~~Critical~~Investments in Unconsolidated Joint Ventures

On April 11, 2016, a joint venture in which we have a 50% interest received an event of default notice from the lender for the loan collateralized by its Annapolis Junction Building One property. Subsequently, the cash flows generated from the property have become insufficient to fund debt service payments and capital improvements necessary to lease and operate the property and the joint venture is not prepared to fund additional cash shortfalls at this time. Consequently, the joint venture is not current on making debt service payments and remains in default. The loan has an outstanding balance of approximately $39.6 million (our share is approximately $19.8 million), is non-recourse to us, bears interest at a variable rate equal to LIBOR plus 1.75% per annum and has a stated maturity date of March 31, 2018, with one, three-year extension option, subject to certain conditions including that the loan is not in default. The lender notified the joint venture that it has elected to charge the default interest rate on the loan equal to LIBOR plus 5.75% per annum. The joint venture is currently in discussions with the lender regarding the event of default, although there can be no assurance as to the outcome of those discussions. The estimated fair value of our investment in the unconsolidated joint venture exceeds its carrying value. Annapolis Junction Building One is a Class A office property with approximately 118,000 net rentable square feet located in Annapolis, Maryland.

On July 1, 2016, we entered the Los Angeles market through our acquisition of a 49.8% interest in an existing joint venture that owns and operates Colorado Center located in Santa Monica, California for a gross purchase price of approximately $511.1 million, or approximately $503.6 million in cash net of credits for free rent, unfunded leasing costs and other adjustments. Colorado Center is a six-building office complex that sits on a 15-acre site and contains an aggregate of approximately 1,184,000 net rentable square feet with an underground parking garage for 3,100 vehicles.

On October 1, 2016, a joint venture in which we have a 50% interest completed and fully placed in-service 1265 Main Street, a Class A office project with approximately 115,000 net rentable square feet located in Waltham, Massachusetts. The property is 100% leased. On December 8, 2016, the joint venture obtained mortgage financing totaling $40.4 million collateralized by the property. The mortgage loan bears interest at a fixed rate of 3.77% per annum and matures on January 1, 2032.

On October 20, 2016, we and our partner in the unconsolidated joint venture that owns Metropolitan Square located in Washington, DC, completed the sale of an 80% interest in the joint venture for a gross sale price of approximately $282.4 million, including the assumption by the buyer of its pro rata share of the mortgage loan collateralized by the property totaling approximately $133.4 million. In addition, the buyer agreed to assume certain unfunded leasing costs totaling approximately $14.2 million. Net proceeds to us totaled approximately $58.2 million, resulting in a gain on sale of investment totaling approximately $59.4 million. Prior to the sale, we owned a 51% interest and our partner owned a 49% interest in the joint venture. Following the sale, we continue to own a 20% interest in the joint venture with the buyer owning the remaining 80%. Metropolitan Square is an approximately 607,000 net rentable square foot Class A office property.

On November 15, 2016, a joint venture in which we have a 50% interest extended the loan collateralized by its Annapolis Junction Building Six property. At the time of the extension, the loan had an outstanding balance of approximately $12.9 million and was scheduled to mature on November 17, 2016. The extended loan has a total commitment amount of approximately $15.4 million, bears interest at a variable rate equal to LIBOR plus 2.25% per annum and matures on November 17, 2018. Annapolis Junction Building Six is a Class A office property with approximately 119,000 net rentable square feet located in Annapolis, Maryland.

On November 28, 2016, we entered into a joint venture with the partner at our North Station development to acquire the air rights for the future development of a hotel property at the site. The joint venture partner contributed an air rights parcel and improvements, with a fair value of approximately $7.4 million, for its initial 50% interest in the joint venture. We contributed improvements totaling approximately $0.7 million and will contribute cash totaling approximately $6.7 million for our initial 50% interest. On November 28, 2016, the joint venture entered into a 99-year air rights lease with a third-party hotel developer/operator. In addition, on November 28, 2016, we and our partner entered into a joint venture to acquire the air rights for the future development of a residential tower at the site, consisting of an approximately 40-story residential tower totaling approximately 320,000 rentable square feet comprised of 440 apartment units. The joint venture partner contributed an air rights parcel, with a fair value of approximately $24.2 million, for its initial 50% interest in the joint venture. We contributed

cash and improvements totaling approximately $17.7 million and will contribute cash totaling approximately $6.5 million for our initial 50% interest.

On December 7, 2016, two joint ventures, in which we have a 50% interest in each, combined and extended mortgage loans totaling approximately $21.6 million and $15.1 million collateralized by Annapolis Junction Building Seven and Eight, respectively. On April 4, 2016, the mortgage loan collateralized by Annapolis Junction Building Seven had been extended from April 4, 2016 to April 4, 2017, with one, one-year extension option, subject to certain conditions, and bore interest at a variable rate equal to LIBOR plus 1.65% per annum. The mortgage loan collateralized by Annapolis Junction Building Eight bore interest at a variable rate equal to LIBOR plus 1.50% per annum and was scheduled to mature on June 23, 2017, with two, one-year extension options, subject to certain conditions. The new mortgage loan has a total commitment amount of approximately $42.0 million, with an initial balance totaling approximately $36.7 million, bears interest at a variable rate equal to LIBOR plus 2.35% per annum and matures on December 7, 2019, with three, one-year extension options, subject to certain conditions. Annapolis Junction Building Seven and Eight are Class A office properties with approximately 127,000 and 126,000 net rentable square feet, respectively, located in Annapolis, Maryland.

On December 19, 2016, a joint venture in which we have a 50% interest obtained construction financing with a total commitment of $250.0 million collateralized by its Dock 72 development project. 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. As of December 31, 2016, there have been no amounts drawn under the loan. Dock 72 is a Class A office project with approximately 670,000 net rentable square feet located in Brooklyn, New York.

Stock Option and Incentive Plan

On January 25, 2016, BXP’s Compensation Committee approved a new equity-based, multi-year, long-term incentive program (the “2016 MYLTIP”) as a performance-based component of our overall compensation program. Under the Financial Accounting Standards Board’s Accounting Standards Codification (“ASC”) 718 “Compensation - Stock Compensation,” the 2016 MYLTIP has an aggregate grant fair value of approximately $17.3 million, which amount will generally be amortized into earnings over the four-year plan period under the graded vesting method (See Note 17 to the Consolidated Financial Statements).

Business and Growth Strategies

Business Strategies

Our primary business objective is to maximize return on investment to provide our investors with the greatest possible total return in all points of the economic cycle. Our strategies to achieve this objective are:

to target a few carefully selected geographic markets: Boston, Los Angeles, New York, San Francisco and Washington, DC, and to be one of the leading, if not the leading, owners, developers and managers in each of those markets with a full-service office in each market providing property management, leasing, development, construction and legal expertise. We select markets and submarkets with a diverse economic base and a deep pool of prospective tenants in various industries and where tenants have demonstrated a preference for high-quality office buildings and other facilities. Additionally, our markets have historically been able to recruit new talent to them and as such created job growth that results in growth in rental rates and occupancy over time. We have explored and may continue to explore for future investment select domestic and international markets that exhibit these same traits;

to emphasize markets and submarkets within those markets where the lack of available sites and the difficulty of receiving the necessary approvals for development and the necessary financing constitute high barriers to the creation of new supply, and where skill, financial strength and diligence are required to successfully develop, finance and manage high-quality office, research and development space, as well as selected retail and residential space;

to take on complex, technically challenging development projects, leveraging the skills of our management team to successfully develop, acquire or reposition properties that other organizations may not have the capacity or resources to pursue;

to own and develop high-quality real estate designed to meet the demands of today’s tenants who require sophisticated telecommunications and related infrastructure, support services, sustainable features and amenities, and to manage those facilities so as to become the landlord of choice for both existing and prospective clients;

to opportunistically acquire assets which increase our market share in the markets in which we have chosen to concentrate, as well as potential new markets, which exhibit an opportunity to improve or preserve returns through repositioning (through a combination of capital improvements and shift in marketing strategy), changes in management focus and leasing;

to explore joint venture opportunities with existing property owners located in desirable locations, who seek to benefit from the depth of development and management expertise we are able to provide and our access to capital, and/or to explore joint venture opportunities with strategic institutional partners, leveraging our skills as owners, operators and developers of Class A office space and mixed-use complexes;

to pursue on a selective basis the sale of properties or interests therein, including core properties, to either (1) take advantage of the demand for our premier properties and realize the value we have created or (2) pare from our portfolio properties that we believe have slower future growth potential;

to seek third-party development contracts to enable us to retain and utilize our existing development and construction management staff, especially when our internal development is less active or when new development is less-warranted due to market conditions; and

to enhance our capital structure through our access to a variety of sources of capital and proactively manage our debt expirations. In the current economic climate with relatively low interest rates we have and will continue to attempt to lower the cost of our debt capital and seek opportunities to lock in such low rates through early debt repayment, refinancings and interest rate hedges.

Growth Strategies

External Growth Strategies

We believe that our development experience, our organizational depth and our balance sheet position us to continue to selectively develop a range of property types, including high-rise urban developments, mixed-use developments (including office, residential and retail), low-rise suburban office properties and research and laboratory space, within budget and on schedule. We believe we are also well positioned to achieve external growth through acquisitions. Other factors that contribute to our competitive position include:

our control of sites (including sites under contract or option to acquire) in our markets that could support in excess of 14.2 million additional square feet of new office, retail and residential development;

our reputation gained through 47 years of successful operations and the stability and strength of our existing portfolio of properties;

our relationships with leading national corporations, universities and public institutions, including government agencies, seeking new facilities and development services;

our relationships with nationally recognized financial institutions that provide capital to the real estate industry;

our track record and reputation for executing acquisitions efficiently provide comfort to domestic and foreign institutions, private investors and corporations who seek to sell commercial real estate in our market areas;

our ability to act quickly on due diligence and financing;

our relationships with institutional buyers and sellers of high-quality real estate assets; and

our ability to procure entitlements from multiple municipalities to develop sites and attract land owners to sell or partner with us.

Opportunities to execute our external growth strategy fall into three categories:

Development in selected submarkets. We believe the selected development of well-positioned office buildings, residential buildings and mixed-use complexes is justified in our markets. We believe in acquiring land after taking into consideration timing factors relating to economic cycles and in response to market conditions that allow for its development at the appropriate time. While we purposely concentrate in markets with high barriers-to-entry, we have demonstrated throughout our 47-year history, an ability to make carefully timed land acquisitions in submarkets where we can become one of the market leaders in establishing rent and other business terms. We believe that there are opportunities at key locations in our existing and other markets for a well-capitalized developer to acquire land with development potential.

In the past, we have been particularly successful at acquiring sites or options to purchase sites that need governmental approvals for development. Because of our development expertise, knowledge of the governmental approval process and reputation for quality development with local government regulatory bodies, we generally have been able to secure the permits necessary to allow development and to profit from the resulting increase in land value. We seek complex projects where we can add value through the efforts of our experienced and skilled management team leading to attractive returns on investment.

Our strong regional relationships and recognized development expertise have enabled us to capitalize on unique build-to-suit opportunities. We intend to seek and expect to continue to be presented with such opportunities in the near term allowing us to earn relatively significant returns on these development opportunities through multiple business cycles.

Acquisition of assets and portfolios of assets from institutions or individuals. We believe that due to our size, management strength and reputation, we are well positioned to acquire portfolios of assets or individual properties from institutions or individuals if valuations meet our criteria. In addition, we believe that our market knowledge and our liquidity and access to capital may provide us with a competitive advantage when pursuing acquisitions. Opportunities to acquire properties may also come through the purchase of first mortgage or mezzanine debt. We are also able to appeal to sellers wishing to contribute on a tax-deferred basis their ownership of property for equity in a diversified real estate operating company that offers liquidity through access to the public equity markets in addition to a quarterly distribution. Our ability to offer common and preferred units of limited partnership in BPLP to sellers who would otherwise recognize a taxable gain upon a sale of assets for cash or BXP’s common stock may facilitate this type of transaction on a tax-efficient basis. Recent Treasury Regulations, however may limit certain of the tax benefits previously available to sellers in these transactions.

Acquisition of underperforming assets and portfolios of assets. We believe that because of our in-depth market knowledge and development experience in each of our markets, our national reputation with brokers, financial institutions, owners of real estate and others involved in the real estate market and our access to competitively-priced capital, we are well-positioned to identify and acquire existing, underperforming properties for competitive prices and to add significant additional value to such properties through our effective marketing strategies, repositioning/redevelopment expertise and a responsive property management program.

Internal Growth Strategies

We believe that opportunities will exist to increase cash flow from our existing properties through an increase in occupancy and rental rates because they are of high quality and in desirable locations within markets where, in general, the creation of new supply is limited by the lack of available sites and the difficulty of obtaining the necessary approvals for development on vacant land and financing. Additionally, our markets have diversified economies that have historically experienced job growth and increased use of office space, resulting in growth in rental rates and occupancy over time. Our strategy for maximizing the benefits from these opportunities is three-fold: (1) to provide high-quality property management services using our employees in order to encourage tenants to renew, expand and relocate in our properties, (2) to achieve speed and transaction cost efficiency in replacing departing tenants through the use of in-house services for marketing, lease negotiation and construction of tenant and capital improvements and (3) to work with new or existing tenants with space expansion or contraction needs maximizing the cash flow from our assets. We expect to continue our internal growth as a result of our ability to:

Cultivate existing submarkets and long-term relationships with credit tenants. In choosing locations for our properties, we have paid particular attention to transportation and commuting patterns, physical environment, adjacency to established business centers and amenities, proximity to sources of business growth and other local factors.

The average lease term of our in-place leases, including leases signed by our unconsolidated joint ventures, was approximately 7.3 years at December 31, 2016, and we continue to cultivate long-term leasing relationships with a diverse base of high-quality, financially stable tenants. Based on leases in place at December 31, 2016, leases with respect to approximately 6.0% of the total square feet in our portfolio, including unconsolidated joint ventures, will expire in calendar year 2017.

Directly manage our office properties to maximize the potential for tenant retention. We provide property management services ourselves, rather than contracting for this service, to maintain awareness of and responsiveness to tenant needs. We and our properties also benefit from cost efficiencies produced by an experienced work force attentive to preventive maintenance and energy management and from our continuing programs to assure that our property management personnel at all levels remain aware of their important role in tenant relations.

Replace tenants quickly at best available market terms and lowest possible transaction costs. We believe that we are well-positioned to attract new tenants and achieve relatively high rental and occupancy rates as a result of our well-located, well-designed and well-maintained properties, our reputation for high-quality building services and responsiveness to tenants, and our ability to offer expansion and relocation alternatives within our submarkets.

Extend terms of existing leases to existing tenants prior to expiration. We have also successfully structured early tenant renewals, which have reduced the cost associated with lease downtime while securing the tenancy of our highest quality credit-worthy tenants on a long-term basis and enhancing relationships.

Policies with Respect to Certain Activities

The ~~preparation~~discussion below sets forth certain additional information regarding our investment, financing and other policies. These policies have been determined by BXP’s Board of ~~financial statements~~Directors and, in ~~conformity~~general, may be amended or revised from time to time by the Board of Directors.

Investment Policies

Investments in Real Estate or Interests in Real Estate

Our investment objectives are to provide quarterly cash dividends/distributions to our securityholders and to achieve long-term capital appreciation through increases in our value. We have not established a specific policy regarding the relative priority of these investment objectives.

We expect to continue to pursue our investment objectives primarily through the ownership of our current properties, development projects and other acquired properties. We currently intend to continue to invest primarily in developments of properties and acquisitions of existing improved properties or properties in need of redevelopment, and acquisitions of land that we believe have development potential, primarily in our existing markets of Boston, Los Angeles, New York, San Francisco and Washington, DC. We have explored and may continue to explore for future investment select domestic and international markets that exhibit these same traits. Future investment or development activities will not be limited to a specified percentage of our assets. We intend to engage in such future investment or development activities in a manner that is consistent with ~~accounting principles~~the maintenance of BXP’s status as a REIT for federal income tax purposes. In addition, we may purchase or lease income-producing commercial and other types of properties for long-term investment, expand and improve the real estate presently owned or other properties purchased, or sell such real estate properties, in whole or in part, when circumstances warrant. We do not have a policy that restricts the amount or percentage of assets that will be invested in any specific property, however, our investments may be restricted by our debt covenants.

We may also continue to participate with third parties in property ownership, through joint ventures or other types of co-ownership. These investments may permit us to own interests in larger assets without unduly restricting diversification and, therefore, add flexibility in structuring our portfolio.

Equity investments may be subject to existing mortgage financing and other indebtedness or such financing or indebtedness as may be incurred in connection with acquiring or refinancing these investments. Debt service on such financing or indebtedness will have a priority over any distributions with respect to BXP’s common stock. Investments are also subject to our policy not to be treated as an investment company under the Investment Company Act of 1940, as amended (the “1940 Act”).

Investments in Real Estate Mortgages

While our current portfolio consists primarily of, and our business objectives emphasize, equity investments in commercial real estate, we may, at the discretion of the Board of Directors of BXP, invest in mortgages and other types of real estate interests consistent with BXP’s qualification as a REIT. Investments in real estate mortgages run the risk that one or more borrowers may default under such mortgages and that the collateral securing such mortgages may not be sufficient to enable us to recoup our full investment. We may invest in participating, convertible or traditional mortgages if we conclude that we may benefit from the cash flow, or any appreciation in value of the property or as an entrance to the fee ownership.

Securities of or Interests in Entities Primarily Engaged in Real Estate Activities

Subject to the percentage of ownership limitations and gross income and asset tests necessary for BXP’s REIT qualification, we also may invest in securities of other REITs, other entities engaged in real estate activities or securities of other issuers, including for the purpose of exercising control over such entities.

Dispositions

Our decision to dispose or partially dispose of properties is based upon the periodic review of our portfolio and the determination by the Board of Directors of BXP that such action would be in our best interests. Any decision to dispose of a property will be authorized by the Board of Directors of BXP or a committee thereof. Some holders of limited partnership interests in BPLP, could incur adverse tax consequences upon the sale of certain of our properties that differ from the tax consequences to BXP. Consequently, holders of limited partnership interests in BPLP may have different objectives regarding the appropriate pricing and timing of any such sale. Such different tax treatment derives in most cases from the fact that we acquired these properties in exchange for partnership interests in contribution transactions structured to allow the prior owners to defer taxable gain. Generally, this deferral continues so long as we do not dispose of the properties in a taxable transaction. Unless a sale by us of these properties is structured as a like-kind exchange under Section 1031 of the Internal Revenue Code or in a manner that otherwise allows deferral to continue, recognition of the deferred tax gain allocable to these prior owners is generally ~~accepted~~triggered by a sale. Only 767 Fifth Avenue (the General Motors Building) is subject to a tax protection agreement through June 2017, which may limit our ability to dispose of it or require us to pay damages to the prior owner in the event of a taxable sale.

Financing Policies

The agreement of limited partnership of BPLP and BXP’s certificate of incorporation and bylaws do not limit the amount or percentage of indebtedness that we may incur. Further, we do not have a policy limiting the amount of indebtedness that we may incur, nor have we established any limit on the number or amount of mortgages that may be placed on any single property or on our portfolio as a whole. However, our mortgages, credit facilities and unsecured debt securities contain customary restrictions, requirements and other limitations on our ability to incur indebtedness. In addition, we evaluate the impact of incremental leverage on our debt metrics and the credit ratings of BPLP's publicly traded debt.

The Board of Directors of BXP will consider a number of factors when evaluating our level of indebtedness and when making decisions regarding the incurrence of indebtedness, including the purchase price of properties to be acquired with debt financing, the estimated market value of our properties upon refinancing, the entering into agreements such as interest rate swaps, caps, floors and other interest rate hedging contracts and the ability of particular properties and us as a whole to generate cash flow to cover expected debt service.

