Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

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

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

The most significant factors that may cause actual results to differ materially from those expressed or implied by the forward-looking statements include the impact on global and U.S. economic conditions due to the ongoing COVID-19 pandemic, the ongoing war in Ukraine, continuing inflation, increasing interest rates, and supply-chain disruptions, as well as the risks described in (i) our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 including those described under the caption “Risk Factors,” (ii) our Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2022 including those described under the caption “Risk Factors,” (iii) our subsequent filings under the Exchange Act and (iv) the risk factors set forth in this Form 10-Q in Part II, Item 1A, if any.

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

the risks and uncertainties related to the impact of (1) the COVID-19 global pandemic, including the emergence of additional variants, the effectiveness, availability and distribution of vaccines, including their efficacy against new variant strains and the willingness of individuals to be vaccinated, (2) the impact of geopolitical conflicts, including the war in Ukraine, and (3) the severity and duration of the indirect economic impacts of the foregoing, such as recession, supply chain disruptions, labor market disruptions, rising inflation, increasing interest rates, dislocation and volatility in capital markets, job losses, potential longer-term changes in consumer and client behavior, as well as possible future governmental responses;
volatile or adverse global economic and geopolitical conditions, health crises and dislocations in the credit markets could adversely affect our access to cost-effective capital and have a resulting material adverse effect on our business opportunities, results of operations and financial condition;
risks associated with downturns in the national and local economies, increasing interest rates, and volatility in the securities markets;
general risks affecting the real estate industry (including, without limitation, the inability to enter into or renew leases, client space utilization, dependence on clients’ financial condition, and competition from other developers, owners and operators of real estate);
failure to manage effectively our growth and expansion into new markets and sub-markets or to integrate acquisitions and developments successfully;
the ability of our joint venture partners to satisfy their obligations;
risks and uncertainties affecting property development and construction (including, without limitation, rising inflation, supply chain disruptions, labor shortages, construction delays, increased construction costs, cost overruns, inability to obtain necessary permits, client accounting considerations that may result in negotiated lease provisions that limit a client’s liability during construction, and public opposition to such activities);
risks associated with the availability and terms of financing and the use of debt to fund acquisitions and developments or refinance existing indebtedness, including the impact of higher interest rates on the cost and/or availability of financing;
risks associated with forward interest rate contracts and the effectiveness of such arrangements;
risks associated with actual or threatened terrorist attacks;
costs of compliance with the Americans with Disabilities Act and other similar laws;
potential liability for uninsured losses and environmental contamination;
risks associated with the physical effects of climate change;
risks associated with security breaches through cyber attacks, cyber intrusions or otherwise, as well as other significant disruptions of our information technology (IT) networks and related systems, which support our operations and our buildings;
risks associated with BXP’s potential failure to qualify as a REIT under the Internal Revenue Code of 1986, as amended;
possible adverse changes in tax and environmental laws;
the impact of newly adopted accounting principles on our accounting policies and on period-to-period comparisons of financial results;
risks associated with possible state and local tax audits; and
risks associated with our dependence on key personnel whose continued service is not guaranteed.

The risks set forth above are not exhaustive. Other sections of this report may include additional factors that could adversely affect our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment, particularly in light of the circumstances relating to COVID-19 and the war in Ukraine. New risk factors emerge from time to time and it is not possible for management to predict all risk factors, nor can we assess the impact of all risk factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. Investors should also refer to our most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q for future periods and Current Reports on Form 8-K as we file them with the SEC, and to other materials we may furnish to the public from time to time through Current Reports on Form 8-K or otherwise, for a discussion of risks and uncertainties that may cause actual results, performance or achievements to differ materially from those expressed or implied by forward-looking statements. We expressly disclaim any responsibility to update any forward-looking statements to reflect changes in underlying assumptions or factors, new information, future events, or otherwise, and you should not rely upon these forward-looking statements after the date of this report.

Overview

BXP is one of the largest publicly traded office real estate investment trusts (REITs) (based on total market capitalization as of June 30, 2022) in the United States that develops, owns, and manages primarily Class A office properties. Our properties are concentrated in six markets in the United States - Boston, Los Angeles, New York, San Francisco, Seattle, and Washington, DC. BPLP is the entity through which BXP conducts substantially all of its business and owns (either directly or through subsidiaries) substantially all of its assets. We generate revenue and cash primarily by leasing Class A office space to our clients. When making leasing decisions, we consider, among other things, the creditworthiness of the client and the industry in which it conducts business, the length of the lease, the rental rate to be paid at inception and throughout the lease term, the costs of tenant improvements, free rent periods and other landlord concessions, anticipated operating expenses and real estate taxes, current and anticipated vacancy in our properties and the market overall (including sublease space), current and expected future demand for the space, the impact of other client’s expansion rights and general economic factors.

Our core strategy has always been to develop, acquire and manage the highest quality properties in supply-constrained markets with high barriers-to-entry and attractive demand drivers, and to focus on executing long-term leases with financially strong clients. Historically, these factors have minimized our exposure in weaker economic cycles and enhanced revenues as market conditions improve. Our client base is diverse across market sectors and the weighted-average lease term for our in-place leases, excluding residential units, was approximately 7.9 years, as of June 30, 2022, including leases signed by our unconsolidated joint ventures. The weighted-average lease term for our 20 largest clients, based on leased square footage, was approximately 11.2 years as of June 30, 2022.

To be successful in any leasing environment, we believe we must consider all aspects of the client-landlord relationship. In this regard, we believe that our competitive leasing advantage is based on the following attributes:

our understanding of our client’s short- and long-term space utilization and amenity needs in the local markets;
our track record of developing and operating Class A office properties in a sustainable and responsible manner;
our reputation as a premier developer, owner and manager of the highest quality Class A office properties in our markets;
our financial strength and our ability to maintain high building standards; and
our relationships with local brokers.

Outlook

Over the last quarter, the economic conditions in the U.S. and globally have deteriorated, primarily due to rising inflation. As inflation continued to reach new highs, it set off a chain reaction of events, beginning with the Federal Reserve taking and signaling severe tightening measures, interest rates rising across the yield curve, volatility and losses in the public equity and debt markets, and now increasing concerns that the U.S. economy may experience a recession. This evolving operating environment impacts BXP’s operating activities as:

business leaders may generally become more reticent to make large capital allocation decisions, such as entry into a new lease, given the uncertain economic environment;
our capital costs have increased due to higher interest rates and credit spreads, and private market debt financing, both for construction and existing assets, is significantly more challenging to arrange; and
construction costs have increased for new development and, although the costs for our active development pipeline are, at this stage, relatively fixed, the cost of potential future developments continues to increase.

Despite the challenging economic environment, we have continued to sign new leases above our historical volumes and our occupancy has increased by 90 basis points since June 30, 2021. Additionally, there is increasing evidence that many businesses have or will tighten up in-person work policies as economic conditions worsen. Many of these companies increased their workforce during the pandemic without increasing their available space. We expect these factors to help offset, at least partially, the recessionary headwinds to space demand.

In light of the foregoing, we are positioning BXP for relative success, regardless of the economic trajectory, by managing our leverage while continuing to selectively invest (including both acquisitions and developments) in premium Class A office and lab opportunities. We remain focused on the following priorities:

ensuring client health, safety and satisfaction;
leasing available space in our in-service and development properties, as well as proactively focusing on future lease expirations;
completing the construction and leasing of our development properties;
continuing and completing the redevelopment, repositioning, and repurposing for growing life sciences use of several key properties;
identifying new investment opportunities that meet our criteria while maintaining discipline in our underwriting;
managing our near-term debt maturities and overall leverage; and
actively managing our operations in a sustainable and responsible manner.

The following is an overview of leasing and investment activity in the second quarter of 2022.

Leasing Activity and Occupancy

In the second quarter of 2022, we signed approximately 1.9 million square feet of new leases and renewals, our strongest leasing quarter since the third quarter of 2019 and approximately 140% of our historical 10-year average for the second quarter. These leases have a weighted-average lease term of approximately 10.9 years, indicating that many new and existing clients continue to commit to the long-term use of space and view our properties as their preferred choice for a premium Class A office environment.

The overall occupancy of our in-service office and retail properties was 89.5% at June 30, 2022, an increase of 40 basis points from March 31, 2022 and our third consecutive quarter of occupancy growth. We expect a slight decline in occupancy over the next few quarters as we wait for recently signed leases covering approximately 975,000 square feet of currently vacant space to commence. Only 4.7% of the square footage in our in-service portfolio expires in 2023 and, based on our current leasing activity, we expect occupancy to increase slightly in 2023 from this quarter’s level.

Our parking and other revenue continue to grow as activity levels increase at our properties and in the cities where they are located. Our parking revenue in the second quarter of 2022 exceeded 90% of its pre-pandemic run rate. Similarly, our hotel property, the Boston Marriott Cambridge, experienced a better-than-projected increase in revenue and revenue returned back to the pre-pandemic level we saw in the second quarter of 2019.

Investment Activity

We remain committed to developing and acquiring assets to enhance our long-term growth and to meet client demand for high-quality office, residential, and life sciences space. We continually evaluate current and prospective markets for possible acquisitions of “value-add” assets that require lease-up or repositioning, and acquisitions that are otherwise consistent with our long-term strategy of owning, managing, developing, and improving, premier Class A properties in each of our chosen markets.

Consistent with this strategy, on May 17, 2022, we completed the acquisition of Madison Centre in Seattle, Washington, for a gross purchase price of $730.0 million. Madison Centre is an approximately 755,000 square foot, 37-story, LEED-Platinum certified, Class A office property. Madison Centre was constructed in 2017, is approximately 93% leased as of June 30, 2022, and is considered one of the highest quality buildings in Seattle. The acquisition was completed with a $730.0 million unsecured term loan that matures on May 16, 2023. As of June 30, 2022, the term loan bears interest at a variable rate equal to term SOFR plus 0.95% per annum.

In June 2022, we completed and fully placed in-service 325 Main Street, a Class A office building with approximately 414,000 square feet of office and retail space located in Cambridge, Massachusetts. The office component, comprising approximately 380,000 square feet, is 100% leased.

As of June 30, 2022, our development/redevelopment pipeline consists of 12 properties that, when completed, we expect will total approximately 4.2 million net rentable square feet. Our share of the estimated total cost for these projects is approximately $2.6 billion, of which approximately $1.1 billion remained to be invested. The total development pipeline, inclusive of both office and lab/life sciences developments, but excluding the View Boston Observatory at the Prudential Center and Reston Next Residential, is 49% pre-leased as of August 2, 2022. The office development projects, which total approximately 2.5 million square feet, are approximately 49% pre-leased, as of August 2, 2022, to predominately credit-strong clients with long-lease terms. We have approximately $1.4 billion (our share) of developments delivering through the second quarter of 2023 that are approximately 81% pre-leased, excluding the View Boston Observatory at the Prudential Center and as of August 2, 2022, and are expected to contribute to our revenue growth in 2023.

As we continue to focus on new investments to drive future growth, we regularly review our portfolio to identify properties as potential sales candidates that either no longer fit within our portfolio strategy or could attract premium pricing in the current market. In June 2022, we completed the sale of Virginia 95 Office Park, a portfolio of 11 suburban office properties aggregating approximately 733,000 net rentable square feet, located in Springfield, Virginia, for an aggregate gross sale price of $127.5 million. Net cash proceeds totaled approximately $121.9 million and BXP recognized a gain on sale of real estate totaling approximately $96.2 million. Total dispositions for 2022 could exceed $850 million, allowing BXP to both raise incremental liquidity and reallocate capital on a tax efficient basis from the Washington, DC market to the Seattle market. There is no assurance that we will be able to dispose of these assets on the terms or timeline currently contemplated or at all.

A brief overview of each of our markets follows.

Boston

During the second quarter of 2022, we signed approximately 1.3 million square feet of leases and approximately 1.6 million square feet of leases commenced. Approximately 1.1 million square feet of the leases that commenced had been vacant for less than one year and represent an increase in net rental obligations of approximately 24% over the prior leases.

Our Boston CBD in-service portfolio was approximately 94% leased as of June 30, 2022.

Our approximately 2.4 million square foot in-service office portfolio in Cambridge, including our newly placed in-service 325 Main Street property, was approximately 98% leased as of June 30, 2022. In April of 2022, we signed an approximately 570,000 square foot lease with AstraZeneca to lease the entirety of the first phase of the future life sciences development at 290 Binney Street. This future development site is located in the heart of Kendall Square and, when all phases are complete, will be comprised of approximately 1.1 million square feet of life sciences space and a 400,000 square foot residential building. This lease is subject to various conditions, some of which are not within our control. There can be no assurance the conditions will be satisfied or that we will commence the development on the terms and schedule currently contemplated or at all.

Waltham and the area surrounding the Route 128-Mass Turnpike interchange continue to be a popular submarket of Boston for leading and emerging companies in the life sciences, biotechnology and technology sectors. Our Route 128-Mass Turnpike portfolio is comprised of approximately 4.8 million square feet and was approximately 84% leased as of June 30, 2022. We currently have three life sciences developments and redevelopments under way in Waltham that average 51% pre-leased as of August 2, 2022, and that are expected to stabilize by the end of 2024. Among these projects is 880 Winter Street, which is 97% pre-leased as of August 2, 2022, and we expect to deliver this project in the fourth quarter of 2022.

Los Angeles

Our Los Angeles (“LA”) in-service portfolio of approximately 2.3 million square feet is currently focused in West LA and includes Colorado Center, an approximately 1.1 million square foot property of which we own 50%, and Santa Monica Business Park, a 21-building, approximately 1.2 million square foot property of which we own 55%. As of June 30, 2022, our LA in-service properties were approximately 93% leased.

New York

During the second quarter of 2022, we executed approximately 294,000 square feet of leases in the New York region and approximately 166,000 square feet of leases commenced. Approximately 130,000 square feet of the leases that commenced in the second quarter had been vacant for less than one year and they represent a decrease in net rental obligations of approximately 17% over the prior leases. The most significant transaction completed in the second quarter of 2022 was an approximately 125,000 square foot lease at 767 Fifth Avenue (The General Motors Building) in New York City, New York. As of June 30, 2022, our New York CBD in-service portfolio was approximately 90% leased.

San Francisco

During the second quarter of 2022, we executed approximately 175,000 square feet of leases and approximately 136,000 square feet of leases commenced in the San Francisco region. Approximately 119,000 square feet of leases that commenced had been vacant for less than one year and represent an increase in net rental obligations of approximately 21% over the prior leases.

Our San Francisco CBD in-service properties were approximately 90% leased as of June 30, 2022.

Seattle

Our Seattle in-service portfolio includes Safeco Plaza, an approximately 780,000 square foot property of which we own 33.67%, and the newly acquired Madison Centre, an approximately 755,000 square foot property. As of June 30, 2022, our Seattle in-service properties were approximately 89% leased. The most significant leasing transaction in the second quarter of 2022 was an approximately 60,000 square foot lease for the top three vacant floors at Safeco Plaza. When we acquired the asset in 2021, our plan included a major repositioning of the public and amenity spaces at the 4th and 3rd Avenue street planes. We believe our repositioning plans for the building,

combined with our proven track record of creating great spaces and places, allowed us to market to, and enter into a lease with, an important West Coast client for space at Safeco Plaza.

