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Item 2. Management’s Discussion and Analysis

2021-05-07 compared with 2020-11-06 · 440 added, 987 removed, 680 unchanged (68% of the section changed)

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Such statements are contained principally, but not only, under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” We caution investors that any such forward-looking statements are based on current beliefs or expectations of future events and on assumptions made by, and information currently available to, our management.

When used, the words “anticipate,” “believe,” “budget,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “project,” “should,” “will” and similar expressions that do not relate solely to historical matters are intended to identify forward-looking statements.

When used, the words “anticipate,” “believe,” “budget,” “could”, “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “project,” “should,” “will” and similar expressions that do not relate solely to historical matters are intended to identify forward-looking statements.

Such statements are subject to risks, uncertainties and assumptions and are not guarantees of future performance or occurrences, which may be affected by known and unknown risks, trends, uncertainties and factors that are, in some cases, beyond our control.

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and international economy and economic activity generally;

whether new or existing actions and measures continue to result in increasing unemployment that impacts the ability of our residential tenants to generate sufficient income to pay, or make them unwilling to pay rent in a timely manner, in full or at all;

the speed, effectiveness and distribution of vaccines, whether new or existing actions and measures continue to impact the ability of our residential tenants to generate sufficient income to pay, or make them unwilling to pay rent in a timely manner, in full or at all;

the health, continued service and availability of our personnel, including our key personnel and property management teams;

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

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• risks and uncertainties affecting property development and construction (including, without limitation, construction delays, increased construction costs, cost overruns, inability to obtain necessary permits, tenant accounting considerations that may result in negotiated lease provisions that limit a tenant’s liability during construction, and public opposition to such activities);

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Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results.

Investors should also refer to our most recent Annual Report on Form 10-K and our Quarterly Reports on Form 10-Q for future periods and Current Reports on Form 8-K as we file them with the SEC, and to other materials we may furnish to the public from time to time through Current Reports on Form 8-K or otherwise, for a discussion of risks and uncertainties that may cause actual results, performance or achievements to differ materially from those expressed or implied by forward-looking statements.

Investors should also refer to our most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q for future periods and Current Reports on Form 8-K as we file them with the SEC, and to other materials we may furnish to the public from time to time through Current Reports on Form 8-K or otherwise, for a discussion of risks and uncertainties that may cause actual results, performance or achievements to differ materially from those expressed or implied by forward-looking statements.

We expressly disclaim any responsibility to update any forward-looking statements to reflect changes in underlying assumptions or factors, new information, future events, or otherwise, and you should not rely upon these forward-looking statements after the date of this report.

BXP is one of the largest publicly-traded office real estate investment trusts (REITs) in the United States (based on total market capitalization as of September 30, 2020) that develops, owns and manages primarily Class A office properties concentrated in five markets in the United States - Boston, Los Angeles, New York, San Francisco and Washington, DC.

BXP is one of the largest publicly traded office real estate investment trusts (REITs) (based on total market capitalization as of March 31, 2021) in the United States that develops, owns and manages primarily Class A office properties.

Our properties are concentrated in five markets in the United States - Boston, Los Angeles, New York, San Francisco and Washington, DC.

BPLP is the entity through which BXP conducts substantially all of its business and owns (either directly or through subsidiaries) substantially all of its assets.

We generate revenue and cash primarily by leasing Class A office space to our tenants.

When making leasing decisions, we consider, among other things, the creditworthiness of the tenant, the length of the lease, the rental rate to be paid at inception and throughout the

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lease term, the costs of tenant improvements and other landlord concessions, anticipated operating expenses and real estate taxes, current and anticipated vacancy, current and expected future demand for the space, the impact of any expansion rights and general economic factors.

When making leasing decisions, we consider, among other things, the creditworthiness of the tenant and the industry in which it conducts business, the length of the lease, the

rental rate to be paid at inception and throughout the lease term, the costs of tenant improvements, free rent period and other landlord concessions, anticipated operating expenses and real estate taxes, current and anticipated vacancy in our properties and the market overall (including sublease space), current and expected future demand for the space, the impact of any expansion rights and general economic factors.

Our core strategy has always been to develop, acquire and manage high-quality properties in supply-constrained markets with high barriers-to-entry and to focus on executing long-term leases with financially strong tenants.

Our tenant base is diverse across market sectors and the weighted-average lease term for our in-place leases was approximately 7.5 years, as of September 30, 2020, including leases at our unconsolidated joint ventures.

The weighted-average lease term for our top 20 office tenant leases was approximately 10.8 years.

Historically, these factors have minimized our exposure in weaker economic cycles and enhanced revenues as market conditions improve.

Our tenant base is diverse across market sectors and the weighted-average lease term for our in-place leases, excluding residential units, was approximately 7.6 years, as of March 31, 2021, including leases signed by our unconsolidated joint ventures.

The weighted-average lease term for our top 20 office tenants was approximately 10.7 years as of March 31, 2021.

To be successful in any leasing environment, we believe we must consider all aspects of the tenant-landlord relationship.

In this regard, we believe that our competitive advantage is based on the following attributes:

In this regard, we believe that our competitive leasing advantage is based on the following attributes:

• our understanding of tenants’ short- and long-term space utilization and amenity needs in the local markets;

• our track record of developing and operating Class A office properties in a sustainable and responsible manner;

• our reputation as a premier developer, owner and manager of primarily Class A office properties;

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

• our focus on developing and operating in a sustainable and responsible manner;

• our relationships with local brokers.

In the third quarter of 2020, the COVID-19 pandemic continued to negatively impact global macroeconomic conditions, and businesses across the United States experienced job losses and other recessionary effects.

Although U.S.

GDP improved 33% on an annualized basis in the third quarter of 2020 as compared to the 31% decline in the second quarter of 2020, the pace of improvement has slowed.

The federal stimulus programs that provided much of the economic lift last quarter have either expired or are expiring, and it is unclear if additional fiscal stimulus will be forthcoming.

economic recovery remains heavily impacted by the pandemic.

The health of the overall economy and employment trends among professional workers have been, and we expect will continue to be, one of the most important drivers of office market conditions.

Beginning in March 2020, public health officials and governmental authorities, including those in all of the markets in which we operate, reacted to the spread of the COVID-19 pandemic by imposing regulatory measures such as prohibiting people from congregating in heavily populated areas, instituting quarantines, restricting travel, issuing “stay-at-home” orders, restricting the types of businesses that could continue to operate (including the types of construction projects that could proceed) and closing schools, among many others.

Although the state and local authorities in all of our regions except Los Angeles and New Jersey have eased those regulations to allow for the return to work, the physical occupancy of our properties remains well below capacity as most employers continued their COVID-19 response protocols and encouraged employees to work from home when possible during the pandemic.

The short and long term impact the pandemic will have on the use of office space is unknown as companies consider the recessionary impact on their business and their demand for labor while, at the same time, consider the space requirements associated with social distancing.

We believe our strategically located, high quality product will continue to be a component of today’s forward thinking organization that desires to drive culture and productivity.

Because of the uncertainty regarding the length and severity of the pandemic, many existing and prospective tenants are deferring decisions on their office space needs as they focus on their employees’ safety, their companies’ liquidity and managing their businesses through the recession and economic recovery.

As a result, new leasing activity was lower in the third quarter of 2020 than it was prior to March 2020.

Despite the slowdown in tour activity during the quarter, we signed approximately 811,000 square feet of leases and renewals during the third quarter with an average lease term of seven years, indicating that many prospective and existing tenants are committed to long-term office space and view our properties as their preferred choice for premium, Class A office.

Included in our third quarter leasing activity was a lease extension and an expansion with a tenant totaling approximately 186,000 square feet in Reston, Virginia and a new lease for approximately 82,000 square feet with a tenant in Boston, Massachusetts.

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Development of primarily pre-leased properties in supply-constrained markets with the strongest economic growth over time has been a cornerstone of our long-term growth strategy.

We have approximately 4.3 million square feet of active developments and redevelopments in our pipeline, which are 80% pre-leased, as of November 3, 2020, to primarily credit-strong tenants with long-lease terms.

All development projects remain on schedule to meet all required delivery milestones in our leases.

The health and safety of our employees, tenants, service providers and visitors continues to be our highest priority.

In the third quarter, we continued to implement our health safety protocols in all in-service properties across our portfolio to provide a safe environment for tenants and employees in accordance with the policies and applicable legal requirements in our regions.

Starting in March 2020, the COVID-19 pandemic negatively affected global macroeconomic conditions.

Following a significant a drop in U.S.

GDP in mid-2020, overall economic conditions began to improve in the second half of 2020 after the enactment of federal stimulus programs.

In the first quarter of 2021, millions of Americans began receiving COVID-19 vaccines, and by March 2021, the unemployment rate was approximately 6.0%, only 250 basis points above the pre-pandemic rate in February 2020.

Although conditions have improved since the middle of 2020, the pandemic continues to weigh on the U.S.

economy and operating conditions for several sectors, including commercial real estate, continue to be negatively impacted.

The health of the overall economy and employment trends among professional workers have been, and we expect will continue to be, important drivers of office market conditions, and we expect vaccine distribution and efficacy to lead to a recovery of market conditions in our sector.

Although the state and local authorities in many of our regions began easing restrictions on businesses and lifting limitations on the size of gatherings during the second half of 2020 and throughout the first quarter of 2021, the physical occupancy of our properties has remained well below capacity as infection rates fluctuated and most employers continued their COVID-19 response protocols and encouraged employees to work from home when possible.

The future impact of the pandemic on the demand for office space is unclear, as companies consider the impact on their business and their demand for labor while, at the same time, evaluate their space requirements in light of their current and projected headcounts and the continued focus on social distancing and employees’ desire for more work-location flexibility.

Real estate is, by nature, a long-term business and we do not believe these considerations and ultimate decisions by tenants will evidence a clear trend in the short-term.

In the meantime, we believe our strategically located, high-quality office properties will continue to be a component of today’s forward-thinking organizations that desire collaboration, innovation, productivity and culture, and we expect tenants will take advantage of the availability of Class A space and upgrade.

In the first quarter of 2021, we signed approximately 592,000 square feet of new leases and renewals with a weighted-average lease term of approximately 7.6 years, indicating that many prospective and existing tenants continue to commit to the long-term use of space and view our properties as their preferred choice for a premium Class A office environment.

The volume of leasing in the first quarter of 2021 was approximately 84% of the total square feet of leases executed in the first quarter of 2020.

We expect leasing volume in 2021 to remain lower than it was prior to the COVID-19 pandemic as many existing and prospective tenants defer decisions on their office space needs as they focus on workforce management strategies, safely returning their employees to an in-person work environment and managing their businesses through the economic recovery.

The development of properties in supply-constrained markets with the strongest economic growth over time continues to be a cornerstone of our long-term growth strategy.

In the first quarter of 2021, we added new developments and redevelopments to our pipeline of properties under construction, primarily focused on the life sciences sector.

The life sciences sector continues to experience strong growth and attract high levels of venture capital investment as demand increases for innovative medicines and therapies to treat an aging U.S.

Cambridge, Boston and the suburban markets of Lexington and Waltham in Massachusetts and South San Francisco and Brisbane in California have been, and continue to be, among the largest life sciences markets, with strong demand from tenants in the life sciences sector because of the close proximity to universities, research institutions and related businesses and concentrations of labor with specialized skills and knowledge specific to this sector.

In the first quarter of 2021, we commenced the development and redevelopment of three properties in two of these markets, including 180 CityPoint, an approximately 329,000 square foot lab development in Waltham, Massachusetts;

880 Winter Street, an approximately 224,000 square foot office property in Waltham, Massachusetts that will be redeveloped and converted into lab space;

and 751 Gateway, an approximately 229,000 square foot lab development in South San Francisco, California.

751 Gateway is the first phase of a multi-phase, life sciences campus development at Gateway Commons.

Upon completion, we will own 49% of 751 Gateway and future development projects at Gateway Commons.

Though all three projects are being commenced speculatively, we are seeing many new life sciences requirements in both the Waltham and South San Francisco markets and have made multiple lease proposals to potential tenants.

Also, in the first quarter of 2021, we commenced the redevelopment of the top three floors of the Prudential Center in Boston, Massachusetts into an approximately 59,000 square foot, world-class observatory attraction.

This project will be Boston’s only observatory and will feature a dramatic, 360-degree outdoor viewing deck, 11,000 square feet of outdoor space and two floors of exhibits and observatory spaces, marking a transformative addition to the City of Boston.

In total, as of March 31, 2021, we had approximately 4.3 million square feet of active developments and redevelopments in our pipeline.

As of May 3, 2021, the office portion of the development pipeline is 86% pre-leased to predominately credit-strong tenants with long-lease terms and the total development pipeline, inclusive of both office and lab/life sciences developments and excluding The Prudential Center Observatory, is 71% pre-leased.

All development projects are projected to meet required delivery milestones as defined in our leases.

Rent Collections

Cash rent payments for a particular month are generally due on the first day of that month (although tenants have varying grace periods).

Cash rent amounts are based on all rent billed by us, including all amounts from consolidated operations and all unconsolidated joint ventures, other than Gateway Commons for which we do not handle billing.

During the third quarter of 2020, our rent collections as a percentage of the total amounts billed to all tenants were 97%.

• Approximately 96% of these billings were made to office tenants.

Our third quarter rent collections from office tenants continued to be strong at 99%.

Approximately $612 million, or $2.4 billion annualized, of our lease revenue was from our office portfolio.

Our reported rent collection amounts are based on the total amount of rent billed by us, including all amounts from consolidated operations and all unconsolidated joint ventures, other than Gateway Commons, our residential properties and one hotel because we do not handle billing.

During the first quarter of 2021, our rent collections as a percentage of the total amounts billed to all tenants were 99.0%.

• Approximately 95.2% of the total amounts billed were made to office tenants.

Our first quarter rent collections from office tenants continued to be strong at 99.6%.

Approximately 91.2% of our lease revenue in the first quarter of 2021 was generated by our office portfolio.

Our office portfolio has long-term lease contracts and modest rollover exposure over the next few years.

• Approximately 4% of these billings related to retail leases.

Our third quarter rent collections from retail tenants was 62%.

When evaluating the collectability of a tenant’s accrued rent and accounts receivable balances, management analyzes the tenant’s creditworthiness, current economic trends, including the impact of COVID-19 on a tenant’s business, and changes in the tenant’s payment patterns on a lease-by-lease basis.

In the third quarter, we recorded write-offs totaling approximately $10 million, of which approximately $6 million were associated with accrued rent and approximately $4 million were associated with accounts receivable.

These amounts represent the write-offs in our consolidated portfolio, plus our share of the write-offs from the unconsolidated joint ventures (calculated based on our ownership percentage), minus our partners’ share of write-offs from our consolidated joint ventures (calculated based upon the partners’ percentage ownership interests).

The majority of these write-offs related to tenants in the retail, fitness and entertainment sectors.

Cash rent abatements and deferrals primarily related to COVID-19 were approximately $18.2 million in the third quarter.

This amount represents our consolidated cash rent abatements and deferrals plus our share of the cash rent abatements and deferrals from the unconsolidated joint ventures (calculated based on our ownership percentage) minus our partners’ share of cash rent abatements and deferrals from our consolidated joint ventures (calculated based upon the partners’ percentage ownership interests).

In the third quarter, our parking and other revenue was approximately $16.3 million, an increase of $2.4 million, or 17%, from the second quarter of 2020, but a decrease of approximately $9.3 million, or 36%, as compared to the third quarter of 2019.

The year-over-year decline was largely due to the decline in transient parking revenue as employees continue to work from home during the pandemic.

Our hotel property, the Boston Marriott Cambridge, remained closed throughout the third quarter and therefore operated at an approximately $3.1 million loss.

As a result, net operating income declined approximately $7.3 million as compared to the third quarter of 2019.

The hotel re-opened on October 2, 2020, but occupancy remains low due to reduced demand as a result of COVID-19 and we expect demand to remain low for the foreseeable future.

As a result of the impact of the current environment, we expect our 2020 revenues to be adversely affected due to (1) declines in revenue from our retail tenants, parking and hotel operator, (2) a slowdown in new leasing activity for vacant and expiring space and (3) write-offs of accounts receivable and accrued rent balances.

Despite the near-term challenges of COVID-19, we remain confident in our ability to weather the current market downturn and manage our business throughout uncertain future market conditions.

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As a leading developer, owner and manager of marquee Class A office properties in the United States, our priorities during and following COVID-19 remain focused on the following:

• ensuring tenant satisfaction by keeping our properties safe, open and available for occupancy;

• implementing measures to ensure tenant and employee health security;

• communicating openly with tenants to provide assurance before and during re-occupancy;

• leasing available space in our in-service and development properties;

• completing the construction of our development properties as conditions allow;

• completing the redevelopment and repositioning of several key properties to increase future revenue and asset values over the long-term;

• maintaining our conservative balance sheet and managing our near-term debt maturities;

• actively managing our operations in a safe, sustainable and responsible manner;

• Approximately 4.8% of the total amounts billed related to retail leases.

Our first quarter rent collections from retail tenants were approximately 89.0%.

As a result of the impact of the COVID-19 pandemic on the current economic environment and on the commercial real estate sector in particular, our first quarter 2021 revenues, when compared to first quarter 2020, continued to be adversely affected due to (1) declines in revenue from our retail tenants, parking and our hotel, and (2) a decline in occupancy in our in-service office and retail properties due to a slowdown in new leasing activity for vacant and expiring space.

Our retail tenants continue to be adversely affected by the COVID-19 pandemic.

Lease revenue from our retail leases was approximately $45.6 million in the first quarter of 2021, a decrease of approximately $3.3 million from the first quarter of 2020.

This amount represents our consolidated lease revenue plus our share of the lease

revenue from the unconsolidated joint ventures (calculated based on our ownership percentage) minus our partners’ share of lease revenue from our consolidated joint ventures (calculated based upon the partners’ percentage ownership interests).

Lease revenue in the first quarter of 2021 included approximately $4.2 million of lease termination income.

Excluding termination income, our revenue from retail leases was approximately $41.4 million, a decrease of approximately $7.5 million from the first quarter of 2020, primarily due to tenants that are receiving COVID-19 related rent abatements.

Our hotel property, the Boston Marriott Cambridge, re-opened in October 2020 but operated at diminished occupancy and generated only $0.6 million in revenue in the first quarter of 2021, a decrease of $6.2 million compared to the first quarter of 2020.

We expect hotel occupancy to remain low until a sufficient number of people have been vaccinated and the demand for travel and leisure returns to historical levels.

The overall occupancy of our in-service office and retail properties was 88.7% at March 31, 2021, a decrease of 140 basis points compared to 90.1% at December 31, 2020.

The decrease was due in part to retail space we recaptured from tenants that defaulted during 2020, as well as the result of a slowdown of leasing activity for available office space due to the ongoing pandemic.

Despite the concerns surrounding the COVID-19 pandemic and the negative impact on economic conditions in our markets, we continue to be optimistic for our industry generally and our company in particular, given low interest rates, the high quality of our properties, the supply and demand characteristics of our markets and the success of our development efforts.

In addition, we anticipate our revenue from retail, parking and our hotel will improve as the rate of vaccinations increases and as the pandemic subsides.

As a leading developer, owner and manager of marquee Class A office properties in the United States, our priorities remain focused on the following:

• ensuring tenant health, safety and satisfaction;

• leasing available space in our in-service and development properties, as well as proactively focusing on future lease expirations;

• completing the construction of our development properties;

• continuing and completing the redevelopment and repositioning of several key properties to increase future revenue and asset values over the long-term;

• maintaining discipline in our underwriting of investment opportunities;

Following is an overview of portfolio activity and leasing activity in the third quarter of 2020.

The overall occupancy of our in-service office and retail properties was 91.1% at September 30, 2020, a decrease of 90 basis points as compared to June 30, 2020.

During the third quarter of 2020, we signed leases across our portfolio totaling approximately 811,000 square feet and we commenced revenue recognition on approximately 1.2 million square feet of leases in second generation space, including lease modifications.

• managing our near-term debt maturities and maintaining our conservative balance sheet;

• actively managing our operations in a sustainable and responsible manner.

The following is an overview of portfolio activity and leasing activity in the first quarter of 2021.

During the first quarter of 2021, we signed leases across our portfolio totaling approximately 592,000 square feet and we commenced revenue recognition on approximately 1.1 million square feet of leases in second-generation space, including lease renewals.

Of these second-generation leases, approximately 735,000 square feet had been vacant for less than one year and, in the aggregate, they represent an increase in net rental obligations (gross rent less operating expenses) of approximately 15% over the prior leases.

Consistent with our long-term investment strategy to invest in high-yielding development opportunities, in the first quarter of 2021, we completed and fully placed in-service One Five Nine East 53rd Street, an approximately 220,000 square feet Class A office and retail redevelopment in the low-rise portion of 601 Lexington Avenue in New York City.

The property includes approximately 195,000 square feet of office space that is 100% leased to a university for a 30-year term.

As of March 31, 2021, our construction/redevelopment pipeline consisted of nine properties that, when completed, we expect will total approximately 4.3 million net rentable square feet.

Three of these development/redevelopment projects are owned by joint ventures.

Our share of the estimated total cost for these projects is approximately $2.7 billion, of which approximately $1.4 billion remained to be invested as of March 31, 2021.

The office portion of the development pipeline is approximately 86% pre-leased and the total development pipeline, inclusive of both office and lab/life sciences developments and excluding The Prudential Center Observatory, is 71% pre-leased as of May 3, 2021.

As we continue to focus on the development and acquisition of assets to enhance our long-term growth, we also continually review our portfolio to identify properties as potential sales candidates that either no longer fit within our portfolio strategy or could attract premium pricing in the current market environment.

For example, in the first quarter of 2021, we completed the sale of Annapolis Junction Buildings Six and Seven, two Class A office properties in Annapolis, Maryland totaling approximately 247,000 square feet, for a gross sales price of approximately $65.9 million.

The Company had a 50% ownership interest in the joint venture that owned the properties.

We expect to continue to sell select assets from time to time, subject to market conditions.

A brief overview of each of our markets follows.

Our Boston central business district (“CBD”) in-service portfolio was approximately 98% leased as of September 30, 2020, including approximately 343,000 square feet of leases that we terminated, due to the nonpayment of rent, where the tenants have yet to vacate.

During the third quarter of 2020, we executed approximately 96,000 square feet of leases and had approximately 262,000 square feet of leases commence in the Boston region.

Our Boston central business district (“CBD”) in-service portfolio was approximately 95% leased as of March 31, 2021.

This includes approximately 212,700 square feet, or approximately 2.2% of our Boston CBD portfolio, of space that we terminated with tenants that defaulted in 2020 due to non-payment of rent.

During the first quarter of 2021, we executed approximately 165,000 square feet of leases and approximately 258,000 square feet of leases commenced in the Boston region.

Approximately 211,000 square feet of the leases that commenced had been vacant for less than one year and represent an increase in net rental obligations of approximately 43% over the prior leases.

During the quarter, a joint venture in which we own 50% fully placed in-service Hub50House, a 440 unit residential property that is part of the 1.3 million square foot mixed-use Hub on Causeway development in Boston, Massachusetts.

Our approximately 2.0 million square foot in-service office portfolio in Cambridge was approximately 99% leased, as of September 30, 2020.

In addition, during the third quarter of 2020, one of our large tenants in Cambridge had the contractual right to terminate a lease for 190,000 square feet but the tenant did not exercise that right and its lease now expires in 2037.

During the quarter, we continued our development of 325 Main Street at Kendall Center in Cambridge, Massachusetts, which is 90% pre-leased to a tenant for a term of 15 years.

In our suburban Waltham/Lexington portfolio, we continued the redevelopment of a portion of 200 West Street, an approximately 261,000 net rentable square foot Class A office property in Waltham, Massachusetts.

The redevelopment is a conversion of a portion of the property to laboratory space to meet growing demand in the life sciences sector.

In November 2020, we signed an approximately 138,000 square-foot, 10-year lease with a new tenant at this building.

With this lease, the property is 100% leased.

During the third quarter of 2020, we also entered into an agreement with an existing joint venture partner for the future development of a 1.2 million square foot site in Waltham.

The agreement allows for the phased development of office and lab properties across 41-acres.

We expect to serve as the development manager.

As part of this development, we expect to complete new exit/interchange improvements onto I-95/Route 128, enhancing access to our entire Waltham portfolio.

Waltham and the surrounding Route 128 Mass Turnpike area continues to be a popular submarket of Boston for leading and emerging companies in the life sciences, biotechnology and technology sectors.

This agreement builds on our current footprint of approximately 4.3 million square feet of office and lab properties in this submarket.

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Our Los Angeles (“LA”) in-service portfolio is currently focused on West LA and includes approximately 2.3 million square feet, including a 1.1 million square foot property, Colorado Center, of which we own 50%, and Santa Monica Business Park, a 21-building, approximately 1.2 million square foot property of which we own 55%.

We increased our occupancy in LA in the third quarter by 80 basis points due to an approximately 46,000 square foot expansion by one of our existing technology tenants.

As of September 30, 2020, our LA in-service properties were approximately 97% leased.

Since our initial entry in the West LA market in 2016, we have continued to explore opportunities to increase our presence in the LA market by seeking investments where our financial, operational, redevelopment and development expertise provide the opportunity to achieve accretive returns.

In the third quarter of 2020, we announced the acquisition of a 50% interest in Beach Cities Media Center, a 6.4-acre land site on the Rosecrans Corridor of the El Segundo submarket of Los Angeles, California for a purchase price of $21.2 million.

The site is fully entitled to support the future development of approximately 275,000 square feet of Class A creative office space and is located in one of the most in-demand creative office areas in the South Bay of Los Angeles where several Fortune 500 and emerging office tenants in the technology, entertainment and financial sectors are located.

In conjunction with the acquisition, we entered into a joint venture with Continental Development Corporation, a premier developer and owner of Class A properties primarily in the El Segundo and Manhattan Beach submarkets with more than 500 tenants across its portfolio.

As of September 30, 2020, our New York CBD in-service portfolio was approximately 94% leased, including approximately 374,000 square feet of leases that we terminated due to the nonpayment of rent, where the tenants have yet to vacate.

We are negotiating a reinstatement and renewal agreement with one of these tenants for approximately 150,000 square feet.

In addition, we have executed approximately 249,000 square feet of leases that we expect will commence by the end of the first quarter of 2021.

In the third quarter of 2020, we commenced approximately 210,000 square feet of leases in the New York region.

Of these leases, approximately 129,000 square feet had been vacant for less than one year and represent an increase in net rental obligations of approximately 14% over the prior leases.

Our approximately 2.0 million square foot in-service office portfolio in Cambridge was approximately 99% leased as of March 31, 2021.

During the first quarter of 2021, we continued our development of 325 Main Street at Kendall Center in Cambridge, Massachusetts, which is 90% pre-leased to an office tenant for a term of 15 years and we expect to deliver into service in 2022.

In the first quarter of 2021, we received approximately one million square feet of new entitlements at Kendall Center in Cambridge, Massachusetts for potential future development.

Waltham and the area surrounding the Route 128-Mass Turnpike interchange continue to comprise a popular submarket of Boston for leading and emerging companies in the life sciences, biotechnology and technology sectors.

In the first quarter of 2021, we signed a 63,500 square foot, 16-year lease with a healthcare company at 195 West Street in Waltham, Massachusetts, bringing that property to 100% leased.

We also continued the redevelopment of 200 West Street, an approximately 273,000 square feet Class A office property in Waltham, Massachusetts.

The redevelopment is a conversion of approximately 138,000 square feet into life sciences space that is 100% pre-leased to a biotechnology tenant with occupancy expected by year-end 2021.

To enable us to meet current and future demand from tenants in the life sciences sector in this region, in the first quarter of 2021, we commenced the redevelopment of 880 Winter Street, an approximately 224,000 square foot office property in Waltham, Massachusetts that will be converted into lab space, and we commenced the development of 180 CityPoint, an approximately 329,000 square foot lab development in Waltham, Massachusetts.

These properties are expected to be delivered in 2023 and 2024, respectively.

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

As of March 31, 2021, our LA in-service properties were approximately 82% leased.

Our occupancy declined in the first quarter of 2021 from 93.5% at December 31, 2020, primarily due to the expiration of an approximately 200,000 square foot lease with an office tenant in the Santa Monica Business Park.

In the first quarter of 2021, we signed a 72,000 square foot, 10-year lease with a new tenant in the digital media sector at Colorado Center in Los Angeles, California.

With this lease, which we commenced revenue recognition in April 2021, our LA in-service properties are approximately 85% leased.

During the first quarter of 2021, we had approximately 43,000 square feet of leases commence in the LA region.

Approximately 22,000 square feet of the leases that commenced had been vacant for less than one year and represent an increase in net rental obligations of approximately 24% over the prior leases.

We continue to explore opportunities to increase our presence by seeking investments where our financial, operational, redevelopment and development expertise provide the opportunity, either alone or with partners, to achieve accretive returns.

As of March 31, 2021, our New York CBD in-service portfolio was approximately 89% leased.

In addition, we executed approximately 50,000 square feet of leases and approximately 390,000 square feet of leases commenced in the first quarter of 2021.

Of these leases, approximately 34,000 square feet had been vacant for less than one year and the net rental obligations rate was relatively flat as compared to prior leases.

In the first quarter of 2021, tour and leasing activity remained slow due to the ongoing pandemic but leasing activity has increased and we conducted more physical tours in New York City than we had in the comparable quarter in either 2019 or 2020.

We are actively negotiating 14 leases totaling approximately 170,000 square feet, including a full floor lease at Dock 72, our joint venture property in Brooklyn, New York.

During the first quarter of 2021, we signed new leases with several small tenants across the New York portfolio as well as a 25,000 square foot, 14-year expansion with a multinational asset management company at 399 Park Avenue in New York City, bringing the total space leased by the tenant to approximately 100,000 square feet.

San Francisco

Our San Francisco CBD in-service properties were approximately 96% leased as of September 30, 2020.

During the third quarter of 2020, we commenced approximately 387,000 square feet of leases in the San Francisco region.

In the first quarter of 2021, governmental authorities in San Francisco began lifting travel quarantines, stay-at-home orders and restrictions on the types of businesses that could continue to operate, including offices.

As these restrictions were lifted, the pace of new leasing activity began to increase, although activity remains well below pre- pandemic levels.

Our San Francisco CBD in-service properties were approximately 93% leased as of March 31, 2021.

During the first quarter of 2021, we executed approximately 167,000 square feet of leases and we commenced approximately 40,000 square feet of leases in the San Francisco region.

Of these leases, approximately 29,000 square feet had been vacant for less than one year and represent an increase in net rental obligations of approximately 18% over the prior leases.

During the third quarter, we placed in service The Skylyne, a 402 unit residential property in Oakland, California, which was 9% leased as of November 3, 2020.

Also during the first quarter of 2021, we commenced development of 751 Gateway, an approximately 229,000 square foot lab development in South San Francisco, California.

751 Gateway is the first phase of a multi-phase life sciences campus development.

We will own 49% of 751 Gateway and future development projects at Gateway Commons upon completion.

Washington , DC

In the Washington, DC region, our focus remains on (1) expanding our development potential in Reston, Virginia, where demand from technology and cybersecurity tenants remains strong, (2) divesting of certain assets in Washington, DC and select suburban markets and (3) matching development sites with tenants to begin development with significant pre-leasing commitments.

During the third quarter of 2020, we commenced approximately 273,000 square feet of leases in the Washington, DC region.

During the first quarter of 2021, we executed approximately 126,000 square feet of leases and we commenced approximately 566,000 square feet of leases in the Washington, DC region.

Of these leases, approximately 440,000 square feet had been vacant for less than one year and represent an increase in net rental obligations of approximately 4% over the prior leases.

Our Washington, DC CBD in-service properties were approximately 85% leased, as of September 30, 2020, with modest near-term exposure, and we have reduced our exposure in the Washington, DC CBD market significantly over the past few years through dispositions of assets.

Our Washington, DC suburban properties, which includes our significant presence in Reston, Virginia, were approximately 84% leased as of September 30, 2020.

During the third quarter of 2020, we signed a lease extension and an expansion with a tenant totaling approximately 186,000 square feet in Reston, Virginia.

In October 2020, we signed an approximately 196,000 square foot, 20-year lease with a tenant at Reston Next, our

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approximately 1.1 million square foot development, the new phase of Reston Town Center in Reston, Virginia.

With this new lease, the Reston Next development is 85% pre-leased.

Our Washington, DC CBD in-service properties were approximately 83% leased, as of March 31, 2021, with modest near-term exposure, and we have reduced our exposure in the Washington, DC CBD market significantly over the past few years through the dispositions of assets.

Our Washington, DC suburban properties include our significant presence in Reston, Virginia, where demand from technology and cybersecurity tenants remains strong.

Our Washington, DC suburban properties were approximately 87% leased as of March 31, 2021.

Leasing Statistics

The table below details the leasing activity, including 100% of the unconsolidated joint ventures, that commenced during the three and nine months ended September 30, 2020:

Three months ended September 30, 2020 Nine months ended September 30, 2020

The table below details the leasing activity, including 100% of the unconsolidated joint ventures, that commenced during the three months ended March 31, 2021:

Three months ended March 31, 2021

Total Square Feet

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2 nd generation leases with new tenants

613,534 1,670,329

2 nd generation lease renewals

574,937 1,791,623

Total space leased (3) 1,296,915

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Leases commencing during the period, in square feet 1,095,513

Weighted Average Lease Term 89 Months 107 Months

Weighted Average Free Rent Period 144 Days 149 Days

Weighted Average Lease Term 84 Months

Weighted Average Free Rent Period 137 Days

Total Transaction Costs Per Square Foot (6) $82.44

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__________________

(1) Total square feet of property dispositions/properties taken out of service during the nine months ended September 30, 2020 consists of 24,508 square feet due to the sale of a portion of Capital Gallery and 125,685 square feet due to the sale of Annapolis Junction Building Eight.

(2) Total square feet of properties placed (and partially placed) in-service during the three months ended September 30, 2020 consists of 12,825 at The Skylyne.

Total square feet of properties placed (and partially placed) in-service during the nine months ended September 30, 2020 consists of 12,825 at The Skylyne, 79,527 at 20 CityPoint, 4,330 at 685 Gateway, 5,156 at 145 Broadway and 275,809 at 17Fifty Presidents Street.

(3) Represents leases for which lease revenue recognition has commenced in accordance with GAAP during the three and nine months ended September 30, 2020.

(4) Represents leases executed during the three and nine months ended September 30, 2020 for which we either (1) commenced lease revenue recognition in such period or (2) will commence lease revenue recognition in subsequent periods, in accordance with GAAP, and includes leases at properties currently under development.

The total square feet of leases executed and recognized in the three and nine months ended September 30, 2020 is 174,187 and 680,575, respectively.

Amounts for the three and nine months ended September 30, 2020 exclude lease modifications related to COVID-19 covering an aggregate of 667,000 and 3,766,343 square feet that were executed in the three and nine months ended September 30, 2020, respectively, to provide cash rent deferrals and/or abatements.

Of these lease modifications, the lease terms associated with 176,787 and 473,776 square feet were extended for a period of 12 or more months during the three and nine months ended September 30, 2020, respectively.

(1) Total square feet of property dispositions during the three months ended March 31, 2021 consists of 29,595 square feet due to the sale of Annapolis Junction Building Six.

Total square feet of properties taken out of service during the three months ended March 31, 2021 consists of 34,290 square feet at 880 Winter Street and 40,728 square feet at 800 Boylston Street - The Prudential Center , both due to redevelopment.

(2) Total square feet of properties placed (and partially placed) in-service during the three months ended March 31, 2021 consists of 195,326 square feet of office and 31,950 square feet of retail at One Five Nine East 53rd Street, located in New York City .

(3) Represents leases for which lease revenue recognition has commenced in accordance with GAAP during the three months ended March 31, 2021.

(4) Represents leases executed during the three months ended March 31, 2021 for which we either (1) commenced lease revenue recognition in such period or (2) will commence lease revenue recognition in subsequent periods, in accordance with GAAP, and includes leases at properties currently under development.

The total square feet of leases executed and recognized in the three months ended March 31, 2021 is 86,652 .

Amounts for the three months ended March 31, 2021 exclude lease modifications related to COVID-19 covering an aggregate of 208,000 square feet that were executed in the three months ended March 31, 2021, to provide cash rent deferrals and/or abatements.

Of these lease modifications, the lease terms associated with 67,387 square feet were extended for a period of 12 or more months during the three months ended March 31, 2021.

(5) Second generation leases are defined as leases for space that had previously been leased by us.

Of the 1,188,471 and 3,461,952 square feet of second generation leases that commenced during the three and nine months ended September 30, 2020, respectively, leases for 1,014,284 and 2,786,533 square feet, respectively, were signed in prior periods.

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Of the 1,095,513 square feet of second generation leases that commenced during the three months ended March 31, 2021, leases for 1,011,835 square feet were signed in prior periods.

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

(7) Represents the increase in gross rent (base rent plus expense reimbursements) on the new versus expired leases on the 894,966 and 2,800,738 square feet of second generation leases that had been occupied within the prior 12 months for the three and nine months ended September 30, 2020, respectively;

(7) Represents the increase in gross rent (base rent plus expense reimbursements) on the new versus expired leases on the 735,432 square feet of second generation leases that had been occupied within the prior 12 months for the three months ended March 31, 2021;

excludes leases that management considers temporary because the tenant is not expected to occupy the space on a long-term basis.

(8) Represents the increase in net rent (gross rent less operating expenses) on the new versus expired leases on the 894,966 and 2,800,738 square feet of second generation leases that had been occupied within the prior 12 months for the three and nine months ended September 30, 2020, respectively;

(8) Represents the increase in net rent (gross rent less operating expenses) on the new versus expired leases on the 735,432 square feet of second generation leases that had been occupied within the prior 12 months for the three months ended March 31, 2021;

excludes leases that management considers temporary because the tenant is not expected to occupy the space on a long-term basis.

Transactions during the three months ended September 30, 2020 included the following:

• On July 31, 2020, we acquired an undivided ownership interest in real property at 759 Harrison Street located in San Francisco, California, which is expected to be included in the Fourth + Harrison development project, for a purchase price totaling approximately $2.3 million.

Fourth + Harrison is expected to support the development of approximately 804,000 square feet of primarily commercial office space.

• On August 15, 2020, we completed and fully placed in-service The Skylyne, an approximately 331,000 square foot project comprised of 402 residential units and retail space located in Oakland, California that was 9% leased, as of November 3, 2020.

Transactions during the three months ended March 31, 2021 included the following:

Developments/redevelopments activities

• On February 1, 2021, we completed and fully placed in-service One Five Nine East 53rd Street, a Class A office and retail redevelopment of the low-rise portion of our 601 Lexington Avenue property with approximately 220,000 net rentable square feet located in New York City.

• On February 25, 2021, we commenced the development of 180 CityPoint, located in Waltham, Massachusetts.

When completed, the building will consist of approximately 329,000 net rentable square feet of laboratory space.

• On February 25, 2021, we commenced the redevelopment of 880 Winter Street, located in Waltham, Massachusetts.

When completed, the building will consist of approximately 224,000 net rentable square feet of laboratory space.

• On February 25, 2021, we commenced the redevelopment of The Prudential Center Observatory, a 59,000 net rentable square foot redevelopment of the top three floors of 800 Boylston Street - The Prudential Center, located in Boston, Massachusetts.

Unconsolidated joint venture activities

• On July 23, 2020, we 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.

• On July 24, 2020, a joint venture in which we have a 50% interest completed and fully placed in-service Hub50House, an approximately 320,000 square foot project comprised of 440 residential units located in Boston, Massachusetts, that was 53% leased, as of November 3, 2020.

• On September 1, 2020, we entered into an agreement with our partner in the joint venture that owns 1265 Main Street located in Waltham, Massachusetts to (1) form additional joint ventures to own and develop a mixed-use property containing approximately 1,200,000 square feet to be developed in phases on an approximately 41-acre site adjacent to 1265 Main Street and (2) share the costs of certain offsite infrastructure improvements with our joint venture partner and other third party abutting land owners.

We will serve as the development manager and expect to own a 50% interest in each of the joint ventures.

• On September 30, 2020, a joint venture in which we have a 50% interest extended the mortgage loan collateralized by its Market Square North property.

At the time of the extension, the outstanding balance of the loan totaled approximately $114.2 million, bore interest at a fixed rate of 4.85% per annum and was scheduled to mature on October 1, 2020.

The extended loan matures on November 1, 2020.

Market Square North is a Class A office property with approximately 418,000 net rentable square feet located in Washington, DC.

Transactions completed subsequent to September 30, 2020 included the following:

• On October 1, 2020, a joint venture in which we have a 50% interest completed and fully placed in-service Dock 72, a Class A office project with approximately 670,000 net rentable square feet located in Brooklyn, New York.

• On October 30, 2020, a joint venture in which we have a 50% interest refinanced the mortgage loan collateralized by its Market Square North property located in Washington, DC.

The outstanding balance of the loan totaled approximately $114.2 million, bore interest at a fixed rate of 4.85% per annum and was scheduled to mature on November 1, 2020.

The new mortgage loan totals

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$125.0 million, bears interest at a variable rate equal to (1) the greater of (x) LIBOR or (y) 0.50%, plus (2) 2.30% per annum, and matures on November 10, 2025, with one, one-year extension option, subject to certain conditions.

• On November 3, 2020, we signed an approximately 138,000 square-foot, 10-year lease with a new tenant at 200 West Street in Waltham, Massachusetts.

We are currently redeveloping a portion of 200 West Street into lab space with expected completion in 2021.

With this lease, the property is 100% leased.

• On February 25, 2021, a joint venture in which we have a 54% interest, commenced the development of 751 Gateway, a speculative laboratory building located in South San Francisco, California, that is expected to be approximately 229,000 net rentable square feet upon completion.

751 Gateway is the first phase of a multi-phase development plan at Gateway Commons.

Upon the formation of the joint venture in 2020, we had an approximately 55% ownership interest in the joint venture as a result of the partner’s deferred contribution and the partner is obligated to fund all required capital until such time as we own a 50% interest.

On March 31, 2021, we had a 54% interest in the joint venture.

We will own a 49% interest in any development project, including 751 Gateway.

• On March 30, 2021, we completed the sale of our 50% ownership interest in Annapolis Junction NFM LLC (the “Annapolis Junction Joint Venture”) to our joint venture partner for a gross sales price of $65.9 million.

Net cash proceeds totaled approximately $17.6 million after repayment of our share of debt totaling approximately $15.1 million and the deferment of a $0.2 million payment due from the purchaser.

We recognized a gain on sale of investment totaling approximately $10.3 million, w hich is included in Income (Loss) from Unconsolidated Joint Ventures in the accompanying Consolidated Statements of Operations.

In addition to net cash proceeds from the sale, we will be distributed approximately $5.8 million of available cash subsequent to March 31, 2021.

