BXP, Inc. 10-Q

ITEM 1—Financial Statements. BOSTON PROPERTIES, INC. CONSOLIDATED BALANCE SHEETS (Unaudited and in thousands, except for share and par value amounts) June 30, 2020 December 31, 2019 ASSETS Real estate, at cost (amounts related to variable interest entities (“VIEs”) of $ 6,581,689 and $ 6,497,031 at June 30, 2020 and December 31, 2019, respectively) $ 22,575,903 $ 22,502,976 Right of use assets - finance leases (amounts related to VIEs of $ 21,000 and $ 21,000 at June 30, 2020 and December 31, 2019, respectively) 237,394 237,394 Right of use assets - operating leases 147,512 148,640 Less: accumulated depreciation (amounts related to VIEs of $( 1,112,769 ) and $( 1,058,495 ) at June 30, 2020 and December 31, 2019, respectively) ( 5,292,389 ) ( 5,266,798 ) Total real estate 17,668,420 17,622,212 Cash and cash equivalents (amounts related to VIEs of $ 300,552 and $ 280,033 at June 30, 2020 and December 31, 2019, respectively) 1,691,047 644,950 Cash held in escrows 300,608 46,936 Investments in securities 32,848 36,747 Tenant and other receivables, net (amounts related to VIEs of $ 11,989 and $ 28,918 at June 30, 2020 and December 31, 2019, respectively) 82,545 112,807 Related party note receivable, net 78,520 80,000 Notes receivable, net 25,480 15,920 Accrued rental income, net (amounts related to VIEs of $ 304,929 and $ 298,318 at June 30, 2020 and December 31, 2019, respectively) 1,069,004 1,038,788 Deferred charges, net (amounts related to VIEs of $ 190,708 and $ 214,769 at June 30, 2020 and December 31, 2019, respectively) 655,813 689,213 Prepaid expenses and other assets (amounts related to VIEs of $ 18,741 and $ 20,931 at June 30, 2020 and December 31, 2019, respectively) 56,768 41,685 Investments in unconsolidated joint ventures 1,339,724 955,647 Total assets $ 23,000,777 $ 21,284,905 LIABILITIES AND EQUITY Liabilities: Mortgage notes payable, net (amounts related to VIEs of $ 2,913,287 and $ 2,918,806 at June 30, 2020 and December 31, 2019, respectively) $ 2,915,852 $ 2,922,408 Unsecured senior notes, net 9,633,577 8,390,459 Unsecured line of credit — — Unsecured term loan, net 499,150 498,939 Lease liabilities - finance leases (amounts related to VIEs of $ 20,227 and $ 20,189 at June 30, 2020 and December 31, 2019, respectively) 230,146 224,042 Lease liabilities - operating leases 200,979 200,180 Accounts payable and accrued expenses (amounts related to VIEs of $ 25,685 and $ 45,777 at June 30, 2020 and December 31, 2019, respectively) 328,292 377,553 Dividends and distributions payable 171,077 170,713 Accrued interest payable 95,274 90,016 Other liabilities (amounts related to VIEs of $ 132,460 and $ 140,110 at June 30, 2020 and December 31, 2019, respectively) 373,281 387,994 Total liabilities 14,447,628 13,262,304 Commitments and contingencies — — Redeemable deferred stock units— 66,424 and 60,676 units outstanding at redemption value at June 30, 2020 and December 31, 2019, respectively 6,003 8,365 1 Table of Content s BOSTON PROPERTIES, INC. CONSOLIDATED BALANCE SHEETS (Unaudited and in thousands, except for share and par value amounts) June 30, 2020 December 31, 2019 Equity: Stockholders’ equity attributable to Boston Properties, Inc.: Excess stock, $ 0.01 par value, 150,000,000 shares authorized, none issued or outstanding — — Preferred stock, $ 0.01 par value, 50,000,000 shares authorized; 5.25 % Series B cumulative redeemable preferred stock, $ 0.01 par value, liquidation preference $ 2,500 per share, 92,000 shares authorized, 80,000 shares issued and outstanding at June 30, 2020 and December 31, 2019 200,000 200,000 Common stock, $ 0.01 par value, 250,000,000 shares authorized, 155,701,186 and 154,869,198 issued and 155,622,286 and 154,790,298 outstanding at June 30, 2020 and December 31, 2019, respectively 1,556 1,548 Additional paid-in capital 6,340,665 6,294,719 Dividends in excess of earnings ( 302,511 ) ( 760,523 ) Treasury common stock at cost, 78,900 shares at June 30, 2020 and December 31, 2019 ( 2,722 ) ( 2,722 ) Accumulated other comprehensive loss ( 54,921 ) ( 48,335 ) Total stockholders’ equity attributable to Boston Properties, Inc. 6,182,067 5,684,687 Noncontrolling interests: Common units of Boston Properties Limited Partnership 640,491 600,860 Property partnerships 1,724,588 1,728,689 Total equity 8,547,146 8,014,236 Total liabilities and equity $ 23,000,777 $ 21,284,905 The accompanying notes are an integral part of these consolidated financial statements. 2 Table of Content s BOSTON PROPERTIES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited and in thousands, except for per share amounts) Three months ended June 30, Six months ended June 30, 2020 2019 2020 2019 Revenue Lease $ 630,119 $ 680,189 $ 1,340,230 $ 1,359,440 Parking and other 13,946 26,319 38,450 51,225 Hotel 99 14,844 6,924 23,782 Development and management services 8,125 9,986 16,004 19,263 Direct reimbursements of payroll and related costs from management services contracts 2,484 2,403 5,721 5,798 Total revenue 654,773 733,741 1,407,329 1,459,508 Expenses Operating Rental 239,787 257,971 502,753 515,488 Hotel 1,973 9,080 8,794 16,943 General and administrative 37,743 35,071 74,197 76,833 Payroll and related costs from management services contracts 2,484 2,403 5,721 5,798 Transaction costs 332 417 947 877 Depreciation and amortization 178,188 177,411 349,282 342,005 Total expenses 460,507 482,353 941,694 957,944 Other income (expense) Income from unconsolidated joint ventures 1,832 47,964 1,463 48,177 Gains on sales of real estate 203,767 1,686 613,932 781 Interest and other income (loss) 1,305 3,615 4,322 7,368 Gains (losses) from investments in securities 4,552 1,165 ( 893 ) 4,134 Impairment loss — — — ( 24,038 ) Interest expense ( 107,142 ) ( 102,357 ) ( 208,733 ) ( 203,366 ) Net income 298,580 203,461 875,726 334,620 Net (income) loss attributable to noncontrolling interests Noncontrolling interests in property partnerships 767 ( 17,482 ) ( 18,719 ) ( 36,312 ) Noncontrolling interest—common units of the Operating Partnership ( 30,197 ) ( 19,036 ) ( 87,525 ) ( 30,627 ) Net income attributable to Boston Properties, Inc. 269,150 166,943 769,482 267,681 Preferred dividends ( 2,625 ) ( 2,625 ) ( 5,250 ) ( 5,250 ) Net income attributable to Boston Properties, Inc. common shareholders $ 266,525 $ 164,318 $ 764,232 $ 262,431 Basic earnings per common share attributable to Boston Properties, Inc. common shareholders: Net income $ 1.71 $ 1.06 $ 4.92 $ 1.70 Weighted average number of common shares outstanding 155,386 154,555 155,199 154,540 Diluted earnings per common share attributable to Boston Properties, Inc. common shareholders: Net income $ 1.71 $ 1.06 $ 4.91 $ 1.69 Weighted average number of common and common equivalent shares outstanding 155,407 154,874 155,333 154,859 The accompanying notes are an integral part of these consolidated financial statements. 3 Table of Content s BOSTON PROPERTIES, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited and in thousands) Three months ended June 30, Six months ended June 30, 2020 2019 2020 2019 Net income $ 298,580 $ 203,461 $ 875,726 $ 334,620 Other comprehensive income (loss): Effective portion of interest rate contracts ( 659 ) ( 4,426 ) ( 10,379 ) ( 7,054 ) Amortization of interest rate contracts (1) 1,677 1,666 3,343 3,332 Other comprehensive income (loss) 1,018 ( 2,760 ) ( 7,036 ) ( 3,722 ) Comprehensive income 299,598 200,701 868,690 330,898 Net income attributable to noncontrolling interests ( 29,430 ) ( 36,518 ) ( 106,244 ) ( 66,939 ) Other comprehensive (income) loss attributable to noncontrolling interests ( 239 ) 154 450 123 Comprehensive income attributable to Boston Properties, Inc. $ 269,929 $ 164,337 $ 762,896 $ 264,082 _______________ (1) Amounts reclassified from comprehensive income primarily to interest expense within Boston Properties, Inc.’s Consolidated Statements of Operations . The accompanying notes are an integral part of these consolidated financial statements. 4 Table of Content s BOSTON PROPERTIES, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited and in thousands) Common Stock Preferred Stock Additional Paid-in Capital Dividends in Excess of Earnings Treasury Stock, at cost Accumulated Other Comprehensive Loss Noncontrolling Interests - Common Units Noncontrolling Interests - Property Partnerships Total Shares Amount Equity, March 31, 2020 155,315 $ 1,553 $ 200,000 $ 6,321,475 $ ( 416,740 ) $ ( 2,722 ) $ ( 55,700 ) $ 636,572 $ 1,736,445 $ 8,420,883 Redemption of operating partnership units to common stock 303 3 — 10,846 — — — ( 10,849 ) — — Allocated net income (loss) for the period — — — — 269,361 — — 29,986 ( 767 ) 298,580 Dividends/distributions declared — — — — ( 155,132 ) — — ( 17,194 ) — ( 172,326 ) Net activity from stock option and incentive plan 4 — — 873 — — — 9,352 — 10,225 Contributions from noncontrolling interests in property partnerships — — — — — — — — 2,081 2,081 Distributions to noncontrolling interests in property partnerships — — — — — — — — ( 13,315 ) ( 13,315 ) Effective portion of interest rate contracts — — — — — — ( 601 ) ( 58 ) — ( 659 ) Amortization of interest rate contracts — — — — — — 1,380 153 144 1,677 Reallocation of noncontrolling interest — — — 7,471 — — — ( 7,471 ) — — Equity, June 30, 2020 155,622 $ 1,556 $ 200,000 $ 6,340,665 $ ( 302,511 ) $ ( 2,722 ) $ ( 54,921 ) $ 640,491 $ 1,724,588 $ 8,547,146 Equity, March 31, 2019 154,515 $ 1,545 $ 200,000 $ 6,414,612 $ ( 728,083 ) $ ( 2,722 ) $ ( 48,734 ) $ 623,061 $ 1,710,608 $ 8,170,287 Redemption of operating partnership units to common stock 21 1 — 719 — — — ( 720 ) — — Allocated net income for the period — — — — 166,951 — — 19,028 17,482 203,461 Dividends/distributions declared — — — — ( 149,460 ) — — ( 17,206 ) — ( 166,666 ) Net activity from stock option and incentive plan 27 — — 1,495 — — — 9,368 — 10,863 Acquisition of noncontrolling interest in property partnership — — — ( 162,505 ) — — — — ( 24,501 ) ( 187,006 ) Contributions from noncontrolling interests in property partnerships — — — — — — — — 7,761 7,761 Distributions to noncontrolling interests in property partnerships — — — — — — — — ( 15,273 ) ( 15,273 ) Effective portion of interest rate contracts — — — — — — ( 3,973 ) ( 453 ) — ( 4,426 ) Amortization of interest rate contracts — — — — — — 1,367 155 144 1,666 Reallocation of noncontrolling interest — — — 24,640 — — — ( 24,640 ) — — Equity, June 30, 2019 154,563 $ 1,546 $ 200,000 $ 6,278,961 $ ( 710,592 ) $ ( 2,722 ) $ ( 51,340 ) $ 608,593 $ 1,696,221 $ 8,020,667 5 Table of Content s BOSTON PROPERTIES, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited and in thousands) Common Stock Preferred Stock Additional Paid-in Capital Dividends in Excess of Earnings Treasury Stock, at cost Accumulated Other Comprehensive Loss Noncontrolling Interests - Common Units Noncontrolling Interests - Property Partnerships Total Shares Amount Equity, December 31, 2019 154,790 $ 1,548 $ 200,000 $ 6,294,719 $ ( 760,523 ) $ ( 2,722 ) $ ( 48,335 ) $ 600,860 $ 1,728,689 $ 8,014,236 Cumulative effect of a change in accounting principle — — — — ( 1,505 ) — — ( 174 ) — ( 1,679 ) Redemption of operating partnership units to common stock 765 8 — 26,336 — — — ( 26,344 ) — — Allocated net income for the period — — — — 769,482 — — 87,525 18,719 875,726 Dividends/distributions declared — — — — ( 309,965 ) — — ( 34,638 ) — ( 344,603 ) Shares issued pursuant to stock purchase plan 2 — — 325 — — — — — 325 Net activity from stock option and incentive plan 65 — — 8,256 — — — 25,029 — 33,285 Contributions from noncontrolling interests in property partnerships — — — — — — — — 5,957 5,957 Distributions to noncontrolling interests in property partnerships — — — — — — — — ( 29,065 ) ( 29,065 ) Effective portion of interest rate contracts — — — — — — ( 9,333 ) ( 1,046 ) — ( 10,379 ) Amortization of interest rate contracts — — — — — — 2,747 308 288 3,343 Reallocation of noncontrolling interest — — — 11,029 — — — ( 11,029 ) — — Equity, June 30, 2020 155,622 $ 1,556 $ 200,000 $ 6,340,665 $ ( 302,511 ) $ ( 2,722 ) $ ( 54,921 ) $ 640,491 $ 1,724,588 $ 8,547,146 Equity, December 31, 2018 154,458 $ 1,545 $ 200,000 $ 6,407,623 $ ( 675,534 ) $ ( 2,722 ) $ ( 47,741 ) $ 619,352 $ 1,711,445 $ 8,213,968 Cumulative effect of a change in accounting principle — — — — ( 3,864 ) — — ( 445 ) ( 70 ) ( 4,379 ) Redemption of operating partnership units to common stock 35 1 — 1,211 — — — ( 1,212 ) — — Allocated net income for the period — — — — 267,681 — — 30,627 36,312 334,620 Dividends/distributions declared — — — — ( 298,875 ) — — ( 34,391 ) — ( 333,266 ) Shares issued pursuant to stock purchase plan 4 — — 373 — — — — — 373 Net activity from stock option and incentive plan 66 — — 4,554 — — — 22,778 — 27,332 Acquisition of noncontrolling interest in property partnerships — — — ( 162,505 ) — — — — ( 24,501 ) ( 187,006 ) Contributions from noncontrolling interests in property partnerships — — — — — — — — 12,148 12,148 Distributions to noncontrolling interests in property partnerships — — — — — — — — ( 39,401 ) ( 39,401 ) Effective portion of interest rate contracts — — — — — — ( 6,332 ) ( 722 ) — ( 7,054 ) Amortization of interest rate contracts — — — — — — 2,733 311 288 3,332 Reallocation of noncontrolling interest — — — 27,705 — — — ( 27,705 ) — — Equity, June 30, 2019 154,563 $ 1,546 $ 200,000 $ 6,278,961 $ ( 710,592 ) $ ( 2,722 ) $ ( 51,340 ) $ 608,593 $ 1,696,221 $ 8,020,667 The accompanying notes are an integral part of these consolidated financial statements. 6 Table of Content s BOSTON PROPERTIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited and in thousands) Six months ended June 30, 2020 2019 Cash flows from operating activities: Net income $ 875,726 $ 334,620 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 349,282 342,005 Amortization of right of use assets - operating leases 1,128 1,213 Impairment loss — 24,038 Non-cash compensation expense 27,899 25,444 Income from unconsolidated joint ventures ( 1,463 ) ( 48,177 ) Distributions of net cash flow from operations of unconsolidated joint ventures 13,382 3,890 Losses (gains) from investments in securities 893 ( 4,134 ) Allowance for current expected credit losses 484 — Non-cash portion of interest expense 11,483 10,900 Gains on sales of real estate ( 613,932 ) ( 781 ) Change in assets and liabilities: Tenant and other receivables, net 18,516 ( 11,514 ) Notes receivable, net ( 258 ) ( 250 ) Accrued rental income, net ( 43,399 ) ( 37,473 ) Prepaid expenses and other assets ( 12,057 ) ( 9,319 ) Lease liabilities - operating leases 799 780 Accounts payable and accrued expenses ( 20,493 ) 17,458 Accrued interest payable 5,262 ( 78 ) Other liabilities ( 21,912 ) ( 30,503 ) Tenant leasing costs ( 37,068 ) ( 52,515 ) Total adjustments ( 321,454 ) 230,984 Net cash provided by operating activities 554,272 565,604 Cash flows from investing activities: Acquisitions of real estate ( 133,406 ) ( 43,061 ) Construction in progress ( 247,615 ) ( 203,259 ) Building and other capital improvements ( 68,386 ) ( 79,943 ) Tenant improvements ( 118,903 ) ( 115,940 ) Proceeds from sales of real estate 506,337 60,398 Capital contributions to unconsolidated joint ventures ( 106,168 ) ( 50,068 ) Capital distributions from unconsolidated joint ventures 54,413 105,000 Issuance of notes receivable, net ( 9,800 ) — Investments in securities, net 3,006 ( 1,079 ) Net cash used in investing activities ( 120,522 ) ( 327,952 ) 7 Table of Content s BOSTON PROPERTIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited and in thousands) Six months ended June 30, 2020 2019 Cash flows from financing activities: Repayments of mortgage notes payable ( 8,477 ) ( 9,702 ) Proceeds from unsecured senior notes 1,248,125 848,428 Borrowings on unsecured line of credit 265,000 380,000 Repayments of unsecured line of credit ( 265,000 ) ( 380,000 ) Payments on finance lease obligations — ( 628 ) Deferred financing costs ( 9,465 ) ( 7,112 ) Net proceeds from equity transactions 3,183 2,261 Dividends and distributions ( 344,239 ) ( 332,961 ) Contributions from noncontrolling interests in property partnerships 5,957 12,148 Distributions to noncontrolling interests in property partnerships ( 29,065 ) ( 39,401 ) Acquisition of noncontrolling interests in property partnership — ( 186,952 ) Net cash provided by financing activities 866,019 286,081 Net increase in cash and cash equivalents and cash held in escrows 1,299,769 523,733 Cash and cash equivalents and cash held in escrows, beginning of period 691,886 639,191 Cash and cash equivalents and cash held in escrows, end of period $ 1,991,655 $ 1,162,924 Reconciliation of cash and cash equivalents and cash held in escrows: Cash and cash equivalents, beginning of period $ 644,950 $ 543,359 Cash held in escrows, beginning of period 46,936 95,832 Cash and cash equivalents and cash held in escrows, beginning of period $ 691,886 $ 639,191 Cash and cash equivalents, end of period $ 1,691,047 $ 1,087,001 Cash held in escrows, end of period 300,608 75,923 Cash and cash equivalents and cash held in escrows, end of period $ 1,991,655 $ 1,162,924 Supplemental disclosures: Cash paid for interest $ 213,754 $ 216,754 Interest capitalized $ 27,866 $ 25,069 Non-cash investing and financing activities: Write-off of fully depreciated real estate $ ( 50,141 ) $ ( 61,283 ) Change in real estate included in accounts payable and accrued expenses $ ( 25,461 ) $ 115,150 Real estate acquired through finance lease $ — $ 122,563 Accrued rental income, net deconsolidated $ ( 4,558 ) $ — Tenant leasing costs, net deconsolidated $ ( 3,462 ) $ — Building and other capital improvements, net deconsolidated $ ( 111,889 ) $ — Tenant improvements, net deconsolidated $ ( 12,331 ) $ — Investment in unconsolidated joint venture recorded upon deconsolidation $ 347,898 $ — Dividends and distributions declared but not paid $ 171,077 $ 165,419 Conversions of noncontrolling interests to stockholders’ equity $ 26,344 $ 1,212 Issuance of restricted securities to employees and non-employee directors $ 43,462 $ 38,923 The accompanying notes are an integral part of these consolidated financial statements. 8 Table of Content s BOSTON PROPERTIES LIMITED PARTNERSHIP CONSOLIDATED BALANCE SHEETS (Unaudited and in thousands, except for unit amounts) June 30, 2020 December 31, 2019 ASSETS Real estate, at cost (amounts related to variable interest entities (“VIEs”) of $ 6,581,689 and $ 6,497,031 at June 30, 2020 and December 31, 2019, respectively) $ 22,199,094 $ 22,107,755 Right of use assets - finance leases (amounts related to VIEs of $ 21,000 and $ 21,000 at June 30, 2020 and December 31, 2019, respectively) 237,394 237,394 Right of use assets - operating leases 147,512 148,640 Less: accumulated depreciation (amounts related to VIEs of $( 1,112,769 ) and $( 1,058,495 ) at June 30, 2020 and December 31, 2019, respectively) ( 5,190,360 ) ( 5,162,908 ) Total real estate 17,393,640 17,330,881 Cash and cash equivalents (amounts related to VIEs of $ 300,552 and $ 280,033 at June 30, 2020 and December 31, 2019, respectively) 1,691,047 644,950 Cash held in escrows 300,608 46,936 Investments in securities 32,848 36,747 Tenant and other receivables, net (amounts related to VIEs of $ 11,989 and $ 28,918 at June 30, 2020 and December 31, 2019, respectively) 82,545 112,807 Related party note receivable, net 78,520 80,000 Notes receivable, net 25,480 15,920 Accrued rental income, net (amounts related to VIEs of $ 304,929 and $ 298,318 at June 30, 2020 and December 31, 2019, respectively) 1,069,004 1,038,788 Deferred charges, net (amounts related to VIEs of $ 190,708 and $ 214,769 at June 30, 2020 and December 31, 2019, respectively) 655,813 689,213 Prepaid expenses and other assets (amounts related to VIEs of $ 18,741 and $ 20,931 at June 30, 2020 and December 31, 2019, respectively) 56,768 41,685 Investments in unconsolidated joint ventures 1,339,724 955,647 Total assets $ 22,725,997 $ 20,993,574 LIABILITIES AND CAPITAL Liabilities: Mortgage notes payable, net (amounts related to VIEs of $ 2,913,287 and $ 2,918,806 at June 30, 2020 and December 31, 2019, respectively) $ 2,915,852 $ 2,922,408 Unsecured senior notes, net 9,633,577 8,390,459 Unsecured line of credit — — Unsecured term loan, net 499,150 498,939 Lease liabilities - finance leases (amounts related to VIEs of $ 20,227 and $ 20,189 at June 30, 2020 and December 31, 2019, respectively) 230,146 224,042 Lease liabilities - operating leases 200,979 200,180 Accounts payable and accrued expenses (amounts related to VIEs of $ 25,685 and $ 45,777 at June 30, 2020 and December 31, 2019, respectively) 328,292 377,553 Dividends and distributions payable 171,077 170,713 Accrued interest payable 95,274 90,016 Other liabilities (amounts related to VIEs of $ 132,460 and $ 140,110 at June 30, 2020 and December 31, 2019, respectively) 373,281 387,994 Total liabilities 14,447,628 13,262,304 Commitments and contingencies — — 9 Table of Content s BOSTON PROPERTIES LIMITED PARTNERSHIP CONSOLIDATED BALANCE SHEETS (Unaudited and in thousands, except for unit amounts) June 30, 2020 December 31, 2019 Redeemable deferred stock units— 66,424 and 60,676 units outstanding at redemption value at June 30, 2020 and December 31, 2019, respectively 6,003 8,365 Noncontrolling interests: Redeemable partnership units— 16,123,912 and 16,764,466 common units and 1,345,723 and 1,143,215 long term incentive units outstanding at redemption value at June 30, 2020 and December 31, 2019, respectively 1,581,010 2,468,753 Capital: 5.25 % Series B cumulative redeemable preferred units, liquidation preference $ 2,500 per unit, 80,000 units issued and outstanding at June 30, 2020 and December 31, 2019 193,623 193,623 Boston Properties Limited Partnership partners’ capital— 1,730,919 and 1,726,980 general partner units and 153,891,367 and 153,063,318 limited partner units outstanding at June 30, 2020 and December 31, 2019, respectively 4,828,066 3,380,175 Accumulated other comprehensive loss ( 54,921 ) ( 48,335 ) Total partners’ capital 4,966,768 3,525,463 Noncontrolling interests in property partnerships 1,724,588 1,728,689 Total capital 6,691,356 5,254,152 Total liabilities and capital $ 22,725,997 $ 20,993,574 The accompanying notes are an integral part of these consolidated financial statements. 10 Table of Content s BOSTON PROPERTIES LIMITED PARTNERSHIP CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited and in thousands, except for per unit amounts) Three months ended June 30, Six months ended June 30, 2020 2019 2020 2019 Revenue Lease $ 630,119 $ 680,189 $ 1,340,230 $ 1,359,440 Parking and other 13,946 26,319 38,450 51,225 Hotel 99 14,844 6,924 23,782 Development and management services 8,125 9,986 16,004 19,263 Direct reimbursements of payroll and related costs from management services contracts 2,484 2,403 5,721 5,798 Total revenue 654,773 733,741 1,407,329 1,459,508 Expenses Operating Rental 239,787 257,971 502,753 515,488 Hotel 1,973 9,080 8,794 16,943 General and administrative 37,743 35,071 74,197 76,833 Payroll and related costs from management services contracts 2,484 2,403 5,721 5,798 Transaction costs 332 417 947 877 Depreciation and amortization 176,409 175,199 345,694 337,881 Total expenses 458,728 480,141 938,106 953,820 Other income (expense) Income from unconsolidated joint ventures 1,832 47,964 1,463 48,177 Gains on sales of real estate 207,241 1,835 626,895 930 Interest and other income (loss) 1,305 3,615 4,322 7,368 Gains (losses) from investments in securities 4,552 1,165 ( 893 ) 4,134 Impairment loss — — — ( 22,272 ) Interest expense ( 107,142 ) ( 102,357 ) ( 208,733 ) ( 203,366 ) Net income 303,833 205,822 892,277 340,659 Net (income) loss attributable to noncontrolling interests Noncontrolling interests in property partnerships 767 ( 17,482 ) ( 18,719 ) ( 36,312 ) Net income attributable to Boston Properties Limited Partnership 304,600 188,340 873,558 304,347 Preferred distributions ( 2,625 ) ( 2,625 ) ( 5,250 ) ( 5,250 ) Net income attributable to Boston Properties Limited Partnership common unitholders $ 301,975 $ 185,715 $ 868,308 $ 299,097 Basic earnings per common unit attributable to Boston Properties Limited Partnership Net income $ 1.75 $ 1.08 $ 5.02 $ 1.74 Weighted average number of common units outstanding 172,659 172,202 172,604 172,167 Diluted earnings per common unit attributable to Boston Properties Limited Partnership Net income $ 1.75 $ 1.08 $ 5.02 $ 1.73 Weighted average number of common and common equivalent units outstanding 172,680 172,521 172,738 172,486 The accompanying notes are an integral part of these consolidated financial statements. 11 Table of Content s BOSTON PROPERTIES LIMITED PARTNERSHIP CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited and in thousands) Three months ended June 30, Six months ended June 30, 2020 2019 2020 2019 Net income $ 303,833 $ 205,822 $ 892,277 $ 340,659 Other comprehensive income (loss): Effective portion of interest rate contracts ( 659 ) ( 4,426 ) ( 10,379 ) ( 7,054 ) Amortization of interest rate contracts (1) 1,677 1,666 3,343 3,332 Other comprehensive income (loss) 1,018 ( 2,760 ) ( 7,036 ) ( 3,722 ) Comprehensive income 304,851 203,062 885,241 336,937 Comprehensive (income) loss attributable to noncontrolling interests 623 ( 17,626 ) ( 19,007 ) ( 36,600 ) Comprehensive income attributable to Boston Properties Limited Partnership $ 305,474 $ 185,436 $ 866,234 $ 300,337 _______________ (1) Amounts reclassified from comprehensive income primarily to interest expense within Boston Properties Limited Partnership’s Consolidated Statements of Operations. The accompanying notes are an integral part of these consolidated financial statements. 12 Table of Content s BOSTON PROPERTIES LIMITED PARTNERSHIP CONSOLIDATED STATEMENTS OF CAPITAL AND NONCONTROLLING INTERESTS (Unaudited and in thousands) Units Capital General Partner Limited Partner Partners’ Capital (General and Limited Partners) Preferred Units Accumulated Other Comprehensive Loss Noncontrolling Interests - Property Partnerships Total Capital Noncontrolling Interests - Redeemable Partnership Units Equity, March 31, 2020 1,731 153,584 $ 4,626,627 $ 193,623 $ ( 55,700 ) $ 1,736,445 $ 6,500,995 $ 1,639,855 Contributions — 5 450 — — — 450 ( 98 ) Allocated net income (loss) for the period — — 271,989 2,625 — ( 767 ) 273,847 29,986 Distributions — — ( 152,507 ) ( 2,625 ) — — ( 155,132 ) ( 17,194 ) Unearned compensation — — 423 — — — 423 9,450 Conversion of redeemable partnership units — 302 10,849 — — — 10,849 ( 10,849 ) Adjustment to reflect redeemable partnership units at redemption value — — 70,235 — — — 70,235 ( 70,235 ) Effective portion of interest rate contracts — — — — ( 601 ) — ( 601 ) ( 58 ) Amortization of interest rate contracts — — — — 1,380 144 1,524 153 Contributions from noncontrolling interests in property partnerships — — — — — 2,081 2,081 — Distributions to noncontrolling interests in property partnerships — — — — — ( 13,315 ) ( 13,315 ) — Equity, June 30, 2020 1,731 153,891 $ 4,828,066 $ 193,623 $ ( 54,921 ) $ 1,724,588 $ 6,691,356 $ 1,581,010 Equity, March 31, 2019 1,725 152,790 $ 3,603,174 $ 193,623 $ ( 48,734 ) $ 1,710,608 $ 5,458,671 $ 2,414,240 Contributions 1 26 882 — — — 882 1,082 Allocated net income for the year — — 166,687 2,625 — 17,482 186,794 19,028 Distributions — — ( 146,835 ) ( 2,625 ) — — ( 149,460 ) ( 17,206 ) Unearned compensation — — 613 — — — 613 8,286 Conversion of redeemable partnership units — 21 720 — — — 720 ( 720 ) Adjustment to reflect redeemable partnership units at redemption value — — 100,174 — — — 100,174 ( 100,174 ) Effective portion of interest rate contracts — — — — ( 3,973 ) — ( 3,973 ) ( 453 ) Amortization of interest rate contracts — — — — 1,367 144 1,511 155 Acquisition of noncontrolling interest in property partnership — — ( 162,505 ) — — ( 24,501 ) ( 187,006 ) — Contributions from noncontrolling interests in property partnerships — — — — — 7,761 7,761 — Distributions to noncontrolling interests in property partnerships — — — — — ( 15,273 ) ( 15,273 ) — Equity, June 30, 2019 1,726 152,837 $ 3,562,910 $ 193,623 $ ( 51,340 ) $ 1,696,221 $ 5,401,414 $ 2,324,238 13 Table of Content s BOSTON PROPERTIES LIMITED PARTNERSHIP CONSOLIDATED STATEMENTS OF CAPITAL AND NONCONTROLLING INTERESTS (Unaudited and in thousands) Units Capital General Partner Limited Partner Partners’ Capital (General and Limited Partners) Preferred Units Accumulated Other Comprehensive Loss Noncontrolling Interests - Property Partnerships Total Capital Noncontrolling Interests - Redeemable Partnership Units Equity, December 31, 2019 1,727 153,063 $ 3,380,175 $ 193,623 $ ( 48,335 ) $ 1,728,689 $ 5,254,152 $ 2,468,753 Cumulative effect of a change in accounting principle — — ( 1,505 ) — — — ( 1,505 ) ( 174 ) Contributions 1 68 7,162 — — — 7,162 39,643 Allocated net income for the period — — 780,783 5,250 — 18,719 804,752 87,525 Distributions — — ( 304,715 ) ( 5,250 ) — — ( 309,965 ) ( 34,638 ) Unearned compensation — — 1,419 — — — 1,419 ( 14,614 ) Conversion of redeemable partnership units 3 760 26,344 — — — 26,344 ( 26,344 ) Adjustment to reflect redeemable partnership units at redemption value — — 938,403 — — — 938,403 ( 938,403 ) Effective portion of interest rate contracts — — — — ( 9,333 ) — ( 9,333 ) ( 1,046 ) Amortization of interest rate contracts — — — — 2,747 288 3,035 308 Contributions from noncontrolling interests in property partnerships — — — — — 5,957 5,957 — Distributions to noncontrolling interests in property partnerships — — — — — ( 29,065 ) ( 29,065 ) — Equity, June 30, 2020 1,731 153,891 $ 4,828,066 $ 193,623 $ ( 54,921 ) $ 1,724,588 $ 6,691,356 $ 1,581,010 Equity, December 31, 2018 1,722 152,736 $ 4,054,996 $ 193,623 $ ( 47,741 ) $ 1,711,445 $ 5,912,323 $ 2,000,591 Cumulative effect of a change in accounting principle — — ( 3,864 ) — — ( 70 ) ( 3,934 ) ( 445 ) Contributions 3 67 5,702 — — — 5,702 35,482 Allocated net income for the period — — 268,470 5,250 — 36,312 310,032 30,627 Distributions — — ( 293,625 ) ( 5,250 ) — — ( 298,875 ) ( 34,391 ) Unearned compensation — — ( 775 ) — — — ( 775 ) ( 12,704 ) Conversion of redeemable partnership units 1 34 1,212 — — — 1,212 ( 1,212 ) Adjustment to reflect redeemable partnership units at redemption value — — ( 306,701 ) — — — ( 306,701 ) 306,701 Effective portion of interest rate contracts — — — — ( 6,332 ) — ( 6,332 ) ( 722 ) Amortization of interest rate contracts — — — — 2,733 288 3,021 311 Acquisition of noncontrolling interest in property partnership — — ( 162,505 ) — — ( 24,501 ) ( 187,006 ) — Contributions from noncontrolling interests in property partnerships — — — — — 12,148 12,148 — Distributions to noncontrolling interests in property partnerships — — — — — ( 39,401 ) ( 39,401 ) — Equity, June 30, 2019 1,726 152,837 $ 3,562,910 $ 193,623 $ ( 51,340 ) $ 1,696,221 $ 5,401,414 $ 2,324,238 The accompanying notes are an integral part of these consolidated financial statements. 14 Table of Content s BOSTON PROPERTIES LIMITED PARTNERSHIP CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited and in thousands) Six months ended June 30, 2020 2019 Cash flows from operating activities: Net income $ 892,277 $ 340,659 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 345,694 337,881 Amortization of right of use assets - operating leases 1,128 1,213 Impairment loss — 22,272 Non-cash compensation expense 27,899 25,444 Income from unconsolidated joint ventures ( 1,463 ) ( 48,177 ) Distributions of net cash flow from operations of unconsolidated joint ventures 13,382 3,890 Losses (gains) from investments in securities 893 ( 4,134 ) Allowance for current expected credit losses 484 — Non-cash portion of interest expense 11,483 10,900 Gains on sales of real estate ( 626,895 ) ( 930 ) Change in assets and liabilities: Tenant and other receivables, net 18,516 ( 11,514 ) Notes receivable, net ( 258 ) ( 250 ) Accrued rental income, net ( 43,399 ) ( 37,473 ) Prepaid expenses and other assets ( 12,057 ) ( 9,319 ) Lease liabilities - operating leases 799 780 Accounts payable and accrued expenses ( 20,493 ) 17,458 Accrued interest payable 5,262 ( 78 ) Other liabilities ( 21,912 ) ( 30,503 ) Tenant leasing costs ( 37,068 ) ( 52,515 ) Total adjustments ( 338,005 ) 224,945 Net cash provided by operating activities 554,272 565,604 Cash flows from investing activities: Acquisitions of real estate ( 133,406 ) ( 43,061 ) Construction in progress ( 247,615 ) ( 203,259 ) Building and other capital improvements ( 68,386 ) ( 79,943 ) Tenant improvements ( 118,903 ) ( 115,940 ) Proceeds from sales of real estate 506,337 60,398 Capital contributions to unconsolidated joint ventures ( 106,168 ) ( 50,068 ) Capital distributions from unconsolidated joint ventures 54,413 105,000 Issuance of notes receivable, net ( 9,800 ) — Investments in securities, net 3,006 ( 1,079 ) Net cash used in investing activities ( 120,522 ) ( 327,952 ) 15 Table of Content s BOSTON PROPERTIES LIMITED PARTNERSHIP CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited and in thousands) Six months ended June 30, 2020 2019 Cash flows from financing activities: Repayments of mortgage notes payable ( 8,477 ) ( 9,702 ) Proceeds from unsecured senior notes 1,248,125 848,428 Borrowings on unsecured line of credit 265,000 380,000 Repayments of unsecured line of credit ( 265,000 ) ( 380,000 ) Payments on finance lease obligations — ( 628 ) Deferred financing costs ( 9,465 ) ( 7,112 ) Net proceeds from equity transactions 3,183 2,261 Distributions ( 344,239 ) ( 332,961 ) Contributions from noncontrolling interests in property partnerships 5,957 12,148 Distributions to noncontrolling interests in property partnerships ( 29,065 ) ( 39,401 ) Acquisition of noncontrolling interest in property partnership — ( 186,952 ) Net cash provided by financing activities 866,019 286,081 Net increase in cash and cash equivalents and cash held in escrows 1,299,769 523,733 Cash and cash equivalents and cash held in escrows, beginning of period 691,886 639,191 Cash and cash equivalents and cash held in escrows, end of period $ 1,991,655 $ 1,162,924 Reconciliation of cash and cash equivalents and cash held in escrows: Cash and cash equivalents, beginning of period $ 644,950 $ 543,359 Cash held in escrows, beginning of period 46,936 95,832 Cash and cash equivalents and cash held in escrows, beginning of period $ 691,886 $ 639,191 Cash and cash equivalents, end of period $ 1,691,047 $ 1,087,001 Cash held in escrows, end of period 300,608 75,923 Cash and cash equivalents and cash held in escrows, end of period $ 1,991,655 $ 1,162,924 Supplemental disclosures: Cash paid for interest $ 213,754 $ 216,754 Interest capitalized $ 27,866 $ 25,069 Non-cash investing and financing activities: Write-off of fully depreciated real estate $ ( 50,141 ) $ ( 61,283 ) Change in real estate included in accounts payable and accrued expenses $ ( 25,461 ) $ 115,150 Real estate acquired through finance lease $ — $ 122,563 Accrued rental income, net deconsolidated $ ( 4,558 ) $ — Tenant leasing costs, net deconsolidated $ ( 3,462 ) $ — Building and other capital improvements, net deconsolidated $ ( 111,889 ) $ — Tenant improvements, net deconsolidated $ ( 12,331 ) $ — Investment in unconsolidated joint venture recorded upon deconsolidation $ 347,898 $ — Distributions declared but not paid $ 171,077 $ 165,419 Conversions of redeemable partnership units to partners’ capital $ 26,344 $ 1,212 Issuance of restricted securities to employees and non-employee directors $ 43,462 $ 38,923 The accompanying notes are an integral part of these consolidated financial statements. 16 Table of Content s BOSTON PROPERTIES, INC. AND BOSTON PROPERTIES LIMITED PARTNERSHIP NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. Organization Boston Properties, Inc., a Delaware corporation, is a fully integrated, self-administered and self-managed real estate investment trust (“REIT”). Boston Properties, Inc. is the sole general partner of Boston Properties Limited Partnership, its operating partnership, and at June 30, 2020 owned an approximate 89.9 % ( 89.6 % at December 31, 2019) general and limited partnership interest in Boston Properties Limited Partnership. Unless stated otherwise or the context requires, the “Company” refers to Boston Properties, Inc. and its subsidiaries, including Boston Properties Limited Partnership and its consolidated subsidiaries. Partnership interests in Boston Properties Limited Partnership include: • common units of partnership interest (also referred to as “OP Units”), • long term incentive units of partnership interest (also referred to as “LTIP Units”), and • preferred units of partnership interest (also referred to as “Preferred Units”). Unless specifically noted otherwise, all references to OP Units exclude units held by Boston Properties, Inc. A holder of an OP Unit may present such OP Unit to Boston Properties Limited Partnership for redemption at any time (subject to restrictions agreed upon at the time of issuance of OP Units to particular holders that may restrict such redemption right for a period of time, generally one year from issuance). Upon presentation of an OP Unit for redemption, Boston Properties Limited Partnership is obligated to redeem the OP Unit for cash equal to the value of a share of common stock of Boston Properties, Inc. (“Common Stock”). In lieu of a cash redemption, Boston Properties, Inc. may elect to acquire the OP Unit for one share of Common Stock. Because the number of shares of Common Stock outstanding at all times equals the number of OP Units that Boston Properties, Inc. owns, one share of Common Stock is generally the economic equivalent of one OP Unit, and the quarterly distribution that may be paid to the holder of an OP Unit equals the quarterly dividend that may be paid to the holder of a share of Common Stock. The Company uses LTIP Units as a form of equity-based award for annual long term incentive equity compensation. The Company has also issued LTIP Units to employees in the form of (1) 2012 outperformance plan awards (“2012 OPP Units”) and (2) 2013 - 2020 multi-year, long-term incentive program awards (also referred to as “MYLTIP Units”), each of which, upon the satisfaction of certain performance and vesting conditions, is convertible into one OP Unit. The three-year measurement periods for the 2012 OPP Units and the 2013 - 2017 MYLTIP Units have ended and Boston Properties, Inc.’s total stockholder return (“TSR”) was sufficient for employees to earn and therefore become eligible to vest in a portion of the awards. Unless and until they are earned, the rights, preferences and privileges of the 2018 - 2020 MYLTIP Units differ from other LTIP Units granted to employees (including the 2012 OPP Units and the 2013 - 2017 MYLTIP Units, which have been earned). Therefore, unless specifically noted otherwise, all references to LTIP Units exclude the 2018 - 2020 MYLTIP Units. LTIP Units (including the earned 2012 OPP Units and the earned 2013 - 2017 MYLTIP Units), whether vested or not, will receive the same quarterly per unit distributions as OP Units, which equal per share dividends on Common Stock (See Notes 8 and 11). At June 30, 2020, there was one series of Preferred Units outstanding (i.e., Series B Preferred Units). The Series B Preferred Units were issued to Boston Properties, Inc. on March 27, 2013 in connection with the issuance of 80,000 shares ( 8,000,000 depositary shares each representing 1/100th of a share) of 5.25 % Series B Cumulative Redeemable Preferred Stock (the “Series B Preferred Stock”). Boston Properties, Inc. contributed the net proceeds from the offering to Boston Properties Limited Partnership in exchange for 80,000 Series B Preferred Units having terms and preferences generally mirroring those of the Series B Preferred Stock (See Note 9). Properties At June 30, 2020, the Company owned or had interests in a portfolio of 195 commercial real estate properties (the “Properties”) aggregating approximately 51.2 million net rentable square feet of primarily Class A office properties, including nine properties under construction/redevelopment totaling approximately 5.0 million net rentable square feet. At June 30, 2020, the Properties consisted of: • 176 office properties (including seven properties under construction/redevelopment); • 12 retail properties; • six residential properties (including two properties under construction); and 17 Table of Content s • one hotel. The Company considers Class A office properties to be well-located buildings that are professionally managed and maintained, attract high-quality tenants and command upper-tier rental rates, and that are modern structures or have been modernized to compete with newer buildings. 2. Basis of Presentation and Summary of Significant Accounting Policies Boston Properties, Inc. does not have any other significant assets, liabilities or operations, other than its investment in Boston Properties Limited Partnership, nor does it have employees of its own. Boston Properties Limited Partnership, not Boston Properties, Inc., generally executes all significant business relationships other than transactions involving securities of Boston Properties, Inc. All majority-owned subsidiaries and joint ventures over which the Company has financial and operating control and variable interest entities (“VIEs”) in which the Company has determined it is the primary beneficiary are included in the consolidated financial statements. All significant intercompany balances and transactions have been eliminated in consolidation. The Company accounts for all other unconsolidated joint ventures using the equity method of accounting. Accordingly, the Company’s share of the earnings of these joint ventures and companies is included in consolidated net income. The accompanying interim financial statements are unaudited; however, the financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) for interim financial information and in conjunction with the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the disclosures required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting solely of normal recurring matters) necessary for a fair statement of the financial statements for these interim periods have been included. The results of operations for the interim periods are not necessarily indicative of the results to be obtained for other interim periods or for the full fiscal year. The year-end consolidated balance sheet data was derived from audited financial statements, but does not include all disclosure required by GAAP. These financial statements should be read in conjunction with the Company’s financial statements and notes thereto contained in the Company’s Annual Report in the Company’s Form 10-K for its fiscal year ended December 31, 2019. The Company bases its estimates on historical experience and on various other assumptions that it considers to be reasonable under the circumstances, including the impact of extraordinary events such as the novel coronavirus (“COVID-19”) pandemic, the results of which form the basis for making significant judgments about the carrying values of assets and liabilities, assessments of future collectability, and other areas of the financial statements that are impacted by the use of estimates. Actual results may differ from these estimates under different assumptions or conditions. Variable Interest Entities (VIEs) Consolidated VIEs are those for which the Company is considered to be the primary beneficiary of a VIE. The primary beneficiary is the entity that has a controlling financial interest in the VIE, which is defined by the entity having both of the following characteristics: (1) the power to direct the activities that, when taken together, most significantly impact the VIE’s performance and (2) the obligation to absorb losses or the right to receive the returns from the VIE that could potentially be significant to the VIE. The Company has determined that it is the primary beneficiary for six of the seven entities that are VIEs. Consolidated Variable Interest Entities As of June 30, 2020, Boston Properties, Inc. has identified six consolidated VIEs, including Boston Properties Limited Partnership. Excluding Boston Properties Limited Partnership, the VIEs consisted of the following five in-service properties: 767 Fifth Avenue (the General Motors Building), Times Square Tower, 601 Lexington Avenue, Atlantic Wharf Office Building and 100 Federal Street. The Company consolidates these VIEs because it is the primary beneficiary. The third parties’ interests in these consolidated entities (excluding Boston Properties Limited Partnership’s interest) are reflected as noncontrolling interests in property partnerships in the accompanying consolidated financial statements (See Note 8). In addition, Boston Properties, Inc.’s only significant asset is its investment in Boston Properties Limited Partnership and, consequently, substantially all of Boston Properties, Inc.’s assets and liabilities are the assets and liabilities of Boston Properties Limited Partnership. 18 Table of Content s Variable Interest Entities Not Consolidated The Company has determined that the Platform 16 Holdings LP joint venture is a VIE. The Company does not consolidate this entity as the Company does not have the power to direct the activities that, when taken together, most significantly impact the VIE’s performance and, therefore, the Company is not considered to be the primary beneficiary. Fair Value of Financial Instruments The Company follows the authoritative guidance for fair value measurements when valuing its financial instruments for disclosure purposes. The table below presents the financial instruments that are being valued for disclosure purposes as well as the Level at which they are categorized (as defined in Accounting Standards Codification (“ASC”) 820 “Fair Value Measurements and Disclosures” (“ASC 820”)). Financial Instrument Level Unsecured senior notes (1) Level 1 Related party note receivable Level 3 Notes receivable Level 3 Mortgage notes payable Level 3 Unsecured term loan / line of credit Level 3 _______________ (1) If trading value for the period is low, the valuation could be categorized as Level 2. Because the Company’s valuations of its financial instruments are based on the above Levels and involve the use of estimates, the actual fair values of its financial instruments may differ materially from those estimates. The following table identifies the range and weighted average of significant unobservable inputs for the Company’s Level 3 fair value measured instruments. Financial Instrument Level Range Weighted Average Related party note receivable Level 3 3.66 % 3.66 % Notes receivable Level 3 3.66 % - 8.00 % 5.35 % Mortgage notes payable Level 3 2.09 % - 3.25 % 2.33 % Unsecured term loan / line of credit Level 3 1.01 % 1.01 % In addition, the Company’s estimated fair values for these instruments as of the end of the applicable reporting period are not projections of, nor necessarily indicative of, estimated or actual fair values in future reporting periods. The following table presents the aggregate carrying value of the Company’s related party note receivable, net, notes receivable, net, mortgage notes payable, net, unsecured senior notes, net, unsecured line of credit and unsecured term loan, net and the Company’s corresponding estimate of fair value as of June 30, 2020 and December 31, 2019 (in thousands): June 30, 2020 December 31, 2019 Carrying Amount Estimated Fair Value Carrying Amount Estimated Fair Value Related party note receivable, net $ 78,520 $ 85,394 $ 80,000 $ 81,931 Notes receivable, net 25,480 25,648 15,920 14,978 Total $ 104,000 $ 111,042 $ 95,920 $ 96,909 Mortgage notes payable, net $ 2,915,852 $ 3,155,771 $ 2,922,408 $ 2,984,956 Unsecured senior notes, net 9,633,577 10,517,869 8,390,459 8,826,375 Unsecured line of credit — — — — Unsecured term loan, net 499,150 500,450 498,939 500,561 Total $ 13,048,579 $ 14,174,090 $ 11,811,806 $ 12,311,892 19 Table of Content s New Accounting Pronouncements Adopted Financial Instruments - Credit Losses In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”). ASU 2016-13 is intended to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date by replacing the current incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. In November 2018, the FASB issued ASU 2018-19, “Codification Improvements to Topic 326, Financial Instruments - Credit Losses” (“ASU 2018-19”). ASU 2018-19 clarifies that receivables arising from operating leases are not within the scope of ASC 326-20, “Financial Instruments - Credit Losses - Measured at Amortized Cost,” which addresses financial assets measured at amortized cost basis, including net investments in leases arising from sales-type and direct financing leases. Instead, impairment of receivables arising from operating leases should be accounted for in accordance with ASC 842 - “Leases” (“ASC 842”). ASU 2016-13 and ASU 2018-19 were effective for the Company for reporting periods beginning after December 15, 2019, with early adoption permitted. ASU 2016-13 and ASU 2018-19 are applicable to the Company with respect to (1) certain of its accounts receivable, except for amounts arising from operating leases accounted for under ASC 842, (2) its related party note receivable, (3) its notes receivable and (4) certain of its off-balance sheet credit exposures. The Company adopted ASU 2016-13 and ASU 2018-19 effective January 1, 2020 using the modified retrospective approach. The adoption of ASU 2016-13 and ASU 2018-19 resulted in the Company recognizing an allowance for current expected credit losses associated with (1) its related party note receivable, (2) its notes receivable and (3) an off-balance sheet loan commitment arrangement. As a result, the modified retrospective approach resulted in the Company recognizing on January 1, 2020, the cumulative effect of adopting ASU 2016-13 and ASU 2018-19 aggregating approximately $ 1.5 million to Dividends in Excess of Earnings of Boston Properties, Inc. and Partners’ Capital of Boston Properties Limited Partnership and approximately $ 0.2 million to Noncontrolling Interests - Common Units of Boston Properties, Inc. and Noncontrolling Interests - Redeemable Partnership Units of Boston Properties Limited Partnership on the corresponding Consolidated Balance Sheets. Fair Value Measurement In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU 2018-13”). ASU 2018-13 is intended to improve the effectiveness of disclosures required by entities regarding recurring and nonrecurring fair value measurements. ASU 2018-13 was effective for the Company for reporting periods beginning after December 15, 2019, with early adoption permitted. The Company adopted ASU 2018-13 on January 1, 2020 and the adoption did not have a material impact on the Company’s consolidated financial statements. Derivatives and Hedging In October 2018, the FASB issued ASU 2018-16, “Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes” (“ASU 2018-16”). ASU 2018-16 permits the use of the overnight index swap rate based on the Secured Overnight Financing Rate (“SOFR”) to be used as a U.S. benchmark interest rate for purposes of applying hedge accounting under ASC 815, “Derivatives and Hedging (Topic 815).” ASU 2018-16 was effective for the Company, which has already adopted ASU 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities” for reporting periods beginning after December 15, 2018 and was required to be adopted on a prospective basis for qualifying new or re-designated hedging relationships entered into on or after the date of adoption. The Company adopted ASU 2018-16 on January 1, 2019 and the adoption did not have a material impact on the Company’s consolidated financial statements. In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting” (“ASU 2020-04”). ASU 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. During the six months ended June 30, 2020, the Company elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. The Company continues to 20 Table of Content s evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur. Consolidation In October 2018, the FASB issued ASU 2018-17, “Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities” (“ASU 2018-17”). ASU 2018-17 is intended to improve the accounting when considering indirect interests held through related parties under common control for determining whether fees paid to decision makers and service providers are variable interests. ASU 2018-17 was effective for the Company for reporting periods beginning after December 15, 2019, with early adoption permitted. The Company adopted ASU 2018-17 on January 1, 2020 and the adoption did not have a material impact on the Company’s consolidated financial statements. 3. Real Estate Boston Properties, Inc. Real estate consisted of the following at June 30, 2020 and December 31, 2019 (in thousands): June 30, 2020 December 31, 2019 Land $ 5,070,126 $ 5,111,606 Right of use assets - finance leases 237,394 237,394 Right of use assets - operating leases 147,512 148,640 Land held for future development (1) 414,053 254,828 Buildings and improvements 13,488,860 13,646,054 Tenant improvements 2,664,294 2,656,439 Furniture, fixtures and equipment 44,635 44,313 Construction in progress 893,935 789,736 Total 22,960,809 22,889,010 Less: Accumulated depreciation ( 5,292,389 ) ( 5,266,798 ) $ 17,668,420 $ 17,622,212 _______________ (1) Includes pre-development costs. Boston Properties Limited Partnership Real estate consisted of the following at June 30, 2020 and December 31, 2019 (in thousands): June 30, 2020 December 31, 2019 Land $ 4,972,910 $ 5,011,153 Right of use assets - finance leases 237,394 237,394 Right of use assets - operating leases 147,512 148,640 Land held for future development (1) 414,053 254,828 Buildings and improvements 13,209,267 13,351,286 Tenant improvements 2,664,294 2,656,439 Furniture, fixtures and equipment 44,635 44,313 Construction in progress 893,935 789,736 Total 22,584,000 22,493,789 Less: Accumulated depreciation ( 5,190,360 ) ( 5,162,908 ) $ 17,393,640 $ 17,330,881 _______________ (1) Includes pre-development costs. 21 Table of Content s Developments On March 26, 2020, the Company completed and fully placed in-service 17Fifty Presidents Street located in Reston, Virginia. 17Fifty Presidents Street is a build-to-suit project with approximately 276,000 net rentable square feet of Class A office space that is 100 % leased. On June 1, 2020, the Company completed and fully placed in-service 20 CityPoint, a Class A office project with approximately 211,000 net rentable square feet located in Waltham, Massachusetts that is 62 % leased. On June 26, 2020, the Company completed the acquisition of real property at 777 Harrison Street (known as Fourth + Harrison and formerly known as 425 Fourth Street) located in San Francisco, California for a gross purchase price, including entitlements, totaling approximately $ 140.1 million. Fourth + Harrison is expected to support the development of approximately 804,000 square feet of primarily commercial office space. Dispositions On January 28, 2020, the Company entered into a joint venture with a third party to own, operate and develop properties at its Gateway Commons complex located in South San Francisco, California. The Company contributed its 601, 611 and 651 Gateway properties and development rights with an agreed upon value aggregating approximately $ 350.0 million for its 50 % interest in the joint venture. 601, 611 and 651 Gateway consist of three Class A office properties aggregating approximately 768,000 net rentable square feet. The partner contributed three properties and development rights with an agreed upon value aggregating approximately $ 280.8 million at closing and will contribute cash totaling approximately $ 69.2 million in the future for its 50 % ownership interest in the joint venture. As a result of the partner’s deferred contribution, the Company has an initial approximately 55 % interest in the joint venture. Future development projects will be owned 49 % by the Company and 51 % by its partner. Upon the partner’s contribution, the Company ceased accounting for the joint venture entity on a consolidated basis and is accounting for the joint venture entity on an unconsolidated basis using the equity method of accounting, as it has reduced its ownership interest in the joint venture entity and no longer has a controlling financial or operating interest in the joint venture entity (See Note 5). The Company recognized a gain on the retained and sold interest in the real estate contributed to the joint venture totaling approximately $ 217.7 million for Boston Properties, Inc. and $ 222.4 million for Boston Properties Limited Partnership during the six months ended June 30, 2020 within Gains on Sales of Real Estate on the respective Consolidated Statements of Operations, as the fair value of the real estate exceeded its carrying value. 601, 611 and 651 Gateway contributed approximately $ 0.2 million of net income to the Company for the period from January 1, 2020 through January 27, 2020 and contributed approximately $ 3.1 million and $ 6.0 million of net income to the Company for the three and six months ended June 30, 2019, respectively. On February 20, 2020, the Company completed the sale of New Dominion Technology Park located in Herndon, Virginia for a gross sale price of $ 256.0 million. Net cash proceeds totaled approximately $ 254.0 million, resulting in a gain on sale of real estate totaling approximately $ 192.3 million for Boston Properties, Inc. and approximately $ 197.1 million for Boston Properties Limited Partnership. New Dominion Technology Park is comprised of two Class A office properties aggregating approximately 493,000 net rentable square feet. New Dominion Technology Park contributed approximately $ 1.6 million of net income to the Company for the period from January 1, 2020 through February 19, 2020 and contributed approximately $ 2.1 million and $ 4.2 million of net income to the Company for the three and six months ended June 30, 2019, respectively. On June 25, 2020, the Company completed the sale of a portion of its Capital Gallery property located in Washington, DC for a gross sale price of approximately $ 253.7 million. Net cash proceeds totaled approximately $ 246.9 million, resulting in a gain on sale of real estate totaling approximately $ 203.8 million for Boston Properties, Inc. and approximately $ 207.2 million for Boston Properties Limited Partnership. Capital Gallery is an approximately 631,000 net rentable square foot Class A office property. The portion sold was comprised of approximately 455,000 net rentable square feet of commercial office space. The Company continues to own the land, underground parking garage and remaining commercial office and retail space containing approximately 176,000 net rentable square feet at the property. The sold portion of Capital Gallery contributed approximately $ 2.9 million and $ 6.3 million of net income to the Company for the period from April 1, 2020 through June 24, 2020 and the period from January 1, 2020 through June 24, 2020, respectively, and contributed approximately $ 3.5 million and $ 7.0 million of net income to the Company for the three and six months ended June 30, 2019, respectively. 22 Table of Content s 4. Leases The Company must make estimates as to the collectability of its accrued rent and accounts receivable related to lease revenue. Management analyzes accrued rent and accounts receivable by considering tenant creditworthiness, current economic trends, including the impact of COVID-19 on tenants’ businesses, and changes in tenants’ payment patterns when evaluating the collectability of the tenant’s receivable balance, including the accrued rent receivable, on a lease-by-lease basis. As a result of this analysis, during the three and six months ended June 30, 2020, the Company wrote off approximately $ 35.9 million and $ 37.4 million, respectively, related to accrued rent balances and approximately $ 18.0 million and $ 18.9 million, respectively, related to accounts receivable balances. The write-offs were for tenants, primarily in the retail sector, that either terminated their leases or that the Company considered their accrued rent and/or accounts receivable balances no longer probable of collection. In April 2020, the FASB staff issued a question and answer document (“Lease Modification Q & A”) related to the application of lease accounting guidance for lease concessions, in accordance with ASC 842, as a result of COVID-19. Under existing lease guidance, the Company would have to determine, on a lease-by-lease basis, if a lease concession was the result of a new arrangement reached with the tenant (treated within the lease modification accounting framework) or if a lease concession was under the enforceable rights and obligations within the existing lease agreement (precluded from applying the lease modification accounting framework). The Lease Modification Q & A allows the Company, if certain criteria have been met, to assume that a lease concession was included within the enforceable rights and obligations of the existing lease agreement and instead elect to either apply the lease modification accounting framework or not, with such election applied consistently to leases with similar characteristics and similar circumstances. The Company did not utilize the guidance provided in the Lease Modification Q & A and instead elected to continue to account for the COVID-19 lease concessions on a lease-by-lease basis in accordance with the existing lease modification accounting framework. The following table summarizes the components of lease revenue recognized during the three and six months ended June 30, 2020 and 2019 included within the Company's Consolidated Statements of Operations (in thousands): Three months ended June 30, Six months ended June 30, Lease Revenue 2020 2019 2020 2019 Fixed contractual payments $ 529,514 $ 557,820 $ 1,116,471 $ 1,111,806 Variable lease payments 100,605 122,369 223,759 247,634 $ 630,119 $ 680,189 $ 1,340,230 $ 1,359,440 23 Table of Content s 5. Investments in Unconsolidated Joint Ventures The investments in unconsolidated joint ventures consist of the following at June 30, 2020 and December 31, 2019: Carrying Value of Investment (1) Entity Properties Nominal % Ownership June 30, 2020 December 31, 2019 (in thousands) Square 407 Limited Partnership Market Square North 50.0 % $ ( 4,123 ) $ ( 4,872 ) BP/CRF Metropolitan Square, LLC Metropolitan Square 20.0 % ( 7,319 ) 9,134 901 New York, LLC 901 New York Avenue 25.0 % (2) ( 12,174 ) ( 12,113 ) WP Project Developer LLC Wisconsin Place Land and Infrastructure 33.3 % (3) 36,102 36,789 Annapolis Junction NFM LLC Annapolis Junction 50.0 % (4) 12,967 25,391 540 Madison Venture LLC 540 Madison Avenue 60.0 % (5) 201 2,953 500 North Capitol Venture LLC 500 North Capitol Street, NW 30.0 % ( 5,530 ) ( 5,439 ) 501 K Street LLC 1001 6th Street 50.0 % (6) 42,673 42,496 Podium Developer LLC The Hub on Causeway - Podium 50.0 % 49,160 49,466 Residential Tower Developer LLC Hub50House 50.0 % 53,340 55,092 Hotel Tower Developer LLC The Hub on Causeway - Hotel Air Rights 50.0 % 10,228 9,883 Office Tower Developer LLC 100 Causeway Street 50.0 % 56,544 56,606 1265 Main Office JV LLC 1265 Main Street 50.0 % 4,116 3,780 BNY Tower Holdings LLC Dock 72 50.0 % 96,013 94,804 BNYTA Amenity Operator LLC Dock 72 50.0 % — — CA-Colorado Center Limited Partnership Colorado Center 50.0 % 236,287 252,069 7750 Wisconsin Avenue LLC 7750 Wisconsin Avenue 50.0 % 57,130 56,247 BP-M 3HB Venture LLC 3 Hudson Boulevard 25.0 % 91,422 67,499 SMBP Venture LP Santa Monica Business Park 55.0 % 148,665 163,937 Platform 16 Holdings LP Platform 16 55.0 % (7) 99,734 29,501 Gateway Portfolio Holdings LLC Gateway Commons 50.0 % (8) 345,142 N/A $ 1,310,578 $ 933,223 _______________ (1) Investments with deficit balances aggregating approximately $ 29.1 million and $ 22.4 million at June 30, 2020 and December 31, 2019, respectively, are included within Other Liabilities in the Company’s Consolidated Balance Sheets. (2) The Company’s economic ownership has increased based on the achievement of certain return thresholds. At June 30, 2020 and December 31, 2019, the Company’s economic ownership was approximately 50 %. (3) The Company’s wholly-owned subsidiary that owns Wisconsin Place Office also owns a 33.3 % interest in the joint venture entity that owns the land, parking garage and infrastructure of the project. (4) The joint venture owns two in-service buildings. (5) T he property was sold on June 27, 2019. As of June 30, 2020 and December 31, 2019, the investment is comprised of undistributed cash. (6) Under the joint venture agreement for this land parcel, the partner will be entitled to up to two additional payments from the venture based on increases in total entitled square footage of the project above 520,000 square feet and achieving certain project returns at stabilization. (7) This entity is a VIE (See Note 2). (8) As a result of the partner’s deferred contribution, the Company owns an approximately 55 % interest in the joint venture at June 30, 2020. Future development projects will be owned 49 % by the Company and 51 % by its partner. Certain of the Company’s unconsolidated joint venture agreements include provisions whereby, at certain specified times, each partner has the right to initiate a purchase or sale of its interest in the joint ventures. With limited exceptions under these provisions, the Company is not compelled to purchase the interest of its outside joint venture partners. Under certain of the Company’s joint venture agreements, if certain return thresholds are achieved, the partners or the Company will be entitled to an additional promoted interest or payments. 24 Table of Content s The combined summarized balance sheets of the Company’s unconsolidated joint ventures are as follows: June 30, 2020 December 31, 2019 (in thousands) ASSETS Real estate and development in process, net (1) $ 4,527,828 $ 3,904,400 Other assets 535,870 502,706 Total assets $ 5,063,698 $ 4,407,106 LIABILITIES AND MEMBERS’/PARTNERS’ EQUITY Mortgage and notes payable, net $ 2,465,039 $ 2,218,853 Other liabilities (2) 655,709 749,675 Members’/Partners’ equity 1,942,950 1,438,578 Total liabilities and members’/partners’ equity $ 5,063,698 $ 4,407,106 Company’s share of equity $ 911,682 $ 591,905 Basis differentials (3) 398,896 341,318 Carrying value of the Company’s investments in unconsolidated joint ventures (4) $ 1,310,578 $ 933,223 _______________ (1) At June 30, 2020 and December 31, 2019, this amount includes right of use assets - finance leases totaling approximately $ 248.9 million and $ 383.9 million, respectively, and right of use assets - operating leases totaling approximately $ 11.7 million and $ 12.1 million, respectively. (2) At June 30, 2020 and December 31, 2019, this amount includes lease liabilities - finance leases totaling approximately $ 390.2 million and $ 510.8 million, respectively, and lease liabilities - operating leases totaling approximately $ 17.4 million and $ 17.3 million, respectively. (3) This amount represents the aggregate difference between the Company’s historical cost basis and the basis reflected at the joint venture level, which is typically amortized over the life of the related assets and liabilities. Basis differentials result from impairments of investments, acquisitions through joint ventures with no change in control and upon the transfer of assets that were previously owned by the Company into a joint venture. In addition, certain acquisition, transaction and other costs may not be reflected in the net assets at the joint venture level. At June 30, 2020 and December 31, 2019, there was an aggregate basis differential of approximately $ 309.0 million and $ 311.3 million, respectively, between the carrying value of the Company’s investment in the joint venture that owns Colorado Center and the joint venture’s basis in the assets and liabilities. At June 30, 2020, there was an aggregate basis differential of approximately $ 54.4 million between the carrying value of the Company’s investment in the joint venture that owns Gateway Commons and the joint venture’s basis in the assets and liabilities. These basis differentials (excluding land) will be amortized over the remaining lives of the related assets and liabilities. (4) Investments with deficit balances aggregating approximately $ 29.1 million and $ 22.4 million at June 30, 2020 and December 31, 2019, respectively, are reflected within Other Liabilities in the Company’s Consolidated Balance Sheets. 25 Table of Content s The combined summarized statements of operations of the Company’s unconsolidated joint ventures are as follows: Three months ended June 30, Six months ended June 30, 2020 2019 2020 2019 (in thousands) Total revenue (1) $ 89,563 $ 80,204 $ 182,766 $ 163,159 Expenses Operating 33,704 30,134 69,105 60,633 Depreciation and amortization 37,390 24,818 69,425 53,464 Total expenses 71,094 54,952 138,530 114,097 Other income (expense) Interest expense ( 23,306 ) ( 20,803 ) ( 45,889 ) ( 41,560 ) Gains on sales of real estate 11,720 34,572 11,720 34,572 Net income $ 6,883 $ 39,021 $ 10,067 $ 42,074 Company’s share of net income $ 4,024 $ 22,376 $ 5,276 $ 23,960 Basis differential (2) ( 2,192 ) 25,588 ( 3,813 ) 24,217 Income from unconsolidated joint ventures $ 1,832 $ 47,964 $ 1,463 $ 48,177 _______________ (1) Includes straight-line rent adjustments of approximately $ 8.5 million and $ 7.6 million for the three months ended June 30, 2020 and 2019, respectively, and $ 18.2 million and $ 13.4 million for the six months ended June 30, 2020 and 2019, respectively. (2) Includes straight-line rent adjustments of approximately $ 0.4 million and $ 0.5 million for the three months ended June 30, 2020 and 2019, respectively, and $ 0.9 million and $ 1.1 million for the six months ended June 30, 2020 and 2019, respectively. Also includes net above-/below-market rent adjustments of approximately $ 0.2 million and $ 0.4 million for the three months ended June 30, 2020 and 2019, respectively, and $ 0.5 million and $ 0.8 million for the six months ended June 30, 2020 and 2019, respectively. On January 28, 2020, the Company entered into a joint venture with a third party to own, operate and develop properties at its Gateway Commons complex located in South San Francisco, California. The Company contributed its 601, 611 and 651 Gateway properties and development rights with an agreed upon value aggregating approximately $ 350.0 million for its 50 % interest in the joint venture (See Note 3). 601, 611 and 651 Gateway consist of three Class A office properties aggregating approximately 768,000 net rentable square feet. The partner contributed three properties and development rights with an agreed upon value aggregating approximately $ 280.8 million at closing and will contribute cash totaling approximately $ 69.2 million in the future for its 50 % ownership interest in the joint venture. As a result of the partner’s deferred contribution, the Company has an initial approximately 55 % interest in the joint venture. Future development projects will be owned 49 % by the Company and 51 % by its partner. On January 28, 2020, a joint venture in which the Company has a 55 % interest commenced development of the first phase of its Platform 16 project located in San Jose, California. Platform 16 consists of a parcel of land totaling approximately 5.6 acres that is expected to support the development of approximately 1.1 million square feet of commercial office space. The first phase of the Platform 16 development project consists of an approximately 390,000 net rentable square foot Class A office building and a below-grade parking garage. The joint venture will pause construction activities after completing site preparation work and intends to revisit its plans once the economic impact of COVID-19 becomes clearer or economic conditions improve. On February 20, 2020, the joint venture acquired the land underlying the ground lease for a purchase price totaling approximately $ 134.8 million. The joint venture had previously made a deposit totaling $ 15.0 million, which deposit was credited against the purchase price. On June 9, 2020, a joint venture in which the Company has a 20 % interest refinanced with a new lender the mortgage loan collateralized by its Metropolitan Square property located in Washington, DC. The outstanding balance of the loan totaled approximately $ 155.9 million, bore interest at a fixed rate of 5.75 % per annum and was scheduled to mature on August 5, 2020. The new mortgage loan totaling $ 325.0 million, of which $ 288.0 million was advanced at closing, bears interest at a variable rate equal to LIBOR plus 4.75 % per annum and matures on 26 Table of Content s July 7, 2022, with two , one -year extension options, subject to certain conditions. The joint venture entered into an interest rate cap agreement with a financial institution to limit its exposure to increases in the LIBOR portion of interest costs to 3.00 % per annum on a notional amount of $ 325.0 million through July 7, 2022. The joint venture distributed excess loan proceeds from the new mortgage loan totaling approximately $ 112.7 million, of which the Company’s share totaled approximately $ 22.5 million. Metropolitan Square is a Class A office property with approximately 654,000 net rentable square feet. On Jun e 25, 2020, a joint venture in which the Company has a 50 % interest completed the sale of Annapolis Junction Building Eight and two land parcels located in Annapolis, Maryland for a gross sale price of $ 47.0 million. Net cash proceeds totaled approximately $ 45.8 million after the payment of transaction costs. The Company recognized a gain on sale of real estate totaling approximately $ 5.8 million, which is included in Income from Unconsolidated Joint Ventures in the accompanying Consolidated Statements of Operations. The joint venture distributed approximately $ 36.8 million of available cash and the net proceeds from the sale after the pay down of the mortgage loan, of which the Company’s share totaled approximately $ 18.4 million. Annapolis Junction Building Eight is an approximately 126,000 net rentable square foot Class A office property, which is vacant. The two land parcels will support the development of approximately 300,000 square feet of commercial office space with one parcel currently containing surface parking for approximately 511 vehicles. On June 25, 2020, in conjunction with the joint venture’s sale of Annapolis Junction Building Eight, the joint venture in which the Company has a 50 % interest modified the mortgage loan collateralized by Annapolis Junction Building Seven and Building Eight with the release of Annapolis Junction Building Eight as collateral under the loan in exchange for a principal pay down of approximately $ 16.1 million using a portion of the net proceeds from the sale of the property. At the time of the modification, the outstanding balance of the loan totaled approximately $ 34.5 million, bore interest at a variable rate equal to LIBOR plus 2.35 % per annum and was scheduled to mature on June 30, 2020. The modified mortgage loan totaling approximately $ 18.4 million is collateralized by Annapolis Junction Building Seven, continues to bear interest at a variable rate equal to LIBOR plus 2.35 % per annum and matures on March 25, 2021. Annapolis Junction Building Seven is a Class A office property with approximately 127,000 net rentable square feet located in Annapolis, Maryland. 6. Unsecured Senior Notes The following summarizes the unsecured senior notes outstanding as of June 30, 2020 (dollars in thousands): Coupon/ Stated Rate Effective Rate(1) Principal Amount Maturity Date(2) 10 Year Unsecured Senior Notes 4.125 % 4.289 % $ 850,000 May 15, 2021 11 Year Unsecured Senior Notes 3.850 % 3.954 % 1,000,000 February 1, 2023 10.5 Year Unsecured Senior Notes 3.125 % 3.279 % 500,000 September 1, 2023 10.5 Year Unsecured Senior Notes 3.800 % 3.916 % 700,000 February 1, 2024 7 Year Unsecured Senior Notes 3.200 % 3.350 % 850,000 January 15, 2025 10 Year Unsecured Senior Notes 3.650 % 3.766 % 1,000,000 February 1, 2026 10 Year Unsecured Senior Notes 2.750 % 3.495 % 1,000,000 October 1, 2026 10 Year Unsecured Senior Notes 4.500 % 4.628 % 1,000,000 December 1, 2028 10 Year Unsecured Senior Notes 3.400 % 3.505 % 850,000 June 21, 2029 10.5 Year Unsecured Senior Notes 2.900 % 2.984 % 700,000 March 15, 2030 10.75 Year Unsecured Senior Notes 3.250 % 3.343 % 1,250,000 January 30, 2031 Total principal 9,700,000 Net unamortized discount ( 17,719 ) Deferred financing costs, net ( 48,704 ) Total $ 9,633,577 _______________ (1) Yield on issuance date including the effects of discounts on the notes, settlements of interest rate contracts and the amortization of financing costs. (2) No principal amounts are due prior to maturity. 27 Table of Content s On May 5, 2020, Boston Properties Limited Partnership completed a public offering of $ 1.25 billion in aggregate principal amount of its 3.250 % unsecured senior notes due 2031. The notes were priced at 99.850 % of the principal amount to yield an effective rate (including financing fees) of approximately 3.343 % per annum to maturity. The notes will mature on January 30, 2031, unless earlier redeemed. The aggregate net proceeds from the offering were approximately $ 1.24 billion after deducting underwriting discounts and transaction expenses. The indenture relating to the unsecured senior notes contains certain financial restrictions and requirements, including (1) a leverage ratio not to exceed 60%, (2) a secured debt leverage ratio not to exceed 50%, (3) an interest coverage ratio of greater than 1.50, and (4) an unencumbered asset value of not less than 150% of unsecured debt. At June 30, 2020, Boston Properties Limited Partnership was in compliance with each of these financial restrictions and requirements. 7. Commitments and Contingencies General In the normal course of business, the Company guarantees its performance of services or indemnifies third parties against its negligence. In addition, in the normal course of business, the Company guarantees to certain tenants the obligations of its subsidiaries for the payment of tenant improvement allowances and brokerage commissions in connection with their leases and limited costs arising from delays in delivery of their premises. The Company has letter of credit and performance obligations related to lender and development requirements that total approximately $ 20.4 million. Certain of the Company’s joint venture agreements include provisions whereby, at certain specified times, each partner has the right to initiate a purchase or sale of its interest in the joint ventures. With limited exception, under these provisions, the Company is not compelled to purchase the interest of its outside joint venture partners. From time to time, under certain of the Company’s joint venture agreements, if certain return thresholds are achieved, either the Company or its partners may be entitled to an additional promoted interest or payments. From time to time, the Company (or ventures in which the Company has an ownership interest) has agreed, and may in the future agree, to (1) guarantee portions of the principal, interest and other amounts in connection with their borrowings, (2) provide customary environmental indemnifications and nonrecourse carve-outs (e.g., guarantees against fraud, misrepresentation and bankruptcy) in connection with their borrowings and (3) provide guarantees to lenders, tenants and other third parties for the completion of development projects. The Company has agreements with its outside partners whereby the partners agree to reimburse the joint venture for their share of any payments made under the guarantee. In some cases, the Company earns a fee from the applicable joint venture for providing the guarantee. In connection with the refinancing of 767 Fifth Avenue’s (the General Motors Building) secured loan by the Company’s consolidated joint venture entity, 767 Venture, LLC, the Company guaranteed the consolidated entity’s obligation to fund various reserves for tenant improvement costs and allowances, leasing commissions and free rent obligations in lieu of cash deposits. As of June 30, 2020, the maximum funding obligation under the guarantee was approximately $ 48.9 million. The Company earns a fee from the joint venture for providing the guarantee and has an agreement with the outside partners to reimburse the joint venture for their share of any payments made under the guarantee. As of June 30, 2020, no amounts related to the guarantee are recorded as liabilities in the Company’s consolidated financial statements. Pursuant to the lease agreement with Marriott, the Company has guaranteed the completion of the office building and parking garage on behalf of its 7750 Wisconsin Avenue joint venture and has also provided a financing guaranty as required with respect to the third-party construction financing. The Company earns fees from the joint venture for providing the guarantees and any amounts the Company pays under the guarantee(s) will be deemed to be capital contributions by the Company to the joint venture. The Company has also agreed to fund construction costs through capital contributions to the joint venture in the event of insufficiency of third-party construction financing. In addition, the Company has guaranteed to Marriott, as hotel manager, the completion of a hotel being developed by an affiliate of The Bernstein Companies (the Company’s partner in the 7750 Wisconsin Avenue joint venture) adjacent to the office property, for which the Company earns a fee from the affiliate of The Bernstein Companies. In addition, the Company entered into agreements with affiliates of The Bernstein Companies whereby the Company could be required to act as a mezzanine and/or mortgage lender and finance the construction of the hotel property. An affiliate of The Bernstein Companies exercised its option to borrow $ 10.0 million from the Company under such agreements, which financing was provided by the Company on June 1, 2020. The financing Table of Content s bears interest at a fixed rate of 8.00 % per annum, compounded monthly, and matures on the fifth anniversary of the date on which the base building of the affiliate of The Bernstein Companies’ hotel property is substantially completed. The financing is collateralized by a pledge of the partner’s equity interest in the joint venture that owns and is developing 7750 Wisconsin Avenue . To secure such financing arrangements, affiliates of The Bernstein Companies are required to provide certain security, which varies depending on the specific loan, by pledges of their equity interest in the office property, a fee mortgage on the hotel property, or both. As of June 30, 2020, no amounts related to the contingent aspect of any of the guarantees are recorded as liabilities in the Company’s consolidated financial statements. In connection with the sale and development of the Company’s 6595 Springfield Center Drive development project, the Company has guaranteed the completion of the project and the payment of certain cost overruns in accordance with the development management agreement with the buyer. Although the project has been sold and the lease with the Federal Government tenant has been assigned to the buyer, pursuant to the terms of the Federal Government lease, the Federal Government tenant is not obligated to release the prior owner/landlord from such landlord’s obligations under the lease until completion of the construction. As a result, the entity which previously owned the land remains liable to the Federal Government tenant for the completion of the construction obligations under the lease. The buyer is obligated to fund the balance of the costs to meet such construction obligations, subject to the Company’s obligation to fund cost overruns (if any), as noted above. An affiliate of the buyer has provided a guaranty of the obligations of the buyer to fund such construction costs and the buyer has agreed to use commercially reasonable efforts to require the construction lender to provide certain remedies to the Company in the event the buyer does not fund such construction obligations. As of June 30, 2020, no amounts related to the contingent aspect of the guarantee are recorded as a liability in the Company’s consolidated financial statements. In connection with the redevelopment of the Company’s 325 Main Street property located in Cambridge, Massachusetts, the Company is required, pursuant to the local zoning ordinance, to commence construction of a residential building of at least 200,000 square feet with 25 % of the project designated as income-restricted (with a minimum of 20 % of the square footage devoted to home ownership units) prior to the occupancy of the 325 Main Street property, which is expected to occur during the third quarter of 2022. 325 Main Street consisted of an approximately 115,000 net rentable square foot Class A office property that was demolished and is being developed into an approximately 420,000 net rentable square foot Class A office property, including approximately 41,000 net rentable square feet of retail space. In 2009, the Company filed a general unsecured creditor’s claim against Lehman Brothers, Inc. for approximately $ 45.3 million related to its rejection of a lease at 399 Park Avenue in New York City. On January 10, 2014, the trustee for the liquidation of the business of Lehman Brothers allowed the Company’s claim in the amount of approximately $ 45.2 million. During the years 2014 through 2018, the Company received distributions aggregating approximately $ 18.0 million, leaving a remaining claim of approximately $ 27.2 million. The Company will continue to evaluate whether to attempt to sell the remaining claim or wait until the trustee distributes proceeds from the Lehman Brothers estate. Given the inherent uncertainties in bankruptcy proceedings, there can be no assurance as to the timing or amount of additional proceeds, if any, that the Company may ultimately realize on the remaining claim, whether by sale to a third party or by one or more distributions from the trustee. Accordingly, the Company has not recorded any estimated recoveries associated with this gain contingency within its Consolidated Financial Statements at June 30, 2020. Insurance The Company’s property insurance program per occurrence limits are $ 1.0 billion for its portfolio insurance program, including coverage for acts of terrorism other than nuclear, biological, chemical or radiological terrorism (“Terrorism Coverage”). The Company also carries $ 250 million of Terrorism Coverage for 601 Lexington Avenue, New York, New York (“601 Lexington Avenue”) in excess of the $ 1.0 billion of coverage in the Company’s property insurance program. Certain properties, including the General Motors Building located at 767 Fifth Avenue in New York, New York (“767 Fifth Avenue”), are currently insured in separate insurance programs. The property insurance program per occurrence limits for 767 Fifth Avenue are $ 1.625 billion, including Terrorism Coverage. The Company also currently carries nuclear, biological, chemical and radiological terrorism insurance coverage for acts of terrorism certified under the Federal Terrorism Risk Insurance Act (as amended, “TRIA”) (“NBCR Coverage”), which is provided by IXP as a direct insurer, for the properties in the Company’s portfolio, including 767 Fifth Avenue, but excluding certain other properties owned in joint ventures with third parties or which the Company manages. The per occurrence limit for NBCR Coverage is $ 1.0 billion. Under TRIA, after the payment of the required deductible and coinsurance, the NBCR Coverage provided by IXP is backstopped by the Federal Government if the aggregate industry insured losses resulting from a certified act of terrorism exceed a “program trigger.” The program trigger is 29 Table of Content s $ 200 million, the coinsurance is 20 % and the deductible is 20 % of the premiums earned by the insurer for the year prior to a claim. If the Federal Government pays out for a loss under TRIA, it is mandatory that the Federal Government recoup the full amount of the loss from insurers offering TRIA coverage after the payment of the loss pursuant to a formula in TRIA. The Company may elect to terminate the NBCR Coverage if the Federal Government seeks recoupment for losses paid under TRIA, if TRIA is not extended after its expiration on December 31, 2027, if there is a change in its portfolio or for any other reason. The Company intends to continue to monitor the scope, nature and cost of available terrorism insurance. The Company also currently carries earthquake insurance on its properties located in areas known to be subject to earthquakes. In addition, this insurance is subject to a deductible in the amount of 3 % of the value of the affected property. Specifically, the Company currently carries earthquake insurance which covers its San Francisco and Los Angeles regions with a $ 240 million per occurrence limit, and a $ 240 million annual aggregate limit, $ 20 million of which is provided by IXP, as a direct insurer. The amount of the Company’s earthquake insurance coverage may not be sufficient to cover losses from earthquakes. In addition, the amount of earthquake coverage could impact the Company’s ability to finance properties subject to earthquake risk. The Company may discontinue earthquake insurance or change the structure of its earthquake insurance program on some or all of its properties in the future if the premiums exceed the Company’s estimation of the value of the coverage. IXP, a captive insurance company which is a wholly-owned subsidiary of the Company, acts as a direct insurer with respect to a portion of the Company’s earthquake insurance coverage for its Greater San Francisco and Los Angeles properties and the Company’s NBCR Coverage. Insofar as the Company owns IXP, it is responsible for its liquidity and capital resources, and the accounts of IXP are part of the Company’s consolidated financial statements. In particular, if a loss occurs which is covered by the Company’s NBCR Coverage but is less than the applicable program trigger under TRIA, IXP would be responsible for the full amount of the loss without any backstop by the Federal Government. IXP would also be responsible for any recoupment charges by the Federal Government in the event losses are paid out and its insurance policy is maintained after the payout by the Federal Government. If the Company experiences a loss and IXP is required to pay under its insurance policy, the Company would ultimately record the loss to the extent of the required payment. Therefore, insurance coverage provided by IXP should not be considered as the equivalent of third-party insurance, but rather as a modified form of self-insurance. In addition, Boston Properties Limited Partnership has issued a guarantee to cover liabilities of IXP in the amount of $ 20.0 million. Due to the current COVID-19 pandemic, the Company anticipates the possibility of business interruption, loss of lease revenue and/or other associated expenses related to the Company’s operations across its portfolio. Because this is an ongoing situation it is not yet possible to quantify the Company’s losses and expenses, which continue to develop. Because of the complexity of the Company’s insurance policies and limited precedent for claims being made related to pandemics, it is not yet possible to determine if such losses and expenses will be covered by the Company’s insurance policies. Therefore, at this time, the Company is providing notice to the applicable insurers of the potential for claims in order to protect the Company’s rights under its policies. The Company continues to monitor the state of the insurance market in general, and the scope and costs of coverage for acts of terrorism, California earthquake risk and pandemics, in particular, but the Company cannot anticipate what coverage will be available on commercially reasonable terms in future policy years. There are other types of losses, such as from wars, for which the Company cannot obtain insurance at all or at a reasonable cost. With respect to such losses and losses from acts of terrorism, earthquakes or other catastrophic events, if the Company experiences a loss that is uninsured or that exceeds policy limits, the Company could lose the capital invested in the damaged properties, as well as the anticipated future revenues from those properties. Depending on the specific circumstances of each affected property, it is possible that the Company could be liable for mortgage indebtedness or other obligations related to the property. Any such loss could materially and adversely affect the Company’s business and financial condition and results of operations. 8. Noncontrolling Interests Noncontrolling interests relate to the interests in Boston Properties Limited Partnership not owned by Boston Properties, Inc. and interests in consolidated property partnerships not wholly-owned by the Company. As of June 30, 2020, the noncontrolling interests in Boston Properties Limited Partnership consisted of 16,123,912 OP Units, 1,345,723 LTIP Units (including 105,080 2012 OPP Units, 64,468 2013 MYLTIP Units, 23,100 2014 MYLTIP Units, 24,966 2015 MYLTIP Units, 89,791 2016 MYLTIP Units and 116,078 2017 MYLTIP Units), 336,195 2018 MYLTIP Units, 220,325 2019 MYLTIP Units and 203,278 2020 MYLTIP Units held by parties other than Boston Properties, Inc. 30 Table of Content s Noncontrolling Interest—Common Units During the six months ended June 30, 2020, 764,640 OP Units were presented by the holders for redemption (including 82,551 O P Units issued upon conversion of LTIP Units, 2012 OPP Units and 2013 - 2017 MYLTIP Units) and were redeemed by Boston Properties, Inc. in exchange for an equal number of shares of Common Stock. At June 30, 2020, Boston Properties Limited Partnership had outstanding 336,195 2018 MYLTIP Units, 220,325 2019 MYLTIP Units and 203,278 2020 MYLTIP Units. Prior to the applicable measurement date (February 5, 2021 for 2018 MYLTIP Units, February 4, 2022 for 2019 MYLTIP Units and February 3, 2023 for 2020 MYLTIP Units), holders of MYLTIP Units will be entitled to receive per unit distributions equal to one-tenth ( 10 %) of the regular quarterly distributions payable on an OP Unit, but will not be entitled to receive any special distributions. After the measurement date, the number of MYLTIP Units, both vested and unvested, that MYLTIP award recipients have earned, if any, based on the establishment of a performance pool, will be entitled to receive distributions in an amount per unit equal to distributions, both regular and special, payable on an OP Unit. On February 6, 2020, the measurement period for the Company’s 2017 MYLTIP awards ended and, based on Boston Properties, Inc.’s relative TSR performance, the final awards were determined to be 83.8 % of target or an aggregate of approximately $ 17.6 million (after giving effect to employee separations). As a result, an aggregate of 270,942 2017 MYLTIP Units that had been previously granted were automatically forfeited. The following table presents Boston Properties Limited Partnership’s distributions on the OP Units and LTIP Units (including the 2012 OPP Units, 2013 - 2016 MYLTIP Units and, after the February 6, 2020 measurement date, the 2017 MYLTIP Units) and its distributions on the 2017 MYLTIP Units (prior to the February 6, 2020 measurement date), 2018 MYLTIP Units, 2019 MYLTIP Units and 2020 MYLTIP Units (after the February 4, 2020 issuance date) that occurred during the six months ended June 30, 2020: Record Date Payment Date Distributions per OP Unit and LTIP Unit Distributions per MYLTIP Unit June 30, 2020 July 31, 2020 $ 0.98 $ 0.098 March 31, 2020 April 30, 2020 $ 0.98 $ 0.098 December 31, 2019 January 30, 2020 $ 0.98 $ 0.098 The following table presents Boston Properties Limited Partnership’s distributions on the OP Units and LTIP Units (including the 2012 OPP Units, 2013 - 2015 MYLTIP Units and, after the February 9, 2019 measurement date, the 2016 MYLTIP Units) and its distributions on the 2016 MYLTIP Units (prior to the February 9, 2019 measurement date), 2017 MYLTIP Units, 2018 MYLTIP Units and 2019 MYLTIP Units (after the February 5, 2019 issuance date) that occurred during the six months ended June 30, 2019: Record Date Payment Date Distributions per OP Unit and LTIP Unit Distributions per MYLTIP Unit June 28, 2019 July 31, 2019 $ 0.95 $ 0.095 March 29, 2019 April 30, 2019 $ 0.95 $ 0.095 December 31, 2018 January 30, 2019 $ 0.95 $ 0.095 A holder of an OP Unit may present the OP Unit to Boston Properties Limited Partnership for redemption at any time (subject to restrictions agreed upon at the time of issuance of OP Units to particular holders that may restrict such redemption right for a period of time, generally one year from issuance). Upon presentation of an OP Unit for redemption, Boston Properties Limited Partnership must redeem the OP Unit for cash equal to the then value of a share of Common Stock of Boston Properties, Inc. Boston Properties, Inc. may, in its sole discretion, elect to assume and satisfy the redemption obligation by paying either cash or issuing one share of Common Stock. The value of the OP Units (not owned by Boston Properties, Inc. and LTIP Units (including the 2012 OPP Units, 2013 - 2017 MYLTIP Units) assuming that all conditions had been met for the conversion thereof) had all of such units been redeemed at June 30, 2020 was approximately $ 1.6 billion based on the last reported price of a share of Common Stock on the New York Stock Exchange of $ 90.38 per share on June 30, 2020. 31 Table of Content s Noncontrolling Interests—Property Partnerships The noncontrolling interests in property partnerships consist of the outside equity interests in ventures that are consolidated with the financial results of the Company because the Company exercises control over the entities that own the properties. The equity interests in these ventures that are not owned by the Company, totaling approximately $ 1.7 billion at June 30, 2020 and December 31, 2019, are included in Noncontrolling Interests—Property Partnerships on the accompanying Consolidated Balance Sheets. 9. Stockholders’ Equity / Partners’ Capital Boston Properties, Inc. As of June 30, 2020, Boston Properties, Inc. had 155,622,286 shares of Common Stock outstanding. As of June 30, 2020, Boston Properties, Inc. owned 1,730,919 general partnership units and 153,891,367 limited partnership units in Boston Properties Limited Partnership. On May 22, 2020, Boston Properties, Inc. renewed its “at the market” (“ATM”) stock offering program through which it may sell from time to time up to an aggregate of $ 600.0 million of its Common Stock through sales agents over a three -year period. Under the ATM stock offering program, Boston Properties, Inc. may also engage in forward sale transactions with affiliates of certain sales agents for the sale of its Common Stock on a forward basis. This program replaced Boston Properties, Inc.’s prior $ 600.0 million ATM stock offering program that was scheduled to expire on June 2, 2020. Boston Properties, Inc. intends to use the net proceeds from any offering for general business purposes, which may include investment opportunities and debt reduction. No shares of Common Stock have been issued under this ATM stock offering program. During the six months ended June 30, 2020, Boston Properties, Inc. issued 43,792 shares of Common Stock upon the exercise of options to purchase Common Stock. During the six months ended June 30, 2020, Boston Properties, Inc. issued 764,640 shares of Common Stock, in connection with the redemption of an equal number of redeemable OP Units from limited partners. The following table presents Boston Properties, Inc.’s dividends per share and Boston Properties Limited Partnership’s distributions per OP Unit and LTIP Unit paid or declared in 2020 and during the six months ended June 30, 2019: Record Date Payment Date Dividend (Per Share) Distribution (Per Unit) June 30, 2020 July 31, 2020 $ 0.98 $ 0.98 March 31, 2020 April 30, 2020 $ 0.98 $ 0.98 December 31, 2019 January 30, 2020 $ 0.98 $ 0.98 June 28, 2019 July 31, 2019 $ 0.95 $ 0.95 March 29, 2019 April 30, 2019 $ 0.95 $ 0.95 December 31, 2018 January 30, 2019 $ 0.95 $ 0.95 Preferred Stock As of June 30, 2020, Boston Properties, Inc. had 80,000 shares ( 8,000,000 depositary shares each representing 1/100th of a share) outstanding of its 5.25 % Series B Cumulative Redeemable Preferred Stock with a liquidation preference of $ 2,500.00 per share ($ 25.00 per depositary share). Boston Properties, Inc. pays cumulative cash dividends on the Series B Preferred Stock at a rate of 5.25% per annum of the $2,500.00 liquidation preference per share. Boston Properties, Inc. did not have the right to redeem the Series B Preferred Stock prior to March 27, 2018, except in certain circumstances relating to the preservation of Boston Properties, Inc.’s REIT status. On and after March 27, 2018, Boston Properties, Inc., at its option, may redeem the Series B Preferred Stock for a cash redemption price of $ 2,500.00 per share ($ 25.00 per depositary share), plus all accrued and unpaid dividends. The Series B Preferred Stock is not redeemable by the holders, has no maturity date and is not convertible into any other security of Boston Properties, Inc. or its affiliates. 32 Table of Content s The following table presents Boston Properties Inc.’s dividends per share on its outstanding Series B Preferred Stock paid or declared during 2020 and during the six months ended June 30, 2019: Record Date Payment Date Dividend (Per Share) August 3, 2020 August 17, 2020 $ 32.8125 May 1, 2020 May 15, 2020 $ 32.8125 February 4, 2020 February 18, 2020 $ 32.8125 August 2, 2019 August 15, 2019 $ 32.8125 May 3, 2019 May 15, 2019 $ 32.8125 February 4, 2019 February 15, 2019 $ 32.8125 10. Earnings Per Share / Common Unit Boston Properties, Inc. The following table provides a reconciliation of both the net income attributable to Boston Properties, Inc. common shareholders and the number of common shares used in the computation of basic earnings per share (“EPS”), which is calculated by dividing net income attributable to Boston Properties, Inc. common shareholders by the weighted-average number of common shares outstanding during the period. Unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are also participating securities. As such, unvested restricted common stock of Boston Properties, Inc. and Boston Properties Limited Partnership’s LTIP Units, 2012 OPP Units and MYLTIP Units are considered participating securities. Participating securities are included in the computation of basic EPS of Boston Properties, Inc. using the two-class method. Participating securities are included in the computation of diluted EPS of Boston Properties, Inc. using the if-converted method if the impact is dilutive. Because the 2012 OPP Units and 2013 - 2017 MYLTIP Units required, and the 2018 - 2020 MYLTIP Units require, Boston Properties, Inc. to outperform absolute and relative return thresholds, unless such thresholds have been met by the end of the applicable reporting period, Boston Properties, Inc. excludes such units from the diluted EPS calculation. Other potentially dilutive common shares, including stock options, restricted stock and other securities of Boston Properties Limited Partnership that are exchangeable for Boston Properties, Inc.’s Common Stock, and the related impact on earnings, are considered when calculating diluted EPS. Three months ended June 30, 2020 Income (Numerator) Shares (Denominator) Per Share Amount (in thousands, except for per share amounts) Basic Earnings: Net income attributable to Boston Properties, Inc. common shareholders $ 266,525 155,386 $ 1.72 Allocation of undistributed earnings to participating securities ( 336 ) — ( 0.01 ) Net income attributable to Boston Properties, Inc. common shareholders $ 266,189 155,386 $ 1.71 Effect of Dilutive Securities: Stock Based Compensation — 21 — Diluted Earnings: Net income attributable to Boston Properties, Inc. common shareholders $ 266,189 155,407 $ 1.71 33 Table of Content s Three months ended June 30, 2019 Income (Numerator) Shares (Denominator) Per Share Amount (in thousands, except for per share amounts) Basic Earnings: Net income attributable to Boston Properties, Inc. common shareholders $ 164,318 154,555 $ 1.06 Allocation of undistributed earnings to participating securities ( 48 ) — — Net income attributable to Boston Properties, Inc. common shareholders $ 164,270 154,555 $ 1.06 Effect of Dilutive Securities: Stock Based Compensation — 319 — Diluted Earnings: Net income attributable to Boston Properties, Inc. common shareholders $ 164,270 154,874 $ 1.06 Six months ended June 30, 2020 Income (Numerator) Shares (Denominator) Per Share Amount (in thousands, except for per share amounts) Basic Earnings: Net income attributable to Boston Properties, Inc. common shareholders $ 764,232 155,199 $ 4.92 Allocation of undistributed earnings to participating securities ( 1,344 ) — — Net income attributable to Boston Properties, Inc. common shareholders $ 762,888 155,199 $ 4.92 Effect of Dilutive Securities: Stock Based Compensation — 134 ( 0.01 ) Diluted Earnings: Net income attributable to Boston Properties, Inc. common shareholders $ 762,888 155,333 $ 4.91 Six months ended June 30, 2019 Income (Numerator) Shares (Denominator) Per Share Amount (in thousands, except for per share amounts) Basic Earnings: Net income attributable to Boston Properties, Inc. common shareholders $ 262,431 154,540 $ 1.70 Effect of Dilutive Securities: Stock Based Compensation — 319 ( 0.01 ) Diluted Earnings: Net income attributable to Boston Properties, Inc. common shareholders $ 262,431 154,859 $ 1.69 34 Table of Content s Boston Properties Limited Partnership The following table provides a reconciliation of both the net income attributable to Boston Properties Limited Partnership common unitholders and the number of common units used in the computation of basic earnings per common unit, which is calculated by dividing net income attributable to Boston Properties Limited Partnership common unitholders by the weighted-average number of common units outstanding during the period. Unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are also participating securities. As such, unvested restricted common stock of Boston Properties, Inc. and Boston Properties Limited Partnership’s LTIP Units, 2012 OPP Units and MYLTIP Units are considered participating securities. Participating securities are included in the computation of basic earnings per common unit using the two-class method. Participating securities are included in the computation of diluted earnings per common unit using the if-converted method if the impact is dilutive. Because the 2012 OPP Units and 2013 - 2017 MYLTIP Units required, and the 2018 - 2020 MYLTIP Units require, Boston Properties, Inc. to outperform absolute and relative return thresholds, unless such thresholds have been met by the end of the applicable reporting period, Boston Properties Limited Partnership excludes such units from the diluted earnings per common unit calculation. Other potentially dilutive common units and the related impact on earnings are considered when calculating diluted earnings per common unit. Included in the number of units (the denominator) below are approximately 17,273,000 and 17,647,000 redeemable common units for the three months ended June 30, 2020 and 2019, respectively, and 17,405,000 and 17,627,000 redeemable common units for the six months ended June 30, 2020 and 2019, respectively. Three months ended June 30, 2020 Income (Numerator) Units (Denominator) Per Unit Amount (in thousands, except for per unit amounts) Basic Earnings: Net income attributable to Boston Properties Limited Partnership common unitholders $ 301,975 172,659 $ 1.75 Allocation of undistributed earnings to participating securities ( 374 ) — — Net income attributable to Boston Properties Limited Partnership common unitholders $ 301,601 172,659 $ 1.75 Effect of Dilutive Securities: Stock Based Compensation — 21 — Diluted Earnings: Net income attributable to Boston Properties Limited Partnership common unitholders $ 301,601 172,680 $ 1.75 Three months ended June 30, 2019 Income (Numerator) Units (Denominator) Per Unit Amount (in thousands, except for per unit amounts) Basic Earnings: Net income attributable to Boston Properties Limited Partnership common unitholders $ 185,715 172,202 $ 1.08 Allocation of undistributed earnings to participating securities ( 54 ) — — Net income attributable to Boston Properties Limited Partnership common unitholders $ 185,661 172,202 $ 1.08 Effect of Dilutive Securities: Stock Based Compensation — 319 — Diluted Earnings: Net income attributable to Boston Properties Limited Partnership common unitholders $ 185,661 172,521 $ 1.08 35 Table of Content s Six months ended June 30, 2020 Income (Numerator) Units (Denominator) Per Unit Amount (in thousands, except for per unit amounts) Basic Earnings: Net income attributable to Boston Properties Limited Partnership common unitholders $ 868,308 172,604 $ 5.03 Allocation of undistributed earnings to participating securities ( 1,495 ) — ( 0.01 ) Net income attributable to Boston Properties Limited Partnership common unitholders $ 866,813 172,604 $ 5.02 Effect of Dilutive Securities: Stock Based Compensation — 134 — Diluted Earnings: Net income attributable to Boston Properties Limited Partnership common unitholders $ 866,813 172,738 $ 5.02 Six months ended June 30, 2019 Income (Numerator) Units (Denominator) Per Unit Amount (in thousands, except for per unit amounts) Basic Earnings: Net income attributable to Boston Properties Limited Partnership common unitholders $ 299,097 172,167 $ 1.74 Effect of Dilutive Securities: Stock Based Compensation — 319 ( 0.01 ) Diluted Earnings: Net income attributable to Boston Properties Limited Partnership common unitholders $ 299,097 172,486 $ 1.73 11. Stock Option and Incentive Plan On February 4, 2020, Boston Properties, Inc.’s Compensation Committee granted the 2020 MYLTIP awards under the Boston Properties, Inc.’s 2012 Stock Option and Incentive Plan (the “2012 Plan”) to certain officers and employees of Boston Properties, Inc. The 2020 MYLTIP awards utilize Boston Properties, Inc.’s TSR over a three-year measurement period, on an annualized, compounded basis, as the performance metric. Earned awards will range from zero to a maximum of 203,278 LTIP Units depending on Boston Properties, Inc.’s TSR relative to the FTSE Russell Nareit Office Index, adjusted to include Vornado Realty Trust, with a target of approximately 101,638 LTIP Units and linear interpolation between zero and maximum. Earned awards (if any) will vest 50% on February 3, 2023 and 50% on February 3, 2024, based on continued employment. Vesting will be accelerated in the event of a change in control, termination of employment by Boston Properties, Inc. without cause, or termination of employment by the award recipient for good reason, death, disability or retirement. If there is a change of control prior to February 3, 2023, earned awards will be calculated based on TSR performance up to the date of the change of control. The 2020 MYLTIP awards are in the form of LTIP Units issued on the grant date which (i) are subject to forfeiture to the extent awards are not earned and (ii) prior to the performance measurement date are only entitled to one-tenth (10%) of the regular quarterly distributions payable on common partnership units. Under ASC 718 “Compensation - Stock Compensation,” the 2020 MYLTIP awards have an aggregate value of approximately $ 13.7 million, which amount will generally be amortized into earnings under the graded vesting method. On February 6, 2020, the measurement period for the Company’s 2017 MYLTIP awards ended and, based on Boston Properties, Inc.’s relative TSR performance, the final awards were determined to be 83.8 % of target or an aggregate of approximately $ 17.6 million (after giving effect to employee separations). As a result, an aggregate of 270,942 2017 MYLTIP Units that had been previously granted were automatically forfeited. 36 Table of Content s During the six months ended June 30, 2020, Boston Properties, Inc. issued 29,630 shares of restricted common stock and Boston Properties Limited Partnership issued 207,181 LTIP Units and 203,278 2020 MYLTIP Units to employees and non-employee directors under the 2012 Plan. Employees and non-employee directors paid $ 0.01 per share of restricted common stock and $ 0.25 per LTIP Unit and 2020 MYLTIP Unit. When issued, LTIP Units are not economically equivalent in value to a share of Common Stock, but over time can increase in value to one-for-one parity with Common Stock if there is sufficient appreciation in the value of the Company’s assets. The aggregate value of the LTIP Units is included in noncontrolling interests in the Consolidated Balance Sheets of Boston Properties, Inc. and Boston Properties Limited Partnership. A majority of the grants of restricted common stock and LTIP Units to employees vest in four equal annual installments. Restricted common stock is measured at fair value on the date of grant based on the number of shares granted and the closing price of Boston Properties, Inc.’s Common Stock on the date of grant as quoted on the New York Stock Exchange. Such value is recognized as an expense ratably over the corresponding employee service period. The shares of restricted common stock granted during the six months ended June 30, 2020 were valued at approximately $ 4.0 million ($ 133.81 per share weighted-average). The LTIP Units granted were valued at approximately $ 26.3 million (approximately $ 127.14 per unit weighted-average fair value) using a Monte Carlo simulation method model. The per unit fair values of the LTIP Units granted were estimated on the dates of grant and for a substantial majority of such units were valued using the following assumptions: an expected life of 5.7 years, a risk-free interest rate of 1.47 % and an expected price volatility of 18.0 %. Because the 2012 OPP Units and 2013 - 2020 MYLTIP Units are subject to both a service condition and a market condition, the Company recognizes the related compensation expense under the graded vesting attribution method. Under the graded vesting attribution method, each portion of the award that vests at a different date is accounted for as a separate award and recognized over the period appropriate to that portion so that the compensation cost for each portion should be recognized in full by the time that portion vests. The Company recognizes forfeitures as they occur on its awards of stock-based compensation. Dividends paid on both vested and unvested shares of restricted stock are charged directly to Dividends in Excess of Earnings in Boston Properties, Inc.’s Consolidated Balance Sheets and Partners’ Capital in Boston Properties Limited Partnership’s Consolidated Balance Sheets. Aggregate stock-based compensation expense associated with restricted stock, LTIP Units and 2016 - 2020 MYLTIP Units was approximately $ 10.1 million and $ 10.1 million for the three months ended June 30, 2020 and 2019, respectively, and $ 27.3 million and $ 24.9 million for the six months ended June 30, 2020 and 2019, respectively. At June 30, 2020, there was (1) an aggregate of approximately $ 37.1 million of unrecognized compensation expense related to unvested restricted stock, LTIP Units and 2017 MYLTIP Units and (2) an aggregate of approximately $ 15.3 million of unrecognized compensation expense related to unvested 2018 - 2020 MYLTIP Units that is expected to be recognized over a weighted-average period of approximately 2.4 years. 37 Table of Content s 12. Segment Information The following tables present reconciliations of Net Income Attributable to Boston Properties, Inc. Common Shareholders to the Company’s share of Net Operating Income and Net Income Attributable to Boston Properties Limited Partnership Common Unitholders to the Company’s share of Net Operating Income for the three and six months ended June 30, 2020 and 2019. Boston Properties, Inc. Three months ended June 30, Six months ended June 30, 2020 2019 2020 2019 (in thousands) Net income attributable to Boston Properties, Inc. common shareholders $ 266,525 $ 164,318 $ 764,232 $ 262,431 Add: Preferred dividends 2,625 2,625 5,250 5,250 Noncontrolling interest—common units of the Operating Partnership 30,197 19,036 87,525 30,627 Noncontrolling interests in property partnerships ( 767 ) 17,482 18,719 36,312 Interest expense 107,142 102,357 208,733 203,366 Impairment loss — — — 24,038 Net operating income from unconsolidated joint ventures 27,911 24,715 56,669 50,064 Depreciation and amortization expense 178,188 177,411 349,282 342,005 Transaction costs 332 417 947 877 Payroll and related costs from management services contracts 2,484 2,403 5,721 5,798 General and administrative expense 37,743 35,071 74,197 76,833 Less: Net operating income attributable to noncontrolling interests in property partnerships 32,427 45,562 80,088 92,647 Gains (losses) from investments in securities 4,552 1,165 ( 893 ) 4,134 Interest and other income (loss) 1,305 3,615 4,322 7,368 Gains on sales of real estate 203,767 1,686 613,932 781 Income from unconsolidated joint ventures 1,832 47,964 1,463 48,177 Direct reimbursements of payroll and related costs from management services contracts 2,484 2,403 5,721 5,798 Development and management services revenue 8,125 9,986 16,004 19,263 Company’s share of Net Operating Income $ 397,888 $ 433,454 $ 850,638 $ 859,433 38 Table of Content s Boston Properties Limited Partnership Three months ended June 30, Six months ended June 30, 2020 2019 2020 2019 (in thousands) Net income attributable to Boston Properties Limited Partnership common unitholders $ 301,975 $ 185,715 $ 868,308 $ 299,097 Add: Preferred distributions 2,625 2,625 5,250 5,250 Noncontrolling interests in property partnerships ( 767 ) 17,482 18,719 36,312 Interest expense 107,142 102,357 208,733 203,366 Impairment loss — — — 22,272 Net operating income from unconsolidated joint ventures 27,911 24,715 56,669 50,064 Depreciation and amortization expense 176,409 175,199 345,694 337,881 Transaction costs 332 417 947 877 Payroll and related costs from management services contracts 2,484 2,403 5,721 5,798 General and administrative expense 37,743 35,071 74,197 76,833 Less: Net operating income attributable to noncontrolling interests in property partnerships 32,427 45,562 80,088 92,647 Gains (losses) from investments in securities 4,552 1,165 ( 893 ) 4,134 Interest and other income (loss) 1,305 3,615 4,322 7,368 Gains on sales of real estate 207,241 1,835 626,895 930 Income from unconsolidated joint ventures 1,832 47,964 1,463 48,177 Direct reimbursements of payroll and related costs from management services contracts 2,484 2,403 5,721 5,798 Development and management services revenue 8,125 9,986 16,004 19,263 Company’s share of Net Operating Income $ 397,888 $ 433,454 $ 850,638 $ 859,433 Net operating income (“NOI”) is a non-GAAP financial measure equal to net income attributable to Boston Properties, Inc. common shareholders and net income attributable to Boston Properties Limited Partnership common unitholders, as applicable, the most directly comparable GAAP financial measures, plus (1) preferred dividends/distributions, net income attributable to noncontrolling interests, interest expense, impairment loss, depreciation and amortization expense, transaction costs, payroll and related costs from management services contracts and corporate general and administrative expense less (2) gains (losses) from investments in securities, interest and other income (loss), gains on sales of real estate, income from unconsolidated joint ventures, direct reimbursements of payroll and related costs from management services contracts and development and management services revenue. The Company believes NOI is useful to investors as a performance measure and believes it provides useful information to investors regarding its results of operations and financial condition because, when compared across periods, it reflects the impact on operations from trends in occupancy rates, rental rates, operating costs and acquisition and development activity on an unleveraged basis, providing perspective not immediately apparent from net income attributable to Boston Properties, Inc. common shareholders and net income attributable to Boston Properties Limited Partnership common unitholders. For example, interest expense is not necessarily linked to the operating performance of a real estate asset and is often incurred at the corporate level as opposed to the property level. Similarly, interest expense may be incurred at the property level even though the financing proceeds may be used at the corporate level (e.g., used for other investment activity). In addition, depreciation and amortization expense, because of historical cost accounting and useful life estimates, may distort operating performance measures at the property level. NOI presented by the Company may not be comparable to NOI reported by other REITs or real estate companies that define NOI differently. 39 Table of Content s The Company’s internal reporting utilizes its share of NOI, which includes its share of NOI from consolidated and unconsolidated joint ventures, which is a non-GAAP financial measure that is calculated as the consolidated amount, plus the Company’s share of the amount from the Company’s unconsolidated joint ventures (calculated based upon the Company’s economic percentage ownership interest and, in some cases, after priority allocations), minus the Company’s partners’ share of the amount from the Company’s consolidated joint ventures (calculated based upon the partners’ economic percentage ownership interests and, in some cases, after priority allocations, income allocation to private REIT shareholders and their share of fees due to the Company). The Company’s share of NOI from unconsolidated joint ventures does not include its share of gains on sale of real estate from unconsolidated joint ventures, which is included within Income From Unconsolidated Joint Ventures in the Company’s Consolidated Statements of Operations. Management utilizes its share of NOI in assessing its performance as the Company has several significant joint ventures and, in some cases, the Company exercises significant influence over, but does not control, the joint venture, in which case GAAP requires that the Company account for the joint venture entity using the equity method of accounting and the Company does not consolidate it for financial reporting purposes. In other cases, GAAP requires that the Company consolidate the venture even though the Company’s partner(s) owns a significant percentage interest. As a result, the presentations of the Company’s share of NOI should not be considered a substitute for, and should only be considered together with and as a supplement to, the Company’s financial information presented in accordance with GAAP. Asset information by segment is not reported because the Company does not use this measure to assess performance. Therefore, depreciation and amortization expense is not allocated among segments. Preferred dividends/distributions, interest expense, impairment loss, depreciation and amortization expense, transaction costs, payroll and related costs from management services contracts, corporate general and administrative expense, gains (losses) from investments in securities, interest and other income (loss), gains on sales of real estate, direct reimbursements of payroll and related costs from management services contracts and development and management services revenue are not included in NOI and are provided as reconciling items to the Company’s reconciliations of its share of NOI to net income attributable to common shareholders/unitholders. The Company’s segments are based on the Company’s method of internal reporting which classifies its operations by geographic area. The Company’s segments by geographic area are Boston, Los Angeles, New York, San Francisco and Washington, DC. The Company also presents information for each segment by property type, including Office, Residential and Hotel. Included within the Office property type are commercial office and retail leases, as well as parking revenue. Upon the adoption of ASC 842, any write-off for bad debt, including accrued rent, will be recorded as a reduction to lease revenue. As a result of COVID-19, during the three and six months ended June 30, 2020, the Company wrote off approximately $ 35.9 million and $ 37.4 million, respectively, related to accrued rent balances and approximately $ 18.0 million and $ 18.9 million, respectively, related to accounts receivable balances. The write-offs were for tenants, primarily in the retail sector, that either terminated their leases or that the Company considered their accrued rent and/or accounts receivable balances no longer probable of collection. In addition, parking and other revenue for the three and six months ended June 30, 2020 decreased by approximately $ 12.4 million and $ 12.8 million, respectively, compared to 2019. These decreases were primarily in transient and monthly parking revenue. The degree to which the Company’s commercial and retail tenants’ and parking operators’ businesses are, or will continue to be, negatively impacted by COVID-19, including by measures intended to reduce its spread, such as mandatory business closures and “stay-at-home” orders, could result in a reduction in the Company’s cash flows or require that the Company write off additional accrued rent and/or accounts receivable balances, and this could have a material adverse effect on lease revenue and thus the results of the Company’s Office property type. The Boston Marriott Cambridge closed in March 2020 and did not re-open during the second quarter. The Company is uncertain as to when the hotel will re-open. The hotel is operating at a monthly deficit and its continued closure has had, and will continue to have, a material adverse impact on the hotel’s operations and thus the results of the Company’s Hotel property type. 40 Table of Content s Information by geographic area and property type (dollars in thousands): For the three months ended June 30, 2020: Boston Los Angeles New York San Francisco Washington, DC Total Rental Revenue: (1) Office $ 218,351 $ — $ 204,242 $ 128,233 $ 83,837 $ 634,663 Residential 3,401 — — — 6,001 9,402 Hotel 99 — — — — 99 Total 221,851 — 204,242 128,233 89,838 644,164 % of Grand Totals 34.43 % — % 31.71 % 19.91 % 13.95 % 100.00 % Rental Expenses: Office 75,694 — 88,367 39,081 32,680 235,822 Residential 1,235 — — — 2,730 3,965 Hotel 1,973 — — — — 1,973 Total 78,902 — 88,367 39,081 35,410 241,760 % of Grand Totals 32.64 % — % 36.54 % 16.17 % 14.65 % 100.00 % Net operating income $ 142,949 $ — $ 115,875 $ 89,152 $ 54,428 $ 402,404 % of Grand Totals 35.52 % — % 28.80 % 22.15 % 13.53 % 100.00 % Less: Net operating income attributable to noncontrolling interests in property partnerships ( 10,576 ) — ( 21,851 ) — — ( 32,427 ) Add: Company’s share of net operating income from unconsolidated joint ventures 2,627 15,026 815 4,127 5,316 27,911 Company’s share of net operating income $ 135,000 $ 15,026 $ 94,839 $ 93,279 $ 59,744 $ 397,888 % of Grand Totals 33.92 % 3.78 % 23.84 % 23.44 % 15.02 % 100.00 % _______________ (1) Rental Revenue is equal to Total Revenue per the Company’s Consolidated Statements of Operations, less Development and Management Services Revenue and Direct Reimbursements of Payroll and Related Costs from Management Services Contracts Revenue per the Consolidated Statements of Operations. 41 Table of Content s For the three months ended June 30, 2019: Boston Los Angeles New York San Francisco Washington, DC Total Rental Revenue: (1) Office $ 217,961 $ — $ 251,556 $ 131,506 $ 96,486 $ 697,509 Residential 3,222 — — — 5,777 8,999 Hotel 14,844 — — — — 14,844 Total 236,027 — 251,556 131,506 102,263 721,352 % of Grand Totals 32.72 % — % 34.87 % 18.23 % 14.18 % 100.00 % Rental Expenses: Office 77,660 — 96,809 43,708 35,672 253,849 Residential 1,279 — — — 2,843 4,122 Hotel 9,080 — — — — 9,080 Total 88,019 — 96,809 43,708 38,515 267,051 % of Grand Totals 32.96 % — % 36.25 % 16.37 % 14.42 % 100.00 % Net operating income $ 148,008 $ — $ 154,747 $ 87,798 $ 63,748 $ 454,301 % of Grand Totals 32.58 % — % 34.06 % 19.33 % 14.03 % 100.00 % Less: Net operating income attributable to noncontrolling interests in property partnerships ( 10,031 ) — ( 35,531 ) — — ( 45,562 ) Add: Company’s share of net operating income from unconsolidated joint ventures 818 15,454 1,696 — 6,747 24,715 Company’s share of net operating income $ 138,795 $ 15,454 $ 120,912 $ 87,798 $ 70,495 $ 433,454 % of Grand Totals 32.01 % 3.57 % 27.90 % 20.26 % 16.26 % 100.00 % _______________ (1) Rental Revenue is equal to Total Revenue per the Company’s Consolidated Statements of Operations, less Development and Management Services Revenue and Direct Reimbursements of Payroll and Related Costs from Management Services Contracts Revenue per the Consolidated Statements of Operations. 42 Table of Content s For the six months ended June 30, 2020: Boston Los Angeles New York San Francisco Washington, DC Total Rental Revenue: (1) Office $ 457,849 $ — $ 459,528 $ 264,972 $ 176,973 $ 1,359,322 Residential 7,469 — — — 11,889 19,358 Hotel 6,924 — — — — 6,924 Total 472,242 — 459,528 264,972 188,862 1,385,604 % of Grand Totals 34.09 % — % 33.16 % 19.12 % 13.63 % 100.00 % Rental Expenses: Office 158,239 — 187,507 81,650 67,328 494,724 Residential 2,575 — — — 5,454 8,029 Hotel 8,794 — — — — 8,794 Total 169,608 — 187,507 81,650 72,782 511,547 % of Grand Totals 33.16 % — % 36.65 % 15.96 % 14.23 % 100.00 % Net operating income $ 302,634 $ — $ 272,021 $ 183,322 $ 116,080 $ 874,057 % of Grand Totals 34.63 % — % 31.12 % 20.97 % 13.28 % 100.00 % Less: Net operating income attributable to noncontrolling interests in property partnerships ( 21,239 ) — ( 58,849 ) — — ( 80,088 ) Add: Company’s share of net operating income from unconsolidated joint ventures 5,726 30,956 1,571 7,286 11,130 56,669 Company’s share of net operating income $ 287,121 $ 30,956 $ 214,743 $ 190,608 $ 127,210 $ 850,638 % of Grand Totals 33.76 % 3.64 % 25.24 % 22.41 % 14.95 % 100.00 % _______________ (1) Rental Revenue is equal to Total Revenue per the Company’s Consolidated Statements of Operations, less Development and Management Services Revenue and Direct Reimbursements of Payroll and Related Costs from Management Services Contracts Revenue per the Consolidated Statements of Operations. 43 Table of Content s For the six months ended June 30, 2019: Boston Los Angeles New York San Francisco Washington, DC Total Rental Revenue: (1) Office $ 435,372 $ — $ 510,187 $ 255,561 $ 192,831 $ 1,393,951 Residential 5,923 — — — 10,791 16,714 Hotel 23,782 — — — — 23,782 Total 465,077 — 510,187 255,561 203,622 1,434,447 % of Grand Totals 32.42 % — % 35.56 % 17.82 % 14.20 % 100.00 % Rental Expenses: Office 157,160 — 193,780 84,833 71,819 507,592 Residential 2,485 — — — 5,411 7,896 Hotel 16,943 — — — — 16,943 Total 176,588 — 193,780 84,833 77,230 532,431 % of Grand Totals 33.17 % — % 36.39 % 15.93 % 14.51 % 100.00 % Net operating income $ 288,489 $ — $ 316,407 $ 170,728 $ 126,392 $ 902,016 % of Grand Totals 31.98 % — % 35.08 % 18.93 % 14.01 % 100.00 % Less: Net operating income attributable to noncontrolling interests in property partnerships ( 19,404 ) — ( 72,795 ) ( 448 ) — ( 92,647 ) Add: Company’s share of net operating income from unconsolidated joint ventures 1,590 31,162 3,482 — 13,830 50,064 Company’s share of net operating income $ 270,675 $ 31,162 $ 247,094 $ 170,280 $ 140,222 $ 859,433 % of Grand Totals 31.49 % 3.63 % 28.75 % 19.81 % 16.32 % 100.00 % _______________ (1) Rental Revenue is equal to Total Revenue per the Company’s Consolidated Statements of Operations, less Development and Management Services Revenue and Direct Reimbursements of Payroll and Related Costs from Management Services Contracts Revenue per the Consolidated Statements of Operations. 13. Subsequent Events On July 23, 2020, the Company acquired a 50 % interest in a joint venture entity that owns Beach Cities Media Center, a 6.4 -acre parcel of land located in El Segundo, California, for a purchase price of approximately $ 21.2 million. Beach Cities Media Center is expected to support the development of approximately 275,000 square feet of Class A office space. 44 Table of Content s