3. Real Estate

Boston Properties, Inc.

Real estate consisted of the following at March 31, 2019 and December 31, 2018 (in thousands):



	March 31, 2019			December 31, 2018
Land	$	5,061,532		$	5,072,568
Right of use assets - finance leases	187,292			—
Right of use assets - operating leases	151,166			—
Land held for future development (1)	258,221			200,498
Buildings and improvements	13,286,605			13,356,751
Tenant improvements	2,444,358			2,396,932
Furniture, fixtures and equipment	43,080			44,351
Construction in progress	647,469			578,796
Total	22,079,723			21,649,896
Less: Accumulated depreciation	(4,962,959		)	(4,897,777		)
	$	17,116,764		$	16,752,119

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(1)	Includes pre-development costs.

Boston Properties Limited Partnership

Real estate consisted of the following at March 31, 2019 and December 31, 2018 (in thousands):



	March 31, 2019			December 31, 2018
Land	$	4,961,028		$	4,971,475
Right of use assets - finance leases	187,292			—
Right of use assets - operating leases	151,166			—
Land held for future development (1)	258,221			200,498
Buildings and improvements	12,991,108			13,059,488
Tenant improvements	2,444,358			2,396,932
Furniture, fixtures and equipment	43,080			44,351
Construction in progress	647,469			578,796
Total	21,683,722			21,251,540
Less: Accumulated depreciation	(4,864,334		)	(4,800,475		)
	$	16,819,388		$	16,451,065

_______________


(1)	Includes pre-development costs.

Development

On February 14, 2019, the Company announced that it had entered into a 15-year lease with Google, LLC for approximately 362,000 net rentable square feet of Class A office space in a build-to-suit development project to be located at the Company’s 325 Main Street property at Kendall Center in Cambridge, Massachusetts. 325 Main Street currently consists of an approximately 115,000 net rentable square foot Class A office property that will be demolished and developed into an approximately 400,000 net rentable square foot Class A office property, including approximately 38,000 net rentable square feet of retail space. There can be no assurance that the project will commence.

Ground Lease

On January 24, 2019, the ground lessor under the Company's 65-year ground lease for land totaling approximately 5.6 acres at Platform 16 located in San Jose, California, which will support approximately 1.1 million square feet of commercial office space, made available for lease to the Company the remaining land parcels. As a result, the Company recognized the remaining portion of the right of use finance lease asset and finance lease liability. The ground lease provides the Company with the right to purchase the land during a 12-month period commencing February 1, 2020 at a purchase price of approximately $134.8 million. The Company is reasonably certain that it will exercise the option to purchase the land and as a result, the Company has concluded that the lease should be accounted for as a finance lease. As a result, the Company recorded an approximately $122.6 million right of use asset - finance lease and a lease liability - finance lease on the Company’s Consolidated Balance Sheets. Finance lease assets and liabilities are accounted for at the lower of fair market value or the present value of future lease payments. The finance lease is for land only. Therefore, the Company will not depreciate the right of use asset - finance lease because land is assumed to have an indefinite life.

As of January 24, 2019, the lease payments from the finance lease are as follows (in thousands):



Period from January 24, 2019 through December 31, 2019	$	17,918
2020	109,460
Total expected minimum lease payments	127,378
Interest portion	(4,815		)
Present value of expected net lease payments	$	122,563

Acquisitions

On January 10, 2019, the Company acquired land parcels at its Carnegie Center property located in Princeton, New Jersey for a gross purchase price of approximately $51.5 million, which includes an aggregate of approximately $8.6 million of additional amounts that are payable in the future to the seller upon the development or sale of each of the parcels. The land parcels could support approximately 1.7 million square feet of development.

Dispositions

On January 24, 2019, the Company completed the sale of its 2600 Tower Oaks Boulevard property located in Rockville, Maryland for a gross sales price of approximately $22.7 million. Net cash proceeds totaled approximately $21.4 million, resulting in a loss on sale of real estate totaling approximately $0.6 million. The Company recognized an impairment loss totaling approximately $3.1 million for Boston Properties, Inc. and approximately $1.5 million for Boston Properties Limited Partnership during the year ended December 31, 2018. 2600 Tower Oaks Boulevard is an approximately 179,000 net rentable square foot Class A office property. 2600 Tower Oaks contributed approximately $(0.2) million of net loss to the Company for the period from January 1, 2019 through January 23, 2019 and contributed approximately $(0.2) million of net loss to the Company for the three months ended March 31, 2018.

At March 31, 2019, the Company evaluated the expected hold period of its One Tower Center property and based on a shorter than expected hold period, the Company reduced the carrying value of the property to its estimated fair value at March 31, 2019 and recognized an impairment loss totaling approximately $24.0 million for Boston Properties, Inc. and approximately $22.3 million for Boston Properties Limited Partnership. The Company’s estimated fair value was based on a pending offer from a third party to acquire the property and the subsequent execution of a purchase and sale agreement on April 18, 2019 for a gross sale price of approximately $38.0 million (See Note 12). One Tower Center is an approximately 410,000 net rentable square foot Class A office property located in East Brunswick, New Jersey.