18,470$  (2,909)


_______________
(1)The increase during the three months ended September 30, 2020 was related to
above-/below-market lease assets that were fully amortized in 2020.
(2)The decrease during the three months ended September 30, 2020 was related to
leases that were terminated during the three months ended June 30, 2020 as a
result of COVID-19.
(3)During the three months ended September 30, 2020, we wrote off approximately
$0.5 million of accrued rent and accounts receivable balances for tenants whose
balances we determined were no longer probable of collection. Approximately $0.3
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
decreased by approximately $2.5 million for the three months ended September 30,
2020 compared to 2019 due primarily to a decrease in allocable income and 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:
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•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
•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 September 30, 2020 (dollars in thousands):
                                                                                                                                                                                                                               Financings
                                                                                                                                                                                          Estimated Total                                                      Estimated Future
                                                                                                                                                                    Investment to            Investment              Total             Outstanding at         Equity Requirement       Percentage Leased
      Construction Properties                Estimated Stabilization Date               Location              # of Buildings          Estimated Square Feet         Date (1)(2)(3)             (1)(2)            Available (1)          9/30/2020 (1)             (1)(2)(4)                   (5)
Office
Dock 72 (50% ownership)                    Second Quarter, 2022                    Brooklyn, NY                       1                     670,000                $     209,795$     243,150$   125,000$       98,206          $         6,561                      33  % (6)
325 Main Street                            Third Quarter, 2022                     Cambridge, MA                      1                     420,000                      148,585                418,400                    -                                          269,815                      90  %
100 Causeway Street (50% ownership)        Third Quarter, 2022                     Boston, MA                         1                     632,000                      167,620                267,300              200,000                  90,274                        -                      95  %
7750 Wisconsin Avenue (Marriott
International Headquarters) (50%
ownership)                                 Third Quarter, 2022                     Bethesda, MD                       1                     734,000                      134,843                198,900              127,500                  66,361                    2,918                     100  %
Reston Next (formerly RestonGateway)                                   Fourth Quarter, 2023                    Reston, VA                         2                   1,062,000                      323,537                715,300                    -                       -                  391,763                      85  %
2100 Pennsylvania Avenue                   Third Quarter, 2024                     Washington, DC                     1                     480,000                      109,153                356,100                    -                       -                  246,947                      62  %
Total Office Properties under
Construction                                                                                                          7                   3,998,000                    1,093,533              2,199,150              452,500                 254,841                  918,004                      78  %
Redevelopment Properties
One Five Nine East 53rd Street (55%
ownership)                                 First Quarter, 2021                     New York, NY                       -                     220,000                      137,155                150,000                    -                       -                   12,845                      96  % (7)
200 West Street                            Fourth Quarter, 2021                    Waltham, MA                        -                     126,000                       13,663                 47,800                    -                       -                   34,137                     100  % (8)
Total Redevelopment Properties under Construction                                                                     -                     346,000                      150,818                197,800                    -                       -                   46,982                      97  %
Total Properties under Construction and Redevelopment                                                                 7                   4,344,000                $   1,244,351$   2,396,950$   452,500$      254,841$       964,986                      80  %


___________
(1)Represents our share.
(2)Investment to Date, Estimated Total Investment and Estimated Future Equity
Requirement all include our share of acquisition expenses, as applicable, and
reflect our share of the estimated net revenue/expenses that we expect to incur
prior to stabilization of the project, including any amounts actually received
or paid through September 30, 2020.
(3)Includes approximately $98.2 million of unpaid but accrued construction costs
and leasing commissions.
(4)Excludes approximately $98.2 million of unpaid but accrued construction costs
and leasing commissions.
(5)Represents percentage leased as of November 3, 2020, including leases with
future commencement dates.
(6)This property was 34% placed in-service as of September 30, 2020.
(7)Represents the low-rise portion of 601 Lexington Avenue.
(8)Represents a portion of the property under redevelopment for conversion to
laboratory space.

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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 third quarter of 2020, our rent collections remained strong as we
collected 99% of rents from our office tenants and 97% 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, fitness
and entertainment tenants, decreases in parking and other revenue and the
continued 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 September 30, 2020, our share of
the remaining development and redevelopment costs that we expect to fund through
2024 was approximately $1.0 billion.
To satisfy these capital needs, as of November 2, 2020, we had approximately
$1.6 billion of cash and cash equivalents, of which approximately $117 million
is attributable to our consolidated joint venture partners.
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 November 2, 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 have not sold any shares under BXP's $600.0 million "at the market" equity
offering program.
We may seek to enhance our liquidity to 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. On
October 30, 2020, a joint venture in which we have a 50% interest refinanced the
mortgage loan collateralized by its Market Square North property located in
Washington, DC. The outstanding balance of the loan totaled approximately
$114.2 million and was scheduled to mature on November 1, 2020. The new mortgage
loan totals $125.0 million and matures on November 10, 2025.
With the refinancing of Market Square North, our unconsolidated joint ventures
have approximately $208.5 million of debt maturing in 2020, of which our share
is approximately $104.3 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.
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
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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 (including gains on sales), liquidity
requirements and other circumstances, including the impact of COVID-19, and
there can be no assurance that the future dividends declared by BXP's Board of
Directors will not differ materially from the current quarterly dividend amount.
Sales
To the extent that we sell assets at a gain and cannot efficiently use the
proceeds in a tax deferred manner for either our development activities or
attractive acquisitions, BXP would, at the appropriate time, decide whether it
is better to declare a special dividend, adopt a stock repurchase program,
reduce indebtedness or retain the cash for future investment opportunities. Such
a decision will depend on many factors including, among others, the timing,
availability and terms of development and acquisition opportunities, our
then-current and anticipated leverage, the cost and availability of capital from
other sources, the price of BXP's common stock and REIT distribution
requirements. At a minimum, we expect that BXP would distribute at least that
amount of proceeds necessary for BXP to avoid paying corporate level tax on the
applicable gains realized from any asset sales.
From time to time in 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 $1.8
billion and $0.8 billion at September 30, 2020 and 2019, respectively,
representing an increase of approximately $1.0 billion. The following table sets
forth changes in cash flows:
                                                     Nine months ended September 30,
                                                                                   Increase
                                                   2020              2019         (Decrease)
                                                             (in thousands)

Net cash provided by operating activities $ 782,423$ 819,792

      $  (37,369)
Net cash used in investing activities           (388,411)          (736,466)        348,055
Net cash provided by financing activities        678,891             82,248 

596,643



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 7.5 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.
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 nine months ended
September 30, 2020 consisted primarily of acquisitions of real estate,
development projects, building and tenant improvements and capital contributions
to unconsolidated joint ventures, partially offset by the proceeds from the
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sales of real estate and capital distributions from unconsolidated joint
ventures. Cash used in investing activities for the nine months ended
September 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:
                                                                          

Nine months ended September 30,

                                                                             2020                    2019
                                                                                   (in thousands)
Acquisitions of real estate (1)                                       $       (135,698)$  (148,912)
Construction in progress (2)                                                  (358,824)            (390,275)
Building and other capital improvements                                       (116,894)            (129,340)
Tenant improvements                                                           (172,401)            (191,532)
Right of use assets - finance leases                                                 -               (5,152)
Proceeds from sales of real estate (3)                                         505,679               83,486
Capital contributions to unconsolidated joint ventures (4)                    (158,374)             (65,499)
Capital distributions from unconsolidated joint ventures (5)                    55,123              136,807
Cash and cash equivalents deconsolidated                                             -              (24,112)
Issuance of notes receivable, net (6)                                           (9,800)                   -
Investments in securities, net                                                   2,778               (1,937)
Net cash used in investing activities                                 $     

(388,411) $ (736,466)

