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

This Annual Report 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, in each case, to the extent applicable. 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 current beliefs or expectations of future events and on assumptions made by, and information currently available to, our management. When used, the words “anticipate,” “believe,” “budget,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “project,” “should,” “will” and similar expressions that 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 or occurrences, which may be affected by known and unknown risks, trends, uncertainties and factors that are, in some cases, beyond our control. Should one or more of these known or unknown risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those expressed or implied 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 or occurrences 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.

One of the most significant factors that may cause actual results to differ materially from those expressed or implied by the forward-looking statements is the ongoing impact of the global COVID-19 pandemic on the U.S. and global economies, which has impacted, and is likely to continue to impact, us and, directly or indirectly, many of the other important factors below and the risks set forth in this Form 10-K in Part I, Item 1A.

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:

• the risks and uncertainties related to the impact of the COVID-19 global pandemic, including the duration, scope and severity of the pandemic domestically and internationally; federal, state and local government actions or restrictive measures implemented in response to COVID-19, the effectiveness of such measures, as well as the effect of any relaxation of current restrictions, and the direct and indirect impact of such measures on our and our tenants' businesses, financial condition, results of operations, cash flows, liquidity and performance, and the U.S. and international economy and economic activity generally; the speed, effectiveness and distribution of vaccines, whether new or existing actions and measures continue to result in increasing unemployment that impacts the ability of our residential tenants to generate sufficient income to pay, or make them unwilling to pay rent in a timely manner, in full or at all; the health, continued service and availability of our personnel, including our key personnel and property management teams; and the effectiveness or lack of effectiveness of governmental relief in providing assistance to individuals and large and small businesses, including our tenants, that have suffered significant adverse effects from COVID-19;

• volatile or adverse global economic and political conditions, health crises 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 the physical effects of climate change;

• 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, particularly in light of the circumstances relating to COVID-19. 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 information, future events, or otherwise, and you should not rely upon these forward-looking statements after the date of this report.

Overview

BXP is one of the largest publicly-traded office real estate investment trusts (REITs) (based on total market capitalization as of December 31, 2020) in the United States that develops, owns and manages primarily Class A office properties. Our properties are concentrated in five markets in the United States - Boston, Los Angeles, New York, San Francisco and Washington, DC. BPLP is the entity through which BXP conducts substantially all of its business and owns (either directly or through subsidiaries) substantially all of its assets. We generate revenue and cash primarily by leasing Class A office space to our tenants. When making leasing decisions, we consider, among other things, the creditworthiness of the tenant and the industry in which it conducts business, the length of the lease, the rental rate to be paid at inception and throughout the lease term, the costs of tenant improvements, free rent period and other landlord concessions, anticipated operating expenses and real estate taxes, current and anticipated vacancy in our properties and the market overall (including sublease space), current and expected future demand for the space, the impact of any expansion rights and general economic factors.

Our core strategy has always been to develop, acquire and manage high-quality properties in supply-constrained markets with high barriers-to-entry and to focus on executing long-term leases with financially strong tenants. Our tenant base is diverse across market sectors and the weighted-average lease term for our in-place leases, excluding residential units, was approximately 7.4 years, as of December 31, 2020, including leases signed by our unconsolidated joint ventures. The weighted-average lease term for our top 20 office tenants was approximately 10.4 years as of December 31, 2020. Historically, these factors have minimized our exposure in weaker economic cycles and enhanced revenues as market conditions improve. To be successful in any leasing environment, we believe we must consider all aspects of the tenant-landlord relationship. In this regard, we believe that our competitive advantage is based on the following attributes:

• our understanding of tenants’ short- and long-term space utilization and amenity needs in the local markets;

• our reputation as a premier developer, owner and manager of primarily Class A office properties;

• our financial strength and our ability to maintain high building standards;

• our focus on developing and operating in a sustainable and responsible manner; and

• our relationships with local brokers.

Outlook

Starting in March 2020, the COVID-19 pandemic negatively impacted global macroeconomic conditions. Following a drop in U.S. GDP of 31% in the second quarter of 2020, GDP growth in each of the third and fourth quarters of 2020 showed sequential quarterly improvements after the enactment of federal stimulus programs. While initial estimates indicate that GDP grew 4% in the fourth quarter of 2020, this was a decline from the third quarter as many of the stimulus programs began to expire toward the end of the year. U.S. stocks rose in November of 2020 as news about vaccine efficacy provided optimism. As we begin 2021, the U.S. economic recovery remains slow and operating conditions for several sectors, including commercial real estate, continue to be negatively impacted by the pandemic. The health of the overall economy and employment trends among professional workers have been, and we expect will continue to be, important drivers of office market conditions as vaccine distribution and efficacy drives a return to normal.

Late in the first quarter of 2020, public health officials and governmental authorities, including those in all of the markets in which we operate, reacted to the spread of the COVID-19 pandemic by imposing various regulatory measures, including quarantines, travel restrictions, issuing “stay-at-home” orders, restricting the types of businesses that could continue to operate (including the types of construction projects that could proceed), closing schools and otherwise limiting the size of gatherings. Although the state and local authorities in many of our regions eased those regulations in the second half of 2020 to allow for the return to work, the physical occupancy of our properties remained well below capacity for the remainder of 2020 as infection rates increased and most employers continued their COVID-19 response protocols and encouraged employees to work from home when possible.

The future impact of the pandemic on the demand for office space is unclear as companies consider the recessionary impact on their business and their demand for labor while, at the same time, evaluate their space requirements in light of their current and projected headcounts and the continued focus on social distancing and employees’ desire for more flexibility to work from home. Real estate is by nature a long-term business and we do not believe these considerations and ultimate decisions by tenants will evidence a clear trend in the short term. In the meantime, we believe our strategically located, high quality office properties will continue to be a component of today’s forward-thinking organizations that desire collaboration, innovation, productivity and culture, and we expect tenants will take advantage of the availability of Class A space and upgrade.

In the fourth quarter of 2020, we signed approximately 1.2 million square feet of new leases and renewals with a weighted-average lease term of approximately eight years, indicating that, despite headwinds, many prospective and existing tenants continue to commit to the long-term use of space and view our properties as their preferred choice for a premium Class A office environment. Included in our fourth quarter 2020 leasing activity were (1) an approximately 196,000 square foot, 20-year lease for the U.S. headquarters of a multinational automotive company at our Reston Next development in Reston, Virginia; (2) an approximately 138,000 square-foot, 10-year lease with a biotechnology company at 200 West Street in Waltham, Massachusetts and (3) an approximately 75,000 square-foot, seven-year lease with a leading healthcare technology company at 20 CityPoint, a development in Waltham, Massachusetts that we fully placed-in service in June 2020.

While the volume of leasing in the fourth quarter of 2020 was an improvement of approximately 350,000 square feet of leasing from the third quarter of 2020, new leasing activity in the fourth quarter of 2020 remained lower than it was prior to the COVID-19 pandemic as many existing and prospective tenants deferred decisions on their office space needs as they focused on their employees’ safety and managing their businesses through the recession and economic recovery.

The development of primarily pre-leased properties in supply-constrained markets with the strongest economic growth over time continues to be a cornerstone of our long-term growth strategy. As of December 31, 2020, we had approximately 3.7 million square feet of active developments and redevelopments in our pipeline, which are 87% pre-leased, as of February 22, 2021, to predominately credit-strong tenants with long-lease terms. Our development projects are projected to meet required delivery milestones as defined in our leases.

The health and safety of our employees, tenants, service providers and visitors continue to be our highest priorities. In the fourth quarter of 2020, we continued to operate in accordance with our health safety protocols in all in-service properties across our portfolio to provide a healthy and safe environment in accordance with the policies and applicable legal requirements in our regions.

Rent Collections

Cash rent payments for a particular month are generally due on the first day of that month (although tenants have varying grace periods). Our reported rent collection amounts are based on the total amount of rent billed by us, including all amounts from consolidated operations and all unconsolidated joint ventures, other than Gateway Commons, our residential properties and one hotel for which we do not handle billing.

During the fourth quarter of 2020, our rent collections as a percentage of the total amounts billed to all tenants were 99.1%.

• Approximately 96.2% of the total amounts billed were made to office tenants. Our fourth quarter rent collections from office tenants continued to be strong at 99.7%. Approximately 91.4% of our lease revenue in the fourth quarter of 2020 was generated by our office portfolio. Our office portfolio has long-term lease contracts and modest rollover exposure over the next few years.

• Approximately 3.8% of the total amounts billed related to retail leases. Our fourth quarter rent collections from retail tenants were 84.6%.

Revenue

As a result of the impact of the COVID-19 pandemic on the current economic environment and on the commercial real estate sector in particular, our fourth quarter 2020 revenues, when compared to fourth quarter 2019, continued to be adversely affected due to (1) write-offs of accrued rent balances, (2) declines in revenue from our retail tenants, parking and our single hotel, and (3) a decline in occupancy in our in-service office and retail properties due to a slowdown in new leasing activity for vacant and expiring space.

When evaluating the collectability of a tenant’s accrued rent and accounts receivable balances, management analyzes the tenant’s creditworthiness, current economic trends, including the impact of COVID-19 on a tenant’s business, and changes in the tenant’s payment patterns on a lease-by-lease basis. In the fourth quarter of 2020, we recorded write-offs totaling approximately $40.1 million, of which approximately $39.8 million were primarily associated with the write-off of accrued rent of all tenants in the co-working sector and approximately $0.3 million were associated with accounts receivable. These amounts represent the write-offs in our consolidated portfolio, plus our share of the write-offs from the unconsolidated joint ventures (calculated based on our ownership percentage), minus our partners’ share of write-offs from our consolidated joint ventures (calculated based upon the partners’ percentage ownership interests). We will recognize lease revenue from tenants in the co-working sector on a cash basis commencing in the first quarter of 2021.

Our retail tenants were materially and adversely affected by the COVID-19 pandemic in 2020. Lease revenue from our retail leases was approximately $46.7 million in the fourth quarter of 2020, a $6.3 million, or 12.0%, decrease compared to $53.0 million during the fourth quarter of 2019.

In the fourth quarter of 2020, our parking and other revenue was approximately $15.9 million, representing a small decrease compared to $16.3 million of parking and other revenue in the third quarter of 2020, but a decrease of approximately $10.8 million, or 40%, compared to the fourth quarter of 2019. The year-over-year decline was largely due to the decline in transient parking revenue as employees continue to work from home amid safety concerns during the pandemic.

Our hotel property, the Boston Marriott Cambridge, re-opened in October 2020 but operated at diminished occupancy and generated only $0.5 million in revenue in the fourth quarter of 2020. Although this was an improvement from the third quarter of 2020 when the hotel was closed, our hotel revenue in the fourth quarter of 2020 decreased $11.3 million as compared to the fourth quarter of 2019. We expect hotel occupancy to remain low until a sufficient number of people have been vaccinated and the demand for travel and leisure returns to historical levels.

The overall occupancy of our in-service office and retail properties was 90.1% at December 31, 2020, a decrease of 290 basis points compared to 93.0% at December 31, 2019. The decrease was primarily due to fully placing in-service Dock 72, an approximately 669,000 square foot office property located in Brooklyn, New York in which we have a 50% ownership interest, which was only 33% leased, as of December 31, 2020, and a slowdown of leasing activity for available space.

Despite the concerns of the COVID-19 pandemic and the negative impact on economic conditions in our markets, we continue to be optimistic for our industry generally and our company in particular, given low interest rates, the high quality of our properties, the supply demand characteristics of our markets and the success of our development efforts. In addition, we anticipate our revenue from retail, parking and our hotel to improve as the pandemic subsides.

As a leading developer, owner and manager of marquee Class A office properties in the United States, our priorities remain focused on the following:

• ensuring tenant health, safety and satisfaction;

• leasing available space in our in-service and development properties, as well as proactively focusing on future lease expirations;

• completing the construction of our development properties;

• continuing and completing the redevelopment and repositioning of several key properties to increase future revenue and asset values over the long-term;

• maintaining discipline in our underwriting of investment opportunities;

• managing our near-term debt maturities and maintaining our conservative balance sheet; and

• actively managing our operations in a sustainable and responsible manner.

The following is an overview of portfolio activity and leasing activity in the fourth quarter and full year 2020.

During the fourth quarter of 2020, we signed leases across our portfolio totaling approximately 1.2 million square feet and we commenced revenue recognition on approximately 935,000 square feet of leases in second generation space, including lease renewals. Of these second generation leases, approximately 869,000 square feet had been vacant for less than one year and, in the aggregate, they represent an increase in net rental obligations (gross rent less operating expenses) of approximately 11% over the prior leases.

Consistent with our long-term investment strategy to invest in high-yielding development opportunities, in 2020, we completed and fully placed in-service approximately 1.8 million square feet of new development, including two office development properties that are each approximately 100% leased, including leases with future commencement dates: 17Fifty Presidents Street, an approximately 276,000 square foot property in Reston, Virginia, and 20 CityPoint, an approximately 211,000 square foot property in Waltham, Massachusetts. We also fully placed in-service Dock 72, an approximately 669,000 square foot office property located in Brooklyn, New York in which we have a 50% ownership interest, which was 33% leased as of December 31, 2020. In addition, during 2020 we fully placed in-service two residential properties: Hub50House, a 440 unit residential property in Boston, Massachusetts in which we have a 50% ownership interest, and The Skylyne, a 402 unit residential property in Oakland, California.

As of December 31, 2020, our construction/redevelopment pipeline consisted of six properties that, when completed, we expect will total approximately 3.7 million net rentable square feet. Three of these development/redevelopment projects are owned by joint ventures. Our share of the estimated total cost for these projects is approximately $2.2 billion, of which approximately $849 million remains to be invested as of December 31, 2020. Approximately 87% of the commercial space in these development projects was pre-leased as of February 22, 2021.

As we continue to focus on the development and acquisition of assets to enhance our long-term growth, we also continually review our portfolio to identify properties as potential sales candidates that either no longer fit within our portfolio strategy or could attract premium pricing in the current market environment. For example, during 2020, we completed the sale of several properties and land parcels for aggregate net proceeds of $537.7 million (our share), including New Dominion Technology Park in Herndon, Virginia; approximately 455,000 square feet of Capital Gallery in Washington, DC; Annapolis Junction Building Eight and two parcels of land at Annapolis Junction Business Park in Annapolis, Maryland and a land parcel in Marlborough, Massachusetts. We expect to continue to sell select assets from time to time, subject to market conditions.

A brief overview of each of our markets follows.

Boston

Our Boston central business district (“CBD”) in-service portfolio was approximately 98% leased as of December 31, 2020. This includes approximately 225,000 square feet of retail leases, representing 2.3% of our Boston CBD portfolio, that we terminated due to the nonpayment of rent, but where the tenants have yet to vacate. During the fourth quarter of 2020, we executed approximately 451,000 square feet of leases and had approximately 171,000 square feet of leases commenced in the Boston region. Approximately 163,000 square feet of the leases that commenced had been vacant for less than one year and represent an increase in net rental obligations of approximately 54% over the prior leases.

Our approximately 2.0 million square foot in-service office portfolio in Cambridge was approximately 99% leased as of December 31, 2020. During the fourth quarter of 2020, we continued our development of 325 Main Street at Kendall Center in Cambridge, Massachusetts, which is 90% pre-leased to an office tenant for a term of 15 years and we expect to deliver into service in 2022.

Waltham and the area surrounding the Route 128-Mass Turnpike interchange continue to comprise a popular submarket of Boston for leading and emerging companies in the life sciences, biotechnology and technology sectors. In our suburban portfolio, we continued the redevelopment of 200 West Street, an approximately 273,000 square feet Class A office property in Waltham, Massachusetts. The redevelopment is a conversion of approximately 138,000 square feet into life sciences space to meet growing demand in the life sciences sector. In the fourth quarter of 2020, we signed a 10-year lease with a new tenant for this life sciences space with occupancy expected by year-end 2021. With this lease, the property, including the office space, is approximately 100% leased. During the fourth quarter of 2020, we also signed a new 75,000 square-foot, seven-year lease with a leading healthcare technology company at 20 CityPoint, a Class A office property that was fully placed in-service in 2020. With this lease, the office portion of the property is 100% leased. Additionally, in the third quarter of 2020, we entered into an agreement with an existing joint venture partner for the future development of a 1.2 million square foot site in Waltham. The agreement allows for the phased development of office and life sciences properties across 41-acres and builds on our current footprint of approximately 4.3 million square feet of office and life sciences properties in this submarket.

Los Angeles

Our Los Angeles (“LA”) in-service portfolio of approximately 2.3 million square feet is currently focused on West LA and includes Colorado Center, a 1.1 million square foot property of which we own 50%, and Santa Monica Business Park, a 21-building, approximately 1.2 million square foot property of which we own 55%. As of December 31, 2020, our LA in-service properties were approximately 94% leased.

We continue to explore opportunities to increase our presence by seeking investments where our financial, operational, redevelopment and development expertise provide the opportunity, either alone or with partners, to achieve accretive returns. In the third quarter of 2020, we acquired a 50% ownership interest in Beach Cities Media Campus, a 6.4-acre land site on the Rosecrans Corridor of the El Segundo submarket of Los Angeles. The site is fully entitled to support the future development of approximately 275,000 square feet of Class A creative office

space and is located in the South Bay of Los Angeles, a creative cluster where several Fortune 500 and emerging office tenants in the technology, entertainment and financial sectors are located.

New York

As of December 31, 2020, our New York CBD in-service portfolio was approximately 90% leased. In addition, we executed approximately 93,000 square feet of leases and approximately 264,000 square feet of leases commenced in the fourth quarter of 2020. Of these leases, approximately 239,000 square feet had been vacant for less than one year and represent an increase in net rental obligations of approximately 12% over the prior leases.

In the fourth quarter of 2020, we fully placed in-service Dock 72, an unconsolidated joint venture development located in Brooklyn, New York in which we own a 50% interest. The property consists of approximately 669,000 square feet of Class A office space and was 33% leased as of December 31, 2020. Excluding Dock 72, the remainder of the New York CBD in-service portfolio is approximately 94% leased. We recognized a $60.5 million non-cash impairment charge related to our investment in Dock 72 due to an increase in construction costs and an extension of the projected period to fully lease the property due to the COVID-19 pandemic, resulting in a lower current fair value.

San Francisco

In the fourth quarter of 2020, governmental authorities in San Francisco extended travel quarantines, stay-at-home orders and restrictions on the types of businesses that could continue to operate, including offices, except for non-essential workers, which impacted the pace of new leasing activity.

Our San Francisco CBD in-service properties were approximately 95% leased as of December 31, 2020. During the fourth quarter of 2020, we executed approximately 67,000 square feet of leases and we commenced approximately 50,000 square feet of leases in the San Francisco region. Of these leases, approximately 39,000 square feet had been vacant for less than one year and represent an increase in net rental obligations of approximately 22% over the prior leases.

Washington, DC

In the Washington, DC region, we remain focused on (1) expanding our development potential in Reston, Virginia, where demand from technology and cybersecurity tenants remains strong, (2) divesting of certain assets in Washington, DC and select suburban markets and (3) matching development sites with tenants to begin development with significant pre-leasing commitments. During the fourth quarter of 2020, we executed approximately 547,000 square feet of leases and we commenced approximately 229,000 square feet of leases in the Washington, DC region. Of these leases, approximately 207,000 square feet had been vacant for less than one year.

Our Washington, DC CBD in-service properties were approximately 84% leased, as of December 31, 2020, with modest near-term exposure, and we have reduced our exposure in the Washington, DC CBD market significantly over the past few years through the dispositions of assets.

Our Washington, DC suburban properties, which includes our significant presence in Reston, Virginia, were approximately 85% leased as of December 31, 2020. During the fourth quarter of 2020, we signed an approximately 196,000 square foot, 20-year lease with a tenant at Reston Next, our approximately 1.1 million square foot development, the new phase of Reston Town Center in Reston, Virginia. With this lease, the Reston Next development is 85% pre-leased, as of February 22, 2021, and we expect to place this property in-service in 2022.

Leasing Statistics

The table below details the leasing activity, including 100% of the unconsolidated joint ventures, that commenced during the year ended December 31, 2020:

																		Year ended December 31, 2020
												Total Square Feet
Vacant space available at the beginning of the period																		3,135,170
Property dispositions/properties taken out of service (1)																		(150,193)
Properties placed (and partially placed) in-service (2)																		824,665
Leases expiring or terminated during the period																		5,446,846
Total space available for lease																		9,256,488
1st generation leases																		342,007
2nd generation leases with new tenants																		2,034,259
2nd generation lease renewals																		2,362,837
Total space leased (3)																		4,739,103
Vacant space available for lease at the end of the period																		4,517,385
Leases executed during the period, in square feet (4)																		3,727,571
Second generation leasing information: (5)
Leases commencing during the period, in square feet																		4,397,096
Weighted Average Lease Term																		102 Months
Weighted Average Free Rent Period																		151 Days
Total Transaction Costs Per Square Foot (6)																		$78.68
Increase in Gross Rents (7)																		15.22		%
Increase in Net Rents (8)																		23.34		%

__________________

(1)Total square feet of property dispositions/properties taken out of service during the year ended December 31, 2020 consists of 24,508 square feet due to the sale of a portion of Capital Gallery and 125,685 square feet due to the sale of Annapolis Junction Building Eight.

(2)Total square feet of properties placed (and partially placed) in-service during the year ended December 31, 2020 consists of 12,825 square feet at The Skylyne, 79,527 square feet at 20 CityPoint, 4,330 square feet at 685 Gateway, 5,156 square feet at 145 Broadway, 275,809 square feet at 17Fifty Presidents Street and 447,018 square feet at Dock 72.

(3)Represents leases for which lease revenue recognition has commenced in accordance with GAAP during the year ended December 31, 2020.

(4)Represents leases executed during the year ended December 31, 2020 for which we either (1) commenced lease revenue recognition in such period or (2) will commence lease revenue recognition in subsequent periods, in accordance with GAAP, and includes leases at properties currently under development. The total square feet of leases executed and recognized in the year ended December 31, 2020 is 758,340. Amounts for the year ended December 31, 2020 exclude lease modifications related to COVID-19 covering an aggregate of 4,687,343 square feet that were executed in the year ended December 31, 2020, to provide cash rent deferrals and/or abatements. Of these lease modifications, the lease terms associated with 637,713 square feet were extended for a period of 12 or more months during the year ended December 31, 2020.

(5)Second generation leases are defined as leases for space that had previously been leased by us. Of the 4,397,096 square feet of second generation leases that commenced during the year ended December 31, 2020, leases for 3,643,912 square feet were signed in prior periods.

(6)Total transaction costs include tenant improvements and leasing commissions but exclude free rent concessions and other inducements in accordance with GAAP.

(7)Represents the increase in gross rent (base rent plus expense reimbursements) on the new versus expired leases on the 3,670,156 square feet of second generation leases that had been occupied within the prior 12 months for the year ended December 31, 2020; excludes leases that management considers temporary because the tenant is not expected to occupy the space on a long-term basis.

(8)Represents the increase in net rent (gross rent less operating expenses) on the new versus expired leases on the 3,670,156 square feet of second generation leases that had been occupied within the prior 12 months for

the year ended December 31, 2020; excludes leases that management considers temporary because the tenant is not expected to occupy the space on a long-term basis.

For descriptions of significant transactions that we completed during 2020, see “Item 1. Business—Transactions During 2020.”

Critical Accounting Policies

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America, or GAAP, requires management to use judgment in the application of accounting policies, including making estimates and assumptions. We base our estimates on historical experience and on various other assumptions believed to be reasonable under the circumstances. These judgments affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. If our judgment or interpretation of the facts and circumstances relating to various transactions had been different, it is possible that different accounting policies would have been applied resulting in a different presentation of our financial statements. From time to time, we evaluate our estimates and assumptions. In the event estimates or assumptions prove to be different from actual results, adjustments are made in subsequent periods to reflect more current information. Below is a discussion of accounting policies that we consider critical in that they may require complex judgment in their application or require estimates about matters that are inherently uncertain.

Real Estate

Upon acquisitions of real estate, we assess whether the transaction should be accounted for as an asset acquisition or as a business combination by applying a screen to determine whether the integrated set of assets and activities acquired meets the definition of a business. Acquisitions of integrated sets of assets and activities that do not meet the definition of a business are accounted for as asset acquisitions. Our acquisitions of real estate or in-substance real estate generally will not meet the definition of a business because substantially all of the fair value is concentrated in a single identifiable asset or group of similar identifiable assets (i.e. land, buildings, and related intangible assets) or because the acquisition does not include a substantive process in the form of an acquired workforce or an acquired contract that cannot be replaced without significant cost, effort or delay.

We assess the fair value of acquired tangible and intangible assets (including land, buildings, tenant improvements, “above-” and “below-market” leases, leasing and assumed financing origination costs, acquired in-place leases, other identified intangible assets and assumed liabilities) and allocate the purchase price to the acquired assets and assumed liabilities, including land and buildings as if vacant. We assess fair value based on estimated cash flow projections that utilize discount and/or capitalization rates that we deem appropriate, as well as available market information. Estimates of future cash flows are based on a number of factors including the historical operating results, known and anticipated trends, and market and economic conditions.

The fair value of the tangible assets of an acquired property considers the value of the property as if it were vacant. We also consider an allocation of purchase price of other acquired intangibles, including acquired in-place leases that may have a customer relationship intangible value, including (but not limited to) the nature and extent of the existing relationship with the tenants, the tenants’ credit quality and expectations of lease renewals. Based on our acquisitions to date, our allocation to customer relationship intangible assets has been immaterial.

We record acquired “above-” and “below-market” leases at their fair values (using a discount rate which reflects the risks associated with the leases acquired) equal to the difference between (1) the contractual amounts to be paid pursuant to each in-place lease and (2) management’s estimate of fair market lease rates for each corresponding in-place lease, measured over a period equal to the remaining term of the lease for above-market leases and the initial term plus the term of any below-market fixed rate renewal options for below-market leases. Acquired “above-” and “below-market” lease values have been reflected within Prepaid Expenses and Other Assets and Other Liabilities, respectively, in our Consolidated Balance Sheets. Other intangible assets acquired include amounts for in-place lease values that are based on our evaluation of the specific characteristics of each tenant’s lease. Factors to be considered include estimates of carrying costs during hypothetical expected lease-up periods considering current market conditions, and costs to execute similar leases. In estimating carrying costs, we include real estate taxes, insurance and other operating expenses and estimates of lost rentals at market rates during the expected lease-up periods, depending on local market conditions. In estimating costs to execute similar leases, we consider leasing commissions, legal and other related expenses.

Management reviews its long-lived assets for indicators of impairment following the end of each quarter and when events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. This evaluation of long-lived assets is dependent on a number of factors, including when there is an event or adverse change in the operating performance of the long-lived asset or a current expectation that, more likely than not, a long-lived asset will be sold or otherwise disposed of significantly before the end of its previously estimated useful life or hold period. An impairment loss is recognized if the carrying amount of an asset is not recoverable and exceeds its fair value. The evaluation of anticipated cash flows is subjective and is based in part on assumptions regarding anticipated hold periods, future occupancy, future rental rates, future capital requirements, discount rates and capitalization rates that could differ materially from actual results in future periods. Because cash flows on properties considered to be “long-lived assets to be held and used” are considered on an undiscounted basis to determine whether an asset may be impaired, our established strategy of holding properties over the long term directly decreases the likelihood of recording an impairment loss. If our hold strategy changes or market conditions otherwise dictate an earlier sale date, an impairment loss may be recognized and such loss could be material. If we determine that an impairment has occurred, the affected assets must be reduced to their fair value.

Guidance in Accounting Standards Codification (“ASC”) 360 “Property Plant and Equipment” requires that qualifying assets and liabilities and the results of operations that have been sold, or otherwise qualify as “held for sale,” be presented as discontinued operations in all periods presented if the property operations are expected to be eliminated and we will not have significant continuing involvement following the sale. Discontinued operations presentation applies only to disposals representing a strategic shift that has (or will have) a major effect on an entity’s operations and financial results (e.g., a disposal of a major geographical area, a major line of business, a major equity method investment or other major parts of an entity). The components of the property’s net income that are reflected as discontinued operations include the net gain (or loss) upon the disposition of the property held for sale, operating results, depreciation and interest expense (if the property is subject to a secured loan). We generally consider assets to be “held for sale” when the transaction has been approved by BXP’s Board of Directors, or a committee thereof, and there are no known significant contingencies relating to the sale, such that a sale of the property within one year is considered probable. Following the classification of a property as “held for sale,” no further depreciation is recorded on the assets, and the asset is written down to the lower of carrying value or fair market value, less cost to sell.

Real estate is stated at depreciated cost. A variety of costs are incurred in the acquisition, development and leasing of properties. The cost of buildings and improvements includes the purchase price of property, legal fees and other acquisition costs. We capitalize acquisition costs that we incur to effect an asset acquisition and expense acquisition costs that we incur to effect a business combination, including legal, due diligence and other closing related costs. Costs directly related to the development of properties are capitalized. Capitalized development costs include interest, internal wages, property taxes, insurance, and other project costs incurred during the period of development. After the determination is made to capitalize a cost, it is allocated to the specific component of the project that benefited from the investment. Determination of when a development project commences and capitalization begins, and when a development project is substantially complete and held available for occupancy and capitalization must cease, involves a degree of judgment. Our capitalization policy on development properties follows the guidance in ASC 835-20 “Capitalization of Interest” and ASC 970 “Real Estate-General.” The costs of land and buildings under development include specifically identifiable costs.

Capitalized costs include pre-construction costs necessary to the development of the property, development costs, construction costs, interest costs, real estate taxes, salaries and related costs and other costs incurred during the period of development. We begin the capitalization of costs during the pre-construction period, which we define as activities that are necessary for the development of the property. We consider a construction project as substantially complete and held available for occupancy upon the completion of tenant improvements, but no later than one year from cessation of major construction activity. We cease capitalization on the portion (1) substantially completed, (2) occupied or held available for occupancy, and capitalize only those costs associated with the portion under construction or (3) if activities necessary for the development of the property have been suspended.

Investments in Unconsolidated Joint Ventures

We consolidate variable interest entities (“VIEs”) in which we are considered to be the primary beneficiary. VIEs are entities in which the equity investors do not have sufficient equity at risk to finance their endeavors without additional financial support or that the holders of the equity investment at risk do not have substantive participating rights. The primary beneficiary is defined by the entity having both of the following characteristics: (1) the power to direct the activities that, when taken together, most significantly impact the variable interest entity’s performance, and (2) the obligation to absorb losses and the right to receive the returns from the variable interest entity that could

potentially be significant to the VIE. For ventures that are not VIEs, we consolidate entities for which we have significant decision making control over the ventures’ operations. Our judgment with respect to our level of influence or control of an entity involves the consideration of various factors including the form of our ownership interest, our representation in the entity’s governance, the size of our investment (including loans), estimates of future cash flows, our ability to participate in policy making decisions and the rights of the other investors to participate in the decision making process and to replace us as manager and/or liquidate the venture, if applicable. Our assessment of our influence or control over an entity affects the presentation of these investments in our consolidated financial statements. In addition to evaluating control rights, we consolidate entities in which the outside partner has no substantive kick-out rights to remove us as the managing member.

Accounts of the consolidated entity are included in our accounts and the noncontrolling interest is reflected on the Consolidated Balance Sheets as a component of equity or in temporary equity between liabilities and equity. Investments in unconsolidated joint ventures are recorded initially at cost, and subsequently adjusted for equity in earnings and cash contributions and distributions. Any difference between the carrying amount of these investments on the balance sheet and the underlying equity in net assets is amortized as an adjustment to equity in earnings of unconsolidated joint ventures over the life of the related asset. Under the equity method of accounting, our net equity investment is reflected within the Consolidated Balance Sheets, and our share of net income or loss from the joint ventures is included within the Consolidated Statements of Operations. The joint venture agreements may designate different percentage allocations among investors for profits and losses; however, our recognition of joint venture income or loss generally follows the joint venture’s distribution priorities, which may change upon the achievement of certain investment return thresholds. We may account for cash distributions in excess of our investment in an unconsolidated joint venture as income when we are not the general partner in a limited partnership and when we have neither the requirement nor the intent to provide financial support to the joint venture. We classify distributions received from equity method investees within our Consolidated Statements of Cash Flows using the nature of the distribution approach, which classifies the distributions received on the basis of the nature of the activity or activities of the investee that generated the distribution as either a return on investment (classified as cash inflows from operating activities) or a return of investment (classified as cash inflows from investing activities). Our investments in unconsolidated joint ventures are reviewed for indicators of impairment on a quarterly basis and we record impairment charges when events or circumstances change indicating that a decline in the fair values below the carrying amounts has occurred and such decline is other-than-temporary. This evaluation of the investments in unconsolidated joint ventures is dependent on a number of factors, including the performance of each investment and market conditions. We will record an impairment charge if we determine that a decline in the fair value below the carrying amount of an investment in an unconsolidated joint venture is other-than-temporary. The fair value is calculated using discounted cash flows which is subjective and considers assumptions regarding future occupancy, future rental rates, future capital requirements, discount rates and capitalization rates that could differ materially from actual results in future periods.

To the extent that we contribute assets to a joint venture, our investment in the joint venture is recorded at our cost basis in the assets that were contributed to the joint venture. To the extent that our cost basis is different than the basis reflected at the joint venture level, the basis difference is amortized over the life of the related asset and included in our share of equity in net income of the joint venture. In accordance with the provisions of ASC 610-20 “Gains and Losses from the Derecognition of Nonfinancial Assets” (“ASC 610-20”), we will recognize a full gain on both the retained and sold portions of real estate contributed or sold to a joint venture by recognizing our new equity method investment interest at fair value.

The combined summarized financial information of the unconsolidated joint ventures is disclosed in Note 6 to the Consolidated Financial Statements.

Revenue Recognition

In general, we commence lease/rental revenue recognition when the tenant takes possession of the leased space and the leased space is substantially ready for its intended use. Contractual lease/rental revenue is reported on a straight-line basis over the terms of the respective leases. We recognize acquired in-place “above-” and “below-market” leases at their fair values as lease/rental revenue over the original term of the respective leases. Accrued rental income as reported on the Consolidated Balance Sheets represents cumulative lease/rental income earned in excess of rent payments received pursuant to the terms of the individual lease agreements.

For the year ended December 31, 2020, the impact of the net adjustments of rents from “above-” and “below-market” leases increased lease revenue by approximately $6.5 million. For the year ended December 31, 2020, the impact of the straight-line rent adjustment increased lease revenue by approximately $104.9 million. Those

amounts exclude the adjustment of rents from “above-” and “below-market” leases and straight-line income from unconsolidated joint ventures, which are disclosed in Note 6 to the Consolidated Financial Statements.

Our leasing strategy is generally to secure creditworthy tenants that meet our underwriting guidelines. Furthermore, following the initiation of a lease, we continue to actively monitor the tenant’s creditworthiness to ensure that all tenant related assets are recorded at their realizable value. When assessing tenant credit quality, we:

• review relevant financial information, including:

• financial ratios;

• net worth;

• revenue;

• cash flows;

• leverage; and

• liquidity;

• evaluate the depth and experience of the tenant’s management team; and

• assess the strength/growth of the tenant’s industry.

As a result of the underwriting process, tenants are then categorized into one of three categories:

(1)acceptable-risk tenants;

(2)the tenant’s credit is such that we may require collateral, in which case we:

• may require a security deposit; and/or

• may reduce upfront tenant improvement investments; or

(3)the tenant’s credit is below our acceptable parameters.

We must make estimates as to the collectability of our accrued rent and accounts receivable related to lease revenue. Management analyzes accrued rent and accounts receivable by considering tenant creditworthiness, current economic trends, including the impact of the novel coronavirus (“COVID-19”) pandemic on tenants’ businesses, and changes in tenants’ payment patterns when evaluating the collectability of the tenant’s receivable balance, including the accrued rent receivable, on a lease-by-lease basis. We write-off the tenant’s receivable balance, including the accrued rent receivable, if we consider the balances no longer probable of collection. In addition, tenants in bankruptcy are analyzed and considerations are made in connection with the expected recovery of pre-petition and post-petition claims If the balances are considered no longer probable of collection and therefore written off, we will cease to recognize lease income, including straight-line rent, unless cash is received. If we subsequently determine that we are probable we will collect substantially all the remaining lessee’s lease payments under the lease term, we will then reinstate the straight-line balance, adjusting for the amount related to the period when the lease payments were considered not probable. If our estimate of collectability differ from the cash received, then the timing and amount of our reported revenue could be impacted. The credit risk is mitigated by the high quality of our existing tenant base, reviews of prospective tenants’ risk profiles prior to lease execution and consistent monitoring of our portfolio to identify potential problem tenants.

The weighted-average term of our in-place leases, excluding residential units, was approximately 7.4 years, as of December 31, 2020, including leases signed by our unconsolidated joint ventures. The credit risk is mitigated by the high quality of our existing tenant base, reviews of prospective tenants’ risk profiles prior to lease execution and consistent monitoring of our portfolio to identify potential problem tenants.

Recoveries from tenants, consisting of amounts due from tenants for common area maintenance, real estate taxes and other recoverable costs, are recognized as revenue in the period during which the expenses are incurred (See “Leases” ). We recognize these reimbursements on a gross basis, as we obtain control of the goods and services before they are transferred to the tenant. We also receive reimbursements of payroll and payroll related costs from unconsolidated joint venture entities and third party property owners in connection with management services contracts which we reflect on a gross basis instead of on a net basis as we have determined that we are the principal and not the agent under these arrangements in accordance with the guidance in ASC 606 “Revenue from Contracts with Customers” (“ASC 606”).

Our parking revenue is derived primarily from monthly and transient daily parking. In addition, we have certain lease arrangements for parking accounted for under the guidance in ASC 842 “Leases” (“ASC 842”). The monthly and transient daily parking revenue falls within the scope of ASC 606 and is accounted for at the point in time when control of the goods or services transfers to the customer and our performance obligation is satisfied.

Our hotel revenue is derived from room rentals and other sources such as charges to guests for telephone service, movie and vending commissions, meeting and banquet room revenue and laundry services. Hotel revenue is recognized as the hotel rooms are occupied and the services are rendered to the hotel customers.

We earn management and development fees. Development and management services revenue is earned from unconsolidated joint venture entities and third-party property owners. We determined that the performance obligations associated with our development services contracts are satisfied over time and that we would recognize our development services revenue under the output method evenly over time from the development commencement date through the substantial completion date of the development management services project due to the stand-ready nature of the contracts. Significant judgments impacting the amount and timing of revenue recognized from our development services contracts include estimates of total development project costs from which the fees are typically derived and estimates of the period of time until substantial completion of the development project, the period of time over which the development services are required to be performed. We recognize development fees earned from unconsolidated joint venture projects equal to its cost plus profit to the extent of the third party partners’ ownership interest. Property management fees are recorded and earned based on a percentage of collected rents at the properties under management, and not on a straight-line basis, because such fees are contingent upon the collection of rents.

