Segment Information

9 Months Ended

Sep. 30, 2022

Segment Reporting [Abstract]

Segment Reporting Disclosure [Text Block]

10. 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 nine months ended September 30, 2022 and 2021.

BXP

	Three months ended September 30,				Nine months ended September 30,
	2022		2021		2022		2021
	(in thousands)
Net income attributable to Boston Properties, Inc. common shareholders	$	360,977	$	108,297	$	727,144	$	311,680
Add:
Preferred stock redemption charge	—		—		—		6,412
Preferred dividends	—		—		—		2,560
Noncontrolling interest—common units of the Operating Partnership	40,883		11,982		82,821		35,393
Noncontrolling interests in property partnerships	18,801		18,971		54,896		52,602
Interest expense	111,846		105,794		317,216		320,015
Losses from early extinguishment of debt	—		—		—		898
Net operating income from unconsolidated joint ventures	35,316		24,266		108,347		74,478
Loss from unconsolidated joint ventures	3,524		5,597		1,389		1,745
Depreciation and amortization expense	190,675		179,412		551,445		539,815
Transaction costs	1,650		1,888		2,146		2,970
Payroll and related costs from management services contracts	3,900		3,006		11,204		9,166
General and administrative expense	32,519		34,560		110,378		117,924
Less:
Net operating income attributable to noncontrolling interests in property partnerships	48,306		47,800		143,223		138,463
Gains (losses) from investments in securities	(1,571)		(190)		(8,549)		3,744
Other income - assignment fee	—		—		6,624		—
Interest and other income (loss)	3,728		1,520		6,151		4,140
Gains on sales of real estate	262,345		348		381,293		8,104
Direct reimbursements of payroll and related costs from management services contracts	3,900		3,006		11,204		9,166
Development and management services revenue	7,465		6,094		19,650		20,181
Company’s share of Net Operating Income	$	475,918	$	435,195	$	1,407,390	$	1,291,860

BPLP

	Three months ended September 30,				Nine months ended September 30,
	2022		2021		2022		2021
	(in thousands)
Net income attributable to Boston Properties Limited Partnership common unitholders	$	403,578	$	122,014	$	819,195	$	353,633
Add:
Preferred unit redemption charge	—		—		—		6,412
Preferred distributions	—		—		—		2,560
Noncontrolling interests in property partnerships	18,801		18,971		54,896		52,602
Interest expense	111,846		105,794		317,216		320,015
Losses from early extinguishment of debt	—		—		—		898
Net operating income from unconsolidated joint ventures	35,316		24,266		108,347		74,478
Loss from unconsolidated joint ventures	3,524		5,597		1,389		1,745
Depreciation and amortization expense	188,969		177,677		546,271		533,255
Transaction costs	1,650		1,888		2,146		2,970
Payroll and related costs from management services contracts	3,900		3,006		11,204		9,166
General and administrative expense	32,519		34,560		110,378		117,924
Less:
Net operating income attributable to noncontrolling interests in property partnerships	48,306		47,800		143,223		138,463
Gains (losses) from investments in securities	(1,571)		(190)		(8,549)		3,744
Other income - assignment fee	—		—		6,624		—
Interest and other income (loss)	3,728		1,520		6,151		4,140
Gains on sales of real estate	262,357		348		385,349		8,104
Direct reimbursements of payroll and related costs from management services contracts	3,900		3,006		11,204		9,166
Development and management services revenue	7,465		6,094		19,650		20,181
Company’s share of Net Operating Income	$	475,918	$	435,195	$	1,407,390	$	1,291,860

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, loss from unconsolidated joint ventures, 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, other income - assignment fee, interest and other income (loss), gains on sales of real estate, 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), less 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 losses from early extinguishment of debt from unconsolidated joint ventures, gains on sales of real estate from unconsolidated joint ventures and gain on sale of investment from unconsolidated joint ventures, both of which are included within Income (Loss) 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, loss from unconsolidated joint ventures, 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, other income - assignment fee, interest and other income (loss), gains on sales of real estate, 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, Seattle and Washington, DC. On September 1, 2021, the Company invested in a joint venture that acquired Safeco Plaza located in Seattle, Washington. As such, the Seattle region was identified as a segment during the third quarter of 2021. The Company also presents information for each segment by property type, including Office, Residential and Hotel.

Parking and other revenue for the three months ended September 30, 2022 increased by approximately $4.6 million compared to the three months ended September 30, 2021. Parking and other revenue for the nine months ended September 30, 2022 increased by approximately $21.5 million compared to 2021. These increases were primarily in transient and monthly parking revenue.

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

For the three months ended September 30, 2022:

	Boston			Los Angeles			New York			San Francisco			Seattle			Washington, DC			Total
Rental Revenue: (1)
Office	$	255,958		$	—		$	260,926		$	134,938		$	12,293		$	88,954		$	753,069
Residential	3,837			—			—			3,133			—			7,370			14,340
Hotel	11,749			—			—			—			—			—			11,749
Total	271,544			—			260,926			138,071			12,293			96,324			779,158
% of Grand Totals	34.85		%	—		%	33.49		%	17.72		%	1.58		%	12.36		%	100.00		%
Rental Expenses:
Office	91,226			—			99,942			47,068			3,125			33,317			274,678
Residential	1,552			—			—			2,125			—			3,347			7,024
Hotel	8,548			—			—			—			—			—			8,548
Total	101,326			—			99,942			49,193			3,125			36,664			290,250
% of Grand Totals	34.91		%	—		%	34.43		%	16.95		%	1.08		%	12.63		%	100.00		%
Net operating income	$	170,218		$	—		$	160,984		$	88,878		$	9,168		$	59,660		$	488,908
% of Grand Totals	34.81		%	—		%	32.93		%	18.18		%	1.88		%	12.20		%	100.00		%
Less: Net operating income attributable to noncontrolling interests in property partnerships	(11,293)			—			(37,013)			—			—			—			(48,306)
Add: Company’s share of net operating income (loss) from unconsolidated joint ventures	8,169			13,143			(259)			3,233			1,978			9,052			35,316
Company’s share of net operating income	$	167,094		$	13,143		$	123,712		$	92,111		$	11,146		$	68,712		$	475,918
% of Grand Totals	35.12		%	2.76		%	25.99		%	19.35		%	2.34		%	14.44		%	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 September 30, 2021:

	Boston			Los Angeles			New York			San Francisco			Seattle			Washington, DC			Total
Rental Revenue: (1)
Office	$	236,080		$	—		$	257,656		$	125,340		$	—		$	85,797		$	704,873
Residential	3,418			—			—			806			—			6,670			10,894
Hotel	5,189			—			—			—			—			—			5,189
Total	244,687			—			257,656			126,146			—			92,467			720,956
% of Grand Totals	33.93		%	—		%	35.74		%	17.50		%	—		%	12.83		%	100.00		%
Rental Expenses:
Office	82,697			—			94,338			43,582			—			31,619			252,236
Residential	1,396			—			—			1,688			—			2,961			6,045
Hotel	3,946			—			—			—			—			—			3,946
Total	88,039			—			94,338			45,270			—			34,580			262,227
% of Grand Totals	33.57		%	—		%	35.98		%	17.26		%	—		%	13.19		%	100.00		%
Net operating income	$	156,648		$	—		$	163,318		$	80,876		$	—		$	57,887		$	458,729
% of Grand Totals	34.15		%	—		%	35.60		%	17.63		%	—		%	12.62		%	100.00		%
Less: Net operating income attributable to noncontrolling interests in property partnerships	(10,841)			—			(36,959)			—			—			—			(47,800)
Add: Company’s share of net operating income from unconsolidated joint ventures	3,464			12,078			104			3,502			671			4,447			24,266
Company’s share of net operating income	$	149,271		$	12,078		$	126,463		$	84,378		$	671		$	62,334		$	435,195
% of Grand Totals	34.30		%	2.78		%	29.06		%	19.39		%	0.15		%	14.32		%	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.

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

For the nine months ended September 30, 2022:

	Boston			Los Angeles			New York			San Francisco			Seattle			Washington, DC			Total
Rental Revenue: (1)
Office	$	742,972		$	—		$	772,060		$	401,020		$	18,765		$	280,473		$	2,215,290
Residential	11,181			—			—			11,374			—			21,663			44,218
Hotel	28,395			—			—			—			—			—			28,395
Total	782,548			—			772,060			412,394			18,765			302,136			2,287,903
% of Grand Totals	34.20		%	—		%	33.75		%	18.02		%	0.82		%	13.21		%	100.00		%
Rental Expenses:
Office	268,781			—			291,645			135,677			4,805			101,623			802,531
Residential	4,481			—			—			9,138			—			9,655			23,274
Hotel	19,832			—			—			—			—			—			19,832
Total	293,094			—			291,645			144,815			4,805			111,278			845,637
% of Grand Totals	34.66		%	—		%	34.49		%	17.12		%	0.57		%	13.16		%	100.00		%
Net operating income	$	489,454		$	—		$	480,415		$	267,579		$	13,960		$	190,858		$	1,442,266
% of Grand Totals	33.94		%	—		%	33.31		%	18.55		%	0.97		%	13.23		%	100.00		%
Less: Net operating income attributable to noncontrolling interests in property partnerships	(34,405)			—			(108,818)			—			—			—			(143,223)
Add: Company’s share of net operating income (loss) from unconsolidated joint ventures	25,996			40,147			(397)			9,597			5,877			27,127			108,347
Company’s share of net operating income	$	481,045		$	40,147		$	371,200		$	277,176		$	19,837		$	217,985		$	1,407,390
% of Grand Totals	34.18		%	2.85		%	26.38		%	19.69		%	1.41		%	15.49		%	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 nine months ended September 30, 2021:

	Boston			Los Angeles			New York			San Francisco			Seattle				Washington, DC			Total
Rental Revenue: (1)
Office	$	696,054		$	—		$	760,002		$	382,119		$	—			$	252,822		$	2,090,997
Residential	9,594			—			—			1,817			—				18,421			29,832
Hotel	7,382			—			—			—			—				—			7,382
Total	713,030			—			760,002			383,936			—				271,243			2,128,211
% of Grand Totals	33.50		%	—		%	35.71		%	18.04		%	—		%		12.75		%	100.00		%
Rental Expenses:
Office	240,743			—			286,385			124,785			—				94,360			746,273
Residential	4,286			—			—			4,918			—				8,896			18,100
Hotel	7,993			—			—			—			—				—			7,993
Total	253,022			—			286,385			129,703			—			—	103,256			772,366
% of Grand Totals	32.76		%	—		%	37.08		%	16.79		%	—		%		13.37		%	100.00		%
Net operating income	$	460,008		$	—		$	473,617		$	254,233		$	—			$	167,987		$	1,355,845
% of Grand Totals	33.93		%	—		%	34.93		%	18.75		%	—		%		12.39		%	100.00		%
Less: Net operating income attributable to noncontrolling interests in property partnerships	(31,641)			—			(106,822)			—			—				—			(138,463)
Add: Company’s share of net operating income (loss) from unconsolidated joint ventures	9,369			38,535			(517)			10,562			671				15,858			74,478
Company’s share of net operating income	$	437,736		$	38,535		$	366,278		$	264,795		$	671			$	183,845		$	1,291,860
% of Grand Totals	33.88		%	2.98		%	28.35		%	20.50		%	0.05		%		14.24		%	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.