Item 8. Financial Statements and Supplementary Data.

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Item 8. Financial Statements and Supplementary Data.

BOSTON PROPERTIES, INC. AND BOSTON PROPERTIES LIMITED PARTNERSHIP

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



		Page

Boston Properties, Inc.
	Management’s Report on Internal Control over Financial Reporting	112
	Report of Independent Registered Public Accounting Firm	113
	Consolidated Balance Sheets as of December 31, 2020 and 2019	116
	Consolidated Statements of Operations for the years ended December 31, 2020, 2019 and 2018	118
	Consolidated Statements of Comprehensive Income for the years ended December 31, 2020, 2019 and 2018	119
	Consolidated Statements of Equity for the years ended December 31, 2020, 2019 and 2018	120
	Consolidated Statements of Cash Flows for the years ended December 31, 2020, 2019 and 2018	122

Boston Properties Limited Partnership
	Management’s Report on Internal Control over Financial Reporting	125
	Report of Independent Registered Public Accounting Firm	126
	Consolidated Balance Sheets as of December 31, 2020 and 2019	129
	Consolidated Statements of Operations for the years ended December 31, 2020, 2019 and 2018	131
	Consolidated Statements of Comprehensive Income for the years ended December 31, 2020, 2019 and 2018	132
	Consolidated Statements of Capital and Noncontrolling Interests for the years ended December 31, 2020, 2019 and 2018	133
	Consolidated Statements of Cash Flows for the years ended December 31, 2020, 2019 and 2018	135

	Notes to Consolidated Financial Statements	138

Boston Properties, Inc.
	Financial Statement Schedule—Schedule 3 - Real Estate Investments and Accumulated Depreciation as of December 31, 2020	185

Boston Properties Limited Partnership
	Financial Statement Schedule—Schedule 3 - Real Estate Investments and Accumulated Depreciation as of December 31, 2020	190

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

Management’s Report on Internal Control over

Financial Reporting

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

As of the end of Boston Properties, Inc.’s 2020 fiscal year, management conducted assessments of the effectiveness of Boston Properties, Inc.’s internal control over financial reporting based on the framework established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on these assessments, management has determined that Boston Properties, Inc.’s internal control over financial reporting as of December 31, 2020 was effective.

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

The effectiveness of Boston Properties, Inc.’s internal control over financial reporting as of December 31, 2020 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in its report appearing on page 113, which expresses an unqualified opinion on the effectiveness of Boston Properties, Inc.’s internal control over financial reporting as of December 31, 2020.

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of Boston Properties, Inc.

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Boston Properties, Inc. and its subsidiaries (the “Company”) as of December 31, 2020 and 2019, and the related consolidated statements of operations, of comprehensive income, of equity and of cash flows for each of the three years in the period ended December 31, 2020, including the related notes and financial statement schedule listed in the accompanying index (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Impairment Assessments of Long-Lived Assets and Investments in Unconsolidated Joint Ventures

As described in Notes 2, 3 and 6 to the consolidated financial statements, the Company’s total real estate balance was $17,818.8 million and its investments in unconsolidated joint ventures was $1,273.9 million as of December 31, 2020. During 2020, the Company did not recognize an impairment loss related to its long-lived assets and recognized a $60.5 million other-than-temporary-impairment loss related to an investment in unconsolidated joint venture. 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. Management reviews its unconsolidated joint ventures for indicators of impairment on a quarterly basis and records 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. The Company will record an impairment charge if it determines 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.

The principal considerations for our determination that performing procedures relating to the impairment assessments of long-lived assets and investments in unconsolidated joint ventures is a critical audit matter are (i) the significant judgment by management in identifying the indicators of impairment for long lived assets, which in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating evidence related to identifying the indicators of impairment for long-lived assets; (ii) the significant judgment by management in identifying the indicators of impairment for investments in unconsolidated joint ventures, which in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating evidence related to the indicators of impairment for investments in unconsolidated joint ventures; (iii) the significant judgment by management when developing the fair value measurement of the investments in unconsolidated joint ventures relating to potential other-than-temporary impairments, which in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating management’s assumptions related to future occupancy, future rental rates, future capital requirements, discount rate and capitalization rate; and, (iv) the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to (i) the identification of the indicators of impairment for long-lived assets, (ii) the identification of the indicators of impairment for investments in unconsolidated joint ventures, and (iii) developing the fair value measurement of the investments in unconsolidated joint ventures in the evaluation of potential other-than-temporary impairments. For the long-lived assets, the procedures included, among others, evaluating the reasonableness of management’s assessment of the indicators of impairment for long lived assets by considering the anticipated hold period, market economic conditions, operating performance of the asset, or evidence obtained in other areas of the audit that may be indicative of an indicator of impairment of the long-lived assets. For the investments in unconsolidated joint ventures, the procedures, included, among others, (i) evaluating the reasonableness of

management’s identification of changes in the performance of each investment and market conditions indicating that there may be a decline in the fair values of the investments in unconsolidated joint ventures below the carrying amounts has occurred and such decline is other-than-temporary by considering changes in the performance of the investments and market conditions, or evidence obtained in other areas of the audit and (ii) evaluating the reasonableness of aforementioned assumptions, by consideration of the past performance of the investment in unconsolidated joint ventures and whether the assumptions were consistent with evidence obtained in other areas of the audit. Professionals with specialized skill and knowledge were used to assist in the evaluation the appropriateness of the discounted cash flow model and reasonableness of the assumptions.

/s/ PricewaterhouseCoopers LLP

Boston, Massachusetts

February 26, 2021

We have served as the Company’s auditor since 1997.


BOSTON PROPERTIES, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except for share and par value amounts)
	December 31, 2020		December 31, 2019
ASSETS
Real estate, at cost (amounts related to variable interest entities (“VIEs”) of $6,592,019 and $6,497,031 at December 31, 2020 and December 31, 2019, respectively)	$	22,969,110	$	22,502,976
Right of use assets - finance leases (amounts related to VIEs of $21,000 and $21,000 at December 31, 2020 and December 31, 2019, respectively)	237,393		237,394
Right of use assets - operating leases	146,406		148,640
Less: accumulated depreciation (amounts related to VIEs of $(1,158,548) and $(1,058,495) at December 31, 2020 and December 31, 2019, respectively)	(5,534,102)		(5,266,798)
Total real estate	17,818,807		17,622,212
Cash and cash equivalents (amounts related to VIEs of $340,642 and $280,033 at December 31, 2020 and December 31, 2019, respectively)	1,668,742		644,950
Cash held in escrows	50,587		46,936
Investments in securities	39,457		36,747
Tenant and other receivables, net (amounts related to VIEs of $10,911 and $28,918 at December 31, 2020 and December 31, 2019, respectively)	77,411		112,807
Related party note receivable, net	77,552		80,000
Notes receivable, net	18,729		15,920
Accrued rental income, net (amounts related to VIEs of $336,594 and $298,318 at December 31, 2020 and December 31, 2019, respectively)	1,122,502		1,038,788
Deferred charges, net (amounts related to VIEs of $183,306 and $214,769 at December 31, 2020 and December 31, 2019, respectively)	640,085		689,213
Prepaid expenses and other assets (amounts related to VIEs of $13,137 and $20,931 at December 31, 2020 and December 31, 2019, respectively)	33,840		41,685
Investments in unconsolidated joint ventures	1,310,478		955,647
Total assets	$	22,858,190	$	21,284,905
LIABILITIES AND EQUITY
Liabilities:
Mortgage notes payable, net (amounts related to VIEs of $2,907,590 and $2,918,806 at December 31, 2020 and December 31, 2019, respectively)	$	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
Lease liabilities - finance leases (amounts related to VIEs of $20,306 and $20,189 at December 31, 2020 and December 31, 2019, respectively)	236,492		224,042
Lease liabilities - operating leases	201,713		200,180
Accounts payable and accrued expenses (amounts related to VIEs of $23,128 and $45,777 at December 31, 2020 and December 31, 2019, respectively)	336,264		377,553
Dividends and distributions payable	171,082		170,713
Accrued interest payable	106,288		90,016
Other liabilities (amounts related to VIEs of $158,805 and $140,110 at December 31, 2020 and December 31, 2019, respectively)	412,084		387,994
Total liabilities	14,511,681		13,262,304
Commitments and contingencies (See Note 10)
Redeemable deferred stock units— 72,966 and 60,676 units outstanding at redemption value at December 31, 2020 and December 31, 2019, respectively	6,897		8,365


BOSTON PROPERTIES, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except for share and par value amounts)
	December 31, 2020		December 31, 2019
Equity:
Stockholders’ equity attributable to Boston Properties, Inc.:
Excess stock, $0.01 par value, 150,000,000 shares authorized, none issued or outstanding	—		—
Preferred stock, $0.01 par value, 50,000,000 shares authorized;
5.25% Series B cumulative redeemable preferred stock, $0.01 par value, liquidation preference $2,500 per share, 92,000 shares authorized, 80,000 shares issued and outstanding at December 31, 2020 and December 31, 2019	200,000		200,000
Common stock, $0.01 par value, 250,000,000 shares authorized, 155,797,725 and 154,869,198 issued and 155,718,825 and 154,790,298 outstanding at December 31, 2020 and December 31, 2019, respectively	1,557		1,548
Additional paid-in capital	6,356,791		6,294,719
Dividends in excess of earnings	(509,653)		(760,523)
Treasury common stock at cost, 78,900 shares at December 31, 2020 and December 31, 2019	(2,722)		(2,722)
Accumulated other comprehensive loss	(49,890)		(48,335)
Total stockholders’ equity attributable to Boston Properties, Inc.	5,996,083		5,684,687
Noncontrolling interests:
Common units of Boston Properties Limited Partnership	616,596		600,860
Property partnerships	1,726,933		1,728,689
Total equity	8,339,612		8,014,236
Total liabilities and equity	$	22,858,190	$	21,284,905

The accompanying notes are an integral part of these consolidated financial statements.

BOSTON PROPERTIES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except for per share amounts)


	Year ended December 31,
		2020		2019		2018
Revenue
Lease		$	2,646,261	$	2,758,014	$	—
Base rent		—		—		2,103,723
Recoveries from tenants		—		—		402,066
Parking and other		70,680		103,534		107,421
Hotel		7,478		48,589		49,118
Development and management services		29,641		40,039		45,158
Direct reimbursements of payroll and related costs from management services contracts		11,626		10,386		9,590
Total revenue		2,765,686		2,960,562		2,717,076
Expenses
Operating
Rental		1,017,208		1,050,010		979,151
Hotel		13,136		34,004		33,863
General and administrative		133,112		140,777		121,722
Payroll and related costs from management services contracts		11,626		10,386		9,590
Transaction costs		1,531		1,984		1,604
Depreciation and amortization		683,751		677,764		645,649
Total expenses		1,860,364		1,914,925		1,791,579
Other income (expense)
Income (loss) from unconsolidated joint ventures		(85,110)		46,592		2,222
Gains on sales of real estate		618,982		709		182,356
Interest and other income (loss)		5,953		18,939		10,823
Gains (losses) from investments in securities		5,261		6,417		(1,865)
Impairment loss		—		(24,038)		(11,812)
Loss from early extinguishment of debt		—		(29,540)		(16,490)
Interest expense		(431,717)		(412,717)		(378,168)
Net income		1,018,691		651,999		712,563
Net income attributable to noncontrolling interests
Noncontrolling interests in property partnerships		(48,260)		(71,120)		(62,909)
Noncontrolling interest—common units of the Operating Partnership		(97,704)		(59,345)		(66,807)
Net income attributable to Boston Properties, Inc.		872,727		521,534		582,847
Preferred dividends		(10,500)		(10,500)		(10,500)
Net income attributable to Boston Properties, Inc. common shareholders		$	862,227	$	511,034	$	572,347
Basic earnings per common share attributable to Boston Properties, Inc. common shareholders:
Net income		$	5.54	$	3.31	$	3.71
Weighted average number of common shares outstanding		155,432		154,582		154,427
Diluted earnings per common share attributable to Boston Properties, Inc. common shareholders:
Net income		$	5.54	$	3.30	$	3.70
Weighted average number of common and common equivalent shares outstanding		155,517		154,883		154,682

The accompanying notes are an integral part of these consolidated financial statements.

BOSTON PROPERTIES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)


	Year ended December 31,
		2020		2019		2018
Net income		$	1,018,691	$	651,999	$	712,563
Other comprehensive income (loss):
Effective portion of interest rate contracts		(7,848)		(6,751)		(3,096)
Amortization of interest rate contracts (1)		6,697		6,664		6,664
Other comprehensive income (loss)		(1,151)		(87)		3,568
Comprehensive income		1,017,540		651,912		716,131
Net income attributable to noncontrolling interests		(145,964)		(130,465)		(129,716)
Other comprehensive income attributable to noncontrolling interests		(404)		(507)		(880)
Comprehensive income attributable to Boston Properties, Inc.		$	871,172	$	520,940	$	585,535

(1)Amounts reclassified from comprehensive income primarily to interest expense within Boston Properties, Inc.’s Consolidated Statements of Operations.

The accompanying notes are an integral part of these consolidated financial statements.


BOSTON PROPERTIES, INC. CONSOLIDATED STATEMENTS OF EQUITY (in thousands)
	Common Stock			Preferred Stock		Additional Paid-in Capital		Dividends in Excess of Earnings		Treasury Stock, at cost		Accumulated Other Comprehensive Loss		Noncontrolling Interests - Common Units		Noncontrolling Interests - Property Partnerships		Total
	Shares	Amount
Equity, December 31, 2017	154,325	$	1,543	$	200,000	$	6,377,908	$	(712,343)	$	(2,722)	$	(50,429)	$	604,739	$	1,683,760	$	8,102,456
Cumulative effect of a change in accounting principle	—	—		—		—		4,933		—		—		563		—		5,496
Redemption of operating partnership units to common stock	83	2		—		2,878		—		—		—		(2,880)		—		—
Allocated net income for the year	—	—		—		—		582,847		—		—		66,807		62,909		712,563
Dividends/distributions declared	—	—		—		—		(550,971)		—		—		(62,731)		—		(613,702)
Shares issued pursuant to stock purchase plan	6	—		—		797		—		—		—		—		—		797
Net activity from stock option and incentive plan	44	—		—		1,729		—		—		—		36,861		—		38,590
Contributions from noncontrolling interests in property partnerships	—	—		—		—		—		—		—		—		46,701		46,701
Distributions to noncontrolling interests in property partnerships	—	—		—		—		—		—		—		—		(82,501)		(82,501)
Effective portion of interest rate contracts	—	—		—		—		—		—		(2,781)		(315)		—		(3,096)
Amortization of interest rate contracts	—	—		—		—		—		—		5,469		619		576		6,664
Reallocation of noncontrolling interest	—	—		—		24,311		—		—		—		(24,311)		—		—
Equity, December 31, 2018	154,458	1,545		200,000		6,407,623		(675,534)		(2,722)		(47,741)		619,352		1,711,445		8,213,968
Cumulative effect of a change in accounting principle	—	—		—		—		(3,864)		—		—		(445)		(70)		(4,379)
Redemption of operating partnership units to common stock	145	2		—		4,883		—		—		—		(4,885)		—		—
Allocated net income for the period	—	—		—		—		521,534		—		—		59,345		71,120		651,999
Dividends/distributions declared	—	—		—		—		(602,659)		—		—		(69,234)		—		(671,893)
Shares issued pursuant to stock purchase plan	6	—		—		688		—		—		—		—		—		688
Net activity from stock option and incentive plan	181	1		—		8,771		—		—		—		36,228		—		45,000
Sale of an interest in property partnerships	—	—		—		(4,216)		—		—		—		—		4,216		—
Acquisition of noncontrolling interest in property partnerships	—	—		—		(162,462)		—		—		—		—		(24,501)		(186,963)
Contributions from noncontrolling interests in property partnerships	—	—		—		—		—		—		—		—		35,816		35,816
Distributions to noncontrolling interests in property partnerships	—	—		—		—		—		—		—		—		(69,913)		(69,913)
Effective portion of interest rate contracts	—	—		—		—		—		—		(6,060)		(691)		—		(6,751)
Amortization of interest rate contracts	—	—		—		—		—		—		5,466		622		576		6,664
Reallocation of noncontrolling interest	—	—		—		39,432		—		—		—		(39,432)		—		—
Equity, December 31, 2019	154,790	1,548		200,000		6,294,719		(760,523)		(2,722)		(48,335)		600,860		1,728,689		8,014,236


BOSTON PROPERTIES, INC. CONSOLIDATED STATEMENTS OF EQUITY (in thousands)
	Common Stock			Preferred Stock		Additional Paid-in Capital		Dividends in Excess of Earnings		Treasury Stock, at cost		Accumulated Other Comprehensive Loss		Noncontrolling Interests - Common Units		Noncontrolling Interests - Property Partnerships		Total
	Shares	Amount
Cumulative effect of a change in accounting principle	—	—		—		—		(1,505)		—		—		(174)		—		(1,679)
Redemption of operating partnership units to common stock	857	9		—		29,689		—		—		—		(29,698)		—		—
Allocated net income for the period	—	—		—		—		872,727		—		—		97,704		48,260		1,018,691
Dividends/distributions declared	—	—		—		—		(620,352)		—		—		(68,921)		—		(689,273)
Shares issued pursuant to stock purchase plan	7	—		—		759		—		—		—		—		—		759
Net activity from stock option and incentive plan	65	—		—		9,303		—		—		—		39,318		—		48,621
Contributions from noncontrolling interests in property partnerships	—	—		—		—		—		—		—		—		8,219		8,219
Distributions to noncontrolling interests in property partnerships	—	—		—		—		—		—		—		—		(58,811)		(58,811)
Effective portion of interest rate contracts	—	—		—		—		—		—		(7,066)		(782)		—		(7,848)
Amortization of interest rate contracts	—	—		—		—		—		—		5,511		610		576		6,697
Reallocation of noncontrolling interest	—	—		—		22,321		—		—		—		(22,321)		—		—
Equity, December 31, 2020	155,719	$	1,557	$	200,000	$	6,356,791	$	(509,653)	$	(2,722)	$	(49,890)	$	616,596	$	1,726,933	$	8,339,612

The accompanying notes are an integral part of these consolidated financial statements.


