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 we 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. If one or more of these known or unknown risks or uncertainties materialize, or if 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 risks and uncertainties related to the impact of changes in general economic and capital market conditions, including continued inflation, increasing interest rates, supply chain disruptions, labor market disruptions, dislocation and volatility in capital markets, and potential longer-term changes in consumer and client behavior resulting from the severity and duration of any downturn in the U.S. or global economy, sustained changes in client preferences and space utilization, as well as the other important factors below and the risks described in (i) our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 including those described under the caption “Risk Factors,” (ii) our subsequent filings under the Exchange Act and (iii) 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:

  • volatile or adverse global economic and geopolitical conditions, health crises, dislocations in the credit markets and potential financial contagion from recent or future failures of banking institutions could adversely affect economic conditions and/or restrict our access to cost-effective capital, which could have a material adverse effect on our business opportunities, results of operations and financial condition;

  • general risks affecting the real estate industry (including, without limitation, the inability to enter into or renew leases, changes in client preferences and space utilization, dependence on clients’ financial condition, and competition from other developers, owners and operators of real estate);

  • the impact of geopolitical conflicts, including the ongoing war in Ukraine;

  • the immediate and long-term impact of the outbreak of a highly infectious or contagious disease, such as COVID-19, on our and our clients’ financial condition, results of operations and cash flows (including the impact of actions taken to contain the outbreak or mitigate its impact, the direct and indirect economic effects of the outbreak and containment measures on our clients, and the ability of our clients to successfully operate their businesses);

  • failure to manage effectively our growth and expansion into new markets and sub-markets or to integrate acquisitions and developments successfully;

  • the ability of our joint venture partners to satisfy their obligations;

  • risks and uncertainties affecting property development and construction (including, without limitation, 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 derivatives 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 climate change and severe weather events, as well as the regulatory efforts intended to reduce the 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. 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 March 31, 2023) in the U.S. that develops, owns, and manages primarily premier workplaces. Our properties are concentrated in six dynamic gateway markets in the U.S. - 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 amount of any security deposit or letter of credit posted by the client, 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 clients’ expansion rights and general economic factors.

Our core strategy has always been to develop, acquire and manage 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. As of March 31, 2023, the weighted-average lease term for our in-place leases based on square feet, including those signed by our unconsolidated joint ventures but excluding residential units, was approximately 7.6 years. The weighted-average lease term for our 20 largest clients, based on leased square footage, was approximately 10.4 years as of March 31, 2023.

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 high-quality developer, owner and manager of premier workplaces in our markets;

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

  • our relationships with local brokers.

Outlook

Although we are not in a recession (traditionally defined as negative GDP growth), the effects of a cooling economy are evident. According to FactSet, the S&P 500 is reporting a year-over-year decline in earnings of more than 3% for the first quarter of 2023, which would mark the second straight quarter the index has reported a decline in earnings. With slowing growth, some companies are announcing corporate layoffs and reducing headcount, focusing on cost reductions and taking more time to make leasing decisions, leasing less space, offering space they have for sublease or taking a combination of one or more of the foregoing actions.

With more challenging economic conditions, the return-to-office trend continues to improve. Companies in a variety of industries, including major technology companies, are increasing the days that workers on hybrid schedules are required to come into the office and reinforcing the importance of in-person interactions as a key contributor to overall success.

The premier workplace segment continues to outperform the broader office market, in both vacancy and net absorption, as companies see an opportunity to upgrade their workplaces as a method of attracting their workforces back to the office and recruiting new employees. Throughout our portfolio, there has been a slow but steady increase in the number of unique occupants that are in our offices each month.

The evolving operating environment impacts various aspects of our operating activities as:

  • labor market conditions shift, resulting in increasing employer demands for mandatory in-person workdays;

  • volatility in the capital markets, on the heels of recent bank failures, have driven companies to be more reticent in capital outlays, including capital required for leasing new space;

  • 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 ourselves for success, notwithstanding the uncertain trajectory of the U.S. and global economies, by managing our leverage while continuing to selectively invest (including through both acquisitions and developments) in premier workplace opportunities. We remain focused on the following strategies:

  • continuing to embrace our leadership position in the premier workplace segment 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 compared to general office space and demonstrating the highest

occupancy, net absorption levels and rental rates in the central business districts (“CBDs”) in 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 residential development;

  • continuing to raise the bar in the quality of our portfolio and actively recycling capital by selling assets, subject to market conditions, which have been, and may continue to be, negatively impacted by a slowdown in the capital markets and the limited availability of private market debt financing;

  • 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.

The following is an overview of leasing and investment activity in the first quarter of 2023.

Leasing Activity and Occupancy

In the first quarter of 2023, we signed approximately 660,500 square feet of leases with a weighted-average lease term of approximately 7.7 years.

The overall occupancy of our in-service premier workplace and retail properties was 88.6% at March 31, 2023, remaining flat from December 31, 2022. We define occupancy as space with signed leases for which revenue recognition has commenced in accordance with GAAP. Inclusive of vacant space with signed leases that have not yet commenced in accordance with GAAP, our in-service premier workplace and retail properties would be approximately 91.0% leased at March 31, 2023.

The macroeconomic environment has resulted in softening demand in all of our markets. While property 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. We have factored in the impacts of a slower economy, softer business performance, and reduced demand for space into our leasing expectations for the remainder of 2023. We expect the bulk of our leasing in 2023 will continue to come from small- and medium-sized professional and financial services firms.

Investment Activity

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. Additional new acquisition opportunities will likely increase in this environment, and we remain committed to developing and acquiring assets to enhance our long-term growth and to meet client demand solely focused on premier workplaces, life sciences, and residential development.

Consistent with this strategy, in the first quarter of 2023, we completed the acquisition of a 50% interest in a joint venture that owns 13100 and 13150 Worldgate Drive located in Herndon, Virginia for a gross purchase price of approximately $17.0 million. The acquisition was completed with available cash. The joint venture intends to redevelop the property for residential use. There can be no assurance that the joint venture will commence the development as currently contemplated or at all.

Also in the first quarter of 2023, we further expanded our life sciences portfolio in Cambridge, Massachusetts, the largest cluster of life sciences companies and research space in the U.S., by commencing the development/redevelopment of two fully pre-leased projects:

  • 290 Binney Street, an approximately 566,000 square foot laboratory/life sciences property, which is 100% pre-leased to AstraZeneca for a lease term of 15 years.

  • 300 Binney Street, an approximately 195,000 net rentable square foot premier workplace that is being redeveloped into approximately 236,000 net rentable square feet of laboratory/life sciences space, which is 100% pre-leased to the Broad Institute for a lease term of 15 years.

As of March 31, 2023, our development/redevelopment pipeline consisted of 15 properties that, when completed, we expect will total approximately 4.0 million net rentable square feet. Our share of the estimated total cost for these projects is approximately $3.3 billion, of which approximately $1.9 billion remains to be invested. The commercial space in the pipeline, which excludes View Boston at The Prudential Center and Reston Next Residential, is 52% pre-leased as of April 28, 2023.

As we continue to focus on new investments to drive future growth, we regularly review our portfolio to identify properties as potential sales candidates that either no longer fit within our portfolio strategy or could attract premium pricing in the current market. However, the asset sale market for all real estate asset classes has slowed dramatically with the increase in interest rates and transaction volume for office assets in the U.S. declined materially in the first quarter of 2023.

A brief overview of each of our markets follows.

Boston

During the first quarter of 2023, we executed approximately 182,000 square feet of leases and approximately 290,000 square feet of leases commenced in the Boston region. Approximately 137,000 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 36% over the prior leases.

As of March 31, 2023, our Boston CBD in-service portfolio was approximately 94% occupied and approximately 97% leased (inclusive of vacant space with signed leases that have not yet commenced in accordance with GAAP).

Our approximately 2.5 million square foot in-service premier workplace portfolio in Cambridge was approximately 98% occupied as of March 31, 2023.

As of March 31, 2023, our Route 128-Mass Turnpike portfolio is comprised of approximately 4.8 million square feet and was approximately 81% occupied and approximately 82% leased (inclusive of vacant space with signed leases that have not yet commenced in accordance with GAAP).

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 March 31, 2023, our LA in-service properties were approximately 86% occupied.

New York

During the first quarter of 2023, we executed approximately 120,000 square feet of leases in the New York region and approximately 249,000 square feet of leases commenced. Approximately 192,000 square feet of the leases that commenced in the first quarter had been vacant for less than one year and they represent a decrease in net rental obligations of approximately 9% over the prior leases. As of March 31, 2023, our New York CBD in-service portfolio was approximately 89% occupied and approximately 93% leased (inclusive of vacant space with signed leases that have not yet commenced in accordance with GAAP).

San Francisco

During the first quarter of 2023, we executed approximately 84,000 square feet of leases and approximately 61,000 square feet of leases commenced in the San Francisco region. Approximately 43,000 square feet of leases that commenced had been vacant for less than one year and represent an increase in net rental obligations of approximately 6% over the prior leases.

As of March 31, 2023, our San Francisco CBD in-service properties were approximately 89% occupied and approximately 90% leased (inclusive of vacant space with signed leases that have not yet commenced in accordance with GAAP).

Seattle

Our Seattle in-service portfolio includes Safeco Plaza, an approximately 779,000 square foot property of which we own 33.67%, and Madison Centre, an approximately 755,000 square foot property. As of March 31, 2023, our

Seattle in-service properties were approximately 88% occupied and approximately 91% leased (inclusive of vacant space with signed leases that have not yet commenced in accordance with GAAP).

Washington, DC

During the first quarter of 2023, we executed approximately 249,000 square feet of leases and approximately 118,000 square feet of leases commenced in the Washington, DC region. Approximately 78,000 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 47% over the prior leases. The large decrease in net rental obligations is due to the restructuring of an approximately 68,950 square foot lease with a theater client in Springfield, Virginia. Excluding the theater lease, the decrease in net rental obligations is approximately 9% over the prior leases. As of March 31, 2023, our Washington, DC CBD in-service properties were approximately 87% occupied and approximately 89% leased (inclusive of vacant space with signed leases that have not yet commenced in accordance with GAAP).

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. As of March 31, 2023, our Reston, Virginia properties were approximately 89% occupied and approximately 94% leased (inclusive of vacant space with signed leases that have not yet commenced in accordance with GAAP).

Leasing Statistics

The table below details the leasing activity, including 100% of the unconsolidated joint ventures, that commenced during the three months ended March 31, 2023:

Three months ended March 31, 2023
(Square Feet)
Vacant space available at the beginning of the period5,610,777
Property dispositions/properties taken out of service (1)(333,277)
Leases expiring or terminated during the period1,067,880
Total space available for lease6,345,380
1st generation leases—
2nd generation leases with new clients432,003
2nd generation lease renewals343,442
Total space leased (2)775,445
Vacant space available for lease at the end of the period5,569,935
Leases executed during the period, in square feet (3)660,480
Second generation leasing information: (4)
Leases commencing during the period, in square feet775,445
Weighted Average Lease Term90 Months
Weighted Average Free Rent Period175 Days
Total Transaction Costs Per Square Foot (5)$72.81
Increase in Gross Rents (6)0.60%
Increase in Net Rents (7)0.81%

__________________

(1)Total vacant square feet of properties taken out of service during the three months ended March 31, 2023 consists of 195,191 square feet at 300 Binney Street, 55,852 square feet at 420 Bedford Street, 57,045 square feet at 430 Bedford Street and 25,189 square feet at 2098 Gaither Road.

(2)Represents leases for which lease revenue recognition has commenced in accordance with GAAP during the three months ended March 31, 2023.

(3)Represents leases executed during the three months ended March 31, 2023 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 months ended March 31, 2023 is 186,898 square feet.

(4)Second generation leases are defined as leases for space that has previously been leased by us. Of the 775,445 square feet of second generation leases that commenced during the three months ended March 31, 2023, leases for 588,547 square feet were signed in prior periods.

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

(6)Represents the increase in gross rent (base rent plus expense reimbursements) on the new versus expired leases on the 505,482 square feet of second generation leases that had been occupied within the prior 12 months for the three months ended March 31, 2023; excludes leases that management considers temporary because the client is not expected to occupy the space on a long-term basis. Includes the renewal of a 68,950 square foot lease with a theater client. Excluding this renewal, the increase in second generation gross rent is 3.87%.

(7)Represents the increase in net rent (gross rent less operating expenses) on the new versus expired leases on the 505,482 square feet of second generation leases that had been occupied within the prior 12 months for the three months ended March 31, 2023. Includes the renewal of a 68,950 square foot lease with a theater client. Excluding this renewal, the increase in second generation net rent is 6.37%.

Transactions during the three months ended March 31, 2023 included the following:

Development/Redevelopment activities

  • On January 5, 2023, we commenced the development of 290 Binney Street, an approximately 566,000 net rentable square foot laboratory/life sciences project in Cambridge, Massachusetts. Concurrent with the commencement of this project, the Kendall Center Blue Parking Garage was taken out of service and demolished to support the development of this project. 290 Binney Street is 100% pre-leased to AstraZeneca.

  • On January 30, 2023, we commenced the redevelopment of 300 Binney Street at Kendall Center in Cambridge, Massachusetts. 300 Binney Street consisted of an approximately 195,000 net rentable square foot premier workplace that is being redeveloped into approximately 236,000 net rentable square feet of laboratory/life sciences space. BXP and BPLP recognized approximately $11.0 million of depreciation expense during the three months ended March 31, 2023 associated with the acceleration of depreciation on the assets being removed from service and demolished as part of the redevelopment of the property. The project is 100% pre-leased to the Broad Institute.

Unconsolidated joint venture activity

  • On January 31, 2023, we acquired a 50% interest in a joint venture that owns 13100 and 13150 Worldgate Drive located in Herndon, Virginia for a gross purchase price of approximately $17.0 million. The acquisition was completed with available cash. 13100 and 13150 Worldgate Drive consists of two vacant office buildings aggregating approximately 350,000 rentable square feet and a 1,200-space structured parking deck situated on a 10-acre site. The joint venture intends to redevelop the property for residential use. There can be no assurance that the joint venture will commence the development as currently contemplated or at all.

Debt activity

  • On January 4, 2023, BPLP entered into a credit agreement that provided for a $1.2 billion unsecured term loan facility (the “2023 Unsecured Term Loan”). Under the credit agreement, BPLP may, at any time prior to the maturity date, increase total commitments by up to an additional $300.0 million in aggregate principal amount by increasing the existing 2023 Unsecured Term Loan or incurring one or more additional term loans, in each case, subject to syndication of the increase and other conditions. The 2023 Unsecured Term Loan matures on May 16, 2024, with one 12-month extension option, subject to customary conditions. Upon entry into the credit agreement, BPLP exercised its option to draw $1.2 billion under the 2023 Unsecured Term Loan, a portion of which was used to repay in full the $730.0 million outstanding under its prior unsecured credit agreement (the “2022 Unsecured Term Loan”), which was scheduled to mature on May 16, 2023. There was no prepayment penalty associated with the repayment of the 2022 Unsecured Term Loan.

Transactions completed subsequent to March 31, 2023 included the following:

  • On April 21, 2023, a joint venture in which we have a 50% interest exercised an option to extend by one year the maturity date of its $252.6 million construction loan collateralized by its 7750 Wisconsin Avenue property. The completed 734,000 square foot build-to-suit, premier workplace is located in Bethesda, Maryland and is 100% leased to an affiliate of Marriott International, Inc. Effective June 1, 2023, the financing will bear interest at a variable rate equal to Term SOFR plus 1.35% per annum and will now mature on April 26, 2024, with a one-year extension option, subject to certain conditions.

  • On April 29, 2023, we completed and fully placed in-service 2100 Pennsylvania Avenue, a premier workplace project with approximately 480,000 net rentable square feet located in Washington, DC.

  • On May 02, 2023, BPLP executed interest rate swaps in notional amounts aggregating $1.2 billion. These interest rate swaps were entered into to fix Term SOFR under for BPLP’s 2023 Unsecured Term Loan at a weighted-average rate of 4.6420% for the period commencing on May 4, 2023 and ending on May 16, 2024. Based on BPLP’s credit rating as of May 2, 2023, the interest rate for the 2023 Unsecured Term Loan would be 5.592%.

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, 2022 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, 2022.

Results of Operations for the Three Months Ended March 31, 2023 and 2022

Net income attributable to Boston Properties, Inc. and net income attributable to Boston Properties Limited Partnership decreased approximately $65.2 million and $73.0 million, respectively, for the three months ended March 31, 2023 compared to 2022, as detailed in the following tables and for the reasons discussed below under the heading “Comparison of the three months ended March 31, 2023 to the three months ended March 31, 2022” 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 March 31, 2023 and 2022. For a detailed discussion of net operating income (“NOI”), including the reasons management believes NOI is useful to investors, see page 43.

