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 (the “Exchange Act”). 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, 2023 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 and dislocations in the credit markets 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);

  • 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, incidents, and compromises 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 legal proceedings and other claims that could result in substantial monetary and other costs;

  • 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, 2024) 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.

We believe the key competitive advantages for BXP are our commitment to the office asset class and to our clients as many competitors disinvest in the sector, a strong balance sheet with access to capital in the secured and unsecured debt and private equity markets, and one of the highest quality portfolios of premier workplaces in the

U.S. assembled over several decades of intentional development, acquisitions, and dispositions. Today, clients and their advisors are more focused than ever on these attributes for their building owners, which distinguishes BXP among its competitors.

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 that are diverse across market sectors.

This strategy is more valuable than ever as our clients are interested in premier workplaces in vibrant, amenitized, accessible and high demand workplaces to encourage more in-person work. This interest has resulted in the acceleration of flight to quality in the office industry. Over the past several years, BXP’s experience and performance has diverged from the larger market and media sentiment, as premier workplaces have outperformed the broader office market consistently and substantially. We believe this divergence validates our strategy and differentiates BXP from other office companies. Although overall leasing demand has still not returned to pre-pandemic levels, premier workplaces in our five traditional central business district (“CBD”) markets (Boston, New York, San Francisco, Seattle, and Washington, DC) have consistently outperformed the broader office market in those CBDs since the first quarter of 2021 on several key metrics, including occupancy, net absorption levels and rental rates. This outperformance is evident in BXP’s portfolio where approximately 89% of our share of net operating income (“NOI”) comes from assets located in CBDs that are predominantly premier workplaces. These CBD assets are 91.0% occupied and 92.8% leased (including vacant space for which we have signed leases that have not yet commenced in accordance with generally accepted accounting principles (“GAAP”)) as of the end of the first quarter of 2024. For a detailed discussion of our share of NOI, including the reasons management believes the metric is useful to investors and a reconciliation to the most comparable GAAP measure, see page 31.

As of March 31, 2024, the weighted-average remaining lease term (1) 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, and (2) for our 20 largest clients, based on square feet, was approximately 10.4 years.

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, including our ability to fund our share of lease obligations and maintain premier building standards; and

  • our relationships with local brokers.

Outlook

Two of the most significant external forces impacting BXP’s performance are interest rates and corporate earnings. We believe lower interest rates would improve our cost of capital, spark more transaction activity and investment opportunities in our sector, reduce the cost of new development and be a tailwind for our client’s earnings growth. Greater corporate earning would, in turn, likely encourage our clients to increase their office space requirements. However, with inflation increasing at greater than expected rates, the Federal Reserve has stated that it expects to delay interest rate cuts.

Our clients generally do not hire new employees and increase their office space requirements unless their earnings are growing or they are in need of additional employees to grow their earnings. From 2011 to present, S&P 500 earnings grew around 12% per year, but in 2023 the growth rate was 0% and in 2022 it was 5%. Though the U.S. economy is growing, and unemployment remains low, only approximately 7% of the jobs created in the first quarter of 2024 were in office using categories compared to the long-term average of over 25%. Growth in S&P 500 earnings are projected to be 11% to 13% per annum over the next two years, which should be constructive to BXP’s leasing activity. Many technology clients, a critically important sector that drove space demand following the Great Financial Crisis, overcommitted to space during the pandemic which has exacerbated the supply-demand imbalance. Over the longer term, we expect earnings at technology companies will grow and they will begin to absorb the available supply.

Although remote work continues to be a factor restraining demand for office space, we believe economic conditions are the primary driver of leasing activity. As overall earnings growth for our clients and potential clients improves, it should lead to employment growth and demand for office space over time. However, we are not counting on a near-term market recovery to maintain BXP’s occupancy. Our leasing, construction and property management teams will lean on our operating prowess to gain new clients and market share as clients choose premier workplaces that are in sound financial condition for their office space.

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

  • labor market conditions shift, which has gradually increased employer demand for mandatory in-person workdays;

  • volatility in the capital markets has led companies to be more reticent in their 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 and, although much of the cost for our active development pipeline is fixed, the cost of potential future construction activity continues to increase.

In light of the uncertain trajectory of the U.S. and global economies, we believe we continue to position BXP for success by increasing liquidity, managing our leverage, pursuing additional capital raising opportunities and maintaining discipline in discretionary capital expenditures, 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;

  • 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, elevated interest rates, 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 2024 and recent business highlights.

Leasing Activity and Occupancy

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. Also impacting clients decisions are the building quality as well as the financial stability and long-term commitment of their building owners, both strong competitive advantages for BXP.

In the first quarter of 2024, we executed 61 leases totaling approximately 900,000 square feet with a weighted-average lease term of approximately 11.6 years, compared to approximately 660,500 square feet of leases executed in the first quarter of 2023 with a weighted-average lease term of approximately 7.7 years.

BXP’s CBD portfolio of premier workplaces was 91.0% occupied and 92.8% leased (including vacant space for which we have signed leases that have not yet commenced in accordance with GAAP) at March 31, 2024.

Approximately 89% of our share of NOI comes from assets located in our CBD portfolio, underscoring the strength of BXP’s strategy to invest in the highest quality buildings in dynamic urban gateway markets. For a detailed discussion of our share of NOI, including the reasons management believes the metric is useful to investors and a reconciliation to the most comparable GAAP measure, see page 31.

The overall occupancy of our in-service office and retail properties was 88.2% at March 31, 2024, a decrease of 20 basis points from December 31, 2023. We define occupancy as space with signed leases for which revenue recognition has commenced in accordance with GAAP. Including vacant space for which we have signed leases that have not yet commenced revenue recognition in accordance with GAAP, our in-service office and retail properties were approximately 89.9% leased at March 31, 2024.

Investment Activity

We remain in active pursuit of opportunities in our core markets and asset types with primarily two types of counterparties: lenders to highly leveraged assets that require recapitalization and institutional owners seeking to diversify from the office asset class. To date, there has been limited market transaction activity for higher-quality office assets. With lenders, there are fewer premier workplaces that are struggling with leverage, and in the few cases involving premier workplaces, lenders are generally electing to extend loans to borrowers who agree to invest modestly in their assets. Institutional owners are less interested in selling their higher quality assets, and there remains a material bid-ask spread given assets have in most cases not been marked down to market clearing levels. Notwithstanding these current challenges, our expectations are that transactions and our investment activity will increase in coming quarters given the volume of maturing financings, continued mark downs in institutional portfolios and prolonged high interest rates. We also have interest from institutional investors in co-investing with us for select opportunities.

Consistent with this strategy, on January 8, 2024, we completed the acquisition of our joint venture partner’s 50% economic ownership interest in the joint venture that owns 901 New York Avenue located in Washington, DC for a purchase price of $10.0 million and recorded a gain on consolidation of approximately $21.8 million. This transaction was sparked by our partner’s election to reduce their exposure to the office sector, and we agreed to purchase their interest on attractive terms. The property is encumbered by an approximately $207.1 million mortgage debt, at acquisition, which bears interest at 3.61% per annum and matures on January 5, 2025. Following the acquisition, we modified the mortgage loan to provide for two loan extension options totaling five years of additional term, each subject to certain conditions. The first loan extension option is for four years at a fixed interest rate of 5.0% per annum. We also extended an approximately 200,000 square foot lease with the anchor client through 2042 after the acquisition. 901 New York Avenue is a premier workplace consisting of approximately 524,000 net rentable square feet.

Also, on March 21, 2024, we completed the previously announced sale of a 45% interest in 290 Binney Street, a life sciences development located in Kendall Square in Cambridge, Massachusetts, to an institutional investor. The institutional investor’s investment in 290 Binney Street will reduce our share of the project’s estimated development spend over time by approximately $533.5 million, including $141.8 million that was funded at closing. The consummation of this joint venture completed the institutional investor’s two-building investment in Cambridge, Massachusetts with a gross valuation of approximately $1.66 billion or $2,050 per square foot. The properties, 290 Binney Street and 300 Binney Street, total 802,000 net rentable square feet and are 100% pre-leased. We retain a 55% interest in each joint venture and provide development, property management, and leasing services for the ventures.

As of March 31, 2024, our development/redevelopment pipeline consisted of 11 properties that, when completed, we expect will total approximately 3.2 million net rentable square feet. Our share of the estimated total cost for these projects is approximately $2.6 billion, of which approximately $1.4 billion remains to be invested. The commercial space in the pipeline, which excludes the residential projects, was 54% pre-leased as of May 2, 2024.

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 while interest rates remain elevated and transaction volume for office assets continues to be minimal in the U.S.

A brief overview of each of our markets follows.

Boston

During the first quarter of 2024, we executed approximately 178,000 square feet of leases and approximately 435,000 square feet of leases commenced in the Boston region. Approximately 374,000 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 21.4% over the prior leases.

As of March 31, 2024, our approximately 8.3 million square foot Boston CBD in-service portfolio was approximately 94.7% occupied and approximately 95.9% leased (including vacant space for which we have signed leases that have not yet commenced in accordance with GAAP).

Our approximately 2.5 million square foot in-service premier workplace CBD portfolio in Cambridge was approximately 97.4% occupied and leased (including vacant space for which we have signed leases that have not yet commenced in accordance with GAAP) as of March 31, 2024.

As of March 31, 2024, our Route 128-Mass Turnpike in-service portfolio is comprised of approximately 4.7 million square feet and was approximately 79.3% occupied and approximately 79.4% leased (including vacant space for which we have 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. As of March 31, 2024, our LA in-service properties were approximately 86.1% occupied and 87.2% leased (including vacant space for which we have signed leases that have not yet commenced in accordance with GAAP).

New York

During the first quarter of 2024, we executed approximately 225,000 square feet of leases in the New York region and approximately 313,000 square feet of leases commenced. Approximately 269,000 square feet of the leases that commenced had been vacant for less than one year and they represent an increase in net rental obligations of approximately 10.5% over the prior leases. As of March 31, 2024, our New York CBD in-service portfolio was approximately 91.5% occupied and approximately 95% leased (including vacant space for which we have signed leases that have not yet commenced in accordance with GAAP).

San Francisco

During the first quarter of 2024, we executed approximately 109,000 square feet of leases and approximately 175,000 square feet of leases commenced in the San Francisco region. Approximately 98,000 square feet of leases that commenced had been vacant for less than one year and represent an increase in net rental obligations of approximately 10.0% over the prior leases.

As of March 31, 2024, our San Francisco CBD in-service properties were approximately 86.6% occupied and approximately 87.4% leased (including vacant space for which we have signed leases that have not yet commenced in accordance with GAAP).

Seattle

Our Seattle in-service portfolio includes Safeco Plaza, an approximately 769,000 square foot property of which we own 33.67%, and Madison Centre, an approximately 755,000 square foot property. As of March 31, 2024, these in-service properties were approximately 81.8% occupied and approximately 83.1% leased (inclusive of vacant space with signed leases that have not yet commenced in accordance with GAAP).

Washington, DC

During the first quarter of 2024, we executed approximately 336,000 square feet of leases and approximately 438,000 square feet of leases commenced in the Washington, DC region. Approximately 256,000 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 4.7% over the prior leases.

As of March 31, 2024, our Washington, DC CBD in-service properties were approximately 86.7% occupied and approximately 88.9% 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, 2024, our Reston CBD portfolio was approximately 93.7% occupied and approximately 95.6% 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 revenue recognition during the three months ended March 31, 2024:

Three months ended March 31, 2024
(Square Feet)
Vacant space available at the beginning of the period5,696,007
Vacant space from property dispositions/properties taken out of service (1)(233,694)
Vacant space from properties placed (and partially placed) in-service (2)44,652
Leases expiring or terminated during the period1,684,796
Total space available for lease7,191,761
1st generation leases171,991
2nd generation leases with new clients414,732
2nd generation lease renewals846,432
Total space leased (3)1,433,155
Vacant space available for lease at the end of the period5,758,606
Leases executed during the period (4)893,941
Second generation leasing information: (5)
Leases commencing during the period, in square feet1,261,164
Weighted Average Lease Term110 Months
Weighted Average Free Rent Period93 Days
Total Transaction Costs Per Square Foot (6)$79.32
Increase in Gross Rents (7)6.78%
Increase in Net Rents (8)9.62%

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(1)Total vacant square feet of properties taken out of service during the three months ended March 31, 2024 consists of 162,274 square feet at 1050 Winter Street and 71,420 square feet at 15825 Shady Grove Road.

(2)Total vacant square feet of properties placed (and partially placed) in-service during the three months ended March 31, 2024 consists of 44,652 square feet at 651 Gateway.

(3)Represents leases for which lease revenue recognition has commenced in accordance with GAAP during the three months ended March 31, 2024.

(4)Represents leases executed during the three months ended March 31, 2024 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, 2024 is 354,567 square feet.

(5)Second generation leases are defined as leases for space that we have previously leased. Of the 1,261,164 square feet of second generation leases that commenced during the three months ended March 31, 2024, leases for 906,597 square feet were signed in prior periods.

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

(7)Represents the increase in gross rent (base rent plus expense reimbursements) on the new versus expired leases on the 1,053,391 square feet of second generation leases that had been occupied within the prior 12 months for the three months ended March 31, 2024; excludes leases that management considers temporary because the client is not expected to occupy the space on a long-term basis.

(8)Represents the increase in net rent (gross rent less operating expenses) on the new versus expired leases on the 1,053,391 square feet of second generation leases that had been occupied within the prior 12 months for the three months ended March 31, 2024.

Transactions during the three months ended March 31, 2024 included the following:

Acquisition activity

  • On January 8, 2024, we completed the acquisition of our joint venture partner’s 50% economic ownership interest in the joint venture that owns 901 New York Avenue, located in Washington, DC. At acquisition, the total net equity acquired was $20.0 million, which includes $10.0 million in cash that we paid for the joint venture partner's 50% economic ownership interest in the joint venture. The property is subject to existing mortgage indebtedness of approximately $207.1 million (See Debt activities below). The acquisition resulted in us recording a gain upon consolidation of approximately $21.8 million, which is the difference between the fair value of the previously held equity method investment immediately prior to the consolidation of $10.0 million, less our costs basis of approximately $(11.8) million. The gain on consolidation is included within income (loss) from unconsolidated joint ventures in the Consolidated Statement of Operations. 901 New York Avenue is a premier workplace consisting of approximately 524,000 net rentable square feet.

Development activity

  • On February 12, 2024, we commenced the development of a residential project at 121 Broadway Street in Cambridge, Massachusetts that is adjacent to our development projects at 290 Binney Street and 300 Binney Street. 121 Broadway will consist of 439 residential units aggregating approximately 492,000 net rentable square feet.

Impairment activity

  • At March 31, 2024, we evaluated the expected hold period for a portion of our Shady Grove property located in Rockville, Maryland. Based on a shorter-than-expected hold period, we reduced the carrying value of a portion of the property that we anticipate selling to a third party developer to its estimated fair value at March 31, 2024. As a result, each of BXP and BPLP recognized an impairment loss of approximately $13.6 million. Our estimated fair value was based on Level 3 inputs as defined in Accounting Standards Codification (“ASC”) 820 “Fair Value Measurements and Disclosures” (“ASC 820”) and on a pending offer from a third party.

Lease activity

  • On March 28, 2024, we entered into a 90-year air rights lease with the Massachusetts Department of Transportation for an approximately 61,000 square feet site at the parking garage located at 100 Clarendon Street and the concourse level of the Massachusetts Bay Transportation Authority’s Back Bay Station (the “Station”). The lease requires annual base rental payments of $250,000 until the commencement of construction, as defined in the lease. If we commence construction of a project on the site on or before August 1, 2028 then a final fixed rental payment is due in accordance with the lease at that time. After August 1, 2028, if we commence construction of a project on the site, then a final rental payment based on the then current fair market value will be due at that time. In addition, the lease requires annual payments of $500,000 through 2033 to fund maintenance and improvements to the Station. We have assumed that we will begin construction on the site on or before August 1, 2028. The incremental borrowing rate for this lease is 6.57% per annum. The net present value of the ground lease payments is approximately $23.2 million. We classify this lease as an operating lease. As a result, we recorded a Right of Use Assets – Operating Leases and Lease Liabilities – Operating Leases of approximately $23.9 million and $23.2 million, respectively, on our Consolidated Balance Sheets as of March 31, 2024. There were no lease costs for the period from March 28, 2024 through March 31, 2024.

Unconsolidated joint venture activities

  • On January 2, 2024, a joint venture in which we have a 50% interest partially placed in-service 651 Gateway, an approximately 327,000 net rentable square foot laboratory/life sciences project in South San Francisco, California. The property is approximately 21% pre-leased as of May 2, 2024.

  • On January 8, 2024, we acquired our joint venture partner’s 50% economic ownership interest in the joint venture that owns 901 New York Avenue, located in Washington, DC, for a gross purchase price of $10.0 million in cash (See Acquisition activity above). Prior to the acquisition, we had a 50% economic ownership interest in the joint venture and accounted for it under the equity method of accounting. The acquisition resulted in us having full ownership of the joint venture such that we now account for the assets, liabilities, and operations of it on a consolidated basis in our financial statements instead of under the equity method of accounting and as a result recognized a gain on consolidation of approximately $21.8 million.

  • On February 6, 2024, a joint venture in which we own a 25% interest extended the maturity date of the loan collateralized by its 3 Hudson Boulevard property. The extended loan continues to bear interest at a variable rate equal to Term SOFR plus approximately 3.61% per annum and matures on May 9, 2024. At the time of the extension, the loan had an outstanding balance totaling $80.0 million and was scheduled to mature on February 9, 2024. 3 Hudson Boulevard consists of land and improvements held for future development located in New York, New York.

  • On February 9, 2024, a joint venture in which we own a 50% interest exercised an option to extend the maturity date of the construction loan collateralized by its 7750 Wisconsin Avenue property. The construction loan had a total commitment amount of approximately $252.6 million. The extended loan continues to bear interest at a variable rate equal to Term SOFR plus 1.35% per annum and matures on April 26, 2025. At the time of the extension, the loan had an outstanding balance totaling approximately $251.6 million and was scheduled to mature on April 26, 2024. 7750 Wisconsin Avenue is a premier workplace with approximately 736,000 net rentable square feet located in Bethesda, Maryland.

Debt activities

  • On January 8, 2024, we acquired our joint venture partner’s 50% economic ownership interest in the joint venture that owns 901 New York Avenue located in Washington, DC (See Acquisition activity and Unconsolidated joint venture activities above). The property is subject to existing mortgage indebtedness. At acquisition, the mortgage loan had an outstanding principal balance of approximately $207.1 million, bore interest at 3.61% per annum and was scheduled to mature on January 5, 2025. The mortgage loan was recorded at a fair value of approximately $198.7 million. On January 11, 2024, we modified the mortgage loan to provide for two extension options totaling five years of additional term, each subject to certain conditions.

  • On February 1, 2024, BPLP repaid $700.0 million in aggregate principal amount of its 3.800% senior notes due February 1, 2024. The repayment was completed with available cash and the $600.0 million proceeds from the mortgage loan entered into on October 26, 2023. The repayment price was approximately $713.3 million, which was equal to the stated principal plus approximately $13.3 million of accrued and unpaid interest to, but not including, the repayment date. Excluding the accrued and unpaid interest, the repayment price was equal to the principal amount being repaid.

Noncontrolling interest activity

  • On March 21, 2024, we completed the sale of a 45% interest in 290 Binney Street in Cambridge, Massachusetts.  The institutional investor funded approximately $97.2 million in cash at closing, which is less than 45% of the agreed upon carrying value of the property immediately prior to the transaction.  The institutional investor will fund all construction costs until its equity balance is proportionate to its ownership percentage, after which we and the institutional investor will fund the development project based on our respective ownership interests.  We retain a 55% ownership interest in the joint venture.  The transaction did not qualify as a sale of real estate for financial reporting purposes as we continue to effectively control the property and thus will continue to account for the property on a consolidated basis in our financial statements and no gain was recognized in the Consolidated Statements of Operations.  We provide customary development, property management and leasing services to the

joint venture.  290 Binney Street is an approximately 566,000 net rentable square foot laboratory/life sciences development project located in Cambridge, Massachusetts.  The  development project is 100% pre-leased to a life sciences company.  

Transactions completed subsequent to March 31, 2024 included the following:

  • On April 5, 2024, we completed and fully placed in-service 760 Boylston Street, an approximately 118,000 net rentable square feet retail redevelopment located in Boston, Massachusetts.

  • On April 16, 2024, BPLP provided notice to exercise its one-year extension option on its $1.2 billion unsecured term loan facility (the “2023 Unsecured Term Loan”). BPLP anticipates effectuating the extension on or prior to the current May 16, 2024 maturity date. Upon effectiveness, the 2023 Unsecured Term Loan will mature on May 16, 2025. After making an approximately $500.0 million optional repayment on April 29, 2024, the 2023 Unsecured Term Loan has an outstanding principal balance of $700.0 million.

  • On April 17, 2024, BPLP established an unsecured commercial paper program. Under the terms of the program, BPLP may issue, from time to time, unsecured commercial paper notes up to a maximum aggregate amount outstanding at any one time of $500 million with varying maturities of up to one year. The notes will be sold in private placements and will rank pari passu with all of BPLP’s other unsecured senior indebtedness, including its outstanding senior notes. The commercial paper program is backstopped by available capacity under BPLP's unsecured revolving credit facility (the “2021 Credit Facility”). As of May 2, 2024, BPLP had $500.0 million outstanding under its commercial paper program that bears interest at a weighted-average rate of 5.58% per annum. Proceeds from the commercial paper program were used to reduce BPLP’s 2023 Unsecured Term Loan to $700.0 million.

  • On April 29, 2024, BPLP increased the current maximum borrowing amount under the 2021 Credit Facility from $1.815 billion to $2.0 billion. All other terms of the 2021 Credit Facility, including its maturity date of June 15, 2026, remain unchanged. BPLP had no borrowings under the 2021 Credit Facility as of May 2, 2024.

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, 2023 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, 2023.

Results of Operations for the Three Months Ended March 31, 2024 and 2023

Net income attributable to Boston Properties, Inc. and net income attributable to Boston Properties Limited Partnership increased approximately $2.0 million and $2.3 million, respectively, for the three months ended March 31, 2024 compared to 2023, as detailed in the following tables and for the reasons discussed below under the heading “Comparison of the three months ended March 31, 2024 to the three months ended March 31, 2023” 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, 2024 and 2023. For a detailed discussion of Net Operating Income (“NOI”), including the reasons management believes NOI is useful to investors, see page 51.

BXP

Three months ended March 31,
20242023Increase/ (Decrease)% Change
(in thousands)
Net Income Attributable to Boston Properties, Inc.$79,883$77,890$1,9932.56%
Net Income Attributable to Noncontrolling Interests:
Noncontrolling interest—common units of the Operating Partnership9,5009,0784224.65%
Noncontrolling interests in property partnerships17,22118,660(1,439)(7.71)%
Net Income106,604105,6289760.92%
Other Expenses:
Add:
Interest expense161,891134,20727,68420.63%
Impairment loss13,615—13,615100.00%
Other Income:
Less:
Unrealized gain on non-real estate investment39625913752.90%
Gains from investments in securities2,2721,66560736.46%
Interest and other income (loss)14,52910,9413,58832.79%
Income (loss) from unconsolidated joint ventures19,186(7,569)26,755353.48%
Other Expenses:
Add:
Depreciation and amortization expense218,716208,7349,9824.78%
Transaction costs513911(398)(43.69)%
Payroll and related costs from management services contracts4,2935,235(942)(17.99)%
General and administrative expense50,01855,802(5,784)(10.37)%
Other Revenue:
Less:
Direct reimbursements of payroll and related costs from management services contracts4,2935,235(942)(17.99)%
Development and management services revenue6,1548,980(2,826)(31.47)%
Net Operating Income$508,820$491,006$17,8143.63%

BPLP

Three months ended March 31,
20242023Increase/ (Decrease)% Change
(in thousands)
Net Income Attributable to Boston Properties Limited Partnership$91,080$88,830$2,2502.53%
Net Income Attributable to Noncontrolling Interests:
Noncontrolling interests in property partnerships17,22118,660(1,439)(7.71)%
Net Income108,301107,4908110.75%
Other Expenses:
Add:
Interest expense161,891134,20727,68420.63%
Impairment loss13,615—13,615100.00%
Other Income:
Less:
Unrealized gain on non-real estate investment39625913752.90%
Gains from investments in securities2,2721,66560736.46%
Interest and other income (loss)14,52910,9413,58832.79%
Income (loss) from unconsolidated joint ventures19,186(7,569)26,755353.48%
Other Expenses:
Add:
Depreciation and amortization expense217,019206,87210,1474.90%
Transaction costs513911(398)(43.69)%
Payroll and related costs from management services contracts4,2935,235(942)(17.99)%
General and administrative expense50,01855,802(5,784)(10.37)%
Other Revenue:
Less:
Direct reimbursements of payroll and related costs from management services contracts4,2935,235(942)(17.99)%
Development and management services revenue6,1548,980(2,826)(31.47)%
Net Operating Income$508,820$491,006$17,8143.63%

At March 31, 2024 and 2023, we owned or had joint venture interests in a portfolio of 187 and 192 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, 2024 and 2023 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, impairment loss, 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 from investments in securities, interest and other income (loss), 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.

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 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, 2024 to the three months ended March 31, 2023

The table below shows selected operating information for the Same Property Portfolio and the Total Property Portfolio. The Same Property Portfolio consists of 130 properties totaling approximately 40.8 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, 2023 and owned and in-service through March 31, 2024. 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, 2023 or disposed of on or prior to March 31, 2024. 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, 2024 and 2023 with respect to the properties that were acquired, placed in-service, in or held for development or redevelopment or sold. We did not sell any properties during the three months ended March 31, 2024 and 2023.

Same Property PortfolioProperties Acquired PortfolioProperties Placed In-Service PortfolioProperties in or Held for Development or Redevelopment PortfolioTotal Property Portfolio
20242023Increase/ (Decrease)% Change20242023202420232024202320242023Increase/ (Decrease)% Change
(dollars in thousands)
Rental Revenue: (1)
Lease Revenue (Excluding Termination Income)$736,512$740,069$(3,557)(0.48)%$25,500$—$12,436$5,014$242$417$774,690$745,500$29,1903.92%
Termination Income1,8101951,615828.21%189—————1,9991951,804925.13%
Lease Revenue738,322740,264(1,942)(0.26)%25,689—12,4365,014242417776,689745,69530,9944.16%
Parking and Other Revenue28,43423,3395,09521.83%2,512—487127—(3)31,43323,4637,97033.97%
Total Rental Revenue (1)766,756763,6033,1530.41%28,201—12,9235,141242414808,122769,15838,9645.07%
Real Estate Operating Expenses292,630280,08412,5464.48%9,577—4,9631,7271,3014,034308,471285,84522,6267.92%
Net Operating Income (Loss), Excluding Residential and Hotel474,126483,519(9,393)(1.94)%18,624—7,9603,414(1,059)(3,620)499,651483,31316,3383.38%
Residential Net Operating Income (2)6,9986,26373511.74%——————6,9986,26373511.74%
Hotel Net Operating Income (2)2,1711,43074151.82%——————2,1711,43074151.82%
Net Operating Income (Loss)$483,295$491,212$(7,917)(1.61)%$18,624$—$7,960$3,414$(1,059)$(3,620)$508,820$491,006$17,8143.63%

(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 51. Residential Net Operating Income for the three months ended March 31, 2024 and 2023 is comprised of Residential Revenue of $12,684 and $11,726 less Residential Expenses of $5,686 and $5,463, respectively. Hotel Net Operating Income for the three months ended March 31, 2024 and 2023 is comprised of Hotel Revenue of $8,186 and $8,101 less Hotel Expenses of $6,015 and $6,671, 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 decreased by approximately $3.6 million for the three months ended March 31, 2024 compared to 2023. The decrease was a result of our average occupancy decreasing from 90.2% to 89.3%, resulting in a decrease of approximately $7.1 million, partially offset by our average revenue per square foot increasing by approximately $0.25, contributing approximately $3.5 million.

Termination Income

Termination income increased by approximately $1.6 million for the three months ended March 31, 2024 compared to 2023.

Termination income for the three months ended March 31, 2024 related to ten clients across the Same Property Portfolio and totaled approximately $1.8 million, which was primarily related to clients that terminated leases early in San Francisco, California.

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.

