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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
xýQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 2015
For the Quarterly Period Ended March 31, 2016
¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             
For the transition period from             to             
Commission File Number: 1-13087 (Boston Properties, Inc.)
Commission File Number: 0-50209 (Boston Properties Limited Partnership)
 
BOSTON PROPERTIES, INC.
BOSTON PROPERTIES LIMITED PARTNERSHIP
(Exact name of RegistrantRegistrants as specified in its charter)
 
Boston Properties, Inc.Delaware04-337294804-2473675
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification Number)
Boston Properties Limited PartnershipDelaware04-3372948
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)Number)
Prudential Center, 800 Boylston Street, Suite 1900, Boston, Massachusetts 02199-8103
(Address of principal executive offices) (Zip Code)
(617) 236-3300
(Registrant’sRegistrants’ telephone number, including area code)
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  
Boston Properties, Inc.:    Yes  x    No  ¨         Boston Properties Limited Partnership:    Yes  x    No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).    
Boston Properties, Inc.:    Yes  x    No  ¨         Boston Properties Limited Partnership:    Yes  x    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Boston Properties, Inc.:    
Large accelerated filer  ý         Accelerated filer  ¨         Non-accelerated filer  ¨         Smaller reporting company  ¨
Boston Properties Limited Partnership:
Large accelerated filer  ¨         Accelerated filer  ¨         Non-accelerated filer  x         Smaller reporting company  ¨

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Large accelerated filer  o
Accelerated filer                    o
Non-accelerated filer    x    (Do not check if a smaller reporting company)
Smaller reporting company   o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    
Boston Properties, Inc.:    Yes  ¨    No  x        Boston Properties Limited Partnership:    Yes  ¨    No  x
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Boston Properties, Inc.Common Stock, par value $0.01 per share153,611,330
(Registrant)(Class)(Outstanding on May 2, 2016)
 

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EXPLANATORY NOTE
This report combines the quarterly reports on Form 10-Q for the period ended March 31, 2016 of Boston Properties, Inc. and Boston Properties Limited Partnership. Unless stated otherwise or the context otherwise requires, references to “BXP” mean Boston Properties, Inc., a Delaware corporation and real estate investment trust (“REIT”), and references to “BPLP” and the “Operating Partnership” mean Boston Properties Limited Partnership, a Delaware limited partnership. References to the “Company,” “we,” “us” and “our” mean collectively BXP, BPLP and those entities/subsidiaries consolidated by BXP.
BPLP is the entity through which we conduct substantially all of our business and own, either directly or through subsidiaries, substantially all of our 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.
As of March 31, 2016, BXP owned an approximate 89.4% ownership interest in BPLP. The remaining approximate 10.6% interest is owned by limited partners. The other limited partners of BPLP are (1) persons who contributed their direct or indirect interests in properties to BPLP in exchange for common units or preferred units of limited partnership interest in BPLP or (2) recipients of long term incentive plan units of BPLP pursuant to BXP’s Stock Option and Incentive Plans. Under the limited partnership agreement of BPLP, unitholders may present their common units of BPLP for redemption at any time (subject to restrictions agreed upon at the time of issuance of the units that may restrict such right for a period of time, generally one year from issuance). Upon presentation of a common unit for redemption, BPLP must redeem the unit for cash equal to the then value of a share of BXP’s common stock. In lieu of cash redemption by BPLP, however, BXP may elect to acquire any common units so tendered by issuing shares of BXP common stock in exchange for the common units. If BXP so elects, its common stock will be exchanged for common units on a one-for-one basis. This one-for-one exchange ratio is subject to specified adjustments to prevent dilution. BXP generally expects that it will elect to issue its common stock in connection with each such presentation for redemption rather than having BPLP pay cash. With each such exchange or redemption, BXP’s percentage ownership in BPLP will increase. In addition, whenever BXP issues shares of its common stock other than to acquire common units of BPLP, BXP must contribute any net proceeds it receives to BPLP and BPLP must issue to BXP an equivalent number of common units of BPLP. This structure is commonly referred to as an umbrella partnership REIT, or UPREIT.
The Company believes that combining the quarterly reports on Form 10-Q of BXP and BPLP into this single report provides the following benefits:
enhances investors’ understanding of BXP and BPLP by enabling investors 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 streamlined and readable presentation because a substantial portion of the disclosure applies to both BXP and BPLP; and
creates time and cost efficiencies through the preparation of one combined report instead of two separate reports.
The Company believes it is important to understand the few differences between BXP and BPLP in the context of how BXP and BPLP operate as a consolidated company. The financial results of BPLP are consolidated into the financial statements of BXP. BXP does not have any other significant assets, liabilities or operations, other than its investment in BPLP, nor does it have employees of its own. BPLP, not BXP, generally executes all significant business relationships other than transactions involving the securities of BXP. BPLP holds substantially all of the assets of BXP, including ownership interests in joint ventures. BPLP conducts the operations of the business and is structured as a partnership with no publicly traded equity. Except for the net proceeds from equity offerings by BXP, which are contributed to the capital of BPLP in exchange for common or preferred units of partnership in BPLP, as applicable, BPLP generates all remaining capital required by the Company’s business. These sources include working capital, net cash provided by operating activities, borrowings under the revolving credit facility, the issuance of secured and unsecured debt and equity securities and proceeds received from the disposition of certain properties and 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 and development joint venture partners. The noncontrolling interests in BXP’s financial statements include the same noncontrolling interests at BPLP’s level and limited partners of BPLP. The differences between shareholders’ equity and partners’ capital result from differences in the equity issued at BXP and BPLP levels.

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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 OP Unit redemptions. This accounting resulted in a step-up of the real estate assets at BXP. This resulted in a difference between the net real estate of BXP as compared to BPLP of approximately $337.2 million, or 2.2% at March 31, 2016 and a corresponding difference in depreciation expense and gains on sales of real estate upon the sale of certain properties having an allocation of the real estate step-up. The acquisition accounting was nullified on a prospective basis beginning in 2009 as a result of the Company’s adoption of a new accounting standard requiring any future redemptions to be accounted for solely as an equity transaction.
To help investors better understand the key differences between BXP and BPLP, certain information for BXP and BPLP in this report has been separated, as set forth below:
Item 1. Financial Statements (unaudited) which includes the following specific disclosures for BXP and BPLP:
•Note 8. Noncontrolling Interest;
•Note 9. Stockholders’ Equity / Partners’ Capital; and
•Note 10. Earnings Per Share / Common Unit;
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations includes information specific to each entity, where applicable;
Item 2. Liquidity and Capital Resources includes separate reconciliations of amounts to each entity’s financial statements, where applicable;
This report also includes separate Part I, Item 4. Controls and Procedures sections and separate Exhibits 31 and 32 certifications for each of BXP and BPLP in order to establish that the requisite certifications have been made and that BXP and BPLP are compliant with Rule 13a-15 or Rule 15d-15 of the Securities Exchange Act of 1934 and 18 U.S.C. §1350.


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BOSTON PROPERTIES, INC. AND BOSTON PROPERTIES LIMITED PARTNERSHIP
FORM 10-Q
for the quarter ended September 30, 2015March 31, 2016
TABLE OF CONTENTS
 
  
Page
PART I.
FINANCIAL INFORMATION
 
ITEM 1.
Financial Statements (unaudited)
1
 
Boston Properties, Inc.
a) Consolidated Balance Sheets as of September 30, 2015March 31, 2016 and December 31, 20142015
1
 
b) Consolidated Statements of Operations for the three and nine months ended September 30,March 31, 2016 and 2015 and 2014
2
 
c) Consolidated Statements of Comprehensive Income for the three and nine months ended September 30,March 31, 2016 and 2015 and 2014
3
 
d) Consolidated Statements of Partners’ CapitalStockholders’ Equity for the ninethree months ended September 30,March 31, 2016 and 2015 and 2014
4
 
e) Consolidated Statements of Cash Flows for the ninethree months ended September 30,March 31, 2016 and 2015 and 2014
5
 
Boston Properties Limited Partnership
f) a) Consolidated Balance Sheets as of March 31, 2016 and December 31, 2015
7
b) Consolidated Statements of Operations for the three months ended March 31, 2016 and 2015
8
c) Consolidated Statements of Comprehensive Income for the three months ended March 31, 2016 and 2015
9
d) Consolidated Statements of Partners’ Capital for the three months ended March 31, 2016 and 2015
10
e) Consolidated Statements of Cash Flows for the three months ended March 31, 2016 and 2015
11
Boston Properties, Inc. and Boston Properties Limited Partnership
Notes to the Consolidated Financial Statements
713
ITEM 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
2835
ITEM 3.
Quantitative and Qualitative Disclosures about Market Risk
7165
ITEM 4.
Controls and Procedures
7266
  
PART II.
OTHER INFORMATION
 
ITEM 1.
Legal Proceedings
7367
ITEM 1A.
Risk Factors
7367
ITEM 2.
Unregistered Sales of Equity Securities and Use of Proceeds
7367
ITEM 3.
Defaults Upon Senior Securities
7368
ITEM 4.
Mine Safety Disclosures
7368
ITEM 5.
Other Information
7468
ITEM 6.
Exhibits
7469
  
SIGNATURES
7570

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PART I. FINANCIAL INFORMATION
ITEM 1—Financial Statements.



BOSTON PROPERTIES LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEETS
(Unaudited)
 September 30,
2015		 December 31,
2014
 (in thousands, except for unit amounts)
ASSETS   
Real estate, at cost$17,990,524
 $17,810,133
Construction in progress725,601
 736,311
Land held for future development264,598
 268,114
Less: accumulated depreciation(3,755,983) (3,476,321)
Total real estate15,224,740
 15,338,237
Cash and cash equivalents1,387,007
 1,763,079
Cash held in escrows90,379
 487,321
Investments in securities19,645
 19,459
Tenant and other receivables (net of allowance for doubtful accounts of $1,164 and $1,142, respectively)66,446
 46,595
Accrued rental income (net of allowance of $1,558 and $1,499, respectively)737,145
 691,999
Deferred charges, net749,628
 831,744
Prepaid expenses and other assets143,476
 164,432
Investments in unconsolidated joint ventures217,529
 193,394
Total assets$18,635,995
 $19,536,260
LIABILITIES AND CAPITAL   
Liabilities:   
Mortgage notes payable$4,132,071
 $4,309,484
Unsecured senior notes (net of discount of $11,092 and $12,296, respectively)5,288,908
 5,287,704
Unsecured line of credit—
 —
Mezzanine notes payable308,817
 309,796
Outside members' notes payable180,000
 180,000
Accounts payable and accrued expenses245,200
 243,263
Distributions payable112,912
 882,472
Accrued interest payable200,916
 163,532
Other liabilities448,680
 502,255
Total liabilities10,917,504
 11,878,506
Commitments and contingencies—
 —
Noncontrolling interests:   
Redeemable interest in property partnership—
 104,692
Redeemable partnership units—0 and 12,667 series four preferred units outstanding at redemption value at September 30, 2015 and December 31, 2014, respectively—
 633
Redeemable partnership units—16,097,473 and 16,453,670 common units and 1,837,080 and 1,496,799 long term incentive units outstanding at redemption value at September 30, 2015 and December 31, 2014, respectively2,123,451
 2,310,046
Capital:   
5.25% Series B cumulative redeemable preferred units, liquidation preference $2,500 per unit, 80,000 units issued and outstanding at September 30, 2015 and December 31, 2014193,623
 193,623
Boston Properties Limited Partnership partners’ capital—1,715,092 and 1,710,644 general partner units and 151,859,508 and 151,403,301 limited partner units outstanding at September 30, 2015 and December 31, 2014, respectively3,810,609
 3,446,293
Noncontrolling interests in property partnerships1,590,808
 1,602,467
Total capital5,595,040
 5,242,383
Total liabilities and capital$18,635,995
 $19,536,260
BOSTON PROPERTIES, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited )
 March 31,
2016		 December 31,
2015
 (in thousands, except for share and par value amounts)
ASSETS   
Real estate, at cost (amounts related to variable interest entities (“VIEs”) of $6,024,005 at March 31, 2016)$18,424,542
 $18,465,405
Construction in progress (amounts related to VIEs of $486,025 at March 31, 2016)857,578
 763,935
Land held for future development256,952
 252,195
Less: accumulated depreciation (amounts related to VIEs of ($690,415) at March 31, 2016)(3,969,648) (3,925,894)
Total real estate15,569,424
 15,555,641
Cash and cash equivalents (amounts related to VIEs of $227,255 at March 31, 2016)1,605,678
 723,718
Cash held in escrows (amounts related to VIEs of $3,671 at March 31, 2016)71,349
 73,790
Investments in securities21,077
 20,380
Tenant and other receivables (amounts related to VIEs of $24,403 at March 31, 2016)73,759
 97,865
Accrued rental income (amounts related to VIEs of $217,148 at March 31, 2016)767,864
 754,883
Deferred charges, net (amounts related to VIEs of $323,493 at March 31, 2016)693,976
 704,867
Prepaid expenses and other assets (amounts related to VIEs of $77,995 at March 31, 2016)136,799
 185,118
Investments in unconsolidated joint ventures235,904
 235,224
Total assets$19,175,830
 $18,351,486
LIABILITIES AND EQUITY   
Liabilities:   
Mortgage notes payable, net (amounts related to VIEs of $2,060,838 at March 31, 2016)$3,416,622
 $3,435,242
Unsecured senior notes, net6,255,602
 5,264,819
Unsecured line of credit—
 —
Mezzanine notes payable (amounts related to VIEs of $308,142 at March 31, 2016)308,142
 308,482
Outside members' notes payable (amounts related to VIEs of $180,000 at March 31, 2016)180,000
 180,000
Accounts payable and accrued expenses (amounts related to VIEs of $82,270 at March 31, 2016)252,727
 274,709
Dividends and distributions payable113,079
 327,320
Accrued interest payable (amounts related to VIEs of $136,165 at March 31, 2016)221,578
 190,386
Other liabilities (amounts related to VIEs of $205,007 at March 31, 2016)498,290
 483,601
Total liabilities11,246,040
 10,464,559
Commitments and contingencies—
 —
Equity:   
Stockholders’ equity attributable to Boston Properties, Inc.:   
Excess stock, $0.01 par value, 150,000,000 shares authorized, none issued or outstanding—
 —
Preferred stock, $0.01 par value, 50,000,000 shares authorized;   
5.25% Series B cumulative redeemable preferred stock, $0.01 par value, liquidation preference $2,500 per share, 92,000 shares authorized, 80,000 shares issued and outstanding at March 31, 2016 and December 31, 2015200,000
 200,000
Common stock, $0.01 par value, 250,000,000 shares authorized, 153,683,866 and 153,658,866 issued and 153,604,966 and 153,579,966 outstanding at March 31, 2016 and December 31, 2015, respectively1,536
 1,536
Additional paid-in capital6,306,723
 6,305,687
Dividends in excess of earnings(699,048) (780,952)
Treasury common stock at cost, 78,900 shares at March 31, 2016 and December 31, 2015(2,722) (2,722)
Accumulated other comprehensive loss(56,706) (14,114)
Total stockholders’ equity attributable to Boston Properties, Inc.5,749,783
 5,709,435
Noncontrolling interests:   
Common units of the Operating Partnership616,095
 603,092
Property partnerships1,563,912
 1,574,400
Total equity7,929,790
 7,886,927
Total liabilities and equity$19,175,830
 $18,351,486

The accompanying notes are an integral part of these consolidated financial statements.

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BOSTON PROPERTIES, LIMITED PARTNERSHIPINC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended
September 30,		 Nine months ended September 30,Three months ended
March 31,
2015 2014 2015 20142016 2015
(in thousands, except for per unit amounts)(in thousands, except for per share amounts)
Revenue          
Rental          
Base rent$494,300
 $484,071
 $1,471,591
 $1,402,328
$536,128
 $490,682
Recoveries from tenants91,544
 90,103
 266,932
 253,419
89,586
 88,593
Parking and other25,509
 26,236
 76,849
 76,869
24,825
 24,788
Total rental revenue611,353
 600,410
 1,815,372
 1,732,616
650,539
 604,063
Hotel revenue12,619
 11,918
 35,107
 32,478
8,757
 9,085
Development and management services5,912
 6,475
 16,102
 18,197
6,689
 5,328
Total revenue629,884
 618,803
 1,866,581
 1,783,291
665,985
 618,476
Expenses          
Operating          
Rental219,796
 215,179
 655,610
 624,213
219,172
 221,350
Hotel8,125
 7,585
 24,196
 21,697
7,634
 7,576
General and administrative20,944
 22,589
 72,019
 75,765
29,353
 28,791
Transaction costs254
 1,402
 789
 2,500
25
 327
Depreciation and amortization151,017
 155,217
 469,087
 460,064
159,448
 154,223
Total expenses400,136
 401,972
 1,221,701
 1,184,239
415,632
 412,267
Operating income229,748
 216,831
 644,880
 599,052
250,353
 206,209
Other income (expense)          
Income from unconsolidated joint ventures2,647
 4,419
 20,559
 10,069
1,791
 14,834
Interest and other income3,637
 3,421
 6,337
 6,841
1,505
 1,407
Gains (losses) from investments in securities(1,515) (297) (1,146) 651
Gains from investments in securities259
 393
Interest expense(108,727) (113,308) (326,018) (337,839)(105,309) (108,757)
Income before gains on sales of real estate125,790
 111,066
 344,612
 278,774
148,599
 114,086
Gains on sales of real estate199,723
 41,937
 294,807
 41,937
67,623
 95,084
Net income325,513
 153,003
 639,419
 320,711
216,222
 209,170
Net income attributable to noncontrolling interests          
Noncontrolling interests in property partnerships(115,240) (5,566) (139,712) (17,473)(10,464) (15,208)
Noncontrolling interest—redeemable preferred units—
 (75) (6) (1,014)
Net income attributable to Boston Properties Limited Partnership210,273
 147,362
 499,701
 302,224
Preferred distributions(2,647) (2,647) (7,854) (7,854)
Net income attributable to Boston Properties Limited Partnership common unitholders$207,626
 $144,715
 $491,847
 $294,370
Basic earnings per common unit attributable to Boston Properties Limited Partnership common unitholders       
Noncontrolling interest—redeemable preferred units of the Operating Partnership—
 (3)
Noncontrolling interest—common units of the Operating Partnership(21,393) (20,188)
Net income attributable to Boston Properties, Inc.184,365
 173,771
Preferred dividends(2,618) (2,589)
Net income attributable to Boston Properties, Inc. common shareholders$181,747
 $171,182
Basic earnings per common share attributable to Boston Properties, Inc. common shareholders:   
Net income$1.21
 $0.85
 $2.87
 $1.73
$1.18
 $1.12
Weighted average number of common units outstanding171,160
 170,785
 171,131
 170,340
Diluted earnings per common unit attributable to Boston Properties Limited Partnership common unitholders       
Weighted average number of common shares outstanding153,626
 153,230
Diluted earnings per common share attributable to Boston Properties, Inc. common shareholders:   
Net income$1.21
 $0.85
 $2.87
 $1.73
$1.18
 $1.11
Weighted average number of common and common equivalent units outstanding171,351
 170,938
 171,530
 170,491
Weighted average number of common and common equivalent shares outstanding153,917
 153,873

The accompanying notes are an integral part of these consolidated financial statements.
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BOSTON PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
 Three months ended
March 31,
 2016 2015
 (in thousands)
Net income$216,222
 $209,170
Other comprehensive loss:   
Effective portion of interest rate contracts(58,646) (3,533)
Amortization of interest rate contracts (1)627
 627
Other comprehensive loss(58,019) (2,906)
Comprehensive income158,203
 206,264
Net income attributable to noncontrolling interests(31,857) (35,399)
Other comprehensive loss attributable to noncontrolling interests15,427
 303
Comprehensive income attributable to Boston Properties, Inc.$141,773
 $171,168
_______________
(1) Amounts reclassified from comprehensive income primarily to interest expense within the Boston Properties, Inc.’s Consolidated Statements of Operations.
































The accompanying notes are an integral part of these consolidated financial statements.

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BOSTON PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited and in thousands)
 Common Stock Preferred Stock 
Additional
Paid-in
Capital
 
Dividends in
Excess of
Earnings
 
Treasury
Stock,
at cost
 
Accumulated
Other
Comprehensive Loss
 
Noncontrolling
Interests
 Total
 Shares Amount  
Equity, December 31, 2015153,580
 $1,536
 $200,000
 $6,305,687
 $(780,952) $(2,722) $(14,114) $2,177,492
 $7,886,927
Redemption of operating partnership units to common stock13
 —
 —
 446
 —
 —
 —
 (446) —
Allocated net income for the year—
 —
 —
 —
 184,365
 —
 —
 31,857
 216,222
Dividends/distributions declared—
 —
 —
 —
 (102,461) —
 —
 (11,865) (114,326)
Shares issued pursuant to stock purchase plan3
 —
 —
 332
 —
 —
 —
 —
 332
Net activity from stock option and incentive plan9
 —
 —
 696
 —
 —
 —
 8,384
 9,080
Contributions from noncontrolling interests in property partnerships—
 —
 —
 —
 —
 —
 —
 2,489
 2,489
Distributions to noncontrolling interests in property partnerships—
 —
 —
 —
 —
 —
 —
 (12,915) (12,915)
Effective portion of interest rate contracts—
 —
 —
 —
 —
 —
 (43,154) (15,492) (58,646)
Amortization of interest rate contracts—
 —
 —
 —
 —
 —
 562
 65
 627
Reallocation of noncontrolling interest—
 —
 —
 (438) —
 —
 —
 438
 —
Equity, March 31, 2016153,605
 $1,536
 $200,000
 $6,306,723
 $(699,048) $(2,722) $(56,706) $2,180,007
 $7,929,790
                  
Equity, December 31, 2014153,114
 $1,531
 $200,000
 $6,270,257
 $(762,464) $(2,722) $(9,304) $2,205,638
 $7,902,936
Redemption of operating partnership units to common stock259
 3
 —
 8,686
 —
 —
 —
 (8,689) —
Allocated net income for the year—
 —
 —
 —
 173,771
 —
 —
 33,168
 206,939
Dividends/distributions declared—
 —
 —
 —
 (102,300) —
 —
 (11,705) (114,005)
Shares issued pursuant to stock purchase plan2
 —
 —
 313
 —
 —
 —
 —
 313
Net activity from stock option and incentive plan27
 —
 —
 1,842
 —
 —
 —
 19,774
 21,616
Contributions from noncontrolling interests in property partnerships—
 —
 —
 —
 —
 —
 —
 629
 629
Distributions to noncontrolling interests in property partnerships—
 —
 —
 —
 —
 —
 —
 (16,574) (16,574)
Effective portion of interest rate contracts—
 —
 —
 —
 —
 —
 (3,165) (368) (3,533)
Amortization of interest rate contracts—
 —
 —
 —
 —
 —
 562
 65
 627
Reallocation of noncontrolling interest—
 —
 —
 5,162
 —
 —
 —
 (5,162) —
Equity, March 31, 2015153,402
 $1,534
 $200,000
 $6,286,260
 $(690,993) $(2,722) $(11,907) $2,216,776
 $7,998,948




The accompanying notes are an integral part of these consolidated financial statements.
Table of Contents

BOSTON PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 For the three months ended March 31,
 2016 2015
 (in thousands)
Cash flows from operating activities:   
Net income$216,222
 $209,170
Adjustments to reconcile net income to net cash provided by operating activities:   
Depreciation and amortization159,448
 154,223
Non-cash compensation expense10,069
 11,011
Income from unconsolidated joint ventures(1,791) (14,834)
Distributions of net cash flow from operations of unconsolidated joint ventures10,718
 1,350
Gains from investments in securities(259) (393)
Non-cash portion of interest expense(10,138) (10,884)
Gains on sales of real estate(67,623) (95,084)
Change in assets and liabilities:   
Cash held in escrows1,940
 1,044
Tenant and other receivables, net25,018
 (1,173)
Accrued rental income, net(12,981) (23,250)
Prepaid expenses and other assets45,560
 3,447
Accounts payable and accrued expenses(5,209) (5,535)
Accrued interest payable31,192
 23,098
Other liabilities(33,319) (23,136)
Tenant leasing costs(19,867) (27,608)
Total adjustments132,758
 (7,724)
Net cash provided by operating activities348,980
 201,446
Cash flows from investing activities:   
Construction in progress(122,940) (60,013)
Building and other capital improvements(25,329) (19,391)
Tenant improvements(55,739) (26,950)
Proceeds from sales of real estate104,816
 194,821
Proceeds from sales of real estate placed in escrow(104,696) (201,857)
Proceeds from sales of real estate released from escrow104,696
 99,916
Cash released from escrow for land sale contracts488
 —
Deposit on real estate—
 (5,000)
Capital contributions to unconsolidated joint ventures(10,215) (2,444)
Capital distributions from unconsolidated joint ventures—
 24,527
Investments in securities, net(438) (884)
Net cash provided by (used in) investing activities(109,357) 2,725
    
    
    
Table of Contents

BOSTON PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 For the three months ended March 31,
 2016 2015
 (in thousands)
Cash flows from financing activities:   
Repayments of mortgage notes payable(6,265) (7,024)
Proceeds from unsecured senior notes997,080
 —
Proceeds from real estate financing transaction—
 6,000
Payments on real estate financing transactions(781) (636)
Deferred financing costs(8,047) (20)
Net proceeds from equity transactions(657) (145)
Dividends and distributions(328,567) (883,684)
        Contributions from noncontrolling interests in property partnerships2,489
 629
Distributions to noncontrolling interests in property partnerships(12,915) (17,974)
Net cash provided by (used in) financing activities642,337
 (902,854)
Net increase (decrease) in cash and cash equivalents881,960
 (698,683)
Cash and cash equivalents, beginning of period723,718
 1,763,079
Cash and cash equivalents, end of period$1,605,678
 $1,064,396
Supplemental disclosures:   
Cash paid for interest$93,524
 $104,508
Interest capitalized$9,269
 $7,965
Non-cash investing and financing activities:   
Additions to real estate included in accounts payable and accrued expenses$(24,857) $9,243
Dividends and distributions declared but not paid$113,079
 $112,796
Conversions of noncontrolling interests to stockholders’ equity$446
 $8,689
Issuance of restricted securities to employees$32,630
 $42,279







The accompanying notes are an integral part of these consolidated financial statements.
Table of Contents


BOSTON PROPERTIES LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEETS
(Unaudited)
 March 31,
2016		 December 31,
2015
 (in thousands, except for unit amounts)
ASSETS   
Real estate, at cost (amounts related to variable interest entities (“VIEs”) of $5,944,607 at March 31, 2016)$18,006,818
 $18,045,011
Construction in progress (amounts related to VIEs of $486,025 at March 31, 2016)857,578
 763,935
Land held for future development256,952
 252,195
Less: accumulated depreciation (amounts related to VIEs of ($675,124) at March 31, 2016)(3,889,084) (3,846,816)
Total real estate15,232,264
 15,214,325
Cash and cash equivalents (amounts related to VIEs of $227,255 at March 31, 2016)1,605,678
 723,718
Cash held in escrows (amounts related to VIEs of $3,671 at March 31, 2016)71,349
 73,790
Investments in securities21,077
 20,380
Tenant and other receivables (amounts related to VIEs of $24,403 at March 31, 2016)73,759
 97,865
Accrued rental income (amounts related to VIEs of $217,148 at March 31, 2016)767,864
 754,883
Deferred charges, net (amounts related to VIEs of $323,493 at March 31, 2016)693,976
 704,867
Prepaid expenses and other assets (amounts related to VIEs of $77,995 at March 31, 2016)136,799
 185,118
Investments in unconsolidated joint ventures235,904
 235,224
Total assets$18,838,670
 $18,010,170
LIABILITIES AND CAPITAL   
Liabilities:   
Mortgage notes payable, net (amounts related to VIEs of $2,060,838 at March 31, 2016)$3,416,622
 $3,435,242
Unsecured senior notes, net6,255,602
 5,264,819
Unsecured line of credit—
 —
Mezzanine notes payable (amounts related to VIEs of $308,142 at March 31, 2016)308,142
 308,482
Outside members' notes payable (amounts related to VIEs of $180,000 at March 31, 2016)180,000
 180,000
Accounts payable and accrued expenses (amounts related to VIEs of $82,270 at March 31, 2016)252,727
 274,709
Distributions payable113,079
 327,320
Accrued interest payable (amounts related to VIEs of $136,165 at March 31, 2016)221,578
 190,386
Other liabilities (amounts related to VIEs of $205,007 at March 31, 2016)498,290
 483,601
Total liabilities11,246,040
 10,464,559
Commitments and contingencies—
 —
Noncontrolling interests:   
Redeemable partnership units—16,092,449 and 16,097,473 common units and 2,065,185 and 1,831,714 long term incentive units outstanding at redemption value at March 31, 2016 and December 31, 2015, respectively2,307,472
 2,286,689
Capital:   
5.25% Series B cumulative redeemable preferred units, liquidation preference $2,500 per unit, 80,000 units issued and outstanding at March 31, 2016 and December 31, 2015193,623
 193,623
Boston Properties Limited Partnership partners’ capital—1,717,626 and 1,715,092 general partner units and 151,887,340 and 151,864,874 limited partner units outstanding at March 31, 2016 and December 31, 2015, respectively3,527,623
 3,490,899
Noncontrolling interests in property partnerships1,563,912
 1,574,400
Total capital5,285,158
 5,258,922
Total liabilities and capital$18,838,670
 $18,010,170



The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

BOSTON PROPERTIES LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 Three months ended
March 31,
 2016 2015
 (in thousands, except for per unit amounts)
Revenue   
Rental   
Base rent$536,128
 $490,682
Recoveries from tenants89,586
 88,593
Parking and other24,825
 24,788
Total rental revenue650,539
 604,063
Hotel revenue8,757
 9,085
Development and management services6,689
 5,328
Total revenue665,985
 618,476
Expenses   
Operating   
Rental219,172
 221,350
Hotel7,634
 7,576
General and administrative29,353
 28,791
Transaction costs25
 327
Depreciation and amortization157,461
 152,224
Total expenses413,645
 410,268
Operating income252,340
 208,208
Other income (expense)   
Income from unconsolidated joint ventures1,791
 14,834
Interest and other income1,505
 1,407
Gains from investments in securities259
 393
Interest expense(105,309) (108,757)
Income before gains on sales of real estate150,586
 116,085
Gains on sales of real estate69,792
 95,084
Net income220,378
 211,169
Net income attributable to noncontrolling interests   
Noncontrolling interests in property partnerships(10,464) (15,208)
Noncontrolling interest—redeemable preferred units—
 (3)
Net income attributable to Boston Properties Limited Partnership209,914
 195,958
Preferred distributions(2,618) (2,589)
Net income attributable to Boston Properties Limited Partnership common unitholders$207,296
 $193,369
Basic earnings per common unit attributable to Boston Properties Limited Partnership common unitholders   
Net income$1.21
 $1.13
Weighted average number of common units outstanding171,309
 171,084
Diluted earnings per common unit attributable to Boston Properties Limited Partnership common unitholders   
Net income$1.21
 $1.12
Weighted average number of common and common equivalent units outstanding171,600
 171,727


The accompanying notes are an integral part of these consolidated financial statements.
Table of Contents

BOSTON PROPERTIES LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME
(Unaudited)
 
Three months ended
September 30,		 Nine months ended September 30,Three months ended
March 31,
2015 2014 2015 20142016 2015
(in thousands)(in thousands)
Net income$325,513
 $153,003
 $639,419
 $320,711
$220,378
 $211,169
Other comprehensive income (loss):       
Other comprehensive loss:   
Effective portion of interest rate contracts(30,156) —
 (18,050) —
(58,646) (3,533)
Amortization of interest rate contracts (1)627
 628
 1,882
 1,881
627
 627
Other comprehensive income (loss)(29,529) 628
 (16,168) 1,881
Other comprehensive loss(58,019) (2,906)
Comprehensive income295,984
 153,631
 623,251
 322,592
162,359
 208,263
Comprehensive income attributable to noncontrolling interests(110,784) (8,288) (136,178) (26,341)
Comprehensive (income) loss attributable to noncontrolling interests62
 (15,211)
Comprehensive income attributable to Boston Properties Limited Partnership$185,200
 $145,343
 $487,073
 $296,251
$162,421
 $193,052
_______________
(1) Amounts reclassified from comprehensive income primarily to interest expense within the Company'sBoston Properties Limited Partnership's Consolidated Statements of Operations.



































The accompanying notes are an integral part of these consolidated financial statements.

3
Table of Contents

BOSTON PROPERTIES LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL
FOR THE NINETHREE MONTHS ENDED SEPTEMBER 30,MARCH 31, 2016 AND 2015 AND 2014
(Unaudited and in thousands)
 
Total Partners’ CapitalTotal Partners’ Capital
Balance at December 31, 2014$3,639,916
Balance at December 31, 2015$3,684,522
Contributions5,126
1,165
Acquisition of redeemable noncontrolling interest in property partnership(1,586)
Net income allocable to general and limited partner units448,795
188,521
Distributions(307,146)(102,461)
Accumulated other comprehensive loss(11,321)(42,592)
Unearned compensation254
(137)
Conversion of redeemable partnership units14,157
446
Adjustment to reflect redeemable partnership units at redemption value216,037
(8,218)
Balance at September 30, 2015$4,004,232
Balance at March 31, 2016$3,721,246
  
Balance at December 31, 2013$4,187,171
Balance at December 31, 2014$3,639,916
Contributions3,892
3,763
Net income allocable to general and limited partner units272,405
175,770
Distributions(306,340)(102,300)
Accumulated other comprehensive income1,690
Accumulated other comprehensive loss(2,603)
Unearned compensation2,046
(1,608)
Conversion of redeemable partnership units2,368
8,689
Adjustment to reflect redeemable partnership units at redemption value(271,032)(211,747)
Balance at September 30, 2014$3,892,200
Balance at March 31, 2015$3,509,880


























The accompanying notes are an integral part of these consolidated financial statements.

4
Table of Contents

BOSTON PROPERTIES LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
BOSTON PROPERTIES LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
BOSTON PROPERTIES LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the nine months ended September 30,For the three months ended March 31,
2015 20142016 2015
(in thousands)(in thousands)
Cash flows from operating activities:      
Net income$639,419
 $320,711
$220,378
 $211,169
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation and amortization469,087
 460,064
157,461
 152,224
Non-cash compensation expense22,825
 22,708
10,069
 11,011
Income from unconsolidated joint ventures(20,559) (10,069)(1,791) (14,834)
Distributions of net cash flow from operations of unconsolidated joint ventures6,484
 3,130
10,718
 1,350
Losses (gains) from investments in securities1,146
 (651)
Gains from investments in securities(259) (393)
Non-cash portion of interest expense(32,818) (28,753)(10,138) (10,884)
Settlement of accreted debt discount on repurchases of unsecured exchangeable senior notes—
 (92,979)
Gains on sales of real estate(294,807) (41,937)(69,792) (95,084)
Change in assets and liabilities:    �� 
Cash held in escrows(32,750) 3,957
1,940
 1,044
Tenant and other receivables, net(19,851) 16,254
25,018
 (1,173)
Accrued rental income, net(55,941) (42,180)(12,981) (23,250)
Prepaid expenses and other assets20,988
 (34,804)45,560
 3,447
Accounts payable and accrued expenses(2,937) 4,237
(5,209) (5,535)
Accrued interest payable37,384
 14,431
31,192
 23,098
Other liabilities(73,370) (60,795)(33,319) (23,136)
Tenant leasing costs(55,422) (63,647)(19,867) (27,608)
Total adjustments(30,541) 148,966
128,602
 (9,723)
Net cash provided by operating activities608,878
 469,677
348,980
 201,446
Cash flows from investing activities:      
Construction in progress(251,984) (305,192)(122,940) (60,013)
Building and other capital improvements(84,644) (57,329)(25,329) (19,391)
Tenant improvements(86,052) (80,692)(55,739) (26,950)
Proceeds from sales of real estate389,457
 103,542
104,816
 194,821
Proceeds from sales of real estate placed in escrow(200,612) (99,917)(104,696) (201,857)
Proceeds from sales of real estate released from escrow634,165
 —
104,696
 99,916
Cash placed in escrow for land sale contracts(7,111) —
Cash released from escrow for land sale contracts3,250
 —
488
 —
Deposit on real estate—
 (5,000)
Capital contributions to unconsolidated joint ventures(20,863) (47,767)(10,215) (2,444)
Capital distributions from unconsolidated joint ventures24,527
 641
—
 24,527
Investments in securities, net(1,332) (1,542)(438) (884)
Net cash provided by (used in) investing activities398,801
 (488,256)(109,357) 2,725

5
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BOSTON PROPERTIES LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) 
 For the nine months ended September 30,
 2015 2014
 (in thousands)
Cash flows from financing activities:   
Repayments of mortgage notes payable(20,137) (82,030)
Repayment of unsecured exchangeable senior notes—
 (654,521)
Proceeds from real estate financing transaction6,000
 —
Payments on real estate financing transaction(2,364) —
Deferred financing costs(1,288) (31)
Net proceeds from equity transactions799
 1,530
Redemption of preferred units(633) (15,984)
Distributions(1,112,019) (726,314)
Acquisition of noncontrolling interest(108,499) —
Contributions from noncontrolling interests in property partnerships1,758
 2,980
Distributions to noncontrolling interests in property partnerships(147,368) (25,524)
Net cash used in financing activities(1,383,751) (1,499,894)
Net decrease in cash and cash equivalents(376,072) (1,518,473)
Cash and cash equivalents, beginning of period1,763,079
 2,365,137
Cash and cash equivalents, end of period$1,387,007
 $846,664
Supplemental disclosures:   
Cash paid for interest$347,367
 $489,949
Interest capitalized$25,915
 $44,809
Non-cash investing and financing activities:   
Additions to real estate included in accounts payable and accrued expenses$28,246
 $20,016
Distributions declared but not paid$112,912
 $112,708
Mortgage notes payable assigned in connection with the sale of real estate$116,993
 $—
Conversions of redeemable partnership units to partners’ capital$14,157
 $2,368
Conversions of redeemable preferred units to common units$—
 $33,306
Issuance of restricted securities to employees$43,363
 $27,445





BOSTON PROPERTIES LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) 
 For the three months ended March 31,
 2016 2015
 (in thousands)
Cash flows from financing activities:   
Repayments of mortgage notes payable(6,265) (7,024)
Proceeds from unsecured senior notes997,080
 —
Proceeds from real estate financing transaction—
 6,000
Payments on real estate financing transaction(781) (636)
Deferred financing costs(8,047) (20)
Net proceeds from equity transactions(657) (145)
Distributions(328,567) (883,684)
Contributions from noncontrolling interests in property partnerships2,489
 629
Distributions to noncontrolling interests in property partnerships(12,915) (17,974)
Net cash provided by (used in) financing activities642,337
 (902,854)
Net increase (decrease) in cash and cash equivalents881,960
 (698,683)
Cash and cash equivalents, beginning of period723,718
 1,763,079
Cash and cash equivalents, end of period$1,605,678
 $1,064,396
Supplemental disclosures:   
Cash paid for interest$93,524
 $104,508
Interest capitalized$9,269
 $7,965
Non-cash investing and financing activities:   
Additions to real estate included in accounts payable and accrued expenses$(24,857) $9,243
Distributions declared but not paid$113,079
 $112,796
Conversions of redeemable partnership units to partners’ capital$446
 $8,689
Issuance of restricted securities to employees$32,630
 $42,279















The accompanying notes are an integral part of these consolidated financial statements.

6
Table of Contents

BOSTON PROPERTIES, INC. AND BOSTON PROPERTIES LIMITED PARTNERSHIP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. Organization
Boston Properties Limited Partnership (the “Company”), a Delaware limited partnership, is the entity through which Boston Properties, Inc., a Delaware corporation, is a fully integrated, self-administered and self-managed real estate investment trust (“REIT”), conducts substantially all of its business and owns (either directly or through subsidiaries) substantially all of its assets.. Boston Properties, Inc. is the sole general partner of the CompanyBoston Properties Limited Partnership and at September 30, 2015 and DecemberMarch 31, 20142016 owned an approximate 89.5%89.4% (89.5% at December 31, 2015) general and limited partnership interest in Boston Properties Limited Partnership. Unless stated otherwise or the Company.context requires, the “Company” refers to Boston Properties, Inc. and its subsidiaries, including Boston Properties Limited Partnership, its operating partnership, and its consolidated subsidiaries. Partnership interests in the Company are denominated as “commonBoston Properties Limited Partnership include:
common units of partnership interest”interest (also referred to as “OP Units”), “long
long term incentive units of partnership interest”interest (also referred to as “LTIP Units”) or “preferred, and
preferred units of partnership interest”interest (also referred to as “Preferred Units”). In addition, in February 2012, the Company issued LTIP Units in connection with the granting to employees of outperformance awards (also referred to as “2012 OPP Units”). On February 6, 2015, the measurement period for the Company’s 2012 OPP Unit awards expired and the Company’s total return to shareholders (“TRS”) was sufficient for employees to earn and therefore become eligible to vest in a portion of the 2012 OPP Unit awards (See Notes 8 and 11). In February 2013, February 2014 and February 2015, the Company issued LTIP Units in connection with the granting to employees of multi-year, long-term incentive program (“MYLTIP”) awards (also referred to as “2013 MYLTIP Units,” “2014 MYLTIP Units” and “2015 MYLTIP Units,” respectively, and collectively as “MYLTIP Units”). Because the rights, preferences and privileges of MYLTIP Units differ from other LTIP Units granted to employees as part of the annual compensation process (including, as of February 6, 2015, the 2012 OPP Units), unless specifically noted otherwise, all references to LTIP Units exclude MYLTIP Units (See Notes 8 and 11).
Unless specifically noted otherwise, all references to OP Units exclude units held by Boston Properties, Inc. A holder of an OP Unit may present such OP Unit to the CompanyBoston Properties Limited Partnership 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, the CompanyBoston Properties Limited Partnership is obligated to redeem such OP Unit for cash equal to the value of a share of common stock of Boston Properties, Inc. (“Common Stock”) at such time. In lieu of a cash redemption, Boston Properties, Inc. may elect to acquire such 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 Boston Properties, Inc. 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. When
The Company uses LTIP Units as a form of equity-based award for annual long-term incentive equity compensation. The Company has also 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 appreciationemployees in the valueform of (1) 2012 outperformance plan awards (“2012 OPP Units”) and (2) 2013, 2014, 2015 and 2016 multi-year, long-term incentive program awards (also referred to as “2013 MYLTIP Units,” “2014 MYLTIP Units,” “2015 MYLTIP Units” and “2016 MYLTIP Units,” respectively, and collectively as “MYLTIP Units”), each of which, upon the satisfaction of certain performance and vesting conditions, is convertible into one OP Unit. The three-year measurement periods for the 2012 OPP Units and 2013 MYLTIP Units expired on February 6, 2015 and February 4, 2016, respectively, and Boston Properties, Inc.’s total stockholder return (“TSR”) was sufficient for employees to earn and therefore become eligible to vest in a portion of the Company's assets.awards. Unless and until they are earned, the rights, preferences and privileges of the 2014, 2015 and 2016 MYLTIP Units differ from other LTIP Units granted to employees (including, as of February 6, 2015, the 2012 OPP Units and, as of February 4, 2016, the 2013 MYLTIP Units). Therefore, unless specifically noted otherwise, all references to LTIP Units exclude the 2014, 2015 and 2016 MYLTIP Units. LTIP Units (including the 2012 OPP Units and the 2013 MYLTIP Units), whether vested or not, will receive the same quarterly per unit distributions as OP Units, which equal per share dividends on Common Stock (See Note 9)Notes 8, 9 and 11).
At September 30, 2015,March 31, 2016, there was one series of Preferred Units outstanding (i.e., Series B Preferred Units). The Series B Preferred Units were issued to Boston Properties, Inc. on March 27, 2013 in connection with Boston Properties, Inc.'s issuance of 80,000 shares (8,000,000 depositary shares each representing 1/100th of a share) of 5.25% Series B Cumulative Redeemable Preferred Stock (the “Series B Preferred Stock”). Boston Properties, Inc. contributed the net proceeds from the offering to the CompanyBoston Properties Limited Partnership in exchange for 80,000 Series B Preferred Units having terms and preferences generally mirroring those of the Series B Preferred Stock (See Note 9).
All references herein to the Company refer to Boston Properties Limited Partnership and its consolidated subsidiaries, collectively, unless the context otherwise requires.
Properties
At September 30, 2015March 31, 2016, the Company owned or had interests in a portfolio of 171167 commercial real estate properties (the “Properties”) aggregating approximately 46.646.3 million net rentable square feet of primarily Class A office properties, including fourteeneleven properties under construction/redevelopment totaling approximately 4.74.6 million net rentable square feet. At September 30, 2015March 31, 2016, the Properties consisted of:

161157 office properties, including 130 Class A officeOffice properties (including elevennine properties under construction/redevelopment) and 31 Office/Technical properties;;
one hotel;
five retail properties (including one property under construction);properties; and
four residential properties (including two properties under construction).
Table of Contents

The Company owns or controls undeveloped land parcels totaling approximately 479.9457.1 acres.

7
Table of Contents

The Company considers Class A office properties to be centrally located buildings that are professionally managed and maintained, attract high-quality tenants and command upper-tier rental rates, and that are modern structures or have been modernized to compete with newer buildings. The Company considers Office/Technical properties to be properties that support office, research and development, laboratory and other technical uses. The Company’s definitions of Class A Office and Office/Technical properties may be different than those used by other companies.
2. Basis of Presentation and Summary of Significant Accounting Policies
Boston Properties, Inc. does not have any other significant assets, liabilities or operations, other than its investment in the Company,Boston Properties Limited Partnership, nor does it have employees of its own. The Company,Boston Properties Limited Partnership, not Boston Properties, Inc., generally executes all significant business relationships other than transactions involving securities of Boston Properties, Inc. 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.
The accompanying interim financial statements are unaudited; however, the financial statements have been prepared in accordance with generally accepted accounting principles generally accepted in the United States of America(“GAAP”) for interim financial information and in conjunction with the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the disclosures required by accounting principles generally accepted in the United States of AmericaGAAP 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 accounting principles generally accepted in the United States of America.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, 2014.2015. Beginning on January 1, 2016, the properties that were historically part of the Company’s Office/Technical segment are reflected as Office properties (See Note 12).
Fair Value of Financial Instruments
The Company determines the fair value of its unsecured senior notes using market prices. The inputs used in determining the fair value of the Company’s unsecured senior notes are categorized at a level 1 basis (as defined in the accounting standards for Fair Value Measurements and Disclosures) due to the fact that the Company uses quoted market rates to value these instruments. However, the inputs used in determining the fair value could be categorized at a level 2 basis (as defined in the accounting standards for Fair Value Measurements and Disclosures) if trading volumes are low. The Company determines the fair value of its mortgage notes payable using discounted cash flow analysesanalysis by discounting the spread between the future contractual interest payments and hypothetical future interest payments on mortgage debt based on current market rates for similar securities. In determining the current market rates, the Company adds its estimates of market spreads to the quoted yields on federal government treasury securities with similar maturity dates to its debt. The inputs used in determining the fair value of the Company’s mortgage notes payable and mezzanine notes payable are categorized at a level 3 basis (as defined in the accounting standards for Fair Value Measurements and Disclosures) due to the fact that the Company considers the rates used in the valuation techniques to be unobservable inputs.
Because the Company’s valuations of its financial instruments are based on these types of estimates, the actual fair values of its financial instruments may differ materially if the Company’s estimates do not prove to be accurate. The following table presents the aggregate carrying value of the Company’s indebtedness and the Company’s corresponding estimate of fair value as of September 30, 2015March 31, 2016 and December 31, 20142015 (in thousands):
 
September 30, 2015 December 31, 2014March 31, 2016 December 31, 2015
Carrying
Amount
 
Estimated
Fair Value
 
Carrying
Amount
 
Estimated
Fair Value
Carrying
Amount
   
Estimated
Fair Value
 
Carrying
Amount
   
Estimated
Fair Value
Mortgage notes payable$4,132,071
  $4,240,944
 $4,309,484
  $4,449,541
Mortgage notes payable, net$3,416,622
    $3,477,310
 $3,435,242
    $3,503,746
Mezzanine notes payable308,817
 306,116
 309,796
 306,156
308,142
 306,089
 308,482
 306,103
Unsecured senior notes5,288,908
  5,603,968
 5,287,704
  5,645,819
Unsecured senior notes, net6,255,602
    6,705,353
 5,264,819
    5,547,738
Total$9,729,796
  $10,151,028
 $9,906,984
  $10,401,516
$9,980,366
    $10,488,752
 $9,008,543
    $9,357,587
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The Company uses interest rate swap agreements to manage its interest rate risk. The valuation of these instruments is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of

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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.  However, as of September 30, 2015,March 31, 2016, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are 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.
Out-of-Period AdjustmentVariable Interest Entities (VIEs)
During the nine months ended September 30, 2014,On January 1, 2016, the Company recorded an additional allocation of net income to the noncontrolling interest holder in its Fountain Square consolidated joint venture totaling approximately $1.9 million related to the cumulative non-cash adjustment to the accretion of the changes in the redemption value of the noncontrolling interest. This resulted in the overstatement of Noncontrolling Interests in Property Partnerships by approximately $1.9 million during the nine months ended September 30, 2014 and in the understatement of Noncontrolling Interests in Property Partnerships in the aggregate amount of approximately $1.9 million in previous periods prior to 2014. Because this adjustment was not material to the prior periods’ consolidated financial statements and the impact of recording the adjustment in 2014 was not material to the Company’s consolidated financial statements, the Company recorded the related adjustment during the nine months ended September 30, 2014. The out-of-period adjustment was identified and recorded during the second quarter of 2014.
Recent Accounting Pronouncements
On April 10, 2014, the Financial Accounting Standards Board (“FASB”) issuedadopted Accounting Standards Update (“ASU”) 2014-08, “Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity” (“ASU 2014-08”). ASU 2014-08 clarifies that discontinued operations presentation applies only to disposals representing a strategic shift that has (or will have) a major effect on an entity’s operations and financial results (e.g., a disposal of a major geographical area, a major line of business, a major equity method investment or other major parts of an entity). ASU 2014-08 is effective prospectively for reporting periods beginning after December 15, 2014. Early adoption is permitted, and the Company early adopted ASU 2014-08 during the first quarter of 2014. The Company’s adoption of ASU 2014-08 resulted in the operating results and gains on sales of real estate from the operating properties sold during the nine months ended September 30, 2015 not being reflected as Discontinued Operations in the Company's Consolidated Statements of Operations (See Note 3).
In February 2015, the FASB issued ASU 2015-02, “Consolidation“Consolidation (Topic 810):  Amendments to the Consolidation Analysis” (“ASU 2015-02”).  ASU 2015-02 affects reporting entities that are required to evaluate whether they should consolidate certain legal entities. ASU 2015-02 (1) modifies the evaluation of whether limited partnerships and similar legal entities are VIEs or voting interest entities, (2) eliminates the presumption that a general partner should consolidate a limited partnership and (3) affects the consolidation analysis of reporting entities that are involved with VIEs, particularly those that have fee arrangements and related party relationships. The Company reviewed all of their legal entities in accordance with ASU 2015-02 and concluded that certain of its legal entities, including Boston Properties Limited Partnership, which had been consolidated in accordance with the voting interest model are now variable interest entities under the VIE model, as discussed below.  The adoption of the guidance did not alter any of the Company’s consolidation conclusions, but resulted in additional disclosures.

Consolidated VIEs are those where 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 Company has determined that is it the primary beneficiary for seven of the eight entities which are VIEs.
Consolidated Variable Interest Entities
As of March 31, 2016, Boston Properties, Inc. has identified seven consolidated VIEs, including Boston Properties Limited Partnership.  These are the entities which own the following in-service properties: 767 Fifth Avenue (the General Motors Building), Time Square Tower, 601 Lexington Avenue, Atlantic Wharf Office Building and 100 Federal Street, the entity that owns the Salesforce Tower which is currently under development and Boston Properties Limited Partnership.

The Company consolidates these VIEs as it is the primary beneficiary.  The third parties’ interests in these consolidated entities, with the exception of Boston Properties Limited Partnership, are reflected as noncontrolling interest in property partnerships in the accompanying Consolidated Financial Statements (See Note 8). 

In addition, Boston Properties, Inc.’s significant asset is its investment in Boston Properties Limited Partnership, and consequently, substantially all of Boston Properties, Inc.’s assets and liabilities represent the assets and liabilities of Boston Properties Limited Partnership.  All of Boston Properties, Inc.’s debt is an obligation of Boston Properties Limited Partnership.
Variable Interest Entities Not Consolidated
The Company has determined that its BNY Tower Holdings LLC joint venture is a VIE.  The Company does not consolidate this entity as the Company does not have the power to direct the activities that, when taken together, most significantly impact the VIE’s performance and therefore, the Company is not considered to be the primary beneficiary.
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Recent Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-09, “Revenue from Contract with Customers (Topic 606)” (“ASU 2014-09”). The objective of ASU 2014-09 is to establish a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and will supersede most of the existing revenue recognition guidance, including industry-specific guidance. The core principle is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In applying ASU 2014-09, companies will perform a five-step analysis of transactions to determine when and how revenue is recognized. ASU 2014-09 applies to all contracts with customers except those that are within the scope of other topics in the FASB’s Accounting Standards Codification (“ASC”). In August 2015, the FASBissued ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date (“ASU 2015-14”), which delayed the effective date of ASU 2014-09 by one year making it effective for fiscal years, and forthe first interim periodsperiod within those fiscal years,annual reporting periods beginning after December 15, 2015.2017. Early adoption is permitted. A reporting entity may apply the amendments in ASU 2015-02 using: (a) a modified retrospective approach by recording a cumulative-effect adjustment to equitypermitted as of the beginning of the fiscal year of adoption; or (b) by applying the amendments retrospectively.original effective date. The Company does not expectis currently assessing the potential impact that the adoption of ASU 2015-02 to2014-09 will have a material impact on its consolidated financial statements.
In April 2015, the FASB issued ASU 2015-03, “Simplifying the Presentation of Debt Issuance Costs” (“ASU 2015-03”), which requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs is not affected. ASU 2015-03 is effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years and shall be applied on a retrospective basis, wherein the balance sheet of each individual period presented should be adjusted to reflect the period-specific effects of applying the new guidance. Early adoption is permitted for financial statements that have not been previously issued. On January 1, 2016, the Company adopted ASU 2015-03 and retrospectively applied the guidance to its Mortgage Notes Payable and Unsecured Senior Notes for all periods presented. Unamortized deferred financing costs, which were previously included in Deferred Charges, Net, totaling approximately $3.2 million and $31.3 million are included in Mortgage Notes Payable, Net and Unsecured Senior Notes, Net, respectively, as of March 31, 2016 and approximately $3.5 million and $24.5 million are included in Mortgage Notes Payable, Net and Unsecured Senior Notes, Net, respectively, as of December 31, 2015.
In January 2016, the FASB issued ASU 2016-01, “Financial Instruments – Overall: Recognition and Measurement of Financial Assets and Financial Liabilities” (“ASU 2016-01”). ASU 2016-01 requires equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income, requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes, requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset, and eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost. ASU 2016-01 is effective for the Company for reporting periods beginning after December 15, 2017. Early application is permitted. The Company does not expectis currently assessing the potential impact that the adoption of ASU 2015-032016-01 will have on its consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02, “Leases” (“ASU 2016-02”), which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to have a materialcontract (i.e. lessees and lessors). ASU 2016-02 requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase of the leased asset by the lessee. This classification will determine whether the lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases today. The new standard requires lessors to account for leases using an approach that is substantially equivalent to existing guidance for sales-type leases, direct financing leases and operating leases. ASU 2016-02 is expected to impact the Company’s consolidated financial statements as the Company has certain operating land lease arrangements for which it is the lessee. ASU 2016-02 supersedes previous leasing standards. ASU 2016-02 is effective for the Company for reporting periods beginning after December 15, 2018, with early adoption permitted. The Company is currently assessing the potential impact that the adoption of ASU 2016-02 will have on its consolidated financial statements.

In March 2016, the FASB issued ASU 2016-05, “Derivatives and Hedging (Topic 815): Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships” (“ASU 2016-05”) which provides guidance clarifying that a novation of party to a derivative instrument, whereby one of the parties to a derivative instrument is replaced with another party, does not, in and of itself, require de-designation of that hedging relationship provided that all other hedge criteria continue to be met. ASU 2016-05 is effective for the Company for reporting periods beginning after December 15, 2016, with early adoption

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permitted. The Company is currently assessing the potential impact that the adoption of ASU 2016-05 will have on its consolidated financial statements.
In March 2016, the FASB issued ASU 2016-09, “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting” (“ASU 2016-09”). ASU 2016-09 is intended to improve the accounting for share-based payments and affects all organizations that issue share-based payment awards to their employees. Several aspects of the accounting for share-based payment awards are simplified with ASU 2016-09, including income tax consequences, classification of awards as equity or liabilities and classification on the statement of cash flows. ASU 2016-09 is effective for the Company for reporting periods beginning after December 15, 2016, with early adoption permitted. The Company is currently assessing the potential impact that the adoption of ASU 2016-09 will have on its consolidated financial statements.
3. Real Estate Activity During the NineThree Months Ended September 30, 2015
Acquisitions
On JulyMarch 31, 2015, the Company entered into a 99-year ground and air rights lease (the “Lease”) with the Massachusetts Department of Transportation (“MDOT”) with respect to the parking garage located at 100 Clarendon Street (the “Clarendon Garage”) and the concourse level of the Massachusetts Bay Transportation Authority’s Back Bay Station (the “Station”).  The Lease amends and restates the air rights lease which the Company had assumed in 2010 at the time it acquired its interests in both the Clarendon Garage and the office tower located at 200 Clarendon Street (formerly known as the John Hancock Tower).  The Lease requires the Company to pay a total of approximately $37.0 million and provides the Company with options to acquire certain air rights above both the Clarendon Garage and the Station with the amount of developable square footage associated with the air rights to be determined at a later date. The previous lease had 45 years remaining in its term.  Upon execution of the Lease, the Company made a $5.0 million payment and the Lease requires the Company’s remaining obligation to be used to fund improvements to the Station.2016
Dispositions
On February 19, 2015,1, 2016, the Company completed the sale of a parcel of land within its Washingtonian North415 Main Street property located in Gaithersburg, MarylandCambridge, Massachusetts to the tenant for a gross sale price of $8.7approximately $105.4 million.  Net cash proceeds totaled approximately $8.3$104.9 million, resulting in a gain on sale of real estate totaling approximately $3.7 million. The parcel contains$60.8 million for Boston Properties, Inc. and approximately 8.5 acres$63.0 million for Boston Properties Limited Partnership. As part of its lease signed on July 14, 2004, the tenant was granted a fixed-price option to purchase the building at the beginning of the Company's11th lease year, which option was exercised by the tenant on October 22, 2014. 415 Main Street is an office property with approximately 27 acre property.
On March 17, 2015, the Company completed the sale of its Residences on The Avenue property located in Washington, DC for a gross sale price of $196.0 million. Net cash proceeds totaled approximately $192.5 million, resulting in a gain on sale of real estate totaling approximately $91.4 million. The Company has agreed to provide net operating income support of up to $6.0 million if the property’s net operating income fails to achieve certain thresholds. This amount has been recorded as a reduction to the gain on sale. The Residences on The Avenue is comprised of 335 apartment units and approximately 50,000231,000 net rentable square feet of retail space, subject to a ground lease that expires on February 1, 2068. The Residences on The Avenuefeet. 415 Main Street contributed approximately $1.1$1.2 million and $2.6 million of net income to the Company for the period from January 1, 20152016 through March 16, 2015January 31, 2016 and $0.7 million and $2.4 million for the three and nine months ended September 30, 2014,March 31, 2015, respectively.
Lease Terminations
On September 18, 2015, a consolidated entity in whichFebruary 3, 2016, the Company hasentered into a 50% interest completed the sale oflease termination agreement with a tenant for an approximately 85,000 square foot lease at its 505 9th250 West 55th Street N.W. property located in Washington, DCNew York City.  The lease was scheduled to expire on February 28, 2035.  In consideration for the termination of the lease, the tenant paid the Company approximately $318.0$45.0 million, including the assumption by the buyer of approximately $117.0 million of mortgage indebtedness (See Note 5).  505 9th Street, N.W. is an approximately 322,000 net rentable square foot Class A office building. Net cash proceeds totaled approximately $194.6 million, of which the Company’s share was approximately $97.3 million. The Company recognized a gain on sale of real estate totaling approximately $199.7 million, of which approximately $101.1 million was allocated to the outside partnersas termination income and is included within Noncontrolling Interests in Property PartnershipsBase Rent in the Company’saccompanying Consolidated Statements of Operations (See Note 8). 505 9th Street, N.W. contributed approximately $1.1 million of net income to the Company for the period from July 1, 2015 through September 17, 2015, approximately $2.3 million of net income to the Company for the period from January 1, 2015 through September 17, 2015 and $0.5 million and $1.7 million of net income for the three and nine months ended September 30, 2014, respectively.March 31, 2016.
Development/Redevelopment
On May 1, 2015, the Company commenced the redevelopment of Reservoir Place North, a Class A office project with approximately 73,000 net rentable square feet located in Waltham, Massachusetts.
On July 23, 2015, the Company commenced construction of its Cambridge Residential project, a residential project aggregating approximately 164,000 square feet comprised of 274 apartment units and approximately 9,000 square feet of retail space located in Cambridge, Massachusetts. On August 13, 2015, the Company acquired an approximately 8,700 square foot parcel of land necessary for the development for a purchase price of approximately $2.0 million.
On July 23, 2015, the Company commenced construction of its Reston Signature Site project, a residential project aggregating approximately 514,000 square feet comprised of 508 apartment units and approximately 24,000 square feet of retail space located in Reston Town Center in Reston, Virginia.
On August 14, 2015, the Company partially placed in-service 601 Massachusetts Avenue, a Class A office project with approximately 478,000 net rentable square feet located in Washington, DC.
On September 10, 2015, the Company partially placed in-service The Point (formerly 99 Third Avenue Retail), a retail project with approximately 17,000 net rentable square feet of retail space located in Waltham, Massachusetts.


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4. Investments in Unconsolidated Joint Ventures
The investments in unconsolidated joint ventures consist of the following at September 30, 2015March 31, 2016 and December 31, 2014:2015:
 
 
Nominal %
Ownership
  Carrying Value of Investment (1)  
Nominal %
Ownership
 Carrying Value of Investment (1) 
Entity Properties September 30, 2015 December 31, 2014  Properties   March 31, 2016 December 31, 2015 
   (in thousands)    (in thousands) 
Square 407 Limited Partnership Market Square North 50.0% $(10,046) $(8,022)  Market Square North 50.0% $(9,506) $(9,951) 
The Metropolitan Square Associates LLC Metropolitan Square 51.0% 9,545
 8,539
  Metropolitan Square 51.0% 9,238
 9,179
 
BP/CRF 901 New York Avenue LLC 901 New York Avenue 25.0%(2)  (12,015) (1,080)  901 New York Avenue 25.0%(2)  (11,617) (11,958) 
WP Project Developer LLC Wisconsin Place Land and Infrastructure 33.3%(3)  44,111
 45,514
  Wisconsin Place Land and Infrastructure 33.3%(3)  43,057
 43,524
 
Annapolis Junction NFM, LLC Annapolis Junction 50.0%(4)  27,851
 25,246
  Annapolis Junction 50.0%(4) (5)  21,134
 29,009
 
540 Madison Venture LLC 540 Madison Avenue 60.0% 69,364
 68,128
  540 Madison Avenue 60.0% 67,715
 68,983
 
500 North Capitol LLC 500 North Capitol Street, NW 30.0% (3,015) (2,250)  500 North Capitol Street, NW 30.0% (3,470) (3,292) 
501 K Street LLC 1001 6th Street 50.0%(5)  42,653
 41,736
  1001 6th Street 50.0%(6)  42,540
 42,584
 
Podium Developer LLC North Station (Phase I - Air Rights) 50.0% 9,541
 4,231
  The Hub on Causeway 50.0% 23,881
 18,508
 
1265 Main Office JV LLC 1265 Main Street 50.0% 4,182
 N/A
  1265 Main Street 50.0% 16,143
 11,916
 
BNY Tower Holdings LLC Dock72 at the Brooklyn Navy Yard 50.0% 10,282
 N/A
  Dock72 at the Brooklyn Navy Yard 50.0%(7) 12,196
 11,521
 
   $192,453
 $182,042
    $211,311
 $210,023
 
_______________
(1)Investments with deficit balances aggregating approximately $25.1$24.6 million and $11.4$25.2 million at September 30, 2015March 31, 2016 and December 31, 2014,2015, respectively, have been reflected within Other Liabilities on the Company'sCompany’s Consolidated Balance Sheets.
(2)The Company’s economic ownership has increased based on the achievement of certain return thresholds.
(3)
The Company’s wholly-owned entity that owns the office component of the project also owns a 33.3% interest in the entity owning the land, parking garage and infrastructure of the project.
(4)
The joint venture owns threefour in-service buildingsone building under construction and two undeveloped land parcels.
(5)See Note 13.
(6)Under the joint venture agreement for this land parcel, the partner will be entitled to up to two additional payments from the venture based on increases in total entitled square footage of the project above 520,000 square feet and achieving certain project returns at stabilization.

(7)Entity is a VIE (See Note 2).
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 at an agreed upon fair value. Under these provisions, the Company is not compelled to purchase the interest of its outside joint venture partners.

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The combined summarized balance sheets of the Company'sCompany’s unconsolidated joint ventures are as follows:
September 30, 2015 December 31, 2014March 31, 2016 December 31, 2015
(in thousands)(in thousands)
ASSETS      
Real estate and development in process, net$1,048,836
 $1,034,552
$1,041,533
 $1,072,412
Other assets240,433
 264,097
225,200
 252,285
Total assets$1,289,269
 $1,298,649
$1,266,733
 $1,324,697
LIABILITIES AND MEMBERS’/PARTNERS’ EQUITY      
Mortgage and notes payable$832,958
 $830,075
Mortgage and notes payable, net$829,089
 $830,125
Other liabilities32,715
 34,211
38,920
 44,549
Members’/Partners’ equity423,596
 434,363
398,724
 450,023
Total liabilities and members’/partners’ equity$1,289,269
 $1,298,649
$1,266,733
 $1,324,697
Company’s share of equity$219,705
 $209,828
$238,166
 $237,070
Basis differentials (1)(27,252) (27,786)(26,855) (27,047)
Carrying value of the Company’s investments in unconsolidated joint ventures (2)$192,453
 $182,042
$211,311
 $210,023
_______________
(1)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 occur from impairment of investments 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.
(2)Investments with deficit balances aggregating approximately $25.1$24.6 million and $11.4$25.2 million at September 30, 2015March 31, 2016 and December 31, 2014,2015, respectively, have been reflected within Other Liabilities on the Company'sCompany’s Consolidated Balance Sheets.

The combined summarized statements of operations of the Company'sCompany’s unconsolidated joint ventures are as follows:
For the three months ended September 30, For the nine months ended September 30,For the three months ended March 31, 
2015 2014 2015 20142016 2015 
(in thousands)(in thousands) 
Total revenue (1)$38,197
 $41,958
 $116,881
 $118,429
$37,669
 $39,532
 
Expenses           
Operating15,896
 15,516
 47,995
 46,441
16,667
 16,275
 
Depreciation and amortization8,832
 9,429
 26,854
 27,688
9,064
 9,071
 
Total expenses24,728
 24,945
 74,849
 74,129
25,731
 25,346
 
Operating income13,469
 17,013
 42,032
 44,300
11,938
 14,186
 
Other expense           
Interest expense8,019
 7,950
 23,985
 23,946
8,389
 7,980
 
Net income$5,450
 $9,063
 $18,047
 $20,354
$3,549
 $6,206
 
           
Company’s share of net income$2,481
 $4,200
 $20,025
(2)$9,403
$1,599
 $14,642
(2)
Basis differential166
 219
 534
 666
192
 192
 
Income from unconsolidated joint ventures$2,647
 $4,419
 $20,559
 $10,069
$1,791
 $14,834
 
 _______________ 
(1)
Includes straight-line rent adjustments of approximately $(0.3)$2.2 million and $0.2$1.6 million for the three months ended September 30, 2015March 31, 2016 and 2014, respectively, and approximately $1.7 million and $1.1 million for the nine months ended September 30, 2015 and 2014,, respectively. Includes net above-/below-market rent adjustments of approximately $(24,000) and $(0.1) million for the three months ended September 30, 2015 and 2014, respectively, and approximately $(0.2) million and $(0.1) million for the nine months ended September 30, 2015 and 2014, respectively.

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(2)
During the ninethree months ended September 30,March 31, 2015, the Company received a distribution of approximately $24.5 million, which was generated from the excess loan proceeds from the refinancing of 901 New York Avenue'sAvenue’s mortgage loan to a new 10-year10-year mortgage loan totaling $225.0 million.  The Company’s allocation of income and distributions for the ninethree months ended September 30,March 31, 2015 was not proportionate to its nominal ownership interest as a result of the achievement of specified investment return thresholds, as provided for in the joint venture agreement.
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5. Unsecured Senior Notes
The following summarizes the unsecured senior notes outstanding as of March 31, 2016 (dollars in thousands):
 
Coupon/
Stated Rate
 
Effective
Rate(1)
 
Principal
Amount
 Maturity Date(2) 
10 Year Unsecured Senior Notes5.875% 5.967% $700,000
 October 15, 2019 
10 Year Unsecured Senior Notes5.625% 5.708% 700,000
 November 15, 2020 
10 Year Unsecured Senior Notes4.125% 4.289% 850,000
 May 15, 2021 
7 Year Unsecured Senior Notes3.700% 3.853% 850,000
 November 15, 2018 
11 Year Unsecured Senior Notes3.850% 3.954% 1,000,000
 February 1, 2023 
10.5 Year Unsecured Senior Notes3.125% 3.279% 500,000
 September 1, 2023 
10.5 Year Unsecured Senior Notes3.800% 3.916% 700,000
 February 1, 2024 
10 Year Unsecured Senior Notes3.650% 3.766% 1,000,000
 February 1, 2026 
Total principal    6,300,000
   
Net unamortized discount    (13,148)   
Deferred financing costs, net    (31,250)   
Total    $6,255,602
   
_______________  
(1)Yield on issuance date including the effects of discounts on the notes and the amortization of financing costs.
(2)No principal amounts are due prior to maturity.

The indenture relating to the unsecured senior notes contains certain financial restrictions and requirements, including (1) a leverage ratio not to exceed 60%, (2) a secured debt leverage ratio not to exceed 50%, (3) an interest coverage ratio of greater than 1.50, and (4) an unencumbered asset value of not less than 150% of unsecured debt. At March 31, 2016, Boston Properties Limited Partnership was in compliance with each of these financial restrictions and requirements.
On May 8, 2015, the Company entered intoJanuary 20, 2016, Boston Properties Limited Partnership completed a joint venture with an unrelated third party to redevelop an existing building into a Class A office building totaling approximately 115,000 net rentable square feetpublic offering of $1.0 billion in aggregate principal amount of its 3.650% senior unsecured notes due 2026. The notes were priced at 1265 Main Street in Waltham, Massachusetts.  The joint venture partner contributed real estate and improvements, with an aggregate fair value of approximately $9.4 million, for its initial 50% interest in the joint venture. For its initial 50% interest, the Company will contribute cash totaling approximately $9.4 million as the joint venture incurs costs. The joint venture has entered into a fifteen-year lease with a tenant to occupy 100%99.708% of the building.
On June 26, 2015, the Company entered into a joint venture withprincipal amount to yield an unrelated third partyeffective rate (including financing fees) of 3.766% to develop Dock72, an office building totaling approximately 670,000 net rentable square feet located at the Brooklyn Navy Yard in Brooklyn, New York. Each partner contributed cash totaling approximately $9.1 million for their initial 50% interest in the joint venture.maturity. The joint venture entered into a 96-year ground lease, comprised of an initial term of 46 years, which may be extended by the joint venture to 2111, subject to certain conditions. The joint venture also entered into a 20-year lease with a tenant to occupy approximately 222,000 net rentable square feet at the building. In addition, the joint venture entered into an option agreement pursuant to which it may lease an additional land parcel at the site, which could support between 600,000 and 1,000,000 net rentable square feet of development. In connection with the execution of the option agreement, the joint venture paid a non-refundable option payment of $1.0 million.
On September 22, 2015, a joint venture in which the Company has a 50% interest completed and fully placed in-service Annapolis Junction Building Seven, a Class A office project with approximately 127,000 net rentable square feet located in Annapolis, Maryland.
On September 30, 2015, a joint venture in which the Company has a 50% interest extended the loan collateralized by its Annapolis Junction Building Six property. At the time of the extension, the outstanding balance of the construction loan totaled approximately $13.4 million and was scheduled tonotes will mature on November 17, 2015.February 1, 2026, unless earlier redeemed. The extended loan has a total commitment amount of $15.9aggregate net proceeds from the offering were approximately $988.9 million bears interest at a variable rate equal to LIBOR plus 2.25% per annumafter deducting underwriting discounts and matures on November 17, 2016. Annapolis Junction Building Six is a Class A office property with approximately 119,000 net rentable square feet located in Annapolis, Maryland.transaction expenses.
5. Mortgage Notes Payable
On September 18, 2015, in connection with the sale of 505 9th Street, N.W. located in Washington, DC by a consolidated entity in which the Company has a 50% interest, the consolidated entity assigned to the buyer the mortgage loan collateralized by the property totaling approximately $117.0 million. The assigned mortgage loan bears interest at a fixed rate of 5.73% per annum and matures on November 1, 2017 (See Note 3).
6. Derivative Instruments and Hedging Activities
On February 19, 2015, the Company commenced a planned interest rate hedging program. The CompanyAs of March 31, 2016, Boston Properties Limited Partnership has entered into sixteenseventeen forward-starting interest rate swap contracts during the nine months ended September 30, 2015, whichthat fix the 10-year swap rate at a weighted-average rate of approximately 2.437%2.423% per annum on notional amounts aggregating $525.0$550.0 million. These interest rate swap contracts were entered into in advance of a financing with a target commencement date in September 2016 and maturity in September 2026 (See Note 13).2026. In addition, during the nine months ended September 30, 2015,as of March 31, 2016, 767 Fifth Partners LLC, which is the consolidated entity (in which the Company has a 60% interest and owns 767 Fifth Avenue (the General Motors Building) in New York City), has entered into ninesixteen forward-starting interest rate swap contracts (including two contracts entered into during the three months ended March 31, 2016 with notional amounts aggregating $50.0 million), which fix the 10-year swap rate at a weighted-average rate of approximately 2.801%2.619% per annum on notional amounts aggregating $250.0$450.0 million. These interest rate swap contracts were entered into in advance of a financing with a target commencement date in June 2017 and maturity in June 2027 (See Note 13). The Company's2027. Boston Properties Limited Partnership’s and 767 Fifth Avenue Partners LLC’s interest rate swap contracts consisted of the following at September 30, 2015:March 31, 2016 (dollars in thousands):

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Derivative Instrument Aggregate Notional Amount Effective Date Maturity Date Strike Rate Range Balance Sheet Location Fair Value
    Low High  
Boston Properties Limited Partnership:          
Interest Rate Swaps $550,000
 September 1, 2016 September 1, 2026 2.129%-2.571% Other Liabilities $(36,561)
767 Fifth Partners LLC:            
Interest Rate Swaps $450,000
 June 7, 2017 June 7, 2027 2.336%-2.950% Other Liabilities $(32,387)
  $1,000,000
           $(68,948)
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Boston Properties Limited Partnership’s and 767 Fifth Avenue Partners LLC’s interest rate swap contracts consisted of the following at December 31, 2015 (dollars in thousands):
Derivative Instrument Aggregate Notional Amount Effective Date Maturity Date Strike Rate Range Balance Sheet Location Fair Value Aggregate Notional Amount Effective Date Maturity Date Strike Rate Range Balance Sheet Location Fair Value
 Low High   Low High 
 (in thousands)     (in thousands)
Boston Properties Limited Partnership:Boston Properties Limited Partnership:      Boston Properties Limited Partnership:      
Interest Rate Swaps $475,000
 September 1, 2016 September 1, 2026 2.249%-2.571% Other Liabilities $(9,231) $400,000
 September 1, 2016 September 1, 2026 2.348%-2.571% Other Liabilities $(5,419)
Interest Rate Swaps 50,000
 September 1, 2016 September 1, 2026 2.238%-2.242% Prepaid Expenses and Other Assets 32
 150,000
 September 1, 2016 September 1, 2026 2.129%-2.325% Prepaid Expenses and Other Assets 1,188
 $525,000
     $(9,199) $550,000
     $(4,231)
767 Fifth Partners LLC:767 Fifth Partners LLC:      767 Fifth Partners LLC:      
Interest Rate Swaps $250,000
 June 7, 2017 June 7, 2027 2.677%-2.950% Other Liabilities $(8,851) $250,000
 June 7, 2017 June 7, 2027 2.677%-2.950% Other Liabilities $(7,247)
Interest Rate Swaps 150,000
 June 7, 2017 June 7, 2027 2.336%-2.430% Prepaid Expenses and Other Assets 1,176
 $775,000
     $(18,050) $400,000
     $(6,071)
 $950,000
     $(10,302)
The CompanyBoston Properties Limited Partnership entered into the interest rate swap contracts designated and qualifying as cash flow hedges to reduce its exposure to the variability in future cash flows attributable to changes in the 10-year swap rate in contemplation of obtaining 10-year fixed-rate financing in September 2016. The Company’s 767 Fifth Partners LLC consolidated entity entered into the interest rate swap contracts designated and qualifying as cash flow hedges to reduce its exposure to the variability in future cash flows attributable to changes in the 10-year swap rate in contemplation of obtaining 10-year fixed-rate financing in June 2017. The CompanyBoston Properties Limited Partnership has formally documented all of its relationships between hedging instruments and hedged items, as well as its risk-management objective and strategy for undertaking various hedge transactions. The CompanyBoston Properties Limited Partnership also assesses and documents, both at the hedging instrument’s inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in cash flows associated with the hedged items. All components of the forward-starting interest rate swap contracts were included in the assessment of hedge effectiveness. The CompanyBoston Properties Limited Partnership has agreements with each of its derivative counterparties that contain a provision where the Companyit could be declared in default on its derivative obligations if repayment of the Company'sits indebtedness is accelerated by the lender due to the Company'sits default on the indebtedness. As of September 30, 2015,March 31, 2016, the fair value of derivatives in a net liability position, which excludesexcluding any adjustment for nonperformance risk and excludesexcluding accrued interest, related to these agreements was approximately $18.1$69.3 million. As of September 30, 2015, the CompanyMarch 31, 2016, Boston Properties Limited Partnership has not posted any collateral related to these agreements. If the CompanyBoston Properties Limited Partnership had breached any of these provisions at September 30, 2015,March 31, 2016, it could have been required to settle its obligations under the agreements at their termination value of approximately $18.1$69.3 million. The Company accounts for the effective portion of changes in the fair value of a derivative in accumulated other comprehensive loss and subsequently reclassifies the effective portion to earnings over the term that the hedged transaction affects earnings. The Company accounts for the ineffective portion of changes in the fair value of a derivative directly in earnings. During the ninethree months ended September 30, 2015,March 31, 2016, the Company has recorded the changes in fair value of the swap contracts related to the effective portion of the interest rate contracts aggregating approximately $18.1$68.9 million in Other Liabilities and approximately $32,000 in Prepaid Expenses and Other Assets and Accumulated Other Comprehensive Loss within the Company’s Consolidated Balance Sheets. During the ninethree months ended September 30, 2015,March 31, 2016, the Company did not record any hedge ineffectiveness. The Company expects that within the next twelve months it will reclassify into earnings as an increase to interest expense approximately $77,000$2.1 million of the amounts recorded within Accumulated Other Comprehensive Loss relating to the forward-starting interest rate swap contracts in effect and as of September 30, 2015.March 31, 2016.
The following table presents the location in the financial statements of the losses recognized related to the Company'sCompany’s cash flow hedges for the three and nine months ended September 30, 2015March 31, 2016 and 2014:

2015:
 Three months ended
September 30,		 Nine months ended September 30, Three months ended
March 31,
 2015 2014 2015 2014 2016 2015
 (in thousands) (in thousands)
Amount of loss related to the effective portion recognized in other comprehensive loss $(30,156) $—
 $(18,050) $—
 $(58,646) $(3,533)
Amount of loss related to the effective portion subsequently reclassified to earnings (1) $(627) $(628) $(1,882) $(1,881) $(627) $(627)
Amount of gain (loss) related to the ineffective portion and amount excluded from effectiveness testing $—
 $—
 $—
 $—
 $—
 $—
___________
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(1)Consists of amounts from previous interest rate hedging programs entered into prior to 2015.
Boston Properties, Inc.
The following table reflects the changes in accumulated other comprehensive loss for the three months ended March 31, 2016 and 2015 (in thousands):
Balance at December 31, 2015 $(14,114)
Effective portion of interest rate contracts (58,646)
Amortization of interest rate contracts (1) 627
Other comprehensive loss attributable to noncontrolling interests 15,427
Balance at March 31, 2016 $(56,706)
   
Balance at December 31, 2014 $(9,304)
Effective portion of interest rate contracts (3,533)
Amortization of interest rate contracts (1) 627
Other comprehensive loss attributable to noncontrolling interests 303
Balance at March 31, 2015 $(11,907)
___________
(1)Consists of amounts from previous interest rate hedging programs.programs entered into prior to 2015.

Boston Properties Limited Partnership

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The following table reflects the changes in accumulated other comprehensive loss for the ninethree months ended September 30,March 31, 2016 and 2015 and 2014 (in thousands):

Balance at December 31, 2015 $(18,337)
Effective portion of interest rate contracts (58,646)
Amortization of interest rate contracts (1) 627
Other comprehensive loss attributable to noncontrolling interests 10,526
Balance at March 31, 2016 $(65,830)
  
Balance at December 31, 2014 $(12,973) $(12,973)
Effective portion of interest rate contracts (18,050) (3,533)
Amortization of interest rate contracts (1) 1,882
 627
Comprehensive loss attributable to noncontrolling interests 3,540
Balance at September 30, 2015 $(25,601)
  
Balance at December 31, 2013 $(15,481)
Amortization of interest rate contracts (1) 1,881
Balance at September 30, 2014 $(13,600)
Balance at March 31, 2015 $(15,879)
_____________________
(1)Consists of amounts from previous interest rate hedging programs.programs entered into prior to 2015.

7. 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 its subsidiaries for the payment of tenant improvement allowances and brokerage commissions in connection with their leases and limited costs arising from delays in delivery of their premises. 
The Company has letter of credit and performance obligations related to lender and development requirements that total approximately $36.2$22.5 million.
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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 ventures. With limited exception, under these provisions, the Company is not compelled to purchase the interest of its outside joint venture partners (See also Note 8).partners. Under certain of the Company'sCompany’s joint venture agreements, if certain return thresholds are achieved the partners will be entitled to an additional promoted interest or payments.
In connection with the assumption 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 joint venture’s obligation to fund various escrows, including tenant improvements, taxes and insurance in lieu of cash deposits. As of September 30, 2015March 31, 2016, the maximum funding obligation under the guarantee was approximately $13.4 million.$16.2 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.
In connection with 767 Fifth Partners LLC entering into interest rate swap contracts (See Note 6), the Company guaranteed 767 Fifth Partners LLC'sLLC’s obligations under the hedging agreements in favor of each hedge counterparty. 767 Fifth Partners LLC is the entity that owns 767 Fifth Avenue (the General Motors Building). It is a subsidiary of 767 Venture, LLC, a consolidated entity in which the Company has a 60% interest. 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.
In connection with the mortgage financing collateralized by the Company's 200 Clarendon Street (formerly the John Hancock Tower) property located in Boston, Massachusetts, the Company has agreed to guarantee approximately $21.2 million related to its obligations to provide funds for certain tenant re-leasing costs. In addition, in connection with the execution of the ground and air rights lease with respect to the parking garage at 100 Clarendon Street and the concourse level of the Massachusetts Bay Transportation Authority’s Back Bay Station, the Company has agreed to guarantee its obligations and liabilities under the lease (See Note 3). The mortgage financing will mature on January 6, 2017.
In connection with the mortgage financing collateralized by the Company'sCompany’s Fountain Square property located in Reston, Virginia, the Company has agreed to guarantee approximately $0.7 million related to its obligation to provide funds for certain tenant re-leasing costs. The mortgage financing willis scheduled to mature on October 11, 2016.2016 (See Note 13).

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From time to time, the Company (or the applicable joint venture) has also agreed to guarantee portions of the principal, interest or other amounts in connection with other unconsolidated joint venture borrowings. In addition to the financial guarantees referenced above, the Company has agreed to customary environmental indemnifications and nonrecourse carve-outs (e.g., guarantees against fraud, misrepresentation and bankruptcy) on certain of its unconsolidated joint venture loans.
In 2009, the Company filed a general unsecured creditor’s claim against Lehman Brothers, Inc. for approximately $45.3 million related to its rejection of a lease at 399 Park Avenue in New York City. On January 10, 2014, the trustee for the liquidation of the business of Lehman Brothers allowed the Company’s claim in the amount of approximately $45.2 million. During 2014, the Company received an initiala distribution totaling approximately $7.7 million, which is included in Base Rent in the accompanying Consolidated Statements of Operations. On March 11,million. During 2015, the Company received a second interim distribution totalingdistributions aggregating approximately $8.1 million, including approximately $4.5 million received on March 11, 2015, which is included in Base Rent in the accompanying Consolidated Statements of Operations for the ninethree months ended September 30, 2015. On September 9, 2015, the Company received a third interim distribution totaling approximately $3.6 million, which is also included in Base Rent in the accompanying Consolidated Statements of Operations for the three and nine months ended September 30,March 31, 2015, leaving a remaining claim of approximately $29.4 million. The Company will continue to evaluate whether to attempt to sell the remaining claim or wait until the trustee distributes proceeds from the Lehman Brothers estate. Given the inherent uncertainties in bankruptcy proceedings, there can be no assurance as to the timing or amount of additional proceeds, if any, that the Company may ultimately realize on the remaining claim, whether by sale to a third party or by one or more distributions from the trustee. Accordingly, the Company has not recorded any estimated recoveries associated with this gain contingency within its Consolidated Financial Statements at September 30, 2015.March 31, 2016.
Insurance
The Company carries insurance coverage on its properties of types and in amounts and with deductibles that it believes are in line with coverage customarily obtained by owners of similar properties. In response to the uncertainty in the insurance market following the terrorist attacks of September 11, 2001, the Federal Terrorism Risk Insurance Act (as amended, “TRIA”) was enacted in November 2002 to require regulated insurers to make available coverage for “certified” acts of terrorism (as defined by the statute). The expiration date of TRIA was extended to December 31, 2014 by the Terrorism Risk Insurance Program Reauthorization Act of 2007 and further extended to December 31, 2020 by the Terrorism Risk Insurance Program Reauthorization Act of 2015 (“TRIPRA”), and the Company can provide no assurance that it will be extended further. Currently, 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 $250 million of Terrorism Coverage for 601 Lexington Avenue, New York, New York (“601 Lexington Avenue”) in excess of the $1.0 billion of coverage in the Company’s property insurance program. 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 TRIA (“NBCR Coverage”), which is provided by IXP as a direct insurer, for the properties in our portfolio, including 767 Fifth Avenue, but excluding certain other properties
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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.” In 2015,2016, the program trigger is $100$120 million and the coinsurance is 15%16%, however, both will increase in subsequent years pursuant to TRIPRA. 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 TRIPRA. The Company may elect to terminate the NBCR Coverage if the Federal Government seeks recoupment for losses paid under TRIA, 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 and maintain terrorism insurance in amounts and on terms that are commercially reasonable.
The Company also currently carries earthquake insurance on its properties located in areas known to be subject to earthquakes in an amount and subject to self-insurance that the Company believes is commercially reasonable. In addition, this insurance is subject to a deductible in the amount of 5%3% of the value of the affected property. Specifically, the Company currently carries earthquake insurance which covers its San Francisco region (excluding Salesforce Tower) with a $170 million per occurrence limit, (increased on March 1, 2015 from $120 million), and a $170 million annual aggregate limit, (increased on March 1, 2015 from $120 million), $20 million of which is provided by IXP, as a direct insurer. The builders risk policy maintained for the development of Salesforce Tower in San Francisco includes a $60 million per occurrence and annual aggregate limit of earthquake coverage. 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

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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 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, the CompanyBoston Properties Limited Partnership has issued a guarantee to cover liabilities of IXP in the amount of $20.0 million.
The mortgages on the Company’s properties typically contain requirements concerning the financial ratings of the insurers who provide policies covering the property. The Company provides the lenders on a regular basis with the identity of the insurance companies in the Company’s insurance programs. The ratings of some of the Company’s insurers are below the rating requirements in some of the Company’s loan agreements and the lenders for these loans could attempt to claim that an event of default has occurred under the loan. The Company believes it could obtain insurance with insurers which satisfy the rating requirements. Additionally, in the future, the Company’s ability to obtain debt financing secured by individual properties, or the terms of such financing, may be adversely affected if lenders generally insist on ratings for insurers or amounts of insurance which are difficult to obtain or which result in a commercially unreasonable premium. There can be no assurance that a deficiency in the financial ratings of one or more of the Company’s insurers will not have a material adverse effect on the Company.
The Company continues to monitor the state of the insurance market in general, and the scope and costs of coverage for acts of terrorism and California earthquake risk 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 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 and financial condition and results of operations.
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8. Noncontrolling Interests
Noncontrolling interests relate to the interests in the CompanyBoston Properties Limited Partnership not owned by Boston Properties, Inc. and interests in consolidated property partnerships not wholly-owned by the Company. As of September 30, 2015March 31, 2016, the noncontrolling interests in the CompanyBoston Properties Limited Partnership consisted of 16,097,47316,092,449 OP Units, 1,837,0802,065,185 LTIP Units (including 216,854215,709 2012 OPP Units), 309,818Units and 103,882 2013 MYLTIP Units, 476,320Units), 475,558 2014 MYLTIP Units, 367,936 2015 MYLTIP Units and 368,415 2015474,456 2016 MYLTIP Units held by parties other than Boston Properties, Inc.
Noncontrolling Interest—Redeemable Preferred Units
On June 25, 2015, Boston Properties Limited Partnership redeemed the remaining 12,667 Series Four Preferred Units for cash totaling approximately $0.6 million, plus accrued and unpaid distributions. The Series Four Preferred Units bore a preferred distribution equal to 2.00% per annum on a liquidation preference of $50.00 per unit and were not convertible into OP Units. The holders of Series Four Preferred Units had the right, at certain times and subject to certain conditions set forth in the Certificate of Designations establishing the rights, limitations and preferences of the Series Four Preferred Units, to require Boston Properties Limited Partnership to redeem all of their units for cash at the redemption price of $50.00 per unit. Boston Properties Limited Partnership also had the right, at certain times and subject to certain conditions, to redeem all of the Series Four Preferred Units for cash at the redemption price of $50.00 per unit. In order to secure the performance of certain post-issuance obligations by the holders, all of such outstanding Series Four Preferred Units were subject to forfeiture pursuant to the terms of a pledge agreement and not eligible for redemption until and unless such security interest was released. Due to the holders’ redemption option existing outside the control of the Company, the Series Four Preferred Units were presented outside of permanent equity in the Company’s Consolidated Balance Sheets.
The following table reflects the activity of the noncontrolling interests—redeemable preferred units for the three months ended March 31, 2015 (in thousands):
Balance at December 31, 2014$633
Net income3
Distributions(3)
Balance at March 31, 2015$633
Noncontrolling Interest—Redeemable Interest in Property Partnership
On October 4, 2012, the Company completed the formation of a joint venture that owns and operates Fountain Square located in Reston, Virginia. The joint venture partner contributed the property valued at approximately $385.0 million and related mortgage indebtedness totaling approximately $211.3 million for a 50% interest in the joint venture. The Company contributed cash totaling approximately $87.0 million for its 50% interest, which cash was distributed to the joint venture partner. Pursuant to the joint venture agreement (i) the Company had rights to acquire the partner'spartner’s 50% interest and (ii) the partner had the right to cause the Company to acquire the partner'spartner’s interest on January 4, 2016, in each case at a fixed price totaling approximately $102.0 million in cash. The fixed price option rights were to expire on January 31, 2016. The Company was consolidating this joint venture due to the Company'sCompany’s right to acquire the partner'spartner’s 50% interest. The Company recorded the noncontrolling interest at its acquisition-date fair value as temporary equity, due to the redemption option existing outside the control of the Company. The Company was accreting the changes in the redemption value quarterly over the period from the acquisition date to the earliest redemption date using the effective interest method.  The Company was recording the accretion after the allocation of net income and distributions of cash flow to the noncontrolling interest account balance.
On August 6, 2015, the parties amended the joint venture agreement to require the Company to acquire its partner'spartner’s 50% interest on September 15, 2015 for approximately $100.9 million in cash. On September 15, 2015, the Company acquired its

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partner’s 50% interest in the consolidated entity that owns Fountain Square located in Reston Town Center in Reston, Virginia for cash of approximately $100.9 million plus working capital and closing prorations and the partner's share of assumed mortgage indebtedness totaling approximately $105.6 million.
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The following table reflects the activity of the noncontrolling interest—redeemable interest in property partnership in the Company'sCompany’s Fountain Square consolidated entity for the ninethree months ended September 30,March 31, 2015 and 2014 (in thousands):
Balance at December 31, 2014$104,692
 
Net loss(7) 
Distributions(2,900) 
Adjustment to reflect redeemable interest at redemption value5,128
 
Acquisition of interest(106,913) 
Balance at September 30, 2015$—
 
   
Balance at December 31, 2013$99,609
 
Net loss(519) 
Distributions(4,300) 
Adjustment to reflect redeemable interest at redemption value9,315
(1)
Balance at September 30, 2014$104,105
 
Balance at December 31, 2014$104,692
Net income75
Distributions(1,400)
Adjustment to reflect redeemable interest at redemption value2,153
Balance at March 31, 2015$105,520
_______________ 
(1)Includes an out-of-period adjustment totaling approximately $1.9 million (See Note 2).
Noncontrolling Interest—Redeemable Preferred Units of the Company
On June 25, 2015, the Company redeemed the remaining 12,667 Series Four Preferred Units for cash totaling approximately $0.6 million, plus accrued and unpaid distributions. The Series Four Preferred Units bore a preferred distribution equal to 2.00% per annum on a liquidation preference of $50.00 per unit and were not convertible into OP Units. The holders of Series Four Preferred Units had the right, at certain times and subject to certain conditions set forth in the Certificate of Designations establishing the rights, limitations and preferences of the Series Four Preferred Units, to require the Company to redeem all of their units for cash at the redemption price of $50.00 per unit. The Company also had the right, at certain times and subject to certain conditions, to redeem all of the Series Four Preferred Units for cash at the redemption price of $50.00 per unit. In order to secure the performance of certain post-issuance obligations by the holders, all of such outstanding Series Four Preferred Units were subject to forfeiture pursuant to the terms of a pledge agreement and not eligible for redemption until and unless such security interest was released. On May 19, 2014, the Company released to the holders 319,687 Series Four Preferred Units that were previously subject to the security interest. On July 3, 2014, the Company redeemed such units for cash totaling approximately $16.0 million, plus accrued and unpaid distributions. On October 16, 2014, the Company released to the holders 27,773 Series Four Preferred Units that were previously subject to the security interest under the pledge agreement. On November 5, 2014, the Company redeemed such units for cash totaling approximately $1.4 million. Due to the holders' redemption option existing outside the control of the Company, the Series Four Preferred Units were not included in Partners’ Capital in the Company's Consolidated Balance Sheets.
On February 17, 2015, the Company paid a distribution on its outstanding Series Four Preferred Units of $0.25 per unit. On May 15, 2015, the Company paid a distribution on its outstanding Series Four Preferred Units of $0.25 per unit.

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The following table reflects the activity of the noncontrolling interests—redeemable preferred units of the Company for the nine months ended September 30, 2015 and 2014 (in thousands):
Balance at December 31, 2014$633
Net income6
Distributions(6)
Redemption of redeemable preferred units (Series Four Preferred Units)(633)
Balance at September 30, 2015$—
  
Balance at December 31, 2013$105,746
Net income1,014
Distributions(1,014)
Redemption of redeemable preferred units (Series Four Preferred Units)(15,984)
Reallocation of partnership interest (1)(87,740)
Balance at September 30, 2014$2,022
_______________ 
(1)Includes the conversion of the remaining 666,116 Series Two Preferred Units into 874,168 OP Units during the nine months ended September 30, 2014.
Noncontrolling Interest—Common Units of the Company
During the ninethree months ended September 30, 2015,March 31, 2016, 418,87013,259 OP Units were presented by the holders for redemption (including 59,8267,277 OP Units issued upon conversion of LTIP Units and 2012 OPP Units) and were redeemed by Boston Properties, Inc. in exchange for an equal number of shares of Common Stock.
At September 30, 2015March 31, 2016, the CompanyBoston Properties Limited Partnership had outstanding 309,818 2013 MYLTIP Units, 476,320475,558 2014 MYLTIP Units, 367,936 2015 MYLTIP Units and 368,415 2015474,456 2016 MYLTIP Units. Prior to the applicable measurement date (February 4, 2016 for 2013 MYLTIP Units, February 3, 2017 for 2014 MYLTIP Units, and February 4, 2018 for 2015 MYLTIP Units and February 9, 2019 for 2016 MYLTIP Units), holders of MYLTIP Units will be 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 measurement date, 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.
On February 6, 2015, the measurement period for the Company’s 2012 OPP Unit awards ended and Boston Properties, Inc.’s TRSTSR performance was sufficient for employees to earn and therefore become eligible to vest in a portion of the 2012 OPP Unit awards. The final outperformance pool was determined to be approximately $32.1 million, or approximately 80% of the total maximum outperformance pool of $40.0 million. As a result, 174,549 2012 OPP Units were automatically forfeited.
On January 28, 2015,February 4, 2016, the Company paidmeasurement period for the Company’s 2013 MYLTIP awards ended and, based on Boston Properties, Inc.’s relative TSR performance, the final awards were determined to be 109.5% of target or an aggregate of approximately $13.5 million. As a special cash distribution on the OP Units and LTIP Units in the amount of $4.50 per unit, a regular quarterly cash distribution on the OP Units and LTIP Units in the amount of $0.65 per unit, and a regular quarterly distribution on the 2012 OPP Units,result, 205,762 2013 MYLTIP Units and 2014 MYLTIP Units in the amount of $0.065 per unit, to holders of record as of the close of business on December 31, 2014. were automatically forfeited.
The special cash distribution was in addition to the regular quarterly distribution on the OP Units and LTIP Units. Unless and until they are earned, holders of OPP Units and MYLTIP Units are not entitled to receive any special distributions. On April 30, 2015, the Company paid a distribution on the OP Units and LTIP Units in the amount of $0.65 per unit, a distribution on the 2012 OPP Units in the amount of $0.416 per unit (representing a blended rate for periods prior to and after February 6, 2015, which was the valuation date for the 2012 Outperformance Plan), and a distribution on the 2013 MYLTIP Units, 2014 MYLTIP Units and 2015 MYLTIP Units in the amount of $0.065 per unit, to holders of record as of the close of business on March 31, 2015. On July 31, 2015, the Company paid a distributionfollowing table presents Boston Properties Limited Partnership’s distributions on the OP Units and LTIP Units (including the 2012 OPP Units and, after the measurement date, the 2013 MYLTIP Units) in the amount of $0.65 per unit and a distributionits distributions on the 2013 MYLTIP Units (prior to the February 4, 2016 measurement date), 2014 MYLTIP Units, and 2015 MYLTIP Units in the amount of $0.065 per unit, to holders of record as of the close of business on June 30, 2015. On September 16, 2015, Boston Properties, Inc., as general partner of the Company, declared a distribution on the OP Units and LTIP Units (including the 2012 OPP Units) in the amount of $0.65 per unit and a distribution on the 20132016 MYLTIP Units 2014 MYLTIP Units and 2015 MYLTIP Units in(after the amount of $0.065 per unit, in each case payable on October 30, 2015 to holders of record as of the close of business on September 30, 2015.

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The following table reflects the activity of the noncontrolling interests—redeemable common unitsFebruary 10, 2016 issuance date) for the nine months ended September 30, 2015 and 2014 (in thousands):
periods presented:
Balance at December 31, 2014$2,310,046
Contributions39,036
Net income50,906
Distributions(35,307)
Conversion of redeemable partnership units(14,157)
Unearned compensation(9,729)
Accumulated other comprehensive income(1,307)
Adjustment to reflect redeemable partnership units at redemption value(216,037)
Balance at September 30, 2015$2,123,451
  
Balance at December 31, 2013$1,710,218
Contributions23,990
Net income29,819
Distributions(34,426)
Conversion of redeemable partnership units(2,368)
Unearned compensation(6,952)
Accumulated other comprehensive income191
Adjustment to reflect redeemable partnership units at redemption value358,772
Balance at September 30, 2014$2,079,244
Record Date Payment Date Distributions on the OP Units and LTIP Units Distributions on MYLTIP Units
March 31, 2016 April 29, 2016 
$0.65
 
$0.065
December 31, 2015 January 28, 2016 
$1.90
(1)
$0.065
_______________
(1)Includes a special distribution of $1.25 per unit.
PursuantA holder of an OP Unit may present such OP Unit to Boston Properties Limited Partnership 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, Boston Properties Limited Partnership must redeem such OP Unit for cash equal to the Company’s partnership agreement, certain limited partners in the Company have the right to redeem all or any portionthen value of their interest for cash from the Company. However,a share of common stock of Boston Properties, Inc. Boston Properties, Inc. may, in its sole discretion, elect to acquire the limited partner’s interest by issuing its Common Stock in exchange for the interest. The amount of cash to be paid to the limited partner ifassume and satisfy the redemption right is exercised and Boston Properties, Inc. does not elect to issue itsobligation by paying either cash or issuing one share of Common Stock is based on the trading price of Boston Properties, Inc.’s common stock at that time. Due to the redemption option existing outside the control of the Company, such limited partners’ units are not included in Partners’ Capital.Stock. The value of the OP Units not owned by Boston Properties, Inc. and LTIP Units (including the 2012 OPP Units and 2013 MYLTIP Units) assuming that all conditions had been met for the conversion thereof assuminghad all of such units had been redeemed at September 30, 2015March 31, 2016 was approximately $2.12.3 billion based on the closing price of Boston Properties, Inc.’s common stock of $118.40127.08 per share.share on March 31, 2016.
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Boston Properties Limited Partnership
The following table reflects the activity of noncontrolling interests—redeemable common units of Boston Properties Limited Partnership for the three months ended March 31, 2016 and 2015 (in thousands):
Balance at December 31, 2015$2,286,689
Contributions30,808
Net income21,393
Distributions(11,865)
Conversion of redeemable partnership units(446)
Unearned compensation(22,424)
Accumulated other comprehensive loss(4,901)
Adjustment to reflect redeemable partnership units at redemption value8,218
Balance at March 31, 2016$2,307,472
  
Balance at December 31, 2014$2,310,046
Contributions38,371
Net income20,188
Distributions(11,705)
Conversion of redeemable partnership units(8,689)
Unearned compensation(18,597)
Accumulated other comprehensive loss(303)
Adjustment to reflect redeemable partnership units at redemption value211,747
Balance at March 31, 2015$2,541,058
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 $1.6 billion at September 30, 2015March 31, 2016 and December 31, 2014,2015, are included in Noncontrolling Interests—Property Partnerships on the accompanying Consolidated Balance Sheets.
On September 18, 2015, a consolidated entity in which the Company has a 50% interest completed the sale of its 505 9th Street, N.W. property located in Washington, DC for approximately $318.0 million, including the assumption by the buyer of approximately $117.0 million of mortgage indebtedness (See Note 5).indebtedness.  505 9th Street, N.W. is an approximately 322,000 net rentable square foot Class A office building. Net cash proceeds totaled approximately $194.6 million, of which the partners’ share was approximately $97.3 million. The Company recognized a gain on sale of real estate totaling approximately $199.5 million and $199.7 million for Boston Properties, Inc. and Boston Properties Limited Partnership, respectively, of which approximately $101.1 million was allocated to the outside partners and is included within Noncontrolling Interests in Property Partnerships in the Company’s Consolidated Statements of Operations (See Note 3).partners.

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The following table reflects the activity of the noncontrolling interests in property partnerships for the ninethree months ended September 30,March 31, 2016 and 2015 and 2014 (in thousands):
Balance at December 31, 2015$1,574,400
Capital contributions2,489
Net income10,464
Accumulated other comprehensive loss(10,526)
Distributions(12,915)
Balance at March 31, 2016$1,563,912
 
Balance at December 31, 2014$1,602,467
$1,602,467
Capital contributions1,758
629
Net income134,591
12,980
Accumulated other comprehensive loss(3,540)
Distributions(144,468)(16,574)
Balance at September 30, 2015$1,590,808
 
Balance at December 31, 2013$726,132
Capital contributions2,980
Net income8,677
Distributions(21,224)
Balance at September 30, 2014$716,565
Balance at March 31, 2015$1,599,502

9. Stockholders’ Equity / Partners’ Capital
As of September 30, 2015March 31, 2016, Boston Properties, Inc. had 153,604,966 shares of Common Stock outstanding.
As of March 31, 2016, Boston Properties, Inc. owned 1,715,0921,717,626 general partnership units and 151,859,508151,887,340 limited partnership units.units of Boston Properties Limited Partnership.
On June 3, 2014, Boston Properties, Inc. established an “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. Boston Properties, Inc.The Company intends to use the net proceeds from any offering for general business purposes, which may include investment opportunities and debt reduction. Boston Properties, Inc. contributes the net proceeds from any such sales to the Company in exchange for a number of OP Units equal to the number of shares issued. No shares of common stock have been issued under this ATM stock offering program since its inception.
During the ninethree months ended September 30, 2015,March 31, 2016, Boston Properties, Inc. acquired 418,870 OP Unitsissued 13,259 shares of Common Stock in connection with the redemption of an equal number of redeemable OP Units from third parties.
During the nine months ended September 30, 2015, the Company issued 11,447 OP Units to Boston Properties, Inc. in connection with the exercise of options to purchase Common Stock of Boston Properties, Inc. by certain employees of Boston Properties, Inc.
On January 28, 2015, the Company paid a special cash distribution and regular quarterly distribution aggregating $5.15 per OP Unit to unitholders of record as of the close of business on December 31, 2014. On April 30, 2015, the Company paid a distribution of $0.65 per OP Unit to unitholders of record as of the close of business on March 31, 2015. On July 31, 2015, the Company paid a distribution of $0.65 per OP Unit to unitholders of record as of the close of business on June 30, 2015. On September 16, 2015,The following table presents Boston Properties, Inc.’s Board of Directors declared a distribution of $0.65dividends per OP Unit payable on October 30, 2015 to unitholders of record as ofshare and Boston Properties Limited Partnership’s distributions per unit for the close of business on September 30, 2015.periods presented:
Record Date Payment Date Dividend (Per Share)
 Distribution (Per Unit)
 
March 31, 2016 April 29, 2016 
$0.65
 
$0.65
 
December 31, 2015 January 28, 2016 
$1.90
(1)
$1.90
(1)
_______________
(1)Includes a special dividend/distribution of $1.25 per share/common unit.
Preferred UnitsStock
As of September 30, 2015,March 31, 2016, Boston Properties, Inc. had 80,000 shares (8,000,000 depositary shares each representing 1/100th of a share) outstanding of its 5.25% Series B Cumulative Redeemable Preferred Stock with a liquidation preference of $2,500.00 per share ($25.00 per depositary share). Boston Properties, Inc. contributed the net proceeds of the offering to the Company in exchange for 80,000 Series B Preferred Units having terms and preferences generally mirroring those of the Series B Preferred Stock. Boston Properties, Inc. pays cumulative cash dividends on the Series B Preferred Stock at a rate of 5.25% per annum of the $2,500.00 liquidation preference per share. Boston Properties, Inc. may not redeem the Series B Preferred Stock prior to March 27, 2018, except in certain circumstances relating to the preservation of Boston Properties, Inc.’s REIT status. On or after March 27, 2018, Boston Properties, Inc., at its option, may redeem the Series B Preferred Stock for a cash redemption price of $2,500.00 per share ($25.00 per depositary share), plus all accrued and unpaid dividends. The Series B Preferred Stock is not redeemable by the holders, has no maturity date and is not convertible into any other security of Boston Properties, Inc., the Company or its affiliates.
On February 17, 2015, the Company paid a distribution
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The following table presents Boston Properties Inc.’s dividends per share on its outstanding Series B Preferred UnitsStock:
Record DatePayment DateDividend (Per Share)
May 5, 2016May 16, 2016
$32.8125
February 5, 2016February 16, 2016
$32.8125

10. Earnings Per Share / Common Unit
Boston Properties, Inc.
The following table provides a reconciliation of $32.8125both the net income attributable to Boston Properties, Inc. common shareholders and the number of common shares used in the computation of basic earnings per unit. On May 15, 2015,share (“EPS”), which is calculated by dividing net income attributable to Boston Properties, Inc. common shareholders 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 the Company, paid a distributionLTIP Units, 2012 OPP Units and MYLTIP Units are considered participating securities. Participating securities are included in the computation of basic EPS of the Company using the two-class method. Participating securities are included in the computation of diluted EPS of the Company using the if-converted method if the impact is dilutive. Because the 2012 OPP Units and 2013 MYLTIP Units required and the 2014-2016 MYLTIP Units require the Company to outperform absolute and relative return thresholds, unless such thresholds have been met by the end of the applicable reporting period, the Company excludes such units from the diluted EPS calculation. Other potentially dilutive common shares, including stock options, restricted stock and other securities of Boston Properties Limited Partnership that are exchangeable for the Boston Properties, Inc.’s Common Stock, and the related impact on its outstanding Series B Preferred Units of $32.8125 per unit. Onearnings, are considered when calculating diluted EPS.

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August 17, 2015, the Company paid a distribution on its outstanding Series B Preferred Units of $32.8125 per unit. On September 16, 2015,
 For the three months ended March 31, 2016
 
Income
(Numerator)
 
Shares
(Denominator)
 
Per Share
Amount
 (in thousands, except for per share amounts)
Basic Earnings:     
Net income attributable to Boston Properties, Inc. common shareholders$181,747
 153,626
 $1.18
Allocation of undistributed earnings to participating securities(247) —
 —
Net income attributable to Boston Properties, Inc. common shareholders$181,500
 153,626
 $1.18
Effect of Dilutive Securities:     
Stock Based Compensation—
 291
 —
Diluted Earnings:     
Net income attributable to Boston Properties, Inc. common shareholders$181,500
 153,917
 $1.18
      
 For the three months ended March 31, 2015
 
Income
(Numerator)
 
Shares
(Denominator)
 
Per Share
Amount
 (in thousands, except for per share amounts)
Basic Earnings:     
Net income attributable to Boston Properties, Inc. common shareholders$171,182
 153,230
 $1.12
Allocation of undistributed earnings to participating securities(188) —
 —
Net income attributable to Boston Properties, Inc. common shareholders$170,994
 153,230
 $1.12
Effect of Dilutive Securities:     
Stock Based Compensation—
 643
 (0.01)
Diluted Earnings:     
Net income attributable to Boston Properties, Inc. common shareholders$170,994
 153,873
 $1.11
Boston Properties Inc.’s Board of Directors declared a distribution of $32.8125 per Series B Preferred Unit payable on November 16, 2015 to shareholders of record as of the close of business on November 5, 2015.
10. Earnings Per Common UnitLimited Partnership
The following table provides a reconciliation of both the net income attributable to Boston Properties Limited Partnership common unitholders and the number of common units used in the computation of basic earnings per common unit, which is calculated by dividing net income attributable to Boston Properties Limited Partnership common unitholders 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 Boston Properties, Inc. and the Company’sBoston Properties Limited Partnership’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 MYLTIP Units required and the 2014-2016 MYLTIP Units require Boston Properties, Inc. to outperform absolute and relative return thresholds, unless such thresholds have been met by the end of the applicable reporting period, the CompanyBoston Properties Limited Partnership 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 17,565,00017,683,000 and 17,665,00017,854,000 redeemable common units for the three months ended September 30,March 31, 2016 and 2015, and 2014, respectively, and approximately 17,705,000 and 17,263,000 redeemable common units for the nine months ended September 30, 2015 and 2014, respectively.
 For the three months ended September 30, 2015
 
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$207,626
 171,160
 $1.21
Allocation of undistributed earnings to participating securities(246) —
 —
Net income attributable to Boston Properties Limited Partnership common unitholders$207,380
 171,160
 $1.21
Effect of Dilutive Securities:     
Stock Based Compensation—
 191
 —
Diluted Earnings:     
Net income attributable to Boston Properties Limited Partnership common unitholders$207,380
 171,351
 $1.21
 For the three months ended September 30, 2014
 
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$144,715
 170,785
 $0.85
Allocation of undistributed earnings to participating securities(70) —
 —
Net income attributable to Boston Properties Limited Partnership common unitholders$144,645
 170,785
 $0.85
Effect of Dilutive Securities:     
Stock Based Compensation—
 153
 —
Diluted Earnings:     
Net income attributable to Boston Properties Limited Partnership common unitholders$144,645
 170,938
 $0.85
      

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For the nine months ended September 30, 2015For the three months ended March 31, 2016
Income
(Numerator)
 
Units
(Denominator)
 
Per Unit
Amount
Income
(Numerator)
 
Units
(Denominator)
 
Per Unit
Amount
(in thousands, except for per unit amounts)(in thousands, except for per unit amounts)
Basic Earnings:          
Net income attributable to Boston Properties Limited Partnership common unitholders$491,847
 171,131
 $2.87
$207,296
 171,309
 $1.21
Allocation of undistributed earnings to participating securities(402) —
 —
(275) —
 —
Net income attributable to Boston Properties Limited Partnership common unitholders$491,445
 171,131
 $2.87
$207,021
 171,309
 $1.21
Effect of Dilutive Securities:          
Stock Based Compensation—
 399
 —
—
 291
 —
Diluted Earnings:          
Net income attributable to Boston Properties Limited Partnership common unitholders$491,445
 171,530
 $2.87
$207,021
 171,600
 $1.21
     
For the nine months ended September 30, 2014
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$294,370
 170,340
 $1.73
Effect of Dilutive Securities:     
Stock Based Compensation—
 151
 —
Diluted Earnings:     
Net income attributable to Boston Properties Limited Partnership common unitholders$294,370
 170,491
 $1.73
     
 For the three months ended March 31, 2015
 
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$193,369
 171,084
 $1.13
Allocation of undistributed earnings to participating securities(210) —
 —
Net income attributable to Boston Properties Limited Partnership common unitholders$193,159
 171,084
 $1.13
Effect of Dilutive Securities:     
Stock Based Compensation—
 643
 (0.01)
Diluted Earnings:     
Net income attributable to Boston Properties Limited Partnership common unitholders$193,159
 171,727
 $1.12
      
11. Stock Option and Incentive Plan
On January 21, 2015,25, 2016, Boston Properties Inc.’s Compensation Committee approved the 20152016 MYLTIP awards under Boston Properties Inc.’s 2012 Stock Option and Incentive Plan (the"2012 Plan"(the “2012 Plan”) to certain officers and employees of Boston Properties, Inc. The 20152016 MYLTIP awards utilize TRSTSR over a three-year measurement period, on an annualized, compounded basis, as the performance metric. Earned awards will be based on Boston Properties, Inc.’s TRSTSR relative to (i) the Cohen & Steers Realty Majors Portfolio Index (50% weight) and (ii) the NAREIT Office Index adjusted to include Vornado Realty Trust and exclude Boston Properties, Inc. (50% weight). Earned awards will range from $0zero to a maximum of approximately $40.8$49.3 million depending on Boston Properties, Inc.'s TRS’s TSR relative to the two indices, with three tiers (threshold: approximately $8.2$9.9 million; target: approximately $16.3$19.7 million; high: approximately $40.8$49.3 million) and linear interpolation between tiers. Earned awards measured on the basis of relative TRSTSR performance are subject to an absolute TRSTSR component in the form of relatively simple modifiers that (A) reduce the level of earned awards in the event Boston Properties, Inc.’s annualized TRSTSR is less than 0% and (B) cause some awards to be earned in the event Boston Properties, Inc.’s annualized TRSTSR is more than 12% even though on a relative basis alone Boston Properties, Inc.’s TRSTSR would not result in any earned awards.
Earned awards (if any) will vest 50% on February 4, 20189, 2019 and 50% on February 4, 2019,9, 2020, based on continued employment. Vesting will be accelerated in the event of a change in control, termination of employment by Boston Properties, Inc. without cause, or termination of employment by the award recipient for good reason, death, disability or retirement. If there is a change of control prior to February 4, 2018,9, 2019, earned awards will be calculated based on TRSTSR performance up to the date of the change of control. The 20152016 MYLTIP awards are in the form of LTIP Units issued on the grant date which (i) are subject to forfeiture to the extent awards are not earned and (ii) prior to the performance measurement date are only entitled to one-tenth (10%) of the regular quarterly distributions payable on OP Units.Units and no special distributions.
Under the FASB’s Accounting Standards Codification (“ASC”)ASC 718 “Compensation-Stock Compensation,” the 20152016 MYLTIP awards have an aggregate value of approximately $15.7$17.3 million, which amount will generally be amortized into earnings over the four-year plan period under the graded vesting method.

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On February 6, 2015, the measurement period for the Company’s 2012 OPP Unit awards ended and Boston Properties, Inc.’s TRSTSR performance was sufficient for employees to earn and therefore become eligible to vest in a portion of the 2012 OPP Unit awards. The final outperformance pool was determined to be approximately $32.1 million, or approximately 80% of the total maximum outperformance pool of $40.0 million. As a result, 174,549 2012 OPP Units were automatically forfeited.
On February 4, 2016, the measurement period for the Company’s 2013 MYLTIP awards ended and, based on Boston Properties, Inc.’s relative TSR performance, the final awards were determined to be 109.5% of target or an aggregate of approximately $13.5 million. As a result, 205,762 2013 MYLTIP Units were automatically forfeited.
During the ninethree months ended September 30, 2015,March 31, 2016, Boston Properties, Inc. issued 34,15018,521 shares of restricted common stock and the CompanyBoston Properties Limited Partnership issued 190,563139,435 LTIP Units (including 85,962 LTIP Units issued on January 1, 2015 to Mortimer B. Zuckerman, non-executive Chairman of the Board of Boston Properties, Inc., pursuant to the Transition Benefits Agreement dated March 10, 2013) and 375,000 2015475,004 2016 MYLTIP Units to employees and non-employee directors under the 2012 Plan. Employees and non-employee directors paid $0.01 per share of restricted common stock and $0.25 per LTIP Unit and 20152016 MYLTIP Unit. When issued, LTIP Units are not economically equivalent in value to a share of Boston Properties, Inc.’s Common Stock, but over time can increase in value to one-for-one parity with Boston Properties, Inc.’s 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. Grants of restricted stock and LTIP Units to employees vest in four equal annual installments. Restricted stock is measured at fair value on the date of grant based on the number of shares granted, as adjusted for forfeitures, and the closing price of Boston Properties, Inc.’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 stock granted during the ninethree months ended September 30, 2015March 31, 2016 were valued at approximately $4.8$2.1 million ($140.88 ($111.14 per share weighted-average)share). The LTIP Units granted (excluding the number issued to Mr. Zuckerman, as discussed above) were valued at approximately $13.5$14.4 million ($128.94103.26 per unit weighted-average fair value) using a Monte Carlo simulation method model. The per unit fair values of the LTIP Units granted were estimated on the dates of grant and for a substantial majority of such units were valued using the following assumptions: an expected life of 5.7 years, a risk-free interest rate of 1.47%1.61% and an expected price volatility of 26%33%. The value of the LTIP Units issued to Mr. Zuckerman was expensed between March 2013 and July 2014 in accordance with the vesting schedule set forth in the Transition Benefits Agreement. As the 2012 OPP Units, 2013 MYLTIP Units, 2014 MYLTIP Units, 2015 MYLTIP Units and 20152016 MYLTIP Units are subject to both a service condition and a market condition, the Company recognizes the compensation expense related to the 2012 OPP Units, 2013 MYLTIP Units, 2014 MYLTIP Units, 2015 MYLTIP Units and 20152016 MYLTIP Units 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. Dividends paid on both vested and unvested shares of restricted stock are charged directly to Dividends in Excess of Earnings in Boston Properties, Inc.’s Consolidated Balance Sheets and Partners’ Capital in theBoston Properties Limited Partnership’s Consolidated Balance Sheets. Aggregate stock-based compensation expense associated with restricted stock, non-qualified stock options, LTIP Units, 2012 OPP Units, 2013 MYLTIP Units, 2014 MYLTIP Units, 2015 MYLTIP Units and 20152016 MYLTIP Units was approximately $5.9$9.4 million and $5.0$10.1 million for the three months ended September 30,March 31, 2016 and 2015, and 2014, respectively, and approximately $21.0 million and $21.0 million for the nine months ended September 30, 2015 and 2014, respectively. At September 30, 2015,March 31, 2016, there was $21.3$30.4 million of unrecognized compensation expense related to unvested restricted stock, LTIP Units, and 2012 OPP Units and $20.52013 MYLTIP Units and $29.6 million of unrecognized compensation expense related to unvested 2013 MYLTIP Units, 2014 MYLTIP Units, 2015 MYLTIP Units and 20152016 MYLTIP Units that is expected to be recognized over a weighted-average period of approximately 2.5 years.2.9 years.
12. Segment Information
The Company’s segments are based on the Company’s method of internal reporting which classifies its operations by both geographic area and property type. The Company’s segments by geographic area are Boston, New York, San Francisco and Washington, DC. Segments by property type include: Class A Office, Office/Technical, Residential and Hotel.
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 and other income, development and management services income, general and administrative expenses, transaction costs, interest expense, depreciation and amortization expense, gains (losses) from investments in securities, income from unconsolidated joint ventures, gains on sales of real estate, noncontrolling interests and preferred dividends/distributions are not included in Net Operating Income as internal reporting addresses these items on a corporate level.
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Net Operating Income is not a measure of operating results or cash flows from operating activities as measured by accounting principles generally accepted in the United States of America,GAAP, and it is not indicative of cash available to fund cash needs and should not be considered an alternative to cash flows as a measure of liquidity. All companies may not calculate Net Operating Income in the same manner. The Company considers Net Operating Income to be an appropriate supplemental measure to net income because it helps both investors and management to understand the core operations of the Company’s properties. The Company'sCompany’s management also uses Net Operating Income to evaluate regional property level performance and to make decisions about resource allocations. Further, the Company believes Net Operating Income is useful to investors as a performance measure because, when compared across periods, Net Operating Income reflects the impact on operations from

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trends in occupancy rates, rental rates, operating costs and acquisition and development activity on an unleveraged basis, providing perspectives not immediately apparent from net income attributable to Boston Properties, Inc. common shareholders and net income attributable to Boston Properties Limited Partnership common unitholders.
The Company has modified the presentation of its Office/Technical properties to be included within Office properties to align with its method of internal reporting, which shifted after the disposition of 415 Main Street in Cambridge, Massachusetts. As such, the amounts previously included in Office/Technical are now included in Office for all periods presented.
Information by geographic area and property type (dollars in thousands):
For the three months ended September 30, 2015March 31, 2016:
Boston New York San
Francisco		 Washington,
DC		 TotalBoston New York 
San
Francisco
 
Washington,
DC
 Total
Rental Revenue:                  
Class A Office$173,412
 $253,612
 $71,720
 $94,086
 $592,830
Office/Technical5,866
 —
 5,595
 2,951
 14,412
Office$177,827
 $291,858
 $76,317
 $100,488
 $646,490
Residential1,275
 —
 —
 2,836
 4,111
1,171
 —
 —
 2,878
 4,049
Hotel12,619
 —
 —
 —
 12,619
8,757
 —
 —
 —
 8,757
Total193,172
 253,612
 77,315
 99,873
 623,972
187,755
 291,858
 76,317
 103,366
 659,296
% of Grand Totals30.96% 40.64% 12.39% 16.01% 100.00%28.48% 44.27% 11.57% 15.68% 100.00%
Rental Expenses:                  
Class A Office70,178
 88,496
 24,864
 30,943
 214,481
Office/Technical1,720
 —
 1,019
 1,042
 3,781
Office70,687
 88,798
 23,905
 34,182
 217,572
Residential485
 —
 —
 1,049
 1,534
520
 —
 —
 1,080
 1,600
Hotel8,125
 —
 —
 —
 8,125
7,634
 —
 —
 —
 7,634
Total80,508
 88,496
 25,883
 33,034
 227,921
78,841
 88,798
 23,905
 35,262
 226,806
% of Grand Totals35.32% 38.83% 11.36% 14.49% 100.00%34.76% 39.15% 10.54% 15.55% 100.00%
Net operating income$112,664
 $165,116
 $51,432
 $66,839
 $396,051
$108,914
 $203,060
 $52,412
 $68,104
 $432,490
% of Grand Totals28.45% 41.69% 12.98% 16.88% 100.00%25.18% 46.95% 12.12% 15.75% 100.00%
For the three months ended September 30, 2014:March 31, 2015:
Boston New York San
Francisco		 Washington,
DC		 TotalBoston New York 
San
Francisco
 
Washington,
DC
 Total
Rental Revenue:                  
Class A Office$176,788
 $243,033
 $61,691
 $96,219
 $577,731
Office/Technical6,056
 —
 5,892
 3,713
 15,661
Office$176,027
 $253,098
 $71,911
 $96,173
 $597,209
Residential1,137
 —
 —
 5,881
 7,018
1,178
 —
 —
 5,676
 6,854
Hotel11,918
 —
 —
 —
 11,918
9,085
 —
 —
 —
 9,085
Total195,899
 243,033
 67,583
 105,813
 612,328
186,290
 253,098
 71,911
 101,849
 613,148
% of Grand Totals31.99% 39.69% 11.04% 17.28% 100.00%30.38% 41.28% 11.73% 16.61% 100.00%
Rental Expenses:                  
Class A Office69,026
 82,335
 22,484
 32,898
 206,743
Office/Technical1,901
 —
 1,363
 1,009
 4,273
Office76,451
 85,061
 22,821
 33,471
 217,804
Residential509
 —
 —
 3,654
 4,163
509
 —
 —
 3,037
 3,546
Hotel7,585
 —
 —
 —
 7,585
7,576
 —
 —
 —
 7,576
Total79,021
 82,335
 23,847
 37,561
 222,764
84,536
 85,061
 22,821
 36,508
 228,926
% of Grand Totals35.47% 36.96% 10.71% 16.86% 100.00%36.92% 37.16% 9.97% 15.95% 100.00%
Net operating income$116,878
 $160,698
 $43,736
 $68,252
 $389,564
$101,754
 $168,037
 $49,090
 $65,341
 $384,222
% of Grand Totals30.00% 41.25% 11.23% 17.52% 100.00%26.48% 43.73% 12.78% 17.01% 100.00%



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For the nine months ended September 30, 2015:Boston Properties, Inc.
The following is a reconciliation of Net Operating Income to net income attributable to Boston Properties, Inc. common shareholders:
 Boston New York San
Francisco		 Washington,
DC		 Total
Rental Revenue:         
Class A Office$518,213
 $753,142
 $206,753
 $278,706
 $1,756,814
Office/Technical18,028
 —
 16,808
 8,946
 43,782
Residential3,584
 —
 —
 11,192
 14,776
Hotel35,107
 —
 —
 —
 35,107
Total574,932
 753,142
 223,561
 298,844
 1,850,479
% of Grand Totals31.07% 40.70% 12.08% 16.15% 100.00%
Rental Expenses:         
Class A Office212,517
 259,218
 70,189
 95,403
 637,327
Office/Technical5,485
 —
 2,930
 3,257
 11,672
Residential1,505
 —
 —
 5,106
 6,611
Hotel24,196
 —
 —
 —
 24,196
Total243,703
 259,218
 73,119
 103,766
 679,806
% of Grand Totals35.85% 38.13% 10.76% 15.26% 100.00%
Net operating income$331,229
 $493,924
 $150,442
 $195,078
 $1,170,673
% of Grand Totals28.29% 42.19% 12.85% 16.67% 100.00%
 Three months ended
March 31,
 2016 2015
 (in thousands)
Net Operating Income$432,490
 $384,222
Add:   
Development and management services income6,689
 5,328
Income from unconsolidated joint ventures1,791
 14,834
Interest and other income1,505
 1,407
Gains from investments in securities259
 393
Gains on sales of real estate67,623
 95,084
Less:   
General and administrative expense29,353
 28,791
Transaction costs25
 327
Depreciation and amortization expense159,448
 154,223
Interest expense105,309
 108,757
Noncontrolling interests in property partnerships10,464
 15,208
Noncontrolling interest—redeemable preferred units of the Operating Partnership—
 3
Noncontrolling interest—common units of the Operating Partnership21,393
 20,188
Preferred dividends2,618
 2,589
Net income attributable to Boston Properties, Inc. common shareholders$181,747
 $171,182

Boston Properties Limited Partnership

For the nine months ended September 30, 2014:
 Boston New York San
Francisco		 Washington,
DC		 Total
Rental Revenue:         
Class A Office$520,857
 $684,240
 $173,749
 $287,489
 $1,666,335
Office/Technical17,788
 —
 18,451
 11,044
 47,283
Residential3,389
 —
 —
 15,609
 18,998
Hotel32,478
 —
 —
 —
 32,478
Total574,512
 684,240
 192,200
 314,142
 1,765,094
% of Grand Totals32.55% 38.76% 10.89% 17.80% 100.00%
Rental Expenses:         
Class A Office206,242
 231,668
 63,078
 98,818
 599,806
Office/Technical5,326
 —
 3,885
 3,335
 12,546
Residential1,501
 —
 —
 10,360
 11,861
Hotel21,697
 —
 —
 —
 21,697
Total234,766
 231,668
 66,963
 112,513
 645,910
% of Grand Totals36.35% 35.86% 10.37% 17.42% 100.00%
Net operating income$339,746
 $452,572
 $125,237
 $201,629
 $1,119,184
% of Grand Totals30.36% 40.43% 11.19% 18.02% 100.00%


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The following is a reconciliation of Net Operating Income to net income attributable to Boston Properties Limited Partnership common unitholders:
Three months ended
September 30,		 Nine months ended September 30,Three months ended
March 31,
2015 2014 2015 20142016 2015
(in thousands)(in thousands)
Net Operating Income$396,051
 $389,564
 $1,170,673
 $1,119,184
$432,490
 $384,222
Add:          
Development and management services income5,912
 6,475
 16,102
 18,197
6,689
 5,328
Income from unconsolidated joint ventures2,647
 4,419
 20,559
 10,069
1,791
 14,834
Interest and other income3,637
 3,421
 6,337
 6,841
1,505
 1,407
Gains from investments in securities
259
 393
Gains on sales of real estate199,723
 41,937
 294,807
 41,937
69,792
 95,084
Less:          
General and administrative expense20,944
 22,589
 72,019
 75,765
29,353
 28,791
Transaction costs254
 1,402
 789
 2,500
25
 327
Depreciation and amortization expense151,017
 155,217
 469,087
 460,064
157,461
 152,224
Losses (gains) from investments in securities1,515
 297
 1,146
 (651)
Interest expense108,727
 113,308
 326,018
 337,839
105,309
 108,757
Noncontrolling interests in property partnerships115,240
 5,566
 139,712
 17,473
10,464
 15,208
Noncontrolling interest—redeemable preferred units—
 75
 6
 1,014
—
 3
Preferred distributions2,647
 2,647
 7,854
 7,854
2,618
 2,589
Net income attributable to Boston Properties Limited Partnership common unitholders$207,626
 $144,715
 $491,847
 $294,370
$207,296
 $193,369
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13. Subsequent Events
From October 1, 2015 through November 6, 2015, the Company entered into one forward-starting interest rate swap contract which fixes the 10-year swap rate atOn April 4, 2016, a rate of 2.129% per annum on a notional amount of $25.0 million. The interest rate swap contract was entered into in advance of a financing with a target commencement date in September 2016 and maturity in September 2026 (See Note 6). In addition, 767 Fifth Partners LLC, the consolidated entityjoint venture in which the Company has a 60%50% interest extended the loan collateralized by its Annapolis Junction Building Seven property. At the time of the extension, the outstanding balance of the construction loan totaled approximately $21.5 million and owns 767 Fifth Avenue (the General Motors Building) in New York City, entered into one forward-startingwas scheduled to mature on April 4, 2016. The extended loan has a total commitment amount of $22.0 million, bears interest rate swap contract which fixes the 10-year swap rate at a variable rate of 2.379%equal to LIBOR plus 1.65% per annum and matures on April 4, 2017, with one, one-year extension option, subject to certain conditions. Annapolis Junction Building Seven is a notional amount of $25.0 million. The interest rate swap contract was entered intoClass A office property with approximately 127,000 net rentable square feet located in advance of a financing with a target commencement date in June 2017 and maturity in June 2027 (See Note 6).Annapolis, Maryland.
On October 1, 2015, the Company completed the sale of a parcel of land within its Washingtonian North property located in Gaithersburg, Maryland for a gross sale price of approximately $13.3 million, which exceeds its carrying value. The parcel contains approximately 5.8 acres of the Company’s approximately 19.3 acre property.
On October 1, 2015,April 11, 2016, the Company used available cash to repay the mortgage loan collateralized by its Kingstowne Two and Kingstowne Retail propertiesFountain Square property located in Alexandria,Reston, Virginia totaling approximately $29.8$211.3 million. The mortgage loan bore interest at a fixed rate of 5.99%5.71% per annum and was scheduled to mature on January 1,October 11, 2016. There was no prepayment penalty.
On October 7, 2015,April 11, 2016, a joint venture in which the Company entered into an agreement to sellhas a 50% interest received a Notice of Event of Default from the lender for the loan collateralized by its Innovation Place property for a gross sale priceAnnapolis Junction Building One property. The Event of $207.0 million, which exceeds its carrying value.  Innovation Place, located in San Jose, California, is a 26-acre site with one occupied and three vacant existing office buildings and a total of approximately 574,000 square feet (approximately 463,000 square feet of which are vacant) located at 3100-3130 Zanker Road.  Currently, the remainder of the site is used for 1,699 surface parking spaces but the land supports an additional 537,000 square feet of office/R&D development and two parking structures with a total of approximately 3,000 parking spaces. However, the sale is subjectDefault relates to the satisfactionloan to value ratio not being in compliance with the loan agreement. The joint venture is currently in discussions with the lender regarding the Event of closing conditions andDefault, although there can be no assurance thatas to the sale will be consummated onoutcome of those discussions. The estimated fair value of the terms currently contemplated orCompany’s investment in the unconsolidated joint venture exceeds its carrying value. The loan has an outstanding balance of approximately $40.0 million, is non-recourse to the Company, bears interest at all.a variable rate equal to LIBOR plus 1.75% per annum and has a stated maturity date of March 31, 2018, with one, three-year extension option, subject to certain conditions. Annapolis Junction Building One is a Class A office property with approximately 118,000 net rentable square feet located in Annapolis, Maryland.
On April 22, 2016, the Company acquired 3625-35 Peterson Way located in Santa Clara, California for a purchase price of approximately $78.0 million in cash. 3625-35 Peterson Way is an approximately 218,000 net rentable square foot office property. The property is 100% leased to a single tenant through March 2021. Upon the lease expiration, the Company intends to develop the site into a Class A office campus containing an aggregate of approximately 632,000 net rentable square feet.


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ITEM 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations
As used herein,The following discussion should be read in conjunction with the terms “BPLP,” “we,” “us,”financial statements and “our” refer collectively to Boston Properties Limited Partnership, a Delaware limited partnership, and its subsidiaries and its respective predecessor entities, considered a single enterprise.notes thereto appearing elsewhere in this report.
ThisThese Quarterly ReportReports on Form 10-Q, including the documents incorporated by reference, contains forward-looking statements within the meaning of the federal securities laws, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We intend these forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and are including this statement for purposes of complying with those safe harbor provisions. Such 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 any such forward-looking statements are based on beliefs and on assumptions made by, and information currently available to, our management. When used, the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “project,” “result,” “should,” “will” and similar expressions which do not relate solely to historical matters are intended to identify forward-looking statements. Such statements are subject to risks, uncertainties and assumptions and are not guarantees of future performance, which may be affected by known and unknown risks, trends, uncertainties and factors that are beyond our control. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or projected 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 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.
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:
If there is a negative change in the economy including but not limited to a reversal of current job growth trends and an increase in unemployment, it could have a negative effect on the following, among other things:
the fundamentals of our business, including overall market occupancy, tenant space utilization, and rental rates;
the financial condition of our tenants, many of which are financial, legal, media/telecommunication, technology and other professional firms, our lenders, counterparties to our derivative financial instruments and institutions that hold our cash balances and short-term investments, which may expose us to increased risks of default by these parties; and
the value of our real estate assets, which may limit our ability to dispose of assets at attractive prices or obtain or maintain debt financing secured by our properties or on an unsecured basis;
general risks affecting the real estate industry (including, without limitation, the inability to enter into or renew leases, tenant space utilization, dependence on tenants’ financial condition, and competition from other developers, owners and operators of real estate);
failure to manage effectively our growth and expansion into new markets and sub-markets or to integrate acquisitions and developments successfully;
the ability of our joint venture partners to satisfy their obligations;
risks and uncertainties affecting property development and construction (including, without limitation, construction delays, increased construction costs, cost overruns, inability to obtain necessary permits, tenant accounting considerations that may result in negotiated lease provisions that limit a tenant’s liability during construction, and public opposition to such activities);
risks associated with the availability and terms of financing and the use of debt to fund acquisitions and developments or refinance existing indebtedness, including the impact of higher interest rates on the cost and/or availability of financing;
risks associated with forward interest rate contracts and the effectiveness of such arrangements;
risks associated with downturns in the national and local economies, increases in interest rates, and volatility in the securities markets;
risks associated with actual or threatened terrorist attacks;
costs of compliance with the Americans with Disabilities Act and other similar laws;
potential liability for uninsured losses and environmental contamination;

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risks associated with security breaches through cyber attacks, cyber intrusions or otherwise, as well as other significant disruptions of our information technology (IT) networks and related systems, which support our operations and our buildings;
risks associated with Boston Properties, Inc.’sBXP’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;
risks associated with our dependence on key personnel whose continued service is not guaranteed; and
the other risk factors identified in our most recently filed Annual ReportReports on Form 10-K, including those described under the caption “Risk Factors.”
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 itwe assess the impact of all risk factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. Investors should also refer to our most recent Annual ReportReports on Form 10-K and our Quarterly Reports on Form 10-Q for future periods and Current Reports on Form 8-K as we file them with the SEC, and to other materials we may furnish to the public from time to time through Forms 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
Boston Properties Limited PartnershipBXP is a fully integrated, self-administered and self-managed REIT and one of the largest owners and developers of office properties in the United States. BPLP is the entity through which Boston Properties, Inc.BXP conducts substantially all of its business and owns (either directly or through subsidiaries) substantially all of its assets. Our properties are concentrated in four markets-markets–Boston, New York, San Francisco and Washington, DC. We generate revenue and cash primarily by leasing Class A office space to our tenants. Factors we consider when we lease space include the creditworthiness of the tenant, the length of the lease, the rental rate to be paid at inception and throughout the lease term, the costs of tenant improvements and other landlord concessions, current and anticipated operating costs and real estate taxes, our current and anticipated vacancy, current and anticipated future demand for office space and general economic factors. From time to time, we also generate cash through the strategic sale of assets.assets depending on market conditions.
Our core strategy has always been to own, operate and develop properties in supply-constrained markets with high barriers-to-entry and to focus on executing long-term leases with financially strong tenants. Historically, this combination has tended to reduce our exposure in down cycles and enhance revenues as market conditions improve. To be successful in any leasing environment, we believe all aspects of the tenant-landlord relationship must be considered. In this regard, we believe that our understanding of tenants’ short- and long-term space utilization and amenity needs in the local markets in which we operate, our relationships with local brokers, our reputation as a premier developer, owner and operator of Class A office properties, our financial strength and our ability to maintain high building standards provide us with a competitive advantage.
Consistent with our core strategy, we make decisions with a long-term view to maximizing the value of individual assets and the portfolio. Outlook
We own and manage many significant buildings with large tenants, and several of these tenants’ leases will expire in 2015 and 2016 and2016. In some cases, we expect it will take time to reposition, market and/or reach an agreement with desired tenants to re-lease this space. We are also planning proactive repositionings of several of our properties, including the retail and low-rise portions of 601 Lexington Avenue and 399 Park Avenue in New York City, and 100 Federal Street in Boston whichand 1330 Connecticut Avenue and Metropolitan Square in Washington, DC, and we expect they will require significant investments and, in some cases, necessitate that space is vacated. For these reasons, despite the overall roll-up in rents on newly signed leases, we expect our projected 2016 growth in net operating income (“NOI”) from our same property portfolio to be relatively flat compared to 2015. However, given our lease-up opportunities in the same property portfolio and expected contributions from our development deliveries, we believe we are well positioned to deliver significantrevenue growth in 2017 given our lease-up opportunities and expected contributions from our development deliveries.into 2018.
During the third quarter, we signed leases for an aggregate of approximately 1.3 million square feet across our regions, which is consistent with our 10-year average, and our overall occupancy improved slightly from 91.1% to 91.3%. In addition,

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During the first quarter of 2016, we sawsigned leases across our regions totaling approximately 1.5 million square feet, which exceeds our 10-year quarterly average. Our overall occupancy decreased slightly from 91.4% at December 31, 2015 to 91.0% at March 31, 2016 due primarily to an approximately 187,000 square foot vacancy at 611 Gateway in South San Francisco. In addition, we realized roll-up in rents on second generation leases driven in particular by strong roll-ups in Boston, New York and San Francisco.
Our capital strategy remains largely unchanged in that we are investing more in new developments and redevelopments than in stabilized acquisitions. We plan to continue to invest more in higher yielding new developments than acquisitions of stabilized properties for which pricing has remained consistent at yields that do not meet our desired return levels. Pricing for value-add assets such as those requiring lease-up or repositioning has become more attractive. In April 2016, we acquired 3625-35 Peterson Way in Santa Clara, California for approximately $78.0 million. This asset is in an in-fill location with the potential to develop additional office space when the current tenant’s lease expires in 2021 and increase the square footage from approximately 218,000 square feet to approximately 632,000 square feet. We continue to seek additional value-add acquisition opportunities that meet our desired return levels.
We currently have 11 development projects under construction/redevelopment representing approximately 4.6 million square feet and an estimated total investment of approximately $2.6 billion. In addition, we have significant land holdings that we will continue to move through the design and permitting process and add selectively to our development pipeline, including some that we expect may commence by 2017. However, given current market conditions, in general we expect we would only commence new construction with significant pre-leasing commitments. The combination of the successful execution of our asset disposition strategy and the delivery of higher yielding development projects over the past three years has resulted in a meaningful decrease in our leverage. As our development deliveries stabilize, we expect our leverage to decrease even further creating significant investment capacity for additional development and opportunistic acquisitions. Although we expect to continue to sell non-core assets and assets for which we can achieve extraordinary pricing, we expect that the gross value of assets sold in 2016 will be less than half of the approximately $584 million of assets we sold in 2015.
A brief overview of each of our markets follows.
New York
Our overall expectations for the midtown Manhattan market and the leasing activity in our portfolio have been generally consistent for the past two years. In 2014, we made the decision to proactively work with our larger tenants with upcoming lease expirations to sign new long-term leases but also provide them with early relief in the form of space reductions. As we expected, the overall market experienced large block availabilities primarily from the addition of new supply, and we believe that our discussions with these tenants has been mutually beneficial to them and the value of our assets. Although our overall expectation for the market remains relatively restrained compared to Boston and San Francisco, but we had a few transactions in New York and Washington, DC that muted the increase in rents for our overallthere continues to be good leasing statistics.
We continue to see heavy activity across our entire New York portfolio, but we have limited current vacancythe city and limited rollover exposure through the end of 2015. With the exception of 250 West 55th Street, where we have leases out for our remaining pre-built suites and half-floor deals on two of the remaining three available floors, most of our current negotiations relate to future availability. At 601 Lexington Avenue, a property in which we have a 55% interest, wethere are still tenant expansions across diverse industry groups. However, public capital market volatility in the planning stagesdebt and equity markets has impacted the timing of a major repositioning ofdecision making at smaller financial firms, which are most active in the higher end space. We are seeing activity on the pending roll-over in the high-rise and retail and low-rise portions of the building that would require tenants to vacate the entire 140,000 square feet of the low-rise portion. In addition, in order to move forward with these plans, we took back a floor at the top of the building and received a termination payment from the existing tenant so that we are now able to relocate a tenant from the low-rise portion. We expect this repositioning will result in a diminution of 2016 and 2017 occupancy and revenue, but we are making this decision with a long-term view of enhancing the value of the asset and the portfolio. At 767 Fifth Avenue (the General Motors Building), we are getting back approximately 80,000 square feet in July 2016 and, based on current market rents and demand for space of this quality, we expect that when we release the space, the new rents will be in excess of $80 per square foot greater than the expiring rents. We also have active interest from tenants ranging in size from 14,000 to 65,000 square feet for the space formerly occupied by FAO Schwartz at 767 Fifth Avenue (the General Motors Building), which we expect will be available in early 2017.
In our Washington, DC region, and the overall leasing activity continues to be slow, though we were able to complete approximately 469,00085,000 square feet of leasingvacant space at 250 West 55th Street resulting from the termination agreement we signed with a tenant in the third quarter. first quarter of 2016 in exchange for an approximately $45 million payment. We expect our same property portfolio NOI growth to be negatively impacted in the near term by these factors, but remain confident that our strategy for these assets will result in stronger long-term growth.
Boston
The Washington, DCgreater Boston region continues to attract life science and established technology companies, as well as start-up technology and maker organizations. The East Cambridge office and lab markets have been the largest beneficiaries of this growth as overall direct vacancy is now less than 5% and office rents continue to reach new peaks. Our East Cambridge properties are outperforming the overall submarket at 100% occupancy. Additionally, we have the ability to develop approximately 540,000 square feet of new office space and approximately 400,000 square feet of new residential space, and we are in active lease discussions for 100% of the office space.
Our Suburban Waltham/Lexington market continues to get stronger due to the organic growth of our existing tenant base and other tenants in the market looking to expand. Rents in this submarket continue to grow and have increased approximately 25% over the last two years. Our current development projects are essentially 100% pre-leased and scheduled for delivery in mid to late 2016.
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The Boston Central Business District (“CBD”) market continues to be very competitive becausesteady and much of the available supply has been absorbed over the past few years though there has not been any significant increase in demand. We were able to complete a major renewal at 1330 Connecticut Avenue, where the existing tenant renewed for 15 years, commencing in 2017, on approximately 212,000 square feet of its current approximately 240,000 square feet with a roll-up in net rent of approximately 25%. As part of this transaction, we will be using approximately 52,000 square feet at 1333 New Hampshire Avenue as “swing space” which will be non-revenue producing. Also, ouris some speculative development at 601 Massachusetts Avenue opened in September 2015 and was delivered at an initial cash return in excess of 8%. The income contribution will ramp up in 2016 and fully contribute in 2017. Activity in Reston Town Center continues to be very strong, though we have limited availability because our vacancy rate is less than 3% while the overall vacancy rate in the Reston market is at 14%. We continue to see expansion by our existing tenants and strong tenant demand due to the combination of walkable retail, high-quality new multifamily, community programming and improving access to the Metro. Much of our current activity involves extending and expanding tenants by accommodating take-overs and sublets. The weakest subset of our Washington, DC portfolio is the GSA-related properties in Springfield, Virginia and Annapolis, Maryland. While the user groups want and need space, GSA-mandated densification and lack of new defense appropriations have severely limited current demand.
In the Boston region, the expansion of the life sciences and technology industries continues to positively impact each of the submarkets in which we operate.Seaport submarket. Our Cambridge portfolio is essentially 100% leased and we have no short-term availability or near-term expirations. In spite of the significant volatility in the life science industry, as well as some job reductions by specific companies, there continues to be a flow of new tenants looking for space in Cambridge. The lack of available supply in Cambridge continues and is a challenge given the continued organic growth of the companies looking to grow within their existing market and new tenants in the marketplace. The Cambridge Redevelopment Authority made its submission to the City of Cambridge for the increased zoning of our Kendall Square project which, if approved, could provide us the ability to develop an additional 600,000 square feet of office and 400,000 square feet of residential space. In the Back Bay, we are now 71% pre-leased in the office space at our development at 888 Boylston Street. We also completed our first retail lease totaling approximately 18,000 square feet and are having extensive conversations with retailers on the remainder of the retail space, which we expect to open in the fall of 2016, a few months after the office building opens. Our repositioning and rebrandinglargest vacancy exposures remain at 120 St. James Street where(the low rise portion of our 200 Clarendon Street property). However, we have anare confident in our leasing strategy for this space as a number of tenants are considering leasing a portion or all of the approximately 170,000 square foot blockfeet of availability, is complete and activity is positive. Wespace at 120 St. James Street. In addition, we have responded to three full block proposalsapproximately 240,000 square feet of vacant space in the last 90 daysmid- and each anticipates full utilizationhigh-rise floors of the space in late 2017. At 200 Clarendon Street, (formerly the John Hancock Tower),of which we completedleased approximately 88,00020,000 square feet in the first quarter of leasing during the third quarter and are experiencing strong roll ups2016.
Finally, in rents. While we have seen interest fromOctober 2015, a few multi-floor users, the high-end demand in Boston has typically been for users seeking less than 30,000 square feet and, as a result, we expect to lease the vacant space at 200 Clarendon Street in smaller units with rent commencing at the end of 2016 or early 2017. At 100 Federal Street, a propertyjoint venture in which we have a 55%50% interest we are in active discussions with an existing tenant to relocatecommenced construction of The Hub on Causeway at North Station, which will contain approximately 385,000 net rentable square feet of retail and extend its lease and another tenant to contract its space in order to accommodate a major lease with a new tenant who would leaseoffice space. We have signed leases for 63% of the contractionapproximately 200,000 square feet of retail space and muchare negotiating leases for another 85,000 square feet of retail and office space. In addition, we have submitted our initial plans for the available space indevelopment of additional sites at the building. However,Back Bay Station. This project is subject to local approvals and public review and, although we do not expect revenue recognitionit would commence prior to occur until late 2016 or 2017. These transactions will have2017 and possibly later, it could ultimately include up to 1.3 million square feet of office, retail and residential space located adjacent to a negative impact on our short-term financial performance, butmajor Boston transit hub.
San Francisco
The San Francisco (the “City”) leasing market remains healthy with a vacancy rate of approximately 6% though, leasing velocity has moderated from the levels we believe they will enhance the valuesaw in 2014 and early 2015 primarily because of the assets overlack of large space requirements and the slow down in venture capital funding to small start-ups.
Our near-term focus will remain on the lease-up of Salesforce Tower and future roll-over at Embarcadero Center. At Salesforce Tower, we are having discussions with companies in various non-tech industries for single or multi-floor leases. However, many of these tenants’ requirements are lease-expiration driven for occupancy at the end of 2017 or early 2018 and therefore they could take longer term. Our Waltham submarket also continues to get stronger, driven by organic growth. This quarter, we completed 16 leases in our suburban portfolio for approximately 150,000 square feetevaluate their options and we have a similar amount under lease negotiations. All of our space at 10 CityPoint is committed and rents have increased 25% over the last 18 months.

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Leasing activity in the San Francisco CBD and Silicon Valley submarkets remains healthy. Other than new developments, there are extremely limited large blocks of space available in the city.make decisions. At Embarcadero Center, we completed approximately 128,000 square feet of office leasing, during the first quarter of 2016, at significantly greater rental rates than the prior leases for this space and we have over 150,000 square feet of renewal leases in negotiations and are in active discussions on approximately 100,000 square feet of leases for currently vacant space.
The supply-demand imbalance has resulted in speculative construction in the City. However, if the two pending development projects in the City’s permitting process are approved, the amount of new development permitted under Proposition M (which is currently less than 1.75 million square feet) will be effectively depleted, thereby further limiting an already tight supply.  Over the longer term, we will continue to seek new development opportunities to bolster our future pipeline.
Washington, DC
Overall market conditions in the Washington CBD have not changed in any meaningful way over the past few quarters. Leasing activity remains very competitive and slow primarily because there has been no significant increase in demand. Although some additional GSA-related and other government demand is expected, we believe the timing will be delayed until after the presidential election.
With respect to our properties, our largest exposure is at our 50% owned Metropolitan Square property where we have approximately 130,000 square feet of vacant space and an additional approximately 120,000 square feet that expired at the end of the first quarter of 2016. We completed a lease transaction for approximately 118,000 square feet of officethat space during the quarter. The largest deal was for approximately 41,000 square feet with a substantial increase in the rental rate fromfirst quarter of 2016. We are planning a repositioning of this building, including updates to its lobby and common areas, which we believe will enhance the prior lease formarketability and value of the space.building. We are also actively engaged with prospective full floorpursuing tenants on more than 350,000 square feet, including five currently vacant floors totaling approximately 117,000 square feet. The anticipated increase into lease the rental rate from in place leases is expected to be in excess of 50% on a gross basis and 75% on a net basis. In total, we have more than 1.0 millionremaining 47,000 square feet of lease expirationsvacancy at Embarcadero601 Massachusetts Avenue, which we partially placed in-service in August 2015 and is currently 90% leased.
Our Reston Town Center throughproperties are approximately 97% leased and continue to command a premium compared to the end of 2017, whererents realized in nearby submarkets. In July 2015, we believe the current market rents are wellcommenced construction on our Reston Signature Site residential project located in excess of the expiring rents. At 535 Mission Street,Reston Town Center and we are now 89% leased and are negotiating leasespursuing a lead tenant for our planned 275,000 square foot office building on all but approximately 4,000 square feet. This building should be fully contributing by the third quarteran adjacent site.

Table of 2016 at a cash return that is greater than our original pro forma. At Salesforce Tower, we have approximately 700,000 square feet available. We are negotiating leases on 100,000 square feet and have active discussions with asset managers, hedge funds, venture capital firms, law firms, consulting firms, real estate brokerages and other non-tech service firms totaling more than 475,000 square feet. At Gateway, we expect our largest tenant to vacate approximately 187,000 square feet at the end of 2015. We believe the upgrade to the Caltrain station and its proximity to our Gateway properties will enhance our leasing prospects, but we expect it will take time to re-lease this space which will negatively impact our 2016 same property net operating income. Contents

The table below details the leasing activity during the three and nine months ended September 30, 2015:March 31, 2016:
  Three Months Ended September 30, 2015 Nine Months Ended September 30, 2015
  Square Feet
Vacant space available at the beginning of the period 3,674,612
 3,442,468
Property dispositions/properties taken out of service —
 (73,258)
Properties placed in-service 611,603
 669,823
Leases expiring or terminated during the period 1,567,419
 4,785,653
Total space available for lease 5,853,634
 8,824,686
1st generation leases
 723,391
 1,017,912
2nd generation leases with new tenants
 885,637
 2,365,279
2nd generation lease renewals
 649,816
 1,846,705
Total space leased (1) 2,258,844
 5,229,896
Vacant space available for lease at the end of the period 3,594,790
 3,594,790
     
Leases executed during the period, in square feet (2) 1,329,648
 3,893,538
     
Second generation leasing information: (3)
    
Leases commencing during the period, in square feet 1,535,453
 4,211,984
Weighted Average Lease Term 110 Months
 101 Months
Weighted Average Free Rent Period 55 Days
 46 Days
Total Transaction Costs Per Square Foot (4) 
$59.78
 
$47.78
Increase in Gross Rents (5) 5.58% 5.36%
Increase in Net Rents (6) 7.97% 7.49%
Three Months Ended March 31, 2016
(Square Feet)
Vacant space available at the beginning of the period3,530,913
Properties placed in-service12,875
Leases expiring or terminated during the period1,594,867
Total space available for lease5,138,655
1st generation leases
73,108
2nd generation leases with new tenants
793,090
2nd generation lease renewals
583,473
Total space leased (1)1,449,671
Vacant space available for lease at the end of the period3,688,984
Leases executed during the period, in square feet (2)1,531,422
Second generation leasing information: (3)
Leases commencing during the period, in square feet1,376,563
Weighted Average Lease Term93 Months
Weighted Average Free Rent Period73 Days
Total Transaction Costs Per Square Foot (4)
$48.87
Increase in Gross Rents (5)16.39%
Increase in Net Rents (6)26.06%
___________________________
(1)Represents leases for which rental revenue recognition has commenced in accordance with GAAP during the three and nine months ended September 30, 2015.March 31, 2016.
(2)
Represents leases executed during the three and nine months ended September 30, 2015March 31, 2016 for which the Companywe either (1) commenced rental revenue recognition in such period or (2) will commence rental revenue recognition in subsequent periods, in accordance with GAAP, and includes leases at properties currently under development. The total square feet of leases executed and recognized in the three and nine months ended September 30, 2015March 31, 2016 is 211,796 and 842,900, respectively.
140,243.
(3)
Second generation leases are defined as leases for space that had previously been leased by the Company.us. Of the 1,535,453 and 4,211,9841,376,563 square feet of second generation leases that commenced during the three and nine months ended September 30, 2015, respectively,March 31, 2016, leases for 1,323,657 and 3,409,2331,242,079 square feet were signed in prior periods for the three and nine months ended September 30, 2015, respectively.
periods.

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(4)
Total transaction costs include tenant improvements and leasing commissions and exclude free rent concessions and other inducements in accordance with GAAP.
(5)
Represents the increase in gross rent (base rent plus expense reimbursements) on the new versus expired leases on the 1,249,105 and 3,264,7461,189,205 square feet of second generation leases that had been occupied within the prior 12 months for the three and nine months ended September 30, 2015, respectively;months; excludes leases that management considers temporary because the tenant is not expected to occupy the space on a long-term basis.
(6)
Represents the increase in net rent (gross rent less operating expenses) on the new versus expired leases on the 1,249,105 and 3,264,7461,189,205 square feet of second generation leases that had been occupied within the prior 12 months for the three and nine months ended September 30, 2015, respectively;months; excludes leases that management considers temporary because the tenant is not expected to occupy the space on a long-term basis.
Investor demand and pricing for real estate assets remains robust as positive rent growth, a significant yield gap and the potential for an appreciating U.S. dollar attracts both domestic and foreign investors to high-quality office assets in our core markets. However, going forward, pricing could be tested by the significant pipeline


Table of real estate currently in the market, higher volatility in the public capital markets and the potential for increasing interest rates. We continue to actively underwrite acquisitions, but acquiring high-quality assets at acceptable returns is challenging in the current environment. Our fundamental capital strategy has not changed. We are continuing to sell selected assets and expect that a portion of the proceeds will be distributed and a portion will be reinvested in our development pipeline. We continue to deliver development properties at lower prices per square foot and materially higher yields than where existing assets are trading. We intend to remain disciplined in our underwriting and may seek to acquire existing buildings in ventures with private capital sources and enhance our returns through fees earned for providing our real estate management expertise.Contents
As of September 30, 2015, our current development pipeline consists of 14 projects totaling approximately 4.7 million square feet. Our share of the total projected investment is approximately $2.7 billion, of which approximately $1.5 billion remains to be funded. During the third quarter, we commenced construction on two projects: a 164,000 square foot residential development located in Kendall Center (formerly Cambridge Center) in Cambridge, Massachusetts and a 514,000 square foot residential development located in Reston Town Center. In the aggregate, the commercial space in our developments is approximately 59% pre-leased. These projects will be delivered in the fourth quarter 2015 through 2018. In addition, we are working on several new developments for which construction has not commenced, including land parcels, options on sites or existing asset redevelopment opportunities. These include the first phase of North Station consisting of 360,000 square feet of retail and loft office space in Boston and significant improvement projects at 601 Lexington Avenue in New York City and 100 Federal Street in Boston, which will enhance and add high-value retail amenities to the buildings. The actual amount and timing of new development activities will depend on the completion of the entitlement and planning processes and in many cases some level of pre-leasing.

Transactions during the three months ended September 30, 2015March 31, 2016 included the following:
Between July 1, 2015On January 4, 2016 and NovemberJanuary 6, 2015,2016, 767 Fifth Partners LLC, the consolidated entity in which we have a 60% interest and owns 767 Fifth Avenue (the General Motors Building) in New York City, entered into two forward-starting interest rate swap contracts including one contract entered into subsequent to September 30, 2015, whichthat fix the 10-year swap rate on notional amounts aggregating $225.0$50.0 million. We have now767 Fifth Partners LLC has entered into forward-starting interest rate swap contracts whichthat fix the 10-year swap rate at a weighted-average rate of approximately 2.423%2.619% per annum on notional amounts aggregating $550.0 million. The interest rate swap contracts were entered into in advance of a financing with a target commencement date in September 2016 and maturity in September 2026.
In addition, between July 1, 2015 and November 6, 2015, our 767 Fifth Partners LLC consolidated entity (the entity in which we have a 60% interest and that owns 767 Fifth Avenue (the General Motors Building) in New York City) entered into forward-starting interest rate swap contracts, including one contract entered into subsequent to September 30, 2015, which fix the 10-year swap rate on notional amounts aggregating $125.0 million. 767 Fifth Partners LLC has now entered into forward-starting interest rate swap contracts which fix the 10-year swap rate at a weighted-average rate of approximately 2.762% per annum on notional amounts aggregating $275.0 million. These interest rate swap contracts were entered into$450.0 million in advance of a financing with a target commencement date in June 2017 and maturity in June 2027.
On July 23, 2015, we commenced constructionJanuary 20, 2016, BPLP completed a public offering of our Cambridge Residential project, a residential project aggregating approximately 164,000 square feet comprised$1.0 billion in aggregate principal amount of 274 apartment units and approximately 9,000 square feet of retail space located in Cambridge, Massachusetts. On August 13, 2015, we acquired an approximately 8,700 square foot parcel of land necessary for the development for a purchase price of approximately $2.0 million.

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On July 23, 2015, we commenced construction of our Reston Signature Site project, a residential project aggregating approximately 514,000 square feet comprised of 508 apartment units and approximately 24,000 square feet of retail space located in Reston Town Center in Reston, Virginia.
On July 31, 2015, we entered into a 99-year ground and air rights lease (the “Lease”) with the Massachusetts Department of Transportation (“MDOT”) with respect to the parking garage locatedits 3.650% senior unsecured notes due 2026. The notes were priced at 100 Clarendon Street (the “Clarendon Garage”) and the concourse level99.708% of the Massachusetts Bay Transportation Authority’s Back Bay Stationprincipal amount to yield an effective rate (including financing fees) of 3.766% to maturity. The notes will mature on February 1, 2026, unless earlier redeemed. The aggregate net proceeds from the offering were approximately $988.9 million after deducting underwriting discounts and transaction expenses.
On January 25, 2016, BXP’s Compensation Committee approved the 2016 Multi-Year, Long-Term Incentive Program (the “Station”“2016 MYLTIP”).  The Lease amends and restates as a performance-based component of its overall compensation program. Under the air rights lease which we had assumed in 2010 atFinancial Accounting Standards Board’s Accounting Standards Codification (“ASC”) 718 “Compensation - Stock Compensation,” the time it acquired its interests in both the Clarendon Garage and the office tower located at 200 Clarendon Street (formerly known as the John Hancock Tower).  The Lease requires us to pay a total of approximately $37.0 million and provides us with options to acquire certain air rights above both the Clarendon Garage and the Station with the amount of developable square footage associated with the air rights to be determined at a later date. The previous lease had 45 years remaining in its term.  Upon execution of the Lease, we made a $5.0 million payment and the Lease requires our remaining obligation to be used to fund improvements to the Station.
On August 14, 2015, we partially placed in-service 601 Massachusetts Avenue, a Class A office project with approximately 478,000 net rentable square feet located in Washington, DC. The property is 87% leased.
On September 9, 2015, we received a third interim distribution from our unsecured creditor claim against Lehman Brothers, Inc. totaling approximately $3.6 million, leaving a remaining claim of approximately $29.4 million that we believe2016 MYLTIP has a marketan aggregate value of approximately $2.5 million. There can$17.3 million, which amount will generally be no assurance as toamortized into earnings over the timing or amount of additional proceeds, if any, thatfour-year plan period under the graded vesting method.
On February 1, 2016, we may ultimately realize on the claim.
On September 10, 2015, we partially placed in-service The Point (formerly 99 Third Avenue Retail), a retail project with approximately 17,000 net rentable square feet of retail space located in Waltham, Massachusetts. The property is 84% leased.
On September 15, 2015, we acquired our partner’s 50% interest in the consolidated entity that owns Fountain Square located in Reston Town Center in Reston, Virginia for cash of approximately $100.9 million plus working capital and closing prorations and the partner’s share of assumed mortgage indebtedness totaling approximately $105.6 million. Fountain Square is an office and retail complex aggregating approximately 759,000 net rentable square feet, comprised of approximately 522,000 net rentable square feet of Class A office space and approximately 237,000 net rentable square feet of retail space.
On September 18, 2015, a consolidated entity in which we have a 50% interest completed the sale of its 505 9thour 415 Main Street N.W. property located in Washington, DCCambridge, Massachusetts to the tenant for approximately $318.0 million, including the assumption by the buyera gross sale price of approximately $117.0 million of mortgage indebtedness.$105.4 million.  Net cash proceeds totaled approximately $194.6$104.9 million, of which our share was approximately $97.3 million. We recognizedresulting in a gain on sale of real estate totaling approximately $199.7$60.8 million and $63.0 million for BXP and BPLP, respectively. As part of its lease signed on July 14, 2004, the tenant was granted a fixed-price option to purchase the building at the beginning of the 11th lease year, which option was exercised by the tenant on October 22, 2014. 415 Main Street is an office property with approximately $101.1231,000 net rentable square feet.
On February 3, 2016, we entered into a lease termination agreement with a tenant for an approximately 85,000 square foot lease at our 250 West 55th Street property located in New York City.  The lease was scheduled to expire on February 28, 2035.  In consideration for the termination of the lease, the tenant paid us approximately $45.0 million, which was allocated to the outside partnersrecognized as termination income and is included within Noncontrolling Interests in Property PartnershipsBase Rent in ourthe accompanying Consolidated Statements of Operations. 505 9th Street, N.W. is an approximately 322,000 net rentable square foot Class A office building. 
Operations for the three months ended March 31, 2016.
Transactions completed subsequent to March 31, 2016 included the following:
On September 22, 2015, a joint venture in which we have a 50% interest completed and fully placed in-service Annapolis Junction Building Seven, a Class A office project with approximately 127,000 net rentable square feet located in Annapolis, Maryland. The property is 100% leased.
On September 30, 2015,April 4, 2016, a joint venture in which we have a 50% interest extended the loan collateralized by its Annapolis Junction Building SixSeven property. At the time of the extension, the outstanding balance of the construction loan totaled approximately $13.4$21.5 million and was scheduled to mature on November 17, 2015.April 4, 2016. The extended loan has a total commitment amount of $15.9$22.0 million, bears interest at a variable rate equal to LIBOR plus 2.25%1.65% per annum and matures on November 17, 2016.April 4, 2017, with one, one-year extension option, subject to certain conditions. Annapolis Junction Building SixSeven is a Class A office property with approximately 119,000127,000 net rentable square feet located in Annapolis, Maryland.

Transactions completed subsequent to September 30, 2015 included the following:
On October 1, 2015, we completed the sale of a parcel of land within its Washingtonian North property located in Gaithersburg, Maryland for a gross sale price of approximately $13.3 million, which exceeds its carrying value. The parcel contains approximately 5.8 acres of our approximately 19.3 acre property.
On October 1, 2015,April 11, 2016, we used available cash to repay the mortgage loan collateralized by our Kingstowne Two and Kingstowne Retail propertiesFountain Square property located in Alexandria,Reston, Virginia totaling approximately $29.8$211.3 million. The mortgage loan

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bore interest at a fixed rate of 5.99%5.71% per annum and was scheduled to mature on January 1,October 11, 2016. There was no prepayment penalty.
On October 7, 2015,April 11, 2016, a joint venture in which we entered into an agreement to sell our Innovation Place propertyhave a 50% interest received a Notice of Event of Default from the lender for a gross sale pricethe loan collateralized by its Annapolis Junction Building One property. The Event of $207.0 million, which exceeds its carrying value.  Innovation Place, located in San Jose, California, is a 26-acre site with one occupied and three vacant existing office buildings and a total of approximately 574,000 square feet (approximately 463,000 square feet of which are vacant) located at 3100-3130 Zanker Road.  Currently, the remainder of the site is used for 1,699 surface parking spaces but the land supports an additional 537,000 square feet of office/R&D development and two parking structures with a total of approximately 3,000 parking spaces.  We expect that the sale will close in the fourth quarter of 2015. However, the sale is subjectDefault relates to the satisfactionloan to value ratio not being in compliance with the loan agreement. The joint venture is currently in discussions with the lender regarding the Event of closing conditions andDefault, although there can be no assurance thatas to the sale will be consummated onoutcome of those discussions. The estimated fair value of our investment in the terms currently contemplated orunconsolidated joint venture exceeds our carrying value. The loan has an outstanding balance of approximately $40.0 million, is non-recourse to us, bears interest at all.a variable rate equal to LIBOR plus 1.75% per annum and has a stated maturity date of March 31, 2018, with one, three-year extension option, subject to certain conditions. Annapolis Junction Building One is a Class A office property with approximately 118,000 net rentable square feet located in Annapolis, Maryland.
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On April 22, 2016, we acquired 3625-35 Peterson Way located in Santa Clara, California for a purchase price of approximately $78.0 million in cash. 3625-35 Peterson Way is an approximately 218,000 net rentable square foot office property. The property is 100% leased to a single tenant through March 2021. Upon the lease expiration, we intend to develop the site into a Class A office campus containing an aggregate of approximately 632,000 net rentable square feet.
Critical Accounting Policies
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 accounting principles generally accepted in the United States of America, or GAAP requires management to use judgment in the application of accounting policies, including makingmake estimates and assumptions. We base our estimates on historical experience and on various other assumptions believed to be reasonable under the circumstances. These judgmentsthat affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the datesdate of the financial statements and the reported amounts of revenue and expenses during the reporting periods. If our judgment or interpretation of the facts and circumstances relating to various transactions had been different, it is possible that differentperiod. Certain accounting policies would have been applied resulting in a different presentation of our financial statements. From time to time, we evaluate our estimates and assumptions. In the event estimates or assumptions proveare considered to be different from actual results, adjustments are made in subsequent periods to reflect more current information. Below is a discussion ofcritical accounting policies, that we consider critical in thatas they may require complex judgment in their application or require estimatesmanagement to make assumptions about matters that are inherently uncertain.
Real Estate
Upon acquisitionshighly uncertain at the time the estimate is made and changes in accounting estimate are reasonably likely to occur from period to period. Management bases its estimates and assumptions on historical experience and current economic conditions. On an on-going basis, management evaluates its estimates and assumptions including those related to revenue, impairment of real estate that constitutes a business, which includes the consolidation of previously unconsolidated joint ventures, we assess the fair value of acquired tangible and intangible assets, (including land, buildings, tenant improvements, “above-” and “below-market” leases, leasing and assumed financing origination costs, acquired in-place leases, other identified intangible assets and assumed liabilities) and allocate the purchase price to the acquired assets and assumed liabilities, including land and buildings as if vacant. We assess and consider fair value based on estimated cash flow projections that utilize discount and/or capitalization rates that we deem appropriate, as well as available market information. Estimates of future cash flows are based on a number of factors including the historical operating results, known and anticipated trends, and market and economic conditions.
The fair value of the tangible assets of an acquired property considers the value of the property as if it were vacant. We also consider an allocation of purchase price of other acquired intangibles, including acquired in-place leases that may have a customer relationship intangible value, including (but not limited to) the nature and extent of the existing relationship with the tenants, the tenants' credit quality and expectations of lease renewals. Based on our acquisitions to date, our allocation to customer relationship intangible assets has been immaterial.
We record acquired “above-” and “below-market” leases at their fair values (using a discount rate which reflects the risks associated with the leases acquired) equal to the difference between (1) the contractual amounts to be paid pursuant to each in-place lease and (2) management's estimate of fair market lease rates for each corresponding in-place lease, measured over a period equal to the remaining term of the lease for above-market leases and the initial term plus the term of any below-market fixed rate renewal options for below-market leases. Acquired “above-” and “below-market” lease values have been reflected within Prepaid Expenses and Other Assets and Other Liabilities, respectively, in our Consolidated Balance Sheets. Other intangible assets acquired include amounts for in-place lease values that are based on our evaluation of the specific characteristics of each tenant's lease. Factors to be considered include estimates of carrying costs during hypothetical expected lease-up periods considering current market conditions, and costs to execute similar leases. In estimating carrying costs, we include real estate taxes, insurance and other operating expenses and estimates of lost rentals at market rates during the expected lease-up periods, depending on local market conditions. In estimating costs to execute similar leases, we consider leasing commissions, legal and other related expenses.
Management reviews its long-lived assets for impairment every quarter and when there is an event or change in circumstances that indicates an impairment in value. An impairment loss is recognized if the carrying amount of its assets is not recoverable and exceeds its fair value. If such criteria are present, an impairment loss is recognized based on the excess of the carrying amount of the asset over its fair value. The evaluation of anticipated cash flows is highly subjective and is based in

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part on assumptions regarding anticipated hold periods, future occupancy, rental rates and capital requirements that could differ materially from actual results in future periods. Since cash flows on properties considered to be “long-lived assets to be held and used” are considered on an undiscounted basis to determine whether an asset has been impaired, our established strategy of holding properties over the long term directly decreases the likelihood of recording an impairment loss. If our hold strategy changes or market conditions otherwise dictate an earlier sale date, an impairment loss may be recognized and such loss could be material. If we determine that an impairment has occurred, the affected assets must be reduced to their fair value, less cost to sell.
Guidance in Accounting Standards Codification (“ASC”) 360 “Property Plant and Equipment” (“ASC 360”) requires that qualifying assets and liabilities and the results of operations that have been sold, or otherwise qualify as “held for sale,” be presented as discontinued operations in all periods presented if the property operations are expected to be eliminated and we will not have significant continuing involvement following the sale. The components of the property’s net income that is reflected as discontinued operations include the net gain (or loss) upon the disposition of the property held for sale, operating results, depreciation and interest expense (if the property is subject to a secured loan). We generally consider assets to be “held for sale” when the transaction has been approved by Boston Properties, Inc.'s Board of Directors, or a committee thereof, and there are no known significant contingencies relating to the sale, such that a sale of the property within one year is considered probable. Following the classification of a property as “held for sale,” no further depreciation is recorded on the assets and the asset is written down to the lower of carrying value or fair market value, less cost to sell. On April 10, 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-08, “Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity” (“ASU 2014-08”). ASU 2014-08 clarifies that discontinued operations presentation applies only to disposals representing a strategic shift that has (or will have) a major effect on an entity’s operations and financial results (e.g., a disposal of a major geographical area, a major line of business, a major equity method investment or other major parts of an entity). ASU 2014-08 is effective prospectively for reporting periods beginning after December 15, 2014. Early adoption is permitted, and we early adopted ASU 2014-08 during the first quarter of 2014. Our adoption of ASU 2014-08 resulted in the operating results and gain on sale of real estate from the operating property sold during the nine months ended September 30, 2015 not being reflected as Discontinued Operations in our Consolidated Statements of Operations (See Note 3 to the Consolidated Financial Statements).
Real estate is stated at depreciated cost. A variety of costs are incurred in the acquisition, development and leasing of properties. The cost of buildings and improvements includes the purchase price of property, legal fees and other acquisition costs. We expense costs that we incur to effect a business combination such as legal, due diligence and other closing related costs. Costs directly related to the development of properties are capitalized. Capitalized development costs include interest, internal wages, property taxes, insurance, and other project costs incurred during the period of development. After the determination is made to capitalize a cost, it is allocated to the specific component of a project that is benefited. Determination of when a development project commences and capitalization begins, and when a development project is substantially complete and held available for occupancy and capitalization must cease, involves a degree of judgment. Our capitalization policy on development properties is guided by guidance in ASC 835-20 “Capitalization of Interest” and ASC 970 “Real Estate-General.” The costs of land and buildings under development include specifically identifiable costs.
The capitalized costs include pre-construction costs necessary to the development of the property, development costs, construction costs, interest costs, real estate taxes, salaries and related costs and other costs incurred during the period of development. We begin the capitalization of costs during the pre-construction period which we define as activities that are necessary to the development of the property. We consider a construction project as substantially completed and held available for occupancy upon the completion of tenant improvements, but no later than one year from cessation of major construction activity. We cease capitalization on the portion (1) substantially completed, (2) occupied or held available for occupancy, and we capitalize only those costs associated with the portion under construction or (3) if activities necessary for the development of the property have been suspended.
Investments in Unconsolidated Joint Ventures
We consolidate variable interest entities (“VIEs”) in which we are considered to be the primary beneficiary. VIEs are entities in which the equity investors do not have sufficient equity at risk to finance their endeavors without additional financial support or that the holders of the equity investment at risk do not have a controlling financial interest. The primary beneficiary 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 variable interest entity's performance, and (2) the obligation to absorb losses and right to receive the returns from the variable interest entity that would be significant to the variable interest entity. For ventures that are not VIEs we consolidate entities for which we have significant decision making control over the ventures' operations. Our judgment with respect to our level of influence or control of an entity involves the consideration of various factors including the form of our ownership interest, our representation in the entity's governance, the size of our investment (including loans), estimates of future cash flows, our ability to participate in policy making decisions and the rights of the other investors to

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participate in the decision making process and to replace us as manager and/or liquidate the venture, if applicable. Our assessment of our influence or control over an entity affects the presentation of these investments in our consolidated financial statements. In addition to evaluating control rights, we consolidate entities in which the outside partner has no substantive kick-out rights to remove us as the managing member.
Accounts of the consolidated entity are included in our accounts and the non-controlling interest is reflected on the Consolidated Balance Sheets as a component of equity or in temporary equity between liabilities and equity. Investments in unconsolidated joint ventures are recorded initially at cost, and subsequently adjusted for equity in earnings and cash contributions and distributions. Any difference between the carrying amount of these investments on the balance sheet and the underlying equity in net assets is amortized as an adjustment to equity in earnings of unconsolidated joint ventures over the life of the related asset. Under the equity method of accounting, our net equity investment is reflected within the Consolidated Balance Sheets, and our share of net income or loss from the joint ventures is included within the Consolidated Statements of Operations. The joint venture agreements may designate different percentage allocations among investors for profits and losses; however, our recognition of joint venture income or loss generally follows the joint venture's distribution priorities, which may change upon the achievement of certain investment return thresholds. We may account for cash distributions in excess of our investment in an unconsolidated joint venture as income when we are not the general partner in a limited partnership and when we have neither the requirement nor the intent to provide financial support to the joint venture. Our investments in unconsolidated joint ventures are reviewed for impairment periodically and we record impairment charges when events or circumstances change indicating that a decline in the fair values below the carrying values has occurred and such decline is other-than-temporary. The ultimate realization of the investment in unconsolidated joint ventures is dependent on a number of factors, including the performance of each investment and market conditions. We will record an impairment charge if we determine that a decline in the value below the carrying value of an investment in an unconsolidated joint venture is other-than-temporary.
To the extent that we contribute assets to a joint venture, our investment in the joint venture is recorded at our cost basis in the assets that were contributed to the joint venture. To the extent that our cost basis is different than the basis reflected at the joint venture level, the basis difference is amortized over the life of the related asset and included in our share of equity in net income of the joint venture. In accordance with the provisions of ASC 970-323 “Investments-Equity Method and Joint Ventures” (“ASC 970-323”), we will recognize gains on the contribution of real estate to joint ventures, relating solely to the outside partner's interest, to the extent the economic substance of the transaction is a sale.
The combined summarized financial information of the unconsolidated joint ventures is disclosed in Note 4 to the Consolidated Financial Statements.
Revenue Recognition
In general, we commence rental revenue recognition when the tenant takes possession of the leased space and the leased space is substantially ready for its intended use. Contractual rental revenue is reported on a straight-line basis over the terms of our respective leases. We recognize rental revenue of acquired in-place “above-” and “below-market” leases at their fair values over the original term of the respective leases. Accrued rental income as reported on the Consolidated Balance Sheets represents rental income recognized in excess of rent payments actually received pursuant to the terms of the individual lease agreements.
For the three and nine months ended September 30, 2015, the impact of the net adjustments of rents from “above-” and “below-market” leases increased rental revenue by approximately $8.8 million and $28.4 million, respectively. For the three and nine months ended September 30, 2015, the impact of the straight-line rent adjustment increased rental revenue by approximately $16.0 million and $60.4 million, respectively. Those amounts exclude the adjustment of rents from “above-” and “below-market” leases and straight-line income from unconsolidated joint ventures, which are disclosed in Note 4 to the Consolidated Financial Statements.
Our leasing strategy is generally to secure creditworthy tenants that meet our underwriting guidelines. Furthermore, following the initiation of a lease, we continue to actively monitor the tenant’s creditworthiness to ensure that all tenant related assets are recorded at their realizable value. When assessing tenant credit quality, we:
review relevant financial information, including:
financial ratios;
net worth;
revenue;
cash flows;
leverage; and

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liquidity;
evaluate the depth and experience of the tenant’s management team; and
assess the strength/growth of the tenant’s industry.

As a result of the underwriting process, tenants are then categorized into one of three categories:
(1)acceptable-risk tenants;
(2)the tenant’s credit is such that we may require collateral, in which case we:
may require a security deposit; and/or
may reduce upfront tenant improvement investments; or
(3)the tenant’s credit is below our acceptable parameters.
We consistently monitor the credit quality of our tenant base. We provide an allowance for doubtful accounts arising from estimated losses that could result from the tenant’s inability to make required current rent payments and an allowance against accrued rental income for future potential losses that we deem to be unrecoverable over the term of the lease.
Tenant receivables are assigned a credit rating of 1 through 4. A rating of 1 represents the highest possible rating and no allowance is recorded. A rating of 4 represents the lowest credit rating, in which case we record a full reserve against the receivable balance. Among the factors considered in determining the credit rating include:
payment history;
credit status and change in status (credit ratings for public companies are used as a primary metric);
change in tenant space needs (i.e., expansion/downsize);
tenant financial performance;
economic conditions in a specific geographic region; and
industry specific credit considerations.
If our estimates of collectabilityaccounts. Actual results may differ from those estimates and assumptions.
Our Annual Reports on Form 10-K for the cash received, the timing and amountyear ended December 31, 2015 contains a discussion of our reported revenue could be impacted. The average remaining term of our in-place tenant leases, including unconsolidated joint ventures, was approximately 6.9 years as of September 30, 2015. The credit risk is mitigated by the high quality of our existing tenant base, reviews of prospective tenants’ risk profiles prior to lease execution and consistent monitoring of our portfolio to identify potential problem tenants.
Recoveries from tenants, consisting of amounts due from tenantscritical accounting policies. Except for common area maintenance, real estate taxes and other recoverable costs, are recognized as revenue in the period during which the expenses are incurred. Tenant reimbursements are recognized and presented in accordance with guidance in ASC 605-45 “Principal Agent Considerations” (“ASC 605-45”). ASC 605-45 requires that these reimbursements be recorded on a gross basis, as we are generally the primary obligor with respect to purchasing goods and services from third-party suppliers, have discretion in selecting the supplier and have credit risk. We also receive reimbursement of payroll and payroll related costs from third parties which we reflect on a net basis.
Our parking revenues are derived from leases, monthly parking and transient parking. We recognize parking revenue as earned.
Our hotel revenues are derived from room rentals and other sources such as charges to guests for telephone service, movie and vending commissions, meeting and banquet room revenue and laundry services. Hotel revenues are recognized as earned.
We receive management and development fees from third parties. Property management fees are recorded and earned based on a percentage of collected rents at the properties under management, and not on a straight-line basis, because such fees are contingent upon the collection of rents. We review each development agreement and record development fees as earned. Profit on development fees earned from joint venture projects is recognized as revenue to the extent of the third-party partners’ ownership interest.
Gains on sales of real estate are recognized pursuant to the provisions included in ASC 360-20 “Real Estate Sales” (“ASC 360-20”). The specific timing of the sale is measured against various criteria in ASC 360-20 related to the terms of the transaction and any continuing involvement in the form of management or financial assistance associated with the properties. If the sales criteria for the full accrual method are not met, we defer some or all of the gain recognition and account for the continued operations of the property by applying the finance, leasing, profit sharing, deposit, installment or cost recovery methods, as appropriate, until the sales criteria are met.

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Depreciation and Amortization
We compute depreciation and amortization on our properties using the straight-line method based on estimated useful asset lives. We allocate the acquisition cost of real estate to its components and depreciate or amortize these assets over their useful lives. The amortization of acquired “above-” and “below-market” leases and acquired in-place leases is recorded as an adjustment to revenue and depreciation and amortization, respectively, in the Consolidated Statements of Operations.
Fair Value of Financial Instruments
The carrying values of cash and cash equivalents, marketable securities, escrows, receivables, accounts payable, accrued expenses and other assets and liabilities are reasonable estimates of their fair values because of the short maturities of these instruments.
We follow the authoritative guidance for fair value measurements when valuing our financial instruments for disclosure purposes. We determine the fair value of our unsecured senior notes and unsecured exchangeable senior notes using market prices. The inputs used in determining the fair value of our unsecured senior notes and unsecured exchangeable senior notes is categorized at a level 1 basis (as defined in the accounting standards for Fair Value Measurements and Disclosures) due to the fact that we use quoted market rates to value these instruments. However, the inputs used in determining the fair value could be categorized at a level 2 basis if trading volumes are low. We determine the fair value of our mortgage notes payable using discounted cash flow analyses by discounting the spread between the future contractual interest payments and hypothetical future interest payments on mortgage debt based on current market rates for similar securities. In determining the current market rates, we add our estimates of market spreads to the quoted yields on federal government treasury securities with similar maturity dates to our debt. The inputs used in determining the fair value of our mortgage notes payable and mezzanine notes payable are categorized at a level 3 basis (as defined in the accounting standards for Fair Value Measurements and Disclosures) due to the fact that we consider the rates used in the valuation techniques to be unobservable inputs.
Derivative Instruments and Hedging Activities
Derivative instruments and hedging activities require management to make judgments on the nature of its derivatives and their effectiveness as hedges. These judgments determine if the changes in fair value of the derivative instruments are reported in the Consolidated Statements of Operations as a component of net income or as a component of comprehensive income (loss) and as a component of equity on the Consolidated Balance Sheets. While management believes its judgments are reasonable, a change in a derivative’s effectiveness as a hedge could materially affect expenses, net income and equity. We account for the effective portion of changes in the fair value of a derivative in other comprehensive income (loss) and subsequently reclassify the effective portion to earnings over the term that the hedged transaction affects earnings. We account for the ineffective portion of changes in the fair value of a derivative directly in earnings.
Recent Accounting Pronouncements
On April 10, 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-08, “Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity” (“ASU 2014-08”). ASU No. 2014-08 clarifies that discontinued operations presentation applies only to disposals representing a strategic shift that has (or will have) a major effect on an entity’s operations and financial results (e.g., a disposal of a major geographical area, a major line of business, a major equity method investment or other major parts of an entity). ASU 2014-08 is effective prospectively for reporting periods beginning after December 15, 2014. Early adoption is permitted, and we early adopted ASU 2014-08 during the first quarter of 2014. Our adoption of ASU 2014-08 resulted in the operating results and gain on sale of real estate from the operating property sold during the nine months ended September 30, 2015 not being reflected as Discontinued Operations in our Consolidated Statements of Operations (See Note 3 to the Consolidated Financial Statements).
In February 2015, the FASB issued ASU 2015-02, “Consolidation (Topic 810): Amendments to the Consolidation Analysis” (“ASU 2015-02”). ASU 2015-02 affects reporting entities that are required to evaluate whether they should consolidate certain legal entities. ASU 2015-02 modifies the evaluation of whether limited partnerships and similar legal entities are VIEs or voting interest entities, eliminates the presumption that a general partner should consolidate a limited partnership and affects the consolidation analysis of reporting entities that are involved with VIEs, particularly those that have fee arrangements and related party relationships. ASU 2015-02 is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted. A reporting entity may apply the amendments in ASU 2015-02 using: (a) a modified retrospective approach by recording a cumulative-effect adjustment to equity as of the beginning of the fiscal year of adoption; or (b) by applying the amendments retrospectively. We do not expect the adoption of ASU 2015-02 to have a material impact on our consolidated financial statements.

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In April 2015, the FASB issuedand ASU 2015-03 “Simplifyingand the Presentationmodified presentation of Debt Issuance Costs”(“ASU 2015-03”),our Office/Technical properties to be included within Office properties to align with our method of internal reporting, which requires that debt issuance costs related to a recognized debt liability be presentedshifted after the disposition of 415 Main Street in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts.Cambridge, Massachusetts, there have been no significant changes in our critical accounting policies since December 31, 2015. The recognition and measurement guidance for debt issuance costs is not affected. ASU 2015-03 is effective for financial statements issued fiscal years beginning after December 15, 2015, and interim periods within those fiscal years and shall be applied on a retrospective basis, wherein the balance sheet of each individual period presented should be adjusted to reflect the period-specific effects of applying the new guidance. Early adoption is permitted for financial statements that have not been previously issued. We do not expect the adoption of ASU 2015-02 and ASU 2015-03 and the modification of our segment presentation are discussed in Notes 2 and 12, respectively to have a material impact on our consolidated financial statements.Consolidated Financial Statements. When applicable, management discusses our critical accounting policies and management’s judgments and estimates with BXP’s Audit Committee.
Results of Operations
The following discussion is based on our Consolidated Statements of Operations for the three and nine months ended September 30, 2015March 31, 2016 and 20142015.
At September 30, 2015March 31, 2016 and September 30, 2014,March 31, 2015, we owned or had interests in a portfolio of 171167 and 172168 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 is necessarily meaningful. Therefore, the comparison of operating results for the three and nine months ended September 30, 2015March 31, 2016 and 20142015 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 Placed In-Service, Acquired, Development or Redevelopment or Sold Portfolios.
In our analysis of operating results, particularly to make comparisons of net operating income between periods 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 placed in-service, acquired or in development or redevelopment after the beginning of the earliest period presented or disposed of prior to the end of the latest period presented.
Net operating income, or “NOI,”NOI, is a non-GAAP financial measure, equaland it is not indicative of cash available to net income attributablefund cash needs and should not be considered as an alternative to Boston Properties Limited Partnership common unitholders, the most directly comparable GAAP financialcash flows as a measure plus preferred distributions, income attributableof liquidity. We consider NOI to noncontrolling interests, depreciation and amortization, interest expense, transaction costs, general and administrative expense, less gains on sales of real estate, gains (losses) from investments in securities, income from unconsolidated joint ventures, interest and other income and developmentbe an appropriate supplemental measure because it helps both investors and management services revenue.to understand the core operations of our properties. We use NOI internally as a performance measure and believe NOIit provides useful information to investors regarding our financial condition and results of operations because it reflects only those income and expense items that are incurred at the property level. Therefore, we believe NOI is a useful measure for evaluating the operating performance of our real estate assets.
Our management also uses NOI to evaluate regional property level performance and to make decisions about resource allocations. Further, we believe NOI is useful to investors as a performance measure because, when compared across periods, NOI reflects the impact on operations from trends in occupancy rates, rental rates, operating costs and acquisition and development activity on an unleveraged basis, providing perspectives not immediately apparent from net income attributable to Boston Properties, Limited PartnershipInc. common unitholders. NOI excludes certain components fromshareholders and net income attributable to Boston Properties Limited Partnership common unitholdersunitholders.
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NOI excludes certain components, including interest and other income, development and management services income, general and administrative expenses, transaction costs, interest expense, depreciation and amortization expense, gains from investments in order to provide results that are more closely related tosecurities, income from unconsolidated joint ventures, gains on sales of real estate, noncontrolling interests and preferred dividends/distributions as internal reporting addresses these items on a property’s results of operations.corporate level. 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. In addition, depreciation and amortization, because of historical cost accounting and useful life estimates, may distort operating performance at the property level. NOI presented by us may not be comparable to NOI reported by other REITs that define NOI differently. We believe that in order to facilitate a clear understanding of our operating results, NOI should be examined in conjunction with net income attributable to Boston Properties, Inc. common shareholders and net income attributable to Boston Properties Limited Partnership common unitholders as presented in our Consolidated Financial Statements. NOI should not be considered as an alternative to net income attributable to Boston Properties, Inc. common shareholders or net income attributable to Boston Properties Limited Partnership common unitholders as an indication of our performance or to cash flows as a measure of liquidity or ability to make distributions.unitholders. For a reconciliation of NOI to net income attributable to Boston Properties, Inc. common shareholders and net income attributable to Boston Properties Limited Partnership common unitholders, see Note 12 to the Consolidated Financial Statements.

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TableThe gains on sales of Contentsreal estate and depreciation expense may differ between BXP and BPLP as a result of previously applied acquisition accounting by BXP for the issuance of common stock in connection with non-sponsor OP Unit redemptions by BPLP.  This accounting resulted in a step-up of the real estate assets at BXP that was allocated to certain properties.  The difference between the real estate assets of BXP as compared to BPLP for certain properties having an allocation of the real estate step-up will result in a corresponding difference in the gains on sales of real estate and depreciation expense when those properties are sold. For additional information see the Explanatory Note.

Comparison of the ninethree months ended September 30, 2015March 31, 2016 to the ninethree months ended September 30, 2014.March 31, 2015.
The table below shows selected operating information for the Same Property Portfolio and the Total Property Portfolio. The Same Property Portfolio consists of 145143 properties totaling approximately 37.638.4 million net rentable square feet of space, excluding unconsolidated joint ventures. The Same Property Portfolio includes properties acquired or placed in-service on or prior to January 1, 20142015 and owned and in-service through September 30, 2015.March 31, 2016. The Total Property Portfolio includes the effects of the other properties either placed in-service, acquired or in development or redevelopment after January 1, 20142015 or disposed of on or prior to September 30, 2015.March 31, 2016. This table includes a reconciliation from the Same Property Portfolio to the Total Property Portfolio by also providing information for the ninethree months ended September 30, 2015March 31, 2016 and 20142015 with respect to the properties that were placed in-service, in development or redevelopment or sold. For the ninethree months ended September 30, 2015March 31, 2016 and 20142015 we did not acquire any properties.

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 Same Property Portfolio 
Properties
Placed
In-Service
Portfolio
 
Properties  in
Development
or
Redevelopment
Portfolio
 Properties Sold Portfolio Total Property Portfolio
(dollars in thousands)2015 2014 
Increase/
(Decrease)
 
%
Change
 2015 2014 2015 2014 2015 2014 2015 2014 
Increase/
(Decrease)
 
%
Change
Rental Revenue:                           
Rental Revenue$1,672,544
 $1,636,438
 $36,106
 2.21 % $78,128
 $22,819
 $661
 $1,648
 $18,072
 $42,453
 $1,769,405
 $1,703,358
 $66,047
 3.88 %
Termination Income31,193
 10,260
 20,933
 204.03 % —
 —
 —
 —
 —
 —
 31,193
 10,260
 20,933
 204.03 %
Total Rental Revenue1,703,737
 1,646,698
 57,039
 3.46 % 78,128
 22,819
 661
 1,648
 18,072
 42,453
 1,800,598
 1,713,618
 86,980
 5.08 %
Real Estate Operating Expenses615,763
 587,699
 28,064
 4.78 % 26,650
 9,496
 254
 783
 6,334
 14,374
 649,001
 612,352
 36,649
 5.98 %
Net Operating Income, excluding residential and hotel1,087,974
 1,058,999
 28,975
 2.74 % 51,478
 13,323
 407
 865
 11,738
 28,079
 1,151,597
 1,101,266
 50,331
 4.57 %
Residential Net Operating Income (1)1,996
 1,887
 109
 5.78 % 4,959
 96
 —
 —
 1,210
 5,154
 8,165
 7,137
 1,028
 14.40 %
Hotel Net Operating Income (1)10,911
 10,781
 130
 1.21 % —
 —
 —
 —
 —
 —
 10,911
 10,781
 130
 1.21 %
Consolidated Net Operating Income (1)1,100,881
 1,071,667
 29,214
 2.73 % 56,437
 13,419
 407
 865
 12,948
 33,233
 1,170,673
 1,119,184
 51,489
 4.60 %
Other Revenue:                           
Development and management services—
 —
 —
 —
 —
 —
 —
 —
 —
 —
 16,102
 18,197
 (2,095) (11.51)%
Other Expenses:                           
General and administrative expense—
 —
 —
 —
 —
 —
 —
 —
 —
 —
 72,019
 75,765
 (3,746) (4.94)%
Transaction costs—
 —
 —
 —
 —
 —
 —
 —
 —
 —
 789
 2,500
 (1,711) (68.44)%
Depreciation and amortization437,002
 437,721
 (719) (0.16)% 29,084
 10,051
 806
 427
 2,195
 11,865
 469,087
 460,064
 9,023
 1.96 %
Total Other Expenses437,002
 437,721
 (719) (0.16)% 29,084
 10,051
 806
 427
 2,195
 11,865
 541,895
 538,329
 3,566
 0.66 %
Operating Income663,879
 633,946
 29,933
 4.72 % 27,353
 3,368
 (399) 438
 10,753
 21,368
 644,880
 599,052
 45,828
 7.65 %
Other Income:                           
Income from unconsolidated joint ventures                    20,559
 10,069
 10,490
 104.18 %
Interest and other income                    6,337
 6,841
 (504) (7.37)%
Gains (losses) from investments in securities                    (1,146) 651
 (1,797) (276.04)%
Other Expenses:                           
Interest expense                    326,018
 337,839
 (11,821) (3.50)%
Income Before Gains On Sales Of Real Estate                    344,612
 278,774
 65,838
 23.62 %
Gains on sales of real estate                    294,807
 41,937
 252,870
 602.98 %
Net Income                    639,419
 320,711
 318,708
 99.38 %
Net Income Attributable to Noncontrolling Interests:                           
Noncontrolling interests in property partnerships                    (139,712) (17,473) (122,239) (699.59)%
Noncontrolling interest—redeemable preferred units                    (6) (1,014) 1,008
 99.41 %
Net Income Attributable to Boston Properties Limited Partnership                    499,701
 302,224
 197,477
 65.34 %
Preferred distributions                    (7,854) (7,854) —
 — %
Net Income Attributable to Boston Properties Limited Partnership Common Unitholders                    $491,847
 $294,370
 $197,477
 67.08 %
 Same Property Portfolio Properties Placed
In-Service Portfolio		 Properties in
Development
or
Redevelopment
Portfolio		 Properties Sold Portfolio Total Property Portfolio
(dollars in thousands)2016 2015 
Increase/
(Decrease)
 
%
Change
 2016 2015 2016 2015 2016 2015 2016 2015 Increase/
(Decrease)		 %
Change
Rental Revenue:                           
Rental Revenue$579,858
 $567,734
 $12,124
 2.14 % $13,651
 $1,628
 $—
 $514
 $1,675
 $12,409
 $595,184
 $582,285
 $12,899
 2.22 %
Termination Income51,306
 14,924
 36,382
 243.78 % —
 —
 —
 —
 —
 —
 51,306
 14,924
 36,382
 243.78 %
Total Rental Revenue631,164
 582,658
 48,506
 8.32 % 13,651
 1,628
 —
 514
 1,675
 12,409
 646,490
 597,209
 49,281
 8.25 %
Real Estate Operating Expenses213,647
 211,966
 1,681
 0.79 % 3,493
 709
 —
 218
 432
 4,911
 217,572
 217,804
 (232) (0.11)%
Net Operating Income, excluding residential and hotel417,517
 370,692
 46,825
 12.63 % 10,158
 919
 —
 296
 1,243
 7,498
 428,918
 379,405
 49,513
 13.05 %
Residential Net Operating Income (1)2,449
 2,098
 351
 16.73 % —
 —
 —
 —
 —
 1,210
 2,449
 3,308
 (859) (25.97)%
Hotel Net Operating Income (1)1,123
 1,509
 (386) (25.58)% —
 —
 —
 —
 —
 —
 1,123
 1,509
 (386) (25.58)%
Consolidated Net Operating Income (1)$421,089
 $374,299
 $46,790
 12.50 % $10,158
 $919
 $—
 $296
 $1,243
 $8,708
 $432,490
 $384,222
 $48,268
 12.56 %
_______________  
(1)
For a detailed discussion of NOI, including the reasons management believes NOI is useful to investors, see page 39.41. Residential Net Operating Income for the ninethree months ended September 30,March 31, 2016 and 2015 and 2014 are comprised of Residential Revenue of $14,776$4,049 and $18,998$6,854 less Residential Expenses of $6,611$1,600 and $11,861,$3,546, respectively. Hotel Net Operating Income for the ninethree months ended September 30,March 31, 2016 and 2015 and 2014 are comprised of Hotel Revenue of $35,107$8,757 and $32,478$9,085 less Hotel Expenses of $24,196$7,634 and $21,697,$7,576, respectively, per the Consolidated Statements of Operations.

41
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Boston Properties, Inc.
The following is a reconciliation of Consolidated Net Operating Income to net income attributable to Boston Properties, Inc. common shareholders (in thousands):
  Total Property Portfolio
  2016 2015 Increase/
(Decrease)		 %
Change
Consolidated Net Operating Income $432,490
 $384,222
 $48,268
 12.56 %
Other Revenue:        
Development and management services 6,689
 5,328
 1,361
 25.54 %
Other Expenses:     

 

General and administrative expense 29,353
 28,791
 562
 1.95 %
Transaction costs 25
 327
 (302) (92.35)%
Depreciation and amortization 159,448
 154,223
 5,225
 3.39 %
Total Other Expenses 188,826
 183,341
 5,485
 2.99 %
Operating Income 250,353
 206,209
 44,144
 21.41 %
Other Income: 
 
 
 

Income from unconsolidated joint ventures 1,791
 14,834
 (13,043) (87.93)%
Interest and other income 1,505
 1,407
 98
 6.97 %
Gains from investments in securities 259
 393
 (134) (34.10)%
Other Expenses:     

 
Interest expense 105,309
 108,757
 (3,448) (3.17)%
Income Before Gains on Sales of Real Estate 148,599
 114,086
 34,513
 30.25 %
Gains on sales of real estate 67,623
 95,084
 (27,461) (28.88)%
Net Income 216,222
 209,170
 7,052
 3.37 %
Net Income Attributable to Noncontrolling Interests:        
Noncontrolling interests in property partnerships (10,464) (15,208) 4,744
 31.19 %
Noncontrolling interest—redeemable preferred units of the Operating Partnership —
 (3) 3
 100.00 %
Noncontrolling interest—common units of the Operating Partnership (21,393) (20,188) (1,205) (5.97)%
Net Income Attributable to Boston Properties, Inc. 184,365
 173,771
 10,594
 6.10 %
Preferred dividends (2,618) (2,589) (29) (1.12)%
Net Income Attributable to Boston Properties, Inc. Common Shareholders $181,747
 $171,182
 $10,565
 6.17 %

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Boston Properties Limited Partnership
The following is a reconciliation of Consolidated Net Operating Income to net income attributable to Boston Properties Limited Partnership common unitholders (in thousands):
  Total Property Portfolio
  2016 2015 Increase/
(Decrease)		 %
Change
Consolidated Net Operating Income $432,490
 $384,222
 $48,268
 12.56 %
Other Revenue:        
Development and management services 6,689
 5,328
 1,361
 25.54 %
Other Expenses:        
General and administrative expense 29,353
 28,791
 562
 1.95 %
Transaction costs 25
 327
 (302) (92.35)%
Depreciation and amortization 157,461
 152,224
 5,237
 3.44 %
Total Other Expenses 186,839
 181,342
 5,497
 3.03 %
Operating Income 252,340
 208,208
 44,132
 21.20 %
Other Income:        
Income from unconsolidated joint ventures 1,791
 14,834
 (13,043) (87.93)%
Interest and other income 1,505
 1,407
 98
 6.97 %
Gains from investments in securities 259
 393
 (134) (34.10)%
Other Expenses:        
Interest expense 105,309
 108,757
 (3,448) (3.17)%
Income Before Gains on Sales of Real Estate 150,586
 116,085
 34,501
 29.72 %
Gains on sales of real estate 69,792
 95,084
 (25,292) (26.60)%
Net Income 220,378
 211,169
 9,209
 4.36 %
Net Income Attributable to Noncontrolling Interests:        
Noncontrolling interests in property partnerships (10,464) (15,208) 4,744
 31.19 %
Noncontrolling interest—redeemable preferred units —
 (3) 3
 100.00 %
Net Income Attributable to Boston Properties Limited Partnership 209,914
 195,958
 13,956
 7.12 %
Preferred distributions (2,618) (2,589) (29) (1.12)%
Net Income Attributable to Boston Properties Limited Partnership Common Unitholders $207,296
 $193,369
 $13,927
 7.20 %

Same Property Portfolio
Rental Revenue
Rental revenue from the Same Property Portfolio increased approximately $36.1$12.1 million for the ninethree months ended September 30, 2015March 31, 2016 compared to 2014.2015. The increase was primarily the result of increasesan increase of approximately $11.6 million in revenue from our leases and an increase in other tenant recoveries, and parking income and other income of approximately $31.6 million, $3.2 million and $1.3 million, respectively.$0.5 million. Rental revenue from our leases increased approximately $31.6$11.6 million as a result of our average revenue per square foot increasing by approximately $1.91,$1.20, contributing approximately $48.8$10.5 million, partially offset by a decrease of approximately $17.2$1.1 million due to a decrease in average occupancy from 92.9%92.1% to 91.8%92.0%.
For fiscal 2016, we project our occupancy will remain relatively stable and average between 90%-92%. We expect our Same Property Portfolio NOI for 2016 to also be relatively flat compared to 2015, primarily due to the expected down-time following some large lease expirations in 2015 and 2016 and the repositioning of certain assets discussed in “-Overview” above.
Termination Income
Termination income increased by approximately $20.9$36.4 million for the ninethree months ended September 30, 2015March 31, 2016 compared to 2014.2015.
Termination income for the ninethree months ended September 30, 2015March 31, 2016 related to thirty-twosixteen tenants across the Same Property Portfolio and totaled approximately $31.2$51.3 million, of which approximately $17.6$50.6 million $3.9was from our New York region. On February 3, 2016, we entered into a lease termination agreement with a tenant for an approximately 85,000 square foot lease at
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our 250 West 55th Street property located in New York City.  The lease was scheduled to expire on February 28, 2035.  In consideration for the termination of the lease, the tenant paid us approximately $45.0 million. The remaining approximately $5.6 million $1.2of termination income from the New York region was primarily related to negotiated settlements with two other tenants.
Termination income for the three months ended March 31, 2015 related to fifteen tenants across the Same Property Portfolio and totaled approximately $14.9 million of which approximately $8.6 million and $0.4$1.2 million related to early terminations in our New York and San Francisco Bostonregions, respectively, and Washington, DC regions, respectively. The termination income from the New York region was primarily dueapproximately $4.5 million related to our negotiated early terminations of a tenant at 767 Fifth Avenue (the General Motors Building), a tenant at 601 Lexington Avenue and a tenant in Princeton, New Jersey each in order to accommodate leasing the space to other tenants. Approximately $7.6 million of our termination income for the nine months ended September 30, 2015 was non-cash and resulted from the acceleration of “above-” and “below-market” lease revenue and straight-line rent adjustments.
In addition, on March 11, 2015 and September 9, 2015second interim distribution we received the second and third interim distributions from our unsecured creditor claim against Lehman Brothers, Inc. totaling approximately $8.1 million, leaving a remaining claim of approximately $29.4 million (See Note 7 toof the Consolidated Financial Statements). Recently, claims of similar priority to that of our remaining claim were quoted privately reflecting a value for our remaining claim of approximately $2.5$2.7 million; however, there can be no assurance as to the timing or amount of additional proceeds, if any, that we may receive.
Termination income for the nine months ended September 30, 2014 related to twenty-one tenants across the Same Property Portfolio and totaled approximately $10.3 million, of which approximately $7.1 million represented the initial interim distribution from our unsecured creditor claim against Lehman Brothers, Inc. (See Note 7 to the Consolidated Financial Statements).
Real Estate Operating Expenses
Real estate operating expenses from the Same Property Portfolio increased approximately $28.1$1.7 million, or 0.8% for the ninethree months ended September 30, 2015March 31, 2016 compared to 2014 due primarily to (1) an increase of approximately $14.1 million, or 5.1%, in real estate taxes, which we primarily experienced in our New York CBD properties, (2) an increase of approximately $3.7 million, or 4.1%, in repairs and maintenance expense, which we primarily experienced in our Boston and New York CBD buildings and the Washington, DC region, (3) an increase of approximately $4.8 million, or 5.3%, in utilities expense in the Boston region and New York CBD buildings, (4) an increase of approximately $2.9 million, or 9.4%, in roads and grounds expense, which we primarily experienced in the Boston region and (5) an increase of approximately $2.6 million, or 2.5%, in other real estate operating expenses across the portfolio. 2015.
Depreciation and Amortization Expense
Depreciation and amortization expense for the Same Property Portfolio decreasedincreased approximately $0.7$6.0 million, or 0.2%4.0%, for both BXP and BPLP for the ninethree months ended September 30, 2015March 31, 2016 compared to 2014.2015. The increase is primarily due to several new leases commencing at 250 West 55th Street in New York City and therefore the occupancy percentage increasing from approximately 64% at March 31, 2015 to approximately 78% at March 31, 2016. Leasehold improvements and leasing commissions are depreciated and amortized over their respective lease terms. For additional information about the differences between BXP and BPLP, see the Explanatory Note.
Properties Placed In-Service Portfolio
WeThe table below lists the properties placed in-service or partially placed in-service seven properties betweenfrom January 1, 2014 and September 30, 2015.2015 through March 31, 2016. Rental revenue, real estate operating expenses and depreciation and amortization expense from our Properties Placed In-Service Portfolio increased approximately $60.7$12.0 million, $17.7$2.8 million and $19.0$2.4 million, respectively, for the ninethree months ended September 30, 2015March 31, 2016 compared to 20142015 as detailed below.


42
  Quarter Initially Placed In-Service Quarter  Fully Placed In-Service   Rental Revenue Real Estate Operating Expenses Depreciation and Amortization Expense
Name   Square Feet 2016 2015 Change 2016 2015 Change 2016 2015 Change
        (dollars in thousands)
535 Mission Street Fourth Quarter, 2014 Fourth Quarter, 2015 307,235
 $5,071
 $1,453
 $3,618
 $1,538
 $675
 $863
 $1,480
 $533
 $947
690 Folsom Street Fourth Quarter, 2014 Fourth Quarter, 2015 26,080
 320
 175
 145
 100
 34
 66
 115
 86
 29
The Point (formerly 99 Third Avenue Retail) Third Quarter, 2015 Fourth Quarter, 2015 16,300
 209
 —
 209
 71
 —
 71
 96
 —
 96
601 Massachusetts Avenue Third Quarter, 2015 N/A 478,000
 8,051
 —
 8,051
 1,784
 —
 1,784
 1,303
 —
 1,303
      827,615
 $13,651
 $1,628
 $12,023
 $3,493
 $709
 $2,784
 $2,994
 $619
 $2,375
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  Quarter Initially Placed In-Service Quarter  Fully Placed In-Service   Rental Revenue Real Estate Operating Expenses Depreciation and Amortization Expense
Name   Square Feet 2015 2014 Change 2015 2014 Change 2015 2014 Change
        (dollars in thousands)
Office                      
250 West 55th Street Third Quarter, 2013 Third Quarter, 2014 986,823
 $45,639
 $14,052
 $31,587
 $17,432
 $6,965
 $10,467
 $15,337
 $4,845
 $10,492
680 Folsom Street (1) Fourth Quarter, 2013 Third Quarter, 2014 524,793
 22,314
 8,767
 13,547
 6,231
 2,531
 3,700
 8,793
 3,238
 5,555
535 Mission Street Fourth Quarter, 2014 N/A 307,000
 7,234
 —
 7,234
 2,523
 —
 2,523
 2,017
 —
 2,017
690 Folsom Street Fourth Quarter, 2014 N/A 26,080
 700
 —
 700
 164
 —
 164
 264
 —
 264
601 Massachusetts Avenue Third Quarter, 2015 N/A 478,000
 2,224
 —
 2,224
 299
 —
 299
 476
 —
 476
The Point (formerly 99 Third Avenue Retail) Third Quarter, 2015 N/A 16,500
 17
 —
 17
 1
 —
 1
 6
 —
 6
      2,339,196
 $78,128
 $22,819
 $55,309
 $26,650
 $9,496
 $17,154
 $26,893
 $8,083
 $18,810
Residential                      
The Avant at Reston Town Center(2) Fourth Quarter, 2013 First Quarter, 2014 355,347
 $8,012
 $2,612
 $5,400
 $3,053
 $2,516
 $537
 $2,191
 $1,968
 $223
      2,694,543
 $86,140
 $25,431
 $60,709
 $29,703
 $12,012
 $17,691
 $29,084
 $10,051
 $19,033
_______________ 
(1) This property is a two-building complex.
(2) This property has 359 apartment units and 26,179 net rentable square feet of retail space.
Properties in Development or Redevelopment Portfolio
During the ninethree months ended September 30,March 31, 2015, and 2014, the Properties in Development or Redevelopment Portfolio consisted of our Reservoir Place North property located in Waltham, Massachusetts. We commenced redevelopment of this approximately 73,000 net rentable square foot Class A Office property on May 1, 2015 and it has an expected stabilization date in the firstthird quarter of 2017. Prior to the commencement of redevelopment, this building was operational, and during the ninethree months ended September 30,March 31, 2015, and 2014, had revenue of approximately $0.7 million and $1.6 million, respectively, and approximately $0.3 million and $0.8 million of real estate operating expenses of approximately $0.5 million and $0.2 million, respectively. In addition, during the ninethree months ended September 30,March 31, 2015, and 2014, the building had approximately $0.8$0.1 million and $0.4 million, respectively, of depreciation and amortization expense.
Properties Sold Portfolio
The table below lists the properties we sold between January 1, 20142015 and September 30, 2015.March 31, 2016. Rental revenue, real estate and operating expenses and depreciation and amortization expense from our Properties Sold Portfolio decreased approximately $34.1$14.0 million, $13.9$6.5 million and $9.7$3.0 million, respectively, for the ninethree months ended September 30, 2015March 31, 2016 compared to 20142015 as detailed below.



43
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        Rental Revenue Real Estate Operating Expenses Depreciation and Amortization Expense
Name Date sold Property Type Square Feet (sf) / Acres 2015 2014 Change 2015 2014 Change 2015 2014 Change
        (dollars in thousands)
Class A Office, Office/Technical and Land                    
Mountain View Technology Park (1) July 29, 2014 Office /Technical 135,000 sf $—
 $2,603
 $(2,603) $—
 $456
 $(456) $—
 $1,782
 $(1,782)
Mountain View Research Park Building Sixteen July 29, 2014 Office /Technical 63,000 sf —
 1,510
 (1,510) —
 235
 (235) —
 1,012
 (1,012)
Broad Run Business Park August 22, 2014 Land Parcel 15.5 acres —
 909
 (909) —
 240
 (240) —
 8
 (8)
Patriots Park (2) October 2, 2014 Class A Office 706,000 sf —
 18,342
 (18,342)��—
 5,905
 (5,905) —
 4,126
 (4,126)
130 Third Avenue October 24, 2014 Land Parcel N/A —
 162
 (162) —
 224
 (224) —
 —
 —
75 Ames Street December 30, 2014 Land Parcel N/A —
 344
 (344) —
 —
 —
 —
 —
 —
505 9th Street, N.W. (3) September 18, 2015 Class A Office 322,000 sf 18,072
 18,583
 (511) 6,334
 7,314
 (980) 2,074
 2,523
 (449)
        $18,072
 $42,453
 $(24,381) $6,334

$14,374
 $(8,040) $2,074
 $9,451
 $(7,377)
Residential                        
Residences on The Avenue March 17, 2015 Residential 323,050 sf (4)


$3,230
 $12,998
 $(9,768) $2,020
 $7,844
 $(5,824) $121
 $2,414
 $(2,293)
        $21,302
 $55,451
 $(34,149) $8,354
 $22,218
 $(13,864) $2,195
 $11,865
 $(9,670)
        Rental Revenue Real Estate Operating Expenses Depreciation and Amortization Expense
Name Date sold Property Type Square Feet (sf) 2016 2015 Change 2016 2015 Change 2016 2015 Change
        (dollars in thousands)
Office                    
505 9th Street, N.W. (1) September 18, 2015 Office 322,000 $—
 $6,525
 $(6,525) $—
 $2,599
 $(2,599) $—
 $874
 $(874)
Innovation Place (2) December 17, 2015 Office 574,000 —
 579
 (579) —
 620
 (620) —
 1,112
 (1,112)
415 Main Street February 1, 2016 Office 231,000 1,675
 5,305
 (3,630) 432
 1,692
 (1,260) 108
 1,001
 (893)
        1,675
 12,409
 (10,734) 432
 4,911
 (4,479) 108
 2,987
 (2,879)
Residential                        
Residences on The Avenue March 17, 2015 Residential 323,050 (3)


—
 3,230
 (3,230) —
 2,020
 (2,020) —
 121
 (121)
        $1,675
 $15,639
 $(13,964) $432
 $6,931
 $(6,499) $108
 $3,108
 $(3,000)
_______________ ___________
(1) This property is a seven-building complex.
(2) This property is a three-building complex.
(3) This property was owned by a consolidated entity in which we had a 50% interest.
(4)(2) This is a 26-acre site with one occupied and three vacant existing office buildings.
(3) This property has 335 apartment units and approximately 50,000 net rentable square feet of retail space.
Other
Operating Income and Expense Items
Residential Net Operating Income
Net operating income for our residential properties increaseddecreased by approximately $1.0$0.9 million for the ninethree months ended September 30, 2015March 31, 2016 compared to 2014.2015.
The following reflects our occupancy and rate information for The Lofts at Atlantic Wharf the Residences on The Avenue and The Avant at Reston Town Center for the ninethree months ended September 30, 2015March 31, 2016 and 2014.2015. On March 17, 2015, we sold the Residences on The Avenue and therefore there is no information shown for the ninethree months ended September 30,March 31, 2016 and 2015.

 The Lofts at Atlantic Wharf Residences on The Avenue (1) The Avant at Reston Town Center (2) The Lofts at Atlantic Wharf The Avant at Reston Town Center
 2015 2014 Percentage
Change		 2015 2014 Percentage
Change		 2015 2014 Percentage
Change		 2016 2015 
Percentage
Change
 2016 2015 Percentage
Change
Average Physical Occupancy (3)(1) 96.8% 96.4% 0.4% N/A 91.8% N/A 89.5% 29.2% 206.5% 96.1% 98.1% (2.0)% 92.9% 80.1% 16.0%
Average Economic Occupancy (4)(2) 97.6% 96.4% 1.2% N/A 91.1% N/A 87.6% 25.0% 250.4% 97.6% 98.8% (1.2)% 92.8% 76.9% 20.7%
Average Monthly Rental Rate (5)(3) $4,027
 $3,914
 2.9% N/A $3,174
 N/A $2,257
 $2,202
 2.5% $4,153
 $4,012
 3.5 % $2,327
 $2,244
 3.7%
Average Rental Rate Per Occupied Square Foot $4.49
 $4.37
 2.7% N/A $3.89
 N/A $2.44
 $2.40
 1.7% $4.57
 $4.44
 2.9 % $2.55
 $2.45
 4.1%
___________  
(1)
This property was sold during the first quarter of 2015. For the operating results refer to “Results of Operations—Properties Sold Portfolio” within “Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 3 to the Consolidated Financial Statements.
(2)
This property was initially placed in-service during the fourth quarter of 2013 and fully placed in-service during the first quarter of 2014. For the operating results refer to “Results of Operations—Properties Placed In-Service

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Portfolio” within “Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
(3)
Average Physical Occupancy is defined as the average number of occupied units divided by the total number of units, expressed as a percentage.
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(4)(2)Average Economic Occupancy is defined as total possible revenue less vacancy loss as a percentage of total possible revenue. 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'sproperty’s units and publicly available market data. Trends in market rents for a region as reported by others could vary. Market Rents for a period are based on the average Market Rents during that period and do not reflect any impact for cash concessions.
(5)(3)
Average Monthly Rental Rates are calculated by us as rental revenue in accordance with GAAP, divided by the weighted monthly average number of occupied units.
units. 

Hotel Net Operating Income
Net operating income for the Boston Marriott Cambridge hotel property increaseddecreased by approximately $130,000$0.4 million for the ninethree months ended September 30, 2015March 31, 2016 compared to 2014.2015. We expect our hotel net operating income for fiscal 2016 to be generally in line with 2015 and contribute between $13 million and $15 million.
The following reflects our occupancy and rate information for the Boston Marriott Cambridge hotel for the ninethree months ended September 30, 2015March 31, 2016 and 2014.
2015.
 2015 2014 
Percentage
Change
 2016 2015 
Percentage
Change
Occupancy 84.1% 84.1% —% 75.2% 78.7% (4.4)%
Average daily rate $271.88
 $249.98
 8.8% $223.48
 $223.34
 0.1 %
Revenue per available room, REVPAR $294.63
 $210.27
 40.1% $168.08
 $175.86
 (4.4)%
Development and Management Services
Development and management services income decreasedincreased approximately $2.1$1.4 million for the ninethree months ended September 30, 2015March 31, 2016 compared to 2014.2015. Development income decreased by approximately $3.6 million partially offset by an increase inand management service income ofincreased by approximately $1.5 million.$1.0 million and $0.4 million, respectively. The decreaseincrease in development income is primarily due to decreasesincreases in fees associated with tenant improvement project management and the development fees earned from our Boston and New York joint ventures as well as an increase in our San Francisco third-party developments fees, partially offset by a decrease in development fees from our Washington, DC third-party developments and our Washington, DC joint ventures. The increaseDevelopment income also increased due to fees we earned on tenant improvement buildouts being constructed in management fees isour New York region. Management service income increased primarily due primarily to an increase in tenant service income that we have received from our tenants. We expect our development and management services income for fiscal 2016 to be generally in line with 2015 and contribute between $20$22 million and $24$26 million.
General and Administrative
General and administrative expenses decreased approximately $3.7 million for the nine months ended September 30, 2015 compared to 2014 due primarily to the timing of the recognition of expenses under the Transition Benefits Agreement that Boston Properties, Inc. entered into with Mortimer B. Zuckerman in 2013. Because Mr. Zuckerman remained employed by Boston Properties, Inc. through July 1, 2014, he received, on January 1, 2015, a lump sum payment of $6.7 million and an equity award of LTIP Units with a targeted value of approximately $11.1 million. The cash payment and equity award vested in three equal installments on each of March 10, 2013, October 1, 2013 and July 1, 2014. As a result, we recognized approximately $4.0 million of compensation expense during the nine months ended September 30, 2014 related to the Transition Benefits Agreement that did not recur in 2015. We also had an approximately $1.8 million decrease in the value of our deferred compensation plan. These decreases were partially offset by the following increases: (1) approximately $1.1 million related to the net effect of the end of the measurement period for the 2011 OPP Awards, a decrease in the quarterly expense related to the 2012 OPP Awards due to certain members of Boston Properties, Inc.’s senior management reached retirement age and therefore became fully vested and the issuance of the 2015 MYLTIP Units (See Note 11 to the Consolidated Financial Statements) and (2) an approximately $1.0 million increase in health care costs. We expect general and administrative expenses for fiscal 2016 to be slightly higher than 2015 and be between $102 million and $107 million. This estimate assumes a cost-of-living adjustment and the issuance in 2016 of a long-term compensation plan that is identical to the

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plan that we had in 2015. The projected increased expense associated with the long-term compensation plan is due to the difference between the unvested expense remaining from the issuance of the 2013 MYLTIP Units compared to the expense that would be recognized during the first year of the new long-term compensation plan.
Wages directly related to the development and leasing of rental properties are capitalized and included in real estate assets or deferred charges on our Consolidated Balance Sheets and amortized over the useful lives of the real estate. Capitalized wages for the nine months ended September 30, 2015 and 2014 were approximately $11.7 million and $11.0 million, respectively. These costs are not included in the general and administrative expenses discussed above.
Transaction Costs
Transaction costs decreased approximately $1.7 million for the nine months ended September 30, 2015 compared to 2014. Transaction costs for both periods were primarily related to the formation of several new and pending joint ventures, pending and completed asset sales and the pursuit of other transactions, including acquisitions.
Other Income and Expense Items
Income from Unconsolidated Joint Ventures
For the nine months ended September 30, 2015 compared to 2014, income from unconsolidated joint ventures increased by approximately $10.5 million due primarily to an approximately $11.7 million increase in our share of net income from 901 New York Avenue in Washington, DC. During the nine months ended September 30, 2015, we received a distribution of approximately $24.5 million, which was generated from the excess loan proceeds from the joint venture’s refinancing of its mortgage loan to a new 10-year mortgage loan totaling $225.0 million.  Our allocation of income and distributions for the nine months ended September 30, 2015 was not proportionate to our nominal ownership interest as a result of the achievement of specified investment return thresholds, as provided for in the joint venture agreement. This increase was partially offset by approximately $1.7 million of termination income we received from our Metropolitan Square property in Washington, DC during the nine months ended September 30, 2014 that did not recur in 2015.
Interest and Other Income
Interest and other income decreased approximately $0.5 million for the nine months ended September 30, 2015 compared to 2014, primarily due to a tax refund we received from the District of Columbia during the nine months ended September 30, 2014 that did not recur during 2015.
Gains (Losses) from Investments in Securities
Gains (losses) from investments in securities for the nine months ended September 30, 2015 and 2014 related to investments that we have made to reduce our market risk relating to a deferred compensation plan that we maintain for Boston Properties, Inc.’s officers. Under this deferred compensation plan, each officer who is eligible to participate is permitted to defer a portion of the officer’s current income 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. In order to reduce our market risk relating to this plan, 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. This enables us to generally match our liabilities to Boston Properties, Inc.’s officers under the deferred compensation plan 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 nine months ended September 30, 2015 and 2014, we recognized gains (losses) of approximately $(1.1) million and $0.7 million, respectively, on these investments. By comparison, our general and administrative expense increased (decreased) by approximately$(1.1) million and $0.7 million during the nine months ended September 30, 2015 and 2014, respectively, as a result of increases (decreases) in our liability under our deferred compensation plan that were associated with the performance of the specific investments selected by Boston Properties, Inc.’s officers participating in the plan.

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Interest Expense
Interest expense decreased approximately $11.8 million for the nine months ended September 30, 2015 compared to 2014 as detailed below:
Component Change in interest
expense for the nine months ended
September 30, 2015 compared
to September 30, 2014
  (in thousands)
Increases to interest expense due to:  
Reduction in capitalized interest (1) $18,892
Total increases to interest expense $18,892
Decreases to interest expense due to:  
Redemption of $300.0 million in aggregate principal of our 5.625% senior notes due 2015 on December 15, 2014 $(12,705)
Redemption of $250.0 million in aggregate principal of our 5.000% senior notes due 2015 on December 15, 2014 (9,640)
Repayment of $747.5 million in aggregate principal of our 3.625% exchangeable senior notes due 2014 on February 18, 2014 (3,343)
Interest expense associated with the adjustment for the equity component allocation of our unsecured exchangeable debt (2) (2,438)
Repayment of mortgage financings (3) (1,769)
Other interest expense (excluding senior notes) (437)
Sale of 505 9th Street, N.W. on September 18, 2015 (381)
Total decreases to interest expense $(30,713)
Total change in interest expense $(11,821)
___________  
(1)
The decrease was primarily due to the completion of several development projects. For a list of developments placed in-service refer to “Results of Operations—Properties Placed In-Service Portfolio” within “Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations”.
(2)All of our exchangeable senior notes were repaid as of February 18, 2014.
(3)
Represents the repayment of New Dominion Technology Park Building Two mortgage loan.

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. As properties are placed in-service, we cease capitalizing interest and interest is then expensed. Interest capitalized for the nine months ended September 30, 2015 and 2014 was approximately $25.9 million and $44.8 million, respectively. These costs are not included in the interest expense referenced above.
We anticipate interest expense for 2016 will be approximately $400 million to $420 million. This amount is net of approximately $38 million to $48 million of capitalized interest. These estimates assume that we will complete a $500 million financing during the fourth quarter of 2016. These estimates also assume that, aside from the $500 million financing, we will not incur any additional indebtedness, make additional prepayments or repurchases of existing indebtedness and that there will not be any fluctuations in interest rates or any changes in our development activity. If we elect to prepay or repurchase existing indebtedness prior to its maturity, we may incur prepayment penalties or realize the acceleration of amortized costs.
At September 30, 2015, our variable rate debt consisted of our $1.0 billion Unsecured Line of Credit, of which no amount was outstanding at September 30, 2015. For a summary of our consolidated debt as of September 30, 2015 and September 30, 2014 refer to the heading “Liquidity and Capital Resources—Capitalization—Debt Financing” within “Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Gains on Sales of Real Estate
On February 19, 2015, we completed the sale of a parcel of land within our Washingtonian North property located in Gaithersburg, Maryland for a gross sale price of $8.7 million. Net cash proceeds totaled approximately $8.3 million, resulting in

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a gain on sale of real estate totaling approximately $3.7 million. The parcel contains approximately 8.5 acres of the approximately 27 acre property.
On March 17, 2015, we completed the sale of our Residences on The Avenue property located in Washington, DC for a gross sale price of $196.0 million. Net cash proceeds totaled approximately $192.5 million, resulting in a gain on sale of real estate totaling approximately $91.4 million. We have agreed to provide net operating income support of up to $6.0 million should the property’s net operating income fail to achieve certain thresholds, which has been recorded as a reduction to the gain on sale. The Residences on The Avenue is comprised of 335 apartment units and approximately 50,000 net rentable square feet of retail space, subject to a ground lease that expires on February 1, 2068.
On September 18, 2015, a consolidated entity in which we have a 50% interest completed the sale of its 505 9th Street, N.W. property located in Washington, DC for approximately $318.0 million, including the assumption by the buyer of approximately $117.0 million of mortgage indebtedness.  Net cash proceeds totaled approximately $194.6 million, of which our share was approximately $97.3 million. We recognized a gain on sale of real estate totaling approximately $199.7 million, of which approximately $101.1 million was allocated to the outside partners and is included within Noncontrolling Interests in Property Partnerships in our Consolidated Statements of Operations. 505 9th Street, N.W. is an approximately 322,000 net rentable square foot Class A office building. 
On July 29, 2014, we completed the sale of our Mountain View Technology Park properties and Mountain View Research Park Building Sixteen property located in Mountain View, California for an aggregate sale price of approximately $92.1 million. Net cash proceeds totaled approximately $91.2 million, resulting in a gain on sale of real estate totaling approximately $36.4 million. Mountain View Technology Park is a seven-building complex of Office/Technical properties aggregating approximately 135,000 net rentable square feet. Mountain View Research Park Building Sixteen is an Office/Technical property with approximately 63,000 net rentable square feet.
On August 20, 2014, a portion of the land parcel at our One Reston Overlook property located in Reston, Virginia was taken by eminent domain. Net cash proceeds totaled approximately $2.6 million, resulting in a gain on sale of real estate totaling approximately $1.2 million.
On August 22, 2014, we completed the sale of a parcel of land within our Broad Run Business Park property located in Loudoun County, Virginia for a sale price of approximately $9.8 million. Net cash proceeds totaled approximately $9.7 million, resulting in a gain on sale of real estate totaling approximately $4.3 million. The parcel is an approximately 15.5 acre land parcel subject to a ground lease that was scheduled to expire on October 31, 2048 with a tenant that exercised its purchase option under the ground lease.
Noncontrolling interests in property partnerships
Noncontrolling interests in property partnerships increased by approximately $122.2 million for the nine months ended September 30, 2015 compared to 2014 as detailed below.
Property Date of Consolidation Partners' noncontrolling interest for the nine months ended September 30,
2015 2014 Change
    (in thousands)
505 9th Street (1) October 1, 2007 $103,507
 $1,739
 $101,768
Fountain Square (2) (3) October 4, 2012 5,121
 8,796
 (3,675)
767 Fifth Avenue (the General Motors Building) (4) May 31, 2013 (13,946) (12,957) (989)
Times Square Tower October 9, 2013 20,025
 19,895
 130
601 Lexington Avenue October 30, 2014 14,985
 —
 14,985
100 Federal Street October 30, 2014 3,005
 —
 3,005
Atlantic Wharf Office October 30, 2014 7,015
 —
 7,015
    $139,712
 $17,473
 $122,239
___________
(1)On September 18, 2015, we recognized a gain on sale of real estate totaling approximately $199.7 million, of which approximately $101.1 million was allocated to the outside partners (See Notes 3, 5 and 8 to the Consolidated Financial Statements).

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(2)On August 6, 2015, the parties amended the joint venture agreement to require us to acquire our partner's nominal 50% interest on September 15, 2015 for approximately $100.9 million in cash. As a result, we stopped accreting the changes in the redemption value through the Consolidated Statement of Operations as of August 6, 2015 (See Note 8 to the Consolidated Financial Statements).
(3)During the nine months ended September 30, 2014, we made an out-of-period adjustment of approximately $1.9 million related to the cumulative non-cash adjustment to the accretion of the changes in the redemption value of the noncontrolling interest (See Note 2 to the Consolidated Financial Statements).
(4)The net loss allocation is primarily due to the partners' share of the interest expense for the outside members' notes payable which was $22.8 million and $21.0 million for the nine months ended September 30, 2015 and 2014, respectively.
Comparison of the three months ended September 30, 2015 to the three months ended September 30, 2014.
The table below shows selected operating information for the Same Property Portfolio and the Total Property Portfolio. The Same Property Portfolio consists of 146 properties totaling approximately 38.0 million net rentable square feet of space, excluding unconsolidated joint ventures. The Same Property Portfolio includes properties acquired or placed in-service on or prior to July 1, 2014 and owned and in service through September 30, 2015. The Total Property Portfolio includes the effects of the other properties either placed in-service, acquired or in development or redevelopment after July 1, 2014 or disposed of on or prior to September 30, 2015. 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, 2015 and 2014 with respect to the properties that were placed in-service, acquired, in development or redevelopment or sold. For the three months ended September 30, 2015 and 2014 we did not acquire any properties.


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 Same Property Portfolio Properties
Placed
In-Service
Portfolio		 Properties  in
Development
or
Redevelopment
Portfolio		 
Properties
Sold Portfolio
 Total Property Portfolio
(dollars in thousands)2015 2014 
Increase/
(Decrease)
 
%
Change
 2015 2014 2015 2014 2015 2014 2015 2014 
Increase/
(Decrease)
 
%
Change
Rental Revenue:                           
Rental Revenue$560,990
 $557,251
 $3,739
 0.67 % $31,524
 $14,233
 $—
 $571
 $5,139
 $13,173
 $597,653
 $585,228
 $12,425
 2.12 %
Termination Income9,589
 8,164
 1,425
 17.45 % —
 —
 —
 —
 —
 —
 9,589
 8,164
 1,425
 17.45 %
Total Rental Revenue570,579
 565,415
 5,164
 0.91 % 31,524
 14,233
 —
 571
 5,139
 13,173
 607,242
 593,392
 13,850
 2.33 %
Real Estate Operating Expenses207,392
 200,764
 6,628
 3.30 % 9,711
 5,391
 —
 253
 1,159
 4,608
 218,262
 211,016
 7,246
 3.43 %
Net Operating Income, excluding residential and hotel363,187
 364,651
 (1,464) (0.40)% 21,813
 8,842
 —
 318
 3,980
 8,565
 388,980
 382,376
 6,604
 1.73 %
Residential Net Operating Income (1)2,577
 1,348
 1,229
 91.17 % —
 —
 —
 —
 —
 1,507
 2,577
 2,855
 (278) (9.74)%
Hotel Net Operating Income(1)4,494
 4,333
 161
 3.72 % —
 —
 —
 —
 —
 —
 4,494
 4,333
 161
 3.72 %
Consolidated Net Operating Income(1)370,258
 370,332
 (74) (0.02)% 21,813
 8,842
 —

318
 3,980
 10,072
 396,051
 389,564
 6,487
 1.67 %
Other Revenue:                           
Development and management services—
 —
 —
 —
 —
 —
 —
 —
 —
 —
 5,912
 6,475
 (563) (8.69)%
Other Expenses:                           
General and administrative expense—
 —
 —
 —
 —
 —
 —
 —
 —
 —
 20,944
 22,589
 (1,645) (7.28)%
Transaction costs—
 —
 —
 —
 —
 —
 —
 —
 —
 —
 254
 1,402
 (1,148) (81.88)%
Depreciation and amortization141,269
 146,368
 (5,099) (3.48)% 9,422
 5,156
 —
 142
 326
 3,551
 151,017
 155,217
 (4,200) (2.71)%
Total Other Expenses141,269
 146,368
 (5,099) (3.48)% 9,422
 5,156
 —
 142
 326
 3,551
 172,215
 179,208
 (6,993) (3.90)%
Operating Income228,989
 223,964
 5,025
 2.24 % 12,391
 3,686
 —
 176
 3,654
 6,521
 229,748
 216,831
 12,917
 5.96 %
Other Income:                           
Income from unconsolidated joint ventures                    2,647
 4,419
 (1,772) (40.10)%
Interest and other income                    3,637
 3,421
 216
 6.31 %
Other Expenses:                        
  
Losses from investments in securities                    1,515
 297
 1,218
 410.10 %
Interest expense                    108,727
 113,308
 (4,581) (4.04)%
Income Before Gains on Sales of Real Estate                    125,790
 111,066
 14,724
 13.26 %
Gains on sales of real estate                    199,723
 41,937
 157,786
 376.25 %
Net Income                    325,513
 153,003
 172,510
 112.75 %
Net Income Attributable to Noncontrolling Interests:                           
Noncontrolling interests in property partnerships                    (115,240) (5,566) (109,674) 1,970.43 %
Noncontrolling interest—redeemable preferred units                    —
 (75) 75
 100.00 %
Net Income Attributable to Boston Properties Limited Partnership                    210,273
 147,362
 62,911
 42.69 %
Preferred distributions                    (2,647) (2,647) —
 — %
Net Income Attributable to Boston Properties Limited Partnership Common Unitholders                    $207,626
 $144,715
 $62,911
 43.47 %
_______________  
(1)
For a detailed discussion of NOI, including the reasons management believes NOI is useful to investors, see page 39. Residential Net Operating Income for the three months ended September 30, 2015 and 2014 are comprised of Residential Revenue of $4,111 and $7,018 less Residential Expenses of $1,534 and $4,163, respectively. Hotel Net Operating Income for the three months ended September 30, 2015 and 2014 are comprised of Hotel Revenue of $12,619 and $11,918 less Hotel Expenses of $8,125 and $7,585, respectively, per the Consolidated Statements of Operations.

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Same Property Portfolio
Rental Revenue
Rental revenue from the Same Property Portfolio increased approximately $3.7 million for the three months ended September 30, 2015 compared to 2014. The increase was primarily the result of an increase of approximately $3.4 million in revenue from our leases and an increase in other tenant recoveries, parking income and other income of approximately $0.3 million. Rental revenue from our leases increased approximately $3.4 million as a result of our average revenue per square foot increasing by approximately $1.11, contributing approximately $9.5 million, partially offset by a decrease of approximately $6.1 million due to a decrease in average occupancy from 92.9% to 91.7%.
Termination Income
Termination income increased by approximately $1.4 million for the three months ended September 30, 2015 compared to 2014.
Termination income for the three months ended September 30, 2015 related to fourteen tenants across the Same Property Portfolio and totaled approximately $9.6 million, of which approximately $4.6 million and $1.3 million related to early terminations in our New York and San Francisco regions, respectively, and $0.1 million related to early terminations in the Boston and Washington, DC regions. The termination income from the New York region was primarily due to our negotiated early terminations of a tenant at 767 Fifth Avenue (the General Motors Building), a tenant at 601 Lexington Avenue and a tenant in Princeton, New Jersey each in order to accommodate leasing the space to other tenants. Approximately $2.5 million of our termination income for the three months ended September 30, 2015 was non-cash and resulted from the acceleration of “above-” and “below-market” lease revenue and straight-line rent adjustments.
In addition, on September 9, 2015 we received the third interim distribution from our unsecured creditor claim against Lehman Brothers, Inc. totaling approximately $3.6 million, leaving a remaining claim of approximately $29.4 million (See Note 7 to the Consolidated Financial Statements). Recently, claims of similar priority to that of our remaining claim were quoted privately reflecting a value for our remaining claim of approximately $2.5 million; however, there can be no assurance as to the timing or amount of additional proceeds, if any, that we may receive.
Termination income for the three months ended September 30, 2014 related to nine tenants across the Same Property Portfolio and totaled approximately $8.2 million, of which approximately $7.7 million related to an initial distribution we received from our unsecured creditor claim against Lehman Brothers, Inc. (See Note 7 to the Consolidated Financial Statements).
Real Estate Operating Expenses
Real estate operating expenses from the Same Property Portfolio increased approximately $6.6 million for the three months ended September 30, 2015 compared to 2014 due primarily to (1) an increase of approximately $3.8 million, or 4.0%, in real estate taxes, which we primarily experienced in our New York region, (2) an increase of approximately $1.4 million, or 4.4%, in utilities expense primarily due to an increase in electricity expense in the Boston region and (3) an increase of approximately $1.4 million, or 2.0%, in other real estate operating expenses across the portfolio.
Depreciation and Amortization Expense
Depreciation and amortization expense for the Same Property Portfolio decreased approximately $5.1 million, or 3.5%, for the three months ended September 30, 2015 compared to 2014 primarily due to a decrease in depreciation and amortization at 200 Clarendon Street (formerly the John Hancock Tower) in Boston, Massachusetts due to several lease expirations during 2014 and earlier in 2015. Leasehold improvements and leasing commissions are depreciated and amortized over their respective lease terms, as such, when the lease term expires these assets are fully depreciated therefore causing the decrease in depreciation for the three months ended September 30, 2015 compared to 2014.
Properties Placed In-Service Portfolio
We placed in-service or partially placed in-service six properties between July 1, 2014 and September 30, 2015. Rental revenue, real estate operating expenses and depreciation and amortization expense from our Properties Placed In-Service Portfolio increased approximately $17.3 million, $4.3 million and $4.3 million, respectively, for the three months ended September 30, 2015 compared to 2014 as detailed below.


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  Quarter Initially Placed In-Service Quarter Fully Placed In-Service   Rental Revenue Real Estate Operating Expenses Depreciation and Amortization Expense
Name   Square Feet 2015 2014 Change 2015 2014 Change 2015 2014 Change
        (dollars in thousands)
250 West 55th Street Third Quarter, 2013 Third Quarter, 2014 986,823
 $17,711
 $8,030
 $9,681
 $6,000
 $3,717
 $2,283
 $5,182
 $2,951
 $2,231
680 Folsom Street (1) Fourth Quarter, 2013 Third Quarter, 2014 524,793
 7,784
 6,203
 1,581
 2,191
 1,674
 517
 2,781
 2,205
 576
535 Mission Street Fourth Quarter, 2014 N/A 307,000
 3,526
 —
 3,526
 1,153
 —
 1,153
 890
 —
 890
690 Folsom Street Fourth Quarter, 2014 N/A 26,080
 262
 —
 262
 67
 —
 67
 87
 —
 87
601 Massachusetts Avenue Third Quarter, 2015 N/A 478,000
 2,224
 —
 2,224
 299
 —
 299
 476
 —
 476
The Point (formerly 99 Third Avenue Retail) Third Quarter, 2015 N/A 16,500
 17
 —
 17
 1
 —
 1
 6
 —
 6
      2,339,196
 $31,524
 $14,233
 $17,291
 $9,711
 $5,391
 $4,320
 $9,422
 $5,156
 $4,266
_______________ 
(1) This property is a two-building complex.
Properties in Development or Redevelopment Portfolio
During the three months ended September 30, 2014, the Properties in Development or Redevelopment Portfolio consisted of our Reservoir Place North property located in Waltham, Massachusetts. We commenced redevelopment of this approximately 73,000 net rentable square foot Class A Office property on May 1, 2015 and it has an expected stabilization date in the first quarter of 2017. Prior to the commencement of redevelopment, this building was operational, and during the three months ended September 30, 2014, had revenue and real estate operating expenses of approximately $0.6 million and $0.3 million, respectively. In addition, during the three months ended September 30, 2014, the building had approximately $0.1 million of depreciation and amortization expense.
Properties Sold Portfolio
The table below lists the properties we sold between July 1, 2014 and September 30, 2015. Rental revenue, real estate operating expenses and depreciation and amortization expense from our Properties Sold Portfolio decreased approximately $12.3 million, $6.2 million and $3.2 million, respectively, for the three months ended September 30, 2015 compared to 2014 as detailed below.


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        Rental Revenue Real Estate Operating Expenses Depreciation and Amortization Expense
Name Date sold Property Type Square Feet (sf) / Acres 2015 2014 Change 2015 2014 Change 2015 2014 Change
        (dollars in thousands)
Class A Office, Office/Technical and Land                    
Mountain View Technology Park (1) July 29, 2014 Office /Technical 135,000 sf $—
 $358
 $(358) $—
 $96
 $(96) $—
 $370
 $(370)
Mountain View Research Park Building Sixteen July 29, 2014 Office /Technical 63,000 sf —
 226
 (226) —
 60
 (60) —
 148
 (148)
Broad Run Business Park August 22, 2014 Land Parcel 15.5 acres —
 175
 (175) —
 53
 (53) —
 1
 (1)
Patriots Park (2) October 2, 2014 Class A Office 706,000 sf —
 6,102
 (6,102) —
 1,895
 (1,895) —
 1,353
 (1,353)
130 Third Avenue October 24, 2014 Land Parcel N/A —
 —
 —
 —
 40
 (40) —
 —
 —
75 Ames Street December 30, 2014 Land Parcel N/A —
 115
 (115) —
 —
 —
 —
 —
 —
505 9th Street, N.W. (3) September 18, 2015 Class A Office 322,000 sf 5,139
 6,197
 (1,058) 1,159
 2,464
 (1,305) 326
 874
 (548)
        $5,139
 $13,173
 $(8,034) $1,159
 $4,608
 $(3,449) $326
 $2,746
 $(2,420)
Residential                        
Residences on The Avenue March 17, 2015 Residential 323,050 sf (4)


$—
 $4,265
 $(4,265) $—
 $2,758
 $(2,758) $—
 $805
 $(805)
        $5,139
 $17,438
 $(12,299) $1,159
 $7,366
 $(6,207) $326
 $3,551
 $(3,225)
___________
(1) This property is a seven-building complex.
(2) This property is a three-building complex.
(3) This property was owned by a consolidated entity in which we had a 50% interest.
(4)This property has 335 apartment units and approximately 50,000 net rentable square feet of retail space.
Operating Income and Expense Items
Residential Net Operating Income
Net operating income for our residential properties decreased by approximately $0.3 million for the three months ended September 30, 2015 compared to 2014.
The following reflects our occupancy and rate information for The Lofts at Atlantic Wharf and The Avant at Reston Town Center for the three months ended September 30, 2015 and 2014. On March 17, 2015, we sold the Residences on The Avenue and therefore there is no information shown for the three months ended September 30, 2015.
  The Lofts at Atlantic Wharf Residences on The Avenue (1) The Avant at Reston Town Center (2)
  2015 2014 Percentage
Change		 2015 2014 Percentage
Change		 2015 2014 Percentage
Change
Average Physical Occupancy (3) 95.4% 96.9% (1.5)% N/A 91.7% N/A 94.4% 51.3% 84.0 %
Average Economic Occupancy (4) 97.1% 96.1% 1.0 % N/A 91.0% N/A 93.9% 46.8% 100.6 %
Average Monthly Rental Rate (5) $4,054
 $3,903
 3.9 % N/A $3,163
 N/A $2,264
 $2,268
 (0.2)%
Average Rental Rate Per Occupied Square Foot $4.53
 $4.36
 3.9 % N/A $3.88
 N/A $2.45
 $2.47
 (0.8)%
___________  
(1)
This property was sold during the first quarter of 2015. For the operating results refer to “Results of Operations—Properties Sold Portfolio” within “Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations”and Note 3 to the Consolidated Financial Statements.
(2)This property was initially placed in-service during the fourth quarter of 2013 and fully placed in-service during the first quarter of 2014.
(3)
Average Physical Occupancy is defined as the average number of occupied units divided by the total number of units, expressed as a percentage.

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(4)Average Economic Occupancy is defined as total possible revenue less vacancy loss as a percentage of total possible revenue. 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. Trends in market rents for a region as reported by others could vary. Market Rents for a period are based on the average Market Rents during that period and do not reflect any impact for cash concessions.
(5)
Average Monthly Rental Rates are calculated by us as rental revenue in accordance with GAAP, divided by the weighted monthly average number of occupied units.
Hotel Net Operating Income
Net operating income for the Boston Marriott Cambridge hotel property increased by approximately $0.2 million for the three months ended September 30, 2015 compared to 2014.
The following reflects our occupancy and rate information for the Boston Marriott Cambridge hotel for the three months ended September 30, 2015 and 2014.
  2015 2014 
Percentage
Change
Occupancy 86.8% 87.3% (0.6)%
Average daily rate $288.43
 $269.91
 6.9 %
Revenue per available room, REVPAR $250.41
 $235.51
 6.3 %
Development and Management Services
Development and management services income decreased approximately $0.6 million for the three months ended September 30, 2015 compared to 2014. Development income decreased by approximately $1.2 million, which was partially offset by an increase in management service income of approximately $0.6 million. The decrease in development income is primarily due to decreases in development fees from our Boston and Washington, DC third-party developments and our Washington, DC joint ventures. The increase in management service income is primarily due to service income that we have received from our tenants.
General and Administrative
General and administrative expenses decreasedincreased approximately $1.6$0.6 million for the three months ended September 30, 2015March 31, 2016 compared to 20142015 due primarily to a decreasean increase in overall compensation expense partially offset by anexpense.
Based on currently budgeted amounts, we expect general and administrative expenses for 2016 to be between $102 million and $107 million, which would be greater than the $96 million for 2015. This estimate assumes a cost-of-living adjustment, projected increase in taxes.the value of BXP’s deferred compensation plan and the impact of the issuance of a long-term compensation plan in February 2016. The projected increased expense associated with the long-term compensation plan is due to the difference between the unvested expense remaining from the 2013 MYLTIP Units compared to the expense that would be recognized during the first year of the new long-term compensation plan.
Wages directly related to the development and leasing of rental properties are capitalized and included in real estate assets or deferred charges on our Consolidated Balance Sheets and amortized over the useful lives of the real estate. Capitalized wages for the three months ended September 30,March 31, 2016 and 2015 and 2014 were approximately $4.1$4.3 million and $3.4$3.6 million, respectively. These costs are not included in the general and administrative expenses discussed above.
Transaction Costs
Transaction costs decreased approximately $1.1$0.3 million for the three months ended September 30, 2015March 31, 2016 compared to 2014.2015. Transaction costs for both periods wereare primarily related to the formation of several new and pending joint ventures, pending and completed asset sales and the pursuit of other transactions, including acquisitions.
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Other Income and Expense Items
Income from Unconsolidated Joint Ventures
For the three months ended September 30, 2015March 31, 2016 compared to 2014,2015, income from unconsolidated joint ventures decreased by approximately $1.8$13.0 million of which approximately $12.3 million was primarily due to a decrease in our share of the net income from 901 New York Avenue and approximately $1.7$0.7 million due to a decrease in our share of terminationnet income we received from a tenant at Metropolitan Square in Washington, DC duringour other joint ventures, particularly our Annapolis Junction joint venture. During the three months ended September 30, 2014 that didMarch 31, 2015, we received a distribution of approximately $24.5 million from our 901 New York Avenue joint venture, which was generated from the excess loan proceeds from the joint venture’s refinancing of its mortgage loan to a new 10-year mortgage loan totaling $225.0 million.  Our allocation of income and distributions for the three months ended March 31, 2015 was not recurproportionate to our nominal ownership interest as a result of the achievement of specified investment return thresholds, as provided for in 2015.the joint venture agreement.

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LossesGains from Investments in Securities
LossesGains from investments in securities for the three months ended September 30,March 31, 2016 and 2015 and 2014 related to investments that we have made to reduce our market risk relating to a deferred compensation plan that we maintain for Boston Properties, Inc.’sBXP’s officers. Under this deferred compensation plan, each officer who is eligible to participate is permitted to defer a portion of the officer’s current income 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. In order to reduce our market risk relating to this plan, 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. This enables us to generally match our liabilities to Boston Properties, Inc.’sBXP’s officers under the deferred compensation plan with equivalent assets and thereby limit our market risk. The performance of these investments is recorded as lossesgains from investments in securities. During the three months ended September 30,March 31, 2016 and 2015, and 2014, we recognized lossesgains of approximately $1.5$0.3 million and $0.3$0.4 million, respectively, on these investments. By comparison, our general and administrative expense decreasedincreased by approximately $1.5 $0.3 million and $0.3$0.4 million during the three months ended September 30,March 31, 2016 and 2015, and 2014, respectively, as a result of decreasesincreases in our liability under our deferred compensation plan that were associated with the performance of the specific investments selected by Boston Properties, Inc.’s officers of BXP participating in the plan.
Interest Expense
Interest expense decreased approximately $4.6$3.4 million for the three months ended September 30, 2015March 31, 2016 compared to 20142015 as detailed below:
Component Change in interest
expense for the three
months ended
September 30, 2015 compared
to September 30, 2014		 Change in interest
expense for the three
months ended
March 31, 2016
compared to
March 31, 2015
 (in thousands) (in thousands)
Increases to interest expense due to:    
Reduction in capitalized interest (1) $3,123
Issuance of $1.0 billion in aggregate principal of 3.650% senior notes due 2026 on January 20, 2016 $7,241
Increase in the interest for the Outside Members’ Notes Payable for 767 Fifth Avenue (the General Motors Building) (1) 850
Other interest expense (excluding senior notes) 54
 21
Total increases to interest expense $3,177
 8,112
Decreases to interest expense due to:    
Redemption of $300.0 million in aggregate principal of our 5.625% senior notes due 2015 on December 15, 2014 $(4,235)
Redemption of $250.0 million in aggregate principal of our 5.000% senior notes due 2015 on December 15, 2014 (3,213)
Defeasance of the mortgage loan collateralized by 100 & 200 Clarendon Street (formerly the John Hancock Tower and Garage) on December 15, 2015 (8,069)
Sale of 505 9th Street, N.W. on September 18, 2015 (310) (1,745)
Increase in capitalized interest (2) (1,303)
Repayment of mortgage financings (3) (443)
Total decreases to interest expense $(7,758) (11,560)
Total change in interest expense $(4,581) $(3,448)
___________ 
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(1)The related interest expense from the Outside Members’ Notes Payable totaled approximately $8.2 million and $7.4 million for the three months ended March 31, 2016 and 2015, respectively. These amounts are fully allocated to the outside joint venture partners as an adjustment to Noncontrolling Interests in Property Partnerships in our Consolidated Statements of Operations.
(2)
The decreaseincrease was primarily due to the completioncommencement and continuation of several development projects. For a list of developments placed in-serviceprojects refer to “Results of Operations—Properties Placed In-Service Portfolio”Liquidity and Capital Resources” within “Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations.”.
(3)Includes the repayment of Kingstowne Two and Kingstowne Retail.
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. As properties are placed in-service, we cease capitalizing interest and interest is then expensed. Interest capitalized for the three months ended September 30,March 31, 2016 and 2015 and 2014 was approximately $9.1$9.3 million and $12.2$8.0 million,, respectively. These costs are not included in the interest expense referenced above.
We anticipate interest expense for 2016 will be approximately $400 million to $415 million. This amount is net of approximately $40 million to $50 million of projected capitalized interest. These estimates also assume we will not incur any additional indebtedness, make additional prepayments or repurchases of existing indebtedness and that there will not be any fluctuations in interest rates or any changes in our development activity. These estimates also do not include any additional interest expense we could incur related to the settlement of BPLP’s outstanding derivative agreements. If we elect to prepay or repurchase existing indebtedness prior to its maturity, we may incur prepayment penalties or recognize the acceleration of amortized costs, or both.
At September 30, 2015,March 31, 2016, our variable rate debt consisted of ourBPLP’s $1.0 billion Unsecured Line of Credit, of which no amount was outstanding at September 30, 2015.March 31, 2016. For a summary of our consolidated debt as of September 30,March 31, 2016 and March 31, 2015 and September 30, 2014 refer to the heading “Liquidity and Capital Resources—Capitalization—Debt Financing” within “Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

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Gains on Sales of Real Estate
On September 18, 2015, a consolidated entity in which we have a 50% interest completed the sale of its 505 9th Street, N.W. property located in Washington, DC for approximately $318.0 million, including the assumption by the buyer of approximately $117.0 million of mortgage indebtedness.  Net cash proceeds totaled approximately $194.6 million, of which our share was approximately $97.3 million. We recognized a gainGains on salesales of real estate totalingfor the Total Property Portfolio decreased approximately $199.7$27.5 million of which approximately $101.1and $25.3 million was allocated tofor BXP and BPLP, respectively for the outside partnersthree months ended March 31, 2016 and is included within Noncontrolling Interests in Property Partnerships in our Consolidated Statements of Operations. 505 9th Street, N.W. is an approximately 322,000 net rentable square foot Class A office building. 2015 as detailed below.
On July 29, 2014, we completed the sale of our Mountain View Technology Park properties and Mountain View Research Park Building Sixteen property located in Mountain View, California for an aggregate sale price of approximately $92.1 million. Net cash proceeds totaled approximately $91.2 million, resulting in a gain on sale of real estate totaling approximately $36.4 million. Mountain View Technology Park is a seven-building complex of Office/Technical properties aggregating approximately 135,000 net rentable square feet. Mountain View Research Park Building Sixteen is an Office/Technical property with approximately 63,000 net rentable square feet.
On August 20, 2014, a portion of the land parcel at our One Reston Overlook property located in Reston, Virginia was taken by eminent domain. Net cash proceeds totaled approximately $2.6 million, resulting in a gain on sale of real estate totaling approximately $1.2 million.
Name Date sold Property Type Square Feet (sf) / Acres Sale Price Cash Proceeds BXP’s Gain on Sale of Real Estate (1) 
        (dollars in millions) 
2016             
415 Main Street February 1, 2016 Office 231,000 sf $105.4
 $104.9
 $60.8
 
    $105.4
 $104.9
 $60.8
(2)
2015             
Washingtonian North February 19, 2015 Land 8.5 acres $8.7
 $8.3
 $3.7
 
Residences on The Avenue (3) March 17, 2015 Residential 323,050 sf 196.0
 192.5
 91.4
 
        $204.7
 $200.8
 $95.1
 
On August 22, 2014, we completed the sale of a parcel of land within our Broad Run Business Park property located in Loudoun County, Virginia for a sale price of approximately $9.8 million. Net cash proceeds totaled approximately $9.7 million, resulting in a gain on sale of real estate totaling approximately $4.3 million. The parcel is an approximately 15.5 acre land parcel subject to a ground lease that was scheduled to expire on October 31, 2048 with a tenant that exercised its purchase option under the ground lease.___________  
(1)With the exception of 415 Main Street, the gains on sales of real estate were the same for BXP and BPLP. The gain on sale of real estate for BPLP was $63.0 million for 415 Main Street. For additional information about the differences between BXP and BPLP, see the Explanatory Note.
(2)Excludes approximately $6.8 million of a gain on sale of real estate recognized during the three months ended March 31, 2016 related to previously deferred gain amounts from the 2014 sale of Patriots Park.
(3)This property has 335 apartment units and approximately 50,000 net rentable square feet of retail space. We have agreed to provide net operating income support of up to $6.0 million should the property’s net operating income fail to achieve certain thresholds, which has been recorded as a reduction to the gain on sale. This property was subject to a ground lease that expires on February 1, 2068.
Noncontrolling interests in property partnerships
Noncontrolling interests in property partnerships increaseddecreased by approximately $109.7$4.7 million for the three months ended September 30, 2015March 31, 2016 compared to 20142015 as detailed below.
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Property Date of Consolidation Partners’ noncontrolling interests for the three months ended September 30, Date of Consolidation 
Partners’ noncontrolling interests for the three months ended March 31,
2015 2014 Change2016 2015 Change
 (in thousands) (in thousands)
505 9th Street (1) October 1, 2007 $102,224
 $562
 $101,662
 October 1, 2007 $—
 $668
 $(668)
Fountain Square (2) October 4, 2012 680
 2,327
 (1,647) October 4, 2012 —
 2,228
 (2,228)
767 Fifth Avenue (the General Motors Building) (3) May 31, 2013 (3,308) (3,789) 481
 May 31, 2013 (4,694) (2,786) (1,908)
Times Square Tower October 9, 2013 6,511
 6,466
 45
 October 9, 2013 6,836
 6,755
 81
601 Lexington Avenue October 30, 2014 5,857
 —
 5,857
 October 30, 2014 5,224
 5,106
 118
100 Federal Street October 30, 2014 975
 —
 975
 October 30, 2014 782
 888
 (106)
Atlantic Wharf Office October 30, 2014 2,301
 —
 2,301
 October 30, 2014 2,316
 2,349
 (33)
 $115,240
 $5,566
 $109,674
 $10,464
 $15,208
 $(4,744)
___________
(1)
On September 18, 2015, we recognized a gain on sale of real estate totaling approximately $199.7 million, of which approximately $101.1 million was allocated to the outside partnerssold this property (See Notes 3, 5 andNote 8 to the Consolidated Financial Statements).
(2)On August 6,September 15, 2015, the parties amended the joint venture agreement to require us to acquirewe acquired our partner'spartners’ nominal 50% interest on September 15, 2015 for approximately $100.9 million in cash. As a result, we stopped accreting the changes in the redemption value through the Consolidated Statement of Operations as of August 6, 2015 (See Note 8 to the Consolidated Financial Statements).
(3)
The net loss allocation is primarily due to the partners'partners’ share of the interest expense for the outside members’ notes payable, which was $7.8$8.2 million and $7.1$7.4 million for the three months ended September 30,March 31, 2016 and 2015, and 2014, respectively.

Noncontrolling Interest—Common Units of the Operating Partnership
56For BXP, noncontrolling interest–common units of the Operating Partnership increased by approximately $1.2 million for the three months ended March 31, 2016 compared to 2015 due primarily to an increase in allocable income partially offset by a decrease in the noncontrolling interest’s ownership percentage. Due to our ownership structure, there is no corresponding line item on BPLP’s financial statements.
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Liquidity and Capital Resources
General
Our principal liquidity needs for the next twelve months and beyond are to:
fund normal recurring expenses;
meet debt service and principal repayment obligations, including balloon payments on maturing debt;
fund capital expenditures, including major renovations, tenant improvements and leasing costs;
fund development costs;
fund possible property acquisitions;
fund distributiondividend requirements on ourBXP’s Series B Preferred Units;Stock;
fund possible property acquisitions; and
make the minimum distribution required to enable Boston Properties, Inc.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;
issuances of BXP equity securities and/or additional preferred or common units of partnership interest in BPLP;
BPLP’s Unsecured Line of Credit and other short-term bridge facilities;
construction loans;
long-term secured and unsecured indebtedness (including unsecured exchangeable indebtedness);
issuances of Boston Properties, Inc.’s equity securities and/or proceeds from issuances of our preferred or common units;
our Unsecured Line of Credit or other short-term bridge facilities; and
sales of real estate or ownership interests in our assets.estate.
We draw on multiple financing sources to fund our long-term capital needs. Our current consolidated development properties are expected to be funded with our available cash balances. OurBPLP’s Unsecured Line of Credit is utilized primarily as a bridge facility to fund acquisition opportunities, refinance outstanding indebtedness and meet short-term development and working capital needs. Although we may seek to fund our development projects with construction loans, which may be guaranteed by us,BPLP, the financing for each particular project ultimately depends on several factors, including, among others, the project’s size and duration, the extent of pre-leasing and our available cash and access to cost effective capital at the given time.

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The following table presents information on properties under construction as of September 30, 2015March 31, 2016 (dollars in thousands):
 
Construction Properties
Estimated
Stabilization Date
 Location 
# of
Buildings
 
Estimated Square
Feet
 
Investment
to Date
(1)
 
Estimated
Total
Investment
(1)
 Percentage Leased (2) 
Estimated
Stabilization Date
 Location 
# of
Buildings
 
Estimated Square
Feet
 
Investment
to Date (1)
 
Estimated Total
Investment(1)
 
Percentage
Leased (2)
 
Office                         
690 Folsom Street (3)First Quarter, 2016 San Francisco, CA 1
 26,080
 $14,671
 $17,900
 100% 
804 Carnegie CenterFirst Quarter, 2016 Princeton, NJ 1
 130,000
 30,504
 47,000
 100% Second Quarter, 2016 Princeton, NJ 1
 130,000
 $44,644
 $47,000
 100% 
The Point (formerly 99 Third Avenue Retail) (4)Second Quarter, 2016 Waltham, MA 1
 16,500
 16,335
 16,900
 84% 
535 Mission Street (5)Third Quarter, 2016 San Francisco, CA 1
 307,000
 190,507
 215,000
 89% 
1265 Main Street (50% ownership)Fourth Quarter, 2016 Waltham, MA 1
 115,000
 7,995
 26,090
 100% Fourth Quarter, 2016 Waltham, MA 1
 115,000
 16,955
 26,090
 100% 
Prudential Center Retail ExpansionFourth Quarter, 2016 Boston, MA —
 15,000
 9,331
 9,980
 100% First Quarter, 2017 Boston, MA —
 15,000
 9,252
 10,760
 100% 
Annapolis Junction Building Eight (50% ownership) (6)First Quarter, 2017 Annapolis, MD 1
 125,000
 12,216
 18,500
 —% 
601 Massachusetts Avenue (3)First Quarter, 2017 Washington, DC 1
 478,000
 301,454
 339,760
 90% 
10 CityPointSecond Quarter, 2017 Waltham, MA 1
 245,000
 56,831
 100,400
 82% Second Quarter, 2017 Waltham, MA 1
 245,000
 78,046
 100,400
 96% 
601 Massachusetts Avenue (7)Fourth Quarter, 2017 Washington, DC 1
 478,000
 298,357
 360,760
 87% 
888 Boylston StreetFourth Quarter, 2017 Boston, MA 1
 425,000
 116,029
 271,500
 68% Fourth Quarter, 2017 Boston, MA 1
 425,000
 187,127
 271,500
 69% 
Salesforce Tower (95% ownership)First Quarter, 2019 San Francisco, CA 1
 1,400,000
 404,171
 1,073,500
 51% First Quarter, 2019 San Francisco, CA 1
 1,400,000
 488,458
 1,073,500
 59% 
Dock72 at the Brooklyn Navy Yard (50% ownership)First Quarter, 2020 Brooklyn, NY 1
 670,000
 10,064
 204,900
 33% 
The Hub on CausewayFourth Quarter, 2019 Boston , MA 1
 385,000
 13,961
 141,870
 33% 
Dock72 (50% ownership)First Quarter, 2020 Brooklyn, NY 1
 670,000
 14,583
 204,900
 33% 
Total Office Properties under ConstructionTotal Office Properties under Construction 11
 3,952,580
 $1,167,011
 $2,362,430
 61% Total Office Properties under Construction 8
 3,863,000
 1,154,480
 2,215,780
 62% 
Residential                     
Cambridge Residential / 88 Ames (274 units)First Quarter, 2019 Cambridge, MA 1
 164,000
 $7,025
 $140,170
 N/A
 First Quarter, 2019 Cambridge, MA 1
 164,000
 12,117
 140,170
 N/A
 
Reston Signature Site (508 units)Second Quarter, 2020 Reston, VA 1
 514,000
 23,059
 217,232
 N/A
 Second Quarter, 2020 Reston, VA 1
 490,000
 32,585
 217,232
 N/A
 
Reston Signature Site - Retail —
 24,600
 —
 —
 81% 
Total Residential Properties under ConstructionTotal Residential Properties under Construction 2
 678,000
 $30,084
 $357,402
 N/A
 Total Residential Properties under Construction 2
 678,600
 44,702
 357,402
 59%(4)
Redevelopment Properties                     
Reservoir Place NorthFirst Quarter, 2017 Waltham, MA 1
 73,000
 $3,258
 $24,510
 —% Third Quarter, 2017 Waltham, MA 1
 73,000
 13,411
 24,510
 —% 
Total Properties under Construction and RedevelopmentTotal Properties under Construction and Redevelopment 14
 4,703,580
 $1,200,353
 $2,744,342
 59%(8)Total Properties under Construction and Redevelopment 11
 4,614,600
 $1,212,593
 $2,597,692
 61%(4)
___________  
(1)Represents our share. Includes net revenue during lease up period, acquisition expenses and approximately $93.4$57.0 million of construction cost and leasing commission accruals.
(2)Represents percentage leased as of NovemberMay 2, 2015,2016, includes leases with future commencement dates.
(3)As of NovemberMay 2, 2015,2016, this property was 55%84% placed in-service.
(4)As of November 2, 2015, this property was 39% placed in-service.
(5)As of November 2, 2015, this property was 66% placed in-service.
(6)This project has a construction loan.
(7)As of November 2, 2015, this property was 81% placed in-service.
(8)Includes approximately 33,0009,000 square feet of retail space from residential developmentsthe Cambridge Residential / 88 Ames development which is 0% leased.

Contractual rental revenue, recoveries from tenants, other income from operations, available cash balances and draws on ourBPLP’s Unsecured Line of Credit are our principal sources of capital used to pay operating expenses, debt service, recurring capital expenditures, tenant improvements and the minimum distribution required to enable Boston Properties, Inc.BXP to maintain its REIT qualification. We seek to maximize income from our existing properties by maintaining quality standards for our properties that promote high occupancy rates and permit increases in rental rates while reducing tenant turnover and controlling operating expenses. Our sources of revenue also include third-party fees generated by our property management, leasing, and development and construction businesses, as well as the sale of assets from time to time. We believe our revenue, together with our cash balances and proceeds from financing activities, will continue to provide the necessary funds for our short-term liquidity needs.
Material adverse changes in one or more sources of capital may adversely affect our net cash flows. Such changes, in turn, could adversely affect our ability to fund operating expenses, dividends and distributions, debt service payments, recurring capital expenditures and tenant improvements. In addition, a

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material adverse change in the cash provided by our operations may affect our ability to comply with the financial covenants under ourBPLP’s Unsecured Line of Credit and unsecured senior notes.
In 2015, we commenced new development projects with an aggregate estimated total investment
Table of approximately $843.9 million (of which our share is approximately $612.9 million). Contents

Our primary uses of capital will be the completion of our ongoingcurrent developments, which, through 2020, have remaining costs to fund of approximately $1.8$1.4 billion, (of which our share is approximately $1.5 billion),as of March 31, 2016 and our 2016 and 2017 debt maturities, which are discussed below.  As of September 30, 2015, we hadWith approximately $1.4$1.2 billion of cash and cash equivalents and approximately $983.9 million available under BPLP’s Unsecured Line of Credit, as of May 2, 2016, we have sufficient capital to complete these developments on our Consolidated Balance Sheet.developments.  We believe that our strong liquidity, including available cash as of November 2, 2015 of approximately $1.0 billion and the approximately $970.0 million availableour availability under ourBPLP’s Unsecured Line of Credit, and proceeds from potentialdebt financings and asset sales and debt financings provide sufficient liquidity to fund our remaining capital requirements on existing development projects and pursue additional attractive investment opportunities.opportunities, including new developments.  We also have full availability under ourBXP’s $600 million ATMat-the-market equity offering program.
Although, we have noWe remain focused on our upcoming debt maturities in 2016 and 2017. Our consolidated debt maturities through the remainderend of 2015, we are focused on our maturities in 2016 and 2017 which, excluding the repayment of Kingstowne Two and Kingstowne Retail which occurred on October 1, 2015, consist of eight mortgagefour mortgage/mezzanine loans totaling approximately $3.5$2.7 billion (of which our share of the consolidated and unconsolidated joint venturesentities is approximately $2.9$2.1 billion). These loans have a weighted-average coupon/stated interest rate of approximately 5.8%5.93% per annum. In this regard, we continue to evaluate costs associated with an early refinancingannum and a GAAP interest rate of existing mortgage debt, or a portion of these maturities, which may result in the incurrance of related prepayment penalties and the acceleration of unamortized costs.approximately 4.19% per annum.
To reduce the risk associated with potential future interest rate increases, we haveBPLP has entered into seventeen forward-starting interest rate swap contracts including one subsequent to September 30, 2015, whichthat fix the 10-year swap rate at a weighted-average rate of 2.423% per annum on notional amounts aggregating $550 million. These swaps are targeting the refinancing of our $750 million mortgage loan at 599 Lexington Avenue in New York, which has a maturity date of March 1, 2017, and can be prepaid without penalty beginning in September 2016.
In addition, 767 Fifth Partners LLC, which is the consolidated entity in which we have a 60% interest and owns 767 Fifth Avenue (the General Motors Building) in New York City, entered into ten forward-starting interest rate swap contracts including one subsequent to September 30, 2015, whichthat fix the 10-year swap rate at a weighted-average rate of approximately 2.762%2.619% per annum on notional amounts aggregating $275$450 million. These swaps are targeting the refinancing of the property’s mortgage loans totaling $1.6 billion that mature on October 7, 2017 but can be prepaid without penalty beginning in June 2017.
The secured debt markets for high-quality stabilized properties in strong locations remain attractive. The bond market has experienced some rate and spread volatility over the past few months from global events but debt issuancescontinues to operate efficiently, and high-quality borrowers like us continue to be well receivedhave access as demonstrated by BPLP’s January 2016 issuance of $1.0 billion aggregate principal amount of 3.650% senior unsecured notes due 2026 yielding an effective interest rate (including financing fees) of 3.766%.
Our asset sale strategy and the delivery of development properties at superior yields have resulted in both the publica reduction in our leverage position. As our new development deliveries stabilize, we expect these ratios to continue to improve and private marketscreate additional investment capacity for new developments and we believe our current borrowing cost for unsecured senior notes having a maturity in 10 years is attractive and less than 4% per annum. In order to reduce future cash interest payments, as well as future amounts due at maturity or upon redemption, we may also, from time to time, purchase unsecured senior notes for cash in open market purchases or privately negotiated transactions, or both. We will evaluate any such potential transactions in light of then-existing market conditions, taking into account the trading prices of the notes, our current liquidity and prospects for future access to capital.acquisition opportunities.
REIT Tax Distribution Considerations
DistributionsDividend
Boston Properties, Inc., asAs a REIT, BXP is subject to a number of organizational and operational requirements, including a requirement that itBXP currently distribute at least 90% of its annual taxable income. Boston Properties, Inc.’sincome (excluding capital gains and with certain other adjustments). Our policy is for BXP to distribute at least 100% of its taxable income, including capital gains, to avoid paying federal tax. On December 8, 2014, Boston Properties, Inc., as our general partner, announced that its17, 2015, BXP’s Board of Directors declared a special cash distributiondividend of $4.50$1.25 per unit payablecommon share paid on January 28, 20152016 to common and LTIP unitholdersshareholders of record as of the close of business on December 31, 2014.2015. The decision to declare a special distributiondividend was primarily a result of the taxable gains associated with the sale of approximately $2.3 billion$584 million of assets during 2014, partially offset by our election to deduct costs that were capitalized in prior years that may now be deducted under the new Tangible Property Regulations, discussed below. Boston Properties, Inc.'s2015. The Board of Directors did not make any change into its policy with respect to our regular quarterly distributions. Boston Properties, Inc.’sdividends. Common and LTIP unitholders of limited partnership interest in BPLP, as of the close of business on December 31, 2015, received the same total distribution per unit, on January 28, 2016.
BXP’s Board of Directors will continue to evaluate our distributionBXP’s dividend rate in light of our actual and projected taxable income, liquidity requirements and other circumstances, and there can be no assurance that the future distributionsdividends declared by Boston Properties, Inc.’sits Board of Directors will not differ materially (See“Application of Recent Regulations”and“Sales”below).materially.

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Application of Recent Regulations
In September 2013, the Internal Revenue Service released final regulations governing when taxpayers like us must capitalize and depreciate costs for acquiring, maintaining, repairing and replacing tangible property and when they can deduct such costs.  These final regulations are effective for tax years beginning on or after January 1, 2014. These regulations permitted us to deduct certain types of expenditures that were previously required to be capitalized by us. They also allowed us to make a one-time election to immediately deduct certain amounts that were capitalized in previous years that are not required to be capitalized under the new regulations.  We analyzed how the application of the new regulations affects our business and decided to make the election for the 2014 tax year. Although such an election did not have a materialhad an immaterial impact on our GAAP financial statements orand Funds from Operations, it materially reduced our taxable income and therefore Boston Properties, Inc.'sBXP’s dividend payout
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requirements under applicable REIT tax regulations for 2014. It also could have an impact on Boston Properties, Inc.'sBXP’s dividend payout requirements in subsequentfuture years, as the amounts deducted in 2014 will no longer be depreciated over time, and amounts expended and deducted in future periods will vary, potentially resulting in more variation in Boston Properties, Inc.'sour distribution requirement from year to year depending on our annual cost of now-deductible expenditures that previously would have been capitalized.  Although Boston Properties, Inc.BXP made the election for tax year 2014, there can be no assurance concerning the impact, if any, on the dividends declared by Boston Properties, Inc.'sthe Board of Directors of BXP in subsequentfuture taxable years.
Sales
To the extent that we sell assets at a taxable gain and cannot efficiently use the proceeds in a tax deferred manner for either our development activities or attractive acquisitions, Boston Properties, Inc., our general partner,BXP would, at the appropriate time, decide whether it is better to declare a special distribution,dividend, adopt a stock repurchase program, reduce our 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 Boston Properties, Inc.’sBXP’s common stock and REIT distribution requirements. At a minimum, we expect that weBXP would distribute at least that amount of proceeds necessary for Boston Properties, Inc.BXP to avoid paying corporate level tax on the applicable gains realized from any asset sales.
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 were approximately $1.4$1.6 billion and $0.8$1.1 billion at September 30,March 31, 2016 and 2015, and 2014, respectively, representing an increase of approximately $0.6 billion.$0.5 billion. The following table sets forth changes in cash flows:
Nine months ended September 30,Three months ended March 31,
2015 2014 Increase
(Decrease)		2016 2015 
Increase
(Decrease)
(in thousands)
Net cash provided by operating activities$608,878
 $469,677
 $139,201
$348,980
 $201,446
 $147,534
Net cash provided by (used in) investing activities398,801
 (488,256) 887,057
(109,357) 2,725
 (112,082)
Net cash used in financing activities(1,383,751) (1,499,894) 116,143
Net cash provided by (used in) financing activities642,337
 (902,854) 1,545,191

Our principal source of cash flow is related to the operation of our properties. The average term of our in-place tenant leases, including our unconsolidated joint ventures, is approximately 6.97.1 years with occupancy rates historically in the range of 90% to 94%. Our properties generate a relatively consistent stream of cash flow that provides us with resources to pay operating expenses, debt service and fund 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, secured and unsecured borrowings and equity offerings by Boston Properties, Inc.of BXP.
For the ninethree months ended September 30,March 31, 2015, our total dividend/distribution payments exceeded our cash flow from operating activities due to the special dividend/distribution which was declared in December 2014 and paid to common stockholders of BXP and common unitholders of BPLP in January 2015. The cash flows distributed were primarily a result of the taxable gains associated with the sale of approximately $2.3 billion of assets during 2014 partially offset by our election to deduct costs that were capitalized in prior years that may now be deducted under the new Tangible Property Regulations and were included as part of cash flows provided by financing

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activities. Dividends/Distributions will generally exceed cash flows from operating activities during periods in which we sell significant real estate assets and the distribution of gains occurs in a different period.
Cash is provided by (used in) investing activities to fund acquisitions, development, net investments in unconsolidated joint ventures and recurring and nonrecurring 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 their market position. Cash used in investing activities for the three months ended March 31, 2016 consisted primarily of development projects and tenant improvements partially offset by the proceeds from the sale of real estate. Cash provided by investing activities for the ninethree months ended September 30,March 31, 2015 consisted primarily of the proceeds from the sales of real estate partially offset by funding of our development projects. Cash used in investing activities for the nine months ended September 30, 2014 consisted primarily of funding our development projects, as detailed below:
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 Nine months ended September 30,
 2015 2014
 (in thousands)
Construction in progress (1)$(251,984) $(305,192)
Building and other capital improvements(84,644) (57,329)
Tenant improvements(86,052) (80,692)
Proceeds from the sales of real estate (2)389,457
 103,542
Proceeds from sales of real estate placed in escrow (2)(200,612) (99,917)
Proceeds from sales of real estate released from escrow (2)634,165
 —
Cash placed in escrow for land sale contracts(7,111) —
Cash released from escrow for land sale contracts3,250
 —
Capital contributions to unconsolidated joint ventures (3)(20,863) (47,767)
Capital distributions from unconsolidated joint ventures (4)24,527
 641
Investments in securities, net(1,332) (1,542)
Net cash provided by (used in) investing activities$398,801
 $(488,256)

 Three months ended March 31,
 2016 2015
 (in thousands)
Construction in progress (1)$(122,940) $(60,013)
Building and other capital improvements(25,329) (19,391)
Tenant improvements(55,739) (26,950)
Proceeds from the sales of real estate (2)104,816
 194,821
Proceeds from sales of real estate placed in escrow (2)(104,696) (201,857)
Proceeds from sales of real estate released from escrow (2)104,696
 99,916
Cash released from escrow for land sale contracts488
 —
Deposit on real estate—
 (5,000)
Capital contributions to unconsolidated joint ventures (3)(10,215) (2,444)
Capital distributions from unconsolidated joint ventures (4)—
 24,527
Investments in securities, net(438) (884)
Net cash provided by (used in) investing activities$(109,357) $2,725
___________  
(1)Construction in progress for the ninethree months ended September 30, 2014March 31, 2016 includes ongoing expenditures associated with The Avant at Reston Town Center, 250 West 55th Street and 680 Folsom Street,601 Massachusetts Avenue, which were fully orwas partially placed in-service during the ninethree months ended September 30, 2014.March 31, 2016. In addition, we incurred costs associated with our continued development of 535 Mission Street, 601 Massachusetts Avenue, 804 Carnegie Center, Salesforce Tower, 888 Boylston Street, 10 CityPoint, The Point (formerly 99 Third Avenue Retail)the Prudential Center retail expansion and 690 Folsom Street.Cambridge and Reston Signature Site residential projects.

Construction in progress for the ninethree months ended September 30,March 31, 2015 includes ongoing expenditures associated with 690 Folsom Street and 535 Mission Street, 601 Massachusetts Avenue and The Point (formerly 99 Third Avenue Retail), which were partially placed in-service during the ninethree months ended September 30,March 31, 2015. In addition, we incurred costs associated with our continued development of 601 Massachusetts Avenue, 804 Carnegie Center, Salesforce Tower, 888 Boylston Street, 10 CityPoint, The Point, (formerly 99 Third Avenue Retail) and the Prudential Center retail expansion and Cambridge and Reston Signature Site residential projects.expansion.
(2)On September 18, 2015, a consolidated entity in whichFebruary 1, 2016, we have a 50% interest completed the sale of its 505 9thour 415 Main Street N.W. property located in Washington, DCCambridge, Massachusetts to the tenant for approximately $318.0 million, including the assumption by the buyera gross sale price of approximately $117.0 million of mortgage indebtedness.$105.4 million.  Net cash proceeds totaled approximately $194.6 million, of which our share was approximately $97.3$104.9 million.
On March 17, 2015, we completed the sale of our Residences on The Avenue property located in Washington, DC for a gross sale price of $196.0 million. Net cash proceeds totaled approximately $192.5 million, resulting in a gain on sale of real estate totaling approximately $91.4 million. We have agreed to provide net operating income support of up to $6.0 million should the property’s net operating income fail to achieve certain thresholds, which has been recorded as a reduction to the gain on sale. As of September 30, 2015, we have released from escrow approximately $192.3 million of the proceeds that were being held for possible investment in a like-kind exchange in accordance with Section 1031 of the Internal Revenue Code.
On February 19, 2015, we completed the sale of a parcel of land within our Washingtonian North property located in Gaithersburg, Maryland for a gross sale price of $8.7 million. Net cash proceeds totaled approximately $8.3 million. As of September 30, 2015, we hadWe have released from escrow approximately $8.3 million of the proceeds that were being held for possible investment in a like-kind exchange in accordance with Section 1031 of the Internal Revenue Code.

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On October 24, 2014, we completed the sale of a parcel of land at 130 Third Avenue in Waltham, Massachusetts for a sale price of approximately $14.3 million. Net cash proceeds totaled approximately $13.6 million. As of September 30, 2015, we had released from escrow approximately $13.6 million of the proceeds that were being held for possible investment in a like-kind exchange in accordance with Section 1031 of the Internal Revenue Code.
On October 2, 2014, we completed the sale of Patriots Park located in Reston, Virginia for a gross sale price of $321.0 million. Net cash proceeds totaled approximately $319.1 million.  As of September 30, 2015, we had released from escrow approximately $320.0 million of the proceeds that were being held for possible investment in a like-kind exchange in accordance with Section 1031 of the Internal Revenue Code.
On August 22, 2014, we completed the sale of a parcel of land within our Broad Run Business Park property located in Loudoun County, Virginia for a sale price of approximately $9.8 million. Net cash proceeds totaled approximately $9.7 million. As of September 30, 2015, we had released from escrow approximately $9.7 million of the proceeds that were being held for possible investment in a like-kind exchange in accordance with Section 1031 of the Internal Revenue Code.
On August 20, 2014, a portion of the land parcel at our One Reston Overlook property located in Reston, Virginia was taken by eminent domain. Net cash proceeds totaled approximately $2.6 million, resulting in a gain on sale of real estate totaling approximately $1.2 million.
On July 29, 2014, we completed the sale of our Mountain View Technology Park properties and Mountain View Research Park Building Sixteen property located in Mountain View, California for an aggregate sale price of approximately $92.1 million. Net cash proceeds totaled approximately $91.2 million. As of September 30, 2015, we had released from escrow approximately $90.2 million of the proceeds that were being held for possible investment in a like-kind exchange in accordance with Section 1031 of the Internal Revenue Code.
(3)Capital contributions to unconsolidated joint ventures for the ninethree months ended September 30, 2015March 31, 2016 were primarily due to cash contributions of approximately $5.3 million, $4.2$5.4 million and $10.3$4.2 million to our North Station (Phase I - Air Rights),Hub on Causeway and 1265 Main Street and Dock72 at the Brooklyn Navy Yard joint ventures, respectively.
Capital contributions to unconsolidated joint ventures for the nine months ended September 30, 2014 were primarily due to cash contributions of approximately $39.0 million and approximately $5.4 million to our 1001 6th Street (formerly 501 K Street) and Annapolis Junction joint ventures, respectively.
(4)Capital distributions from unconsolidated joint ventures increaseddecreased due to a distribution made by the joint venture that owns 901 New York Avenue located in Washington, DC. During the ninethree months ended September 30,March 31, 2015, we received a distribution of approximately $24.5 million, which was generated from the excess loan proceeds from the joint venture’s refinancing of its mortgage loan to a new 10-year mortgage loan totaling $225.0 million.  Our allocation of income and distributions for the ninethree months ended September 30,March 31, 2015 was not proportionate to our nominal ownership interest as a result of the achievement of specified investment return thresholds, as provided for in the joint venture agreement.

Cash used inprovided by financing activities for the ninethree months ended September 30, 2015March 31, 2016 totaled approximately $1.4$0.6 billion. This consisted primarily of the issuance of BPLP’s $1.0 billion in aggregate principal amount of its 3.650% senior unsecured notes due 2026 partially offset by the payments of regular and special dividends and distributions to our shareholders and unitholders. Future debt payments are discussed below under the heading “Capitalization—Debt Financing.”
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Capitalization
At September 30, 2015,March 31, 2016, our total consolidated debt was approximately $9.7 billion.$10.0 billion. The GAAP weighted-average annual interest rate on our consolidated indebtedness was 4.40%4.29% (with a coupon/stated rate of 4.97%4.79%) and the weighted-average maturity was approximately 4.34.6 years.
ConsolidatedThe following table presents total consolidated and adjusted market capitalization as well as the corresponding ratio of total and adjusted debt to total consolidatedand adjusted market capitalization (dollars in thousands):
  March 31, 2016 
  Shares / Units Outstanding Common Stock Equivalent Equivalent Value (1) 
Common Stock 153,604,966
 153,604,966
 $19,520,119
(2)
Common Operating Partnership Units 18,157,634
 18,157,634
 2,307,472
(3)
5.25% Series B Cumulative Redeemable Preferred Stock 80,000
 —
 200,000
(4)
Total Equity   171,762,600
 $22,027,591
 
Total Consolidated Debt   

 9,980,366
 
Total Consolidated Market Capitalization     $32,007,957
 
        
Total Equity     $22,027,591
 
Total Adjusted Debt     9,349,468
 
Total Adjusted Market Capitalization     $31,377,059
 
Total Debt/Total Market Capitalization     31.18% 
Total Adjusted Debt/Total Adjusted Market Capitalization     29.80% 
_______________  
(1)Values based on March 31, 2016 closing price of $127.08, except for BXP’s shares of Series B Cumulative Redeemable Preferred Stock which have been valued at the liquidation preference of $2,500.00 per share (see Note 4 below).
(2)As of March 31, 2016 includes 59,875 shares of restricted stock.
(3)Includes 2,065,185 long-term incentive plan units (including 215,709 2012 OPP Units and 103,882 2013 MYLTIP Units), but excludes an aggregate of 1,317,950 MYLTIP Units granted between 2014 and 2016.
(4)On or after March 27, 2018, BXP, at its option, may redeem the Series B Preferred Stock for a cash redemption price of $2,500.00 per share ($25.00 per depositary share), plus all accrued and unpaid dividends. The Series B Preferred Stock is not redeemable by the holders, has no maturity date and is not convertible into or exchangeable for any other security of BXP or any of its affiliates.

Total adjusted debt to total adjusted market capitalization ratio, defined as total consolidated debt as a percentage of the value of our outstanding equity securities plus our total consolidated debt, is a measure of leverage commonly used by analysts in the REIT sector. Our total consolidated market capitalization was approximately $30.2 billion at September 30, 2015. Our total consolidated market capitalization was calculated using Boston Properties, Inc.'s September 30, 2015 closing stock price of $118.40 per common share and the following: (1) 169,672,073 outstanding common units of limited partnership interest (including 153,574,600 units held by Boston Properties, Inc.), (2) an aggregate of 1,620,226 common units issuable upon conversion of all outstanding LTIP Units, assuming all conditions have been met for the conversion of the LTIP Units, (3)216,854 2012 OPP Units that were issued in the form of LTIP Units and earned as of February 6, 2015, (4) 80,000 Series B Preferred Units, at a price of $2,500 per unit, and (5) our consolidated debt totaling approximately $9.7 billion. At

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September 30, 2015, our total consolidated debt, which excludes debt collateralized by our unconsolidated joint ventures, represented approximately 32.18% of our total consolidated market capitalization.
Following the consolidation of 767 Venture, LLC (the entity that owns 767 Fifth Avenue (the General Motors Building)), effective June 1, 2013, our consolidated debt increased significantly compared to prior periods even though our economic interest in 767 Venture, LLC remained substantially unchanged. As a result, we believe the presentation of total adjusted debt may provide investors with a more complete picture of our share of consolidated and unconsolidated debt. Total adjusted debt is defined as(which equals our total consolidated debt, plus our share of unconsolidated joint venture debt, minus our joint venture partners’ share of consolidated debt) as a percentage of the market value of BXP’s outstanding equity securities plus our total adjusted debt, and was approximately $9.1 billion at September 30, 2015.is an alternative measure of leverage used by some analysts in the REIT sector. For a tabular reconciliation refer to “Liquidity and Capital Resources—Capitalization—Debt Financing” within “Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
We present this ratio because, following the consolidation of 767 Venture, LLC (the entity that owns 767 Fifth Avenue (The General Motors Building)) effective June 1, 2013, our consolidated debt increased significantly compared to prior periods even though our economic interest in 767 Venture, LLC remained substantially unchanged at 60%. Similarly, after selling an interest in 601 Lexington Avenue, our economic interest in the property decreased to 55% even though we continue to consolidate the related mortgage indebtedness. Accordingly, we believe the presentation of total adjusted debt may provide investors with a more complete picture of our share of consolidated and unconsolidated debt. In addition, in light of the difference between our total consolidated debt and our total adjusted debt, we believe that also presenting our total adjusted debt to total adjusted market capitalization ratio may provide investors with a more complete picture of our leverage in relation to the overall size of our company. The calculation of theInvestors should understand that our total adjusted debt to total adjusted market capitalization ratio is in part a function of the samemarket price of the common stock of BXP and as consolidatedsuch will fluctuate with changes in such price and does not necessarily reflect our capacity to incur additional debt to finance our activities or our ability to manage our existing debt obligations. The total adjusted debt to total consolidatedadjusted market capitalization ratio except thatshould be evaluated along with the total adjusted debt balance isratio of indebtedness to other measures of asset value used in lieu ofby financial analysts and other financial ratios, as well as the total consolidated debt balance. At September 30, 2015 our total adjusted debt represented approximately 30.71%various components of our total adjusted market capitalization.outstanding indebtedness.
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The calculation of total consolidated market capitalization and total adjusted market capitalization doesdo not include 309,818 2013 MYLTIP Units, 476,320 2014 MYLTIP Units, 2015 MYLTIP Units and 368,415 20152016 MYLTIP Units because, unlike other LTIP Units, they are not earned until certain return thresholds are achieved. These percentages will fluctuate with changes in the market value of Boston Properties, Inc.’sour common stock and 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 ours, whose assets are primarily income-producing real estate, the total consolidated debt to total consolidated market capitalization ratio and the total adjusted debt to total adjusted market capitalization ratio may provide investors with alternate indications of leverage, so long as they are evaluated along with other financial ratios and the various components of our outstanding indebtedness.
For a discussion of our unconsolidated joint venture indebtedness, see “Liquidity and Capital Resources—Capitalization—Off-Balance Sheet Arrangements—Joint Venture Indebtedness” 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—Capitalization—Mortgage Notes Payable, Net” and ““—Mezzanine Notes Payable” within “Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Debt Financing
As of September 30, 2015,March 31, 2016, we had approximately $9.7$10.0 billion of outstanding consolidated indebtedness, representing approximately 32.18%31.18% of our total consolidated market capitalization as calculated above consisting of approximately (1) $5.3$6.3 billion (net of discount) in publicly traded unsecured senior notes having a GAAP weighted-average interest rate of 4.42%4.32% per annum and maturities in 2018 through 2024;2026; (2) $4.1$3.4 billion of property-specific mortgage debt having a GAAP weighted-average interest rate of 4.28%4.11% per annum and weighted-average term of 2.52.2 years and (3) $0.3 billion of mezzanine notes payable associated with 767 Fifth Avenue (the General Motors Building), in New York City having a GAAP interest rate of 5.53% per annum and maturing in 2017. The table below summarizes our mortgage and mezzanine notes payable, ourBPLP’s unsecured senior notes and ourBPLP’s Unsecured Line of Credit at September 30, 2015March 31, 2016 and September 30, 2014:March 31, 2015:
 

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September 30,March 31,
2015 20142016 2015
(dollars in thousands)(dollars in thousands)
Debt Summary:      
Balance      
Fixed rate mortgage notes payable$4,132,071
 $4,328,464
Unsecured senior notes, net of discount5,288,908
 5,837,172
Fixed rate mortgage notes payable, net$3,416,622
 $4,283,948
Unsecured senior notes, net6,255,602
 5,260,260
Unsecured line of credit—
 —
—
 —
Mezzanine notes payable308,817
 310,114
308,142
 309,475
Total consolidated debt9,729,796
 10,475,750
9,980,366
 9,853,683
Add:      
Our share of unconsolidated joint venture debt352,923
 331,765
Our share of unconsolidated joint venture debt, net351,394
 350,178
Deduct:      
Partners' share of consolidated mortgage notes payable(871,481) (743,331)
Partners' share of consolidated mezzanine notes payable(123,527) (124,046)
Partners’ share of consolidated mortgage notes payable, net(859,035) (1,049,777)
Partners’ share of consolidated mezzanine notes payable(123,257) (123,790)
Total adjusted debt$9,087,711
 $9,940,138
$9,349,468
 $9,030,294
      
September 30,March 31,
2015 20142016 2015
Consolidated Debt Financing Statistics:      
Percent of total debt:      
Fixed rate100.00% 100.00%100.00% 100.00%
Variable rate—% —%—% —%
Total100.00% 100.00%100.00% 100.00%
GAAP Weighted-average interest rate at end of period:      
Fixed rate4.40% 4.46%4.29% 4.40%
Variable rate—% —%—% —%
Total4.40% 4.46%4.29% 4.40%
Coupon/Stated Weighted-average interest rate at end of period:      
Fixed rate4.97% 5.00%4.79% 4.98%
Variable rate—% —%—% —%
Total4.97% 5.00%4.79% 4.98%
Unsecured Line of Credit
We haveBPLP has a $1.0 billion revolving credit facility (the “Unsecured Line of Credit”) with a maturity date of July 26, 2018. WeBPLP may increase the total commitment to $1.5 billion, subject to syndication of the increase and other conditions. At ourBPLP’s option, loans outstanding under the Unsecured Line of Credit will bear interest at a rate per annum equal to (1), in the case of loans denominated in Dollars, Euro or Sterling, LIBOR or, in the case of loans denominated in Canadian Dollars, CDOR, in each case, plus a margin ranging from 0.925% to 1.70% based on ourBPLP’s credit rating or (2) an alternate base rate equal to the greatest of (a) the Administrative Agent’s prime rate, (b) the Federal Funds rate plus 0.5% or (c) LIBOR for a one month period plus 1.00%, in each case, plus a margin ranging from 0.0% to 0.70% based on ourBPLP’s credit rating. The Unsecured Line of Credit also contains a competitive bid option that allows banks that are part of the lender consortium to bid to make loan advances to usBPLP at a reduced interest rate. In addition, we areBPLP is also obligated to pay (1) in quarterly installments a facility fee on the total commitment at a rate per annum ranging from 0.125% to 0.35% based on ourBPLP’s credit rating and (2) an annual fee on the undrawn amount of each letter of credit equal to the LIBOR margin. Based on our currentBPLP’s credit rating, the LIBOR and CDOR margin is 1.00%, the alternate base rate margin is 0.0% and the facility fee is 0.15%. OurBPLP’s ability to borrow under ourits Unsecured Line of Credit is subject to ourits compliance with a number of customary financial and other covenants on an ongoing basis, including:

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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;
•a secured debt leverage ratio not to exceed 55%;
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•a fixed charge coverage ratio of at least 1.40;
an unsecured 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;
•an unsecured debt interest coverage ratio of at least 1.75; and
•limitations on permitted investments.
We believe we areBPLP believes it is in compliance with the financial and other covenants listed above.
As of September 30, 2015March 31, 2016 and NovemberMay 2, 2015,2016, we had no borrowings and outstanding letters of credit totaling approximately $30.0$16.1 million outstanding under the Unsecured Line of Credit, with the ability to borrow approximately $970.0$983.9 million.
Unsecured Senior Notes, Net
The following summarizes the unsecured senior notes outstanding asOn January 20, 2016, BPLP completed a public offering of September 30, 2015 (dollars$1.0 billion in thousands):
 
Coupon/
Stated Rate
 
Effective
Rate(1)
 
Principal
Amount
 Maturity Date(2) 
10 Year Unsecured Senior Notes5.875% 5.967% $700,000
 October 15, 2019 
10 Year Unsecured Senior Notes5.625% 5.708% 700,000
 November 15, 2020 
10 Year Unsecured Senior Notes4.125% 4.289% 850,000
 May 15, 2021 
7 Year Unsecured Senior Notes3.700% 3.853% 850,000
 November 15, 2018 
11 Year Unsecured Senior Notes3.850% 3.954% 1,000,000
 February 1, 2023 
10.5 Year Unsecured Senior Notes3.125% 3.279% 500,000
 September 1, 2023 
10.5 Year Unsecured Senior Notes3.800% 3.916% 700,000
 February 1, 2024 
Total principal    5,300,000
   
Net unamortized discount    (11,092)   
Total    $5,288,908
   
_______________  
(1)Yield on issuance date including the effects of discounts on the notes and the amortization of financing costs.
(2)No principal amounts are due prior to maturity.
Our unsecured senior notes are redeemable at our option, in whole or in part, at a redemption price equal to the greater of (i) 100% of theiraggregate principal amount or (ii) the sumof its 3.650% senior unsecured notes due 2026. The notes were priced at 99.708% of the present valueprincipal amount to yield an effective rate (including financing fees) of the remaining scheduled payments of principal and interest discounted at a rate equal3.766% to the yield on U.S. Treasury securities with a comparable maturity plus 35 basis points (or 20 basis points in the case of the $500 million ofmaturity. The notes that mature on September 1, 2023, 25 basis points in the case of the $700 million of notes thatwill mature on February 1, 2024, 40 basis points in2026, unless earlier redeemed. The aggregate net proceeds from the case of the $700offering were approximately $988.9 million of notes that mature on October 15, 2019after deducting underwriting discounts and 30 basis points in the case of the $700 million and $850 million of notes that mature on November 15, 2020 and May 15, 2021, respectively), in each case plus accrued and unpaid interesttransaction expenses (See Note 5 to the redemption date. The indenture under which our unsecured senior notes were issued contains restrictions on incurring debt and using our assets as security in other financing transactions and other customary financial and other covenants, including (1) a leverage ratio not to exceed 60%, (2) a secured debt leverage ratio not to exceed 50%, (3) an interest coverage ratio of greater than 1.50, and (4) unencumbered asset value to be no less than 150% of our unsecured debt. As of September 30, 2015, we believe we were in compliance with each of these financial restrictions and requirements.Consolidated Financial Statements).
Derivative Instruments and Hedging Activities
On February 19, 2015, we commenced a planned interest rate hedging program. Between July 1, 2015 and November 6, 2015, weAs of March 31, 2016, BPLP has entered into seventeen forward-starting interest rate swap contracts including one contract entered into subsequent to September 30, 2015, which fix the 10-year swap rate on notional amounts aggregating $225.0 million. We have now entered into forward-starting interest rate swap contracts whichthat fix the 10-year swap rate at a weighted-average rate of approximately 2.423% per annum on notional amounts aggregating $550.0 million. The interest rate swap contracts were entered into in

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advance of a financing with a target commencement date in September 2016 and maturity in September 2026. WeBPLP entered into the interest rate swap contracts designated and qualifying as cash flow hedges to reduce our exposure to the variability in future cash flows attributable to changes in the 10-year swap rate in contemplation of obtaining 10-year fixed-rate financing in September 2016.
In addition, between July 1, 2015 and November 6, 2015, ouras of March 31, 2016, 767 Fifth Partners LLC, which is the consolidated entity (the entity in(in which we have a 60% interest and that owns 767 Fifth Avenue (the General Motors Building) in New York City), has entered into sixteen forward-starting interest rate swap contracts, including one contract entered into subsequent to September 30, 2015, which fix the 10-year swap rate on notional amounts aggregating $125.0 million. 767 Fifth Partners LLC has now entered into forward-starting interest rate swap contracts whichthat fix the 10-year swap rate at a weighted-average rate of approximately 2.762%2.619% per annum on notional amounts aggregating $275.0$450.0 million. These interest rate swap contracts were entered into in advance of a financing with a target commencement date in June 2017 and maturity in June 2027. Our 767 Fifth Partners LLC consolidated entity entered into the interest rate swap contracts designated and qualifying as cash flow hedges to reduce its exposure to the variability in future cash flows attributable to changes in the 10-year swap rate in contemplation of obtaining 10-year fixed-rate financing in June 2017 (See NotesNote 6 and 13 to the Consolidated Financial Statements).
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Mortgage Notes Payable, Net
The following represents the outstanding principal balances due under the mortgage notes payable at September 30, 2015:
March 31, 2016:
Properties 
Stated
Interest Rate
 
GAAP
Interest Rate(1)
 
Stated
Principal
Amount
 
Historical
Fair Value
Adjustment
 
Carrying
Amount
 Carrying Amount (partners' share)   Maturity Date 
Stated
Interest Rate
 
GAAP
Interest Rate(1)
 
Stated
Principal
Amount
 
Historical
Fair Value
Adjustment
 Deferred Financing Costs, Net (2) 
Carrying
Amount
 
Carrying Amount (partners’ share)
   Maturity Date
 (dollars in thousands) (dollars in thousands)
Wholly-ownedWholly-owned         Wholly-owned           
599 Lexington Avenue 5.57% 5.41% $750,000
 $—
 $750,000
 N/A
 (2)(3)  March 1, 2017 5.57% 5.41% $750,000
 $—
 $(403) $749,597
 N/A
 (3)(4)  March 1, 2017
200 Clarendon Street (formerly the John Hancock Tower) 5.68% 5.16% 640,500
 5,612
 646,112
 N/A
 (2)(4) January 6, 2017
Embarcadero Center Four 6.10% 7.02% 350,368
 —
 350,368
 N/A
 (5) December 1, 2016 6.10% 7.02% 347,382
 —
 (107) 347,275
 N/A
 (5) December 1, 2016
Fountain Square 5.71% 2.56% 211,250
 3,923
 215,173
 N/A
 (2)(6) October 11, 2016 5.71% 2.56% 211,250
 564
 (12) 211,802
 N/A
 (3)(6) October 11, 2016
New Dominion Tech Park, Bldg. One 7.69% 7.84% 38,494
 —
 38,494
 N/A
    January 15, 2021 7.69% 7.84% 37,182
 —
 (400) 36,782
 N/A
    January 15, 2021
Kingstowne Two and Retail 5.99% 5.61% 29,775
 35
 29,810
 N/A
 (7) January 1, 2016
University Place 6.94% 6.99% 11,173
 —
 11,173
 N/A
    August 1, 2021 6.94% 6.99% 10,396
 —
 (68) 10,328
 N/A
    August 1, 2021
     $2,031,560
 $9,570
 $2,041,130
 N/A
      1,356,210
 564
 (990) 1,355,784
 N/A
 
Consolidated Joint VenturesConsolidated Joint Ventures         Consolidated Joint Ventures           
767 Fifth Avenue (the General Motors Building) 5.95% 2.44% $1,300,000
 $88,859
 $1,388,859
 $555,544
 (2)(8)(9) October 7, 2017 5.95% 2.44% 1,300,000
 67,047
 (206) 1,366,841
 546,736
 (3)(7)(8) October 7, 2017
601 Lexington Avenue 4.75% 4.79% 702,082
 —
 702,082
 315,937
 (10) April 10, 2022 4.75% 4.79% 696,005
 —
 (2,008) 693,997
 312,299
 (9) April 10, 2022
     $2,002,082
 $88,859
 $2,090,941
 $871,481
      1,996,005
 67,047
 (2,214) 2,060,838
 859,035
 
Total     $4,033,642
 $98,429
 $4,132,071
 $871,481
         $3,352,215
 $67,611
 $(3,204) $3,416,622
 $859,035
    
_______________  
(1)GAAP interest rate differs from the stated interest rate due to the inclusion of the amortization of financing charges, effects of hedging transactions and adjustments required to reflect loans at their fair values upon acquisition or consolidation. All adjustments to reflect loans at their fair value upon acquisition or consolidation are noted above.
(2)
On January 1, 2016, we adopted ASU 2015-03, “Simplifying the Presentation of Debt Issuance Costs”(“ASU 2015-03”) (See Note 2 to the Consolidated Financial Statements).
(3)The mortgage loan requires interest only payments with a balloon payment due at maturity.
(3)(4)On December 19, 2006, we terminated the forward-starting interest rate swap contracts related to this financing and received approximately $10.9 million, which amount is reducing our GAAP interest expense for this mortgage over the term of the financing, resulting in an effective interest rate of 5.41% per annum for the financing. The stated interest rate is 5.57% per annum.
(4)In connection with the mortgage financing we have agreed to guarantee approximately $21.2 million related to our obligation to provide funds for certain tenant re-leasing costs.
(5)Under a previous interest rate hedging program, we are reclassifying into earnings over the eight-year term of the loan as an increase in interest expense approximately $26.4 million (approximately $3.3 million per year) of the amounts recorded on our Consolidated Balance Sheets within Accumulated Other Comprehensive Loss resulting in an effective interest rate of 7.02% per annum.

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recorded on our Consolidated Balance Sheets within Accumulated Other Comprehensive Loss resulting in an effective interest rate of 7.02% per annum.
(6)In connection with the mortgage financing we have agreed to guarantee approximately $0.7 million related to our obligation to provide funds for certain tenant re-leasing costs. This mortgage loan was repaid on April 11, 2016 (See Note 13 to the Consolidated Financial Statements).
(7)This mortgage loan was repaid on October 1, 2015.
(8)This property is owned by a consolidated entity in which we have a 60% interest.
(9)(8)
In connection with the assumption of the loan, we guaranteed the joint venture’s obligation to fund various escrows, including tenant improvements, taxes and insurance in lieu of cash deposits. As of September 30, 2015,March 31, 2016, the maximum funding obligation under the guarantee was approximately $13.4 million.$16.2 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.
(10)(9)This property is owned by a consolidated entity in which we have a 55% interest.
Mezzanine Notes Payable
The following represents the outstanding principal balances due under the mezzanine notes payable at September 30, 2015:March 31, 2016:
 
Property Debt is Associated With 
Stated
Interest Rate
 
GAAP
Interest Rate(1)
 
Stated
Principal
Amount
 
Historical
Fair Value
Adjustment
 
Carrying
Amount
 Carrying Amount (partners' share)   Maturity Date 
Stated
Interest Rate
 
GAAP
Interest Rate(1)
 
Stated
Principal
Amount
 
Historical
Fair Value
Adjustment
 
Carrying
Amount
 
Carrying Amount (partners’ share)
   Maturity Date
 (dollars in thousands) (dollars in thousands)
767 Fifth Avenue (the General Motors Building) 6.02% 5.53% $306,000
 $2,817
 $308,817
 $123,527
 (2)(3) October 7, 2017 6.02% 5.53% $306,000
 $2,142
 $308,142
 $123,257
 (2)(3) October 7, 2017
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_______________  
(1)GAAP interest rate differs from the stated interest rate due to adjustments required to reflect loans at their fair values upon acquisition or consolidation. The adjustment to reflect the loan at its fair value upon consolidation is noted above.
(2)This property is owned by a consolidated joint venture in which we have a 60% interest.
(3)The mortgage loan requires interest only payments with a balloon payment due at maturity.
Outside Members’Members’ Notes Payable
In conjunction with the consolidation of 767 Fifth Avenue (the General Motors Building), we recorded loans payable to the joint venture’s partners totaling $450.0 million and related accrued interest payable totaling approximately $175.8 million. The partner loans bear interest at a fixed rate of 11.0% per annum and mature on June 9, 2017. We have eliminated in consolidation our partner loan totaling $270.0 million and our share of the related accrued interest payable of approximately $167.1$191.5 million at September 30, 2015.March 31, 2016. The remaining notes payable to the outside joint venture partners and related accrued interest payable totaling $180.0 million and approximately $111.4$127.7 million as of September 30, 2015March 31, 2016 have been reflected as Outside Members’ Notes Payable and within Accrued Interest Payable, respectively, onand is being allocated to our partners in noncontrolling interest in our Consolidated Balance Sheets. The related interest expense from the Outside Members’ Notes Payable totaling approximately $7.8 million and $22.8$8.2 million for the three and nine months ended September 30, 2015March 31, 2016 is fully allocated to the outside joint venture partners as an adjustment to Noncontrolling Interests in Property Partnerships in our Consolidated Statements of Operations.
Off-Balance Sheet Arrangements—Joint Venture Indebtedness
We have investments in unconsolidated joint ventures with our effective ownership interests ranging from 25% to 60%. Six of these ventures have mortgage indebtedness. We exercise significant influence over, but do not control, these entities and therefore they are presently accounted for using the equity method of accounting. See also Note 4 to the Consolidated Financial Statements. At September 30, 2015,March 31, 2016, the aggregate carrying amount of debt, including both our and our partners’ share, incurred by these ventures was approximately $833.0829.1 million (of which our proportionate share is approximately $352.9$351.4 million). The table below summarizes the outstanding debt of these joint venture properties at September 30, 2015March 31, 2016. 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) on certain of the loans.
 

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Properties 
Venture
Ownership
%
 
Stated
Interest
Rate
 
GAAP
Interest
Rate(1)
 Carrying
Amount		 Carrying Amount (Our Share)   Maturity Date 
Venture
Ownership
%
 
Stated
Interest
Rate
 
GAAP
Interest
Rate (1)
 Stated Principal Amount Deferred Financing Costs, Net (2) Carrying Amount Carrying Amount (Our Share)   Maturity Date
 (dollars in thousands) (dollars in thousands)
540 Madison Avenue 60% 1.69% 1.86% $120,000
 $72,000
 (2)(3) June 5, 2018 60% 1.93% 2.10% $120,000
 $(442) $119,558
 $71,735
 (3)(4) June 5, 2018
Metropolitan Square 51% 5.75% 5.81% 169,540
 86,465
    May 5, 2020 51% 5.75% 5.81% 168,271
 (411) 167,860
 85,605
    May 5, 2020
Market Square North 50% 4.85% 4.91% 126,138
 63,068
    October 1, 2020 50% 4.85% 4.91% 125,070
 (378) 124,692
 62,346
    October 1, 2020
Annapolis Junction Building One 50% 1.94% 2.11% 40,294
 20,147
 (4) March 31, 2018 50% 2.18% 2.36% 40,015
 (185) 39,830
 19,909
 (5) March 31, 2018
Annapolis Junction Building Six 50% 2.44% 2.58% 13,404
 6,702
 (2)(5) November 17, 2016 50% 2.68% 2.82% 13,224
 —
 13,224
 6,612
 (3)(6) November 17, 2016
Annapolis Junction Building Seven 50% 1.84% 2.40% 19,736
 9,868
 (2)(6) April 4, 2016 50% 2.08% 2.70% 21,546
 (28) 21,518
 10,759
 (3)(7) April 4, 2016
Annapolis Junction Building Eight 50% 1.69% 2.13% 13,846
 6,923
 (2)(7) June 23, 2017 50% 1.93% 2.38% 14,534
 (146) 14,388
 7,194
 (3)(8) June 23, 2017
500 North Capitol Street 30% 4.15% 4.19% 105,000
 31,500
 (2) June 6, 2023 30% 4.15% 4.19% 105,000
 (424) 104,576
 31,373
 (3) June 6, 2023
901 New York Avenue 25% 3.61% 3.68% 225,000
 56,250
    January 5, 2025 25% 3.61% 3.68% 225,000
 (1,557) 223,443
 55,861
    January 5, 2025
Total       $832,958
 $352,923
           $832,660
 $(3,571) $829,089
 $351,394
    
_______________  
(1)GAAP interest rate differs from the stated interest rate due to the inclusion of the amortization of financing charges.
(2)
On January 1, 2016, we adopted ASU 2015-03, “Simplifying the Presentation of Debt Issuance Costs”(“ASU 2015-03”) (See Note 2 to the Consolidated Financial Statements).
(3)The loan requires interest only payments with a balloon payment due at maturity.
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(3)(4)Mortgage loan bears interest at a variable rate equal to LIBOR plus 1.50% per annum.
(4)(5)Mortgage loan bears interest at a variable rate equal to LIBOR plus 1.75% per annum and matures on March 31, 2018 with one, three-year extension option, subject to certain conditions.conditions (See Note 13 to the Consolidated Financial Statements).
(5)(6)The construction financing bears interest at a variable rate equal to LIBOR plus 2.25% per annum.
(6)(7)The construction financing bears interest at a variable rate equal to LIBOR plus 1.65% per annum and maturesmatured on April 4, 2016 with two, one-year extension options, subject to certain conditions.conditions (See Note 13 to the Consolidated Financial Statements).
(7)(8)The construction financing bears interest at a variable rate equal to LIBOR plus 1.50% per annum and matures on June 23, 2017 with two, one-year extension options, subject to certain conditions.
State and Local Tax Matters
Because Boston Properties, Inc.BXP is organized and qualifies as a REIT, it is generally not subject to federal income taxes, but 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 positions 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
We carry insurance coverage on our properties of types and in amounts and with deductibles that we believe are in line with coverage customarily obtained by owners of similar properties. In responseFor additional information concerning our insurance program, see Note 7 to the uncertainty in the insurance market following the terrorist attacks of September 11, 2001, the Federal Terrorism Risk Insurance Act (as amended, “TRIA”) was enacted in November 2002 to require regulated insurers to make available coverage for “certified” acts of terrorism (as defined by the statute). The expiration date of TRIA was extended to December 31, 2014 by the Terrorism Risk Insurance Program Reauthorization Act of 2007 and further extended to December 31, 2020 by the Terrorism Risk Insurance Program Reauthorization Act of 2015 (“TRIPRA”), and we can provide no assurance that it will be extended further. Currently, the per occurrence limits of our portfolio property insurance program are $1.0 billion, including coverage for acts of terrorism other than nuclear, biological, chemical or radiological terrorism (“Terrorism Coverage”). We also carry $250 million of Terrorism Coverage for 601 Lexington Avenue, New York, New York (“601 Lexington Avenue”) in excess of the $1.0 billion of Terrorism Coverage in our property insurance program. 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. We also currently carry nuclear, biological, chemical and radiological terrorism insurance coverage for acts of terrorism certified under TRIA (“NBCR Coverage”), which is provided by IXP, as a direct insurer, for the properties in our portfolio, including 767 Fifth Avenue, but excluding certain other properties owned in joint ventures with third parties or which we manage. The per occurrence limit for NBCR Coverage is $1 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 lossesConsolidated Financial Statements.

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resulting from a certified act of terrorism exceed a “program trigger.” In 2015, the program trigger is $100.0 million and the coinsurance is 15%, however both will increase in subsequent years pursuant to TRIPRA. 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 TRIPRA. We may elect to terminate the NBCR Coverage if the Federal Government seeks recoupment for losses paid under TRIA, if there is a change in our portfolio or for any other reason. We intend to continue to monitor the scope, nature and cost of available terrorism insurance and maintain terrorism insurance in amounts and on terms that are commercially reasonable.
We also currently carry earthquake insurance on our properties located in areas known to be subject to earthquakes in an amount and subject to self-insurance that we believe is commercially reasonable. In addition, this insurance is subject to a deductible in the amount of 5% of the value of the affected property. Specifically, we currently carry earthquake insurance which covers our San Francisco region (excluding Salesforce Tower) with a $170 million per occurrence limit (increased on March 1, 2015 from $120 million) and a $170 million annual aggregate limit (increased on March 1, 2015 from $120 million), $20 million of which is provided by IXP, as a direct insurer. The builders risk policy maintained for the development of Salesforce Tower in San Francisco includes a $60 million per occurrence and annual aggregate limit of earthquake coverage. The amount of our earthquake insurance coverage may not be sufficient to cover losses from earthquakes. In addition, the amount of earthquake coverage could impact our ability to finance properties subject to earthquake risk. We may discontinue earthquake insurance or change the structure of our earthquake insurance program on some or all of our properties in the future if the premiums exceed our estimation of the value of the coverage.
IXP, a captive insurance company which is a wholly-owned subsidiary, acts as a direct insurer with respect to a portion of our earthquake insurance coverage for our Greater San Francisco properties and our NBCR Coverage. Insofar as we own IXP, we are responsible for its liquidity and capital resources, and the accounts of IXP are part of our consolidated financial statements. In particular, if a loss occurs which is covered by our 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 we experience a loss and IXP is required to pay under its insurance policy, we 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, we have issued a guarantee to cover liabilities of IXP in the amount of $20.0 million.
The mortgages on our properties typically contain requirements concerning the financial ratings of the insurers who provide policies covering the property. We provide the lenders on a regular basis with the identity of the insurance companies in our insurance programs. The ratings of some of our insurers are below the rating requirements in some of our loan agreements and the lenders for these loans could attempt to claim an event of default has occurred under the loan. We believe we could obtain insurance with insurers which satisfy the rating requirements. Additionally, in the future our ability to obtain debt financing secured by individual properties, or the terms of such financing, may be adversely affected if lenders generally insist on ratings for insurers or amounts of insurance which are difficult to obtain or which result in a commercially unreasonable premium. There can be no assurance that a deficiency in the financial ratings of one or more of our insurers will not have a material adverse effect on us.
We continue to monitor the state of the insurance market in general, and the scope and costs of coverage for acts of terrorism and California earthquake risk in particular, but we 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 we cannot obtain insurance at all or at a reasonable cost. With respect to such losses and losses from acts of terrorism, earthquakes or other catastrophic events, if we experience a loss that is uninsured or that exceeds policy limits, we 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 we could be liable for mortgage indebtedness or other obligations related to the property. Any such loss could materially and adversely affect our business and financial condition and results of operations.
Funds from Operations
Pursuant to the revised definition of Funds from Operations adopted by the Board of Governors of NAREIT,the National Association of Real Estate Investment Trusts (“NAREIT”), we calculate Funds from Operations, or “FFO,” by adjusting net income (loss) attributable to Boston Properties, Inc. common shareholders or net income (loss) attributable to Boston Properties Limited Partnership common unitholders (computed in accordance with GAAP, including non-recurring items) for gains (or losses) from sales of properties, impairment losses on depreciable real estate of consolidated real estate,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, real estate relatedestate-related depreciation and amortization, and after adjustment forour share of income (loss) from unconsolidated partnerships and joint ventures and preferred distributions.ventures. FFO is a non-GAAP financial measure. The usemeasure, but we believe the presentation of FFO, combined with the presentation of required primary GAAP presentations,financial measures, has been fundamentally beneficial in improvingimproved the understanding of operating

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results of REITs among the investing public and makinghas helped make comparisons of REIT operating results more meaningful. Management generally considers FFO to be a useful measuremeasures for reviewingunderstanding and comparing our comparative operating and financial performanceresults because, by excluding gains and losses related to sales of previously depreciated operating real estate assets, impairment losses on depreciable real estate of consolidated real estate, impairment losses on 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 excluding real estate asset depreciation and amortization (which can vary amongdiffer across owners of identicalsimilar assets in similar condition based on historical cost accounting and useful life estimates), FFO can help oneinvestors compare the operating performance of a company’scompany's real estate betweenacross reporting periods or as comparedand to differentthe 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.
FFO should not be considered as an alternativea substitute to net income attributable to Boston Properties, Inc. common shareholders or net income attributable to Boston Properties Limited Partnership common unitholders (determined in accordance with GAAP) as an indication of our performance.. FFO does not represent cash generated from operating activities determined in accordance with GAAP and is not a measure of liquidity or an indicator of our ability to make cash distributions. We believe that to furthermore comprehensively understand our operating performance, FFO should be comparedconsidered along with our reported net income attributable to Boston Properties, Inc. or net income attributable to Boston Properties Limited Partnership common unitholders and considered in addition toour cash flows in accordance with GAAP, as presented in our Consolidated Financial Statements.consolidated financial statements.

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Boston Properties, Inc.
The following table presents a reconciliation of net income attributable to Boston Properties, Inc. common shareholders to FFO attributable to Boston Properties, Inc. common shareholders for the three months ended March 31, 2016 and 2015:
 Three months ended
March 31,
2016 2015
 (in thousands)
Net income attributable to Boston Properties, Inc. common shareholders$181,747
 $171,182
Add:   
Preferred dividends2,618
 2,589
Noncontrolling interest—common units of the Operating Partnership21,393
 20,188
Noncontrolling interest—redeemable preferred units of the Operating Partnership—
 3
Noncontrolling interests in property partnerships10,464
 15,208
Less:   
Gains on sales of real estate67,623
 95,084
Income from continuing operations148,599
 114,086
Add:   
Real estate depreciation and amortization (1)163,580
 148,754
Less:   
Noncontrolling interests in property partnerships’ share of funds from operations30,019
 36,515
Noncontrolling interest—redeemable preferred units of the Operating Partnership—
 3
Preferred dividends2,618
 2,589
Funds from Operations (FFO) attributable to the Operating Partnership common unitholders (including Boston Properties, Inc.)$279,542
 $223,733
Less:   
Noncontrolling interest—common units of the Operating Partnership’s share of funds from operations28,854
 23,348
FFO attributable to Boston Properties, Inc. common shareholders$250,688
 $200,385
Boston Properties, Inc.’s percentage share of Funds from Operations—basic89.68% 89.56%
Weighted-average shares outstanding—basic153,626
 153,230
 _______________  
(1)
Real estate depreciation and amortization consists of depreciation and amortization from the Consolidated Statements of Operations of $159,448 and $154,223, our share of unconsolidated joint venture real estate depreciation and amortization of $4,496 and $(5,132), less corporate related depreciation and amortization of $364 and $337 for the three months ended March 31, 2016 and 2015, respectively.

Reconciliation to Diluted Funds from Operations:
 Three Months Ended March 31, 2016 Three Months Ended March 31, 2015
Income
(Numerator)
 
Shares
(Denominator)
 
Income
(Numerator)
 
Shares
(Denominator)
 (in thousands)
Basic FFO$279,542
 171,309
 $223,733
 171,084
Effect of Dilutive Securities       
Stock Based Compensation—
 291
 —
 643
Diluted FFO$279,542
 171,600
 $223,733
 171,727
Less:       
Noncontrolling interest—common units of the Operating Partnership’s share of diluted FFO28,805
 17,683
 23,261
 17,854
Boston Properties, Inc.’s share of Diluted FFO (1)$250,737
 153,917
 $200,472
 153,873
 _______________  
(1)BXP’s share of diluted FFO was 89.70% and 89.60% for the quarter ended March 31, 2016 and 2015, respectively.

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Boston Properties Limited Partnership
The following table presents a reconciliation of net income attributable to Boston Properties Limited Partnership common unitholders to FFO attributable to Boston Properties Limited Partnership common unitholders for the three months ended September 30, 2015March 31, 2016 and 2014:2015:
 
Three months ended
September 30,		Three months ended
March 31,
2015 20142016 2015
(in thousands)(in thousands)
Net income attributable to Boston Properties Limited Partnership common unitholders$207,626
 $144,715
$207,296
 $193,369
Add:      
Preferred distributions2,647
 2,647
2,618
 2,589
Noncontrolling interest—redeemable preferred units—
 75
—
 3
Noncontrolling interests in property partnerships115,240
 5,566
10,464
 15,208
Less:      
Gains on sales of real estate199,723
 41,937
69,792
 95,084
Income from continuing operations125,790
 111,066
150,586
 116,085
Add:      
Real estate depreciation and amortization (1)154,491
 159,984
161,593
 146,755
Less:      
Noncontrolling interests in property partnerships’ share of funds from operations35,527
 19,150
30,019
 36,515
Noncontrolling interest—redeemable preferred units—
 75
—
 3
Preferred distributions2,647
 2,647
2,618
 2,589
Funds from Operations (FFO) attributable to Boston Properties Limited Partnership common unitholders (2)$242,107
 $249,178
$279,542
 $223,733
Weighted-average units outstanding—basic171,160
 170,785
171,309
 171,084
_______________ 
(1)
Real estate depreciation and amortization consists of depreciation and amortization from the Consolidated Statements of Operations of $151,017$157,461 and $155,217,$152,224, our share of unconsolidated joint venture real estate depreciation and amortization of $3,8084,496 and $5,099$(5,132), less corporate related depreciation and amortization of $334364 and $332$337 for the three months ended September 30,March 31, 2016 and 2015, and 2014, respectively.
(2)Our calculation includes OP Units and vested LTIP Units (including vested 2012 OPP Units and vested 2013 MYLTIP Units).


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Reconciliation to Diluted Funds from Operations:

 
Three Months Ended September 30, 2015 Three Months Ended September 30, 2014Three Months Ended March 31, 2016 Three Months Ended March 31, 2015
Income
(Numerator)
 
Units
(Denominator)
 
Income
(Numerator)
 
Units
(Denominator)
Income
(Numerator)
 
Units
(Denominator)
 
Income
(Numerator)
 
Units
(Denominator)
(in thousands)(in thousands)
Basic FFO$242,107
 171,160
 $249,178
 170,785
$279,542
 171,309
 $223,733
 171,084
Effect of Dilutive Securities              
Stock Based Compensation—
 191
 —
 153
—
 291
 —
 643
Diluted FFO$242,107
 171,351
 $249,178
 170,938
$279,542
 171,600
 $223,733
 171,727

Contractual Obligations
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 thirdfirst quarter of 2015,2016, we paid approximately $47.0$75.6 million to fund tenant-related obligations, including tenant improvements and leasing commissions, and incurred approximately $66.5$101.7 million of new tenant-related obligations associated with 1,054,966approximately 1.4 million square feet of second generation leases, or approximately $63$72 per square foot. In
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addition, we signed leases for 274,682approximately 121,000 square feet at our development properties. 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 the aggregate, during the thirdfirst quarter of 2015,2016, we signed leases for 1,329,648approximately 1.5 million square feet of space and incurred aggregate tenant-related obligations of approximately $72.1$115.3 million,, or approximately $54$75 per square foot.
ITEM 3—Quantitative and Qualitative Disclosures about Market Risk.
As of September 30, 2015March 31, 2016, approximately $9.710.0 billion of our consolidated borrowings bore interest at fixed rates and none of our consolidated borrowings bore interest at variable rates. The fair value of these instruments is affected by changes in market interest rates. The table below does not include our unconsolidated joint venture debt. For a discussion concerning our unconsolidated joint venture debt, see Note 4 to the Consolidated Financial Statements and “Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations—Capitalization—Off-Balance Sheet Arrangements—Joint Venture Indebtedness.”

2015 2016 2017 2018 2019 2020+ Total 
Estimated
Fair Value
2016 2017 2018 2019 2020 2021+ Total 
Estimated
Fair Value
(dollars in thousands)
Mortgage debt
(dollars in thousands)
Mortgage debt, net
Fixed Rate$18,990
 $656,774
 $2,742,346
 $18,633
 $19,670
 $675,658
 $4,132,071
 $4,240,944
$603,595
 $2,100,789
 $18,201
 $19,238
 $20,334
 $654,465
 $3,416,622
 $3,477,310
Average Interest Rate5.64% 5.34% 3.88% 5.52% 5.53% 4.93% 4.28%  5.33% 3.50% 5.52% 5.53% 5.55% 4.91% 4.11%  
Variable Rate—
 —
 —
 —
 —
 —
 —
 —
—
 —
 —
 —
 —
 —
 —
 —
Mezzanine debtMezzanine debt
Fixed Rate$335
 $1,389
 $307,093
 $—
 $—
 $—
 $308,817
 $306,116
$1,049
 $307,093
 $—
 $—
 $—
 $—
 $308,142
 $306,089
Average Interest Rate—
 —
 5.53% —
 —
 —
 5.53%  —
 5.53% —
 —
 —
 —
 5.53%  
Variable Rate—
 —
 —
 —
 —
 —
 —
 —
—
 —
 —
 —
 —
 —
 —
 —
Unsecured debtUnsecured debt, net
Fixed Rate$(440) $(1,681) $(1,749) $848,226
 $698,447
 $3,746,105
 $5,288,908
 $5,603,968
$(5,325) $(7,381) $842,753
 $693,947
 $694,468
 $4,037,140
 $6,255,602
 $6,705,353
Average Interest Rate—
 —
 —
 3.85% 5.97% 4.26% 4.42%  —
 —
 3.85% 5.97% 5.71% 3.89% 4.32%  
Variable Rate—
 —
 —
 —
 —
 —
 —
 —
—
 —
 —
 —
 —
 —
 —
 —
Total Debt$18,885
 $656,482

$3,047,690

$866,859

$718,117

$4,421,763
 $9,729,796
 $10,151,028
$599,319
 $2,400,501

$860,954

$713,185

$714,802

$4,691,605

$9,980,366
 $10,488,752

At September 30, 2015March 31, 2016, the weighted-average coupon/stated rates on all of our outstanding consolidated debt, all of which had a fixed rate, debt was 4.97%4.79% per annum. The weighted-average coupon/stated rates for our unsecured debt was 4.34% per annum.

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At September 30, 2015March 31, 2016, we had no outstanding consolidated variable rate debt.
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.
On February 19, 2015, we commenced a planned interest rate hedging program. Between July 1, 2015 and November 6, 2015, weAs of March 31, 2016, BPLP has entered into seventeen forward-starting interest rate swap contracts including one contract entered into subsequent to September 30, 2015, which fix the 10-year swap rate on notional amounts aggregating $225.0 million. We have now entered into forward-starting interest rate swap contracts whichthat fix the 10-year swap rate at a weighted-average rate of approximately 2.423% per annum on notional amounts aggregating $550.0 million. The interest rate swap contracts were entered into in advance of a financing with a target commencement date in September 2016 and maturity in September 2026. WeBPLP entered into the interest rate swap contracts designated and qualifying as cash flow hedges to reduce our exposure to the variability in future cash flows attributable to changes in the 10-year swap rate in contemplation of obtaining 10-year fixed-rate financing in September 2016.
In addition, between July 1, 2015 and November 6, 2015, ouras of March 31, 2016, 767 Fifth Partners LLC, which is the consolidated entity (the entity in(in which we have a 60% interest and that owns 767 Fifth Avenue (the General Motors Building) in New York City), has entered into sixteen forward-starting interest rate swap contracts, including one contract entered into subsequent to September 30, 2015, which fix the 10-year swap rate on notional amounts aggregating $125.0 million. 767 Fifth Partners LLC has now entered into forward-starting interest rate swap contracts whichthat fix the 10-year swap rate at a weighted-average rate of approximately 2.762%2.619% per annum on notional amounts aggregating $275.0$450.0 million. These interest rate swap contracts were entered into in advance of a financing with a target commencement date in June 2017 and maturity in June 2027. Our 767 Fifth Partners LLC consolidated entity entered into the interest rate swap contracts designated and qualifying as cash flow hedges to reduce its exposure to the variability in future cash flows attributable to changes in the 10-year swap rate in contemplation of obtaining 10-year fixed-rate financing in June 2017 (See NotesNote 6 and 13 to the Consolidated Financial Statements).
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 our 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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ITEM 4—Controls and Procedures.
Boston Properties, 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 Boston Properties, 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). Based upon that evaluation, Boston Properties, 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 Boston Properties, Inc.’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) occurred during the first quarter of our fiscal year ending December 31, 2016 that has materially affected, or is reasonably likely to materially affect, Boston Properties, 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 Boston Properties, Inc., 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). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer of Boston Properties, 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 ourits internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) occurred during the thirdfirst quarter of our fiscal year ending December 31, 20152016 that has materially affected, or is reasonably likely to materially affect, ourits 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. Boston Properties, Inc.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 previously updated or to the extent additional factual information disclosed elsewhere in thisthese Quarterly ReportReports 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, 2014.2015.
ITEM 2—Unregistered Sales of Equity Securities and Use of Proceeds.Proceeds
Boston Properties, Inc.

(a)During the three months ended March 31, 2016, Boston Properties, Inc. issued an aggregate of 13,259 shares of common stock common shares in exchange for 13,259 common units of limited partnership held by certain limited partners of Boston Properties Limited Partnership. Of these shares, 5,982 shares were issued in reliance on an exemption from registration under Section 4(a)(2) of the Securities Act of 1933, as amended. We relied on the exemption under Section 4(a)(2) based upon factual representations received from the limited partner who received the shares of common stock.
(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
January 1, 2016 - January 31, 20168,747
(1)
$118.45
N/AN/A
February 1, 2016 - February 29, 2016532
(1)111.14
N/AN/A
March 1, 2016 - March 31, 2016179
(2)0.01
N/AN/A
Total9,458
 
$115.80
N/AN/A
_________________
(1)Represents shares of common stock surrendered by employees to Boston Properties, Inc. to satisfy such employees’ tax withholding obligations in connection with the vesting of restricted common stock.
(2)Represents shares of restricted common stock repurchased in connection with the termination of an employee’s employment with Boston Properties, Inc. Under the terms of the applicable restricted stock award agreement, such shares were repurchased by Boston Properties, Inc. at a price of and $0.01 per share, which was the amount originally paid by such employee for such shares.
Boston Properties Limited Partnership

(a)Each time Boston Properties, Inc. issues shares of stock (other than in exchange for common units of Boston Properties Limited Partnership when such common units are presented for redemption), it contributes the proceeds of such issuance to usBoston Properties Limited Partnership 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, 2015,March 31, 2016, in connection with issuances of common stock by Boston Properties, Inc. pursuant to issuances to employees of restricted common stock under the 2012 Plan and pursuant to issuances under the Boston Properties, Inc. 1999 Non-Qualified Employee Stock Purchase Plan, weBoston Properties Limited Partnership issued an aggregate of approximately 3,814 common units to Boston Properties, Inc. in exchange for approximately $0.40 million, the aggregate proceeds of such common stock issuances to Boston Properties, Inc. Such units were issued in reliance on an exemption from registration under Section 4(a)(2) of the Securities Act of 1933, as amended.
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approximately 21,200 common units to Boston Properties, Inc. in exchange for approximately $292,717, the aggregate proceeds of such common stock issuances to Boston Properties, Inc. Such units were issued in reliance on an exemption from registration under Section 4(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
July 1, 2015 - July 31, 2015350(1)$0.25N/AN/A
August 1, 2015 - August 31, 2015315(2)$0.01N/AN/A
September 1, 2015 - September 30, 2015− −N/AN/A
Total665 $0.14N/AN/A
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
January 1, 2016 - January 31, 20168,747
(1)$118.45N/AN/A
February 1, 2016 - February 29, 2016209,868
(2)0.53N/AN/A
March 1, 2016 - March 31, 2016179
(3)0.01N/AN/A
Total218,794
 $5.24N/AN/A

____________________                
(1)Represents common units of Boston Properties Limited Partnership previously held by Boston Properties, Inc. that were redeemed in connection with the surrender of shares of restricted common stock of Boston Properties, Inc. by employees to Boston Properties, Inc. to satisfy such employees’ tax withholding obligations in connection with the vesting of restricted common stock.
(2)Includes 205,762 2013 MYLTIP units. The measurement period for such 2013 MYLTIP units ended on February 4, 2016 and Boston Properties, Inc.’s total stockholder return was sufficient for employees to earn and therefore become eligible to vest in a portion of the 2013 MYLTIP units. Under the terms of the applicable 2013 MYLTIP award agreements, the 205,762 unearned 2013 MYLTIP units were repurchased at a price of $0.25 per 2013 MYLTIP unit, which was the amount originally paid by each employee for the units. Also includes 532 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 and 1,329 LTIP units, 282 2012 OPP units, 174 2013 MYLTIP units, 762 2014 MYLTIP units, 479 2015 MYLTIP units and 548 2016 MYLTIP units that were repurchased in connection with the termination of ancertain employee’s employment with the Company.Boston Properties, Inc. Under the terms of the applicable LTIP unit vesting agreement,agreements and OPP and MYLTIP award agreements, these units were repurchased by the CompanyBoston Properties Limited Partnership at a price of $0.25 per unit, which was the amount originally paid by such employee for the units.
(2)(3)Represents 179 common units previously held by Boston Properties, Inc. that were redeemed in connection with the repurchase of restricted shares of common stock of Boston Properties, Inc. in connection with the termination of an employee’s employment with the Company. Under the terms of the applicable restricted stock award agreement, such shares were repurchased by usBoston Properties, Inc. at a price of $0.01 per share, which was the amount originally paid by such employee for such shares.

ITEM 3—Defaults Upon Senior Securities.
None.
ITEM 4—Mine Safety Disclosures.
None.

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ITEM 5—Other Information.
(a)None.
(b)None.
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ITEM 6—Exhibits.
(a)Exhibits
10.1
—
Amendment to Letter Agreement, dated as of March 9, 2016, by and between Boston Properties, Inc. and Mortimer B. Zuckerman.

12.1
—Calculation of Ratios of Earnings to Fixed Charges and Calculation of Ratios of Earnings to Combined Fixed Charges and Preferred Distributions.Dividends for Boston Properties, Inc.
12.2
—Calculation of Ratios of Earnings to Fixed Charges and Calculation of Ratios of Earnings to Combined Fixed Charges and Preferred Distributions for Boston Properties Limited Partnership.
   
31.1
—Certification of Chief Executive Officer of Boston Properties, Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.2002 for Boston Properties, Inc.
   
31.2
—Certification of Chief Financial Officer of Boston Properties, Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.2002 for Boston Properties, Inc.
31.3
—Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for Boston Properties Limited Partnership.
31.4
—Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for Boston Properties Limited Partnership.
   
32.1
—Certification of Chief Executive Officer of Boston Properties, Inc. pursuant to Section 906 of the Sarbanes Oxley Act of 2002.2002 for Boston Properties, Inc.
   
32.2
—Certification of Chief Financial Officer of Boston Properties, Inc. pursuant to Section 906 of the Sarbanes Oxley Act of 2002.2002 for Boston Properties, Inc.
32.3
—Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes Oxley Act of 2002 for Boston Properties Limited Partnership.
32.4
—Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes Oxley Act of 2002 for Boston Properties Limited Partnership.
   
101
—
The following materials from Boston Properties, Inc.’s and Boston Properties Limited PartnershipPartnership’s Quarterly ReportReports on Form 10-Q for the quarter ended September 30, 2015March 31, 2016 formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Comprehensive Income, (iv) the Consolidated Statements of Stockholders’ Equity, (v) the Consolidated Statements of Partners’ Capital (v)(vi) the Consolidated Statements of Cash Flows, and (vi)(vii) related notes to these financial statements.



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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, INC.
May 6, 2016
/s/    MICHAEL E. LABELLE        
Michael E. LaBelle
Chief Financial Officer
(duly authorized officer and principal financial officer)

Table of Contents

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: Boston Properties, Inc., its General Partner
November
May 6, 20152016  
/s/    MICHAEL E. LABELLE        
   Michael E. LaBelle
   
Chief Financial Officer
(duly authorized officer and principal financial officer)


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