BXP Inc.

11/05/2024 | Press release | Distributed by Public on 11/05/2024 12:25

Quarterly Report for Quarter Ending 9/30/2024 (Form 10-Q)

bxp-20240930
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 2024
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 1-13087 (BXP, Inc.)
Commission File Number: 0-50209 (Boston Properties Limited Partnership)
BXP, INC.
BOSTON PROPERTIES LIMITED PARTNERSHIP
(Exact name of Registrants as specified in its charter)
BXP, Inc. Delaware 04-2473675
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number)
Boston Properties Limited Partnership Delaware 04-3372948
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number)
Prudential Center, 800 Boylston Street, Suite 1900, Boston, Massachusetts 02199-8103
(Address of principal executive offices) (Zip Code)
(617) 236-3300
(Registrants' telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Registrant Title of each class Trading Symbol(s) Name of each exchange on which registered
BXP, Inc. Common Stock, par value $0.01 per share BXP New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
BXP, Inc.: Yes x No ☐ Boston Properties Limited Partnership: Yes x No ☐
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Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
BXP, Inc.: Yes x No ☐ Boston Properties Limited Partnership: Yes x No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.
BXP, Inc.:
Large accelerated filer x Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐
Boston Properties Limited Partnership:
Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer x Smaller reporting company ☐ Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
BXP, Inc. ☐ Boston Properties Limited Partnership ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
BXP, Inc.: Yes ☐ No x Boston Properties Limited Partnership: Yes ☐ No x
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
BXP, Inc. Common Stock, par value $0.01 per share 158,110,697
(Registrant) (Class)
(Outstanding on October 31, 2024)
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EXPLANATORY NOTE
This report combines the Quarterly Reports on Form 10-Q for the period ended September 30, 2024 of BXP, Inc. and Boston Properties Limited Partnership. Unless stated otherwise or the context otherwise requires, references to "BXP" mean BXP, Inc. (formerly known as Boston Properties, Inc.), a Delaware corporation and real estate investment trust ("REIT"), and references to "BPLP" and the "Operating Partnership" mean Boston Properties Limited Partnership, a Delaware limited partnership. BPLP is the entity through which BXP conducts substantially all of its business and owns, either directly or through subsidiaries, substantially all of its assets. BXP is the sole general partner and also a limited partner of BPLP. As the sole general partner of BPLP, BXP has exclusive control of BPLP's day-to-day management. Therefore, unless stated otherwise or the context requires, references to the "Company," "we," "us" and "our" refer collectively to BXP, BPLP and those subsidiaries consolidated by BXP.
As of September 30, 2024, BXP owned an approximate 89.6% ownership interest in BPLP. The remaining approximate 10.4% interest was owned by limited partners. The other limited partners of BPLP (1) contributed their direct or indirect interests in properties to BPLP in exchange for common units of limited partnership interest in BPLP or (2) received long-term incentive plan units of BPLP pursuant to BXP's Stock Option and Incentive Plans, or both. Under the limited partnership agreement of BPLP, unitholders may present their common units of BPLP for redemption at any time (subject to restrictions agreed upon at the time of issuance of the units that may restrict such right for a period of time, generally one year from issuance). Upon presentation of a common unit for redemption, BPLP must redeem the unit for cash equal to the then value of a share of BXP's common stock. In lieu of a cash redemption by BPLP, however, BXP may elect to acquire any common units so tendered by issuing shares of BXP common stock in exchange for the common units. If BXP so elects, its common stock will be exchanged for common units on a one-for-one basis. This one-for-one exchange ratio is subject to specified adjustments to prevent dilution. BXP generally expects that it will elect to issue its common stock in connection with each such presentation for redemption rather than having BPLP pay cash. With each such exchange or redemption, BXP's percentage ownership in BPLP will increase. In addition, whenever BXP issues shares of its common stock other than to acquire common units of BPLP, BXP must contribute any net proceeds it receives to BPLP and BPLP must issue to BXP a number of common units of BPLP that equals the number of shares of BXP common stock so issued. This structure is commonly referred to as an umbrella partnership REIT, or UPREIT.
The Company believes that combining the Quarterly Reports on Form 10-Q of BXP and BPLP into this single report:
•enhances investors' understanding of BXP and BPLP by enabling them to view the business as a whole in the same manner as management views and operates the business;
•eliminates duplicative disclosure and provides a more concise and readable presentation because a substantial portion of the disclosure applies to both BXP and BPLP; and
•creates time and cost efficiencies through the preparation of one combined report instead of two separate reports.
The Company believes it is important to understand the few differences between BXP and BPLP in the context of how BXP and BPLP operate as a consolidated company. The financial results of BPLP are consolidated into the financial statements of BXP. BXP does not have any other significant assets, liabilities or operations, other than its investment in BPLP, nor does it have employees of its own. BPLP, not BXP, generally executes all significant business relationships other than transactions involving the securities of BXP. BPLP holds substantially all of the assets of BXP, including ownership interests in subsidiaries and joint ventures. BPLP conducts the operations of the business and is structured as a partnership with no publicly traded equity. Except for the net proceeds from equity issuances by BXP, which are contributed to the capital of BPLP in exchange for common or preferred units of partnership in BPLP, as applicable, BPLP generates all remaining capital required by the Company's business. These sources include working capital, net cash provided by operating activities, borrowings under its credit facilities, the issuance of secured and unsecured debt and equity securities and proceeds received from the disposition of certain properties and interests in joint ventures.
Shareholders' equity, partners' capital and noncontrolling interests are the main areas of difference between the consolidated financial statements of BXP and BPLP. The limited partners of BPLP are accounted for as partners' capital in BPLP's financial statements and as noncontrolling interests in BXP's financial statements. The noncontrolling interests in BPLP's financial statements include the interests of unaffiliated partners in various consolidated partnerships. The noncontrolling interests in BXP's financial statements include the same
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noncontrolling interests in BPLP and limited partners of BPLP. The differences between shareholders' equity and partners' capital result from differences in the equity issued by each of BXP and BPLP.
In addition, the consolidated financial statements of BXP and BPLP differ in total real estate assets resulting from previously applied acquisition accounting by BXP for the issuance of common stock in connection with non-sponsor redemptions of common units of BPLP. This accounting resulted in a step-up of the real estate assets of BXP at the time of such redemptions, resulting in a difference between the net real estate of BXP as compared to BPLP of approximately $237.8 million, or 1.2% at September 30, 2024, and a corresponding difference in depreciation expense, impairment losses and gains on sales of real estate upon the sale of these properties having an allocation of the real estate step-up. The acquisition accounting was nullified on a prospective basis beginning in 2009 as a result of the Company's adoption of a new accounting standard requiring any subsequent redemptions to be accounted for solely as an equity transaction.
To help investors better understand the key differences between BXP and BPLP, the following items in this report present information separately for BXP and BPLP:
• Item 1. Financial Statements (unaudited), which includes the following specific disclosures for BXP and BPLP:
• Note 3. Real Estate;
• Note 10. Stockholders' Equity / Partners' Capital;
• Note 11. Segment Information;
• Note 12. Earnings Per Share / Common Unit; and
• Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations and Liquidity and Capital Resources, includes information specific to each entity, where applicable.
This report also includes separate Part I - Item 4. Controls and Procedures and Part II - Item 2. Unregistered Sales of Equity Securities and Use of Proceeds sections for each of BXP and BPLP, as well as separate Exhibits 31 and 32 certifications for each of BXP and BPLP.
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BXP, INC. AND BOSTON PROPERTIES LIMITED PARTNERSHIP
FORM 10-Q
for the quarter ended September 30, 2024
TABLE OF CONTENTS
Page
PART I. FINANCIAL INFORMATION
ITEM 1.
Financial Statements (unaudited)
1
BXP, Inc.
a) Consolidated Balance Sheets as of September 30, 2024 and December 31, 2023
1
b) Consolidated Statements of Operations for the three and nine months ended September 30, 2024 and 2023
3
c) Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2024 and 2023
4
d) Consolidated Statements of Equity for the three and nine months ended September 30, 2024 and 2023
5
e) Consolidated Statements of Cash Flows for the nine months ended September 30, 2024 and 2023
7
Boston Properties Limited Partnership
a) Consolidated Balance Sheets as of September 30, 2024 and December 31, 2023
10
b) Consolidated Statements of Operations for the three and nine months ended September 30, 2024 and 2023
12
c) Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2024 and 2023
13
d) Consolidated Statements of Capital and Noncontrolling Interests for the three and nine months ended September 30, 2024 and 2023
14
e) Consolidated Statements of Cash Flows for the nine months ended September 30, 2024 and 2023
16
BXP, Inc. and Boston Properties Limited Partnership
Notes to the Consolidated Financial Statements
19
ITEM 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
50
ITEM 3.
Quantitative and Qualitative Disclosures about Market Risk
103
ITEM 4.
Controls and Procedures
104
PART II. OTHER INFORMATION
ITEM 1.
Legal Proceedings
105
ITEM 1A.
Risk Factors
105
ITEM 2.
Unregistered Sales of Equity Securities and Use of Proceeds
106
ITEM 3.
Defaults Upon Senior Securities
106
ITEM 4.
Mine Safety Disclosures
107
ITEM 5.
Other Information
107
ITEM 6.
Exhibits
108
SIGNATURES
109
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PART I. FINANCIAL INFORMATION
ITEM 1-Financial Statements.
BXP, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited and in thousands, except for share and par value amounts)
September 30, 2024 December 31, 2023
ASSETS
Real estate, at cost (amounts related to variable interest entities ("VIEs") of $7,646,435 and $7,054,075 at September 30, 2024 and December 31, 2023, respectively)
$ 27,557,824 $ 26,749,209
Right of use assets - finance leases (amounts related to VIEs of $21,000 and $21,000 at September 30, 2024 and December 31, 2023, respectively)
372,896 401,680
Right of use assets - operating leases (amounts related to VIEs of $145,052 and $158,885 at September 30, 2024 and December 31, 2023, respectively)
339,804 324,298
Less: accumulated depreciation (amounts related to VIEs of $(1,601,919) and $(1,501,483) at September 30, 2024 and December 31, 2023, respectively)
(7,369,545) (6,881,728)
Total real estate 20,900,979 20,593,459
Cash and cash equivalents (amounts related to VIEs of $322,604 and $245,317 at September 30, 2024 and December 31, 2023, respectively)
1,420,475 1,531,477
Cash held in escrows (amounts related to VIEs of $5,032 and $22,160 at September 30, 2024 and December 31, 2023, respectively)
51,009 81,090
Investments in securities 39,186 36,337
Tenant and other receivables, net (amounts related to VIEs of $19,216 and $27,987 at September 30, 2024 and December 31, 2023, respectively)
99,706 122,407
Note receivable, net 3,937 1,714
Related party notes receivable, net 88,788 88,779
Sales-type lease receivable, net 14,429 13,704
Accrued rental income, net (amounts related to VIEs of $425,867 and $401,159 at September 30, 2024 and December 31, 2023, respectively)
1,438,492 1,355,212
Deferred charges, net (amounts related to VIEs of $201,947 and $175,383 at September 30, 2024 and December 31, 2023, respectively)
794,571 760,421
Prepaid expenses and other assets (amounts related to VIEs of $50,275 and $11,824 at September 30, 2024 and December 31, 2023, respectively)
132,078 64,230
Investments in unconsolidated joint ventures 1,421,886 1,377,319
Total assets $ 26,405,536 $ 26,026,149
LIABILITIES AND EQUITY
Liabilities:
Mortgage notes payable, net (amounts related to VIEs of $3,280,817 and $3,277,185 at September 30, 2024 and December 31, 2023, respectively)
$ 4,275,155 $ 4,166,379
Unsecured senior notes, net 10,642,033 10,491,617
Unsecured line of credit - -
Unsecured term loans, net 798,058 1,198,301
Unsecured commercial paper 500,000 -
Lease liabilities - finance leases (amounts related to VIEs of $20,897 and $20,794 at September 30, 2024 and December 31, 2023, respectively)
373,260 417,961
Lease liabilities - operating leases (amounts related to VIEs of $154,637 and $145,826 at September 30, 2024 and December 31, 2023, respectively)
389,444 350,391
Accounts payable and accrued expenses (amounts related to VIEs of $120,092 and $59,667 at September 30, 2024 and December 31, 2023, respectively)
444,288 458,329
Dividends and distributions payable 172,191 171,176
Accrued interest payable
121,360 133,684
Other liabilities (amounts related to VIEs of $89,876 and $115,275 at September 30, 2024 and December 31, 2023, respectively)
407,441 445,947
Total liabilities 18,123,230 17,833,785
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BXP, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited and in thousands, except for share and par value amounts)
September 30, 2024 December 31, 2023
Commitments and contingencies (See Note 8)
Redeemable deferred stock units- 132,930 and 119,471 units outstanding at redemption value at September 30, 2024 and December 31, 2023, respectively
10,696 8,383
Equity:
Stockholders' equity attributable to BXP, Inc.:
Excess stock, $0.01 par value, 150,000,000 shares authorized, none issued or outstanding
- -
Preferred stock, $0.01 par value, 50,000,000 shares authorized, none issued or outstanding
- -
Common stock, $0.01 par value, 250,000,000 shares authorized, 158,058,798 and 157,019,766 issued and 157,979,898 and 156,940,866 outstanding at September 30, 2024 and December 31, 2023, respectively
1,580 1,569
Additional paid-in capital
6,822,489 6,715,149
Dividends in excess of earnings (1,035,710) (816,152)
Treasury common stock at cost, 78,900 shares at September 30, 2024 and December 31, 2023
(2,722) (2,722)
Accumulated other comprehensive loss (26,428) (21,147)
Total stockholders' equity attributable to BXP, Inc. 5,759,209 5,876,697
Noncontrolling interests:
Common units of Boston Properties Limited Partnership 638,129 666,580
Property partnerships 1,874,272 1,640,704
Total equity 8,271,610 8,183,981
Total liabilities and equity $ 26,405,536 $ 26,026,149
The accompanying notes are an integral part of these consolidated financial statements.
2
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BXP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited and in thousands, except for per share amounts)
Three months ended September 30, Nine months ended September 30,
2024 2023 2024 2023
Revenue
Lease $ 799,471 $ 767,181 $ 2,378,616 $ 2,285,789
Parking and other 34,255 30,428 101,086 81,421
Hotel 15,082 13,484 38,080 35,554
Development and management services 6,770 9,284 19,276 28,122
Direct reimbursements of payroll and related costs from management services contracts
3,649 3,906 12,090 13,750
Total revenue 859,227 824,283 2,549,148 2,444,636
Expenses
Operating
Rental 327,897 300,192 963,480 882,536
Hotel 9,833 9,020 25,687 23,852
General and administrative 33,352 31,410 127,479 131,387
Payroll and related costs from management services contracts 3,649 3,906 12,090 13,750
Transaction costs 188 751 890 1,970
Depreciation and amortization 222,890 207,435 661,148 618,746
Total expenses 597,809 552,714 1,790,774 1,672,241
Other income (expense)
Income (loss) from unconsolidated joint ventures (7,011) (247,556) 6,376 (261,793)
Gains on sales of real estate 517 517 517 517
Interest and other income (loss) 14,430 20,715 39,747 48,999
Gains (losses) from investments in securities 2,198 (925) 4,785 2,311
Unrealized gain (loss) on non-real estate investment 94 (51) 548 332
Impairment loss - - (13,615) -
Interest expense (163,194) (147,812) (474,727) (424,492)
Net income (loss) 108,452 (103,543) 322,005 138,269
Net (income) loss attributable to noncontrolling interests
Noncontrolling interests in property partnerships (15,237) (20,909) (50,283) (59,337)
Noncontrolling interest-common units of the Operating Partnership (9,587) 12,626 (28,596) (8,642)
Net income (loss) attributable to BXP, Inc. $ 83,628 $ (111,826) 243,126 70,290
Basic earnings per common share attributable to BXP, Inc.
Net income (loss) $ 0.53 $ (0.71) $ 1.55 $ 0.45
Weighted average number of common shares outstanding 157,725 156,880 157,250 156,837
Diluted earnings per common share attributable to BXP, Inc.
Net income (loss) $ 0.53 $ (0.71) $ 1.54 $ 0.45
Weighted average number of common and common equivalent shares outstanding
158,213 156,880 157,547 157,177
The accompanying notes are an integral part of these consolidated financial statements.
3
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BXP, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited and in thousands)
Three months ended September 30, Nine months ended September 30,
2024 2023 2024 2023
Net income (loss) $ 108,452 $ (103,543) $ 322,005 $ 138,269
Other comprehensive income (loss):
Effective portion of interest rate contracts (32,263) 5,459 (14,976) 13,886
Amortization of interest rate contracts (1) 3,077 1,677 9,518 5,026
Other comprehensive income (loss) (29,186) 7,136 (5,458) 18,912
Comprehensive income (loss) 79,266 (96,407) 316,547 157,181
Net income attributable to noncontrolling interests (24,824) (8,283) (78,879) (67,979)
Other comprehensive (income) loss attributable to noncontrolling interests 2,913 (864) 177 (2,327)
Comprehensive income (loss) attributable to BXP, Inc. $ 57,355 $ (105,554) $ 237,845 $ 86,875
_______________
(1)Amounts reclassified from comprehensive income primarily to interest expense within BXP, Inc.'s Consolidated Statements of Operations.
The accompanying notes are an integral part of these consolidated financial statements.
4
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BXP, INC.
CONSOLIDATED STATEMENTS OF EQUITY
(unaudited and in thousands)
Common Stock Additional Paid-in Capital Dividends in Excess of Earnings Treasury Stock,
at cost 		Accumulated Other Comprehensive Loss Noncontrolling Interests - Common Units Noncontrolling Interests - Property Partnerships Total
Shares Amount
Equity, June 30, 2024
157,098 $ 1,571 $ 6,768,686 $ (964,518) $ (2,722) $ (155) $ 677,789 $ 1,801,676 $ 8,282,327
Redemption of operating partnership units to common stock 875 9 30,983 - - - (30,992) - -
Allocated net income for the period - - - 83,628 - - 9,587 15,237 108,452
Dividends/distributions declared - - - (154,820) - - (17,986) - (172,806)
Shares issued pursuant to stock purchase plan 9 - 541 - - - - - 541
Net activity from stock option and incentive plan (2) - (1,773) - - - 3,225 - 1,452
Proceeds from sale of interest in property partnerships and contributions from noncontrolling interests in property partnerships - - 23,615 - - - - 72,109 95,724
Distributions to noncontrolling interests in property partnerships - - - - - - - (14,894) (14,894)
Effective portion of interest rate contracts - - - - - (28,910) (3,353) - (32,263)
Amortization of interest rate contracts - - - - - 2,637 296 144 3,077
Reallocation of noncontrolling interest - - 437 - - - (437) - -
Equity, September 30, 2024
157,980 $ 1,580 $ 6,822,489 $ (1,035,710) $ (2,722) $ (26,428) $ 638,129 $ 1,874,272 $ 8,271,610
Equity, June 30, 2023
156,854 $ 1,569 $ 6,561,161 $ (516,550) $ (2,722) $ (3,406) $ 689,123 $ 1,557,368 $ 8,286,543
Redemption of operating partnership units to common stock 79 - 2,920 - - - (2,920) - -
Allocated net income (loss) for the period - - - (111,925) - - (12,527) 20,909 (103,543)
Dividends/distributions declared - - - (153,800) - - (18,301) - (172,101)
Shares issued pursuant to stock purchase plan 10 - 570 - - - - - 570
Net activity from stock option and incentive plan (4) - 421 - - - 4,065 - 4,486
Proceeds from sale of interest in property partnerships and contributions from noncontrolling interests in property partnerships - - - - - - - 22,635 22,635
Distributions to noncontrolling interests in property partnerships - - - - - - - (12,150) (12,150)
Effective portion of interest rate contracts - - - - - 4,896 563 - 5,459
Amortization of interest rate contracts - - - - - 1,376 157 144 1,677
Reallocation of noncontrolling interest - - 3,573 - - - (3,573) - -
Equity, September 30, 2023
156,939 $ 1,569 $ 6,568,645 $ (782,275) $ (2,722) $ 2,866 $ 656,587 $ 1,588,906 $ 8,033,576
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BXP, INC.
CONSOLIDATED STATEMENTS OF EQUITY
(unaudited and in thousands)
Common Stock Additional Paid-in Capital Dividends in Excess of Earnings Treasury Stock,
at cost 		Accumulated Other Comprehensive Loss Noncontrolling Interests - Common Units Noncontrolling Interests - Property Partnerships Total
Shares Amount
Equity, December 31, 2023 156,941 $ 1,569 $ 6,715,149 $ (816,152) $ (2,722) $ (21,147) $ 666,580 $ 1,640,704 $ 8,183,981
Redemption of operating partnership units to common stock 952 11 33,735 - - - (33,746) - -
Allocated net income for the period - - - 243,126 - - 28,596 50,283 322,005
Dividends/distributions declared - - - (462,684) - - (55,692) - (518,376)
Shares issued pursuant to stock purchase plan 17 - 1,141 - - - - - 1,141
Net activity from stock option and incentive plan 70 - 2,988 - - - 31,535 - 34,523
Proceeds from sale of interest in property partnerships and contributions from noncontrolling interests in property partnerships - - 70,941 - - - - 235,206 306,147
Distributions to noncontrolling interests in property partnerships - - - - - - - (52,353) (52,353)
Effective portion of interest rate contracts - - - - - (13,429) (1,547) - (14,976)
Amortization of interest rate contracts - - - - - 8,148 938 432 9,518
Reallocation of noncontrolling interest - - (1,465) - - - 1,465 - -
Equity, September 30, 2024
157,980 $ 1,580 $ 6,822,489 $ (1,035,710) $ (2,722) $ (26,428) $ 638,129 $ 1,874,272 $ 8,271,610
Equity, December 31, 2022 156,758 $ 1,568 $ 6,539,147 $ (391,356) $ (2,722) $ (13,718) $ 683,583 $ 1,547,317 $ 8,363,819
Redemption of operating partnership units to common stock 100 1 3,713 - - - (3,714) - -
Allocated net income for the period - - - 70,290 - - 8,642 59,337 138,269
Dividends/distributions declared - - - (461,209) - - (55,038) - (516,247)
Shares issued pursuant to stock purchase plan 19 - 1,156 - - - - - 1,156
Net activity from stock option and incentive plan 62 - 3,759 - - - 42,088 - 45,847
Proceeds from sale of interest in property partnerships and contributions from noncontrolling interests in property partnerships - - - - - - - 30,190 30,190
Distributions to noncontrolling interests in property partnerships - - - - - - - (48,370) (48,370)
Effective portion of interest rate contracts - - - - - 12,461 1,425 - 13,886
Amortization of interest rate contracts - - - - - 4,123 471 432 5,026
Reallocation of noncontrolling interest - - 20,870 - - - (20,870) - -
Equity, September 30, 2023
156,939 $ 1,569 $ 6,568,645 $ (782,275) $ (2,722) $ 2,866 $ 656,587 $ 1,588,906 $ 8,033,576
The accompanying notes are an integral part of these consolidated financial statements.
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BXP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited and in thousands)
Nine months ended September 30,
2024 2023
Cash flows from operating activities:
Net income $ 322,005 $ 138,269
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 661,148 618,746
Impairment loss 13,615 -
Amortization of right of use assets - operating leases 1,719 1,502
Amortization of sales type lease (738) -
Amortization of above and below market leases (4,245) -
Non-cash compensation expense 39,552 46,699
(Income) loss from unconsolidated joint ventures (6,376) 261,793
Distributions of net cash flow from operations of unconsolidated joint ventures 27,332 21,871
Gains from investments in securities (4,785) (2,311)
Allowance for current expected credit losses 44 302
Non-cash portion of interest expense 25,575 22,541
Gains on sales of real estate (517) (517)
Unrealized gain on non-real estate investment (548) (332)
Change in assets and liabilities:
Tenant and other receivables, net 23,932 (13,467)
Accrued rental income, net (78,576) (72,190)
Prepaid expenses and other assets (73,215) (76,621)
Right of use assets - operating lease (750) (25,640)
Lease liabilities - operating leases (390) 282
Accounts payable and accrued expenses 7,596 40,914
Accrued interest payable (12,383) 24,648
Other liabilities (27,579) (6,254)
Tenant leasing costs (61,661) (65,863)
Total adjustments 528,750 776,103
Net cash provided by operating activities 850,755 914,372
Cash flows from investing activities:
Construction in progress (469,948) (361,625)
Building and other capital improvements (118,411) (117,393)
Tenant improvements (178,835) (244,841)
Proceeds from sales of real estate 517 517
Acquisition of real estate (net of cash received upon consolidation) 6,086 -
Capital contributions to unconsolidated joint ventures (87,498) (148,875)
Capital distributions from unconsolidated joint ventures - 7,350
Investment in non-real estate investments (1,500) (1,990)
Issuance of note receivables (including related party) (2,223) (10,500)
Investments in securities, net 1,025 1,779
Net cash used in investing activities (850,787) (875,578)
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BXP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited and in thousands)
Nine months ended September 30,
2024 2023
Cash flows from financing activities:
Repayments of mortgage notes payable (3,461) -
Proceeds from unsecured senior notes 849,671 747,727
Repayment / redemption of unsecured senior notes (700,000) (500,000)
Borrowings on unsecured term loans - 1,200,000
Payments on finance lease obligations (9,250) -
Repayment of unsecured term loans (500,000) (730,000)
Borrowings on commercial paper program 3,554,932 -
Repayments on commercial paper program (3,054,932) -
Deferred financing costs (10,892) (12,639)
Net activity from equity transactions (1,728) 367
Dividends and distributions (517,361) (514,974)
Proceeds from sale of interest in property partnerships and contributions from noncontrolling interests in property partnerships 304,323 12,671
Distributions to noncontrolling interests in property partnerships (52,353) (48,370)
Net cash provided by (used in) financing activities (141,051) 154,782
Net increase (decrease) in cash and cash equivalents and cash held in escrows (141,083) 193,576
Cash and cash equivalents and cash held in escrows, beginning of period 1,612,567 736,812
Cash and cash equivalents and cash held in escrows, end of period $ 1,471,484 $ 930,388
Reconciliation of cash and cash equivalents and cash held in escrows:
Cash and cash equivalents, beginning of period $ 1,531,477 $ 690,333
Cash held in escrows, beginning of period 81,090 46,479
Cash and cash equivalents and cash held in escrows, beginning of period $ 1,612,567 $ 736,812
Cash and cash equivalents, end of period $ 1,420,475 $ 882,647
Cash held in escrows, end of period 51,009 47,741
Cash and cash equivalents and cash held in escrows, end of period $ 1,471,484 $ 930,388
Supplemental disclosures:
Cash paid for interest (net of amounts capitalized) $ 505,746 $ 404,016
Interest capitalized $ 31,342 $ 33,426
Non-cash investing and financing activities:
Write-off of fully depreciated real estate $ (76,653) $ (111,154)
Change in real estate included in accounts payable and accrued expenses $ (21,035) $ 29,435
Right of use assets obtained in exchange for lease liabilities - operating lease $ 30,631 $ 134,509
Lease liability - finance lease reversal for re-assessment event $ (38,491) $ -
Right of use asset - finance lease reversal for re-assessment event $ (28,962) $ -
Non-cash contributions from noncontrolling interests in property partnerships, net $ 86,860 $ 17,519
Capitalized operating lease costs $ 22,647 $ 5,031
Construction in progress from prepaid expenses and other assets $ - $ 25,577
Investment in unconsolidated joint ventures eliminated upon consolidation $ (11,834) $ -
Mortgage note payable recorded upon consolidation $ 207,093 $ -
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BXP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited and in thousands)
Nine months ended September 30,
2024 2023
Mortgage note payable converted to unsecured term loan $ 100,000 $ -
Real estate and intangibles recorded upon consolidation $ (220,015) $ -
Dividends and distributions declared but not paid $ 172,191 $ 171,916
Conversions of noncontrolling interests to stockholders' equity $ 33,746 $ 3,714
Issuance of restricted securities to employees and non-employee directors $ 43,360 $ 48,121
The accompanying notes are an integral part of these consolidated financial statements.
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BOSTON PROPERTIES LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEETS
(unaudited and in thousands, except for unit amounts)
September 30, 2024 December 31, 2023
ASSETS
Real estate, at cost (amounts related to variable interest entities ("VIEs") of $7,646,435 and $7,054,075 at September 30, 2024 and December 31, 2023, respectively)
$ 27,191,559 $ 26,382,944
Right of use assets - finance leases (amounts related to VIEs of $21,000 and $21,000 at September 30, 2024 and December 31, 2023, respectively)
372,896 401,680
Right of use assets - operating leases (amounts related to VIEs of $145,052 and $158,885 at September 30, 2024 and December 31, 2023, respectively)
339,804 324,298
Less: accumulated depreciation (amounts related to VIEs of $(1,601,919) and $(1,501,483) at September 30, 2024 and December 31, 2023, respectively)
(7,241,074) (6,758,361)
Total real estate 20,663,185 20,350,561
Cash and cash equivalents (amounts related to VIEs of $322,604 and $245,317 at September 30, 2024 and December 31, 2023, respectively)
1,420,475 1,531,477
Cash held in escrows (amounts related to VIEs of $5,032 and $22,160 at September 30, 2024 and December 31, 2023, respectively)
51,009 81,090
Investments in securities 39,186 36,337
Tenant and other receivables, net (amounts related to VIEs of $19,216 and $27,987 at September 30, 2024 and December 31, 2023, respectively)
99,706 122,407
Note receivable, net 3,937 1,714
Related party notes receivables, net 88,788 88,779
Sales-type lease receivable, net 14,429 13,704
Accrued rental income, net (amounts related to VIEs of $425,867 and $401,159 at September 30, 2024 and December 31, 2023, respectively)
1,438,492 1,355,212
Deferred charges, net (amounts related to VIEs of $201,947 and $175,383 at September 30, 2024 and December 31, 2023, respectively)
794,571 760,421
Prepaid expenses and other assets (amounts related to VIEs of $50,275 and $11,824 at September 30, 2024 and December 31, 2023, respectively)
132,078 64,230
Investments in unconsolidated joint ventures 1,421,886 1,377,319
Total assets $ 26,167,742 $ 25,783,251
LIABILITIES AND CAPITAL
Liabilities:
Mortgage notes payable, net (amounts related to VIEs of $3,280,817 and $3,277,185 at September 30, 2024 and December 31, 2023, respectively)
$ 4,275,155 $ 4,166,379
Unsecured senior notes, net 10,642,033 10,491,617
Unsecured line of credit - -
Unsecured term loans, net 798,058 1,198,301
Unsecured commercial paper 500,000 -
Lease liabilities - finance leases (amounts related to VIEs of $20,897 and $20,794 at September 30, 2024 and December 31, 2023, respectively)
373,260 417,961
Lease liabilities - operating leases (amounts related to VIEs of $154,637 and $145,826 at September 30, 2024 and December 31, 2023, respectively)
389,444 350,391
Accounts payable and accrued expenses (amounts related to VIEs of $120,092 and $59,667 at September 30, 2024 and December 31, 2023, respectively)
444,288 458,329
Dividends and distributions payable 172,191 171,176
Accrued interest payable
121,360 133,684
Other liabilities (amounts related to VIEs of $89,876 and $115,275 at September 30, 2024 and December 31, 2023, respectively)
407,441 445,947
Total liabilities 18,123,230 17,833,785
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BOSTON PROPERTIES LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEETS
(unaudited and in thousands, except for unit amounts)
September 30, 2024 December 31, 2023
Commitments and contingencies (See Note 8)
Redeemable deferred stock units- 132,930 and 119,471 units outstanding at redemption value at September 30, 2024 and December 31, 2023, respectively
10,696 8,383
Noncontrolling interests:
Redeemable partnership units- 15,926,014 and 16,508,277 common units and 2,336,797 and 2,065,861 long term incentive units outstanding at redemption value at September 30, 2024 and December 31, 2023, respectively
1,500,501 1,347,575
Capital:
Boston Properties Limited Partnership partners' capital- 1,762,427 and 1,755,150 general partner units and 156,217,471 and 155,185,716 limited partner units outstanding at September 30, 2024 and December 31, 2023, respectively
4,685,471 4,973,951
Accumulated other comprehensive loss (26,428) (21,147)
Total partners' capital 4,659,043 4,952,804
Noncontrolling interests in property partnerships 1,874,272 1,640,704
Total capital 6,533,315 6,593,508
Total liabilities and capital $ 26,167,742 $ 25,783,251
The accompanying notes are an integral part of these consolidated financial statements.
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BOSTON PROPERTIES LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited and in thousands, except for per unit amounts)
Three months ended September 30, Nine months ended September 30,
2024 2023 2024 2023
Revenue
Lease $ 799,471 $ 767,181 $ 2,378,616 $ 2,285,789
Parking and other 34,255 30,428 101,086 81,421
Hotel 15,082 13,484 38,080 35,554
Development and management services 6,770 9,284 19,276 28,122
Direct reimbursements of payroll and related costs from management services contracts
3,649 3,906 12,090 13,750
Total revenue 859,227 824,283 2,549,148 2,444,636
Expenses
Operating
Rental 327,897 300,192 963,480 882,536
Hotel 9,833 9,020 25,687 23,852
General and administrative 33,352 31,410 127,479 131,387
Payroll and related costs from management services contracts 3,649 3,906 12,090 13,750
Transaction costs 188 751 890 1,970
Depreciation and amortization 221,186 205,679 656,044 613,446
Total expenses 596,105 550,958 1,785,670 1,666,941
Other income (expense)
Income (loss) from unconsolidated joint ventures (7,011) (247,556) 6,376 (261,793)
Gains on sales of real estate 517 517 517 517
Interest and other income (loss) 14,430 20,715 39,747 48,999
Gains (losses) from investments in securities 2,198 (925) 4,785 2,311
Unrealized gain (loss) on non-real estate investment 94 (51) 548 332
Impairment loss - - (13,615) -
Interest expense (163,194) (147,812) (474,727) (424,492)
Net income (loss) 110,156 (101,787) 327,109 143,569
Net income attributable to noncontrolling interests
Noncontrolling interests in property partnerships (15,237) (20,909) (50,283) (59,337)
Net income (loss) attributable to Boston Properties Limited Partnership $ 94,919 $ (122,696) $ 276,826 $ 84,232
Basic earnings per common unit attributable to Boston Properties Limited Partnership
Net income (loss) $ 0.54 $ (0.70) $ 1.58 $ 0.48
Weighted average number of common units outstanding 175,446 174,882 175,369 174,765
Diluted earnings per common unit attributable to Boston Properties Limited Partnership
Net income (loss) $ 0.54 $ (0.70) $ 1.58 $ 0.48
Weighted average number of common and common equivalent units outstanding
175,934 174,882 175,666 175,105
The accompanying notes are an integral part of these consolidated financial statements.
