Item 6. Selected Financial Data

The following tables set 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,
	2018			2017			2016			2015			2014
	(in thousands, except per share data)
Statement of Operations Information:
Total revenue	$	2,717,076		$	2,602,076		$	2,550,820		$	2,490,821		$	2,396,998
Expenses:
Rental operating	979,151			929,977			889,768			872,252			835,290
Hotel operating	33,863			32,059			31,466			32,084			29,236
General and administrative	121,722			113,715			105,229			96,319			98,937
Payroll and related costs from management services contracts	9,590			—			—			—			—
Transaction costs	1,604			668			2,387			1,259			3,140
Depreciation and amortization	645,649			617,547			694,403			639,542			628,573
Total expenses	1,791,579			1,693,966			1,723,253			1,641,456			1,595,176
Other income (expense):
Income from unconsolidated joint ventures	2,222			11,232			8,074			22,770			12,769
Gain on sale of investment in unconsolidated joint venture	—			—			59,370			—			—
Gains on sales of real estate	182,356			7,663			80,606			375,895			168,039
Interest and other income	10,823			5,783			7,230			6,777			8,765
Gains (losses) from investments in securities	(1,865		)	3,678			2,273			(653		)	1,038
Gains (losses) from early extinguishments of debt	(16,490		)	496			(371		)	(22,040		)	(10,633		)
Impairment losses	(11,812		)	—			(1,783		)	—			—
Losses from interest rate contracts	—			—			(140		)	—			—
Interest expense	(378,168		)	(374,481		)	(412,849		)	(432,196		)	(455,743		)
Net income	712,563			562,481			569,977			799,918			526,057
Net income attributable to noncontrolling interests	(129,716		)	(100,042		)	(57,192		)	(216,812		)	(82,446		)
Net income attributable to Boston Properties, Inc.	582,847			462,439			512,785			583,106			443,611
Preferred dividends	(10,500		)	(10,500		)	(10,500		)	(10,500		)	(10,500		)
Net income attributable to Boston Properties, Inc. common shareholders	$	572,347		$	451,939		$	502,285		$	572,606		$	433,111
Basic earnings per common share attributable to Boston Properties, Inc.:
Net income	$	3.71		$	2.93		$	3.27		$	3.73		$	2.83
Weighted average number of common shares outstanding	154,427			154,190			153,715			153,471			153,089
Diluted earnings per common share attributable to Boston Properties, Inc.:
Net income	$	3.70		$	2.93		$	3.26		$	3.72		$	2.83
Weighted average number of common and common equivalent shares outstanding	154,682			154,390			153,977			153,844			153,308



	December 31,
	2018			2017			2016			2015			2014
	(in thousands)
Balance Sheet information:
Real estate, gross	$	21,649,896		$	21,096,642		$	20,147,263		$	19,481,535		$	19,236,403
Real estate, net	16,752,119			16,507,008			15,925,028			15,555,641			15,688,744
Cash and cash equivalents	543,359			434,767			356,914			723,718			1,763,079
Total assets (1)	20,256,477			19,372,233			18,851,643			18,351,486			19,852,195
Total indebtedness (1)	11,007,757			10,271,611			9,796,133			9,188,543			10,052,412
Noncontrolling interests	—			—			—			—			105,325
Stockholders’ equity attributable to Boston Properties, Inc.	5,883,171			5,813,957			5,786,295			5,709,435			5,697,298
Equity noncontrolling interests	2,330,797			2,288,499			2,145,629			2,177,492			2,205,638

	For the year ended December 31,
	2018			2017			2016			2015			2014
	(in thousands, except per share and percentage data)
Other Information:
Funds from Operations attributable to Boston Properties, Inc. common shareholders (2)	$	974,489		$	959,412		$	927,747		$	823,715		$	807,506
Dividends declared per share (3)	3.50			3.05			2.70			3.85			7.10
Cash flows provided by operating activities (4)	1,150,245			911,979			1,034,548			817,898			692,120
Cash flows used in investing activities (4)	(1,098,876		)	(882,044		)	(1,337,347		)	(711,980		)	(231,571		)
Cash flows provided by (used in) financing activities (4)	82,453			55,346			(74,621		)	(1,558,810		)	(632,487		)
Total square feet at end of year (including development projects)	51,586			50,339			47,704			46,495			45,760
In-service percentage leased at end of year	91.4		%	90.7		%	90.2		%	91.4		%	91.7		%


(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. Unamortized deferred financing costs, with the exception of December 31, 2018, 2017 and 2016, were previously included in Total Assets totaling approximately $28.0 million and $34.5 million are now included in Total Indebtedness as of December 31, 2015 and 2014, respectively.