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 July 31, 2020, we acquired an undivided ownership interest in real property
at 759 Harrison Street located in San Francisco, California for a purchase price
totaling approximately $2.3 million.
On 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.
On August 27, 2019, we acquired 880 and 890 Winter Street located in Waltham,
Massachusetts for a gross
purchase price of approximately $106.0 million in cash, including transaction
costs. 880 and 890 Winter
Street consists of two Class A office properties aggregating approximately
392,000 net rentable square feet.
(2)Construction in progress for the nine months ended September 30, 2020
includes ongoing expenditures associated with 17Fifty Presidents Street, 20
CityPoint and The Skylyne, which were partially or fully placed in-service
during the nine months ended September 30, 2020. In addition, we incurred costs
associated with our continued development/redevelopment of One Five Nine East
53rd Street, Reston Next (formerly Reston Gateway), 2100 Pennsylvania Avenue,
200 West Street and 325 Main Street.
Construction in progress for the nine months ended September 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), 2100 Pennsylvania Avenue, 200 West Street, 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
                                       88
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$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.
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 $246.6 million,
resulting in a gain on sale of real estate totaling approximately $203.6 million
for BXP and approximately $207.0 million for BPLP. Capital Gallery is an
approximately 631,000 net rentable square foot Class A office property. The
portion sold is comprised of approximately 455,000 net rentable square feet of
commercial office space. We continue to own the land, underground parking garage
and remaining commercial office and retail space containing approximately
176,000 net rentable square feet at the property.
On 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.
On September 20, 2019, we sold a 45% interest in our Platform 16 property
located in San Jose, California for a gross sale price of approximately $23.1
million. Net cash proceeds totaled approximately $23.1 million. We ceased
accounting for the property on a consolidated basis and now account for the
property on an unconsolidated basis using the equity method of accounting as we
reduced our ownership interest in the property and no longer have a controlling
financial or operating interest in the property. We did not recognize a gain on
the retained or sold interest in the property as the fair value of the property
approximated its carrying value. Platform 16 consists of a 65-year ground lease
for land totaling approximately 5.6 acres that will support the development of
approximately 1.1 million square feet of commercial office space.
(4)Capital contributions to unconsolidated joint ventures for the nine months
ended September 30, 2020 consisted primarily of cash contributions of
approximately $75.0 million, $39.0 million, $27.2 million and $7.5 million to
our Platform 16, 3 Hudson Boulevard, Beach Cities Media Center and Metropolitan
Square joint ventures, respectively.
Capital contributions to unconsolidated joint ventures for the nine months ended
September 30, 2019
consisted primarily of cash contributions of approximately $41.4 million, $12.1
million and $7.0 million to our
Hub on Causeway, Dock 72 and 3 Hudson Boulevard joint ventures, respectively.
(5)Capital distributions from unconsolidated joint ventures for the nine months
ended September 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 nine months
ended September 30, 2019 consisted of (1) cash distributions totaling
approximately $104.1 million from our 540 Madison Avenue joint venture resulting
from the net proceeds from the sale of the property, (2) a cash distribution
totaling approximately $17.6 million from our 100 Causeway Street joint venture
resulting from the proceeds from the construction loan financing and (3) a cash
distribution totaling approximately $15.1 million from our 7750 Wisconsin Avenue
joint venture resulting from the proceeds from the construction loan financing.
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(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 nine months ended September 30,
2020 totaled approximately $678.9 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."
Capitalization
The following table presents Consolidated Market Capitalization and BXP's Share
of Market Capitalization, as well as the corresponding ratios of Consolidated
Debt to Consolidated Market Capitalization and BXP's Share of Debt to BXP's
Share of Market Capitalization (in thousands except for percentages):
                                                                                     September 30, 2020
                                                           Shares / Units                                          Equivalent Value
                                                            Outstanding            Common Stock Equivalent               (1)
Common Stock                                                  155,636                      155,636                 $  12,497,571
Common Operating Partnership Units                             17,458                       17,458                     1,401,877    (2)
5.25% Series B Cumulative Redeemable Preferred
Stock                                                              80                            -                       200,000
Total Equity                                                                               173,094                 $  14,099,448

