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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
ý☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 20182019
¨☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from             to             
Commission File Number: 1-13087 (Boston Properties, Inc.)
Commission File Number: 0-50209 (Boston Properties Limited Partnership)
 
BOSTON PROPERTIES, INC.
BOSTON PROPERTIES LIMITED PARTNERSHIP
(Exact name of Registrants as specified in its charter)
 
Boston Properties, Inc.Delaware04-2473675
 (State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification Number)
   
Boston Properties Limited PartnershipDelaware04-3372948
 (State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification Number)
Prudential Center, 800 Boylston Street, Suite 1900, Boston, Massachusetts02199-8103
(Address of principal executive offices) (Zip Code)
(617)236-3300
(Registrants’ telephone number, including area code)
 
Securities registered pursuant to Section 12(b) of the Act:
RegistrantTitle of each classTrading Symbol(s)Name of each exchange on which registered
Boston Properties, Inc.Common Stock, par value $0.01 per shareBXPNew York Stock Exchange
Boston Properties, Inc.Depository Shares Each Representing 1/100th of a shareBXP PRBNew York Stock Exchange
of 5.25% Series B Cumulative Redeemable Preferred Stock, par value $0.01 per share


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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  
Boston Properties, Inc.:    Yesx   No  ¨☐         Boston Properties Limited Partnership:    Yesx    No  ¨☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    
Boston Properties, Inc.:    Yesx    No  ¨☐         Boston Properties Limited Partnership:    Yesx    No  ¨☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See definitionthe definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Boston Properties, Inc.:    
Large accelerated filerx         Accelerated filer  ¨☐         Non-accelerated filer  ¨☐         Smaller reporting company  ¨☐         Emerging growth company¨☐


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Boston Properties Limited Partnership:
Large accelerated filer  ¨☐         Accelerated filer  ¨☐Non-accelerated filerx           Smaller reporting company  ¨☐           Emerging growth company¨☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Boston Properties, Inc. ¨☐                 Boston Properties Limited Partnership ¨☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    
Boston Properties, Inc.:    Yes  ¨☐    No  x        Boston Properties Limited Partnership:    Yes  ¨☐    No  x
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Boston Properties, Inc.Common Stock, par value $0.01 per share154,419,806154,567,750
(Registrant)(Class)(Outstanding on August 2, 2018)2019)
 


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EXPLANATORY NOTE
This report combines the quarterly reports on Form 10-Q for the period ended June 30, 20182019 of Boston Properties, Inc. and Boston Properties Limited Partnership. Unless stated otherwise or the context otherwise requires, references to “BXP” mean Boston Properties, Inc., a Delaware corporation and real estate investment trust (“REIT”), and references to “BPLP” and the “Operating Partnership” mean Boston Properties Limited Partnership, a Delaware limited partnership. 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. BXP is the sole general partner and also a limited partner of BPLP. As the sole general partner of BPLP, BXP has exclusive control of BPLP’s day-to-day management. Therefore, unless stated otherwise or the context requires, references to the “Company,” “we,” “us” and “our” mean collectively BXP, BPLP and those entities/subsidiaries consolidated by BXP.
As of June 30, 2018,2019, BXP owned an approximate 89.7%89.6% ownership interest in BPLP. The remaining approximate 10.3%10.4% interest iswas owned by limited partners. The other limited partners of BPLP are (1) persons who contributed their direct or indirect interests in properties to BPLP in exchange for common units or preferred units of limited partnership interest in BPLP and/or (2) recipients of long term incentive plan units of BPLP pursuant to BXP’s Stock Option and Incentive Plans. Under the limited partnership agreement of BPLP, unitholders may present their common units of BPLP for redemption at any time (subject to restrictions agreed upon at the time of issuance of the units that may restrict such right for a period of time, generally one year from issuance). Upon presentation of a common unit for redemption, BPLP must redeem the unit for cash equal to the then value of a share of BXP’s common stock. In lieu of a cash redemption by BPLP, however, BXP may elect to acquire any common units so tendered by issuing shares of BXP common stock in exchange for the common units. If BXP so elects, its common stock will be exchanged for common units on a one-for-one basis. This one-for-one exchange ratio is subject to specified adjustments to prevent dilution. BXP generally expects that it will elect to issue its common stock in connection with each such presentation for redemption rather than having BPLP pay cash. With each such exchange or redemption, BXP’s percentage ownership in BPLP will increase. In addition, whenever BXP issues shares of its common stock other than to acquire common units of BPLP, BXP must contribute any net proceeds it receives to BPLP and BPLP must issue to BXP an equivalent number of common units of BPLP. This structure is commonly referred to as an umbrella partnership REIT, or UPREIT.
The Company believes that combining the quarterly reports on Form 10-Q of BXP and BPLP into this single report provides the following benefits:
enhances investors’ understanding of BXP and BPLP by enabling investors to view the business as a whole in the same manner as management views and operates the business;
eliminates duplicative disclosure and provides a more concise and readable presentation because a substantial portion of the disclosure applies to both BXP and BPLP; and
creates time and cost efficiencies through the preparation of one combined report instead of two separate reports.
The Company believes it is important to understand the few differences between BXP and BPLP in the context of how BXP and BPLP operate as a consolidated company. The financial results of BPLP are consolidated into the financial statements of BXP. BXP does not have any other significant assets, liabilities or operations, other than its investment in BPLP, nor does it have employees of its own. BPLP, not BXP, generally executes all significant business relationships other than transactions involving the securities of BXP. BPLP holds substantially all of the assets of BXP, including ownership interests in joint ventures. BPLP conducts the operations of the business and is structured as a partnership with no publicly traded equity. Except for the net proceeds from equity offerings by BXP, which are contributed to the capital of BPLP in exchange for common or preferred units of partnership in BPLP, as applicable, BPLP generates all remaining capital required by the Company’s business. These sources include working capital, net cash provided by operating activities, borrowings under its credit facilities, the issuance of secured and unsecured debt and equity securities and proceeds received from the disposition of certain properties and interests in joint ventures.
Shareholders’ equity, partners’ capital and noncontrolling interests are the main areas of difference between the consolidated financial statements of BXP and BPLP. The limited partners of BPLP are accounted for as partners’ capital in BPLP’s financial statements and as noncontrolling interests in BXP’s financial statements. The noncontrolling interests in BPLP’s financial statements include the interests of unaffiliated partners in various consolidated partnerships. The noncontrolling interests in BXP’s financial statements include the same


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noncontrolling interests at BPLP’s level and limited partners of BPLP. The differences between shareholders’ equity and partners’ capital result from differences in the equity issued at BXP and BPLP levels.
In addition, the consolidated financial statements of BXP and BPLP differ in total real estate assets resulting from previously applied acquisition accounting by BXP for the issuance of common stock in connection with non-sponsor redemptions of common units of BPLP. This accounting resulted in a step-up of the real estate assets at BXP. This resulted in a difference between the net real estate of BXP as compared to BPLP of approximately $311.9$295.0 million, or 1.9%1.7% at June 30, 20182019 and a corresponding difference in depreciation expense, impairments losses and gains on sales of real estate upon the sale of certain properties having an allocation of the real estate step-up. The acquisition accounting was nullified on a prospective basis beginning in 2009 as a result of the Company’s adoption of a new accounting standard requiring any future redemptions to be accounted for solely as an equity transaction.
To help investors better understand the key differences between BXP and BPLP, certain information for BXP and BPLP in this report has been separated, as set forth below:
Item 1. Financial Statements (unaudited), which includes the following specific disclosures for BXP and BPLP:
•Note 3. Real Estate;
•Note 7. Noncontrolling Interests;
•Note 89. Stockholders’ Equity / Partners’ Capital;
•Note 910. Earnings Per Share / Common Unit; and
•Note 1112. Segment Information
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations includes information specific to each entity, where applicable; and
Item 2. Liquidity and Capital Resources includes separate reconciliations of amounts to each entity’s financial statements, where applicable.
This report also includes separate Part I - Item 4. Controls and Procedures and Part II - Item 2. Unregistered Sales of Equity Securities and Use of Proceeds sections for each of BXP and BPLP, as well as separate Exhibits 12, 31 and 32 calculation of ratios of earnings to fixed charges and certifications for each of BXP and BPLP.




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BOSTON PROPERTIES, INC. AND BOSTON PROPERTIES LIMITED PARTNERSHIP
FORM 10-Q
for the quarter ended June 30, 20182019
TABLE OF CONTENTS
   
  Page
  
PART I. FINANCIAL INFORMATION
 
ITEM 1.
Financial Statements (unaudited)
1
   
Boston Properties, Inc. 
 
a) Consolidated Balance Sheets as of June 30, 20182019 and December 31, 20172018
21
 
b) Consolidated Statements of Operations for the three and six months ended June 30, 20182019 and 20172018
3
 
c) Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 20182019 and 20172018
4
 
d) Consolidated Statements of Stockholders’ Equity for the three and six months ended June 30, 20182019 and 20172018
5
 
e) Consolidated Statements of Cash Flows for the six months ended June 30, 20182019 and 20172018
67
   
Boston Properties Limited Partnership 
 
a) Consolidated Balance Sheets as of June 30, 20182019 and December 31, 20172018
89
 
b) Consolidated Statements of Operations for the three and six months ended June 30, 20182019 and 20172018
911
 
c) Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 20182019 and 20172018
1012
 
d) Consolidated Statements of Partners’ Capital and Noncontrolling Interests for the three and six months ended June 30, 20182019 and 20172018
1113
 
e) Consolidated Statements of Cash Flows for the six months ended June 30, 20182019 and 20172018
1215
   
Boston Properties, Inc. and Boston Properties Limited Partnership 
 
Notes to the Consolidated Financial Statements
1417
 




 
ITEM 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
4048
ITEM 3.
Quantitative and Qualitative Disclosures about Market Risk
8694
ITEM 4.
Controls and Procedures
8694
  
PART II. OTHER INFORMATION
 
ITEM 1.
Legal Proceedings
8796
ITEM 1A.
Risk Factors
8796
ITEM 2.
Unregistered Sales of Equity Securities and Use of Proceeds
8796
ITEM 3.
Defaults Upon Senior Securities
8897
ITEM 4.
Mine Safety Disclosures
8897
ITEM 5.
Other Information
8897
ITEM 6.
Exhibits
8998
  
SIGNATURES
9099


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PART I. FINANCIAL INFORMATION
ITEM 1—Financial Statements.





1

BOSTON PROPERTIES, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
  June 30, 2019 December 31, 2018
  (in thousands, except for share and par value amounts)
ASSETS    
Real estate, at cost (amounts related to variable interest entities (“VIEs”) of $6,426,427 and $7,481,015 at June 30, 2019 and December 31, 2018, respectively) $21,943,208
 $21,649,896
Right of use assets - finance leases (amount related to VIEs of $21,000 at June 30, 2019) 187,269
 —
Right of use assets - operating leases 149,839
 —
Less: accumulated depreciation (amounts related to VIEs of $(1,011,743) and $(965,500) at June 30, 2019 and December 31, 2018, respectively) (5,050,606) (4,897,777)
Total real estate 17,229,710
 16,752,119
Cash and cash equivalents (amounts related to VIEs of $245,444 and $296,806 at June 30, 2019 and December 31, 2018, respectively) 1,087,001
 543,359
Cash held in escrows 75,923
 95,832
Investments in securities 33,411
 28,198
Tenant and other receivables (amounts related to VIEs of $10,309 and $15,519 at June 30, 2019 and December 31, 2018, respectively) 87,727
 86,629
Note receivable 19,718
 19,468
Related party note receivable 80,000
 80,000
Accrued rental income (amounts related to VIEs of $283,891 and $272,466 at June 30, 2019 and December 31, 2018, respectively) 973,167
 934,896
Deferred charges, net (amounts related to VIEs of $226,426 and $263,402 at June 30, 2019 and December 31, 2018, respectively) 676,082
 678,724
Prepaid expenses and other assets (amounts related to VIEs of $25,635 and $26,513 at June 30, 2019 and December 31, 2018, respectively) 68,701
 80,943
Investments in unconsolidated joint ventures 936,835
 956,309
Total assets $21,268,275
 $20,256,477
LIABILITIES AND EQUITY    
Liabilities:    
Mortgage notes payable, net (amounts related to VIEs of $2,924,151 and $2,929,326 at June 30, 2019 and December 31, 2018, respectively) $2,956,833
 $2,964,572
Unsecured senior notes, net 8,390,708
 7,544,697
Unsecured line of credit —
 —
Unsecured term loan, net 498,700
 498,488
Lease liabilities - finance leases (amount related to VIEs of $20,107 at June 30, 2019) 172,902
 —
Lease liabilities - operating leases 199,344
 —
Accounts payable and accrued expenses (amounts related to VIEs of $45,917 and $75,786 at June 30, 2019 and December 31, 2018, respectively) 418,429
 276,645
Dividends and distributions payable 165,419
 165,114
Accrued interest payable 89,289
 89,267
Other liabilities (amounts related to VIEs of $128,504 and $200,344 at June 30, 2019 and December 31, 2018, respectively) 355,984
 503,726
Total liabilities 13,247,608
 12,042,509
Commitments and contingencies —
 —
Equity:    
Stockholders’ equity attributable to Boston Properties, Inc.:    
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BOSTON PROPERTIES, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
  June 30, 2018 December 31, 2017
  (in thousands, except for share and par value amounts)
ASSETS    
Real estate, at cost (amounts related to variable interest entities (“VIEs”) of $7,358,363 and $7,172,718 at June 30, 2018 and December 31, 2017, respectively) $21,526,520
 $21,096,642
Less: accumulated depreciation (amounts related to VIEs of $(910,381) and $(854,172) at June 30, 2018 and December 31, 2017, respectively) (4,745,590) (4,589,634)
Total real estate 16,780,930
 16,507,008
Cash and cash equivalents (amounts related to VIEs of $277,252 and $304,955 at June 30, 2018 and December 31, 2017, respectively) 472,555
 434,767
Cash held in escrows (amounts related to VIEs of $6,099 and $6,135 at June 30, 2018 and December 31, 2017, respectively) 254,505
 70,602
Investments in securities 30,063
 29,161
Tenant and other receivables (amounts related to VIEs of $17,130 and $27,057 at June 30, 2018 and December 31, 2017, respectively) 63,660
 92,186
Accrued rental income (amounts related to VIEs of $268,120 and $242,589 at June 30, 2018 and December 31, 2017, respectively) 912,652
 861,575
Deferred charges, net (amounts related to VIEs of $264,973 and $281,678 at June 30, 2018 and December 31, 2017, respectively) 678,319
 679,038
Prepaid expenses and other assets (amounts related to VIEs of $34,853 and $33,666 at June 30, 2018 and December 31, 2017, respectively) 85,972
 77,971
Investments in unconsolidated joint ventures 682,507
 619,925
Total assets $19,961,163
 $19,372,233
LIABILITIES AND EQUITY    
Liabilities:    
Mortgage notes payable, net (amounts related to VIEs of $2,934,336 and $2,939,183 at June 30, 2018 and December 31, 2017, respectively) $2,972,052
 $2,979,281
Unsecured senior notes, net 7,251,578
 7,247,330
Unsecured line of credit —
 45,000
Unsecured term loan, net 498,248
 —
Accounts payable and accrued expenses (amounts related to VIEs of $80,098 and $106,683 at June 30, 2018 and December 31, 2017, respectively) 327,067
 331,500
Dividends and distributions payable 139,263
 139,040
Accrued interest payable (amounts related to VIEs of $6,669 and $6,907 at June 30, 2018 and December 31, 2017, respectively) 96,844
 83,646
Other liabilities (amounts related to VIEs of $183,114 and $164,806 at June 30, 2018 and December 31, 2017, respectively) 462,869
 443,980
Total liabilities 11,747,921
 11,269,777
Commitments and contingencies —
 —
Equity:    
Stockholders’ equity attributable to Boston Properties, Inc.:    
Excess stock, $0.01 par value, 150,000,000 shares authorized, none issued or outstanding —
 —
Preferred stock, $0.01 par value, 50,000,000 shares authorized;    
5.25% Series B cumulative redeemable preferred stock, $0.01 par value, liquidation preference $2,500 per share, 92,000 shares authorized, 80,000 shares issued and outstanding at June 30, 2018 and December 31, 2017 200,000
 200,000
Common stock, $0.01 par value, 250,000,000 shares authorized, 154,490,429 and 154,404,186 issued and 154,411,529 and 154,325,286 outstanding at June 30, 2018 and December 31, 2017, respectively 1,544
 1,543
Additional paid-in capital 6,391,460
 6,377,908
Dividends in excess of earnings (649,747) (712,343)
Treasury common stock at cost, 78,900 shares at June 30, 2018 and December 31, 2017 (2,722) (2,722)
Accumulated other comprehensive loss (47,695) (50,429)
Total stockholders’ equity attributable to Boston Properties, Inc. 5,892,840
 5,813,957
Noncontrolling interests:    
Common units of Boston Properties Limited Partnership 621,221
 604,739
Property partnerships 1,699,181
 1,683,760
Total equity 8,213,242
 8,102,456
Total liabilities and equity $19,961,163
 $19,372,233
BOSTON PROPERTIES, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
  June 30, 2019 December 31, 2018
  (in thousands, except for share and par value amounts)
Excess stock, $0.01 par value, 150,000,000 shares authorized, none issued or outstanding —
 —
Preferred stock, $0.01 par value, 50,000,000 shares authorized;    
5.25% Series B cumulative redeemable preferred stock, $0.01 par value, liquidation preference $2,500 per share, 92,000 shares authorized, 80,000 shares issued and outstanding at June 30, 2019 and December 31, 2018 200,000
 200,000
Common stock, $0.01 par value, 250,000,000 shares authorized, 154,642,030 and 154,537,378 issued and 154,563,130 and 154,458,478 outstanding at June 30, 2019 and December 31, 2018, respectively 1,546
 1,545
Additional paid-in capital 6,278,961
 6,407,623
Dividends in excess of earnings (710,592) (675,534)
Treasury common stock at cost, 78,900 shares at June 30, 2019 and December 31, 2018 (2,722) (2,722)
Accumulated other comprehensive loss (51,340) (47,741)
Total stockholders’ equity attributable to Boston Properties, Inc. 5,715,853
 5,883,171
Noncontrolling interests:    
Common units of Boston Properties Limited Partnership 608,593
 619,352
Property partnerships 1,696,221
 1,711,445
Total equity 8,020,667
 8,213,968
Total liabilities and equity $21,268,275
 $20,256,477
























The accompanying notes are an integral part of these consolidated financial statements.

2

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BOSTON PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended June 30, Six months ended June 30,Three months ended June 30, Six months ended June 30,
2018 2017 2018 20172019 2018 2019 2018
(in thousands, except for per share amounts)(in thousands, except for per share amounts)
Revenue              
Rental       
Lease$680,189
 $—
 $1,359,440
 $—
Base rent$516,439
 $520,542
 $1,035,946
 $1,024,104
—
 516,439
 —
 1,035,946
Recoveries from tenants95,259
 89,163
 190,377
 178,327
—
 95,259
 —
 190,377
Parking and other26,904
 26,462
 53,038
 52,072
26,319
 26,904
 51,225
 53,038
Total rental revenue638,602
 636,167
 1,279,361
 1,254,503
Hotel revenue14,607
 13,375
 23,709
 20,795
14,844
 14,607
 23,782
 23,709
Development and management services9,305
 7,365
 17,710
 13,837
9,986
 9,305
 19,263
 17,710
Direct reimbursements of payroll and related costs from management services contracts1,970
 —
 4,855
 —
2,403
 1,970
 5,798
 4,855
Total revenue664,484
 656,907
 1,325,635
 1,289,135
733,741
 664,484
 1,459,508
 1,325,635
Expenses              
Operating              
Rental237,790
 230,454
 478,119
 458,741
257,971
 237,790
 515,488
 478,119
Hotel8,741
 8,404
 16,814
 15,495
9,080
 8,741
 16,943
 16,814
General and administrative28,468
 27,141
 64,362
 58,527
35,071
 28,468
 76,833
 64,362
Payroll and related costs from management services contracts1,970
 —
 4,855
 —
2,403
 1,970
 5,798
 4,855
Transaction costs474
 299
 495
 333
417
 474
 877
 495
Depreciation and amortization156,417
 151,919
 322,214
 311,124
177,411
 156,417
 342,005
 322,214
Total expenses433,860
 418,217
 886,859
 844,220
482,353
 433,860
 957,944
 886,859
Operating income230,624
 238,690
 438,776
 444,915
Other income (expense)              
Income from unconsolidated joint ventures769
 3,108
 1,230
 6,192
47,964
 769
 48,177
 1,230
Gains on sales of real estate1,686
 18,292
 781
 114,689
Interest and other income2,579
 1,504
 4,227
 2,118
3,615
 2,579
 7,368
 4,227
Gains from investments in securities505
 730
 379
 1,772
1,165
 505
 4,134
 379
Gains from early extinguishments of debt—
 14,354
 —
 14,354
Impairment loss—
 —
 (24,038) —
Interest expense(92,204) (95,143) (182,424) (190,677)(102,357) (92,204) (203,366) (182,424)
Income before gains on sales of real estate142,273
 163,243
 262,188
 278,674
Gains on sales of real estate18,292
 3,767
 114,689
 3,900
Net income160,565
 167,010
 376,877
 282,574
203,461
 160,565
 334,620
 376,877
Net income attributable to noncontrolling interests              
Noncontrolling interests in property partnerships(14,400) (15,203) (31,634) (19,627)(17,482) (14,400) (36,312) (31,634)
Noncontrolling interest—common units of Boston Properties Limited Partnership(14,859) (15,473) (35,311) (26,933)(19,036) (14,859) (30,627) (35,311)
Net income attributable to Boston Properties, Inc.131,306
 136,334
 309,932
 236,014
166,943
 131,306
 267,681
 309,932
Preferred dividends(2,625) (2,625) (5,250) (5,250)(2,625) (2,625) (5,250) (5,250)
Net income attributable to Boston Properties, Inc. common shareholders$128,681
 $133,709
 $304,682
 $230,764
$164,318
 $128,681
 $262,431
 $304,682
Basic earnings per common share attributable to Boston Properties, Inc. common shareholders:              
Net income$0.83
 $0.87
 $1.97
 $1.50
$1.06
 $0.83
 $1.70
 $1.97
Weighted average number of common shares outstanding154,415
 154,177
 154,400
 154,019
154,555
 154,415
 154,540
 154,400
Diluted earnings per common share attributable to Boston Properties, Inc. common shareholders:              
Net income$0.83
 $0.87
 $1.97
 $1.50
$1.06
 $0.83
 $1.69
 $1.97
Weighted average number of common and common equivalent shares outstanding154,571
 154,331
 154,638
 154,273
154,874
 154,571
 154,859
 154,638
       
Dividends per common share$0.80
 $0.75
 $1.60
 $1.50
The accompanying notes are an integral part of these consolidated financial statements.

3

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BOSTON PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
 
Three months ended June 30, Six months ended June 30,Three months ended June 30, Six months ended June 30,
2018 2017 2018 20172019 2018 2019 2018
(in thousands)(in thousands)
Net income$160,565
 $167,010
 $376,877
 $282,574
$203,461
 $160,565
 $334,620
 $376,877
Other comprehensive income (loss):              
Effective portion of interest rate contracts—
 (6,313) —
 (6,133)(4,426) —
 (7,054) —
Amortization of interest rate contracts (1)1,666
 1,397
 3,332
 2,703
1,666
 1,666
 3,332
 3,332
Other comprehensive income (loss)1,666
 (4,916) 3,332
 (3,430)(2,760) 1,666
 (3,722) 3,332
Comprehensive income162,231
 162,094
 380,209
 279,144
200,701
 162,231
 330,898
 380,209
Net income attributable to noncontrolling interests(29,259) (30,676) (66,945) (46,560)(36,518) (29,259) (66,939) (66,945)
Other comprehensive (income) loss attributable to noncontrolling interests(299) 2,738
 (598) 2,520
Other comprehensive loss (income) attributable to noncontrolling interests154
 (299) 123
 (598)
Comprehensive income attributable to Boston Properties, Inc.$132,673
 $134,156
 $312,666
 $235,104
$164,337
 $132,673
 $264,082
 $312,666
_______________
(1) Amounts reclassified from comprehensive income primarily to interest expense within the Boston Properties, Inc.’s Consolidated Statements of Operations.































































The accompanying notes are an integral part of these consolidated financial statements.

4

Table of Content

BOSTON PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited and in thousands)
BOSTON PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited and in thousands)

BOSTON PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited and in thousands)

Common Stock Preferred Stock Additional Paid-in Capital Dividends in Excess of Earnings Treasury Stock, at cost Accumulated Other Comprehensive Loss Noncontrolling Interests - Common Units Noncontrolling Interests - Property Partnerships Total
Common Stock Preferred Stock 
Additional
Paid-in
Capital
 
Dividends in
Excess of
Earnings
 
Treasury
Stock,
at cost
 
Accumulated
Other
Comprehensive Loss
 
Noncontrolling
Interests
 TotalShares Amount 
Equity, March 31, 2019154,515
 $1,545
 $200,000
 $6,414,612
 $(728,083) $(2,722) $(48,734) $623,061
 $1,710,608
 $8,170,287
Redemption of operating partnership units to common stock21
 1
 —
 719
 —
 —
 —
 (720) —
 —
Allocated net income for the year—
 —
 —
 —
 166,951
 —
 —
 19,028
 17,482
 203,461
Dividends/distributions declared—
 —
 —
 —
 (149,460) —
 —
 (17,206) —
 (166,666)
Shares issued pursuant to stock purchase plan—
 —
 —
 —
 —
 —
 —
 —
 —
 —
Net activity from stock option and incentive plan27
 —
 —
 1,495
 —
 —
 —
 9,368
 —
 10,863
Acquisition of noncontrolling interest in property partnership—
 —
 —
 (162,505) —
 —
 —
 —
 (24,501) (187,006)
Contributions from noncontrolling interests in property partnerships—
 —
 —
 —
 —
 —
 —
 —
 7,761
 7,761
Distributions to noncontrolling interests in property partnerships—
 —
 —
 —
 —
 —
 —
 —
 (15,273) (15,273)
Effective portion of interest rate contracts—
 —
 —
 —
 —
 —
 (3,973) (453) —
 (4,426)
Amortization of interest rate contracts—
 —
 —
 —
 —
 —
 1,367
 155
 144
 1,666
Reallocation of noncontrolling interest—
 —
 —
 24,640
 —
 —
 —
 (24,640) —
 —
Equity, June 30, 2019154,563
 $1,546
 $200,000
 $6,278,961
 $(710,592) $(2,722) $(51,340) $608,593
 $1,696,221
 $8,020,667
Shares Amount Preferred Stock 
Additional
Paid-in
Capital
 
Dividends in
Excess of
Earnings
 
Treasury
Stock,
at cost
 
Accumulated
Other
Comprehensive Loss
 
Noncontrolling
Interests
 Total

                  
Equity, December 31, 2017154,325
 $1,543
 
Cumulative effect of a change in accounting principle—
 —
 —
 —
 4,933
 —
 —
 563
 5,496
Equity, March 31, 2018154,362
 $1,544
 $200,000
 $6,384,147
 $(654,879) $(2,722) $(49,062) $619,347
 $1,685,715
 $8,184,090
Redemption of operating partnership units to common stock35
 1
 —
 1,195
 —
 —
 —
 (1,196) —
11
 —
 —
 364
 —
 —
 —
 (364) —
 —
Allocated net income for the year—
 —
 —
 —
 309,932
 —
 —
 66,945
 376,877
—
 —
 —
 —
 131,286
 —
 —
 14,879
 14,400
 160,565
Dividends/distributions declared—
 —
 —
 —
 (252,269) —
 —
 (28,708) (280,977)—
 —
 —
 —
 (126,154) —
 —
 (14,357) —
 (140,511)
Shares issued pursuant to stock purchase plan3
 —
 —
 429
 —
 —
 —
 —
 429
—
 —
 —
 —
 —
 —
 —
 —
 —
 —
Net activity from stock option and incentive plan49
 —
 —
 600
 —
 —
 —
 21,530
 22,130
39
 —
 —
 785
 —
 —
 —
 7,725
 —
 8,510
Contributions from noncontrolling interests in property partnerships—
 —
 —
 —
 —
 —
 —
 27,532
 27,532
—
 —
 —
 —
 —
 —
 —
 —
 12,265
 12,265
Distributions to noncontrolling interests in property partnerships—
 —
 —
 —
 —
 —
 —
 (44,033) (44,033)—
 —
 —
 —
 —
 —
 —
 —
 (13,343) (13,343)
Amortization of interest rate contracts—
 —
 —
 —
 —
 —
 2,734
 598
 3,332
—
 —
 —
 —
 —
 —
 1,367
 155
 144
 1,666
Reallocation of noncontrolling interest—
 —
 —
 11,328
 —
 —
 —
 (11,328) —
—
 —
 —
 6,164
 —
 —
 —
 (6,164) —
 —
Equity, June 30, 2018154,412
 $1,544
 $200,000
 $6,391,460
 $(649,747) $(2,722) $(47,695) $2,320,402
 $8,213,242
154,412
 $1,544
 $200,000
 $6,391,460
 $(649,747) $(2,722) $(47,695) $621,221
 $1,699,181
 $8,213,242
                 
Equity, December 31, 2016153,790
 $1,538
 $200,000
 $6,333,424
 $(693,694) $(2,722) $(52,251) $2,145,629
 $7,931,924
Redemption of operating partnership units to common stock481
 5
 —
 16,417
 —
 —
 —
 (16,422) —
Allocated net income for the year—
 —
 —
 —
 236,014
 —
 —
 46,560
 282,574
Dividends/distributions declared—
 —
 —
 —
 (236,368) —
 —
 (26,977) (263,345)
Shares issued pursuant to stock purchase plan3
 —
 —
 373
 —
 —
 —
 —
 373
Net activity from stock option and incentive plan34
 —
 —
 1,980
 —
 —
 —
 19,188
 21,168
Cumulative effect of a change in accounting principle—
 —
 —
 —
 (272) —
 —
 (1,763) (2,035)
Contributions from noncontrolling interests in property partnerships—
 —
 —
 —
 —
 —
 —
 133,072
 133,072
Distributions to noncontrolling interests in property partnerships—
 —
 —
 —
 —
 —
 —
 (26,949) (26,949)
Effective portion of interest rate contracts—
 —
 —
 —
 —
 —
 (3,301) (2,832) (6,133)
Amortization of interest rate contracts—
 —
 —
 —
 —
 —
 2,391
 312
 2,703
Reallocation of noncontrolling interest—
 —
 —
 10,840
 —
 —
 —
 (10,840) —
Equity, June 30, 2017154,308
 $1,543
 $200,000
 $6,363,034
 $(694,320) $(2,722) $(53,161) $2,258,978
 $8,073,352



Table of Content




BOSTON PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited and in thousands)

 Common Stock Preferred Stock Additional Paid-in Capital Dividends in Excess of Earnings Treasury Stock, at cost Accumulated Other Comprehensive Loss Noncontrolling Interests - Common Units Noncontrolling Interests - Property Partnerships Total
 Shares Amount  
Equity, December 31, 2018154,458
 $1,545
 $200,000
 $6,407,623
 $(675,534) $(2,722) $(47,741) $619,352
 $1,711,445
 $8,213,968
Cumulative effect of a change in accounting principle—
 —
 —
 —
 (3,864) —
 —
 (445) (70) (4,379)
Redemption of operating partnership units to common stock35
 1
 —
 1,211
 —
 —
 —
 (1,212) —
 —
Allocated net income for the year—
 —
 —
 —
 267,681
 —
 —
 30,627
 36,312
 334,620
Dividends/distributions declared—
 —
 —
 —
 (298,875) —
 —
 (34,391) —
 (333,266)
Shares issued pursuant to stock purchase plan4
 —
 —
 373
 —
 —
 —
 —
 —
 373
Net activity from stock option and incentive plan66
 —
 —
 4,554
 —
 —
 —
 22,778
 —
 27,332
Acquisition of noncontrolling interest in property partnership—
 —
 —
 (162,505) —
 —
 —
 —
 (24,501) (187,006)
Contributions from noncontrolling interests in property partnerships—
 —
 —
 —
 —
 —
 —
 —
 12,148
 12,148
Distributions to noncontrolling interests in property partnerships—
 —
 —
 —
 —
 —
 —
 —
 (39,401) (39,401)
Effective portion of interest rate contracts—
 —
 —
 —
 —
 —
 (6,332) (722) —
 (7,054)
Amortization of interest rate contracts—
 —
 —
 —
 —
 —
 2,733
 311
 288
 3,332
Reallocation of noncontrolling interest—
 —
 —
 27,705
 —
 —
 —
 (27,705) —
 —
Equity, June 30, 2019154,563
 $1,546
 $200,000
 $6,278,961
 $(710,592) $(2,722) $(51,340) $608,593
 $1,696,221
 $8,020,667
                    
Equity, December 31, 2017154,325
 $1,543
 $200,000
 $6,377,908
 $(712,343) $(2,722) $(50,429) $604,739
 $1,683,760
 $8,102,456
Cumulative effect of a change in accounting principle—
 —
 —
 —
 4,933
 —
 —
 563
 —
 5,496
Redemption of operating partnership units to common stock35
 1
 —
 1,195
 —
 —
 —
 (1,196) —
 —
Allocated net income for the year—
 —
 —
 —
 309,932
 —
 —
 35,311
 31,634
 376,877
Dividends/distributions declared—
 —
 —
 —
 (252,269) —
 —
 (28,708) —
 (280,977)
Shares issued pursuant to stock purchase plan3
 —
 —
 429
 —
 —
 —
 —
 —
 429
Net activity from stock option and incentive plan49
 —
 —
 600
 —
 —
 —
 21,530
 —
 22,130
Contributions from noncontrolling interests in property partnerships—
 —
 —
 —
 —
 —
 —
 —
 27,532
 27,532
Distributions to noncontrolling interests in property partnerships—
 —
 —
 —
 —
 —
 —
 —
 (44,033) (44,033)
Amortization of interest rate contracts—
 —
 —
 —
 —
 —
 2,734
 310
 288
 3,332
Reallocation of noncontrolling interest—
 —
 —
 11,328
 —
 —
 —
 (11,328) —
 —
Equity, June 30, 2018154,412
 $1,544
 $200,000
 $6,391,460
 $(649,747) $(2,722) $(47,695) $621,221
 $1,699,181
 $8,213,242



The accompanying notes are an integral part of these consolidated financial statements.

5

Table of Content


BOSTON PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
                         
For the six months ended June 30,For the six months ended June 30,
2018 20172019 2018
(in thousands)(in thousands)
Cash flows from operating activities:      
Net income$376,877
 $282,574
$334,620
 $376,877
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation and amortization322,214
 311,124
342,005
 322,214
Amortization of right of use assets - operating leases1,213
 —
Impairment loss24,038
 —
Non-cash compensation expense23,243
 19,237
25,444
 23,243
Income from unconsolidated joint ventures(1,230) (6,192)(48,177) (1,230)
Distributions of net cash flow from operations of unconsolidated joint ventures1,663
 2,905
3,890
 1,663
Gains from investments in securities(379) (1,772)(4,134) (379)
Gains from early extinguishments of debt—
 (14,354)
Non-cash portion of interest expense10,607
 (11,979)10,900
 10,607
Gains on sales of real estate(114,689) (3,900)(781) (114,689)
Change in assets and liabilities:      
Tenant and other receivables, net33,012
 2,033
(11,514) 33,012
Note receivable(250) —
Accrued rental income, net(45,759) (19,348)(37,473) (45,759)
Prepaid expenses and other assets(4,641) 36,223
(9,319) (4,641)
Lease liabilities - operating leases780
 —
Accounts payable and accrued expenses(9,899) (2,608)17,458
 (9,899)
Accrued interest payable12,999
 (158,761)(78) 12,999
Other liabilities11,571
 (33,121)(30,503) 11,571
Tenant leasing costs(54,743) (37,252)(52,515) (54,743)
Total adjustments183,969
 82,235
230,984
 183,969
Net cash provided by operating activities560,846
 364,809
565,604
 560,846
Cash flows from investing activities:      
Acquisition of real estate—
 (15,953)(43,061) —
Construction in progress(380,565) (297,747)(203,259) (380,565)
Building and other capital improvements(96,730) (100,808)(79,943) (96,730)
Tenant improvements(83,982) (107,533)(115,940) (83,982)
Proceeds from sales of real estate141,249
 17,049
60,398
 141,249
Capital contributions to unconsolidated joint ventures(65,250) (41,491)(50,068) (65,250)
Capital distributions from unconsolidated joint ventures105,000
 —
Investments in securities, net(523) (1,195)(1,079) (523)
Net cash used in investing activities(485,801) (547,678)(327,952) (485,801)
      
      
      
6

Table of Content


BOSTON PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
BOSTON PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
BOSTON PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the six months ended June 30,For the six months ended June 30,
2018 20172019 2018
(in thousands)(in thousands)
Cash flows from financing activities:      
Proceeds from mortgage notes payable—
 2,300,000
Repayments of mortgage notes payable(9,192) (1,308,708)(9,702) (9,192)
Proceeds from unsecured senior notes848,428
 —
Borrowings on unsecured line of credit345,000
 430,000
380,000
 345,000
Repayments of unsecured line of credit(390,000) (430,000)(380,000) (390,000)
Proceeds from unsecured term loan500,000
 —
—
 500,000
Repayments of mezzanine notes payable—
 (306,000)
Repayments of outside members’ notes payable—
 (70,424)
Payments on capital lease obligations—
 (548)
Payments on finance lease obligations(628) —
Payments on real estate financing transactions(960) (1,013)—
 (960)
Deposit on mortgage note payable interest rate lock—
 (23,200)
Return of deposit on mortgage note payable interest rate lock—
 23,200
Deferred financing costs(263) (43,635)(7,112) (263)
Debt prepayment and extinguishment costs—
 (90)
Net proceeds from equity transactions(684) (181)2,261
 (684)
Dividends and distributions(280,754) (263,221)(332,961) (280,754)
Contributions from noncontrolling interests in property partnerships27,532
 23,496
12,148
 27,532
Distributions to noncontrolling interests in property partnerships(44,033) (27,115)(39,401) (44,033)
Acquisition of noncontrolling interest in property partnership(186,952) —
Net cash provided by financing activities146,646
 302,561
286,081
 146,646
Net increase in cash and cash equivalents and cash held in escrows221,691
 119,692
523,733
 221,691
Cash and cash equivalents and cash held in escrows, beginning of period505,369
 420,088
639,191
 505,369
Cash and cash equivalents and cash held in escrows, end of period$727,060
 $539,780
$1,162,924
 $727,060
      
Reconciliation of cash and cash equivalents and cash held in escrows:      
Cash and cash equivalents, beginning of period$434,767
 $356,914
$543,359
 $434,767
Cash held in escrows, beginning of period70,602
 63,174
95,832
 70,602
Cash and cash equivalents and cash held in escrows, beginning of period$505,369
 $420,088
$639,191
 $505,369
      
Cash and cash equivalents, end of period$472,555
 $492,435
$1,087,001
 $472,555
Cash held in escrows, end of period254,505
 47,345
75,923
 254,505
Cash and cash equivalents and cash held in escrows, end of period$727,060
 $539,780
$1,162,924
 $727,060
      
Supplemental disclosures:      
Cash paid for interest$192,898
 $388,045
$216,754
 $192,898
Interest capitalized$34,999
 $26,628
$25,069
 $34,999
Non-cash investing and financing activities:      
Write-off of fully depreciated real estate$(78,900) $(86,135)$(61,283) $(78,900)
Additions to real estate included in accounts payable and accrued expenses$326
 $22,994
$115,150
 $326
Real estate acquired through capital lease$—
 $28,962
Outside members’ notes payable contributed to noncontrolling interests in property partnerships$—
 $109,576
Real estate acquired through finance lease$122,563
 $—
Dividends and distributions declared but not paid$139,263
 $130,432
$165,419
 $139,263
Conversions of noncontrolling interests to stockholders’ equity$1,196
 $16,422
$1,212
 $1,196
Issuance of restricted securities to employees$37,342
 $35,945
$38,923
 $37,342



The accompanying notes are an integral part of these consolidated financial statements.

7

Table of Content




BOSTON PROPERTIES LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEETS
(Unaudited)
  June 30, 2018 December 31, 2017
  (in thousands, except for unit amounts)
ASSETS    
Real estate, at cost (amounts related to variable interest entities (“VIEs”) of $7,358,363 and $7,172,718 at June 30, 2018 and December 31, 2017, respectively) $21,118,909
 $20,685,164
Less: accumulated depreciation (amounts related to VIEs of $(910,381) and $(854,172) at June 30, 2018 and December 31, 2017, respectively) (4,649,907) (4,496,959)
Total real estate 16,469,002
 16,188,205
Cash and cash equivalents (amounts related to VIEs of $277,252 and $304,955 at June 30, 2018 and December 31, 2017, respectively) 472,555
 434,767
Cash held in escrows (amounts related to VIEs of $6,099 and $6,135 at June 30, 2018 and December 31, 2017, respectively) 254,505
 70,602
Investments in securities 30,063
 29,161
Tenant and other receivables (amounts related to VIEs of $17,130 and $27,057 at June 30, 2018 and December 31, 2017, respectively) 63,660
 92,186
Accrued rental income (amounts related to VIEs of $268,120 and $242,589 at June 30, 2018 and December 31, 2017, respectively) 912,652
 861,575
Deferred charges, net (amounts related to VIEs of $264,973 and $281,678 at June 30, 2018 and December 31, 2017, respectively) 678,319
 679,038
Prepaid expenses and other assets (amounts related to VIEs of $34,853 and $33,666 at June 30, 2018 and December 31, 2017, respectively) 85,972
 77,971
Investments in unconsolidated joint ventures 682,507
 619,925
Total assets $19,649,235
 $19,053,430
LIABILITIES AND CAPITAL    
Liabilities:    
Mortgage notes payable, net (amounts related to VIEs of $2,934,336 and $2,939,183 at June 30, 2018 and December 31, 2017, respectively) $2,972,052
 $2,979,281
Unsecured senior notes, net 7,251,578
 7,247,330
Unsecured line of credit —
 45,000
Unsecured term loan 498,248
 —
Accounts payable and accrued expenses (amounts related to VIEs of $80,098 and $106,683 at June 30, 2018 and December 31, 2017, respectively) 327,067
 331,500
Distributions payable 139,263
 139,040
Accrued interest payable (amounts related to VIEs of $6,669 and $6,907 at June 30, 2018 and December 31, 2017, respectively) 96,844
 83,646
Other liabilities (amounts related to VIEs of $183,114 and $164,806 at June 30, 2018 and December 31, 2017, respectively) 462,869
 443,980
Total liabilities 11,747,921
 11,269,777
Commitments and contingencies —
 —
Noncontrolling interests:    
Redeemable partnership units—16,831,182 and 16,810,378 common units and 992,387 and 818,343 long term incentive units outstanding at redemption value at June 30, 2018 and December 31, 2017, respectively 2,235,432
 2,292,263
Capital:    
5.25% Series B cumulative redeemable preferred units, liquidation preference $2,500 per unit, 80,000 units issued and outstanding at June 30, 2018 and December 31, 2017 193,623
 193,623
Boston Properties Limited Partnership partners’ capital—1,722,351 and 1,719,540 general partner units and 152,689,178 and 152,605,746 limited partner units outstanding at June 30, 2018 and December 31, 2017, respectively 3,773,078
 3,614,007
Noncontrolling interests in property partnerships 1,699,181
 1,683,760
Total capital 5,665,882
 5,491,390
Total liabilities and capital $19,649,235
 $19,053,430
BOSTON PROPERTIES LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEETS
(Unaudited)
  June 30, 2019 December 31, 2018
  (in thousands, except for unit amounts)
ASSETS    
Real estate, at cost (amounts related to variable interest entities (“VIEs”) of $6,426,427 and $7,481,015 at June 30, 2019 and December 31, 2018, respectively) $21,547,409
 $21,251,540
Right of use assets - finance leases (amount related to VIEs of $21,000 at June 30, 2019) 187,269
 —
Right of use assets - operating leases 149,839
 —
Less: accumulated depreciation (amounts related to VIEs of $(1,011,743) and $(965,500) at June 30, 2019 and December 31, 2018, respectively) (4,949,822) (4,800,475)
Total real estate 16,934,695
 16,451,065
Cash and cash equivalents (amounts related to VIEs of $245,444 and $296,806 at June 30, 2019 and December 31, 2018, respectively) 1,087,001
 543,359
Cash held in escrows 75,923
 95,832
Investments in securities 33,411
 28,198
Tenant and other receivables (amounts related to VIEs of $10,309 and $15,519 at June 30, 2019 and December 31, 2018, respectively) 87,727
 86,629
Note receivable 19,718
 19,468
Related party note receivable 80,000
 80,000
Accrued rental income (amounts related to VIEs of $283,891 and $272,466 at June 30, 2019 and December 31, 2018, respectively) 973,167
 934,896
Deferred charges, net (amounts related to VIEs of $226,426 and $263,402 at June 30, 2019 and December 31, 2018, respectively) 676,082
 678,724
Prepaid expenses and other assets (amounts related to VIEs of $25,635 and $26,513 at June 30, 2019 and December 31, 2018, respectively) 68,701
 80,943
Investments in unconsolidated joint ventures 936,835
 956,309
Total assets $20,973,260
 $19,955,423
LIABILITIES AND CAPITAL    
Liabilities:    
Mortgage notes payable, net (amounts related to VIEs of $2,924,151 and $2,929,326 at June 30, 2019 and December 31, 2018, respectively) $2,956,833
 $2,964,572
Unsecured senior notes, net 8,390,708
 7,544,697
Unsecured line of credit —
 —
Unsecured term loan, net 498,700
 498,488
Lease liabilities - finance leases (amount related to VIEs of $20,107 at June 30, 2019) 172,902
 —
Lease liabilities - operating leases 199,344
 —
Accounts payable and accrued expenses (amounts related to VIEs of $45,917 and $75,786 at June 30, 2019 and December 31, 2018, respectively) 418,429
 276,645
Distributions payable 165,419
 165,114
Accrued interest payable 89,289
 89,267
Other liabilities (amounts related to VIEs of $128,504 and $200,344 at June 30, 2019 and December 31, 2018, respectively) 355,984
 503,726
Total liabilities 13,247,608
 12,042,509
Commitments and contingencies —
 —
Noncontrolling interests:    
Redeemable partnership units—16,828,230 and 16,783,558 common units and 1,189,117 and 991,577 long term incentive units outstanding at redemption value at June 30, 2019 and December 31, 2018, respectively 2,324,238
 2,000,591

Table of Content

BOSTON PROPERTIES LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEETS
(Unaudited)
  June 30, 2019 December 31, 2018
  (in thousands, except for unit amounts)
Capital:    
5.25% Series B cumulative redeemable preferred units, liquidation preference $2,500 per unit, 80,000 units issued and outstanding at June 30, 2019 and December 31, 2018 193,623
 193,623
Boston Properties Limited Partnership partners’ capital — 1,725,805 and 1,722,336 general partner units and 152,837,325 and 152,736,142 limited partner units outstanding at June 30, 2019 and December 31, 2018, respectively 3,562,910
 4,054,996
Accumulated other comprehensive loss (51,340) (47,741)
Total partners’ capital 3,705,193
 4,200,878
Noncontrolling interests in property partnerships 1,696,221
 1,711,445
Total capital 5,401,414
 5,912,323
Total liabilities and capital $20,973,260
 $19,955,423































The accompanying notes are an integral part of these consolidated financial statements.

8

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BOSTON PROPERTIES LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 Three months ended June 30, Six months ended June 30,
 2019 2018 2019 2018
 (in thousands, except for per unit amounts)
Revenue       
Lease$680,189
 $—
 $1,359,440
 $—
Base rent—
 516,439
 —
 1,035,946
Recoveries from tenants—
 95,259
 —
 190,377
Parking and other26,319
 26,904
 51,225
 53,038
Hotel revenue14,844
 14,607
 23,782
 23,709
Development and management services9,986
 9,305
 19,263
 17,710
Direct reimbursements of payroll and related costs from management services contracts2,403
 1,970
 5,798
 4,855
Total revenue733,741
 664,484
 1,459,508
 1,325,635
Expenses       
Operating       
Rental257,971
 237,790
 515,488
 478,119
Hotel9,080
 8,741
 16,943
 16,814
General and administrative35,071
 28,468
 76,833
 64,362
Payroll and related costs from management services contracts2,403
 1,970
 5,798
 4,855
Transaction costs417
 474
 877
 495
Depreciation and amortization175,199
 154,474
 337,881
 318,327
Total expenses480,141
 431,917
 953,820
 882,972
Other income (expense)       
Income from unconsolidated joint ventures47,964
 769
 48,177
 1,230
Gains on sales of real estate1,835
 18,770
 930
 117,677
Interest and other income3,615
 2,579
 7,368
 4,227
Gains from investments in securities1,165
 505
 4,134
 379
Impairment loss—
 —
 (22,272) —
Interest expense(102,357) (92,204) (203,366) (182,424)
Net income205,822
 162,986
 340,659
 383,752
Net income attributable to noncontrolling interests       
Noncontrolling interests in property partnerships(17,482) (14,400) (36,312) (31,634)
Net income attributable to Boston Properties Limited Partnership188,340
 148,586
 304,347
 352,118
Preferred distributions(2,625) (2,625) (5,250) (5,250)
Net income attributable to Boston Properties Limited Partnership common unitholders$185,715
 $145,961
 $299,097
 $346,868
Basic earnings per common unit attributable to Boston Properties Limited Partnership common unitholders:       
Net income$1.08
 $0.85
 $1.74
 $2.02
Weighted average number of common units outstanding172,202
 171,916
 172,167
 171,892
Diluted earnings per common unit attributable to Boston Properties Limited Partnership common unitholders:       
Net income$1.08
 $0.85
 $1.73
 $2.01
Weighted average number of common and common equivalent units outstanding172,521
 172,072
 172,486
 172,130
 Three months ended June 30, Six months ended June 30,
 2018 2017 2018 2017
 (in thousands, except for per unit amounts)
Revenue       
Rental       
Base rent$516,439
 $520,542
 $1,035,946
 $1,024,104
Recoveries from tenants95,259
 89,163
 190,377
 178,327
Parking and other26,904
 26,462
 53,038
 52,072
Total rental revenue638,602
 636,167
 1,279,361
 1,254,503
Hotel revenue14,607
 13,375
 23,709
 20,795
Development and management services9,305
 7,365
 17,710
 13,837
Direct reimbursements of payroll and related costs from management services contracts1,970
 —
 4,855
 —
Total revenue664,484
 656,907
 1,325,635
 1,289,135
Expenses       
Operating       
Rental237,790
 230,454
 478,119
 458,741
Hotel8,741
 8,404
 16,814
 15,495
General and administrative28,468
 27,141
 64,362
 58,527
Payroll and related costs from management services contracts1,970
 —
 4,855
 —
Transaction costs474
 299
 495
 333
Depreciation and amortization154,474
 149,834
 318,327
 306,892
Total expenses431,917
 416,132
 882,972
 839,988
Operating income232,567
 240,775
 442,663
 449,147
Other income (expense)       
Income from unconsolidated joint ventures769
 3,108
 1,230
 6,192
Interest and other income2,579
 1,504
 4,227
 2,118
Gains from investments in securities505
 730
 379
 1,772
Gains from early extinguishments of debt—
 14,354
 —
 14,354
Interest expense(92,204) (95,143) (182,424) (190,677)
Income before gains on sales of real estate144,216
 165,328
 266,075
 282,906
Gains on sales of real estate18,770
 4,344
 117,677
 4,477
Net income162,986
 169,672
 383,752
 287,383
Net income attributable to noncontrolling interests       
Noncontrolling interests in property partnerships(14,400) (15,203) (31,634) (19,627)
Net income attributable to Boston Properties Limited Partnership148,586
 154,469
 352,118
 267,756
Preferred distributions(2,625) (2,625) (5,250) (5,250)
Net income attributable to Boston Properties Limited Partnership common unitholders$145,961
 $151,844
 $346,868
 $262,506
Basic earnings per common unit attributable to Boston Properties Limited Partnership common unitholders:       
Net income$0.85
 $0.88
 $2.02
 $1.53
Weighted average number of common units outstanding171,916
 171,675
 171,892
 171,628
Diluted earnings per common unit attributable to Boston Properties Limited Partnership common unitholders:       
Net income$0.85
 $0.88
 $2.01
 $1.53
Weighted average number of common and common equivalent units outstanding172,072
 171,829
 172,130
 171,882
        
Distributions per common unit$0.80
 $0.75
 $1.60
 $1.50
The accompanying notes are an integral part of these consolidated financial statements.

9

Table of Content


BOSTON PROPERTIES LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
 
Three months ended June 30, Six months ended June 30,Three months ended June 30, Six months ended June 30,
2018 2017 2018 20172019 2018 2019 2018
(in thousands)    (in thousands)
Net income$162,986
 $169,672
 $383,752
 $287,383
$205,822
 $162,986
 $340,659
 $383,752
Other comprehensive income (loss):              
Effective portion of interest rate contracts—
 (6,313) —
 (6,133)(4,426) —
 (7,054) —
Amortization of interest rate contracts (1)1,666
 1,397
 3,332
 2,703
1,666
 1,666
 3,332
 3,332
Other comprehensive income (loss)1,666
 (4,916) 3,332
 (3,430)(2,760) 1,666
 (3,722) 3,332
Comprehensive income164,652
 164,756
 387,084
 283,953
203,062
 164,652
 336,937
 387,084
Comprehensive income attributable to noncontrolling interests(14,544) (12,715) (31,922) (17,211)(17,626) (14,544) (36,600) (31,922)
Comprehensive income attributable to Boston Properties Limited Partnership$150,108
 $152,041
 $355,162
 $266,742
$185,436
 $150,108
 $300,337
 $355,162
_______________
(1) Amounts reclassified from comprehensive income primarily to interest expense within the Boston Properties Limited Partnership'sPartnership’s Consolidated Statements of Operations.



































































The accompanying notes are an integral part of these consolidated financial statements.