Washington, DC

During the second quarter of 2022, we executed approximately 81,000 square feet of leases and approximately 296,000 square feet of leases commenced in the Washington, DC region. Approximately 159,000 square feet of the leases that commenced had been vacant for less than one year and represent a decrease in net rental obligations of approximately 16% over the prior leases. Our Washington, DC CBD in-service properties were approximately 85% leased as of June 30, 2022.

On April 29, 2022, we partially placed in-service 2100 Pennsylvania Avenue, a Class A office project with approximately 480,000 net rentable square feet located in Washington, DC. The project is 61% pre-leased as of August 2, 2022, and we are negotiating leases for an additional 95,000 square feet, which, if signed, will increase our percentage pre-leased to greater than 80%.

A significant component of our Washington DC regional portfolio is in Reston Town Center, an award winning mixed-use development in Northern Virginia. Reston is a hub for technology, cloud services, cybersecurity and defense intelligence companies. Our Reston, Virginia properties were approximately 95% leased as of June 30, 2022.

Leasing Statistics

The table below details the leasing activity, including 100% of the unconsolidated joint ventures, that commenced during the three and six months ended June 30, 2022:


	Three months ended June 30, 2022		Six months ended June 30, 2022
	(Square Feet)
Vacant space available at the beginning of the period	5,143,538		5,340,029
Property dispositions/properties taken out of service (1)	(185,298)		(280,478)
Vacant space in properties acquired (2)	77,581		77,581
Properties placed (and partially placed) in-service (3)	420,553		831,243
Leases expiring or terminated during the period	1,918,961		3,016,764
Total space available for lease	7,375,335		8,985,139
1st generation leases	423,150		975,880
2nd generation leases with new clients	887,859		1,575,515
2nd generation lease renewals	1,044,390		1,413,808
Total space leased (4)	2,355,399		3,965,203
Vacant space available for lease at the end of the period	5,019,936		5,019,936

Leases executed during the period, in square feet (5)	1,932,879		3,112,471

Second generation leasing information: (6)
Leases commencing during the period, in square feet	1,932,249		2,989,323
Weighted Average Lease Term	111 Months		97 Months
Weighted Average Free Rent Period	92 Days		107 Days
Total Transaction Costs Per Square Foot (7)	$71.73		$65.81
Increase in Gross Rents (8)	9.62	%	5.51	%
Increase in Net Rents (9)	14.73	%	8.27	%

__________________

(1)Total vacant square feet of properties taken out of service during the three months ended June 30, 2022 consists of 185,298 square feet at Virginia 95 Office Park. Total vacant square feet of properties taken out of service and property dispositions during the six months ended June 30, 2022 consists of 95,180 square feet at 651 Gateway and 185,298 square feet at Virginia 95 Office Park.

(2)Total vacant square feet of properties acquired during the three and six months ended June 30, 2022 consists of 77,581 square feet at Madison Centre.

(3)Total vacant square feet of properties placed (and partially placed) in-service during the three months ended June 30, 2022 consists of 6,545 square feet at 2100 Pennsylvania Avenue and 414,008 square feet at 325 Main Street. Total square feet of properties placed (and partially placed) in-service during the six months ended June 30, 2022 consists of 410,690 square feet at Reston Next, 6,545 square feet at 2100 Pennsylvania Avenue and 414,008 square feet at 325 Main Street.

(4)Represents leases for which lease revenue recognition has commenced in accordance with GAAP during the three and six months ended June 30, 2022.

(5)Represents leases executed during the three and six months ended June 30, 2022 for which we either (1) commenced lease revenue recognition in such period or (2) will commence lease revenue recognition in subsequent periods, in accordance with GAAP, and includes leases at properties currently under development. The total square feet of leases executed and recognized during the three and six months ended June 30, 2022 is 243,004 and 564,921, respectively.

(6)Second generation leases are defined as leases for space that had previously been leased by us. Of the 1,932,249 and 2,989,323 square feet of second generation leases that commenced during the three and six months ended June 30, 2022, respectively, leases for 1,689,245 and 2,424,402 square feet, respectively, were signed in prior periods.

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

(8)Represents the increase in gross rent (base rent plus expense reimbursements) on the new versus expired leases on the 1,565,183 and 2,299,208 square feet of second generation leases that had been occupied within the prior 12 months for the three and six months ended June 30, 2022, respectively; excludes leases that management considers temporary because the client is not expected to occupy the space on a long-term basis.

(9)Represents the increase in net rent (gross rent less operating expenses) on the new versus expired leases on the 1,565,183 and 2,299,208 square feet of second generation leases that had been occupied within the prior 12 months for the three and six months ended June 30, 2022, respectively.

Transactions during the three months ended June 30, 2022 included the following:

Acquisition activity

On May 17, 2022, we completed the acquisition of Madison Centre in Seattle, Washington for a net purchase price, including transaction costs, of approximately $724.3 million. The acquisition was completed using the proceeds from BPLP’s $730.0 million unsecured term loan (See Note 6 to the Consolidated Financial Statements). Madison Centre is an approximately 755,000 net rentable square foot, 37-story, LEED-Platinum certified, Class A office property.

Disposition activities

On April 19, 2021, we entered into an agreement to acquire 11251 Roger Bacon Drive in Reston, Virginia for an aggregate purchase price of approximately $5.6 million. On April 7, 2022, we executed an agreement to assign our right to acquire 11251 Roger Bacon Drive to a third party for an assignment fee of approximately $6.9 million. Net cash proceeds totaled approximately $6.6 million and is reflected as Other income - assignment fee in the Company's Consolidated Statements of Operations. 11251 Roger Bacon Drive is an approximately 65,000 square foot office building situated on approximately 2.6 acres. The property was 100% leased.
On June 15, 2022, we completed the sale of our suburban Virginia 95 Office Park properties located in Springfield, Virginia for an aggregate gross sale price of $127.5 million. Net cash proceeds totaled approximately $121.9 million, resulting in a gain on sale of real estate totaling approximately $96.2 million for BXP and approximately $99.5 million for BPLP. Virginia 95 Office Park consists of eleven Class A office/flex properties aggregating approximately 733,000 net rentable square feet.

Development activities

On April 27, 2022, we entered into a 15-year lease agreement with AstraZeneca for approximately 570,000 net rentable square feet at our 290 Binney Street future development project. 290 Binney Street is part of the initial phase of a future life sciences development project located in the heart of Kendall Square in Cambridge, Massachusetts. The full project will consist of two buildings aggregating approximately 1.1 million rentable square feet of life sciences space and an approximately 400,000 square foot residential building. The lease and commencement of construction are subject to various conditions, some of which are not within our control. There can be no assurance that the conditions will

be satisfied or that we will commence the development on the terms and schedule currently contemplated or at all.

On April 29, 2022, we partially placed in-service 2100 Pennsylvania Avenue, a Class A office project with approximately 480,000 net rentable square feet located in Washington, DC.
On May 13, 2022, we commenced the development of Reston Next Office Phase II, a Class A office project located in Reston, Virginia. When completed, the building will consist of approximately 90,000 net rentable square feet.
On June 29, 2022, we completed and fully placed in-service 325 Main Street, a Class A office project with approximately 414,000 net rentable square feet located in Cambridge, Massachusetts.

Unconsolidated joint venture activities

On April 18, 2022, a joint venture in which we have a 50% ownership interest extended the maturity date of the construction loan collateralized by its Hub50House property to June 19, 2022. At the time of the extension, the outstanding balance of the loan totaled approximately $176.5 million, bore interest at a variable rate equal to LIBOR plus 2.00% per annum and was scheduled to mature on April 19, 2022. On June 17, 2022, the joint venture repaid the existing construction loan and obtained a new mortgage loan. The new mortgage loan has a principal balance of $185.0 million, bears interest at a variable rate equal to the Secured Overnight Financing Rate (“SOFR”) plus 1.35% per annum and matures on June 17, 2032. At closing, the joint venture entered into interest rate swap contracts with notional amounts aggregating $185.0 million through April 10, 2032, resulting in a fixed rate of approximately 4.432% per annum through the expiration of the interest rate swap contracts. In conjunction with the new mortgage loan, the joint venture paid off the existing construction loan. At the time of the payoff of the construction loan, the outstanding balance of the loan totaled approximately $176.7 million. The joint venture distributed excess loan proceeds from the new mortgage loan totaling approximately $6.8 million, of which our share totaled approximately $3.4 million. Hub50House is a residential property that consists of approximately 320,000 net rentable square feet and 440 residential units located in Boston, Massachusetts.
On May 13, 2022, we entered into a joint venture with a third party to own, operate and develop Reston Next Residential located in Reston, Virginia. Reston Next Residential is expected to consist of 508 residential rental units upon completion. We contributed approximately $11.3 million of improvements at closing and will contribute cash totaling approximately $3.5 million in the future for our 20% ownership interest in the joint venture. The partner contributed approximately $0.5 million of cash at closing and will contribute cash totaling approximately $58.7 million in the future for its 80% ownership interest in the joint venture. As a result of the partner’s deferred contribution, as of the acquisition date we owned an approximately 96% interest in the joint venture. On May 13, 2022, the joint venture commenced development and entered into a construction loan collateralized by the property. The construction loan has a principal amount of up to $140.0 million, bears interest at a variable rate equal to SOFR plus 2.00% per annum and matures on May 13, 2026, with two, one-year extension options, subject to certain conditions. As of June 30, 2022, no amounts had been drawn under the loan.
On June 16, 2022, we entered into a joint venture with a third party to own, operate and develop 751 Gateway, a laboratory building located in South San Francisco, California, that is expected to be approximately 231,000 net rentable square feet upon completion. 751 Gateway was previously part of our Gateway Commons joint venture. We contributed assets with an agreed upon value aggregating approximately $53.9 million and cash totaling approximately $2.6 million for our 49% ownership interest in the joint venture. The partner contributed assets with an agreed upon value aggregating approximately $53.9 million and cash totaling approximately $4.9 million for its 51% ownership interest in the joint venture.

Debt activity

On May 17, 2022, BPLP entered into an unsecured credit agreement (the “Unsecured Term Loan”) providing for a single borrowing of up to $730.0 million. The Unsecured Term Loan matures on May 16, 2023.

On May 17, 2022, BPLP exercised its option to draw $730.0 million under the Unsecured Term Loan (See Note 3 to the Consolidated Financial Statements). As of June 30, 2022, the Unsecured Term Loan bears interest at a variable rate equal to term SOFR plus 0.95% per annum based on BPLP’s credit rating at June 30, 2022. At June 30, 2022, BPLP had $730.0 million outstanding under the Unsecured Term Loan.

Critical Accounting Estimates

Management’s Discussion and Analysis of Financial Condition and Results of Operations discuss our Consolidated Financial Statements, which have been prepared in accordance with generally accepted accounting principles (“GAAP”). The preparation of these financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results may differ from those estimates and assumptions.

Our Annual Report on Form 10-K for the year ended December 31, 2021 contains a discussion of our critical accounting estimates. There have been no significant changes in our critical accounting estimates since the year ended December 31, 2021.

Results of Operations for the Six Months Ended June 30, 2022 and 2021

Net income attributable to Boston Properties, Inc. common shareholders and net income attributable to Boston Properties Limited Partnership common unitholders increased approximately $162.7 million and $184.0 million for the six months ended June 30, 2022 compared to 2021, respectively, as set forth in the following tables and for the reasons discussed below under the heading “Comparison of the six months ended June 30, 2022 to the six months ended June 30, 2021” within “Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

The following are reconciliations of Net Income Attributable to Boston Properties, Inc. Common Shareholders to Net Operating Income and Net Income Attributable to Boston Properties Limited Partnership Common Unitholders to Net Operating Income for the six months ended June 30, 2022 and 2021. For a detailed discussion of Net Operating Income (“NOI”), including the reasons management believes NOI is useful to investors, see page 55.

BXP


	Six months ended June 30,
	2022		2021		Increase/ (Decrease)		% Change
	(in thousands)
Net Income Attributable to Boston Properties, Inc. Common Shareholders	$	366,044	$	203,372	$	162,672	79.99	%
Preferred stock redemption charge	—		6,412		(6,412)		(100.00)	%
Preferred dividends	—		2,560		(2,560)		(100.00)	%
Net Income Attributable to Boston Properties, Inc.	366,044		212,344		153,700		72.38	%
Net Income Attributable to Noncontrolling Interests:
Noncontrolling interest—common units of the Operating Partnership	42,061		23,422		18,639		79.58	%
Noncontrolling interests in property partnerships	36,095		33,631		2,464		7.33	%
Net Income	444,200		269,397		174,803		64.89	%
Other Expenses:
Add:
Interest expense	205,370		214,221		(8,851)		(4.13)	%
Losses from early extinguishment of debt	—		898		(898)		(100.00)	%

Other Income:
Less:
Gains (losses) from investments in securities	(6,978)		3,934		(10,912)		(277.38)	%
Other income - assignment fee	6,624		—		6,624		100.00	%
Interest and other income (loss)	2,423		2,620		(197)		(7.52)	%
Gains on sales of real estate	118,948		7,756		111,192		1,433.63	%
Income from unconsolidated joint ventures	2,135		3,852		(1,717)		(44.57)	%
Other Expenses:
Add:
Depreciation and amortization expense	360,770		360,403		367		0.10	%
Transaction costs	496		1,082		(586)		(54.16)	%
Payroll and related costs from management services contracts	7,304		6,160		1,144		18.57	%
General and administrative expense	77,859		83,364		(5,505)		(6.60)	%
Other Revenue:
Less:
Direct reimbursements of payroll and related costs from management services contracts	7,304		6,160		1,144		18.57	%
Development and management services revenue	12,185		14,087		(1,902)		(13.50)	%
Net Operating Income	$	953,358	$	897,116	$	56,242	6.27	%

BPLP


	Six months ended June 30,
	2022		2021		Increase/ (Decrease)		% Change
	(in thousands)
Net Income Attributable to Boston Properties Limited Partnership Common Unitholders	$	415,617	$	231,619	$	183,998	79.44	%
Preferred unit redemption charge	—		6,412		(6,412)		(100.00)	%
Preferred distributions	—		2,560		(2,560)		(100.00)	%
Net Income Attributable to Boston Properties Limited Partnership	415,617		240,591		175,026		72.75	%
Net Income Attributable to Noncontrolling Interests:
Noncontrolling interests in property partnerships	36,095		33,631		2,464		7.33	%
Net Income	451,712		274,222		177,490		64.72	%
Other Expenses:
Add:
Interest expense	205,370		214,221		(8,851)		(4.13)	%
Losses from early extinguishment of debt	—		898		(898)		(100.00)	%

Other Income:
Less:
Gains (losses) from investments in securities	(6,978)		3,934		(10,912)		(277.38)	%
Other income - assignment fee	6,624		—		6,624		100.00	%
Interest and other income (loss)	2,423		2,620		(197)		(7.52)	%
Gains on sales of real estate	122,992		7,756		115,236		1,485.77	%
Income from unconsolidated joint ventures	2,135		3,852		(1,717)		(44.57)	%
Other Expenses:
Add:
Depreciation and amortization expense	357,302		355,578		1,724		0.48	%
Transaction costs	496		1,082		(586)		(54.16)	%
Payroll and related costs from management services contracts	7,304		6,160		1,144		18.57	%
General and administrative expense	77,859		83,364		(5,505)		(6.60)	%
Other Revenue:
Less:
Direct reimbursements of payroll and related costs from management services contracts	7,304		6,160		1,144		18.57	%
Development and management services revenue	12,185		14,087		(1,902)		(13.50)	%
Net Operating Income	$	953,358	$	897,116	$	56,242	6.27	%

At June 30, 2022 and 2021, we owned or had joint venture interests in a portfolio of 193 and 197 commercial real estate properties, respectively (in each case, the “Total Property Portfolio”). As a result of changes within our Total Property Portfolio, the financial data presented below shows significant changes in revenue and expenses from period-to-period. Accordingly, we do not believe that our period-to-period financial data with respect to the Total Property Portfolio provides a complete understanding of our operating results. Therefore, the comparison of operating results for the three and six months ended June 30, 2022 and 2021 show separately the changes attributable to the properties that were owned by us and in-service throughout each period compared (the “Same Property Portfolio”) and the changes attributable to the properties included in the Acquired, Placed In-Service, Development or Redevelopment or Sold Portfolios.

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

in development or redevelopment after the beginning of the earliest period presented or disposed of prior to the end of the latest period presented.

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

We believe that in order to understand our operating results, NOI should be examined in conjunction with net income attributable to Boston Properties, Inc. common shareholders and net income attributable to Boston Properties Limited Partnership common unitholders as presented in our Consolidated Financial Statements. NOI should not be considered as a substitute for net income attributable to Boston Properties, Inc. common shareholders or net income attributable to Boston Properties Limited Partnership common unitholders (determined in accordance with GAAP) or any other GAAP financial measures and should only be considered together with and as a supplement to our financial information prepared in accordance with GAAP.

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

Comparison of the six months ended June 30, 2022 to the six months ended June 30, 2021

The table below shows selected operating information for the Same Property Portfolio and the Total Property Portfolio. The Same Property Portfolio consists of 129 properties totaling approximately 38.9 million net rentable square feet, excluding unconsolidated joint ventures. The Same Property Portfolio includes properties acquired or placed in-service on or prior to January 1, 2021 and owned and in service through June 30, 2022. The Total Property Portfolio includes the effects of the other properties either acquired, placed in-service, in development or redevelopment after January 1, 2021 or disposed of on or prior to June 30, 2022. This table includes a reconciliation from the Same Property Portfolio to the Total Property Portfolio by also providing information for the six months ended June 30, 2022 and 2021 with respect to the properties that were acquired, placed in-service, in development or redevelopment or sold.


	Same Property Portfolio								Properties Acquired Portfolio				Properties Placed In-Service Portfolio				Properties in Development or Redevelopment Portfolio				Properties Sold Portfolio				Total Property Portfolio
	2022		2021		Increase/ (Decrease)		% Change		2022		2021		2022		2021		2022		2021		2022		2021		2022		2021		Increase/ (Decrease)		% Change
	(dollars in thousands)
Rental Revenue: (1)
Lease Revenue (Excluding Termination Income)	$	1,359,792	$	1,311,653	$	48,139	3.67	%	$	12,425	$	756	$	31,743	$	9,830	$	—	$	4,028	$	5,939	$	15,382	$	1,409,899	$	1,341,649	$	68,250	5.09	%
Termination Income	3,867		9,625		(5,758)		(59.82)	%	133		—		—		—		—		—		—		—		4,000		9,625		(5,625)		(58.44)	%
Lease Revenue	1,363,659		1,321,278		42,381		3.21	%	12,558		756		31,743		9,830		—		4,028		5,939		15,382		1,413,899		1,351,274		62,625		4.63	%
Parking and Other	47,769		34,640		13,129		37.90	%	524		—		29		9		—		201		—		—		48,322		34,850		13,472		38.66	%
Total Rental Revenue (1)	1,411,428		1,355,918		55,510		4.09	%	13,082		756		31,772		9,839		—		4,229		5,939		15,382		1,462,221		1,386,124		76,097		5.49	%
Real Estate Operating Expenses	513,725		484,797		28,928		5.97	%	3,049		71		9,050		2,743		—		1,907		2,029		4,519		527,853		494,037		33,816		6.84	%
Net Operating Income, Excluding Residential and Hotel	897,703		871,121		26,582		3.05	%	10,033		685		22,722		7,096		—		2,322		3,910		10,863		934,368		892,087		42,281		4.74	%
Residential Net Operating Income (2)	13,628		6,883		6,745		98.00	%	—		—		—		—		—		—		—		—		13,628		6,883		6,745		98.00	%
Hotel Net Operating Income (Loss) (2)	5,362		(1,854)		7,216		389.21	%	—		—		—		—		—		—		—		—		5,362		(1,854)		7,216		389.21	%
Net Operating Income	$	916,693	$	876,150	$	40,543	4.63	%	$	10,033	$	685	$	22,722	$	7,096	$	—	$	2,322	$	3,910	$	10,863	$	953,358	$	897,116	$	56,242	6.27	%

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

(2)For a detailed discussion of NOI, including the reasons management believes NOI is useful to investors, see page 55. Residential Net Operating Income for the six months ended June 30, 2022 and 2021 is comprised of Residential Revenue of $29,878 and $18,938 less Residential Expenses of $16,250 and $12,055, respectively. Hotel Net Operating Income (Loss) for the six months ended June 30, 2022 and 2021 is comprised of Hotel Revenue of $16,646 and $2,193 less Hotel Expenses of $11,284 and $4,047, respectively, per the Consolidated Statements of Operations.

Same Property Portfolio

Lease Revenue (Excluding Termination Income)

Lease revenue (excluding termination income) from the Same Property Portfolio increased by approximately $48.1 million for the six months ended June 30, 2022 compared to 2021. The increase was a result of our average revenue per square foot increasing by approximately $2.96, contributing approximately $50.6 million, partially offset by average occupancy decreasing from 91.5% to 91.4%, resulting in a decrease of approximately $2.5 million.

Termination Income

Termination income decreased by approximately $5.8 million for the six months ended June 30, 2022 compared to 2021.

Termination income for the six months ended June 30, 2022 related to 15 clients across the Same Property Portfolio and totaled approximately $3.3 million, which was primarily related to clients that terminated leases early in New York City. In addition, we received a distribution from our unsecured credit claim against Lehman Brothers, Inc. of approximately $0.6 million.

Termination income for the six months ended June 30, 2021 related to 19 clients across the Same Property Portfolio and totaled approximately $9.6 million, which was primarily related to clients that terminated leases early in New York City and the Boston region.

Parking and Other Revenue

Parking and other revenue increased by approximately $13.1 million for the six months ended June 30, 2022 compared to 2021. Parking revenue increased by approximately $13.4 million and was partially offset by a decrease in other revenue of approximately $0.3 million. The increase in parking revenue was primarily due to an increase in transient and monthly parking.

Real Estate Operating Expenses

Real estate operating expenses from the Same Property Portfolio increased by approximately $28.9 million, or 6.0%, for the six months ended June 30, 2022 compared to 2021, due primarily to an increase in operating expenses, including cleaning, utilities, repairs and maintenance, and roads/grounds/security. The increase in operating expenses was driven by an increase in physical occupancy.

Properties Acquired Portfolio

The table below lists the properties acquired between January 1, 2021 and June 30, 2022. Rental revenue and real estate operating expenses increased by approximately $12.3 million and $3.0 million, respectively, for the six months ended June 30, 2022 compared to 2021, as detailed below.


		Square Feet		Rental Revenue									Real Estate Operating Expenses
Name	Date acquired		2022			2021			Change			2022			2021			Change
				(dollars in thousands)
153 & 211 Second Avenue	June 2, 2021	136,882		$	5,108		$	756		$	4,352		$	569		$	71		$	498
Shady Grove Innovation District	August 2, 2021	232,278		1,502			—			1,502			800			—			800
Madison Centre (1)	May 17, 2022	754,988		6,472			—			6,472			1,680			—			1,680
		1,124,148		$	13,082		$	756		$	12,326		$	3,049		$	71		$	2,978

(1)Rental revenue for the six months ended June 30, 2022 includes approximately $0.1 million of termination income.

Properties Placed In-Service Portfolio

The table below lists the properties that were placed in-service or partially placed in-service between January 1, 2021 and June 30, 2022. Rental revenue and real estate operating expenses from our Properties Placed In-Service Portfolio increased by approximately $21.9 million and $6.3 million, respectively, for the six months ended June 30, 2022 compared to 2021, as detailed below.


	Quarter Initially Placed In-Service	Quarter Fully Placed In-Service		Rental Revenue						Real Estate Operating Expenses
Name		Square Feet	2022	2021		Change		2022		2021		Change
				(dollars in thousands)
One Five Nine East 53rd Street (1)	First Quarter, 2021	First Quarter, 2021	220,000	$	8,817	$	6,691	$	2,126	$	1,402	$	1,398	$	4
200 West Street (2)	Fourth Quarter, 2020	Fourth Quarter, 2021	273,365	7,755		3,148		4,607		2,590		1,236		1,354
Reston Next	Fourth Quarter, 2021	N/A	1,062,000	14,978		—		14,978		5,031		—		5,031
325 Main Street (3)	Second Quarter, 2022	Second Quarter, 2022	414,000	213		—		213		10		109		(99)
2100 Pennsylvania Avenue	Second Quarter, 2022	N/A	480,000	9		—		9		17		—		17
			2,449,365	$	31,772	$	9,839	$	21,933	$	9,050	$	2,743	$	6,307

(1)This is the low-rise portion of 601 Lexington Avenue.

(2)Includes 138,444 square feet of redevelopment that was fully placed in-service in December 2021.

(3)Real estate operating expenses for the six months ended June 30, 2021 were related to demolition costs.

Properties in Development or Redevelopment Portfolio

The table below lists the properties that were in development or redevelopment between January 1, 2021 and June 30, 2022. Rental revenue and real estate operating expenses from our Properties in Development or Redevelopment Portfolio decreased by approximately $4.2 million and $1.9 million, respectively, for the six months ended June 30, 2022 compared to 2021, as detailed below.


			Rental Revenue						Real Estate Operating Expenses
Name	Date Commenced Development / Redevelopment	Square Feet	2022		2021		Change		2022		2021		Change
			(dollars in thousands)
880 Winter Street (1)	February 25, 2021	224,000	$	—	$	2,476	$	(2,476)	$	—	$	1,448	$	(1,448)
3625-3635 Peterson Way (2)	April 16, 2021	218,000	—		1,753		(1,753)		—		459		(459)
		442,000	$	—	$	4,229	$	(4,229)	$	—	$	1,907	$	(1,907)

(1)On February 25, 2021, we commenced the redevelopment and conversion of 880 Winter Street, a 224,000 square foot office property located in Waltham, Massachusetts, to laboratory space.

(2)On April 16, 2021, we removed 3625-3635 Peterson Way, located in Santa Clara, California, from our in-service portfolio. We demolished the building and expect to redevelop the site at a future date.

Properties Sold Portfolio

The table below lists the properties we sold between January 1, 2021 and June 30, 2022. Rental revenue and real estate operating expenses from our Properties Sold Portfolio decreased by approximately $9.4 million and $2.5 million, respectively, for the six months ended June 30, 2022 compared to 2021, as detailed below.


				Rental Revenue						Real Estate Operating Expenses
Name	Date Sold	Property Type	Square Feet	2022		2021		Change		2022		2021		Change
				(dollars in thousands)
181, 191 and 201 Spring Street	October 25, 2021	Office	333,000	$	—	$	7,569	$	(7,569)	$	—	$	2,178	$	(2,178)
195 West Street	March 31, 2022	Office	63,500	749		124		625		242		277		(35)
Virginia 95 Office Park	June 15, 2022	Office/Flex	733,421	5,190		7,689		(2,499)		1,787		2,064		(277)
			1,129,921	$	5,939	$	15,382	$	(9,443)	$	2,029	$	4,519	$	(2,490)

For additional information on the sales of the above properties refer to “Results of Operations—Other Income and Expense Items—Gains on Sales of Real Estate” within “Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Residential Net Operating Income

Net operating income for our residential same properties increased by approximately $6.7 million for the six months ended June 30, 2022 compared to 2021.

The following reflects our occupancy and rate information for our residential same properties for the six months ended June 30, 2022 and 2021.


	Average Monthly Rental Rate (1)						Average Rental Rate Per Occupied Square Foot						Average Physical Occupancy (2)						Average Economic Occupancy (3)
Name	2022		2021		Change (%)		2022		2021		Change (%)		2022		2021		Change (%)		2022		2021		Change (%)
Proto Kendall Square	$	2,759	$	2,544	8.5	%	$	5.07	$	4.69	8.1	%	94.4	%	91.0	%	3.7	%	93.7	%	89.5	%	4.7	%
The Lofts at Atlantic Wharf	$	4,015	$	3,315	21.1	%	$	4.47	$	3.75	19.2	%	96.9	%	91.9	%	5.4	%	96.4	%	88.8	%	8.6	%
The Avant at Reston Town Center	$	2,375	$	2,233	6.4	%	$	2.58	$	2.45	5.3	%	95.1	%	93.2	%	2.0	%	95.2	%	92.2	%	3.3	%
Signature at Reston	$	2,631	$	2,204	19.4	%	$	2.71	$	2.29	18.3	%	94.7	%	83.6	%	13.3	%	94.1	%	79.4	%	18.5	%
The Skylyne	$	3,366	$	3,068	9.7	%	$	4.09	$	3.67	11.4	%	77.7	%	21.2	%	266.5	%	75.2	%	13.5	%	457.0	%

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

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

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

Hotel Net Operating Income (Loss)

The Boston Marriott Cambridge hotel had net operating income of approximately $5.4 million for the six months ended June 30, 2022, representing an increase of approximately $7.2 million compared to the six months ended June 30, 2021.

The following reflects our occupancy and rate information for the Boston Marriott Cambridge hotel for the six months ended June 30, 2022 and 2021.


	2022			2021			Change (%)
Occupancy	55.1		%	16.5		%	233.9	%
Average daily rate	$	316.56		$	147.66		114.4	%
REVPAR	$	174.38		$	24.36		615.8	%

Other Operating Revenue and Expense Items

Development and Management Services Revenue

Development and management services revenue decreased by approximately $1.9 million for the six months ended June 30, 2022 compared to 2021. Development and management services revenue decreased by approximately $1.7 million and $0.2 million, respectively. The decrease in development services revenue primarily related to a decrease in development fees earned from unconsolidated joint venture properties in the Washington, DC and Boston regions, which were placed in-service during prior periods.

General and Administrative Expense

General and administrative expense decreased by approximately $5.5 million for the six months ended June 30, 2022 compared to 2021 primarily due to a decrease in compensation expense of approximately $9.3 million, partially offset by an approximately $3.8 million increase in other general and administrative expenses. The decrease in compensation expense related to an approximately $10.9 million decrease in the value of our deferred compensation plan, partially offset by an approximately $1.6 million increase in other compensation expenses. The increase in other general and administrative expenses was primarily related to an increase in professional fees.

Wages directly related to the development of rental properties are capitalized and included in real estate assets on our Consolidated Balance Sheets and amortized over the useful lives of the applicable asset or lease term. Capitalized wages for the six months ended June 30, 2022 and 2021 were approximately $8.1 million and $6.8 million, respectively. These costs are not included in the general and administrative expenses discussed above.

Transaction Costs

Transaction costs decreased by approximately $0.6 million for the six months ended June 30, 2022 compared to 2021 due primarily to costs incurred in connection with the pursuit and formation of new joint ventures. In general, transaction costs relating to the formation of new joint ventures and the pursuit of other transactions are expensed as incurred.

Depreciation and Amortization Expense

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

BXP

Depreciation and amortization expense increased by approximately $0.4 million for the six months ended June 30, 2022 compared to 2021, as detailed below.


Portfolio	Depreciation and Amortization for the six months ended June 30,
2022	2021		Change
	(in thousands)
Same Property Portfolio (1)	$	334,586	$	334,547	$	39
Properties Acquired Portfolio	12,312		974		11,338
Properties Placed In-Service Portfolio	12,615		1,851		10,764
Properties in Development or Redevelopment Portfolio (2)	—		19,703		(19,703)
Properties Sold Portfolio	1,257		3,328		(2,071)
	$	360,770	$	360,403	$	367

(1)During the six months ended June 30, 2021, we commenced redevelopment of View Boston Observatory at The Prudential Center, a 59,000 net rentable square foot redevelopment of the top three floors of 800 Boylston Street - The Prudential Center, located in Boston, Massachusetts. As a result, during the six months ended June 30, 2021, we recorded approximately $2.6 million of accelerated depreciation expense for the demolition of the space, of which approximately $0.8 million related to the step-up of real estate assets.

(2)On February 25, 2021, we commenced redevelopment of 880 Winter Street in Waltham, Massachusetts. As a result, during the six months ended June 30, 2021, we recorded approximately $13.7 million of accelerated depreciation expense for the demolition of a portion of the building.

BPLP

Depreciation and amortization expense increased by approximately $1.7 million for the six months ended June 30, 2022 compared to 2021, as detailed below.


Portfolio	Depreciation and Amortization for the six months ended June 30,
2022	2021		Change
	(in thousands)
Same Property Portfolio (1)	$	331,118	$	329,722	$	1,396
Properties Acquired Portfolio	12,312		974		11,338
Properties Placed In-Service Portfolio	12,615		1,851		10,764
Properties in Development or Redevelopment Portfolio (2)	—		19,703		(19,703)
Properties Sold Portfolio	1,257		3,328		(2,071)
	$	357,302	$	355,578	$	1,724

(1)During the six months ended June 30, 2021, we commenced redevelopment of View Boston Observatory at The Prudential Center, a 59,000 net rentable square foot redevelopment of the top three floors of 800 Boylston Street - The Prudential Center, located in Boston, Massachusetts. As a result, during the six months ended June 30, 2021, we recorded approximately $1.8 million of accelerated depreciation expense for the demolition of the space.

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

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

Other Income and Expense Items

Income from Unconsolidated Joint Ventures

For the six months ended June 30, 2022 compared to 2021, income from unconsolidated joint ventures decreased by approximately $1.7 million primarily due to a $10.3 million gain on sale of investment from the sale of our Annapolis Junction joint venture interest during the six months ended June 30, 2021. This decrease was partially offset by an approximately $10.1 million increase in net income from placing in-service (1) 7750 Wisconsin Avenue (Marriott International Headquarters) in Bethesda, Maryland, and (2) 100 Causeway Street in Boston, Massachusetts, as well as increased leasing at the Hub50House residential property in Boston, Massachusetts.

Gains on Sales of Real Estate

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

BXP

Gains on sales of real estate increased by approximately $111.2 million for the six months ended June 30, 2022 compared to 2021, as detailed below.


Name	Date Sold	Property Type	Square Feet	Sale Price		Net Cash Proceeds		Gain on Sale of Real Estate
				(dollars in millions)
2022
195 West Street	March 31, 2022	Office	63,500	$	37.7	$	35.4	$	22.7
Virginia 95 Office Park	June 15, 2022	Office/Flex	733,421	127.5		121.9		96.2
				$	165.2	$	157.3	$	118.9	(1)
2021
6595 Springfield Center Drive	December 13, 2018	Office	634,000	N/A		N/A		$	7.8	(2)



				N/A		N/A		$	7.8

(1)Excludes approximately $0.1 million of gains on sales of real estate recognized during the six months ended June 30, 2022 related to gains on sales of real estate occurring in the prior periods.

(2)On December 13, 2018, we sold our 6595 Springfield Center Drive development project located in Springfield, Virginia. Concurrently with the sale, we agreed to act as development manager and guaranteed the completion of the project. The development project achieved final completion during the third quarter of 2021 and, upon completion of the project, the total cost of development was determined to be below the estimated total investment at the time of sale. As a result, we recognized a gain of approximately $7.8 million.

BPLP

Gains on sales of real estate increased by approximately $115.2 million for the six months ended June 30, 2022 compared to 2021, as detailed below.


Name	Date Sold	Property Type	Square Feet	Sale Price		Net Cash Proceeds		Gain on Sale of Real Estate
				(dollars in millions)
2022
195 West Street	March 31, 2022	Office	63,500	$	37.7	$	35.4	$	23.4
Virginia 95 Office Park	June 15, 2022	Office/Flex	733,421	127.5		121.9		99.5
				$	165.2	$	157.3	$	122.9	(1)
2021
6595 Springfield Center Drive	December 13, 2018	Office	634,000	N/A		N/A		$	7.8	(2)



				N/A		N/A		$	7.8

(1)Excludes approximately $0.1 million of gains on sales of real estate recognized during the six months ended June 30, 2022 related to gains on sales of real estate occurring in the prior periods.

Interest and Other Income (Loss)

Interest and other income (loss) decreased by approximately $0.2 million for the six months ended June 30, 2022 compared to 2021, due primarily to a decrease of approximately $0.3 million in interest income due to lower interest earned on our deposits.

Other Income - Assignment Fee

On April 19, 2021, we entered into an agreement to acquire 11251 Roger Bacon Drive in Reston, Virginia for an aggregate purchase price of approximately $5.6 million. On April 7, 2022, we executed an agreement to assign the right to acquire 11251 Roger Bacon Drive to a third party for an assignment fee of approximately $6.9 million. Net cash proceeds totaled approximately $6.6 million and is reflected as Other income - assignment fee. 11251 Roger Bacon Drive is an approximately 65,000 square foot office building situated on approximately 2.6 acres. The property was 100% leased.

Gains (losses) from Investments in Securities

Gains (losses) from investments in securities for the six months ended June 30, 2022 and 2021 related to investments that we have made to reduce our market risk relating to deferred compensation plans that we maintain for BXP’s officers and former non-employee directors. Under the deferred compensation plans, each officer or non-employee director who is eligible to participate is permitted to defer a portion of the officer’s current income or the non-employee director’s compensation on a pre-tax basis and receive a tax-deferred return on these deferrals based on the performance of specific investments selected by the officer or non-employee director. In order to reduce our market risk relating to these plans, we typically acquire, in a separate account that is not restricted as to its use, similar or identical investments as those selected by each officer or non-employee director. This enables us to generally match our liabilities to BXP’s officers or former non-employee directors under our deferred compensation plans with equivalent assets and thereby limit our market risk. The performance of these investments is recorded as gains (losses) from investments in securities. During the six months ended June 30, 2022 and 2021, we recognized gains (losses) of approximately $(7.0) million and $3.9 million, respectively, on these investments. By comparison, our general and administrative expense increased (decreased) by approximately $(7.0) million and $3.9 million during the six months ended June 30, 2022 and 2021, respectively, as a result of increases (decreases) in our liability under our deferred compensation plans that was associated with the performance of the specific investments selected by officers and former non-employee directors of BXP participating in the plans.

Losses From Early Extinguishment of Debt

On February 14, 2021, BPLP completed the redemption of $850.0 million in aggregate principal amount of its 4.125% senior notes due May 15, 2021. The redemption price was approximately $858.7 million, which was equal to the stated principal plus approximately $8.7 million of accrued and unpaid interest to, but not including, the redemption date. We recognized a loss from early extinguishment of debt totaling approximately $0.4 million related to unamortized origination costs.

On March 16, 2021, BPLP repaid $500.0 million, representing all amounts outstanding on its delayed draw term loan facility (“Delayed Draw Facility”) under its prior unsecured revolving credit agreement (the “2017 Credit Facility”). We recognized a loss from early extinguishment of debt totaling approximately $0.5 million related to unamortized financing costs.

Interest Expense

Interest expense decreased by approximately $8.9 million for the six months ended June 30, 2022 compared to 2021, as detailed below.


Component	Change in interest expense for the six months ended June 30, 2022 compared to June 30, 2021
	(in thousands)
Increases to interest expense due to:
Issuance of $850 million in aggregate principal of 2.450% senior notes due 2033 on September 29, 2021	$	10,424
Issuance of $850 million in aggregate principal of 2.550% senior notes due 2032 on March 16, 2021	4,577
Increase in interest associated with unsecured credit facilities and term loans	2,271
Amortization expense of financing fees related to unsecured term loan	801
Total increases to interest expense	18,073
Decreases to interest expense due to:
Redemption of $1.0 billion in aggregate principal of 3.85% senior notes due 2023 on October 15, 2021	(19,367)
Redemption of $850 million in aggregate principal of 4.125% senior notes due 2021 on February 14, 2021	(4,279)
Increase in capitalized interest related to development projects	(2,735)
Other interest expense (excluding senior notes)	(543)
Total decreases to interest expense	(26,924)
Total change in interest expense	$	(8,851)

Interest expense directly related to the development of rental properties is capitalized and included in real estate assets on our Consolidated Balance Sheets and amortized over the useful lives of the real estate or lease term. As portions of properties are placed in-service, we cease capitalizing interest on that portion and interest is then expensed. Interest capitalized for the six months ended June 30, 2022 and 2021 was approximately $27.8 million and $25.0 million, respectively. These costs are not included in the interest expense referenced above.

At June 30, 2022, our variable rate debt consisted of BPLP’s $1.5 billion revolving facility (the “Revolving Facility”) and BPLP’s Unsecured Term Loan. The Revolving Facility and Unsecured Term Loan had $895 million outstanding as of June 30, 2022. For a summary of our consolidated debt as of June 30, 2022 and 2021 refer to the heading “Liquidity and Capital Resources—Debt Financing” within “Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Noncontrolling Interests in Property Partnerships

Noncontrolling interests in property partnerships increased by approximately $2.5 million for the six months ended June 30, 2022 compared to 2021, as detailed below.


Property	Noncontrolling Interests in Property Partnerships for the six months ended June 30,
2022	2021		Change
	(in thousands)
767 Fifth Avenue (the General Motors Building)	$	6,049	$	5,467	$	582
Times Square Tower	10,483		9,920		563
601 Lexington Avenue (1)	5,651		6,809		(1,158)
100 Federal Street	6,421		6,790		(369)
Atlantic Wharf Office Building (2)	7,491		4,645		2,846
	$	36,095	$	33,631	$	2,464

(1)The decrease was primarily attributable to a decrease in lease revenue from our clients.

(2)The increase was primarily attributable to an increase in lease revenue from our clients.

Noncontrolling Interest—Common Units of the Operating Partnership

For BXP, noncontrolling interest—common units of the Operating Partnership increased by approximately $18.6 million for the six months ended June 30, 2022 compared to 2021 due primarily to an increase in allocable income, which was the result of recognizing a greater gain on sales of real estate amount during 2022. Due to our ownership structure, there is no corresponding line item on BPLP’s financial statements.

Preferred Stock/Unit Redemption Charge

On March 2, 2021, BXP issued a redemption notice for 80,000 shares of its Series B Preferred Stock, which constituted all of the outstanding Series B Preferred Stock, and the corresponding Depositary Shares, each representing 1/100th of a share of Series B Preferred Stock. The redemption price per share of Series B Preferred Stock was $2,500, plus all accrued and unpaid dividend to, but not including, the redemption date, totaling $2,516.41 per share. On March 31, 2021, we transferred the full redemption price for all outstanding shares of Series B Preferred Stock of approximately $201.3 million, including approximately $1.3 million of accrued and unpaid dividends to, but not including, the redemption date, to the redemption agent. The excess of the redemption price over the carrying value of the Series B Preferred Stock and Series B Preferred Units of approximately $6.4 million relates to the original issuance costs and is reflected as a reduction to Net Income Attributable to Boston Properties, Inc. common shareholders and Net Income Attributable to Boston Properties Limited Partnership common unitholders on the Consolidated Income Statement.

Results of Operations for the Three Months Ended June 30, 2022 and 2021

Net income attributable to Boston Properties, Inc. and net income attributable to Boston Properties Limited Partnership increased approximately $111.3 million and $127.9 million for the three months ended June 30, 2022 compared to 2021, respectively, as detailed in the following tables and for the reasons discussed below under the heading “Comparison of the three months ended June 30, 2022 to the three months ended June 30, 2021” within “Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

The following are reconciliations of Net Income Attributable to Boston Properties, Inc. to Net Operating Income and Net Income Attributable to Boston Properties Limited Partnership to Net Operating Income for the three months ended June 30, 2022 and 2021. For a detailed discussion of NOI, including the reasons management believes NOI is useful to investors, see page 67.

BXP


	Three months ended June 30,
	2022		2021		Increase/ (Decrease)		% Change
	(in thousands)
Net Income Attributable to Boston Properties, Inc.	$	222,989	$	111,703	$	111,286	99.63	%
Net Income Attributable to Noncontrolling Interests:
Noncontrolling interest—common units of the Operating Partnership	25,708		12,383		13,325		107.61	%
Noncontrolling interests in property partnerships	18,546		17,164		1,382		8.05	%
Net Income	267,243		141,250		125,993		89.20	%
Other Expenses:
Add:
Interest expense	104,142		106,319		(2,177)		(2.05)	%


Loss from unconsolidated joint ventures	54		1,373		(1,319)		(96.07)	%
Other Income:
Less:
Gains (losses) from investments in securities	(4,716)		2,275		(6,991)		(307.30)	%
Other income - assignment fee	6,624		—		6,624		100.00	%
Interest and other income (loss)	1,195		1,452		(257)		(17.70)	%
Gains on sales of real estate	96,247		7,756		88,491		1,140.94	%
Other Expenses:
Add:
Depreciation and amortization expense	183,146		183,838		(692)		(0.38)	%
Transaction costs	496		751		(255)		(33.95)	%
Payroll and related costs from management services contracts	3,239		2,655		584		22.00	%
General and administrative expense	34,665		38,405		(3,740)		(9.74)	%
Other Revenue:
Less:
Direct reimbursements of payroll and related costs from management services contracts	3,239		2,655		584		22.00	%
Development and management services revenue	6,354		7,284		(930)		(12.77)	%
Net Operating Income	$	484,042	$	453,169	$	30,873	6.81	%

BPLP


	Three months ended June 30,
	2022		2021		Increase/ (Decrease)		% Change
	(in thousands)
Net Income Attributable to Boston Properties Limited Partnership	$	253,788	$	125,846	$	127,942	101.67	%
Net Income Attributable to Noncontrolling Interests:
Noncontrolling interests in property partnerships	18,546		17,164		1,382		8.05	%
Net Income	272,334		143,010		129,324		90.43	%
Other Expenses:
Add:
Interest expense	104,142		106,319		(2,177)		(2.05)	%


Loss from unconsolidated joint ventures	54		1,373		(1,319)		(96.07)	%
Other Income:
Less:
Gains (losses) from investments in securities	(4,716)		2,275		(6,991)		(307.30)	%
Other income - assignment fee	6,624		—		6,624		100.00	%
Interest and other income (loss)	1,195		1,452		(257)		(17.70)	%
Gains on sales of real estate	99,608		7,756		91,852		1,184.27	%
Other Expenses:
Add:
Depreciation and amortization expense	181,416		182,078		(662)		(0.36)	%
Transaction costs	496		751		(255)		(33.95)	%
Payroll and related costs from management services contracts	3,239		2,655		584		22.00	%
General and administrative expense	34,665		38,405		(3,740)		(9.74)	%
Other Revenue:
Less:
Direct reimbursements of payroll and related costs from management services contracts	3,239		2,655		584		22.00	%
Development and management services revenue	6,354		7,284		(930)		(12.77)	%
Net Operating Income	$	484,042	$	453,169	$	30,873	6.81	%

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

We believe that in order to understand our operating results, NOI should be examined in conjunction with net income attributable to Boston Properties, Inc. and net income attributable to Boston Properties Limited Partnership

as presented in our Consolidated Financial Statements. NOI should not be considered as a substitute for net income attributable to Boston Properties, Inc. or net income attributable to Boston Properties Limited Partnership (determined in accordance with GAAP) or any other GAAP financial measures and should only be considered together with and as a supplement to our financial information prepared in accordance with GAAP.

Comparison of the three months ended June 30, 2022 to the three months ended June 30, 2021

The table below shows selected operating information for the Same Property Portfolio and the Total Property Portfolio. The Same Property Portfolio consists of 129 properties totaling approximately 39.1 million net rentable square feet, excluding unconsolidated joint ventures. The Same Property Portfolio includes properties acquired or placed in-service on or prior to April 1, 2021 and owned and in-service through June 30, 2022. The Total Property Portfolio includes the effects of the other properties either acquired, placed in-service, in development or redevelopment after April 1, 2021 or disposed of on or prior to June 30, 2022. This table includes a reconciliation from the Same Property Portfolio to the Total Property Portfolio by also providing information for the three months ended June 30, 2022 and 2021 with respect to the properties that were acquired, placed in-service, in development or redevelopment or sold.


	Same Property Portfolio								Properties Acquired Portfolio				Properties Placed In-Service Portfolio				Properties in Development or Redevelopment Portfolio				Properties Sold Portfolio				Total Property Portfolio
	2022		2021		Increase/ (Decrease)		% Change		2022		2021		2022		2021		2022		2021		2022		2021		2022		2021		Increase/ (Decrease)		% Change
	(dollars in thousands)
Rental Revenue: (1)
Lease Revenue (Excluding Termination Income)	$	682,184	$	657,753	$	24,431	3.71	%	$	9,134	$	756	$	12,853	$	1,647	$	—	$	1,257	$	2,354	$	7,693	$	706,525	$	669,106	$	37,419	5.59	%
Termination Income	1,789		5,355		(3,566)		(66.59)	%	133		—		—		—		—		—		—		—		1,922		5,355		(3,433)		(64.11)	%
Lease Revenue	683,973		663,108		20,865		3.15	%	9,267		756		12,853		1,647		—		1,257		2,354		7,693		708,447		674,461		33,986		5.04	%
Parking and Other	26,333		17,882		8,451		47.26	%	524		—		29		—		—		201		—		—		26,886		18,083		8,803		48.68	%
Total Rental Revenue (1)	710,306		680,990		29,316		4.30	%	9,791		756		12,882		1,647		—		1,458		2,354		7,693		735,333		692,544		42,789		6.18	%
Real Estate Operating Expenses	256,526		238,760		17,766		7.44	%	2,332		71		4,348		958		—		797		824		2,189		264,030		242,775		21,255		8.76	%
Net Operating Income, Excluding Residential and Hotel	453,780		442,230		11,550		2.61	%	7,459		685		8,534		689		—		661		1,530		5,504		471,303		449,769		21,534		4.79	%
Residential Net Operating Income (2)	7,094		3,835		3,259		84.98	%	—		—		—		—		—		—		—		—		7,094		3,835		3,259		84.98	%
Hotel Net Operating Income (Loss) (2)	5,645		(435)		6,080		1,397.70	%	—		—		—		—		—		—		—		—		5,645		(435)		6,080		1,397.70	%
Net Operating Income	$	466,519	$	445,630	$	20,889	4.69	%	$	7,459	$	685	$	8,534	$	689	$	—	$	661	$	1,530	$	5,504	$	484,042	$	453,169	$	30,873	6.81	%

(2)For a detailed discussion of NOI, including the reasons management believes NOI is useful to investors, see page 67. Residential Net Operating Income for the three months ended June 30, 2022 and 2021 is comprised of Residential Revenue of $16,912 and $9,763 less Residential Expenses of $9,818 and $5,928, respectively. Hotel Net Operating Income (Loss) for the three months ended June 30, 2022 and 2021 is comprised of Hotel Revenue of $12,089 and $1,561 less Hotel Expenses of $6,444 and $1,996, respectively, per the Consolidated Statements of Operations.

Same Property Portfolio

Lease Revenue (Excluding Termination Income)

Lease revenue (excluding termination income) from the Same Property Portfolio increased by approximately $24.4 million for the three months ended June 30, 2022 compared to 2021. The increase was a result of our average revenue per square foot increasing by approximately $3.02, contributing approximately $25.5 million, partially offset by an approximately $1.1 million decrease due to our average occupancy decreasing from 91.5% to 91.4%.

Termination Income

Termination income decreased by approximately $3.6 million for the three months ended June 30, 2022 compared to 2021.

Termination income for the three months ended June 30, 2022 related to six clients across the Same Property Portfolio and totaled approximately $1.8 million, which was primarily related to clients that terminated leases early in New York City.

Termination income for the three months ended June 30, 2021 related to 13 clients across the Same Property Portfolio and totaled approximately $5.4 million, which was primarily related to clients that terminated leases early in New York City.

Parking and Other Revenue

Parking and other revenue increased by approximately $8.5 million for the three months ended June 30, 2022 compared to 2021. Parking and other revenue increased by approximately $7.4 million and $1.1 million, respectively. The increase in parking revenue was primarily due to an increase in transient and monthly parking. The increase in other revenue was due to an increase in insurance proceeds received during the three months ended June 30, 2022 compared to 2021.

Real Estate Operating Expenses

Real estate operating expenses from the Same Property Portfolio increased by approximately $17.8 million, or 7.4%, for the three months ended June 30, 2022 compared to 2021, due primarily to an increase in operating expenses, including cleaning, utilities, repairs and maintenance, and roads/grounds/security. The increase in operating expenses was driven by an increase in physical client occupancy.

Properties Acquired Portfolio

The table below lists the properties acquired between April 1, 2021 and June 30, 2022. Rental revenue and real estate operating expenses increased by approximately $9.0 million and $2.3 million, respectively, for the three months ended June 30, 2022 compared to 2021, as detailed below.


		Square Feet		Rental Revenue									Real Estate Operating Expenses
Name	Date acquired		2022			2021			Change			2022			2021			Change
				(dollars in thousands)
153 & 211 Second Avenue	June 2, 2021	136,882		$	2,553		$	756		$	1,797		$	272		$	71		$	201
Shady Grove Innovation District	August 2, 2021	232,278		766			—			766			380			—			380
Madison Centre (1)	May 17, 2022	754,988		6,472			—			6,472			1,680			—			1,680
		1,124,148		$	9,791		$	756		$	9,035		$	2,332		$	71		$	2,261

(1)Rental revenue for the three months ended June 30, 2022 includes approximately $0.1 million of termination income.

Properties Placed In-Service Portfolio

The table below lists the properties that were placed in-service or partially placed in-service between April 1, 2021 and June 30, 2022. Rental revenue and real estate operating expenses from our Properties Placed In-Service Portfolio increased by approximately $11.2 million and $3.4 million, respectively, for the three months ended June 30, 2022 compared to 2021, as detailed below.


	Quarter Initially Placed In-Service	Quarter Fully Placed In-Service		Rental Revenue						Real Estate Operating Expenses
Name		Square Feet	2022	2021		Change		2022		2021		Change
				(dollars in thousands)
200 West Street (1)	Fourth Quarter, 2020	Fourth Quarter, 2021	273,365	$	4,572	$	1,647	$	2,925	$	1,404	$	866	$	538
Reston Next	Fourth Quarter, 2021	N/A	1,062,000	8,088		—		8,088		2,917		—		2,917
325 Main Street (2)	Second Quarter, 2022	Second Quarter, 2022	414,000	213		—		213		10		92		(82)
2100 Pennsylvania Avenue	Second Quarter, 2022	N/A	480,000	9		—		9		17		—		17
			2,229,365	$	12,882	$	1,647	$	11,235	$	4,348	$	958	$	3,390

(1)Includes 138,444 square feet of redevelopment that was fully placed in-service in December 2021.

(2)Real estate operating expenses for the three months ended June 30, 2021 were related to demolition costs.

Properties in Development or Redevelopment Portfolio

The table below lists the properties that were in development or redevelopment between April 1, 2021 and June 30, 2022. Rental revenue and real estate operating expenses from our Properties in Development or Redevelopment Portfolio decreased by approximately $1.5 million and $0.8 million, respectively, for the three months ended June 30, 2022 compared to 2021, as detailed below.


			Rental Revenue						Real Estate Operating Expenses
Name	Date Commenced Development / Redevelopment	Square Feet	2022		2021		Change		2022		2021		Change
			(dollars in thousands)
880 Winter Street (1)	February 25, 2021	224,000	$	—	$	1,141	$	(1,141)	$	—	$	690	$	(690)
3625-3635 Peterson Way (2)	April 16, 2021	218,000	—		317		(317)		—		107		(107)
		442,000	$	—	$	1,458	$	(1,458)	$	—	$	797	$	(797)

(1)On February 25, 2021, we commenced the redevelopment and conversion of 880 Winter Street, a 224,000 square foot office property located in Waltham, Massachusetts, to laboratory space.

Properties Sold Portfolio

The table below lists the properties we sold between April 1, 2021 and June 30, 2022. Rental revenue and real estate operating expenses from our Properties Sold Portfolio decreased by approximately $5.3 million and $1.4 million, respectively, for the three months ended June 30, 2022 compared to 2021, as detailed below.


				Rental Revenue						Real Estate Operating Expenses
Name	Date Sold	Property Type	Square Feet	2022		2021		Change		2022		2021		Change
				(dollars in thousands)
181, 191 and 201 Spring Street	October 25, 2021	Office	333,000	$	—	$	3,826	$	(3,826)	$	—	$	1,103	$	(1,103)
195 West Street	March 31, 2022	Office	63,500	—		122		(122)		—		148		(148)
Virginia 95 Office Park	June 15, 2022	Office/Flex	733,421	2,354		3,745		(1,391)		824		938		(114)
			1,129,921	$	2,354	$	7,693	$	(5,339)	$	824	$	2,189	$	(1,365)

Residential Net Operating Income

Net operating income for our residential same properties increased by approximately $3.3 million for the three months ended June 30, 2022 compared to 2021.

The following reflects our occupancy and rate information for our residential same properties for the three months ended June 30, 2022 and 2021.


	Average Monthly Rental Rate (1)						Average Rental Rate Per Occupied Square Foot						Average Physical Occupancy (2)						Average Economic Occupancy (3)
Name	2022		2021		Change (%)		2022		2021		Change (%)		2022		2021		Change (%)		2022		2021		Change (%)
Proto Kendall Square	$	2,774	$	2,504	10.8	%	$	5.11	$	4.60	11.1	%	95.2	%	91.7	%	3.8	%	94.3	%	90.2	%	4.5	%
The Lofts at Atlantic Wharf	$	4,097	$	3,156	29.8	%	$	4.57	$	3.51	30.2	%	97.7	%	96.1	%	1.7	%	97.1	%	93.7	%	3.6	%
The Avant at Reston Town Center	$	2,411	$	2,180	10.6	%	$	2.61	$	2.38	9.7	%	96.0	%	95.0	%	1.1	%	96.4	%	94.3	%	2.2	%
Signature at Reston	$	2,683	$	2,143	25.2	%	$	2.77	$	2.22	24.8	%	95.1	%	87.2	%	9.1	%	94.8	%	83.1	%	14.1	%
The Skylyne	$	3,391	$	3,183	6.5	%	$	4.15	$	3.79	9.5	%	83.8	%	26.5	%	216.2	%	81.7	%	18.7	%	336.9	%

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

Hotel Net Operating Income (Loss)

The Boston Marriott Cambridge hotel had net operating income of approximately $5.6 million for the three months ended June 30, 2022, representing an increase of approximately $6.1 million compared to the three months ended June 30, 2021.

The following reflects our occupancy and rate information for the Boston Marriott Cambridge hotel for the three months ended June 30, 2022 and 2021.


	2022			2021			Change (%)
Occupancy	69.6		%	21.7		%	220.7	%
Average daily rate	$	368.52		$	160.96		129.0	%
REVPAR	$	256.47		$	34.86		635.7	%

Other Operating Revenue and Expense Items

Development and Management Services Revenue

Development and management services revenue decreased by approximately $0.9 million for the three months ended June 30, 2022 compared to 2021. Development and management services revenue decreased by approximately $0.8 million and $0.1 million, respectively. The decrease in development services revenue is primarily related to a decrease in development fees.

General and Administrative Expense

General and administrative expense decreased by approximately $3.7 million for the three months ended June 30, 2022 compared to 2021 primarily due to a decrease in compensation expense of approximately $5.7 million, partially offset by an increase of approximately $2.0 million in other general and administrative expenses. The decrease in compensation expense primarily related to an approximately $7.0 million decrease in the value of our deferred compensation plan, partially offset by an approximately $1.3 million increase in other compensation

expenses, primarily due to age-based vesting. The increase in other general and administrative expenses primarily related to an increase in professional fees.

Wages directly related to the development of rental properties are capitalized and included in real estate assets on our Consolidated Balance Sheets and amortized over the useful lives of the applicable asset or lease term. Capitalized wages for the three months ended June 30, 2022 and 2021 were approximately $4.1 million and $3.5 million, respectively. These costs are not included in the general and administrative expenses discussed above.

Transaction Costs

Transaction costs decreased by approximately $0.3 million for the three months ended June 30, 2022 compared to 2021 due primarily to costs incurred in connection with the pursuit and formation of new joint ventures. In general, transaction costs relating to the formation of new joint ventures and the pursuit of other transactions are expensed as incurred.

Depreciation and Amortization Expense

BXP

Depreciation and amortization expense decreased by approximately $0.7 million for the three months ended June 30, 2022 compared to 2021, as detailed below.


Portfolio	Depreciation and Amortization for the three months ended June 30,
2022	2021		Change
	(in thousands)
Same Property Portfolio	$	169,612	$	166,746	$	2,866
Properties Acquired Portfolio	8,233		974		7,259
Properties Placed In-Service Portfolio	4,816		379		4,437
Properties in Development or Redevelopment Portfolio (1)	—		14,011		(14,011)
Properties Sold Portfolio	485		1,728		(1,243)
	$	183,146	$	183,838	$	(692)

(1)On February 25, 2021, we commenced redevelopment of 880 Winter Street in Waltham, Massachusetts. As a result, during the three months ended June 30, 2021, we recorded approximately $10.5 million of accelerated depreciation expense for the demolition of a portion of the building.

BPLP

Depreciation and amortization expense decreased by approximately $0.7 million for the three months ended June 30, 2022 compared to 2021, as detailed below.


Portfolio	Depreciation and Amortization for the three months ended June 30,
2022	2021		Change
	(in thousands)
Same Property Portfolio	$	167,882	$	164,986	$	2,896
Properties Acquired Portfolio	8,233		974		7,259
Properties Placed In-Service Portfolio	4,816		379		4,437
Properties in Development or Redevelopment Portfolio (1)	—		14,011		(14,011)
Properties Sold Portfolio	485		1,728		(1,243)
	$	181,416	$	182,078	$	(662)

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

Other Income and Expense Items

Loss from Unconsolidated Joint Ventures

For the three months ended June 30, 2022 compared to 2021, loss from unconsolidated joint ventures decreased by approximately $1.3 million due to an approximately $2.1 million increase in net income from placing in-service 7750 Wisconsin Avenue in Bethesda, Maryland during the first quarter of 2022. This decrease was partially offset by an approximately $0.8 million decrease in net income from our Hub on Causeway - Podium joint venture, primarily related to termination income recognized during the three months ended June 30, 2021.

Gains on Sales of Real Estate

BXP

Gains on sales of real estate increased by approximately $88.5 million for the three months ended June 30, 2022 compared to 2021, as detailed below.


Name	Date Sold	Property Type	Square Feet	Sale Price		Net Cash Proceeds		Gain on Sale of Real Estate
				(dollars in millions)
2022
Virginia 95 Office Park	June 15, 2022	Office/Flex	733,421	$	127.5	$	121.9	$	96.2

				$	127.5	$	121.9	$	96.2	(1)
2021
6595 Springfield Center Drive	December 13, 2018	Office	634,000	N/A		N/A		$	7.8	(2)



				N/A		N/A		$	7.8

(1)Excludes approximately $0.1 million of gains on sales of real estate recognized during the three months ended June 30, 2022 related to gains on sales of real estate occurring in the prior periods.

BPLP

Gains on sales of real estate increased by approximately $91.9 million for the three months ended June 30, 2022 compared to 2021, as detailed below.


Name	Date Sold	Property Type	Square Feet	Sale Price		Net Cash Proceeds		Gain on Sale of Real Estate
				(dollars in millions)
2022
Virginia 95 Office Park	June 15, 2022	Office/Flex	733,421	$	127.5	$	121.9	$	99.5

				$	127.5	$	121.9	$	99.5	(1)
2021
6595 Springfield Center Drive	December 13, 2018	Office	634,000	N/A		N/A		$	7.8	(2)



				N/A		N/A		$	7.8

(1)Excludes approximately $0.1 million of gains on sales of real estate recognized during the three months ended June 30, 2022 related to the sale of real estate occurring in the prior periods.

Interest and Other Income (Loss)

Interest and other income (loss) decreased by approximately $0.3 million for the three months ended June 30, 2022 compared to 2021, due primarily to a decrease of approximately $0.2 million in interest income due to lower interest earned on our deposits.

Other Income - Assignment Fee

Gains (Losses) from Investments in Securities

Gains (losses) from investments in securities for the three months ended June 30, 2022 and 2021 related to investments that we have made to reduce our market risk relating to deferred compensation plans that we maintain for BXP’s officers and former non-employee directors. Under the deferred compensation plans, each officer or non-employee director who is eligible to participate is permitted to defer a portion of the officer’s current income or the non-employee director’s compensation on a pre-tax basis and receive a tax-deferred return on these deferrals based on the performance of specific investments selected by the officer or non-employee director. In order to reduce our market risk relating to these plans, we typically acquire, in a separate account that is not restricted as to its use, similar or identical investments as those selected by each officer or non-employee director. This enables us to generally match our liabilities to BXP’s officers or former non-employee directors under our deferred compensation plans with equivalent assets and thereby limit our market risk. The performance of these investments is recorded as gains (losses) from investments in securities. During the three months ended June 30,

2022 and 2021, we recognized gains (losses) of approximately $(4.7) million and $2.3 million, respectively, on these investments. By comparison, our general and administrative expense increased (decreased) by approximately $(4.7) million and $2.3 million during the three months ended June 30, 2022 and 2021, respectively, as a result of increases (decreases) in our liability under our deferred compensation plans that was associated with the performance of the specific investments selected by officers and former non-employee directors of BXP participating in the plans.

Interest Expense

Interest expense decreased by approximately $2.2 million for the three months ended June 30, 2022 compared to 2021, as detailed below.


Component	Change in interest expense for the three months ended June 30, 2022 compared to June 30, 2021
	(in thousands)
Increases to interest expense due to:
Issuance of $850 million in aggregate principal of 2.450% senior notes due 2033 on September 29, 2021	$	5,212
Increase in interest associated with unsecured credit facilities and term loans	2,836
Amortization expense of financing fees related to unsecured term loan	801
Total increases to interest expense	8,849
Decreases to interest expense due to:
Redemption of $1.0 billion in aggregate principal of 3.85% senior notes due 2023 on October 15, 2021	(9,684)
Increase in capitalized interest related to development projects	(1,050)
Other interest expense (excluding senior notes)	(292)
Total decreases to interest expense	(11,026)
Total change in interest expense	$	(2,177)

Interest expense directly related to the development of rental properties is capitalized and included in real estate assets on our Consolidated Balance Sheets and amortized over the useful lives of the real estate or lease term. As portions of properties are placed in-service, we cease capitalizing interest on that portion and interest is then expensed. Interest capitalized for the three months ended June 30, 2022 and 2021 was approximately $14.1 million and $13.0 million, respectively. These costs are not included in the interest expense referenced above.

At June 30, 2022, our outstanding variable rate debt consisted of BPLP’s $1.5 billion Revolving Facility and Unsecured Term Loan. The Revolving Facility and Unsecured Term Loan had $895 million outstanding as of June 30, 2022. For a summary of our consolidated debt as of June 30, 2022 and June 30, 2021 refer to the heading “Liquidity and Capital Resources—Debt Financing” within “Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Noncontrolling Interests in Property Partnerships

Noncontrolling interests in property partnerships increased by approximately $1.4 million for the three months ended June 30, 2022 compared to 2021, as detailed below.


Property	Noncontrolling Interests in Property Partnerships for the three months ended June 30,
2022	2021		Change
	(in thousands)
767 Fifth Avenue (the General Motors Building)	$	3,012	$	3,171	$	(159)
Times Square Tower	5,183		5,020		163
601 Lexington Avenue	3,372		3,057		315
100 Federal Street	3,258		3,441		(183)
Atlantic Wharf Office Building (1)	3,721		2,475		1,246
	$	18,546	$	17,164	$	1,382

(1)The increase was primarily attributable to an increase in lease revenue from our clients.

Noncontrolling Interest—Common Units of the Operating Partnership

For BXP, noncontrolling interest—common units of the Operating Partnership increased by approximately $13.3 million for the three months ended June 30, 2022 compared to 2021 due primarily to an increase in allocable income, which was the result of recognizing a greater gain on sales of real estate during 2022. Due to our ownership structure, there is no corresponding line item on BPLP’s financial statements.

Liquidity and Capital Resources

General

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

fund normal recurring expenses;
meet debt service and principal repayment obligations, including the Unsecured Term Loan and balloon payments on maturing debt;
fund development and redevelopment costs;
fund capital expenditures, including major renovations, tenant improvements and leasing costs;
fund pending and possible acquisitions of properties, either directly or indirectly through the acquisition of equity interests therein; and
make the minimum distribution required to enable BXP to maintain its REIT qualification under the Internal Revenue Code of 1986, as amended.

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

cash flow from operations;
distribution of cash flows from joint ventures;
cash and cash equivalent balances;
borrowings under BPLP’s Revolving Facility, unsecured term loans, short-term bridge facilities and construction loans;
long-term secured and unsecured indebtedness (including unsecured exchangeable indebtedness);
sales of real estate;
private equity sources through our Strategic Capital Program (“SCP”) with large institutional investors; and
issuances of BXP equity securities and/or preferred or common units of partnership interests in BPLP.

We draw on multiple financing sources to fund our long-term capital needs. We expect to fund our current development/redevelopment properties primarily with our available cash balances, construction loans, proceeds from asset sales and BPLP’s Revolving Facility. We use BPLP’s Revolving Facility primarily as a bridge facility to fund acquisition opportunities, refinance outstanding indebtedness and meet short-term development and working capital needs. Although we may seek to fund our development projects with construction loans, which may require guarantees by BPLP, the financing for each particular project ultimately depends on several factors, including,

among others, the project’s size and duration, the extent of pre-leasing, our available cash and access to cost effective capital at the given time.

The following table presents information on properties under construction and redevelopment as of June 30, 2022 (dollars in thousands):


									Financings
Construction Properties	Estimated Stabilization Date	Location	# of Buildings	Estimated Square Feet	Investment to Date (1)(2)(3)		Estimated Total Investment (1)(2)		Total Available (1)		Outstanding at June 30, 2022 (1)		Estimated Future Equity Requirement (1)(2)(4)		Percentage Leased (5)
Office
Reston Next	Fourth Quarter, 2023	Reston, VA	2	1,062,000	$	554,408	$	715,300	$	—	$	—	$	160,892	87	%	(6)
2100 Pennsylvania Avenue	Third Quarter, 2024	Washington, DC	1	480,000	273,011		356,100		—		—		83,089		61	%	(7)
360 Park Avenue South (42% ownership)	First Quarter, 2025	New York, NY	1	450,000	197,862		219,000		92,774		86,245		14,609		—	%	(8)
Reston Next Office Phase II	Second Quarter, 2025	Reston, VA	1	90,000	7,185		61,000		—		—		53,815		—	%
Platform 16 Building A (55% ownership)	Fourth Quarter, 2026	San Jose, CA	1	389,500	71,672		231,900		—		—		160,228		—	%	(9)
Total Office Properties under Construction			6	2,471,500	1,104,138		1,583,300		92,774		86,245		472,633		49	%

Lab/Life Sciences
880 Winter Street (Redevelopment)	First Quarter, 2023	Waltham, MA	1	244,000	78,560		108,000		—		—		29,440		97	%
751 Gateway (49% ownership)	Second Quarter, 2024	South San Francisco, CA	1	231,000	67,168		127,600		—		—		60,432		100	%
103 CityPoint	Third Quarter, 2024	Waltham, MA	1	113,000	21,588		115,100		—		—		93,512		—	%
180 CityPoint	Fourth Quarter, 2024	Waltham, MA	1	329,000	91,255		274,700		—		—		183,445		43	%
651 Gateway (50% ownership) (Redevelopment)	Fourth Quarter, 2025	South San Francisco, CA	1	327,000	12,782		146,500		—		—		133,718		—	%
Total Lab/Life Sciences Properties under Construction			5	1,244,000	271,353		771,900		—		—		500,547		49	%

Residential
Reston Next Residential (508 units) (20% ownership)	Second Quarter, 2026	Reston, VA	1	417,000	11,368		47,700		28,000		—		8,332		—	%
Total Residential Properties under Construction			1	417,000	11,368		47,700		28,000		—		8,332		—
Other
View Boston Observatory at The Prudential Center (Redevelopment)	N/A	Boston, MA	—	59,000	109,624		182,300		—		—		72,676		N/A		(10)
Total Properties under Construction			12	4,191,500	$	1,496,483	$	2,585,200	$	120,774	$	86,245	$	1,054,188	49	%	(11)

(1)Represents our share.

(2)Each of Investment to Date, Estimated Total Investment and Estimated Future Equity Requirement represent our share of acquisition expenses, as applicable, and reflect our share of the estimated net revenue/expenses that we expect to incur prior to stabilization of the project, including any amounts actually received or paid through June 30, 2022.

(3)Includes approximately $90.0 million of unpaid but accrued construction costs and leasing commissions.

(4)Excludes approximately $90.0 million of unpaid but accrued construction costs and leasing commissions.

(5)Represents percentage leased as of August 2, 2022, including leases with future commencement dates.

(6)The property was 69% placed in-service as of June 30, 2022.

(7)The property was 4% placed in-service as of June 30, 2022.

(8)Investment to Date includes all related costs incurred prior to the contribution of the property by us to the joint venture on December 15, 2021 totaling approximately $107 million and our proportionate share of the loan. Our joint venture partners will fund required capital until their aggregate investment is approximately 58% of all capital contributions; thereafter, the joint venture partners will fund required capital according to their percentage interests.

(9)Estimated total investment represents the costs to complete Building A, a 389,500 square foot building, and Building A’s proportionate share of land and garage costs. In conjunction with the construction of Building A, garage and site work will be completed for Phase II, which will support approximately 700,000 square feet of development in two office buildings, budgeted to be an incremental $141 million.

(10)We expect to place this project in-service and open to the public in the second quarter of 2023.

(11)Percentage leased excludes the residential property and the View Boston Observatory at The Prudential Center (redevelopment) at 800 Boylston Street - The Prudential Center.

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

We expect our primary uses of capital over the next twelve months will be the commencement, continuation and completion of our current and committed development and redevelopment projects, servicing the interest payments on our outstanding indebtedness, repaying debt maturities (as discussed below), and satisfying our REIT distribution requirements.

As of June 30, 2022, we had 12 properties under development or redevelopment. Our share of the remaining development and redevelopment costs that we expect to fund through 2026 was approximately $1.1 billion. In the second quarter of 2022, we commenced development of Phase II of the Reston Next Office project, a 90,000 square foot office and retail development in Reston, Virginia, and Reston Next Residential, a 508-unit residential project that will include a five-story low-rise building and a 39-story high-rise tower in Reston, Virginia. We will own a 20% interest in the Reston Next residential project (see Note 5 to the Consolidated Financial Statements).

In July 2021, we announced the formation of the SCP with two partners committing a targeted equity investment of $1.0 billion and a $250 million commitment from us. Under this agreement, we agreed to provide these partners, for up to two years, exclusive first offers to form joint ventures with us to invest in assets that meet target criteria. All investments are discretionary to each partner.

The SCP provides us the opportunity to partner with large institutional investors and capitalize our investment opportunities partially through private equity. The SCP enhances our access to capital and investment capacity, enhances our returns through fee income, and in some investments provides us the opportunity to realize a greater share of income upon achieving certain success criteria. These large financial partners are among the world’s largest sovereign wealth funds and pension plans.

On May 17, 2022, we acquired Madison Centre, an approximately 755,000 square foot, 37-story Class A office building in Seattle, Washington, for a gross purchase price of $730.0 million. The acquisition was funded with proceeds from BPLP’s $730.0 million Unsecured Term Loan. The loan bears interest at a variable rate equal to term SOFR plus 0.95% per annum as of June 30, 2022.

We have no debt maturities until 2023. Our 2023 maturities include (1) the Unsecured Term Loan, which matures on May 16, 2023 and (2) BPLP’s 3.125% $500.0 million senior unsecured notes, which mature on September 1, 2023. In our unconsolidated joint venture portfolio, we have no debt maturities in 2022 and approximately $532.4 million (our share) of debt maturating in 2023. We expect to fund 2023 debt maturities using available cash balances, proceeds from asset sales and/or BPLP’s Revolving Facility, or through refinancings at existing balances or greater. We expect our interest expense will be greater in 2023 when compared to 2022 due to projected higher interest rates on our floating rate debt and the impact of refinancing our 2023 debt maturities.

As of August 2, 2022, we had available cash of approximately $289.9 million (of which approximately $103.8 million is attributable to our consolidated joint venture partners). Our liquidity and capital resources will depend on a wide range of factors and we believe that our access to capital and our strong liquidity, including the approximately $1.2 billion available under the Revolving Facility and our available cash, as of August 2, 2022, are sufficient to fund our remaining capital requirements on existing development and redevelopment projects, fund acquisitions, repay or refinance our maturing indebtedness when due, satisfy our REIT distribution requirements and still allow us to act opportunistically on attractive investment opportunities.

We may seek to enhance our liquidity to fund our current and future development activity, pursue additional attractive investment opportunities and refinance or repay indebtedness. Depending on interest rates, the overall conditions in the debt and public and private equity markets, and our leverage at the time, we may decide to access one or more of these capital sources (including utilization of BXP’s $600.0 million “at the market” equity offering program). Doing so may result in us carrying additional cash and cash equivalents pending our use of the proceeds, which could increase our net interest expense or be dilutive to our earnings, or both.

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

REIT Tax Distribution Considerations

Dividend

BXP as a REIT is subject to a number of organizational and operational requirements, including a requirement that BXP currently distribute at least 90% of its annual taxable income (excluding capital gains and with certain other adjustments). Our policy is for BXP to distribute at least 100% of its taxable income, including capital gains, to avoid paying federal tax. Common and LTIP unitholders (other than unearned MYLTIP units) of limited partnership interest in BPLP receive the same total distribution per unit.

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

Sales

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

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

Cash Flow Summary

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

Cash and cash equivalents and cash held in escrows aggregated approximately $502.9 million and $637.3 million at June 30, 2022 and 2021, respectively, representing a decrease of approximately $134.4 million. The following table sets forth changes in cash flows:


	Six months ended June 30,
2022			2021			Change
(in thousands)
Net cash provided by operating activities	$	616,639		$	560,476		$	56,163
Net cash used in investing activities	(980,170)			(563,611)			(416,559)
Net cash provided by (used in) financing activities	365,223			(1,078,914)			1,444,137

Our principal source of cash flow is related to the operation of our properties. The weighted-average term of our in-place leases, including leases signed by our unconsolidated joint ventures, excluding residential units, was approximately 7.9 years as of June 30, 2022, with occupancy rates historically in the range of 88% to 94%. Generally, our properties generate a relatively consistent stream of cash flow that provides us with resources to pay operating expenses, debt service and fund regular quarterly dividend and distribution payment requirements. In addition, over the past several years, we have raised capital through the sale of some of our properties and through secured and unsecured borrowings.

Cash is used in investing activities to fund acquisitions, development, net investments in unconsolidated joint ventures and maintenance and repositioning capital expenditures. We selectively invest in new projects that enable us to take advantage of our development, leasing, financing and property management skills and invest in existing

buildings to enhance or maintain our market position. Cash used in investing activities for the six months ended June 30, 2022 and June 30, 2021 is detailed below:


	Six months ended June 30,
	2022		2021
	(in thousands)
Acquisitions of real estate (1)	$	(727,835)	$	(100,176)
Construction in progress (2)	(237,182)		(235,577)
Building and other capital improvements	(63,278)		(66,033)
Tenant improvements	(97,844)		(161,619)
Proceeds from the sales of real estate (3)	157,345		—
Proceeds from assignment fee (4)	6,624		—
Capital contributions to unconsolidated joint ventures (5)	(69,819)		(20,032)
Capital distributions from unconsolidated joint ventures (6)	36,622		122
Proceeds from sale of investment in unconsolidated joint venture (7)	—		17,789
Proceeds from note receivable (8)	10,000		—
Investments in securities, net	5,197		1,915
Net cash used in investing activities	$	(980,170)	$	(563,611)

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

(1)On May 17, 2022, we completed the acquisition of Madison Centre in Seattle, Washington, for an aggregate purchase price, including transaction costs, of approximately $724.3 million. Madison Centre is an approximately 755,000 net rentable square foot, 37-story, LEED-Platinum certified, Class A office property.

On June 2, 2021, we acquired 153 & 211 Second Avenue located in Waltham, Massachusetts for a purchase price of approximately $100.2 million in cash. 153 & 211 Second Avenue consists of two life sciences lab buildings totaling approximately 137,000 net rentable square feet.

(2)Construction in progress for the six months ended June 30, 2022 included ongoing expenditures associated with Reston Next and 2100 Pennsylvania Avenue which are partially placed in-service and 325 Main Street, which was completed and fully placed in-service during the six months ended June 30, 2022. In addition, we incurred costs associated with our continued development/redevelopment of 180 CityPoint, View Boston Observatory at The Prudential Center, 880 Winter Street, 103 CityPoint and Reston Next Office Phase II.

Construction in progress for the six months ended June 30, 2021 included ongoing expenditures associated with One Five Nine East 53rd Street, which was completed and fully placed in-service during the six months ended June 30, 2021. In addition, we incurred costs associated with our continued development/redevelopment of 200 West Street, 325 Main Street, 2100 Pennsylvania Avenue, Reston Next, 180 CityPoint, View Boston Observatory at The Prudential Center and 880 Winter Street.

(3)On June 15, 2022, we completed the sale of our Virginia 95 Office Park properties located in Springfield, Virginia for an aggregate gross sale price of $127.5 million. Net cash proceeds totaled approximately $121.9 million, resulting in a gain on sale of real estate totaling approximately $96.2 million for BXP and approximately $99.5 million for BPLP. Virginia 95 Office Park consists of eleven Class A office/flex properties aggregating approximately 733,000 net rentable square feet.

On March 31, 2022, we completed the sale of 195 West Street located in Waltham, Massachusetts for a gross sale price of $37.7 million. Net cash proceeds totaled approximately $35.4 million, resulting in a gain on sale of real estate totaling approximately $22.7 million for BXP and approximately $23.4 million for BPLP. 195 West Street is an approximately 63,500 net rentable square foot Class A office property.

(4)On April 19, 2021, we entered into an agreement to acquire 11251 Roger Bacon Drive in Reston, Virginia for an aggregate purchase price of approximately $5.6 million. On April 7, 2022, we executed an agreement to assign the right to acquire 11251 Roger Bacon Drive to a third party for an assignment fee of approximately $6.9 million. Net cash proceeds totaled approximately $6.6 million. 11251 Roger Bacon Drive is an approximately 65,000 square foot office building situated on approximately 2.6 acres. The property was 100% leased.

(5)Capital contributions to unconsolidated joint ventures for the six months ended June 30, 2022 consisted primarily of cash contributions of approximately $32.6 million and $22.0 million to our Gateway Commons and Platform 16 joint ventures, respectively.

Capital contributions to unconsolidated joint ventures for the six months ended June 30, 2021 consisted primarily of cash contributions of approximately $11.4 million to our Santa Monica Business Park joint venture.

(6)Capital distributions from unconsolidated joint ventures for the six months ended June 30, 2022 consisted primarily of a cash distribution totaling approximately $21.6 million and $11.6 million from our Metropolitan Square and 7750 Wisconsin Avenue joint ventures, respectively.

(7)On March 30, 2021, we completed the sale of our 50% ownership interest in Annapolis Junction NFM LLC to the joint venture partner for a gross sale price of $65.9 million. Net cash proceeds to us totaled approximately $17.8 million after repayment of our share of debt totaling approximately $15.1 million.

(8)An affiliate of The Bernstein Companies exercised its option to borrow $10.0 million from us, and we provided the financing on June 1, 2020. The financing bore interest at a fixed rate of 8.00% per annum, compounded monthly, and was scheduled to mature on the fifth anniversary of the date on which the base building of the affiliate of The Bernstein Companies’ hotel property was substantially completed. On June 27, 2022, the borrower repaid the loan in full, including approximately $1.6 million of accrued interest.

Cash provided by financing activities for the six months ended June 30, 2022 totaled approximately $365.2 million. This amount consisted primarily of borrowings under BPLP’s Revolving Facility and Unsecured Term Loan partially offset by the payment of our regular dividends and distributions to our shareholders and unitholders. Future debt payments are discussed below under the heading “Debt Financing.”

Capitalization

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


	June 30, 2022
	Shares / Units Outstanding	Common Stock Equivalent	Equivalent Value (1)
Common Stock	156,726	156,726	$	13,945,479
Common Operating Partnership Units	18,225	18,225	1,621,661			(2)
Total Equity		174,951	$	15,567,140

Consolidated Debt			$	13,652,773
Add:
BXP’s share of unconsolidated joint venture debt (3)			1,446,617
Subtract:
Partners’ share of Consolidated Debt (4)			(1,357,399)
BXP’s Share of Debt			$	13,741,991

Consolidated Market Capitalization			$	29,219,913
BXP’s Share of Market Capitalization			$	29,309,131
Consolidated Debt/Consolidated Market Capitalization			46.72		%
BXP’s Share of Debt/BXP’s Share of Market Capitalization			46.89		%

(1)Values are based on the closing price per share of BXP’s Common Stock on the New York Stock Exchange on June 30, 2022 of $88.98.

(2)Includes long-term incentive plan units (including 2012 OPP Units and 2013 - 2019 MYLTIP Units) but excludes the 2020 - 2022 MYLTIP Units because the three-year performance periods have not ended.

(3)See page 90 for additional information.

(4)See page 89 for additional information.

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

(1) our consolidated debt; plus

(2) the product of (x) the closing price per share of BXP Common Stock on June 30, 2022, as reported by the New York Stock Exchange, multiplied by (y) the sum of:

(i) the number of outstanding shares of Common Stock of BXP,

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

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

(iv) the number of OP Units issuable upon conversion of 2012 OPP Units, 2013 - 2019 MYLTIP Units that were issued in the form of LTIP Units.

The calculation of consolidated market capitalization does not include LTIP Units issued in the form of MYLTIP Awards unless and until certain performance thresholds are achieved and they are earned. Because their three-year performance periods have not yet ended, 2020 - 2022 MYLTIP Units are not included in this calculation as of June 30, 2022.

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

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

For a discussion of our unconsolidated joint venture indebtedness, see “Liquidity and Capital Resources—Investment in Unconsolidated Joint Ventures - Secured Debt” within “Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations” and for a discussion of our consolidated joint venture indebtedness see “Liquidity and Capital Resources—Mortgage Notes Payable” within “Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Debt Financing

As of June 30, 2022, we had approximately $13.7 billion of outstanding consolidated indebtedness, representing approximately 46.72% of our Consolidated Market Capitalization as calculated above consisting of approximately (1) $9.5 billion (net of discount and deferred financing fees) in publicly traded unsecured senior notes having a GAAP weighted-average interest rate of 3.43% per annum and maturities in 2023 through 2033, (2) $3.3 billion (net of deferred financing fees) of property-specific mortgage debt having a GAAP weighted-average interest rate of 3.42% per annum and a weighted-average term of 6.3 years, (3) $165.0 million outstanding under BPLP’s Revolving Facility that matures on June 15, 2026 and (4) $728.8 million (net of deferred financing fees) outstanding under BPLP’s Unsecured Term Loan that matures on May 16, 2023.

The table below summarizes the aggregate carrying value of our mortgage notes payable and BPLP’s unsecured senior notes, line of credit, and Unsecured Term Loan, as well as Consolidated Debt Financing Statistics at June 30, 2022 and June 30, 2021.


	June 30,
	2022			2021
	(dollars in thousands)
Debt Summary:
Balance
Fixed rate mortgage notes payable, net	$	3,269,948		$	2,901,709
Unsecured senior notes, net	9,489,030			9,634,356
Unsecured line of credit	165,000			—
Unsecured term loan, net	728,795			—
Consolidated Debt	13,652,773			12,536,065
Add:
BXP’s share of unconsolidated joint venture debt, net (1)	1,446,617			1,190,473
Subtract:
Partners’ share of consolidated mortgage notes payable, net (2)	(1,357,399)			(1,191,879)
BXP’s Share of Debt	$	13,741,991		$	12,534,659

	June 30,
	2022			2021
Consolidated Debt Financing Statistics:
Percent of total debt:
Fixed rate	93.45		%	100.00		%
Variable rate	6.55		%	—		%
Total	100.00		%	100.00		%
GAAP Weighted-average interest rate at end of period:
Fixed rate	3.43		%	3.64		%
Variable rate	2.53		%	—		%
Total	3.37		%	3.64		%
Coupon/Stated Weighted-average interest rate at end of period:
Fixed rate	3.32		%	3.54		%
Variable rate	1.96		%	—		%
Total	3.23		%	3.54		%
Weighted-average maturity at end of period (in years):
Fixed rate	6.1			5.8
Variable rate	1.4			—
Total	5.8			5.8

(1)See page 90 for additional information.

(2)See page 89 for additional information.

