Real Estate

12 Months Ended

Dec. 31, 2021

3. Real Estate

Boston Properties, Inc.

Real estate consisted of the following at December 31, 2021 and December 31, 2020 (in thousands):


	December 31, 2021		December 31, 2020
Land	$	5,061,169	$	5,069,206
Right of use assets - finance leases	237,507		237,393
Right of use assets - operating leases (1)	169,778		146,406
Land held for future development (2)	560,355		450,954
Buildings and improvements	14,291,214		13,777,691
Tenant improvements	2,894,025		2,752,880
Furniture, fixtures and equipment	51,695		49,606
Construction in progress	894,172		868,773
Total	24,159,915		23,352,909
Less: Accumulated depreciation	(5,883,961)		(5,534,102)
	$	18,275,954	$	17,818,807

_______________

(1)See Note 4.

(2)Includes pre-development costs.

Boston Properties Limited Partnership

Real estate consisted of the following at December 31, 2021 and December 31, 2020 (in thousands):


	December 31, 2021		December 31, 2020
Land	$	4,964,986	$	4,971,990
Right of use assets - finance leases	237,507		237,393
Right of use assets - operating leases (1)	169,778		146,406
Land held for future development (2)	560,355		450,954
Buildings and improvements	14,014,010		13,498,098
Tenant improvements	2,894,025		2,752,880
Furniture, fixtures and equipment	51,695		49,606
Construction in progress	894,172		868,773
Total	23,786,528		22,976,100
Less: Accumulated depreciation	(5,772,018)		(5,428,576)
	$	18,014,510	$	17,547,524

_______________

(1)See Note 4.

(2)Includes pre-development costs.

Acquisitions

On June 2, 2021, the Company acquired 153 & 211 Second Avenue located in Waltham, Massachusetts for an aggregate purchase price of approximately $100.2 million in cash. 153 & 211 Second Avenue consists of two life sciences lab buildings totaling approximately 137,000 net rentable square feet. The properties are 100% leased. The following table summarizes the allocation of the purchase price, including transaction costs, of 153 & 211 Second Avenue at the date of acquisition (in thousands):


Land	$	33,233
Building and improvements	53,309
Tenant improvements	2,631
In-place lease intangibles	13,415
Below-market lease intangibles	(2,412)
Net assets acquired	$	100,176

On August 2, 2021, the Company acquired Shady Grove Innovation District in Rockville, Maryland, for a purchase price, including transaction costs, of approximately $118.5 million in cash. Shady Grove Innovation District is an approximately 435,000 net rentable square foot, seven-building office park situated on an approximately 31-acre site. The Company intends to reposition three of the buildings, which are currently vacant, to support lab or life sciences uses. As a result, the three vacant buildings are not part of the Company’s in-service portfolio. The Company anticipates that it will redevelop or convert the remaining four buildings to lab or life sciences-related uses as each becomes vacant. The following table summarizes the allocation of the purchase price, including transaction costs, of Shady Grove Innovation District at the date of acquisition (in thousands):


Land	$	52,030
Building and improvements	63,060
Tenant improvements	1,152
In-place lease intangibles	2,523
Above-market lease intangibles	142
Below-market lease intangibles	(403)
Net assets acquired	$	118,504

On December 14, 2021, the Company completed the acquisition of 360 Park Avenue South, an approximately 450,000 square-foot, 20-story Class A office property located in the Midtown South submarket of Manhattan. The gross purchase price, including transaction costs, was approximately $300.7 million and consisted of (1) the assumption of approximately $200.3 million of mortgage debt collateralized by the property and (2) the issuance of approximately 866,503 common units of limited partnership interest in Boston Properties Limited Partnership (“OP Units”). The OP Units issued totaled approximately $99.7 million based on the average closing price per share of BXP common stock for the five trading days immediately preceding the closing date and is recorded as Partners’ Capital in Boston Properties Limited Partnership’s Consolidated Balance Sheets. Following the acquisition, on December 14, 2021, the Company refinanced the mortgage loan with a new lender. The new mortgage loan totals $220.0 million (See Note 7). On December 15, 2021, the Company entered into a joint venture with two institutional partners, as part of the Company’s Strategic Capital Program, and contributed the property and related loan for its aggregate (direct and indirect) 42.21% ownership interest in the joint venture (See Note 6). There was no gain on sale of real estate associated with the contribution of the property to the joint venture. 360 Park Avenue South did not contribute any income to the Company for the period from December 14, 2021 to December 15, 2021. The joint venture has commenced redevelopment activity. The following table summarizes the allocation of the purchase price of 360 Park Avenue South at the date of acquisition (in thousands):


Land	$	215,448
Building and improvements	85,220




Net assets acquired	$	300,668

The following table summarizes the estimated amortization of the acquired in-place lease intangibles

and the acquired above/below-market lease intangibles as of December 31, 2021 for 153 & 211 Second Avenue and Shady Grove Innovation District through the last lease expiration (in thousands):


	Acquired In-Place Lease Intangibles		Acquired Above-Market Lease Intangibles		Acquired Below-Market Lease Intangibles
2022	$	9,691	$	74	$	1,713
2023	151		25		39
2024	56		12		26

153 & 211 Second Avenue contributed approximately $5.5 million of revenue and approximately ($2.1) million of earnings to the Company for the period from June 2, 2021 through December 31, 2021. Shady Grove Innovation District contributed approximately $1.2 million of revenue and approximately $(1.5) million of earnings to the Company for the period from August 2, 2021 through December 31, 2021.

Pending Acquisition

On April 19, 2021, the Company entered into an agreement to acquire 11251 Roger Bacon Drive, in Reston, Virginia, for an aggregate purchase price of approximately $5.6 million. The closing is scheduled to occur in the first or second quarter of 2022. 11251 Roger Bacon Drive is an approximately 65,000 square foot office building situated on approximately 2.6 acres. The property is 100% leased to a single tenant with a lease that expires concurrently with the planned closing. There can be no assurance that this transaction will be consummated on the terms currently contemplated or at all.

Developments

On February 1, 2021, the consolidated entity in which the Company has a 55% interest completed and fully placed in-service One Five Nine East 53rd Street, a Class A office and retail redevelopment of the low-rise portion of its 601 Lexington Avenue property with approximately 220,000 net rentable square feet located in New York City.

On February 25, 2021, the Company commenced the development of 180 CityPoint, located in Waltham, Massachusetts. When completed, the building will consist of approximately 329,000 net rentable square feet of laboratory space.

On February 25, 2021, the Company commenced the redevelopment of 880 Winter Street, located in Waltham, Massachusetts. When completed, the building will consist of approximately 224,000 net rentable square feet of laboratory space.

On February 25, 2021, the Company commenced the redevelopment of View Boston Observatory at The Prudential Center, a 59,000 net rentable square foot redevelopment of the top three floors of 800 Boylston Street - The Prudential Center, located in Boston, Massachusetts.

On April 16, 2021, the Company removed 3625-3635 Peterson Way from its in-service portfolio following the lease expiration of the last tenant on April 15, 2021. Subsequently, the Company demolished the building and expects to redevelop the site at a future date. 3625-3635 Peterson Way was an approximately 218,000 net rentable square foot Class A office building located in Santa Clara, California.

On October 19, 2021, the Company partially placed in-service Reston Next, a Class A office project with approximately 1.1 million net rentable square feet located in Reston, Virginia.

On December 3, 2021, the Company completed and fully placed in-service approximately 138,000 net rentable square feet at 200 West Street located in Waltham, Massachusetts, a redevelopment to convert a portion of the building to laboratory space.

On December 8, 2021, the Company commenced the development of 103 CityPoint, located in Waltham, Massachusetts. When completed, the building will consist of approximately 113,000 net rentable square feet of life sciences space.

Dispositions

On December 13, 2018, the Company sold its 6595 Springfield Center Drive development project located in Springfield, Virginia. Concurrently with the sale, the Company agreed to act as development manager and guaranteed the completion of the project (See Note 10). The development project achieved final completion during the third quarter of 2021. The total cost of development was determined to be below the estimated total investment at the time of sale. As a result, the Company recognized a gain on sale of real estate of approximately $8.1 million during the year ended December 31, 2021.

On October 25, 2021, the Company completed the sale of its 181,191 and 201 Spring Street properties located in Lexington, Massachusetts for an aggregate gross sales price of $191.5 million. Net cash proceeds totaled approximately $179.9 million, resulting in a gain on sale of real estate totaling approximately $115.6 million for Boston Properties, Inc. and approximately $117.1 million for Boston Properties Limited Partnership. 181,191 and 201 Spring Street are three Class A office properties aggregating approximately 333,000 net rentable square

feet. 181,191 and 201 Spring Street contributed approximately $5.7 million of net income to the Company for the period from January 1, 2021 through October 24, 2021 and contributed approximately $7.2 million and $7.0 million of net income to the Company for the years ended December 31, 2020 and 2019, respectively.