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BOSTON PROPERTIES INC - Quarter Report: 2020 September (Form 10-Q)

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 2020
or
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, Massachusetts 02199-8103
(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.Depositary 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.:    Yes  x   No           Boston Properties Limited Partnership:    Yes  x    No      
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).    
Boston Properties, Inc.:    Yes  x    No           Boston Properties Limited Partnership:    Yes  x    No      
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the 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 filer  x         Accelerated filer           Non-accelerated filer           Smaller reporting company           Emerging growth company  

Boston Properties Limited Partnership:
Large accelerated filer           Accelerated filer           Non-accelerated filer  x           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 share155,659,539
(Registrant)(Class)
(Outstanding on November 2, 2020)


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EXPLANATORY NOTE
This report combines the quarterly reports on Form 10-Q for the period ended September 30, 2020 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 September 30, 2020, BXP owned an approximate 89.9% ownership interest in BPLP. The remaining approximate 10.1% interest was 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 $273.0 million, or 1.6% at September 30, 2020, and a corresponding difference in depreciation expense, impairment 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 9. Stockholders’ Equity / Partners’ Capital;
Note 10. Earnings Per Share / Common Unit; and
Note 12. 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 31 and 32 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 September 30, 2020
TABLE OF CONTENTS
 Page
ITEM 1.
Boston Properties, Inc.
Boston Properties Limited Partnership
Boston Properties, Inc. and Boston Properties Limited Partnership
ITEM 2.
ITEM 3.
ITEM 4.
ITEM 1.
ITEM 1A.
ITEM 2.
ITEM 3.
ITEM 4.
ITEM 5.
ITEM 6.
 



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PART I. FINANCIAL INFORMATION
ITEM 1—Financial Statements.

BOSTON PROPERTIES, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited and in thousands, except for share and par value amounts)
September 30,
2020
December 31,
2019
ASSETS
Real estate, at cost (amounts related to variable interest entities (“VIEs”) of $6,592,925 and $6,497,031 at September 30, 2020 and December 31, 2019, respectively)
$22,770,691 $22,502,976 
Right of use assets - finance leases (amounts related to VIEs of $21,000 and $21,000 at September 30, 2020 and December 31, 2019, respectively)
237,382 237,394 
Right of use assets - operating leases
146,973 148,640 
Less: accumulated depreciation (amounts related to VIEs of $(1,134,450) and $(1,058,495) at September 30, 2020 and December 31, 2019, respectively)
(5,413,709)(5,266,798)
Total real estate17,741,337 17,622,212 
Cash and cash equivalents (amounts related to VIEs of $267,229 and $280,033 at September 30, 2020 and December 31, 2019, respectively)
1,714,783 644,950 
Cash held in escrows
50,006 46,936 
Investments in securities34,934 36,747 
Tenant and other receivables, net (amounts related to VIEs of $12,968 and $28,918 at September 30, 2020 and December 31, 2019, respectively)
76,330 112,807 
Related party note receivable, net77,592 80,000 
Notes receivable, net
25,304 15,920 
Accrued rental income, net (amounts related to VIEs of $323,220 and $298,318 at September 30, 2020 and December 31, 2019, respectively)
1,111,078 1,038,788 
Deferred charges, net (amounts related to VIEs of $187,025 and $214,769 at September 30, 2020 and December 31, 2019, respectively)
644,036 689,213 
Prepaid expenses and other assets (amounts related to VIEs of $53,529 and $20,931 at September 30, 2020 and December 31, 2019, respectively)
106,524 41,685 
Investments in unconsolidated joint ventures1,377,291 955,647 
Total assets$22,959,215 $21,284,905 
LIABILITIES AND EQUITY
Liabilities:
Mortgage notes payable, net (amounts related to VIEs of $2,910,460 and $2,918,806 at September 30, 2020 and December 31, 2019, respectively)
$2,912,494 $2,922,408 
Unsecured senior notes, net9,636,397 8,390,459 
Unsecured line of credit— — 
Unsecured term loan, net499,270 498,939 
Lease liabilities - finance leases (amounts related to VIEs of $20,266 and $20,189 at September 30, 2020 and December 31, 2019, respectively)
233,288 224,042 
Lease liabilities - operating leases 201,337 200,180 
Accounts payable and accrued expenses (amounts related to VIEs of $26,848 and $45,777 at September 30, 2020 and December 31, 2019, respectively)
345,959 377,553 
Dividends and distributions payable171,070 170,713 
Accrued interest payable
88,826 90,016 
Other liabilities (amounts related to VIEs of $128,451 and $140,110 at September 30, 2020 and December 31, 2019, respectively)
369,932 387,994 
Total liabilities14,458,573 13,262,304 
Commitments and contingencies— — 
Redeemable deferred stock units— 69,787 and 60,676 units outstanding at redemption value at September 30, 2020 and December 31, 2019, respectively
5,604 8,365 
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BOSTON PROPERTIES, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited and in thousands, except for share and par value amounts)
September 30,
2020
December 31,
2019
Equity:
Stockholders’ equity attributable to Boston Properties, Inc.:
Excess stock, $0.01 par value, 150,000,000 shares authorized, none issued or outstanding
— — 
Preferred stock, $0.01 par value, 50,000,000 shares authorized;
5.25% Series B cumulative redeemable preferred stock, $0.01 par value, liquidation preference $2,500 per share, 92,000 shares authorized, 80,000 shares issued and outstanding at September 30, 2020 and December 31, 2019
200,000 200,000 
Common stock, $0.01 par value, 250,000,000 shares authorized, 155,715,200 and 154,869,198 issued and 155,636,300 and 154,790,298 outstanding at September 30, 2020 and December 31, 2019, respectively
1,556 1,548 
Additional paid-in capital
6,348,076 6,294,719 
Dividends in excess of earnings(364,720)(760,523)
Treasury common stock at cost, 78,900 shares at September 30, 2020 and December 31, 2019
(2,722)(2,722)
Accumulated other comprehensive loss(52,622)(48,335)
Total stockholders’ equity attributable to Boston Properties, Inc.6,129,568 5,684,687 
Noncontrolling interests:
Common units of Boston Properties Limited Partnership634,796 600,860 
Property partnerships1,730,674 1,728,689 
Total equity8,495,038 8,014,236 
Total liabilities and equity$22,959,215 $21,284,905 

















The accompanying notes are an integral part of these consolidated financial statements.
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BOSTON PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited and in thousands, except for per share amounts)
Three months ended September 30,Nine months ended September 30,
 2020201920202019
Revenue
Lease$666,674 $692,225 $2,006,904 $2,051,665 
Parking and other16,327 25,582 54,777 76,807 
Hotel90 13,014 7,014 36,796 
Development and management services7,281 10,303 23,285 29,566 
Direct reimbursements of payroll and related costs from management services contracts
2,896 2,429 8,617 8,227 
Total revenue693,268 743,553 2,100,597 2,203,061 
Expenses
Operating
Rental258,261 265,603 761,014 781,091 
Hotel3,164 8,743 11,958 25,686 
General and administrative27,862 31,147 102,059 107,980 
Payroll and related costs from management services contracts2,896 2,429 8,617 8,227 
Transaction costs307 538 1,254 1,415 
Depreciation and amortization166,456 165,862 515,738 507,867 
Total expenses458,946 474,322 1,400,640 1,432,266 
Other income (expense)
Income (loss) from unconsolidated joint ventures(6,873)(649)(5,410)47,528 
Gains (losses) on sales of real estate(209)(15)613,723 766 
Interest and other income (loss)(45)7,178 4,277 14,546 
Gains from investments in securities1,858 106 965 4,240 
Impairment loss— — — (24,038)
Loss from early extinguishment of debt— (28,010)— (28,010)
Interest expense(110,993)(106,471)(319,726)(309,837)
Net income118,060 141,370 993,786 475,990 
Net (income) loss attributable to noncontrolling interests
Noncontrolling interests in property partnerships(15,561)(18,470)(34,280)(54,782)
Noncontrolling interest—common units of the Operating Partnership(10,020)(12,504)(97,090)(43,133)
Net income attributable to Boston Properties, Inc.92,479 110,396 862,416 378,075 
Preferred dividends(2,625)(2,625)(7,875)(7,875)
Net income attributable to Boston Properties, Inc. common shareholders$89,854 $107,771 $854,541 $370,200 
Basic earnings per common share attributable to Boston Properties, Inc. common shareholders:
Net income$0.58 $0.70 $5.49 $2.40 
Weighted average number of common shares outstanding155,645 154,577 155,349 154,553 
Diluted earnings per common share attributable to Boston Properties, Inc. common shareholders:
Net income$0.58 $0.70 $5.49 $2.39 
Weighted average number of common and common equivalent shares outstanding
155,670 154,820 155,447 154,847 






The accompanying notes are an integral part of these consolidated financial statements.
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BOSTON PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited and in thousands)
 
Three months ended September 30,Nine months ended September 30,
 2020201920202019
Net income$118,060 $141,370 $993,786 $475,990 
Other comprehensive income (loss):
Effective portion of interest rate contracts1,027 (2,253)(9,352)(9,307)
Amortization of interest rate contracts (1)1,677 1,666 5,020 4,998 
Other comprehensive income (loss)2,704 (587)(4,332)(4,309)
Comprehensive income120,764 140,783 989,454 471,681 
Net income attributable to noncontrolling interests(25,581)(30,974)(131,370)(97,915)
Other comprehensive (income) loss attributable to noncontrolling interests
(405)(69)45 54 
Comprehensive income attributable to Boston Properties, Inc.$94,778 $109,740 $858,129 $373,820 
_______________
(1)Amounts reclassified from comprehensive income primarily to interest expense within Boston Properties, Inc.’s Consolidated Statements of Operations.
































The accompanying notes are an integral part of these consolidated financial statements.
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BOSTON PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited and in thousands)

 Common StockPreferred StockAdditional Paid-in CapitalDividends in Excess of EarningsTreasury Stock,
at cost
Accumulated Other Comprehensive LossNoncontrolling Interests - Common UnitsNoncontrolling Interests - Property PartnershipsTotal
 SharesAmount
Equity, June 30, 2020155,622 $1,556 $200,000 $6,340,665 $(302,511)$(2,722)$(54,921)$640,491 $1,724,588 $8,547,146 
Redemption of operating partnership units to common stock— — 338 — — — (338)— — 
Allocated net income for the period— — — — 92,934 — — 9,565 15,561 118,060 
Dividends/distributions declared— — — — (155,143)— — (17,183)— (172,326)
Shares issued pursuant to stock purchase plan— — 434 — — — — — 434 
Net activity from stock option and incentive plan— — — 1,390 — — — 7,249 — 8,639 
Contributions from noncontrolling interests in property partnerships— — — — — — — — 1,407 1,407 
Distributions to noncontrolling interests in property partnerships— — — — — — — — (11,026)(11,026)
Effective portion of interest rate contracts— — — — — — 917 110 — 1,027 
Amortization of interest rate contracts— — — — — — 1,382 151 144 1,677 
Reallocation of noncontrolling interest— — — 5,249 — — — (5,249)— — 
Equity, September 30, 2020
155,636 $1,556 $200,000 $6,348,076 $(364,720)$(2,722)$(52,622)$634,796 $1,730,674 $8,495,038 
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 
Redemption of operating partnership units to common stock— — 223 — — — (223)— — 
Allocated net income for the period— — — — 110,394 — — 12,506 18,470 141,370 
Dividends/distributions declared— — — — (149,468)— — (17,200)— (166,668)
Shares issued pursuant to stock purchase plan— — 315 — — — — — 315 
Net activity from stock option and incentive plan— — — (7,219)— — — 6,774 — (445)
Sale of an interest in property partnerships— — — (4,216)— — — — 4,216 — 
Acquisition of noncontrolling interest in property partnership— — — 43 — — — — — 43 
Contributions from noncontrolling interests in property partnerships— — — — — — — — 14,820 14,820 
Distributions to noncontrolling interests in property partnerships— — — — — — — — (13,748)(13,748)
Effective portion of interest rate contracts— — — — — — (2,022)(231)— (2,253)
Amortization of interest rate contracts— — — — — — 1,366 156 144 1,666 
Reallocation of noncontrolling interest— — — 6,685 — — — (6,685)— — 
Equity, September 30, 2019
154,572 $1,546 $200,000 $6,274,792 $(749,666)$(2,722)$(51,996)$603,690 $1,720,123 $7,995,767 
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BOSTON PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited and in thousands)

 Common StockPreferred StockAdditional Paid-in CapitalDividends in Excess of EarningsTreasury Stock,
at cost
Accumulated Other Comprehensive LossNoncontrolling Interests - Common UnitsNoncontrolling Interests - Property PartnershipsTotal
 SharesAmount
Equity, December 31, 2019154,790 $1,548 $200,000 $6,294,719 $(760,523)$(2,722)$(48,335)$600,860 $1,728,689 $8,014,236 
Cumulative effect of a change in accounting principle— — — — (1,505)— — (174)— (1,679)
Redemption of operating partnership units to common stock774 — 26,674 — — — (26,682)— — 
Allocated net income for the period— — — — 862,416 — — 97,090 34,280 993,786 
Dividends/distributions declared— — — — (465,108)— — (51,821)— (516,929)
Shares issued pursuant to stock purchase plan— — 759 — — — — — 759 
Net activity from stock option and incentive plan65 — — 9,646 — — — 32,278 — 41,924 
Contributions from noncontrolling interests in property partnerships— — — — — — — — 7,364 7,364 
Distributions to noncontrolling interests in property partnerships— — — — — — — — (40,091)(40,091)
Effective portion of interest rate contracts— — — — — — (8,416)(936)— (9,352)
Amortization of interest rate contracts— — — — — — 4,129 459 432 5,020 
Reallocation of noncontrolling interest— — — 16,278 — — — (16,278)— — 
Equity, September 30, 2020
155,636 $1,556 $200,000 $6,348,076 $(364,720)$(2,722)$(52,622)$634,796 $1,730,674 $8,495,038 
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 stock42 — 1,434 — — — (1,435)— — 
Allocated net income for the period— — — — 378,075 — — 43,133 54,782 475,990 
Dividends/distributions declared— — — — (448,343)— — (51,591)— (499,934)
Shares issued pursuant to stock purchase plan— — 688 — — — — — 688 
Net activity from stock option and incentive plan66 — — (2,665)— — — 29,552 — 26,887 
Sale of an interest in property partnerships— — — (4,216)— — — — 4,216 — 
Acquisition of noncontrolling interest in property partnerships— — — (162,462)— — — — (24,501)(186,963)
Contributions from noncontrolling interests in property partnerships— — — — — — — — 26,968 26,968 
Distributions to noncontrolling interests in property partnerships— — — — — — — — (53,149)(53,149)
Effective portion of interest rate contracts— — — — — — (8,354)(953)— (9,307)
Amortization of interest rate contracts— — — — — — 4,099 467 432 4,998 
Reallocation of noncontrolling interest— — — 34,390 — — — (34,390)— — 
Equity, September 30, 2019
154,572 $1,546 $200,000 $6,274,792 $(749,666)$(2,722)$(51,996)$603,690 $1,720,123 $7,995,767 
The accompanying notes are an integral part of these consolidated financial statements.
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BOSTON PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited and in thousands)
 Nine months ended September 30,
 20202019
Cash flows from operating activities:
Net income$993,786 $475,990 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization515,738 507,867 
Amortization of right of use assets - operating leases1,667 1,821 
Impairment loss— 24,038 
Non-cash compensation expense36,152 33,253 
Loss (Income) from unconsolidated joint ventures5,410 (47,528)
Distributions of net cash flow from operations of unconsolidated joint ventures
22,285 16,770 
Gains from investments in securities(965)(4,240)
Allowance for current expected credit losses1,997 — 
Non-cash portion of interest expense17,397 16,594 
Settlement of accreted debt discount on redemption of unsecured senior notes— (763)
Loss from early extinguishment of debt— 28,010 
Gains on sales of real estate(613,723)(766)
Change in assets and liabilities:
Tenant and other receivables, net18,543 (20,677)
Notes receivable, net(395)(376)
Accrued rental income, net(85,843)(19,327)
Prepaid expenses and other assets(60,365)(63,857)
Lease liabilities - operating leases1,157 1,191 
Accounts payable and accrued expenses8,273 32,467 
Accrued interest payable(1,202)(6,104)
Other liabilities(24,868)(78,449)
Tenant leasing costs(52,621)(76,122)
Total adjustments(211,363)343,802 
Net cash provided by operating activities782,423 819,792 
Cash flows from investing activities:
Acquisitions of real estate(135,698)(148,912)
Construction in progress(358,824)(390,275)
Building and other capital improvements(116,894)(129,340)
Tenant improvements(172,401)(191,532)
Right of use assets - finance leases— (5,152)
Proceeds from sales of real estate505,679 83,486 
Capital contributions to unconsolidated joint ventures
(158,374)(65,499)
Capital distributions from unconsolidated joint ventures
55,123 136,807 
Cash and cash equivalents deconsolidated— (24,112)
Issuance of notes receivable, net(9,800)— 
Investments in securities, net
2,778 (1,937)
Net cash used in investing activities(388,411)(736,466)
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BOSTON PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited and in thousands)
 Nine months ended September 30,
 20202019
Cash flows from financing activities:
Repayments of mortgage notes payable(12,795)(15,510)
Proceeds from unsecured senior notes1,248,125 1,548,106 
Redemption of unsecured senior notes— (699,237)
Borrowings on unsecured line of credit265,000 380,000 
Repayments of unsecured line of credit(265,000)(380,000)
Payments on finance lease obligations— (502)
Deferred financing costs(10,416)(13,130)
Debt prepayment and extinguishment costs— (27,270)
Net proceeds from equity transactions3,276 2,562 
Dividends and distributions(516,572)(499,627)
Contributions from noncontrolling interests in property partnerships7,364 26,968 
Distributions to noncontrolling interests in property partnerships(40,091)(53,149)
Acquisition of noncontrolling interests in property partnership— (186,963)
Net cash provided by financing activities678,891 82,248 
Net increase in cash and cash equivalents and cash held in escrows1,072,903 165,574 
Cash and cash equivalents and cash held in escrows, beginning of period691,886 639,191 
Cash and cash equivalents and cash held in escrows, end of period$1,764,789 $804,765 
Reconciliation of cash and cash equivalents and cash held in escrows:
Cash and cash equivalents, beginning of period$644,950 $543,359 
Cash held in escrows, beginning of period46,936 95,832 
Cash and cash equivalents and cash held in escrows, beginning of period$691,886 $639,191 
Cash and cash equivalents, end of period$1,714,783 $751,210 
Cash held in escrows, end of period50,006 53,555 
Cash and cash equivalents and cash held in escrows, end of period$1,764,789 $804,765 
Supplemental disclosures:
Cash paid for interest$335,591 $338,033 
Interest capitalized$41,329 $41,253 
Non-cash investing and financing activities:
Write-off of fully depreciated real estate$(73,584)$(86,496)
Change in real estate included in accounts payable and accrued expenses$(30,924)$95,857 
Right of use assets obtained in exchange for lease liabilities$— $287,540 
Prepaid rent reclassified to right of use asset$— $15,000 
Accrued rental income, net deconsolidated$(4,558)$— 
Tenant leasing costs, net deconsolidated$(3,462)$— 
Building and other capital improvements, net deconsolidated$(111,889)$(12,767)
Tenant improvements, net deconsolidated$(12,331)$— 
Right of use asset - finance lease deconsolidated$— $(135,004)
Lease liability - finance lease deconsolidated$— $119,534 
Investment in unconsolidated joint venture recorded upon deconsolidation$347,898 $29,246 
8

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BOSTON PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited and in thousands)
 Nine months ended September 30,
 20202019
Dividends and distributions declared but not paid$171,070 $165,421 
Conversions of noncontrolling interests to stockholders’ equity$26,682 $1,435 
Issuance of restricted securities to employees and non-employee directors$43,244 $38,923 



























The accompanying notes are an integral part of these consolidated financial statements.
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BOSTON PROPERTIES LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEETS
(Unaudited and in thousands, except for unit amounts)
September 30,
2020
December 31,
2019
ASSETS
Real estate, at cost (amounts related to variable interest entities (“VIEs”) of $6,592,925 and $6,497,031 at September 30, 2020 and December 31, 2019, respectively)
$22,393,882 $22,107,755 
Right of use assets - finance leases (amounts related to VIEs of $21,000 and $21,000 at September 30, 2020 and December 31, 2019, respectively)
237,382 237,394 
Right of use assets - operating leases146,973 148,640 
Less: accumulated depreciation (amounts related to VIEs of $(1,134,450) and $(1,058,495) at September 30, 2020 and December 31, 2019, respectively)
(5,309,930)(5,162,908)
Total real estate17,468,307 17,330,881 
Cash and cash equivalents (amounts related to VIEs of $267,229 and $280,033 at September 30, 2020 and December 31, 2019, respectively)
1,714,783 644,950 
Cash held in escrows
50,006 46,936 
Investments in securities34,934 36,747 
Tenant and other receivables, net (amounts related to VIEs of $12,968 and $28,918 at September 30, 2020 and December 31, 2019, respectively)
76,330 112,807 
Related party note receivable, net77,592 80,000 
Notes receivable, net25,304 15,920 
Accrued rental income, net (amounts related to VIEs of $323,220 and $298,318 at September 30, 2020 and December 31, 2019, respectively)
1,111,078 1,038,788 
Deferred charges, net (amounts related to VIEs of $187,025 and $214,769 at September 30, 2020 and December 31, 2019, respectively)
644,036 689,213 
Prepaid expenses and other assets (amounts related to VIEs of $53,529 and $20,931 at September 30, 2020 and December 31, 2019, respectively)
106,524 41,685 
Investments in unconsolidated joint ventures1,377,291 955,647 
Total assets$22,686,185 $20,993,574 
LIABILITIES AND CAPITAL
Liabilities:
Mortgage notes payable, net (amounts related to VIEs of $2,910,460 and $2,918,806 at September 30, 2020 and December 31, 2019, respectively)
$2,912,494 $2,922,408 
Unsecured senior notes, net9,636,397 8,390,459 
Unsecured line of credit— — 
Unsecured term loan, net499,270 498,939 
Lease liabilities - finance leases (amounts related to VIEs of $20,266 and $20,189 at September 30, 2020 and December 31, 2019, respectively)
233,288 224,042 
Lease liabilities - operating leases
201,337 200,180 
Accounts payable and accrued expenses (amounts related to VIEs of $26,848 and $45,777 at September 30, 2020 and December 31, 2019, respectively)
345,959 377,553 
Dividends and distributions payable171,070 170,713 
Accrued interest payable
88,826 90,016 
Other liabilities (amounts related to VIEs of $128,451 and $140,110 at September 30, 2020 and December 31, 2019, respectively)
369,932 387,994 
Total liabilities14,458,573 13,262,304 
Commitments and contingencies— — 
Redeemable deferred stock units— 69,787 and 60,676 units outstanding at redemption value at September 30, 2020 and December 31, 2019, respectively
5,604 8,365 
10

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BOSTON PROPERTIES LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEETS
(Unaudited and in thousands, except for unit amounts)
September 30,
2020
December 31,
2019
Noncontrolling interests:
Redeemable partnership units— 16,120,074 and 16,764,466 common units and 1,338,400 and 1,143,215 long term incentive units outstanding at redemption value at September 30, 2020 and December 31, 2019, respectively
1,406,484 2,468,753 
Capital:
5.25% Series B cumulative redeemable preferred units, liquidation preference $2,500 per unit, 80,000 units issued and outstanding at September 30, 2020 and December 31, 2019
193,623 193,623 
Boston Properties Limited Partnership partners’ capital— 1,730,948 and 1,726,980 general partner units and 153,905,352 and 153,063,318 limited partner units outstanding at September 30, 2020 and December 31, 2019, respectively
4,943,849 3,380,175 
Accumulated other comprehensive loss(52,622)(48,335)
Total partners’ capital5,084,850 3,525,463 
Noncontrolling interests in property partnerships1,730,674 1,728,689 
Total capital6,815,524 5,254,152 
Total liabilities and capital$22,686,185 $20,993,574 



























The accompanying notes are an integral part of these consolidated financial statements.
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BOSTON PROPERTIES LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited and in thousands, except for per unit amounts)
 Three months ended September 30,Nine months ended September 30,
 2020201920202019
Revenue
Lease$666,674 $692,225 $2,006,904 $2,051,665 
Parking and other16,327 25,582 54,777 76,807 
Hotel90 13,014 7,014 36,796 
Development and management services7,281 10,303 23,285 29,566 
Direct reimbursements of payroll and related costs from management services contracts
2,896 2,429 8,617 8,227 
Total revenue693,268 743,553 2,100,597 2,203,061 
Expenses
Operating
Rental258,261 265,603 761,014 781,091 
Hotel3,164 8,743 11,958 25,686 
General and administrative27,862 31,147 102,059 107,980 
Payroll and related costs from management services contracts2,896 2,429 8,617 8,227 
Transaction costs307 538 1,254 1,415 
Depreciation and amortization164,706 164,020 510,400 501,901 
Total expenses457,196 472,480 1,395,302 1,426,300 
Other income (expense)
Income (loss) from unconsolidated joint ventures(6,873)(649)(5,410)47,528 
Gains (losses) on sales of real estate(209)(15)626,686 915 
Interest and other income (loss)(45)7,178 4,277 14,546 
Gains from investments in securities1,858 106 965 4,240 
Impairment loss— — — (22,272)
Loss from early extinguishment of debt— (28,010)— (28,010)
Interest expense(110,993)(106,471)(319,726)(309,837)
Net income119,810 143,212 1,012,087 483,871 
Net (income) loss attributable to noncontrolling interests
Noncontrolling interests in property partnerships(15,561)(18,470)(34,280)(54,782)
Net income attributable to Boston Properties Limited Partnership104,249 124,742 977,807 429,089 
Preferred distributions(2,625)(2,625)(7,875)(7,875)
Net income attributable to Boston Properties Limited Partnership common unitholders
$101,624 $122,117 $969,932 $421,214 
Basic earnings per common unit attributable to Boston Properties Limited Partnership
Net income$0.59 $0.71 $5.61 $2.45 
Weighted average number of common units outstanding172,677 172,215 172,628 172,183 
Diluted earnings per common unit attributable to Boston Properties Limited Partnership
Net income$0.59 $0.71 $5.61 $2.44 
Weighted average number of common and common equivalent units outstanding
172,702 172,458 172,726 172,477 





The accompanying notes are an integral part of these consolidated financial statements.
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BOSTON PROPERTIES LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited and in thousands)
 
 Three months ended September 30,Nine months ended September 30,
 2020201920202019
Net income$119,810 $143,212 $1,012,087 $483,871 
Other comprehensive income (loss):
Effective portion of interest rate contracts1,027 (2,253)(9,352)(9,307)
Amortization of interest rate contracts (1)1,677 1,666 5,020 4,998 
Other comprehensive income (loss)2,704 (587)(4,332)(4,309)
Comprehensive income122,514 142,625 1,007,755 479,562 
Comprehensive income attributable to noncontrolling interests(15,705)(18,614)(34,712)(55,214)
Comprehensive income attributable to Boston Properties Limited Partnership
$106,809 $124,011 $973,043 $424,348 
_______________
(1)Amounts reclassified from comprehensive income primarily to interest expense within Boston Properties Limited Partnership’s Consolidated Statements of Operations.





































The accompanying notes are an integral part of these consolidated financial statements.
13

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

UnitsCapital
 
General PartnerLimited PartnerPartners’ Capital (General and Limited Partners)Preferred UnitsAccumulated
Other
Comprehensive Loss
Noncontrolling
Interests - Property Partnerships
Total CapitalNoncontrolling Interests - Redeemable Partnership Units
Equity, June 30, 2020
1,731 153,891 $4,828,066 $193,623 $(54,921)$1,724,588 $6,691,356 $1,581,010 
Contributions
— 421 — — — 421 (219)
Allocated net income for the period— — 92,059 2,625 — 15,561 110,245 9,565 
Distributions
— — (152,518)(2,625)— — (155,143)(17,183)
Unearned compensation
— — 1,403 — — — 1,403 7,468 
Conversion of redeemable partnership units
— 338 — — — 338 (338)
Adjustment to reflect redeemable partnership units at redemption value
— — 174,080 — — — 174,080 (174,080)
Effective portion of interest rate contracts
— — — — 917 — 917 110 
Amortization of interest rate contracts
— — — — 1,382 144 1,526 151 
Contributions from noncontrolling interests in property partnerships
— — — — — 1,407 1,407 — 
Distributions to noncontrolling interests in property partnerships
— — — — — (11,026)(11,026)— 
Equity, September 30, 20201,731 153,905 $4,943,849 $193,623 $(52,622)$1,730,674 $6,815,524 $1,406,484 
Equity, June 30, 2019
1,726 152,837 $3,562,910 $193,623 $(51,340)$1,696,221 $5,401,414 $2,324,238 
Contributions— (3,915)— — — (3,915)— 
Allocated net income for the period— — 109,611 2,625 — 18,470 130,706 12,506 
Distributions— — (146,843)(2,625)— — (149,468)(17,200)
Unearned compensation— — (7,205)— — — (7,205)6,774 
Conversion of redeemable partnership units— 223 — — — 223 (223)
Adjustment to reflect redeemable partnership units at redemption value— — (9,252)— — — (9,252)9,252 
Effective portion of interest rate contracts— — — — (2,022)— (2,022)(231)
Amortization of interest rate contracts— — — — 1,366 144 1,510 156 
Acquisition of noncontrolling interest in property partnership— — 43 — — — 43 — 
Sale of an interest in property partnerships— — — — — 4,216 4,216 — 
Contributions from noncontrolling interests in property partnerships— — — — — 14,820 14,820 — 
Distributions to noncontrolling interests in property partnerships— — — — — (13,748)(13,748)— 
Equity, September 30, 20191,726 152,846 $3,505,572 $193,623 $(51,996)$1,720,123 $5,367,322 $2,335,272 

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

UnitsCapital
 
General PartnerLimited PartnerPartners’ Capital (General and Limited Partners)Preferred UnitsAccumulated
Other
Comprehensive Loss
Noncontrolling
Interests - Property Partnerships
Total CapitalNoncontrolling Interests - Redeemable Partnership Units
Equity, December 31, 2019
1,727 153,063 $3,380,175 $193,623 $(48,335)$1,728,689 $5,254,152 $2,468,753 
Cumulative effect of a change in accounting principle
— — (1,505)— — — (1,505)(174)
Contributions
73 7,583 — — — 7,583 39,424 
Allocated net income for the period
— — 872,842 7,875 — 34,280 914,997 97,090 
Distributions
— — (457,233)(7,875)— — (465,108)(51,821)
Unearned compensation
— — 2,822 — — — 2,822 (7,146)
Conversion of redeemable partnership units
769 26,682 — — — 26,682 (26,682)
Adjustment to reflect redeemable partnership units at redemption value
— — 1,112,483 — — — 1,112,483 (1,112,483)
Effective portion of interest rate contracts
— — — — (8,416)— (8,416)(936)
Amortization of interest rate contracts
— — — — 4,129 432 4,561 459 
Contributions from noncontrolling interests in property partnerships
— — — — — 7,364 7,364 — 
Distributions to noncontrolling interests in property partnerships
— — — — — (40,091)(40,091)— 
Equity, September 30, 20201,731 153,905 $4,943,849 $193,623 $(52,622)$1,730,674 $6,815,524 $1,406,484 
Equity, December 31, 2018
1,722 152,736 $4,054,996 $193,623 $(47,741)$1,711,445 $5,912,323 $2,000,591 
Cumulative effect of a change in accounting principle
— — (3,864)— — (70)(3,934)(445)
Contributions
69 1,787 — — — 1,787 35,482 
Allocated net income for the period
— — 378,081 7,875 — 54,782 440,738 43,133 
Distributions
— — (440,468)(7,875)— — (448,343)(51,591)
Unearned compensation
— — (7,980)— — — (7,980)(5,930)
Conversion of redeemable partnership units
41 1,435 — — — 1,435 (1,435)
Adjustment to reflect redeemable partnership units at redemption value
— — (315,953)— — — (315,953)315,953 
Effective portion of interest rate contracts
— — — — (8,354)— (8,354)(953)
Amortization of interest rate contracts
— — — — 4,099 432 4,531 467 
Acquisition of noncontrolling interest in property partnership— — (162,462)— — (24,501)(186,963)— 
Sale of an interest in property partnerships— — — — — 4,216 4,216 — 
Contributions from noncontrolling interests in property partnerships
— — — — — 26,968 26,968 — 
Distributions to noncontrolling interests in property partnerships
— — — — — (53,149)(53,149)— 
Equity, September 30, 20191,726 152,846 $3,505,572 $193,623 $(51,996)$1,720,123 $5,367,322 $2,335,272 

The accompanying notes are an integral part of these consolidated financial statements.
15

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BOSTON PROPERTIES LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited and in thousands)
 Nine months ended September 30,
 20202019
Cash flows from operating activities:
Net income$1,012,087 $483,871 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization510,400 501,901 
Amortization of right of use assets - operating leases1,667 1,821 
Impairment loss— 22,272 
Non-cash compensation expense36,152 33,253 
Loss (Income) from unconsolidated joint ventures5,410 (47,528)
Distributions of net cash flow from operations of unconsolidated joint ventures22,285 16,770 
Gains from investments in securities(965)(4,240)
Allowance for current expected credit losses1,997 — 
Non-cash portion of interest expense17,397 16,594 
Settlement of accreted debt discount on redemption of unsecured senior notes— (763)
Loss from early extinguishment of debt— 28,010 
Gains on sales of real estate(626,686)(915)
Change in assets and liabilities:
Tenant and other receivables, net18,543 (20,677)
Notes receivable, net(395)(376)
Accrued rental income, net(85,843)(19,327)
Prepaid expenses and other assets(60,365)(63,857)
Lease liabilities - operating leases1,157 1,191 
Accounts payable and accrued expenses8,273 32,467 
Accrued interest payable(1,202)(6,104)
Other liabilities(24,868)(78,449)
Tenant leasing costs(52,621)(76,122)
Total adjustments(229,664)335,921 
Net cash provided by operating activities782,423 819,792 
Cash flows from investing activities:
Acquisitions of real estate(135,698)(148,912)
Construction in progress(358,824)(390,275)
Building and other capital improvements(116,894)(129,340)
Tenant improvements(172,401)(191,532)
Right of use assets - finance leases— (5,152)
Proceeds from sales of real estate505,679 83,486 
Capital contributions to unconsolidated joint ventures(158,374)(65,499)
Capital distributions from unconsolidated joint ventures55,123 136,807 
Cash and cash equivalents deconsolidated— (24,112)
Issuance of notes receivable, net(9,800)— 
Investments in securities, net2,778 (1,937)
Net cash used in investing activities(388,411)(736,466)
16

Table of Contents
BOSTON PROPERTIES LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited and in thousands)
 Nine months ended September 30,
 20202019
Cash flows from financing activities:
Repayments of mortgage notes payable(12,795)(15,510)
Proceeds from unsecured senior notes1,248,125 1,548,106 
Redemption of unsecured senior notes— (699,237)
Borrowings on unsecured line of credit265,000 380,000 
Repayments of unsecured line of credit(265,000)(380,000)
Payments on finance lease obligations— (502)
Deferred financing costs(10,416)(13,130)
Debt prepayment and extinguishment costs— (27,270)
Net proceeds from equity transactions3,276 2,562 
Distributions(516,572)(499,627)
Contributions from noncontrolling interests in property partnerships7,364 26,968 
Distributions to noncontrolling interests in property partnerships(40,091)(53,149)
Acquisition of noncontrolling interest in property partnership— (186,963)
Net cash provided by financing activities678,891 82,248 
Net increase in cash and cash equivalents and cash held in escrows1,072,903 165,574 
Cash and cash equivalents and cash held in escrows, beginning of period691,886 639,191 
Cash and cash equivalents and cash held in escrows, end of period$1,764,789 $804,765 
Reconciliation of cash and cash equivalents and cash held in escrows:
Cash and cash equivalents, beginning of period$644,950 $543,359 
Cash held in escrows, beginning of period46,936 95,832 
Cash and cash equivalents and cash held in escrows, beginning of period$691,886 $639,191 
Cash and cash equivalents, end of period$1,714,783 $751,210 
Cash held in escrows, end of period50,006 53,555 
Cash and cash equivalents and cash held in escrows, end of period$1,764,789 $804,765 
Supplemental disclosures:
Cash paid for interest$335,591 $338,033 
Interest capitalized$41,329 $41,253 
Non-cash investing and financing activities:
Write-off of fully depreciated real estate$(73,584)$(86,496)
Change in real estate included in accounts payable and accrued expenses$(30,924)$95,857 
Right of use assets obtained in exchange for lease liabilities$— $287,540 
Prepaid rent reclassified to right of use asset$— $15,000 
Accrued rental income, net deconsolidated$(4,558)$— 
Tenant leasing costs, net deconsolidated$(3,462)$— 
Building and other capital improvements, net deconsolidated$(111,889)$(12,767)
Tenant improvements, net deconsolidated$(12,331)$— 
Right of use asset - finance lease deconsolidated$— $(135,004)
Lease liability - finance lease deconsolidated$— $119,534 
Investment in unconsolidated joint venture recorded upon deconsolidation$347,898 $29,246 
17

Table of Contents
BOSTON PROPERTIES LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited and in thousands)
 Nine months ended September 30,
 20202019
Distributions declared but not paid$171,070 $165,421 
Conversions of redeemable partnership units to partners’ capital$26,682 $1,435 
Issuance of restricted securities to employees and non-employee directors$43,244 $38,923 



























The accompanying notes are an integral part of these consolidated financial statements.
18

Table of Contents
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 September 30, 2020 owned an approximate 89.9% (89.6% at December 31, 2019) general and limited partnership interest in Boston Properties Limited Partnership. Unless stated otherwise or the context requires, the “Company” refers to Boston Properties, Inc. and its subsidiaries, including Boston Properties Limited Partnership and its consolidated subsidiaries. Partnership interests in Boston Properties Limited Partnership include:
common units of partnership interest (also referred to as “OP Units”),
long term incentive units of partnership interest (also referred to as “LTIP Units”), and
preferred units of partnership interest (also referred to as “Preferred Units”).
Unless specifically noted otherwise, all references to OP Units exclude units held by Boston Properties, Inc. A holder of an OP Unit may present such OP Unit to Boston Properties Limited Partnership for redemption at any time (subject to restrictions agreed upon at the time of issuance of OP Units to particular holders that may restrict such redemption right for a period of time, generally one year from issuance). Upon presentation of an OP Unit for redemption, Boston Properties Limited Partnership is obligated to redeem the OP Unit for cash equal to the value of a share of common stock of Boston Properties, Inc. (“Common Stock”). In lieu of a cash redemption, Boston Properties, Inc. may elect to acquire the OP Unit for one share of Common Stock. Because the number of shares of Common Stock outstanding at all times equals the number of OP Units that Boston Properties, Inc. owns, one share of Common Stock is generally the economic equivalent of one OP Unit, and the quarterly distribution that may be paid to the holder of an OP Unit equals the quarterly dividend that may be paid to the holder of a share of Common Stock.
The Company uses LTIP Units as a form of equity-based award for annual long term incentive equity compensation. The Company has also issued LTIP Units to employees in the form of (1) 2012 outperformance plan awards (“2012 OPP Units”) and (2) 2013 - 2020 multi-year, long-term incentive program awards (also referred to as “MYLTIP Units”), each of which, upon the satisfaction of certain performance and vesting conditions, is convertible into one OP Unit. The three-year measurement periods for the 2012 OPP Units and the 2013 - 2017 MYLTIP Units have ended and Boston Properties, Inc.’s total stockholder return (“TSR”) was sufficient for employees to earn and therefore become eligible to vest in a portion of the awards. Unless and until they are earned, the rights, preferences and privileges of the 2018 - 2020 MYLTIP Units differ from other LTIP Units granted to employees (including the 2012 OPP Units and the 2013 - 2017 MYLTIP Units, which have been earned). Therefore, unless specifically noted otherwise, all references to LTIP Units exclude the 2018 - 2020 MYLTIP Units. LTIP Units (including the earned 2012 OPP Units and the earned 2013 - 2017 MYLTIP Units), whether vested or not, will receive the same quarterly per unit distributions as OP Units, which equal per share dividends on Common Stock (See Notes 8 and 11).
At September 30, 2020, there was one series of Preferred Units outstanding (i.e., Series B Preferred Units). The Series B Preferred Units were issued to Boston Properties, Inc. on March 27, 2013 in connection with the issuance of 80,000 shares (8,000,000 depositary shares each representing 1/100th of a share) of 5.25% Series B Cumulative Redeemable Preferred Stock (the “Series B Preferred Stock”). Boston Properties, Inc. contributed the net proceeds from the offering to Boston Properties Limited Partnership in exchange for 80,000 Series B Preferred Units having terms and preferences generally mirroring those of the Series B Preferred Stock (See Note 9).
Properties
At September 30, 2020, the Company owned or had joint venture interests in a portfolio of 196 commercial real estate properties (the “Properties”) aggregating approximately 51.2 million net rentable square feet of primarily Class A office properties, including seven properties under construction/redevelopment totaling approximately 4.3 million net rentable square feet. At September 30, 2020, the Properties consisted of:
177 office properties (including seven properties under construction/redevelopment);
12 retail properties;
six residential properties; and
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one hotel.
The Company considers Class A office properties to be well-located buildings that are professionally managed and maintained, attract high-quality tenants and command upper-tier rental rates, and that are modern structures or have been modernized to compete with newer buildings.
2. Basis of Presentation and Summary of Significant Accounting Policies
Boston Properties, Inc. does not have any other significant assets, liabilities or operations, other than its investment in Boston Properties Limited Partnership, nor does it have employees of its own. Boston Properties Limited Partnership, not Boston Properties, Inc., generally executes all significant business relationships other than transactions involving securities of Boston Properties, Inc. All majority-owned subsidiaries and joint ventures over which the Company has financial and operating control and variable interest entities (“VIEs”) in which the Company has determined it is the primary beneficiary are included in the consolidated financial statements. All significant intercompany balances and transactions have been eliminated in consolidation. The Company accounts for all other unconsolidated joint ventures using the equity method of accounting. Accordingly, the Company’s share of the earnings of these joint ventures and companies is included in consolidated net income.
The accompanying interim financial statements are unaudited; however, the financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) for interim financial information and in conjunction with the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the disclosures required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting solely of normal recurring matters) necessary for a fair statement of the financial statements for these interim periods have been included. The results of operations for the interim periods are not necessarily indicative of the results to be obtained for other interim periods or for the full fiscal year. The year-end consolidated balance sheet data was derived from audited financial statements, but does not include all disclosure required by GAAP.  These financial statements should be read in conjunction with the Company’s financial statements and notes thereto contained in the Company’s Annual Report in the Company’s Form 10-K for its fiscal year ended December 31, 2019.
The Company bases its estimates on historical experience and on various other assumptions that it considers to be reasonable under the circumstances, including the impact of extraordinary events such as the novel coronavirus (“COVID-19”) pandemic, the results of which form the basis for making significant judgments about the carrying values of assets and liabilities, assessments of future collectability, and other areas of the financial statements that are impacted by the use of estimates. Actual results may differ from these estimates under different assumptions or conditions.
Variable Interest Entities (VIEs)
Consolidated VIEs are those for which the Company is considered to be the primary beneficiary of a VIE. The primary beneficiary is the entity that has a controlling financial interest in the VIE, which is defined by the entity having both of the following characteristics: (1) the power to direct the activities that, when taken together, most significantly impact the VIE’s performance and (2) the obligation to absorb losses or the right to receive the returns from the VIE that could potentially be significant to the VIE. The Company has determined that it is the primary beneficiary for six of the seven entities that are VIEs.
Consolidated Variable Interest Entities
As of September 30, 2020, Boston Properties, Inc. has identified six consolidated VIEs, including Boston Properties Limited Partnership. Excluding Boston Properties Limited Partnership, the VIEs consisted of the following five in-service properties: 767 Fifth Avenue (the General Motors Building), Times Square Tower, 601 Lexington Avenue, Atlantic Wharf Office Building and 100 Federal Street.
The Company consolidates these VIEs because it is the primary beneficiary.  The third parties’ interests in these consolidated entities (excluding Boston Properties Limited Partnership’s interest) are reflected as noncontrolling interests in property partnerships in the accompanying consolidated financial statements (See Note 8). 
In addition, Boston Properties, Inc.’s only significant asset is its investment in Boston Properties Limited Partnership and, consequently, substantially all of Boston Properties, Inc.’s assets and liabilities are the assets and liabilities of Boston Properties Limited Partnership.
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Variable Interest Entities Not Consolidated
The Company has determined that the Platform 16 Holdings LP joint venture is a VIE. The Company does not consolidate this entity as the Company does not have the power to direct the activities that, when taken together, most significantly impact the VIE’s performance and, therefore, the Company is not considered to be the primary beneficiary.
Fair Value of Financial Instruments
The Company follows the authoritative guidance for fair value measurements when valuing its financial instruments for disclosure purposes. The table below presents the financial instruments that are being valued for disclosure purposes as well as the Level at which they are categorized (as defined in Accounting Standards Codification (“ASC”) 820 “Fair Value Measurements and Disclosures” (“ASC 820”)).
Financial InstrumentLevel
Unsecured senior notes (1)Level 1
Related party note receivableLevel 3
Notes receivableLevel 3
Mortgage notes payableLevel 3
Unsecured term loan / line of creditLevel 3
_______________
(1) If trading value for the period is low, the valuation could be categorized as Level 2.
Because the Company’s valuations of its financial instruments are based on the above Levels and involve the use of estimates, the actual fair values of its financial instruments may differ materially from those estimates.
The following table identifies the range and weighted average of significant unobservable inputs for the Company’s Level 3 fair value measured instruments.
Financial InstrumentLevelRangeWeighted Average
Related party note receivableLevel 33.65%3.65%
Notes receivableLevel 3
3.62% - 8.00%
5.31%
Mortgage notes payableLevel 3
1.82% - 3.25%
2.11%
Unsecured term loan / line of creditLevel 31.05%1.05%
In addition, the Company’s estimated fair values for these instruments as of the end of the applicable reporting period are not projections of, nor necessarily indicative of, estimated or actual fair values in future reporting periods.
The following table presents the aggregate carrying value of the Company’s related party note receivable, net, notes receivable, net, mortgage notes payable, net, unsecured senior notes, net, unsecured line of credit and unsecured term loan, net and the Company’s corresponding estimate of fair value as of September 30, 2020 and December 31, 2019 (in thousands):
 September 30, 2020December 31, 2019
 Carrying
Amount
Estimated
Fair Value
Carrying
Amount
Estimated
Fair Value
Related party note receivable, net$77,592 $84,990 $80,000 $81,931 
Notes receivable, net25,304 25,974 15,920 14,978 
Total$102,896 $110,964 $95,920 $96,909 
Mortgage notes payable, net$2,912,494 $3,183,294 $2,922,408 $2,984,956 
Unsecured senior notes, net9,636,397 10,491,966 8,390,459 8,826,375 
Unsecured line of credit— — — — 
Unsecured term loan, net499,270 500,388 498,939 500,561 
Total$13,048,161 $14,175,648 $11,811,806 $12,311,892 
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New Accounting Pronouncements Adopted
Financial Instruments - Credit Losses    
In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”). ASU 2016-13 is intended to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date by replacing the current incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. In November 2018, the FASB issued ASU 2018-19, “Codification Improvements to Topic 326, Financial Instruments - Credit Losses” (“ASU 2018-19”). ASU 2018-19 clarifies that receivables arising from operating leases are not within the scope of ASC 326-20, “Financial Instruments - Credit Losses - Measured at Amortized Cost,” which addresses financial assets measured at amortized cost basis, including net investments in leases arising from sales-type and direct financing leases. Instead, impairment of receivables arising from operating leases should be accounted for in accordance with ASC 842 - “Leases” (“ASC 842”). ASU 2016-13 and ASU 2018-19 were effective for the Company for reporting periods beginning after December 15, 2019, with early adoption permitted. ASU 2016-13 and ASU 2018-19 are applicable to the Company with respect to (1) certain of its accounts receivable, except for amounts arising from operating leases accounted for under ASC 842, (2) its related party note receivable, (3) its notes receivable and (4) certain of its off-balance sheet credit exposures. The Company adopted ASU 2016-13 and ASU 2018-19 effective January 1, 2020 using the modified retrospective approach. The adoption of ASU 2016-13 and ASU 2018-19 resulted in the Company recognizing an allowance for current expected credit losses associated with (1) its related party note receivable, (2) its notes receivable and (3) an off-balance sheet loan commitment arrangement. As a result, the modified retrospective approach resulted in the Company recognizing on January 1, 2020, the cumulative effect of adopting ASU 2016-13 and ASU 2018-19 aggregating approximately $1.5 million to Dividends in Excess of Earnings of Boston Properties, Inc. and Partners’ Capital of Boston Properties Limited Partnership and approximately $0.2 million to Noncontrolling Interests - Common Units of Boston Properties, Inc. and Noncontrolling Interests - Redeemable Partnership Units of Boston Properties Limited Partnership on the corresponding Consolidated Balance Sheets.
Fair Value Measurement
In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU 2018-13”). ASU 2018-13 is intended to improve the effectiveness of disclosures required by entities regarding recurring and nonrecurring fair value measurements. ASU 2018-13 was effective for the Company for reporting periods beginning after December 15, 2019, with early adoption permitted. The Company adopted ASU 2018-13 on January 1, 2020 and the adoption did not have a material impact on the Company’s consolidated financial statements.
Derivatives and Hedging
In October 2018, the FASB issued ASU 2018-16, “Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes” (“ASU 2018-16”). ASU 2018-16 permits the use of the overnight index swap rate based on the Secured Overnight Financing Rate (“SOFR”) to be used as a U.S. benchmark interest rate for purposes of applying hedge accounting under ASC 815, “Derivatives and Hedging (Topic 815).” ASU 2018-16 was effective for the Company, which has already adopted ASU 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities” for reporting periods beginning after December 15, 2018 and was required to be adopted on a prospective basis for qualifying new or re-designated hedging relationships entered into on or after the date of adoption. The Company adopted ASU 2018-16 on January 1, 2019 and the adoption did not have a material impact on the Company’s consolidated financial statements.
In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting” (“ASU 2020-04”). ASU 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. During the nine months ended September 30, 2020, the Company elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. The
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Company continues to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur.
Consolidation
In October 2018, the FASB issued ASU 2018-17, “Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities” (“ASU 2018-17”). ASU 2018-17 is intended to improve the accounting when considering indirect interests held through related parties under common control for determining whether fees paid to decision makers and service providers are variable interests. ASU 2018-17 was effective for the Company for reporting periods beginning after December 15, 2019, with early adoption permitted. The Company adopted ASU 2018-17 on January 1, 2020 and the adoption did not have a material impact on the Company’s consolidated financial statements.    
3. Real Estate
Boston Properties, Inc.
Real estate consisted of the following at September 30, 2020 and December 31, 2019 (in thousands):
September 30, 2020December 31, 2019
Land$5,069,206 $5,111,606 
Right of use assets - finance leases237,382 237,394 
Right of use assets - operating leases146,973 148,640 
Land held for future development (1)446,392 254,828 
Buildings and improvements13,748,127 13,646,054 
Tenant improvements2,687,911 2,656,439 
Furniture, fixtures and equipment49,209 44,313 
Construction in progress769,846 789,736 
Total23,155,046 22,889,010 
Less: Accumulated depreciation(5,413,709)(5,266,798)
$17,741,337 $17,622,212 
_______________
(1)Includes pre-development costs.
Boston Properties Limited Partnership
Real estate consisted of the following at September 30, 2020 and December 31, 2019 (in thousands):
September 30, 2020December 31, 2019
Land$4,971,990 $5,011,153 
Right of use assets - finance leases237,382 237,394 
Right of use assets - operating leases146,973 148,640 
Land held for future development (1)446,392 254,828 
Buildings and improvements13,468,534 13,351,286 
Tenant improvements2,687,911 2,656,439 
Furniture, fixtures and equipment49,209 44,313 
Construction in progress769,846 789,736 
Total22,778,237 22,493,789 
Less: Accumulated depreciation(5,309,930)(5,162,908)
$17,468,307 $17,330,881 
_______________
(1)Includes pre-development costs.
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Developments
On March 26, 2020, the Company completed and fully placed in-service 17Fifty Presidents Street located in Reston, Virginia. 17Fifty Presidents Street is a build-to-suit project with approximately 276,000 net rentable square feet of Class A office space that is 100% leased.
On June 1, 2020, the Company completed and fully placed in-service 20 CityPoint, a Class A office project with approximately 211,000 net rentable square feet located in Waltham, Massachusetts that is 62% leased.
On June 26, 2020, the Company completed the acquisition of real property at 777 Harrison Street (known as Fourth + Harrison and formerly known as 425 Fourth Street) located in San Francisco, California for a gross purchase price, including entitlements, totaling approximately $140.1 million. On July 31, 2020, the Company acquired an undivided ownership interest in real property at 759 Harrison Street located in San Francisco, California, which is expected to be included in the Fourth + Harrison development project, for a purchase price totaling approximately $2.3 million. Fourth + Harrison is expected to support the development of approximately 804,000 square feet of primarily commercial office space.
On August 15, 2020, the Company completed and fully placed in-service The Skylyne, an approximately 331,000 square foot project comprised of 402 residential units and retail space located in Oakland, California.
Dispositions
On January 28, 2020, the Company entered into a joint venture with a third party to own, operate and develop properties at its Gateway Commons complex located in South San Francisco, California. The Company contributed its 601, 611 and 651 Gateway properties and development rights with an agreed upon value aggregating approximately $350.0 million for its 50% interest in the joint venture. 601, 611 and 651 Gateway consist of three Class A office properties aggregating approximately 768,000 net rentable square feet. The partner contributed three properties and development rights with an agreed upon value aggregating approximately $280.8 million at closing and will contribute cash totaling approximately $69.2 million in the future for its 50% ownership interest in the joint venture. As a result of the partner’s deferred contribution, the Company has an initial approximately 55% interest in the joint venture. Future development projects will be owned 49% by the Company and 51% by its partner. Upon the partner’s contribution, the Company ceased accounting for the joint venture entity on a consolidated basis and is accounting for the joint venture entity on an unconsolidated basis using the equity method of accounting, as it has reduced its ownership interest in the joint venture entity and no longer has a controlling financial or operating interest in the joint venture entity (See Note 5). The Company recognized a gain on the retained and sold interest in the real estate contributed to the joint venture totaling approximately $217.7 million for Boston Properties, Inc. and $222.4 million for Boston Properties Limited Partnership during the nine months ended September 30, 2020 within Gains on Sales of Real Estate on the respective Consolidated Statements of Operations, as the fair value of the real estate exceeded its carrying value. 601, 611 and 651 Gateway contributed approximately $0.2 million of net income to the Company for the period from January 1, 2020 through January 27, 2020 and contributed approximately $2.4 million and $8.5 million of net income to the Company for the three and nine months ended September 30, 2019, respectively.
On February 20, 2020, the Company completed the sale of New Dominion Technology Park located in Herndon, Virginia for a gross sale price of $256.0 million. Net cash proceeds totaled approximately $254.0 million, resulting in a gain on sale of real estate totaling approximately $192.3 million for Boston Properties, Inc. and approximately $197.1 million for Boston Properties Limited Partnership. New Dominion Technology Park is comprised of two Class A office properties aggregating approximately 493,000 net rentable square feet. New Dominion Technology Park contributed approximately $1.6 million of net income to the Company for the period from January 1, 2020 through February 19, 2020 and contributed approximately $2.1 million and $6.3 million of net income to the Company for the three and nine months ended September 30, 2019, respectively.
On June 25, 2020, the Company completed the sale of a portion of its Capital Gallery property located in Washington, DC for a gross sale price of approximately $253.7 million. Net cash proceeds totaled approximately $246.6 million, resulting in a gain on sale of real estate totaling approximately $203.6 million for Boston Properties, Inc. and approximately $207.0 million for Boston Properties Limited Partnership. Capital Gallery is an approximately 631,000 net rentable square foot Class A office property. The portion sold was comprised of approximately 455,000 net rentable square feet of commercial office space. The Company continues to own the land, underground parking garage and remaining commercial office and retail space containing approximately 176,000 net rentable square feet at the property. The sold portion of Capital Gallery contributed approximately $6.3 million of net income to the Company for the period from January 1, 2020 through June 24, 2020 and
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contributed approximately $4.0 million and $11.5 million of net income to the Company for the three and nine months ended September 30, 2019, respectively.
4. Leases
The Company must make estimates as to the collectability of its accrued rent and accounts receivable related to lease revenue. Management analyzes accrued rent and accounts receivable by considering tenant creditworthiness, current economic trends, including the impact of COVID-19 on tenants’ businesses, and changes in tenants’ payment patterns when evaluating the collectability of the tenant’s receivable balance, including the accrued rent receivable, on a lease-by-lease basis. As a result of this analysis, during the three and nine months ended September 30, 2020, the Company wrote off approximately $4.1 million and $41.5 million, respectively, related to accrued rent balances and approximately $3.4 million and $22.3 million, respectively, related to accounts receivable balances. The write-offs were for tenants, primarily in the retail sector, that either terminated their leases or that the Company considered their accrued rent and/or accounts receivable balances no longer probable of collection.
In April 2020, the FASB staff issued a question and answer document (“Lease Modification Q & A”) related to the application of lease accounting guidance for lease concessions, in accordance with ASC 842, as a result of COVID-19. Under existing lease guidance, the Company would have to determine, on a lease-by-lease basis, if a lease concession was the result of a new arrangement reached with the tenant (treated within the lease modification accounting framework) or if a lease concession was under the enforceable rights and obligations within the existing lease agreement (precluded from applying the lease modification accounting framework). The Lease Modification Q & A allows the Company, if certain criteria have been met, to assume that a lease concession was included within the enforceable rights and obligations of the existing lease agreement and instead elect to either apply the lease modification accounting framework or not, with such election applied consistently to leases with similar characteristics and similar circumstances. The Company did not utilize the guidance provided in the Lease Modification Q & A and instead elected to continue to account for the COVID-19 lease concessions on a lease-by-lease basis in accordance with the existing lease modification accounting framework.
The following table summarizes the components of lease revenue recognized during the three and nine months ended September 30, 2020 and 2019 included within the Company's Consolidated Statements of Operations (in thousands):
Three months ended September 30,Nine months ended September 30,
Lease Revenue2020201920202019
Fixed contractual payments$557,384 $566,294 $1,673,855 $1,678,100 
Variable lease payments109,290 125,931 333,049 373,565 
$666,674 $692,225 $2,006,904 $2,051,665 


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5. Investments in Unconsolidated Joint Ventures
The investments in unconsolidated joint ventures consist of the following at September 30, 2020 and December 31, 2019:
 Carrying Value of Investment (1)
EntityPropertiesNominal %
Ownership
September 30,
2020
December 31,
2019
(in thousands)
Square 407 Limited PartnershipMarket Square North50.0 %$(3,864)$(4,872)
BP/CRF Metropolitan Square, LLC
Metropolitan Square20.0 %(7,166)9,134 
901 New York, LLC901 New York Avenue25.0 %(2) (12,187)(12,113)
WP Project Developer LLC
Wisconsin Place Land and Infrastructure
33.3 %(3) 35,682 36,789 
Annapolis Junction NFM LLCAnnapolis Junction50.0 %(4) 13,238 25,391 
540 Madison Venture LLC540 Madison Avenue60.0 %(5) 105 2,953 
500 North Capitol Venture LLC500 North Capitol Street, NW30.0 %(6,239)(5,439)
501 K Street LLC
1001 6th Street
50.0 %(6) 42,640 42,496 
Podium Developer LLCThe Hub on Causeway - Podium50.0 %49,092 49,466 
Residential Tower Developer LLCHub50House50.0 %52,055 55,092 
Hotel Tower Developer LLC
The Hub on Causeway - Hotel Air Rights
50.0 %10,469 9,883 
Office Tower Developer LLC100 Causeway Street50.0 %56,572 56,606 
1265 Main Office JV LLC1265 Main Street50.0 %4,027 3,780 
BNY Tower Holdings LLCDock 72 50.0 %98,844 94,804 
BNYTA Amenity Operator LLC Dock 72 50.0 %236 N/A
CA-Colorado Center Limited Partnership
Colorado Center50.0 %232,065 252,069 
7750 Wisconsin Avenue LLC 7750 Wisconsin Avenue 50.0 %57,720 56,247 
BP-M 3HB Venture LLC3 Hudson Boulevard25.0 %106,546 67,499 
SMBP Venture LPSanta Monica Business Park55.0 %147,015 163,937 
Platform 16 Holdings LPPlatform 1655.0 %(7)104,422 29,501 
Gateway Portfolio Holdings LLCGateway Commons50.0 %(8)339,383 N/A
Rosecrans-Sepulveda Partners 4, LLCBeach Cities Media Center50.0 %27,180 N/A
$1,347,835 $933,223 
 _______________
(1)Investments with deficit balances aggregating approximately $29.5 million and $22.4 million at September 30, 2020 and December 31, 2019, respectively, are included within Other Liabilities in the Company’s Consolidated Balance Sheets.
(2)The Company’s economic ownership has increased based on the achievement of certain return thresholds. At September 30, 2020 and December 31, 2019, the Company’s economic ownership was approximately 50%.
(3)The Company’s wholly-owned subsidiary that owns Wisconsin Place Office also owns a 33.3% interest in the joint venture entity that owns the land, parking garage and infrastructure of the project.
(4)The joint venture owns two in-service buildings.
(5)The property was sold on June 27, 2019. As of September 30, 2020 and December 31, 2019, the investment included only undistributed cash.
(6)Under the joint venture agreement for this land parcel, the partner will be entitled to up to two additional payments from the venture based on increases in total entitled square footage of the project above 520,000 square feet and achieving certain project returns at stabilization.
(7)This entity is a VIE (See Note 2).
(8)As a result of the partner’s deferred contribution, the Company owns an approximately 55% interest in the joint venture at September 30, 2020. Future development projects will be owned 49% by the Company and 51% by its partner.
Certain of the Company’s unconsolidated joint venture agreements include provisions whereby, at certain specified times, each partner has the right to initiate a purchase or sale of its interest in the joint ventures. With limited exceptions under these provisions, the Company is not compelled to purchase the interest of its outside joint venture partners. Under certain of the Company’s joint venture agreements, if certain return thresholds are achieved, the partners or the Company will be entitled to an additional promoted interest or payments.
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The combined summarized balance sheets of the Company’s unconsolidated joint ventures are as follows: 
September 30,
2020
December 31,
2019
 (in thousands)
ASSETS
Real estate and development in process, net (1)$4,651,694 $3,904,400 
Other assets560,764 502,706 
Total assets$5,212,458 $4,407,106 
LIABILITIES AND MEMBERS’/PARTNERS’ EQUITY
Mortgage and notes payable, net$2,558,499 $2,218,853 
Other liabilities (2)651,744 749,675 
Members’/Partners’ equity2,002,215 1,438,578 
Total liabilities and members’/partners’ equity$5,212,458 $4,407,106 
Company’s share of equity$948,569 $591,905 
Basis differentials (3)399,266 341,318 
Carrying value of the Company’s investments in unconsolidated joint ventures (4)$1,347,835 $933,223 
 _______________
(1)At September 30, 2020 and December 31, 2019, this amount included right of use assets - finance leases totaling approximately $248.9 million and $383.9 million, respectively, and right of use assets - operating leases totaling approximately $11.5 million and $12.1 million, respectively.
(2)At September 30, 2020 and December 31, 2019, this amount included lease liabilities - finance leases totaling approximately $389.4 million and $510.8 million, respectively, and lease liabilities - operating leases totaling approximately $17.5 million and $17.3 million, respectively.
(3)This amount represents the aggregate difference between the Company’s historical cost basis and the basis reflected at the joint venture level, which is typically amortized over the life of the related assets and liabilities. Basis differentials result from impairments of investments, acquisitions through joint ventures with no change in control and upon the transfer of assets that were previously owned by the Company into a joint venture. In addition, certain acquisition, transaction and other costs may not be reflected in the net assets at the joint venture level. At September 30, 2020 and December 31, 2019, there was an aggregate basis differential of approximately $308.0 million and $311.3 million, respectively, between the carrying value of the Company’s investment in the joint venture that owns Colorado Center and the joint venture’s basis in the assets and liabilities. At September 30, 2020, there was an aggregate basis differential of approximately $53.1 million between the carrying value of the Company’s investment in the joint venture that owns Gateway Commons and the joint venture’s basis in the assets and liabilities. These basis differentials (excluding land) will be amortized over the remaining lives of the related assets and liabilities.
(4)Investments with deficit balances aggregating approximately $29.5 million and $22.4 million at September 30, 2020 and December 31, 2019, respectively, are 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 September 30,Nine months ended September 30,
 2020201920202019
 (in thousands)
Total revenue (1)$87,724 $75,940 $270,490 $239,099 
Expenses
Operating37,572 28,839 106,677 89,472 
Depreciation and amortization35,810 23,477 105,235 76,941 
Total expenses73,382 52,316 211,912 166,413 
Other income (expense)
Interest expense(25,481)(20,483)(71,370)(62,043)
Gains on sales of real estate— (812)11,720 33,760 
Net income$(11,139)$2,329 $(1,072)$44,403 
Company’s share of net income$(4,421)$392 $855 $24,352 
Basis differential (2)(2,452)(1,041)(6,265)23,176 
Income from unconsolidated joint ventures$(6,873)$(649)$(5,410)$47,528 
_______________ 
(1)Includes straight-line rent adjustments of approximately $3.8 million and $5.3 million for the three months ended September 30, 2020 and 2019, respectively, and $22.0 million and $18.7 million for the nine months ended September 30, 2020 and 2019, respectively.
(2)Includes straight-line rent adjustments of approximately $0.4 million and $0.5 million for the three months ended September 30, 2020 and 2019, respectively, and $1.3 million and $1.6 million for the nine months ended September 30, 2020 and 2019, respectively. Also includes net above-/below-market rent adjustments of approximately $0.2 million and $0.4 million for the three months ended September 30, 2020 and 2019, respectively, and $0.7 million and $1.3 million for the nine months ended September 30, 2020 and 2019, respectively.

On January 28, 2020, the Company entered into a joint venture with a third party to own, operate and develop properties at its Gateway Commons complex located in South San Francisco, California. The Company contributed its 601, 611 and 651 Gateway properties and development rights with an agreed upon value aggregating approximately $350.0 million for its 50% interest in the joint venture (See Note 3). 601, 611 and 651 Gateway consist of three Class A office properties aggregating approximately 768,000 net rentable square feet. The partner contributed three properties and development rights with an agreed upon value aggregating approximately $280.8 million at closing and will contribute cash totaling approximately $69.2 million in the future for its 50% ownership interest in the joint venture. As a result of the partner’s deferred contribution, the Company has an initial approximately 55% interest in the joint venture. Future development projects will be owned 49% by the Company and 51% by its partner.
On January 28, 2020, a joint venture in which the Company has a 55% interest commenced development of the first phase of its Platform 16 project located in San Jose, California. Platform 16 consists of a parcel of land totaling approximately 5.6 acres that is expected to support the development of approximately 1.1 million square feet of commercial office space. The first phase of the Platform 16 development project consists of an approximately 390,000 net rentable square foot Class A office building and a below-grade parking garage. During the third quarter of 2020, the joint venture paused construction activities after completing site preparation work and intends to revisit its plans once the economic impact of COVID-19 becomes clearer or economic conditions improve. On February 20, 2020, the joint venture acquired the land underlying the ground lease for a purchase price totaling approximately $134.8 million. The joint venture had previously made a deposit totaling $15.0 million, which was credited against the purchase price.
On June 9, 2020, a joint venture in which the Company has a 20% interest refinanced with a new lender the mortgage loan collateralized by its Metropolitan Square property located in Washington, DC. The outstanding balance of the loan totaled approximately $155.9 million, bore interest at a fixed rate of 5.75% per annum and was scheduled to mature on August 5, 2020. The new mortgage loan totaling $325.0 million, of which $288.0 million
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was advanced at closing, bears interest at a variable rate equal to (1) the greater of (x) LIBOR or (y) 0.65%, plus (2) 4.75% per annum, and matures on July 7, 2022, with two, one-year extension options, subject to certain conditions. The joint venture entered into an interest rate cap agreement with a financial institution to limit its exposure to increases in the LIBOR rate 3.00% per annum on a notional amount of $325.0 million through July 7, 2022. The joint venture distributed excess loan proceeds from the new mortgage loan totaling approximately $112.7 million, of which the Company’s share totaled approximately $22.5 million. Metropolitan Square is a Class A office property with approximately 654,000 net rentable square feet.
On June 25, 2020, a joint venture in which the Company has a 50% interest completed the sale of Annapolis Junction Building Eight and two land parcels located in Annapolis, Maryland for a gross sale price of $47.0 million. Net cash proceeds totaled approximately $45.8 million after the payment of transaction costs. The Company recognized a gain on sale of real estate totaling approximately $5.8 million, which is included in Income (Loss) from Unconsolidated Joint Ventures in the accompanying Consolidated Statements of Operations. The joint venture distributed approximately $36.8 million of available cash and the net proceeds from the sale after the pay down of the mortgage loan, of which the Company’s share totaled approximately $18.4 million. Annapolis Junction Building Eight is an approximately 126,000 net rentable square foot Class A office property, which is vacant. The two land parcels will support the development of approximately 300,000 square feet of commercial office space with one parcel currently containing surface parking for approximately 511 vehicles.
On June 25, 2020, in conjunction with the joint venture’s sale of Annapolis Junction Building Eight, the joint venture in which the Company has a 50% interest modified the mortgage loan collateralized by Annapolis Junction Building Seven and Building Eight with the release of Annapolis Junction Building Eight as collateral under the loan in exchange for a principal pay down of approximately $16.1 million using a portion of the net proceeds from the sale of the property. At the time of the modification, the outstanding balance of the loan totaled approximately $34.5 million, bore interest at a variable rate equal to LIBOR plus 2.35% per annum and was scheduled to mature on June 30, 2020. The modified mortgage loan totaling approximately $18.4 million is collateralized by Annapolis Junction Building Seven, continues to bear interest at a variable rate equal to LIBOR plus 2.35% per annum and matures on March 25, 2021. Annapolis Junction Building Seven is a Class A office property with approximately 127,000 net rentable square feet located in Annapolis, Maryland.
On July 23, 2020, the Company acquired a 50% interest in a joint venture entity that owns Beach Cities Media Center, a 6.4-acre parcel of land located in El Segundo, California, for a purchase price of approximately $21.2 million. Beach Cities Media Center is expected to support the development of approximately 275,000 square feet of Class A office space.
On July 24, 2020, a joint venture in which the Company has a 50% interest completed and fully placed in-service Hub50House, an approximately 320,000 square foot project comprised of 440 residential units located in Boston, Massachusetts.
On September 1, 2020, the Company entered into an agreement with its partner in the joint venture that owns 1265 Main Street located in Waltham, Massachusetts to (1) form additional joint ventures to own and develop a mixed-use property containing approximately 1,200,000 square feet to be developed in phases on an approximately 41-acre site adjacent to 1265 Main Street and (2) share the costs of certain offsite infrastructure improvements with its joint venture partner and other third-party abutting land owners. The Company will serve as the development manager and expects to own a 50% interest in each of the joint ventures.
On September 30, 2020, a joint venture in which the Company has a 50% interest extended the mortgage loan collateralized by its Market Square North property. At the time of the extension, the outstanding balance of the loan totaled approximately $114.2 million, bore interest at a fixed rate of 4.85% per annum and was scheduled to mature on October 1, 2020. The extended loan matures on November 1, 2020 (See Note 13). Market Square North is a Class A office property with approximately 418,000 net rentable square feet located in Washington, DC.

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6. Unsecured Senior Notes
The following summarizes the unsecured senior notes outstanding as of September 30, 2020 (dollars in thousands): 
Coupon/
Stated Rate
Effective
Rate(1)
Principal
Amount
Maturity Date(2)
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
10.5 Year Unsecured Senior Notes2.900 %2.984 %700,000 March 15, 2030
10.75 Year Unsecured Senior Notes3.250 %3.343 %1,250,000 January 30, 2031
Total principal9,700,000 
Net unamortized discount(16,880)
Deferred financing costs, net(46,723)
Total$9,636,397 
_______________
(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 May 5, 2020, Boston Properties Limited Partnership completed a public offering of $1.25 billion in aggregate principal amount of its 3.250% unsecured senior notes due 2031. The notes were priced at 99.850% of the principal amount to yield an effective rate (including financing fees) of approximately 3.343% per annum to maturity. The notes will mature on January 30, 2031, unless earlier redeemed. The aggregate net proceeds from the offering were approximately $1.24 billion after deducting underwriting discounts and transaction expenses.
The indenture relating to the unsecured senior notes contains certain financial restrictions and requirements, including (1) a leverage ratio not to exceed 60%, (2) a secured debt leverage ratio not to exceed 50%, (3) an interest coverage ratio of greater than 1.50, and (4) an unencumbered asset value of not less than 150% of unsecured debt. At September 30, 2020, Boston Properties Limited Partnership was in compliance with each of these financial restrictions and requirements.
7. Commitments and Contingencies
General
In the normal course of business, the Company guarantees its performance of services or indemnifies third parties against its negligence. In addition, in the normal course of business, the Company guarantees to certain tenants the obligations of its subsidiaries for the payment of tenant improvement allowances and brokerage commissions in connection with their leases and limited costs arising from delays in delivery of their premises. 
The Company has letter of credit and performance obligations related to lender and development requirements that total approximately $19.4 million.
Certain of the Company’s joint venture agreements include provisions whereby, at certain specified times, each partner has the right to initiate a purchase or sale of its interest in the joint ventures. With limited exception, under these provisions, the Company is not compelled to purchase the interest of its outside joint venture partners. From time to time, under certain of the Company’s joint venture agreements, if certain return thresholds are achieved, either the Company or its partners may be entitled to an additional promoted interest or payments.


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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 September 30, 2020, the maximum funding obligation under the guarantee was approximately $37.2 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 September 30, 2020, no amounts related to the guarantee are recorded as liabilities in the Company’s consolidated financial statements.

Pursuant to the lease agreement with Marriott, the Company has guaranteed the completion of the office building and parking garage on behalf of its 7750 Wisconsin Avenue joint venture and has also provided a financing guaranty as required with respect to the third-party construction financing.  The Company earns fees from the joint venture for providing the guarantees and any amounts the Company pays under the guarantee(s) will be deemed to be capital contributions by the Company to the joint venture.  The Company has also agreed to fund construction costs through capital contributions to the joint venture in the event of insufficiency of third-party construction financing.  In addition, the Company has guaranteed to Marriott, as hotel manager, the completion of a hotel being developed by an affiliate of The Bernstein Companies (the Company’s partner in the 7750 Wisconsin Avenue joint venture) adjacent to the office property, for which the Company earns a fee from the affiliate of The Bernstein Companies.  In addition, the Company entered into agreements with affiliates of The Bernstein Companies whereby the Company could be required to act as a mezzanine and/or mortgage lender and finance the construction of the hotel property.  An affiliate of The Bernstein Companies exercised its option to borrow $10.0 million from the Company under such agreements, which financing was provided by the Company on June 1, 2020. The financing bears interest at a fixed rate of 8.00% per annum, compounded monthly, and matures on the fifth anniversary of the date on which the base building of the affiliate of The Bernstein Companies’ hotel property is substantially completed. The financing is collateralized by a pledge of the partner’s equity interest in the joint venture that owns and is developing 7750 Wisconsin Avenue. To secure such financing arrangements, affiliates of The Bernstein Companies are required to provide certain security, which varies depending on the specific loan, by pledges of their equity interest in the office property, a fee mortgage on the hotel property, or both. As of September 30, 2020, no amounts related to the contingent aspect of any of the guarantees are recorded as liabilities in the Company’s consolidated financial statements.
In connection with the sale and development of the Company’s 6595 Springfield Center Drive development project, the Company has guaranteed the completion of the project and the payment of certain cost overruns in accordance with the development management agreement with the buyer. Although the project has been sold and the lease with the Federal Government tenant has been assigned to the buyer, pursuant to the terms of the Federal Government lease, the Federal Government tenant is not obligated to release the prior owner/landlord from such landlord’s obligations under the lease until completion of the construction. As a result, the entity which previously owned the land remains liable to the Federal Government tenant for the completion of the construction obligations under the lease.  The buyer is obligated to fund the balance of the costs to meet such construction obligations, subject to the Company’s obligation to fund cost overruns (if any), as noted above. An affiliate of the buyer has provided a guaranty of the obligations of the buyer to fund such construction costs and the buyer has agreed to use commercially reasonable efforts to require the construction lender to provide certain remedies to the Company in the event the buyer does not fund such construction obligations. As of September 30, 2020, no amounts related to the contingent aspect of the guarantee are recorded as a liability in the Company’s consolidated financial statements.
In connection with the redevelopment of the Company’s 325 Main Street property located in Cambridge, Massachusetts, the Company is required, pursuant to the local zoning ordinance, to commence construction of a residential building of at least 200,000 square feet with 25% of the project designated as income-restricted (with a minimum of 20% of the square footage devoted to home ownership units) prior to the occupancy of the 325 Main Street property, which is expected to occur during the third quarter of 2022. 325 Main Street consisted of an
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approximately 115,000 net rentable square foot Class A office property that was demolished and is being developed into an approximately 420,000 net rentable square foot Class A office property, including approximately 41,000 net rentable square feet of retail space.
In 2009, the Company filed a general unsecured creditor’s claim against Lehman Brothers, Inc. for approximately $45.3 million related to its rejection of a lease at 399 Park Avenue in New York City. On January 10, 2014, the trustee for the liquidation of the business of Lehman Brothers allowed the Company’s claim in the amount of approximately $45.2 million. During the years 2014 through 2018, the Company received distributions aggregating approximately $18.0 million, leaving a remaining claim of approximately $27.2 million. The Company will continue to evaluate whether to attempt to sell the remaining claim or wait until the trustee distributes proceeds from the Lehman Brothers estate. Given the inherent uncertainties in bankruptcy proceedings, there can be no assurance as to the timing or amount of additional proceeds, if any, that the Company may ultimately realize on the remaining claim, whether by sale to a third party or by one or more distributions from the trustee. Accordingly, the Company has not recorded any estimated recoveries associated with this gain contingency within its Consolidated Financial Statements at September 30, 2020.
Insurance
The Company’s property insurance program per occurrence limits are $1.0 billion for its portfolio insurance program, including coverage for acts of terrorism other than nuclear, biological, chemical or radiological terrorism (“Terrorism Coverage”). The Company also carries $250 million of Terrorism Coverage for 601 Lexington Avenue, New York, New York (“601 Lexington Avenue”) in excess of the $1.0 billion of coverage in the Company’s property insurance program. Certain properties, including the General Motors Building located at 767 Fifth Avenue in New York, New York (“767 Fifth Avenue”), are currently insured in separate insurance programs. The property insurance program per occurrence limits for 767 Fifth Avenue are $1.625 billion, including Terrorism Coverage. The Company also currently carries nuclear, biological, chemical and radiological terrorism insurance coverage for acts of terrorism certified under the Federal Terrorism Risk Insurance Act (as amended, “TRIA”) (“NBCR Coverage”), which is provided by IXP as a direct insurer, for the properties in the Company’s portfolio, including 767 Fifth Avenue, but excluding certain other properties owned in joint ventures with third parties or which the Company manages. The per occurrence limit for NBCR Coverage is $1.0 billion. Under TRIA, after the payment of the required deductible and coinsurance, the NBCR Coverage provided by IXP is backstopped by the Federal Government if the aggregate industry insured losses resulting from a certified act of terrorism exceed a “program trigger.” The program trigger is $200 million, the coinsurance is 20% and the deductible is 20% of the premiums earned by the insurer for the year prior to a claim. If the Federal Government pays out for a loss under TRIA, it is mandatory that the Federal Government recoup the full amount of the loss from insurers offering TRIA coverage after the payment of the loss pursuant to a formula in TRIA. The Company may elect to terminate the NBCR Coverage if the Federal Government seeks recoupment for losses paid under TRIA, if TRIA is not extended after its expiration on December 31, 2027, if there is a change in its portfolio or for any other reason. The Company intends to continue to monitor the scope, nature and cost of available terrorism insurance.
The Company also currently carries earthquake insurance on its properties located in areas known to be subject to earthquakes. In addition, this insurance is subject to a deductible in the amount of 3% of the value of the affected property. Specifically, the Company currently carries earthquake insurance which covers its San Francisco and Los Angeles regions with a $240 million per occurrence limit, and a $240 million annual aggregate limit, $20 million of which is provided by IXP, as a direct insurer. The amount of the Company’s earthquake insurance coverage may not be sufficient to cover losses from earthquakes. In addition, the amount of earthquake coverage could impact the Company’s ability to finance properties subject to earthquake risk. The Company may discontinue earthquake insurance or change the structure of its earthquake insurance program on some or all of its properties in the future if the premiums exceed the Company’s estimation of the value of the coverage.
IXP, a captive insurance company which is a wholly-owned subsidiary of the Company, acts as a direct insurer with respect to a portion of the Company’s earthquake insurance coverage for its Greater San Francisco and Los Angeles properties and the Company’s NBCR Coverage. Insofar as the Company owns IXP, it is responsible for its liquidity and capital resources, and the accounts of IXP are part of the Company’s consolidated financial statements. In particular, if a loss occurs which is covered by the Company’s NBCR Coverage but is less than the applicable program trigger under TRIA, IXP would be responsible for the full amount of the loss without any backstop by the Federal Government. IXP would also be responsible for any recoupment charges by the Federal Government in the event losses are paid out and its insurance policy is maintained after the payout by the Federal Government. If the Company experiences a loss and IXP is required to pay under its insurance policy, the Company would ultimately record the loss to the extent of the required payment. Therefore, insurance coverage provided by IXP should not be
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considered as the equivalent of third-party insurance, but rather as a modified form of self-insurance. In addition, Boston Properties Limited Partnership has issued a guarantee to cover liabilities of IXP in the amount of $20.0 million.
Due to the current COVID-19 pandemic, the Company anticipates the possibility of business interruption, loss of lease revenue and/or other associated expenses related to the Company’s operations across its portfolio. Because this is an ongoing situation it is not yet possible to quantify the Company’s losses and expenses, which continue to develop. Because of the complexity of the Company’s insurance policies and limited precedent for claims being made related to pandemics, it is not yet possible to determine if such losses and expenses will be covered by the Company’s insurance policies. Therefore, at this time, the Company is providing notice to the applicable insurers of the potential for claims in order to protect the Company’s rights under its policies.
The Company continues to monitor the state of the insurance market in general, and the scope and costs of coverage for acts of terrorism, California earthquake risk and pandemics, in particular, but the Company cannot anticipate what coverage will be available on commercially reasonable terms in future policy years. There are other types of losses, such as from wars, for which the Company cannot obtain insurance at all or at a reasonable cost. With respect to such losses and losses from acts of terrorism, earthquakes or other catastrophic events, if the Company experiences a loss that is uninsured or that exceeds policy limits, the Company could lose the capital invested in the damaged properties, as well as the anticipated future revenues from those properties. Depending on the specific circumstances of each affected property, it is possible that the Company could be liable for mortgage indebtedness or other obligations related to the property. Any such loss could materially and adversely affect the Company’s business and financial condition and results of operations.
8. Noncontrolling Interests
Noncontrolling interests relate to the interests in Boston Properties Limited Partnership not owned by Boston Properties, Inc. and interests in consolidated property partnerships not wholly-owned by the Company. As of September 30, 2020, the noncontrolling interests in Boston Properties Limited Partnership consisted of 16,120,074 OP Units, 1,338,400 LTIP Units (including 105,080 2012 OPP Units, 64,468 2013 MYLTIP Units, 23,100 2014 MYLTIP Units, 24,966 2015 MYLTIP Units, 89,791 2016 MYLTIP Units and 116,078 2017 MYLTIP Units), 336,195 2018 MYLTIP Units, 219,916 2019 MYLTIP Units and 203,278 2020 MYLTIP Units held by parties other than Boston Properties, Inc.
Noncontrolling Interest—Common Units
During the nine months ended September 30, 2020, 773,858 OP Units were presented by the holders for redemption (including 82,608 OP Units issued upon conversion of LTIP Units, 2012 OPP Units and 2013 - 2017 MYLTIP Units) and were redeemed by Boston Properties, Inc. in exchange for an equal number of shares of Common Stock.
At September 30, 2020, Boston Properties Limited Partnership had outstanding 336,195 2018 MYLTIP Units, 219,916 2019 MYLTIP Units and 203,278 2020 MYLTIP Units. Prior to the applicable measurement date (February 5, 2021 for 2018 MYLTIP Units, February 4, 2022 for 2019 MYLTIP Units and February 3, 2023 for 2020 MYLTIP Units), holders of MYLTIP Units will be entitled to receive per unit distributions equal to one-tenth (10%) of the regular quarterly distributions payable on an OP Unit, but will not be entitled to receive any special distributions. After the measurement date, the number of MYLTIP Units, both vested and unvested, that MYLTIP award recipients have earned, if any, based on the establishment of a performance pool, will be entitled to receive distributions in an amount per unit equal to distributions, both regular and special, payable on an OP Unit.
On February 6, 2020, the measurement period for the Company’s 2017 MYLTIP awards ended and, based on Boston Properties, Inc.’s relative TSR performance, the final awards were determined to be 83.8% of target, or an aggregate of approximately $17.6 million (after giving effect to employee separations). As a result, an aggregate of 270,942 2017 MYLTIP Units that had been previously granted were automatically forfeited.
The following table presents Boston Properties Limited Partnership’s distributions on the OP Units and LTIP Units (including the 2012 OPP Units, 2013 - 2016 MYLTIP Units and, after the February 6, 2020 measurement date, the 2017 MYLTIP Units) and its distributions on the 2017 MYLTIP Units (prior to the February 6, 2020 measurement date) and 2018 - 2020 MYLTIP Units (after the February 4, 2020 issuance date) that occurred during the nine months ended September 30, 2020:
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Record DatePayment DateDistributions per OP Unit and LTIP UnitDistributions per MYLTIP Unit
September 30, 2020October 30, 2020$0.98 $0.098 
June 30, 2020July 31, 2020$0.98 $0.098 
March 31, 2020April 30, 2020$0.98 $0.098 
December 31, 2019January 30, 2020$0.98 $0.098 
The following table presents Boston Properties Limited Partnership’s distributions on the OP Units and LTIP Units (including the 2012 OPP Units, 2013 - 2015 MYLTIP Units and, after the February 9, 2019 measurement date, the 2016 MYLTIP Units) and its distributions on the 2016 MYLTIP Units (prior to the February 9, 2019 measurement date) and 2017 - 2019 MYLTIP Units (after the February 5, 2019 issuance date) that occurred during the nine months ended September 30, 2019:
Record DatePayment DateDistributions per OP Unit and LTIP UnitDistributions per MYLTIP Unit
September 30, 2019October 31, 2019$0.95 $0.095 
June 28, 2019July 31, 2019$0.95 $0.095 
March 29, 2019April 30, 2019$0.95 $0.095 
December 31, 2018January 30, 2019$0.95 $0.095 
A holder of an OP Unit may present the OP Unit to Boston Properties Limited Partnership for redemption at any time (subject to restrictions agreed upon at the time of issuance of OP Units to particular holders that may restrict such redemption right for a period of time, generally one year from issuance). Upon presentation of an OP Unit for redemption, Boston Properties Limited Partnership must redeem the OP Unit for cash equal to the then value of a share of Common Stock of Boston Properties, Inc. Boston Properties, Inc. may, in its sole discretion, elect to assume and satisfy the redemption obligation by paying either cash or issuing one share of Common Stock. The value of the OP Units (not owned by Boston Properties, Inc. and LTIP Units (including the 2012 OPP Units and 2013 - 2017 MYLTIP Units) assuming that all conditions had been met for the conversion thereof) had all of such units been redeemed at September 30, 2020 was approximately $1.4 billion based on the last reported price of a share of Common Stock on the New York Stock Exchange of $80.30 per share on September 30, 2020.
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 September 30, 2020 and December 31, 2019, are included in Noncontrolling Interests—Property Partnerships on the accompanying Consolidated Balance Sheets.
9. Stockholders’ Equity / Partners’ Capital
Boston Properties, Inc.
As of September 30, 2020, Boston Properties, Inc. had 155,636,300 shares of Common Stock outstanding.
As of September 30, 2020, Boston Properties, Inc. owned 1,730,948 general partnership units and 153,905,352 limited partnership units in Boston Properties Limited Partnership.
On May 22, 2020, Boston Properties, Inc. renewed its “at the market” (“ATM”) stock offering program through which it may sell from time to time up to an aggregate of $600.0 million of its Common Stock through sales agents over a three-year period. Under the ATM stock offering program, Boston Properties, Inc. may also engage in forward sale transactions with affiliates of certain sales agents for the sale of its Common Stock on a forward basis. This program replaced Boston Properties, Inc.’s prior $600.0 million ATM stock offering program that was scheduled to expire on June 2, 2020. Boston Properties, Inc. intends to use the net proceeds from any offering for general business purposes, which may include investment opportunities and debt reduction. No shares of Common Stock have been issued under this ATM stock offering program.
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During the nine months ended September 30, 2020, Boston Properties, Inc. issued 43,792 shares of Common Stock upon the exercise of options to purchase Common Stock.
During the nine months ended September 30, 2020, Boston Properties, Inc. issued 773,858 shares of Common Stock in connection with the redemption of an equal number of redeemable OP Units from limited partners.
The following table presents Boston Properties, Inc.’s dividends per share and Boston Properties Limited Partnership’s distributions per OP Unit and LTIP Unit paid or declared in 2020 and during the nine months ended September 30, 2019:
Record DatePayment DateDividend (Per Share)Distribution (Per Unit)
September 30, 2020October 30, 2020$0.98 $0.98 
June 30, 2020July 31, 2020$0.98 $0.98 
March 31, 2020April 30, 2020$0.98 $0.98 
December 31, 2019January 30, 2020$0.98 $0.98 
September 30, 2019October 31, 2019$0.95 $0.95 
June 28, 2019July 31, 2019$0.95 $0.95 
March 29, 2019April 30, 2019$0.95 $0.95 
December 31, 2018January 30, 2019$0.95 $0.95 
Preferred Stock
As of September 30, 2020, Boston Properties, Inc. had 80,000 shares (8,000,000 depositary shares each representing 1/100th of a share) outstanding of its 5.25% Series B Cumulative Redeemable Preferred Stock with a liquidation preference of $2,500.00 per share ($25.00 per depositary share). Boston Properties, Inc. pays cumulative cash dividends on the Series B Preferred Stock at a rate of 5.25% per annum of the $2,500.00 liquidation preference per share. Boston Properties, Inc. did not have the right to redeem the Series B Preferred Stock prior to March 27, 2018, except in certain circumstances relating to the preservation of Boston Properties, Inc.’s REIT status. On and after March 27, 2018, Boston Properties, Inc., at its option, may redeem the Series B Preferred Stock for a cash redemption price of $2,500.00 per share ($25.00 per depositary share), plus all accrued and unpaid dividends. The Series B Preferred Stock is not redeemable by the holders, has no maturity date and is not convertible into any other security of Boston Properties, Inc. or its affiliates.
The following table presents Boston Properties, Inc.’s dividends per share on its outstanding Series B Preferred Stock paid or declared during 2020 and during the nine months ended September 30, 2019:
Record DatePayment DateDividend (Per Share)
November 4, 2020November 16, 2020$32.8125 
August 3, 2020August 17, 2020$32.8125 
May 1, 2020May 15, 2020$32.8125 
February 4, 2020February 18, 2020$32.8125 
November 1, 2019November 15, 2019$32.8125 
August 2, 2019August 15, 2019$32.8125 
May 3, 2019May 15, 2019$32.8125 
February 4, 2019February 15, 2019$32.8125 
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10. Earnings Per Share / Common Unit
Boston Properties, Inc.
The following table provides a reconciliation of both the net income attributable to Boston Properties, Inc. common shareholders and the number of common shares used in the computation of basic earnings per share (“EPS”), which is calculated by dividing net income attributable to Boston Properties, Inc. common shareholders by the weighted-average number of common shares outstanding during the period. Unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are also participating securities. As such, unvested restricted common stock of Boston Properties, Inc. and Boston Properties Limited Partnership’s LTIP Units, 2012 OPP Units and MYLTIP Units are considered participating securities. Participating securities are included in the computation of basic EPS of Boston Properties, Inc. using the two-class method. Participating securities are included in the computation of diluted EPS of Boston Properties, Inc. using the if-converted method if the impact is dilutive. Because the 2012 OPP Units and 2013 - 2017 MYLTIP Units required, and the 2018 - 2020 MYLTIP Units require, Boston Properties, Inc. to outperform absolute and/or relative return thresholds, unless such thresholds have been met by the end of the applicable reporting period, Boston Properties, Inc. excludes such units from the diluted EPS calculation. Other potentially dilutive common shares, including stock options, restricted stock and other securities of Boston Properties Limited Partnership that are exchangeable for Boston Properties, Inc.’s Common Stock, and the related impact on earnings, are considered when calculating diluted EPS.
Three months ended September 30, 2020
Income
(Numerator)
Shares
(Denominator)
Per Share
Amount
(in thousands, except for per share amounts)
Basic Earnings:
Net income attributable to Boston Properties, Inc. common shareholders
$89,854 155,645 $0.58 
Effect of Dilutive Securities:
Stock Based Compensation— 25 — 
Diluted Earnings:
Net income attributable to Boston Properties, Inc. common shareholders
$89,854 155,670 $0.58 
Three months ended September 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
$107,771 154,577 $0.70 
Effect of Dilutive Securities:
Stock Based Compensation
— 243 — 
Diluted Earnings:
Net income attributable to Boston Properties, Inc. common shareholders
$107,771 154,820 $0.70 


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 Nine months ended September 30, 2020
 Income
(Numerator)
Shares
(Denominator)
Per Share
Amount
 (in thousands, except for per share amounts)
Basic Earnings:
Net income attributable to Boston Properties, Inc. common shareholders
$854,541 155,349 $5.50 
Allocation of undistributed earnings to participating securities
(1,150)— (0.01)
Net income attributable to Boston Properties, Inc. common shareholders
$853,391 155,349 $5.49 
Effect of Dilutive Securities:
Stock Based Compensation
— 98 — 
Diluted Earnings:
Net income attributable to Boston Properties, Inc. common shareholders
$853,391 155,447 $5.49 
 Nine months ended September 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
$370,200 154,553 $2.40 
Effect of Dilutive Securities:
Stock Based Compensation
— 294 (0.01)
Diluted Earnings:
Net income attributable to Boston Properties, Inc. common shareholders
$370,200 154,847 $2.39 

Boston Properties Limited Partnership
The following table provides a reconciliation of both the net income attributable to Boston Properties Limited Partnership common unitholders and the number of common units used in the computation of basic earnings per common unit, which is calculated by dividing net income attributable to Boston Properties Limited Partnership common unitholders by the weighted-average number of common units outstanding during the period. Unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are also participating securities. As such, unvested restricted common stock of Boston Properties, Inc. and Boston Properties Limited Partnership’s LTIP Units, 2012 OPP Units and MYLTIP Units are considered participating securities. Participating securities are included in the computation of basic earnings per common unit using the two-class method. Participating securities are included in the computation of diluted earnings per common unit using the if-converted method if the impact is dilutive. Because the 2012 OPP Units and 2013 - 2017 MYLTIP Units required, and the 2018 - 2020 MYLTIP Units require, Boston Properties, Inc. to outperform absolute and/or 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 17,032,000 and 17,638,000 redeemable common units for the three months ended September 30, 2020 and 2019, respectively, and 17,279,000 and 17,630,000 redeemable common units for the nine months ended September 30, 2020 and 2019, respectively.
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 Three months ended September 30, 2020
 Income
(Numerator)
Units
(Denominator)
Per Unit
Amount
 (in thousands, except for per unit amounts)
Basic Earnings:
Net income attributable to Boston Properties Limited Partnership common unitholders
$101,624 172,677 $0.59 
Effect of Dilutive Securities:
Stock Based Compensation
— 25 — 
Diluted Earnings:
Net income attributable to Boston Properties Limited Partnership common unitholders
$101,624 172,702 $0.59 
Three months ended September 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
$122,117 172,215 $0.71 
Effect of Dilutive Securities:
Stock Based Compensation
— 243 — 
Diluted Earnings:
Net income attributable to Boston Properties Limited Partnership common unitholders
$122,117 172,458 $0.71 
Nine months ended September 30, 2020
Income
(Numerator)
Units
(Denominator)
Per Unit
Amount
(in thousands, except for per unit amounts)
Basic Earnings:
Net income attributable to Boston Properties Limited Partnership common unitholders
$969,932 172,628 $5.62 
Allocation of undistributed earnings to participating securities
(1,278)— (0.01)
Net income attributable to Boston Properties Limited Partnership common unitholders
$968,654 172,628 $5.61 
Effect of Dilutive Securities:
Stock Based Compensation
— 98 — 
Diluted Earnings:
Net income attributable to Boston Properties Limited Partnership common unitholders
$968,654 172,726 $5.61 
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 Nine months ended September 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
$421,214 172,183 $2.45 
Effect of Dilutive Securities:
Stock Based Compensation
— 294 (0.01)
Diluted Earnings:
Net income attributable to Boston Properties Limited Partnership common unitholders
$421,214 172,477 $2.44 
11. Stock Option and Incentive Plan
On February 4, 2020, Boston Properties, Inc.’s Compensation Committee granted the 2020 MYLTIP awards under the Boston Properties, Inc.’s 2012 Stock Option and Incentive Plan (the “2012 Plan”) to certain officers and employees of Boston Properties, Inc. The 2020 MYLTIP awards utilize Boston Properties, Inc.’s TSR over a three-year measurement period, on an annualized, compounded basis, as the performance metric. Earned awards will range from zero to a maximum of 203,278 LTIP Units depending on Boston Properties, Inc.’s TSR relative to the FTSE Russell Nareit Office Index, adjusted to include Vornado Realty Trust, with a target of approximately 101,638 LTIP Units and linear interpolation between zero and maximum. Earned awards (if any) will vest 50% on February 3, 2023 and 50% on February 3, 2024, based on continued employment. Vesting will be accelerated in the event of a change in control, termination of employment by Boston Properties, Inc. without cause, or termination of employment by the award recipient for good reason, death, disability or retirement. If there is a change of control prior to February 3, 2023, earned awards will be calculated based on TSR performance up to the date of the change of control. The 2020 MYLTIP awards are in the form of LTIP Units issued on the grant date which (i) are subject to forfeiture to the extent awards are not earned and (ii) prior to the performance measurement date are only entitled to one-tenth (10%) of the regular quarterly distributions payable on common partnership units. Under ASC 718 “Compensation - Stock Compensation,” the 2020 MYLTIP awards have an aggregate value of approximately $13.7 million, which amount will generally be amortized into earnings under the graded vesting method.
On February 6, 2020, the measurement period for the Company’s 2017 MYLTIP awards ended and, based on Boston Properties, Inc.’s relative TSR performance, the final awards were determined to be 83.8% of target, or an aggregate of approximately $17.6 million (after giving effect to employee separations). As a result, an aggregate of 270,942 2017 MYLTIP Units that had been previously granted were automatically forfeited.
During the nine months ended September 30, 2020, Boston Properties, Inc. issued 29,630 shares of restricted common stock and Boston Properties Limited Partnership issued 207,181 LTIP Units and 203,278 2020 MYLTIP Units to employees and non-employee directors under the 2012 Plan. Employees and non-employee directors paid $0.01 per share of restricted common stock and $0.25 per LTIP Unit and 2020 MYLTIP Unit. When issued, LTIP Units are not economically equivalent in value to a share of Common Stock, but over time can increase in value to one-for-one parity with Common Stock if there is sufficient appreciation in the value of the Company’s assets. The aggregate value of the LTIP Units is included in noncontrolling interests in the Consolidated Balance Sheets of Boston Properties, Inc. and Boston Properties Limited Partnership. A majority of the grants of restricted common stock and LTIP Units to employees vest in four equal annual installments. Restricted common stock is measured at fair value on the date of grant based on the number of shares granted and the closing price of Boston Properties, Inc.’s Common Stock on the date of grant as quoted on the New York Stock Exchange. Such value is recognized as an expense ratably over the corresponding employee service period. The shares of restricted common stock granted during the nine months ended September 30, 2020 were valued at approximately $4.0 million ($133.81 per share weighted-average). The LTIP Units granted were valued at approximately $26.3 million (approximately $127.14 per unit weighted-average fair value) using a Monte Carlo simulation method model. The per unit fair values of the LTIP Units granted were estimated on the dates of grant and for a substantial majority of such units were valued using the following assumptions: an expected life of 5.7 years, a risk-free interest rate of 1.47% and an expected price volatility of 18.0%. Because the 2012 OPP Units and 2013 - 2020 MYLTIP Units are subject to both a service condition and a market condition, the Company recognizes the related compensation expense under the graded vesting attribution method. Under the graded vesting attribution method, each portion of the award that vests at a different date is accounted for as a separate award and recognized over the period appropriate to that
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portion so that the compensation cost for each portion should be recognized in full by the time that portion vests. The Company recognizes forfeitures as they occur on its awards of stock-based compensation. Dividends paid on both vested and unvested shares of restricted stock are charged directly to Dividends in Excess of Earnings in Boston Properties, Inc.’s Consolidated Balance Sheets and Partners’ Capital in Boston Properties Limited Partnership’s Consolidated Balance Sheets. Aggregate stock-based compensation expense associated with restricted stock, LTIP Units and 2016 - 2020 MYLTIP Units was approximately $8.0 million and $7.5 million for the three months ended September 30, 2020 and 2019, respectively, and $35.3 million and $32.4 million for the nine months ended September 30, 2020 and 2019, respectively. At September 30, 2020, there was (1) an aggregate of approximately $31.3 million of unrecognized compensation expense related to unvested restricted stock, LTIP Units and 2017 MYLTIP Units and (2) an aggregate of approximately $12.8 million of unrecognized compensation expense related to unvested 2018 - 2020 MYLTIP Units that is expected to be recognized over a weighted-average period of approximately 2.3 years.
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 nine months ended September 30, 2020 and 2019.
Boston Properties, Inc.
 Three months ended September 30,Nine months ended September 30,
2020201920202019
(in thousands)
Net income attributable to Boston Properties, Inc. common shareholders
$89,854 $107,771 $854,541 $370,200 
Add:
Preferred dividends2,625 2,625 7,875 7,875 
Noncontrolling interest—common units of the Operating Partnership
10,020 12,504 97,090 43,133 
Noncontrolling interests in property partnerships15,561 18,470 34,280 54,782 
Interest expense110,993 106,471 319,726 309,837 
Loss from early extinguishment of debt— 28,010 — 28,010 
Impairment loss— — — 24,038 
Net operating income from unconsolidated joint ventures24,938 23,065 81,607 73,129 
Depreciation and amortization expense166,456 165,862 515,738 507,867 
Transaction costs307 538 1,254 1,415 
Payroll and related costs from management services contracts
2,896 2,429 8,617 8,227 
General and administrative expense27,862 31,147 102,059 107,980 
Less:
Net operating income attributable to noncontrolling interests in property partnerships
42,160 46,249 122,248 138,896 
Gains from investments in securities1,858 106 965 4,240 
Interest and other income (loss)(45)7,178 4,277 14,546 
Gains (losses) on sales of real estate(209)(15)613,723 766 
Income (loss) from unconsolidated joint ventures(6,873)(649)(5,410)47,528 
Direct reimbursements of payroll and related costs from management services contracts
2,896 2,429 8,617 8,227 
Development and management services revenue7,281 10,303 23,285 29,566 
Company’s share of Net Operating Income$404,444 $433,291 $1,255,082 $1,292,724 
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Boston Properties Limited Partnership
 Three months ended September 30,Nine months ended September 30,
 2020201920202019
(in thousands)
Net income attributable to Boston Properties Limited Partnership common unitholders
$101,624 $122,117 $969,932 $421,214 
Add:
Preferred distributions2,625 2,625 7,875 7,875 
Noncontrolling interests in property partnerships15,561 18,470 34,280 54,782 
Interest expense110,993 106,471 319,726 309,837 
Loss from early extinguishment of debt— 28,010 — 28,010 
Impairment loss— — — 22,272 
Net operating income from unconsolidated joint ventures24,938 23,065 81,607 73,129 
Depreciation and amortization expense164,706 164,020 510,400 501,901 
Transaction costs307 538 1,254 1,415 
Payroll and related costs from management services contracts
2,896 2,429 8,617 8,227 
General and administrative expense27,862 31,147 102,059 107,980 
Less:
Net operating income attributable to noncontrolling interests in property partnerships
42,160 46,249 122,248 138,896 
Gains from investments in securities1,858 106 965 4,240 
Interest and other income (loss)(45)7,178 4,277 14,546 
Gains (losses) on sales of real estate(209)(15)626,686 915 
Income (loss) from unconsolidated joint ventures(6,873)(649)(5,410)47,528 
Direct reimbursements of payroll and related costs from management services contracts
2,896 2,429 8,617 8,227 
Development and management services revenue7,281 10,303 23,285 29,566 
Company’s share of Net Operating Income$404,444 $433,291 $1,255,082 $1,292,724 
Net operating income (“NOI”) is a non-GAAP financial measure equal to net income attributable to Boston Properties, Inc. common shareholders and net income attributable to Boston Properties Limited Partnership common unitholders, as applicable, the most directly comparable GAAP financial measures, plus (1) preferred dividends/distributions, net income attributable to noncontrolling interests, interest expense, loss from early extinguishment of debt, impairment loss, depreciation and amortization expense, transaction costs, payroll and related costs from management services contracts and corporate general and administrative expense less (2) gains from investments in securities, interest and other income (loss), gains (losses) on sales of real estate, income (loss) from unconsolidated joint ventures, direct reimbursements of payroll and related costs from management services contracts and development and management services revenue. The Company believes NOI is useful to investors as a performance measure and believes it provides useful information to investors regarding its results of operations and financial condition because, when compared across periods, it reflects the impact on operations from trends in occupancy rates, rental rates, operating costs and acquisition and development activity on an unleveraged basis, providing perspective not immediately apparent from net income attributable to Boston Properties, Inc. common shareholders and net income attributable to Boston Properties Limited Partnership common unitholders. For example, interest expense is not necessarily linked to the operating performance of a real estate asset and is often incurred at the corporate level as opposed to the property level. Similarly, interest expense may be incurred at the property level even though the financing proceeds may be used at the corporate level (e.g., used for other investment activity). In addition, depreciation and amortization expense, because of historical cost accounting and useful life estimates, may distort operating performance measures at the property level. NOI presented by the Company may not be comparable to NOI reported by other REITs or real estate companies that define NOI differently.
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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 economic percentage ownership interest and, in some cases, after priority allocations), minus the Company’s partners’ share of the amount from the Company’s consolidated joint ventures (calculated based upon the partners’ economic percentage ownership interests and, in some cases, after priority allocations, income allocation to private REIT shareholders and their share of fees due to the Company). The Company’s share of NOI from unconsolidated joint ventures does not include its share of gains on sale of real estate from unconsolidated joint ventures, which is included within Income From Unconsolidated Joint Ventures in the Company’s Consolidated Statements of Operations.  Management utilizes its share of NOI in assessing its performance as the Company has several significant joint ventures and, in some cases, the Company exercises significant influence over, but does not control, the joint venture, in which case GAAP requires that the Company account for the joint venture entity using the equity method of accounting and the Company does not consolidate it for financial reporting purposes. In other cases, GAAP requires that the Company consolidate the venture even though the Company’s partner(s) owns a significant percentage interest. As a result, the presentations of the Company’s share of NOI should not be considered a substitute for, and should only be considered together with and as a supplement to, the Company’s financial information presented in accordance with GAAP.
Asset information by segment is not reported because the Company does not use this measure to assess performance. Therefore, depreciation and amortization expense is not allocated among segments. Preferred dividends/distributions, interest expense, loss from early extinguishment of debt, impairment loss, depreciation and amortization expense, transaction costs, payroll and related costs from management services contracts, corporate general and administrative expense, gains from investments in securities, interest and other income (loss), gains (losses) on sales of real estate, direct reimbursements of payroll and related costs from management services contracts and development and management services revenue are not included in NOI and are provided as reconciling items to the Company’s reconciliations of its share of NOI to net income attributable to common shareholders/unitholders.
The Company’s segments are based on the Company’s method of internal reporting which classifies its operations by geographic area. The Company’s segments by geographic area are Boston, Los Angeles, New York, San Francisco and Washington, DC. The Company also presents information for each segment by property type, including Office, Residential and Hotel.
Included within the Office property type are commercial office and retail leases, as well as parking revenue.  Upon the adoption of ASC 842, any write-off for bad debt, including accrued rent, will be recorded as a reduction to lease revenue. As a result of COVID-19, during the three and nine months ended September 30, 2020, the Company wrote off approximately $4.1 million and $41.5 million, respectively, related to accrued rent balances and approximately $3.4 million and $22.3 million, respectively, related to accounts receivable balances. The write-offs were for tenants, primarily in the retail sector, that either terminated their leases or that the Company considered their accrued rent and/or accounts receivable balances no longer probable of collection.
In addition, parking and other revenue for the three and nine months ended September 30, 2020 decreased by approximately $9.3 million and $22.0 million, respectively, compared to 2019. These decreases were primarily in transient and monthly parking revenue.
The degree to which the Company’s commercial and retail tenants’ and parking operators’ businesses are, or will continue to be, negatively impacted by COVID-19, including by measures intended to reduce its spread, such as mandatory business closures and “stay-at-home” orders, could result in a reduction in the Company’s cash flows or require that the Company write off additional accrued rent and/or accounts receivable balances, and this could have a material adverse effect on lease revenue and thus the results of the Company’s Office property type.
The Boston Marriott Cambridge closed in March 2020 due to COVID-19 and did not re-open until October 2, 2020. The hotel is operating at a monthly deficit. The closing of the hotel for more than two fiscal quarters, weak demand and low occupancy since its re-opening, have had, and are expected to continue to have, a material adverse effect on the hotel’s operations and thus the results of the Company’s Hotel property type.
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Information by geographic area and property type (dollars in thousands):
For the three months ended September 30, 2020:
BostonLos AngelesNew YorkSan FranciscoWashington, DCTotal
Rental Revenue: (1)
Office$225,652 $— $239,535 $128,165 $79,931 $673,283 
Residential3,043 — — 23 6,652 9,718 
Hotel90 — — — — 90 
Total228,785 — 239,535 128,188 86,583 683,091 
% of Grand Totals33.48 %— %35.07 %18.77 %12.68 %100.00 %
Rental Expenses:
Office81,890 — 97,904 41,518 31,994 253,306 
Residential1,350 — — 740 2,865 4,955 
Hotel3,164 — — — — 3,164 
Total86,404 — 97,904 42,258 34,859 261,425 
% of Grand Totals33.05 %— %37.46 %16.16 %13.33 %100.00 %
Net operating income
$142,381 $— $141,631 $85,930 $51,724 $421,666 
% of Grand Totals33.77 %— %33.58 %20.38 %12.27 %100.00 %
Less: Net operating income attributable to noncontrolling interests in property partnerships
(10,228)— (31,932)— — (42,160)
Add: Company’s share of net operating income from unconsolidated joint ventures
2,764 11,953 539 4,098 5,584 24,938 
Company’s share of net operating income
$134,917 $11,953 $110,238 $90,028 $57,308 $404,444 
% of Grand Totals33.35 %2.96 %27.26 %22.26 %14.17 %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 September 30, 2019:
BostonLos AngelesNew YorkSan FranciscoWashington, DCTotal
Rental Revenue: (1)
Office$224,345 $— $251,806 $136,290 $95,370 $707,811 
Residential3,809 — — — 6,187 9,996 
Hotel13,014 — — — — 13,014 
Total241,168 — 251,806 136,290 101,557 730,821 
% of Grand Totals33.00 %— %34.45 %18.65 %13.90 %100.00 %
Rental Expenses:
Office81,278 — 98,698 45,900 35,716 261,592 
Residential1,244 — — — 2,767 4,011 
Hotel8,743 — — — — 8,743 
Total91,265 — 98,698 45,900 38,483 274,346 
% of Grand Totals33.27 %— %35.97 %16.73 %14.03 %100.00 %
Net operating income
$149,903 $— $153,108 $90,390 $63,074 $456,475 
% of Grand Totals32.84 %— %33.54 %19.80 %13.82 %100.00 %
Less: Net operating income attributable to noncontrolling interests in property partnerships
(10,379)— (35,870)— — (46,249)
Add: Company’s share of net operating income from unconsolidated joint ventures
1,686 14,702 (27)— 6,704 23,065 
Company’s share of net operating income
$141,210 $14,702 $117,211 $90,390 $69,778 $433,291 
% of Grand Totals32.60 %3.39 %27.05 %20.86 %16.10 %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 nine months ended September 30, 2020:
BostonLos AngelesNew YorkSan FranciscoWashington, DCTotal
Rental Revenue: (1)
Office$683,501 $— $699,063 $393,137 $256,904 $2,032,605 
Residential10,512 — — 23 18,541 29,076 
Hotel7,014 — — — — 7,014 
Total701,027 — 699,063 393,160 275,445 2,068,695 
% of Grand Totals33.89 %— %33.79 %19.01 %13.31 %100.00 %
Rental Expenses:
Office240,129 — 285,411 123,168 99,322 748,030 
Residential3,925 — — 740 8,319 12,984 
Hotel11,958 — — — — 11,958 
Total256,012 — 285,411 123,908 107,641 772,972 
% of Grand Totals33.12 %— %36.92 %16.03 %13.93 %100.00 %
Net operating income
$445,015 $— $413,652 $269,252 $167,804 $1,295,723 
% of Grand Totals34.35 %— %31.92 %20.78 %12.95 %100.00 %
Less: Net operating income attributable to noncontrolling interests in property partnerships
(31,467)— (90,781)— — (122,248)
Add: Company’s share of net operating income from unconsolidated joint ventures
8,490 42,909 2,110 11,384 16,714 81,607 
Company’s share of net operating income
$422,038 $42,909 $324,981 $280,636 $184,518 $1,255,082 
% of Grand Totals33.63 %3.42 %25.89 %22.36 %14.70 %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 nine months ended September 30, 2019:
BostonLos AngelesNew YorkSan FranciscoWashington, DCTotal
Rental Revenue: (1)
Office$659,717 $— $761,993 $391,851 $288,201 $2,101,762 
Residential9,732 — — — 16,978 26,710 
Hotel36,796 — — — — 36,796 
Total706,245 — 761,993 391,851 305,179 2,165,268 
% of Grand Totals32.62 %— %35.19 %18.10 %14.09 %100.00 %
Rental Expenses:
Office238,438 — 292,478 130,733 107,535 769,184 
Residential3,729 — — — 8,178 11,907 
Hotel25,686 — — — — 25,686 
Total267,853 — 292,478 130,733 115,713 806,777 
% of Grand Totals33.20 %— %36.26 %16.20 %14.34 %100.00 %
Net operating income
$438,392 $— $469,515 $261,118 $189,466 $1,358,491 
% of Grand Totals32.27 %— %34.56 %19.22 %13.95 %100.00 %
Less: Net operating income attributable to noncontrolling interests in property partnerships
(29,783)— (108,665)(448)— (138,896)
Add: Company’s share of net operating income from unconsolidated joint ventures
3,276 45,864 3,455 — 20,534 73,129 
Company’s share of net operating income
$411,885 $45,864 $364,305 $260,670 $210,000 $1,292,724 
% of Grand Totals31.87 %3.55 %28.18 %20.16 %16.24 %100.00 %
  _______________
(1)Rental Revenue is equal to Total Revenue per the Company’s Consolidated Statements of Operations, less Development and Management Services Revenue and Direct Reimbursements of Payroll and Related Costs from Management Services Contracts Revenue per the Consolidated Statements of Operations.
13. Subsequent Events
On October 1, 2020, a joint venture in which the Company has a 50% interest completed and fully placed in-service Dock 72, a Class A office project with approximately 670,000 net rentable square feet located in Brooklyn, New York.
On October 30, 2020, a joint venture in which the Company has a 50% interest refinanced the mortgage loan collateralized by its Market Square North property located in Washington, DC. The outstanding balance of the loan totaled approximately $114.2 million, bore interest at a fixed rate of 4.85% per annum and was scheduled to mature on November 1, 2020 (See Note 5). The new mortgage loan totals $125.0 million, bears interest at a variable rate equal to (1) the greater of (x) LIBOR or (y) 0.50%, plus (2) 2.30% per annum, and matures on November 10, 2025, with one, one-year extension option, subject to certain conditions.

On November 3, 2020, the Company signed an approximately 138,000 square-foot, 10-year lease with a new tenant at 200 West Street in Waltham, Massachusetts. The Company is currently redeveloping a portion of 200 West Street into lab space with expected completion in 2021. With this lease, the property is 100% leased.

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ITEM 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with the financial statements and notes thereto appearing elsewhere in this report.
This Quarterly Report on Form 10-Q, including the documents incorporated by reference, contain forward-looking statements within the meaning of the federal securities laws, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. 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, in each case, to the extent applicable. Such statements are contained principally, but not only, under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” We caution investors that any such forward-looking statements are based on current beliefs or expectations of future events and on assumptions made by, and information currently available to, our management. When used, the words “anticipate,” “believe,” “budget,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “project,” “should,” “will” and similar expressions that do not relate solely to historical matters are intended to identify forward-looking statements. Such statements are subject to risks, uncertainties and assumptions and are not guarantees of future performance or occurrences, which may be affected by known and unknown risks, trends, uncertainties and factors that are, in some cases, beyond our control. Should one or more of these known or unknown risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those expressed or implied by the forward-looking statements. We caution you that, while forward-looking statements reflect our good-faith beliefs when we make them, they are not guarantees of future performance or occurrences and are impacted by actual events when they occur after we make such statements. Accordingly, investors should use caution in relying on forward-looking statements, which are based on results and trends at the time they are made, to anticipate future results or trends.
One of the most significant factors that may cause actual results to differ materially from those expressed or implied by the forward-looking statements is the ongoing impact of the global COVID-19 pandemic on the U.S. and global economies, which has impacted, and is likely to continue to impact, us and, directly or indirectly, many of the other important factors below and the risks described in (i) our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 including those described under the caption “Risk Factors,” (ii) our subsequent filings under the Exchange Act and (iii) the risk factors set forth in this Form 10-Q in Part II, Item 1A.
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:
the risks and uncertainties related to the impact of the COVID-19 global pandemic, including the duration, scope and severity of the pandemic domestically and internationally; federal, state and local government actions or restrictive measures implemented in response to COVID-19, the effectiveness of such measures, as well as the effect of any relaxation of current restrictions, and the direct and indirect impact of such measures on our and our tenants' businesses, financial condition, results of operations, cash flows, liquidity and performance, and the U.S. and international economy and economic activity generally; whether new or existing actions and measures continue to result in increasing unemployment that impacts the ability of our residential tenants to generate sufficient income to pay, or make them unwilling to pay rent in a timely manner, in full or at all; the health, continued service and availability of our personnel, including our key personnel and property management teams; and the effectiveness or lack of effectiveness of governmental relief in providing assistance to individuals and large and small businesses, including our tenants, that have suffered significant adverse effects from COVID-19;
volatile or adverse global economic and political conditions, health crises 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;
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risks and uncertainties affecting property development and construction (including, without limitation, construction delays, increased construction costs, cost overruns, inability to obtain necessary permits, tenant accounting considerations that may result in negotiated lease provisions that limit a tenant’s liability during construction, and public opposition to such activities);
risks associated with the availability and terms of financing and the use of debt to fund acquisitions and developments or refinance existing indebtedness, including the impact of higher interest rates on the cost and/or availability of financing;
risks associated with forward interest rate contracts and the effectiveness of such arrangements;
risks associated with downturns in the national and local economies, increases in interest rates, and volatility in the securities markets;
risks associated with actual or threatened terrorist attacks;
costs of compliance with the Americans with Disabilities Act and other similar laws;
potential liability for uninsured losses and environmental contamination;
risks associated with the physical effects of climate change;
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 Report on Form 10-K for the fiscal year ended December 31, 2019 or described herein, including those 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, particularly in light of the circumstances relating to COVID-19. New risk factors emerge from time to time and it is not possible for management to predict all risk factors, nor can we assess the impact of all risk factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. Investors should also refer to our most recent Annual Report on Form 10-K and 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 one of the largest publicly-traded office real estate investment trusts (REITs) in the United States (based on total market capitalization as of September 30, 2020) that develops, owns and manages primarily Class A office properties concentrated in five markets in the United States - Boston, Los Angeles, New York, San Francisco and Washington, DC. BPLP is the entity through which BXP conducts substantially all of its business and owns (either directly or through subsidiaries) substantially all of its assets. We generate revenue and cash primarily by leasing Class A office space to our tenants. When making leasing decisions, we consider, among other things, the creditworthiness of the tenant, the length of the lease, the rental rate to be paid at inception and throughout the
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lease term, the costs of tenant improvements and other landlord concessions, anticipated operating expenses and real estate taxes, current and anticipated vacancy, current and expected future demand for the space, the impact of any expansion rights and general economic factors.
Our core strategy has always been to develop, acquire and manage high-quality properties in supply-constrained markets with high barriers-to-entry and to focus on executing long-term leases with financially strong tenants. Our tenant base is diverse across market sectors and the weighted-average lease term for our in-place leases was approximately 7.5 years, as of September 30, 2020, including leases at our unconsolidated joint ventures. The weighted-average lease term for our top 20 office tenant leases was approximately 10.8 years. Historically, these factors have minimized our exposure in weaker economic cycles and enhanced revenues as market conditions improve. 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:
our understanding of tenants’ short- and long-term space utilization and amenity needs in the local markets;
our reputation as a premier developer, owner and manager of primarily Class A office properties;
our financial strength and our ability to maintain high building standards;
our focus on developing and operating in a sustainable and responsible manner; and
our relationships with local brokers.
Outlook
In the third quarter of 2020, the COVID-19 pandemic continued to negatively impact global macroeconomic conditions, and businesses across the United States experienced job losses and other recessionary effects. Although U.S. GDP improved 33% on an annualized basis in the third quarter of 2020 as compared to the 31% decline in the second quarter of 2020, the pace of improvement has slowed. The federal stimulus programs that provided much of the economic lift last quarter have either expired or are expiring, and it is unclear if additional fiscal stimulus will be forthcoming. The U.S. economic recovery remains heavily impacted by the pandemic. The health of the overall economy and employment trends among professional workers have been, and we expect will continue to be, one of the most important drivers of office market conditions.
Beginning in March 2020, public health officials and governmental authorities, including those in all of the markets in which we operate, reacted to the spread of the COVID-19 pandemic by imposing regulatory measures such as prohibiting people from congregating in heavily populated areas, instituting quarantines, restricting travel, issuing “stay-at-home” orders, restricting the types of businesses that could continue to operate (including the types of construction projects that could proceed) and closing schools, among many others. Although the state and local authorities in all of our regions except Los Angeles and New Jersey have eased those regulations to allow for the return to work, the physical occupancy of our properties remains well below capacity as most employers continued their COVID-19 response protocols and encouraged employees to work from home when possible during the pandemic.
The short and long term impact the pandemic will have on the use of office space is unknown as companies consider the recessionary impact on their business and their demand for labor while, at the same time, consider the space requirements associated with social distancing. We believe our strategically located, high quality product will continue to be a component of today’s forward thinking organization that desires to drive culture and productivity.
Because of the uncertainty regarding the length and severity of the pandemic, many existing and prospective tenants are deferring decisions on their office space needs as they focus on their employees’ safety, their companies’ liquidity and managing their businesses through the recession and economic recovery. As a result, new leasing activity was lower in the third quarter of 2020 than it was prior to March 2020. Despite the slowdown in tour activity during the quarter, we signed approximately 811,000 square feet of leases and renewals during the third quarter with an average lease term of seven years, indicating that many prospective and existing tenants are committed to long-term office space and view our properties as their preferred choice for premium, Class A office. Included in our third quarter leasing activity was a lease extension and an expansion with a tenant totaling approximately 186,000 square feet in Reston, Virginia and a new lease for approximately 82,000 square feet with a tenant in Boston, Massachusetts.
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Development of primarily pre-leased properties in supply-constrained markets with the strongest economic growth over time has been a cornerstone of our long-term growth strategy. We have approximately 4.3 million square feet of active developments and redevelopments in our pipeline, which are 80% pre-leased, as of November 3, 2020, to primarily credit-strong tenants with long-lease terms. All development projects remain on schedule to meet all required delivery milestones in our leases.
The health and safety of our employees, tenants, service providers and visitors continues to be our highest priority. In the third quarter, we continued to implement our health safety protocols in all in-service properties across our portfolio to provide a safe environment for tenants and employees in accordance with the policies and applicable legal requirements in our regions.
Rent Collections
Cash rent payments for a particular month are generally due on the first day of that month (although tenants have varying grace periods). Cash rent amounts are based on all rent billed by us, including all amounts from consolidated operations and all unconsolidated joint ventures, other than Gateway Commons for which we do not handle billing.
During the third quarter of 2020, our rent collections as a percentage of the total amounts billed to all tenants were 97%.
Approximately 96% of these billings were made to office tenants. Our third quarter rent collections from office tenants continued to be strong at 99%. Approximately $612 million, or $2.4 billion annualized, of our lease revenue was from our office portfolio. Our office portfolio has long-term lease contracts and modest rollover exposure over the next few years.
Approximately 4% of these billings related to retail leases. Our third quarter rent collections from retail tenants was 62%.
When evaluating the collectability of a tenant’s accrued rent and accounts receivable balances, management analyzes the tenant’s creditworthiness, current economic trends, including the impact of COVID-19 on a tenant’s business, and changes in the tenant’s payment patterns on a lease-by-lease basis. In the third quarter, we recorded write-offs totaling approximately $10 million, of which approximately $6 million were associated with accrued rent and approximately $4 million were associated with accounts receivable. These amounts represent the write-offs in our consolidated portfolio, plus our share of the write-offs from the unconsolidated joint ventures (calculated based on our ownership percentage), minus our partners’ share of write-offs from our consolidated joint ventures (calculated based upon the partners’ percentage ownership interests). The majority of these write-offs related to tenants in the retail, fitness and entertainment sectors.
Cash rent abatements and deferrals primarily related to COVID-19 were approximately $18.2 million in the third quarter. This amount represents our consolidated cash rent abatements and deferrals plus our share of the cash rent abatements and deferrals from the unconsolidated joint ventures (calculated based on our ownership percentage) minus our partners’ share of cash rent abatements and deferrals from our consolidated joint ventures (calculated based upon the partners’ percentage ownership interests).
In the third quarter, our parking and other revenue was approximately $16.3 million, an increase of $2.4 million, or 17%, from the second quarter of 2020, but a decrease of approximately $9.3 million, or 36%, as compared to the third quarter of 2019. The year-over-year decline was largely due to the decline in transient parking revenue as employees continue to work from home during the pandemic.
Our hotel property, the Boston Marriott Cambridge, remained closed throughout the third quarter and therefore operated at an approximately $3.1 million loss. As a result, net operating income declined approximately $7.3 million as compared to the third quarter of 2019. The hotel re-opened on October 2, 2020, but occupancy remains low due to reduced demand as a result of COVID-19 and we expect demand to remain low for the foreseeable future.
As a result of the impact of the current environment, we expect our 2020 revenues to be adversely affected due to (1) declines in revenue from our retail tenants, parking and hotel operator, (2) a slowdown in new leasing activity for vacant and expiring space and (3) write-offs of accounts receivable and accrued rent balances. Despite the near-term challenges of COVID-19, we remain confident in our ability to weather the current market downturn and manage our business throughout uncertain future market conditions.
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As a leading developer, owner and manager of marquee Class A office properties in the United States, our priorities during and following COVID-19 remain focused on the following:
ensuring tenant satisfaction by keeping our properties safe, open and available for occupancy;
implementing measures to ensure tenant and employee health security;
communicating openly with tenants to provide assurance before and during re-occupancy;
leasing available space in our in-service and development properties;
completing the construction of our development properties as conditions allow;
completing the redevelopment and repositioning of several key properties to increase future revenue and asset values over the long-term;
maintaining our conservative balance sheet and managing our near-term debt maturities;
actively managing our operations in a safe, sustainable and responsible manner; and
maintaining discipline in our underwriting of investment opportunities.
Following is an overview of portfolio activity and leasing activity in the third quarter of 2020.
The overall occupancy of our in-service office and retail properties was 91.1% at September 30, 2020, a decrease of 90 basis points as compared to June 30, 2020. During the third quarter of 2020, we signed leases across our portfolio totaling approximately 811,000 square feet and we commenced revenue recognition on approximately 1.2 million square feet of leases in second generation space, including lease modifications. Of these second generation leases, approximately 895,000 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 20% over the prior leases.
A brief overview of each of our markets follows.
Boston
Our Boston central business district (“CBD”) in-service portfolio was approximately 98% leased as of September 30, 2020, including approximately 343,000 square feet of leases that we terminated, due to the nonpayment of rent, where the tenants have yet to vacate. During the third quarter of 2020, we executed approximately 96,000 square feet of leases and had approximately 262,000 square feet of leases commence in the Boston region. Approximately 222,000 square feet of the leases that commenced had been vacant for less than one year and represent an increase in net rental obligations of approximately 15% over the prior leases. During the quarter, a joint venture in which we own 50% fully placed in-service Hub50House, a 440 unit residential property that is part of the 1.3 million square foot mixed-use Hub on Causeway development in Boston, Massachusetts.
Our approximately 2.0 million square foot in-service office portfolio in Cambridge was approximately 99% leased, as of September 30, 2020. In addition, during the third quarter of 2020, one of our large tenants in Cambridge had the contractual right to terminate a lease for 190,000 square feet but the tenant did not exercise that right and its lease now expires in 2037. During the quarter, we continued our development of 325 Main Street at Kendall Center in Cambridge, Massachusetts, which is 90% pre-leased to a tenant for a term of 15 years.
In our suburban Waltham/Lexington portfolio, we continued the redevelopment of a portion of 200 West Street, an approximately 261,000 net rentable square foot Class A office property in Waltham, Massachusetts. The redevelopment is a conversion of a portion of the property to laboratory space to meet growing demand in the life sciences sector. In November 2020, we signed an approximately 138,000 square-foot, 10-year lease with a new tenant at this building. With this lease, the property is 100% leased. During the third quarter of 2020, we also entered into an agreement with an existing joint venture partner for the future development of a 1.2 million square foot site in Waltham. The agreement allows for the phased development of office and lab properties across 41-acres. We expect to serve as the development manager. As part of this development, we expect to complete new exit/interchange improvements onto I-95/Route 128, enhancing access to our entire Waltham portfolio. Waltham and the surrounding Route 128 Mass Turnpike area continues to be a popular submarket of Boston for leading and emerging companies in the life sciences, biotechnology and technology sectors. This agreement builds on our current footprint of approximately 4.3 million square feet of office and lab properties in this submarket.
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Los Angeles
Our Los Angeles (“LA”) in-service portfolio is currently focused on West LA and includes approximately 2.3 million square feet, including a 1.1 million square foot property, Colorado Center, of which we own 50%, and Santa Monica Business Park, a 21-building, approximately 1.2 million square foot property of which we own 55%. We increased our occupancy in LA in the third quarter by 80 basis points due to an approximately 46,000 square foot expansion by one of our existing technology tenants. As of September 30, 2020, our LA in-service properties were approximately 97% leased.
Since our initial entry in the West LA market in 2016, we have continued to explore opportunities to increase our presence in the LA market by seeking investments where our financial, operational, redevelopment and development expertise provide the opportunity to achieve accretive returns. In the third quarter of 2020, we announced the acquisition of a 50% interest in Beach Cities Media Center, a 6.4-acre land site on the Rosecrans Corridor of the El Segundo submarket of Los Angeles, California for a purchase price of $21.2 million. The site is fully entitled to support the future development of approximately 275,000 square feet of Class A creative office space and is located in one of the most in-demand creative office areas in the South Bay of Los Angeles where several Fortune 500 and emerging office tenants in the technology, entertainment and financial sectors are located. In conjunction with the acquisition, we entered into a joint venture with Continental Development Corporation, a premier developer and owner of Class A properties primarily in the El Segundo and Manhattan Beach submarkets with more than 500 tenants across its portfolio.
New York
As of September 30, 2020, our New York CBD in-service portfolio was approximately 94% leased, including approximately 374,000 square feet of leases that we terminated due to the nonpayment of rent, where the tenants have yet to vacate. We are negotiating a reinstatement and renewal agreement with one of these tenants for approximately 150,000 square feet. In addition, we have executed approximately 249,000 square feet of leases that we expect will commence by the end of the first quarter of 2021. In the third quarter of 2020, we commenced approximately 210,000 square feet of leases in the New York region. Of these leases, approximately 129,000 square feet had been vacant for less than one year and represent an increase in net rental obligations of approximately 14% over the prior leases.
San Francisco
Our San Francisco CBD in-service properties were approximately 96% leased as of September 30, 2020. During the third quarter of 2020, we commenced approximately 387,000 square feet of leases in the San Francisco region. Of these leases, approximately 354,000 square feet had been vacant for less than one year and represent an increase in net rental obligations of approximately 29% over the prior leases.
During the third quarter, we placed in service The Skylyne, a 402 unit residential property in Oakland, California, which was 9% leased as of November 3, 2020.
Washington, DC
In the Washington, DC region, our focus remains on (1) expanding our development potential in Reston, Virginia, where demand from technology and cybersecurity tenants remains strong, (2) divesting of certain assets in Washington, DC and select suburban markets and (3) matching development sites with tenants to begin development with significant pre-leasing commitments. During the third quarter of 2020, we commenced approximately 273,000 square feet of leases in the Washington, DC region. Of these leases, approximately 163,000 square feet had been vacant for less than one year and represent an increase in net rental obligations of approximately 1% over the prior leases.
Our Washington, DC CBD in-service properties were approximately 85% leased, as of September 30, 2020, with modest near-term exposure, and we have reduced our exposure in the Washington, DC CBD market significantly over the past few years through dispositions of assets.
Our Washington, DC suburban properties, which includes our significant presence in Reston, Virginia, were approximately 84% leased as of September 30, 2020. During the third quarter of 2020, we signed a lease extension and an expansion with a tenant totaling approximately 186,000 square feet in Reston, Virginia. In October 2020, we signed an approximately 196,000 square foot, 20-year lease with a tenant at Reston Next, our
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approximately 1.1 million square foot development, the new phase of Reston Town Center in Reston, Virginia. With this new lease, the Reston Next development is 85% pre-leased.
Leasing Statistics
The table below details the leasing activity, including 100% of the unconsolidated joint ventures, that commenced during the three and nine months ended September 30, 2020:
Three months ended September 30, 2020Nine months ended September 30, 2020
Total Square Feet
Vacant space available at the beginning of the period3,570,356 3,135,170 
Property dispositions/properties taken out of service (1)— (150,193)
Properties placed (and partially placed) in-service (2)12,825 377,647 
Leases expiring or terminated during the period1,597,697 4,433,742 
Total space available for lease5,180,878 7,796,366 
1st generation leases
— 342,007 
2nd generation leases with new tenants
613,534 1,670,329 
2nd generation lease renewals
574,937 1,791,623 
Total space leased (3)1,188,471 3,803,959 
Vacant space available for lease at the end of the period3,992,407 3,992,407 
 
Leases executed during the period, in square feet (4)810,972 2,454,913 
Second generation leasing information: (5)
Leases commencing during the period, in square feet1,188,471 3,461,952 
Weighted Average Lease Term89 Months107 Months
Weighted Average Free Rent Period144 Days149 Days
Total Transaction Costs Per Square Foot (6)$66.57 $81.32 
Increase in Gross Rents (7)13.65 %17.48 %
Increase in Net Rents (8)20.14 %26.70 %
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(1)Total square feet of property dispositions/properties taken out of service during the nine months ended September 30, 2020 consists of 24,508 square feet due to the sale of a portion of Capital Gallery and 125,685 square feet due to the sale of Annapolis Junction Building Eight.
(2)Total square feet of properties placed (and partially placed) in-service during the three months ended September 30, 2020 consists of 12,825 at The Skylyne. Total square feet of properties placed (and partially placed) in-service during the nine months ended September 30, 2020 consists of 12,825 at The Skylyne, 79,527 at 20 CityPoint, 4,330 at 685 Gateway, 5,156 at 145 Broadway and 275,809 at 17Fifty Presidents Street.
(3)Represents leases for which lease revenue recognition has commenced in accordance with GAAP during the three and nine months ended September 30, 2020.
(4)Represents leases executed during the three and nine months ended September 30, 2020 for which we either (1) commenced lease revenue recognition in such period or (2) will commence lease revenue recognition in subsequent periods, in accordance with GAAP, and includes leases at properties currently under development. The total square feet of leases executed and recognized in the three and nine months ended September 30, 2020 is 174,187 and 680,575, respectively. Amounts for the three and nine months ended September 30, 2020 exclude lease modifications related to COVID-19 covering an aggregate of 667,000 and 3,766,343 square feet that were executed in the three and nine months ended September 30, 2020, respectively, to provide cash rent deferrals and/or abatements. Of these lease modifications, the lease terms associated with 176,787 and 473,776 square feet were extended for a period of 12 or more months during the three and nine months ended September 30, 2020, respectively.
(5)Second generation leases are defined as leases for space that had previously been leased by us. Of the 1,188,471 and 3,461,952 square feet of second generation leases that commenced during the three and nine months ended September 30, 2020, respectively, leases for 1,014,284 and 2,786,533 square feet, respectively, were signed in prior periods.
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(6)Total transaction costs include tenant improvements and leasing commissions but exclude free rent concessions and other inducements in accordance with GAAP.
(7)Represents the increase in gross rent (base rent plus expense reimbursements) on the new versus expired leases on the 894,966 and 2,800,738 square feet of second generation leases that had been occupied within the prior 12 months for the three and nine months ended September 30, 2020, respectively; excludes leases that management considers temporary because the tenant is not expected to occupy the space on a long-term basis.
(8)Represents the increase in net rent (gross rent less operating expenses) on the new versus expired leases on the 894,966 and 2,800,738 square feet of second generation leases that had been occupied within the prior 12 months for the three and nine months ended September 30, 2020, respectively; excludes leases that management considers temporary because the tenant is not expected to occupy the space on a long-term basis.
Transactions during the three months ended September 30, 2020 included the following:
Developments
On July 31, 2020, we acquired an undivided ownership interest in real property at 759 Harrison Street located in San Francisco, California, which is expected to be included in the Fourth + Harrison development project, for a purchase price totaling approximately $2.3 million. Fourth + Harrison is expected to support the development of approximately 804,000 square feet of primarily commercial office space.
On August 15, 2020, we completed and fully placed in-service The Skylyne, an approximately 331,000 square foot project comprised of 402 residential units and retail space located in Oakland, California that was 9% leased, as of November 3, 2020.
Unconsolidated joint venture activities
On July 23, 2020, we acquired a 50% interest in a joint venture entity that owns Beach Cities Media Center, a 6.4-acre parcel of land located in El Segundo, California, for a purchase price of approximately $21.2 million. Beach Cities Media Center is expected to support the development of approximately 275,000 square feet of Class A office space.
On July 24, 2020, a joint venture in which we have a 50% interest completed and fully placed in-service Hub50House, an approximately 320,000 square foot project comprised of 440 residential units located in Boston, Massachusetts, that was 53% leased, as of November 3, 2020.
On September 1, 2020, we entered into an agreement with our partner in the joint venture that owns 1265 Main Street located in Waltham, Massachusetts to (1) form additional joint ventures to own and develop a mixed-use property containing approximately 1,200,000 square feet to be developed in phases on an approximately 41-acre site adjacent to 1265 Main Street and (2) share the costs of certain offsite infrastructure improvements with our joint venture partner and other third party abutting land owners. We will serve as the development manager and expect to own a 50% interest in each of the joint ventures.
On September 30, 2020, a joint venture in which we have a 50% interest extended the mortgage loan collateralized by its Market Square North property. At the time of the extension, the outstanding balance of the loan totaled approximately $114.2 million, bore interest at a fixed rate of 4.85% per annum and was scheduled to mature on October 1, 2020. The extended loan matures on November 1, 2020. Market Square North is a Class A office property with approximately 418,000 net rentable square feet located in Washington, DC.
Transactions completed subsequent to September 30, 2020 included the following:
On October 1, 2020, a joint venture in which we have a 50% interest completed and fully placed in-service Dock 72, a Class A office project with approximately 670,000 net rentable square feet located in Brooklyn, New York.
On October 30, 2020, a joint venture in which we have a 50% interest refinanced the mortgage loan collateralized by its Market Square North property located in Washington, DC. The outstanding balance of the loan totaled approximately $114.2 million, bore interest at a fixed rate of 4.85% per annum and was scheduled to mature on November 1, 2020. The new mortgage loan totals
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$125.0 million, bears interest at a variable rate equal to (1) the greater of (x) LIBOR or (y) 0.50%, plus (2) 2.30% per annum, and matures on November 10, 2025, with one, one-year extension option, subject to certain conditions.
On November 3, 2020, we signed an approximately 138,000 square-foot, 10-year lease with a new tenant at 200 West Street in Waltham, Massachusetts. We are currently redeveloping a portion of 200 West Street into lab space with expected completion in 2021. With this lease, the property is 100% leased.
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, 2019 contains a discussion of our critical accounting policies, except for our policies established following the adoption of Accounting Standards Update (“ASU”) ASU 2016-13, ASU 2018-13, ASU 2018-17 and ASU 2020-04. The adoption of each of the pronouncements is discussed in Note 2 to our Consolidated Financial Statements. Management discusses and reviews our critical accounting policies and management’s judgments and estimates with BXP’s Audit Committee.
Results of Operations for the Nine Months Ended September 30, 2020 and 2019
The impact that COVID-19 has had on our business, financial position and results of operations during the second and third quarters of 2020 is discussed throughout this report. The full extent of the impact of COVID-19 on our business, operations and financial results will depend on numerous evolving factors that we may not be able to accurately predict. In addition, we cannot predict the impact that COVID-19 will have on our tenants, employees, contractors, lenders, suppliers, vendors and joint venture partners; any material adverse effect on these parties could also have a material adverse effect on us. The situation surrounding COVID-19 remains fluid, and we are actively managing our response in collaboration with tenants, government officials and joint venture partners and assessing potential impacts to our financial position and operating results, as well as potential adverse developments in our business. See Item 1A: “Risk Factors” for additional details.
Net income attributable to Boston Properties, Inc. common shareholders and net income attributable to Boston Properties Limited Partnership common unitholders increased approximately $484.3 million and $548.7 million for the nine months ended September 30, 2020 compared to 2019, respectively, as detailed in the following tables and for the reasons discussed below under the heading “Comparison of the nine months ended September 30, 2020 to the nine months ended September 30, 2019” within “Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
The following are reconciliations of Net Income Attributable to Boston Properties, Inc. Common Shareholders to Net Operating Income and Net Income Attributable to Boston Properties Limited Partnership Common Unitholders to Net Operating Income for the nine months ended September 30, 2020 and 2019 (in thousands):

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Boston Properties, Inc.
Nine months ended September 30,
20202019Increase/
(Decrease)
%
Change
Net Income Attributable to Boston Properties, Inc. Common Shareholders
$854,541 $370,200 $484,341 130.83 %
Preferred dividends
7,875 7,875 — — %
Net Income Attributable to Boston Properties, Inc.862,416 378,075 484,341 128.11 %
Net Income Attributable to Noncontrolling Interests:
Noncontrolling interest—common units of the Operating Partnership
97,090 43,133 53,957 125.09 %
Noncontrolling interests in property partnerships
34,280 54,782 (20,502)(37.42)%
Net Income993,786 475,990 517,796 108.78 %
Other Expenses:
Add:
Interest expense
319,726 309,837 9,889 3.19 %
Loss from early extinguishment of debt— 28,010 (28,010)(100.00)%
Impairment loss
— 24,038 (24,038)(100.00)%
Other Income:
Less:
Gains from investments in securities965 4,240 (3,275)(77.24)%
Interest and other income (loss)4,277 14,546 (10,269)(70.60)%
Gains on sales of real estate
613,723 766 612,957 80,020.50 %
Income (loss) from unconsolidated joint ventures(5,410)47,528 (52,938)(111.38)%
Other Expenses:
Add:
Depreciation and amortization expense515,738 507,867 7,871 1.55 %
Transaction costs
1,254 1,415 (161)(11.38)%
Payroll and related costs from management services contracts
8,617 8,227 390 4.74 %
General and administrative expense
102,059 107,980 (5,921)(5.48)%
Other Revenue:
Less:
Direct reimbursements of payroll and related costs from management services contracts
8,617 8,227 390 4.74 %
Development and management services revenue
23,285 29,566 (6,281)(21.24)%
Net Operating Income$1,295,723 $1,358,491 $(62,768)(4.62)%
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Boston Properties Limited Partnership
Nine months ended September 30,
20202019Increase/
(Decrease)
%
Change
Net Income Attributable to Boston Properties Limited Partnership Common Unitholders
$969,932 $421,214 $548,718 130.27 %
Preferred distributions
7,875 7,875 — — %
Net Income Attributable to Boston Properties Limited Partnership977,807 429,089 548,718 127.88 %
Net Income Attributable to Noncontrolling Interests:
Noncontrolling interests in property partnerships
34,280 54,782 (20,502)(37.42)%
Net Income1,012,087 483,871 528,216 109.16 %
Other Expenses:
Add:
Interest expense
319,726 309,837 9,889 3.19 %
Loss from early extinguishment of debt— 28,010 (28,010)(100.00)%
Impairment loss
— 22,272 (22,272)(100.00)%
Other Income:
Less:
Gains from investments in securities965 4,240 (3,275)(77.24)%
Interest and other income (loss)4,277 14,546 (10,269)(70.60)%
Gains on sales of real estate
626,686 915 625,771 68,390.27 %
Income (loss) from unconsolidated joint ventures(5,410)47,528 (52,938)(111.38)%
Other Expenses:
Add:
Depreciation and amortization expense510,400 501,901 8,499 1.69 %
Transaction costs
1,254 1,415 (161)(11.38)%
Payroll and related costs from management services contracts
8,617 8,227 390 4.74 %
General and administrative expense
102,059 107,980 (5,921)(5.48)%
Other Revenue:
Less:
Direct reimbursements of payroll and related costs from management services contracts
8,617 8,227 390 4.74 %
Development and management services revenue
23,285 29,566 (6,281)(21.24)%
Net Operating Income$1,295,723 $1,358,491 $(62,768)(4.62)%

At each of September 30, 2020 and 2019, we owned or had joint venture interests in a portfolio of 196 commercial real estate properties (in each case, the “Total Property Portfolio”). As a result of changes within our Total Property Portfolio, the financial data presented below shows significant changes in revenue and expenses from period-to-period. Accordingly, we do not believe that our period-to-period financial data with respect to the Total Property Portfolio is meaningful. Therefore, the comparison of operating results for the three and nine months ended September 30, 2020 and 2019 show separately the changes attributable to the properties that were owned by us and in-service throughout each period compared (the “Same Property Portfolio”) and the changes attributable to the properties included in the Acquired, Placed In-Service, Development or Redevelopment or Sold Portfolios.
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 acquired, placed in-service or in development or redevelopment after the beginning of the earliest period presented or disposed of prior to the end of the latest period presented.
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Net operating income (“NOI”) is a non-GAAP financial measure equal to net income attributable to Boston Properties, Inc. common shareholders and net income attributable to Boston Properties Limited Partnership common unitholders, as applicable, the most directly comparable GAAP financial measures, plus (1) preferred dividends/distributions, net income attributable to noncontrolling interests, interest expense, loss from early extinguishment of debt, impairment loss, depreciation and amortization expense, transaction costs, payroll and related costs from management services contracts and corporate general and administrative expense less (2) gains from investments in securities, interest and other income (loss), gains (losses) on sales of real estate, income (loss) from unconsolidated joint ventures, direct reimbursements of payroll and related costs from management services contracts and development and management services revenue. 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, depreciation expense and impairment losses 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 gains on sales of real estate, depreciation expense and impairment losses, when those properties are sold. For additional information see the Explanatory Note that follows the cover page of this Quarterly Report on Form 10-Q.
Comparison of the nine months ended September 30, 2020 to the nine months ended September 30, 2019
The table below shows selected operating information for the Same Property Portfolio and the Total Property Portfolio. The Same Property Portfolio consists of 139 properties totaling approximately 38.6 million net rentable square feet, excluding unconsolidated joint ventures. The Same Property Portfolio includes properties acquired or placed in-service on or prior to January 1, 2019 and owned and in service through September 30, 2020. The Total Property Portfolio includes the effects of the other properties either acquired, placed in-service, in development or redevelopment after January 1, 2019 or disposed of on or prior to September 30, 2020. This table includes a reconciliation from the Same Property Portfolio to the Total Property Portfolio by also providing information for the nine months ended September 30, 2020 and 2019 with respect to the properties that were acquired, placed in-service, in development or redevelopment or sold.

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 Same Property PortfolioProperties Acquired PortfolioProperties
Placed In-Service
Portfolio
Properties in Development or Redevelopment PortfolioProperties Sold PortfolioTotal Property Portfolio
20202019Increase/
(Decrease)
%
Change
2020201920202019202020192020201920202019Increase/
(Decrease)
%
Change
(dollars in thousands)
Rental Revenue: (1)
Lease Revenue (Excluding Termination Income)
$1,886,518 $1,934,860 $(48,342)(2.50)%$10,518 $1,298 $46,161 $1,576 $2,614 $7,935 $24,067 $65,898 $1,969,878 $2,011,567 $(41,689)(2.07)%
Termination Income
8,363 13,226 (4,863)(36.77)%— — — — — — 59 580 8,422 13,806 (5,384)(39.00)%
Lease Revenue
1,894,881 1,948,086 (53,205)(2.73)%10,518 1,298 46,161 1,576 2,614 7,935 24,126 66,478 1,978,300 2,025,373 (47,073)(2.32)%
Parking and Other
51,556 73,858 (22,302)(30.20)%— 1,579 — 16 119 1,150 2,412 54,305 76,389 (22,084)(28.91)%
Total Rental Revenue (1)1,946,437 2,021,944 (75,507)(3.73)%10,522 1,298 47,740 1,576 2,630 8,054 25,276 68,890 2,032,605 2,101,762 (69,157)(3.29)%
Real Estate Operating Expenses721,455 736,203 (14,748)(2.00)%4,558 649 8,733 477 3,995 6,454 9,289 25,401 748,030 769,184 (21,154)(2.75)%
Net Operating Income (Loss), Excluding Residential and Hotel
1,224,982 1,285,741 (60,759)(4.73)%5,964 649 39,007 1,099 (1,365)1,600 15,987 43,489 1,284,575 1,332,578 (48,003)(3.60)%
Residential Net Operating Income (Loss) (2)16,809 14,803 2,006 13.55 %— — (717)— — — — — 16,092 14,803 1,289 8.71 %
Hotel Net Operating Income (Loss) (2)(4,944)11,110 (16,054)(144.50)%— — — — — — — — (4,944)11,110 (16,054)(144.50)%
Net Operating Income (Loss)
$1,236,847 $1,311,654 $(74,807)(5.70)%$5,964 $649 $38,290 $1,099 $(1,365)$1,600 $15,987 $43,489 $1,295,723 $1,358,491 $(62,768)(4.62)%
_______________
(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. 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 nine months ended September 30, 2020 and 2019 is comprised of Residential Revenue of $29,076 and $26,710 less Residential Expenses of $12,984 and $11,907, respectively. Hotel Net Operating Income for the nine months ended September 30, 2020 and 2019 is comprised of Hotel Revenue of $7,014 and $36,796 less Hotel Expenses of $11,958 and $25,686, respectively, per the Consolidated Statements of Operations.
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Same Property Portfolio
Lease Revenue (Excluding Termination Income)
Lease revenue from the Same Property Portfolio decreased by approximately $48.3 million for the nine months ended September 30, 2020 compared to 2019. Approximately $60.8 million of the decrease was related to write-offs, which are discussed below. Excluding the impact of the write-offs, the average revenue per square foot increased by approximately $0.49, contributing approximately $17.9 million, offset by an approximately $5.4 million decrease due to our average occupancy decreasing from 93.8% to 93.5%.
Under Accounting Standards Codification (“ASC”) 842 - “Leases” (“ASC 842”), any write-off for bad debt, including accrued rent, is recorded as a reduction to lease revenue. As a result, during the nine months ended September 30, 2020, for our Same Property Portfolio, we wrote off approximately $39.2 million and $21.6 million of accrued rent and accounts receivable balances, respectively. These write-offs related to tenants, primarily in the retail sector, that either terminated their leases or for which we determined that their accrued rent and/or accounts receivable balances were no longer probable of collection.
In addition, as a result of COVID-19, for the Same Property Portfolio, during the second and third quarters of 2020, we executed lease modification agreements for approximately 2.9 million square feet and granted approximately $46.9 million of cash rent abatements and deferrals, of which approximately $31.2 million related to rental charges for the second and third quarters of 2020. Although some of the lease modifications were deferrals under which we expect the tenant will pay us in full primarily in 2021, the majority of the lease modifications involved extending the lease term (in some cases for a year or more). As a result of the lease modification agreements that extended the lease term, we expect to see an increase in cash rent received in the future.
In April 2020, the Financial Accounting Standards Board (“FASB”) staff issued a question and answer document (“Lease Modification Q & A”) related to the application of lease accounting guidance for lease concessions, in accordance with ASC 842, as a result of COVID-19. We did not utilize the guidance provided in the Lease Modification Q & A and instead elected to continue to account for the COVID-19 lease concessions on a lease-by-lease basis in accordance with the existing lease modification accounting framework (See Note 4 to the Consolidated Financial Statements). As such, our accrued rent balances, which are a component of lease revenue, include the accounting impact (adjusted for write-offs) from the rent abatements, deferrals and extensions that were executed during the second and third quarters of 2020.
We expect to continue to execute lease modification agreements as a result of COVID-19. However, the degree to which our tenants’ businesses are negatively impacted by COVID-19 could leave some tenants still unable to meet their rental payment obligations and result in a reduction in our cash flows. We may write off additional accrued rent or accounts receivable balances and this could have a material adverse effect on lease revenue. See Item 1A: “Risk Factors” for additional details.
Termination Income
Termination income decreased by approximately $4.9 million for the nine months ended September 30, 2020 compared to 2019.
Termination income for the nine months ended September 30, 2020 related to 34 tenants across the Same Property Portfolio and totaled approximately $8.4 million, which was primarily related to tenants that terminated leases early in the New York region.
Termination income for the nine months ended September 30, 2019 related to 29 tenants across the Same Property Portfolio and totaled approximately $13.2 million, of which approximately $7.8 million is from two tenants that terminated leases early at 399 Park Avenue in New York City.
Parking and Other Revenue
Parking and other revenue decreased by approximately $22.3 million for the nine months ended September 30, 2020 compared to 2019. Parking revenue decreased by approximately $24.4 million while other revenue increased by approximately $2.1 million. The decrease in parking revenue was primarily due to a decrease in transient and monthly parking.
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During the second and third quarters of 2020, with stay-at-home orders in effect business closures and people working remotely in a majority of regions in which our properties are located, we generated minimal hourly/daily parking revenue and this trend may continue for as long as these conditions exist. However, as these conditions shifted, and stay-at-home orders were partially or fully lifted, businesses began to open and people began to return to working in an office setting, we expected, and have begun to see, an increase in parking revenue. As a result, for the nine months ended September 30, 2020, transient and monthly parking decreased by approximately $15.2 million and $5.1 million, respectively. Some of our monthly parking revenues are contractual agreements embedded in our leases, and some are at will individual agreements.
Real Estate Operating Expenses
Real estate operating expenses from the Same Property Portfolio decreased by approximately $14.7 million, or 2.0%, for the nine months ended September 30, 2020 compared to 2019, due primarily to decreases in utility and cleaning expense of approximately $15.6 million, or 18.7%, and $7.5 million, or 11.7%, respectively, partially offset by an increase in other real estate operating expenses of $8.4 million, or 1.4%. The decreases in utility and cleaning expense were experienced across the portfolio and were primarily driven by a decrease in physical tenant occupancy, which led to lower demand for electricity, HVAC, and cleaning.
Properties Acquired Portfolio
The table below lists the properties acquired between January 1, 2019 and September 30, 2020. Rental revenue and real estate operating expenses increased by approximately $9.2 million and $3.9 million, respectively, for the nine months ended September 30, 2020 compared to 2019, as detailed below.
Square FeetRental RevenueReal Estate Operating Expenses
NameDate acquired20202019Change20202019Change
(dollars in thousands)
880 and 890 Winter Street
August 27, 2019392,576 $10,222 $1,298 $8,924 $4,122 $649 $3,473 
Fourth + Harrison (1)June 26, 2020N/A300 — 300 436 — 436 
392,576 $10,522 $1,298 $9,224 $4,558 $649 $3,909 
_______________
(1)Located at 777 Harrison Street in San Francisco, California (known as Fourth + Harrison and formerly known as 425 Fourth Street).
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Properties Placed In-Service Portfolio
The table below lists the properties that were placed in-service or partially placed in-service between January 1, 2019 and September 30, 2020. Rental revenue and real estate operating expenses from our Properties Placed In-Service Portfolio increased by approximately $46.2 million and $9.0 million, respectively, for the nine months ended September 30, 2020 compared to 2019, as detailed below.
Quarter Initially Placed In-ServiceQuarter Fully Placed In-ServiceRental RevenueReal Estate Operating Expenses
NameSquare Feet20202019Change20202019Change
(dollars in thousands)
Office
20 CityPointSecond Quarter, 2019Second Quarter, 2020211,476 $5,485 $1,576 $3,909 $2,053 $477 $1,576 
145 Broadway
Fourth Quarter, 2019Fourth Quarter, 2019490,086 33,377 — 33,377 4,104 — 4,104 
17Fifty Presidents Street
First Quarter, 2020First Quarter, 2020275,809 8,878 — 8,878 2,576 — 2,576 
Total Office977,371 47,740 1,576 46,164 8,733 477 8,256 
Residential
The SkylyneThird Quarter, 2020Third Quarter, 2020330,996 23 — 23 740 — 740 
Total Residential330,996 23 — 23 740 — 740 
1,308,367 $47,763 $1,576 $46,187 $9,473 $477 $8,996 

Properties in Development or Redevelopment Portfolio
The table below lists the properties that were in development or redevelopment between January 1, 2019 and September 30, 2020. Rental revenue and real estate operating expenses from our Properties in Development or Redevelopment Portfolio decreased by approximately $5.4 million and $2.5 million, respectively, for the nine months ended September 30, 2020 compared to 2019.
Rental RevenueReal Estate Operating Expenses
NameDate Commenced Development / RedevelopmentSquare Feet20202019Change20202019Change
(dollars in thousands)
One Five Nine East 53rd Street (1)
August 19, 2016220,000 $(1,232)$2,781 $(4,013)$1,149 $1,430 $(281)
325 Main Street (2)
May 9, 2019115,000 36 (704)740 281 1,338 (1,057)
200 West Street (3)
September 30, 2019261,000 3,826 5,977 (2,151)2,565 3,686 (1,121)
596,000 $2,630 $8,054 $(5,424)$3,995 $6,454 $(2,459)
_______________
(1)Rental revenue for the nine months ended September 30, 2020 includes an approximately $2.9 million write-off of accrued rent and accounts receivable balances for a terminated tenant.
(2)Rental revenue for the nine months ended September 30, 2019 includes the acceleration and write-off of accrued rent associated with the early termination of a lease at the property. Real estate operating expenses for the nine months ended September 30, 2020 and 2019 includes approximately $0.3 million and $0.7 million of demolition costs, respectively.
(3)Rental revenue and real estate operating expenses for the nine months ended September 30, 2019 are related to the entire building. The redevelopment is a conversion of a 126,000 square foot portion of the property to laboratory space.
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Properties Sold Portfolio
The table below lists the properties we sold between January 1, 2019 and September 30, 2020. Rental revenue and real estate operating expenses from our Properties Sold Portfolio decreased by approximately $43.6 million and $16.1 million, respectively, for the nine months ended September 30, 2020 compared to 2019, as detailed below.
Rental RevenueReal Estate Operating Expenses
NameDate SoldProperty TypeSquare Feet 20202019Change20202019Change
(dollars in thousands)
2600 Tower Oaks Boulevard
January 24, 2019Office179,000 $— $159 $(159)$— $189 $(189)
One Tower CenterJune 3, 2019Office410,000 — 2,100 (2,100)— 2,080 (2,080)
164 Lexington RoadJune 28, 2019Office64,000 — — — — 82 (82)
Washingtonian NorthDecember 20, 2019LandN/A— — — — 117 (117)
601, 611 and 651 Gateway (1)
January 28, 2020Office768,000 1,946 21,495 (19,549)881 7,682 (6,801)
New Dominion Technology Park
February 20, 2020Office493,000 2,551 14,593 (12,042)772 4,328 (3,556)
Capital Gallery (2)June 25, 2020Office631,000 20,779 30,543 (9,764)7,636 10,923 (3,287)
2,545,000 $25,276 $68,890 $(43,614)$9,289 $25,401 $(16,112)
_______________
(1)Rental revenue for the nine months ended September 30, 2019 includes approximately $0.8 million of termination income (See Notes 3 and 5 to the Consolidated Financial Statements).
(2)We completed the sale of a portion of our Capital Gallery property located in Washington, DC. Capital Gallery is an approximately 631,000 net rentable square foot Class A office property. The portion sold was comprised of approximately 455,000 net rentable square feet of commercial office space. We continue to own the land, underground parking garage and remaining commercial office and retail space. The amounts shown represent the entire property and not just the portion sold (See Note 3 to the Consolidated Financial Statements).
For additional information on the sales of the above properties and land parcel refer to “Results of Operations—Other Income and Expense Items—Gains on Sales of Real Estate” within “Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Residential Net Operating Income
Net operating income for our residential same properties increased by approximately $2.0 million for the nine months ended September 30, 2020 compared to 2019. Net operating income for the nine months ended September 30, 2020 includes approximately $0.7 million of termination income from a retail tenant.
The following reflects our occupancy and rate information for The Lofts at Atlantic Wharf, The Avant at Reston Town Center, Signature at Reston and Proto Kendall Square for the nine months ended September 30, 2020 and 2019.
The Lofts at Atlantic WharfThe Avant at Reston Town CenterSignature at RestonProto Kendall Square
20202019Change (%)20202019Change (%)20202019Change (%)20202019Change (%)
Average Monthly Rental Rate (1)
$4,424 $4,471 (1.1)%$2,381 $2,401 (0.8)%$2,327 $2,339 (0.5)%$2,865 $2,847 0.6 %
Average Rental Rate Per Occupied Square Foot
$4.89 $4.92 (0.6)%$2.61 $2.62 (0.4)%$2.46 $2.53 (2.8)%$5.26 $5.31 (0.9)%
Average Physical Occupancy (2)
89.0 %95.0 %(6.3)%90.2 %92.5 %(2.5)%82.0 %64.0 %28.1 %91.2 %79.4 %14.9 %
Average Economic Occupancy (3)
88.9 %95.2 %(6.6)%89.2 %92.0 %(3.0)%77.3 %58.0 %33.3 %90.0 %76.8 %17.2 %
_______________  
(1)Average Monthly Rental Rate is calculated as the average of the quotients obtained by dividing (A) rental revenue as determined in accordance with GAAP, by (B) the number of occupied units for each month within the applicable fiscal period.
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(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 Economic Occupancy are based on the current market rates set by the managers of our residential properties based on their experience in renting their residential property’s units and publicly available market data. Actual market rents and trends in such rents for a region as reported by others may vary materially from Market Rents used by us. Market Rents for a period are based on the average Market Rents during that period and do not reflect any impact for cash concessions.
Hotel Net Operating Income (Loss)
Net operating income (loss) for the Boston Marriott Cambridge hotel property decreased by approximately $16.1 million for the nine months ended September 30, 2020 compared to 2019.
The Boston Marriott Cambridge closed in March 2020 due to COVID-19 and did not re-open until October 2, 2020. The hotel is operating at a monthly deficit. The closing of the hotel for more than two fiscal quarters, weak demand and low occupancy since its re-opening, have had, and are expected to continue to have, a material adverse effect on the hotel’s operations. See Item 1A: “Risk Factors” for additional details.
The following reflects our occupancy and rate information for the Boston Marriott Cambridge hotel for the nine months ended September 30, 2020 and 2019.
20202019
Change (%)
Occupancy19.8 %86.7 %(77.2)%
Average daily rate$211.36 $280.18 (24.6)%
REVPAR$41.85 $242.98 (82.8)%

Other Operating Revenue and Expense Items
Development and Management Services Revenue
Development and management services revenue decreased by approximately $6.3 million for the nine months ended September 30, 2020 compared to 2019. Development services revenue decreased by approximately $6.5 million, while management services revenue increased by approximately $0.2 million. The decrease in development services revenue was primarily related to a decrease of approximately $7.3 million in development fees and fees associated with tenant improvement projects earned from our unconsolidated joint ventures in the Boston and New York regions partially offset by an increase of approximately $0.8 million in development fees earned in the San Francisco region. The increase in management services revenue was primarily related to property management fees earned from third-party owned buildings in the Washington, DC region and our Gateway Commons unconsolidated joint venture, which was deconsolidated on January 28, 2020, partially offset by a decrease in leasing commissions earned from our unconsolidated joint ventures in the Boston region.
General and Administrative Expense
General and administrative expense decreased by approximately $5.9 million for the nine months ended September 30, 2020 compared to 2019 primarily due to a decrease in compensation expense of approximately $6.1 million, partially offset by an approximately $0.2 million increase in other general and administrative expenses. The decrease in compensation expense was related to (1) an approximately $3.2 million decrease in the value of our deferred compensation plan, (2) an approximately $1.3 million decrease in health care costs and (3) an approximately $1.6 million decrease in other compensation-related expenses. The increase in other general and administrative expenses was primarily related to the write-off of the remaining fees associated with BXP’s prior “at the market” stock offering program that was scheduled to expire on June 2, 2020 and an increase in other professional fees.
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Wages directly related to the development of rental properties are capitalized and included in real estate assets on our Consolidated Balance Sheets and amortized over the useful lives of the applicable asset or lease term. Capitalized wages for the nine months ended September 30, 2020 and 2019 were approximately $9.6 million and $8.1 million, respectively. These costs are not included in the general and administrative expenses discussed above.
Transaction Costs
Transaction costs decreased by approximately $0.2 million for the nine months ended September 30, 2020 compared to 2019 due primarily to costs incurred in connection with the pursuit and formation of new joint ventures. In general, transaction costs relating to the formation of new and pending joint ventures and the pursuit of other transactions are expensed as incurred.
Depreciation and Amortization Expense
Depreciation expense may differ between BXP and BPLP as a result of previously applied acquisition accounting by BXP for the issuance of common stock in connection with non-sponsor OP Unit redemptions by BPLP.  This accounting resulted in a step-up of the real estate assets at BXP that was allocated to certain properties.  The difference between the real estate assets of BXP as compared to BPLP for certain properties having an allocation of the real estate step-up will result in a corresponding difference in depreciation expense. For additional information see the Explanatory Note that follows the cover page of this Quarterly Report on Form 10-Q.
Boston Properties, Inc.
Depreciation and amortization expense increased by approximately $7.9 million for the nine months ended September 30, 2020 compared to 2019, as detailed below.
Portfolio
Depreciation and Amortization for the nine months ended September 30,
20202019Change
(in thousands)
Same Property Portfolio$491,747 $482,196 $9,551 
Properties Acquired Portfolio7,108 873 6,235 
Properties Placed In-Service Portfolio11,897 632 11,265 
Properties in Development or Redevelopment Portfolio (1)1,374 12,070 (10,696)
Properties Sold Portfolio3,612 12,096 (8,484)
$515,738 $507,867 $7,871 
_______________  
(1)On May 9, 2019, we commenced development of 325 Main Street in Cambridge, Massachusetts. As a result, during the nine months ended September 30, 2019, we recorded approximately $9.9 million of accelerated depreciation expense for the demolition of the building, of which approximately $0.4 million related to the step-up of real estate assets.
Boston Properties Limited Partnership
Depreciation and amortization expense increased by approximately $8.5 million for the nine months ended September 30, 2020 compared to 2019, as detailed below.
PortfolioDepreciation and Amortization for the nine months ended September 30,
20202019Change
(in thousands)
Same Property Portfolio $486,409 $476,609 $9,800 
Properties Acquired Portfolio7,108 873 6,235 
Properties Placed In-Service Portfolio11,897 632 11,265 
Properties in Development or Redevelopment Portfolio (1)1,374 11,691 (10,317)
Properties Sold Portfolio3,612 12,096 (8,484)
$510,400 $501,901 $8,499 
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_______________
(1)On May 9, 2019, we commenced development of 325 Main Street in Cambridge, Massachusetts. As a result, during the nine months ended September 30, 2019, we recorded approximately $9.5 million of accelerated depreciation expense for the demolition of the building.
Direct Reimbursements of Payroll and Related Costs From Management Services Contracts and Payroll and Related Costs From Management Service Contracts
We have determined that amounts reimbursed for payroll and related costs received from third parties in connection with management services contracts should be reflected on a gross basis instead of on a net basis as we have determined that we are the principal under these arrangements. We anticipate that these two financial statement line items will generally offset each other.
Other Income and Expense Items
Income (loss) from Unconsolidated Joint Ventures
For the nine months ended September 30, 2020 compared to 2019, income (loss) from unconsolidated joint ventures decreased by approximately $52.9 million primarily due to an approximately $47.5 million gain on sale of real estate from the sale of 540 Madison Avenue during the nine months ended September 30, 2019 and the resulting loss of income thereafter, along with the addition of our Gateway Commons joint venture and the placing in-service of the Hub50House joint venture in South San Francisco, California and Boston, Massachusetts, respectively. These joint ventures reduced our net income by approximately $5.9 million for the nine months ended September 30, 2020. During the nine months ended September 30, 2020, Hub50House was fully placed in-service and we do not expect it to be stabilized until the first quarter of 2022. The decrease in net income from the Gateway Commons joint venture was primarily related to depreciation and amortization. The decrease in our net income was also driven by a $2.1 million reduction at our Colorado Center joint venture, primarily due to a write-off of lease revenue during the nine months ended September 30, 2020. These decreases were partially offset by an approximately $5.8 million gain on sale of real estate from the sale of Annapolis Junction Building Eight and two undeveloped land parcels during the nine months ended September 30, 2020.
Under ASC 842, any write-off for bad debt, including accrued rent, is recorded as a reduction to lease revenue. As a result, during the nine months ended September 30, 2020, for our unconsolidated joint ventures, we wrote off our share of the accrued rent and accounts receivable balances of approximately $2.6 million and $1.5 million, respectively. These write-offs related to tenants that either terminated their leases or for which we determined that their accrued rent and/or accounts receivable balances were no longer probable of collection.
In addition, as a result of COVID-19, for properties owned by our unconsolidated joint ventures, during the second and third quarters of 2020, the joint ventures executed lease modification agreements for approximately 855,000 square feet. As a result of these lease modification agreements, our share of the total cash rent abatements and deferrals granted was approximately $5.8 million, of which approximately $4.4 million was related to rental charges for the second and third quarters of 2020. Although some of the lease modifications were deferrals where we expect the tenant will pay the joint venture in full primarily in 2021, the majority of the lease modifications involved extending the lease term (in some cases for longer than a year). As a result of the lease modification agreements that extended the lease term, we expect to see an increase in cash rent received in the future.
In April 2020, the FASB staff issued the Lease Modification Q & A related to the application of lease accounting guidance for lease concessions, in accordance with ASC 842, as a result of COVID-19. We did not utilize the guidance provided in the Lease Modification Q & A and instead elected to continue to account for the COVID-19 lease concessions on a lease-by-lease basis in accordance with the existing lease modification accounting framework (See Note 4 to the Consolidated Financial Statements). As such, the accrued rent balances, which are a component of lease revenue, include the accounting impact (adjusted for write-offs) from the rent abatements, deferrals and extensions that were executed during the second and third quarters of 2020.
The joint ventures expect to continue to execute lease modification agreements as a result of COVID-19. However, the degree to which tenants’ businesses are negatively impacted by COVID-19 could leave some tenants still unable to meet their rental payment obligations and result in a reduction in cash flows. Our unconsolidated joint ventures may write-off additional accrued rent or accounts receivable balances and this could have a material adverse effect on lease revenue. See Item 1A: “Risk Factors” for additional details.
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Gains on Sales of Real Estate
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 sales of real estate when those properties are sold. For additional information, see the Explanatory Note that follows the cover page of this Quarterly Report on Form 10-Q.
Boston Properties, Inc.
Gains on sales of real estate increased by approximately $613.0 million for the nine months ended September 30, 2020 compared to 2019, as detailed below.
NameDate SoldProperty TypeSquare Feet Sale PriceNet Cash ProceedsGain (Loss) on Sale of Real Estate
(dollars in millions)
2020
601, 611 and 651 Gateway
January 28, 2020Office768,000 $350.0 $— $217.7 (1)
New Dominion Technology Park
February 20, 2020Office493,000 256.0 254.0 192.3 
Capital GalleryJune 25, 2020Office455,000 253.7 246.6 203.6 (2)
$859.7 $500.6 $613.6 (3)
2019
2600 Tower Oaks Boulevard
January 24, 2019Office179,000 $22.7 $21.4 $(0.6)
One Tower CenterJune 3, 2019Office410,000 38.0 36.6 (0.8)
164 Lexington RoadJune 28, 2019Office64,000 4.0 3.8 2.5 
$64.7 $61.8 $1.1 (4)
___________  
(1)On January 28, 2020, we entered into a joint venture with a third party to own, operate and develop properties at our Gateway Commons complex located in South San Francisco. We contributed our 601, 611 and 651 Gateway properties and development rights with an agreed upon value aggregating approximately $350.0 million for our 50% interest in the joint venture (See Notes 3 and 5 to the Consolidated Financial Statements).
(2)We completed the sale of a portion of our Capital Gallery property located in Washington, DC. Capital Gallery is an approximately 631,000 net rentable square foot Class A office property. The portion sold was comprised of approximately 455,000 net rentable square feet of commercial office space. We continue to own the land, underground parking garage and remaining commercial office and retail space (See Note 3 to the Consolidated Financial Statements).
(3)Excludes approximately $0.1 million of gains on sales of real estate recognized during the nine months ended September 30, 2020 related to gain amounts from sales of real estate occurring in the prior year.
(4)Excludes approximately $0.3 million of losses on sales of real estate recognized during the nine months ended September 30, 2019 related to loss amounts from sales of real estate occurring in prior years.

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Boston Properties Limited Partnership
Gains on sales of real estate increased by approximately $625.8 million for the nine months ended September 30, 2020 compared to 2019, as detailed below.
NameDate SoldProperty TypeSquare Feet Sale PriceNet Cash ProceedsGain (Loss) on Sale of Real Estate
(dollars in millions)
2020
601, 611 and 651 Gateway
January 28, 2020Office768,000 $350.0 $— $222.4 (1)
New Dominion Technology Park
February 20, 2020Office493,000 256.0 254.0 197.1 
Capital GalleryJune 25, 2020Office455,000 253.7 246.6 207.0 (2)
$859.7 $500.6 $626.5 (3)
2019
2600 Tower Oaks Boulevard
January 24, 2019Office179,000 $22.7 $21.4 $(0.6)
One Tower Center
June 3, 2019Office410,000 38.0 36.6 (0.8)
164 Lexington Road
June 28, 2019Office64,000 4.0 3.8 2.6 
$64.7 $61.8 $1.2 (4)
___________  
(1)On January 28, 2020, we entered into a joint venture with a third party to own, operate and develop properties at our Gateway Commons complex located in South San Francisco. We contributed our 601, 611 and 651 Gateway properties and development rights with an agreed upon value aggregating approximately $350.0 million for our 50% interest in the joint venture (See Notes 3 and 5 to the Consolidated Financial Statements).
(2)We completed the sale of a portion of our Capital Gallery property located in Washington, DC. Capital Gallery is an approximately 631,000 net rentable square foot Class A office property. The portion sold was comprised of approximately 455,000 net rentable square feet of commercial office space. We continue to own the land, underground parking garage and remaining commercial office and retail space (See Note 3 to the Consolidated Financial Statements).
(3)Excludes approximately $0.1 million of gains on sales of real estate recognized during the nine months ended September 30, 2020 related to gain amounts from sales of real estate occurring in the prior year.
(4)Excludes approximately $0.3 million of losses on sales of real estate recognized during the nine months ended September 30, 2019 related to loss amounts from sales of real estate occurring in prior years.
Interest and Other Income (Loss)
Interest and other income (loss) decreased by approximately $10.3 million for the nine months ended September 30, 2020 compared to 2019.
Interest and other income decreased by approximately $8.3 million due primarily to a decrease in interest rates.
On January 1, 2020, we adopted ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”) and, as a result, we were required to record an allowance for current expected credit losses related to our outstanding (1) related party note receivable, (2) notes receivable and (3) off-balance sheet credit exposures (See Note 2 to the Consolidated Financial Statements). For the nine months ended September 30, 2020 the allowance for current expected credit losses was $2.0 million.
Gains from Investments in Securities
Gains from investments in securities for the nine months ended September 30, 2020 and 2019 related to investments that we have made to reduce our market risk relating to deferred compensation plans that we maintain for BXP’s officers and former non-employee directors. Under the deferred compensation plans, each officer or non-employee director who is eligible to participate is permitted to defer a portion of the officer’s current income or the non-employee director’s compensation on a pre-tax basis and receive a tax-deferred return on these deferrals based on the performance of specific investments selected by the officer or non-employee director. In order to reduce our market risk relating to these plans, we typically acquire, in a separate account that is not restricted as to its use, similar or identical investments as those selected by each officer or non-employee director. This enables us
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to generally match our liabilities to BXP’s officers or former non-employee directors under our deferred compensation plans with equivalent assets and thereby limit our market risk. The performance of these investments is recorded as gains from investments in securities. During the nine months ended September 30, 2020 and 2019, we recognized gains of approximately $1.0 million and $4.2 million, respectively, on these investments. By comparison, our general and administrative expense increased by approximately $1.0 million and $4.2 million during the nine months ended September 30, 2020 and 2019, respectively, as a result of increases in our liability under our deferred compensation plans that was associated with the performance of the specific investments selected by officers and former non-employee directors of BXP participating in the plans.
Impairment Loss
Impairment loss may differ between BXP and BPLP as a result of previously applied acquisition accounting by BXP for the issuance of common stock in connection with non-sponsor OP Unit redemptions by BPLP.  This accounting resulted in a step-up of the real estate assets at BXP that was allocated to certain properties.  The difference between the real estate assets of BXP as compared to BPLP for certain properties having an allocation of the real estate step-up will result in a corresponding difference in depreciation expense. For additional information see the Explanatory Note that follows the cover page of this Quarterly Report on Form 10-Q.
At March 31, 2019, we evaluated the expected hold period of our One Tower Center property located in East Brunswick, New Jersey and, based on a shorter-than-expected hold period, we reduced the carrying value of the property to its estimated fair value at March 31, 2019 and recognized an impairment loss totaling approximately $24.0 million for BXP and approximately $22.3 million for BPLP. Our estimated fair value was based on a pending offer from a third party to acquire the property and the subsequent execution of a purchase and sale agreement on April 18, 2019 for a gross sale price of approximately $38.0 million. On June 3, 2019, we completed the sale of the property. One Tower Center is an approximately 410,000 net rentable square foot Class A office property. We did not have any impairments during the nine months ended September 30, 2020.
Loss From Early Extinguishment of Debt
On September 18, 2019, BPLP completed the redemption of $700.0 million in aggregate principal amount of its 5.625% senior notes due November 15, 2020. The redemption price was approximately $740.7 million. The redemption price included approximately $13.5 million of accrued and unpaid interest to, but not including, the redemption date. Excluding the accrued and unpaid interest, the redemption price was approximately 103.90% of the principal amount being redeemed. We recognized a loss from early extinguishment of debt totaling approximately $28.0 million, which amount included the payment of the redemption premium totaling approximately $27.3 million.
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Interest Expense
Interest expense increased by approximately $9.9 million for the nine months ended September 30, 2020 compared to 2019, as detailed below.
Component
Change in interest expense for the nine months ended September 30, 2020 compared to September 30, 2019
 (in thousands)
Increases to interest expense due to:
Issuance of $1.25 billion in aggregate principal of 3.250% senior notes due 2031 on May 5, 2020
$16,425 
Issuance of $850 million in aggregate principal of 3.400% senior notes due 2029 on June 21, 201913,714 
Issuance of $700 million in aggregate principal of 2.900% senior notes due 2030 on September 3, 2019
13,666 
Decrease in capitalized interest related to development projects
2,834 
Increase in interest due to finance leases2,758 
Other interest expense (excluding senior notes)
527 
Total increases to interest expense49,924 
Decreases to interest expense due to:
Redemption of $700 million in aggregate principal of 5.625% senior notes due 2020 on September 18, 2019
(28,172)
Decrease in interest rates for the 2017 Credit Facility
(7,361)
Increase in capitalized interest related to development projects that had finance leases
(2,834)
Repayment of a bond financing collateralized by New Dominion Technology Building One
(1,668)
Total decreases to interest expense(40,035)
Total change in interest expense$9,889 
Interest expense directly related to the development of rental properties is capitalized and included in real estate assets on our Consolidated Balance Sheets and amortized over the useful lives of the real estate or lease term. As portions of properties are placed in-service, we cease capitalizing interest on that portion and interest is then expensed. Interest capitalized for each of the nine months ended September 30, 2020 and 2019 was approximately $41.3 million. These costs are not included in the interest expense referenced above.
At September 30, 2020, our outstanding variable rate debt consisted of BPLP’s $2.0 billion unsecured revolving credit facility (the “2017 Credit Facility”), which includes the $500.0 million delayed draw term loan facility (the “Delayed Draw Facility”) and the $1.5 billion revolving line of credit (the “Revolving Facility”). The Delayed Draw Facility had $500.0 million outstanding as of September 30, 2020. The Revolving Facility did not have an outstanding balance as of September 30, 2020. For a summary of our consolidated debt as of September 30, 2020 and September 30, 2019 refer to the heading “Liquidity and Capital Resources—Capitalization—Debt Financing” within “Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations.
On May 5, 2020, BPLP completed a public offering of $1.25 billion in aggregate principal amount of its 3.250% unsecured senior notes due 2031 (See Note 6 to the Consolidated Financial Statements). We used a portion of the net proceeds from this offering for the repayment of borrowings outstanding under the Revolving Facility.
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Noncontrolling Interests in Property Partnerships
Noncontrolling interests in property partnerships decreased by approximately $20.5 million for the nine months ended September 30, 2020 compared to 2019, as detailed below.
 
Property
Noncontrolling Interests in Property Partnerships for the nine months ended September 30,
20202019Change
(in thousands)
Salesforce Tower (1)$— $116 $(116)
767 Fifth Avenue (the General Motors Building) (2)4,205 2,811 1,394 
Times Square Tower (3)198 20,680 (20,482)
601 Lexington Avenue (4)12,317 14,909 (2,592)
100 Federal Street (5)10,874 9,187 1,687 
Atlantic Wharf Office Building (6)6,686 7,079 (393)
$34,280 $54,782 $(20,502)
_______________
(1)On April 1, 2019, we acquired our partner’s 5% interest and subsequently own 100%.
(2)The increase during the nine months ended September 30, 2020 was related to above-/below-market lease assets that were fully amortized in 2020.
(3)During the nine months ended September 30, 2020, we wrote off approximately $26.8 million of accrued rent and accounts receivable balances for tenants that either terminated their leases or for which we determined their accrued rent and/or accounts receivable balances, primarily retail tenants, were no longer probable of collection. Approximately $14.7 million represents our share of the write-offs. As a result of these terminations, lease revenue decreased for the nine months ended September 30, 2020.
(4)During the nine months ended September 30, 2019, we wrote off approximately $2.9 million of accrued rent and accounts receivable balances for tenants that either terminated their leases or for which we determined their accrued rent and/or accounts receivable balances, primarily retail tenants, were no longer probable of collection. Approximately $1.6 million represents our share of the write-offs. As a result of these terminations, lease revenue decreased for the nine months ended September 30, 2020.
(5)The increase was primarily due to an increase in lease revenue from our tenants.
(6)During the nine months ended September 30, 2020, we wrote off approximately $0.5 million of accrued rent and accounts receivable balances for tenants whose balances we determined were no longer probable of collection. Approximately $0.3 million represents our share of the write-offs.
Noncontrolling Interest—Common Units of the Operating Partnership
For BXP, noncontrolling interest—common units of the Operating Partnership increased by approximately $54.0 million for the nine months ended September 30, 2020 compared to 2019 due primarily to an increase in allocable income, which was the result of recognizing a greater gain on sales of real estate amount during 2020 partially offset by a decrease in the noncontrolling interest’s ownership percentage. Due to our ownership structure, there is no corresponding line item on BPLP’s financial statements.
Results of Operations for the Three Months Ended September 30, 2020 and 2019
The impact that COVID-19 has had on our business, financial position and results of operations during the third quarter of 2020 is discussed throughout this report. The full extent of the impact of COVID-19 on our business, operations and financial results will depend on numerous evolving factors that we may not be able to accurately predict. In addition, we cannot predict the impact that COVID-19 will have on our tenants, employees, contractors, lenders, suppliers, vendors and joint venture partners; any material adverse effect on these parties could also have a material adverse effect on us. The situation surrounding COVID-19 remains fluid, and we are actively managing our response in collaboration with tenants, government officials and joint venture partners and assessing potential impacts to our financial position and operating results, as well as potential adverse developments in our business. See Item 1A: “Risk Factors” for additional details.
Net income attributable to Boston Properties, Inc. common shareholders and net income attributable to Boston Properties Limited Partnership common unitholders decreased approximately $17.9 million and $20.5 million for the three months ended September 30, 2020 compared to 2019, respectively, as detailed in the following tables and for the reasons discussed below under the heading “Comparison of the three months ended September 30, 2020 to the
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three months ended September 30, 2019” within “Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Below are reconciliations of net income attributable to Boston Properties, Inc. common shareholders to NOI and net income attributable to Boston Properties Limited Partnership common unitholders to NOI for the three months ended September 30, 2020 and 2019. For a detailed discussion of NOI, including the reasons management believes NOI is useful to investors, see page 58.
Boston Properties, Inc.
Three months ended September 30,
20202019Increase/
(Decrease)
%
Change
(in thousands)
Net Income Attributable to Boston Properties, Inc. Common Shareholders
$89,854 $107,771 $(17,917)(16.63)%
Preferred dividends
2,625 2,625 — — %
Net Income Attributable to Boston Properties, Inc.92,479 110,396 (17,917)(16.23)%
Net Income Attributable to Noncontrolling Interests:
Noncontrolling interest—common units of the Operating Partnership
10,020 12,504 (2,484)(19.87)%
Noncontrolling interests in property partnerships
15,561 18,470 (2,909)(15.75)%
Net Income118,060 141,370 (23,310)(16.49)%
Other Expenses:
Add:
Interest expense110,993 106,471 4,522 4.25 %
Loss from early extinguishment of debt— 28,010 (28,010)(100.00)%
Losses on sales of real estate209 15 194 1,293.33 %
Loss from unconsolidated joint ventures6,873 649 6,224 959.01 %
Other Income:
Less:
Gains from investments in securities
1,858 106 1,752 1,652.83 %
Interest and other income (loss)
(45)7,178 (7,223)(100.63)%
Other Expenses:
Add:
Depreciation and amortization expense166,456 165,862 594 0.36 %
Transaction costs
307 538 (231)(42.94)%
Payroll and related costs from management services contracts
2,896 2,429 467 19.23 %
General and administrative expense
27,862 31,147 (3,285)(10.55)%
Other Revenue:
Less:
Direct reimbursements of payroll and related costs from management services contracts
2,896 2,429 467 19.23 %
Development and management services revenue
7,281 10,303 (3,022)(29.33)%
Net Operating Income$421,666 $456,475 $(34,809)(7.63)%
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Boston Properties Limited Partnership
Three months ended September 30,
20202019Increase/
(Decrease)
%
Change
(in thousands)
Net Income Attributable to Boston Properties Limited Partnership Common Unitholders
$101,624 $122,117 $(20,493)(16.78)%
Preferred distributions
2,625 2,625 — — %
Net Income Attributable to Boston Properties Limited Partnership104,249 124,742 (20,493)(16.43)%
Net Income Attributable to Noncontrolling Interests:
Noncontrolling interests in property partnerships
15,561 18,470 (2,909)(15.75)%
Net Income119,810 143,212 (23,402)(16.34)%
Other Expenses:
Add:
Interest expense
110,993 106,471 4,522 4.25 %
Loss from early extinguishment of debt— 28,010 (28,010)(100.00)%
Losses on sales of real estate209 15 194 1,293.33 %
Loss from unconsolidated joint ventures6,873 649 6,224 959.01 %
Other Income:
Less:
Gains from investments in securities
1,858 106 1,752 1,652.83 %
Interest and other income (loss)
(45)7,178 (7,223)(100.63)%
Other Expenses:
Add:
Depreciation and amortization expense164,706 164,020 686 0.42 %
Transaction costs
307 538 (231)(42.94)%
Payroll and related costs from management services contracts
2,896 2,429 467 19.23 %
General and administrative expense
27,862 31,147 (3,285)(10.55)%
Other Revenue:
Less:
Direct reimbursements of payroll and related costs from management services contracts
2,896 2,429 467 19.23 %
Development and management services revenue
7,281 10,303 (3,022)(29.33)%
Net Operating Income$421,666 $456,475 $(34,809)(7.63)%

Comparison of the three months ended September 30, 2020 to the three months ended September 30, 2019
The table below shows selected operating information for the Same Property Portfolio and the Total Property Portfolio. The Same Property Portfolio consists of 139 properties totaling approximately 38.6 million net rentable square feet, excluding unconsolidated joint ventures. The Same Property Portfolio includes properties acquired or placed in-service on or prior to July 1, 2019 and owned and in-service through September 30, 2020. The Total Property Portfolio includes the effects of the other properties either acquired, placed in-service, in development or redevelopment after July 1, 2019 or disposed of on or prior to September 30, 2020. This table includes a reconciliation from the Same Property Portfolio to the Total Property Portfolio by also providing information for the three months ended September 30, 2020 and 2019 with respect to the properties that were acquired, placed in-service, in development or redevelopment or sold.

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 Same Property PortfolioProperties
Acquired Portfolio
Properties
Placed In-Service
Portfolio
Properties in
Development or
Redevelopment
Portfolio
Properties Sold PortfolioTotal Property Portfolio
20202019Increase/
(Decrease)
%
Change
2020201920202019202020192020201920202019Increase/
(Decrease)
%
Change
(dollars in thousands)
Rental Revenue: (1)
Lease Revenue (Excluding Termination Income)
$629,175 $654,129 $(24,954)(3.81)%$3,625 $1,298 $17,835 $1,576 $1,390 $2,577 $2,369 $20,837 $654,394 $680,417 $(26,023)(3.82)%
Termination Income
2,715 1,698 1,017 59.89 %— — — — — — — 262 2,715 1,960 755 38.52 %
Lease Revenue
631,890 655,827 (23,937)(3.65)%3,625 1,298 17,835 1,576 1,390 2,577 2,369 21,099 657,109 682,377 (25,268)(3.70)%
Parking and Other
15,428 24,529 (9,101)(37.10)%— 521 — 218 898 16,174 25,434 (9,260)(36.41)%
Total Rental Revenue (1)647,318 680,356 (33,038)(4.86)%3,628 1,298 18,356 1,576 1,394 2,584 2,587 21,997 673,283 707,811 (34,528)(4.88)%
Real Estate Operating Expenses245,346 250,554 (5,208)(2.08)%1,706 649 3,802 477 1,298 1,926 1,154 7,986 253,306 261,592 (8,286)(3.17)%
Net Operating Income, Excluding Residential and Hotel 401,972 429,802 (27,830)(6.48)%1,922 649 14,554 1,099 96 658 1,433 14,011 419,977 446,219 (26,242)(5.88)%
Residential Net Operating Income (Loss) (2)5,480 5,985 (505)(8.44)%— — (717)— — — — — 4,763 5,985 (1,222)(20.42)%
Hotel Net Operating Income (Loss) (2)(3,074)4,271 (7,345)(171.97)%— — — — — — — — (3,074)4,271 (7,345)(171.97)%
Net Operating Income $404,378 $440,058 $(35,680)(8.11)%$1,922 $649 $13,837 $1,099 $96 $658 $1,433 $14,011 $421,666 $456,475 $(34,809)(7.63)%
_______________
(1)Rental Revenue is equal to Revenue less Development and Management Services Revenue and Direct Reimbursements of Payroll and Related Costs from Management Services Revenue per the Consolidated Statements of Operations, excluding the residential and hotel revenue that is noted below. We use Rental Revenue internally as a performance measure and in calculating other non-GAAP financial measures (e.g., NOI), which provides investors with information regarding our performance that is not immediately apparent from the comparable non-GAAP measures and allows investors to compare operating performance between periods.
(2)For a detailed discussion of NOI, including the reasons management believes NOI is useful to investors, see page 58. Residential Net Operating Income for the three months ended September 30, 2020 and 2019 is comprised of Residential Revenue of $9,718 and $9,996 less Residential Expenses of $4,955 and $4,011, respectively. Hotel Net Operating Income for the three months ended September 30, 2020 and 2019 is comprised of Hotel Revenue of $90 and $13,014 less Hotel Expenses of $3,164 and $8,743, respectively, per the Consolidated Statements of Operations.
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Same Property Portfolio
Lease Revenue (Excluding Termination Income)
Lease revenue from the Same Property Portfolio decreased by approximately $25.0 million for the three months ended September 30, 2020 compared to 2019. Approximately $7.5 million of the decrease was related to write-offs, which are discussed below. Excluding the write-offs, the remaining decrease was a result of an approximately $9.8 million decrease due to our average occupancy decreasing from 94.0% to 92.6%, and our average revenue per square foot decreasing by approximately $1.11, contributing approximately $7.7 million.
Under ASC 842, any write-off for bad debt, including accrued rent, is recorded as a reduction to lease revenue. As a result, during the three months ended September 30, 2020, for our Same Property Portfolio, we wrote off approximately $4.1 million and $3.4 million of accrued rent and accounts receivable balances, respectively. These write-offs related to tenants, primarily in the retail sector, that either terminated their leases or for which we determined that their accrued rent and/or accounts receivable balances were no longer probable of collection.
In addition, as a result of COVID-19, for the Same Property Portfolio, during the third quarter of 2020, we executed lease modification agreements for approximately 479,000 square feet and granted approximately $21.9 million of cash rent abatements and deferrals, of which approximately $11.7 million was related to rental charges for the third quarter of 2020. Although some of the lease modifications were deferrals under which we expect the tenant will pay us in full primarily in 2021, the majority of the lease modifications involved extending the lease term (in some cases for a year or more). As a result of the lease modification agreements that extended the lease term, we expect to see an increase in cash rent received in the future.
In April 2020, the FASB staff issued the Lease Modification Q & A related to the application of lease accounting guidance for lease concessions, in accordance with ASC 842, as a result of COVID-19. We did not utilize the guidance provided in the Lease Modification Q & A and instead elected to continue to account for the COVID-19 lease concessions on a lease-by-lease basis in accordance with the existing lease modification accounting framework (See Note 4 to the Consolidated Financial Statements). As such, our accrued rent balances, which are a component of lease revenue, include the accounting impact (adjusted for write-offs) from the rent abatements, deferrals and extensions that were executed during the third quarter of 2020.
We expect to continue to execute lease modification agreements as a result of COVID-19. However, the degree to which our tenants’ businesses are negatively impacted by COVID-19 could leave some tenants still unable to meet their rental payment obligations and result in a reduction in our cash flows. We may write off additional accrued rent or accounts receivable balances and this could have a material adverse effect on lease revenue. See Item 1A: “Risk Factors” for additional details.
Termination Income
Termination income increased by approximately $1.0 million for the three months ended September 30, 2020 compared to 2019.
Termination income for the three months ended September 30, 2020 related to 10 tenants across the Same Property Portfolio and totaled approximately $2.7 million, which was primarily related to tenants that terminated leases early in the New York and Washington DC regions.
Termination income for the three months ended September 30, 2019 related to 17 tenants across the Same Property Portfolio and totaled approximately $1.7 million, of which approximately $1.0 million is from a tenant that terminated a lease early at 399 Park Avenue in New York City.
Parking and Other Revenue
Parking and other revenue decreased by approximately $9.1 million for the three months ended September 30, 2020 compared to 2019. Parking revenue decreased by approximately $10.4 million while other revenue increased by approximately $1.3 million. The decrease in parking revenue was primarily due to a decrease in transient and monthly parking.
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During the third quarter of 2020, with stay-at-home orders in effect in certain regions, business closures and people working remotely in a majority of regions in which our properties are located, we generated minimal hourly/daily parking revenue and this trend may continue for as long as these conditions exist. However, as these conditions shifted, and stay-at-home orders were partially or fully lifted, businesses began to open and people began to return to working in an office setting, we expected, and have begun to see, an increase in parking revenue. As a result, for the three months ended September 30, 2020, transient and monthly parking decreased by approximately $5.4 million and $2.9 million, respectively. Some of our monthly parking revenues are contractual agreements embedded in our leases, and some are at will individual agreements.
Real Estate Operating Expenses
Real estate operating expenses from the Same Property Portfolio decreased by approximately $5.2 million, or 2.1%, for the three months ended September 30, 2020 compared to 2019, due primarily to decreases in utility and cleaning expense of approximately $5.6 million, or 18.7%, and $4.5 million, or 20.7%, respectively, partially offset by an increase in other real estate operating expenses of approximately $4.9 million, or 2.5%. The decreases in utility and cleaning expense were experienced across the portfolio and were primarily driven by a decrease in physical tenant occupancy, which led to lower demand for electricity, HVAC, and cleaning.
Properties Acquired Portfolio
The table below lists the properties acquired between July 1, 2019 and September 30, 2020. Rental revenue and real estate operating expenses increased by approximately $2.3 million and $1.1 million, respectively, for the three months ended September 30, 2020 compared to 2019, as detailed below.
Square FeetRental RevenueReal Estate Operating Expenses
NameDate acquired20202019Change20202019Change
(dollars in thousands)
880 and 890 Winter Street
August 27, 2019392,576 $3,344 $1,298 $2,046 $1,271 $649 $622 
Fourth + Harrison (1)June 26, 2020N/A284 — 284 435 — 435 
392,576 $3,628 $1,298 $2,330 $1,706 $649 $1,057 
_______________
(1)Located at 777 Harrison Street in San Francisco, California (known as Fourth + Harrison and formerly known as 425 Fourth Street).
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Properties Placed In-Service Portfolio
The table below lists the properties that were placed in-service or partially placed in-service between July 1, 2019 and September 30, 2020. Rental revenue and real estate operating expenses from our Properties Placed In-Service Portfolio increased by approximately $16.8 million and $4.1 million, respectively, for the three months ended September 30, 2020 compared to 2019, as detailed below.
Quarter Initially Placed In-ServiceQuarter Fully Placed In-ServiceRental RevenueReal Estate Operating Expenses
NameSquare Feet20202019Change20202019Change
(dollars in thousands)
Office
20 CityPointSecond Quarter, 2019Second Quarter, 2020211,476 $1,861 $1,576 $285 $731 $477 $254 
145 Broadway
Fourth Quarter, 2019Fourth Quarter, 2019490,086 11,560 — 11,560 1,771 — 1,771 
17Fifty Presidents Street
First Quarter, 2020First Quarter, 2020275,809 4,935 — 4,935 1,300 — 1,300 
Total Office977,371 18,356 1,576 16,780 3,802 477 3,325 
Residential
The SkylyneThird Quarter, 2020Third Quarter, 2020330,996 23 — 23 740 — 740 
Total Residential330,996 23 — 23 740 — 740 
1,308,367 $18,379 $1,576 $16,803 $4,542 $477 $4,065 
Properties in Development or Redevelopment Portfolio
The table below lists the properties that were in development or redevelopment between July 1, 2019 and September 30, 2020. Rental revenue and real estate operating expenses from our Properties in Development or Redevelopment Portfolio decreased by approximately $1.2 million and $0.6 million, respectively, for the three months ended September 30, 2020 compared to 2019.
Rental RevenueReal Estate Operating Expenses
NameDate Commenced Development / RedevelopmentSquare Feet20202019Change20202019Change
(dollars in thousands)
One Five Nine East 53rd Street August 19, 2016220,000 $161 $919 $(758)$307 $476 $(169)
325 Main Street (1)May 9, 2019115,000 — 49 (49)207 298 (91)
200 West Street (2)September 30, 2019261,000 1,233 1,616 (383)784 1,152 (368)
596,000 $1,394 $2,584 $(1,190)$1,298 $1,926 $(628)
_______________
(1)Real estate operating expenses for the three months ended September 30, 2020 and September 30, 2019 includes approximately $0.2 million and $0.3 million of demolition costs, respectively.
(2)Rental revenue and real estate operating expenses for the three months ended September 30, 2019 are related to the entire building. The redevelopment is a conversion of a 126,000 square foot portion of the property to laboratory space.
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Properties Sold Portfolio
The table below lists the properties we sold between July 1, 2019 and September 30, 2020. Rental revenue and real estate operating expenses from our Properties Sold Portfolio decreased by approximately $19.4 million and $6.8 million, respectively, for the three months ended September 30, 2020 compared to 2019, as detailed below.
Rental RevenueReal Estate Operating Expenses
NameDate SoldProperty TypeSquare Feet 20202019Change20202019Change
(dollars in thousands)
Washingtonian NorthDecember 20, 2019LandN/A$— $— $— $— $41 $(41)
601, 611 and 651 Gateway (1)
January 28, 2020Office768,000 — 6,949 (6,949)— 2,711 (2,711)
New Dominion Technology Park
February 20, 2020Office493,000 — 4,813 (4,813)— 1,418 (1,418)
Capital Gallery (2)June 25, 2020Office631,000 2,587 10,235 (7,648)1,154 3,816 (2,662)
1,892,000$2,587 $21,997 $(19,410)$1,154 $7,986 $(6,832)
_______________
(1)Rental revenue for the three months ended September 30, 2019 includes approximately $0.3 million of termination income (See Notes 3 and 5 to the Consolidated Financial Statements).
(2)We completed the sale of a portion of our Capital Gallery property located in Washington, DC. Capital Gallery is an approximately 631,000 net rentable square foot Class A office property. The portion sold was comprised of approximately 455,000 net rentable square feet of commercial office space. We continue to own the land, underground parking garage and remaining commercial office and retail space. The amounts shown represent the entire property and not just the portion sold (See Note 3 to the Consolidated Financial Statements).
For additional information on the sales of the above properties and land parcel refer to “Results of Operations—Other Income and Expense Items - Losses on Sales of Real Estate” within “Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Residential Net Operating Income
Net operating income for our residential same properties decreased by approximately $0.5 million for the three months ended September 30, 2020 compared to 2019. Net operating income for the three months ended September 30, 2020 includes approximately $0.7 million of termination income from a retail tenant.
The following reflects our occupancy and rate information for The Lofts at Atlantic Wharf, The Avant at Reston Town Center, Signature at Reston and Proto Kendall Square for the three months ended September 30, 2020 and 2019.
The Lofts at Atlantic WharfThe Avant at Reston Town CenterSignature at RestonProto Kendall Square
20202019Change (%)20202019Change (%)20202019Change (%)20202019Change (%)
Average Monthly Rental Rate (1)
$4,231 $4,498 (5.9)%$2,352 $2,447 (3.9)%$2,319 $2,379 (2.5)%$2,676 $2,972 (10.0)%
Average Rental Rate Per Occupied Square Foot
$4.62 $4.99 (7.4)%$2.57 $2.66 (3.4)%$2.42 $2.56 (5.5)%$4.91 $5.49 (10.6)%
Average Physical Occupancy (2)
80.2 %95.4 %(15.9)%89.7 %92.9 %(3.4)%82.2 %74.5 %10.3 %85.7 %96.0 %(10.7)%
Average Economic Occupancy (3)
80.7 %95.2 %(15.2)%88.9 %93.0 %(4.4)%78.2 %68.9 %13.5 %83.1 %96.1 %(13.5)%
_______________  
(1)Average Monthly Rental Rate is calculated as the average of the quotients obtained by dividing (A) rental revenue as determined in accordance with GAAP, by (B) the number of occupied units for each month within the applicable fiscal period.
(2)Average Physical Occupancy is defined as (1) the average number of occupied units divided by (2) the total number of units, expressed as a percentage.
(3)Average Economic Occupancy is defined as (1) total possible revenue less vacancy loss divided by (2) total possible revenue, expressed as a percentage. Total possible revenue is determined by valuing average occupied units at contract rates and average vacant units at Market Rents. Vacancy loss is determined by valuing vacant units at current Market Rents. By measuring vacant units at their Market Rents, Average Economic Occupancy takes into account the
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fact that units of different sizes and locations within a residential property have different economic impacts on a residential property’s total possible gross revenue. Market Rents used by us in calculating Economic Occupancy are based on the current market rates set by the managers of our residential properties based on their experience in renting their residential property’s units and publicly available market data. Actual market rents and trends in such rents for a region as reported by others may vary materially from Market Rents used by us. Market Rents for a period are based on the average Market Rents during that period and do not reflect any impact for cash concessions.
Hotel Net Operating Income (Loss)
Net operating income (loss) for the Boston Marriott Cambridge hotel property decreased by approximately $7.3 million for the three months ended September 30, 2020 compared to 2019.
The Boston Marriott Cambridge closed in March 2020 due to COVID-19 and did not re-open until October 2, 2020. The hotel is operating at a monthly deficit. The closing of the hotel for more than two fiscal quarters, weak demand and low occupancy since its re-opening, have had, and are expected to continue to have, a material adverse effect on the hotel’s operations. See Item 1A: “Risk Factors” for additional details.
The following reflects our occupancy and rate information for the Boston Marriott Cambridge hotel for the three months ended September 30, 2020 and 2019.
20202019
Change (%)
Occupancy— %90.7 %(100.0)%
Average daily rate$— $293.45 (100.0)%
REVPAR$— $266.31 (100.0)%
Other Operating Revenue and Expense Items
Development and Management Services Revenue
Development and management services revenue decreased by approximately $3.0 million for the three months ended September 30, 2020 compared to 2019. Development services revenue and management services revenue decreased by approximately $2.6 million and $0.4 million, respectively. The decrease in development services revenue was primarily related to a decrease of approximately $2.3 million in development fees earned in the Washington, DC and Boston regions and a decrease of approximately $0.3 million in fees associated with tenant improvement projects earned in the San Francisco region. The decrease in management services revenue was primarily related to a decrease in leasing commissions earned from our unconsolidated joint ventures in the Boston region, partially offset by property management fees earned from third-party owned buildings in the Washington, DC region.
General and Administrative Expense
General and administrative expense decreased by approximately $3.3 million for the three months ended September 30, 2020 compared to 2019 primarily due to decreases in compensation expense and other general and administrative expenses of approximately $2.9 million and $0.4 million, respectively. The decrease in other general and administrative expenses was primarily related to a decrease in meals and travel expense.
Wages directly related to the development of rental properties are capitalized and included in real estate assets on our Consolidated Balance Sheets and amortized over the useful lives of the applicable asset or lease term. Capitalized wages for the three months ended September 30, 2020 and 2019 were approximately $3.4 million and $2.6 million, respectively. These costs are not included in the general and administrative expenses discussed above.
Transaction Costs
Transaction costs decreased by approximately $0.2 million for the three months ended September 30, 2020 compared to 2019 due primarily to costs incurred in connection with the pursuit and formation of new joint ventures. In general, transaction costs relating to the formation of new and pending joint ventures and the pursuit of other transactions are expensed as incurred.
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Depreciation and Amortization Expense
Depreciation expense may differ between BXP and BPLP as a result of previously applied acquisition accounting by BXP for the issuance of common stock in connection with non-sponsor OP Unit redemptions by BPLP.  This accounting resulted in a step-up of the real estate assets at BXP that was allocated to certain properties.  The difference between the real estate assets of BXP as compared to BPLP for certain properties having an allocation of the real estate step-up will result in a corresponding difference in depreciation expense. For additional information see the Explanatory Note that follows the cover page of this Quarterly Report on Form 10-Q.
Boston Properties, Inc.
Depreciation and amortization expense increased by approximately $0.6 million for the three months ended September 30, 2020 compared to 2019, as detailed below.
Portfolio
Depreciation and Amortization for the three months ended September 30,
20202019Change
(in thousands)
Same Property Portfolio$158,609 $160,245 $(1,636)
Properties Acquired Portfolio2,215 873 1,342 
Properties Placed In-Service Portfolio4,854 513 4,341 
Properties in Development or Redevelopment Portfolio 451 589 (138)
Properties Sold Portfolio327 3,642 (3,315)
$166,456 $165,862 $594 
Boston Properties Limited Partnership
Depreciation and amortization expense increased by approximately $0.7 million for the three months ended September 30, 2020 compared to 2019, as detailed below.
Portfolio
Depreciation and Amortization for the three months ended September 30,
20202019Change
(in thousands)
Same Property Portfolio $156,859 $158,403 $(1,544)
Properties Acquired Portfolio2,215 873 1,342 
Properties Placed In-Service Portfolio4,854 513 4,341 
Properties in Development or Redevelopment Portfolio 451 589 (138)
Properties Sold Portfolio327 3,642 (3,315)
$164,706 $164,020 $686 

Direct Reimbursements of Payroll and Related Costs From Management Services Contracts and Payroll and Related Costs From Management Service Contracts
We have determined that amounts reimbursed for payroll and related costs received from third parties in connection with management services contracts should be reflected on a gross basis instead of on a net basis as we have determined that we are the principal under these arrangements. We anticipate that these two financial statement line items will generally offset each other.
Other Income and Expense Items
Loss from Unconsolidated Joint Ventures
For the three months ended September 30, 2020 compared to 2019, loss from unconsolidated joint ventures increased by approximately $6.2 million due to a $2.9 million reduction of our net income at our Colorado Center joint venture, primarily due to a write-off of lease revenue during the three months ended September 30, 2020, along with the addition of our Gateway Commons joint venture and the placing in-service of the Hub50House joint
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venture in South San Francisco, California and Boston, Massachusetts, respectively. These joint ventures reduced our net income by approximately $1.9 million for the three months ended September 30, 2020. During the three months ended September 30, 2020, Hub50House was fully placed in-service and we do not expect it to be stabilized until the first quarter of 2022. The decrease in net income from the Gateway Commons joint venture was primarily related to depreciation and amortization. The decrease in our net income was also due to a $0.8 million decrease at our Metropolitan Square joint venture in Washington, DC mainly attributable to increased interest expense related to the mortgage refinancing.
Under ASC 842, any write-off for bad debt, including accrued rent, will be recorded as a reduction to lease revenue. As a result, during the three months ended September 30, 2020, for our unconsolidated joint ventures, we wrote off our share of the accrued rent and accounts receivable balances of approximately $1.9 million and $0.5 million, respectively. These write-offs related to tenants that either terminated their leases or for which we determined that their accrued rent and/or accounts receivable balances were no longer probable of collection.
In addition, as a result of COVID-19, for properties owned by our unconsolidated joint ventures, during the third quarter of 2020, the joint ventures executed lease modification agreements for approximately 181,000 square feet. As a result of these lease modification agreements, our share of the total cash rent abatements and deferrals granted was approximately $0.5 million, all of which related to rental charges for the third quarter of 2020. Although some of the lease modifications were deferrals where we expect the tenant will pay the joint venture in full primarily in 2021, the majority of the lease modifications involved extending the lease term (in some cases for longer than a year). As a result of the lease modification agreements that extended the lease term, we expect to see an increase in cash rent received in the future.
In April 2020, the FASB staff issued the Lease Modification Q & A related to the application of lease accounting guidance for lease concessions, in accordance with ASC 842, as a result of COVID-19. We did not utilize the guidance provided in the Lease Modification Q & A and instead elected to continue to account for the COVID-19 lease concessions on a lease-by-lease basis in accordance with the existing lease modification accounting framework (See Note 4 to the Consolidated Financial Statements). As such, the accrued rent balances, which are a component of lease revenue, include the accounting impact (adjusted for write-offs) from the rent abatements, deferrals and extensions that were executed during the third quarter of 2020.
The joint ventures expect to continue to execute lease modification agreements as a result of COVID-19. However, the degree to which tenants’ businesses are negatively impacted by COVID-19 could leave some tenants still unable to meet their rental payment obligations and result in a reduction in cash flows. Our unconsolidated joint ventures may write-off additional accrued rent or accounts receivable balances and this could have a material adverse effect on lease revenue. See Item 1A: “Risk Factors” for additional details.
Losses on Sales of Real Estate
During the three months ended September 30, 2020, we incurred approximately $0.2 million of additional expenses related to the sale of a portion of Capital Gallery in Washington, DC, thus resulting in a loss on sale of real estate (See Note 3 to the Consolidated Financial Statements).
Interest and Other Income (Loss)
Interest and other income (loss) decreased by approximately $7.2 million for the three months ended September 30, 2020 compared to 2019.
Interest and other income decreased by approximately $5.7 million due primarily to a decrease in interest rates.
On January 1, 2020, we adopted ASU 2016-13 and, as a result, we were required to record anallowance for current expected credit losses related to our outstanding (1) related party note receivable, (2) notes receivable and (3) off-balance sheet credit exposures (See Note 2 to the Consolidated Financial Statements). For the three months ended September 30, 2020 the allowance for current expected credit losses was $1.5 million.
Gains from Investments in Securities
Gains from investments in securities for the three months ended September 30, 2020 and 2019 related to investments that we have made to reduce our market risk relating to deferred compensation plans that we maintain for BXP’s officers and former non-employee directors. Under the deferred compensation plans, each officer or non-employee director who is eligible to participate is permitted to defer a portion of the officer’s current income or the
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non-employee director’s compensation on a pre-tax basis and receive a tax-deferred return on these deferrals based on the performance of specific investments selected by the officer or non-employee director. In order to reduce our market risk relating to these plans, we typically acquire, in a separate account that is not restricted as to its use, similar or identical investments as those selected by each officer or non-employee director. This enables us to generally match our liabilities to BXP’s officers or former non-employee directors under our deferred compensation plans with equivalent assets and thereby limit our market risk. The performance of these investments is recorded as gains from investments in securities. During the three months ended September 30, 2020 and 2019, we recognized gains of approximately $1.9 million and $0.1 million, respectively, on these investments. By comparison, our general and administrative expense increased by approximately $1.9 million and $0.1 million during the three months ended September 30, 2020 and 2019, respectively, as a result of increases in our liability under our deferred compensation plans that was associated with the performance of the specific investments selected by officers and former non-employee directors of BXP participating in the plans.
Loss From Early Extinguishment of Debt
On September 18, 2019, BPLP completed the redemption of $700.0 million in aggregate principal amount of its 5.625% senior notes due November 15, 2020. The redemption price was approximately $740.7 million. The redemption price included approximately $13.5 million of accrued and unpaid interest to, but not including, the redemption date. Excluding the accrued and unpaid interest, the redemption price was approximately 103.90% of the principal amount being redeemed. We recognized a loss from early extinguishment of debt totaling approximately $28.0 million, which amount included the payment of the redemption premium totaling approximately $27.3 million.
Interest Expense
Interest expense increased by approximately $4.5 million for the three months ended September 30, 2020 compared to 2019, as detailed below.
Component
Change in interest expense for the three months ended September 30, 2020 compared to September 30, 2019
 (in thousands)
Increases to interest expense due to:
Issuance of $1.25 billion in aggregate principal of 3.250% senior notes due 2031 on May 5, 2020
$10,193 
Issuance of $700 million in aggregate principal of 2.900% senior notes due 2030 on September 3, 2019
3,502 
Increase in interest due to finance leases
2,165 
Decrease in capitalized interest related to development projects
556 
Other interest expense (excluding senior notes)
196 
Total increases to interest expense16,612 
Decreases to interest expense due to:
Redemption of $700 million in aggregate principal of 5.625% senior notes due 2020 on September 18, 2019
(8,441)
Decrease in interest rates for the 2017 Credit Facility
(2,555)
Increase in capitalized interest related to development projects that had finance leases
(556)
Repayment of bond financing collateralized by New Dominion Technology Building One
(538)
Total decreases to interest expense(12,090)
Total change in interest expense$4,522 
Interest expense directly related to the development of rental properties is capitalized and included in real estate assets on our Consolidated Balance Sheets and amortized over the useful lives of the real estate or lease term. As portions of properties are placed in-service, we cease capitalizing interest on that portion and interest is
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then expensed. Interest capitalized for the three months ended September 30, 2020 and 2019 was approximately $13.5 million and $16.2 million, respectively. These costs are not included in the interest expense referenced above.
At September 30, 2020, our outstanding variable rate debt consisted of BPLP’s $2.0 billion 2017 Credit Facility, which includes the $500.0 million Delayed Draw Facility and the $1.5 billion Revolving Facility. The Delayed Draw Facility had $500.0 million outstanding as of September 30, 2020. The Revolving Facility did not have an outstanding balance as of September 30, 2020. For a summary of our consolidated debt as of September 30, 2020 and September 30, 2019 refer to the heading “Liquidity and Capital Resources—Capitalization—Debt Financing” within “Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Noncontrolling Interests in Property Partnerships
Noncontrolling interests in property partnerships decreased by approximately $2.9 million for the three months ended September 30, 2020 compared to 2019, as detailed below.
 
Property
Noncontrolling Interests in Property Partnerships for the three months ended September 30,
20202019Change
(in thousands)
767 Fifth Avenue (the General Motors Building) (1)$2,104 $440 $1,664 
Times Square Tower (2)3,545 6,760 (3,215)
601 Lexington Avenue (2)4,352 5,374 (1,022)
100 Federal Street 3,565 3,503 62 
Atlantic Wharf Office Building (3)1,995 2,393 (398)
$15,561 $18,470 $(2,909)
_______________
(1)The increase during the three months ended September 30, 2020 was related to above-/below-market lease assets that were fully amortized in 2020.
(2)The decrease during the three months ended September 30, 2020 was related to leases that were terminated during the three months ended June 30, 2020 as a result of COVID-19.
(3)During the three months ended September 30, 2020, we wrote off approximately $0.5 million of accrued rent and accounts receivable balances for tenants whose balances we determined were no longer probable of collection. Approximately $0.3 million represents our share of the write-offs.
Noncontrolling Interest—Common Units of the Operating Partnership
For BXP, noncontrolling interest—common units of the Operating Partnership decreased by approximately $2.5 million for the three months ended September 30, 2020 compared to 2019 due primarily to a decrease in allocable income and a decrease in the noncontrolling interest’s ownership percentage. Due to our ownership structure, there is no corresponding line item on BPLP’s financial statements.
Liquidity and Capital Resources
General
Our principal liquidity needs for the next twelve months and beyond are to:
fund normal recurring expenses;
meet debt service and principal repayment obligations, including balloon payments on maturing debt;
fund development/redevelopment costs;
fund capital expenditures, including major renovations, tenant improvements and leasing costs;
fund planned and possible acquisitions of properties, either directly or indirectly through the acquisition of equity interests therein;
fund dividend requirements on BXP’s Series B Preferred Stock; 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:
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cash flow from operations;
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.
We draw on multiple financing sources to fund our long-term capital needs. Our current development properties are expected to be primarily funded with our available cash balances, construction loans and BPLP’s Revolving Facility. We use BPLP’s Revolving Facility primarily as a bridge facility to fund acquisition opportunities, refinance outstanding indebtedness and meet short-term development and working capital needs. Although we may seek to fund our development projects with construction loans, which may require guarantees by BPLP, the financing for each particular project ultimately depends on several factors, including, among others, the project’s size and duration, the extent of pre-leasing and our available cash and access to cost effective capital at the given time.

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The following table presents information on properties under construction and redevelopment as of September 30, 2020 (dollars in thousands):
Financings
Construction PropertiesEstimated Stabilization DateLocation# of BuildingsEstimated Square FeetInvestment to Date (1)(2)(3)Estimated Total Investment (1)(2)Total Available (1)
Outstanding at 9/30/2020 (1)
Estimated Future Equity Requirement (1)(2)(4)Percentage Leased (5)
Office
Dock 72 (50% ownership)
Second Quarter, 2022Brooklyn, NY670,000 $209,795 $243,150 $125,000 $98,206 $6,561 33 %(6)
325 Main Street
Third Quarter, 2022Cambridge, MA420,000 148,585 418,400 — 269,815 90 %
100 Causeway Street (50% ownership)
Third Quarter, 2022Boston, MA632,000 167,620 267,300 200,000 90,274 — 95 %
7750 Wisconsin Avenue (Marriott International Headquarters) (50% ownership)
Third Quarter, 2022Bethesda, MD734,000 134,843 198,900 127,500 66,361 2,918 100 %
Reston Next (formerly Reston Gateway)
Fourth Quarter, 2023Reston, VA1,062,000 323,537 715,300 — — 391,763 85 %
2100 Pennsylvania Avenue
Third Quarter, 2024Washington, DC480,000 109,153 356,100 — — 246,947 62 %
Total Office Properties under Construction
3,998,000 1,093,533 2,199,150 452,500 254,841 918,004 78 %
Redevelopment Properties
One Five Nine East 53rd Street (55% ownership)
First Quarter, 2021New York, NY— 220,000 137,155 150,000 — — 12,845 96 %(7)
200 West Street
Fourth Quarter, 2021Waltham, MA— 126,000 13,663 47,800 — — 34,137 100 %(8)
Total Redevelopment Properties under Construction
— 346,000 150,818 197,800 — — 46,982 97 %
Total Properties under Construction and Redevelopment
4,344,000 $1,244,351 $2,396,950 $452,500 $254,841 $964,986 80 %
___________  
(1)Represents our share.
(2)Investment to Date, Estimated Total Investment and Estimated Future Equity Requirement all include our share of acquisition expenses, as applicable, and reflect our share of the estimated net revenue/expenses that we expect to incur prior to stabilization of the project, including any amounts actually received or paid through September 30, 2020.
(3)Includes approximately $98.2 million of unpaid but accrued construction costs and leasing commissions.
(4)Excludes approximately $98.2 million of unpaid but accrued construction costs and leasing commissions.
(5)Represents percentage leased as of November 3, 2020, including leases with future commencement dates.
(6)This property was 34% placed in-service as of September 30, 2020.
(7)Represents the low-rise portion of 601 Lexington Avenue.
(8)Represents a portion of the property under redevelopment for conversion to laboratory space.

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Lease revenue (which includes recoveries from tenants), other income from operations, available cash balances, mortgage financings, unsecured indebtedness and draws on BPLP’s Revolving Facility are the principal sources of capital that we use to fund operating expenses, debt service, maintenance and repositioning capital expenditures, tenant improvements and the minimum distribution required to enable BXP to maintain its REIT qualification. 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 these sources of capital will continue to provide the funds necessary for our short-term liquidity needs, including our properties under development and redevelopment.
Material adverse changes in one or more sources of capital, including from the impacts of COVID-19, may adversely affect our net cash flows. For example, during the third quarter of 2020, our rent collections remained strong as we collected 99% of rents from our office tenants and 97% of rents from all tenants, including retail tenants. However, COVID-19 resulted in the write-off of accrued rent and accounts receivable balances for primarily retail, fitness and entertainment tenants, decreases in parking and other revenue and the continued closure of our hotel, which reduced our revenue. In turn, if these impacts are material, they could adversely affect our ability to fund operating expenses, dividends and distributions, debt service payments, maintenance and repositioning capital expenditures and tenant improvements. In addition, a material adverse change in the cash provided by our operations may affect our ability to comply with the financial covenants under BPLP’s 2017 Credit Facility or its unsecured senior notes.
Our primary uses of capital over the next twelve months will be the completion of our current and committed development and redevelopment projects and the repayment of $850 million aggregate principal amount of BPLP’s 4.125% senior unsecured notes that mature in May 2021. As of September 30, 2020, our share of the remaining development and redevelopment costs that we expect to fund through 2024 was approximately $1.0 billion.
To satisfy these capital needs, as of November 2, 2020, we had approximately $1.6 billion of cash and cash equivalents, of which approximately $117 million is attributable to our consolidated joint venture partners.
Although the full extent to which COVID-19 will impact our liquidity and capital resources, as well as the duration of such impact, will depend on a wide range of factors, all of which are highly uncertain and cannot be predicted with confidence at this time, we believe that our strong liquidity, including the approximately $1.5 billion available under the Revolving Facility and available cash, as of November 2, 2020, is sufficient to fund our remaining capital requirements on existing development and redevelopment projects, repay our maturing indebtedness when due and still allow us to act opportunistically on attractive investment opportunities.
We have not sold any shares under BXP’s $600.0 million “at the market” equity offering program.
We may seek to enhance our liquidity to provide sufficient capacity to fund our remaining capital requirements on existing development/redevelopment projects, fund our foreseeable potential development activity, pursue additional attractive investment opportunities and refinance or repay indebtedness. On October 30, 2020, a joint venture in which we have a 50% interest refinanced the mortgage loan collateralized by its Market Square North property located in Washington, DC. The outstanding balance of the loan totaled approximately $114.2 million and was scheduled to mature on November 1, 2020. The new mortgage loan totals $125.0 million and matures on November 10, 2025.
With the refinancing of Market Square North, our unconsolidated joint ventures have approximately $208.5 million of debt maturing in 2020, of which our share is approximately $104.3 million. Depending on interest rates and overall conditions in the debt and equity markets, we may decide to access either or both of these markets in advance of the need for the funds. Doing so may result in us carrying additional cash and cash equivalents pending our use of the proceeds, which would increase our net interest expense and be dilutive to our 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 December 17, 2019, the Board of Directors of BXP increased our regular quarterly
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dividend from $0.95 per common share to $0.98 per common share, or 3%, beginning with the fourth quarter of 2019. Common and LTIP unitholders of limited partnership interest in BPLP, received the same total distribution per unit.
BXP’s Board of Directors will continue to evaluate BXP’s dividend rate in light of our actual and projected taxable income (including gains on sales), liquidity requirements and other circumstances, including the impact of COVID-19, and there can be no assurance that the future dividends declared by BXP’s Board of Directors will not differ materially from the current quarterly dividend amount.
Sales
To the extent that we sell assets at a gain and cannot efficiently use the proceeds in a tax deferred manner for either our development activities or attractive acquisitions, BXP would, at the appropriate time, decide whether it is better to declare a special dividend, adopt a stock repurchase program, reduce indebtedness or retain the cash for future investment opportunities. Such a decision will depend on many factors including, among others, the timing, availability and terms of development and acquisition opportunities, our then-current and anticipated leverage, the cost and availability of capital from other sources, the price of BXP’s common stock and REIT distribution requirements. At a minimum, we expect that BXP would distribute at least that amount of proceeds necessary for BXP to avoid paying corporate level tax on the applicable gains realized from any asset sales.
From time to time in 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”). 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 $1.8 billion and $0.8 billion at September 30, 2020 and 2019, respectively, representing an increase of approximately $1.0 billion. The following table sets forth changes in cash flows:
 Nine months ended September 30,
20202019Increase
(Decrease)
(in thousands)
Net cash provided by operating activities$782,423 $819,792 $(37,369)
Net cash used in investing activities(388,411)(736,466)348,055 
Net cash provided by financing activities678,891 82,248 596,643 
Our principal source of cash flow is related to the operation of our properties. The weighted-average term of our in-place tenant leases, including our unconsolidated joint ventures, is approximately 7.5 years with occupancy rates historically in the range of 90% to 94%. Generally, our properties generate a relatively consistent stream of cash flow that provides us with resources to pay operating expenses, debt service and fund regular quarterly dividend and distribution payment requirements. In addition, over the past several years, we have raised capital through the sale of some of our properties and through secured and unsecured borrowings.
The full extent of the impact of COVID-19 on our business, operations and financial results will depend on numerous evolving factors that we may not be able to accurately predict. In addition, we cannot predict the impact that COVID-19 will have on our tenants, employees, contractors, lenders, suppliers, vendors and joint venture partners; any material adverse effect on these parties could also have a material adverse effect on us. See Item 1A: “Risk Factors” for additional details.
Cash is used in investing activities to fund acquisitions, development, net investments in unconsolidated joint ventures and maintenance and repositioning capital expenditures. We selectively invest in new projects that enable us to take advantage of our development, leasing, financing and property management skills and invest in existing buildings to enhance or maintain their market position. Cash used in investing activities for the nine months ended September 30, 2020 consisted primarily of acquisitions of real estate, development projects, building and tenant improvements and capital contributions to unconsolidated joint ventures, partially offset by the proceeds from the
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sales of real estate and capital distributions from unconsolidated joint ventures. Cash used in investing activities for the nine months ended September 30, 2019 consisted primarily of the acquisition of real estate, development projects, building and tenant improvements and capital contributions to unconsolidated joint ventures, partially offset by the proceeds from the sale of real estate and capital distributions from unconsolidated joint ventures, as detailed below:
 Nine months ended September 30,
 20202019
 (in thousands)
Acquisitions of real estate (1)$(135,698)$(148,912)
Construction in progress (2)(358,824)(390,275)
Building and other capital improvements(116,894)(129,340)
Tenant improvements(172,401)(191,532)
Right of use assets - finance leases— (5,152)
Proceeds from sales of real estate (3)505,679 83,486 
Capital contributions to unconsolidated joint ventures (4)(158,374)(65,499)
Capital distributions from unconsolidated joint ventures (5)55,123 136,807 
Cash and cash equivalents deconsolidated— (24,112)
Issuance of notes receivable, net (6)(9,800)— 
Investments in securities, net2,778 (1,937)
Net cash used in investing activities$(388,411)$(736,466)
Cash used in investing activities changed primarily due to the following:

(1)On June 26, 2020, we completed the acquisition of real property at 777 Harrison Street (known as Fourth + Harrison and formerly known as 425 Fourth Street) located in San Francisco, California for a gross purchase price, including entitlements, totaling approximately $140.1 million. Fourth + Harrison is expected to support the development of approximately 804,000 square feet of primarily commercial office space.
On July 31, 2020, we acquired an undivided ownership interest in real property at 759 Harrison Street located in San Francisco, California for a purchase price totaling approximately $2.3 million.
On January 10, 2019, we acquired land parcels at our Carnegie Center property located in Princeton, New Jersey for a gross purchase price of approximately $51.5 million, which includes an aggregate of approximately $8.6 million of additional amounts that are payable in the future to the seller upon the development or sale of each of the parcels. The land parcels will support approximately 1.7 million square feet of development.
On August 27, 2019, we acquired 880 and 890 Winter Street located in Waltham, Massachusetts for a gross
purchase price of approximately $106.0 million in cash, including transaction costs. 880 and 890 Winter
Street consists of two Class A office properties aggregating approximately 392,000 net rentable square feet.
(2)Construction in progress for the nine months ended September 30, 2020 includes ongoing expenditures associated with 17Fifty Presidents Street, 20 CityPoint and The Skylyne, which were partially or fully placed in-service during the nine months ended September 30, 2020. In addition, we incurred costs associated with our continued development/redevelopment of One Five Nine East 53rd Street, Reston Next (formerly Reston Gateway), 2100 Pennsylvania Avenue, 200 West Street and 325 Main Street.
Construction in progress for the nine months ended September 30, 2019 includes ongoing expenditures associated with Salesforce Tower, which was placed in-service during the year ended December 31, 2018. In addition, we incurred costs associated with our continued development/redevelopment of One Five Nine East 53rd Street, 145 Broadway, 20 CityPoint, 17Fifty Presidents Street, Reston Next (formerly Reston Gateway), 2100 Pennsylvania Avenue, 200 West Street, The Skylyne and 325 Main Street.
(3)On February 20, 2020, we completed the sale of New Dominion Technology Park located in Herndon, Virginia for a gross sale price of $256.0 million. Net cash proceeds totaled approximately $254.0 million, resulting in a gain on sale of real estate totaling approximately $192.3 million for BXP and approximately
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$197.1 million for BPLP. New Dominion Technology Park is comprised of two Class A office properties aggregating approximately 493,000 net rentable square feet.
On June 25, 2020, we completed the sale of a portion of our Capital Gallery property located in Washington, DC for a gross sale price of approximately $253.7 million. Net cash proceeds totaled approximately $246.6 million, resulting in a gain on sale of real estate totaling approximately $203.6 million for BXP and approximately $207.0 million for BPLP. Capital Gallery is an approximately 631,000 net rentable square foot Class A office property. The portion sold is comprised of approximately 455,000 net rentable square feet of commercial office space. We continue to own the land, underground parking garage and remaining commercial office and retail space containing approximately 176,000 net rentable square feet at the property.
On January 24, 2019, we completed the sale of our 2600 Tower Oaks Boulevard property located in Rockville, Maryland for a gross sale price of approximately $22.7 million. Net cash proceeds totaled approximately $21.4 million, resulting in a loss on sale of real estate totaling approximately $0.6 million. 2600 Tower Oaks Boulevard is an approximately 179,000 net rentable square foot Class A office property.
On June 3, 2019, we completed the sale of our One Tower Center property located in East Brunswick, New Jersey for a gross sale price of $38.0 million. Net cash proceeds totaled approximately $36.6 million. One Tower Center is an approximately 410,000 net rentable Class A office property.
On June 28, 2019, we completed the sale of our 164 Lexington Road property located in Billerica, Massachusetts for a gross sale price of $4.0 million. Net cash proceeds totaled approximately $3.8 million, resulting in a gain on sale of real estate totaling approximately $2.5 million for BXP and approximately $2.6 million for BPLP. 164 Lexington Road is an approximately 64,000 net rentable square foot Class A office property.
On September 20, 2019, we sold a 45% interest in our Platform 16 property located in San Jose, California for a gross sale price of approximately $23.1 million. Net cash proceeds totaled approximately $23.1 million. We ceased accounting for the property on a consolidated basis and now account for the property on an unconsolidated basis using the equity method of accounting as we reduced our ownership interest in the property and no longer have a controlling financial or operating interest in the property. We did not recognize a gain on the retained or sold interest in the property as the fair value of the property approximated its carrying value. Platform 16 consists of a 65-year ground lease for land totaling approximately 5.6 acres that will support the development of approximately 1.1 million square feet of commercial office space.
(4)Capital contributions to unconsolidated joint ventures for the nine months ended September 30, 2020 consisted primarily of cash contributions of approximately $75.0 million, $39.0 million, $27.2 million and $7.5 million to our Platform 16, 3 Hudson Boulevard, Beach Cities Media Center and Metropolitan Square joint ventures, respectively.
Capital contributions to unconsolidated joint ventures for the nine months ended September 30, 2019
consisted primarily of cash contributions of approximately $41.4 million, $12.1 million and $7.0 million to our
Hub on Causeway, Dock 72 and 3 Hudson Boulevard joint ventures, respectively.
(5)Capital distributions from unconsolidated joint ventures for the nine months ended September 30, 2020 consisted of (1) a cash distribution totaling approximately $22.5 million from our Metropolitan Square joint venture resulting from the excess proceeds from the refinancing of the mortgage loan on the property, (2) a cash distribution totaling approximately $17.9 million from our Annapolis Junction joint venture resulting from available cash and the net proceeds from the sale of Annapolis Junction Building Eight and two land parcels after the pay down of the mortgage loan and (3) a cash distribution totaling approximately $14.0 million from our Colorado Center joint venture resulting from the excess proceeds from the mortgage financing on the property that occurred during 2017, which proceeds were released from lender reserves.
Capital distributions from unconsolidated joint ventures for the nine months ended September 30, 2019 consisted of (1) cash distributions totaling approximately $104.1 million from our 540 Madison Avenue joint venture resulting from the net proceeds from the sale of the property, (2) a cash distribution totaling approximately $17.6 million from our 100 Causeway Street joint venture resulting from the proceeds from the construction loan financing and (3) a cash distribution totaling approximately $15.1 million from our 7750 Wisconsin Avenue joint venture resulting from the proceeds from the construction loan financing.
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(6)Issuance of notes receivable, net consisted of the $10.0 million of financing provided to an affiliate of our partner in the joint venture that owns and is developing 7750 Wisconsin Avenue located in Bethesda, Maryland. The financing bears interest at a fixed rate of 8.00% per annum, compounded monthly, and matures on the fifth anniversary of the date on which the base building of the affiliate of our partner’s hotel property is substantially completed. The loan is collateralized by a pledge of the partner’s equity interest in our joint venture that owns and is developing 7750 Wisconsin Avenue.
Cash provided by financing activities for the nine months ended September 30, 2020 totaled approximately $678.9 million. This consisted primarily of the proceeds from the issuance by BPLP of $1.25 billion in aggregate principal amount of its 3.250% senior unsecured notes due 2031, partially offset by the payment of our regular dividends and distributions to our shareholders and unitholders. Future debt payments are discussed below under the heading “Capitalization—Debt Financing.”
Capitalization
The following table presents Consolidated Market Capitalization and BXP’s Share of Market Capitalization, as well as the corresponding ratios of Consolidated Debt to Consolidated Market Capitalization and BXP’s Share of Debt to BXP’s Share of Market Capitalization (in thousands except for percentages):
September 30, 2020
Shares / Units OutstandingCommon Stock EquivalentEquivalent Value (1)
Common Stock155,636 155,636 $12,497,571 
Common Operating Partnership Units
17,458 17,458 1,401,877 (2)
5.25% Series B Cumulative Redeemable Preferred Stock
80 — 200,000 
Total Equity173,094 $14,099,448 
Consolidated Debt $13,048,161 
Add:
BXP’s share of unconsolidated joint venture debt (3)1,114,031 
Subtract:
Partners’ share of Consolidated Debt (4)(1,195,957)
BXP’s Share of Debt$12,966,235 
Consolidated Market Capitalization$27,147,609 
BXP’s Share of Market Capitalization$27,065,683 
Consolidated Debt/Consolidated Market Capitalization48.06 %
BXP’s Share of Debt/BXP’s Share of Market Capitalization
47.91 %
_______________  
(1)Except for the Series B Cumulative Redeemable Preferred Stock, which is valued at the liquidation preference of $2,500 per share, values are based on the closing price per share of BXP’s Common Stock on the New York Stock Exchange on September 30, 2020 of $80.30.
(2)Includes long-term incentive plan units (including 2012 OPP Units and 2013 - 2017 MYLTIP Units), but excludes MYLTIP Units granted between 2018 and 2020.
(3)See page 94 for additional information.
(4)See page 93 for additional information.

Consolidated Debt to Consolidated Market Capitalization Ratio is a measure of leverage commonly used by analysts in the REIT sector. We present this measure as a percentage and it is calculated by dividing (A) our consolidated debt by (B) our consolidated market capitalization, which is the market value of our outstanding equity securities plus our consolidated debt. Consolidated market capitalization is the sum of:
(1)     our consolidated debt; plus
(2)     the product of (x) the closing price per share of BXP common stock on September 30, 2020, as reported by the New York Stock Exchange, multiplied by (y) the sum of:
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(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 - 2017 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.
The calculation of consolidated market capitalization does not include LTIP Units issued in the form of MYLTIP Awards unless and until certain performance thresholds are achieved and they are earned. Because their three-year performance periods have not yet ended, 2018 - 2020 MYLTIP Units are not included in this calculation as of September 30, 2020.
We also present BXP’s Share of Market Capitalization and BXP’s Share of Debt/BXP’s Share of Market Capitalization, which are calculated in the same manner, except that BXP’s Share of Debt is utilized instead of our consolidated debt in both the numerator and the denominator. BXP’s Share of Debt is defined as our consolidated debt plus our share of debt from our unconsolidated joint ventures (calculated based upon our ownership percentage), minus our partners’ share of debt from our consolidated joint ventures (calculated based upon the partners’ percentage ownership interests adjusted for basis differentials). Management believes that BXP’s Share of Debt provides useful information to investors regarding our financial condition because it includes our share of debt from unconsolidated joint ventures and excludes our partners’ share of debt from consolidated joint ventures, in each case presented on the same basis. We have several significant joint ventures and presenting various measures of financial condition in this manner can help investors better understand our financial condition and/or results of operations after taking into account our economic interest in these joint ventures.  We caution investors that the ownership percentages used in calculating BXP’s Share of Debt may not completely and accurately depict all of the legal and economic implications of holding an interest in a consolidated or unconsolidated joint venture. For example, in addition to partners’ interests in profits and capital, venture agreements vary in the allocation of rights regarding decision making (both for routine and major decisions), distributions, transferability of interests, financing and guarantees, liquidations and other matters.  Moreover, in some cases we exercise significant influence over, but do not control, the joint venture in which case GAAP requires that we account for the joint venture entity using the equity method of accounting and we do not consolidate it for financial reporting purposes. In other cases, GAAP requires that we consolidate the venture even though our partner(s) own(s) a significant percentage interest.  As a result, management believes that the presentation of BXP’s Share of a financial measure should not be considered a substitute for, and should only be considered with and as a supplement to our financial information presented in accordance with GAAP.
We present these supplemental ratios because our degree of leverage could affect our ability to obtain additional financing for working capital, capital expenditures, acquisitions, development or other general corporate purposes and because different investors and lenders consider one or both of these ratios. Investors should understand that these ratios are, in part, a function of the market price of the common stock of BXP and as such will fluctuate with changes in such price, and they do not necessarily reflect our capacity to incur additional debt to finance our activities or our ability to manage our existing debt obligations. However, for a company like BXP, whose assets are primarily income-producing real estate, these ratios may provide investors with an alternate indication of leverage, so long as they are evaluated along with the ratio of indebtedness to other measures of asset value used by financial analysts and other financial ratios, as well as the various components of our outstanding indebtedness.
For a discussion of our unconsolidated joint venture indebtedness, see “Liquidity and Capital Resources—Capitalization—Off-Balance Sheet Arrangements—Joint Venture Indebtedness” within “Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations” and for a discussion of our consolidated joint venture indebtedness see “Liquidity and Capital Resources—Capitalization—Mortgage Notes Payable, Net” within “Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
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Debt Financing
As of September 30, 2020, we had approximately $13.0 billion of outstanding consolidated indebtedness, representing approximately 48.06% of our Consolidated Market Capitalization as calculated above consisting of approximately (1) $9.6 billion (net of discount and deferred financing fees) in publicly traded unsecured senior notes having a GAAP weighted-average interest rate of 3.71% per annum and maturities in 2021 through 2031 (See Note 6 to the Consolidated Financial Statements), (2) $2.9 billion (net of deferred financing fees) of property-specific mortgage debt having a GAAP weighted-average interest rate of 3.89% per annum and a weighted-average term of 5.6 years and (3) $499.3 million (net of deferred financing fees) outstanding under BPLP’s 2017 Credit Facility that matures on April 24, 2022.
The table below summarizes the aggregate carrying value of our mortgage notes payable and BPLP’s unsecured senior notes, line of credit and term loan, as well as Consolidated Debt Financing Statistics at September 30, 2020 and September 30, 2019.  
September 30,
20202019
 (dollars in thousands)
Debt Summary:
Balance
Fixed rate mortgage notes payable, net$2,912,494 $2,952,006 
Unsecured senior notes, net9,636,397 8,387,913 
Unsecured line of credit— — 
Unsecured term loan, net499,270 498,819 
Consolidated Debt13,048,161 11,838,738 
Add:
BXP’s share of unconsolidated joint venture debt, net (1)1,114,031 924,366 
Subtract:
Partners’ share of consolidated mortgage notes payable, net (2)(1,195,957)(1,201,113)
BXP’s Share of Debt$12,966,235 $11,561,991 
September 30,
20202019
Consolidated Debt Financing Statistics:
Percent of total debt:
Fixed rate96.17 %95.79 %
Variable rate3.83 %4.21 %
Total100.00 %100.00 %
GAAP Weighted-average interest rate at end of period:
Fixed rate3.75 %3.81 %
Variable rate1.18 %3.12 %
Total3.65 %3.78 %
Coupon/Stated Weighted-average interest rate at end of period:
Fixed rate3.65 %3.70 %
Variable rate1.09 %3.03 %
Total3.55 %3.67 %
Weighted-average maturity at end of period (in years):
Fixed rate5.8 6.3 
Variable rate1.6 2.6 
Total5.6 6.1 
_______________
(1)See page 94 for additional information.
(2)See page 93 for additional information.
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Unsecured 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 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 permitted BPLP to draw until the first anniversary of the closing date. Based on BPLP’s current credit rating, (1) the applicable Eurocurrency margins for the Revolving Facility and Delayed Draw Facility are 87.5 basis points and 95 basis points, respectively, and (2) the facility fee on the Revolving Facility commitment is 0.15% 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 September 30, 2020 credit rating and matures on April 24, 2022.
As of September 30, 2020 and November 2, 2020, BPLP had $500.0 million of borrowings outstanding under its Delayed Draw Facility, no borrowings under its Revolving Facility and letters of credit totaling approximately $2.5 million outstanding with the ability to borrow approximately $1.5 billion under the Revolving Facility.
Unsecured Senior Notes, Net
For a description of BPLP’s outstanding unsecured senior notes as of September 30, 2020, see Note 6 to the
Consolidated Financial Statements.
On May 5, 2020, BPLP completed a public offering of $1.25 billion in aggregate principal amount of its 3.250% unsecured senior notes due 2031. The notes were priced at 99.850% of the principal amount to yield an effective rate (including financing fees) of approximately 3.343% per annum to maturity. The notes will mature on January 30, 2031, unless earlier redeemed. The aggregate net proceeds from the offering were approximately $1.24 billion after deducting underwriting discounts and transaction expenses.
The indenture relating to the unsecured senior notes contains certain financial restrictions and requirements, including (1) a leverage ratio not to exceed 60%, (2) a secured debt leverage ratio not to exceed 50%, (3) an interest coverage ratio of greater than 1.50, and (4) an unencumbered asset value of not less than 150% of unsecured debt. At September 30, 2020, BPLP was in compliance with each of these financial restrictions and requirements.
Mortgage Notes Payable, Net
The following represents the outstanding principal balances due under the mortgage notes payable at September 30, 2020:
 
PropertiesStated
Interest Rate
GAAP
Interest Rate (1)
Stated
Principal Amount
Deferred Financing Costs, Net Carrying Amount
Carrying Amount (Partners Share)
Maturity Date
 (dollars in thousands)
Wholly-owned
University Place6.94 %6.99 %$2,045 $(11)$2,034 N/AAugust 1, 2021
Consolidated Joint Ventures
767 Fifth Avenue (the General Motors Building)
3.43 %3.64 %2,300,000 (23,352)2,276,648 $910,742 (2)(3)(4)June 9, 2027
601 Lexington Avenue4.75 %4.79 %634,314 (502)633,812 285,215 (5)April 10, 2022
2,934,314 (23,854)2,910,460 1,195,957 
Total$2,936,359 $(23,865)$2,912,494 $1,195,957 
_______________ 
(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 (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’ share of the carrying amount has been adjusted for basis differentials.
(4)In connection with the refinancing of the loan, we guaranteed the consolidated entity’s obligation to fund various reserves for tenant improvement costs and allowances, leasing commissions and free rent obligations in lieu of cash
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deposits. As of September 30, 2020, the maximum funding obligation under the guarantee was approximately $37.2 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 7 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%. Fourteen of these ventures have mortgage indebtedness. We exercise significant influence over, but do not control, these entities. As a result, we account for them using the equity method of accounting. See also Note 5 to the Consolidated Financial Statements. At September 30, 2020, the aggregate carrying amount of debt, including both our and our partners’ share, incurred by these ventures was approximately $2.6 billion (of which our proportionate share is approximately $1.1 billion). The table below summarizes the outstanding debt of these joint venture properties at September 30, 2020. In addition to other guarantees specifically noted in the table, we have agreed to customary environmental indemnifications and nonrecourse carve-outs (e.g., guarantees against fraud, misrepresentation and bankruptcy) as well as the completion of development projects on certain of the loans. 
PropertiesNominal % Ownership Stated Interest RateGAAP Interest Rate (1)Stated Principal AmountDeferred Financing Costs, NetCarrying AmountCarrying Amount (Our share) Maturity Date
 (dollars in thousands)
Santa Monica Business Park
55 %4.06 %4.24 %$300,000 $(2,525)$297,475 $163,611 (2)(3)July 19, 2025
Market Square North
50 %4.85 %4.85 %114,201 (65)114,136 57,068 (4)November 1, 2020
Annapolis Junction Building Six
50 %2.15 %2.30 %12,131 (4)12,127 6,064 (5)November 17, 2020
Annapolis Junction Building Seven
50 %2.58 %2.92 %18,420 (31)18,389 9,195 (6)March 25, 2021
1265 Main Street
50 %3.77 %3.84 %37,544 (313)37,231 18,615 January 1, 2032
Colorado Center
50 %3.56 %3.58 %550,000 (705)549,295 274,648 (2)August 9, 2027
Dock 72
50 %2.41 %3.55 %196,412 (843)195,569 97,784 (2)(7)December 18, 2020
The Hub on Causeway - Podium
50 %2.41 %2.90 %174,329 (945)173,384 86,692 (2)(8)September 6, 2021
Hub50House
50 %2.17 %2.45 %169,034 (807)168,227 84,113 (2)(9)April 19, 2022
100 Causeway Street
50 %1.66 %1.87 %180,547 (2,471)178,076 89,038 (2)(10)September 5, 2023
7750 Wisconsin Avenue (Marriott International Headquarters)
50 %1.41 %1.95 %132,722 (3,597)129,125 64,563 (2)(11)April 26, 2023
500 North Capitol Street, NW
30 %4.15 %4.20 %105,000 (158)104,842 31,453 (2)June 6, 2023
901 New York Avenue
25 %3.61 %3.69 %222,192 (759)221,433 55,358   January 5, 2025
3 Hudson Boulevard
25 %3.66 %3.74 %80,000 (176)79,824 19,956 (2)(12)July 13, 2023
Metropolitan Square
20 %5.40 %6.90 %288,000 (8,634)279,366 55,873 (2)(13)July 7, 2022
Total$2,580,532 $(22,033)$2,558,499 $1,114,031   
_______________
(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)The loan bears interest at a variable rate equal to LIBOR plus 1.28% per annum and matures on July 19, 2025. 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.
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(4)On September 30, 2020, the joint venture extended the maturity date to November 1, 2020. Then, on October 30, 2020, the joint venture refinanced the mortgage loan. See Notes 5 and 13 to the Consolidated Financial Statements.
(5)The loan bears interest at a variable rate equal to LIBOR plus 2.00% per annum and matures on November 17, 2020.
(6)The loan bears interest at a variable rate equal to LIBOR plus 2.35% per annum and matures on March 25, 2021.
(7)The construction financing has a borrowing capacity of $250.0 million. The construction financing bears interest at a variable rate equal to LIBOR plus 2.25% per annum and matures on December 18, 2020, with two, one-year extension options, subject to certain conditions.
(8)The construction financing had a borrowing capacity of $204.6 million. On September 16, 2019, the joint venture paid down the construction loan principal balance in the amount of approximately $28.8 million, reducing the borrowing capacity to $175.8 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.
(9)The construction financing has a borrowing capacity of $180.0 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.
(10)The construction financing has a borrowing capacity of $400.0 million. The construction financing bears interest at a variable rate equal to LIBOR plus 1.50% per annum (LIBOR plus 1.375% per annum upon stabilization, as defined in the loan agreement) and matures on September 5, 2023, with two, one-year extension options, subject to certain conditions.
(11)The construction financing has a borrowing capacity of $255.0 million. 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.
(12)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, Net on our Consolidated Balance Sheets.
(13)The loan bears interest at a variable rate equal to (1) the greater of (x) LIBOR or (y) 0.65%, plus (2) 4.75% per annum, and matures on July 7, 2022.
State and Local Tax Matters 
Because BXP is organized and qualifies as a REIT, it is generally not subject to federal income taxes, but is subject to certain state and local taxes. In the normal course of business, certain entities through which we own real estate either have undergone, or are currently undergoing, tax audits or other inquiries. Although we believe that we have substantial arguments in favor of our position in the ongoing audits, in some instances there is no controlling precedent or interpretive guidance on the specific point at issue. Collectively, tax deficiency notices received to date from the jurisdictions conducting the ongoing audits have not been material. However, there can be no assurance that future audits will not occur with increased frequency or that the ultimate result of such audits will not have a material adverse effect on our results of operations. 
Insurance
For information concerning our insurance program, see Note 7 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 (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. 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
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accounting and useful life estimates), FFO can help investors compare the operating performance of a company’s real estate across reporting periods and to the operating performance of other companies.
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.  
The impact that COVID-19 has had on our business, financial position and results of operations during the second and third quarters of 2020 is discussed throughout this report. The full extent of the impact of COVID-19 on our business, operations and financial results will depend on numerous evolving factors that we may not be able to accurately predict. The impact of COVID-19 on our revenue, in particular lease, parking and hotel revenue was negatively impacted by COVID-19 for the three and nine months ended September 30, 2020, thus negatively impacting our FFO. These decreases are discussed under the heading “Comparison of the nine months ended September 30, 2020 to the nine months ended September 30, 2019” within “Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations” and under the heading “Comparison of the three months ended September 30, 2020 to the three months ended September 30, 2019” within “Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
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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 September 30, 2020 and 2019:
 Three months ended September 30,
 20202019
 (in thousands)
Net income attributable to Boston Properties, Inc. common shareholders
$89,854 $107,771 
Add:
Preferred dividends2,625 2,625 
Noncontrolling interest—common units of the Operating Partnership
10,020 12,504 
Noncontrolling interests in property partnerships
15,561 18,470 
Net income118,060 141,370 
Add:
Depreciation and amortization 166,456 165,862 
Noncontrolling interests in property partnerships’ share of depreciation and amortization
(15,833)(17,402)
BXP’s share of depreciation and amortization from unconsolidated joint ventures
20,413 13,745 
Corporate-related depreciation and amortization
(444)(411)
Less:
Gain on sale of real estate included within income (loss) from unconsolidated joint ventures— (487)
Losses on sales of real estate(209)(15)
Noncontrolling interests in property partnerships
15,561 18,470 
Preferred dividends2,625 2,625 
Funds from Operations (FFO) attributable to the Operating Partnership common unitholders (including Boston Properties, Inc.)
270,675 282,571 
Less:
Noncontrolling interest—common units of the Operating Partnership’s share of funds from operations
26,697 28,940 
Funds from Operations attributable to Boston Properties, Inc. common shareholders
$243,978 $253,631 
Our percentage share of Funds from Operations—basic
90.14 %89.76 %
Weighted average shares outstanding—basic155,645 154,577 
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Reconciliation to Diluted Funds from Operations: 
 Three months ended September 30,
 20202019
Income
(Numerator)
Shares/Units
(Denominator)
Income
(Numerator)
Shares/Units
(Denominator)
(in thousands)
Basic Funds from Operations$270,675 172,677 $282,571 172,215 
Effect of Dilutive Securities:
Stock based compensation— 25 — 243 
Diluted Funds from Operations$270,675 172,702 $282,571 172,458 
Less:
Noncontrolling interest—common units of the Operating Partnership’s share of diluted Funds from Operations
26,693 17,032 28,900 17,638 
Diluted Funds from Operations attributable to Boston Properties, Inc. (1)
$243,982 155,670 $253,671 154,820 
 _______________
(1)BXP’s share of diluted Funds from Operations was 90.14% and 89.77% for the three months ended September 30, 2020 and 2019, respectively.

Boston Properties Limited Partnership
The following table presents a reconciliation of net income attributable to Boston Properties Limited Partnership common unitholders to FFO attributable to Boston Properties Limited Partnership common unitholders for the three months ended September 30, 2020 and 2019:
 Three months ended September 30,
 20202019
 (in thousands)
Net income attributable to Boston Properties Limited Partnership common unitholders
$101,624 $122,117 
Add:
Preferred distributions
2,625 2,625 
Noncontrolling interests in property partnerships
15,561 18,470 
Net income119,810 143,212 
Add:
Depreciation and amortization
164,706 164,020 
Noncontrolling interests in property partnerships’ share of depreciation and amortization
(15,833)(17,402)
BPLP’s share of depreciation and amortization from unconsolidated joint ventures
20,413 13,745 
Corporate-related depreciation and amortization
(444)(411)
Less:
Gain on sale of real estate included within income (loss) from unconsolidated joint ventures
— (487)
Losses on sales of real estate(209)(15)
Noncontrolling interests in property partnerships
15,561 18,470 
Preferred distributions
2,625 2,625 
Funds from operations attributable to Boston Properties Limited Partnership common unitholders (1)
$270,675 $282,571 
Weighted average units outstanding—basic
172,677 172,215 
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 _______________  
(1)Our calculation includes OP Units and vested LTIP Units (including vested 2012 OPP Units and vested 2013 - 2017 MYLTIP Units).

Reconciliation to Diluted Funds from Operations: 
Three months ended September 30,
 20202019
 Income
(Numerator)
Shares/Units
(Denominator)
Income
(Numerator)
Shares/Units
(Denominator)
(in thousands)
Basic Funds from Operations$270,675 172,677 $282,571 172,215 
Effect of Dilutive Securities:
Stock based compensation— 25 — 243 
Diluted Funds from Operations $270,675 172,702 $282,571 172,458 

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 three months ended September 30, 2020, we paid approximately $69.1 million to fund tenant-related obligations, including tenant improvements and leasing commissions.
In addition, during the three months ended September 30, 2020, we and our unconsolidated joint venture partners incurred approximately $35 million of new tenant-related obligations associated with approximately 988,000 square feet, which included approximately 177,000 square feet of lease modifications related to COVID-19, of second generation leases, or approximately $36 per square foot. We did not sign any first generation leases. 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.”
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 September 30, 2020. As of September 30, 2020, approximately $12.5 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 September 30, 2020, the weighted-average interest rate on our variable rate debt was LIBOR plus 0.95% (1.09%) 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 5 to the Consolidated Financial Statements and “Item 2Management’s Discussion and Analysis of Financial Condition and Results of Operations—Capitalization—Off-Balance Sheet Arrangements—Joint Venture Indebtedness.
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202020212022202320242025+TotalEstimated
Fair Value
(dollars in thousands)
Mortgage debt, net
Fixed Rate$3,413 $13,440 $611,132 $(3,494)$(3,494)$2,291,497 $2,912,494 $3,183,294 
GAAP Average Interest Rate
5.07 %4.98 %4.79 %— %— %3.64 %3.89 %
Variable Rate— — — — — — — — 
 Unsecured debt, net
Fixed Rate$(2,887)$839,355 $(10,189)$1,490,888 $692,161 $6,627,069 $9,636,397 $10,491,966 
GAAP Average Interest Rate
— %4.29 %— %3.73 %3.92 %3.61 %3.71 %
Variable Rate(119)(461)499,850 — — — 499,270 500,388 
Total Debt$407 $852,334 $1,100,793 $1,487,394 $688,667 $8,918,566 $13,048,161 $14,175,648 

At September 30, 2020, the weighted-average coupon/stated rates on the fixed rate debt stated above was 3.65% per annum. At September 30, 2020, our outstanding variable rate debt based on LIBOR totaled approximately $500.0 million. At September 30, 2020, the coupon/stated rate on our variable rate debt was approximately 1.09% per annum. If market interest rates on our variable rate debt had been 100 basis points greater, total interest expense would have increased approximately $1.3 million and $3.8 million for the three and nine months ended September 30, 2020, 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, as amended). 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.
(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, as amended) occurred during the third quarter of our fiscal year ending December 31, 2020 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, as amended). Based upon that evaluation, the Chief
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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, as amended) occurred during the third quarter of our fiscal year ending December 31, 2020 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 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, 2019.

The COVID-19 pandemic has caused severe disruptions in the United States and global economies and we expect it will continue to materially and adversely affect our financial condition, results of operations, cash flows, liquidity and performance and that of our tenants.
Since being reported in December 2019, COVID-19 has spread globally, including to every state in the United States. On March 11, 2020, the World Health Organization declared COVID-19 a global pandemic, and on March 13, 2020, the United States declared a national emergency with respect to COVID-19.
The global impact of the COVID-19 pandemic is continually evolving and public health officials and governmental authorities, including those in all of the markets in which we operate, have reacted by taking measures such as prohibiting people from congregating in heavily populated areas, instituting quarantines, restricting travel, issuing “stay-at-home” orders, restricting the types of businesses that may continue to operate (including the types of construction projects that may proceed) and closing schools, among many others. Most of these restrictions began in earnest in March 2020 and they quickly had a material adverse impact on economic and market conditions around the world, including the United States and the markets in which our properties are located, and on us. It is possible that public health officials and governmental authorities in the markets in which we operate may relax or revoke existing restrictions too quickly or may impose additional restrictions in an effort to slow the spread of COVID-19, either of which could exacerbate the severity of these adverse impacts on the economy. There is great uncertainty regarding the duration and breadth of the COVID-19 pandemic, as well as possible future responses, which makes it impossible for us to predict with certainty the impact that COVID-19 will have on us and our tenants at this time. Factors related to COVID-19 that have had, or could have, a material adverse effect on our results of operations and financial condition, include:
a complete or partial closure of, or other operational issues at, one or more of our properties resulting from government or tenant action, including continued delays in re-opening or subsequent closures of previously re-opened properties, which could adversely affect our operations and those of our tenants;
reduced economic activity impacting the businesses, financial condition and liquidity of our tenants has caused, and is expected to continue to cause, one or more of our tenants to be unable to meet their obligations to us, including their ability to make rental payments, in full or at all, or to otherwise seek modifications of such obligations, including rent concessions, deferrals or abatements, or to declare bankruptcy;
the failure of our tenants to properly implement or deploy their business continuity plans, or if those plans are ineffective, it could have a material adverse effect on our tenants’ businesses and their ability to pay rent;
the impact of new or continued complete or partial shutdowns of the operations of one or more of our tenants’ businesses, including office, hotel and retail tenants, and parking operators, temporary or long-term disruptions in our tenants’ supply chains from local, national and international suppliers or delays in the delivery of products, services or other materials necessary for our tenants’ operations, could force our tenants to reduce, delay or eliminate offerings of their products and services, which could result in less revenue, income and cash flow, and possibly their bankruptcy or insolvency, which in turn could:
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reduce our cash flows,
adversely impact our ability to finance, refinance or sell a property,
adversely impact our ability to continue paying dividends to our stockholders at current levels, or at all, and
result in additional legal and other costs to enforce our rights, collect rent and/or re-lease the space occupied by the distressed tenant;
the duration and scope of the mandatory business closures and “stay-at-home” orders have had, and are expected to continue to have, a severe negative impact on our retail, fitness and entertainment tenants that depend on in-person interactions with their customers to generate revenues and have resulted, and are expected to continue to result, in most retail, fitness and entertainment tenants being unable to make timely rental payments in full or at all;
the extent to which COVID-19 decreases customers’ willingness to frequent, or prevents customers from frequenting, our tenants’ businesses in the future, may result in our retail tenants’ continued inability to make timely rental payments to us under their leases;
many of our retail and some of our office tenants have approached us seeking either rent concessions, deferrals or abatements, and the extent to which we grant these requests or instead seek to enforce our legal remedies could have a material adverse effect on our results of operations, liquidity and cash flows;
the degree to which our tenants’ businesses have been, and continue to be, negatively impacted has required, and may continue to require, us to write-off a tenant’s accrued rent balance and this could have a material adverse effect on our results of operations and liquidity;
if new or existing actions or measures implemented to prevent the spread of COVID-19 continue to result in increasing unemployment, it may negatively affect the leasing of residential units as well as the ability of our existing residential tenants to generate sufficient income to pay, or make them unwilling to pay rent, in full or at all, in a timely manner;
the impact of prolonged restrictions on freedom of movement and business operations, such as travel bans, business closures and “stay-at-home” orders have had, and are expected to continue to have, a material adverse effect on the operators of our parking garages and our hotel property, which negatively impacts our revenues and may also result in a decrease in demand for hotel stays even after the travel bans and other restrictions are lifted;
our failure, or that of any of our joint venture partners’, to meet our or their, as applicable, responsibilities or obligations to the other or to third parties, such as lenders, including a failure to contribute additional capital needed by the ventures or a default by a party under a joint venture agreement or other agreement relating to a joint venture, each of which, in our case, could result in dilution of our interest or a loss of our management and other rights relating to our joint ventures, and in the case of a joint venture partner, could result in our payment of the partner’s share of the additional capital;
the impact of COVID-19 could result in an event or change in circumstances that results in an impairment in the value of our properties or our investments in unconsolidated joint ventures, and any such impairment could have a material adverse effect on our results of operations in the periods in which the charge is taken;
we may be unable to restructure or amend leases with certain of our tenants on terms favorable to us or at all;
the impact and validity of interpretations of lease provisions and related claims by tenants regarding their obligations to pay rent as a result of COVID-19, and any court rulings or decisions interpreting these provisions and the common law, could have a material adverse effect on our results of operations and liquidity;
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restrictions intended to prevent the spread of COVID-19 have limited, and are expected to continue to limit, our leasing activities, such as property tours, and may have a material adverse effect on our ability to renew leases, lease vacant space, including vacant space from tenant bankruptcies and defaults, or re-lease available space as leases expire in our properties on favorable terms, or at all;
COVID-19 has caused a material decline in general business activity and demand for real estate transactions, and if this persists, it would adversely affect our ability or desire to make strategic acquisitions or dispositions;
the impact of recent and future efforts by state, local, federal and industry groups to enact laws and regulations have restricted, and may further restrict, the ability of landlords, such as us, to collect rent, enforce remedies for the failure to pay rent, or otherwise enforce the terms of the lease agreements, such as a rent freeze for tenants or a suspension of a landlord’s ability to enforce evictions;
the extent of construction delays on our development/redevelopment projects due to work-stoppage orders, disruptions in the supply of materials, delays in permitting or inspections, or other factors could result in our failure to meet the development milestones set forth in any applicable lease agreement, which could provide the tenant the right to terminate its lease or entitle the tenant to monetary damages, delay the commencement or completion of construction and our anticipated lease-up plans for a development/redevelopment project or our overall development pipeline, including recognizing revenue for new leases, that may cause returns on investment to be less than projected, and/or increase the costs of construction of new or existing projects, any of which could adversely affect our investment returns, profitability and/or our future growth;
we may be unable to access debt and equity capital on attractive terms, or at all, and a further disruption and instability in the global financial markets or deteriorations in credit and financing conditions may affect our tenants’ and our access to capital and other sources of funding necessary to fund our respective operations or address maturing liabilities on a timely basis;
the financial effects of the COVID-19 pandemic on our future financial results, cash flows and financial condition could adversely impact our compliance with the financial covenants of our credit facility and other debt agreements and could result in an event of default and the acceleration of indebtedness, which could negatively impact our financial condition, results of operations and our ability to make additional borrowings and pay dividends;
adaptions made by companies in response to “stay-at-home” orders and future limitations on in-person work environments could lead to a sustained shift away from collective in-person work environments and adversely affect the overall demand for office space across our portfolio over the long term;
the effectiveness or lack of effectiveness of governmental relief in providing assistance to large and small businesses, including some of our tenants, that have suffered significant declines in revenues as a result of mandatory business shut-downs, “stay-at-home” orders and social distancing practices, and the potential for a prolonged, severe recession, could have a material adverse impact on our financial condition and results of operations;
increased vulnerability to cyber-security threats and potential breaches, including phishing attacks, malware and impersonation tactics, resulting from the increase in numbers of individuals working from home;
the potential that business interruption, loss of rental income and/or other associated expenses related to our operations will not be covered in whole or in part by our insurance policies, which may increase unreimbursed liabilities;
if the health of our employees, particularly our key personnel and property management teams, are negatively impacted, we may be unable to ensure business continuity and be exposed to lawsuits from tenants;
if we choose to pay dividends in our stock instead of cash, our stockholders may have to pay income taxes on the dividends without receiving a corresponding amount of cash;
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uncertainty as to what conditions must be satisfied before government authorities lift “stay-at-home” orders and public health officials begin the process of gradually returning Americans to work and whether government authorities will impose (or suggest) requirements on landlords, such as us, to protect the health and safety of tenants and visitors to our buildings could result in increased operating costs and demands on our property management teams to ensure compliance with any such requirements, as well as increased costs associated with protecting against potential liability arising from these measures, such as claims by tenants that the measures violate their leases and claims by visitors that the measures caused them damages; and
limited access to our facilities, management, tenants, support staff and professional advisors could decrease the effectiveness of our disclosure controls and procedures, internal controls over financial reporting and other risk mitigation strategies, increase our susceptibility to security breaches, hamper our ability to comply with regulatory obligations and prevent us from conducting our business as efficiently and effectively as we otherwise would have.
The full extent to which the COVID-19 pandemic impacts our operations and those of our tenants will depend on future developments, which are highly uncertain and cannot be predicted with confidence at this time. The fluidity of the situation presents material uncertainty and risk with respect to our financial condition, results of operations, cash flows, liquidity and overall performance. Moreover, many risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2019 are heightened risks as a result of the impact of the COVID-19 pandemic.
ITEM 2—Unregistered Sales of Equity Securities and Use of Proceeds
Boston Properties, Inc.
(a)None.
(b)Not applicable.
(c)None.
Boston Properties Limited Partnership
(a)Each time BXP issues shares of stock (other than in exchange for common units of BPLP when such common units are presented for redemption), it contributes the proceeds of such issuance to BPLP in return for an equivalent number of partnership units with rights and preferences analogous to the shares issued. During the three months ended September 30, 2020, pursuant to issuances of common stock under the Boston Properties, Inc. 1999 Non-Qualified Employee Stock Purchase Plan, BPLP issued an aggregate of approximately 4,796 common units to BXP in exchange for approximately $373,500, the aggregate proceeds of such common stock issuances to BXP. 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.
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
July 1, 2020 - July 31, 2020— $— N/AN/A
August 1, 2020 - August 31, 2020— $— N/AN/A
September 1, 2020 - September 30, 20202,352 (1)$0.25 N/AN/A
Total2,352  $0.25 N/AN/A
___________
(1)Includes 1,943 LTIP units and 409 2019 MYLTIP units that were repurchased in connection with the termination of an employee’s employment with BXP. Under the terms of the applicable LTIP unit vesting agreements and 2019 MYLTIP award agreement, such LTIP units and 2019 MYLTIP units were repurchased at a price $0.25 per unit, which was the amount originally paid by such employee for such units.
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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 
31.1 
31.2 
31.3 
31.4 
32.1 
32.2 
32.3 
32.4 
101.SCHInline XBRL Taxonomy Extension Schema Document. (Filed herewith.)
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document. (Filed herewith.)
101.LABInline XBRL Taxonomy Extension Label Linkbase Document. (Filed herewith.)
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document. (Filed herewith.)
101.DEFInline 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 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.
November 6, 2020
/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
November 6, 2020  
/s/    MICHAEL R. WALSH        
  Michael R. Walsh
  Chief Accounting Officer
(duly authorized officer and principal accounting officer)
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