Parking and Other Revenue

Parking and other revenue increased by approximately $5.1 million for the three months ended March 31, 2024 compared to 2023. Parking and other revenue increased by approximately $0.5 million and $4.6 million, respectively. The increase in other revenue was primarily associated with the View Boston observatory, which was completed and placed in-service on June 1, 2023.

Real Estate Operating Expenses

Real estate operating expenses from the Same Property Portfolio increased by approximately $12.5 million, or 4.5%, for the three months ended March 31, 2024 compared to 2023, due primarily to increases in repairs and maintenance of approximately $3.7 million, or 8.4%, and other real estate operating expenses of approximately $4.9 million, or 2.1%. The increase in repairs and maintenance was primarily in Boston. In addition, there was approximately $3.9 million related to the marketing and operating expenses associated with the View Boston observatory, which was completed and placed in-service on June 1, 2023.

Properties Acquired Portfolio

The table below lists the properties acquired between January 1, 2023 and March 31, 2024. Rental revenue and real estate operating expenses increased by approximately $28.2 million and $9.6 million, respectively, for the three months ended March 31, 2024 compared to 2023, as detailed below.

Square FeetRental RevenueReal Estate Operating Expenses
NameDate acquired20242023Change20242023Change
(dollars in thousands)
Santa Monica Business Park (1)December 14, 20231,182,696$20,401$—$20,401$6,569$—$6,569
901 New York AvenueJanuary 8, 2024523,9397,800—7,8003,008—3,008
1,706,635$28,201$—$28,201$9,577$—$9,577

(1)Rental revenue for the three months ended March 31, 2024 includes approximately $0.2 million of termination income.

Properties Placed In-Service Portfolio

The table below lists the properties that were placed in-service or partially placed in-service between January 1, 2023 and March 31, 2024. Rental revenue and real estate operating expenses from our Properties Placed In-Service Portfolio increased by approximately $7.8 million and $3.2 million, respectively, for the three months ended March 31, 2024 compared to 2023, as detailed below.

Quarter Initially Placed In-ServiceQuarter Fully Placed In-ServiceRental RevenueReal Estate Operating Expenses
NameSquare Feet20242023Change20242023Change
(dollars in thousands)
2100 Pennsylvania AvenueSecond Quarter, 2022Second Quarter, 2023475,849$7,924$5,141$2,783$2,721$1,727$994
140 Kendrick Street - Building AThird Quarter, 2023Third Quarter, 2023104,1661,925—1,925592—592
180 CityPointThird Quarter, 2023N/A329,0003,074—3,0741,389—1,389
103 CityPointFourth Quarter, 2023N/A113,000———261—261
1,022,015$12,923$5,141$7,782$4,963$1,727$3,236

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, 2023 and March 31, 2024. Rental revenue and real estate operating expenses from our Properties in or Held for Development or Redevelopment Portfolio decreased by approximately $0.2 million and $2.7 million, respectively, for the three months ended March 31, 2024 compared to 2023, as detailed below.

Rental RevenueReal Estate Operating Expenses
NameDate Commenced or Held for Development / RedevelopmentSquare Feet20242023Change20242023Change
(dollars in thousands)
105 Carnegie Center (1)November 30, 202273,000$—$—$—$155$—$155
Kendall Center Blue Parking Garage (2)January 4, 2023N/A—25(25)—2,277(2,277)
300 Binney StreetJanuary 30, 2023236,000—(900)900—117(117)
Shady Grove Innovation District (3)March 31, 2023184,000(45)631(676)292402(110)
Lexington Office Park (3)March 31, 2023167,000257629(372)417611(194)
1050 Winter Street (3)March 31, 2024162,00030291437627(190)
822,000$242$414$(172)$1,301$4,034$(2,733)

(1)On November 30, 2023, we elected to suspend redevelopment. Although no longer in redevelopment, this property is not considered “in-service” as we are not actively leasing this property in anticipation of restarting redevelopment in the future.

(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)A portion of Shady Grove Innovation District, Lexington Office Park and 1050 Winter Street are no longer considered “in-service” because each property’s occupied percentage is less than 50% and we are no longer actively leasing the properties in anticipation of a future development/redevelopment. This portion of Shady Grove Innovation District is comprised of three buildings, 2092 and 2098 Gaither Road and 15825 Shady Grove Road that were taken out of service between March 31, 2023 and March 31, 2024.

Residential Net Operating Income

Net operating income for our residential same properties increased by approximately $0.7 million for the three months ended March 31, 2024 compared to 2023.

The following reflects our occupancy and rate information for our residential same properties for the three months ended March 31, 2024 and 2023.

Average Monthly Rental Rate (1)Average Rental Rate Per Occupied Square FootAverage Physical Occupancy (2)Average Economic Occupancy (3)
Name20242023Change (%)20242023Change (%)20242023Change (%)20242023Change (%)
Proto Kendall Square$3,154$3,0025.1%$5.79$5.524.9%94.9%95.4%(0.5)%94.4%94.8%(0.4)%
The Lofts at Atlantic Wharf$4,257$4,428(3.9)%$4.70$4.91(4.3)%95.0%95.4%(0.4)%94.5%95.4%(0.9)%
Signature at Reston$2,774$2,6773.6%$2.85$2.772.9%95.5%93.7%1.9%95.5%93.1%2.6%
The Skylyne$3,478$3,4451.0%$4.37$4.38(0.2)%87.9%91.5%(3.9)%86.7%89.3%(2.9)%

(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 Average 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

The Boston Marriott Cambridge hotel had net operating income of approximately $2.2 million for the three months ended March 31, 2024, representing an increase of approximately $0.7 million compared to the three months ended March 31, 2023.

The following reflects our occupancy and rate information for the Boston Marriott Cambridge hotel for the three months ended March 31, 2024 and 2023.

20242023Change (%)
Occupancy71.0%61.3%15.8%
Average daily rate$254.86$261.52(2.5)%
REVPAR$181.05$160.4112.9%

Other Operating Revenue and Expense Items

Development and Management Services Revenue

Development and management services revenue decreased by approximately $2.8 million for the three months ended March 31, 2024 compared to 2023. Development services revenue and management services revenue decreased by approximately $1.2 million and $1.6 million, respectively. The decrease in development services revenue was primarily related to a decrease in fees associated with a tenant improvement project in New York City. The decrease in management services revenue was primarily related to a decrease in property and asset management fees earned from an unconsolidated joint venture in the Los Angeles region which we acquired the joint venture partner’s interest in December 2023.

General and Administrative Expense

General and administrative expense decreased by approximately $5.8 million for the three months ended March 31, 2024 compared to 2023 primarily due to a decrease in compensation expense of approximately $6.1 million, partially offset by an approximately $0.3 million increase in other general and administrative expenses. The decrease in compensation expense related to an approximately $6.7 million decrease in other compensation expenses partially offset by an approximately $0.6 million increase in the value of our deferred compensation plan.

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, 2024 and 2023 were approximately $4.1 million and $4.5 million, respectively. These costs are not included in the general and administrative expenses discussed above.

Transaction Costs

Transaction costs decreased by approximately $0.4 million for the three months ended March 31, 2024 compared to 2023 due primarily to decreased costs incurred in connection with the pursuit and formation of new joint ventures during the three months ended March 31, 2023, that did not recur in 2024. 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 $10.0 million for the three months ended March 31, 2024 compared to 2023, as detailed below.

PortfolioDepreciation and Amortization for the three months ended March 31,
20242023Change
(in thousands)
Same Property Portfolio$198,939$193,775$5,164
Properties Acquired Portfolio14,141—14,141
Properties Placed In-Service Portfolio5,0751,7833,292
Properties in or Held for Development or Redevelopment Portfolio (1)56113,176(12,615)
$218,716$208,734$9,982

(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 $10.1 million for the three months ended March 31, 2024 compared to 2023, as detailed below.

PortfolioDepreciation and Amortization for the three months ended March 31,
20242023Change
(in thousands)
Same Property Portfolio$197,242$192,093$5,149
Properties Acquired Portfolio14,141—14,141
Properties Placed In-Service Portfolio5,0751,7833,292
Properties in or Held for Development or Redevelopment Portfolio (1)56112,996(12,435)
$217,019$206,872$10,147

(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, 2024 compared to 2023, income (loss) from unconsolidated joint ventures increased by approximately $26.8 million primarily due to an approximately $21.8 million gain on consolidation related to the acquisition of our joint venture partner’s economic interest in the joint venture that owns 901 New York Avenue during the three months ended March 31, 2024 (See Note 5 to the Consolidated Financial Statements).

Interest and Other Income (Loss)

Interest and other income (loss) increased by approximately $3.6 million for the three months ended March 31, 2024 compared to 2023, due primarily to an increase in interest income from increased interest earned on our deposits.

Gains from Investments in Securities

Gain from investments in securities for the three months ended March 31, 2024 and 2023 related to investments that we have made to reduce our market risk relating to deferred compensation plans that we maintain for BXP’s officers and former non-employee directors. Under the deferred compensation plans, each officer or non-employee director who is eligible to participate is permitted to defer a portion of the officer’s current income or the non-employee director’s compensation on a pre-tax basis and receive a tax-deferred return on these deferrals based on the performance of specific investments selected by the officer or non-employee director. In order to reduce our market risk relating to these plans, we typically acquire, in a separate account that is not restricted as to its use, similar or identical investments as those selected by each officer or non-employee director. This enables us to generally match our liabilities to BXP’s officers or former non-employee directors under our deferred compensation plans with equivalent assets and thereby limit our market risk. The performance of these investments is recorded as gains from investments in securities. During the three months ended March 31, 2024 and 2023, we recognized gains of approximately $2.3 million and $1.7 million, respectively, on these investments. By comparison, our general and administrative expense increased by approximately $2.3 million and $1.7 million during the three months ended March 31, 2024 and 2023, respectively, as a result of increases in our liability under our deferred compensation plans that was associated with the performance of the specific investments selected by officers and former non-employee directors of BXP participating in the plans.

