BXP 10-K 2016-12-31

Filed 2017-02-28. 22 sections, 920K characters. Original on sec.gov · Markdown · JSON

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10-K 1 bxpandbplp201610-k.htm 10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K



ý	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2016



¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 1-13087 (Boston Properties, Inc.)

Commission File Number: 0-50209 (Boston Properties Limited Partnership)

BOSTON PROPERTIES, INC.

BOSTON PROPERTIES LIMITED PARTNERSHIP

(Exact name of Registrants as specified in its charter)



Boston Properties, Inc.	Delaware	04-2473675
	(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

Boston Properties Limited Partnership	Delaware	04-3372948
	(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

	Prudential Center, 800 Boylston Street, Suite 1900 Boston, Massachusetts	02199-8103
	(Address of principal executive offices)	(Zip Code)

Registrants’ telephone number, including area code: (617) 236-3300

Securities registered pursuant to Section 12(b) of the Act:

Registrant	Title of each class	Name of exchange on which registered
Boston Properties, Inc.	Common Stock, par value $.01 per share	New York Stock Exchange
Boston Properties, Inc.	Depository Shares Each Representing 1/100th of a share of 5.25% Series B Cumulative Redeemable Preferred Stock, par value $0.01 per share	New York Stock Exchange
Boston Properties, Inc.	Preferred Stock Purchase Rights	New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:

Registrant	Title of each class
Boston Properties Limited Partnership	Units of Limited Partnership

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Boston Properties, Inc.: Yes ý No ¨ Boston Properties Limited Partnership: Yes ý No ¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Boston Properties, Inc.: Yes ¨ No ý Boston Properties Limited Partnership: Yes ¨ No ý

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Boston Properties, Inc.: Yes ý No ¨ Boston Properties Limited Partnership: Yes ý No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Boston Properties, Inc.: Yes ý No ¨ Boston Properties Limited Partnership: Yes ý No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ý

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Boston Properties, Inc.:

Large accelerated filer ý Accelerated filer ¨ Non-accelerated filer ¨ Smaller reporting company ¨

Boston Properties Limited Partnership:

Large accelerated filer ¨ Accelerated filer ¨ Non-accelerated filer ý Smaller reporting company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

Boston Properties, Inc.: Yes ¨ No ý Boston Properties Limited Partnership: Yes ¨ No ý

As of June 30, 2016, the aggregate market value of the 152,616,735 shares of Common Stock held by non-affiliates of Boston Properties, Inc. was $20,130,147,347 based upon the last reported sale price of $131.90 per share on the New York Stock Exchange on June 30, 2016. (For this computation, Boston Properties, Inc. has excluded the market value of all shares of Common Stock reported as beneficially owned by executive officers and directors of Boston Properties, Inc.; such exclusion shall not be deemed to constitute an admission that any such person is an affiliate of Boston Properties, Inc.)

As of February 22, 2017, there were 153,836,251 shares of Common Stock of Boston Properties, Inc. outstanding.

Because no established market for common units of limited partnership of Boston Properties Limited Partnership exists, there is no market value for such units.

Certain information contained in Boston Properties Inc.’s Proxy Statement relating to its Annual Meeting of Stockholders to be held May 23, 2017 is incorporated by reference in Items 10, 11, 12, 13 and 14 of Part III. Boston Properties, Inc. intends to file such Proxy Statement with the Securities and Exchange Commission not later than 120 days after the end of its fiscal year ended December 31, 2016.

EXPLANATORY NOTE

This report combines the Annual Reports on Form 10-K for the fiscal year ended December 31, 2016 of Boston Properties, Inc. and Boston Properties Limited Partnership. Unless stated otherwise or the context otherwise requires, references to “BXP” mean Boston Properties, Inc., a Delaware corporation and real estate investment trust (“REIT”), and references to “BPLP” and the “Operating Partnership” mean Boston Properties Limited Partnership, a Delaware limited partnership. References to the “Company,” “we,” “us” and “our” mean collectively BXP, BPLP and those entities/subsidiaries consolidated by BXP.

BPLP is the entity through which BXP conducts substantially all of our business and owns, either directly or through subsidiaries, substantially all of its assets. BXP is the sole general partner and also a limited partner of BPLP. As the sole general partner of BPLP, BXP has exclusive control of BPLP’s day-to-day management.

As of December 31, 2016, BXP owned an approximate 89.5% ownership interest in BPLP. The remaining approximate 10.5% interest is owned by limited partners. The other limited partners of BPLP are (1) persons who contributed their direct or indirect interests in properties to BPLP in exchange for common units or preferred units of limited partnership interest in BPLP or (2) recipients of long term incentive plan units of BPLP pursuant to BXP’s Stock Option and Incentive Plans. Under the limited partnership agreement of BPLP, unitholders may present their common units of BPLP for redemption at any time (subject to restrictions agreed upon at the time of issuance of the units that may restrict such right for a period of time, generally one year from issuance). Upon presentation of a common unit for redemption, BPLP must redeem the unit for cash equal to the then value of a share of BXP’s common stock. In lieu of cash redemption by BPLP, however, BXP may elect to acquire any common units so tendered by issuing shares of BXP common stock in exchange for the common units. If BXP so elects, its common stock will be exchanged for common units on a one-for-one basis. This one-for-one exchange ratio is subject to specified adjustments to prevent dilution. BXP generally expects that it will elect to issue its common stock in connection with each such presentation for redemption rather than having BPLP pay cash. With each such exchange or redemption, BXP’s percentage ownership in BPLP will increase. In addition, whenever BXP issues shares of its common stock other than to acquire common units of BPLP, BXP must contribute any net proceeds it receives to BPLP and BPLP must issue to BXP an equivalent number of common units of BPLP. This structure is commonly referred to as an umbrella partnership REIT, or UPREIT.

The Company believes that combining the Annual Reports on Form 10-K of BXP and BPLP into this single report provides the following benefits:


•	enhances investors’ understanding of BXP and BPLP by enabling investors to view the business as a whole in the same manner as management views and operates the business;


•	eliminates duplicative disclosure and provides a more concise and readable presentation because a substantial portion of the disclosure applies to both BXP and BPLP; and


•	creates time and cost efficiencies through the preparation of one combined report instead of two separate reports.

The Company believes it is important to understand the few differences between BXP and BPLP in the context of how BXP and BPLP operate as a consolidated company. The financial results of BPLP are consolidated into the financial statements of BXP. BXP does not have any other significant assets, liabilities or operations, other than its investment in BPLP, nor does it have employees of its own. BPLP, not BXP, generally executes all significant business relationships other than transactions involving the securities of BXP. BPLP holds substantially all of the assets of BXP, including ownership interests in joint ventures. BPLP conducts the operations of the business and is structured as a partnership with no publicly traded equity. Except for the net proceeds from equity offerings by BXP, which are contributed to the capital of BPLP in exchange for common or preferred units of partnership in BPLP, as applicable, BPLP generates all remaining capital required by the Company’s business. These sources include working capital, net cash provided by operating activities, borrowings under its revolving credit facility, the issuance of secured and unsecured debt and equity securities and proceeds received from the disposition of certain properties and joint ventures.

Shareholders’ equity, partners’ capital and noncontrolling interests are the main areas of difference between the consolidated financial statements of BXP and BPLP. The limited partners of BPLP are accounted for as partners’ capital in BPLP’s financial statements and as noncontrolling interests in BXP’s financial statements. The noncontrolling interests in BPLP’s financial statements include the interests of unaffiliated partners in various consolidated partnerships. The noncontrolling interests in BXP’s financial statements include the same noncontrolling interests at BPLP’s level and limited partners of BPLP. The differences between shareholders’ equity and partners’ capital result from differences in the equity issued at BXP and BPLP levels.

In addition, the consolidated financial statements of BXP and BPLP differ in total real estate assets resulting from previously applied acquisition accounting by BXP for the issuance of common stock in connection with non-sponsor redemptions of common units of BPLP. This accounting resulted in a step-up of the real estate assets at BXP. This resulted in a difference between the net real estate of BXP as compared to BPLP of approximately $327.5 million, or 2.1% at December 31, 2016 and a corresponding difference in depreciation expense, impairment losses and gains on sales of real estate upon the sale of certain properties having an allocation of the real estate step-up. The acquisition accounting was nullified on a prospective basis beginning in 2009 as a result of the Company’s adoption of a new accounting standard requiring any future redemptions to be accounted for solely as an equity transaction.

To help investors better understand the key differences between BXP and BPLP, certain information for BXP and BPLP in this report has been separated, as set forth below:


•	Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities;


•	Item 6. Selected Financial Data;


•	Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations includes information specific to each entity, where applicable;


•	Item 7. Liquidity and Capital Resources includes separate reconciliations of amounts to each entity’s financial statements, where applicable;


•	Item 8. Financial Statements and Supplementary Data which includes the following specific disclosures for BXP and BPLP:

Note 2. Summary of Significant Accounting Policies;
Note 3. Real Estate;
Note 7: Derivative Instruments and Hedging Activities;
Note 11. Noncontrolling Interest;
Note 12. Stockholders’ Equity / Partners’ Capital;
Note 15. Earnings Per Share / Per Common Unit;
Note 19. Selected Interim Financial Information (unaudited); and


•	Item 15. Financial Statement Schedule—Schedule III.

This report also includes separate Part II, Item 9A. Controls and Procedures sections and separate Exhibits 23, 31 and 32 consents and certifications for each of BXP and BPLP.

TABLE OF CONTENTS




ITEM NO.	DESCRIPTION	PAGE NO.

PART I		1
1.	BUSINESS	1
1A.	RISK FACTORS	13
1B.	UNRESOLVED STAFF COMMENTS	29
2.	PROPERTIES	30
3.	LEGAL PROCEEDINGS	36
4.	MINE SAFETY DISCLOSURES	36

PART II		37
5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	37
6.	SELECTED FINANCIAL DATA	39
7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	44
7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	105
8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	106
9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	170
9A.	CONTROLS AND PROCEDURES	170
9B.	OTHER INFORMATION	170

PART III		171
10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	171
11.	EXECUTIVE COMPENSATION	171
12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	171
13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	171
14.	PRINCIPAL ACCOUNTANT FEES AND SERVICES	171

PART IV		172
15.	EXHIBITS AND FINANCIAL STATEMENT SCHEDULES	172
16.	FORM 10-K SUMMARY	186

PART I

Item 1. Business

General

BXP, a Delaware corporation organized in 1997; is a fully integrated, self-administered and self-managed real estate investment trust, or “REIT,” and one of the largest owners and developers of office properties in the United States.

Our properties are concentrated in five markets—Boston, Los Angeles, New York, San Francisco and Washington, DC. For information concerning the operations of our segments, see Note 14 to the Consolidated Financial Statements. At December 31, 2016, we owned or had interests in 174 commercial real estate properties, aggregating approximately 47.7 million net rentable square feet of primarily Class A office properties, including eight properties under construction/redevelopment totaling approximately 4.0 million net rentable square feet. As of December 31, 2016 our properties consisted of:


•	164 Office properties (including six properties under construction/redevelopment);


•	one hotel;


•	five retail properties; and


•	four residential properties (including two under construction).