Gains on sales of real estate are recognized pursuant to the provisions included in ASC 610-20. Under ASC 610-20, we must first determine whether the transaction is a sale to a customer or non-customer. We typically sell real estate on a selective basis and not within the ordinary course of our business and therefore expects that our sale transactions will not be contracts with customers. We next determine whether we have a controlling financial interest in the property after the sale, consistent with the consolidation model in ASC 810 “Consolidation” (“ASC 810”). If we determine that we do not have a controlling financial interest in the real estate, we evaluate whether a contract exists under ASC 606 and whether the buyer has obtained control of the asset that was sold. We recognize a full gain on sale of real estate when the derecognition criteria under ASC 610-20 have been met.

Leases

Lessee

For leases in which we are the lessee (generally ground leases), in accordance with ASC 842 we recognize a right-of-use asset and a lease liability. We made the policy election to not apply the revenue recognition requirements of ASC 842 to short-term leases. This policy election is made by class of underlying assets and as described below, we consider real estate to be a class of underlying assets, and will not be further delineating it into specific uses of the real estate asset as the risk profiles are similar in nature. We will recognize the lease payments in net income on a straight-line basis over the lease term.

The lease liability is equal to the present value of the minimum lease payments in accordance with ASC 842. We will use our incremental borrowing rate (“IBR”) to determine the net present value of the minimum lease payments. In order to determine the IBR, we utilized a market-based approach to estimate the incremental borrowing rate for each individual lease. The approach required significant judgment. Therefore, we utilized different data sets to estimate base IBRs via an analysis of the following weighted-components:

• the interpolated rates from yields on outstanding U.S. Treasury issuances for up to 30 years and for years 31 and beyond, longer-term publicly traded educational institution debt issued by high credit quality educational institutions with maturity dates exceeding 31 years,

• observable mortgage rates spread over U.S. Treasury issuances, and

• unlevered property yields and discount rates.

We then applied adjustments to account for considerations related to term and interpolated the IBR.

Lessor

We lease primarily Class A office, life sciences, retail and residential space to tenants. These leases may contain extension and termination options that are predominately at the sole discretion of the tenant, provided certain conditions are satisfied. In a few instances, the leases also contain purchase options, which would be exercisable at fair market value. Also, certain of our leases include rental payments that are based on a percentage of the tenant sales in excess of contractual amounts.

Per ASC 842, lessors do not need to separate nonlease components from the associated lease component if certain criteria stated above are met for each class of underlying assets. The guidance in ASC 842 defines “underlying asset” as “an asset that is the subject of a lease for which a right to use that asset has been conveyed to a lessee. The underlying asset could be a physically distinct portion of a single asset.” Based on the above guidance, we consider real estate assets as a class of underlying assets and will not be further delineating it into specific uses of the real estate asset as the risk profiles are similar in nature.

Lease components are elements of an arrangement that provide the customer with the right to use an identified asset. Nonlease components are distinct elements of a contract that are not related to securing the use of the leased asset and revenue is recognized in accordance with ASC 606. We consider common area maintenance (CAM) and service income associated with tenant work orders to be nonlease components because they represent delivery of a separate service but are not considered a cost of securing the identified asset. In the case of our business, the identified asset would be the leased real estate (office, life sciences, retail or residential).

We assessed and concluded that the timing and pattern of transfer for nonlease components and the associated lease component are the same. We determined that the predominant component was the lease component and as such our leases will continue to qualify as operating leases and we have made a policy election to account for and present the lease component and the nonlease component as a single component in the revenue section of the Consolidated Statements of Operations labeled Lease. Prior to the January 1, 2019 adoption of ASC 842, nonlease components had been included within Recoveries from Tenants Revenue, Parking and Other Revenue and Development and Management Services Revenue on our Consolidated Statements of Operations.

Recoveries from tenants, consisting of amounts due from tenants for common area maintenance, real estate taxes and other recoverable costs, are recognized as revenue in the period during which the expenses are incurred.

In addition, in accordance with ASC 842, lessors will only capitalize incremental direct leasing costs. As a result, upon adoption of ASC 842 on January 1, 2019, we no longer capitalizes non-incremental legal costs and internal leasing wages. These costs are expensed as incurred. The expensing of these items is included within General and Administrative Expense on the Consolidated Statements of Operations.

Depreciation and Amortization

We compute depreciation and amortization on our properties using the straight-line method based on estimated useful asset lives. We allocate the acquisition cost of real estate to its components and depreciate or amortize these assets (or liabilities) over their useful lives. The amortization of acquired “above-” and “below-market” leases and acquired in-place leases is recorded as an adjustment to revenue and depreciation and amortization, respectively, in the Consolidated Statements of Operations.

Fair Value of Financial Instruments

The carrying values of cash and cash equivalents, marketable securities, escrows, receivables, accounts payable, accrued expenses and other assets and liabilities are reasonable estimates of their fair values because of the short maturities of these instruments.

We follow the authoritative guidance for fair value measurements when valuing our financial instruments for disclosure purposes The table below presents the financial instruments that are being valued for disclosure purposes as well as the Level at which they are categorized as defined in ASC 820 “Fair Value Measurements and Disclosures”.

Financial Instrument			Level
Unsecured senior notes (1)			Level 1
Related party note receivable			Level 3
Notes receivable			Level 3
Mortgage notes payable			Level 3
Unsecured term loan / line of credit			Level 3

---

(1) If trading volume for the period is low, the valuation could be categorized as Level 2.

Because our valuations of our financial instruments are based on the above Levels and involve the use of estimates, the actual fair values of our financial instruments may differ materially from those estimates.

Derivative Instruments and Hedging Activities

Derivative instruments and hedging activities require management to make judgments on the nature of its derivatives and their effectiveness as hedges. These judgments determine if the changes in fair value of the derivative instruments are reported in the Consolidated Statements of Operations as a component of net income or as a component of comprehensive income and as a component of equity on the Consolidated Balance Sheets. While management believes its judgments are reasonable, a change in a derivative’s effectiveness as a hedge could materially affect expenses, net income and equity. We account for both the effective and ineffective portions of changes in the fair value of a derivative in other comprehensive income (loss) and subsequently reclassify the fair value of the derivative to earnings over the term that the hedged transaction affects earnings and in the same line item as the hedged transaction within the statements of operations

Income Taxes

Boston Properties Inc.

BXP has elected to be treated as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the “Code”), commencing with its taxable year ended December 31, 1997. As a result, it generally will not be subject to federal corporate income tax on its taxable income that is distributed to its stockholders. A REIT is subject to a number of organizational and operational requirements, including a requirement that it currently distribute at least 90% of its annual taxable income (with certain adjustments). BXP’s policy is to distribute at least 100% of its taxable income. Accordingly, the only provision for federal income taxes in the accompanying consolidated financial statements relates to BXP’s consolidated taxable REIT subsidiaries. BXP’s taxable REIT subsidiaries did not have significant tax provisions or deferred income tax items. BXP had no uncertain tax positions recognized as of December 31, 2020 and 2019. At December 31, 2020, BXP’s tax returns for the years 2017 forward remain subject to examination by the major tax jurisdictions under the statute of limitations.

We own a hotel property that we lease to one of our taxable REIT subsidiaries and that is managed by Marriott International, Inc. The hotel taxable REIT subsidiary, a wholly owned subsidiary of BPLP, is the lessee pursuant to the lease for the hotel property. As lessor, BPLP is entitled to a percentage of gross receipts from the hotel property. Marriott International, Inc. continues to manage the hotel property under the Marriott name and under terms of a management agreement. The hotel taxable REIT subsidiary is subject to tax at the federal and state level and, accordingly, BXP has recorded a tax provision in its Consolidated Statements of Operations for the years ended December 31, 2020, 2019 and 2018.

The net difference between the tax basis and the reported amounts of BXP’s assets and liabilities was approximately $2.0 billion and $1.7 billion as of December 31, 2020 and 2019, respectively, which was primarily related to the difference in basis of contributed property and accrued rental income.

Certain entities included in BXP’s Consolidated Financial Statements are subject to certain state and local taxes. These taxes are recorded as operating expenses in the accompanying consolidated financial statements.

The following table reconciles GAAP net income attributable to Boston Properties, Inc. to taxable income (unaudited):

						For the year ended December 31,
						2020						2019						2018
						(in thousands)
Net income attributable to Boston Properties, Inc.						$	872,727					$	521,534					$	582,847
Straight-line rent and net “above-” and “below-market” rent adjustments						(90,144)						(65,111)						(53,080)
Book/Tax differences from depreciation and amortization						106,203						125,281						109,756
Book/Tax differences from interest expense						—						—						(18,190)
Book/Tax differences on gains/(losses) from capital transactions						(345,854)						51,555						(26,428)
Book/Tax differences from stock-based compensation						42,576						49,123						48,817
Tangible Property Regulations						(144,981)						(148,157)						(128,639)
Other book/tax differences, net						117,166						(15,221)						56,870
Taxable income						$	557,693					$	519,004					$	571,953

Boston Properties Limited Partnership

The partners are required to report their respective share of BPLP’s taxable income or loss on their respective tax returns and are liable for any related taxes thereon. Accordingly, the only provision for federal income taxes in the accompanying consolidated financial statements relates to BPLP’s consolidated taxable REIT subsidiaries. BPLP’s taxable REIT subsidiaries did not have significant tax provisions or deferred income tax items. BPLP had no uncertain tax positions recognized as of December 31, 2020 and 2019.

We own a hotel property which is managed through a taxable REIT subsidiary. The hotel taxable REIT subsidiary, a wholly owned subsidiary BPLP, is the lessee pursuant to the lease for the hotel property. As lessor, BPLP is entitled to a percentage of gross receipts from the hotel property. Marriott International, Inc. continues to manage the hotel property under the Marriott name and under terms of a management agreement. The hotel taxable REIT subsidiary is subject to tax at the federal and state level and, accordingly, BPLP had recorded a tax provision in its Consolidated Statements of Operations for the years ended December 31, 2020, 2019 and 2018.

The net difference between the tax basis and the reported amounts of BPLP’s assets and liabilities was approximately $2.9 billion and $2.7 billion as of December 31, 2020 and 2019, respectively, which was primarily related to the difference in basis of contributed property and accrued rental income.

Certain entities included in BPLP’s consolidated financial statements are subject to certain state and local taxes. These taxes are recorded as operating expenses in the accompanying consolidated financial statements.

The following table reconciles GAAP net income attributable to Boston Properties Limited Partnership to taxable income (unaudited):

						For the year ended December 31,
						2020						2019						2018
						(in thousands)
Net income attributable to Boston Properties Limited Partnership						$	990,479					$	590,602					$	667,403
Straight-line rent and net “above-” and “below-market” rent adjustments						(100,375)						(72,687)						(59,199)
Book/Tax differences from depreciation and amortization						101,470						124,108						109,673
Book/Tax differences from interest expense						—						—						(20,287)
Book/Tax differences on gains/(losses) from capital transactions						(359,497)						56,955						5,762
Book/Tax differences from stock-based compensation						47,408						54,838						54,445
Tangible Property Regulations						(161,435)						(165,395)						(143,468)
Other book/tax differences, net						121,397						(20,177)						70,003
Taxable income						$	639,447					$	568,244					$	684,332

Recent Accounting Pronouncements

For a discussion concerning new accounting pronouncements that may have an effect on our Consolidated Financial Statements, see Note 2 to the Consolidated Financial Statements.

Results of Operations for the Years Ended December 31, 2020 and 2019

This section of this Form 10-K generally discusses 2020 and 2019 items and year-to-year comparisons between 2020 and 2019. Discussions of 2018 items and year-to-year comparisons between 2019 and 2018 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2019, which was filed with the SEC on March 2, 2020.

The impact that COVID-19 has had on our business, financial position and results of operations during the year ended December 31, 2020 is discussed throughout this Annual Report on Form 10-K. The full extent of the impact of COVID-19 on our business, operations and financial results will depend on numerous evolving factors that we may not be able to accurately predict. In addition, we cannot predict the impact that COVID-19 will have on our tenants, employees, contractors, lenders, suppliers, vendors and joint venture partners and any material adverse effect on these parties could also have a material adverse effect on us. The situation surrounding COVID-19 remains fluid, and we are actively managing our response in collaboration with tenants, government officials and joint venture partners and assessing potential impacts to our financial position and operating results, as well as potential adverse developments in our business. See Item 1A: “Risk Factors” for additional details.

Net income attributable to Boston Properties, Inc. common shareholders and net income attributable to Boston Properties Limited Partnership common unitholders increased approximately $351.2 million and $399.9 million for the year ended December 31, 2020 compared to 2019, respectively, as set forth in the following tables and for the reasons discussed below under the heading “Comparison of the year ended December 31, 2020 to the year ended December 31, 2019” within “Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

The following are reconciliations of Net Income Attributable to Boston Properties, Inc. Common Shareholders to Net Operating Income and Net Income Attributable to Boston Properties Limited Partnership Common Unitholders to Net Operating Income for the years ended December 31, 2020 and 2019 (in thousands):

Boston Properties, Inc.

						Year ended December 31,
						2020						2019						Increase/ (Decrease)						% Change
Net Income Attributable to Boston Properties, Inc. Common Shareholders						$	862,227					$	511,034					$	351,193					68.72		%
Preferred dividends						10,500						10,500						—						—		%
Net Income Attributable to Boston Properties, Inc.						872,727						521,534						351,193						67.34		%
Net Income Attributable to Noncontrolling Interests:
Noncontrolling interest—common units of the Operating Partnership						97,704						59,345						38,359						64.64		%
Noncontrolling interests in property partnerships						48,260						71,120						(22,860)						(32.14)		%
Net Income						1,018,691						651,999						366,692						56.24		%
Other Expenses:
Add:
Interest expense						431,717						412,717						19,000						4.60		%
Loss from early extinguishment of debt						—						29,540						(29,540)						(100.00)		%
Impairment loss						—						24,038						(24,038)						(100.00)		%
Other Income:
Less:
Gains from investments in securities						5,261						6,417						(1,156)						(18.01)		%
Interest and other income (loss)						5,953						18,939						(12,986)						(68.57)		%
Gains on sales of real estate						618,982						709						618,273						87,203.53		%
Income (loss) from unconsolidated joint ventures						(85,110)						46,592						(131,702)						(282.67)		%
Other Expenses:
Add:
Depreciation and amortization expense						683,751						677,764						5,987						0.88		%
Transaction costs						1,531						1,984						(453)						(22.83)		%
Payroll and related costs from management services contracts						11,626						10,386						1,240						11.94		%
General and administrative expense						133,112						140,777						(7,665)						(5.44)		%
Other Revenue:
Less:
Direct reimbursements of payroll and related costs from management services contracts						11,626						10,386						1,240						11.94		%
Development and management services revenue						29,641						40,039						(10,398)						(25.97)		%
Net Operating Income						$	1,694,075					$	1,826,123					$	(132,048)					(7.23)		%

Boston Properties Limited Partnership

						Year ended December 31,
						2020						2019						Increase/ (Decrease)						% Change
Net Income Attributable to Boston Properties Limited Partnership Common Unitholders						$	979,979					$	580,102					$	399,877					68.93		%
Preferred distributions						10,500						10,500						—						—		%
Net Income Attributable to Boston Properties Limited Partnership						990,479						590,602						399,877						67.71		%
Net Income Attributable to Noncontrolling Interests:
Noncontrolling interests in property partnerships						48,260						71,120						(22,860)						(32.14)		%
Net Income						1,038,739						661,722						377,017						56.98		%
Other Expenses:
Add:
Interest expense						431,717						412,717						19,000						4.60		%
Loss from early extinguishment of debt						—						29,540						(29,540)						(100.00)		%
Impairment loss						—						22,272						(22,272)						(100.00)		%
Other Income:
Less:
Gains from investments in securities						5,261						6,417						(1,156)						(18.01)		%
Interest and other income (loss)						5,953						18,939						(12,986)						(68.57)		%
Gains on sales of real estate						631,945						858						631,087						73,553.26		%
Income (loss) from unconsolidated joint ventures						(85,110)						46,592						(131,702)						(282.67)		%
Other Expenses:
Add:
Depreciation and amortization expense						676,666						669,956						6,710						1.00		%
Transaction costs						1,531						1,984						(453)						(22.83)		%
Payroll and related costs from management services contracts						11,626						10,386						1,240						11.94		%
General and administrative expense						133,112						140,777						(7,665)						(5.44)		%
Other Revenue:
Less:
Direct reimbursements of payroll and related costs from management services contracts						11,626						10,386						1,240						11.94		%
Development and management services revenue						29,641						40,039						(10,398)						(25.97)		%
Net Operating Income						$	1,694,075					$	1,826,123					$	(132,048)					(7.23)		%

At each of December 31, 2020 and 2019, we owned or had joint venture interests in a portfolio of 196 commercial real estate properties (in each case, the “Total Property Portfolio”). As a result of changes within our Total Property Portfolio, the financial data presented below shows significant changes in revenue and expenses from period-to-period. Accordingly, we do not believe that our period-to-period financial data with respect to the Total Property Portfolio is meaningful. Therefore, the comparison of operating results for the years ended December 31, 2020 and 2019 show separately the changes attributable to the properties that were owned by us and in-service throughout each period compared (the “Same Property Portfolio”) and the changes attributable to the properties included in the Acquired, Placed In-Service, Development or Redevelopment or Sold Portfolios.

In our analysis of operating results, particularly to make comparisons of net operating income between periods meaningful, it is important to provide information for properties that were in-service and owned by us throughout each period presented. We refer to properties acquired or placed in-service prior to the beginning of the earliest period presented and owned by us and in-service through the end of the latest period presented as our Same Property Portfolio. The Same Property Portfolio therefore excludes properties acquired, placed in-service or in development or redevelopment after the beginning of the earliest period presented or disposed of prior to the end of the latest period presented.

Net operating income (“NOI”) is a non-GAAP financial measure equal to net income attributable to Boston Properties, Inc. common shareholders and net income attributable to Boston Properties Limited Partnership common unitholders, as applicable, the most directly comparable GAAP financial measures, plus (1) preferred dividends/distributions, net income attributable to noncontrolling interests, interest expense, loss from early extinguishment of debt, impairment loss, depreciation and amortization expense, transaction costs, payroll and related costs from management services contracts and corporate general and administrative expense less (2) gains from investments in securities, interest and other income (loss), gains on sales of real estate, income (loss) from unconsolidated joint ventures, direct reimbursements of payroll and related costs from management services contracts and development and management services revenue. We use NOI internally as a performance measure and believe it provides useful information to investors regarding our results of operations and financial condition because, when compared across periods, it reflects the impact on operations from trends in occupancy rates, rental rates, operating costs and acquisition and development activity on an unleveraged basis, providing perspective not immediately apparent from net income attributable to Boston Properties, Inc. common shareholders and net income attributable to Boston Properties Limited Partnership common unitholders. For example, interest expense is not necessarily linked to the operating performance of a real estate asset and is often incurred at the corporate level as opposed to the property level. Similarly, interest expense may be incurred at the property level even though the financing proceeds may be used at the corporate level (e.g., used for other investment activity). In addition, depreciation and amortization expense, because of historical cost accounting and useful life estimates, may distort operating performance measures at the property level. NOI presented by us may not be comparable to NOI reported by other REITs or real estate companies that define NOI differently.

We believe that, in order to facilitate a clear understanding of our operating results, NOI should be examined in conjunction with net income attributable to Boston Properties, Inc. common shareholders and net income attributable to Boston Properties Limited Partnership common unitholders as presented in our Consolidated Financial Statements. NOI should not be considered as a substitute for net income attributable to Boston Properties, Inc. common shareholders or 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 our financial information prepared in accordance with GAAP.

The gains on sales of real estate, depreciation expense and impairment losses may differ between BXP and BPLP as a result of previously applied acquisition accounting by BXP for the issuance of common stock in connection with non-sponsor OP Unit redemptions by BPLP. This accounting resulted in a step-up of the real estate assets at BXP that was allocated to certain properties. The difference between the real estate assets of BXP as compared to BPLP for certain properties having an allocation of the real estate step-up will result in a corresponding difference in gains on sales of real estate, depreciation expense and impairment losses, when those properties are sold. For additional information see the Explanatory Note that follows the cover page of this Annual Report on Form 10-K.

Comparison of the year ended December 31, 2020 to the year ended December 31, 2019

The table below shows selected operating information for the Same Property Portfolio and the Total Property Portfolio. The Same Property Portfolio consists of 139 properties totaling approximately 38.6 million net rentable square feet, excluding unconsolidated joint ventures. The Same Property Portfolio includes properties acquired or placed in-service on or prior to January 1, 2019 and owned and in service through December 31, 2020. The Total Property Portfolio includes the effects of the other properties either acquired, placed in-service, in development or redevelopment after January 1, 2019 or disposed of on or prior to December 31, 2020. This table includes a reconciliation from the Same Property Portfolio to the Total Property Portfolio by also providing information for the years ended December 31, 2020 and 2019 with respect to the properties that were acquired, placed in-service, in development or redevelopment or sold.

			Same Property Portfolio																								Properties Acquired Portfolio												Properties Placed In-Service Portfolio												Properties in Development or Redevelopment Portfolio												Properties Sold Portfolio												Total Property Portfolio
			2020						2019						Increase/ (Decrease)						% Change						2020						2019						2020						2019						2020						2019						2020						2019						2020						2019						Increase/ (Decrease)						% Change
			(dollars in thousands)
Rental Revenue: (1)
Lease Revenue (Excluding Termination Income)			$	2,492,058					$	2,593,591					$	(101,533)					(3.91)		%				$	13,911					$	4,920					$	63,397					$	10,987					$	4,024					$	10,368					$	26,386					$	86,608					$	2,599,776					$	2,706,474					$	(106,698)					(3.94)		%
Termination Income			8,914						14,623						(5,709)						(39.04)		%				—						—						—						—						—						—						59						580						8,973						15,203						(6,230)						(40.98)		%
Lease Revenue			2,500,972						2,608,214						(107,242)						(4.11)		%				13,911						4,920						63,397						10,987						4,024						10,368						26,445						87,188						2,608,749						2,721,677						(112,928)						(4.15)		%
Parking and Other			66,521						99,625						(33,104)						(33.23)		%				15						—						2,086						—						20						127						1,404						3,205						70,046						102,957						(32,911)						(31.97)		%
Total Rental Revenue (1)			2,567,493						2,707,839						(140,346)						(5.18)		%				13,926						4,920						65,483						10,987						4,044						10,495						27,849						90,393						2,678,795						2,824,634						(145,839)						(5.16)		%
Real Estate Operating Expenses			964,228						988,400						(24,172)						(2.45)		%				6,445						1,989						12,307						1,795						5,167						8,820						10,322						33,021						998,469						1,034,025						(35,556)						(3.44)		%
Net Operating Income (Loss), Excluding Residential and Hotel			1,603,265						1,719,439						(116,174)						(6.76)		%				7,481						2,931						53,176						9,192						(1,123)						1,675						17,527						57,372						1,680,326						1,790,609						(110,283)						(6.16)		%
Residential Net Operating Income (Loss) (2)			21,513						20,929						584						2.79		%				—						—						(2,106)						—						—						—						—						—						19,407						20,929						(1,522)						(7.27)		%
Hotel Net Operating Income (Loss) (2)			(5,658)						14,585						(20,243)						(138.79)		%				—						—						—						—						—						—						—						—						(5,658)						14,585						(20,243)						(138.79)		%
Net Operating Income (Loss)			$	1,619,120					$	1,754,953					$	(135,833)					(7.74)		%				$	7,481					$	2,931					$	51,070					$	9,192					$	(1,123)					$	1,675					$	17,527					$	57,372					$	1,694,075					$	1,826,123					$	(132,048)					(7.23)		%

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(1)Rental Revenue is equal to Revenue less Development and Management Services Revenue and Direct Reimbursements of Payroll and Related Costs from Management Services Revenue per the Consolidated Statements of Operations, excluding the residential and hotel revenue that is noted below. We use Rental Revenue internally as a performance measure and in calculating other non-GAAP financial measures (e.g., NOI), which provides investors with information regarding our performance that is not immediately apparent from the comparable non-GAAP measures and allows investors to compare operating performance between periods.

(2)For a detailed discussion of NOI, including the reasons management believes NOI is useful to investors, see page 76. Residential Net Operating Income for the year ended December 31, 2020 and 2019 is comprised of Residential Revenue of $38,146 and $36,914 less Residential Expenses of $18,739 and $15,985, respectively. Hotel Net Operating Income for the year ended December 31, 2020 and 2019 is comprised of Hotel Revenue of $7,478 and $48,589 less Hotel Expenses of $13,136 and $34,004, respectively, per the Consolidated Statements of Operations.

Same Property Portfolio

Lease Revenue (Excluding Termination Income)

Lease revenue from the Same Property Portfolio decreased by approximately $101.5 million for the year ended December 31, 2020 compared to 2019. Approximately $87.3 million of the decrease was related to write-offs, which are discussed below. In addition to the impact of the write-offs, we experienced an approximately $14.2 million decrease due to our average occupancy decreasing from 93.9% to 93.2%. Average revenue per square foot was approximately the same for both years.

Under ASC 842, the write-off for bad debt, including accrued rent, is recorded as a reduction to lease revenue. As a result, during the year ended December 31, 2020, for our Same Property Portfolio, we wrote off approximately $65.4 million and $21.9 million of accrued rent and accounts receivable balances, respectively. These write-offs related to tenants, primarily in the retail, entertainment and co-working sectors, that either terminated their leases or for which we determined that substantially all of their amount owed, related to accrued rent and/or accounts receivable balances, were no longer probable of collection.

In addition, as a result of COVID-19, for the Same Property Portfolio, during 2020, we executed lease modification agreements for approximately 3.5 million square feet and granted approximately $63.9 million of cash rent abatements and deferrals, of which approximately $50.0 million related to rental charges for 2020. Although some of the lease modifications were deferrals under which we expect the tenant will pay us in full primarily in 2021, the majority of the lease modifications involved extending the lease term (in some cases for a year or more) or providing for a period of time where the tenant will only pay percentage rent. As a result of the lease modification agreements that extended the lease term, we expect to see an increase in the cash rent we will receive in the future.

In April 2020, the Financial Accounting Standards Board (“FASB”) staff issued a question and answer document (“Lease Modification Q & A”) related to the application of lease accounting guidance for lease concessions, in accordance with ASC 842, as a result of COVID-19. We did not utilize the guidance provided in the Lease Modification Q & A and instead elected to continue to account for the COVID-19 lease concessions on a lease-by-lease basis in accordance with the existing lease modification accounting framework (See Note 4 to the Consolidated Financial Statements). As such, our accrued rent balances, which are a component of lease revenue, include the accounting impact (adjusted for write-offs) from the rent abatements, deferrals and extensions that were executed during 2020.

We expect the volume of lease modifications as a result of COVID-19 to decrease as vaccines are rolled out and the pandemic subsides. However, the degree to which our tenants’ businesses are negatively impacted by COVID-19 may leave some tenants still unable to meet their rental payment obligations and result in a reduction in our cash flows. We may write off additional accrued rent or accounts receivable balances and this could have a material adverse effect on lease revenue. See Item 1A: “Risk Factors” for additional details.

Termination Income

Termination income decreased by approximately $5.7 million for the year ended December 31, 2020 compared to 2019.

Termination income for the year ended December 31, 2020 related to 38 tenants across the Same Property Portfolio and totaled approximately $8.9 million, which was primarily related to tenants that terminated leases early in the New York region.

Termination income for the year ended December 31, 2019 related to 39 tenants across the Same Property Portfolio and totaled approximately $14.6 million, of which approximately $8.2 million is from two tenants that terminated leases early at 399 Park Avenue in New York City.

Parking and Other Revenue

Parking and other revenue decreased by approximately $33.1 million for the year ended December 31, 2020 compared to 2019. Parking revenue decreased by approximately $34.7 million while other revenue increased by approximately $1.6 million. The decrease in parking revenue was primarily due to a decrease in transient and monthly parking.

During the majority of 2020, with stay-at-home orders in effect, business closures and people working remotely in a majority of regions in which our properties are located, we generated minimal hourly/daily parking revenue. As a result, for the year ended December 31, 2020, transient and monthly parking decreased by approximately $24.1 million and $8.0 million, respectively, compared to 2019. However, as these conditions shifted, and stay-at-home orders were partially or fully lifted, businesses began to open, people began to return to working in an office setting, and, as we expected, we have begun to see, an increase in parking revenue. Some of our monthly parking revenues are contractual agreements embedded in our leases, and some are at will individual agreements.

Real Estate Operating Expenses

Real estate operating expenses from the Same Property Portfolio decreased by approximately $24.2 million, or 2.4%, for the year ended December 31, 2020 compared to 2019, due primarily to decreases in utility and cleaning expense of approximately $11.9 million, or 13.7%, and $20.8 million, or 19.1%, respectively, partially offset by an increase in other real estate operating expenses of $8.5 million, or 1.1%. The decreases in utility and cleaning expense were experienced across the portfolio and were primarily driven by a decrease in physical tenant occupancy, which led to lower demand for electricity, HVAC, and cleaning.

Properties Acquired Portfolio

The table below lists the properties acquired between January 1, 2019 and December 31, 2020. Rental revenue and real estate operating expenses increased by approximately $9.0 million and $4.5 million, respectively, for the year ended December 31, 2020 compared to 2019, as detailed below.

												Square Feet						Rental Revenue																		Real Estate Operating Expenses
Name						Date acquired									2020						2019						Change						2020						2019						Change
																		(dollars in thousands)
880 and 890 Winter Street						August 27, 2019						392,576						$	13,527					$	4,920					$	8,607					$	5,575					$	1,989					$	3,586
777 Harrison Street (1)						June 26, 2020						N/A						399						—						399						870						—						870
												392,576						$	13,926					$	4,920					$	9,006					$	6,445					$	1,989					$	4,456

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(1)Formerly known as Fourth + Harrison and 425 Fourth Street.

Properties Placed In-Service Portfolio

The table below lists the properties that were placed in-service or partially placed in-service between January 1, 2019 and December 31, 2020. Rental revenue and real estate operating expenses from our Properties Placed In-Service Portfolio increased by approximately $54.7 million and $12.8 million, respectively, for the year ended December 31, 2020 compared to 2019, as detailed below.

						Quarter Initially Placed In-Service						Quarter Fully Placed In-Service												Rental Revenue																		Real Estate Operating Expenses
Name												Square Feet						2020						2019						Change						2020						2019						Change
																								(dollars in thousands)
Office
20 CityPoint						Second Quarter, 2019						Second Quarter, 2020						211,476						$	7,246					$	3,320					$	3,926					$	2,782					$	1,048					$	1,734
145 Broadway						Fourth Quarter, 2019						Fourth Quarter, 2019						488,862						44,898						7,667						37,231						5,631						747						4,884
17Fifty Presidents Street						First Quarter, 2020						First Quarter, 2020						275,809						13,339						—						13,339						3,894						—						3,894
Total Office																		976,147						65,483						10,987						54,496						12,307						1,795						10,512
Residential
The Skylyne						Third Quarter, 2020						Third Quarter, 2020						330,996						155						—						155						2,261						—						2,261
Total Residential																		330,996						155						—						155						2,261						—						2,261
																		1,307,143						$	65,638					$	10,987					$	54,651					$	14,568					$	1,795					$	12,773

Properties in Development or Redevelopment Portfolio

The table below lists the properties that were in development or redevelopment between January 1, 2019 and December 31, 2020. Rental revenue and real estate operating expenses from our Properties in Development or Redevelopment Portfolio decreased by approximately $6.5 million and $3.7 million, respectively, for the year ended December 31, 2020 compared to 2019.

																		Rental Revenue																		Real Estate Operating Expenses
Name						Date Commenced Development / Redevelopment						Square Feet						2020						2019						Change						2020						2019						Change
																		(dollars in thousands)
One Five Nine East 53rd Street (1)						August 19, 2016						220,000						$	(1,041)					$	3,736					$	(4,777)					$	1,504					$	1,999					$	(495)
325 Main Street (2)						May 9, 2019						115,000						36						(704)						740						276						2,128						(1,852)
200 West Street (3)						September 30, 2019						261,000						5,049						7,463						(2,414)						3,387						4,693						(1,306)
												596,000						$	4,044					$	10,495					$	(6,451)					$	5,167					$	8,820					$	(3,653)

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(1)Rental revenue for the year ended December 31, 2020 includes an approximately $2.9 million write-off of accrued rent and accounts receivable balances for a terminated tenant.

(2)Rental revenue for the year ended December 31, 2019 includes the acceleration and write-off of accrued rent associated with the early termination of a lease at the property. Real estate operating expenses for the years ended December 31, 2020 and 2019 includes approximately $0.3 million and $1.5 million of demolition costs, respectively.

(3)Rental revenue and real estate operating expenses for the year ended December 31, 2019 are related to the entire building. The redevelopment is a conversion of a 138,000 square foot portion of the property to life sciences space.

Properties Sold Portfolio

The table below lists the properties we sold between January 1, 2019 and December 31, 2020. Rental revenue and real estate operating expenses from our Properties Sold Portfolio decreased by approximately $62.5 million and $22.7 million, respectively, for the year ended December 31, 2020 compared to 2019, as detailed below.

																								Rental Revenue																		Real Estate Operating Expenses
Name						Date Sold						Property Type						Square Feet						2020						2019						Change						2020						2019						Change
																								(dollars in thousands)
2600 Tower Oaks Boulevard						January 24, 2019						Office						179,000						$	—					$	159					$	(159)					$	—					$	189					$	(189)
One Tower Center						June 3, 2019						Office						410,000						—						2,605						(2,605)						—						2,078						(2,078)
164 Lexington Road						June 28, 2019						Office						64,000						—						—						—						—						82						(82)
Washingtonian North						December 20, 2019						Land						N/A						—						62						(62)						—						157						(157)
601, 611 and 651 Gateway (1)						January 28, 2020						Office						768,000						1,946						27,964						(26,018)						881						10,272						(9,391)
New Dominion Technology Park						February 20, 2020						Office						493,000						2,551						19,437						(16,886)						772						6,005						(5,233)
Capital Gallery (2)						June 25, 2020						Office						631,000						23,352						40,166						(16,814)						8,669						14,238						(5,569)
																		2,545,000						$	27,849					$	90,393					$	(62,544)					$	10,322					$	33,021					$	(22,699)

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(1)Rental revenue for the year ended December 31, 2019 includes approximately $0.8 million of termination income (See Notes 3 and 6 to the Consolidated Financial Statements).

(2)We completed the sale of a portion of our Capital Gallery property located in Washington, DC. Capital Gallery is an approximately 631,000 net rentable square foot Class A office property. The portion sold was comprised of approximately 455,000 net rentable square feet of commercial office space. We continue to own the land, underground parking garage and remaining commercial office and retail space. The amounts shown represent the entire property and not just the portion sold (See Note 3 to the Consolidated Financial Statements).

For additional information on the sales of the above properties and land parcel refer to “Results of Operations—Other Income and Expense Items—Gains on Sales of Real Estate” within “Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Residential Net Operating Income

Net operating income for our residential same properties increased by approximately $0.6 million for the year ended December 31, 2020 compared to 2019. Some of our residential properties include retail tenants and as a result, net operating income for the year ended December 31, 2020 includes approximately $0.7 million of termination income from a retail tenant.

The following reflects our occupancy and rate information for The Lofts at Atlantic Wharf, The Avant at Reston Town Center, Signature at Reston and Proto Kendall Square for the years ended December 31, 2020 and 2019.

						The Lofts at Atlantic Wharf																		The Avant at Reston Town Center																		Signature at Reston																		Proto Kendall Square
						2020						2019						Change (%)						2020						2019						Change (%)						2020						2019						Change (%)						2020						2019						Change (%)
Average Monthly Rental Rate (1)						$	4,269					$	4,482					(4.8)		%				$	2,336					$	2,417					(3.4)		%				$	2,329					$	2,347					(0.8)		%				$	2,810					$	2,889					(2.7)		%
Average Rental Rate Per Occupied Square Foot						$	4.73					$	4.95					(4.4)		%				$	2.56					$	2.64					(3.0)		%				$	2.45					$	2.54					(3.5)		%				$	5.17					$	5.36					(3.5)		%
Average Physical Occupancy (2)						88.4		%				95.1		%				(7.0)		%				90.3		%				92.0		%				(1.8)		%				81.6		%				67.4		%				21.1		%				90.9		%				83.9		%				8.3		%
Average Economic Occupancy (3)						87.9		%				95.2		%				(7.7)		%				89.1		%				91.6		%				(2.7)		%				77.2		%				61.4		%				25.7		%				89.4		%				81.9		%				9.2		%

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(1)Average Monthly Rental Rate is calculated as the average of the quotients obtained by dividing (A) rental revenue as determined in accordance with GAAP, by (B) the number of occupied units for each month within the applicable fiscal period.

(2)Average Physical Occupancy is defined as (1) the average number of occupied units divided by (2) the total number of units, expressed as a percentage.

(3)Average Economic Occupancy is defined as (1) total possible revenue less vacancy loss divided by (2) total possible revenue, expressed as a percentage. Total possible revenue is determined by valuing average occupied units at contract rates and average vacant units at Market Rents. Vacancy loss is determined by valuing vacant units at current Market Rents. By measuring vacant units at their Market Rents, Average Economic Occupancy takes into account the fact that units of different sizes and locations within a residential property have different economic impacts on a residential property’s total possible gross revenue. Market Rents used by us in calculating Economic Occupancy are based on the current market rates set by the managers of our residential properties based on their experience in renting their residential property’s units and publicly available market data. Actual market rents and trends in such rents for a region as reported by others may vary materially from Market Rents used by us. Market Rents for a period are based on the average Market Rents during that period and do not reflect any impact for cash concessions.

Hotel Net Operating Income

Net operating income for the Boston Marriott Cambridge hotel property decreased by approximately $20.2 million for the year ended December 31, 2020 compared to 2019.

The Boston Marriott Cambridge closed in March 2020 due to COVID-19. The hotel re-opened on October 2, 2020 and has been operating at a diminished occupancy due to the continued impacts that COVID-19 has had on business and leisure travel. The closing of the hotel for more than two fiscal quarters, weak demand and low occupancy since its re-opening, have had, and are expected to continue to have, a material adverse effect on the hotel’s operations. We expect hotel occupancy to remain low until a sufficient number of people have been vaccinated and the demand for travel and leisure returns to historical levels. See Item 1A: “Risk Factors” for additional details.

The following reflects our occupancy and rate information for the Boston Marriott Cambridge hotel for the year ended December 31, 2020 and 2019.

						2020						2019						Change (%)
Occupancy						16.4		%				83.8		%				(80.4)		%
Average daily rate						$	211.36					$	281.15					(24.8)		%
REVPAR						$	33.52					$	235.64					(85.8)		%

Other Operating Revenue and Expense Items

Development and Management Services Revenue

Development and management services revenue decreased by approximately $10.4 million for the year ended December 31, 2020 compared to 2019. Development and management services revenue decreased by approximately $10.0 million and $0.4 million, respectively. The decrease in development services revenue was primarily related to a decrease of approximately $10.7 million in development fees from the completion of development projects in the Boston and Washington, DC regions and fees associated with tenant improvement projects earned in the Boston region, partially offset by an increase of approximately $0.7 million in fees associated with tenant improvement projects earned in the Washington, DC region. The decrease in management services revenue was primarily related to a decrease in leasing commissions earned from our unconsolidated joint ventures in the Boston region, partially offset by property management fees earned from third-party owned buildings in the Washington, DC region and our Gateway Commons unconsolidated joint venture, which was deconsolidated on January 28, 2020.

General and Administrative Expense

General and administrative expense decreased by approximately $7.7 million for the year ended December 31, 2020 compared to 2019 primarily due to a decrease in compensation expense of approximately $7.4 million and an approximately $0.3 million decrease in other general and administrative expenses. The decrease in compensation expense was related to (1) an approximately $2.5 million increase in capitalized wages, which decreases general and administrative expenses, (2) an approximately $1.1 million decrease in the value of our deferred compensation plan, (3) an approximately $0.6 million decrease in health care costs and (3) an approximately $3.2 million decrease in other compensation-related expenses. The increase in capitalized wages is shown as an decrease to general and administrative expense as some of these costs were capitalized and included in real estate assets on our Consolidated Balance Sheets (see below).

Wages directly related to the development of rental properties are capitalized and included in real estate assets on our Consolidated Balance Sheets and amortized over the useful lives of the applicable asset or lease term. Capitalized wages for the year ended December 31, 2020 and 2019 were approximately $12.9 million and $10.4 million, respectively. These costs are not included in the general and administrative expenses discussed above.

Transaction Costs

Transaction costs decreased by approximately $0.5 million for the year ended December 31, 2020 compared to 2019 due primarily to costs incurred in connection with the pursuit and formation of new joint ventures. In general, transaction costs relating to the formation of new and pending joint ventures and the pursuit of other transactions are expensed as incurred.

Depreciation and Amortization Expense

Depreciation expense may differ between BXP and BPLP as a result of previously applied acquisition accounting by BXP for the issuance of common stock in connection with non-sponsor OP Unit redemptions by BPLP. This accounting resulted in a step-up of the real estate assets at BXP that was allocated to certain properties. The difference between the real estate assets of BXP as compared to BPLP for certain properties having an allocation of the real estate step-up will result in a corresponding difference in depreciation expense. For additional information see the Explanatory Note that follows the cover page of this Annual Report on Form 10-K.

Boston Properties, Inc.

Depreciation and amortization expense increased by approximately $6.0 million for the year ended December 31, 2020 compared to 2019, as detailed below.

Portfolio						Depreciation and Amortization for the year ended December 31,
2020						2019						Change
						(in thousands)
Same Property Portfolio						$	650,987					$	643,655					$	7,332
Properties Acquired Portfolio						9,285						3,449						5,836
Properties Placed In-Service Portfolio						17,664						2,561						15,103
Properties in Development or Redevelopment Portfolio (1)						1,819						12,381						(10,562)
Properties Sold Portfolio						3,996						15,718						(11,722)
						$	683,751					$	677,764					$	5,987

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(1)On May 9, 2019, we commenced development of 325 Main Street in Cambridge, Massachusetts. As a result, during the year ended December 31, 2019, we recorded approximately $9.9 million of accelerated depreciation expense for the demolition of the building, of which approximately $0.4 million related to the step-up of real estate assets.

Boston Properties Limited Partnership

Depreciation and amortization expense increased by approximately $6.7 million for the year ended December 31, 2020 compared to 2019, as detailed below.

Portfolio						Depreciation and Amortization for the year ended December 31,
2020						2019						Change
						(in thousands)
Same Property Portfolio						$	643,902					$	636,226					$	7,676
Properties Acquired Portfolio						9,285						3,449						5,836
Properties Placed In-Service Portfolio						17,664						2,561						15,103
Properties in Development or Redevelopment Portfolio (1)						1,819						12,002						(10,183)
Properties Sold Portfolio						3,996						15,718						(11,722)
						$	676,666					$	669,956					$	6,710

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(1)On May 9, 2019, we commenced development of 325 Main Street in Cambridge, Massachusetts. As a result, during the year ended December 31, 2019, we recorded approximately $9.5 million of accelerated depreciation expense for the demolition of the building.

Direct Reimbursements of Payroll and Related Costs From Management Services Contracts and Payroll and Related Costs From Management Service Contracts

We have determined that amounts reimbursed for payroll and related costs received from third parties in connection with management services contracts should be reflected on a gross basis instead of on a net basis as we have determined that we are the principal under these arrangements. We anticipate that these two financial statement line items will generally offset each other.

Other Income and Expense Items

Income (loss) from Unconsolidated Joint Ventures

For the year ended December 31, 2020 compared to 2019, income (loss) from unconsolidated joint ventures decreased by approximately $131.7 million primarily due to, (1) a $60.5 million non-cash impairment charge at our Dock 72 joint venture during the year ended December 31, 2020, (2) a $47.5 million gain on sale of real estate from the sale of 540 Madison Avenue during the year ended December 31, 2019 and the resulting loss of income thereafter, (3) our share of the write-off of accrued rent and accounts receivable of approximately $16.2 million and $1.5 million, respectively for the year ended December 31, 2020, (4) an approximately $3.3 million net loss from our

Gateway Commons joint venture, primarily due to depreciation and amortization expense and (5) the fully placing in-service of the Hub50House residential property, which is not expected to be stabilized until the first quarter of 2022, decreased our net income by approximately $3.4 million. These decreases were partially offset by an approximately $5.8 million gain on sale of real estate from the sale of Annapolis Junction Building Eight and two undeveloped land parcels during the year ended December 31, 2020.

Under ASC 842, the write-off for bad debt, including accrued rent, is recorded as a reduction to lease revenue. As a result, during the year ended December 31, 2020, for our unconsolidated joint ventures, we wrote off our share of the accrued rent and accounts receivable balances of approximately $16.2 million and $1.5 million, respectively. These write-offs related to tenants that either terminated their leases or for which we determined that their accrued rent and/or accounts receivable balances were no longer probable of collection.

In addition, as a result of COVID-19, for properties owned by our unconsolidated joint ventures, during 2020, the joint ventures executed lease modification agreements for approximately 1.1 million square feet. As a result of these lease modification agreements, our share of the total cash rent abatements and deferrals granted was approximately $9.5 million, of which approximately $7.5 million was related to rental charges for 2020. Although some of the lease modifications were deferrals where we expect the tenant will pay the joint venture in full primarily in 2021, the majority of the lease modifications involved extending the lease term (in some cases for longer than a year). As a result of the lease modification agreements that extended the lease term, we expect to see an increase in the cash rent we will receive in the future.

In April 2020, the FASB staff issued the Lease Modification Q & A related to the application of lease accounting guidance for lease concessions, in accordance with ASC 842, as a result of COVID-19. We did not utilize the guidance provided in the Lease Modification Q & A and instead elected to continue to account for the COVID-19 lease concessions on a lease-by-lease basis in accordance with the existing lease modification accounting framework (See Note 4 to the Consolidated Financial Statements). As such, the accrued rent balances, which are a component of lease revenue, include the accounting impact (adjusted for write-offs) from the rent abatements, deferrals and extensions that were executed during 2020.

The joint ventures expect the volume of lease modifications as a result of COVID-19 to start to decrease. However, the degree to which tenants’ businesses are negatively impacted by COVID-19 could leave some tenants still unable to meet their rental payment obligations and result in a reduction in cash flows. Our unconsolidated joint ventures may write-off additional accrued rent or accounts receivable balances and this could have a material adverse effect on lease revenue. See Item 1A: “Risk Factors” for additional details.

Gains on Sales of Real Estate

Gains on sales of real estate may differ between BXP and BPLP as a result of previously applied acquisition accounting by BXP for the issuance of common stock in connection with non-sponsor OP Unit redemptions by BPLP. This accounting resulted in a step-up of the real estate assets at BXP that was allocated to certain properties. The difference between the real estate assets of BXP as compared to BPLP for certain properties having an allocation of the real estate step-up will result in a corresponding difference in the gains on sales of real estate when those properties are sold. For additional information, see the Explanatory Note that follows the cover page of this Annual Report on Form 10-K.

Boston Properties, Inc.

Gains on sales of real estate increased by approximately $618.3 million for the year ended December 31, 2020 compared to 2019, as detailed below.

Name						Date Sold						Property Type						Square Feet						Sale Price						Net Cash Proceeds						Gain (Loss) on Sale of Real Estate
																								(dollars in millions)
2020
601, 611 and 651 Gateway						January 28, 2020						Office						768,000						$	350.0					$	—					$	217.7		(1)
New Dominion Technology Park						February 20, 2020						Office						493,000						256.0						254.0						192.3
Capital Gallery						June 25, 2020						Office						455,000						253.7						246.6						203.5			(2)
Crane Meadow						December 16, 2020						Land						N/A						14.3						14.2						5.2
																								$	874.0					$	514.8					$	618.7		(3)
2019
2600 Tower Oaks Boulevard						January 24, 2019						Office						179,000						$	22.7					$	21.4					$	(0.6)
One Tower Center						June 3, 2019						Office						410,000						38.0						36.6						(0.8)
164 Lexington Road						June 28, 2019						Office						64,000						4.0						3.8						2.5
Washingtonian North						December 20, 2019						Land						N/A						7.8						7.3						(0.1)
																								$	72.5					$	69.1					$	1.0		(4)

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(1)On January 28, 2020, we entered into a joint venture with a third party to own, operate and develop properties at our Gateway Commons complex located in South San Francisco. We contributed our 601, 611 and 651 Gateway properties and development rights with an agreed upon value aggregating approximately $350.0 million for our 50% interest in the joint venture (See Notes 3 and 6 to the Consolidated Financial Statements).

(2)We completed the sale of a portion of our Capital Gallery property located in Washington, DC. Capital Gallery is an approximately 631,000 net rentable square foot Class A office property. The portion sold was comprised of approximately 455,000 net rentable square feet of commercial office space. We continue to own the land, underground parking garage and remaining commercial office and retail space (See Note 3 to the Consolidated Financial Statements).

(3)Excludes approximately $0.2 million of gains on sales of real estate recognized during the year ended December 31, 2020 related to gain amounts from sales of real estate occurring in the prior year.

(4)Excludes approximately $0.3 million of losses on sales of real estate recognized during the year ended December 31, 2019 related to loss amounts from sales of real estate occurring in prior years.

Boston Properties Limited Partnership

Gains on sales of real estate increased by approximately $631.1 million for the year ended December 31, 2020 compared to 2019, as detailed below.

Name						Date Sold						Property Type						Square Feet						Sale Price						Net Cash Proceeds						Gain (Loss) on Sale of Real Estate
																								(dollars in millions)
2020
601, 611 and 651 Gateway						January 28, 2020						Office						768,000						$	350.0					$	—					$	222.4		(1)
New Dominion Technology Park						February 20, 2020						Office						493,000						256.0						254.0						197.1
Capital Gallery						June 25, 2020						Office						455,000						253.7						246.6						207.0			(2)
Crane Meadow						December 16, 2020						Land						N/A						14.3						14.2						5.2
																								$	874.0					$	514.8					$	631.7		(3)
2019
2600 Tower Oaks Boulevard						January 24, 2019						Office						179,000						$	22.7					$	21.4					$	(0.6)
One Tower Center						June 3, 2019						Office						410,000						38.0						36.6						(0.8)
164 Lexington Road						June 28, 2019						Office						64,000						4.0						3.8						2.6
Washingtonian North						December 20, 2019						Land						N/A						7.8						7.3						(0.1)
																								$	72.5					$	69.1					$	1.1		(4)

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(1)On January 28, 2020, we entered into a joint venture with a third party to own, operate and develop properties at our Gateway Commons complex located in South San Francisco. We contributed our 601, 611 and 651 Gateway properties and development rights with an agreed upon value aggregating approximately $350.0 million for our 50% interest in the joint venture (See Notes 3 and 6 to the Consolidated Financial Statements).

(2)We completed the sale of a portion of our Capital Gallery property located in Washington, DC. Capital Gallery is an approximately 631,000 net rentable square foot Class A office property. The portion sold was comprised of approximately 455,000 net rentable square feet of commercial office space. We continue to own the land, underground parking garage and remaining commercial office and retail space (See Note 3 to the Consolidated Financial Statements).

(3)Excludes approximately $0.2 million of gains on sales of real estate recognized during the year ended December 31, 2020 related to gain amounts from sales of real estate occurring in the prior year.

(4)Excludes approximately $0.3 million of losses on sales of real estate recognized during the year ended December 31, 2019 related to loss amounts from sales of real estate occurring in prior years.

Interest and Other Income (Loss)

Interest and other income (loss) decreased by approximately $13.0 million for the year ended December 31, 2020 compared to 2019, due primarily to a decrease of approximately $11.2 million in interest income which was primarily due to a decrease in interest rates.

On January 1, 2020, we adopted ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”) and, as a result, we were required to record an allowance for current expected credit losses related to our outstanding (1) related party note receivable, (2) notes receivable and (3) off-balance sheet credit exposures (See Note 2 to the Consolidated Financial Statements). For the year ended December 31, 2020 the allowance for current expected credit losses was $1.8 million.

Gains from Investments in Securities

Gains from investments in securities for the year ended December 31, 2020 and 2019 related to investments that we have made to reduce our market risk relating to deferred compensation plans that we maintain for BXP’s officers and former non-employee directors. Under the deferred compensation plans, each officer or non-employee director who is eligible to participate is permitted to defer a portion of the officer’s current income or the non-employee director’s compensation on a pre-tax basis and receive a tax-deferred return on these deferrals based on the performance of specific investments selected by the officer or non-employee director. In order to reduce our

market risk relating to these plans, we typically acquire, in a separate account that is not restricted as to its use, similar or identical investments as those selected by each officer or non-employee director. This enables us to generally match our liabilities to BXP’s officers or former non-employee directors under our deferred compensation plans with equivalent assets and thereby limit our market risk. The performance of these investments is recorded as gains from investments in securities. During the year ended December 31, 2020 and 2019, we recognized gains of approximately $5.3 million and $6.4 million, respectively, on these investments. By comparison, our general and administrative expense increased by approximately $5.3 million and $6.4 million during the year ended December 31, 2020 and 2019, respectively, as a result of increases in our liability under our deferred compensation plans that was associated with the performance of the specific investments selected by officers and former non-employee directors of BXP participating in the plans.

Impairment Loss

Impairment loss may differ between BXP and BPLP as a result of previously applied acquisition accounting by BXP for the issuance of common stock in connection with non-sponsor OP Unit redemptions by BPLP. This accounting resulted in a step-up of the real estate assets at BXP that was allocated to certain properties. The difference between the real estate assets of BXP as compared to BPLP for certain properties having an allocation of the real estate step-up will result in a corresponding difference in depreciation expense. For additional information see the Explanatory Note that follows the cover page of this Annual Report on Form 10-K.

At March 31, 2019, we evaluated the expected hold period of our One Tower Center property located in East Brunswick, New Jersey and, based on a shorter-than-expected hold period, we reduced the carrying value of the property to its estimated fair value at March 31, 2019 and recognized an impairment loss totaling approximately $24.0 million for BXP and approximately $22.3 million for BPLP. Our estimated fair value was based on a pending offer from a third party to acquire the property and the subsequent execution of a purchase and sale agreement on April 18, 2019 for a gross sale price of approximately $38.0 million. On June 3, 2019, we completed the sale of the property. One Tower Center is an approximately 410,000 net rentable square foot Class A office property. We did not have any impairments during the year ended December 31, 2020.

Loss From Early Extinguishment of Debt

On September 18, 2019, BPLP completed the redemption of $700.0 million in aggregate principal amount of its 5.625% senior notes due November 15, 2020. The redemption price was approximately $740.7 million. The redemption price included approximately $13.5 million of accrued and unpaid interest to, but not including, the redemption date. Excluding the accrued and unpaid interest, the redemption price was approximately 103.90% of the principal amount being redeemed. We recognized a loss from early extinguishment of debt totaling approximately $28.0 million, which amount included the payment of the redemption premium totaling approximately $27.3 million.

On December 19, 2019, we used available cash to repay the bond financing collateralized by our New Dominion Technology Park, Building One property totaling approximately $26.5 million. The bond financing bore interest at a weighted-average fixed rate of approximately 7.69% per annum and was scheduled to mature on January 15, 2021. We recognized a loss from early extinguishment of debt totaling approximately $1.5 million, which amount included the payment of a prepayment penalty totaling approximately $1.4 million. New Dominion Technology Park, Building One is an approximately 235,000 net rentable square foot Class A office property located in Herndon, Virginia.

Interest Expense

Interest expense increased by approximately $19.0 million for the year ended December 31, 2020 compared to 2019, as detailed below.

Component						Change in interest expense for the year ended December 31, 2020 compared to December 31, 2019
						(in thousands)
Increases to interest expense due to:
Issuance of $1.25 billion in aggregate principal of 3.250% senior notes due 2031 on May 5, 2020						$	26,618
Issuance of $850 million in aggregate principal of 3.400% senior notes due 2029 on June 21, 2019						13,714
Issuance of $700 million in aggregate principal of 2.900% senior notes due 2030 on September 3, 2019						13,666
Increase in interest due to finance leases that are related to development properties						3,695
Decrease in capitalized interest related to development projects						2,665
Increase in interest due to a finance lease for an in-service property						535
Other interest expense (excluding senior notes)						443
Total increases to interest expense						61,336
Decreases to interest expense due to:
Redemption of $700 million in aggregate principal of 5.625% senior notes due 2020 on September 18, 2019						(28,172)
Decrease in interest rates for the 2017 Credit Facility						(9,364)
Increase in capitalized interest related to development projects that had finance leases						(2,665)
Repayment of a bond financing collateralized by New Dominion Technology Building One						(2,135)
Total decreases to interest expense						(42,336)
Total change in interest expense						$	19,000

Interest expense directly related to the development of rental properties is capitalized and included in real estate assets on our Consolidated Balance Sheets and amortized over the useful lives of the real estate or lease term. As portions of properties are placed in-service, we cease capitalizing interest on that portion and interest is then expensed. Interest capitalized for the years ended December 31, 2020 and 2019 was approximately $53.9 million and $54.9 million, respectively. These costs are not included in the interest expense referenced above.

On May 5, 2020, BPLP completed a public offering of $1.25 billion in aggregate principal amount of its 3.250% unsecured senior notes due 2031 (See Note 8 to the Consolidated Financial Statements). We used a portion of the net proceeds from this offering for the repayment of borrowings outstanding under the Revolving Facility.

On February 14, 2021, BPLP completed the redemption of $850.0 million in aggregate principal amount of its 4.125% senior notes due May 15, 2021. The redemption price was approximately $858.7 million, which was equal to par plus approximately $8.7 million of accrued and unpaid interest to, but not including, the redemption date.

At December 31, 2020, our variable rate debt consisted of BPLP’s $2.0 billion unsecured revolving credit facility (the “2017 Credit Facility”), which includes the $500.0 million delayed draw term loan facility (the “Delayed Draw Facility”) and the $1.5 billion revolving line of credit (the “Revolving Facility”). The Delayed Draw Facility had $500.0 million outstanding as of December 31, 2020. The Revolving Facility did not have an outstanding balance as of December 31, 2020. For a summary of our consolidated debt as of December 31, 2020 and December 31, 2019 refer to the heading “Liquidity and Capital Resources—Capitalization—Debt Financing” within “Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Noncontrolling Interests in Property Partnerships

Noncontrolling interests in property partnerships decreased by approximately $22.9 million for the year ended December 31, 2020 compared to 2019, as detailed below.

Property						Noncontrolling Interests in Property Partnerships for the year ended December 31,
2020						2019						Change
						(in thousands)
Salesforce Tower (1)						$	—					$	116					$	(116)
767 Fifth Avenue (the General Motors Building) (2)						4,954						2,638						2,316
Times Square Tower (3)						3,535						27,146						(23,611)
601 Lexington Avenue (4)						16,575						19,143						(2,568)
100 Federal Street (5)						14,313						12,614						1,699
Atlantic Wharf Office Building (6)						8,883						9,463						(580)
						$	48,260					$	71,120					$	(22,860)

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(1)On April 1, 2019, we acquired our partner’s 5% interest and subsequently own 100%.

(2)The increase during the year ended December 31, 2020 was related to above-/below-market lease assets that were fully amortized in 2020.

(3)During the year ended December 31, 2020, we wrote off approximately $26.8 million of accrued rent and accounts receivable balances for tenants that either terminated their leases or for which we determined their accrued rent and/or accounts receivable balances, primarily retail tenants, were no longer probable of collection. Approximately $14.7 million represents our share of the write-offs. As a result of these terminations, lease revenue decreased for the year ended December 31, 2020.

(4)During the year ended December 31, 2020, we wrote off approximately $2.9 million of accrued rent and accounts receivable balances for tenants that either terminated their leases or for which we determined their accrued rent and/or accounts receivable balances, primarily tenants in the retail sector, were no longer probable of collection. Approximately $1.6 million represents our share of the write-offs. As a result of these terminations, lease revenue decreased for the year ended December 31, 2020.

(5)The increase was primarily due to an increase in lease revenue from our tenants.

(6)During the year ended December 31, 2020, we wrote off approximately $0.5 million of accrued rent and accounts receivable balances for tenants whose balances we determined were no longer probable of collection. Approximately $0.3 million represents our share of the write-offs.

Noncontrolling Interest—Common Units of the Operating Partnership

For BXP, noncontrolling interest—common units of the Operating Partnership increased by approximately $38.4 million for the year ended December 31, 2020 compared to 2019 due primarily to an increase in allocable income, which was the result of recognizing a greater gain on sales of real estate amount during 2020 partially offset by a decrease in the noncontrolling interest’s ownership percentage. Due to our ownership structure, there is no corresponding line item on BPLP’s financial statements.

Liquidity and Capital Resources

General

Our principal liquidity needs for the next twelve months and beyond are to:

• fund normal recurring expenses;

• meet debt service and principal repayment obligations, including balloon payments on maturing debt;

• fund development/redevelopment costs;

• fund capital expenditures, including major renovations, tenant improvements and leasing costs;

• fund planned and possible acquisitions of properties, either directly or indirectly through the acquisition of equity interests therein;

• fund dividend requirements on BXP’s Series B Preferred Stock; and

• make the minimum distribution required to enable BXP to maintain its REIT qualification under the Internal Revenue Code of 1986, as amended.

We expect to satisfy these needs using one or more of the following:

• cash flow from operations;

• distribution of cash flows from joint ventures;

• cash and cash equivalent balances;

• BPLP’s 2017 Credit Facility;

• short-term bridge facilities;

• construction loans;

• long-term secured and unsecured indebtedness (including unsecured exchangeable indebtedness);

• sales of real estate; and

• issuances of BXP equity securities and/or additional preferred or common units of partnership interest in BPLP.

We draw on multiple financing sources to fund our long-term capital needs. Our current development properties are expected to be primarily funded with our available cash balances, construction loans and BPLP’s Revolving Facility. We use BPLP’s Revolving Facility primarily as a bridge facility to fund acquisition opportunities, refinance outstanding indebtedness and meet short-term development and working capital needs. Although we may seek to fund our development projects with construction loans, which may require guarantees by BPLP, the financing for each particular project ultimately depends on several factors, including, among others, the project’s size and duration, the extent of pre-leasing and our available cash and access to cost effective capital at the given time.

The following table presents information on properties under construction and redevelopment as of December 31, 2020 (dollars in thousands):

																																										Financings
Construction Properties						Estimated Stabilization Date						Location						# of Buildings						Estimated Square Feet						Investment to Date (1)(2)(3)						Estimated Total Investment (1)(2)						Total Available (1)						Outstanding at 12/31/2020 (1)						Estimated Future Equity Requirement (1)(2)(4)						Percentage Leased (5)
Office
325 Main Street						Third Quarter, 2022						Cambridge, MA						1						420,000						$	181,917					$	418,400					$	—					$	—					$	236,483					90		%
100 Causeway Street (50% ownership)						Third Quarter, 2022						Boston, MA						1						632,000						189,528						267,300						200,000						108,287						—						94		%
7750 Wisconsin Avenue (Marriott International Headquarters) (50% ownership)						Third Quarter, 2022						Bethesda, MD						1						734,000						148,452						198,900						127,500						81,932						4,880						100		%
Reston Next (formerly Reston Gateway)						Fourth Quarter, 2023						Reston, VA						2						1,062,000						372,788						715,300						—						—						342,512						85		%
2100 Pennsylvania Avenue						Third Quarter, 2024						Washington, DC						1						480,000						134,071						356,100						—						—						222,029						56		%
Total Office Properties under Construction																		6						3,328,000						1,026,756						1,956,000						327,500						190,219						805,904						86		%
Redevelopment Properties
One Five Nine East 53rd Street (55% ownership)						First Quarter, 2021						New York, NY						—						220,000						137,964						150,000						—						—						12,036						96		%	(6)
200 West Street						Fourth Quarter, 2021						Waltham, MA						—						138,000						17,028						47,800						—						—						30,772						100		%	(7)
Total Redevelopment Properties under Construction																		—						358,000						154,992						197,800						—						—						42,808						98		%
Total Properties under Construction and Redevelopment																		6						3,686,000						$	1,181,748					$	2,153,800					$	327,500					$	190,219					$	848,712					87		%

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(1)Represents our share.

(2)Investment to Date, Estimated Total Investment and Estimated Future Equity Requirement all include our share of acquisition expenses, as applicable, and reflect our share of the estimated net revenue/expenses that we expect to incur prior to stabilization of the project, including any amounts actually received or paid through December 31, 2020.

(3)Includes approximately $81.6 million of unpaid but accrued construction costs and leasing commissions.

(4)Excludes approximately $81.6 million of unpaid but accrued construction costs and leasing commissions.

(5)Represents percentage leased as of February 22, 2021, including leases with future commencement dates.

(6)Represents the low-rise portion of 601 Lexington Avenue.

(7)Represents a portion of the property under redevelopment for conversion to life sciences space.

Lease revenue (which includes recoveries from tenants), other income from operations, available cash balances, mortgage financings, unsecured indebtedness and draws on BPLP’s Revolving Facility are the principal sources of capital that we use to fund operating expenses, debt service, maintenance and repositioning capital expenditures, tenant improvements and the minimum distribution required to enable BXP to maintain its REIT qualification. We seek to maximize income from our existing properties by maintaining quality standards for our properties that promote high occupancy rates and permit increases in rental rates while reducing tenant turnover and controlling operating expenses. Our sources of revenue also include third-party fees generated by our property management, leasing and development and construction businesses, as well as the sale of assets from time to time. We believe these sources of capital will continue to provide the funds necessary for our short-term liquidity needs, including our properties under development and redevelopment.

Material adverse changes in one or more sources of capital, including from the impacts of COVID-19, may adversely affect our net cash flows. During the fourth quarter of 2020, our rent collections remained strong as we collected 99.7% of rents from our office tenants and 99.1% of rents from all tenants, including retail tenants. However, COVID-19 resulted in the write-off of accrued rent balances for all remaining co-working tenants. Decreases in parking and other revenue and the continued disruption in operations for our hotel reduced our revenue for the fourth quarter of 2020.

Cash rent abatements and deferrals primarily related to COVID-19 were approximately $19.2 million in the fourth quarter. This amount represents our consolidated cash rent abatements and deferrals plus our share of the cash rent abatements and deferrals from the unconsolidated joint ventures (calculated based on our ownership percentage) minus our partners’ share of cash rent abatements and deferrals from our consolidated joint ventures (calculated based upon the partners’ percentage ownership interests).

To date, these impacts have not adversely affected our ability to fund operating expenses, dividends and distributions, debt service payments, maintenance and repositioning capital expenditures and tenant improvements. Any future material adverse change in the cash provided by our operations may affect our ability to comply with the financial covenants under BPLP’s 2017 Credit Facility or its unsecured senior notes.

Our primary uses of capital over the next twelve months will be the completion of our current and committed development and redevelopment projects. Following the redemption of the $850 million aggregate principal amount of BPLP’s 4.125% senior unsecured notes on February 14, 2021, we have no further 2021 debt maturities, other than three loans borrowed by our unconsolidated joint ventures of which our share is approximately $102 million. As of December 31, 2020, our share of the remaining development and redevelopment costs that we expect to fund through 2024 was approximately $849 million. In addition, we anticipate development/redevelopment starts in 2021 of over $700 million, the majority of which are new life sciences developments and conversions.

To satisfy these capital needs, as of February 22, 2021, we had approximately $517 million of cash and cash equivalents, of which approximately $155 million is attributable to our consolidated joint venture partners.

Although the full impact of COVID-19 on our liquidity and capital resources, as well as the duration of such impact, will depend on a wide range of factors, all of which are highly uncertain and cannot be predicted with confidence at this time, we believe that our strong liquidity, including the approximately $1.5 billion available under the Revolving Facility and available cash, as of February 22, 2021, is sufficient to fund our remaining capital requirements on existing development and redevelopment projects, repay our maturing indebtedness when due, satisfy our REIT distribution requirements and still allow us to act opportunistically on attractive investment opportunities.

We have not sold any shares under BXP’s $600.0 million “at the market” equity offering program.

During 2020 we continued to access various sources of capital, including the sale of more than $920 million of assets generating approximately $538 million of proceeds, the issuance by BPLP in May 2020 of $1.25 billion in aggregate principal amount of its 3.25% senior unsecured notes due 2031 and the completion of $731.6 million of secured debt transactions to refinance maturing debt, of which our share of the aggregate principal is $268.3 million. The refinancing transactions included the following:

• A $250.0 million mortgage loan collateralized by Dock 72, a 669,000 square-foot Class A office property in Brooklyn, New York in which we have a 50% interest. The new loan matures on December 18, 2023.

• A $125.0 million mortgage loan collateralized by Market Square North, a 418,000 square foot Class A office property in Washington, DC in which we have a 50% interest. The new loan matures on November 10, 2025.

• A $325.0 million mortgage loan collateralized by Metropolitan Square, a 654,000 square foot Class A office property in Washington, DC, in which we have a 20% interest. The new loan matures on July 7, 2022.

We may seek to enhance our liquidity to fund our foreseeable potential development activity, pursue additional attractive investment opportunities and refinance or repay indebtedness. Depending on interest rates and overall conditions in the debt and equity markets, we may decide to access either or both of these markets in advance of the need for the funds. Doing so may result in us carrying additional cash and cash equivalents pending our use of the proceeds, which would increase our net interest expense and be dilutive to our earnings.

REIT Tax Distribution Considerations

Dividend

BXP as a REIT is subject to a number of organizational and operational requirements, including a requirement that BXP currently distribute at least 90% of its annual taxable income (excluding capital gains and with certain other adjustments). Our policy is for BXP to distribute at least 100% of its taxable income, including capital gains, to avoid paying federal tax. On December 17, 2019, the Board of Directors of BXP increased our regular quarterly dividend from $0.95 per common share to $0.98 per common share, or 3%, beginning with the fourth quarter of 2019. Common and LTIP unitholders of limited partnership interest in BPLP, received the same total distribution per unit.

BXP’s Board of Directors will continue to evaluate BXP’s dividend rate in light of our actual and projected taxable income (including gains on sales), liquidity requirements and other circumstances, including the impact of COVID-19, and there can be no assurance that the future dividends declared by BXP’s Board of Directors will not differ materially from the current quarterly dividend amount.

Sales

To the extent that we sell assets at a gain and cannot efficiently use the proceeds in a tax deferred manner for either our development activities or attractive acquisitions, BXP would, at the appropriate time, decide whether it is better to declare a special dividend, adopt a stock repurchase program, reduce indebtedness or retain the cash for future investment opportunities. Such a decision will depend on many factors including, among others, the timing, availability and terms of development and acquisition opportunities, our then-current and anticipated leverage, the cost and availability of capital from other sources, the price of BXP’s common stock and REIT distribution requirements. At a minimum, we expect that BXP would distribute at least that amount of proceeds necessary for BXP to avoid paying corporate level tax on the applicable gains realized from any asset sales.

From time to time in selected cases, whether due to a change in use, structuring issues to comply with applicable REIT regulations or other reasons, we may sell an asset that is held by a taxable REIT subsidiary (“TRS”). Such a sale by a TRS would be subject to federal and local taxes.

Cash Flow Summary

The following summary discussion of our cash flows is based on the Consolidated Statements of Cash Flows and is not meant to be an all-inclusive discussion of the changes in our cash flows for the periods presented below.

Cash and cash equivalents and cash held in escrows aggregated approximately $1.7 billion and $0.7 billion at December 31, 2020 and 2019, respectively, representing an increase of approximately $1.0 billion. The following table sets forth changes in cash flows:

			Year ended December 31,
2020						2019						Increase (Decrease)
(in thousands)
Net cash provided by operating activities			$	1,156,840					$	1,181,165					$	(24,325)
Net cash used in investing activities			(613,719)						(1,015,091)						401,372
Net cash provided by (used in) financing activities			484,322						(113,379)						597,701

Our principal source of cash flow is related to the operation of our properties. The weighted-average term of our in-place leases, excluding residential units, was approximately 7.4 years, as of December 31, 2020, including leases signed by our unconsolidated joint ventures, with occupancy rates historically in the range of 90% to 94%. Generally, our properties generate a relatively consistent stream of cash flow that provides us with resources to pay operating expenses, debt service and fund regular quarterly dividend and distribution payment requirements. In addition, over the past several years, we have raised capital through the sale of some of our properties and through secured and unsecured borrowings.

The full extent of the impact of COVID-19 on our business, operations and financial results will depend on numerous evolving factors that we may not be able to accurately predict. In addition, we cannot predict the impact that COVID-19 will have on our tenants, employees, contractors, lenders, suppliers, vendors and joint venture partners; any material adverse effect on these parties could also have a material adverse effect on us. See Item 1A: “Risk Factors” for additional details.

Cash is used in investing activities to fund acquisitions, development, net investments in unconsolidated joint ventures and maintenance and repositioning capital expenditures. We selectively invest in new projects that enable us to take advantage of our development, leasing, financing and property management skills and invest in existing buildings to enhance or maintain their market position. Cash used in investing activities for the year ended December 31, 2020 consisted primarily of acquisitions of real estate, development projects, building and tenant improvements and capital contributions to unconsolidated joint ventures, partially offset by the proceeds from the sales of real estate and capital distributions from unconsolidated joint ventures. Cash used in investing activities for the year ended December 31, 2019 consisted primarily of the acquisition of real estate, development projects, building and tenant improvements and capital contributions to unconsolidated joint ventures, partially offset by the proceeds from the sale of real estate and capital distributions from unconsolidated joint ventures, as detailed below:

			Year ended December 31,
			2020						2019
			(in thousands)
Acquisitions of real estate (1)			$	(137,976)					$	(149,031)
Construction in progress (2)			(482,507)						(546,060)
Building and other capital improvements			(160,126)						(180,556)
Tenant improvements			(234,423)						(251,831)
Right of use assets - finance leases			—						(5,152)
Proceeds from sales of real estate (3)			519,303						90,824
Capital contributions to unconsolidated joint ventures (4)			(172,436)						(87,392)
Capital distributions from unconsolidated joint ventures (5)			55,298						136,807
Cash and cash equivalents deconsolidated			—						(24,112)
Issuance of notes receivable, net			(9,800)						—
Proceeds from note receivable			6,397						3,544
Investments in securities, net			2,551						(2,132)
Net cash used in investing activities			$	(613,719)					$	(1,015,091)

Cash used in investing activities changed primarily due to the following:

(1)On June 26, 2020, we completed the acquisition of real property at 777 Harrison Street (known as Fourth + Harrison and formerly known as 425 Fourth Street) located in San Francisco, California for a gross purchase price, including entitlements, totaling approximately $140.1 million. On July 31, 2020 and December 16, 2020, we acquired real property at 759 Harrison Street located in San Francisco, California, which is expected to be included in the Fourth + Harrison development project, for an aggregate purchase price totaling approximately $4.5 million. 759 Harrison Street and Fourth + Harrison are expected to support the development of approximately 850,000 square feet of primarily commercial office space.

On January 10, 2019, we acquired land parcels at our Carnegie Center property located in Princeton, New Jersey for a gross purchase price of approximately $51.5 million, which includes an aggregate of approximately $8.6 million of additional amounts that are payable in the future to the seller upon the development or sale of each of the parcels. The land parcels will support approximately 1.7 million square feet of development.

On August 27, 2019, we acquired 880 and 890 Winter Street located in Waltham, Massachusetts for a gross

purchase price of approximately $106.0 million in cash, including transaction costs. 880 and 890 Winter

Street consists of two Class A office properties aggregating approximately 392,000 net rentable square feet.

(2)Construction in progress for the year ended December 31, 2020 includes ongoing expenditures associated with 20 CityPoint, 17Fifty Presidents Street and The Skylyne, which were completed and fully placed in-service during the year ended December 31, 2020. In addition, we incurred costs associated with our continued development/redevelopment of One Five Nine East 53rd Street, 200 West Street, 325 Main Street, 2100 Pennsylvania Avenue and Reston Next (formerly Reston Gateway).

Construction in progress for the year ended December 31, 2019 includes ongoing expenditures associated with Salesforce Tower, which was placed in-service during the year ended December 31, 2018 and 20 CityPoint and 145 Broadway, which were partially or fully placed in-service during the year ended December 31, 2019. In addition, we incurred costs associated with our continued development/redevelopment of 17Fifty Presidents Street, The Skylyne, One Five Nine East 53rd Street, 200 West Street, 325 Main Street, 2100 Pennsylvania Avenue and Reston Next (formerly Reston Gateway).

(3)On February 20, 2020, we completed the sale of New Dominion Technology Park located in Herndon, Virginia for a gross sale price of $256.0 million. Net cash proceeds totaled approximately $254.0 million, resulting in a gain on sale of real estate totaling approximately $192.3 million for BXP and approximately $197.1 million for BPLP. New Dominion Technology Park is comprised of two Class A office properties aggregating approximately 493,000 net rentable square feet.

On June 25, 2020, we completed the sale of a portion of our Capital Gallery property located in Washington, DC for a gross sale price of approximately $253.7 million. Net cash proceeds totaled approximately $246.6 million, resulting in a gain on sale of real estate totaling approximately $203.5 million for BXP and approximately $207.0 million for BPLP. Capital Gallery is an approximately 631,000 net rentable square foot Class A office property. The portion sold is comprised of approximately 455,000 net rentable square feet of commercial office space. We continue to own the land, underground parking garage and remaining commercial office and retail space containing approximately 176,000 net rentable square feet at the property.

On December 16, 2020, we completed the sale of a parcel of land located in Marlborough, Massachusetts for a gross sale price of approximately $14.3 million. Net cash proceeds totaled approximately $14.2 million, resulting in a gain on sale of real estate totaling approximately $5.2 million.

On January 24, 2019, we completed the sale of our 2600 Tower Oaks Boulevard property located in Rockville, Maryland for a gross sale price of approximately $22.7 million. Net cash proceeds totaled approximately $21.4 million, resulting in a loss on sale of real estate totaling approximately $0.6 million. 2600 Tower Oaks Boulevard is an approximately 179,000 net rentable square foot Class A office property.

On June 3, 2019, we completed the sale of our One Tower Center property located in East Brunswick, New Jersey for a gross sale price of $38.0 million. Net cash proceeds totaled approximately $36.6 million. One Tower Center is an approximately 410,000 net rentable Class A office property.

On June 28, 2019, we completed the sale of our 164 Lexington Road property located in Billerica, Massachusetts for a gross sale price of $4.0 million. Net cash proceeds totaled approximately $3.8 million, resulting in a gain on sale of real estate totaling approximately $2.5 million for BXP and approximately $2.6 million for BPLP. 164 Lexington Road is an approximately 64,000 net rentable square foot Class A office property.

On September 20, 2019, we sold a 45% interest in our Platform 16 property located in San Jose, California for a gross sale price of approximately $23.1 million. Net cash proceeds totaled approximately $23.1 million. We ceased accounting for the property on a consolidated basis and now account for the property on an unconsolidated basis using the equity method of accounting as we reduced our ownership interest in the

property and no longer have a controlling financial or operating interest in the property. We did not recognize a gain on the retained or sold interest in the property as the fair value of the property approximated its carrying value. Platform 16 consists of a 65-year ground lease for land totaling approximately 5.6 acres that will support the development of approximately 1.1 million square feet of commercial office space.

On December 20, 2019, we completed the sale of the remaining parcel of land at our Washingtonian North property located in Gaithersburg, Maryland for a gross sale price of approximately $7.8 million. Net cash proceeds totaled approximately $7.3 million, resulting in a loss on sale of real estate totaling approximately $0.1 million.

(4)Capital contributions to unconsolidated joint ventures for the year ended December 31, 2020 consisted primarily of cash contributions of approximately $79.3 million, $46.3 million, $27.2 million, $7.5 million and $7.4 million to our Platform 16, 3 Hudson Boulevard, Beach Cities Media Campus, Dock 72 and Metropolitan Square joint ventures, respectively.

Capital contributions to unconsolidated joint ventures for the year ended December 31, 2019 consisted primarily of cash contributions of approximately $45.0 million, $20.4 million, $12.8 million and $7.2 million to our Hub on Causeway, 3 Hudson Boulevard, Dock 72 and Metropolitan Square joint ventures, respectively.

(5)Capital distributions from unconsolidated joint ventures for the year ended December 31, 2020 consisted of (1) a cash distribution totaling approximately $22.5 million from our Metropolitan Square joint venture resulting from the excess proceeds from the refinancing of the mortgage loan on the property, (2) a cash distribution totaling approximately $17.9 million from our Annapolis Junction joint venture resulting from available cash and the net proceeds from the sale of Annapolis Junction Building Eight and two land parcels after the pay down of the mortgage loan and (3) a cash distribution totaling approximately $14.0 million from our Colorado Center joint venture resulting from the excess proceeds from the mortgage financing on the property that occurred during 2017, which proceeds were released from lender reserves.

Capital distributions from unconsolidated joint ventures for the year ended December 31, 2019 consisted of (1) cash distributions totaling approximately $104.1 million from our 540 Madison Avenue joint venture resulting from the net proceeds from the sale of the property, (2) a cash distribution totaling approximately $17.6 million from our 100 Causeway Street joint venture resulting from the proceeds from the construction loan financing and (3) a cash distribution totaling approximately $15.1 million from our 7750 Wisconsin Avenue joint venture resulting from the proceeds from the construction loan financing.

Cash provided by financing activities for the year ended December 31, 2020 totaled approximately $484.3 million. This consisted primarily of the proceeds from the issuance by BPLP of $1.25 billion in aggregate principal amount of its 3.250% senior unsecured notes due 2031, partially offset by the payment of our regular dividends and distributions to our shareholders and unitholders and distributions to noncontrolling interest holders in property partnerships. Future debt payments are discussed below under the heading “Capitalization—Debt Financing.”

Capitalization

The following table presents Consolidated Market Capitalization and BXP’s Share of Market Capitalization, as well as the corresponding ratios of Consolidated Debt to Consolidated Market Capitalization and BXP’s Share of Debt to BXP’s Share of Market Capitalization (in thousands except for percentages):

						December 31, 2020
						Shares / Units Outstanding						Common Stock Equivalent						Equivalent Value (1)
Common Stock						155,719						155,719						$	14,720,117
Common Operating Partnership Units						17,373						17,373						1,642,270			(2)
5.25% Series B Cumulative Redeemable Preferred Stock						80						—						200,000
Total Equity												173,092						$	16,562,387
Consolidated Debt																		$	13,047,758
Add:
BXP’s share of unconsolidated joint venture debt (3)																		1,153,628
Subtract:
Partners’ share of Consolidated Debt (4)																		(1,194,619)
BXP’s Share of Debt																		$	13,006,767
Consolidated Market Capitalization																		$	29,610,145
BXP’s Share of Market Capitalization																		$	29,569,154
Consolidated Debt/Consolidated Market Capitalization																		44.07		%
BXP’s Share of Debt/BXP’s Share of Market Capitalization																		43.99		%

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(1)Except for the Series B Cumulative Redeemable Preferred Stock, which is valued at the liquidation preference of $2,500 per share, values are based on the closing price per share of BXP’s Common Stock on the New York Stock Exchange on December 31, 2020 of $94.53.

(2)Includes long-term incentive plan units (including 2012 OPP Units and 2013 - 2017 MYLTIP Units), but excludes MYLTIP Units granted between 2018 and 2020.

(3)See page 108 for additional information.

(4)See page 100 for additional information.

Consolidated Debt to Consolidated Market Capitalization Ratio is a measure of leverage commonly used by analysts in the REIT sector. We present this measure as a percentage and it is calculated by dividing (A) our consolidated debt by (B) our consolidated market capitalization, which is the market value of our outstanding equity securities plus our consolidated debt. Consolidated market capitalization is the sum of:

(1) our consolidated debt; plus

(2) the product of (x) the closing price per share of BXP common stock on December 31, 2020, as reported by the New York Stock Exchange, multiplied by (y) the sum of:

(i) the number of outstanding shares of common stock of BXP,

(ii) the number of outstanding OP Units in BPLP (excluding OP Units held by BXP),

(iii) the number of OP Units issuable upon conversion of all outstanding LTIP Units, assuming all conditions have been met for the conversion of the LTIP Units, and

(iv) the number of OP Units issuable upon conversion of 2012 OPP Units, 2013 - 2017 MYLTIP Units that were issued in the form of LTIP Units; plus

(3) the aggregate liquidation preference ($2,500 per share) of the outstanding shares of BXP’s 5.25% Series B Cumulative Redeemable Preferred Stock.

The calculation of consolidated market capitalization does not include LTIP Units issued in the form of MYLTIP Awards unless and until certain performance thresholds are achieved and they are earned. Because their three-year performance periods have not yet ended, 2018 - 2020 MYLTIP Units are not included in this calculation as of December 31, 2020.

We also present BXP’s Share of Market Capitalization and BXP’s Share of Debt/BXP’s Share of Market Capitalization, which are calculated in the same manner, except that BXP’s Share of Debt is utilized instead of our consolidated debt in both the numerator and the denominator. BXP’s Share of Debt is defined as our consolidated debt plus our share of debt from our unconsolidated joint ventures (calculated based upon our ownership percentage), minus our partners’ share of debt from our consolidated joint ventures (calculated based upon the partners’ percentage ownership interests adjusted for basis differentials). Management believes that BXP’s Share of Debt provides useful information to investors regarding our financial condition because it includes our share of debt from unconsolidated joint ventures and excludes our partners’ share of debt from consolidated joint ventures, in each case presented on the same basis. We have several significant joint ventures and presenting various measures of financial condition in this manner can help investors better understand our financial condition and/or results of operations after taking into account our economic interest in these joint ventures. We caution investors that the ownership percentages used in calculating BXP’s Share of Debt may not completely and accurately depict all of the legal and economic implications of holding an interest in a consolidated or unconsolidated joint venture. For example, in addition to partners’ interests in profits and capital, venture agreements vary in the allocation of rights regarding decision making (both for routine and major decisions), distributions, transferability of interests, financing and guarantees, liquidations and other matters. Moreover, in some cases we exercise significant influence over, but do not control, the joint venture in which case GAAP requires that we account for the joint venture entity using the equity method of accounting and we do not consolidate it for financial reporting purposes. In other cases, GAAP requires that we consolidate the venture even though our partner(s) own(s) a significant percentage interest. As a result, management believes that the presentation of BXP’s Share of a financial measure should not be considered a substitute for, and should only be considered with and as a supplement to our financial information presented in accordance with GAAP.

We present these supplemental ratios because our degree of leverage could affect our ability to obtain additional financing for working capital, capital expenditures, acquisitions, development or other general corporate purposes and because different investors and lenders consider one or both of these ratios. Investors should understand that these ratios are, in part, a function of the market price of the common stock of BXP and as such will fluctuate with changes in such price, and they do not necessarily reflect our capacity to incur additional debt to finance our activities or our ability to manage our existing debt obligations. However, for a company like BXP, whose assets are primarily income-producing real estate, these ratios may provide investors with an alternate indication of leverage, so long as they are evaluated along with the ratio of indebtedness to other measures of asset value used by financial analysts and other financial ratios, as well as the various components of our outstanding indebtedness.

For a discussion of our unconsolidated joint venture indebtedness, see “Liquidity and Capital Resources—Capitalization—Off-Balance Sheet Arrangements—Joint Venture Indebtedness” within “Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations” and for a discussion of our consolidated joint venture indebtedness see “Liquidity and Capital Resources—Capitalization—Mortgage Notes Payable, Net” within “Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Debt Financing

As of December 31, 2020, we had approximately $13.0 billion of outstanding consolidated indebtedness, representing approximately 44.07% of our Consolidated Market Capitalization as calculated above consisting of approximately (1) $9.6 billion (net of discount and deferred financing fees) in publicly traded unsecured senior notes having a GAAP weighted-average interest rate of 3.71% per annum and maturities in 2021 through 2031 (See Notes 8 and 18 to the Consolidated Financial Statements), (2) $2.9 billion (net of deferred financing fees) of property-specific mortgage debt having a GAAP weighted-average interest rate of 3.89% per annum and a weighted-average term of 5.3 years and (3) $499.4 million (net of deferred financing fees) outstanding under BPLP’s 2017 Credit Facility that matures on April 24, 2022.

The table below summarizes the aggregate carrying value of our mortgage notes payable and BPLP’s unsecured senior notes, line of credit and term loan, as well as Consolidated Debt Financing Statistics at December 31, 2020 and December 31, 2019.

			December 31,
			2020						2019
			(dollars in thousands)
Debt Summary:
Balance
Fixed rate mortgage notes payable, net			$	2,909,081					$	2,922,408
Unsecured senior notes, net			9,639,287						8,390,459
Unsecured line of credit			—						—
Unsecured term loan, net			499,390						498,939
Consolidated Debt			13,047,758						11,811,806
Add:
BXP’s share of unconsolidated joint venture debt, net (1)			1,153,628						980,110
Subtract:
Partners’ share of consolidated mortgage notes payable, net (2)			(1,194,619)						(1,199,854)
BXP’s Share of Debt			$	13,006,767					$	11,592,062
			December 31,
			2020						2019
Consolidated Debt Financing Statistics:
Percent of total debt:
Fixed rate			96.17		%				95.78		%
Variable rate			3.83		%				4.22		%
Total			100.00		%				100.00		%
GAAP Weighted-average interest rate at end of period:
Fixed rate			3.75		%				3.80		%
Variable rate			1.19		%				2.75		%
Total			3.65		%				3.75		%
Coupon/Stated Weighted-average interest rate at end of period:
Fixed rate			3.65		%				3.69		%
Variable rate			1.10		%				2.66		%
Total			3.55		%				3.65		%
Weighted-average maturity at end of period (in years):
Fixed rate			5.5						6.0
Variable rate			1.3						2.3
Total			5.4						5.9

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(1)See page 108 for additional information.

(2)See page 100 for additional information.

Unsecured Credit Facility

On April 24, 2017, BPLP entered into the 2017 Credit Facility. Among other things, the 2017 Credit Facility (1) increased the total commitment of the Revolving Facility from $1.0 billion to $1.5 billion, (2) extended the maturity date from July 26, 2018 to April 24, 2022, (3) reduced the per annum variable interest rates, and (4) added a $500.0 million Delayed Draw Facility that permitted BPLP to draw until the first anniversary of the closing date. Based on BPLP’s current credit rating, (1) the applicable Eurocurrency margins for the Revolving Facility and Delayed Draw Facility are 87.5 basis points and 95 basis points, respectively, and (2) the facility fee on the Revolving Facility commitment is 0.15% per annum.

On April 24, 2018, BPLP exercised its option to draw $500.0 million on its Delayed Draw Facility. The Delayed Draw Facility bears interest at a variable rate equal to LIBOR plus 0.90% per annum based on BPLP’s December 31, 2020 credit rating and matures on April 24, 2022.

As of December 31, 2020, BPLP had $500.0 million of borrowings outstanding under its Delayed Draw Facility, no borrowings under its Revolving Facility and letters of credit totaling approximately $2.5 million outstanding with the ability to borrow approximately $1.5 billion under the Revolving Facility. As of February 22, 2021, BPLP had $500.0 million of borrowings outstanding under its Delayed Draw Facility, no borrowings under its Revolving Facility and letters of credit totaling approximately $2.3 million outstanding with the ability to borrow approximately $1.5 billion under the Revolving Facility.

Unsecured Senior Notes, Net

For a description of BPLP’s outstanding unsecured senior notes as of December 31, 2020, see Notes 8 and 18 to the Consolidated Financial Statements.

On May 5, 2020, BPLP completed a public offering of $1.25 billion in aggregate principal amount of its 3.250% unsecured senior notes due 2031. The notes were priced at 99.850% of the principal amount to yield an effective rate (including financing fees) of approximately 3.343% per annum to maturity. The notes will mature on January 30, 2031, unless earlier redeemed. The aggregate net proceeds from the offering were approximately $1.24 billion after deducting underwriting discounts and transaction expenses.

The indenture relating to the unsecured senior notes contains certain financial restrictions and requirements, including (1) a leverage ratio not to exceed 60%, (2) a secured debt leverage ratio not to exceed 50%, (3) an interest coverage ratio of greater than 1.50, and (4) an unencumbered asset value of not less than 150% of unsecured debt. At December 31, 2020, BPLP was in compliance with each of these financial restrictions and requirements.

Mortgage Notes Payable, Net

The following represents the outstanding principal balances due under the mortgage notes payable at December 31, 2020:

Properties						Stated Interest Rate						GAAP Interest Rate (1)						Stated Principal Amount						Deferred Financing Costs, Net						Carrying Amount						Carrying Amount (Partners’ Share)												Maturity Date
						(dollars in thousands)
Wholly-owned
University Place						6.94		%				6.99		%				$	1,500					$	(9)					$	1,491					N/A												August 1, 2021
Consolidated Joint Ventures
767 Fifth Avenue (the General Motors Building)						3.43		%				3.64		%				2,300,000						(22,478)						2,277,522						$	911,088					(2)(3)(4)						June 9, 2027
601 Lexington Avenue						4.75		%				4.79		%				630,486						(418)						630,068						283,531						(5)						April 10, 2022
																		2,930,486						(22,896)						2,907,590						1,194,619
Total																		$	2,931,986					$	(22,905)					$	2,909,081					$	1,194,619

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(1)GAAP interest rate differs from the stated interest rate due to the inclusion of the amortization of financing charges and the effects of hedging transactions (if any).

(2)The mortgage loan requires interest only payments with a balloon payment due at maturity.

(3)This property is owned by a consolidated entity in which we have a 60% interest. The partners’ share of the carrying amount has been adjusted for basis differentials.

(4)In connection with the refinancing of the loan, we guaranteed the consolidated entity’s obligation to fund various reserves for tenant improvement costs and allowances, leasing commissions and free rent obligations in lieu of cash deposits. As of December 31, 2020, the maximum funding obligation under the guarantee was approximately $30.6 million. We earn a fee from the joint venture for providing the guarantee and have an agreement with our partners to reimburse the joint venture for their share of any payments made under the guarantee (See Note 10 to the Consolidated Financial Statements).

(5)This property is owned by a consolidated entity in which we have a 55% interest.

Contractual aggregate principal payments of mortgage notes payable at December 31, 2020 are as follows:

			Principal Payments
Year			(in thousands)
2021			$	17,276
2022			614,710
2023			—
2024			—
2025			—
Thereafter			2,300,000
			$	2,931,986

Market Risk

Market risk is the risk of loss from adverse changes in market prices and interest rates. Our future earnings, cash flows and fair values relevant to financial instruments are dependent upon prevalent market interest rates. Our primary market risk results from our indebtedness, which bears interest at fixed and variable rates. The fair value of our debt obligations are affected by changes in the market interest rates. We manage our market risk by matching long-term leases with long-term, fixed-rate, non-recourse debt of similar duration. We continue to follow a conservative strategy of generally pre-leasing development projects on a long-term basis to creditworthy tenants in order to achieve the most favorable construction and permanent financing terms. Approximately 96.2% of our outstanding debt, excluding our unconsolidated joint ventures, has fixed interest rates, which minimizes the interest rate risk through the maturity of such outstanding debt. We also manage our market risk by entering into hedging arrangements with financial institutions. Our primary objectives when undertaking hedging transactions and derivative positions is to reduce our floating rate exposure and to fix a portion of the interest rate for anticipated financing and refinancing transactions. This in turn, reduces the risks that the variability of cash flows imposes on variable rate debt. Our strategy mitigates against future increases in our interest rates.

At December 31, 2020, our weighted-average coupon/stated rate on our fixed rate outstanding Consolidated Debt was 3.65% per annum. At December 31, 2020, we had $500.0 million outstanding of consolidated variable rate debt. At December 31, 2020, the GAAP interest rate on our variable rate debt was approximately 1.19% per annum. If market interest rates on our variable rate debt had been 100 basis points greater, total interest expense would have increased approximately $5.0 million, on an annualized basis, for the year ended December 31, 2020.

Funds from Operations

Pursuant to the revised definition of Funds from Operations adopted by the Board of Governors of the National Association of Real Estate Investment Trusts (“Nareit”), we calculate Funds from Operations, or “FFO,” for each of BXP and BPLP by adjusting net income (loss) attributable to Boston Properties, Inc. common shareholders and net income (loss) attributable to Boston Properties Limited Partnership common unitholders (computed in accordance with GAAP), respectively, for gains (or losses) from sales of properties, impairment losses on depreciable real estate consolidated on our 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. We believe the presentation of FFO, combined with the presentation of required GAAP financial measures, improves the understanding of operating results of REITs among the investing public and helps make comparisons of REIT operating results more meaningful. Management generally considers FFO to be useful measures for understanding and comparing our 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, Inc. common shareholders and net

income attributable to Boston Properties Limited Partnership as presented in our Consolidated Financial Statements. FFO should not be considered as a substitute for net income attributable to Boston Properties, Inc. common shareholders or 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 our financial information prepared in accordance with GAAP.

