Segment Information

3 Months Ended

Mar. 31, 2023

Segment Reporting [Abstract]

Segment Reporting Disclosure [Text Block]

10. Segment Information

The following tables present reconciliations of Net Income Attributable to Boston Properties, Inc. to the Company’s share of Net Operating Income and Net Income Attributable to Boston Properties Limited Partnership to the Company’s share of Net Operating Income for the three months ended March 31, 2023 and 2022.

BXP

	Three months ended March 31,
	2023		2022
	(in thousands)
Net income attributable to Boston Properties, Inc.	$	77,890	$	143,047
Add:
Noncontrolling interest—common units of the Operating Partnership	9,078		16,361
Noncontrolling interests in property partnerships	18,660		17,549
Interest expense	134,207		101,228
Net operating income from unconsolidated joint ventures	40,756		37,321
Depreciation and amortization expense	208,734		177,624
Transaction costs	911		—
Payroll and related costs from management services contracts	5,235		4,065
General and administrative expense	55,802		43,194
Less:
Net operating income attributable to noncontrolling interests in property partnerships	47,097		47,055
Unrealized gain on non-real estate investment	259		—
Gains (losses) from investments in securities	1,665		(2,262)
Interest and other income (loss)	10,941		1,228
Gains on sales of real estate	—		22,701
Income (loss) from unconsolidated joint ventures	(7,569)		2,189
Direct reimbursements of payroll and related costs from management services contracts	5,235		4,065
Development and management services revenue	8,980		5,831
Company’s share of Net Operating Income	$	484,665	$	459,582

BPLP

	Three months ended March 31,
	2023		2022
	(in thousands)
Net income attributable to Boston Properties Limited Partnership	$	88,830	$	161,829
Add:
Noncontrolling interests in property partnerships	18,660		17,549
Interest expense	134,207		101,228
Net operating income from unconsolidated joint ventures	40,756		37,321
Depreciation and amortization expense	206,872		175,886
Transaction costs	911		—
Payroll and related costs from management services contracts	5,235		4,065
General and administrative expense	55,802		43,194
Less:
Net operating income attributable to noncontrolling interests in property partnerships	47,097		47,055
Unrealized gain on non-real estate investment	259		—
Gains (losses) from investments in securities	1,665		(2,262)
Interest and other income (loss)	10,941		1,228
Gains on sales of real estate	—		23,384
Income (loss) from unconsolidated joint ventures	(7,569)		2,189
Direct reimbursements of payroll and related costs from management services contracts	5,235		4,065
Development and management services revenue	8,980		5,831
Company’s share of Net Operating Income	$	484,665	$	459,582

Net operating income (“NOI”) is a non-GAAP financial measure equal to net income attributable to Boston Properties, Inc. and net income attributable to Boston Properties Limited Partnership, as applicable, the most directly comparable GAAP financial measures, plus (1) net income attributable to noncontrolling interests, interest expense, depreciation and amortization expense, transaction costs, payroll and related costs from management services contracts and corporate general and administrative expense less (2) unrealized gain on non-real estate investment, 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. and net income attributable to Boston Properties Limited Partnership. 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, as defined above, also does not include its share of losses from early extinguishment of debt from unconsolidated joint ventures and unrealized loss on derivative instruments, 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. Interest expense, depreciation and amortization expense, transaction costs, payroll and related costs from management services contracts, corporate general and administrative expense, unrealized gain on non-real estate investment, 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.

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. The Company also presents information for each segment by property type, including Premier Workplace (which includes office, life sciences and retail), Residential and Hotel.

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

For the three months ended March 31, 2023:

	Boston			Los Angeles			New York			San Francisco			Seattle			Washington, DC			Total
Rental Revenue: (1)
Premier Workplace	$	269,951		$	—		$	258,192		$	136,093		$	14,258		$	90,664		$	769,158
Residential	4,049			—			—			3,642			—			4,035			11,726
Hotel	8,101			—			—			—			—			—			8,101
Total	282,101			—			258,192			139,735			14,258			94,699			788,985
% of Grand Totals	35.76		%	—		%	32.72		%	17.71		%	1.81		%	12.00		%	100.00		%
Rental Expenses:
Premier Workplace	100,049			—			102,485			46,085			2,960			34,266			285,845
Residential	1,552			—			—			2,173			—			1,738			5,463
Hotel	6,671			—			—			—			—			—			6,671
Total	108,272			—			102,485			48,258			2,960			36,004			297,979
% of Grand Totals	36.34		%	—		%	34.39		%	16.20		%	0.99		%	12.08		%	100.00		%
Net operating income	$	173,829		$	—		$	155,707		$	91,477		$	11,298		$	58,695		$	491,006
% of Grand Totals	35.41		%	—		%	31.71		%	18.63		%	2.30		%	11.95		%	100.00		%
Less: Net operating income attributable to noncontrolling interests in property partnerships	(10,817)			—			(36,280)			—			—			—			(47,097)
Add: Company’s share of net operating income from unconsolidated joint ventures	8,577			13,225			3,650			3,464			1,846			9,994			40,756
Company’s share of net operating income	$	171,589		$	13,225		$	123,077		$	94,941		$	13,144		$	68,689		$	484,665
% of Grand Totals	35.41		%	2.73		%	25.39		%	19.59		%	2.71		%	14.17		%	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 March 31, 2022:

	Boston			Los Angeles			New York			San Francisco			Seattle			Washington, DC			Total
Rental Revenue: (1)
Premier Workplace	$	242,078		$	—		$	256,870		$	132,375		$	—		$	95,565		$	726,888
Residential	3,596			—			—			2,391			—			6,979			12,966
Hotel	4,557			—			—			—			—			—			4,557
Total	250,231			—			256,870			134,766			—			102,544			744,411
% of Grand Totals	33.61		%	—		%	34.51		%	18.10		%	—		%	13.78		%	100.00		%
Rental Expenses:
Premier Workplace	90,528			—			96,340			43,408			—			33,547			263,823
Residential	1,437			—			—			1,868			—			3,127			6,432
Hotel	4,840			—			—			—			—			—			4,840
Total	96,805			—			96,340			45,276			—			36,674			275,095
% of Grand Totals	35.19		%	—		%	35.02		%	16.46		%	—		%	13.33		%	100.00		%
Net operating income	$	153,426		$	—		$	160,530		$	89,490		$	—		$	65,870		$	469,316
% of Grand Totals	32.69		%	—		%	34.21		%	19.07		%	—		%	14.03		%	100.00		%
Less: Net operating income attributable to noncontrolling interests in property partnerships	(11,735)			—			(35,320)			—			—			—			(47,055)
Add: Company’s share of net operating income (loss) from unconsolidated joint ventures	9,693			13,757			(156)			3,181			1,955			8,891			37,321
Company’s share of net operating income	$	151,384		$	13,757		$	125,054		$	92,671		$	1,955		$	74,761		$	459,582
% of Grand Totals	32.94		%	2.99		%	27.21		%	20.16		%	0.43		%	16.27		%	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.