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 June 30, 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, continued 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, continued inflation, 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;

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risks and uncertainties affecting property development and construction (including, without limitation, continued 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 September 30, 2022) in the United States that develops, owns, and manages primarily premier workplaces. 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 premier workplaces 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.

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Our core strategy has always been to develop, acquire and manage highest quality premier workplaces in gateway markets with high barriers-to-entry and attractive demand drivers, and to focus on executing long-term leases with financially strong clients. Our client base is diverse across market sectors and the weighted-average lease term for our in-place leases, excluding residential units, was approximately 7.8 years, as of September 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 11.0 years as of September 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 premier workplaces in a sustainable and responsible manner;
our reputation as a premier developer, owner and manager of the highest quality premier workplaces 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, inflation has remained resilient. Although the U.S. GDP returned to growth in the third quarter after two consecutive quarterly contractions, consumer spending still slowed as inflation shrank buying power. The Federal Reserve remains committed to taming the fastest rising inflation in four decades by aggressively raising interest rates and are expected to continue to do so. This evolving operating environment impacts our 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.

In light of the foregoing, we believe we are positioning ourself for success, notwithstanding the uncertain trajectory of the U.S. and global economy, by managing our leverage while continuing to selectively invest (including both acquisitions and developments) in premier workplace opportunities. We remain focused on the following priorities:

continuing to embrace our leadership position in the premier workplace industry and leveraging our strength in portfolio quality, client relationships, development skills, market penetration and sustainability to profitably build market share. Premier workplaces, the preferred choice for our current and prospective clients, are gaining market share and demonstrating the highest occupancy, net absorption levels and rental rates in the central business district (“CBD”) markets where we operate;
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;
pursuing attractive asset class adjacencies where we have a track record of success, such as life sciences and multi-family development;
continuing to raise the bar in the quality of our portfolio and actively recycle capital by selling assets, subject to market condition;
actively managing our operations in a sustainable and responsible manner; and
prioritizing risk management by actively managing liquidity, investing more extensively with joint venture partners to manage our debt levels, and being highly selective in new investment commitments.

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

Leasing Activity and Occupancy

In the third quarter of 2022, we signed approximately 1.4 million square feet of new leases and renewals, our strongest third quarter leasing volume since 2019. These leases have a weighted-average lease term of approximately 9.8 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 premier workplace environment.

The overall occupancy of our in-service office and retail properties was 88.9% at September 30, 2022, a decrease of 60 basis points from June 30, 2022. We experienced a slight decline in occupancy as we wait for recently signed leases to commence. We also removed three assets from our in-service portfolio: 601 Massachusetts Avenue, which was approximately 98% leased prior to its sale, 140 Kendrick Street Building A, which is now under redevelopment and 100% pre-leased, and 760 Boylston Street which is in redevelopment and 100% pre-leased.

The macroeconomic environment has resulted in softening demand in all of our markets. While tours continue and leases under negotiation move forward, there is less urgency from clients to make new commitments. Potential clients touring space acknowledge that economic uncertainty is impacting space decisions. As we consider our expectations for leasing in 2023, we are factoring in the impacts of a slower economy, softer business performance, and reduced demand for space. We expect the bulk of our leasing will continue to come from small and medium-sized professional and financial services firms.

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 workplaces in each of our chosen markets.

Consistent with this strategy, in September 2022, we further expanded our life sciences portfolio in Kendall Square in Cambridge, Massachusetts by completing the acquisition of 125 Broadway for a purchase price, including transaction costs, of approximately $592.4 million. 125 Broadway is a six-story, 271,000 square foot laboratory/life sciences property adjacent to our existing 2.2 million square foot portfolio in the heart of Kendall Square. Kendall Square is considered to be among the largest and most important cluster of life sciences companies and research space in the United States. This property is 100% leased.

In October of 2022, we entered into an agreement to acquire an approximate 27% interest in the joint venture that owns 200 Fifth Avenue, a 14-story, approximately 870,000 square-foot, LEED Gold certified, premier workplace located in New York City that is approximately 93% leased. The acquisition of the joint venture interest will be our second investment in the vibrant Midtown South neighborhood in the past twelve months. We will serve as the managing member and provide customary leasing and property management services for the joint venture. We expect to close the acquisition in the fourth quarter of 2022 for a gross purchase price of approximately $280.2 million, which includes $120.1 million of cash and our pro rata share of the outstanding loan secured by the property of $160.1 million. The mortgage loan bears interest at 4.34% per annum and matures in November 2028. There can be no assurance that we will complete the acquisition on the terms currently contemplated or at all.

As of September 30, 2022, our development/redevelopment pipeline consists of 14 properties that, when completed, we expect will total approximately 4.4 million square feet. Our share of the estimated total cost for these projects is approximately $2.7 billion, of which approximately $948.2 million remained to be invested. The total development pipeline, inclusive of both office and laboratory/life sciences developments, but excluding the View Boston Observatory at the Prudential Center and Reston Next Residential, is 52% pre-leased.

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 the third quarter of 2022, we completed the disposition of:

601 Massachusetts Avenue located in Washington, DC for a gross sale price of $531.0 million. Net cash proceeds totaled approximately $512.3 million resulting in a gain on sale of real estate totaling approximately $237.4 million for BXP and $237.5 million for BPLP. 601 Massachusetts Avenue is an 11-

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story, approximately 479,000 square foot premier workplace originally developed by us in 2013. We will continue to provide property management services to the new owner.

Land parcels located in Loudoun County, Virginia for a gross sale price of $27.0 million. Net cash proceeds totaled approximately $25.6 million resulting in a gain on sale of real estate totaling approximately $24.4 million.

In October of 2022, we entered into an agreement to sell the residential component of The Avant at Reston Town Center located in Reston, Virginia. The Avant is a 15-story, approximately 329,000 square foot, excluding retail space, 359-unit, luxury multifamily building that was 95% occupied, as of September 30, 2022. We will retain ownership of the approximately 26,000 square foot ground-level retail space. We expect to complete the transaction in the fourth quarter of 2022 for a gross sale price of $141 million. There can be no assurance that we will complete the sale on the terms currently contemplated or at all.

We do not anticipate any further dispositions in 2022. Assuming the completion of the sale of The Avant, our total dispositions in 2022 is projected to be approximately $864 million.

A brief overview of each of our markets follows.

Boston

During the third quarter of 2022, we signed approximately 800,000 square feet of leases and approximately 238,000 square feet of leases commenced in the Boston region. Approximately 180,000 square feet of the leases that commenced had been vacant for less than one year and represent an increase in net rental obligations of approximately 28% over the prior leases.

Our Boston CBD in-service portfolio was approximately 95% leased as of September 30, 2022.

Our approximately 2.7 million square foot in-service office portfolio in Cambridge was approximately 96% leased as of September 30, 2022. We and Biogen Inc. terminated Biogen’s lease at 300 Binney Street in Kendall Square to facilitate the conversion and expansion of the property, which is expected to begin in early 2023. Biogen will be vacating the property in phases through early 2023. 300 Binney Street is currently an approximately 195,000 net rentable square foot property that will be redeveloped into an approximately 240,000 net rentable square foot laboratory/life sciences space for The Broad Institute who has signed a lease for 100% of the laboratory/life sciences space. There can be no assurance that we will commence the redevelopment on the terms and schedule currently contemplated or at all.

Our Route 128-Mass Turnpike portfolio is comprised of approximately 4.7 million square feet and was approximately 83% leased as of September 30, 2022. We partially placed in-service 880 Winter Street, an approximately 244,000 square foot laboratory/life sciences project located in Waltham, Massachusetts. The project is 97% pre-leased, as of November 1, 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 September 30, 2022, our LA in-service properties were approximately 90% leased.

New York

During the third quarter of 2022, we executed approximately 290,000 square feet of leases in the New York region and approximately 704,000 square feet of leases commenced. Approximately 578,000 square feet of the leases that commenced in the third quarter had been vacant for less than one year and they represent a decrease in net rental obligations of approximately 4% over the prior leases. As of September 30, 2022, our New York CBD in-service portfolio was approximately 89% leased.

San Francisco

During the third quarter of 2022, we executed approximately 165,000 square feet of leases and approximately 271,000 square feet of leases commenced in the San Francisco region. Approximately 169,000 square feet of leases that commenced had been vacant for less than one year and represent an increase in net rental obligations of approximately 3% over the prior leases.

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Our San Francisco CBD in-service properties were approximately 89% leased as of September 30, 2022.

Seattle

Our Seattle in-service portfolio includes Safeco Plaza, an approximately 778,000 square foot property of which we own 33.67%, and Madison Centre, an approximately 755,000 square foot property. As of September 30, 2022, our Seattle in-service properties were approximately 89% leased.

Washington, DC

During the third quarter of 2022, we executed approximately 163,000 square feet of leases and approximately 526,000 square feet of leases commenced in the Washington, DC region. Approximately 455,000 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 9% over the prior leases. Our Washington, DC CBD in-service properties were approximately 84% leased as of September 30, 2022.

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 92% leased as of September 30, 2022.

Leasing Statistics

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


	Three months ended September 30, 2022		Nine months ended September 30, 2022
	(Square Feet)
Vacant space available at the beginning of the period	5,019,936		5,340,029
Property dispositions/properties taken out of service (1)	(123,177)		(403,655)
Vacant space in properties acquired (2)	—		77,581
Properties placed (and partially placed) in-service (3)	62,933		894,176
Leases expiring or terminated during the period	2,038,565		5,055,329
Total space available for lease	6,998,257		10,963,460
1st generation leases	67,007		1,042,887
2nd generation leases with new clients	595,133		2,170,648
2nd generation lease renewals	1,085,208		2,499,016
Total space leased (4)	1,747,348		5,712,551
Vacant space available for lease at the end of the period	5,250,909		5,250,909

Leases executed during the period, in square feet (5)	1,446,284		4,558,755

Second generation leasing information: (6)
Leases commencing during the period, in square feet	1,680,341		4,669,664
Weighted Average Lease Term	114 Months		103 Months
Weighted Average Free Rent Period	77 Days		97 Days
Total Transaction Costs Per Square Foot (7)	$116.42		$84.02
Increase in Gross Rents (8)	1.41	%	3.93	%
Increase in Net Rents (9)	0.21	%	5.15	%

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(1)Total vacant square feet of properties taken out of service and property disposition during the three months ended September 30, 2022 consists of 117,907 square feet at 760 Boylston Street and 5,270 square feet at 601 Massachusetts Avenue. Total vacant square feet of properties taken out of service and property dispositions during the nine months ended September 30, 2022 consists of 117,907 square feet at 760

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Boylston Street, 95,180 square feet at 651 Gateway, 185,298 square feet at Virginia 95 Office Park and 5,270 square feet at 601 Massachusetts Avenue.

(2)Total vacant square feet of properties acquired during the nine months ended September 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 September 30, 2022 consists of 4,207 square feet at 2100 Pennsylvania Avenue, 7,531 square feet at Reston Next and 51,195 square feet at 880 Winter Street. Total square feet of properties placed (and partially placed) in-service during the nine months ended September 30, 2022 consists of 51,195 square feet at 880 Winter Street, 418,221 square feet at Reston Next, 10,752 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 nine months ended September 30, 2022.

(5)Represents leases executed during the three and nine months ended September 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 nine months ended September 30, 2022 is 193,318 and 758,239 square feet, respectively.

(6)Second generation leases are defined as leases for space that had previously been leased by us. Of the 1,680,341 and 4,669,664 square feet of second generation leases that commenced during the three and nine months ended September 30, 2022, respectively, leases for 1,498,628 and 3,923,030 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 1,382,469 and 3,681,677 square feet of second generation leases that had been occupied within the prior 12 months for the three and nine months ended September 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 1,382,469 and 3,681,677 square feet of second generation leases that had been occupied within the prior 12 months for the three and nine months ended September 30, 2022, respectively.

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

Acquisition activity

On September 16, 2022, we acquired 125 Broadway in Cambridge, Massachusetts for a net purchase price, including transaction costs, of approximately $592.4 million. The acquisition was completed with available cash and borrowings under BPLP’s unsecured credit facility. 125 Broadway is a 271,000 net rentable square foot, six-story, laboratory/life sciences property. The property is 100% leased.

Disposition activities

*•*On August 30, 2022, we completed the sale of 601 Massachusetts Avenue located in Washington, DC for a gross sale price of $531.0 million. Net cash proceeds totaled approximately $512.3 million, resulting in a gain on sale of real estate of approximately $237.4 million for BXP and approximately $237.5 million for BPLP. 601 Massachusetts Avenue is an approximately 479,000 net rentable square foot premier workplace.

*•*On September 15, 2022, we completed the sale of two parcels of land located in Loudoun County, Virginia for an aggregate gross sale price of $27.0 million. Net cash proceeds totaled approximately $25.6 million, resulting in a gain on sale of real estate totaling approximately $24.4 million for BXP and BPLP.

Development activities

On July 1, 2022, we commenced the redevelopment of 140 Kendrick Street, a premier workplace that consists of three buildings aggregating approximately 388,000 net rentable square feet located in Needham, Massachusetts. The redevelopment is a repositioning of one building consisting of approximately 90,000 net rentable square feet into a net zero, carbon neutral premier workplace building, as defined by the LEED Zero Carbon Certification. When completed, the building will consist of approximately 104,000 net rentable square feet. This project is 100% pre-leased.

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On July 15, 2022, we partially placed in-service 880 Winter Street, an approximately 244,000 net rentable square foot laboratory/life sciences project located in Waltham, Massachusetts. This project is 97% pre-leased.
On September 8, 2022, we terminated our existing lease agreement with our client at 300 Binney Street to facilitate the conversion and expansion of the property. 300 Binney Street is a premier workplace with approximately 195,000 net rentable square feet at Kendall Center in Cambridge, Massachusetts that will be redeveloped into approximately 240,000 net rentable square feet of laboratory/life sciences space. The commencement of construction is subject to various conditions. There can be no assurance that we will commence the redevelopment on the terms and schedule currently contemplated or at all. This property is 100% pre-leased to a single client.
On September 12, 2022, we commenced the redevelopment of 760 Boylston Street, a retail project at the Prudential Center located in Boston, Massachusetts. The redevelopment is a modernization of the space consisting of approximately 118,000 net rentable square feet. This project is 100% pre-leased to a single client.

Unconsolidated joint venture activities

On August 8, 2022, a joint venture in which we have a 50% interest modified the construction loan collateralized by its Dock 72 property located in Brooklyn, New York. At the time of the modification, the loan had an outstanding balance totaling approximately $198.4 million, a total commitment amount of $250.0 million, bore interest at a variable rate equal to LIBOR plus 3.35% per annum, and was scheduled to mature on December 18, 2023. The modified construction loan bears interest at a variable rate equal to (1) the greater of (x) SOFR or (y) 0.25% plus (2) 3.10% per annum, has a total commitment amount of approximately $198.4 million, and continues to mature on December 18, 2023. Dock 72 is a premier workplace with approximately 669,000 net rentable square feet.
On September 1, 2022, a joint venture in which we have a 20% interest entered into an interest rate cap agreement to cap the variable rate debt secured by its Metropolitan Square property located in Washington, DC. The mortgage and mezzanine loans have an aggregate principal balance of $420.0 million and bear interest at a weighted average variable rate equal to SOFR plus 2.75% per annum. The interest rate cap agreement capped SOFR at 4.50% per annum on a notional amount of $420.0 million through April 15, 2024. Metropolitan Square is a premier workplace with approximately 657,000 net rentable square feet located in Washington, DC.
On September 9, 2022, a joint venture in which we have an approximate 33.67% interest modified the mortgage loan collateralized by its Safeco Plaza property located in Seattle, Washington. At the time of the modification, the loan’s outstanding balance totaled $250.0 million, bore interest at a variable rate equal to the greater of (x) 2.35% or (y) LIBOR plus 2.20% per annum, and was scheduled to mature on September 1, 2026. The modified mortgage loan bears interest at a variable rate equal to the greater of (x) 2.35% or (y) SOFR plus 2.32% per annum and continues to mature on September 1, 2026. In conjunction with the loan modification, the joint venture entered into an interest rate cap agreement that capped SOFR at 2.50% per annum on a notional amount of $250.0 million through September 1, 2023. Safeco Plaza is a premier workplace with approximately 765,000 net rentable square feet.

Transactions completed subsequent to September 30, 2022 included the following:

On October 6, 2022, we entered into an agreement to sell the residential component of The Avant at Reston Town Center, located in Reston, Virginia, for a gross sale price of $141 million. The Avant is a 15-story, approximately 329,000 square foot, excluding retail space, 359-unit, luxury multifamily building. We will retain ownership of the approximately 26,000 square foot ground-level retail space. There can be no assurance that we will complete the sale on the terms currently contemplated or at all.
On October 25, 2022, we entered into an agreement to acquire an approximate 27% interest in the joint venture that owns 200 Fifth Avenue located in New York City, for a gross purchase price of approximately $280.2 million, which includes $120.1 million of cash and our pro rata share of the outstanding loan secured by the property of $160.1 million. The mortgage loan bears interest at 4.34% per annum and matures in November 2028. 200 Fifth Avenue is a 14-story, approximately 870,000 square-foot, LEED Gold certified, premier workplace located in the Midtown South submarket. There can be no assurance that we will complete the acquisition on the terms currently contemplated or at all.

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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 Nine Months Ended September 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 by approximately $415.5 million and $465.6 million for the nine months ended September 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 nine months ended September 30, 2022 to the nine months ended September 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 nine months ended September 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 56.

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BXP


	Nine months ended September 30,
	2022		2021		Increase/ (Decrease)		% Change
	(in thousands)
Net Income Attributable to Boston Properties, Inc. Common Shareholders	$	727,144	$	311,680	$	415,464	133.30	%
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.	727,144		320,652		406,492		126.77	%
Net Income Attributable to Noncontrolling Interests:
Noncontrolling interest—common units of the Operating Partnership	82,821		35,393		47,428		134.00	%
Noncontrolling interests in property partnerships	54,896		52,602		2,294		4.36	%
Net Income	864,861		408,647		456,214		111.64	%
Other Expenses:
Add:
Interest expense	317,216		320,015		(2,799)		(0.87)	%
Losses from early extinguishment of debt	—		898		(898)		(100.00)	%

Loss from unconsolidated joint ventures	1,389		1,745		(356)		(20.40)	%
Other Income:
Less:
Gains (losses) from investments in securities	(8,549)		3,744		(12,293)		(328.34)	%
Other income - assignment fee	6,624		—		6,624		100.00	%
Interest and other income (loss)	6,151		4,140		2,011		48.57	%
Gains on sales of real estate	381,293		8,104		373,189		4,605.00	%
Other Expenses:
Add:
Depreciation and amortization expense	551,445		539,815		11,630		2.15	%
Transaction costs	2,146		2,970		(824)		(27.74)	%
Payroll and related costs from management services contracts	11,204		9,166		2,038		22.23	%
General and administrative expense	110,378		117,924		(7,546)		(6.40)	%
Other Revenue:
Less:
Direct reimbursements of payroll and related costs from management services contracts	11,204		9,166		2,038		22.23	%
Development and management services revenue	19,650		20,181		(531)		(2.63)	%
Net Operating Income	$	1,442,266	$	1,355,845	$	86,421	6.37	%