10

Table of Content

BOSTON PROPERTIES LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL
FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2017
(Unaudited and in thousands)

BOSTON PROPERTIES LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CAPITAL AND NONCONTROLLING INTERESTS
(Unaudited and in thousands)

BOSTON PROPERTIES LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CAPITAL AND NONCONTROLLING INTERESTS
(Unaudited and in thousands)

Units Capital  
Total Partners’ CapitalGeneral Partner Limited Partner Partners’ Capital (General and Limited Partners) Preferred Units 
Accumulated
Other
Comprehensive Loss
 
Noncontrolling
Interests - Property Partnerships
 Total Capital Noncontrolling interests - Redeemable Partnership Units
Balance at December 31, 2017$3,807,630
General Partner Limited Partner Partners’ Capital (General and Limited Partners) Preferred Units 
Accumulated
Other
Comprehensive Loss
 
Noncontrolling
Interests - Property Partnerships
 Total Capital Noncontrolling interests - Redeemable Partnership Units
Equity, March 31, 2019 
Cumulative effect of a change in accounting principle4,933
—
 —
 —
 —
 —
 —
 —
 —
Contributions1,685
1
 26
 882
 —
 —
 —
 882
 1,082
Net income allocable to general and limited partner units316,807
Allocated net income for the year—
 —
 166,687
 2,625
 —
 17,482
 186,794
 19,028
Distributions(252,269)—
 —
 (146,835) (2,625) —
 —
 (149,460) (17,206)
Other comprehensive income2,734
Unearned compensation(656)—
 —
 613
 —
 —
 —
 613
 8,286
Conversion of redeemable partnership units1,196
—
 21
 720
 —
 —
 —
 720
 (720)
Adjustment to reflect redeemable partnership units at redemption value84,641
—
 —
 100,174
 —
 —
 —
 100,174
 (100,174)
Balance at June 30, 2018$3,966,701
Effective portion of interest rate contracts—
 —
 —
 —
 (3,973) —
 (3,973) (453)
Amortization of interest rate contracts—
 —
 —
 —
 1,367
 144
 1,511
 155
Acquisition of noncontrolling interest in property partnership—
 —
 (162,505) —
 —
 (24,501) (187,006) —
Contributions from noncontrolling interests in property partnerships—
 —
 —
 —
 —
 7,761
 7,761
 —
Distributions to noncontrolling interests in property partnerships—
 —
 —
 —
 —
 (15,273) (15,273) —
Equity, June 30, 20191,726
 152,837
 $3,562,910
 $193,623
 $(51,340) $1,696,221
 $5,401,414
 $2,324,238
                
Balance at December 31, 2016$3,811,717
Equity, March 31, 20181,722
 152,640
 $3,842,862
 $193,623
 $(49,062) $1,685,715
 $5,673,138
 $2,196,603
Cumulative effect of a change in accounting principle—
 —
 —
 —
 —
 —
 —
 —
Contributions4,682
—
 39
 233
 —
 —
 —
 233
 715
Net income allocable to general and limited partner units240,823
Allocated net income for the year—
 —
 131,082
 2,625
 —
 14,400
 148,107
 14,879
Distributions(236,368)—
 —
 (123,529) (2,625) —
 —
 (126,154) (14,357)
Other comprehensive loss(910)
Cumulative effect of a change in accounting principle(272)
Unearned compensation(2,329)—
 —
 552
 —
 —
 —
 552
 7,010
Conversion of redeemable partnership units16,422
—
 10
 364
 —
 —
 —
 364
 (364)
Adjustment to reflect redeemable partnership units at redemption value92,740
—
 —
 (30,791) —
 —
 —
 (30,791) 30,791
Balance at June 30, 2017$3,926,505
Effective portion of interest rate contracts—
 —
 —
 —
 —
 —
 —
 —
Amortization of interest rate contracts—
 —
 —
 —
 1,367
 144
 1,511
 155
Contributions from noncontrolling interests in property partnerships—
 —
 —
 —
 —
 12,265
 12,265
 —
Distributions to noncontrolling interests in property partnerships—
 —
 —
 —
 —
 (13,343) (13,343) —
Equity, June 30, 20181,722
 152,689
 $3,820,773
 $193,623
 $(47,695) $1,699,181
 $5,665,882
 $2,235,432





Table of Content




BOSTON PROPERTIES LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CAPITAL AND NONCONTROLLING INTERESTS
(Unaudited and in thousands)

 Units Capital  
 General Partner Limited Partner Partners’ Capital (General and Limited Partners) Preferred Units 
Accumulated
Other
Comprehensive Loss
 
Noncontrolling
Interests - Property Partnerships
 Total Capital Noncontrolling interests - Redeemable Partnership Units
    
Equity, December 31, 20181,722
 152,736
 $4,054,996
 $193,623
 $(47,741) $1,711,445
 $5,912,323
 $2,000,591
Cumulative effect of a change in accounting principle—
 —
 (3,864) —
 —
 (70) (3,934) (445)
Contributions3
 67
 5,702
 —
 —
 —
 5,702
 35,482
Allocated net income for the year—
 —
 268,470
 5,250
 —
 36,312
 310,032
 30,627
Distributions—
 —
 (293,625) (5,250) —
 —
 (298,875) (34,391)
Unearned compensation—
 —
 (775) —
 —
 —
 (775) (12,704)
Conversion of redeemable partnership units1
 34
 1,212
 —
 —
 —
 1,212
 (1,212)
Adjustment to reflect redeemable partnership units at redemption value—
 —
 (306,701) —
 —
 —
 (306,701) 306,701
Effective portion of interest rate contracts—
 —
 —
 —
 (6,332) —
 (6,332) (722)
Amortization of interest rate contracts—
 —
 —
 —
 2,733
 288
 3,021
 311
Acquisition of noncontrolling interest in property partnership—
 —
 (162,505) —
 —
 (24,501) (187,006) —
Contributions from noncontrolling interests in property partnerships—
 —
 —
 —
 —
 12,148
 12,148
 —
Distributions to noncontrolling interests in property partnerships—
 —
 —
 —
 —
 (39,401) (39,401) —
Equity, June 30, 20191,726
 152,837
 $3,562,910
 $193,623
 $(51,340) $1,696,221
 $5,401,414
 $2,324,238
                
Equity, December 31, 20171,720
 152,606
 $3,664,436
 $193,623
 $(50,429) $1,683,760
 $5,491,390
 $2,292,263
Cumulative effect of a change in accounting principle—
 —
 4,933
 —
 —
 —
 4,933
 563
Contributions1
 50
 1,685
 —
 —
 —
 1,685
 34,973
Allocated net income for the year—
 —
 314,182
 2,625
 —
 31,634
 348,441
 35,311
Distributions—
 —
 (249,644) (2,625) —
 —
 (252,269) (28,708)
Unearned compensation—
 —
 (656) —
 —
 —
 (656) (13,443)
Conversion of redeemable partnership units1
 33
 1,196
 —
 —
 —
 1,196
 (1,196)
Adjustment to reflect redeemable partnership units at redemption value—
 —
 84,641
 —
 —
 —
 84,641
 (84,641)
Effective portion of interest rate contracts—
 —
 —
 —
 —
 —
 —
 —
Amortization of interest rate contracts—
 —
 —
 —
 2,734
 288
 3,022
 310
Contributions from noncontrolling interests in property partnerships—
 —
 —
 —
 —
 27,532
 27,532
 —
Distributions to noncontrolling interests in property partnerships—
 —
 —
 —
 —
 (44,033) (44,033) —
Equity, June 30, 20181,722
 152,689
 $3,820,773
 $193,623
 $(47,695) $1,699,181
 $5,665,882
 $2,235,432


















The accompanying notes are an integral part of these consolidated financial statements.


11

Table of Content


BOSTON PROPERTIES LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
BOSTON PROPERTIES LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
BOSTON PROPERTIES LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the six months ended June 30,For the six months ended June 30,
2018 20172019 2018
(in thousands)(in thousands)
Cash flows from operating activities:      
Net income$383,752
 $287,383
$340,659
 $383,752
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation and amortization318,327
 306,892
337,881
 318,327
Amortization of right of use assets - operating leases1,213
 —
Impairment loss22,272
 —
Non-cash compensation expense23,243
 19,237
25,444
 23,243
Income from unconsolidated joint ventures(1,230) (6,192)(48,177) (1,230)
Distributions of net cash flow from operations of unconsolidated joint ventures1,663
 2,905
3,890
 1,663
Gains from investments in securities(379) (1,772)(4,134) (379)
Gains from early extinguishments of debt—
 (14,354)
Non-cash portion of interest expense10,607
 (11,979)10,900
 10,607
Gains on sales of real estate(117,677) (4,477)(930) (117,677)
Change in assets and liabilities:      
Tenant and other receivables, net33,012
 2,033
(11,514) 33,012
Note receivable(250) —
Accrued rental income, net(45,759) (19,348)(37,473) (45,759)
Prepaid expenses and other assets(4,641) 36,223
(9,319) (4,641)
Lease liabilities - operating leases780
 —
Accounts payable and accrued expenses(9,899) (2,608)17,458
 (9,899)
Accrued interest payable12,999
 (158,761)(78) 12,999
Other liabilities11,571
 (33,121)(30,503) 11,571
Tenant leasing costs(54,743) (37,252)(52,515) (54,743)
Total adjustments177,094
 77,426
224,945
 177,094
Net cash provided by operating activities560,846
 364,809
565,604
 560,846
Cash flows from investing activities:      
Acquisition of real estate—
 (15,953)(43,061) —
Construction in progress(380,565) (297,747)(203,259) (380,565)
Building and other capital improvements(96,730) (100,808)(79,943) (96,730)
Tenant improvements(83,982) (107,533)(115,940) (83,982)
Proceeds from sales of real estate141,249
 17,049
60,398
 141,249
Capital contributions to unconsolidated joint ventures(65,250) (41,491)(50,068) (65,250)
Capital distributions from unconsolidated joint ventures105,000
 —
Investments in securities, net(523) (1,195)(1,079) (523)
Net cash used in investing activities(485,801) (547,678)(327,952) (485,801)
      
      
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BOSTON PROPERTIES LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
BOSTON PROPERTIES LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
BOSTON PROPERTIES LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the six months ended June 30,For the six months ended June 30,
2018 20172019 2018
(in thousands)(in thousands)
Cash flows from financing activities:      
Proceeds from mortgage notes payable—
 2,300,000
Repayments of mortgage notes payable(9,192) (1,308,708)(9,702) (9,192)
Proceeds from unsecured senior notes848,428
 —
Borrowings on unsecured line of credit345,000
 430,000
380,000
 345,000
Repayments of unsecured line of credit(390,000) (430,000)(380,000) (390,000)
Proceeds from unsecured term loan500,000
 —
—
 500,000
Repayments of mezzanine notes payable—
 (306,000)
Repayments of outside members’ notes payable—
 (70,424)
Payments on capital lease obligations—
 (548)
Payments on finance lease obligations(628) —
Payments on real estate financing transaction(960) (1,013)—
 (960)
Deposit on mortgage note payable interest rate lock—
 (23,200)
Return of deposit on mortgage note payable interest rate lock—
 23,200
Deferred financing costs(263) (43,635)(7,112) (263)
Debt prepayment and extinguishment costs—
 (90)
Net proceeds from equity transactions(684) (181)2,261
 (684)
Distributions(280,754) (263,221)(332,961) (280,754)
Contributions from noncontrolling interests in property partnerships27,532
 23,496
12,148
 27,532
Distributions to noncontrolling interests in property partnerships(44,033) (27,115)(39,401) (44,033)
Acquisition of noncontrolling interest in property partnership(186,952) —
Net cash provided by financing activities146,646
 302,561
286,081
 146,646
Net increase in cash and cash equivalents and cash held in escrows221,691
 119,692
523,733
 221,691
Cash and cash equivalents and cash held in escrows, beginning of period505,369
 420,088
639,191
 505,369
Cash and cash equivalents and cash held in escrows, end of period$727,060
 $539,780
$1,162,924
 $727,060
      
Reconciliation of cash and cash equivalents and cash held in escrows:      
Cash and cash equivalents, beginning of period$434,767
 $356,914
$543,359
 $434,767
Cash held in escrows, beginning of period70,602
 63,174
95,832
 70,602
Cash and cash equivalents and cash held in escrows, beginning of period$505,369
 $420,088
$639,191
 $505,369
      
Cash and cash equivalents, end of period$472,555
 $492,435
$1,087,001
 $472,555
Cash held in escrows, end of period254,505
 47,345
75,923
 254,505
Cash and cash equivalents and cash held in escrows, end of period$727,060
 $539,780
$1,162,924
 $727,060
      
Supplemental disclosures:      
Cash paid for interest$192,898
 $388,045
$216,754
 $192,898
Interest capitalized$34,999
 $26,628
$25,069
 $34,999
Non-cash investing and financing activities:      
Write-off of fully depreciated real estate$(78,900) $(85,525)$(61,283) $(78,900)
Additions to real estate included in accounts payable and accrued expenses$326
 $22,994
$115,150
 $326
Real estate acquired through capital lease$—
 $28,962
Outside members’ notes payable contributed to noncontrolling interests in property partnerships$—
 $109,576
Real estate acquired through finance lease$122,563
 $—
Distributions declared but not paid$139,263
 $130,432
$165,419
 $139,263
Conversions of redeemable partnership units to partners’ capital$1,196
 $16,422
$1,212
 $1,196
Issuance of restricted securities to employees$37,342
 $35,945
$38,923
 $37,342








The accompanying notes are an integral part of these consolidated financial statements.

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BOSTON PROPERTIES, INC. AND BOSTON PROPERTIES LIMITED PARTNERSHIP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. Organization
Boston Properties, Inc., a Delaware corporation, is a fully integrated, self-administered and self-managed real estate investment trust (“REIT”). Boston Properties, Inc. is the sole general partner of Boston Properties Limited Partnership, its operating partnership, and at June 30, 20182019 owned an approximate 89.7%89.6% (89.7% at December 31, 2017)2018) general and limited partnership interest in Boston Properties Limited Partnership. Unless stated otherwise or the context requires, the “Company” refers to Boston Properties, Inc. and its subsidiaries, including Boston Properties Limited Partnership, and its consolidated subsidiaries. Partnership interests in Boston Properties Limited Partnership include:
common units of partnership interest (also referred to as “OP Units”),
long term incentive units of partnership interest (also referred to as “LTIP Units”), and
preferred units of partnership interest (also referred to as “Preferred Units”).
Unless specifically noted otherwise, all references to OP Units exclude units held by Boston Properties, Inc. A holder of an OP Unit may present such OP Unit to Boston Properties Limited Partnership for redemption at any time (subject to restrictions agreed upon at the time of issuance of OP Units to particular holders that may restrict such redemption right for a period of time, generally one year from issuance). Upon presentation of an OP Unit for redemption, Boston Properties Limited Partnership is obligated to redeem the OP Unit for cash equal to the value of a share of common stock of Boston Properties, Inc. (“Common Stock”). In lieu of a cash redemption, Boston Properties, Inc. may elect to acquire the OP Unit for one share of Common Stock. Because the number of shares of Common Stock outstanding at all times equals the number of OP Units that Boston Properties, Inc. owns, one share of Common Stock is generally the economic equivalent of one OP Unit, and the quarterly distribution that may be paid to the holder of an OP Unit equals the quarterly dividend that may be paid to the holder of a share of Common Stock.
The Company uses LTIP Units as a form of equity-based award for annual long-term incentive equity compensation. The Company has also issued LTIP Units to employees in the form of (1) 2012 outperformance plan awards (“2012 OPP Units”) and (2) 2013, 2014, 2015, 2016, 2017, 2018 and 20182019 multi-year, long-term incentive program awards (also referred to as “MYLTIP Units”), each of which, upon the satisfaction of certain performance and vesting conditions, is convertible into one OP Unit. The three-year measurement periods for the 2012 OPP Units, 2013 MYLTIP Units, 2014 MYLTIP Units, 2015 MYLTIP Units and 20152016 MYLTIP Units expired on February 6, 2015, February 4, 2016, February 3, 2017, and February 4, 2018 and February 9, 2019, respectively, and Boston Properties, Inc.’s total stockholder return (“TSR”) was sufficient for employees to earn and therefore become eligible to vest in a portion of the awards. Unless and until they are earned, the rights, preferences and privileges of the 2016, 2017 MYLTIP Units, 2018 MYLTIP Units and 20182019 MYLTIP Units differ from other LTIP Units granted to employees (including the 2012 OPP Units, the 2013 MYLTIP Units, the 2014 MYLTIP Units, the 2015 MYLTIP Units and the 20152016 MYLTIP Units, which have been earned). Therefore, unless specifically noted otherwise, all references to LTIP Units exclude the 2016, 2017 MYLTIP Units, 2018 MYLTIP Units and 20182019 MYLTIP Units. LTIP Units (including the earned 2012 OPP Units, the 2013 MYLTIP Units, the 2014 MYLTIP Units, and the 2015 MYLTIP Units and 2016 MYLTIP Units), whether vested or not, will receive the same quarterly per unit distributions as OP Units, which equal per share dividends on Common Stock (See Notes 7, 8, 9 and 10)11).
At June 30, 2018,2019, there was one series of Preferred Units outstanding (i.e., Series B Preferred Units). The Series B Preferred Units were issued to Boston Properties, Inc. on March 27, 2013 in connection with the issuance of 80,000 shares (8,000,000 depositary shares each representing 1/100th of a share) of 5.25% Series B Cumulative Redeemable Preferred Stock (the “Series B Preferred Stock”). Boston Properties, Inc. contributed the net proceeds from the offering to Boston Properties Limited Partnership in exchange for 80,000 Series B Preferred Units having terms and preferences generally mirroring those of the Series B Preferred Stock (See Note 8)9).
Properties
At June 30, 2018,2019, the Company owned or had interests in a portfolio of 178193 commercial real estate properties (the “Properties”) aggregating approximately 50.250.9 million net rentable square feet of primarily Class A office properties, including twelve properties under construction/redevelopment totaling approximately 6.05.7 million net rentable square feet. At June 30, 2018,2019, the Properties consisted of:


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166
174 office properties (including nineten properties under construction/redevelopment);
twelve retail properties;
six residential properties (including threetwo properties under construction);
five retail properties; and
one hotel.
The Company considers Class A office properties to be well-located buildings that are professionally managed and maintained, attract high-quality tenants and command upper-tier rental rates, and that are modern structures or have been modernized to compete with newer buildings.
2. Basis of Presentation and Summary of Significant Accounting Policies
Boston Properties, Inc. does not have any other significant assets, liabilities or operations, other than its investment in Boston Properties Limited Partnership, nor does it have employees of its own. Boston Properties Limited Partnership, not Boston Properties, Inc., generally executes all significant business relationships other than transactions involving securities of Boston Properties, Inc. All majority-owned subsidiaries and joint ventures over which the Company has financial and operating control and variable interest entities (“VIEs”) in which the Company has determined it is the primary beneficiary are included in the consolidated financial statements. All significant intercompany balances and transactions have been eliminated in consolidation. The Company accounts for all other unconsolidated joint ventures using the equity method of accounting. Accordingly, the Company’s share of the earnings of these joint ventures and companies is included in consolidated net income.
The accompanying interim financial statements are unaudited; however, the financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) for interim financial information and in conjunction with the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the disclosures required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting solely of normal recurring matters) necessary for a fair statement of the financial statements for these interim periods have been included. The results of operations for the interim periods are not necessarily indicative of the results to be obtained for other interim periods or for the full fiscal year. The year-end consolidated balance sheet data was derived from audited financial statements, but does not include all disclosure required by GAAP.  These financial statements should be read in conjunction with the Company’s financial statements and notes thereto contained in the Company’s Annual Report in the Company’s Form 10-K for its fiscal year ended December 31, 2017.2018.
Fair Value of Financial Instruments
The Company follows the authoritative guidance for fair value measurements when valuing its financial instruments for disclosure purposes. Boston Properties Limited Partnership determines the fair value of its unsecured senior notes using market prices. The inputs used in determining the fair value of Boston Properties Limited Partnership’s unsecured senior notes is categorized at a Level 1 basis (as defined in Accounting Standards Codification ("ASC"(“ASC”) 820 "Fair“Fair Value Measurements and Disclosures," the accounting standards for Fair Value Measurements and Disclosures)Disclosures” (“ASC 820”)) due to the fact that it uses quoted market rates to value these instruments. However, the inputs used in determining the fair value could be categorized at a Level 2 basis (as defined in the accounting standards for Fair Value Measurements and Disclosures)ASC 820) if trading volumes are low. The Company determines the fair value of its related party note receivable, note receivable and mortgage notes payable using discounted cash flow analysis by discounting the spread between the future contractual interest payments and hypothetical future interest payments on note receivables / mortgage debt based on current market rates for similar securities. In determining the current market rates, the Company adds its estimates of market spreads to the quoted yields on federal government treasury securities with similar maturity dates to its debt. The inputs used in determining the fair value of the Company’s related party note receivable, note receivable, and mortgage notes payable are categorized at a Level 3 basis (as defined in the accounting standards for Fair Value Measurements and Disclosures)ASC 820) due to the fact that the Company considers the rates used in the valuation techniques to be unobservable inputs. To the extent that there are outstanding borrowings under the unsecured line of credit or unsecured term loan, the Company utilizes a discounted cash flow methodology in order to estimate the fair value. To the extent that credit spreads have changed since the origination, the net present value of the difference between future contractual interest payments and future interest payments based on the Company’s estimate of a current market rate would represent the difference between the book value and the fair value. The Company’s estimate of a current market rate is based upon the rate, considering current market conditions and Boston Properties Limited Partnership'sPartnership’s specific credit profile, at which it estimates it could obtain similar borrowings. To the extent there are outstanding borrowings, this current market rate is estimated and therefore would be primarily based upon a Level 3 input.

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Because the Company’s valuations of its financial instruments are based on these types of estimates, the actual fair values of its financial instruments may differ materially if the Company’sfrom those estimates, do not prove to be accurate, and the Company’s estimated fair values for these instruments as of the end of the applicable reporting period are not projections of nor necessarily indicative of estimated or actual fair values in future reporting periods. The following table presents the aggregate carrying value of the Company’s related party note receivable, note receivable, mortgage notes payable, net, unsecured senior notes, net, unsecured line of credit and unsecured term loan, net and unsecured senior notes, net and the Company’s corresponding estimate of fair value as of June 30, 20182019 and December 31, 20172018 (in thousands):
 
June 30, 2019
 December 31, 2018
 
Carrying
Amount
   
Estimated
Fair Value
 
Carrying
Amount
   
Estimated
Fair Value
Related party note receivable$80,000
   $80,321
 $80,000
   $80,000
Note receivable19,718
   18,205
 19,468
   19,468
 $99,718
   $98,526
 $99,468
   $99,468
            
Mortgage notes payable, net$2,956,833
    $3,013,338
 $2,964,572
    $2,903,925
Unsecured senior notes, net8,390,708
    8,745,888
 7,544,697
    7,469,338
Unsecured line of credit—
   —
 —
   —
Unsecured term loan, net498,700
   500,673
 498,488
   500,783
Total$11,846,241
    $12,259,899
 $11,007,757
    $10,874,046
 June 30, 2018 December 31, 2017
 
Carrying
Amount
   
Estimated
Fair Value
 
Carrying
Amount
   
Estimated
Fair Value
Mortgage notes payable, net$2,972,052
    $2,938,167
 $2,979,281
    $3,042,920
Unsecured senior notes, net7,251,578
    7,188,261
 7,247,330
    7,461,615
Unsecured line of credit—
   —
 45,000
   45,000
Unsecured term loan, net498,248
   500,181
 —
   —
Total$10,721,878
    $10,626,609
 $10,271,611
    $10,549,535

    
Variable Interest Entities (VIEs)
Consolidated VIEs are those wherefor which the Company is considered to be the primary beneficiary of a VIE. The primary beneficiary is the entity that has a controlling financial interest in the VIE, which is defined by the entity having both of the following characteristics: (1) the power to direct the activities that, when taken together, most significantly impact the VIE’s performance and (2) the obligation to absorb losses or the right to receive the returns from the VIE that could potentially be significant to the VIE. The Company has determined that it is the primary beneficiary for sevensix of the nine entities that are VIEs.
Consolidated Variable Interest Entities
As of June 30, 2018,2019, Boston Properties, Inc. has identified sevensix consolidated VIEs, including Boston Properties Limited Partnership. TheExcluding Boston Properties Limited Partnership, the VIEs own (1)consisted of the following five in-service properties: 767 Fifth Avenue (the General Motors Building), Times Square Tower, 601 Lexington Avenue, Atlantic Wharf Office Building and 100 Federal Street and (2) Salesforce Tower, which was partially placed in-service on December 1, 2017.Street.
The Company consolidates these VIEs because it is the primary beneficiary.  The third parties’ interests in these consolidated entities with the exception of(i.e., excluding Boston Properties Limited Partnership,Partnership’s interest) are reflected as noncontrolling interest in property partnerships in the accompanying Consolidated Financial Statements (See Note 7)8). 
In addition, Boston Properties, Inc.’s only significant asset is its investment in Boston Properties Limited Partnership and, consequently, substantially all of Boston Properties, Inc.’s assets and liabilities are the assets and liabilities of Boston Properties Limited Partnership.
Variable Interest Entities Not Consolidated
The Company has determined that its 7750 Wisconsin Avenue LLC and ResidentialOffice Tower Developer LLC joint ventures, which own 7750 Wisconsin Avenue and 100 Causeway Street (which is the office component of The Hub on Causeway - Residential,mixed-use development project), respectively, are VIEs. The Company also determined that the landlord entity for its Platform 16 ground lease is a VIE. The Company does not consolidate these entities as the Company does not have the power to direct the activities that, when taken together, most significantly impact the VIE’s performance and, therefore, the Company is not considered to be the primary beneficiary.
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New Accounting Pronouncements
New Accounting Pronouncements Adopted
Revenue from Contracts with CustomersLeases    
In May 2014,On January 1, 2019, the FinancialCompany adopted Accounting Standards Board ("FASB"Update (“ASU”) issued ASU 2014-09, “Revenue from Contracts with Customers2016-02, “Leases (Topic 606)842)” (“ASU 2014-09”2016-02” or “Topic 842”). The objective of ASU 2014-09 isFor information pertaining to establish a single comprehensive model for entitiesthe Company’s adoption and disclosures with respect to use in accounting for revenue arising from contracts with customers, which supersedes mostleases, see Note 4.
3. Real Estate
Boston Properties, Inc.
Real estate consisted of the existing revenue recognition guidance,following at June 30, 2019 and December 31, 2018 (in thousands):
 
June 30, 2019
 December 31, 2018
Land$5,056,046
 $5,072,568
Right of use assets - finance leases187,269
 —
Right of use assets - operating leases149,839
 —
Land held for future development (1)272,332
 200,498
Buildings and improvements13,271,691
 13,356,751
Tenant improvements2,486,269
 2,396,932
Furniture, fixtures and equipment44,462
 44,351
Construction in progress812,408
 578,796
Total22,280,316
 21,649,896
Less: Accumulated depreciation(5,050,606) (4,897,777)
 $17,229,710
 $16,752,119
_______________
(1)Includes pre-development costs.
Boston Properties Limited Partnership
Real estate consisted of the following at June 30, 2019 and December 31, 2018 (in thousands):
 
June 30, 2019
 December 31, 2018
Land$4,955,593
 $4,971,475
Right of use assets - finance leases187,269
 —
Right of use assets - operating leases149,839
 —
Land held for future development (1)272,332
 200,498
Buildings and improvements12,976,345
 13,059,488
Tenant improvements2,486,269
 2,396,932
Furniture, fixtures and equipment44,462
 44,351
Construction in progress812,408
 578,796
Total21,884,517
 21,251,540
Less: Accumulated depreciation(4,949,822) (4,800,475)
 $16,934,695
 $16,451,065
_______________
(1)Includes pre-development costs.
Development
On May 9, 2019, the Company entered into a 15-year lease with Google, LLC for approximately 379,000 net rentable square feet of Class A office space in a build-to-suit development project to be located at the Company’s 325 Main Street property at Kendall Center in Cambridge, Massachusetts. 325 Main Street currently consists of an approximately 115,000 net rentable square foot Class A office property that will be demolished and developed into an approximately 420,000 net rentable square foot Class A office property, including industry-specific guidance. The core

approximately 41,000 net
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principle is that an entity should recognize revenue to depictrentable square feet of retail space. On May 9, 2019, the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In applying ASU 2014-09, companies will perform a five-step analysis of transactions to determine when and how revenue is recognized. The five-step analysis consistsCompany commenced development of the following: (i) identifyingproject. Boston Properties, Inc. and Boston Properties Limited Partnership recognized approximately $9.9 million and $9.5 million, respectively, of depreciation expense associated with the contract with a customer, (ii) identifyingacceleration of depreciation on the performance obligationsassets being removed from service and demolished as part of the redevelopment of the property.
Ground Lease
On January 24, 2019, the ground lessor under the Company’s 65-year ground lease for land totaling approximately 5.6 acres at Platform 16 located in the contract, (iii) determining the transaction price, (iv) allocating the transaction priceSan Jose, California made available for lease to the performance obligations inCompany the contract and (v) recognizing revenue when (or as) the entity satisfies a performance obligation. ASU 2014-09 applies to all contracts with customers except those that are within the scope of other topics in the FASB’s ASC. In August 2015, the FASB issued ASU 2015-14, “Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date” (“ASU 2015-14”), which delayed the effective date of ASU 2014-09 by one year making it effective for the first interim period within annual reporting periods beginning after December 15, 2017. Early adoption was permitted as of the original effective date. In May 2016, the FASB issued ASU No. 2016-12, “Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients” (“ASU 2016-12”). ASU 2016-12 is intended to clarify and provide practical expedients for certain aspects of ASU 2014-09 and notes that lease contracts with customers are a scope exception. ASU 2014-09 was effective for the Company for reporting periods beginning after December 15, 2017.
The Company adopted ASU 2014-09 effective January 1, 2018 using the modified retrospective approach. The adoption of ASU 2014-09 did not have a material impact on the Company’s consolidated financial statements. The Company applied the guidance only to contracts that were not completed as of January 1, 2018. The Company does not have material contract assets and liabilities within the scope of ASC 606. The adoption of ASU 2014-09 resulted in a change to the timing pattern of revenue recognized, but not the total revenue recognized over time for certain of the Company’s development services contracts.remaining land parcels. As a result, the modified retrospective approach resultedCompany recognized the remaining portion of the right of use finance lease asset and finance lease liability. During 2018, the Company executed the ground lease. However, at the inception of the ground lease only a portion of the land was available for lease from the lessor, resulting in the Company recognizing on Januaryonly a portion of the ground lease. In the aggregate, the land will support the development of approximately 1.1 million square feet of commercial office space. The ground lease provides the Company with the right to purchase all of the land during a 12-month period commencing February 1, 2018 the cumulative effect2020 at a purchase price of adopting ASU 2014-09 aggregating approximately $4.9 million to Dividends in Excess of Earnings of Boston Properties, Inc. and Partners’ Capital of Boston Properties Limited Partnership and approximately $0.6 million to Noncontrolling Interests - Common Units of Boston Properties, Inc. and Noncontrolling Interests - Redeemable Partnership Units of Boston Properties Limited Partnership on the corresponding Consolidated Balance Sheets.
$134.8 million. The Company disaggregates its revenue by source within its Consolidated Statements of Operations. As an owner and operator of real estate,is reasonably certain that it will exercise the Company derivesoption to purchase the majority of its revenue from leasing space to tenants at its properties. As a result, the majority of the Company’s revenue is accounted for pursuant to ASC 840 “Leases” (“ASC 840”) and is reflected within Base Rent in the Consolidated Statements of Operations. In addition, the Company earns revenue from recoveries from tenants, consisting of amounts due from tenants for common area maintenance, real estate taxes and other recoverable costs. Revenue from recoveries from tenants is recognized under the guidance within ASC 840 until the adoption of ASC 842 "Leases" in 2019 at which time it may fall within the guidance under ASC 606 (see New Accounting Pronouncements Issued but not yet Adopted "Leases").
The Company also earns revenue from the following sources; parking and other revenue, hotel revenue and development and management services revenue.
Parking and other revenue is derived primarily from monthly and transient daily parking. In addition, the Company has certain lease arrangements for parking accounted for under the guidance in ASC 840. The monthly and transient daily parking revenue falls within the scope of ASC 606 and is accounted for at the point in time when control of the goods or services transfers to the customer and the Company’s performance obligation is satisfied, consistent with the Company’s previous accounting.
Hotel revenue is derived from room rentals and other sources such as charges to guests for telephone service, movie and vending commissions, meeting and banquet room revenue and laundry services. Hotel revenue also falls within the scope of ASC 606 and is accounted for at the point in time when control of the goods or services transfers to the customer and the Company’s performance obligation is satisfied, consistent with the Company’s previous accounting.
Development and management services revenue is earned from unconsolidated joint venture entities and third party property owners. The Company determined that the performance obligations associated with its development services contracts are satisfied over time and that the Company would recognize its development services revenue under the output method evenly over time from the development commencement date through the substantial completion date of the development management services project due to the stand-ready nature of the contracts. Significant judgments impacting the amount and timing of revenue recognized from the Company's

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development services contracts include estimates of total development project costs from which the fees are typically derived and estimates of the period of time until substantial completion of the development project, the period of time over which the development services are required to be performed. As a result, the pattern of revenue recognized over time under ASC 606 differs from the Company’s previous accounting. The Company recognizes development fees earned from unconsolidated joint venture projects equal to its cost plus profit to the extent of the third party partners’ ownership interest. Property management fees are recorded and earned based on a percentage of collected rents at the properties under management, and not on a straight-line basis, because such fees are contingent upon the collection of rents. The revenue recognized under property management services contracts is recognized consistent with the Company's previous accounting.
ASU 2014-09 also updates the principal versus agent considerationsland and as a result, the Company determinedhas concluded that the lease should be accounted for as a finance lease. As a result, the Company recorded an approximately $122.6 million right of use asset - finance lease and a lease liability - finance lease on the Company’s Consolidated Balance Sheets reflecting the remaining land parcels made available for lease to the Company. Finance lease assets and liabilities are accounted for at the lower of fair market value or the present value of future lease payments. The finance lease is for land only. Therefore, the Company will not depreciate the right of use asset - finance lease because land is assumed to have an indefinite life.
As of January 24, 2019, the lease payments from the finance lease related to the remaining parcels made available for lease to the Company are as follows (in thousands):
Period from January 24, 2019 through December 31, 2019$17,918
2020109,460
Total expected minimum lease payments127,378
Interest portion(4,815)
Present value of expected net lease payments$122,563

Acquisitions
On January 10, 2019, the Company acquired land parcels at its Carnegie Center property located in Princeton, New Jersey for a gross purchase price of approximately $51.5 million, which includes an aggregate of approximately $8.6 million of additional amounts reimbursedthat are payable in the future to the seller upon the development or sale of each of the parcels. The land parcels could support approximately 1.7 million square feet of development.
Dispositions
On January 24, 2019, the Company completed the sale of its 2600 Tower Oaks Boulevard property located in Rockville, Maryland for payrolla gross sale price of approximately $22.7 million. Net cash proceeds totaled approximately $21.4 million, resulting in a loss on sale of real estate totaling approximately $0.6 million. The Company recognized an impairment loss totaling approximately $3.1 million for Boston Properties, Inc. and related costs receivedapproximately $1.5 million for Boston Properties Limited Partnership during the year ended December 31, 2018. 2600 Tower Oaks Boulevard is an approximately 179,000 net rentable square foot Class A office property. 2600 Tower Oaks contributed approximately $(0.2) million of net loss to the Company for the period from unconsolidated joint venture entitiesJanuary 1, 2019 through January 23, 2019 and contributed approximately $(0.1) million and $(0.3) million of net loss to the Company for the three and six months ended June 30, 2018, respectively.
At March 31, 2019, the Company evaluated the expected hold period of its One Tower Center property and, based on a shorter-than-expected hold period, the Company reduced the carrying value of the property to its estimated fair value at March 31, 2019 and recognized an impairment loss totaling approximately $24.0 million for Boston Properties, Inc. and approximately $22.3 million for Boston Properties Limited Partnership. The Company’s estimated fair value was based on a pending offer from a third party to acquire the property owners in connection with management services contracts should be reflectedand the subsequent execution of a purchase and sale agreement on April 18, 2019 for a gross basis insteadsale price of on a net basis as$38.0 million. On June 3, 2019, the Company has determined that itcompleted the sale of the property. Net cash proceeds totaled approximately $36.6 million, resulting in a loss on sale of real estate totaling approximately $0.8 million. One Tower Center is an approximately
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410,000 net rentable square foot Class A office property located in East Brunswick, New Jersey. One Tower Center contributed approximately $(0.1) million and $(0.9) million of net loss to the principal under these arrangements. DuringCompany for the period from April 1, 2019 through June 2, 2019 and the period from January 1, 2019 through June 2, 2019, respectively, and contributed approximately $(0.7) million and $(1.3) million of net loss to the Company for the three and six months ended June 30, 2018, respectively.

On June 28, 2019, the Company completed the sale of its 164 Lexington Road property located in Billerica, Massachusetts for a gross sale price of $4.0 million. Net cash proceeds totaled approximately $3.8 million, resulting in a gain on sale of real estate totaling approximately $2.5 million for Boston Properties, Inc. and approximately $2.6 million for Boston Properties Limited Partnership. 164 Lexington Road is an approximately 64,000 net rentable square foot Class A office property. 164 Lexington Road contributed approximately $(0.1) million and $(0.1) million of net loss to the Company for the period from April 1, 2019 through June 27, 2019 and the period from January 1, 2019 through June 27, 2019, respectively, and contributed approximately $(0.1) million and $(0.1) million of net loss to the Company for the three and six months ended June 30, 2018, the Company recognized approximately $2.0 million and $4.9 million, respectively, of expenses consisting of payroll and related costs from management services contracts and recognized corresponding revenue of approximately $2.0 million and $4.9 million, respectively, reflecting the direct reimbursements of such costs from the unconsolidated joint venture entities and third party property owners.respectively.
Statement of Cash Flows
In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (a consensus of the FASB Emerging Issues Task Force)” (“ASU 2016-15”). ASU 2016-15 is intended to reduce diversity in practice in how certain transactions are classified in the statement of cash flows. The areas addressed in the new guidance related to debt prepayment costs, settlement of zero-coupon debt instruments, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate-owned and bank-owned life insurance policies, distributions received from equity method investments, beneficial interest in securitization transactions, and separately identifiable cash flows and application of the predominance principle. ASU 2016-15 was effective for the Company for reporting periods beginning after December 15, 2017, with early adoption permitted (provided that all of the amendments are adopted in the same period), and was required to be applied retrospectively to all periods presented. The Company adopted ASU 2016-15 effective January 1, 2018. The adoption of ASU 2016-15 did not have a material impact on the Company’s consolidated financial statements. The adoption of ASU 2016-15 will result in the retrospective classification of debt prepayment costs as a component of financing activities instead of as a component of operating activities in the Company's Consolidated Statements of Cash Flows.4. Leases
In November 2016, the FASB issued ASU No. 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of the FASB Emerging Issues Task Force)” (“ASU 2016-18”). ASU 2016-18 requires companies to include restricted cash and restricted cash equivalents with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. ASU 2016-18 also requires a disclosure of a reconciliation between the statement of financial position and the statement of cash flows when the statement of financial position includes more than one line item for cash, cash equivalents, restricted cash and restricted cash equivalents. Entities with material restricted cash and restricted cash equivalents balances are required to disclose the nature of the restrictions. ASU 2016-18 was effective for reporting periods beginning after December 15, 2017, with early adoption permitted, and is required to be applied retrospectively to all periods presented. The Company adopted ASU 2016-18 effective January 1, 2018. The adoption of ASU 2016-18 did not have a material impact on the Company’s consolidated financial statements. The retrospective adoption of ASU 2016-18 resulted in a decrease to net cash provided by operating activities totaling approximately $7.5 million, an increase to net cash used in investing activities totaling approximately $8.2 million, a decrease to net cash provided by financing activities totaling approximately $0.1 million, and a corresponding decrease to the net increase in cash and cash equivalents and cash held in escrows totaling approximately $15.8 million from amounts previously reported for the six months ended June 30, 2017. Cash held in escrows include amounts established pursuant to various agreements for security deposits, property taxes, insurance and other costs. Cash held in escrows also include cash held by qualified intermediaries for possible investments in like-kind exchanges in accordance with Section 1031 of the Internal Revenue Code of 1986, as amended, in connection with sales of the Company’s properties.General Adoption
Sales of Real Estate

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In February 2017, the FASB issued ASU No. 2017-05, “Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets” (“ASU 2017-05”). ASU 2017-05 updates the definition of an “in substance nonfinancial asset” and clarifies the derecognition guidance for nonfinancial assets to conform with the new revenue recognition standard. The effective date and transition methods of ASU 2017-05 are aligned with ASU 2014-09 described above and were effective for the first interim period within annual reporting periods beginning after December 15, 2017. The Company adopted ASU 2017-05 effective January 1, 2018 using the modified retrospective approach. The adoption of ASU 2017-05 did not have a material impact on the Company's consolidated financial statements. See also Note 3.
Stock Compensation
In May 2017, the FASB issued ASU 2017-09, “Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting” (“ASU 2017-09”). ASU 2017-09 is intended to provide clarity and reduce (1) diversity in practice, (2) cost and (3) complexity when applying the guidance in Topic 718 to a change to the terms or conditions of a share-based payment award. ASU 2017-09 was effective for public entities for fiscal years and interim periods beginning after December 15, 2017. The Company adopted ASU 2017-09 effective January 1, 2018. The adoption of ASU 2017-09 did not have a material impact on the Company's consolidated financial statements.
Derivatives and Hedging
In August 2017, the FASB issued ASU 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities” (“ASU 2017-12”). ASU 2017-12 was issued with the objective of improving the financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial statements. ASU 2017-12 also makes certain targeted improvements to simplify the application of the hedge accounting guidance. ASU 2017-12 is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted. The Company early adopted ASU 2017-12 effective January 1, 2018. The adoption of ASU 2017-12 did not have a material impact on the Company's consolidated financial statements. As of June 30, 2018, the Company does not have any outstanding hedges, but continues to reclassify into earnings as an increase primarily to interest expense approximately $1.7 million per quarter relating to previously settled interest rate contracts.
New Accounting Pronouncements Issued but not yet Adopted
Leases    
In February 2016, the FASBFinancial Accounting Standards Board (“FASB”) issued ASU 2016-02, “Leases (Topic 842)” (“ASU 2016-02”), which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e., lessees and lessors). ASU 2016-02 requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease for accounting purposes is effectively a financed purchase of the leased asset by the lessee. This classification will determine whether the lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to existingthe prior guidance for operating leases today. The new standardin ASC 840 -“Leases” (“Topic 840”). ASU 2016-02 requires lessors to account for leases using an approach that is substantially equivalent to existing guidanceTopic 840 for sales-type leases, direct financing leases and operating leases. ASU 2016-02 supersedes previous leasing standards. ASU 2016-02 is effective for the Company for reporting periods beginning after December 15, 2018, with early adoption permitted. The Company will adopt ASU 2016-02 effective January 1, 2019 using the modified retrospective approach. The Company is in the process of evaluating whether it will elect to apply the practical expedients. The Company is in the process of adopting ASU 2016-02 and its project team has compiled an inventory of its leases that will be impacted by the adoption of ASU 2016-02. The Company continues to assess the impact of adopting ASU 2016-02. However, the Company will account for operating leases under which it is the lessor on its balance sheet in a manner similar to its current accounting with the underlying leased asset recognized as real estate.
On July 30, 2018, the FASB issued ASU 2018-11, “Leases (Topic 842): Targeted Improvements” (“ASU 2018-11”), that (1) simplifies transition requirements for both lessees and lessors by adding an option that permits an organization to apply the transition provisions of the new standard at its adoption date instead of at the earliest comparative period presented in its financial statements and (2) allows lessors to elect, as a practical expedient, by class of underlying asset, to not separate nonlease components from the associated lease component and, instead, to account for those components as a single component if the nonlease components otherwise would be accounted for under the new revenue guidance (ASC(ASU 2014-09, “Revenue from Contracts with Customers (Topic 606) (“ASC 606”)) that was adopted on January 1, 2018, and both of the following are met:
1.The
(1) the timing and pattern of transfer of the nonlease component(s) and associated lease components are the same; and
(2) the nonlease component(s) and associated lease components are the same.
2.The lease component, if accounted for separately, would be classified as an operating lease.

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If the nonlease component or components associated with the lease component are the predominant component of the combined component, an entity is required to account for the combined component in accordance with ASC 606. Certain disclosures are required if applying this
The Company adopted ASU 2016-02 and ASU 2018-11 effective January 1, 2019. For purposes of transition, the Company elected the practical expedient package, which has been applied consistently to all of its leases, but did not elect the hindsight practical expedient. The Company’s project team is evaluating this recently issuedpractical expedient package did not require the Company to reassess the following: (i) whether an expired or existing contract meets the definition of a lease; (ii) the lease classification at the adoption date for existing leases; and (iii) whether costs previously capitalized as initial direct costs would continue to be amortized. This allows the Company to continue to account for its ground leases as operating leases. However, as of January 1, 2019, any new or modified ground leases may be classified as financing leases unless they meet certain conditions. The Company also elected to apply the transition provisions as of the adoption date, January 1, 2019, and not change its comparative statements. The Company recorded an adjustment to the opening balance of retained earnings related to initial direct costs that, as of January 1, 2019, had not started to amortize and are no longer allowed to be capitalized in accordance with ASU 2018-11. For leases2016-02, totaling
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approximately $3.9 million to Dividends in whichExcess of Earnings of Boston Properties, Inc. and Partners’ Capital of Boston Properties Limited Partnership, approximately $0.4 million to Noncontrolling interests - Common Units of Boston Properties, Inc. and Noncontrolling Interest - Redeemable Partnership Units of Boston Properties Limited Partnership and $70,000 to Noncontrolling Interests - Property Partnerships of Boston Properties, Inc. and Noncontrolling Interests in Property Partnerships of Boston Properties Limited Partnership on the corresponding Consolidated Balance Sheets.
The Company made the policy election, when it is the lessee, primarily consistingto not apply the revenue recognition requirements of ground leases,Topic 842 to short-term leases. This policy election is made by class of underlying assets and as described below, the Company considers real estate to be a class of underlying assets, and will not be further delineating it into specific uses of the real estate asset as the risk profiles are similar in nature. The Company will recognize a right-of-use asset and a lease liability equal to the present value of the minimum lease payments with rental payments being applied toin net income on a straight-line basis over the lease liability and to interest expense and the right-of-use asset being amortized to expenseterm.
Lease payments from operating leases are recognized on a straight-line basis over the term of the lease.leases. The cumulative difference between lease revenue recognized under this method and the contractual lease payment terms is recorded as deferred rent receivable on our consolidated balance sheets. The Company reviews its trade accounts receivable, including its straight-line rent receivable, related to base rents, straight-line rent, expense reimbursements and other revenues for collectability. The Company analyzes its accounts receivable, customer credit worthiness and current economic trends when evaluating the adequacy of the collectability of the lessee’s total accounts receivable balance on a lease-by-lease basis. In addition, under ASU 2016-02, lessors will only capitalize incremental direct leasing costs. Astenants in bankruptcy are analyzed and considerations are made in connection with the expected recovery of pre-petition and post-petition claims. If a result,lessee’s accounts receivable balance is considered uncollectible the Company will no longer be ablewrite-off the receivable balances associated with the lease to capitalize legal costsLease revenue and internal leasing wages and insteadcease to recognize lease income, including straight-line rent unless cash is received. If the Company subsequently determines that it is probable it will be requiredcollect substantially all the remaining lessee’s lease payments under the lease term, the Company will then reinstate the straight-line balance adjusting for the amount related to expense these and other non-incremental costs as incurred. the period when the lease payments were considered not probable. The Company’s reported net earnings are directly affected by management’s estimate of the collectability of its trade accounts receivable.
In January 2018, the FASB issued ASU 2018-01, “Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic 842” (“ASU 2018-01”), which provides an optional transition practical expedient to not evaluate, under Topic 842, existing or expired land easements that were not previously accounted for as leases under the current leases guidance in Topic 840.  An entity that elects this practical expedient should evaluate new or modified land easements under Topic 842 beginning at the date that the entity adopts Topic 842.  An entity that does not elect this practical expedient should evaluate all existing or expired land easements in connection with the adoption of the new lease requirements in Topic 842 to assess whether they meet the definition of a lease.  The effective date and transition requirements for ASU 2018-01 are the same as the effective date and transition requirements in ASU 2016-02. The Company plansadopted ASU 2018-01 on January 1, 2019.
Lessee
For leases in which the Company is the lessee (generally ground leases), on January 1, 2019, the Company recognized a right-of-use asset and a lease liability of approximately $151.8 million and $199.3 million, respectively. The leases liability was equal to elect this practical expedientthe present value of the minimum lease payments in accordance with Topic ASC 840. In addition, the Company did not know the rate implicit in any of its ground leases that were classified as operating leases, and has gathered its inventory and is inaccordingly used the processCompany’s incremental borrowing rate (“IBR”) to determine the net present value of drafting procedures and controls.the minimum lease payments.
3. Real Estate
Boston Properties, Inc.
Real estate consistedIn order to determine the IBR, the Company utilized a market-based approach to estimate the incremental borrowing rate for each individual lease. The approach required significant judgment. Therefore, the Company utilized different data sets to estimate base IBRs via an analysis of the following atweighted-components: 
The interpolated rates from yields on outstanding U.S. Treasury issuances for up to 30 years and for years 31 and beyond, longer-term publicly traded educational institution debt issued by high credit quality educational institutions with maturity dates up to 2116,
Observable mortgage rates spread over U.S. Treasury issuances, and
Unlevered property yields and discount rates.
The Company then applied adjustments to account for considerations related to term and interpolated the IBR.
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The Company has four non-cancelable ground lease obligations, which were classified as operating leases, with various initial term expiration dates through 2114. The Company recognizes ground rent expense on a straight-line basis over the term of the respective ground lease agreements. None of the amounts disclosed below for these ground leases contain variable payments, extension options or residual value guarantees. One of the ground leases does have an extension option. However, lease payments for this ground lease are based on fair market value and as such have not been included in the analysis below.
The Company has four finance lease obligations with various initial term expiration dates through 2036.
The following table provides lease cost information for the Company’s operating and finance leases for the three and six months ended June 30, 2018 and December 31, 20172019 (in thousands):
 June 30, 2018 December 31, 2017
Land$5,108,880
 $5,080,679
Land held for future development (1)210,902
 204,925
Buildings and improvements12,720,779
 12,284,164
Tenant improvements2,278,755
 2,219,608
Furniture, fixtures and equipment44,164
 37,928
Construction in progress1,163,040
 1,269,338
Total21,526,520
 21,096,642
Less: Accumulated depreciation(4,745,590) (4,589,634)
 $16,780,930
 $16,507,008
 Three months ended June 30, 2019 Six months ended June 30, 2019
Lease costs   
Operating lease costs$3,656
 $7,333
Finance lease costs   
Amortization of right of use asset (1)$(14) $2
Interest on lease liabilities (2)$12
 $24
_______________
(1)Includes pre-development costs.The finance leases relate to either land, buildings or assets that remain in development. The Company’s policy is not to depreciate finance lease assets related to land because it is assumed to have an indefinite life. For assets under development, depreciation may commence once the asset is placed in-service and depreciation would be recognized in accordance with the Company’s policy.
(2)Three of the finance leases relate to assets under development and as such, the entire interest amount was capitalized.
Boston Properties Limited Partnership
Real estate consistedThe following table provides other quantitative information for the Company’s operating and finance leases as of the following at June 30, 2018 and2019:
June 30, 2019
Other information
Weighted-average remaining lease term (in years)
Operating leases51
Finance leases5
Weighted-average discount rate
Operating leases5.7%
Finance leases4.1%

The following table provides a maturity analysis for the Company’s future contractual minimum lease payments to be made by the Company as of December 31, 20172018, under non-cancelable ground leases which expire on various dates through 2114:
Years Ending December 31,(in thousands)
2019$11,425
202018,425
202125,310
20228,894
20239,084
Thereafter567,232

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The following table provides a maturity analysis for the Company's future minimum lease payments, as of December 31, 2018, related to the four capital leases, through 2036:
Years Ending December 31,(in thousands)
2019$1,441
202012,682
20212,123
20221,253
2023944
Thereafter73,241
Total expected minimum lease payments91,684
Interest portion(27,497)
Present value of expected net minimum lease payments$64,187

The following table provides a maturity analysis for the Company’s lease liabilities related to its operating and finance leases as of June 30, 2019 (in thousands):
 June 30, 2018 December 31, 2017
Land$5,005,471
 $4,976,303
Land held for future development (1)210,902
 204,925
Buildings and improvements12,416,577
 11,977,062
Tenant improvements2,278,755
 2,219,608
Furniture, fixtures and equipment44,164
 37,928
Construction in progress1,163,040
 1,269,338
Total21,118,909
 20,685,164
Less: Accumulated depreciation(4,649,907) (4,496,959)
 $16,469,002
 $16,188,205
 Operating Finance (1)
July 1, 2019 - December 31, 2019$4,872
 $2,494
202010,050
 121,499
202124,953
 2,096
202218,041
 1,632
202310,326
 1,039
Thereafter567,232
 73,241
Total lease payments635,474
 202,001
Less: interest portion(436,130) (29,099)
Present value of lease payments$199,344
 $172,902

_______________
(1)Includes pre-development costs.Finance lease payments in 2020 and 2024 include approximately $119.8 million and $38.7 million, respectively, related to purchase options that the Company is reasonably certain that it will exercise.


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Development
On January 24, 2018, theThe Company entered into a lease agreement with Leidos for a build-to-suit project with approximately 276,000 net rentable square feet ofleases primarily Class A office, retail and residential space to tenants. These leases may contain extension and termination options that are predominately at the Company's 17Fifty Presidents Street development project locatedsole discretion of the tenant, provided certain conditions are satisfied. In a few instances, the leases also contain purchase options, which would be exercisable at fair market value. Also, certain of the Company’s leases include rental payments that are based on a percentage of the tenant sales in Reston, Virginia. Concurrentlyexcess of contractual amounts.
ASU 2018-11 provides lessors a practical expedient to not separate nonlease components from the associated lease component if certain criteria stated above are met for each class of underlying assets. The guidance in Topic 842 defines “underlying asset” as “an asset that is the subject of a lease for which a right to use that asset has been conveyed to a lessee. The underlying asset could be a physically distinct portion of a single asset.” Based on the above guidance, the Company considers real estate assets as a class of underlying assets and will not be further delineating it into specific uses of the real estate asset as the risk profiles are similar in nature.
Lease components are elements of an arrangement that provide the customer with the executionright to use an identified asset. Nonlease components are distinct elements of a contract that are not related to securing the use of the leased asset and revenue is recognized in accordance with ASC 606. The Company considers common area maintenance (CAM) and service income associated with tenant work orders to be nonlease components because they represent delivery of a separate service but are not considered a cost of securing the identified asset. In the case of the Company’s business, the identified asset would be the leased real estate (office, retail or residential).
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The Company assessed and concluded that the timing and pattern of transfer for nonlease components and the associated lease component are the same. The Company determined that the predominate component was the lease component and as such its leases will continue to qualify as operating leases and the Company commenced developmenthas made a policy election to account for and present the lease component and the nonlease component as a single component in the revenue section of the projectConsolidated Statements of Operations labeled Lease. Prior to the adoption of Topic 842, nonlease components had been included within Recoveries from Tenants Revenue, Parking and expectsOther Revenue and Development and Management Services Revenue on the building to be completedCompany’s Consolidated Statements of Operations.
In addition, under ASU 2016-02, lessors will only capitalize incremental direct leasing costs. As a result, starting January 1, 2019, the Company no longer capitalizes non-incremental legal costs and available for occupancyinternal leasing wages. These costs are expensed as incurred. The expensing of these items is included within General and Administrative Expense on the Consolidated Statements of Operations.
The following table summarizes the components of lease revenue recognized during the second quarter of 2020.
On January 31, 2018, the Company partially placed in-service its Signature at Reston development project comprised of 508 apartment units and retail space aggregating approximately 518,000 square feet located in Reston, Virginia. This project was completed and fully placed in-service on June 7, 2018.
On February 23, 2018, the Company entered into a lease agreement with Fannie Mae to lease approximately 850,000 net rentable square feet of Class A office space at the Company's Reston Gateway development project located in Reston, Virginia. The initial phase of the project will consist of approximately 1.1 million net rentable square feet. The Company expects to begin construction in the second half of 2018 upon receipt of all necessary approvals.
On June 20, 2018, the Company partially placed in-service its Proto Kendall Square development project comprised of 280 apartment units and retail space aggregating approximately 167,000 square feet located in Cambridge, Massachusetts.
Dispositions
On January 9, 2018, the Company completed the sale of its 500 E Street, S.W. property located in Washington, DC for a net contract sale price of approximately $118.6 million. Net cash proceeds totaled approximately $116.1 million, resulting in a gain on sale of real estate totaling approximately $96.4 million for Boston Properties, Inc. and approximately $98.9 million for Boston Properties Limited Partnership. 500 E Street, S.W. is an approximately 262,000 net rentable square foot Class A office property. 500 E Street, S.W. contributed approximately $0.1 million of net income to the Company for the period from January 1, 2018 through January 8, 2018 and contributed approximately $1.6 million and $3.2 million of net income to the Company for the three and six months ended June 30, 2017, respectively.2019 included within the Company’s Consolidated Statements of Operations (in thousands):

Lease Revenue Three months ended June 30, 2019 Six months ended June 30, 2019
Fixed Contractual Payments $557,820
 $1,111,806
Variable lease payments 122,369
 247,634
  $680,189
 $1,359,440

On May 24, 2018,The Company’s properties are leased to tenants under operating leases with initial term expiration dates ranging from 2019 to 2049.
The future contractual minimum lease payments to be received (excluding operating expense reimbursements) by the Company completed the saleas of its 91 Hartwell Avenue property located in Lexington, Massachusetts for a gross sale price of approximately $22.2 million. Net cash proceeds totaled approximately $21.7 million, resulting in a gainDecember 31, 2018, under non-cancelable operating leases which expire on sale of real estate totaling approximately $15.5 million for Boston Properties, Inc. and approximately $15.9 million for Boston Properties Limited Partnership. 91 Hartwell Avenue is an approximately 119,000 net rentable square foot Class A office property. 91 Hartwell Avenue contributed approximately $0.1 million and $0.3 million of net incomevarious dates through 2049: 
Years Ending December 31,(in thousands)
2019$2,088,171
20202,106,963
20212,015,031
20221,838,699
20231,736,636
Thereafter12,295,464

The future contractual lease payments to be received (excluding operating expense reimbursements) by the Company for the period from April 1, 2018 through May 23, 2018 and the period from January 1, 2018 through May 23, 2018, respectively, and contributed approximately $0.1 million and $0.3 millionas of net income to the Company for the three and six months ended June 30, 2017, respectively.

2019, under non-cancelable operating leases which expire on various dates through 2049: 
21
 (in thousands)
July 1, 2019 - December 31, 2019$1,053,967
20202,144,485
20212,111,755
20221,982,534
20231,910,896
Thereafter14,416,019


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4.5. Investments in Unconsolidated Joint Ventures
The investments in unconsolidated joint ventures consist of the following at June 30, 20182019 and December 31, 2017:2018:
 
 Nominal % Ownership Carrying Value of Investment (1) Nominal % Ownership Carrying Value of Investment (1)
Entity Properties  June 30, 2018 December 31, 2017 Properties  
June 30, 2019
 December 31, 2018
   (in thousands)   (in thousands)
Square 407 Limited Partnership Market Square North 50.0% $(7,371) $(8,258) Market Square North 50.0% $(5,518) $(6,424)
The Metropolitan Square Associates LLC Metropolitan Square 20.0% 4,628
 3,339
 Metropolitan Square 20.0% 5,827
 2,644
BP/CRF 901 New York Avenue LLC 901 New York Avenue 25.0%(2) (12,824) (13,811) 901 New York Avenue 25.0%(2) (12,859) (13,640)
WP Project Developer LLC Wisconsin Place Land and Infrastructure 33.3%(3) 39,015
 39,710
 Wisconsin Place Land and Infrastructure 33.3%(3) 37,521
 38,214
Annapolis Junction NFM, LLC Annapolis Junction 50.0%(4) 17,597
 18,381
Annapolis Junction NFM LLC Annapolis Junction 50.0%(4) 25,290
 25,268
540 Madison Venture LLC 540 Madison Avenue 60.0% 66,385
 66,179
 540 Madison Avenue 60.0%(5)9,200
 66,391
500 North Capitol Venture LLC 500 North Capitol Street, NW 30.0% (4,416) (3,876) 500 North Capitol Street, NW 30.0% (5,451) (5,026)
501 K Street LLC 1001 6th Street 50.0%(5) 42,646
 42,657
 1001 6th Street 50.0%(6) 42,473
 42,557
Podium Developer LLC The Hub on Causeway 50.0% 72,900
 67,120
 The Hub on Causeway - Podium 50.0% 58,637
 69,302
Residential Tower Developer LLC The Hub on Causeway - Residential 50.0%(6)38,958
 28,212
 The Hub on Causeway - Residential 50.0% 48,201
 47,505
Hotel Tower Developer LLC The Hub on Causeway - Hotel Air Rights 50.0% 2,046
 1,690
 The Hub on Causeway - Hotel Air Rights 50.0% 3,626
 3,022
Office Tower Developer LLC 100 Causeway Street 50.0%(7)69,551
 23,804
1265 Main Office JV LLC 1265 Main Street 50.0% 4,413
 4,641
 1265 Main Street 50.0% 4,125
 3,918
BNY Tower Holdings LLC Dock 72 at the Brooklyn Navy Yard 50.0% 71,651
 72,104
 Dock 72 50.0% 91,134
 82,520
CA-Colorado Center Limited Partnership Colorado Center 50.0% 253,864
 254,440
 Colorado Center 50.0% 254,122
 253,495
7750 Wisconsin Avenue LLC 7750 Wisconsin Avenue 50.0%(6)68,404
 21,452
 7750 Wisconsin Avenue 50.0%(7)70,122
 69,724
BP-M 3HB Venture LLC 3 Hudson Boulevard 25.0% 47,966
 46,993
SMBP Venture LP Santa Monica Business Park 55.0% 169,040
 180,952
   $657,896
 $593,980
   $913,007
 $931,219
_______________
(1)
Investments with deficit balances aggregating approximately $24.6$23.8 million and $25.9$25.1 millionat June 30, 20182019 and December 31, 2017,2018, respectively, have been reflected within Other Liabilities in the Company’s Consolidated Balance Sheets.
(2)The Company’s economic ownership has increased based on the achievement of certain return thresholds.
(3)The Company’s wholly-owned subsidiary that owns Wisconsin Place Office also owns a 33.3% interest in the joint venture entity that owns the land, parking garage and infrastructure of the project.
(4)The joint venture owns fourthree in-service buildings and two undeveloped land parcels.
(5)The property was sold on June 27, 2019. As of June 30, 2019, the investment is comprised of undistributed cash. See note below for additional details.
(6)Under the joint venture agreement for this land parcel, the partner will be entitled to up to two additional payments from the venture based on increases in total entitled square footage of the project above 520,000 square feet and achieving certain project returns at stabilization.
(6)(7)
This entity is a VIE (See Note 2).
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Certain of the Company’s unconsolidated joint venture agreements include provisions whereby,provide that, at certain specified times, each partner has the right to initiate a purchase or sale of its interest in the joint ventures. With limited exceptions, under these provisions, the Company is not compelled to purchase the interest of its outside joint venture partners. Under certain of the Company’s joint venture agreements, if certain return thresholds are achieved, the partners will be entitled to an additional promoted interest or payments.

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TableThe Company classifies distributions received from equity method investees within its consolidated statements of Content

cash flows using the nature of the distribution approach, which classifies the distributions received on the basis of the nature of the activity or activities of the investee that generated the distribution as either a return on investment (classified as cash inflows from operating activities) or a return of investment (classified as cash inflows from investing activities).
The combined summarized balance sheets of the Company’s unconsolidated joint ventures are as follows:
June 30, 2018 December 31, 2017June 30, 2019 December 31, 2018
(in thousands)(in thousands)
ASSETS      
Real estate and development in process, net(1)$1,938,438
 $1,768,996
$3,551,504
 $3,545,906
Other assets397,442
 367,743
515,923
 543,512
Total assets$2,335,880
 $2,136,739
$4,067,427
 $4,089,418
LIABILITIES AND MEMBERS’/PARTNERS’ EQUITY      
Mortgage and notes payable, net$1,524,951
 $1,437,440
$1,991,290
 $2,017,609
Other liabilities(2)126,179
 99,215
656,902
 582,006
Members’/Partners’ equity684,750
 600,084
1,419,235
 1,489,803
Total liabilities and members’/partners’ equity$2,335,880
 $2,136,739
$4,067,427
 $4,089,418
Company’s share of equity$349,576
 $286,495
$574,662
 $622,498
Basis differentials (1)(3)308,320
 307,485
338,345
 308,721
Carrying value of the Company’s investments in unconsolidated joint ventures (2)(4)$657,896
 $593,980
$913,007
 $931,219
 _______________
(1)
At June 30, 2019, this amount includes right of use assets - finance leases and right of use assets - operating leases totaling approximately $248.9 million and $12.5 million, respectively.
(2)
At June 30, 2019, this amount includes lease liabilities - finance leases and lease liabilities - operating leases totaling approximately $393.2 million and $17.2 million, respectively.
(3)
This amount represents the aggregate difference between the Company’s historical cost basis and the basis reflected at the joint venture level, which is typically amortized over the life of the related assets and liabilities. Basis differentials result from impairments of investments, acquisitions through joint ventures with no change in control and upon the transfer of assets that were previously owned by the Company into a joint venture. In addition, certain acquisition, transaction and other costs may not be reflected in the net assets at the joint venture level. At June 30, 20182019 and December 31, 2017,2018, there was an aggregate basis differential of approximately $319.7$313.3 million and $322.5$316.7 million, respectively, between the carrying value of the Company’s investment in the joint venture that owns Colorado Center and the joint venture’s basis in the assets and liabilities, which differential (excluding land) shall be amortized over the remaining lives of the related assets and liabilities.
(2)(4)
Investments with deficit balances aggregating approximately $24.6$23.8 millionand $25.9$25.1 million at June 30, 20182019 and December 31, 2017,2018, respectively, have been reflected within Other Liabilities in the Company’s Consolidated Balance Sheets.
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The combined summarized statements of operations of the Company’s unconsolidated joint ventures are as follows:
 Three months ended June 30, Six months ended June 30,
 2018 2017 2018 2017
 (in thousands)    
Total revenue (1)$57,096
 $55,862
 $113,582
 $110,623
Expenses       
Operating22,868
 22,103
 45,717
 44,182
Depreciation and amortization14,527
 14,224
 29,252
 28,533
Total expenses37,395
 36,327
 74,969
 72,715
Operating income19,701
 19,535
 38,613
 37,908
Other expense       
Interest expense14,708
 9,427
 29,132
 18,727
Net income$4,993
 $10,108
 $9,481
 $19,181
        
Company’s share of net income$2,105
 $4,344
 $3,931
 $8,667
Basis differential (2)(1,336) (1,236) (2,701) (2,475)
Income from unconsolidated joint ventures$769
 $3,108
 $1,230
 $6,192

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 Three months ended June 30, Six months ended June 30,
 2019 2018 2019 2018
 (in thousands)
Total revenue (1)$80,204
 $57,096
 $163,159
 $113,582
Expenses       
Operating30,134
 22,868
 60,633
 45,717
Depreciation and amortization24,818
 14,527
 53,464
 29,252
Total expenses54,952
 37,395
 114,097
 74,969
Other income (expense)       
Interest expense(20,803) (14,708) (41,560) (29,132)
Gain on sale of real estate (2)34,572
 —
 34,572
 —
Net income$39,021
 $4,993
 $42,074
 $9,481
        
Company’s share of net income$22,376
 $2,105
 $23,960
 $3,931
Basis differential (2) (3)25,588
 (1,336) 24,217
 (2,701)
Income from unconsolidated joint ventures$47,964
 $769
 $48,177
 $1,230
 _______________ 
(1)
Includes straight-line rent adjustments of approximately $3.2$7.6 million and $4.3$3.2 million for the three months ended June 30, 2019 and 2018, respectively, and 2017, respectively,$13.4 million and $5.0 million and $11.3 million for the six months ended June 30, 2019 and 2018, and 2017, respectively.
(2)Represents the total gain on sale of 540 Madison Avenue recognized by the joint venture, as described below. During 2008, the Company recognized an other-than-temporary impairment loss on its investment in the unconsolidated joint venture resulting in a basis differential between the carrying value of the Company’s investment in the joint venture and the joint venture’s basis in the assets and liabilities of the property. As a result of the historical basis difference, the Company recognized a gain on sale of real estate totaling approximately $47.8 million, which consists of its share of the gain on sale reported by the joint venture as well as an adjustment for the basis differential. The gain on sale is included in Income from Unconsolidated Joint Ventures in the Company’s Consolidated Statements of Operations.
(3)
Includes straight-line rent adjustments of approximately $0.7$0.5 million and $0.8$0.7 million for the three months ended June 30, 2019 and 2018, respectively, and 2017, respectively,$1.1 million and $1.4 million and $1.5 million for the six months ended June 30, 20182019 and 2017,2018, respectively. Also includes net above-/below-market rent adjustments of approximately $0.4 million and $0.4 million for the three months ended June 30, 20182019 and 2017,2018, respectively, and $0.8 million and $0.9$0.8 million for the six months ended June 30, 2019 and 2018, and 2017, respectively.

On January 24, 2019, a joint venture in which the Company has a 50% interest extended the loan collateralized by its Annapolis Junction Building Six property. At the time of the extension, the outstanding balance of the loan totaled approximately $13.0 million and was scheduled to mature on November 17, 2019, with one, one-year extension option, subject to certain conditions. The extended loan has a total commitment amount of approximately $14.3 million, bears interest at a variable rate equal to LIBOR plus 2.00% per annum and matures on November 17, 2020. Annapolis Junction Building Six is a Class A office property with approximately 119,000 net rentable square feet located in Annapolis, Maryland.
On April 19, 2018,26, 2019, a joint venture in which the Company has a 50% interest obtained construction financing with a total commitment of $180.0$255.0 million collateralized by its Hub on Causeway - Residential7750 Wisconsin Avenue development project.project located in Bethesda, Maryland. The construction financing bears interest at a variable rate equal to LIBOR plus 2.00%1.25% per annum and matures on April 19, 2022,26, 2023, with two, one-year extension options, subject to certain conditions. The joint venture has not yetAs of June 30, 2019, there have been no amounts drawn any funds under the loan. 7750 Wisconsin Avenue is a 734,000 net rentable square foot build-to-suit Class A office project and below-grade parking garage.
On May 28, 2019, joint ventures in which the Company has a 50% interest and that own The Hub on Causeway - Residential isPodium and 100 Causeway Street development projects entered into an infrastructure development
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assistance agreement (the “IDAA”) with the Commonwealth of Massachusetts and the City of Boston. Per the IDAA, the Hub on Causeway - Podium development project will be reimbursed for certain costs of public infrastructure improvements using the proceeds of up to $30.0 million in aggregate principal amount of municipal bonds issued by the Commonwealth of Massachusetts. As of June 30, 2019, the joint venture had not received any reimbursements of costs for the public infrastructure improvements. In addition, the joint venture that owns the Hub on Causeway - Podium development project modified its construction loan agreement with the lender requiring the joint venture to pay down the construction loan balance using the proceeds received from the reimbursement of costs of the public infrastructure improvements. On June 15, 2019, the joint venture partially placed in-service The Hub on Causeway - Podium development project, an approximately 320,000385,000 net rentable square foot project comprised of 440 residential unitscontaining retail and office space located in Boston, Massachusetts.
On AprilJune 27, 2018,2019, a joint venture in which the Company has a 60% interest refinancedcompleted the sale of 540 Madison Avenue in New York City for a gross sale price of approximately $310.3 million, including the assumption by the buyer of the mortgage loan collateralized by its 540 Madison Avenuethe property located in New York City totaling $120.0 million. The mortgage loan bearsbore interest at a variable rate equal to LIBOR plus 1.10% per annum and matures on June 5, 2023.  The previous mortgage loan bore interest at a variable rate equal to LIBOR plus 1.50% per annum and was scheduled to mature on June 5, 2018.2023. Net cash proceeds totaled approximately $178.7 million, of which the Company’s share was approximately $107.1 million, after the payment of transaction costs. During 2008, the Company recognized an other-than-temporary impairment loss on its investment in the unconsolidated joint venture. As a result, the Company recognized a gain on sale of real estate totaling approximately $47.8 million, which is included in Income from Unconsolidated Joint Ventures in the accompanying Consolidated Statements of Operations. 540 Madison Avenue is an approximately 284,000 net rentable square foot Class A office property.
5. Debt6. Unsecured Senior Notes
Credit FacilityThe following summarizes the unsecured senior notes outstanding as of June 30, 2019 (dollars in thousands):
 Coupon/Stated Rate Effective Rate(1) Principal Amount Maturity Date(2)
10 Year Unsecured Senior Notes5.625% 5.708% $700,000
 
November 15, 2020
10 Year Unsecured Senior Notes4.125% 4.289% 850,000
 
May 15, 2021
11 Year Unsecured Senior Notes3.850% 3.954% 1,000,000
 
February 1, 2023
10.5 Year Unsecured Senior Notes3.125% 3.279% 500,000
 
September 1, 2023
10.5 Year Unsecured Senior Notes3.800% 3.916% 700,000
 
February 1, 2024
7 Year Unsecured Senior Notes3.200% 3.350% 850,000
 
January 15, 2025
10 Year Unsecured Senior Notes3.650% 3.766% 1,000,000
 
February 1, 2026
10 Year Unsecured Senior Notes2.750% 3.495% 1,000,000
 
October 1, 2026
10 Year Unsecured Senior Notes4.500% 4.628% 1,000,000
 
December 1, 2028
10 Year Unsecured Senior Notes3.400% 3.505% 850,000
 
June 21, 2029
Total principal    8,450,000
  
Net unamortized discount    (18,802)  
Deferred financing costs, net    (40,490)  
Total    $8,390,708
  
_______________  
(1)Yield on issuance date including the effects of discounts on the notes, settlements of interest rate contracts and the amortization of financing costs.
(2)No principal amounts are due prior to maturity.
On April 24, 2017,June 21, 2019, Boston Properties Limited Partnership amended and restatedcompleted a public offering of $850.0 million in aggregate principal amount of its 3.400% unsecured revolving credit agreement (as amended and restated, the "2017 Credit Facility"). Among other things, the 2017 Credit Facility (1) increased the total commitmentsenior notes due 2029. The notes were priced at 99.815% of the revolving lineprincipal amount to yield an effective rate (including financing fees) of credit (the "Revolving Facility") from $1.0 billion to $1.5 billion, (2) extended the maturity date from July 26, 2018 to April 24, 2022, (3) reduced theapproximately 3.505% per annum variableto maturity. The notes will mature on June 21, 2029, unless earlier redeemed. The aggregate net proceeds from the offering were approximately $841.3 million after deducting underwriting discounts and transaction expenses.
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The indenture relating to the unsecured senior notes contains certain financial restrictions and requirements, including (1) a leverage ratio not to exceed 60%, (2) a secured debt leverage ratio not to exceed 50%, (3) an interest rates,coverage ratio of greater than 1.50 and (4) added a $500.0 million delayed draw term loan facility (the "Delayed Draw Facility") that permitsan unencumbered asset value of not less than 150% of unsecured debt. At June 30, 2019, Boston Properties Limited Partnership to draw until the first anniversarywas in compliance with each of the closing date. Based on Boston Properties Limited Partnership’s current credit rating, (1) the applicable Eurocurrency margins for the Revolving Facilitythese financial restrictions and Delayed Draw Facility are 82.5 basis points and 90 basis points, respectively, and (2) the facility fee on the Revolving Facility commitment is 0.125% per annum.
On April 24, 2018, Boston Properties Limited Partnership exercised its option to draw $500.0 million on its Delayed Draw Facility. The Delayed Draw Facility bears interest at a variable rate equal to LIBOR plus 0.90% per annum based on Boston Properties Limited Partnership's current credit rating and matures on April 24, 2022.
As of June 30, 2018, Boston Properties Limited Partnership had $500.0 million of borrowings outstanding under its Delayed Draw Facility, no borrowings outstanding under its Revolving Facility and outstanding letters of credit totaling approximately $1.6 million, with the ability to borrow approximately $1.5 billion.requirements.
6.7. Commitments and Contingencies
General
In the normal course of business, the Company guarantees its performance of services or indemnifies third parties against its negligence. In addition, in the normal course of business, the Company guarantees to certain tenants the obligations of its subsidiaries for the payment of tenant improvement allowances and brokerage commissions in connection with their leases and limited costs arising from delays in delivery of their premises. 
The Company has letter of credit and performance obligations related to lender and development requirements that total approximately $9.3$18.4 million.
Certain of the Company’s joint venture agreements include provisions whereby, at certain specified times, each partner has the right to initiate a purchase or sale of its interest in the joint ventures. With limited exception, under these provisions, the Company is not compelled to purchase the interest of its outside joint venture partners.

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From time to time, under certain of the Company’s joint venture agreements, if certain return thresholds are achieved, either the Company or its partners will be entitled to an additional promoted interest or payments. See alsopayments (See Note 7.8).
From time to time, the Company (or ventures in which the Company has an ownership interest) has agreed, and may in the future agree, to (1) guarantee portions of the principal, interest and other amounts in connection with their borrowings, (2) provide customary environmental indemnifications and nonrecourse carve-outs (e.g., guarantees against fraud, misrepresentation and bankruptcy) in connection with their borrowings and (3) provide guarantees to lenders, tenants and other third parties for the completion of development projects. The Company has agreements with its outside partners whereby the partners agree to reimburse the joint venture for their share of any payments made under the guarantee. In some cases, the Company earns a fee from the applicable joint venture for providing the guarantee.
In connection with the refinancing of 767 Fifth Avenue’s (the General Motors Building) secured loan by the Company’s consolidated joint venture entity, 767 Venture, LLC, the Company guaranteed the consolidated entity’s obligation to fund various reserves for tenant improvement costs and allowances, leasing commissions and free rent obligations in lieu of cash deposits. As of June 30, 2018,2019, the maximum funding obligation under the guarantee was approximately $144.7$79.8 million. The Company earns a fee from the joint venture for providing the guarantee and has an agreement with the outside partners to reimburse the joint venture for their share of any payments made under the guarantee. As of June 30, 2018,2019, no amounts related to the guarantee are recorded as liabilities in the Company’s consolidated financial statements.
Pursuant to the lease agreement with Marriott, the Company has guaranteed the completion of the office building and parking garage on behalf of its 7750 Wisconsin Avenue joint venture and has also agreed to provide any financing guaranty that may be required with respect to third-party construction financing.  The Company earns fees from the joint venture for providing the guarantees and any amounts the Company pays under the guarantee(s) will be deemed to be capital contributions by the Company to the joint venture.  The Company has also agreed to fund construction costs through capital contributions to the joint venture in the event of unavailability or insufficiency of third-party construction financing.  In addition, the Company has guaranteed to Marriott, as hotel manager, the completion of a hotel being developed by an affiliate of The Bernstein Companies (the Company'sCompany’s partner in the 7750 Wisconsin Avenue joint venture) adjacent to the office property, for which the Company earns a fee from the affiliate of The Bernstein Companies.  In addition, the Company entered into agreements with affiliates of The Bernstein Companies whereby the Company could be required to act as a mezzanine and/or mortgage lender and finance the construction of the hotel property.  To secure such financing arrangements, affiliates of The Bernstein Companies are required to provide certain security, which varies depending on the specific loan, by pledges of their equity interest in the office property, a fee mortgage on the hotel property, or both. As of June 30, 2018,2019, no amounts related to the contingent aspect of any of the guarantees are recorded as liabilities in the Company’s consolidated financial statements.
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In connection with the sale and development of the Company’s 6595 Springfield Center Drive development project, the Company has guaranteed the completion of the project and the payment of certain cost overruns in accordance with the development management agreement with the buyer. Although the project has been sold and the lease with the federal government tenant has been assigned to the buyer, pursuant to the terms of the Federal Government lease, the Federal Government tenant is not obligated to release the prior owner/landlord from such landlord’s obligations under the lease until completion of the construction. As a result, the entity which previously owned the land remains liable to the Federal Government tenant for the completion of the construction obligations under the lease.  The buyer is obligated to fund the balance of the costs to meet such construction obligations, subject to the Company’s obligation to fund cost overruns (if any), as noted above. An affiliate of the buyer has provided a guaranty of the obligations of the buyer to fund such construction costs and the buyer has agreed to use commercially reasonable efforts to require the construction lender to provide certain remedies to the Company in the event the buyer does not fund such construction obligations. As of June 30, 2019, no amounts related to the contingent aspect of the guarantee are recorded as a liability in the Company’s consolidated financial statements.
In connection with the redevelopment of the Company’s 325 Main Street property located in Cambridge, Massachusetts, the Company is required, pursuant to the local zoning ordinance, to commence construction of a residential building of at least 200,000 square feet with 25% of the project designated as income-restricted (with a minimum of 20% of the square footage devoted to home ownership units) prior to the occupancy of the 325 Main Street property. 325 Main Street currently consists of an approximately 115,000 net rentable square foot Class A office property that will be demolished and developed into an approximately 420,000 net rentable square foot Class A office property, including approximately 41,000 net rentable square feet of retail space (See Note 3).
In 2009, the Company filed a general unsecured creditor’s claim against Lehman Brothers, Inc. for approximately $45.3 million related to its rejection of a lease at 399 Park Avenue in New York City. On January 10, 2014, the trustee for the liquidation of the business of Lehman Brothers allowed the Company’s claim in the amount of approximately $45.2 million. During 2014, 2015, 2016, 2017 and 2016,2018, the Company received distributions of approximately $7.7 million, $8.1 million, and $1.4 million, respectively. On May 19, 2017, the Company received a fifth interim distribution totaling approximately $0.4 million leavingand $0.3 million, respectively. The Company has a remaining claim of approximately $27.6$27.2 million. The Company will continue to evaluate whether to attempt to sell the remaining claim or wait until the trustee distributes proceeds from the Lehman Brothers estate. Given the inherent uncertainties in bankruptcy proceedings, there can be no assurance as to the timing or amount of additional proceeds, if any, that the Company may ultimately realize on the remaining claim, whether by sale to a third party or by one or more distributions from the trustee. Accordingly, the Company has not recorded any estimated recoveries associated with this gain contingency within its Consolidated Financial Statements at June 30, 2018.2019.
Insurance
The Company’s property insurance program per occurrence limits are $1.0 billion for its portfolio insurance program, including coverage for acts of terrorism other than nuclear, biological, chemical or radiological terrorism (“Terrorism Coverage”). The Company also carries $250 million of Terrorism Coverage for 601 Lexington Avenue, New York, New York (“601 Lexington Avenue”) in excess of the $1.0 billion of coverage in the Company’s property insurance program. Certain properties, including the General Motors Building located at 767 Fifth Avenue in New York, New York (“767 Fifth Avenue”), are currently insured in separate insurance programs. The property insurance

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program per occurrence limits for 767 Fifth Avenue are $1.625 billion, including Terrorism Coverage. The Company also currently carries nuclear, biological, chemical and radiological terrorism insurance coverage for acts of terrorism certified under the Federal Terrorism Risk Insurance Act (as amended, “TRIA”) (“NBCR Coverage”), which is provided by IXP as a direct insurer, for the properties in the Company'sCompany’s portfolio, including 767 Fifth Avenue, but excluding certain other properties owned in joint ventures with third parties or which the Company manages. The per occurrence limit for NBCR Coverage is $1.0 billion. Under TRIA, after the payment of the required deductible and coinsurance, the NBCR Coverage provided by IXP is backstopped by the Federal Government if the aggregate industry insured losses resulting from a certified act of terrorism exceed a “program trigger.” In 2018,2019, the program trigger is $160$180 million and the coinsurance is 18%19%, however, both will increase in subsequent years pursuant to TRIA. If the Federal Government pays out for a loss under TRIA, it is mandatory that the Federal Government recoup the full amount of the loss from insurers offering TRIA coverage after the payment of the loss pursuant to a formula in TRIA. The Company may elect to terminate the NBCR Coverage if the Federal Government seeks recoupment for losses paid under TRIA, if TRIA is not extended after its expiration on December 31, 2020, if there is a change in its portfolio or for any other reason. The Company intends to continue to monitor the scope, nature and cost of available terrorism insurance.
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The Company also currently carries earthquake insurance on its properties located in areas known to be subject to earthquakes. In addition, this insurance is subject to a deductible in the amount of 3% of the value of the affected property. Specifically, the Company currently carries earthquake insurance which covers its San Francisco and Los Angeles regions with a $240 million per occurrence limit, and a $240 million annual aggregate limit, $20 million of which is provided by IXP, as a direct insurer. The amount of the Company’s earthquake insurance coverage may not be sufficient to cover losses from earthquakes. In addition, the amount of earthquake coverage could impact the Company’s ability to finance properties subject to earthquake risk. The Company may discontinue earthquake insurance or change the structure of its earthquake insurance program on some or all of its properties in the future if the premiums exceed the Company’s estimation of the value of the coverage.
IXP, a captive insurance company which is a wholly-owned subsidiary of the Company, acts as a direct insurer with respect to a portion of the Company’s earthquake insurance coverage for its Greater San Francisco and Los Angeles properties and the Company’s NBCR Coverage. Insofar as the Company owns IXP, it is responsible for its liquidity and capital resources, and the accounts of IXP are part of the Company’s consolidated financial statements. In particular, if a loss occurs which is covered by the Company’s NBCR Coverage but is less than the applicable program trigger under TRIA, IXP would be responsible for the full amount of the loss without any backstop by the Federal Government. IXP would also be responsible for any recoupment charges by the Federal Government in the event losses are paid out and its insurance policy is maintained after the payout by the Federal Government. If the Company experiences a loss and IXP is required to pay under its insurance policy, the Company would ultimately record the loss to the extent of the required payment. Therefore, insurance coverage provided by IXP should not be considered as the equivalent of third-party insurance, but rather as a modified form of self-insurance. In addition, Boston Properties Limited Partnership has issued a guarantee to cover liabilities of IXP in the amount of $20.0 million.
The mortgages on the Company’s properties typically contain requirements concerning the financial ratings of the insurers who provide policies covering the property. The Company provides the lenders on a regular basis with the identity of the insurance companies in the Company’s insurance programs. The ratings of some of the Company’s insurers are below the rating requirements in some of the Company’s loan agreements and the lenders for these loans could attempt to claim that an event of default has occurred under the loan. The Company believes it could obtain insurance with insurers which satisfy the rating requirements. Additionally, in the future, the Company’s 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 the Company’s insurers will not have a material adverse effect on the Company.
The Company continues 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 the Company cannot anticipate what coverage will be available on commercially reasonable terms in future policy years. There are other types of losses, such as from wars, for which the Company cannot obtain insurance at all or at a reasonable cost. With respect to such losses and losses from acts of terrorism, earthquakes or other catastrophic events, if the Company experiences a loss that is uninsured or that exceeds policy limits, the Company could lose the capital invested in the damaged properties, as well as the anticipated future revenues from those properties. Depending on the specific circumstances of each affected property, it is possible that the Company could be liable for mortgage

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indebtedness or other obligations related to the property. Any such loss could materially and adversely affect the Company’s business and financial condition and results of operations.
7.8. Noncontrolling Interests
Noncontrolling interests relate to the interests in Boston Properties Limited Partnership not owned by Boston Properties, Inc. and interests in consolidated property partnerships not wholly-owned by the Company. As of June 30, 2018,2019, the noncontrolling interests in Boston Properties Limited Partnership consisted of 16,831,18216,828,230 OP Units, 992,3871,189,117 LTIP Units (including 118,067 2012 OPP Units, 68,88968,659 2013 MYLTIP Units, 23,18723,100 2014 MYLTIP Units, and 28,724 2015 MYLTIP Units), 471,579Units and 98,706 2016 MYLTIP Units, 398,871Units), 394,921 2017 MYLTIP Units, 336,195 2018 MYLTIP Units and 341,366 2018220,734 2019 MYLTIP Units held by parties other than Boston Properties, Inc.
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Noncontrolling Interest—Common Units
During the six months ended June 30, 2018, 34,7412019, 34,967 OP Units were presented by the holders for redemption (including 31,74133,767 OP Units issued upon conversion of LTIP Units, 2012 OPP Units, 2013 MYLTIP Units, 2014 MYLTIP Units and 20142016 MYLTIP Units) and were redeemed by Boston Properties, Inc. in exchange for an equal number of shares of Common Stock.
At June 30, 2018,2019, Boston Properties Limited Partnership had outstanding 471,579 2016 MYLTIP Units, 398,871394,921 2017 MYLTIP Units, 336,195 2018 MYLTIP Units and 341,366 2018220,734 2019 MYLTIP Units. Prior to the applicable measurement date (February 9, 2019 for 2016 MYLTIP Units, February 6, 2020 for the 2017 MYLTIP Units, and February 5, 2021 for the 2018 MYLTIP Units and February 4, 2022 for the 2019 MYLTIP Units), holders of MYLTIP Units will be entitled to receive per unit distributions equal to one-tenth (10%) of the regular quarterly distributions payable on an OP Unit, but will not be entitled to receive any special distributions. After the measurement date, the number of MYLTIP Units, both vested and unvested, that MYLTIP award recipients have earned, if any, based on the establishment of a performance pool, will be entitled to receive distributions in an amount per unit equal to distributions, both regular and special, payable on an OP Unit.
On February 4, 2018,9, 2019, the measurement period for the Company’s 20152016 MYLTIP awards ended and, based on Boston Properties, Inc.’s relative TSR performance, the final awards were determined to be 22.0%69.5% of target or an aggregate of approximately $3.6$13.6 million(after giving effect to voluntary employee separations). As a result, an aggregate of 337,847 2015364,980 2016 MYLTIP Units that had been previously granted were automatically forfeited.
The following table presents Boston Properties Limited Partnership’s distributions on the OP Units and LTIP Units (including the 2012 OPP Units, 2013 MYLTIP Units, 2014 MYLTIP Units and 2015 MYLTIP Units and, after the February 9, 2019 measurement date, the 2016 MYLTIP Units) and its distributions on the 2016 MYLTIP Units (prior to the February 9, 2019 measurement date), 2017 MYLTIP Units, 2018 MYLTIP Units and 2019 MYLTIP Units (after the February 5, 2019 issuance date) paid in 2019:
Record Date Payment Date Distributions per OP Unit and LTIP Unit Distributions per MYLTIP Unit
June 28, 2019 July 31, 2019 
$0.95
 
$0.095
March 29, 2019 April 30, 2019 
$0.95
 
$0.095
December 31, 2018 January 30, 2019 
$0.95
 
$0.095

The following table presents Boston Properties Limited Partnership’s distributions on the OP Units and LTIP Units (including the 2012 OPP Units, 2013 MYLTIP Units, 2014 MYLTIP Units and, after the February 4, 2018 measurement date, the 2015 MYLTIP Units) and its distributions on the 2015 MYLTIP Units (prior to the February 4, 2018 measurement date), 2016 MYLTIP Units, 2017 MYLTIP Units and 2018 MYLTIP Units (after the February 6, 2018 issuance date) paid inthat occurred during the first and second quarters of 2018:
Record Date Payment Date Distributions per OP Unit and LTIP Unit Distributions per MYLTIP Unit
June 29, 2018 July 31, 2018 
$0.80
 
$0.080
March 29, 2018 April 30, 2018 
$0.80
 
$0.080
December 31, 2017 January 30, 2018 
$0.80
 
$0.080
Record Date Payment Date Distributions per OP Unit and LTIP Unit Distributions per MYLTIP Unit
June 29, 2018 July 31, 2018 
$0.80
 
$0.080
March 29, 2018 April 30, 2018 
$0.80
 
$0.080
December 29, 2017 January 30, 2018 
$0.80
 
$0.080

A holder of an OP Unit may present the OP Unit to Boston Properties Limited Partnership for redemption at any time (subject to restrictions agreed upon at the time of issuance of OP Units to particular holders that may restrict such redemption right for a period of time, generally one year from issuance). Upon presentation of an OP Unit for redemption, Boston Properties Limited Partnership must redeem the OP Unit for cash equal to the then value of a share of common stock of Boston Properties, Inc. Boston Properties, Inc. may, in its sole discretion, elect to assume and satisfy the redemption obligation by paying either cash or issuing one share of Common Stock. The value of the OP Units not owned by Boston Properties, Inc. and LTIP Units (including the 2012 OPP Units, 2013 MYLTIP Units, 2014 MYLTIP Units, 2015 MYLTIP Units and 20152016 MYLTIP Units), assuming that all conditions had been met for the conversion thereof, had all of such units been redeemed at June 30, 20182019 was approximately $2.2$2.3 billion based on the last reported price of a share of Common Stock on the New York Stock Exchange of $125.42$129.00 per share on June 29, 2018.

28, 2019.
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Boston Properties Limited Partnership
The following table reflects the activity of noncontrolling interests—redeemable partnership units of Boston Properties Limited Partnership for the six months ended June 30, 2018 and 2017 (in thousands):
Balance at December 31, 2017$2,292,263
Contributions34,973
Net income35,311
Distributions(28,708)
Conversion of redeemable partnership units(1,196)
Unearned compensation(13,443)
Cumulative effect of a change in accounting principle563
Other comprehensive income310
Adjustment to reflect redeemable partnership units at redemption value(84,641)
Balance at June 30, 2018$2,235,432
  
Balance at December 31, 2016$2,262,040
Contributions31,532
Net income26,933
Distributions(26,977)
Conversion of redeemable partnership units(16,422)
Unearned compensation(12,344)
Cumulative effect of a change in accounting principle(1,763)
Other comprehensive loss(104)
Adjustment to reflect redeemable partnership units at redemption value(92,740)
Balance at June 30, 2017$2,170,155

Noncontrolling Interests—Property Partnerships
The noncontrolling interests in property partnerships consist of the outside equity interests in ventures that are consolidated with the financial results of the Company because the Company exercises control over the entities that own the properties. The equity interests in these ventures that are not owned by the Company, totaling approximately $1.7 billion at June 30, 20182019 and December 31, 2017,2018, are included in Noncontrolling Interests—Property Partnerships in the accompanying Consolidated Balance Sheets.
On May 12, 2016, the partners in the Company’s consolidated entity that owns Salesforce Tower located in San Francisco, California amended the venture agreement. Under the original venture agreement, if the Company electselected to fund the construction of Salesforce Tower without a construction loan (or a construction loan of less than 50% of project costs) and the venture has commenced vertical construction of the project, then the partner’s capital funding obligation shallwould be limited, in which event the Company shallwould fund up to 2.5% of the total project costs (i.e., 50% of the partner’s 5% interest in the venture) in the form of a loan to the partner. This loan would bear interest at the then prevailing market interest rates for construction loans. Under the amended agreement, the partners have agreed to structure this funding by the Company as preferred equity rather than a loan. The preferred equity contributed by the Company earnsearned a preferred return equal to LIBOR plus 3.00% per annum and iswas payable to the Company out of any distributions to which the partner would otherwise be entitled until such preferred equity and preferred return have beenwas repaid to the Company. As of June 30, 2018, theThe Company had contributed an aggregate of approximately $20.7$22.6 million of preferred equity to the venture. Also, under the joint venture agreement, (a) from and after the stabilization date, the partner hashad the right to cause the Company to purchase all (but not less than all) of the partner’s interest and (b) from and after the third anniversary of the stabilization date, the Company hashad the right to acquire all (but not less than all) of the partner’s interest, in each case at an agreed upon purchase price or appraised value.  In addition, if certain threshold returns arewere achieved the partner willwould be entitled to receive an additional promoted interest.  interest with respect to cash flow distributions.  The term stabilization date iswas defined in the agreement to generally mean the first date after completion upon which Salesforce Tower is (1) at least 90% leased and (2) 50% occupied by tenants that are paying rent. The stabilization dateSalesforce Tower is expectedan approximately 1,421,000 net rentable square foot Class A office property.
On January 18, 2019, the Company and its partner amended the venture agreement. Per the amendment, the partner exercised its right to occurcause the Company to purchase on April 1, 2019 its 5% ownership interest and promoted profits interest in the second halfventure for cash totaling approximately $210.9 million, which amount was reduced by approximately $24.1 million, consisting of 2018.the repayment of the Company’s preferred equity and preferred return as provided for in the venture agreement.

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TableOn April 1, 2019, the Company completed the acquisition of Content

its partner’s 5% ownership interest and promoted profits interest in the consolidated entity for cash totaling approximately $210.9 million, which amount was reduced by approximately $24.1 million to $186.8 million to reflect the repayment of the Company's preferred equity and preferred return in the venture, as described above. The following table reflectsCompany now owns 100% of Salesforce Tower. The Company has accounted for the activitytransaction as an equity transaction for financial reporting purposes and has reflected the difference between the fair value of the total consideration paid and the related carrying value of the noncontrolling interests—interest - property partnerships forpartnership totaling approximately $162.5 million as a decrease to Additional Paid-in Capital and Partners’ Capital in the six months ended June 30, 2018Consolidated Balance Sheets of Boston Properties, Inc. and 2017 (in thousands):
Balance at December 31, 2017$1,683,760
Capital contributions27,532
Net income31,634
Accumulated other comprehensive income288
Distributions(44,033)
Balance at June 30, 2018$1,699,181
  
Balance at December 31, 2016$1,530,647
Capital contributions133,072
Net income19,627
Accumulated other comprehensive loss(2,416)
Distributions(26,949)
Balance at June 30, 2017$1,653,981

Boston Properties Limited Partnership, respectively.
8.9. Stockholders’ Equity / Partners’ Capital
As of June 30, 2018,2019, Boston Properties, Inc. had 154,411,529154,563,130 shares of Common Stock outstanding.
As of June 30, 2018,2019, Boston Properties, Inc. owned 1,722,3511,725,805 general partnership units and 152,689,178152,837,325 limited partnership units of Boston Properties Limited Partnership.
On June 2, 2017, Boston Properties, Inc. renewed its “at the market” (“ATM”) stock offering program through which it may sell from time to time up to an aggregate of $600.0 million of its common stock through sales agents over a three-year period. This program replaced the Company’s prior $600.0 million ATM stock offering program that was scheduled to expire on June 3, 2017. The Company intends to use the net proceeds from any offering for general business purposes, which may include investment opportunities and debt reduction. No shares of common stock have been issued under this ATM stock offering program.
During the six months ended June 30, 2018,2019, Boston Properties, Inc. issued 34,74129,704 shares of Common Stock upon the exercise of options to purchase Common Stock.
During the six months ended June 30, 2019, Boston Properties, Inc. issued 34,967 shares of Common Stock in connection with the redemption of an equal number of redeemable OP Units from limited partners.
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The following table presents Boston Properties, Inc.’s dividends per share and Boston Properties Limited Partnership’s distributions per OP Unit and LTIP Unit paid or declared in 2019 and during the first and second quarters of 2018:
Record Date Payment Date Dividend (Per Share)
 Distribution (Per Unit)
June 28, 2019 July 31, 2019 
$0.95
 
$0.95
March 29, 2019 April 30, 2019 
$0.95
 
$0.95
December 31, 2018 January 30, 2019 
$0.95
 
$0.95
       
June 29, 2018 July 31, 2018 
$0.80
 
$0.80
March 29, 2018 April 30, 2018 
$0.80
 
$0.80
December 31, 2017 January 30, 2018 
$0.80
 
$0.80
Record Date Payment Date Dividend (Per Share)
 Distribution (Per Unit)
June 29, 2018 July 31, 2018 
$0.80
 
$0.80
March 29, 2018 April 30, 2018 
$0.80
 
$0.80
December 29, 2017 January 30, 2018 
$0.80
 
$0.80

Preferred Stock
As of June 30, 2018,2019, Boston Properties, Inc. had 80,000 shares (8,000,000 depositary shares each representing 1/100th of a share) outstanding of its 5.25% Series B Cumulative Redeemable Preferred Stock with a liquidation preference of $2,500.00 per share ($25.00 per depositary share). Boston Properties, Inc. pays cumulative cash dividends on the Series B Preferred Stock at a rate of 5.25% per annum of the $2,500.00 liquidation preference per share. Boston Properties, Inc. did not have the right to redeem the Series B Preferred Stock prior to March 27, 2018, except in certain circumstances relating to the preservation of Boston Properties, Inc.’s REIT status. On and after March 27, 2018, Boston Properties, Inc., at its option, may redeem the Series B Preferred Stock for a cash redemption price of $2,500.00 per share ($25.00 per depositary share), plus all accrued and unpaid dividends. The Series B Preferred Stock is not redeemable by the holders, has no maturity date and is not convertible into any other security of Boston Properties, Inc. or its affiliates.