Annapolis Junction Buildings Six and Seven are Class A office properties totaling approximately 2 47,000 net rentable square feet.

With the sale of our ownership interest in the Annapolis Junction Joint Venture, we no longer have any assets in Annapolis, Maryland.

Capital markets activities

• On February 14, 2021, BPLP completed the redemption of $850.0 million in aggregate principal amount of its 4.125% senior notes due May 15, 2021.

The redemption price was approximately $858.7 million, which was equal to par plus approximately $8.7 million of accrued and unpaid interest to, but not including, the redemption date.

Excluding the accrued and unpaid interest, the redemption price was equal to the principal amount being redeemed.

We recognized a loss from early extinguishment of debt totaling approximately $0.4 million related to unamortized origination costs.

• On March 16, 2021, BPLP completed a public offering of $850.0 million in aggregate principal amount of its 2.550% unsecured senior notes due 2032.

The notes were priced at 99.570% of the principal amount to yield an effective rate (including financing fees) of approximately 2.671% per annum to maturity.

The notes will mature on April 1, 2032, unless earlier redeemed.

The aggregate net proceeds

from the offering were approximately $839.2 million after deducting underwriting discounts and transaction expenses.

• On March 16, 2021, BPLP repaid all amounts borrowed under the delayed draw term loan facility (“Delayed Draw Facility”) ($500.0 million).

We recognized a loss from early extinguishment of debt totaling approximately $0.5 million, related to unamortized financing costs.

• On March 26, 2021, we used available cash to repay the mortgage loan collateralized by our University Place property located in Cambridge, Massachusetts totaling approximately $0.9 million.

The mortgage loan bore interest at a fixed rate of 6.94% per annum and was scheduled to mature on August 1, 2021.

There was no prepayment penalty.

Equity Transaction

• On March 2, 2021, BXP issued a redemption notice for 80,000 shares of its Series B Preferred Stock, which constituted all of the outstanding Series B Preferred Stock, and the corresponding depositary shares, each representing 1/100th of a share of Series B Preferred Stock (the “Depositary Shares”), and recorded it as a liability.

The redemption price per share of Series B Preferred Stock was equal to $2,500 plus all accrued and unpaid dividends to, but not including, the redemption date, totaling $2,516.41 per share.

On March 31, 2021, BXP transferred the full redemption price for all outstanding shares of Series B Preferred Stock of approximately $201.3 million including approximately $1.3 million of accrued and unpaid dividends to, but not including, the redemption date, to the redemption agent and recorded that amount within Cash held in escrows on the Consolidated Balance Sheets.

Upon redemption of the Series B Preferred Stock, all outstanding shares of the Series B Preferred Units, which had terms and preferences generally mirroring those of the Series B Preferred Stock, were redeemed by BPLP.

The excess of the redemption price over the carrying value of the Series B Preferred Stock and Series B Preferred Units of approximately $6.4 million relates to the original issuance costs and will be reflected as a reduction to Net Income Attributable to Boston Properties, Inc.

common shareholders and Net Income Attributable to Boston Properties Limited Partnership common unitholders on the Consolidated Income Statement.

Transactions completed subsequent to March 31, 2021 included the following:

• On April 1, 2021, BXP redeemed 80,000 shares of Series B Preferred Stock (including the corresponding 8,000,000 Depositary Shares), which represented all of the outstanding shares of Series B Preferred Stock.

We paid an aggregate $201.3 million including $1.3 million of accrued but unpaid interest.

• On May 3, 2021, we entered into an agreement to acquire two life sciences lab buildings located in Waltham, Massachusetts for a purchase price of approximately $100.0 million.

These two life sciences lab buildings aggregate approximately 137,000 net rentable square feet.

The properties are 100% leased.

We expect to close on the acquisition during the second quarter of 2021.

The transaction is subject to the satisfaction of customary closing conditions.

There can be no assurance that the acquisition will be consummated on the terms currently contemplated or at all.

Critical Accounting Policies

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Actual results may differ from those estimates and assumptions.

Our Annual Report on Form 10-K for the year ended December 31, 2019 contains a discussion of our critical accounting policies, except for our policies established following the adoption of Accounting Standards Update (“ASU”) ASU 2016-13, ASU 2018-13, ASU 2018-17 and ASU 2020-04.

The adoption of each of the pronouncements is discussed in Note 2 to our Consolidated Financial Statements.

Our Annual Report on Form 10-K for the year ended December 31, 2020 contains a discussion of our critical accounting policies.

Management discusses and reviews our critical accounting policies and management’s judgments and estimates with BXP’s Audit Committee.

Results of Operations for the Nine Months Ended September 30, 2020 and 2019

The impact that COVID-19 has had on our business, financial position and results of operations during the second and third quarters of 2020 is discussed throughout this report.

The full extent of the impact of COVID-19 on our business, operations and financial results will depend on numerous evolving factors that we may not be able to accurately predict.

In addition, we cannot predict the impact that COVID-19 will have on our tenants, employees, contractors, lenders, suppliers, vendors and joint venture partners;

any material adverse effect on these parties could also have a material adverse effect on us.

The situation surrounding COVID-19 remains fluid, and we are actively managing our response in collaboration with tenants, government officials and joint venture partners and assessing potential impacts to our financial position and operating results, as well as potential adverse developments in our business.

“Risk Factors” for additional details.

Results of Operations for the Three Months Ended March 31, 2021 and 2020

Net income attributable to Boston Properties, Inc.

common shareho lders and net income attributable to Boston Properties Limited Partnership common unitholders increased approximately $484.3 million and $548.7 million for the nine months ended September 30, 2020 compared to 2019, respectively, as detailed in the following tables and for the reasons discussed below under the heading “ Comparison of the nine months ended September 30, 2020 to the nine months ended September 30, 2019” within “ Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations .”

common shareho lders and net income attributable to Boston Properties Limited Partnership common unitholders decreased approximately $405.9 million and $460.6 million for the three months ended March 31, 2021 compared to 2020, respectively, as set forth in the following tables and for the reasons discussed below under the heading “ Comparison of the three months ended March 31, 2021 to the three months ended March 31, 2020” within “ Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations .”

The following are reconciliations of Net Income Attributable to Boston Properties, Inc.

Common Shareholders to Net Operating Income and Net Income Attributable to Boston Properties Limited Partnership Common Unitholders to Net Operating Income for the nine months ended September 30, 2020 and 2019 (in thousands):

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Common Shareholders to Net Operating Income and Net Income Attributable to Boston Properties Limited Partnership Common Unitholders to Net Operating Income for the three months ended March 31, 2021 and 2020 (in thousands):

Boston Properties, Inc.

Nine months ended September 30,

Three months ended March 31,

2021 2020 Increase/

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$ 91,624 $ 497,496 $ (405,872) (81.58) %

Preferred stock redemption charge 6,412 — 6,412 100.00 %

Preferred dividends

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107,902 101,591 6,311 6.21 %

Loss from early extinguishment of debt — 28,010 (28,010) (100.00) %

Impairment loss

— 24,038 (24,038) (100.00) %

Losses from early extinguishment of debt 898 — 898 100.00 %

Other Income:

Gains from investments in securities 965 4,240 (3,275) (77.24) %

Gains (losses) from investments in securities 1,659 (5,445) 7,104 130.47 %

Interest and other income (loss) 1,168 3,017 (1,849) (61.29) %

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Net Operating Income $ 443,947 $ 471,653 $ (27,706) (5.87) %

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Boston Properties Limited Partnership

Nine months ended September 30,

Three months ended March 31,

2021 2020 Increase/

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$ 105,773 $ 566,333 $ (460,560) (81.32) %

Preferred unit redemption charge 6,412 — 6,412 100.00 %

Preferred distributions

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107,902 101,591 6,311 6.21 %

Loss from early extinguishment of debt — 28,010 (28,010) (100.00) %

Impairment loss

— 22,272 (22,272) (100.00) %

Losses from early extinguishment of debt 898 — 898 100.00 %

Other Income:

Gains from investments in securities 965 4,240 (3,275) (77.24) %

Gains (losses) from investments in securities 1,659 (5,445) 7,104 130.47 %

Interest and other income (loss) 1,168 3,017 (1,849) (61.29) %

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Net Operating Income $ 443,947 $ 471,653 $ (27,706) (5.87) %

At each of September 30, 2020 and 2019, we owned or had joint venture interests in a portfolio of 196 commercial real estate properties (in each case, the “Total Property Portfolio”).

At each of March 31, 2021 and 2020, we owned or had joint venture interests in a portfolio of 196 commercial real estate properties (in each case, the “Total Property Portfolio”).

As a result of changes within our Total Property Portfolio, the financial data presented below shows significant changes in revenue and expenses from period-to-period.

Accordingly, we do not believe that our period-to-period financial data with respect to the Total Property Portfolio is meaningful.

Therefore, the comparison of operating results for the three and nine months ended September 30, 2020 and 2019 show separately the changes attributable to the properties that were owned by us and in-service throughout each period compared (the “Same Property Portfolio”) and the changes attributable to the properties included in the Acquired, Placed In-Service, Development or Redevelopment or Sold Portfolios.

Therefore, the comparison of operating results for the three months ended March 31, 2021 and 2020 show separately the changes attributable to the properties that were owned by us and in-service throughout each period compared (the “Same Property Portfolio”) and the changes attributable to the properties included in the Acquired, Placed In-Service, Development or Redevelopment or Sold Portfolios.

In our analysis of operating results, particularly to make comparisons of net operating income between periods meaningful, it is important to provide information for properties that were in-service and owned by us throughout each period presented.

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The Same Property Portfolio therefore excludes properties acquired, placed in-service or in development or redevelopment after the beginning of the earliest period presented or disposed of prior to the end of the latest period presented.

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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, loss from early extinguishment of debt, 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 from investments in securities, interest and other income (loss), gains (losses) on sales of real estate, income (loss) from unconsolidated joint ventures, direct reimbursements of payroll and related costs from management services contracts and development and management services revenue.

common shareholders and net income attributable to Boston Properties Limited Partnership common unitholders, as applicable, the most directly comparable GAAP financial measures, plus (1) preferred stock/unit redemption charge, preferred dividends/distributions, net income attributable to noncontrolling interests, interest expense, losses from early extinguishment of debt, depreciation and amortization expense, transaction costs, payroll and related costs from management services contracts and corporate general and administrative expense less (2) gains (losses) from investments in securities, interest and other income (loss), gains on sales of real estate, income (loss) from unconsolidated joint ventures, direct reimbursements of payroll and related costs from management services contracts and development and management services revenue.

We use NOI internally as a performance measure and believe it provides useful information to investors regarding our results of operations and financial condition because, when compared across periods, it reflects the impact on operations from trends in occupancy rates, rental rates, operating costs and acquisition and development activity on an unleveraged basis, providing perspective not immediately apparent from net income attributable to Boston Properties, Inc.

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For additional information see the Explanatory Note that follows the cover page of this Quarterly Report on Form 10-Q.

Comparison of the nine months ended September 30, 2020 to the nine months ended September 30, 2019

Comparison of the three months ended March 31, 2021 to the three months ended March 31, 2020

The table below shows selected operating information for the Same Property Portfolio and the Total Property Portfolio.

The Same Property Portfolio consists of 141 properties totaling approximately 39.2 million net rentable square feet, excluding unconsolidated joint ventures.

The Same Property Portfolio includes properties acquired or placed in-service on or prior to January 1, 2019 and owned and in service through September 30, 2020.

The Total Property Portfolio includes the effects of the other properties either acquired, placed in-service, in development or redevelopment after January 1, 2019 or disposed of on or prior to September 30, 2020.

This table includes a reconciliation from the Same Property Portfolio to the Total Property Portfolio by also providing information for the nine months ended September 30, 2020 and 2019 with respect to the properties that were acquired, placed in-service, in development or redevelopment or sold.

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The Same Property Portfolio includes properties acquired or placed in-service on or prior to January 1, 2020 and owned and in service through March 31, 2021.

The Total Property Portfolio includes the effects of the other properties either acquired, placed in-service, in development or redevelopment after January 1, 2020 or disposed of on or prior to March 31, 2021.

This table includes a reconciliation from the Same Property Portfolio to the Total Property Portfolio by also providing information for the three months ended March 31, 2021 and 2020 with respect to the properties that were acquired, placed in-service, in development or redevelopment or sold.

Same Property Portfolio Properties Acquired Portfolio Properties

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(2) For a detailed discussion of NOI, including the reasons management believes NOI is useful to investors, see page 50.

Residential Net Operating Income for the nine months ended September 30, 2020 and 2019 is comprised of Residential Revenue of $29,076 and $26,710 less Residential Expenses of $12,984 and $11,907, respectively.

Hotel Net Operating Income for the nine months ended September 30, 2020 and 2019 is comprised of Hotel Revenue of $7,014 and $36,796 less Hotel Expenses of $11,958 and $25,686, respectively, per the Consolidated Statements of Operations.

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Residential Net Operating Income for the three months ended March 31, 2021 and 2020 is comprised of Residential Revenue of $9,175 and $9,956 less Residential Expenses of $6,127 and $4,064, respectively.

Hotel Net Operating Income for the three months ended March 31, 2021 and 2020 is comprised of Hotel Revenue of $632 and $6,825 less Hotel Expenses of $2,051 and $6,821, respectively, per the Consolidated Statements of Operations.

Same Property Portfolio

Lease Revenue (Excluding Termination Income)

Lease revenue from the Same Property Portfolio decreased by approximately $48.3 million for the nine months ended September 30, 2020 compared to 2019.

Approximately $60.8 million of the decrease was related to write-offs, which are discussed below.

Excluding the impact of the write-offs, the average revenue per square foot increased by approximately $0.49, contributing approximately $17.9 million, offset by an approximately $5.4 million decrease due to our average occupancy decreasing from 93.8% to 93.5%.

Under Accounting Standards Codification (“ASC”) 842 - “Leases” (“ASC 842”), any write-off for bad debt, including accrued rent, is recorded as a reduction to lease revenue.

As a result, during the nine months ended September 30, 2020 , for our Same Property Portfolio, we wrote off approximately $39.2 million and $21.6 million of accrued rent and accounts receivable balances, respectively.

These write-offs related to tenants, primarily in the retail sector, that either terminated their leases or for which we determined that their accrued rent and/or accounts receivable balances were no longer probable of collection.

In addition, as a result of COVID-19, for the Same Property Portfolio, during the second and third quarters of 2020, we executed lease modification agreements for approximately 2.9 million square feet and granted approximately $46.9 million of cash rent abatements and deferrals, of which approximately $31.2 million related to rental charges for the second and third quarters of 2020.

Although some of the lease modifications were deferrals under which we expect the tenant will pay us in full primarily in 2021, the majority of the lease modifications involved extending the lease term (in some cases for a year or more).

As a result of the lease modification agreements that extended the lease term, we expect to see an increase in cash rent received in the future.

In April 2020, the Financial Accounting Standards Board (“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.

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

As such, our accrued rent balances, which are a component of lease revenue, include the accounting impact (adjusted for write-offs) from the rent abatements, deferrals and extensions that were executed during the second and third quarters of 2020.

We expect to continue to execute lease modification agreements as a result of COVID-19.

However, the degree to which our tenants’ businesses are negatively impacted by COVID-19 could leave some tenants still unable to meet their rental payment obligations and result in a reduction in our cash flows.

We may write off additional accrued rent or accounts receivable balances and this could have a material adverse effect on lease revenue.

“Risk Factors” for additional details .

Lease revenue (excluding termination income) from the Same Property Portfolio decreased by approximately $19.7 million for the three months ended March 31, 2021 compared to 2020.

The decrease was a result of our average occupancy decreasing from 94.3% to 91.6%.

Average revenue per square foot was approximately the same for both periods.

As a result of COVID-19, for the Same Property Portfolio, during the three months ended March 31, 2021, we executed lease modification agreements for approximately 127,000 square feet and granted approximately $5.3 million of cash rent abatements and deferrals, of which approximately $2.5 million related to tenant charges for the three months ended March 31, 2021.

In addition, during the three months ended March 31, 2021, we recognized approximately $5.9 million related to tenant charges for lease modifications signed during 2020.

As a result of the lease modification agreements that extended the lease term, we expect to see an increase in the cash rent we will receive in the future.

Each quarter since the second quarter of 2020, the number of executed COVID-19 lease modifications has decreased.

We expect the volume of lease modifications to further decrease as the economy recovers.

However, the degree to which our tenants’ businesses have been negatively impacted by COVID-19 and any resulting downturn in their business may leave some tenants still unable to meet their rental payment obligations and result in a reduction in our cash flows.

Termination Income

Termination income decreased by approximately $4.9 million for the nine months ended September 30, 2020 compared to 2019.

Termination income for the nine months ended September 30, 2020 related to 34 tenants across the Same Property Portfolio and totaled approximately $8.4 million, which was primarily related to tenants that terminated leases early in the New York region.

Termination income for the nine months ended September 30, 2019 related to 29 tenants across the Same Property Portfolio and totaled approximately $13.2 million, of which approximately $7.8 million is from two tenants that terminated leases early at 399 Park Avenue in New York City.

Termination income increased by approximately $1.9 million for the three months ended March 31, 2021 compared to 2020.

Termination income for the three months ended March 31, 2021 related to 11 tenants across the Same Property Portfolio and totaled approximately $4.3 million, of which $3.7 million was related to a retail tenant in the Boston region that closed all its retail stores.

Termination income for the three months ended March 31, 2020 related to 14 tenants across the Same Property Portfolio and totaled approximately $2.4 million, which was primarily related to tenants that terminated leases early in New York City and the Boston region.

Parking and Other Revenue

Parking and other revenue decreased by approximately $22.3 million for the nine months ended September 30, 2020 compared to 2019.

Parking and other revenue decreased by approximately $7.2 million for the three months ended March 31, 2021 compared to 2020.

Parking revenue decreased by approximately $9.4 million while other revenue increased by approximately $2.2 million.

The decrease in parking revenue was primarily due to a decrease in transient and monthly parking.

Table of Conte n ts

During the second and third quarters of 2020, with stay-at-home orders in effect business closures and people working remotely in a majority of regions in which our properties are located, we generated minimal hourly/daily parking revenue and this trend may continue for as long as these conditions exist.

However, as these conditions shifted, and stay-at-home orders were partially or fully lifted, businesses began to open and people began to return to working in an office setting, we expected, and have begun to see, an increase in parking revenue.

As a result, for the nine months ended September 30, 2020 , transient and monthly parking decreased by approximately $15.2 million and $5.1 million, respectively.

The increase in other revenue was primarily due to insurance proceeds related to damage at one of our properties in the New York region due to a water main break.

Expenses of $2.2 million related to this insurance claim are included within real estate operating expenses.

During the first quarter of 2021, stay-at-home orders continued to be partially lifted, businesses began to re-open, vaccines began to be distributed and people began to return to work in an office setting.

We expect to see an increase in parking revenue as the return to office work grows.

For the three months ended March 31, 2021, transient and monthly parking decreased by approximately $4.6 million and $3.6 million, respectively, compared to the three months ended March 31, 2020.

Some of our monthly parking revenues are contractual agreements embedded in our leases, and some are at will individual agreements.

Real Estate Operating Expenses

Real estate operating expenses from the Same Property Portfolio decreased by approximately $14.7 million, or 2.0%, for the nine months ended September 30, 2020 compared to 2019, due primarily to decreases in utility and cleaning expense of approximately $15.6 million, or 18.7%, and $7.5 million, or 11.7%, respectively, partially offset by an increase in other real estate operating expenses of $8.4 million, or 1.4%.

The decreases in utility and cleaning expense were experienced across the portfolio and were primarily driven by a decrease in physical tenant occupancy, which led to lower demand for electricity, HVAC, and cleaning.

Real estate operating expenses from the Same Property Portfolio decreased by approximately $4.8 million, or 1.9%, for the three months ended March 31, 2021 compared to 2020, due primarily to a decrease in cleaning expenses of approximately $4.8 million, or 21.2%.

The decrease in cleaning expenses was experienced across the portfolio and was primarily driven by a decrease in physical tenant occupancy, which led to lower demand for cleaning.

Properties Acquired Portfolio

The table below lists the properties acquired between January 1, 2019 and September 30, 2020.

Rental revenue and real estate operating expenses increased by approximately $9.2 million and $3.9 million, respectively, for the nine months ended September 30, 2020 compared to 2019, as detailed below.

The table below lists the properties acquired between January 1, 2020 and March 31, 2021.

Rental revenue and real estate operating expenses increased by approximately $0.3 million and $0.5 million, respectively, for the three months ended March 31, 2021 compared to 2020, as detailed below.

Square Feet Rental Revenue Real Estate Operating Expenses

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(dollars in thousands)

880 and 890 Winter Street

August 27, 2019 392,576 $ 10,222 $ 1,298 $ 8,924 $ 4,122 $ 649 $ 3,473

Fourth + Harrison (1) June 26, 2020 N/A 300 — 300 436 — 436

777 Harrison Street (1) June 26, 2020 N/A $ 347 $ — $ 347 $ 451 $ — $ 451

$ 347 $ — $ 347 $ 451 $ — $ 451

_______________

(1) Located at 777 Harrison Street in San Francisco, California (known as Fourth + Harrison and formerly known as 425 Fourth Stree t) .

Table of Conte n ts

(1) Formerly known as Fourth + Harrison and 425 Fourth Street and includes operating results for 759 Harrison Street, which was fully acquired on December 16, 2020 .

Properties Placed In-Service Portfolio

The table below lists the properties that were placed in-service or partially placed in-service between January 1, 2019 and September 30, 2020.