BXP

Three months ended March 31,
20232022Increase/ (Decrease)% Change
(in thousands)
Net Income Attributable to Boston Properties, Inc.$77,890$143,047$(65,157)(45.55)%
Net Income Attributable to Noncontrolling Interests:
Noncontrolling interest—common units of the Operating Partnership9,07816,361(7,283)(44.51)%
Noncontrolling interests in property partnerships18,66017,5491,1116.33%
Net Income105,628176,957(71,329)(40.31)%
Other Expenses:
Add:
Interest expense134,207101,22832,97932.58%
Other Income:
Less:
Unrealized gain on non-real estate investment259—259100.00%
Gains (losses) from investments in securities1,665(2,262)3,927173.61%
Interest and other income (loss)10,9411,2289,713790.96%
Gains on sales of real estate—22,701(22,701)(100.00)%
Income (loss) from unconsolidated joint ventures(7,569)2,189(9,758)(445.77)%
Other Expenses:
Add:
Depreciation and amortization expense208,734177,62431,11017.51%
Transaction costs911—911100.00%
Payroll and related costs from management services contracts5,2354,0651,17028.78%
General and administrative expense55,80243,19412,60829.19%
Other Revenue:
Less:
Direct reimbursements of payroll and related costs from management services contracts5,2354,0651,17028.78%
Development and management services revenue8,9805,8313,14954.00%
Net Operating Income$491,006$469,316$21,6904.62%

BPLP

Three months ended March 31,
20232022Increase/ (Decrease)% Change
(in thousands)
Net Income Attributable to Boston Properties Limited Partnership$88,830$161,829$(72,999)(45.11)%
Net Income Attributable to Noncontrolling Interests:
Noncontrolling interests in property partnerships18,66017,5491,1116.33%
Net Income107,490179,378(71,888)(40.08)%
Other Expenses:
Add:
Interest expense134,207101,22832,97932.58%
Other Income:
Less:
Unrealized gain on non-real estate investment259—259100.00%
Gains (losses) from investments in securities1,665(2,262)3,927173.61%
Interest and other income (loss)10,9411,2289,713790.96%
Gains on sales of real estate—23,384(23,384)(100.00)%
Income (loss) from unconsolidated joint ventures(7,569)2,189(9,758)(445.77)%
Other Expenses:
Add:
Depreciation and amortization expense206,872175,88630,98617.62%
Transaction costs911—911100.00%
Payroll and related costs from management services contracts5,2354,0651,17028.78%
General and administrative expense55,80243,19412,60829.19%
Other Revenue:
Less:
Direct reimbursements of payroll and related costs from management services contracts5,2354,0651,17028.78%
Development and management services revenue8,9805,8313,14954.00%
Net Operating Income$491,006$469,316$21,6904.62%

At March 31, 2023 and 2022, we owned or had joint venture interests in a portfolio of 192 and 201 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 months ended March 31, 2023 and 2022 show separately the changes attributable to the properties that were owned by us and in-service throughout each period compared (the “Same Property Portfolio”) and the changes attributable to the properties included in the Acquired, Placed In-Service, Development or Redevelopment or Sold Portfolios.

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

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, depreciation and amortization expense, transaction costs, payroll and related costs from management services contracts and

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

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

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 redemptions of common units of limited partnership interest of BPLP (“OP Units”). 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 three months ended March 31, 2023 to the three months ended March 31, 2022

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, 2022 and owned and in-service through March 31, 2023. The Total Property Portfolio includes the effects of the other properties either acquired, placed in-service, in or held for development or redevelopment after January 1, 2022 or disposed of on or prior to March 31, 2023. This table includes a reconciliation from the Same Property Portfolio to the Total Property Portfolio by also providing information for the three months ended March 31, 2023 and 2022 with respect to the properties that were acquired, placed in-service, in or held for development or redevelopment or sold.

Same Property PortfolioProperties Acquired PortfolioProperties Placed In-Service PortfolioProperties in or Held for Development or Redevelopment PortfolioProperties Sold PortfolioTotal Property Portfolio
20232022Increase/ (Decrease)% Change2023202220232022202320222023202220232022Increase/ (Decrease)% Change
(dollars in thousands)
Rental Revenue: (1)
Lease Revenue (Excluding Termination Income)$687,679$677,524$10,1551.50%$23,426$—$33,930$6,890$123$5,218$342$13,742$745,500$703,374$42,1265.99%
Termination Income1952,078(1,883)(90.62)%————————1952,078(1,883)(90.62)%
Lease Revenue687,874679,6028,2721.22%23,426—33,9306,8901235,21834213,742745,695705,45240,2435.70%
Parking and Other Revenue22,38918,7203,66919.60%950—127—(3)2,437—27923,46321,4362,0279.46%
Total Rental Revenue (1)710,263698,32211,9411.71%24,376—34,0576,8901207,65534214,021769,158726,88842,2705.82%
Real Estate Operating Expenses269,871255,16414,7075.76%3,950—8,8002,1143,1422,329824,216285,845263,82322,0228.35%
Net Operating Income (Loss), Excluding Residential and Hotel440,392443,158(2,766)(0.62)%20,426—25,2574,776(3,022)5,3262609,805483,313463,06520,2484.37%
Residential Net Operating Income (2)6,2634,8431,42029.32%———————1,6916,2636,534(271)(4.15)%
Hotel Net Operating Income (Loss) (2)1,430(283)1,713605.30%————————1,430(283)1,713605.30%
Net Operating Income (Loss)$448,085$447,718$3670.08%$20,426$—$25,257$4,776$(3,022)$5,326$260$11,496$491,006$469,316$21,6904.62%

(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 43. Residential Net Operating Income for the three months ended March 31, 2023 and 2022 is comprised of Residential Revenue of $11,726 and $12,966 less Residential Expenses of $5,463 and $6,432, respectively. Hotel Net Operating Income (Loss) for the three months ended March 31, 2023 and 2022 is comprised of Hotel Revenue of $8,101 and $4,557 less Hotel Expenses of $6,671 and $4,840, respectively, per the Consolidated Statements of Operations.

Same Property Portfolio

Lease Revenue (Excluding Termination Income)

Lease revenue (excluding termination income) from the Same Property Portfolio increased by approximately $10.2 million for the three months ended March 31, 2023 compared to 2022. The increase was a result of our average revenue per square foot increasing by approximately $2.25, contributing approximately $19.9 million, partially offset by an approximately $9.7 million decrease due to our average occupancy decreasing from 91.7% to 90.4%.

Termination Income

Termination income decreased by approximately $1.9 million for the three months ended March 31, 2023 compared to 2022.

Termination income for the three months ended March 31, 2023 related to seven clients across the Same Property Portfolio and totaled approximately $0.2 million, which was primarily related to clients that terminated leases early in New York City.

Termination income for the three months ended March 31, 2022 related to ten clients across the Same Property Portfolio and totaled approximately $1.5 million, which was primarily related to clients that terminated leases early in San Francisco. In addition, we received a distribution from our unsecured credit claim against Lehman Brothers, Inc. of approximately $0.6 million.

Parking and Other Revenue

Parking and other revenue increased by approximately $3.7 million for the three months ended March 31, 2023 compared to 2022. Parking revenue increased by approximately $3.8 million and was partially offset by a decrease in other revenue of approximately $0.1 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 $14.7 million, or 5.8%, for the three months ended March 31, 2023 compared to 2022, due primarily to an increase in real estate taxes of approximately $7.2 million, or 5.8%, and other real estate operating expenses of $7.5 million, or 5.8%. The increase in real estate taxes was primarily in the Boston region.

Properties Acquired Portfolio

The table below lists the properties acquired between January 1, 2022 and March 31, 2023. Rental revenue and real estate operating expenses increased by approximately $24.4 million and $4.0 million, respectively, for the three months ended March 31, 2023 compared to 2022, as detailed below.

Square FeetRental RevenueReal Estate Operating Expenses
NameDate acquired20232022Change20232022Change
(dollars in thousands)
Madison CentreMay 17, 2022754,988$14,258$—$14,258$2,960$—$2,960
125 BroadwaySeptember 16, 2022271,00010,118—10,118990—990
1,025,988$24,376$—$24,376$3,950$—$3,950

Properties Placed In-Service Portfolio

The table below lists the properties that were placed in-service or partially placed in-service between January 1, 2022 and March 31, 2023. Rental revenue and real estate operating expenses from our Properties Placed In-Service Portfolio increased by approximately $27.2 million and $6.7 million, respectively, for the three months ended March 31, 2023 compared to 2022, as detailed below.

Quarter Initially Placed In-ServiceQuarter Fully Placed In-ServiceRental RevenueReal Estate Operating Expenses
NameSquare Feet20232022Change20232022Change
(dollars in thousands)
Reston NextFourth Quarter, 2021Fourth Quarter, 20221,063,236$11,335$6,890$4,445$3,880$2,114$1,766
325 Main StreetSecond Quarter, 2022Second Quarter, 2022414,56511,526—11,5261,858—1,858
2100 Pennsylvania Avenue (1)Second Quarter, 2022N/A480,0005,141—5,1411,727—1,727
880 Winter Street (2)Third Quarter, 2022Fourth Quarter, 2022243,6186,055—6,0551,335—1,335
2,201,419$34,057$6,890$27,167$8,800$2,114$6,686

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

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

Properties in or Held for Development or Redevelopment Portfolio

The table below lists the properties that were in or held for development or redevelopment between January 1, 2022 and March 31, 2023. Rental revenue from our Properties in or Held for Development or Redevelopment Portfolio decreased by approximately $7.5 million and real estate operating expenses from our Properties in or Held for Development or Redevelopment Portfolio increased by approximately $0.8 million, for the three months ended March 31, 2023 compared to 2022, as detailed below.

Rental RevenueReal Estate Operating Expenses
NameDate Commenced or Held for Development / RedevelopmentSquare Feet20232022Change20232022Change
(dollars in thousands)
140 Kendrick Street - Building AJuly 1, 2022104,000$—$1,103$(1,103)$—$337$(337)
760 Boylston StreetSeptember 12, 2022118,000————221(221)
105 Carnegie CenterNovember 30, 202273,000—304(304)—234(234)
2096 Gaither RoadDecember 1, 202250,000—53(53)3493(59)
RTC Next-Hotel (1)December 19, 2022N/A201—2012—2
Kendall Center Blue Parking Garage (2)January 4, 2023N/A252,439(2,414)2,2773241,953
300 Binney StreetJanuary 30, 2023236,000(900)2,927(3,827)117462(345)
Lexington Office Park (3)March 31, 2023166,779629684(55)61159219
2098 Gaither Road (3)March 31, 202350,000165145201016635
797,779$120$7,655$(7,535)$3,142$2,329$813

(1)On December 19, 2022, this lease was reclassified as a sales-type lease.

(2)The Kendall Center Blue Parking Garage was taken out of service on January 4, 2023 to support the development of 290 Binney Street. Real estate operating expenses for the three months ended March 31, 2023 included approximately $2.3 million of demolition costs.

(3)Lexington Office Park and 2098 Gaither Road are no longer considered “in-service” as each property’s occupied percentage is below 50% and we are no longer actively leasing the properties in anticipation of a future development/redevelopment.

Properties Sold Portfolio

The table below lists the properties we sold between January 1, 2022 and March 31, 2023. Rental revenue and real estate operating expenses from our Properties Sold Portfolio decreased by approximately $16.6 million and $5.4 million, respectively, for the three months ended March 31, 2023 compared to 2022, as detailed below.

Rental RevenueReal Estate Operating Expenses
NameDate SoldProperty TypeSquare Feet20232022Change20232022Change
(dollars in thousands)
Office
195 West StreetMarch 31, 2022Office63,500$—$749$(749)$—$242$(242)
Virginia 95 Office ParkJune 15, 2022Office/Flex733,421—2,836(2,836)—962(962)
601 Massachusetts AvenueAugust 30, 2022Office478,667—10,436(10,436)—3,012(3,012)
1,275,588—14,021(14,021)—4,216(4,216)
Residential
The Avant at Reston Town Center (1)November 8, 2022Residential329,1953422,938(2,596)821,247(1,165)
Total Residential329,1953422,938(2,596)821,247(1,165)
1,604,783$342$16,959$(16,617)$82$5,463$(5,381)

(1)We retained and continue to own approximately 26,000 square feet of ground-level retail space. Rental Revenue and Real Estate Operating Expenses for the three months ended March 31, 2023 represent the ground-level retail space. Rental Revenue and Real Estate Operating Expenses for the three months ended March 31, 2022 represent the entire property and not just the portion sold.

Residential Net Operating Income

Net operating income for our residential same properties increased by approximately $1.4 million for the three months ended March 31, 2023 compared to 2022.

The following reflects our occupancy and rate information for our residential same properties for the three months ended March 31, 2023 and 2022.

Average Monthly Rental Rate (1)Average Rental Rate Per Occupied Square FootAverage Physical Occupancy (2)Average Economic Occupancy (3)
Name20232022Change (%)20232022Change (%)20232022Change (%)20232022Change (%)
Proto Kendall Square$3,002$2,7439.4%$5.52$5.049.5%95.4%93.6%1.9%94.8%93.1%1.8%
The Lofts at Atlantic Wharf$4,428$3,93312.6%$4.91$4.3612.6%95.4%96.1%(0.7)%95.4%95.6%(0.2)%
Signature at Reston$2,677$2,5803.8%$2.77$2.664.1%93.7%94.2%(0.5)%93.1%93.5%(0.4)%
The Skylyne$3,445$3,3423.1%$4.38$4.038.7%91.5%71.5%28.0%89.3%68.6%30.2%

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

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

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

Hotel Net Operating Income (Loss)

The Boston Marriott Cambridge hotel had net operating income of approximately $1.4 million for the three months ended March 31, 2023, representing an increase of approximately $1.7 million compared to the three months ended March 31, 2022.

The following reflects our occupancy and rate information for the Boston Marriott Cambridge hotel for the three months ended March 31, 2023 and 2022.

20232022Change (%)
Occupancy61.3%40.4%51.7%
Average daily rate$261.52$266.10(1.7)%
REVPAR$160.41$91.3875.5%

Other Operating Revenue and Expense Items

Development and Management Services Revenue

Development and management services revenue increased by approximately $3.1 million for the three months ended March 31, 2023 compared to 2022. Development services revenue and management services revenue increased by approximately $0.9 million and $2.2 million, respectively. The increase in development management services revenue was primarily related to an increase in development fees from unconsolidated joint ventures in the San Francisco and Washington, DC regions. The increase in management services revenue was primarily related to an increase in property management fees earned from an unconsolidated joint venture in New York City and a third-party owned building in the Washington, DC region and asset management fees earned from an unconsolidated joint venture in the Los Angeles region.

General and Administrative Expense

General and administrative expense increased by approximately $12.6 million for the three months ended March 31, 2023 compared to 2022 primarily due to increases in compensation expense and other general and administrative expenses of approximately $11.6 million and $1.0 million, respectively. The increase in compensation expense was related to (1) an approximately $4.0 million increase in the value of our deferred compensation plan and (2) an approximately $7.6 million increase in other compensation expenses, primarily due to age-based vesting. 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 March 31, 2023 and 2022 were approximately $4.5 million and $4.0 million, respectively. These costs are not included in the general and administrative expenses discussed above.

Transaction Costs

Transaction costs increased by approximately $0.9 million for the three months ended March 31, 2023 compared to 2022 due primarily to costs incurred in connection with the pursuit and formation of new joint ventures. In general, transaction costs relating to the formation of new joint ventures and the pursuit of other transactions are expensed as incurred.

Depreciation and Amortization Expense

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

BXP

Depreciation and amortization expense increased by approximately $31.1 million for the three months ended March 31, 2023 compared to 2022, as detailed below.

PortfolioDepreciation and Amortization for the three months ended March 31,
20232022Change
(in thousands)
Same Property Portfolio$169,106$168,572$534
Properties Acquired Portfolio15,856—15,856
Properties Placed In-Service Portfolio10,9743,0127,962
Properties in Development or Redevelopment Portfolio (1)12,6862,8049,882
Properties Sold Portfolio1123,236(3,124)
$208,734$177,624$31,110

(1)During the three months ended March 31, 2023, the Kendall Center Blue Parking Garage was taken out of service and demolished to support the development of 290 Binney Street, an approximately 566,000 net rentable square foot laboratory/life sciences project in Cambridge, Massachusetts. As a result, during the three months ended March 31, 2023, we recorded approximately $0.8 million of accelerated depreciation expense for the demolition of the garage, of which approximately $0.2 million related to the step-up of real estate assets.

BPLP

Depreciation and amortization expense increased by approximately $31.0 million for the three months ended March 31, 2023 compared to 2022, as detailed below.

PortfolioDepreciation and Amortization for the three months ended March 31,
20232022Change
(in thousands)
Same Property Portfolio$167,424$166,834$590
Properties Acquired Portfolio15,856—15,856
Properties Placed In-Service Portfolio10,9743,0127,962
Properties in Development or Redevelopment Portfolio (1)12,5062,8049,702
Properties Sold Portfolio1123,236(3,124)
$206,872$175,886$30,986

(1)During the three months ended March 31, 2023, the Kendall Center Blue Parking Garage was taken out of service and demolished to support the development of 290 Binney Street, an approximately 566,000 net rentable square foot laboratory/life sciences project in Cambridge, Massachusetts. As a result, during the three months ended March 31, 2023, we recorded approximately $0.6 million of accelerated depreciation expense for the demolition of the garage.

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

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

Other Income and Expense Items

Income (loss) from Unconsolidated Joint Ventures

For the three months ended March 31, 2023 compared to 2022, income (loss) from unconsolidated joint ventures decreased by approximately $9.8 million due primarily to an increase in interest expense due to increasing interest rates on variable rate debt.

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 immediately follows the cover page of this Quarterly Report on Form 10-Q.

BXP

Gains on sales of real estate decreased by approximately $22.7 million for the three months ended March 31, 2023 compared to 2022. During the three months ended March 31, 2022, we recognized a gain of approximately $22.7 million related to the sale of 195 West Street in Waltham, Massachusetts.

BPLP

Gains on sales of real estate decreased by approximately $23.4 million for the three months ended March 31, 2023 compared to 2022. During the three months ended March 31, 2022, we recognized a gain of approximately $23.4 million related to the sale of 195 West Street in Waltham, Massachusetts.

Interest and Other Income (Loss)

Interest and other income (loss) increased by approximately $9.7 million for the three months ended March 31, 2023 compared to 2022, due primarily to an increase of approximately $10.1 million in interest income due to increased interest earned on our deposits.

Gains (Losses) from Investments in Securities

Gains (losses) from investments in securities for the three months ended March 31, 2023 and 2022 related to investments that we have made to reduce our market risk relating to deferred compensation plans that we maintain for BXP’s officers and former non-employee directors. Under the deferred compensation plans, each officer or non-employee director who is eligible to participate is permitted to defer a portion of the officer’s current income or the non-employee director’s compensation on a pre-tax basis and receive a tax-deferred return on these deferrals based on the performance of specific investments selected by the officer or non-employee director. In order to reduce our market risk relating to these plans, we typically acquire, in a separate account that is not restricted as to its use, similar or identical investments as those selected by each officer or non-employee director. This enables us to generally match our liabilities to BXP’s officers or former non-employee directors under our deferred compensation plans with equivalent assets and thereby limit our market risk. The performance of these investments is recorded as gains (losses) from investments in securities. During the three months ended March 31, 2023 and 2022, we recognized gains (losses) of approximately $1.7 million and $(2.3) million, respectively, on these investments. By comparison, our general and administrative expense increased (decreased) by approximately $1.7 million and $(2.3) million during the three months ended March 31, 2023 and 2022, respectively, as a result of increases (decreases) in our liability under our deferred compensation plans that was associated with the performance of the specific investments selected by officers and former non-employee directors of BXP participating in the plans.

Unrealized Gain on Non-Real Estate Investment

During the year ended December 31, 2022, we began investing in non-real estate investments, which are primarily environmentally-focused investment funds. As a result, for the three months ended March 31, 2023, we recognized an unrealized gain of $0.3 million due to the observable changes in the fair value of the investments.

Interest Expense

Interest expense increased by approximately $33.0 million for the three months ended March 31, 2023 compared to 2022, as detailed below.

ComponentChange in interest expense for the three months ended March 31, 2023 compared to March 31, 2022
(in thousands)
Increases to interest expense due to:
Increase in interest associated with unsecured term loan$16,210
Issuance of $750 million in aggregate principal of 6.750% senior notes due 2027 on November 17, 202212,675
Increase in interest due to finance lease for one in-service property1,894
Amortization expense of financing fees primarily related to unsecured term loan1,386
Decrease in capitalized interest related to development projects1,308
Other interest expense (excluding senior notes)44
Total increases to interest expense33,517
Decrease to interest expense due to:
Decrease in interest associated with unsecured credit facilities(538)
Total decrease to interest expense(538)
Total change in interest expense$32,979

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 March 31, 2023 and 2022 was approximately $10.6 million and $13.7 million, respectively. These costs are not included in the interest expense referenced above.

At March 31, 2023, our variable rate debt consisted of BPLP’s $1.5 billion unsecured credit facility (the “Revolving Facility”) and $1.2 billion 2023 Unsecured Term Loan. For a summary of our consolidated debt as of March 31, 2023 and March 31, 2022 refer to the heading “Liquidity and Capital Resources—Debt Financing” within “Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Noncontrolling Interests in Property Partnerships

Noncontrolling interests in property partnerships increased by approximately $1.1 million for the three months ended March 31, 2023 compared to 2022, as detailed below.

PropertyNoncontrolling Interests in Property Partnerships for the three months ended March 31,
20232022Change
(in thousands)
767 Fifth Avenue (the General Motors Building)$2,403$3,037$(634)
Times Square Tower5,6835,300383
601 Lexington Avenue (1)4,0112,2791,732
100 Federal Street2,8123,163(351)
Atlantic Wharf Office Building3,7513,770(19)
$18,660$17,549$1,111

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

Noncontrolling Interest—Common Units of the Operating Partnership

For BXP, noncontrolling interest—common units of the Operating Partnership decreased by approximately $7.3 million for the three months ended March 31, 2023 compared to 2022 due primarily to a decrease in allocable income, which included 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 and balloon payments on maturing debt, including $500 million of 3.125% unsecured senior notes due September 1, 2023 and $700 million of 3.800% unsecured senior notes due February 1, 2024;

  • 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 and interests in joint ventures owning 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.

The following table presents information on properties under construction/redevelopment as of March 31, 2023 (dollars in thousands):

Financings
Construction/Redevelopment PropertiesEstimated Stabilization DateLocation# of BuildingsEstimated Square FeetInvestment to Date (1)(2)(3)Estimated Total Investment (1)(2)Total Available (1)Outstanding at March 31, 2023 (1)Estimated Future Equity Requirement (1)(2)(4)Percentage Leased (5)
Office
140 Kendrick - Building A (Redevelopment)Third Quarter, 2023Needham, MA1104,000$19,133$26,600$—$—$7,467100%
2100 Pennsylvania AvenueThird Quarter, 2024Washington, DC1480,000334,638375,900——41,26284%(6)
360 Park Avenue South (42% ownership)Fourth Quarter, 2025New York, NY1450,000206,950248,00092,77489,67737,953—%(7)
Reston Next Office Phase IISecond Quarter, 2025Reston, VA190,00029,57861,000——31,422—%
Platform 16 Building A (55% ownership)Fourth Quarter, 2026San Jose, CA1389,50093,161231,900——138,739—%(8)
Total Office Properties under Construction/Redevelopment51,513,500683,460943,40092,77489,677256,84334%
Laboratory/Life Sciences
751 Gateway (49% ownership)Second Quarter, 2024South San Francisco, CA1231,00095,636127,600——31,964100%
103 CityPointThird Quarter, 2024Waltham, MA1113,00060,312115,100——54,788—%
180 CityPointFourth Quarter, 2024Waltham, MA1329,000168,668274,700——106,03243%
300 Binney StreetFirst Quarter, 2025Cambridge, MA1236,00014,914210,200——195,286100%
105 Carnegie Center (Redevelopment)Second Quarter, 2025Princeton, NJ173,0001,03040,600——39,570—%
651 Gateway (50% ownership) (Redevelopment)Fourth Quarter, 2025South San Francisco, CA1327,00046,074146,500——100,4267%
290 Binney StreetSecond Quarter, 2026Cambridge, MA1566,000124,0261,185,200——1,061,174100%
Total Laboratory/Life Sciences Properties under Construction/Redevelopment71,875,000510,6602,099,900——1,589,24064%
Residential
Reston Next Residential (508 units) (20% ownership)Second Quarter, 2026Reston, VA1417,00011,50947,70028,0005,04513,236—%
Total Residential Properties under Construction1417,00011,50947,70028,0005,04513,236—
Retail
760 Boylston Street (Redevelopment)Second Quarter, 2024Boston, MA1118,0004,04743,800——39,753100%
Reston Next RetailFourth Quarter, 2025Reston, VA133,00018,49526,600——8,105—%
Total Retail Properties under Construction/Redevelopment2151,00022,54270,400——47,85878%
Other
View Boston Observatory at The Prudential Center (Redevelopment)N/ABoston, MA—59,000161,945182,300——20,355N/A(9)
Total Properties under Construction/Redevelopment154,015,500$1,390,116$3,343,700$120,774$94,722$1,927,53252%(10)

(1)Represents our share.

(2)Each of Investment to Date, Estimated Total Investment and Estimated Future Equity Requirement represent our share of acquisition expenses, as applicable, and reflect our share of the estimated net revenue/expenses that we expect to incur prior to stabilization of the project, including any amounts actually received or paid through March 31, 2023.

(3)Includes approximately $174.1 million of unpaid but accrued construction costs and leasing commissions.

(4)Excludes approximately $174.1 million of unpaid but accrued construction costs and leasing commissions.

(5)Represents percentage leased as of April 28, 2023, including leases with future commencement dates.

(6)The property was 64% placed in-service as of March 31, 2023. See Note 13 to the Consolidated Financial Statements.

(7)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.

(8)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 $118 million remaining to spend.

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

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

Lease revenue (which includes recoveries from clients), other income from operations, available cash balances, proceeds from mortgage financings and offerings of unsecured indebtedness, draws on BPLP’s Revolving Facility, and funding from institutional private equity partners 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 continuation and completion of our current and committed development and redevelopment projects, repay debt maturities (as discussed below), service the interest payments on our outstanding indebtedness, and satisfy our REIT distribution requirements.

As of March 31, 2023, we had 15 properties under development or redevelopment. Our share of the estimated total cost for these projects is approximately $3.3 billion, of which approximately $1.9 billion remains to be funded with equity through 2026. In the first quarter of 2023, we commenced the development/redevelopment of:

  • 290 Binney Steet in Cambridge, Massachusetts, an approximately 566,000 net rentable square foot laboratory/life sciences project. The project has a total budget of approximately $1.2 billion and is expected to be completed in 2026. The project is 100% pre-leased to AstraZeneca.

  • 300 Binney Street in Cambridge, Massachusetts. The redevelopment of this approximately 195,000 net rentable square foot property into an approximately 236,000 net rentable square foot laboratory/life sciences property has a total budgeted cost of $210.2 million. This project is 100% pre-leased to the Broad Institute.

On January 4, 2023, we entered into the 2023 Unsecured Term Loan, which provided for a $1.2 billion unsecured term loan facility that matures in May 2024, with one, twelve-month extension, subject to the satisfaction of customary conditions. Upon entry into the credit agreement, we borrowed the full $1.2 billion available under the 2023 Unsecured Term Loan, a portion of which was used to repay in full the $730.0 million 2022 Unsecured Term Loan, which was scheduled to mature on May 16, 2023.

After repayment of the 2022 Unsecured Term Loan on January 4, 2023, our remaining 2023 and 2024 debt maturities include (1) $500.0 million aggregate principal amount of BPLP’s 3.125% senior unsecured notes, which mature on September 1, 2023, (2) $700.0 million aggregate principal amount of BPLP’s 3.800% senior unsecured notes, which mature on February 1, 2024 and (3) the $1.2 billion 2023 Unsecured Term Loan (unless extended as noted above). In our unconsolidated joint venture portfolio, after extending the construction loan collateralized by 7750 Wisconsin Avenue in April 2023 (see Note 13 to the Consolidated Financial Statements), we have approximately $481.2 million (our share) of debt maturing through 2024. We expect to fund 2023 and 2024 debt maturities using available cash balances, proceeds from asset sales, draws on BPLP’s Revolving Facility, and/or through refinancings using secured debt, unsecured debt or both. We expect our quarterly interest expense will increase moderately for the remainder of 2023 compared to the first quarter of 2023 primarily due to the cessation of capitalized interest on our 2023 development deliveries.

As of April 28, 2023, we had available cash of approximately $670.2 million (of which approximately $99.9 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 $1.5 billion available under BPLP’s Revolving Facility and our available cash, as of April 28, 2023, are sufficient to fund our remaining capital requirements on existing development and redevelopment projects, fund acquisitions, repay our maturing indebtedness when due (if not refinanced), 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. 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, which is scheduled to expire on May 22, 2023. We expect to replace the “at the market” equity offering program prior to its expiration.

REIT Tax Distribution Considerations

Dividend

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

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

Sales

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

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

Cash Flow Summary

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

Cash and cash equivalents and cash held in escrows aggregated approximately $964.3 million and $482.3 million at March 31, 2023 and 2022, respectively, representing an increase of approximately $482.0 million. The following table sets forth changes in cash flows:

Three months ended March 31,
20232022Change
(in thousands)
Net cash provided by operating activities$234,010$219,490$14,520
Net cash used in investing activities(285,592)(151,335)(134,257)
Net cash provided by (used in) financing activities279,052(86,970)366,022

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 7.6 years as of March 31, 2023, 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 three months ended March 31, 2023 and March 31, 2022 is detailed below:

Three months ended March 31,
20232022
(in thousands)
Acquisitions of real estate$—$(3,580)
Construction in progress (1)(119,682)(100,313)
Building and other capital improvements(39,100)(26,811)
Tenant improvements(67,175)(55,168)
Proceeds from the sales of real estate (2)—35,397
Capital contributions to unconsolidated joint ventures (3)(60,745)(26,293)
Capital distributions from unconsolidated joint ventures (4)—20,095
Investment in non-real estate investments(733)—
Investments in securities, net1,8435,338
Net cash used in investing activities$(285,592)$(151,335)

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

(1)Construction in progress for the three months ended March 31, 2023 included ongoing expenditures associated with 2100 Pennsylvania Avenue, which was partially placed in-service during the three months ended March 31, 2023. 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, 760 Boylston Street, 105 Carnegie Center, 290 Binney Street and 300 Binney Street.

Construction in progress for the three months ended March 31, 2022 included ongoing expenditures associated with Reston Next, which is partially placed in-service. In addition, we incurred costs associated with our continued development/redevelopment of 325 Main Street, 2100 Pennsylvania Avenue, 180 CityPoint, View Boston Observatory at The Prudential Center, 880 Winter Street and 103 CityPoint.

(2)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 premier workplace.

(3)Capital contributions to unconsolidated joint ventures for the three months ended March 31, 2023 consisted primarily of cash contributions of approximately $17.3 million, $15.6 million, $11.6 million, $6.5 million and $4.0 million to our Worldgate Drive, Gateway Commons, Platform 16, Dock 72 and 751 Gateway joint ventures, respectively. On January 31, 2023, we entered into a new joint venture for 13100 and 13150 Worldgate Drive located in Herndon, Virginia.

Capital contributions to unconsolidated joint ventures for the three months ended March 31, 2022 consisted primarily of cash contributions of approximately $14.1 million and $7.9 million to our Gateway Commons and Platform 16 joint ventures, respectively.

(4)Capital distributions from unconsolidated joint ventures for the three months ended March 31, 2022 consisted primarily of a cash distribution totaling approximately $20.1 million from our Metropolitan Square joint venture resulting from the excess proceeds from the refinancing of the mortgage and mezzanine loans on the property.

Cash provided by financing activities for the three months ended March 31, 2023 totaled approximately $279.1 million. This amount consisted primarily of borrowings under the 2023 Unsecured Term Loan, partially offset by the repayment of our 2022 Unsecured Term Loan and 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):

March 31, 2023
Shares / Units OutstandingCommon Stock EquivalentEquivalent Value (1)
Common Stock156,830156,830$8,487,640
Common Operating Partnership Units18,65918,6591,009,825(2)
Total Equity175,489$9,497,465
Consolidated Debt$14,709,436
Add:
BXP’s share of unconsolidated joint venture debt (3)1,604,852
Subtract:
Partners’ share of Consolidated Debt (4)(1,358,881)
BXP’s Share of Debt$14,955,407
Consolidated Market Capitalization$24,206,901
BXP’s Share of Market Capitalization$24,452,872
Consolidated Debt/Consolidated Market Capitalization60.77%
BXP’s Share of Debt/BXP’s Share of Market Capitalization61.16%

(1)Values are based on the closing price per share of BXP’s Common Stock on the New York Stock Exchange on March 31, 2023 of $54.12.

(2)Includes long-term incentive plan units (including 2012 OPP Units and 2013 - 2020 MYLTIP Units) but excludes the 2021 - 2023 MYLTIP Units because the three-year performance periods had not ended as of March 31, 2023.

(3)See page 64 for additional information.

(4)See page 63 for additional information.

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

(1) our consolidated debt; plus

(2) the product of (x) the closing price per share of BXP Common Stock on March 31, 2023, 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 - 2020 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, 2021 - 2023 MYLTIP Units are not included in this calculation as of March 31, 2023.

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

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

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

Debt Financing

As of March 31, 2023, we had approximately $14.7 billion of outstanding consolidated indebtedness, representing approximately 60.77% of our Consolidated Market Capitalization as calculated above consisting of approximately (1) $10.2 billion (net of discount and deferred financing fees) in publicly traded unsecured senior notes having a GAAP weighted-average interest rate of 3.69% 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 5.6 years and (3) $1.2 billion outstanding under BPLP’s 2023 Unsecured Term Loan that matures on May 16, 2024.

The table below summarizes the aggregate carrying value of our mortgage notes payable and BPLP’s unsecured senior notes, unsecured line of credit, and unsecured term loan, as well as Consolidated Debt Financing Statistics at March 31, 2023 and March 31, 2022.

March 31,
20232022
(dollars in thousands)
Debt Summary:
Balance
Fixed rate mortgage notes payable, net$3,273,553$3,268,745
Unsecured senior notes, net10,240,9679,486,379
Unsecured line of credit—255,000
Unsecured term loan, net1,194,916—
Consolidated Debt14,709,43613,010,124
Add:
BXP’s share of unconsolidated joint venture debt, net (1)1,604,8521,425,290
Subtract:
Partners’ share of consolidated mortgage notes payable, net (2)(1,358,881)(1,356,905)
BXP’s Share of Debt$14,955,407$13,078,509
March 31,
20232022
Consolidated Debt Financing Statistics:
Percent of total debt:
Fixed rate91.88%98.04%
Variable rate8.12%1.96%
Total100.00%100.00%
GAAP Weighted-average interest rate at end of period:
Fixed rate3.62%3.43%
Variable rate5.87%1.13%
Total3.81%3.39%
Coupon/Stated Weighted-average interest rate at end of period:
Fixed rate3.51%3.32%
Variable rate5.49%1.02%
Total3.67%3.28%
Weighted-average maturity at end of period (in years):
Fixed rate5.46.4
Variable rate1.14.2
Total5.06.3

(1)See page 64 for additional information.

(2)See page 63 for additional information.

Unsecured Credit Facility

On June 15, 2021, BPLP amended and restated its prior credit facility (as amended and restated, the “2021 Credit Facility”). The 2021 Credit Facility provides for borrowings of up to $1.5 billion through the Revolving Facility, subject to customary conditions. Among other things, the 2021 Credit Facility (1) extended the maturity date from April 24, 2022 to June 15, 2026, (2) eliminated the $500.0 million delayed draw facility (3) reduced the per annum variable interest rates on borrowings and (4) added a sustainability-linked pricing component. Under the 2021 Credit Facility, BPLP may increase the total commitment by up to $500.0 million by increasing the amount of the Revolving Facility and/or by incurring one or more term loans, in each case, subject to syndication of the increase and other conditions. Based on BPLP’s March 31, 2023 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. The 2021 Credit Facility includes provisions which allow LIBOR Daily Floating Rate to be switched to SOFR.

At March 31, 2023, BPLP had no borrowings under its Revolving Facility and outstanding letters of credit totaling approximately $6.4 million, with the ability to borrow approximately $1.5 billion. At April 28, 2023, BPLP had no borrowings under its Revolving Facility and outstanding letters of credit totaling approximately $6.4 million, with the ability to borrow approximately $1.5 billion.

Unsecured Term Loan

On January 4, 2023, BPLP entered into the 2023 Unsecured Term Loan, which provided for a single borrowing

of up to $1.2 billion. Under the credit agreement, BPLP may, at any time prior to the maturity date, increase total commitments by up to an additional $300.0 million in aggregate principal amount by increasing the existing 2023 Unsecured Term Loan or incurring one or more additional term loans, in each case, subject to syndication of the increase and other conditions. The 2023 Unsecured Term Loan matures on May 16, 2024, with one 12-month extension option, subject to customary conditions.

At BPLP’s option, loans under the 2023 Unsecured Term Loan will bear interest at a rate per annum equal to (1) a base rate equal to the greatest of (a) the Federal Funds rate plus 0.5%, (b) the administrative agent’s prime rate, (c) Term SOFR for a one-month period plus 1.00%, and (d) 1.00%, in each case, plus a margin ranging from 0 to 60 basis points based on BPLP’s credit rating; or (2) a rate equal to adjusted Term SOFR with a one-month period plus a margin ranging from 75 to 160 basis points based on BPLP’s credit rating.

On January 4, 2023, upon entry into the credit agreement, BPLP exercised its option to draw $1.2 billion under the 2023 Unsecured Term Loan, a portion of which was used to repay in full the 2022 Unsecured Term Loan, which was scheduled to mature on May 16, 2023. There was no prepayment penalty associated with the repayment of the 2022 Unsecured Term Loan.

As of March 31, 2023, the 2023 Unsecured Term Loan bears interest at a rate equal to adjusted Term SOFR plus 0.85% per annum based on BPLP’s current credit rating at March 31, 2023 (See Note 13 to the Consolidated Financial Statements). At March 31, 2023, BPLP had $1.2 billion outstanding under the 2023 Unsecured Term Loan.

Unsecured Senior Notes

The following summarizes the unsecured senior notes outstanding as of March 31, 2023 (dollars in thousands):

Coupon/Stated RateEffective Rate(1)Principal AmountMaturity Date(2)
10.5 Year Unsecured Senior Notes3.125%3.279%$500,000September 1, 2023
10.5 Year Unsecured Senior Notes3.800%3.916%700,000February 1, 2024
7 Year Unsecured Senior Notes3.200%3.350%850,000January 15, 2025
10 Year Unsecured Senior Notes3.650%3.766%1,000,000February 1, 2026
10 Year Unsecured Senior Notes2.750%3.495%1,000,000October 1, 2026
5 Year Unsecured Senior Notes6.750%6.924%750,000December 1, 2027
10 Year Unsecured Senior Notes4.500%4.628%1,000,000December 1, 2028
10 Year Unsecured Senior Notes3.400%3.505%850,000June 21, 2029
10.5 Year Unsecured Senior Notes2.900%2.984%700,000March 15, 2030
10.75 Year Unsecured Senior Notes3.250%3.343%1,250,000January 30, 2031
11 Year Unsecured Senior Notes2.550%2.671%850,000April 1, 2032
12 Year Unsecured Senior Notes2.450%2.524%850,000October 1, 2033
Total principal10,300,000
Less:
Net unamortized discount13,339
Deferred financing costs, net45,694
Total$10,240,967

(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 March 31, 2023, 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 March 31, 2023:

PropertiesStated Interest RateGAAP Interest Rate (1)Stated Principal AmountDeferred Financing Costs, NetCarrying AmountCarrying Amount (Partners’ Share)Maturity Date
(dollars in thousands)
Consolidated Joint Ventures
767 Fifth Avenue (the General Motors Building)3.43%3.64%$2,300,000$(14,616)$2,285,384$914,205(2)(3)(4)June 9, 2027
601 Lexington Avenue2.79%2.93%1,000,000(11,831)988,169444,676(2)(5)January 9, 2032
Total$3,300,000$(26,447)$3,273,553$1,358,881

(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 March 31, 2023, the maximum funding obligation under the guarantee was approximately $12.5 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%. Seventeen 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 March 31, 2023, the aggregate carrying amount of debt, including both our and our partners’ share, incurred by these ventures was approximately $4.0 billion (of which our proportionate share is approximately $1.6 billion). The table below summarizes the outstanding debt of these joint venture properties at March 31, 2023. 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.

PropertiesNominal % OwnershipStated Interest RateGAAP Interest Rate (1)Stated Principal AmountDeferred Financing Costs, NetCarrying AmountCarrying Amount (Our share)Maturity Date
(dollars in thousands)
Santa Monica Business Park55.00%4.06%4.23%$300,000$(1,223)$298,777$164,327(2)(4)July 19, 2025
Market Square North50.00%6.92%7.10%125,000(597)124,40362,202(2)(3) (5)November 10, 2025
1265 Main Street50.00%3.77%3.84%35,357(243)35,11417,557January 1, 2032
Colorado Center50.00%3.56%3.59%550,000(781)549,219274,610(2)August 9, 2027
Dock 7250.00%7.13%7.39%198,383(1,272)197,11198,555(2)(6)December 18, 2025
The Hub on Causeway - Podium50.00%6.89%7.06%174,329(135)174,19487,097(2)(7)September 6, 2023
Hub50House50.00%4.43%4.51%185,000(1,257)183,74391,871(2)(8)June 17, 2032
100 Causeway Street50.00%6.03%6.24%337,604(362)337,242168,621(2)(3) (9)September 5, 2023
7750 Wisconsin Avenue (Marriott International Headquarters)50.00%5.77%6.32%251,542(116)251,426125,713(2)(3) (10)April 26, 2023
360 Park Avenue South42.21%7.11%7.56%212,668(1,707)210,96189,047(2)(3) (11)December 14, 2024
Safeco Plaza33.67%4.82%4.96%250,000(1,162)248,83883,784(2)(12)September 1, 2026
500 North Capitol Street, NW30.00%4.15%4.20%105,000(10)104,99031,497(2)June 6, 2023
200 Fifth Avenue26.69%4.34%5.60%600,000(9,424)590,576149,196(2)(13)November 24, 2028
901 New York Avenue25.00%3.61%3.69%211,039(313)210,72652,682January 5, 2025
3 Hudson Boulevard25.00%8.06%8.14%80,000(16)79,98419,996(2)(3) (14)July 13, 2023
Metropolitan Square20.00%7.25%8.03%420,000(3,342)416,65883,332(2)(3) (15)April 9, 2024
Reston Next Residential20.00%6.55%6.87%25,223(1,396)23,8274,765(2)(3) (16)May 13, 2026
Total$4,061,145$(23,356)$4,037,789$1,604,852

(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 includes certain extension options, subject to certain conditions.

(4)The loan bears interest at a variable rate equal to SOFR plus 1.38% per annum. 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 4.059% per annum through the expiration of the interest rate swap contracts.

(5)The loan bears interest at a variable rate equal to the greater of (1) the sum of (x) SOFR and (y) 2.41% or (2) 2.80% per annum.

(6)The construction financing bears interest at a variable rate equal to (1) the greater of (x) SOFR or (y) 0.25%, plus (2) 2.50% per annum.

(7)The construction financing bears interest at a variable rate equal to LIBOR plus 2.25% per annum.

(8)The loan bears interest at a variable rate equal to SOFR plus 1.35% per annum. 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.

(9)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).

(10)The construction financing bears interest at a variable rate equal to LIBOR plus 1.25% per annum. The maturity date of the loan has been extended to April 26, 2024 (See Note 13 to the Consolidated Financial Statements).

(11)The loan bears interest at a variable rate equal to Adjusted Term SOFR plus 2.40% per annum. The spread on the variable rate may be reduced, subject to certain conditions.

(12)The loan bears interest at a variable rate equal to the greater of (x) 2.35% or (y) SOFR plus 2.32% per annum. 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.

(13)The loan bears interest at a variable rate equal to LIBOR plus 1.30% per annum. The joint venture entered into interest rate swap contracts with notional amounts aggregating $600.0 million through June 2028, resulting in a fixed rate of approximately 4.34% per annum through the expiration of the interest rate swap contracts. In addition to items noted in footnote one above, the GAAP interest rate includes the adjustment required to reflect the loan at fair value upon acquisition.

(14)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. The loan has been reflected as Related Party Note Receivable, Net on our Consolidated Balance Sheets. As of March 31, 2023, the loan has approximately $21.0 million of accrued interest due at the maturity date.

(15)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 (y) a $115.0 million mezzanine note payable which bears interest at a variable rate equal to SOFR plus 5.25%. 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.

(16)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.

State and Local Tax Matters

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

Insurance

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

Funds from Operations

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

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

BXP

The following table presents a reconciliation of net income attributable to Boston Properties, Inc. to FFO attributable to Boston Properties, Inc. for the three months ended March 31, 2023 and 2022:

Three months ended March 31,
20232022
(in thousands)
Net income attributable to Boston Properties, Inc.$77,890$143,047
Add:
Noncontrolling interest—common units of the Operating Partnership9,07816,361
Noncontrolling interests in property partnerships18,66017,549
Net income105,628176,957
Add:
Depreciation and amortization208,734177,624
Noncontrolling interests in property partnerships’ share of depreciation and amortization(17,711)(17,653)
BXP’s share of depreciation and amortization from unconsolidated joint ventures25,64522,044
Corporate-related depreciation and amortization(469)(404)
Less:
Gains on sales of real estate—22,701
Unrealized gain on non-real estate investment259—
Noncontrolling interests in property partnerships18,66017,549
Funds from Operations (FFO) attributable to the Operating Partnership302,908318,318
Less:
Noncontrolling interest—common units of the Operating Partnership’s share of funds from operations30,95732,182
Funds from Operations attributable to Boston Properties, Inc.$271,951$286,136
Our percentage share of Funds from Operations—basic89.78%89.89%
Weighted average shares outstanding—basic156,803156,650

The following tables presents a reconciliation of net income attributable to Boston Properties, Inc. to Diluted FFO attributable to Boston Properties, Inc. for income (numerator) and shares/units (denominator) for the three months ended March 31, 2023 and 2022:

Three months ended March 31,
20232022
(in thousands)
Net income attributable to Boston Properties, Inc.$77,890$143,047
Add:
Noncontrolling interest—common units of the Operating Partnership9,07816,361
Noncontrolling interests in property partnerships18,66017,549
Net income105,628176,957
Add:
Depreciation and amortization208,734177,624
Noncontrolling interests in property partnerships’ share of depreciation and amortization(17,711)(17,653)
BXP’s share of depreciation and amortization from unconsolidated joint ventures25,64522,044
Corporate-related depreciation and amortization(469)(404)
Less:
Gains on sales of real estate—22,701
Unrealized gain on non-real estate investment259—
Noncontrolling interests in property partnerships18,66017,549
Funds from Operations (FFO) attributable to the Operating Partnership302,908318,318
Effect of Dilutive Securities:
Stock based compensation——
Diluted FFO302,908318,318
Less:
Noncontrolling interest—common units of the Operating Partnership’s share of diluted FFO30,92732,118
Diluted FFO attributable to Boston Properties, Inc. (1)$271,981$286,200

(1)BXP’s share of diluted Funds from Operations was 89.79% and 89.91% for the three months ended March 31, 2023 and 2022, respectively.

Three months ended March 31,
20232022
shares/units (in thousands)
Basic Funds from Operations174,652174,276
Effect of Dilutive Securities:
Stock based compensation240354
Diluted Funds from Operations174,892174,630
Less:
Noncontrolling interest—common units of the Operating Partnership’s share of diluted Funds from Operations17,84917,626
Diluted Funds from Operations attributable to Boston Properties, Inc. (1)157,043157,004

(1)BXP’s share of diluted Funds from Operations was 89.79% and 89.91% for the three months ended March 31, 2023 and 2022, 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 March 31, 2023 and 2022:

Three months ended March 31,
20232022
(in thousands)
Net income attributable to Boston Properties Limited Partnership$88,830$161,829
Add:
Noncontrolling interests in property partnerships18,66017,549
Net income107,490179,378
Add:
Depreciation and amortization206,872175,886
Noncontrolling interests in property partnerships’ share of depreciation and amortization(17,711)(17,653)
BXP’s share of depreciation and amortization from unconsolidated joint ventures25,64522,044
Corporate-related depreciation and amortization(469)(404)
Less:
Gains on sales of real estate—23,384
Unrealized gain on non-real estate investment259—
Noncontrolling interests in property partnerships18,66017,549
Funds from Operations attributable to Boston Properties Limited Partnership (1)$302,908$318,318
Weighted average shares outstanding—basic174,652174,276

(1)Our calculation includes OP Units and vested LTIP Units (including vested 2012 OPP Units and vested 2013 - 2020 MYLTIP Units).

The following tables presents a reconciliation of net income attributable to Boston Properties Limited Partnership to Diluted FFO attributable to Boston Properties Limited Partnership for income (numerator) and shares/units (denominator) for the three months ended March 31, 2023 and 2022:

Three months ended March 31,
20232022
(in thousands)
Net income attributable to Boston Properties Limited Partnership$88,830$161,829
Add:
Noncontrolling interests in property partnerships18,66017,549
Net income107,490179,378
Add:
Depreciation and amortization206,872175,886
Noncontrolling interests in property partnerships’ share of depreciation and amortization(17,711)(17,653)
BXP’s share of depreciation and amortization from unconsolidated joint ventures25,64522,044
Corporate-related depreciation and amortization(469)(404)
Less:
Gains on sales of real estate—23,384
Unrealized gain on non-real estate investment259—
Noncontrolling interests in property partnerships18,66017,549
Funds from Operations attributable to Boston Properties Limited Partnership (1)302,908318,318
Effect of Dilutive Securities:
Stock based compensation——
Diluted Funds from Operations attributable to Boston Properties Limited Partnership$302,908$318,318

(1)Our calculation includes OP Units and vested LTIP Units (including vested 2012 OPP Units and vested 2013 - 2020 MYLTIP Units).

Three months ended March 31,
20232022
shares/units (in thousands)
Basic Funds from Operations174,652174,276
Effect of Dilutive Securities:
Stock based compensation240354
Diluted Funds from Operations174,892174,630

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 March 31, 2023, we paid approximately $103.1 million to fund tenant-related obligations, including tenant improvements and leasing commissions.

In addition, during the three months ended March 31, 2023, we and our unconsolidated joint venture partners incurred approximately $61.9 million of new client-related obligations associated with approximately 643,000 square feet of second generation leases, or approximately $96 per square foot. We signed approximately 17,500 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 first quarter of

2023, we signed leases for approximately 660,500 million square feet of space and incurred aggregate client-related obligations of approximately $66.2 million, or approximately $100 per square foot.

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