We consider Class A office properties to be well-located buildings that are professionally managed and maintained, attract high-quality tenants and command upper-tier rental rates, and that are modern structures or have been modernized to compete with newer buildings. Our definitions of Class A office properties may be different than those used by other companies.

We are a full-service real estate company, with substantial in-house expertise and resources in acquisitions, development, financing, capital markets, construction management, property management, marketing, leasing, accounting, risk management, tax and legal services. BXP manages BPLP as its sole general partner. As of December 31, 2016, we had approximately 785 employees. Our 35 senior officers have an average of 30 years of experience in the real estate industry, including an average of nineteen years of experience with us. Our principal executive office and Boston regional office are located at The Prudential Center, 800 Boylston Street, Suite 1900, Boston, Massachusetts 02199 and our telephone number is (617) 236-3300. In addition, we have regional offices at 2400 Broadway, Suite 225, Santa Monica, California 90404, 599 Lexington Avenue, New York, New York 10022; Four Embarcadero Center, San Francisco, California 94111 and 2200 Pennsylvania Avenue NW, Washington, DC 20037.

Our internet address is http://www.bostonproperties.com. On our website, you can obtain a free copy of our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission, or the SEC. You may also obtain BXP’s and BPLP’s reports by accessing the EDGAR database at the SEC’s website at http://www.sec.gov, or we will furnish an electronic or paper copy of these reports free of charge upon written request to: Investor Relations, Boston Properties, Inc., The Prudential Center, 800 Boylston Street, Suite 1900, Boston, Massachusetts 02199. “Boston Properties” is a registered trademark, and the “bxp” logo is a trademark, of BPLP.

Boston Properties Limited Partnership

BPLP is a Delaware limited partnership organized in 1997, and the entity through which we conduct substantially all of our business and own, either directly or through subsidiaries, substantially all of our assets. BXP is the sole general partner and, as of February 22, 2017, the owner of approximately 89.5% of the economic interests in BPLP. Economic interest was calculated as the number of common partnership units of BPLP owned by BXP as a percentage of the sum of (1) the actual aggregate number of outstanding common partnership units of BPLP, (2) the number of common units issuable upon conversion of all outstanding long term incentive plan units of BPLP, or LTIP Units, other than LTIP Units issued in the form of Multi-Year Long-Term Incentive Plan Awards (“MYLTIP Awards”) that remain subject to performance conditions, assuming all conditions have been met for the conversion of the LTIP Units, (3) the 2012 Outperformance Awards that were issued in the form of LTIP Units and earned as of February 6, 2015 (the “2012 OPP Units”), (4) the 2013 MYLTIP Units that were issued in the form of LTIP Units and earned as of February 4, 2016 (the “2013 MYLTIP Units”) and (5) the 2014 MYLTIP Units that were issued in the form of LTIP Units and earned as of February 3, 2017 (the “2014 MYLTIP Units”). An LTIP Unit is generally the economic equivalent of a share of BXP’s restricted common stock, although LTIP Units issued in the form of MYLTIP Awards are only entitled to receive one-tenth (1/10th) of the regular quarterly distributions (and no special distributions) prior to being earned. BXP’s general and limited partnership interests in BPLP entitles BXP to share in cash distributions from, a

nd in the profits and losses of, BPLP in proportion to BXP’s percentage interest and entitles BXP to vote on all matters requiring a vote of the limited partners.

Preferred units of BPLP have the rights, preferences and other privileges as are set forth in an amendment to the limited partnership agreement of BPLP. As of December 31, 2016 and February 22, 2017, BPLP had one series of Preferred Units outstanding consisting of 80,000 Series B Preferred Units. The Series B Preferred Units have a liquidation preference of $2,500.00 per share (or an aggregate of approximately $193.6 million at December 31, 2016 and February 22, 2017, after deducting the underwriting discount and transaction expenses). The Series B Preferred Units were issued by BPLP on March 27, 2013 in connection with BXP’s issuance of 80,000 shares (8,000,000 depositary shares each representing 1/100th of a share) of 5.25% Series B Cumulative Redeemable Preferred Stock (the “Series B Preferred Stock”). BXP contributed the net proceeds from the offering to BPLP in exchange for Series B Preferred Units having terms and preferences generally mirroring those of the Series B Preferred Stock. BXP will pay cumulative cash dividends on the Series B Preferred Stock at a rate of 5.25% per annum of the $2,500.00 liquidation preference per share. BXP may not redeem the Series B Preferred Stock prior to March 27, 2018, except in certain circumstances relating to the preservation of BXP’s REIT status. On or after March 27, 2018, BXP may redeem the Series B Preferred Stock for a cash redemption price of $2,500.00 per share, plus all accrued and unpaid dividends. The Series B Preferred Stock is not redeemable by the holders, has no maturity date and is not convertible into any other security of the Company or its affiliates.

Transactions During 2016

Acquisitions

On April 22, 2016, we acquired 3625-3635 Peterson Way located in Santa Clara, California for a purchase price of approximately $78.0 million in cash. 3625-3635 Peterson Way is an approximately 218,000 net rentable square foot office property. The property is 100% leased to a single tenant through March 2021. Following the lease expiration, we intend to develop the site into a Class A office campus containing an aggregate of approximately 632,000 net rentable square feet.

Dispositions

For information explaining why BXP and BPLP may have different gains on sales of real estate, see the Explanatory Note.

On February 1, 2016, we completed the sale of our 415 Main Street property located in Cambridge, Massachusetts to the tenant for a gross sale price of approximately $105.4 million. Net cash proceeds totaled approximately $104.9 million, resulting in a gain on sale of real estate totaling approximately $60.8 million for BXP and approximately $63.0

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Item 1A. Risk Factors.

Set forth below are the risks that we believe are material to our investors. We refer to the equity and debt securities of both BXP and BPLP as our “securities,” and the investors who own securities, or both, as our “securityholders.” This section contains forward-looking statements. You should refer to the explanation of the qualifications and limitations on forward-looking statements beginning on page 44.

Our performance and value are subject to risks associated with our real estate assets and with the real estate industry.

Our economic performance and the value of our real estate assets, and consequently the value of our securities, are subject to the risk that if our properties do not generate revenues sufficient to meet our operating expenses, including debt service and capital expenditures, our cash flow and ability to pay distributions to our securityholders will be adversely affected. The following factors, among others, may adversely affect the income generated by our properties:


•	downturns in the national, regional and local economic conditions (particularly increases in unemployment);


•	competition from other office, hotel, retail and residential buildings;


•	local real estate market conditions, such as oversupply or reduction in demand for office, hotel, retail or residential space;


•	changes in interest rates and availability of financing;


•	vacancies, changes in market rental rates and the need to periodically repair, renovate and re-let space;


•	changes in space utilization by our tenants due to technology, economic conditions and business culture;


•	increased operating costs, including insurance expense, utilities, real estate taxes, state and local taxes and heightened security costs;


•	civil disturbances, earthquakes and other natural disasters or terrorist acts or acts of war which may result in uninsured or underinsured losses or decrease the desirability to our tenants in impacted locations;


•	significant expenditures associated with each investment, such as debt service payments, real estate taxes, insurance and maintenance costs which are generally not reduced when circumstances cause a reduction in revenues from a property;


•	declines in the financial condition of our tenants and our ability to collect rents from our tenants; and


•	decreases in the underlying value of our real estate.

We are dependent upon the economic climates of our markets—Boston, Los Angeles, New York, San Francisco and Washington, DC.

All of our revenue is derived from properties located in five markets: Boston, Los Angeles, New York, San Francisco and Washington, DC. A downturn in the economies of these markets, or the impact that a downturn in the overall national economy may have upon these economies, could result in reduced demand for office space and/or a reduction in rents. Because our portfolio consists primarily of office buildings (as compared to a more diversified real estate portfolio), a decrease in demand for office space in turn could adversely affect our results of operations. Additionally, there are submarkets within our markets that are dependent upon a limited number of industries. For example, in our Washington, DC market, we focus on leasing

office properties to governmental agencies and contractors, as well as legal firms. A reduction in spending by the federal government could result in reduced demand for office space and adversely affect our results of operations. In addition, in our New York market, we have historically leased properties to financial, legal and other professional firms. A significant downturn in one or more of these sectors could adversely affect our results of operations.

In addition, a significant economic downturn over a period of time could result in an event or change in circumstances that results in an impairment in the value of our properties or our investments in unconsolidated joint ventures. An impairment loss is recognized if the carrying amount of the asset (1) is not recoverable over its expected holding period and (2) exceeds its fair value. There can be no assurance that we will not take charges in the future related to the impairment of our assets or investments. Any future impairment could have a material adverse effect on our results of operations in the period in which the charge is taken.

Our investment in property development may be more costly than anticipated.

We intend to continue to develop and substantially renovate office, retail and residential properties. Our current and future development and construction activities may be exposed to the following risks:


•	we may be unable to proceed with the development of properties because we cannot obtain financing on favorable terms or at all;


•	we may incur construction costs for a development project that exceed our original estimates due to increases in interest rates and increased materials, labor, leasing or other costs, which could make completion of the project less profitable because market rents may not increase sufficiently to compensate for the increase in construction costs;


•	we may be unable to obtain, or face delays in obtaining, required zoning, land-use, building, occupancy, and other governmental permits and authorizations, which could result in increased costs and could require us to abandon our activities entirely with respect to a project;


•	we may abandon development opportunities after we begin to explore them and as a result we may lose deposits or fail to recover expenses already incurred;


•	we may expend funds on and devote management’s time to projects that we do not complete;


•	we may be unable to complete construction and/or leasing of a property on schedule or at all; and


•	we may suspend development projects after construction has begun due to changes in economic conditions or other factors, and this may result in the write-off of costs, payment of additional costs or increases in overall costs when the development project is restarted.

Investment returns from our developed properties may be less than anticipated.

Our developed properties may be exposed to the following risks:


•	we may lease developed properties at rental rates that are less than the rates projected at the time we decide to undertake the development;


•	operating expenses may be greater than projected at the time of development, resulting in our investment being less profitable than we expected; and


•	occupancy rates and rents at newly developed properties may fluctuate depending on a number of factors, including market and economic conditions, and may result in our investments being less profitable than we expected or not profitable at all.

We face risks associated with the development of mixed-use commercial properties.

We operate, are currently developing, and may in the future develop, properties either alone or through joint ventures with other persons that are known as “mixed-use” developments. This means that in addition to the development of office space, the project may also include space for residential, retail, hotel or other commercial purposes. We have less experience in developing and managing non-office and non-retail real estate than we do with office real estate. As a result, if a development project includes a non-office or non-retail use, we may seek to develop that component ourselves, sell the rights to that component

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Item 1B. Unresolved Staff Comments

None.

Item 2. Properties.