(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. Unamortized deferred financing costs, with the exception of December 31, 2018, 2017 and 2016, were previously included in Total Assets totaling approximately $28.0 million and $34.5 million are now included in Total Indebtedness as of December 31, 2015 and 2014, 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 and our share of real estate-related depreciation and amortization. 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 89.83%, 89.82%, 89.70%, 89.68% and 89.81% for the years ended December 31, 2018, 2017, 2016, 2015 and 2014, respectively, after allocation to the noncontrolling interests.

(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 and our share of real estate-related depreciation and amortization. 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 89.83%, 89.82%, 89.70%, 89.68% and 89.81% for the years ended December 31, 2018, 2017, 2016, 2015 and 2014, 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 attributable to Boston Properties, Inc. common shareholders 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.


(4)	On January 1, 2018, we adopted ASU 2016-15 and ASU 2016-18 and retrospectively applied the guidance to our Consolidated Statements of Cash Flows for all periods presented. The adoption of ASU 2016-15 and ASU 2016-18 required us to include Cash Held in Escrows with Cash and Cash Equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the Consolidated Statements of Cash Flows and required us to classify debt prepayment and extinguishment costs as a component of financing activities instead of as a component of operating activities in our Consolidated Statements of Cash Flows resulting in changes to the reported amounts of cash flows provided by (used in) operating, investing and financing activities (See Note 2 to the Consolidated Financial Statements).

(4)

On January 1, 2018, we adopted ASU 2016-15 and ASU 2016-18 and retrospectively applied the guidance to our Consolidated Statements of Cash Flows for all periods presented. The adoption of ASU 2016-15 and ASU 2016-18 required us to include Cash Held in Escrows with Cash and Cash Equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the Consolidated Statements of Cash Flows and required us to classify debt prepayment and extinguishment costs as a component of financing activities instead of as a component of operating activities in our Consolidated Statements of Cash Flows resulting in changes to the reported amounts of cash flows provided by (used in) operating, investing and financing activities (See Note 2 to the Consolidated Financial Statements).

Boston Properties Limited Partnership



	For the year ended December 31,
	2018			2017			2016			2015			2014
	(in thousands, except per unit data)
Statement of Operations Information:
Total revenue	$	2,717,076		$	2,602,076		$	2,550,820		$	2,490,821		$	2,396,998
Expenses:
Rental operating	979,151			929,977			889,768			872,252			835,290
Hotel operating	33,863			32,059			31,466			32,084			29,236
General and administrative	121,722			113,715			105,229			96,319			98,937
Payroll and related costs from management services contracts	9,590			—			—			—			—
Transaction costs	1,604			668			2,387			1,259			3,140
Depreciation and amortization	637,891			609,407			682,776			631,549			620,064
Total expenses	1,783,821			1,685,826			1,711,626			1,633,463			1,586,667
Other income (expense):
Income from unconsolidated joint ventures	2,222			11,232			8,074			22,770			12,769
Gain on sale of investment in unconsolidated joint venture	—			—			59,370			—			—
Gains on sales of real estate	190,716			8,240			82,775			377,093			174,686
Interest and other income	10,823			5,783			7,230			6,777			8,765
Gains (losses) from investments in securities	(1,865		)	3,678			2,273			(653		)	1,038
Gains (losses) from early extinguishments of debt	(16,490		)	496			(371		)	(22,040		)	(10,633		)
Impairment losses	(10,181		)	—			(1,783		)	—			—
Losses from interest rate contracts	—			—			(140		)	—			—
Interest expense	(378,168		)	(374,481		)	(412,849		)	(432,196		)	(455,743		)
Net income	730,312			571,198			583,773			809,109			541,213
Net income attributable to noncontrolling interests:
Noncontrolling interests in property partnerships	(62,909		)	(47,832		)	2,068			(149,855		)	(30,561		)
Noncontrolling interest-redeemable preferred units	—			—			—			(6		)	(1,023		)
Net income attributable to Boston Properties Limited Partnership	667,403			523,366			585,841			659,248			509,629
Preferred distributions	(10,500		)	(10,500		)	(10,500		)	(10,500		)	(10,500		)
Net income attributable to Boston Properties Limited Partnership common unitholders	$	656,903		$	512,866		$	575,341		$	648,748		$	499,129
Basic earnings per common unit attributable to Boston Properties Limited Partnership:
Net income	$	3.82		$	2.99		$	3.36		$	3.79		$	2.93
Weighted average number of common units outstanding	171,912			171,661			171,361			171,139			170,453
Diluted earnings per common unit attributable to Boston Properties Limited Partnership:
Net income	$	3.81		$	2.98		$	3.35		$	3.78		$	2.92
Weighted average number of common and common equivalent units outstanding	172,167			171,861			171,623			171,512			170,672



	December 31,
	2018			2017			2016			2015			2014
	(in thousands)
Balance Sheet information:
Real estate, gross	$	21,251,540		$	20,685,164		$	19,733,872		$	19,061,141		$	18,814,558
Real estate, net	16,451,065			16,188,205			15,597,508			15,214,325			15,338,237
Cash and cash equivalents	543,359			434,767			356,914			723,718			1,763,079
Total assets (1)	19,955,423			19,053,430			18,524,123			18,010,170			19,501,688
Total indebtedness (1)	11,007,757			10,271,611			9,796,133			9,188,543			10,052,412
Noncontrolling interests	2,000,591			2,292,263			2,262,040			2,286,689			2,415,371
Boston Properties Limited Partnership partners’ capital	4,200,878			3,807,630			3,811,717			3,684,522			3,639,916
Noncontrolling interests in property partnerships	1,711,445			1,683,760			1,530,647			1,574,400			1,602,467

	For the year ended December 31,
	2018			2017			2016			2015			2014
	(in thousands, except per unit and percentage data)
Other Information:
Funds from operations attributable to Boston Properties Limited Partnership common unitholders (2)	$	1,084,827		$	1,068,119		$	1,034,251		$	918,543		$	899,094
Distributions per common unit (3)	3.50			3.05			2.70			3.85			7.10
Cash flows provided by operating activities (4)	1,150,245			911,979			1,034,548			817,898			692,120
Cash flows used in investing activities (4)	(1,098,876		)	(882,044		)	(1,337,347		)	(711,980		)	(231,571		)
Cash flows provided by (used in) financing activities (4)	82,453			55,346			(74,621		)	(1,558,810		)	(632,487		)
Total square feet at end of year (including development projects)	51,586			50,339			47,704			46,495			45,760
In-service percentage leased at end of year	91.4		%	90.7		%	90.2		%	91.4		%	91.7		%


(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. Unamortized deferred financing costs, with the exception of December 31, 2018, 2017 and 2016, were previously included in Total Assets totaling approximately $28.0 million and $34.5 million are now included in Total Indebtedness as of December 31, 2015 and 2014, respectively.

(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 and our share of real estate-related depreciation and amortization. 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.

(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 and our share of real estate-related depreciation and amortization. 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 attributable to Boston Properties Limited Partnership common unitholders 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.


(4)	On January 1, 2018, we adopted ASU 2016-15 and ASU 2016-18 and retrospectively applied the guidance to our Consolidated Statements of Cash Flows for all periods presented. The adoption of ASU 2016-15 and ASU 2016-18 required us to include Cash Held in Escrows with Cash and Cash Equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the Consolidated Statements of Cash Flows and required us to classify debt prepayment and extinguishment costs as a component of financing activities instead of as a component of operating activities in our Consolidated Statements of Cash Flows resulting in changes to the reported amounts of cash flows provided by (used in) operating, investing and financing activities (See Note 2 to the Consolidated Financial Statements).

(4)

Previous: Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities · Next: Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations