Marcio Silva/iStock via Getty Images Introduction Working my way through office real estate, I saw that I covered Boston Properties (NYSE:BXP), one of America's largest office landlords, four times in the past (this article is number five). Seeking Alpha I started covering the stock in April of 2020. My most recent article was written on October 8, when I went with the title "7% Yield And Mounting Risks - A Closer Look At Boston Properties". Every single one of my articles had a Hold rating, which wa ...

BOSTON--(BUSINESS WIRE)--Boston Properties, Inc. (NYSE: BXP), the largest publicly traded developer, owner, and manager of premier workplaces in the United States, announced today the 2023 tax treatment of distributions on shares of its common stock, as described below. Shareholders are encouraged to consult with their personal tax advisors as to the specific tax treatment to them of these distributions. Common Shares (CUSIP #101121101) Record Date Payment Date Total Distribution per Sha ...

FORM 10-Q For the Quarterly Period Ended September 30, 2023 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to 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 ...

Financial Data and Key Metrics Changes - The company reported funds from operations (FFO) of $1.86 per share, which was $0.02 above the midpoint of guidance [65] - Revenues exceeded assumptions due to better rental revenues, client service income, parking, and hotel performance [35] - Non-cash impairment charges totaled $273 million related to four unconsolidated joint ventures, reflecting a significant market dislocation [35][66] Business Line Data and Key Metrics Changes - The company completed over a million square feet of leasing in the third quarter with a weighted average lease term of over eight years [14] - Net absorption for the premier segment was a positive half a million square feet, contrasting with a negative 600,000 square feet for the balance of the market [7] - The development portfolio now sits at 2.8 million square feet and is 52% leased [56] Market Data and Key Metrics Changes - U.S. transaction volume for office assets dropped 48% from the second quarter to $4.4 billion, marking the lowest quarterly level since Q1 2010 [46] - Direct vacancy for premier workplaces was 12.4% compared to 17% for the balance of the market [16] - The company noted that construction financing for office space is currently difficult to obtain, with traditional lenders reducing exposure to commercial real estate [29] Company Strategy and Development Direction - The company aims to capitalize on unique opportunities to expand its portfolio amid current market dislocation [19] - Focus remains on premier workplace assets, life science, and residential development [49] - The company is actively pursuing additional capital raising through joint ventures and considering incremental asset sales [10] Management's Comments on Operating Environment and Future Outlook - Management expressed that economic conditions are the primary driver of slower leasing activity, with a rebound expected when earnings growth returns [15] - The company remains well-positioned to weather the economic slowdown due to its leadership in the premier workplace market segment [21] - Management highlighted that all office buildings are not the same, with premier workplaces outperforming the broader market [16] Other Important Information - The company has maintained access to capital primarily through unsecured debt markets, which is available to few competitors [19] - The company expects to see additional portfolio vacancy stemming from WeWork defaults as it moves into 2024 [26] - The company has a strong liquidity position with $2.7 billion available [49] Q&A Session Summary Question: Concerns about underwriting lease-up and lease growth - Management noted that buyers are concerned about how to underwrite lease-up and lease growth amid economic uncertainty and the cost of capital [39] Question: Impairments related to joint ventures - Management indicated that the impairment charges reflect accounting adjustments and do not necessarily indicate a meaningful change in asset prospects, except for Platform 16 [40][72] Question: Expectations for WeWork's lease exits - Management stated it is uncertain where WeWork will exit but expects to collect termination income from their leases [87][88] Question: Development opportunities and market conditions - Management discussed the differences between two development opportunities, emphasizing that both serve different market segments [104][105] Question: Pricing adjustments for investment opportunities - Management indicated that pricing adjustments are necessary for buyers to become more active, particularly in light of high borrowing costs [82][93]

[PART I. FINANCIAL INFORMATION](index=5&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Financial Statements (unaudited)](index=5&type=section&id=ITEM%201.%20Financial%20Statements%20(unaudited)) This section presents the unaudited consolidated financial statements for Boston Properties, Inc. and Boston Properties Limited Partnership, including balance sheets, statements of operations, and cash flows [Boston Properties, Inc. Financial Statements](index=5&type=section&id=Boston%20Properties%2C%20Inc.%20Financial%20Statements) Boston Properties, Inc. reported a net income of **$182.2 million** for the six months ended June 30, 2023, a decrease from **$366.0 million** in 2022, with diluted EPS falling to **$1.16** BXP Consolidated Balance Sheet Summary (in thousands) | Metric | June 30, 2023 (in thousands) | December 31, 2022 (in thousands) | | :--- | :--- | :--- | | **Total Assets** | $25,341,680 | $24,207,669 | | **Total Liabilities** | $17,048,845 | $15,837,237 | | **Total Equity** | $8,286,543 | $8,363,819 | BXP Statement of Operations Summary (in thousands, except per share data) | Metric | Six Months Ended June 30, 2023 (in thousands) | Six Months Ended June 30, 2022 (in thousands) | | :--- | :--- | :--- | | **Total Revenue** | $1,620,353 | $1,528,234 | | **Net Income Attributable to BXP** | $182,215 | $366,044 | | **Diluted EPS** | $1.16 | $2.33 | BXP Statement of Cash Flows Summary (in thousands) | Metric | Six Months Ended June 30, 2023 (in thousands) | Six Months Ended June 30, 2022 (in thousands) | | :--- | :--- | :--- | | **Net Cash from Operating Activities** | $613,183 | $616,639 | | **Net Cash from Investing Activities** | ($554,864) | ($980,170) | | **Net Cash from Financing Activities** | $833,359 | $365,223 | [Boston Properties Limited Partnership Financial Statements](index=14&type=section&id=Boston%20Properties%20Limited%20Partnership%20Financial%20Statements) Boston Properties Limited Partnership reported a net income of **$206.9 million** for the six months ended June 30, 2023, a decrease from **$415.6 million** in 2022, with diluted earnings per unit falling to **$1.18** BPLP Consolidated Balance Sheet Summary (in thousands) | Metric | June 30, 2023 (in thousands) | December 31, 2022 (in thousands) | | :--- | :--- | :--- | | **Total Assets** | $25,095,318 | $23,957,763 | | **Total Liabilities** | $17,048,845 | $15,837,237 | | **Total Capital** | $6,905,128 | $6,833,027 | BPLP Statement of Operations Summary (in thousands, except per unit data) | Metric | Six Months Ended June 30, 2023 (in thousands) | Six Months Ended June 30, 2022 (in thousands) | | :--- | :--- | :--- | | **Total Revenue** | $1,620,353 | $1,528,234 | | **Net Income Attributable to BPLP** | $206,928 | $415,617 | | **Diluted Earnings per Common Unit** | $1.18 | $2.38 | BPLP Statement of Cash Flows Summary (in thousands) | Metric | Six Months Ended June 30, 2023 (in thousands) | Six Months Ended June 30, 2022 (in thousands) | | :--- | :--- | :--- | | **Net Cash from Operating Activities** | $613,183 | $616,639 | | **Net Cash from Investing Activities** | ($554,864) | ($980,170) | | **Net Cash from Financing Activities** | $833,359 | $365,223 | [Notes to the Consolidated Financial Statements](index=22&type=section&id=Notes%20to%20the%20Consolidated%20Financial%20Statements) These notes detail the company's accounting policies, financial activities, property portfolio, debt instruments, segment performance, and subsequent events including a new joint venture - As of June 30, 2023, the company owned or had interests in a portfolio of **191 commercial properties** totaling approximately **54.1 million net rentable square feet**, primarily consisting of premier workplaces[125](index=125&type=chunk) - The company consolidates **six Variable Interest Entities (VIEs)**, including its operating partnership BPLP and five in-service properties, for which it is the primary beneficiary[20](index=20&type=chunk)[127](index=127&type=chunk) - On May 15, 2023, BPLP issued **$750.0 million** of **6.500% unsecured senior notes due 2034**, and on January 4, 2023, entered into a **$1.2 billion unsecured term loan facility** subsequently hedged in May 2023[173](index=173&type=chunk)[174](index=174&type=chunk)[176](index=176&type=chunk) - Subsequent to quarter-end, on July 28, 2023, the company entered into a joint venture for the future development of **343 Madison Avenue** in New York City[234](index=234&type=chunk)[295](index=295&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=49&type=section&id=ITEM%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the economic outlook, return-to-office trends, and the company's strategy, highlighting increased leasing activity, **4.3% NOI growth** for the first six months of 2023, and strong liquidity - The company's strategy focuses on its leadership in the premier workplace segment, which continues to outperform the broader office market in vacancy and net absorption as companies upgrade their spaces to attract employees back to the office[218](index=218&type=chunk)[220](index=220&type=chunk) - In Q2 2023, the company signed approximately **938,000 square feet of leases**, an increase from **660,000** in Q1 2023, with the overall in-service premier workplace and retail portfolio **88.3% occupied** and **90.4% leased** as of June 30, 2023[221](index=221&type=chunk) Net Operating Income (NOI) Comparison (in thousands) | Period | 2023 (in thousands) | 2022 (in thousands) | Change (in thousands) | % Change | | :--- | :--- | :--- | :--- | :--- | | **Six Months Ended June 30** | $994,495 | $953,358 | $41,137 | 4.31% | | **Three Months Ended June 30** | $503,489 | $484,042 | $19,447 | 4.02% | - As of July 28, 2023, the company had approximately **$1.4 billion in cash** and **$1.5 billion available** under its revolving credit facility, which management believes is sufficient to fund capital requirements and investment opportunities[434](index=434&type=chunk) [Results of Operations](index=58&type=section&id=Results%20of%20Operations) Net Operating Income (NOI) increased by **$41.1 million (4.3%)** to **$994.5 million** for the six months ended June 30, 2023, primarily driven by acquired and in-service properties Six-Month NOI Change by Portfolio (in thousands) | Portfolio | 2023 NOI (in thousands) | 2022 NOI (in thousands) | Change (in thousands) | | :--- | :--- | :--- | :--- | | **Same Property** | $904,094 | $904,634 | ($540) | | **Acquired** | $43,920 | $4,792 | $39,128 | | **Placed In-Service** | $49,558 | $10,142 | $39,416 | | **Development/Redevelopment** | ($3,607) | $11,377 | ($14,984) | | **Sold** | $530 | $22,413 | ($21,883) | | **Total NOI** | **$994,495** | **$953,358** | **$41,137** | - The increase in Same Property operating expenses for the first six months of 2023 was driven by higher real estate taxes (+$12.1 million), particularly in New York City, and other operating expenses (+$17.4 million), including **$2.3 million** in opening costs for the View Boston Observatory[282](index=282&type=chunk) - Gains on sales of real estate decreased by **$118.9 million** for the six months ended June 30, 2023, as there were no sales in 2023, compared to gains from two property sales in the same period of 2022[319](index=319&type=chunk) - Interest expense for the first six months of 2023 increased by **$71.3 million**, primarily due to higher interest on unsecured term loans and credit facilities (+$29.9 million) and the issuance of new senior notes in late 2022 (+$25.4 million)[324](index=324&type=chunk)[347](index=347&type=chunk) [Liquidity and Capital Resources](index=82&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains strong liquidity with **$15.5 billion** in consolidated debt, a **$1.6 billion** development pipeline, and sufficient capital to meet upcoming obligations and fund new projects - As of June 30, 2023, the company had **13 properties** under construction/redevelopment, with an estimated remaining equity requirement of approximately **$1.6 billion** to be funded through 2026[455](index=455&type=chunk)[453](index=453&type=chunk) Consolidated Debt Summary (as of June 30, 2023, in thousands) | Debt Type | Carrying Amount (in thousands) | | :--- | :--- | | Fixed rate mortgage notes, net | $3,274,764 | | Unsecured senior notes, net | $10,985,395 | | Unsecured term loan, net | $1,196,046 | | **Total Consolidated Debt** | **$15,456,205** | - The company has upcoming debt maturities including **$500 million** of **3.125% notes due September 2023** and **$700 million** of **3.800% notes due February 2024**, which it expects to fund with available cash, asset sales, or refinancing[428](index=428&type=chunk) - On May 17, 2023, BXP renewed its "at the market" (ATM) stock offering program, allowing for the sale of up to **$600.0 million** of its Common Stock, with no shares issued under this program to date[268](index=268&type=chunk)[434](index=434&type=chunk) [Funds from Operations (FFO)](index=96&type=section&id=Funds%20from%20Operations) Funds from Operations (FFO) attributable to Boston Properties, Inc. for Q2 2023 was **$292.8 million** or **$1.86 per diluted share**, a decrease primarily due to the absence of property sales gains BXP FFO Reconciliation (in thousands) | Metric | Q2 2023 (in thousands) | Q2 2022 (in thousands) | | :--- | :--- | :--- | | Net Income Attributable to BXP | $104,299 | $222,989 | | Adjustments (Depreciation, etc.) | $188,545 | $81,571 | | **FFO Attributable to BXP** | **$292,844** | **$304,560** | BPLP FFO Reconciliation (in thousands) | Metric | Q2 2023 (in thousands) | Q2 2022 (in thousands) | | :--- | :--- | :--- | | Net Income Attributable to BPLP | $118,098 | $253,788 | | Adjustments (Depreciation, etc.) | $208,227 | $85,101 | | **FFO Attributable to BPLP** | **$326,325** | **$338,889** | [Quantitative and Qualitative Disclosures about Market Risk](index=102&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company's primary market risk is interest rate changes, with **$15.5 billion** in consolidated debt as of June 30, 2023, of which **$1.2 billion** in variable-rate debt was fully hedged - As of June 30, 2023, the company had **no unhedged variable rate debt**, as its entire **$1.2 billion** of variable rate borrowings was subject to interest rate swaps[488](index=488&type=chunk) Consolidated Debt by Rate Type (as of June 30, 2023) | Rate Type | Amount (billions) | Percentage of Total | | :--- | :--- | :--- | | Fixed Rate | $14.3 | ~92.3% | | Variable Rate (Hedged) | $1.2 | ~7.7% | | **Total** | **$15.5** | **100%** | [Controls and Procedures](index=103&type=section&id=ITEM%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2023, with no material changes to internal control over financial reporting during Q2 - The Chief Executive Officer and Chief Financial Officer of Boston Properties, Inc. concluded that the disclosure controls and procedures for both BXP and BPLP were **effective** as of June 30, 2023[515](index=515&type=chunk)[516](index=516&type=chunk) - There were **no material changes** in internal control over financial reporting during the second quarter of 2023 that materially affected, or are reasonably likely to materially affect, the company's internal controls[515](index=515&type=chunk)[516](index=516&type=chunk) [PART II. OTHER INFORMATION](index=104&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Legal Proceedings](index=104&type=section&id=ITEM%201.%20Legal%20Proceedings) The company is subject to ordinary course legal proceedings, generally covered by insurance, and not expected to materially affect its financial position or liquidity - The company reports that it is subject to ordinary course legal proceedings, which are generally covered by insurance and are not expected to have a **material adverse effect** on its financial condition[542](index=542&type=chunk) [Risk Factors](index=104&type=section&id=ITEM%201A.%20Risk%20Factors) There were no material changes to the risk factors previously disclosed in the company's 2022 Annual Report on Form 10-K - There were **no material changes** to the risk factors previously disclosed in the company's 2022 Annual Report on Form 10-K[543](index=543&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=104&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During Q2 2023, BPLP issued **7,449 common units** to BXP for **$67.80** and repurchased **11,627 LTIP and MYLTIP units** from terminated employees - BPLP issued **7,449 common units** to BXP in connection with BXP's issuance of restricted stock to non-employee directors and settlement of deferred stock awards[546](index=546&type=chunk) - BPLP repurchased **11,627 LTIP and MYLTIP units** during the quarter from terminated employees at a price of **$0.25 per unit**[548](index=548&type=chunk)[519](index=519&type=chunk) [Defaults Upon Senior Securities](index=105&type=section&id=ITEM%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon its senior securities during the period - The company reported **no defaults** upon senior securities[549](index=549&type=chunk)[521](index=521&type=chunk) [Other Information](index=105&type=section&id=ITEM%205.%20Other%20Information) The company reported no other information required to be disclosed under this item - The company reported **no other material information** for the quarter[522](index=522&type=chunk)[551](index=551&type=chunk) [Exhibits](index=106&type=section&id=ITEM%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including credit agreements, senior notes indenture, and required CEO and CFO certifications - Exhibit 4.1 contains the Supplemental Indenture for the **$750 million 6.500% Senior Notes due 2034**[558](index=558&type=chunk) - Exhibit 10.1 is the First Amendment to the Ninth Amended and Restated Credit Agreement, dated June 1, 2023[553](index=553&type=chunk) - Exhibits 31.1 through 32.4 contain the required CEO and CFO certifications under the Sarbanes-Oxley Act[525](index=525&type=chunk)[558](index=558&type=chunk)

Financial Data and Key Metrics Changes - BXP reported funds from operations (FFO) of $1.86 per share, exceeding the midpoint of guidance by $0.06 per share, attributed to better-than-expected revenues and lower operating expenses [135] - The company increased its FFO per share guidance for the entirety of 2023, indicating a positive outlook despite challenging market conditions [24] Business Line Data and Key Metrics Changes - In Q2, BXP completed 938,000 square feet of leasing with a weighted average lease term of 8 years, despite a challenging leasing market [24] - The leasing activity included 63 transactions, with 37 renewals and 26 new tenants, indicating a diverse leasing strategy [123] - The lease rates varied by market, with increases in Boston (8%) and San Francisco (10%), while New York and D.C. saw declines of 11% and 13.5% respectively [125] Market Data and Key Metrics Changes - The direct vacancy for premier workplaces was reported at 11.6%, compared to 16.5% for the overall market, highlighting the strength of BXP's assets [27] - The San Francisco CBD saw a more than 50% increase in tenant demand since Q4 2022, driven by new technology demand, particularly in AI [127][128] Company Strategy and Development Direction - BXP is focusing on premier workplaces, life sciences, and residential development in its six target markets, pausing construction on certain projects to align with market recovery [119][120] - The company has a significant development pipeline with 13 projects underway, aggregating approximately 3.1 million square feet and $2.6 billion in investment [121] Management's Comments on Operating Environment and Future Outlook - Management expressed a cautious outlook for the tech sector, noting that demand has not yet materialized significantly and that comparisons to previous years will be muted [10][11] - The company anticipates a gradual recovery in leasing activity, driven by a focus on premier workplaces and the potential for increased demand as companies finalize return-to-office strategies [42][43] Other Important Information - BXP's capital market activity included issuing $750 million in unsecured green bonds, which were well oversubscribed, indicating strong investor interest [133] - The company is considering additional capital raising through dispositions and joint ventures, particularly in residential assets and select pre-leased developments [51][85] Q&A Session All Questions and Answers Question: What are the conversations like regarding leasing velocity and expectations for the second half of the year? - Management noted that leasing velocity was up significantly in the quarter but down year-over-year, with expectations for modest improvement in lease rates in the back half of the year [8][15] Question: What is the outlook for tech companies and their space demand? - Management indicated that tech companies' income growth has flattened, leading to a focus on cost-cutting, which impacts space demand. However, there is optimism regarding AI demand as a potential driver for future leasing activity [42][46] Question: How is the leasing pipeline trending between life sciences and traditional office users? - Management reported that while traditional office demand is light, they are capturing some demand due to their premier properties. Life sciences remain a focus for growth, with expectations for continued leasing activity [101][102] Question: What is the company's strategy regarding capital allocation and potential acquisitions? - Management stated that they are being patient with new investment activity, believing acquisition opportunities will grow in number and become more attractive as market conditions evolve [29][81]

PART I. FINANCIAL INFORMATION [Financial Statements (Unaudited)](index=5&type=section&id=ITEM%201.%20Financial%20Statements%20(unaudited)) Unaudited consolidated financial statements for BXP and BPLP for the quarter ended March 31, 2023, detail assets, liabilities, equity, operations, and cash flows [Consolidated Financial Statements](index=6&type=section&id=Consolidated%20Financial%20Statements) Consolidated statements as of March 31, 2023, show BXP's total assets at **$24.6 billion** and a net income of **$77.9 million**, a decrease from the prior year BXP Consolidated Balance Sheet Highlights (As of March 31, 2023) | Metric | Amount (in thousands) | | :--- | :--- | | Total Real Estate | $19,539,375 | | Total Assets | $24,625,422 | | Total Liabilities | $16,313,339 | | Total Equity | $8,306,484 | BXP Consolidated Statement of Operations Highlights (Three months ended March 31) | Metric | 2023 (in thousands) | 2022 (in thousands) | | :--- | :--- | :--- | | Total Revenue | $803,200 | $754,307 | | Total Expenses | $568,661 | $499,978 | | Net Income | $105,628 | $176,957 | | Net Income Attributable to BXP | $77,890 | $143,047 | [Notes to the Consolidated Financial Statements](index=20&type=section&id=Notes%20to%20the%20Consolidated%20Financial%20Statements) Detailed notes explain the company's accounting policies, real estate portfolio, joint ventures, debt structure, and segment performance [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=39&type=section&id=ITEM%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management's analysis covers Q1 2023 financial performance, leasing activities, liquidity, and capital resources, noting a decrease in net income but a **4.6%** increase in NOI - The company's core strategy is to develop, acquire, and manage premier workplaces in six gateway markets: Boston, Los Angeles, New York, San Francisco, Seattle, and Washington, DC[299](index=299&type=chunk)[327](index=327&type=chunk) - In Q1 2023, the company signed approximately **660,500 square feet** of leases with a weighted-average lease term of **7.7 years**, and overall occupancy was **88.6%**[302](index=302&type=chunk) Q1 2023 vs Q1 2022 Financial Highlights (BXP) | Metric | Q1 2023 (in thousands) | Q1 2022 (in thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Net Income Attributable to BXP | $77,890 | $143,047 | (45.55)% | | Net Operating Income (NOI) | $491,006 | $469,316 | 4.62% | | Diluted FFO attributable to BXP | $271,981 | $286,200 | (5.0)% | [Results of Operations](index=46&type=section&id=Results%20of%20Operations) Q1 2023 net income decreased by **$65.2 million** due to lower gains on sales and higher expenses, though Net Operating Income (NOI) grew by **4.6%** Total Property Portfolio - Q1 2023 vs Q1 2022 | Metric | 2023 (in thousands) | 2022 (in thousands) | % Change | | :--- | :--- | :--- | :--- | | Total Rental Revenue | $769,158 | $726,888 | 5.82% | | Real Estate Operating Expenses | $285,845 | $263,823 | 8.35% | | Net Operating Income (NOI) | $491,006 | $469,316 | 4.62% | - The Same Property Portfolio NOI decreased by **0.62%** (excluding residential and hotel), as a 1.5% increase in lease revenue was offset by a 5.8% increase in operating expenses, primarily higher real estate taxes[82](index=82&type=chunk)[345](index=345&type=chunk) - Interest expense increased by approximately **$33.0 million**, primarily due to higher interest rates on variable-rate debt and new debt issuances[393](index=393&type=chunk) - Depreciation and amortization expense increased by **$31.1 million**, largely due to properties acquired or placed in-service and accelerated depreciation on assets being redeveloped[358](index=358&type=chunk)[417](index=417&type=chunk) [Liquidity and Capital Resources](index=58&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains a strong liquidity position with **$670.2 million** in cash and **$1.5 billion** available under its credit facility to fund development and debt service - As of March 31, 2023, the development/redevelopment pipeline includes 15 properties totaling **4.0 million sq. ft.**, with an estimated remaining investment of **$1.9 billion**[11](index=11&type=chunk)[107](index=107&type=chunk) - In January 2023, BPLP entered into a new **$1.2 billion** unsecured term loan, maturing in May 2024, and used a portion of the proceeds to repay a **$730.0 million** term loan that was due in May 2023[117](index=117&type=chunk)[240](index=240&type=chunk) - As of March 31, 2023, BPLP had **no borrowings** under its **$1.5 billion** revolving credit facility[54](index=54&type=chunk) Consolidated Debt Statistics (as of March 31, 2023) | Metric | Value | | :--- | :--- | | Total Consolidated Debt | $14.7 billion | | Fixed Rate Debt | 91.88% | | Variable Rate Debt | 8.12% | | Weighted-Average Interest Rate | 3.81% | | Weighted-Average Maturity | 5.0 years | [Funds from Operations (FFO)](index=70&type=section&id=Funds%20from%20Operations%20(FFO)) Diluted FFO for Q1 2023 was **$272.0 million** (**$1.73 per share**), a decrease from the prior year, primarily due to higher interest expense Reconciliation of Net Income to FFO (BXP) | (in thousands) | Three months ended March 31, 2023 | Three months ended March 31, 2022 | | :--- | :--- | :--- | | Net income attributable to BXP | $77,890 | $143,047 | | Add: Depreciation and amortization (BXP Share) | $216,200 | $181,567 | | Less: Gains on sales of real estate | $0 | ($22,701) | | Less: Unrealized gain on non-real estate investment | $259 | $0 | | **Diluted FFO attributable to BXP** | **$271,981** | **$286,200** | Diluted FFO Per Share (BXP) | Metric | Three months ended March 31, 2023 | Three months ended March 31, 2022 | | :--- | :--- | :--- | | Diluted FFO per Share | $1.73 | $1.82 | [Quantitative and Qualitative Disclosures about Market Risk](index=76&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company's primary market risk is interest rate fluctuations on its **$1.2 billion** of variable-rate debt - The company's primary market risk is interest rate risk; as of March 31, 2023, variable-rate debt totaled **$1.2 billion**[451](index=451&type=chunk) - A **100 basis point** increase in interest rates would have increased interest expense by approximately **$3.0 million** for the three months ended March 31, 2023[451](index=451&type=chunk) Debt Maturity Profile (Consolidated) | Maturity Year | Fixed Rate Debt (in thousands) | Variable Rate Debt (in thousands) | Total (in thousands) | | :--- | :--- | :--- | :--- | | 2023 | $496,028 | $0 | $496,028 | | 2024 | $699,332 | $1,194,916 | $1,894,248 | | 2025 | $842,934 | $0 | $842,934 | | 2026 | $1,986,314 | $0 | $1,986,314 | | 2027 | $3,041,033 | $0 | $3,041,033 | | 2028+ | $6,453,722 | $0 | $6,453,722 | | **Total** | **$13,519,363** | **$1,194,916** | **$14,714,279** | [Controls and Procedures](index=76&type=section&id=ITEM%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of March 31, 2023, with no material changes in internal controls - Both BXP's and BPLP's management, including their respective CEO and CFO, concluded that **disclosure controls and procedures were effective** as of the end of the period covered by the report[68](index=68&type=chunk)[69](index=69&type=chunk)[454](index=454&type=chunk) - **No changes** in internal control over financial reporting occurred during the first quarter of 2023 that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[69](index=69&type=chunk)[454](index=454&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=78&type=section&id=ITEM%201.%20Legal%20Proceedings) Ordinary course legal proceedings are not expected to have a material adverse effect on the company's financial condition - Legal proceedings and claims arise in the ordinary course of business and are **generally covered by insurance**[41](index=41&type=chunk) - Management does not expect the outcome of such matters to have a **material adverse effect** on the company's financial position, operations, or liquidity[41](index=41&type=chunk) [Risk Factors](index=78&type=section&id=ITEM%201A.%20Risk%20Factors) No material changes were reported to the risk factors disclosed in the 2022 Annual Report on Form 10-K - **No material changes** were reported to the risk factors previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2022[71](index=71&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=78&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) BPLP issued **75,436 common units** to BXP for **$0.5 million**, and BXP repurchased **8,698 shares** to satisfy employee tax obligations - BPLP issued **75,436 common units** to BXP for approximately **$0.5 million** in connection with BXP's employee stock plans, issued in reliance on an exemption from registration under Section 4(a)(2) of the Securities Act[73](index=73&type=chunk) Issuer Purchases of Equity Securities (BXP Common Stock) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | Jan 1 - Jan 31, 2023 | 7,533 | $71.20 | | Feb 1 - Feb 28, 2023 | 1,165 | $75.48 | | Mar 1 - Mar 31, 2023 | 0 | $0.00 | | **Total** | **8,698** | **$71.77** | [Defaults Upon Senior Securities](index=79&type=section&id=ITEM%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities during the period - None[45](index=45&type=chunk)[74](index=74&type=chunk) [Mine Safety Disclosures](index=79&type=section&id=ITEM%204.%20Mine%20Safety%20Disclosures) The company reported no mine safety disclosures - None[86](index=86&type=chunk) [Other Information](index=79&type=section&id=ITEM%205.%20Other%20Information) The company reported no other information for the period - None[74](index=74&type=chunk)[460](index=460&type=chunk) [Exhibits](index=80&type=section&id=ITEM%206.%20Exhibits) Filed exhibits include credit agreements, CEO/CFO certifications, and Inline XBRL documents - Exhibits filed include **CEO and CFO certifications** under Sarbanes-Oxley Act Sections 302 and 906 for both BXP and BPLP[462](index=462&type=chunk) - **Inline XBRL** taxonomy and data files are included as exhibits[76](index=76&type=chunk) Signatures [Signatures](index=81&type=section&id=Signatures) The report was duly signed by authorized officers of BXP and BPLP on May 3, 2023 - The report was duly signed on behalf of the Registrants (Boston Properties, Inc. and Boston Properties Limited Partnership) on **May 3, 2023**[49](index=49&type=chunk)[465](index=465&type=chunk)

Financial Data and Key Metrics Changes - The company reported first quarter FFO of $1.73 per share, exceeding the midpoint of guidance by $0.06 per share [65] - Full year guidance for FFO has been increased by $0.04 per share, now ranging from $7.14 to $7.20 per share [97][95] - The increase in guidance is attributed to $0.03 of better projected contribution from the portfolio and $0.01 of higher fee income [97] Business Line Data and Key Metrics Changes - The company completed 660,000 square feet of leasing in the first quarter, with a weighted average lease term of 7.7 years [35] - The leasing activity is expected to reach approximately 3 million square feet for the year, with a current pipeline of 900,000 square feet in negotiation and 1.5 million square feet in proposals [26][84] - The portfolio's in-service occupancy stands at 88.6%, which rises to 91% with leases signed but not commenced [54] Market Data and Key Metrics Changes - Direct vacancy for Premier Workplaces increased only 20 basis points to 10.7%, while the balance of the market saw an increase of 80 basis points to 15.5% [41] - U.S. transaction volume for office assets slowed to $6.6 billion in the first quarter, down 47% from the previous quarter [42] - The company noted that the availability rates are at or above 20% in coastal and Sun Belt markets, indicating a challenging supply picture [52] Company Strategy and Development Direction - The company is focusing on premier workplaces, life science, and residential development as key areas for growth [18] - The strategy includes being opportunistic in the current market environment while maintaining a strong and liquid balance sheet [20] - The company aims to maintain a steady dividend and increase it over time as developments add to income [93] Management's Comments on Operating Environment and Future Outlook - Management acknowledged significant economic headwinds but noted that the company continued to perform well in the first quarter [7] - The leasing slowdown is viewed as a cyclical trend rather than a secular trend, with expectations for recovery alongside economic conditions [36] - Management expressed confidence in the ability to achieve leasing targets despite current market challenges [116] Other Important Information - The company has elevated levels of liquidity, with $2.4 billion available, including $900 million in cash [88] - The company has a diverse portfolio with 8% of total revenue coming from life science clients, primarily from public companies [56][98] - The company is actively negotiating leases and has seen a modest growth in its active proposal pipeline [79][104] Q&A Session Summary Question: Can you speak to the leasing pipeline and projected yields? - The leasing pipeline is bulky, primarily in two locations, with expected returns slightly lower due to current market conditions [71] Question: How healthy is the mortgage market for office assets? - The mortgage market remains open for high-quality, well-leased premier workplace assets, despite tighter underwriting criteria [30][75] Question: What is the company's approach to capital preservation versus growth? - The company is open to growth opportunities but is focused on pricing and maintaining a strong capital structure [110] Question: How is the company addressing demand from smaller tenants? - The company is actively creating spec suites to accommodate demand from medium and small financial and professional services companies [134]

Supplemental Operating and Financial Data for the Quarter Ended March 31, 2023 FORWARD-LOOKING STATEMENTS This Supplemental package includes non-GAAP financial measures, which are accompanied by what the Company considers the most directly comparable financial measures calculated and presented in accordance with GAAP. Quantitative reconciliations of the differences between the most directly comparable GAAP financial measures and the non-GAAP financial measures presented are provided within this Supplemental ...

15 Table of Contents Ø Risk Management BXP is committed to managing and avoiding the impacts of climate change. Our risk management program includes physical and transition risks, including both climate mitigation (resource efficiency and emissions reduction) and adaptation (integration of climate resilience into our investment decisionmaking). We are actively acquiring, developing and operating a geographically diverse portfolio of high-quality commercial real estate properties. Individual assets have uniq ...