11. Noncontrolling Interests

Noncontrolling interests relate to the interests in Boston Properties Limited Partnership not owned by Boston Properties, Inc. and interests in consolidated property partnerships not wholly-owned by the Company. As of December 31, 2015, the noncontrolling interests in Boston Properties Limited Partnership consisted of 16,097,473 OP Units, 1,831,714 LTIP Units (including 216,854 2012 OPP Units), 309,818 2013 MYLTIP Units, 476,320 2014 MYLTIP Units and 368,415 2015 MYLTIP Units held by parties other than Boston Properties, Inc.

Noncontrolling Interest—Redeemable Preferred Units

On March 11, 2014, Boston Properties Limited Partnership notified the holders of the outstanding Series Two Preferred Units that it had elected to redeem all of such Series Two Preferred Units on May 12, 2014. As a result of Boston Properties Limited Partnership election to redeem the units, as of May 12, 2014, the holders of all remaining 666,116 Series Two Preferred Units converted such units into an aggregate of 874,168 OP Units. The Series Two Preferred Units bore a preferred distribution equal to the greater of (1) the distribution which would have been paid in respect of the Series Two Preferred Unit had such Series Two Preferred Unit been converted into an OP Unit (including both regular and special distributions) or (2) 6.00% per annum on a liquidation preference of $50.00 per unit, and were convertible into OP Units at a rate of $38.10 per Preferred Unit (1.312336 OP Units for each Preferred Unit). During the year ended December 31, 2013, 329,881 Series Two Preferred Units of Boston Properties Limited Partnership were converted by the holders into 432,914 OP Units. Due to the holders’ redemption option existing outside the control of the Company, the Series Two Preferred Units were presented outside of permanent equity in the Company’s Consolidated Balance Sheets.

On June 25, 2015, Boston Properties Limited Partnership redeemed the remaining 12,667 Series Four Preferred Units for cash totaling approximately $0.6 million, plus accrued and unpaid distributions. The Series Four Preferred Units bore a preferred distribution equal to 2.00% per annum on a liquidation preference of $50.00 per unit and were not convertible into OP Units. The holders of Series Four Preferred Units had the right, at certain times and subject to certain conditions set forth in the Certificate of Designations establishing the rights, limitations and preferences of the Series Four Preferred Units, to require Boston Properties Limited Partnership to redeem all of their units for cash at the redemption price of $50.00 per unit. Boston Properties Limited Partnership also had the right, at certain times and subject to certain conditions, to redeem all of the Series Four Preferred Units for cash at the redemption price of $50.00 per unit. In order to secure the performance of certain post-issuance obligations by the holders, all of such outstanding Series Four Preferred Units were subject to forfeiture pursuant to the terms of a pledge agreement and not eligible for redemption until and unless such security interest is released. Boston Properties Limited Partnership’s first right to redeem the Series Four Preferred Units was a 30-day period beginning on August 29, 2013. On August 29, 2013, Boston Properties Limited Partnership redeemed approximately 861,400 Series Four Preferred Units for cash at the redemption price of $50.00 per unit. On May 19, 2014, Boston Properties Limited Partnership released to the holders 319,687 Series Four Preferred Units that were previously subject to the security interest. On July 3, 2014, Boston Properties Limited Partnership redeemed such units for cash totaling approximately $16.0 million. On October 16, 2014, Boston Properties Limited Partnership released to the holders 27,773 Series Four Preferred Units that were previously subject to the security interest under the pledge agreement. On November 5, 2014, Boston Properties Limited Partnership redeemed such units for cash totaling approximately $1.4 million. Due to the holders’ redemption option existing outside the control of the Company, the Series Four Preferred Units were presented outside of permanent equity in the Company’s Consolidated Balance Sheets.

On February 17, 2015, Boston Properties Limited Partnership paid a distribution on its outstanding Series Four Preferred Units of $0.25 per unit. On May 15, 2015, Boston Properties Limited Partnership paid a distribution on its outstanding Series Four Preferred Units of $0.25 per unit.

Boston Properties, Inc.

The following table reflects the activity of the noncontrolling interests—redeemable preferred units of Boston Properties, Inc. for the years ended December 31, 2015, 2014 and 2013 (in thousands):



Balance at December 31, 2012	$	110,876
Net income	6,046
Distributions	(6,046		)
Redemption of redeemable preferred units (Series Four Preferred Units)	(43,070		)
Conversion of redeemable preferred units (Series Two Preferred Units) to common units	(16,494		)
Balance at December 31, 2013	51,312
Net income	1,023
Distributions	(1,023		)
Redemption of redeemable preferred units (Series Four Preferred Units)	(17,373		)
Conversion of redeemable preferred units (Series Two Preferred Units) to common units	(33,306		)
Balance at December 31, 2014	633
Net income	6
Distributions	(6		)
Redemption of redeemable preferred units (Series Four Preferred Units)	(633		)
Balance at December 31, 2015	$	—

Boston Properties Limited Partnership

The following table reflects the activity of the noncontrolling interests—redeemable preferred units of Boston Properties Limited Partnership for the years ended December 31, 2015, 2014 and 2013 (in thousands):



Balance at December 31, 2012	$	199,378
Net income	6,046
Distributions	(6,046		)
Redemption of redeemable preferred units (Series Four Preferred Units)	(43,070		)
Reallocation of partnership interest (1)	(50,562		)
Balance at December 31, 2013	105,746
Net income	1,023
Distributions	(1,023		)
Redemption of redeemable preferred units (Series Four Preferred Units)	(17,373		)
Reallocation of partnership interest (1)	(87,740		)
Balance at December 31, 2014	633
Net income	6
Distributions	(6		)
Redemption of redeemable preferred units (Series Four Preferred Units)	(633		)
Balance at December 31, 2015	$	—

_____________


(1)	Includes the conversion of 666,116 and 329,881 Series Two Preferred Units into 874,168 and 432,914 OP Units during the years ended December 31, 2014 and 2013, respectively.

Noncontrolling Interest—Redeemable Interest in Property Partnership

On October 4, 2012, the Company completed the formation of a joint venture, which owns and operates Fountain Square located in Reston, Virginia. The joint venture partner contributed the property valued at approximately $385.0 million and related mortgage indebtedness totaling approximately $211.3 million for a 50% interest in the joint venture. The Company contributed cash totaling approximately $87.0 million for its 50% interest, which cash was distributed to the joint venture partner. Pursuant to the joint venture agreement (i) the Company had rights to acquire the partner’s nominal 50% interest and (ii) the partner had the right to cause the Company to acquire the partner’s interest on January 4, 2016, in each case at a fixed price totaling approximately $102.0 million in cash. The fixed price option rights were to expire on January 31, 2016. The Company was consolidating this joint venture due to the Company’s right to acquire the partner’s nominal 50% interest. The Company recorded the noncontrolling interest at its acquisition-date fair value as temporary equity, due to the redemption option existing outside the control of the Company. The Company was accreting the changes in the redemption value quarterly over the period from the acquisition date to the earliest redemption date using the effective interest method. The Company was recording the accretion after the allocation of net income and distributions of cash flow to the noncontrolling interest account balance.

On August 6, 2015, the parties amended the joint venture agreement to require the Company to acquire its partner’s 50% interest on September 15, 2015 for approximately $100.9 million in cash. On September 15, 2015, the Company acquired its partner’s 50% interest in the consolidated entity that owns Fountain Square located in Reston Town Center in Reston, Virginia for cash of approximately $100.9 million plus working capital and closing prorations and the partner’s share of assumed mortgage indebtedness totaling approximately $105.6 million.

The following table reflects the activity of the noncontrolling interest—redeemable interest in property partnership in the Company’s Fountain Square consolidated joint venture for the years ended December 31, 2015, 2014 and 2013 (in thousands):



Balance at December 31, 2012	$	97,558
Net loss	(1,839		)
Distributions	(4,585		)
Adjustment to reflect redeemable interest at redemption value	8,475
Balance at December 31, 2013	99,609
Net loss	(603		)
Distributions	(6,000		)
Adjustment to reflect redeemable interest at redemption value	11,686
Balance at December 31, 2014	104,692
Net loss	(7		)
Distributions	(2,900		)
Adjustment to reflect redeemable interest at redemption value	5,128
Acquisition of interest	(106,913		)
Balance at December 31, 2015	$	—

Noncontrolling Interest—Common Units

During the years ended December 31, 2015 and 2014, 424,236 and 80,246 OP Units, respectively, were presented by the holders for redemption (including 0 and 3,734 OP Units, respectively, issued upon conversion of Series Two Preferred Units and 65,192 and 67,857 OP Units, respectively, issued upon conversion of LTIP Units) and were redeemed by Boston Properties, Inc. in exchange for an equal number of shares of Common Stock.

At December 31, 2015, the Company had outstanding 309,818 2013 MYLTIP Units, 476,320 2014 MYLTIP Units and 368,415 2015 MYLTIP Units (See Note 17). Prior to the applicable measurement date (February 4, 2016 for 2013 MYLTIP Units, February 3, 2017 for 2014 MYLTIP Units and February 4, 2018 for 2015 MYLTIP Units), holders of MYLTIP Units will be entitled to receive per unit distributions equal to one-tenth (10%) of the regular quarterly distributions payable on an OP Unit, but will not be entitled to receive any special distributions. After the measurement date, the number of MYLTIP Units, both vested and unvested, that MYLTIP award recipients have earned, if any, based on the establishment of a performance pool, will be entitled to receive distributions in an amount per unit equal to distributions, both regular and special, payable on an OP Unit.

On January 31, 2014, the measurement period for the Company’s 2011 OPP Unit awards expired and Boston Properties, Inc.'s TSR was not sufficient for employees to earn and therefore become eligible to vest in any of the 2011 OPP Unit awards. As a result, the Company accelerated the then remaining unrecognized compensation expense totaling approximately $1.2 million during the year ended December 31, 2014. Accordingly, all 2011 OPP Unit awards were automatically forfeited.

On February 6, 2015, the measurement period for the Company’s 2012 OPP Unit awards ended and Boston Properties, Inc.'s TSR performance was sufficient for employees to earn and therefore become eligible to vest in a portion of the 2012 OPP Unit awards. The final outperformance pool was determined to be approximately $32.1 million, or approximately 80% of the total maximum outperformance pool of $40.0 million. As a result, 174,549 2012 OPP Units were automatically forfeited.

On January 28, 2015, Boston Properties Limited Partnership paid a special cash distribution on the OP Units and LTIP Units in the amount of $4.50 per unit, a regular quarterly cash distribution on the OP Units and LTIP Units in the amount of $0.65 per unit, and a regular quarterly distribution on the 2012 OPP Units, 2013 MYLTIP Units and 2014 MYLTIP Units in the amount of $0.065 per unit, to holders of record as of the close of business on December 31, 2014. The special cash distribution was in addition to the regular quarterly distribution on the OP Units and LTIP Units. Unless and until they are earned, holders of OPP Units and MYLTIP Units are not entitled to receive any special distributions. On April 30, 2015, Boston Properties Limited Partnership paid a distribution on the OP Units and LTIP Units in the amount of $0.65 per unit, a distribution on the 2012 OPP Units in the amount of $0.416 per unit (representing a blended rate for periods prior to and after February 6, 2015, which was the valuation date for the 2012 Outperformance Plan), and a distribution on the 2013 MYLTIP Units, 2014 MYLTIP Units and 2015 MYLTIP Units in the amount of $0.065 per unit, to holders of record as of the close of business on March 31, 2015. On July 31, 2015, Boston Properties Limited Partnership paid a distribution on the OP Units and LTIP Units (including the 2012 OPP Units) in the amount of $0.65 per unit and a distribution on the 2013 MYLTIP Units, 2014 MYLTIP Units and 2015 MYLTIP Units in the amount of $0.065 per unit, to holders of record as of the close of business on June 30, 2015. On October 30, 2015, Boston Properties Limited Partnership paid a distribution on the OP Units and LTIP Units (including the 2012 OPP Units) in the amount of $0.65 per unit and a distribution on the 2013 MYLTIP Units, 2014 MYLTIP Units and 2015 MYLTIP Units in the amount of $0.065 per unit, to holders of record as of the close of business on September 30, 2015. On December 17, 2015, Boston Properties, Inc., as general partner of Boston Properties Limited Partnership, declared a special cash distribution on the OP Units and LTIP Units (including the 2012 OPP Units) in the amount of $1.25 per unit payable on January 28, 2016 to unitholders of record as of the close of business on December 31, 2015. The special cash distribution was in addition to the regular quarterly distribution on the OP Units and LTIP Units (including the 2012 OPP Units) of $0.65 per unit and the distribution on the 2013 MYLTIP Units, 2014 MYLTIP Units and 2015 MYLTIP Units in the amount of $0.065 per unit, in each case payable on January 28, 2016 to unitholders of record as of the close of business on December 31, 2015.

A holder of an OP Unit may present such OP Unit to Boston Properties Limited Partnership for redemption at any time (subject to restrictions agreed upon at the time of issuance of OP Units to particular holders that may restrict such redemption right for a period of time, generally one year from issuance). Upon presentation of an OP Unit for redemption, Boston Properties Limited Partnership must redeem such OP Unit for cash equal to the then value of a share of common stock of Boston Properties, Inc. Boston Properties, Inc. may, in its sole discretion, elect to assume and satisfy the redemption obligation by paying either cash or issuing one share of Common Stock. The value of the OP Units (not owned by Boston Properties, Inc. and including LTIP Units assuming that all conditions had been met for the conversion thereof) had all of such units been redeemed at December 31, 2015 was approximately $2.3 billion based on the closing price of Boston Properties, Inc.’s common stock of $127.54 per share on December 31, 2015.

Boston Properties Limited Partnership

The following table reflects the activity of noncontrolling interests—redeemable common units of Boston Properties Limited Partnership for the years ended December 31, 2015, 2014 and 2013 (in thousands):



Balance at December 31, 2012	$	1,836,522
Contributions	26,398
Net income	84,236
Distributions	(83,448		)
Conversion of redeemable partnership units	(30,291		)
Unearned compensation	1,472
Other comprehensive income	252
Adjustment to reflect redeemable partnership units at redemption value	(124,923		)
Balance at December 31, 2013	1,710,218
Contributions	23,990
Net income	50,862
Distributions	(126,948		)
Conversion of redeemable partnership units	(2,700		)
Unearned compensation	(2,813		)
Other comprehensive income	256
Adjustment to reflect redeemable partnership units at redemption value	657,181
Balance at December 31, 2014	2,310,046
Contributions	39,030
Net income	66,951
Distributions	(69,447		)
Conversion of redeemable partnership units	(14,343		)
Unearned compensation	(4,579		)
Other comprehensive loss	(554		)
Adjustment to reflect redeemable partnership units at redemption value	(40,415		)
Balance at December 31, 2015	$	2,286,689

Noncontrolling Interests—Property Partnerships

The noncontrolling interests in property partnerships consist of the outside equity interests in ventures that are consolidated with the financial results of the Company because the Company exercises control over the entities that own the properties. The equity interests in these ventures that are not owned by the Company, totaling approximately $1.6 billion at December 31, 2015 and December 31, 2014, are included in Noncontrolling Interests—Property Partnerships on the accompanying Consolidated Balance Sheets.

On May 31, 2013, the Company’s two joint venture partners in 767 Venture, LLC (the entity that owns 767 Fifth Avenue (the General Motors Building) in New York City) transferred all of their interests in the joint venture to third parties. In connection with the transfer, the Company and its new joint venture partners modified the Company’s relative decision making authority and consent rights with respect to the joint venture’s assets and operations. These changes resulted in the Company having sufficient financial and operating control over 767 Venture, LLC such that the Company now accounts for the assets, liabilities and operations of 767 Venture, LLC on a consolidated basis in its financial statements instead of under the equity method of accounting. Upon consolidation, the Company recognized the new joint venture partners’ aggregate 40% equity interest at its aggregate fair value of approximately $480.9 million within Noncontrolling Interests-Property Partnerships on the accompanying Consolidated Balance Sheets.

On October 9, 2013, the Company completed the sale of a 45% ownership interest in its Times Square Tower property for a gross sale price of $684.0 million in cash. Net cash proceeds totaled approximately $673.1 million, after the payment of transaction costs. In connection with the sale, the Company formed a limited liability company with the buyer and will provide customary property management and leasing services to the joint venture. Times Square Tower is an approximately 1,246,000 net rentable square foot Class A office tower located in New York City. The transaction did not qualify as a sale of real estate for financial reporting purposes because the Company effectively continues to control the property and thus will continue to account for the entity on a consolidated basis in its financial statements. The Company has accounted for the transaction as an equity transaction and has recognized noncontrolling interest in its consolidated balance sheets totaling approximately $243.5 million, which is equal to 45% of the carrying value of the total equity of the property immediately prior to the transaction. The difference between the net cash proceeds received and the noncontrolling interest recognized, which was approximately $429.6 million, has not been reflected as a gain on sale of real estate in the Company’s consolidated statements of operations and has instead been reflected as an increase to Additional Paid-in Capital and Partners' Capital in Boston Properties, Inc.’s and Boston Properties Limited Partnership's Consolidated Balance Sheets, respectively.

On October 30, 2014, the Company completed the sale of a 45% interest in each of 601 Lexington Avenue in New York City and Atlantic Wharf Office Building and 100 Federal Street in Boston for an aggregate gross sale price of approximately $1.827 billion in cash, less the partner’s pro rata share of the indebtedness collateralized by 601 Lexington Avenue. Net cash proceeds totaled approximately $1.497 billion, after the payment of transaction costs. In connection with the sale, the Company formed a limited liability company for each property with the buyer and will provide customary property management and leasing services to the joint ventures. 601 Lexington Avenue is a 1,669,000 square foot Class A office complex located in Midtown Manhattan. The property consists of a 59-story tower as well as a six-story low-rise office and retail building. The property is subject to existing mortgage indebtedness of approximately $712.9 million. The Atlantic Wharf Office Building is a 791,000 square foot Class A office tower located on Boston's Waterfront. 100 Federal Street is a 1,323,000 square foot Class A office tower located in Boston’s Financial District. The transaction did not qualify as a sale of real estate for financial reporting purposes as the Company continues to effectively control these properties and thus will continue to account for the properties on a consolidated basis in its financial statements. The Company has accounted for the transaction as an equity transaction and has recognized noncontrolling interest in its consolidated balance sheets totaling approximately $849.0 million, which is equal to 45% of the aggregate carrying value of the total equity of the properties immediately prior to the transaction. The difference between the net cash proceeds received and the noncontrolling interest recognized, which was approximately $648.4 million, has not been reflected as a gain on sale of real estate in the Company's consolidated statements of operations and has instead been reflected as an increase in Additional Paid-in Capital in the Company’s Consolidated Balance Sheets.

On September 18, 2015, a consolidated entity in which the Company has a 50% interest completed the sale of its 505 9th Street, N.W. property located in Washington, DC for approximately $318.0 million, including the assumption by the buyer of approximately $117.0 million of mortgage indebtedness (See Note 6). 505 9th Street, N.W. is an approximately 322,000 net rentable square foot Class A office building. Net cash proceeds totaled approximately $194.6 million, of which the partners’ share was approximately $97.3 million. The Company recognized a gain on sale of real estate totaling approximately $199.5 million and $199.7 million for Boston Properties, Inc. and Boston Properties Limited Partnership, respectively, of which approximately $101.1 million was allocated to the outside partners and is included within Noncontrolling Interests in Property Partnerships in the Company’s Consolidated Statements of Operations (See Note 3). On December 10, 2015, the consolidated entity was dissolved and the Company reclassified the remaining noncontrolling interest balance totaling approximately $4.1 million to Accounts Payable and Accrued Expenses on the Consolidated Balances Sheets.

The following table reflects the activity of the noncontrolling interests—property partnerships for the years ended December 31, 2015, 2014 and 2013 (in thousands):



Balance at December 31, 2012	$	(1,964	)
Fair value of capital recorded upon consolidation	480,861
Capital contributions	257,564
Net loss	(5,290		)
Distributions	(5,039		)
Balance at December 31, 2013	726,132
Capital contributions	887,975
Net income	19,478
Distributions	(31,118		)
Balance at December 31, 2014	1,602,467
Capital contributions	3,758
Dissolution	(4,082		)
Net income	144,734
Accumulated other comprehensive loss	(2,428		)
Distributions	(170,049		)
Balance at December 31, 2015	$	1,574,400