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The following table presents Boston Properties Inc.’s dividends per share on its outstanding Series B Preferred Stock paid or declared during 2019 and the first and second quarters of 2018:
Record Date Payment Date Dividend (Per Share)

August 2, 2019August 15, 2019
$32.8125
May 3, 2019May 15, 2019
$32.8125
February 4, 2019February 15, 2019
$32.8125
August 3, 2018 August 15, 2018 

$32.8125

May 4, 2018 May 15, 2018 

$32.8125

February 2, 2018 February 15, 2018 

$32.8125




9.10. Earnings Per Share / Common Unit
Boston Properties, Inc.
The following table provides a reconciliation of both the net income attributable to Boston Properties, Inc. common shareholders and the number of common shares used in the computation of basic earnings per share (“EPS”), which is calculated by dividing net income attributable to Boston Properties, Inc. common shareholders by the weighted-average number of common shares outstanding during the period. Unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are also participating securities. As such, unvested restricted common stock of Boston Properties, Inc. and Boston Properties Limited Partnership'sPartnership’s LTIP Units, 2012 OPP Units and MYLTIP Units are considered participating securities. Participating securities are included in the computation of basic EPS of Boston Properties, Inc. using the two-classtwo-class method. Participating securities are included in the computation of diluted EPS of Boston Properties, Inc. using the if-converted method if the impact is dilutive. Because the 2012 OPP Units, 2013 MYLTIP Units, 2014 MYLTIP Units, 2015 MYLTIP Units and 20152016 MYLTIP Units required, and the 2016-20182017-2019 MYLTIP Units require, Boston Properties, Inc. to outperform absolute and relative return thresholds, unless such thresholds have been met by the end of the applicable reporting period, Boston Properties, Inc. excludes such units from the diluted EPS
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calculation. Other potentially dilutive common shares, including stock options, restricted stock and other securities of Boston Properties Limited Partnership that are exchangeable for the Boston Properties, Inc.’s Common Stock, and the related impact on earnings, are considered when calculating diluted EPS.
 Three months ended June 30, 2019
 
Income
(Numerator)
 
Shares
(Denominator)
 
Per Share
Amount
 (in thousands, except for per share amounts)
Basic Earnings:     
Net income attributable to Boston Properties, Inc. common shareholders$164,318
 154,555
 $1.06
Allocation of undistributed earnings to participating securities(48) —
 —
Net income attributable to Boston Properties, Inc. common shareholders$164,270
 154,555
 $1.06
Effect of Dilutive Securities:     
Stock Based Compensation—
 319
 —
Diluted Earnings:     
Net income attributable to Boston Properties, Inc. common shareholders$164,270
 154,874
 $1.06
      
 Three months ended June 30, 2018
 
Income
(Numerator)
 
Shares
(Denominator)
 
Per Share
Amount
 (in thousands, except for per share amounts)
Basic Earnings:     
Net income attributable to Boston Properties, Inc. common shareholders$128,681
 154,415
 $0.83
Allocation of undistributed earnings to participating securities(16) —
 —
Net income attributable to Boston Properties, Inc. common shareholders$128,665
 154,415
 $0.83
Effect of Dilutive Securities:     
Stock Based Compensation—
 156
 —
Diluted Earnings:     
Net income attributable to Boston Properties, Inc. common shareholders$128,665
 154,571
 $0.83
      
 Six months ended June 30, 2019
 
Income
(Numerator)
 
Shares
(Denominator)
 
Per Share
Amount
 (in thousands, except for per share amounts)
Basic Earnings:     
Net income attributable to Boston Properties, Inc. common shareholders$262,431
 154,540
 $1.70
Effect of Dilutive Securities:     
Stock Based Compensation—
 319
 (0.01)
Diluted Earnings:     
Net income attributable to Boston Properties, Inc. common shareholders$262,431
 154,859
 $1.69
      
 Three months ended June 30, 2018
 
Income
(Numerator)
 
Shares
(Denominator)
 
Per Share
Amount
 (in thousands, except for per share amounts)
Basic Earnings:     
Net income attributable to Boston Properties, Inc. common shareholders$128,681
 154,415
 $0.83
Allocation of undistributed earnings to participating securities(16) —
 —
Net income attributable to Boston Properties, Inc. common shareholders$128,665
 154,415
 $0.83
Effect of Dilutive Securities:     
Stock Based Compensation—
 156
 —
Diluted Earnings:     
Net income attributable to Boston Properties, Inc. common shareholders$128,665
 154,571
 $0.83
      


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 Six months ended June 30, 2018
 
Income
(Numerator)
 
Shares
(Denominator)
 
Per Share
Amount
 (in thousands, except for per share amounts)
Basic Earnings:     
Net income attributable to Boston Properties, Inc. common shareholders$304,682
 154,400
 $1.97
Allocation of undistributed earnings to participating securities(142) —
 —
Net income attributable to Boston Properties, Inc. common shareholders$304,540
 154,400
 $1.97
Effect of Dilutive Securities:     
Stock Based Compensation—
 238
 —
Diluted Earnings:     
Net income attributable to Boston Properties, Inc. common shareholders$304,540
 154,638
 $1.97
 Three months ended June 30, 2017
 
Income
(Numerator)
 
Shares
(Denominator)
 
Per Share
Amount
 (in thousands, except for per share amounts)
Basic Earnings:     
Net income attributable to Boston Properties, Inc. common shareholders$133,709
 154,177
 $0.87
Allocation of undistributed earnings to participating securities(43) —
 —
Net income attributable to Boston Properties, Inc. common shareholders$133,666
 154,177
 $0.87
Effect of Dilutive Securities:     
Stock Based Compensation—
 154
 —
Diluted Earnings:     
Net income attributable to Boston Properties, Inc. common shareholders$133,666
 154,331
 $0.87
      
 Six months ended June 30, 2018
 
Income
(Numerator)
 
Shares
(Denominator)
 
Per Share
Amount
 (in thousands, except for per share amounts)
Basic Earnings:     
Net income attributable to Boston Properties, Inc. common shareholders$304,682
 154,400
 $1.97
Allocation of undistributed earnings to participating securities(142) —
 —
Net income attributable to Boston Properties, Inc. common shareholders$304,540
 154,400
 $1.97
Effect of Dilutive Securities:     
Stock Based Compensation—
 238
 —
Diluted Earnings:     
Net income attributable to Boston Properties, Inc. common shareholders$304,540
 154,638
 $1.97
      
 Six months ended June 30, 2017
 
Income
(Numerator)
 
Shares
(Denominator)
 
Per Share
Amount
 (in thousands, except for per share amounts)
Basic Earnings:     
Net income attributable to Boston Properties, Inc. common shareholders$230,764
 154,019
 $1.50
Allocation of undistributed earnings to participating securities(9) —
 —
Net income attributable to Boston Properties, Inc. common shareholders$230,755
 154,019
 $1.50
Effect of Dilutive Securities:     
Stock Based Compensation—
 254
 —
Diluted Earnings:     
Net income attributable to Boston Properties, Inc. common shareholders$230,755
 154,273
 $1.50

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Boston Properties Limited Partnership
The following table provides a reconciliation of both the net income attributable to Boston Properties Limited Partnership common unitholders and the number of common units used in the computation of basic earnings per common unit, which is calculated by dividing net income attributable to Boston Properties Limited Partnership common unitholders by the weighted-average number of common units outstanding during the period. Unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are also participating securities. As such, unvested restricted common stock of Boston Properties, Inc. and Boston Properties Limited Partnership’s LTIP Units, 2012 OPP Units and MYLTIP Units are considered participating securities. Participating securities are included in the computation of basic earnings per common unit using the two-classtwo-class method. Participating securities are included in the computation of diluted earnings per common unit using the if-converted method if the impact is dilutive. Because the 2012 OPP Units, 2013 MYLTIP Units, 2014 MYLTIP Units, 2015 MYLTIP Units and 20152016 MYLTIP Units required, and the 2016-20182017-2019 MYLTIP Units require, Boston Properties, Inc. to outperform absolute and relative return thresholds, unless such thresholds have been met by the end of the applicable reporting period, Boston Properties Limited Partnership excludes such units from the diluted earnings per common unit calculation. Other potentially dilutive common units and the related impact on earnings are considered when calculating diluted earnings per common unit. Included in the number of units (the denominator) below are approximately 17,501,00017,647,000 and 17,498,00017,501,000 redeemable common units for the three months ended June 30, 20182019 and 2017,2018, respectively, and 17,492,00017,627,000 and 17,609,00017,492,000 redeemable common units for the six months ended June 30, 2019 and 2018, and 2017, respectively.
Three months ended June 30, 2018Three months ended June 30, 2019
Income
(Numerator)
 
Units
(Denominator)
 
Per Unit
Amount
Income
(Numerator)
 
Units
(Denominator)
 
Per Unit
Amount
(in thousands, except for per unit amounts)(in thousands, except for per unit amounts)
Basic Earnings:          
Net income attributable to Boston Properties Limited Partnership common unitholders$145,961
 171,916
 $0.85
$185,715
 172,202
 $1.08
Allocation of undistributed earnings to participating securities(18) —
 —
(54) —
 —
Net income attributable to Boston Properties Limited Partnership common unitholders$145,943
 171,916
 $0.85
$185,661
 172,202
 $1.08
Effect of Dilutive Securities:          
Stock Based Compensation—
 156
 —
—
 319
 —
Diluted Earnings:          
Net income attributable to Boston Properties Limited Partnership common unitholders$145,943
 172,072
 $0.85
$185,661
 172,521
 $1.08
          


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 Three months ended June 30, 2018
 
Income
(Numerator)
 
Units
(Denominator)
 
Per Unit
Amount
 (in thousands, except for per unit amounts)
Basic Earnings:     
Net income attributable to Boston Properties Limited Partnership common unitholders$145,961
 171,916
 $0.85
Allocation of undistributed earnings to participating securities(18) —
��—
Net income attributable to Boston Properties Limited Partnership common unitholders$145,943
 171,916
 $0.85
Effect of Dilutive Securities:     
Stock Based Compensation—
 156
 —
Diluted Earnings:     
Net income attributable to Boston Properties Limited Partnership common unitholders$145,943
 172,072
 $0.85
      
 Six months ended June 30, 2019
 
Income
(Numerator)
 
Units
(Denominator)
 
Per Unit
Amount
 (in thousands, except for per unit amounts)
Basic Earnings:     
Net income attributable to Boston Properties Limited Partnership common unitholders$299,097
 172,167
 $1.74
Effect of Dilutive Securities:     
Stock Based Compensation—
 319
 (0.01)
Diluted Earnings:     
Net income attributable to Boston Properties Limited Partnership common unitholders$299,097
 172,486
 $1.73
      
 Six months ended June 30, 2018
 
Income
(Numerator)
 
Units
(Denominator)
 
Per Unit
Amount
 (in thousands, except for per unit amounts)
Basic Earnings:     
Net income attributable to Boston Properties Limited Partnership common unitholders$346,868
 171,892
 $2.02
Allocation of undistributed earnings to participating securities(158) —
 —
Net income attributable to Boston Properties Limited Partnership common unitholders$346,710
 171,892
 $2.02
Effect of Dilutive Securities:     
Stock Based Compensation—
 238
 (0.01)
Diluted Earnings:     
Net income attributable to Boston Properties Limited Partnership common unitholders$346,710
 172,130
 $2.01
      

 Three months ended June 30, 2017
 
Income
(Numerator)
 
Units
(Denominator)
 
Per Unit
Amount
 (in thousands, except for per unit amounts)
Basic Earnings:     
Net income attributable to Boston Properties Limited Partnership common unitholders$151,844
 171,675
 $0.88
Allocation of undistributed earnings to participating securities(48) —
 —
Net income attributable to Boston Properties Limited Partnership common unitholders$151,796
 171,675
 $0.88
Effect of Dilutive Securities:     
Stock Based Compensation—
 154
 —
Diluted Earnings:     
Net income attributable to Boston Properties Limited Partnership common unitholders$151,796
 171,829
 $0.88
      
 Six months ended June 30, 2018
 
Income
(Numerator)
 
Units
(Denominator)
 
Per Unit
Amount
 (in thousands, except for per unit amounts)
Basic Earnings:     
Net income attributable to Boston Properties Limited Partnership common unitholders$346,868
 171,892
 $2.02
Allocation of undistributed earnings to participating securities(158) —
 —
Net income attributable to Boston Properties Limited Partnership common unitholders$346,710
 171,892
 $2.02
Effect of Dilutive Securities:     
Stock Based Compensation—
 238
 (0.01)
Diluted Earnings:     
Net income attributable to Boston Properties Limited Partnership common unitholders$346,710
 172,130
 $2.01
      
 Six months ended June 30, 2017
 
Income
(Numerator)
 
Units
(Denominator)
 
Per Unit
Amount
 (in thousands, except for per unit amounts)
Basic Earnings:     
Net income attributable to Boston Properties Limited Partnership common unitholders$262,506
 171,628
 $1.53
Allocation of undistributed earnings to participating securities(10) —
 —
Net income attributable to Boston Properties Limited Partnership common unitholders$262,496
 171,628
 $1.53
Effect of Dilutive Securities:     
Stock Based Compensation—
 254
 —
Diluted Earnings:     
Net income attributable to Boston Properties Limited Partnership common unitholders$262,496
 171,882
 $1.53
      

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10.11. Stock Option and Incentive Plan
On February 6, 2018,5, 2019, Boston Properties, Inc.’s Compensation Committee approved the 20182019 MYLTIP awards under Boston Properties, Inc.’s 2012 Stock Option and Incentive Plan (the "2012 Plan"“2012 Plan”) to certain officers and employees of Boston Properties, Inc. The 20182019 MYLTIP awards utilize Boston Properties, Inc.’s TSR over a three-yearthree year measurement period, on an annualized, compounded basis, as the performance metric. Earned awards will
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be based on Boston Properties, Inc.’s TSR relative to (i) the Cohen & SteersNareit Office Index adjusted to include Vornado Realty Majors Portfolio Index (50% weight) and (ii)Trust. Earned awards will range from zero to a maximum of 220,734 LTIP Units depending on Boston Properties, Inc.’s TSR relative to the Nareit Office Index adjusted to include Vornado Realty Trust, (50% weight). For 2018 MYLTIP awards, levelswith a target of payout opportunity will range from zero for relative TSR performance that is at least 1,000 basis points below the index, 100% of target if the Company's TSR equals the index return, 200% of target if the Company's TSR is equal to or greater than 1,000 basis points above the index to a maximum of 200% of target value, on a straight-line basis, depending on the valueapproximately 110,367 LTIP Units and linear interpolation between zero and maximum. Earned awards measured on the basis of relative TSR performance are subject to an absolute TSR component in the form of modifiers that (A) reduce the level of earned awards in the event Boston Properties, Inc.’s annualized TSR is 0% or less and (B) cause some awards to be earned in the event Boston Properties, Inc.’s annualized TSR is 12% or more even though on a relative basis alone Boston Properties, Inc.’s TSR would not result in any earned awards.
Earned awards (if any) will vest 50% on February 5, 20214, 2022 and 50% on February 5, 2022,4, 2023, based on continued employment. Vesting will be accelerated in the event of a change in control, termination of employment by Boston Properties, Inc. without cause, or termination of employment by the award recipient for good reason, death, disability or retirement. If there is a change of control prior to February 5, 2021,4, 2022, earned awards will be calculated based on TSR performance up to the date of the change of control. The 20182019 MYLTIP awards are in the form of LTIP Units issued on the grant date which (i) are subject to forfeiture to the extent awards are not earned and (ii) prior to the performance measurement date are only entitled to one-tenth (10%) of the regular quarterly distributions payable on common partnership units.
Under ASC 718 “Compensation - Stock Compensation”, the 20182019 MYLTIP awards have an aggregate value of approximately $13.3$13.5 million, which amount will generally be amortized into earnings over the four-yearfour year plan period under the graded vesting method.
On February 4, 2018,9, 2019, the measurement period for the Company’s 20152016 MYLTIP awards ended and, based on Boston Properties, Inc.’s relative TSR performance, the final awards were determined to be 22.0%69.5% of target or an aggregate of approximately $3.6$13.6 million(after giving effect to voluntary employee separations). As a result, an aggregate of 337,847 2015364,980 2016 MYLTIP Units that had been previously granted were automatically forfeited.
During the six months ended June 30, 2018,2019, Boston Properties, Inc. issued 20,32026,503 shares of restricted common stock and Boston Properties Limited Partnership issued 205,838181,919 LTIP Units and 342,659 2018220,734 2019 MYLTIP Units to employees and non-employee directors under the 2012 Plan. Employees and non-employee directors paid $0.01 per share of restricted common stock and $0.25 per LTIP Unit and 20182019 MYLTIP Unit. When issued, LTIP Units are not economically equivalent in value to a share of Common Stock, but over time can increase in value to one-for-one parity with Common Stock if there is sufficient appreciation in the value of the Company’s assets. The aggregate value of the LTIP Units is included in noncontrolling interests in the Consolidated Balance Sheets. GrantsA substantial majority of the grants of restricted common stock and LTIP Units to employees vest in four equal annual installments. Restricted common stock is measured at fair value on the date of grant based on the number of shares granted and the closing price of Boston Properties, Inc.’s Common Stock on the date of grant as quoted on the New York Stock Exchange. Such value is recognized as an expense ratably over the corresponding employee service period. The shares of restricted common stock granted during the six months ended June 30, 20182019 were valued at approximately $2.4$3.5 million ($119.27131.27 per share weighted-average). The LTIP Units granted were valued at approximately $22.7$22.1 million (approximately $110.29$121.50 per unit weighted-average fair value) using a Monte Carlo simulation method model. The per unit fair values of the LTIP Units granted were estimated on the dates of grant and for a substantial majority of such units were valued using the following assumptions: an expected life of 5.7 years, a risk-free interest rate of 2.63%2.68% and an expected price volatility of 27.0%. Because the 2012 OPP Units, 2013 MYLTIP Units, 2014 MYLTIP Units, 2015 MYLTIP Units, 2016 MYLTIP Units, 2017 MYLTIP Units, 2018 MYLTIP Units and 20182019 MYLTIP Units are subject to both a service condition and a market condition, the Company recognizes the related compensation expense under the graded vesting attribution method. Under the graded vesting attribution method, each portion of the award that vests at a different date is accounted for as a separate award and recognized over the period appropriate to that portion so that the compensation cost for each portion should be recognized in full by the time that portion vests. The Company recognizes forfeitures as they occur on its awards of stock-based compensation. Dividends paid on both vested and unvested shares of restricted stock are charged directly to Dividends in Excess of Earnings in Boston Properties, Inc.’s Consolidated Balance Sheets and Partners’ Capital in Boston Properties Limited Partnership’s Consolidated Balance Sheets. Aggregate stock-based compensation expense associated with restricted stock, non-qualified stock options, LTIP Units, 2012 OPP Units,

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2013 MYLTIP Units, 2014 MYLTIP Units, 2015 MYLTIP Units, 2016 MYLTIP Units, 2017 MYLTIP Units, 2018 MYLTIP Units and 20182019 MYLTIP Units was approximately $7.9$10.1 million and $7.9 million for the three months ended June 30, 20182019 and 2017,2018, respectively, and $22.1approximately $24.9 million and $18.1$22.1 million for the six months ended June 30, 20182019 and 2017,2018, respectively. At June 30, 2018,2019, there was (1) an aggregate of approximately $31.7$33.2 million of unrecognized compensation expense related to unvested restricted stock, LTIP Units and 20152016 MYLTIP Units and (2) an aggregate of approximately $22.4$17.9 million of unrecognized compensation expense related to unvested 2016 MYLTIP Units, 2017 MYLTIP Units, 2018 MYLTIP Units and 20182019 MYLTIP Units that is expected to be recognized over a weighted-average period of approximately 2.6 years.
11.
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12. Segment Information
The following tables present reconciliations of Net Income Attributable to Boston Properties, Inc. Common Shareholders to the Company’s share of Net Operating Income and Net Income Attributable to Boston Properties Limited Partnership Common Unitholders to the Company’s share of Net Operating Income for the three and six months ended June 30, 20182019 and 2017.2018.
Boston Properties, Inc.
Three months ended June 30, Six months ended June 30,Three months ended June 30, Six months ended June 30,
2018 2017 2018 20172019 2018 2019 2018
(in thousands)(in thousands)
Net income attributable to Boston Properties, Inc. common shareholders$128,681
 $133,709
 $304,682
 $230,764
$164,318
 $128,681
 $262,431
 $304,682
Add:              
Preferred dividends2,625
 2,625
 5,250
 5,250
2,625
 2,625
 5,250
 5,250
Noncontrolling interest—common units of Boston Properties Limited Partnership14,859
 15,473
 35,311
 26,933
19,036
 14,859
 30,627
 35,311
Noncontrolling interests in property partnerships14,400
 15,203
 31,634
 19,627
17,482
 14,400
 36,312
 31,634
Interest expense92,204
 95,143
 182,424
 190,677
102,357
 92,204
 203,366
 182,424
Impairment loss—
 —
 24,038
 —
Net operating income from unconsolidated joint ventures24,715
 16,227
 50,064
 32,287
Depreciation and amortization expense156,417
 151,919
 322,214
 311,124
177,411
 156,417
 342,005
 322,214
Transaction costs474
 299
 495
 333
417
 474
 877
 495
Payroll and related costs from management services contracts1,970
 —
 4,855
 —
2,403
 1,970
 5,798
 4,855
General and administrative expense28,468
 27,141
 64,362
 58,527
35,071
 28,468
 76,833
 64,362
Less:              
Gains on sales of real estate18,292
 3,767
 114,689
 3,900
Gains from early extinguishments of debt—
 14,354
 —
 14,354
Net operating income attributable to noncontrolling interests in property partnerships45,562
 43,049
 92,647
 88,958
Gains from investments in securities505
 730
 379
 1,772
1,165
 505
 4,134
 379
Interest and other income2,579
 1,504
 4,227
 2,118
3,615
 2,579
 7,368
 4,227
Gains on sales of real estate1,686
 18,292
 781
 114,689
Income from unconsolidated joint ventures769
 3,108
 1,230
 6,192
47,964
 769
 48,177
 1,230
Direct reimbursements of payroll and related costs from management services contracts1,970
 —
 4,855
 —
2,403
 1,970
 5,798
 4,855
Development and management services revenue9,305
 7,365
 17,710
 13,837
9,986
 9,305
 19,263
 17,710
Net Operating Income$406,678
 $410,684
 $808,137
 $801,062
Company’s share of Net Operating Income$433,454
 $379,856
 $859,433
 $751,466



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Boston Properties Limited Partnership
 Three months ended June 30, Six months ended June 30,
 2019 2018 2019 2018
 (in thousands)
Net income attributable to Boston Properties Limited Partnership common unitholders$185,715
 $145,961
 $299,097
 $346,868
Add:       
Preferred distributions2,625
 2,625
 5,250
 5,250
Noncontrolling interests in property partnerships17,482
 14,400
 36,312
 31,634
Interest expense102,357
 92,204
 203,366
 182,424
Impairment loss—
 —
 22,272
 —
Net operating income from unconsolidated joint ventures24,715
 16,227
 50,064
 32,287
Depreciation and amortization expense175,199
 154,474
 337,881
 318,327
Transaction costs417
 474
 877
 495
Payroll and related costs from management services contracts2,403
 1,970
 5,798
 4,855
General and administrative expense35,071
 28,468
 76,833
 64,362
Less:       
Net operating income attributable to noncontrolling interests in property partnerships45,562
 43,049
 92,647
 88,958
Gains from investments in securities1,165
 505
 4,134
 379
Interest and other income3,615
 2,579
 7,368
 4,227
Gains on sales of real estate1,835
 18,770
 930
 117,677
Income from unconsolidated joint ventures47,964
 769
 48,177
 1,230
Direct reimbursements of payroll and related costs from management services contracts2,403
 1,970
 5,798
 4,855
Development and management services revenue9,986
 9,305
 19,263
 17,710
Company’s share of Net Operating Income$433,454
 $379,856
 $859,433

$751,466

 Three months ended June 30, Six months ended June 30,
 2018 2017 2018 2017
 (in thousands)
Net income attributable to Boston Properties Limited Partnership common unitholders$145,961
 $151,844
 $346,868
 $262,506
Add:       
Preferred distributions2,625
 2,625
 5,250
 5,250
Noncontrolling interests in property partnerships14,400
 15,203
 31,634
 19,627
Interest expense92,204
 95,143
 182,424
 190,677
Depreciation and amortization expense154,474
 149,834
 318,327
 306,892
Transaction costs474
 299
 495
 333
Payroll and related costs from management services contracts1,970
 —
 4,855
 —
General and administrative expense28,468
 27,141
 64,362
 58,527
Less:       
Gains on sales of real estate18,770
 4,344
 117,677
 4,477
Gains from early extinguishments of debt—
 14,354
 —
 14,354
Gains from investments in securities505
 730
 379
 1,772
Interest and other income2,579
 1,504
 4,227
 2,118
Income from unconsolidated joint ventures769
 3,108
 1,230
 6,192
Direct reimbursements of payroll and related costs from management services contracts1,970
 —
 4,855
 —
Development and management services revenue9,305
 7,365
 17,710
 13,837
Net Operating Income$406,678
 $410,684
 $808,137
 $801,062
Net operating income (“NOI”) is a non-GAAP financial measure equal to net income attributable to Boston Properties, Inc. common shareholders and net income attributable to Boston Properties Limited Partnership common unitholders, as applicable, the most directly comparable GAAP financial measures, plus (1) preferred dividends/distributions, net income attributable to noncontrolling interests, interest expense, impairment loss, depreciation and amortization expense, transaction costs, payroll and related costs from management services contracts and corporate general and administrative expense less (2) gains on sales of real estate, gains from early extinguishments of debt, gains from investments in securities, interest and other income, gains on sales of real estate, income from unconsolidated joint ventures, direct reimbursements of payroll and related costs from management services contracts and development and management services revenue. The Company believes NOI is useful to investors as a performance measure and believes it provides useful information to investors regarding the Company's Company’s results of operations and financial condition because, when compared across periods, it reflects the impact on operations from trends in occupancy rates, rental rates, operating costs and acquisition and development activity on an unleveraged basis, providing perspective not immediately apparent from net income attributable to Boston Properties, Inc. common shareholders and net income attributable to Boston Properties Limited Partnership common unitholders. For example, interest expense is not necessarily linked to the operating performance of a real estate asset and is often incurred at the corporate level as opposed to the property level. Similarly, interest expense may be incurred at the property level even though the financing proceeds may be used at the corporate level (e.g., used for other investment activity). In addition, depreciation and amortization expense, because of historical cost accounting and useful life estimates, may distort operating performance measures at the property level. NOI presented by the Company may not be comparable to NOI reported by other REITs or real estate companies that define NOI differently.
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The Company’s internal reporting utilizes its share of NOI, which includes its share of NOI from consolidated and unconsolidated joint ventures, which is a non-GAAP financial measure that is calculated as the consolidated amount, plus the Company’s share of the amount from the Company’s unconsolidated joint ventures (calculated based upon the Company’s percentage ownership interest and, in some cases, after priority allocations), minus the Company’s partners’ share of the amount from the Company’s consolidated joint ventures (calculated based upon the partners’ percentage ownership interests and, in some cases, after priority allocations, income allocation to private REIT shareholders and their share of fees due to the Company). The Company’s share of NOI from unconsolidated joint ventures does not include its share of gains on sale of real estate from unconsolidated joint ventures which is included within income from unconsolidated joint ventures in the Company’s Consolidated Statements of Operations.  Management utilizes its share of NOI in assessing its performance as the Company has several significant joint ventures and, in some cases, the Company exercises significant influence over, but does not control, the joint venture, in which case GAAP requires that the Company account for the joint venture entity using the equity method of accounting and the Company does not consolidate it for financial reporting purposes. In other cases, GAAP requires that the Company consolidate the venture even though the Company’s partner(s) owns a significant percentage interest. As a result, the presentations of the Company’s share of NOI should not be considered a substitute for, and should only be considered together with and as a supplement to, the Company’s financial information presented in accordance with GAAP.
Asset information by segment is not reported because the Company does not use this measure to assess performance. Therefore, depreciation and amortization expense is not allocated among segments. Preferred dividends/distributions, net income attributable to noncontrolling interests, interest expense, impairment loss, depreciation and amortization expense, transaction costs, payroll and related costs from management services contracts, corporate

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general and administrative expense, gains on sales of real estate, gains from early extinguishments of debt, gains from investments in securities, interest and other income, income from unconsolidated joint ventures,gains on sales of real estate, direct reimbursements of payroll and related costs from management services contracts and development and management services revenue are not included in NOI and are provided as internal reporting addresses thesereconciling items on a corporate level.to the Company’s reconciliations of its share of NOI to net income attributable to common shareholders/unitholders.
The Company’s segments are based on the Company’s method of internal reporting which classifies its operations by both geographic area and property type.area. The Company’s segments by geographic area are Boston, Los Angeles, New York, San Francisco and Washington, DC. SegmentsThe Company also presents information for each segment by property type include:including Office, Residential and Hotel.
Beginning in 2019, the Company modified the presentation of its geographic area classification for all periods presented to include the Los Angeles geographic area to align with its method of internal reporting. The Company expanded its presence in the Los Angeles geographic area with its equity method investment in Santa Monica Business Park located in Santa Monica, California. As of June 30, 2019, the Company has equity interests in a portfolio of 27 office and retail properties in the Los Angeles geographic area aggregating approximately 2.3 million net rentable square feet, all of which are owned through investments in unconsolidated joint ventures. The Company is presenting the Los Angeles geographic area as a reportable segment to align with its method of internal reporting given the increased significance as a result of commencing a full reporting period of ownership of the Santa Monica Business Park portfolio. The inclusion of the Los Angeles geographic area has also resulted in a change in the reported measure of segment profit or loss from NOI to the Company’s share of NOI. This change has been reflected in all periods presented and the impact of the change can been seen within the tables below. The Company has not presented rental revenue and rental expenses for properties owned through investments in unconsolidated joint ventures, including those in the Los Angeles geographic area, as the Company accounts for these properties using the equity method of accounting.
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Information by geographic area and property type (dollars in thousands):
For the three months ended June 30, 2018:2019:
Boston New York San Francisco Washington, DC TotalBoston Los Angeles New York San Francisco Washington, DC Total
Rental Revenue:(1)                    
Office$207,810
 $234,006
 $93,482
 $98,505
 $633,803
$217,961
 $—
 $251,556
 $131,506
 $96,486
 $697,509
Residential1,195
 —
 —
 3,604
 4,799
3,222
 —
 —
 —
 5,777
 8,999
Hotel14,607
 —
 —
 —
 14,607
14,844
 —
 —
 —
 —
 14,844
Total223,612
 234,006
 93,482
 102,109
 653,209
236,027
 —
 251,556
 131,506
 102,263
 721,352
% of Grand Totals34.23% 35.83% 14.31% 15.63% 100.00%32.72% —% 34.87% 18.23% 14.18% 100.00%
Rental Expenses:                    
Office77,147
 91,838
 31,214
 34,678
 234,877
77,660
 —
 96,809
 43,708
 35,672
 253,849
Residential706
 —
 —
 2,207
 2,913
1,279
 —
 —
 —
 2,843
 4,122
Hotel8,741
 —
 —
 —
 8,741
9,080
 —
 —
 —
 —
 9,080
Total86,594
 91,838
 31,214
 36,885
 246,531
88,019
 —
 96,809
 43,708
 38,515
 267,051
% of Grand Totals35.12% 37.26% 12.66% 14.96% 100.00%32.96% —% 36.25% 16.37% 14.42% 100.00%
Net operating income$137,018
 $142,168
 $62,268
 $65,224
 $406,678
$148,008
 $—
 $154,747
 $87,798
 $63,748
 $454,301
% of Grand Totals33.69% 34.96% 15.31% 16.04% 100.00%32.58% —% 34.06% 19.33% 14.03% 100.00%
Less: Net operating income attributable to noncontrolling interests in property partnerships(10,031) —
 (35,531) —
 —
 (45,562)
Add: Company’s share of net operating income from unconsolidated joint ventures818
 15,454
 1,696
 —
 6,747
 24,715
Company’s share of net operating income$138,795
 $15,454
 $120,912
 $87,798
 $70,495
 $433,454
% of Grand Totals32.01% 3.57% 27.90% 20.26% 16.26% 100.00%
 _______________
(1)Rental Revenue is equal to Total Revenue per the Company’s Consolidated Statements of Operations, less Development and Management Services Revenue and Direct Reimbursements of Payroll and Related Costs from Management Services Contracts Revenue per the Consolidated Statements of Operations.

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For the three months ended June 30, 2017:2018:
 Boston Los Angeles New York San Francisco Washington, DC Total
Rental Revenue: (1)           
Office$207,810
 $—
 $234,006
 $93,482
 $98,505
 $633,803
Residential1,195
 —
 —
 —
 3,604
 4,799
Hotel14,607
 —
 —
 —
 —
 14,607
Total223,612

—
 234,006
 93,482
 102,109
 653,209
% of Grand Totals34.23% —% 35.83% 14.31% 15.63% 100.00%
Rental Expenses:           
Office77,147
 —
 91,838
 31,214
 34,678
 234,877
Residential706
 —
 —
 —
 2,207
 2,913
Hotel8,741
 —
 —
 —
 —
 8,741
Total86,594

—
 91,838
 31,214
 36,885
 246,531
% of Grand Totals35.12% —% 37.26% 12.66% 14.96% 100.00%
Net operating income$137,018

$—
 $142,168
 $62,268
 $65,224
 $406,678
% of Grand Totals33.69% —% 34.96% 15.31% 16.04% 100.00%
Less: Net operating income attributable to noncontrolling interests in property partnerships(8,418) —
 (34,751) 120
 —
 (43,049)
Add: Company’s share of net operating income from unconsolidated joint ventures781
 6,902
 1,706
 —
 6,838
 16,227
Company’s share of net operating income$129,381

$6,902

$109,123

$62,388

$72,062
 $379,856
% of Grand Totals34.06% 1.82% 28.73% 16.42% 18.97% 100.00%

 Boston New York San Francisco Washington, DC Total
Rental Revenue:         
Office$191,760
 $251,844
 $85,483
 $102,870
 $631,957
Residential1,153
 —
 —
 3,057
 4,210
Hotel13,375
 —
 —
 —
 13,375
Total206,288
 251,844
 85,483
 105,927
 649,542
% of Grand Totals31.76% 38.77% 13.16% 16.31% 100.00%
Rental Expenses:         
Office74,160
 93,110
 25,938
 35,611
 228,819
Residential545
 —
 —
 1,090
 1,635
Hotel8,404
 —
 —
 —
 8,404
Total83,109
 93,110
 25,938
 36,701
 238,858
% of Grand Totals34.79% 38.98% 10.86% 15.37% 100.00%
Net operating income$123,179
 $158,734
 $59,545
 $69,226
 $410,684
% of Grand Totals29.99% 38.65% 14.50% 16.86% 100.00%
 _______________
(1)Rental Revenue is equal to Total Revenue per the Company’s Consolidated Statements of Operations, less Development and Management Services Revenue and Direct Reimbursements of Payroll and Related Costs from Management Services Contracts Revenue per the Consolidated Statements of Operations.



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For the six months ended June 30, 2018:2019:
Boston New York San Francisco Washington, DC TotalBoston Los Angeles New York San Francisco Washington, DC Total
Rental Revenue:(1)                    
Office$412,807
 $476,404
 $183,375
 $197,817
 $1,270,403
$435,372
 $—
 $510,187
 $255,561
 $192,831
 $1,393,951
Residential2,347
 —
 —
 6,611
 8,958
5,923
 —
 —
 —
 10,791
 16,714
Hotel23,709
 —
 —
 —
 23,709
23,782
 —
 —
 —
 —
 23,782
Total438,863
 476,404
 183,375
 204,428
 1,303,070
465,077
 —
 510,187
 255,561
 203,622
 1,434,447
% of Grand Totals33.68% 36.56% 14.07% 15.69% 100.00%32.42% —% 35.56% 17.82% 14.20% 100.00%
Rental Expenses:                    
Office157,471
 185,600
 58,842
 71,021
 472,934
157,160
 —
 193,780
 84,833
 71,819
 507,592
Residential1,220
 —
 —
 3,965
 5,185
2,485
 —
 —
 —
 5,411
 7,896
Hotel16,814
 —
 —
 —
 16,814
16,943
 —
 —
 —
 —
 16,943
Total175,505
 185,600
 58,842
 74,986
 494,933
176,588
 —
 193,780
 84,833
 77,230
 532,431
% of Grand Totals35.46% 37.50% 11.89% 15.15% 100.00%33.17% —% 36.39% 15.93% 14.51% 100.00%
Net operating income$263,358
 $290,804
 $124,533
 $129,442
 $808,137
$288,489
 $—
 $316,407
 $170,728
 $126,392
 $902,016
% of Grand Totals32.59% 35.98% 15.41% 16.02% 100.00%31.98% —% 35.08% 18.93% 14.01% 100.00%
Less: Net operating income attributable to noncontrolling interests in property partnerships(19,404) —
 (72,795) (448) —
 (92,647)
Add: Company’s share of net operating income from unconsolidated joint ventures1,590
 31,162
 3,482
 —
 13,830
 50,064
Company’s share of net operating income$270,675
 $31,162
 $247,094
 $170,280
 $140,222
 $859,433
% of Grand Totals31.49% 3.63% 28.75% 19.81% 16.32% 100.00%
 _______________
(1)Rental Revenue is equal to total Revenue per the Company’s Consolidated Statements of Operations, less Development and Management Services Revenue and Direct Reimbursements of Payroll and Related Costs from Management Services Contracts Revenue per the Consolidated Statements of Operations.

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For the six months ended June 30, 2017:2018:
Boston New York San Francisco Washington, DC TotalBoston Los Angeles New York San Francisco Washington, DC Total
Rental Revenue:(1)                    
Office$377,196
 $493,414
 $170,124
 $205,603
 $1,246,337
$412,807
 $—
 $476,404
 $183,375
 $197,817
 $1,270,403
Residential2,292
 —
 —
 5,874
 8,166
2,347
 —
 —
 —
 6,611
 8,958
Hotel20,795
 —
 —
 —
 20,795
23,709
 —
 —
 —
 —
 23,709
Total400,283
 493,414
 170,124
 211,477
 1,275,298
438,863
 —
 476,404
 183,375
 204,428
 1,303,070
% of Grand Totals31.39% 38.69% 13.34% 16.58% 100.00%33.68% —% 36.56% 14.07% 15.69% 100.00%
Rental Expenses:                    
Office149,416
 184,794
 50,412
 70,933
 455,555
157,471
 —
 185,600
 58,842
 71,021
 472,934
Residential1,040
 —
 —
 2,146
 3,186
1,220
 —
 —
 —
 3,965
 5,185
Hotel15,495
 —
 —
 —
 15,495
16,814
 —
 —
 —
 —
 16,814
Total165,951
 184,794
 50,412
 73,079
 474,236
175,505
 —
 185,600
 58,842
 74,986
 494,933
% of Grand Totals34.99% 38.97% 10.63% 15.41% 100.00%35.46% —% 37.50% 11.89% 15.15% 100.00%
Net operating income$234,332
 $308,620
 $119,712
 $138,398
 $801,062
$263,358
 $—
 $290,804
 $124,533
 $129,442
 $808,137
% of Grand Totals29.25% 38.53% 14.94% 17.28% 100.00%32.59% —% 35.98% 15.41% 16.02% 100.00%
Less: Net operating income attributable to noncontrolling interests in property partnerships(16,547) —
 (72,697) 286
 —
 (88,958)
Add: Company’s share of net operating income from unconsolidated joint ventures1,315
 13,976
 3,367
 —
 13,629
 32,287
Company’s share of net operating income$248,126
 $13,976
 $221,474
 $124,819
 $143,071
 $751,466
% of Grand Totals33.02% 1.86% 29.47% 16.61% 19.04% 100.00%

 _______________
(1)Rental Revenue is equal to total Revenue per the Company’s Consolidated Statements of Operations, less Development and Management Services Revenue and Direct Reimbursements of Payroll and Related Costs from Management Services Contracts Revenue per the Consolidated Statements of Operations.

12.13. Subsequent Events
On July 13, 2018,16, 2019, the Company entered intoexecuted a joint venture with a third party to acquire a development site at 3 Hudson Boulevard that, upon the future acquisition of additional available development rights, can accommodate a Class A office tower with up to 2.0 million net rentable square feet located on the entire square block between 11th Avenue and Hudson Boulevard Park from West 34th Street to West 35th Street in New York City.  The Company owns a 25% interest in and will be the managing member of the joint venture.  The acquisition includes improvements consisting of excavation work and foundation elements that are currently being constructed on the site. The Company contributed cash totaling approximately $45.6 million at closing and will contribute in the future approximately $62.2 million for its initial capital contribution, a portion of which will fund the remaining costs to complete the foundation elements to grade for the future office building.  In addition, the Company has provided $80.0 million of mortgage financing to the joint venture which bears interest at a variable rate equal to LIBOR plus 3.50% per annum and matures on July 13, 2023, with extension options, subject to certain conditions. 
On July 19, 2018, the Company completed the acquisition of Santa Monica Business Park in the Ocean Park neighborhood of Santa Monica, California for a purchase price of approximately $627.5 million, including $11.5

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million of seller funded leasing costs after the effective date of the purchase and sale agreement. Santa Monica Business Park is a 47-acre office park consisting of 21 buildings totaling approximately 1.2 million net rentable square feet. Approximately 70% of the rentable square footage is subject to a75-year ground lease with 80 years remaining, including renewal periods. The ground lease provides the Company with the right to purchase theGeorge Washington University for land underlying the propertiesparcels at 2100 Pennsylvania Avenue located in 2028 with subsequent purchase rights every 15 years. The acquisition was completed in a joint venture with Canada Pension Plan Investment Board, which invested approximately $147.4 million for a 45% ownership interest in the joint venture. The Company will provide customary operating, property managementWashington, DC and leasing services to, and invested approximately $180.1 million in the joint venture. The acquisition was completed with $300.0 million of financing. The mortgage financing bears interest at a variable rate equal to LIBOR plus 1.28% per annum and matures on July 19, 2025. At closing, the borrower under the loan, which is a subsidiary of the joint venture, entered into interest rate swap contracts with notional amounts aggregating $300.0 million through April 1, 2025, resulting in a fixed rate of approximately 4.063% per annum through the expiration of the interest rate swap contracts.
On July 27, 2018, the Company entered into a joint venture with its partner at The Hub on Causeway mixed-use development in Boston, Massachusetts to acquire the air rights for thecommenced development of an approximately 627,000480,000 net rentable square foot Class A office tower atproperty pursuant to a development agreement that the site to be known as 100 Causeway Street. The joint ventureCompany entered into a leasewith The George Washington University in 2016. The development agreement with an affiliate of Verizon Communications, Inc. under which Verizon will lease approximately 70% of the office towerprovided for a term of 20 years. With the execution of the ground lease the joint venture commenced developmentupon completion of the project. Theentitlement process and relocation of existing tenants. Also in 2016, the Company made a deposit of $15.0 million that, upon execution of the ground lease, will serve as co-development manager forbe credited against ground rent payable under the project. The joint venture partner contributed an air rights parcel and improvements, with a fair value of approximately $41.3 million, for its initial 50% interest in the joint venture. The Company contributed improvements totaling approximately $3.9 million and will contribute cash totaling approximately $37.4 million for its initial 50% interest.
On August 7, 2018,ground lease. In 2017, the Company entered into an agreementa 16-year lease with a third party to (1) agree to share certain pre-development costs during the pre-lease period and (2) to agree to form a joint venture to thereafter own and develop a leasehold interest in 343 Madison Avenue located in New York City. The Company will serve as development manager of the project and will own a 55% interest in the joint venture. In 2016, the Company was selected by the Metropolitan Transportation Authority ("MTA") as the developer of the project and will enter into a pre-lease agreement and a 99-year ground lease with the MTAtenant for the site. The site will support a Class A office tower with approximately 900,000300,000 net rentable square feet. There can be no assurances thatfeet of space at the transaction will be completed on the terms currently contemplated, or at all.property.




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ITEM 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with the financial statements and notes thereto appearing elsewhere in this report.
These Quarterly Reports on Form 10-Q, including the documents incorporated by reference, contains forward-looking statements within the meaning of the federal securities laws, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We intend these forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and are including this statement for purposes of complying with those safe harbor provisions. Such statements are contained principally, but not only, under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” We caution investors that any such forward-looking statements are based on beliefs and on assumptions made by, and information currently available to, our management. When used, the words “anticipate,” “believe,” “budget,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “project,” “should,” “will” and similar expressions 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 increase in unemployment, it could have a 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 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;

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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;
risks associated with our dependence on key personnel whose continued service is not guaranteed; and
the other risk factors identified in our most recently filed Annual Reports on Form 10-K, including those described under the caption “Risk Factors.”
The risks set forth above are not exhaustive. Other sections of this report may include additional factors that could adversely affect our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time and it is not possible for management to predict all risk factors, nor can we assess the impact of all risk factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. Investors should also refer to our most recent Annual Reports on Form 10-K and our Quarterly Reports on Form 10-Q for future periods and Current Reports on Form 8-K as we file them with the SEC, and to other materials we may furnish to the public from time to time through Current Reports on Form 8-K or otherwise, for a discussion of risks and uncertainties that may cause actual results, performance or achievements to differ materially from those expressed or implied by forward-looking statements. 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, managerspublicly-traded real estate investment trust (REIT) (based on market capitalization) in the United States that develops, owns and developers ofmanages primarily Class A office properties concentrated in the United States.five markets - Boston, Los Angeles, New York, San Francisco and Washington, DC. BPLP is the entity through which BXP conducts substantially all of its business and owns (either directly or through subsidiaries) substantially all of its assets. 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. When making leasing decisions, we consider, among other things, the creditworthiness of the tenant, the length of the lease, the rental rate to be paid at inception and throughout the lease term, the costs of tenant improvements and other landlord concessions, anticipated operating expenses and real estate taxes, current and anticipated vacancy, current and expected future demand for the space, the impact of any expansion rights and general economic factors.
Our core strategy has always been to develop, acquire and operatemanage properties in supply-constrained markets with high barriers-to-entry and to focus on executing long-term leases with financially strong tenants. Our tenant base is diverse across market sectors and the average lease term for our in-service office leases was approximately 7.9 years, as of June 30, 2019, including leases signed by our unconsolidated joint ventures. Historically, this combination has tended to reducethese factors have minimized our exposure in downweaker economic cycles and enhanceenhanced revenues as market conditions improve. To be successful in any leasing environment, we believe we must consider all aspects of the tenant-landlord relationship. In this regard, we believe that our competitive advantage is based on the following attributes:

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our understanding of tenants’ short- and long-term space utilization and amenity needs in the local markets, our relationships with local brokers, markets;
our reputation as a premier developer, owner and operatormanager of primarily Class A office properties, properties;
our financial strength and our ability to maintain high building standards provide usstandards;
our focus on developing and operating in a sustainable and responsible manner; and
our relationships with a competitive advantage.

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local brokers.
Outlook
The combinationMacroeconomic conditions remain stable and overall favorable for our Company in the second quarter of general macroeconomic factors, specific circumstances2019. While initial U.S. GDP growth estimates for the second quarter were 2.1%, marking a decline from prior quarters, job creation remains steady as the U.S. economy created approximately 512,000 jobs in the second quarter of 2019 and the unemployment rate remained near 50-year lows at 3.7%. Despite these relatively favorable economic statistics, global and U.S. economies are slowing and the Federal Reserve has turned increasingly dovish and decreased the overnight lending rate by 25 basis points in July 2019.
Notwithstanding the potential economic slowdown, we remain optimistic for our industry generally and our Company in particular given the positive economic statistics, low interest rates, strong leasing trends in most of our particularcore markets and the continued success of our development efforts. As a leading developer, owner and leasing efforts leaves us optimistic for our industry generally and our company in particular. The outlook for 2018 GDP remains positive with growth projected by the Federal Reserve to reach approximately 2.8%. Job creation remains steady as the United States economy created approximately 630,000 jobsmanager of marquee Class A office properties in the second quarter of 2018 andU.S., our priorities remain focused on the unemployment rate rose slightly to approximately 4.0%. The Federal Reserve increased short-term interest rates in June by 25 basis points and the 10-year U.S. Treasury rate increased by a lesser amount during the quarter driven by low inflation and global market conditions. Though we expect additional interest rate increases by the Federal Reserve in 2018, we anticipate only modest increases in long-term United States interest rates. Despite a flattening yield curve, we do not see interest rate increases as a major risk factor to our business at this time and we expect reasonably healthy operating and financial market conditions to continue.
In this economic climate, we continue to focus on:following:
ensuring tenant satisfaction;
leasing available space in our in-service and development properties, as well as proactively focusing on sizable future lease expirations well in advance;expirations;
completing the construction of our development and redevelopment properties;
continuing and completing the redevelopment and repositioning of several key properties to increase future revenue and asset values over the long-term, despite the adverse impact on near-term revenue and earnings;long-term;
maintaining discipline in our underwriting of investment opportunities by (1) seeking significant pre-leasing commitments before beginning new construction, and (2) targeting acquisition activity in non-stabilized assets near innovation centers where we see the bestfavorable prospects for overall growth and our operational expertise can create value; and
managing our near-term debt maturities and maintaining our conservative balance sheet.sheet; and
actively managing our operations in a sustainable and responsible manner.
The overall occupancy of our in-service office and retail properties decreased modestly to 90.4%was 93.4% at June 30, 20182019, an increase of 50 basis points from 90.5%92.9% at March 31, 2018.2019 and the highest occupancy rate we have achieved since 2014. During the second quarter, we signed leases across our portfolio totaling approximately 1.72.4 million square feet, which is greater than our most recent 10-year historical quarterly average of 1.4 million square feet, and we commenced revenue recognition on approximately 900,000814,000 square feet of leases in second-generationsecond generation space. Of these second-generationsecond generation leases, approximately 700,000590,000 square feet had been vacant for less than one year and, in the aggregate, they represent an increase in net rental obligations (gross rent less operating expenses) of approximately 6.1%. Across our portfolio we continue to experience increases in construction costs, which generally results in increased tenant allowances and costs to build out tenant spaces.25% over the prior leases.

Our core investment strategy remains mostly unchanged. Other than possible selective acquisitions of "value-add"“value-add” assets (e.g., assets that require lease-up or repositioning,repositioning), and acquisitions that are otherwise consistent with our long-term strategy, we intend to continue to investfocus on investing primarily in higher yieldinghigher-yielding, new development opportunities with significant pre-leasing commitments, rather than lower yielding acquisitions of stabilized assets for whichcommitments. From time to time, due to anticipated market demand, specific tenant considerations and pricing remain strong.
Consistentsimilar factors, we may commence a development project prior to signing leases with this strategy, we committed to the following investments in July 2018:
On July 13, 2018, we entered into a joint venture with a third party to acquire a 25% interest in the development site at 3 Hudson Boulevard in New York City that, upon the future acquisition of additional available development rights, can accommodate a Class A office tower with up to 2.0 million net rentable square feet. We will serve as the managing member of the joint venture.
On July 19, 2018, we acquired Santa Monica Business Park, an approximately 1.2 million net rentable square foot office park located in the Ocean Park neighborhood of Santa Monica, California for a purchase price of approximately $627.5 million (including $11.5 million of seller funded leasing costs after the effective date of the purchase and sale agreement), where we expect our return on investment to increase over the next few years as free rent periods expire and the rental rates paid under the new leases are increased to market. The acquisition was completed in a joint venture with Canada Pension Plan Investment Board, which owns a 45% ownership interest in the joint venture.

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On July 27, 2018, we entered into a joint venture with our partner at The Hub on Causeway mixed-use development in Boston, Massachusetts to acquire the air rights for the development of an approximately 627,000 net rentable square foot Class A office tower at the site to be known as 100 Causeway Street. The joint venture entered into a lease agreement with an affiliate of Verizon Communications, Inc. for approximately 70% of the office tower for a term of 20 years and has commenced development of the office tower.tenants. 
As of June 30, 2018,2019, our developmentconstruction/redevelopment pipeline consisted of thirteen development/redevelopment12 projects that, when completed, we expect will total approximately 6.05.7 million net rentable square feet. Our share of the estimated total budgeted cost for these projects is approximately $3.3$3.2 billion, of which approximately $1.1$1.5 billion of equity remains to be invested as of June 30, 2018. Due to the tightening labor market and increased costs for a range of building materials, construction costs have risen steadily across our markets since 2014. In addition to increased rental rates offsetting the impact of these cost increases, we mitigate the risk of construction cost increases through one or more of the following: agreeing to guaranteed maximum prices, or GMPs, in our construction contracts and including contingencies in the budgeted costs. As of August 6, 2018, approximately 88%2019. Approximately 81% of the commercial space in these development projects was pre-leased as of August 2, 2019.
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During the second quarter, we increased our development pipeline by commencing the redevelopment of 325 Main Street in Kendall Center in Cambridge, Massachusetts. We previously announced the signing of a long-term lease agreement with Google at the property. The existing 115,000 square foot building will be replaced with a new approximately 420,000 net rentable square foot Class A office property. Total incremental project costs are estimated to be approximately $418 million.
In July 2019, we commenced development of 2100 Pennsylvania Avenue, an approximately 480,000 net rentable square foot Class A office property that will include approximately 450,000 square feet of Class A office space and 30,000 square feet of retail space located in the central business district (“CBD”) of Washington, DC. The office space is pre-leased.approximately 66% pre-leased and we expect our total investment will be approximately $360 million.
The same factors that create challenges to acquire assets present opportunities for us toAs we continue to focus on our strategy of developing and acquiring assets to enhance our long-term growth, we also continually review our portfolio to identify properties as potential salesales candidates because they may either no longer fit within our portfolio strategy or they could attract premium pricing in the current market environment. For example, during the second quarter of 2018,2019, we completed three dispositions including 540 Madison Avenue in New York City, a 39-story, 284,000-square foot, office building in midtown Manhattan. We and our 40% joint venture partner completed the sale of 91 Hartwell540 Madison Avenue located in Lexington, Massachusetts, which was approximately 94% leased and soldon June 27, 2019 for a gross sale price of approximately $22.2$310.3 million. We realized net proceeds of approximately $107.1 million from the sale after the assignment of $120.0 million of mortgage debt and closing costs. We also completed the sale of One Tower Center, a 410,000 square foot suburban office building in East Brunswick, New Jersey, for a gross sale price of $38.0 million and 164 Lexington Road, a vacant 64,000 square foot suburban building in Billerica, Massachusetts, for a gross sale price of $4.0 million.
We expect to continue to sell select non-core assets in 2018,2019, subject to market conditions.
A brief overview of each of our markets follows:
Boston
The leasing market in the greater Boston region remains active and strong. The Boston central business district ("CBD")CBD sub-market continues to be driven by lease expirationa strong flow of new and expanding technology and life science companies, demand from traditional financial and professional services tenants and a strong flowan ongoing trend of new and expanding technology companies leasing space in the CBD.urbanization. During the second quarter of 2018, we completed 26 lease transactions totaling more than 200,000 square feet. In addition, on July 27, 2018, a joint venture, in which we have a 50% interest, signed a lease with an affiliate of Verizon Communications, Inc. for2019, approximately 440,0001.7 million square feet of leases were executed, led by approximately 829,000 square feet of leases executed with Google, including the build-to-suit at 325 Main Street, and a 545,000 square foot, 15-year lease agreement with Bank of America to renew and expand at 100 Federal Street. In the second quarter of 2019, approximately 409,000 square feet of leases commenced development activities atin the remaining office portionBoston region. Of these leases, approximately 214,000 square feet had been vacant for less than one year and represent an increase in net rental obligations (gross rent less operating expenses) of approximately 18% over the Hub on Causeway development project.prior leases.
Our approximately 1.61.5 million square foot in-service office portfolio in Cambridge is dominated by large users, is nearlyapproximately 100% leased and continues to generate strong rental rates. For example, in the second quarter of 2018, we re-leased a full floor to a growing tenant generating initial net rents that are approximately 100% greater than the prior lease. We are also actively working to meet tenant demand through increasing density and redevelopment. For example, in the second quarter we are currently in discussions with a tenant to expand withinbegan redevelopment of 325 Main Street at Kendall Center replacing anin Cambridge, Massachusetts which is 90% pre-leased to Google for a term of 15 years. We expect the new 16-story building will be approximately 420,000 square feet (including a retail component) and will replace the existing, four-story, approximately 115,000 net rentable square foot building withcurrently on site. In the aggregate, Google will lease more than 800,000 square feet on a 400,000 net rentable square foot modern Class A office building.long-term basis in the Boston region.
OurIn the suburban Waltham/Lexington sub-market, continueswe continue to strengthen due to increasedexperience significant demand from the organic growth ofwithin our existing tenant base and from other tenants in the market, particularly from technology and life-science companies seeking space to accommodate their expanding workforces. During
The primary challenge we have in our Boston portfolio is the second quarterlack of 2018, we signedavailable space to meet tenant demand. As a lease with a tenant for 100% of our recently completed Reservoir Place North redevelopment property in Waltham andresult, we are focused on future lease expirations and are working on expansions and early renewals that are expected to result in discussionsincreases in future rents. We are also actively marketing new development sites in Boston and Waltham. Rents in Boston, Cambridge and the suburban Waltham/Lexington market have continued to experience strong increases in rental rates along with two tenants to lease the majoritydeclines in concessions.
Table of the remaining space at our 20 CityPoint development project in Waltham.Content

Los Angeles
As of August 2, 2018, ourThe market in Los Angeles (“LA”), particularly in West LA, remains strong. Our Colorado Center joint venture asset in Santa Monica, Californiacomplex, of which we own 50%, is approximately 98% leased, including leases with future commencement dates.100% leased. Our approach to property management, leasing and commitment to invest capital has transformed this asset, which was 66% leased when we acquired it in July 2016, into a top-tier property in the marketplace.
The strength of the Santa Monica sub-market, as evidenced by our experience at Colorado Center, affirmed our reasons for entering the market and gave us confidence to move forward with our plan to grow this region. As a result, we expanded our footprint in the Santa Monica sub-market through our acquisition of the 47-acre21-building Santa Monica Business Park, on July 19, 2018 through a joint venture.of which we own 55%, is approximately 93% leased. We believe this acquisition providesboth properties provide us with ample opportunity for future growth, as a majority of the current leases are at below-market rents.

