Segment Information

3 Months Ended

Mar. 31, 2017

Segment Reporting [Abstract]

Segment Information

11. Segment Information

The following tables present 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 three months ended March 31, 2017 and 2016.

Boston Properties, Inc.

	Three months ended March 31,
	2017		2016
	(in thousands)
Net income attributable to Boston Properties, Inc. common shareholders	$	97,083	$	181,747
Add:
Preferred dividends	2,625		2,618
Noncontrolling interest—common units of Boston Properties Limited Partnership	11,432		21,393
Noncontrolling interests in property partnerships	4,424		10,464
Interest expense	95,534		105,309
Depreciation and amortization expense	159,205		159,448
Transaction costs	34		25
General and administrative expense	31,386		29,353
Less:
Gains on sales of real estate	133		67,623
Gains from investments in securities	1,042		259
Interest and other income	614		1,505
Income from unconsolidated joint ventures	3,084		1,791
Development and management services revenue	6,472		6,689
Net Operating Income	$	390,378	$	432,490

Boston Properties Limited Partnership

	Three months ended March 31,
	2017		2016
	(in thousands)
Net income attributable to Boston Properties Limited Partnership common unitholders	110,662		207,296
Add:
Preferred distributions	2,625		2,618
Noncontrolling interests in property partnerships	4,424		10,464
Interest expense	95,534		105,309
Depreciation and amortization expense	157,058		157,461
Transaction costs	34		25
General and administrative expense	31,386		29,353
Less:
Gains on sales of real estate	133		69,792
Gains from investments in securities	1,042		259
Interest and other income	614		1,505
Income from unconsolidated joint ventures	3,084		1,791
Development and management services revenue	6,472		6,689
Net Operating Income	$	390,378	$	432,490

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, the most directly comparable GAAP financial measures, plus (1) preferred dividends/distributions, noncontrolling interests, interest expense, depreciation and amortization expense, transaction costs and general and administrative expense less (2) gains on sales of real estate, gains from investments in securities, interest and other income, income from unconsolidated joint ventures and development and management services revenue. The Company believes NOI is useful to investors as a performance measure and believes it provides useful information to investors regarding its financial condition and results of operations 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., for other investment activity). In addition, because of historical cost accounting and useful life estimates, depreciation and amortization may distort operating performance measures at the property level. NOI presented by the Company may not be comparable to NOI reported by other REITs or real estate companies that define NOI differently.

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. Preferred dividends/distributions, noncontrolling interests, gains on sales of real estate, interest expense, gains from investments in securities, interest and other income, income from unconsolidated joint ventures, depreciation and amortization expense, transaction costs, general and administrative expenses and development and management services revenue are not included in Net Operating Income as internal reporting addresses these items on a corporate level.

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: Office, Residential and Hotel.

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

For the three months ended March 31, 2017:

	Boston			New York			San Francisco			Washington, DC			Total
Rental Revenue:
Office	$	185,436		$	241,570		$	84,641		$	102,733		$	614,380
Residential	1,139			—			—			2,817			3,956
Hotel	7,420			—			—			—			7,420
Total	193,995			241,570			84,641			105,550			625,756
% of Grand Totals	31.00		%	38.60		%	13.53		%	16.87		%	100.00		%
Rental Expenses:
Office	75,256			91,684			24,474			35,322			226,736
Residential	495			—			—			1,056			1,551
Hotel	7,091			—			—			—			7,091
Total	82,842			91,684			24,474			36,378			235,378
% of Grand Totals	35.19		%	38.95		%	10.40		%	15.46		%	100.00		%
Net operating income	$	111,153		$	149,886		$	60,167		$	69,172		$	390,378
% of Grand Totals	28.47		%	38.40		%	15.41		%	17.72		%	100.00		%

For the three months ended March 31, 2016:

	Boston			New York			San Francisco			Washington, DC			Total
Rental Revenue:
Office	$	177,827		$	291,858		$	76,317		$	100,488		$	646,490
Residential	1,171			—			—			2,878			4,049
Hotel	8,757			—			—			—			8,757
Total	187,755			291,858			76,317			103,366			659,296
% of Grand Totals	28.48		%	44.27		%	11.57		%	15.68		%	100.00		%
Rental Expenses:
Office	70,687			88,798			23,905			34,182			217,572
Residential	520			—			—			1,080			1,600
Hotel	7,634			—			—			—			7,634
Total	78,841			88,798			23,905			35,262			226,806
% of Grand Totals	34.76		%	39.15		%	10.54		%	15.55		%	100.00		%
Net operating income	$	108,914		$	203,060		$	52,412		$	68,104		$	432,490
% of Grand Totals	25.18		%	46.95		%	12.12		%	15.75		%	100.00		%