BXP Inc

Current report

We continue to experience market tailwinds from the two most important external forces impacting BXP’s performance: interest rates and corporate earnings growth. The U.S. inflation report released on July 11, 2024 reflected a 3% inflation rate for the 12 months ending in June 2024, which was lower than expected. This report sparked new forecasts of accelerated interest rate cuts by the Federal Reserve as well as lower market yields for the 10-year U.S. Treasury Note. Lower interest rates are favorable for real estate and BXP’s valuation, as well as broader corporate earnings growth, which is the second important external factor driving BXP’s performance. After remaining flat for all of 2023, S&P 500 earnings growth was 6.6% in the first quarter of 2024 and is expected to be approximately 9% for the second quarter. In our experience, companies with earnings growth are much more likely to invest, hire and lease additional space, which is consistent with our growing leasing volumes this year.

Current report

We are also experiencing moderate but steady increases in workers returning to the office based on the turnstile data we capture for roughly half of our portfolio. Corporations continue to push for increased office attendance, including a large technology company that recently announced its policy shift from primarily remote work to mandatory office attendance of three to five days per week depending on job function.

Current report

We are experiencing an improving operating environment. Although all the markets we operate in 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 properties 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 despite limited demand growth.

Current report

In the second quarter of 2024, we executed 73 leases totaling over 1.3 million square feet with a weighted-average lease term of approximately 9.0 years. The approximately 1.3 million square feet of leasing represents a 41% increase from the second quarter of 2023 and 93% of our 10-year leasing average for the second quarter.

Current report

In July 2024, BXP 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% interest.

Current report

Pending disposition activity

Current report

•On May 7, 2024, we entered into an agreement with a third-party developer for the sale of a portion of our Shady Grove property, consisting of 2 Choke Cherry Road, 2094 Gaither Road and a land parcel, located in Rockville, Maryland for an aggregate gross sale price of approximately $24.8 million (See Note 3). On July 22, 2024, we executed an amendment to the agreement for an aggregate gross sale price of approximately $24.7 million. Thereafter, the third-party developer completed their due diligence and their deposit of approximately $2.5 million became non-refundable. 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 customary closing conditions and there can be no assurance that this transaction will be consummated on the terms currently contemplated or at all.

Current report

•We have a ground lease for the land underlying our 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 us 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 and, as a result, we classified it as a finance lease and we assumed the lessor would exercise its right to require us 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 we 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 we now estimate 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 three and six months ended June 30, 2024. There can be no assurance that this transaction will be consummated on the terms currently contemplated or at all.

Current report

Unconsolidated joint ventures activity

Current report

•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.

Current report

•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.

Current report

Net income attributable to BXP, Inc. and netincome attributable to Boston Properties Limited Partnership decreased by approximately $22.7 million and $25.0 million, respectively, for the six months ended June 30, 2024 compared to 2023, as set forth in the following tables and for the reasons discussed below under the heading “Comparison of the six months ended June 30, 2024 to the six months ended June 30, 2023” within “Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Current report

Comparison of the six months ended June 30, 2024 to the six months ended June 30, 2023

Current report

(2)For a detailed discussion of NOI, including the reasons management believes NOI is useful to investors, see page 58. Residential Net Operating Income for the six months ended June 30, 2024 and 2023 is comprised of Residential Revenue of $24,910 and $23,979 less Residential Expenses of $11,425 and $11,246, respectively. Hotel Net Operating Income for the six months ended June 30, 2024 and 2023 is comprised of Hotel Revenue of $22,998 and $22,070 less Hotel Expenses of $15,854 and $14,832, respectively, per the Consolidated Statements of Operations.

Current report

Termination income increased by approximately $2.6 million for the six months ended June 30, 2024 compared to 2023.

Current report

Termination income for the six months ended June 30, 2023 related to 15 clients across the Same Property Portfolio and totaled approximately $32,000.

Current report

The table below lists the properties acquired between January 1, 2023 and June 30, 2024. Rental revenue and real estate operating expenses increased by approximately $55.1 million and $19.5 million, respectively, for the six months ended June 30, 2024 compared to 2023, as detailed below.

Current report

The table below lists the properties that were in or held for development or redevelopment between January 1, 2023 and June 30, 2024. Rental revenue and real estate operating expenses from our Properties in or Held for Development or Redevelopment Portfolio decreased by approximately $1.0 million and $3.6 million, respectively, for the six months ended June 30, 2024 compared to 2023, as detailed below.

Current report

Net operating income for our residential same properties increased by approximately $0.8 million for the six months ended June 30, 2024 compared to 2023.

Current report

The Boston Marriott Cambridge hotel had net operating income of approximately $7.1 million for the six months ended June 30, 2024, representing a decrease of approximately $0.1 million compared to the six months ended June 30, 2023.

Current report

Depreciation and amortization expense increased by approximately $26.9 million for the six months ended June 30, 2024 compared to 2023, as detailed below.

Current report

Depreciation and amortization expense increased by approximately $27.1 million for the six months ended June 30, 2024 compared to 2023, as detailed below.

Current report

Interest and other income (loss) decreased by approximately $3.0 million for the six months ended June 30, 2024 compared to 2023, due primarily to a decrease in interest income as a result of a decrease in our outstanding cash balances.

Current report

Interest expense increased by approximately $34.9 million for the six months ended June 30, 2024 compared to 2023, as detailed below.

Current report

(2)On April 17, 2024, BPLP established an unsecured commercial paper program (See Note 6 to the Consolidated Financial Statements).

Current report

Noncontrolling interests in property partnerships decreased by approximately $3.4 million for the six months ended June 30, 2024 compared to 2023, as detailed below.

Current report

(1)The decrease was primarily attributable to depreciation and amortization expense related to new and expiring clients.

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Same Property Portfolio

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Lease Revenue (Excluding Termination Income)

Current report

Termination Income

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Termination income for the three months ended June 30, 2023 related to 10 clients across the Same Property Portfolio and totaled approximately $(164,000).

Current report

Parking and Other Revenue

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Real Estate Operating Expenses

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Properties Acquired Portfolio

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Properties Placed In-Service Portfolio

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Residential Net Operating Income

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Hotel Net Operating Income

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Development and Management Services Revenue

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General and Administrative Expense

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Transaction Costs

Previous report

Two of the most significant external forces impacting BXP’s performance are interest rates and corporate earnings. We believe lower interest rates would improve our cost of capital, spark more transaction activity and investment opportunities in our sector, reduce the cost of new development and be a tailwind for our client’s earnings growth. Greater corporate earning would, in turn, likely encourage our clients to increase their office space requirements. However, with inflation increasing at greater than expected rates, the Federal Reserve has stated that it expects to delay interest rate cuts.

Previous report

Our clients generally do not hire new employees and increase their office space requirements unless their earnings are growing or they are in need of additional employees to grow their earnings. From 2011 to present, S&P 500 earnings grew around 12% per year, but in 2023 the growth rate was 0% and in 2022 it was 5%. Though the U.S. economy is growing, and unemployment remains low, only approximately 7% of the jobs created in the first quarter of 2024 were in office using categories compared to the long-term average of over 25%. Growth in S&P 500 earnings are projected to be 11% to 13% per annum over the next two years, which should be constructive to BXP’s leasing activity. Many technology clients, a critically important sector that drove space demand following the Great Financial Crisis, overcommitted to space during the pandemic which has exacerbated the supply-demand imbalance. Over the longer term, we expect earnings at technology companies will grow and they will begin to absorb the available supply.

Previous report

The macroeconomic environment has resulted in softening demand in all of our markets. While property tours continue and leases under negotiation move forward, there is less urgency from clients to make new commitments. Potential clients touring space acknowledge that economic uncertainty is impacting space decisions. Also impacting clients decisions are the building quality as well as the financial stability and long-term commitment of their building owners, both strong competitive advantages for BXP.

Previous report

In the first quarter of 2024, we executed 61 leases totaling approximately 900,000 square feet with a weighted-average lease term of approximately 11.6 years, compared to approximately 660,500 square feet of leases executed in the first quarter of 2023 with a weighted-average lease term of approximately 7.7 years.

Previous report

Consistent with this strategy, 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 purchase price of $10.0 million and recorded a gain on consolidation of approximately $21.8 million. This transaction was sparked by our partner’s election to reduce their exposure to the office sector, and we agreed to purchase their interest on attractive terms. The property is encumbered by an approximately $207.1 million mortgage debt, at acquisition, which bears interest at 3.61% per annum and matures on January 5, 2025. Following the acquisition, we modified the mortgage loan to provide for two loan extension options totaling five years of additional term, each subject to certain conditions. The first loan extension option is for four years at a fixed interest rate of 5.0% per annum. We also extended an approximately 200,000 square foot lease with the anchor client through 2042 after the acquisition. 901 New York Avenue is a premier workplace consisting of approximately 524,000 net rentable square feet.

Previous report

Also, on March 21, 2024, we completed the previously announced sale of a 45% interest in 290 Binney Street, a life sciences development located in Kendall Square in Cambridge, Massachusetts, to an institutional investor. The institutional investor’s investment in 290 Binney Street will reduce our share of the project’s estimated development spend over time by approximately $533.5 million, including $141.8 million that was funded at closing. The consummation of this joint venture completed the institutional investor’s two-building investment in Cambridge, Massachusetts with a gross valuation of approximately $1.66 billion or $2,050 per square foot. The properties, 290 Binney Street and 300 Binney Street, total 802,000 net rentable square feet and are 100% pre-leased. We retain a 55% interest in each joint venture and provide development, property management, and leasing services for the ventures.

Previous report

Acquisition activity

Previous report

•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. At acquisition, the total net equity acquired was $20.0 million, which includes $10.0 million in cash that we 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 Debt activities below). The acquisition resulted in us 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 our 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. 901 New York Avenue is a premier workplace consisting of approximately 524,000 net rentable square feet.

Previous report

•On February 12, 2024, we commenced the development of a residential project at 121 Broadway Street in Cambridge, Massachusetts that is adjacent to our 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.

Previous report

Impairment activity

Previous report

•On March 28, 2024, we entered into a 90-year air rights lease with the Massachusetts Department of Transportation for an approximately 61,000 square feet 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 we commence 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 we commence 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. We have assumed that we 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. We classify this lease as an operating lease. As a result, we recorded a Right of Use Assets – Operating Leases and Lease Liabilities – Operating Leases of approximately $23.9 million and $23.2 million, respectively, on our Consolidated Balance Sheets as of March 31, 2024. There were no lease costs for the period from March 28, 2024 through March 31, 2024.

Previous report

Unconsolidated joint venture activities

Previous report

•On January 2, 2024, a joint venture in which we have 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. The property is approximately 21% pre-leased as of May 2, 2024.

Previous report

•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, for a gross purchase price of $10.0 million in cash (See Acquisition activity above). Prior to the acquisition, we had a 50% economic ownership interest in the joint venture and accounted for it under the equity method of accounting. The acquisition resulted in us having full ownership of the joint venture such that we now account for the assets, liabilities, and operations of it on a consolidated basis in our financial statements instead of under the equity method of accounting and as a result recognized a gain on consolidation of approximately $21.8 million.

Previous report

•On February 9, 2024, a joint venture in which we own 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 a premier workplace with approximately 736,000 net rentable square feet located in Bethesda, Maryland.

Previous report

Noncontrolling interest activity

Previous report

•On March 21, 2024, we 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 we and the institutional investor will fund the development project based on our respective ownership interests. We retain a 55% ownership interest in the joint venture. The transaction did not qualify as a sale of real estate for financial reporting purposes as we continue to effectively control the property and thus will continue to account for the property on a consolidated basis in our financial statements and no gain was recognized in the Consolidated Statements of Operations. We provide customary development, property management and leasing services to the joint venture. 290 Binney Street is an approximately 566,000 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.

Previous report

Depreciation and amortization expense increased by approximately $10.0 million for the three months ended March 31, 2024 compared to 2023, as detailed below.

Previous report

Depreciation and amortization expense increased by approximately $10.1 million for the three months ended March 31, 2024 compared to 2023, as detailed below.

Previous report

Interest and other income (loss) increased by approximately $3.6 million for the three months ended March 31, 2024 compared to 2023, due primarily to an increase in interest income from increased interest earned on our deposits.

Previous report

Interest expense increased by approximately $27.7 million for the three months ended March 31, 2024 compared to 2023, as detailed below.

Previous report

(1)The decrease was primarily attributable to a decrease in lease revenue from our clients.

Previous report

(4)Property is currently in development (See Note 9 to the Consolidated Financial Statements).

Previous report

•On February 1, 2024, BPLP repaid at maturity its 3.800% unsecured senior notes at par utilizing the proceeds from a $600.0 million mortgage loan entered into on October 26, 2023 and available cash. The repayment price was approximately $713.3 million, which included the stated principal of $700 million plus approximately $13.3 million of accrued and unpaid interest.

Previous report

On April 16, 2024, BPLP provided notice to exercise its one-year extension option on the 2023 Unsecured Term Loan. BPLP anticipates effectuating the extension on or prior to the current May 16, 2024 maturity date. Upon effectiveness, the 2023 Unsecured Term Loan will mature on May 16, 2025.

Previous report

On May 2, 2023, BPLP executed interest rate swaps in notional amounts aggregating $1.2 billion. These interest rate swaps were entered into to fix Term SOFR, at a weighted-average rate of 4.6420% for the period commencing on May 4, 2023 and ending on May 16, 2024 (See Note 7 to the Consolidated Financial Statements).

Previous report

Commercial Paper Program

Current report — wording carried from elsewhere

In the second quarter of 2024, we completed and fully placed in-service 760 Boylston Street, an approximately 118,000 net rentable square feet retail redevelopment located in Boston, Massachusetts. The property is 100% leased to DICK’S Sporting Goods’ Boston House of Sport.

Current report — wording carried from elsewhere

Results of Operations for the Six Months Ended June 30, 2024 and 2023

Current report — wording carried from elsewhere

At June 30, 2024 and 2023, we owned or had joint venture interests in a portfolio of 186 and 191 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 six months ended June 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.

Current report — wording carried from elsewhere

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.

Current report — wording carried from elsewhere

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.

Current report — wording carried from elsewhere

The table below shows selected operating information for the Same Property Portfolio and the Total Property Portfolio. The Same Property Portfolio consists of 129 properties totaling approximately 40.7 million net rentable square feet, excluding unconsolidated joint ventures. The Same Property Portfolio includes properties acquired or placed in-service on or prior to January 1, 2023 and owned and in service through June 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 June 30, 2024. This table includes a reconciliation from the Same Property Portfolio to the Total Property Portfolio by also providing information for the six months ended June 30, 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 six months ended June 30, 2024 and 2023.

Current report — wording carried from elsewhere

Lease revenue (excluding termination income) from the Same Property Portfolio decreased by approximately $12.1 million for the six months ended June 30, 2024 compared to 2023. The decrease was a result of our average occupancy decreasing from 90.2% to 88.8%, resulting in a decrease of approximately $23.3 million, partially offset by revenue per square foot increasing by approximately $0.59, contributing approximately $11.2 million.

Current report — wording carried from elsewhere

Parking and other revenue increased by approximately $11.2 million for the six months ended June 30, 2024 compared to 2023. Parking and other revenue increased by approximately $1.0 million and $10.2 million, respectively. The increase in other revenue was primarily related to the View Boston observatory.

Current report — wording carried from elsewhere

Real estate operating expenses from the Same Property Portfolio increased by approximately $31.1 million, or 5.5%, for the six months ended June 30, 2024 compared to 2023, due primarily to increases in repairs and maintenance of approximately $10.9 million, or 12.0%, and other real estate operating expenses of approximately $13.9 million, or 3.0%. The increase in repairs and maintenance was primarily in Boston. In addition, there was an approximately $6.3 million increase related to the marketing and operating expenses associated with the View Boston observatory.

Current report — wording carried from elsewhere

The table below lists the properties that were placed in-service or partially placed in-service between January 1, 2023 and June 30, 2024. Rental revenue and real estate operating expenses from our Properties Placed In-Service Portfolio increased by approximately $19.6 million and $6.1 million, respectively, for the six months ended June 30, 2024 compared to 2023, as detailed below.

Current report — wording carried from elsewhere

The following reflects our occupancy and rate information for our residential same properties for the six months ended June 30, 2024 and 2023.

Current report — wording carried from elsewhere

(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.

Current report — wording carried from elsewhere

The following reflects our occupancy and rate information for the Boston Marriott Cambridge hotel for the six months ended June 30, 2024 and 2023.

Current report — wording carried from elsewhere

Development and management services revenue decreased by approximately $6.3 million for the six months ended June 30, 2024 compared to 2023. Development services revenue and management services revenue decreased by approximately $3.1 million and $3.2 million, respectively. The decrease in development services revenue was primarily related to a decrease in fees associated with a tenant improvement project in New York City and decreases in development income earned from unconsolidated joint ventures in the San Francisco region. 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.

Current report — wording carried from elsewhere

General and administrative expense decreased by approximately $5.9 million for the six months ended June 30, 2024 compared to 2023 primarily due to a decrease in compensation expense and other general and administrative expenses of approximately $5.8 million and $0.1 million, respectively. The decrease in compensation expense related to (1) an approximately $0.6 million decrease in the value of our deferred compensation plan and (2) an approximately $5.2 million decrease in other compensation expenses.

Current report — wording carried from elsewhere

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 six months ended June 30, 2024 and 2023 were approximately $8.9 million and $9.1 million, respectively. These costs are not included in the general and administrative expenses discussed above.

Current report — wording carried from elsewhere

Transaction costs decreased by approximately $0.5 million for the six months ended June 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.

Current report — wording carried from elsewhere

Gains from investments in securities for the six months ended June 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 six months ended June 30, 2024 and 2023, we recognized gains of approximately $2.6 million and $3.2 million, respectively, on these investments. By comparison, our general and administrative expense decreased by approximately $2.6 million and $3.2 million during the six months ended June 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.

Current report — wording carried from elsewhere

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 six months ended June 30, 2024 and 2023 was approximately $19.7 million and $21.2 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.

Current report — wording carried from elsewhere

For BXP, noncontrolling interest—common units of the Operating Partnership decreased by approximately $2.2 million for thesix months ended June 30, 2024 compared to 2023 due primarily to a decrease in allocable income. Due to our ownership structure, there is no corresponding line item on BPLP’s financial statements.

Current report — wording carried from elsewhere

The following 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 three months ended June 30, 2024 and 2023. For a detailed discussion of NOI, including the reasons management believes NOI is useful to investors, see page 68.

Current report — wording carried from elsewhere

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, 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 on non-real estate investment, gains from investments in securities, interest and other income (loss), 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.

Current report — wording carried from elsewhere

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.

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(1)Rental Revenue is equal to Revenue less Development and Management Services Revenue and Direct Reimbursements of Payroll and Related Costs from Management Services Revenue per the Consolidated Statements of Operations, excluding the residential and hotel revenue that is noted below. We use Rental Revenue internally as a performance measure and in calculating other non-GAAP financial measures (e.g., NOI), which provides investors with information regarding our performance that is not immediately apparent from the comparable non-GAAP measures and allows investors to compare operating performance between periods.

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Properties in or Held for Development or Redevelopment Portfolio

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(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.

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(2)Lexington Office Park, 1050 Winter Street, 17 Hartwell Avenue 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.

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(1)Average Monthly Rental Rate is calculated as the average of the quotients obtained by dividing (A) rental revenue as determined in accordance with GAAP, by (B) the number of occupied units for each month within the applicable fiscal period.

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(2)Average Physical Occupancy is defined as (1) the average number of occupied units divided by (2) the total number of units, expressed as a percentage.

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Other Operating Revenue and Expense Items

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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.

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

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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.

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Unrealized Gain on Non-Real Estate Investment

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We invest in non-real estate investments, which are primarily environmentally-focused investment funds. As a result, for each of the three months ended June 30, 2024 and 2023, we recognized an unrealized gain of approximately $0.1 million, due to the observable changes in the fair value of the investments.

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(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, Californiaand (3) 901 New York Avenue in Washington, DC (See Note 6 to the Consolidated Financial Statements).

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At June 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 June 30, 2024, the 2021 Credit Facility did not have a balance outstanding. In addition, we have $900.0 million of mortgage notes collateralized by Santa Monica Business Park and our 325 Main Street, 355 Main Street, 90 Broadway and 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 June 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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(2)Property is held for future development.

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(3)Property is currently under redevelopment or in development.

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Noncontrolling Interest—Common Units of the Operating Partnership

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U.S. assembled over several decades of intentional development, acquisitions, and dispositions. Today, clients and their advisors are more focused than ever on these attributes for their building owners, which distinguishes BXP among its competitors.

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BXP’s CBD portfolio of premier workplaces was 91.0% occupied and 92.8% leased (including vacant space for which we have signed leases that have not yet commenced in accordance with GAAP) at March 31, 2024.

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•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 Acquisition activityand Unconsolidated joint venture activities above). 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.

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At March 31, 2024, we evaluated the expected hold period for a portion of our Shady Grove property located in Rockville, Maryland. 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 ASC 820 and on a pending offer from a third party.

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the case of loans denominated in Dollars, Term SOFR and SOFR, (b) in the case of loans denominated in Euro,

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EURIBOR, (c) in the case of loans denominated in Canadian Dollars, CDOR, and (d) in the case of loans

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denominated in Sterling, SONIA, in each case, plus a margin ranging from 70.0 to 140.0 basis points based on

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BPLP’s credit rating or (2) an alternate base rate equal to the greatest of (a) the Federal Funds rate plus 0.5%, (b)

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the administrative agent’s prime rate, (c) Term SOFR plus 1.00%, and (d) 1.00%, in each case, plus a margin

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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%.

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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.