Rental revenue and real estate operating expenses from our Properties Placed In-Service Portfolio increased by approximately $46.2 million and $9.0 million, respectively, for the nine months ended September 30, 2020 compared to 2019, as detailed below.

The table below lists the properties that were placed in-service or partially placed in-service between January 1, 2020 and March 31, 2021.

Rental revenue and real estate operating expenses from our Properties Placed In-Service Portfolio increased by approximately $6.4 million and $3.3 million, respectively, for the three months ended March 31, 2021 compared to 2020, as detailed below.

Quarter Initially Placed In-Service Quarter Fully Placed In-Service Rental Revenue Real Estate Operating Expenses

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20 CityPoint Second Quarter, 2019 Second Quarter, 2020 211,476 $ 1,694 $ 1,849 $ (155) $ 727 $ 588 $ 139

Fourth Quarter, 2019 Fourth Quarter, 2019 490,086 33,377 — 33,377 4,104 — 4,104

17Fifty Presidents Street

First Quarter, 2020 First Quarter, 2020 275,809 5,051 598 4,453 1,502 233 1,269

One Five Nine East 53rd Street (1)

First Quarter, 2021 First Quarter, 2021 220,000 2,676 886 1,790 719 563 156

Total Office 707,285 9,421 3,333 6,088 2,948 1,384 1,564

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1,038,281 $ 9,742 $ 3,333 $ 6,409 $ 4,634 $ 1,384 $ 3,250

_____________

(1) This is the low-rise portion of 601 Lexington Avenue and was in development for the three months ended March 31, 2020.

Properties in Development or Redevelopment Portfolio

The table below lists the properties that were in development or redevelopment between January 1, 2019 and September 30, 2020.

Rental revenue and real estate operating expenses from our Properties in Development or Redevelopment Portfolio decreased by approximately $5.4 million and $2.5 million, respectively, for the nine months ended September 30, 2020 compared to 2019.

The table below lists the properties that were in development or redevelopment between January 1, 2020 and March 31, 2021.

Rental revenue and real estate operating expenses from our Properties in Development or Redevelopment Portfolio each decreased by approximately $0.7 million for the three months ended March 31, 2021 compared to 2020.

Rental Revenue Real Estate Operating Expenses

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(dollars in thousands)

One Five Nine East 53rd Street (1)

August 19, 2016 220,000 $ (1,232) $ 2,781 $ (4,013) $ 1,149 $ 1,430 $ (281)

325 Main Street (2)

May 9, 2019 115,000 36 (704) 740 281 1,338 (1,057)

200 West Street (3)

September 30, 2019 261,000 3,826 5,977 (2,151) 2,565 3,686 (1,121)

325 Main Street (1) May 9, 2019 115,000 $ — $ — $ — $ 17 $ 149 $ (132)

200 West Street (2) September 30, 2019 261,000 1,501 1,268 233 370 843 (473)

880 Winter Street (3) February 25, 2021 224,000 1,335 2,280 (945) 758 805 (47)

600,000 $ 2,836 $ 3,548 $ (712) $ 1,145 $ 1,797 $ (652)

_______________

(1) Rental revenue for the nine months ended September 30, 2020 includes an approximately $2.9 million write-off of accrued rent and accounts receivable balances for a terminated tenant.

(2) Rental revenue for the nine months ended September 30, 2019 includes the acceleration and write-off of accrued rent associated with the early termination of a lease at the property.

Real estate operating expenses for the nine months ended September 30, 2020 and 2019 includes approximately $0.3 million and $0.7 million of demolition costs, respectively.

(3) Rental revenue and real estate operating expenses for the nine months ended September 30, 2019 are related to the entire building.

The redevelopment is a conversion of a 126,000 square foot portion of the property to laboratory space.

Table of Conte n ts

(1) Real estate operating expenses for the three months ended March 31, 2021 and 2020 were related to demolition costs.

(2) Conversion of a 126,000 square foot portion of the property to life sciences space from office space.

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

Properties Sold Portfolio

The table below lists the properties we sold between January 1, 2019 and September 30, 2020.

Rental revenue and real estate operating expenses from our Properties Sold Portfolio decreased by approximately $43.6 million and $16.1 million, respectively, for the nine months ended September 30, 2020 compared to 2019, as detailed below.

The table below lists the properties we sold between January 1, 2020 and March 31, 2021.

Rental revenue and real estate operating expenses from our Properties Sold Portfolio decreased by approximately $11.9 million and $4.2 million, respectively, for the three months ended March 31, 2021 compared to 2020, as detailed below.

Rental Revenue Real Estate Operating Expenses

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(dollars in thousands)

2600 Tower Oaks Boulevard

January 24, 2019 Office 179,000 $ — $ 159 $ (159) $ — $ 189 $ (189)

One Tower Center June 3, 2019 Office 410,000 — 2,100 (2,100) — 2,080 (2,080)

164 Lexington Road June 28, 2019 Office 64,000 — — — — 82 (82)

Washingtonian North December 20, 2019 Land N/A — — — — 117 (117)

601, 611 and 651 Gateway (1)

January 28, 2020 Office 768,000 1,946 21,495 (19,549) 881 7,682 (6,801)

601, 611 and 651 Gateway January 28, 2020 Office 768,000 $ — $ 1,946 $ (1,946) $ — $ 881 $ (881)

New Dominion Technology Park

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______________

(1) Rental revenue for the nine months ended September 30, 2019 includes approximately $0.8 million of termination income (See Notes 3 and 5 to the Consolidated Financial Statements).

(1) We completed the sale of a portion of our Capital Gallery property located in Washington, DC.

2 unchanged sentences

We continue to own the land, underground parking garage and remaining commercial office and retail space.

The amounts shown represent the entire property and not just the portion sold (See Note 3 to the Consolidated Financial Statements).

The amounts shown represent the entire property and not just the portion sold .

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

Residential Net Operating Income

Net operating income for our residential same properties increased by approximately $2.0 million for the nine months ended September 30, 2020 compared to 2019.

Net operating income for the nine months ended September 30, 2020 includes approximately $0.7 million of termination income from a retail tenant.

The following reflects our occupancy and rate information for The Lofts at Atlantic Wharf, The Avant at Reston Town Center, Signature at Reston and Proto Kendall Square for the nine months ended September 30, 2020 and 2019.

Net operating income for our residential same properties decreased by approximately $1.5 million for the three months ended March 31, 2021 compared to 2020.

The following reflects our occupancy and rate information for The Lofts at Atlantic Wharf, The Avant at Reston Town Center, Signature at Reston and Proto Kendall Square for the three months ended March 31, 2021 and 2020.

The Lofts at Atlantic Wharf The Avant at Reston Town Center Signature at Reston Proto Kendall Square

10 unchanged sentences

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

Table of Conte n ts

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

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Hotel Net Operating Income (Loss)

Net operating income (loss) for the Boston Marriott Cambridge hotel property decreased by approximately $16.1 million for the nine months ended September 30, 2020 compared to 2019.

The Boston Marriott Cambridge closed in March 2020 due to COVID-19 and did not re-open until October 2, 2020.

The hotel is operating at a monthly deficit.

Net operating income (loss) for the Boston Marriott Cambridge hotel property decreased by approximately $1.4 million for the three months ended March 31, 2021 compared to 2020.

The Boston Marriott Cambridge closed in March 2020 due to COVID-19.

The hotel re-opened on October 2, 2020 and it has operated at a diminished occupancy due to the continued impact of COVID-19 on business and leisure travel.

The closing of the hotel for more than two fiscal quarters, weak demand and low occupancy since its re-opening, have had, and are expected to continue to have, a material adverse effect on the hotel’s operations.

“Risk Factors” for additional details.

The following reflects our occupancy and rate information for the Boston Marriott Cambridge hotel for the nine months ended September 30, 2020 and 2019.

We expect hotel occupancy to remain low until a sufficient number of people have been vaccinated and the demand for business and leisure travel returns to historical levels .

The following reflects our occupancy and rate information for the Boston Marriott Cambridge hotel for the three months ended March 31, 2021 and 2020.

Occupancy 10.9 % 59.6 % (81.7) %

3 unchanged sentences

Development and Management Services Revenue

Development and management services revenue decreased by approximately $6.3 million for the nine months ended September 30, 2020 compared to 2019.

Development and management services revenue decreased by approximately $1.1 million for the three months ended March 31, 2021 compared to 2020.

Development services revenue decreased by approximately $1.6 million while management services revenue increased by approximately $0.5 million.

The decrease in development services revenue was primarily related to a decrease of approximately $7.3 million in development fees and fees associated with tenant improvement projects earned from our unconsolidated joint ventures in the Boston and New York regions partially offset by an increase of approximately $0.8 million in development fees earned in the San Francisco region.

The increase in management services revenue was primarily related to property management fees earned from third-party owned buildings in the Washington, DC region and our Gateway Commons unconsolidated joint venture, which was deconsolidated on January 28, 2020, partially offset by a decrease in leasing commissions earned from our unconsolidated joint ventures in the Boston region.

The decrease in development services revenue was primarily related to a decrease in development fees earned from a third-party owned building in the Washington, DC region.

The increase in management services revenue was primarily related to an increase in property management fees earned from third-party owned buildings in the Washington, DC region.

General and Administrative Expense

General and administrative expense decreased by approximately $5.9 million for the nine months ended September 30, 2020 compared to 2019 primarily due to a decrease in compensation expense of approximately $6.1 million, partially offset by an approximately $0.2 million increase in other general and administrative expenses.

The decrease in compensation expense was related to (1) an approximately $3.2 million decrease in the value of our deferred compensation plan, (2) an approximately $1.3 million decrease in health care costs and (3) an approximately $1.6 million decrease in other compensation-related expenses.

The increase in other general and administrative expenses was primarily related to the write-off of the remaining fees associated with BXP’s prior “at the market” stock offering program that was scheduled to expire on June 2, 2020 and an increase in other professional fees.

Table of Conte n ts

General and administrative expense increased by approximately $8.5 million for the three months ended March 31, 2021 compared to 2020 primarily due to an increase in compensation expense of approximately $9.3 million, partially offset by an approximately $0.8 million decrease in other general and administrative expenses.

The increase in compensation expense was related to (1) an approximately $7.1 million increase in the value of our deferred compensation plan and (2) an approximately $2.2 million increase in other compensation-related expenses, primarily due to age-based vesting.

Wages directly related to the development of rental properties are capitalized and included in real estate assets on our Consolidated Balance Sheets and amortized over the useful lives of the applicable asset or lease term.

Capitalized wages for the nine months ended September 30, 2020 and 2019 were approximately $9.6 million and $8.1 million, respectively.

Capitalized wages for the three months ended March 31, 2021 and 2020 were approximately $3.3 million and $2.8 million, respectively.

These costs are not included in the general and administrative expenses discussed above.

Transaction Costs

Transaction costs decreased by approximately $0.2 million for the nine months ended September 30, 2020 compared to 2019 due primarily to costs incurred in connection with the pursuit and formation of new joint ventures.

Transaction costs decreased by approximately $0.3 million for the three months ended March 31, 2021 compared to 2020 due primarily to costs incurred in connection with the pursuit and formation of new joint ventures.

In general, transaction costs relating to the formation of new and pending joint ventures and the pursuit of other transactions are expensed as incurred.

5 unchanged sentences

Boston Properties, Inc.

Depreciation and amortization expense increased by approximately $7.9 million for the nine months ended September 30, 2020 compared to 2019, as detailed below.

Portfolio Depreciation and Amortization for the nine months ended September 30,

Depreciation and amortization expense increased by approximately $5.5 million for the three months ended March 31, 2021 compared to 2020, as detailed below.

Portfolio Depreciation and Amortization for the three months ended March 31,

2021 2020 Change

7 unchanged sentences

_______________

(1) On May 9, 2019, we commenced development of 325 Main Street in Cambridge, Massachusetts.

As a result, during the nine months ended September 30, 2019, we recorded approximately $9.9 million of accelerated depreciation expense for the demolition of the building, of which approximately $0.4 million related to the step-up of real estate assets.

(1) During the three months ended March 31, 2021, we commenced redevelopment of The Prudential Center Observatory, a 59,000 net rentable square foot redevelopment of the top three floors of 800 Boylston Street - The Prudential Center, located in Boston, Massachusetts.

As a result, during the three months ended March 31, 2021, we recorded approximately $2.6 million of accelerated depreciation expense for the demolition of the space, of which approximately $0.8 million related to the step-up of real estate assets.

(2) On February 25, 2021, we commenced redevelopment of 880 Winter Street in Waltham, Massachusetts.

As a result, during the three months ended March 31, 2021, we recorded approximately $3.2 million of accelerated depreciation expense for the demolition of a portion of the building.

Boston Properties Limited Partnership

Depreciation and amortization expense increased by approximately $8.5 million for the nine months ended September 30, 2020 compared to 2019, as detailed below.

Portfolio Depreciation and Amortization for the nine months ended September 30,

Depreciation and amortization expense increased by approximately $4.2 million for the three months ended March 31, 2021 compared to 2020, as detailed below.

Portfolio Depreciation and Amortization for the three months ended March 31,

2021 2020 Change

6 unchanged sentences

$ 173,500 $ 169,285 $ 4,215

Table of Conte n ts

_______________

(1) On May 9, 2019, we commenced development of 325 Main Street in Cambridge, Massachusetts.

As a result, during the nine months ended September 30, 2019, we recorded approximately $9.5 million of accelerated depreciation expense for the demolition of the building.

As a result, during the three months ended March 31, 2021, we recorded approximately $1.8 million of accelerated depreciation expense for the demolition of the space.

(2) On February 25, 2021, we commenced redevelopment of 880 Winter Street in Waltham, Massachusetts.

As a result, during the three months ended March 31, 2021, we recorded approximately $3.2 million of accelerated depreciation expense for the demolition of a portion of the building.

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

3 unchanged sentences

Income (loss) from Unconsolidated Joint Ventures

For the nine months ended September 30, 2020 compared to 2019, income (loss) from unconsolidated joint ventures decreased by approximately $52.9 million primarily due to an approximately $47.5 million gain on sale of real estate from the sale of 540 Madison Avenue during the nine months ended September 30, 2019 and the resulting loss of income thereafter, along with the addition of our Gateway Commons joint venture and the placing in-service of the Hub50House joint venture in South San Francisco, California and Boston, Massachusetts, respectively.

These joint ventures reduced our net income by approximately $5.9 million for the nine months ended September 30, 2020.

During the nine months ended September 30, 2020, Hub50House was fully placed in-service and we do not expect it to be stabilized until the first quarter of 2022.

The decrease in net income from the Gateway Commons joint venture was primarily related to depreciation and amortization.

The decrease in our net income was also driven by a $2.1 million reduction at our Colorado Center joint venture, primarily due to a write-off of lease revenue during the nine months ended September 30, 2020.

These decreases were partially offset by an approximately $5.8 million gain on sale of real estate from the sale of Annapolis Junction Building Eight and two undeveloped land parcels during the nine months ended September 30, 2020.

Under ASC 842, any write-off for bad debt, including accrued rent, is recorded as a reduction to lease revenue.

As a result, during the nine months ended September 30, 2020, for our unconsolidated joint ventures, we wrote off our share of the accrued rent and accounts receivable balances of approximately $2.6 million and $1.5 million, respectively.

These write-offs related to tenants that either terminated their leases or for which we determined that their accrued rent and/or accounts receivable balances were no longer probable of collection.

In addition, as a result of COVID-19, for properties owned by our unconsolidated joint ventures, during the second and third quarters of 2020, the joint ventures executed lease modification agreements for approximately 855,000 square feet.

As a result of these lease modification agreements, our share of the total cash rent abatements and deferrals granted was approximately $5.8 million, of which approximately $4.4 million was related to rental charges for the second and third quarters of 2020.

Although some of the lease modifications were deferrals where we expect the tenant will pay the joint venture in full primarily in 2021, the majority of the lease modifications involved extending the lease term (in some cases for longer than a year).

As a result of the lease modification agreements that extended the lease term, we expect to see an increase in cash rent received in the future.

In April 2020, the FASB staff issued the 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.

As such, the accrued rent balances, which are a component of lease revenue, include the accounting impact (adjusted for write-offs) from the rent abatements, deferrals and extensions that were executed during the second and third quarters of 2020.

The joint ventures expect to continue to execute lease modification agreements as a result of COVID-19.

However, the degree to which tenants’ businesses are negatively impacted by COVID-19 could leave some tenants still unable to meet their rental payment obligations and result in a reduction in cash flows.

Our unconsolidated joint ventures may write-off additional accrued rent or accounts receivable balances and this could have a material adverse effect on lease revenue.

“Risk Factors” for additional details .

Table of Conte n ts

For the three months ended March 31, 2021 compared to 2020, income (loss) from unconsolidated joint ventures increased by approximately $5.6 million primarily due to an approximately $10.3 million gain on sale of investment from the sale of our Annapolis Junction joint venture during the three months ended March 31, 2021 (See Note 5 to the Consolidated Financial Statements).

This increase was partially offset by an approximately (1) $2.9 million decrease in net income from our Dock 72 and Metropolitan Square joint ventures, primarily related to depreciation and amortization and (2) $0.8 million decrease in net income from our Colorado Center joint venture, primarily due to lease expirations.

Gains on Sales of Real Estate

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Boston Properties, Inc.

Gains on sales of real estate increased by approximately $613.0 million for the nine months ended September 30, 2020 compared to 2019, as detailed below.

Gains on sales of real estate decreased by approximately $410.2 million for the three months ended March 31, 2021 compared to 2020, as detailed below.

Name Date Sold Property Type Square Feet Sale Price Net Cash Proceeds Gain (Loss) on Sale of Real Estate

4 unchanged sentences

February 20, 2020 Office 493,000 256.0 254.0 192.3

Capital Gallery June 25, 2020 Office 455,000 253.7 246.6 203.6 (2)

$ 606.0 $ 254.0 $ 410.0 (1)

2600 Tower Oaks Boulevard

January 24, 2019 Office 179,000 $ 22.7 $ 21.4 $ (0.6)

One Tower Center June 3, 2019 Office 410,000 38.0 36.6 (0.8)

164 Lexington Road June 28, 2019 Office 64,000 4.0 3.8 2.5

$ 64.7 $ 61.8 $ 1.1 (4)

(1) On January 28, 2020, we entered into a joint venture with a third party to own, operate and develop properties at our Gateway Commons complex located in South San Francisco.

We contributed our 601, 611 and 651 Gateway properties and development rights with an agreed upon value aggregating approximately $350.0 million for our 50% interest in the joint venture (See Notes 3 and 5 to the Consolidated Financial Statements).

(2) We completed the sale of a portion of our Capital Gallery property located in Washington, DC.

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.

We continue to own the land, underground parking garage and remaining commercial office and retail space (See Note 3 to the Consolidated Financial Statements).

(3) Excludes approximately $0.1 million of gains on sales of real estate recognized during the nine months ended September 30, 2020 related to gain amounts from sales of real estate occurring in the prior year.

(4) Excludes approximately $0.3 million of losses on sales of real estate recognized during the nine months ended September 30, 2019 related to loss amounts from sales of real estate occurring in prior years.

Table of Conte n ts

(1) Excludes approximately $0.2 million of gains on sales of real estate recognized during the three months ended March 31, 2020 related to gain amounts from sales of real estate occurring in the prior year.

Boston Properties Limited Partnership

Gains on sales of real estate increased by approximately $625.8 million for the nine months ended September 30, 2020 compared to 2019, as detailed below.

Gains on sales of real estate decreased by approximately $419.7 million for the three months ended March 31, 2021 compared to 2020, as detailed below.

Name Date Sold Property Type Square Feet Sale Price Net Cash Proceeds Gain (Loss) on Sale of Real Estate

4 unchanged sentences

February 20, 2020 Office 493,000 256.0 254.0 197.1

Capital Gallery June 25, 2020 Office 455,000 253.7 246.6 207.0 (2)

$ 606.0 $ 254.0 $ 419.5 (1)

2600 Tower Oaks Boulevard

January 24, 2019 Office 179,000 $ 22.7 $ 21.4 $ (0.6)

One Tower Center

June 3, 2019 Office 410,000 38.0 36.6 (0.8)

164 Lexington Road

June 28, 2019 Office 64,000 4.0 3.8 2.6

$ 64.7 $ 61.8 $ 1.2 (4)

(1) On January 28, 2020, we entered into a joint venture with a third party to own, operate and develop properties at our Gateway Commons complex located in South San Francisco.

(2) We completed the sale of a portion of our Capital Gallery property located in Washington, DC.

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.

We continue to own the land, underground parking garage and remaining commercial office and retail space (See Note 3 to the Consolidated Financial Statements).

Interest and Other Income (Loss)

Interest and other income (loss) decreased by approximately $10.3 million for the nine months ended September 30, 2020 compared to 2019.

Interest and other income decreased by approximately $8.3 million due primarily to a decrease in interest rates.

On January 1, 2020, we adopted ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”) and, as a result, we were required to record an allowance for current expected credit losses related to our outstanding (1) related party note receivable, (2) notes receivable and (3) off-balance sheet credit exposures (See Note 2 to the Consolidated Financial Statements).

For the nine months ended September 30, 2020 the allowance for current expected credit losses was $2.0 million.

Gains from Investments in Securities

Gains from investments in securities for the nine months ended September 30, 2020 and 2019 related to investments that we have made to reduce our market risk relating to deferred compensation plans that we maintain for BXP’s officers and former non-employee directors.

Interest and other income (loss) decreased by approximately $1.8 million for the three months ended March 31, 2021 compared to 2020, due primarily to a decrease in interest income as a result of lower interest earned on our deposits.

