BXP, Inc. (BXP) FY 2021 MD&A

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

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

Forward-Looking Statements

This Annual Report on Form 10-K, 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 “Business—Business and Growth Strategies,” “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” We caution investors that any such forward-looking statements are based on 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,” “could”, “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “project,” “should,” “will” and similar expressions that do not relate solely to historical matters are intended to identify forward-looking statements. Such statements are subject to risks, uncertainties and assumptions and are not guarantees of future performance or occurrences, which may be affected by known and unknown risks, trends, uncertainties and factors that are, in some cases, beyond our control. 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.

The most significant factors that may cause actual results to differ materially from those expressed or implied by the forward-looking statements include 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 directly and indirectly, as well as the other important factors below and the risks set forth in this Form 10-K in Part I, 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 emergence of additional variants, the effectiveness, availability and distribution of vaccines, including their efficacy against new variant strains and the willingness of individuals to be vaccinated, the severity and duration of indirect economic impacts such as recession, supply chain disruptions, labor market disruptions, inflation, dislocation and volatility in capital markets, job losses, potential longer-term changes in consumer and tenant behavior, as well as possible future governmental responses;

•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;

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

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•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; and

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

The risks set forth above are not exhaustive. Other sections of this report, including “Part I, Item 1A—Risk Factors,” include additional factors that could adversely affect our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment, 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 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) (based on total market capitalization as of December 31, 2021) in the United States that develops, owns and manages primarily Class A office properties. Our properties are concentrated in six markets in the United States - Boston, Los Angeles, New York, San Francisco, Seattle, 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 and the industry in which it conducts business, the length of the lease, the rental rate to be paid at inception and throughout the lease term, the costs of tenant improvements, free rent periods and other landlord concessions, anticipated operating expenses and real estate taxes, current and anticipated vacancy in our properties and the market overall (including sublease space), current and expected future demand for the space, the impact of other tenants’ 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 attractive demand drivers, and to focus on executing long-term leases with financially strong tenants. Historically, these factors have minimized our exposure in weaker economic cycles and enhanced revenues as market conditions improve. Our tenant base is diverse across market sectors

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and the weighted-average lease term for our in-place leases, excluding residential units, was approximately 7.9 years, as of December 31, 2021, including leases signed by our unconsolidated joint ventures. The weighted-average lease term for our 20 largest office tenants was approximately 11.4 years as of December 31, 2021.

To be successful in any leasing environment, we believe we must consider all aspects of the tenant-landlord relationship. In this regard, we believe that our competitive leasing advantage is based on the following attributes:

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

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

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

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

•our relationships with local brokers.

Outlook

The United States economy continues to recover from the COVID-19 pandemic as quarter-over-quarter GDP growth increased to an annual rate of 6.9% in the fourth quarter of 2021 compared to 2.3% in the third quarter of 2021. GDP growth was 3.1% above pre-pandemic level, including the impacts of an uptick of COVID-19 infections. However, the momentum slowed by December as the Omicron variant contributed to decreased spending as well as disruptions to factories and services businesses. Despite this, we have not experienced any delays in negotiating leases nor did these tenants change their space needs. We believe there are signs that infections have peaked within the markets we operate in, which could lead to increased demand for services. We believe these trends, combined with relatively low unemployment rates and consistent job growth, bode well for continuing economic growth in our markets.

The overall economic recovery is having a positive impact on our leasing activity. Although additional COVID variants and supply-chain issues may continue to emerge, we believe as employees return to their offices in greater numbers, our strategically located, high-quality office properties will remain a vital component of the strategies of today’s forward-thinking organizations that prioritize fostering collaboration, innovation, productivity and culture, and we expect tenants will take advantage of the availability of Class A space and upgrade.

BXP Priorities

Despite the concerns surrounding COVID-19 and the lingering impact on economic conditions in our markets, we remain optimistic for our industry generally and our company in particular, given the demand for workers across sectors, the high quality of our properties, and the success of our development efforts.

We remain focused on the following priorities, which we believe are key to increasing future revenue and asset values over the long-term:

•ensuring tenant health, safety and satisfaction;

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

•completing the construction and leasing of our development properties;

•continuing and completing the redevelopment, repositioning, and repurposing for growing life sciences use of several key properties;

•identifying new investment opportunities that meet our criteria while maintaining discipline in our underwriting;

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

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

The following is an overview of leasing and investment activity in the fourth quarter of 2021.

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Leasing Activity and Occupancy

In the fourth quarter of 2021, we signed approximately 1.8 million square feet of new leases and renewals with a weighted-average lease term of approximately 8.6 years, indicating that many new and existing tenants continue to commit to the long-term use of space and view our properties as their preferred choice for a premium Class A office environment. More than 25% of the square footage signed in the fourth quarter was leased to life sciences tenants, demonstrating the strong demand from this sector and the opportunities we have to grow our life sciences portfolio. Leasing activity steadily increased throughout 2021, with the fourth quarter achieving the largest square footage leased since the third quarter of 2019, a 55% increase from the fourth quarter of 2020, and approximately 97% of our 10-year fourth quarter leasing average.

The overall occupancy of our in-service office and retail properties was 88.8% at December 31, 2021, an increase of 0.4% from September 30, 2021. Given current vacancy and near-term rollover, the amount of leases signed, but for which occupancy has not commenced, leases in negotiation on space in the in-service portfolio, and the expected delivery of our development properties, we are confident that our occupancy will increase.

Our parking and other revenue was approximately $23 million in the fourth quarter of 2021, an increase of approximately $1.7 million, or 8% from the third quarter of 2021, and an increase of approximately $7 million, or 41% from the depth of the pandemic in the second quarter of 2020. As infections from the Omicron variant rose, transient parking revenue declined modestly in January 2022 as compared to our forecast, but we believe this decrease is only temporary and that we will begin to see an increase in the remainder of the first quarter of 2022 as infection rates decline and workers increasingly return to work in their offices.

Our hotel property, the Boston Marriott Cambridge, operated at approximately 50% occupancy during the fourth quarter of 2021. For the full-year 2021, it operated at a small profit contributing approximately $0.6 million to our net income. In 2019, prior to the commencement of the pandemic, the hotel contributed approximately $15 million to our net income. Given the hotel’s location in the heart of Cambridge, Massachusetts and adjacent to MIT, we expect hotel occupancy and REVPAR to improve to pre-pandemic levels over time as business and leisure travel return to historical levels.

Investment Activity

We remain committed to developing and acquiring assets to enhance our long-term growth and to meet tenant demand for high-quality office, residential, and lab space. We continually evaluate current and prospective markets for possible acquisitions of “value-add” assets that require lease-up or repositioning, and acquisitions that are otherwise consistent with our long-term strategy of owning, managing, developing and improving, premier Class A properties in each of our chosen markets.

During the fourth quarter of 2021, we continued to execute on our strategy and completed the acquisition of 360 Park Avenue South. 360 Park Avenue South is an approximately 450,000 square foot, 20-story office property located in the Midtown South submarket of Manhattan, New York. Utilizing our Strategic Capital Program (“SCP”), we contributed the asset and related loan to a joint venture with two institutional partners for our aggregate (direct and indirect) 42.21% ownership interest in the joint venture. Midtown South has been an attractive market to growing technology companies. We are repositioning the asset, both in terms of building system and the common areas and tenant spaces, to attract the type of tenancy that prefers the Midtown South location.

We believe this investment aligns with several elements of our growth strategy, including entering new markets or submarkets that exhibit strong demand and limitations on supply, uncovering opportunities that utilize our leasing and redevelopment skills to increase value, broadening our portfolio to meet the current and anticipated future demand of tenants in the technology sector and using private equity to increase our returns and enhance our investment capacity (Refer to the heading “Liquidity and Capital Resources” within “Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations” for a discussion of the SCP).

In the fourth quarter of 2021, we completed and fully placed in-service two development projects and one redevelopment project, partially placed in-service a development project, and commenced two new development projects. For the full-year 2021 and including January 2022, we placed in-service five development projects and commenced the development/redevelopment of seven projects.

As of December 31, 2021, our development/redevelopment pipeline consists of nine properties that, when completed, we expect will total approximately 3.4 million net rentable square feet. Our share of the estimated total cost for these projects is approximately $2.5 billion, of which approximately $1.1 billion remained to be invested. The total development pipeline, inclusive of both office and lab/life sciences developments, but excluding the View

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Boston Observatory at The Prudential Center, is 59% pre-leased as of February 14, 2022. The office development projects, which total approximately 2.4 million square feet, are approximately 65% pre-leased, as of February 14, 2022, to predominately credit-strong tenants with long-lease terms.

Four of the new development and redevelopment projects added to our development pipeline in 2021 focus on the specific needs of tenants in the life sciences sector. As of January 2022, our lab/life sciences developments in our pipeline total approximately 1.2 million square feet and include properties in Waltham, Massachusetts and South San Francisco, California. Although the approximately 435,000 square foot Shady Grove Innovation District, which we acquired in 2021, is not currently included in our development pipeline, we anticipate redeveloping these office buildings to lab/life sciences space. We commenced the development of 103 CityPoint in Waltham, Massachusetts in the fourth quarter of 2021, and in January 2022, we commenced the redevelopment of 651 Gateway, which we own a 50% interest, in South San Francisco, California. Our lab/life sciences developments are located in some of the largest life sciences clusters in the United States, with strong demand from tenants because of the close proximity to universities, research institutions and related businesses and concentrations of labor with specialized skills and knowledge.

