3. Real Estate

Boston Properties, Inc.

Real estate consisted of the following at December 31 (in thousands):



	2016			2015
Land	$	4,879,020		$	4,806,021
Land held for future development (1)	246,656			252,195
Buildings and improvements	11,890,626			11,709,285
Tenant improvements	2,060,315			1,920,247
Furniture, fixtures and equipment	32,687			29,852
Construction in progress	1,037,959			763,935
Total	20,147,263			19,481,535
Less: Accumulated depreciation	(4,222,235		)	(3,925,894		)
	$	15,925,028		$	15,555,641

_______________


(1)	Includes pre-development costs.

Boston Properties Limited Partnership

Real estate consisted of the following at December 31 (in thousands):



	2016			2015
Land	$	4,774,460		$	4,700,793
Land held for future development (1)	246,656			252,195
Buildings and improvements	11,581,795			11,394,119
Tenant improvements	2,060,315			1,920,247
Furniture, fixtures and equipment	32,687			29,852
Construction in progress	1,037,959			763,935
Total	19,733,872			19,061,141
Less: Accumulated depreciation	(4,136,364		)	(3,846,816		)
	$	15,597,508		$	15,214,325

_______________


(1)	Includes pre-development costs.

Acquisitions

On April 22, 2016, the Company acquired 3625-3635 Peterson Way located in Santa Clara, California for a purchase price of approximately $78.0 million in cash. 3625-3635 Peterson Way is an approximately 218,000 net rentable square foot office property. The property is 100% leased to a single tenant through March 2021. Following the lease expiration, the Company intends to develop the site into a Class A office campus containing an aggregate of approximately 632,000 net rentable square feet. The following table summarizes the allocation of the aggregate purchase price of 3625-3635 Peterson Way at the date of acquisition (in thousands).



Land	$	63,206
Building and improvements	7,210
Tenant improvements	7,669
In-place lease intangibles	4,262
Below-market lease intangible	(4,347		)
Net assets acquired	$	78,000

The following table summarizes the estimated annual amortization of the acquired below-market lease intangible and the acquired in-place lease intangibles for 3625-3635 Peterson Way for the remainder of 2016 and each of the next four succeeding fiscal years (in thousands).



	Acquired In-Place Lease Intangibles		Acquired Below- Market Lease Intangible
Period from April 22, 2016 through December 31, 2016	$	296	$	(589	)
2017	444		(884		)
2018	444		(884		)
2019	444		(884		)
2020	444		(884		)

3625-3635 Peterson Way contributed approximately $3.9 million of revenue and approximately $0.2 million of earnings to the Company for the period from April 22, 2016 through December 31, 2016.

Dispositions

On February 1, 2016, the Company completed the sale of its 415 Main Street property located in Cambridge, Massachusetts to the tenant for a gross sale price of approximately $105.4 million. Net cash proceeds totaled approximately $104.9 million, resulting in a gain on sale of real estate totaling approximately $60.8 million for Boston Properties, Inc. and approximately $63.0 million for Boston Properties Limited Partnership. As part of its lease signed on July 14, 2004, the tenant was granted a fixed-price option to purchase the building at the beginning of the 11th lease year, which option was exercised by the tenant on October 22, 2014. 415 Main Street is an office property with approximately 231,000 net rentable square feet. 415 Main Street contributed approximately $1.2 million of net income to the Company for the period from January 1, 2016 through January 31, 2016 and contributed approximately $8.3 million and $8.2 million of net income to the Company for the years ended December 31, 2015 and 2014, respectively.

On August 16, 2016, the Company completed the sale of a parcel of land within its Broad Run Business Park property located in Loudoun County, Virginia for a gross sale price of approximately $18.0 million. Net cash proceeds totaled approximately $17.9 million, resulting in a gain on sale of real estate totaling approximately $13.0 million.

On September 27, 2016, the Company executed a letter of intent for the sale of the remaining parcel of land at its Washingtonian North property located in Gaithersburg, Maryland. The letter of intent caused the Company to reevaluate its strategy for the land and, based on a shorter than expected hold period, the Company reduced the carrying value of the land to the estimated net sales price and recognized an impairment loss of approximately $1.8 million during the year ended December 31, 2016. On November 14, 2016, the Company executed an agreement for the sale of the land for a sale price of approximately $7.8 million. The sale is subject to the receipt of certain approvals and the satisfaction of customary closing conditions and there can be no assurance that the sale will be consummated on the terms currently contemplated or at all.

Development/Redevelopment

On May 27, 2016, the Company completed and fully placed in-service 601 Massachusetts Avenue, a Class A office project with approximately 479,000 net rentable square feet located in Washington, DC.

On May 27, 2016, the Company completed and fully placed in-service 804 Carnegie Center, a Class A office project with approximately 130,000 net rentable square feet located in Princeton, New Jersey.

On June 24, 2016, the Company completed and fully placed in-service 10 CityPoint, a Class A office project with approximately 241,000 net rentable square feet located in Waltham, Massachusetts.

On August 19, 2016, the consolidated entity in which the Company has a 55% interest and that owns 601 Lexington Avenue located in New York City commenced the redevelopment of the six-story, low-rise office and retail building component of the complex, which will be called 159 East 53rd Street. The redeveloped portion of the low-rise building will contain approximately 195,000 net rentable square feet of Class A office space and approximately 25,000 net rentable square feet of retail space. The Company will capitalize incremental costs during the redevelopment. Boston Properties, Inc. and Boston Properties Limited Partnership recognized approximately $50.8 million and $47.6 million, respectively, of depreciation expense associated with the acceleration of depreciation on the assets being removed from service and demolished as part of the redevelopment of the property. Approximately $21.4 million of those amounts was allocated to the outside partners and is included within Noncontrolling Interests in Property Partnerships in the Company’s Consolidated Statements of Operations.

On September 16, 2016, the Company partially placed in-service 888 Boylston Street, a Class A office project with approximately 425,000 net rentable square feet located in Boston, Massachusetts.

On November 7, 2016, the Company entered into a 15-year lease with a tenant for approximately 476,500 net rentable square feet of Class A office space in a build-to-suit development project to be located at the Company’s 145 Broadway property at Kendall Center in Cambridge, Massachusetts. 145 Broadway currently consists of an approximately 80,000 net rentable square foot Class A office property that will be demolished and developed into an approximately 486,000 net rentable square foot Class A office property, including approximately 9,500 net rentable square feet of retail space. The commencement of the redevelopment project is subject to the receipt of the remaining necessary approvals, and the Company currently expects to begin the project in the second quarter of 2017 with the relocation of an existing tenant to another property within the Company’s portfolio. The Company expects the building will be available for occupancy by the new tenant during the fourth quarter of 2019. There can be no assurance that the project will commence or that the building will be available for occupancy on the anticipated schedule or at all.

On December 29, 2016, the Company commenced the redevelopment of 191 Spring Street, a Class A office project with approximately 160,000 net rentable square feet located in Lexington, Massachusetts.

Option and Development Agreements

On October 24, 2016, the Company entered into an option agreement that will allow it to ground lease, with the future right to purchase, real property adjacent to the MacArthur BART station located in Oakland, California, that could support the development of a 400-unit residential building and supporting retail space.

On December 6, 2016, the Company entered into a development agreement with The George Washington University to pursue the development of a Class A office property with approximately 482,000 net rentable square feet on land parcels located at 2100 Pennsylvania Avenue in Washington, DC. The development agreement provides for the execution of a 75-year ground lease for the property upon completion of the entitlement process and relocation of existing tenants anticipated to occur in 2019. The Company has made a deposit of $15.0 million that, upon execution of the ground lease, will be credited against ground rent under the ground lease.

Lease Terminations

On February 3, 2016, the Company entered into a lease termination agreement with a tenant for an approximately 85,000 square foot lease at its 250 West 55th Street property located in New York City. The lease was scheduled to expire on February 28, 2035. In consideration for the termination of the lease, the tenant paid the Company approximately $45.0 million, which was recognized as termination income and is included in Base Rent in the Consolidated Statements of Operations for the year ended December 31, 2016.