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bxp-20210930

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, 2021


☐			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.	Delaware	04-2473675
	(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

Boston Properties Limited Partnership	Delaware	04-3372948
	(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:

Registrant

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Boston Properties, Inc.

Common Stock, par value $0.01 per share

BXP

New York Stock Exchange

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 ☐

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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 share	156,206,944
(Registrant)	(Class)	(Outstanding on November 2, 2021)

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EXPLANATORY NOTE

This report combines the Quarterly Reports on Form 10-Q for the period ended September 30, 2021 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, 2021, 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:

•enhances investors’ understanding of BXP and BPLP by enabling them 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.

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 noncontrolling interests in

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BPLP 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 of BXP at the time of such redemptions. This resulted in a difference between the net real estate of BXP as compared to BPLP of approximately $264.7 million, or 1.5% at September 30, 2021, 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 11. Stockholders’ Equity / Partners’ Capital;

• Note 12. Segment Information; and

• Note 13. Earnings Per Share / Common Unit

• 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, 2021

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		Page
PART I. FINANCIAL INFORMATION
ITEM 1.	Financial Statements (unaudited)	1

Boston Properties, Inc.


	a) Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020	1
	b) Consolidated Statements of Operations for the three and nine months ended Sept ember 30 , 2021 and 2020	3
	c) Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2021 and 2020	4
	d) Consolidated Statements of Equity for the three and nine months ended September 30 , 2021 and 2020	5
	e) Consolidated Statements of Cash Flows for the nine months ended September 30 , 2021 and 2020	7

Boston Properties Limited Partnership


	a) Consolidated Balance Sheets as of September 30 , 2021 and December 31, 2020	9
	b) Consolidated Statements of Operations for the three and nine months ended September 30 , 2021 and 2020	11
	c) Consolidated Statements of Comprehensive Income for the three and nine months ended September 30 , 2021 and 2020	12
	d) Consolidated Statements of Capital and Noncontrolling Interests for the three and nine months ended September 30 , 2021 and 2020	13
	e) Consolidated Statements of Cash Flows for the nine months ended September 30 , 2021 and 2020	15

Boston Properties, Inc. and Boston Properties Limited Partnership
	Notes to the Consolidated Financial Statements	17

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	47
ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	97
ITEM 4.	Controls and Procedures	98

PART II. OTHER INFORMATION
ITEM 1.	Legal Proceedings	99
ITEM 1A.	Risk Factors	99
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	100
ITEM 3.	Defaults Upon Senior Securities	101
ITEM 4.	Mine Safety Disclosures	101
ITEM 5.	Other Information	101
ITEM 6.	Exhibits	102

SIGNATURES		103

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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, 2021		December 31, 2020
ASSETS
Real estate, at cost (amounts related to variable interest entities (“VIEs”) of $6,688,647 and $6,592,019 at September 30, 2021 and December 31, 2020, respectively)	$	23,711,400	$	22,969,110
Right of use assets - finance leases (amounts related to VIEs of $21,000 and $21,000 at September 30, 2021 and December 31, 2020, respectively)	237,845		237,393
Right of use assets - operating leases	170,085		146,406
Less: accumulated depreciation (amounts related to VIEs of $(1,266,516) and $(1,158,548) at September 30, 2021 and December 31, 2020, respectively)	(5,850,397)		(5,534,102)
Total real estate	18,268,933		17,818,807
Cash and cash equivalents (amounts related to VIEs of $288,186 and $340,642 at September 30, 2021 and December 31, 2020, respectively)	1,002,728		1,668,742
Cash held in escrows	79,193		50,587
Investments in securities	41,517		39,457
Tenant and other receivables, net (amounts related to VIEs of $8,598 and $10,911 at September 30, 2021 and December 31, 2020, respectively)	61,269		77,411
Related party note receivable, net	78,144		77,552
Notes receivable, net	19,297		18,729
Accrued rental income, net (amounts related to VIEs of $352,291 and $336,594 at September 30, 2021 and December 31, 2020, respectively)	1,203,840		1,122,502
Deferred charges, net (amounts related to VIEs of $174,172 and $183,306 at September 30, 2021 and December 31, 2020, respectively)	622,807		640,085
Prepaid expenses and other assets (amounts related to VIEs of $42,051 and $13,137 at September 30, 2021 and December 31, 2020, respectively)	97,560		33,840
Investments in unconsolidated joint ventures	1,373,522		1,310,478
Total assets	$	22,848,810	$	22,858,190
LIABILITIES AND EQUITY
Liabilities:
Mortgage notes payable, net (amounts related to VIEs of $2,898,699 and $2,907,590 at September 30, 2021 and December 31, 2020, respectively)	$	2,898,699	$	2,909,081
Unsecured senior notes, net	10,479,651		9,639,287
Unsecured line of credit	—		—
Unsecured term loan, net	—		499,390
Lease liabilities - finance leases (amounts related to VIEs of $20,420 and $20,306 at September 30, 2021 and December 31, 2020, respectively)	243,562		236,492
Lease liabilities - operating leases	204,137		201,713
Accounts payable and accrued expenses (amounts related to VIEs of $36,967 and $23,128 at September 30, 2021 and December 31, 2020, respectively)	331,687		336,264
Dividends and distributions payable	169,739		171,082
Accrued interest payable	87,408		106,288

Other liabilities (amounts related to VIEs of $124,615 and $158,805 at September 30, 2021 and December 31, 2020, respectively)	370,403		412,084
Total liabilities	14,785,286		14,511,681
Commitments and contingencies (See Note 9)
Redeemable deferred stock units— 80,989 and 72,966 units outstanding at redemption value at September 30, 2021 and December 31, 2020, respectively	8,775		6,897

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BOSTON PROPERTIES, INC. CONSOLIDATED BALANCE SHEETS (unaudited and in thousands, except for share and par value amounts)
	September 30, 2021		December 31, 2020
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 December 31, 2020	—		200,000
Common stock, $0.01 par value, 250,000,000 shares authorized, 156,285,391 and 155,797,725 issued and 156,206,491 and 155,718,825 outstanding at September 30, 2021 and December 31, 2020, respectively	1,562		1,557
Additional paid-in capital	6,415,802		6,356,791
Dividends in excess of earnings	(657,021)		(509,653)
Treasury common stock at cost, 78,900 shares at September 30, 2021 and December 31, 2020	(2,722)		(2,722)
Accumulated other comprehensive loss	(40,803)		(49,890)
Total stockholders’ equity attributable to Boston Properties, Inc.	5,716,818		5,996,083
Noncontrolling interests:
Common units of Boston Properties Limited Partnership	609,830		616,596
Property partnerships	1,728,101		1,726,933
Total equity	8,054,749		8,339,612
Total liabilities and equity	$	22,848,810	$	22,858,190

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,
	2021		2020		2021		2020
Revenue
Lease	$	692,260	$	666,674	$	2,062,102	$	2,006,904
Parking and other	23,507		16,327		58,727		54,777
Hotel	5,189		90		7,382		7,014
Development and management services	6,094		7,281		20,181		23,285
Direct reimbursements of payroll and related costs from management services contracts	3,006		2,896		9,166		8,617
Total revenue	730,056		693,268		2,157,558		2,100,597
Expenses
Operating
Rental	258,281		258,261		764,373		761,014
Hotel	3,946		3,164		7,993		11,958
General and administrative	34,560		27,862		117,924		102,059
Payroll and related costs from management services contracts	3,006		2,896		9,166		8,617
Transaction costs	1,888		307		2,970		1,254
Depreciation and amortization	179,412		166,456		539,815		515,738
Total expenses	481,093		458,946		1,442,241		1,400,640
Other income (expense)
Loss from unconsolidated joint ventures	(5,597)		(6,873)		(1,745)		(5,410)
Gains (losses) on sales of real estate	348		(209)		8,104		613,723
Interest and other income (loss)	1,520		(45)		4,140		4,277
Gains (losses) from investments in securities	(190)		1,858		3,744		965
Losses from early extinguishment of debt	—		—		(898)		—
Interest expense	(105,794)		(110,993)		(320,015)		(319,726)
Net income	139,250		118,060		408,647		993,786
Net income attributable to noncontrolling interests
Noncontrolling interests in property partnerships	(18,971)		(15,561)		(52,602)		(34,280)
Noncontrolling interest—common units of the Operating Partnership	(11,982)		(10,020)		(35,393)		(97,090)
Net income attributable to Boston Properties, Inc.	108,297		92,479		320,652		862,416
Preferred dividends	—		(2,625)		(2,560)		(7,875)
Preferred stock redemption charge	—		—		(6,412)		—
Net income attributable to Boston Properties, Inc. common shareholders	$	108,297	$	89,854	$	311,680	$	854,541
Basic earnings per common share attributable to Boston Properties, Inc. common shareholders:
Net income	$	0.69	$	0.58	$	2.00	$	5.49
Weighted average number of common shares outstanding	156,183		155,645		156,062		155,349
Diluted earnings per common share attributable to Boston Properties, Inc. common shareholders:
Net income	$	0.69	$	0.58	$	1.99	$	5.49
Weighted average number of common and common equivalent shares outstanding	156,598		155,670		156,394		155,447

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,
	2021		2020		2021		2020
Net income	$	139,250	$	118,060	$	408,647	$	993,786
Other comprehensive income (loss):
Effective portion of interest rate contracts	1,088		1,027		5,482		(9,352)
Amortization of interest rate contracts (1)	1,676		1,677		5,028		5,020
Other comprehensive income (loss)	2,764		2,704		10,510		(4,332)
Comprehensive income	142,014		120,764		419,157		989,454
Net income attributable to noncontrolling interests	(30,953)		(25,581)		(87,995)		(131,370)
Other comprehensive (income) loss attributable to noncontrolling interests	(401)		(405)		(1,423)		45
Comprehensive income attributable to Boston Properties, Inc.	$	110,660	$	94,778	$	329,739	$	858,129

_______________

(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 EQUITY (unaudited and in thousands)
	Common Stock			Preferred Stock		Additional Paid-in Capital		Dividends in Excess of Earnings		Treasury Stock, at cost		Accumulated Other Comprehensive Loss		Noncontrolling Interests - Common Units		Noncontrolling Interests - Property Partnerships		Total
	Shares	Amount
Equity, June 30, 2021	156,136	$	1,561	$	—	$	6,405,916	$	(612,247)	$	(2,722)	$	(43,166)	$	615,308	$	1,725,343	$	8,089,993
Redemption of operating partnership units to common stock	50	1		—		1,747		—		—		—		(1,748)		—		—
Allocated net income for the period	—	—		—		—		108,308		—		—		11,971		18,971		139,250
Dividends/distributions declared	—	—		—		—		(153,082)		—		—		(17,203)		—		(170,285)
Shares issued pursuant to stock purchase plan	4	—		—		520		—		—		—		—		—		520
Net activity from stock option and incentive plan	16	—		—		1,185		—		—		—		7,679		—		8,864
Contributions from noncontrolling interests in property partnerships	—	—		—		—		—		—		—		—		11,318		11,318
Distributions to noncontrolling interests in property partnerships	—	—		—		—		—		—		—		—		(27,675)		(27,675)
Effective portion of interest rate contracts	—	—		—		—		—		—		981		107		—		1,088
Amortization of interest rate contracts	—	—		—		—		—		—		1,382		150		144		1,676
Reallocation of noncontrolling interest	—	—		—		6,434		—		—		—		(6,434)		—		—
Equity, September 30, 2021	156,206	$	1,562	$	—	$	6,415,802	$	(657,021)	$	(2,722)	$	(40,803)	$	609,830	$	1,728,101	$	8,054,749

Equity, June 30, 2020	155,622	$	1,556	$	200,000	$	6,340,665	$	(302,511)	$	(2,722)	$	(54,921)	$	640,491	$	1,724,588	8,547,146
Redemption of operating partnership units to common stock	9	—		—		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	5	—		—		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

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BOSTON PROPERTIES, INC. CONSOLIDATED STATEMENTS OF EQUITY (unaudited and in thousands)
	Common Stock			Preferred Stock		Additional Paid-in Capital		Dividends in Excess of Earnings		Treasury Stock, at cost		Accumulated Other Comprehensive Loss		Noncontrolling Interests - Common Units		Noncontrolling Interests - Property Partnerships		Total
	Shares	Amount












Equity, December 31, 2020	155,719	$	1,557	$	200,000	$	6,356,791	$	(509,653)	$	(2,722)	$	(49,890)	$	616,596	$	1,726,933	$	8,339,612
Redemption of operating partnership units to common stock	227	2		—		8,031		—		—		—		(8,033)		—		—
Allocated net income for the period	—	—