At December 31, 2016, we owned or had interests in 174 commercial real estate properties, aggregating approximately 47.7 million net rentable square feet, including eight properties under construction/redevelopment totaling approximately 4.0 million net rentable square feet. Our properties consisted of (1) 164 office properties (including six properties under construction/redevelopment), (2) five retail properties, (3) one hotel and (4) four residential properties (including two under construction). The table set forth below shows information relating to the properties we owned, or in which we had an ownership interest, at December 31, 2016.



Properties	Location	% Leased as of December 31, 2016 (1)		Number of Buildings	Net Rentable Square Feet
Office
767 Fifth Avenue (the General Motors Building) (60% ownership)	New York, NY	93.6	%	1	1,845,092
200 Clarendon Street	Boston, MA	79.2	%	1	1,746,221
399 Park Avenue	New York, NY	93.9	%	1	1,713,251
601 Lexington Avenue (55% ownership) (2)	New York, NY	94.3	%	1	1,436,439
100 Federal Street (55% ownership)	Boston, MA	80.8	%	1	1,265,037
Times Square Tower (55% ownership)	New York, NY	98.2	%	1	1,248,521
800 Boylston Street - The Prudential Center	Boston, MA	97.8	%	1	1,235,885
Colorado Center (49.8% ownership) (3)(4)	Santa Monica, CA	79.1	%	6	1,117,542
599 Lexington Avenue	New York, NY	96.8	%	1	1,058,805
Bay Colony Corporate Center	Waltham, MA	75.6	%	4	1,011,172
250 West 55th Street	New York, NY	85.2	%	1	980,927
Embarcadero Center Four	San Francisco, CA	88.5	%	1	938,168
111 Huntington Avenue - The Prudential Center	Boston, MA	98.6	%	1	860,455
Embarcadero Center One	San Francisco, CA	97.1	%	1	831,140
Atlantic Wharf Office (55% ownership)	Boston, MA	100.0	%	1	793,827
Embarcadero Center Two	San Francisco, CA	95.6	%	1	787,049
Embarcadero Center Three	San Francisco, CA	88.3	%	1	779,578
Capital Gallery	Washington, DC	99.8	%	1	631,029
South of Market	Reston, VA	97.7	%	3	623,666
Metropolitan Square (20% ownership) (3)	Washington, DC	75.0	%	1	607,041
Mountain View Research Park	Mountain View, CA	100.0	%	15	540,433
901 New York Avenue (25% ownership) (3)	Washington, DC	96.9	%	1	539,680
Reservoir Place	Waltham, MA	98.3	%	1	526,985
680 Folsom Street	San Francisco, CA	98.9	%	2	524,793
Fountain Square	Reston, VA	93.8	%	2	518,345
601 and 651 Gateway	South San Francisco, CA	97.7	%	2	506,279
101 Huntington Avenue - The Prudential Center	Boston, MA	95.8	%	1	505,583
601 Massachusetts Avenue	Washington, DC	90.2	%	1	478,883
2200 Pennsylvania Avenue	Washington, DC	100.0	%	1	458,831
One Freedom Square	Reston, VA	95.9	%	1	432,581
Two Freedom Square	Reston, VA	98.5	%	1	421,757



Properties	Location	% Leased as of December 31, 2016 (1)		Number of Buildings	Net Rentable Square Feet
Market Square North (50% ownership) (3)	Washington, DC	71.4	%	1	415,386
One Tower Center	East Brunswick, NJ	21.2	%	1	412,797
140 Kendrick Street	Needham, MA	87.8	%	3	380,987
One and Two Discovery Square	Reston, VA	100.0	%	2	366,990
Weston Corporate Center	Weston, MA	100.0	%	1	356,995
510 Madison Avenue	New York, NY	100.0	%	1	355,598
One Reston Overlook	Reston, VA	100.0	%	1	319,519
1333 New Hampshire Avenue	Washington, DC	100.0	%	1	315,371
535 Mission Street	San Francisco, CA	100.0	%	1	307,235
Waltham Weston Corporate Center	Waltham, MA	93.4	%	1	301,667
Wisconsin Place Office	Chevy Chase, MD	97.6	%	1	299,186
230 CityPoint	Waltham, MA	86.5	%	1	298,890
540 Madison Avenue (60% ownership) (3)	New York, NY	94.6	%	1	283,695
Quorum Office Park	Chelmsford, MA	90.0	%	2	267,527
355 Main Street	Cambridge, MA	100.0	%	1	265,342
Reston Corporate Center	Reston, VA	100.0	%	2	261,046
611 Gateway	South San Francisco, CA	28.2	%	1	260,337
Democracy Tower	Reston, VA	100.0	%	1	259,441
New Dominion Technology Park - Building Two	Herndon, VA	100.0	%	1	257,400
200 West Street	Waltham, MA	97.8	%	1	256,245
1330 Connecticut Avenue	Washington, DC	98.0	%	1	253,121
500 E Street, S.W.	Washington, DC	100.0	%	1	251,994
10 CityPoint	Waltham, MA	92.7	%	1	241,460
New Dominion Technology Park - Building One	Herndon, VA	100.0	%	1	235,201
510 Carnegie Center	Princeton, NJ	100.0	%	1	234,160
500 North Capitol Street, N.W. (30% ownership) (3)	Washington, DC	100.0	%	1	230,860
90 Broadway	Cambridge, MA	100.0	%	1	223,771
3625-3635 Peterson Way (5)	Santa Clara, CA	100.0	%	1	218,366
255 Main Street	Cambridge, MA	85.1	%	1	215,629
77 CityPoint	Waltham, MA	100.0	%	1	209,707
Sumner Square	Washington, DC	100.0	%	1	208,892
University Place	Cambridge, MA	100.0	%	1	195,282
300 Binney Street	Cambridge, MA	100.0	%	1	195,191
North First Business Park (5)	San Jose, CA	87.2	%	5	190,636
2600 Tower Oaks Boulevard	Rockville, MD	48.1	%	1	179,369
150 Broadway	Cambridge, MA	100.0	%	1	177,226
Lexington Office Park	Lexington, MA	75.7	%	2	166,858
206 Carnegie Center	Princeton, NJ	100.0	%	1	161,763
210 Carnegie Center	Princeton, NJ	78.9	%	1	159,468
Kingstowne Two	Alexandria, VA	74.1	%	1	156,251
105 Broadway	Cambridge, MA	100.0	%	1	152,664
212 Carnegie Center	Princeton, NJ	86.9	%	1	151,547
Kingstowne One	Alexandria, VA	75.6	%	1	151,483



Properties	Location	% Leased as of December 31, 2016 (1)		Number of Buildings	Net Rentable Square Feet
214 Carnegie Center	Princeton, NJ	67.2	%	1	148,942
2440 West El Camino Real	Mountain View, CA	100.0	%	1	141,392
506 Carnegie Center	Princeton, NJ	56.4	%	1	140,312
Two Reston Overlook	Reston, VA	97.1	%	1	134,615
508 Carnegie Center	Princeton, NJ	100.0	%	1	134,433
202 Carnegie Center	Princeton, NJ	86.3	%	1	134,381
804 Carnegie Center	Princeton, NJ	100.0	%	1	130,000
Annapolis Junction Building Seven (50% ownership) (3)	Annapolis, MD	100.0	%	1	127,229
Annapolis Junction Building Eight (50% ownership) (3)	Annapolis, MD	—	%	1	125,685
101 Carnegie Center	Princeton, NJ	96.9	%	1	125,627
504 Carnegie Center	Princeton, NJ	100.0	%	1	121,990
40 Shattuck Road	Andover, MA	68.7	%	1	121,542
502 Carnegie Center	Princeton, NJ	92.7	%	1	121,460
701 Carnegie Center	Princeton, NJ	100.0	%	1	120,000
Annapolis Junction Building Six (50% ownership) (3)	Annapolis, MD	48.9	%	1	119,339
91 Hartwell Avenue	Lexington, MA	100.0	%	1	119,216
Annapolis Junction Building One (50% ownership) (3)	Annapolis, MD	21.9	%	1	117,599
325 Main Street	Cambridge, MA	100.0	%	1	115,361
1265 Main Street (50% ownership) (3)	Waltham, MA	100.0	%	1	114,969
7601 Boston Boulevard	Springfield, VA	100.0	%	1	114,028
201 Spring Street	Lexington, MA	100.0	%	1	106,300
7435 Boston Boulevard	Springfield, VA	83.4	%	1	103,557
104 Carnegie Center	Princeton, NJ	40.3	%	1	102,830
8000 Grainger Court	Springfield, VA	37.6	%	1	88,775
33 Hayden Avenue	Lexington, MA	100.0	%	1	80,872
7500 Boston Boulevard	Springfield, VA	100.0	%	1	79,971
145 Broadway (5)	Cambridge, MA	100.0	%	1	79,616
7501 Boston Boulevard	Springfield, VA	100.0	%	1	75,756
105 Carnegie Center	Princeton, NJ	56.3	%	1	69,955
32 Hartwell Avenue	Lexington, MA	100.0	%	1	69,154
250 Binney Street	Cambridge, MA	100.0	%	1	67,362
302 Carnegie Center	Princeton, NJ	100.0	%	1	64,926
164 Lexington Road	Billerica, MA	—	%	1	64,140
195 West Street	Waltham, MA	100.0	%	1	63,500
7450 Boston Boulevard	Springfield, VA	—	%	1	62,402
7374 Boston Boulevard	Springfield, VA	100.0	%	1	57,321
100 Hayden Avenue	Lexington, MA	100.0	%	1	55,924
181 Spring Street	Lexington, MA	100.0	%	1	55,793
8000 Corporate Court	Springfield, VA	100.0	%	1	52,539
211 Carnegie Center	Princeton, NJ	100.0	%	1	47,025
7451 Boston Boulevard	Springfield, VA	67.4	%	1	45,615
7300 Boston Boulevard	Springfield, VA	—	%	1	32,000
92 Hayden Avenue	Lexington, MA	100.0	%	1	31,100