BOSTON PROPERTIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
	Year ended December 31,
	2020		2019		2018
Cash flows from operating activities:
Net income	$	1,018,691	$	651,999	$	712,563
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	683,751		677,764		645,649
Amortization of right of use assets - operating leases	2,234		2,412		—
Impairment losses	—		24,038		11,812
Non-cash compensation expense	44,142		40,958		40,117
Loss (income) from unconsolidated joint ventures	85,110		(46,592)		(2,222)
Distributions of net cash flow from operations of unconsolidated joint ventures	31,892		17,155		6,703
(Gains) losses from investments in securities	(5,261)		(6,417)		1,865
Allowance for current expected credit losses	1,849		—		—
Non-cash portion of interest expense	23,384		22,254		21,303
Settlement of accreted debt discount on redemption of unsecured senior notes	—		(763)		(483)
Losses from early extinguishments of debt	—		29,540		16,490
Gains on sales of real estate	(618,982)		(709)		(182,356)
Change in assets and liabilities:
Tenant and other receivables, net	22,550		(24,876)		29,204
Notes receivable, net	(19)		4		(13)
Accrued rental income, net	(97,099)		(56,817)		(43,662)
Prepaid expenses and other assets	12,488		2,965		12,472
Lease liabilities - finance leases	568		—		—
Lease liabilities - operating leases	1,533		1,616		—
Accounts payable and accrued expenses	(4,059)		12,627		1,353
Accrued interest payable	16,211		858		5,237
Other liabilities	17,629		(49,569)		4,955
Tenant leasing costs	(79,772)		(117,282)		(130,742)
Total adjustments	138,149		529,166		437,682
Net cash provided by operating activities	1,156,840		1,181,165		1,150,245
Cash flows from investing activities:
Acquisitions of real estate	(137,976)		(149,031)		—
Construction in progress	(482,507)		(546,060)		(694,791)
Building and other capital improvements	(160,126)		(180,556)		(189,771)
Tenant improvements	(234,423)		(251,831)		(210,034)
Right of use assets - finance leases	—		(5,152)		—
Proceeds from sales of real estate	519,303		90,824		455,409
Capital contributions to unconsolidated joint ventures	(172,436)		(87,392)		(345,717)
Capital distributions from unconsolidated joint ventures	55,298		136,807		—
Cash and cash equivalents deconsolidated	—		(24,112)		—
Deposit on capital lease	—		—		(13,615)
Issuance of related party note receivable	—		—		(80,000)


BOSTON PROPERTIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
	Year ended December 31,
	2020		2019		2018
Issuance of notes receivable, net	(9,800)		—		(19,455)
Proceeds from notes receivable	6,397		3,544		—
Investments in securities, net	2,551		(2,132)		(902)
Net cash used in investing activities	(613,719)		(1,015,091)		(1,098,876)


Cash flows from financing activities:
Repayments of mortgage notes payable	(17,168)		(46,173)		(18,634)
Proceeds from unsecured senior notes	1,248,125		1,548,106		996,410
Redemption of unsecured senior notes	—		(699,237)		(699,517)
Borrowings on unsecured line of credit	265,000		380,000		745,000
Repayments of unsecured line of credit	(265,000)		(380,000)		(790,000)
Proceeds from unsecured term loan	—		—		500,000
Payments on finance lease obligations	—		(502)		—
Payments on capital lease obligations	—		—		(1,353)
Payments on real estate financing transactions	—		—		(960)
Deferred financing costs	(10,416)		(13,213)		(8,362)
Debt prepayment and extinguishment costs	—		(28,716)		(15,973)
Net proceeds from equity transactions	3,277		13,710		(730)
Dividends and distributions	(688,904)		(666,294)		(587,628)
Contributions from noncontrolling interests in property partnerships	8,219		35,816		46,701
Distributions to noncontrolling interests in property partnerships	(58,811)		(69,913)		(82,501)
Acquisition of noncontrolling interests in property partnership	—		(186,963)		—
Net cash provided by (used in) financing activities	484,322		(113,379)		82,453
Net increase in cash and cash equivalents and cash held in escrows	1,027,443		52,695		133,822
Cash and cash equivalents and cash held in escrows, beginning of period	691,886		639,191		505,369
Cash and cash equivalents and cash held in escrows, end of period	$	1,719,329	$	691,886	$	639,191

Reconciliation of cash and cash equivalents and cash held in escrows:
Cash and cash equivalents, beginning of period	$	644,950	$	543,359	$	434,767
Cash held in escrows, beginning of period	46,936		95,832		70,602
Cash and cash equivalents and cash held in escrows, beginning of period	$	691,886	$	639,191	$	505,369

Cash and cash equivalents, end of period	$	1,668,742	$	644,950	$	543,359
Cash held in escrows, end of period	50,587		46,936		95,832
Cash and cash equivalents and cash held in escrows, end of period	$	1,719,329	$	691,886	$	639,191

Supplemental disclosures:
Cash paid for interest	$	433,492	$	439,059	$	416,019
Interest capitalized	$	53,881	$	54,911	$	65,766

Non-cash investing and financing activities:
Write-off of fully depreciated real estate	$	(99,494)	$	(129,831)	$	(135,431)
Change in real estate included in accounts payable and accrued expenses	$	(19,848)	$	89,245	$	(44,866)
Real estate acquired through capital lease	$	—	$	—	$	12,397
Right of use assets obtained in exchange for lease liabilities	$	—	$	287,540	$	—


BOSTON PROPERTIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
	Year ended December 31,
	2020		2019		2018
Prepaid rent reclassified to right of use asset	$	—	$	15,000	$	—
Accrued rental income, net deconsolidated	$	(4,558)	$	—	$	—
Tenant leasing costs, net deconsolidated	$	(3,462)	$	—	$	—
Building and other capital improvements, net deconsolidated	$	(111,889)	$	(12,767)	$	—
Tenant improvements, net deconsolidated	$	(12,331)	$	—	$	—
Right of use asset - finance lease deconsolidated	$	—	$	(135,004)	$	—
Lease liability - finance lease deconsolidated	$	—	$	119,534	$	—
Investment in unconsolidated joint venture recorded upon deconsolidation	$	347,898	$	29,246	$	—
Dividends and distributions declared but not paid	$	171,082	$	170,713	$	165,114
Conversions of noncontrolling interests to stockholders’ equity	$	29,698	$	4,885	$	2,880
Issuance of restricted securities to employees and non-employee directors	$	42,607	$	37,622	$	37,052

The accompanying notes are an integral part of these consolidated financial statements.

Management’s Report on Internal Control over

Financial Reporting

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

As of the end of Boston Properties Limited Partnership’s 2020 fiscal year, management conducted assessments of the effectiveness of Boston Properties Limited Partnership’s internal control over financial reporting based on the framework established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on these assessments, management has determined that Boston Properties Limited Partnership’s internal control over financial reporting as of December 31, 2020 was effective.

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

The effectiveness of Boston Properties Limited Partnership’s internal control over financial reporting as of December 31, 2020 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in its report appearing on page 126, which expresses an unqualified opinion on the effectiveness of Boston Properties Limited Partnership’s internal control over financial reporting as of December 31, 2020.

Report of Independent Registered Public Accounting Firm

To the Partners of Boston Properties Limited Partnership

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Boston Properties Limited Partnership and its subsidiaries (the “Partnership”) as of December 31, 2020 and 2019, and the related consolidated statements of operations, of comprehensive income, of capital and noncontrolling interests and of cash flows for each of the three years in the period ended December 31, 2020, including the related notes and financial statement schedule listed in the accompanying index (collectively referred to as the “consolidated financial statements”). We also have audited the Partnership's internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Partnership as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Partnership maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Basis for Opinions

The Partnership's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express opinions on the Partnership’s consolidated financial statements and on the Partnership's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Partnership in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

Definition and Limitations of Internal Control over Financial Reporting

assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Critical Audit Matters

Impairment Assessments of Long-Lived Assets and Investments in Unconsolidated Joint Ventures

As described in Notes 2, 3 and 6 to the consolidated financial statements, the Partnership’s total real estate balance was $17,547.5 million and its investments in unconsolidated joint ventures was $1,273.9 million as of December 31, 2020. During 2020, the Partnership did not recognize an impairment loss related to its long-lived assets and recognized a $60.5 million other-than-temporary-impairment loss related to an investment in unconsolidated joint venture. 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. Management reviews its unconsolidated joint ventures for indicators of impairment on a quarterly basis and records 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. The Partnership will record an impairment charge if it determines 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.

period, market economic conditions, operating performance of the asset, or evidence obtained in other areas of the audit that may be indicative of an indicator of impairment of the long-lived assets. For the investments in unconsolidated joint ventures, the procedures, included, among others, (i) evaluating the reasonableness of management’s identification of changes in the performance of each investment and market conditions indicating that there may be a decline in the fair values of the investments in unconsolidated joint ventures below the carrying amounts has occurred and such decline is other-than-temporary by considering changes in the performance of the investments and market conditions, or evidence obtained in other areas of the audit and (ii) evaluating the reasonableness of aforementioned assumptions, by consideration of the past performance of the investment in unconsolidated joint ventures and whether the assumptions were consistent with evidence obtained in other areas of the audit. Professionals with specialized skill and knowledge were used to assist in the evaluation the appropriateness of the discounted cash flow model and reasonableness of the assumptions.

/s/ PricewaterhouseCoopers LLP

Boston, Massachusetts

February 26, 2021

We have served as the Partnership’s auditor since 1997.


BOSTON PROPERTIES LIMITED PARTNERSHIP CONSOLIDATED BALANCE SHEETS (in thousands, except for unit amounts)
	December 31, 2020		December 31, 2019
ASSETS
Real estate, at cost (amounts related to variable interest entities (“VIEs”) of $6,592,019 and $6,497,031 at December 31, 2020 and December 31, 2019, respectively)	$	22,592,301	$	22,107,755
Right of use assets - finance leases (amounts related to VIEs of $21,000 and $21,000 at December 31, 2020 and December 31, 2019, respectively)	237,393		237,394
Right of use assets - operating leases	146,406		148,640
Less: accumulated depreciation (amounts related to VIEs of $(1,158,548) and $(1,058,495) at December 31, 2020 and December 31, 2019, respectively)	(5,428,576)		(5,162,908)
Total real estate	17,547,524		17,330,881
Cash and cash equivalents (amounts related to VIEs of $340,642 and $280,033 at December 31, 2020 and December 31, 2019, respectively)	1,668,742		644,950
Cash held in escrows	50,587		46,936
Investments in securities	39,457		36,747
Tenant and other receivables, net (amounts related to VIEs of $10,911 and $28,918 at December 31, 2020 and December 31, 2019, respectively)	77,411		112,807
Related party note receivable, net	77,552		80,000
Notes receivable, net	18,729		15,920
Accrued rental income, net (amounts related to VIEs of $336,594 and $298,318 at December 31, 2020 and December 31, 2019, respectively)	1,122,502		1,038,788
Deferred charges, net (amounts related to VIEs of $183,306 and $214,769 at December 31, 2020 and December 31, 2019, respectively)	640,085		689,213
Prepaid expenses and other assets (amounts related to VIEs of $13,137 and $20,931 at December 31, 2020 and December 31, 2019, respectively)	33,840		41,685
Investments in unconsolidated joint ventures	1,310,478		955,647
Total assets	$	22,586,907	$	20,993,574
LIABILITIES AND CAPITAL
Liabilities:
Mortgage notes payable, net (amounts related to VIEs of $2,907,590 and $2,918,806 at December 31, 2020 and December 31, 2019, respectively)	$	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
Lease liabilities - finance leases (amounts related to VIEs of $20,306 and $20,189 at December 31, 2020 and December 31, 2019, respectively)	236,492		224,042
Lease liabilities - operating leases	201,713		200,180
Accounts payable and accrued expenses (amounts related to VIEs of $23,128 and $45,777 at December 31, 2020 and December 31, 2019, respectively)	336,264		377,553
Dividends and distributions payable	171,082		170,713
Accrued interest payable	106,288		90,016
Other liabilities (amounts related to VIEs of $158,805 and $140,110 at December 31, 2020 and December 31, 2019, respectively)	412,084		387,994
Total liabilities	14,511,681		13,262,304
Commitments and contingencies (See Note 10)
Redeemable deferred stock units— 72,966 and 60,676 units outstanding at redemption value at December 31, 2020 and December 31, 2019, respectively	6,897		8,365


BOSTON PROPERTIES LIMITED PARTNERSHIP CONSOLIDATED BALANCE SHEETS (in thousands, except for unit amounts)
	December 31, 2020		December 31, 2019
Noncontrolling interests:
Redeemable partnership units— 16,037,121 and 16,764,466 common units and 1,336,115 and 1,143,215 long term incentive units outstanding at redemption value at December 31, 2020 and December 31, 2019, respectively	1,643,024		2,468,753
Capital:
5.25% Series B cumulative redeemable preferred units, liquidation preference $2,500 per unit, 80,000 units issued and outstanding at December 31, 2020 and December 31, 2019	193,623		193,623
Boston Properties Limited Partnership partners’ capital— 1,730,921 and 1,726,980 general partner units and 153,987,904 and 153,063,318 limited partner units outstanding at December 31, 2020 and December 31, 2019, respectively	4,554,639		3,380,175
Accumulated other comprehensive loss	(49,890)		(48,335)
Total partners’ capital	4,698,372		3,525,463
Noncontrolling interests in property partnerships	1,726,933		1,728,689
Total capital	6,425,305		5,254,152
Total liabilities and capital	$	22,586,907	$	20,993,574

The accompanying notes are an integral part of these consolidated financial statements.

BOSTON PROPERTIES LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except for per unit amounts)


	Year ended December 31,
		2020		2019		2018
Revenue
Lease		$	2,646,261	$	2,758,014	$	—
Base rent		—		—		2,103,723
Recoveries from tenants		—		—		402,066
Parking and other		70,680		103,534		107,421
Hotel		7,478		48,589		49,118
Development and management services		29,641		40,039		45,158
Direct reimbursements of payroll and related costs from management services contracts		11,626		10,386		9,590
Total revenue		2,765,686		2,960,562		2,717,076
Expenses
Operating
Rental		1,017,208		1,050,010		979,151
Hotel		13,136		34,004		33,863
General and administrative		133,112		140,777		121,722
Payroll and related costs from management services contracts		11,626		10,386		9,590
Transaction costs		1,531		1,984		1,604
Depreciation and amortization		676,666		669,956		637,891
Total expenses		1,853,279		1,907,117		1,783,821
Other income (expense)
Income (loss) from unconsolidated joint ventures		(85,110)		46,592		2,222
Gains on sales of real estate		631,945		858		190,716
Interest and other income (loss)		5,953		18,939		10,823
Gains (losses) from investments in securities		5,261		6,417		(1,865)
Impairment loss		—		(22,272)		(10,181)
Loss from early extinguishment of debt		—		(29,540)		(16,490)
Interest expense		(431,717)		(412,717)		(378,168)
Net income		1,038,739		661,722		730,312
Net income attributable to noncontrolling interests
Noncontrolling interests in property partnerships		(48,260)		(71,120)		(62,909)
Net income attributable to Boston Properties Limited Partnership		990,479		590,602		667,403
Preferred distributions		(10,500)		(10,500)		(10,500)
Net income attributable to Boston Properties Limited Partnership common unitholders		$	979,979	$	580,102	$	656,903
Basic earnings per common unit attributable to Boston Properties Limited Partnership
Net income		$	5.67	$	3.37	$	3.82
Weighted average number of common units outstanding		172,643		172,200		171,912
Diluted earnings per common unit attributable to Boston Properties Limited Partnership
Net income		$	5.67	$	3.36	$	3.81
Weighted average number of common and common equivalent units outstanding		172,728		172,501		172,167

The accompanying notes are an integral part of these consolidated financial statements.

BOSTON PROPERTIES LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)


	Year ended December 31,
		2020		2019		2018
Net income		$	1,038,739	$	661,722	$	730,312
Other comprehensive income (loss):
Effective portion of interest rate contracts		(7,848)		(6,751)		(3,096)
Amortization of interest rate contracts (1)		6,697		6,664		6,664
Other comprehensive income (loss)		(1,151)		(87)		3,568
Comprehensive income		1,037,588		661,635		733,880
Comprehensive income attributable to noncontrolling interests		(48,836)		(71,696)		(63,485)
Comprehensive income attributable to Boston Properties Limited Partnership		$	988,752	$	589,939	$	670,395

(1)Amounts reclassified from comprehensive income primarily to interest expense within Boston Properties Limited Partnership’s Consolidated Statements of Operations.

The accompanying notes are an integral part of these consolidated financial statements.


BOSTON PROPERTIES LIMITED PARTNERSHIP CONSOLIDATED STATEMENTS OF CAPITAL AND NONCONTROLLING INTERESTS (in thousands)
	Units		Capital
	General Partner	Limited Partner	Partners’ Capital (General and Limited Partners)		Preferred Units		Accumulated Other Comprehensive Loss		Noncontrolling Interests - Property Partnerships		Total Capital		Noncontrolling Interests - Redeemable Partnership Units

Equity, December 31, 2017	1,720	152,606	$	3,664,436	$	193,623	$	(50,429)	$	1,683,760	$	5,491,390	$	2,292,263
Cumulative effect of a change in accounting principle	—	—	4,933		—		—		—		4,933		563
Contributions	1	49	1,642		—		—		—		1,642		34,680
Allocated net income for the period	—	—	590,096		10,500		—		62,909		663,505		66,807
Distributions	—	—	(540,471)		(10,500)		—		—		(550,971)		(62,731)
Unearned compensation	—	—	884		—		—		—		884		2,181
Conversion of redeemable partnership units	1	81	2,880		—		—		—		2,880		(2,880)
Adjustment to reflect redeemable partnership units at redemption value	—	—	330,596		—		—		—		330,596		(330,596)
Effective portion of interest rate contracts	—	—	—		—		(2,781)		—		(2,781)		(315)
Amortization of interest rate contracts	—	—	—		—		5,469		576		6,045		619
Contributions from noncontrolling interests in property partnerships	—	—	—		—		—		46,701		46,701		—
Distributions to noncontrolling interests in property partnerships	—	—	—		—		—		(82,501)		(82,501)		—
Equity, December 31, 2018	1,722	152,736	4,054,996		193,623		(47,741)		1,711,445		5,912,323		2,000,591
Cumulative effect of a change in accounting principle	—	—	(3,864)		—		—		(70)		(3,934)		(445)
Contributions	3	185	17,115		—		—		—		17,115		34,217
Allocated net income for the period	—	—	520,757		10,500		—		71,120		602,377		59,345
Distributions	—	—	(592,159)		(10,500)		—		—		(602,659)		(69,234)
Unearned compensation	—	—	(7,655)		—		—		—		(7,655)		2,011
Conversion of redeemable partnership units	2	142	4,885		—		—		—		4,885		(4,885)
Adjustment to reflect redeemable partnership units at redemption value	—	—	(447,222)		—		—		—		(447,222)		447,222
Effective portion of interest rate contracts	—	—	—		—		(6,060)		—		(6,060)		(691)
Amortization of interest rate contracts	—	—	—		—		5,466		576		6,042		622
Acquisition of noncontrolling interest in property partnership	—	—	(162,462)		—		—		(24,501)		(186,963)		—
Sale of an interest in property partnerships	—	—	(4,216)		—		—		4,216		—		—
Contributions from noncontrolling interests in property partnerships	—	—	—		—		—		35,816		35,816		—
Distributions to noncontrolling interests in property partnerships	—	—	—		—		—		(69,913)		(69,913)		—
Equity, December 31, 2019	1,727	153,063	3,380,175		193,623		(48,335)		1,728,689		5,254,152		2,468,753


BOSTON PROPERTIES LIMITED PARTNERSHIP CONSOLIDATED STATEMENTS OF CAPITAL AND NONCONTROLLING INTERESTS (in thousands)
	Units		Capital
	General Partner	Limited Partner	Partners’ Capital (General and Limited Partners)		Preferred Units		Accumulated Other Comprehensive Loss		Noncontrolling Interests - Property Partnerships		Total Capital		Noncontrolling Interests - Redeemable Partnership Units

Cumulative effect of a change in accounting principle	—	—	(1,505)		—		—		—		(1,505)		(174)
Contributions	1	72	7,529		—		—		—		7,529		38,841
Allocated net income for the period	—	—	882,275		10,500		—		48,260		941,035		97,704
Distributions	—	—	(609,852)		(10,500)		—		—		(620,352)		(68,921)
Unearned compensation	—	—	2,533		—		—		—		2,533		477
Conversion of redeemable partnership units	3	853	29,689		—		—		—		29,689		(29,689)
Adjustment to reflect redeemable partnership units at redemption value	—	—	863,795		—		—		—		863,795		(863,795)
Effective portion of interest rate contracts	—	—	—		—		(7,066)		—		(7,066)		(782)
Amortization of interest rate contracts	—	—	—		—		5,511		576		6,087		610
Contributions from noncontrolling interests in property partnerships	—	—	—		—		—		8,219		8,219		—
Distributions to noncontrolling interests in property partnerships	—	—	—		—		—		(58,811)		(58,811)		—
Equity, December 31, 2020	1,731	153,988	$	4,554,639	$	193,623	$	(49,890)	$	1,726,933	$	6,425,305	$	1,643,024

The accompanying notes are an integral part of these consolidated financial statements.


BOSTON PROPERTIES LIMITED PARTNERSHIP CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
	Year ended December 31,
	2020		2019		2018
Cash flows from operating activities:
Net income	$	1,038,739	$	661,722	$	730,312
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	676,666		669,956		637,891
Amortization of right of use assets - operating leases	2,234		2,412		—
Impairment losses	—		22,272		10,181
Non-cash compensation expense	44,142		40,958		40,117
Loss (income) from unconsolidated joint ventures	85,110		(46,592)		(2,222)
Distributions of net cash flow from operations of unconsolidated joint ventures	31,892		17,155		6,703
(Gains) losses from investments in securities	(5,261)		(6,417)		1,865
Allowance for current expected credit losses	1,849		—		—
Non-cash portion of interest expense	23,384		22,254		21,303
Settlement of accreted debt discount on redemption of unsecured senior notes	—		(763)		(483)
Losses from early extinguishments of debt	—		29,540		16,490
Gains on sales of real estate	(631,945)		(858)		(190,716)
Change in assets and liabilities:
Tenant and other receivables, net	22,550		(24,876)		29,204
Notes receivable, net	(19)		4		(13)
Accrued rental income, net	(97,099)		(56,817)		(43,662)
Prepaid expenses and other assets	12,488		2,965		12,472
Lease liabilities - finance leases	568		—		—
Lease liabilities - operating leases	1,533		1,616		—
Accounts payable and accrued expenses	(4,059)		12,627		1,353
Accrued interest payable	16,211		858		5,237
Other liabilities	17,629		(49,569)		4,955
Tenant leasing costs	(79,772)		(117,282)		(130,742)
Total adjustments	118,101		519,443		419,933
Net cash provided by operating activities	1,156,840		1,181,165		1,150,245
Cash flows from investing activities:
Acquisitions of real estate	(137,976)		(149,031)		—
Construction in progress	(482,507)		(546,060)		(694,791)
Building and other capital improvements	(160,126)		(180,556)		(189,771)
Tenant improvements	(234,423)		(251,831)		(210,034)
Right of use assets - finance leases	—		(5,152)		—
Proceeds from sales of real estate	519,303		90,824		455,409
Capital contributions to unconsolidated joint ventures	(172,436)		(87,392)		(345,717)
Capital distributions from unconsolidated joint ventures	55,298		136,807		—
Cash and cash equivalents deconsolidated	—		(24,112)		—
Deposit on capital lease	—		—		(13,615)
Issuance of related party note receivable	—		—		(80,000)


BOSTON PROPERTIES LIMITED PARTNERSHIP CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
	Year ended December 31,
	2020		2019		2018
Issuance of notes receivable, net	(9,800)		—		(19,455)
Proceeds from notes receivable	6,397		3,544		—
Investments in securities, net	2,551		(2,132)		(902)
Net cash used in investing activities	(613,719)		(1,015,091)		(1,098,876)

Cash flows from financing activities:
Repayments of mortgage notes payable	(17,168)		(46,173)		(18,634)
Proceeds from unsecured senior notes	1,248,125		1,548,106		996,410
Redemption of unsecured senior notes	—		(699,237)		(699,517)
Borrowings on unsecured line of credit	265,000		380,000		745,000
Repayments of unsecured line of credit	(265,000)		(380,000)		(790,000)
Proceeds from unsecured term loan	—		—		500,000
Payments on finance lease obligations	—		(502)		—
Payments on capital lease obligations	—		—		(1,353)
Payments on real estate financing transactions	—		—		(960)
Deferred financing costs	(10,416)		(13,213)		(8,362)
Debt prepayment and extinguishment costs	—		(28,716)		(15,973)
Net proceeds from equity transactions	3,277		13,710		(730)
Distributions	(688,904)		(666,294)		(587,628)
Contributions from noncontrolling interests in property partnerships	8,219		35,816		46,701
Distributions to noncontrolling interests in property partnerships	(58,811)		(69,913)		(82,501)
Acquisition of noncontrolling interest in property partnership	—		(186,963)		—
Net cash provided by (used in) financing activities	484,322		(113,379)		82,453
Net increase in cash and cash equivalents and cash held in escrows	1,027,443		52,695		133,822
Cash and cash equivalents and cash held in escrows, beginning of period	691,886		639,191		505,369
Cash and cash equivalents and cash held in escrows, end of period	$	1,719,329	$	691,886	$	639,191

Reconciliation of cash and cash equivalents and cash held in escrows:
Cash and cash equivalents, beginning of period	$	644,950	$	543,359	$	434,767
Cash held in escrows, beginning of period	46,936		95,832		70,602
Cash and cash equivalents and cash held in escrows, beginning of period	$	691,886	$	639,191	$	505,369

Cash and cash equivalents, end of period	$	1,668,742	$	644,950	$	543,359
Cash held in escrows, end of period	50,587		46,936		95,832
Cash and cash equivalents and cash held in escrows, end of period	$	1,719,329	$	691,886	$	639,191

Supplemental disclosures:
Cash paid for interest	$	433,492	$	439,059	$	416,019
Interest capitalized	$	53,881	$	54,911	$	65,766

Non-cash investing and financing activities:
Write-off of fully depreciated real estate	$	(99,494)	$	(129,253)	$	(135,431)
Change in real estate included in accounts payable and accrued expenses	$	(19,848)	$	89,245	$	(44,866)
Real estate acquired through capital lease	$	—	$	—	$	12,397
Right of use assets obtained in exchange for lease liabilities	$	—	$	287,540	$	—


BOSTON PROPERTIES LIMITED PARTNERSHIP CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
	Year ended December 31,
	2020		2019		2018
Prepaid rent reclassified to right of use asset	$	—	$	15,000	$	—
Accrued rental income, net deconsolidated	$	(4,558)	$	—	$	—
Tenant leasing costs, net deconsolidated	$	(3,462)	$	—	$	—
Building and other capital improvements, net deconsolidated	$	(111,889)	$	(12,767)	$	—
Tenant improvements, net deconsolidated	$	(12,331)	$	—	$	—
Right of use asset - finance lease deconsolidated	$	—	$	(135,004)	$	—
Lease liability - finance lease deconsolidated	$	—	$	119,534	$	—
Investment in unconsolidated joint venture recorded upon deconsolidation	$	347,898	$	29,246	$	—
Distributions declared but not paid	$	171,082	$	170,713	$	165,114
Conversions of redeemable partnership units to partners’ capital	$	29,698	$	4,885	$	2,880
Issuance of restricted securities to employees and non-employee directors	$	42,607	$	37,622	$	37,052

The accompanying notes are an integral part of these consolidated financial statements.

BOSTON PROPERTIES, INC. AND BOSTON PROPERTIES LIMITED PARTNERSHIP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. Organization

Boston Properties, Inc., a Delaware corporation, is a fully integrated, self-administered and self-managed real estate investment trust (“REIT”). Boston Properties, Inc. is the sole general partner of Boston Properties Limited Partnership, its operating partnership, and at December 31, 2020 owned an approximate 90.0% (89.6% at December 31, 2019) general and limited partnership interest in Boston Properties Limited Partnership. Unless stated otherwise or the context requires, the “Company” refers to Boston Properties, Inc. and its subsidiaries, including Boston Properties Limited Partnership and its consolidated subsidiaries. Partnership interests in Boston Properties Limited Partnership include:

common units of partnership interest (also referred to as “OP Units”),
long term incentive units of partnership interest (also referred to as “LTIP Units”), and
preferred units of partnership interest (also referred to as “Preferred Units”).

Unless specifically noted otherwise, all references to OP Units exclude units held by Boston Properties, Inc. A holder of an OP Unit may present such OP Unit to Boston Properties Limited Partnership for redemption at any time (subject to restrictions agreed upon at the time of issuance of OP Units to particular holders that may restrict such redemption right for a period of time, generally one year from issuance). Upon presentation of an OP Unit for redemption, Boston Properties Limited Partnership is obligated to redeem the OP Unit for cash equal to the value of a share of common stock of Boston Properties, Inc. (“Common Stock”). In lieu of a cash redemption, Boston Properties, Inc. may elect to acquire the OP Unit for one share of Common Stock. Because the number of shares of Common Stock outstanding at all times equals the number of OP Units that Boston Properties, Inc. owns, one share of Common Stock is generally the economic equivalent of one OP Unit, and the quarterly distribution that may be paid to the holder of an OP Unit equals the quarterly dividend that may be paid to the holder of a share of Common Stock.

The Company uses LTIP Units as a form of equity-based award for annual long term incentive equity compensation. The Company has also issued LTIP Units to employees in the form of (1) 2012 outperformance plan awards (“2012 OPP Units”) and (2) 2013 - 2020 multi-year, long-term incentive program awards (also referred to as “MYLTIP Units”), each of which, upon the satisfaction of certain performance and vesting conditions, is convertible into one OP Unit. The three-year measurement periods for the 2012 OPP Units and the 2013 - 2017 MYLTIP Units have ended and Boston Properties, Inc.’s total stockholder return (“TSR”) was sufficient for employees to earn and therefore become eligible to vest in a portion of the awards. Unless and until they are earned, the rights, preferences and privileges of the 2018 - 2020 MYLTIP Units differ from other LTIP Units granted to employees (including the 2012 OPP Units and the 2013 - 2017 MYLTIP Units, which have been earned). Therefore, unless specifically noted otherwise, all references to LTIP Units exclude the 2018 - 2020 MYLTIP Units. LTIP Units (including the earned 2012 OPP Units and the earned 2013 - 2017 MYLTIP Units), whether vested or not, will receive the same quarterly per unit distributions as OP Units, which equal per share dividends on Common Stock (See Notes 11, 16 and 18).

At December 31, 2020 and 2019, there was one series of Preferred Units outstanding (i.e., Series B Preferred Units). The Series B Preferred Units were issued to Boston Properties, Inc. on March 27, 2013 in connection with the issuance of 80,000 shares (8,000,000 depositary shares each representing 1/100th of a share) of 5.25% Series B Cumulative Redeemable Preferred Stock (the “Series B Preferred Stock”). Boston Properties, Inc. contributed the net proceeds from the offering to Boston Properties Limited Partnership in exchange for 80,000 Series B Preferred Units having terms and preferences generally mirroring those of the Series B Preferred Stock (See Note 12).

Properties

At December 31, 2020, the Company owned or had joint venture interests in a portfolio of 196 commercial real estate properties (the “Properties”) aggregating approximately 51.2 million net rentable square feet (unaudited) of primarily Class A office properties, including six properties under construction/redevelopment totaling approximately 3.7 million net rentable square feet (unaudited). At December 31, 2020, the Properties consisted of:

177 office properties (including six properties under construction/redevelopment);
12 retail properties;
six residential properties; and
one hotel.

The Company considers Class A office properties to be well-located buildings that are modern structures or have been modernized to compete with newer buildings and professionally managed and maintained. As such, these properties attract high-quality tenants and command upper-tier rental rates.

Basis of Presentation

The accompanying consolidated financial statements are presented using the accrual basis of accounting in conformity with accounting principles generally accepted in the United States of America. Boston Properties, Inc. does not have any other significant assets, liabilities or operations, other than its investment in Boston Properties Limited Partnership, nor does it have employees of its own. Boston Properties Limited Partnership, not Boston Properties, Inc., generally executes all significant business relationships other than transactions involving securities of Boston Properties, Inc. All majority-owned subsidiaries and joint ventures over which the Company has financial and operating control and variable interest entities (“VIEs”) in which the Company has determined it is the primary beneficiary are included in the consolidated financial statements. All significant intercompany balances and transactions have been eliminated in consolidation. The Company accounts for all other unconsolidated joint ventures using the equity method of accounting. Accordingly, the Company’s share of the earnings of these joint ventures and companies is included in consolidated net income.

Variable Interest Entities (VIEs)

Consolidated VIEs are those for which the Company is considered to be the primary beneficiary of a VIE. The primary beneficiary is the entity that has a controlling financial interest in the VIE, which 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 VIE’s performance and (2) the obligation to absorb losses or the right to receive the returns from the VIE that could potentially be significant to the VIE. The Company has determined that it is the primary beneficiary for six of the seven entities that are VIEs as of December 31, 2020.

Consolidated Variable Interest Entities

As of December 31, 2020, Boston Properties, Inc. has identified six consolidated VIEs, including Boston Properties Limited Partnership. Excluding Boston Properties Limited Partnership, the VIEs consisted of the following five in-service properties: 767 Fifth Avenue (the General Motors Building), Times Square Tower, 601 Lexington Avenue, Atlantic Wharf Office Building and 100 Federal Street.

The Company consolidates these VIEs because it is the primary beneficiary. The third parties’ interests in these consolidated entities (excluding Boston Properties Limited Partnership’s interest) are reflected as noncontrolling interests in property partnerships in the accompanying consolidated financial statements (See Note 11).

In addition, Boston Properties, Inc.’s only significant asset is its investment in Boston Properties Limited Partnership and, consequently, substantially all of Boston Properties, Inc.’s assets and liabilities are the assets and liabilities of Boston Properties Limited Partnership.

Variable Interest Entities Not Consolidated

As of December 31, 2020, the Company has determined that the Platform 16 Holdings LP joint venture is a VIE. The Company does not consolidate this entity as the Company does not have the power to direct the activities that, when taken together, most significantly impact the VIE’s performance and, therefore, the Company is not considered to be the primary beneficiary.

2. Summary of Significant Accounting Policies

Real Estate

Upon acquisitions of real estate, the Company assesses 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. The Company’s 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.

The Company assesses 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 allocates the purchase price to the acquired assets and assumed liabilities, including land and buildings as if vacant. The Company assesses fair value based on estimated cash flow projections that utilize discount and/or capitalization rates that it deems 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. The Company also considers 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 its acquisitions to date, the Company’s allocation to customer relationship intangible assets has been immaterial.

The Company records 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 the Company’s Consolidated Balance Sheets. Other intangible assets acquired include amounts for in-place lease values that are based on the Company’s 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, the Company includes 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, the Company considers 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, the Company’s established strategy of holding properties over the long term directly decreases the likelihood of recording an impairment loss. If the Company’s 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 the Company determines 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 the Company 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). The Company generally considers assets to be “held for sale” when the transaction has been approved by Boston Properties, Inc.’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. The Company capitalizes acquisition costs that it incurs to effect an asset acquisition and expenses acquisition costs that it incurs 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. The Company’s 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. The Company begins the capitalization of costs during the pre-construction period, which it defines as activities that are necessary for the development of the property. The Company considers 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. The Company ceases capitalization on the portion (1) substantially completed, (2) occupied or held available for occupancy, and capitalizes only those costs associated with the portion under construction or (3) if activities necessary for the development of the property have been suspended. Interest costs capitalized for the years ended December 31, 2020, 2019 and 2018 were approximately $53.9 million, $54.9 million and $65.8 million, respectively. Salaries and related costs capitalized for the years ended December 31, 2020, 2019 and 2018 were approximately $12.9 million, $10.4 million and $12.5 million, respectively.

Expenditures for repairs and maintenance are charged to operations as incurred. Significant betterments are capitalized. When assets are sold or retired, their costs and related accumulated depreciation are removed from the accounts with the resulting gains or losses reflected in net income or loss for the period.

The Company computes depreciation and amortization on properties using the straight-line method based on estimated useful asset lives. The Company allocates the acquisition cost of real estate to its components and depreciates or amortizes 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.

Depreciation is computed on a straight-line basis over the estimated useful lives of the assets as follows:



Land improvements						25 to 40 years
Buildings and improvements						10 to 40 years
Tenant improvements						Shorter of useful life or terms of related lease
Furniture, fixtures, and equipment						3 to 7 years

Cash and Cash Equivalents

Cash and cash equivalents consist of cash on hand and investments with maturities of three months or less from the date of purchase. The majority of the Company’s cash and cash equivalents are held at major commercial banks which may at times exceed the Federal Deposit Insurance Corporation limit of $250,000.

Cash Held in Escrows

Escrows include amounts established pursuant to various agreements for security deposits, property taxes, insurance and other costs. Escrows also include cash held by qualified intermediaries for possible investments in

like-kind exchanges in accordance with Section 1031 of the Internal Revenue Code, as amended (the “Code”), in connection with sales of the Company’s properties.

Investments in Securities

The Company accounts for investments in equity securities at fair value, with gains or losses resulting from changes in fair value recognized currently in earnings. The Company maintains deferred compensation plans that are designed to allow officers and non-employee directors of Boston Properties, Inc. to defer a portion of the officer’s current income or the non-employee director’s current 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. The Company’s obligation under the plans is that of an unsecured promise to pay the deferred compensation to the plan participants in the future. At December 31, 2020 and 2019, the Company had maintained approximately $39.5 million and $36.7 million, respectively, in separate accounts, which are not restricted as to their use. The Company recognized gains (losses) of approximately $5.3 million, $6.4 million and $(1.9) million on its investments in the accounts associated with the Company’s deferred compensation plans during the years ended December 31, 2020, 2019 and 2018, respectively.

Tenant and Other Receivables

Tenant and other accounts receivable, other than accrued rents receivable, are expected to be collected within one year.

Notes Receivable

The Company accounts for notes receivable at their unamortized cost, net of any unamortized deferred fees or costs, premiums or discounts and an allowance for loan losses (see “New Accounting Pronouncements Adopted—Financial Instruments - Credit Losses”). Loan fees and direct costs associated with loans originated by the Company are deferred and amortized over the term of the note as interest income.

Deferred Charges

Deferred charges include leasing costs and certain financing fees. Leasing costs include acquired intangible in-place lease values and direct and incremental fees and costs incurred in the successful negotiation of leases, including brokerage and other costs which have been deferred and are being amortized on a straight-line basis over the terms of the respective leases. Unamortized leasing costs are charged to expense upon the early termination of the lease. Fully amortized deferred leasing costs are removed from the books upon the expiration of the lease. The Company did not capitalize any external legal costs and internal leasing salaries and related costs for the years ended December 31, 2020 and 2019 (see “Leases”). Internal leasing salaries and related costs capitalized for the year ended December 31, 2018 were approximately $5.4 million. Financing fees included in deferred charges consist of external fees and costs incurred to obtain the Company’s revolving facility and if applicable, the delayed draw facility and construction financing arrangements where there are not sufficient amounts outstanding. Such financing costs have been deferred and are being amortized over the terms of the respective financing and included within interest expense. Unamortized financing costs are charged to expense upon the early repayment or significant modification of the financing. Fully amortized deferred financing costs are removed from the books upon the maturity of the debt.

External fees and costs incurred to obtain mortgage financings and unsecured senior notes have been deferred and are presented as direct deductions from the carrying amounts of the corresponding debt liability. Such financing costs are being amortized over the terms of the respective financing and included within interest expense. Unamortized financing costs are charged to expense upon the early repayment or significant modification of the financing.

Investments in Unconsolidated Joint Ventures

The Company consolidates VIEs in which it is 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, the Company consolidates entities for which it has significant

decision making control over the ventures’ operations. The Company’s judgment with respect to its level of influence or control of an entity involves the consideration of various factors including the form of the Company’s ownership interest, its representation in the entity’s governance, the size of its investment (including loans), estimates of future cash flows, its ability to participate in policy making decisions and the rights of the other investors to participate in the decision making process and to replace the Company as manager and/or liquidate the venture, if applicable. The Company’s assessment of its influence or control over an entity affects the presentation of these investments in the Company’s consolidated financial statements. In addition to evaluating control rights, the Company consolidates entities in which the outside partner has no substantive kick-out rights to remove the Company as the managing member.

Accounts of the consolidated entity are included in the accounts of the Company 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, the net equity investment of the Company is reflected within the Consolidated Balance Sheets, and the Company’s 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, the Company’s 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. The Company may account for cash distributions in excess of its investment in an unconsolidated joint venture as income when the Company is not the general partner in a limited partnership and when the Company has neither the requirement nor the intent to provide financial support to the joint venture. The Company classifies distributions received from equity method investees within its 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). The Company’s investments in unconsolidated joint ventures are reviewed for indicators of impairment on a quarterly basis and the Company records 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. The Company will record an impairment charge if it determines 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 the Company contributed assets to a joint venture, the Company’s investment in the joint venture was recorded at the Company’s cost basis in the assets that were contributed to the joint venture. To the extent that the Company’s 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 the Company’s 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”), the Company will recognize a full gain on both the retained and sold portions of real estate contributed or sold to a joint venture by recognizing its new equity method investment interest at fair value.

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

Revenue Recognition

In general, the Company commences 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. The impact of the straight-line rent adjustment increased revenue by approximately $104.9 million, $58.4 million and $51.9 million for the years ended December 31, 2020, 2019 and 2018, respectively, as the revenue recorded exceeded amounts billed. 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.

The Company must make estimates as to the collectability of its 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. The Company writes-off the tenant’s receivable balance, including the accrued rent receivable, if the Company considers 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, the Company will cease to recognize lease income, including straight-line rent, unless cash is received (See Note 4). If the Company subsequently determines that it is probable it will collect substantially all the remaining lessee’s lease payments under the lease term, the Company will then reinstate the straight-line balance, adjusting for the amount related to the period when the lease payments were considered not probable. If the Company’s estimates of collectability differ from the cash received, then the timing and amount of the Company’s reported revenue could be impacted. The credit risk is mitigated by the high quality of the Company’s existing tenant base, reviews of prospective tenants’ risk profiles prior to lease execution and consistent monitoring of the Company’s portfolio to identify potential problem tenants.

The Company recognizes acquired in-place “above-” and “below-market” leases at their fair values as rental revenue over the original term of the respective leases. The impact of the acquired in-place “above-” and “below-market” leases increased revenue by approximately $6.5 million, $20.9 million and $23.8 million for the years ended December 31, 2020, 2019 and 2018, respectively. The following table summarizes the scheduled amortization of the Company’s acquired “above-” and “below-market” lease intangibles for each of the five succeeding years (in thousands).


	Acquired Above-Market Lease Intangibles		Acquired Below-Market Lease Intangibles
2021	$	3,019	$	6,193
2022	354		5,437
2023	183		5,296
2024	135		3,780
2025	135		3,775

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” ). The Company receives reimbursements of payroll and payroll related costs from unconsolidated joint venture entities and third party property owners in connection with management services contracts which the Company reflects on a gross basis instead of on a net basis as the Company has determined that it is the principal and not the agent under these arrangements in accordance with the guidance in ASC 606 “Revenue from Contracts with Customers” (“ASC 606”).

The Company’s parking revenue is derived primarily from monthly and transient daily parking. In addition, the Company has 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 the Company’s performance obligation is satisfied.

The Company’s 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.

The Company earns management and development fees. Development and management services revenue is earned from unconsolidated joint venture entities and third-party property owners. The Company determined that the performance obligations associated with its development services contracts are satisfied over time and that the Company would recognize its 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 the Company’s 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. The Company recognizes 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, the Company must first determine whether the transaction is a sale to a customer or non-customer. The Company typically sells real estate on a selective basis and not within the ordinary course of its business and therefore expects that its sale transactions will not be contracts with customers. The Company next determines whether it has a controlling financial interest in the property after the sale, consistent with the consolidation model in ASC 810 “Consolidation” (“ASC 810”). If the Company determines that it does not have a controlling financial interest in the real estate, it evaluates whether a contract exists under ASC 606 and whether the buyer has obtained control of the asset that was sold. The Company recognizes 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 the Company is the lessee (generally ground leases), in accordance with ASC 842 the Company recognizes a right-of-use asset and a lease liability. The Company 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, the Company considers 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. The Company 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. The Company will use its incremental borrowing rate (“IBR”) to determine the net present value of the minimum lease payments. In order to determine the IBR, the Company utilized a market-based approach to estimate the incremental borrowing rate for each individual lease. The approach required significant judgment. Therefore, the Company 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.

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

Lessor

The Company leases 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 the Company’s 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, the Company considers 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. The Company considers 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 the Company’s business, the identified asset would be the leased real estate (office, life sciences, retail or residential).

The Company assessed and concluded that the timing and pattern of transfer for nonlease components and the associated lease component are the same. The Company determined that the predominant component was the lease component and as such its leases will continue to qualify as operating leases and the Company has 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 the Company’s 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. The Company recognizes these reimbursements on a gross basis, as the Company obtains control of the goods and services before they are transferred to the tenant.

In addition, in accordance with ASC 842, lessors will only capitalize incremental direct leasing costs (See “Deferred Charges”). As a result, upon adoption of ASC 842 on January 1, 2019, the Company 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.

Earnings Per Share

Basic earnings per share (“EPS”) is computed by dividing net income available to common shareholders, as adjusted for undistributed earnings (if any) of certain securities issued by Boston Properties Limited Partnership, by the weighted average number of shares of Common Stock outstanding during the year. Diluted EPS reflects the potential dilution that could occur from shares issuable in connection with awards under stock-based compensation plans, including upon the exercise of stock options, and securities of Boston Properties Limited Partnership that are exchangeable for Common Stock.

Earnings Per Common Unit

Basic earnings per common unit is computed by dividing net income available to common unitholders, as adjusted for undistributed earnings (if any) of certain securities issued by Boston Properties Limited Partnership, by the weighted average number of common units outstanding during the year. Diluted earnings per common unit reflects the potential dilution that could occur from units issuable in connection with awards under Boston Properties, Inc.’s stock-based compensation plans, including upon the exercise of stock options, and conversion of preferred units of Boston Properties Limited Partnership.

Fair Value of Financial Instruments

The Company follows the authoritative guidance for fair value measurements when valuing its 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” (“ASC 820”) (see “New Accounting Pronouncements Adopted—**Fair Value Measurement”).


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

The following table identifies the range and weighted average discount rate for the significant unobservable inputs for the Company’s Level 3 fair value measured instruments as of December 31, 2020.


Financial Instrument	Level	Range	Weighted Average
Related party note receivable	Level 3	3.64%	3.64%
Notes receivable	Level 3	3.60% - 8.00%	5.87%
Mortgage notes payable	Level 3	2.00% - 3.04%	2.21%
Unsecured term loan / line of credit	Level 3	1.04%	1.04%

In addition, the Company’s estimated fair values for these instruments as of the end of the applicable reporting period are not projections of, nor necessarily indicative of, estimated or actual fair values in future reporting periods.

The following table presents the aggregate carrying value of the Company’s related party note receivable, net, notes receivable, net, mortgage notes payable, net, unsecured senior notes, net, unsecured line of credit and unsecured term loan, net and the Company’s corresponding estimate of fair value as of December 31, 2020 and December 31, 2019 (in thousands):


	December 31, 2020				December 31, 2019
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Related party note receivable, net	$	77,552	$	84,579	$	80,000	$	81,931
Note receivable, net	18,729		19,372		15,920		14,978
Total	$	96,281	$	103,951	$	95,920	$	96,909

Mortgage notes payable, net	$	2,909,081	$	3,144,150	$	2,922,408	$	2,984,956
Unsecured senior notes, net	9,639,287		10,620,527		8,390,459		8,826,375
Unsecured line of credit	—		—		—		—
Unsecured term loan, net	499,390		500,326		498,939		500,561
Total	$	13,047,758	$	14,265,003	$	11,811,806	$	12,311,892

The Company uses interest rate swap agreements to manage its interest rate risk. The valuation of these instruments is determined using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves. To comply with the provisions of ASC 820, the Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. Although the Company determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by the Company and its counterparties. The Company assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and determined that the credit valuation adjustments were not significant to the overall valuation of its derivatives. As a result, the Company has determined that its derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.

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. The Company accounts for both the effective and ineffective portions of changes in the fair value of a derivative in other comprehensive income (loss) and

subsequently reclassifies 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 (see “New Accounting Pronouncements Adopted—Derivatives and Hedging”).

Stock-Based Employee Compensation Plans

At December 31, 2020, the Company had a stock-based employee compensation plan. The Company accounts for the plan under the guidance in ASC 718 “Compensation – Stock Compensation” (“ASC 718”), which revised the fair value based method of accounting for share-based payment liabilities, forfeitures and modifications of stock-based awards and clarified previous guidance in several areas, including measuring fair value, classifying an award as equity or as a liability and attributing compensation cost to reporting periods.

Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. These estimates include such items as depreciation and allowances for doubtful accounts. Actual results could differ from those estimates.

The Company bases its estimates on historical experience and on various other assumptions that it considers to be reasonable under the circumstances, including the impact of extraordinary events such as COVID-19, the results of which form the basis for making significant judgments about the carrying values of assets and liabilities, assessments of future collectability, and other areas of the financial statements that are impacted by the use of estimates. Actual results may differ from these estimates under different assumptions or conditions.

New Accounting Pronouncements Adopted

Financial Instruments - Credit Losses

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”). ASU 2016-13 is intended to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date by replacing the current incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. In November 2018, the FASB issued ASU 2018-19, “Codification Improvements to Topic 326, Financial Instruments - Credit Losses” (“ASU 2018-19”). ASU 2018-19 clarifies that receivables arising from operating leases are not within the scope of ASC 326-20, “Financial Instruments - Credit Losses - Measured at Amortized Cost,” which addresses financial assets measured at amortized cost basis, including net investments in leases arising from sales-type and direct financing leases. Instead, impairment of receivables arising from operating leases should be accounted for in accordance with ASC 842 - “Leases” (“ASC 842”). ASU 2016-13 and ASU 2018-19 were effective for the Company for reporting periods beginning after December 15, 2019, with early adoption permitted. ASU 2016-13 and ASU 2018-19 are applicable to the Company with respect to (1) certain of its accounts receivable, except for amounts arising from operating leases accounted for under ASC 842, (2) its related party note receivable, (3) its notes receivable and (4) certain of its off-balance sheet credit exposures. The Company adopted ASU 2016-13 and ASU 2018-19 effective January 1, 2020 using the modified retrospective approach. The adoption of ASU 2016-13 and ASU 2018-19 resulted in the Company recognizing an allowance for current expected credit losses associated with (1) its related party note receivable, (2) its notes receivable and (3) an off-balance sheet loan commitment arrangement. As a result, the modified retrospective approach resulted in the Company recognizing on January 1, 2020, the cumulative effect of adopting ASU 2016-13 and ASU 2018-19 aggregating approximately $1.5 million to Dividends in Excess of Earnings of Boston Properties, Inc. and Partners’ Capital of Boston Properties Limited Partnership and approximately $0.2 million to Noncontrolling Interests - Common Units of Boston Properties, Inc. and Noncontrolling Interests - Redeemable Partnership Units of Boston Properties Limited Partnership on the corresponding Consolidated Balance Sheets.

Fair Value Measurement

In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU 2018-13”). ASU 2018-13 is intended to improve the effectiveness of disclosures required by entities regarding recurring and nonrecurring fair value measurements. ASU 2018-13 was effective for the Company for reporting periods beginning after December 15, 2019, with early adoption permitted. The Company adopted ASU 2018-13 on January 1, 2020 and the adoption did not have a material impact on the Company’s consolidated financial statements.

Derivatives and Hedging

In October 2018, the FASB issued ASU 2018-16, “Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes” (“ASU 2018-16”). ASU 2018-16 permits the use of the overnight index swap rate based on the Secured Overnight Financing Rate (“SOFR”) to be used as a U.S. benchmark interest rate for purposes of applying hedge accounting under ASC 815, “Derivatives and Hedging (Topic 815).” ASU 2018-16 was effective for the Company, which has already adopted ASU 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities” for reporting periods beginning after December 15, 2018 and was required to be adopted on a prospective basis for qualifying new or re-designated hedging relationships entered into on or after the date of adoption. The Company adopted ASU 2018-16 on January 1, 2019 and the adoption did not have a material impact on the Company’s consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting” (“ASU 2020-04”). ASU 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. During the year ended December 31, 2020, the Company elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. The Company continues to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur.

In January 2021, the FASB issued ASU 2021-01, “Reference Rate Reform (Topic 848): Scope” (“ASU 2021-01”). ASU 2021-01 amends the scope of the recent reference rate reform guidance (Topic 848). ASU 2021-01 permits entities to elect certain optional expedients when accounting for derivative instruments impacted by changes in the interest rate used for margining, discounting, or contract price alignment (i.e., discount transition). The new optional expedients for contract modifications and hedge accounting are expected to benefit companies, including those with certain centrally cleared derivatives affected by a discount rate transition in 2020. ASU 2021-01 is effective immediately and can be applied retrospectively to any interim period beginning January 1, 2020 or prospectively to any new modifications in any period including or subsequent to the issuance date. ASU 2021-01 did not have a material impact on the Company’s consolidated financial statements.

Consolidation

In October 2018, the FASB issued ASU 2018-17, “Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities” (“ASU 2018-17”). ASU 2018-17 is intended to improve the accounting when considering indirect interests held through related parties under common control for determining whether fees paid to decision makers and service providers are variable interests. ASU 2018-17 was effective for the Company for reporting periods beginning after December 15, 2019, with early adoption permitted. The Company adopted ASU 2018-17 on January 1, 2020 and the adoption did not have a material impact on the Company’s consolidated financial statements.

Boston Properties, Inc.

Equity Offering Costs

Underwriting commissions and offering costs have been reflected as a reduction of additional paid-in capital.

Treasury Stock

Boston Properties, Inc.’s share repurchases are reflected as treasury stock utilizing the cost method of accounting and are presented as a reduction to consolidated stockholders’ equity.

Dividends

Earnings and profits, which determine the taxability of dividends to stockholders, will differ from income reported for financial reporting purposes due to the differences for federal income tax purposes in the treatment of gains/losses on the sale of real property, revenue and expense recognition, compensation expense, and in the estimated useful lives and basis used to compute depreciation.

The tax treatment of common dividends per share for federal income tax purposes is as follows:


	For the year ended December 31,
	2020					2019					2018
	Per Share			%		Per Share			%		Per Share			%
Ordinary income	$	2.52		64.91	%	$	2.99		94.84	%	$	2.79		78.17	%
Capital gain income	0.99			25.49	%	0.16			5.16	%	0.78			21.83	%
Return of capital	0.37			9.60	%	—			—	%	—			—	%
Total	$	3.88	(1)	100.00	%	$	3.15	(2)	100.00	%	$	3.57	(3)	100.00	%

(1)The fourth quarter 2020 regular quarterly dividend was $0.98 per common share, all of which was allocable to 2021.

(2)The fourth quarter 2019 regular quarterly dividend was $0.98 per common share of which approximately $0.04 per common share was allocable to 2019 and approximately $0.94 per common share was allocable to 2020.

(3)The fourth quarter 2018 regular quarterly dividend was $0.95 per common share of which approximately $0.69 per common share was allocable to 2018 and approximately $0.26 per common share was allocable to 2019.

Income Taxes

Boston Properties, Inc. has elected to be treated as a REIT under Sections 856 through 860 of 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). Boston Properties, Inc.’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 Boston Properties, Inc.’s consolidated taxable REIT subsidiaries. Boston Properties, Inc.’s taxable REIT subsidiaries did not have significant tax provisions or deferred income tax items. Boston Properties, Inc. has no uncertain tax positions recognized as of December 31, 2020 and 2019. At December 31, 2020, Boston Properties, Inc.’s tax returns for the years 2017 forward remain subject to examination by the major tax jurisdictions under the statute of limitations.

The Company owns a hotel property that it leases to one of its taxable REIT subsidiaries and that is managed by Marriott International, Inc. The hotel taxable REIT subsidiary, a wholly owned subsidiary of Boston Properties Limited Partnership, is the lessee pursuant to the lease for the hotel property. As lessor, Boston Properties Limited Partnership 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, Boston Properties, Inc. has recorded a tax provision in its Consolidated Statements of Operations for the years ended December 31, 2020, 2019 and 2018.

Certain entities included in Boston Properties, Inc.’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.

Boston Properties Limited Partnership

Income Taxes

The partners are required to report their respective share of Boston Properties Limited Partnership’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 Boston

Properties Limited Partnership’s consolidated taxable REIT subsidiaries. Boston Properties Limited Partnership’s taxable REIT subsidiaries did not have significant tax provisions or deferred income tax items. Boston Properties Limited Partnership has no uncertain tax positions recognized as of December 31, 2020 and 2019. At December 31, 2020, Boston Properties Limited Partnership’s tax returns for the years 2017 forward remain subject to examination by the major tax jurisdictions under the statute of limitations.

The Company owns a hotel property which is managed through a taxable REIT subsidiary. The hotel taxable REIT subsidiary, a wholly owned subsidiary Boston Properties Limited Partnership, is the lessee pursuant to the lease for the hotel property. As lessor, Boston Properties Limited Partnership 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, Boston Properties Limited Partnership has recorded a tax provision in its Consolidated Statements of Operations for the years ended December 31, 2020, 2019 and 2018.

Certain entities included in Boston Properties Limited Partnership’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.

3. Real Estate

Boston Properties, Inc.

Real estate consisted of the following at December 31, 2020 and December 31, 2019 (in thousands):


	December 31, 2020		December 31, 2019
Land	$	5,069,206	$	5,111,606
Right of use assets - finance leases	237,393		237,394
Right of use assets - operating leases	146,406		148,640
Land held for future development (1)	450,954		254,828
Buildings and improvements	13,777,691		13,646,054
Tenant improvements	2,752,880		2,656,439
Furniture, fixtures and equipment	49,606		44,313
Construction in progress	868,773		789,736
Total	23,352,909		22,889,010
Less: Accumulated depreciation	(5,534,102)		(5,266,798)
	$	17,818,807	$	17,622,212

(1)Includes pre-development costs.

Boston Properties Limited Partnership

Real estate consisted of the following at December 31, 2020 and December 31, 2019 (in thousands):


	December 31, 2020		December 31, 2019
Land	$	4,971,990	$	5,011,153
Right of use assets - finance leases	237,393		237,394
Right of use assets - operating leases	146,406		148,640
Land held for future development (1)	450,954		254,828
Buildings and improvements	13,498,098		13,351,286
Tenant improvements	2,752,880		2,656,439
Furniture, fixtures and equipment	49,606		44,313
Construction in progress	868,773		789,736
Total	22,976,100		22,493,789
Less: Accumulated depreciation	(5,428,576)		(5,162,908)
	$	17,547,524	$	17,330,881

(1)Includes pre-development costs.

Developments

On March 26, 2020, the Company completed and fully placed in-service 17Fifty Presidents Street located in Reston, Virginia. 17Fifty Presidents Street is a build-to-suit project with approximately 276,000 net rentable square feet of Class A office space that is 100% leased.

On June 1, 2020, the Company completed and fully placed in-service 20 CityPoint, a Class A office project with approximately 211,000 net rentable square feet located in Waltham, Massachusetts. The office portion of the property is 100% leased, including a lease with a future commencement.

On June 26, 2020, the Company 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, the Company 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 August 15, 2020, the Company completed and fully placed in-service The Skylyne, an approximately 331,000 square foot project comprised of 402 residential units and retail space located in Oakland, California.

On November 3, 2020, the Company signed an approximately 138,000 square-foot, 10-year lease with a new tenant at 200 West Street in Waltham, Massachusetts. The Company is currently redeveloping a portion of 200 West Street into life sciences space with expected completion in 2021. With this lease, the property is 100% leased.

Dispositions

On January 28, 2020, the Company entered into a joint venture with a third party to own, operate and develop properties at its Gateway Commons complex located in South San Francisco, California. The Company contributed its 601, 611 and 651 Gateway properties and development rights with an agreed upon value aggregating approximately $350.0 million for its 50% interest in the joint venture. 601, 611 and 651 Gateway consist of three Class A office properties aggregating approximately 768,000 net rentable square feet. The partner contributed three properties and development rights with an agreed upon value aggregating approximately $280.8 million at closing and will contribute cash totaling approximately $69.2 million in the future for its 50% ownership interest in the joint venture. As a result of the partner’s deferred contribution, the Company had an initial approximately 55% interest in the joint venture. Future development projects will be owned 49% by the Company and 51% by its partner. Upon the partner’s contribution, the Company ceased accounting for the joint venture entity on a consolidated basis and is accounting for the joint venture entity on an unconsolidated basis using the equity method of accounting, as it has reduced its ownership interest in the joint venture entity and no longer has a controlling financial or operating interest in the joint venture entity (See Note 6). The Company recognized a gain on the retained and sold interest in

the real estate contributed to the joint venture totaling approximately $217.7 million for Boston Properties, Inc. and $222.4 million for Boston Properties Limited Partnership during the year ended December 31, 2020 within Gains on Sales of Real Estate on the respective Consolidated Statements of Operations, as the fair value of the real estate exceeded its carrying value. 601, 611 and 651 Gateway contributed approximately $0.2 million of net income to the Company for the period from January 1, 2020 through January 27, 2020 and contributed approximately $10.4 million and $8.6 million of net income to the Company for the years ended December 31, 2019 and 2018, respectively.

On February 20, 2020, the Company 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 Boston Properties, Inc. and approximately $197.1 million for Boston Properties Limited Partnership. New Dominion Technology Park is comprised of two Class A office properties aggregating approximately 493,000 net rentable square feet. New Dominion Technology Park contributed approximately $1.6 million of net income to the Company for the period from January 1, 2020 through February 19, 2020 and contributed approximately $6.8 million and $8.2 million of net income to the Company for the years ended December 31, 2019 and 2018, respectively.

On June 25, 2020, the Company completed the sale of a portion of its 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 Boston Properties, Inc. and approximately $207.0 million for Boston Properties Limited Partnership. 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. The Company continues 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. The sold portion of Capital Gallery contributed approximately $6.3 million of net income to the Company for the period from January 1, 2020 through June 24, 2020 and contributed approximately $15.0 million and $14.5 million of net income to the Company for the years ended December 31, 2019 and 2018, respectively.

On December 16, 2020, the Company 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.

4. Leases

In April 2020, the 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. Under existing lease guidance, the Company would have to determine, on a lease-by-lease basis, if a lease concession was the result of a new arrangement reached with the tenant (treated within the lease modification accounting framework) or if a lease concession was under the enforceable rights and obligations within the existing lease agreement (precluded from applying the lease modification accounting framework). The Lease Modification Q & A allows the Company, if certain criteria have been met, to assume that a lease concession was included within the enforceable rights and obligations of the existing lease agreement and instead elect to either apply the lease modification accounting framework or not, with such election applied consistently to leases with similar characteristics and similar circumstances. The Company 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.

Lessee

The Company has four non-cancelable ground lease obligations, as lessee, which were classified as operating leases, with various initial term expiration dates through 2114. The Company recognizes ground rent expense on a straight-line basis over the term of the respective ground lease agreements. None of the amounts disclosed below for these ground leases contain variable payments, extension options or residual value guarantees. One of the ground leases does have an extension option. However, lease payments, for the extension option, for this ground lease are based on fair market value and as such have not been included in the analysis below.

The Company has four finance lease obligations with various initial term expiration dates through 2094.

The following table provides lease cost information for the Company’s operating and finance leases for the year ended (in thousands):


Lease costs	December 31, 2020		December 31, 2019
Operating lease costs	$	13,948	$	14,573
Finance lease costs
Amortization of right of use asset (1)	$	56	$	29
Interest on lease liabilities (2)	$	583	$	47

(1)The finance leases relate to either land, buildings or assets that remain in development. For land leases classified as finance leases because of a purchase option that the Company views as an economic incentive, the Company follows its existing policy and does not depreciate land because it is assumed to have an indefinite life. For all other finance leases, the Company would amortize the right of use asset over the shorter of the useful life of the asset or the lease term. If the finance lease relates to a property under development, the amortization of the right of use asset may be eligible for capitalization. For assets under development, depreciation may commence once the asset is placed in-service and depreciation would be recognized in accordance with the Company’s policy.

(2)Three of the finance leases relate to assets under development for all or a portion of the years ended December 31, 2020 and December 31, 2019, respectively, and as such, a portion of the interest amount was capitalized.

The following table provides other quantitative information for the Company’s operating and finance leases as of December 31, 2020 and December 31, 2019:


	December 31, 2020		December 31, 2019
Other information
Weighted-average remaining lease term (in years)
Operating leases	51		51
Finance leases	70		71
Weighted-average discount rate
Operating leases	5.7	%	5.7	%
Finance leases	6.2	%	6.2	%

The following table provides a maturity analysis for the Company’s lease liabilities related to its operating and finance leases as of December 31, 2020 (in thousands):


	Operating		Finance
2021	$	25,092	$	5,896
2022	18,020		10,206
2023	10,262		9,701
2024 (1)	9,277		48,518
2025	9,476		9,971
Thereafter	548,478		1,373,177
Total lease payments	620,605		1,457,469
Less: Interest portion	(418,892)		(1,220,977)
Present value of lease payments	$	201,713	$	236,492

(1)Finance lease payments in 2024 include approximately $38.7 million related to a purchase option that the Company is reasonably certain it will exercise.

Lessor

The following table summarizes the components of lease revenue recognized during the years ended December 31, 2020 and 2019 included within the Company's Consolidated Statements of Operations (in thousands):


	Year ended December 31,
Lease Revenue		2020		2019
Fixed contractual payments		$	2,211,915	$	2,261,260
Variable lease payments		434,346		496,754
		$	2,646,261	$	2,758,014

The future contractual lease payments to be received (excluding operating expense reimbursements and percentage rent) by the Company as of December 31, 2020, under non-cancelable operating leases which expire on various dates through 2049 (in thousands):


Years Ending December 31,
2021	$	2,177,848
2022	2,188,846
2023	2,144,213
2024	2,043,264
2025	1,901,624
Thereafter	12,577,660

No single tenant represented more than 10.0% of the Company’s total lease revenue for the year ended December 31, 2020.

Ground Lease

On July 29, 2020, the Company entered into a 99-year ground lease with a third-party hotel developer for land at its Reston Next property located in Reston Virginia, which will support the development of a 270-room, approximately 241,000 square foot hotel property. The lease commenced on October 21, 2020 and upon commencement, the Company performed classification testing. The ground lease is subject to termination rights with respect to the hotel developer’s ability to obtain construction financing for the property and as of the lease commencement date, the Company was not reasonably certain that those termination rights would not be exercised and as such it has accounted for this as an operating lease that will expire on August 28, 2022.

5. Deferred Charges

Deferred charges consisted of the following at December 31, 2020 and 2019 (in thousands):


	2020		2019
Leasing costs, including lease related intangibles	$	1,023,058	$	1,155,958
Financing costs	12,728		12,728
	1,035,786		1,168,686
Less: Accumulated amortization	(395,701)		(479,473)
	$	640,085	$	689,213

The following table summarizes the scheduled amortization of the Company’s acquired in-place lease intangibles for each of the five succeeding years (in thousands).


	Acquired In-Place Lease Intangibles
2021	$	10,352
2022	5,464
2023	3,854
2024	2,220
2025	2,174

6. Investments in Unconsolidated Joint Ventures

The investments in unconsolidated joint ventures consist of the following at December 31, 2020 and December 31, 2019:


					Carrying Value of Investment (1)
Entity	Properties	Nominal % Ownership			December 31, 2020		December 31, 2019
					(in thousands)
Square 407 Limited Partnership	Market Square North	50.0	%		$	(3,766)	$	(4,872)
BP/CRF Metropolitan Square, LLC	Metropolitan Square	20.0	%		(13,584)		9,134
901 New York, LLC	901 New York Avenue	25.0	%	(2)	(12,264)		(12,113)
WP Project Developer LLC	Wisconsin Place Land and Infrastructure	33.3	%	(3)	35,297		36,789
Annapolis Junction NFM LLC	Annapolis Junction	50.0	%	(4)	13,463		25,391
540 Madison Venture LLC	540 Madison Avenue	60.0	%	(5)	122		2,953
500 North Capitol Venture LLC	500 North Capitol Street, NW	30.0	%		(6,945)		(5,439)
501 K Street LLC	1001 6th Street	50.0	%	(6)	42,499		42,496
Podium Developer LLC	The Hub on Causeway - Podium	50.0	%		48,818		49,466
Residential Tower Developer LLC	Hub50House	50.0	%		50,943		55,092
Hotel Tower Developer LLC	The Hub on Causeway - Hotel Air Rights	50.0	%		10,754		9,883
Office Tower Developer LLC	100 Causeway Street	50.0	%		56,312		56,606
1265 Main Office JV LLC	1265 Main Street	50.0	%		3,787		3,780
BNY Tower Holdings LLC	Dock 72	50.0	%		29,536		94,804
BNYTA Amenity Operator LLC	Dock 72	50.0	%		1,846		N/A
CA-Colorado Center Limited Partnership	Colorado Center	50.0	%		227,671		252,069
7750 Wisconsin Avenue LLC	7750 Wisconsin Avenue	50.0	%		58,112		56,247
BP-M 3HB Venture LLC	3 Hudson Boulevard	25.0	%		113,774		67,499
SMBP Venture LP	Santa Monica Business Park	55.0	%		145,761		163,937
Platform 16 Holdings LP	Platform 16	55.0	%	(7)	108,393		29,501
Gateway Portfolio Holdings LLC	Gateway Commons	50.0	%	(8)	336,206		N/A
Rosecrans-Sepulveda Partners 4, LLC	Beach Cities Media Campus	50.0	%		27,184		N/A
					$	1,273,919	$	933,223

(1)Investments with deficit balances aggregating approximately $36.6 million and $22.4 million at December 31, 2020 and 2019, respectively, are included within Other Liabilities in the Company’s Consolidated Balance Sheets.

(2)The Company’s economic ownership has increased based on the achievement of certain return thresholds. At December 31, 2020 and 2019, the Company’s economic ownership was approximately 50%.

(3)The Company’s wholly-owned subsidiary that owns Wisconsin Place Office also owns a 33.3% interest in the joint venture entity that owns the land, parking garage and infrastructure of the project.

(4)The joint venture owns two in-service buildings.

(5)The property was sold on June 27, 2019. As of December 31, 2020 and 2019, the investment consisted of undistributed cash.

(6)Under the joint venture agreement for this land parcel, the partner will be entitled to up to two additional payments from the venture based on increases in total entitled square footage of the project above 520,000 square feet and achieving certain project returns at stabilization.

(7)This entity is a VIE (See Note 1).

(8)As a result of the partner’s deferred contribution, the Company owns an approximately 55% interest in the joint venture at December 31, 2020. Future development projects will be owned 49% by the Company and 51% by its partner.

Certain of the Company’s unconsolidated joint venture agreements include provisions whereby, at certain specified times, each partner has the right to initiate a purchase or sale of its interest in the joint ventures. With limited exceptions under these provisions, the Company is not compelled to purchase the interest of its outside joint venture partners. Under certain of the Company’s joint venture agreements, if certain return thresholds are achieved, the partners or the Company will be entitled to an additional promoted interest or payments.

The combined summarized balance sheets of the Company’s unconsolidated joint ventures are as follows:


	December 31, 2020		December 31, 2019
	(in thousands)
ASSETS
Real estate and development in process, net (1)	$	4,708,571	$	3,904,400
Other assets	531,071		502,706
Total assets	$	5,239,642	$	4,407,106
LIABILITIES AND MEMBERS’/PARTNERS’ EQUITY
Mortgage and notes payable, net	$	2,637,911	$	2,218,853
Other liabilities (2)	650,433		749,675
Members’/Partners’ equity	1,951,298		1,438,578
Total liabilities and members’/partners’ equity	$	5,239,642	$	4,407,106
Company’s share of equity	$	936,087	$	591,905
Basis differentials (3)	337,832		341,318
Carrying value of the Company’s investments in unconsolidated joint ventures (4)	$	1,273,919	$	933,223

(1)At December 31, 2020 and 2019, this amount included right of use assets - finance leases totaling approximately $248.9 million and $383.9 million, respectively, and right of use assets - operating leases totaling approximately $22.5 million and $12.1 million, respectively.

(2)At December 31, 2020 and 2019, this amount included lease liabilities - finance leases totaling approximately $388.7 million and $510.8 million, respectively, and lease liabilities - operating leases totaling approximately $29.0 million and $17.3 million, respectively.

(3)This amount represents the aggregate difference between the Company’s historical cost basis and the basis reflected at the joint venture level, which is typically amortized over the life of the related assets and liabilities. Basis differentials result from impairments of investments, acquisitions through joint ventures with no change in control and upon the transfer of assets that were previously owned by the Company into a joint venture. In addition, certain acquisition, transaction and other costs may not be reflected in the net assets at the joint venture level. At December 31, 2020 and 2019, there was an aggregate basis differential of approximately $307.3 million and $311.3 million, respectively, between the carrying value of the Company’s investment in the joint venture that owns Colorado Center and the joint venture’s basis in the assets and liabilities. At December 31, 2020, there was an aggregate basis differential of approximately $51.9 million between the carrying value of the Company’s investment in the joint venture that owns Gateway Commons and the joint venture’s basis in the assets and liabilities. At December 31, 2020, there was an aggregate basis differential of approximately $(52.2) million between the carrying value of the Company’s investment in the joint venture that owns Dock 72 and the joint venture’s basis in the assets and liabilities. These basis differentials (excluding land) will be amortized over the remaining lives of the related assets and liabilities.

(4)Investments with deficit balances aggregating approximately $36.6 million and $22.4 million at December 31, 2020 and 2019, respectively, are reflected within Other Liabilities in the Company’s Consolidated Balance Sheets.

The combined summarized statements of operations of the Company’s unconsolidated joint ventures are as follows:


	Year ended December 31,
		2020		2019		2018
		(in thousands)
Total revenue (1)		$	319,560	$	322,817	$	271,951
Expenses
Operating		144,347		122,992		106,610
Transaction costs		1,027		1,000		—
Depreciation and amortization (2)		141,853		102,296		103,079
Total expenses		287,227		226,288		209,689
Other income (expense)
Interest expense		(98,051)		(84,409)		(71,308)
Gains on sales of real estate (3)		11,737		32,706		16,951
Net income (loss)		$	(53,981)	$	44,826	$	7,905

Company’s share of net income (loss)		$	(16,256)	$	24,423	$	8,084
Impairment loss on investment (4)		(60,524)		—		—
Basis differential (3)(4)(5)		(8,330)		22,169		(5,862)
(Loss) income from unconsolidated joint ventures		$	(85,110)	$	46,592	$	2,222

(1)Includes straight-line rent adjustments of approximately $(10.1) million, $32.4 million and $15.9 million for the years ended December 31, 2020, 2019 and 2018, respectively. Due primarily to the impact of COVID-19, for the year ended December 31, 2020, write-offs of accounts receivable and accrued rent balances totaled approximately $51.7 million.

(2)During the year ended December 31, 2018, the joint venture that owns Metropolitan Square in Washington, DC, commenced a renovation project and recorded accelerated depreciation expense of approximately $22.4 million related to the remaining book value of the assets to be replaced. The Company’s share of the accelerated depreciation expense totaled approximately $4.5 million.

(3)For the year ended December 31, 2019, represents the gain on sale of 540 Madison Avenue recognized by the joint venture. During 2008, the Company recognized an other-than-temporary impairment loss on its investment in the unconsolidated joint venture resulting in a basis differential between the carrying value of the Company’s investment in the joint venture and the joint venture’s basis in the assets and liabilities of the property. As a result of the historical basis difference, the Company recognized a gain on sale of real estate totaling approximately $47.2 million for the year ended December 31, 2019, which consists of its share of the gain on sale reported by the joint venture as well as an adjustment for the basis differential. The gain on sale of real estate is included in Income from Unconsolidated Joint Ventures in the Company’s Consolidated Statements of Operations.

(4)During the year ended December 31, 2020, the Company recognized an other-than-temporary impairment loss on its investment in the unconsolidated joint venture that owns Dock 72 in Brooklyn, New York totaling approximately $60.5 million.

(5)Includes straight-line rent adjustments of approximately $1.8 million, $2.1 million and $2.4 million for the years ended December 31, 2020, 2019 and 2018, respectively. Also includes net above-/below-market rent adjustments of approximately $0.9 million, $1.7 million and $1.6 million for the years ended December 31, 2020, 2019 and 2018, respectively.

On February 20, 2020, a joint venture in which the Company has a 55% interest acquired the land underlying the ground lease at its Platform 16 property located in San Jose, California for a purchase price totaling approximately $134.8 million. The joint venture had previously made a deposit totaling $15.0 million, which was credited against the purchase price. Platform 16 consists of a parcel of land totaling approximately 5.6 acres that is expected to support the development of approximately 1.1 million square feet of commercial office space.

On June 9, 2020, a joint venture in which the Company has a 20% interest refinanced with a new lender the mortgage loan collateralized by its Metropolitan Square property located in Washington, DC. The outstanding balance of the loan totaled approximately $155.9 million, bore interest at a fixed rate of 5.75% per annum and was scheduled to mature on August 5, 2020. The new mortgage loan totaling $325.0 million, of which $288.0 million was advanced at closing, 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 at a cap of 3.00% per annum on a notional amount of $325.0 million through July 7, 2022. The joint venture distributed excess loan proceeds from the new mortgage loan totaling approximately $112.7 million, of which the Company’s share totaled approximately $22.5 million. Metropolitan Square is a Class A office property with approximately 654,000 net rentable square feet.

On June 25, 2020, a joint venture in which the Company has a 50% interest completed the sale of Annapolis Junction Building Eight and two land parcels located in Annapolis, Maryland for a gross sale price of $47.0 million. Net cash proceeds totaled approximately $45.8 million after the payment of transaction costs. The Company recognized a gain on sale of real estate totaling approximately $5.8 million, which is included in Income (Loss) from Unconsolidated Joint Ventures in the accompanying Consolidated Statements of Operations. The joint venture distributed approximately $36.8 million of available cash and the net proceeds from the sale after the pay down of the mortgage loan, of which the Company’s share totaled approximately $18.4 million. Annapolis Junction Building Eight is an approximately 126,000 net rentable square foot Class A office property, which is vacant. The two land parcels will support the development of approximately 300,000 square feet of commercial office space with one parcel currently containing surface parking for approximately 511 vehicles.

On June 25, 2020, in conjunction with the joint venture’s sale of Annapolis Junction Building Eight, the joint venture in which the Company has a 50% interest modified the mortgage loan collateralized by Annapolis Junction Building Seven and Building Eight with the release of Annapolis Junction Building Eight as collateral under the loan in exchange for a principal pay down of approximately $16.1 million using a portion of the net proceeds from the sale of the property. At the time of the modification, the outstanding balance of the loan totaled approximately $34.5 million, bore interest at a variable rate equal to LIBOR plus 2.35% per annum and was scheduled to mature on June 30, 2020. The modified mortgage loan totaling approximately $18.4 million is collateralized by Annapolis Junction Building Seven, continues to bear interest at a variable rate equal to LIBOR plus 2.35% per annum and matures on March 25, 2021. Annapolis Junction Building Seven is a Class A office property with approximately 127,000 net rentable square feet located in Annapolis, Maryland.

On July 23, 2020, the Company acquired a 50% interest in a joint venture entity that owns Beach Cities Media Campus, a 6.4-acre parcel of land located in El Segundo, California, for a purchase price of approximately $21.2 million. Beach Cities Media Campus is expected to support the development of approximately 275,000 square feet of Class A office space.

On July 24, 2020, a joint venture in which the Company has a 50% interest completed and fully placed in-service Hub50House, an approximately 320,000 square foot project comprised of 440 residential units located in Boston, Massachusetts.

On September 1, 2020, the Company entered into an agreement with its partner in the joint venture that owns 1265 Main Street located in Waltham, Massachusetts to (1) form additional joint ventures to own and develop a mixed-use property containing approximately 1,200,000 square feet to be developed in phases on an approximately 41-acre site adjacent to 1265 Main Street and (2) share the costs of certain offsite infrastructure improvements with its joint venture partner and other third-party abutting land owners. The Company will serve as the development manager and expects to own a 50% interest in each of the joint ventures.

On September 30, 2020, a joint venture in which the Company has a 50% interest extended the mortgage loan collateralized by its Market Square North property. At the time of the extension, the outstanding balance of the loan totaled approximately $114.2 million, bore interest at a fixed rate of 4.85% per annum and was scheduled to mature on October 1, 2020. The extended loan was scheduled to mature on November 1, 2020. On October 30,

2020, the joint venture refinanced the mortgage loan. The new mortgage loan totals $125.0 million, 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. Market Square North is a Class A office property with approximately 418,000 net rentable square feet.

On October 1, 2020, a joint venture in which the Company has a 50% interest completed and fully placed in-service Dock 72, a Class A office project with approximately 669,000 net rentable square feet located in Brooklyn, New York that is 33% leased. During December 2020, the Company recognized a non-cash impairment charge totaling approximately $60.5 million, which represented the other-than temporary decline in the fair value below the carrying value of the Company’s investment in the unconsolidated joint venture that owns Dock 72. The non-cash impairment charge was the result of an increase in costs, an extension of the projected period to fully lease the property and lower projected rental rates due to the COVID-19 pandemic, resulting in a current fair value that was less than the carrying value of the Company’s investment. The Company assessed the impairment and concluded that it was other than temporary. The Company determined that its valuation of the investment was categorized within Level 3 of the fair value hierarchy, as it utilized significant unobservable inputs in its assessment including an exit capitalization rate of 5.25%, a discount rate on the Company’s equity investment (the property is encumbered by mortgage debt) of 8.0% and an average lease commencement on currently vacant space of mid-2023. In addition, on December 14, 2020, the joint venture extended the mortgage loan collateralized by the property. At the time of the extension, the outstanding balance of the loan totaled approximately $198.6 million, bore interest at a variable rate equal to LIBOR plus 2.25% per annum and was scheduled to mature on December 18, 2020. The extended mortgage loan has a total commitment amount of $250.0 million, bears interest at an initial 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.

On November 13, 2020, a joint venture in which the Company has a 50% interest extended the mortgage loan collateralized by its Annapolis Junction Building Six property located in Annapolis, Maryland. At the time of the extension, the outstanding balance of the loan totaled approximately $12.0 million, bore interest at a variable rate equal to LIBOR plus 2.00% per annum and was scheduled to mature on November 17, 2020. The extended mortgage loan has a total commitment amount of approximately $13.2 million, 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. Annapolis Junction Building Six is a Class A office property with approximately 119,000 net rentable square feet.

7. Mortgage Notes Payable, Net

The Company had outstanding mortgage notes payable totaling approximately $2.9 billion as of December 31, 2020 and 2019, each collateralized by one or more buildings and related land included in real estate assets. The mortgage notes payable are generally due in monthly installments and mature at various dates through June 9, 2027.

Fixed rate mortgage notes payable totaled approximately $2.9 billion at December 31, 2020 and 2019, with contractual interest rates ranging from 3.43% to 6.94% per annum at December 31, 2020 and 2019 (with a weighted-average interest rate of 3.72% and 3.73% per annum at December 31, 2020 and 2019, respectively). There were no variable rate mortgage loans at December 31, 2020 and 2019.

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


	Principal Payments
2021	$	17,276
2022	614,710
2023	—
2024	—
2025	—
Thereafter	2,300,000
Total aggregate principal payments	2,931,986
Deferred financing costs, net	(22,905)
Total carrying value of mortgage notes payable, net	$	2,909,081

8. Unsecured Senior Notes

The following summarizes the unsecured senior notes outstanding as of December 31, 2020 (dollars in thousands):


	Coupon/ Stated Rate		Effective Rate(1)		Principal Amount		Maturity Date(2)
10 Year Unsecured Senior Notes	4.125	%	4.289	%	$	850,000	May 15, 2021	(3)
11 Year Unsecured Senior Notes	3.850	%	3.954	%	1,000,000		February 1, 2023
10.5 Year Unsecured Senior Notes	3.125	%	3.279	%	500,000		September 1, 2023
10.5 Year Unsecured Senior Notes	3.800	%	3.916	%	700,000		February 1, 2024
7 Year Unsecured Senior Notes	3.200	%	3.350	%	850,000		January 15, 2025
10 Year Unsecured Senior Notes	3.650	%	3.766	%	1,000,000		February 1, 2026
10 Year Unsecured Senior Notes	2.750	%	3.495	%	1,000,000		October 1, 2026
10 Year Unsecured Senior Notes	4.500	%	4.628	%	1,000,000		December 1, 2028
10 Year Unsecured Senior Notes	3.400	%	3.505	%	850,000		June 21, 2029
10.5 Year Unsecured Senior Notes	2.900	%	2.984	%	700,000		March 15, 2030
10.75 Year Unsecured Senior Notes	3.250	%	3.343	%	1,250,000		January 30, 2031
Total principal					9,700,000
Net unamortized discount					(16,034)
Deferred financing costs, net					(44,679)
Total					$	9,639,287

(1)Yield on issuance date including the effects of discounts on the notes, settlements of interest rate contracts and the amortization of financing costs.

(2)No principal amounts are due prior to maturity.

(3)See Note 18.

On May 5, 2020, Boston Properties Limited Partnership 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, Boston Properties Limited Partnership was in compliance with each of these financial restrictions and requirements.

9. Unsecured Credit Facility

On April 24, 2017, Boston Properties Limited Partnership amended and restated its unsecured revolving credit agreement (as amended and restated, the “2017 Credit Facility”). Among other things, the 2017 Credit Facility (1) increased the total commitment of the revolving line of credit (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 term loan facility (the “Delayed Draw Facility”) that permitted Boston Properties Limited Partnership to draw upon it provided that amounts drawn and subsequently repaid may not be borrowed again. In addition, Boston Properties Limited Partnership may increase the total commitment under the 2017 Credit Facility by up to $500.0 million through increases in the Revolving Facility or the Delayed Draw Facility, or both, subject to syndication of the increase and other conditions.

On April 24, 2018, Boston Properties Limited Partnership 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 0.95% per annum based on Boston Properties Limited Partnership’s current credit rating and matures on April 24, 2022.

At Boston Properties Limited Partnership’s option, loans under the Revolving Facility and Delayed Draw Facility will bear interest at a rate per annum equal to (1) (a) in the case of loans denominated in Dollars, Euro or Sterling, LIBOR, and (b) in the case of loans denominated in Canadian Dollars, CDOR, in each case, plus a margin ranging from 77.5 to 155 basis points for the Revolving Commitment and 85 to 175 basis points for the Delayed Draw Facility, based on Boston Properties Limited Partnership’s credit rating or (2) an alternate base rate equal to the greatest of (x) the Administrative Agent’s prime rate, (y) the Federal Funds rate plus 0.50% or (z) LIBOR for a one-month period plus 1.00%, in each case, plus a margin ranging from 0 to 55 basis points for the Revolving Facility and 0 to 75 basis points for the Delayed Draw Facility, based on Boston Properties Limited Partnership’s credit rating. The 2017 Credit Facility also contains a competitive bid option for up to 65% of the Revolving Facility that allows banks that are part of the lender consortium to bid to make loan advances to Boston Properties Limited Partnership at a reduced interest rate.

In addition, Boston Properties Limited Partnership is obligated to pay (1) in quarterly installments a facility fee on the total commitment under the Revolving Facility at a rate per annum ranging from 0.10% to 0.30% based on Boston Properties Limited Partnership’s credit rating, (2) an annual fee on the undrawn amount of each letter of credit equal to the LIBOR margin on the Revolving Facility and (3) a fee on the unused commitments under the Delayed Draw Facility equal to 0.15% per annum. Based on Boston Properties Limited Partnership’s December 31, 2020 credit rating, (1) the applicable Eurocurrency margins for the Revolving Facility and Delayed Draw Facility are 0.875% and 0.95% per annum, respectively, (2) the alternate base rate margin is zero basis points for each of the Revolving Facility and Delayed Draw Facility and (3) the facility fee on the Revolving Facility commitment is 0.15% per annum.

At December 31, 2020 and 2019, Boston Properties Limited Partnership had $500.0 million of borrowings outstanding under its Delayed Draw Facility and no amounts outstanding under its Revolving Facility.

The 2017 Credit Facility contains customary representations and warranties, affirmative and negative covenants and events of default provisions, including failure to pay indebtedness, breaches of covenants, and bankruptcy and other insolvency events, which could result in the acceleration of all amounts and cancellation of all commitments outstanding under the Credit Agreement. Among other covenants, the 2017 Credit Facility requires that Boston Properties Limited Partnership maintain on an ongoing basis: (1) a leverage ratio not to exceed 60%, however, the leverage ratio may increase to no greater than 65% provided that it is reduced back to 60% within one year, (2) a secured debt leverage ratio not to exceed 55%, (3) a fixed charge coverage ratio of at least 1.40, (4) an unsecured debt leverage ratio not to exceed 60%, however, the unsecured debt leverage ratio may increase to no greater than 65% provided that it is reduced to 60% within one year, (5) an unsecured debt interest coverage ratio of at least 1.75 and (6) limitations on permitted investments. At December 31, 2020, Boston Properties Limited Partnership was in compliance with each of these financial and other covenant requirements.

10. Commitments and Contingencies

General

In the normal course of business, the Company guarantees its performance of services or indemnifies third parties against its negligence. In addition, in the normal course of business, the Company guarantees to certain tenants the obligations of its subsidiaries for the payment of tenant improvement allowances and brokerage commissions in connection with their leases and limited costs arising from delays in delivery of their premises.

The Company has letter of credit and performance obligations related to lender and development requirements that total approximately $20.0 million at December 31, 2020.

Certain of the Company’s joint venture agreements include provisions whereby, at certain specified times, each partner has the right to initiate a purchase or sale of its interest in the joint ventures. With limited exception, under these provisions, the Company is not compelled to purchase the interest of its outside joint venture partners. From time to time, under certain of the Company’s joint venture agreements, if certain return thresholds are achieved, either the Company or its partners may be entitled to an additional promoted interest or payments.

From time to time, the Company (or ventures in which the Company has an ownership interest) has agreed, and may in the future agree, to (1) guarantee portions of the principal, interest and other amounts in connection with their borrowings, (2) provide customary environmental indemnifications and nonrecourse carve-outs (e.g., guarantees against fraud, misrepresentation and bankruptcy) in connection with their borrowings and (3) provide guarantees to lenders, tenants and other third parties for the completion of development projects. The Company has agreements with its outside partners whereby the partners agree to reimburse the joint venture for their share of

any payments made under the guarantee. In some cases, the Company earns a fee from the applicable joint venture for providing the guarantee.

In connection with the refinancing of 767 Fifth Avenue’s (the General Motors Building) secured loan by the Company’s consolidated joint venture entity, 767 Venture, LLC, the Company 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. The Company earns a fee from the joint venture for providing the guarantee and has an agreement with the outside partners to reimburse the joint venture for their share of any payments made under the guarantee. As of December 31, 2020, no amounts related to the guarantee are recorded as liabilities in the Company’s consolidated financial statements.

Pursuant to the lease agreement with Marriott, the Company has guaranteed the completion of the office building and parking garage on behalf of its 7750 Wisconsin Avenue joint venture and has also provided a financing guaranty as required with respect to the third-party construction financing. The Company earns fees from the joint venture for providing the guarantees and any amounts the Company pays under the guarantee(s) will be deemed to be capital contributions by the Company to the joint venture. The Company has also agreed to fund construction costs through capital contributions to the joint venture in the event of insufficiency of third-party construction financing. In addition, the Company has guaranteed to Marriott, as hotel manager, the completion of a hotel being developed by an affiliate of The Bernstein Companies (the Company’s partner in the 7750 Wisconsin Avenue joint venture) adjacent to the office property, for which the Company earns a fee from the affiliate of The Bernstein Companies. In addition, the Company entered into agreements with affiliates of The Bernstein Companies whereby the Company could be required to act as a mezzanine and/or mortgage lender and finance the construction of the hotel property. An affiliate of The Bernstein Companies exercised its option to borrow $10.0 million from the Company under such agreements, which financing was provided by the Company on June 1, 2020. The financing bears interest at a fixed rate of 8.00% per annum, compounded monthly, and matures on the fifth anniversary of the date on which the base building of the affiliate of The Bernstein Companies’ hotel property is substantially completed. The financing is collateralized by a pledge of the partner’s equity interest in the joint venture that owns and is developing 7750 Wisconsin Avenue. To secure such financing arrangements, affiliates of The Bernstein Companies are required to provide certain security, which varies depending on the specific loan, by pledges of their equity interest in the office property, a fee mortgage on the hotel property, or both. As of December 31, 2020, no amounts related to the contingent aspect of any of the guarantees are recorded as liabilities in the Company’s consolidated financial statements.

In connection with the sale and development of the Company’s 6595 Springfield Center Drive development project, the Company has guaranteed the completion of the project and the payment of certain cost overruns in accordance with the development management agreement with the buyer. Although the project has been sold and the lease with the Federal Government tenant has been assigned to the buyer, pursuant to the terms of the Federal Government lease, the Federal Government tenant is not obligated to release the prior owner/landlord from such landlord’s obligations under the lease until completion of the construction. As a result, the entity which previously owned the land remains liable to the Federal Government tenant for the completion of the construction obligations under the lease. The buyer is obligated to fund the balance of the costs to meet such construction obligations, subject to the Company’s obligation to fund cost overruns (if any), as noted above. An affiliate of the buyer has provided a guaranty of the obligations of the buyer to fund such construction costs and the buyer has agreed to use commercially reasonable efforts to require the construction lender to provide certain remedies to the Company in the event the buyer does not fund such construction obligations. As of December 31, 2020, no amounts related to the contingent aspect of the guarantee are recorded as a liability in the Company’s consolidated financial statements.

In connection with the redevelopment of the Company’s 325 Main Street property located in Cambridge, Massachusetts, the Company is required, pursuant to the local zoning ordinance, to commence construction of a residential building of at least 200,000 square feet with 25% of the project designated as income-restricted (with a minimum of 20% of the square footage devoted to home ownership units) prior to the occupancy of the 325 Main Street property, which is expected to occur during the third quarter of 2022. 325 Main Street consisted of an approximately 115,000 net rentable square foot Class A office property that was demolished and is being developed into an approximately 420,000 net rentable square foot Class A office property, including approximately 41,000 net rentable square feet of retail space.

In 2009, the Company filed a general unsecured creditor’s claim against Lehman Brothers, Inc. for approximately $45.3 million related to its rejection of a lease at 399 Park Avenue in New York City. On January 10, 2014, the trustee for the liquidation of the business of Lehman Brothers allowed the Company’s claim in the amount of approximately $45.2 million. During 2020, the Company received a distribution totaling approximately $0.1 million. During the years 2014 through 2018, the Company received distributions aggregating approximately $18.0 million, leaving a remaining claim of approximately $27.1 million. The Company will continue to evaluate whether to attempt to sell the remaining claim or wait until the trustee distributes proceeds from the Lehman Brothers estate. Given the inherent uncertainties in bankruptcy proceedings, there can be no assurance as to the timing or amount of additional proceeds, if any, that the Company may ultimately realize on the remaining claim, whether by sale to a third party or by one or more distributions from the trustee. Accordingly, the Company has not recorded any estimated recoveries associated with this gain contingency within its Consolidated Financial Statements at December 31, 2020.

Concentrations of Credit Risk

Management of the Company performs ongoing credit evaluations of tenants and may require tenants to provide some form of credit support such as corporate guarantees and/or other financial guarantees. Although the Company’s properties are geographically diverse and the tenants operate in a variety of industries, to the extent the Company has a significant concentration of rental revenue from any single tenant, the inability of that tenant to make its lease payments could have an adverse effect on the Company.

Insurance

The Company’s property insurance program per occurrence limits are $1.0 billion for its portfolio insurance program, including coverage for acts of terrorism other than nuclear, biological, chemical or radiological terrorism (“Terrorism Coverage”). The Company also carries $250 million of Terrorism Coverage for 601 Lexington Avenue, New York, New York (“601 Lexington Avenue”) in excess of the $1.0 billion of coverage in the Company’s property insurance program. Certain properties, including the General Motors Building located at 767 Fifth Avenue in New York, New York (“767 Fifth Avenue”), are currently insured in separate insurance programs. The property insurance program per occurrence limits for 767 Fifth Avenue are $1.625 billion, including Terrorism Coverage. The Company also currently carries nuclear, biological, chemical and radiological terrorism insurance coverage for acts of terrorism certified under the Federal Terrorism Risk Insurance Act (as amended, “TRIA”) (“NBCR Coverage”), which is provided by IXP as a direct insurer, for the properties in the Company’s portfolio, including 767 Fifth Avenue, but excluding certain other properties owned in joint ventures with third parties or which the Company manages. The per occurrence limit for NBCR Coverage is $1.0 billion. Under TRIA, after the payment of the required deductible and coinsurance, the NBCR Coverage provided by IXP is backstopped by the Federal Government if the aggregate industry insured losses resulting from a certified act of terrorism exceed a “program trigger.” The program trigger is $200 million, the coinsurance is 20% and the deductible is 20% of the premiums earned by the insurer for the year prior to a claim. If the Federal Government pays out for a loss under TRIA, it is mandatory that the Federal Government recoup the full amount of the loss from insurers offering TRIA coverage after the payment of the loss pursuant to a formula in TRIA. The Company may elect to terminate the NBCR Coverage if the Federal Government seeks recoupment for losses paid under TRIA, if TRIA is not extended after its expiration on December 31, 2027, if there is a change in its portfolio or for any other reason. The Company intends to continue to monitor the scope, nature and cost of available terrorism insurance.

The Company also currently carries earthquake insurance on its properties located in areas known to be subject to earthquakes. In addition, this insurance is subject to a deductible in the amount of 3% of the value of the affected property. Specifically, the Company currently carries earthquake insurance which covers its San Francisco and Los Angeles regions with a $240 million per occurrence limit, and a $240 million annual aggregate limit, $20 million of which is provided by IXP, as a direct insurer. The amount of the Company’s earthquake insurance coverage may not be sufficient to cover losses from earthquakes. In addition, the amount of earthquake coverage could impact the Company’s ability to finance properties subject to earthquake risk. The Company may discontinue earthquake insurance or change the structure of its earthquake insurance program on some or all of its properties in the future if the premiums exceed the Company’s estimation of the value of the coverage.

IXP, a captive insurance company which is a wholly-owned subsidiary of the Company, acts as a direct insurer with respect to a portion of the Company’s earthquake insurance coverage for its Greater San Francisco and Los Angeles properties and the Company’s NBCR Coverage. Insofar as the Company owns IXP, it is responsible for its liquidity and capital resources, and the accounts of IXP are part of the Company’s consolidated financial statements. In particular, if a loss occurs which is covered by the Company’s NBCR Coverage but is less than the applicable

program trigger under TRIA, IXP would be responsible for the full amount of the loss without any backstop by the Federal Government. IXP would also be responsible for any recoupment charges by the Federal Government in the event losses are paid out and its insurance policy is maintained after the payout by the Federal Government. If the Company experiences a loss and IXP is required to pay under its insurance policy, the Company would ultimately record the loss to the extent of the required payment. Therefore, insurance coverage provided by IXP should not be considered as the equivalent of third-party insurance, but rather as a modified form of self-insurance. In addition, Boston Properties Limited Partnership has issued a guarantee to cover liabilities of IXP in the amount of $20.0 million.

Due to the current COVID-19 pandemic, the Company anticipates the possibility of business interruption, loss of lease revenue and/or other associated expenses related to the Company’s operations across its portfolio. Because this is an ongoing situation it is not yet possible to quantify the Company’s losses and expenses, which continue to develop. Because of the complexity of the Company’s insurance policies and limited precedent for claims being made related to pandemics, it is not yet possible to determine if such losses and expenses will be covered by the Company’s insurance policies. Therefore, at this time, the Company is providing notice to the applicable insurers of the potential for claims in order to protect the Company’s rights under its policies.

The Company continues to monitor the state of the insurance market in general, and the scope and costs of coverage for acts of terrorism, California earthquake risk and pandemics, in particular, but the Company cannot anticipate what coverage will be available on commercially reasonable terms in future policy years. There are other types of losses, such as from wars, for which the Company cannot obtain insurance at all or at a reasonable cost. With respect to such losses and losses from acts of terrorism, earthquakes or other catastrophic events, if the Company experiences a loss that is uninsured or that exceeds policy limits, the Company could lose the capital invested in the damaged properties, as well as the anticipated future revenues from those properties. Depending on the specific circumstances of each affected property, it is possible that the Company could be liable for mortgage indebtedness or other obligations related to the property. Any such loss could materially and adversely affect the Company’s business and financial condition and results of operations.

Legal Matters

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

State and Local Tax Matters

Because Boston Properties, Inc. is organized and qualifies as a REIT, it is generally not subject to federal income taxes, but is subject to certain state and local taxes. In the normal course of business, certain entities through which the Company owns real estate either have undergone, or are currently undergoing, tax audits. Although the Company believes that it has substantial arguments in favor of its positions in the ongoing audits, in some instances there is no controlling precedent or interpretive guidance on the specific point at issue. Collectively, tax deficiency notices received to date from the jurisdictions conducting the ongoing audits have not been material. However, there can be no assurance that future audits will not occur with increased frequency or that the ultimate result of such audits will not have a material adverse effect on the Company’s results of operations.

Environmental Matters

It is the Company’s policy to retain independent environmental consultants to conduct or update Phase I environmental assessments (which generally do not involve invasive techniques such as soil or ground water sampling) and asbestos surveys in connection with the Company’s acquisition of properties. These pre-purchase environmental assessments have not revealed environmental conditions that the Company believes will have a material adverse effect on its business, assets, financial condition, results of operations or liquidity, and the Company is not otherwise aware of environmental conditions with respect to its properties that the Company believes would have such a material adverse effect. However, from time to time environmental conditions at the Company’s properties have required and may in the future require environmental testing and/or regulatory filings, as well as remedial action.

For example, in February 1999, the Company (through a joint venture) acquired from Exxon Corporation a property in Massachusetts that was formerly used as a petroleum bulk storage and distribution facility and was known by the state regulatory authority to contain soil and groundwater contamination. The Company developed an office park on the property. The Company engaged a specially licensed environmental consultant to oversee the

management of contaminated soil and groundwater that was disturbed in the course of construction. Under the property acquisition agreement, Exxon agreed to (1) bear the liability arising from releases or discharges of oil and hazardous substances which occurred at the site prior to the Company’s ownership, (2) continue monitoring and/or remediating such releases and discharges as necessary and appropriate to comply with applicable requirements, and (3) indemnify the Company for certain losses arising from preexisting site conditions. Any indemnity claim may be subject to various defenses and contractual limitations, including time limits, and there can be no assurance that the amounts paid under the indemnity, if any, would be sufficient to cover the liabilities arising from any such releases and discharges.

Environmental investigations at some of the Company’s properties and certain properties owned by affiliates of the Company have identified groundwater contamination migrating from off-site source properties. In each case the Company engaged a licensed environmental consultant to perform the necessary investigations and assessments and to prepare any required submittals to the regulatory authorities. In each case the environmental consultant concluded that the properties qualify under the regulatory program or the regulatory practice for a status which eliminates certain deadlines for conducting response actions at a site. The Company also believes that these properties qualify for liability relief under certain statutory provisions or regulatory practices regarding upgradient releases. Although the Company believes that the current or former owners of the upgradient source properties may bear responsibility for some or all of the costs of addressing the identified groundwater contamination, the Company will take such further response actions (if any) that it deems necessary or advisable. Other than periodic testing at some of these properties, no such additional response actions are anticipated at this time.

Some of the Company’s properties and certain properties owned by the Company’s affiliates are located in urban, industrial and other previously developed areas where fill or current or historical uses of the areas have caused site contamination. Accordingly, it is sometimes necessary to institute special soil and/or groundwater handling procedures and/or include particular building design features in connection with development, construction and other property operations in order to achieve regulatory closure and/or ensure that contaminated materials are addressed in an appropriate manner. In these situations, it is the Company’s practice to investigate the nature and extent of detected contamination, including potential issues associated with vapor intrusion concerns and/or potential contaminant migration to or from the subject property in groundwater, assess potential liability risks and estimate the costs of required response actions and special handling procedures contaminant migration, assess potential liability risks and estimate the costs of required response actions and special handling procedures. The Company then uses this information as part of its decision-making process with respect to the acquisition, deal structure and/or development of the property. For example, the Company owns a parcel in Massachusetts which was formerly used as a quarry/asphalt batching facility. Pre-purchase testing indicated that the site contained relatively low levels of certain contaminants. The Company has developed an office park on this property. Prior to and during redevelopment activities, the Company engaged a specially licensed environmental consultant to monitor environmental conditions at the site and prepare necessary regulatory submittals based on the results of an environmental risk characterization. A submittal has been made to the regulatory authorities in order to achieve regulatory closure at this site. The submittal included an environmental deed restriction that mandates compliance with certain protective measures in a portion of the site where low levels of residual soil contamination have been left in place in accordance with applicable laws.

The Company expects that resolution of the environmental matters relating to the above will not have a material impact on its business, assets, financial condition, results of operations or liquidity. However, the Company cannot assure you that it has identified all environmental liabilities at its properties, that all necessary remediation actions have been or will be undertaken at the Company’s properties or that the Company will be indemnified, in full or at all, in the event that such environmental liabilities arise.

11. Noncontrolling Interests

Noncontrolling interests relate to the interests in Boston Properties Limited Partnership not owned by Boston Properties, Inc. and interests in consolidated property partnerships not wholly-owned by the Company. As of December 31, 2020, the noncontrolling interests in Boston Properties Limited Partnership consisted of 16,037,121 OP Units, 1,336,115 LTIP Units (including 105,080 2012 OPP Units, 64,468 2013 MYLTIP Units, 23,100 2014 MYLTIP Units, 24,966 2015 MYLTIP Units, 89,791 2016 MYLTIP Units and 116,078 2017 MYLTIP Units), 336,195 2018 MYLTIP Units, 219,916 2019 MYLTIP Units and 203,278 2020 MYLTIP Units held by parties other than Boston Properties, Inc.

Noncontrolling Interest—Common Units

During the years ended December 31, 2020 and 2019, 856,811 and 144,481 OP Units, respectively, were presented by the holders for redemption (including 88,168 and 92,678 OP Units, respectively, issued upon conversion of LTIP Units, 2012 OPP Units and 2013 - 2017 MYLTIP Units) and were redeemed by Boston Properties, Inc. in exchange for an equal number of shares of Common Stock.

At December 31, 2020, Boston Properties Limited Partnership had outstanding 336,195 2018 MYLTIP Units, 219,916 2019 MYLTIP Units and 203,278 2020 MYLTIP Units. Prior to the applicable measurement date (February 5, 2021 for 2018 MYLTIP Units (See Note 18), February 4, 2022 for 2019 MYLTIP Units and February 3, 2023 for 2020 MYLTIP Units), holders of MYLTIP Units will be entitled to receive per unit distributions equal to one-tenth (10%) of the regular quarterly distributions payable on an OP Unit, but will not be entitled to receive any special distributions. After the measurement date, the number of MYLTIP Units, both vested and unvested, that MYLTIP award recipients have earned, if any, based on the establishment of a performance pool, will be entitled to receive distributions in an amount per unit equal to distributions, both regular and special, payable on an OP Unit.

On February 4, 2018, the measurement period for the Company’s 2015 MYLTIP awards ended and, based on Boston Properties, Inc.’s relative TSR performance, the final awards were determined to be 22.0% of target, or an aggregate of approximately $3.6 million (after giving effect to employee separations). As a result, an aggregate of 337,847 2015 MYLTIP Units that had been previously granted were automatically forfeited.

On February 9, 2019, the measurement period for the Company’s 2016 MYLTIP awards ended and, based on Boston Properties, Inc.’s relative TSR performance, the final awards were determined to be 69.5% of target, or an aggregate of approximately $13.6 million (after giving effect to employee separations). As a result, an aggregate of 364,980 2016 MYLTIP Units that had been previously granted were automatically forfeited.

On February 6, 2020, the measurement period for the Company’s 2017 MYLTIP awards ended and, based on Boston Properties, Inc.’s relative TSR performance, the final awards were determined to be 83.8% of target, or an aggregate of approximately $17.6 million (after giving effect to employee separations). As a result, an aggregate of 270,942 2017 MYLTIP Units that had been previously granted were automatically forfeited.

The following table presents Boston Properties Limited Partnership’s distributions on the OP Units and LTIP Units (including the 2012 OPP Units, 2013 - 2016 MYLTIP Units and, after the February 6, 2020 measurement date, the 2017 MYLTIP Units) and its distributions on the 2017 MYLTIP Units (prior to the February 6, 2020 measurement date) and 2018 - 2020 MYLTIP Units (after the February 4, 2020 issuance date) that occurred during the year ended December 31, 2020:


Record Date	Payment Date	Distributions per OP Unit and LTIP Unit	Distributions per MYLTIP Unit
December 31, 2020	January 28, 2021	$0.98	$0.098
September 30, 2020	October 30, 2020	$0.98	$0.098
June 30, 2020	July 31, 2020	$0.98	$0.098
March 31, 2020	April 30, 2020	$0.98	$0.098
December 31, 2019	January 30, 2020	$0.98	$0.098

The following table presents Boston Properties Limited Partnership’s distributions on the OP Units and LTIP Units (including the 2012 OPP Units, 2013 - 2015 MYLTIP Units and, after the February 9, 2019 measurement date, the 2016 MYLTIP Units) and its distributions on the 2016 MYLTIP Units (prior to the February 9, 2019 measurement date) and 2017 - 2019 MYLTIP Units (after the February 5, 2019 issuance date) that occurred during the year ended December 31, 2019:


Record Date	Payment Date	Distributions per OP Unit and LTIP Unit	Distributions per MYLTIP Unit
December 31, 2019	January 30, 2020	$0.98	$0.098
September 30, 2019	October 31, 2019	$0.95	$0.095
June 28, 2019	July 31, 2019	$0.95	$0.095
March 29, 2019	April 30, 2019	$0.95	$0.095
December 31, 2018	January 30, 2019	$0.95	$0.095

A holder of an OP Unit may present the OP Unit to Boston Properties Limited Partnership for redemption at any time (subject to restrictions agreed upon at the time of issuance of OP Units to particular holders that may restrict such redemption right for a period of time, generally one year from issuance). Upon presentation of an OP Unit for redemption, Boston Properties Limited Partnership must redeem the OP Unit for cash equal to the then value of a share of Common Stock of Boston Properties, Inc. Boston Properties, Inc. may, in its sole discretion, elect to assume and satisfy the redemption obligation by paying either cash or issuing one share of Common Stock. The value of the OP Units (not owned by Boston Properties, Inc. and LTIP Units (including the 2012 OPP Units and 2013 - 2017 MYLTIP Units) assuming that all conditions had been met for the conversion thereof) had all of such units been redeemed at December 31, 2020 was approximately $1.6 billion based on the last reported price of a share of Common Stock on the New York Stock Exchange of $94.53 per share on December 31, 2020.

Noncontrolling Interests—Property Partnerships

The noncontrolling interests in property partnerships consist of the outside equity interests in ventures that are consolidated with the financial results of the Company because the Company exercises control over the entities that own the properties. The equity interests in these ventures that are not owned by the Company, totaling approximately $1.7 billion at December 31, 2020 and 2019, are included in Noncontrolling Interests—Property Partnerships on the accompanying Consolidated Balance Sheets.

On April 1, 2019, the Company completed the acquisition of its partner’s 5% ownership interest and promoted profits interest in the consolidated entity that owns Salesforce Tower located in San Francisco, California for cash totaling approximately $210.9 million, which amount was reduced by approximately $24.1 million to $186.8 million to reflect the repayment of the Company’s preferred equity and preferred return in the venture. The Company now owns 100% of Salesforce Tower. The Company has accounted for the transaction as an equity transaction for financial reporting purposes and has reflected the difference between the fair value of the total consideration paid and the related carrying value of the noncontrolling interest - property partnership totaling approximately $162.5 million as a decrease to Additional Paid-in Capital and Partners’ Capital in the Consolidated Balance Sheets of Boston Properties, Inc. and Boston Properties Limited Partnership, respectively.

12. Stockholders’ Equity / Partners’ Capital

Boston Properties, Inc.

As of December 31, 2020, Boston Properties, Inc. had 155,718,825 shares of Common Stock outstanding.

As of December 31, 2020, Boston Properties, Inc. owned 1,730,921 general partnership units and 153,987,904 limited partnership units in Boston Properties Limited Partnership.

On May 22, 2020, Boston Properties, Inc. renewed its “at the market” (“ATM”) stock offering program through which it may sell from time to time up to an aggregate of $600.0 million of its Common Stock through sales agents over a three-year period. Under the ATM stock offering program, Boston Properties, Inc. may also engage in forward sale transactions with affiliates of certain sales agents for the sale of its Common Stock on a forward basis. This program replaced Boston Properties, Inc.’s prior $600.0 million ATM stock offering program that was scheduled to expire on June 2, 2020. Boston Properties, Inc. intends to use the net proceeds from any offering for general business purposes, which may include investment opportunities and debt reduction. No shares of Common Stock have been issued under this ATM stock offering program.

During the years ended December 31, 2020 and 2019, Boston Properties, Inc. issued 43,792 and 145,088 shares of Common Stock, respectively, upon the exercise of options to purchase Common Stock.

During the years ended December 31, 2020 and 2019, Boston Properties, Inc. issued 856,811 and 144,481 shares of Common Stock, respectively, in connection with the redemption of an equal number of redeemable OP Units from limited partners.

The following table presents Boston Properties, Inc.’s dividends per share and Boston Properties Limited Partnership’s distributions per OP Unit and LTIP Unit paid or declared in 2020 and during the year ended December 31, 2019:


Record Date	Payment Date	Dividend (Per Share)	Distribution (Per Unit)
December 31, 2020	January 28, 2021	$0.98	$0.98
September 30, 2020	October 30, 2020	$0.98	$0.98
June 30, 2020	July 31, 2020	$0.98	$0.98
March 31, 2020	April 30, 2020	$0.98	$0.98
December 31, 2019	January 30, 2020	$0.98	$0.98

December 31, 2019	January 30, 2020	$0.98	$0.98
September 30, 2019	October 31, 2019	$0.95	$0.95
June 28, 2019	July 31, 2019	$0.95	$0.95
March 29, 2019	April 30, 2019	$0.95	$0.95
December 31, 2018	January 30, 2019	$0.95	$0.95

Preferred Stock

As of December 31, 2020, Boston Properties, Inc. had 80,000 shares (8,000,000 depositary shares each representing 1/100th of a share) outstanding of its 5.25% Series B Cumulative Redeemable Preferred Stock with a liquidation preference of $2,500.00 per share ($25.00 per depositary share). Boston Properties, Inc. pays cumulative cash dividends on the Series B Preferred Stock at a rate of 5.25% per annum of the $2,500.00 liquidation preference per share. Boston Properties, Inc. did not have the right to redeem the Series B Preferred Stock prior to March 27, 2018, except in certain circumstances relating to the preservation of Boston Properties, Inc.’s REIT status. On and after March 27, 2018, Boston Properties, Inc., at its option, may redeem the Series B Preferred Stock for a cash redemption price of $2,500.00 per share ($25.00 per depositary share), plus all accrued and unpaid dividends. The Series B Preferred Stock is not redeemable by the holders, has no maturity date and is not convertible into any other security of Boston Properties, Inc. or its affiliates.

The following table presents Boston Properties, Inc.’s dividends per share on its outstanding Series B Preferred Stock paid or declared during 2020 and during the year ended December 31, 2019:


Record Date	Payment Date	Dividend (Per Share)
February 5, 2021	February 16, 2021	$32.8125
November 4, 2020	November 16, 2020	$32.8125
August 3, 2020	August 17, 2020	$32.8125
May 1, 2020	May 15, 2020	$32.8125
February 4, 2020	February 18, 2020	$32.8125

February 4, 2020	February 18, 2020	$32.8125
November 1, 2019	November 15, 2019	$32.8125
August 2, 2019	August 15, 2019	$32.8125
May 3, 2019	May 15, 2019	$32.8125
February 4, 2019	February 15, 2019	$32.8125

13. Segment Information

The following tables present reconciliations of Net Income Attributable to Boston Properties, Inc. Common Shareholders to the Company’s share of Net Operating Income and Net Income Attributable to Boston Properties Limited Partnership Common Unitholders to the Company’s share of Net Operating Income for the years ended December 31, 2020, 2019 and 2018.

Boston Properties, Inc.


	Year ended December 31,
			2020		2019		2018
		(in thousands)
Net income attributable to Boston Properties, Inc. common shareholders			$	862,227	$	511,034	$	572,347
Add:
Preferred dividends			10,500		10,500		10,500
Noncontrolling interest—common units of the Operating Partnership			97,704		59,345		66,807
Noncontrolling interests in property partnerships			48,260		71,120		62,909
Interest expense			431,717		412,717		378,168
Loss from early extinguishment of debt			—		29,540		16,490
Impairment loss			—		24,038		11,812
Net operating income from unconsolidated joint ventures			94,943		97,716		79,893
Depreciation and amortization expense			683,751		677,764		645,649
Transaction costs			1,531		1,984		1,604
Payroll and related costs from management services contracts			11,626		10,386		9,590
General and administrative expense			133,112		140,777		121,722
Less:
Net operating income attributable to noncontrolling interests in property partnerships			162,887		183,989		177,365
Gains (losses) from investments in securities			5,261		6,417		(1,865)
Interest and other income (loss)			5,953		18,939		10,823
Gains on sales of real estate			618,982		709		182,356
Income (loss) from unconsolidated joint ventures			(85,110)		46,592		2,222
Direct reimbursements of payroll and related costs from management services contracts			11,626		10,386		9,590
Development and management services revenue			29,641		40,039		45,158
Company’s share of Net Operating Income			$	1,626,131	$	1,739,850	$	1,551,842

Boston Properties Limited Partnership


	Year ended December 31,
		2020		2019		2018
		(in thousands)
Net income attributable to Boston Properties Limited Partnership common unitholders		$	979,979	$	580,102	$	656,903
Add:
Preferred distributions		10,500		10,500		10,500
Noncontrolling interests in property partnerships		48,260		71,120		62,909
Interest expense		431,717		412,717		378,168
Loss from early extinguishment of debt		—		29,540		16,490
Impairment loss		—		22,272		10,181
Net operating income from unconsolidated joint ventures		94,943		97,716		79,893
Depreciation and amortization expense		676,666		669,956		637,891
Transaction costs		1,531		1,984		1,604
Payroll and related costs from management services contracts		11,626		10,386		9,590
General and administrative expense		133,112		140,777		121,722
Less:
Net operating income attributable to noncontrolling interests in property partnerships		162,887		183,989		177,365
Gains (losses) from investments in securities		5,261		6,417		(1,865)
Interest and other income (loss)		5,953		18,939		10,823
Gains on sales of real estate		631,945		858		190,716
Income (loss) from unconsolidated joint ventures		(85,110)		46,592		2,222
Direct reimbursements of payroll and related costs from management services contracts		11,626		10,386		9,590
Development and management services revenue		29,641		40,039		45,158
Company’s share of Net Operating Income		$	1,626,131	$	1,739,850	$	1,551,842

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 (losses) from investments in securities, interest and other income (loss), gains on sales of real estate, income (loss) from unconsolidated joint ventures, direct reimbursements of payroll and related costs from management services contracts and development and management services revenue. The Company believes NOI is useful to investors as a performance measure and believes it provides useful information to investors regarding its results of operations and financial condition because, when compared across periods, it reflects the impact on operations from trends in occupancy rates, rental rates, operating costs and acquisition and development activity on an unleveraged basis, providing perspective not immediately apparent from net income attributable to Boston Properties, Inc. common shareholders and net income attributable to Boston Properties Limited Partnership common unitholders. For example, interest expense is not necessarily linked to the operating performance of a real estate asset and is often incurred at the corporate level as opposed to the property level. Similarly, interest expense may be incurred at the property level even though the financing proceeds may be used at the corporate level (e.g., used for other investment activity). In addition, depreciation and amortization expense, because of historical cost accounting and useful life estimates, may distort operating performance measures at the property level. NOI presented by the Company may not be comparable to NOI reported by other REITs or real estate companies that define NOI differently.

The Company’s internal reporting utilizes its share of NOI, which includes its share of NOI from consolidated and unconsolidated joint ventures, which is a non-GAAP financial measure that is calculated as the consolidated amount, plus the Company’s share of the amount from the Company’s unconsolidated joint ventures (calculated based upon the Company’s economic percentage ownership interest and, in some cases, after priority allocations), minus the Company’s partners’ share of the amount from the Company’s consolidated joint ventures (calculated based upon the partners’ economic percentage ownership interests and, in some cases, after priority allocations, income allocation to private REIT shareholders and their share of fees due to the Company). The Company’s share of NOI from unconsolidated joint ventures does not include impairment losses on its investments in unconsolidated joint ventures or its share of gains on sales of real estate from unconsolidated joint ventures, both of which are included within Income From Unconsolidated Joint Ventures in the Company’s Consolidated Statements of Operations. Management utilizes its share of NOI in assessing its performance as the Company has several significant joint ventures and, in some cases, the Company exercises significant influence over, but does not control, the joint venture, in which case GAAP requires that the Company account for the joint venture entity using the equity method of accounting and the Company does not consolidate it for financial reporting purposes. In other cases, GAAP requires that the Company consolidate the venture even though the Company’s partner(s) owns a significant percentage interest. As a result, the presentations of the Company’s share of NOI should not be considered a substitute for, and should only be considered together with and as a supplement to, the Company’s financial information presented in accordance with GAAP.

Asset information by segment is not reported because the Company does not use this measure to assess performance. Therefore, depreciation and amortization expense is not allocated among segments. Preferred dividends/distributions, interest expense, loss from early extinguishment of debt, impairment loss, depreciation and amortization expense, transaction costs, payroll and related costs from management services contracts, corporate general and administrative expense, gains (losses) from investments in securities, interest and other income (loss), gains on sales of real estate, income (loss) from unconsolidated joint ventures, direct reimbursements of payroll and related costs from management services contracts and development and management services revenue are not included in NOI and are provided as reconciling items to the Company’s reconciliations of its share of NOI to net income attributable to common shareholders/unitholders.

The Company’s segments are based on the Company’s method of internal reporting which classifies its operations by geographic area. The Company’s segments by geographic area are Boston, Los Angeles, New York, San Francisco and Washington, DC. The Company also presents information for each segment by property type, including Office, Residential and Hotel.

Included within the Office property type are commercial office and retail leases, as well as parking revenue. Upon the adoption of ASC 842, any write-off for bad debt, including accrued rent, will be recorded as a reduction to lease revenue. As a result of COVID-19, during the year ended December 31, 2020, the Company wrote off approximately $67.7 million related to accrued rent balances and approximately $22.6 million related to accounts receivable balances. The write-offs were for tenants, primarily in the retail, entertainment and co-working sectors, that either terminated their leases or that the Company considered their accrued rent and/or accounts receivable balances no longer probable of collection.

In addition, parking and other revenue for the year ended December 31, 2020 decreased by approximately $32.9 million compared to 2019. These decreases were primarily in transient and monthly parking revenue.

The degree to which the Company’s commercial and retail tenants’ and parking operators’ businesses are, or will continue to be, negatively impacted by COVID-19, including by measures intended to reduce its spread, such as mandatory business closures and “stay-at-home” orders, could result in a reduction in the Company’s cash flows or require that the Company write off additional accrued rent and/or accounts receivable balances, and this could have a material adverse effect on lease revenue and thus the results of the Company’s Office property type.

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 and thus the results of the Company’s Hotel property type.

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

For the year ended December 31, 2020:


	Boston			Los Angeles			New York			San Francisco			Washington, DC			Total
Rental Revenue: (1)
Office	$	897,915		$	—		$	935,966		$	508,327		$	336,587		$	2,678,795
Residential	13,616			—			—			155			24,375			38,146
Hotel	7,478			—			—			—			—			7,478
Total	919,009			—			935,966			508,482			360,962			2,724,419
% of Grand Totals	33.73		%	—		%	34.36		%	18.66		%	13.25		%	100.00		%
Rental Expenses:
Office	318,509			—			384,753			163,156			132,051			998,469
Residential	5,378			—			—			2,261			11,100			18,739
Hotel	13,136			—			—			—			—			13,136
Total	337,023			—			384,753			165,417			143,151			1,030,344
% of Grand Totals	32.71		%	—		%	37.35		%	16.05		%	13.89		%	100.00		%
Net operating income	$	581,986		$	—		$	551,213		$	343,065		$	217,811		$	1,694,075
% of Grand Totals	34.35		%	—		%	32.54		%	20.25		%	12.86		%	100.00		%
Less: Net operating income attributable to noncontrolling interests in property partnerships	(41,849)			—			(121,038)			—			—			(162,887)
Add: Company’s share of net operating income from unconsolidated joint ventures	10,765			57,907			(5,326)			14,928			16,669			94,943
Company’s share of net operating income	$	550,902		$	57,907		$	424,849		$	357,993		$	234,480		$	1,626,131
% of Grand Totals	33.88		%	3.56		%	26.12		%	22.02		%	14.42		%	100.00		%

(1)Rental Revenue is equal to Total Revenue per the Company’s Consolidated Statements of Operations, less Development and Management Services Revenue and Direct Reimbursements of Payroll and Related Costs from Management Services Contracts Revenue per the Consolidated Statements of Operations.

For the year ended December 31, 2019:


	Boston			Los Angeles			New York			San Francisco			Washington, DC			Total
Rental Revenue: (1)
Office	$	895,098		$	—		$	1,011,912		$	533,189		$	384,435		$	2,824,634
Residential	13,786			—			—			—			23,128			36,914
Hotel	48,589			—			—			—			—			48,589
Total	957,473			—			1,011,912			533,189			407,563			2,910,137
% of Grand Totals	32.90		%	—		%	34.78		%	18.32		%	14.00		%	100.00		%
Rental Expenses:
Office	322,282			—			389,532			177,994			144,217			1,034,025
Residential	5,071			—			—			—			10,914			15,985
Hotel	34,004			—			—			—			—			34,004
Total	361,357			—			389,532			177,994			155,131			1,084,014
% of Grand Totals	33.34		%	—		%	35.93		%	16.42		%	14.31		%	100.00		%
Net operating income	$	596,116		$	—		$	622,380		$	355,195		$	252,432		$	1,826,123
% of Grand Totals	32.64		%	—		%	34.09		%	19.45		%	13.82		%	100.00		%
Less: Net operating income attributable to noncontrolling interests in property partnerships	(40,109)			—			(143,432)			(448)			—			(183,989)
Add: Company’s share of net operating income from unconsolidated joint ventures	5,494			61,338			4,174			—			26,710			97,716
Company’s share of net operating income	$	561,501		$	61,338		$	483,122		$	354,747		$	279,142		$	1,739,850
% of Grand Totals	32.27		%	3.53		%	27.77		%	20.39		%	16.04		%	100.00		%

For the year ended December 31, 2018:


	Boston			Los Angeles			New York			San Francisco			Washington, DC			Total
Rental Revenue: (1)
Office	$	838,341		$	—		$	959,050		$	397,180		$	396,088		$	2,590,659
Residential	6,694			—			—			—			15,857			22,551
Hotel	49,118			—			—			—			—			49,118
Total	894,153			—			959,050			397,180			411,945			2,662,328
% of Grand Totals	33.59		%	—		%	36.02		%	14.92		%	15.47		%	100.00		%
Rental Expenses:
Office	315,653			—			377,992			130,016			142,886			966,547
Residential	3,632			—			—			—			8,972			12,604
Hotel	33,863			—			—			—			—			33,863
Total	353,148			—			377,992			130,016			151,858			1,013,014
% of Grand Totals	34.86		%	—		%	37.32		%	12.83		%	14.99		%	100.00		%
Net operating income	$	541,005		$	—		$	581,058		$	267,164		$	260,087		$	1,649,314
% of Grand Totals	32.80		%	—		%	35.23		%	16.20		%	15.77		%	100.00		%
Less: Net operating income attributable to noncontrolling interests in property partnerships	(33,862)			—			(143,562)			59			—			(177,365)
Add: Company’s share of net operating income from unconsolidated joint ventures	2,866			42,750			6,590			—			27,687			79,893
Company’s share of net operating income	$	510,009		$	42,750		$	444,086		$	267,223		$	287,774		$	1,551,842
% of Grand Totals	32.86		%	2.75		%	28.63		%	17.22		%	18.54		%	100.00		%

14. Earnings Per Share / Common Unit

Boston Properties, Inc.

The following table provides a reconciliation of both the net income attributable to Boston Properties, Inc. common shareholders and the number of common shares used in the computation of basic earnings per share (“EPS”), which is calculated by dividing net income attributable to Boston Properties, Inc. common shareholders by the weighted-average number of common shares outstanding during the period. Unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are also participating securities. As such, unvested restricted common stock of Boston Properties, Inc. and Boston Properties Limited Partnership’s LTIP Units, 2012 OPP Units and MYLTIP Units are considered participating securities. Participating securities are included in the computation of basic EPS of Boston Properties, Inc. using the two-class method. Participating securities are included in the computation of diluted EPS of Boston Properties, Inc. using the if-converted method if the impact is dilutive. Because the 2012 OPP Units and 2013 - 2017 MYLTIP Units required, and the 2018 - 2020 MYLTIP Units require, Boston Properties, Inc. to outperform absolute and/or relative return thresholds, unless such thresholds have been met by the end of the applicable reporting period, Boston Properties, Inc. excludes such units from the diluted EPS calculation. Other potentially dilutive common shares, including stock options, restricted stock and other securities of Boston Properties Limited Partnership that are exchangeable for Boston Properties, Inc.’s Common Stock, and the related impact on earnings, are considered when calculating diluted EPS.


	Year ended December 31, 2020
	Income (Numerator)		Shares (Denominator)	Per Share Amount
	(in thousands, except for per share amounts)
Basic Earnings:
Net income attributable to Boston Properties, Inc. common shareholders	$	862,227	155,432	$	5.55
Allocation of undistributed earnings to participating securities	(748)		—	(0.01)
Net income attributable to Boston Properties, Inc. common shareholders	$	861,479	155,432	$	5.54
Effect of Dilutive Securities:
Stock Based Compensation	—		85	—
Diluted Earnings:
Net income attributable to Boston Properties, Inc. common shareholders	$	861,479	155,517	$	5.54

	Year ended December 31, 2019
	Income (Numerator)		Shares (Denominator)	Per Share Amount
	(in thousands, except for per share amounts)
Basic Earnings:


Net income attributable to Boston Properties, Inc. common shareholders	$	511,034	154,582	$	3.31
Effect of Dilutive Securities:
Stock Based Compensation	—		301	(0.01)
Diluted Earnings:
Net income attributable to Boston Properties, Inc. common shareholders	$	511,034	154,883	$	3.30

	Year ended December 31, 2018
	Income (Numerator)		Shares (Denominator)	Per Share Amount
	(in thousands, except for per share amounts)
Basic Earnings:
Net income attributable to Boston Properties, Inc. common shareholders	$	572,347	154,427	$	3.71
Allocation of undistributed earnings to participating securities	(101)		—	—
Net income attributable to Boston Properties, Inc. common shareholders	$	572,246	154,427	$	3.71
Effect of Dilutive Securities:
Stock Based Compensation	—		255	(0.01)
Diluted Earnings:
Net income attributable to Boston Properties, Inc. common shareholders	$	572,246	154,682	$	3.70

Boston Properties Limited Partnership

The following table provides a reconciliation of both the net income attributable to Boston Properties Limited Partnership common unitholders and the number of common units used in the computation of basic earnings per common unit, which is calculated by dividing net income attributable to Boston Properties Limited Partnership common unitholders by the weighted-average number of common units outstanding during the period. Unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are also participating securities. As such, unvested restricted common stock of Boston Properties, Inc. and Boston Properties Limited Partnership’s LTIP Units, 2012 OPP Units and MYLTIP Units are considered participating securities. Participating securities are included in the computation of basic earnings per common unit using the two-class method. Participating securities are included in the computation of diluted earnings per common unit using the if-converted method if the impact is dilutive. Because the 2012 OPP Units and 2013 - 2017 MYLTIP Units required, and the 2018 - 2020 MYLTIP Units require, Boston Properties, Inc. to outperform absolute and/or relative return thresholds, unless such thresholds have been met by the end of the applicable reporting period, Boston Properties Limited Partnership excludes such units from the diluted earnings per common unit calculation. Other potentially dilutive common units and the related impact on earnings are considered when calculating diluted earnings per common unit. Included in the number of units (the denominator) below are approximately 17,211,000 and 17,618,000 and 17,485,000 redeemable common units for the years ended December 31, 2020, 2019 and 2018, respectively.


	Year ended December 31, 2020
	Income (Numerator)		Units (Denominator)	Per Unit Amount
	(in thousands, except for per unit amounts)
Basic Earnings:
Net income attributable to Boston Properties Limited Partnership common unitholders	$	979,979	172,643	$	5.68
Allocation of undistributed earnings to participating securities	(830)		—	(0.01)
Net income attributable to Boston Properties Limited Partnership common unitholders	$	979,149	172,643	$	5.67
Effect of Dilutive Securities:
Stock Based Compensation	—		85	—
Diluted Earnings:
Net income attributable to Boston Properties Limited Partnership common unitholders	$	979,149	172,728	$	5.67

	Year ended December 31, 2019
	Income (Numerator)		Units (Denominator)	Per Unit Amount
	(in thousands, except for per unit amounts)
Basic Earnings:


Net income attributable to Boston Properties Limited Partnership common unitholders	$	580,102	172,200	$	3.37
Effect of Dilutive Securities:
Stock Based Compensation	—		301	(0.01)
Diluted Earnings:
Net income attributable to Boston Properties Limited Partnership common unitholders	$	580,102	172,501	$	3.36


	Year ended December 31, 2018
	Income (Numerator)		Units (Denominator)	Per Unit Amount
	(in thousands, except for per unit amounts)
Basic Earnings:
Net income attributable to Boston Properties Limited Partnership common unitholders	$	656,903	171,912	$	3.82
Allocation of undistributed earnings to participating securities	(113)		—	—
Net income attributable to Boston Properties Limited Partnership common unitholders	$	656,790	171,912	$	3.82
Effect of Dilutive Securities:
Stock Based Compensation	—		255	(0.01)
Diluted Earnings:
Net income attributable to Boston Properties Limited Partnership common unitholders	$	656,790	172,167	$	3.81

15. Employee Benefit Plans

Effective January 1, 1985, the predecessor of the Company adopted a 401(k) Savings Plan (the “Plan”) for its employees. Upon formation, the Company adopted the Plan and the terms of the Plan.

Under the Plan, as amended, the Company’s matching contribution equals 200% of the first 3% of participant’s eligible earnings contributed (utilizing earnings that are not in excess of an amount established by the IRS ($285,000, $280,000 and $275,000 in 2020, 2019 and 2018, respectively), indexed for inflation) with no vesting requirement. The Company’s aggregate matching contribution for the years ended December 31, 2020, 2019 and 2018 was approximately $4.0 million, $4.2 million and $4.1 million, respectively.

The Company also maintains a deferred compensation plan that is designed to allow officers of Boston Properties, Inc. to defer a portion of the officer’s current income 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. The Company’s obligation under the plan is that of an unsecured promise to pay the deferred compensation to the plan participants in the future. At December 31, 2020 and 2019, the Company had maintained approximately $38.6 million and $36.0 million, respectively, in a separate account, which is not restricted as to its use. The Company’s liability under the plan is equal to the total amount of compensation deferred by the plan participants and earnings on the deferred compensation pursuant to investments elected by the plan participants. The Company’s liability as of December 31, 2020 and 2019 was approximately $38.6 million and $36.0 million, respectively, which are included in the accompanying Consolidated Balance Sheets.

16. Stock Option and Incentive Plan

At Boston Properties, Inc.’s 2012 annual meeting of stockholders held on May 15, 2012, its stockholders approved the Boston Properties, Inc. 2012 Stock Option and Incentive Plan (the “2012 Plan”). The 2012 Plan replaced the 1997 Stock Option and Incentive Plan (the “1997 Plan”). The material terms of the 2012 Plan include, among other things: (1) the maximum number of shares of common stock reserved and available for issuance under the 2012 Plan is the sum of (i) 13,000,000 newly authorized shares, plus (ii) the number of shares available for grant under the 1997 Stock Plan immediately prior to the effective date of the 2012 Plan, plus (iii) any shares underlying grants under the 1997 Plan that are forfeited, canceled or terminated (other than by exercise) in the future; (2) “full-value” awards (i.e., awards other than stock options) are multiplied by a 2.32 conversion ratio to calculate the number of shares available under the 2012 Plan that are used for each full-value award, as opposed to a 1.0 conversion ratio for each stock option awarded under the 2012 Plan; (3) shares tendered or held back for taxes will not be added back to the reserved pool under the 2012 Plan; (4) stock options may not be re-priced without stockholder approval; and (5) the term of the 2012 Plan is for 10 years from the date of stockholder approval.

On February 4, 2020, Boston Properties, Inc.’s Compensation Committee granted the 2020 MYLTIP awards under the Boston Properties, Inc.’s 2012 Stock Option and Incentive Plan (the “2012 Plan”) to certain officers and employees of Boston Properties, Inc. The 2020 MYLTIP awards utilize Boston Properties, Inc.’s TSR over a three-year measurement period, on an annualized, compounded basis, as the performance metric. Earned awards will range from zero to a maximum of 203,278 LTIP Units depending on Boston Properties, Inc.’s TSR relative to the FTSE Russell Nareit Office Index, adjusted to include Vornado Realty Trust, with a target of approximately 101,638 LTIP Units and linear interpolation between zero and maximum. Earned awards (if any) will vest 50% on February 3, 2023 and 50% on February 3, 2024, based on continued employment. Vesting will be accelerated in the event of a change in control, termination of employment by Boston Properties, Inc. without cause, or termination of employment by the award recipient for good reason, death, disability or retirement. If there is a change of control prior to February 3, 2023, earned awards will be calculated based on TSR performance up to the date of the change of control. The 2020 MYLTIP awards are in the form of LTIP Units issued on the grant date which (i) are subject to forfeiture to the extent awards are not earned and (ii) prior to the performance measurement date are only entitled to one-tenth (10%) of the regular quarterly distributions payable on common partnership units. Under ASC 718, the 2020 MYLTIP awards have an aggregate value of approximately $13.7 million, which amount will generally be amortized into earnings under the graded vesting method.

Boston Properties, Inc. issued 29,630, 26,503 and 20,320 shares of restricted common stock and Boston Properties Limited Partnership issued 207,181, 181,919 and 205,838 LTIP Units to employees and non-employee directors under the 2012 Plan during the years ended December 31, 2020, 2019 and 2018, respectively. Boston Properties, Inc. did not issue any non-qualified stock options under the 2012 Plan during the years ended December 31, 2020, 2019 and 2018. Boston Properties Limited Partnership issued 203,278 2020 MYLTIP Units, 220,734 2019 MYLTIP Units and 342,659 2018 MYLTIP Units to employees under the 2012 Plan during the years ended December 31, 2020, 2019 and 2018, respectively. Employees and non-employee directors paid $0.01 per share of restricted common stock and $0.25 per LTIP Unit and MYLTIP Unit. When issued, LTIP Units are not economically equivalent in value to a share of Common Stock, but over time can increase in value to one-for-one parity with Common Stock if there is sufficient appreciation in the value of the Company’s assets. The aggregate value of the LTIP Units is included in noncontrolling interests in the Consolidated Balance Sheets of Boston Properties, Inc. and Boston Properties Limited Partnership. A majority of the grants of restricted common stock and LTIP Units to employees vest in 4 equal annual installments. Restricted common stock is measured at fair value on the date of grant based on the number of shares granted and the closing price of Boston Properties, Inc.’s Common Stock on the date of grant as quoted on the New York Stock Exchange. Such value is recognized as an expense ratably over the corresponding employee service period. Because the 2012 OPP Units and 2013 - 2020 MYLTIP Units are subject to both a service condition and a market condition, the Company recognizes the related compensation expense under the graded vesting attribution method. Under the graded vesting attribution method, each portion of the award that vests at a different date is accounted for as a separate award and recognized over the period appropriate to that portion so that the compensation cost for each portion should be recognized in full by the time that portion vests. The Company recognizes forfeitures as they occur on its awards of stock-based compensation. Dividends paid on both vested and unvested shares of restricted stock are charged directly to Dividends in Excess of Earnings in Boston Properties, Inc.’s Consolidated Balance Sheets and Partners’ Capital in Boston Properties Limited Partnership’s Consolidated Balance Sheets. Aggregate stock-based compensation expense associated with restricted stock, LTIP Units and 2015 - 2020 MYLTIP Units was approximately $43.0 million, $39.8 million and $38.0 million for the years ended December 31, 2020, 2019 and 2018, respectively. At December 31, 2020, there was (1) an aggregate of approximately $25.4 million of unrecognized compensation expense related to unvested

restricted stock and LTIP Units and (2) an aggregate of approximately $10.3 million of unrecognized compensation expense related to unvested 2018 - 2020 MYLTIP Units that is expected to be recognized over a weighted-average period of approximately 2.1 years.

The shares of restricted stock were valued at approximately $4.0 million ($133.81 per share weighted-average), $3.5 million ($131.27 per share weighted-average) and $2.4 million ($119.27 per share weighted-average) for the years ended December 31, 2020, 2019 and 2018, respectively.

LTIP Units were valued using a Monte Carlo simulation method model in accordance with the provisions of ASC 718. LTIP Units issued during the years ended December 31, 2020, 2019 and 2018 were valued at approximately $26.3 million, $22.1 million and $22.7 million, respectively. The weighted-average per unit fair value of LTIP Unit grants in 2020, 2019 and 2018 was $127.14, $121.50 and $110.29, respectively. The per unit fair value of each LTIP Unit granted in 2020, 2019 and 2018 was estimated on the date of grant using the following assumptions; an expected life of 5.7 years, 5.7 years and 5.7 years, a risk-free interest rate of 1.47%, 2.68% and 2.63% and an expected price volatility of 18.0%, 27.0% and 27.0%, respectively.

There were no non-qualified stock options granted during the years ended December 31, 2020, 2019 and 2018.

A summary of the status of Boston Properties, Inc.’s stock options as of December 31, 2020, 2019 and 2018 and changes during the years then ended are presented below:


	Shares	Weighted-Average Exercise Price
Outstanding at December 31, 2017	540,441	$	96.35
Exercised	—	$	—
Outstanding at December 31, 2018	540,441	$	96.35
Exercised	(145,088)	$	96.27
Outstanding at December 31, 2019	395,353	$	96.37
Exercised	(43,792)	$	91.60
Outstanding at December 31, 2020	351,561	$	96.97

The following table summarizes information about Boston Properties, Inc.’s stock options outstanding at December 31, 2020:


Options Outstanding				Options Exercisable
Number Outstanding at 12/31/20	Weighted-Average Remaining Contractual Life	Exercise Price		Number Exercisable at 12/31/20	Exercise Price
54,003	0.1 years	$	86.86	54,003	$	86.86
54,282	2.3 years	$	95.69	54,282	$	95.69
133,834	2.1 years	$	98.46	133,834	$	98.46
109,442	1.1 years	$	100.77	109,442	$	100.77

The total intrinsic value of the outstanding and exercisable stock options as of December 31, 2020 was approximately $0.4 million. In addition, Boston Properties, Inc. had 395,353 and 540,441 options exercisable at a weighted-average exercise price of $96.37 and $96.35 at December 31, 2019 and 2018, respectively.

Boston Properties, Inc. adopted the 1999 Non-Qualified Employee Stock Purchase Plan (the “Stock Purchase Plan”) to encourage the ownership of Common Stock by eligible employees. The Stock Purchase Plan became effective on January 1, 1999 with an aggregate maximum of 250,000 shares of Common Stock available for issuance. The Stock Purchase Plan provides for eligible employees to purchase on the business day immediately following the end of the biannual purchase periods (i.e., January 1-June 30 and July 1-December 31) shares of Common Stock at a purchase price equal to 85% of the average closing prices of the Common Stock during the last ten business days of the purchase period. Boston Properties, Inc. issued 7,195, 5,862 and 6,268 shares with the weighted-average purchase price equal to $90.53 per share, $104.11 per share and $107.20 per share under the Stock Purchase Plan during the years ended December 31, 2020, 2019 and 2018, respectively.

17. Related Party Transactions

A firm controlled by Mr. Raymond A. Ritchey’s brother was paid aggregate leasing commissions of approximately $914,000, $21,000 and $921,000 during the years ended December 31, 2020, 2019 and 2018, respectively, related to certain exclusive leasing arrangements for certain Northern Virginia properties. In addition, Mr. Ritchey’s brother is employed by a real estate brokerage firm and participated in brokerage activities for which the Company paid the firm approximately $3.4 million and $2.6 million for the years ended December 31, 2020 and 2019, respectively. Mr. Ritchey’s brother did not participate in brokerage activities related to such arrangement during the year ended December 31, 2018. Mr. Ritchey is a Senior Executive Vice President of Boston Properties, Inc.

In accordance with Boston Properties, Inc.’s 2012 Plan, and as approved by its Board of Directors, seven non-employee directors made elections to receive deferred stock units in lieu of cash fees for 2020. As a result of these elections, the aggregate cash fees otherwise payable to a non-employee director during a fiscal quarter are converted into a number of deferred stock units equal to the aggregate cash fees divided by the last reported sales price of a share of Boston Properties, Inc.’s Common Stock on the last trading of the applicable fiscal quarter. The deferred stock units are also credited with dividend equivalents as dividends are paid by Boston Properties, Inc. The deferred stock units may be settled in shares of Common Stock upon the cessation of such director’s service on the Board of Directors of Boston Properties, Inc. The non-employee director compensation program provides, subject to certain conditions, the non-employee directors holding deferred stock units with the ability to elect, following cessation of their service on the Company’s Board of Directors, to diversify their investment elections into non-employer securities on a pre-tax basis and receive tax-deferred returns on such deferrals, which will ultimately be settled in cash. The Company’s obligation under the plan is that of an unsecured promise to pay the deferred compensation to the non-employee director in the future. At December 31, 2020 and 2019, the Company had maintained approximately $0.8 million and $0.7 million, respectively, in a separate account, which is not restricted as to its use. The Company’s liability under the plan is equal to the total amount of compensation deferred by the non-employee director and earnings on the deferred compensation pursuant to investments elected by the non-employee director. The Company’s liability as of December 31, 2020 and 2019 was approximately $0.8 million and $0.7 million, respectively, which is included in the accompanying Consolidated Balance Sheets. The terms of the non-employee director compensation program require the classification of these deferred stock units as temporary equity on the Consolidated Balance Sheets of Boston Properties, Inc. and Boston Properties Limited Partnership within Redeemable Deferred Stock Units. On May 21, 2019, in connection with the cessation of a director’s service on the Board of Directors of Boston Properties, Inc., Boston Properties, Inc. issued 17,949 shares of Common Stock in settlement of a portion of the director’s outstanding deferred stock units. In addition, on September 3, 2019, the Company converted 4,917 of such director’s deferred stock units as a result of such director’s election to diversify their investment elections into non-employer securities. At December 31, 2020 and 2019, Boston Properties, Inc. had outstanding 72,966 and 60,676 deferred stock units, respectively.

18. Subsequent Events

On January 29, 2021 and February 2, 2021, Boston Properties, Inc. issued an aggregate of 33,449 shares of restricted Common Stock and Boston Properties Limited Partnership issued an aggregate of 263,527 LTIP Units under the 2012 Plan to certain employees of Boston Properties, Inc.

On February 2, 2021, Boston Properties, Inc.’s Compensation Committee approved the 2021 Multi-Year Long-Term Incentive Program (the “2021 MYLTIP”) awards under Boston Properties, Inc.’s 2012 Plan to certain officers and employees of Boston Properties, Inc. Earned awards will range from zero to a maximum of 352,021 LTIP Units depending on Boston Properties, Inc.’s relative and absolute TSR performance with a target of approximately 176,009 LTIP Units. Under ASC 718, the 2021 MYLTIP awards have an aggregate value of approximately $15.3 million.

On February 5, 2021, the measurement period for the Company’s 2018 MYLTIP awards ended and, based on Boston Properties, Inc.’s relative TSR performance, the final awards were determined to be 29.2% of target, or an aggregate of approximately $4.6 million (after giving effect to employee separations). As a result, an aggregate of 285,925 2018 MYLTIP Units that had been previously granted were automatically forfeited.

On February 14, 2021, Boston Properties Limited Partnership used available cash to complete 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.

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