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BPLP


	Nine months ended September 30,
	2022		2021		Increase/ (Decrease)		% Change
	(in thousands)
Net Income Attributable to Boston Properties Limited Partnership Common Unitholders	$	819,195	$	353,633	$	465,562	131.65	%
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	819,195		362,605		456,590		125.92	%
Net Income Attributable to Noncontrolling Interests:
Noncontrolling interests in property partnerships	54,896		52,602		2,294		4.36	%
Net Income	874,091		415,207		458,884		110.52	%
Other Expenses:
Add:
Interest expense	317,216		320,015		(2,799)		(0.87)	%
Losses from early extinguishment of debt	—		898		(898)		(100.00)	%
Loss from unconsolidated joint ventures	1,389		1,745		(356)		(20.40)	%

Other Income:
Less:
Gains (losses) from investments in securities	(8,549)		3,744		(12,293)		(328.34)	%
Other income - assignment fee	6,624		—		6,624		100.00	%
Interest and other income (loss)	6,151		4,140		2,011		48.57	%
Gains on sales of real estate	385,349		8,104		377,245		4,655.05	%
Other Expenses:
Add:
Depreciation and amortization expense	546,271		533,255		13,016		2.44	%
Transaction costs	2,146		2,970		(824)		(27.74)	%
Payroll and related costs from management services contracts	11,204		9,166		2,038		22.23	%
General and administrative expense	110,378		117,924		(7,546)		(6.40)	%
Other Revenue:
Less:
Direct reimbursements of payroll and related costs from management services contracts	11,204		9,166		2,038		22.23	%
Development and management services revenue	19,650		20,181		(531)		(2.63)	%
Net Operating Income	$	1,442,266	$	1,355,845	$	86,421	6.37	%

At September 30, 2022 and 2021, we owned or had joint venture interests in a portfolio of 193 and 202 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 nine months ended September 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

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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, 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. 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 nine months ended September 30, 2022 to the nine months ended September 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 126 properties totaling approximately 38.2 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 September 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 September 30, 2022. This table includes a reconciliation from the Same Property Portfolio to the Total Property Portfolio by also providing information for the nine months ended September 30, 2022 and 2021 with respect to the properties that were acquired, placed in-service, in development or redevelopment or sold.

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	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)	$	2,007,651	$	1,939,988	$	67,663	3.49	%	$	28,430	$	3,596	$	61,026	$	17,962	$	2,876	$	5,043	$	33,357	$	54,805	$	2,133,340	$	2,021,394	$	111,946	5.54	%
Termination Income	5,579		11,499		(5,920)		(51.48)	%	402		—		—		—		—		—		—		—		5,981		11,499		(5,518)		(47.99)	%
Lease Revenue	2,013,230		1,951,487		61,743		3.16	%	28,832		3,596		61,026		17,962		2,876		5,043		33,357		54,805		2,139,321		2,032,893		106,428		5.24	%
Parking and Other	73,672		57,067		16,605		29.10	%	1,461		—		29		14		—		201		807		822		75,969		58,104		17,865		30.75	%
Total Rental Revenue (1)	2,086,902		2,008,554		78,348		3.90	%	30,293		3,596		61,055		17,976		2,876		5,244		34,164		55,627		2,215,290		2,090,997		124,293		5.94	%
Real Estate Operating Expenses	767,517		720,559		46,958		6.52	%	7,214		653		15,673		6,001		1,599		2,182		10,528		16,878		802,531		746,273		56,258		7.54	%
Net Operating Income, Excluding Residential and Hotel	1,319,385		1,287,995		31,390		2.44	%	23,079		2,943		45,382		11,975		1,277		3,062		23,636		38,749		1,412,759		1,344,724		68,035		5.06	%
Residential Net Operating Income (2)	20,944		11,732		9,212		78.52	%	—		—		—		—		—		—		—		—		20,944		11,732		9,212		78.52	%
Hotel Net Operating Income (Loss) (2)	8,563		(611)		9,174		1,501.47	%	—		—		—		—		—		—		—		—		8,563		(611)		9,174		1,501.47	%
Net Operating Income	$	1,348,892	$	1,299,116	$	49,776	3.83	%	$	23,079	$	2,943	$	45,382	$	11,975	$	1,277	$	3,062	$	23,636	$	38,749	$	1,442,266	$	1,355,845	$	86,421	6.37	%

(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 56. Residential Net Operating Income for the nine months ended September 30, 2022 and 2021 is comprised of Residential Revenue of $44,218 and $29,832 less Residential Expenses of $23,274 and $18,100, respectively. Hotel Net Operating Income (Loss) for the nine months ended September 30, 2022 and 2021 is comprised of Hotel Revenue of $28,395 and $7,382 less Hotel Expenses of $19,832 and $7,993, respectively, per the Consolidated Statements of Operations.

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Same Property Portfolio

Lease Revenue (Excluding Termination Income)

Lease revenue (excluding termination income) from the Same Property Portfolio increased by approximately $67.7 million for the nine months ended September 30, 2022 compared to 2021. The increase was a result of our average revenue per square foot increasing by approximately $2.95, contributing approximately $74.6 million, partially offset by average occupancy decreasing from 91.6% to 91.2%, resulting in a decrease of approximately $6.9 million.

Termination Income

Termination income decreased by approximately $5.9 million for the nine months ended September 30, 2022 compared to 2021.

Termination income for the nine months ended September 30, 2022 related to 23 clients across the Same Property Portfolio and totaled approximately $5.0 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 nine months ended September 30, 2021 related to 23 clients across the Same Property Portfolio and totaled approximately $11.5 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 $16.6 million for the nine months ended September 30, 2022 compared to 2021. Parking revenue increased by approximately $17.3 million and was partially offset by a decrease in other revenue of approximately $0.7 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 $47.0 million, or 6.5%, for the nine months ended September 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 September 30, 2022. Rental revenue and real estate operating expenses increased by approximately $26.7 million and $6.6 million, respectively, for the nine months ended September 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		$	7,669		$	3,101		$	4,568		$	840		$	319		$	521
Shady Grove Innovation District	August 2, 2021	232,278		2,237			495			1,742			1,361			334			1,027
Madison Centre (1)	May 17, 2022	754,988		18,765			—			18,765			4,805			—			4,805
125 Broadway	September 16, 2022	271,000		1,622			—			1,622			208			—			208
		1,395,148		$	30,293		$	3,596		$	26,697		$	7,214		$	653		$	6,561

(1)Rental revenue for the nine months ended September 30, 2022 includes approximately $0.4 million of termination income.

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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 September 30, 2022. Rental revenue and real estate operating expenses from our Properties Placed In-Service Portfolio increased by approximately $43.1 million and $9.7 million, respectively, for the nine months ended September 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	$	13,356	$	10,600	$	2,756	$	2,078	$	2,046	$	32
200 West Street (2)	Fourth Quarter, 2020	Fourth Quarter, 2021	273,365	12,522		4,900		7,622		4,223		2,168		2,055
Reston Next	Fourth Quarter, 2021	N/A	1,062,000	24,029		—		24,029		7,861		—		7,861
325 Main Street (3)	Second Quarter, 2022	Second Quarter, 2022	414,008	10,295		—		10,295		830		278		552
2100 Pennsylvania Avenue	Second Quarter, 2022	N/A	480,000	169		—		169		305		—		305
880 Winter Street (4)	Third Quarter, 2022	N/A	244,000	684		2,476		(1,792)		376		1,509		(1,133)
			2,693,373	$	61,055	$	17,976	$	43,079	$	15,673	$	6,001	$	9,672

(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 nine months ended September 30, 2021 were related to demolition costs.

(4)Conversion of a 224,000 square foot office property located in Waltham, Massachusetts to laboratory space.

Properties in Development or Redevelopment Portfolio

The table below lists the properties that were in development or redevelopment between January 1, 2021 and September 30, 2022. Rental revenue and real estate operating expenses from our Properties in Development or Redevelopment Portfolio decreased by approximately $2.4 million and $0.6 million, respectively, for the nine months ended September 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)
3625-3635 Peterson Way (1)	April 16, 2021	218,000	$	—	$	1,753	$	(1,753)	$	—	$	459	$	(459)
140 Kendrick - Building A	July 1, 2022	104,000	2,876		3,244		(368)		991		889		102
760 Boylston Street	September 12, 2022	118,000	—		247		(247)		608		834		(226)
		440,000	$	2,876	$	5,244	$	(2,368)	$	1,599	$	2,182	$	(583)

(1)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.

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Properties Sold Portfolio

The table below lists the properties we sold between January 1, 2021 and September 30, 2022. Rental revenue and real estate operating expenses from our Properties Sold Portfolio decreased by approximately $21.5 million and $6.4 million, respectively, for the nine months ended September 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	$	—	$	11,588	$	(11,588)	$	—	$	3,545	$	(3,545)
195 West Street	March 31, 2022	Office	63,500	749		849		(100)		242		466		(224)
Virginia 95 Office Park	June 15, 2022	Office/Flex	733,421	5,190		11,091		(5,901)		1,787		2,990		(1,203)
601 Massachusetts Avenue	August 30, 2022	Office	478,667	28,225		32,099		(3,874)		8,499		9,877		(1,378)
			1,608,588	$	34,164	$	55,627	$	(21,463)	$	10,528	$	16,878	$	(6,350)

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 $9.2 million for the nine months ended September 30, 2022 compared to 2021.

The following reflects our occupancy and rate information for our residential same properties for the nine months ended September 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	$	2,804	$	2,577	8.8	%	$	5.16	$	4.73	9.1	%	94.8	%	92.2	%	2.8	%	94.1	%	91.0	%	3.4	%
The Lofts at Atlantic Wharf	$	4,089	$	3,459	18.2	%	$	4.55	$	3.89	17.0	%	97.8	%	93.4	%	4.7	%	97.3	%	91.0	%	6.9	%
The Avant at Reston Town Center (4)	$	2,400	$	2,225	7.9	%	$	2.61	$	2.46	6.1	%	95.2	%	94.2	%	1.1	%	95.3	%	93.6	%	1.8	%
Signature at Reston	$	2,644	$	2,279	16.0	%	$	2.73	$	2.36	15.7	%	95.2	%	86.8	%	9.7	%	94.7	%	83.6	%	13.3	%
The Skylyne	$	3,378	$	3,147	7.3	%	$	4.15	$	3.75	10.7	%	82.7	%	30.2	%	173.8	%	80.2	%	22.7	%	253.3	%

(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.

(4)See Note 13 to the Consolidated Financial Statements.

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Hotel Net Operating Income (Loss)

The Boston Marriott Cambridge hotel had net operating income of approximately $8.6 million for the nine months ended September 30, 2022, representing an increase of approximately $9.2 million compared to the nine months ended September 30, 2021.

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


	2022			2021			Change (%)
Occupancy	63.4		%	27.8		%	128.1	%
Average daily rate	$	315.24		$	192.67		63.6	%
REVPAR	$	199.83		$	53.59		272.9	%

Other Operating Revenue and Expense Items

Development and Management Services Revenue

Development and management services revenue decreased by approximately $0.5 million for the nine months ended September 30, 2022 compared to 2021. Development services revenue decreased by approximately $1.7 million and management services revenue increased by approximately $1.2 million. The decrease in development services revenue was 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. The increase in management services revenue was primarily related to an increase in property management fees from an unconsolidated joint venture in the Boston region and asset management fees from an unconsolidated joint venture in the Seattle region.

General and Administrative Expense

General and administrative expense decreased by approximately $7.5 million for the nine months ended September 30, 2022 compared to 2021 primarily due to a decrease in compensation expense of approximately $13.2 million, partially offset by an approximately $5.7 million increase in other general and administrative expenses. The decrease in compensation expense related to an approximately $12.2 million decrease in the value of our deferred compensation plan and an approximately $1.0 million decrease 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 nine months ended September 30, 2022 and 2021 were approximately $12.0 million and $10.1 million, respectively. These costs are not included in the general and administrative expenses discussed above.

Transaction Costs

Transaction costs decreased by approximately $0.8 million for the nine months ended September 30, 2022 compared to 2021 due primarily to costs incurred in connection with the pursuit and formation of new joint ventures in 2021 that did not occur at the same levels in 2022. 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.

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BXP

Depreciation and amortization expense increased by approximately $11.6 million for the nine months ended September 30, 2022 compared to 2021, as detailed below.


Portfolio	Depreciation and Amortization for the nine months ended September 30,
2022	2021		Change
	(in thousands)
Same Property Portfolio (1)	$	493,588	$	498,760	$	(5,172)
Properties Acquired Portfolio	25,735		4,735		21,000
Properties Placed In-Service Portfolio (2)	22,655		24,050		(1,395)
Properties in Development or Redevelopment Portfolio	3,329		1,826		1,503
Properties Sold Portfolio	6,138		10,444		(4,306)
	$	551,445	$	539,815	$	11,630

(1)During the nine months ended September 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 nine months ended September 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 nine months ended September 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 $13.0 million for the nine months ended September 30, 2022 compared to 2021, as detailed below.


Portfolio	Depreciation and Amortization for the nine months ended September 30,
2022	2021		Change
	(in thousands)
Same Property Portfolio (1)	$	488,414	$	492,200	$	(3,786)
Properties Acquired Portfolio	25,735		4,735		21,000
Properties Placed In-Service Portfolio (2)	22,655		24,050		(1,395)
Properties in Development or Redevelopment Portfolio	3,329		1,826		1,503
Properties Sold Portfolio	6,138		10,444		(4,306)
	$	546,271	$	533,255	$	13,016

(1)During the nine months ended September 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 nine months ended September 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.

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Other Income and Expense Items

Loss from Unconsolidated Joint Ventures

For the nine months ended September 30, 2022 compared to 2021, loss from unconsolidated joint ventures decreased by approximately $0.4 million primarily due to an approximately $10.0 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. This increase was partially offset by a $10.3 million gain on sale of investment from the sale of our Annapolis Junction joint venture interest during the nine months ended September 30, 2021.

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 $373.2 million for the nine months ended September 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
601 Massachusetts Avenue	August 30, 2022	Office	478,667	531.0		512.3		237.4
Broadrun Land Parcel	September 15, 2022	Land	N/A	27.0		25.6		24.4
				$	723.2	$	695.2	$	380.7	(1)
2021
6595 Springfield Center Drive	December 13, 2018	Office	634,000	N/A		N/A		$	8.1	(2)



				N/A		N/A		$	8.1

(1)Excludes approximately $0.6 million of gains on sales of real estate recognized during the nine months ended September 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 at which time 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 $8.1 million.

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BPLP

Gains on sales of real estate increased by approximately $377.2 million for the nine months ended September 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
601 Massachusetts Avenue	August 30, 2022	Office	478,667	531.0		512.3		237.5
Broadrun Land Parcel	September 15, 2022	Land	N/A	27.0		25.6		24.4
				$	723.2	$	695.2	$	384.8	(1)
2021
6595 Springfield Center Drive	December 13, 2018	Office	634,000	N/A		N/A		$	8.1	(2)



				N/A		N/A		$	8.1

(1)Excludes approximately $0.5 million of gains on sales of real estate recognized during the nine months ended September 30, 2022 related to gains on sales of real estate occurring in the prior periods.

(1)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 at which time 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 $8.1 million.

Interest and Other Income (Loss)

Interest and other income (loss) increased by approximately $2.0 million for the nine months ended September 30, 2022 compared to 2021, due primarily to an increase of approximately $2.0 million in interest income due to increased 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 nine months ended September 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 nine months ended September 30, 2022 and 2021, we recognized gains (losses) of approximately $(8.5) million and $3.7 million, respectively, on these investments. By comparison, our general and administrative expense increased (decreased) by approximately $(8.5) million and $3.7 million during the nine months ended September 30, 2022 and 2021, respectively, as a result of increases (decreases) in our liability under our deferred compensation plans that was

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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 the acceleration of remaining unamortized financing costs.

Interest Expense

Interest expense decreased by approximately $2.8 million for the nine months ended September 30, 2022 compared to 2021, as detailed below.


Component	Change in interest expense for the nine months ended September 30, 2022 compared to September 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	$	15,521
Increase in interest associated with unsecured credit facilities and term loans	9,672
Issuance of $850 million in aggregate principal of 2.550% senior notes due 2032 on March 16, 2021	4,577
Amortization expense of financing fees primarily related to the unsecured term loan	2,208
Total increases to interest expense	31,978
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	(29,051)
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	(855)
Other interest expense (excluding senior notes)	(592)
Total decreases to interest expense	(34,777)
Total change in interest expense	$	(2,799)

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 nine months ended September 30, 2022 and 2021 was approximately $40.0 million and $39.3 million, respectively. These costs are not included in the interest expense referenced above.

We expect our interest expense will be materially greater in 2023 compared to 2022 due to the cessation of capitalized interest on our development deliveries, acquisitions funded by debt, higher interest rates on our floating rate debt, and the impact of refinancing our 2023 debt maturities at materially higher interest rates.

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At September 30, 2022, our variable rate debt consisted of BPLP’s $1.5 billion revolving facility (the “Revolving Facility”) and BPLP’s $730.0 million unsecured credit agreement (the “Unsecured Term Loan”.) The Revolving Facility and Unsecured Term Loan had approximately $1.1 billion outstanding as of September 30, 2022. For a summary of our consolidated debt as of September 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 $2.3 million for the nine months ended September 30, 2022 compared to 2021, as detailed below.


Property	Noncontrolling Interests in Property Partnerships for the nine months ended September 30,
2022	2021		Change
	(in thousands)
767 Fifth Avenue (the General Motors Building)	$	9,338	$	8,873	$	465
Times Square Tower	15,394		14,915		479
601 Lexington Avenue (1)	9,281		11,245		(1,964)
100 Federal Street	9,814		10,211		(397)
Atlantic Wharf Office Building (2)	11,069		7,358		3,711
	$	54,896	$	52,602	$	2,294

(1)The decrease was primarily attributable to an increase in operating expenses.

(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 $47.4 million for the nine months ended September 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 September 30, 2022 and 2021

Net income attributable to Boston Properties, Inc. and net income attributable to Boston Properties Limited Partnership increased approximately $252.7 million and $281.6 million for the three months ended September 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 September 30, 2022 to the three months ended September 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 September 30, 2022 and 2021. For a detailed discussion of NOI, including the reasons management believes NOI is useful to investors, see page 68.

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BXP


	Three months ended September 30,
	2022		2021		Increase/ (Decrease)		% Change
	(in thousands)
Net Income Attributable to Boston Properties, Inc.	$	360,977	$	108,297	$	252,680	233.32	%
Net Income Attributable to Noncontrolling Interests:
Noncontrolling interest—common units of the Operating Partnership	40,883		11,982		28,901		241.20	%
Noncontrolling interests in property partnerships	18,801		18,971		(170)		(0.90)	%
Net Income	420,661		139,250		281,411		202.09	%
Other Expenses:
Add:
Interest expense	111,846		105,794		6,052		5.72	%


Losses from investments in securities	1,571		190		1,381		726.84	%
Loss from unconsolidated joint ventures	3,524		5,597		(2,073)		(37.04)	%
Other Income:
Less:

Interest and other income (loss)	3,728		1,520		2,208		145.26	%
Gains on sales of real estate	262,345		348		261,997		75,286.49	%
Other Expenses:
Add:
Depreciation and amortization expense	190,675		179,412		11,263		6.28	%
Transaction costs	1,650		1,888		(238)		(12.61)	%
Payroll and related costs from management services contracts	3,900		3,006		894		29.74	%
General and administrative expense	32,519		34,560		(2,041)		(5.91)	%
Other Revenue:
Less:
Direct reimbursements of payroll and related costs from management services contracts	3,900		3,006		894		29.74	%
Development and management services revenue	7,465		6,094		1,371		22.50	%
Net Operating Income	$	488,908	$	458,729	$	30,179	6.58	%

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BPLP


	Three months ended September 30,
	2022		2021		Increase/ (Decrease)		% Change
	(in thousands)
Net Income Attributable to Boston Properties Limited Partnership	$	403,578	$	122,014	$	281,564	230.76	%
Net Income Attributable to Noncontrolling Interests:
Noncontrolling interests in property partnerships	18,801		18,971		(170)		(0.90)	%
Net Income	422,379		140,985		281,394		199.59	%
Other Expenses:
Add:
Interest expense	111,846		105,794		6,052		5.72	%


Losses from investments in securities	1,571		190		1,381		726.84	%
Loss from unconsolidated joint ventures	3,524		5,597		(2,073)		(37.04)	%
Other Income:
Less:

Interest and other income (loss)	3,728		1,520		2,208		145.26	%
Gains on sales of real estate	262,357		348		262,009		75,289.94	%
Other Expenses:
Add:
Depreciation and amortization expense	188,969		177,677		11,292		6.36	%
Transaction costs	1,650		1,888		(238)		(12.61)	%
Payroll and related costs from management services contracts	3,900		3,006		894		29.74	%
General and administrative expense	32,519		34,560		(2,041)		(5.91)	%
Other Revenue:
Less:
Direct reimbursements of payroll and related costs from management services contracts	3,900		3,006		894		29.74	%
Development and management services revenue	7,465		6,094		1,371		22.50	%
Net Operating Income	$	488,908	$	458,729	$	30,179	6.58	%

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, losses from investments in securities, 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) 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

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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 September 30, 2022 to the three months ended September 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 128 properties totaling approximately 38.6 million net rentable square feet, excluding unconsolidated joint ventures. The Same Property Portfolio includes properties acquired or placed in-service on or prior to July 1, 2021 and owned and in-service through September 30, 2022. The Total Property Portfolio includes the effects of the other properties either acquired, placed in-service, in development or redevelopment after July 1, 2021 or disposed of on or prior to September 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 September 30, 2022 and 2021 with respect to the properties that were acquired, placed in-service, in development or redevelopment or sold.

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	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)	$	678,399	$	657,377	$	21,022	3.20	%	$	13,444	$	495	$	24,744	$	1,752	$	—	$	1,366	$	6,855	$	18,754	$	723,442	$	679,744	$	43,698	6.43	%
Termination Income	1,711		1,874		(163)		(8.70)	%	269		—		—		—		—		—		—		—		1,980		1,874		106		5.66	%
Lease Revenue	680,110		659,251		20,859		3.16	%	13,713		495		24,744		1,752		—		1,366		6,855		18,754		725,422		681,618		43,804		6.43	%
Parking and Other	26,511		22,972		3,539		15.41	%	937		—		—		—		—		—		199		283		27,647		23,255		4,392		18.89	%
Total Rental Revenue (1)	706,621		682,223		24,398		3.58	%	14,650		495		24,744		1,752		—		1,366		7,054		19,037		753,069		704,873		48,196		6.84	%
Real Estate Operating Expenses	262,076		244,283		17,793		7.28	%	3,894		334		5,947		1,162		501		560		2,260		5,897		274,678		252,236		22,442		8.90	%
Net Operating Income (Loss), Excluding Residential and Hotel	444,545		437,940		6,605		1.51	%	10,756		161		18,797		590		(501)		806		4,794		13,140		478,391		452,637		25,754		5.69	%
Residential Net Operating Income (2)	7,316		4,849		2,467		50.88	%	—		—		—		—		—		—		—		—		7,316		4,849		2,467		50.88	%
Hotel Net Operating Income (2)	3,201		1,243		1,958		157.52	%	—		—		—		—		—		—		—		—		3,201		1,243		1,958		157.52	%
Net Operating Income (Loss)	$	455,062	$	444,032	$	11,030	2.48	%	$	10,756	$	161	$	18,797	$	590	$	(501)	$	806	$	4,794	$	13,140	$	488,908	$	458,729	$	30,179	6.58	%

(2)For a detailed discussion of NOI, including the reasons management believes NOI is useful to investors, see page 68. Residential Net Operating Income for the three months ended September 30, 2022 and 2021 is comprised of Residential Revenue of $14,340 and $10,894 less Residential Expenses of $7,024 and $6,045, respectively. Hotel Net Operating Income for the three months ended September 30, 2022 and 2021 is comprised of Hotel Revenue of $11,749 and $5,189 less Hotel Expenses of $8,548 and $3,946, respectively, per the Consolidated Statements of Operations.

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Same Property Portfolio

Lease Revenue (Excluding Termination Income)

Lease revenue (excluding termination income) from the Same Property Portfolio increased by approximately $21.0 million for the three months ended September 30, 2022 compared to 2021. The increase was a result of our average revenue per square foot increasing by approximately $2.88, contributing approximately $25.4 million, partially offset by an approximately $4.4 million decrease due to our average occupancy decreasing from 91.4% to 90.8%.

Termination Income

Termination income decreased by approximately $0.2 million for the three months ended September 30, 2022 compared to 2021.

Termination income for the three months ended September 30, 2022 related to eight clients across the Same Property Portfolio and totaled approximately $1.7 million, which was primarily related to clients that terminated leases early in San Francisco.

Termination income for the three months ended September 30, 2021 related to six clients across the Same Property Portfolio and totaled approximately $1.9 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 $3.5 million for the three months ended September 30, 2022 compared to 2021. Parking revenue increased by approximately $3.9 million and was partially offset by a decrease in other revenue of approximately $0.4 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 $17.8 million, or 7.3%, for the three months ended September 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 July 1, 2021 and September 30, 2022. Rental revenue and real estate operating expenses increased by approximately $14.2 million and $3.6 million, respectively, for the three months ended September 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)
Shady Grove Innovation District	August 2, 2021	232,278		$	735		$	495		$	240		$	561		$	334		$	227
Madison Centre (1)	May 17, 2022	754,988		12,293			—			12,293			3,125			—			3,125
125 Broadway	September 16, 2022	271,000		1,622			—			1,622			208			—			208
		1,258,266		$	14,650		$	495		$	14,155		$	3,894		$	334		$	3,560

(1)Rental revenue for the three months ended September 30, 2022 includes approximately $0.3 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 July 1, 2021 and September 30, 2022. Rental revenue and real estate operating expenses from our Properties Placed In-Service Portfolio increased by approximately $23.0 million and $4.8 million, respectively, for the three months ended September 30, 2022 compared to 2021, as detailed below.

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	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	$	4,767	$	1,752	$	3,015	$	1,633	$	932	$	701
Reston Next	Fourth Quarter, 2021	N/A	1,062,000	9,051		—		9,051		2,830		—		2,830
325 Main Street (2)	Second Quarter, 2022	Second Quarter, 2022	414,008	10,082		—		10,082		820		169		651
2100 Pennsylvania Avenue	Second Quarter, 2022	N/A	480,000	160		—		160		288		—		288
880 Winter Street (3)	Third Quarter, 2022	N/A	244,000	684		—		684		376		61		315
			2,473,373	$	24,744	$	1,752	$	22,992	$	5,947	$	1,162	$	4,785

(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 September 30, 2021 were related to demolition costs.

(3)Conversion of a 224,000 square foot office property located in Waltham, Massachusetts to laboratory space.

Properties in Development or Redevelopment Portfolio

The table below lists the properties that were in development or redevelopment between July 1, 2021 and September 30, 2022. Rental revenue and real estate operating expenses from our Properties in Development or Redevelopment Portfolio decreased by approximately $1.4 million and $0.1 million, respectively, for the three months ended September 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)
140 Kendrick - Building A	July 1, 2022	104,000	$	—	$	1,119	$	(1,119)	$	321	$	310	$	11
760 Boylston Street	September 12, 2022	118,000	—		247		(247)		180		250		(70)
		222,000	$	—	$	1,366	$	(1,366)	$	501	$	560	$	(59)

Properties Sold Portfolio

The table below lists the properties we sold between July 1, 2021 and September 30, 2022. Rental revenue and real estate operating expenses from our Properties Sold Portfolio decreased by approximately $12.0 million and $3.6 million, respectively, for the three months ended September 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	$	—	$	4,019	$	(4,019)	$	—	$	1,368	$	(1,368)
195 West Street	March 31, 2022	Office	63,500	—		727		(727)		—		189		(189)
Virginia 95 Office Park	June 15, 2022	Office/Flex	733,421	—		3,397		(3,397)		—		925		(925)
601 Massachusetts Avenue	August 30, 2022	Office	478,667	7,054		10,894		(3,840)		2,260		3,415		(1,155)
			1,608,588	$	7,054	$	19,037	$	(11,983)	$	2,260	$	5,897	$	(3,637)

Residential Net Operating Income

Net operating income for our residential same properties increased by approximately $2.5 million for the three months ended September 30, 2022 compared to 2021.

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The following reflects our occupancy and rate information for our residential same properties for the three months ended September 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	$	2,895	$	2,642	9.6	%	$	5.32	$	4.82	10.4	%	95.6	%	94.5	%	1.2	%	94.9	%	93.9	%	1.1	%
The Lofts at Atlantic Wharf	$	4,238	$	3,747	13.1	%	$	4.71	$	4.17	12.9	%	99.6	%	96.5	%	3.2	%	99.3	%	95.4	%	4.1	%
The Avant at Reston Town Center (4)	$	2,450	$	2,299	6.6	%	$	2.67	$	2.50	6.8	%	95.4	%	96.3	%	(0.9)	%	95.3	%	96.3	%	(1.0)	%
Signature at Reston	$	2,671	$	2,429	10.0	%	$	2.75	$	2.51	9.6	%	96.3	%	93.2	%	3.3	%	95.9	%	92.0	%	4.2	%
The Skylyne	$	3,400	$	3,307	2.8	%	$	4.27	$	3.92	8.9	%	92.8	%	48.3	%	92.1	%	90.2	%	41.0	%	120.0	%

(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.

(4)See Note 13 to the Consolidated Financial Statements.

Hotel Net Operating Income

The Boston Marriott Cambridge hotel had net operating income of approximately $3.2 million for the three months ended September 30, 2022, representing an increase of approximately $2.0 million compared to the three months ended September 30, 2021.

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


	2022			2021			Change (%)
Occupancy	75.8		%	49.4		%	53.4	%
Average daily rate	$	328.40		$	222.31		47.7	%
REVPAR	$	249.06		$	109.86		126.7	%

Other Operating Revenue and Expense Items

Development and Management Services Revenue

Development and management services revenue increased by approximately $1.4 million for the three months ended September 30, 2022 compared to 2021. Management services revenue increased by approximately $1.4 million and was primarily related to an increase in property management fees from an unconsolidated joint venture in the Boston region and asset management fees from an unconsolidated joint venture in the Los Angeles region.

General and Administrative Expense

General and administrative expense decreased by approximately $2.0 million for the three months ended September 30, 2022 compared to 2021 primarily due to a decrease in compensation expense of approximately $3.9 million, partially offset by an increase of approximately $1.9 million in other general and administrative expenses. The decrease in compensation expense primarily related to an approximately $1.4 million decrease in the value of

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our deferred compensation plan, and an approximately $2.5 million decrease 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 three months ended September 30, 2022 and 2021 were approximately $3.9 million and $3.4 million, respectively. These costs are not included in the general and administrative expenses discussed above.

Transaction Costs

Transaction costs decreased by approximately $0.2 million for the three months ended September 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 increased by approximately $11.3 million for the three months ended September 30, 2022 compared to 2021, as detailed below.


Portfolio	Depreciation and Amortization for the three months ended September 30,
2022	2021		Change
	(in thousands)
Same Property Portfolio	$	169,996	$	174,548	$	(4,552)
Properties Acquired Portfolio	10,399		737		9,662
Properties Placed In-Service Portfolio	7,980		379		7,601
Properties in Development or Redevelopment Portfolio	1,076		277		799
Properties Sold Portfolio	1,224		3,471		(2,247)
	$	190,675	$	179,412	$	11,263

BPLP

Depreciation and amortization expense increased by approximately $11.3 million for the three months ended September 30, 2022 compared to 2021, as detailed below.


Portfolio	Depreciation and Amortization for the three months ended September 30,
2022	2021		Change
	(in thousands)
Same Property Portfolio	$	168,290	$	172,813	$	(4,523)
Properties Acquired Portfolio	10,399		737		9,662
Properties Placed In-Service Portfolio	7,980		379		7,601
Properties in Development or Redevelopment Portfolio	1,076		277		799
Properties Sold Portfolio	1,224		3,471		(2,247)
	$	188,969	$	177,677	$	11,292

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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 September 30, 2022 compared to 2021, loss from unconsolidated joint ventures decreased by approximately $2.1 million due primarily to an approximately $2.2 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.

Gains on Sales of Real Estate

BXP

Gains on sales of real estate increased by approximately $262.0 million for the three months ended September 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
601 Massachusetts Avenue	August 30, 2022	Office	478,667	$	531.0	$	512.3	$	237.4
Broadrun Land Parcel	September 15, 2022	Land	N/A	27.0		25.6		24.4
				$	558.0	$	537.9	$	261.8	(1)
2021
6595 Springfield Center Drive	December 13, 2018	Office	634,000	N/A		N/A		$	0.3	(2)



				N/A		N/A		$	0.3

(1)Excludes approximately $0.5 million of gains on sales of real estate recognized during the three months ended September 30, 2022 related to gains on sales of real estate occurring in the prior periods.

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BPLP

Gains on sales of real estate increased by approximately $262.0 million for the three months ended September 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
601 Massachusetts Avenue	August 30, 2022	Office	478,667	$	531	$	512.3	$	237.5
Broadrun Land Parcel	September 15, 2022	Land	N/A	27.0		25.6		24.4
				$	558.0	$	537.9	$	261.9	(1)
2021
6595 Springfield Center Drive	December 13, 2018	Office	634,000	N/A		N/A		$	0.3	(2)



				N/A		N/A		$	0.3

(1)Excludes approximately $0.4 million of gains on sales of real estate recognized during the three months ended September 30, 2022 related to the sale of real estate occurring in the prior periods.

Interest and Other Income (Loss)

Interest and other income (loss) increased by approximately $2.2 million for the three months ended September 30, 2022 compared to 2021, due primarily to an increase of approximately $2.2 million in interest income due to increased interest earned on our deposits.

Losses from Investments in Securities

Losses from investments in securities for the three months ended September 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 losses from investments in securities. During the three months ended September 30, 2022 and 2021, we recognized losses of approximately $1.6 million and $0.2 million, respectively, on these investments. By comparison, our general and administrative expense decreased by approximately $1.6 million and $0.2 million during the three months ended September 30, 2022 and 2021, respectively, as a result of 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 increased by approximately $6.1 million for the three months ended September 30, 2022 compared to 2021, as detailed below.

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Component	Change in interest expense for the three months ended September 30, 2022 compared to September 30, 2021
	(in thousands)
Increases to interest expense due to:
Increase in interest associated with unsecured credit facilities and term loans	$	7,401
Issuance of $850 million in aggregate principal of 2.450% senior notes due 2033 on September 29, 2021	5,097
Decrease in capitalized interest related to development projects	1,880
Amortization expense of financing fees primarily related to unsecured term loan	1,407
Total increases to interest expense	15,785
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)
Other interest expense (excluding senior notes)	(49)
Total decreases to interest expense	(9,733)
Total change in interest expense	$	6,052

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 September 30, 2022 and 2021 was approximately $12.2 million and $14.2 million, respectively. These costs are not included in the interest expense referenced above.

At September 30, 2022, our outstanding variable rate debt consisted of BPLP’s $1.5 billion Revolving Facility and $730.0 million Unsecured Term Loan. The Revolving Facility and Unsecured Term Loan had approximately $1.1 billion outstanding as of September 30, 2022. For a summary of our consolidated debt as of September 30, 2022 and September 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 decreased by approximately $0.2 million for the three months ended September 30, 2022 compared to 2021, as detailed below.


Property	Noncontrolling Interests in Property Partnerships for the three months ended September 30,
2022	2021		Change
	(in thousands)
767 Fifth Avenue (the General Motors Building)	$	3,289	$	3,406	$	(117)
Times Square Tower	4,911		4,995		(84)
601 Lexington Avenue (1)	3,630		4,436		(806)
100 Federal Street	3,393		3,421		(28)
Atlantic Wharf Office Building (2)	3,578		2,713		865
	$	18,801	$	18,971	$	(170)

(1)The decrease was primarily attributable to an increase in operating expenses.

(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 $28.9 million for the three months ended September 30, 2022 compared to 2021 due primarily to an increase in

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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 including 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, unsecured term 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.

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The following table presents information on properties under construction and redevelopment as of September 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 September 30, 2022 (1)		Estimated Future Equity Requirement (1)(2)(4)		Percentage Leased (5)
Office
140 Kendrick - Building A (Redevelopment)	Third Quarter, 2023	Needham, MA	1	104,000	$	4,163	$	26,600	$	—	$	—	$	22,437	100	%
Reston Next	Fourth Quarter, 2023	Reston, VA	2	1,062,000	560,445		715,300		—		—		154,855		87	%	(6)
2100 Pennsylvania Avenue	Third Quarter, 2024	Washington, DC	1	480,000	301,118		356,100		—		—		54,982		61	%	(7)
360 Park Avenue South (42% ownership)	First Quarter, 2025	New York, NY	1	450,000	200,474		219,000		92,774		87,299		13,051		—	%	(8)
Reston Next Office Phase II	Second Quarter, 2025	Reston, VA	1	90,000	15,321		61,000		—		—		45,679		—	%
Platform 16 Building A (55% ownership)	Fourth Quarter, 2026	San Jose, CA	1	389,500	78,343		231,900		—		—		153,557		—	%	(9)
Total Office Properties under Construction			7	2,575,500	1,159,864		1,609,900		92,774		87,299		444,561		51	%

Laboratory/Life Sciences
880 Winter Street (Redevelopment)	First Quarter, 2023	Waltham, MA	1	244,000	100,112		108,000		—		—		7,888		97	%	(10)
751 Gateway (49% ownership)	Second Quarter, 2024	South San Francisco, CA	1	231,000	81,235		127,600		—		—		46,365		100	%
103 CityPoint	Third Quarter, 2024	Waltham, MA	1	113,000	33,288		115,100		—		—		81,812		—	%
180 CityPoint	Fourth Quarter, 2024	Waltham, MA	1	329,000	119,190		274,700		—		—		155,510		43	%
651 Gateway (50% ownership) (Redevelopment)	Fourth Quarter, 2025	South San Francisco, CA	1	327,000	33,738		146,500		—		—		112,762		—	%
Total Laboratory/Life Sciences Properties under Construction			5	1,244,000	367,563		771,900		—		—		404,337		49	%

Residential
Reston Next Residential (508 units) (20% ownership)	Second Quarter, 2026	Reston, VA	1	417,000	11,394		47,700		28,000		4,116		12,422		—	%
Total Residential Property under Construction			1	417,000	11,394		47,700		28,000		4,116		12,422		—

Retail
760 Boylston Street (Redevelopment)	Second Quarter, 2024	Boston, MA	1	118,000	2,355		43,800		—		—		41,445		100	%
Total Retail Property under Construction			1	118,000	2,355		43,800		—		—		41,445		100	%

Other
View Boston Observatory at The Prudential Center (Redevelopment)	N/A	Boston, MA	—	59,000	136,896		182,300		—		—		45,404		N/A		(11)
Total Properties under Construction			14	4,413,500	$	1,678,072	$	2,655,600	$	120,774	$	91,415	$	948,169	52	%	(12)

(1)Represents our share.

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(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 September 30, 2022.

(3)Includes approximately $95.9 million of unpaid but accrued construction costs and leasing commissions.

(4)Excludes approximately $95.9 million of unpaid but accrued construction costs and leasing commissions.

(5)Represents percentage leased as of November 1, 2022, including leases with future commencement dates.

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

(7)The property was 6% placed in-service as of September 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)The property was 25% placed in-service as of September 30, 2022.

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

(12)Percentage leased excludes the residential property and the View Boston Observatory at The Prudential Center (redevelopment) at 800 Boylston Street - The Prudential Center. Estimated total investment excludes approximately $210 million related to the redevelopment of 300 Binney Street which is currently in-service. We terminated our existing lease agreement with Biogen at 300 Binney Street to facilitate the redevelopment of the property, which is expected to begin in early 2023. Biogen will be vacating the property in phases through early 2023. The project is 100% pre-leased. The commencement of construction is subject to various conditions. There can be no assurance that we will commence the redevelopment on the terms and schedule currently contemplated or at all.

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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 to fund the anticipated acquisition of an approximate 27% interest in the joint venture that owns 200 Fifth Avenue in New York City, the commencement, continuation and completion of our current and committed development and redevelopment projects, repaying debt maturities (as discussed below), servicing the interest payments on our outstanding indebtedness, and satisfying our REIT distribution requirements.

As of September 30, 2022, we had 14 properties under development or redevelopment. Our share of the remaining development and redevelopment costs of active development and redevelopment projects that we expect to fund through 2026 was approximately $948.2 million (excluding costs related to 300 Binney Street). In the third quarter of 2022, we commenced two redevelopment projects and committed to begin a third redevelopment project in early 2023 described below:

140 Kendrick Street Building A in Needham, Massachusetts. When completed, the building will consist of approximately 104,000 net rentable square feet and will be the first net zero, carbon neutral office repositioning of this scale in Massachusetts. This project is 100% pre-leased.
760 Boylston Street, a retail property at the Prudential Center in Boston, Massachusetts. The redevelopment is a modernization of the approximately 118,000 net rentable square foot space. This project is 100% pre-leased.
300 Binney Street in Cambridge, Massachusetts. The conversion of this approximately 195,000 net rentable square foot property into an approximately 240,000 net rentable square foot laboratory/life sciences property has a total budgeted cost of $210.0 million and is expected to begin in early 2023. This project is 100% pre-leased. There can be no assurance that we will commence the redevelopment on the terms and schedule currently contemplated or at all.

On September 16, 2022, we acquired 125 Broadway in Cambridge, Massachusetts for a net purchase price, including transaction costs, of approximately $592.4 million. The acquisition was completed with available cash and borrowings under BPLP’s Revolving Facility. 125 Broadway is a 271,000 square foot, six-story, laboratory/life sciences property. The property is 100% leased.

In the third quarter of 2022, we completed the sale of 601 Massachusetts Avenue located in Washington, DC and two parcels of land located in Loudoun County, Virginia for aggregate net proceeds of $537.9 million. On October 6, 2022, we entered into an agreement to sell the residential component of The Avant at Reston Town Center located in Reston, Virginia for a gross sale price of $141 million. There can be no assurance that we will complete the sale on the terms currently contemplated or at all.

In July 2021, we announced the formation of the SCP with two partners each having a targeted equity commitment 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. As we move forward, we anticipate increasing our use of joint venture partner equity to manage our debt levels.

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We have no remaining debt maturities in 2022. Our 2023 debt maturities include (1) the Unsecured Term Loan, which matures on May 16, 2023, and (2) $500.0 million aggregate principal amount of BPLP’s 3.125% senior unsecured notes, which mature on September 1, 2023. In our unconsolidated joint venture portfolio, we have approximately $533.6 million (our share) of debt maturating in 2023. We expect to fund 2023 debt maturities using available cash balances, proceeds from asset sales, BPLP’s Revolving Facility, and/or through refinancings. We expect our interest expense will be materially greater in 2023 compared to 2022 due to the cessation of capitalized interest on our development deliveries, acquisitions funded by debt, higher interest rates on our floating rate debt, and the impact of refinancing our 2023 debt maturities at materially higher interest rates.

As of November 1, 2022, we had available cash of approximately $268.5 million (of which approximately $100.3 million is attributable to our consolidated joint venture partners). Our liquidity and capital resources depend on a wide range of factors and we believe that our access to capital and our strong liquidity, including the approximately $1.1 billion available under the Revolving Facility and our available cash, as of November 1, 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.

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Cash and cash equivalents and cash held in escrows aggregated approximately $448.9 million and $1.1 billion at September 30, 2022 and 2021, respectively, representing a decrease of approximately $633.0 million. The following table sets forth changes in cash flows:


	Nine months ended September 30,
2022			2021			Change
(in thousands)
Net cash provided by operating activities	$	912,403		$	786,859		$	125,544
Net cash used in investing activities	(1,313,220)			(998,368)			(314,852)
Net cash provided by (used in) financing activities	348,545			(425,899)			774,444

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 7.8 years as of September 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 nine months ended September 30, 2022 and September 30, 2021 is detailed below:


	Nine months ended September 30,
	2022		2021
	(in thousands)
Acquisitions of real estate (1)	$	(1,320,273)	$	(218,679)
Construction in progress (2)	(384,083)		(381,104)
Building and other capital improvements	(112,755)		(103,840)
Tenant improvements	(139,986)		(218,878)
Proceeds from the sales of real estate (3)	695,231		—
Proceeds from assignment fee (4)	6,624		—
Capital contributions to unconsolidated joint ventures (5)	(109,643)		(95,462)
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	5,043		1,684
Net cash used in investing activities	$	(1,313,220)	$	(998,368)

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

(1)On September 16, 2022, we acquired 125 Broadway in Cambridge, Massachusetts for a net purchase price, including transaction costs, of approximately $592.4 million. The acquisition was completed with available cash and borrowings under BPLP’s Revolving Facility. 125 Broadway is a 271,000 net rentable square foot, six-story, laboratory/life sciences property.

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, premier workplace.

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On August 2, 2021, we acquired Shady Grove Bio+Tech Campus in Rockville, Maryland, for a purchase price, including transaction costs, of approximately $118.5 million in cash. Shady Grove Bio+Tech Campus is an approximately 435,000 net rentable square foot, seven-building office park situated on an approximately 31-acre site.

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 nine months ended September 30, 2022 included ongoing expenditures associated with Reston Next, 2100 Pennsylvania Avenue and 880 Winter Street, each of which are partially placed in-service, and 325 Main Street, which was completed and fully placed in-service during the nine months ended September 30, 2022. In addition, we incurred costs associated with our continued development/redevelopment of 180 CityPoint, View Boston Observatory at The Prudential Center, 103 CityPoint, Reston Next Office Phase II, 140 Kendrick Street Building A and 760 Boylston Street.

Construction in progress for the nine months ended September 30, 2021 included ongoing expenditures associated with One Five Nine East 53rd Street, which was completed and fully placed in-service during the nine months ended September 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 August 30, 2022, we completed the sale of 601 Massachusetts Avenue located in Washington, DC for a gross sale price of $531.0 million. Net cash proceeds totaled approximately $512.3 million, resulting in a gain on sale of real estate totaling approximately $237.4 million for BXP and approximately $237.5 million for BPLP. 601 Massachusetts Avenue is an approximately 479,000 net rentable square foot premier workplace.

On September 15, 2022, we completed the sale of two parcels of land located in Loudoun County, Virginia for a gross sale price of $27.0 million. Net cash proceeds totaled approximately $25.6 million, resulting in a gain on sale of real estate totaling approximately $24.4 million for BXP and BPLP.

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 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 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 nine months ended September 30, 2022 consisted primarily of cash contributions of approximately $44.8 million, $31.6 million and $16.4 million to our Gateway Commons, Platform 16 and 751 Gateway joint ventures, respectively.

Capital contributions to unconsolidated joint ventures for the nine months ended September 30, 2021 consisted primarily of cash contributions of approximately $72.6 million and $11.4 million to our Safeco Plaza and Santa Monica Business Park joint ventures, respectively. On September 1, 2021, we entered into a new joint venture for Safeco Plaza located in Seattle, Washington.

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(6)Capital distributions from unconsolidated joint ventures for the nine months ended September 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 nine months ended September 30, 2022 totaled approximately $348.5 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 and distributions to noncontrolling interests in property partnerships. 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):


	September 30, 2022
	Shares / Units Outstanding	Common Stock Equivalent	Equivalent Value (1)
Common Stock	156,755	156,755	$	11,751,922
Common Operating Partnership Units	18,215	18,215	1,365,579			(2)
Total Equity		174,970	$	13,117,501

Consolidated Debt			$	13,832,871
Add:
BXP’s share of unconsolidated joint venture debt (3)			1,450,624
Subtract:
Partners’ share of Consolidated Debt (4)			(1,357,896)
BXP’s Share of Debt			$	13,925,599

Consolidated Market Capitalization			$	26,950,372
BXP’s Share of Market Capitalization			$	27,043,100
Consolidated Debt/Consolidated Market Capitalization			51.33		%
BXP’s Share of Debt/BXP’s Share of Market Capitalization			51.49		%

(1)Values are based on the closing price per share of BXP’s Common Stock on the New York Stock Exchange on September 30, 2022 of $74.97.

(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:

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(1) our consolidated debt; plus

(2) the product of (x) the closing price per share of BXP Common Stock on September 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, and 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 September 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.”

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Debt Financing

As of September 30, 2022, we had approximately $13.8 billion of outstanding consolidated indebtedness, representing approximately 51.33% 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 6.1 years, (3) $340.0 million outstanding under BPLP’s Revolving Facility that matures on June 15, 2026 and (4) $730.0 million 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 September 30, 2022 and September 30, 2021.


	September 30,
	2022			2021
	(dollars in thousands)
Debt Summary:
Balance
Fixed rate mortgage notes payable, net	$	3,271,157		$	2,898,699
Unsecured senior notes, net	9,491,714			10,479,651
Unsecured line of credit	340,000			—
Unsecured term loan, net	730,000			—
Consolidated Debt	13,832,871			13,378,350
Add:
BXP’s share of unconsolidated joint venture debt, net (1)	1,450,624			1,289,582
Subtract:
Partners’ share of consolidated mortgage notes payable, net (2)	(1,357,896)			(1,190,479)
BXP’s Share of Debt	$	13,925,599		$	13,477,453

	September 30,
	2022			2021
Consolidated Debt Financing Statistics:
Percent of total debt:
Fixed rate	92.26		%	100.00		%
Variable rate	7.74		%	—		%
Total	100.00		%	100.00		%
GAAP Weighted-average interest rate at end of period:
Fixed rate	3.43		%	3.57		%
Variable rate	3.43		%	—		%
Total	3.43		%	3.57		%
Coupon/Stated Weighted-average interest rate at end of period:
Fixed rate	3.32		%	3.47		%
Variable rate	3.40		%	—		%
Total	3.33		%	3.47		%
Weighted-average maturity at end of period (in years):
Fixed rate	5.9			5.9
Variable rate	1.6			—
Total	5.6			5.9

(1)See page 90 for additional information.

(2)See page 89 for additional information.

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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 September 30, 2022 credit rating, (1) the applicable Eurocurrency and LIBOR Daily Floating Rate margins are 0.775%, (2) the alternate base rate margin is zero basis points and (3) the facility fee is 0.15% per annum.

At September 30, 2022, BPLP had $340.0 million of borrowings under its Revolving Facility and outstanding letters of credit totaling approximately $6.4 million, with the ability to borrow approximately $1.2 billion. At November 1, 2022, BPLP had $440.0 million of borrowings under its Revolving Facility and outstanding letters of credit totaling approximately $6.4 million, with the ability to borrow approximately $1.1 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 zero 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 September 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 September 30, 2022. At September 30, 2022, BPLP had $730.0 million outstanding under its Unsecured Term Loan.

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Unsecured Senior Notes

The following summarizes the unsecured senior notes outstanding as of September 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					14,391
Deferred financing costs, net					43,895
Total					$	9,491,714

(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 September 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 September 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	$	(16,363)	$	2,283,637	$	913,512	(2)(3)(4)	June 9, 2027
601 Lexington Avenue	2.79	%	2.93	%	1,000,000		(12,480)		987,520		444,384		(2)(5)	January 9, 2032

Total					$	3,300,000	$	(28,843)	$	3,271,157	$	1,357,896

(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 September 30, 2022, the maximum funding obligation under the guarantee was approximately $14.9

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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 September 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 $1.5 billion). The table below summarizes the outstanding debt of these joint venture properties at September 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	$	(1,480)	$	298,520	$	164,186	(2)(3)	July 19, 2025
Market Square North	50.00	%	4.64	%	4.80	%	125,000		(643)		124,357		62,179		(2)(4)	November 10, 2025
1265 Main Street	50.00	%	3.77	%	3.84	%	35,811		(257)		35,554		17,777			January 1, 2032
Colorado Center	50.00	%	3.56	%	3.59	%	550,000		(871)		549,129		274,565		(2)	August 9, 2027
Dock 72	50.00	%	5.45	%	5.72	%	198,383		(655)		197,728		98,864		(2)(5)	December 18, 2023
The Hub on Causeway - Podium	50.00	%	4.78	%	4.94	%	174,329		(269)		174,060		87,030		(2)(6)	September 6, 2023
Hub50House	50.00	%	4.43	%	4.51	%	185,000		(1,325)		183,675		91,837		(2)(7)	June 17, 2032
100 Causeway Street	50.00	%	3.72	%	3.93	%	337,604		(776)		336,828		168,414		(2)(8)	September 5, 2023
7750 Wisconsin Avenue (Marriott International Headquarters)	50.00	%	3.39	%	3.93	%	253,887		(812)		253,075		126,538		(2)(9)	April 26, 2023
360 Park Avenue South	42.21	%	4.87	%	5.33	%	207,030		(2,208)		204,823		86,456		(2)(10)	December 14, 2024
Safeco Plaza	33.67	%	4.41	%	4.55	%	250,000		(1,332)		248,668		83,727		(2)(11)	September 1, 2026
500 North Capitol Street, NW	30.00	%	4.15	%	4.20	%	105,000		(39)		104,961		31,488		(2)	June 6, 2023
901 New York Avenue	25.00	%	3.61	%	3.69	%	213,351		(402)		212,949		53,237			January 5, 2025
3 Hudson Boulevard	25.00	%	5.80	%	5.88	%	80,000		(48)		79,952		19,988		(2)(12)	July 13, 2023
Metropolitan Square	20.00	%	5.12	%	5.90	%	420,000		(4,973)		415,027		83,005		(2)(13)	April 9, 2024
Reston Next Residential	20.00	%	4.75	%	5.06	%	8,231		(1,566)		6,666		1,333		(2)(14)	May 13, 2026
Total							$	3,443,626	$	(17,656)	$	3,425,972	$	1,450,624

(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.

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(5)The construction financing has a borrowing capacity of $198.4 million. The construction financing bears interest at a variable rate equal to (1) the greater of (x) SOFR or (y) 0.25%, plus (2) 3.10% 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) SOFR plus 2.32% per annum and matures on September 1, 2026. The joint venture entered into an interest rate cap agreement with a financial institution to limit its exposure to increases in the SOFR rate at a cap of 2.50% per annum on a notional amount of $250.0 million through September 1, 2023.

(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 September 30, 2022, the loan has approximately $17.3 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. The joint venture entered into an interest rate cap agreement with a financial institution to limit its exposure to increases in the SOFR rate at a cap of 4.50% per annum on a notional amount of $420.0 million through April 15, 2024.

(14)The construction financing has a borrowing capacity of $140.0 million. 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

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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 September 30, 2022 and 2021:


	Three months ended September 30,
	2022			2021
	(in thousands)
Net income attributable to Boston Properties, Inc.	$	360,977		$	108,297
Add:


Noncontrolling interest—common units of the Operating Partnership	40,883			11,982
Noncontrolling interests in property partnerships	18,801			18,971
Net income	420,661			139,250
Add:
Depreciation and amortization	190,675			179,412
Noncontrolling interests in property partnerships’ share of depreciation and amortization	(17,706)			(16,773)
BXP’s share of depreciation and amortization from unconsolidated joint ventures	21,485			17,803
Corporate-related depreciation and amortization	(431)			(443)

Less:

Gains on sales of real estate	262,345			348
Noncontrolling interests in property partnerships	18,801			18,971


Funds from Operations (FFO) attributable to the Operating Partnership	333,538			299,930
Less:
Noncontrolling interest—common units of the Operating Partnership’s share of funds from operations	33,787			29,453
Funds from Operations attributable to Boston Properties, Inc.	$	299,751		$	270,477
Our percentage share of Funds from Operations—basic	89.87		%	90.18		%
Weighted average shares outstanding—basic	156,754			156,183

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Reconciliation to Diluted Funds from Operations:


	Three months ended September 30,
	2022			2021
	Income (Numerator)		Shares/Units (Denominator)	Income (Numerator)		Shares/Units (Denominator)
	(in thousands)
Basic Funds from Operations	$	333,538	174,416	$	299,930	173,194
Effect of Dilutive Securities:
Stock based compensation	—		379	—		415
Diluted Funds from Operations	$	333,538	174,795	$	299,930	173,609
Less:
Noncontrolling interest—common units of the Operating Partnership’s share of diluted Funds from Operations	33,687		17,662	29,393		17,011
Diluted Funds from Operations attributable to Boston Properties, Inc. (1)	$	299,851	157,133	$	270,537	156,598

(1)BXP’s share of diluted Funds from Operations was 89.90% and 90.20% for the three months ended September 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 September 30, 2022 and 2021:


	Three months ended September 30,
		2022		2021
		(in thousands)
Net income attributable to Boston Properties Limited Partnership		$	403,578	$	122,014
Add:


Noncontrolling interests in property partnerships		18,801		18,971
Net income		422,379		140,985
Add:
Depreciation and amortization		188,969		177,677
Noncontrolling interests in property partnerships’ share of depreciation and amortization		(17,706)		(16,773)
BXP’s share of depreciation and amortization from unconsolidated joint ventures		21,485		17,803
Corporate-related depreciation and amortization		(431)		(443)


Less:

Gains on sales of real estate		262,357		348
Noncontrolling interests in property partnerships		18,801		18,971


Funds from Operations attributable to Boston Properties Limited Partnership (1)		$	333,538	$	299,930
Weighted average shares outstanding—basic		174,416		173,194

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

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Reconciliation to Diluted Funds from Operations:


	Three months ended September 30,
	2022			2021
	Income (Numerator)		Shares/Units (Denominator)	Income (Numerator)		Shares/Units (Denominator)
	(in thousands)
Basic Funds from Operations	$	333,538	174,416	$	299,930	173,194
Effect of Dilutive Securities:
Stock based compensation	—		379	—		415
Diluted Funds from Operations	$	333,538	174,795	$	299,930	173,609

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 September 30, 2022, we paid approximately $60.1 million to fund client-related obligations, including tenant improvements and leasing commissions.

In addition, during the three months ended September 30, 2022, we and our unconsolidated joint venture partners incurred approximately $100.3 million of new client-related obligations associated with approximately 1.0 million square feet of second generation leases, or approximately $99 per square foot. We signed approximately 429,900 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 third quarter of 2022, we signed leases for approximately 1.4 million square feet of space and incurred aggregate client-related obligations of approximately $198.9 million, or approximately $137 per square foot.

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