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We will continue to explore opportunities to increase our presence in the Los AngelesLA market by seeking investments similar to Colorado Center and Santa Monica Business Park, where our financial, operational, redevelopment and development expertise provide the opportunity to achieve accretive returns.
New York
Overall leasing activity for the midtown Manhattan office market has strengthened this quarter with activity led by the FIRE (Finance, InsuranceOccupancy in our CBD New York in-service portfolio was 95.3% as of June 30, 2019, an increase from 94.5% as of March 31, 2019, and Real Estate) sector which continues to benefitan increase of 510 basis points from the advantages of midtown locations. We also benefited from this demand by completing 26 leases during90.2% at June 30, 2018. In the second quarter of 2018, aggregating2019, approximately 470,000 square feet. In addition, we have strong activity for the available space at 399 Park Avenue with approximately 320,000158,000 square feet of leases under negotiation. Also, on August 6, 2018, we signed a lease with a tenantcommenced in the New York region. Of these leases, approximately 85,000 square feet had been vacant for 100%less than one year and represent an increase in net rental obligations (gross rent less operating expenses) of approximately 34% over the prior leases.
While rental rate growth in New York remain muted due to increased supply, leasing activity remains strong due to ongoing demand for high-quality office space, atparticularly in midtown Manhattan. We continue to expect stable rent and tenant improvement allowances in most of our One Five Nine East 53rd Street redevelopment project, which is the low-rise portion of 601 Lexington Avenue. The lease is held in escrow pending satisfaction of the escrow conditions.New York submarkets.
San Francisco
The San Francisco CBD leasing market remains healthy and among the strongest markets in the United States. With no new uncommitted development projects anticipated through 2021, combinedU.S. with relatively low direct vacant spacehigh market absorption rates. The lack of vacancies and few availablethe limited number of large blocks of available sublease space leaveshave left tenants seeking spacewith few options.options and created a supply and demand imbalance. We expect these fundamentals to continue. As we move into 2019, we expectcontinue and that market rents will continue to rise due to limitations on supply, including Proposition M and litigation of the focusCentral SoMa zoning plan. We are moving forward with seeking approval of our attentionapproximately 800,000 square foot Fourth and Harrison development site later this year. We also have several large scale development opportunities in the CBD will be at Embarcadero Center whereSilicon Valley that we have commenced a major re-fresh of the public areas and amenities and have consistent leasing activity from lease expirations. Market rental rates for Embarcadero Center are increasing, yet remain a value comparedmarketing to rental rates of new construction.
Washington, DCtenants.
Our focus in the Washington, DC region has centered around (1) matching development sites with tenants to begin development with significant pre-leasing commitments, (2) Reston, Virginia and (3) market conditions in the Washington, DC CBD. In 2017, we committed to developing an aggregateCBD San Francisco in-service properties are 93% leased as of 1.8 million square feet of new office space pursuant to leases signed with a major law firm at 2100 Pennsylvania Avenue in Washington, DC, the TSA for its new headquarters in Springfield, Virginia and Marriott International, Inc. for its new headquarters and hotel in Bethesda, Maryland. During the first quarter of 2018, we committed to approximately 1.4 million square feet of new developments at 17Fifty Presidents Street in Reston Town Center, which is 100% pre-leased to Leidos, and the new Fannie Mae headquarters, of which the office space is approximately 85% pre-leased, at our Reston Gateway development project. In total, these five development projects aggregated approximately 3.2 million square feet of development for a total budget of approximately $1.8 billion (our share) and are approximately 88% pre-leased, at June 30, 2018. In addition, we completed2019, and, including signed leases that have not yet commenced, would be approximately 662,000 square feet of leasing during98% leased. During the second quarter includingof 2019, approximately 226,000 square feet in the Washington, DC CBD and fully placed in-service our Signature at Reston residential property.
Our Reston, Virginia portfolio was 92.3% leased at June 30, 2018, and we continue to see strong tenant demand with approximately 430,000215,000 square feet of leases signed duringcommenced in the second quarterSan Francisco region. Of these leases, approximately 80,000 square feet had been vacant for less than one year and represent an increase in net rental obligations (gross rent less operating expenses) of 2018. Overall marketapproximately 78% over the prior leases.
Washington, DC
Market conditions in the Washington, DC CBD have not changed in any meaningful way over the past few quarters. LeasingIn the Washington, DC region, our focus remains on (1) expanding our development potential in Reston, Virginia where demand from technology and cybersecurity tenants remains strong, (2) divesting of non-core assets in Washington, DC and select suburban markets and (3) matching development sites with tenants to begin development with significant pre-leasing commitments.
Consistent with this strategy, on July 16, 2019, we executed a 75-year ground lease with The George Washington University for land parcels at 2100 Pennsylvania Avenue located in Washington, DC and commenced development of an approximately 480,000 net rentable square foot property that will include approximately 450,000 square feet of Class A office space and 30,000 square feet of retail space. The project is located in the vibrant Foggy Bottom neighborhood of Washington, DC and is adjacent to our highly successful 2200 Pennsylvania Avenue mixed-use property. The office space in the 2100 Pennsylvania Avenue project is approximately 66% pre-leased to a tenant for a term of 16 years.
In our Reston, Virginia portfolio, we continued development of Reston Gateway, our mixed-use development project, which will consist of an aggregate of approximately 4.5 million net rentable square feet. The initial phase is approximately 1.1 million net rentable square feet of which approximately 80% is pre-leased to Fannie Mae. Our Reston, Virginia in-service portfolio was approximately 93% leased as of June 30, 2019 and continues to be the strongest submarket in the region.
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Conversely, leasing activity in the Washington, DC CBD remains very competitive primarily because there has been a significantan increase in supply without a corresponding increase in demand. However, it is unclear at this time howWe are reasonably well-leased in the Federal omnibus spending bill, which includes billionsCBD with modest near-term exposure and we have reduced our exposure in the Washington, DC CBD market significantly over the past few years through dispositions of dollars of increases to non-defense spending, will translate into new job creation and increased tenant demand.non-core assets.




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The table below details the leasing activity during the three and six months ended June 30, 2018:2019:
 Three months ended June 30, 2018 Six months ended June 30, 2018 Three months ended June 30, 2019 Six months ended June 30, 2019
 (Square Feet) (Square Feet)
Vacant space available at the beginning of the period 4,063,557
 4,039,528
 3,182,365
 3,859,897
Property dispositions/properties taken out of service(1) (7,355) (7,355) (473,687) (558,706)
Properties acquired vacant space —
 —
Properties placed (and partially placed) in-service 171,243
 315,949
Properties placed (and partially placed) in-service (2) 147,061
 147,061
Leases expiring or terminated during the period 939,808
 2,212,612
 1,076,520
 2,350,626
Total space available for lease 5,167,253
 6,560,734
 3,932,259
 5,798,878
1st generation leases
 185,720
 357,104
 239,194
 483,624
2nd generation leases with new tenants
 400,536
 1,004,159
 564,060
 1,447,982
2nd generation lease renewals
 487,224
 1,105,698
 250,311
 988,578
Total space leased (1) 1,073,480
 2,466,961
Total space leased (3) 1,053,565
 2,920,184
Vacant space available for lease at the end of the period 4,093,773
 4,093,773
 2,878,694
 2,878,694
        
Leases executed during the period, in square feet (2) 1,732,842
 3,857,462
Leases executed during the period, in square feet (4) 2,427,209
 3,949,555
        
Second generation leasing information: (3)
    
Second generation leasing information: (5)
    
Leases commencing during the period, in square feet 887,760
 2,109,857
 814,371
 2,436,560
Weighted Average Lease Term 110 Months
 101 Months
 98 Months
 114 Months
Weighted Average Free Rent Period 87 Days
 107 Days
 163 Days
 129 Days
Total Transaction Costs Per Square Foot (4) 
$65.69
 
$68.92
Increase in Gross Rents (5) 4.34% 6.71%
Increase in Net Rents (6) 6.13% 9.82%
Total Transaction Costs Per Square Foot (6) 
$80.60
 
$79.80
Increase in Gross Rents (7) 16.14% 8.83%
Increase in Net Rents (8) 25.01% 13.56%
___________________________
(1)Total square feet of available space associated with property dispositions during the three months ended June 30, 2019 consists of 64,140 square feet at 164 Lexington Road, 50,150 square feet at 540 Madison Avenue and 249,739 square feet at One Tower Center. Total square feet of available space associated with properties taken out of service during the three months ended June 30, 2019 consists of 109,658 square feet at 325 Main Street.
(2)
Total square feet of property partially placed in-service during the three and six months ended June 30, 2019 consists of 147,061 square feet at The Hub on Causeway Podium.
(3)
Represents leases for which rental revenue recognition has commenced in accordance with GAAP during the three and six months ended June 30, 2018.2019.
(2)(4)
Represents leases executed during the three and six months ended June 30, 20182019 for which we either (1) commenced rental revenue recognition in such period or (2) 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 six months ended June 30, 20182019 is 363,110173,448 and 737,194,324,523, respectively.
(3)(5)
Second generation leases are defined as leases for space that had previously been leased by us. Of the 887,760814,371 and 2,109,8572,436,560 square feet of second generation leases that commenced during the three and six months ended June 30, 2018,2019, respectively, leases for 524,650640,923 and 1,447,3612,112,037 square feet were signed in prior periods.
(4)(6)Total transaction costs include tenant improvements and leasing commissions, andbut exclude free rent concessions and other inducements in accordance with GAAP.
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(5)(7)
Represents the increase in gross rent (base rent plus expense reimbursements) on the new versus expired leases on the 705,451589,611 and 1,661,9021,883,383 square feet of second generation leases that had been occupied within the prior 12 months for the three and six months ended June 30, 2018,2019, respectively; excludes leases that management considers temporary because the tenant is not expected to occupy the space on a long-term basis.
(6)(8)
Represents the increase in net rent (gross rent less operating expenses) on the new versus expired leases on the 705,451589,611 and 1,661,9021,883,383 square feet of second generation leases that had been occupied within the prior 12 months for the three and six months ended June 30, 2018,2019, respectively; excludes leases that management considers temporary because the tenant is not expected to occupy the space on a long-term basis.

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Transactions during the three months ended June 30, 20182019 included the following:
Development activities
•
On May 9, 2019, we commenced development of 325 Main Street in Cambridge, Massachusetts (See Note 3 to the Consolidated Financial Statements).
On June 7, 2018, we completed and fully placed in-service our Signature at Reston development project comprised of 508 apartment units and retail space aggregating approximately 518,000 square feet located in Reston, Virginia. The retail space totaling approximately 25,000 net rentable square feet was approximately 81% leased and the residential units as of August 2, 2018 were approximately 35% leased.
On June 20, 2018, we partially placed in-service our Proto Kendall Square development project comprised of 280 apartment units and retail space aggregating approximately 167,000 square feet located in Cambridge, Massachusetts. The retail space totaling approximately 15,000 net rentable square feet was approximately 98% leased and the residential units as of August 2, 2018 were approximately 37% leased.
AcquisitionAcquisitions and disposition activities
On May 24, 2018,April 1, 2019, we completed the acquisition of our partner’s 5% ownership interest and promoted profits interest in the consolidated entity that owns Salesforce Tower for cash totaling approximately $210.9 million, which amount was reduced by approximately $24.1 million to $186.8 million to reflect the repayment of our preferred equity and preferred return in the venture. We now own 100% of Salesforce Tower. We have accounted for the transaction as an equity transaction for financial reporting purposes and have reflected the difference between the fair value of the total consideration paid and the related carrying value of the noncontrolling interest - property partnership totaling approximately $162.5 million as a decrease to Additional Paid-in Capital and Partners’ Capital in the Consolidated Balance Sheets of BXP and BPLP, respectively.
On June 3, 2019, we completed the sale of our 91 Hartwell AvenueOne Tower Center property located in East Brunswick, New Jersey for a gross sale price of $38.0 million. Net cash proceeds totaled approximately $36.6 million, resulting in a loss on sale of real estate totaling approximately $0.8 million. One Tower Center is an approximately 410,000 net rentable square foot Class A office property.
On June 28, 2019, we completed the sale of our 164 Lexington Road property located in Billerica, Massachusetts for a gross sale price of approximately $22.2$4.0 million. Net cash proceeds totaled approximately $21.7$3.8 million, resulting in a gain on sale of real estate totaling approximately $15.5$2.5 million for BXP and approximately $15.9$2.6 million for BPLP. 91 Hartwell Avenue164 Lexington Road is an approximately 119,00064,000 net rentable square foot Class A office property.
Capital marketsUnconsolidated joint venture activities
On April 19, 2018,26, 2019, a joint venture in which we have a 50% interest obtained construction financing with a total commitment of $180.0$255.0 million collateralized by its Hub on Causeway - Residential7750 Wisconsin Avenue development project.project located in Bethesda, Maryland. The construction financing bears interest at a variable rate equal to LIBOR plus 2.00%1.25% per annum and matures on April 19, 2022,26, 2023, with two, one-year extension options, subject to certain conditions. TheAs of June 30, 2019, there have been no amounts drawn under the loan. 7750 Wisconsin Avenue is a 734,000 net rentable square foot build-to-suit Class A office project and below-grade parking garage.
On June 15, 2019, a joint venture has not yet drawn any funds under the loan.in which we have a 50% interest partially placed in-service The Hub on Causeway - Residential isPodium development project, an approximately 320,000385,000 net rentable square foot project comprised of 440 residential unitscontaining retail and office space located in Boston, Massachusetts.
On April 24, 2018, BPLP exercised its option to draw $500.0 million on its Delayed Draw Facility. The Delayed Draw Facility bears interest at a variable rate equal to LIBOR plus 0.90% per annum based on BPLP's current credit rating and matures on April 24, 2022.
property is 89% pre-leased as of August 2, 2019.
On AprilJune 27, 2018,2019, a joint venture in which we have a 60% interest refinancedcompleted the sale of 540 Madison Avenue in New York City for a gross sale price of approximately $310.3 million, including the assumption by the buyer of the mortgage loan collateralized by its 540 Madison Avenuethe property located in New York City totaling $120.0 million. The mortgage loan bearsbore interest at a variable rate equal to LIBOR plus 1.10% per annum and matures on June 5, 2023.  The previous mortgage loan bore interest at a variable rate equal to LIBOR plus 1.50% per annum and was
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scheduled to mature on June 5, 2018.2023. Net cash proceeds totaled approximately $178.7 million, of which our share was approximately $107.1 million, after the payment of transaction costs. We recognized a gain on sale of real estate totaling approximately $47.8 million, which is included in Income from Unconsolidated Joint Ventures in the accompanying Consolidated Statements of Operations. 540 Madison Avenue is an approximately 284,000 net rentable square foot Class A office property.
Capital markets activities
•
On June 21, 2019, BPLP completed a public offering of $850.0 million in aggregate principal amount of its 3.400% unsecured senior notes due 2029. The notes were priced at 99.815% of the principal amount to yield an effective rate (including financing fees) of approximately 3.505% per annum to maturity. The notes will mature on June 21, 2029, unless earlier redeemed. The aggregate net proceeds from the offering were approximately $841.3 million after deducting underwriting discounts and transaction expenses.
Transactions completed subsequent to June 30, 20182019 included the following:
On July 13, 2018,16, 2019, we entered intoexecuted a joint venture with a third party to acquire a development site at 3 Hudson Boulevard that, upon the future acquisition of additional available development rights, can accommodate a Class A office tower with up to 2.0 million net rentable square feet located on the entire square block between 11th Avenue and Hudson Boulevard Park from West 34th Street to West 35th Street in New York City.  We own a 25% interest in and will be the managing member of the joint venture.  The acquisition includes improvements consisting of excavation work and foundation elements that are currently being constructed on the site. We contributed cash totaling approximately $45.6 million at closing and will contribute in the future approximately $62.2 million for our initial capital contribution, a portion of which will fund the remaining costs to complete the foundation elements to grade for the future office building.  In addition, we have provided $80.0 million of mortgage financing to the joint venture which bears interest at a variable rate equal to LIBOR plus 3.50% per annum and matures on July 13, 2023, with extension options, subject to certain conditions.

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On July 19, 2018, we completed the acquisition of Santa Monica Business Park in the Ocean Park neighborhood of Santa Monica, California for a purchase price of approximately $627.5 million, including $11.5 million of seller funded leasing costs after the effective date of the purchase and sale agreement. Santa Monica Business Park is a 47-acre office park consisting of 21 buildings totaling approximately 1.2 million net rentable square feet. Approximately 70% of the rentable square footage is subject to a75-year ground lease with 80 years remaining, including renewal periods. The ground lease provides us with the right to purchase theGeorge Washington University for land underlying the propertiesparcels at 2100 Pennsylvania Avenue located in 2028 with subsequent purchase rights every 15 years. The property is 94% leased. The acquisition was completed in a joint venture with Canada Pension Plan Investment Board, which invested approximately $147.4 million for a 45% ownership interest in the joint venture. We will provide customary operating, property managementWashington, DC and leasing services to, and invested approximately $180.1 million in the joint venture. The acquisition was completed with $300.0 million of financing. The mortgage financing bears interest at a variable rate equal to LIBOR plus 1.28% per annum and matures on July 19, 2025. At closing, the borrower under the loan, which is a subsidiary of the joint venture, entered into interest rate swap contracts with notional amounts aggregating $300.0 million through April 1, 2025, resulting in a fixed rate of approximately 4.063% per annum through the expiration of the interest rate swap contracts.
On July 27, 2018, we entered into a joint venture with our partner at The Hub on Causeway mixed-use development in Boston, Massachusetts to acquire the air rights for thecommenced development of an approximately 627,000480,000 net rentable square foot Class A office tower at the siteproperty pursuant to be known as 100 Causeway Street. The joint venturea development agreement that we entered into a leasewith The George Washington University in 2016. The development agreement with an affiliate of Verizon Communications, Inc. under which Verizon will lease approximately 70% of the office towerprovided for a term of 20 years. With the execution of the ground lease the joint venture commenced developmentupon completion of the project. We will serve as co-development manager for the project. The joint venture partner contributed an air rights parcelentitlement process and improvements, withrelocation of existing tenants. Also in 2016, we made a fair valuedeposit of approximately $41.3$15.0 million for its initial 50% interest in the joint venture. We contributed improvements totaling approximately $3.9 million and will contribute cash totaling approximately $37.4 million for our initial 50% interest. Our sharethat, upon execution of the total project cost is estimated toground lease, will be approximately $270 million.
On August 7, 2018,credited against ground rent payable under the ground lease. In 2017, we entered into an agreementa 16-year lease with a third party to (1) agree to share certain pre-development costs during the pre-lease period and (2) to agree to form a joint venture to thereafter own and develop a leasehold interest in 343 Madison Avenue located in New York City. We will serve as development manager of the project and will own a 55% interest in the joint venture. In 2016, we were selected by the Metropolitan Transportation Authority ("MTA") as the developer of the project and will enter into a pre-lease agreement and a 99-year ground lease with the MTAtenant for the site. The site will support a Class A office tower with approximately 900,000300,000 net rentable square feet. There can be no assurances thatfeet of space at the transaction will be completed on the terms currently contemplated, or at all.property.
Critical Accounting Policies
Management’s Discussion and Analysis of Financial Condition and Results of Operations discuss our Consolidated Financial Statements, which have been prepared in accordance with generally accepted accounting principles (“GAAP”). The preparation of these financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Certain accounting policies are considered to be critical accounting policies, as they require management to make assumptions about matters that are highly uncertain at the time the estimate is made and changes in accounting estimate are reasonably likely to occur from period to period. Management bases its estimates and assumptions on historical experience and current economic conditions. On an on-going basis, management evaluates its estimates and assumptions including those related to revenue, impairment of long-lived assets and the allowance for doubtful accounts. Actual results may differ from those estimates and assumptions.
Our Annual Report on Form 10-K for the year ended December 31, 20172018 contains a discussion of our critical accounting policies, except for our policies established following the adoption of each of Accounting Standards Update (“ASU”) ASU 2014-09,2016-02, ASU 2016-15, ASU 2016-18, ASU 2017-05, ASU 2017-092018-01 and ASU 2017-12.2018-11. The adoption of each of the above pronouncements is discussed in Note 24 to our Consolidated Financial Statements. Management discusses and reviews our critical accounting policies and management’s judgments and estimates with BXP’s Audit Committee.
Results of Operations for the Six Months Ended June 30, 20182019 and 20172018
Net income attributable to Boston Properties, Inc. common shareholders and net income attributable to Boston Properties Limited Partnership common unitholders increaseddecreased approximately $73.9$42.3 million and $84.4$47.8 million for the six months ended June 30, 20182019 compared to 2017,2018, respectively, as detailed in the following tables and for the reasons discussed below under the heading “Comparison of the six months ended June 30, 20182019 to the six months ended June 30, 2017” 2018” within “Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
The following are reconciliations of net income attributable to Boston Properties, Inc. common shareholders to net operating income and net income attributable to Boston Properties Limited Partnership common unitholders to net operating income for thesix months ended June 30, 20182019 and 20172018 (in thousands):

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Boston Properties, Inc.
 Six months ended June 30, Six months ended June 30,
 2018 2017 Increase/(Decrease) %
Change		 2019 2018 Increase/(Decrease) %
Change
Net Income Attributable to Boston Properties, Inc. Common Shareholders $304,682
 $230,764
 $73,918
 32.03 % $262,431
 $304,682
 $(42,251) (13.87)%
Preferred dividends 5,250
 5,250
 —
 — % 5,250
 5,250
 —
 — %
Net Income Attributable to Boston Properties, Inc. 309,932
 236,014
 73,918
 31.32 % 267,681
 309,932
 (42,251) (13.63)%
Net Income Attributable to Noncontrolling Interests:                
Noncontrolling interest—common units of the Operating Partnership 35,311
 26,933
 8,378
 31.11 % 30,627
 35,311
 (4,684) (13.26)%
Noncontrolling interests in property partnerships 31,634
 19,627
 12,007
 61.18 % 36,312
 31,634
 4,678
 14.79 %
Net Income 376,877
 282,574
 94,303
 33.37 % 334,620
 376,877
 (42,257) (11.21)%
Gains on sales of real estate 114,689
 3,900
 110,789
 2,840.74 %
Income Before Gains on Sales of Real Estate 262,188
 278,674
 (16,486) (5.92)%
Other Expenses:                
Add:                
Interest expense 182,424
 190,677
 (8,253) (4.33)% 203,366
 182,424
 20,942
 11.48 %
Impairment loss 24,038
 —
 24,038
 100.00 %
Other Income:     

 
     

 
Less:                
Gains from early extinguishments of debt —
 14,354
 (14,354) (100.00)%
Gains from investments in securities 379
 1,772
 (1,393) (78.61)% 4,134
 379
 3,755
 990.77 %
Interest and other income 4,227
 2,118
 2,109
 99.58 % 7,368
 4,227
 3,141
 74.31 %
Gains on sales of real estate 781
 114,689
 (113,908) (99.32)%
Income from unconsolidated joint ventures 1,230
 6,192
 (4,962) (80.14)% 48,177
 1,230
 46,947
 3,816.83 %
Operating Income 438,776
 444,915
 (6,139) (1.38)%
Other Expenses:                
Add:                
Depreciation and amortization expense 322,214
 311,124
 11,090
 3.56 % 342,005
 322,214
 19,791
 6.14 %
Transaction costs 495
 333
 162
 48.65 % 877
 495
 382
 77.17 %
Payroll and related costs from management services contracts 4,855
 —
 4,855
 100.00 % 5,798
 4,855
 943
 19.42 %
General and administrative expense 64,362
 58,527
 5,835
 9.97 % 76,833
 64,362
 12,471
 19.38 %
Other Revenue:     

 

     

 

Less:                
Direct reimbursements of payroll and related costs from management services contracts 4,855
 —
 4,855
 100.00 % 5,798
 4,855
 943
 19.42 %
Development and management services revenue 17,710
 13,837
 3,873
 27.99 % 19,263
 17,710
 1,553
 8.77 %
Net Operating Income $808,137
 $801,062
 $7,075
 0.88 % $902,016
 $808,137
 $93,879
 11.62 %



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Boston Properties Limited Partnership
 Six months ended June 30, Six months ended June 30,
 2018 2017 Increase/(Decrease) %
Change		 2019 2018 Increase/(Decrease) %
Change
Net Income Attributable to Boston Properties Limited Partnership Common Unitholders $346,868
 $262,506
 $84,362
 32.14 % $299,097
 $346,868
 $(47,771) (13.77)%
Preferred distributions 5,250
 5,250
 —
 — % 5,250
 5,250
 —
 — %
Net Income Attributable to Boston Properties Limited Partnership 352,118
 267,756
 84,362
 31.51 % 304,347
 352,118
 (47,771) (13.57)%
Net Income Attributable to Noncontrolling Interests:                
Noncontrolling interests in property partnerships 31,634
 19,627
 12,007
 61.18 % 36,312
 31,634
 4,678
 14.79 %
Net Income 383,752
 287,383
 96,369
 33.53 % 340,659
 383,752
 (43,093) (11.23)%
Gains on sales of real estate 117,677
 4,477
 113,200
 2,528.48 %
Income Before Gains on Sales of Real Estate 266,075
 282,906
 (16,831) (5.95)%
Other Expenses:                
Add:                
Interest expense 182,424
 190,677
 (8,253) (4.33)% 203,366
 182,424
 20,942
 11.48 %
Impairment loss 22,272
 —
 22,272
 100.00 %
Other Income:                
Less:                
Gains from early extinguishments of debt —
 14,354
 (14,354) (100.00)%
Gains from investments in securities 379
 1,772
 (1,393) (78.61)% 4,134
 379
 3,755
 990.77 %
Interest and other income 4,227
 2,118
 2,109
 99.58 % 7,368
 4,227
 3,141
 74.31 %
Gains on sales of real estate 930
 117,677
 (116,747) (99.21)%
Income from unconsolidated joint ventures 1,230
 6,192
 (4,962) (80.14)% 48,177
 1,230
 46,947
 3,816.83 %
Operating Income 442,663
 449,147

(6,484) (1.44)%
Other Expenses:                
Add:                
Depreciation and amortization expense 318,327
 306,892
 11,435
 3.73 % 337,881
 318,327
 19,554
 6.14 %
Transaction costs 495
 333
 162
 48.65 % 877
 495
 382
 77.17 %
Payroll and related costs from management services contracts 4,855
 —
 4,855
 100.00 % 5,798
 4,855
 943
 19.42 %
General and administrative expense 64,362
 58,527
 5,835
 9.97 % 76,833
 64,362
 12,471
 19.38 %
Other Revenue:                
Less:                
Direct reimbursements of payroll and related costs from management services contracts 4,855
 —
 4,855
 100.00 % 5,798
 4,855
 943
 19.42 %
Development and management services revenue 17,710
 13,837
 3,873
 27.99 % 19,263
 17,710
 1,553
 8.77 %
Net Operating Income $808,137
 $801,062
 $7,075
 0.88 % $902,016
 $808,137
 $93,879
 11.62 %




At June 30, 20182019 and June 30, 2017,2018, we owned or had interests in a portfolio of 193 and 178 and 175commercial real estate properties, respectively (in each case, the “Total Property Portfolio”). As a result of changes within our Total Property Portfolio, the financial data presented below shows significant changes in revenue and expenses from period-to-period. Accordingly, we do not believe that our period-to-period financial data with respect to the Total Property Portfolio provides a complete picture of our performance. Therefore, the comparison of operating results for the three and six months ended June 30, 20182019 and 20172018 show separately the changes attributable to the properties that were owned by us and in-service throughout each period compared (the “Same Property Portfolio”) and the changes attributable to the properties included in the Placed In-Service, Acquired, Development or Redevelopment or Sold Portfolios.
In our analysis of operating results, particularly to make comparisons of net operating income between periods meaningful, it is important to provide information for properties that were in-service and owned by us throughout each period presented. We refer to properties acquired or placed in-service prior to the beginning of the earliest period presented and owned by us and in-service through the end of the latest period presented as our Same Property Portfolio. The Same Property Portfolio therefore excludes properties placed in-service, acquired or in

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development or redevelopment after the beginning of the earliest period presented or disposed of prior to the end of the latest period presented.
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Net operating income (“NOI”) is a non-GAAP financial measure equal to net income attributable to Boston Properties, Inc. common shareholders and net income attributable to Boston Properties Limited Partnership common unitholders, as applicable, the most directly comparable GAAP financial measures, plus (1) preferred dividends/distributions, net income attributable to noncontrolling interests, interest expense, impairment loss, depreciation and amortization expense, transaction costs, payroll and related costs from management services contracts and corporate general and administrative expense less (2) gains on sales of real estate, gains from early extinguishments of debt, gains from investments in securities, interest and other income, gains on sales of real estate, income from unconsolidated joint ventures, direct reimbursements of payroll and related costs from management services contracts and development and management services revenue. We use NOI internally as a performance measure and believe it provides useful information to investors regarding our results of operations and financial condition because, when compared across periods, it reflects the impact on operations from trends in occupancy rates, rental rates, operating costs and acquisition and development activity on an unleveraged basis, providing perspective not immediately apparent from net income attributable to Boston Properties, Inc. common shareholders and net income attributable to Boston Properties Limited Partnership common unitholders. For example, interest expense is not necessarily linked to the operating performance of a real estate asset and is often incurred at the corporate level as opposed to the property level. Similarly, interest expense may be incurred at the property level even though the financing proceeds may be used at the corporate level (e.g., used for other investment activity). In addition, depreciation and amortization expense, because of historical cost accounting and useful life estimates, may distort operating performance measures at the property level. NOI presented by us may not be comparable to NOI reported by other REITs or real estate companies that define NOI differently.
We believe that, in order to facilitate a clear understanding of our operating results, NOI should be examined in conjunction with net income attributable to Boston Properties, Inc. common shareholders and net income attributable to Boston Properties Limited Partnership common unitholders as presented in our Consolidated Financial Statements. NOI should not be considered as a substitute for net income attributable to Boston Properties, Inc. common shareholders or net income attributable to Boston Properties Limited Partnership common unitholders (determined in accordance with GAAP) or any other GAAP financial measures and should only be considered together with and as a supplement to our financial information prepared in accordance with GAAP.
The gains on sales of real estate, impairment losses and depreciation expense may differ between BXP and BPLP as a result of previously applied acquisition accounting by BXP for the issuance of common stock in connection with non-sponsor OP Unit redemptions by BPLP. This accounting resulted in a step-up of the real estate assets at BXP that was allocated to certain properties. The difference between the real estate assets of BXP as compared to BPLP for certain properties having an allocation of the real estate step-up will result in a corresponding difference in impairment losses and in the gains on sales of real estate and depreciation expense when those properties are sold. For additional information see the Explanatory Note that follows the cover page of this Form 10-Q.
Comparison of the six months ended June 30, 20182019 to the six months ended June 30, 2017.2018.
The table below shows selected operating information for the Same Property Portfolio and the Total Property Portfolio. The Same Property Portfolio consists of 146142 properties totaling approximately 39.238.3 million net rentable square feet of space, excluding unconsolidated joint ventures. The Same Property Portfolio includes properties acquired or fully placed in-service on or prior to January 1, 20172018 and owned and in-service through June 30, 2018.2019. The Total Property Portfolio includes the effects of the other properties either placed in-service, acquired or in development or redevelopment after January 1, 20172018 or disposed of on or prior to June 30, 2018.2019. This table includes a reconciliation from the Same Property Portfolio to the Total Property Portfolio by also providing information for the six months ended June 30, 20182019 and 20172018 with respect to the properties that were placed in-service, acquired, in development or redevelopment or sold. There were no properties acquired between January 1, 2018 and June 30, 2019.



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Same Property Portfolio 
Properties
Placed In-Service
Portfolio
 Properties
Acquired Portfolio		 
Properties in
Development or
Redevelopment
Portfolio
 Properties Sold Portfolio Total Property PortfolioSame Property Portfolio 
Properties
Placed In-Service
Portfolio
 
Properties in
Development or
Redevelopment
Portfolio
 Properties Sold Portfolio Total Property Portfolio
(dollars in thousands)2018 2017 
Increase/
(Decrease)
 
%
Change
 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 
Increase/
(Decrease)
 
%
Change
2019 2018 
Increase/
(Decrease)
 
%
Change
 2019 2018 2019 2018 2019 2018 2019 2018 
Increase/
(Decrease)
 
%
Change
Rental Revenue:(1)                                                          
Rental Revenue$1,237,194
 $1,211,474
 $25,720
 2.12 % $26,447
 $5,888
 $1,478
 $363
 $1,710
 $2,648
 $1,494
 $8,445
 $1,268,323
 $1,228,818
 $39,505
 3.21 %
Lease Revenue (Excluding Termination Income)$1,263,580
 $1,186,132
 $77,448
 6.53 % $64,011
 $10,822
 $997
 $4,704
 $2,438
 $13,908
 $1,331,026
 $1,215,566
 $115,460
 9.50 %
Termination Income2,075
 18,987
 (16,912) (89.07)% —
 —
 —
 —
 5
 (1,472) —
 4
 2,080
 17,519
 (15,439) (88.13)%12,041
 1,010
 11,031
 1,092.18 % —
 —
 —
 5
 (196) 1,065
 11,845
 2,080
 9,765
 469.47 %
Total Rental Revenue1,239,269
 1,230,461
 8,808
 0.72 % 26,447
 5,888
 1,478
 363
 1,715
 1,176
 1,494
 8,449
 1,270,403
 1,246,337
 24,066
 1.93 %
Lease Revenue1,275,621
 1,187,142
 88,479
 7.45 % 64,011
 10,822
 997
 4,709
 2,242
 14,973
 1,342,871
 1,217,646
 125,225
 10.28 %
Parking and Other Income50,200
 51,964
 (1,764) (3.39)% 750
 255
 112
 37
 17
 501
 51,079
 52,757
 (1,678) (3.18)%
Total Rental Revenue (1)1,325,821
 1,239,106
 86,715
 7.00 % 64,761
 11,077
 1,109
 4,746
 2,259
 15,474
 1,393,950
 1,270,403
 123,547
 9.73 %
Real Estate Operating Expenses459,623
 441,043
 18,580
 4.21 % 11,115
 2,508
 631
 175
 782
 8,108
 783
 3,721
 472,934
 455,555
 17,379
 3.81 %476,501
 456,566
 19,935
 4.37 % 26,745
 6,438
 1,994
 1,685
 2,351
 8,245
 507,591
 472,934
 34,657
 7.33 %
Net Operating Income (Loss), excluding residential and hotel779,646
 789,418
 (9,772) (1.24)% 15,332
 3,380
 847
 188
 933
—
(6,932) 711
 4,728
 797,469
 790,782
 6,687
 0.85 %849,320
 782,540
 66,780
 8.53 % 38,016
 4,639
 (885)—
3,061
 (92) 7,229
 886,359
 797,469
 88,890
 11.15 %
Residential Net Operating Income (Loss) (1)5,194
 4,980
 214
 4.30 % (1,421) —
 —
 —
 —
 —
 —
 —
 3,773
 4,980
 (1,207) (24.24)%
Hotel Net Operating Income (1)6,895
 5,300
 1,595
 30.09 % —
 —
 —
 —
 —
 —
 —
 —
 6,895
 5,300
 1,595
 30.09 %
Net Operating Income (Loss) (1)$791,735
 $799,698
 $(7,963) (1.00)% $13,911
 $3,380
 $847
 $188
 $933
 $(6,932) $711
 $4,728
 $808,137
 $801,062
 $7,075
 0.88 %
Residential Net Operating Income (Loss) (2)4,816
 5,194
 (378) (7.28)% 4,002
 (1,421) —
 —
 —
 —
 8,818
 3,773
 5,045
 133.71 %
Hotel Net Operating Income (2)6,839
 6,895
 (56) (0.81)% —
 —
 —
 —
 —
 —
 6,839
 6,895
 (56) (0.81)%
Net Operating Income (Loss)$860,975
 $794,629
 $66,346
 8.35 % $42,018
 $3,218
 $(885) $3,061
 $(92) $7,229
 $902,016
 $808,137
 $93,879
 11.62 %
_______________  
(1)Rental Revenue is equal to Revenue less Development and Management Services Revenue and Direct Reimbursements of Payroll and Related Costs from Management Services Revenue per the Consolidated Statements of Operations excluding the residential and hotel revenue that is noted below. Upon the adoption of ASU-2016-02 “Leases” on January 1, 2019, service income from tenants is included in Lease revenue. Prior to adoption, these amounts were included in the line item for Development and Management Services Revenue. We use Rental Revenue internally as a performance measure and in calculating other non-GAAP financial measures (e.g., NOI), which provides investors with information regarding our performance that is not immediately apparent from the comparable non-GAAP measures and allows investors to compare operating performance between periods.
(2)For a detailed discussion of NOI, including the reasons management believes NOI is useful to investors, see page 50.58. Residential Net Operating Income for the six months ended June 30, 20182019 and 20172018 is comprised of Residential Revenue of $8,958$16,714 and $8,166,$8,958, less Residential Expenses of $5,185$7,896 and $3,186,$5,185, respectively. Hotel Net Operating Income for the six months ended June 30, 20182019 and 20172018 is comprised of Hotel Revenue of $23,709$23,782 and $20,795$23,709 less Hotel Expenses of $16,814$16,943 and $15,495,$16,814, respectively, per the Consolidated Statements of Operations.

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Same Property Portfolio
RentalLease Revenue (Excluding Termination Income)
RentalLease revenue from the Same Property Portfolio increased by approximately $25.7$77.4 million for the six months ended June 30, 20182019 compared to 2017.2018. The increase was primarily the result of an increaseincreases in revenue from our leases and parkingthe reclassification of service income from tenants and other income of approximately $24.7$67.9 million and $1.0$9.5 million, respectively. RentalLease revenue from our leases increased approximately $24.7$67.9 million as a result of our average revenue per square foot increasing by approximately $1.38,$2.89, which contributed approximately $23.8$45.7 million, and an increase of approximately $0.9$22.2 million increase due to an increase inour average occupancy increasing from 91.6%92.4% to 91.7%94.1%.
TerminationOn January 1, 2019, we adopted ASU 2016-02. As a result of the adoption, there were certain nonlease components (service income from tenants, overtime HVAC, late fees and other items) that were reclassified on a prospective basis from the Development and Management Services revenue and Parking and Other Income
Termination income line items of our Consolidated Statements of Operations. As a result, Lease revenue increased by approximately $9.5 million and Development and Management Services revenue and Parking and Other Income decreased by approximately $16.9$5.8 million and $3.7 million, respectively, for the six months ended June 30, 20182019 (See Note 4 to the Consolidated Financial Statements).
Termination Income
Termination income increased by approximately $11.0 million for the six months ended June 30, 2019 compared to 2017.2018.
Termination income for the six months ended June 30, 2019 related to 20 tenants across the Same Property Portfolio and totaled approximately $12.0 million, of which approximately $6.8 million is from two tenants that terminated leases early at 399 Park Avenue in New York City.
Termination income for the six months ended June 30, 2018 related to seventeen16 tenants across the Same Property Portfolio and totaled approximately $2.1$1.0 million.
Parking and Other Income
Parking and other income decreased by approximately $1.8 million of which approximately $1.1 million is from a tenant that terminated its lease early at a CBD property in Washington, DC.
Termination income for the six months ended June 30, 2017 related2019 compared to nineteen tenants across2018, which was primarily due to the Same Property Portfolio and totaledreclassification of approximately $19.0$3.7 million of which approximately $11.2 million and $5.1 million arecertain nonlease components resulting from tenants that terminated leases early at 767 Fifth Avenue (the General Motors Building) and 399 Park Avenue, respectively. Boththe adoption of these buildings are located in New York City. In addition, we received the fifth interim distribution from our unsecured credit claim against Lehman Brothers, Inc. of approximately $0.4 millionASU 2016-02, described above (See Note 64 to the Consolidated Financial Statements). Excluding this reclassification, parking and other income increased by approximately $1.9 million.
Real Estate Operating Expenses
Real estate operating expenses from the Same Property Portfolio increased by approximately $18.6$19.9 million, or 4.2%4.4%, for the six months ended June 30, 20182019 compared to 20172018 due primarily to increases in (1) real estate taxes utilities,of approximately $14.1 million, or 6.3%, (2) repairs and maintenance of approximately $3.8 million, or 5.3%, and (3) other real estate operating expenses of approximately $10.7$2.0 million, or 5.0%, $4.0 million, or 7.3%, and $3.9 million, or 2.3%, respectively.1.3%. The increase in real estate taxes wasand repairs and maintenance were primarily experienced in the New York CBD properties. The increase in utilities was primarily experienced in the Boston CBD properties.
Properties Placed In-Service Portfolio
The table below lists the properties placed in-service or partially placed in-service from January 1, 20172018 through June 30, 2018.2019. Rental revenue and real estate operating expenses increased by approximately $21.2$61.6 million and $10.6$22.8 million, respectively, for the six months ended June 30, 20182019 compared to 20172018, as detailed below.



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 Quarter Initially Placed In-Service Quarter Fully Placed In-Service   Rental Revenue Real Estate Operating Expenses Quarter Initially Placed In-Service Quarter Fully Placed In-Service   Rental Revenue Real Estate Operating Expenses
Name Square Feet 2018 2017 Change 2018 2017 Change Square Feet 2019 2018 Change 2019 2018 Change
   (dollars in thousands)   (dollars in thousands)
Office                            
Reservoir Place North Second Quarter, 2016 Second Quarter, 2017 73,258
 $—
 $—
 $—
 $247
 $122
 $125
888 Boylston Street Third Quarter, 2016 Third Quarter, 2017 417,320
 15,370
 5,888
 9,482
 4,430
 2,386
 2,044
191 Spring Street Fourth Quarter, 2017 N/A 171,000
 1,850
 —
 1,850
 852
 —
 852
 Fourth Quarter, 2017 Fourth Quarter, 2018 170,997
 $3,761
 $1,850
 $1,911
 $975
 $852
 $123
Salesforce Tower Fourth Quarter, 2017 N/A 1,400,000
 9,227
 —
 9,227
 5,586
 —
 5,586
 Fourth Quarter, 2017 Fourth Quarter, 2018 1,420,682
 61,000
 9,227
 51,773
 25,770
 5,586
 20,184
Total Office 2,061,578
 26,447
 5,888
 20,559
 11,115
 2,508
 8,607
 1,591,679
 64,761
 11,077
 53,684
 26,745
 6,438
 20,307
                            
Residential                            
Signature at Reston First Quarter, 2018 Second Quarter, 2018 517,847
 567
 —
 567
 1,837
 —
 1,837
 First Quarter, 2018 Second Quarter, 2018 517,783
 5,023
 567
 4,456
 3,120
 1,837
 1,283
Proto Kendall Square Second Quarter, 2018 N/A 166,500
 43
 —
 43
 194
 —
 194
 Second Quarter, 2018 Third Quarter, 2018 166,717
 3,521
 43
 3,478
 1,422
 194
 1,228
Total Residential 684,347
 610
 —
 610
 2,031
 —
 2,031
 684,500
 8,544
 610
 7,934
 4,542
 2,031
 2,511
 2,745,925
 $27,057
 $5,888
 $21,169
 $13,146
 $2,508
 $10,638
 2,276,179
 $73,305
 $11,687
 $61,618
 $31,287
 $8,469
 $22,818
Properties Acquiredin Development or Redevelopment Portfolio
The table below lists the properties acquiredthat were in development or redevelopment between January 1, 20172018 and June 30, 2018.2019. Rental revenue decreased by approximately $3.6 million and real estate operating expenses increased by approximately $1.1$0.3 million and $0.5 million, respectively for the six months ended June 30, 20182019 compared to 2017,2018, as detailed below.
      Rental Revenue Real Estate Operating Expenses
Name Date acquired Square Feet 2018 2017 Change 2018 2017 Change
      (dollars in thousands)
103 Carnegie Center May 15, 2017 96,332
 $1,478
 $363
 $1,115
 $631
 $175
 $456
Properties in Development or Redevelopment Portfolio
The table below lists the properties we placed in development or redevelopment between January 1, 2017 and June 30, 2018. Rental revenue increased by approximately $0.5 million and real estate operating expenses decreased by approximately $7.3 million, for the six months ended June 30, 2018 compared to 2017, as detailed below.
   Rental Revenue Real Estate Operating Expenses   Rental Revenue Real Estate Operating Expenses
Name Date commenced development / redevelopment Square Feet 2018 2017 Change 2018 2017 Change Date commenced development / redevelopment Square Feet 2019 2018 Change 2019 2018 Change
   (dollars in thousands)   (dollars in thousands)
One Five Nine East 53rd Street (1) August 19, 2016 220,000
 $1,715
 $434
 $1,281
 $782
 $4,358
 $(3,576) August 19, 2016 220,000
 $1,862
 $1,715
 $147
 $954
 $782
 $172
191 Spring Street (2) December 29, 2016 160,000
 —
 —
 —
 —
 2,588
 (2,588)
145 Broadway (3) April 6, 2017 79,616
 —
 742
 (742) —
 1,162
 (1,162)
325 Main Street (1) May 9, 2019 115,000
 (753) 3,031
 (3,784) 1,040
 903
 137
 459,616
 $1,715
 $1,176
 $539
 $782
 $8,108
 $(7,326) 335,000
 $1,109
 $4,746
 $(3,637) $1,994
 $1,685
 $309
___________
(1)
This is the low-rise portion of 601 Lexington Avenue in New York City. Rental revenue includes termination income of approximately $5,000 and $(1.5) millionfor the six months ended June 30, 20182019 includes the acceleration and 2017, respectively. In addition, real

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estate operating expenses include demolition costs of approximately $3.6 million for the six months ended June 30, 2017.
(2)write-off of straight-line rent associated with the early termination of a lease at that building. Real estate operating expenses for the six months ended June 30, 2017 include2019 includes approximately $2.6$0.4 million of demolition costs.
(3)On April 6, 2017, we commenced the development of 145 Broadway, a build-to-suit Class A office project with approximately 485,000 net rentable square feet located in Cambridge, Massachusetts. Real estate operating expenses for the six months ended June 30, 2017 include approximately $0.8 million of demolition costs.


Table of Content

Properties Sold Portfolio
The table below lists the properties we sold between January 1, 20172018 and June 30, 2018.2019. Rental revenue and real estate operating expenses decreased by approximately $7.0$13.2 million and $2.9$5.9 million, respectively, for the six months ended June 30, 20182019 compared to 2017,2018, as detailed below.
   Rental Revenue Real Estate Operating Expenses   Rental Revenue Real Estate Operating Expenses
Name Date Sold Property Type Square Feet 2018 2017 Change 2018 2017 Change Date Sold Property Type Square Feet 2019 2018 Change 2019 2018 Change
   (dollars in thousands)   (dollars in thousands)
30 Shattuck Road April 19, 2017 Land N/A
 $—
 $—
 $—
 $—
 $14
 $(14)
40 Shattuck Road June 13, 2017 Office 122,000
 —
 846
 (846) —
 599
 (599)
Reston Eastgate August 30, 2017 Land N/A
 —
 —
 —
 —
 57
 (57)
500 E Street, S.W. January 9, 2018 Office 262,000
 270
 6,032
 (5,762) 129
 2,244
 (2,115) January 9, 2018 Office 262,000
 $—
 $270
 $(270) $—
 $129
 $(129)
91 Hartwell Avenue May 24, 2018 Office 119,000
 1,224
 1,571
 (347) 654
 807
 (153) May 24, 2018 Office 119,000
 —
 1,224
 (1,224) —
 654
 (654)
Quorum Office Park September 27, 2018 Office 268,000
 —
 2,273
 (2,273) —
 1,226
 (1,226)
1333 New Hampshire Avenue (1) November 30, 2018 Office 315,000
 —
 7,941
 (7,941) —
 2,890
 (2,890)
Tower Oaks December 20, 2018 Land N/A
 —
 170
 (170) —
 108
 (108)
2600 Tower Oaks Boulevard January 24, 2019 Office 179,000
 159
 1,359
 (1,200) 189
 973
 (784)
One Tower Center June 3, 2019 Office 410,000
 2,100
 2,237
 (137) 2,080
 2,169
 (89)
164 Lexington Road June 28, 2019 Office 64,000
 —
 —
 —
 82
 96
 (14)
 503,000
 $1,494

$8,449

$(6,955) $783
 $3,721
 $(2,938) 1,617,000
 $2,259

$15,474

$(13,215) $2,351
 $8,245
 $(5,894)

___________
(1)Rental revenue includes approximately $1.1 million of termination income for the six months ended June 30, 2018.
Residential Net Operating Income
Net operating income for our residential same properties increaseddecreased by approximately $0.2$0.4 million for the six months ended June 30, 20182019 compared to 2017.2018.
The following reflects our occupancy and rate information for The Lofts at Atlantic Wharf and The Avant at Reston Town Center for the six months ended June 30, 20182019 and 2017.2018.


 The Lofts at Atlantic Wharf The Avant at Reston Town Center The Lofts at Atlantic Wharf The Avant at Reston Town Center
 2018 2017 Percentage
Change		 2018 2017 Percentage
Change		 2019 2018 Percentage
Change		 2019 2018 Percentage
Change
Average Monthly Rental Rate (1) $4,177
 $4,224
 (1.1)% $2,384
 $2,378
 0.3% $4,457
 $4,177
 6.7% $2,379
 $2,384
 (0.2)%
Average Rental Rate Per Occupied Square Foot $4.65
 $4.69
 (0.9)% $2.63
 $2.61
 0.8% $4.89
 $4.65
 5.2% $2.60
 $2.63
 (1.1)%
Average Physical Occupancy (2) 92.3% 94.6% (2.4)% 95.5% 92.9% 2.8% 94.8% 92.3% 2.7% 92.3% 95.5% (3.4)%
Average Economic Occupancy (3) 91.5% 95.3% (4.0)% 94.3% 92.2% 2.3% 95.2% 91.5% 4.0% 91.5% 94.3% (3.0)%
___________  
(1)
Average Monthly Rental Rates are calculated by the Company as the average of the quotients obtained by dividing (A) rental revenue as determined in accordance with GAAP by (B) the number of occupied units for each month within the applicable fiscal period.
(2)Average Physical Occupancy is defined as (1) the average number of occupied units divided by (2) the total number of units, expressed as a percentage.
(3)Average Economic Occupancy is defined as (1) total possible revenue less vacancy loss divided by (2) total possible revenue, expressed as a percentage. Total possible revenue is determined by valuing average occupied units at contract rates and average vacant units at Market Rents. Vacancy loss is determined by valuing vacant units at current Market Rents. By measuring vacant units at their Market Rents, Average Economic Occupancy takes into account the fact that units of different sizes and locations within a residential property have different economic impacts on a residential property'sproperty’s total possible gross revenue. Market Rents used by us in calculating Economic Occupancy are based on the current market rates set by the managers of our residential properties based on their experience in renting their residential property’s units and publicly available market data. Trends in market rents for a region as reported by others could vary. Market Rents for a period are based on the average Market Rents during that period and do not reflect any impact for cash concessions.

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could vary. Market Rents for a period are based on the average Market Rents during that period and do not reflect any impact for cash concessions.
Hotel Net Operating Income
Net operating income for the Boston Marriott Cambridge hotel property increaseddecreased by approximately $1.6$0.1 million for the six months ended June 30, 20182019 compared to 2017. The hotel underwent a renovation project on all of its rooms, which was completed during the year ended December 31, 2017. We expect our hotel to contribute between $13 million and $15 million to net operating income for 2018.
The following reflects our occupancy and rate information for the Boston Marriott Cambridge hotel for the six months ended June 30, 20182019 and 2017.2018.
 
 2018 2017 
Percentage
Change
 2019 2018 
Percentage
Change
Occupancy 85.7% 76.3% 12.3% 84.7% 85.7% (1.2)%
Average daily rate $271.36
 $268.01
 1.2% $272.65
 $271.36
 0.5 %
Revenue per available room, REVPAR $232.57
 $204.37
 13.8% $230.97
 $232.57
 (0.7)%
Other Operating Income and Expense Items
Development and Management Services
Development and management services revenue increased by an aggregate of approximately $3.9$1.6 million for the six months ended June 30, 20182019 compared to 2017.2018. Development revenue and management services revenue increased by approximately $2.8$4.6 million and $1.1 million, respectively.while management services revenue decreased by approximately $3.0 million. The increase in development revenue is primarily related to increasesan increase in (1)development fees earned from our Washington, DC region and an increase in fees associated with tenant improvement projects in our San FranciscoregionBoston region.
On January 1, 2019, we adopted ASU 2016-02. As a result of the adoption, there were certain nonlease components (service income from tenants) that were reclassified on a prospective basis from this line item of our Consolidated Statements of Operations to Lease revenue. For the six months ended June 30, 2018, management service revenue included $5.2 million of service income from tenants. Excluding this reclassification, management services revenue would have increased by approximately $2.2 million due primarily to property and (2) developmentasset management fees we earned from our Boston and Washington, DCSanta Monica Business Park unconsolidated joint ventures that are developing The Hubventure, which we acquired on Causeway in Boston, Massachusetts and 7750 Wisconsin Avenue in Bethesda, Maryland, respectively. Management services revenue increased primarily due to an increase in leasing commissions from our Boston and Washington, DC unconsolidated joint ventures. We expect our development and management services revenue to be between $37 million and $42 million forJuly 19, 2018.
General and Administrative Expense
General and administrative expense increased by approximately $5.8$12.5 million for the six months ended June 30, 20182019 compared to 20172018 primarily due to compensation expense and other general and administrative expenses increasing by approximately $5.3$11.3 million and $0.5$1.2 million, respectively. The increase in compensation expense was primarily related to (1) an approximately $4.7 million increase related to a decrease in the expense associated with MYLTIP Awards,capitalized wages, which includes the accelerationeffect of amortization that occurred for employees that reached a certain ageno longer being able to capitalize internal and number of years of serviceexternal legal costs and therefore became vested in these awards sooner andinternal leasing wages, (2) an increase in other compensation related expenses. These increases were partially offset by an approximately $1.4$3.7 million decreaseincrease in the value of our deferred compensation plan and (3) an approximately $2.9 million increase in capitalized wages of approximately $0.4 million.related to other compensation expenses. The increasedecrease in capitalized wages is shown as a decrease inan increase to general and administrative expense as some of these costs are capitalized and included in real estate assets or deferred charges on our Consolidated Balance Sheets (see below). We expect ourThe increase in other general and administrative expenses was primarily related to be between $118 millionan increase in professional fees and $121 million for 2018.taxes.
Wages directly related to the development and leasing of rental properties are capitalized and included in real estate assets or deferred charges on our Consolidated Balance Sheets and they are amortized over the useful lives of the applicable asset or lease term. On January 1, 2019, we adopted ASU 2016-02 and therefore, as a lessor, we can only capitalize incremental direct leasing costs. As a result, we are no longer able to capitalize internal and external legal costs and internal leasing wages; instead, we are required to expense these and other non-incremental costs as incurred (See Note 4 to the Consolidated Financial Statements).
Capitalized wages for the six months ended June 30, 20182019 and 20172018 were approximately $9.3$5.5 million and $8.9$9.3 million, respectively. These costs are not included in the general and administrative expenses discussed above.
Transaction Costs
Transaction costs increased by approximately $0.2$0.4 million for the six months ended June 30, 20182019 compared to 2017. This2018. The increase was primarily related to the disposition of assets and costs related to the potential formation of thenew and pending joint ventures that we entered into for 3 Hudson Boulevard in New York City and Santa Monica Business Park in Santa Monica, California (See Note 12 to the Consolidated Financial Statements).ventures. In general, transaction costs relating to the formation of new and pending joint ventures and the pursuit of other transactions are expensed as incurred.

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Depreciation and Amortization
Depreciation expense may differ between BXP and BPLP as a result of previously applied acquisition accounting by BXP for the issuance of common stock in connection with non-sponsor OP Unit redemptions by BPLP.  This accounting resulted in a step-up of the real estate assets at BXP that was allocated to certain properties.  The difference between the real estate assets of BXP as compared to BPLP for certain properties having an allocation of the real estate step-up will result in a corresponding difference in depreciation expense. For additional information, see the Explanatory Note that follows the cover page of this Form 10-Q.
Boston Properties, Inc.
Depreciation and amortization expense increased by approximately $11.1$19.8 million for the six months ended June 30, 20182019 compared to 2017,2018, as detailed below.
 Depreciation and Amortization Expense for the six months ended June 30, Depreciation and Amortization Expense for the six months ended June 30,
2018 2017 Change2019 2018 Change
 (in thousands) (in thousands)
Same Property Portfolio $312,193
 $305,801
 $6,392
 $308,333
 $312,760
 $(4,427)
Properties Placed in-Service Portfolio 8,838
 1,103
 7,735
 21,633
 4,609
 17,024
Properties Acquired Portfolio 841
 —
 841
Properties in Development or Redevelopment Portfolio —
 2,924
 (2,924)
Properties in Development or Redevelopment Portfolio (1) 10,963
 473
 10,490
Properties Sold Portfolio 342
 1,296
 (954) 1,076
 4,372
 (3,296)
 $322,214
 $311,124
 $11,090
 $342,005
 $322,214
 $19,791

___________  
(1)
On May 9, 2019, we commenced development of 325 Main Street in Cambridge, Massachusetts (See Note 3 to the Consolidated Financial Statements). As a result, during the six months ended June 30, 2019, we recorded approximately $9.9 million of accelerated depreciation expense for the demolition of the building, of which approximately $0.4 million related to the step-up of real estate assets.
Boston Properties Limited Partnership
Depreciation and amortization expense increased by approximately $11.4$19.6 million for the six months ended June 30, 20182019 compared to 2017,2018, as detailed below.
 Depreciation and Amortization Expense for the six months ended June 30, Depreciation and Amortization Expense for the six months ended June 30,
2018 2017 Change2019 2018 Change
 (in thousands) (in thousands)
Same Property Portfolio $308,306
 $301,569
 $6,737
 $304,588
 $308,873
 $(4,285)
Properties Placed in-Service Portfolio 8,838
 1,103
 7,735
 21,633
 4,609
 17,024
Properties Acquired Portfolio 841
 —
 841
Properties in Development or Redevelopment Portfolio —
 2,924
 (2,924)
Properties in Development or Redevelopment Portfolio (1) 10,584
 473
 10,111
Properties Sold Portfolio 342
 1,296
 (954) 1,076
 4,372
 (3,296)
 $318,327
 $306,892
 $11,435
 $337,881
 $318,327
 $19,554

___________  
(1)
On May 9, 2019, we commenced development of 325 Main Street in Cambridge, Massachusetts (See Note 3 to the Consolidated Financial Statements). As a result, during the six months ended June 30, 2019, we recorded approximately $9.5 million of accelerated depreciation expense for the demolition of the building.

Direct Reimbursements of Payroll and Related Costs From Management Services Contracts and Payroll and Related Costs From Management Service Contracts
ASU 2014-092016-08 “Revenue from Contracts with Customers (Topic 606)”: Principal versus Agent Considerations” updated the principal versus agent considerations and as a result we determined that amounts reimbursed for payroll and related costs received from third parties in connection with management services contracts should be reflected on a gross basis instead of on a net basis, as we have determined that we are the principal under these arrangements (See Note 2 to the Consolidated Financial Statements).arrangements. It is anticipated that these two financial statement line items will offset each other.

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Hotel Net Operating Income
Net operating income for the Boston Marriott Cambridge hotel property decreased by approximately $0.1 million for the six months ended June 30, 2019 compared to 2018.
The following reflects our occupancy and rate information for the Boston Marriott Cambridge hotel for the six months ended June 30, 2019 and 2018.
  2019 2018 
Percentage
Change
Occupancy 84.7% 85.7% (1.2)%
Average daily rate $272.65
 $271.36
 0.5 %
Revenue per available room, REVPAR $230.97
 $232.57
 (0.7)%
Other Operating Income and Expense Items
Income from Unconsolidated Joint VenturesDevelopment and Management Services
Income from unconsolidated joint venturesDevelopment and management services revenue increased by an aggregate of approximately $1.6 million for the six months ended June 30, 2019 compared to 2018. Development revenue increased by approximately $4.6 million while management services revenue decreased by approximately $5.0 million for$3.0 million. The increase in development revenue is primarily related to an increase in development fees earned from our Washington, DC region and an increase in fees associated with tenant improvement projects in our Boston region.
On January 1, 2019, we adopted ASU 2016-02. As a result of the adoption, there were certain nonlease components (service income from tenants) that were reclassified on a prospective basis from this line item of our Consolidated Statements of Operations to Lease revenue. For the six months ended June 30, 2018, compared to 2017management service revenue included $5.2 million of service income from tenants. Excluding this reclassification, management services revenue would have increased by approximately $2.2 million due primarily to a decrease in our share of net incomeproperty and asset management fees we earned from our Colorado Center joint venture. On July 28, 2017, theSanta Monica Business Park unconsolidated joint venture, that owns Colorado Center obtained a $550.0 million mortgage loan, with an effective GAAP interest rate of 3.58% per annum, which resulted in interest expense, thus reducing the net income for the joint venture. We own a 50% interest in Colorado Center. we acquired on July 19, 2018.
InterestGeneral and Other IncomeAdministrative Expense
Interest and other income increased by approximately $2.1 million for the six months ended June 30, 2018 compared to 2017 due primarily to an increase in interest rates.
Gains from Investments in Securities
Gains from investments in securities for the six months ended June 30, 2018 and 2017 related to investments that we have made to reduce our market risk relating to a deferred compensation plan that we maintain for BXP’s officers. Under this deferred compensation plan, each officer who is eligible to participate is permitted to defer a portion of the officer’s current income on a pre-tax basis and receive a tax-deferred return on these deferrals based on the performance of specific investments selected by the officer. In order to reduce our market risk relating to this plan, we typically acquire, in a separate account that is not restricted as to its use, similar or identical investments as those selected by each officer. This enables us to generally match our liabilities to BXP’s officers under the deferred compensation plan with equivalent assets and thereby limit our market risk. The performance of these investments is recorded as gains from investments in securities. During the six months ended June 30, 2018 and 2017, we recognized gains of approximately $0.4 million and $1.8 million, respectively, on these investments. By comparison, our generalGeneral and administrative expense increased by approximately $0.4$12.5 million and $1.8 million duringfor the six months ended June 30, 2019 compared to 2018 primarily due to compensation expense and 2017, respectively, as a result of another general and administrative expenses increasing by approximately $11.3 million and $1.2 million, respectively. The increase in our liability undercompensation expense was related to (1) an approximately $4.7 million increase related to a decrease in capitalized wages, which includes the effect of no longer being able to capitalize internal and external legal costs and internal leasing wages, (2) an approximately $3.7 million increase in the value of our deferred compensation plan that were associated with the performance of the specific investments selected by our officers participating in the plan.
Gains from Early Extinguishments of Debt
On June 7, 2017, our consolidated entity in which we have a 60% ownership interest and that owns 767 Fifth Avenue (the General Motors Building) located in New York City completed the refinancing of(3) an approximately $1.6 billion of indebtedness that had been secured by direct and indirect interests in 767 Fifth Avenue. The new mortgage financing has a principal amount of $2.3 billion, bears interest at a fixed interest rate of 3.43% per annum and matures on June 9, 2027. The loan requires interest-only payments during the 10-year term of the loan, with the entire principal amount due at maturity. The extinguished debt bore interest at a weighted-average rate of approximately 5.96% per annum, an effective GAAP interest rate of approximately 3.03% per annum and was scheduled to mature on October 7, 2017. There was no prepayment penalty associated with the repayment of the prior indebtedness. We recognized a net gain from early extinguishment of debt totaling approximately $14.6$2.9 million primarily consisting of the acceleration of the remaining balanceincrease related to the historical fair value debt adjustment.
On April 24, 2017, BPLP entered into the 2017 Credit Facility (See Note 5other compensation expenses. The decrease in capitalized wages is shown as an increase to thegeneral and administrative expense as some of these costs are capitalized and included in real estate assets on our Consolidated Financial Statements)Balance Sheets (see below). Certain lenders, under the prior credit facility, chose to not participateThe increase in the 2017 Credit Facilityother general and as such we recognized a loss on early extinguishment of debt of approximately $0.3 millionadministrative expenses was primarily related to the acceleration of financean increase in professional fees associated with the prior credit agreement.and taxes.


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Interest Expense
Interest expense decreased by approximately $8.3 million for the six months ended June 30, 2018 compared to 2017 as detailed below.
Component Change in interest
expense for the six months ended
June 30, 2018 compared to June 30, 2017
  (in thousands)
Increases to interest expense due to:  
Refinancing of the debt collateralized by 767 Fifth Avenue (the General Motors Building) $15,448
Issuance of $850 million in aggregate principal of 3.200% senior notes due 2025 on December 4, 2017 13,730
Utilization of the 2017 Credit Facility 2,491
Amortization of deferred financing fees for BPLP’s unsecured debt and credit facility 400
Other interest expense (excluding senior notes) 181
Total increases to interest expense 32,250
Decreases to interest expense due to:  
Decrease in the interest for the Outside Members’ Notes Payable for the 767 Fifth Avenue (the General Motors Building) (1) (16,256)
Redemption of $850 million in aggregate principal of 3.700% senior notes due 2018 on December 17, 2017 (15,876)
Increase in capitalized interest (2) (8,371)
Total decreases to interest expense (40,503)
Total change in interest expense $(8,253)
___________  
(1)The related interest expense from the Outside Members’ Notes Payable totaled approximately $16.3 million for the six months ended June 30, 2017. This amount was allocated to the outside joint venture partners as an adjustment to Noncontrolling Interests in Property Partnerships in our Consolidated Statements of Operations. On June 7, 2017, a portion of the outside members’ notes payable was repaid and the remaining portion was contributed as equity in the consolidated entity.
(2)
The increase was primarily due to the commencement and continuation of several development projects. For a list of development projects refer to “Liquidity and Capital Resources” within “Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Interest expenseWages directly related to the development of rental properties isare capitalized and included in real estate assets on our Consolidated Balance Sheets and they are amortized over the useful lives of the real estateapplicable asset or lease term. On January 1, 2019, we adopted ASU 2016-02 and therefore, as a lessor, we can only capitalize incremental direct leasing costs. As portions of propertiesa result, we are placed in-service,no longer able to capitalize internal and external legal costs and internal leasing wages; instead, we cease capitalizing interest on that portionare required to expense these and interest is then expensed. Interest capitalizedother non-incremental costs as incurred (See Note 4 to the Consolidated Financial Statements).
Capitalized wages for the six months ended June 30, 2019 and 2018 and 2017 waswere approximately $35.0$5.5 million and $26.6$9.3 million, respectively. These costs are not included in the interest expense referencedgeneral and administrative expenses discussed above.
We estimate net interest expense, which includes debt extinguishmentTransaction Costs
Transaction costs will be between $363 million to $375increased by approximately $0.4 million for 2018. These amounts are net of approximately $60 million to $70 million of estimated capitalized interest. In addition, if we refinance, prepay or repurchase existing indebtedness prior to its maturity, we may incur prepayment penalties, realize the acceleration of amortized costs, and our actual interest expense may differ materially from the estimates above.
Atsix months ended June 30, 2018, our outstanding variable rate debt consisted of BPLP’s $500.0 million Delayed Draw Facility. BPLP's $1.5 billion Revolving Facility is also variable rate debt, however no amounts were outstanding at June 30,2019 compared to 2018. For a summary of our consolidated debt as of June 30, 2018 and June 30, 2017 referThe increase was primarily related to the heading “Liquiditydisposition of assets and Capital Resources—Capitalization—Debt Financing” within “Item 2—Management’s Discussioncosts related to the potential formation of new and Analysispending joint ventures. In general, transaction costs relating to the formation of Financial Conditionnew and Resultspending joint ventures and the pursuit of Operations.”

other transactions are expensed as incurred.
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Gains on Sales of Real EstateDepreciation and Amortization
The gains on sales of real estateDepreciation expense may differ between BXP and BPLP as a result of previously applied acquisition accounting by BXP for the issuance of common stock in connection with non-sponsor OP Unit redemptions by BPLP.  This accounting resulted in a step-up of the real estate assets at BXP that was allocated to certain properties.  The difference between the real estate assets of BXP as compared to BPLP for certain properties having an allocation of the real estate step-up will result in a corresponding difference in the gains on sales of real estate when those properties are sold.depreciation expense. For additional information, see the Explanatory Note that follows the cover page of this Form 10-Q.
Boston Properties, Inc.
Gains on sales of real estateDepreciation and amortization expense increased by approximately $110.8$19.8 million for the six months ended June 30, 20182019 compared to 2017, respectively,2018, as detailed below.
Name Date Sold Property Type Square Feet Sale Price Cash Proceeds Gain on Sale of Real Estate 
        (dollars in millions) 
2018             
500 E Street January 8, 2018 Office 262,000 $118.6
 $116.1
 $96.4
 
91 Hartwell Avenue May 24, 2018 Office 119,000 22.2
 21.7
 15.5
 
        $140.8
 $137.8
 $111.9
(1)
2017             
30 Shattuck Road April 19, 2017 Land N/A $5.0
 $5.0
 $3.7
 
40 Shattuck Road June 13, 2017 Office 122,000 12.0
 11.9
 —
(2)
        $17.0
 $16.9
 $3.7
(3)
___________  
(1)Excludes approximately $2.8 million of gains on sales of real estate recognized during the six months ended June 30, 2018 related to gain amounts from sales of real estate occurring in prior years.
(2)The gain on sale of real estate for this property was $28,000.
(3)Excludes approximately $0.1 million of gains on sales of real estate recognized during the six months ended June 30, 2017 related to a previously deferred gain amount from the 2015 sale of the Residences on The Avenue residential property located in Washington, DC.
Boston Properties Limited Partnership
Gains on sales of real estate increased by approximately $113.2 million for the six months ended June 30, 2018 compared to 2017, respectively, as detailed below.
Name Date Sold Property Type Square Feet Sale Price Cash Proceeds Gain on Sale of Real Estate 
        (dollars in millions) 
2018             
500 E Street January 8, 2018 Office 262,000 $118.6
 $116.1
 $98.9
 
91 Hartwell Avenue May 24, 2018 Office 119,000 22.2
 21.7
 15.9
 
        $140.8
 $137.8
 $114.8
(1)
2017             
30 Shattuck Road April 19, 2017 Land N/A $5.0
 $5.0
 $3.7
 
40 Shattuck Road June 13, 2017 Office 122,000 12.0
 11.9
 0.6
 
        $17.0
 $16.9
 $4.3
(2)
  Depreciation and Amortization Expense for the six months ended June 30,
2019 2018 Change
  (in thousands)
Same Property Portfolio $308,333
 $312,760
 $(4,427)
Properties Placed in-Service Portfolio 21,633
 4,609
 17,024
Properties in Development or Redevelopment Portfolio (1) 10,963
 473
 10,490
Properties Sold Portfolio 1,076
 4,372
 (3,296)
  $342,005
 $322,214
 $19,791
___________  
(1)Excludes approximately $2.8 million
On May 9, 2019, we commenced development of gains on sales of real estate recognized325 Main Street in Cambridge, Massachusetts (See Note 3 to the Consolidated Financial Statements). As a result, during the six months ended June 30, 20182019, we recorded approximately $9.9 million of accelerated depreciation expense for the demolition of the building, of which approximately $0.4 million related to gain amounts from salesthe step-up of real estate occurring in prior years.assets.
(2)Excludes approximately $0.1 million of gains on sales of real estate recognized during the six months ended June 30, 2017 related to a previously deferred gain amount from the 2015 sale of the Residences on The Avenue residential property located in Washington, DC.

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Noncontrolling interests in property partnerships
Noncontrolling interests in property partnerships increased by approximately $12.0 million for the six months ended June 30, 2018 compared to 2017 as detailed below.
Property Noncontrolling Interests in Property Partnerships for the six months ended June 30,
2018 2017 Change
  (in thousands)
Salesforce Tower $(306) $(195) $(111)
767 Fifth Avenue (the General Motors Building) (1) 446
 (2,958) 3,404
Times Square Tower 13,626
 13,261
 365
601 Lexington Avenue (2) 10,187
 3,532
 6,655
100 Federal Street (3) 3,025
 1,308
 1,717
Atlantic Wharf Office 4,656
 4,679
 (23)
  $31,634
 $19,627
 $12,007
___________
(1)On June 7, 2017, our consolidated entity in which we have a 60% interest completed the refinancing of indebtedness that had been secured by direct and indirect interests in 767 Fifth Avenue. The net loss allocation was primarily due to the partners' share of the interest expense for the outside members' notes payable, which was approximately $16.3 million for the six months ended June 30, 2017. However, during the six months ended June 30, 2017, we recognized a net gain from early extinguishment of debt totaling approximately $14.6 million primarily consisting of the acceleration of the remaining balance related to the historical fair value debt adjustment and as a result, this contributed to the property having a reduced net loss allocation. In addition, during the six months ended June 30, 2017, we accelerated depreciation and amortization related to capital improvements being performed at the building and had approximately $11.2 million of termination income. Neither of these items reoccurred during the six months ended June 30, 2018.
(2)On August 19, 2016, the consolidated entity in which we have a 55% interest and that owns this property commenced the redevelopment of the six-story low-rise office and retail building component of the complex. The redeveloped portion of the low-rise building will contain approximately 195,000 net rentable square feet of Class A office space and approximately 25,000 net rentable square feet of retail space. We will capitalize incremental costs during the redevelopment. In addition, real estate operating expenses for the six months ended June 30, 2017 includes approximately $3.6 million of demolition costs, which did not reoccur during the six months ended June 30, 2018.
(3)The six months ended June 30, 2018 included an approximately $1.4 million increase in rental revenue from our tenants partially offset by the acceleration of depreciation and amortization expense during the six months ended June 30, 2017, which did not reoccur during the six months ended June 30, 2018.
Noncontrolling interest - Common Units of the Operating Partnership
For BXP, noncontrolling interest–common units of the Operating Partnership increased by approximately $8.4 million for the six months ended June 30, 2018 compared to 2017 due primarily to an increase in allocable income, which was the result of recognizing greater gains on sales of real estate amount during 2018, partially offset by a decrease in the noncontrolling interest’s ownership percentage. Due to our UPREIT ownership structure, there is no corresponding line item on BPLP’s financial statements.
Results of Operations for the Three Months Ended June 30, 2018 and 2017
Net income attributable to Boston Properties, Inc. common shareholders and net income attributable to Boston Properties Limited Partnership common unitholders decreased approximately $5.0 million and $5.9 million for the three months ended June 30, 2018 compared to 2017, respectively, as detailed in the following tables and for the reasons discussed below under the heading “Comparison of the three months ended June 30, 2018 to the three months ended June 30, 2017” within “Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Below are reconciliations of net income attributable to Boston Properties, Inc. common shareholders to NOI and net income attributable to Boston Properties Limited Partnership common unitholders to NOI for the three months ended June 30, 2018 and 2017. For a detailed discussion of NOI, including the reasons management believes NOI is useful to investors, see page 50.


Boston Properties, Inc.
  Three months ended June 30,
  2018 2017 Increase/
(Decrease)		 %
Change
  (in thousands)
Net Income Attributable to Boston Properties, Inc. Common Shareholders $128,681
 $133,709
 $(5,028) (3.76)%
Preferred dividends 2,625
 2,625
 —
 — %
Net Income Attributable to Boston Properties, Inc. 131,306
 136,334
 (5,028) (3.69)%
Net Income Attributable to Noncontrolling Interests:        
Noncontrolling interest—common units of Boston Properties Limited Partnership 14,859
 15,473
 (614) (3.97)%
Noncontrolling interests in property partnerships 14,400
 15,203
 (803) (5.28)%
Net Income 160,565
 167,010
 (6,445) (3.86)%
Gains on sales of real estate 18,292
 3,767
 14,525
 385.59 %
Income Before Gains on Sales of Real Estate 142,273
 163,243
 (20,970) (12.85)%
Other Expenses:        
Add:        
Interest expense 92,204
 95,143
 (2,939) (3.09)%
Other Income:        
Less:        
Gains from early extinguishments of debt —
 14,354
 (14,354) (100.00)%
Gains from investments in securities 505
 730
 (225) (30.82)%
Interest and other income 2,579
 1,504
 1,075
 71.48 %
Income from unconsolidated joint ventures 769
 3,108
 (2,339) (75.26)%
Operating Income 230,624
 238,690
 (8,066) (3.38)%
Other Expenses:        
Add:        
Depreciation and amortization expense 156,417
 151,919
 4,498
 2.96 %
Transaction costs 474
 299
 175
 58.53 %
Payroll and related costs from management services contracts 1,970
 —
 1,970
 100.00 %
General and administrative expense 28,468
 27,141
 1,327
 4.89 %
Other Revenue:        
Less:        
Direct reimbursements of payroll and related costs from management services contracts 1,970
 —
 1,970
 100.00 %
Development and management services revenue 9,305
 7,365
 1,940
 26.34 %
Net Operating Income $406,678
 $410,684
 $(4,006) (0.98)%




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Boston Properties Limited Partnership
  Three months ended June 30,
  2018 2017 Increase/
(Decrease)		 %
Change
  (in thousands)
Net Income Attributable to Boston Properties Limited Partnership Common Unitholders $145,961
 $151,844
 $(5,883) (3.87)%
Preferred distributions 2,625
 2,625
 —
 — %
Net Income Attributable to Boston Properties Limited Partnership 148,586
 154,469
 (5,883) (3.81)%
Net Income Attributable to Noncontrolling Interests:        
Noncontrolling interests in property partnerships 14,400
 15,203
 (803) (5.28)%
Net Income 162,986
 169,672
 (6,686) (3.94)%
Gains on sales of real estate 18,770
 4,344
 14,426
 332.09 %
Income Before Gains on Sales of Real Estate 144,216
 165,328
 (21,112) (12.77)%
Other Expenses:        
Add:        
Interest expense 92,204
 95,143
 (2,939) (3.09)%
Other Income:        
Less:        
Gains from early extinguishments of debt —
 14,354
 (14,354) (100.00)%
Gains from investments in securities 505
 730
 (225) (30.82)%
Interest and other income 2,579
 1,504
 1,075
 71.48 %
Income from unconsolidated joint ventures 769
 3,108
 (2,339) (75.26)%
Operating Income 232,567
 240,775
 (8,208) (3.41)%
Other Expenses:        
Add:        
Depreciation and amortization expense 154,474
 149,834
 4,640
 3.10 %
Transaction costs 474
 299
 175
 58.53 %
Payroll and related costs from management services contracts 1,970
 —
 1,970
 100.00 %
General and administrative expense 28,468
 27,141
 1,327
 4.89 %
Other Revenue:        
Less:        
Direct reimbursements of payroll and related costs from management services contracts 1,970
 —
 1,970
 100.00 %
Development and management services revenue 9,305
 7,365
 1,940
 26.34 %
Net Operating Income $406,678
 $410,684
 $(4,006) (0.98)%
Comparison ofDepreciation and amortization expense increased by approximately $19.6 million for the threesix months ended June 30, 2019 compared to 2018, to the three months ended June 30, 2017.
The table below shows selected operating information for the Same Property Portfolio and the Total Property Portfolio. The Same Property Portfolio consists of 146 properties totaling approximately 39.2 million net rentable square feet of space, excluding unconsolidated joint ventures. The Same Property Portfolio includes properties acquired or fully placed in-service on or prior to April 1, 2017 and owned and in-service through June 30, 2018. The Total Property Portfolio includes the effects of the other properties either placed in-service, acquired or in development or redevelopment after April 1, 2017 or disposed of on or prior to June 30, 2018. This table includes a reconciliation from the Same Property Portfolio to the Total Property Portfolio by also providing information for the three months ended June 30, 2018 and 2017 with respect to the properties that were placed in-service, acquired, in development or redevelopment or sold.

as detailed below.
 Same Property Portfolio 
Properties
Placed In-Service
Portfolio
 Properties Acquired Portfolio Properties in
Development or
Redevelopment
Portfolio		 Properties Sold Portfolio Total Property Portfolio
(dollars in thousands)2018 2017 Increase/(Decrease) 
%
Change
 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 Increase/(Decrease) %
Change
Rental Revenue:                               
Rental Revenue$615,893
 $609,844
 $6,049
 0.99 % $15,090
 $3,053
 $789
 $363
 $852
 $900
 $461
 $4,196
 $633,085
 $618,356
 $14,729
 2.38 %
Termination Income718
 13,599
 (12,881) (94.72)% —
 —
 —
 —
 —
 —
 —
 2
 718
 13,601
 (12,883) (94.72)%
Total Rental Revenue616,611
 623,443
 (6,832) (1.10)% 15,090
 3,053
 789
 363
 852
 900
 461
 4,198
 633,803
 631,957
 1,846
 0.29 %
Real Estate Operating Expenses227,913
 220,545
 7,368
 3.34 % 6,017
 1,406
 288
 175
 388
 4,880
 271
 1,813
 234,877
 228,819
 6,058
 2.65 %
Net Operating Income (Loss), excluding residential and hotel388,698
 402,898
 (14,200) (3.52)% 9,073
 1,647
 501
 188
 464
 (3,980) 190
 2,385
 398,926
 403,138
 (4,212) (1.04)%
Residential Net Operating Income (Loss) (1)2,702
 2,575
 127
 4.93 % (816) —
 —
 —
 —
 —
 —
 —
 1,886
 2,575
 (689) (26.76)%
Hotel Net Operating Income (1)5,866
 4,971
 895
 18.00 % —
 —
 —
 —
 —
 —
 —
 —
 5,866
 4,971
 895
 18.00 %
Net Operating Income (Loss) (1)$397,266
 $410,444
 $(13,178) (3.21)% $8,257
 $1,647
 $501
 $188
 $464
 $(3,980) $190
 $2,385
 $406,678
 $410,684
 $(4,006) (0.98)%
_______________  
(1)For a detailed discussion of NOI, including the reasons management believes NOI is useful to investors, see page 50. Residential Net Operating Income for the three months ended June 30, 2018 and 2017 is comprised of Residential Revenue of $4,799 and $4,210, less Residential Expenses of $2,913 and $1,635, respectively. Hotel Net Operating Income for the three months ended June 30, 2018 and 2017 is comprised of Hotel Revenue of $14,607 and $13,375 less Hotel Expenses of $8,741 and $8,404, respectively, per the Consolidated Statements of Operations.


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Same Property Portfolio
Rental Revenue
Rental revenue from the Same Property Portfolio increased by approximately $6.0 million for the three months ended June 30, 2018 compared to 2017. The increase was primarily the result of increases in revenue from our leases, parking and other income, and other tenant recoveries of approximately $5.1 million, $0.5 million, and $0.4 million, respectively. Rental revenue from our leases increased approximately $5.1 million as a result of our average revenue per square foot increasing by approximately $0.75, which contributed approximately $5.9 million, partially offset by an approximately $0.8 million decrease due to our average occupancy decreasing from 91.8% to 91.6%.
Termination Income
Termination income decreased by approximately $12.9 million for the three months ended June 30, 2018 compared to 2017.
Termination income for the three months ended June 30, 2018 related to five tenants across the Same Property Portfolio and totaled approximately $0.7 million.
Termination income for the three months ended June 30, 2017 related to fifteen tenants across the Same Property Portfolio and totaled approximately $13.6 million, of which approximately $6.3 million and $5.1 million are from tenants that terminated leases early at 767 Fifth Avenue (the General Motors Building) and 399 Park Avenue, respectively. Both of these buildings are located in New York City. In addition, we received the fifth interim distribution from our unsecured credit claim against Lehman Brothers, Inc. of approximately $0.4 million (See Note 6 to the Consolidated Financial Statements).
Real Estate Operating Expenses
Real estate operating expenses from the Same Property Portfolio increased by approximately $7.4 million, or 3.3%, for the three months ended June 30, 2018 compared to 2017 due primarily to increases in real estate taxes and other real estate operating expenses of approximately $5.0 million, or 4.6%, and $2.4 million, or 2.1%, respectively. The increase in real estate taxes was primarily experienced in the New York CBD properties.
Properties Placed In-Service Portfolio
The table below lists the properties placed in-service or partially placed in-service from April 1, 2017 through June 30, 2018. Rental revenue and real estate operating expenses increased by approximately $12.6 million and $6.0 million, respectively, for the three months ended June 30, 2018 compared to 2017, as detailed below.


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  Quarter Initially Placed In-Service Quarter Fully Placed In-Service   Rental Revenue Real Estate Operating Expenses
Name   Square Feet 2018 2017 Change 2018 2017 Change
        (dollars in thousands)
Office                  
Reservoir Place North Second Quarter, 2016 Second Quarter, 2017 73,258
 $—
 $—
 $—
 $116
 $53
 $63
888 Boylston Street Third Quarter, 2016 Third Quarter, 2017 417,320
 7,746
 3,053
 4,693
 2,026
 1,353
 673
191 Spring Street Fourth Quarter, 2017 N/A 171,000
 923
 —
 923
 464
 —
 464
Salesforce Tower Fourth Quarter, 2017 N/A 1,400,000
 6,421
 —
 6,421
 3,411
 —
 3,411
Total Office     2,061,578
 15,090

3,053

12,037

6,017

1,406

4,611
                   
Residential                  
Signature at Reston First Quarter, 2018 Second Quarter, 2018 517,847
 486
 —
 486
 1,151
 —
 1,151
Proto Kendall Square Second Quarter, 2018 N/A 166,500
 43
 —
 43
 194
 —
 194
Total Residential     684,347
 529
 —
 529
 1,345
 —
 1,345
      2,745,925
 $15,619
 $3,053
 $12,566
 $7,362
 $1,406
 $5,956

Properties Acquired Portfolio
The table below lists the properties acquired between April 1, 2017 and June 30, 2018. Rental revenue and real estate operating expenses increased by approximately $0.4 million and $0.1 million, respectively, for the three months ended June 30, 2018 compared to 2017, as detailed below.
      Rental Revenue Real Estate Operating Expenses
Name Date acquired Square Feet 2018 2017 Change 2018 2017 Change
      (dollars in thousands)
103 Carnegie Center May 25, 2017 96,332
 $789
 $363
 $426
 $288
 $175
 $113


Properties in Development or Redevelopment Portfolio
The table below lists the properties we placed in development or redevelopment between April 1, 2017 and June 30, 2018. Rental revenue and real estate operating expenses decreased by approximately $48,000 and $4.5 million, respectively, for the three months ended June 30, 2018 compared to 2017, as detailed below.
      Rental Revenue Real Estate Operating Expenses
Name Date commenced development / redevelopment Square Feet 2018 2017 Change 2018 2017 Change
      (dollars in thousands)
One Five Nine East 53rd Street (1) August 19, 2016 220,000
 $852
 $867
 $(15) $388
 $2,835
 $(2,447)
191 Spring Street (2) December 29, 2016 171,000
 —
 —
 —
 —
 1,213
 (1,213)
145 Broadway (3) April 6, 2017 79,616
 —
 33
 (33) —
 832
 (832)
    470,616
 $852
 $900
 $(48) $388
 $4,880
 $(4,492)
___________
(1)This is the low-rise portion of 601 Lexington Avenue in New York City. Real estate operating expenses for the three months ended June 30, 2017 includes approximately $2.5 million of demolition costs.

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(2)Real estate operating expenses for the three months ended June 30, 2017 includes approximately $1.2 million of demolition costs.
(3)On April 6, 2017, we commenced the development of 145 Broadway, a build-to-suit Class A office project with approximately 485,000 net rentable square feet located in Cambridge, Massachusetts. Real estate operating expenses for the three months ended June 30, 2017 includes approximately $0.8 million of demolition costs.
Properties Sold Portfolio
The table below lists the properties we sold between April 1, 2017 and June 30, 2018. Rental revenue and real estate operating expenses from our Properties Sold Portfolio decreased by approximately $3.7 million and $1.5 million, respectively, for the three months ended June 30, 2018 compared to 2017, as detailed below.
        Rental Revenue Real Estate Operating Expenses
Name Date Sold Property Type Square Feet 2018 2017 Change 2018 2017 Change
        (dollars in thousands)
30 Shattuck Road April 19, 2017 Land N/A
 $—
 $—
 $—
 $—
 $3
 $(3)
40 Shattuck Road June 13, 2017 Office 122,000
 —
 359
 (359) —
 236
 (236)
Reston Eastgate August 30, 2017 Land N/A
 —
 —
 —
 —
 28
 (28)
500 E Street, S.W. January 9, 2018 Office 262,000
 —
 3,066
 (3,066) —
 1,153
 (1,153)
91 Hartwell Avenue May 24, 2018 Office 119,000
 461
 773
 (312) 271
 393
 (122)
      503,000
 $461
 $4,198
 $(3,737) $271
 $1,813
 $(1,542)


Residential Net Operating Income
Net operating income for our residential same properties increased by approximately $0.1 million for the three months ended June 30, 2018 compared to 2017.
The following reflects our occupancy and rate information for The Lofts at Atlantic Wharf and The Avant at Reston Town Center for the three months ended June 30, 2018 and 2017.
  The Lofts at Atlantic Wharf The Avant at Reston Town Center
  2018 2017 Percentage
Change		 2018 2017 Percentage
Change
Average Monthly Rental Rate (1) $4,237
 $4,280
 (1.0)% $2,421
 $2,386
 1.5%
Average Rental Rate Per Occupied Square Foot $4.69
 $4.71
 (0.4)% $2.68
 $2.64
 1.5%
Average Physical Occupancy (2) 92.3% 95.4% (3.2)% 97.0% 95.9% 1.1%
Average Economic Occupancy (3) 91.9% 96.9% (5.2)% 95.6% 94.5% 1.2%
  Depreciation and Amortization Expense for the six months ended June 30,
2019 2018 Change
  (in thousands)
Same Property Portfolio $304,588
 $308,873
 $(4,285)
Properties Placed in-Service Portfolio 21,633
 4,609
 17,024
Properties in Development or Redevelopment Portfolio (1) 10,584
 473
 10,111
Properties Sold Portfolio 1,076
 4,372
 (3,296)
  $337,881
 $318,327
 $19,554
___________  
(1)Average Monthly Rental Rates are calculated by us as
On May 9, 2019, we commenced development of 325 Main Street in Cambridge, Massachusetts (See Note 3 to the averageConsolidated Financial Statements). As a result, during the six months ended June 30, 2019, we recorded approximately $9.5 million of accelerated depreciation expense for the demolition of the quotients obtained by dividing (A) rental revenue as determined in accordance with GAAP by (B) the number of occupied units for each month within the applicable fiscal period.  
(2)Average Physical Occupancy is defined as (1) the average number of occupied units divided by (2) the total number of units, expressed as a percentage.
(3)Average Economic Occupancy is defined as (1) total possible revenue less vacancy loss divided by (2) total possible revenue, expressed as a percentage. Total possible revenue is determined by valuing average occupied units at contract rates and average vacant units at Market Rents. Vacancy loss is determined by valuing vacant units at current Market Rents. By measuring vacant units at their Market Rents, Average Economic Occupancy takes into account the fact that units of different sizes and locations within a residential property have different economic impacts on a residential property's total possible gross revenue. Market Rents used by us in calculating Average Economic Occupancy are based on the current market rates set by the managers of our residential properties based on their experience in renting their residential property’s units and publicly available market data. Trends in market rents for a region as reported by others could vary. Market Rents for a period are based on the average Market Rents during that period and do not reflect any impact for cash concessions.building.



Direct Reimbursements of Payroll and Related Costs From Management Services Contracts and Payroll and Related Costs From Management Service Contracts
ASU 2016-08 “Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations” updated the principal versus agent considerations and as a result we determined that amounts reimbursed for payroll and related costs received from third parties in connection with management services contracts should be reflected on a gross basis instead of on a net basis, as we have determined that we are the principal under these arrangements. It is anticipated that these two financial statement line items will offset each other.
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Hotel Net Operating Income
Net operating income for the Boston Marriott Cambridge hotel property increaseddecreased by approximately $0.9$0.1 million for the threesix months ended June 30, 20182019 compared to 2017. The hotel underwent a renovation project on all of its rooms, which was completed during the year ended December 31, 2017.2018.
The following reflects our occupancy and rate information for the Boston Marriott Cambridge hotel for the threesix months ended June 30, 20182019 and 2017.2018.
 2018 2017 
Percentage
Change
 2019 2018 
Percentage
Change
Occupancy 90.3% 85.9% 5.1% 84.7% 85.7% (1.2)%
Average daily rate $317.95
 $304.82
 4.3% $272.65
 $271.36
 0.5 %
Revenue per available room, REVPAR $287.20
 $261.98
 9.6% $230.97
 $232.57
 (0.7)%
Other Operating RevenueIncome and Expense Items
Development and Management Services Revenue
Development and management services revenue increased by an aggregate of approximately $1.9$1.6 million for the threesix months ended June 30, 20182019 compared to 2017.2018. Development revenue and management services revenue increased by approximately $1.2$4.6 million and $0.7 million, respectively.while management services revenue decreased by approximately $3.0 million. The increase in development revenue is primarily related to increasesan increase in (1)development fees earned from our Washington, DC region and an increase in fees associated with tenant improvement projects in our San FranciscoregionBoston region.
On January 1, 2019, we adopted ASU 2016-02. As a result of the adoption, there were certain nonlease components (service income from tenants) that were reclassified on a prospective basis from this line item of our Consolidated Statements of Operations to Lease revenue. For the six months ended June 30, 2018, management service revenue included $5.2 million of service income from tenants. Excluding this reclassification, management services revenue would have increased by approximately $2.2 million due primarily to property and (2) developmentasset management fees we earned from our Boston and Washington, DCSanta Monica Business Park unconsolidated joint ventures that are developing The Hubventure, which we acquired on Causeway in Boston, Massachusetts and 7750 Wisconsin Avenue in Bethesda, Maryland, respectively. Management services revenue increased primarily due to an increase in leasing commissions from our Boston and Washington, DC unconsolidated joint ventures.July 19, 2018.
General and Administrative Expense
General and administrative expense increased by approximately $1.3$12.5 million for the threesix months ended June 30, 20182019 compared to 20172018 primarily due to compensation expense and other general and administrative expenses increasing by approximately $1.3 million.$11.3 million and $1.2 million, respectively. The increase in compensation expense was primarily related to the difference between the unrecognized expense remaining from the 2015 MYLTIP Units compared to the expense that was recognized for the newly issued 2018 MYLTIP Units. This increase was partially offset by(1) an approximately $0.2$4.7 million increase related to a decrease in capitalized wages, which includes the effect of no longer being able to capitalize internal and external legal costs and internal leasing wages, (2) an approximately $3.7 million increase in the value of our deferred compensation plan.plan and (3) an approximately $2.9 million increase related to other compensation expenses. The decrease in capitalized wages is shown as an increase to general and administrative expense as some of these costs are capitalized and included in real estate assets on our Consolidated Balance Sheets (see below). The increase in other general and administrative expenses was primarily related to an increase in professional fees and taxes.
Wages directly related to the development and leasing of rental properties are capitalized and included in real estate assets or deferred charges on our Consolidated Balance Sheets and they are amortized over the useful lives of the applicable asset or lease term. On January 1, 2019, we adopted ASU 2016-02 and therefore, as a lessor, we can only capitalize incremental direct leasing costs. As a result, we are no longer able to capitalize internal and external legal costs and internal leasing wages; instead, we are required to expense these and other non-incremental costs as incurred (See Note 4 to the Consolidated Financial Statements).
Capitalized wages for the threesix months ended June 30, 20182019 and 20172018 were approximately $4.8$5.5 million and $4.9$9.3 million, respectively. These costs are not included in the general and administrative expenses discussed above.
Transaction Costs
Transaction costs increased by approximately $0.2$0.4 million for the threesix months ended June 30, 20182019 compared to 2017. This2018. The increase was primarily related to the disposition of assets and costs related to the potential formation of thenew and pending joint ventures that we entered into for 3 Hudson Boulevard in New York City and Santa Monica Business Park in Santa Monica, California (See Note 12 to the Consolidated Financial Statements).ventures. In general, transaction costs relating to the formation of new and pending joint ventures and the pursuit of other transactions are expensed as incurred.
Table of Content

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

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Boston Properties, Inc.
Depreciation and amortization expense increased by approximately $4.5$19.8 million for the threesix months ended June 30, 20182019 compared to 2017,2018, as detailed below.
 Depreciation and Amortization Expense for the three months ended June 30, Depreciation and Amortization Expense for the six months ended June 30,
2018 2017 Change2019 2018 Change
 (in thousands) (in thousands)
Same Property Portfolio $150,625
 $149,921
 $704
 $308,333
 $312,760
 $(4,427)
Properties Placed in-Service Portfolio 5,191
 577
 4,614
 21,633
 4,609
 17,024
Properties Acquired Portfolio 475
 —
 475
Properties in Development or Redevelopment Portfolio —
 814
 (814)
Properties in Development or Redevelopment Portfolio (1) 10,963
 473
 10,490
Properties Sold Portfolio 126
 607
 (481) 1,076
 4,372
 (3,296)
 $156,417
 $151,919
 $4,498
 $342,005
 $322,214
 $19,791

___________  
(1)
On May 9, 2019, we commenced development of 325 Main Street in Cambridge, Massachusetts (See Note 3 to the Consolidated Financial Statements). As a result, during the six months ended June 30, 2019, we recorded approximately $9.9 million of accelerated depreciation expense for the demolition of the building, of which approximately $0.4 million related to the step-up of real estate assets.
Boston Properties Limited Partnership
Depreciation and amortization expense increased by approximately $4.6$19.6 million for the threesix months ended June 30, 20182019 compared to 2017,2018, as detailed below.
 Depreciation and Amortization Expense for the three months ended June 30, Depreciation and Amortization Expense for the six months ended June 30,
2018 2017 Change2019 2018 Change
 (in thousands) (in thousands)
Same Property Portfolio $148,682
 $147,836
 $846
 $304,588
 $308,873
 $(4,285)
Properties Placed in-Service Portfolio 5,191
 577
 4,614
 21,633
 4,609
 17,024
Properties Acquired Portfolio 475
 —
 475
Properties in Development or Redevelopment Portfolio —
 814
 (814)
Properties in Development or Redevelopment Portfolio (1) 10,584
 473
 10,111
Properties Sold Portfolio 126
 607
 (481) 1,076
 4,372
 (3,296)
 $154,474
 $149,834
 $4,640
 $337,881
 $318,327
 $19,554

___________  
(1)
On May 9, 2019, we commenced development of 325 Main Street in Cambridge, Massachusetts (See Note 3 to the Consolidated Financial Statements). As a result, during the six months ended June 30, 2019, we recorded approximately $9.5 million of accelerated depreciation expense for the demolition of the building.

Direct Reimbursements of Payroll and Related Costs From Management Services Contracts and Payroll and Related Costs From Management Service Contracts
ASU 2014-092016-08 “Revenue from Contracts with Customers (Topic 606)”: Principal versus Agent Considerations” updated the principal versus agent considerations and as a result we determined that amounts reimbursed for payroll and related costs received from third parties in connection with management services contracts should be reflected on a gross basis instead of on a net basis, as we have determined that we are the principal under these arrangements (See Note 2 to the Consolidated Financial Statements).arrangements. It is anticipated that these two financial statement line items will offset each other.
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Other Income and Expense Items
Income from Unconsolidated Joint Ventures
Income from unconsolidated joint ventures decreasedincreased by approximately $2.3$46.9 million for the threesix months ended June 30, 20182019 compared to 20172018 due primarily to a decrease in our share of net incomethe gain on sale of real estate from our Colorado Center joint venture. the sale of 540 Madison Avenue.
On July 28, 2017, theJune 27, 2019, a joint venture that owns Colorado Center obtainedin which we have a $550.060% interest completed the sale of its 540 Madison Avenue property located in New York City for a gross sale price of approximately $310.3 million, including the assumption by the buyer of the mortgage loan collateralized by the property totaling $120.0 million. Net cash proceeds totaled approximately $178.7 million, of which our share was approximately $107.1 million, after the payment of transaction costs. We recognized a gain on sale of real estate totaling approximately $47.8 million (See Note 5 to the Consolidated Financial Statements).
Gains on Sales of Real Estate
The gains on sales of real estate may differ between BXP and BPLP as a result of previously applied acquisition accounting by BXP for the issuance of common stock in connection with an effective GAAP interest rate of 3.58% per annum, whichnon-sponsor OP Unit redemptions by BPLP. This accounting resulted in interest expense, thus reducinga step-up of the net incomereal estate assets at BXP that was allocated to certain properties. The difference between the real estate assets of BXP as compared to BPLP for certain properties having an allocation of the real estate step-up will result in a corresponding difference in the gains on sales of real estate when those properties are sold. For additional information, see the Explanatory Note that follows the cover page of this Form 10-Q.
Boston Properties, Inc.
Gains on sales of real estate decreased by approximately $113.9 million for the joint venture. We own a 50% interest in Colorado Center. six months ended June 30, 2019 compared to 2018, as detailed below.
Name Date Sold Property Type Square Feet Sale Price Cash Proceeds (Losses) Gains on Sale of Real Estate 
2019             
2600 Tower Oaks Boulevard January 24, 2019 Office 179,000 $22.7
 $21.4
 $(0.6) 
One Tower Center June 3, 2019 Office 410,000 38.0
 36.6
 (0.8) 
164 Lexington Road June 28, 2019 Office 64,000 4.0
 3.8
 2.5
 
        $64.7
 $61.8
 $1.1
(1)
2018             
500 E Street, S.W. January 9, 2018 Office 262,000 $118.6
 $116.1
 $96.4
 
91 Hartwell Avenue May 24, 2018 Office 119,000 22.2
 21.7
 15.5
 
        $140.8
 $137.8
 $111.9
(2)
___________
(1)
Excludes approximately $0.3 million of losses on sales of real estate recognized during the six months ended June 30, 2019 related to loss amounts from sales of real estate occurring in prior years.
(2)Excludes approximately $2.8 million of gains on sales of real estate recognized during the six months ended June 30, 2018 related to gain amounts from sales of real estate occurring in prior years.
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Boston Properties Limited Partnership
Gains on sales of real estate decreased by approximately $116.7 million for the six months ended June 30, 2019 compared to 2018, as detailed below.
Name Date Sold Property Type Square Feet Sale Price Cash Proceeds (Losses) Gains on Sale of Real Estate 
2019             
2600 Tower Oaks Boulevard January 24, 2019 Office 179,000 $22.7
 $21.4
 $(0.6) 
One Tower Center June 3, 2019 Office 410,000 38.0
 36.6
 (0.8) 
164 Lexington Road June 28, 2019 Office 64,000 4.0
 3.8
 2.6
 
        $64.7
 $61.8
 $1.2
(1)
2018             
500 E Street, S.W. January 9, 2018 Office 262,000 $118.6
 $116.1
 $98.9
 
91 Hartwell Avenue May 24, 2018 Office 119,000 22.2
 21.7
 15.9
 
        $140.8
 $137.8
 $114.8
(2)
___________
(1)Excludes approximately $0.3 million of losses on sales of real estate recognized during the six months ended June 30, 2019 related to loss amounts from sales of real estate occurring in prior years.
(2)Excludes approximately $2.8 million of gains on sales of real estate recognized during the six months ended June 30, 2018 related to gain amounts from sales of real estate occurring in prior years.

Interest and Other Income
Interest and other income increased by approximately $1.1$3.1 million for the threesix months ended June 30, 20182019 compared to 2017,2018 due primarily to an increase in interest rates.

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Gains from Investments in Securities
Gains from investments in securities for the threesix months ended June 30, 20182019 and 20172018 related to investments that we have made to reduce our market risk relating to a deferred compensation plan that we maintain for BXP’s officers. Under this deferred compensation plan, each officer who is eligible to participate is permitted to defer a portion of the officer’s current income on a pre-tax basis and receive a tax-deferred return on these deferrals based on the performance of specific investments selected by the officer. In order to reduce our market risk relating to this plan, we typically acquire, in a separate account that is not restricted as to its use, similar or identical investments as those selected by each officer. This enables us to generally match our liabilities to BXP’s officers under theour deferred compensation plan with equivalent assets and thereby limit our market risk. The performance of these investments is recorded as gains from investments in securities. During the threesix months ended June 30, 20182019 and 2017,2018, we recognized gains of approximately $0.5$4.1 million and $0.7$0.4 million, respectively, on these investments. By comparison, our general and administrative expense increased by approximately $0.5$4.1 million and $0.7$0.4 million during the threesix months ended June 30, 20182019 and 2017,2018, respectively, as a result of increasesan increase in our liability under our deferred compensation plan that were associated with the performance of the specific investments selected by officers of BXP participating in the plan.
GainsImpairment Loss
An impairment loss may differ between BXP and BPLP as a result of previously applied acquisition accounting by BXP for the issuance of common stock in connection with non-sponsor OP Unit redemptions by BPLP. This accounting resulted in a step-up of the real estate assets at BXP that was allocated to certain properties. The difference between the real estate assets of BXP as compared to BPLP for certain properties having an allocation of the real estate step-up will result in a corresponding difference in the gains on sales of real estate when those properties are sold. For additional information, see the Explanatory Note that follows the cover page of this Form 10-Q.
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At March 31, 2019, we evaluated the expected hold period of our One Tower Center property and, based on a shorter-than-expected hold period, we reduced the carrying value of the property to our estimated fair value at March 31, 2019 and recognized an impairment loss totaling approximately $24.0 million for BXP and approximately $22.3 million for BPLP. Our estimated fair value was based on a pending offer from Early Extinguishmentsa third party to acquire the property and the subsequent execution of Debt
On June 7, 2017, our consolidated entity in which we have a 60% ownership interestpurchase and that owns 767 Fifth Avenue (the General Motors Building) located in New York City completed the refinancingsale agreement on April 18, 2019 for a gross sale price of approximately $1.6 billion of indebtedness that had been secured by direct and indirect interests in 767 Fifth Avenue. The new mortgage financing has a principal amount of $2.3 billion, bears interest at a fixed interest rate of 3.43% per annum and matures on June 9, 2027. The loan requires interest-only payments during the 10-year term of the loan, with the entire principal amount due at maturity. The extinguished debt bore interest at a weighted-average rate of approximately 5.96% per annum, an effective GAAP interest rate of approximately 3.03% per annum and was scheduled to mature on October 7, 2017. There was no prepayment penalty associated with the repayment of the prior indebtedness. We recognized a net gain from early extinguishment of debt totaling approximately $14.6$38.0 million primarily consisting of the acceleration of the remaining balance related to the historical fair value debt adjustment.
On April 24, 2017, BPLP entered into the 2017 Credit Facility (See Note 53 to the Consolidated Financial Statements). Certain lenders, underOn June 3, 2019, we completed the prior credit facility, chose to not participatesale of the property. One Tower Center is an approximately 410,000 net rentable square foot Class A office property located in the 2017 Credit Facility and as such we recognized a loss on early extinguishment of debt of approximately $0.3 million related to the acceleration of finance fees associated with the prior credit agreement.


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East Brunswick, New Jersey.
Interest Expense
Interest expense decreasedincreased by approximately $2.9$20.9 million for the threesix months ended June 30, 20182019 compared to 2017,2018, as detailed below:below.
Component Change in interest expense for the three months ended June 30, 2018 compared to
June 30, 2017		 Change in interest
expense for the six months ended
June 30, 2019 compared to June 30, 2018
 (in thousands) (in thousands)
Increases to interest expense due to:    
Issuance of $850 million in aggregate principal of 3.200% senior notes due 2025 on December 4, 2017 $6,865
Refinancing of the debt collateralized by 767 Fifth Avenue (the General Motors Building) 6,469
Issuance of $1 billion in aggregate principal of 4.500% senior notes due 2028 on November 28, 2018 $22,643
Decrease in capitalized interest related to development projects 11,967
Utilization of the 2017 Credit Facility 1,824
 6,471
Amortization of deferred financing fees for BPLP’s unsecured debt and credit facility 172
Other interest expense (excluding senior notes) 85
Increase in interest due to finance leases 2,037
Issuance of $850 million in aggregate principal of 3.400% senior notes due 2029 on June 21, 2019 804
Total increases to interest expense 15,415
 43,922
Decreases to interest expense due to:    
Redemption of $850 million in aggregate principal of 3.700% senior notes due 2018 on December 17, 2017 (7,938)
Decrease in the interest for the Outside Members’ Notes Payable for the 767 Fifth Avenue (the General Motors Building) (1) (7,078)
Increase in capitalized interest (2) (3,338)
Redemption of $700 million in aggregate principal of 5.875% senior notes due 2019 on December 13, 2018 (20,591)
Increase in capitalized interest related to development projects that had finance leases (2,037)
Other interest expense (excluding senior notes) (352)
Total decreases to interest expense (18,354) (22,980)
Total change in interest expense $(2,939) $20,942
___________ 
(1)The related interest expense from the Outside Members’ Notes Payable totaled approximately $7.1 million for the three months ended June 30, 2017. This amount was allocated to the outside joint venture partners as an adjustment to Noncontrolling Interests in Property Partnerships in our Consolidated Statements of Operations. On June 7, 2017, a portion of the outside members’ notes payable was repaid and the remaining portion was contributed as equity in the consolidated entity.
(2)
The increase was primarily due to the commencement and continuation of several development projects. For a list of development projects refer to “Liquidity and Capital Resources” within “Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Interest expense directly related to the development of rental properties is capitalized and included in real estate assets on our Consolidated Balance Sheets and amortized over the useful lives of the real estate or lease term. As portions of properties are placed in-service, we cease capitalizing interest on these portionsthat portion and interest is then expensed. Interest capitalized for the threesix months ended June 30, 20182019 and 20172018 was approximately $17.6$25.1 million and $14.3$35.0 million, respectively. These costs are not included in the interest expense referenced above.
At June 30, 2018,2019, our outstanding variable rate debt consisted of BPLP’s $2.0 billion unsecured revolving credit facility (the “2017 Credit Facility”), which consists of the $500.0 million delayed draw term loan facility (the “Delayed Draw Facility”) and the $1.5 billion revolving line of credit (the “Revolving Facility”). The Delayed Draw Facility. BPLP's $1.5 billion Revolving Facility is also variable rate debt, however no amounts werehad $500.0 million outstanding at June 30, 2018.2019. At June 30, 2019, the Revolving Facility did not have any borrowings outstanding. For a summary of our consolidated debt as of June 30, 20182019 and June 30, 20172018 refer to the heading “Liquidity and Capital Resources—Capitalization—Debt Financing” within “Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
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Noncontrolling interests in property partnerships
Noncontrolling interests in property partnerships increased by approximately $4.7 million for the six months ended June 30, 2019 compared to 2018, as detailed below.
Property Noncontrolling Interests in Property Partnerships for the six months ended June 30,
2019 2018 Change
  (in thousands)
Salesforce Tower (1) $116
 $(306) $422
767 Fifth Avenue (the General Motors Building) 2,371
 446
 1,925
Times Square Tower 13,920
 13,626
 294
601 Lexington Avenue 9,535
 10,187
 (652)
100 Federal Street (2) 5,684
 3,025
 2,659
Atlantic Wharf Office 4,686
 4,656
 30
  $36,312
 $31,634
 $4,678
___________
(1)
On April 1, 2019, we acquired our partner’s 5% interest. See Note 8 to the Consolidated Financial Statements.
(2)The increase was primarily due to an increase in lease revenue from our tenants.
Noncontrolling interest - Common Units of the Operating Partnership
For BXP, noncontrolling interest–common units of the Operating Partnership decreased by approximately $4.7 million for the six months ended June 30, 2019 compared to 2018 due primarily to a decrease in allocable income, which was the result of recognizing a greater gain on sales of real estate amount during 2018, partially offset by an increase in the noncontrolling interest’s ownership percentage. Due to our UPREIT ownership structure, there is no corresponding line item on BPLP’s financial statements.
Results of Operations for the Three Months Ended June 30, 2019 and 2018
Net income attributable to Boston Properties, Inc. common shareholders and net income attributable to Boston Properties Limited Partnership common unitholders increased approximately $35.6 million and $39.8 million for the three months ended June 30, 2019 compared to 2018, respectively, as detailed in the following tables and for the reasons discussed below under the heading “Comparison of the three months ended June 30, 2019 to the three months ended June 30, 2018” within “Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Below are reconciliations of net income attributable to Boston Properties, Inc. common shareholders to NOI and net income attributable to Boston Properties Limited Partnership common unitholders to NOI for the three months ended June 30, 2019 and 2018. For a detailed discussion of NOI, including the reasons management believes NOI is useful to investors, see page 58.


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Boston Properties, Inc.
  Three months ended June 30,
  2019 2018 Increase/
(Decrease)		 %
Change
  (in thousands)
Net Income Attributable to Boston Properties, Inc. Common Shareholders $164,318
 $128,681
 $35,637
 27.69 %
Preferred dividends 2,625
 2,625
 —
 — %
Net Income Attributable to Boston Properties, Inc. 166,943
 131,306
 35,637
 27.14 %
Net Income Attributable to Noncontrolling Interests:        
Noncontrolling interest—common units of Boston Properties Limited Partnership 19,036
 14,859
 4,177
 28.11 %
Noncontrolling interests in property partnerships 17,482
 14,400
 3,082
 21.40 %
Net Income 203,461
 160,565
 42,896
 26.72 %
Other Expenses:        
Add:        
Interest expense 102,357
 92,204
 10,153
 11.01 %
Other Income:        
Less:        
Gains from investments in securities 1,165
 505
 660
 130.69 %
Interest and other income 3,615
 2,579
 1,036
 40.17 %
Gains on sales of real estate 1,686
 18,292
 (16,606) (90.78)%
Income from unconsolidated joint ventures 47,964
 769
 47,195
 6,137.19 %
Other Expenses:        
Add:        
Depreciation and amortization expense 177,411
 156,417
 20,994
 13.42 %
Transaction costs 417
 474
 (57) (12.03)%
Payroll and related costs from management services contracts 2,403
 1,970
 433
 21.98 %
General and administrative expense 35,071
 28,468
 6,603
 23.19 %
Other Revenue:        
Less:        
Direct reimbursements of payroll and related costs from management services contracts 2,403
 1,970
 433
 21.98 %
Development and management services revenue 9,986
 9,305
 681
 7.32 %
Net Operating Income $454,301
 $406,678
 $47,623
 11.71 %



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Boston Properties Limited Partnership
  Three months ended June 30,
  2019 2018 Increase/
(Decrease)		 %
Change
  (in thousands)
Net Income Attributable to Boston Properties Limited Partnership Common Unitholders $185,715
 $145,961
 $39,754
 27.24 %
Preferred distributions 2,625
 2,625
 —
 — %
Net Income Attributable to Boston Properties Limited Partnership 188,340
 148,586
 39,754
 26.75 %
Net Income Attributable to Noncontrolling Interests:        
Noncontrolling interests in property partnerships 17,482
 14,400
 3,082
 21.40 %
Net Income 205,822
 162,986
 42,836
 26.28 %
Other Expenses:        
Add:        
Interest expense 102,357
 92,204
 10,153
 11.01 %
Less:        
Gains from investments in securities 1,165
 505
 660
 130.69 %
Interest and other income 3,615
 2,579
 1,036
 40.17 %
Gains on sales of real estate 1,835
 18,770
 (16,935) (90.22)%
Income from unconsolidated joint ventures 47,964
 769
 47,195
 6,137.19 %
Other Expenses:        
Add:        
Depreciation and amortization expense 175,199
 154,474
 20,725
 13.42 %
Transaction costs 417
 474
 (57) (12.03)%
Payroll and related costs from management services contracts 2,403
 1,970
 433
 21.98 %
General and administrative expense 35,071
 28,468
 6,603
 23.19 %
Other Revenue:        
Less:        
Direct reimbursements of payroll and related costs from management services contracts 2,403
 1,970
 433
 21.98 %
Development and management services revenue 9,986
 9,305
 681
 7.32 %
Net Operating Income $454,301

$406,678

$47,623
 11.71 %

Comparison of the three months ended June 30, 2019 to the three months ended June 30, 2018.
The table below shows selected operating information for the Same Property Portfolio and the Total Property Portfolio. The Same Property Portfolio consists of 142 properties totaling approximately 38.3 million net rentable square feet of space, excluding unconsolidated joint ventures. The Same Property Portfolio includes properties acquired or fully placed in-service on or prior to April 1, 2018 and owned and in-service through June 30, 2019. The Total Property Portfolio includes the effects of the other properties either placed in-service, acquired or in development or redevelopment after April 1, 2018 or disposed of on or prior to June 30, 2019. This table includes a reconciliation from the Same Property Portfolio to the Total Property Portfolio by also providing information for the three months ended June 30, 2019 and 2018 with respect to the properties that were placed in-service, acquired, in development or redevelopment or sold. There were no properties acquired between April 1, 2018 and June 30, 2019.

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 Same Property Portfolio 
Properties
Placed In-Service
Portfolio
 Properties in
Development or
Redevelopment
Portfolio		 Properties Sold Portfolio Total Property Portfolio
(dollars in thousands)2019 2018 Increase/(Decrease) 
%
Change
 2019 2018 2019 2018 2019 2018 2019 2018 Increase/(Decrease) %
Change
Rental Revenue: (1)                           
Lease Revenue (Excluding Termination Income)$632,037
 $590,190
 $41,847
 7.09 % $34,492
 $7,134
 $(1,070) $2,331
 $886
 $6,668
 $666,345
 $606,323
 $60,022
 9.90 %
Termination Income4,910
 186
 4,724
 2,539.78 % —
 —
 —
 —
 —
 532
 4,910
 718
 4,192
 583.84 %
Lease Revenue636,947
 590,376
 46,571
 7.89 % 34,492
 7,134
 (1,070) 2,331
 886
 7,200
 671,255
 607,041
 64,214
 10.58 %
Parking and Other Income25,670
 26,304
 (634) (2.41)% 469
 210
 106
 19
 9
 229
 26,254
 26,762
 (508) (1.90)%
Total Rental Revenue (1)662,617
 616,680
 45,937
 7.45 % 34,961
 7,344
 (964) 2,350
 895
 7,429
 697,509
 633,803
 63,706
 10.05 %
Real Estate Operating Expenses238,262
 226,141
 12,121
 5.36 % 13,702
 3,875
 942
 830
 943
 4,031
 253,849
 234,877
 18,972
 8.08 %
Net Operating Income (Loss), excluding residential and hotel424,355
 390,539
 33,816
 8.66 % 21,259
 3,469
 (1,906) 1,520
 (48) 3,398
 443,660
 398,926
 44,734
 11.21 %
Residential Net Operating Income (Loss) (2)2,466
 2,702
 (236) (8.73)% 2,411
 (816) —
 —
 —
 —
 4,877
 1,886
 2,991
 158.59 %
Hotel Net Operating Income (2)5,764
 5,866
 (102) (1.74)% —
 —
 —
 —
 —
 —
 5,764
 5,866
 (102) (1.74)%
Net Operating Income (Loss)$432,585
 $399,107
 $33,478
 8.39 % $23,670
 $2,653
 $(1,906) $1,520
 $(48) $3,398
 $454,301
 $406,678
 $47,623
 11.71 %
_______________  
(1)Rental Revenue is equal to Revenue less Development and Management Services Revenue and Direct Reimbursements of Payroll and Related Costs from Management Services Revenue per the Consolidated Statements of Operations excluding the residential and hotel revenue that is noted below. Upon the adoption of ASU-2016-02 “Leases” on January 1, 2019, service income from tenants is included in Lease revenue. Prior to adoption, these amounts were included in the line item for Development and Management Services Revenue. We use Rental Revenue internally as a performance measure and in calculating other non-GAAP financial measures (e.g., NOI), which provides investors with information regarding our performance that is not immediately apparent from the comparable non-GAAP measures and allows investors to compare operating performance between periods.
(2)For a detailed discussion of NOI, including the reasons management believes NOI is useful to investors, see page 58. Residential Net Operating Income for the three months ended June 30, 2019 and 2018 is comprised of Residential Revenue of $8,999 and $4,799, less Residential Expenses of $4,122 and $2,913, respectively. Hotel Net Operating Income for the three months ended June 30, 2019 and 2018 is comprised of Hotel Revenue of $14,844 and $14,607 less Hotel Expenses of $9,080 and $8,741, respectively, per the Consolidated Statements of Operations.

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Same Property Portfolio
Lease Revenue (Excluding Termination Income)
Lease revenue from the Same Property Portfolio increased by approximately $41.8 million for the three months ended June 30, 2019 compared to 2018. The increase was primarily the result of increases in revenue from our leases and the reclassification of service income from tenants and other income of approximately $37.2 million and $4.6 million, respectively. Lease revenue from our leases increased approximately $37.2 million as a result of our average revenue per square foot increasing by approximately $2.92, which contributed approximately $23.6 million, and an approximately $13.6 million increase due to our average occupancy increasing from 92.3% to 94.5%.
On January 1, 2019, we adopted ASU 2016-02. As a result of the adoption, there were certain nonlease components (service income from tenants, overtime HVAC, late fees and other items) that were reclassified on a prospective basis from the Development and Management Services revenue and Parking and Other Income line items of our Consolidated Statements of Operations. As a result, Lease revenue increased by approximately $4.6 million and Development and Management Services revenue and Parking and Other Income decreased by approximately $2.8 million and $1.8 million, respectively, for the three months ended June 30, 2019 (See Note 4 to the Consolidated Financial Statements).
Termination Income
Termination income increased by approximately $4.7 million for the three months ended June 30, 2019 compared to 2018.
Termination income for the three months ended June 30, 2019 related to 11 tenants across the Same Property Portfolio and totaled approximately $4.9 million, of which approximately $2.0 million is from a tenant that terminated a lease early at 399 Park Avenue in New York City.
Termination income for the three months ended June 30, 2018 related to four tenants across the Same Property Portfolio and totaled approximately $0.2 million.
Parking and Other Income
Parking and other income decreased by approximately $0.6 million for the three months ended June 30, 2019 compared to 2018, which was primarily due to the reclassification of approximately $1.8 million of certain nonlease components resulting from the adoption of ASU 2016-02, described above (See Note 4 to the Consolidated Financial Statements). Excluding this reclassification, parking and other income increased by approximately $1.2 million.
Real Estate Operating Expenses
Real estate operating expenses from the Same Property Portfolio increased by approximately $12.1 million, or 5.4%, for the three months ended June 30, 2019 compared to 2018 due primarily to increases in (1) real estate taxes of approximately $7.9 million, or 7.1%, (2) repairs and maintenance of approximately $2.1 million, or 5.6% and (3) other real estate operating expenses of approximately $2.1 million, or 2.7%. The increase in real estate taxes and repairs and maintenance were primarily experienced in the New York CBD properties.
Properties Placed In-Service Portfolio
The table below lists the properties placed in-service or partially placed in-service from April 1, 2018 through June 30, 2019. Rental revenue and real estate operating expenses increased by approximately $31.9 million and $10.9 million, respectively, for the three months ended June 30, 2019 compared to 2018, as detailed below.

Table of Content

  Quarter Initially Placed In-Service Quarter Fully Placed In-Service   Rental Revenue Real Estate Operating Expenses
Name   Square Feet 2019 2018 Change 2019 2018 Change
        (dollars in thousands)
Office                  
191 Spring Street Fourth Quarter, 2017 Fourth Quarter, 2018 170,997
 $1,938
 $923
 $1,015
 $384
 $464
 $(80)
Salesforce Tower Fourth Quarter, 2017 Fourth Quarter, 2018 1,420,682
 33,023
 6,421
 26,602
 13,318
 3,411
 9,907
Total Office     1,591,679
 34,961

7,344

27,617

13,702

3,875

9,827
                   
Residential                  
Signature at Reston First Quarter, 2018 Second Quarter, 2018 517,783
 2,805
 486
 2,319
 1,643
 1,151
 492
Proto Kendall Square Second Quarter, 2018 Third Quarter, 2018 166,717
 2,011
 43
 1,968
 762
 194
 568
Total Residential     684,500
 4,816
 529
 4,287
 2,405
 1,345
 1,060
      2,276,179
 $39,777
 $7,873
 $31,904
 $16,107
 $5,220
 $10,887
Properties in Development or Redevelopment Portfolio
The table below lists the properties that were in development or redevelopment between April 1, 2018 and June 30, 2019. Rental revenue decreased by approximately $3.3 million and real estate operating expenses increased by approximately $0.1 million, respectively, for the three months ended June 30, 2019 compared to 2018, as detailed below.
      Rental Revenue Real Estate Operating Expenses
Name Date commenced development / redevelopment Square Feet 2019 2018 Change 2019 2018 Change
      (dollars in thousands)
One Five Nine East 53rd Street August 19, 2016 220,000
 $989
 $852
 $137
 $395
 $388
 $7
325 Main Street (1) May 9, 2019 115,000
 (1,953) 1,498
 (3,451) 547
 442
 105
    335,000
 $(964) $2,350
 $(3,314) $942
 $830
 $112
___________
(1)Rental revenue for the three months ended June 30, 2019 includes the acceleration and write-off of straight-line rent associated with the early termination of a lease at that building. Real estate operating expenses for the three months ended June 30, 2019 includes approximately $0.4 million of demolition costs.
Properties Sold Portfolio
The table below lists the properties we sold between April 1, 2018 and June 30, 2019. Rental revenue and real estate operating expenses from our Properties Sold Portfolio decreased by approximately $6.5 million and $3.1 million, respectively, for the three months ended June 30, 2019 compared to 2018, as detailed below.
Table of Content

        Rental Revenue Real Estate Operating Expenses
Name Date Sold Property Type Square Feet 2019 2018 Change 2019 2018 Change
        (dollars in thousands)
91 Hartwell Avenue May 24, 2018 Office 119,000
 $—
 $461
 $(461) $—
 $271
 $(271)
Quorum Office Park September 27, 2018 Office 268,000
 —
 1,176
 (1,176) —
 669
 (669)
1333 New Hampshire Avenue (1) November 30, 2018 Office 315,000
 —
 3,932
 (3,932) —
 1,429
 (1,429)
Tower Oaks December 20, 2018 Land N/A
 —
 64
 (64) —
 54
 (54)
2600 Tower Oaks Boulevard January 24, 2019 Office 179,000
 —
 681
 (681) —
 472
 (472)
One Tower Center June 3, 2019 Office 410,000
 895
 1,115
 (220) 904
 1,092
 (188)
164 Lexington Road June 28, 2019 Office 64,000
 —
 —
 —
 39
 44
 (5)
      1,355,000
 $895

$7,429

$(6,534)
$943

$4,031

$(3,088)
___________
(1)Rental revenue includes approximately $0.5 million of termination income for the three months ended June 30, 2018.


Residential Net Operating Income
Net operating income for our residential same properties decreased by approximately $0.2 million for the three months ended June 30, 2019 compared to 2018.
The following reflects our occupancy and rate information for The Lofts at Atlantic Wharf and The Avant at Reston Town Center for the three months ended June 30, 2019 and 2018.
  The Lofts at Atlantic Wharf The Avant at Reston Town Center
  2019 2018 Percentage
Change		 2019 2018 Percentage
Change
Average Monthly Rental Rate (1) $4,481
 $4,237
 5.8% $2,405
 $2,421
 (0.7)%
Average Rental Rate Per Occupied Square Foot $4.92
 $4.69
 4.9% $2.63
 $2.68
 (1.9)%
Average Physical Occupancy (2) 95.0% 92.3% 2.9% 94.2% 97.0% (2.9)%
Average Economic Occupancy (3) 95.4% 91.9% 3.8% 93.8% 95.6% (1.9)%
___________  
(1)Average Monthly Rental Rates are calculated by us as the average of the quotients obtained by dividing (A) rental revenue as determined in accordance with GAAP by (B) the number of occupied units for each month within the applicable fiscal period.  
(2)Average Physical Occupancy is defined as (1) the average number of occupied units divided by (2) the total number of units, expressed as a percentage.
(3)Average Economic Occupancy is defined as (1) total possible revenue less vacancy loss divided by (2) total possible revenue, expressed as a percentage. Total possible revenue is determined by valuing average occupied units at contract rates and average vacant units at Market Rents. Vacancy loss is determined by valuing vacant units at current Market Rents. By measuring vacant units at their Market Rents, Average Economic Occupancy takes into account the fact that units of different sizes and locations within a residential property have different economic impacts on a residential property’s total possible gross revenue. Market Rents used by us in calculating Average Economic Occupancy are based on the current market rates set by the managers of our residential properties based on their experience in renting their residential property’s units and publicly available market data. Trends in market rents for a region as reported by others could vary. Market Rents for a period are based on the average Market Rents during that period and do not reflect any impact for cash concessions.

Hotel Net Operating Income
Net operating income for the Boston Marriott Cambridge hotel property decreased by approximately $0.1 million for the three months ended June 30, 2019 compared to 2018.
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The following reflects our occupancy and rate information for the Boston Marriott Cambridge hotel for the three months ended June 30, 2019 and 2018.
  2019 2018 
Percentage
Change
Occupancy 89.1% 90.3% (1.3)%
Average daily rate $318.28
 $317.95
 0.1 %
Revenue per available room, REVPAR $283.73
 $287.20
 (1.2)%
Operating Revenue and Expense Items
Development and Management Services Revenue
Development and management services revenue increased by an aggregate of approximately $0.7 million for the three months ended June 30, 2019 compared to 2018. Development revenue increased by approximately $2.7 million while management services revenue decreased by approximately $2.0 million. The increase in development revenue is primarily related to an increase in development fees earned from our Washington, DC and New York regions.
On January 1, 2019, we adopted ASU 2016-02. As a result of the adoption, there were certain nonlease components (service income from tenants) that were reclassified on a prospective basis from this line item of our Consolidated Statements of Operations to Lease revenue. For the three months ended June 30, 2018, management service revenue included $2.6 million of service income from tenants. Excluding this reclassification, management services revenue would have increased by approximately $0.6 million due primarily to property and asset management fees we earned from our Santa Monica Business Park unconsolidated joint venture, which we acquired on July 19, 2018.
General and Administrative Expense
General and administrative expense increased by approximately $6.6 million for the three months ended June 30, 2019 compared to 2018 due to compensation expense and other general and administrative expenses increasing by approximately $5.9 million and $0.7 million, respectively. The increase in compensation expense was related to (1) an approximately $2.6 million increase related to a decrease in capitalized wages, which includes the effect of no longer being able to capitalize internal and external legal costs and internal leasing wages, (2) an approximately $1.2 million difference between the unrecognized expense remaining from the 2015-2018 MYLTIP Units compared to the expense that was recognized for the newly issued 2019 MYLTIP Units, (3) an approximately $0.7 million increase in the value of the deferred compensation plan and (4) an approximately $1.4 million increase related to other compensation expenses. The decrease in capitalized wages is shown as an increase to general and administrative expense as some of these costs are capitalized and included in real estate assets on our Consolidated Balance Sheets (see below). The increase in other general and administrative expenses was primarily related to an increase in professional fees and taxes.
Wages directly related to the development of rental properties are capitalized and included in real estate assets on our Consolidated Balance Sheets and they are amortized over the useful lives of the applicable asset or lease term. On January 1, 2019, we adopted ASU 2016-02 and therefore, as a lessor, we can only capitalize incremental direct leasing costs. As a result, we are no longer able to capitalize internal and external legal costs and internal leasing wages; instead, we are required to expense these and other non-incremental costs as incurred (See Note 4 to the Consolidated Financial Statements).
Capitalized wages for the three months ended June 30, 2019 and 2018 were approximately $2.6 million and $4.8 million, respectively. These costs are not included in the general and administrative expenses discussed above.
Depreciation and Amortization Expense
Depreciation expense may differ between BXP and BPLP as a result of previously applied acquisition accounting by BXP for the issuance of common stock in connection with non-sponsor OP Unit redemptions by BPLP.  This accounting resulted in a step-up of the real estate assets at BXP that was allocated to certain properties.  The difference between the real estate assets of BXP as compared to BPLP for certain properties having an allocation of the real estate step-up will result in a corresponding difference in depreciation expense. For additional information, see the Explanatory Note that follows the cover page of this Form 10-Q.
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Boston Properties, Inc.
Depreciation and amortization expense increased by approximately $21.0 million for the three months ended June 30, 2019 compared to 2018, as detailed below.
  Depreciation and Amortization Expense for the three months ended June 30,
2019 2018 Change
  (in thousands)
Same Property Portfolio $155,531
 $150,913
 $4,618
Properties Placed in-Service Portfolio 11,006
 2,137
 8,869
Properties in Development or Redevelopment Portfolio (1) 10,726
 236
 10,490
Properties Sold Portfolio 148
 3,131
 (2,983)
  $177,411
 $156,417
 $20,994
___________  
(1)
On May 9, 2019, we commenced development of 325 Main Street in Cambridge, Massachusetts (See Note 3 to the Consolidated Financial Statements). As a result, during the three months ended June 30, 2019, we recorded approximately $9.9 million of accelerated depreciation expense for the demolition of the building, of which approximately $0.4 million related to the step-up of real estate assets.
Boston Properties Limited Partnership
Depreciation and amortization expense increased by approximately $20.7 million for the three months ended June 30, 2019 compared to 2018, as detailed below.
  Depreciation and Amortization Expense for the three months ended June 30,
2019 2018 Change
  (in thousands)
Same Property Portfolio $153,698
 $148,970
 $4,728
Properties Placed in-Service Portfolio 11,006
 2,137
 8,869
Properties in Development or Redevelopment Portfolio (1) 10,347
 236
 10,111
Properties Sold Portfolio 148
 3,131
 (2,983)
  $175,199
 $154,474
 $20,725
___________  
(1)
On May 9, 2019, we commenced development of 325 Main Street in Cambridge, Massachusetts (See Note 3 to the Consolidated Financial Statements). As a result, during the three months ended June 30, 2019, we recorded approximately $9.5 million of accelerated depreciation expense for the demolition of the building.

Direct Reimbursements of Payroll and Related Costs From Management Services Contracts and Payroll and Related Costs From Management Service Contracts
ASU 2016-08 “Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations” updated the principal versus agent considerations and as a result we determined that amounts reimbursed for payroll and related costs received from third parties in connection with management services contracts should be reflected on a gross basis instead of on a net basis, as we have determined that we are the principal under these arrangements. It is anticipated that these two financial statement line items will offset each other.
Other Income and Expense Items
Income from Unconsolidated Joint Ventures
Income from unconsolidated joint ventures increased by approximately $47.2 million for the three months ended June 30, 2019 compared to 2018 due primarily to our share of the gain on sale of real estate from the sale of 540 Madison Avenue.
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On June 27, 2019, a joint venture in which we have a 60% interest completed the sale of its 540 Madison Avenue property located in New York City for a gross sale price of approximately $310.3 million, including the assumption by the buyer of the mortgage loan collateralized by the property totaling $120.0 million. Net cash proceeds totaled approximately $178.7 million, of which our share was approximately $107.1 million, after the payment of transaction costs. We recognized a gain on sale of real estate totaling approximately $47.8 million (See Note 5 to the Consolidated Financial Statements).
Gains on Sales of Real Estate
The gains on sales of real estate may differ between BXP and BPLP as a result of previously applied acquisition accounting by BXP for the issuance of common stock in connection with non-sponsor OP Unit redemptions by BPLP. This accounting resulted in a step-up of the real estate assets at BXP that was allocated to certain properties. The difference between the real estate assets of BXP as compared to BPLP for certain properties having an allocation of the real estate step-up will result in a corresponding difference in the gains on

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sales of real estate when those properties are sold. For additional information, see the Explanatory Note that follows the cover page of this Form 10-Q.
Boston Properties, Inc.
Gains on sales of real estate increaseddecreased by approximately $14.5$16.6 million for the three months ended June 30, 20182019 compared to 2017,2018, as detailed below (dollars in millions):.
Name Date Sold Property Type Square Feet Sale Price Cash Proceeds Gain on Sale of Real Estate 
2018             
91 Hartwell Avenue May 24, 2018 Office 119,000
 $22.2
 $21.7
 $15.5
(1)
              
2017             
30 Shattuck Road April 19, 2017 Land N/A
 $5.0
 $5.0
 $3.7
 
40 Shattuck Road June 13, 2017 Office 122,000
 12.0
 11.9
 —
(2)
        $17.0
 $16.9
 $3.7
 
___________
(1)Excludes approximately $2.8 million of gains on sales of real estate recognized during the three months ended June 30, 2018 related to gain amounts from sales of real estate occurring in prior years.
(2)The gain on sale of real estate for this property was $28,000.
Boston Properties Limited Partnership
Gains on sales of real estate increased by approximately $14.4 million for the three months ended June 30, 2018 compared to 2017, as detailed below (dollars in millions):
Name Date Sold Property Type Square Feet Sale Price Cash Proceeds Gain on Sale of Real Estate  Date Sold Property Type Square Feet Sale Price Cash Proceeds Gains (Losses) on Sale of Real Estate 
2019       
One Tower Center June 3, 2019 Office 410,000 $38.0
 $36.6
 $(0.8) 
164 Lexington Road June 28, 2019 Office 64,000 4.0
 3.8
 2.5
 
 $42.0
 $40.4
 $1.7
 
2018                
91 Hartwell Avenue May 24, 2018 Office 119,000
 $22.2
 $21.7
 $15.9
(1) May 24, 2018 Office 119,000 $22.2
 $21.7
 $15.5
(1)
         
2017         
30 Shattuck Road April 19, 2017 Land N/A
 $5.0
 $5.0
 $3.7
 
40 Shattuck Road June 13, 2017 Office 122,000
 12.0
 11.9
 0.6
 
   $17.0
 $16.9
 $4.3
 
___________
(1)Excludes approximately $2.8 million of gains on sales of real estate recognized during the three months ended June 30, 2018 related to gain amounts from sales of real estate occurring in prior years.

Boston Properties Limited Partnership
Gains on sales of real estate decreased by approximately $16.9 million for the three months ended June 30, 2019 compared to 2018, as detailed below (dollars in millions).
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Name Date Sold Property Type Square Feet Sale Price Cash Proceeds Gains (Losses) on Sale of Real Estate 
2019             
One Tower Center June 3, 2019 Office 410,000
 $38.0
 $36.6
 $(0.8) 
164 Lexington Road June 28, 2019 Office 64,000
 4.0
 3.8
 2.6
 
        $42.0
 $40.4
 $1.8
 
2018             
91 Hartwell Avenue May 24, 2018 Office 119,000
 $22.2
 $21.7
 $15.9
(1)
___________
(1)Excludes approximately $2.8 million of gains on sales of real estate recognized during the three months ended June 30, 2018 related to gain amounts from sales of real estate occurring in prior years.
Interest and Other Income
Interest and other income increased by approximately $1.0 million for the three months ended June 30, 2019 compared to 2018 due primarily to an increase in interest rates.
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Gains from Investments in Securities
Gains from investments in securities for the three months ended June 30, 2019 and 2018 related to investments that we have made to reduce our market risk relating to a deferred compensation plan that we maintain for BXP’s officers. Under this deferred compensation plan, each officer who is eligible to participate is permitted to defer a portion of the officer’s current income on a pre-tax basis and receive a tax-deferred return on these deferrals based on the performance of specific investments selected by the officer. In order to reduce our market risk relating to this plan, we typically acquire, in a separate account that is not restricted as to its use, similar or identical investments as those selected by each officer. This enables us to generally match our liabilities to BXP’s officers under our deferred compensation plan with equivalent assets and thereby limit our market risk. The performance of these investments is recorded as gains from investments in securities. During the three months ended June 30, 2019 and 2018, we recognized gains of approximately $1.2 million and $0.5 million, respectively, on these investments. By comparison, our general and administrative expense increased by approximately $1.2 million and $0.5 million during the three months ended June 30, 2019 and 2018, respectively, as a result of increases in our liability under our deferred compensation plan that were associated with the performance of the specific investments selected by officers of BXP participating in the plan.
Interest Expense
Interest expense increased by approximately $10.2 million for the three months ended June 30, 2019 compared to 2018, as detailed below.
Component Change in interest expense for the three months ended June 30, 2019 compared to
June 30, 2018
  (in thousands)
Increases to interest expense due to:  
Issuance of $1 billion in aggregate principal of 4.500% senior notes due 2028 on November 28, 2018 $11,322
Decrease in capitalized interest related to development projects 5,485
Utilization of the 2017 Credit Facility 3,013
Increase in interest due to finance leases 1,120
Issuance of $850 million in aggregate principal of 3.400% senior notes due 2029 on June 21, 2019 804
Total increases to interest expense 21,744
Decreases to interest expense due to:  
Redemption of $700 million in aggregate principal of 5.875% senior notes due 2019 on December 13, 2018 (10,296)
Increase in capitalized interest related to development projects that had finance leases (1,120)
Other interest expense (excluding senior notes) (175)
Total decreases to interest expense (11,591)
Total change in interest expense $10,153
Interest expense directly related to the development of rental properties is capitalized and included in real estate assets on our Consolidated Balance Sheets and amortized over the useful lives of the real estate or lease term. As portions of properties are placed in-service, we cease capitalizing interest on these portions and interest is then expensed. Interest capitalized for the three months ended June 30, 2019 and 2018 was approximately $13.3 million and $17.6 million, respectively. These costs are not included in the interest expense referenced above.
At June 30, 2019, our outstanding variable rate debt consisted of BPLP’s $2.0 billion 2017 Credit Facility which consists of the $500.0 million Delayed Draw Facility and the $1.5 billion Revolving Facility. The Delayed Draw Facility had $500.0 million outstanding at June 30, 2019. At June 30, 2019, the Revolving Facility did not have any borrowings outstanding. For a summary of our consolidated debt as of June 30, 2019 and June 30, 2018 refer to
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the heading “Liquidity and Capital Resources—Capitalization—Debt Financing” within “Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Noncontrolling interests in property partnerships
Noncontrolling interests in property partnerships decreasedincreased by approximately $0.8$3.1 million for the three months ended June 30, 20182019 compared to 2017,2018, as detailed below.
Property Noncontrolling Interests in Property Partnerships for the three months ended June 30, Noncontrolling Interests in Property Partnerships for the three months ended June 30,
2018 2017 Change2019 2018 Change
 (in thousands) (in thousands)
Salesforce Tower(1) $(142) $(130) $(12) $—
 $(142) $142
767 Fifth Avenue (the General Motors Building) (1) (16) 3,206
 (3,222) 73
 (16) 89
Times Square Tower 6,725
 6,607
 118
 7,028
 6,725
 303
601 Lexington Avenue (2) 3,860
 2,042
 1,818
 4,871
 3,860
 1,011
100 Federal Street(2) 1,627
 1,148
 479
 3,129
 1,627
 1,502
Atlantic Wharf Office 2,346
 2,330
 16
 2,381
 2,346
 35
 $14,400
 $15,203
 $(803) $17,482
 $14,400
 $3,082
___________
(1)
On June 7, 2017,April 1, 2019, we acquired our consolidated entity in which we have a 60% interest completed the refinancing of indebtedness that had been secured by direct and indirect interests in 767 Fifth Avenue. Prior to this quarter, the net loss allocation was primarily duepartner’s 5% interest. See Note 8 to the partners’ share of the interest expense for the outside members’ notes payable, which was $7.1 million three months ended June 30, 2017. During the three months ended June 30, 2017, we recognized a net gain from early extinguishment of debt totaling approximately $14.6 million primarily consisting of the acceleration of the remaining balance related to the historical fair value debt adjustment and as a result, this assisted the property in having a net income allocation. In addition, revenue for the three months ended June 30, 2017 included termination income of approximately $6.3 million from tenants that terminated leases early at 767 Fifth Avenue (the General Motors Building), which did not reoccur during the three months ended June 30, 2018.Consolidated Financial Statements.
(2)On August 19, 2016, the consolidated entityThis increase was primarily due to an increase in which we have a 55% interest and that owns this property commenced the redevelopment of the six-story low-rise office and retail building component of the complex. The redeveloped portion, One Five Nine East 53rd Street, will contain approximately 220,000 square feet. We will capitalize incremental costs during the redevelopment. In addition, real estate operating expenses for the three months ended June 30, 2017 includes approximately $2.5 million of demolition costs, which did not reoccur during the three months ended June 30, 2018.lease revenue from our tenants.
Noncontrolling Interest—Common Units of Boston Properties Limited Partnership
For BXP, noncontrolling interest–common units of Boston Properties Limited Partnership decreasedincreased by approximately $0.6$4.2 million for the three months ended June 30, 20182019 compared to 20172018 due primarily to decreasesincreases in allocable income and in the noncontrolling interest’s ownership percentage. Due to our UPREIT ownership structure, there is no corresponding line item on BPLP’s financial statements.
Liquidity and Capital Resources
General
Our principal liquidity needs for the next twelve months and beyond are to:
fund normal recurring expenses;
meet debt service and principal repayment obligations, including balloon payments on maturing debt;
fund developmentdevelopment/redevelopment costs;
fund capital expenditures, including major renovations, tenant improvements and leasing costs;
fund planned and possible acquisitions of properties, either directly or indirectly through the acquisition of equity interests therein, including the acquisition price and promote payment to our partner for their 5% interest in Salesforce Tower;
fund dividend requirements on BXP’s Series B Preferred Stock; and
make the minimum distribution required to enable BXP to maintain its REIT qualification under the Internal Revenue Code of 1986, as amended.
We expect to satisfy these needs using one or more of the following:
cash flow from operations;

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distribution of cash flows from joint ventures;
cash and cash equivalent balances;
BPLP’s 2017 Credit Facility and other short-term bridge facilities;
construction loans;
long-term secured and unsecured indebtedness (including unsecured exchangeable indebtedness);
sales of real estate; and
issuances of BXP equity securities and/or additional preferred or common units of partnership interest in BPLP.BPLP.
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We draw on multiple financing sources to fund our long-term capital needs. Our current consolidated development properties are expected to be primarily funded with our available cash balances, construction loans and BPLP’s Revolving Facility, while our unconsolidated development projects are expected to be primarily funded with construction loans. We use BPLP’s Revolving Facility primarily as a bridge facility to fund acquisition opportunities, refinance outstanding indebtedness and meet short-term development and working capital needs. Although we may seek to fund our development projects with construction loans, which may require guarantees by BPLP, the financing for each particular project ultimately depends on several factors, including, among others, the project’s size and duration, the extent of pre-leasing and our available cash and access to cost effective capital at the given time.



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The following table presents information on properties under construction and redevelopment as of June 30, 20182019 (dollars in thousands):

         Financings     
Construction Properties Estimated Stabilization Date Location # of Buildings Estimated Square Feet Investment to Date (1) Estimated Total Investment (1) Estimated Future Equity Requirement (1) Percentage Leased (2)  Estimated Stabilization Date Location # of Buildings Estimated Square Feet Investment to Date (1)(2)(3) Estimated Total Investment (1)(2) Total Available (1) Outstanding at 6/30/2019 (1) Estimated Future Equity Requirement (1)(2)(4) Percentage Leased (5) 
Office                              
Salesforce Tower (95% ownership) Q3 2019 San Francisco, CA 1
 1,400,000
 $1,027,613
 $1,073,500
 $50,576
 98%(3)
The Hub on Causeway - Podium (50% ownership) Q4 2019 Boston, MA 1
 385,000
 85,687
 141,870
 —
 88%(4) Q4 2019 Boston, MA 1
 385,000
 $140,749
 $141,870
 $102,300
 $77,980
 $—
 89%(6)
145 Broadway Q4 2019 Cambridge, MA 1
 485,000
 166,821
 375,000
 208,179
 98%  Q4 2019 Cambridge, MA 1
 485,000
 279,624
 366,400
 —
 —
 86,776
 98% 
17Fifty Presidents Street Q3 2020 Reston, VA 1
 276,000
 77,338
 142,900
 —
 —
 65,562
 100% 
20 CityPoint Q1 2021 Waltham, MA 1
 211,000
 76,112
 97,000
 —
 —
 20,888
 63%(7)
Dock 72 (50% ownership) Q3 2020 Brooklyn, NY 1
 670,000
 131,944
 204,900
 —
 33%(5) Q3 2021 Brooklyn, NY 1
 670,000
 178,592
 243,150
 125,000
 71,746
 11,304
 33% 
17Fifty Presidents Street Q3 2020 Reston, VA 1
 276,000
 27,968
 142,900
 114,932
 100% 
6595 Springfield Center Drive (TSA Headquarters) Q4 2020 Springfield, VA 1
 634,000
 78,009
 313,700
 235,691
 98% 
20 CityPoint Q1 2021 Waltham, MA 1
 211,000
 31,263
 97,000
 65,737
 52% 
325 Main Street Q3 2022 Cambridge, MA 1
 420,000
 59,548
 418,400
 —
 —
 358,852
 90% 
100 Causeway Street (50% ownership) Q3 2022 Boston, MA 1
 627,000
 91,697
 267,300
 —
 —
 175,603
 81% 
7750 Wisconsin Avenue (Marriott International Headquarters) (50% ownership) Q3 2022 Bethesda, MD 1
 740,000
 46,046
 211,100
 165,054
 100%(6) Q3 2022 Bethesda, MD 1
 734,000
 75,181
 198,900
 127,500
 —
 —
 100% 
Reston Gateway Q4 2023 Reston, VA 2
 1,062,000
 73,532
 715,300
 —
 —
 641,768
 80% 
Total Office Properties under ConstructionTotal Office Properties under Construction 8
 4,801,000
 1,595,351
 2,559,970
 840,169
 87% Total Office Properties under Construction 10
 4,870,000
 1,052,373
 2,591,220
 354,800
 149,726
 1,360,753
 80% 
Residential                              
Proto Kendall Square (280 units) Q2 2019 Cambridge, MA 1
 152,000
 129,902
 140,170
 10,268
 37%(7)
Proto Kendall Square - Retail —
 14,500
 —
 —
 —
 98% 
The Hub on Causeway - Residential (440 units) (50% ownership) Q4 2021 Boston, MA 1
 320,000
 49,629
 153,500
 13,871
  N/A
(8) Q4 2021 Boston, MA 1
 320,000
 118,237
 153,500
 90,000
 41,778
 —
 18% 
MacArthur Station Residences (402 units) Q4 2021 Oakland, CA 1
 324,000
 31,030
 263,600
 232,570
  N/A
(9)
The Skylyne (MacArthur Station Residences) (402 units) Q4 2021 Oakland, CA 1
 324,000
 127,135
 263,600
 —
 —
 136,465
  N/A
(8)
Total Residential Properties under ConstructionTotal Residential Properties under Construction 3
 810,500
 210,561
 557,270
 256,709
 98%(10)Total Residential Properties under Construction 2
 644,000
 245,372
 417,100
 90,000
 41,778
 136,465
 18% 
Redevelopment PropertiesRedevelopment Properties             Redevelopment Properties                 
191 Spring Street Q4 2018 Lexington, MA 1
 171,000
 46,413
 53,920
 7,507
 100%(11)
One Five Nine East 53rd Street (55% ownership) Q4 2019 New York, NY —
 220,000
 88,557
 106,000
 17,443
 89%(12) Q3 2020 New York, NY —
 220,000
 114,866
 150,000
 —
 —
 35,134
 96%(9)
Total Properties under RedevelopmentTotal Properties under Redevelopment 1
 391,000
 134,970
 159,920
 24,950
 94% Total Properties under Redevelopment —
 220,000
 114,866
 150,000
 —
 —
 35,134
 96% 
Total Properties under Construction and RedevelopmentTotal Properties under Construction and Redevelopment 12
 6,002,500
 $1,940,882
 $3,277,160
 $1,121,828
 88%(10)Total Properties under Construction and Redevelopment 12
 5,734,000
 $1,412,611
 $3,158,320
 $444,800
 $191,504
 $1,532,352
 81%(10)
___________  
(1)Represents our share. Investment to Date and Estimated Total Investment includes net revenue during lease up period, acquisition expenses and approximately $82.1 million of construction cost and leasing commission accruals.
(2)Investment to Date, Estimated Total Investment and Estimated Future Equity Requirement all include our share of acquisition expenses, as applicable, and reflect our share of the estimated net revenue/expenses that we expect to incur prior to stabilization of the project, including any amounts actually received or paid through June 30, 2019.
(3)Includes approximately $162.2 million of unpaid but accrued construction costs and leasing commissions.
(4)Excludes approximately $162.2 million of unpaid but accrued construction costs and leasing commissions.
(5)Represents percentage leased of office and redevelopment properties as of August 6, 2018 and residential properties as of August 2, 2018,2019, including leases with future commencement dates.
(3)(6)Under the joint venture agreement, if the project is funded with 100% equity, we have agreed to fund 50% of our partner’s equity requirement, structured as preferred equity. We expect to fund approximately $25.4 million at a per annum interest rate of LIBOR plus 3.0% and receive priority distributions from all distributions to our partner until the principal and interest are repaid in full. As of June 30, 2018, we had funded an aggregate of approximately $20.7 million of preferred equity to the venture. This property is 28%39% placed in-service as of June 30, 2018. Estimated Total Investment and Estimated Future Equity Requirement excludes the acquisition price and promote payment to our partner for their 5% interest (See Note 7 to the Consolidated Financial Statements).
(4)This development has a $102.3 million (our share) construction loan facility. As of June 30, 2018, $17.6 million (our share) has been drawn under this facility.

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(5)This development has a $125 million (our share) construction loan facility. As of June 30, 2018, $47.7 million (our share) has been drawn under this facility.
(6)Rentable square feet is an estimate based on current building design.2019.
(7)This property is 46%2% placed in-service as of June 30, 2018.2019.
(8)This development has a $90.0 million (our share) construction loan facility. As of June 30, 2018, no amount has been drawn under this facility.
(9)This development is subject to a 99-year ground lease (including extension options) with an option to purchase in the future.
(9)The low-rise portion of 601 Lexington Avenue.
(10)Percentage leased excludes residential units.
(11)This property is 46% placed in-service, as of June 30, 2018.
(12)The low-rise portion of 601 Lexington Avenue. Percentage leased


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Lease revenue (which includes a lease signed August 6, 2018 for 100% of the office space. The lease is held in escrow pending satisfaction of the escrow conditions.

Contractual rental revenue, recoveries from tenants,tenants), other income from operations, available cash balances, mortgage financings and draws on BPLP’s Revolving Facility are the principal sources of capital that we use to fund operating expenses, debt service, maintenance and repositioning capital expenditures, tenant improvements and the minimum distribution required to enable BXP to maintain its REIT qualification. We seek to maximize income from our existing properties by maintaining quality standards for our properties that promote high occupancy rates and permit increases in rental rates while reducing tenant turnover and controlling operating expenses. Our sources of revenue also include third-party fees generated by our property management, leasing and development and construction businesses, as well as the sale of assets from time to time. We believe our revenue, together with our cash balances and proceeds from financing activities, will continue to provide the funds necessary for our short-term liquidity needs, including our properties under development and redevelopment.
Material adverse changes in one or more sources of capital may adversely affect our net cash flows. In turn, these changes could adversely affect our ability to fund operating expenses, dividends and distributions, debt service payments, maintenance and repositioning capital expenditures and tenant improvements. In addition, a material adverse change in the cash provided by our operations may affect our ability to comply with the financial covenants under BPLP’s 2017 Credit Facility and unsecured senior notes.
Subsequent to the quarter we made two important investments:
On July 13, 2018, we entered into a joint venture with a third party to acquire a development site at 3 Hudson Boulevard that, upon the future acquisition of additional available development rights, can accommodate a Class A office tower with up to 2.0 million net rentable square feet located on the entire square block between 11th Avenue and Hudson Boulevard Park from West 34th Street to West 35th Street in New York City.  We own a 25% interest in and will be the managing member of the joint venture.  The acquisition includes improvements consisting of excavation work and foundation elements that are currently being constructed on the site. We contributed cash totaling approximately $45.6 million at closing and will contribute in the future approximately $62.2 million for our initial capital contribution, a portion of which will fund the remaining costs to complete the foundation elements to grade for the future office building.  In addition, we have provided $80.0 million of mortgage financing to the joint venture, which bears interest at a variable rate equal to LIBOR plus 3.50% per annum and matures on July 13, 2023, with extension options, subject to certain conditions.
On July 19, 2018, we completed the acquisition of Santa Monica Business Park in the Ocean Park neighborhood of Santa Monica, California for a purchase price of approximately $627.5 million, including $11.5 million of seller funded leasing costs after the effective date of the purchase and sale agreement. Santa Monica Business Park is a 47-acre office park consisting of 21 buildings totaling approximately 1.2 million net rentable square feet. Approximately 70% of the rentable square footage is subject to a ground lease with 80 years remaining, including renewal periods. The ground lease provides us with the right to purchase the land underlying the properties in 2028 with subsequent purchase rights every 15 years. The property is 94% leased. The acquisition was completed in a joint venture with Canada Pension Plan Investment Board, which invested approximately $147.4 million for a 45% ownership interest in the joint venture. We will provide customary operating, property management and leasing services to, and invested approximately $180.1 million in the joint venture. The acquisition was completed with $300.0 million of financing. The mortgage financing bears interest at a variable rate equal to LIBOR plus 1.28% per annum and matures on July 19, 2025. At closing, the borrower under the loan, which is a subsidiary of the joint

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venture, entered into interest rate swap contracts with notional amounts aggregating $300.0 million through April 1, 2025, resulting in a fixed rate of approximately 4.063% per annum through the expiration of the interest rate swap contracts.
Our primary uses of capital will be the completion of our current and committed development and redevelopment projects. As of June 30, 2018,2019, our share of the remaining development and redevelopment costs that we expect to fund through 20222023 is approximately $1.1$1.5 billion. In addition, in the third quarter of 2019, we executed a 75-year ground lease for land parcels at 2100 Pennsylvania Avenue located in Washington, DC and, as we had previously secured an anchor tenant, we commenced development of an approximately 480,000 net rentable square foot project with an estimated total investment of approximately $360 million.
As of August 2, 2019, we have approximately $1.4 billion (our share) in pending new developments for which we have anchor-lease commitments, but have not yet commenced construction, including 2100 Pennsylvania Avenue in Washington, DC, Reston Gateway in Reston, Virginia and 100 Causeway Street in Boston, Massachusetts.
With approximately $316$825 million of cash and cash equivalents, of which approximately $93 million is attributable to our consolidated joint venture partners, and approximately $1.3$1.5 billion available under BPLP'sBPLP’s Revolving Facility, as of August 2, 2018, we have sufficient capital to fund our current development and redevelopment projects.Facility. We believe that our strong liquidity, including the availability under BPLP’s Revolving Facility, and proceeds from debt financings and asset sales will provide sufficient liquidity to fund our remaining capital requirements on existing development and redevelopment projects, fund pending new developments and still be able to act opportunistically on attractive investment opportunities.
During the second quarter of 2018,2019, we enhanced our liquidity throughby (1) a $180.0issuing $850 million construction financing obtained byof 3.400% unsecured senior notes due in 2029, generating approximately $841.3 million of net proceeds after issuance costs, (2) selling three assets, generating net proceeds to us of approximately $147.5 million and (3) a joint venture, in which we have a 50% interest, obtaining construction financing with a total commitment of $255.0 million collateralized by its Hub on Causeway - Residential7750 Wisconsin Avenue development project located in Boston, Massachusetts, (2) borrowing the maximum of $500.0 million under the Delayed Draw Facility and (3) a $120.0 million refinancing collateralized by our 540 Madison Avenue joint venture property, in which we have a 60% interest, located in New York City that reduced the stated interest rate by 0.40% per annum.Bethesda, Maryland. Excluding our unconsolidated joint venture assets, we have no debt maturing in 2018 and $700.0 million of 5.875% unsecured senior notes that mature in October 2019.
We also have not sold any shares under BXP'sBXP’s $600.0 million at the market (ATM) program.
We may seek to enhance our liquidity to provide sufficient capacity to meet our debt obligations and to fund our remaining capital requirements on existing development/redevelopment projects, our foreseeable potential development activity and pursue additional attractive investment opportunities. Depending on interest rates and overall conditions in the debt markets, we may decide to access the debt markets in advance of the need for the funds. Doing so may result in us carrying additional cash and cash equivalents pending BPLP’s use of the proceeds, which would increase our net interest expense and it would be dilutive to our earnings by increasing our net interest expense.earnings.
REIT Tax Distribution Considerations
Dividend
BXP as a REIT is subject to a number of organizational and operational requirements, including a requirement that BXP currently distribute at least 90% of its annual taxable income (excluding capital gains and with certain other adjustments). Our policy is for BXP to distribute at least 100% of its taxable income, including capital gains, to avoid paying federal tax. On DecemberSeptember 18, 2017,2018, the Board of Directors of BXP increased our regular quarterly dividend from $0.75$0.80 per common share to $0.80$0.95 per common share, or 6.7%18.75%, beginning with the fourththird quarter of 2017. The second quarter dividend was paid on July 31, 2018 to shareholders of record as of the close of business on June 29, 2018. Common and LTIP unitholders of limited partnership interest in BPLP, as of the close of business on June 29, 2018, received the same total distribution per unit on July 31, 2018.unit.
BXP’s Board of Directors will continue to evaluate BXP’s dividend rate in light of our actual and projected taxable income, liquidity requirements and other circumstances, and there can be no assurance that the future dividends declared by itsBXP’s or our Board of Directors will not differ materially.
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Sales
To the extent that we sell assets at a gain and cannot efficiently use the proceeds in a tax deferred manner for either our development activities or attractive acquisitions, BXP would, at the appropriate time, decide whether it is better to declare a special dividend, adopt a stock repurchase program, reduce indebtedness or retain the cash for future investment opportunities. Such a decision will depend on many factors including, among others, the timing, availability and terms of development and acquisition opportunities, our then-current and anticipated leverage, the cost and availability of capital from other sources, the price of BXP’s common stock and REIT distribution requirements. At a minimum, we expect that BXP would distribute at least that amount of proceeds necessary for BXP to avoid paying corporate level tax on the applicable gains realized from any asset sales.

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From time to time in selected cases, whether due to a change in use, structuring issues to comply with applicable REIT regulations or other reasons, we may sell an asset that is held by a taxable REIT subsidiary ("TRS"(“TRS”). Such a sale by a TRS would be subject to federal and local taxes.
Cash Flow Summary
The following summary discussion of our cash flows is based on the Consolidated Statements of Cash Flows and is not meant to be an all-inclusive discussion of the changes in our cash flows for the periods presented below.
Cash and cash equivalents and cash held in escrows aggregated approximately $727.1 million$1.2 billion and $539.8$727.1 million at June 30, 20182019 and 2017,2018, respectively, representing an increase of approximately $187.3$435.9 million. The following table sets forth changes in cash flows:
Six months ended June 30,Six months ended June 30,
2018 2017 Increase
(Decrease)		2019 2018 Increase
(Decrease)
(in thousands)
Net cash provided by operating activities$560,846
 $364,809
 $196,037
$565,604
 $560,846
 $4,758
Net cash used in investing activities(485,801) (547,678) 61,877
(327,952) (485,801) 157,849
Net cash provided by financing activities146,646
 302,561
 (155,915)286,081
 146,646
 139,435
Our principal source of cash flow is related to the operation of our properties. The average term of our in-place tenant leases, including our unconsolidated joint ventures, is approximately 7.37.9 years with occupancy rates historically in the range of 90% to 94%. Our properties generate a relatively consistent stream of cash flow that provides us with resources to pay operating expenses, debt service and fund regular quarterly dividend and distribution payment requirements. In addition, over the past several years, we have raised capital through the sale of some of our properties, secured and unsecured borrowings, and equity offerings of BXP.
Cash is used in investing activities to fund acquisitions, development, net investments in unconsolidated joint ventures and maintenance and repositioning capital expenditures. We selectively invest in new projects that enable us to take advantage of our development, leasing, financing and property management skills and invest in existing buildings to enhance or maintain their market position. Cash used in investing activities for the six months ended June 30, 2019 consisted primarily of the acquisition of real estate, development projects, building and tenant improvements and capital contributions to unconsolidated joint ventures, partially offset by the proceeds from the sales of real estate and capital distributions from unconsolidated joint ventures. Cash used in investing activities for the six months ended June 30, 2018 consisted primarily of development projects, building and tenant improvements and capital contributions to unconsolidated joint ventures, partially offset by the proceeds from sales orof real estate. Cash used in investing activities for the six months ended June 30, 2017 consisted primarily of development projects, building and tenant improvements and capital contributions to unconsolidated joint ventures,estate, as detailed below:
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Six months ended June 30,Six months ended June 30,
2018 20172019 2018
(in thousands)(in thousands)
Acquisition of real estate (1)$—
 $(15,953)$(43,061) $—
Construction in progress (2)(380,565) (297,747)(203,259) (380,565)
Building and other capital improvements(96,730) (100,808)(79,943) (96,730)
Tenant improvements(83,982) (107,533)(115,940) (83,982)
Proceeds from sales of real estate (3)141,249
 17,049
60,398
 141,249
Capital contributions to unconsolidated joint ventures (4)(65,250) (41,491)(50,068) (65,250)
Capital distributions from unconsolidated joint ventures (5)105,000
 —
Investments in securities, net(523) (1,195)(1,079) (523)
Net cash used in investing activities$(485,801) $(547,678)$(327,952) $(485,801)
___________  
(1)On May 15, 2017,January 10, 2019, we acquired 103land parcels at our Carnegie Center property located in Princeton, New Jersey for a gross purchase price of approximately $16.0$51.5 million, which includes an aggregate of approximately $8.6 million of additional amounts that are payable in cash, including transaction costs.the future to the seller upon the development or sale of each of the parcels. The land parcels will support approximately 1.7 million square feet of development.
(2)
Construction in progress for the six months ended June 30, 20182019 includes ongoing expenditures associated with 191 Spring Street, Salesforce Tower, Signature at Reston and Proto Kendall Square, which were partially or fullywas placed in-service during the six monthsyear ended June 30,December 31, 2018. In addition, we incurred costs associated with our continued development/redevelopment of One Five Nine East 53rd Street, 145
Broadway, 20 CityPoint, 17Fifty Presidents Street, Reston Gateway, The Skylyne (MacArthur Station Residences) and 325 Main Street.

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Broadway, 20 CityPoint, 17Fifty Presidents Street, 6595 Springfield Center Drive and MacArthur Station Residences projects.
Construction in progress for the six months ended June 30, 20172018 includes ongoing expenditures associated with Reservoir Place North, 888 Boylston191 Spring Street, Salesforce Tower, Signature at Reston and the Prudential Center retail expansion,Proto Kendall Square, which were partially or fully placed in-service during the six months ended June 30, 2017.2018. In addition, we incurred costs associated with our continued development/redevelopment of Salesforce Tower, One Five Nine East 53rd Street, 191 Spring Street, 145 Broadway, MacArthur20 CityPoint, 17Fifty Presidents Street, 6595 Springfield Center Drive and The Skylyne (MacArthur Station Residences, Proto Kendall Square and Signature at Reston.Residences) projects.
(3)On January 9, 2018,24, 2019, we completed the sale of our 500 E Street, S.W.2600 Tower Oaks Boulevard property located in Washington, DCRockville, Maryland for a net contractgross sale price of approximately $118.6$22.7 million. Net cash proceeds totaled approximately $116.1$21.4 million, resulting in a gainloss on sale of real estate totaling approximately $96.4 million for BXP and approximately $98.9 million for BPLP. 500 E Street, S.W.$0.6 million. 2600 Tower Oaks Boulevard is an approximately 262,000179,000 net rentable square foot Class A office property.
On June 3, 2019, we completed the sale of our One Tower Center property located in East Brunswick, New Jersey for a gross sale price of $38.0 million. Net cash proceeds totaled approximately $36.6 million, resulting in a loss on sale of real estate totaling approximately $0.8 million. One Tower Center is an approximately 410,000 net rentable Class A office property.
On June 28, 2019, we completed the sale of our 164 Lexington Road property located in Billerica, Massachusetts for a gross sale price of $4.0 million. Net cash proceeds totaled approximately $3.8 million, resulting in a gain on sale of real estate totaling approximately $2.5 million for BXP and approximately $2.6 million for BPLP. 164 Lexington Road is an approximately 64,000 net rentable square foot Class A office property.
On January 9, 2018, we completed the sale of our 500 E Street, S.W. property located in Washington, DC for a net contract sale price of approximately $118.6 million. Net cash proceeds totaled approximately $116.1 million, resulting in a gain on sale of real estate totaling approximately $96.4 million for BXP and approximately $98.9 million for BPLP. 500 E Street, S.W. is an approximately 262,000 net rentable square foot Class A office property.
On May 24, 2018, we completed the sale of our 91 Hartwell Avenue property located in Lexington, Massachusetts for a gross sale price of approximately $22.2 million. Net cash proceeds totaled approximately $21.7 million, resulting in a gain on sale of real estate totaling approximately $15.5 million for BXP.
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BXP and approximately $15.9 million for BPLP. 91 Hartwell Avenue is an approximately 119,000 net rentable square foot Class A office property.
On April 19, 2017, we completed the sale of an approximately 9.5-acre parcel of land at 30 Shattuck Road located in Andover, Massachusetts for a gross sale price of $5.0 million. Net cash proceeds totaled approximately $5.0 million.
On June 13, 2017, we completed the sale of 40 Shattuck Road located in Andover, Massachusetts for a gross sale price of $12.0 million. Net cash proceeds totaled approximately $11.9 million.
(4)
Capital contributions to unconsolidated joint ventures for the six months ended June 30, 20182019 consisted primarily of cash contributions of approximately $46.5$36.2 million and $17.2$8.6 million to our 7750 Wisconsin Avenue and Hub on Causeway and Dock 72 joint ventures, respectively.
Capital contributions to unconsolidated joint ventures for the six months ended June 30, 2017 were2018 consisted primarily due toof cash contributions of approximately $21.9$46.5 million and $19.4$17.2 million to our Dock 727750 Wisconsin Avenue and Hub on Causeway joint ventures, respectively.
(5)Capital distributions from unconsolidated joint ventures for the six months ended June 30, 2019 consisted of a cash distribution totaling approximately $105.0 million from our 540 Madison Avenue joint venture resulting from the net proceeds from the sale of the property.
Cash provided by financing activities for the six months ended June 30, 20182019 totaled approximately $146.6$286.1 million. This consisted primarily of the proceeds from our Delayed Draw Facility totaling $500.0the issuance by BPLP of $850.0 million in aggregate principal amount of its 3.400% senior unsecured notes due 2029, partially offset by the payment of our regular dividends and distributions to our shareholders and unitholders.unitholders and the acquisition of our partner's 5% ownership interest and promoted profits interest in the consolidated entity that owns Salesforce Tower located in San Francisco, California. Future debt payments are discussed below under the heading “Capitalization—Debt Financing.”

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Capitalization
The following table presents Consolidated Market Capitalization and BXP’s Share of Market Capitalization, as well as the corresponding ratios of Consolidated Debt to Consolidated Market Capitalization and BXP’s Share of Debt to BXP’s Share of Market Capitalization (in thousands except for percentages):
 June 30, 2018  June 30, 2019 
 Shares / Units Outstanding Common Stock Equivalent Equivalent Value (1)  Shares / Units Outstanding Common Stock Equivalent Equivalent Value (1) 
Common Stock 154,412
 154,412
 $19,366,353
  154,563
 154,563
 $19,938,627
 
Common Operating Partnership Units 17,824
 17,824
 2,235,486
(2) 18,017
 18,017
 2,324,193
(2)
5.25% Series B Cumulative Redeemable Preferred Stock (callable on and after March 27, 2018) 80
 —
 200,000
  80
 —
 200,000
 
Total Equity   172,236
 $21,801,839
    172,580
 $22,462,820
 
              
Consolidated Debt   

 $10,721,878
    

 $11,846,241
 
Add: 
      
     
BXP’s share of unconsolidated joint venture debt (3)     648,935
      865,894
 
Subtract:              
Partners’ share of Consolidated Debt (4)     (1,207,123)      (1,202,353) 
BXP’s Share of Debt     $10,163,690
      $11,509,782
 
              
Consolidated Market Capitalization     $32,523,717
      $34,309,061
 
BXP’s Share of Market Capitalization     $31,965,529
      $33,972,602
 
Consolidated Debt/Consolidated Market Capitalization     32.97%      34.53% 
BXP’s Share of Debt/BXP’s Share of Market CapitalizationBXP’s Share of Debt/BXP’s Share of Market Capitalization   31.80% BXP’s Share of Debt/BXP’s Share of Market Capitalization   33.88% 
_______________  
(1)Except for the Series B Cumulative Redeemable Preferred Stock, which is valued at the liquidation preference of $2,500.00 per share, values are based on the closing price per share of BXP’s Common Stock on June 29, 201828, 2019 of $125.42.$129.00.
(2)Includes long-term incentive plan units (including 2012 OPP Units, 2013 MYLTIP Units, 2014 MYLTIP Units, 2015 MYLTIP Units and 20152016 MYLTIP Units), but excludes MYLTIP Units granted between 20162017 and 2018.2019.
(3)See page 8290 for additional information.
(4)See page 8189 for additional information.

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Consolidated Debt to Consolidated Market Capitalization Ratio is a measure of leverage commonly used by analysts in the REIT sector. We present this measure as a percentage and it is calculated by dividing (A) our consolidated debt by (B) our consolidated market capitalization, which is the market value of our outstanding equity securities plus our consolidated debt. Consolidated market capitalization is the sum of:
(1)     our consolidated debt; plus
(2)     the product of (x) the closing price per share of BXP common stock on June 29, 2018,28, 2019, as reported by the New York Stock Exchange, multiplied by (y) the sum of:
(i)the number of outstanding shares of common stock of BXP,
(ii)the number of outstanding OP Units in BPLP (excluding OP Units held by BXP),
(iii)the number of OP Units issuable upon conversion of all outstanding LTIP Units, assuming all conditions have been met for the conversion of the LTIP Units, and
(iv)the number of OP Units issuable upon conversion of 2012 OPP Units, 2013 MYLTIP Units, 2014 MYLTIP Units, 2015 MYLTIP Units and 20152016 MYLTIP Units that were issued in the form of LTIP Units; plus
(3)     the aggregate liquidation preference ($2,500 per share) of the outstanding shares of BXP’s 5.25% Series B Cumulative Redeemable Preferred Stock.

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The calculation of consolidated market capitalization does not include LTIP Units issued in the form of MYLTIP Awards unless and until certain performance thresholds are achieved and they are earned. Because their three-year performance periods have not yet ended, 2016, 2017, 2018 and 20182019 MYLTIP Units are not included in this calculation as of June 30, 2018.2019.
We also present BXP’s Share of Market Capitalization, which is calculated in the same manner, except that BXP’s Share of Debt is utilized instead of our consolidated debt in both the numerator and the denominator. BXP’s Share of Debt is defined as our consolidated debt plus our share of debt from our unconsolidated joint ventures (calculated based upon our ownership percentage), minus our partners’ share of debt from our consolidated joint ventures (calculated based upon the partners’ percentage ownership interests adjusted for basis differentials). Management believes that BXP’s Share of Debt provides useful information to investors regarding our financial condition because it includes our share of debt from unconsolidated joint ventures and excludes our partners’ share of debt from consolidated joint ventures, in each case presented on the same basis. We have several significant joint ventures and presenting various measures of financial condition in this manner can help investors better understand our financial condition and/or results of operations after taking into account our economic interest in these joint ventures.  We caution investors that the ownership percentages used in calculating BXP’s Share of Debt may not completely and accurately depict all of the legal and economic implications of holding an interest in a consolidated or unconsolidated joint venture. For example, in addition to partners’ interests in profits and capital, venture agreements vary in the allocation of rights regarding decision making (both for routine and major decisions), distributions, transferability of interests, financing and guarantees, liquidations and other matters.  Moreover, in some cases we exercise significant influence over, but do not control, the joint venture in which case GAAP requires that we account for the joint venture entity using the equity method of accounting and we do not consolidate it for financial reporting purposes. In other cases, GAAP requires that we consolidate the venture even though our partner(s) owns a significant percentage interest.  As a result, presentationsmanagement believes that the presentation of BXP’s Share of a financial measure should not be considered a substitute for, and should only be considered with and as a supplement to our financial information presented in accordance with GAAP.
We present these supplemental ratios because our degree of leverage could affect our ability to obtain additional financing for working capital, capital expenditures, acquisitions, development or other general corporate purposes and because different investors and lenders consider one or both of these ratios. Investors should understand that these ratios are, in part, a function of the market price of the common stock of BXP and as such will fluctuate with changes in such price, and they do not necessarily reflect our capacity to incur additional debt to finance our activities or our ability to manage our existing debt obligations. However, for a company like BXP, whose assets are primarily income-producing real estate, these ratios may provide investors with an alternate indication of
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leverage, so long as they are evaluated along with the ratio of indebtedness to other measures of asset value used by financial analysts and other financial ratios, as well as the various components of our outstanding indebtedness.
For a discussion of our unconsolidated joint venture indebtedness, see “Liquidity and Capital Resources—Capitalization—Off-Balance Sheet Arrangements—Joint Venture Indebtedness” within “Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations” and for a discussion of our consolidated joint venture indebtedness see “Liquidity and Capital Resources—Capitalization—Mortgage Notes Payable, Net” within “Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Debt Financing
As of June 30, 2018,2019, we had approximately $10.7$11.8 billion of outstanding consolidated indebtedness, representing approximately 32.97%34.53% of our Consolidated Market Capitalization as calculated above consisting of approximately (1) $7.3$8.4 billion (net of discount and deferred financing fees) in publicly traded unsecured senior notes having a GAAP weighted-average interest rate of 4.15%3.99% per annum and maturities in 20192020 through 2026;2029; (2) $3.0 billion (net of deferred financing fees) of property-specific mortgage debt having a GAAP weighted-average interest rate of 3.95%3.94% per annum and weighted-average term of 7.76.7 years and (3) $498.2$498.7 million (net of deferred financing fees) outstanding under BPLP's Delayed DrawBPLP’s 2017 Credit Facility that matures on April 24, 2022.
The table below summarizes the aggregate carrying value of our mortgage notes payable and BPLP’s unsecured senior notes, line of credit and term loan as well as Consolidated Debt Financing Statistics at June 30, 20182019 and June 30, 2017.

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June 30,June 30,
2018 20172019 2018
(dollars in thousands)(dollars in thousands)
Debt Summary:      
Balance      
Fixed rate mortgage notes payable, net$2,972,052
 $2,986,283
$2,956,833
 $2,972,052
Unsecured senior notes, net of discount7,251,578
 7,250,356
8,390,708
 7,251,578
Unsecured line of credit—
 —
—
 —
Unsecured term loan, net498,248
 —
498,700
 498,248
Consolidated Debt10,721,878
 10,236,639
11,846,241
 10,721,878
Add:      
BXP’s share of unconsolidated joint venture debt, net (1)648,935
 317,724
865,894
 648,935
Subtract:      
Partners’ share of consolidated mortgage notes payable, net (2)(1,207,123) (1,211,485)(1,202,353) (1,207,123)
BXP’s Share of Debt$10,163,690
 $9,342,878
$11,509,782
 $10,163,690

      
June 30,June 30,
2018 20172019 2018
Consolidated Debt Financing Statistics:      
Percent of total debt:      
Fixed rate95.35% 100.00%95.79% 95.35%
Variable rate4.65% —%4.21% 4.65%
Total100.00% 100.00%100.00% 100.00%
GAAP Weighted-average interest rate at end of period:      
Fixed rate4.09% 4.13%3.98% 4.09%
Variable rate2.98% —%3.43% 2.98%
Total4.04% 4.13%3.95% 4.04%
Coupon/Stated Weighted-average interest rate at end of period:      
Fixed rate3.98% 4.03%3.87% 3.98%
Variable rate2.88% —%3.34% 2.88%
Total3.93% 4.03%3.85% 3.93%
Weighted-average maturity at end of period (in years):      
Fixed rate5.9
 6.4
5.9
 5.9
Variable rate3.8
 —
2.8
 3.8
Total5.8
 6.4
5.8
 5.8
_______________  
(1)See page 8290 for additional information.
(2)See page 8189 for additional information.
Credit Facility
On April 24, 2017, BPLP entered into the 2017 Credit Facility. Among other things, the 2017 Credit Facility (1) increased the total commitment of the revolving line of credit (the "Revolving Facility")Revolving Facility from $1.0 billion to $1.5 billion, (2) extended the maturity date from July 26, 2018 to April 24, 2022, (3) reduced the per annum variable interest rates, and (4) added a $500.0 million Delayed Draw Facility that permits BPLP to draw until the first anniversary of the closing date. Based on BPLP’s currentJune 30, 2019 credit rating, (1) the applicable Eurocurrency margins for the Revolving Facility and Delayed Draw Facility are 82.5 basis points and 90 basis points, respectively, and (2) the facility fee on the Revolving Facility commitment is 0.125% per annum.
On April 24, 2018, BPLP exercised its option to draw $500.0 million on its Delayed Draw Facility. The Delayed Draw Facility bears interest at a variable rate equal to LIBOR plus 0.90% per annum based on BPLP's current creditBPLP’s June 30, 2019 rating and matures on April 24, 2022.


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As of June 30, 2018,2019, BPLP had $500.0 million of borrowings outstanding under its Delayed Draw Facility, no borrowings under its Revolving Facility and outstanding letters of credit totaling approximately $1.6$0.2 million outstanding with the ability to borrow approximately $1.5 billion under the Revolving Facility. As ofoff August 2, 2018,2019, BPLP had $500.0 million of borrowings outstanding under its Delayed Draw Facility, $160 million ofno borrowings under its Revolving Facility and outstanding letters of credit totaling approximately $0.3$3.2 million outstanding with the ability to borrow approximately $1.3$1.5 billion under the Revolving Facility.
Unsecured Senior Notes, Net
The following summarizes theFor a description of BPLP’s outstanding unsecured senior notes outstanding as of June 30, 2018 (dollars2019, See Note 6 to the Consolidated Financial Statements.
On June 21, 2019, BPLP completed a public offering of $850.0 million in thousands):aggregate principal amount of its 3.400% unsecured senior notes due 2029. The notes were priced at 99.815% of the principal amount to yield an effective rate (including financing fees) of approximately 3.505% per annum to maturity. The notes will mature on June 21, 2029, unless earlier redeemed. The aggregate net proceeds from the offering were approximately $841.3 million after deducting underwriting discounts and transaction expenses.
 Coupon/Stated Rate Effective Rate (1) Principal Amount Maturity Date (2)
10 Year Unsecured Senior Notes5.875% 5.967% $700,000
 October 15, 2019
10 Year Unsecured Senior Notes5.625% 5.708% 700,000
 November 15, 2020
10 Year Unsecured Senior Notes4.125% 4.289% 850,000
 May 15, 2021
11 Year Unsecured Senior Notes3.850% 3.954% 1,000,000
 February 1, 2023
10.5 Year Unsecured Senior Notes3.125% 3.279% 500,000
 September 1, 2023
10.5 Year Unsecured Senior Notes3.800% 3.916% 700,000
 February 1, 2024
7 Year Unsecured Senior Notes3.200% 3.350% 850,000
 January 15, 2025
10 Year Unsecured Senior Notes3.650% 3.766% 1,000,000
 February 1, 2026
10 Year Unsecured Senior Notes2.750% 3.495% 1,000,000
 October 1, 2026
Total principal    7,300,000
  
Net unamortized discount    (16,563)  
Deferred financing costs, net    (31,859)  
Total    $7,251,578
  
_______________
(1)Yield on issuance date including the effects of discounts on the notes, settlements of interest rate contracts and the amortization of financing costs.
(2)
No principal amounts are due prior to maturity.
The indenture relating to the unsecured senior notes contains certain financial restrictions and requirements, including (1) a leverage ratio not to exceed 60%, (2) a secured debt leverage ratio not to exceed 50%, (3) an interest coverage ratio of greater than 1.50, and (4) an unencumbered asset value of not less than 150% of unsecured debt. At June 30, 2018,2019, BPLP was in compliance with each of these financial restrictions and requirements.

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Mortgage Notes Payable, Net
The following represents the outstanding principal balances due under the mortgage notes payable at June 30, 2018:2019:
Properties Stated Interest Rate GAAP Interest Rate (1) Stated Principal Amount Deferred Financing Costs, Net Carrying Amount 
Carrying Amount (partners’ share)
   Maturity Date Stated Interest Rate GAAP Interest Rate (1) Stated Principal Amount Deferred Financing Costs, Net Carrying Amount 
Carrying Amount (partners’ share)
   Maturity Date
 (dollars in thousands) (dollars in thousands)
Wholly-ownedWholly-owned         Wholly-owned         
New Dominion Tech Park, Bldg. One 7.69% 7.84% $31,422
 $(211) $31,211
 N/A
    January 15, 2021 7.69% 7.84% $28,205
 $(127) $28,078
 N/A
    January 15, 2021
University Place 6.94% 6.99% 6,545
 (40) 6,505
 N/A
    August 1, 2021 6.94% 6.99% 4,630
 (26) 4,604
 N/A
    August 1, 2021
     37,967
 (251) 37,716
 N/A
      32,835
 (153) 32,682
 N/A
 
Consolidated Joint VenturesConsolidated Joint Ventures         Consolidated Joint Ventures         
767 Fifth Avenue (the General Motors Building) 3.43% 3.64% 2,300,000
 (31,212) 2,268,788
 $907,626
 (2)(3)(4) June 9, 2027 3.43% 3.64% 2,300,000
 (27,719) 2,272,281
 $909,011
 (2)(3)(4) June 9, 2027
601 Lexington Avenue 4.75% 4.79% 666,802
 (1,254) 665,548
 299,497
 (5) April 10, 2022 4.75% 4.79% 652,790
 (920) 651,870
 293,342
 (5) April 10, 2022
     2,966,802
 (32,466) 2,934,336
 1,207,123
      2,952,790
 (28,639) 2,924,151
 1,202,353
 
Total     $3,004,769
 $(32,717) $2,972,052
 $1,207,123
         $2,985,625
 $(28,792) $2,956,833
 $1,202,353
    
_______________  
(1)GAAP interest rate differs from the stated interest rate due to the inclusion of the amortization of financing charges and the effects of hedging transactions.transactions (if any).
(2)The mortgage loan requires interest only payments with a balloon payment due at maturity.
(3)This property is owned by a consolidated entity in which we have a 60% interest. The partners'partners’ share of the carrying amount has been adjusted for basis differentials.
(4)In connection with the refinancing of the loan, we guaranteed the consolidated entity’s obligation to fund various reserves for tenant improvement costs and allowances, leasing commissions and free rent obligations in lieu of cash deposits. As of June 30, 2018,2019, the maximum funding obligation under the guarantee was approximately $144.7$79.8 million. We earn a fee from the joint venture for providing the guarantee and have an agreement with our partners to reimburse the joint venture for their share of any payments made under the guarantee (See Note 67 to the Consolidated Financial Statements).
(5)This property is owned by a consolidated entity in which we have a 55% interest.
Off-Balance Sheet Arrangements—Joint Venture Indebtedness
We have investments in unconsolidated joint ventures with our effective ownership interests ranging from 20% to 60%55%. ElevenThirteen of these ventures have mortgage indebtedness. We exercise significant influence over, but do not
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control, these entities and therefore they are presently accounted for using the equity method of accounting. See also Note 45 to the Consolidated Financial Statements. At June 30, 2018,2019, the aggregate carrying amount of debt, including both our and our partners’ share, incurred by these ventures was approximately $1.5$2.0 billion (of which our proportionate share is approximately $648.9$865.9 million). The table below summarizes the outstanding debt of these joint venture properties at June 30, 2018.2019. In addition to other guarantees specifically noted in the table, we have agreed to customary environmental indemnifications and nonrecourse carve-outs (e.g., guarantees against fraud, misrepresentation and bankruptcy) as well as the completion of development projects on certain of the loans.
 

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Properties Venture Ownership % Stated Interest Rate GAAP Interest Rate (1) Stated Principal Amount Deferred Financing Costs, Net Carrying Amount Carrying Amount (Our Share)   Maturity Date Venture Ownership % Stated Interest Rate GAAP Interest Rate (1) Stated Principal Amount Deferred Financing Costs, Net Carrying Amount Carrying Amount (Our Share)   Maturity Date
 (dollars in thousands) (dollars in thousands)
540 Madison Avenue 60% 3.14% 3.42% $120,000
 $(657) $119,343
 $71,606
 (2)(3) June 5, 2023
Santa Monica Business Park 55% 4.06% 4.24% $300,000
 $(3,179) $296,821
 $163,252
 (2)(3) July 19, 2025
Market Square North 50% 4.85% 4.91% 119,931
 (189) 119,742
 59,871
    October 1, 2020 50% 4.85% 4.91% 117,461
 (105) 117,356
 58,678
    October 1, 2020
Annapolis Junction Building One 50% 7.67% 7.85% 39,549
 —
 39,549
 19,775
 (4) March 31, 2018
Annapolis Junction Building Six 50% 4.24% 4.42% 13,346
 (14) 13,332
 6,666
 (5) November 17, 2018 50% 4.44% 4.67% 12,806
 (40) 12,766
 6,383
 (4) November 17, 2020
Annapolis Junction Building Seven and Eight 50% 4.27% 4.55% 35,771
 (146) 35,625
 17,813
 (6) December 7, 2019 50% 4.83% 5.11% 35,119
 (43) 35,076
 17,538
 (5) December 7, 2019
1265 Main Street 50% 3.77% 3.84% 39,343
 (375) 38,968
 19,484
 January 1, 2032 50% 3.77% 3.84% 38,562
 (348) 38,214
 19,107
 January 1, 2032
Colorado Center 50% 3.56% 3.58% 550,000
 (936) 549,064
 274,531
 (2) August 9, 2027 50% 3.56% 3.58% 550,000
 (834) 549,166
 274,583
 (2) August 9, 2027
Dock 72 50% 4.24% 5.39% 95,415
 (8,580) 86,835
 43,417
 (2)(7) December 18, 2020 50% 4.69% 5.83% 143,491
 (5,093) 138,398
 69,198
 (2)(6) December 18, 2020
The Hub on Causeway - Podium 50% 4.21% 4.68% 35,109
 (3,071) 32,038
 16,019
 (2)(8) September 6, 2021 50% 4.69% 5.16% 155,959
 (2,101) 153,858
 76,929
 (2)(7) September 6, 2021
The Hub on Causeway - Residential 50% N/A
 N/A
 —
 —
 —
 —
 (2)(9) April 19, 2022 50% 4.44% 4.72% 83,557
 (1,445) 82,112
 41,056
 (2)(8) April 19, 2022
500 North Capitol Street 30% 4.15% 4.20% 105,000
 (291) 104,709
 31,413
 (2) June 6, 2023
7750 Wisconsin Avenue 50% N/A
 N/A
 —
 —
 —
 —
 (2)(9) April 26, 2023
500 North Capitol Street, NW 30% 4.15% 4.20% 105,000
 (231) 104,769
 31,431
 (2) June 6, 2023
901 New York Avenue 25% 3.61% 3.69% 225,000
 (1,161) 223,839
 55,960
    January 5, 2025 25% 3.61% 3.69% 225,000
 (983) 224,017
 56,004
    January 5, 2025
3 Hudson Boulevard 25% 5.95% 6.03% 80,000
 (257) 79,743
 19,936
 (2)(10) July 13, 2023
Metropolitan Square 20% 5.75% 5.81% 162,090
 (183) 161,907
 32,380
    May 5, 2020 20% 5.75% 5.81% 159,077
 (83) 158,994
 31,799
    May 5, 2020
Total       $1,540,554
 $(15,603) $1,524,951
 $648,935
           $2,006,032
 $(14,742) $1,991,290
 $865,894
    
_______________  
(1)GAAP interest rate differs from the stated interest rate due to the inclusion of the amortization of financing charges, which includes mortgage recording fees.
(2)The loan requires interest only payments with a balloon payment due at maturity.
(3)
MortgageThe loan bears interest at a variable rate equal to LIBOR plus 1.10%1.28% per annum (See Note 4 toand matures on July 19, 2025. A subsidiary of the Consolidated Financial Statements).
joint venture entered into interest rate swap contracts with notional amounts aggregating $300.0 million through April 1, 2025, resulting in a fixed rate of approximately 4.063% per annum through the expiration of the interest rate swap contracts.
(4)On April 11, 2016, a notice of event of default was received from the lender because the loan to value ratio is not in compliance with the applicable covenant in the loan agreement. On October 17, 2016, the lender notified the joint venture that it has elected to charge the default rate on the loan. The default rate is defined as LIBOR plus 5.75% per annum. 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.
(5)The loan bears interest at a variable rate equal to LIBOR plus 2.25%2.00% per annum.annum and matures on November 17, 2020.
(6)(5)The loan 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.
(7)(6)The construction financing has a borrowing capacity of $250.0 million. The construction financing bears interest at a variable rate equal to LIBOR plus 2.25% per annum and matures on December 18, 2020, with two, one-year extension option, subject to certain conditions.
(8)(7)The construction financing has a borrowing capacity of $204.6 million. The construction financing bears interest at a variable rate equal to LIBOR plus 2.25% per annum and matures on September 6, 2021, with two, one-year extension options, subject to certain conditions. In connection with the construction financing, we obtained the right to complete the construction of the garage underneath the project being developed by an affiliate of our joint venture partner and obtain funding from the garage construction lender.  We agreed to guarantee completion of the garage to the construction lender and an affiliate of our partner agreed to reimburse us for our partner’s share of any payments under the guarantee.one-
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year extension options, subject to certain conditions. In connection with the construction financing, we obtained the right to complete the construction of the garage underneath the project being developed by an affiliate of our joint venture partner and obtain funding from the garage construction lender.  We agreed to guarantee completion of the garage to the construction lender and an affiliate of our partner agreed to reimburse us for our partner’s share of any payments under the guarantee.
(9)(8)No amounts have been drawn under theThe construction financing has a borrowing capacity of $180.0 million construction facility.million. The construction financing bears interest at a variable rate equal to LIBOR plus 2.00% per annum and matures on April 19, 2022, with two, one-year extension options, subject to certain conditions.

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(9)No amounts have been drawn under the $255.0 million construction facility. The construction financing bears interest at a variable rate equal to LIBOR plus 1.25% per annum and matures on April 26, 2023, with two, one-year extension options, subject to certain conditions.
(10)We provided $80.0 million of mortgage financing to the joint venture. The loan bears interest at a variable rate equal to LIBOR plus 3.50% per annum and matures on July 13, 2023, with extension options, subject to certain conditions. The loan has been reflected as Related Party Note Receivable on our Consolidated Balance Sheets.
State and Local Tax Matters
Because BXP is organized and qualifies as a REIT, it is generally not subject to federal income taxes, but it is subject to certain state and local taxes. In the normal course of business, BXP, BPLP and certain entities through which we own real estate either have undergone, or are currently undergoing, tax audits or other inquiries. Although we believe that we have substantial arguments in favor of our 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.
Insurance
For information concerning our insurance program, see Note 67 to the Consolidated Financial Statements.
Funds from Operations
Pursuant to the revised definition of Funds from Operations adopted by the Board of Governors of the National Association of Real Estate Investment Trusts (“Nareit”), we calculate Funds from Operations, or “FFO,” for each of BXP and BPLP by adjusting net income (loss) attributable to Boston Properties, Inc. common shareholders and net income (loss) attributable to Boston Properties Limited Partnership common unitholders respectively, (computed in accordance with GAAP), respectively, for gains (or losses) from sales of properties, impairment losses on depreciable real estate consolidated on our balance sheet, impairment losses on our investments in unconsolidated joint ventures driven by a measurable decrease in the fair value of depreciable real estate held by the unconsolidated joint ventures and our share of real estate-related depreciation and amortization. FFO is a non-GAAP financial measure, 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 our operating results because, by excluding gains and losses related to sales of previously depreciated operating real estate assets, impairment losses and real estate asset depreciation and amortization (which can differ across owners of similar assets in similar condition based on historical cost accounting and useful life estimates), FFO can help investors compare the operating performance of a company'scompany’s real estate across reporting periods and to the operating performance of other companies.
Our computation of FFO may not be comparable to FFO reported by other REITs or real estate companies that do not define the term in accordance with the current Nareit definition or that interpret the current Nareit definition differently. We believe that in order to facilitate a clear understanding of our operating results, FFO should be examined in conjunction with net income attributable to Boston Properties, Inc. common shareholders and net income attributable to Boston Properties Limited Partnership as presented in our Consolidated Financial Statements. FFO should not be considered as a substitute for net income attributable to Boston Properties, Inc. common shareholders or net income attributable to Boston Properties Limited Partnership common unitholders (determined in accordance with GAAP) or any other GAAP financial measures and should only be considered together with and as a supplement to our financial information prepared in accordance with GAAP.

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Boston Properties, Inc.
The following table presents a reconciliation of net income attributable to Boston Properties, Inc. common shareholders to FFO attributable to Boston Properties, Inc. common shareholders for the three months ended June 30, 20182019 and 2017:2018:
Three months ended June 30,Three months ended June 30,
2018 20172019 2018
(in thousands)(in thousands)
Net income attributable to Boston Properties, Inc. common shareholders$128,681
 $133,709
$164,318
 $128,681
Add:      
Preferred dividends2,625
 2,625
2,625
 2,625
Noncontrolling interest—common units of Boston Properties Limited Partnership14,859
 15,473
19,036
 14,859
Noncontrolling interests in property partnerships14,400
 15,203
17,482
 14,400
Less:   
Gains on sales of real estate18,292
 3,767
Income before gains on sales of real estate142,273
 163,243
Net Income203,461
 160,565
Add:      
Depreciation and amortization156,417
 151,919
Depreciation and amortization expense177,411
 156,417
Noncontrolling interests in property partnerships’ share of depreciation and amortization(18,426) (19,327)(17,869) (18,426)
BXP’s share of depreciation and amortization from unconsolidated joint ventures9,312
 9,629
14,778
 9,312
Corporate-related depreciation and amortization(406) (486)(412) (406)
Less:      
Gain on sale of real estate included within income from unconsolidated joint ventures47,757
 —
Gains on sales of real estate1,686
 18,292
Noncontrolling interests in property partnerships14,400
 15,203
17,482
 14,400
Preferred dividends2,625
 2,625
2,625
 2,625
Funds from Operations (FFO) attributable to Boston Properties Limited Partnership common unitholders (including Boston Properties, Inc.) (“Basic FFO”)
272,145
 287,150
307,819
 272,145
Less:      
Noncontrolling interest—common units of Boston Properties Limited Partnership’s share of funds from operations27,704
 29,269
31,544
 27,704
FFO attributable to Boston Properties, Inc. common shareholders$244,441
 $257,881
$276,275
 $244,441
Boston Properties, Inc.’s percentage share of Funds from Operations—basic89.82% 89.81%89.75% 89.82%
Weighted-average shares outstanding—basic154,415
 154,177
154,555
 154,415
Reconciliation to Diluted Funds from Operations:
Three months ended June 30, 2018 Three months ended June 30, 2017Three months ended June 30, 2019 Three months ended June 30, 2018
Income
(Numerator)
 
Shares
(Denominator)
 
Income
(Numerator)
 
Shares
(Denominator)
Income
(Numerator)
 
Shares
(Denominator)
 
Income
(Numerator)
 
Shares
(Denominator)
(in thousands)(in thousands)
Basic FFO$272,145
 171,916
 $287,150
 171,675
$307,819
 172,202
 $272,145
 171,916
Effect of Dilutive Securities              
Stock Based Compensation—
 156
 —
 154
—
 319
 —
 156
Diluted FFO272,145
 172,072
 287,150
 171,829
307,819
 172,521
 272,145
 172,072
Less:              
Noncontrolling interest—common units of Boston Properties Limited Partnership’s share of diluted FFO27,678
 17,501
 29,243
 17,498
31,486
 17,647
 27,678
 17,501
Boston Properties, Inc.’s share of Diluted FFO (1)$244,467
 154,571
 $257,907
 154,331
$276,333
 154,874
 $244,467
 154,571
 _______________  
(1)BXP’s share of diluted FFO was 89.83%89.77% and 89.82%89.83% for the three months ended June 30, 20182019 and 2017,2018, respectively.

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Boston Properties Limited Partnership
The following table presents a reconciliation of net income attributable to Boston Properties Limited Partnership common unitholders to FFO attributable to Boston Properties Limited Partnership common unitholders for the three months ended June 30, 20182019 and 2017:2018:
Three months ended June 30,Three months ended June 30,
2018 20172019 2018
(in thousands)(in thousands)
Net income attributable to Boston Properties Limited Partnership common unitholders$145,961
 $151,844
$185,715
 $145,961
Add:      
Preferred distributions2,625
 2,625
2,625
 2,625
Noncontrolling interests in property partnerships14,400
 15,203
17,482
 14,400
Less:   
Gains on sales of real estate18,770
 4,344
Income before gains on sales of real estate144,216
 165,328
Net Income205,822
 162,986
Add:      
Depreciation and amortization154,474
 149,834
Depreciation and amortization expense175,199
 154,474
Noncontrolling interests in property partnerships’ share of depreciation and amortization(18,426) (19,327)(17,869) (18,426)
BPLP’s share of depreciation and amortization from unconsolidated joint ventures
9,312
 9,629
14,778
 9,312
Corporate-related depreciation and amortization(406) (486)(412) (406)
Less:      
Gain on sale of real estate included within income from unconsolidated joint ventures47,757
 —
Gains on sales of real estate1,835
 18,770
Noncontrolling interests in property partnerships14,400
 15,203
17,482
 14,400
Preferred distributions2,625
 2,625
2,625
 2,625
Funds from Operations (FFO) attributable to Boston Properties Limited Partnership common unitholders (“Basic FFO”) (1)$272,145
 $287,150
$307,819
 $272,145
Weighted-average units outstanding—basic171,916
 171,675
172,202
 171,916
_______________ 
(1)Our calculation includes OP Units and vested LTIP Units (including vested 2012 OPP Units, vested 2013 MYLTIP Units, vested 2014 MYLTIP Units, vested 2015 MYLTIP Units and vested 20152016 MYLTIP Units).
Reconciliation to Diluted Funds from Operations:
Three months ended June 30, 2018 Three months ended June 30, 2017Three months ended June 30, 2019 Three months ended June 30, 2018
Income
(Numerator)
 
Units
(Denominator)
 
Income
(Numerator)
 
Units
(Denominator)
Income
(Numerator)
 
Units
(Denominator)
 
Income
(Numerator)
 
Units
(Denominator)
(in thousands)(in thousands)
Basic FFO$272,145
 171,916
 $287,150
 171,675
$307,819
 172,202
 $272,145
 171,916
Effect of Dilutive Securities              
Stock Based Compensation—
 156
 —
 154
—
 319
 —
 156
Diluted FFO$272,145
 172,072
 $287,150
 171,829
$307,819
 172,521
 $272,145
 172,072


Contractual Obligations
We have various service contracts with vendors related to our property management. In addition, we have certain other contracts we enter into in the ordinary course of business that may extend beyond one year. These contracts include terms that provide for cancellation with insignificant or no cancellation penalties. Contract terms are generally between three and five years.
During the second quarter of 2018,2019, we paid approximately $60.0$95.8 million to fund tenant-related obligations, including tenant improvements and leasing commissions,commissions.
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In addition, we and our unconsolidated joint venture partners incurred approximately $121$165 million of new tenant-related obligations associated with approximately 1.72.0 million square feet of second generation leases, or approximately $71$82 per square foot. In addition, we signed leases for approximately 35,000415,000 square feet at our

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development properties. The tenant-related obligations for the development properties are included within the projects’ “Estimated Total Investment” referred to in “Item 2—Management’s Discussion and Analysis of Financial Condition” and “Results of Operations—Liquidity and Capital Resources.” In the aggregate during the second quarter of 2018,2019, we signed leases for approximately 1.72.4 million square feet of space and incurred aggregate tenant-related obligations of approximately $129$223 million, or approximately $74$92 per square foot.
ITEM 3—Quantitative and Qualitative Disclosures about Market Risk.
The following table presents the aggregate carrying value of our mortgage notes payable, net, unsecured senior notes, net, unsecured line of credit, unsecured term loan, net and our corresponding estimate of fair value as of June 30, 2018.2019. Approximately $10.2$11.3 billion of these borrowings bore interest at fixed rates and therefore the fair value of these instruments is affected by changes in the market interest rates. As of June 30, 2018,2019, the weighted-average interest rate on our variable rate debt was LIBOR plus 0.90%, or 2.88%3.34% per annum. The following table presents our aggregate fixed rate debt obligations with corresponding weighted-average interest rates sorted by maturity date and our aggregate variable rate debt obligations sorted by maturity date.
The table below does not include our unconsolidated joint venture debt. For a discussion concerning our unconsolidated joint venture debt, see Note 45 to the Consolidated Financial Statements and “Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations—Capitalization—Off-Balance Sheet Arrangements—Joint Venture Indebtedness.”
 
2018 2019 2020 2021 2022 2023+ Total 
Estimated
Fair Value
2019 2020 2021 2022 2023 2024+ Total 
Estimated
Fair Value
(dollars in thousands)
Mortgage debt, net
(dollars in thousands)
Mortgage debt, net
Fixed Rate$7,478
 $15,745
 $16,841
 $36,346
 $611,132
 $2,284,510
 $2,972,052
 $2,938,167
$8,005
 $16,841
 $36,346
 $611,132
 $(3,494) $2,288,003
 $2,956,833
 $3,013,338
Average Interest Rate5.53% 5.53% 5.55% 6.61% 4.79% 3.64% 3.95%  5.53% 5.55% 6.61% 4.79% —
 3.64% 3.94%  
Variable Rate—
 —
 —
 —
 —
 —
 —
 —
—
 —
 —
 —
 —
 —
 —
 —
Unsecured debt, netUnsecured debt, net
Fixed Rate$(4,423) $691,233
 $691,726
 $843,044
 $(6,475) $5,036,473
 $7,251,578
 $7,188,261
$(5,136) $689,748
 $841,048
 $(8,491) $1,492,592
 $5,380,947
 $8,390,708
 $8,745,888
Average Interest Rate—
 5.97% 5.71% 4.29% —
 3.65% 4.15%  —
 5.71% 4.29% —
 3.73% 3.79% 3.99%  
Variable Rate$(240) $(460) $(451) $(451) $499,850
 —
 $498,248
 $500,181
$(239) $(460) $(451) $499,850
 $—
 —
 $498,700
 $500,673
$2,815
 $706,518

$708,116

$878,939

$1,104,507

$7,320,983

$10,721,878
 $10,626,609
$2,630
 $706,129

$876,943

$1,102,491

$1,489,098

$7,668,950

$11,846,241
 $12,259,899


At June 30, 2018,2019, the weighted-average coupon/stated rates on the fixed rate debt stated above was 3.98%3.87% per annum. At June 30, 2018,2019, our outstanding variable rate debt based on LIBOR totaled approximately $498.2$500.0 million. At June 30, 2018,2019, the coupon/stated rate on our variable rate debt was approximately 2.88%3.34%. If market interest rates on our variable rate debt had been 100 basis points greater, total interest expense would have increased approximately $1.2$1.3 million and $2.5 million respectively, for the three and six months ended June 30, 2018.2019, respectively.
The fair value amounts were determined solely by considering the impact of hypothetical interest rates on our financial instruments.
Due to the uncertainty of specific actions we may undertake to minimize possible effects of market interest rate increases, this analysis assumes no changes in our financial structure. In the event that LIBOR is discontinued, the interest rate for our variable rate debt and our unconsolidated joint ventures’ variable rate debt and the swap rate for our unconsolidated joint ventures’ interest rate swaps following such event will be based on an alternative variable rate as specified in the applicable documentation governing such debt or swaps or as otherwise agreed upon. Such an event would not affect our ability to borrow or maintain already outstanding borrowings or our unconsolidated joint ventures’ ability to maintain its outstanding swaps, but the alternative variable rate could be higher and more volatile than LIBOR prior to its discontinuance. We understand that LIBOR is expected to remain available through the end of 2021, but may be discontinued or otherwise become unavailable thereafter.


ITEM 4—Controls and Procedures.
Boston Properties, Inc.
(a) Evaluation of Disclosure Controls and Procedures. As of the end of the period covered by this report, our management, with the participation of Boston Properties, Inc.’s Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer), evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934). Based upon that evaluation, Boston Properties, Inc.’s Chief Executive Officer and Chief Financial Officer concluded that these disclosure controls and procedures were effective as of the end of the period covered by this report.
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(b) Changes in Internal Control Over Financial Reporting. No change in Boston Properties, Inc.’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) occurred during the second quarter of our fiscal year ending December 31, 20182019 that has materially affected, or is reasonably likely to materially affect, Boston Properties, Inc.’s internal control over financial reporting.
Boston Properties Limited Partnership
(a) Evaluation of Disclosure Controls and Procedures. As of the end of the period covered by this report, the management of Boston Properties, Inc., the sole general partner of Boston Properties Limited Partnership, with the participation of its Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer), evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer of Boston Properties, Inc. concluded that these disclosure controls and procedures were effective as of the end of the period covered by this report.
(b) Changes in Internal Control Over Financial Reporting. No change in its internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) occurred during the second quarter of our fiscal year ending December 31, 20182019 that has materially affected, or is reasonably likely to materially affect, its internal control over financial reporting.



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PART II. OTHER INFORMATION
ITEM 1—Legal Proceedings.
We are subject to 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 1A—Risk Factors.
Except to the extent updated below or previously updated or to the extent additional factual information disclosed elsewhere in these Quarterly Reports on Form 10-Q relates to such risk factors (including, without limitation, the matters discussed in Part I, “Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations”), there were no material changes to the risk factors disclosed in Part I, “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2017.2018.
ITEM 2—Unregistered Sales of Equity Securities and Use of Proceeds
Boston Properties, Inc.
(a)None.During the three months ended June 30, 2019, Boston Properties, Inc. issued an aggregate of 20,838 shares of common stock in exchange for 20,838 common units of limited partnership held by certain limited partners of Boston Properties Limited Partnership. Of these shares, 2,716 shares were issued in reliance on an exemption from registration under Section 4(a)(2) of the Securities Act of 1933, as amended. We relied on the exemption under Section 4(a)(2) based upon factual representations received from the limited partner who received the common shares.
(b)Not applicable.
(c)Issuer Purchases of Equity Securities.


Period
(a)
Total Number of Shares of Common Stock Purchased
 
(b)
Average Price Paid per Common Share
(c)
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
(d)
Maximum Number (or Approximate Dollar Value) of Shares that May Yet be Purchased
April 1, 2018 - April 30, 2018—
 —
N/AN/A
May 1, 2018 - May 31, 2018—
 —
N/AN/A
June 1, 2018 - June 30, 2018180
(1)$0.01
N/AN/A
Total180
 $0.01
N/AN/A
Period
(a)
Total Number of Shares of Common Stock Purchased
 
(b)
Average Price Paid per Common Share
(c)
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
(d)
Maximum Number (or Approximate Dollar Value) of Shares that May Yet be Purchased
April 1, 2019 - April 30, 2019134
(1)$135.94
N/AN/A
May 1, 2019 - May 31, 201945
(2)$0.01
N/AN/A
June 1, 2019 - June 30, 2019—
 $—
N/AN/A
Total179
 $101.77
N/AN/A
___________
(1)Represents shares of common stock of Boston Properties, Inc. surrendered by an employee to Boston Properties, Inc. to satisfy such employee’s tax withholding obligation in connection with the vesting of restricted common stock.
(2)Represents shares of restricted common stock of Boston Properties, Inc. repurchased in connection with the termination of a certainan employee’s employment with Boston Properties, Inc. Under the terms of the applicable restricted stock award agreements, suchagreement, the shares were repurchased by Boston Properties, Inc. at a price of $0.01 per share, which was the amount originally paid by such employee for such shares.

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Boston Properties Limited Partnership
(a)Each time Boston Properties, Inc. issues shares of stock (other than in exchange for common units when such common units are presented for redemption), it contributes the proceeds of thesuch issuance to Boston Properties Limited Partnership in return for an equivalent number of partnership units with rights and preferences analogous to the shares issued. During the three months ended June 30, 2018,2019, in connection with issuances of common stock by Boston Properties, Inc. pursuant to issuances of restricted common stock to non-employee directors of Boston Properties, Inc., exercises of non-qualified stock options and the settlement of deferred stock awards and issuances to non-employee directors of restricted common stock under the Boston Properties, Inc. 2012 Stock Option and Incentive Plan, we issued an aggregate of approximately 38,93026,985 common units to Boston Properties, Inc. in exchange for approximately $20.94,$0.5 million, the aggregate proceeds of such common stock issuances to Boston Properties, Inc. Such units were issued in reliance on an exemption from registration under Section 4(a)(2) of the Securities Act of 1933, as amended.
(b)Not Applicable.
(c)Issuer Purchases of Equity Securities.

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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
April 1, 2018 - April 30, 2018—
 —
N/AN/A
May 1, 2018 - May 31, 201839
(1)
$0.25
N/AN/A
June 1, 2018 - June 30, 20187,268
(2)
$0.24
N/AN/A
Total7,307
 
$0.24
N/AN/A
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
April 1, 2019 - April 30, 20193,158
(1)(3)$6.01
N/AN/A
May 1, 2019 - May 31, 20191,455
(2)(3)$0.24
N/AN/A
June 1, 2019 - June 30, 2019—
 $—
N/AN/A
Total4,613
 $4.19
N/AN/A
___________
(1)Represents LTIPIncludes 134 common units previously held by Boston Properties, Inc. that were repurchasedredeemed in connection with the terminationsurrender of a certain employee’s employment withshares of restricted common stock of Boston Properties, Inc. Underby an employee to Boston Properties, Inc. to satisfy such employee’s tax withholding obligation in connection with the termsvesting of the applicablerestricted common stock and 3,024 LTIP unit vesting agreement, such units that were repurchased by Boston Properties Limited Partnership at a pricein connection with the termination of $0.25 per unit, which was the amount originally paid by such employee for such unit.an employee’s employment with Boston Properties, Inc.
(2)Includes 2,838 LTIP units, 47 2015 MYLTIP units, 1,781 2016 MYLTIP units, 1,129 2017 MYLTIP units and 1,293 2018 MYLTIP units that were repurchased in connection with the termination of certain employees’ employment with Boston Properties, Inc. Under the terms of the applicable LTIP unit vesting agreements and applicable MYLTIP award agreements, such units were repurchased by Boston Properties Limited Partnership at a price of $0.25 per unit, which was the amount originally paid by such employees for such units. Also includes 18045 common units of limited partnership interest of Boston Properties Limited Partnership previously held by Boston Properties, Inc. that were redeemed in connection with the repurchase of shares of restricted common stock of Boston Properties, Inc. in connection with the termination of a certainan employee’s employment with Boston Properties, Inc. and 1,410 LTIP units that were repurchased by Boston Properties Limited Partnership in connection with the termination of certain employees’ employment with Boston Properties, Inc.
(3)Under the terms of the applicable restricted stock award agreement,agreements and LTIP unit vesting agreements, such shares were repurchased by Boston Properties, Inc. at a price of $0.01 per share and such LTIP units were repurchased at a price $0.25 per unit, which waswere the amountamounts originally paid by such employeeemployees for such shares.shares and units.



ITEM 3—Defaults Upon Senior Securities.
None.
ITEM 4—Mine Safety Disclosures.
None.
ITEM 5—Other Information.
(a)None.
(b)None.

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ITEM 6—Exhibits.
(a)Exhibits
 
10.14.1

—
Employment Agreement by and between Owen D. Thomas and Boston Properties, Inc.Supplemental Indenture No. 19, dated as of April 2, 2018.June 21, 2019, between Boston Properties Limited Partnership and The Bank of New York Mellon Trust Company, N.A., as Trustee; including a form of the 3.400% Senior Notes due 2029. (Incorporated by reference to Exhibit 10.24.1 to Boston Properties, Inc.’s Quarterlythe Current Report on Form 10-Q8-K of Boston Properties Limited Partnership filed on May 7, 2018.June 21, 2019.)
   
12.110.1

—
Calculation of Ratios of Earnings to Fixed Charges and Calculation of Ratios of Earnings to Combined Fixed Charges and Preferred Dividends for Boston Properties, Inc. (Filed herewith.)
12.2
—
Calculation of Ratios of EarningsNon-Employee Director Compensation Plan (Incorporated by reference to Fixed Charges and Calculation of Ratios of EarningsAppendix B to Combined Fixed Charges and Preferred Distributions for Boston Properties, Limited Partnership. (Filed herewith.Inc.’s Proxy Statement on Schedule 14A filed on April 5, 2019.)
   
31.1

—
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for Boston Properties, Inc. (Filed herewith.)
   
31.2

—
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for Boston Properties, Inc. (Filed herewith.)
   
31.3

—
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for Boston Properties Limited Partnership. (Filed herewith.)
   
31.4

—
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for Boston Properties Limited Partnership. (Filed herewith.)
   
32.1

—
Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes Oxley Act of 2002 for Boston Properties, Inc. (Furnished herewith.)
   
32.2

—
Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes Oxley Act of 2002 for Boston Properties, Inc. (Furnished herewith.)
   
32.3

—
Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes Oxley Act of 2002 for Boston Properties Limited Partnership. (Furnished herewith.)
   
32.4

—
Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes Oxley Act of 2002 for Boston Properties Limited Partnership. (Furnished herewith.)
   
101101.SCH

—The following materials from Boston Properties, Inc.’s and Boston Properties Limited Partnership’s Quarterly Reports on Form 10-Q for the quarter ended June 30, 2018 formattedInline XBRL Taxonomy Extension Schema Document. (Filed herewith.)
101.CAL
—Inline XBRL Taxonomy Extension Calculation Linkbase Document. (Filed herewith.)
101.LAB
—Inline XBRL Taxonomy Extension Label Linkbase Document. (Filed herewith.)
101.PRE
—Inline XBRL Taxonomy Extension Presentation Linkbase Document. (Filed herewith.)
101.DEF
—Inline XBRL Taxonomy Extension Definition Linkbase Document. (Filed herewith.)
104
—Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Comprehensive Income, (iv) the Consolidated Statements of Stockholders’ Equity, (v) the Consolidated Statements of Partners’ Capital (vi) the Consolidated Statements of Cash Flows, and (vii) related notes to these financial statements.Exhibits 101.*). (Filed herewith.)



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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.






 BOSTON PROPERTIES, INC.
   
August 7, 20182019 
/s/    MICHAEL R. WALSH        
  Michael R. Walsh
  
Chief Accounting Officer
(duly authorized officer and principal accounting officer)



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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.






 BOSTON PROPERTIES LIMITED PARTNERSHIP
 By: Boston Properties, Inc., its General Partner
   
August 7, 20182019  
/s/    MICHAEL R. WALSH        
   Michael R. Walsh
   
Chief Accounting Officer
(duly authorized officer and principal accounting officer)




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