Segment Information

6 Months Ended

Jun. 30, 2021

Segment Reporting [Abstract]

Segment Reporting Disclosure [Text Block]

12. Segment Information

The following tables present reconciliations of Net Income Attributable to Boston Properties, Inc. Common Shareholders to the Company’s share of Net Operating Income and Net Income Attributable to Boston Properties Limited Partnership Common Unitholders to the Company’s share of Net Operating Income for the three and six months ended June 30, 2021 and 2020.

Boston Properties, Inc.

	Three months ended June 30,				Six months ended June 30,
	2021		2020		2021		2020
	(in thousands)
Net income attributable to Boston Properties, Inc. common shareholders	$	111,703	$	266,525	$	203,372	$	764,232
Add:
Preferred stock redemption charge	—		—		6,412		—
Preferred dividends	—		2,625		2,560		5,250
Noncontrolling interest—common units of the Operating Partnership	12,383		30,197		23,422		87,525
Noncontrolling interests in property partnerships	17,164		(767)		33,631		18,719
Interest expense	106,319		107,142		214,221		208,733
Losses from early extinguishment of debt	—		—		898		—
Net operating income from unconsolidated joint ventures	25,417		27,911		50,212		56,669
Depreciation and amortization expense	183,838		178,188		360,403		349,282
Transaction costs	751		332		1,082		947
Payroll and related costs from management services contracts	2,655		2,484		6,160		5,721
General and administrative expense	38,405		37,743		83,364		74,197
Less:
Net operating income attributable to noncontrolling interests in property partnerships	46,287		32,427		90,663		80,088
Gains (losses) from investments in securities	2,275		4,552		3,934		(893)
Interest and other income (loss)	1,452		1,305		2,620		4,322
Gains on sales of real estate	7,756		203,767		7,756		613,932
Income (loss) from unconsolidated joint ventures	(1,373)		1,832		3,852		1,463
Direct reimbursements of payroll and related costs from management services contracts	2,655		2,484		6,160		5,721
Development and management services revenue	7,284		8,125		14,087		16,004
Company’s share of Net Operating Income	$	432,299	$	397,888	$	856,665	$	850,638

Boston Properties Limited Partnership

	Three months ended June 30,				Six months ended June 30,
	2021		2020		2021		2020
	(in thousands)
Net income attributable to Boston Properties Limited Partnership common unitholders	$	125,846	$	301,975	$	231,619	$	868,308
Add:
Preferred unit redemption charge	—		—		6,412		—
Preferred distributions	—		2,625		2,560		5,250
Noncontrolling interests in property partnerships	17,164		(767)		33,631		18,719
Interest expense	106,319		107,142		214,221		208,733
Losses from early extinguishment of debt	—		—		898		—
Net operating income from unconsolidated joint ventures	25,417		27,911		50,212		56,669
Depreciation and amortization expense	182,078		176,409		355,578		345,694
Transaction costs	751		332		1,082		947
Payroll and related costs from management services contracts	2,655		2,484		6,160		5,721
General and administrative expense	38,405		37,743		83,364		74,197
Less:
Net operating income attributable to noncontrolling interests in property partnerships	46,287		32,427		90,663		80,088
Gains (losses) from investments in securities	2,275		4,552		3,934		(893)
Interest and other income (loss)	1,452		1,305		2,620		4,322
Gains on sales of real estate	7,756		207,241		7,756		626,895
Income (loss) from unconsolidated joint ventures	(1,373)		1,832		3,852		1,463
Direct reimbursements of payroll and related costs from management services contracts	2,655		2,484		6,160		5,721
Development and management services revenue	7,284		8,125		14,087		16,004
Company’s share of Net Operating Income	$	432,299	$	397,888	$	856,665	$	850,638

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, as applicable, the most directly comparable GAAP financial measures, plus (1) preferred stock/unit redemption charge, preferred dividends/distributions, net income attributable to noncontrolling interests, interest expense, losses from early extinguishment of debt, depreciation and amortization expense, transaction costs, payroll and related costs from management services contracts and corporate general and administrative expense less (2) gains (losses) from investments in securities, interest and other income (loss), gains on sales of real estate, income (loss) from unconsolidated joint ventures, direct reimbursements of payroll and related costs from management services contracts 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 results of operations and financial condition 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., used for other investment activity). In addition, depreciation and amortization expense, because of historical cost accounting and useful life estimates, 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.

The Company’s internal reporting utilizes its share of NOI, which includes its share of NOI from consolidated and unconsolidated joint ventures, which is a non-GAAP financial measure that is calculated as the consolidated amount, plus the Company’s share of the amount from the Company’s unconsolidated joint ventures (calculated based upon the Company’s economic percentage ownership interest and, in some cases, after priority allocations), minus the Company’s partners’ share of the amount from the Company’s consolidated joint ventures (calculated based upon the partners’ economic percentage ownership interests and, in some cases, after priority allocations, income allocation to private REIT shareholders and their share of fees due to the Company). The Company’s share of NOI from unconsolidated joint ventures does not include its share of gains on sales of real estate from unconsolidated joint ventures, both of which are included within Income From Unconsolidated Joint Ventures in the Company’s Consolidated Statements of Operations.  Management utilizes its share of NOI in assessing its performance as the Company has several significant joint ventures and, in some cases, the Company exercises significant influence over, but does not control, the joint venture, in which case GAAP requires that the Company account for the joint venture entity using the equity method of accounting and the Company does not consolidate it for financial reporting purposes. In other cases, GAAP requires that the Company consolidate the venture even though the Company’s partner(s) owns a significant percentage interest. As a result, the presentations of the Company’s share of NOI should not be considered a substitute for, and should only be considered together with and as a supplement to, the Company’s financial information presented in accordance with GAAP.

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 stock/unit redemption charge, preferred dividends/distributions, interest expense, losses from early extinguishment of debt, depreciation and amortization expense, transaction costs, payroll and related costs from management services contracts, corporate general and administrative expense, gains (losses) from investments in securities, interest and other income (loss), gains on sales of real estate, income (loss) from unconsolidated joint ventures, direct reimbursements of payroll and related costs from management services contracts and development and management services revenue are not included in NOI and are provided as reconciling items to the Company’s reconciliations of its share of NOI to net income attributable to common shareholders/unitholders.

The Company’s segments are based on the Company’s method of internal reporting which classifies its operations by geographic area. The Company’s segments by geographic area are Boston, Los Angeles, New York, San Francisco and Washington, DC. The Company also presents information for each segment by property type, including Office, Residential and Hotel.

Included within the Office property type are commercial office and retail leases, as well as parking revenue.  Upon the adoption of ASC 842, any write-off for bad debt, including accrued rent, will be recorded as a reduction to lease revenue. As a result of COVID-19, during the three and six months ended June 30, 2021, the Company wrote off approximately $0.6 million and $1.2 million, respectively, related to accrued rent, net balances and approximately $0.3 million and $0.1 million, respectively, related to accounts receivable, net balances. During the three and six months ended June 30, 2020, the Company wrote off approximately $35.9 million and $37.4 million, respectively, related to accrued rent, net balances and approximately $18.0 million and $18.9 million related to accounts receivable, net balances. The write-offs were for tenants, primarily in the retail sector, that either terminated their leases or for which the Company considered their accrued rent and/or accounts receivable balances were no longer probable of collection.

In addition, parking and other revenue for the three months ended June 30, 2021 increased by approximately $4.3 million compared to the three months ended June 30, 2020. Parking and other revenue for the six months ended June 30, 2021 decreased by approximately $3.2 million compared to 2020.

The Boston Marriott Cambridge closed in March 2020 due to COVID-19. The hotel re-opened on October 2, 2020 but has operated at a reduced occupancy due to the continued impact of COVID-19 on business and leisure travel. The closing of the hotel for more than two fiscal quarters, and the weak demand and low occupancy since its re-opening, have had, and are expected to continue to have, a material adverse effect on the hotel’s operations and thus the results of the Company’s Hotel property type.

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

For the three months ended June 30, 2021:

	Boston			Los Angeles			New York			San Francisco			Washington, DC			Total
Rental Revenue: (1)
Office	$	229,571		$	—		$	252,182		$	126,181		$	84,610		$	692,544
Residential	3,131			—			—			690			5,942			9,763
Hotel	1,561			—			—			—			—			1,561
Total	234,263			—			252,182			126,871			90,552			703,868
% of Grand Totals	33.28		%	—		%	35.84		%	18.02		%	12.86		%	100.00		%
Rental Expenses:
Office	78,165			—			92,662			40,954			30,994			242,775
Residential	1,435			—			—			1,544			2,949			5,928
Hotel	1,996			—			—			—			—			1,996
Total	81,596			—			92,662			42,498			33,943			250,699
% of Grand Totals	32.55		%	—		%	36.96		%	16.95		%	13.54		%	100.00		%
Net operating income	$	152,667		$	—		$	159,520		$	84,373		$	56,609		$	453,169
% of Grand Totals	33.69		%	—		%	35.20		%	18.62		%	12.49		%	100.00		%
Less: Net operating income attributable to noncontrolling interests in property partnerships	(10,576)			—			(35,711)			—			—			(46,287)
Add: Company’s share of net operating income from unconsolidated joint ventures	3,624			12,265			172			3,580			5,776			25,417
Company’s share of net operating income	$	145,715		$	12,265		$	123,981		$	87,953		$	62,385		$	432,299
% of Grand Totals	33.70		%	2.84		%	28.68		%	20.35		%	14.43		%	100.00		%

  _______________

(1)Rental Revenue is equal to Total Revenue per the Company’s Consolidated Statements of Operations, less Development and Management Services Revenue and Direct Reimbursements of Payroll and Related Costs from Management Services Contracts Revenue per the Consolidated Statements of Operations.

For the three months ended June 30, 2020:

	Boston			Los Angeles			New York			San Francisco			Washington, DC			Total
Rental Revenue: (1)
Office	$	218,351		$	—		$	204,242		$	128,233		$	83,837		$	634,663
Residential	3,401			—			—			—			6,001			9,402
Hotel	99			—			—			—			—			99
Total	221,851			—			204,242			128,233			89,838			644,164
% of Grand Totals	34.43		%	—		%	31.71		%	19.91		%	13.95		%	100.00		%
Rental Expenses:
Office	75,694			—			88,367			39,081			32,680			235,822
Residential	1,235			—			—			—			2,730			3,965
Hotel	1,973			—			—			—			—			1,973
Total	78,902			—			88,367			39,081			35,410			241,760
% of Grand Totals	32.64		%	—		%	36.54		%	16.17		%	14.65		%	100.00		%
Net operating income	$	142,949		$	—		$	115,875		$	89,152		$	54,428		$	402,404
% of Grand Totals	35.52		%	—		%	28.80		%	22.15		%	13.53		%	100.00		%
Less: Net operating income attributable to noncontrolling interests in property partnerships	(10,576)			—			(21,851)			—			—			(32,427)
Add: Company’s share of net operating income from unconsolidated joint ventures	2,627			15,026			815			4,127			5,316			27,911
Company’s share of net operating income	$	135,000		$	15,026		$	94,839		$	93,279		$	59,744		$	397,888
% of Grand Totals	33.92		%	3.78		%	23.84		%	23.44		%	15.02		%	100.00		%

  _______________

(1)Rental Revenue is equal to Total Revenue per the Company’s Consolidated Statements of Operations, less Development and Management Services Revenue and Direct Reimbursements of Payroll and Related Costs from Management Services Contracts Revenue per the Consolidated Statements of Operations.

For the six months ended June 30, 2021:

	Boston			Los Angeles			New York			San Francisco			Washington, DC			Total
Rental Revenue: (1)
Office	$	459,974		$	—		$	502,346		$	256,779		$	167,025		$	1,386,124
Residential	6,176			—			—			1,011			11,751			18,938
Hotel	2,193			—			—			—			—			2,193
Total	468,343			—			502,346			257,790			178,776			1,407,255
% of Grand Totals	33.28		%	—		%	35.70		%	18.32		%	12.70		%	100.00		%
Rental Expenses:
Office	158,046			—			192,047			81,203			62,741			494,037
Residential	2,890			—			—			3,230			5,935			12,055
Hotel	4,047			—			—			—			—			4,047
Total	164,983			—			192,047			84,433			68,676			510,139
% of Grand Totals	32.34		%	—		%	37.65		%	16.55		%	13.46		%	100.00		%
Net operating income	$	303,360		$	—		$	310,299		$	173,357		$	110,100		$	897,116
% of Grand Totals	33.82		%	—		%	34.59		%	19.32		%	12.27		%	100.00		%
Less: Net operating income attributable to noncontrolling interests in property partnerships	(20,800)			—			(69,863)			—			—			(90,663)
Add: Company’s share of net operating income from unconsolidated joint ventures	5,905			26,457			(621)			7,060			11,411			50,212
Company’s share of net operating income	$	288,465		$	26,457		$	239,815		$	180,417		$	121,511		$	856,665
% of Grand Totals	33.68		%	3.09		%	27.99		%	21.06		%	14.18		%	100.00		%

  _______________

(1)Rental Revenue is equal to Total Revenue per the Company’s Consolidated Statements of Operations, less Development and Management Services Revenue and Direct Reimbursements of Payroll and Related Costs from Management Services Contracts Revenue per the Consolidated Statements of Operations.

For the six months ended June 30, 2020:

	Boston			Los Angeles			New York			San Francisco			Washington, DC			Total
Rental Revenue: (1)
Office	$	457,849		$	—		$	459,528		$	264,972		$	176,973		$	1,359,322
Residential	7,469			—			—			—			11,889			19,358
Hotel	6,924			—			—			—			—			6,924
Total	472,242			—			459,528			264,972			188,862			1,385,604
% of Grand Totals	34.09		%	—		%	33.16		%	19.12		%	13.63		%	100.00		%
Rental Expenses:
Office	158,239			—			187,507			81,650			67,328			494,724
Residential	2,575			—			—			—			5,454			8,029
Hotel	8,794			—			—			—			—			8,794
Total	169,608			—			187,507			81,650			72,782			511,547
% of Grand Totals	33.16		%	—		%	36.65		%	15.96		%	14.23		%	100.00		%
Net operating income	$	302,634		$	—		$	272,021		$	183,322		$	116,080		$	874,057
% of Grand Totals	34.63		%	—		%	31.12		%	20.97		%	13.28		%	100.00		%
Less: Net operating income attributable to noncontrolling interests in property partnerships	(21,239)			—			(58,849)			—			—			(80,088)
Add: Company’s share of net operating income from unconsolidated joint ventures	5,726			30,956			1,571			7,286			11,130			56,669
Company’s share of net operating income	$	287,121		$	30,956		$	214,743		$	190,608		$	127,210		$	850,638
% of Grand Totals	33.76		%	3.64		%	25.24		%	22.41		%	14.95		%	100.00		%

  _______________

(1)Rental Revenue is equal to Total Revenue per the Company’s Consolidated Statements of Operations, less Development and Management Services Revenue and Direct Reimbursements of Payroll and Related Costs from Management Services Contracts Revenue per the Consolidated Statements of Operations.