Unrealized Gain on Non-Real Estate Investment

We invest in non-real estate investments, which are primarily environmentally-focused investment funds. As a result, for the three months ended March 31, 2024 and 2023, we recognized an unrealized gain of approximately $0.4 million and $0.3 million, respectively, due to the observable changes in the fair value of the investments.

Impairment Loss

At March 31, 2024, we evaluated the expected hold period for a portion of our Shady Grove property located in Rockville, Maryland. Based on a shorter-than-expected hold period, we reduced the carrying value of a portion of the property that we anticipate selling to a third party developer to its estimated fair value at March 31, 2024. As a result, each of BXP and BPLP recognized an impairment loss of approximately $13.6 million. Our estimated fair value was based on Level 3 inputs as defined in ASC 820 and on a pending offer from a third party.

Interest Expense

Interest expense increased by approximately $27.7 million for the three months ended March 31, 2024 compared to 2023, as detailed below.

ComponentChange in interest expense for the three months ended March 31, 2024 compared to March 31, 2023
(in thousands)
Increases to interest expense due to:
New mortgage loan financings (1)$20,598
Issuance of $750 million in aggregate principal of 6.500% senior notes due 2034 on May 15, 202312,227
Increase in interest due to finance leases2,291
Decrease in capitalized interest related to development projects1,262
Amortization expense of financing fees481
Total increases to interest expense36,859
Decreases to interest expense due to:
Repayment of $700 million in aggregate principal of 3.800% senior notes due 2024 on February 1, 2024(4,471)
Repayment of $500 million in aggregate principal of 3.125% senior notes due 2023 on September 1, 2023(3,991)
Decrease in interest associated with unsecured term loans and the unsecured credit facility, net(709)
Other interest expense (excluding senior notes)(4)
Total decreases to interest expense(9,175)
Total change in interest expense$27,684

(1) Consists of the mortgage loan collateralized by the 325 Main Street, 355 Main Street, 90 Broadway and Cambridge East Garage (also known as Kendall Center Green Garage) properties located in Cambridge, Massachusetts, and the mortgage loan and fair value debt and swap adjustments for Santa Monica Business Park located in Santa Monica, California and 901 New York Avenue in Washington, DC (See Note 6 to the Consolidated Financial Statements).

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, 2024 and 2023 was approximately $9.4 million and $10.6 million, respectively. These costs are not included in the interest expense referenced above.

At March 31, 2024, our variable rate debt consisted of (1) BPLP’s $1.815 billion 2021 Credit Facility, (2) BPLP’s $1.2 billion 2023 Unsecured Term Loan and (3) $900 million of mortgage notes collateralized by Santa Monica Business Park and our 325 Main Street, 355 Main Street, 90 Broadway and Kendall Center Green Garage properties. As of March 31, 2024, the 2021 Credit Facility did not have a balance outstanding. The other variable rate debt has all been hedged with interest rates swaps to fix SOFR for all, or a portion of the applicable debt term. For a summary of our consolidated debt as of March 31, 2024 refer to the heading “Liquidity and Capital Resources—Debt Financing” within “Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Noncontrolling Interests in Property Partnerships

Noncontrolling interests in property partnerships decreased by approximately $1.4 million for the three months ended March 31, 2024 compared to 2023, as detailed below.

PropertyNoncontrolling Interests in Property Partnerships for the three months ended March 31,
20242023Change
(in thousands)
767 Fifth Avenue (the General Motors Building)$2,849$2,403$446
Times Square Tower5,2825,683(401)
601 Lexington Avenue (1)2,1034,011(1,908)
100 Federal Street2,9012,81289
Atlantic Wharf Office Building4,0713,751320
343 Madison Avenue (2)———
300 Binney Street (3)5—5
290 Binney Street (4)10—10
$17,221$18,660$(1,439)

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

(2)Property is held for future development.

(3)Property is currently under redevelopment.

(4)Property is currently in development (See Note 9 to the Consolidated Financial Statements).

Noncontrolling Interest—Common Units of the Operating Partnership

For BXP, noncontrolling interest—common units of the Operating Partnership increased by approximately $0.4 million for the three months ended March 31, 2024 compared to 2023 due primarily to an increase in allocable income. 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 the $700.0 million outstanding on the 2023 Unsecured Term Loan, the maturity date of which we intend to extend to May 16, 2025, $850.0 million of 3.200% unsecured senior notes due January 15, 2025 and amounts that become due under BPLP’s commercial paper program;

  • fund development and redevelopment costs;

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

  • fund possible acquisitions of properties, either directly or indirectly through the acquisition of equity interests; 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 2021 Credit 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 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, funding from institutional private equity partners, construction loans, unsecured term loans, and proceeds from possible asset sales, BPLP’s 2021 Credit Facility and BPLP's commercial paper program. We use BPLP’s 2021 Credit 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, whether the project is owned by a joint venture, 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, 2024 (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, 2024 (1)Estimated Future Equity Requirement (1)(2)(4)Percentage Leased (5)
Office
360 Park Avenue South (71% ownership) (Redevelopment)Q4 2025New York, NY1450,000$332,077$418,300$156,470$156,470$86,22323%
Reston Next Office Phase IIQ4 2025Reston, VA190,00040,95661,000——20,0444%
Total Office Properties under Construction/Redevelopment2540,000373,033479,300156,470156,470106,26720%
Laboratory/Life Sciences
103 CityPointQ4 2025Waltham, MA1113,00089,274115,100——25,826—%(6)
180 CityPointQ3 2025Waltham, MA1329,000224,356290,500——66,14443%(7)
300 Binney Street (55% ownership) (Redevelopment)Q1 2025Cambridge, MA1236,0005,211112,900——107,689100%(8)
651 Gateway (50% ownership) (Redevelopment)Q4 2025South San Francisco, CA1327,000116,103167,100——50,99721%(9)
290 Binney Street (55% ownership)Q2 2026Cambridge, MA1566,000205,977508,000——302,023100%(10)
Total Laboratory/Life Sciences Properties under Construction/Redevelopment51,571,000640,9211,193,600——552,67964%
Residential
Skymark - Reston Next Residential (508 units) (20% ownership)Q2 2026Reston, VA1417,00036,74447,70028,00018,1531,1093%
121 Broadway Street (439 units)Q2 2029Cambridge, MA1492,00045,891597,800——551,909—%
Total Residential Property under Construction2909,00082,635645,50028,00018,153553,0181%
Retail
760 Boylston Street (Redevelopment)Q2 2024Boston, MA1118,00033,05143,800——10,749100%
Reston Next RetailQ4 2025Reston, VA133,00022,80926,600——3,791—%
Total Retail Properties under Construction/Redevelopment2151,00055,86070,400——14,54078%
Total Properties under Construction/Redevelopment113,171,000$1,152,449$2,388,800$184,470$174,623$1,226,50454%(11)

(1)Represents our share.

(2)Each of Investment to Date, Estimated Total Investment and Estimated Future Equity Requirement represent our share of acquisition expenses, as applicable, and reflect our share of the estimated net revenue/expenses that we expect to incur prior to stabilization of the project, including any amounts actually received or paid through March 31, 2024.

(3)Includes approximately $73.6 million of unpaid but accrued construction costs and leasing commissions.

(4)Excludes approximately $73.6 million of unpaid but accrued construction costs and leasing commissions.

(5)Represents percentage leased as of May 2, 2024, including leases with future commencement dates.

(6)As of March 31, 2024, this property was 4% placed in-service.

(7)As of March 31, 2024, this property was 46% placed in-service.

(8)The institutional investor funded approximately $212.9 million at closing for its investment in 300 Binney Street. We withdrew approximately $212.9 million at closing and will fund all future costs of the project.

(9)As of March 31, 2024, this property was 14% placed in-service.

(10)On March 21, 2024, we completed the sale of a 45% interest in 290 Binney Street (See Note 9 to the Consolidated Financial Statements). The project budget reflects our 55% share of joint venture costs related to 290 Binney Street. We have the sole obligation to construct an underground electrical vault for an estimated gross cost of $183.9 million. We have entered into a contract to sell the electrical vault to a third party for a fixed price of $84.1 million upon completion. The net investment of $99.8 million will be included in our outside basis in 290 Binney Street. We have invested $40.5 million for the vault as of March 31, 2024.

(11)Percentage leased excludes the residential properties.

Lease revenue (which includes reimbursement of operating expenses from clients, if any), other income from operations, available cash balances, proceeds from mortgage financings, offerings of unsecured indebtedness and BPLP's commercial paper program, draws on BPLP’s 2021 Credit Facility, and funding from institutional private equity partners are the principal sources of capital that we use to fund operating expenses, debt service, development and redevelopment activities, 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, interest earned on cash deposits and, from time to time, the sale of assets. 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 our current and committed development and redevelopment projects, repay debt maturities (as discussed below), make interest payments on our outstanding indebtedness, and satisfy our REIT distribution requirements.

As of March 31, 2024, we had 11 properties under development or redevelopment. Our share of the estimated total investment for these projects is approximately $2.6 billion, of which approximately $1.4 billion remains to be funded primarily with equity through 2027. On April 5, 2024, we completed and fully placed into service 760 Boylston Street, an approximately 118,000 net rentable square foot retail redevelopment located in Boston, Massachusetts.

During the first quarter of 2024, we further strengthened our balance sheet through sourcing additional liquidity and reducing our debt obligations. Notable transactions include:

  • On February 1, 2024, BPLP repaid at maturity its 3.800% unsecured senior notes at par utilizing the proceeds from a $600.0 million mortgage loan entered into on October 26, 2023 and available cash. The repayment price was approximately $713.3 million, which included the stated principal of $700 million plus approximately $13.3 million of accrued and unpaid interest.

  • On April 16, 2024, BPLP provided notice to exercise its one-year extension option on its 2023 Unsecured Term Loan. BPLP anticipates effectuating the extension on or prior to the current May 16, 2024 maturity date. Upon effectiveness, the 2023 Unsecured Term Loan will mature on May 16, 2025. After making an approximately $500.0 million optional repayment on April 29, 2024 with the proceeds from BPLP's commercial paper program, the 2023 Unsecured Term Loan has an outstanding principal balance of $700.0 million.

  • On April 17, 2024, BPLP established an unsecured commercial paper program. Under the terms of the program, BPLP may issue, from time to time, unsecured commercial paper notes up to a maximum aggregate amount outstanding at any one time of $500.0 million with varying maturities of up to one year. The notes will be sold in private placements and will rank pari passu with all of BPLP’s other unsecured senior indebtedness, including its outstanding senior notes. The commercial paper program is backstopped by available capacity under the 2021 Credit Facility. As of May 2, 2024, BPLP had $500.0 million outstanding under the commercial paper program that bears interest at a weighted-average rate of 5.58% per annum.

  • On April 29, 2024, BPLP increased the current maximum borrowing amount under the 2021 Credit Facility from $1.815 billion to $2.0 billion. All other terms of the 2021 Credit Facility, including its maturity date of June 15, 2026, remain unchanged. BPLP had no borrowings under the 2021 Credit Facility as of May 2, 2024.

Our consolidated debt maturities through May 2025 include (1) $850.0 million aggregate principal amount of BPLP’s 3.200% unsecured senior notes due January 15, 2025, (2) $700.0 million 2023 Unsecured Term Loan that matures on May 16, 2025 upon effectiveness of our extension option, (3) approximately $202.2 million of mortgage debt secured by our 901 New York Avenue property located in Washington, DC maturing on January 5, 2025 (unless we exercise a four-year extension option, subject to certain conditions) and (4) amounts that become due under BPLP’s commercial paper program.

As of March 31, 2024, our unconsolidated joint venture portfolio have approximately $469.0 million (our share) of debt maturing through May 2, 2025. We expect to fund the foregoing debt maturities using available cash

balances, proceeds from asset sales, draws on BPLP’s 2021 Credit Facility, proceeds from BPLP’s commercial paper program, secured debt or unsecured debt, or both. We expect our net interest expense will increase in 2024 compared to 2023 primarily due to higher interest rates on outstanding debt and debt that we refinance, the impact of non-cash interest charges related to recent acquisitions, which included the assumption of below market debt, and lower interest income as we use cash balances to repay debt and fund our development pipeline.

As of May 2, 2024, we had available cash of approximately $502.5 million (of which approximately $125.9 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 $2.0 billion available under BPLP’s 2021 Credit Facility, of which $500.0 million is being used as a backstop for the commercial paper program, and our available cash, as of May 2, 2024, are sufficient to fund our remaining capital needs on existing development and redevelopment projects, fund acquisitions, repay our maturing indebtedness when due (if not refinanced or extended), 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 public and private debt and 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 would increase our net interest expense.

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

REIT Tax Distribution Considerations

Dividend

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

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 $766.6 million and $964.3 million at March 31, 2024 and 2023, respectively, representing a decrease of approximately $197.6 million. The following table sets forth changes in cash flows:

Three months ended March 31,
20242023Change
(in thousands)
Net cash provided by operating activities$197,595$234,010$(36,415)
Net cash used in investing activities(286,619)(285,592)(1,027)
Net cash (used in) provided by financing activities(756,909)279,052(1,035,961)

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, 2024, with occupancy rates historically in the range of 88% to 92%. 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, 2024 and March 31, 2023 is detailed below:

Three months ended March 31,
20242023
(in thousands)
Construction in progress (1)$(181,636)$(119,682)
Building and other capital improvements(32,087)(39,100)
Tenant improvements(53,377)(67,175)
Acquisition of real estate (net of cash received upon consolidation) (2)6,086—
Capital contributions to unconsolidated joint ventures (3)(26,457)(60,745)
Investment in non-real estate investments—(733)
Issuance of note receivables (including related party)(573)—
Investments in securities, net1,4251,843
Net cash used in investing activities$(286,619)$(285,592)

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

(1)Construction in progress for the three months ended March 31, 2024 included ongoing expenditures associated with 180 CityPoint and 103 CityPoint that were partially placed in-service during 2023. In addition, we incurred costs associated with our continued development/redevelopment of Reston Next Office Phase II, 760 Boylston Street, 290 Binney Street, 300 Binney Street and 121 Broadway.

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.

(2)On January 8, 2024, we completed the acquisition of our joint venture partner’s 50% economic ownership interest in the joint venture that owns 901 New York Avenue, located in Washington, DC, for a gross purchase price of $10.0 million and we acquired net working capital, including cash and cash equivalents of approximately $16.1 million.

(3)Capital contributions to unconsolidated joint ventures for the three months ended March 31, 2024 consisted primarily of cash contributions of approximately $9.9 million, $6.7 million and $5.7 million to our Gateway Commons, 360 Park Avenue South and Platform 16 joint ventures, respectively.

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.

Cash used by financing activities for the three months ended March 31, 2024 totaled approximately $756.9 million. This amount consisted primarily of the repayment of BPLP’s $700 million in aggregate principal amount of its 3.800% unsecured senior notes due February 1, 2024 and payment of our regular dividends and distributions to our shareholders and unitholders and distributions to noncontrolling interests in property partnerships, partially offset by the approximately $97.2 million from the sale of a 45% interest in 290 Binney Street in Cambridge, Massachusetts. 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, 2024
Shares / Units OutstandingCommon Stock EquivalentEquivalent Value (1)
Common Stock157,049157,049$10,256,870
Common Operating Partnership Units19,15919,1591,251,274(2)
Total Equity176,208$11,508,144
Consolidated Debt$15,362,324
Add:
BXP’s share of unconsolidated joint venture debt (3)1,373,986
Subtract:
Partners’ share of Consolidated Debt (4)1,360,873
BXP’s Share of Debt$15,375,437
Consolidated Market Capitalization$26,870,468
BXP’s Share of Market Capitalization$26,883,581
Consolidated Debt/Consolidated Market Capitalization57.17%
BXP’s Share of Debt/BXP’s Share of Market Capitalization57.19%

(1)Values are based on the closing price per share of BXP’s common stock on the New York Stock Exchange on March 28, 2024 of $65.31.

(2)Includes long-term incentive plan units (including 2012 OPP Units and 2013 - 2021 MYLTIP Units) but excludes the 2022 - 2024 MYLTIP Units because the three-year performance periods had not ended as of March 31, 2024.

(3)See page 73 for additional information.

(4)See page 71 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 28, 2024, 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 - 2021 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, 2022 - 2024 MYLTIP Units are not included in this calculation as of March 31, 2024.

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, 2024, we had approximately $15.4 billion of outstanding consolidated indebtedness, representing approximately 57.17% of our Consolidated Market Capitalization as calculated above consisting of approximately (1) $9.8 billion (net of discount and deferred financing fees) in publicly traded unsecured senior notes having a GAAP weighted-average interest rate of 3.91% per annum and maturities in 2025 through 2034, (2) $4.4 billion (net of deferred financing fees and fair value interest adjustments) of property-specific mortgage debt having

a GAAP weighted-average interest rate of 4.22% per annum and a weighted-average term of 4.2 years and (3) $1.2 billion outstanding under BPLP’s 2023 Unsecured Term Loan that matures on May 16, 2024 (See Note 14 to the Consolidated Financial Statements).

The table below summarizes the aggregate carrying value of our outstanding indebtedness, as well as Consolidated Debt Financing Statistics at March 31, 2024 and March 31, 2023.

March 31,
20242023
(dollars in thousands)
Debt Summary:
Balance
Mortgage notes payable, net$4,368,367$3,273,553
Unsecured senior notes, net9,794,52710,240,967
Unsecured line of credit——
Unsecured term loan, net1,199,4301,194,916
Consolidated Debt15,362,32414,709,436
Add:
BXP’s share of unconsolidated joint venture debt, net (1)1,373,9861,604,852
Subtract:
Partners’ share of consolidated mortgage notes payable, net (2)1,360,8731,358,881
BXP’s Share of Debt$15,375,437$14,955,407
March 31,
20242023
Consolidated Debt Financing Statistics:
Percent of total debt:
Fixed rate (3)100.00%91.88%
Variable rate—%8.12%
Total100.00%100.00%
GAAP Weighted-average interest rate at end of period:
Fixed rate (3)4.17%3.62%
Variable rate—%5.87%
Total4.17%3.81%
Coupon/Stated Weighted-average interest rate at end of period:
Fixed rate (3)3.93%3.51%
Variable rate—%5.49%
Total3.93%3.67%
Weighted-average maturity at end of period (in years):
Fixed rate (3)4.65.4
Variable rate—1.1
Total4.65.0

(1)See page 73 for additional information.

(2)See page 71 for additional information.

(3)At March 31, 2024, the $1.2 billion 2023 Unsecured Term Loan and two of our mortgage loans aggregating approximately $900.0 million bore interest at variable rates. We entered into interest rate swap contracts that effectively fixed the variability of these loans for all or a portion of the applicable debt term and as such, they are reflected in our Fixed rate statistics.

Unsecured Credit Facility

The 2021 Credit Facility provides for borrowings of up to $2.0 billion, as described below, subject to customary conditions. The 2021 Credit Facility matures on June 15, 2026 and includes 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 (the “Accordion”). On September 28, 2023, BPLP exercised a portion of the Accordion which increased the maximum borrowing amount under the 2021 Credit Facility from $1.5 billion to $1.815 billion. On April 29, 2024, BPLP exercised the remainder of the Accordian and increased the maximum borrowing amount under the 2021 Credit Facility from $1.815 billion to $2.0 billion. All other terms of the 2021 Credit Facility remain unchanged.

At BPLP’s option, loans under the 2021 Credit Facility will bear interest at a rate per annum equal to (1) (a) in

the case of loans denominated in Dollars, Term SOFR and SOFR, (b) in the case of loans denominated in Euro,

EURIBOR, (c) in the case of loans denominated in Canadian Dollars, CDOR, and (d) in the case of loans

denominated in Sterling, SONIA, in each case, plus a margin ranging from 70.0 to 140.0 basis points based on

BPLP’s credit rating or (2) an alternate 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 plus 1.00%, and (d) 1.00%, in each case, plus a margin

ranging from 0 to 40 basis points based on BPLP’s credit rating. In addition, there is a SOFR credit spread adjustment of 0.10%.

Based on BPLP’s March 31, 2024 credit rating, (1) the applicable Daily SOFR, Term SOFR, alternative currency daily rate, and alternative currency term rate margins are 0.850%, (2) the alternate base rate margin is zero basis points and (3) the facility fee is 0.20% per annum.

At March 31, 2024, BPLP had no borrowings under its 2021 Credit Facility and outstanding letters of credit totaling approximately $6.7 million, with the ability to borrow approximately $1.8 billion. At May 2, 2024, BPLP had no borrowings under its 2021 Credit Facility and outstanding letters of credit totaling approximately $6.6 million, with the ability to borrow approximately $2.0 billion, of which $500.0 million is being used as a backstop for the commercial paper program.

Unsecured Term Loan

The 2023 Unsecured Term Loan provided for a single borrowing of up to $1.2 billion. Upon entry into the credit agreement in January 2023, 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 BPLP’s $730.0 million unsecured term loan (the “2022 Unsecured Term Loan”), which was scheduled to mature on May 16, 2023. Under the credit agreement governing the 2023 Unsecured Term Loan, 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.

On April 16, 2024, BPLP provided notice to exercise its one-year extension option on the 2023 Unsecured Term Loan. BPLP anticipates effectuating the extension on or prior to the current May 16, 2024 maturity date. Upon effectiveness, the 2023 Unsecured Term Loan will mature on May 16, 2025.

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 May 2, 2023, BPLP executed interest rate swaps in notional amounts aggregating $1.2 billion. These interest rate swaps were entered into to fix Term SOFR, at a weighted-average rate of 4.6420% for the period commencing on May 4, 2023 and ending on May 16, 2024 (See Note 7 to the Consolidated Financial Statements).

Based on BPLP’s March 31, 2024 credit rating, the 2023 Unsecured Term Loan bears interest at a rate equal to adjusted Term SOFR plus 0.95% per annum. At March 31, 2024, BPLP had $1.2 billion outstanding under the 2023 Unsecured Term Loan. After making an approximately $500.0 million optional repayment on April 29, 2024, the 2023 Unsecured Term Loan has an outstanding principal balance of $700.0 million as of May 2, 2024.

Unsecured Senior Notes

For a description of BPLP’s outstanding unsecured senior notes as of March 31, 2024, see Note 6 to the Consolidated Financial Statements.

On February 1, 2024, BPLP repaid $700.0 million in aggregate principal amount of its 3.800% senior notes due February 1, 2024. The repayment was completed with available cash and the $600.0 million proceeds from the mortgage loan entered into on October 26, 2023. The repayment price was approximately $713.3 million, which was equal to the stated principal plus approximately $13.3 million of accrued and unpaid interest to, but not including, the repayment date. Excluding the accrued and unpaid interest, the repayment price was equal to the principal amount being repaid.

Commercial Paper Program

On April 17, 2024, BPLP established an unsecured commercial paper program. Under the terms of the program, BPLP may issue, from time to time, unsecured commercial paper notes up to a maximum aggregate amount outstanding at any one time of $500 million with varying maturities of up to one year. The notes will be sold in private placements and will rank pari passu with all of BPLP’s other unsecured senior indebtedness, including its outstanding senior notes. The commercial paper program is backstopped by available capacity under BPLP's 2021 Credit Facility. As of May 2, 2024, BPLP had $500.0 million outstanding under its commercial paper program that bears interest at a weighted-average rate of 5.58% per annum. Proceeds from the commercial paper program were used to reduce BPLP’s 2023 Unsecured Term Loan to $700.0 million.

Mortgage Notes Payable

On January 8, 2024, we completed the acquisition of our joint venture partner’s 50% economic ownership interest in the joint venture that owns 901 New York Avenue located in Washington, DC (See Note 3 to the Consolidated Financial Statements). The property is subject to existing mortgage indebtedness. At acquisition, the mortgage loan had an outstanding balance of approximately $207.1 million, bore interest at 3.61% per annum and was scheduled to mature on January 5, 2025. The mortgage loan was recorded at fair value of approximately $198.7 million. On January 11, 2024, we modified the mortgage loan to provide for two extension options totaling five years of additional term, each subject to certain conditions.

The following represents the outstanding mortgage notes payable, net at March 31, 2024:

PropertiesStated Interest RateGAAP Interest Rate (1)Stated Principal AmountFair Value Adjustment and Deferred Financing Costs, NetCarrying AmountCarrying Amount (Partners’ Share)Maturity Date
(dollars in thousands)
Wholly-owned
901 New York Avenue3.61%7.69%$206,289$(6,530)$199,759N/A(2)January 5, 2025
Santa Monica Business Park4.06%6.53%300,000(3,649)296,351N/A(3)(4)July 19, 2025
90 Broadway, 325 Main Street, 355 Main Street, and Cambridge East Garage (also known as Kendall Center Green Garage)6.04%6.26%600,000(6,139)593,861N/A(3)(5)October 26, 2028
Subtotal1,106,289(16,318)1,089,971N/A
Consolidated Joint Ventures
767 Fifth Avenue (the General Motors Building)3.43%3.64%2,300,000(11,122)2,288,878$915,590(3)(6)(7)June 9, 2027
601 Lexington Avenue2.79%2.93%1,000,000(10,482)989,518445,283(3)(8)January 9, 2032
Subtotal3,300,000(21,604)3,278,3961,360,873
Total$4,406,289$(37,922)$4,368,367$1,360,873

(1)The GAAP interest rate differs from the stated interest rate due to the inclusion of the amortization of financing charges, the effects of hedging transactions (if any) and adjustments required under Accounting Standards Codification 805 “Business Combinations” to reflect loans and swaps at their fair values (if any).

(2)Deferred financing costs, net includes an approximately $6.5 million fair value interest adjustment. The loan includes two extension options, subject to certain conditions.

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

(4)The mortgage loan bears interest at a variable rate of SOFR plus 1.38% per annum. The borrower under the loan entered into three interest rate swap contracts with notional amounts aggregating $300.0 million to fix SOFR at a weighted-average fixed interest rate of 2.679% for the period commencing on February 1, 2023 and ending on April 1, 2025. Stated interest rate reflects the weighted average fixed interest rate based on the interest rate swap contracts plus 1.38% per annum. Deferred financing costs, net includes an approximately $3.6 million fair value interest adjustment and excludes the adjustment required to reflect the interest rate swap at fair value upon acquisition of approximately $5.7 million.

(5)The mortgage loan bears interest at a variable rate of Daily Compounded SOFR plus 2.25% per annum. On December 7, 2023, BPLP entered into three interest rate swap contracts with notional amounts aggregating $600.0 million to fix Daily Compounded SOFR at a weighted-average fixed interest rate of 3.7925% for the period commencing on December 15, 2023 and ending on October 26, 2028. Stated interest rate reflects the weighted average fixed interest rate based on the interest rate swap contracts plus 2.25% per annum.

(6)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.

(7)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, 2024, the maximum funding obligation under the guarantee was approximately $8.5 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 8 to the Consolidated Financial Statements).

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

Derivative Instruments and Hedging Activities

As of March 31, 2024, we had $2.1 billion of interest rate swaps outstanding, where hedge accounting was elected, with a fair value of approximately $12.3 million. For a description of these interest rate swaps, see Note 7 to the Consolidated Financial Statements.

Investment in Unconsolidated Joint Ventures - Secured Debt

We have investments in unconsolidated joint ventures with our effective ownership interests ranging from 20% to approximately 71%. Fourteen of these ventures have mortgage indebtedness. We exercise significant influence over, but do not control, these entities. As a result, we account for them using the equity method of accounting. See also Note 5 to the Consolidated Financial Statements. At March 31, 2024, the aggregate carrying amount of debt, including both our and our partners’ share, incurred by these ventures was approximately $3.2 billion (of which our proportionate share is approximately $1.4 billion). The table below summarizes the outstanding debt of these joint venture properties at March 31, 2024. 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)Term of Variable Rate + SpreadStated Principal AmountDeferred Financing Costs, NetCarrying AmountCarrying Amount (Our share)Maturity Date
(dollars in thousands)
360 Park Avenue South71.11%7.83%8.28%Adjusted Term SOFR + 2.40%$220,000$(705)$219,295$155,940(2)(3)(4)December 14, 2024
Market Square North50.00%7.73%7.91%SOFR + 2.41%125,000(368)124,63262,316(2)(3)(5)November 10, 2025
1265 Main Street50.00%3.77%3.84%N/A34,424(216)34,20817,104January 1, 2032
Colorado Center50.00%3.56%3.59%N/A550,000(601)549,399274,700(2)August 9, 2027
Dock 7250.00%7.83%8.09%SOFR +2.50%198,383(825)197,55898,779(2)(6)December 18, 2025
The Hub on Causeway - Podium50.00%7.35%7.75%Daily Simple SOFR + 2.50%154,329(887)153,44276,721(2)(3)(7)September 8, 2025
Hub50House50.00%4.43%4.51%SOFR + 1.35%185,000(1,120)183,88091,940(2)(8)June 17, 2032
100 Causeway Street50.00%6.80%6.94%SOFR + 1.48%333,579(203)333,376166,688(2)(3)September 5, 2024
7750 Wisconsin Avenue (Marriott International Headquarters)50.00%6.67%6.82%SOFR + 1.35%251,542(406)251,136125,568(2)April 26, 2025
Safeco Plaza33.67%4.82%7.73%SOFR + 2.32%250,000(822)249,17883,898(2)(9)September 1, 2026
500 North Capitol Street, NW30.00%6.83%7.16%N/A105,000(614)104,38631,178(2)(10)June 5, 2026
200 Fifth Avenue26.69%4.34%5.60%Term SOFR + 1.41%600,000(7,764)592,236151,190(2)(11)November 24, 2028
3 Hudson Boulevard25.00%9.04%9.04%Term SOFR + 3.61%80,000—80,00020,000(2)(12)May 9, 2024
Skymark - Reston Next Residential20.00%7.33%7.65%SOFR + 2.00%90,767(948)89,81917,964(2)(3)(13)May 13, 2026
Total$3,178,024$(15,479)$3,162,545$1,373,986

(1)The GAAP interest rate differs from the stated interest rate due to the inclusion of the amortization of financing costs, which includes mortgage recording fees, the effects of hedging transactions (if any) and adjustments required under Accounting Standards Codification 805 “Business Combinations” to reflect loans at their fair values (if any).

(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 spread on the variable rate may be reduced, subject to certain conditions.

(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 loan 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 joint venture entered into interest rate swap contracts with notional amounts aggregating $154.3 million through September 2, 2025, resulting in a fixed rate of approximately 7.35% per annum through the expiration of the interest rate swap contracts.

(8)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 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, 2024.

(10)The indebtedness consists of (x) a $70.0 million mortgage loan payable (Note A) which bears interest at a fixed rate of 6.23% per annum, and (y) a $35.0 million mortgage loan payable (Note B) which bears interest at a fixed rate of 8.03% per annum. We provided $10.5 million of the Note B mortgage financing to the joint venture. Our portion of the loan is reflected as Related Party Note Receivables, Net on our Consolidated Balance Sheets.

(11)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. The deferred financing costs, net include the adjustment required to reflect the loan and interest rate swap at fair value upon acquisition.

(12)We provided $80.0 million of mortgage financing to the joint venture. The loan is reflected as Related Party Note Receivables, Net on our Consolidated Balance Sheets. As of March 31, 2024, the loan has approximately $30.4 million of accrued interest due at the maturity date.

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

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 8 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 attributable to Boston Properties, Inc. and net income attributable to Boston Properties Limited Partnership (computed in accordance with GAAP), respectively, for gains (or losses) from sales of properties, including a change in control, 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 a useful measure for understanding and comparing our operating results because, by excluding gains and losses related to sales or a change in control 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, 2024 and 2023:

Three months ended March 31,
20242023
(in thousands)
Net income attributable to Boston Properties, Inc.$79,883$77,890
Add:
Noncontrolling interest—common units of the Operating Partnership9,5009,078
Noncontrolling interests in property partnerships17,22118,660
Net income106,604105,628
Add:
Depreciation and amortization218,716208,734
Noncontrolling interests in property partnerships’ share of depreciation and amortization(18,695)(17,711)
BXP’s share of depreciation and amortization from unconsolidated joint ventures20,22325,645
Corporate-related depreciation and amortization(419)(469)
Non-real estate depreciation and amortization2,130—
Impairment loss13,615—
Less:
Gain (loss) on sale / consolidation included within loss from unconsolidated joint ventures21,696—
Unrealized gain on non-real estate investment396259
Noncontrolling interests in property partnerships17,22118,660
Funds from Operations (FFO) attributable to the Operating Partnership common unitholders (including Boston Properties, Inc.)302,861302,908
Less:
Noncontrolling interest—common units of the Operating Partnership’s share of funds from operations31,58830,957
Funds from Operations attributable to Boston Properties, Inc.$271,273$271,951
Our percentage share of Funds from Operations—basic89.57%89.78%
Weighted average shares outstanding—basic156,983156,803

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, 2024 and 2023:

Three months ended March 31,
20242023
(in thousands)
Net income attributable to Boston Properties, Inc.$79,883$77,890
Add:
Noncontrolling interest—common units of the Operating Partnership9,5009,078
Noncontrolling interests in property partnerships17,22118,660
Net income106,604105,628
Add:
Depreciation and amortization218,716208,734
Noncontrolling interests in property partnerships’ share of depreciation and amortization(18,695)(17,711)
BXP’s share of depreciation and amortization from unconsolidated joint ventures20,22325,645
Corporate-related depreciation and amortization(419)(469)
Non-real estate depreciation and amortization2,130—
Impairment loss13,615—
Less:
Gain (loss) on sale / consolidation included within loss from unconsolidated joint ventures21,696—
Unrealized gain on non-real estate investment396259
Noncontrolling interests in property partnerships17,22118,660
Funds from Operations (FFO) attributable to the Operating Partnership common unitholders (including Boston Properties, Inc.)302,861302,908
Effect of Dilutive Securities:
Stock based compensation——
Diluted FFO302,861302,908
Less:
Noncontrolling interest—common units of the Operating Partnership’s share of diluted FFO31,55830,927
Diluted FFO attributable to Boston Properties, Inc. (1)$271,303$271,981

(1)BXP’s share of diluted Funds from Operations was 89.58% and 89.79% for the three months ended March 31, 2024 and 2023, respectively.

Three months ended March 31,
20242023
shares/units (in thousands)
Basic Funds from Operations175,255174,652
Effect of Dilutive Securities:
Stock based compensation149240
Diluted Funds from Operations175,404174,892
Less:
Noncontrolling interest—common units of the Operating Partnership’s share of diluted Funds from Operations18,27217,849
Diluted Funds from Operations attributable to Boston Properties, Inc. (1)157,132157,043

(1)BXP’s share of diluted Funds from Operations was 89.58% and 89.79% for the three months ended March 31, 2024 and 2023, 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, 2024 and 2023:

Three months ended March 31,
20242023
(in thousands)
Net income attributable to Boston Properties Limited Partnership$91,080$88,830
Add:
Noncontrolling interests in property partnerships17,22118,660
Net income108,301107,490
Add:
Depreciation and amortization217,019206,872
Noncontrolling interests in property partnerships’ share of depreciation and amortization(18,695)(17,711)
BXP’s share of depreciation and amortization from unconsolidated joint ventures20,22325,645
Corporate-related depreciation and amortization(419)(469)
Non-real estate depreciation and amortization2,130—
Impairment loss13,615—
Less:
Gain (loss) on sale / consolidation included within loss from unconsolidated joint ventures21,696—
Unrealized gain on non-real estate investment396259
Noncontrolling interests in property partnerships17,22118,660
Funds from Operations attributable to Boston Properties Limited Partnership (1)$302,861$302,908
Weighted average shares outstanding—basic175,255174,652

(1)Our calculation includes OP Units and vested LTIP Units (including vested 2012 OPP Units and vested 2013 - 2021 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, 2024 and 2023:

Three months ended March 31,
20242023
(in thousands)
Net income attributable to Boston Properties Limited Partnership$91,080$88,830
Add:
Noncontrolling interests in property partnerships17,22118,660
Net income108,301107,490
Add:
Depreciation and amortization217,019206,872
Noncontrolling interests in property partnerships’ share of depreciation and amortization(18,695)(17,711)
BXP’s share of depreciation and amortization from unconsolidated joint ventures20,22325,645
Corporate-related depreciation and amortization(419)(469)
Non-real estate depreciation and amortization2,130—
Impairment loss13,615—
Less:
Gain (loss) on sale / consolidation included within loss from unconsolidated joint ventures21,696—
Unrealized gain on non-real estate investment396259
Noncontrolling interests in property partnerships17,22118,660
Funds from Operations attributable to Boston Properties Limited Partnership (1)302,861302,908
Effect of Dilutive Securities:
Stock based compensation——
Diluted Funds from Operations attributable to Boston Properties Limited Partnership$302,861$302,908

(1)Our calculation includes OP Units and vested LTIP Units (including vested 2012 OPP Units and vested 2013 - 2021 MYLTIP Units).

Three months ended March 31,
20242023
shares/units (in thousands)
Basic Funds from Operations175,255174,652
Effect of Dilutive Securities:
Stock based compensation149240
Diluted Funds from Operations175,404174,892

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, 2024, we paid approximately $83.0 million to fund tenant-related obligations, including tenant improvements and leasing commissions.

In addition, during the three months ended March 31, 2024, we and our unconsolidated joint venture partners incurred approximately $117.6 million of new tenant-related obligations associated with approximately 825,700 square feet of second generation leases, or approximately $142 per square foot. We signed approximately 68,200

square feet of first generation leases. The tenant-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 2024, we signed leases for approximately 893,900 square feet of space and incurred aggregate tenant-related obligations of approximately $129.6 million, or approximately $145 per square foot.

Previous: Item 1. Financial Statements. · Next: Item 3. Quantitative and Qualitative Disclosures about Market Risk.