Supply-chain concerns and inflation pressures continue to impact our business both in time to completion and increased costs. Our construction schedule is one of the criteria we use when we evaluate bids for development projects and capital improvements. We have been successful in awarding bids and maintaining schedules through the pandemic. However, there are fewer choices for materials, and we are working closely with our consultants and contractors to ensure there are not items used in the development or redevelopment process that could, directly or indirectly, cause delays. We are intentionally minimizing the amount of materials we acquire from foreign suppliers, releasing material packages as early as possible and making advance purchases of materials and storing them off-site. We currently expect to deliver all active developments and redevelopments on time and budget. However, we may experience greater costs and/or necessary materials may not be available, which could delay the completion of our development projects. A failure to deliver a project on time could expose us to additional costs, in time or penalties, for signed leases with such penalties.

As we continue to focus on new investments to drive future growth, we continually review our portfolio to identify properties as potential sales candidates that either no longer fit within our portfolio strategy or could attract premium pricing in the current market. On October 25, 2021, we completed the sale of 181,191 and 201 Spring Street, a three-building complex aggregating approximately 333,000 net rentable square feet in Lexington, Massachusetts, for an aggregate gross sales price of $191.5 million. The three buildings were 100% leased at the time of the sale. We will continue to evaluate the sale of similar properties.

A brief overview of each of our markets follows.

Boston

The Boston region is home to the largest cluster of life sciences companies in the world with growth and increasing demand driving and growing rents. During the fourth quarter of 2021, we signed approximately 415,000 square feet of leases and approximately 274,000 square feet of leases commenced. Approximately 167,000 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 34% over the prior leases.

Our Boston central business district (“CBD”) in-service portfolio was approximately 94% leased as of December 31, 2021. During the fourth quarter of 2021, we completed and fully placed in-service 100 Causeway Street, an approximately 634,000 net rentable square feet Class A office building in which we have a 50% ownership interest. Including leases that have not yet commenced, this project is 95% leased.

Our approximately 2.0 million square foot in-service office portfolio in Cambridge was approximately 99% leased as of December 31, 2021. During the fourth quarter of 2021, we continued our development of 325 Main Street at Kendall Center in Cambridge, Massachusetts, which is 90% pre-leased to an office tenant for a term of 15 years. We expect to place the building in-service in 2022. In early 2021, we received approximately one million square feet of new entitlements at Kendall Center for potential future development of office or lab/life sciences spaces.

Waltham and the area surrounding the Route 128-Mass Turnpike interchange continue to comprise a popular submarket of Boston for leading and emerging companies in the life sciences, biotechnology and technology sectors. During the fourth quarter of 2021, we signed leases for approximately 165,000 square feet at 880 Winter Street, an approximately 224,000 square foot office property in Waltham, Massachusetts under conversion to lab

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space. This project is 74% pre-leased as of February 14, 2022, with delivery expected in late 2022. In addition, we completed and fully placed in-service the redeveloped portion of 200 West Street in Waltham, Massachusetts, an approximately 138,000 square foot redevelopment to convert a portion of the building to lab space. Including leases that have not yet commenced, this project is 100% leased. In addition, we commenced the development of 103 CityPoint in Waltham, Massachusetts. When completed, the project will consist of approximately 113,000 square feet of life sciences space.

Los Angeles

Our Los Angeles (“LA”) in-service portfolio of approximately 2.3 million square feet is currently focused in West LA and includes Colorado Center, a 1.1 million square foot property of which we own 50%, and Santa Monica Business Park, a 21-building, approximately 1.2 million square foot property of which we own 55%. As of December 31, 2021, our LA in-service properties were approximately 89% leased.

Leasing activity in the greater Los Angeles market continued to recover in the fourth quarter of 2021, especially in West LA where our properties are located. Technology and media tenants accounted for almost half of all transactions in the fourth quarter in the greater Los Angeles market. These transactions suggest a steady preference by many creative tenants for modern low-rise product with collaborative space similar to our two office parks in Santa Monica.

New York

As of December 31, 2021, our New York CBD in-service portfolio was approximately 90% leased. During the fourth quarter of 2021, we executed approximately 594,000 square feet of leases and commenced approximately 222,000 square feet of leases. Approximately 93,000 square feet of the leases that commenced had been vacant for less than one year and represent a decrease in net rental obligations of approximately 18% over the prior leases. One lease where we terminated a tenant, received a fee, and subsequently took over a below-market sublease accounted for the decrease. Excluding this lease, we experienced an increase in net rental obligations of approximately 7%.

In the fourth quarter of 2021, we acquired and commenced the redevelopment of 360 Park Avenue South, in which we have an aggregate (direct and indirect) 42.21% interest. The redevelopment will include modernizing building systems and creating amenities, collaborative spaces, and client spaces to reimagine the property to meet the needs of today’s tech and creative firms and position it as the premier workspace for growing companies in the Midtown South submarket.

San Francisco

The recovery in San Francisco continues to lag our East Coast markets as fewer businesses have commenced their return to work, street-level retail remains closed or slow, and the streets are quiet. As restrictions are lifted, we believe the pace of new leasing activity will begin to increase.

Our San Francisco CBD in-service properties were approximately 92% leased as of December 31, 2021. In the fourth quarter of 2021 in the CBD portfolio, we commenced approximately 76,000 square feet of leases with an increase in net rental obligations of approximately 13%.

In South San Francisco, life sciences activity at our Gateway Commons joint venture continues to be productive. We executed a 229,000 square foot lease with a leading biotech company at 751 Gateway. The lease comprises the entire building, which is currently under construction with initial occupancy expected in 2024. 751 Gateway is the first phase of a multi-phase life sciences campus development project at Gateway Commons. When completed, we will have a 49% ownership interest in 751 Gateway. Also at Gateway Commons, in January 2022, we commenced the redevelopment 651 Gateway. 651 Gateway is an approximately 300,000 net rentable square feet office building that will be converted to life sciences space. This property is owned by a joint venture in which we have a 50% interest.

Throughout 2021, the Class A office Silicon Valley leasing markets grew stronger with healthy net absorption. We are experiencing improving tour activity and the market is seeing large technology tenant requirements for existing and new products. Due to the limited supply of new, high-quality office space in this submarket, in February 2022, we announced the restart of the first phase of our Platform 16 development project. Platform 16, in which we own a 55% interest, is an approximately 1.1 million aggregate square foot development located in San Jose, California and proximate to San Jose Diridon Station. The first phase of the development project will include the

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construction of an approximately 390,000 square foot Class A creative office building and a below-grade parking garage, which are expected to be completed in early 2025.

Inclusive of the CBD and suburban portfolio, we executed approximately 405,000 square feet of leases, and commenced approximately 191,000 square feet of leases in the San Francisco region during the fourth quarter of 2021. Of the leases that commenced, approximately 159,000 square feet had been vacant for less than one year and represent a modest increase in net rental obligations of approximately 1% over the prior leases.

Seattle

We entered the Seattle market on September 1, 2021 with the acquisition of Safeco Plaza, a 50-story, 765,000 net rentable square feet, LEED Platinum certified, Class A office property in Seattle, Washington. The property was acquired under a joint venture in which we have a 33.67% ownership interest. Safeco Plaza was approximately 90% leased at December 31, 2021.

Seattle is one of the most dynamic office markets in the U.S. for companies in the technology, life sciences, financial services, and manufacturing sectors. Much like San Francisco, the recovery from the pandemic is lagging behind our East Coast markets as workers are slow to return to the office, office worker supported retail remains closed or slow and the streets remain quiet. However, in the Seattle market, there are signs of recovery as leasing activity and tenant demand increased throughout 2021. The technology industry remains a key market driver and, in the fourth quarter of 2021, accounted for more than 51% of the total leasing volume.

We continue to explore opportunities to increase our presence in the Seattle market including seeking investments where our financial, operational, redevelopment and development expertise provide the opportunity to achieve accretive returns.

Washington, DC

During the fourth quarter of 2021, we executed approximately 379,000 square feet of leases and we commenced approximately 1.4 million square feet of leases in the Washington, DC region. Of these leases, approximately 240,000 square feet had been vacant for less than one year and represent a decrease in net rental obligations of approximately 18% over the prior leases.

Our Washington, DC CBD in-service properties were approximately 85% leased as of December 31, 2021. In December 2021, we delivered 2100 Pennsylvania Avenue to our anchor tenant, who leases approximately 56% of the building, to perform their tenant improvements and we are working on leasing the remainder of the building. 2100 Pennsylvania Avenue is a Class A office project with approximately 480,000 net rentable square feet located in Washington, DC and is 58% pre-leased as of February 14, 2022.

Our Washington, DC suburban properties include our significant presence in Reston, Virginia, where demand from technology and cybersecurity tenants remains strong. Our Washington, DC suburban properties were approximately 89% leased as of December 31, 2021. During the fourth quarter of 2021, we completed more than 200,000 square feet of leasing in Reston, including an approximately 89,000 square foot lease with a technology company at South of Market in Reston, Virginia.