Properties	Location	% Leased as of December 31, 2016 (1)			Number of Buildings	Net Rentable Square Feet
17 Hartwell Avenue	Lexington, MA	100.0	%		1	30,000
453 Ravendale Drive	Mountain View, CA	65.7	%		1	29,620
7375 Boston Boulevard	Springfield, VA	79.2	%		1	26,865
690 Folsom Street	San Francisco, CA	100.0	%		1	26,080
201 Carnegie Center	Princeton, NJ	100.0	%		—	6,500
Subtotal for Office Properties		90.0	%		158	41,971,166
Retail
Prudential Center (retail shops) (6)	Boston, MA	97.4	%		1	530,992
Fountain Square Retail	Reston, VA	98.8	%		1	237,209
Kingstowne Retail	Alexandria, VA	100.0	%		1	88,288
Star Market at the Prudential Center	Boston, MA	100.0	%		1	57,235
The Point	Waltham, MA	84.7	%		1	16,300
Subtotal for Retail Properties		97.9	%		5	930,024
Residential Properties
The Avant at Reston Town Center (359 units)	Reston, VA	90.5	%	(7)	1	355,347	(8)
The Lofts at Atlantic Wharf (86 units)	Boston, MA	91.9	%	(7)	1	87,097	(9)
Subtotal for Residential Properties		90.8	%		2	442,444
Hotel Property
Boston Marriott Cambridge (433 rooms)	Cambridge, MA	79.5	%	(10)	1	334,260	(11)
Subtotal for Hotel Property		79.5	%		1	334,260
Subtotal for In-Service Properties		90.2	%		166	43,677,894
Properties Under Development/Redevelopment (12)
Office and Retail
Prudential Center Retail Expansion	Boston, MA	100	%		—	15,000
888 Boylston Street	Boston, MA	84	%		1	425,000
Salesforce Tower (95% ownership)	San Francisco, CA	62	%		1	1,400,000
The Hub on Causeway (50% ownership) (3)	Boston, MA	33	%		1	385,000
Dock 72 (50% ownership) (3)	Brooklyn, NY	33	%		1	670,000
Residential
Proto at Cambridge (274 units)	Cambridge, MA	N/A			1	164,000
Signature at Reston (508 units)	Reston, VA	N/A			1	490,000
Signature at Reston - Retail		81	%		—	24,600
Redevelopment
Reservoir Place North	Waltham, MA	—	%		1	73,000
191 Spring Street	Lexington, MA	50.0	%		1	160,000
159 East 53rd (55% ownership) (13)	New York, NY	—	%		—	220,000
Subtotal for Properties Under Development/Redevelopment		50	%	(14)	8	4,026,600
Total Portfolio					174	47,704,494


(1)	Represents signed leases for in-service properties which revenue recognition has commenced in accordance with generally accepted accounting principles in the United States (“GAAP”).


(2)	Approximately 13% of this complex was removed from the in-service portfolio upon commencement of construction of the planned redevelopment that commenced during the third quarter of 2016.


(3)	Property is an unconsolidated joint venture.


(4)	Excludes approximately 59,000 square feet of storage space and 8,000 square feet of remeasurement upon lease expirations.


(5)	Property is held for redevelopment.


(6)	As a result of the conversion of the food court into a retail unit, the property's rentable area increased by approximately 40,000 square feet.


(7)	Note that these amounts are not included in the calculation of the Total Portfolio occupancy rate for In-Service Properties as of December 31, 2016.


(8)	Includes 26,179 square feet of retail space which is 100% leased as of December 31, 2016. Note that this amount is not included in the calculation of the Total Portfolio occupancy rate for In-Service Properties as of December 31, 2016.


(9)	Includes 9,617 square feet of retail space which is 100% leased as of December 31, 2016. Note that this amount is not included in the calculation of the Total Portfolio occupancy rate for In-Service Properties as of December 31, 2016.


(10)	Represents the weighted-average room occupancy for the year ended December 31, 2016. Note that this amount is not included in the calculation of the Total Portfolio occupancy rate for In-Service Properties as of December 31, 2016.


(11)	Includes 4,260 square feet of retail space which is 100% leased of December 31, 2016. Note that this amount is not included in the calculation of the Total Portfolio occupancy rate for In-Service Properties as of December 31, 2016.


(12)	Represents percentage leased as of February 22, 2017.


(13)	Formerly the low-rise portion of 601 Lexington Avenue.


(14)	Includes approximately 9,000 square feet of retail space at the Proto at Cambridge residential development, which is 0% leased.

Percentage Leased and Average Annualized Revenue per Square Foot for In-Service Properties

The following table sets forth our percentage leased and average annualized revenue per square foot on a historical basis for our In-Service Properties.



	December 31, 2016			December 31, 2015			December 31, 2014			December 31, 2013			December 31, 2012
Percentage leased (1)	90.2		%	91.4		%	91.7		%	93.4		%	91.4		%
Average annualized revenue per square foot (2)		$62.54			$60.89			$58.97			$56.36			$55.43


(1)	Represents signed leases, excluding hotel and residential properties, for which revenue recognition has commenced in accordance with GAAP.

(2)

Represents the monthly contractual base rents and recoveries from tenants under existing leases as of December 31, 2016, 2015, 2014, 2013 and 2012 multiplied by twelve. These annualized amounts are before rent abatements and include expense reimbursements, which may be estimates as of such date. The aggregate amounts of rent abatements per square foot under existing leases as of December 31, 2016, 2015, 2014, 2013 and 2012 for the succeeding twelve month period were $1.18, $0.60, $1.05, $0.58 and $1.17, respectively.

Top 20 Tenants by Square Feet

Our 20 largest tenants by square feet as of December 31, 2016 were as follows:



	Tenant	Square Feet		% of In-Service Portfolio
1.	U.S. Government	1,640,920	(1)	3.82	%
2.	Biogen	772,212		1.80	%
3.	Citibank	724,364	(2)	1.69	%
4.	Bank of America	693,265	(3)	1.61	%
5.	Wellington Management	648,752	(4)	1.51	%
6.	Kirkland & Ellis	646,023	(5)	1.50	%
7.	Arnold & Porter	607,242		1.41	%
8.	Ropes & Gray	539,467		1.26	%
9.	Shearman & Sterling	513,060	(6)	1.19	%
10.	O’Melveny & Myers	500,046	(7)	1.16	%
11.	Weil Gotshal Manges	393,195	(8)	0.92	%
12.	Genentech	383,968		0.89	%
13.	Google	381,105		0.89	%
14.	Finnegan Henderson Farabow	362,405	(9)	0.84	%
15.	Ann Inc. (fka Ann Taylor Corp.)	351,026	(10)	0.82	%
16.	Bechtel Corporation	346,990		0.81	%
17.	PTC	320,655		0.75	%
18.	Microsoft	319,354		0.74	%
19.	Blue Cross Blue Shield	308,210		0.72	%
20.	Mass Financial Services	301,668		0.70	%


(1)	Includes 157,029 and 1,980 square feet of space in properties in which we have a 50% and 20% interest, respectively.


(2)	Includes 302,896 and 2,761 square feet of space in properties in which we have a 55% and 20% interest, respectively.


(3)	Includes 625,354, 50,887 and 50 square feet of space in properties in which we have a 55%, 60% and 50% interest, respectively.


(4)	Includes 637,993 square feet of space in properties in which we have a 55% interest.


(5)	Includes 422,599 and 223,424 square feet of space in properties in which we have a 55% and 20% interest, respectively.


(6)	Includes 37,877 square feet of space in a property in which we have a 50% interest.


(7)	Includes 325,750 square feet of space in a property in which we have a 55% interest.


(8)	Includes 365,048 and 28,147 square feet of space in properties in which we have a 60% and 55% interest, respectively.


(9)	Includes 292,548 square feet of space in a property in which we have a 25% interest.


(10)	Includes 331,209 square feet of space in a property in which we have a 55% interest.

Tenant Diversification

Our tenant diversification by square feet as of December 31, 2016 were as follows:



Sector	% of In-Service Portfolio
Media & Technology	25%
Legal Services	21%
Financial Services - all other	13%
Other	12%
Other Professional Services	9%
Financial Services - commercial and investment banking	8%
Government / Public Administration	6%
Retail	6%

Lease Expirations (1)(2)



Year of Lease Expiration	Rentable Square Feet Subject to Expiring Leases	Current Annualized Contractual Rent Under Expiring Leases Without Future Step-Ups (3)		Current Annualized Contractual Rent Under Expiring Leases Without Future Step-Ups p.s.f. (3)		Current Annualized Contractual Rent Under Expiring Leases With Future Step-Ups (4)		Current Annualized Contractual Rent Under Expiring Leases With Future Step-Ups p.s.f. (4)		Percentage of Total Square Feet
2016 (5)	115,331		$5,755,938		$49.91		$5,755,938		$49.91	0.3	%
2017	2,328,197	151,100,135		64.90		152,513,741		65.51		5.7	%
2018	1,541,680	103,841,839		67.36		105,931,206		68.71		3.8	%
2019	3,524,261	186,301,876		52.86		190,824,771		54.15		8.7	%
2020	4,454,917	284,094,049		63.77		293,865,720		65.96		11.0	%
2021	3,820,575	213,053,299		55.76		228,417,659		59.79		9.4	%
2022	4,244,368	246,333,201		58.04		272,361,921		64.17		10.5	%
2023	1,643,788	95,716,163		58.23		109,314,767		66.50		4.1	%
2024	2,766,152	165,609,504		59.87		183,522,732		66.35		6.8	%
2025	2,608,773	150,380,359		57.64		172,691,441		66.20		6.4	%
Thereafter	11,267,301	797,434,531		70.77		1,029,945,825		91.41		27.7	%


(1)	Includes 100% of unconsolidated joint venture properties. Does not include residential units or the hotel.


(2)	Does not include data for leases expiring in a particular year when leases for the same space have already been signed with replacement tenants with future commencement dates. In those cases, the data is included in the year in which the future lease with the replacement tenant expires.


(3)	Represents the monthly contractual base rent and recoveries from tenants under existing leases as of December 31, 2016 multiplied by twelve. This amount reflects total rent before any rent abatements and includes expense reimbursements, which may be estimates as of such date.


(4)	Represents the monthly contractual base rent under expiring leases with future contractual increases upon expiration and recoveries from tenants under existing leases as of December 31, 2016 multiplied by twelve. This amount reflects total rent before any rent abatements and includes expense reimbursements, which may be estimates as of such date.


(5)	Represents leases that expired on December 31, 2016.

Item 3. Legal Proceedings

We are subject to various legal proceedings and claims that arise in the ordinary course of business. These matters are generally covered by insurance. Management believes that the final outcome of such matters will not have a material adverse effect on our financial position, results of operations or liquidity.

Item 4. Mine Safety Disclosures

Not Applicable.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

(a) The common stock of Boston Properties, Inc. is listed on the New York Stock Exchange under the symbol “BXP.” At February 22, 2017, BXP had approximately 1,248 stockholders of record.

There is no established public trading market for BPLP’s common units. On February 22, 2017, there were approximately 262 holders of record and 171,118,961 common units outstanding, 153,836,251 of which were held by BXP.

The high and low sales prices and dividends per share of BXP common stock and distributions per common unit of BPLP for the periods indicated in the table below were:



Quarter Ended	High		Low		Dividends per common share			Distributions per common unit
December 31, 2016	$	135.47	$	113.69	$	0.75	(1)	$	0.75	(1)
September 30, 2016	144.02		129.49		0.65			0.65
June 30, 2016	133.59		123.45		0.65			0.65
March 31, 2016	127.77		107.28		0.65			0.65
December 31, 2015	130.68		116.64		1.90		(2)	1.90		(2)
September 30, 2015	127.15		94.91		0.65			0.65
June 30, 2015	143.09		120.44		0.65			0.65
March 31, 2015	146.07		129.29		0.65			0.65


(1)	On December 19, 2016, we increased our regular quarterly dividend/distribution to $0.75 per common share/unit.


(2)	Includes a special dividend/distribution of $1.25 per common share/unit.

In order to enable BXP to maintain its qualification as a REIT, it must make annual distributions to its stockholders of at least 90% of its taxable income (not including net capital gains and with certain other adjustments). BXP has adopted a policy of paying regular quarterly dividends on its common stock, and, as BPLP’s general partner, BXP has adopted a policy of paying regular quarterly distributions on common units of BPLP. For the year ended December 31, 2015, the decision to declare the special distribution was primarily a result of the taxable gains associated with the sale of approximately $584 million of assets in 2015.

Cash distributions have been paid on the common stock of BXP and BPLP’s common units since BXP’s initial public offering. Distributions are declared at the discretion of the Board of Directors of BXP and depend on actual and anticipated cash from operations, our financial condition, capital requirements, the annual distribution requirements under the REIT provisions of the Internal Revenue Code and other factors the Board of Directors of BXP may consider relevant.

Stock Performance Graph

The following graph provides a comparison of cumulative total stockholder return for the period from December 31, 2011 through December 31, 2016, among BXP, Standard & Poor’s (“S&P”) 500 Index, NAREIT Equity REIT Total Return Index (the “Equity REIT Index”) and the NAREIT Office REIT Index (the “Office REIT Index”). The Equity REIT Index includes all tax-qualified equity REITs listed on the New York Stock Exchange, the American Stock Exchange and the NASDAQ Stock Market. Equity REITs are defined as those with 75% or more of their gross invested book value of assets invested directly or indirectly in the equity ownership of real estate. The Office REIT Index includes all office REITs included in the Equity REIT Index. Data for BXP, the S&P 500 Index, the Equity REIT Index and the Office REIT Index was provided to us by NAREIT. Upon written request, we will provide any stockholder with a list of the REITs included in the Equity REIT Index and the Office REIT Index. The stock performance graph assumes an investment of $100 in each of BXP and the three indices, and the reinvestment of any dividends. The historical information set forth below is not necessarily indicative of future performance. The data shown is based on the share prices or index values, as applicable, at the end of each month shown.



	As of the year ended December 31,
	2011		2012		2013		2014		2015		2016
Boston Properties, Inc.	$	100.00	$	108.56	$	107.96	$	146.32	$	149.44	$	150.50
S&P 500 Index	$	100.00	$	116.00	$	153.57	$	174.60	$	177.01	$	198.18
Equity REIT Index	$	100.00	$	119.70	$	123.12	$	157.63	$	162.08	$	176.07
Office REIT Index	$	100.00	$	114.15	$	120.52	$	151.68	$	152.11	$	172.14

(b) None.

Boston Properties Limited Partnership

(a) None.

(b) None.



Period	(a) Total Number of Units Purchased		(b) Average Price Paid per Unit		(c) Total Number of Units Purchased as Part of Publicly Announced Plans or Programs	(d) Maximum Number (or Approximate Dollar Value) of Units that May Yet be Purchased Under the Plans or Programs
October 1, 2016 - October 31, 2016	906	(1)	$	0.25	N/A	N/A
November 1, 2016 - November 30, 2016	—		—		N/A	N/A
December 1, 2016 - December 31, 2016	—		—		N/A	N/A
Total	906		$	0.25	N/A	N/A


(1)	Represents LTIP Units that were repurchased in connection with the termination of a certain employee’s employment with BXP. Under the terms of the applicable LTIP Unit vesting agreements, such units were repurchased by BPLP at a price of $0.25 per unit, which was the amount originally paid by such employee for such units.

Item 6. Selected Financial Data

The following tables sets forth selected financial and operating data on a historical basis for each of BXP and BPLP. The following data should be read in conjunction with BXP’s and BPLP’s financial statements and notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations included elsewhere in this Form 10-K. Our historical operating results may not be comparable to our future operating results.

Boston Properties, Inc.



	For the year ended December 31,
	2016			2015			2014			2013			2012
	(in thousands, except per share data)
Statement of Operations Information:
Total revenue	$	2,550,820		$	2,490,821		$	2,396,998		$	2,135,539		$	1,847,186
Expenses:
Rental operating	889,768			872,252			835,290			742,956			639,088
Hotel operating	31,466			32,084			29,236			28,447			28,120
General and administrative	105,229			96,319			98,937			115,329			90,129
Transaction costs	2,387			1,259			3,140			1,744			3,653
Impairment loss	1,783			—			—			8,306			—
Depreciation and amortization	694,403			639,542			628,573			560,637			445,875
Total expenses	1,725,036			1,641,456			1,595,176			1,457,419			1,206,865
Operating income	825,784			849,365			801,822			678,120			640,321
Other income (expense):
Income from unconsolidated joint ventures	8,074			22,770			12,769			75,074			49,078
Gain on sale of investment in unconsolidated joint venture	59,370			—			—			—			—
Gains on consolidation of joint ventures	—			—			—			385,991			—
Interest and other income	7,230			6,777			8,765			8,310			10,091
Gains (losses) from investments in securities	2,273			(653		)	1,038			2,911			1,389
Interest expense	(412,849		)	(432,196		)	(455,743		)	(446,880		)	(410,970		)
Gains (losses) from early extinguishments of debt	(371		)	(22,040		)	(10,633		)	122			(4,453		)
Losses from interest rate contracts	(140		)	—			—			—			—
Income from continuing operations	489,371			424,023			358,018			703,648			285,456
Discontinued operations	—			—			—			137,792			46,683
Income before gains on sales of real estate	489,371			424,023			358,018			841,440			332,139
Gains on sales of real estate	80,606			375,895			168,039			—			—
Net income	569,977			799,918			526,057			841,440			332,139
Net income attributable to noncontrolling interests	(57,192		)	(216,812		)	(82,446		)	(91,629		)	(42,489		)
Net income attributable to Boston Properties, Inc.	512,785			583,106			443,611			749,811			289,650
Preferred dividends	(10,500		)	(10,500		)	(10,500		)	(8,057		)	—
Net income attributable to Boston Properties, Inc. common shareholders	$	502,285		$	572,606		$	433,111		$	741,754		$	289,650
Basic earnings per common share attributable to Boston Properties, Inc.:
Income from continuing operations	$	3.27		$	3.73		$	2.83		$	4.06		$	1.65
Discontinued operations	—			—			—			0.81			0.28
Net income	$	3.27		$	3.73		$	2.83		$	4.87		$	1.93
Weighted average number of common shares outstanding	153,715			153,471			153,089			152,201			150,120
Diluted earnings per common share attributable to Boston Properties, Inc.:
Income from continuing operations	$	3.26		$	3.72		$	2.83		$	4.05		$	1.64
Discontinued operations	—			—			—			0.81			0.28
Net income	$	3.26		$	3.72		$	2.83		$	4.86		$	1.92
Weighted average number of common and common equivalent shares outstanding	153,977			153,844			153,308			152,521			150,711



	December 31,
	2016			2015			2014			2013			2012
	(in thousands)
Balance Sheet information:
Real estate, gross	$	20,147,263		$	19,481,535		$	19,236,403		$	18,978,765		$	14,893,328
Real estate, net	15,925,028			15,555,641			15,688,744			15,817,194			11,959,168
Cash and cash equivalents	356,914			723,718			1,763,079			2,365,137			1,041,978
Total assets (1)	18,851,643			18,351,486			19,852,195			20,135,014			15,436,051
Total indebtedness (1)	9,796,133			9,188,543			10,052,412			11,480,258			8,873,355
Noncontrolling interests	—			—			105,325			150,921			208,434
Stockholders’ equity attributable to Boston Properties, Inc.	5,786,295			5,709,435			5,697,298			5,741,153			5,097,065
Equity noncontrolling interests	2,145,629			2,177,492			2,205,638			1,302,465			537,789

	For the year ended December 31,
	2016			2015			2014			2013			2012
	(in thousands, except per share and percentage data)
Other Information:
Funds from Operations attributable to Boston Properties, Inc. (2)	$	927,747		$	823,715		$	807,506		$	751,464		$	741,419
Dividends declared per share (3)	2.70			3.85			7.10			4.85			2.30
Cash flows provided by operating activities	1,036,874			799,411			695,553			777,926			642,949
Cash flows used in investing activities	(1,329,057		)	(280,226		)	(665,124		)	(532,640		)	(1,278,032		)
Cash flows provided by (used in) financing activities	(74,621		)	(1,558,546		)	(632,487		)	1,077,873			(146,147		)
Total square feet at end of year (including development projects)	47,704			46,495			45,760			44,399			44,384
In-service percentage leased at end of year	90.2		%	91.4		%	91.7		%	93.4		%	91.4		%

(1)

On January 1, 2016, we adopted ASU 2015-03 and retrospectively applied the guidance to our Mortgage Notes Payable and Unsecured Senior Notes for all periods presented (See Note 2 to the Consolidated Financial Statements). Unamortized deferred financing costs, with the exception of December 31, 2016, were previously included in Total Assets totaling approximately $37.7 million, $28.0 million, $34.5 million, $41.2 million and $39.0 million are now included in Total Indebtedness as of December 31, 2016, 2015, 2014, 2013 and 2012, respectively.

(2)

Pursuant to the revised definition of Funds from Operations adopted by the Board of Governors of NAREIT, we calculate Funds from Operations, or “FFO,” for BXP by adjusting net income attributable to Boston Properties, Inc. common shareholders (computed in accordance with GAAP) for gains (or losses) from sales of properties, impairment losses on depreciable real estate consolidated on BXP’s balance sheet, impairment losses on our investments in unconsolidated joint ventures driven by a measurable decrease in the fair value of depreciable real estate held by the unconsolidated joint ventures, real estate-related depreciation and amortization, and our share of income (loss) from unconsolidated partnerships and joint ventures. FFO is a non-GAAP financial measure, but we believe the presentation of FFO, combined with the presentation of required GAAP financial measures, has improved the understanding of operating results of REITs among the investing public and has helped make comparisons of REIT operating results more meaningful. Management generally considers FFO to be a useful measure for understanding and comparing BXP’s operating results because, by excluding gains and losses related to sales of previously depreciated operating real estate assets, impairment losses and real estate asset depreciation and amortization (which can differ across owners of similar assets in similar condition based on historical cost accounting and useful life estimates), FFO can help investors compare the operating performance of a company’s real estate across reporting periods and to the operating performance of other companies. Amount represents BXP’s share, which was 89.70%, 89.68%, 89.81%, 89.99% and 89.48% for the years ended December 31, 2016, 2015, 2014, 2013 and 2012, respectively, after allocation to the noncontrolling interests.

Our computation of FFO may not be comparable to FFO reported by other REITs or real estate companies that do not define the term in accordance with the current NAREIT definition or that interpret the current NAREIT definition differently. We believe that in order to facilitate a clear understanding of our operating results, FFO should be examined in conjunction with net income attributable to Boston Properties, Inc. common shareholders as presented in BXP’s Consolidated Financial Statements. FFO should not be considered as a substitute for net income attributable to Boston Properties, Inc. common shareholders (determined in accordance with GAAP) or any other GAAP financial measures and should only be considered together with and as a supplement to BXP’s financial information prepared in accordance with GAAP.

A reconciliation of FFO to net income attributable to Boston Properties, Inc. common shareholders computed in accordance with GAAP is provided under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Funds from Operations.”


(3)	Includes the special dividends of $1.25 per share, $4.50 per share and $2.25 per share paid on January 28, 2016, January 28, 2015 and January 29, 2014, respectively, to shareholders of record as of the close of business on December 31, 2015, 2014 and 2013, respectively.

Boston Properties Limited Partnership



	For the year ended December 31,
	2016			2015			2014			2013			2012
	(in thousands, except per unit data)
Statement of Operations Information:
Total revenue	$	2,550,820		$	2,490,821		$	2,396,998		$	2,135,539		$	1,847,186
Expenses:
Rental operating	889,768			872,252			835,290			742,956			639,088
Hotel operating	31,466			32,084			29,236			28,447			28,120
General and administrative	105,229			96,319			98,937			115,329			90,129
Transaction costs	2,387			1,259			3,140			1,744			3,653
Impairment loss	1,783			—			—			4,401			—
Depreciation and amortization	682,776			631,549			620,064			552,589			437,692
Total expenses	1,713,409			1,633,463			1,586,667			1,445,466			1,198,682
Operating income	837,411			857,358			810,331			690,073			648,504
Other income (expense):
Income from unconsolidated joint ventures	8,074			22,770			12,769			75,074			49,078
Gain on sale of investment in unconsolidated joint venture	59,370			—			—			—			—
Gains on consolidation of joint ventures	—			—			—			385,991			—
Interest and other income	7,230			6,777			8,765			8,310			10,091
Gains (losses) from investments in securities	2,273			(653		)	1,038			2,911			1,389
Interest expense	(412,849		)	(432,196		)	(455,743		)	(446,880		)	(410,970		)
Gains (losses) from early extinguishments of debt	(371		)	(22,040		)	(10,633		)	122			(4,453		)
Losses from interest rate contracts	(140		)	—			—			—			—
Income from continuing operations	500,998			432,016			366,527			715,601			293,639
Discontinued operations	—			—			—			141,365			48,251
Income before gains on sales of real estate	500,998			432,016			366,527			856,966			341,890
Gains on sales of real estate	82,775			377,093			174,686			—			—
Net income	583,773			809,109			541,213			856,966			341,890
Net income attributable to noncontrolling interests:
Noncontrolling interests in property partnerships	2,068			(149,855		)	(30,561		)	(1,347		)	(3,792		)
Noncontrolling interest-redeemable preferred units	—			(6		)	(1,023		)	(6,046		)	(3,497		)
Net income attributable to Boston Properties Limited Partnership	585,841			659,248			509,629			849,573			334,601
Preferred distributions	(10,500		)	(10,500		)	(10,500		)	(8,057		)	—
Net income attributable to Boston Properties Limited Partnership common unitholders	$	575,341		$	648,748		$	499,129		$	841,516		$	334,601
Basic earnings per common unit attributable to Boston Properties Limited Partnership:
Income from continuing operations	$	3.36		$	3.79		$	2.93		$	4.14		$	1.70
Discontinued operations	—			—			—			0.83			0.29
Net income	$	3.36		$	3.79		$	2.93		$	4.97		$	1.99
Weighted average number of common units outstanding	171,361			171,139			170,453			169,126			167,769
Diluted earnings per common unit attributable to Boston Properties Limited Partnership:
Income from continuing operations	$	3.35		$	3.78		$	2.92		$	4.14		$	1.70
Discontinued operations	—			—			—			0.83			0.29
Net income	$	3.35		$	3.78		$	2.92		$	4.97		$	1.99
Weighted average number of common and common equivalent units outstanding	171,623			171,512			170,672			169,446			168,360



	December 31,
	2016			2015			2014			2013			2012
	(in thousands)
Balance Sheet information:
Real estate, gross	$	19,733,872		$	19,061,141		$	18,814,558		$	18,548,441		$	14,454,962
Real estate, net	15,597,508			15,214,325			15,338,237			15,451,531			11,577,979
Cash and cash equivalents	356,914			723,718			1,763,079			2,365,137			1,041,978
Total assets (1)	18,524,123			18,010,170			19,501,688			19,769,351			15,054,862
Total indebtedness (1)	9,796,133			9,188,543			10,052,412			11,480,258			8,873,355
Noncontrolling interests	2,262,040			2,286,689			2,415,371			1,915,573			2,133,458
Boston Properties Limited Partnership partners’ capital	3,811,717			3,684,522			3,639,916			4,187,171			3,330,605
Noncontrolling interests in property partnerships	1,530,647			1,574,400			1,602,467			726,132			(1,964		)

	For the year ended December 31,
	2016			2015			2014			2013			2012
	(in thousands, except per unit and percentage data)
Other Information:
Funds from operations (2)	$	1,034,251		$	918,543		$	899,094		$	839,369		$	828,586
Distributions per common unit (3)	2.70			3.85			7.10			4.85			2.30
Cash flows provided by operating activities	1,036,874			799,411			695,553			777,926			642,949
Cash flows used in investing activities	(1,329,057		)	(280,226		)	(665,124		)	(532,640		)	(1,278,032		)
Cash flows provided by (used in) financing activities	(74,621		)	(1,558,546		)	(632,487		)	1,077,873			(146,147		)
Total square feet at end of year (including development projects)	47,704			46,495			45,760			44,399			44,384
In-service percentage leased at end of year	90.2		%	91.4		%	91.7		%	93.4		%	91.4		%

(1)

(2)

Pursuant to the revised definition of Funds from Operations adopted by the Board of Governors of NAREIT, we calculate Funds from Operations, or “FFO,” for BPLP by adjusting net income attributable to Boston Properties Limited Partnership common unitholders (computed in accordance with GAAP) for gains (or losses) from sales of properties, impairment losses on depreciable real estate consolidated on BPLP’s balance sheet, impairment losses on our investments in unconsolidated joint ventures driven by a measurable decrease in the fair value of depreciable real estate held by the unconsolidated joint ventures, real estate-related depreciation and amortization, and our share of income (loss) from unconsolidated partnerships and joint ventures. FFO is a non-GAAP financial measure, but we believe the presentation of FFO, combined with the presentation of required GAAP financial measures, has improved the understanding of operating results of REITs among the investing public and has helped make comparisons of REIT operating results more meaningful. Management generally considers FFO to be useful measures for understanding and comparing BPLP’s operating results because, by excluding gains and losses related to sales of previously depreciated operating real estate assets, impairment losses and real estate asset depreciation and amortization (which can differ across owners of similar assets in similar condition based on historical cost accounting and useful life estimates), FFO can help investors compare the operating performance of a company’s real estate across reporting periods and to the operating performance of other companies.

Our computation of FFO may not be comparable to FFO reported by other REITs or real estate companies that do not define the term in accordance with the current NAREIT definition or that interpret the current NAREIT definition differently. We believe that in order to facilitate a clear understanding of our operating results, FFO should be examined in conjunction with net income attributable to Boston Properties Limited Partnership common unitholders as presented in BPLP’s Consolidated Financial Statements. FFO should not be considered as a substitute for net income attributable to Boston Properties Limited Partnership common unitholders (determined in accordance with GAAP) or any other GAAP financial measures and should only be considered together with and as a supplement to BPLP’s financial information prepared in accordance with GAAP.

A reconciliation of FFO to net income attributable to Boston Properties Limited Partnership common unitholders computed in accordance with GAAP is provided under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Funds from Operations.”


(3)	Includes the special distributions of $1.25 per common unit, $4.50 per common unit and $2.25 per common unit paid on January 28, 2016, January 28, 2015 and January 29, 2014, respectively, to unitholders of record as of the close of business on December 31, 2015, 2014 and 2013, respectively.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the financial statements and notes thereto appearing elsewhere in this report.

Forward-Looking Statements

The Annual Reports on Form 10-K, including the documents incorporated by reference, contain forward-looking statements within the meaning of the federal securities laws, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We intend these forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and are including this statement for purposes of complying with those safe harbor provisions. Such statements are contained principally, but not only, under the captions “Business—Business and Growth Strategies,” “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” We caution investors that any such forward-looking statements are based on beliefs and on assumptions made by, and information currently available to, our management. When used, the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “project,” “result,” “should,” “will” and similar expressions which do not relate solely to historical matters are intended to identify forward-looking statements. Such statements are subject to risks, uncertainties and assumptions and are not guarantees of future performance, which may be affected by known and unknown risks, trends, uncertainties and factors that are beyond our control. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or projected by the forward-looking statements. We caution you that, while forward-looking statements reflect our good faith beliefs when we make them, they are not guarantees of future performance and are impacted by actual events when they occur after we make such statements. Accordingly, investors should use caution in relying on forward-looking statements, which are based on results and trends at the time they are made, to anticipate future results or trends.

Some of the risks and uncertainties that may cause our actual results, performance or achievements to differ materially from those expressed or implied by forward-looking statements include, among others, the following:


•	if there is a negative change in the economy, including, but not limited to, a reversal of current job growth trends and an increase in unemployment, it could have a negative effect on the following, among other things:


•	the fundamentals of our business, including overall market occupancy, tenant space utilization, and rental rates;


•	the financial condition of our tenants, many of which are financial, legal, media/telecommunication, technology and other professional firms, our lenders, counterparties to our derivative financial instruments and institutions that hold our cash balances and short-term investments, which may expose us to increased risks of default by these parties; and


•	the value of our real estate assets, which may limit our ability to dispose of assets at attractive prices or obtain or maintain debt financing secured by our properties or on an unsecured basis;


•	volatile or adverse global economic and political conditions, and dislocations in the credit markets could adversely affect our access to cost-effective capital and have a resulting material adverse effect on our business opportunities, results of operations and financial condition;


•	general risks affecting the real estate industry (including, without limitation, the inability to enter into or renew leases, tenant space utilization, dependence on tenants’ financial condition, and competition from other developers, owners and operators of real estate);


•	failure to manage effectively our growth and expansion into new markets and sub-markets or to integrate acquisitions and developments successfully;


•	the ability of our joint venture partners to satisfy their obligations;


•	risks and uncertainties affecting property development and construction (including, without limitation, construction delays, increased construction costs, cost overruns, inability to obtain necessary permits, tenant accounting considerations that may result in negotiated lease provisions that limit a tenant’s liability during construction, and public opposition to such activities);


•	risks associated with the availability and terms of financing and the use of debt to fund acquisitions and developments or refinance existing indebtedness, including the impact of higher interest rates on the cost and/or availability of financing;


•	risks associated with forward interest rate contracts and the effectiveness of such arrangements;


•	risks associated with downturns in the national and local economies, increases in interest rates, and volatility in the securities markets;


•	risks associated with actual or threatened terrorist attacks;


•	costs of compliance with the Americans with Disabilities Act and other similar laws;


•	potential liability for uninsured losses and environmental contamination;


•	risks associated with security breaches through cyber attacks, cyber intrusions or otherwise, as well as other significant disruptions of our information technology (IT) networks and related systems, which support our operations and our buildings;


•	risks associated with BXP’s potential failure to qualify as a REIT under the Internal Revenue Code of 1986, as amended;


•	possible adverse changes in tax and environmental laws;


•	the impact of newly adopted accounting principles on our accounting policies and on period-to-period comparisons of financial results;


•	risks associated with possible state and local tax audits; and


•	risks associated with our dependence on key personnel whose continued service is not guaranteed.

The risks set forth above are not exhaustive. Other sections of this report, including “Part I, Item 1A—Risk Factors,” include additional factors that could adversely affect our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time and it is not possible for management to predict all risk factors, nor can we assess the impact of all risk factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. Investors should also refer to our Quarterly Reports on Form 10-Q for future periods and Current Reports on Form 8-K as we file them with the SEC, and to other materials we may furnish to the public from time to time through Current Reports on Form 8-K or otherwise, for a discussion of risks and uncertainties that may cause actual results, performance or achievements to differ materially from those expressed or implied by forward-looking statements. We expressly disclaim any responsibility to update any forward-looking statements to reflect changes in underlying assumptions or factors, new informa

Showing the first 8K of 287K characters. Open the full section

Item 7A. Quantitative and Qualitative Disclosures about Market Risk.

The following table presents the aggregate carrying value of our mortgage notes payable, net, mezzanine notes payable and unsecured senior notes, net and our corresponding estimate of fair value as of December 31, 2016. All of these borrowings bore interest at fixed rates. The fair value of these instruments is affected by changes in market interest rates. The table below does not include our unconsolidated joint venture debt. For a discussion concerning our unconsolidated joint venture debt, see Note 5 to the Consolidated Financial Statements and “Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations—Capitalization—Off-Balance Sheet Arrangements—Joint Venture Indebtedness.”



	2017			2018			2019			2020			2021			2022+			Total			Estimated Fair Value
	(Dollars in thousands) Mortgage debt
Fixed Rate	$	1,350,847		$	18,202		$	19,239		$	20,335		$	39,840		$	614,624		$	2,063,087		$	2,092,237
GAAP Average Interest Rate	2.47		%	5.52		%	5.53		%	5.55		%	5.62		%	4.79		%	3.33		%
Variable Rate	—			—			—			—			—			—			—			—
	Mezzanine debt
Fixed Rate	$	307,093		$	—		$	—		$	—		$	—		$	—		$	307,093		$	308,344
GAAP Average Interest Rate	5.53		%	—			—			—			—			—			5.53		%
Variable Rate	—			—			—			—			—			—			—			—
	Unsecured debt
Fixed Rate	$	(8,830	)	$	841,285		$	692,461		$	692,962		$	844,289		$	4,183,786		$	7,245,953		$	7,428,077
GAAP Average Interest Rate	—			3.85		%	5.97		%	5.71		%	4.29		%	3.71		%	4.21		%
Variable Rate	—			—			—			—			—			—			—			—
Total Debt	$	1,649,110		$	859,487		$	711,700		$	713,297		$	884,129		$	4,798,410		$	9,616,133		$	9,828,658

At December 31, 2016, the weighted-average coupon/stated rates on the debt stated above, all of which had a fixed rate, was 4.50% per annum. At December 31, 2016, we had no outstanding consolidated variable rate debt.

The fair value amounts were determined solely by considering the impact of hypothetical interest rates on our financial instruments. Due to the uncertainty of specific actions we may undertake to minimize possible effects of market interest rate increases, this analysis assumes no changes in our financial structure.

In addition, beginning in 2015, our 767 Fifth Partners LLC, which is a subsidiary of the consolidated entity in which we have a 60% interest and that owns 767 Fifth Avenue (the General Motors Building) in New York City, entered into sixteen forward-starting interest rate swap contracts that fix the 10-year swap rate at a weighted-average rate of approximately 2.619% per annum on notional amounts aggregating $450.0 million. These interest rate swap contracts were entered into in advance of a financing with a target commencement date in June 2017 and maturity in June 2027. Our 767 Fifth Partners LLC consolidated entity entered into the interest rate swap contracts designated and qualifying as cash flow hedges to reduce its exposure to the variability in future cash flows attributable to changes in the 10-year swap rate in contemplation of obtaining 10-year fixed-rate financing in June 2017 (See Note 7 to the Consolidated Financial Statements).

Our use of derivative instruments also involves certain additional risks such as counterparty credit risk, the enforceability of hedging contracts and the risk that unanticipated and significant changes in interest rates will cause a significant loss of basis in the contract. We believe that there is a low likelihood that these counterparties will fail to meet our obligations and we minimize our exposure by limiting counterparties to major banks who meet established credit and capital guidelines. There can be no assurance that we will adequately protect against the foregoing risks.

Additional disclosure about market risk is incorporated herein by reference from “Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Market Risk.”

Item 8. Financial Statements and Supplementary Data

BOSTON PROPERTIES, INC. AND BOSTON PROPERTIES LIMITED PARTNERSHIP

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS




		Page

Boston Properties, Inc.
	Management’s Report on Internal Control over Financial Reporting	107
	Report of Independent Registered Public Accounting Firm	108
	Consolidated Balance Sheets as of December 31, 2016 and 2015	109
	Consolidated Statements of Operations for the years ended December 31, 2016, 2015 and 2014	110
	Consolidated Statements of Comprehensive Income for the years ended December 31, 2016, 2015 and 2014	111
	Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2016, 2015 and 2014	112
	Consolidated Statements of Cash Flows for the years ended December 31, 2016, 2015 and 2014	113

Boston Properties Limited Partnership
	Management’s Report on Internal Control over Financial Reporting	115
	Report of Independent Registered Public Accounting Firm	116
	Consolidated Balance Sheets as of December 31, 2016 and 2015	117
	Consolidated Statements of Operations for the years ended December 31, 2016, 2015 and 2014	118
	Consolidated Statements of Comprehensive Income for the years ended December 31, 2016, 2015 and 2014	119
	Consolidated Statements of Partners’ Capital for the years ended December 31, 2016, 2015 and 2014	120
	Consolidated Statements of Cash Flows for the years ended December 31, 2016, 2015 and 2014	121

	Notes to Consolidated Financial Statements	123

Boston Properties, Inc.
	Financial Statement Schedule—Schedule III	172

Boston Properties Limited Partnership
	Financial Statement Schedule—Schedule III	177

All other schedules for which a provision is made in the applicable accounting regulations of the SEC are not required under the related instructions or are inapplicable, and therefore have been omitted.

Management’s Report on Internal Control over

Financial Reporting

Management of Boston Properties, Inc. is responsible for establishing and maintaining adequate internal control over financial reporting for Boston Properties, Inc. Boston Properties, Inc.’s internal control over financial reporting is a process designed under the supervision of its principal executive officer and principal financial officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of Boston Properties, Inc.’s financial statements for external reporting purposes in accordance with U.S. generally accepted accounting principles.

As of the end of Boston Properties, Inc.’s 2016 fiscal year, management conducted assessments of the effectiveness of Boston Properties, Inc.’s internal control over financial reporting based on the framework established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on these assessments, management has determined that Boston Properties, Inc.’s internal control over financial reporting as of December 31, 2016 was effective.

Our internal control over financial reporting includes policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of management and the directors of Boston Properties, Inc.; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of Boston Properties, Inc.’s assets that could have a material effect on its financial statements.

The effectiveness of Boston Properties, Inc.’s internal control over financial reporting as of December 31, 2016 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in its report appearing on page 108, which expresses an unqualified opinion on the effectiveness of Boston Properties, Inc.’s internal control over financial reporting as of December 31, 2016.

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of

Boston Properties Inc.:

In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of Boston Properties, Inc. and its subsidiaries (the “Company”) at December 31, 2016 and December 31, 2015, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2016 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the accompanying index presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2016, based on criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these financial statements and financial statement schedule, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express opinions on these financial statements, on the financial statement schedule, and on the Company’s internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and d

Showing the first 8K of 290K characters. Open the full section

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures

None.

Item 9A. Controls and Procedures

Boston Properties, Inc.

As of the end of the period covered by this report, an evaluation was carried out by our management, with the participation of Boston Properties, Inc.’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of its disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934). Based upon that evaluation, Boston Properties, Inc.’s Chief Executive Officer and Chief Financial Officer concluded that these disclosure controls and procedures were effective as of the end of the period covered by this report. In addition, no change in Boston Properties, Inc.’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) occurred during the fourth quarter of Boston Properties, Inc.’s fiscal year ended December 31, 2016 that has materially affected, or is reasonably likely to materially affect, Boston Properties, Inc.’s internal control over financial reporting.

Management’s Report on Internal Control over Financial Reporting is set forth on page 107 of this Annual Report on Form 10-K and is incorporated herein by reference.

Boston Properties Limited Partnership

As of the end of the period covered by this report, an evaluation was carried out by the management of Boston Properties, Inc., with the participation of its Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer of Boston Properties, Inc. concluded that these disclosure controls and procedures were effective as of the end of the period covered by this report. In addition, no change in its internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) occurred during the fourth quarter of its fiscal year ended December 31, 2016 that has materially affected, or is reasonably likely to materially affect, its internal control over financial reporting.

Management’s Report on Internal Control over Financial Reporting is set forth on page 115 of this Annual Report on Form 10-K and is incorporated herein by reference.

Item 9B. Other Information

None.

PART III

Item 10. Directors, Executive Officers and Corporate Governance

The information required by Item 10 will be included in the Proxy Statement to be filed relating to Boston Properties, Inc.’s 2017 Annual Meeting of Stockholders and is incorporated herein by reference.

Item 11. Executive Compensation

The information required by Item 11 will be included in the Proxy Statement to be filed relating to Boston Properties, Inc.’s 2017 Annual Meeting of Stockholders and is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The following table summarizes Boston Properties, Inc.’s equity compensation plans as of December 31, 2016.

Equity Compensation Plan Information



Plan category	Number of securities to be issued upon exercise of outstanding options, warrants and rights		Weighted-average exercise price of outstanding options, warrants and rights			Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
	(a)		(b)			(c)
Equity compensation plans approved by security holders (1)	3,960,534	(2)	$	96.38	(2)	9,358,207	(3)
Equity compensation plans not approved by security holders (4)	N/A		N/A			103,794
Total	3,960,534		$	96.38		9,462,001


(1)	Includes information related to BXP’s 1997 Plan and 2012 Plan.

(2)

Includes (a) 547,129 shares of common stock issuable upon the exercise of outstanding options (514,360 of which are vested and exercisable), (b) 904,588 long term incentive units (LTIP units) (477,447 of which are vested) that, upon the satisfaction of certain conditions, are convertible into common units, which may be presented to BPLP for redemption and acquired by BXP for shares of its common stock, (c) 1,094,789 common units issued upon conversion of LTIP units, which may be presented to BPLP for redemption and acquired by BXP for shares of its common stock, (d) 474,415 2014 MYLTIP Units that, upon the satisfaction of certain conditions, are convertible into common units, which may be presented to BPLP for redemption and acquired by BXP for shares of its common stock, (e) 367,218 2015 MYLTIP Units that, upon the satisfaction of certain conditions, are convertible into common units, which may be presented to BPLP for redemption and acquired by BXP for shares of its common stock, (f) 473,360 2016 MYLTIP Units that, upon the satisfaction of certain conditions, are convertible into common units, which may be presented to BPLP for redemption and acquired by BXP for shares of its common stock and (g) 99,035 deferred stock units which were granted pursuant to elections by certain of BXP’s non-employee directors to defer all cash compensation to be paid to such directors and to receive their deferred cash compensation in shares of BXP’s common stock upon their retirement from its Board of Directors. Does not include 59,777 shares of restricted stock, as they have been reflected in BXP’s total shares outstanding. Because there is no exercise price associated with LTIP units, 2014 MYLTIP Units, 2015 MYLTIP Units, 2016 MYLTIP Units or deferred stock units, such shares are not included in the weighed-average exercise price calculation.


(3)	Represents awards available for issuance under BXP’s 2012 Plan. “Full-value” awards (i.e., awards other than stock options) are multiplied by a 2.32 conversion ratio to calculate the number of shares available under the 2012 Plan that are used for each full-value award, as opposed to a 1.0 conversion ratio for each stock option awarded under the 2012 Plan.

(4)

Includes information related to the 1999 Non-Qualified Employee Stock Purchase Plan (ESPP). The ESPP was adopted by the Board of Directors of BXP on October 29, 1998. The ESPP has not been approved by BXP’s stockholders. The ESPP is available to all our employees that are employed on the first day of the purchase period. Under the ESPP, each eligible employee may purchase shares of our common stock at semi-annual intervals each year at a purchase price equal to 85% of the average closing prices of our common stock on the New York Stock Exchange during the last ten business days of the purchase period. Each eligible employee may contribute no more than $10,000 per year to purchase our common stock under the ESPP.

Additional information concerning security ownership of certain beneficial owners and management required by Item 12 will be included in the Proxy Statement to be filed relating to Boston Properties, Inc.’s 2017 Annual Meeting of Stockholders and is incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions, and Director Independence

The information required by Item 13 will be included in the Proxy Statement to be filed relating to Boston Properties, Inc.’s 2017 Annual Meeting of Stockholders and is incorporated herein by reference.

Item 14. Principal Accountant Fees and Services

The information required by Item 14 will be included in the Proxy Statement to be filed relating to Boston Properties, Inc.’s 2017 Annual Meeting of Stockholders and is incorporated herein by reference.

PART IV

Item 15. Exhibits and Financial Statement Schedules

(a) Financial Statement Schedule

Boston Properties, Inc. Schedule 3 - Real Estate and Accumulated Depreciation December 31, 2016 (dollars in thousands)

Property Name	Type	Location	Encumbrances		Original				Costs Capitalized Subsequent to Acquisition		Land and Improvements		Building and Improvements		Land Held for Development		Development and Construction in Progress		Total		Accumulated Depreciation		Year(s) Built/ Renovated	Year(s) Acquired	Depreciable Lives (Years)

Land		Building
767 Fifth Avenue (the General Motors Building)	Office	New York, NY	$	1,333,625	$	1,796,252	$	1,532,654	$	75,211	$	1,796,252	$	1,607,865	$	—	$	—	$	3,404,117	$	189,209	1968	2013	(1)
Prudential Center	Office	Boston, MA	—		92,077		734,594		656,606		115,638		1,214,787		—		152,852		1,483,277		482,661		1965/1993/2002/2016	1998/1999/2000	(1)
Embarcadero Center	Office	San Francisco, CA	—		179,697		847,410		343,726		195,987		1,174,846		—		—		1,370,833		560,416		1970/1989	1998-1999	(1)
399 Park Avenue	Office	New York, NY	—		339,200		700,358		132,062		354,107		817,513		—		—		1,171,620		287,748		1961	2002	(1)
200 Clarendon Street and Garage	Office	Boston, MA	—		219,543		667,884		115,996		219,616		777,557		6,250		—		1,003,423		140,629		1976	2010	(1)
601 Lexington Avenue	Office	New York, NY	684,858		241,600		494,782		196,359		289,639		620,487		—		22,615		932,741		239,984		1977/1997	2001	(1)
250 West 55th Street	Office	New York, NY	—		285,263		603,167		35,668		285,263		638,835		—		—		924,098		49,852		2014	2007	(1)
Times Square Tower	Office	New York, NY	—		165,413		380,438		87,583		169,193		464,241		—		—		633,434		178,904		2004	2000	(1)
Carnegie Center	Office	Princeton, NJ	—		105,107		377,259		149,576		106,734		522,654		2,554		—		631,942		211,035		1983-2016	1998/1999/2000/2007/2014	(1)
100 Federal Street	Office	Boston, MA	—		131,067		435,954		38,611		131,067		474,565		—		—		605,632		77,409		1971-1975	2012	(1)
Atlantic Wharf	Office	Boston, MA	—		63,988		454,537		17,442		63,988		471,979		—		—		535,967		85,984		2011	2007	(1)
Fountain Square	Office	Reston, VA	—		56,853		306,298		17,748		56,853		320,759		3,287		—		380,899		50,106		1986-1990	2012	(1)
510 Madison Avenue	Office	New York, NY	—		103,000		253,665		21,952		103,000		275,617		—		—		378,617		44,515		2012	2010	(1)
599 Lexington Avenue	Office	New York, NY	—		81,040		100,507		169,222		87,852		262,917		—		—		350,769		168,776		1986	1997	(1)
680 Folsom Street	Office	San Francisco, CA	—		72,545		219,766		7,352		72,545		227,118		—		—		299,663		21,845		2014	2012	(1)
South of Market and Democracy Tower	Office	Reston, VA	—		13,603		237,479		15,455		13,687		252,850		—		—		266,537		79,868		2008-2009	2003	(1)
601 Massachusetts Avenue	Office	Washington, DC	—		95,310		165,173		12		95,322		165,173		—		—		260,495		6,534		2016	2008	(1)
Bay Colony Corporate Center	Office	Waltham, MA	—		18,789		148,451		68,371		18,789		216,822		—		—		235,611		46,015		1985-1989	2011	(1)
Gateway Center	Office	San Francisco, CA	—		28,255		139,245		55,680		30,627		192,553		—		—		223,180		98,003		1984/1986/2002	1999	(1)
535 Mission Street	Office	San Francisco, CA	—		40,933		148,378		2,015		40,933		150,393		—		—		191,326		8,844		2015	2013	(1)
2200 Pennsylvania Avenue	Office	Washington, DC	—		—		183,541		5,047		—		188,588		—		—		188,588		39,956		2011	2008	(1)
Mountain View Research Park	Office	Mountain View, CA	—		95,066		68,373		6,491		95,066		74,864		—		—		169,930		12,849		1977-1981/2007-2013	2013	(1)
Reservoir Place	Office	Waltham, MA	—		18,605		92,619		53,163		20,118		129,712		—		14,557		164,387		61,362		1955/1987	1997/1998	(1)
1330 Connecticut Avenue	Office	Washington, DC	—		25,982		82,311		32,276		27,135		113,434		—		—		140,569		34,137

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Item 16. Form 10-K Summary

Not Applicable.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, Boston Properties, Inc. has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.




		BOSTON PROPERTIES, INC.

February 28, 2017		/s/ MICHAEL E. LABELLE
		Michael E. LaBelle
		Chief Financial Officer
		(duly authorized officer and principal financial officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of Boston Properties, Inc., and in the capacities and on the dates indicated.




February 28, 2017

	By:	/s/ OWEN D. THOMAS
		Owen D. Thomas Director, Chief Executive Officer and Principal Executive Officer

	By:	/s/ DOUGLAS T. LINDE
		Douglas T. Linde Director and President

	By:	/s/ BRUCE W. DUNCAN
		Bruce W. Duncan Director

	By:	/s/ KAREN E. DYKSTRA
		Karen E. Dykstra Director

	By:	/s/ CAROL B. EINIGER
		Carol B. Einiger Director

	By:	/s/ DR. JACOB A. FRENKEL
		Dr. Jacob A. Frenkel Director

	By:	/s/ JOEL I. KLEIN
		Joel I. Klein Director

	By:	/s/ MATTHEW J. LUSTIG
		Matthew J. Lustig Director




		By:		/s/ ALAN J. PATRICOF
				Alan J. Patricof Director

		By:		/s/ MARTIN TURCHIN
				Martin Turchin Director

		By:		/s/ DAVID A. TWARDOCK
				David A. Twardock Director

		By:		/s/ MICHAEL E. LABELLE
				Michael E. LaBelle Executive Vice President, Chief Financial Officer and Principal Financial Officer

		By:		/s/ MICHAEL R. WALSH
				Michael R. Walsh Senior Vice President, Chief Accounting Officer and Principal Accounting Officer

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, Boston Properties Limited Partnership has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



		BOSTON PROPERTIES LIMITED PARTNERSHIP
		By: Boston Properties, Inc., its General Partner
February 28, 2017		/s/ MICHAEL E. LABELLE
		Michael E. LaBelle
		Chief Financial Officer (duly authorized officer and principal financial officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of Boston Properties, Inc., as general partner of Boston Properties Limited Partnership, and in the capacities and on the dates indicated.




February 28, 2017

	By:	/s/ OWEN D. THOMAS
		Owen D. Thomas Director, Chief Executive Officer and Principal Executive Officer

	By:	/s/ DOUGLAS T. LINDE
		Douglas T. Linde Director and President

	By:	/s/ BRUCE W. DUNCAN
		Bruce W. Duncan Director

	By:	/s/ KAREN E. DYKSTRA
		Karen E. Dykstra Director

	By:	/s/ CAROL B. EINIGER
		Carol B. Einiger Director

	By:	/s/ DR. JACOB A. FRENKEL
		Dr. Jacob A. Frenkel Director

	By:	/s/ JOEL I. KLEIN
		Joel I. Klein Director

	By:	/s/ MATTHEW J. LUSTIG
		Matthew J. Lustig Director




		By:		/s/ ALAN J. PATRICOF
				Alan J. Patricof Director

		By:		/s/ MARTIN TURCHIN
				Martin Turchin Director

		By:		/s/ DAVID A. TWARDOCK
				David A. Twardock Director

		By:		/s/ MICHAEL E. LABELLE
				Michael E. LaBelle Executive Vice President, Chief Financial Officer and Principal Financial Officer

		By:		/s/ MICHAEL R. WALSH
				Michael R. Walsh Senior Vice President, Chief Accounting Officer and Principal Accounting Officer