Consolidated Debt                                                                                                  $  13,048,161
Add:
BXP's share of unconsolidated joint venture debt
(3)                                                                                                                    1,114,031

Subtract:

Partners' share of Consolidated Debt (4)                                                                              (1,195,957)
BXP's Share of Debt                                                                                                $  12,966,235

Consolidated Market Capitalization                                                                                 $  27,147,609
BXP's Share of Market Capitalization                                                                               $  27,065,683
Consolidated Debt/Consolidated Market
Capitalization                                                                                                             48.06  %
BXP's Share of Debt/BXP's Share of Market Capitalization                                                                   47.91  %


_______________

(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 September 30, 2020 of $80.30.
(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 94 for additional information.
(4)See page 93 for additional information.

Consolidated Debt to Consolidated Market Capitalization Ratio is a measure of
leverage commonly used by analysts in the REIT sector. We present this measure
as a percentage and it is calculated by dividing (A) our consolidated debt by
(B) our consolidated market capitalization, which is the market value of our
outstanding equity securities plus our consolidated debt. Consolidated market
capitalization is the sum of:
(1)   our consolidated debt; plus
(2)   the product of (x) the closing price per share of BXP common stock on
September 30, 2020, as reported by the New York Stock Exchange, multiplied by
(y) the sum of:
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(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.
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 September 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."
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Debt Financing
As of September 30, 2020, we had approximately $13.0 billion of outstanding
consolidated indebtedness, representing approximately 48.06% 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
3.89% per annum and a weighted-average term of 5.6 years and (3) $499.3 million
(net of deferred financing fees) outstanding under BPLP's 2017 Credit Facility
that matures on April 24, 2022.
The table below summarizes the aggregate carrying value of our mortgage notes
payable and BPLP's unsecured senior notes, line of credit and term loan, as well
as Consolidated Debt Financing Statistics at September 30, 2020 and
September 30, 2019.
                                                                                     September 30,
                                                                              2020                  2019
                                                                                (dollars in thousands)
Debt Summary:
Balance
Fixed rate mortgage notes payable, net                                   $  2,912,494$  2,952,006
Unsecured senior notes, net                                                 9,636,397             8,387,913
Unsecured line of credit                                                            -                     -
Unsecured term loan, net                                                      499,270               498,819
Consolidated Debt                                                          13,048,161            11,838,738

Add:

BXP's share of unconsolidated joint venture debt, net (1)                   1,114,031               924,366

Subtract:

Partners' share of consolidated mortgage notes payable, net (2)            (1,195,957)           (1,201,113)
BXP's Share of Debt                                                      $ 

12,966,235 $ 11,561,991

September 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  %               3.81  %
Variable rate                                                                    1.18  %               3.12  %
Total                                                                            3.65  %               3.78  %
Coupon/Stated Weighted-average interest rate at end of period:
Fixed rate                                                                       3.65  %               3.70  %
Variable rate                                                                    1.09  %               3.03  %
Total                                                                            3.55  %               3.67  %
Weighted-average maturity at end of period (in years):
Fixed rate                                                                        5.8                   6.3
Variable rate                                                                     1.6                   2.6
Total                                                                             5.6                   6.1


_______________
(1)See page 94 for additional information.
(2)See page 93 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.
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 September 30, 2020
credit rating and matures on April 24, 2022.
As of September 30, 2020 and November 2, 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
September 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 September 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 September 30, 2020:

                                                                                                                          Deferred                                     Carrying Amount
                                          Stated                       GAAP                        Stated                 Financing                                       (Partners'
Properties                             Interest Rate             Interest Rate (1)            Principal Amount           Costs, Net           
Carrying Amount              Share)                                   Maturity Date
                                                                                                                          (dollars in thousands)
Wholly-owned
University Place                                6.94  %                       6.99  %       $           2,045          $        (11)         $          2,034                       N/A                          August 1, 2021Consolidated Joint Ventures767 Fifth Avenue (the General
Motors Building)                                3.43  %                       3.64  %               2,300,000               (23,352)                

2,276,648 $ 910,742 (2)(3)(4) June 9, 2027601 Lexington Avenue

                            4.75  %                       4.79  %                 634,314                  (502)                  633,812                285,215          (5)                April 10, 2022
                                                                                                    2,934,314               (23,854)                2,910,460              1,195,957
Total                                                                                       $       2,936,359$    (23,865)$      2,912,494$   1,195,957


_______________
(1)GAAP interest rate differs from the stated interest rate due to the inclusion
of the amortization of financing charges and the effects of hedging transactions
(if any).
(2)The mortgage loan requires interest only payments with a balloon payment due
at maturity.
(3)This property is owned by a consolidated entity in which we have a 60%
interest. The partners' share of the carrying amount has been adjusted for basis
differentials.
(4)In connection with the refinancing of the loan, we guaranteed the
consolidated entity's obligation to fund various reserves for tenant improvement
costs and allowances, leasing commissions and free rent obligations in lieu of
cash
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deposits. As of September 30, 2020, the maximum funding obligation under the
guarantee was approximately $37.2 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 September 30, 2020, the aggregate carrying amount of debt, including both our
and our partners' share, incurred by these ventures was approximately $2.6
billion (of which our proportionate share is approximately $1.1 billion). The
table below summarizes the outstanding debt of these joint venture properties at
September 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.
                                                                                                                             Deferred
                                Nominal %                Stated            GAAP Interest        Stated Principal             Financing                                    Carrying Amount
     Properties                 Ownership            Interest Rate           Rate (1)                Amount                 Costs, Net            Carrying Amount           (Our share)                                     Maturity Date
                                                                                                             (dollars in thousands)
Santa Monica Business
Park                                     55  %              4.06  %               4.24  %       $     300,000$     (2,525)$        297,475$     163,611          (2)(3)               July 19, 2025Market Square North                      50  %              4.85  %               4.85  %             114,201                      (65)                  114,136                 57,068          (4)                  November 1, 

2020

Annapolis JunctionBuilding Six                             50  %              2.15  %               2.30  %              12,131                       (4)                   12,127                  6,064          (5)                  November 17, 

2020

Annapolis JunctionBuilding Seven                           50  %              2.58  %               2.92  %              18,420                      (31)                   18,389                  9,195          (6)                  March 25, 20211265 Main Street                         50  %              3.77  %               3.84  %              37,544                     (313)                   37,231                 18,615                               January 1, 2032
Colorado Center                          50  %              3.56  %               3.58  %             550,000                     (705)                  549,295                274,648          (2)                  August 9, 2027Dock 72                                  50  %              2.41  %               3.55  %             196,412                     (843)                  195,569                 97,784          (2)(7)               December 18, 2020
The Hub on Causeway -
Podium                                   50  %              2.41  %               2.90  %             174,329                     (945)                  173,384                 86,692          (2)(8)               September 6, 2021
Hub50House                               50  %              2.17  %               2.45  %             169,034                     (807)                  168,227                 84,113          (2)(9)               April 19, 2022100 Causeway Street                      50  %              1.66  %               1.87  %             180,547                   (2,471)                  178,076                 89,038          (2)(10)              September 5, 20237750 Wisconsin Avenue
(Marriott
International
Headquarters)                            50  %              1.41  %               1.95  %             132,722                   (3,597)                  129,125                 64,563          (2)(11)              April 26, 2023
500 North Capitol
Street, NW                               30  %              4.15  %               4.20  %             105,000                     (158)                  104,842                 31,453          (2)                  June 6, 2023901 New York Avenue                      25  %              3.61  %               3.69  %             222,192                     (759)                  221,433                 55,358                               January 5, 

2025

3 Hudson Boulevard                       25  %              3.66  %               3.74  %              80,000                     (176)                   79,824                 19,956          (2)(12)              July 13, 2023Metropolitan Square                      20  %              5.40  %               6.90  %             288,000                   (8,634)                  279,366                 55,873          (2)(13)              July 7, 2022
Total                                                                                           $   2,580,532$    (22,033)$      2,558,499$   1,114,031


_______________
(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 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.
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(4)On September 30, 2020, the joint venture extended the maturity date to
November 1, 2020. Then, on October 30, 2020, the joint venture refinanced the
mortgage loan. See Notes 5 and 13 to the Consolidated Financial Statements.
(5)The loan bears interest at a variable rate equal to LIBOR plus 2.00% per
annum and matures on November 17, 2020.
(6)The loan bears interest at a variable rate equal to LIBOR plus 2.35% per
annum and matures on March 25, 2021.
(7)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.
(8)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.
(9)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.
(10)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.
(11)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.
(12)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.
(13)The loan bears interest at a variable rate equal to (1) the greater of (x)
LIBOR or (y) 0.65%, plus (2) 4.75% per annum, and matures on July 7, 2022.
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 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
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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 and third quarters 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 nine months ended September 30, 2020,
thus negatively impacting our FFO. These decreases are discussed under the
heading "Comparison of the nine months ended September 30, 2020 to the nine
months ended September 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 September 30, 2020 to the three months
ended September 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 September 30,
2020 and 2019:
                                                                                    Three months ended September 30,
                                                                                        2020                   2019
                                                                                             (in thousands)

Net income attributable to Boston Properties, Inc. common shareholders

      $        89,854$ 107,771

Add:

Preferred dividends                                                                        2,625               2,625

Noncontrolling interest-common units of the Operating Partnership

               10,020              12,504

Noncontrolling interests in property partnerships                                         15,561              18,470
Net income                                                                               118,060             141,370
Add:
Depreciation and amortization                                                            166,456             165,862

Noncontrolling interests in property partnerships' share of depreciation and amortization

                                                                         (15,833)            (17,402)

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

                                                                                  20,413              13,745
Corporate-related depreciation and amortization                                             (444)               (411)

Less:

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

                                                                  -                (487)
Losses on sales of real estate                                                              (209)                (15)
Noncontrolling interests in property partnerships                                         15,561              18,470

Preferred dividends                                                                        2,625               2,625

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

                                   270,675             282,571

Less:

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

                                                                  26,697              28,940

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

                                                                     $       243,978$ 253,631
Our percentage share of Funds from Operations-basic                                        90.14   %           89.76  %
Weighted average shares outstanding-basic                                                155,645             154,577


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Reconciliation to Diluted Funds from Operations:
                                                                                      Three months ended September 30,
                                                                           2020                                                2019
                                                             Income                  Shares/Units               Income                Shares/Units
                                                          (Numerator)               (Denominator)             (Numerator)            (Denominator)
                                                                                               (in thousands)
Basic Funds from Operations                           $         270,675                172,677              $    282,571                172,215
Effect of Dilutive Securities:
Stock based compensation                                              -                     25                         -                    243
Diluted Funds from Operations                         $         270,675                172,702              $    282,571                172,458

Less:

Noncontrolling interest-common units of the
Operating Partnership's share of diluted Funds
from Operations                                                  26,693                 17,032                    28,900                 17,638
Diluted Funds from Operations attributable to
Boston Properties, Inc. (1)                           $         243,982                155,670              $    253,671                154,820


 _______________

(1)BXP's share of diluted Funds from Operations was 90.14% and 89.77% for the three months ended September 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 September 30, 2020 and 2019:
                                                                                 Three months ended September 30,
                                                                                     2020                2019
                                                                                          (in thousands)

Net income attributable to Boston Properties Limited Partnership common unitholders

                                                                      $  101,624$ 122,117
Add:
Preferred distributions                                                               2,625              2,625
Noncontrolling interests in property partnerships                                    15,561             18,470
Net income                                                                          119,810            143,212

Add:

Depreciation and amortization                                                       164,706            164,020

Noncontrolling interests in property partnerships' share of depreciation and amortization

                                                                    (15,833)           (17,402)

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

                                                                             20,413             13,745
Corporate-related depreciation and amortization                                        (444)              (411)

Less:

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

                                                             -               (487)
Losses on sales of real estate                                                         (209)               (15)
Noncontrolling interests in property partnerships                                    15,561             18,470
Preferred distributions                                                               2,625              2,625

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

                                               $  270,675$ 282,571
Weighted average units outstanding-basic                                            172,677            172,215


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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 September 30,

                                                                        2020                                                2019
                                                          Income                  Shares/Units               Income                Shares/Units
                                                       (Numerator)               (Denominator)             (Numerator)            (Denominator)
                                                                                            (in thousands)
Basic Funds from Operations                        $         270,675                172,677              $    282,571                172,215
Effect of Dilutive Securities:
Stock based compensation                                           -                     25                         -                    243
Diluted Funds from Operations                      $         270,675                172,702              $    282,571                172,458



Contractual Obligations
We have various service contracts with vendors related to our property
management. In addition, we have certain other contracts we enter into in the
ordinary course of business that may extend beyond one year. These contracts
include terms that provide for cancellation with insignificant or no
cancellation penalties. Contract terms are generally between three and five
years.
During the three months ended September 30, 2020, we paid approximately $69.1
million to fund tenant-related obligations, including tenant improvements and
leasing commissions.
In addition, during the three months ended September 30, 2020, we and our
unconsolidated joint venture partners incurred approximately $35 million of new
tenant-related obligations associated with approximately 988,000 square feet,
which included approximately 177,000 square feet of lease modifications related
to COVID-19, of second generation leases, or approximately $36 per square foot.
We did not sign any 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."
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 September 30,
2020. As of September 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 September 30, 2020,
the weighted-average interest rate on our variable rate debt was LIBOR plus
0.95% (1.09%) 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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  Table of     Conte    n    ts
                                                                                                                                                                  Estimated
                     2020               2021                2022                 2023                2024               2025+                 Total              Fair Value
                                                                                     (dollars in thousands)
                                                                                       Mortgage debt, net

Fixed Rate $ 3,413 $ 13,440 $ 611,132 $ (3,494) $ (3,494) $ 2,291,497 $ 2,912,494

       $  3,183,294
GAAP Average
Interest Rate         5.07  %            4.98  %              4.79  %                 -  %               -  %              3.64  %               3.89  %
Variable Rate            -                  -                    -                    -                  -                    -                     -                     -
                                                                           

Unsecured debt, net Fixed Rate $ (2,887) $ 839,355 $ (10,189) $ 1,490,888 $ 692,161 $ 6,627,069 $ 9,636,397

          $ 10,491,966
GAAP Average
Interest Rate            -  %            4.29  %                 -  %              3.73  %            3.92  %              3.61  %               3.71  %
Variable Rate         (119)              (461)             499,850                    -                  -                    -               499,270               500,388

Total Debt $ 407 $ 852,334 $ 1,100,793 $ 1,487,394 $ 688,667 $ 8,918,566 $ 13,048,161

$ 14,175,648




At September 30, 2020, the weighted-average coupon/stated rates on the fixed
rate debt stated above was 3.65% per annum. At September 30, 2020, our
outstanding variable rate debt based on LIBOR totaled approximately $500.0
million. At September 30, 2020, the coupon/stated rate on our variable rate debt
was approximately 1.09% 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 $3.8 million for the three and nine
months ended September 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 third 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.
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
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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 third
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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