Policies with Respect to Other Activities

As the sole general partner of BPLP, BXP has the authority to issue additional common and preferred units of limited partnership interest of BPLP. BXP has issued, and may in the future issue, common or preferred units of limited partnership interest to persons who contribute their direct or indirect interests in properties to us in exchange for such common or preferred units. We have not engaged in trading, underwriting or agency distribution or sale of securities of issuers other than BPLP and we do not intend to do so. At all times, we intend to make investments in such a manner as to enable BXP to maintain its qualification as a REIT, unless, due to changes in circumstances or to the Internal Revenue Code of 1986, as amended (or the Treasury Regulations promulgated thereunder), the Board of Directors of BXP determines that it is no longer in the best interest of BXP to qualify as a REIT. We may make loans to third parties, including, without limitation, to joint ventures in which we participate or in connection with the disposition of a property. We intend to make investments in such a way that we will not be treated as an investment company under the 1940 Act. Our policies with respect to these and other activities may be reviewed and modified or amended from time to time by the Board of Directors of BXP.

Sustainability

As one of the largest owners and developers of office properties in the United States, we actively work to promote our growth and operations in a sustainable and responsible manner across our five regions. Our sustainability strategy is broadly focused on the economic, social and environmental aspects of ~~America, or GAAP, requires management~~our activities, which include the design and construction of our new developments and the operation of our existing buildings. We are focused on creating healthy workspaces and high performance properties while simultaneously mitigating operational costs and the potential external impacts of energy, water, waste and greenhouse gas emissions. To that end, we have publicly adopted long-term energy, emissions, water and waste goals that establish aggressive reduction targets. As a company with a core strategy of long-term ownership, we are committed to ~~use judgment~~charitable giving, volunteerism and public realm investments that make a positive impact on the communities in which we conduct business. Through these efforts, we demonstrate that operating and developing commercial real estate can be conducted with a conscious regard for the environment while mutually benefiting our tenants, investors, employees and the communities in which we operate.

We have been recognized as an industry leader in sustainability. During 2016, we ranked second among US Office companies in the ~~application~~Global Real Estate Sustainability Benchmark (“GRESB”) assessment. BXP was among the top 5% of ~~accounting policies, including making estimates~~all participants, ranking 36th out of 733 global companies. 2016 was the fifth straight year that BXP has ranked in the top quartile of GRESB assessment participants, earning another “Green Star” recognition and ~~assumptions.~~ a GRESB 5-star Rating. During 2014 and 2015, BXP was selected by the National Association of Real Estate Investment Trusts (“NAREIT”) as a Leader in the Light Award winner. NAREITs annual Leader in the Light Awards honor NAREIT member companies that have demonstrated superior and sustained sustainability practices.

We ~~base~~are committed to transparent reporting of environmental, social and governance (“ESG”) sustainability indicators. BXP publishes an annual sustainability report that is aligned with the Global Reporting Initiative (“GRI”) reporting framework. Our sustainability strategy, key performance indicators, achievements and sustainability reports are available on our ~~estimates~~website at http://www.bostonproperties.com under the heading “Sustainability.” Except for the documents specifically incorporated by reference into this Annual Report on ~~historical experience~~Form 10-K, information contained on our website or that can be accessed through our website is not incorporated by reference into this Annual Report on Form 10-K.

Competition

We compete in the leasing of office, retail and residential space with a considerable number of other real estate companies, some of which may have greater marketing and financial resources than are available to us. In addition, our hotel property competes for guests with other hotels, some of which may have greater marketing and financial resources than are available to us and to the manager of our one hotel, Marriott International, Inc.

Principal factors of competition in our primary business of owning, acquiring and developing office properties are the quality of properties, leasing terms (including rent and other charges and allowances for tenant improvements), attractiveness and convenience of location, the quality and breadth of tenant services provided, and reputation as an owner and operator of quality office properties in the relevant market. Additionally, our ability to compete depends upon, among other factors, trends of the national and local economies, investment alternatives, financial condition and operating results of current and prospective tenants, availability and cost of capital, construction and renovation costs, taxes, utilities, governmental regulations, legislation and population trends.

In addition, we currently have four residential properties (including two under construction) and may in the future decide to acquire or develop additional residential properties. As an owner, we will also face competition for prospective residents from other operators/owners whose properties may be perceived to offer a better location or better amenities or whose rent may be perceived as a better value given the quality, location and amenities that the resident seeks. We will also compete against condominiums and single-family homes that are for sale or rent. Because the scale of our residential portfolio is relatively small, we expect to continue to retain third parties to manage our residential properties.

Our Hotel Property

We operate our hotel property through a taxable REIT subsidiary. The taxable REIT subsidiary, a wholly-owned subsidiary of BPLP, is the lessee pursuant to a lease for the hotel property. As lessor, BPLP is entitled to a percentage of gross receipts from the hotel property. The hotel lease is intended to provide the economic benefits of ownership of the underlying real estate to flow to us as rental income, while our taxable REIT subsidiary earns the profit from operating the property as a hotel. Marriott International, Inc. continues to manage the hotel property under the Marriott name and under terms of the existing management agreements. Marriott has been engaged under a separate long-term incentive management agreement to operate and manage the hotel on ~~various other assumptions believed~~behalf of the taxable REIT subsidiary.

Corporate Governance

BXP is currently governed by an eleven member Board of Directors. The current members of the Board of Directors of BXP are Bruce W. Duncan, Karen E. Dykstra, Carol B. Einiger, Dr. Jacob A. Frenkel, Joel I. Klein, Douglas T. Linde, Matthew J. Lustig, Alan J. Patricof, Owen D. Thomas, Martin Turchin and David A. Twardock. All directors of BXP stand for election for one-year terms expiring at the next succeeding annual meeting of stockholders.

Joel I. Klein currently serves as the Lead Independent Director of BXP's Board of Directors. The Board of Directors of BXP also has Audit, Compensation and Nominating and Corporate Governance Committees. The membership of each of these committees is described below.

Independent Director

Audit

Compensation

Nominating

and

Corporate

Governance

Bruce W. Duncan

Karen E. Dykstra

Carol B. Einiger

Dr. Jacob A. Frenkel

Joel I. Klein **

Matthew J. Lustig

Alan J. Patricof

Martin Turchin

David A. Twardock

X=Committee member, *=Chair, **=Lead Independent Director

The Board of Directors has adopted charters for each of its Audit, Compensation and Nominating and Corporate Governance Committees. A copy of each of these charters is available on our website at http://www.bostonproperties.com under the heading “Corporate Governance” and subheading “Committees and Charters.”

The Board of Directors has adopted Corporate Governance Guidelines, a copy of which is available on our website at http://www.bostonproperties.com under the heading “Corporate Governance” and subheading “Governance Guidelines.”

The Board of Directors has adopted a Code of Business Conduct and Ethics, which governs business decisions made and actions taken by BXP’s directors, officers and employees. A copy of this code is available on our website at http://www.bostonproperties.com under the heading “Corporate Governance” and subheading “Code of Conduct and Ethics.” BXP intends to disclose on this website any amendment to, or waiver of, any provisions of this Code applicable to the directors and executive officers of BXP that would otherwise be required to be ~~reasonable~~disclosed under the ~~circumstances. These judgments affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates~~rules of the ~~financial statements~~SEC or the New York Stock Exchange.

The Board of Directors has established an ethics reporting system that employees may use to anonymously report possible violations of the Code of Business Conduct and Ethics, including concerns regarding questionable accounting, internal accounting controls or auditing matters, by telephone or over the internet.

The Board of Directors has adopted a Policy on Company Political Spending, a copy of which is available on our website at http://www.bostonproperties.com under the heading “Corporate Governance” and subheading “Policy on Political Spending.”

Recent Tax Legislation Affecting BXP and BPLP

Bipartisan Budget Act of 2015

On November 2, 2015, Congress enacted the Bipartisan Budget Act of 2015. Among other things, this Act changes the rules applicable to federal income tax audits of partnerships (such as BPLP) and the ~~reported amounts~~collection of ~~revenue~~any tax resulting from any such audits or other tax proceedings. Under the new rules, the partnership itself must pay any “imputed underpayments,” consisting of delinquent taxes, interest, and ~~expenses during the reporting periods. If our judgment or interpretation~~penalties deemed to arise out of an audit of the ~~facts~~partnership, unless certain alternative methods are available and ~~circumstances relating~~the partnership elects to ~~various transactions had~~utilize them.

The new rule generally does not apply to audits of taxable years beginning before January 1, 2018, and many of the details, including the means by which a partnership can avail itself of the alternative methods and the manner in which the alternative methods may apply to REITs, will be determined through Treasury Regulations. Proposed Treasury Regulations provide guidance as to how these rules apply to REITs, including clarification regarding the treatment of deficiency dividends. However, these regulations have not been ~~different,~~finalized and the government has imposed an indefinite freeze on further regulatory action. Therefore, it is not clear at this time what effect this new legislation will have on us. However, it is possible that ~~different accounting policies would have been applied~~in the future, BXP or BPLP, or both, could be subject to, or otherwise bear the economic burden of, federal income tax, interest, and penalties resulting infrom a ~~different presentation~~federal income tax audit as a result of ~~our financial statements. From time to time, we evaluate our estimates and assumptions. In~~ the ~~event estimates or assumptions prove to be different~~changes enacted by the Act.

Protecting Americans from ~~actual results, adjustments are made in subsequent periods to reflect more current information. Below is a discussion~~Tax Hikes Act of ~~accounting policies that we consider critical in that they may require complex judgment in their application or require estimates about matters that are inherently uncertain.~~2015

~~Real Estate~~

~~Upon acquisitions~~On December 18, 2015, Congress enacted the Protecting Americans from Tax Hikes Act of real estate that constitutes a business, which includes the consolidation of previously unconsolidated joint ventures, we assess the fair value of acquired tangible and intangible assets, (including land, buildings, tenant improvements, “above-” and “below-market” leases, leasing and assumed financing origination costs, acquired in-place leases, other identified intangible assets and assumed liabilities) and allocate the purchase price to the acquired assets and assumed liabilities, including land and buildings as if vacant. We assess and consider fair value based on estimated cash flow projections that utilize discount and/or capitalization rates that we deem appropriate, as well as available market information. Estimates of future cash flows are based on2015. This legislation modifies a number of ~~factors~~rules pertaining to qualification as a REIT and the taxation of REITs and their shareholders, including, among others, the ~~historical operating results, known and anticipated trends, and market and economic conditions.~~following changes to certain rules described in the disclosure set forth in our prospectus:

~~The fair~~For tax years beginning after December 31, 2017, not more than 20% of our total assets may be represented by securities of one or more taxable REIT subsidiaries. At this time, the securities we own in our taxable REIT subsidiaries do not, in the aggregate, exceed 20% of the total value of our assets.

A 100% excise tax is imposed on “redetermined TRS service income,” which is income of a taxable REIT subsidiary attributable to services provided to, or on behalf of its associated REIT and which would otherwise be increased on distribution, apportionment, or allocation under Section 482 of the ~~tangible~~Internal Revenue Code of 1986, as amended (i.e., as a result of a determination that the income was not arm’s length).

Item 1A. Risk Factors.

Set forth below are the risks that we believe are material to our investors. We refer to the equity and debt securities of both BXP and BPLP as our “securities,” and the investors who own securities, or both, as our “securityholders.” This section contains forward-looking statements. You should refer to the explanation of the qualifications and limitations on forward-looking statements beginning on page 44.

Our performance and value are subject to risks associated with our real estate assets ~~of an acquired property considers~~and with the real estate industry.

Our economic performance and the value of our real estate assets, and consequently the ~~property~~value of our securities, are subject to the risk that if our properties do not generate revenues sufficient to meet our operating expenses, including debt service and capital expenditures, our cash flow and ability to pay distributions to our securityholders will be adversely affected. The following factors, among others, may adversely affect the income generated by our properties:

downturns in the national, regional and local economic conditions (particularly increases in unemployment);

competition from other office, hotel, retail and residential buildings;

local real estate market conditions, such as ~~if it were vacant. We also consider an allocation~~oversupply or reduction in demand for office, hotel, retail or residential space;

changes in interest rates and availability of ~~purchase price~~financing;

vacancies, changes in market rental rates and the need to periodically repair, renovate and re-let space;

changes in space utilization by our tenants due to technology, economic conditions and business culture;

increased operating costs, including insurance expense, utilities, real estate taxes, state and local taxes and heightened security costs;

civil disturbances, earthquakes and other natural disasters or terrorist acts or acts of ~~other acquired intangibles, including acquired in-place leases that~~war which may ~~have a customer relationship intangible value, including (but not limited to)~~result in uninsured or underinsured losses or decrease the ~~nature and extent of the existing relationship with the~~desirability to our tenants ~~the tenants’ credit quality and expectations of lease renewals. Based on our acquisitions to date, our allocation to customer relationship intangible assets has been immaterial.~~in impacted locations;

~~We record acquired “above-” and “below-market” leases at their fair values (using a discount rate which reflects the risks~~significant expenditures associated with ~~the leases acquired) equal to the difference between (1) the contractual amounts to be paid pursuant to~~ each in-place lease and (2) management’s estimate of fair market lease rates for each corresponding in-place lease, measured over a period equal to the remaining term of the lease for above-market leases and the initial term plus the term of any below-market fixed rate renewal options for below-market leases. Acquired “above-” and “below-market” lease values have been reflected within Prepaid Expenses and Other Assets and Other Liabilities, respectively, in our Consolidated Balance Sheets. Other intangible assets acquired include amounts for in-place lease values that are based on our evaluation of the specific characteristics of each tenant’s lease. Factors to be considered include estimates of carrying costs during hypothetical expected lease-up periods considering current market conditions, and costs to execute similar leases. In estimating carrying costs, we includeinvestment, such as debt service payments, real estate taxes, insurance and ~~other operating expenses~~maintenance costs which are generally not reduced when circumstances cause a reduction in revenues from a property;

declines in the financial condition of our tenants and ~~estimates~~our ability to collect rents from our tenants; and

decreases in the underlying value of ~~lost rentals at~~our real estate.

We are dependent upon the economic climates of our markets—Boston, Los Angeles, New York, San Francisco and Washington, DC.

All of our revenue is derived from properties located in five markets: Boston, Los Angeles, New York, San Francisco and Washington, DC. A downturn in the economies of these markets, or the impact that a downturn in the overall national economy may have upon these economies, could result in reduced demand for office space and/or a reduction in rents. Because our portfolio consists primarily of office buildings (as compared to a more diversified real estate portfolio), a decrease in demand for office space in turn could adversely affect our results of operations. Additionally, there are submarkets within our markets that are dependent upon a limited number of industries. For example, in our Washington, DC market, ~~rates during~~we focus on leasing

office properties to governmental agencies and contractors, as well as legal firms. A reduction in spending by the ~~expected lease-up periods, depending on local~~federal government could result in reduced demand for office space and adversely affect our results of operations. In addition, in our New York market, ~~conditions. In estimating costs~~we have historically leased properties to ~~execute similar leases, we consider leasing commissions,~~financial, legal and other ~~related expenses.~~professional firms. A significant downturn in one or more of these sectors could adversely affect our results of operations.

~~Management reviews its long-lived assets for impairment every quarter and when there is~~In addition, a significant economic downturn over a period of time could result in an event or change in circumstances that ~~indicates~~results in an impairment in ~~value.~~the value of our properties or our investments in unconsolidated joint ventures. An impairment loss is recognized if the carrying amount of ~~its assets~~the asset (1) is not recoverable over its expected holding period and (2) exceeds its fair value. There can be no assurance that we will not take charges in the future related to the impairment of our assets or investments. Any future impairment could have a material adverse effect on our results of operations in the period in which the charge is taken.

Our investment in property development may be more costly than anticipated.

We intend to continue to develop and substantially renovate office, retail and residential properties. Our current and future development and construction activities may be exposed to the following risks:

we may be unable to proceed with the development of properties because we cannot obtain financing on favorable terms or at all;

we may incur construction costs for a development project that exceed our original estimates due to increases in interest rates and increased materials, labor, leasing or other costs, which could make completion of the project less profitable because market rents may not increase sufficiently to compensate for the increase in construction costs;

we may be unable to obtain, or face delays in obtaining, required zoning, land-use, building, occupancy, and other governmental permits and authorizations, which could result in increased costs and could require us to abandon our activities entirely with respect to a project;

we may abandon development opportunities after we begin to explore them and as a result we may lose deposits or fail to recover expenses already incurred;

we may expend funds on and devote management’s time to projects that we do not complete;

we may be unable to complete construction and/or leasing of a property on schedule or at all; and

we may suspend development projects after construction has begun due to changes in economic conditions or other factors, and this may result in the write-off of costs, payment of additional costs or increases in overall costs when the development project is restarted.

Investment returns from our developed properties may be less than anticipated.

Our developed properties may be exposed to the following risks:

we may lease developed properties at rental rates that are less than the rates projected at the time we decide to undertake the development;

operating expenses may be greater than projected at the time of development, resulting in our investment being less profitable than we expected; and

occupancy rates and rents at newly developed properties may fluctuate depending on a number of factors, including market and economic conditions, and may result in our investments being less profitable than we expected or not profitable at all.

We face risks associated with the development of mixed-use commercial properties.

We operate, are currently developing, and may in the future develop, properties either alone or through joint ventures with other persons that are known as “mixed-use” developments. This means that in addition to the development of office space, the project may also include space for residential, retail, hotel or other commercial purposes. We have less experience in developing and managing non-office and non-retail real estate than we do with office real estate. As a result, if a development project includes a non-office or non-retail use, we may seek to develop that component ourselves, sell the rights to that component to a third-party developer with experience in that use or we may seek to partner with such a developer. If we do not sell the rights or partner with such ~~criteria~~a developer, or if we choose to develop the other component ourselves, we would be exposed not only to those risks typically associated with the development of commercial real estate generally, but also to

specific risks associated with the development and ownership of non-office and non-retail real estate. In addition, even if we sell the rights to develop the other component or elect to participate in the development through a joint venture, we may be exposed to the risks associated with the failure of the other party to complete the development as expected. These include the risk that the other party would default on its obligations necessitating that we complete the other component ourselves (including providing any necessary financing). In the case of residential properties, these risks include competition for prospective residents from other operators whose properties may be perceived to offer a better location or better amenities or whose rent may be perceived as a better value given the quality, location and amenities that the resident seeks. We will also compete against condominiums and single-family homes that are ~~present,~~for sale or rent. Because we have less experience with residential properties than with office and retail properties, we expect to retain third parties to manage our residential properties. If we decide to not sell or participate in a joint venture and instead hire a third party manager, we would be dependent on them and their key personnel who provide services to us and we may not find a suitable replacement if the management agreement is terminated, or if key personnel leave or otherwise become unavailable to us.

Our properties face significant competition.

We face significant competition from developers, owners and operators of office and residential properties and other commercial real estate, including sublease space available from our tenants. Substantially all of our properties face competition from similar properties in the same market. This competition may affect our ability to attract and retain tenants and may reduce the rents we are able to charge. These competing properties may have vacancy rates higher than our properties, which may result in their owners being willing to lease available space at lower rates than the space in our properties.

We face potential difficulties or delays renewing leases or re-leasing space.

We derive most of our income from rent received from our tenants. If a tenant experiences a downturn in its business or other types of financial distress, it may be unable to make timely rental payments. Also, when our tenants decide not to renew their leases or terminate early, we may not be able to re-let the space or there could be a substantial delay in re-letting the space. Even if tenants decide to renew or lease new space, the terms of renewals or new leases, including the cost of required renovations or concessions to tenants, may be less favorable to us than current lease terms. As a result, our cash flow could decrease and our ability to make distributions to our securityholders could be adversely affected.

We face potential adverse effects from major tenants’ bankruptcies or insolvencies.

The bankruptcy or insolvency of a major tenant may adversely affect the income produced by our properties. Our tenants could file for bankruptcy protection or become insolvent in the future. We cannot evict a tenant solely because of its bankruptcy. On the other hand, a bankrupt tenant may reject and terminate its lease with us. In such case, our claim against the bankrupt tenant for unpaid and future rent would be subject to a statutory cap that might be substantially less than the remaining rent actually owed under the lease, and, even so, our claim for unpaid rent would likely not be paid in full. This shortfall could adversely affect our cash flow and results of operations.

We face risks associated with the use of debt to fund acquisitions and developments, including refinancing risk.