During the fourth quarter of 2021, we partially placed in-service Reston Next, a Class A office project with approximately 1.1 million square feet located in Reston, Virginia. This project is 86% pre-leased as of February 14, 2022. In addition, a joint venture in which we own a 50% interest fully placed in-service 7750 Wisconsin Avenue, a Class A office project with approximately 733,000 net rentable square feet located in Bethesda, Maryland. This project is 100% leased.

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Leasing Statistics

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

__________________

(1)Total square feet of property dispositions during the year ended December 31, 2021 consists of 29,595 square feet due to the sale of Annapolis Junction Building Six. Total square feet of properties taken out of service during the year ended December 31, 2021 consists of 34,290 square feet at 880 Winter Street and 40,728 square feet at 800 Boylston Street - The Prudential Center, both due to redevelopment.

(2)Total square feet of vacant space in properties acquired during the year ended December 31, 2021 consists of 69,581 square feet at Safeco Plaza and 74,267 square feet at Shady Grove Innovation District.

(3)Total square feet of properties placed (and partially placed) in-service during the year ended December 31, 2021 consists of 195,326 square feet of office and 31,950 square feet of retail at One Five Nine East 53rd Street, 6,709 square feet at 685 Gateway, 633,819 square feet at 100 Causeway Street, 733,483 square feet at 7750 Wisconsin Avenue, 295,506 square feet at Reston Next and 138,444 square feet at 200 West Street.

(4)Represents leases for which lease revenue recognition has commenced in accordance with GAAP during the year ended December 31, 2021.

(5)Represents leases executed during the year ended December 31, 2021 for which we either (1) commenced lease revenue recognition in such period or (2) will commence lease revenue recognition in subsequent periods, in accordance with GAAP, and includes leases at properties currently under development. The total square feet of leases executed and recognized during the year ended December 31, 2021 is 1,156,558.

(6)Second generation leases are defined as leases for space that had previously been leased by us. Of the 4,591,307 square feet of second generation leases that commenced during the year ended December 31, 2021, leases for 2,856,968 square feet were signed in prior periods.

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

(8)Represents the decrease in gross rent (base rent plus expense reimbursements) on the new versus expired leases on the 3,285,722 square feet of second generation leases that had been occupied within the prior 12 months for the year ended December 31, 2021; excludes leases that management considers temporary because the tenant is not expected to occupy the space on a long-term basis.

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(9)Represents the decrease in net rent (gross rent less operating expenses) on the new versus expired leases on the 3,285,722 square feet of second generation leases that had been occupied within the prior 12 months for the year ended December 31, 2021.

For descriptions of significant transactions that we completed during 2021, see “Item 1. Business—Transactions During 2021.”

Critical Accounting Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America, or GAAP, requires management to use judgment in the application of accounting policies, including making estimates and assumptions. We base our estimates on historical experience and on various other assumptions believed to be reasonable under the circumstances. These judgments affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. If our judgment or interpretation of the facts and circumstances relating to various transactions had been different, it is possible that different accounting policies would have been applied resulting in a different presentation of our financial statements. From time to time, we evaluate our estimates and assumptions. In the event estimates or assumptions prove to be different from actual results, adjustments are made in subsequent periods to reflect more current information. Our significant accounting policies, which utilize these critical accounting estimates, are described in Note 2 to our Consolidated Financial Statements.

We consider our critical accounting estimates to be those used in the determination of the reported amounts and disclosure related to the following:

•Purchase price allocations; and

•Impairment.

Each of the above critical accounting estimates is described in more detail below.

Real Estate

Purchase Price Allocations

We assess the fair value of acquired tangible and intangible assets (including land, buildings, tenant improvements, “above-” and “below-market” leases, leasing and assumed financing origination costs, acquired in-place leases, other identified intangible assets and assumed liabilities) and allocate the purchase price to the acquired assets and assumed liabilities, including land and buildings as if vacant. We assess fair value based on estimated cash flow projections that utilize discount and/or capitalization rates that we deem appropriate, as well as available market information. Estimates of future cash flows are based on a number of factors including the historical operating results, known and anticipated trends, and market and economic conditions.

The fair value of the tangible assets of an acquired property considers the value of the property as if it were vacant. We also consider an allocation of purchase price of other acquired intangibles, including acquired in-place leases that may have a customer relationship intangible value, including (but not limited to) the nature and extent of the existing relationship with the tenants, the tenants’ credit quality and expectations of lease renewals. Based on our acquisitions to date, our allocation to customer relationship intangible assets has been immaterial.

We record acquired “above-” and “below-market” leases at their fair values (using a discount rate which reflects the risks associated with the leases acquired) equal to the difference between (1) the contractual amounts to be paid pursuant to each in-place lease and (2) management’s estimate of fair market lease rates for each corresponding in-place lease, measured over a period equal to the remaining term of the lease for above-market leases and the initial term plus the term of any below-market fixed rate renewal options for below-market leases. Acquired “above-” and “below-market” lease values have been reflected within Prepaid Expenses and Other Assets and Other Liabilities, respectively, in our Consolidated Balance Sheets. Other intangible assets acquired include amounts for in-place lease values that are based on our evaluation of the specific characteristics of each tenant’s lease. Factors to be considered include estimates of carrying costs during hypothetical expected lease-up periods considering current market conditions, and costs to execute similar leases. In estimating carrying costs, we include real estate taxes, insurance and other operating expenses and estimates of lost rentals at market rates during the expected lease-up periods, depending on local market conditions. In estimating costs to execute similar leases, we consider leasing commissions, legal and other related expenses.

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Impairment

Management reviews its long-lived assets for indicators of impairment following the end of each quarter and when events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. This evaluation of long-lived assets is dependent on a number of factors, including when there is an event or adverse change in the operating performance of the long-lived asset or a current expectation that, more likely than not, a long-lived asset will be sold or otherwise disposed of significantly before the end of its previously estimated useful life or hold period. An impairment loss is recognized if the carrying amount of an asset is not recoverable and exceeds its fair value. The evaluation of anticipated cash flows is subjective and is based in part on assumptions regarding anticipated hold periods, future occupancy, future rental rates, future capital requirements, discount rates and capitalization rates that could differ materially from actual results in future periods. Because cash flows on properties considered to be “long-lived assets to be held and used” are considered on an undiscounted basis to determine whether an asset may be impaired, our established strategy of holding properties over the long term directly decreases the likelihood of recording an impairment loss. If our hold strategy changes or market conditions otherwise dictate an earlier sale date, an impairment loss may be recognized and such loss could be material. If we determine that an impairment has occurred, the affected assets must be reduced to their fair value.

Income Taxes

Our accounting policies related to income tax are described in Note 2 to our Consolidated Financial Statements.

Boston Properties Inc.

The net difference between the tax basis and the reported amounts of BXP’s assets and liabilities was approximately $1.8 billion and $2.0 billion as of December 31, 2021 and 2020, respectively, which was primarily related to the difference in basis of contributed property and accrued rental income.

Certain entities included in BXP’s Consolidated Financial Statements are subject to certain state and local taxes. These taxes are recorded as operating expenses in the accompanying Consolidated Financial Statements.

The following table reconciles GAAP net income attributable to Boston Properties, Inc. to taxable income:

Boston Properties Limited Partnership

The net difference between the tax basis and the reported amounts of BPLP’s assets and liabilities was approximately $2.9 billion as of December 31, 2021 and 2020, which was primarily related to the difference in basis of contributed property and accrued rental income.

Certain entities included in BPLP’s Consolidated Financial Statements are subject to certain state and local taxes. These taxes are recorded as operating expenses in the accompanying Consolidated Financial Statements.

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The following table reconciles GAAP net income attributable to Boston Properties Limited Partnership to taxable income:

Results of Operations for the Year Ended December 31, 2021 and 2020

This section of this Form 10-K generally discusses 2021 and 2020 items and year-to-year comparisons between 2021 and 2020. Discussions of 2019 items and year-to-year comparisons between 2020 and 2019 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2020, which was filed with the SEC on February 26, 2021.

Net income attributable to Boston Properties, Inc. common shareholders and net income attributable to Boston Properties Limited Partnership common unitholders decreased approximately $366.0 million and $418.0 million for the year ended December 31, 2021 compared to 2020, respectively, as set forth in the following tables and for the reasons discussed below under the heading “Comparison of the year ended December 31, 2021 to the year ended December 31, 2020” within “Item 7—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 year ended December 31, 2021 and 2020 (in thousands):

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Boston Properties, Inc.

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Boston Properties Limited Partnership

At December 31, 2021 and 2020, we owned or had joint venture interests in a portfolio of 201 and 196 commercial real estate properties, respectively (in each case, the “Total Property Portfolio”). As a result of changes within our Total Property Portfolio, the financial data presented below shows significant changes in revenue and expenses from period-to-period. Accordingly, we do not believe that our period-to-period financial data with respect to the Total Property Portfolio provides a complete understanding of our operating results. Therefore, the comparison of operating results for the year ended December 31, 2021 and 2020 show separately the changes attributable to the properties that were owned by us and in-service throughout each period compared (the “Same Property Portfolio”) and the changes attributable to the properties included in the Acquired, Placed In-Service, Development or Redevelopment or Sold Portfolios.