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BOSTON PROPERTIES LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited and in thousands)
Three months ended September 30, Nine months ended September 30,
2024 2023 2024 2023
Net income (loss) $ 110,156 $ (101,787) $ 327,109 $ 143,569
Other comprehensive income (loss):
Effective portion of interest rate contracts (32,263) 5,459 (14,976) 13,886
Amortization of interest rate contracts (1) 3,077 1,677 9,518 5,026
Other comprehensive income (loss) (29,186) 7,136 (5,458) 18,912
Comprehensive income (loss) 80,970 (94,651) 321,651 162,481
Comprehensive income attributable to noncontrolling interests (15,381) (21,053) (50,715) (59,769)
Comprehensive income (loss) attributable to Boston Properties Limited Partnership $ 65,589 $ (115,704) $ 270,936 $ 102,712
_______________
(1)Amounts reclassified from comprehensive income primarily to interest expense within Boston Properties Limited Partnership's Consolidated Statements of Operations.
The accompanying notes are an integral part of these consolidated financial statements.
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BOSTON PROPERTIES LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CAPITAL AND NONCONTROLLING INTERESTS
(unaudited and in thousands)
Units Capital
General Partner Limited Partner Partners' Capital (General and Limited Partners) Accumulated
Other
Comprehensive Loss 		Noncontrolling
Interests - Property Partnerships 		Total Capital Noncontrolling Interests - Redeemable Partnership Units
Equity, June 30, 2024 1,762 155,336 $ 5,010,460 $ (155) $ 1,801,676 $ 6,811,981 $ 1,230,848
Net activity from contributions and unearned compensation - 6 (1,232) - - (1,232) 3,225
Allocated net income for the period - - 85,332 - 15,237 100,569 9,587
Distributions - - (154,820) - - (154,820) (17,986)
Conversion of redeemable partnership units - 875 30,992 - - 30,992 (30,992)
Adjustment to reflect redeemable partnership units at redemption value - - (308,876) - - (308,876) 308,876
Effective portion of interest rate contracts - - - (28,910) - (28,910) (3,353)
Amortization of interest rate contracts - - - 2,637 144 2,781 296
Proceeds from sale of interest in property partnerships and contributions from noncontrolling interests in property partnerships - - 23,615 - 72,109 95,724 -
Distributions to noncontrolling interests in property partnerships - - - - (14,894) (14,894) -
Equity, September 30, 2024
1,762 156,217 $ 4,685,471 $ (26,428) $ 1,874,272 $ 6,533,315 $ 1,500,501
Equity, June 30, 2023 1,755 155,098 $ 5,351,166 $ (3,406) $ 1,557,368 $ 6,905,128 $ 1,135,053
Net activity from contributions and unearned compensation - 7 991 - - 991 4,065
Allocated net income (loss) for the period - - (110,169) - 20,909 (89,260) (12,527)
Distributions - - (153,800) - - (153,800) (18,301)
Conversion of redeemable partnership units - 79 2,920 - - 2,920 (2,920)
Adjustment to reflect redeemable partnership units at redemption value - - (54,663) - - (54,663) 54,663
Effective portion of interest rate contracts - - - 4,896 - 4,896 563
Amortization of interest rate contracts - - - 1,376 144 1,520 157
Proceeds from sale of interest in property partnerships and contributions from noncontrolling interests in property partnerships - - - - 22,635 22,635 -
Distributions to noncontrolling interests in property partnerships - - - - (12,150) (12,150) -
Equity, September 30, 2023
1,755 155,184 $ 5,036,445 $ 2,866 $ 1,588,906 $ 6,628,217 $ 1,160,753
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BOSTON PROPERTIES LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CAPITAL AND NONCONTROLLING INTERESTS
(unaudited and in thousands)
Units Capital
General Partner Limited Partner Partners' Capital (General and Limited Partners) Accumulated
Other
Comprehensive Loss 		Noncontrolling
Interests - Property Partnerships 		Total Capital Noncontrolling Interests - Redeemable Partnership Units
Equity, December 31, 2023 1,755 155,185 $ 4,973,951 $ (21,147) $ 1,640,704 $ 6,593,508 $ 1,347,575
Net activity from contributions and unearned compensation 5 82 4,129 - - 4,129 31,535
Allocated net income for the period - - 248,230 - 50,283 298,513 28,596
Distributions - - (462,684) - - (462,684) (55,692)
Conversion of redeemable partnership units 2 950 33,746 - - 33,746 (33,746)
Adjustment to reflect redeemable partnership units at redemption value - - (182,842) - - (182,842) 182,842
Effective portion of interest rate contracts - - - (13,429) - (13,429) (1,547)
Amortization of interest rate contracts - - - 8,148 432 8,580 938
Proceeds from sale of interest in property partnerships and contributions from noncontrolling interests in property partnerships - - 70,941 - 235,206 306,147 -
Distributions to noncontrolling interests in property partnerships - - - - (52,353) (52,353) -
Equity, September 30, 2024
1,762 156,217 $ 4,685,471 $ (26,428) $ 1,874,272 $ 6,533,315 $ 1,500,501
Equity, December 31, 2022 1,750 155,008 $ 5,299,428 $ (13,718) $ 1,547,317 $ 6,833,027 $ 1,280,886
Net activity from contributions and unearned compensation 5 76 4,913 - - 4,913 42,090
Allocated net income for the period - - 75,590 - 59,337 134,927 8,642
Distributions - - (461,209) - - (461,209) (55,038)
Conversion of redeemable partnership units - 100 3,714 - - 3,714 (3,714)
Adjustment to reflect redeemable partnership units at redemption value - - 114,009 - - 114,009 (114,009)
Effective portion of interest rate contracts - - - 12,461 - 12,461 1,425
Amortization of interest rate contracts - - - 4,123 432 4,555 471
Proceeds from sale of interest in property partnerships and contributions from noncontrolling interests in property partnerships - - - - 30,190 30,190 -
Distributions to noncontrolling interests in property partnerships - - - - (48,370) (48,370) -
Equity, September 30, 2023 1,755 155,184 $ 5,036,445 $ 2,866 $ 1,588,906 $ 6,628,217 $ 1,160,753
The accompanying notes are an integral part of these consolidated financial statements.
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BOSTON PROPERTIES LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited and in thousands)
Nine months ended September 30,
2024 2023
Cash flows from operating activities:
Net income $ 327,109 $ 143,569
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 656,044 613,446
Impairment loss 13,615 -
Amortization of right of use assets - operating leases 1,719 1,502
Amortization of sales type lease (738) -
Amortization of above and below market leases (4,245) -
Non-cash compensation expense 39,552 46,699
(Income) loss from unconsolidated joint ventures (6,376) 261,793
Distributions of net cash flow from operations of unconsolidated joint ventures 27,332 21,871
Gains from investments in securities (4,785) (2,311)
Allowance for current expected credit losses 44 302
Non-cash portion of interest expense 25,575 22,541
Gains on sales of real estate (517) (517)
Unrealized gain on non-real estate investment (548) (332)
Change in assets and liabilities:
Tenant and other receivables, net 23,932 (13,467)
Accrued rental income, net (78,576) (72,190)
Prepaid expenses and other assets (73,215) (76,621)
Right of use assets - operating lease (750) (25,640)
Lease liabilities - operating leases (390) 282
Accounts payable and accrued expenses 7,596 40,914
Accrued interest payable (12,383) 24,648
Other liabilities (27,579) (6,254)
Tenant leasing costs (61,661) (65,863)
Total adjustments 523,646 770,803
Net cash provided by operating activities 850,755 914,372
Cash flows from investing activities:
Construction in progress (469,948) (361,625)
Building and other capital improvements (118,411) (117,393)
Tenant improvements (178,835) (244,841)
Proceeds from sales of real estate 517 517
Acquisition of real estate (net of cash received upon consolidation) 6,086 -
Capital contributions to unconsolidated joint ventures (87,498) (148,875)
Capital distributions from unconsolidated joint ventures - 7,350
Investment in non-real estate investments (1,500) (1,990)
Issuance of note receivables (including related party) (2,223) (10,500)
Investments in securities, net 1,025 1,779
Net cash used in investing activities (850,787) (875,578)
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BOSTON PROPERTIES LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited and in thousands)
Nine months ended September 30,
2024 2023
Cash flows from financing activities:
Repayments of mortgage notes payable (3,461) -
Proceeds from unsecured senior notes 849,671 747,727
Repayment / redemption of unsecured senior notes (700,000) (500,000)
Borrowings on unsecured term loan - 1,200,000
Payments on finance lease obligations (9,250) -
Repayment of unsecured term loan (500,000) (730,000)
Borrowings on commercial paper program 3,554,932 -
Repayments on commercial paper program (3,054,932) -
Deferred financing costs (10,892) (12,639)
Net activity from equity transactions (1,728) 367
Distributions (517,361) (514,974)
Proceeds from sale of interest in property partnerships and contributions from noncontrolling interests in property partnerships 304,323 12,671
Distributions to noncontrolling interests in property partnerships (52,353) (48,370)
Net cash provided by (used in) financing activities (141,051) 154,782
Net increase (decrease) in cash and cash equivalents and cash held in escrows (141,083) 193,576
Cash and cash equivalents and cash held in escrows, beginning of period 1,612,567 736,812
Cash and cash equivalents and cash held in escrows, end of period $ 1,471,484 $ 930,388
Reconciliation of cash and cash equivalents and cash held in escrows:
Cash and cash equivalents, beginning of period $ 1,531,477 $ 690,333
Cash held in escrows, beginning of period 81,090 46,479
Cash and cash equivalents and cash held in escrows, beginning of period $ 1,612,567 $ 736,812
Cash and cash equivalents, end of period $ 1,420,475 $ 882,647
Cash held in escrows, end of period 51,009 47,741
Cash and cash equivalents and cash held in escrows, end of period $ 1,471,484 $ 930,388
Supplemental disclosures:
Cash paid for interest (net of amounts capitalized) $ 505,746 $ 404,016
Interest capitalized $ 31,342 $ 33,426
Non-cash investing and financing activities:
Write-off of fully depreciated real estate $ (76,653) $ (109,905)
Change in real estate included in accounts payable and accrued expenses $ (21,035) $ 29,435
Right of use assets obtained in exchange for lease liabilities - operating lease $ 30,631 $ 134,509
Lease liability - finance lease reversal for re-assessment event $ (38,491) $ -
Right of use asset - finance lease reversal for re-assessment event $ (28,962) $ -
Non-cash contributions from noncontrolling interests in property partnerships, net $ 86,860 $ 17,519
Capitalized operating lease costs $ 22,647 $ 5,031
Construction in progress from prepaid expenses and other assets $ - $ 25,577
Investment in unconsolidated joint ventures eliminated upon consolidation $ (11,834) $ -
Mortgage notes payable recorded upon consolidation $ 207,093 $ -
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BOSTON PROPERTIES LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited and in thousands)
Nine months ended September 30,
2024 2023
Mortgage note payable converted to unsecured term loan $ 100,000 $ -
Real estate and intangibles recorded upon consolidation $ (220,015) $ -
Distributions declared but not paid $ 172,191 $ 171,916
Conversions of redeemable partnership units to partners' capital $ 33,746 $ 3,714
Issuance of restricted securities to employees and non-employee directors $ 43,360 $ 48,121
The accompanying notes are an integral part of these consolidated financial statements.
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BXP, INC. AND BOSTON PROPERTIES LIMITED PARTNERSHIP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. Organization
BXP is a fully integrated, self-administered and self-managed REIT. BXP is the sole general partner of BPLP, its operating partnership, and at September 30, 2024, owned an approximate 89.6% (89.4% at December 31, 2023) general and limited partnership interest in BPLP. Unless stated otherwise or the context requires, the "Company" refers to BXP and its subsidiaries, including BPLP and its consolidated subsidiaries. Partnership interests in BPLP include:
•common units of partnership interest (also referred to as "OP Units") and
•long term incentive units of partnership interest (also referred to as "LTIP Units")
Unless specifically noted otherwise, all references to OP Units exclude units held by BXP. A holder of an OP Unit may present the OP Unit to BPLP for redemption at any time (subject to restrictions agreed upon at the time of issuance of OP Units to particular holders that may restrict such redemption right for a period of time, generally one year from issuance). Upon presentation of an OP Unit for redemption, BPLP is obligated to redeem the OP Unit for cash equal to the value of a share of common stock of BXP ("Common Stock"). In lieu of such cash redemption, BXP may elect to acquire the OP Unit for one share of Common Stock. Because the number of shares of Common Stock outstanding at all times equals the number of OP Units that BXP owns, one share of Common Stock is generally the economic equivalent of one OP Unit, and the quarterly distribution that may be paid to the holder of an OP Unit equals the quarterly dividend that may be paid to the holder of a share of Common Stock.
The Company uses LTIP Units as a form of time-based, restricted equity compensation and as a form of performance-based equity compensation for employees, and has previously granted LTIP Units in the form of (1) 2012 outperformance plan awards ("2012 OPP Units") and (2) 2013 - 2024 multi-year, long-term incentive program awards (also referred to as "MYLTIP Units"), each of which, upon the satisfaction of certain performance-based and time-based vesting conditions, is convertible into one OP Unit. The three-year measurement periods for the 2012 OPP Units and the 2013 - 2021 MYLTIP Units have ended and BXP's total stockholder return ("TSR") was sufficient for employees to earn and therefore become eligible to vest in a portion of the awards. Unless and until they are earned, the rights, preferences and privileges of the 2022 - 2024 MYLTIP Units differ from other LTIP Units granted to employees (including the 2012 OPP Units and the 2013 - 2021 MYLTIP Units, which have been earned). Therefore, unless specifically noted otherwise, all references to LTIP Units exclude the 2022 - 2024 MYLTIP Units. LTIP Units (including the earned 2012 OPP Units and the earned 2013 - 2021 MYLTIP Units), whether vested or not, receive the same quarterly per unit distributions as OP Units, which equal per share dividends on Common Stock (See Notes 9 and 13).
Properties
At September 30, 2024, the Company owned or had joint venture interests in a portfolio of 184 commercial real estate properties (the "Properties") aggregating approximately 53.0 million net rentable square feet of primarily office properties, including nine properties under construction/redevelopment totaling approximately 2.7 million net rentable square feet. At September 30, 2024, the Properties consisted of:
•162 office and life sciences properties (including six properties under construction/redevelopment);
•14 retail properties (including one property under construction);
•seven residential properties (including two properties under construction); and
•one hotel.
2. Summary of Significant Accounting Policies
BXP does not have any other significant assets, liabilities or operations, other than its investment in BPLP, nor does it have employees of its own. BPLP, not BXP, generally executes all significant business relationships other than transactions involving securities of BXP. All majority-owned subsidiaries and joint ventures over which the Company has financial and operating control and variable interest entities ("VIEs") in which the Company has determined it is the primary beneficiary are included in the consolidated financial statements. All significant intercompany balances and transactions have been eliminated in consolidation. The Company accounts for all other unconsolidated joint ventures using the equity method of accounting. Accordingly, the Company's share of the earnings of these joint ventures and companies is included in consolidated net income.
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The accompanying interim financial statements are unaudited; however, the financial statements have been prepared in accordance with generally accepted accounting principles ("GAAP") for interim financial information and in conjunction with the rules and regulations of the Securities and Exchange Commission (the "SEC"). Accordingly, they do not include all of the disclosures required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting solely of normal recurring matters) necessary for a fair statement of the financial statements for these interim periods have been included. The results of operations for the interim periods are not necessarily indicative of the results to be obtained for other interim periods or for the full fiscal year. The year-end consolidated balance sheet data was derived from audited financial statements, but does not include all disclosure required by GAAP. These financial statements should be read in conjunction with the Company's financial statements and notes thereto contained in the Company's Annual Report in the Company's Form 10-K for its fiscal year ended December 31, 2023.
The Company bases its estimates on historical experience and on various other assumptions that it considers to be reasonable under the circumstances, including the impact of extraordinary events, the results of which form the basis for making significant judgments about the carrying values of assets and liabilities, assessments of future collectability, and other areas of the financial statements that are impacted by the use of estimates. Actual results may differ from these estimates under different assumptions or conditions.
Variable Interest Entities (VIEs)
Consolidated VIEs are those for which the Company is considered to be the primary beneficiary of a VIE. The primary beneficiary is the entity that has a controlling financial interest in the VIE, which is defined by the entity having both of the following characteristics: (1) the power to direct the activities that, when taken together, most significantly impact the VIE's performance and (2) the obligation to absorb losses or the right to receive the returns from the VIE that could potentially be significant to the VIE. The assets of each VIE are only available to satisfy such VIE's respective liabilities. The Company has identified nine entities that are VIEs as of September 30, 2024 and has determined that it is the primary beneficiary for all of these entities as of September 30, 2024.
Consolidated Variable Interest Entities
As of September 30, 2024, BXP has identified nine consolidated VIEs, including BPLP. Excluding BPLP, the consolidated VIEs consisted of (i) the following five in-service properties: 767 Fifth Avenue (the General Motors Building), Times Square Tower, 601 Lexington Avenue, Atlantic Wharf Office Building and 100 Federal Street, (ii) 343 Madison Avenue, which is categorized as land held for future development and (iii) 290 Binney Street and 300 Binney Street, which are currently under development / redevelopment (See Note 14).
The Company consolidates these VIEs because it is the primary beneficiary. The third parties' interests in these consolidated entities (excluding BPLP's interest) are reflected as noncontrolling interests in property partnerships in the accompanying consolidated financial statements (See Note 9).
In addition, BXP's only significant asset is its investment in BPLP and, consequently, substantially all of BXP's assets and liabilities are the assets and liabilities of BPLP.
Variable Interest Entities Not Consolidated
As of September 30, 2024, the Company does not have any unconsolidated joint ventures that are classified as VIEs.
Fair Value Measurements
The Company follows the authoritative guidance for fair value measurements when valuing its financial instruments for disclosure purposes. The table below presents for September 30, 2024 and December 31, 2023, the financial instruments that are being valued for disclosure purposes, as well as the Level at which they are categorized as defined in Accounting Standards Codification ("ASC") 820 "Fair Value Measurements and Disclosures" ("ASC 820").
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Financial Instrument Level
3-Month United States Treasury Bills Level 1
Unsecured commercial paper Level 1
Investment in securities Level 1
Unsecured senior notes (1) Level 1
Related party note receivable Level 3
Notes receivable Level 3
Sales-type lease receivable Level 3
Mortgage notes payable Level 3
Unsecured line of credit Level 3
Unsecured term loans Level 3
_______________
(1)If trading volume for the period is low, the valuation could be categorized as Level 2.
Because the Company's valuations of its financial instruments are based on the above Levels and involve the use of estimates, the actual fair values of its financial instruments may differ materially from those estimates. In addition, the Company's estimated fair values for these instruments as of the end of the applicable reporting period are not projections of, nor necessarily indicative of, estimated or actual fair values in future reporting periods.
At September 30, 2024 and December 31, 2023, the Company had outstanding three-month United States Treasury Bills with a maturity date of November 21, 2024 and January 30, 2024, respectively, that were classified as held to maturity because the Company determined that it had the positive intent and ability to hold to maturity. Because these securities are considered short-term investments, they are reflected at amortized cost within Cash and Cash Equivalents on the Consolidated Balance Sheets. At September 30, 2024 and December 31, 2023, the amortized cost of these securities were approximately $175.9 million and $302.7 million, respectively.
At September 30, 2024, the Company had $500.0 million outstanding under its unsecured commercial paper program (See Note 6). Due to their short-term maturity and stated interest rates at approximate current market rates, the fair value of outstanding commercial paper borrowings approximates the Company's carrying amount at September 30, 2024.
The Company's investment in non-real estate investments is shown within Prepaid and Other Assets on the Consolidated Balance Sheets and was approximately $6.7 million and $4.6 million at September 30, 2024 and December 31, 2023, respectively. The non-real estate investments utilize net asset value as the practical expedient.
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Non-Recurring Fair Value
The following table presents the aggregate carrying value of the Company's non-recurring fair value financial instruments and the Company's corresponding estimate of fair value as of September 30, 2024 and December 31, 2023 (in thousands):
September 30, 2024 December 31, 2023
Carrying
Amount 		Estimated
Fair Value 		Carrying
Amount 		Estimated
Fair Value
3-Month United States Treasury Bills (1) $ 175,944 $ 175,944 $ 302,746 $ 302,746
Related party note receivable, net $ 88,788 $ 90,138 $ 88,779 $ 90,593
Note receivable, net 3,937 4,799 1,714 1,677
Sales-type lease receivable, net 14,429 13,563 13,704 13,338
Total $ 107,154 $ 108,500 $ 104,197 $ 105,608
Mortgage notes payable, net $ 4,275,155 $ 3,907,688 $ 4,166,379 $ 3,705,513
Unsecured senior notes, net 10,642,033 10,191,058 10,491,617 9,697,393
Unsecured line of credit - - - -
Unsecured term loans, net 798,058 800,303 1,198,301 1,196,945
Unsecured commercial paper 500,000 500,000 - -
Total $ 16,215,246 $ 15,399,049 $ 15,856,297 $ 14,599,851
_______________
(1) Per the guidance in ASC 326 "Financial Instruments - Credit Losses" ("ASC 326"), the Company concluded that the risk of nonpayment is nonexistent because the U.S. Government has a long history with no credit losses and, therefore, no credit loss allowance was recorded.
At March 31, 2024, the Company evaluated the expected hold period for a portion of its Shady Grove property, consisting of 2 Choke Cherry Road, 2094 Gaither Road and a land parcel, located in Rockville, Maryland. Based on a shorter-than-expected hold period, the Company reduced the carrying value of a portion of the property that the Company anticipates selling to a third-party developer to its estimated fair value at March 31, 2024. As a result, during the nine months ended September 30, 2024, each of BXP and BPLP recognized an impairment loss of approximately $13.6 million. The Company's estimated fair value utilized Level 3 inputs and was based on a pending offer from a third party (See Note 3).
Recurring Fair Value
Derivatives
In addition to the financial instruments noted above, the Company uses interest rate swap agreements to manage its interest rate risk (See Note 7). The valuation of these instruments is determined using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves. To comply with the provisions of ASC 820, the Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty's nonperformance risk in the fair value measurements. Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by the Company and its counterparties. The Company assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and determined that the credit valuation adjustments were not significant to the overall valuation of its derivatives. As a result, the Company has determined that its derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.
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The following table presents the aggregate fair value of the Company's interest rate swaps as of September 30, 2024 and December 31, 2023 (in thousands):
Fair value September 30, 2024 December 31, 2023
Interest rate swaps $ (10,191) $ 1,976
Investments
The Company accounts for investments in equity securities at fair value, with gains or losses resulting from changes in fair value recognized currently in earnings. The Company maintains deferred compensation plans that are designed to allow officers and non-employee directors of BXP to defer a portion of the officer's current income or the non-employee director's current 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. The Company's obligation under the plans is that of an unsecured promise to pay the deferred compensation to the plan participants in the future. At September 30, 2024 and December 31, 2023, the Company had maintained approximately $38.9 million and $36.1 million, respectively, in separate accounts, which are not restricted as to their use. The Company recognized gains (losses) of approximately $2.2 million and $(0.9) million on its investments in the accounts associated with the Company's deferred compensation plans during the three months ended September 30, 2024 and September 30, 2023, respectively, and approximately $4.8 million and $2.3 million during the nine months ended September 30, 2024 and September 30, 2023, respectively, primarily due to the observable change in fair value.
3. Real Estate
BXP
Real estate consisted of the following at September 30, 2024 and December 31, 2023 (in thousands):
September 30, 2024 December 31, 2023
Land $ 5,318,724 $ 5,251,224
Right of use assets - finance leases (1) 372,896 401,680
Right of use assets - operating leases (1) 339,804 324,298
Land held for future development (2) 690,774 697,061
Buildings and improvements 16,898,821 16,607,756
Tenant improvements 3,782,391 3,592,172
Furniture, fixtures and equipment 54,992 53,716
Construction in progress 812,122 547,280
Total 28,270,524 27,475,187
Less: Accumulated depreciation (7,369,545) (6,881,728)
$ 20,900,979 $ 20,593,459
_______________
(1)See Note 4.
(2)Includes pre-development costs.
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BPLP
Real estate consisted of the following at September 30, 2024 and December 31, 2023 (in thousands):
September 30, 2024 December 31, 2023
Land $ 5,224,015 $ 5,156,515
Right of use assets - finance leases (1) 372,896 401,680
Right of use assets - operating leases (1) 339,804 324,298
Land held for future development (2) 690,774 697,061
Buildings and improvements 16,627,265 16,336,200
Tenant improvements 3,782,391 3,592,172
Furniture, fixtures and equipment 54,992 53,716
Construction in progress 812,122 547,280
Total 27,904,259 27,108,922
Less: Accumulated depreciation (7,241,074) (6,758,361)
$ 20,663,185 $ 20,350,561
_______________
(1)See Note 4.
(2)Includes pre-development costs.
Acquisition
On January 8, 2024, the Company completed the acquisition of its joint venture partner's 50% economic ownership interest in the joint venture that owns 901 New York Avenue, located in Washington, DC. At acquisition, the total net equity acquired was $20.0 million, which includes $10.0 million in cash that the Company paid for the joint venture partner's 50% economic ownership interest in the joint venture. The property is subject to existing mortgage indebtedness of approximately $207.1 million (See Note 6). The acquisition resulted in the Company recording a gain upon consolidation of approximately $21.8 million, which is the difference between the fair value of the previously held equity method investment immediately prior to the consolidation of $10.0 million, less the Company's costs basis of approximately $(11.8) million. The gain on consolidation is included within income (loss) from unconsolidated joint ventures in the Consolidated Statement of Operations.
The total net assets acquired is equal to (1) the total net equity acquired of $20.0 million, which includes $10.0 million in cash that the Company paid for the joint venture partner's 50% economic ownership interest in the joint venture plus (2) $207.1 million of debt assumed, less (3) net working capital acquired of approximately $7.1 million. The following table summarizes the allocation of the fair value of the net assets the Company received at the date of acquisition for 901 New York Avenue (in thousands):
Land and site improvements $ 65,808
Building and improvements 56,882
Tenant improvements 16,088
In-place lease intangibles 72,621
Above-market lease intangibles 2,757
Below-market lease intangibles (2,515)
Mortgage note payable adjustment 8,374
Net assets acquired $ 220,015
The following table summarizes the estimated annual amortization of the acquired in-place lease intangibles, and the acquired above- and below-market lease intangibles for 901 New York Avenue from January 8, 2024 through the remainder of 2024 and each of the next five succeeding fiscal years (in thousands):
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Acquired In-Place Lease Intangibles Acquired Above-Market Lease Intangibles Acquired Below-Market Lease Intangibles
Period from January 8, 2024 through December 31, 2024 $ 10,364 $ 607 $ 252
2025 9,030 454 257
2026 6,494 238 257
2027 6,265 201 257
2028 6,069 186 257
2029 6,076 186 251
The following table summarizes the weighted-average useful life of the acquired in-place lease intangibles and the acquired above- and below-market lease intangibles for 901 New York Avenue as of the acquisition date (in years):
Acquired In-Place Lease Intangibles Acquired Above-Market Lease Intangibles Acquired Below-Market Lease Intangibles
Weighted-average useful life 6.7 4.0 9.8
901 New York Avenue contributed approximately $24.7 million of revenue and $6.9 million of net loss to the Company for the period from January 8, 2024 through September 30, 2024. 901 New York Avenue is an office property consisting of approximately 524,000 net rentable square feet.
Development
On February 12, 2024, the Company commenced the development of a residential project at 121 Broadway Street in Cambridge, Massachusetts that is adjacent to its development projects at 290 Binney Street and 300 Binney Street. 121 Broadway will consist of 439 residential units aggregating approximately 492,000 net rentable square feet. There can be no assurance that the Company will complete development of the project on the terms and schedule currently contemplated or at all.
On April 5, 2024, the Company completed and fully placed in-service 760 Boylston Street, an approximately 118,000 net rentable square foot retail redevelopment located in Boston, Massachusetts.
On July 17, 2024, the Company partially placed in-service Reston Next Office Phase II, an approximately 90,000 net rentable square foot development project comprised of office and retail space located in Reston, Virginia.
On September 26, 2024, the Company fully placed in-service 180 CityPoint, an approximately 329,000 net rentable square foot laboratory/life sciences project located in Waltham, Massachusetts.
Pending Disposition and Impairment
At March 31, 2024, the Company evaluated the expected hold period for a portion of its Shady Grove property, consisting of 2 Choke Cherry Road, 2094 Gaither Road and a land parcel, located in Rockville, Maryland. Based on a shorter-than-expected hold period, the Company reduced the carrying value of a portion of the property that the Company anticipates selling to a third-party developer to its estimated fair value at March 31, 2024. As a result, each of BXP and BPLP recognized an impairment loss of approximately $13.6 million during the nine months ended September 30, 2024. The Company's estimated fair value was based on Level 3 inputs as defined in ASC 820 and on a pending offer from a third-party.
On May 7, 2024, the Company entered into an agreement with the third-party developer for the sale of 2 Choke Cherry Road, 2094 Gaither Road and the land parcel for an aggregate gross sale price of approximately $24.8 million. On July 22, 2024, the Company executed an amendment to the agreement for an aggregate gross sale price of approximately $24.7 million. 2 Choke Cherry Road and 2094 Gaither Road are two vacant office properties aggregating approximately 143,000 net rentable square feet that were taken out of service and held for redevelopment. The disposition is subject to satisfaction of certain closing conditions and there can be no assurance that this transaction will be consummated on the terms currently contemplated or at all.
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4. Leases
Lessor
The following table summarizes the components of lease revenue recognized under the Company's operating and sales-type leases for the three and nine months ended September 30, 2024 and 2023 and included within the Company's Consolidated Statements of Operations (in thousands):
Three months ended September 30, Nine months ended September 30,
Lease Revenue 2024 2023 2024 2023
Fixed contractual payments $ 646,979 $ 626,738 $ 1,947,599 $ 1,877,573
Variable lease payments 152,242 140,210 430,279 407,528
Sales-type lease revenue 250 233 738 688
$ 799,471 $ 767,181 $ 2,378,616 $ 2,285,789
Lessee
On March 28, 2024, the Company entered into a 90-year air rights lease with the Massachusetts Department of Transportation for an approximately 61,000 square foot site at the parking garage located at 100 Clarendon Street and the concourse level of the Massachusetts Bay Transportation Authority's Back Bay Station (the "Station"). The lease requires annual base rental payments of $250,000 until the commencement of construction, as defined in the lease. If the Company commences construction of a project on the site on or before August 1, 2028, then a final fixed rental payment is due in accordance with the lease at that time. After August 1, 2028, if the Company commences construction of a project on the site, then a final rental payment based on the then current fair market value will be due at that time. In addition, the lease requires annual payments of $500,000 through 2033 to fund maintenance and improvements to the Station. The Company has assumed that it will begin construction on the site on or before August 1, 2028. The incremental borrowing rate for this lease is 6.57% per annum. The net present value of the ground lease payments is approximately $23.2 million. The Company classifies this lease as an operating lease. As a result, the Company recorded a Right of Use Assets - Operating Leases and Lease Liabilities - Operating Leases of approximately $23.9 million and $23.2 million, respectively, on its Consolidated Balance Sheets at March 31, 2024. The ground lease had operating lease costs of approximately $87,000 for the three months ended September 30, 2024 and approximately $0.2 million for the period from March 28, 2024 through September 30, 2024.
The following table provides a maturity analysis for the air rights operating lease as of March 28, 2024 (in thousands):
Operating
Period from March 28, 2024 through December 31, 2024 $ -
2025 750
2026 750
2027 750
2028 25,826
2029 500
Thereafter 2,000
Total lease payments 30,576
Less: Interest portion 7,391
Present value of lease payments $ 23,185
The Company has a ground lease for the land underlying its residential property, The Skylyne, in Oakland, California. The Skylyne is a residential property consisting of 402 residential units and supporting retail space totaling approximately 331,000 net rentable square feet. The ground lease has approximately 92-years remaining (including extension options) and provides the Company with the right to purchase the land subject to certain conditions. When the lease was executed in 2017, the purchase option was considered a bargain purchase option
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and, as a result, the Company classified it as a finance lease and the Company assumed the lessor would exercise its right to require the Company to purchase the land in May 2024 for approximately $38.7 million. In May 2024 and as of the date of this report, the lessor has not exercised this option and the Company reassessed the accounting for the ground lease and determined that the purchase option continues to be considered a bargain purchase option and the ground lease will continue to be accounted for as a finance lease. The lease requires monthly base rental payments of a nominal amount until the purchase occurs, which the Company now estimates will be in 2030. As a result of the reassessment, the lease liability was remeasured and reduced to approximately $0.1 million. In conjunction with the reduction in the lease liability, the right of use asset was reduced to $0 and the difference between the lease liability and right of use asset of approximately $9.5 million was recorded as a decrease to interest expense for the nine months ended September 30, 2024. There can be no assurance that this transaction will be consummated on the terms currently contemplated or at all.
5. Investments in Unconsolidated Joint Ventures
The investments in unconsolidated joint ventures consist of the following at September 30, 2024 and December 31, 2023:
Carrying Value of Investment (1)
Entity Properties Nominal % Ownership September 30, 2024 December 31, 2023
(in thousands)
Square 407 Limited Partnership Market Square North 50.00 % $ (12,042) $ (5,996)
901 New York, LLC 901 New York Avenue 25.00 % (2) - (11,764)
WP Project Developer LLC Wisconsin Place Land and Infrastructure 33.33 % (3) 29,969 30,375
500 North Capitol Venture LLC 500 North Capitol Street, NW 30.00 % (11,630) (10,253)
501 K Street LLC 1001 6th Street 50.00 % 45,955 44,774
Podium Developer LLC The Hub on Causeway - Podium 50.00 % 42,916 45,201
Residential Tower Developer LLC Hub50House 50.00 % 38,116 40,235
Hotel Tower Developer LLC The Hub on Causeway - Hotel Air Rights 50.00 % 14,076 13,494
Office Tower Developer LLC 100 Causeway Street 50.00 % 56,055 57,660
1265 Main Office JV LLC 1265 Main Street 50.00 % 3,515 3,585
BNY Tower Holdings LLC Dock 72 50.00 % (4) (7,065) (11,890)
CA-Colorado Center, LLC Colorado Center 50.00 % 234,972 237,815
7750 Wisconsin Avenue LLC 7750 Wisconsin Avenue 50.00 % 48,814 50,064
BP-M 3HB Venture LLC 3 Hudson Boulevard 25.00 % 113,288 115,103
Platform 16 Holdings LP Platform 16 55.00 % 55,381 45,564
Gateway Portfolio Holdings LLC Gateway Commons 50.00 % 393,679 376,834
Rosecrans-Sepulveda Partners 4, LLC Beach Cities Media Campus 50.00 % 27,051 27,034
Safeco Plaza REIT LLC Safeco Plaza 33.67 % (5) 47,510 44,734
360 PAS Holdco LLC 360 Park Avenue South 71.11 % (6) 69,538 42,988
PR II/BXP Reston Gateway LLC Skymark - Reston Next Residential 20.00 % 15,359 15,184
751 Gateway Holdings LLC 751 Gateway 49.00 % 98,882 93,411
200 Fifth Avenue JV LLC 200 Fifth Avenue 26.69 % 68,563 75,718
ABXP Worldgate Investments LLC 13100 and 13150 Worldgate Drive 50.00 % 18,247 17,546
$ 1,391,149 $ 1,337,416
_______________
(1)Investments with deficit balances aggregating approximately $30.7 million and $39.9 million at September 30, 2024 and December 31, 2023, respectively, are included within Other Liabilities in the Company's Consolidated Balance Sheets.
(2)At December 31, 2023, the Company's economic ownership was approximately 50%. On January 8, 2024, the Company completed the acquisition of its joint venture partner's 50% economic ownership interest for a gross purchase price of
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$10.0 million, as described in Note 3 and this Note 5. Since then, the Company accounts for its assets, liabilities and operations on a consolidated basis.
(3)The Company's wholly-owned subsidiary that owns Wisconsin Place Office also owns a 33.33% interest in the joint venture entity that owns the land, parking garage and infrastructure of the project.
(4)This property includes net equity balances from the amenity joint venture.
(5)The Company's ownership includes (1) a 33.0% direct interest in the joint venture, and (2) an additional 1% interest in each of the two entities through which each partner owns its interest in the joint venture.
(6)The Company's ownership includes (1) a 35.79% direct interest in the joint venture, (2) an additional 35.02% indirect ownership in the joint venture, and (3) an additional 1% interest in the entity through which the partner owns its interest in the joint venture.
Certain of the Company's unconsolidated joint venture agreements include provisions whereby, at certain specified times, each partner has the right to initiate a purchase or sale of its interest in the joint ventures. Under certain of the Company's joint venture agreements, if certain return thresholds are achieved, the partners or the Company will be entitled to an additional promoted interest or payments.
The combined summarized balance sheets of the Company's unconsolidated joint ventures are as follows:
September 30, 2024 December 31, 2023
(in thousands)
ASSETS
Real estate and development in process, net (1) $ 5,756,008 $ 5,811,763
Other assets (2) 651,956 682,291
Total assets $ 6,407,964 $ 6,494,054
LIABILITIES AND MEMBERS'/PARTNERS' EQUITY
Mortgage and notes payable, net $ 3,198,547 $ 3,351,873
Other liabilities (3) 294,795 361,357
Members'/Partners' equity 2,914,622 2,780,824
Total liabilities and members'/partners' equity $ 6,407,964 $ 6,494,054
Company's share of equity $ 1,334,102 $ 1,278,483
Basis differentials (4) 57,047 58,933
Carrying value of the Company's investments in unconsolidated joint ventures (5) $ 1,391,149 $ 1,337,416
_______________
(1)At September 30, 2024 and December 31, 2023, this amount included right of use assets - operating leases totaling approximately $19.2 million and $20.1 million, respectively.
(2)At September 30, 2024 and December 31, 2023, this amount included sales-type lease receivable, net totaling approximately $14.1 million and $13.9 million, respectively.
(3)At September 30, 2024 and December 31, 2023, this amount included lease liabilities - operating leases totaling approximately $30.5 million.
(4)This amount represents the aggregate difference between the Company's historical cost basis and the basis reflected at the joint venture level, which is typically amortized over the life of the related assets and liabilities. Basis differentials result from impairments of investments, acquisitions through joint ventures with no change in control and upon the transfer of assets that were previously owned by the Company into a joint venture. In addition, certain acquisition, transaction and other costs may not be reflected in the net assets at the joint venture level. The Company's basis differences include:
September 30, 2024 December 31, 2023
Property (in thousands)
Colorado Center $ 296,758 $ 298,906
200 Fifth Avenue 51,779 58,308
Gateway Commons 51,009 48,971
Safeco Plaza (29,032) (29,678)
360 Park Avenue South (114,202) (116,534)
Dock 72 (92,930) (95,521)
Platform 16 (142,670) (143,052)
These basis differentials (excluding land) will be amortized over the remaining lives of the related assets and liabilities.
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(5)Investments with deficit balances aggregating approximately $30.7 million and $39.9 million at September 30, 2024 and December 31, 2023, respectively, are reflected within Other Liabilities in the Company's Consolidated Balance Sheets.
The combined summarized statements of operations of the Company's unconsolidated joint ventures are as follows:
Three months ended September 30, Nine months ended September 30,
2024 2023 2024 2023
(in thousands)
Total revenue (1) $ 128,435 $ 153,551 $ 378,981 $ 469,745
Expenses
Operating 53,280 65,119 148,929 183,348
Transaction costs 53 78 61 179
Depreciation and amortization 41,082 49,840 118,901 151,051
Total expenses 94,415 115,037 267,891 334,578
Other income (expense)
Loss from early extinguishment of debt - - - (3)
Interest expense (45,244) (60,737) (132,106) (176,786)
Unrealized gain (loss) on derivative instruments (19,172) 10,242 (8,212) 14,089
Net loss $ (30,396) $ (11,981) $ (29,228) $ (27,533)
Company's share of net loss $ (9,319) $ (4,476) $ (9,105) $ (10,739)
Gain on investment (2) - 35,756 - 35,756
Gain on sale / consolidation - - 21,696 -
Impairment losses on investments (3) - (272,603) - (272,603)
Basis differential (4) 2,308 (6,233) (6,215) (14,207)
Income (loss) from unconsolidated joint ventures $ (7,011) $ (247,556) $ 6,376 $ (261,793)
_______________
(1)Includes straight-line rent adjustments of approximately $2.6 million and $7.7 million for the three months ended September 30, 2024 and 2023, respectively, and approximately $16.5 million and $20.9 million for the nine months ended September 30, 2024 and 2023, respectively.
(2)During the three months ended September 30, 2023, the Company completed a restructuring of its ownership in Metropolitan Square.
(3)During the three and nine months ended September 30, 2023, the Company recognized an other-than-temporary impairment loss on its investments in Platform 16, 360 Park Avenue South, 200 Fifth Avenue and Safeco Plaza aggregating approximately $272.6 million.
(4)Includes depreciation and amortization of approximately $3.9 million and $4.1 million for the three months ended September 30, 2024 and 2023, respectively, and approximately $6.8 million and $7.8 million for the nine months ended September 30, 2024 and 2023, respectively. Includes unrealized loss on derivative instruments of approximately $5.1 million and $2.7 million for the three months ended September 30, 2024 and 2023, respectively, and approximately $4.9 million and $6.6 million for the nine months ended September 30, 2024 and 2023, respectively. Includes straight-line rent adjustments of approximately $0.3 million and $0.4 million for the three months ended September 30, 2024 and 2023, respectively, and approximately $1.0 million and $1.1 million for the nine months ended September 30, 2024 and 2023, respectively. Also includes net above-/below-market rent adjustments of approximately $0.2 million for the three months ended September 30, 2024 and 2023, and approximately $0.6 million for the nine months ended September 30, 2024 and 2023.
On January 2, 2024, a joint venture in which the Company has a 50% interest partially placed in-service 651 Gateway, an approximately 327,000 net rentable square foot laboratory/life sciences project in South San Francisco, California.
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On January 8, 2024, the Company acquired its joint venture partner's 50% economic ownership interest in the joint venture that owns 901 New York Avenue, located in Washington, DC, for a gross purchase price of $10.0 million in cash (See Note 3). Prior to the acquisition, the Company had a 50% economic ownership interest in the joint venture and accounted for it under the equity method of accounting. The acquisition resulted in the Company having full ownership of the joint venture such that the Company now accounts for its assets, liabilities, and operations on a consolidated basis in its financial statements instead of under the equity method of accounting. As a result, the Company recognized a gain on consolidation of approximately $21.8 million.
On February 6, 2024, a joint venture in which the Company owns a 25% interest extended the maturity date of the loan collateralized by its 3 Hudson Boulevard property. At the time of the extension, the loan had an outstanding principal balance totaling $80.0 million and was scheduled to mature on February 9, 2024. The extended loan was scheduled to mature on May 9, 2024. On May 8, 2024, the loan was extended 30 days and on June 7, 2024, the loan was extended an additional 60 days. The extended loan continued to bear interest at a variable rate equal to Term SOFR plus approximately 3.61% per annum and was scheduled to mature on August 7, 2024. As of September 30, 2024, the loan was in a maturity default and had an outstanding balance, including accrued and unpaid interest and default interest of approximately $116.0 million. The Company is the lender of the loan and the loan is reflected as Related Party Note Receivables, Net on the Company's Consolidated Balance Sheets. 3 Hudson Boulevard consists of land and improvements held for future development located in New York, New York.
On February 9, 2024, a joint venture in which the Company owns a 50% interest exercised an option to extend the maturity date of the construction loan collateralized by its 7750 Wisconsin Avenue property. The construction loan had a total commitment amount of approximately $252.6 million. The extended loan continues to bear interest at a variable rate equal to Term SOFR plus 1.35% per annum and matures on April 26, 2025. At the time of the extension, the loan had an outstanding balance totaling approximately $251.6 million and was scheduled to mature on April 26, 2024. 7750 Wisconsin Avenue is an office property with approximately 736,000 net rentable square feet located in Bethesda, Maryland.
On July 12, 2024, a joint venture in which the Company has a 20% ownership interest partially placed in-service Skymark, a luxury residential property located in Reston, Virginia, that consists of 508 residential units aggregating approximately 417,000 net rentable square feet across a five-story low-rise building and an iconic 39-story tower, which is one of the tallest buildings in Northern Virginia.
On July 18, 2024, a joint venture in which the Company has a 50% ownership interest extended by oneyear the maturity date of its loan collateralized by 100 Causeway Street. At the time of the extension, the loan had an outstanding balance totaling approximately $333.6 million, bore interest at Term SOFR plus 1.48% per annum, and was scheduled to mature on September 5, 2024. Following the extension, the loan will continue to bear interest at Term SOFR plus 1.48% per annum, and is scheduled to mature on September 5, 2025. 100 Causeway Street is an approximately 634,000 net rentable square foot office property located in Boston, Massachusetts.
On August 7, 2024, a joint venture in which the Company has a 71.11% ownership interest partially placed in-service 360 Park Avenue South, a 20-story, office building with ground floor retail located in New York City, New York, aggregating approximately 450,000 net rentable square feet.
6. Debt
Mortgage Notes Payable
On January 8, 2024, the Company acquired its joint venture partner's 50% economic ownership interest in the joint venture that owns 901 New York Avenue located in Washington, DC (See Note 3). The property is subject to existing mortgage indebtedness. At acquisition, the mortgage loan had an outstanding principal balance of approximately $207.1 million, bore interest at 3.61% per annum and was scheduled to mature on January 5, 2025. The mortgage loan was recorded at a fair value of approximately $198.7 million. On January 11, 2024, the Company modified the mortgage loan to provide for two extension options totaling five years of additional term, each subject to certain conditions.
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Unsecured Senior Notes
The following summarizes the unsecured senior notes outstanding as of September 30, 2024 (dollars in thousands):
Coupon/Stated Rate Effective Rate(1) Principal Amount Maturity Date(2)
7 Year Unsecured Senior Notes 3.200 % 3.350 % $ 850,000 January 15, 2025
10 Year Unsecured Senior Notes 3.650 % 3.766 % 1,000,000 February 1, 2026
10 Year Unsecured Senior Notes 2.750 % 3.495 % 1,000,000 October 1, 2026
5 Year Unsecured Senior Notes 6.750 % 6.924 % 750,000 December 1, 2027
10 Year Unsecured Senior Notes 4.500 % 4.628 % 1,000,000 December 1, 2028
10 Year Unsecured Senior Notes 3.400 % 3.505 % 850,000 June 21, 2029
10.5 Year Unsecured Senior Notes 2.900 % 2.984 % 700,000 March 15, 2030
10.75 Year Unsecured Senior Notes 3.250 % 3.343 % 1,250,000 January 30, 2031
11 Year Unsecured Senior Notes 2.550 % 2.671 % 850,000 April 1, 2032
12 Year Unsecured Senior Notes 2.450 % 2.524 % 850,000 October 1, 2033
10.7 Year Unsecured Senior Notes 6.500 % 6.619 % 750,000 January 15, 2034
10 Year Unsecured Senior Notes 5.750 % 5.842 % 850,000 January 15, 2035
Total principal 10,700,000
Less:
Net unamortized discount 11,580
Deferred financing costs, net 46,387
Total $ 10,642,033
_______________
(1)Yield on issuance date including the effects of discounts on the notes, settlements of interest rate contracts and the amortization of financing costs.
(2)No principal amounts are due prior to maturity.
On February 1, 2024, BPLP repaid $700.0 million in aggregate principal amount of its 3.800% senior notes due February 1, 2024. The repayment was completed with available cash and the $600.0 million proceeds from the mortgage loan entered into on October 26, 2023. The repayment price was approximately $713.3 million, which was equal to the stated principal plus approximately $13.3 million of accrued and unpaid interest to, but not including, the repayment date. Excluding the accrued and unpaid interest, the repayment price was equal to the principal amount being repaid.
On August 26, 2024, BPLP completed a public offering of $850.0 million in aggregate principal amount of its 5.750% unsecured senior notes due 2035. The notes were priced at 99.961% of the principal amount to yield an effective rate (including financing fees) of approximately 5.842% per annum to maturity. The notes will mature on January 15, 2035, unless earlier redeemed. The aggregate net proceeds from the offering were approximately $841.9 million after deducting underwriting discounts and transaction expenses.
Unsecured Credit Facility
BPLP's unsecured revolving credit facility (the "2021 Credit Facility") provides for borrowings of up to $2.0 billion, as described below in this Note 6, through BPLP's revolving facility, subject to customary conditions. The 2021 Credit Facility matures on June 15, 2026 and includes a sustainability-linked pricing component. Under the 2021 Credit Facility, BPLP had the option to increase the original total commitment of $1.5 billion by up to an additional $500.0 million by 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 (the "Accordion Option"). On September 28, 2023, BPLP exercised a portion of the Accordion Option which increased the then maximum borrowing amount under the 2021 Credit Facility from $1.5 billion to $1.815 billion. On April 29, 2024, BPLP exercised the remainder of the Accordion Option and further increased the maximum borrowing amount under the 2021 Credit Facility to $2.0 billion. All other terms of the 2021 Credit Facility remain unchanged.
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At September 30, 2024, BPLP had no amount outstanding under the 2021 Credit Facility. The 2021 Credit Facility is used as a backstop for BPLP's $500.0 million unsecured commercial paper program (See "Unsecured Commercial Paper" below). As such, BPLP intends to maintain, at a minimum, availability under the 2021 Credit Facility in an amount equal to the amount of unsecured commercial paper notes outstanding.
Unsecured Term Loans
On January 4, 2023, BPLP entered into a credit agreement that provided for a $1.2 billion unsecured term loan facility (the "2023 Unsecured Term Loan"). Upon entry into the credit agreement, BPLP exercised its option to draw $1.2 billion under the 2023 Unsecured Term Loan.
On April 29, 2024, BPLP repaid $500.0 million of the outstanding balance under the 2023 Unsecured Term Loan from the proceeds of its unsecured commercial paper program (See "Unsecured Commercial Paper" below). At September 30, 2024, BPLP had $700.0 million of principal outstanding under the 2023 Unsecured Term Loan.
Under the credit agreement governing the 2023 Unsecured Term Loan, BPLP may, at any time prior to the maturity date, increase total commitments by up to an additional $300.0 million in aggregate principal amount by increasing the existing 2023 Unsecured Term Loan or incurring one or more additional term loans, in each case, subject to syndication of the increase and other conditions. The 2023 Unsecured Term Loan had an initial maturity date of May 16, 2024, with one 12-month extension option, subject to customary conditions. On May 16, 2024, BPLP exercised its option to extend the maturity date of the 2023 Unsecured Term Loan to May 16, 2025. All other terms of the 2023 Unsecured Term Loan remain unchanged.
On September 27, 2024, BPLP entered into a credit agreement that provides for a $100.0 million unsecured term loan facility (the "2024 Unsecured Term Loan") with a lender (the "Lender") under the mortgage loan collateralized by the Company's Santa Monica Business Park properties located in Santa Monica, California (the "SMBP Loan"). Upon entry into the credit agreement, BPLP exercised its option to draw $100.0 million under the 2024 Unsecured Term Loan. The proceeds were used to repay the portion of the SMBP Loan held by the Lender. After the repayment, the SMBP Loan had a remaining principal balance of $200.0 million (See Note 14). The 2024 Unsecured Term Loan matures on September 26, 2025 with three, one-year extension options, subject to customary conditions.
At BPLP's option, loans under the 2024 Unsecured Term Loan will bear interest at a rate per annum equal to (1) a base rate equal to the highest of (a) zero, (b) Prime Rate, (c) the Federal Funds effective rate plus 0.50%, and (d) Term SOFR for a one-month period plus 1.10%, in each case, plus a margin ranging from 0 to 60 basis points based on BPLP's credit rating; or (2) a rate equal to adjusted Term SOFR or Daily Simple SOFR with a one-month period plus a margin ranging from 75 to 160 basis points based on BPLP's credit rating.
Based on BPLP's September 30, 2024 credit rating, the 2024 Unsecured Term Loan bears interest at a rate equal to Daily Simple SOFR plus 1.05% per annum. The 2024 Unsecured Term Loan is subject to an existing interest rate swap to fix Daily Simple SOFR at a fixed rate of approximately 2.688% per annum for a period that ends on April 1, 2025 (See Note 7). At September 30, 2024, BPLP had $100.0 million of principal outstanding under the 2024 Unsecured Term Loan.
The 2023 and 2024 Unsecured Term Loans contain customary representations and warranties, affirmative and negative covenants and events of default provisions, including the failure to pay indebtedness, breaches of covenants and bankruptcy and other insolvency events, which could result in the acceleration of the obligation to repay any outstanding amount under the 2023 and 2024 Unsecured Term Loans. Among other covenants, the 2023 and 2024 Unsecured Term Loans require that BPLP maintain on an ongoing basis: (1) a leverage ratio not to exceed 60%, however, the leverage ratio may increase to no greater than 65% provided that it is reduced back to 60% within one year, (2) a secured debt leverage ratio not to exceed 55%, (3) a fixed charge coverage ratio of at least 1.40 to 1.00, (4) an unsecured debt leverage ratio not to exceed 60%, however, the unsecured debt leverage ratio may increase to no greater than 65% provided that it is reduced to 60% within one year, (5) an unsecured debt interest coverage ratio of at least 1.75 to 1.00 and (6) limitations on permitted investments. At September 30, 2024, BPLP was in compliance with each of these financial and other covenant requirements.
Unsecured Commercial Paper
On April 17, 2024, BPLP established an unsecured commercial paper program. Under the terms of the program, BPLP may issue, from time to time, unsecured commercial paper notes up to a maximum aggregate amount outstanding at any one time of $500.0 million with varying maturities of up to one year. Amounts available
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under the unsecured commercial paper program may be borrowed, repaid, and re-borrowed from time to time. The notes are sold in private placements and rank pari passu with all of BPLP's other unsecured senior indebtedness, including its outstanding senior notes. The commercial paper program is backstopped by available capacity under the 2021 Credit Facility. At September 30, 2024, BPLP had an aggregate of $500.0 million of unsecured commercial paper notes outstanding that bore interest at a weighted-average rate of approximately 5.22% per annum and had a weighted-average maturity of 34 days from the issuance date.
7. Derivative Instruments and Hedging Activities
BPLP's agreements with derivative counterparties contain provisions whereby if BPLP defaults on the underlying indebtedness, including defaults where repayment of the indebtedness has not been accelerated by the lender, then BPLP could also be declared in default of the swap derivative obligation. As of September 30, 2024, the Company had not posted any collateral related to the agreements.
Effective Hedge Instruments
BPLP assesses the effectiveness of its derivatives both at inception and on an ongoing basis. If the hedges are deemed to be effective, the fair value is recorded in "Accumulated other comprehensive loss" in the Company's Consolidated Balance Sheets and is subsequently reclassified into "Interest expense" in the Company's Consolidated Statements of Operationsin the period that the hedged forecasted transactions affect earnings. BPLP's derivative financial instruments are cash flow hedges that are designated as effective hedges, and they are carried at their estimated fair value on a recurring basis (See Note 2). The Company did not incur ineffectiveness during the three and nine months ended September 30, 2024.
BPLP's and SMBP LLC's derivative contracts consisted of the following at September 30, 2024 (dollars in thousands):
Derivative Instrument Aggregate Notional Amount Strike Rate Range Balance Sheet Location
Effective Date Maturity Date Low High Fair Value
BPLP:
Interest Rate Swaps $ 600,000 December 15, 2023 October 26, 2028 3.790 % - 3.798 % Other liabilities $ (12,600)
Interest Rate Swaps 100,000 September 27, 2024 April 1, 2025 2.688 % - 2.688 % Prepaid expenses and other assets 799
700,000 (11,801)
SMBP LLC (1)
Interest Rate Swaps 200,000 December 14, 2023 April 1, 2025 2.661 % - 2.688 % Prepaid expenses and other assets 1,610
$ 900,000 $ (10,191)
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(1)A consolidated subsidiary of the Company that is the borrower under the mortgage loan collateralized by its Santa Monica Business Park property.
The following table presents the location in the financial statements of the gains or (losses) recognized as a result of the Company's cash flow hedges for the three and nine months ended September 30, 2024 and 2023 (in thousands):
Three months ended September 30, Nine months ended September 30,
2024 2023 2024 2023
Amount of gain (loss) related to the effective portion recognized in other comprehensive income (1) $ (32,263) $ 5,459 $ (14,976) $ 13,886
Amount of gain (loss) related to the effective portion subsequently reclassified to earnings (2) $ 3,077 $ 1,677 $ 9,518 $ 5,026
Amount of gain (loss) related do the ineffective portion and amount excluded from effectiveness testing $ - $ - $ - $ -
_______________
(1)Includes the Company's share of gain (loss) related to the effective portion of derivatives outstanding at its unconsolidated joint venture properties.
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(2)Includes amounts from previous interest rate programs.
BPLP has formally documented all of its relationships between hedge instruments and hedging items, as well as its risk-management objectives and strategy for undertaking various hedge transactions. While management believes its judgments are reasonable, a change in a derivative's effectiveness as a hedge could materially affect expenses, net income (loss) and equity.
Ineffective Hedging Instruments
During the year ended December 31, 2023, to satisfy a lender requirement, the Company entered into two agreements with the same third-party to purchase and sell a $600.0 million interest rate cap. The Company did not elect hedge accounting, and as such, any change in market value will be recognized in Gain (losses) from interest rate contracts in the Consolidated Statement of Operations. For the three and nine months ended September 30, 2024 and 2023, the Company recognized no impact to its Consolidated Statement of Operations from entering into these agreements.
8. Commitments and Contingencies
General
In the normal course of business, the Company guarantees its performance of services or indemnifies third parties against its negligence. In addition, in the normal course of business, the Company guarantees to certain tenants the obligations of the Company's subsidiaries to pay tenant improvement allowances and brokerage commissions in connection with their leases and limited costs arising from delays in delivery of their premises.
The Company had letter of credit and performance obligations related to lender and development requirements that total approximately $21.0 million at September 30, 2024.
Certain of the Company's joint venture agreements include provisions whereby, at certain specified times, each partner has the right to initiate a purchase or sale of its interest in the joint venture. From time to time, under certain of the Company's joint venture agreements, if certain return thresholds are achieved, either the Company or its partners may be entitled to receive an additional promoted interest or payments.
From time to time, the Company (or ventures in which the Company has an ownership interest) has agreed, and may in the future agree, to (1) guarantee portions of the principal, interest and other amounts in connection with their borrowings, (2) provide customary environmental indemnifications and nonrecourse carve-outs (e.g., guarantees against fraud, misrepresentation and bankruptcy) in connection with their borrowings and (3) provide guarantees to lenders, tenants and other third parties for the completion of development projects. The Company has agreements with its third-party joint venture partners whereby the partners agree to reimburse the joint venture for their share of any payments made under the guarantee. In some cases, the Company earns a fee from the applicable joint venture for providing the guarantee.
In connection with the refinancing of 767 Fifth Avenue's (the General Motors Building) secured loan by the Company's consolidated joint venture entity, 767 Venture, LLC, the Company guaranteed the consolidated entity's obligation to fund various reserves for tenant improvement costs and allowances, leasing commissions and free rent obligations in lieu of cash deposits. As of September 30, 2024, the maximum funding obligation under the guarantee was approximately $6.4 million. The Company earns a fee from the joint venture for providing the guarantee and has an agreement with the outside partners to reimburse the joint venture for their share of any payments made under the guarantee. As of September 30, 2024, no amounts related to the guarantee were recorded as liabilities in the Company's consolidated financial statements.
In connection with the sale of Metropolitan Square, an approximately 657,000 square foot office building in Washington, DC in which the Company had a 20% equity interest, the Company agreed to become a co-lender of up to $20.0 million under a mezzanine loan. The mezzanine loan has a maximum principal amount of $100.0 million, and it is subordinate only to an existing senior loan. The mezzanine loan may be drawn upon for future lease-up, operating and other costs on an as-needed basis, and amounts borrowed will bear interest at a per annum rate of 12%, compounded monthly. As of September 30, 2024, the Company has funded approximately $3.9 million under the mezzanine loan.
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Legal Matters
The Company is subject to various legal proceedings and claims that arise in the ordinary course of business. These matters are generally covered by insurance. Management believes that the final outcome of such matters will not have a material adverse effect on the financial position, results of operations or liquidity of the Company.
In connection with the acquisition of an office property in New York City in 2010, the Company entered into an agreement with the seller pursuant to which the seller could earn various fees based on the future leasing performance of the property. The Company initially accrued approximately $1.5 million as an estimate of the fees it would owe the seller. In 2020, the seller filed suit against the Company in the Supreme Court of the State of New York, County of New York, claiming that consideration significantly in excess of the initial reserve amount is owed under the agreement. The disagreement between the Company and the seller involves material issues of contract interpretation and, more importantly, the method of calculating fees, including various inputs (both facts and assumptions) that drive the calculations. In February 2024, the court granted the seller's motion for summary judgement interpreting certain sections of the agreement in favor of the seller's claims. The Company is disputing the seller's calculations and intends to continue defending itself vigorously. However, there can be no assurance that the Company will prevail in the lawsuit. If the court ultimately agrees with the seller's calculations, then amounts due to the seller could theoretically be as high as the additional $31 million claimed in the seller's complaint, plus interest. Although the Company disputes those calculations, there can be no assurance that the Company's ultimate liability will not be significantly greater than its established accrual.
On April 26, 2024, Brammer Bio MA, LLC ("Brammer"), a subsidiary of Thermo Fisher Scientific Inc. and an abutter to the Company's 290 Binney Street development project located in Cambridge, Massachusetts, filed a complaint in Superior Court in Suffolk County, Massachusetts against the Company relating to certain ongoing construction activities.
In the first quarter of 2023, the Company commenced development of 290 Binney Street, an approximately 573,000 net rentable square foot laboratory/life sciences property that is 100% pre-leased to AstraZeneca Pharmaceuticals ("AstraZeneca"). The Company has a 55% interest in the joint venture that owns 290 Binney Street. Brammer subleases the premises at 250 Binney Street, the Company's approximately 67,000 net rentable square foot life sciences property that is adjacent to 290 Binney Street.
Brammer alleges that, as a result of the Company's construction of 290 Binney Street, it is threatened with irreparable harm due to intrusion onto the 250 Binney Street premises and the loss of its property rights. Brammer also alleges that the 290 Binney Street development project has caused and is causing major disruption to its manufacturing operations, and that it has suffered and will continue to suffer damages in the form of losses to its clients and customers. Brammer brought the action for quiet title, breach of contract, trespass and nuisance, and it is seeking declaratory and injunctive relief and specific performance purportedly to protect its property interests in the premises located at 250 Binney Street.
The Company believes it has meritorious defenses against Brammer's claims and intends to defend against them vigorously. However, there can be no assurance the Company will prevail in the litigation. If the Company is enjoined from further construction activities, it could suffer delays in construction that could result in its failure to deliver a completed building on the schedule contemplated by the Company's lease with AstraZeneca or at all, and this could result in owing financial penalties to AstraZeneca and other third parties. Although the Company is unable to estimate a range of loss for all related matters for which losses are reasonably possible, if the court grants injunctive relief or awards monetary damages to Brammer, it could have a material adverse effect on the Company's results of operations and financial condition.
On May 16, 2024, Brammer's motion for a preliminary injunction was denied by the trial court. Brammer subsequently appealed that decision, electing pursuant to Massachusetts civil procedure rules to petition for appeals to both a single justice of the Massachusetts Appeals Court and to a full appellate panel. On July 16, 2024, the single justice assigned to the appeal issued an order declining to rule on the substance of the appeal petition, which means that the appeal will be decided by the full panel. A date has not yet been set for the full panel hearing.
Insurance
The Company's property insurance program per occurrence limits are $1.0 billion for its portfolio insurance program, including coverage for acts of terrorism other than nuclear, biological, chemical or radiological terrorism ("Terrorism Coverage"). The Company also carries $1.35 billion of property insurance in excess of the $1.0 billion of coverage in the Company's property insurance program for 601 Lexington Avenue, New York, New York, consisting
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of $750 million of property and Terrorism Coverage in excess of the Company's property insurance program and $600 million of Terrorism Coverage only in excess of the $1.75 billion of coverage. Certain properties, including the General Motors Building located at 767 Fifth Avenue in New York, New York ("767 Fifth Avenue"), are currently insured in separate insurance programs. The property insurance program per occurrence limits for 767 Fifth Avenue are $1.625 billion, including Terrorism Coverage. The Company also currently carries nuclear, biological, chemical and radiological terrorism insurance coverage for acts of terrorism certified under the Federal Terrorism Risk Insurance Act (as amended, "TRIA") ("NBCR Coverage"), which is provided by IXP as a direct insurer, for the properties in the Company's portfolio, including 767 Fifth Avenue, but excluding certain other properties owned in joint ventures with third parties or which the Company manages. The per occurrence limit for NBCR Coverage is $1.0 billion. Under TRIA, after the payment of the required deductible and coinsurance, the NBCR Coverage provided by IXP is backstopped by the Federal Government if the aggregate industry insured losses resulting from a certified act of terrorism exceed a "program trigger." The program trigger is $200 million, the coinsurance is 20% and the deductible is 20% of the premiums earned by the insurer for the year prior to a claim. If the Federal Government pays out for a loss under TRIA, it is mandatory that the Federal Government recoup the full amount of the loss from insurers offering TRIA coverage after the payment of the loss pursuant to a formula in TRIA. The Company may elect to terminate the NBCR Coverage if the Federal Government seeks recoupment for losses paid under TRIA, if TRIA is not extended after its expiration on December 31, 2027, if there is a change in its portfolio or for any other reason. The Company intends to continue to monitor the scope, nature and cost of available terrorism insurance.
The Company also currently carries earthquake insurance on its properties located in areas known to be subject to earthquakes. Specifically, the Company currently carries earthquake insurance which covers its San Francisco and Los Angeles regions with a $330 million per occurrence limit, and a $330 million annual aggregate limit, $30 million of which is provided by IXP, as a direct insurer. This insurance is subject to a deductible in the amount of 5% of the value of the affected property. In addition, the Company currently carries earthquake insurance which covers its Seattle region with a $110 million per occurrence limit, and a $110 million annual aggregate limit. This insurance is subject to a deductible in the amount of 2% of the value of the affected property. The amount of the Company's earthquake insurance coverage may not be sufficient to cover losses from earthquakes. In addition, the amount of earthquake coverage could impact the Company's ability to finance properties subject to earthquake risk. The Company may discontinue earthquake insurance or change the structure of its earthquake insurance program on some or all of its properties in the future if the premiums exceed the Company's estimation of the value of the coverage.
IXP, a captive insurance company which is a wholly-owned subsidiary of the Company, acts as a direct insurer with respect to a portion of the Company's earthquake insurance coverage for its Greater San Francisco and Los Angeles properties and the Company's NBCR Coverage. Insofar as the Company owns IXP, it is responsible for its liquidity and capital resources, and the accounts of IXP are part of the Company's consolidated financial statements. In particular, if a loss occurs which is covered by the Company's NBCR Coverage but is less than the applicable program trigger under TRIA, IXP would be responsible for the full amount of the loss without any backstop by the Federal Government. IXP would also be responsible for any recoupment charges by the Federal Government in the event losses are paid out and its insurance policy is maintained after the payout by the Federal Government. If the Company experiences a loss and IXP is required to pay under its insurance policy, the Company would ultimately record the loss to the extent of the required payment. Therefore, insurance coverage provided by IXP should not be considered as the equivalent of third-party insurance, but rather as a modified form of self-insurance. In addition, BPLP has issued a guarantee to cover liabilities of IXP in the amount of $20.0 million.
The Company continues to monitor the state of the insurance market in general, and the scope and costs of coverage for acts of terrorism, earthquakes, pandemics and cybersecurity incidents, in particular, but the Company cannot anticipate what coverage will be available on commercially reasonable terms in future policy years. There are other types of losses, such as from wars, for which the Company cannot obtain insurance at all or at a reasonable cost. With respect to such losses and losses from acts of terrorism, earthquakes, pandemics or other catastrophic events, if the Company experiences a loss that is uninsured or that exceeds policy limits, the Company could lose the capital invested in the damaged properties, as well as the anticipated future revenues from those properties. Depending on the specific circumstances of each affected property, it is possible that the Company could be liable for mortgage indebtedness or other obligations related to the property. Any such loss could materially and adversely affect the Company's business, financial condition and results of operations.
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9. Noncontrolling Interests
Noncontrolling interests relate to the interests in BPLP not owned by BXP and interests in consolidated property partnerships not wholly-owned by the Company. As of September 30, 2024, the noncontrolling interests in BPLP consisted of the following:
OP Units LTIP Units (1) 2022 MYLTIP Units 2023 MYLTIP Units 2024 MYLTIP Units
15,926,014 2,336,797 252,151 322,053 330,479
__________
(1)Includes 617,961 LTIP Units earned by employees under the Company's multi-year long-term incentive awards granted between 2012 and 2021 (i.e., 2012 OPP and 2013 - 2021 MYLTIP awards).
Noncontrolling Interest-Common Units
During the nine months ended September 30, 2024, 951,881 OP Units were presented by the holders for redemption (including an aggregate of 105,814 OP Units issued upon conversion of LTIP Units, 2012 OPP Units and MYLTIP Units) and were redeemed by BXP in exchange for an equal number of shares of Common Stock.
At September 30, 2024, BPLP had outstanding the 2022 - 2024 MYLTIP Units. Prior to the end of the respective three-year performance period for each plan, holders of MYLTIP Units are entitled to receive per unit distributions equal to one-tenth (10%) of the regular quarterly distributions payable on an OP Unit, but will not be entitled to receive any special distributions. After the three-year performance period for each plan has ended, (1) the number of MYLTIP Units, both vested and unvested, that MYLTIP award recipients have earned, if any, based on the establishment of a performance pool, will be entitled to receive distributions in an amount per unit equal to distributions, both regular and special, payable on an OP Unit and (2) with respect to the 2022 - 2024 MYLTIP Units, the Company will make a "catch-up" cash payment on the MYLTIP Units that are ultimately earned in an amount equal to the regular and special dividends, if any, declared during the performance period on a number of shares of Common Stock agreed to the number of 2022 - 2024 MYLTIP Units that are earned, less the distributions actually paid during the performance period on all of the awarded 2022 - 2024 MYLTIP Units.
On February 1, 2024, the measurement period for the Company's 2021 MYLTIP awards ended and, based on BXP's absolute and relative TSR performance, the final payout was determined to be 112% of target, or an aggregate of approximately $12.6 million (after giving effect to employee separations). As a result, an aggregate of 155,625 2021 MYLTIP Units that had been previously granted were automatically forfeited.
The following table presents BPLP's distributions on the OP Units and LTIP Units and MYLTIP Units paid or declared in 2024 and during the nine months ended September 30, 2023:
Record Date Payment Date Distributions per OP Unit and LTIP Unit Distributions per MYLTIP Unit
September 30, 2024 October 31, 2024 $0.98 $0.098
June 28, 2024 July 31, 2024 $0.98 $0.098
March 28, 2024 April 30, 2024 $0.98 $0.098
December 29, 2023 January 30, 2024 $0.98 $0.098
September 29, 2023 October 31, 2023 $0.98 $0.098
June 30, 2023 July 31, 2023 $0.98 $0.098
March 31, 2023 April 28, 2023 $0.98 $0.098
December 30, 2022 January 30, 2023 $0.98 $0.098
A holder of an OP Unit may present the OP Unit to BPLP for redemption at any time (subject to restrictions agreed upon at the time of issuance of OP Units to particular holders that may restrict such redemption right for a period of time, generally one year from issuance). Upon presentation of an OP Unit for redemption, BPLP must redeem the OP Unit for cash equal to the then value of a share of Common Stock of BXP. BXP may, in its sole discretion, elect to assume and satisfy the redemption obligation by paying either cash or issuing one share of Common Stock. The value of the OP Units (other than OP Units owned by BXP), and LTIP Units (including the 2012 OPP Units and 2013 - 2021 MYLTIP Units), assuming in each case that all conditions had been met for the conversion thereof, had all of such units been redeemed at September 30, 2024 was approximately $1.5 billion
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based on the last reported price of a share of Common Stock on the New York Stock Exchange of $80.46 per share on September 30, 2024.
Noncontrolling Interests-Property Partnerships
The noncontrolling interests in property partnerships consist of the outside equity interests in ventures that are consolidated with the financial results of the Company because the Company exercises control over the entities that own the properties. The equity interests in these ventures that are not owned by the Company, totaling approximately $1.9 billion and $1.6 billion at September 30, 2024 and December 31, 2023, respectively, are included in Noncontrolling Interests-Property Partnerships on the accompanying Consolidated Balance Sheets.
On March 21, 2024, the Company completed the sale of a 45% interest in 290 Binney Street in Cambridge, Massachusetts.  The institutional investor funded approximately $97.2 million in cash at closing, which is less than 45% of the agreed upon carrying value of the property immediately prior to the transaction.  The institutional investor will fund all construction costs until its equity balance is proportionate to its ownership percentage, after which the Company and the institutional investor will fund the development project based on their respective ownership interests.  The Company retains a 55% ownership interest in the joint venture.  The transaction did not qualify as a sale of real estate for financial reporting purposes as the Company continues to effectively control the property and thus will continue to account for the property on a consolidated basis in its financial statements and no gain was recognized in the Consolidated Statements of Operations.  The Company provides customary development, property management and leasing services to the joint venture. 
The Company has accounted for the transaction as an equity transaction and as of March 21, 2024 has recognized noncontrolling interest in its Consolidated Balance Sheets totaling approximately $104.6 million, which is equal to 45% of the aggregate carrying value of the total equity of the property immediately prior to the transaction.  The difference between the cash proceeds received and the noncontrolling interest recognized, which was approximately $7.5 million, has been reflected as a decrease in additional paid-in capital in the Company's Consolidated Balance Sheets.  At the end of each reporting period, there will be a reallocation of the partners' equity balances such that the ending balance in each partners' capital account reflects each partners' claim on net assets. These adjustments will impact additional paid-in capital and noncontrolling interest in property partnerships in the Company's Consolidated Balance Sheets. For the three and nine months ended September 30, 2024, the adjustment was approximately $(27.1) million and $7.8 million, respectively. 
290 Binney Street is an approximately 573,000 net rentable square foot laboratory/life sciences development project located in Cambridge, Massachusetts.  The  development project is 100% pre-leased to a life sciences company.  
10. Stockholders' Equity / Partners' Capital
As of September 30, 2024, BXP had 157,979,898 shares of Common Stock outstanding.
As of September 30, 2024, BXP owned 1,762,427 general partnership units and 156,217,471 limited partnership units in BPLP.
On May 17, 2023, BXP renewed its "at the market" ("ATM") stock offering program through which it may sell from time to time up to an aggregate of $600.0 million of its Common Stock through sales agents over a three-year period. Under the ATM stock offering program, BXP may also engage in forward sale transactions with affiliates of certain sales agents for the sale of its Common Stock on a forward basis. This program replaced BXP's prior $600.0 million ATM stock offering program that was scheduled to expire on May 22, 2023. BXP intends to use the net proceeds from any offering for general business purposes, which may include investment opportunities and debt reduction. No shares of Common Stock have been issued under this ATM stock offering program.
During the nine months ended September 30, 2024, BXP issued 951,881 shares of Common Stock in connection with the redemption of an equal number of redeemable OP Units from limited partners.
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The following table presents BXP's dividends per share and BPLP's distributions per OP Unit and LTIP Unit paid or declared in 2024 and during the nine months ended September 30, 2023:
Record Date Payment Date Dividend (Per Share) Distribution (Per Unit)
September 30, 2024 October 31, 2024 $0.98 $0.98
June 28, 2024 July 31, 2024 $0.98 $0.98
March 28, 2024 April 30, 2024 $0.98 $0.98
December 29, 2023 January 30, 2024 $0.98 $0.98
September 29, 2023 October 31, 2023 $0.98 $0.98
June 30, 2023 July 31, 2023 $0.98 $0.98
March 31, 2023 April 28, 2023 $0.98 $0.98
December 30, 2022 January 30, 2023 $0.98 $0.98
11. Segment Information
The following tables present reconciliations of Net Income (Loss) Attributable to BXP, Inc. to the Company's share of Net Operating Income and Net Income (Loss) Attributable to Boston Properties Limited Partnership to the Company's share of Net Operating Income for the three and nine months ended September 30, 2024 and 2023.
BXP
Three months ended September 30, Nine months ended September 30,
2024 2023 2024 2023
(in thousands)
Net income (loss) attributable to BXP, Inc. $ 83,628 $ (111,826) $ 243,126 $ 70,290
Add:
Noncontrolling interest-common units of the Operating Partnership
9,587 (12,626) 28,596 8,642
Noncontrolling interests in property partnerships 15,237 20,909 50,283 59,337
Interest expense 163,194 147,812 474,727 424,492
Impairment loss - - 13,615 -
Net operating income from unconsolidated joint ventures 31,919 39,165 98,936 122,175
Depreciation and amortization expense 222,890 207,435 661,148 618,746
Transaction costs 188 751 890 1,970
Payroll and related costs from management services contracts
3,649 3,906 12,090 13,750
General and administrative expense 33,352 31,410 127,479 131,387
Less:
Net operating income attributable to noncontrolling interests in property partnerships
44,487 50,047 138,448 145,102
Unrealized gain (loss) on non-real estate investment 94 (51) 548 332
Gains (losses) from investments in securities 2,198 (925) 4,785 2,311
Interest and other income (loss) 14,430 20,715 39,747 48,999
Gains on sales of real estate 517 517 517 517
Income (loss) from unconsolidated joint ventures (7,011) (247,556) 6,376 (261,793)
Direct reimbursements of payroll and related costs from management services contracts
3,649 3,906 12,090 13,750
Development and management services revenue 6,770 9,284 19,276 28,122
Company's share of Net Operating Income $ 498,510 $ 490,999 $ 1,489,103 $ 1,473,449
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BPLP
Three months ended September 30, Nine months ended September 30,
2024 2023 2024 2023
(in thousands)
Net income (loss) attributable to Boston Properties Limited Partnership $ 94,919 $ (122,696) $ 276,826 $ 84,232
Add:
Noncontrolling interests in property partnerships 15,237 20,909 50,283 59,337
Interest expense 163,194 147,812 474,727 424,492
Impairment loss - - 13,615 -
Net operating income from unconsolidated joint ventures 31,919 39,165 98,936 122,175
Depreciation and amortization expense 221,186 205,679 656,044 613,446
Transaction costs 188 751 890 1,970
Payroll and related costs from management services contracts
3,649 3,906 12,090 13,750
General and administrative expense 33,352 31,410 127,479 131,387
Less:
Net operating income attributable to noncontrolling interests in property partnerships
44,487 50,047 138,448 145,102
Unrealized gain (loss) on non-real estate investment 94 (51) 548 332
Gains (losses) from investments in securities 2,198 (925) 4,785 2,311
Interest and other income (loss) 14,430 20,715 39,747 48,999
Gains on sales of real estate 517 517 517 517
Income (loss) from unconsolidated joint ventures (7,011) (247,556) 6,376 (261,793)
Direct reimbursements of payroll and related costs from management services contracts
3,649 3,906 12,090 13,750
Development and management services revenue 6,770 9,284 19,276 28,122
Company's share of Net Operating Income $ 498,510 $ 490,999 $ 1,489,103 $ 1,473,449
Net operating income ("NOI") is a non-GAAP financial measure equal to net income (loss) attributable to BXP, Inc. and net income (loss) attributable to Boston Properties Limited Partnership, as applicable, the most directly comparable GAAP financial measures, plus (1) net income (loss) attributable to noncontrolling interests, interest expense, impairment loss, depreciation and amortization expense, transaction costs, payroll and related costs from management services contracts and corporate general and administrative expense less (2) unrealized gain (loss) on non-real estate investment, gains (losses) from investments in securities, interest and other income (loss), gains on sales of real estate, income (loss) from unconsolidated joint ventures, direct reimbursements of payroll and related costs from management services contracts and development and management services revenue. The Company believes NOI is useful to investors as a performance measure and believes it provides useful information to investors regarding its results of operations and financial condition because, when compared across periods, it reflects the impact on operations from trends in occupancy rates, rental rates, operating costs and acquisition and development activity on an unleveraged basis, providing perspective not immediately apparent from net income (loss) attributable to BXP, Inc. and net income (loss) attributable to Boston Properties Limited Partnership. For example, interest expense is not necessarily linked to the operating performance of a real estate asset and is often incurred at the corporate level as opposed to the property level. Similarly, interest expense may be incurred at the property level even though the financing proceeds may be used at the corporate level (e.g., used for other investment activity). In addition, depreciation and amortization expense, because of historical cost accounting and useful life estimates, may distort operating performance measures at the property level. NOI presented by the Company may not be comparable to NOI reported by other REITs or real estate companies that define NOI differently.
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The Company's internal reporting utilizes its share of NOI, which includes its share of NOI from consolidated and unconsolidated joint ventures, which is a non-GAAP financial measure that is calculated as the consolidated amount, plus the Company's share of the amount from the Company's unconsolidated joint ventures (calculated based upon the Company's economic percentage ownership interest and, in some cases, after priority allocations), less the Company's partners' share of the amount from the Company's consolidated joint ventures (calculated based upon the partners' economic percentage ownership interests and, in some cases, after priority allocations, income allocation to private REIT shareholders and their share of fees due to the Company). The Company's share of NOI from unconsolidated joint ventures, as defined above, also does not include its share of loss from early extinguishment of debt, unrealized gain (loss) on derivative instruments, gain on sale / consolidation, gain on investment, and impairment losses on investments, all of which are included within Income (Loss) from Unconsolidated Joint Ventures in the Company's Consolidated Statements of Operations. Management utilizes its share of NOI in assessing its performance as the Company has several significant joint ventures and, in some cases, the Company exercises significant influence over, but does not control, the joint venture, in which case GAAP requires that the Company account for the joint venture entity using the equity method of accounting and the Company does not consolidate it for financial reporting purposes. In other cases, GAAP requires that the Company consolidate the venture even though the Company's partner(s) owns a significant percentage interest. As a result, the presentations of the Company's share of NOI should not be considered a substitute for, and should only be considered together with and as a supplement to, the Company's financial information presented in accordance with GAAP.
Asset information by segment is not reported because the Company does not use this measure to assess performance. Therefore, depreciation and amortization expense is not allocated among segments. Interest expense, impairment loss, depreciation and amortization expense, transaction costs, payroll and related costs from management services contracts, corporate general and administrative expense, unrealized gain (loss) on non-real estate investment, gains (losses) from investments in securities, interest and other income (loss), gains on sales of real estate, income (loss) from unconsolidated joint ventures, direct reimbursements of payroll and related costs from management services contracts and development and management services revenue are not included in NOI and are provided as reconciling items to the Company's reconciliations of its share of NOI to net income.
The Company's segments are based on the Company's method of internal reporting which classifies its operations by geographic area. The Company's segments by geographic area are Boston, Los Angeles, New York, San Francisco, Seattle and Washington, DC. The Company also presents information for each segment by property type, including Office (which includes office, life sciences and retail), Residential and Hotel.
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Information by geographic area and property type (dollars in thousands):
For the three months ended September 30, 2024:
Boston Los Angeles New York San Francisco Seattle Washington, DC Total
Rental Revenue: (1)
Office $ 300,613 $ 18,661 $ 258,295 $ 128,929 $ 10,821 $ 104,290 $ 821,609
Residential 4,219 - - 3,152 - 4,746 12,117
Hotel 15,082 - - - - - 15,082
Total 319,914 18,661 258,295 132,081 10,821 109,036 848,808
% of Grand Totals 37.69 % 2.20 % 30.43 % 15.56 % 1.27 % 12.85 % 100.00 %
Rental Expenses:
Office 107,876 7,344 111,419 52,410 3,382 39,478 321,909
Residential 1,621 - - 2,346 - 2,021 5,988
Hotel 9,833 - - - - - 9,833
Total 119,330 7,344 111,419 54,756 3,382 41,499 337,730
% of Grand Totals 35.34 % 2.17 % 32.99 % 16.21 % 1.00 % 12.29 % 100.00 %
Net operating income $ 200,584 $ 11,317 $ 146,876 $ 77,325 $ 7,439 $ 67,537 $ 511,078
% of Grand Totals 39.25 % 2.21 % 28.74 % 15.13 % 1.46 % 13.21 % 100.00 %
Less: Net operating income attributable to noncontrolling interests in property partnerships (10,823) - (33,664) - - - (44,487)
Add: Company's share of net operating income from unconsolidated joint ventures 9,099 6,835 3,472 4,285 1,899 6,329 31,919
Company's share of net operating income $ 198,860 $ 18,152 $ 116,684 $ 81,610 $ 9,338 $ 73,866 $ 498,510
% of Grand Totals 39.89 % 3.64 % 23.41 % 16.37 % 1.87 % 14.82 % 100.00 %
_______________
(1)Rental Revenue is equal to Total Revenue per the Company's Consolidated Statements of Operations, less Development and Management Services Revenue and Direct Reimbursements of Payroll and Related Costs from Management Services Contracts Revenue per the Consolidated Statements of Operations.
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For the three months ended September 30, 2023:
Boston Los Angeles New York San Francisco Seattle Washington, DC Total
Rental Revenue: (1)
Office $ 276,153 $ - $ 268,680 $ 135,839 $ 13,660 $ 91,488 $ 785,820
Residential 4,198 - - 3,214 - 4,377 11,789
Hotel 13,484 - - - - - 13,484
Total 293,835 - 268,680 139,053 13,660 95,865 811,093
% of Grand Totals 36.23 % - % 33.13 % 17.14 % 1.68 % 11.82 % 100.00 %
Rental Expenses:
Office 97,358 - 107,462 50,450 2,971 36,213 294,454
Residential 1,629 - - 2,221 - 1,888 5,738
Hotel 9,020 - - - - - 9,020
Total 108,007 - 107,462 52,671 2,971 38,101 309,212
% of Grand Totals 34.94 % - % 34.75 % 17.03 % 0.96 % 12.32 % 100.00 %
Net operating income $ 185,828 $ - $ 161,218 $ 86,382 $ 10,689 $ 57,764 $ 501,881
% of Grand Totals 37.03 % - % 32.12 % 17.21 % 2.13 % 11.51 % 100.00 %
Less: Net operating income attributable to noncontrolling interests in property partnerships (11,786) - (38,261) - - - (50,047)
Add: Company's share of net operating income from unconsolidated joint ventures 7,946 12,508 3,938 4,023 1,874 8,876 39,165
Company's share of net operating income $ 181,988 $ 12,508 $ 126,895 $ 90,405 $ 12,563 $ 66,640 $ 490,999
% of Grand Totals 37.07 % 2.55 % 25.84 % 18.41 % 2.56 % 13.57 % 100.00 %
_______________
(1)Rental Revenue is equal to Total Revenue per the Company's Consolidated Statements of Operations, less Development and Management Services Revenue and Direct Reimbursements of Payroll and Related Costs from Management Services Contracts Revenue per the Consolidated Statements of Operations.
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For the nine months ended September 30, 2024:
Boston Los Angeles New York San Francisco Seattle Washington, DC Total
Rental Revenue: (1)
Office $ 866,431 $ 57,534 $ 780,909 $ 393,252 $ 32,251 $ 312,298 $ 2,442,675
Residential 12,687 - - 10,428 - 13,912 37,027
Hotel 38,080 - - - - - 38,080
Total 917,198 57,534 780,909 403,680 32,251 326,210 2,517,782
% of Grand Totals 36.42 % 2.29 % 31.02 % 16.03 % 1.28 % 12.96 % 100.00 %
Rental Expenses:
Office 321,955 20,678 327,376 148,020 9,753 118,285 946,067
Residential 4,757 - - 6,733 - 5,923 17,413
Hotel 25,687 - - - - - 25,687
Total 352,399 20,678 327,376 154,753 9,753 124,208 989,167
% of Grand Totals 35.62 % 2.09 % 33.10 % 15.64 % 0.99 % 12.56 % 100.00 %
Net operating income $ 564,799 $ 36,856 $ 453,533 $ 248,927 $ 22,498 $ 202,002 $ 1,528,615
% of Grand Totals 36.96 % 2.41 % 29.67 % 16.28 % 1.47 % 13.21 % 100.00 %
Less: Net operating income attributable to noncontrolling interests in property partnerships (32,803) - (105,645) - - - (138,448)
Add: Company's share of net operating income from unconsolidated joint ventures 26,547 21,118 12,614 13,850 5,713 19,094 98,936
Company's share of net operating income $ 558,543 $ 57,974 $ 360,502 $ 262,777 $ 28,211 $ 221,096 $ 1,489,103
% of Grand Totals 37.51 % 3.89 % 24.21 % 17.65 % 1.89 % 14.85 % 100.00 %
_______________
(1)Rental Revenue is equal to Total Revenue per the Company's Consolidated Statements of Operations, less Development and Management Services Revenue and Direct Reimbursements of Payroll and Related Costs from Management Services Contracts Revenue per the Consolidated Statements of Operations.
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For the nine months ended September 30, 2023:
Boston Los Angeles New York San Francisco Seattle Washington, DC Total
Rental Revenue: (1)
Office $ 815,568 $ - $ 789,851 $ 408,173 $ 44,978 $ 272,872 $ 2,331,442
Residential 12,371 - - 10,720 - 12,677 35,768
Hotel 35,554 - - - - - 35,554
Total 863,493 - 789,851 418,893 44,978 285,549 2,402,764
% of Grand Totals 35.95 % - % 32.87 % 17.43 % 1.87 % 11.88 % 100.00 %
Rental Expenses:
Office 293,004 - 312,895 144,732 9,013 105,908 865,552
Residential 4,782 - - 6,609 - 5,593 16,984
Hotel 23,852 - - - - - 23,852
Total 321,638 - 312,895 151,341 9,013 111,501 906,388
% of Grand Totals 35.49 % - % 34.52 % 16.70 % 0.99 % 12.30 % 100.00 %
Net operating income $ 541,855 $ - $ 476,956 $ 267,552 $ 35,965 $ 174,048 $ 1,496,376
% of Grand Totals 36.22 % - % 31.87 % 17.88 % 2.40 % 11.63 % 100.00 %
Less: Net operating income attributable to noncontrolling interests in property partnerships (33,946) - (111,156) - - - (145,102)
Add: Company's share of net operating income from unconsolidated joint ventures 25,294 38,501 10,951 10,819 5,598 31,012 122,175
Company's share of net operating income $ 533,203 $ 38,501 $ 376,751 $ 278,371 $ 41,563 $ 205,060 $ 1,473,449
% of Grand Totals 36.19 % 2.61 % 25.57 % 18.89 % 2.82 % 13.92 % 100.00 %
_______________
(1)Rental Revenue is equal to Total Revenue per the Company's Consolidated Statements of Operations, less Development and Management Services Revenue and Direct Reimbursements of Payroll and Related Costs from Management Services Contracts Revenue per the Consolidated Statements of Operations.
12. Earnings Per Share / Common Unit
BXP
The following table provides a reconciliation of both the net income (loss) attributable to BXP, Inc. and the number of common shares used in the computation of basic earnings per share ("EPS"), which is calculated by dividing net income (loss) attributable to BXP, Inc. by the weighted-average number of common shares outstanding during the period. Unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are also participating securities. As such, unvested restricted common stock of BXP and BPLP's LTIP Units, 2012 OPP Units and MYLTIP Units are considered participating securities. Participating securities are included in the computation of basic EPS of BXP using the two-class method. Participating securities are included in the computation of diluted EPS of BXP using the if-converted method if the impact is dilutive. Because the 2012 OPP Units and 2013 - 2021 MYLTIP Units required, and the 2022 - 2024 MYLTIP Units require, BXP to outperform certain performance thresholds, unless such thresholds have been met by the end of the applicable reporting period, BXP excludes such units from the diluted EPS calculation. Other potentially dilutive common shares, including stock options, restricted stock and other securities of BPLP that are exchangeable for BXP's Common Stock, and the related impact on earnings, are considered when calculating diluted EPS.
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Three months ended September 30, 2024
Income
(Numerator) 		Shares
(Denominator) 		Per Share
Amount
(in thousands, except for per share amounts)
Basic Earnings:
Net income attributable to BXP, Inc. $ 83,628 157,725 $ 0.53
Effect of Dilutive Securities:
Stock Based Compensation - 488 -
Diluted Earnings:
Net income attributable to BXP, Inc. $ 83,628 158,213 $ 0.53
Three months ended September 30, 2023
Income
(Numerator) 		Shares
(Denominator) 		Per Share
Amount
(in thousands, except for per share amounts)
Basic Earnings:
Net income (loss) attributable to BXP, Inc. $ (111,826) 156,880 $ (0.71)
Effect of Dilutive Securities:
Stock Based Compensation
- - -
Diluted Earnings:
Net income (loss) attributable to BXP, Inc. $ (111,826) 156,880 $ (0.71)
Nine months ended September 30, 2024
Income
(Numerator) 		Shares
(Denominator) 		Per Share
Amount
(in thousands, except for per share amounts)
Basic Earnings:
Net income attributable to BXP, Inc. common shareholders $ 243,126 157,250 $ 1.55
Effect of Dilutive Securities:
Stock Based Compensation
- 297 (0.01)
Diluted Earnings:
Net income attributable to BXP, Inc. common shareholders $ 243,126 157,547 $ 1.54
Nine months ended September 30, 2023
Income
(Numerator) 		Shares
(Denominator) 		Per Share
Amount
(in thousands, except for per share amounts)
Basic Earnings:
Net income attributable to BXP, Inc. common shareholders $ 70,290 156,837 $ 0.45
Effect of Dilutive Securities:
Stock Based Compensation
- 340 -
Diluted Earnings:
Net income attributable to BXP, Inc. common shareholders $ 70,290 157,177 $ 0.45
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BPLP
The following table provides a reconciliation of both the net income (loss) attributable to Boston Properties Limited Partnership and the number of common units used in the computation of basic earnings per common unit, which is calculated by dividing net income (loss) attributable to Boston Properties Limited Partnership by the weighted-average number of common units outstanding during the period. Unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are also participating securities. As such, unvested restricted common stock of BXP and BPLP's LTIP Units, 2012 OPP Units and MYLTIP Units are considered participating securities. Participating securities are included in the computation of basic earnings per common unit using the two-class method. Participating securities are included in the computation of diluted earnings per common unit using the if-converted method if the impact is dilutive. Because the 2012 OPP Units and 2013 - 2021 MYLTIP Units required, and the 2022 - 2024 MYLTIP Units require, BXP to outperform certain performance thresholds, unless such thresholds have been met by the end of the applicable reporting period, BPLP excludes such units from the diluted earnings per common unit calculation. Other potentially dilutive common units and the related impact on earnings are considered when calculating diluted earnings per common unit. Included in the number of units (the denominator) below are approximately 17,721,000 and 18,002,000 redeemable common units for the three months ended September 30, 2024 and 2023, respectively, and 18,119,000 and 17,928,000 redeemable common units for the nine months ended September 30, 2024 and 2023, respectively.
Three months ended September 30, 2024
Income
(Numerator) 		Units
(Denominator) 		Per Unit
Amount
(in thousands, except for per unit amounts)
Basic Earnings:
Net income attributable to Boston Properties Limited Partnership $ 94,919 175,446 $ 0.54
Effect of Dilutive Securities:
Stock Based Compensation
- 488 -
Diluted Earnings:
Net income attributable to Boston Properties Limited Partnership $ 94,919 175,934 $ 0.54
Three months ended September 30, 2023
Income
(Numerator) 		Units
(Denominator) 		Per Unit
Amount
(in thousands, except for per unit amounts)
Basic Earnings:
Net income (loss) attributable to Boston Properties Limited Partnership $ (122,696) 174,882 $ (0.70)
Effect of Dilutive Securities:
Stock Based Compensation
- - -
Diluted Earnings:
Net income (loss) attributable to Boston Properties Limited Partnership $ (122,696) 174,882 $ (0.70)
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Nine months ended September 30, 2024
Income
(Numerator) 		Units
(Denominator) 		Per Unit
Amount
(in thousands, except for per unit amounts)
Basic Earnings:
Net income attributable to Boston Properties Limited Partnership common unitholders
$ 276,826 175,369 $ 1.58
Effect of Dilutive Securities:
Stock Based Compensation - 297 -
Diluted Earnings:
Net income attributable to Boston Properties Limited Partnership common unitholders
$ 276,826 175,666 $ 1.58
Nine months ended September 30, 2023
Income
(Numerator) 		Units
(Denominator) 		Per Unit
Amount
(in thousands, except for per unit amounts)
Basic Earnings:
Net income attributable to Boston Properties Limited Partnership common unitholders
$ 84,232 174,765 $ 0.48
Effect of Dilutive Securities:
Stock Based Compensation - 340 -
Diluted Earnings:
Net income attributable to Boston Properties Limited Partnership common unitholders
$ 84,232 175,105 $ 0.48
13. Stock Option and Incentive Plan
On January 25, 2024, the Compensation Committee of BXP's Board of Directors approved the grant of 2024 Multi-Year Long-Term Incentive Program (the "2024 MYLTIP") awards under the Boston Properties, Inc. 2021 Stock Incentive Plan (the "2021 Plan") to certain executive officers of BXP. The 2024 MYLTIP awards consists of three components. Two of the components, each weighted 40%, utilize BXP's TSR over a three-year measurement period as the performance metrics and the third component utilizes a leverage ratio as the performance metric. Earned awards will range from zero to a maximum of 330,479 LTIP Units depending on BXP's performance under the three components, with a target of approximately 165,240 LTIP Units. Under ASC 718 "Compensation - Stock Compensation," the 2024 MYLTIP awards have an aggregate value of approximately $11.1 million.
On February 1, 2024, the measurement period for the Company's 2021 MYLTIP awards ended and, based on BXP's absolute and relative TSR performance, the final payout was determined to be 112% of target, or an aggregate of approximately $12.6 million (after giving effect to employee separations). As a result, an aggregate of 155,625 2021 MYLTIP Units that had been previously granted were automatically forfeited.
During the nine months ended September 30, 2024, BXP issued 83,316 shares of restricted common stock and BPLP issued 451,044 LTIP Units and 330,479 2024 MYLTIP Units to employees and non-employee directors under the 2021 Plan. Employees and non-employee directors paid $0.01 per share of restricted common stock and $0.25 per LTIP Unit and 2024 MYLTIP Unit. When issued, LTIP Units are not economically equivalent in value to a share of Common Stock, but over time can increase in value to one-for-one parity with Common Stock if there is sufficient appreciation in the value of the Company's assets. The aggregate value of the LTIP Units is included in noncontrolling interests in the Consolidated Balance Sheets of BXP and BPLP. A substantial majority of the grants of restricted common stock and LTIP Units to employees vest in four equal annual installments. Restricted common stock is measured at fair value on the date of grant based on the number of shares granted and the closing price of BXP's Common Stock on the date of grant as quoted on the New York Stock Exchange. Such value is recognized as an expense ratably over the corresponding employee service period. The shares of restricted common stock
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granted during the nine months ended September 30, 2024 were valued at approximately $5.3 million. The LTIP Units granted were valued at approximately $26.7 million using a Monte Carlo simulation method model. Because the 2012 OPP Units and 2013 - 2024 MYLTIP Units are subject to both a service condition and a market condition, the Company recognizes the related compensation expense under the graded vesting attribution method. Under the graded vesting attribution method, each portion of the award that vests at a different date is accounted for as a separate award and recognized over the period appropriate to that portion so that the compensation cost for each portion should be recognized in full by the time that portion vests. The Company recognizes forfeitures as they occur on its awards of stock-based compensation. Dividends paid on both vested and unvested shares of restricted stock are charged directly to Dividends in Excess of Earnings in BXP, Inc.'s Consolidated Balance Sheets and Partners' Capital in Boston Properties Limited Partnership's Consolidated Balance Sheets. Aggregate stock-based compensation expense associated with restricted stock, LTIP Units and MYLTIP Units was approximately $4.0 million and $4.8 million for the three months ended September 30, 2024 and 2023, respectively, and $38.5 million and $45.7 million for the nine months ended September 30, 2024 and 2023, respectively. At September 30, 2024, there was (1) an aggregate of approximately $25.4 million of unrecognized compensation expense related to unvested restricted stock and LTIP Units and (2) an aggregate of approximately $(40,000) of unrecognized compensation expense related to unvested 2022 - 2024 MYLTIP Units that is expected to be recognized over a weighted-average period of approximately 2.5 years.
14. Subsequent Events
On October 5, 2024, the Company fully placed in-service 103 CityPoint, an approximately 113,000 net rentable square foot laboratory/life sciences project located in Waltham, Massachusetts.
On October 8, 2024, the Company modified the mortgage loan collateralized by its Santa Monica Business Park properties located in Santa Monica, California. The mortgage loan had an outstanding principal balance of $200.0 million, bore interest at a variable rate equal to Daily Simple SOFR + 1.38% per annum and was scheduled to mature on July 19, 2025 (See Note 6). The modified loan is scheduled to mature on October 8, 2028 and continues to bear interest at a variable rate equal to Daily Simple SOFR + 1.38% per annum until July 19, 2025. Beginning July 19, 2025, the mortgage loan will bear interest at Daily Simple SOFR + 1.60% per annum through the maturity date. The entire principal is subject to interest rate swap contracts to fix Daily Simple SOFR at a weighted-average fixed interest rate of approximately 2.675% per annum through April 1, 2025 (See Note 7). The mortgage loan requires monthly interest-only payments during the term of the loan, with the entire principal due at maturity. Santa Monica Business Park is an office park consisting of 21 buildings totaling approximately 1.2 million net rentable square feet.
On October 31, 2024, the Company completed and fully placed in-service 300 Binney Street, a laboratory/life sciences redevelopment project with approximately 236,000 net rentable square feet located in Cambridge, Massachusetts. The property is fully leased to a life sciences tenant.
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ITEM 2-Management's Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion should be read in conjunction with the financial statements and notes thereto appearing elsewhere in this report.
This Quarterly Report on Form 10-Q, including the documents incorporated by reference, contain forward-looking statements within the meaning of the federal securities laws, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). 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 we are including this statement for purposes of complying with those safe harbor provisions, in each case, to the extent applicable. The forward-looking statements are contained principally, but not only, under the captions"Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." We caution investors that forward-looking statements are based on current beliefs, expectations of future events and 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. These 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. If one or more of these known or unknown risks or uncertainties materialize, or if 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 risks and uncertainties related to adverse changes in general economic and capital market conditions, including inflation, increases in interest rates, supply chain disruptions, labor market disruptions, dislocation and volatility in capital markets, and potential longer-term changes in consumer and client behavior, sustained changes in client preferences and space utilization, as well as the other important factors below and the risks described in (i) our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 including those described under the caption "Risk Factors," (ii) our subsequent filings under the Exchange Act and (iii) the risk factors set forth in this Form 10-Q in Part II, Item 1A.
Some of the risks and uncertainties that may cause our actual results, performance or achievements to differ materially from those expressed or implied by forward-looking statements include, among others, the following:
•volatile or adverse global economic and geopolitical conditions, health crises and dislocations in the credit markets could adversely affect economic conditions and/or restrict our access to cost-effective capital, which could have a 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 on attractive terms, changes in client preferences and space utilization, dependence on clients' 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, client accounting considerations that may result in negotiated lease provisions that limit a client's liability during construction, and public opposition to such activities);
•risks associated with the availability and terms of financing and the use of debt to fund acquisitions and developments or refinance existing indebtedness, including the impact of higher interest rates on the cost and/or availability of financing;
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•risks associated with forward interest rate contracts and derivatives and the effectiveness of such arrangements;
•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 climate change and severe weather events, as well as the regulatory efforts intended to reduce the effects of climate change;
•risks associated with security breaches, incidents, and compromises 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 legal proceedings and other claims that could result in substantial monetary damages and other costs;
•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 may include additional factors that could adversely affect our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time and it is not possible for management to predict all risk factors, nor can we assess the impact of all risk factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, investors should not unduly rely on forward-looking statements as a prediction of actual results. Investors should also refer to our most recent Annual Report on Form 10-K and 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 September 30, 2024) in the U.S. that develops, owns, and manages primarily premier workplaces. Our properties are concentrated in six dynamic gateway markets in the U.S. - 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 premier workplaces to our clients. When making leasing decisions, we consider, among other things, the creditworthiness of the client 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 amount of any security deposit or letter of credit posted by the client, the costs of tenant improvement allowances, 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 clients' expansion rights and general economic factors.
We believe our key competitive advantages are our commitment to the office asset class and to our clients as many competitors disinvest in the sector, a strong balance sheet with access to capital in the secured and unsecured debt and private and public equity markets, and one of the highest quality portfolios of premier workplaces in the U.S. assembled over several decades of intentional development, acquisitions and dispositions.
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Today, clients and their advisors are more focused than ever on these attributes for their building owners, which distinguishes BXP among its competitors.
We consider premier workplaces to be well-located buildings that are modern structures or have been modernized to compete with newer buildings, are professionally managed and maintained, and offer a number and type of amenities that are in high demand by clients that are focused on the importance of the physical work environment in recruiting and retaining the best and brightest employees. As such, these properties attract creditworthy clients and command upper-tier rental rates in their markets. We do not consider the expression "premier workplaces" a classification of our properties in accordance with any standard listing criteria in the real estate industry. We therefore caution investors that our use and definition of "premier workplaces" may be different than the use and definition of similar expressions and traditional classifications that may be used by other companies.
Our core strategy has always been to develop, acquire and manage premier workplaces in gateway markets with high barriers-to-entry and attractive demand drivers, and to focus on executing long-term leases with financially strong clients that are diverse across market sectors. We believe this strategy provides a competitive advantage that helps BXP distinguish itself from competitors as our clients are interested in leasing space in vibrant, amenitized and accessible premier workplaces to encourage more in-person work. This interest has accelerated the flight to quality in the office industry. Over the past several years, BXP's experience and performance has diverged from the larger market and media sentiment, as premier workplaces have outperformed the broader office market consistently and substantially in both rental rates achieved and occupancy. We believe this divergence validates our strategy and differentiates BXP from other office companies.
Premier workplaces in our five traditional central business district ("CBD") markets (Boston, New York, San Francisco, Seattle and Washington, DC) have consistently outperformed the broader office market in those CBDs on several key metrics, including occupancy, net absorption levels, rental rates and landlord concessions. This outperformance is evident in BXP's portfolio where approximately 90% of our share of net operating income ("NOI") comes from predominantly premier workplaces located in CBDs. As of September 30, 2024, these CBD assets are 90.1% occupied and 92.1% leased (including vacant space for which we have signed leases that have not yet commenced in accordance with generally accepted accounting principles ("GAAP")). For a detailed discussion of our share of NOI, including the reasons management believes the metric is useful to investors and a reconciliation to the most comparable GAAP measure, see page 39.
As of September 30, 2024, the weighted-average remaining lease term (1) for our in-place leases, based on square feet, including those signed by our unconsolidated joint ventures but excluding residential units, was approximately 7.6 years, and (2) for our 20 largest clients, based on square feet, was approximately 10.0 years.
Outlook
We believe the most important market forces driving occupancy, rental rates and earnings for BXP are interest rates, corporate earnings growth, return-to-office behaviors, and outperformance of premier workplaces, all of which are currently trending in BXP's favor, serving as tailwinds for BXP's performance.
In particular, corporate earnings growth is an important driver for BXP's performance given its correlation to leasing activity. After remaining flat for all of 2023, S&P 500 earnings, which are viewed as a proxy for corporate health, are expected to grow 9.9% in 2024. Our experience tells us that companies with earnings growth are much more likely to invest, hire and expand their leased space, as demonstrated in BXP's growing leasing volumes this year. We do not currently see evidence of a looming recession in the decision-making of our clients.
Return-to-office behaviors continue to improve in the cities in which we operate. Several large companies have recently announced more stringent in-office work requirements for their employees, and 84% of the CEOs surveyed in a recent third-party study believe there will be a full return-to-office work at their companies within three years, up from 64% of those surveyed just one year ago. The reasons cited by the CEOs include concerns about diminished collaboration, innovation and productivity, inadequate supervision and training for younger employees, and the cost of maintaining vacant offices.
The evolving operating environment impacts various aspects of our operating activities as:
•labor market conditions shift, which has gradually increased employer demand for mandatory in-person workdays;
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•volatility in the capital markets has led companies to be more reticent in their capital outlays and slowed down decision-making, including capital required for leasing new space;
•private market debt financing, both for construction and existing assets, is significantly more challenging to arrange; and
•construction costs have increased and, although much of the cost for our active development pipeline is fixed, the cost of potential future construction activity continues to increase.
In light of the uncertain trajectory of the U.S. and global economies, we continue to position BXP for success by ensuring ample liquidity, managing our leverage, pursuing additional capital raising opportunities and maintaining discipline in discretionary capital expenditures, while continuing to selectively invest (including through both acquisitions and developments) in premier workplace opportunities. We remain focused on:
•continuing to embrace our leadership position in the premier workplace segment and leveraging our strength in portfolio quality, client relationships, development skills, market penetration and sustainability to profitably build market share;
•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;
•pursuing attractive asset class adjacencies where we have a track record of success, such as life sciences and residential development;
•continuing to enhance the overall quality of our portfolio and actively recycling capital by selling assets, subject to market conditions, that we believe no longer fit within our portfolio strategy or could attract premium pricing in the current market;
•actively managing our operations in a sustainable and responsible manner; and
•prioritizing risk management by actively managing liquidity, investing more extensively with joint venture partners to manage our debt levels, and being highly selective in new investment commitments.
The following is an overview of leasing and investment activity in the third quarter of 2024 and recent business highlights.
Leasing Activity and Occupancy
To be successful in any leasing environment, we believe we must consider all aspects of the client-landlord relationship. In this regard, we believe that our competitive leasing advantage is based on the following attributes:
•our understanding of our client's short- and long-term space utilization and amenity needs in the local markets;
•our track record of developing and operating premier workplaces in a sustainable and responsible manner;
•our reputation as a high-quality developer, owner and manager of premier workplaces in our markets;
•our financial strength, including our ability to fund our share of lease obligations and maintain premier building standards; and
•our relationships with local brokers.
Overall, the environments in which we operate are improving. Although all the markets in which we operate still need consistent incremental absorption to constitute a macro recovery, we have started to see pockets of strength where low availability is driving constructive client behavior. As clients choose premier workplaces in sound financial condition, with building owners that are committed for the long term to their properties operated by the best property management teams, we expect to continue to be successful in gaining market share.
In the third quarter of 2024, we executed 74 leases totaling more than 1.1 million square feet with a weighted-average lease term of approximately 7.2 years. We signed leases for a total of approximately 3.3 million square feet in the first three quarters of 2024, representing a 25% increase compared to the same period in 2023.
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BXP's CBD portfolio was 90.1% occupied and 92.1% leased (including vacant space for which we have signed leases that have not yet commenced in accordance with GAAP) at September 30, 2024. Approximately 90% of our share of NOI comes from assets located in our CBD portfolio, underscoring the strength of BXP's strategy to invest in the highest quality buildings in dynamic urban gateway markets. For a detailed discussion of our share of NOI, including the reasons management believes the metric is useful to investors and a reconciliation to the most comparable GAAP measure, see page 39.
The overall occupancy of our in-service office and retail properties was 87.0% at September 30, 2024, a decrease of 10 basis points from June 30, 2024. We define occupancy as space with signed leases for which revenue recognition has commenced in accordance with GAAP. Including vacant space for which we have signed leases that have not yet commenced revenue recognition in accordance with GAAP, our in-service office and retail properties were approximately 89.1% leased at September 30, 2024.
Investment Activity
We remain in active pursuit of opportunities in our core markets and asset types with primarily two types of counterparties: lenders to highly leveraged assets that require recapitalization and institutional owners seeking to diversify from the office asset class. To date, there has been limited market transaction activity for higher-quality office assets, though owners are increasingly testing the market to understand pricing. With lenders, there are fewer premier workplaces that are struggling with leverage, and in the few cases involving premier workplaces, lenders are generally electing to extend loans to borrowers who agree to invest modestly in their assets. Institutional owners are less interested in selling their higher quality assets, and there remains a material bid-ask spread given that, in most cases, assets have not been marked down to market-clearing levels. Notwithstanding these current challenges, we expect that transactions and our investment activity will increase in the coming quarters given the volume of maturing financings and continued mark downs in institutional portfolios. Our pipeline of potential opportunities is growing, including property and note acquisitions, sites with near term preleasing potential and new residential developments. No agreements are imminent, but we are encouraged by the activity. We also have interest from institutional investors in co-investing with us for select opportunities.
As of September 30, 2024, our development/redevelopment pipeline consisted of nine properties that, when completed, we expect will total approximately 2.7 million net rentable square feet. Our share of the estimated total cost for these projects is approximately $2.2 billion, of which approximately $1.1 billion remains to be invested. The commercial space in the pipeline, which excludes the residential projects, was 54% pre-leased as of October 31, 2024.
In the third quarter of 2024, we completed and fully placed in-service 180 CityPoint, an approximately 329,000 square foot laboratory/life sciences project located in Waltham, Massachusetts. BXP also partially placed in-service Skymark, a luxury residential property in Reston, Virginia that consists of 508 residential units across a five-story low-rise building and an iconic 39-story tower, which is one of the tallest buildings in Northern Virginia. The residential property is owned by a joint venture in which BXP has a 20% ownership interest.
As we continue to focus on new investments to drive future growth, we regularly 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. In addition, the BXP regional teams are pursuing alternative uses for some of our suburban land holdings, which includes vacant office buildings for which the highest and best use may not be office.
We are currently in active negotiations for the disposition of three land positions which, if successful, would generate approximately $70.0 million of proceeds in 2025. However, there can be no assurance that we will complete any of these transactions on the terms currently contemplated or at all.
A brief overview of each of our markets follows.
Boston
During the third quarter of 2024, we executed approximately 647,000 square feet of leases and approximately 421,000 square feet of leases commenced in the Boston region. Approximately 279,000 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 3.1% over the prior leases.
As of September 30, 2024, our approximately 8.4 million square foot Boston CBD in-service portfolio was approximately 95.3% occupied and approximately 97.2% leased (including vacant space for which we have signed leases that have not yet commenced in accordance with GAAP).
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Our approximately 2.5 million square foot in-service CBD portfolio in Cambridge was approximately 96.7% occupied and 96.7% leased (including vacant space for which we have signed leases that have not yet commenced in accordance with GAAP) as of September 30, 2024.
As of September 30, 2024, our Route 128-Mass Turnpike in-service portfolio is comprised of approximately 4.7 million square feet and was approximately 77.1% occupied and approximately 79.2% leased (including vacant space for which we have signed leases that have not yet commenced in accordance with GAAP).
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, an approximately 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. As of September 30, 2024, our LA in-service properties were approximately 84.9% occupied and 86.3% leased (including vacant space for which we have signed leases that have not yet commenced in accordance with GAAP).
New York
During the third quarter of 2024, we executed approximately 143,000 square feet of leases in the New York region and approximately 641,000 square feet of leases commenced. Approximately 551,000 square feet of the leases that commenced had been vacant for less than one year, and they represent a decrease in net rental obligations of approximately 10.6% over the prior leases. As of September 30, 2024, our New York CBD in-service portfolio was approximately 88.9% occupied and approximately 92.6% leased (including vacant space for which we have signed leases that have not yet commenced in accordance with GAAP).
San Francisco
During the third quarter of 2024, we executed leases for approximately 109,000 square feet and approximately 90,000 square feet commenced in the San Francisco region. Approximately 25,000 square feet of leases that commenced had been vacant for less than one year and represent a decrease in net rental obligations of approximately 6.7% over the prior leases.
As of September 30, 2024, our San Francisco CBD in-service properties were approximately 84.2% occupied and approximately 84.5% leased (including vacant space for which we have signed leases that have not yet commenced in accordance with GAAP).
Seattle
Our Seattle in-service portfolio includes Safeco Plaza, an approximately 762,000 square foot property of which we own 33.67%, and Madison Centre, an approximately 755,000 square foot property. As of September 30, 2024, these in-service properties were approximately 80.2% occupied and approximately 83.0% leased (inclusive of vacant space with signed leases that have not yet commenced in accordance with GAAP).
Washington, DC
During the third quarter of 2024, we executed leases for approximately 155,000 square feet and leases for approximately 66,000 square feet commenced in the Washington, DC region. Leases for approximately 14,000 square feet that commenced had been vacant for less than one year and represent a decrease in net rental obligations of approximately 15.3% over the prior leases.
As of September 30, 2024, our Washington, DC CBD in-service properties were approximately 88.0% occupied and approximately 90.1% leased (inclusive of vacant space with signed leases that have not yet commenced in accordance with GAAP).
A significant component of our Washington, DC regional portfolio is in Reston Town Center, an award-winning mixed-use development in Northern Virginia. Reston is a hub for technology, cloud services, cybersecurity and defense intelligence companies. As of September 30, 2024, our Reston CBD portfolio was approximately 94.5% occupied and approximately 96.6% leased (inclusive of vacant space with signed leases that have not yet commenced in accordance with GAAP).
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Leasing Statistics
The table below details the leasing activity, including 100% of the unconsolidated joint ventures, that commenced revenue recognition during the three and nine months ended September 30, 2024:
Three months ended September 30, 2024 Nine months ended September 30, 2024
(Square Feet)
Vacant space available at the beginning of the period 6,289,299 5,696,007
Vacant space from property dispositions/properties taken out of service (1) (316,538) (580,232)
Vacant space from properties placed (and partially placed) in-service (2) 209,413 371,972
Leases expiring or terminated during the period 1,405,356 4,304,498
Total space available for lease 7,587,530 9,792,245
1stgeneration leases
75,326 415,917
2ndgeneration leases with new clients
615,831 1,359,801
2ndgeneration lease renewals
574,864 1,695,018
Total space leased (3) 1,266,021 3,470,736
Vacant space available for lease at the end of the period 6,321,509 6,321,509
Leases executed during the period (4) 1,108,457 3,325,062
Second generation leasing information: (5)
Leases commencing during the period, in square feet 1,190,695 3,054,819
Weighted Average Lease Term 76 Months 89 Months
Weighted Average Free Rent Period 153 Days 127 Days
Total Transaction Costs Per Square Foot (6) $74.93 $74.44
Increase in Gross Rents (7) (4.48) % 2.08 %
Increase in Net Rents (8) (6.81) % 2.77 %
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(1)Total square feet of properties taken out of service during the three months ended September 30, 2024 consists of 205,355 square feet at 1100 Winter Street and 111,183 square feet at Kingstowne One. Total square feet of properties taken out of service during the nine months ended September 30, 2024 consists of 205,355 square feet at 1100 Winter Street, 162,274 square feet at 1050 Winter Street, 111,183 square feet at Kingstowne One, 71,420 square feet at 15825 Shady Grove Road and 30,000 square feet at 17 Hartwell Avenue.
(2)Total square feet of properties placed in service during the three months ended September 30, 2024 consists of 187,048 square feet at 180 CityPoint and 22,365 square feet at 651 Gateway. Total square feet of properties placed in service during the nine months ended September 30, 2024 consists of 187,048 square feet at 180 CityPoint, 117,907 square feet at 760 Boylston Street and 67,017 square feet at 651 Gateway.
(3)Represents leases for which lease revenue recognition has commenced in accordance with GAAP during the three and nine months ended September 30, 2024.
(4)Represents leases executed during the three and nine months ended September 30, 2024 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 for which revenue recognition commenced during the three and nine months ended September 30, 2024 are 319,985 and 796,152 square feet, respectively.
(5)Second generation leases are defined as leases for space that we have previously leased. Of the 1,190,695 and 3,054,819 square feet of second generation leases that commenced during the three and nine months ended September 30, 2024, respectively, leases for 881,793 and 2,278,081 square feet, respectively, were signed in prior periods.
(6)Total transaction costs include tenant improvements and leasing commissions but exclude free rent concessions and other inducements in accordance with GAAP.
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(7)Represents the increase (decrease) in gross rent (base rent plus expense reimbursements) on the new versus expired leases on the 896,196 and 2,323,471 square feet of second generation leases that had been occupied within the prior 12 months for the three and nine months ended September 30, 2024, respectively; excludes leases that management considers temporary because the client is not expected to occupy the space on a long-term basis.
(8)Represents the increase (decrease) in net rent (gross rent less operating expenses) on the new versus expired leases on the 896,196 and 2,323,471 square feet of second generation leases that had been occupied within the prior 12 months for the three and nine months ended September 30, 2024, respectively.
Transactions during the three months ended September 30, 2024 included the following:
Development activities
•On July 17, 2024, we partially placed in-service Reston Next Office Phase II, an approximately 90,000 net rentable square foot development project comprised of office and retail space located in Reston, Virginia.
•On September 26, 2024, we fully placed in-service 180 CityPoint, an approximately 329,000 net rentable square foot laboratory/life sciences project located in Waltham, Massachusetts.
Pending disposition activity
•On July 22, 2024, we executed an amendment to an agreement with a third-party developer for the sale of a portion of our Shady Grove property for an aggregate gross sale price of approximately $24.7 million (See Note 3 to the Consolidated Financial Statements). The properties under agreement consist of 2 Choke Cherry Road, 2094 Gaither Road and a land parcel, located in Rockville, Maryland. The disposition is subject to satisfaction of certain closing conditions and there can be no assurance that this transaction will be consummated on the terms currently contemplated or at all.
Unconsolidated joint ventures activities
•On July 12, 2024, a joint venture in which we have a 20% ownership interest partially placed in-service Skymark, a luxury residential property located in Reston, Virginia, that consists of 508 residential units aggregating approximately 417,000 net rentable square feet across a five-story, low-rise building and an iconic 39-story tower, which is one of the tallest buildings in Northern Virginia.
•On July 18, 2024, a joint venture in which we have a 50% ownership interest extended by one year the maturity date of its loan collateralized by 100 Causeway Street. At the time of the extension, the loan had an outstanding balance totaling approximately $333.6 million, bore interest at Term SOFR plus 1.48% per annum, and was scheduled to mature on September 5, 2024. Following the extension, the loan will continue to bear interest at Term SOFR plus 1.48% per annum, and is scheduled to mature on September 5, 2025. 100 Causeway Street is an approximately 634,000 net rentable square foot premier workplace located in Boston, Massachusetts.
•On August 8, 2024, a joint venture in which we have a 71.11% ownership interest partially placed in-service 360 Park Avenue South, a 20-story, premier workplace building with ground floor retail located in New York City, New York, aggregating approximately 450,000 net rentable square feet.
Debt activities
•On August 26, 2024, BPLP completed a public offering of $850.0 million in aggregate principal amount of its 5.750% unsecured senior notes due 2035. The notes were priced at 99.961% of the principal amount to yield an effective rate (including financing fees) of approximately 5.842% per annum to maturity. The notes will mature on January 15, 2035, unless earlier redeemed. The aggregate net proceeds from the offering were approximately $841.9 million after deducting underwriting discounts and transaction expenses.
•On September 27, 2024, BPLP entered into a credit agreement that provides for a $100.0 million unsecured term loan facility (the "2024 Unsecured Term Loan") with a lender (the "Lender") under the mortgage loan collateralized by our Santa Monica Business Park properties located in Santa Monica, California (the "SMBP Loan"). Upon entry into the credit agreement, BPLP exercised its option to draw $100.0 million under the 2024 Unsecured Term Loan. The proceeds were used to repay the portion of the SMBP Loan held by the Lender. After the repayment, the SMBP Loan had a remaining principal
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balance of $200.0 million. The 2024 Unsecured Term Loan bears interest at a variable rate, matures on September 26, 2025 with three, one-year extension options, subject to customary conditions (See Note 6 to the Consolidated Financial Statements). The interest rate is subject to an existing interest rate swap to fix Daily Simple SOFR at a fixed interest rate of approximately 2.688% per annum for a period that ends on April 1, 2025.
Transactions completed subsequent to September 30, 2024 included the following:
•On October 5, 2024, we fully placed in-service 103 CityPoint, an approximately 113,000 net rentable square foot laboratory/life sciences project located in Waltham, Massachusetts.
•On October 8, 2024, we modified the SMBP Loan. The SMBP Loan had an outstanding principal balance of $200.0 million, bore interest at a variable rate equal to Daily Simple SOFR + 1.38% per annum and was scheduled to mature on July 19, 2025 (See "Debt Activities" above). The modified loan is scheduled to mature on October 8, 2028 and continues to bear interest at a variable rate equal to Daily Simple SOFR + 1.38% per annum until July 19, 2025. Beginning July 19, 2025, the mortgage loan will bear interest at Daily Simple SOFR + 1.60% per annum through the maturity date. The entire principal is subject to interest rate swap contracts to fix Daily Simple SOFR at a weighted-average fixed interest rate of approximately 2.675% per annum through April 1, 2025 (See Note 7 to the Consolidated Financial Statements). The mortgage loan requires monthly interest-only payments during the term of the loan, with the entire principal due at maturity. Santa Monica Business Park is an office park consisting of 21 buildings totaling approximately 1.2 million net rentable square feet.
•On October 31, 2024, we completed and fully placed in-service 300 Binney Street, a laboratory/life sciences redevelopment project with approximately 236,000 net rentable square feet located in Cambridge, Massachusetts. The property is fully leased to a life sciences client.
Critical Accounting Estimates
Management's Discussion and Analysis of Financial Condition and Results of Operations discuss our Consolidated Financial Statements, which have been prepared in accordance with generally accepted accounting principles ("GAAP"). The preparation of these financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results may differ from those estimates and assumptions.
Our Annual Report on Form 10-K for the year ended December 31, 2023 contains a discussion of our critical accounting estimates. There have been no significant changes in our critical accounting estimates since the year ended December 31, 2023.
Results of Operations for the Nine Months Ended September 30, 2024 and 2023
Netincome attributable to BXP, Inc.and net incomeattributable to Boston Properties Limited Partnership increased by approximately $172.8 million and $192.6 million, respectively, for the nine months ended September 30, 2024 compared to 2023, as set forth in the following tables and for the reasons discussed below under the heading "Comparison of the nine months ended September 30, 2024 to the nine months ended September 30, 2023"within "Item 2-Management's Discussion and Analysis of Financial Condition and Results of Operations."
Thefollowing are reconciliations of Net Income Attributable to BXP, Inc. to Net Operating Income and Net Income Attributable to Boston Properties Limited Partnership to Net Operating Income for the nine months ended September 30, 2024 and 2023. For a detailed discussion of Net Operating Income ("NOI"), including the reasons management believes NOI is useful to investors, see page 61.
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BXP
Nine months ended September 30,
2024 2023 Increase/
(Decrease) 		%
Change
(in thousands)
Net Income Attributable to BXP, Inc. $ 243,126 $ 70,290 $ 172,836 245.89 %
Net Income Attributable to Noncontrolling Interests:
Noncontrolling interest-common units of the Operating Partnership
28,596 8,642 19,954 230.90 %
Noncontrolling interests in property partnerships
50,283 59,337 (9,054) (15.26) %
Net Income 322,005 138,269 183,736 132.88 %
Other Expenses:
Add:
Interest expense
474,727 424,492 50,235 11.83 %
Impairment loss
13,615 - 13,615 100.00 %
Other Income:
Less:
Unrealized gain on non-real estate investment 548 332 216 65.06 %
Gains from investments in securities 4,785 2,311 2,474 107.05 %
Interest and other income (loss) 39,747 48,999 (9,252) (18.88) %
Gains on sales of real estate 517 517 - - %
Income (loss) from unconsolidated joint ventures 6,376 (261,793) 268,169 102.44 %
Other Expenses:
Add:
Depreciation and amortization expense 661,148 618,746 42,402 6.85 %
Transaction costs
890 1,970 (1,080) (54.82) %
Payroll and related costs from management services contracts
12,090 13,750 (1,660) (12.07) %
General and administrative expense
127,479 131,387 (3,908) (2.97) %
Other Revenue:
Less:
Direct reimbursements of payroll and related costs from management services contracts
12,090 13,750 (1,660) (12.07) %
Development and management services revenue
19,276 28,122 (8,846) (31.46) %
Net Operating Income $ 1,528,615 $ 1,496,376 $ 32,239 2.15 %
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BPLP
Nine months ended September 30,
2024 2023 Increase/
(Decrease) 		%
Change
(in thousands)
Net Income Attributable to Boston Properties Limited Partnership $ 276,826 $ 84,232 $ 192,594 228.65 %
Net Income Attributable to Noncontrolling Interests:
Noncontrolling interests in property partnerships
50,283 59,337 (9,054) (15.26) %
Net Income 327,109 143,569 183,540 127.84 %
Other Expenses:
Add:
Interest expense
474,727 424,492 50,235 11.83 %
Impairment loss
13,615 - 13,615 100.00 %
Other Income:
Less:
Unrealized gain on non-real estate investment 548 332 216 65.06 %
Gains from investments in securities 4,785 2,311 2,474 107.05 %
Interest and other income (loss) 39,747 48,999 (9,252) (18.88) %
Gains on sales of real estate 517 517 - - %
Income (loss) from unconsolidated joint ventures 6,376 (261,793) 268,169 102.44 %
Other Expenses:
Add:
Depreciation and amortization expense 656,044 613,446 42,598 6.94 %
Transaction costs
890 1,970 (1,080) (54.82) %
Payroll and related costs from management services contracts
12,090 13,750 (1,660) (12.07) %
General and administrative expense
127,479 131,387 (3,908) (2.97) %
Other Revenue:
Less:
Direct reimbursements of payroll and related costs from management services contracts
12,090 13,750 (1,660) (12.07) %
Development and management services revenue
19,276 28,122 (8,846) (31.46) %
Net Operating Income $ 1,528,615 $ 1,496,376 $ 32,239 2.15 %
At September 30, 2024 and 2023, we owned or had joint venture interests in a portfolio of 184 and 190 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 nine months ended September 30, 2024 and 2023 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, In or Held for Development or Redevelopment or Sold Portfolios.
In our analysis of operating results, particularly to make comparisons of NOI 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 or held for 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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NOI is a non-GAAP financial measure equal to net income attributable to BXP, Inc. and net income attributable to Boston Properties Limited Partnership, as applicable, the most directly comparable GAAP financial measures, plus (1) net income attributable to noncontrolling interests, interest expense, impairment loss, depreciation and amortization expense, transaction costs, payroll and related costs from management services contracts and corporate general and administrative expense less (2) unrealized gain on non-real estate investment, gains from investments in securities, interest and other income (loss), gains on sales of real estate, income (loss) from unconsolidated joint ventures, direct reimbursements of payroll and related costs from management services contracts and development and management services revenue. We use NOI internally as a performance measure and believe it provides useful information to investors regarding our results of operations and financial condition because, when compared across periods, it reflects the impact on operations from trends in occupancy rates, rental rates, operating costs and acquisition and development activity on an unleveraged basis, providing perspective not immediately apparent from net income attributable to BXP, Inc. and net income attributable to Boston Properties Limited Partnership. 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 BXP, Inc. and net income attributable to Boston Properties Limited Partnership as presented in our Consolidated Financial Statements. NOI should not be considered as a substitute for net income attributable to BXP, Inc. or net income attributable to Boston Properties Limited Partnership (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.
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 redemptions of common units of limited partnership interest of BPLP ("OP Units"). 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 when those properties are sold. For additional information see the Explanatory Note that immediately follows the cover page of this Quarterly Report on Form 10-Q.
Comparison of the nine months ended September 30, 2024 to the nine months ended September 30, 2023
The table below shows selected operating information for the Same Property Portfolio and the Total Property Portfolio. The Same Property Portfolio consists of 127 properties totaling approximately 40.3 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, 2023 and owned and in service through September 30, 2024. The Total Property Portfolio includes the effects of the other properties either acquired, placed in-service, in or held for development or redevelopment after January 1, 2023 or disposed of on or prior to September 30, 2024. This table includes a reconciliation from the Same Property Portfolio to the Total Property Portfolio by also providing information for the nine months ended September 30, 2024 and 2023 with respect to the properties that were acquired, placed in-service, in or held for development or redevelopment or sold. We did not sell any properties during the nine months ended September 30, 2024 and 2023.
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Same Property Portfolio Properties Acquired Portfolio Properties
Placed In-Service
Portfolio 		Properties in or Held for Development or Redevelopment Portfolio Total Property Portfolio
2024 2023 Increase/
(Decrease) 		%
Change 		2024 2023 2024 2023 2024 2023 2024 2023 Increase/
(Decrease) 		%
Change
(dollars in thousands)
Rental Revenue: (1)
Lease Revenue (Excluding Termination Income)
$ 2,199,822 $ 2,223,951 $ (24,129) (1.08) % $ 75,697 $ - $ 46,434 $ 16,582 $ 6,066 $ 8,366 $ 2,328,019 $ 2,248,899 $ 79,120 3.52 %
Termination Income
8,361 2,597 5,764 221.95 % 189 - - - 6,409 - 14,959 2,597 12,362 476.01 %
Lease Revenue
2,208,183 2,226,548 (18,365) (0.82) % 75,886 - 46,434 16,582 12,475 8,366 2,342,978 2,251,496 91,482 4.06 %
Parking and Other
92,014 79,110 12,904 16.31 % 6,236 - 1,337 834 110 2 99,697 79,946 19,751 24.71 %
Total Rental Revenue (1) 2,300,197 2,305,658 (5,461) (0.24) % 82,122 - 47,771 17,416 12,585 8,368 2,442,675 2,331,442 111,233 4.77 %
Real Estate Operating Expenses 892,274 846,956 45,318 5.35 % 29,841 - 15,833 7,297 8,119 11,299 946,067 865,552 80,515 9.30 %
Net Operating Income (Loss), Excluding Residential and Hotel 1,407,923 1,458,702 (50,779) (3.48) % 52,281 - 31,938 10,119 4,466 (2,931) 1,496,608 1,465,890 30,718 2.10 %
Residential Net Operating Income (2) 19,614 18,784 830 4.42 % - - - - - - 19,614 18,784 830 4.42 %
Hotel Net Operating Income (2) 12,393 11,702 691 5.90 % - - - - - - 12,393 11,702 691 5.90 %
Net Operating Income (Loss) $ 1,439,930 $ 1,489,188 $ (49,258) (3.31) % $ 52,281 $ - $ 31,938 $ 10,119 $ 4,466 $ (2,931) $ 1,528,615 $ 1,496,376 $ 32,239 2.15 %
_______________
(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 61. Residential Net Operating Income for the nine months ended September 30, 2024 and 2023 is comprised of Residential Revenue of $37,027 and $35,768 less Residential Expenses of $17,413 and $16,984, respectively. Hotel Net Operating Income for the nine months ended September 30, 2024 and 2023 is comprised of Hotel Revenue of $38,080 and $35,554 less Hotel Expenses of $25,687 and $23,852, 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 decreased by approximately $24.1 million for the nine months ended September 30, 2024 compared to 2023. The decrease was a result of our average occupancy decreasing from 90.9% to 89.0%, resulting in a decrease of approximately $45.8 million, partially offset by revenue per square foot increasing by approximately $0.82, contributing approximately $21.7 million.
Termination Income
Termination income increased by approximately $5.8 million for the nine months ended September 30, 2024 compared to 2023.
Termination income for the nine months ended September 30, 2024 related to 24 clients across the Same Property Portfolio and totaled approximately $8.4 million, which was primarily related to a retail client that terminated its lease early in Boston.
Termination income for the nine months ended September 30, 2023 related to 22 clients across the Same Property Portfolio and totaled approximately $2.6 million, which was primarily related to clients that terminated leases early in Seattle and Washington, DC.
Parking and Other Revenue
Parking and other revenue increased by approximately $12.9 million for the nine months ended September 30, 2024 compared to 2023. Parking and other revenue increased by approximately $1.0 million and $11.9 million, respectively. The increase in other revenue primarily related to the View Boston observatory.
Real Estate Operating Expenses
Real estate operating expenses from the Same Property Portfolio increased by approximately $45.3 million, or 5.4%, for the nine months ended September 30, 2024 compared to 2023, due primarily to increases in (1) repairs and maintenance of approximately $15.1 million, or 11.0%, (2) utilities fluctuation of approximately $8.7 million, or 10.1%, and (3) increases in other real estate operating expenses of approximately $12.6 million, or 2.0%. The increase in repairs and maintenance related primarily to properties in our Boston region. The increase in utilities related primarily to properties in our New York City region. In addition, approximately $8.9 million of the increase related to marketing and operating expenses associated with the View Boston observatory.
Properties Acquired Portfolio
The table below lists the properties acquired between January 1, 2023 and September 30, 2024. Rental revenue and real estate operating expenses increased by approximately $82.1 million and $29.8 million, respectively, for the nine months ended September 30, 2024 compared to 2023, as detailed below.
Square Feet Rental Revenue Real Estate Operating Expenses
Name Date acquired 2024 2023 Change 2024 2023 Change
(dollars in thousands)
Santa Monica Business Park (1) December 14, 2023 1,181,298 $ 57,534 $ - $ 57,534 $ 20,684 $ - $ 20,684
901 New York Avenue January 8, 2024 523,939 24,588 - 24,588 9,157 - 9,157
1,705,237 $ 82,122 $ - $ 82,122 $ 29,841 $ - $ 29,841
______________
(1)Rental revenue for the nine months ended September 30, 2024 includes approximately $0.2 million of termination income.
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Properties Placed In-Service Portfolio
The table below lists the properties that were placed in-service or partially placed in-service between January 1, 2023 and September 30, 2024. Rental revenue and real estate operating expenses from our Properties Placed In-Service Portfolio increased by approximately $30.4 million and $8.5 million, respectively, for the nine months ended September 30, 2024 compared to 2023, as detailed below.
Quarter Initially Placed In-Service Quarter Fully Placed In-Service Rental Revenue Real Estate Operating Expenses
Name Square Feet 2024 2023 Change 2024 2023 Change
(dollars in thousands)
2100 Pennsylvania Avenue Second Quarter, 2022 Second Quarter, 2023 475,849 $ 26,894 $ 15,911 $ 10,983 $ 8,630 $ 6,752 $ 1,878
140 Kendrick Street - Building A Third Quarter, 2023 Third Quarter, 2023 104,166 5,787 1,505 4,282 1,820 545 1,275
180 CityPoint Third Quarter, 2023 Third Quarter, 2024 329,195 10,475 - 10,475 4,313 - 4,313
103 CityPoint (1) Fourth Quarter, 2023 N/A 113,000 2 - 2 531 - 531
760 Boylston Street Second Quarter, 2024 Second Quarter, 2024 118,000 4,613 - 4,613 528 - 528
Reston Next Office Phase II Third Quarter, 2024 N/A 90,000 - - - 11 - 11
1,230,210 $ 47,771 $ 17,416 $ 30,355 $ 15,833 $ 7,297 $ 8,536
______________
(1)On October 5, 2024, 103 CityPoint was fully placed in-service.
Properties in or Held for Development or Redevelopment Portfolio
The table below lists the properties that were in or held for development or redevelopment between January 1, 2023 and September 30, 2024. Rental revenue from our Properties in or Held for Development or Redevelopment Portfolio increased by approximately $4.2 million and real estate operating expenses decreased by approximately $3.2 million for the nine months ended September 30, 2024 compared to 2023, as detailed below.
Rental Revenue Real Estate Operating Expenses
Name Date Commenced Held for Development / Redevelopment Square Feet 2024 2023 Change 2024 2023 Change
(dollars in thousands)
105 Carnegie Center (1) November 30, 2022 73,000 $ - $ - $ - $ 426 $ - $ 426
Kendall Center Blue Parking Garage (2) January 4, 2023 N/A - 25 (25) - 2,395 (2,395)
300 Binney Street (3) January 30, 2023 236,000 - (900) 900 - 117 (117)
Shady Grove Innovation District (4) March 31, 2023 184,000 82 1,604 (1,522) 703 1,169 (466)
Lexington Office Park (4) March 31, 2023 167,000 757 1,316 (559) 1,224 1,615 (391)
171 Dartmouth Street March 28, 2024 N/A - - - 174 - 174
1050 and 1100 Winter Street (4) (5) March 31, 2024 455,000 9,548 3,237 6,311 4,269 4,553 (284)
17 Hartwell Avenue (4) June 30, 2024 30,000 604 1,411 (807) 323 378 (55)
Kingstowne One (4) September 30, 2024 154,000 1,594 1,675 (81) 1,000 1,072 (72)
1,299,000 $ 12,585 $ 8,368 $ 4,217 $ 8,119 $ 11,299 $ (3,180)
_____________
(1)On November 30, 2023, we elected to suspend redevelopment. Although no longer in redevelopment, this property is not considered "in-service" as we are not actively leasing this property in anticipation of restarting redevelopment in the future.
(2)The Kendall Center Blue Parking Garage was taken out of service on January 4, 2023 and then demolished to support the development of 290 Binney Street. Real estate operating expenses for the nine months ended September 30, 2023 included approximately $2.4 million of demolition costs.
(3)On October 31, 2024, 300 Binney Street was fully placed in service.
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(4)Lexington Office Park, 1050 and 1100 Winter Street, 17 Hartwell Avenue, Kingstowne One and a portion of Shady Grove Innovation District are no longer considered "in-service" because each property's occupied percentage is less than 50% and we are no longer actively leasing the properties in anticipation of a future development/redevelopment. The properties will be considered held for development or redevelopment until the last client has vacated the property and the property is no longer revenue producing. This portion of Shady Grove Innovation District is comprised of three buildings, 2092 and 2098 Gaither Road and 15825 Shady Grove Road that were taken out of service between January 1, 2023 and September 30, 2024.
(5)1100 Winter Street was taken out of service as of September 30, 2024. Rental revenue at 1100 Winter Street for the nine months ended September 30, 2024 includes approximately $6.4 million of termination income.
Residential Net Operating Income
Net operating income for our residential same properties increased by approximately $0.8 million for the nine months ended September 30, 2024 compared to 2023.
The following reflects our occupancy and rate information for our residential same properties for the nine months ended September 30, 2024 and 2023.
Average Monthly Rental Rate (1) Average Rental Rate Per Occupied Square Foot Average Physical Occupancy (2) Average Economic Occupancy (3)
Name 2024 2023 Change (%) 2024 2023 Change (%) 2024 2023 Change (%) 2024 2023 Change (%)
Proto Kendall Square $ 3,198 $ 3,060 4.5 % $ 5.88 $ 5.62 4.6 % 95.1 % 95.5 % (0.4) % 95.1 % 95.1 % - %
The Lofts at Atlantic Wharf $ 4,368 $ 4,443 (1.7) % $ 4.86 $ 4.92 (1.2) % 95.2 % 96.3 % (1.1) % 94.3 % 96.1 % (1.9) %
Signature at Reston $ 2,822 $ 2,689 4.9 % $ 2.90 $ 2.79 3.9 % 95.8 % 94.6 % 1.3 % 95.8 % 93.9 % 2.0 %
The Skylyne $ 3,419 $ 3,467 (1.4) % $ 4.31 $ 4.41 (2.3) % 88.3 % 92.3 % (4.3) % 86.5 % 90.2 % (4.1) %
_____________
(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
The Boston Marriott Cambridge hotel had net operating income of approximately $12.4 million for the nine months ended September 30, 2024, representing an increase of approximately $0.7 million compared to the nine months ended September 30, 2023.
The following reflects our occupancy and rate information for the Boston Marriott Cambridge hotel for the nine months ended September 30, 2024 and 2023.
2024 2023
Change (%)
Occupancy 78.1 % 73.5 % 6.3 %
Average daily rate $ 331.19 $ 326.22 1.5 %
REVPAR $ 258.75 $ 239.64 8.0 %
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Other Operating Revenue and Expense Items
Development and Management Services Revenue
Development and management services revenue decreased by approximately $8.8 million for the nine months ended September 30, 2024 compared to 2023. Development services revenue and management services revenue decreased by approximately $4.6 million and $4.2 million, respectively. The decrease in development services revenue is primarily related to decreases in fees associated with tenant improvement projects in Boston and New York City and decreases in development income earned from unconsolidated joint ventures in the San Francisco region. The decrease in management services revenue primarily related to the elimination of property and asset management fees earned from an unconsolidated joint venture in the Los Angeles region in which we acquired the joint venture partner's interest in December 2023.
General and Administrative Expense
General and administrative expense decreased by approximately $3.9 million for the nine months ended September 30, 2024 compared to 2023 primarily due to decreases in compensation expense and other general and administrative expenses of approximately $3.2 million and $0.7 million, respectively. The decrease in compensation expense related to an approximately $5.7 million decrease in other compensation expenses, partially offset by an approximately $2.5 million increase in the value of our deferred compensation plan.
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 each of the nine months ended September 30, 2024 and 2023 were approximately $13.2 million and $13.5 million, respectively. These costs are not included in the general and administrative expenses discussed above.
Transaction Costs
Transaction costs decreased by approximately $1.1 million for the nine months ended September 30, 2024 compared to 2023. In general, transaction costs relating to the formation of new 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 immediately follows the cover page of this Quarterly Report on Form 10-Q.
BXP
Depreciation and amortization expense increased by approximately $42.4 million for the nine months ended September 30, 2024 compared to 2023, as detailed below.
Portfolio
Depreciation and Amortization for the nine months ended September 30,
2024 2023 Change
(in thousands)
Same Property Portfolio $ 597,768 $ 593,331 $ 4,437
Properties Acquired Portfolio 41,811 - 41,811
Properties Placed In-Service Portfolio 17,242 8,607 8,635
Properties in or Held for Development or Redevelopment Portfolio (1) 4,327 16,808 (12,481)
$ 661,148 $ 618,746 $ 42,402
_____________
(1)During the nine months ended September 30, 2023, the Kendall Center Blue Parking Garage was taken out of service and demolished to support the development of 290 Binney Street, an approximately 573,000 net rentable square foot
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laboratory/life sciences project in Cambridge, Massachusetts. As a result, during the nine months ended September 30, 2023, we recorded approximately $0.8 million of accelerated depreciation expense for the demolition of the garage, of which approximately $0.2 million related to the step-up of real estate assets.
BPLP
Depreciation and amortization expense increased by approximately $42.6 million for the nine months ended September 30, 2024 compared to 2023, as detailed below.
Portfolio Depreciation and Amortization for the nine months ended September 30,
2024 2023 Change
(in thousands)
Same Property Portfolio $ 592,664 $ 588,211 $ 4,453
Properties Acquired Portfolio 41,811 - 41,811
Properties Placed In-Service Portfolio 17,242 8,607 8,635
Properties in or Held for Development or Redevelopment Portfolio (1) 4,327 16,628 (12,301)
$ 656,044 $ 613,446 $ 42,598
_____________
(1)During the nine months ended September 30, 2023, the Kendall Center Blue Parking Garage was taken out of service and demolished to support the development of 290 Binney Street, an approximately 573,000 net rentable square foot laboratory/life sciences project in Cambridge, Massachusetts. As a result, during the nine months ended September 30, 2023, BPLP recorded approximately $0.6 million of accelerated depreciation expense for the demolition of the garage.
Direct Reimbursements of Payroll and Related Costs From Management Services Contracts and Payroll and Related Costs From Management Service Contracts
We have determined that amounts reimbursed for payroll and related costs received from third parties in connection with management services contracts should be reflected on a gross basis instead of on a net basis as we have determined that we are the principal under these arrangements. We anticipate that these two financial statement line items will generally offset each other.
Other Income and Expense Items
Income (Loss) from Unconsolidated Joint Ventures
For the nine months ended September 30, 2024 compared to 2023, income (loss) from unconsolidated joint ventures increased by approximately $268.2 million primarily due to the recognition of non-cash impairment charges related to our investments in 360 Park Avenue South, 200 Fifth Avenue, Platform 16, and Safeco Plaza aggregating approximately $272.6 million during the nine months ended September 30, 2023, partially offset by an approximately $35.8 million gain on investment related to our Metropolitan Square joint venture interest. Neither of these items recurred during the nine months ended September 30, 2024.
Gains on Sales of Real Estate
The $0.5 million gains on sale of real estate for the nine months ended September 30, 2024 and 2023 were related to the sale of real estate occurring in prior periods.
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 immediately follows the cover page of this Quarterly Report on Form 10-Q.
Interest and Other Income (Loss)
Interest and other income (loss) decreased by approximately $9.3 million for the nine months ended September 30, 2024 compared to 2023, due primarily to a decrease in our outstanding cash balances.
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Gains from Investments in Securities
Gains from investments in securities for the nine months ended September 30, 2024 and 2023 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 nine months ended September 30, 2024 and 2023, we recognized gains of approximately $4.8 million and $2.3 million, respectively, on these investments. By comparison, our general and administrative expense decreased by approximately $4.8 million and $2.3 million during the nine months ended September 30, 2024 and 2023, respectively, as a result of decreases 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.
Unrealized Gain on Non-Real Estate Investment
We invest in non-real estate investments, which are primarily environmentally-focused investment funds. As a result, during the nine months ended September 30, 2024 and 2023, we recognized an unrealized gain of approximately $0.5 million and $0.3 million, respectively, due to the observable changes in the fair value of the investments.
Impairment Loss
At March 31, 2024, we evaluated the expected hold period for a portion of our Shady Grove property, located in Rockville, Maryland, consisting of 2 Choke Cherry Road, 2094 Gaither Road and a land parcel. Based on a shorter-than-expected hold period, we reduced the carrying value of a portion of the property that we anticipate selling to a third-party developer to its estimated fair value at March 31, 2024. As a result, each of BXP and BPLP recognized an impairment loss of approximately $13.6 million. Our estimated fair value was based on Level 3 inputs as defined in Accounting Standards Codification ("ASC") 820 "Fair Value Measurements and Disclosures" and on a pending offer from a third party (See Note 3 to the Consolidated Financial Statements).
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Interest Expense
Interest expense increased by approximately $50.2 million for the nine months ended September 30, 2024 compared to 2023, as detailed below.
Component
Change in interest expense for the nine months ended September 30, 2024 compared to September 30, 2023
(in thousands)
Increases to interest expense due to:
New mortgage loan financings (1) $ 55,430
Issuance of $750 million in aggregate principal of 6.500% senior notes due 2034 on May 15, 2023 18,342
Unsecured commercial paper (2) 12,263
Issuance of $850 million in aggregate principal of 5.750% senior notes due 2035 on August 26, 2024 4,754
Amortization expense of financing fees 157
Total increases to interest expense 90,946
Decreases to interest expense due to:
Repayment of $700 million in aggregate principal of 3.800% senior notes due 2024 on February 1, 2024 (17,890)
Repayment of $500 million in aggregate principal of 3.125% senior notes due 2023 on September 1, 2023 (10,672)
Decrease in interest associated with unsecured term loans and the unsecured credit facility, net (7,646)
Decrease in interest due to finance leases (3,443)
Other interest expense (excluding senior notes) (709)
Increase in capitalized interest related to development projects (351)
Total decreases to interest expense (40,711)
Total change in interest expense $ 50,235
______________
(1)Consists of the mortgage loan and, if applicable, fair value debt and swap adjustments collateralized by (1) 325 Main Street, 355 Main Street, 90 Broadway and Cambridge East Garage (also known as Kendall Center Green Garage) properties located in Cambridge, Massachusetts, (2) Santa Monica Business Park located in Santa Monica, California and (3) 901 New York Avenue in Washington, DC(See Note 6to the Consolidated Financial Statements).
(2)On April 17, 2024, BPLP established an unsecured commercial paper program (See Note 6to 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 nine months ended September 30, 2024 and 2023 was approximately $31.3 million and $30.8 million, respectively. These costs are not included in the interest expense referenced above. The decrease in capitalized interest is primarily attributable to a development project that had a finance lease and is now placed in service.
At September 30, 2024, our variable rate debt consisted of (1) BPLP's $2.0 billion 2021 Credit Facility, (2) BPLP's $700.0 million 2023 Unsecured Term Loan and (3) BPLP's $500.0 million unsecured commercial paper notes. As of September 30, 2024, the 2021 Credit Facility did not have a balance outstanding. In addition, we have the $100.0 million 2024 Unsecured Term Loan and $800.0 million of mortgage notes collateralized by Santa Monica Business Park and our 325 Main Street, 355 Main Street, 90 Broadway and Cambridge East Garage (also known as Kendall Center Green Garage) properties that bore interest at variable rates, which have all been hedged with interest rates swaps to fix SOFR for all or a portion of, the applicable debt term. For a summary of our consolidated debt as of September 30, 2024 refer to the heading "Liquidity and Capital Resources-Debt Financing"within "Item 2-Management's Discussion and Analysis of Financial Condition and Results of Operations."
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Noncontrolling Interests in Property Partnerships
Noncontrolling interests in property partnerships decreased by approximately $9.1 million for the nine months ended September 30, 2024 compared to 2023, as detailed below.
Property
Noncontrolling Interests in Property Partnerships for the nine months ended September 30,
2024 2023 Change
(in thousands)
767 Fifth Avenue (the General Motors Building) $ 9,242 $ 9,770 $ (528)
Times Square Tower (1) 12,651 16,737 (4,086)
601 Lexington Avenue (2) 6,951 11,188 (4,237)
100 Federal Street 8,713 9,732 (1,019)
Atlantic Wharf Office Building 11,750 11,910 (160)
343 Madison Avenue (3) (27) - (27)
300 Binney Street (4) 412 - 412
290 Binney Street (4) 591 - 591
$ 50,283 $ 59,337 $ (9,054)
______________
(1)The decrease was primarily attributable to a decrease in lease revenue from our clients.
(2)The decrease was primarily attributable to a decrease in lease revenue from our clients and depreciation and amortization expense related to new and expiring clients.
(3)Property is held for future development.
(4)Property is currently under redevelopment or in development.
Noncontrolling Interest-Common Units of the Operating Partnership
For BXP, noncontrolling interest-common units of the Operating Partnership increased by approximately $20.0 million for the nine monthsended September 30, 2024 compared to 2023 due primarily to an increase in allocable income, which was primarily the result of recognizing a non-cash impairment charge related to our investment in unconsolidated joint ventures during the nine monthsended September 30, 2023 that did not recur during the nine months ended September 30, 2024. Due to our ownership structure, there is no corresponding line item on BPLP's financial statements.
Results of Operations for the Three Months Ended September 30, 2024 and 2023
Net income (loss) attributable to BXP, Inc. and net income (loss) attributable to Boston Properties Limited Partnership increased approximately $195.5 million and $217.6 million, respectively, for the three months ended September 30, 2024 compared to 2023, as detailed in the following tables and for the reasons discussed below under the heading "Comparison of the three months ended September 30, 2024 to the three months ended September 30, 2023" within "Item 2-Management's Discussion and Analysis of Financial Condition and Results of Operations."
Thefollowing are reconciliations of Net Income (Loss) Attributable to BXP, Inc. to Net Operating Income and Net Income (Loss) Attributable to Boston Properties Limited Partnershipto Net Operating Income for the three months ended September 30, 2024 and 2023. For a detailed discussion of NOI, including the reasons management believes NOI is useful to investors, see page 73.
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BXP
Three months ended September 30,
2024 2023 Increase/
(Decrease) 		%
Change
(in thousands)
Net Income (Loss) Attributable to BXP, Inc. $ 83,628 $ (111,826) $ 195,454 174.78 %
Net Income (Loss) Attributable to Noncontrolling Interests:
Noncontrolling interest-common units of the Operating Partnership
9,587 (12,626) 22,213 175.93 %
Noncontrolling interests in property partnerships
15,237 20,909 (5,672) (27.13) %
Net Income (Loss) 108,452 (103,543) 211,995 204.74 %
Other Expenses:
Add:
Interest expense 163,194 147,812 15,382 10.41 %
Loss from unconsolidated joint ventures 7,011 247,556 (240,545) (97.17) %
Other Income:
Less:
Unrealized gain (loss) on non-real estate investment 94 (51) 145 284.31 %
Gains (losses) from investments in securities 2,198 (925) 3,123 337.62 %
Interest and other income (loss)
14,430 20,715 (6,285) (30.34) %
Gains on sales of real estate 517 517 - - %
Other Expenses:
Add:
Depreciation and amortization expense 222,890 207,435 15,455 7.45 %
Transaction costs
188 751 (563) (74.97) %
Payroll and related costs from management services contracts
3,649 3,906 (257) (6.58) %
General and administrative expense
33,352 31,410 1,942 6.18 %
Other Revenue:
Less:
Direct reimbursements of payroll and related costs from management services contracts
3,649 3,906 (257) (6.58) %
Development and management services revenue
6,770 9,284 (2,514) (27.08) %
Net Operating Income $ 511,078 $ 501,881 $ 9,197 1.83 %
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BPLP
Three months ended September 30,
2024 2023 Increase/
(Decrease) 		%
Change
(in thousands)
Net Income (Loss) Attributable to Boston Properties Limited Partnership $ 94,919 $ (122,696) $ 217,615 177.36 %
Net Income Attributable to Noncontrolling Interests:
Noncontrolling interests in property partnerships
15,237 20,909 (5,672) (27.13) %
Net Income (Loss) 110,156 (101,787) 211,943 208.22 %
Other Expenses:
Add:
Interest expense
163,194 147,812 15,382 10.41 %
Loss from unconsolidated joint ventures 7,011 247,556 (240,545) (97.17) %
Other Income:
Less:
Unrealized gain (loss) on non-real estate investment 94 (51) 145 284.31 %
Gains (losses) from investments in securities 2,198 (925) 3,123 337.62 %
Interest and other income (loss)
14,430 20,715 (6,285) (30.34) %
Gains on sales of real estate 517 517 - - %
Other Expenses:
Add:
Depreciation and amortization expense 221,186 205,679 15,507 7.54 %
Transaction costs
188 751 (563) (74.97) %
Payroll and related costs from management services contracts
3,649 3,906 (257) (6.58) %
General and administrative expense
33,352 31,410 1,942 6.18 %
Other Revenue:
Less:
Direct reimbursements of payroll and related costs from management services contracts
3,649 3,906 (257) (6.58) %
Development and management services revenue
6,770 9,284 (2,514) (27.08) %
Net Operating Income $ 511,078 $ 501,881 $ 9,197 1.83 %
At September 30, 2024 and 2023, we owned or had joint venture interests in a portfolio of 184 and 190 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 three months ended September 30, 2024 and 2023 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, In or Held for 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 or held for 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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NOI is a non-GAAP financial measure equal to net income (loss) attributable to BXP, Inc. and net income (loss) attributable to Boston Properties Limited Partnership, as applicable, the most directly comparable GAAP financial measures, plus (1) net income (loss) attributable to noncontrolling interests, interest expense, 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) unrealized gain (loss) on non-real estate investment, gains (losses) 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 (loss) attributable to BXP, Inc. and net income (loss) attributable to Boston Properties Limited Partnership. 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 (loss) attributable to BXP, Inc. and net income (loss) attributable to Boston Properties Limited Partnership as presented in our Consolidated Financial Statements. NOI should not be considered as a substitute for net income (loss) attributable to BXP, Inc. or net income (loss) attributable to Boston Properties Limited Partnership (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.
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 redemptions of common units of limited partnership interest of BPLP ("OP Units"). 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 when those properties are sold. For additional information see the Explanatory Note that follows the cover page of this Quarterly Report on Form 10-Q.
Comparison of the three months ended September 30, 2024 to the three months ended September 30, 2023
The table below shows selected operating information for the Same Property Portfolio and the Total Property Portfolio. The Same Property Portfolio consists of 128 properties totaling approximately 40.8 million net rentable square feet, excluding unconsolidated joint ventures. The Same Property Portfolio includes properties acquired or placed in-service on or prior to July 1, 2023 and owned and in-service through September 30, 2024. The Total Property Portfolio includes the effects of the other properties either acquired, placed in-service, in or held for development or redevelopment after July 1, 2023 or disposed of on or prior to September 30, 2024. This table includes a reconciliation from the Same Property Portfolio to the Total Property Portfolio by also providing information for the three months ended September 30, 2024 and 2023 with respect to the properties that were acquired, placed in-service, in or held for development or redevelopment or sold. We did not sell any properties during the three months ended September 30, 2024 and 2023.
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Same Property Portfolio Properties
Acquired Portfolio 		Properties
Placed In-Service
Portfolio 		Properties in or Held for
Development or
Redevelopment
Portfolio 		Total Property Portfolio
2024 2023 Increase/
(Decrease) 		%
Change 		2024 2023 2024 2023 2024 2023 2024 2023 Increase/
(Decrease) 		%
Change
(dollars in thousands)
Rental Revenue: (1)
Lease Revenue (Excluding Termination Income)
$ 740,975 $ 748,611 $ (7,636) (1.02) % $ 25,196 $ - $ 7,893 $ 1,505 $ 1,485 $ 2,856 $ 775,549 $ 752,972 $ 22,577 3.00 %
Termination Income
5,711 2,564 3,147 122.74 % - - - - 6,409 - 12,120 2,564 9,556 372.70 %
Lease Revenue
746,686 751,175 (4,489) (0.60) % 25,196 - 7,893 1,505 7,894 2,856 787,669 755,536 32,133 4.25 %
Parking and Other Revenue 32,038 30,284 1,754 5.79 % 1,821 - 1 - 80 - 33,940 30,284 3,656 12.07 %
Total Rental Revenue (1) 778,724 781,459 (2,735) (0.35) % 27,017 - 7,894 1,505 7,974 2,856 821,609 785,820 35,789 4.55 %
Real Estate Operating Expenses 306,316 291,003 15,313 5.26 % 10,389 - 2,604 545 2,600 2,906 321,909 294,454 27,455 9.32 %
Net Operating Income (Loss), Excluding Residential and Hotel 472,408 490,456 (18,048) (3.68) % 16,628 - 5,290 960 5,374 (50) 499,700 491,366 8,334 1.70 %
Residential Net Operating Income (2) 6,129 6,051 78 1.29 % - - - - - - 6,129 6,051 78 1.29 %
Hotel Net Operating Income (2) 5,249 4,464 785 17.59 % - - - - - - 5,249 4,464 785 17.59 %
Net Operating Income (Loss) $ 483,786 $ 500,971 $ (17,185) (3.43) % $ 16,628 $ - $ 5,290 $ 960 $ 5,374 $ (50) $ 511,078 $ 501,881 $ 9,197 1.83 %
_______________
(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 73. Residential Net Operating Income for the three months ended September 30, 2024 and 2023 is comprised of Residential Revenue of $12,117 and $11,789 less Residential Expenses of $5,988 and $5,738, respectively. Hotel Net Operating Income for the three months ended September 30, 2024 and 2023 is comprised of Hotel Revenue of $15,082 and $13,484 less Hotel Expenses of $9,833 and $9,020, 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 decreased by approximately $7.6 million for the three months ended September 30, 2024 compared to 2023. The decrease was a result of our average occupancy decreasing from 90.6% to 88.2%, resulting in a decrease of approximately $20.0 million, partially offset by our average revenue per square foot increasing by approximately $1.54, contributing approximately $12.4 million.
Termination Income
Termination income increased by approximately $3.1 million for the three months ended September 30, 2024 compared to 2023.
Termination income for the three months ended September 30, 2024 related to eight clients across the Same Property Portfolio and totaled approximately $5.7 million, which was primarily related to a retail client that terminated its lease early in Boston.
Termination income for the three months ended September 30, 2023 related to 10 clients across the Same Property Portfolio and totaled approximately $2.6 million, which was primarily related to clients that terminated leases early in Seattle and Washington, DC.
Parking and Other Revenue
Parking and other revenue increased by approximately $1.8 million for the three months ended September 30, 2024 compared to 2023. Parking and other revenue increased by approximately $0.1 million and $1.7 million, respectively. The increase in other revenue was primarily associated with the View Boston observatory.
Real Estate Operating Expenses
Real estate operating expenses from the Same Property Portfolio increased by approximately $15.3 million, or 5.3%, for the three months ended September 30, 2024 compared to 2023, due primarily to increases in (1)utilities of approximately $4.3 million, or 13.9%, (2) repairs and maintenance of approximately $4.3 million, or 9.2%, and (3) other real estate operating expenses of approximately $4.1 million, or 1.9%. The increase in utilities related primarily to properties in our New York City region. The increase in repairs and maintenance related primarily to properties in our Boston region. In addition, there was an approximately $2.6 million increase related to the marketing and operating expenses associated with the View Boston observatory.
Properties Acquired Portfolio
The table below lists the properties acquired between July 1, 2023 and September 30, 2024. Rental revenue and real estate operating expenses increased by approximately $27.0 million and $10.4 million, respectively, for the three months ended September 30, 2024 compared to 2023, as detailed below.
Square Feet Rental Revenue Real Estate Operating Expenses
Name Date acquired 2024 2023 Change 2024 2023 Change
(dollars in thousands)
Santa Monica Business Park December 14, 2023 1,181,298 $ 18,661 $ - $ 18,661 $ 7,346 $ - $ 7,346
901 New York Avenue January 8, 2024 523,939 8,356 - 8,356 3,043 - 3,043
1,705,237 $ 27,017 $ - $ 27,017 $ 10,389 $ - $ 10,389
Properties Placed In-Service Portfolio
The table below lists the properties that were placed in-service or partially placed in-service between July 1, 2023 and September 30, 2024. Rental revenue and real estate operating expenses from our Properties Placed In-Service Portfolio increased by approximately $6.4 million and $2.1 million, respectively, for the three months ended September 30, 2024 compared to 2023, as detailed below.
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Quarter Initially Placed In-Service Quarter Fully Placed In-Service Rental Revenue Real Estate Operating Expenses
Name Square Feet 2024 2023 Change 2024 2023 Change
(dollars in thousands)
140 Kendrick Street - Building A Third Quarter, 2023 Third Quarter, 2023 104,166 $ 1,976 $ 1,505 $ 471 $ 671 $ 545 $ 126
180 CityPoint Third Quarter, 2023 Third Quarter, 2024 329,195 3,627 - 3,627 1,525 - 1,525
103 CityPoint (1) Fourth Quarter, 2023 N/A 113,000 1 - 1 155 - 155
760 Boylston Street Second Quarter, 2024 Second Quarter, 2024 118,000 2,290 - 2,290 242 - 242
Reston Next Office Phase II Third Quarter, 2024 N/A 90,000 - - - 11 - 11
754,361 $ 7,894 $ 1,505 $ 6,389 $ 2,604 $ 545 $ 2,059
______________
(1)On October 5, 2024, 103 CityPoint was fully placed in-service.
Properties in or Held for Development or Redevelopment Portfolio
The table below lists the properties that were in or held for development or redevelopment between July 1, 2023 and September 30, 2024. Rental revenue from our Properties in or Held for Development or Redevelopment Portfolio increased by approximately $5.1 million and real estate operating expenses decreased by approximately $0.3 million for the three months ended September 30, 2024 compared to 2023, as detailed below.
Date Commenced Held for Development / Redevelopment Rental Revenue Real Estate Operating Expenses
Name Square Feet 2024 2023 Change 2024 2023 Change
(dollars in thousands)
105 Carnegie Center (1) November 30, 2022 73,000 $ - $ - $ - $ 135 $ - $ 135
Shady Grove Innovation District (2) March 31, 2023 184,000 57 361 (304) 224 441 (217)
Lexington Office Park (2) March 31, 2023 167,000 248 341 (93) 446 507 (61)
171 Dartmouth Street March 28, 2024 N/A - - - 87 - 87
1050 and 1100 Winter Street (2) (3) March 31, 2024 455,000 7,260 1,050 6,210 1,281 1,466 (185)
17 Hartwell Avenue (2) June 30, 2024 30,000 (10) 472 (482) 103 127 (24)
Kingstowne One (2) September 30, 2024 154,000 419 632 (213) 324 365 (41)
1,063,000 $ 7,974 $ 2,856 $ 5,118 $ 2,600 $ 2,906 $ (306)
______________
(1)On November 30, 2023, we elected to suspend redevelopment. Although no longer in redevelopment, this property is not considered "in-service" as we are not actively leasing this property in anticipation of restarting redevelopment in the future.
(2)Lexington Office Park, 1050 and 1100 Winter Street, 17 Hartwell Avenue, Kingstowne One and a portion of Shady Grove Innovation District are no longer considered "in-service" because each property's occupied percentage is less than 50% and we are no longer actively leasing the property in anticipation of a future development/redevelopment. The properties will be considered held for development or redevelopment until the last client has vacated the property and the property is no longer revenue producing. This portion of Shady Grove Innovation District is comprised of three buildings, 2092 and 2098 Gaither Road and 15825 Shady Grove Road.
(3)1100 Winter Street was taken out of service as of September 30, 2024. Rental revenue at 1100 Winter Street for the three months ended September 30, 2024 includes approximately $6.4 million of termination income.
Residential Net Operating Income
Net operating income for our residential same properties increased by approximately $78,000 for the three months ended September 30, 2024 compared to 2023.
The following reflects our occupancy and rate information for our residential same properties for the three months ended September 30, 2024 and 2023.
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Average Monthly Rental Rate (1) Average Rental Rate Per Occupied Square Foot Average Physical Occupancy (2) Average Economic Occupancy (3)
Name 2024 2023 Change (%) 2024 2023 Change (%) 2024 2023 Change (%) 2024 2023 Change (%)
Proto Kendall Square $ 3,235 $ 3,113 3.9 % $ 5.94 $ 5.71 4.0 % 94.5 % 95.2 % (0.7) % 94.7 % 94.7 % - %
The Lofts at Atlantic Wharf $ 4,414 $ 4,462 (1.1) % $ 4.95 $ 4.95 - % 95.0 % 96.9 % (2.0) % 93.4 % 96.6 % (3.3) %
Signature at Reston $ 2,869 $ 2,726 5.2 % $ 2.95 $ 2.82 4.6 % 96.0 % 95.5 % 0.5 % 95.9 % 94.9 % 1.1 %
The Skylyne $ 3,349 $ 3,509 (4.6) % $ 4.24 $ 4.45 (4.7) % 89.9 % 93.1 % (3.4) % 87.5 % 91.3 % (4.2) %
_______________
(1)Average Monthly Rental Rate is calculated as the average of the quotients obtained by dividing (A) rental revenue as determined in accordance with GAAP, by (B) the number of occupied units for each month within the applicable fiscal period.
(2)Average Physical Occupancy is defined as (1) the average number of occupied units divided by (2) the total number of units, expressed as a percentage.
(3)Average Economic Occupancy is defined as (1) total possible revenue less vacancy loss divided by (2) total possible revenue, expressed as a percentage. Total possible revenue is determined by valuing average occupied units at contract rates and average vacant units at Market Rents. Vacancy loss is determined by valuing vacant units at current Market Rents. By measuring vacant units at their Market Rents, Average Economic Occupancy takes into account the fact that units of different sizes and locations within a residential property have different economic impacts on a residential property's total possible gross revenue. "Market Rents" used by us in calculating Average Economic Occupancy are based on the current market rates set by the managers of our residential properties based on their experience in renting their residential property's units and publicly available market data. 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
The Boston Marriott Cambridge hotel had net operating income of approximately $5.2 million for the three months ended September 30, 2024, representing an increase of approximately $0.8 million compared to the three months ended September 30, 2023.
The following reflects our occupancy and rate information for the Boston Marriott Cambridge hotel for the three months ended September 30, 2024 and 2023.
2024 2023
Change (%)
Occupancy 82.7 % 81.6 % 1.3 %
Average daily rate $ 356.44 $ 331.37 7.6 %
REVPAR $ 294.86 $ 270.50 9.0 %
Other Operating Revenue and Expense Items
Development and Management Services Revenue
Development and management services revenue decreased by approximately $2.5 million for the three months ended September 30, 2024 compared to 2023. Development services revenue and management services revenue decreased by approximately $1.5 million and $1.0 million, respectively. The decrease in development services revenue was primarily related to a decrease in development income earned from unconsolidated joint ventures in the San Francisco and Washington D.C. regions. The decrease in management services revenue was primarily related to the elimination of property and asset management fees earned from an unconsolidated joint venture in the Los Angeles region which we acquired the joint venture partner's interest in December 2023.
General and Administrative Expense
General and administrative expense increased by approximately $1.9 million for the three months ended September 30, 2024 compared to 2023 primarily due to an increase in compensation expense of approximately $2.6 million, partially offset by an approximately $0.7 million decrease in other general and administrative expenses. The increase in compensation expense related to an approximately $3.1 million increase in the value of our deferred compensation plan partially offset by an approximately $0.5 million decrease in other compensation expenses.
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Wages directly related to the development of rental properties are capitalized and included in real estate assets on our Consolidated Balance Sheets and amortized over the useful lives of the applicable asset or lease term. Capitalized wages for the three months ended September 30, 2024 and 2023 were approximately $4.2 million and $4.4 million, respectively. These costs are not included in the general and administrative expenses discussed above.
Transaction Costs
Transaction costs decreased by approximately $0.6 million for the three months ended September 30, 2024 compared to 2023. In general, transaction costs relating to the formation of new 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 immediately follows the cover page of this Quarterly Report on Form 10-Q.
BXP
Depreciation and amortization expense increased by approximately $15.5 million for the three months ended September 30, 2024 compared to 2023, as detailed below.
Portfolio
Depreciation and Amortization for the three months ended September 30,
2024 2023 Change
(in thousands)
Same Property Portfolio $ 204,822 $ 205,676 $ (854)
Properties Acquired Portfolio 13,983 - 13,983
Properties Placed In-Service Portfolio 2,460 450 2,010
Properties in or Held for Development or Redevelopment Portfolio 1,625 1,309 316
$ 222,890 $ 207,435 $ 15,455
BPLP
Depreciation and amortization expense increased by approximately $15.5 million for the three months ended September 30, 2024 compared to 2023, as detailed below.
Portfolio
Depreciation and Amortization for the three months ended September 30,
2024 2023 Change
(in thousands)
Same Property Portfolio $ 203,118 $ 203,920 $ (802)
Properties Acquired Portfolio 13,983 - 13,983
Properties Placed In-Service Portfolio 2,460 450 2,010
Properties in or Held for Development or Redevelopment Portfolio 1,625 1,309 316
$ 221,186 $ 205,679 $ 15,507
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Direct Reimbursements of Payroll and Related Costs From Management Services Contracts and Payroll and Related Costs From Management Service Contracts
We have determined that amounts reimbursed for payroll and related costs received from third parties in connection with management services contracts should be reflected on a gross basis instead of on a net basis as we have determined that we are the principal under these arrangements. We anticipate that these two financial statement line items will generally offset each other.
Other Income and Expense Items
Loss from Unconsolidated Joint Ventures
For the three months ended September 30, 2024 compared to 2023, loss from unconsolidated joint ventures decreased by approximately $240.5 million primarily due to the recognition of non-cash impairment charges related to our investments in 360 Park Avenue South, 200 Fifth Avenue, Platform 16, and Safeco Plaza aggregating approximately $272.6 million during the three months ended September 30, 2023, partially offset by an approximately $35.8 million gain on investment related to our Metropolitan Square joint venture interest. Neither of these items recurred during the three months ended September 30, 2024.
Gains on Sales of Real Estate
The $0.5 million gains on sale of real estate for the three months ended September 30, 2024 and 2023 were related to the sale of real estate occurring in prior periods.
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 immediately follows the cover page of this Quarterly Report on Form 10-Q.
Interest and Other Income (Loss)
Interest and other income (loss) decreased by approximately $6.3 million for the three months ended September 30, 2024 compared to 2023, due primarily to a decrease in our outstanding cash balances.
Gains (Losses) from Investments in Securities
Gain (losses) from investments in securities for the three months ended September 30, 2024 and 2023 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 (losses) from investments in securities. During the three months ended September 30, 2024 and 2023, we recognized gains (losses) of approximately $2.2 million and $(0.9) million, respectively, on these investments. By comparison, our general and administrative expense increased (decreased) by approximately $2.2 million and $(0.9) million during the three months ended September 30, 2024 and 2023, respectively, as a result of increases (decreases) 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.
Unrealized Gain (Loss) on Non-Real Estate Investment
We invest in non-real estate investments, which are primarily environmentally-focused investment funds. As a result, during the three months ended September 30, 2024 and 2023, we recognized an unrealized gain (loss) of approximately $0.1 million and $(0.1) million, respectively, due to the observable changes in the fair value of the investments.
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Interest Expense
Interest expense increased by approximately $15.4 million for the three months ended September 30, 2024 compared to 2023, as detailed below.
Component
Change in interest expense for the three months ended September 30, 2024 compared to September 30, 2023
(in thousands)
Increases to interest expense due to:
New mortgage loan financings (1) $ 18,401
Unsecured commercial paper (2) 7,213
Issuance of $850 million in aggregate principal of 5.750% senior notes due 2035 on August 26, 2024 4,754
Decrease in interest due to finance leases 1,805
Other interest expense (excluding senior notes) 31
Total increases to interest expense 32,204
Decreases to interest expense due to:
Repayment of $700 million in aggregate principal of 3.800% senior notes due 2024 on February 1, 2024 (6,710)
Decrease in interest associated with unsecured term loans and the unsecured credit facility, net (5,227)
Repayment of $500 million in aggregate principal of 3.125% senior notes due 2023 on September 1, 2023 (2,689)
Increase in capitalized interest related to development projects (1,895)
Amortization expense of financing fees (301)
Total decreases to interest expense (16,822)
Total change in interest expense $ 15,382
______________
(1)Consistsof the mortgage loan and, if applicable, fair value debt and swap adjustments collateralized by (1) 325 Main Street, 355 Main Street, 90 Broadway and Cambridge East Garage (also known as Kendall Center Green Garage) properties located in Cambridge, Massachusetts, (2) Santa Monica Business Park located in Santa Monica, California and (3) 901 New York Avenue in Washington, DC(See Note 6to the Consolidated Financial Statements).
(2)On April 17, 2024, BPLP established an unsecured commercial paper program (See Note 6 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 three months ended September 30, 2024 and 2023 was approximately $11.6 million and $9.7 million, respectively. These costs are not included in the interest expense referenced above.
At September 30, 2024, our variable rate debt consisted of (1) BPLP's $2.0 billion 2021 Credit Facility, (2) BPLP's $700.0 million 2023 Unsecured Term Loan and (3) BPLP's $500.0 million unsecured commercial paper notes. As of September 30, 2024, the 2021 Credit Facility did not have a balance outstanding. In addition, we have the $100.0 million 2024 Unsecured Term Loan and $800.0 million of mortgage notes collateralized by Santa Monica Business Park and our 325 Main Street, 355 Main Street, 90 Broadway and Cambridge East Garage (also known as Kendall Center Green Garage) properties that bore interest at variable rates, which have all been hedged with interest rates swaps to fix SOFR for all or a portion of, the applicable debt term. For a summary of our consolidated debt as of September 30, 2024 refer to the heading "Liquidity and Capital Resources-Debt Financing"within "Item 2-Management's Discussion and Analysis of Financial Condition and Results of Operations."
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Noncontrolling Interests in Property Partnerships
Noncontrolling interests in property partnerships decreased by approximately $5.7 million for the three months ended September 30, 2024 compared to 2023, as detailed below.
Property
Noncontrolling Interests in Property Partnerships for the three months ended September 30,
2024 2023 Change
(in thousands)
767 Fifth Avenue (the General Motors Building) $ 2,954 $ 3,589 $ (635)
Times Square Tower (1) 2,326 5,639 (3,313)
601 Lexington Avenue (2) 2,509 3,935 (1,426)
100 Federal Street 3,038 3,675 (637)
Atlantic Wharf Office Building 3,706 4,071 (365)
343 Madison Avenue (3) (33) - (33)
300 Binney Street (4) 277 - 277
290 Binney Street (4) 460 - 460
$ 15,237 $ 20,909 $ (5,672)
_______________
(1)The decrease was primarily attributable to a decrease in lease revenue from our clients.
(2)The decrease was primarily attributable to a decrease in lease revenue from our clients and depreciation expense related to new and expiring clients.
(3)Property is held for future development.
(4)Property is currently under redevelopment or in development.
Noncontrolling Interest-Common Units of the Operating Partnership
For BXP, noncontrolling interest-common units of the Operating Partnership increased by approximately $22.2 million for the three months ended September 30, 2024 compared to 2023 due primarily to an increase in allocable income, which was primarily the result of recognizing a non-cash impairment charge related our investment in unconsolidated joint ventures during the three months ended September 30, 2023 that did not recur during the three months ended September 30, 2024. Due to our ownership structure, there is no corresponding line item on BPLP's financial statements.
Liquidity and Capital Resources
General
Our principal liquidity needs for the next twelve months and beyond are to:
•fund normal recurring expenses;
•meet debt service and principal repayment obligations and balloon payments on maturing debt, including:
◦$850.0 million of 3.200% unsecured senior notes due January 15, 2025,
◦$700.0 million of principal outstanding on the 2023 Unsecured Term Loan due May 16, 2025,
◦$100.0 million of principal outstanding on the 2024 Unsecured Term Loan due September 26, 2025, for which we have three, one-year extension options, subject to customary conditions,
◦$203.6 million of mortgage debt secured by our 901 New York Avenue property due January 5, 2025, for which we have the right to extend the maturity date for a period of five years, subject to certain customary conditions, and
◦amounts that become due under BPLP's unsecured commercial paper program;
•fund capital calls from our unconsolidated joint venture investments to fund capital improvements, leasing costs and debt principal;
•fund development and redevelopment costs;
•fund capital expenditures, including major renovations, tenant improvements and leasing costs;
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•fund possible acquisitions of properties, either directly or indirectly through the acquisition of equity interests; and
•make the minimum distribution required to enable BXP to maintain its REIT qualification under the Internal Revenue Code of 1986, as amended.
We expect to satisfy these needs using one or more of the following:
•cash flow from operations;
•distribution of cash flows from joint ventures;
•cash and cash equivalent balances;
•borrowings under BPLP's 2021 Credit Facility, unsecured term loans, short-term bridge facilities and construction loans;
•long-term secured and unsecured indebtedness (including unsecured exchangeable indebtedness);
•sales of real estate and interests in joint ventures owning real estate;
•private equity sources, including 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 projects primarily with our available cash balances, funding from institutional private equity partners, construction loans, unsecured term loans, and proceeds from possible asset sales, BPLP's 2021 Credit Facility and BPLP's commercial paper program. We use BPLP's 2021 Credit Facility primarily as a bridge facility to fund acquisition opportunities, refinance outstanding indebtedness, fund short-term development costs and for working capital. We also use BPLP's 2021 Credit Facility to backstop BPLP's commercial paper program. Although we may seek to fund our development projects with construction loans, which may require guarantees by BPLP, the source of financing for each particular project ultimately depends on several factors, including, among others, the project's size and duration, whether the project is owned by a joint venture, the extent of pre-leasing, 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/redevelopment as of September 30, 2024 (dollars in thousands):
Financings
Construction/Redevelopment Properties Estimated Stabilization Date Location # of Buildings Estimated Square Feet Investment to Date (1)(2)(3) Estimated Total Investment (1)(2) Total Available (1)
Outstanding at September 30, 2024
(1)
Estimated Future Equity Requirement (1)(2)(4) Percentage Leased (5)
Office
360 Park Avenue South (71% ownership) (Redevelopment) Q4 2026 New York, NY 1 450,000 $ 352,530 $ 418,300 $ 156,470 $ 156,470 $ 65,770 23 % (6)
Reston Next Office Phase II Q2 2026 Reston, VA 1 90,000 44,207 61,000 - - 16,793 4 % (7)
Total Office Properties under Construction/Redevelopment 2 540,000 396,737 479,300 156,470 156,470 82,563 20 %
Laboratory/Life Sciences
103 CityPoint Q4 2026 Waltham, MA 1 113,000 91,682 115,100 - - 23,418 - % (8)
300 Binney Street (55% ownership) (Redevelopment) Q4 2024 Cambridge, MA 1 236,000 56,357 112,900 - - 56,543 100 % (9)
651 Gateway (50% ownership) (Redevelopment) Q3 2026 South San Francisco, CA 1 327,000 130,506 167,100 - - 36,594 21 % (10)
290 Binney Street (55% ownership) Q2 2026 Cambridge, MA 1 573,000 209,483 508,000 - - 298,517 100 % (11)
Total Laboratory/Life Sciences Properties under Construction/Redevelopment 4 1,249,000 488,028 903,100 - - 415,072 70 %
Residential
Skymark - Reston Next Residential (508 units) (20% ownership) Q2 2026 Reston, VA 1 417,000 42,192 47,700 28,000 24,934 2,442 36 % (12)
121 Broadway Street (439 units) Q2 2029 Cambridge, MA 1 492,000 78,889 597,800 - - 518,911 - %
Total Residential Properties under Construction 2 909,000 121,081 645,500 28,000 24,934 521,353 36 %
Retail
Reston Next Retail Q4 2025 Reston, VA 1 33,000 23,259 26,600 - - 3,341 13 %
Total Retail Properties under Construction 1 33,000 23,259 26,600 - - 3,341 13 %
Total Properties under Construction/Redevelopment 9 2,731,000 $ 1,029,105 $ 2,054,500 $ 184,470 $ 181,404 $ 1,022,329 54 % (13)
___________
(1)Represents our share.
(2)Each of Investment to Date, Estimated Total Investment and Estimated Future Equity Requirement represent our share of acquisition expenses, as applicable, and reflect our share of the estimated net revenue/expenses that we expect to incur prior to stabilization of the project, including any amounts actually received or paid through September 30, 2024.
(3)Includes approximately $60.4 million of unpaid but accrued construction costs and leasing commissions.
(4)Excludes approximately $60.4 million of unpaid but accrued construction costs and leasing commissions.
(5)Represents percentage leased as of October 31, 2024, including leases with future commencement dates.
(6)As of September 30, 2024, this property was 8% placed in-service.
(7)As of September 30, 2024, this property was 2% placed in-service.
(8)As of September 30, 2024, this property was 4% placed in-service.
(9)The institutional investor funded approximately $212.9 million at closing for its investment in 300 Binney Street. We withdrew approximately $212.9 million at closing and will fund all future costs of the project. See Note 14 to the Consolidated Financial Statements.
(10)As of September 30, 2024, this property was 21% placed in-service.
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(11)On March 21, 2024, we completed the sale of a 45% interest in 290 Binney Street (See Note 9 to the Consolidated Financial Statements). The project budget reflects our 55% share of joint venture costs related to 290 Binney Street. We have the sole obligation to construct an underground electrical vault for an estimated gross cost of $183.9 million. We have entered into a contract to sell the electrical vault to a third party for a fixed price of $84.1 million upon completion. The net investment of $99.8 million will be included in our outside basis in 290 Binney Street. We have invested $58.9 million for the vault as of September 30, 2024.
(12)As of September 30, 2024, this property was 42% placed in-service.
(13)Percentage leased excludes the residential properties.
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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 client turnover and controlling operating expenses. Our sources of revenue also include third-party fees generated by our property management, leasing, development and construction businesses, interest earned on cash deposits and, from time to time, the sale of assets. We believe these sources of capital will continue to provide the funds necessary for our short-term liquidity needs. Material adverse changes in one or more sources of capital may adversely affect our net cash flows.
As of September 30, 2024, we had nine properties under development or redevelopment. BXP's Share of the estimated total investment for these projects is approximately $2.2 billion, of which approximately $1.1 billion remains to be funded through 2029.
Since the second quarter of 2024, we further strengthened our balance sheet by sourcing additional liquidity. Notable transactions include:
•On August 26, 2024, BPLP completed a public offering of $850.0 million in aggregate principal amount of its 5.750% unsecured senior notes due 2035. The notes were priced at 99.961% of the principal amount to yield an effective rate (including financing fees) of approximately 5.842% per annum to maturity. The notes will mature on January 15, 2035, unless earlier redeemed. The aggregate net proceeds from the offering were approximately $841.9 million after deducting underwriting discounts and transaction expenses. We intend to use the net proceeds to repay the $850.0 million of 3.200% unsecured senior notes due January 15, 2025.
•On September 27, 2024, BPLP entered into the 2024 Unsecured Term Loan that provides for a $100.0 million unsecured term loan facility with the Lender under the SMBP Loan. The 2024 Unsecured Term Loan bears interest at a variable rate, matures on September 26, 2025 and has three, one-year extension options, subject to customary conditions. The interest rate is subject to an existing interest rate swap to fix Daily Simple SOFR at a fixed interest rate of approximately 2.688% per annum for a period that ends on April 1, 2025 (See Notes 6 and 7 to the Consolidated Financial Statements). Upon entry into the credit agreement, BPLP exercised its option to draw $100.0 million under the 2024 Unsecured Term Loan. The proceeds were used to repay the portion of the SMBP Loan held by the Lender. After the repayment, the SMBP Loan had a remaining principal balance of $200.0 million.
•On October 8, 2024, we modified the SMBP Loan. The SMBP Loan had an outstanding principal balance of $200.0 million, bore interest at a variable rate equal to Daily Simple SOFR + 1.38% per annum and was scheduled to mature on July 19, 2025. The modified loan is scheduled to mature on October 8, 2028 and continues to bear interest at a variable rate equal to Daily Simple SOFR + 1.38% per annum until July 19, 2025. Beginning July 19, 2025, the mortgage loan will bear interest at Daily Simple SOFR + 1.60% per annum through the maturity date. The entire principal is subject to interest rate swap contracts to fix Daily Simple SOFR at a weighted-average fixed interest rate of approximately 2.675% per annum through April 1, 2025 (See Note 7 to the Consolidated Financial Statements).
As of September 30, 2024, our share of unconsolidated joint venture debt maturing through November 2025 was approximately $588.7 million. The foregoing debt matures at different times through November 2025 and, to the extent not refinanced, we expect to fund the repayment of this debt using available cash balances, proceeds from asset sales, draws on BPLP's 2021 Credit Facility, proceeds from BPLP's unsecured commercial paper program, secured debt or unsecured debt, or both. We expect our interest expense will be flat or slightly less in 2025 compared to 2024 primarily due to expiring below market debt related to acquisitions in late 2023 and early 2024, lower average outstanding debt balances and the impact of anticipated lower short-term rates.
As of October 31, 2024, we had available cash of approximately $1.2 billion (of which approximately $121.2 million was attributable to our consolidated joint venture partners). Our liquidity and capital resources depend on a wide range of factors, and we believe that our access to capital and our strong liquidity, including the approximately $2.0 billion available under BPLP's 2021 Credit Facility, of which $500.0 million is being used to backstop the unsecured commercial paper program, and our available cash, as of October 31, 2024, are sufficient to fund our remaining capital needs on existing development and redevelopment projects, fund acquisitions, repay our maturing indebtedness when due (if not refinanced or extended), satisfy our REIT distribution requirements and still allow us to act opportunistically on attractive investment opportunities. We are currently in active negotiations for the disposition of three land positions which, if successful, would generate approximately $70.0 million of proceeds in
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2025. However, there can be no assurance that we will complete any of these transactions on the terms currently contemplated or at all.
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 then-current interest rates, the overall conditions in the public and private debt and equity markets, and our existing and expected leverage at the time, we may decide to access one or more of these capital sources. Doing so may result in greater cash and cash equivalents pending our use of the proceeds, and depending on the sources of liquidity, higher interest expense or share count.
We have not sold any shares under BXP's $600.0 million "at the market" equity offering program.
REIT Tax Distribution Considerations
Dividend
As a REIT, BXP 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. Common and LTIP unitholders (other than unearned MYLTIP units) of limited partnership interest in BPLP receive the same distribution per unit that is paid per share of BXP common stock.
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, and there can be no assurance that the future dividends declared by BXP's Board of Directors will not differ materially from the current quarterly dividend amount.
Sales
To the extent that we sell assets at a gain and cannot efficiently use the proceeds in a tax deferred manner for either our development activities or attractive acquisitions, BXP would, at the appropriate time, decide whether it is better to declare a special dividend, adopt a stock repurchase program, reduce indebtedness or retain the cash for future investment opportunities. Such a decision will depend on many factors including, among others, the timing, availability and terms of development and acquisition opportunities, our then-current and anticipated leverage, the cost and availability of capital from other sources, the price of BXP's common stock and REIT distribution requirements. At a minimum, we expect that BXP would distribute at least that amount of proceeds necessary for BXP to avoid paying corporate level tax on the applicable gains realized from any asset sales.
From time to time in 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 $1.5 billion and $0.9 billion at September 30, 2024 and 2023, respectively, representing an increase of approximately $0.5 billion. The following table sets forth changes in cash flows:
Nine months ended September 30,
2024 2023 Change
(in thousands)
Net cash provided by operating activities $ 850,755 $ 914,372 $ (63,617)
Net cash used in investing activities (850,787) (875,578) 24,791
Net cash (used in) provided by financing activities (141,051) 154,782 (295,833)
Our principal source of cash flow is related to the operation of our properties. The weighted-average term of our in-place leases, including leases signed by our unconsolidated joint ventures, excluding residential units, was approximately 7.6 years as of September 30, 2024, with occupancy rates historically in the range of 87% to 92%.
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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.
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 nine monthsended September 30, 2024 and September 30, 2023 is detailed below:
Nine months ended September 30,
2024 2023
(in thousands)
Construction in progress (1) $ (469,948) $ (361,625)
Building and other capital improvements (118,411) (117,393)
Tenant improvements (178,835) (244,841)
Proceeds from sales of real estate 517 517
Acquisition of real estate (net of cash received upon consolidation) (2) 6,086 -
Capital contributions to unconsolidated joint ventures (3) (87,498) (148,875)
Capital distributions from unconsolidated joint ventures (4) - 7,350
Investment in non-real estate investments (1,500) (1,990)
Issuance of note receivables (including related party) (5) (2,223) (10,500)
Investments in securities, net 1,025 1,779
Net cash used in investing activities $ (850,787) $ (875,578)
Cash used in investing activities changed primarily due to the following:
(1)Construction in progress for the nine months ended September 30, 2024 included ongoing expenditures associated with 760 Boylston Street and 180 CityPoint, which were fully placed in-service during the nine months ended September 30, 2024, and 103 CityPoint that was partially placed in-service during 2023 (See Note 14 to the Consolidated Financial Statements). In addition, we incurred costs associated with our continued development/redevelopment of Reston Next Office Phase II that was partially placed in-service, 290 Binney Street, 300 Binney Street and 121 Broadway.
Construction in progress for the nine months ended September 30, 2023 included ongoing expenditures associated with 2100 Pennsylvania Avenue, 140 Kendrick Street Building A and the View Boston observatory at The Prudential Center, which were fully placed in-service during the nine months ended September 30, 2023 and 180 CityPoint that was partially placed in-service during the nine months ended September 30, 2023. In addition, we incurred costs associated with our continued development/redevelopment of 103 CityPoint, Reston Next Office Phase II, 760 Boylston Street, 105 Carnegie Center, 290 Binney Street and 300 Binney Street.
(2)On January 8, 2024, we completed the acquisition of our joint venture partner's 50% economic ownership interest in the joint venture that owns 901 New York Avenue, located in Washington, DC, for a gross purchase price of $10.0 million and we acquired net working capital, including cash and cash equivalents of approximately $16.1 million.
(3)Capital contributions to unconsolidated joint ventures for the nine months ended September 30, 2024 consisted primarily of cash contributions of approximately $27.5 million, $25.2 million, $11.8 million and $11.5 million to our 360 Park Avenue South, Gateway Commons, Platform 16 and Dock 72 joint ventures, respectively.
Capital contributions to unconsolidated joint ventures for the nine months ended September 30, 2023 consisted primarily of cash contributions of approximately $46.8 million, $32.8 million, $17.5 million, $14.4 million and $9.5 million to our Gateway Commons, Platform 16, Worldgate Drive, Dock 72 and 751 Gateway joint ventures, respectively. On January 31, 2023, we entered into a new joint venture for 13100 and 13150 Worldgate Drive located in Herndon, Virginia.
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(4)Capital distributions from unconsolidated joint ventures for the nine months ended September 30, 2023 consisted primarily of a cash distribution totaling approximately $7.4 million from our 360 Park Avenue South joint venture.
(5)On June 5, 2023, a joint venture in which we own a 30% interest repaid the existing construction loan collateralized by its 500 North Capitol Street, NW property and obtained new mortgage loans with related parties. At the time of the payoff, the outstanding balance of the loan totaled approximately $105.0 million and was scheduled to mature on June 6, 2023. The new mortgage loans have an aggregate principal balance of $105.0 million, bear interest at a weighted average fixed rate of 6.83% per annum and mature on June 5, 2026. Our portion of the mortgage loans, $10.5 million, has been reflected as a Related Party Note Receivable on our Consolidated Balance Sheets. 500 North Capitol Street, NW is an approximately 231,000 square foot premier workplace in Washington, DC.
Cash used in financing activities for the nine months ended September 30, 2024 totaled approximately $141.1 million. This amount consisted primarily of the repayment of BPLP's $700 million in aggregate principal amount of its 3.800% unsecured senior notes due February 1, 2024 and payment of our regular dividends and distributions to our shareholders and unitholders and distributions to noncontrolling interests in property partnerships, partially offset by the issuance of BPLP's $850 million in aggregate principal amount of its 5.750% unsecured senior notes due 2035 and contributions from noncontrolling interests in property partnerships including approximately $97.2 million from the sale of a 45% interest in 290 Binney Street in Cambridge, Massachusetts. 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):
September 30, 2024
Shares / Units Outstanding Common Stock Equivalent Equivalent Value (1)
Common Stock 157,980 157,980 $ 12,711,071
Common Operating Partnership Units 18,263 18,263 1,469,441 (2)
Total Equity 176,243 $ 14,180,512
Consolidated Debt $ 16,215,246
Add:
BXP's share of unconsolidated joint venture debt (3) 1,382,412
Subtract:
Partners' share of Consolidated Debt (4) 1,361,869
BXP's Share of Debt $ 16,235,789
Consolidated Market Capitalization $ 30,395,758
BXP's Share of Market Capitalization $ 30,416,301
Consolidated Debt/Consolidated Market Capitalization 53.35 %
BXP's Share of Debt/BXP's Share of Market Capitalization 53.38 %
_______________
(1)Values are based on the closing price per share of BXP's common stock on the New York Stock Exchange on September 30, 2024 of $80.46.
(2)Includes long-term incentive plan units (including 2012 OPP Units and 2013 - 2021 MYLTIP Units) but excludes the 2022 - 2024 MYLTIP Units because the three-year performance periods had not ended as of September 30, 2024.
(3)See page 95 for additional information.
(4)See page 94 for additional information.
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Consolidated Debt to Consolidated Market Capitalization Ratio is a measure of leverage commonly used by analysts in the REIT sector. We present this measure as a percentage and it is calculated by dividing (A) our consolidated debt by (B) our consolidated market capitalization, which is the market value of our outstanding equity securities plus our consolidated debt. Consolidated market capitalization is the sum of:
(1) our consolidated debt; plus
(2) the product of (x) the closing price per share of BXP common stock on September 30, 2024, 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, and 2013 - 2021 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-year performance periods have not yet ended, 2022 - 2024 MYLTIP Units are not included in this calculation as of September 30, 2024.
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.
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For a discussion of our unconsolidated joint venture indebtedness, see "Liquidity and Capital Resources-Investment in Unconsolidated Joint Ventures - Secured Debt" within "Item 2-Management's Discussion and Analysis of Financial Condition and Results of Operations" and for a discussion of our consolidated joint venture indebtedness see "Liquidity and Capital Resources-Mortgage Notes Payable" within "Item 2-Management's Discussion and Analysis of Financial Condition and Results of Operations."
Debt Financing
As of September 30, 2024, we had approximately $16.2 billion of outstanding consolidated indebtedness, representing approximately 53.35% of our Consolidated Market Capitalization as calculated above consisting of approximately (1) $10.6 billion (net of discount and deferred financing fees) in publicly traded unsecured senior notes having a GAAP weighted-average interest rate of 4.07% per annum and maturities in 2025 through 2035, (2) $4.3 billion (net of deferred financing fees and fair value interest adjustments) of property-specific mortgage debt having a GAAP weighted-average interest rate of 4.16% per annum and a weighted-average term of 3.7 years, (3) $0.8 billion (net of deferred financing fees and fair value interest adjustments) of unsecured term loans having a GAAP weighted-average interest rate of 6.45% per annum with maturities in 2025, and (4) $0.5 billion of unsecured commercial paper borrowings having a weighted-average interest rate of 5.22% per annum and a weighted-average maturity of 34 days, from the issuance date.
The table below summarizes the aggregate carrying value of our outstanding indebtedness, as well as Consolidated Debt Financing Statistics at September 30, 2024 and September 30, 2023.
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September 30,
2024 2023
(dollars in thousands)
Debt Summary:
Balance
Mortgage notes payable, net $ 4,275,155 $ 3,275,974
Unsecured senior notes, net 10,642,033 10,488,568
Unsecured line of credit - -
Unsecured term loans, net 798,058 1,197,173
Unsecured commercial paper 500,000 -
Consolidated Debt 16,215,246 14,961,715
Add:
BXP's share of unconsolidated joint venture debt, net (1) 1,382,412 1,518,195
Subtract:
Partners' share of consolidated mortgage notes payable, net (2) 1,361,869 1,359,877
BXP's Share of Debt $ 16,235,789 $ 15,120,033
September 30,
2024 2023
Consolidated Debt Financing Statistics:
Percent of total debt:
Fixed rate (3) 92.60 % 100.00 %
Variable rate 7.40 % - %
Total 100.00 % 100.00 %
GAAP Weighted-average interest rate at end of period:
Fixed rate (3) 4.11 % 3.97 %
Variable rate 6.04 % - %
Total 4.25 % 3.97 %
Coupon/Stated Weighted-average interest rate at end of period:
Fixed rate (3) 3.89 % 3.84 %
Variable rate 5.91 % - %
Total 4.04 % 3.84 %
Weighted-average maturity at end of period (in years):
Fixed rate (3) 4.8 4.9
Variable rate 0.4 -
Total 4.4 4.9
_______________
(1)See page 95 for additional information.
(2)See page 94 for additional information.
(3)At September 30, 2024, BPLP's $100.0 million 2024 Unsecured Term Loan and two of our mortgage loans aggregating approximately $800.0 million bore interest at variable rates. We entered into interest rate swap contracts that effectively fixed the variability of these loans for all or a portion of the applicable debt term and as such, they are reflected in our Fixed rate statistics. At September 30, 2023, BPLP's 2023 Unsecured Term Loan bore interest at a variable rate which was subject to interest rate swaps that effectively fixed the interest rate for a portion of the applicable debt term, and as such, the 2023 Unsecured Term Loan is reflected in our Fixed rate statistics.
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Unsecured Credit Facility
The 2021 Credit Facility provides for borrowings of up to $2.0 billion, as described below, through BPLP's revolving facility, subject to customary conditions. The 2021 Credit Facility matures on June 15, 2026 and includes a sustainability-linked pricing component. Under the 2021 Credit Facility, BPLP had the option to increase the original total commitment of $1.5 billion by up to an additional $500.0 million by 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 (the "Accordion Option"). On September 28, 2023, BPLP exercised a portion of the Accordion Option, which increased the then maximum borrowing amount under the 2021 Credit Facility from $1.5 billion to $1.815 billion. On April 29, 2024, BPLP exercised the remainder of the Accordion Option and further increased the maximum borrowing amount under the 2021 Credit Facility to $2.0 billion. All other terms of the 2021 Credit Facility remain unchanged.
At BPLP's option, loans under the 2021 Credit Facility will bear interest at a rate per annum equal to (1) (a) in the case of loans denominated in Dollars, Term SOFR and SOFR, (b) in the case of loans denominated in Euro, EURIBOR, (c) in the case of loans denominated in Canadian Dollars, Term CORRA, and (d) in the case of loans denominated in Sterling, SONIA, in each case, plus a margin ranging from 70.0 to 140.0 basis points based on BPLP's credit rating or (2) an alternate base rate equal to the greatest of (a) the Federal Funds rate plus 0.5%, (b) the administrative agent's prime rate, (c) Term SOFR plus 1.00%, and (d) 1.00%, in each case, plus a margin ranging from 0 to 40 basis points based on BPLP's credit rating. In addition, there is a SOFR credit spread adjustment of 0.10%.
Based on BPLP's September 30, 2024 credit rating, (1) the applicable Daily SOFR, Term SOFR, alternative currency daily rate, and alternative currency term rate margins are 0.850%, (2) the alternate base rate margin is zero basis points and (3) the facility fee is 0.20% per annum.
The 2021 Credit Facility is used as a backstop for BPLP's $500.0 million unsecured commercial paper program (See "Unsecured Commercial Paper" below). As such, BPLP intends to maintain, at a minimum, availability under the 2021 Credit Facility in an amount equal to the amount of unsecured commercial paper notes outstanding.
At September 30, 2024 and October 31, 2024, BPLP had no borrowings under its 2021 Credit Facility, outstanding letters of credit totaling approximately $6.1 million, and $500.0 million is being used as a backstop for the commercial paper program. Therefore, at September 30, 2024 and October 31, 2024, BPLP has the ability to borrow approximately $1.5 billion.
Unsecured Term Loans
The 2023 Unsecured Term Loan provided for a single borrowing of up to $1.2 billion. Upon entry into the credit agreement in January 2023, BPLP exercised its option to draw $1.2 billion under the 2023 Unsecured Term Loan. Under the credit agreement governing the 2023 Unsecured Term Loan, BPLP may, at any time prior to the maturity date, increase total commitments by up to an additional $300.0 million in aggregate principal amount by increasing the existing 2023 Unsecured Term Loan or incurring one or more additional term loans, in each case, subject to syndication of the increase and other conditions. On April 29, 2024, BPLP repaid $500.0 million of the outstanding balance under the 2023 Unsecured Term Loan from the proceeds of its unsecured commercial paper program (See "Unsecured Commercial Paper" below). The 2023 Unsecured Term Loan had an initial maturity date of May 16, 2024, with one 12-month extension option, subject to customary conditions. On May 16, 2024, BPLP exercised its option to extend the maturity date of the 2023 Unsecured Term Loan to May 16, 2025. All other terms of the 2023 Unsecured Term Loan remain unchanged.
At BPLP's option, loans under the 2023 Unsecured Term Loan will bear interest at a rate per annum equal to (1) a base rate equal to the greatest of (a) the Federal Funds rate plus 0.5%, (b) the administrative agent's prime rate, (c) Term SOFR for a one-month period plus 1.00%, and (d) 1.00%, in each case, plus a margin ranging from 0 to 60 basis points based on BPLP's credit rating; or (2) a rate equal to adjusted Term SOFR with a one-month period plus a margin ranging from 75 to 160 basis points based on BPLP's credit rating.
On September 27, 2024, BPLP entered into the 2024 Unsecured Term Loan with the Lender under the SMBP Loan. Upon entry into the credit agreement, BPLP exercised its option to draw $100.0 million under the 2024 Unsecured Term Loan. The proceeds were used to repay the portion of the SMBP Loan held by the Lender. After the repayment, the SMBP Loan had a remaining principal balance of $200.0 million (See Note 14 to the Consolidated Financial Statements). The 2024 Unsecured Term Loan matures on September 26, 2025 with three,
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one-year extension options, subject to customary conditions.
At BPLP's option, loans under the 2024 Unsecured Term Loan will bear interest at a rate per annum equal to (1) a base rate equal to the highest of (a) zero, (b) Prime Rate, (c) the Federal Funds effective rate plus 0.50%, and (d) Term SOFR for a one-month period plus 1.10%, in each case, plus a margin ranging from 0 to 60 basis points based on BPLP's credit rating; or (2) a rate equal to adjusted Term SOFR or Daily Simple SOFR with a one-month period plus a margin ranging from 75 to 160 basis points based on BPLP's credit rating.
Based on BPLP's September 30, 2024 credit rating, (1) the 2023 Unsecured Term Loan bears interest at a rate equal to Term SOFR plus 1.05% per annum and (2) the 2024 Unsecured Term Loan bears interest at a rate equal to Daily Simple SOFR plus1.05% per annum. The 2024 Unsecured Term Loan is subject to an existing interest rate swap to fix Daily Simple SOFR at a fixed rate of approximately 2.688% per annum for a period that ends on April 1, 2025 (See Note 7 to the Consolidated Financial Statements). At September 30, 2024 and October 31, 2024, BPLP had $700.0 million and $100.0 million of principal outstanding under the 2023 Unsecured Term Loan and 2024 Unsecured Term Loan, respectively.
Unsecured Senior Notes
For a description of BPLP's outstanding unsecured senior notes as of September 30, 2024, See Note 6 to the Consolidated Financial Statements.
On February 1, 2024, BPLP repaid $700.0 million in aggregate principal amount of its 3.800% senior notes due February 1, 2024. The repayment was completed with available cash and the $600.0 million proceeds from the mortgage loan entered into on October 26, 2023. The repayment price was approximately $713.3 million, which was equal to the stated principal plus approximately $13.3 million of accrued and unpaid interest to, but not including, the repayment date. Excluding the accrued and unpaid interest, the repayment price was equal to the principal amount being repaid.
On August 26, 2024, BPLP completed a public offering of $850.0 million in aggregate principal amount of its 5.750% unsecured senior notes due 2035. The notes were priced at 99.961% of the principal amount to yield an effective rate (including financing fees) of approximately 5.842% per annum to maturity. The notes will mature on January 15, 2035, unless earlier redeemed. The aggregate net proceeds from the offering were approximately $841.9 million after deducting underwriting discounts and transaction expenses.
Unsecured Commercial Paper
On April 17, 2024, BPLP established an unsecured commercial paper program. Under the terms of the program, BPLP may issue, from time to time, unsecured commercial paper notes up to a maximum aggregate amount outstanding at any one time of $500.0 million with varying maturities of up to one year. Amounts available under the unsecured commercial paper program may be borrowed, repaid, and re-borrowed from time to time. The notes are sold in private placements and rank pari passu with all of BPLP's other unsecured senior indebtedness, including its outstanding senior notes. The unsecured commercial paper program is backstopped by available capacity under the 2021 Credit Facility. At September 30, 2024, BPLP had an aggregate of $500.0 million of unsecured commercial paper notes outstanding that bore interest at a weighted-average rate of approximately 5.22% per annum and had a weighted-average maturity of 34 days, from the issuance date. At October 31, 2024, BPLP had an aggregate of $500.0 million of commercial paper notes outstanding that bore interest at a weighted-average rate of approximately 5.03% per annum and had a weighted-average maturity of 29 days, from the issuance date. Proceeds from the unsecured commercial paper program were used to reduce BPLP's 2023 Unsecured Term Loan to $700.0 million.
Mortgage Notes Payable
On January 8, 2024, we acquired our joint venture partner's 50% economic ownership interest in the joint venture that owns 901 New York Avenue located in Washington, DC (See Note 3 to the Consolidated Financial Statements). The property is subject to existing mortgage indebtedness. At acquisition, the mortgage loan had an outstanding principal balance of approximately $207.1 million, bore interest at 3.61% per annum and was scheduled to mature on January 5, 2025. The mortgage loan was recorded at a fair value of approximately $198.7 million. On January 11, 2024, we modified the mortgage loan to provide for two extension options totaling five years of additional term, each subject to certain conditions. The first loan extension option provides for an additional term of four years at a fixed interest rate of 5.0% per annum.
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The following represents the outstanding mortgage notes payable, net at September 30, 2024:
Properties Stated Interest Rate GAAP Interest Rate (1) Stated Principal Amount Fair Value Adjustment and Deferred Financing Costs, Net Carrying Amount
Carrying Amount (Partners'Share)
Maturity Date
(dollars in thousands)
Wholly-owned
901 New York Avenue 3.61 % 7.69 % $ 203,632 $ (2,330) $ 201,302 N/A (2) January 5, 2025
Santa Monica Business Park 4.06 % 6.53 % 200,000 (1,497) 198,503 N/A (3)(4) July 19, 2025
90 Broadway, 325 Main Street, 355 Main Street, and Cambridge East Garage (also known as Kendall Center Green Garage) 6.04 % 6.27 % 600,000 (5,467) 594,533 N/A (3)(5) October 26, 2028
Subtotal 1,003,632 (9,294) 994,338 N/A
Consolidated Joint Ventures
767 Fifth Avenue (the General Motors Building)
3.43 % 3.64 % 2,300,000 (9,375) 2,290,625 $ 916,283 (3)(6)(7) June 9, 2027
601 Lexington Avenue 2.79 % 2.93 % 1,000,000 (9,808) 990,192 445,586 (3)(8) January 9, 2032
Subtotal 3,300,000 (19,183) 3,280,817 1,361,869
Total $ 4,303,632 $ (28,477) $ 4,275,155 $ 1,361,869
_______________
(1)The GAAP interest rate differs from the stated interest rate due to the inclusion of the amortization of financing charges, the effects of hedging transactions (if any) and adjustments required under Accounting Standards Codification 805 "Business Combinations" to reflect loans and swaps at their fair values (if any).
(2)Carrying amount includes an approximately $2.2 million fair value interest adjustment. The loan includes two extension options, subject to certain conditions. The first loan extension option provides for an additional term of four years at a fixed interest rate of 5.0% per annum.
(3)The mortgage loan requires interest only payments with a balloon payment due at maturity.
(4)The mortgage loan bears interest at a variable rate of Daily Simple SOFR plus 1.38% per annum (See Notes 6 and 14 to the Consolidated Financial Statements). The borrower under the loan entered into interest rate swap contracts to fix Daily Simple SOFR at a weighted-average fixed interest rate of 2.675% for the period commencing on February 1, 2023 and ending on April 1, 2025. Stated interest rate reflects the weighted average fixed interest rate based on the interest rate swap contracts plus 1.38% per annum. Carrying amount includes an approximately $1.5 million fair value interest adjustment and excludes the adjustment required to reflect the interest rate swap at fair value upon acquisition of approximately $1.9 million.
(5)The mortgage loan bears interest at a variable rate of Daily Compounded SOFR plus 2.25% per annum. On December 7, 2023, BPLP entered into three interest rate swap contracts with notional amounts aggregating $600.0 million to fix Daily Compounded SOFR at a weighted-average fixed interest rate of 3.7925% for the period commencing on December 15, 2023 and ending on October 26, 2028. The stated interest rate reflects the weighted average fixed interest rate based on the interest rate swap contracts plus 2.25% per annum.
(6)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.
(7)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 September 30, 2024, the maximum funding obligation under the guarantee was approximately $6.4 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 8 to the Consolidated Financial Statements).
(8)This property is owned by a consolidated entity in which we have a 55% interest.
Derivative Instruments and Hedging Activities
As of September 30, 2024, we had $900.0 million of interest rate swaps outstanding, where hedge accounting was elected, with a fair value of approximately $(10.2) million. For a description of these interest rate swaps, see Note 7 to the Consolidated Financial Statements.
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Investment in Unconsolidated Joint Ventures - Secured Debt
We have investments in unconsolidated joint ventures with our effective ownership interests ranging from 20% to approximately 71%. Fourteen of these ventures have mortgage indebtedness. We exercise significant influence over, but do not control, these entities. As a result, we account for them using the equity method of accounting. See also Note 5 to the Consolidated Financial Statements. At September 30, 2024, 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 September 30, 2024. In addition to other guarantees specifically noted in the table, we have agreed to customary environmental indemnifications and nonrecourse carve-outs (e.g., guarantees against fraud, misrepresentation and bankruptcy) as well as the completion of development projects on certain of the loans.
Properties Nominal % Ownership Stated Interest Rate GAAP Interest Rate (1) Term of Variable Rate + Spread Stated Principal Amount Deferred Financing Costs, Net Carrying Amount Carrying Amount (Our share) Maturity Date
(dollars in thousands)
360 Park Avenue South 71.11 % 7.70 % 8.16 % Adjusted Term SOFR + 2.40% $ 220,000 $ (205) $ 219,795 156,297 (2)(3)(4) December 14, 2024
Market Square North 50.00 % 7.52 % 7.70 % SOFR + 2.41% 125,000 (254) 124,746 62,373 (2)(3)(5) November 10, 2025
1265 Main Street 50.00 % 3.77 % 3.84 % N/A 33,943 (202) 33,741 16,871 January 1, 2032
Colorado Center 50.00 % 3.56 % 3.59 % N/A 550,000 (510) 549,490 274,745 (2) August 9, 2027
Dock 72 50.00 % 7.75 % 8.02 % SOFR +2.50% 198,383 (563) 197,820 98,910 (2)(6) December 18, 2025
The Hub on Causeway - Podium 50.00 % 7.35 % 7.75 % Daily Simple SOFR + 2.50% 154,329 (578) 153,751 76,875 (2)(3)(7) September 8, 2025
Hub50House 50.00 % 4.43 % 4.51 % SOFR + 1.35% 185,000 (1,052) 183,948 91,974 (2)(8) June 17, 2032
100 Causeway Street 50.00 % 6.68 % 6.85 % Term SOFR + 1.48% 333,579 (542) 333,037 166,519 (2) September 5, 2025
7750 Wisconsin Avenue (Marriott International Headquarters) 50.00 % 6.46 % 6.61 % SOFR + 1.35% 251,541 (216) 251,325 125,663 (2) April 26, 2025
Safeco Plaza 33.67 % 4.82 % 6.68 % SOFR + 2.32% 250,000 (652) 249,348 83,955 (2)(9) September 1, 2026
500 North Capitol Street, NW 30.00 % 6.83 % 7.16 % N/A 105,000 (473) 104,527 31,252 (2)(10) June 5, 2026
200 Fifth Avenue 26.69 % 4.34 % 5.60 % Term SOFR + 1.41% 600,000 (6,929) 593,071 152,188 (2)(11) November 24, 2028
3 Hudson Boulevard 25.00 % 11.24 % 11.24 % Term SOFR + 3.61% 80,000 - 80,000 20,000 (2)(12) August 7, 2024
Skymark - Reston Next Residential 20.00 % 7.19 % 7.51 % SOFR + 2.00% 124,672 (724) 123,948 24,790 (2)(3)(13) May 13, 2026
Total $ 3,211,447 $ (12,900) $ 3,198,547 $ 1,382,412
_______________
(1)The GAAP interest rate differs from the stated interest rate due to the inclusion of the amortization of financing costs, which includes mortgage recording fees, the effects of hedging transactions (if any) and adjustments required under Accounting Standards Codification 805 "Business Combinations" to reflect loans at their fair values (if any).
(2)The loan requires interest only payments with a balloon payment due at maturity.
(3)The loan includes certain extension options, subject to certain conditions.
(4)The spread on the variable rate may be reduced, subject to certain conditions.
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(5)The loan bears interest at a variable rate equal to the greater of (1) the sum of (x) SOFR and (y) 2.41% or (2) 2.80% per annum.
(6)The loan bears interest at a variable rate equal to (1) the greater of (x) SOFR or (y) 0.25%, plus (2) 2.50% per annum.
(7)The joint venture entered into interest rate swap contracts with notional amounts aggregating $154.3 million through September 2, 2025, resulting in a fixed rate of approximately 7.35% per annum through the expiration of the interest rate swap contracts.
(8)The joint venture entered into interest rate swap contracts with notional amounts aggregating $185.0 million through April 10, 2032, resulting in a fixed rate of approximately 4.432% per annum through the expiration of the interest rate swap contracts.
(9)The loan bears interest at a variable rate equal to the greater of (x) 2.35% or (y) SOFR plus 2.32% per annum. The joint venture entered into an interest rate cap agreement with a financial institution to limit its exposure to increases in the SOFR rate at a cap of 2.50% per annum on a notional amount of $250.0 million through September 1, 2025.
(10)The indebtedness consists of (x) a $70.0 million mortgage loan payable (Note A) which bears interest at a fixed rate of 6.23% per annum, and (y) a $35.0 million mortgage loan payable (Note B) which bears interest at a fixed rate of 8.03% per annum. We provided $10.5 million of the Note B mortgage financing to the joint venture. Our portion of the loan is reflected as Related Party Note Receivables, Net on our Consolidated Balance Sheets.
(11)The joint venture entered into interest rate swap contracts with notional amounts aggregating $600.0 million through June 2028, resulting in a fixed rate of approximately 4.34% per annum through the expiration of the interest rate swap contracts. The deferred financing costs, net include the adjustment required to reflect the loan and interest rate swap at fair value upon acquisition.
(12)The Company provided $80.0 million of mortgage financing to the joint venture. The loan is reflected as Related Party Note Receivables, Net on our Consolidated Balance Sheets. As of September 30, 2024, the loan was in a maturity default and had an outstanding balance, including accrued and unpaid interest and default interest, of approximately $116.0 million.
(13)The construction financing has a borrowing capacity of $140.0 million.
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State and Local Tax Matters
Because BXP is organized and qualifies as a REIT, it is generally not subject to federal income taxes, but is subject to certain state and local taxes. In the normal course of business, certain entities through which we own real estate either have undergone, or are currently undergoing, tax audits or other inquiries. Although we believe that we have substantial arguments in favor of our position in the ongoing audits, in some instances there is no controlling precedent or interpretive guidance on the specific point at issue. Collectively, tax deficiency notices received to date from the jurisdictions conducting the ongoing audits have not been material. However, there can be no assurance that future audits will not occur with increased frequency or that the ultimate result of such audits will not have a material adverse effect on our results of operations.
Insurance
For information concerning our insurance program, see Note 8 to the Consolidated Financial Statements.
Funds from Operations
Pursuant to the revised definition of Funds from Operations adopted by the Board of Governors of the National Association of Real Estate Investment Trusts ("Nareit"), we calculate Funds from Operations, or "FFO," for each of BXP and BPLP by adjusting net income (loss) attributable to BXP, Inc. and net income (loss) attributable to Boston Properties Limited Partnership (computed in accordance with GAAP), respectively, for gains (or losses) from sales of properties, including a change in control, 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 a useful measure for understanding and comparing our operating results because, by excluding gains and losses related to sales or a change in control 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 (loss) attributable to BXP, Inc. and net income (loss) attributable to Boston Properties Limited Partnership as presented in our Consolidated Financial Statements. FFO should not be considered as a substitute for net income (loss) attributable to BXP, Inc. or net income (loss) attributable to Boston Properties Limited Partnership (determined in accordance with GAAP) or any other GAAP financial measures and should only be considered together with and as a supplement to our financial information prepared in accordance with GAAP.
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BXP
The following table presents a reconciliation of net income (loss) attributable to BXP, Inc. to FFO attributable to BXP, Inc. for the three months ended September 30, 2024 and 2023:
Three months ended September 30,
2024 2023
(in thousands)
Net income (loss) attributable to BXP, Inc. $ 83,628 $ (111,826)
Add:
Noncontrolling interest-common units of the Operating Partnership 9,587 (12,626)
Noncontrolling interests in property partnerships 15,237 20,909
Net income (loss) 108,452 (103,543)
Add:
Depreciation and amortization 222,890 207,435
Noncontrolling interests in property partnerships' share of depreciation and amortization (18,857) (18,174)
BXP's share of depreciation and amortization from unconsolidated joint ventures 20,757 25,666
Corporate-related depreciation and amortization (438) (446)
Non-real estate depreciation and amortization 2,130 -
Impairment losses included within loss from unconsolidated joint ventures (1) - 272,603
Less:
Gain on investment included within loss from unconsolidated joint ventures (2) - 35,756
Gains on sales of real estate 517 517
Unrealized gain (loss) on non-real estate investment 94 (51)
Noncontrolling interests in property partnerships 15,237 20,909
Funds from Operations (FFO) attributable to the Operating Partnership common unitholders (including BXP, Inc.) 319,086 326,410
Less:
Noncontrolling interest-common units of the Operating Partnership's share of funds from operations 32,228 33,588
Funds from Operations attributable to BXP, Inc. $ 286,858 $ 292,822
Our percentage share of Funds from Operations-basic 89.90 % 89.71 %
Weighted average shares outstanding-basic 157,725 156,880
___________
(1)During the three months ended September 30, 2023, we recognized an other-than-temporary impairment loss on our investments in Platform 16, 360 Park Avenue South, 200 Fifth Avenue and Safeco Plaza aggregating approximately $272.6 million.
(2)On September 13, 2023, a joint venture in which we owned a 20% equity interest completed the first step of a two-step restructuring of the ownership in Metropolitan Square, which resulted in, among other things, (i) the cessation of our obligation to fund future investments through our then 20% equity interest, which caused us to recognize a gain on investment of approximately $35.8 million related to our deficit investment balance, which was primarily due to excess distributions, and (ii) the removal of the property from our in-service portfolio.
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The following tables presents a reconciliation of net income (loss) attributable to BXP, Inc. to Diluted FFO attributable to BXP, Inc. for income (numerator) and shares/units (denominator) for the three months ended September 30, 2024 and 2023:
Three months ended September 30,
2024 2023
(in thousands)
Net income (loss) attributable to BXP, Inc. $ 83,628 $ (111,826)
Add:
Noncontrolling interest-common units of the Operating Partnership 9,587 (12,626)
Noncontrolling interests in property partnerships 15,237 20,909
Net income (loss) 108,452 (103,543)
Add:
Depreciation and amortization 222,890 207,435
Noncontrolling interests in property partnerships' share of depreciation and amortization (18,857) (18,174)
BXP's share of depreciation and amortization from unconsolidated joint ventures 20,757 25,666
Corporate-related depreciation and amortization (438) (446)
Non-real estate depreciation and amortization 2,130 -
Impairment losses included within loss from unconsolidated joint ventures (1) - 272,603
Less:
Gain on investment included within loss from unconsolidated joint ventures (2) - 35,756
Gains on sales of real estate 517 517
Unrealized gain (loss) on non-real estate investment 94 (51)
Noncontrolling interests in property partnerships 15,237 20,909
Funds from Operations (FFO) attributable to the Operating Partnership common unitholders (including BXP, Inc.) 319,086 326,410
Effect of Dilutive Securities:
Stock based compensation - -
Diluted FFO 319,086 326,410
Less:
Noncontrolling interest-common units of the Operating Partnership's share of diluted FFO 32,132 33,522
Diluted FFO attributable to BXP, Inc. (3) $ 286,954 $ 292,888
___________
(1)During the three months ended September 30, 2023, we recognized an other-than-temporary impairment loss on our investments in Platform 16, 360 Park Avenue South, 200 Fifth Avenue and Safeco Plaza aggregating approximately $272.6 million.
(2)On September 13, 2023, a joint venture in which we owned a 20% equity interest completed the first step of a two-step restructuring of the ownership in Metropolitan Square, which resulted in, among other things, (i) the cessation of our obligation to fund future investments through our then 20% equity interest, which caused us to recognize a gain on investment of approximately $35.8 million related to our deficit investment balance, which was primarily due to excess distributions, and (ii) the removal of the property from our in-service portfolio.
(3)BXP's share of diluted Funds from Operations was 89.93% and 89.73% for the three months ended September 30, 2024 and 2023, respectively.
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Three months ended September 30,
2024 2023
shares/units (in thousands)
Basic Funds from Operations 175,446 174,882
Effect of Dilutive Securities:
Stock based compensation 488 389
Diluted Funds from Operations 175,934 175,271
Less:
Noncontrolling interest-common units of the Operating Partnership's share of diluted Funds from Operations 17,721 18,002
Diluted Funds from Operations attributable to BXP, Inc. (1) 158,213 157,269
_______________
(1)BXP's share of diluted Funds from Operations was 89.93% and 89.73% for the three months ended September 30, 2024 and 2023, respectively.
BPLP
The following table presents a reconciliation of net income (loss) attributable to Boston Properties Limited Partnership to FFO attributable to Boston Properties Limited Partnership for the three months ended September 30, 2024 and 2023:
Three months ended September 30,
2024 2023
(in thousands)
Net income (loss) attributable to Boston Properties Limited Partnership $ 94,919 $ (122,696)
Add:
Noncontrolling interests in property partnerships 15,237 20,909
Net income (loss) 110,156 (101,787)
Add:
Depreciation and amortization 221,186 205,679
Noncontrolling interests in property partnerships' share of depreciation and amortization (18,857) (18,174)
BXP's share of depreciation and amortization from unconsolidated joint ventures 20,757 25,666
Corporate-related depreciation and amortization (438) (446)
Non-real estate depreciation and amortization 2,130 -
Impairment losses included within loss from unconsolidated joint ventures (1) - 272,603
Less:
Gain on investment included within loss from unconsolidated joint ventures (2) - 35,756
Gains on sales of real estate 517 517
Unrealized gain (loss) on non-real estate investment 94 (51)
Noncontrolling interests in property partnerships 15,237 20,909
Funds from Operations attributable to Boston Properties Limited Partnership (3) $ 319,086 $ 326,410
Weighted average shares outstanding-basic 175,446 174,882
_______________
(1)During the three months ended September 30, 2023, we recognized an other-than-temporary impairment loss on our investments in Platform 16, 360 Park Avenue South, 200 Fifth Avenue and Safeco Plaza aggregating approximately $272.6 million.
(2)On September 13, 2023, a joint venture in which we owned a 20% equity interest completed the first step of a two-step restructuring of the ownership in Metropolitan Square, which resulted in, among other things, (i) the cessation of our obligation to fund future investments through our then 20% equity interest, which caused us to recognize a gain on investment of approximately $35.8 million related to our deficit investment balance, which was primarily due to excess distributions, and (ii) the removal of the property from our in-service portfolio.
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(3)Our calculation includes OP Units and vested LTIP Units (including vested 2012 OPP Units and vested 2013 - 2021 MYLTIP Units).
The following tables presents a reconciliation of net income (loss) attributable to Boston Properties Limited Partnership to Diluted FFO attributable to Boston Properties Limited Partnership for income (numerator) and shares/units (denominator) for the three months ended September 30, 2024 and 2023:
Three months ended September 30,
2024 2023
(in thousands)
Net income (loss) attributable to Boston Properties Limited Partnership $ 94,919 $ (122,696)
Add:
Noncontrolling interests in property partnerships 15,237 20,909
Net income (loss) 110,156 (101,787)
Add:
Depreciation and amortization 221,186 205,679
Noncontrolling interests in property partnerships' share of depreciation and amortization (18,857) (18,174)
BXP's share of depreciation and amortization from unconsolidated joint ventures 20,757 25,666
Corporate-related depreciation and amortization (438) (446)
Non-real estate depreciation and amortization 2,130 -
Impairment losses included within loss from unconsolidated joint ventures (1) - 272,603
Less:
Gain on investment included within loss from unconsolidated joint ventures (2) - 35,756
Gains on sales of real estate 517 517
Unrealized gain (loss) on non-real estate investment 94 (51)
Noncontrolling interests in property partnerships 15,237 20,909
Funds from Operations attributable to Boston Properties Limited Partnership (3) 319,086 326,410
Effect of Dilutive Securities:
Stock based compensation - -
Diluted Funds from Operations attributable to Boston Properties Limited Partnership $ 319,086 $ 326,410
_______________
(1)During the three months ended September 30, 2023, we recognized an other-than-temporary impairment loss on our investments in Platform 16, 360 Park Avenue South, 200 Fifth Avenue and Safeco Plaza aggregating approximately $272.6 million.
(2)On September 13, 2023, a joint venture in which we owned a 20% equity interest completed the first step of a two-step restructuring of the ownership in Metropolitan Square, which resulted in, among other things, (i) the cessation of our obligation to fund future investments through our then 20% equity interest, which caused us to recognize a gain on investment of approximately $35.8 million related to our deficit investment balance, which was primarily due to excess distributions, and (ii) the removal of the property from our in-service portfolio.
(3)Our calculation includes OP Units and vested LTIP Units (including vested 2012 OPP Units and vested 2013 - 2021 MYLTIP Units).
Three months ended September 30,
2024 2023
shares/units (in thousands)
Basic Funds from Operations 175,446 174,882
Effect of Dilutive Securities:
Stock based compensation 488 389
Diluted Funds from Operations 175,934 175,271
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Material Cash Commitments
We have various service contracts with vendors related to our property management. In addition, we have certain other contracts we enter into in the ordinary course of business that may extend beyond one year. These contracts include terms that provide for cancellation with insignificant or no cancellation penalties. Contract terms are generally between three and five years.
During the three months ended September 30, 2024, we paid approximately $80.2 million to fund tenant-related obligations, including tenant improvements and leasing commissions.
In addition, during the three months ended September 30, 2024, we and our unconsolidated joint venture partners incurred approximately $120.8 million of new tenant-related obligations associated with approximately 1.1 million square feet of second generation leases, or approximately $111 per square foot. We signed approximately 15,400 square feet of first generation leases. The tenant-related obligations for the development properties are included within the projects' "Estimated Total Investment" referred to in "Item 2-Management's Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources." In aggregate during the third quarter of 2024, we signed leases for approximately 1.1 million square feet of space and incurred aggregate tenant-related obligations of approximately $121.9 million, or approximately $110 per square foot.
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ITEM 3-Quantitative and Qualitative Disclosures about Market Risk.
We are exposed to certain market risks, one of the most predominant of which is a change in interest rates. Unless we have entered into interest rate swaps or other derivatives to fix the interest rate, increases in interest rates can result in increased interest expense under our 2021 Credit Facility, unsecured term loans, unsecured commercial paper, certain mortgage loans and other debt that bears interest at variable rates. Increases in interest rates can also result in increased interest expense when our fixed rate debt matures and needs to be refinanced.
As of September 30, 2024, approximately $14.1 billion of our indebtedness bore interest at fixed rates and therefore the fair value of these instruments is not affected by changes in the market interest rates. The remaining approximately $2.1 billion of outstanding indebtedness bore interest at variable rates, including approximately $800.0 million of unsecured term loans, $500.0 million of unsecured commercial paper borrowings and approximately $800.0 million of secured debt. However, we entered into interest rate swaps with notional amounts aggregating $800.0 million for our secured debt and $100.0 million for BPLP's 2024 Unsecured Term Loan, thus fixing the interest rates for all, or a portion of the applicable debt term (See Note 7 to the Consolidated Financial Statements for information pertaining to interest rate swap contracts in place as of September 30, 2024 and their respective fair values). Therefore, as of September 30, 2024, we have $1.2 billion of variable rate debt outstanding.
The following table presents our aggregate debt obligations carrying value, estimated fair value and where applicable, the corresponding weighted-average GAAP interest rates sorted by maturity date as of September 30, 2024.
The table below does not include our unconsolidated joint venture debt. For a discussion concerning our unconsolidated joint venture debt, including interest rate swaps, see Note 5 to the Consolidated Financial Statements and "Item 2-Management's Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources-Investment in Unconsolidated Joint Ventures - Secured Debt."
2024 2025 2026 2027 2028 2029+ Total Estimated Fair Value
(dollars in thousands)
Mortgage debt, net
Fixed Rate $ (2,013) $ 197,333 $ (4,865) $ 2,297,114 $ (1,372) $ 995,922 $ 3,482,119 $ 3,110,778
GAAP Average Interest Rate
- % 7.69 % - % 3.64 % - % 2.93 % 3.67 %
Variable Rate (809) 197,632 (1,344) (1,344) 598,901 - 793,036 796,910
Subtotal $ (2,822) $ 394,965 $ (6,209) $ 2,295,770 $ 597,529 $ 995,922 $ 4,275,155 $ 3,907,688
Unsecured debt, net
Fixed Rate $ (3,057) $ 838,975 $ 1,990,365 $ 741,734 $ 992,961 $ 6,081,055 $ 10,642,033 $ 10,191,058
GAAP Average Interest Rate
- % 3.35 % 3.63 % 6.92 % 4.63 % 3.87 % 4.07 %
Variable Rate 499,333 798,725 - - - - 1,298,058 1,300,303
Subtotal $ 496,276 $ 1,637,700 $ 1,990,365 $ 741,734 $ 992,961 $ 6,081,055 $ 11,940,091 $ 11,491,361
Total Debt $ 493,454 $ 2,032,665 $ 1,984,156 $ 3,037,504 $ 1,590,490 $ 7,076,977 $ 16,215,246 $ 15,399,049
At September 30, 2024, the weighted-average stated interest rates on the fixed rate debt stated above was 3.80% per annum. At September 30, 2024, our outstanding variable rate debt totaled $2.1 billion, of which $900.0 million was subject to interest rate swaps. At September 30, 2024, the weighted-average stated interest rate on our variable rate debt, including the effect of the interest rate swaps, was 4.38% per annum. If market interest rates on our variable rate debt had been 100 basis points greater, total interest expense would have increased approximately $5.3 million and $15.8 million for the three and nine months ended September 30, 2024.
Our use of derivative instruments also involves certain additional risks such as counterparty credit risk, the enforceability of hedging contracts and the risk that unanticipated and significant changes in interest rates will cause a significant loss of basis in the contract. We believe that there is a low likelihood that these counterparties will fail to meet their obligations and we minimize our exposure by limiting counterparties to major banks who meet established credit and capital guidelines. There can be no assurance that we will adequately protect against the foregoing risks.
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The fair value amounts were determined solely by considering the impact of hypothetical interest rates on our financial instruments. Due to the uncertainty of specific actions, we may undertake to minimize possible effects of market interest rate increases, this analysis assumes no changes in our financial structure.
ITEM 4-Controls and Procedures.
BXP, Inc.
(a) Evaluation of Disclosure Controls and Procedures. As of the end of the period covered by this report, our management, with the participation of BXP, Inc.'s Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer), evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended). Based upon that evaluation, BXP, Inc.'s Chief Executive Officer and Chief Financial Officer concluded that these disclosure controls and procedures were effective as of the end of the period covered by this report.
(b) Changes in Internal Control Over Financial Reporting. No change in BXP, Inc.'s internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended) occurred during the third quarter of our fiscal year ending December 31, 2024 that has materially affected, or is reasonably likely to materially affect, BXP, Inc.'s internal control over financial reporting.
Boston Properties Limited Partnership
(a) Evaluation of Disclosure Controls and Procedures. As of the end of the period covered by this report, the management of BXP, Inc., the sole general partner of Boston Properties Limited Partnership, with the participation of its Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer), evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer of BXP, Inc. concluded that these disclosure controls and procedures were effective as of the end of the period covered by this report.
(b) Changes in Internal Control Over Financial Reporting. No change in its internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended) occurred during the third quarter of our fiscal year ending December 31, 2024 that has materially affected, or is reasonably likely to materially affect, its internal control over financial reporting.
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PART II. OTHER INFORMATION
ITEM 1-Legal Proceedings.
We are subject to legal proceedings and claims that arise in the ordinary course of business. These matters are generally covered by insurance. Management believes that the final outcome of such matters will not have a material adverse effect on our financial position, results of operations or liquidity.
ITEM 1A-Risk Factors.
Except to the extent updated below or to the extent factual information disclosed elsewhere in this Quarterly Report on Form 10-Q relates to such risk factors (including, without limitation, the matters discussed in Part I, "Item 2-Management's Discussion and Analysis of Financial Condition and Results of Operations"), there were no material changes to the risk factors disclosed in Part I, "Item 1A. Risk Factors" of our Annual Report on Form 10-K for the year ended December 31, 2023.
The use of technology based on artificial intelligence and machine learning presents risks and challenges that may adversely affect our business and results of operations.
We use artificial intelligence and machine learning technology (collectively, "AI") capabilities with the goal to enhance efficiencies in conducting our business. Our deployment and application of AI remains ongoing. While these AI tools hold promise in optimizing our work processes and driving efficiencies, they also present risks, challenges and unintended consequences that could adversely affect our business and results of operations or those of our clients. These include, but are not limited to:
•the release, leak or disclosure of proprietary, confidential, sensitive or otherwise valuable information as a result of or in connection with our use of AI tools,
•the incorporation of AI by our clients, vendors, contractors and other third-parties into their products or services, with or without our knowledge, in a manner that could give rise to issues pertaining to data privacy, information security and intellectual property considerations, and
•the evolving legal regulations relating to AI, which may require significant resources to modify and maintain business practices to comply with applicable law or otherwise result in legal or regulatory action or create additional liabilities, the nature of which cannot be determined at this time.
While we aim to use AI responsibly and securely and attempt to mitigate ethical and legal issues presented by its use, we may ultimately be unsuccessful in identifying or resolving issues before they arise. There can be no assurance that we will properly implement AI, and the failure to do so could have a material adverse effect on our results of operations or financial condition.
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ITEM 2-Unregistered Sales of Equity Securities and Use of Proceeds
BXP, Inc.
(a)None.
(b)Not Applicable.
(c)Issuer Purchases of Equity Securities.
Period (a)
Total Number of Shares of Common Stock
Purchased 		(b)
Average Price Paid per Common Share 		(c)
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs 		(d)
Maximum Number (or Approximate Dollar Value) of Shares that May Yet be Purchased under the Plans or Programs
July 1, 2024 - July 31, 2024 - $ - N/A N/A
August 1, 2024 - August 31, 2024 773 (1) $ 69.99 N/A N/A
September 1, 2024 - September 30, 2024 1,064 (1) $ 74.56 N/A N/A
Total 1,837 $ 72.64 N/A N/A
___________
(1)Represents shares of common stock of BXP surrendered by employees to BXP to satisfy such employees' tax withholding obligations in connection with the vesting of restricted common stock.
Boston Properties Limited Partnership
(a)Each time BXP issues shares of common stock (other than in exchange for common units when such common units are presented for redemption), it contributes the proceeds of such issuance to BPLP in return for an equivalent number of partnership units with rights and preferences analogous to the shares issued. During the three months ended September 30, 2024, in connection with issuances of common stock by BXP pursuant to purchases under the Boston Properties, Inc. 1999 Employee Stock Purchase Plan, BPLP issued an aggregate of 8,919 common units to BXP in exchange for approximately $0.47 million, the aggregate proceeds of such common stock issuances to BXP. Such units were issued in reliance on an exemption from registration under Section 4(a)(2) of the Securities Act of 1933, as amended.
(b)Not Applicable.
(c)Issuer Purchases of Equity Securities.
Period (a)
Total Number of Units Purchased 		(b)
Average Price Paid per Unit 		(c)
Total Number of Units Purchased as Part of Publicly Announced Plans or Programs 		(d)
Maximum Number (or Approximate Dollar Value) of Units that May Yet be Purchased Under the Plans or Programs
July 1, 2024 - July 31, 2024 - $ - N/A N/A
August 1, 2024 - August 31, 2024 773 (1) $ 69.99 N/A N/A
September 1, 2024 - September 30, 2024 1,064 (1) $ 74.56 N/A N/A
Total 1,837 $ 72.64 N/A N/A
___________
(1)Represents common units previously held by BXP that were redeemed in connection with the surrender of shares of restricted common stock of BXP by employees to BXP to satisfy such employees' tax withholding obligations in connection with the vesting of restricted common stock.
ITEM 3-Defaults Upon Senior Securities.
None.
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ITEM 4-Mine Safety Disclosures.
None.
ITEM 5-Other Information.
(a)None.
(b)None.
(c)During the three months ended September 30, 2024, none of our directors or officers (as defined in Rule 16a-1(f) of the Securities Exchange Act of 1934, as amended) adopted, terminated or modified a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement (as such terms are defined in Item 408 of Regulation S-K).
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ITEM 6-Exhibits.
(a)Exhibits
3.1 -
4.1 -
10.1 -
Second Amendment to Ninth Amended and Restated Credit Agreement, dated as of June 27, 2024, among Boston Properties Limited Partnership and the lenders identified therein. (Filed herewith.)
10.2 -
Third Amendment to Ninth Amended and Restated Credit Agreement, dated as of August 2, 2024, among Boston Properties Limited Partnership and the lenders identified therein. (Filed herewith.)
10.3 -
First Amendment to Credit Agreement, dated as of August 2, 2024, among Boston Properties Limited Partnership and the lenders identified therein. (Filed herewith.)
31.1 -
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for BXP, Inc. (Filed herewith.)
31.2 -
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for BXP, Inc. (Filed herewith.)
31.3 -
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for Boston Properties Limited Partnership. (Filed herewith.)
31.4 -
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for Boston Properties Limited Partnership. (Filed herewith.)
32.1 -
Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes Oxley Act of 2002 for BXP, Inc. (Furnished herewith.)
32.2 -
Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes Oxley Act of 2002 for BXP, Inc. (Furnished herewith.)
32.3 -
Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes Oxley Act of 2002 for Boston Properties Limited Partnership. (Furnished herewith.)
32.4 -
Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes Oxley Act of 2002 for Boston Properties Limited Partnership. (Furnished herewith.)
101.SCH - Inline XBRL Taxonomy Extension Schema Document. (Filed herewith.)
101.CAL - Inline XBRL Taxonomy Extension Calculation Linkbase Document. (Filed herewith.)
101.LAB - Inline XBRL Taxonomy Extension Label Linkbase Document. (Filed herewith.)
101.PRE - Inline XBRL Taxonomy Extension Presentation Linkbase Document. (Filed herewith.)
101.DEF - Inline XBRL Taxonomy Extension Definition Linkbase Document. (Filed herewith.)
104 - Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101.*). (Filed herewith.)
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
BXP, INC.
November 5, 2024
/s/ MICHAELR. WALSH
Michael R. Walsh
Chief Accounting Officer
(duly authorized officer and principal accounting officer)
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
BOSTON PROPERTIES LIMITED PARTNERSHIP
By: BXP, Inc., its General Partner
November 5, 2024
/s/ MICHAELR. WALSH
Michael R. Walsh
Chief Accounting Officer
(duly authorized officer and principal accounting officer)
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