We are subject to the risks normally associated with debt financing, including the risk that our cash flow will be insufficient to meet required payments of principal and interest. We anticipate that only a small portion of the principal of our debt will be repaid prior to maturity. Therefore, we are likely to need to refinance at least a portion of our outstanding debt as it matures. There is a risk that we may not be able to refinance existing debt or that the terms of any refinancing will not be as favorable as the terms of our existing debt. If principal payments due at maturity cannot be refinanced, extended or repaid with proceeds from other sources, such as new equity capital, our cash flow may not be sufficient to repay all maturing debt in years when significant “balloon” payments come due. In addition, we may rely on debt to fund a portion of our new investments such as our acquisition and development activity. There is a risk that we may be unable to finance these activities on favorable terms or at all. These conditions, which increase the cost and reduce the availability of debt, may continue or worsen in the future.

We have agreements with a number of limited partners of BPLP who contributed properties in exchange for partnership interests that require BPLP to maintain for specified periods of time secured debt on certain of our assets and/or allocate partnership debt to such limited partners to enable them to continue to defer recognition of their taxable gain with respect to the contributed property. These tax protection and debt allocation agreements may restrict our ability to repay or refinance debt.

Adverse economic and geopolitical conditions and dislocations in the credit markets could have a material adverse effect on our results of operations, financial condition and ability to pay distributions to you.

Our business may be affected by market and economic challenges experienced by the U.S. economy or real estate industry as a whole, by the local economic conditions in the markets in which our properties are located, including the impact of high unemployment, volatility in the public equity and debt markets, and international economic conditions. These current conditions, or similar conditions existing in the future, may adversely affect our results of operations, financial condition and ability to pay distributions as a result of the following, among other potential consequences:

the financial condition of our tenants, many of which are media and technology, financial, legal and other professional firms, may be adversely affected, which may result in tenant defaults under leases due to bankruptcy, lack of liquidity, operational failures or for other reasons;

significant job losses in the financial and professional services industries may occur, which may decrease demand for our office space, causing market rental rates and property values to be negatively impacted;

our ability to borrow on terms and conditions that we find acceptable, or at all, may be limited, which could reduce our ability to pursue acquisition and development opportunities and refinance existing debt, reduce our returns from our acquisition and development activities and increase our future interest expense;

reduced values of our properties may limit our ability to dispose of assets at attractive prices or to obtain debt financing secured by our properties and may reduce the availability of unsecured loans;

the value and liquidity of our short-term investments and cash deposits could be reduced as a result of a deterioration of the financial condition of the institutions that hold our cash deposits or the institutions or assets in which we have made short-term investments, a dislocation of the markets for our short-term investments, increased volatility in market rates for such investments or other factors;

one or more lenders under our line of credit could refuse to fund their financing commitment to us or could fail and we may not be able to replace the financing commitment of any such lenders on favorable terms, or at all; and

to the extent we enter into derivative financial instruments, one or more counterparties to our derivative financial instruments could default on their obligations to us, or could fail, increasing the risk that we may not realize the benefits of these instruments.

An increase in interest rates would increase our interest costs on variable rate debt and could adversely impact our ability to refinance existing debt or sell assets on favorable terms or at all.

As of February 22, 2017, we had approximately $125 million of outstanding indebtedness, excluding our unconsolidated joint ventures, that bears interest at variable rates, and we may incur more indebtedness in the future. If interest rates increase, then so would the interest costs on our unhedged variable rate debt, which could adversely affect our cash flow and our ability to pay principal and interest on our debt and our ability to make distributions to our securityholders. Further, rising interest rates could limit our ability to refinance existing debt when it matures or significantly increase our future interest expense. From time to time, we enter into interest rate swap agreements and other interest rate hedging contracts, including swaps, caps and floors (See Note 7 to the Consolidated Financial Statements). While these agreements are intended to lessen the impact of rising interest rates on us, they also expose us to the risk that the other parties to the agreements will not perform, we could incur significant costs associated with the settlement of the agreements, the agreements will be unenforceable and the underlying transactions will fail to qualify as highly-effective cash flow hedges under guidance included in ASC 815 “Derivatives and Hedging.” In addition, an ~~impairment loss~~increase in interest rates could decrease the amounts third-parties are willing to pay for our assets, thereby limiting our ability to change our portfolio promptly in response to changes in economic or other conditions.

Covenants in our debt agreements could adversely affect our financial condition.

The mortgages on our properties contain customary covenants such as those that limit our ability, without the prior consent of the lender, to further mortgage the applicable property or to discontinue insurance coverage. Our unsecured credit facility, unsecured debt securities and certain secured loans contain customary restrictions, requirements and other limitations on our ability to incur indebtedness, including total debt to asset ratios, secured debt to total asset ratios, debt service coverage ratios and minimum ratios of unencumbered assets to unsecured debt, which we must maintain. Our continued ability to borrow under our credit facilities is ~~recognized~~subject to compliance with our financial and other covenants. In addition, our failure to comply with such covenants could cause a default under the applicable debt agreement, and we may then be required to repay such debt with capital from other sources. Under those circumstances, other sources of capital may not be available to us, or be

available only on unattractive terms. Additionally, in the future our ability to satisfy current or prospective lenders’ insurance requirements may be adversely affected if lenders generally insist upon greater insurance coverage against acts of terrorism or losses resulting from earthquakes than is available to us in the marketplace or on commercially reasonable terms.

We rely on debt financing, including borrowings under our unsecured credit facility, issuances of unsecured debt securities and debt secured by individual properties, to finance our existing portfolio, our acquisition and development activities and for working capital. If we are unable to obtain debt financing from these or other sources, or to refinance existing indebtedness upon maturity, our financial condition and results of operations would likely be adversely affected. If we breach covenants in our debt agreements, the lenders can declare a default and, if the debt is secured, can take possession of the property securing the defaulted loan. In addition, our unsecured debt agreements contain specific cross-default provisions with respect to specified other indebtedness, giving the unsecured lenders the right to declare a default if we are in default under other loans in some circumstances. Defaults under our debt agreements could materially and adversely affect our financial condition and results of operations.

Our degree of leverage could limit our ability to obtain additional financing or affect the market price of our equity and debt securities.

On February 22, 2017, our Consolidated Debt was approximately $9.9 billion (excluding unconsolidated joint venture debt).

The following table presents Consolidated Market Capitalization as well as the corresponding ratios of Consolidated Debt to Consolidated Market Capitalization (dollars in thousands):



	February 22, 2017
	Shares / Units Outstanding	Common Stock Equivalent	Equivalent Value (1)
Common Stock	153,836,251	153,836,251	$	21,330,935		(2)
Common Operating Partnership Units	18,101,565	18,101,565	2,509,963			(3)
5.25% Series B Cumulative Redeemable Preferred Stock	80,000	—	200,000			(4)
Total Equity (A)		171,937,816	$	24,040,898

Consolidated Debt (B)			$	9,907,216

Consolidated Market Capitalization (A + B)			$	33,948,114
Consolidated Debt/Consolidated Market Capitalization [B / (A + B)]			29.18		%

_______________


(1)	Values based on the closing price per share of BXP’s Common Stock on February 22, 2017 of $138.66, except for the Series B Cumulative Redeemable Preferred Stock which have been valued at the liquidation preference of $2,500.00 per share (see Note 4 below).


(2)	As of February 22, 2017, includes 65,879 shares of restricted Common Stock.


(3)	Includes 818,855 LTIP Units (including 118,067 2012 OPP Units, 85,491 2013 MYLTIP Units and 27,029 2014 MYLTIP Units), but excludes an aggregate of 1,240,578 MYLTIP Units granted between 2015 and 2017.


(4)	On or after March 27, 2018, BXP, at its option, may redeem the Series B Preferred Stock for a cash redemption price of $2,500.00 per share ($25.00 per depositary share), plus all accrued and unpaid dividends. The Series B Preferred Stock is not redeemable by the holders, has no maturity date and is not convertible into or exchangeable for any other security of BXP or any of its affiliates.

Our degree of leverage could affect our ability to obtain additional financing for working capital, capital expenditures, acquisitions, development or other general corporate purposes. Our senior unsecured debt is currently rated investment grade by the three major rating agencies. However, there can be no assurance that we will be able to maintain this rating, and in the event our senior debt is downgraded from its current rating, we would likely incur higher borrowing costs and/or difficulty in obtaining additional financing. Our degree of leverage could also make us more vulnerable to a downturn in business or the economy generally. There is a risk that changes in our debt to market capitalization ratio, which is in part a function of BXP’s stock price, or BPLP’s ratio of indebtedness to other measures of asset value used by financial analysts may have an adverse effect on the ~~excess~~market price of our equity or debt securities.

We face risks associated with property acquisitions.

We have acquired in the past and intend to continue to pursue the acquisition of properties and portfolios of properties, including large portfolios that could increase our size and result in alterations to our capital structure. Our acquisition activities and their success are subject to the following risks:

even if we enter into an acquisition agreement for a property, we may be unable to complete that acquisition after making a non-refundable deposit and incurring certain other acquisition-related costs;

we may be unable to obtain or assume financing for acquisitions on favorable terms or at all;

acquired properties may fail to perform as expected;

the actual costs of repositioning, redeveloping or maintaining acquired properties may be greater than our estimates;

the acquisition agreement will likely contain conditions to closing, including completion of due diligence investigations to our satisfaction or other conditions that are not within our control, which may not be satisfied;

acquired properties may be located in new markets, either within or outside the United States, where we may face risks associated with a lack of market knowledge or understanding of the ~~carrying~~local economy, lack of business relationships in the area, costs associated with opening a new regional office and unfamiliarity with local governmental and permitting procedures;

we may acquire real estate through the acquisition of the ownership entity subjecting us to the risks of that entity; and

we may be unable to quickly and efficiently integrate new acquisitions, particularly acquisitions of portfolios of properties, into our existing operations, and this could have an adverse effect on our results of operations and financial condition.

We have acquired in the past and in the future may acquire properties through the acquisition of first mortgage or mezzanine debt. Investments in these loans must be carefully structured to ensure that BXP continues to satisfy the various asset and income requirements applicable to REITs. If we fail to structure any such acquisition properly, BXP could fail to qualify as a REIT. In addition, acquisitions of first mortgage or mezzanine loans subject us to the risks associated with the borrower’s default, including potential bankruptcy, and there may be significant delays and costs associated with the process of foreclosure on collateral securing or supporting these investments. There can be no assurance that we would recover any or all of our investment in the event of such a default or bankruptcy.

We have acquired in the past and in the future may acquire properties or portfolios of properties through tax deferred contribution transactions in exchange for partnership interests in BPLP. This acquisition structure has the effect, among others, of reducing the amount of tax depreciation we can deduct over the tax life of the acquired properties, and typically requires that we agree to protect the contributors’ ability to defer recognition of taxable gain through restrictions on our ability to dispose of the acquired properties and/or the allocation of partnership debt to the contributors to maintain their tax bases. These restrictions could limit our ability to sell an asset at a time, or on terms, that would be favorable absent such restrictions.

Acquired properties may expose us to unknown liability.

We may acquire properties or invest in joint ventures that own properties subject to liabilities and without any recourse, or with only limited recourse, against the prior owners or other third parties with respect to unknown liabilities. As a result, if a liability were asserted against us based upon ownership of those properties, we might have to pay substantial sums to settle or contest it, which could adversely affect our results of operations and cash flow. Unknown liabilities with respect to acquired properties might include:

liabilities for clean-up of undisclosed environmental contamination;

claims by tenants, vendors or other persons against the former owners of the properties;

liabilities incurred in the ordinary course of business; and

claims for indemnification by general partners, directors, officers and others indemnified by the former owners of the properties.

Competition for acquisitions may result in increased prices for properties.

We plan to continue to acquire properties as we are presented with attractive opportunities. We may face competition for acquisition opportunities with other investors, and this competition may adversely affect us by subjecting us to the following risks:

we may be unable to acquire a desired property because of competition from other well-capitalized real estate investors, including publicly traded and private REITs, institutional investment funds and other real estate investors; and

even if we are able to acquire a desired property, competition from other real estate investors may significantly increase the purchase price.

Any future international activities will be subject to special risks and we may not be able to effectively manage our international business.

We have underwritten, and in the future may acquire, properties, portfolios of properties or interests in real estate-related entities on a strategic or selective basis in international markets that are new to us. If we acquire properties or platforms located in these markets, we will face risks associated with a lack of market knowledge and understanding of the local economy, forging new business relationships in the area and unfamiliarity with local laws and government and permitting procedures. In addition, our international operations will be subject to the usual risks of doing business abroad such as possible revisions in tax treaties or other laws and regulations, including those governing the taxation of our international income, restrictions on the transfer of funds and uncertainty over terrorist activities. We cannot predict the likelihood that any of these developments may occur. Further, we may in the future enter into agreements with non-U.S. entities that are governed by the laws of, and are subject to dispute resolution in the courts of, another country or region. We cannot accurately predict whether such a forum would provide us with an effective and efficient means of resolving disputes that may arise.

Investments in international markets may also subject us to risks associated with funding increasing headcount, integrating new offices, and establishing effective controls and procedures to regulate the operations of new offices and to monitor compliance with U.S. laws and regulations such as the Foreign Corrupt Practices Act and similar foreign laws and regulations, such as the U.K. Bribery Act.

We may be subject to risks from potential fluctuations in exchange rates between the U.S. dollar and the currencies of the other countries in which we invest.

If we invest in countries where the U.S. dollar is not the national currency, we will be subject to international currency risks from the potential fluctuations in exchange rates between the U.S. dollar and the currencies of those other countries. A significant depreciation in the value of the currency of one or more countries where we have a significant investment may materially affect our results of operations. We may attempt to mitigate any such effects by borrowing in the currency of the country in which we are investing and, under certain circumstances, by hedging exchange rate fluctuations; however, access to capital may be more restricted, or unavailable on favorable terms or at all, in certain locations. For leases denominated in international currencies, we may use derivative financial instruments to manage the international currency exchange risk. We cannot assure you, however, that our efforts will successfully neutralize all international currency risks.

Our use of joint ventures may limit our flexibility with jointly owned investments.

In appropriate circumstances, we intend to develop, acquire and recapitalize properties in joint ventures with other persons or entities when circumstances warrant the use of these structures. We currently have joint ventures that are and are not consolidated within our financial statements. Our participation in joint ventures subjects us to risks, including but not limited to, the following risks that:

we could become engaged in a dispute with any of our joint venture partners that might affect our ability to develop, finance or operate a property and could lead to the sale of either parties ownership interest or the property;

some of our joint ventures are subject to debt and in the current credit markets the refinancing of such debt may require equity capital calls;

our joint venture partners may default on their obligations necessitating that we fulfill their obligation ourselves;

our joint venture partners may have different objectives than we have regarding the appropriate timing and terms of any sale or refinancing of properties or the commencement of development activities;

our joint venture partners may be structured differently than us for tax purposes and this could create conflicts of interest;

our joint venture partners may have competing interests in our markets that could create conflicts of interest; and

our joint ventures may be unable to repay any amounts that we may loan to them.

We may have difficulty selling our properties, which may limit our flexibility.

Properties like the ones that we own could be difficult to sell. This may limit our ability to change our portfolio promptly in response to changes in economic or other conditions. In addition, federal tax laws limit our ability to sell properties and this may affect our ability to sell properties without adversely affecting returns to our securityholders. These restrictions reduce our ability to respond to changes in the performance of our investments and could adversely affect our financial condition and results of operations.

Our ability to dispose of some of our properties is constrained by their tax attributes. Properties which we developed and have owned for a significant period of time or which we acquired through tax deferred contribution transactions in exchange for partnership interests in BPLP often have low tax bases. Furthermore, as a REIT, BXP may be subject to a 100% “prohibited transactions” tax on the gain from dispositions of property if BXP is deemed to hold the property primarily for sale to customers in the ordinary course of business, unless the disposition qualifies under a safe harbor exception for properties that have been held for at least two years and with respect to which certain other requirements are met. The potential application of the prohibited transactions tax could cause us to forego potential dispositions of property or other opportunities that might otherwise be attractive to us, or to undertake such dispositions or other opportunities through a taxable REIT subsidiary, which would generally result in income taxes being incurred. If we dispose of these properties outright in taxable transactions, we may be required to distribute a significant amount of the ~~asset over~~taxable gain to our securityholders under the requirements of the Internal Revenue Code for REITs, which in turn would impact our future cash flow and may increase our leverage. In some cases, without incurring additional costs we may be restricted from disposing of properties contributed in exchange for our partnership interests under tax protection agreements with contributors. To dispose of low basis or tax-protected properties efficiently we from time to time use like-kind exchanges, which are intended to qualify for non-recognition of taxable gain, but can be difficult to consummate and result in the property for which the disposed assets are exchanged inheriting their low tax bases and other tax attributes (including tax protection covenants).

Conflicts of interest exist with holders of interests in BPLP.

Sales of properties and repayment of related indebtedness will have different effects on holders of interests in BPLP than on BXP’s stockholders.

Some holders of interests in BPLP could incur adverse tax consequences upon the sale of certain of our properties and on the repayment of related debt which differ from the tax consequences to BXP and its ~~fair value. The evaluation~~stockholders. Consequently, such holders of ~~anticipated cash flows is highly subjective~~partnership interests in BPLP may have different objectives regarding the appropriate pricing and is based in part on assumptions regarding anticipated hold periods, future occupancy, rental rates and capital requirements that could differ materially from actual results in future periods. Since cash flows on properties considered to be “long-lived assets to be held and used” are considered on an undiscounted basistiming of any such sale or repayment of debt. While BXP has exclusive authority under the limited partnership agreement of BPLP to determine when to refinance or repay debt or whether, ~~an asset~~when, and on what terms to sell a property, subject, in the case of certain properties, to the contractual commitments described below, any such decision would require the approval of BXP’s Board of Directors. While the Board of Directors has ~~been impaired, our established strategy~~a policy with respect to these matters directors and executive officers could exercise their influence in a manner inconsistent with the interests of ~~holding~~some, or a majority, of BXP’s stockholders, including in a manner which could prevent completion of a sale of a property or the repayment of indebtedness.

Agreement not to sell some properties.

We have entered into agreements with respect to some properties over the long term directly decreases the likelihood of recording an impairment loss. If our hold strategy changes or market conditions otherwise dictate an earlier sale date, an impairment loss may be recognized and such loss could be material. Ifthat we ~~determine that an impairment has occurred, the affected assets must be reduced~~have acquired in exchange for partnership interests in BPLP. Pursuant to ~~their fair value, less cost~~those agreements, we have agreed not to ~~sell.~~

Guidance in Accounting Standards Codification (“ASC”) 360 “Property Plant and Equipment” (“ASC 360”) requires that qualifying assets and liabilities and the results of operations that have been sold,sell or otherwise ~~qualify as “held~~transfer some of our properties, prior to specified dates, in any transaction that would trigger taxable income and we are responsible for ~~sale,” be presented as discontinued operations in all periods presented~~the reimbursement of certain tax-related costs to the prior owners if the subject properties are sold in a taxable sale. In general, our obligations to the prior owners are limited in time and only apply to actual damages suffered.

BPLP has also entered into agreements providing prior owners of properties with the right to guarantee specific amounts of indebtedness and, in the event that the specific indebtedness they guarantee is repaid or reduced, additional and/or substitute indebtedness. These agreements may hinder actions that BPLP may otherwise desire to take to repay or refinance guaranteed indebtedness because BPLP would be required to make payments to the beneficiaries of such agreements if it violates these agreements. As of December 31, 2016, only 767 Fifth Avenue (the General Motors Building) was subject to these restrictions. The restrictions on this property ~~operations~~will remain in place only until June 9, 2017.

Because we own a hotel property, we face the risks associated with the hospitality industry.

The following factors, among others, are ~~expected~~common to the hotel industry, and may reduce the receipts generated by our hotel property:

our hotel property competes for guests with other hotels, a number of which may have greater marketing and financial resources than our hotel-operating business partners;

if there is an increase in operating costs resulting from inflation and other factors, our hotel-operating business partners may not be ~~eliminated and we~~able to offset such increase by increasing room rates;

~~Table of Contents~~

will not have significant continuing involvement following the sale. The components of the property’s net income that is reflected as discontinued operations include the net gain (or loss) upon the disposition of the property held for sale, operating results, depreciation and interest expense (if theour hotel property is subject to the fluctuating and seasonal demands of business travelers and tourism; and

our hotel property is subject to general and local economic and social conditions that may affect demand for travel in general, including war and terrorism.

In addition, because our hotel property is located in Cambridge, Massachusetts, it is subject to the Cambridge market’s fluctuations in demand, increases in operating costs and increased competition from additions in supply.

We face risks associated with short-term liquid investments.

We may invest cash balances in a ~~secured loan)~~variety of short-term investments that are intended to preserve principal value and maintain a high degree of liquidity while providing current income. From time to time, these investments may include (either directly or indirectly):

direct obligations issued by the U.S. Treasury;

obligations issued or guaranteed by the U.S. government or its agencies;

taxable municipal securities;

obligations (including certificates of deposit) of banks and thrifts;

commercial paper and other instruments consisting of short-term U.S. dollar denominated obligations issued by corporations and banks;

repurchase agreements collateralized by corporate and asset-backed obligations;

both registered and unregistered money market funds; and

other highly rated short-term securities.

Investments in these securities and funds are not insured against loss of principal. Under certain circumstances we may be required to redeem all or part of our investment, and our right to redeem some or all of our investment may be delayed or suspended. In addition, there is no guarantee that our investments in these securities or funds will be redeemable at par value. A decline in the value of our investment or a delay or suspension of our right to redeem may have a material adverse effect on our results of operations or financial condition.

Our success depends on key personnel whose continued service is not guaranteed.

We depend on the efforts of key personnel, particularly Owen D. Thomas, Chief Executive Officer, Douglas T. Linde, President, and Raymond A. Ritchey, Senior Executive Vice President. Among the reasons that Messrs. Thomas, Linde and Ritchey are important to our success is that each has a national reputation, which attracts business and investment opportunities and assists us in negotiations with lenders, joint venture partners and other investors. If we lost their services, our relationships with lenders, potential tenants and industry personnel could diminish.

Our Chief Financial Officer and Regional Managers also have strong reputations. Their reputations aid us in identifying opportunities, having opportunities brought to us, and negotiating with tenants and build-to-suit prospects. While we believe that we could find replacements for these key personnel, the loss of their services could materially and adversely affect our operations because of diminished relationships with lenders, prospective tenants and industry personnel.

Compliance or failure to comply with the Americans with Disabilities Act or other safety regulations and requirements could result in substantial costs.

The Americans with Disabilities Act generally requires that certain buildings, including office buildings, residential buildings and hotels, be made accessible to disabled persons. Noncompliance could result in the imposition of fines by the federal government or the award of damages to private litigants. If, under the Americans with Disabilities Act, we are required to make substantial alterations and capital expenditures in one or more of our properties, including the removal of access barriers, it could adversely affect our financial condition and results of operations, as well as the amount of cash available for distribution to our securityholders.

Our properties are subject to various federal, state and local regulatory requirements, such as state and local fire and life safety requirements. If we fail to comply with these requirements, we could incur fines or private damage awards. We do not know whether existing requirements will change or whether compliance with future requirements will require significant unanticipated expenditures that will affect our cash flow and results of operations.

Failure to comply with federal Government contractor requirements could result in substantial costs and loss of substantial revenue.

As of December 31, 2016, the U.S. Government was our largest tenant by square feet. We are subject to compliance with a wide variety of complex legal requirements because we are a federal Government contractor. These laws regulate how we conduct business, require us to administer various compliance programs and require us to impose compliance responsibilities on some of our contractors. Our failure to comply with these laws could subject us to fines, penalties and damages, cause us to be in default of our leases and other contracts with the federal Government and bar us from entering into future leases and other contracts with the federal Government. There can be no assurance that these costs and loss of revenue will not have a material adverse effect on our properties, operations or business.

Some potential losses are not covered by insurance.

We carry insurance coverage on our properties, including those under development, of types and in amounts and with deductibles that we believe are in line with coverage customarily obtained by owners of similar properties. Certain properties owned in joint ventures with third parties are insured by the third party partner with insurance coverage of types and in amounts and with deductibles we believe are in line with coverage customarily obtained by owners of similar properties. In response to the uncertainty in the insurance market following the terrorist attacks of September 11, 2001, the Federal Terrorism Risk Insurance Act (as amended, “TRIA”) was enacted in November 2002 to require regulated insurers to make available coverage for “certified” acts of terrorism (as defined by the statute). The expiration date of TRIA was extended to December 31, 2014 by the Terrorism Risk Insurance Program Reauthorization Act of 2007 and further extended to December 31, 2020 by the Terrorism Risk Insurance Program Reauthorization Act of 2015 (“TRIPRA”), and we can provide no assurance that it will be extended further. Currently, our property insurance program per occurrence limits are $1.0 billion for our portfolio insurance program, including coverage for acts of terrorism other than nuclear, biological, chemical or radiological terrorism (“Terrorism Coverage”). We ~~generally consider assets~~also carry $250 million of Terrorism Coverage for 601 Lexington Avenue, New York, New York (“601 Lexington Avenue”) in excess of the $1.0 billion of coverage in our property insurance program. Certain properties, including the General Motors Building located at 767 Fifth Avenue in New York, New York (“767 Fifth Avenue”), are currently insured in separate insurance programs. The property insurance program per occurrence limits for 767 Fifth Avenue are $1.625 billion, including Terrorism Coverage. We also currently carry nuclear, biological, chemical and radiological terrorism insurance coverage for acts of terrorism certified under TRIA (“NBCR Coverage”), which is provided by IXP, as a direct insurer, for the properties in our portfolio, including 767 Fifth Avenue, but excluding certain other properties owned in joint ventures with third parties or which we manage. The per occurrence limit for NBCR Coverage is $1.0 billion. Under TRIA, after the payment of the required deductible and coinsurance, the NBCR Coverage provided by IXP is backstopped by the Federal Government if the aggregate industry insured losses resulting from a certified act of terrorism exceed a “program trigger.” In 2016, the program trigger was $120 million and the coinsurance was 16%, however, both will increase in subsequent years pursuant to TRIPRA. If the Federal Government pays out for a loss under TRIA, it is mandatory that the Federal Government recoup the full amount of the loss from insurers offering TRIA coverage after the payment of the loss pursuant to a formula in TRIPRA. We may elect to terminate the NBCR Coverage if the Federal Government seeks recoupment for losses paid under TRIA, if there is a change in our portfolio or for any other reason. We intend to continue to monitor the scope, nature and cost of available terrorism insurance and maintain terrorism insurance in amounts and on terms that are commercially reasonable.

We also currently carry earthquake insurance on our properties located in areas known to be ~~“held~~subject to earthquakes in an amount and subject to self-insurance that we believe is commercially reasonable. In addition, this insurance is subject to a deductible in the amount of 3% of the value of the affected property. Specifically, we currently carry earthquake insurance which covers our San Francisco and Los Angeles regions (excluding Salesforce Tower) with a $170 million per occurrence limit and a $170 million annual aggregate limit, $20 million of which is provided by IXP, as a direct insurer. The builders risk

policy maintained for ~~sale”~~the development of Salesforce Tower in San Francisco includes a $60 million per occurrence and annual aggregate limit of earthquake coverage. The amount of our earthquake insurance coverage may not be sufficient to cover losses from earthquakes. In addition, the amount of earthquake coverage could impact our ability to finance properties subject to earthquake risk. We may discontinue earthquake insurance or change the structure of our earthquake insurance program on some or all of our properties in the future if the premiums exceed our estimation of the value of the coverage.

IXP, a captive insurance company which is a wholly-owned subsidiary, acts as a direct insurer with respect to a portion of our earthquake insurance coverage for our Greater San Francisco and Los Angeles properties and our NBCR Coverage. Insofar as we own IXP, we are responsible for its liquidity and capital resources, and the accounts of IXP are part of our consolidated financial statements. In particular, if a loss occurs which is covered by our NBCR Coverage but is less than the applicable program trigger under TRIA, IXP would be responsible for the full amount of the loss without any backstop by the Federal Government. IXP would also be responsible for any recoupment charges by the Federal Government in the event losses are paid out and its insurance policy is maintained after the payout by the Federal Government. If we experience a loss and IXP is required to pay under its insurance policy, we would ultimately record the loss to the extent of the required payment. Therefore, insurance coverage provided by IXP should not be considered as the equivalent of third-party insurance, but rather as a modified form of self-insurance. In addition, BPLP has issued a guarantee to cover liabilities of IXP in the amount of $20.0 million.

The mortgages on our properties typically contain requirements concerning the financial ratings of the insurers who provide policies covering the property. We provide the lenders on a regular basis with the identity of the insurance companies in our insurance programs. The ratings of some of our insurers are below the rating requirements in some of our loan agreements and the lenders for these loans could attempt to claim that an event of default has occurred under the loan. We believe we could obtain insurance with insurers which satisfy the rating requirements. Additionally, in the future, our ability to obtain debt financing secured by individual properties, or the terms of such financing, may be adversely affected if lenders generally insist on ratings for insurers or amounts of insurance which are difficult to obtain or which result in a commercially unreasonable premium. There can be no assurance that a deficiency in the financial ratings of one or more of our insurers will not have a material adverse effect on us.

We continue to monitor the state of the insurance market in general, and the scope and costs of coverage for acts of terrorism and California earthquake risk in particular, but we cannot anticipate what coverage will be available on commercially reasonable terms in future policy years. There are other types of losses, such as from wars, for which we cannot obtain insurance at all or at a reasonable cost. With respect to such losses and losses from acts of terrorism, earthquakes or other catastrophic events, if we experience a loss that is uninsured or that exceeds policy limits, we could lose the capital invested in the damaged properties, as well as the anticipated future revenues from those properties. Depending on the specific circumstances of each affected property, it is possible that we could be liable for mortgage indebtedness or other obligations related to the property. Any such loss could materially and adversely affect our business and financial condition and results of operations.

Actual or threatened terrorist attacks may adversely affect our ability to generate revenues and the value of our properties.

We have significant investments in large metropolitan markets that have been or may be in the future the targets of actual or threatened terrorism attacks, including Boston, Los Angeles, New York, San Francisco and Washington, DC. As a result, some tenants in these markets may choose to relocate their businesses to other markets or to lower-profile office buildings within these markets that may be perceived to be less likely targets of future terrorist activity. This could result in an overall decrease in the demand for office space in these markets generally or in our properties in particular, which could increase vacancies in our properties or necessitate that we lease our properties on less favorable terms or both. In addition, future terrorist attacks in these markets could directly or indirectly damage our properties, both physically and financially, or cause losses that materially exceed our insurance coverage. As a result of the foregoing, our ability to generate revenues and the value of our properties could decline materially. See also “—Some potential losses are not covered by insurance.”

We face risks associated with our tenants and contractual counterparties being designated “Prohibited Persons” by the Office of Foreign Assets Control.

Pursuant to Executive Order 13224 and other laws, the Office of Foreign Assets Control of the United States Department of the Treasury (“OFAC”) maintains a list of persons designated as terrorists or who are otherwise blocked or banned (“Prohibited Persons”). OFAC regulations and other laws prohibit conducting business or engaging in transactions with Prohibited Persons (the “OFAC Requirements”). Certain of our loan and other agreements require us to comply with OFAC Requirements. We have established a compliance program whereby tenants and others with whom we conduct business are checked against the OFAC list of Prohibited Persons prior to entering into any agreement and on a periodic basis thereafter. Our leases and other agreements, in general, require the other party to comply with OFAC Requirements. If a tenant or other

party with whom we contract is placed on the OFAC list we may be required by the OFAC Requirements to terminate the lease or other agreement. Any such termination could result in a loss of revenue or a damage claim by the other party that the termination was wrongful.

We face possible risks associated with the physical effects of climate change.

The physical effects of climate change could have a material adverse effect on our properties, operations and business. For example, many of our properties are located along the East and West coasts, particularly those in the Central Business Districts of Boston, Los Angeles, New York, San Francisco and Washington, DC. To the extent climate change causes changes in weather patterns, our markets could experience increases in storm intensity and rising sea-levels. Over time, these conditions could result in declining demand for office space in our buildings or our inability to operate the buildings at all. Climate change may also have indirect effects on our business by increasing the cost of (or making unavailable) property insurance on terms we find acceptable, increasing the cost of energy and increasing the cost of snow removal at our properties. There can be no assurance that climate change will not have a material adverse effect on our properties, operations or business.

Potential liability for environmental contamination could result in substantial costs.

Under federal, state and local environmental laws, ordinances and regulations, we may be required to investigate and clean up the effects of releases of hazardous or toxic substances or petroleum products at or migrating from our properties simply because of our current or past ownership or operation of the real estate. If unidentified environmental problems arise, we may have to make substantial payments, which could adversely affect our cash flow and our ability to make distributions to our securityholders, because: as owner or operator we may have to pay for property damage and for investigation and clean-up costs incurred in connection with the contamination; the law typically imposes clean-up responsibility and liability regardless of whether the owner or operator knew of or caused the contamination; even if more than one person may be responsible for the contamination, each person who shares legal liability under the environmental laws may be held responsible for all of the clean-up costs; and governmental entities and third parties may sue the owner or operator of a contaminated site for damages and costs.

These costs could be substantial and in extreme cases could exceed the amount of our insurance or the value of the contaminated property. We currently carry environmental insurance in an amount and subject to deductibles that we believe are commercially reasonable. Specifically, we carry a pollution legal liability policy with a $20 million limit per incident and a policy aggregate limit of $40 million. The presence or migration of hazardous or toxic substances or petroleum products or the failure to properly remediate contamination may give rise to third-party claims for bodily injury, property damage and/or response costs and may materially and adversely affect our ability to borrow against, sell or rent an affected property. In addition, applicable environmental laws create liens on contaminated sites in favor of the government for damages and costs it incurs in connection with contamination. Changes in laws, regulations and practices and their implementation increasing the potential liability for environmental conditions existing at our properties, or increasing the restrictions on the handling, storage or discharge of hazardous or toxic substances or petroleum products or other actions may result in significant unanticipated expenditures.

Environmental laws also govern the presence, maintenance and removal of asbestos and other building materials. For example, laws require that owners or operators of buildings containing asbestos:

properly manage and maintain the asbestos;

notify and train those who may come into contact with asbestos; and

undertake special precautions, including removal or other abatement, if asbestos would be disturbed during renovation or demolition of a building.

Such laws may impose fines and penalties on building owners or operators who fail to comply with these requirements and may allow third parties to seek recovery from owners or operators for personal injury associated with exposure to asbestos fibers.

Some of our properties are located in urban and previously developed areas where fill or current or historic industrial uses of the areas have caused site contamination. It is our policy to retain independent environmental consultants to conduct or update Phase I environmental site assessments and asbestos surveys with respect to our acquisition of properties. These assessments generally include a visual inspection of the properties and the surrounding areas, an examination of current and historical uses of the properties and the surrounding areas and a review of relevant state, federal and historical documents, but do not involve invasive techniques such as soil and ground water sampling. Where appropriate, on a property-by-property basis, our practice is to have these consultants conduct additional testing, including sampling for asbestos, for lead and other

contaminants in drinking water and, for soil and/or groundwater contamination where underground storage tanks are or were located or where other past site usage creates a potential environmental problem. Even though these environmental assessments are conducted, there is still the risk that:

the environmental assessments and updates did not identify or properly address all potential environmental liabilities;

a prior owner created a material environmental condition that is not known to us or the independent consultants preparing the assessments;

new environmental liabilities have developed since the environmental assessments were conducted; and

future uses or conditions such as changes in applicable environmental laws and regulations could result in environmental liability for us.

Inquiries about indoor air quality may necessitate special investigation and, depending on the results, remediation beyond our regular indoor air quality testing and maintenance programs. Indoor air quality issues can stem from inadequate ventilation, chemical contaminants from indoor or outdoor sources, and biological contaminants such as molds, pollen, viruses and bacteria. Indoor exposure to chemical or biological contaminants above certain levels can be alleged to be connected to allergic reactions or other health effects and symptoms in susceptible individuals. If these conditions were to occur at one of our properties, we may be subject to third-party claims for personal injury, or may need to undertake a targeted remediation program, including without limitation, steps to increase indoor ventilation rates and eliminate sources of contaminants. Such remediation programs could be costly, necessitate the temporary relocation of some or all of the property’s tenants or require rehabilitation of the affected property.

We face risks associated with security breaches through cyber attacks, cyber intrusions or otherwise, as well as other significant disruptions of our information technology (IT) networks and related systems.

We face risks associated with security breaches, whether through cyber attacks or cyber intrusions over the Internet, malware, computer viruses, attachments to e-mails, persons inside our organization or persons with access to systems inside our organization, and other significant disruptions of our IT networks and related systems. The risk of a security breach or disruption, particularly through cyber attack or cyber intrusion, including by computer hackers, foreign governments and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased. Our IT networks and related systems are essential to the operation of our business and our ability to perform day-to-day operations (including managing our building systems) and, in some cases, may be critical to the operations of certain of our tenants. Although we make efforts to maintain the security and integrity of these types of IT networks and related systems, and we have implemented various measures to manage the risk of a security breach or disruption, there can be no assurance that our security efforts and measures will be effective or that attempted security breaches or disruptions would not be successful or damaging. Even the most well protected information, networks, systems and facilities remain potentially vulnerable because the techniques used in such attempted security breaches evolve and generally are not recognized until launched against a target, and in some cases are designed not be detected and, in fact, may not be detected. Accordingly, we may be unable to anticipate these techniques or to implement adequate security barriers or other preventative measures, and thus it is impossible for us to entirely mitigate this risk.

A security breach or other significant disruption involving our IT networks and related systems could:

disrupt the proper functioning of our networks and systems and therefore our operations and/or those of certain of our tenants;

result in misstated financial reports, violations of loan covenants, missed reporting deadlines and/or missed permitting deadlines;

result in our inability to properly monitor our compliance with the rules and regulations regarding BXP’s qualification as a REIT;

result in the unauthorized access to, and destruction, loss, theft, misappropriation or release of, proprietary, confidential, sensitive or otherwise valuable information of ours or others, which others could use to compete against us or which could expose us to damage claims by third-parties for disruptive, destructive or otherwise harmful purposes and outcomes;

result in our inability to maintain the building systems relied upon by our tenants for the efficient use of their leased space;

require significant management attention and resources to remedy any damages that result;

subject us to claims for breach of contract, damages, credits, penalties or termination of leases or other agreements; and

damage our reputation among our tenants and investors generally.

Any or all of the foregoing could have a material adverse effect on our results of operations, financial condition and cash flows.

We did not obtain new owner’s title insurance policies in connection with properties acquired during BXP’s initial public offering.

We acquired many of our properties from our predecessors at the completion of BXP’s initial public offering in June 1997. Before we acquired these properties, each of them was insured by a title insurance policy. We did not obtain new owner’s title insurance policies in connection with the acquisition of these properties. To the extent we have financed properties after acquiring them in connection with the initial public offering, we have obtained new title insurance policies, however, the amount of these policies may be less than the current or future value of the applicable properties. Nevertheless, because in many instances we acquired these properties indirectly by acquiring ownership of the entity that owned the property and those owners remain in existence as our subsidiaries, some of these title insurance policies may continue to benefit us. Many of these title insurance policies may be for amounts less than the current or future values of the applicable properties. If there was a title defect related to any of these properties, or to any of the properties acquired at the time of the initial public offering of BXP, that is no longer covered by a title insurance policy, we could lose both our capital invested in and our anticipated profits from such property. We have obtained title insurance policies for all properties that we have acquired after the initial public offering of BXP, however, these policies may be for amounts less than the current or future values of the applicable properties.

We may be subject to adverse legislative or regulatory tax changes that could negatively impact our financial condition.

At any time, the U.S. federal income tax laws governing REITs or the administrative interpretations of those laws may be amended, including with respect to our hotel ownership structure. We cannot predict if or when any new U.S. federal income tax law, regulation, or administrative interpretation, or any amendment to any existing U.S. federal income tax law, Treasury regulation or administrative interpretation, will be adopted, promulgated or become effective and any such law, regulation, or interpretation may take effect retroactively. BXP, its taxable REIT subsidiaries, and our securityholders could be adversely affected by any such change in, or any new, U.S. federal income tax law, Treasury regulation or administrative interpretation.

Members of the government have expressed an intent to pass legislation to fundamentally reform the tax code. Among other changes, the proposals have included significant changes to the taxation of business entities and the deductibility of interest expense. While there can be no assurance regarding the content of any tax legislation, whether it will ultimately be enacted, or when it will become effective, any such legislation could have a significant effect on BXP and our stockholders.

We face possible adverse state local tax audits and changes in state and local tax law.

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

From time to time changes in state and local tax laws or regulations are enacted, which may result in an increase in our tax liability. A shortfall in tax revenues for states and municipalities in which we operate may lead to an increase in the frequency and size of such changes. If such changes occur, we may be required to pay additional taxes on our assets or income. These increased tax costs could adversely affect our financial condition and results of operations and the amount of cash available for the payment of dividends and distributions to our securityholders.

Changes in accounting pronouncements could adversely affect our operating results, in addition to the reported financial performance of our tenants.

Accounting policies and methods are fundamental to how we record and report our financial condition and results of operations. Uncertainties posed by various initiatives of accounting standard-setting by the Financial Accounting Standards Board and the Securities and Exchange Commission, which create and interpret applicable accounting standards for U.S.

companies, may change the financial accounting and reporting standards or their interpretation and application of these standards that govern the preparation of our financial statements. Proposed changes include, but are not limited to, changes in revenue recognition, lease accounting and the adoption of accounting standards likely to require the increased use of “fair-value” measures.

These changes could have a material impact on our reported financial condition and results of operations. In some cases, we could be required to apply a new or revised standard retroactively, resulting in potentially material restatements of prior period financial statements. Similarly, these changes could have a material impact on our tenants’ reported financial condition or results of operations or could affect our tenants’ preferences regarding leasing real estate.

Failure to qualify as a real estate investment trust would cause BXP to be taxed as a corporation, which would substantially reduce funds available for payment of dividends.

If BXP fails to qualify as a REIT for federal income tax purposes, it will be taxed as a corporation unless certain relief provisions apply. We believe that BXP is organized and qualified as a REIT and intends to operate in a manner that will allow BXP to continue to qualify as a REIT. However, we cannot assure you that BXP is qualified as such, or that it will remain qualified as such in the future. This is because qualification as a REIT involves the application of highly technical and complex provisions of the Internal Revenue Code as to which there are only limited judicial and administrative interpretations and involves the determination of facts and circumstances not entirely within our control. Future legislation, new regulations, administrative interpretations or court decisions may significantly change the tax laws or the application of the tax laws with respect to qualification as a REIT for federal income tax purposes or the federal income tax consequences of such qualification.

In addition, we currently hold certain of our properties through subsidiaries that have elected to be taxed as REITs and we may in the future determine that it is in our best interests to hold one or more of our other properties through one or more subsidiaries that elect to be taxed as REITs. If any of these subsidiaries fails to qualify as a REIT for federal income tax purposes, then BXP may also fail to qualify as a REIT for federal income tax purposes.

If BXP or any of its subsidiaries that are REITs fails to qualify as a REIT then, unless certain relief provisions apply, it will face serious tax consequences that will substantially reduce the funds available for payment of dividends for each of the years involved because:

BXP would not be allowed a deduction for dividends paid to stockholders in computing its taxable income and would be subject to federal income tax at regular corporate rates;

BXP also could be subject to the federal alternative minimum tax and possibly increased state and local taxes; and

unless BXP is entitled to relief under statutory provisions, BXP could not elect to be subject to tax as a REIT for four taxable years following the year during which it was disqualified.

In addition, if BXP fails to qualify as a REIT and the relief provisions do not apply, it will no longer be required to pay dividends. As a result of all these factors, BXP’s failure to qualify as a REIT could impair our ability to raise capital and expand our business, and it would adversely affect the value of BXP’s common stock. If BXP or any of its subsidiaries that are REITs fails to qualify as a REIT but is eligible for certain relief provisions, then it may retain its status as a REIT, but may be required to pay a penalty tax, which could be substantial.

In order to maintain BXP’s REIT status, we may be forced to borrow funds during unfavorable market conditions.

In order to maintain BXP’s REIT status, we may need to borrow funds on a short-term basis to meet the REIT distribution requirements, even if the then-prevailing market conditions are not favorable for these borrowings. To qualify as a REIT, BXP generally must distribute to its stockholders at least 90% of its taxable income each year, excluding capital gains and with certain other adjustments. In addition, BXP will be subject to a 4% nondeductible excise tax on the amount, if any, by which dividends paid in any calendar year are less than the sum of 85% of ordinary income, 95% of capital gain net income and 100% of undistributed income from prior years. We may need short-term debt or long-term debt or proceeds from asset sales, creation of joint ventures or sales of common stock to fund required distributions as a result of differences in timing between the actual receipt of income and the recognition of income for federal income tax purposes, or the effect of non-deductible capital expenditures, the creation of reserves or required debt or amortization payments. The inability of our cash flows to cover our distribution requirements could have an adverse impact on our ability to raise short- and long-term debt or sell equity securities in order to fund distributions required to maintain BXP’s REIT status.

Limits on changes in control may discourage takeover attempts beneficial to stockholders.

Provisions in BXP’s charter and bylaws, BXP’s shareholder rights agreement and the limited partnership agreement of BPLP, as well as provisions of the Internal Revenue Code and Delaware corporate law, may:

delay or prevent a change of control over BXP or a tender offer, even if such action might be beneficial to BXP’s stockholders; and

limit BXP’s stockholders’ opportunity to receive a potential premium for their shares of common stock over then-prevailing market prices.

Stock Ownership Limit

To facilitate maintenance of BXP’s qualification as a REIT and to otherwise address concerns relating to concentration of stock ownership, BXP’s charter generally prohibits ownership, directly, indirectly or beneficially, by any single stockholder of more than 6.6% of the number of outstanding shares of any class or series of its common stock. We refer to this limitation as the “ownership limit.” BXP’s Board of Directors may waive, in its sole discretion, or modify the ownership limit with respect to one or more persons if it is satisfied that ownership in excess of this limit will not jeopardize BXP’s status as a REIT for federal income tax purposes. In addition, under BXP’s charter, each of Mortimer B. Zuckerman and the respective families and affiliates of Mortimer B. Zuckerman and Edward H. Linde, as well as, in general, pension plans and mutual funds, may actually and beneficially own up to 15% of the number of outstanding shares of any class or series of BXP’s equity common stock. Shares owned in violation of the ownership limit will be subject to the loss of rights to distributions and voting and other penalties. The ownership limit may have the effect of inhibiting or impeding a change in control.

BPLP’s Partnership Agreement

BXP has agreed in the limited partnership agreement of BPLP not to engage in specified extraordinary transactions, including, among others, business combinations, unless limited partners of BPLP other than BXP receives, or have the opportunity to receive, either (1) the same consideration for their partnership interests as holders of BXP common stock in the transaction or (2) limited partnership units that, among other things, would entitle the holders, upon redemption of these units, to receive shares of common equity of a publicly traded company or the same consideration as holders of BXP common stock received in the transaction. If these limited partners would not receive such consideration, we cannot engage in the transaction unless limited partners holding at least 75% of the common units of limited partnership interest, other than those held by BXP or its affiliates, consent to the transaction. In addition, BXP has agreed in the limited partnership agreement of BPLP that it will not complete specified extraordinary transactions, including among others, business combinations, in which BXP receive the approval of its common stockholders unless (1) limited partners holding at least 75% of the common units of limited partnership interest, other than those held by BXP or its affiliates, consent to the transaction or (2) the limited partners of BPLP are also allowed to vote and the transaction would have been approved had these limited partners been able to vote as common stockholders on the transaction. Therefore, if BXP’s common stockholders approve a specified extraordinary transaction, the partnership agreement requires the following before it can complete the transaction:

holders of partnership interests in BPLP, including BXP, must vote on the matter;

BXP must vote its partnership interests in the same proportion as its stockholders voted on the transaction; and

the result of the vote of holders of partnership interests in BPLP must be such that had such vote been a vote of stockholders, the business combination would have been approved.

With respect to specified extraordinary transactions, BXP has agreed in BPLP’s partnership agreement to use its commercially reasonable efforts to structure such a transaction to avoid causing its limited partners to recognize gain for federal income tax purposes by virtue of the occurrence of or their participation in such a transaction.

As a result of these provisions, a potential acquirer may be deterred from making an acquisition proposal, and BXP may be prohibited by contract from engaging in a proposed extraordinary transaction, including a proposed business combination, even though BXP stockholders approve of the transaction.

Shareholder Rights Plan

BXP has a shareholder rights plan. Under the terms of this plan, BXP can in effect prevent a person or group from acquiring more than 15% of the outstanding shares of its common stock because, unless BXP’s Board of Directors approves of the acquisition, after the person acquires more than 15% of BXP’s outstanding common stock, all other stockholders will have the right to purchase securities from BXP at a price that is less than their then fair market value. This would substantially reduce the value and influence of the stock owned by the acquiring person. The Board of Directors of BXP can prevent the

plan from operating by approving the transaction in advance, which gives us significant power to approve or disapprove of the efforts of a person or group to acquire a large interest in our company.

Changes in market conditions could adversely affect the market price of BXP’s common stock.

As with other publicly traded equity securities, the value of BXP’s common stock depends on various market conditions that may change from time to time. Among the market conditions that may affect the value of BXP’s common stock are the following:

the extent of investor interest in our securities;

the general reputation of REITs and the attractiveness of our equity securities in comparison to other equity securities, including securities issued by other real estate-based companies;

our underlying asset value;

investor confidence in the stock and bond markets, generally;

national economic conditions;

changes in tax laws;

our financial performance;

changes in our credit ratings; and

general stock and bond market conditions.

The market value of BXP’s common stock is based primarily upon the market’s perception of our growth potential and our current and potential future earnings and cash dividends. Consequently, BXP’s common stock may trade at prices that are greater or less than BXP’s net asset value per share of common stock. If our future earnings or cash dividends are less than expected, it is likely that the market price of BXP’s common stock will diminish.

Further issuances of equity securities may be dilutive to current securityholders.

The interests of our existing securityholders could be diluted if additional equity securities are issued to finance future developments, acquisitions or repay indebtedness. Our ability to execute our business strategy depends on our access to an appropriate blend of debt financing, including unsecured lines of credit and other forms of secured and unsecured debt, and equity financing, including common and preferred equity.

The number of shares available for future sale could adversely affect the market price of BXP’s stock.

In connection with and subsequent to BXP’s initial public offering, we have completed many private placement transactions in which shares of stock of BXP or partnership interests in BPLP were issued to owners of properties we acquired or to institutional investors. This common stock, or common stock issuable in exchange for such partnership interests in BPLP, may be sold in the public securities markets over time under registration rights we granted to these investors. Additional common stock issuable under our employee benefit and other incentive plans, including as a result of the grant of stock options and restricted equity securities, may also be sold in the market at some time in the future. Future sales of BXP common stock in the market could adversely affect the price of its common stock. We cannot predict the effect the perception in the market that such sales may occur will have on the market price of BXP’s common stock.

We may change our policies without obtaining the approval of our stockholders.

Our operating and financial policies, including our policies with respect to acquisitions of real estate, growth, operations, indebtedness, capitalization and dividends, are exclusively determined by BXP’s Board of Directors. Accordingly, our securityholders do not control these policies.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties.

At December 31, 2016, we owned or had interests in 174 commercial real estate properties, aggregating approximately 47.7 million net rentable square feet, including eight properties under construction/redevelopment totaling approximately 4.0 million net rentable square feet. Our properties consisted of (1) 164 office properties (including six properties under construction/redevelopment), (2) five retail properties, (3) one hotel and (4) four residential properties (including two under construction). The table set forth below shows information relating to the properties we owned, or in which we had an ownership interest, at December 31, 2016.



Properties	Location	% Leased as of December 31, 2016 (1)		Number of Buildings	Net Rentable Square Feet
Office
767 Fifth Avenue (the General Motors Building) (60% ownership)	New York, NY	93.6	%	1	1,845,092
200 Clarendon Street	Boston, MA	79.2	%	1	1,746,221
399 Park Avenue	New York, NY	93.9	%	1	1,713,251
601 Lexington Avenue (55% ownership) (2)	New York, NY	94.3	%	1	1,436,439
100 Federal Street (55% ownership)	Boston, MA	80.8	%	1	1,265,037
Times Square Tower (55% ownership)	New York, NY	98.2	%	1	1,248,521
800 Boylston Street - The Prudential Center	Boston, MA	97.8	%	1	1,235,885
Colorado Center (49.8% ownership) (3)(4)	Santa Monica, CA	79.1	%	6	1,117,542
599 Lexington Avenue	New York, NY	96.8	%	1	1,058,805
Bay Colony Corporate Center	Waltham, MA	75.6	%	4	1,011,172
250 West 55th Street	New York, NY	85.2	%	1	980,927
Embarcadero Center Four	San Francisco, CA	88.5	%	1	938,168
111 Huntington Avenue - The Prudential Center	Boston, MA	98.6	%	1	860,455
Embarcadero Center One	San Francisco, CA	97.1	%	1	831,140
Atlantic Wharf Office (55% ownership)	Boston, MA	100.0	%	1	793,827
Embarcadero Center Two	San Francisco, CA	95.6	%	1	787,049
Embarcadero Center Three	San Francisco, CA	88.3	%	1	779,578
Capital Gallery	Washington, DC	99.8	%	1	631,029
South of Market	Reston, VA	97.7	%	3	623,666
Metropolitan Square (20% ownership) (3)	Washington, DC	75.0	%	1	607,041
Mountain View Research Park	Mountain View, CA	100.0	%	15	540,433
901 New York Avenue (25% ownership) (3)	Washington, DC	96.9	%	1	539,680
Reservoir Place	Waltham, MA	98.3	%	1	526,985
680 Folsom Street	San Francisco, CA	98.9	%	2	524,793
Fountain Square	Reston, VA	93.8	%	2	518,345
601 and 651 Gateway	South San Francisco, CA	97.7	%	2	506,279
101 Huntington Avenue - The Prudential Center	Boston, MA	95.8	%	1	505,583
601 Massachusetts Avenue	Washington, DC	90.2	%	1	478,883
2200 Pennsylvania Avenue	Washington, DC	100.0	%	1	458,831
One Freedom Square	Reston, VA	95.9	%	1	432,581
Two Freedom Square	Reston, VA	98.5	%	1	421,757



Properties	Location	% Leased as of December 31, 2016 (1)		Number of Buildings	Net Rentable Square Feet
Market Square North (50% ownership) (3)	Washington, DC	71.4	%	1	415,386
One Tower Center	East Brunswick, NJ	21.2	%	1	412,797
140 Kendrick Street	Needham, MA	87.8	%	3	380,987
One and Two Discovery Square	Reston, VA	100.0	%	2	366,990
Weston Corporate Center	Weston, MA	100.0	%	1	356,995
510 Madison Avenue	New York, NY	100.0	%	1	355,598
One Reston Overlook	Reston, VA	100.0	%	1	319,519
1333 New Hampshire Avenue	Washington, DC	100.0	%	1	315,371
535 Mission Street	San Francisco, CA	100.0	%	1	307,235
Waltham Weston Corporate Center	Waltham, MA	93.4	%	1	301,667
Wisconsin Place Office	Chevy Chase, MD	97.6	%	1	299,186
230 CityPoint	Waltham, MA	86.5	%	1	298,890
540 Madison Avenue (60% ownership) (3)	New York, NY	94.6	%	1	283,695
Quorum Office Park	Chelmsford, MA	90.0	%	2	267,527
355 Main Street	Cambridge, MA	100.0	%	1	265,342
Reston Corporate Center	Reston, VA	100.0	%	2	261,046
611 Gateway	South San Francisco, CA	28.2	%	1	260,337
Democracy Tower	Reston, VA	100.0	%	1	259,441
New Dominion Technology Park - Building Two	Herndon, VA	100.0	%	1	257,400
200 West Street	Waltham, MA	97.8	%	1	256,245
1330 Connecticut Avenue	Washington, DC	98.0	%	1	253,121
500 E Street, S.W.	Washington, DC	100.0	%	1	251,994
10 CityPoint	Waltham, MA	92.7	%	1	241,460
New Dominion Technology Park - Building One	Herndon, VA	100.0	%	1	235,201
510 Carnegie Center	Princeton, NJ	100.0	%	1	234,160
500 North Capitol Street, N.W. (30% ownership) (3)	Washington, DC	100.0	%	1	230,860
90 Broadway	Cambridge, MA	100.0	%	1	223,771
3625-3635 Peterson Way (5)	Santa Clara, CA	100.0	%	1	218,366
255 Main Street	Cambridge, MA	85.1	%	1	215,629
77 CityPoint	Waltham, MA	100.0	%	1	209,707
Sumner Square	Washington, DC	100.0	%	1	208,892
University Place	Cambridge, MA	100.0	%	1	195,282
300 Binney Street	Cambridge, MA	100.0	%	1	195,191
North First Business Park (5)	San Jose, CA	87.2	%	5	190,636
2600 Tower Oaks Boulevard	Rockville, MD	48.1	%	1	179,369
150 Broadway	Cambridge, MA	100.0	%	1	177,226
Lexington Office Park	Lexington, MA	75.7	%	2	166,858
206 Carnegie Center	Princeton, NJ	100.0	%	1	161,763
210 Carnegie Center	Princeton, NJ	78.9	%	1	159,468
Kingstowne Two	Alexandria, VA	74.1	%	1	156,251
105 Broadway	Cambridge, MA	100.0	%	1	152,664
212 Carnegie Center	Princeton, NJ	86.9	%	1	151,547
Kingstowne One	Alexandria, VA	75.6	%	1	151,483



Properties	Location	% Leased as of December 31, 2016 (1)		Number of Buildings	Net Rentable Square Feet
214 Carnegie Center	Princeton, NJ	67.2	%	1	148,942
2440 West El Camino Real	Mountain View, CA	100.0	%	1	141,392
506 Carnegie Center	Princeton, NJ	56.4	%	1	140,312
Two Reston Overlook	Reston, VA	97.1	%	1	134,615
508 Carnegie Center	Princeton, NJ	100.0	%	1	134,433
202 Carnegie Center	Princeton, NJ	86.3	%	1	134,381
804 Carnegie Center	Princeton, NJ	100.0	%	1	130,000
Annapolis Junction Building Seven (50% ownership) (3)	Annapolis, MD	100.0	%	1	127,229
Annapolis Junction Building Eight (50% ownership) (3)	Annapolis, MD	—	%	1	125,685
101 Carnegie Center	Princeton, NJ	96.9	%	1	125,627
504 Carnegie Center	Princeton, NJ	100.0	%	1	121,990
40 Shattuck Road	Andover, MA	68.7	%	1	121,542
502 Carnegie Center	Princeton, NJ	92.7	%	1	121,460
701 Carnegie Center	Princeton, NJ	100.0	%	1	120,000
Annapolis Junction Building Six (50% ownership) (3)	Annapolis, MD	48.9	%	1	119,339
91 Hartwell Avenue	Lexington, MA	100.0	%	1	119,216
Annapolis Junction Building One (50% ownership) (3)	Annapolis, MD	21.9	%	1	117,599
325 Main Street	Cambridge, MA	100.0	%	1	115,361
1265 Main Street (50% ownership) (3)	Waltham, MA	100.0	%	1	114,969
7601 Boston Boulevard	Springfield, VA	100.0	%	1	114,028
201 Spring Street	Lexington, MA	100.0	%	1	106,300
7435 Boston Boulevard	Springfield, VA	83.4	%	1	103,557
104 Carnegie Center	Princeton, NJ	40.3	%	1	102,830
8000 Grainger Court	Springfield, VA	37.6	%	1	88,775
33 Hayden Avenue	Lexington, MA	100.0	%	1	80,872
7500 Boston Boulevard	Springfield, VA	100.0	%	1	79,971
145 Broadway (5)	Cambridge, MA	100.0	%	1	79,616
7501 Boston Boulevard	Springfield, VA	100.0	%	1	75,756
105 Carnegie Center	Princeton, NJ	56.3	%	1	69,955
32 Hartwell Avenue	Lexington, MA	100.0	%	1	69,154
250 Binney Street	Cambridge, MA	100.0	%	1	67,362
302 Carnegie Center	Princeton, NJ	100.0	%	1	64,926
164 Lexington Road	Billerica, MA	—	%	1	64,140
195 West Street	Waltham, MA	100.0	%	1	63,500
7450 Boston Boulevard	Springfield, VA	—	%	1	62,402
7374 Boston Boulevard	Springfield, VA	100.0	%	1	57,321
100 Hayden Avenue	Lexington, MA	100.0	%	1	55,924
181 Spring Street	Lexington, MA	100.0	%	1	55,793
8000 Corporate Court	Springfield, VA	100.0	%	1	52,539
211 Carnegie Center	Princeton, NJ	100.0	%	1	47,025
7451 Boston Boulevard	Springfield, VA	67.4	%	1	45,615
7300 Boston Boulevard	Springfield, VA	—	%	1	32,000
92 Hayden Avenue	Lexington, MA	100.0	%	1	31,100



Properties	Location	% Leased as of December 31, 2016 (1)			Number of Buildings	Net Rentable Square Feet
17 Hartwell Avenue	Lexington, MA	100.0	%		1	30,000
453 Ravendale Drive	Mountain View, CA	65.7	%		1	29,620
7375 Boston Boulevard	Springfield, VA	79.2	%		1	26,865
690 Folsom Street	San Francisco, CA	100.0	%		1	26,080
201 Carnegie Center	Princeton, NJ	100.0	%		—	6,500
Subtotal for Office Properties		90.0	%		158	41,971,166
Retail
Prudential Center (retail shops) (6)	Boston, MA	97.4	%		1	530,992
Fountain Square Retail	Reston, VA	98.8	%		1	237,209
Kingstowne Retail	Alexandria, VA	100.0	%		1	88,288
Star Market at the Prudential Center	Boston, MA	100.0	%		1	57,235
The Point	Waltham, MA	84.7	%		1	16,300
Subtotal for Retail Properties		97.9	%		5	930,024
Residential Properties
The Avant at Reston Town Center (359 units)	Reston, VA	90.5	%	(7)	1	355,347	(8)
The Lofts at Atlantic Wharf (86 units)	Boston, MA	91.9	%	(7)	1	87,097	(9)
Subtotal for Residential Properties		90.8	%		2	442,444
Hotel Property
Boston Marriott Cambridge (433 rooms)	Cambridge, MA	79.5	%	(10)	1	334,260	(11)
Subtotal for Hotel Property		79.5	%		1	334,260
Subtotal for In-Service Properties		90.2	%		166	43,677,894
Properties Under Development/Redevelopment (12)
Office and Retail
Prudential Center Retail Expansion	Boston, MA	100	%		—	15,000
888 Boylston Street	Boston, MA	84	%		1	425,000
Salesforce Tower (95% ownership)	San Francisco, CA	62	%		1	1,400,000
The Hub on Causeway (50% ownership) (3)	Boston, MA	33	%		1	385,000
Dock 72 (50% ownership) (3)	Brooklyn, NY	33	%		1	670,000
Residential
Proto at Cambridge (274 units)	Cambridge, MA	N/A			1	164,000
Signature at Reston (508 units)	Reston, VA	N/A			1	490,000
Signature at Reston - Retail		81	%		—	24,600
Redevelopment
Reservoir Place North	Waltham, MA	—	%		1	73,000
191 Spring Street	Lexington, MA	50.0	%		1	160,000
159 East 53rd (55% ownership) (13)	New York, NY	—	%		—	220,000
Subtotal for Properties Under Development/Redevelopment		50	%	(14)	8	4,026,600
Total Portfolio					174	47,704,494

_______________


(1)	Represents signed leases for in-service properties which revenue recognition has commenced in accordance with generally accepted accounting principles in the United States (“GAAP”).


(2)	Approximately 13% of this complex was removed from the in-service portfolio upon commencement of construction of the planned redevelopment that commenced during the third quarter of 2016.


(3)	Property is an unconsolidated joint venture.


(4)	Excludes approximately 59,000 square feet of storage space and 8,000 square feet of remeasurement upon lease expirations.


(5)	Property is held for redevelopment.


(6)	As a result of the conversion of the food court into a retail unit, the property's rentable area increased by approximately 40,000 square feet.


(7)	Note that these amounts are not included in the calculation of the Total Portfolio occupancy rate for In-Service Properties as of December 31, 2016.


(8)	Includes 26,179 square feet of retail space which is 100% leased as of December 31, 2016. Note that this amount is not included in the calculation of the Total Portfolio occupancy rate for In-Service Properties as of December 31, 2016.


(9)	Includes 9,617 square feet of retail space which is 100% leased as of December 31, 2016. Note that this amount is not included in the calculation of the Total Portfolio occupancy rate for In-Service Properties as of December 31, 2016.


(10)	Represents the weighted-average room occupancy for the year ended December 31, 2016. Note that this amount is not included in the calculation of the Total Portfolio occupancy rate for In-Service Properties as of December 31, 2016.


(11)	Includes 4,260 square feet of retail space which is 100% leased of December 31, 2016. Note that this amount is not included in the calculation of the Total Portfolio occupancy rate for In-Service Properties as of December 31, 2016.


(12)	Represents percentage leased as of February 22, 2017.


(13)	Formerly the low-rise portion of 601 Lexington Avenue.


(14)	Includes approximately 9,000 square feet of retail space at the Proto at Cambridge residential development, which is 0% leased.

Percentage Leased and Average Annualized Revenue per Square Foot for In-Service Properties

The following table sets forth our percentage leased and average annualized revenue per square foot on a historical basis for our In-Service Properties.



	December 31, 2016			December 31, 2015			December 31, 2014			December 31, 2013			December 31, 2012
Percentage leased (1)	90.2		%	91.4		%	91.7		%	93.4		%	91.4		%
Average annualized revenue per square foot (2)		$62.54			$60.89			$58.97			$56.36			$55.43

_______________


(1)	Represents signed leases, excluding hotel and residential properties, for which revenue recognition has commenced in accordance with GAAP.

(2)

Represents the monthly contractual base rents and recoveries from tenants under existing leases as of December 31, 2016, 2015, 2014, 2013 and 2012 multiplied by twelve. These annualized amounts are before rent abatements and include expense reimbursements, which may be estimates as of such date. The aggregate amounts of rent abatements per square foot under existing leases as of December 31, 2016, 2015, 2014, 2013 and 2012 for the succeeding twelve month period were $1.18, $0.60, $1.05, $0.58 and $1.17, respectively.

Top 20 Tenants by Square Feet

Our 20 largest tenants by square feet as of December 31, 2016 were as follows:



	Tenant	Square Feet		% of In-Service Portfolio
1.	U.S. Government	1,640,920	(1)	3.82	%
2.	Biogen	772,212		1.80	%
3.	Citibank	724,364	(2)	1.69	%
4.	Bank of America	693,265	(3)	1.61	%
5.	Wellington Management	648,752	(4)	1.51	%
6.	Kirkland & Ellis	646,023	(5)	1.50	%
7.	Arnold & Porter	607,242		1.41	%
8.	Ropes & Gray	539,467		1.26	%
9.	Shearman & Sterling	513,060	(6)	1.19	%
10.	O’Melveny & Myers	500,046	(7)	1.16	%
11.	Weil Gotshal Manges	393,195	(8)	0.92	%
12.	Genentech	383,968		0.89	%
13.	Google	381,105		0.89	%
14.	Finnegan Henderson Farabow	362,405	(9)	0.84	%
15.	Ann Inc. (fka Ann Taylor Corp.)	351,026	(10)	0.82	%
16.	Bechtel Corporation	346,990		0.81	%
17.	PTC	320,655		0.75	%
18.	Microsoft	319,354		0.74	%
19.	Blue Cross Blue Shield	308,210		0.72	%
20.	Mass Financial Services	301,668		0.70	%

__________________


(1)	Includes 157,029 and 1,980 square feet of space in properties in which we have a 50% and 20% interest, respectively.


(2)	Includes 302,896 and 2,761 square feet of space in properties in which we have a 55% and 20% interest, respectively.


(3)	Includes 625,354, 50,887 and 50 square feet of space in properties in which we have a 55%, 60% and 50% interest, respectively.


(4)	Includes 637,993 square feet of space in properties in which we have a 55% interest.


(5)	Includes 422,599 and 223,424 square feet of space in properties in which we have a 55% and 20% interest, respectively.


(6)	Includes 37,877 square feet of space in a property in which we have a 50% interest.


(7)	Includes 325,750 square feet of space in a property in which we have a 55% interest.


(8)	Includes 365,048 and 28,147 square feet of space in properties in which we have a 60% and 55% interest, respectively.


(9)	Includes 292,548 square feet of space in a property in which we have a 25% interest.


(10)	Includes 331,209 square feet of space in a property in which we have a 55% interest.

Tenant Diversification

Our tenant diversification by square feet as of December 31, 2016 were as follows:



Sector	% of In-Service Portfolio
Media & Technology	25%
Legal Services	21%
Financial Services - all other	13%
Other	12%
Other Professional Services	9%
Financial Services - commercial and investment banking	8%
Government / Public Administration	6%
Retail	6%

Lease Expirations (1)(2)



Year of Lease Expiration	Rentable Square Feet Subject to Expiring Leases	Current Annualized Contractual Rent Under Expiring Leases Without Future Step-Ups (3)		Current Annualized Contractual Rent Under Expiring Leases Without Future Step-Ups p.s.f. (3)		Current Annualized Contractual Rent Under Expiring Leases With Future Step-Ups (4)		Current Annualized Contractual Rent Under Expiring Leases With Future Step-Ups p.s.f. (4)		Percentage of Total Square Feet
2016 (5)	115,331		$5,755,938		$49.91		$5,755,938		$49.91	0.3	%
2017	2,328,197	151,100,135		64.90		152,513,741		65.51		5.7	%
2018	1,541,680	103,841,839		67.36		105,931,206		68.71		3.8	%
2019	3,524,261	186,301,876		52.86		190,824,771		54.15		8.7	%
2020	4,454,917	284,094,049		63.77		293,865,720		65.96		11.0	%
2021	3,820,575	213,053,299		55.76		228,417,659		59.79		9.4	%
2022	4,244,368	246,333,201		58.04		272,361,921		64.17		10.5	%
2023	1,643,788	95,716,163		58.23		109,314,767		66.50		4.1	%
2024	2,766,152	165,609,504		59.87		183,522,732		66.35		6.8	%
2025	2,608,773	150,380,359		57.64		172,691,441		66.20		6.4	%
Thereafter	11,267,301	797,434,531		70.77		1,029,945,825		91.41		27.7	%

_______________


(1)	Includes 100% of unconsolidated joint venture properties. Does not include residential units or the hotel.


(2)	Does not include data for leases expiring in a particular year when leases for the same space have already been signed with replacement tenants with future commencement dates. In those cases, the data is included in the year in which the future lease with the replacement tenant expires.


(3)	Represents the monthly contractual base rent and recoveries from tenants under existing leases as of December 31, 2016 multiplied by twelve. This amount reflects total rent before any rent abatements and includes expense reimbursements, which may be estimates as of such date.


(4)	Represents the monthly contractual base rent under expiring leases with future contractual increases upon expiration and recoveries from tenants under existing leases as of December 31, 2016 multiplied by twelve. This amount reflects total rent before any rent abatements and includes expense reimbursements, which may be estimates as of such date.


(5)	Represents leases that expired on December 31, 2016.

Item 3. Legal Proceedings

We are subject to various legal proceedings and claims that arise in the ordinary course of business. These matters are generally covered by insurance. Management believes that the final outcome of such matters will not have a material adverse effect on our financial position, results of operations or liquidity.

Item 4. Mine Safety Disclosures

Not Applicable.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

(a) The common stock of Boston Properties, Inc. is listed on the New York Stock Exchange under the symbol “BXP.” At February 22, 2017, BXP had approximately 1,248 stockholders of record.

There is no established public trading market for BPLP’s common units. On February 22, 2017, there were approximately 262 holders of record and 171,118,961 common units outstanding, 153,836,251 of which were held by BXP.

The high and low sales prices and dividends per share of BXP common stock and distributions per common unit of BPLP for the periods indicated in the table below were:



Quarter Ended	High		Low		Dividends per common share			Distributions per common unit
December 31, 2016	$	135.47	$	113.69	$	0.75	(1)	$	0.75	(1)
September 30, 2016	144.02		129.49		0.65			0.65
June 30, 2016	133.59		123.45		0.65			0.65
March 31, 2016	127.77		107.28		0.65			0.65
December 31, 2015	130.68		116.64		1.90		(2)	1.90		(2)
September 30, 2015	127.15		94.91		0.65			0.65
June 30, 2015	143.09		120.44		0.65			0.65
March 31, 2015	146.07		129.29		0.65			0.65

_______________


(1)	On December 19, 2016, we increased our regular quarterly dividend/distribution to $0.75 per common share/unit.


(2)	Includes a special dividend/distribution of $1.25 per common share/unit.

In order to enable BXP to maintain its qualification as a REIT, it must make annual distributions to its stockholders of at least 90% of its taxable income (not including net capital gains and with certain other adjustments). BXP has adopted a policy of paying regular quarterly dividends on its common stock, and, as BPLP’s general partner, BXP has adopted a policy of paying regular quarterly distributions on common units of BPLP. For the year ended December 31, 2015, the decision to declare the special distribution was primarily a result of the taxable gains associated with the sale of approximately $584 million of assets in 2015.

Cash distributions have been paid on the common stock of BXP and BPLP’s common units since BXP’s initial public offering. Distributions are declared at the discretion of the Board of Directors of BXP ~~or a committee thereof,~~ and ~~there are no known significant contingencies relating to~~depend on actual and anticipated cash from operations, our financial condition, capital requirements, the ~~sale, such that a sale~~annual distribution requirements under the REIT provisions of the ~~property within one year is considered probable. Following~~Internal Revenue Code and other factors the ~~classification~~Board of Directors of BXP may consider relevant.

Stock Performance Graph

The following graph provides a ~~property as “held~~comparison of cumulative total stockholder return for ~~sale,” no further depreciation is recorded~~the period from December 31, 2011 through December 31, 2016, among BXP, Standard & Poor’s (“S&P”) 500 Index, NAREIT Equity REIT Total Return Index (the “Equity REIT Index”) and the NAREIT Office REIT Index (the “Office REIT Index”). The Equity REIT Index includes all tax-qualified equity REITs listed on the ~~assets,~~New York Stock Exchange, the American Stock Exchange and the ~~asset~~NASDAQ Stock Market. Equity REITs are defined as those with 75% or more of their gross invested book value of assets invested directly or indirectly in the equity ownership of real estate. The Office REIT Index includes all office REITs included in the Equity REIT Index. Data for BXP, the S&P 500 Index, the Equity REIT Index and the Office REIT Index was provided to us by NAREIT. Upon written request, we will provide any stockholder with a list of the REITs included in the Equity REIT Index and the Office REIT Index. The stock performance graph assumes an investment of $100 in each of BXP and the three indices, and the reinvestment of any dividends. The historical information set forth below is ~~written down~~not necessarily indicative of future performance. The data shown is based on the share prices or index values, as applicable, at the end of each month shown.



	As of the year ended December 31,
	2011		2012		2013		2014		2015		2016
Boston Properties, Inc.	$	100.00	$	108.56	$	107.96	$	146.32	$	149.44	$	150.50
S&P 500 Index	$	100.00	$	116.00	$	153.57	$	174.60	$	177.01	$	198.18
Equity REIT Index	$	100.00	$	119.70	$	123.12	$	157.63	$	162.08	$	176.07
Office REIT Index	$	100.00	$	114.15	$	120.52	$	151.68	$	152.11	$	172.14

(b) None.

Boston Properties Limited Partnership

(a) None.

(b) None.



Period	(a) Total Number of Units Purchased		(b) Average Price Paid per Unit		(c) Total Number of Units Purchased as Part of Publicly Announced Plans or Programs	(d) Maximum Number (or Approximate Dollar Value) of Units that May Yet be Purchased Under the Plans or Programs
October 1, 2016 - October 31, 2016	906	(1)	$	0.25	N/A	N/A
November 1, 2016 - November 30, 2016	—		—		N/A	N/A
December 1, 2016 - December 31, 2016	—		—		N/A	N/A
Total	906		$	0.25	N/A	N/A

____________________


(1)	Represents LTIP Units that were repurchased in connection with the termination of a certain employee’s employment with BXP. Under the terms of the applicable LTIP Unit vesting agreements, such units were repurchased by BPLP at a price of $0.25 per unit, which was the amount originally paid by such employee for such units.

Item 6. Selected Financial Data

The following tables sets forth selected financial and operating data on a historical basis for each of BXP and BPLP. The following data should be read in conjunction with BXP’s and BPLP’s financial statements and notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations included elsewhere in this Form 10-K.Our historical operating results may not be comparable to our future operating results.

Boston Properties, Inc.



	For the year ended December 31,
	2016			2015			2014			2013			2012
	(in thousands, except per share data)
Statement of Operations Information:
Total revenue	$	2,550,820		$	2,490,821		$	2,396,998		$	2,135,539		$	1,847,186
Expenses:
Rental operating	889,768			872,252			835,290			742,956			639,088
Hotel operating	31,466			32,084			29,236			28,447			28,120
General and administrative	105,229			96,319			98,937			115,329			90,129
Transaction costs	2,387			1,259			3,140			1,744			3,653
Impairment loss	1,783			—			—			8,306			—
Depreciation and amortization	694,403			639,542			628,573			560,637			445,875
Total expenses	1,725,036			1,641,456			1,595,176			1,457,419			1,206,865
Operating income	825,784			849,365			801,822			678,120			640,321
Other income (expense):
Income from unconsolidated joint ventures	8,074			22,770			12,769			75,074			49,078
Gain on sale of investment in unconsolidated joint venture	59,370			—			—			—			—
Gains on consolidation of joint ventures	—			—			—			385,991			—
Interest and other income	7,230			6,777			8,765			8,310			10,091
Gains (losses) from investments in securities	2,273			(653		)	1,038			2,911			1,389
Interest expense	(412,849		)	(432,196		)	(455,743		)	(446,880		)	(410,970		)
Gains (losses) from early extinguishments of debt	(371		)	(22,040		)	(10,633		)	122			(4,453		)
Losses from interest rate contracts	(140		)	—			—			—			—
Income from continuing operations	489,371			424,023			358,018			703,648			285,456
Discontinued operations	—			—			—			137,792			46,683
Income before gains on sales of real estate	489,371			424,023			358,018			841,440			332,139
Gains on sales of real estate	80,606			375,895			168,039			—			—
Net income	569,977			799,918			526,057			841,440			332,139
Net income attributable to noncontrolling interests	(57,192		)	(216,812		)	(82,446		)	(91,629		)	(42,489		)
Net income attributable to Boston Properties, Inc.	512,785			583,106			443,611			749,811			289,650
Preferred dividends	(10,500		)	(10,500		)	(10,500		)	(8,057		)	—
Net income attributable to Boston Properties, Inc. common shareholders	$	502,285		$	572,606		$	433,111		$	741,754		$	289,650
Basic earnings per common share attributable to Boston Properties, Inc.:
Income from continuing operations	$	3.27		$	3.73		$	2.83		$	4.06		$	1.65
Discontinued operations	—			—			—			0.81			0.28
Net income	$	3.27		$	3.73		$	2.83		$	4.87		$	1.93
Weighted average number of common shares outstanding	153,715			153,471			153,089			152,201			150,120
Diluted earnings per common share attributable to Boston Properties, Inc.:
Income from continuing operations	$	3.26		$	3.72		$	2.83		$	4.05		$	1.64
Discontinued operations	—			—			—			0.81			0.28
Net income	$	3.26		$	3.72		$	2.83		$	4.86		$	1.92
Weighted average number of common and common equivalent shares outstanding	153,977			153,844			153,308			152,521			150,711



	December 31,
	2016			2015			2014			2013			2012
	(in thousands)
Balance Sheet information:
Real estate, gross	$	20,147,263		$	19,481,535		$	19,236,403		$	18,978,765		$	14,893,328
Real estate, net	15,925,028			15,555,641			15,688,744			15,817,194			11,959,168
Cash and cash equivalents	356,914			723,718			1,763,079			2,365,137			1,041,978
Total assets (1)	18,851,643			18,351,486			19,852,195			20,135,014			15,436,051
Total indebtedness (1)	9,796,133			9,188,543			10,052,412			11,480,258			8,873,355
Noncontrolling interests	—			—			105,325			150,921			208,434
Stockholders’ equity attributable to Boston Properties, Inc.	5,786,295			5,709,435			5,697,298			5,741,153			5,097,065
Equity noncontrolling interests	2,145,629			2,177,492			2,205,638			1,302,465			537,789

	For the year ended December 31,
	2016			2015			2014			2013			2012
	(in thousands, except per share and percentage data)
Other Information:
Funds from Operations attributable to Boston Properties, Inc. (2)	$	927,747		$	823,715		$	807,506		$	751,464		$	741,419
Dividends declared per share (3)	2.70			3.85			7.10			4.85			2.30
Cash flows provided by operating activities	1,036,874			799,411			695,553			777,926			642,949
Cash flows used in investing activities	(1,329,057		)	(280,226		)	(665,124		)	(532,640		)	(1,278,032		)
Cash flows provided by (used in) financing activities	(74,621		)	(1,558,546		)	(632,487		)	1,077,873			(146,147		)
Total square feet at end of year (including development projects)	47,704			46,495			45,760			44,399			44,384
In-service percentage leased at end of year	90.2		%	91.4		%	91.7		%	93.4		%	91.4		%

_______________

(1)

On January 1, 2016, we adopted ASU 2015-03 and retrospectively applied the guidance to our Mortgage Notes Payable and Unsecured Senior Notes for all periods presented (See Note 2 to the Consolidated Financial Statements). Unamortized deferred financing costs, with the exception of December 31, 2016, were previously included in Total Assets totaling approximately $37.7 million, $28.0 million, $34.5 million, $41.2 million and $39.0 million are now included in Total Indebtedness as of December 31, 2016, 2015, 2014, 2013 and 2012, respectively.