Gains (losses) from Investments in Securities

Gains (losses) from investments in securities for the three months ended March 31, 2021 and 2020 related to investments that we have made to reduce our market risk relating to deferred compensation plans that we maintain for BXP’s officers and former non-employee directors.

Under the deferred compensation plans, each officer or non-employee director who is eligible to participate is permitted to defer a portion of the officer’s current income or the non-employee director’s compensation on a pre-tax basis and receive a tax-deferred return on these deferrals based on the performance of specific investments selected by the officer or non-employee director.

In order to reduce our market risk relating to these plans, we typically acquire, in a separate account that is not restricted as to its use, similar or identical investments as those selected by each officer or non-employee director.

This enables us

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to generally match our liabilities to BXP’s officers or former non-employee directors under our deferred compensation plans with equivalent assets and thereby limit our market risk.

The performance of these investments is recorded as gains from investments in securities.

During the nine months ended September 30, 2020 and 2019, we recognized gains of approximately $1.0 million and $4.2 million, respectively, on these investments.

By comparison, our general and administrative expense increased by approximately $1.0 million and $4.2 million during the nine months ended September 30, 2020 and 2019, respectively, as a result of increases in our liability under our deferred compensation plans that was associated with the performance of the specific investments selected by officers and former non-employee directors of BXP participating in the plans.

Impairment Loss

Impairment loss may differ between BXP and BPLP as a result of previously applied acquisition accounting by BXP for the issuance of common stock in connection with non-sponsor OP Unit redemptions by BPLP.

This accounting resulted in a step-up of the real estate assets at BXP that was allocated to certain properties.

The difference between the real estate assets of BXP as compared to BPLP for certain properties having an allocation of the real estate step-up will result in a corresponding difference in depreciation expense.

For additional information see the Explanatory Note that follows the cover page of this Quarterly Report on Form 10-Q.

At March 31, 2019, we evaluated the expected hold period of our One Tower Center property located in East Brunswick, New Jersey and, based on a shorter-than-expected hold period, we reduced the carrying value of the property to its estimated fair value at March 31, 2019 and recognized an impairment loss totaling approximately $24.0 million for BXP and approximately $22.3 million for BPLP.

Our estimated fair value was based on a pending offer from a third party to acquire the property and the subsequent execution of a purchase and sale agreement on April 18, 2019 for a gross sale price of approximately $38.0 million.

On June 3, 2019, we completed the sale of the property.

One Tower Center is an approximately 410,000 net rentable square foot Class A office property.

We did not have any impairments during the nine months ended September 30, 2020.

Loss From Early Extinguishment of Debt

On September 18, 2019, BPLP completed the redemption of $700.0 million in aggregate principal amount of its 5.625% senior notes due November 15, 2020.

The redemption price was approximately $740.7 million.

The redemption price included approximately $13.5 million of accrued and unpaid interest to, but not including, the redemption date.

Excluding the accrued and unpaid interest, the redemption price was approximately 103.90% of the principal amount being redeemed.

We recognized a loss from early extinguishment of debt totaling approximately $28.0 million, which amount included the payment of the redemption premium totaling approximately $27.3 million.

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Interest Expense

Interest expense increased by approximately $9.9 million for the nine months ended September 30, 2020 compared to 2019, as detailed below.

Component Change in interest expense for the nine months ended September 30, 2020 compared to September 30, 2019

(in thousands)

Increases to interest expense due to:

Issuance of $1.25 billion in aggregate principal of 3.250% senior notes due 2031 on May 5, 2020

Issuance of $850 million in aggregate principal of 3.400% senior notes due 2029 on June 21, 2019 13,714

Issuance of $700 million in aggregate principal of 2.900% senior notes due 2030 on September 3, 2019

Decrease in capitalized interest related to development projects

Increase in interest due to finance leases 2,758

Other interest expense (excluding senior notes)

Total increases to interest expense 49,924

Decreases to interest expense due to:

Redemption of $700 million in aggregate principal of 5.625% senior notes due 2020 on September 18, 2019

Decrease in interest rates for the 2017 Credit Facility

Increase in capitalized interest related to development projects that had finance leases

Repayment of a bond financing collateralized by New Dominion Technology Building One

Total decreases to interest expense (40,035)

Total change in interest expense $ 9,889

Interest expense directly related to the development of rental properties is capitalized and included in real estate assets on our Consolidated Balance Sheets and amortized over the useful lives of the real estate or lease term.

As portions of properties are placed in-service, we cease capitalizing interest on that portion and interest is then expensed.

Interest capitalized for each of the nine months ended September 30, 2020 and 2019 was approximately $41.3 million.

These costs are not included in the interest expense referenced above.

At September 30, 2020, our outstanding variable rate debt consisted of BPLP’s $2.0 billion unsecured revolving credit facility (the “2017 Credit Facility”), which includes the $500.0 million delayed draw term loan facility (the “Delayed Draw Facility”) and the $1.5 billion revolving line of credit (the “Revolving Facility”).

The Delayed Draw Facility had $500.0 million outstanding as of September 30, 2020.

The Revolving Facility did not have an outstanding balance as of September 30, 2020.

For a summary of our consolidated debt as of September 30, 2020 and September 30, 2019 refer to the heading “ Liquidity and Capital Resources—Capitalization—Debt Financing” within “ Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations.

On May 5, 2020, BPLP completed a public offering of $1.25 billion in aggregate principal amount of its 3.250% unsecured senior notes due 2031 (See Note 6 to the Consolidated Financial Statements).

We used a portion of the net proceeds from this offering for the repayment of borrowings outstanding under the Revolving Facility.

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Noncontrolling Interests in Property Partnerships

Noncontrolling interests in property partnerships decreased by approximately $20.5 million for the nine months ended September 30, 2020 compared to 2019, as detailed below.

Property Noncontrolling Interests in Property Partnerships for the nine months ended September 30,

2020 2019 Change

(in thousands)

Salesforce Tower (1) $ — $ 116 $ (116)

767 Fifth Avenue (the General Motors Building) (2) 4,205 2,811 1,394

Times Square Tower (3) 198 20,680 (20,482)

601 Lexington Avenue (4) 12,317 14,909 (2,592)

100 Federal Street (5) 10,874 9,187 1,687

Atlantic Wharf Office Building (6) 6,686 7,079 (393)

$ 34,280 $ 54,782 $ (20,502)

_______________

(1) On April 1, 2019, we acquired our partner’s 5% interest and subsequently own 100%.

(2) The increase during the nine months ended September 30, 2020 was related to above-/below-market lease assets that were fully amortized in 2020.

(3) During the nine months ended September 30, 2020, we wrote off approximately $26.8 million of accrued rent and accounts receivable balances for tenants that either terminated their leases or for which we determined their accrued rent and/or accounts receivable balances, primarily retail tenants, were no longer probable of collection.

Approximately $14.7 million represents our share of the write-offs.

As a result of these terminations, lease revenue decreased for the nine months ended September 30, 2020.

(4) During the nine months ended September 30, 2019, we wrote off approximately $2.9 million of accrued rent and accounts receivable balances for tenants that either terminated their leases or for which we determined their accrued rent and/or accounts receivable balances, primarily retail tenants, were no longer probable of collection.

Approximately $1.6 million represents our share of the write-offs.

As a result of these terminations, lease revenue decreased for the nine months ended September 30, 2020.

(5) The increase was primarily due to an increase in lease revenue from our tenants.

(6) During the nine months ended September 30, 2020, we wrote off approximately $0.5 million of accrued rent and accounts receivable balances for tenants whose balances we determined were no longer probable of collection.

Approximately $0.3 million represents our share of the write-offs.

Noncontrolling Interest—Common Units of the Operating Partnership

For BXP, noncontrolling interest—common units of the Operating Partnership increased by approximately $54.0 million for the nine months ended September 30, 2020 compared to 2019 due primarily to an increase in allocable income, which was the result of recognizing a greater gain on sales of real estate amount during 2020 partially offset by a decrease in the noncontrolling interest’s ownership percentage.

Due to our ownership structure, there is no corresponding line item on BPLP’s financial statements.

Results of Operations for the Three Months Ended September 30, 2020 and 2019

The impact that COVID-19 has had on our business, financial position and results of operations during the third quarter of 2020 is discussed throughout this report.

The full extent of the impact of COVID-19 on our business, operations and financial results will depend on numerous evolving factors that we may not be able to accurately predict.

In addition, we cannot predict the impact that COVID-19 will have on our tenants, employees, contractors, lenders, suppliers, vendors and joint venture partners;

any material adverse effect on these parties could also have a material adverse effect on us.

“Risk Factors” for additional details.

Net income attributable to Boston Properties, Inc.

common shareholders and net income attributable to Boston Properties Limited Partnership common unitholders decreased approximately $17.9 million and $20.5 million for the three months ended September 30, 2020 compared to 2019, respectively, as detailed in the following tables and for the reasons discussed below under the heading “ Comparison of the three months ended September 30, 2020 to the

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three months ended September 30, 2019” within “Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Below are reconciliations of net income attributable to Boston Properties, Inc.

common shareholders to NOI and net income attributable to Boston Properties Limited Partnership common unitholders to NOI for the three months ended September 30, 2020 and 2019.

For a detailed discussion of NOI, including the reasons management believes NOI is useful to investors, see page 58.

Boston Properties, Inc.

Three months ended September 30,

2020 2019 Increase/

(in thousands)

Net Income Attributable to Boston Properties, Inc.

Common Shareholders

$ 89,854 $ 107,771 $ (17,917) (16.63) %

Preferred dividends

2,625 2,625 — — %

Net Income Attributable to Boston Properties, Inc.

92,479 110,396 (17,917) (16.23) %

Net Income Attributable to Noncontrolling Interests:

Noncontrolling interest—common units of the Operating Partnership

10,020 12,504 (2,484) (19.87) %

Noncontrolling interests in property partnerships

15,561 18,470 (2,909) (15.75) %

Net Income 118,060 141,370 (23,310) (16.49) %

Other Expenses:

Interest expense 110,993 106,471 4,522 4.25 %

Loss from early extinguishment of debt — 28,010 (28,010) (100.00) %

Losses on sales of real estate 209 15 194 1,293.33 %

Loss from unconsolidated joint ventures 6,873 649 6,224 959.01 %

Other Income:

Gains from investments in securities

1,858 106 1,752 1,652.83 %

Interest and other income (loss)

( 45 ) 7,178 (7,223) (100.63) %

Other Expenses:

Depreciation and amortization expense 166,456 165,862 594 0.36 %

Transaction costs

307 538 (231) (42.94) %

Payroll and related costs from management services contracts

2,896 2,429 467 19.23 %

General and administrative expense

27,862 31,147 (3,285) (10.55) %

Other Revenue:

Direct reimbursements of payroll and related costs from management services contracts

2,896 2,429 467 19.23 %

Development and management services revenue

7,281 10,303 (3,022) (29.33) %

Net Operating Income $ 421,666 $ 456,475 $ (34,809) (7.63) %

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Boston Properties Limited Partnership

Three months ended September 30,

2020 2019 Increase/

(in thousands)

Net Income Attributable to Boston Properties Limited Partnership Common Unitholders

$ 101,624 $ 122,117 $ (20,493) (16.78) %

Preferred distributions

2,625 2,625 — — %

Net Income Attributable to Boston Properties Limited Partnership 104,249 124,742 (20,493) (16.43) %

Net Income Attributable to Noncontrolling Interests:

Noncontrolling interests in property partnerships

15,561 18,470 (2,909) (15.75) %

Net Income 119,810 143,212 (23,402) (16.34) %

Other Expenses:

Interest expense

110,993 106,471 4,522 4.25 %

Loss from early extinguishment of debt — 28,010 (28,010) (100.00) %

Losses on sales of real estate 209 15 194 1,293.33 %

Loss from unconsolidated joint ventures 6,873 649 6,224 959.01 %

Other Income:

Gains from investments in securities

1,858 106 1,752 1,652.83 %

Interest and other income (loss)

( 45 ) 7,178 (7,223) (100.63) %

Other Expenses:

Depreciation and amortization expense 164,706 164,020 686 0.42 %

Transaction costs

307 538 (231) (42.94) %

Payroll and related costs from management services contracts

2,896 2,429 467 19.23 %

General and administrative expense

27,862 31,147 (3,285) (10.55) %

Other Revenue:

Direct reimbursements of payroll and related costs from management services contracts

2,896 2,429 467 19.23 %

Development and management services revenue

7,281 10,303 (3,022) (29.33) %

Net Operating Income $ 421,666 $ 456,475 $ (34,809) (7.63) %

Comparison of the three months ended September 30, 2020 to the three months ended September 30, 2019

The table below shows selected operating information for the Same Property Portfolio and the Total Property Portfolio.

The Same Property Portfolio consists of 139 properties totaling approximately 38.6 million net rentable square feet, excluding unconsolidated joint ventures.

The Same Property Portfolio includes properties acquired or placed in-service on or prior to July 1, 2019 and owned and in-service through September 30, 2020.

The Total Property Portfolio includes the effects of the other properties either acquired, placed in-service, in development or redevelopment after July 1, 2019 or disposed of on or prior to September 30, 2020.

This table includes a reconciliation from the Same Property Portfolio to the Total Property Portfolio by also providing information for the three months ended September 30, 2020 and 2019 with respect to the properties that were acquired, placed in-service, in development or redevelopment or sold.

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Same Property Portfolio Properties

Acquired Portfolio Properties

Placed In-Service

Portfolio Properties in

Development or

Redevelopment

Portfolio Properties Sold Portfolio Total Property Portfolio

2020 2019 Increase/

Change 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 Increase/

(dollars in thousands)

Rental Revenue:

Lease Revenue (Excluding Termination Income)

$ 629,175 $ 654,129 $ (24,954) (3.81) % $ 3,625 $ 1,298 $ 17,835 $ 1,576 $ 1,390 $ 2,577 $ 2,369 $ 20,837 $ 654,394 $ 680,417 $ (26,023) (3.82) %

Termination Income

2,715 1,698 1,017 59.89 % — — — — — — — 262 2,715 1,960 755 38.52 %

Lease Revenue

631,890 655,827 (23,937) (3.65) % 3,625 1,298 17,835 1,576 1,390 2,577 2,369 21,099 657,109 682,377 (25,268) (3.70) %

Parking and Other

15,428 24,529 (9,101) (37.10) % 3 — 521 — 4 7 218 898 16,174 25,434 (9,260) (36.41) %

Total Rental Revenue (1) 647,318 680,356 (33,038) (4.86) % 3,628 1,298 18,356 1,576 1,394 2,584 2,587 21,997 673,283 707,811 (34,528) (4.88) %

Real Estate Operating Expenses 245,346 250,554 (5,208) (2.08) % 1,706 649 3,802 477 1,298 1,926 1,154 7,986 253,306 261,592 (8,286) (3.17) %

Net Operating Income, Excluding Residential and Hotel 401,972 429,802 (27,830) (6.48) % 1,922 649 14,554 1,099 96 658 1,433 14,011 419,977 446,219 (26,242) (5.88) %

Residential Net Operating Income (Loss) (2) 5,480 5,985 (505) (8.44) % — — (717) — — — — — 4,763 5,985 (1,222) (20.42) %

Hotel Net Operating Income (Loss) (2) (3,074) 4,271 (7,345) (171.97) % — — — — — — — — (3,074) 4,271 (7,345) (171.97) %

Net Operating Income $ 404,378 $ 440,058 $ (35,680) (8.11) % $ 1,922 $ 649 $ 13,837 $ 1,099 $ 96 $ 658 $ 1,433 $ 14,011 $ 421,666 $ 456,475 $ (34,809) (7.63) %

_______________

(1) Rental Revenue is equal to Revenue less Development and Management Services Revenue and Direct Reimbursements of Payroll and Related Costs from Management Services Revenue per the Consolidated Statements of Operations, excluding the residential and hotel revenue that is noted below.

We use Rental Revenue internally as a performance measure and in calculating other non-GAAP financial measures (e.g., NOI), which provides investors with information regarding our performance that is not immediately apparent from the comparable non-GAAP measures and allows investors to compare operating performance between periods.

(2) For a detailed discussion of NOI, including the reasons management believes NOI is useful to investors, see page 58.

Residential Net Operating Income for the three months ended September 30, 2020 and 2019 is comprised of Residential Revenue of $ 9,718 and $ 9,996 less Residential Expenses of $ 4,955 and $ 4,011 , respectively.

Hotel Net Operating Income for the three months ended September 30, 2020 and 2019 is comprised of Hotel Revenue of $ 90 and $ 13,014 less Hotel Expenses of $ 3,164 and $ 8,743 , respectively, per the Consolidated Statements of Operations.

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Same Property Portfolio

Lease Revenue (Excluding Termination Income)

Lease revenue from the Same Property Portfolio decreased by approximately $25.0 million for the three months ended September 30, 2020 compared to 2019.

Approximately $7.5 million of the decrease was related to write-offs, which are discussed below.

Excluding the write-offs, the remaining decrease was a result of an approximately $9.8 million decrease due to our average occupancy decreasing from 94.0% to 92.6%, and our average revenue per square foot decreasing by approximately $1.11, contributing approximately $7.7 million.

Under ASC 842, any write-off for bad debt, including accrued rent, is recorded as a reduction to lease revenue.

As a result, during the three months ended September 30, 2020, for our Same Property Portfolio, we wrote off approximately $4.1 million and $3.4 million of accrued rent and accounts receivable balances, respectively.

In addition, as a result of COVID-19, for the Same Property Portfolio, during the third quarter of 2020, we executed lease modification agreements for approximately 479,000 square feet and granted approximately $21.9 million of cash rent abatements and deferrals, of which approximately $11.7 million was related to rental charges for the third quarter of 2020.

As a result of the lease modification agreements that extended the lease term, we expect to see an increase in cash rent received in the future.

In April 2020, the FASB staff issued the 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.

We expect to continue to execute lease modification agreements as a result of COVID-19.

We may write off additional accrued rent or accounts receivable balances and this could have a material adverse effect on lease revenue.

“Risk Factors” for additional details .

Termination Income

Termination income increased by approximately $1.0 million for the three months ended September 30, 2020 compared to 2019.

Termination income for the three months ended September 30, 2020 related to 10 tenants across the Same Property Portfolio and totaled approximately $2.7 million, which was primarily related to tenants that terminated leases early in the New York and Washington DC regions.

Termination income for the three months ended September 30, 2019 related to 17 tenants across the Same Property Portfolio and totaled approximately $1.7 million, of which approximately $1.0 million is from a tenant that terminated a lease early at 399 Park Avenue in New York City.

Parking and Other Revenue

Parking and other revenue decreased by approximately $9.1 million for the three months ended September 30, 2020 compared to 2019.

Parking revenue decreased by approximately $10.4 million while other revenue increased by approximately $1.3 million.

The decrease in parking revenue was primarily due to a decrease in transient and monthly parking.

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During the third quarter of 2020, with stay-at-home orders in effect in certain regions, business closures and people working remotely in a majority of regions in which our properties are located, we generated minimal hourly/daily parking revenue and this trend may continue for as long as these conditions exist.

As a result, for the three months ended September 30, 2020, transient and monthly parking decreased by approximately $5.4 million and $2.9 million, respectively.

Some of our monthly parking revenues are contractual agreements embedded in our leases, and some are at will individual agreements.

Real Estate Operating Expenses

Real estate operating expenses from the Same Property Portfolio decreased by approximately $5.2 million, or 2.1%, for the three months ended September 30, 2020 compared to 2019, due primarily to decreases in utility and cleaning expense of approximately $5.6 million, or 18.7%, and $4.5 million, or 20.7%, respectively, partially offset by an increase in other real estate operating expenses of approximately $4.9 million, or 2.5%.

Properties Acquired Portfolio

The table below lists the properties acquired between July 1, 2019 and September 30, 2020.

Rental revenue and real estate operating expenses increased by approximately $2.3 million and $1.1 million, respectively, for the three months ended September 30, 2020 compared to 2019, as detailed below.

Square Feet Rental Revenue Real Estate Operating Expenses

Name Date acquired 2020 2019 Change 2020 2019 Change

(dollars in thousands)

880 and 890 Winter Street

August 27, 2019 392,576 $ 3,344 $ 1,298 $ 2,046 $ 1,271 $ 649 $ 622

Fourth + Harrison (1) June 26, 2020 N/A 284 — 284 435 — 435

392,576 $ 3,628 $ 1,298 $ 2,330 $ 1,706 $ 649 $ 1,057

_______________

(1) Located at 777 Harrison Street in San Francisco, California (known as Fourth + Harrison and formerly known as 425 Fourth Stree t) .

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Properties Placed In-Service Portfolio

The table below lists the properties that were placed in-service or partially placed in-service between July 1, 2019 and September 30, 2020.

Rental revenue and real estate operating expenses from our Properties Placed In-Service Portfolio increased by approximately $16.8 million and $4.1 million, respectively, for the three months ended September 30, 2020 compared to 2019, as detailed below.

Quarter Initially Placed In-Service Quarter Fully Placed In-Service Rental Revenue Real Estate Operating Expenses

Name Square Feet 2020 2019 Change 2020 2019 Change

(dollars in thousands)

20 CityPoint Second Quarter, 2019 Second Quarter, 2020 211,476 $ 1,861 $ 1,576 $ 285 $ 731 $ 477 $ 254

Fourth Quarter, 2019 Fourth Quarter, 2019 490,086 11,560 — 11,560 1,771 — 1,771

17Fifty Presidents Street

First Quarter, 2020 First Quarter, 2020 275,809 4,935 — 4,935 1,300 — 1,300

Total Office 977,371 18,356 1,576 16,780 3,802 477 3,325

The Skylyne Third Quarter, 2020 Third Quarter, 2020 330,996 23 — 23 740 — 740

Total Residential 330,996 23 — 23 740 — 740

1,308,367 $ 18,379 $ 1,576 $ 16,803 $ 4,542 $ 477 $ 4,065

Properties in Development or Redevelopment Portfolio

The table below lists the properties that were in development or redevelopment between July 1, 2019 and September 30, 2020.

