14. 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, 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 income, general and administrative expenses, transaction costs, impairment loss, interest expense, depreciation and amortization expense, gains (losses) from investments in securities, gains (losses) from early extinguishments of debt, income from unconsolidated joint ventures, gains on consolidation of joint ventures, discontinued operations, gains on sales of real estate, noncontrolling interests and preferred dividends/distributions 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. The Company’s management also uses Net Operating Income to evaluate regional property level performance and to make decisions about resource allocations. Further, the Company believes Net Operating Income is useful to investors as a performance measure because, when compared across periods, Net Operating Income reflects the impact on operations from trends in occupancy rates, rental rates, operating costs and acquisition and development activity on an unleveraged basis, providing perspectives not immediately apparent from net income attributable to Boston Properties, Inc. common shareholders and net income attributable to Boston Properties Limited Partnership common unitholders.

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) located in New York City) transferred all of their interests in the joint venture to third parties (See Note 3). Effective as of May 31, 2013, the Company 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 operations for this building are included in the New York region.

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

For the year ended December 31, 2015:



	Boston			New York			San Francisco			Washington, DC			Total
Rental Revenue:
Class A Office	$	692,419		$	1,000,030		$	280,005		$	372,721		$	2,345,175
Office/Technical	23,827			—			22,429			11,907			58,163
Residential	4,801			—			—			14,082			18,883
Hotel	46,046			—			—			—			46,046
Total	767,093			1,000,030			302,434			398,710			2,468,267
% of Grand Totals	31.08		%	40.52		%	12.25		%	16.15		%	100.00		%
Rental Expenses:
Class A Office	280,307			346,897			94,268			127,291			848,763
Office/Technical	7,034			—			3,938			4,290			15,262
Residential	2,006			—			—			6,221			8,227
Hotel	32,084			—			—			—			32,084
Total	321,431			346,897			98,206			137,802			904,336
% of Grand Totals	35.54		%	38.36		%	10.86		%	15.24		%	100.00		%
Net operating income	$	445,662		$	653,133		$	204,228		$	260,908		$	1,563,931
% of Grand Totals	28.50		%	41.76		%	13.06		%	16.68		%	100.00		%

For the year ended December 31, 2014:



	Boston			New York			San Francisco			Washington, DC			Total
Rental Revenue:
Class A Office	$	692,116		$	928,692		$	237,381		$	381,930		$	2,240,119
Office/Technical	23,801			—			23,840			14,344			61,985
Residential	4,528			—			—			21,665			26,193
Hotel	43,385			—			—			—			43,385
Total	763,830			928,692			261,221			417,939			2,371,682
% of Grand Totals	32.21		%	39.16		%	11.01		%	17.62		%	100.00		%
Rental Expenses:
Class A Office	270,947			315,330			85,178			131,447			802,902
Office/Technical	7,173			—			4,955			4,338			16,466
Residential	1,957			—			—			13,965			15,922
Hotel	29,236			—			—			—			29,236
Total	309,313			315,330			90,133			149,750			864,526
% of Grand Totals	35.78		%	36.47		%	10.43		%	17.32		%	100.00		%
Net operating income	$	454,517		$	613,362		$	171,088		$	268,189		$	1,507,156
% of Grand Totals	30.16		%	40.70		%	11.35		%	17.79		%	100.00		%

For the year ended December 31, 2013:



	Boston			New York			San Francisco			Washington, DC			Total
Rental Revenue:
Class A Office	$	665,991		$	725,566		$	214,755		$	381,359		$	1,987,671
Office/Technical	22,617			—			17,259			15,649			55,525
Residential	4,395			—			—			17,923			22,318
Hotel	40,330			—			—			—			40,330
Total	733,333			725,566			232,014			414,931			2,105,844
% of Grand Totals	34.82		%	34.46		%	11.02		%	19.70		%	100.00		%
Rental Expenses:
Class A Office	259,997			251,640			77,905			126,507			716,049
Office/Technical	6,879			—			3,708			4,190			14,777
Residential	1,823			—			—			10,307			12,130
Hotel	28,447			—			—			—			28,447
Total	297,146			251,640			81,613			141,004			771,403
% of Grand Totals	38.52		%	32.62		%	10.58		%	18.28		%	100.00		%
Net operating income	$	436,187		$	473,926		$	150,401		$	273,927		$	1,334,441
% of Grand Totals	32.69		%	35.51		%	11.27		%	20.53		%	100.00		%

Boston Properties, Inc.

The following is a reconciliation of Net Operating Income to net income attributable to Boston Properties, Inc. common shareholders (in thousands):



	Year ended December 31,
		2015			2014			2013
Net Operating Income		$	1,563,931		$	1,507,156		$	1,334,441
Add:
Development and management services income		22,554			25,316			29,695
Income from unconsolidated joint ventures		22,770			12,769			75,074
Gains on consolidation of joint ventures		—			—			385,991
Interest and other income		6,777			8,765			8,310
Gains (losses) from investments in securities		(653		)	1,038			2,911
Gains (losses) from early extinguishments of debt		(22,040		)	(10,633		)	122
Income from discontinued operations		—			—			8,022
Gains on sales of real estate from discontinued operations		—			—			112,829
Gain on forgiveness of debt from discontinued operations		—			—			20,182
Gains on sales of real estate		375,895			168,039			—
Less:
General and administrative expense		96,319			98,937			115,329
Transaction costs		1,259			3,140			1,744
Depreciation and amortization expense		639,542			628,573			560,637
Interest expense		432,196			455,743			446,880
Impairment loss		—			—			8,306
Impairment loss from discontinued operations		—			—			3,241
Noncontrolling interest in property partnerships		149,855			30,561			1,347
Noncontrolling interest—redeemable preferred units of the Operating Partnership		6			1,023			6,046
Noncontrolling interest—common units of the Operating Partnership		66,951			50,862			70,085
Noncontrolling interest in discontinued operations—common units of the Operating Partnership		—			—			14,151
Preferred dividends		10,500			10,500			8,057
Net income attributable to Boston Properties, Inc. common shareholders		$	572,606		$	433,111		$	741,754

Boston Properties Limited Partnership

The following is a reconciliation of Net Operating Income to net income attributable to Boston Properties Limited Partnership common unitholders (in thousands):



	Year ended December 31,
		2015			2014			2013
Net Operating Income		$	1,563,931		$	1,507,156		$	1,334,441
Add:
Development and management services income		22,554			25,316			29,695
Income from unconsolidated joint ventures		22,770			12,769			75,074
Gains on consolidation of joint ventures		—			—			385,991
Interest and other income		6,777			8,765			8,310
Gains (losses) from investments in securities		(653		)	1,038			2,911
Gains (losses) from early extinguishments of debt		(22,040		)	(10,633		)	122
Income from discontinued operations		—			—			8,022
Gains on sales of real estate from discontinued operations		—			—			115,459
Gain on forgiveness of debt from discontinued operations		—			—			20,736
Gains on sales of real estate		377,093			174,686			—
Less:
General and administrative expense		96,319			98,937			115,329
Transaction costs		1,259			3,140			1,744
Depreciation and amortization expense		631,549			620,064			552,589
Interest expense		432,196			455,743			446,880
Impairment loss		—			—			4,401
Impairment loss from discontinued operations		—			—			2,852
Noncontrolling interest in property partnerships		149,855			30,561			1,347
Noncontrolling interest—redeemable preferred units		6			1,023			6,046
Preferred distributions		10,500			10,500			8,057
Net income attributable to Boston Properties Limited Partnership common unitholders		$	648,748		$	499,129		$	841,516