(2)

Pursuant to the revised definition of Funds from Operations adopted by the Board of Governors of NAREIT, we calculate Funds from Operations, or “FFO,” for BXP by adjusting net income attributable to Boston Properties, Inc. common shareholders (computed in accordance with GAAP) for gains (or losses) from sales of properties, impairment losses on depreciable real estate consolidated on BXP’s balance sheet, impairment losses on our investments in unconsolidated joint ventures driven by a measurable decrease in the fair value of depreciable real estate held by the unconsolidated joint ventures, real estate-related depreciation and amortization, and our share of income (loss) from unconsolidated partnerships and joint ventures. FFO is a non-GAAP financial measure, but 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. Management generally considers FFO to be a useful measure for understanding and comparing BXP’s 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. Amount represents BXP’s share, which was 89.70%, 89.68%, 89.81%, 89.99% and 89.48% for the years ended December 31, 2016, 2015, 2014, 2013 and 2012, respectively, after allocation to the noncontrolling interests.

Our computation of FFO may not be comparable to FFO reported by other REITs or real estate companies that do not define the ~~lower~~term in accordance with the current NAREIT definition or that interpret the current NAREIT definition differently. We believe that in order to facilitate a clear understanding of ~~carrying value~~our operating results, FFO should be examined in conjunction with net income attributable to Boston Properties, Inc. common shareholders as presented in BXP’s Consolidated Financial Statements. FFO should not be considered as a substitute for net income attributable to Boston Properties, Inc. common shareholders (determined in accordance with GAAP) or ~~fair market value, less cost~~any other GAAP financial measures and should only be considered together with and as a supplement to ~~sell. On April 10, 2014,~~BXP’s financial information prepared in accordance with GAAP.

A reconciliation of FFO to net income attributable to Boston Properties, Inc. common shareholders computed in accordance with GAAP is provided under the heading “Management’s Discussion and Analysis of Financial ~~Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-08, “Reporting Discontinued~~Condition and Results of Operations—Funds from Operations.”


(3)	Includes the special dividends of $1.25 per share, $4.50 per share and $2.25 per share paid on January 28, 2016, January 28, 2015 and January 29, 2014, respectively, to shareholders of record as of the close of business on December 31, 2015, 2014 and 2013, respectively.

Boston Properties Limited Partnership



	For the year ended December 31,
	2016			2015			2014			2013			2012
	(in thousands, except per unit data)
Statement of Operations Information:
Total revenue	$	2,550,820		$	2,490,821		$	2,396,998		$	2,135,539		$	1,847,186
Expenses:
Rental operating	889,768			872,252			835,290			742,956			639,088
Hotel operating	31,466			32,084			29,236			28,447			28,120
General and administrative	105,229			96,319			98,937			115,329			90,129
Transaction costs	2,387			1,259			3,140			1,744			3,653
Impairment loss	1,783			—			—			4,401			—
Depreciation and amortization	682,776			631,549			620,064			552,589			437,692
Total expenses	1,713,409			1,633,463			1,586,667			1,445,466			1,198,682
Operating income	837,411			857,358			810,331			690,073			648,504
Other income (expense):
Income from unconsolidated joint ventures	8,074			22,770			12,769			75,074			49,078
Gain on sale of investment in unconsolidated joint venture	59,370			—			—			—			—
Gains on consolidation of joint ventures	—			—			—			385,991			—
Interest and other income	7,230			6,777			8,765			8,310			10,091
Gains (losses) from investments in securities	2,273			(653		)	1,038			2,911			1,389
Interest expense	(412,849		)	(432,196		)	(455,743		)	(446,880		)	(410,970		)
Gains (losses) from early extinguishments of debt	(371		)	(22,040		)	(10,633		)	122			(4,453		)
Losses from interest rate contracts	(140		)	—			—			—			—
Income from continuing operations	500,998			432,016			366,527			715,601			293,639
Discontinued operations	—			—			—			141,365			48,251
Income before gains on sales of real estate	500,998			432,016			366,527			856,966			341,890
Gains on sales of real estate	82,775			377,093			174,686			—			—
Net income	583,773			809,109			541,213			856,966			341,890
Net income attributable to noncontrolling interests:
Noncontrolling interests in property partnerships	2,068			(149,855		)	(30,561		)	(1,347		)	(3,792		)
Noncontrolling interest-redeemable preferred units	—			(6		)	(1,023		)	(6,046		)	(3,497		)
Net income attributable to Boston Properties Limited Partnership	585,841			659,248			509,629			849,573			334,601
Preferred distributions	(10,500		)	(10,500		)	(10,500		)	(8,057		)	—
Net income attributable to Boston Properties Limited Partnership common unitholders	$	575,341		$	648,748		$	499,129		$	841,516		$	334,601
Basic earnings per common unit attributable to Boston Properties Limited Partnership:
Income from continuing operations	$	3.36		$	3.79		$	2.93		$	4.14		$	1.70
Discontinued operations	—			—			—			0.83			0.29
Net income	$	3.36		$	3.79		$	2.93		$	4.97		$	1.99
Weighted average number of common units outstanding	171,361			171,139			170,453			169,126			167,769
Diluted earnings per common unit attributable to Boston Properties Limited Partnership:
Income from continuing operations	$	3.35		$	3.78		$	2.92		$	4.14		$	1.70
Discontinued operations	—			—			—			0.83			0.29
Net income	$	3.35		$	3.78		$	2.92		$	4.97		$	1.99
Weighted average number of common and common equivalent units outstanding	171,623			171,512			170,672			169,446			168,360



		December 31,
		2016			2015			2014			2013			2012
		(in thousands)
Balance Sheet information:
Real estate, gross		$	19,733,872		$	19,061,141		$	18,814,558		$	18,548,441		$	14,454,962
Real estate, net		15,597,508			15,214,325			15,338,237			15,451,531			11,577,979
Cash and cash equivalents		356,914			723,718			1,763,079			2,365,137			1,041,978
Total assets (1)		18,524,123			18,010,170			19,501,688			19,769,351			15,054,862
Total indebtedness (1)		9,796,133			9,188,543			10,052,412			11,480,258			8,873,355
Noncontrolling interests		2,262,040			2,286,689			2,415,371			1,915,573			2,133,458
Boston Properties Limited Partnership partners’ capital		3,811,717			3,684,522			3,639,916			4,187,171			3,330,605
Noncontrolling interests in property partnerships	��	1,530,647			1,574,400			1,602,467			726,132			(1,964		)

		For the year ended December 31,
		2016			2015			2014			2013			2012
		(in thousands, except per unit and percentage data)
Other Information:
Funds from operations (2)		$	1,034,251		$	918,543		$	899,094		$	839,369		$	828,586
Distributions per common unit (3)		2.70			3.85			7.10			4.85			2.30
Cash flows provided by operating activities		1,036,874			799,411			695,553			777,926			642,949
Cash flows used in investing activities		(1,329,057		)	(280,226		)	(665,124		)	(532,640		)	(1,278,032		)
Cash flows provided by (used in) financing activities		(74,621		)	(1,558,546		)	(632,487		)	1,077,873			(146,147		)
Total square feet at end of year (including development projects)		47,704			46,495			45,760			44,399			44,384
In-service percentage leased at end of year		90.2		%	91.4		%	91.7		%	93.4		%	91.4		%

_______________

(1)

(2)

Pursuant to the revised definition of Funds from Operations adopted by the Board of Governors of NAREIT, we calculate Funds from Operations, or “FFO,” for BPLP by adjusting net income attributable to Boston Properties Limited Partnership common unitholders (computed in accordance with GAAP) for gains (or losses) from sales of properties, impairment losses on depreciable real estate consolidated on BPLP’s balance sheet, impairment losses on our investments in unconsolidated joint ventures driven by a measurable decrease in the fair value of depreciable real estate held by the unconsolidated joint ventures, real estate-related depreciation and amortization, and our share of income (loss) from unconsolidated partnerships and joint ventures. FFO is a non-GAAP financial measure, but 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. Management generally considers FFO to be useful measures for understanding and comparing BPLP’s operating results because, by excluding gains and losses related to sales of previously depreciated operating real estate assets, impairment losses and real estate asset depreciation and amortization (which can differ across owners of similar assets in similar condition based on historical cost accounting and useful life estimates), FFO can help investors compare the operating performance of a company’s real estate across reporting periods and to the operating performance of other companies.

Our computation of FFO may not be comparable to FFO reported by other REITs or real estate companies that do not define the term in accordance with the current NAREIT definition or that interpret the current NAREIT definition differently. We believe that in order to facilitate a clear understanding of our operating results, FFO should be examined in conjunction with net income attributable to Boston Properties Limited Partnership common unitholders as presented in BPLP’s Consolidated Financial Statements. FFO should not be considered as a substitute for 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 BPLP’s financial information prepared in accordance with GAAP.

A reconciliation of FFO to net income attributable to Boston Properties Limited Partnership common unitholders computed in accordance with GAAP is provided under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Funds from Operations.”


(3)	Includes the special distributions of $1.25 per common unit, $4.50 per common unit and $2.25 per common unit paid on January 28, 2016, January 28, 2015 and January 29, 2014, respectively, to unitholders of record as of the close of business on December 31, 2015, 2014 and 2013, respectively.

Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the financial statements and ~~Disclosures~~notes thereto appearing elsewhere in this report.

Forward-Looking Statements

The Annual Reports on Form 10-K, including the documents incorporated by reference, contain forward-looking statements within the meaning of ~~Disposals~~the federal securities laws, Section 27A of ~~Components~~the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We intend these forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and are including this statement for purposes of complying with those safe harbor provisions. Such statements are contained principally, but not only, under the captions “Business—Business and Growth Strategies,” “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 beliefs and on assumptions made by, and information currently available to, our management. When used, the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “project,” “result,” “should,” “will” and similar expressions which 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, which may be affected by known and unknown risks, trends, uncertainties and factors that are beyond our control. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or projected by the forward-looking statements. We caution you that, while forward-looking statements reflect our good faith beliefs when we make them, they are not guarantees of future performance and are impacted by actual events when they occur after we make such statements. Accordingly, investors should use caution in relying on forward-looking statements, which are based on results and trends at the time they are made, to anticipate future results or trends.

Some of the risks and uncertainties that may cause our actual results, performance or achievements to differ materially from those expressed or implied by forward-looking statements include, among others, the following:

if there is a negative change in the economy, including, but not limited to, a reversal of current job growth trends and an ~~Entity” (“ASU 2014-08”). ASU 2014-08 clarifies that discontinued operations presentation applies only to disposals representing~~increase in unemployment, it could have a ~~strategic shift that has (or will have) a major~~negative effect on the following, among other things:

the fundamentals of our business, including overall market occupancy, tenant space utilization, and rental rates;

the financial condition of our tenants, many of which are financial, legal, media/telecommunication, technology and other professional firms, our lenders, counterparties to our derivative financial instruments and institutions that hold our cash balances and short-term investments, which may expose us to increased risks of default by these parties; and

the value of our real estate assets, which may limit our ability to dispose of assets at attractive prices or obtain or maintain debt financing secured by our properties or on an ~~entity’s~~unsecured basis;

volatile or adverse global economic and political conditions, and dislocations in the credit markets could adversely affect our access to cost-effective capital and have a resulting material adverse effect on our business opportunities, results of operations and financial condition;

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

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

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

risks and uncertainties affecting property development and construction (including, without limitation, 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);

risks associated with the availability and terms of financing and the use of debt to fund acquisitions and developments or refinance existing indebtedness, including the impact of higher interest rates on the cost and/or availability of financing;

risks associated with forward interest rate contracts and the effectiveness of such arrangements;

risks associated with downturns in the national and local economies, increases in interest rates, and volatility in the securities markets;

risks associated with actual or threatened terrorist attacks;

costs of compliance with the Americans with Disabilities Act and other similar laws;

potential liability for uninsured losses and environmental contamination;

risks associated with security breaches through cyber attacks, cyber intrusions or otherwise, as well as other significant disruptions of our information technology (IT) networks and related systems, which support our operations and our buildings;

risks associated with BXP’s potential failure to qualify as a REIT under the Internal Revenue Code of 1986, as amended;

possible adverse changes in tax and environmental laws;

the impact of newly adopted accounting principles on our accounting policies and on period-to-period comparisons of financial results;

risks associated with possible state and local tax audits; and

risks associated with our dependence on key personnel whose continued service is not guaranteed.

The risks set forth above are not exhaustive. Other sections of this report, including “Part I, Item 1A—Risk Factors,” include additional factors that could adversely affect our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time and it is not possible for management to predict all risk factors, nor can we assess the impact of all risk factors on our business or the extent to which any factor, or combination of factors, may cause actual results ~~(e.g.~~to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. Investors should also refer to our Quarterly Reports on Form 10-Q for future periods and Current Reports on Form 8-K as we file them with the SEC, and to other materials we may furnish to the public from time to time through Current Reports on Form 8-K or otherwise, for a discussion of risks and uncertainties that may cause actual results, performance or achievements to differ materially from those expressed or implied by forward-looking statements. We expressly disclaim any responsibility to update any forward-looking statements to reflect changes in underlying assumptions or factors, new information, future events, or otherwise, and you should not rely upon these forward-looking statements after the date of this report.

Overview

BXP is a fully integrated, self-administered and self-managed REIT and one of the largest owners, managers and developers of primarily Class A office properties in the United States. 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. Our properties are concentrated in five markets – Boston, Los Angeles, New York, San Francisco and Washington, DC. We generate revenue and cash primarily by leasing Class A office space to our tenants. Factors we consider when we lease space include the creditworthiness of the tenant, the length of the lease, the rental rate to be paid at inception and throughout the lease term, the costs of tenant improvements and other landlord concessions, current and anticipated operating costs and real estate taxes, current and anticipated vacancy, current and anticipated future demand for office space and general economic factors.

Our core strategy has always been to develop, acquire and operate properties in supply-constrained markets with high barriers-to-entry and to focus on executing long-term leases with financially strong tenants. Historically, this combination has tended to reduce our exposure in down cycles and enhance revenues as market conditions improve. To be successful in any leasing environment, we believe all aspects of the tenant-landlord relationship must be considered. In this regard, we believe that our understanding of tenants’ short- and long-term space utilization and amenity needs in the local markets in which we operate, our relationships with local brokers, our reputation as a premier developer, owner and operator of Class A office properties, our financial strength and our ability to maintain high building standards provide us with a competitive advantage.

Outlook

Economic growth in the United States continues, despite decelerating in the fourth quarter of 2016 as Gross Domestic Product decreased from an annual rate of 3.5% for the third quarter of 2016 to 1.9% for the fourth quarter of 2016, according to initial estimates. Employment continues to improve gradually with approximately 156,000 jobs created in December 2016 and the unemployment rate remained stable at 4.7%. We believe employment indicators, which are driving improving office market fundamentals in our markets, combined with the relatively low interest rate environment and the prospect for fiscal stimulus, provide confidence for continued growth.

In this economic climate, we continue to focus on (1) ensuring tenant satisfaction throughout our portfolio; (2) leasing available space in our in-service and development properties, as well as focusing on future large lease expirations; (3) completing the construction of our properties under development; (4) redeveloping and repositioning several key properties to increase future revenues and asset values, despite the adverse impact on near-term revenue; (5) maintaining discipline in our underwriting of investment opportunities by (i) seeking pre-leasing commitments to begin new construction and (ii) targeting acquisition activity in non-stabilized assets near innovation centers where we see the strongest prospects for overall growth and our operational expertise can create value; and (6) maintaining our conservative balance sheet by managing our near-term debt maturities.

During the fourth quarter of 2016, we signed leases across our portfolio totaling approximately 3.0 million square feet, which is our all-time quarterly record, and commenced revenue recognition on approximately 1.1 million square feet of leases in second generation space. Of these leases in second generation space, approximately 654,000 square feet have been vacant for less than one year and provide an average increase in net rental obligation of more than 39.0%, ~~a disposal~~demonstrating the strong internal growth opportunities embedded in our portfolio. The overall occupancy of our in-service properties increased from 89.6% at September 30, 2016 to 90.2% at December 31, 2016 due mainly to leasing at the recently acquired Colorado Center in Santa Monica, California, which improved to 79.1% leased as of December 31, 2016 from 65.5% at September 30, 2016.

Our investment strategy remains largely unchanged. Other than possible acquisitions of value-add assets, such as those requiring lease-up or repositioning like Colorado Center, we intend to continue to invest primarily in higher yielding new developments with significant pre-leasing commitments and redevelopment opportunities rather than lower yielding acquisitions of stabilized assets for which demand and pricing remains strong. Our current development pipeline consists of eight development/redevelopment projects representing approximately 4.0 million net rentable square feet and an estimated total investment of approximately $2.3 billion, of which approximately $1.0 billion remains to be spent. As of February 22, 2017, approximately 50% of the commercial space in these development projects is pre-leased. In addition, we have begun, or will soon begin, the repositioning of several of our properties, including 159 East 53rd Street (the former low-rise portion of 601 Lexington Avenue), the retail and plaza at 767 Fifth Avenue and 399 Park Avenue in New York City; 100 Federal Street and the Prudential Center (retail shops) in Boston, Massachusetts; 191 Spring Street in Lexington, Massachusetts; and 1330 Connecticut Avenue and Metropolitan Square in Washington, DC. These projects require significant capital expenditures and, in some cases, necessitate that space is vacated for an extended period of time.

We also have significant land holdings and opportunities to increase square footage density that we intend to move through the design and permitting processes and add selectively to our development/redevelopment pipeline, including some developments that may commence in 2017.

During the fourth quarter of 2016, we raised approximately $200 million of incremental capital from the sale of a ~~major geographical area,~~partial interest in our Metropolitan Square joint venture and two secured financings at joint venture assets. Given the relatively low interest rates currently available to us in the debt markets, we expect to enhance our liquidity to provide sufficient capacity to fund our remaining capital requirements for existing development projects and pursue attractive additional investment opportunities. Depending on the type and timing of financing, raising capital may result in us carrying additional cash and cash equivalents pending our use of the proceeds.

The same factors that create challenges to acquiring assets present opportunities for us to continue to review our portfolio to identify properties that may no longer fit within our portfolio strategy or could attract premium pricing in the current market environment as potential sales candidates. We expect to continue to sell non-core assets in 2017, subject to market conditions.

A brief overview of each of our markets follows.

Boston

The greater Boston region continues to attract life science and established technology companies, as well as start-up technology and maker organizations. Our East Cambridge properties are outperforming the overall submarket at approximately 97.9% occupancy. During the fourth quarter of 2016, we entered into a ~~major line of business,~~476,500 square foot lease with a ~~major equity method investment or other major parts~~tenant for our 145 Broadway property at Kendall Center in Cambridge. 145 Broadway currently consists of an ~~entity). ASU 2014-08~~approximately 80,000 net rentable square foot Class A office property that will be demolished and redeveloped into an approximately 486,000 net rentable square foot Class A office property including approximately 9,500 net rentable square feet of retail space. The commencement of the redevelopment project is ~~effective prospectively for reporting periods beginning after December 15, 2014. Early adoption is permitted,~~subject to the receipt of the remaining necessary approvals, and we ~~early adopted ASU 2014-08~~currently expect to begin the project in the second quarter of 2017 with the relocation of an existing tenant to another property within our portfolio. We expect the building will be available for occupancy by the new tenant during the ~~first~~fourth quarter of ~~2014.~~ 2019. There can be no assurance that the project will commence or that the building will be available for occupancy on the anticipated schedule or at all.

Our ~~adoption~~suburban Waltham/Lexington submarket continues to strengthen due to the organic growth of ~~ASU 2014-08 resulted~~our existing tenant base and other tenants in the ~~operating results~~market looking for space to accommodate their expanding workforces. In the fourth quarter of 2016, we completed approximately 300,000 square feet of leases. We commenced the redevelopment of 191 Spring Street, an approximately 160,000 square foot building, and ~~gains~~signed a lease with a lead tenant for approximately 80,000 square feet. In addition, on ~~sales~~October 1, 2016, a joint venture in which we have a 50% interest completed and fully placed in-service 1265 Main Street, a Class A office building with approximately 115,000 net rentable feet located in Waltham, Massachusetts. The property is 100% leased.

The Boston Central Business District (“CBD”) submarket continues to be driven by lease-expirations from traditional financial and professional services tenants and a steady flow of ~~real estate~~new technology companies moving into the CBD. During the fourth quarter of 2016, we leased approximately 480,000 square feet and our Boston CBD portfolio was 90.3% leased at December 31, 2016. Our largest vacancy exposure remains at 200 Clarendon Street where we have approximately 250,000 square feet available. Activity, particularly at the low-rise portion of the building has increased as evidenced by recently signed leases for approximately 90,000 square feet with new tenants. In addition, the leases signed in the fourth quarter of 2016 includes 64,000 square feet at the recently completed 888 Boylston Street, which brings the office building to 89% leased.

LosAngeles

Activity at our Colorado Center joint venture asset in West Los Angeles (“LA”) is robust. During the fourth quarter of 2016, we signed leases for approximately 220,000 of the 350,000 square feet of availability, and we extended leases for another approximately 190,000 square feet, driving the percentage leased from ~~operating~~65.5% to 87.3%, including leases that have not yet commenced, in just the first six months of our ownership. We are committed to growing our presence and portfolio in LA and expect to continue to underwrite investment opportunities in this market.

New York

Our overall expectations for the midtown Manhattan office market and the leasing activity in our portfolio have been generally consistent for the past two years. New supply continues to come into the market in the form of new deliveries and large lease expirations. As a result, tenants have increasing options and therefore we are not anticipating significant growth in office rents and are witnessing higher tenant concessions. Our New York City portfolio remains well leased at 94.2% with 7.8% rollover in 2017. In the fourth quarter of 2016, we completed approximately 551,000 square feet of leases at our properties ~~sold~~in the New York region, including an approximately 77,000 square foot lease extension and expansion with Apple at 767 Fifth Avenue.

San Francisco

Although leasing velocity in the San Francisco CBD has moderated from the peak levels we saw in 2014 and early 2015, the CBD leasing market remains healthy and among the strongest markets in the United States. We continue to benefit from this strength as evidenced by the approximately 160,000 square feet of second generation leases executed during the ~~years~~fourth quarter of 2016, which have been vacant for less than one year and provide an average increase in net rental obligation of approximately 90.0%.

Our near-term leasing focus remains the lease-up of Salesforce Tower, where we are 62% leased and anticipate signing an additional 100,000 square foot with a tenant in the near term. Construction of Salesforce Tower is at its full height of 61 floors and is now the tallest building in the city. Prospective tenants may now tour the available floors and experience the breadth of vision glass, column free floors and floor heights and views. Tour activity remains strong and we expect the first tenants to occupy this building in the fourth quarter of 2017.

Washington, DC

Overall market conditions in the Washington CBD have not changed in any meaningful way over the past few quarters. Leasing activity remains very competitive primarily because there has been no significant increase in demand. In this environment we are pleased that during the fourth quarter of 2016 we signed leases for approximately 422,000 square feet including a 206,000 square foot, 15-year renewal with a GSA tenant.

In October 2016, we completed the sale of a portion of our 51% interest in Metropolitan Square. Following the transaction, we continue to own a 20% interest and have retained responsibility for property management and leasing. The joint venture plans to reposition this building, including updates to its lobby and common areas, which it believes will enhance the marketability and value of the building.

Our Reston Town Center properties are approximately 97.8% leased and continue to command a premium compared to the rents realized in nearby submarkets.

Leasing Statistics

The table below details the leases that commenced during the three and twelve months ended December 31, ~~2015 and 2014 not being reflected as Discontinued Operations in our Consolidated Statements~~2016:



	Three Months Ended December 31, 2016			Twelve Months Ended December 31, 2016
	Total Square Feet
Vacant space available at the beginning of the period	4,475,330			3,530,913
Property dispositions/properties taken out of service	(158,900		)	(370,010		)
Vacant space in properties acquired	—			511,789
Properties placed in-service	203,536			716,708
Leases expiring or terminated during the period	994,531			5,626,716
Total space available for lease	5,514,497			10,016,116
1^st generation leases	205,923			848,850
2^nd generation leases with new tenants	833,976			3,053,913
2^nd generation lease renewals	278,323			1,917,078
Total space leased (1)	1,318,222			5,819,841
Vacant space available for lease at the end of the period	4,196,275			4,196,275

Leases executed during the period, in square feet (2)	3,028,788			6,379,539

Second generation leasing information: (3)
Leases commencing during the period, in square feet	1,112,299			4,970,991
Weighted Average Lease Term	115 Months			103 Months
Weighted Average Free Rent Period	160 Days			110 Days
Total Transaction Costs Per Square Foot (4)		$71.78			$62.04
Increase in Gross Rents (5)	25.20		%	16.12		%
Increase in Net Rents (6)	39.01		%	24.55		%

__________________


(1)	Represents leases for which rental revenue recognition has commenced in accordance to GAAP during the three and twelve months ended December 31, 2016.

(2)

Represents leases executed during the three and twelve months ended December 31, 2016 for which the Company either (a) commenced rental revenue recognition in such period or (b) will commence rental 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 twelve months ended December 31, 2016 is 400,927 and 974,283, respectively.


(3)	Second generation leases are defined as leases for space that had previously been under lease by us. Of the 1,112,299 and 4,970,991 square feet of second generation leases that commenced during the three and twelve months ended December 31, 2016, respectively, 711,372 and 4,023,100 square feet were signed in prior periods for the three and twelve months ended December 31, 2016, respectively.


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

(5)

Represents the increase in gross rent (base rent plus expense reimbursements) on the new versus expired leases on the 653,690 and 3,750,026 square feet of second generation leases that had been occupied within the prior 12 months for the three and twelve months ended December 31, 2016, respectively; excludes leases that management considers temporary because the tenant is not expected to occupy the space on a long-term basis.

(6)

Represents the increase in net rent (gross rent less operating expenses) on the new versus expired leases on the 653,690 and 3,750,026 square feet of second generation leases that had been occupied within the prior 12 months for the three and twelve months ended December 31, 2016, respectively; excludes leases that management considers temporary because the tenant is not expected to occupy the space on a long-term basis.

For descriptions of ~~Operations (See Note 3 to the Consolidated Financial Statements).~~

Real estate is stated at depreciated cost. A variety of costs are incurred in the acquisition, development and leasing of properties. The cost of buildings and improvements includes the purchase price of property, legal fees and other acquisition costs. We expense costssignificant transactions that we incur to effect a business combination such as legal, due diligence and other closing related costs. Costs directly related to the development of properties are capitalized. Capitalized development costs include interest, internal wages, property taxes, insurance, and other project costs incurredcompleted during the period of development. After the determination is made to capitalize a cost, it is allocated to the specific component of a project that is benefited. Determination of when a development project commences and capitalization begins, and when a development project is substantially complete and held available for occupancy and capitalization must cease, involves a degree of judgment. Our capitalization policy on development properties is guided by guidance in ASC 835-20 “Capitalization of Interest” and ASC 970 “Real Estate-General.2016, see “Item 1. Business—Transactions During 2016.” ~~The costs of land and buildings under development include specifically identifiable costs.~~

Investments in Unconsolidated Joint Ventures

cash and improvements totaling approximately $17.7 million and will contribute cash totaling approximately $6.5 million for our initial 50% interest.

Stock Option and Incentive Plan

Business and Growth Strategies

Business Strategies

Growth Strategies

External Growth Strategies

our reputation gained through 47 years of successful operations and the stability and strength of our existing portfolio of properties;

our relationships with leading national corporations, universities and public institutions, including government agencies, seeking new facilities and development services;

our relationships with nationally recognized financial institutions that provide capital to the real estate industry;

our ability to act quickly on due diligence and financing;

our relationships with institutional buyers and sellers of high-quality real estate assets; and

our ability to procure entitlements from multiple municipalities to develop sites and attract land owners to sell or partner with us.

Opportunities to execute our external growth strategy fall into three categories:

Internal Growth Strategies

Policies with Respect to Certain Activities

The discussion below sets forth certain additional information regarding our investment, financing and other policies. These policies have been determined by BXP’s Board of Directors and, in general, may be amended or revised from time to time by the Board of Directors.

Investment Policies

Investments in Real Estate or Interests in Real Estate

We expect to continue to pursue our investment objectives primarily through the ownership of our current properties, development projects and other acquired properties. We currently intend to continue to invest primarily in developments of properties and acquisitions of existing improved properties or properties in need of redevelopment, and acquisitions of land that we believe have development potential, primarily in our existing markets of Boston, Los Angeles, New York, San Francisco and Washington, DC. We have explored and may continue to explore for future investment select domestic and international markets that exhibit these same traits. Future investment or development activities will not be limited to a specified percentage of our assets. We intend to engage in such future investment or development activities in a manner that is consistent with the maintenance of BXP’s status as a REIT for federal income tax purposes. In addition, we may purchase or lease income-producing commercial and other types of properties for long-term investment, expand and improve the real estate presently owned or other properties purchased, or sell such real estate properties, in whole or in part, when circumstances warrant. We do not have a policy that restricts the amount or percentage of assets that will be invested in any specific property, however, our investments may be restricted by our debt covenants.

Investments in Real Estate Mortgages

Securities of or Interests in Entities Primarily Engaged in Real Estate Activities

Dispositions

Our decision to dispose or partially dispose of properties is based upon the periodic review of our portfolio and the determination by the Board of Directors of BXP that such action would be in our best interests. Any decision to dispose of a property will be authorized by the Board of Directors of BXP or a committee thereof. Some holders of limited partnership interests in BPLP, could incur adverse tax consequences upon the sale of certain of our properties that differ from the tax consequences to BXP. Consequently, holders of limited partnership interests in BPLP may have different objectives regarding the appropriate pricing and timing of any such sale. Such different tax treatment derives in most cases from the fact that we acquired these properties in exchange for partnership interests in contribution transactions structured to allow the prior owners to defer taxable gain. Generally, this deferral continues so long as we do not dispose of the properties in a taxable transaction. Unless a sale by us of these properties is structured as a like-kind exchange under Section 1031 of the Internal Revenue Code or in a manner that otherwise allows deferral to continue, recognition of the deferred tax gain allocable to these prior owners is generally triggered by a sale. Only 767 Fifth Avenue (the General Motors Building) is subject to a tax protection agreement through June 2017, which may limit our ability to dispose of it or require us to pay damages to the prior owner in the event of a taxable sale.

Financing Policies

Policies with Respect to Other Activities

Sustainability

As one of the largest owners and developers of office properties in the United States, we actively work to promote our growth and operations in a sustainable and responsible manner across our five regions. Our sustainability strategy is broadly focused on the economic, social and environmental aspects of our activities, which include the design and construction of our new developments and the operation of our existing buildings. We are focused on creating healthy workspaces and high performance properties while simultaneously mitigating operational costs and the potential external impacts of energy, water, waste and greenhouse gas emissions. To that end, we have publicly adopted long-term energy, emissions, water and waste goals that establish aggressive reduction targets. As a company with a core strategy of long-term ownership, we are committed to charitable giving, volunteerism and public realm investments that make a positive impact on the communities in which we conduct business. Through these efforts, we demonstrate that operating and developing commercial real estate can be conducted with a conscious regard for the environment while mutually benefiting our tenants, investors, employees and the communities in which we operate.

We have been recognized as an industry leader in sustainability. During 2016, we ranked second among US Office companies in the Global Real Estate Sustainability Benchmark (“GRESB”) assessment. BXP was among the top 5% of all participants, ranking 36th out of 733 global companies. 2016 was the fifth straight year that BXP has ranked in the top quartile of GRESB assessment participants, earning another “Green Star” recognition and a GRESB 5-star Rating. During 2014 and 2015, BXP was selected by the National Association of Real Estate Investment Trusts (“NAREIT”) as a Leader in the Light Award winner. NAREITs annual Leader in the Light Awards honor NAREIT member companies that have demonstrated superior and sustained sustainability practices.

We are committed to transparent reporting of environmental, social and governance (“ESG”) sustainability indicators. BXP publishes an annual sustainability report that is aligned with the Global Reporting Initiative (“GRI”) reporting framework. Our sustainability strategy, key performance indicators, achievements and sustainability reports are available on our website at http://www.bostonproperties.com under the heading “Sustainability.” Except for the documents specifically incorporated by reference into this Annual Report on Form 10-K, information contained on our website or that can be accessed through our website is not incorporated by reference into this Annual Report on Form 10-K.

Competition

Our Hotel Property

Corporate Governance

Independent Director

Audit

Compensation

Nominating

and

Corporate

Governance

Bruce W. Duncan

Karen E. Dykstra

Carol B. Einiger

Dr. Jacob A. Frenkel

Joel I. Klein **

Matthew J. Lustig

Alan J. Patricof

Martin Turchin

David A. Twardock

X=Committee member, *=Chair, **=Lead Independent Director

The Board of Directors has adopted a Code of Business Conduct and Ethics, which governs business decisions made and actions taken by BXP’s directors, officers and employees. A copy of this code is available on our website at http://www.bostonproperties.com under the heading “Corporate Governance” and subheading “Code of Conduct and Ethics.” BXP intends to disclose on this website any amendment to, or waiver of, any provisions of this Code applicable to the directors and executive officers of BXP that would otherwise be required to be disclosed under the rules of the SEC or the New York Stock Exchange.

Recent Tax Legislation Affecting BXP and BPLP

Bipartisan Budget Act of 2015

On November 2, 2015, Congress enacted the Bipartisan Budget Act of 2015. Among other things, this Act changes the rules applicable to federal income tax audits of partnerships (such as BPLP) and the collection of any tax resulting from any such audits or other tax proceedings. Under the new rules, the partnership itself must pay any “imputed underpayments,” consisting of delinquent taxes, interest, and penalties deemed to arise out of an audit of the partnership, unless certain alternative methods are available and the partnership elects to utilize them.

The new rule generally does not apply to audits of taxable years beginning before January 1, 2018, and many of the details, including the means by which a partnership can avail itself of the alternative methods and the manner in which the alternative methods may apply to REITs, will be determined through Treasury Regulations. Proposed Treasury Regulations provide guidance as to how these rules apply to REITs, including clarification regarding the treatment of deficiency dividends. However, these regulations have not been finalized and the government has imposed an indefinite freeze on further regulatory action. Therefore, it is not clear at this time what effect this new legislation will have on us. However, it is possible that in the future, BXP or BPLP, or both, could be subject to, or otherwise bear the economic burden of, federal income tax, interest, and penalties resulting from a federal income tax audit as a result of the changes enacted by the Act.

Protecting Americans from Tax Hikes Act of 2015

On December 18, 2015, Congress enacted the Protecting Americans from Tax Hikes Act of 2015. This legislation modifies a number of rules pertaining to qualification as a REIT and the taxation of REITs and their shareholders, including, among others, the following changes to certain rules described in the disclosure set forth in our prospectus:

For tax years beginning after December 31, 2017, not more than 20% of our total assets may be represented by securities of one or more taxable REIT subsidiaries. At this time, the securities we own in our taxable REIT subsidiaries do not, in the aggregate, exceed 20% of the total value of our assets.

A 100% excise tax is imposed on “redetermined TRS service income,” which is income of a taxable REIT subsidiary attributable to services provided to, or on behalf of its associated REIT and which would otherwise be increased on distribution, apportionment, or allocation under Section 482 of the Internal Revenue Code of 1986, as amended (i.e., as a result of a determination that the income was not arm’s length).

Item 1A. Risk Factors.

Our performance and value are subject to risks associated with our real estate assets and with the real estate industry.

Our economic performance and the value of our real estate assets, and consequently the value of our securities, are subject to the risk that if our properties do not generate revenues sufficient to meet our operating expenses, including debt service and capital expenditures, our cash flow and ability to pay distributions to our securityholders will be adversely affected. The following factors, among others, may adversely affect the income generated by our properties:

downturns in the national, regional and local economic conditions (particularly increases in unemployment);

competition from other office, hotel, retail and residential buildings;

local real estate market conditions, such as oversupply or reduction in demand for office, hotel, retail or residential space;

changes in interest rates and availability of financing;

vacancies, changes in market rental rates and the need to periodically repair, renovate and re-let space;

changes in space utilization by our tenants due to technology, economic conditions and business culture;

increased operating costs, including insurance expense, utilities, real estate taxes, state and local taxes and heightened security costs;

civil disturbances, earthquakes and other natural disasters or terrorist acts or acts of war which may result in uninsured or underinsured losses or decrease the desirability to our tenants in impacted locations;

significant expenditures associated with each investment, such as debt service payments, real estate taxes, insurance and maintenance costs which are generally not reduced when circumstances cause a reduction in revenues from a property;

declines in the financial condition of our tenants and our ability to collect rents from our tenants; and

decreases in the underlying value of our real estate.

We are dependent upon the economic climates of our markets—Boston, Los Angeles, New York, San Francisco and Washington, DC.

office properties to governmental agencies and contractors, as well as legal firms. A reduction in spending by the federal government could result in reduced demand for office space and adversely affect our results of operations. In addition, in our New York market, we have historically leased properties to financial, legal and other professional firms. A significant downturn in one or more of these sectors could adversely affect our results of operations.

In addition, a significant economic downturn over a period of time could result in an event or change in circumstances that results in an impairment in the value of our properties or our investments in unconsolidated joint ventures. An impairment loss is recognized if the carrying amount of the asset (1) is not recoverable over its expected holding period and (2) exceeds its fair value. There can be no assurance that we will not take charges in the future related to the impairment of our assets or investments. Any future impairment could have a material adverse effect on our results of operations in the period in which the charge is taken.