In our analysis of operating results, particularly to make comparisons of net operating income between periods more 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 stock/unit redemption charge, preferred dividends/distributions, net income attributable to noncontrolling interests, interest expense, losses from early extinguishment of debt, loss from unconsolidated joint ventures, 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 on sales of real estate, 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 understand 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 and depreciation expense may differ between BXP and BPLP as a result of previously applied acquisition accounting by BXP for the issuance of common stock in connection with non-sponsor OP Unit redemptions by BPLP. This accounting resulted in a step-up of the real estate assets at BXP that was allocated to certain properties. The difference between the real estate assets of BXP as compared to BPLP for certain properties having an allocation of the real estate step-up will result in a corresponding difference in gains on sales of real estate and depreciation expense when those properties are sold. For additional information see the Explanatory Note that follows the cover page of this Annual Report on Form 10-K.

Comparison of the year ended December 31, 2021 to the year ended December 31, 2020

The table below shows selected operating information for the Same Property Portfolio and the Total Property Portfolio. The Same Property Portfolio consists of 137 properties totaling approximately 38.7 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, 2020 and owned and in service through December 31, 2021. The Total Property Portfolio includes the effects of the other properties either acquired, placed in-service, in development or redevelopment after January 1, 2020 or disposed of on or prior to December 31, 2021. This table includes a reconciliation from the Same Property Portfolio to the Total Property Portfolio by also providing information for the years ended December 31, 2021 and 2020 with respect to the properties that were acquired, placed in-service, in development or redevelopment or sold.

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_______________

(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 71. Residential Net Operating Income (Loss) for the year ended December 31, 2021 and 2020 is comprised of Residential Revenue of $42,668 and $38,146 less Residential Expenses of $24,444 and $18,739, respectively. Hotel Net Operating Income (Loss) for the year ended December 31, 2021 and 2020 is comprised of Hotel Revenue of $13,609 and $7,478 less Hotel Expenses of $12,998 and $13,136, respectively, per the Consolidated Statements of Operations.

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Same Property Portfolio

Lease Revenue (Excluding Termination Income)

Lease revenue (excluding termination income) from the Same Property Portfolio increased by approximately $95.7 million for the year ended December 31, 2021 compared to 2020. Approximately $86.1 million of the increase related to write-offs of accrued rent and accounts receivable balances which occurred during the year ended December 31, 2020 and did not recur in 2021, for primarily retail and co-working tenants that either terminated their leases or for which we determined that the accrued rent and/or accounts receivable balances were no longer probable of collection. Excluding the write-offs, the Same Property Portfolio increased by approximately $9.6 million due to an increase in average revenue per square foot by approximately $1.54, contributing approximately $52.0 million, partially offset by average occupancy decreasing from 93.1% to 91.5%, resulting in a decrease of approximately $42.4 million.

We continue to evaluate the collectability of our accrued rent and accounts receivable balances related to lease revenue. Following a write-off, if (1) we subsequently determine that it is probable we will collect substantially all the remaining lessee’s lease payments under the lease term and (2) the lease has not been modified since the write-off, we will then reinstate the accrued rent and accounts receivable write-offs, adjusting for the amount related to the period when the lease payments were considered not probable of collection. If our estimate of collectability differs from the cash received, then the timing and amount of our reported revenue could be impacted.

The number of executed COVID-19 lease modifications has decreased each quarter since the second quarter of 2020 and we are now executing COVID-19 modifications on a limited basis.

Termination Income

Termination income increased by approximately $2.5 million for the year ended December 31, 2021 compared to 2020.

Termination income for the year ended December 31, 2021 totaled approximately $11.4 million and related to 27 tenants across the Same Property Portfolio, most of which related to tenants that terminated leases early in New York City and the Boston region.

Termination income for the year ended December 31, 2020 totaled approximately $8.9 million and related to 39 tenants across the Same Property Portfolio, most of which related to tenants that terminated leases early in New York City.

Parking and Other Revenue

Parking and other revenue increased by approximately $9.8 million for the year ended December 31, 2021 compared to 2020. Parking revenue and other revenue increased by approximately $7.1 million and $2.7 million, respectively. The increase in parking revenue was primarily due to an increase in transient parking. The increase in other revenue was primarily due to approximately $5.3 million in insurance proceeds related to damage at one of our properties in the New York region due to a water-main break, partially offset by a decrease in other revenue of approximately $2.6 million related to tenant restoration obligation payments in 2020 that did not recur in 2021. Expenses of $5.3 million related to the insurance claim are included within real estate operating expenses.

For the year ended December 31, 2021, transient parking increased by approximately $10.0 million, partially offset by a decrease in monthly parking of approximately $3.3 million, compared to the year ended December 31, 2020. Some of our monthly parking revenues are contractual agreements embedded in our leases, and some are at will individual agreements.

Real Estate Operating Expenses

Real estate operating expenses from the Same Property Portfolio increased by approximately $0.7 million, or 0.1%, for the year ended December 31, 2021 compared to 2020, due primarily to an increase in utility expense and expenses related to the insurance claim mentioned above, partially offset by a decrease in real estate taxes. The increase in utility expense was experienced across the portfolio and was primarily driven by an increase in physical tenant occupancy, which led to greater demand for electricity and HVAC.

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Properties Acquired Portfolio

The table below lists the properties acquired between January 1, 2020 and December 31, 2021. Rental revenue and real estate operating expenses increased by approximately $8.6 million and $2.8 million, respectively, for the year ended December 31, 2021 compared to 2020, as detailed below.

_______________

(1)Includes operating results for 759 Harrison Street, which we fully acquired on December 16, 2020.

Properties Placed In-Service Portfolio

The table below lists the properties that were placed in-service or partially placed in-service between January 1, 2020 and December 31, 2021. Rental revenue and real estate operating expenses from our Properties Placed In-Service Portfolio increased by approximately $29.9 million and $8.5 million, respectively, for the year ended December 31, 2021 compared to 2020, as detailed below.

_____________

(1)This is the low-rise portion of 601 Lexington Avenue, which was in development for the year ended December 31, 2020. Rental revenue for the year ended December 31, 2020 includes an approximately $2.9 million write-off of accrued rent and accounts receivable balances for a terminated tenant.

(2)Includes 138,444 square feet of redevelopment that was fully placed in-service in December 2021. This property was in development for the year ended December 31, 2020.

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Properties in Development or Redevelopment Portfolio

The table below lists the properties that were in development or redevelopment between January 1, 2020 and December 31, 2021. Rental revenue and real estate operating expenses from our Properties in Development or Redevelopment Portfolio decreased by approximately $10.2 million and $2.5 million, respectively, for the year ended December 31, 2021 compared to 2020, as detailed below.

_______________

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

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

(3)On April 16, 2021, we removed 3625-3635 Peterson Way, located in Santa Clara, California, from our in-service portfolio. We demolished the building and expect to redevelop the site at a future date.

Properties Sold Portfolio

The table below lists the properties we sold between January 1, 2020 and December 31, 2021. Rental revenue and real estate operating expenses from our Properties Sold Portfolio decreased by approximately $19.2 million and $6.7 million, respectively, for the year ended December 31, 2021 compared to 2020, as detailed below.

______________

(1)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.

For additional information on the sales of the above properties refer to “Results of Operations—Other Income and Expense Items—Gains on Sales of Real Estate” within “Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Residential Net Operating Income (Loss)

Net operating income for our residential same properties decreased by approximately $0.5 million for the year ended December 31, 2021 compared to 2020. The decrease was primarily due to approximately $0.7 million of termination income from a retail tenant in 2020 that did not recur in 2021.

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 years ended December 31, 2021 and 2020.

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_______________

(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 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)

The Boston Marriott Cambridge hotel had net operating income of approximately $0.6 million for the year ended December 31, 2021, representing an increase of approximately $6.3 million compared to the year ended December 31, 2020.

The Boston Marriott Cambridge closed in March 2020 due to COVID-19. The hotel re-opened on October 2, 2020 and has operated at lower occupancy levels due to the continued impact of COVID-19 on business and leisure travel. The closing of the hotel for more than two fiscal quarters, and the decreased demand and occupancy since its re-opening, have had, and are expected to continue to have, a material adverse effect on the hotel’s operations. We expect hotel occupancy to remain low until the demand for business and leisure travel accelerates.

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

Other Operating Revenue and Expense Items

Development and Management Services Revenue

Development and management services revenue decreased by approximately $1.9 million for the year ended December 31, 2021 compared to 2020. Development services revenue decreased by approximately $3.9 million while management services revenue increased by approximately $2.0 million. The decrease in development services revenue was primarily related to a decrease in development fees earned from a building owned by a third-party in the Washington, DC region and an unconsolidated joint venture in New York City and fees associated with tenant improvement projects earned from a third-party owned building in the Washington, DC region. The increase in management services revenue was primarily related to an increase in property management fees earned from a building owned by a third-party in the Washington, DC region, the unconsolidated joint venture that owns Safeco

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Plaza in Seattle, Washington, leasing commissions earned in the Washington, DC region and from an unconsolidated joint venture in the Los Angeles region.

General and Administrative Expense

General and administrative expense increased by approximately $18.5 million for the year ended December 31, 2021 compared to 2020 primarily due to an increase in compensation and health care expenses of approximately $19.9 million, partially offset by an approximately $1.4 million decrease in other general and administrative expenses. The increase in compensation expense was related to (1) an approximately $18.4 million increase in other compensation expenses, primarily due to the reduction of bonuses paid to senior management for the year ended December 31, 2020, which resulted from the impact of the COVID-19 pandemic on our actual performance versus targets under BXP’s 2020 annual cash incentive plan, and accelerated age-based vesting of certain employees, (2) an approximately $1.2 million increase in health care costs and (3) an approximately $0.3 million increase in the value of our deferred compensation plan. The decrease in other general and administrative expenses was primarily related to a decrease in professional fees.

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 year ended December 31, 2021 and 2020 were approximately $13.7 million and $12.9 million, respectively. These costs are not included in the general and administrative expenses discussed above.

Transaction Costs

Transaction costs increased by approximately $3.5 million for the year ended December 31, 2021 compared to 2020 due primarily to costs incurred in connection with the pursuit and formation of new joint ventures. In general, transaction costs relating to the formation of new and pending joint ventures and the pursuit of other transactions are expensed as incurred.

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 Annual Report on Form 10-K.

Boston Properties, Inc.

Depreciation and amortization expense increased by approximately $33.6 million for the year ended December 31, 2021 compared to 2020, as detailed below.

_______________

(1)During the year ended December 31, 2021, we commenced redevelopment of View Boston Observatory at The Prudential Center, a 59,000 net rentable square foot redevelopment of the top three floors of 800 Boylston Street - The Prudential Center, located in Boston, Massachusetts. As a result, during the year ended December 31, 2021, we recorded approximately $2.6 million of accelerated depreciation expense for the demolition of the space, of which approximately $0.8 million related to the step-up of real estate assets.

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(2)On February 25, 2021, we commenced redevelopment of 880 Winter Street in Waltham, Massachusetts. As a result, during the year ended December 31, 2021, we recorded approximately $13.7 million of accelerated depreciation expense for the demolition of a portion of the building.

Boston Properties Limited Partnership

Depreciation and amortization expense increased by approximately $32.4 million for the year ended December 31, 2021 compared to 2020, as detailed below.

_______________

(1)During the year ended December 31, 2021, we commenced redevelopment of View Boston Observatory at The Prudential Center, a 59,000 net rentable square foot redevelopment of the top three floors of 800 Boylston Street - The Prudential Center, located in Boston, Massachusetts. As a result, during the year ended December 31, 2021, we recorded approximately $1.8 million of accelerated depreciation expense for the demolition of the space.

(2)On February 25, 2021, we commenced redevelopment of 880 Winter Street in Waltham, Massachusetts. As a result, during the year ended December 31, 2021, we recorded approximately $13.7 million of accelerated depreciation expense for the demolition of a portion of the building.

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

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 year ended December 31, 2021 compared to 2020, loss from unconsolidated joint ventures decreased by approximately $82.5 million primarily due to (1) a $60.5 million non-cash impairment charge at our Dock 72 joint venture during the year ended December 31, 2020, (2) a net decrease in loss from unconsolidated joint ventures of approximately $4.5 million related to our exit from the Annapolis, Maryland submarket in 2021 and 2020 (See Note 6 to the Consolidated Financial Statements) and (3) an approximately $8.1 million increase in net income at our Dock 72 and Metropolitan Square joint ventures primarily due to a write-off of lease revenue during the year ended December 31, 2020. There were no non-cash impairment charge or write-off of lease revenue during 2021.

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 Annual Report on Form 10-K.

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Boston Properties, Inc.

Gains on sales of real estate decreased by approximately $495.3 million for the year ended December 31, 2021 compared to 2020, as detailed below.

___________

(1)On December 13, 2018, we sold our 6595 Springfield Center Drive development project located in Springfield, Virginia. Concurrently with the sale, we agreed to act as development manager and guaranteed the completion of the project (See Note 10 to the Consolidated Financial Statements). The development project achieved final completion during the third quarter of 2021 and, upon completion of the project, the total cost of development was determined to be below the estimated total investment at the time of sale. As a result, we recognized a gain of approximately $8.1 million.

(2)Excludes approximately $0.3 million of gains on sales of real estate recognized during the year ended December 31, 2020 related to gain amounts from sales of real estate occurring in the prior year.

Boston Properties Limited Partnership

Gains on sales of real estate decreased by approximately $506.7 million for the year ended December 31, 2021 compared to 2020, as detailed below.

___________

(1)On December 13, 2018, we sold our 6595 Springfield Center Drive development project located in Springfield, Virginia. Concurrently with the sale, we agreed to act as development manager and guaranteed the completion of the project (See Note 10 to the Consolidated Financial Statements). The development project achieved final completion during the third quarter of 2021 and, upon completion of the project, the total cost of development was determined to be below the estimated total investment at the time of sale. As a result, we recognized a gain of approximately $8.1 million.

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

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Interest and Other Income (Loss)

Interest and other income (loss) decreased by approximately $0.2 million for the year ended December 31, 2021 compared to 2020, due primarily to a decrease of approximately $3.4 million in interest income due to lower interest earned on our deposits, partially offset by an approximately $3.2 million decrease in the allowance for current expected credit losses, which results in higher income.

On January 1, 2020, we adopted Accounting Standards Update (“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.

Gains from Investments in Securities

Gains from investments in securities for the year ended December 31, 2021 and 2020 related to investments that we have made to reduce our market risk relating to deferred compensation plans that we maintain for BXP’s officers and former non-employee directors. Under the deferred compensation plans, each officer or non-employee director who is eligible to participate is permitted to defer a portion of the officer’s current income or the non-employee director’s compensation on a pre-tax basis and receive a tax-deferred return on these deferrals based on the performance of specific investments selected by the officer or non-employee director. In order to reduce our market risk relating to these plans, we typically acquire, in a separate account that is not restricted as to its use, similar or identical investments as those selected by each officer or non-employee director. This enables us 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 year ended December 31, 2021 and 2020, we recognized gains of approximately $5.6 million and $5.3 million, respectively, on these investments. By comparison, our general and administrative expense increased by approximately $5.6 million and $5.3 million during the year ended December 31, 2021 and 2020, 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.

Losses From Early Extinguishment of Debt

On February 14, 2021, BPLP completed the redemption of $850.0 million in aggregate principal amount of its 4.125% senior notes due May 15, 2021. The redemption price was approximately $858.7 million, which was equal to the stated principal plus approximately $8.7 million of accrued and unpaid interest to, but not including, the redemption date. Excluding the accrued and unpaid interest, the redemption price was equal to the principal amount being redeemed. We recognized a loss from early extinguishment of debt totaling approximately $0.4 million related to unamortized origination costs.

On March 16, 2021, BPLP repaid $500.0 million, representing all amounts outstanding on its delayed draw term loan facility (“Delayed Draw Facility”) under our prior unsecured revolving credit agreement (the “2017 Credit Facility”). We recognized a loss from early extinguishment of debt totaling approximately $0.5 million related to unamortized financing costs.

On October 15, 2021, BPLP used proceeds from its September 2021 offering of unsecured senior notes and borrowings under its new credit facility, which replaced the 2017 Credit Facility (as amended and restated, the “2021 Credit Facility”) to complete the redemption of $1.0 billion in aggregate principal amount of its 3.85% senior notes due February 1, 2023. The redemption price was approximately $1.05 billion. The redemption price included approximately $7.9 million of accrued and unpaid interest to, but not including, the redemption date. Excluding the accrued and unpaid interest, the redemption price was approximately 104.284% of the principal amount being redeemed. We recognized a loss from early extinguishment of debt totaling approximately $44.2 million, which amount included the payment of the redemption premium totaling approximately $42.8 million.

On December 10, 2021, the consolidated entity in which we have a 55% interest refinanced the mortgage loan collateralized by its 601 Lexington Avenue property located in New York City with a new lender. The mortgage loan has a principal amount of $1.0 billion, requires interest-only payments at a fixed interest rate of 2.79% per annum and matures on January 9, 2032. The previous mortgage loan had an outstanding balance of approximately $616.1 million, bore interest at a fixed rate of 4.75% per annum and was scheduled to mature on April 10, 2022. There was no prepayment penalty associated with the repayment of the previous mortgage loan. We recognized a

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loss from early extinguishment of debt totaling approximately $0.1 million due to the write-off of unamortized deferred financing costs.

Interest Expense

Interest expense decreased by approximately $8.4 million for the year ended December 31, 2021 compared to 2020, as detailed below.

_______________

(1)On June 15, 2021, BPLP entered into the 2021 Credit Facility, which replaced the 2017 Credit Facility (See Note 9 to the Consolidated Financial Statements).

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 the years ended December 31, 2021 and 2020 was approximately $53.1 million and $53.9 million, respectively. These costs are not included in the interest expense referenced above.

At December 31, 2021, our variable rate debt consisted of BPLP’s $1.5 billion revolving facility (the “Revolving Facility”). The Revolving Facility had $145 million outstanding as of December 31, 2021. For a summary of our consolidated debt as of December 31, 2021 and December 31, 2020 refer to the heading “Liquidity and Capital Resources—Debt Financing” within “Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

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Noncontrolling Interests in Property Partnerships

Noncontrolling interests in property partnerships increased by approximately $22.5 million for the year ended December 31, 2021 compared to 2020, as detailed below.

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(1)The increase was primarily attributable to an increase in lease revenue from our tenants. In addition, during the year ended December 31, 2020, we accelerated amortization expense related to a below-market lease that terminated early.

(2)During the year ended December 31, 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 these balances were no longer probable of collection. Approximately $12.0 million represents our partners’ 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 $41.8 million for the year ended December 31, 2021 compared to 2020 due primarily to a decrease in allocable income, which was the result of recognizing a greater gain on sales of real estate amount during 2020. Due to our ownership structure, there is no corresponding line item on BPLP’s financial statements.

Preferred Stock/Unit Redemption Charge

On March 2, 2021, BXP issued a redemption notice for 80,000 shares of its Series B Preferred Stock, which constituted all of the outstanding Series B Preferred Stock, and the corresponding Depositary Shares, each representing 1/100th of a share of Series B Preferred Stock. The redemption price per share of Series B Preferred Stock was $2,500, plus all accrued and unpaid dividend to, but not including, the redemption date, totaling $2,516.41 per share. On March 31, 2021, we transferred the full redemption price for all outstanding shares of Series B Preferred Stock of approximately $201.3 million, including approximately $1.3 million of accrued and unpaid dividends to, but not including, the redemption date, to the redemption agent. The excess of the redemption price over the carrying value of the Series B Preferred Stock and Series B Preferred Units of approximately $6.4 million relates to the original issuance costs and is reflected as a reduction to Net Income Attributable to Boston Properties, Inc. common shareholders and Net Income Attributable to Boston Properties Limited Partnership common unitholders on the Consolidated Income Statement.

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 and redevelopment costs;

•fund capital expenditures, including major renovations, tenant improvements and leasing costs;

•fund pending and possible acquisitions of properties, either directly or indirectly through the acquisition of equity interests therein; and

•make the minimum distribution required to enable BXP to maintain its REIT qualification under the Internal Revenue Code of 1986, as amended.

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We expect to satisfy these needs using one or more of the following:

•cash flow from operations;

•distribution of cash flows from joint ventures;

•cash and cash equivalent balances;

•borrowings under BPLP’s Revolving Facility, short-term bridge facilities and construction loans;

•long-term secured and unsecured indebtedness (including unsecured exchangeable indebtedness);

•sales of real estate;

•private equity sources through our Strategic Capital Program (“SCP”) with large institutional investors, and

•issuances of BXP equity securities and/or preferred or common units of partnership interests in BPLP.

We draw on multiple financing sources to fund our long-term capital needs. We expect to fund our current development/redevelopment properties primarily with our available cash balances, construction loans and BPLP’s Revolving Facility. We use BPLP’s Revolving Facility primarily as a bridge facility to fund acquisition opportunities, refinance outstanding indebtedness and meet short-term development and working capital needs. Although we may seek to fund our development projects with construction loans, which may require guarantees by BPLP, the financing for each particular project ultimately depends on several factors, including, among others, the project’s size and duration, the extent of pre-leasing and our available cash and access to cost effective capital at the given time.

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The following table presents information on properties under construction and redevelopment as of December 31, 2021 (dollars in thousands):

___________

(1)Represents our share.

(2)Each of Investment to Date, Estimated Total Investment and Estimated Future Equity Requirement includes 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 December 31, 2021.

(3)Includes approximately $51.1 million of unpaid but accrued construction costs and leasing commissions.

(4)Excludes approximately $51.1 million of unpaid but accrued construction costs and leasing commissions.

(5)Represents percentage leased as of February 14, 2022, including leases with future commencement dates.

(6)The property was 28% placed in-service as of December 31, 2021.

(7)Investment to Date includes all related costs incurred prior to the contribution of the property by us to the venture on December 15, 2021 totaling approximately $107 million and our proportionate share of the loan. Our partners will fund required capital until their aggregate investment is approximately 58% of all capital contributions; thereafter, the partners will fund required capital according to their percentage interests.

(8)We expect to place this project in-service and open to the public in the second quarter of 2023.

(9)Percentage leased excludes View Boston Observatory at The Prudential Center (redevelopment) at 800 Boylston Street - The Prudential Center.

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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, whether due to the impacts of the COVID-19 pandemic or otherwise, may adversely affect our net cash flows.

Leasing activity and revenue from parking and our hotel improved in the fourth quarter of 2021. We signed approximately 1.8 million square feet of leases in the fourth quarter of 2021, which is in-line with our 10-year fourth quarter leasing average. Our fourth quarter parking revenue was approximately 87% of our fourth quarter 2019 pre-pandemic parking revenue. While our hotel revenue significantly improved in the fourth quarter of 2021 compared to the fourth quarter of 2020, it was approximately 47% below our fourth quarter 2019 (i.e., pre-pandemic) hotel revenue as a result of low occupancy.

Our primary uses of capital over the next twelve months will be the commencement, continuation and completion of our current and committed development and redevelopment projects, servicing the interest payments on our outstanding indebtedness and satisfying our REIT distribution requirements.

As of December 31, 2021, we had nine properties under development or redevelopment. Our share of the remaining development and redevelopment costs that we expect to fund through 2025 was approximately $1.1 billion. In January 2022, we commenced the redevelopment of 651 Gateway, in which we own a 50% interest, located in South San Francisco, California and in February 2022, we announced the restart of the first phase of our Platform 16 development project, in which we own a 55% interest, in San Jose, California (see Note 18 to the Consolidated Financial Statements).

During the fourth quarter of 2021, a joint venture in which we own a 55% interest refinanced the mortgage debt collateralized by its 601 Lexington Avenue property located in New York City with a new lender. The new mortgage loan totals $1.0 billion, bears interest at a rate of 2.79% per annum and matures in January 2032. The previous mortgage debt had an outstanding balance of approximately $616.1 million, bore interest at a rate of 4.75% per annum and was scheduled to expire in April 2022.

In July 2021, we announced the formation of an investment program with two partners committing a targeted equity investment of $1.0 billion, including $250 million from us. Under this agreement, we will provide these partners, for up to two years, exclusive first offers to form joint ventures with us to invest in assets that meet pre-established target criteria. All investments are discretionary to each partner.

The SCP provides us the opportunity to partner with large institutional investors and capitalize our investment opportunities partially through private equity. The SCP enhances our access to capital and investment capacity and further enhances our returns through fees paid to us, and in certain partnerships, a greater share of income upon achieving certain success criteria. These large financial partners include some of the world’s largest sovereign wealth funds and pension plans. Our use of the SCP is consistent with our ongoing strategy to create value through opportunistic investments in high-quality office properties in markets with the strongest economic growth over time while maintaining a strong balance sheet and modest leverage.

On December 14, 2021, we acquired 360 Park Avenue South, an approximately 450,000 square foot office building located in New York City, for an aggregate purchase price, including transactions costs, of approximately $300.7 million. At closing, we assumed approximately $200.3 million of mortgage debt and BPLP issued approximately $99.7 million of its common units of limited partnership interest in BPLP (“OP Units”) at approximately $115 per OP Unit. Immediately following the acquisition, we refinanced the assumed debt with a $220.0 million, of which $202.0 million was advanced at closing, three-year mortgage loan with a variable interest rate equal to the Adjusted SOFR plus 2.40% per annum. The spread on the variable rate may be reduced subject to certain conditions. On December 15, 2021, we contributed the property to a joint venture for our aggregate (direct and indirect) approximately 42.21% ownership interest and the two SCP partners own the remaining approximately 58%

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interest. The joint venture assumed the related indebtedness. The venture immediately commenced redevelopment of the asset with an estimated initial occupancy in late 2023.

On October 25, 2021, we completed the sale of our 181, 191 and 201 Spring Street properties, located in Lexington, Massachusetts, for an aggregate gross sales price of $191.5 million. Net cash proceeds totaled approximately $179.9 million.

We have no debt maturities until September 2023. Our unconsolidated joint ventures have two loans maturing in 2022, of which our share of the aggregate outstanding principal is approximately $146.5 million. We are currently in the market to refinance both maturities with mortgage debt in amounts equal to or greater than the current balances. There can be no assurance that we will complete these refinancings on the terms currently contemplated or at all.

Although the current and future impact of COVID-19 on our liquidity and capital resources will depend on a wide range of factors, we believe that our access to capital and our strong liquidity, including the approximately $1.2 billion available under the 2021 Credit Facility and available cash of approximately $292.2 million (of which approximately $101.0 million is attributable to our consolidated joint venture partners), as of February 14, 2022, is sufficient to fund our remaining capital requirements on existing development and redevelopment projects, repay our maturing indebtedness when due, satisfy our REIT distribution requirements and still allow us to act opportunistically on attractive investment opportunities.

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 fund our current and future development activity, pursue additional attractive investment opportunities and refinance or repay indebtedness. Depending on interest rates, the overall conditions in the debt and equity markets, and our leverage at the time, we may decide to access either or both of these capital sources. Doing so may result in us carrying additional cash and cash equivalents pending our use of the proceeds, which could increase our net interest expense or be dilutive to our earnings, or both.

Inflation

We are exposed to inflation risk, as income from long-term leases is the primary source of our cash flows from operations. There are provisions in the majority of our tenant leases that protect us from, and mitigate the risk of, the impact of inflation. These provisions include rent steps and resets to market, reimbursement billings for operating expense pass-through charges, real estate tax and insurance reimbursements on a per-square-foot basis, or in some cases, annual reimbursement of operating expenses above a certain per-square-foot allowance. However, due to the long-term nature of the leases, the rent may not increase frequently enough to fully cover inflation.

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 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

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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 select 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 $0.5 billion and $1.7 billion at December 31, 2021 and 2020, respectively, representing a decrease of approximately $1.2 billion. The following table sets forth changes in cash flows:

Our principal source of cash flow is related to the operation of our properties. The weighted-average term of our in-place leases, excluding residential units, was approximately 7.9 years as of December 31, 2021, including leases signed by our unconsolidated joint ventures, with occupancy rates historically in the range of 88% to 94%. Generally, our properties generate a relatively consistent stream of cash flow that provides us with resources to pay operating expenses, debt service and fund regular quarterly dividend and distribution payment requirements. 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.

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 our market position. Cash used in investing activities for the year ended December 31, 2021 consisted primarily of acquisitions of real estate, development projects, building and tenant improvements and capital contributions to unconsolidated joint ventures, partially offset by proceeds from the sales of real estate and proceeds from sale of investment in unconsolidated joint ventures. Cash used in investing activities for the year ended December 31, 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 sale of real estate and capital distribution from unconsolidated joint ventures, as detailed below:

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Cash used in investing activities changed primarily due to the following:

(1)On August 2, 2021, we acquired Shady Grove Innovation District in Rockville, Maryland, for a purchase price, including transaction costs, of approximately $118.5 million in cash. Shady Grove Innovation District is an approximately 435,000 net rentable square foot, seven-building office park situated on an approximately 31-acre site.

On June 2, 2021, we acquired 153 & 211 Second Avenue located in Waltham, Massachusetts for a purchase price of approximately $100.2 million in cash. 153 & 211 Second Avenue consists of two life sciences lab buildings totaling approximately 137,000 net rentable square feet.

On June 26, 2020, we completed the acquisition of real property at 777 Harrison Street (known as Fourth + Harrison) located in San Francisco, California for a gross purchase price, including entitlements, totaling approximately $140.1 million. On July 31, 2020 and December 16, 2020, we acquired real property at 759 Harrison Street located in San Francisco, California, which is expected to be included in the Fourth + Harrison development project, for an aggregate purchase price totaling approximately $4.5 million. 759 Harrison Street and Fourth + Harrison are expected to support the development of approximately 850,000 square feet of primarily commercial office space.

(2)Construction in progress for the year ended December 31, 2021 includes ongoing expenditures associated with One Five Nine East 53rd Street, which was completed and fully placed in-service during the year ended December 31, 2021. In addition, we incurred costs associated with our continued development/redevelopment of 200 West Street, 325 Main Street, 2100 Pennsylvania Avenue, Reston Next, 180 CityPoint, View Boston Observatory at The Prudential Center and 880 Winter Street.

Construction in progress for the year ended December 31, 2020 includes ongoing expenditures associated with 17Fifty Presidents Street, 20 CityPoint and The Skylyne, which were completed and fully placed in-service during the year ended December 31, 2020. In addition, we incurred costs associated with our continued development/redevelopment of One Five Nine East 53rd Street, Reston Next, 2100 Pennsylvania Avenue, 200 West Street and 325 Main Street.

(3)On October 25, 2021, we completed the sale of our 181,191 and 201 Spring Street properties located in Lexington, Massachusetts for an aggregate gross sales price of $191.5 million. Net cash proceeds totaled approximately $179.9 million, resulting in a gain on sale of real estate totaling approximately $115.6 million for BXP and approximately $117.1 million for BPLP. 181,191 and 201 Spring Street are three Class A office properties aggregating approximately 333,000 net rentable square feet.

On December 16, 2020, we completed the sale of a parcel of land located in Marlborough, Massachusetts for a gross sale price of approximately $14.3 million. Net cash proceeds totaled approximately $14.2 million, resulting in a gain on sale of real estate totaling approximately $5.2 million.

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On June 25, 2020, we completed the sale of a portion of our Capital Gallery property located in Washington, DC for a gross sales 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 February 20, 2020, we completed the sale of New Dominion Technology Park located in Herndon, Virginia for a gross sales 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 $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.

(4)Capital contributions to unconsolidated joint ventures for the year ended December 31, 2021 consisted primarily of cash contributions of approximately $73.0 million and $11.4 million to our Safeco Plaza and Santa Monica Business Park joint ventures, respectively. On September 1, 2021, we entered into a new joint venture for Safeco Plaza located in Seattle, Washington (See Note 6 to the Consolidated Financial Statements).

Capital contributions to unconsolidated joint ventures for the year ended December 31, 2020 consisted primarily of cash contributions of approximately $79.3 million, $46.3 million, $27.2 million, $7.5 million and $7.4 million to our Platform 16, 3 Hudson Boulevard, Beach Cities Media Campus, Dock 72 and Metropolitan Square joint ventures, respectively.

(5)Capital distributions from unconsolidated joint ventures for the year ended December 31, 2020 consisted of cash distributions totaling (1) 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) 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) 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.

(6)On March 30, 2021, we completed the sale of our 50% ownership interest in Annapolis Junction NFM LLC (the “Annapolis Junction Joint Venture”) to the joint venture partner for a gross sales price of $65.9 million. Net cash proceeds to us totaled approximately $17.8 million after repayment of our share of debt totaling approximately $15.1 million.

(7)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.

(8)Proceeds from note receivable consists of the final repayment of a note receivable provided by us to the buyer in connection with the sale of land at our Tower Oaks property located in Rockville, Maryland, which was collateralized by a portion of the land parcel, bore interest at an effective rate of 1.92% per annum and matured on December 20, 2021.

Cash used in financing activities for the year ended December 31, 2021 totaled approximately $1.3 billion. This amount consisted primarily of (1) the redemption of $1.0 billion in aggregate principal amount of BPLP’s 3.85% senior notes due 2023, (2) the redemption of $850.0 million in aggregate principal amount of BPLP’s 4.125% senior notes due 2021, (3) the repayment of the $500.0 million Delayed Draw Facility under the 2017 Credit Facility, (4) redemption of the $200 million Series B Preferred Stock, (5) payment of our regular dividends and distributions to our shareholders and unitholders and (6) distributions to noncontrolling interest holders in property partnership. These decreases were partially offset by the proceeds from the issuance by BPLP of (1) $850.0 million in aggregate principal amount of its 2.550% senior unsecured notes due 2032 and (2) $850.0 million in aggregate principal

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amount of its 2.450% senior unsecured notes due 2033. Future debt payments are discussed below under the heading “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):

_______________

(1)Values are based on the closing price per share of BXP’s Common Stock on the New York Stock Exchange on December 31, 2021 of $115.18.

(2)Includes long-term incentive plan units (including 2012 OPP Units and 2013 - 2018 MYLTIP Units) but excludes MYLTIP Units granted between 2019 and 2021 because the three-year performance period has not ended.

(3)See page 95 for additional information.

(4)See page 94 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 December 31, 2021, as reported by the New York Stock Exchange, multiplied by (y) the sum of:

(i)     the number of outstanding shares of common stock of BXP,

(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 - 2018 MYLTIP Units that were issued in the form of LTIP Units.

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-

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year performance periods have not yet ended, 2019 - 2021 MYLTIP Units are not included in this calculation as of December 31, 2021.

We also present BXP’s Share of Market Capitalization and BXP’s Share of Debt/BXP’s Share of Market Capitalization, which are calculated in the same manner, except that BXP’s Share of Debt is utilized instead of our consolidated debt in both the numerator and the denominator. BXP’s Share of Debt is defined as our consolidated debt plus our share of debt from our unconsolidated joint ventures (calculated based upon our ownership percentage), minus our partners’ share of debt from our consolidated joint ventures (calculated based upon the partners’ percentage ownership interests adjusted for basis differentials). 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—Investments in Unconsolidated Joint Ventures - Secured Debt within “Item 7—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—Mortgage Notes Payable” within “Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Debt Financing

As of December 31, 2021, we had approximately $12.9 billion of outstanding consolidated indebtedness, representing approximately 39.07% of our Consolidated Market Capitalization as calculated above consisting of approximately (1) $9.5 billion (net of discount and deferred financing fees) in publicly traded unsecured senior notes having a GAAP weighted-average interest rate of 3.43% per annum and maturities in 2023 through 2033, (2) $3.3 billion (net of deferred financing fees) of property-specific mortgage debt having a GAAP weighted-average interest rate of 3.42% per annum and a weighted-average term of 6.8 years and (3) $145.0 million outstanding under BPLP’s 2021 Credit Facility that matures on June 15, 2026.

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 December 31, 2021 and December 31, 2020.

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_______________

(1)See page 95 for additional information.

(2)See page 94 for additional information.

Unsecured Credit Facility

On March 16, 2021, BPLP repaid $500.0 million, representing all amounts outstanding, on the Delayed Draw Facility under the 2017 Credit Facility. We recognized a loss from early extinguishment of debt totaling approximately $0.5 million, related to unamortized financing costs.

On June 15, 2021, BPLP amended and restated the 2017 Credit Facility and entered into the 2021 Credit Facility. The 2021 Credit Facility provides for borrowings of up to $1.5 billion through the Revolving Facility, subject to customary conditions. Among other things, the amendment and restatement (1) extended the maturity date to June 15, 2026, (2) eliminated the $500.0 million Delayed Draw Facility provided under the 2017 Credit Facility, (3) reduced the per annum variable interest rates on borrowings and (4) added a sustainability-linked pricing component. Under the 2021 Credit Facility, BPLP may increase the total commitment by up to $500.0 million by

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increasing the amount of the Revolving Facility and/or by incurring one or more term loans, in each case, subject to syndication of the increase and other conditions (See Note 9 to the Consolidated Financial Statements).

The 2021 Credit Facility replaces the 2017 Credit Facility, which consisted of a $1.5 billion unsecured revolving line of credit and a $500.0 million Delayed Draw Facility, and was scheduled to expire on April 24, 2022.

At December 31, 2021, BPLP had $145.0 million of borrowings under its 2021 Credit Facility and outstanding letters of credit totaling approximately $6.3 million, with the ability to borrow approximately $1.3 billion. At February 14, 2022, BPLP had $265.0 million of borrowings under its 2021 Credit Facility and outstanding letters of credit totaling approximately $6.3 million, with the ability to borrow approximately $1.2 billion.

Unsecured Senior Notes

For a description of BPLP’s outstanding unsecured senior notes as of December 31, 2021, see Note 8 to the Consolidated Financial Statements.

On February 14, 2021, BPLP completed the redemption of $850.0 million in aggregate principal amount of its 4.125% senior notes due May 15, 2021. The redemption price was approximately $858.7 million, which was equal to the stated principal plus approximately $8.7 million of accrued and unpaid interest to, but not including, the redemption date. Excluding the accrued and unpaid interest, the redemption price was equal to the principal amount being redeemed. We recognized a loss from early extinguishment of debt totaling approximately $0.4 million, related to unamortized origination costs.

On March 16, 2021, BPLP completed a public offering of $850.0 million in aggregate principal amount of its 2.550% unsecured senior notes due 2032. The notes were priced at 99.570% of the principal amount to yield an effective rate (including financing fees) of approximately 2.671% per annum to maturity. The notes will mature on April 1, 2032, unless earlier redeemed. The aggregate net proceeds from the offering were approximately $839.2 million after deducting underwriting discounts and transaction expenses.

On September 29, 2021, BPLP completed a public offering of $850.0 million in aggregate principal amount of its 2.450% unsecured senior notes due 2033. The notes were priced at 99.959% of the principal amount to yield an effective rate (including financing fees) of approximately 2.524% per annum to maturity. The notes will mature on October 1, 2033, unless earlier redeemed. The aggregate net proceeds from the offering were approximately $842.5 million after deducting underwriting discounts and transaction expenses.

On October 15, 2021, BPLP used proceeds from its September 2021 offering of unsecured senior notes and borrowings under its 2021 Credit Facility to complete the redemption of $1.0 billion in aggregate principal amount of its 3.85% senior notes due February 1, 2023. The redemption price was approximately $1.05 billion. The redemption price included approximately $7.9 million of accrued and unpaid interest to, but not including, the redemption date. Excluding the accrued and unpaid interest, the redemption price was approximately 104.284% of the principal amount being redeemed. We recognized a loss from early extinguishment of debt totaling approximately $44.2 million, which amount included the payment of the redemption premium totaling approximately $42.8 million.

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 December 31, 2021, BPLP was in compliance with each of these financial restrictions and requirements.

Mortgage Notes Payable

On March 26, 2021, we used available cash to repay the mortgage loan collateralized by our University Place property located in Cambridge, Massachusetts totaling approximately $0.9 million. The mortgage loan bore interest at a fixed rate of 6.94% per annum and was scheduled to mature on August 1, 2021. There was no prepayment penalty.

On December 10, 2021, the consolidated entity in which we have a 55% interest refinanced the mortgage loan collateralized by its 601 Lexington Avenue property located in New York City with a new lender. The mortgage loan has a principal amount of $1.0 billion, requires interest-only payments at a fixed interest rate of 2.79% per annum and matures on January 9, 2032. The previous mortgage loan had an outstanding balance of approximately

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$616.1 million, bore interest at a fixed rate of 4.75% per annum and was scheduled to mature on April 10, 2022. There was no prepayment penalty associated with the repayment of the previous mortgage loan. We recognized a loss from early extinguishment of debt totaling approximately $0.1 million due to the write-off of unamortized deferred financing costs.

The following represents the outstanding principal balances due under the mortgage notes payable at December 31, 2021:

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(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 deposits. As of December 31, 2021, the maximum funding obligation under the guarantee was approximately $19.0 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 10 to the Consolidated Financial Statements).

(5)This property is owned by a consolidated entity in which we have a 55% interest.

Contractual aggregate principal payments of mortgage notes payable at December 31, 2021 are as follows:

Investments in Unconsolidated Joint Ventures - Secured Debt

We have investments in unconsolidated joint ventures with our effective ownership interests ranging from 20% to 55%. Fifteen 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 6 to the Consolidated Financial Statements. At December 31, 2021, the aggregate carrying amount of debt, including both our and our partners’ share, incurred by these ventures was approximately $3.2 billion (of which our proportionate share is approximately $1.4 billion). The table below summarizes the outstanding debt of these joint venture properties at December 31, 2021. In addition to other guarantees that may be specifically noted in the table, we have agreed to customary environmental indemnifications and nonrecourse carve-outs (e.g., guarantees against fraud, misrepresentation and bankruptcy) as well as the completion of development projects on certain of the loans.

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(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.

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

(5)The construction financing has a borrowing capacity of $250.0 million. The construction financing bears interest at a variable rate equal to (1) the greater of (x) LIBOR or (y) 0.25%, plus (2) 2.85% per annum and matures on December 18, 2023.

(6)The construction financing had a borrowing capacity of $204.6 million. 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, 2023.

(7)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.

(8)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.

(9)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.

(10)The loan bears interest at a variable rate equal to Adjusted Term SOFR plus 2.40% per annum and matures on December 14, 2024, with two, one-year extension options, subject to certain conditions. The spread on the variable rate may be reduced, subject to certain conditions.

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(11)The loan bears interest at a variable rate equal to the greater of (x) 2.35% or (y) LIBOR plus 2.20% per annum and matures on September 1, 2026.

(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 with two, one-year extension options, subject to certain conditions. The joint venture entered into an interest rate cap agreement with a financial institution to limit its exposure to increases in the LIBOR rate at a cap of 3.00% per annum on a notional amount of $325.0 million through July 7, 2022.

Market Risk

Market risk is the risk of loss from adverse changes in market prices and interest rates. Our future earnings, cash flows and fair values relevant to financial instruments are dependent upon prevalent market interest rates. Our primary market risk results from our indebtedness, which bears interest at fixed and variable rates. The fair value of our debt obligations are affected by changes in the market interest rates. We manage our market risk by matching long-term leases with long-term, fixed-rate, non-recourse debt of similar duration. We continue to follow a conservative strategy of generally pre-leasing development projects on a long-term basis to creditworthy tenants in order to achieve the most favorable construction and permanent financing terms. Approximately 98.9% of our outstanding debt, excluding our unconsolidated joint ventures, has fixed interest rates, which minimizes the interest rate risk through the maturity of such outstanding debt. We also manage our market risk by entering into hedging arrangements with financial institutions. Our primary objectives when undertaking hedging transactions and derivative positions is to reduce our floating rate exposure and to fix a portion of the interest rate for anticipated financing and refinancing transactions. This in turn, reduces the risks that the variability of cash flows imposes on variable rate debt. Our strategy mitigates against future increases in our interest rates.

At December 31, 2021, our weighted-average coupon/stated rate on our fixed rate outstanding Consolidated Debt was 3.32% per annum. At December 31, 2021, we had $145.0 million outstanding of consolidated variable rate debt. At December 31, 2021, the GAAP interest rate on our variable rate debt was approximately 0.98% per annum. If market interest rates on our variable rate debt had been 100 basis points greater, total interest expense would have increased approximately $1.5 million, on an annualized basis, for the year ended December 31, 2021.

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, improves the understanding of operating results of REITs among the investing public and helps make comparisons of REIT operating results more meaningful. Management generally considers FFO to be useful measures for understanding and comparing our operating results because, by excluding gains and losses related to sales of previously depreciated operating real estate assets, impairment losses and real estate asset depreciation and amortization (which can differ across owners of similar assets in similar condition based on historical cost accounting and useful life estimates), FFO can help investors compare the operating performance of a company’s real estate across reporting periods and to the operating performance of other companies.

Our computation of FFO may not be comparable to FFO reported by other REITs or real estate companies that do not define the term in accordance with the current Nareit definition or that interpret the current Nareit definition differently. 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

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(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 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.

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 years ended December 31, 2021, 2020 and 2019:

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(1)The impairment loss on investment in unconsolidated joint venture consists of an other-than-temporary decline in the fair value below the carrying value of our investment in the Dock 72 unconsolidated joint venture for the year ended December 31, 2020.

(2)Consists of the portion of income from unconsolidated joint ventures related to the gain on sale of real estate associated with the sale of our ownership interest in the joint venture that owned Annapolis Junction Buildings Six and Seven for the year ended December 31, 2021, Annapolis Junction Building Eight and two land parcels for the year ended December 31, 2020 and 540 Madison Avenue for the year ended December 31, 2019.

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Reconciliation to Diluted Funds from Operations: