Segment Information

6 Months Ended

Jun. 30, 2012

Segment Information

13. Segment Information

The Company’s segments are based on the Company’s method of internal reporting which classifies its operations by both geographic area and property type. The Company’s segments by geographic area are Boston, New York, Princeton, San Francisco and Washington, DC. Segments by property type include: Class A Office, Office/Technical, Residential and Hotel.

Asset information by segment is not reported because the Company does not use this measure to assess performance. Therefore, depreciation and amortization expense is not allocated among segments. Interest and other income, development and management services, general and administrative expenses, transaction costs, interest expense, depreciation and amortization expense, gains (losses) from investments in securities, gains from early extinguishments of debt, income from unconsolidated joint ventures, discontinued operations and noncontrolling interests are not included in Net Operating Income as internal reporting addresses these items on a corporate level.

Net Operating Income is not a measure of operating results or cash flows from operating activities as measured by accounting principles generally accepted in the United States of America, and it is not indicative of cash available to fund cash needs and should not be considered an alternative to cash flows as a measure of liquidity. All companies may not calculate Net Operating Income in the same manner. The Company considers Net Operating Income to be an appropriate supplemental measure to net income because it helps both investors and management to understand the core operations of the Company’s properties.

Information by geographic area and property type (dollars in thousands):

For the three months ended June 30, 2012:

	Boston			New York			Princeton			San Francisco			Washington, DC			Total
Rental Revenue:
Class A Office	$	157,642		$	122,657		$	15,617		$	53,650		$	88,740		$	438,306
Office/Technical		5,744			—			—			144			4,054			9,942
Residential		1,013			—			—			—			4,023			5,036
Hotel		10,049			—			—			—			—			10,049
Total		174,448			122,657			15,617			53,794			96,817			463,333
% of Grand Totals		37.65	%		26.47	%		3.37	%		11.61	%		20.90	%		100.0	%
Rental Expenses:
Class A Office		60,504			38,936			7,691			21,188			28,306			156,625
Office/Technical		1,652			—			—			38			964			2,654
Residential		367			—			—			—			2,207			2,574
Hotel		6,616			—			—			—			—			6,616
Total		69,139			38,936			7,691			21,226			31,477			168,469
% of Grand Totals		41.04	%		23.11	%		4.57	%		12.60	%		18.68	%		100.0	%
Net operating income	$	105,309		$	83,721		$	7,926		$	32,568		$	65,340		$	294,864
% of Grand Totals		35.71	%		28.39	%		2.69	%		11.05	%		22.16	%		100.0	%

For the three months ended June 30, 2011:

	Boston			New York			Princeton			San Francisco			Washington, DC			Total
Rental Revenue:
Class A Office	$	135,505		$	113,407		$	15,811		$	54,168		$	86,114		$	405,005
Office/Technical		6,337			—			—			—			3,950			10,287
Residential		—			—			—			—			576			576
Hotel		8,904			—			—			—			—			8,904
Total		150,746			113,407			15,811			54,168			90,640			424,772
% of Grand Totals		35.49	%		26.70	%		3.72	%		12.75	%		21.34	%		100.0	%
Rental Expenses:
Class A Office		50,772			37,378			7,487			20,118			24,365			140,120
Office/Technical		1,779			—			—			—			1,011			2,790
Residential		—			—			—			—			723			723
Hotel		6,281			—			—			—			—			6,281
Total		58,832			37,378			7,487			20,118			26,099			149,914
% of Grand Totals		39.25	%		24.93	%		4.99	%		13.42	%		17.41	%		100.0	%
Net operating income	$	91,914		$	76,029		$	8,324		$	34,050		$	64,541		$	274,858
% of Grand Totals		33.44	%		27.66	%		3.03	%		12.39	%		23.48	%		100.0	%

For the six months ended June 30, 2012:

	Boston			New York			Princeton			San Francisco			Washington, DC			Total
Rental Revenue:
Class A Office	$	298,650		$	240,246		$	30,467		$	105,847		$	179,137		$	854,347
Office/Technical		11,343			—			—			196			8,146			19,685
Residential		1,896			—			—			—			7,621			9,517
Hotel		16,865			—			—			—			—			16,865
Total		328,754			240,246			30,467			106,043			194,904			900,414
% of Grand Totals		36.51	%		26.68	%		3.38	%		11.78	%		21.65	%		100.0	%
Rental Expenses:
Class A Office		118,337			77,443			15,049			41,209			55,747			307,785
Office/Technical		3,152			—			—			62			2,011			5,225
Residential		757			—			—			—			4,532			5,289
Hotel		12,715			—			—			—			—			12,715
Total		134,961			77,443			15,049			41,271			62,290			331,014
% of Grand Totals		40.77	%		23.39	%		4.55	%		12.47	%		18.82	%		100.0	%
Net operating income	$	193,793		$	162,803		$	15,418		$	64,772		$	132,614		$	569,400
% of Grand Totals		34.03	%		28.59	%		2.71	%		11.38	%		23.29	%		100.0	%

For the six months ended June 30, 2011:

	Boston			New York			Princeton			San Francisco			Washington, DC			Total
Rental Revenue:
Class A Office	$	262,302		$	226,414		$	32,090		$	107,061		$	168,795		$	796,662
Office/Technical		12,596			—			—			—			7,942			20,538
Residential		—			—			—			—			576			576
Hotel		14,852			—			—			—			—			14,852
Total		289,750			226,414			32,090			107,061			177,313			832,628
% of Grand Totals		34.80	%		27.19	%		3.85	%		12.86	%		21.30	%		100.0	%
Rental Expenses:
Class A Office		98,542			75,092			15,402			39,452			47,533			276,021
Office/Technical		3,647			—			—			—			2,133			5,780
Residential		—			—			—			—			723			723
Hotel		12,020			—			—			—			—			12,020
Total		114,209			75,092			15,402			39,452			50,389			294,544
% of Grand Totals		38.77	%		25.50	%		5.23	%		13.39	%		17.11	%		100.0	%
Net operating income	$	175,541		$	151,322		$	16,688		$	67,609		$	126,924		$	538,084
% of Grand Totals		32.62	%		28.12	%		3.10	%		12.57	%		23.59	%		100.0	%

The following is a reconciliation of Net Operating Income to net income attributable to Boston Properties, Inc.:

	Three months ended June 30,					Six months ended June 30,
	2012		2011			2012			2011
Net Operating Income	$	294,864	$	274,858		$	569,400		$	538,084
Add:
Development and management services income		9,564		9,095			17,710			16,521
Income from unconsolidated joint ventures		21,191		8,882			32,912			16,858
Interest and other income		2,382		1,953			4,028			2,927
Gains from early extinguishments of debt		274		—			1,041			—
Income (loss) from discontinued operations		398		(132	)		884			(80	)
Gain on sale of real estate from discontinued operations		36,877		—			36,877			—
Gain on forgiveness of debt from discontinued operations		—		—			17,807			—
Less:
General and administrative expense		19,066		18,721			46,685			43,364
Transaction costs		8		1,361			2,112			1,433
Depreciation and amortization expense		111,643		110,259			220,583			218,852
Interest expense		99,901		94,583			203,138			193,108
Losses (gains) from investments in securities		186		(6	)		(615	)		(379	)
Noncontrolling interest in property partnerships		457		503			1,003			1,032
Noncontrolling interest—redeemable preferred units of the Operating Partnership		765		842			1,566			1,665
Noncontrolling interest—common units of the Operating Partnership		10,360		8,194			16,400			14,296
Noncontrolling interest in discontinued operations—common units of the Operating Partnership		4,094		(15	)		6,115			(10	)
Net income attributable to Boston Properties, Inc.	$	119,070	$	60,214		$	183,672		$	100,949