Unsecured Credit Facility

On June 15, 2021, BPLP amended and restated its prior credit facility (as amended and restated, the “2021 Credit Facility”). The 2021 Credit Facility provides for borrowings of up to $1.5 billion through the Revolving Facility, subject to customary conditions. Among other things, the 2021 Credit Facility (1) extended the maturity date from April 24, 2022 to June 15, 2026, (2) eliminated the $500.0 million delayed draw facility (3) reduced the per annum variable interest rates on borrowings and (4) added a sustainability-linked pricing component. Under the 2021 Credit Facility, BPLP may increase the total commitment by up to $500.0 million by increasing the amount of the Revolving Facility and/or by incurring one or more term loans, in each case, subject to syndication of the increase and other conditions. Based on BPLP’s June 30, 2022 credit rating, (1) the applicable Eurocurrency and LIBOR Daily Floating Rate margins are 0.775%, (2) the alternate base rate margin is 0 basis points and (3) the facility fee is 0.15% per annum.

At June 30, 2022, BPLP had $165.0 million of borrowings under its Revolving Facility and outstanding letters of credit totaling approximately $6.3 million, with the ability to borrow approximately $1.3 billion. At August 2, 2022, BPLP had $320.0 million of borrowings under its Revolving Facility and outstanding letters of credit totaling approximately $6.3 million, with the ability to borrow approximately $1.2 billion.

Unsecured Term Loan

On May 17, 2022, BPLP entered into an Unsecured Term Loan providing for a single borrowing of up to $730.0 million. The Unsecured Term Loan matures on May 16, 2023.

At BPLP’s option, the Unsecured Term Loan will bear interest at a rate per annum equal to (A) (1) a base rate per annum equal to the greater of (a) the federal funds rate plus 0.5%, (b) the administrative agent’s prime rate, (c) term SOFR plus 1.00% and (d) 1.00%, or (2) a term SOFR rate per annum equal to the forward-looking SOFR term rate administered by CME Group Benchmark Administration (“CME”) two business days prior to the commencement of such interest period; or if the rate is unavailable, then the forward-looking SOFR term rate administered by CME on the first business day immediately prior thereto, in each case, plus 0.10%, and (B) a margin ranging from 0 to 160 basis points based on BPLP’s credit rating.

On May 17, 2022, BPLP exercised its option to draw $730.0 million under the Unsecured Term Loan (See Notes 3 and 6 to the Consolidated Financial Statements). As of June 30, 2022, the Unsecured Term Loan bears interest at a variable rate equal to term SOFR plus 0.95% per annum based on BPLP’s current credit rating at June 30, 2022. At June 30, 2022, BPLP had $730.0 million outstanding under its Unsecured Term Loan.

Unsecured Senior Notes

The following summarizes the unsecured senior notes outstanding as of June 30, 2022 (dollars in thousands):


	Coupon/Stated Rate		Effective Rate(1)		Principal Amount		Maturity Date(2)
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
11 Year Unsecured Senior Notes	2.550	%	2.671	%	850,000		April 1, 2032
12 Year Unsecured Senior Notes	2.450	%	2.524	%	850,000		October 1, 2033
Total principal					9,550,000
Less:
Net unamortized discount					15,116
Deferred financing costs, net					45,854
Total					$	9,489,030

(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.

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 June 30, 2022, BPLP was in compliance with each of these financial restrictions and requirements.

Mortgage Notes Payable

The following represents the outstanding principal balances due under the mortgage notes payable at June 30, 2022:


Properties	Stated Interest Rate		GAAP Interest Rate (1)		Stated Principal Amount		Deferred Financing Costs, Net		Carrying Amount		Carrying Amount (Partners’ Share)			Maturity Date
	(dollars in thousands)



Consolidated Joint Ventures
767 Fifth Avenue (the General Motors Building)	3.43	%	3.64	%	$	2,300,000	$	(17,237)	$	2,282,763	$	913,166	(2)(3)(4)	June 9, 2027
601 Lexington Avenue	2.79	%	2.93	%	1,000,000		(12,815)		987,185		444,233		(2)(5)	January 9, 2032

Total					$	3,300,000	$	(30,052)	$	3,269,948	$	1,357,399

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

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

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

(4)In connection with the refinancing of the loan, we guaranteed the consolidated entity’s obligation to fund various reserves for tenant improvement costs and allowances, leasing commissions and free rent obligations in lieu of cash deposits. As of June 30, 2022, the maximum funding obligation under the guarantee was approximately $16.2 million. We earn a fee from the joint venture for providing the guarantee and have an agreement with our partners to reimburse the joint venture for their share of any payments made under the guarantee (See Note 7 to the Consolidated Financial Statements).

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

Investment in Unconsolidated Joint Ventures - Secured Debt

We have investments in unconsolidated joint ventures with our effective ownership interests ranging from 20% to 55%. Sixteen of these ventures have mortgage indebtedness. We exercise significant influence over, but do not control, these entities. As a result, we account for them using the equity method of accounting. See also Note 5 to the Consolidated Financial Statements. At June 30, 2022, the aggregate carrying amount of debt, including both our and our partners’ share, incurred by these ventures was approximately $3.4 billion (of which our proportionate share is approximately $1.4 billion). The table below summarizes the outstanding debt of these joint venture properties at June 30, 2022. In addition to other guarantees specifically noted in the table, we have agreed to customary environmental indemnifications and nonrecourse carve-outs (e.g., guarantees against fraud, misrepresentation and bankruptcy) as well as the completion of development projects on certain of the loans.


Properties	Nominal % Ownership		Stated Interest Rate		GAAP Interest Rate (1)		Stated Principal Amount		Deferred Financing Costs, Net		Carrying Amount		Carrying Amount (Our share)			Maturity Date
	(dollars in thousands)
Santa Monica Business Park	55.00	%	4.06	%	4.24	%	$	300,000	$	(1,611)	$	298,389	$	164,114	(2)(3)	July 19, 2025
Market Square North	50.00	%	3.15	%	3.31	%	125,000		(694)		124,306		62,153		(2)(4)	November 10, 2025
1265 Main Street	50.00	%	3.77	%	3.84	%	36,035		(264)		35,771		17,885			January 1, 2032
Colorado Center	50.00	%	3.56	%	3.59	%	550,000		(892)		549,108		274,554		(2)	August 9, 2027
Dock 72	50.00	%	3.76	%	3.98	%	198,383		(804)		197,579		98,789		(2)(5)	December 18, 2023
The Hub on Causeway - Podium	50.00	%	3.28	%	3.44	%	174,329		(347)		173,982		86,991		(2)(6)	September 6, 2023
Hub50House	50.00	%	4.43	%	4.51	%	185,000		(1,365)		183,635		91,818		(2)(7)	June 17, 2032
100 Causeway Street	50.00	%	2.27	%	2.48	%	337,604		(988)		336,616		168,308		(2)(8)	September 5, 2023
7750 Wisconsin Avenue (Marriott International Headquarters)	50.00	%	1.96	%	2.51	%	251,542		(1,160)		250,382		125,191		(2)(9)	April 26, 2023
360 Park Avenue South	42.21	%	3.11	%	3.57	%	204,531		(2,458)		202,073		85,295		(2)(10)	December 14, 2024
Safeco Plaza	33.67	%	2.97	%	3.11	%	250,000		(1,417)		248,583		83,698		(2)(11)	September 1, 2026
500 North Capitol Street, NW	30.00	%	4.15	%	4.20	%	105,000		(54)		104,946		31,484		(2)	June 6, 2023
901 New York Avenue	25.00	%	3.61	%	3.69	%	214,491		(447)		214,044		53,511			January 5, 2025
3 Hudson Boulevard	25.00	%	4.31	%	4.39	%	80,000		(64)		79,936		19,984		(2)(12)	July 13, 2023
Metropolitan Square	20.00	%	3.61	%	4.38	%	420,000		(5,788)		414,212		82,842		(2)(13)	April 9, 2024
Reston Next Residential	20.00	%	N/A		N/A		—		—		—		—		(2)(14)	May 13, 2026
Total							$	3,431,915	$	(18,353)	$	3,413,562	$	1,446,617

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

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

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

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

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

(6)The construction financing had a borrowing capacity of $204.6 million. On September 16, 2019, the joint venture paid down the construction loan principal balance in the amount of approximately $28.8 million, reducing the borrowing capacity to $175.8 million. The construction financing bears interest at a variable rate equal to LIBOR plus 2.25% per annum and matures on September 6, 2023.

(7)The loan bears interest at a variable rate equal to SOFR plus 1.35% per annum and matures on June 17, 2032. The joint venture entered into interest rate swap contracts with notional amounts aggregating $185.0 million through April 10, 2032, resulting in a fixed rate of approximately 4.432% per annum through the expiration of the interest rate swap contracts.

(8)The construction financing has a borrowing capacity of $400.0 million. The construction financing bears interest at a variable rate equal to LIBOR plus 1.50% per annum (LIBOR plus 1.375% per annum upon stabilization, as defined in the loan agreement) and matures on September 5, 2023, with two, one-year extension options, subject to certain conditions.

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

(10)The loan bears interest at a variable rate equal to Adjusted Term SOFR plus 2.40% per annum and matures on December 14, 2024, with two, one-year extension options, subject to certain conditions. The spread on the variable rate may be reduced, subject to certain conditions.

(11)The loan bears interest at a variable rate equal to the greater of (x) 2.35% or (y) LIBOR plus 2.20% per annum and matures on September 1, 2026.

(12)We provided $80.0 million of mortgage financing to the joint venture. The loan bears interest at a variable rate equal to LIBOR plus 3.50% per annum and matures on July 13, 2023, with extension options, subject to certain conditions. The loan has been reflected as Related Party Note Receivable, Net on our Consolidated Balance Sheets. As of June 30, 2022, the loan has approximately $15.9 million of accrued interest due at the maturity date.

(13)The indebtedness consists of (x) a $305.0 million mortgage loan payable which bears interest at a variable rate equal to SOFR plus approximately 1.81% and matures on April 9, 2024 with three, one-year extension options, subject to certain conditions, and (y) a $115.0 million mezzanine note payable which bears interest at a variable rate equal to SOFR plus 5.25% and matures on April 9, 2024 with three, one-year extension options, subject to certain conditions.

(14)No amounts have been drawn under the $140.0 million construction facility. The construction financing bears interest at a variable rate equal to SOFR plus 2.00% per annum and matures on May 13, 2026, with two, one-year extension options, subject to certain conditions.

State and Local Tax Matters

Because BXP 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 we own real estate either have undergone, or are currently undergoing, tax audits or other inquiries. Although we believe that we have substantial arguments in favor of our position 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 our results of operations.

Insurance

For information concerning our insurance program, see Note 7 to the Consolidated Financial Statements.

Funds from Operations

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

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

BXP

The following table presents a reconciliation of net income attributable to Boston Properties, Inc. to FFO attributable to Boston Properties, Inc. for the three months ended June 30, 2022 and 2021:


	Three months ended June 30,
	2022			2021
	(in thousands)
Net income attributable to Boston Properties, Inc.	$	222,989		$	111,703
Add:


Noncontrolling interest—common units of the Operating Partnership	25,708			12,383
Noncontrolling interests in property partnerships	18,546			17,164
Net income	267,243			141,250
Add:
Depreciation and amortization	183,146			183,838
Noncontrolling interests in property partnerships’ share of depreciation and amortization	(17,414)			(17,113)
BXP’s share of depreciation and amortization from unconsolidated joint ventures	21,120			15,350
Corporate-related depreciation and amortization	(413)			(444)

Less:

Gains on sales of real estate	96,247			7,756
Noncontrolling interests in property partnerships	18,546			17,164


Funds from Operations (FFO) attributable to the Operating Partnership	338,889			297,961
Less:
Noncontrolling interest—common units of the Operating Partnership’s share of funds from operations	34,329			29,319
Funds from Operations attributable to Boston Properties, Inc.	$	304,560		$	268,642
Our percentage share of Funds from Operations—basic	89.87		%	90.16		%
Weighted average shares outstanding—basic	156,720			156,107

Reconciliation to Diluted Funds from Operations:


	Three months ended June 30,
	2022			2021
	Income (Numerator)		Shares/Units (Denominator)	Income (Numerator)		Shares/Units (Denominator)
	(in thousands)
Basic Funds from Operations	$	338,889	174,392	$	297,961	173,150
Effect of Dilutive Securities:
Stock based compensation	—		472	—		412
Diluted Funds from Operations	$	338,889	174,864	$	297,961	173,562
Less:
Noncontrolling interest—common units of the Operating Partnership’s share of diluted Funds from Operations	34,262		17,672	29,259		17,043
Diluted Funds from Operations attributable to Boston Properties, Inc. (1)	$	304,627	157,192	$	268,702	156,519

(1)BXP’s share of diluted Funds from Operations was 89.89% and 90.18% for the three months ended June 30, 2022 and 2021, respectively.

BPLP

The following table presents a reconciliation of net income attributable to Boston Properties Limited Partnership to FFO attributable to Boston Properties Limited Partnership for the three months ended June 30, 2022 and 2021:


	Three months ended June 30,
		2022		2021
		(in thousands)
Net income attributable to Boston Properties Limited Partnership		$	253,788	$	125,846
Add:


Noncontrolling interests in property partnerships		18,546		17,164
Net income		272,334		143,010
Add:
Depreciation and amortization		181,416		182,078
Noncontrolling interests in property partnerships’ share of depreciation and amortization		(17,414)		(17,113)
BXP’s share of depreciation and amortization from unconsolidated joint ventures		21,120		15,350
Corporate-related depreciation and amortization		(413)		(444)


Less:

Gains on sales of real estate		99,608		7,756
Noncontrolling interests in property partnerships		18,546		17,164


Funds from Operations attributable to Boston Properties Limited Partnership (1)		$	338,889	$	297,961
Weighted average shares outstanding—basic		174,392		173,150

(1)Our calculation includes OP Units and vested LTIP Units (including vested 2012 OPP Units and vested 2013 - 2019 MYLTIP Units).

Reconciliation to Diluted Funds from Operations:


	Three months ended June 30,
	2022			2021
	Income (Numerator)		Shares/Units (Denominator)	Income (Numerator)		Shares/Units (Denominator)
	(in thousands)
Basic Funds from Operations	$	338,889	174,392	$	297,961	173,150
Effect of Dilutive Securities:
Stock based compensation	—		472	—		412
Diluted Funds from Operations	$	338,889	174,864	$	297,961	173,562

Material Cash Commitments

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

During the three months ended June 30, 2022, we paid approximately $68.3 million to fund client-related obligations, including tenant improvements and leasing commissions.

In addition, during the three months ended June 30, 2022, we and our unconsolidated joint venture partners incurred approximately $163.0 million of new client-related obligations associated with approximately 1.3 million square feet of second generation leases, or approximately $122 per square foot. We signed approximately 603,800

square feet of first generation leases. The client-related obligations for the development properties are included within the projects’ “Estimated Total Investment” referred to in “Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.” In aggregate during the second quarter of 2022, we signed leases for approximately 1.9 million square feet of space and incurred aggregate client-related obligations of approximately $346.1 million, or approximately $179 per square foot.

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