The impact that COVID-19 has had on our business, financial position and results of operations during 2020 is discussed throughout this report. The full extent of the impact of COVID-19 on our business, operations and financial results will depend on numerous evolving factors that we may not be able to accurately predict. The impact of COVID-19 on our revenue, in particular lease, parking and hotel revenue was negatively impacted by COVID-19 for the year ended December 31, 2020, thus negatively impacting our FFO. These decreases are discussed under the heading “Comparison of the year ended December 31, 2020 to the year ended December 31, 2019” within “Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Boston Properties, Inc.

The following table presents a reconciliation of net income attributable to Boston Properties, Inc. common shareholders to FFO attributable to Boston Properties, Inc. common shareholders for the years ended December 31, 2020, 2019, 2018, 2017 and 2016:

												Year ended December 31,
																		2020						2019						2018						2017						2016
																		(in thousands)
Net income attributable to Boston Properties, Inc. common shareholders																		$	862,227					$	511,034					$	572,347					$	451,939					$	502,285
Add:
Preferred dividends																		10,500						10,500						10,500						10,500						10,500
Noncontrolling interest—common units of the Operating Partnership																		97,704						59,345						66,807						52,210						59,260
Noncontrolling interests in property partnerships																		48,260						71,120						62,909						47,832						(2,068)
Net income																		1,018,691						651,999						712,563						562,481						569,977
Add:
Depreciation and amortization																		683,751						677,764						645,649						617,547						694,403
Noncontrolling interests in property partnerships’ share of depreciation and amortization																		(71,850)						(71,389)						(73,880)						(78,190)						(107,087)
BXP’s share of depreciation and amortization from unconsolidated joint ventures																		80,925						58,451						54,352						34,262						26,934
Corporate-related depreciation and amortization																		(1,840)						(1,695)						(1,634)						(1,986)						(1,568)
Impairment loss on investment in unconsolidated joint venture (1)																		60,524						—						—						—						—
Impairment loss																		—						24,038						11,812						—						—
Less:
Gain on sale of investment in unconsolidated joint venture (2)																		—						—						—						—						59,370
Gain on sale of real estate included within (loss) income from unconsolidated joint ventures (3)																		5,958						47,238						8,270						—						—
Gains on sales of real estate																		618,982						709						182,356						7,663						80,606
Noncontrolling interests in property partnerships																		48,260						71,120						62,909						47,832						(2,068)
Preferred dividends																		10,500						10,500						10,500						10,500						10,500
Funds from Operations (FFO) attributable to the Operating Partnership common unitholders (including Boston Properties, Inc.)																		1,086,501						1,209,601						1,084,827						1,068,119						1,034,251
Less:
Noncontrolling interest—common units of the Operating Partnership’s share of funds from operations																		108,310						123,757						110,338						108,707						106,504
Funds from Operations attributable to Boston Properties, Inc. common shareholders																		$	978,191					$	1,085,844					$	974,489					$	959,412					$	927,747
Our percentage share of Funds from Operations—basic																		90.03		%				89.77		%				89.83		%				89.82		%				89.70		%
Weighted average shares outstanding—basic																		155,432						154,582						154,427						154,190						153,715

---

(1)The impairment loss on investment in unconsolidated joint venture consists of an other-than-temporary decline in the fair value below the carrying value of our investment in the Dock 72 unconsolidated joint venture (See Note 6 to the Consolidated Financial Statements).

(2)The gain on sale of investment in unconsolidated joint venture consists of the gain on sale of a 31% interest in Metropolitan Square. We continue to own a 20% interest in the joint venture.

(3)Consists of the portion of income from unconsolidated joint ventures related to the gain on sale of real estate associated with the sale of Annapolis Junction Building Eight and two land parcels for the year ended December 31, 2020, 540 Madison Avenue for the year ended December 31, 2019 and the gain on the distribution of Annapolis Junction Building One for the year ended December 31, 2018.

Reconciliation to Diluted Funds from Operations:

						Year ended December 31,
						2020												2019												2018												2017												2016
						(in thousands)
						Income (Numerator)						Shares/Units (Denominator)						Income (Numerator)						Shares/Units (Denominator)						Income (Numerator)						Shares/Units (Denominator)						Income (Numerator)						Shares/Units (Denominator)						Income (Numerator)						Shares/Units (Denominator)
Basic Funds from Operations						$	1,086,501					172,643						$	1,209,601					172,200						$	1,084,827					171,912						$	1,068,119					171,661						$	1,034,251					171,361
Effect of Dilutive Securities:
Stock based compensation						—						85						—						301						—						255						—						200						—						262
Diluted Funds from Operations						$	1,086,501					172,728						$	1,209,601					172,501						$	1,084,827					172,167						$	1,068,119					171,861						$	1,034,251					171,623
Less: Noncontrolling interest—common units of the Operating Partnership’s share of diluted Funds from Operations						108,256						17,211						123,541						17,618						110,175						17,485						108,580						17,471						106,341						17,646
Diluted Funds from Operations attributable to Boston Properties, Inc. (1)						$	978,245					155,517						$	1,086,060					154,883						$	974,652					154,682						$	959,539					154,390						$	927,910					153,977

---

(1)BXP’s share of diluted Funds from Operations was 90.04%, 89.79%, 89.84%, 89.83% and 89.72% for the years ended December 31, 2020, 2019, 2018, 2017 and 2016, respectively.

Boston Properties Limited Partnership

The following table presents a reconciliation of net income attributable to Boston Properties Limited Partnership common unitholders to FFO attributable to Boston Properties Limited Partnership common unitholders for the years ended December 31, 2020, 2019, 2018, 2017 and 2016:

												Year ended December 31,
																		2020						2019						2018						2017						2016
																		(in thousands)
Net income attributable to Boston Properties Limited Partnership common unitholders																		$	979,979					$	580,102					$	656,903					$	512,866					$	575,341
Add:
Preferred distributions																		10,500						10,500						10,500						10,500						10,500
Noncontrolling interests in property partnerships																		48,260						71,120						62,909						47,832						(2,068)
Net income																		1,038,739						661,722						730,312						571,198						583,773
Add:
Depreciation and amortization																		676,666						669,956						637,891						609,407						682,776
Noncontrolling interests in property partnerships’ share of depreciation and amortization																		(71,850)						(71,389)						(73,880)						(78,190)						(107,087)
BXP’s share of depreciation and amortization from unconsolidated joint ventures																		80,925						58,451						54,352						34,262						26,934
Corporate-related depreciation and amortization																		(1,840)						(1,695)						(1,634)						(1,986)						(1,568)
Impairment loss on investment in unconsolidated joint venture (1)																		60,524						—						—						—						—
Impairment loss																		—						22,272						10,181						—						—
Less:
Gain on sale of investment in unconsolidated joint venture (2)																		—						—						—						—						59,370
Gain on sale of real estate included within (loss) income from unconsolidated joint ventures (3)																		5,958						47,238						8,270						—						—
Gains on sales of real estate																		631,945						858						190,716						8,240						82,775
Noncontrolling interests in property partnerships																		48,260						71,120						62,909						47,832						(2,068)
Preferred distributions																		10,500						10,500						10,500						10,500						10,500
Funds from Operations attributable to Boston Properties Limited Partnership common unitholders (4)																		1,086,501						1,209,601						1,084,827						1,068,119						1,034,251
Weighted average shares outstanding—basic																		172,643						172,200						171,912						171,661						171,361

---

(1)The impairment loss on investment in unconsolidated joint venture consists of an other-than-temporary decline in the fair value below the carrying value of our investment in the Dock 72 unconsolidated joint venture (See Note 6 to the Consolidated Financial Statements).

(2)The gain on sale of investment in unconsolidated joint venture consists of the gain on sale of a 31% interest in Metropolitan Square. We continue to own a 20% interest in the joint venture.

(3)Consists of the portion of income from unconsolidated joint ventures related to the gain on sale of real estate associated with the sale of Annapolis Junction Building Eight and two land parcels for the year ended December 31, 2020, 540 Madison Avenue for the year ended December 31, 2019 and the gain on the distribution of Annapolis Junction Building One for the year ended December 31, 2018.

(4)Our calculation includes OP Units and vested LTIP Units (including vested 2012 OPP Units and vested 2013 - 2017 MYLTIP Units).

Reconciliation to Diluted Funds from Operations:

						Year ended December 31,
						2020												2019												2018												2017												2016
						(in thousands)
						Income (Numerator)						Shares/Units (Denominator)						Income (Numerator)						Shares/Units (Denominator)						Income (Numerator)						Shares/Units (Denominator)						Income (Numerator)						Shares/Units (Denominator)						Income (Numerator)						Shares/Units (Denominator)
Basic Funds from Operations						$	1,086,501					172,643						$	1,209,601					172,200						$	1,084,827					171,912						$	1,068,119					171,661						$	1,034,251					171,361
Effect of Dilutive Securities:
Stock based compensation						—						85						—						301						—						255						—						200						—						262
Diluted Funds from Operations						$	1,086,501					172,728						$	1,209,601					172,501						$	1,084,827					172,167						$	1,068,119					171,861						$	1,034,251					171,623

Contractual Obligations

As of December 31, 2020, we were subject to contractual payment obligations as described in the table below.

						Payments Due by Period
						Total						2021						2022						2023						2024						2025						Thereafter
						(in thousands)
Contractual Obligations:
Long-term debt
Mortgage debt (1)						$	3,479,254					$	125,811					$	703,301					$	78,890					$	78,890					$	78,890					$	2,413,472
Unsecured senior notes (1)						11,603,243						1,174,281						306,750						1,773,969						932,675						1,049,943						6,365,625
Unsecured line of credit / term loan (1) (2)						507,188						5,500						501,688						—						—						—						—
Operating leases						620,605						25,092						18,020						10,262						9,277						9,476						548,478
Tenant obligations (3)						587,789						450,885						97,372						34,286						4,264						739						243
Construction contracts on development projects						904,978						525,405						323,511						53,357						2,705						—						—
Finance leases (4)						1,457,469						5,896						10,206						9,701						48,518						9,971						1,373,177
Other obligations						11,939						10,756						112						112						112						114						733
Total Contractual Obligations						$	19,172,465					$	2,323,626					$	1,960,960					$	1,960,577					$	1,076,441					$	1,149,133					$	10,701,728

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(1)Amounts include principal and interest payments.

(2)Interest payments are calculated using the December 31, 2020 interest rate of 1.10%.

(3)Committed tenant-related obligations based on executed leases as of December 31, 2020 (tenant improvements and lease commissions).

(4)Finance lease payments in 2024 include approximately $38.7 million related to a purchase option that we are reasonably certain we will exercise.

We have various service contracts with vendors related to our property management. In addition, we have certain other contracts we enter into in the ordinary course of business that may extend beyond one year. These contracts include terms that provide for cancellation with insignificant or no cancellation penalties. Contract terms are generally between three and five years.

During 2020, we paid approximately $314.2 million to fund tenant-related obligations, including tenant improvements and leasing commissions.

In addition, we and our unconsolidated joint venture partners incurred approximately $248 million of new tenant-related obligations associated with approximately 3.7 million square feet of second generation leases, which included approximately 340,000 square feet of lease modifications related to COVID-19, or approximately $66 per square foot. In addition, we signed leases for approximately 276,000 square feet at our development properties. The tenant-related obligations for the development properties are included within the projects’ “Estimated Total Investment” referred to in “Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.” In the aggregate, during 2020, we signed leases for approximately 4.0 million square feet of space, including approximately 340,000 square feet of lease modifications related to COVID-19, and incurred aggregate tenant-related obligations of approximately $293 million, or approximately $72 per square foot.

Off-Balance Sheet Arrangements—Joint Venture Indebtedness

We have investments in unconsolidated joint ventures with our effective ownership interests ranging from 20% to 60%. Fourteen of these ventures have mortgage indebtedness. We exercise significant influence over, but do not control, these entities. As a result, we account for them using the equity method of accounting. See also Note 6 to the Consolidated Financial Statements. At December 31, 2020, the aggregate carrying amount of debt, including both our and our partners’ share, incurred by these ventures was approximately $2.6 billion (of which our proportionate share is approximately $1.2 billion). The table below summarizes the outstanding debt of these joint venture properties at December 31, 2020. In addition to other guarantees specifically noted in the table, we have

agreed to customary environmental indemnifications and nonrecourse carve-outs (e.g., guarantees against fraud, misrepresentation and bankruptcy) as well as the completion of development projects on certain of the loans.

Properties						Venture Ownership %						Stated Interest Rate						GAAP Interest Rate (1)						Stated Principal Amount									Deferred Financing Costs, Net						Carrying Amount						Carrying Amount (Our share)												Maturity Date
						(dollars in thousands)
Santa Monica Business Park						55		%				4.06		%				4.24		%				$	300,000								$	(2,394)					$	297,606					$	163,683					(2)(3)						July 19, 2025
Market Square North						50		%				2.80		%				2.96		%				125,000									(1,003)						123,997						61,999						(4)						November 10, 2025
Annapolis Junction Building Six						50		%				2.71		%				3.12		%				11,996									(51)						11,945						5,972						(5)						November 16, 2021
Annapolis Junction Building Seven						50		%				2.60		%				2.95		%				18,420									(15)						18,405						9,203						(6)						March 25, 2021
1265 Main Street						50		%				3.77		%				3.84		%				37,334									(306)						37,028						18,514												January 1, 2032
Colorado Center						50		%				3.56		%				3.58		%				550,000									(679)						549,321						274,660						(2)						August 9, 2027
Dock 72						50		%				2.63		%				2.85		%				196,412									(1,630)						194,782						97,391						(2)(7)						December 18, 2023
The Hub on Causeway - Podium						50		%				2.40		%				2.89		%				174,329									(687)						173,642						86,821						(2)(8)						September 6, 2021
Hub50House						50		%				2.15		%				2.43		%				171,249									(680)						170,569						85,284						(2)(9)						April 19, 2022
100 Causeway Street						50		%				1.65		%				1.86		%				216,575									(2,259)						214,316						107,158						(2)(10)						September 5, 2023
7750 Wisconsin Avenue (Marriott International Headquarters)						50		%				1.40		%				1.94		%				163,863									(3,249)						160,614						80,307						(2)(11)						April 26, 2023
500 North Capitol Street, NW						30		%				4.15		%				4.20		%				105,000									(143)						104,857						31,457						(2)						June 6, 2023
901 New York Avenue						25		%				3.61		%				3.69		%				221,121									(715)						220,406						55,102												January 5, 2025
3 Hudson Boulevard						25		%				3.64		%				3.72		%				80,000									(160)						79,840						19,960						(2)(12)						July 13, 2023
Metropolitan Square						20		%				5.40		%				6.90		%				288,000									(7,417)						280,583						56,117						(2)(13)						July 7, 2022
Total																								$	2,659,299								$	(21,388)					$	2,637,911					$	1,153,628

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(1)GAAP interest rate differs from the stated interest rate due to the inclusion of the amortization of financing charges, which includes mortgage recording fees.

(2)The loan requires interest only payments with a balloon payment due at maturity.

(3)The loan bears interest at a variable rate equal to LIBOR plus 1.28% per annum and matures on July 19, 2025. A subsidiary of the joint venture entered into interest rate swap contracts with notional amounts aggregating $300.0 million through April 1, 2025, resulting in a fixed rate of approximately 4.063% per annum through the expiration of the interest rate swap contracts.

(4)The loan bears interest at a variable rate equal to (1) the greater of (x) LIBOR or (y) 0.50%, plus (2) 2.30% per annum and matures on November 10, 2025, with one, one-year extension option, subject to certain conditions.

(5)The loan bears interest at a variable rate equal to (1) the greater of (x) LIBOR or (y) 0.50%, plus (2) 2.50% per annum and matures on November 16, 2021.

(6)The loan bears interest at a variable rate equal to LIBOR plus 2.35% per annum and matures on March 25, 2021.

(7)The construction financing has a borrowing capacity of $250.0 million. The construction financing bears interest at a variable rate equal to (1) the greater of (x) LIBOR or (y) 0.25%, plus (2) 2.85% per annum and matures on December 18, 2023.

(8)The construction financing had a borrowing capacity of $204.6 million. On September 16, 2019, the joint venture paid down the construction loan principal balance in the amount of approximately $28.8 million, reducing the borrowing capacity to $175.8 million. The construction financing bears interest at a variable rate equal to LIBOR plus 2.25% per annum and matures on September 6, 2021, with two, one-year extension options, subject to certain conditions.

(9)The construction financing has a borrowing capacity of $180.0 million. The construction financing bears interest at a variable rate equal to LIBOR plus 2.00% per annum and matures on April 19, 2022, with two, one-year extension options, subject to certain conditions.

(10)The construction financing has a borrowing capacity of $400.0 million. The construction financing bears interest at a variable rate equal to LIBOR plus 1.50% per annum (LIBOR plus 1.375% per annum upon

stabilization, as defined in the loan agreement) and matures on September 5, 2023, with two, one-year extension options, subject to certain conditions.

(11)The construction financing has a borrowing capacity of $255.0 million. The construction financing bears interest at a variable rate equal to LIBOR plus 1.25% per annum and matures on April 26, 2023, with two, one-year extension options, subject to certain conditions.

(12)We provided $80.0 million of mortgage financing to the joint venture. The loan bears interest at a variable rate equal to LIBOR plus 3.50% per annum and matures on July 13, 2023, with extension options, subject to certain conditions. The loan has been reflected as Related Party Note Receivable, Net on our Consolidated Balance Sheets.

(13)The loan bears interest at a variable rate equal to (1) the greater of (x) LIBOR or (y) 0.65%, plus (2) 4.75% per annum and matures on July 7, 2022 with two, one-year extension options, subject to certain conditions. The joint venture entered into an interest rate cap agreement with a financial institution to limit its exposure to increases in the LIBOR rate at a cap of 3.00% per annum on a notional amount of $325.0 million through July 7, 2022.

Off-Balance Sheet Arrangements—Joint Venture Contractual Obligations

As of December 31, 2020, we were subject to contractual payment obligations as described in the table below. The table represents our share of the contractual obligations.

						Payments Due by Period
						Total						2021						2022						2023						2024						2025						Thereafter
						(in thousands)
Contractual Obligations:
Operating leases (1)						$	97,051					$	587					$	838					$	849					$	861					$	896					$	93,020
Tenant obligations (2)						21,724						11,094						6,098						—						—						—						4,532
Construction contracts on development projects						181,357						100,678						43,164						1,421						36,094						—						—
Finance leases (3)						270,366						9,945						9,945						10,894						10,980						10,980						217,622
Total Contractual Obligations						$	570,498					$	122,304					$	60,045					$	13,164					$	47,935					$	11,876					$	315,174

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(1)Operating leases include approximately $61.7 million related to renewal options that the joint venture is reasonably certain it will exercise.

(2)Committed tenant-related obligations based on executed leases as of December 31, 2020 (tenant improvements and lease commissions).

(3)Finance leases include approximately $194.7 million related to a purchase option that the joint venture is reasonably certain it will exercise in 2028.

New Accounting Pronouncements

For a discussion of the new accounting pronouncements that may have an effect on our Consolidated Financial Statements (See Note 2 to the Consolidated Financial Statements).

Inflation

Most of our leases provide for separate real estate tax and operating expense escalations over a base amount. In addition, many of our leases provide for fixed base rent increases or indexed increases. We believe that inflationary increases in costs may be at least partially offset by the contractual rent increases and operating expense escalations.