Rental revenue and real estate operating expenses from our Properties in Development or Redevelopment Portfolio decreased by approximately $1.2 million and $0.6 million, respectively, for the three months ended September 30, 2020 compared to 2019.

Rental Revenue Real Estate Operating Expenses

Name Date Commenced Development / Redevelopment Square Feet 2020 2019 Change 2020 2019 Change

(dollars in thousands)

One Five Nine East 53rd Street August 19, 2016 220,000 $ 161 $ 919 $ (758) $ 307 $ 476 $ (169)

325 Main Street (1) May 9, 2019 115,000 — 49 (49) 207 298 (91)

200 West Street (2) September 30, 2019 261,000 1,233 1,616 (383) 784 1,152 (368)

596,000 $ 1,394 $ 2,584 $ (1,190) $ 1,298 $ 1,926 $ (628)

_______________

(1) Real estate operating expenses for the three months ended September 30, 2020 and September 30, 2019 includes approximately $0.2 million and $0.3 million of demolition costs, respectively.

(2) Rental revenue and real estate operating expenses for the three months ended September 30, 2019 are related to the entire building.

The redevelopment is a conversion of a 126,000 square foot portion of the property to laboratory space.

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Properties Sold Portfolio

The table below lists the properties we sold between July 1, 2019 and September 30, 2020.

Rental revenue and real estate operating expenses from our Properties Sold Portfolio decreased by approximately $19.4 million and $6.8 million, respectively, for the three months ended September 30, 2020 compared to 2019, as detailed below.

Rental Revenue Real Estate Operating Expenses

Name Date Sold Property Type Square Feet 2020 2019 Change 2020 2019 Change

(dollars in thousands)

Washingtonian North December 20, 2019 Land N/A $ — $ — $ — $ — $ 41 $ (41)

601, 611 and 651 Gateway (1)

January 28, 2020 Office 768,000 — 6,949 (6,949) — 2,711 (2,711)

New Dominion Technology Park

February 20, 2020 Office 493,000 — 4,813 (4,813) — 1,418 (1,418)

Capital Gallery (2) June 25, 2020 Office 631,000 2,587 10,235 (7,648) 1,154 3,816 (2,662)

1,892,000 $ 2,587 $ 21,997 $ (19,410) $ 1,154 $ 7,986 $ (6,832)

_______________

(1) Rental revenue for the three months ended September 30, 2019 includes approximately $0.3 million of termination income (See Notes 3 and 5 to the Consolidated Financial Statements).

(2) We completed the sale of a portion of our Capital Gallery property located in Washington, DC.

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.

We continue to own the land, underground parking garage and remaining commercial office and retail space.

The amounts shown represent the entire property and not just the portion sold (See Note 3 to the Consolidated Financial Statements).

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

Residential Net Operating Income

Net operating income for our residential same properties decreased by approximately $0.5 million for the three months ended September 30, 2020 compared to 2019.

Net operating income for the three months ended September 30, 2020 includes approximately $0.7 million of termination income from a retail tenant.

The Lofts at Atlantic Wharf The Avant at Reston Town Center Signature at Reston Proto Kendall Square

2020 2019 Change (%) 2020 2019 Change (%) 2020 2019 Change (%) 2020 2019 Change (%)

Average Monthly Rental Rate (1)

$ 4,231 $ 4,498 (5.9) % $ 2,352 $ 2,447 (3.9) % $ 2,319 $ 2,379 (2.5) % $ 2,676 $ 2,972 (10.0) %

Average Rental Rate Per Occupied Square Foot

$ 4.62 $ 4.99 (7.4) % $ 2.57 $ 2.66 (3.4) % $ 2.42 $ 2.56 (5.5) % $ 4.91 $ 5.49 (10.6) %

Average Physical Occupancy (2)

80.2 % 95.4 % (15.9) % 89.7 % 92.9 % (3.4) % 82.2 % 74.5 % 10.3 % 85.7 % 96.0 % (10.7) %

Average Economic Occupancy (3)

80.7 % 95.2 % (15.2) % 88.9 % 93.0 % (4.4) % 78.2 % 68.9 % 13.5 % 83.1 % 96.1 % (13.5) %

_______________

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

(3) Average Economic Occupancy is defined as (1) total possible revenue less vacancy loss divided by (2) total possible revenue, expressed as a percentage.

Total possible revenue is determined by valuing average occupied units at contract rates and average vacant units at Market Rents.

Vacancy loss is determined by valuing vacant units at current Market Rents.

By measuring vacant units at their Market Rents, Average Economic Occupancy takes into account the

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fact that units of different sizes and locations within a residential property have different economic impacts on a residential property’s total possible gross revenue.

Market Rents used by us in calculating Economic Occupancy are based on the current market rates set by the managers of our residential properties based on their experience in renting their residential property’s units and publicly available market data.

Actual market rents and trends in such rents for a region as reported by others may vary materially from Market Rents used by us.

Market Rents for a period are based on the average Market Rents during that period and do not reflect any impact for cash concessions.

Hotel Net Operating Income (Loss)

Net operating income (loss) for the Boston Marriott Cambridge hotel property decreased by approximately $7.3 million for the three months ended September 30, 2020 compared to 2019.

The Boston Marriott Cambridge closed in March 2020 due to COVID-19 and did not re-open until October 2, 2020.

The hotel is operating at a monthly deficit.

“Risk Factors” for additional details.

The following reflects our occupancy and rate information for the Boston Marriott Cambridge hotel for the three months ended September 30, 2020 and 2019.

Occupancy — % 90.7 % (100.0) %

Average daily rate $ — $ 293.45 (100.0) %

REVPAR $ — $ 266.31 (100.0) %

Other Operating Revenue and Expense Items

Development and Management Services Revenue

Development and management services revenue decreased by approximately $3.0 million for the three months ended September 30, 2020 compared to 2019.

Development services revenue and management services revenue decreased by approximately $2.6 million and $0.4 million, respectively.

The decrease in development services revenue was primarily related to a decrease of approximately $2.3 million in development fees earned in the Washington, DC and Boston regions and a decrease of approximately $0.3 million in fees associated with tenant improvement projects earned in the San Francisco region.

The decrease in management services revenue was primarily related to a decrease in leasing commissions earned from our unconsolidated joint ventures in the Boston region, partially offset by property management fees earned from third-party owned buildings in the Washington, DC region.

General and Administrative Expense

General and administrative expense decreased by approximately $3.3 million for the three months ended September 30, 2020 compared to 2019 primarily due to decreases in compensation expense and other general and administrative expenses of approximately $2.9 million and $0.4 million, respectively.

The decrease in other general and administrative expenses was primarily related to a decrease in meals and travel expense.

Capitalized wages for the three months ended September 30, 2020 and 2019 were approximately $3.4 million and $2.6 million, respectively.

These costs are not included in the general and administrative expenses discussed above.

Transaction Costs

Transaction costs decreased by approximately $0.2 million for the three months ended September 30, 2020 compared to 2019 due primarily to costs incurred in connection with the pursuit and formation of new joint ventures.

In general, transaction costs relating to the formation of new and pending joint ventures and the pursuit of other transactions are expensed as incurred.

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Depreciation and Amortization Expense

Depreciation expense may differ between BXP and BPLP as a result of previously applied acquisition accounting by BXP for the issuance of common stock in connection with non-sponsor OP Unit redemptions by BPLP.

This accounting resulted in a step-up of the real estate assets at BXP that was allocated to certain properties.

For additional information see the Explanatory Note that follows the cover page of this Quarterly Report on Form 10-Q.

Boston Properties, Inc.

Depreciation and amortization expense increased by approximately $0.6 million for the three months ended September 30, 2020 compared to 2019, as detailed below.

Portfolio Depreciation and Amortization for the three months ended September 30,

2020 2019 Change

(in thousands)

Same Property Portfolio $ 158,609 $ 160,245 $ (1,636)

Properties Acquired Portfolio 2,215 873 1,342

Properties Placed In-Service Portfolio 4,854 513 4,341

Properties in Development or Redevelopment Portfolio 451 589 (138)

Properties Sold Portfolio 327 3,642 (3,315)

$ 166,456 $ 165,862 $ 594

Boston Properties Limited Partnership

Depreciation and amortization expense increased by approximately $0.7 million for the three months ended September 30, 2020 compared to 2019, as detailed below.

Portfolio Depreciation and Amortization for the three months ended September 30,

2020 2019 Change

(in thousands)

Same Property Portfolio $ 156,859 $ 158,403 $ (1,544)

Properties Acquired Portfolio 2,215 873 1,342

Properties Placed In-Service Portfolio 4,854 513 4,341

Properties in Development or Redevelopment Portfolio 451 589 (138)

Properties Sold Portfolio 327 3,642 (3,315)

$ 164,706 $ 164,020 $ 686

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

We have determined that amounts reimbursed for payroll and related costs received from third parties in connection with management services contracts should be reflected on a gross basis instead of on a net basis as we have determined that we are the principal under these arrangements.

We anticipate that these two financial statement line items will generally offset each other.

Other Income and Expense Items

Loss from Unconsolidated Joint Ventures

For the three months ended September 30, 2020 compared to 2019, loss from unconsolidated joint ventures increased by approximately $6.2 million due to a $2.9 million reduction of our net income at our Colorado Center joint venture, primarily due to a write-off of lease revenue during the three months ended September 30, 2020, along with the addition of our Gateway Commons joint venture and the placing in-service of the Hub50House joint

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venture in South San Francisco, California and Boston, Massachusetts, respectively.

These joint ventures reduced our net income by approximately $1.9 million for the three months ended September 30, 2020.

During the three months ended September 30, 2020, Hub50House was fully placed in-service and we do not expect it to be stabilized until the first quarter of 2022.

The decrease in net income from the Gateway Commons joint venture was primarily related to depreciation and amortization.

The decrease in our net income was also due to a $0.8 million decrease at our Metropolitan Square joint venture in Washington, DC mainly attributable to increased interest expense related to the mortgage refinancing.

Under ASC 842, any write-off for bad debt, including accrued rent, will be recorded as a reduction to lease revenue.

As a result, during the three months ended September 30, 2020, for our unconsolidated joint ventures, we wrote off our share of the accrued rent and accounts receivable balances of approximately $1.9 million and $0.5 million, respectively.

These write-offs related to tenants that either terminated their leases or for which we determined that their accrued rent and/or accounts receivable balances were no longer probable of collection.

In addition, as a result of COVID-19, for properties owned by our unconsolidated joint ventures, during the third quarter of 2020, the joint ventures executed lease modification agreements for approximately 181,000 square feet.

As a result of these lease modification agreements, our share of the total cash rent abatements and deferrals granted was approximately $0.5 million, all of which related to rental charges for the third quarter of 2020.

As a result of the lease modification agreements that extended the lease term, we expect to see an increase in cash rent received in the future.

In April 2020, the FASB staff issued the 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.

The joint ventures expect to continue to execute lease modification agreements as a result of COVID-19.

Our unconsolidated joint ventures may write-off additional accrued rent or accounts receivable balances and this could have a material adverse effect on lease revenue.

“Risk Factors” for additional details.

Losses on Sales of Real Estate

During the three months ended September 30, 2020, we incurred approximately $0.2 million of additional expenses related to the sale of a portion of Capital Gallery in Washington, DC, thus resulting in a loss on sale of real estate (See Note 3 to the Consolidated Financial Statements).

Interest and Other Income (Loss)

Interest and other income (loss) decreased by approximately $7.2 million for the three months ended September 30, 2020 compared to 2019.

Interest and other income decreased by approximately $5.7 million due primarily to a decrease in interest rates.

On January 1, 2020, we adopted ASU 2016-13 and, as a result, we were required to record anallowance for current expected credit losses related to our outstanding (1) related party note receivable, (2) notes receivable and (3) off-balance sheet credit exposures (See Note 2 to the Consolidated Financial Statements).

For the three months ended September 30, 2020 the allowance for current expected credit losses was $1.5 million.

Gains from Investments in Securities

Gains from investments in securities for the three months ended September 30, 2020 and 2019 related to investments that we have made to reduce our market risk relating to deferred compensation plans that we maintain for BXP’s officers and former non-employee directors.

Under the deferred compensation plans, each officer or non-employee director who is eligible to participate is permitted to defer a portion of the officer’s current income or the

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non-employee director’s compensation on a pre-tax basis and receive a tax-deferred return on these deferrals based on the performance of specific investments selected by the officer or non-employee director.

In order to reduce our market risk relating to these plans, we typically acquire, in a separate account that is not restricted as to

its use, similar or identical investments as those selected by each officer or non-employee director.

This enables us to generally match our liabilities to BXP’s officers or former non-employee directors under our deferred compensation plans with equivalent assets and thereby limit our market risk.

The performance of these investments is recorded as gains from investments in securities.

During the three months ended September 30, 2020 and 2019, we recognized gains of approximately $1.9 million and $0.1 million, respectively, on these investments.

By comparison, our general and administrative expense increased by approximately $1.9 million and $0.1 million during the three months ended September 30, 2020 and 2019, respectively, as a result of increases in our liability under our deferred compensation plans that was associated with the performance of the specific investments selected by officers and former non-employee directors of BXP participating in the plans.

Loss From Early Extinguishment of Debt

On September 18, 2019, BPLP completed the redemption of $700.0 million in aggregate principal amount of its 5.625% senior notes due November 15, 2020.

The redemption price was approximately $740.7 million.

The redemption price included approximately $13.5 million of accrued and unpaid interest to, but not including, the redemption date.

Excluding the accrued and unpaid interest, the redemption price was approximately 103.90% of the principal amount being redeemed.

We recognized a loss from early extinguishment of debt totaling approximately $28.0 million, which amount included the payment of the redemption premium totaling approximately $27.3 million.

During the three months ended March 31, 2021 and 2020, we recognized gains (losses) of approximately $1.7 million and $(5.4) million, respectively, on these investments.

By comparison, our general and administrative expense increased (decreased) by approximately $1.7 million and $(5.4) million during the three months ended March 31, 2021 and 2020, respectively, as a result of increases (decreases) in our liability under our deferred compensation plans that was associated with the performance of the specific investments selected by officers and former non-employee directors of BXP participating in the plans.

Losses From Early Extinguishment of Debt

On February 14, 2021, BPLP completed the redemption of $850.0 million in aggregate principal amount of its 4.125% senior notes due May 15, 2021.

The redemption price was approximately $858.7 million, which was equal to par plus approximately $8.7 million of accrued and unpaid interest to, but not including, the redemption date.

Excluding the accrued and unpaid interest, the redemption price was equal to the principal amount being redeemed.

We recognized a loss from early extinguishment of debt totaling approximately $0.4 million related to unamortized origination costs.

On March 16, 2021, BPLP repaid $500.0 million of its borrowings under the Delayed Draw Facility.

We recognized a loss from early extinguishment of debt totaling approximately $0.5 million related to unamortized financing costs.

Interest Expense

Interest expense increased by approximately $4.5 million for the three months ended September 30, 2020 compared to 2019, as detailed below.

Component Change in interest expense for the three months ended September 30, 2020 compared to September 30, 2019

Interest expense increased by approximately $6.3 million for the three months ended March 31, 2021 compared to 2020, as detailed below.

Component Change in interest expense for the three months ended March 31, 2021 compared to March 31, 2020

(in thousands)

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Issuance of $1.25 billion in aggregate principal of 3.250% senior notes due 2031 on May 5, 2020

Issuance of $700 million in aggregate principal of 2.900% senior notes due 2030 on September 3, 2019

Increase in interest due to finance leases

Increase in interest due to finance leases that are related to development properties 1,772

Issuance of $850 million in aggregate principal of 2.550% senior notes due 2032 on March 16, 2021 915

Increase in interest due to finance leases for two in-service properties 533

Decrease in capitalized interest related to development projects 345

Other interest expense (excluding senior notes)

Total increases to interest expense 13,758

Decreases to interest expense due to:

Redemption of $700 million in aggregate principal of 5.625% senior notes due 2020 on September 18, 2019

Redemption of $850 million in aggregate principal of 4.125% senior notes due 2021 on February 14, 2021 (4,662)

Decrease in interest rates for the 2017 Credit Facility

Increase in capitalized interest related to development projects that had finance leases (345)

Repayment of bond financing collateralized by New Dominion Technology Building One

Other interest expense (excluding senior notes) (203)

Decrease in interest related to the repayment of the University Place mortgage loan (38)

Total decreases to interest expense (7,447)

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As portions of properties are placed in-service, we cease capitalizing interest on that portion and interest is

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then expensed.

Interest capitalized for the three months ended September 30, 2020 and 2019 was approximately $13.5 million and $16.2 million, respectively.

As portions of properties are placed in-service, we cease capitalizing interest on that portion and interest is then expensed.

Interest capitalized for the three months ended March 31, 2021 and 2020 was approximately $12.0 million and $14.1 million, respectively.

These costs are not included in the interest expense referenced above.

At September 30, 2020, our outstanding variable rate debt consisted of BPLP’s $2.0 billion 2017 Credit Facility, which includes the $500.0 million Delayed Draw Facility and the $1.5 billion Revolving Facility.

The Delayed Draw Facility had $500.0 million outstanding as of September 30, 2020.

The Revolving Facility did not have an outstanding balance as of September 30, 2020.

At March 31, 2021, our variable rate debt consisted of BPLP’s $1.5 billion revolving line of credit (the “Revolving Facility”).

T he Revolving Facility did not have an outstanding balance as of March 31, 2021.

For a summary of our consolidated debt as of March 31, 2021 and March 31, 2020 refer to the heading “ Liquidity and Capital Resources—Capitalization—Debt Financing” within “ Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Noncontrolling Interests in Property Partnerships

Noncontrolling interests in property partnerships decreased by approximately $2.9 million for the three months ended September 30, 2020 compared to 2019, as detailed below.

Property Noncontrolling Interests in Property Partnerships for the three months ended September 30,

Noncontrolling interests in property partnerships decreased by approximately $3.0 million for the three months ended March 31, 2021 compared to 2020, as detailed below.

Property Noncontrolling Interests in Property Partnerships for the three months ended March 31,

2021 2020 Change

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_______________

(1) The increase during the three months ended September 30, 2020 was related to above-/below-market lease assets that were fully amortized in 2020.

(2) The decrease during the three months ended September 30, 2020 was related to leases that were terminated during the three months ended June 30, 2020 as a result of COVID-19.

(3) During the three months ended September 30, 2020, we wrote off approximately $0.5 million of accrued rent and accounts receivable balances for tenants whose balances we determined were no longer probable of collection.

Approximately $0.3 million represents our share of the write-offs.

(1) The decrease was primarily due to a decrease in lease revenue from signage and a tenant in the retail industry.

During 2020, we executed a lease modification with a tenant in the retail industry, which involved a decrease in rent as well as a space reduction.

(2) The decrease was primarily due to a decrease in lease revenue from our retail tenants and a tenant that terminated its space during the three months ended March 31, 2020.

Noncontrolling Interest—Common Units of the Operating Partnership

For BXP, noncontrolling interest—common units of the Operating Partnership decreased by approximately $2.5 million for the three months ended September 30, 2020 compared to 2019 due primarily to a decrease in allocable income and a decrease in the noncontrolling interest’s ownership percentage.

For BXP, noncontrolling interest—common units of the Operating Partnership decreased by approximately $46.5 million for the three months ended March 31, 2021 compared to 2020 due primarily to a decrease in allocable income, which was the result of recognizing a greater gain on sales of real estate amount during 2020.

Due to our ownership structure, there is no corresponding line item on BPLP’s financial statements.

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• meet debt service and principal repayment obligations, including balloon payments on maturing debt;

• fund development/redevelopment costs;

• fund development and redevelopment costs;

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

• fund planned and possible acquisitions of properties, either directly or indirectly through the acquisition of equity interests therein;

• fund dividend requirements on BXP’s Series B Preferred Stock;

• make the minimum distribution required to enable BXP to maintain its REIT qualification under the Internal Revenue Code of 1986, as amended.

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

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• cash flow from operations;

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• cash and cash equivalent balances;

• BPLP’s 2017 Credit Facility and other short-term bridge facilities;

• construction loans;

• borrowings under BPLP’s 2017 Credit Facility, short-term bridge facilities and construction loans;

• long-term secured and unsecured indebtedness (including unsecured exchangeable indebtedness);

• sales of real estate;

• issuances of BXP equity securities and/or additional preferred or common units of partnership interest in BPLP.

• issuances of BXP equity securities and/or preferred or common units of partnership interest in BPLP.

We draw on multiple financing sources to fund our long-term capital needs.

Our current development properties are expected to be primarily funded with our available cash balances, construction loans and BPLP’s Revolving Facility.

We expect to fund our current development properties primarily with our available cash balances, construction loans and BPLP’s Revolving Facility.

We use BPLP’s Revolving Facility primarily as a bridge facility to fund acquisition opportunities, refinance outstanding indebtedness and meet short-term development and working capital needs.

Although we may seek to fund our development projects with construction loans, which may require guarantees by BPLP, the financing for each particular project ultimately depends on several factors, including, among others, the project’s size and duration, the extent of pre-leasing and our available cash and access to cost effective capital at the given time.

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The following table presents information on properties under construction and redevelopment as of September 30, 2020 (dollars in thousands):

The following table presents information on properties under construction and redevelopment as of March 31, 2021 (dollars in thousands):

Construction Properties Estimated Stabilization Date Location # of Buildings Estimated Square Feet Investment to Date (1)(2)(3) Estimated Total Investment (1)(2) Total Available (1) Outstanding at 3/31/2021 (1)

Estimated Future Equity Requirement (1)(2)(4) Percentage Leased (5)

Dock 72 (50% ownership)

Second Quarter, 2022 Brooklyn, NY 1 670,000 $ 209,795 $ 243,150 $ 125,000 $ 98,206 $ 6,561 33 % (6)

325 Main Street

Third Quarter, 2022 Cambridge, MA 1 420,000 148,585 418,400 — 269,815 90 %

100 Causeway Street (50% ownership)

Third Quarter, 2022 Boston, MA 1 632,000 167,620 267,300 200,000 90,274 — 95 %

7750 Wisconsin Avenue (Marriott International Headquarters) (50% ownership)

Third Quarter, 2022 Bethesda, MD 1 734,000 134,843 198,900 127,500 66,361 2,918 100 %

Reston Next (formerly Reston Gateway)

325 Main Street Third Quarter, 2022 Cambridge, MA 1 420,000 $ 217,456 $ 418,400 $ — $ — $ 200,944 90 %

100 Causeway Street (50% ownership) Third Quarter, 2022 Boston, MA 1 632,000 202,068 267,300 200,000 125,306 — 94 %

7750 Wisconsin Avenue (Marriott International Headquarters) (50% ownership) Second Quarter, 2022 Bethesda, MD 1 734,000 159,250 198,900 127,500 90,229 2,379 100 %

Fourth Quarter, 2023 Reston, VA 2 1,062,000 422,881 715,300 — — 292,419 85 %

2100 Pennsylvania Avenue

Third Quarter, 2024 Washington, DC 1 480,000 109,153 356,100 — — 246,947 62 %

2100 Pennsylvania Avenue Third Quarter, 2024 Washington, DC 1 480,000 157,235 356,100 — — 198,865 56 %

Total Office Properties under Construction 6 3,328,000 1,158,890 1,956,000 327,500 215,535 694,607 86 %

7 3,998,000 1,093,533 2,199,150 452,500 254,841 918,004 78 %

Redevelopment Properties

One Five Nine East 53rd Street (55% ownership)

First Quarter, 2021 New York, NY — 220,000 137,155 150,000 — — 12,845 96 % (7)

200 West Street

Fourth Quarter, 2021 Waltham, MA — 126,000 13,663 47,800 — — 34,137 100 % (8)

Total Redevelopment Properties under Construction

— 346,000 150,818 197,800 — — 46,982 97 %

Total Properties under Construction and Redevelopment

7 4,344,000 $ 1,244,351 $ 2,396,950 $ 452,500 $ 254,841 $ 964,986 80 %

Lab/Life Sciences

200 West Street (Redevelopment) Fourth Quarter, 2021 Waltham, MA — 138,000 18,116 47,800 — — 29,684 100 % (6)

880 Winter Street (Redevelopment) Second Quarter, 2024 Waltham, MA 1 224,000 1,634 108,000 — — 106,366 — %

751 Gateway (49% ownership) Third Quarter, 2024 South San Francisco, CA 1 229,000 15,420 127,600 — — 112,180 — %

180 CityPoint Fourth Quarter, 2024 Waltham, MA 1 329,000 20,382 274,700 — — 254,318 — %

Total Lab/Life Sciences Properties under Construction 3 920,000 55,552 558,100 — — 502,548 15 %

The Prudential Center Observatory (Redevelopment) N/A Boston, MA — 59,000 25,018 182,300 — — 157,282 N/A

Total Properties under Construction 9 4,307,000 $ 1,239,460 $ 2,696,400 $ 327,500 $ 215,535 $ 1,354,437 71 % (7)

(1) Represents our share.

(2) Investment to Date, Estimated Total Investment and Estimated Future Equity Requirement all include our share of acquisition expenses, as applicable, and reflect our share of the estimated net revenue/expenses that we expect to incur prior to stabilization of the project, including any amounts actually received or paid through September 30, 2020.

(3) Includes approximately $72.7 million of unpaid but accrued construction costs and leasing commissions.

(4) Excludes approximately $72.7 million of unpaid but accrued construction costs and leasing commissions.

(5) Represents percentage leased as of November 3, 2020, including leases with future commencement dates.

(6) This property was 34% placed in-service as of September 30, 2020.

(7) Represents the low-rise portion of 601 Lexington Avenue.

(8) Represents a portion of the property under redevelopment for conversion to laboratory space.

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(5) Represents percentage leased as of May 3, 2021, including leases with future commencement dates.

(6) Represents a portion of the property under redevelopment for conversion to life sciences space.

(7) Percentage leased excludes The Prudential Center Observatory redevelopment at 800 Boylston Street - The Prudential Center.

Lease revenue (which includes recoveries from tenants), other income from operations, available cash balances, mortgage financings, unsecured indebtedness and draws on BPLP’s Revolving Facility are the principal sources of capital that we use to fund operating expenses, debt service, maintenance and repositioning capital expenditures, tenant improvements and the minimum distribution required to enable BXP to maintain its REIT qualification.

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We believe these sources of capital will continue to provide the funds necessary for our short-term liquidity needs, including our properties under development and redevelopment.

Material adverse changes in one or more sources of capital, including from the impacts of COVID-19, may adversely affect our net cash flows.

For example, during the third quarter of 2020, our rent collections remained strong as we collected 99% of rents from our office tenants and 97% of rents from all tenants, including retail tenants.

However, COVID-19 resulted in the write-off of accrued rent and accounts receivable balances for primarily retail, fitness and entertainment tenants, decreases in parking and other revenue and the continued closure of our hotel, which reduced our revenue.

In turn, if these impacts are material, they could adversely affect our ability to fund operating expenses, dividends and distributions, debt service payments, maintenance and repositioning capital expenditures and tenant improvements.

In addition, a material adverse change in the cash provided by our operations may affect our ability to comply with the financial covenants under BPLP’s 2017 Credit Facility or its unsecured senior notes.

Our primary uses of capital over the next twelve months will be the completion of our current and committed development and redevelopment projects and the repayment of $850 million aggregate principal amount of BPLP’s 4.125% senior unsecured notes that mature in May 2021.

As of September 30, 2020, our share of the remaining development and redevelopment costs that we expect to fund through 2024 was approximately $1.0 billion.

To satisfy these capital needs, as of November 2, 2020, we had approximately $1.6 billion of cash and cash equivalents, of which approximately $117 million is attributable to our consolidated joint venture partners.

Although the full extent to which COVID-19 will impact our liquidity and capital resources, as well as the duration of such impact, will depend on a wide range of factors, all of which are highly uncertain and cannot be predicted with confidence at this time, we believe that our strong liquidity, including the approximately $1.5 billion available under the Revolving Facility and available cash, as of November 2, 2020, is sufficient to fund our remaining capital requirements on existing development and redevelopment projects, repay our maturing indebtedness when due and still allow us to act opportunistically on attractive investment opportunities.

Material adverse changes in one or more sources of capital, whether due to the impacts of the COVID-19 pandemic or otherwise, may adversely affect our net cash flows.

During the first quarter of 2021, our rent collections remained strong as we collected 99.6% of rents from our office tenants and 99.0% of rents from all tenants, including retail tenants.

The COVID-19 pandemic also continued to cause material declines in parking and other revenue and revenue from our hotel for the first quarter of 2021 when compared to pre-COVID-19 levels.

Cash rent abatements and deferrals primarily related to COVID-19 were approximately $9.1 million in the first quarter, approximately 51% less than the average of the three most recent fiscal quarters.

To date, these impacts have not adversely affected our ability to fund operating expenses, dividends and distributions, debt service payments, maintenance and repositioning capital expenditures and tenant improvements.

Any future material adverse change in the cash provided by our operations may affect our ability to comply with the financial covenants under BPLP’s 2017 Credit Facility or its unsecured senior notes.

Our primary uses of capital over the next twelve months will be the completion of our current and committed development and redevelopment projects.

During the first quarter of 2021, we utilized our available cash balances and proceeds from BPLP’s issuance of $850 million aggregate principal amount of green bonds to repay or redeem an aggregate of approximately $1.6 billion of debt and preferred equity, including the:

• redemption of the $850 million aggregate principal amount of BPLP’s 4.125% senior unsecured notes due 2021,

• repayment of BPLP’s $500 million unsecured Delayed Draw Facility,

• redemption of all $200 million of BXP’s outstanding shares of its Series B Preferred Stock, and

• repayment of the mortgage loan collateralized by University Place located in Cambridge, Massachusetts totaling approximately $0.9 million.

We have no debt maturities during the remainder of 2021, other than one loan borrowed by an unconsolidated joint venture of which our share is approximately $87.2 million.

We have one loan totaling approximately $610.6 million maturing in 2022 and our unconsolidated joint ventures have two loans maturing in 2022, of which our share is approximately $144.8 million.

As of March 31, 2021, our share of the remaining development and redevelopment costs that we expect to fund through 2024 was approximately $1.4 billion, which includes new development and redevelopment starts in the first quarter of 2021 with an aggregate estimated investment of approximately $692.6 million, the majority of which are new lab/life sciences developments and conversions.

In addition, during the first quarter, we sold our remaining interest in Annapolis Junction Buildings Six and Seven for a gross sale price of approximately $65.9 million, generating net proceeds of $17.6 million after repayment of our share of the debt.

We also have tentative agreements to sell three buildings within our VA95 Business Park in Springfield, Virginia and a three-building suburban portfolio that we expect, if completed, will total approximately $260 million of net proceeds.

We are evaluating additional assets sales, which, if completed, could generate aggregate additional net proceeds in excess of $200 million.

However, there can be no assurance that the dispositions will be consummated on the terms currently contemplated, or at all.

Although the full impact of COVID-19 on our liquidity and capital resources, as well as the duration of such impact, will depend on a wide range of factors, we believe that our access to capital and our strong liquidity, including the approximately $1.5 billion available under the 2017 Credit Facility and available cash of approximately $593.2 million (of which approximately $123.9 million is attributable to our consolidated joint venture partners), as of May 3, 2021, is sufficient to fund our remaining capital requirements on existing development and redevelopment projects, repay our maturing indebtedness when due, satisfy our REIT distribution requirements and still allow us to act opportunistically on attractive investment opportunities.

In addition, to further enhance our investment capacity and capital resources, we expect to finalize an agreement with two institutional investors to pursue and co-invest in select office acquisitions.

In the aggregate, BXP and its partners would commit $1.0 billion of equity and would have the opportunity to invest in each identified transaction at their discretion.

However, there can be no assurance that the agreement or the co-investments contemplated thereby will be consummated on the terms currently contemplated, or at all.

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

We may seek to enhance our liquidity to provide sufficient capacity to fund our remaining capital requirements on existing development/redevelopment projects, fund our foreseeable potential development activity, pursue additional attractive investment opportunities and refinance or repay indebtedness.

On October 30, 2020, a joint venture in which we have a 50% interest refinanced the mortgage loan collateralized by its Market Square North property located in Washington, DC.

The outstanding balance of the loan totaled approximately $114.2 million and was scheduled to mature on November 1, 2020.

The new mortgage loan totals $125.0 million and matures on November 10, 2025.

With the refinancing of Market Square North, our unconsolidated joint ventures have approximately $208.5 million of debt maturing in 2020, of which our share is approximately $104.3 million.

We may seek to enhance our liquidity to fund our foreseeable potential development activity, pursue additional attractive investment opportunities and refinance or repay indebtedness.

Depending on interest rates and overall conditions in the debt and equity markets, we may decide to access either or both of these markets in advance of the need for the funds.

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Our policy is for BXP to distribute at least 100% of its taxable income, including capital gains, to avoid paying federal tax.

On December 17, 2019, the Board of Directors of BXP increased our regular quarterly

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dividend from $0.95 per common share to $0.98 per common share, or 3%, beginning with the fourth quarter of 2019.

Common and LTIP unitholders of limited partnership interest in BPLP, received the same total distribution per unit.

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

Cash and cash equivalents and cash held in escrows aggregated approximately $1.8 billion and $0.8 billion at September 30, 2020 and 2019, respectively, representing an increase of approximately $1.0 billion.

Cash and cash equivalents and cash held in escrows aggregated approximately $0.9 billion and $0.9 billion at March 31, 2021 and 2020, respectively, representing an increase of approximately $0.1 billion.

The following table sets forth changes in cash flows:

Nine months ended September 30,

2020 2019 Increase

Three months ended March 31,

2021 2020 Increase (Decrease)

(in thousands)

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Net cash used in investing activities (242,273) (73,793) (168,480)

Net cash provided by financing activities 678,891 82,248 596,643

Net cash provided by (used in) financing activities (679,936) 65,288 (745,224)

Our principal source of cash flow is related to the operation of our properties.

The weighted-average term of our in-place tenant leases, including our unconsolidated joint ventures, is approximately 7.5 years with occupancy rates historically in the range of 90% to 94%.

The weighted-average term of our in-place leases, excluding residential units, was approximately 7.6 years as of March 31, 2021, including leases signed by our unconsolidated joint ventures, with occupancy rates historically in the range of 88% to 94%.

Generally, our properties generate a relatively consistent stream of cash flow that provides us with resources to pay operating expenses, debt service and fund regular quarterly dividend and distribution payment requirements.

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any material adverse effect on these parties could also have a material adverse effect on us.

“Risk Factors” for additional details.

For the three months ended March 31, 2021, our total dividend and distribution payments were approximately $171.6 million, which exceeded our cash flow from operating activities by approximately $19.5 million.

We funded the dividend and distribution payments using cash flow from operating activities, approximately $17.6 million of proceeds from sale of investment in unconsolidated joint ventures and cash on hand.

Cash is used in investing activities to fund acquisitions, development, net investments in unconsolidated joint ventures and maintenance and repositioning capital expenditures.

We selectively invest in new projects that enable us to take advantage of our development, leasing, financing and property management skills and invest in existing buildings to enhance or maintain their market position.

Cash used in investing activities for the nine months ended September 30, 2020 consisted primarily of acquisitions of real estate, development projects, building and tenant improvements and capital contributions to unconsolidated joint ventures, partially offset by the proceeds from the

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sales of real estate and capital distributions from unconsolidated joint ventures.

Cash used in investing activities for the nine months ended September 30, 2019 consisted primarily of the acquisition of real estate, development projects, building and tenant improvements and capital contributions to unconsolidated joint ventures, partially offset by the proceeds from the sale of real estate and capital distributions from unconsolidated joint ventures, as detailed below:

Nine months ended September 30,

Cash used in investing activities for the three months ended March 31, 2021 consisted primarily of development projects, building and tenant improvements and capital contributions to unconsolidated joint ventures, partially offset by proceeds from sale of investment in unconsolidated joint ventures.

Cash used in investing activities for the three months ended March 31, 2020 consisted of development projects, building and tenant improvements and capital contributions to unconsolidated joint ventures, partially offset by the proceeds from the sale of real estate, as detailed below:

Three months ended March 31,

(in thousands)

Acquisitions of real estate (1) $ (135,698) $ (148,912)

Construction in progress (1) $ (119,496) $ (143,160)

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Tenant improvements (93,201) (64,172)

Right of use assets - finance leases — (5,152)

Proceeds from sales of real estate (2) — 259,489

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Capital distributions from unconsolidated joint ventures 122 —

Cash and cash equivalents deconsolidated — (24,112)

Issuance of notes receivable, net (6) (9,800) —

Proceeds from sale of investment in unconsolidated joint venture (4) 17,589 —

Investments in securities, net 2,114 3,201

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

(1) On June 26, 2020, we 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.

On July 31, 2020, we acquired an undivided ownership interest in real property at 759 Harrison Street located in San Francisco, California for a purchase price totaling approximately $2.3 million.

On January 10, 2019, we acquired land parcels at our Carnegie Center property located in Princeton, New Jersey for a gross purchase price of approximately $51.5 million, which includes an aggregate of approximately $8.6 million of additional amounts that are payable in the future to the seller upon the development or sale of each of the parcels.

The land parcels will support approximately 1.7 million square feet of development.

On August 27, 2019, we acquired 880 and 890 Winter Street located in Waltham, Massachusetts for a gross

purchase price of approximately $106.0 million in cash, including transaction costs.

880 and 890 Winter

Street consists of two Class A office properties aggregating approximately 392,000 net rentable square feet.

(2) Construction in progress for the nine months ended September 30, 2020 includes ongoing expenditures associated with 17Fifty Presidents Street, 20 CityPoint and The Skylyne, which were partially or fully placed in-service during the nine months ended September 30, 2020.

In addition, we incurred costs associated with our continued development/redevelopment o f One Five Nine East 53rd Street, Reston Next (formerly Reston Gateway), 2100 Pennsylvania Avenue, 200 West Street and 325 Main Street.

Construction in progress for the nine months ended September 30, 2019 includes ongoing expenditures associated with Salesforce Tower, which was placed in-service during the year ended December 31, 2018.

In addition, we incurred costs associated with our continued development/redevelopment of One Five Nine East 53rd Street, 145 Broadway, 20 CityPoint, 17Fifty Presidents Street, Reston Next (formerly Reston Gateway), 2100 Pennsylvania Avenue, 200 West Street, The Skylyne and 325 Main Street.

(1) Construction in progress for the three months ended March 31, 2021 includes ongoing expenditures associated with One Five Nine East 53rd Street , which was completed and fully placed in-service during the three months ended March 31, 2021.

In addition, we incurred costs associated with our continued development/redevelopment of 200 West Street, 325 Main Street, 2100 Pennsylvania Avenue, Reston Next , 180 CityPoint, The Prudential Center Observatory and 880 Winter Street.

Construction in progress for the three months ended March 31, 2020 includes ongoing expenditures associated with 17Fifty Presidents Street, which was completed and placed in-service during the three months ended March 31, 2020 and 20 CityPoint, which was partially placed in-service during the year ended December 31, 2019.

In addition, we incurred costs associated with our continued development/redevelopment of One Five Nine East 53rd Street, Reston Next, 2100 Pennsylvania Avenue, 200 West Street, The Skylyne and 325 Main Street.

(2) On February 20, 2020, we 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 BXP and approximately

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$197.1 million for BPLP.

New Dominion Technology Park is comprised of two Class A office properties aggregating approximately 493,000 net rentable square feet.

On June 25, 2020, we completed the sale of a portion of our Capital Gallery property located in Washington, DC for a gross sale price of approximately $253.7 million.

Net cash proceeds totaled approximately $254.0 million, resulting in a gain on sale of real estate totaling approximately $192.3 million for BXP and approximately $197.1 million for BPLP.

Capital Gallery is an approximately 631,000 net rentable square foot Class A office property.

The portion sold is comprised of approximately 455,000 net rentable square feet of commercial office space.

We continue 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.

On January 24, 2019, we completed the sale of our 2600 Tower Oaks Boulevard property located in Rockville, Maryland for a gross sale price of approximately $22.7 million.

Net cash proceeds totaled approximately $21.4 million, resulting in a loss on sale of real estate totaling approximately $0.6 million.

2600 Tower Oaks Boulevard is an approximately 179,000 net rentable square foot Class A office property.

On June 3, 2019, we completed the sale of our One Tower Center property located in East Brunswick, New Jersey for a gross sale price of $38.0 million.

Net cash proceeds totaled approximately $36.6 million.

One Tower Center is an approximately 410,000 net rentable Class A office property.

On June 28, 2019, we completed the sale of our 164 Lexington Road property located in Billerica, Massachusetts for a gross sale price of $4.0 million.

Net cash proceeds totaled approximately $3.8 million, resulting in a gain on sale of real estate totaling approximately $2.5 million for BXP and approximately $2.6 million for BPLP.

164 Lexington Road is an approximately 64,000 net rentable square foot Class A office property.

On September 20, 2019, we sold a 45% interest in our Platform 16 property located in San Jose, California for a gross sale price of approximately $23.1 million.

Net cash proceeds totaled approximately $23.1 million.

We ceased accounting for the property on a consolidated basis and now account for the property on an unconsolidated basis using the equity method of accounting as we reduced our ownership interest in the property and no longer have a controlling financial or operating interest in the property.

We did not recognize a gain on the retained or sold interest in the property as the fair value of the property approximated its carrying value.

Platform 16 consists of a 65-year ground lease for land totaling approximately 5.6 acres that will support the development of approximately 1.1 million square feet of commercial office space.

(4) Capital contributions to unconsolidated joint ventures for the nine months ended September 30, 2020 consisted primarily of cash contributions of approximately $75.0 million, $39.0 million, $27.2 million and $7.5 million to our Platform 16, 3 Hudson Boulevard, Beach Cities Media Center and Metropolitan Square joint ventures, respectively.

Capital contributions to unconsolidated joint ventures for the nine months ended September 30, 2019

consisted primarily of cash contributions of approximately $41.4 million, $12.1 million and $7.0 million to our

Hub on Causeway, Dock 72 and 3 Hudson Boulevard joint ventures, respectively.

(5) Capital distributions from unconsolidated joint ventures for the nine months ended September 30, 2020 consisted of (1) a cash distribution totaling approximately $22.5 million from our Metropolitan Square joint venture resulting from the excess proceeds from the refinancing of the mortgage loan on the property, (2) a cash distribution totaling approximately $17.9 million from our Annapolis Junction joint venture resulting from available cash and the net proceeds from the sale of Annapolis Junction Building Eight and two land parcels after the pay down of the mortgage loan and (3) a cash distribution totaling approximately $14.0 million from our Colorado Center joint venture resulting from the excess proceeds from the mortgage financing on the property that occurred during 2017, which proceeds were released from lender reserves.

Capital distributions from unconsolidated joint ventures for the nine months ended September 30, 2019 consisted of (1) cash distributions totaling approximately $104.1 million from our 540 Madison Avenue joint venture resulting from the net proceeds from the sale of the property, (2) a cash distribution totaling approximately $17.6 million from our 100 Causeway Street joint venture resulting from the proceeds from the construction loan financing and (3) a cash distribution totaling approximately $15.1 million from our 7750 Wisconsin Avenue joint venture resulting from the proceeds from the construction loan financing.

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(6) Issuance of notes receivable, net consisted of the $10.0 million of financing provided to an affiliate of our partner in the joint venture that owns and is developing 7750 Wisconsin Avenue located in Bethesda, Maryland.

The financing 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 our partner’s hotel property is substantially completed .

The loan is collateralized by a pledge of the partner’s equity interest in our joint venture that owns and is developing 7750 Wisconsin Avenue .

Cash provided by financing activities for the nine months ended September 30, 2020 totaled approximately $678.9 million.

This consisted primarily of the proceeds from the issuance by BPLP of $1.25 billion in aggregate principal amount of its 3.250% senior unsecured notes due 2031, partia lly offset by the payment of our regular dividends and distributions to our shareholders and unitholders.

New Dominion Technology Park is comprised of two Class A office properties aggregating approximately 493,000 net rentable square feet.

(3) Capital contributions to unconsolidated joint ventures for the three months ended March 31, 2021 consisted primarily of cash contributions of approximately $11.4 million to our Santa Monica Business Park joint venture.

Capital contributions to unconsolidated joint ventures for the three months ended March 31, 2020 consisted primarily of cash contributions of approximately $64.5 million, $16.8 million and $4.0 million to our Platform 16, 3 Hudson Boulevard and Metropolitan Square joint ventures, respectively.

(4) On March 30, 2021, we completed the sale of our 50% ownership interest in Annapolis Junction NFM LLC (the “Annapolis Junction Joint Venture”) to the joint venture partner for a gross sales price of $65.9 million.

Net cash proceeds to us totaled approximately $17.6 million after repayment of our share of debt totaling approximately $15.1 million and the deferment of a $0.2 million payment due from the purchaser.

Cash used in financing activities for the three months ended March 31, 2021 totaled approximately $679.9 million.

This amount consisted primarily of (1) the redemption of BPLP’s $850.0 million in aggregate principal amount of its 4.125% senior notes due 2021, (2) the repayment of the Delayed Draw Facility, (3) payment of our regular dividends and distributions to our shareholders and unitholders and (4) distributions to noncontrolling interest holders in property partnership.

These decreases were partially offset by the proceeds from the issuance by BPLP of $850.0 million in aggregate principal amount of its 2.550% senior unsecured notes due 2032.

Future debt payments are discussed below under the heading “Capitalization—Debt Financing .”

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

September 30, 2020

March 31, 2021

Shares / Units Outstanding Common Stock Equivalent Equivalent Value (1)

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Common Operating Partnership Units 17,579 17,579 1,780,050 (2)

17,458 17,458 1,401,877 (2)

5.25% Series B Cumulative Redeemable Preferred Stock

Total Equity 173,653 $ 17,584,103

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_______________

(1) Except for the Series B Cumulative Redeemable Preferred Stock, which is valued at the liquidation preference of $2,500 per share, values are based on the closing price per share of BXP’s Common Stock on the New York Stock Exchange on September 30, 2020 of $80.30.

(2) Includes long-term incentive plan units (including 2012 OPP Units and 2013 - 2017 MYLTIP Units), but excludes MYLTIP Units granted between 2018 and 2020.

(1) Values are based on the closing price per share of BXP’s Common Stock on the New York Stock Exchange on March 31, 2021 of $101.26.

(2) Includes long-term incentive plan units (including 2012 OPP Units and 2013 - 2018 MYLTIP Units) but excludes MYLTIP Units granted between 2019 and 2021 because the three-year performance period has not ended.

(3) See page 71 for additional information.

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(1) our consolidated debt;

(2) the product of (x) the closing price per share of BXP common stock on September 30, 2020, as reported by the New York Stock Exchange, multiplied by (y) the sum of:

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(2) the product of (x) the closing price per share of BXP common stock on March 31, 2021, as reported by the New York Stock Exchange, multiplied by (y) the sum of:

(i) the number of outstanding shares of common stock of BXP,

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(iv) the number of OP Units issuable upon conversion of 2012 OPP Units, 2013 - 2018 MYLTIP Units that were issued in the form of LTIP Units.

(3) the aggregate liquidation preference ($2,500 per share) of the outstanding shares of BXP’s 5.25% Series B Cumulative Redeemable Preferred Stock.

The calculation of consolidated market capitalization does not include LTIP Units issued in the form of MYLTIP Awards unless and until certain performance thresholds are achieved and they are earned.

Because their three-year performance periods have not yet ended, 2018 - 2020 MYLTIP Units are not included in this calculation as of September 30, 2020.

Because their three-year performance periods have not yet ended, 2019 - 2021 MYLTIP Units are not included in this calculation as of March 31, 2021.

We also present BXP’s Share of Market Capitalization and BXP’s Share of Debt/BXP’s Share of Market Capitalization, which are calculated in the same manner, except that BXP’s Share of Debt is utilized instead of our consolidated debt in both the numerator and the denominator.

BXP’s Share of Debt is defined as our consolidated debt plus our share of debt from our unconsolidated joint ventures (calculated based upon our ownership percentage), minus our partners’ share of debt from our consolidated joint ventures (calculated based upon the partners’ percentage ownership interests adjusted for basis differentials).

partners’ percentage ownership interests adjusted for basis differentials).

Management believes that BXP’s Share of Debt provides useful information to investors regarding our financial condition because it includes our share of debt from unconsolidated joint ventures and excludes our partners’ share of debt from consolidated joint ventures, in each case presented on the same basis.

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For a discussion of our unconsolidated joint venture indebtedness, see “ Liquidity and Capital Resources—Capitalization—Off-Balance Sheet Arrangements—Joint Venture Indebtedness ” within “ Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations ” and for a discussion of our consolidated joint venture indebtedness see “Liquidity and Capital Resources—Capitalization—Mortgage Notes Payable, Net ” within “ Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations .”

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Debt Financing

As of September 30, 2020, we had approximately $13.0 billion of outstanding consolidated indebtedness, representing approximately 48.06% of our Consolidated Market Capitalization as calculated above consisting of approximately (1) $9.6 billion (net of discount and deferred financing fees) in publicly traded unsecured senior notes having a GAAP weighted-average interest rate of 3.71% per annum and maturities in 2021 through 2031 (See Note 6 to the Consolidated Financial Statements), (2) $2.9 billion (net of deferred financing fees) of property-specific mortgage debt having a GAAP weighted-average interest rate of 3.89% per annum and a weighted-average term of 5.6 years and (3) $499.3 million (net of deferred financing fees) outstanding under BPLP’s 2017 Credit Facility that matures on April 24, 2022.

The table below summarizes the aggregate carrying value of our mortgage notes payable and BPLP’s unsecured senior notes, line of credit and term loan, as well as Consolidated Debt Financing Statistics at September 30, 2020 and September 30, 2019.

September 30,

As of March 31, 2021, we had approximately $12.5 billion of outstanding consolidated indebtedness, representing approximately 41.62% of our Consolidated Market Capitalization as calculated above consisting of approximately (1) $9.6 billion (net of discount and deferred financing fees) in publicly traded unsecured senior notes having a GAAP weighted-average interest rate of 3.57% per annum and maturities in 2023 through 2032 (See Note 7 to the Consolidated Financial Statements) and (2) $2.9 billion (net of deferred financing fees) of property-specific mortgage debt having a GAAP weighted-average interest rate of 3.89% per annum and a weighted-average term of 5.1 years.

(dollars in thousands)

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BXP’s Share of Debt $ 12,508,876 $ 11,890,196

September 30,

Consolidated Debt Financing Statistics:

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(2) See page 70 for additional information.

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Unsecured Credit Facility

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On April 24, 2018, BPLP exercised its option to draw $500.0 million on its Delayed Draw Facility.

The Delayed Draw Facility bears interest at a variable rate equal to LIBOR plus 0.90% per annum based on BPLP’s September 30, 2020 credit rating and matures on April 24, 2022.

As of September 30, 2020 and November 2, 2020, BPLP had $500.0 million of borrowings outstanding under its Delayed Draw Facility, no borrowings under its Revolving Facility and letters of credit totaling approximately $2.5 million outstanding with the ability to borrow approximately $1.5 billion under the Revolving Facility.

Unsecured Senior Notes, Net

For a description of BPLP’s outstanding unsecured senior notes as of September 30, 2020, see Note 6 to the

Consolidated Financial Statements.

On May 5, 2020, BPLP completed a public offering of $1.25 billion in aggregate principal amount of its 3.250% unsecured senior notes due 2031.

Prior to its repayment on March 16, 2021, the Delayed Draw Facility bore interest at a variable rate equal to LIBOR plus 0.95% per annum based on BPLP’s credit rating.

As of March 31, 2021 and May 3, 2021, BPLP had no borrowings under its 2017 Credit Facility and outstanding letters of credit totaling approximately $2.3 million and $6.3 million, respectively, with the ability to borrow approximately $1.5 billion under the Revolving Facility.

Unsecured Senior Notes

For a description of BPLP’s outstanding unsecured senior notes as of March 31, 2021, see Note 7 to the Consolidated Financial Statements.

On February 14, 2021, BPLP completed the redemption of $850.0 million in aggregate principal amount of its 4.125% senior notes due May 15, 2021.

The redemption price was approximately $858.7 million, which was equal to par plus approximately $8.7 million of accrued and unpaid interest to, but not including, the redemption date.

Excluding the accrued and unpaid interest, the redemption price was equal to the principal amount being redeemed.

We recognized a loss from early extinguishment of debt totaling approximately $0.4 million, related to unamortized origination costs.

On March 16, 2021, BPLP completed a public offering of $850.0 million in aggregate principal amount of its 2.550% unsecured senior notes due 2032.

The notes were priced at 99.570% of the principal amount to yield an effective rate (including financing fees) of approximately 2.671% 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 notes will mature on April 1, 2032, unless earlier redeemed.

The aggregate net proceeds from the offering were approximately $839.2 million 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 September 30, 2020, BPLP was in compliance with each of these financial restrictions and requirements.

Mortgage Notes Payable, Net

The following represents the outstanding principal balances due under the mortgage notes payable at September 30, 2020:

At March 31, 2021, BPLP was in compliance with each of these financial restrictions and requirements.

Mortgage Notes Payable

The following represents the outstanding principal balances due under the mortgage notes payable at March 31, 2021:

Properties Stated

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(dollars in thousands)

University Place 6.94 % 6.99 % $ 2,045 $ (11) $ 2,034 N/A August 1, 2021

Consolidated Joint Ventures

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The partners’ share of the carrying amount has been adjusted for basis differentials.

(4) In connection with the refinancing of the loan, we guaranteed the consolidated entity’s obligation to fund various reserves for tenant improvement costs and allowances, leasing commissions and free rent obligations in lieu of cash

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As of September 30, 2020, the maximum funding obligation under the guarantee was approximately $37.2 million.

As of March 31, 2021, the maximum funding obligation under the guarantee was approximately $23.1 million.

We earn a fee from the joint venture for providing the guarantee and have an agreement with our partners to reimburse the joint venture for their share of any payments made under the guarantee (See Note 9 to the Consolidated Financial Statements).

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We have investments in unconsolidated joint ventures with our effective ownership interests ranging from 20% to 60%.

Fourteen of these ventures have mortgage indebtedness.

Thirteen of these ventures have mortgage indebtedness.

We exercise significant influence over, but do not control, these entities.

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See also Note 5 to the Consolidated Financial Statements.

At September 30, 2020, the aggregate carrying amount of debt, including both our and our partners’ share, incurred by these ventures was approximately $2.6 billion (of which our proportionate share is approximately $1.1 billion).

The table below summarizes the outstanding debt of these joint venture properties at September 30, 2020.

At March 31, 2021, the aggregate carrying amount of debt, including both our and our partners’ share, incurred by these ventures was approximately $2.7 billion (of which our proportionate share is approximately $1.2 billion).

The table below summarizes the outstanding debt of these joint venture properties at March 31, 2021.

In addition to other guarantees specifically noted in the table, we have agreed to customary environmental indemnifications and nonrecourse carve-outs (e.g., guarantees against fraud, misrepresentation and bankruptcy) as well as the completion of development projects on certain of the loans.

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50 % 2.80 % 2.96 % 125,000 (951) 124,049 62,025 (2)(4) November 10, 2025

Annapolis Junction Building Six

50 % 2.15 % 2.30 % 12,131 (4) 12,127 6,064 (5) November 17, 2020

Annapolis Junction Building Seven

50 % 2.58 % 2.92 % 18,420 (31) 18,389 9,195 (6) March 25, 2021

1265 Main Street

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A subsidiary of the joint venture entered into interest rate swap contracts with notional amounts aggregating $300.0 million through April 1, 2025, resulting in a fixed rate of approximately 4.063% per annum through the expiration of the interest rate swap contracts.

Table of Conte n ts

(4) On September 30, 2020, the joint venture extended the maturity date to November 1, 2020.

Then, on October 30, 2020, the joint venture refinanced the mortgage loan.

See Notes 5 and 13 to the Consolidated Financial Statements.

(5) The loan bears interest at a variable rate equal to LIBOR plus 2.00% per annum and matures on November 17, 2020.

(6) The loan bears interest at a variable rate equal to LIBOR plus 2.35% per annum and matures on March 25, 2021.

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

(5) The construction financing has a borrowing capacity of $250.0 million.

The construction financing bears interest at a variable rate equal to LIBOR plus 2.25% per annum and matures on December 18, 2020, with two, one-year extension options, subject to certain conditions.

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

(6) The construction financing had a borrowing capacity of $204.6 million.

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The loan has been reflected as Related Party Note Receivable, Net on our Consolidated Balance Sheets.

(13) The loan bears interest at a variable rate equal to (1) the greater of (x) LIBOR or (y) 0.65%, plus (2) 4.75% per annum, and matures on July 7, 2022.

(11) The loan bears interest at a variable rate equal to (1) the greater of (x) LIBOR or (y) 0.65%, plus (2) 4.75% per annum and matures on 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 rate at a cap of 3.00% per annum on a notional amount of $325.0 million through July 7, 2022.

State and Local Tax Matters

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FFO is a non-GAAP financial measure.

We believe the presentation of FFO, combined with the presentation of required GAAP financial measures, has improved the understanding of operating results of REITs among the investing public and has helped make comparisons of REIT operating results more meaningful.

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accounting and useful life estimates), FFO can help investors compare the operating performance of a company’s real estate across reporting periods and to the operating performance of other companies.

We believe the presentation of FFO, combined with the presentation of required GAAP financial measures, improves the understanding of operating results of REITs among the investing public and helps make comparisons of REIT operating results more meaningful.

Management generally considers FFO to be useful measures for understanding and comparing our operating results because, by excluding gains and losses related to sales of previously depreciated operating real estate assets, impairment losses and real estate asset depreciation and amortization (which can differ across owners of similar assets in similar condition based on historical cost accounting and useful life estimates), FFO can help investors compare the operating performance of a company’s real estate across reporting periods and to the operating performance of other companies.

Our computation of FFO may not be comparable to FFO reported by other REITs or real estate companies that do not define the term in accordance with the current Nareit definition or that interpret the current Nareit definition differently.

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common shareholders or net income attributable to Boston Properties Limited Partnership common unitholders (determined in accordance with GAAP) or any other GAAP financial measures and should only be considered together with and as a supplement to our financial information prepared in accordance with GAAP.

The impact that COVID-19 has had on our business, financial position and results of operations during the second and third quarters of 2020 is discussed throughout this report.

The impact that COVID-19 has had on our business, financial position and results of operations during the first quarter of 2021 is discussed throughout this report.

The full extent of the impact of COVID-19 on our business, operations and financial results will depend on numerous evolving factors that we may not be able to accurately predict.

The impact of COVID-19 on our revenue, in particular lease, parking and hotel revenue was negatively impacted by COVID-19 for the three and nine months ended September 30, 2020, thus negatively impacting our FFO.

These decreases are discussed under the heading “ Comparison of the nine months ended September 30, 2020 to the nine months ended September 30, 2019 ” within “ Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations ” and under the heading “ Comparison of the three months ended September 30, 2020 to the three months ended September 30, 2019 ” within “ Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations .”

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The impact of COVID-19 on our revenue, in particular lease, parking and hotel revenue was negatively impacted by COVID-19 for the three months ended March 31, 2021, thus negatively impacting our FFO.

These decreases are discussed under the heading “ Comparison of the three months ended March 31, 2021 to the three months ended March 31, 2020 ” within “ Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations .”

Boston Properties, Inc.

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common shareholders to FFO attributable to Boston Properties, Inc.

common shareholders for the three months ended September 30, 2020 and 2019:

Three months ended September 30,

common shareholders for the three months ended March 31, 2021 and 2020:

Three months ended March 31,

(in thousands)

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$ 91,624 $ 497,496

Preferred stock redemption charge 6,412 —

Preferred dividends 2,560 2,625

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Corporate-related depreciation and amortization

Gain on sale of real estate included within income (loss) from unconsolidated joint ventures — (487)

Losses on sales of real estate (209) (15)

Gain on sale of investment included within income (loss) from unconsolidated joint ventures 10,257 —

Gains on sales of real estate — 410,165

Noncontrolling interests in property partnerships

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Preferred dividends 2,560 2,625

Preferred stock redemption charge 6,412 —

Funds from Operations (FFO) attributable to the Operating Partnership common unitholders (including Boston Properties, Inc.)

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Weighted average shares outstanding—basic 155,928 155,011

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Reconciliation to Diluted Funds from Operations:

Three months ended September 30,

Three months ended March 31,

(Numerator) Shares/Units

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_______________

(1) BXP’s share of diluted Funds from Operations was 90.14% and 89.77% for the three months ended September 30, 2020 and 2019, respectively.

(1) BXP’s share of diluted Funds from Operations was 90.13% and 89.95% for the three months ended March 31, 2021 and 2020, respectively.

Boston Properties Limited Partnership

The following table presents a reconciliation of net income attributable to Boston Properties Limited Partnership common unitholders to FFO attributable to Boston Properties Limited Partnership common unitholders for the three months ended September 30, 2020 and 2019:

Three months ended September 30,

Three months ended March 31,

(in thousands)

Net income attributable to Boston Properties Limited Partnership common unitholders $ 105,773 $ 566,333

$ 101,624 $ 122,117

Preferred unit redemption charge 6,412 —

Preferred distributions 2,560 2,625

Noncontrolling interests in property partnerships 16,467 19,486

15,561 18,470

Net income 131,212 588,444

Depreciation and amortization 173,500 169,285

164,706 164,020

Noncontrolling interests in property partnerships’ share of depreciation and amortization (16,457) (17,627)

(15,833) (17,402)

BPLP’s share of depreciation and amortization from unconsolidated joint ventures

20,413 13,745

BXP’s share of depreciation and amortization from unconsolidated joint ventures 18,412 18,332

Corporate-related depreciation and amortization (440) (469)

Gain on sale of real estate included within income (loss) from unconsolidated joint ventures

Losses on sales of real estate (209) (15)

Gain on sale of investment included within (loss) income from unconsolidated joint ventures 10,257 —

Gains on sales of real estate — 419,654

Noncontrolling interests in property partnerships 16,467 19,486

15,561 18,470

Preferred distributions 2,560 2,625

Preferred unit redemption charge 6,412 —

Funds from Operations attributable to Boston Properties Limited Partnership common unitholders (1) $ 270,531 $ 316,200

$ 270,675 $ 282,571

Weighted average units outstanding—basic

172,677 172,215

Table of Conte n ts

Weighted average shares outstanding—basic 173,018 172,549

_______________

1 unchanged sentence

Reconciliation to Diluted Funds from Operations:

Three months ended September 30,

Three months ended March 31,

(in thousands)

(Numerator) Shares/Units

2 unchanged sentences

(Denominator)

(in thousands)

Basic Funds from Operations $ 270,531 173,018 $ 316,200 172,549

7 unchanged sentences

Contract terms are generally between three and five years.

During the three months ended September 30, 2020, we paid approximately $69.1 million to fund tenant-related obligations, including tenant improvements and leasing commissions.

In addition, during the three months ended September 30, 2020, we and our unconsolidated joint venture partners incurred approximately $35 million of new tenant-related obligations associated with approximately 988,000 square feet, which included approximately 177,000 square feet of lease modifications related to COVID-19, of second generation leases, or approximately $36 per square foot.

We did not sign any first generation leases.

During the three months ended March 31, 2021, we paid approximately $109.8 million to fund tenant-related obligations, including tenant improvements and leasing commissions.

In addition, during the three months ended March 31, 2021, we and our unconsolidated joint venture partners incurred approximately $53 million of new tenant-related obligations associated with approximately 588,000 square feet, which included approximately 67,000 square feet of lease modifications related to COVID-19, of second generation leases, or approximately $91 per square foot.

We signed approximately 4,000 square feet of

first generation leases.

The tenant-related obligations for the development properties are included within the projects’ “Estimated Total Investment” referred to in “Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.” In aggregate during the first quarter of 2021, we signed leases for approximately 592,000 square feet of space and incurred aggregate tenant-related obligations of approximately $54 million, or approximately $91 per square foot.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis